Broadway Financial Corporation (the “Company”)
(NASDAQ: BYFC), parent company of Broadway Federal Bank, f.s.b. (the “Bank”),
today reported first quarter net earnings of $607,000, or $0.32 per
diluted share, up $163,000, or 36.71%, when compared with net earnings
of $444,000, or $0.23 per diluted share, in the first quarter of 2007.
The increase in net earnings was primarily due to increased
interest-earning assets and a higher net interest margin.
Chief Executive Officer Paul C. Hudson stated, “Bank
earnings are benefiting from strong loan demand and increasing net
interest margins.” He went on to state, “Going
forward, we are focusing on deposit growth and asset credit quality.”
First Quarter Results:
Net interest income before provision for loan losses of $3.3 million
in the first quarter of 2008 was up $622,000, or 22.89%, from the
first quarter of 2007, primarily reflecting a higher level of average
interest-earning assets which increased $64.3 million, or 22.02%.
Loan originations were $37.8 million for the first quarter of 2008,
compared with loan originations of $21.6 million for the first quarter
of 2007. We do not originate or purchase sub-prime loans and we have
no sub-prime loans represented in our loan or investment portfolios.
Nonperforming assets at March 31, 2008 increased to 0.17% of total
assets from 0.01% of total assets at year-end 2007.
The provision for loan losses for the first quarter of 2008 was up
$138,000 from the first quarter of 2007 due to funding the allowance
for loan losses for the growth of the loan portfolio.
Non-interest income in the first quarter of 2008 was down $21,000, or
6.62%, from the first quarter of 2007, primarily due to lower loan
related fees which was partially offset by higher retail banking fees.
Non-interest expense in the first quarter of 2008 was up $197,000, or
8.56%, from the first quarter of 2007, primarily due to increases in
occupancy expense and other expense.
Net Interest Income
Net interest income before provision for loan losses of $3.3 million in
the first quarter of 2008 was up $622,000, or 22.89%, from the first
quarter a year ago. The increase was attributable to interest-earning
asset growth and net interest rate margin improvement. Interest-earning
assets averaged $356.6 million in the current quarter, up $64.3 million,
or 22.02%, from the same period a year ago. The annualized yield on
average interest-earning assets increased 19 basis points to 6.92% in
the current quarter from 6.73% a year ago. The annualized yield on
average loans improved 12 basis points to 7.22% in the first quarter of
2008 from 7.10% for the same period in 2007.
The annualized cost of average interest-bearing liabilities increased 16
basis points to 3.32% in the current quarter from 3.16% a year ago. The
annualized weighted average cost of FHLB borrowings increased 28 basis
points to 4.07% in the first quarter of 2008 from 3.79% for the same
period in 2007. The annualized weighted average cost of deposits
decreased slightly to 2.88% in the first quarter of 2008 from 2.89% for
the same period in 2007.
Annualized net interest rate margin increased 3 basis points to 3.75% in
the current quarter from 3.72% a year ago. The annualized net interest
rate spread increased 3 basis points to 3.60% in the current quarter
from 3.57% a year ago.
Provision and Allowance for Loan Losses
During the first quarter of 2008, the provision for loan losses amounted
to $158,000, compared to $20,000 a year ago. The increase was primarily
due to increased loan originations/volume. At March 31, 2008, the
allowance for loan losses was $2.2 million, or 0.69% of total gross
loans receivable, excluding loans held for sale, compared to $2.1
million, or 0.68% of total gross loans receivable, excluding loans held
for sale, at year-end 2007. Management believes that the allowance for
loan losses is adequate to cover probable incurred losses in the loan
portfolio as of March 31, 2008, but there can be no assurance that
actual losses will not exceed the estimated amounts. In addition, the
Office of Thrift Supervision (“OTS”)
and the Federal Deposit Insurance Corporation periodically review the
allowance for loan losses as an integral part of their examination
process. These agencies may require an increase to the allowance for
loan losses based on their judgments of the information available to
them at the time of their examination.
Non-Interest Income
Non-interest income totaled $296,000 in the first quarter of 2008, down
$21,000, or 6.62%, from the first quarter a year ago, primarily due to
lower loan related fees. The decrease in loan related fees primarily
resulted from lower loan referral fee income and loan service fee
income. Partially offsetting this decrease was higher retail banking
fees as our new branch became operational in February 2008.
Non-Interest Expense
Non-interest expense totaled $2.5 million in the first quarter of 2008,
up $197,000, or 8.56%, from the first quarter a year ago. The increase
in non-interest expense was primarily due to higher occupancy expense
and other expense. Occupancy expense increased $73,000, or 28.08%,
primarily due to the addition of the new branch. Other expense increased
$111,000, or 58.42%, primarily due to increases in donations,
sponsorships, promotion and FDIC insurance premiums. Partially
offsetting the increases in occupancy expense and other expense was a
$42,000, or 28.97%, decrease in professional services expenses,
primarily attributable to additional costs incurred in the first quarter
of 2007 related to staffing the new wealth management division.
Income Taxes
The effective income tax rate was 38.00% for the first quarter 2008
compared to 37.73% for the first quarter 2007.
Assets, Loan Originations, Deposits and Borrowings
At March 31, 2008, assets totaled $381.0 million, up $24.2 million, or
6.78%, from year-end 2007. During the current quarter, net loans,
including loans held for sale, increased $24.1 million, cash and cash
equivalents increased $1.4 million and FHLB stock increased $0.8
million, while securities held to maturity decreased $2.3 million.
Loan originations totaled $37.8 million in the current quarter, up $16.2
million, or 75.00%, from $21.6 million a year ago. Loan repayments,
including loan sales, amounted to $13.8 million in the first quarter of
2008, down $5.2 million, or 27.37%, from $19.0 million in the first
quarter of 2007.
Deposits totaled $235.1 million at March 31, 2008, up $6.3 million, or
2.77%, from year-end 2007. During the current quarter, our core deposits
(NOW, demand, money market and passbook accounts) increased $8.9 million
while our certificates of deposit decreased $2.6 million. At March 31,
2008, core deposits represented 43.32% of total deposits compared to
40.61% at December 31, 2007.
Since the end of 2007, FHLB borrowings increased $17.5 million, or
18.13%, to $114.0 million at March 31, 2008 from $96.5 million at
December 31, 2007. The Company continued to utilize FHLB advances to
fund loans as an additional alternative to retail deposits.
Asset Quality and Performance Ratios
Non-performing assets, consisting of non-accrual and delinquent loans 90
or more days past due, at March 31, 2008 were $645,000, or 0.17% of
total assets, compared to $34,000, or 0.01% of total assets, at December
31, 2007. During the first quarter of 2008, two loans totaling $611,000
were placed on non-accrual status. The new non-accrual loans included a
$601,000 loan secured by a 10-unit residential property located in Los
Angeles, California and a $10,000 commercial line of credit. No
significant losses are anticipated on these new non-accrual loans.
The annualized return on average equity for first quarter 2008 was
10.89%, compared to 8.66% for fourth quarter 2007 and 8.78% for first
quarter 2007. The annualized return on average assets for first quarter
2008 was 0.66%, compared to 0.55% for fourth quarter 2007 and 0.59% for
first quarter 2007. The efficiency ratio for first quarter 2008 was
68.72%, compared to 77.26% for fourth quarter 2007 and 75.84% for first
quarter 2007. The improvement in our returns on average equity and
average assets as well as our efficiency ratio was primarily due to
higher net earnings in the first quarter of 2008 as a result of the
strong growth in our interest earning assets which translated to higher
net interest income.
At March 31, 2008, the Bank’s Total
Risk-Based Capital ratio was 10.23% and the Bank met the capital
requirements necessary to be deemed “well-capitalized”
for regulatory purposes, but fell short of management’s
goal to keep the Total Risk-Based Capital ratio above 11.00%. In April
2008, the Company invested an additional $1.5 million into the Bank,
increasing the Bank’s Total Risk-Based
Capital ratio.
Forward-Looking Statements
Certain matters discussed in this news release may constitute
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. These forward-looking statements relate
to, among other things, expectations regarding the business environment
in which the Company operates, projections of future performance,
perceived opportunities in the market, and statements regarding
strategic objectives. These forward-looking statements are based upon
current management expectations, and involve risks and uncertainties.
Actual results or performance may differ materially from those
suggested, expressed, or implied by forward-looking statements due to a
wide range of factors including, but not limited to, the general
business environment, the real estate market, competitive conditions in
the business and geographic areas in which the Company conducts its
business, regulatory actions or changes and other risks detailed in the
Company’s reports filed with the Securities
and Exchange Commission, including the Company’s
Annual Reports on Form 10-KSB and Quarterly Reports on Form 10-QSB.
About Broadway Federal Bank
Broadway Federal Bank, f.s.b. is a community-oriented savings bank,
which primarily originates residential and commercial mortgage loans and
conducts funds acquisition in the geographic areas known as Mid-City and
South Los Angeles. The Bank operates five full service branches, four in
the city of Los Angeles, and one located in the nearby city of
Inglewood, California.
Shareholders, analysts and others seeking information about the Company
are invited to write to: Broadway Financial Corporation, Investor
Relations, 4800 Wilshire Blvd., Los Angeles, CA 90010, or visit our
website at www.broadwayfederalbank.com.
BROADWAY FINANCIAL CORPORATION
AND SUBSIDIARIES
Consolidated Balance Sheets
(Dollars in thousands)
(Unaudited)
March 31,
December 31,
2008
2007
ASSETS
Cash
$
5,695
$
4,331
Securities available for sale, at fair value
4,605
4,763
Securities held to maturity
26,894
29,184
Loans receivable held for sale, at fair value at March 31, 2008
and at lower of cost or fair value at December 31, 2007
12,601
3,554
Loans receivable, net of allowance of $2,205 and $2,051
315,087
300,024
Accrued interest receivable
2,068
1,867
Federal Home Loan Bank (FHLB) stock, at cost
5,358
4,536
Office properties and equipment, net
5,718
5,678
Bank owned life insurance
2,251
2,227
Other assets
720
643
Total assets
$
380,997
$
356,807
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
$
235,062
$
228,727
Federal Home Loan Bank advances
114,000
96,500
Junior subordinated debentures
6,000
6,000
Advance payments by borrowers for taxes and insurance
119
512
Deferred income taxes
941
926
Other liabilities
2,325
2,093
Total liabilities
358,447
334,758
Stockholders' Equity:
Preferred, non-cumulative and non-voting stock, $.01 par value,
authorized 1,000,000 shares; issued and outstanding 55,199 shares
of Series A, 100,000 shares of Series B and 76,950 shares of
Series C at March 31, 2008 and December 31, 2007
2
2
Common stock, $.01 par value, authorized 3,000,000 shares; issued
2,013,942 shares at March 31, 2008 and December 31, 2007;
outstanding 1,758,589 shares at March 31, 2008 and 1,761,778
shares at December 31, 2007
20
20
Additional paid-in capital
12,217
12,212
Accumulated other comprehensive income, net of taxes of $19 and $3
29
6
Retained earnings-substantially restricted
13,650
13,152
Treasury stock-at cost, 255,353 shares at March 31, 2008 and
252,164 shares at December 31, 2007
(3,368
)
(3,343
)
Total stockholders' equity
22,550
22,049
Total liabilities and stockholders' equity
$
380,997
$
356,807
BROADWAY FINANCIAL CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Operations and Comprehensive Earnings
(Dollars in thousands, except per share amounts)
(Unaudited)
Three Months ended March 31,
2008
2007
Interest and fees on loans receivable
$
5,684
$
4,405
Interest on mortgage-backed securities
369
401
Interest on investment securities
16
25
Other interest income
100
84
Total interest income
6,169
4,915
Interest on deposits
1,667
1,608
Interest on borrowings
1,163
590
Total interest expense
2,830
2,198
Net interest income before provision for loan losses
3,339
2,717
Provision for loan losses
158
20
Net interest income after provision for loan losses
3,181
2,697
Non-interest income:
Service charges
249
275
Net gains on mortgage banking activities
14
6
Other
33
36
Total non-interest income
296
317
Non-interest expense:
Compensation and benefits
1,447
1,428
Occupancy expense, net
333
260
Information services
172
161
Professional services
103
145
Office services and supplies
142
117
Other
301
190
Total non-interest expense
2,498
2,301
Earnings before income taxes
979
713
Income taxes
372
269
Net earnings
$
607
$
444
Other comprehensive income (loss), net of tax:
Unrealized gain (loss) on securities available for sale
$
39
$
(7
)
Income tax effect
(16
)
3
Other comprehensive income (loss), net of tax
23
(4
)
Comprehensive earnings
$
630
$
440
Net earnings
$
607
$
444
Dividends paid on preferred stock
(20
)
(32
)
Earnings available to common shareholders
$
587
$
412
Earnings per share-basic
$
0.33
$
0.25
Earnings per share-diluted
$
0.32
$
0.23
Dividends declared per share-common stock
$
0.05
$
0.05
Basic weighted average shares outstanding
1,760,054
1,637,438
Diluted weighted average shares outstanding
1,810,966
1,774,831
BROADWAY FINANCIAL CORPORATION
AND SUBSIDIARIES
Selected Ratios and Data
(Dollars in thousands)
As of March 31,
2008
2007
Regulatory Capital Ratios:
Core Capital
7.03
%
8.01
%
Tangible Capital
7.03
%
8.01
%
Tier 1 Risk-Based Ratio
9.46
%
11.25
%
Total Risk-Based Capital
10.23
%
12.04
%
Asset Quality Ratios and Data:
Non-performing loans as a percentage of total gross loans,
excluding loans held for sale
0.20
%
0.01
%
Non-performing assets as a percentage of total assets
0.17
%
0.01
%
Allowance for loan losses as a percentage of total gross loans,
excluding loans held for sale
0.69
%
0.70
%
Allowance for loan losses as a percentage of non-performing loans
341.86
%
5,147.06
%
Allowance for losses as a percentage of non-performing assets
341.86
%
5,147.06
%
Non-performing assets:
Non-accrual loans
$
645
$
34
Total non-performing assets
$
645
$
34
Three Months ended March 31,
2008
2007
Performance Ratios:
Return on average assets
0
.66%
(A)
0
.59%
(A)
Return on average equity
10
.89%
(A)
8
.78%
(A)
Average equity to average assets
6
.06%
6
.69%
Non-interest expense to average assets
2
.72%
(A)
3
.04%
(A)
Efficiency ratio (1)
68
.72%
75
.84%
Net interest rate spread (2)
3
.60%
(A)
3
.57%
(A)
Net interest rate margin (3)
3
.75%
(A)
3
.72%
(A)
(1)
Efficiency ratio represents non-interest expense divided by net
interest income plus non-interest income.
(2)
Net interest rate spread represents the difference between the
yield on average interest-earning assets and the cost of
interest-bearing liabilities.
(3)
Net interest rate margin represents net interest income as a
percentage of average interest-earning assets.
(A)
Annualized
BROADWAY FINANCIAL CORPORATION
AND SUBSIDIARIES
Support for Calculations
(Dollars in thousands)
Three Months ended March 31,
2008
2007
Total assets
$
380,997
$
304,693
Total gross loans, excluding loans held for sale
$
317,292
$
251,370
Total equity
$
22,550
$
20,392
Average assets
$
367,941
$
302,463
Average loans
$
315,016
$
248,009
Average equity
$
22,293
$
20,224
Average interest-earning assets
$
356,555
$
292,206
Average interest-bearing liabilities
$
341,412
$
278,561
Net income
$
607
$
444
Total income
$
3,635
$
3,034
Non-interest expense
$
2,498
$
2,301
Efficiency ratio
68.72
%
75.84
%
Non-accrual loans
$
645
$
34
REO, net
$
-
$
-
ALLL
$
2,205
$
1,750
REO-Allowance
$
-
$
-
Interest income
$
6,169
$
4,915
Interest expense
$
2,830
$
2,198
Net interest income
$
3,339
$
2,717
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