MANHATTAN BRIDGE CAPITAL, INC quarterly report, Q2 FY2023

Manhattan Bridge Capital, Inc. — Q2 2023 Form 10-Q

Reporting period: Quarter and six months ended June 30, 2023. The company originates and services short-term, first-mortgage loans to real estate investors, principally in the New York metropolitan area and Florida. Figures below are unaudited unless otherwise stated.

Financial performance and position

MetricQ2 2023Q2 2022Six months 2023Six months 2022
Revenue$2.399 million$2.117 million$4.797 million$4.232 million
Operating income$1.402 million$1.352 million$2.657 million$2.773 million
Net income$1.422 million$1.356 million$2.681 million$2.781 million
Basic and diluted EPS$0.12$0.12$0.23$0.24
Net margin59.3%64.1%55.9%65.7%
  • Q2 revenue rose 13.3%, mainly because interest rates charged on loans were higher; interest income increased while origination-fee income declined.
  • Six-month revenue rose 13.4%, but net income fell 3.6%. Higher financing costs and a special officer bonus related to the credit-line extension partly offset higher interest income.
  • Interest and deferred-financing-cost expense increased 58.2% in Q2 and 75.4% for the six-month period, primarily due to higher SOFR-linked borrowing costs.
  • At June 30, loans receivable were $69.81 million, down from $74.48 million at year-end 2022. Cash was $248,874, versus $103,540 at year-end.
  • Reported liabilities totaled $28.93 million, including $20.67 million drawn on the credit line and $5.79 million in senior secured notes, net of financing costs. Notes have $6.0 million principal outstanding.
  • Six-month operating cash flow was $2.72 million, compared with $2.85 million in 2022. Investing activities provided $4.68 million, as loan collections exceeded new loan issuances. Financing activities used $7.26 million, including credit-line repayments and dividends. Cash increased by $145,334 over the period.

Material changes, outlook and risks

  • The $32.5 million secured credit line now matures February 28, 2026. Its rate was approximately 8.7% at June 30, 2023, including the agency fee, and fluctuates daily. The company reported compliance with its covenants at quarter-end.
  • The company repurchased 33,360 shares for $164,806 under a program authorizing up to 100,000 shares through April 10, 2024.
  • Management expects cash, operating cash flows and available credit to fund operations for the next 12 months, while warning that working-capital needs may increase as it pursues growth. No numerical earnings or revenue guidance was provided.
  • The company had $8.39 million of construction-loan commitments available for borrower drawdown subject to conditions. It reported all loans as performing and no loan impairment provision at June 30, despite a number of loans having original maturities in prior years; borrowers generally pay interest and loans may be extended.
  • A June foreclosure lawsuit concerns a performing loan and valid mortgage after a property deed transfer and a buyer-side data breach disrupted payoff funds. The company expects recovery through title insurance or foreclosure. It also disclosed a February sale of a $485,000 loan at face value; CEO Assaf Ran participated with $152,000.
  • Key risks include borrower and collateral credit risk, loan concentration, reliance on the CEO, competition for loan originations, and higher interest rates. The company also disclosed credit-line restrictions on dividends and share repurchases, a cross-default provision, and a 120% loan-and-cash collateral requirement for the notes.
  • The company is taxed as a REIT and generally must distribute at least 90% of REIT taxable income annually. A $0.1125-per-share dividend, totaling $1.29 million, was paid July 17, 2023.

Important facts for investors to verify

  • How the company’s loan extensions and past-due original maturities affect repayment prospects, and whether the foreclosure-related payoff is recovered.
  • Loan portfolio performance, collateral values, borrower concentration, and the status of the $8.39 million in conditional construction commitments.
  • Credit-line availability, covenant headroom, and sensitivity of financing expense to SOFR; also verify compliance with the senior-note collateral test.
  • Whether loan yields and fee income can continue to outpace borrowing and operating-cost increases while supporting dividends and portfolio growth.
  • The filing reports effective disclosure controls and no material change in internal control over financial reporting during the quarter.