Broadway Financial Corporation (the “Company”) (NASDAQ Capital
Market: BYFC), parent company of Broadway Federal Bank, f.s.b. (the
“Bank”), today reported a net loss of $135 thousand, or ($0.01) per
diluted share, for the second quarter of 2019, compared to a net
loss of $127 thousand, or $0.00 per diluted share, for the second
quarter of 2018.
The increase in net loss during the second quarter of 2019
primarily resulted from an increase in interest expense of $561
thousand, which offset higher interest income of $451 thousand.
Also, results during the second quarter of 2019 were impacted by
higher compensation costs of $124 thousand and higher professional
services costs of $52 thousand, which were more than offset by a
loan loss provision recapture of $158 thousand and a decrease in
marketing expense of $54 thousand.
For the six months ended June 30, 2019, the Company reported net
income of $142 thousand, or $0.01 per share, compared to a net loss
of $211 thousand, or ($0.01) per share for the six months ended
June 30, 2018.
The increase in net income during the first half of 2019 was
primarily due to a grant of $233 thousand from the U.S. Department
of the Treasury’s Community Development Financial Institution
(“CDFI”) Fund, and a loan loss provision recapture of $348
thousand. These additional earnings were offset by a decrease of
$71 thousand in net interest income and an increase of $217
thousand in non-interest expense, primarily due to an increase in
professional fees and compensation costs, partially offset by
decrease in marketing, REO, occupancy and office related expenses,
as well as a lower provision for off balance sheet commitments
during the first half of 2019. There were no loan loss provisions
or recaptures during the first six months of 2018.
Chief Executive Officer, Wayne Bradshaw, commented, “Results in
the second quarter were impacted by the continuing challenges
created by the difficult interest rate environment, which
exacerbated the competitive conditions for both loan originations
and acquisition and retention of deposits. Nonetheless, we remain
committed to growing our interest earning asset base to achieve
better economies of scale by originating high quality loans,
primarily for multi-family residential properties in low to
moderate income communities in Southern California. During the
first half of the year we grew total assets by approximately 5%,
primarily through loan growth.”
“Also, we continue to improve the quality of our assets; during
the second quarter we completed the sale of our sole REO property
and decreased our non-performing loans to just 0.19% of our total
loans at June 30, 2019. The net result of these efforts is that the
Bank decreased its non-performing assets by 58%, or over $1
million, since the end of 2018. As of June 30, 2019, Broadway’s
non-performing assets were just $728 thousand, or 0.17% of the
Company’s total assets.”
“Also, I am pleased to report that we successfully had our CRA
rating reaffirmed as “Outstanding” by the Bank’s primary regulator
during the second quarter. This reaffirmation represents the 24th
consecutive year that Broadway has received the highest CRA
rating.”
“In addition, subsequent to the end of the second quarter we
successfully sold $22.7 million of the loans held for sale at June
30 that will be reported in the Company’s results for the third
quarter of 2019. Despite the difficult rate environment, we have
been able to consistently sell loans at a profit, which is a
testimony to the quality of our loan originations.”
“Finally, I wish to thank our team for their dedication and
tireless efforts to build value, and Broadway’s stockholders for
their continuing support of our mission.”
Net Interest Income
Net interest income for the second quarter of 2019 totaled $2.5
million, compared to $2.6 million for the second quarter of 2018.
The $110 thousand decrease in net interest income primarily
resulted from an increase in interest expense of $561 thousand
during the quarter primarily due to higher interest expense on all
deposits and borrowings types, which offset an increase in interest
income of $451 thousand during the quarter primarily due to higher
interest income on loans receivable.
During the second quarter of 2019, interest and fees on loans
receivable increased by $426 thousand due to an increase of $17.8
million in the average balance of loans receivable (including loans
held for sale), which increased interest income by $174 thousand,
and an increase of 27 basis points in loan yield, which increased
interest income by $252 thousand.
Interest on deposits increased by $412 thousand during the
second quarter of 2019 compared to the second quarter of 2018. The
increase was attributable to higher rates paid on all deposit
types, which caused interest expense on deposits to increase by
$371 thousand. In addition, the average total deposit balance
increased by $6.5 million, which led to an increase in interest
expense of $41 thousand.
Interest expense on FHLB advances increased by $145 thousand
during the second quarter of 2019 compared to the second quarter of
2018. The increase in interest expense on FHLB advances was
primarily due to an increase of $9.6 million in the average balance
of FHLB advances, which increased interest expense by $49 thousand,
and an increase of 51 basis points in the average cost of FHLB
advances, which increased interest expense by $96 thousand.
For the six months ended June 30, 2019, net interest income
decreased by $71 thousand to $5.3 million. The decrease in net
interest income during the period primarily resulted from an
increase in interest income of $1.1 million primarily due to higher
interest income on loans receivable, which more than offset an
increase in interest expense of $1.1 million primarily due to
higher interest expense on deposits and borrowings.
During the first half of 2019, interest and fees on loans
receivable increased by $1.0 million due to an increase of $18.5
million in the average balance of loans receivable (including loans
held for sale), which increased interest income by $369 thousand,
and an increase of 36 basis points in loan yield, which increased
interest income by $666 thousand.
During the first half of 2019, interest on deposits increased by
$808 thousand due to an increase of $3.2 million in the average
balance of deposits, which caused interest expense to increase by
$54 thousand, and an increase of 56 basis points attributable to
higher rates paid on all deposit types, which caused interest
expense on deposits to increase by $754 thousand.
During the first half of 2019, interest expense on FHLB advances
increased by $309 thousand due to an increase of $10.1 million in
the average balance of FHLB advances, which increased interest
expense by $101 thousand, and an increase of 56 basis points in the
average cost of FHLB advances, which increased interest expense by
$208 thousand.
The net interest margin decreased by 13 basis points to 2.57%
for the six months ended June 30, 2019 from 2.70% for the same
period in 2018, primarily due to higher rates paid on certificates
of deposit and FHLB advances, which offset higher rates earned on
the loan portfolio.
Loan Loss Provision
The Company recorded loan loss provision recaptures of $158
thousand during the second quarter of 2019 and $348 thousand during
the first six months of 2019. No loan loss provision or recapture
was recorded during the comparable periods of 2018. Loan loss
recoveries totaled $190 thousand during the first six months of
2019 compared to $114 thousand recorded in the same period of 2018.
There were no charge-offs during the first six months of 2019 and
2018. At June 30, 2019, the allowance for loan losses (“ALLL”) was
$2.8 million, or 0.78% of our gross loans receivable held for
investment compared to $2.9 million, or 0.82% at December 31, 2018.
The ALLL as a percentage of non-performing loans stood at 380.6% at
June 30, 2019 compared to 321.5% at December 31, 2018.
Non-interest Income
Non-interest income for the second quarter of 2019 totaled $139
thousand compared to $170 thousand for the second quarter of 2018.
Non-interest income decreased by $31 thousand primarily because the
Bank recorded lower miscellaneous fees during the second quarter of
2019 compared to the second quarter of 2018. Also, no loan sales
occurred during 2019, whereas the Bank recorded a gain on sale of
loans of $11 thousand during the second quarter of 2018.
For the six months ended June 30, 2019, non-interest income
totaled $515 thousand compared to $301 thousand for the same period
one year ago. The increase of $214 thousand in non-interest income
was primarily due to a grant of $233 thousand from the CDFI
Fund.
Non-interest Expense
Non-interest expense for the second quarter of 2019 totaled $3.0
million, compared to $2.9 million for the second quarter of 2018.
The increase of $99 thousand in non-interest expense during the
second quarter of 2019 compared to the same quarter of 2018 was
primarily due to increases of $124 thousand in compensation and
benefits expense and $52 thousand in professional services expense,
offset by decreases of $54 thousand in marketing expense and $30
thousand in REO expense.
Compensation and benefits expense increased by $124 thousand
during the second quarter of 2019 compared to the second quarter of
2018 largely because we deferred a lower amount of compensation
costs associated with loans originated for the portfolio.
Professional services expenses increased due to $31 thousand of
audit fees, $14 thousand of consulting services fees, and $7
thousand of legal fees.
For the six months ended June 30, 2019, non-interest expense
totaled $6.1 million, compared to $6.0 million for the same period
a year ago. The increase of $127 thousand in non-interest expense
was primarily due to an increase of $101 thousand in compensation
and benefits expense and an increase of $203 thousand in
professional services expenses, offset by decreases of $61 thousand
in REO expense, $65 thousand in marketing expense and $26 thousand
in occupancy and office related expenses, as well as a decrease in
the provision for off balance sheet loan commitments of $35
thousand. Professional services expenses increased due to $104
thousand of audit related fees, $18 thousand of consulting services
fees and $81 thousand of legal fees.
Income Taxes
Income tax expense or benefit is computed by applying the
statutory federal income tax rate of 21% and the California income
tax rate of 10.84% to taxable income. The Company recorded income
tax benefits of $128 thousand and $86 thousand for the three and
six months ended June 30, 2019, respectively, compared to income
tax benefits of $54 thousand and $97 thousand for the three and six
months ended June 30, 2018, respectively. The Company’s effective
income tax benefits were 48.7% and 29.8% of our pretax losses for
the three months ended June 30, 2019 and 2018, respectively. For
the six months ended June 30, 2019 and 2018, the income tax
benefits were 153.7% and 31.5% of our taxable income and pretax
losses, respectively. The variations in the effective benefit rates
are attributable to the Company’s low-income housing tax credits.
The Company had no valuation allowance on its deferred tax assets,
which totaled $5.0 million at both June 30, 2019 and December 31,
2018.
Balance Sheet Summary
Total assets increased by $20.4 million to $429.8 million at
June 30, 2019 from $409.4 million at December 31, 2018. The
increase in total assets was primarily comprised of an increase of
$19.9 million in loans receivable held for sale and an increase of
$3.5 million in cash and cash equivalents. These increases were
offset by a decrease of $2.2 million in loans held for investment
and a decrease of $833 thousand in REO.
Loans receivable held for sale totaled $26.1 million at June 30,
2019, compared to $6.2 million at December 31, 2018. The increase
was primarily due to $10.2 million of new loans originations for
sale during the second quarter of 2019 and $10.7 million of loans
transferred from the loans held for investment portfolio during the
second quarter of 2019 for loan concentration management purposes.
In addition, one loan which totaled $1.1 million was transferred to
the loans held for investment portfolio at fair value during the
first quarter of 2019. Repayments of loans receivable held for sale
totaled $57 thousand during the first half of 2019.
Loans receivable held for investment, net of the allowance for
loan losses, totaled $353.3 million at June 30, 2019, compared to
$355.6 million at December 31, 2018. During the first half of 2019,
the Bank originated $27.0 million in loans held for investment, and
transferred a balance of $9.6 million to loans held for sale. Loan
repayments during the first half of 2019 totaled $20.1 million.
Deposits increased to $295.8 million at June 30, 2019 from
$281.4 million at December 31, 2018, which consisted primarily of
an increase of $13.0 million in certificates of deposit and a net
increase of $6.6 million in two-way CDARS, offset by a decrease of
$5.9 million in liquid deposits (NOW, demand, money market and
passbook accounts) and a decrease of $602 thousand in deposits
gathered from a deposit listing service.
FHLB advances increased to $75.0 million at June 30, 2019 from
$70.0 million at December 31, 2018 as the Bank took on a new
three-year advance to fund new loans.
Stockholders' equity was $49.0 million, or 11.40% of the
Company’s total assets, at June 30, 2019, compared to $48.4
million, or 11.83% of the Company’s total assets at December 31,
2018. The Company’s book value was $1.76 per share as of June 30,
2019, compared to $1.77 per share as of December 31, 2018.
At June 30, 2019, the Bank’s Total Capital ratio was 19.86% and
its Leverage ratio (Tier 1 Capital to adjusted total assets) was
11.83%, compared to a Total Capital ratio of 20.48% and a Leverage
ratio of 12.03% at December 31, 2018.
About Broadway Financial Corporation
Broadway Financial Corporation conducts its operations through
its wholly-owned subsidiary, Broadway Federal Bank, f.s.b., which
is the leading community-oriented savings bank in Southern
California serving low-to-moderate income communities. We offer a
variety of residential and commercial real estate loan products for
consumers, businesses, and non-profit organizations, other loan
products, and a variety of deposit products, including checking,
savings and money market accounts, certificates of deposits and
retirement accounts. The Bank operates three full service branches,
two 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, 5055 Wilshire Blvd., Suite 500, Los Angeles, CA
90036, or visit our website at www.broadwayfederalbank.com.
This press release contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of
1995. These forward-looking statements are based upon our
management’s current expectations, and involve risks and
uncertainties. Actual results or performance may differ materially
from those suggested, expressed, or implied by the 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-K and Quarterly Reports on Form
10-Q. The Company undertakes no obligation to revise any
forward-looking statement to reflect any future events or
circumstances, except to the extent required by law.
BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY Selected
Financial Data and Ratios (Unaudited) (Dollars in thousands,
except per share data) June 30, 2019 December
31, 2018 Selected Financial Condition Data and Ratios:
Cash and cash equivalents
$
20,146
$
16,651
Securities available-for-sale, at fair value
14,110
14,722
Loans receivable held for sale
26,085
6,231
Loans receivable held for investment
356,113
358,485
Allowance for loan losses
(2,771
)
(2,929
)
Loans receivable held for investment, net of allowance
353,342
355,556
Total assets
429,844
409,397
Deposits
295,798
281,414
FHLB advances
75,000
70,000
Junior subordinated debentures
4,845
5,100
Total stockholders' equity
49,016
48,436
Book value per share
$
1.76
$
1.77
Equity to total assets
11.40
%
11.83
%
Asset Quality Ratios: Non-accrual loans to total
loans
0.19
%
0.25
%
Non-performing assets to total assets
0.17
%
0.43
%
Allowance for loan losses to total gross loans
0.78
%
0.82
%
Allowance for loan losses to total delinquent loans
380.63
%
8368.57
%
Allowance for loan losses to non-performing loans
380.63
%
321.51
%
Non-Performing Assets: Non-accrual loans
$
728
$
911
Loans delinquent 90 days or more and still accruing
-
-
Real estate acquired through foreclosure
-
833
Total non-performing assets
$
728
$
1,744
Three Months Ended June 30, Six
Months Ended June 30, Selected Operating Data and
Ratios:
2019
2018
2019
2018
Interest income
$
4,085
$
3,634
$
8,458
$
7,392
Interest expense
1,623
1,062
3,183
2,046
Net interest income
2,462
2,572
5,275
5,346
Loan loss provision recapture
158
-
348
-
Net interest income after loan loss provision recapture
2,620
2,572
5,623
5,346
Non-interest income
139
170
515
301
Non-interest expense
(3,022
)
(2,923
)
(6,082
)
(5,955
)
Income (loss) before income taxes
(263
)
(181
)
56
(308
)
Income tax expense (benefit)
(128
)
(54
)
(86
)
(97
)
Net income (loss)
$
(135
)
$
(127
)
$
142
$
(211
)
Earnings per common share-diluted
$
(0.01
)
$
-
$
-
$
(0.01
)
Loan originations (1)
$
17,793
$
41,783
$
37,265
$
56,795
Net recoveries to average loans
(0.00
)%
(2
)
(0.00
)%
(2
)
(0.10
)%
(2
)
(0.06
)%
(2
)
Return on average assets
-0.13
%
(2
)
-0.13
%
(2
)
0.07
%
(2
)
-0.10
%
(2
)
Return on average equity
-1.10
%
(2
)
-1.07
%
(2
)
0.58
%
(2
)
-0.89
%
(2
)
Net interest margin
2.40
%
(2
)
2.62
%
(2
)
2.57
%
(2
)
2.70
%
(2
)
(1
)
Does not include net deferred origination costs.
(2
)
Annualized
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190807005245/en/
Brenda J. Battey, Chief
Financial Officer, (323) 556-3264; or
investor.relations@broadwayfederalbank.com
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