MANHATTAN BRIDGE CAPITAL, INC annual report, FY2020

Manhattan Bridge Capital, Inc. — FY 2020 Form 10-K

Reporting period: Fiscal year ended December 31, 2020. This filing reports annual results, not standalone fourth-quarter results. The company is a REIT-focused real estate lender originating short-term, first-mortgage “hard money” loans, principally in the New York metropolitan area and Florida.

Financial performance and position

MetricFY 2020FY 2019Change
Revenue$7.006 million$7.340 millionDown 4.6%
Interest income on loans$5.989 million$6.186 millionDown 3.2%
Origination fees$1.018 million$1.154 millionDown 11.8%
Operating income$4.210 million$4.498 millionDown 6.4%
Net income$4.229 million$4.495 millionDown 5.9%
Basic and diluted EPS$0.44$0.47Down $0.03
Net cash from operations$4.222 million$4.432 millionDown $0.210 million
  • Net margin was approximately 60.4%, compared with 61.2% in 2019. Operating margin was approximately 60.1%, versus 61.3%.
  • At year-end, loans receivable were $58.098 million, up from $53.485 million; there were 128 loans outstanding versus 135. Weighted-average contractual loan rate declined to 10.33% from 10.91%. Loans originated were $43.719 million, compared with $48.054 million, and repayments were $39.136 million, compared with $49.420 million.
  • Cash was $132,000; restricted cash was $327,000 and was mainly pending loan collections dedicated to reducing the credit line. Total assets were $59.843 million and stockholders’ equity was $31.964 million.
  • Year-end line-of-credit borrowings were $20.309 million against a $32.5 million facility. Senior notes had $6.0 million principal outstanding (reported at $5.603 million net of deferred financing costs). Gross principal debt was therefore approximately $26.309 million; net book debt was $25.912 million. The company reported approximately $15.8 million of borrowing availability as of March 4, 2021.
  • Operating cash flow was $4.222 million; investing activities used $4.607 million, reflecting loan originations exceeding collections; financing activities provided $726,000. Dividends paid were $4.143 million. A subsequent quarterly dividend of $0.11 per share was declared for payment April 15, 2021.

Changes, outlook and notable items

  • Management attributed lower revenue mainly to reduced loan rates and origination fees amid competition, plus weaker new-loan demand related to COVID-19. Lower LIBOR reduced interest and financing-cost expense by 17.1%, partly offsetting lower revenue; general and administrative expenses rose 19.2% to $1.434 million.
  • Two long-term borrowers received COVID-related forbearances deferring two to three months of interest payments to payoff. They subsequently paid monthly interest on time. The filing reports no defaults or foreclosures historically; it does not guarantee future collections.
  • Unfunded construction-loan commitments were approximately $4.598 million at year-end. Subsequent to year-end, $8.041 million of year-end loans had been paid off, including $4.385 million originally due in or before 2020.
  • Management expects cash balances, operating cash flow and the credit facility to fund operations for the next 12 months, while noting working-capital needs may rise with planned growth. No specific earnings or loan-growth guidance is provided.
  • The company adopted CECL on January 1, 2020; it recorded no opening adjustment and no allowance for credit losses at year-end. The auditor identified the allowance assessment as a critical audit matter, while issuing an unqualified opinion on the financial statements.
  • Key risks include COVID-19 effects, regional and property-type concentration, competition and lending spreads, borrower repayment and collateral values, reliance on debt and facility covenants, variable-rate funding and LIBOR transition, and REIT and Investment Company Act compliance. The credit line matures February 28, 2023; the 6% senior notes mature April 22, 2026.
  • The company reported effective management disclosure controls and internal control over financial reporting; the auditor did not provide an internal-controls attestation. The filing reports no legal proceedings or off-balance-sheet arrangements.

Important facts for investors to verify

  • Review the audited statements and loan-level disclosures, especially extensions, subsequent repayments, collateral valuations and the absence of a year-end credit-loss allowance.
  • Confirm current credit-line availability, borrowing-base capacity, covenant compliance and refinancing plans ahead of the February 2023 facility maturity.
  • Assess whether lower loan pricing and origination volumes are continuing to pressure revenue and margins, and whether COVID-related borrower accommodations have changed.
  • Check dividend sustainability against REIT distribution requirements, cash generation, debt restrictions and liquidity needs.
  • Consider geographic concentration, the CEO’s central role and 26.8% ownership, and the limited trading liquidity of the common shares.