Manhattan Bridge Capital, Inc. — Q2 2019 Form 10-Q
Business and period: The company originates and services short-term, generally one-year, first-mortgage loans to real estate investors, primarily in the New York metropolitan area and Florida. This unaudited report covers the three and six months ended June 30, 2019; comparisons are with the corresponding 2018 periods.
Financial performance
| Metric | Q2 2019 | Q2 2018 | Six months 2019 | Six months 2018 |
|---|---|---|---|---|
| Revenue | $1.779 million | $1.668 million | $3.567 million | $3.332 million |
| Operating income | $1.082 million | $0.949 million | $2.200 million | $1.930 million |
| Net income | $1.084 million | $0.949 million | $2.205 million | $1.930 million |
| Basic and diluted EPS | $0.11 | $0.12 | $0.23 | $0.24 |
| Operating cash flow | Not separately reported | Not separately reported | $2.059 million | $2.029 million |
Q2 revenue increased 6.7% and net income 14.2% year over year; for the six-month period, revenue rose 7.1% and net income 14.2%. Management attributed earnings growth to higher lending revenue and lower interest costs. EPS declined year over year despite higher net income, alongside a larger weighted-average share count.
At June 30, 2019, loans receivable were $55.912 million, total assets $56.986 million, total liabilities $23.861 million, and stockholders’ equity $33.125 million. Cash was $127,169; restricted cash was zero. The $17.738 million line-of-credit balance and $5.490 million net carrying amount of senior secured notes were the principal reported debt. The line of credit had a $25 million limit and an approximately 6.40% rate at quarter-end; its rate fluctuates. The company reported compliance with its covenants.
Six-month investing cash use was $1.076 million, reflecting $24.698 million of loan originations and $23.622 million of collections. Financing cash use was $1.212 million, including $2.318 million of dividends, partly offset by $1.116 million of net line-of-credit proceeds. Cash and restricted cash fell by $227,888 to $127,169.
Portfolio, changes, and notable items
- Loans receivable increased from $54.836 million at December 31, 2018 to $55.912 million at June 30, 2019. No individual borrower represented more than 10% of the portfolio.
- The company reported no loan impairment or provision at quarter-end. It disclosed $8.927 million of loans originally due in 2016–2018; borrowers were paying interest, and the company said it reevaluates collateral before extensions. Subsequent to quarter-end, approximately $1.916 million of loans were paid off, including $245,000 originally due by December 31, 2018.
- Borrowers could draw a further $7.349 million of committed construction loans if specified conditions are met.
- Q2 dividends paid were approximately $1.159 million. During the quarter, the company repurchased 4,000 shares for $23,810 under a program authorizing up to 100,000 shares; 86,888 remained available at June 30.
- The company adopted lease accounting in 2019, recording a $113,724 right-of-use asset and matching liability; adoption was reported as not materially impacting the financial statements.
Outlook, risks, and contingencies
Management expected cash balances, 2018 offering proceeds, the credit facility, and operating cash flows to fund operations for the next 12 months, while anticipating higher working-capital needs as it pursues growth. No specific earnings or portfolio-growth guidance was provided. The company stated that it had met REIT requirements and must distribute at least 90% of REIT taxable income annually to maintain REIT status.
Risks highlighted include dependence on available funding and competitive loan pricing; reliance on the CEO for business development and, at times, short-term funding; incorrect collateral valuations or loan-yield estimates; borrower concentration; and potential lender-liability claims or due-diligence gaps. The credit facility includes collateral, financial-ratio, dividend and other restrictions, and a cross-default provision. The notes require specified collateral coverage and include redemption provisions. The filing reports no off-balance-sheet arrangements and does not describe a specific material legal contingency.
Important facts for investors to verify
- Loan-level maturity extensions, collateral values, guarantees, and collections, particularly for loans past their original due dates.
- Available borrowing capacity and covenant headroom under the $25 million credit line, including exposure to its floating interest rate and refinancing at its February 2021 expiration.
- Funding requirements if committed construction loans are drawn, and whether cash and operating inflows remain adequate as the portfolio grows.
- Dividend sustainability relative to earnings, REIT taxable income, and credit-agreement restrictions.
- Post-quarter-end loan repayments and any subsequent changes in portfolio credit quality; the filing’s no-default history does not assure future performance.