Manhattan Bridge Capital, Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023. The company originates and services short-term, first-mortgage loans to real estate investors, principally in the New York metropolitan area and Florida. Its unaudited consolidated results include MBC Funding II Corp.
Key financial results
| Metric | Q1 2023 | Q1 2022 / prior date |
|---|---|---|
| Total revenue | $2.398 million | $2.115 million; up 13.4% |
| Net income | $1.260 million | $1.425 million; down 11.6% |
| Basic and diluted EPS | $0.11 | $0.12 |
| Operating cash flow | $1.315 million | $1.455 million |
| Cash at period end | $75,192 | $103,540 at Dec. 31, 2022 |
| Loans receivable | $71.950 million | $74.483 million at Dec. 31, 2022 |
| Total assets | $73.669 million | $76.280 million at Dec. 31, 2022 |
| Total liabilities | $30.836 million | $33.416 million at Dec. 31, 2022 |
| Stockholders’ equity | $42.833 million | $42.864 million at Dec. 31, 2022 |
Interest income rose to $1.954 million from $1.644 million, while origination fees declined to $444,000 from $471,000. Operating costs and expenses increased to $1.143 million from $695,000. Interest and deferred financing cost expense rose 94.6% to $646,000; general and administrative expense rose 37.4% to $496,000. Net margin was approximately 52.5%, versus 67.4% in Q1 2022.
Investing activities provided $2.546 million, reflecting $16.286 million of loan collections against $13.735 million of new loan issuances. Financing activities used $3.889 million, including $2.414 million of net line-of-credit repayments and $1.437 million of dividends paid. Cash declined by $28,348 during the quarter.
Debt, liquidity and capital
- The revolving Webster Credit Line had $22.580 million outstanding against a $32.5 million facility, maturing February 28, 2026. Its rate was approximately 8.4% at March 31, 2023, including the agency fee, and fluctuates with the applicable benchmark.
- MBC Funding II had $6.0 million principal outstanding on 6% senior secured notes due April 22, 2026. The notes require eligible mortgage loans and cash to equal at least 120% of outstanding principal.
- The company reported compliance with the Webster facility covenants at quarter-end. The facility includes borrowing, financial-ratio, dividend and other restrictions, as well as a cross-default provision.
- Management expects cash balances, operating cash flows and the credit facility to fund operations for the next 12 months, but expects working-capital needs to increase as it pursues growth.
Material changes, outlook and risks
- Revenue grew on increased lending activity and higher interest rates charged on commercial loans, but higher funding costs and a special officer bonus more than offset the revenue increase, reducing net income.
- The January 2023 credit agreement amendment extended the facility maturity to 2026, transitioned the benchmark from LIBOR to SOFR, revised certain covenants and loan-concentration terms, and removed a requirement to pledge additional mortgage loans. The CEO’s guarantee was capped at $1 million plus enforcement costs.
- At March 31, the company had $7.001 million of construction-loan commitments available for borrower draws subject to conditions. No borrower represented more than 10% of loans outstanding. The company reported no loan impairments or impairment provisions, while noting that some loans had been extended or were in the process of extension. Loans included balances originally due in years 2016 through 2023.
- After quarter-end, $3.575 million of loans outstanding at March 31 was paid off. In February, the company sold a $485,000 loan at face value; CEO Assaf Ran participated in the acquisition for $152,000.
- The board declared a $0.1125-per-share cash dividend, totaling $1.293 million, paid April 17, 2023. On April 11, it authorized a discretionary repurchase program for up to 100,000 shares through April 10, 2024; 6,000 shares had been repurchased by April 19.
- Key disclosed risks include limited funding constraining originations and profits, competition, dependence on the CEO, borrower and collateral risks, borrower concentration, and the effect of rising interest rates on profitability. The company stated it had never foreclosed on a property to date, but gave no assurance that future loans would remain collectible.
Investor facts to verify
- How higher SOFR-linked borrowing costs and any further rate changes affect net interest earnings and margins.
- The performance, collateral coverage and repayment or extension status of loans originally due in prior years, as well as the post-quarter $3.575 million payoff.
- Available borrowing capacity under the $32.5 million facility after collateral and covenant requirements, and the ability to fund committed construction draws and portfolio growth.
- The impact of dividends and share repurchases on liquidity, capital and credit-facility restrictions.