Loan Originations Totaled $90 million for
the first half of 2017
Broadway Financial Corporation (the “Company”) (NASDAQ Capital
Market: BYFC), parent company of Broadway Federal Bank, f.s.b. (the
“Bank”), today reported net income of $533 thousand, or $0.02
per diluted share, for the second quarter of 2017, compared to
net income of $319 thousand, or $0.01 per diluted share, for
the second quarter of 2016.
For the six months ended June 30, 2017, the Company reported net
income of $1.8 million, or $0.07 per diluted share, compared to
$952 thousand, or $0.03 per diluted share for the six months ended
June 30, 2016.
The increase in net income during the three months ended June
30, 2017 compared to the second quarter of 2016 primarily resulted
from higher net interest income, higher recaptures of loan loss
provisions, higher non-interest income primarily from gains on
sales of loans, and lower non-interest expense, which reflected a
reversal to reduce a liability for deferred compensation due to a
former executive by $700 thousand. These increases in net income in
the second quarter of 2017 compared to the second quarter of 2016
were partially offset by an increase in income tax expense of $432
thousand.
The increase in net income for the six months ended June 30,
2017 compared to the first half of 2016 primarily reflected higher
non-interest income, which reflected a settlement of insurance
litigation that increased non-interest income by $1.2 million in
the first quarter, and gains on sales of loans. In addition, net
income increased during the first half of 2017 because of higher
net interest income of $569 thousand, higher recaptures of loan
loss provisions, and lower non-interest expense, partially offset
by an increase in income tax expense of $934 thousand. During 2016,
the Company did not report material income tax expense because of
adjustments to the valuation allowance for deferred tax assets.
Chief Executive Officer, Wayne Bradshaw commented, “I am pleased
to announce that Broadway originated approximately $40 million in
new multi-family loans during the second quarter, bringing our
total originations for the first half of 2017 to $90 million. These
results demonstrate our leadership position within the market for
loans secured by well-managed, multi-family, residential properties
located within low-to-moderate income communities within Southern
California. Despite continuing competitive market conditions. a
flattening yield curve, and overall low interest rates, which have
created challenges for increasing interest rate margins, our team
has been able to increase Broadway’s interest income and net
interest income, while maintaining high asset quality and strong
capital ratios.
“During the remainder of 2017, we expect to originate a
combination of loans for investment and loans for sale as we
balance our loan growth with the loan concentration guidelines
established by the Bank’s primary regulator. Also, we plan to
re-deploy cash from loan sales into purchases of single family
loans to help grow interest income. Regardless of the Bank’s asset
mix, we will continue to leverage our lending team’s expertise,
experience, and customer relationships to drive growth in earnings
and create value for our stockholders.”
Net Interest Income
Net interest income for the second quarter of 2017 totaled $3.0
million, compared to $2.8 million for the second quarter of 2016.
The increase in net interest income of $161 thousand primarily
resulted from an increase in the average balance of loans
receivable (including loans held for sale), which was partially
offset by a decrease in the net interest margin.
During the second quarter of 2017, the average balance of loans
receivable increased by $64.1 million, which increased interest
income by $654 thousand. However, the average yield on loans
decreased by 34 basis points compared to the second quarter of
2016, which reduced interest income by $301 thousand. The decrease
in the average yield on loans primarily resulted from the payoff of
loans with higher rates than those originated over the last year.
The lower rates on loan originations primarily reflect the low
interest rate environment and competitive market conditions.
The increase of $353 thousand in interest income on loans was
partially offset by higher interest expense on deposits and FHLB
advances for the second quarter of 2017 compared to the second
quarter of 2016. Interest expense on deposits increased by $86
thousand, primarily due to an increase of $34.2 million in the
average balance of deposits and an increase of 2 basis points in
the average cost of deposits compared to the second quarter of
2016. The higher average balance of deposits increased interest
expense by $71 thousand and the higher average cost of deposits
increased interest expense by $15 thousand. Interest expense on
FHLB advances increased by $109 thousand, primarily due to an
increase of $29.4 million in the average balance of FHLB advances,
which increased interest expense by $148 thousand, offset in part
by a decrease of 20 basis points in the average cost of FHLB
advances, which reduced interest expense by $39 thousand.
For the six months ended June 30, 2017, net interest income
increased by $569 thousand to $6.1 million from $5.5 million for
the same period a year ago, as the impact of a higher average
balance of interest-earning assets more than offset the impact of a
lower net interest margin. Average interest-earning assets
increased by $53.2 million to $434.9 million for the six months
ended June 30, 2017 from $381.7 million for the same period in
2016. The net interest margin decreased by 9 basis points to 2.80%
for the six months ended June 30, 2017 from 2.89% for the same
period in 2016, primarily due to the decline in average yield on
loans.
Loan Loss Provision Recapture
The Company recorded a loan loss provision recapture of $300
thousand for the second quarter of 2017, compared to $250 thousand
for the second quarter of 2016. The loan loss provision recaptures
during both quarters were primarily due to payoffs and recoveries
of problem loans, as well as continued improvement in the overall
quality of the Bank’s loan portfolio. At June 30, 2017, the
allowance for loan losses (“ALLL”) was $4.2 million, or 1.20% of
our gross loans receivable held for investment, which is the same
percentage as of December 31, 2016.
Non-interest Income
Non-interest income for the second quarter of 2017 totaled $322
thousand, compared to $199 thousand for the second quarter of 2016.
Non-interest income increased by $123 thousand primarily because
the Bank recorded a gain of $196 thousand from the sale of loans
during the second quarter of 2017, whereas the Bank did not sell
any loans during the second quarter of 2016. This increase was
partially offset by a decrease of $20 thousand in service charges
on deposit accounts and a decrease of $50 thousand in loan
extension fees, compared to the second quarter of 2016.
For the six months ended June 30, 2017, non-interest income
totaled $1.7 million, compared to $742 thousand for the same period
a year ago. The increase of $939 thousand in non-interest income
was primarily due to a $1.2 million litigation settlement and a
gain of $223 thousand from the sale of loans during the first half
of 2017. These increases were partially offset by a $265 thousand
grant received from the U.S. Department of the Treasury’s Community
Development Financial Institutions (CDFI) Fund during the first
half of 2016. Additionally, the results for the first half of 2016
included an unusually large early withdrawal fee that generated
income of $80 thousand, a loan extension fee of $50 thousand, and a
foreclosure forbearance fee of $38 thousand.
Non-interest Expense
Non-interest expense for the second quarter of 2017 totaled $2.7
million, compared to $3.0 million for the second quarter of 2016.
The decrease of $303 thousand in non-interest expense during the
second quarter of 2017 was primarily due to a decrease of $381
thousand in compensation and benefits expense, primarily resulting
from a reversal to reduce a deferred compensation liability due to
a former executive by $700 thousand, which was partially offset by
an increase of $81 thousand in stock based compensation expense and
a net increase of $228 thousand in salary expense. Additionally,
professional services expense decreased by $89 thousand during the
second quarter of 2017 compared to the second quarter of 2016,
primarily because the Bank incurred $60 thousand of expense related
to a third-party review of its loan portfolio in 2016. These
decreases in non-interest expense during the second quarter of 2017
were partially offset by payment of $139 thousand of expenses
related to the U.S. Treasury’s sale of a portion of its holdings of
the Company’s shares to two Southern California based banks.
For the six months ended June 30, 2017, non-interest expense
totaled $5.7 million, compared to $5.9 million for the same period
a year ago. The decrease of $139 thousand in non-interest expense
was primarily due to a decrease of $297 thousand in compensation
and benefits expense which was partially offset by an increase of
$128 thousand in other non-interest expenses, as discussed
above.
Income Taxes
Income taxes are computed by applying the statutory federal
income tax rate of 34% and the California income tax rate of 10.84%
to taxable income. The Company recorded income tax expense of $423
thousand and $936 thousand for the three and six months ended June
30, 2017, respectively, compared to $0 and $2 thousand for the
three and six months ended June 30, 2016, respectively. The
Company’s effective income tax rate was 44.2% and 34.7% for the
three and six months ended June 30, 2017, respectively, compared to
0 for the comparable periods in 2016. The tax expense for 2016
primarily reflected the statutory minimum taxes payable to the
State of California and the existence of and adjustment to the
valuation allowance on deferred tax assets. The Company had no
valuation allowance on its deferred tax assets, which totaled $6.0
million and $6.9 million at June 30, 2017 and December 31, 2016,
respectively.
Balance Sheet Summary
Total assets increased by $6.4 million to $435.5 million at June
30, 2017 from $429.1 million at December 31, 2016. The growth in
assets included an increase of $39.0 million in loans receivable
held for sale which was partially offset by a decrease of $29.1
million in loans receivable held for investment, a decrease of $1.6
million in cash and cash equivalents, a decrease of $1.2 million in
securities available-for-sale and a decrease of $932 thousand in
deferred tax assets.
The Bank originated multi-family loans for sale rather than
investment during the first half of 2017 in order to comply with
the loan concentration guidelines established by its primary
regulator. During the first half of 2017, loans held for sale
included $85.9 million of originations, net of loans sold totaling
$46.6 million and loan repayments totaling $200 thousand. The Bank
had no loans receivable held for sale during 2016.
Loans receivable held for investment, net of the allowance for
loan losses, totaled $350.3 million at June 30, 2017, compared to
$379.5 million at December 31, 2016. During the first half of 2017,
the Bank originated for portfolio $4.2 million in multi-family
loans, compared to $59.9 million during the first half of 2016.
Loan repayments during the first half of 2017 totaled $33.9
million, compared to $23.5 million during the first half of
2016.
Deposits decreased to $273.8 million at June 30, 2017 from
$287.4 million at December 31, 2016, which consisted of an increase
of $8.2 million in core deposits (NOW, demand, money market and
passbook accounts) and a decrease of $21.8 million in certificates
of deposit, primarily in QwickRate CDs. FHLB advances increased to
$104.0 million at June 30, 2017 from $85.0 million at December 31,
2016, as the Bank borrowed $19.0 million from the FHLB to fund loan
originations and payment of maturing deposits.
Stockholders' equity was $47.5 million, or 10.92% of the
Company’s total assets, at June 30, 2017, compared to $45.5
million, or 10.61% of the Company’s total assets, at December 31,
2016. The Company’s book value was $1.73 per share as of June 30,
2017, compared to $1.66 per share as of December 31, 2016.
At June 30, 2017, the Bank’s Total Capital ratio was 17.12% and
its Leverage ratio (Tier 1 Capital to adjusted total assets) was
10.51%, compared to a Total Capital ratio of 16.62% and a Leverage
ratio of 10.60% at December 31, 2016.
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, 2017 December 31, 2016 Selected Financial
Condition Data and Ratios: Cash and cash equivalents $ 16,835 $
18,430 Securities available-for-sale, at fair value 12,029 13,202
Loans receivable held for sale 39,037 - Loans receivable held for
investment 354,554 384,057 Allowance for loan losses (4,246
) (4,603 ) Loans receivable held for investment, net of
allowance 350,308 379,454 Total assets 435,495 429,083 Deposits
273,847 287,427 FHLB advances 104,000 85,000 Junior subordinated
debentures 5,100 5,100 Total stockholders' equity 47,544 45,526
Book value per share $ 1.73 $ 1.66 Equity to total assets
10.92 % 10.61 %
Asset Quality Ratios: Non-accrual
loans to total loans 0.71 % 0.77 % Non-performing assets to total
assets 0.64 % 0.69 % Allowance for loan losses to total gross loans
1.20 % 1.20 % Allowance for loan losses to total delinquent loans
254.25 % 331.63 % Allowance for loan losses to non-performing loans
152.84 % 156.35 %
Non-Performing Assets: Non-accrual
loans $ 2,778 $ 2,944 Loans delinquent 90 days or more and still
accruing - - Real estate acquired through foreclosure -
- Total non-performing assets $ 2,778 $
2,944
Three Months Ended June
30, Six Months Ended June 30, Selected Operating Data
and Ratios: 2017 2016
2017 2016 Interest income
$ 4,136 $ 3,773 $ 8,273 $ 7,388 Interest expense 1,134
932 2,192 1,876
Net interest income 3,002 2,841 6,081 5,512 Loan loss provision
recapture 300 250 650
550 Net interest income after loan loss provision
recapture 3,302 3,091 6,731 6,062 Non-interest income 322 199 1,681
742 Non-interest expense (2,668 ) (2,971 )
(5,711 ) (5,850 ) Income before income taxes 956 319 2,701
954 Income tax expense 423 - 936
2 Net income $ 533 $ 319 $ 1,765
$ 952 Earnings per common share-basic and
diluted $ 0.02 $ 0.01 $ 0.07 $ 0.03 Loan originations (1) $
39,498 (2 ) $ 32,082 $ 90,143 (2 ) $ 59,930 Net recoveries
to average loans (0.16 )% (3 ) (0.31 )% (3 ) (0.15 )% (3 ) (0.16 )%
Return on average assets 0.47 % (3 ) 0.33 % (3 ) 0.79 % (3 ) 0.49 %
Return on average equity 4.51 % (3 ) 2.71 % (3 ) 7.60 % (3 ) 4.07 %
Net interest margin 2.72 % (3 ) 2.99 % (3 ) 2.80 % (3 ) 2.89 %
(1 ) Does not include net deferred origination costs.
(2 ) Includes loans held for sale originations of $37.2 million and
$85.9 million for the three and six months ended June 30, 2017,
respectively. (3 ) Annualized
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version on businesswire.com: http://www.businesswire.com/news/home/20170731005996/en/
Broadway Financial CorporationBrenda J. Battey, Chief Financial
Officer(323) 556-3264investor.relations@broadwayfederalbank.com
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