Manhattan Bridge Capital, Inc. — Q1 2020 Form 10-Q
Reporting period: Three months ended March 31, 2020. The company originates and services short-term, first-mortgage loans to real estate investors, primarily in the New York metropolitan area and Florida.
Financial performance
| Metric | Q1 2020 | Q1 2019 | Change |
|---|---|---|---|
| Revenue | $1.711 million | $1.788 million | Down 4.3% |
| Net income | $1.016 million | $1.121 million | Down 9.4% |
| Basic and diluted EPS | $0.11 | $0.12 | Down $0.01 |
| Operating costs and expenses | $698,000 | $670,000 | Up approximately 4.2% |
| Operating cash flow | $1.129 million | $1.126 million | Approximately unchanged |
| Investing cash flow | $(3.345) million | $43,000 | Shifted to cash use |
| Financing cash flow | $2.310 million | $(1.349) million | Shifted to cash provision |
Interest income was $1.474 million, versus $1.503 million; origination fees were $237,000, versus $285,000. Management attributed lower revenue mainly to reduced loan interest rates and origination points amid market conditions and competition. Financing interest and amortization expense fell 7.1% to $352,000, primarily due to lower LIBOR rates. General and administrative expense increased 19.4% to $345,000, reflecting higher payroll, advertising, board compensation and a CFO bonus, partly offset by lower legal fees.
Balance sheet, lending and capital
- At March 31, 2020, total assets were $57.94 million, including $56.81 million of loans receivable, up from $53.49 million at December 31, 2019. Stockholders’ equity was $32.83 million.
- Cash was $213,000, compared with $118,000 at year-end. The filing does not provide a current ratio or other specific liquidity ratio.
- Debt included $18.86 million outstanding on the credit line and $6.00 million principal of 6% senior secured notes (reported net of financing costs at $5.55 million). The credit-line rate was approximately 4.99% at quarter-end.
- The Webster Credit Line was increased to $32.5 million and extended to February 28, 2023 under a February 2020 amendment. The company reported compliance with its covenants at March 31.
- Loans were classified as performing; no loan impairment or allowance was reported. No single borrower represented more than 10% of outstanding loans. The company had $7.16 million in committed construction loans available for qualifying draws.
- During the quarter, the company issued $16.08 million of loans and collected $12.75 million. Approximately $946,000 of quarter-end loans were paid off after the balance-sheet date.
- The company paid approximately $1.159 million in dividends and repurchased 26,609 shares for $131,000 under a program authorizing repurchases of up to 100,000 shares.
Material developments, outlook and risks
- COVID-19 had reduced demand for new loans, although the company said it continued originating and servicing loans. Management warned of possible late interest collections, declining property values and loan extensions, and said the financial and operational impact could be material but could not yet be estimated.
- Management expects cash, operating cash flows and available credit to fund operations for the next 12 months. This outlook is subject to lending, collection, market and credit risks; the filing provides no earnings guidance.
- The company said recent government support for businesses could mitigate effects on it and borrowers, but the impact was uncertain. It noted more intense competition in its markets.
- Management reported no historical loan defaults or foreclosures, but cautioned that future loans could become delinquent or uncollectible. Loans generally have one-year terms, and some outstanding loans were originally due in earlier years but were extended while borrowers continued paying interest.
- The company elected REIT tax treatment and must generally distribute at least 90% of REIT taxable income annually to maintain qualification.
Important facts for investors to verify
- Subsequent borrower collections, payment timing, extensions and any changes in loan performance or collateral values amid COVID-19.
- Actual available borrowing capacity and compliance with credit-line covenants as lending and collections evolve.
- Whether revenue yields and origination fees continue to be pressured by competition and market conditions.
- Loan concentration, commitments to fund construction loans, and the status of older-maturity loans.
- Dividend sustainability in light of REIT distribution requirements, cash needs and debt restrictions.