Quarterly Report (10-q)

Date : 05/15/2019 @ 10:09PM
Source : Edgar (US Regulatory)
Stock : Broadway Financial Corp. (BYFC)
Quote : 1.92  0.12 (6.67%) @ 7:39PM

Quarterly Report (10-q)

Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

 

FORM 10-Q

 

(Mark One)

[X]                           QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2019

 

[  ]       TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For transition period from__________ to___________

 

Commission file number      000-27464

 

BROADWAY FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)

 

Delaware

 

95-4547287

(State or other jurisdiction of

 

(I.R.S. Employer

incorporation or organization)

 

Identification No.)

 

5055 Wilshire Boulevard, Suite 500
Los Angeles, California

 

90036

(Address of principal executive offices)

 

(Zip Code)

 

(323) 634-1700

(Registrant’s telephone number, including area code)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes      x    No     o

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes      x    No     o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated, a smaller reporting company, or an emerging growth company.  See the definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

o

 

Accelerated filer

o

 

 

 

 

 

 

Non-accelerated filer

 

x

 

Smaller reporting company

x

 

 

 

 

 

 

 

 

 

 

Emerging growth company

o

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.     o

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes    o     No    x

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:  As of May 3, 2019, 19,123,455 shares of the Registrant’s voting common stock and 8,756,396 shares of the Registrant’s non-voting common stock were outstanding.

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class:

 

Trading Symbol(s)

 

Name of each exchange on which registered:

Common Stock, par value $0.01 per share

 

BYFC

 

The NASDAQ Stock Market, LLC

 

 


Table of Contents

 

TABLE OF CONTENTS

 

 

 

Page

PART I.

FINANCIAL STATEMENTS

 

 

 

 

 

Item 1.

Consolidated Financial Statements (Unaudited)

 

 

 

 

 

 

 

Consolidated Statements of Financial Condition as of March 31, 2019 and December 31, 2018

1

 

 

 

 

 

 

Consolidated Statements of Operations and Comprehensive Income (Loss) for the three months ended March 31, 2019 and 2018

2

 

 

 

 

 

 

Consolidated Statements of Cash Flows for the three months ended March 31, 2019 and 2018

3

 

 

 

 

 

 

Consolidated Statements of Changes in Stockholders’ Equity three months ended March 31, 2019 and 2018

4

 

 

 

 

 

 

Notes to Consolidated Financial Statements

5

 

 

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

23

 

 

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

31

 

 

 

 

 

Item 4.

Controls and Procedures

31

 

 

 

 

PART II.

OTHER INFORMATION

 

 

 

 

 

Item 1.

Legal Proceedings

31

 

 

 

 

 

Item 1A.

Risk Factors

31

 

 

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

31

 

 

 

 

 

Item 3.

Defaults Upon Senior Securities

31

 

 

 

 

 

Item 4.

Mine Safety Disclosures

31

 

 

 

 

 

Item 5.

Other Information

31

 

 

 

 

 

Item 6.

Exhibits

31

 

 

 

 

 

Signatures

33

 


Table of Contents

 

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Consolidated Statements of Financial Condition

(In thousands, except share and per share amounts)

 

 

 

March 31, 2019

 

December 31, 2018

 

 

(Unaudited)

 

 

Assets:

 

 

 

 

Cash and due from banks

 

$

3,115

 

$

4,124

Interest-bearing deposits in other banks

 

16,110

 

12,527

Cash and cash equivalents

 

19,225

 

16,651

Securities available-for-sale, at fair value

 

14,517

 

14,722

Loans receivable held for sale, at lower of cost or fair value

 

5,154

 

6,231

Loans receivable held for investment, net of allowance of $2,929 and $2,929

 

365,015

 

355,556

Accrued interest receivable

 

1,206

 

1,143

Federal Home Loan Bank (FHLB) stock

 

2,916

 

2,916

Office properties and equipment, net

 

3,328

 

2,242

Bank owned life insurance

 

3,060

 

3,047

Deferred tax assets, net

 

4,889

 

5,045

Investment in affordable housing limited partnership

 

293

 

342

Real estate owned (REO)

 

820

 

833

Other assets

 

723

 

669

Total assets

 

$

421,146

 

$

409,397

 

 

 

 

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

Deposits

 

$

286,654

 

$

281,414

FHLB advances

 

75,000

 

70,000

Junior subordinated debentures

 

5,100

 

5,100

Advance payments by borrowers for taxes and insurance

 

563

 

1,055

Accrued expenses and other liabilities

 

4,878

 

3,392

Total liabilities

 

372,195

 

360,961

 

 

 

 

 

Stockholders’ Equity:

 

 

 

 

Preferred stock, $.01 par value, authorized 1,000,000 shares; none issued or outstanding

 

-

 

-

Common stock, $.01 par value, voting, authorized 50,000,000 shares at March 31, 2019 and December 31, 2018; issued 21,741,281 shares at March 31, 2019 and 21,280,228 shares at December 31, 2018; outstanding 19,123,455 shares at March 31, 2019 and 18,662,402 shares at December 31, 2018

 

218

 

213

Common stock, $.01 par value, non-voting, authorized 25,000,000 shares at March 31, 2019 and December 31, 2018; issued and outstanding 8,756,396 shares at March 31, 2019 and December 31, 2018

 

87

 

87

Additional paid-in capital

 

46,219

 

46,141

Retained earnings

 

8,908

 

8,631

Unearned Employee Stock Ownership Plan (ESOP) shares

 

(1,010)

 

(1,027)

Accumulated other comprehensive loss, net of tax

 

(145)

 

(283)

Treasury stock-at cost, 2,617,826 shares at March 31 2019 and at December 31, 2018

 

(5,326)

 

(5,326)

Total stockholders’ equity

 

48,951

 

48,436

Total liabilities and stockholders’ equity

 

$

421,146

 

$

409,397

 

See accompanying notes to unaudited consolidated financial statements.

 

1


Table of Contents

 

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Consolidated Statements of Operations and Comprehensive Income (Loss)

(Unaudited)

 

 

 

Three Months Ended March 31,

 

 

 

2019

 

 

2018

 

 

 

 

(In thousands, except per share)

 

 

 

 

 

 

 

 

 

Interest income:

 

 

 

 

 

 

 

Interest and fees on loans receivable

 

$

4,115

 

 

$

3,509

 

 

Interest on mortgage-backed and other securities

 

98

 

 

109

 

 

Other interest income

 

160

 

 

140

 

 

Total interest income

 

4,373

 

 

3,758

 

 

 

 

 

 

 

 

 

 

Interest expense:

 

 

 

 

 

 

 

Interest on deposits

 

1,027

 

 

631

 

 

Interest on borrowings

 

533

 

 

353

 

 

Total 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:

 

 

 

 

 

 

 

Service charges

 

122

 

 

115

 

 

CDFI grant

 

233

 

 

-

 

 

Other

 

21

 

 

16

 

 

Total non-interest income

 

376

 

 

131

 

 

 

 

 

 

 

 

 

 

Non-interest expense:

 

 

 

 

 

 

 

Compensation and benefits

 

1,882

 

 

1,905

 

 

Occupancy expense

 

308

 

 

316

 

 

Information services

 

208

 

 

214

 

 

Professional services

 

339

 

 

188

 

 

Office services and supplies

 

68

 

 

82

 

 

REO expense

 

31

 

 

62

 

 

Marketing expense

 

39

 

 

50

 

 

Corporate insurance

 

35

 

 

42

 

 

Amortization of investment in affordable housing limited partnership

 

49

 

 

48

 

 

Other

 

101

 

 

125

 

 

Total 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

)

 

 

 

 

 

 

 

 

 

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

 

Unrealized gains (losses) on securities available-for-sale arising during the period

 

$

196

 

 

$

(283

)

 

Income tax expense (benefit)

 

58

 

 

(83

)

 

Other comprehensive income (loss), net of tax

 

138

 

 

(200

)

 

 

 

 

 

 

 

 

 

Comprehensive income (loss)

 

$

415

 

 

$

(284

)

 

 

 

 

 

 

 

 

 

Earnings (loss) per common share-basic

 

$

0.01

 

 

$

(0.00

)

 

Earnings (loss) per common share-diluted

 

$

0.01

 

 

$

(0.00

)

 

 

See accompanying notes to unaudited consolidated financial statements.

 

2


Table of Contents

 

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Consolidated Statements of Cash Flows

(Unaudited)

 

 

 

Three Months Ended March 31,

 

 

 

2019

 

2018

 

 

 

(In thousands)

 

 

 

 

 

 

 

 

 

Cash flows from operating activities :

 

 

 

 

 

 

 

Net income (loss)

 

$

277

 

 

$

(84

)

 

Adjustments to reconcile net income (loss) to net cash used in operating activities:

 

 

 

 

 

 

 

Loan loss provision recapture

 

(190

)

 

-

 

 

Provision for losses on REOs

 

13

 

 

45

 

 

Depreciation

 

59

 

 

62

 

 

Reversal of valuation allowance on loan held for sale

 

(12

)

 

-

 

 

Net amortization of deferred loan origination costs

 

61

 

 

152

 

 

Net amortization of premiums on mortgage-backed securities

 

6

 

 

10

 

 

Amortization of investment in affordable housing limited partnership

 

49

 

 

48

 

 

Director compensation expense-common stock

 

52

 

 

45

 

 

Stock-based compensation expense

 

34

 

 

36

 

 

ESOP compensation expense

 

14

 

 

25

 

 

Earnings on bank owned life insurance

 

(13

)

 

(13

)

 

Repayments on loans receivable held for sale

 

24

 

 

71

 

 

Change in assets and liabilities:

 

 

 

 

 

 

 

Net change in deferred taxes

 

98

 

 

68

 

 

Net change in accrued interest receivable

 

(63

)

 

(88

)

 

Net change in other assets

 

(54

)

 

(169

)

 

Net change in advance payments by borrowers for taxes and insurance

 

(492

)

 

(477

)

 

Net change in accrued expenses and other liabilities

 

366

 

 

(483

)

 

Net cash provided by (used in) operating activities

 

229

 

 

(752

)

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net change in loans receivable held for investment

 

(8,265

)

 

5,352

 

 

Principal payments on available-for-sale securities

 

395

 

 

507

 

 

Purchase of office properties and equipment

 

(25

)

 

(11

)

 

Net cash (used in) provided by investing activities

 

(7,895

)

 

5,848

 

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net change in deposits

 

5,240

 

 

(10,960

)

 

Proceeds from FHLB advances

 

10,000

 

 

-

 

 

Repayments of FHLB advances

 

(5,000

)

 

-

 

 

Payment for tax withholding for vesting of restricted stock

 

-

 

 

(108

)

 

Net cash provided by (used in) financing activities

 

10,240

 

 

(11,068

)

 

 

 

 

 

 

 

 

 

Net change in cash and cash equivalents

 

2,574

 

 

(5,972

)

 

Cash and cash equivalents at beginning of the period

 

16,651

 

 

22,219

 

 

Cash and cash equivalents at end of the period

 

$

19,225

 

 

$

16,247

 

 

 

 

 

 

 

 

 

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

 

 

Cash paid for interest

 

$

1,375

 

 

$

930

 

 

 

 

 

 

 

 

 

 

Supplemental disclosures of non-cash investing and financing:

 

 

 

 

 

 

 

Transfers of loans receivable held for sale to loans receivable held for investment

 

$

1,064

 

 

$

16,871

 

 

Stock cancelled for payment of tax withholding

 

14

 

 

108

 

 

Initial Recognition of Operating Lease Right-to-Use Assets

 

1,120

 

 

-

 

 

Initial Recognition of Operating Lease Liabilities

 

1,120

 

 

-

 

 

 

See accompanying notes to unaudited consolidated financial statements.

 

3


Table of Contents

 

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Consolidated Statements of Changes in Stockholders’ Equity

(Unaudited)

 

 

 

Common
Stock
Voting

 

Common
Stock
Non-
Voting

 

Additional
Paid-in
Capital

 

Accumulated
Other
Comprehensive
Income

 

Retained
Earnings
(Substantially
Restricted)

 

Unearned
ESOP
Shares

 

Treasury
Stock

 

Total
Stockholders’
Equity

 

 

 

 

 

 

 

 

(In thousands)

 

 

 

 

 

 

 

 

Balance at December 31, 2018

 

$

213

 

$

87

 

$

46,141

 

$

(283)

 

$

8,631

 

$

(1,027)

 

$

(5,326)

 

$

48,436

Net income for the three months ended March 31, 2019

 

 

-

 

 

-

 

 

-

 

 

-

 

 

277

 

 

-

 

 

-

 

 

277

Release of unearned ESOP shares

 

 

-

 

 

-

 

 

(3)

 

 

-

 

 

-

 

 

17

 

 

-

 

 

14

Restricted stock Compensation expense

 

 

5

 

 

-

 

 

20

 

 

-

 

 

-

 

 

-

 

 

-

 

 

25

Stock awarded to directors

 

 

-

 

 

-

 

 

52

 

 

-

 

 

-

 

 

-

 

 

-

 

 

52

Stock option compensation expense

 

 

-

 

 

-

 

 

9

 

 

-

 

 

-

 

 

-

 

 

-

 

 

9

Other comprehensive income, net of tax

 

 

-

 

 

-

 

 

-

 

 

138

 

 

-

 

 

-

 

 

-

 

 

138

Balance at March 31, 2019

 

$

218

 

$

87

 

$

46,219

 

$

(145)

 

$

8,908

 

$

(1,010)

 

$

(5,326)

 

$

48,951

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common
Stock
Voting

 

Common
Stock
Non-
Voting

 

Additional
Paid-in
Capital

 

Accumulated
Other
Comprehensive
Income

 

Retained
Earnings
(Substantially
Restricted)

 

Unearned
ESOP
Shares

 

Treasury
Stock

 

Total
Stockholders’
Equity

 

 

 

 

 

 

 

 

 

 

 

(In thousands)

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2017

 

$

213

 

$

87

 

$

46,117

 

$

(81)

 

$

7,816

 

$

(1,095)

 

$

(5,326)

 

$

47,731

Net income for the three months ended March 31, 2018

 

 

-

 

 

-

 

 

-

 

 

-

 

 

(84)

 

 

-

 

 

-

 

 

(84)

Release of unearned ESOP shares

 

 

-

 

 

-

 

 

8

 

 

-

 

 

-

 

 

17

 

 

-

 

 

25

Restricted stock Compensation expense

 

 

-

 

 

-

 

 

26

 

 

-

 

 

-

 

 

-

 

 

-

 

 

26

Stock awarded to directors

 

 

-

 

 

-

 

 

45

 

 

-

 

 

-

 

 

-

 

 

-

 

 

45

Stock option compensation expense

 

 

-

 

 

-

 

 

10

 

 

-

 

 

-

 

 

-

 

 

-

 

 

10

Cancellation of shares issued to CEO

 

 

-

 

 

-

 

 

(108)

 

 

-

 

 

-

 

 

-

 

 

-

 

 

(108)

Other comprehensive loss, net of tax

 

 

-

 

 

-

 

 

-

 

 

(200)

 

 

-

 

 

-

 

 

-

 

 

(200)

Balance at March 31, 2018

 

$

213

 

$

87

 

$

46,098

 

$

(281)

 

$

7,732

 

$

(1,078)

 

$

(5,326)

 

$

47,445

 

See accompanying notes to unaudited consolidated financial statements.

 

4


Table of Contents

 

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Unaudited Consolidated Financial Statements

March 31, 2019

 

NOTE (1) – Basis of Financial Statement Presentation

 

The accompanying unaudited consolidated financial statements include Broadway Financial Corporation (the “Company”) and its wholly owned subsidiary, Broadway Federal Bank, f.s.b. (the “Bank”).  Also included in the unaudited consolidated financial statements is Broadway Service Corporation, a wholly owned subsidiary of the Bank.  All significant intercompany balances and transactions have been eliminated in consolidation.

 

The unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions for quarterly reports on Form 10-Q.  These unaudited consolidated financial statements do not include all disclosures associated with the Company’s consolidated annual financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2018 and, accordingly, should be read in conjunction with such audited consolidated financial statements.  In the opinion of management, all adjustments (all of which are normal and recurring in nature) considered necessary for a fair presentation have been included.  Operating results for the three months ended March 31, 2019 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019.

 

Recently Adopted Accounting Pronouncements

 

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)”, which is intended to increase transparency and comparability in the accounting for lease transactions.  ASU 2016-02 became effective as of January 1, 2019 and provides for a modified retrospective transition approach requiring lessees to recognize and measure leases on the balance sheet at the either the earliest period presented or as of the beginning of the period of adoption with the option to elect certain practical expedients. We have elected to apply ASU 2016-02 as of the beginning of the period of adoption, which as January 1, 2019 and we have elected not to restate comparative periods. Of the practical expedients available under ASU 206-02, all have been adopted except for the hindsight practical expedient.

 

The Bank has a combined operating lease for its corporate headquarters and main retail branch and a photocopier lease. As a result of implementing ASU 2016-02, we recognized an operating lease right-of-use (“ROU”) asset of $1.2 million and an operating lease liability of $1.2 million as of January 1, 2019, with no impact on our consolidated statements of operations or consolidated statements of cash flows compared to the prior lease accounting model. The ROU asset and operating lease liability are recorded in fixed assets and other liabilities, respectively, in the consolidated statements of financial condition. See Note 6 Leases for additional information. The implementation of this standard had a minor impact on our regulatory capital ratios.

 

In January 2016, the FASB issued ASU 2016-01, “Financial Instruments Overall (Subtopic 825-10) - Recognition and Measurement of Financial Assets and Financial Liabilities”.  ASU 2016-01 (i) amends existing guidance that requires equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income.  It requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes.  It requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (i.e., securities or loans and receivables).  It eliminates the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost.  These amendments are effective for public business entities for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years.  Adoption of this standard did not have a material impact on the Company’s consolidated financial statements.  In accordance with this standard, the Company measured the fair value of its financial assets and financial liabilities as of December 31, 2018 using an exit price notion (see Note 5 Fair Value).

 

In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments”.  ASU 2016-15 provides guidance on the classification of certain cash receipts and payments on the consolidated statement of cash flows in order to reduce diversity in practice.  ASU 2016-15 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Adoption of this standard did not have a material impact on the Company’s consolidated financial statements.

 

5


Table of Contents

 

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Unaudited Consolidated Financial Statements (continued)

 

In November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash”.  ASU 2016-18 requires entities to show the changes in the total of cash, cash equivalents, restricted cash and restricted cash equivalents in the statement of cash flows.  As a result, entities will no longer present transfers between cash and cash equivalents and restricted cash and restricted cash equivalents in the consolidated statement of cash flows.  ASU 2016-18 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, where the guidance should be applied using a retrospective transition method to each period presented.  Early adoption is permitted. Adoption of this standard did not have a material impact on the Company’s consolidated financial statements.

 

In February 2018, the FASB issued Accounting Standards Update (“ASU”) 2018-02, “Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (Topic 220)”, which allows an entity to elect a reclassification from accumulated other comprehensive income (AOCI) to retained earnings for the stranded tax effects resulting from the Tax Cuts and Jobs Act.  The amount of that reclassification should include the effect of changes of tax rate on the deferred tax amount, any related valuation allowance and other income tax effects on the items in AOCI.  The standard requires an entity to state if an election to reclassify the tax effect to retained earnings is made along with the description of other income tax effects that are reclassified from AOCI.  The guidance is effective for public business entities for annual periods beginning on or after December 15, 2018 and interim periods within those annual periods with early adoption permitted. The Company early adopted this amendment and has elected to reclassify $66 thousand from AOCI to retained earnings at December 31, 2017.

 

Recent Accounting Pronouncements Yet to Be Adopted

 

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”.  ASU 2016-13 replaces the incurred loss model with an expected loss model, which is referred to as the current expected credit loss (CECL) model.  The CECL model is applicable to the measurement of credit losses on financial assets measured at amortized cost, including loan receivables, held-to-maturity debt securities, and reinsurance receivables. It also applies to off-balance sheet credit exposures not accounted for as insurance (such as loan commitments, standby letters of credit, financial guarantees, and other similar instruments) and net investments in leases recognized by a lessor.  For public business entities that meet the definition of an SEC filer, the standard will be effective for fiscal years beginning after Dec. 15, 2019, including interim periods in those fiscal years.  All entities may early adopt for fiscal years beginning after Dec. 15, 2018, including interim periods in those fiscal years.  For debt securities with other-than-temporary impairment, the guidance will be applied prospectively.  Existing purchased credit impaired (PCI) assets will be grandfathered and classified as purchased credit deteriorated (PCD) assets at the date of adoption.  The asset will be grossed up for the allowance for expected credit losses for all PCD assets at the date of adoption and will continue to recognize the noncredit discount in interest income based on the yield of such assets as of the adoption date.  Subsequent changes in expected credit losses will be recorded through the allowance.  For all other assets within the scope of CECL, a cumulative-effect adjustment will be recognized in retained earnings as of the beginning of the first reporting period in which the guidance is effective.  The Company has begun its implementation efforts by identifying key interpretive issues, assessing its processes and identifying the system requirements against the new guidance to determine what modifications may be required.  While the Company is still evaluating the overall impact on the new standard on its consolidated financial statements, the Company expects the adoption may result in an increase to the allowance for loan losses balance.

 

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement. The ASU was issued to improve the effectiveness of disclosures surrounding fair value measurements. The ASU removes numerous disclosures from Topic 820 including; transfers between level 1 and 2 of the fair value hierarchy, the policy for timing of transfers between levels, and the valuation process for level 3 fair value measurements. The ASU also modified and added disclosure requirements in regards to changes in unrealized gains and losses included in other comprehensive income, as well as the range and weighted average of unobservable inputs for level 3 fair value measurements. The ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted. The guidance is not expected to have a significant impact on the Company’s consolidated financial statements.

 

6


Table of Contents

 

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Unaudited Consolidated Financial Statements (continued)

 

NOTE (2)  Earnings Per Share of Common Stock

 

Basic earnings per share of common stock is computed pursuant to the two-class method by dividing net income available to common stockholders less dividends paid on participating securities (unvested shares of restricted common stock) and any undistributed earnings attributable to participating securities by the weighted average common shares outstanding during the period.  The weighted average common shares outstanding includes the weighted average number of shares of common stock outstanding less the weighted average number of unvested shares of restricted common stock.  ESOP shares are considered outstanding for this calculation unless unearned.  Diluted earnings per share of common stock includes the dilutive effect of unvested stock awards and additional potential common shares issuable under stock options.

 

The following table shows how the Company computed basic and diluted earnings per share of common stock for the periods indicated:

 

 

 

For the three months ended March 31,

 

 

 

2019

 

2018

 

 

 

(In thousands, except share
and per share)

 

 

 

 

 

 

 

Net income (loss)

 

$

277

 

$

(84)

 

Less net income attributable to participating securities

 

4

 

-

 

Net income (loss) available to common stockholders

 

$

273

 

$

(84)

 

 

 

 

 

 

 

Weighted average common shares outstanding for basic earnings per common share

 

26,546,315

 

26,766,158

 

Add: dilutive effects of assumed exercises of stock options

 

-

 

-

 

Weighted average common shares outstanding for diluted earnings per common share

 

26,546,315

 

26,766,158

 

 

 

 

 

 

 

Earnings (loss) per common share - basic

 

$

0.01

 

$

(0.00)

 

Earnings (loss) per common share - diluted

 

$

0.01

 

$

(0.00)

 

 

Stock options for 455,000 shares of common stock for the three months ended March 31, 2019 and stock options for 537,500 shares of common stock for the three months ended March 31, 2018 were not considered in computing diluted earnings per common share because they were anti-dilutive.

 

7


Table of Contents

 

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Unaudited Consolidated Financial Statements (continued)

 

NOTE (3)  Securities

 

The following table summarizes the amortized cost and fair value of the available-for-sale investment securities portfolios as of the periods indicated and the corresponding amounts of unrealized gains and losses which were recognized in accumulated other comprehensive income (loss):

 

 

 

Amortized Cost

 

Gross
Unrealized
Gains

 

Gross
Unrealized
Losses

 

Fair Value

 

 

 

(In thousands)

 

March 31, 2019:

 

 

 

 

 

 

 

 

 

Federal agency mortgage-backed securities

 

$

9,171

 

$

83

 

$

(31)

 

$

9,223

 

Federal agency debt

 

5,320

 

-

 

(26)

 

5,294

 

Total available-for-sale securities

 

$

14,491

 

$

83

 

$

(57)

 

$

14,517

 

December 31, 2018:

 

 

 

 

 

 

 

 

 

Federal agency mortgage-backed securities

 

$

9,575

 

$

88

 

$

(155)

 

$

9,508

 

Federal agency debt

 

5,317

 

-

 

(103)

 

5,214

 

Total available-for-sale securities

 

$

14,892

 

$

88

 

$

(258)

 

$

14,722

 

 

At March 31, 2019, the Bank had three federal agency debt securities with total amortized cost of $5.3 million, estimated total fair value of $5.3 million and an estimated average remaining life of 3.6 years.  The Bank also had 22 federal agency mortgage-backed securities with total amortized cost of $9.2 million, estimated total fair value of $9.2 million and an estimated average remaining life of 4.4 years.  Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties.

 

There were no securities pledged to secure public deposits at March 31, 2019 and December 31, 2018.  At March 31, 2019 and December 31, 2018, there were no holdings of securities by any one issuer, other than the U.S. Government and its agencies, in an amount greater than 10% of stockholders’ equity.

 

There were no sales of securities during the three months ended March 31, 2019 and 2018.

 

The Bank held 8 securities with unrealized losses at March 31, 2019 compared to 10 securities with unrealized losses at December 31, 2018. Securities in unrealized loss positions are analyzed as part of our ongoing assessment of other-than-temporary impairment. Consideration is given to the financial condition and near-term prospects of the issuer, the length of time and the extent to which the fair value has been less than the cost, and our intent and ability to retain our investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. All of the Bank’s securities were issued by the federal government or its agencies. The unrealized losses on our available-for-sale securities at March 31, 2019 were primarily caused by movements in market interest rates subsequent to the purchase of such securities. We do not consider these unrealized losses to be other than temporary impairment.

 

NOTE (4)  Loans Receivable Held for Sale

 

Loans receivable held for sale at March 31, 2019 and December 31, 2018 totaled $5.2 million and $6.2 million, respectively, and consisted of multi-family loans.  The Bank transferred $1.1 million and $16.9 million of multi-family loans from the held-for-sale portfolio to the held-for-investment portfolio during the three months ended March 31, 2019 and 2018, respectively.  There were no loan sales during the three months ended March 31, 2019 and 2018.  Loan repayments totaled $24 thousand and $71 thousand during the three months ended March 31, 2019 and 2018, respectively.

 

8


Table of Contents

 

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Unaudited Consolidated Financial Statements (continued)

 

NOTE (5)  Loans Receivable Held for Investment

 

Loans receivable held for investment were as follows as of the periods indicated:

 

 

 

March 31, 2019

 

December 31, 2018

 

 

 

(In thousands)

 

Real estate:

 

 

 

 

 

Single family

 

$   

89,043

 

$  

91,835

 

Multi-family

 

245,551

 

231,870

 

Commercial real estate

 

6,890

 

5,802

 

Church

 

23,376

 

25,934

 

Construction

 

1,749

 

1,876

 

Commercial – other

 

234

 

226

 

Consumer

 

15

 

5

 

Gross loans receivable before deferred loan costs and premiums

 

366,858

 

357,548

 

Unamortized net deferred loan costs and premiums

 

1,086

 

937

 

Gross loans receivable

 

367,944

 

358,485

 

Allowance for loan losses

 

(2,929)

 

(2,929)

 

Loans receivable, net

 

$  

365,015

 

$  

355,556

 

 

The following tables present the activity in the allowance for loan losses by loan type for the periods indicated:

 

 

 

Three Months Ended March 31, 2019

 

 

Real Estate

 

 

 

 

 

 

 

 

Single
family

 

Multi-
family

 

Commercial
real estate

 

Church

 

Construction

 

Commercial
- other

 

Consumer

 

Total

 

 

(In thousands)

Beginning balance

  $

369

 

  $

1,880

 

  $

52

 

  $

603

 

  $

19

 

  $

6

 

  $

-

 

  $

2,929

Provision for (recapture of) loan losses

 

(22)

 

110

 

10

 

(286)

 

(1)

 

(1)

 

-

 

(190)

Recoveries

 

-

 

-

 

-

 

190

 

-

 

-

 

-

 

190

Loans charged off

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

Ending balance

 

  $

347

 

  $

1,990

 

  $

62

 

  $

507

 

  $

18

 

  $

5

 

  $

-

 

  $

2,929

 

 

 

Three Months Ended March 31, 2018

 

 

Real Estate

 

 

 

 

 

 

 

 

Single
family

 

Multi-
family

 

Commercial
real estate

 

Church

 

Construction

 

Commercial
- other

 

Consumer

 

Total

 

 

(In thousands)

Beginning balance

 

  $

594

 

  $

2,300

 

  $

71

 

  $

1,081

 

  $

17

 

  $

6

 

  $

-

 

  $

4,069

Provision for (recapture of) loan losses

 

(6)

 

208

 

(6)

 

(190)

 

(6)

 

-

 

-

 

-

Recoveries

 

-

 

-

 

-

 

114

 

-

 

-

 

-

 

114

Loans charged off

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

Ending balance

 

  $

588

 

  $

2,508

 

  $

65

 

  $

1,005

 

  $

11

 

  $

6

 

  $

-

 

  $

4,183

 

9


Table of Contents

 

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Unaudited Consolidated Financial Statements (continued)

 

The following tables present the balance in the allowance for loan losses and the recorded investment (unpaid contractual principal balance less charge-offs, less interest applied to principal, plus unamortized deferred costs and premiums) by loan type and based on impairment method as of and for the periods indicated:

 

 

 

March 31, 2019

 

 

Real Estate

 

 

 

 

 

 

 

 

Single
family

 

Multi-
family

 

Commercial
real estate

 

Church

 

Construction

 

Commercial
- other

 

Consumer

 

Total

 

 

(In thousands)

Allowance for loan losses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending allowance balance attributable to loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Individually evaluated for impairment

 

$

38

 

$

-

 

$

-

 

$

145

 

$

-

 

$

3

 

$

-

 

$

186

Collectively evaluated for impairment

 

309

 

1,990

 

62

 

362

 

18

 

2

 

-

 

2,743

 Total ending allowance balance

 

$

347

 

$

1,990

 

$

62

 

$

507

 

$

18

 

$

5

 

$

-

 

$

2,929

Loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans individually evaluated for impairment

 

$

606

 

$

321

 

$

-

 

$

4,181

 

$

-

 

$

63

 

$

-

 

$

5,171

Loans collectively evaluated for impairment

 

88,762

 

246,683

 

6,894

 

18,503

 

1,745

 

171

 

15

 

362,773

Total ending loans balance

 

$

89,368

 

$

247,004

 

$

6,894

 

$

22,684

 

$

1,745

 

$

234

 

$

15

 

$

367,944

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2018

 

 

Real Estate

 

 

 

 

 

 

 

 

Single
family

 

Multi-
family

 

Commercial
real estate

 

Church

 

Construction

 

Commercial
- other

 

Consumer

 

Total

 

 

(In thousands)

Allowance for loan losses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending allowance balance attributable to loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Individually evaluated for impairment

 

$

53

 

$

-

 

$

-

 

$

170

 

$

-

 

$

4

 

$

-

 

$

227

Collectively evaluated for impairment

 

316

 

1,880

 

52

 

433

 

19

 

2

 

-

 

2,702

Total ending allowance balance

 

$

369

 

$

1,880

 

$

52

 

$

603

 

$

19

 

$

6

 

$

-

 

$

2,929

Loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans individually evaluated for impairment

 

$

610

 

$

323

 

$

-

 

$

5,383

 

$

-

 

$

64

 

$

-

 

$

6,380

Loans collectively evaluated for impairment

 

91,567

 

232,986

 

5,800

 

19,713

 

1,872

 

162

 

5

 

352,105

Total ending loans balance

 

$

92,177

 

$

233,309

 

$

5,800

 

$

25,096

 

$

1,872

 

$

226

 

$

5

 

$

358,485

 

10


Table of Contents

 

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Unaudited Consolidated Financial Statements (continued)

 

The following table presents information related to loans individually evaluated for impairment by loan type as of the periods indicated:

 

 

 

March 31, 2019

 

December 31, 2018

 

 

 

Unpaid
Principal
Balance

 

Recorded
Investment

 

Allowance
for Loan
Losses
Allocated

 

Unpaid
Principal
Balance

 

Recorded
Investment

 

Allowance
for Loan
Losses
Allocated

 

 

 

(In thousands)

 

With no related allowance recorded:

 

 

 

 

 

 

 

 

 

 

 

 

 

Multi-family

 

$

321

 

$

321

 

$

-

 

$

323

 

$

323

 

$

-

 

Church

 

3,492

 

2,165

 

-

 

4,666

 

2,803

 

-

 

With an allowance recorded:

 

 

 

 

 

 

 

 

 

 

 

 

 

Single family

 

605

 

606

 

38

 

610

 

610

 

53

 

Church

 

2,017

 

2,016

 

145

 

2,580

 

2,580

 

170

 

Commercial - other

 

63

 

63

 

3

 

64

 

64

 

4

 

Total

 

$

6,498

 

$

5,171

 

$

186

 

$

8,243

 

$

6,380

 

$

227

 

 

The recorded investment in loans excludes accrued interest receivable due to immateriality.  For purposes of this disclosure, the unpaid principal balance is not reduced for net charge-offs.

 

The following tables present the monthly average of loans individually evaluated for impairment by loan type and the related interest income for the periods indicated:

 

 

 

Three Months Ended March 31, 2019

 

Three Months Ended March 31, 2018

 

 

Average
Recorded
Investment

 

Cash Basis
Interest
Income
Recognized

 

Average
Recorded
Investment

 

Cash Basis
Interest
Income
Recognized

 

 

(In thousands)

Single family

 

 

$

608

 

 

 

$

8

 

 

 

$

625

 

 

 

$

8

 

Multi-family

 

 

322

 

 

 

6

 

 

 

332

 

 

 

6

 

Church

 

 

5,001

 

 

 

430

 

 

 

7,981

 

 

 

174

 

Commercial – other

 

 

64

 

 

 

1

 

 

 

65

 

 

 

1

 

Total

 

 

$

5,995

 

 

 

$

445

 

 

 

$

9,003

 

 

 

$

189

 

 

Cash-basis interest income recognized represents cash received for interest payments on accruing impaired loans and interest recoveries on non-accrual loans that were paid off.  Interest payments collected on non-accrual loans are characterized as payments of principal rather than payments of the outstanding accrued interest on the loans until the remaining principal on the non-accrual loans is considered to be fully collectible or paid off.  When a loan is returned to accrual status, the interest payments that were previously applied to principal are deferred and amortized over the remaining life of the loan.  Foregone interest income that would have been recognized had loans performed in accordance with their original terms amounted to $40 thousand and $86 thousand for the three months ended March 31, 2019 and 2018, respectively, and were not included in the consolidated results of operations.

 

11


Table of Contents

 

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Unaudited Consolidated Financial Statements (continued)

 

The following tables present the aging of the recorded investment in past due loans by loan type as of the periods indicated:

 

 

 

March 31, 2019

 

 

30-59
Days
Past Due

 

60-89
Days
Past Due

 

Greater
than
90 Days
Past Due

 

Total
Past Due

 

Current

 

Total

 

 

(In thousands)

Loans receivable held for investment:

 

 

 

 

 

 

 

 

 

 

 

 

Single family

 

$

-

 

$

-

 

$

34

 

$

34

 

$

89,334

 

$

89,368

Multi-family

 

-

 

-

 

-

 

-

 

247,004

 

247,004

Commercial real estate

 

-

 

-

 

-

 

-

 

6,894

 

6,894

Church

 

259

 

283

 

-

 

542

 

22,142

 

22,684

Construction

 

-

 

-

 

-

 

-

 

1,745

 

1,745

Commercial - other

 

-

 

-

 

-

 

-

 

234

 

234

Consumer

 

-

 

-

 

-

 

-

 

15

 

15

Total

 

$

259

 

$

283

 

$

34

 

$

576

 

$

367,368

 

$

367,944

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2018

 

 

30-59
Days
Past Due

 

60-89
Days
Past Due

 

Greater
than
90 Days
Past Due

 

Total
Past Due

 

Current

 

Total

 

 

(In thousands)

Loans receivable held for investment:

 

 

 

 

 

 

 

 

 

 

 

 

Single family

 

$

35

 

$

-

 

$

-

 

$

35

 

$

92,142

 

$

92,177

Multi-family

 

-

 

-

 

-

 

-

 

233,309

 

233,309

Commercial real estate

 

-

 

-

 

-

 

-

 

5,800

 

5,800

Church

 

-

 

-

 

-

 

-

 

25,096

 

25,096

Construction

 

-

 

-

 

-

 

-

 

1,872

 

1,872

Commercial - other

 

-

 

-

 

-

 

-

 

226

 

226

Consumer

 

-

 

-

 

-

 

-

 

5

 

5

Total

 

$

35

 

$

-

 

$

-

 

$

35

 

$

358,450

 

$

358,485

 

The following table presents the recorded investment in non-accrual loans by loan type as of the periods indicated:

 

 

 

March 31, 2019

 

December 31, 2018

 

 

(In thousands)

Loans receivable held for investment:

 

 

 

 

 

 

 

 

 

 

Single-family residence

 

 

$

34

 

 

 

$

-

 

Church

 

 

 

748

 

 

 

 

911

 

Total non-accrual loans

 

 

$

782

 

 

 

$

911

 

 

There were no loans 90 days or more delinquent that were accruing interest as of March 31, 2019 or December 31, 2018.

 

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BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Unaudited Consolidated Financial Statements (continued)

 

Troubled Debt Restructurings

 

At March 31, 2019, loans classified as troubled debt restructurings (“TDRs”) totaled $5.2 million, of which $748 thousand were included in non-accrual loans and $4.4 million were on accrual status.  At December 31, 2018, loans classified as TDRs totaled $6.4 million, of which $591 thousand were included in non-accrual loans and $5.8 million were on accrual status.  The Company has allocated $186 thousand and $227 thousand of specific reserves for TDRs as of March 31, 2019 and December 31, 2018, respectively.  TDRs on accrual status are comprised of loans that were accruing at the time of restructuring or loans that have complied with the terms of their restructured agreements for a satisfactory period of time and for which the Bank anticipates full repayment of both principal and interest.  TDRs that are on non-accrual status can be returned to accrual status after a period of sustained performance, generally determined to be six months of timely payments, as modified.  A well-documented credit analysis that supports a return to accrual status based on the borrower’s financial condition and prospects for repayment under the revised terms is also required.  As of March 31, 2019 and December 31, 2018, the Company had no commitment to lend additional amounts to customers with outstanding loans that are classified as TDRs.  No loans were modified during the three months ended March 31, 2019 and 2018.

 

Credit Quality Indicators

 

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as:  current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors.  For single family residential, consumer and other smaller balance homogenous loans, a credit grade is established at inception, and generally only adjusted based on performance.  Information about payment status is disclosed elsewhere herein.  The Company analyzes all other loans individually by classifying the loans as to credit risk.  This analysis is performed at least on a quarterly basis.  The Company uses the following definitions for risk ratings:

 

§                   Watch.   Loans classified as watch exhibit weaknesses that could threaten the current net worth and paying capacity of the obligors.  Watch graded loans are generally performing and are not more than 59 days past due. A watch rating is used when a material deficiency exists but correction is anticipated within an acceptable time frame.

 

§                   Special Mention.   Loans classified as special mention have a potential weakness that deserves management’s close attention.  If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date.

 

§                   Substandard.   Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any.  Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt.  They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

 

§                   Doubtful.   Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

 

§                   Loss.   Loans classified as loss are considered uncollectible and of such little value that to continue to carry the loan as an active asset is no longer warranted.

 

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass rated loans.  Pass rated loans are generally well protected by the current net worth and paying capacity of the obligor and/or by the value of the underlying collateral.  Pass rated loans are not more than 59 days past due and are generally performing in accordance with the loan terms.  Based on the most recent analysis performed, the risk categories of loans by loan type as of the periods indicated were as follows:

 

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Table of Contents

 

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Unaudited Consolidated Financial Statements (continued)

 

 

 

March 31, 2019

 

 

 

Pass

 

Watch

 

Special Mention

 

Substandard

 

Doubtful

 

Loss

 

 

 

(In thousands)

 

Single family

 

 

  $

89,324

 

  $

-

 

  $

-

 

  $

44

 

  $

-

 

  $

-

 

Multi-family

 

245,808

 

-

 

536

 

660

 

-

 

-

 

Commercial real estate

 

6,894

 

-

 

-

 

-

 

-

 

-

 

Church

 

17,670

 

667

 

259

 

4,088

 

-

 

-

 

Construction

 

1,745

 

-

 

-

 

-

 

-

 

-

 

Commercial - other

 

171

 

-

 

-

 

63

 

-

 

-

 

Consumer

 

15

 

-

 

-

 

-

 

-

 

-

 

Total

 

  $

361,627

 

  $

667

 

  $

795

 

  $

4,855

 

  $

-

 

  $

-

 

 

 

 

December 31, 2018

 

 

 

Pass

 

Watch

 

Special Mention

 

Substandard

 

Doubtful

 

Loss

 

 

 

(In thousands)

 

Single family

 

 

  $

92,132

 

  $

-

 

  $

35

 

  $

10

 

  $

-

 

  $

-

 

Multi-family

 

232,642

 

-

 

-

 

667

 

-

 

-

 

Commercial real estate

 

5,800

 

-

 

-

 

-

 

-

 

-

 

Church

 

19,678

 

672

 

-

 

4,746

 

-

 

-

 

Construction

 

1,872

 

-

 

-

 

-

 

-

 

-

 

Commercial - other

 

162

 

-

 

-

 

64

 

-

 

-

 

Consumer

 

5

 

-

 

-

 

-

 

-

 

-

 

Total

 

  $

352,291

 

  $

672

 

  $

35

 

  $

5,487

 

  $

-

 

  $

-

 

 

NOTE (6)  Leases

 

The Bank has a combined operating lease for its corporate headquarters and main retail branch and a photocopier lease. The ROU asset and operating lease liability are recorded in fixed assets and other liabilities, respectively, in the consolidated statements of financial condition.

 

Our ROU asset represents our right to use an underlying asset during the lease term. Operating liabilities represent our obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized based on the present value of the remaining lease payments using a discount rate that represents our incremental borrowing rate at the date of implementation of the new accounting standard.

 

The operating lease for our corporate headquarters and main retail branch has one 5-year extension option at the then fair market rate. As this extension option is not reasonably certain of exercise, it is not included in the lease term. The Bank recorded a ROU asset of $1.1 million and an operating lease liability of $1.1 million as of March 31, 2019. The Bank has no finance leases.

 

The Bank recorded operating lease expense costs of $123 thousand and $121 thousand for the quarters ended March 31, 2019 and March 31, 2018, respectively.

 

Additional information regarding our operating leases is summarized below as of or for the three months ended March 31, 2019 (dollars in thousands):

 

Cash paid for amounts included in the measurement
of lease liabilities for operating leases:

 

$   134

 

 

 

 

 

ROU assets obtained in exchange for lease liabilities

 

$1,120