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 $277 thousand, or $0.01
per diluted share, for the first quarter of 2019, compared to
a net loss of $84 thousand, or ($0.00) per diluted share, for
the first quarter of 2018.
The higher earnings during the first quarter of 2019 compared to
the first quarter of 2018 primarily resulted from an increase of
$245 thousand in non-interest income as the Bank received a grant
of $233 thousand from U.S. Department of the Treasury’s Community
Development Financial Institution (“CDFI”) Fund. In addition,
during the first quarter of 2019, the Company’s reported income was
enhanced by a loan loss provision recapture of $190 thousand and
interest recoveries of $351 thousand due to the payoff of two
non-accrual loans. There were no recaptures or recoveries recorded
during the first quarter of 2018.
Chief Executive Officer, Wayne Bradshaw, commented, “I am
pleased to announce that Broadway was profitable during the first
quarter of 2019, despite a difficult interest rate environment that
has continued to compress net interest margins for the banking
industry. Our team generated higher loan origination volumes during
the first quarter compared to the first quarter of 2018, and we are
continuing to modify the Bank’s mix of loans by reinvesting payoffs
into originations of new multi-family loans and non-multi-family
commercial real estate loans, including construction loans, which
typically generate superior margins to those earned from the Bank’s
prime single-family residential loans.”
“While adjusting our loan portfolio, we remain vigilant in
maintaining the high quality of the Bank’s assets. During the first
quarter, the Bank decreased non-accrual loans to 0.21% of the
Bank’s total loans at the end of March, compared to 0.25% at the
end of 2018. In addition, shortly after the end of the quarter we
completed the sale of the Bank’s sole REO property, which will
lower expenses moving forward.”
“I also wish to mention that on May 1st, the U.S. Treasury sold
the remaining 2.7 million voting common shares that it owned in
Broadway, which were the last remnants of the U.S. Treasury’s TARP
investments in Broadway in 2008 and 2009. These shares represented
approximately 14.1% of our total voting shares and 9.7% of the
Company’s total equity at March 31, 2019 and were sold to two
purchasers in separate transactions.”
“Our dedicated team remains focused on Broadway’s mission, which
includes addressing the unrelenting demand for affordable housing,
particularly within the Bank’s target market of low to moderate
income communities in Southern California.”
Net Interest Income
For the first quarter of 2019, net interest income was $2.8
million, which was substantially the same as the net interest
income for the first quarter of 2018. Average interest-earning
assets increased by $11.0 million compared to the first quarter of
the prior year, but this increase was offset by a decrease of 4
basis points in the net interest margin.
Interest income on loans receivable increased by $606 thousand
to $4.1 million for the first quarter of 2019, from $3.5 million
for the first quarter of 2018. Higher interest income on loans
receivable for the first quarter of 2019 resulted from an increase
of $19.1 million in the average balance of loans receivable, which
increased interest income by $195 thousand. Additionally, the
average yield on loans receivable during the first quarter of 2019
increased by 45 basis points compared to the first quarter of 2018,
which increased interest income by $411 thousand, of which $351
thousand related to interest recoveries on payoffs of non-accrual
loans during the first quarter of 2019.
Interest income on securities decreased by $11 thousand to $98
thousand for the first quarter of 2019, from $109 thousand for the
first quarter of 2018, due to a decrease of $2.6 million in the
average balance of securities offset by an increase of 15 basis
points in the average yield on securities.
Other interest income increased by $20 thousand to $160 thousand
for the first quarter of 2019, from $140 thousand for the first
quarter of 2018. The increase of $20 thousand in other interest
income was due to an increase in interest earned on
interest-bearing deposits in other banks, primarily reflecting an
increase of 99 basis points in the average rate earned, offset by a
lower average balance of $5.5 million for the first quarter of 2019
compared to the first quarter of 2018. There was no change in
dividends earned on FHLB stock during the first quarter of 2019
compared to the first quarter of 2018.
Interest expense on deposits increased by $396 thousand to $1.0
million for the first quarter of 2019, from $631 thousand for the
first quarter of 2018. The higher interest expense on deposits for
the first quarter of 2019 primarily resulted from an increase of 55
basis points in the average cost of deposits, which increased
interest expense by $381 thousand. The increase in the average cost
of deposits primarily resulted from higher rates paid on
certificates of deposit due to rising short term interest rates and
competitive pricing pressures.
Interest expense on borrowings increased by $180 thousand to
$533 thousand for the first quarter of 2019, from $353 thousand for
the first quarter of 2018. The higher interest expense on
borrowings for the first quarter of 2019 primarily resulted from an
increase of 62 basis points in the average cost of FHLB advances,
which increased interest expense by $112 thousand, and an increase
of $10.7 million in the average balance of FHLB advances, which
increased interest expense by $54 thousand. Additionally, the
interest rate on the Company’s junior subordinated floating rate
debentures increased by 110 basis points during the first quarter
of 2019 compared to the first quarter of 2018, which resulted in
additional interest expense of $14 thousand.
Loan Loss Provision Recapture
During the first quarter of 2019, the Bank recorded a loan loss
provision recapture of $190 thousand. No recapture was recorded
during the first quarter of 2018. The loan loss provision recapture
for the first quarter of 2019 primarily resulted from cash
recoveries upon the full payoff of two partially charged off church
loans. The allowance for loan and lease losses (“ALLL”)
requirements for new loan originations were provided by loan
payoffs and improvement in historical loss factors. At March 31,
2019, the ALLL was $2.9 million, or 0.80% of our gross loans
receivable held for investment, compared to $2.9 million, or 0.82%
of our gross loans receivable held for investment at December 31,
2018. At March 31, 2019, the ALLL as a percentage of non-performing
loans increased to 374.55% from 321.51% at the end of 2018 as the
Bank decreased total non-performing loans by $129 thousand during
the first quarter.
Non-interest Income
Non-interest income for the first quarter of 2019 totaled $376
thousand, compared to $131 thousand for the first quarter of 2018.
The increase in non-interest income of $245 thousand was primarily
due to a grant of $233 thousand received from the CDFI Fund in the
first quarter of 2019.
Non-interest Expense
Total non-interest expense was $3.1 million for the first
quarter of 2019, compared to $3.0 million for the first quarter of
2018. Overall, non-interest expense increased by $28 thousand,
primarily reflecting an increase of $86 thousand in loan review
expense, partially offset by a decrease of $32 thousand in the
reserve for off balance sheet commitments, a decrease of $11
thousand in marketing expense, and a decrease of $15 thousand in
other corporate expenses.
Income Taxes
Income taxes are 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 expense of $42
thousand for the first quarter of 2019. The Company’s effective
income tax rate was 13.20% for the first quarter of 2019, due to
the availability of low-income housing tax credits. The Company had
no valuation allowance on its deferred tax assets, which totaled
$4.9 million and $5.0 million at March 31, 2019 and December 31,
2018, respectively.
Balance Sheet Summary
Total assets increased by $11.8 million to $421.2 million at
March 31, 2019 from $409.4 million at December 31, 2018. The
increase in total assets primarily consisted of an increase of $9.4
million in loans receivable held for investment, an increase of
$2.6 million in cash and cash equivalents partially offset by a
decrease of $1.1 million in securities available-for-sale.
Loans held for investment, net of the allowance for loan losses,
totaled $365.0 million at March 31, 2019, compared to $355.6
million at December 31, 2018. During the first quarter of 2019, the
Bank originated $18.0 million of multi-family loans and $1.1
million of commercial real estate loans for loans held for
investment and transferred $1.1 million of multi-family loan from
loans held for sale to loans held for investment. No loans were
originated for sale during the first quarter of 2019 or 2018. Loan
repayments during the first quarter of 2019 totaled $11.7 million,
compared to $20.4 million during the first quarter of 2018.
The Bank contracted to sell its sole REO property during March
of 2019, and escrow closed in April of 2019. The Bank recorded an
additional valuation allowance of $13 thousand related to this REO
property during the first quarter of 2019 to reduce the carrying
value at March 31, 2019 to the net proceeds received from the sale
of the property in April.
Deposits increased to $286.7 million at March 31, 2019 from
$281.4 million at December 31, 2018, which consisted of an increase
of $8.0 million in certificates of deposit (“CDs”), primarily in
Certificate of Deposit Account Registry Service (“CDARS”) accounts,
partially offset by a decrease of $2.8 million in liquid
deposits.
Total borrowings at March 31, 2019 and December 31, 2018
consisted of advances to the Bank from the FHLB of $75.0 million
and $70 million, respectively, and $5.1 million of subordinated
floating rate debentures issued by the Company.
Stockholders' equity was $49.0 million, or 11.62% of the
Company’s total assets, at March 31, 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 and $1.77 per share as of
March 31, 2019 and December 31, 2018, respectively. During the
first quarter of 2019, the Company issued 428,796 shares of
restricted common stock to certain executive officers and
employees.
At March 31, 2019, the Bank’s Total Capital ratio (Total Capital
to Total Risk-Weighted Assets) was 20.55%, and its Leverage ratio
(Tier 1 Capital to Adjusted Total Assets) was 11.99%, 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 deposit and
retirement accounts. The Bank operates three full service branches,
two in the city of Los Angeles, California, 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. Forward-looking statements may include, but are not limited
to, the use of forward-looking language, such as “likely result
in,” “expects,” “anticipates,” “estimates,” “forecasts,”
“projects,” “intends to,” “assumes,” or may include other similar
words or phrases, such as “believes,” “plans,” “trend,”
“objective,” “continues,” “remains,” or similar expressions, or
future or conditional verbs, such as “will,” “would,” “should,”
“could,” “may,” “might,” “can,” or similar verbs, and the negative
thereof. 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, monetary and fiscal policy 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)
March 31, 2019 December 31, 2018
Selected Financial Condition Data and Ratios: Cash and cash
equivalents $ 19,225 $ 16,651 Securities available-for-sale, at
fair value 14,517 14,722 Loans receivable held for sale 5,154 6,231
Loans receivable held for investment 367,944 358,485 Allowance for
loan losses (2,929 ) (2,929 ) Loans receivable held
for investment, net of allowance 365,015 355,556 Total assets
421,163 409,397 Deposits 286,654 281,414 FHLB advances 75,000
70,000 Junior subordinated debentures 5,100 5,100 Total
stockholders' equity 48,951 48,436 Book value per share $
1.76 $ 1.77 Equity to total assets 11.62 % 11.83 %
Asset
Quality Ratios: Non-accrual loans to total loans 0.21 % 0.25 %
Non-performing assets to total assets 0.38 % 0.43 % Allowance for
loan losses to total gross loans 0.80 % 0.82 % Allowance for loan
losses to total delinquent loans 508.51 % 2871.57 % Allowance for
loan losses to non-performing loans 374.55 % 321.51 %
Non-Performing Assets: Non-accrual loans $ 782 $ 911 Loans
delinquent 90 days or more and still accruing - - Real estate
acquired through foreclosure 820 833
Total non-performing assets $ 1,602 $ 1,744
Three Months Ended March 31, Selected
Operating Data and Ratios: 2019 2018 Interest
income $ 4,373 $ 3,758 Interest expense 1,560
984 Net interest income 2,813 2,774 Loan loss provision
recapture 190 - Net interest income
after loan loss provision recapture 3,003 2,774 Non-interest income
376 131 Non-interest expense (3,060 ) (3,032 ) Income
(loss) before income taxes 319 (127 ) Income tax expense (benefit)
42 (43 ) Net income (loss) $ 277 $ (84
) Earnings per common share-diluted $ 0.01 $ - Loan
originations (1) $ 19,472 $ 15,012 Loan purchase $ - $ - Net
recoveries to average loans (0.20 )% (2) (0.13 )% (2) Return on
average assets 0.26 % (2) -0.08 % (2) Return on average equity 2.28
% (2) -0.70 % (2) Net interest margin 2.75 % (2) 2.79 % (2)
(1) Does not include net deferred origination costs.
(2) Annualized
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version on businesswire.com: https://www.businesswire.com/news/home/20190509005329/en/
Brenda J. Battey, Chief Financial Officer(323) 556-3264 or
investor.relations@broadwayfederalbank.com
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