Manhattan Bridge Capital, Inc. — Q1 2019 Form 10-Q
Reporting period: Three months ended March 31, 2019; unaudited consolidated results for the Company and its wholly owned subsidiary. The Company originates and manages short-term, secured real-estate loans, primarily first-mortgage loans to investors in the New York metropolitan area.
Financial results
| Metric | Q1 2019 | Q1 2018 / prior date |
|---|---|---|
| Interest income from loans | $1.503 million | $1.429 million |
| Origination fees | $285,000 | $235,000 |
| Total revenue | $1.788 million | $1.664 million |
| Operating costs and expenses | $670,000 | $684,000 |
| Income from operations | $1.118 million | $981,000 |
| Net income | $1.121 million | $981,000 |
| Basic and diluted EPS | $0.12 | $0.12 |
| Net cash from operating activities | $1.126 million | $1.024 million |
| Cash at period end | $175,000 | $204,000 at Dec. 31, 2018 |
| Loans receivable | $54.793 million | $54.836 million at Dec. 31, 2018 |
| Total assets | $55.800 million | $55.903 million at Dec. 31, 2018 |
| Stockholders’ equity | $33.221 million | $32.081 million at Dec. 31, 2018 |
Operating margin was approximately 62.5% (58.9% in Q1 2018); net margin was approximately 62.7% (58.9%). These are calculated from reported revenue and income figures. Revenue increased 7.5% and net income increased 14.3% year over year.
Debt, liquidity, and cash flow
- The $25 million secured Webster/Flushing credit facility had $16.417 million outstanding at March 31, 2019, at a reported 6.49% rate including the agency fee. The facility expires February 28, 2021, with a possible one-year extension subject to lender consent. The Company reported compliance with all covenants.
- Senior secured notes carry a 6% coupon and mature April 22, 2026. Their $6 million principal is reported net of deferred financing costs at $5.471 million. The notes include collateral coverage requirements and specified redemption and change-of-control provisions.
- Net cash used in financing activities was $1.349 million, including $1.159 million of dividends and approximately $205,000 of net credit-line repayments. Investing activities provided $43,000: $13.369 million of loan collections exceeded $13.326 million of new loan funding.
- Management expected cash balances, public-offering proceeds, the credit facility, and operating cash flows to fund operations for the next 12 months, while noting working-capital needs were expected to increase as the loan portfolio grows.
Portfolio, changes, and outlook
- Loans are generally one-year, fixed-rate loans bearing 10%–14% interest, secured principally by first mortgages and generally supported by personal guarantees. The portfolio totaled $54.793 million; no single borrower represented more than 10%.
- At quarter-end, $8.219 million of construction-loan commitments remained available for draws when specified conditions are met. Management reported no loan defaults or impairments; loans originally due in 2016–2018 were still outstanding but borrowers were paying interest. Approximately $1.548 million of loans were paid off after quarter-end.
- Revenue growth reflected increased lending activity and higher interest and origination-fee income. Lower interest and financing-cost expense was attributed primarily to lower credit-line borrowings following the July 2018 equity offering. General and administrative expense was broadly stable.
- The Company raised approximately $9.9 million net in its July 2018 public offering. It repurchased 1,000 shares for $5,644 during Q1 under a program authorizing up to 100,000 shares; 90,888 shares remained available at quarter-end.
- The Company elected REIT tax treatment and generally must distribute at least 90% of REIT taxable income to maintain qualification. The filing provides no specific earnings or portfolio-growth guidance.
Risks, contingencies, and other items
Forward-looking risks include limited funding constraining loan originations and revenue, competition, dependence on the CEO and potential short-term loans from him, collateral valuation and underwriting risk, borrower concentration, lender-liability claims, and the possibility of future defaults or uncollectible loans. Credit-line covenants restrict borrowing, dividends in certain circumstances, share repurchases, and other actions. Management reported effective disclosure controls and no material change in internal control over financial reporting during the quarter. The Company adopted lease accounting on January 1, 2019, recognizing a $124,801 right-of-use asset and matching lease liability; adoption was not considered material.
Key facts for investors to verify
- Loan-level maturity, extension, collateral valuation, and collection status, particularly for loans past original maturity.
- Availability under the secured credit facility after collateral and covenant limitations, and sensitivity to its floating interest rate.
- Funding needs for the $8.219 million construction-loan commitments and management’s projected working-capital increase.
- REIT distribution requirements, dividend sustainability, and restrictions under debt agreements.
- Potential credit losses despite management’s report of no defaults or impairments to date.