Manhattan Bridge Capital, Inc. — Q1 2013 Form 10-Q
Reporting period: Three months ended March 31, 2013; unaudited consolidated results. The company makes short-term, real-estate-secured loans to investors in the New York metropolitan area, generally for property acquisition and construction.
Key financial metrics
| Metric | Q1 2013 / March 31, 2013 | Comparable period / December 31, 2012 |
|---|---|---|
| Revenue | $534,361 | $391,826 in Q1 2012; up 36.4% |
| Operating income | $258,252; 48.3% of revenue | $180,580; 46.1% of revenue |
| Net income | $173,139; 32.4% net margin | $114,967 in Q1 2012; up 50.6% |
| Net income per share | $0.04 basic and diluted | $0.03 basic and diluted in Q1 2012 |
| Cash and cash equivalents | $236,513 | $240,693 at December 31, 2012 |
| Working capital | Approximately $5.004 million | Approximately $5.582 million at December 31, 2012 |
| Loans receivable | $12.534 million: $9.198 million short-term and $3.336 million long-term | $13.624 million at December 31, 2012 |
| Interest-bearing obligations | $4.359 million: $1.159 million short-term loans, $2.700 million line of credit, and $500,000 senior notes | $5.399 million at December 31, 2012 |
| Cash flows | Operations: $(21,412); investing: $1.090 million; financing: $(1.073) million | Q1 2012: operations $70,947; investing $(516,219); financing $265,000 |
Material changes and operating developments
- Interest income rose to $444,779 from $307,602, reflecting increased lending activity; origination fees were $89,582 versus $84,224.
- Interest and debt-service-cost expense increased to $102,646 from $41,141, primarily due to greater use of the credit line. General and administrative expense was $172,867 versus $167,976.
- Cash collections of loans exceeded new loan advances during Q1: collections were $3.944 million and advances were $2.854 million. Loan receivables declined from year-end, while some loans were classified as long-term, contributing to lower working capital.
- The Sterling National Bank revolving facility was increased from $3.5 million to $5.0 million in January 2013; $2.7 million was outstanding at quarter-end. Its interest rate is 2% above prime, subject to a 6% floor, and the CEO provides a personal guarantee.
- The company repurchased 29,600 shares for approximately $37,800 under its buyback program, leaving 44,000 shares authorized for repurchase. It also received $4,690 from option exercises.
Outlook, risks, and contingencies
- Management expected existing cash, the Sterling credit line, and operating cash flows to fund operations for the next 12 months. The filing does not clearly state whether the one-year credit facility was renewed or extended beyond its stated term.
- The company had $1,944,950 of additional construction-loan commitments available for borrower drawdowns subject to conditions.
- Management reported no historical defaults or uncollectible loans and no loan impairments at March 31, 2013. However, some loans had been extended beyond original maturities amid real-estate financing difficulties; management reassesses collateral before extensions and cautions that future loans could default or prove uncollectible.
- Borrower-group concentration is notable: loans to entities associated with three individuals totaled $4.472 million, or 35.7% of the portfolio. The filing states these individuals were not related to company officers or directors; no single entity exceeded 10% of outstanding loans.
- The $500,000 senior secured notes bear interest at 6.63% and mature in December 2013. The company’s short-term loans are secured by certain loan assets; some also carry the CEO’s personal guarantee.
- A stockholder derivative action was approved for settlement and dismissed on April 2, 2013. The court awarded plaintiff’s counsel $80,000, payable by the company’s directors’ and officers’ insurance policy rather than the company.
- Forward-looking risks include integrating any acquired businesses, success of new operations and strategy, limited operating history in the new business, quarterly fluctuations, and growth challenges. Management reported disclosure controls were effective and no material change in internal control during the quarter.
Facts investors should verify
- Whether the Sterling credit line was renewed or replaced, its availability and covenants, and the related CEO guarantee.
- Repayment status, collateral values, and extension terms for loans past original maturity, including the concentrated borrower groups.
- Expected funding and drawdown timing for the $1.945 million construction-loan commitments and the repayment schedule for the December 2013 senior notes.
- Whether loan collections and operating cash flow can sustain lending growth while maintaining liquidity and meeting obligations.