Manhattan Bridge Capital, Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022; balance-sheet comparisons are with December 31, 2021. The company originates and manages short-term, first-mortgage loans to real estate investors, primarily in the New York metropolitan area and Florida.
Financial results and position
| Metric | Q1 2022 | Q1 2021 or prior date |
|---|---|---|
| Revenue | $2.115 million | $1.729 million |
| Net income | $1.425 million | $1.106 million |
| Basic and diluted EPS | $0.12 | $0.12 |
| Operating cash flow | $1.455 million | $1.065 million |
| Net cash used in investing | $2.723 million | $0.392 million |
| Cash at period end | $145,366 | $142,546 at Dec. 31, 2021 |
| Loans receivable | $68.438 million | $65.715 million at Dec. 31, 2021 |
| Total assets | $70.049 million | $67.206 million at Dec. 31, 2021 |
| Total liabilities / stockholders’ equity | $26.671 million / $43.377 million | $23.819 million / $43.386 million at Dec. 31, 2021 |
Interest income was $1.644 million and origination-fee revenue was $471,271. Operating costs and expenses were $694,703, including $331,853 of interest and deferred-financing-cost amortization and $361,489 of general and administrative expense. Income from operations was $1.420 million. Net margin was approximately 67.4%, versus 64.0% in Q1 2021.
At March 31, the company had $18.390 million outstanding under its revolving credit line and $6.0 million principal outstanding on 6% senior secured notes due in 2026. The notes’ balance-sheet carrying value, net of deferred financing costs, was $5.697 million. The credit line’s stated aggregate limit is $32.5 million and its rate was approximately 4.45% at quarter-end. It is secured and scheduled to expire February 28, 2023.
Changes versus the prior-year quarter
- Revenue rose 22.3%, primarily reflecting increased lending activity; net income increased 28.8%.
- Interest income increased from $1.443 million to $1.644 million, and origination fees increased from $286,473 to $471,271.
- Interest and financing-cost expense increased 4.7% to approximately $332,000, attributed mainly to higher LIBOR and greater use of the credit line. General and administrative expense increased 16.8% to approximately $361,000.
- Loan originations were $18.295 million, compared with $9.660 million; collections were $15.572 million, compared with $9.267 million. Investing cash use consequently increased.
- Weighted-average shares increased to 11,494,945 from 9,619,945, while reported EPS remained $0.12.
Outlook, risks, and notable items
- Management expects cash balances, operating cash flow, and the credit facility to fund operations for the next 12 months, while expecting working-capital needs to rise as the loan portfolio grows. No quantified earnings or revenue guidance is provided.
- Management described competition as more intense and said market conditions had led to lower customer interest rates and origination fees. It also reported periods of weaker loan demand during the COVID-19 pandemic, but no material effect on operations to date; future effects could be material.
- The company reported $8.802 million of construction-loan commitments available for borrower drawdown when conditions are met. Loans are generally one-year, interest-only loans secured by real estate and personal guarantees.
- Some loans were originally due in earlier years, including loans originally due from 2016 through 2021 and $3.644 million originally due in Q1 2022. The company said borrowers were paying interest and had signed, or were in the process of signing, extensions. It reported no impairments or impairment provisions at March 31 and said no loans had defaulted historically; these statements do not assure future collectability.
- On March 7, 2022, lenders waived the fixed-charge-coverage covenant for the quarter ended December 31, 2021. The waiver also excluded $700,000 of distributions or dividends paid in Q4 2021 from covenant calculations for Q1 through Q3 2022. The company said it complied with other credit-line covenants at March 31.
- A $0.125-per-share cash dividend, totaling $1.437 million, was declared and scheduled for payment April 15, 2022. The company is a REIT and generally must distribute at least 90% of REIT taxable income to maintain its tax status.
- Key stated risks include limited funding for originations, competition, reliance on the CEO, collateral valuation and borrower-credit risk, borrower concentration, lender-liability claims, and pandemic-related effects. The credit line also has financial covenants, dividend restrictions, and a cross-default provision.
Important facts for investors to verify
- Whether extended loans remain current and whether collateral values support repayment, particularly for loans past their original maturity dates.
- Availability of the credit line under its collateral and covenant requirements, its floating-rate exposure, and the company’s refinancing plans before its February 2023 expiration.
- Compliance with fixed-charge-coverage requirements after the temporary waiver and exclusions expire, and the effect of dividends on covenant capacity and liquidity.
- Timing and conditions for funding the $8.802 million construction-loan commitments, as well as subsequent loan collections and payoffs.
- The filing reports $2.451 million of loan repayments after quarter-end, including $2.051 million originally due in or before 2021; investors should verify subsequent portfolio performance.