Manhattan Bridge Capital, Inc. — Q3 2021 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2021; comparisons are with the corresponding 2020 periods. The company originates and services short-term, first-mortgage loans to real estate investors, primarily in the New York metropolitan area and Florida.
Financial results and position
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Revenue | $1.627 million | $1.786 million | $5.070 million | $5.239 million |
| Operating income | $1.105 million | $1.141 million | $3.261 million | $3.249 million |
| Net income | $1.110 million | $1.151 million | $3.274 million | $3.264 million |
| Basic and diluted EPS | $0.10 | $0.12 | $0.32 | $0.34 |
- Revenue declined 8.9% in Q3 and 3.2% year to date, mainly because of lower loan interest rates amid competition; higher origination fees partly offset the decline. Net income fell 3.6% in Q3 but edged up year to date.
- At September 30, loans receivable were $53.57 million, down from $58.10 million at December 31, 2020. Interest receivable was $995,384. The filing reports no loan impairments and says no borrower represented over 10% of outstanding loans.
- Cash was $109,692, with no restricted cash at quarter-end. Total assets were $55.12 million and stockholders’ equity was $45.11 million.
- Debt included $3.48 million outstanding under the credit line and $5.66 million of senior secured notes, net of deferred financing costs; the notes’ principal amount was $6.0 million. The credit line’s stated aggregate capacity was $32.5 million, subject to its terms and collateral requirements.
- For the nine months, operating cash flow was $3.15 million; investing cash flow was positive $4.52 million as loan collections exceeded new loan funding; financing cash flow was negative $8.02 million. Cash decreased by $349,445.
Changes, capital and distributions
- On July 9, the company issued 1.875 million shares at $7.20 per share, receiving approximately $12.354 million net. Proceeds were used to reduce the Webster credit line. Shares outstanding increased; weighted-average shares were 11.33 million in Q3 versus 9.63 million a year earlier.
- The credit-line balance fell from $20.31 million at December 31, 2020 to $3.48 million at September 30, 2021. The rate on the outstanding balance was approximately 4.1% at quarter-end. The company reported compliance with its covenants.
- The company paid $3.553 million in dividends during the first nine months. A declared $0.125-per-share cash dividend, totaling approximately $1.437 million, was paid October 15, 2021.
- Q3 interest expense and deferred financing-cost amortization fell 45.3% year over year, primarily due to lower credit-line borrowings and lower LIBOR. General and administrative expenses increased 9.8% in Q3.
Outlook, commentary and risks
- Management said cash balances, offering proceeds, the credit facility and operating cash flows were expected to fund operations for the next 12 months. It also expected working-capital needs to rise as it pursued portfolio growth. No earnings or revenue guidance was provided.
- Management described lower demand for new loans, more competition, and reduced interest rates and origination fees. It said the company had not been materially affected by COVID-19 to date, but warned that worsening conditions could materially affect results, collections, property values and loan extensions.
- At September 30, the company had $5.665 million of construction-loan commitments available for borrower drawdowns subject to conditions. Subsequent to quarter-end, $1.310 million of loans were paid off.
- The CEO voluntarily waived $76,250 of base salary for October–December 2021 to provide temporary liquidity. Key risks include limited funding for originations, competition, borrower and collateral risks, reliance on the CEO, and potential effects of COVID-19. The credit line has financial, collateral, dividend and other restrictive covenants; the notes also have collateral-coverage and change-of-control provisions.
- Management concluded disclosure controls were effective as of September 30, 2021 and reported no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether loan demand, pricing and portfolio growth recover amid increased competition, and the effect on interest and origination-fee revenue.
- Loan performance, collateral values, extensions and collections—particularly given loans originally due in prior years and the $5.665 million of conditional construction commitments.
- Available borrowing capacity under the credit line after collateral and covenant requirements, and the company’s liquidity after dividends and loan funding.
- The effect of the share offering on per-share earnings and dividends, and whether the CEO salary waiver is temporary or indicative of continuing liquidity needs.
- Potential COVID-19 effects and the company’s exposure to its CEO, borrower concentration, and credit-line and senior-note requirements.