Pre-tax Earnings Improved for Fourth Quarter
and Full Year 2017
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 $399 thousand, or
($0.01) per diluted share, for the fourth quarter of 2017,
reflecting an additional tax expense of $519 thousand due to the
enactment of the Tax Cuts and Jobs Act of 2017, which required
adjustment of the Company’s deferred tax asset to recognize the
decrease in the federal corporate income tax rate to 21% from 34%.
In comparison, the Company recorded net income of $2.2
million, or $0.08 per diluted share, for the fourth quarter of 2016
due to an income tax benefit of $2.2 million that resulted from the
reversal of the valuation allowance on the deferred tax assets.
Pre-tax earnings increased by $270 thousand during the fourth
quarter of 2017, compared to the fourth quarter of 2016, due to an
increase of $386 thousand in non-interest income and a loan loss
provision recapture of $150 thousand, which were partially offset
by a decrease of $256 thousand in net interest income and an
increase of $10 thousand in non-interest expense.
For the year ended December 31, 2017, the Company reported net
income of $1.9 million, or $0.07 per diluted share, compared to
$3.5 million, or $0.12 per diluted share, for the year ended
December 31, 2016. Pre-tax earnings increased by $2.5 million
during calendar year 2017, compared to calendar year 2016,
primarily due to an increase of $1.5 million in non-interest
income, an increase of $526 thousand in net interest income, and an
increase of $550 thousand in loan loss provision recaptures, which
were partially offset by an increase of $85 thousand in
non-interest expense.
Chief Executive Officer, Wayne Bradshaw, commented, “I am
pleased to announce that Broadway increased its pre-tax
profitability for the fourth quarter of 2017 and the full calendar
year relative to the comparable periods in 2016. Like many
corporations, we incurred a non-recurring charge to earnings during
the fourth quarter to recognize the impact of lower corporate
income tax rates from the new federal tax legislation, which
reduced the value of our deferred tax assets, and lowered our net
income.
“This performance is a direct reflection of the skill and
persistence of Broadway’s team, who have continued to improve the
strength of Broadway’s capital base and the quality of the Bank’s
loan portfolio, while ensuring that the Bank maintains compliance
with the full gamut of regulatory guidelines. I am pleased to
report that the Bank’s Total Capital Ratio increased to 19.88% at
the end of the year, and the Bank’s non-accrual loans decreased to
less than $1.8 million, or 0.49% of total loans.
“Looking forward to 2018, the challenges facing the Bank remain
much the same as I have articulated throughout 2017: a competitive
marketplace for loan originations and deposits, and a relatively
flat yield curve that depresses net interest margins. In addition,
maintaining compliance with loan concentration guidelines set by
the Bank’s primary regulator has required Broadway to complete
periodic loan sales, which has hampered the Bank’s efforts to
increase the size of the loan portfolio to generate earnings growth
and capture economies of scale. Specifically, during 2017, Broadway
profitably sold almost $97 million of performing multi-family
loans, including over $15 million in the fourth quarter, which
represented approximately 84% of the Bank’s originations for the
year. However, based on the pristine quality of the Bank’s
remaining loan portfolio and our employees’ rigorous efforts to
improve all facets of Broadway’s business, I am optimistic that the
Bank will be able to retain more of its loan originations in 2018
than it did in 2017, which should grow Broadway’s assets and
interest income but may result in lower gain on sale of loans.
“I wish to thank again our team for their dedication and
tireless efforts to build value, and Broadway’s stockholders for
their continuing support of our mission and business plans.”
Net Interest Income
For the fourth quarter of 2017, net interest income decreased by
$256 thousand to $2.6 million from $2.9 million for the same period
a year ago, primarily because of a decrease of 28 basis points in
net interest margin.
Interest income on loans receivable decreased by $268 thousand
to $3.4 million for the fourth quarter of 2017, from $3.6 million
for the fourth quarter of 2016. Lower interest income on loans
receivable for the fourth quarter of 2017 resulted from a decrease
of $14.6 million in the average balance of loans receivable, which
decreased interest income by $142 thousand. The decrease in the
average balance of loans receivable primarily resulted from loan
repayments. Additionally, the average yield on loans receivable
during the fourth quarter of 2017 decreased by 14 basis points
compared to the fourth quarter of 2016, which reduced interest
income by $126 thousand. The decrease in the average yield on loans
receivable 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.
Interest income on securities increased by $25 thousand to $101
thousand for the fourth quarter of 2017, from $76 thousand for the
fourth quarter of 2016, due to an increase of $2.6 million in the
average balance of securities and an increase of 26 basis points in
the average yield on securities. Other interest income increased by
$24 thousand to $207 thousand for the fourth quarter of 2017, from
$183 thousand for the fourth quarter of 2016. The increase of $24
thousand in other interest income was due to an increase of $116
thousand in interest income on interest-bearing deposits in other
banks, primarily reflecting a higher average yield and a higher
average balance for the fourth quarter of 2017, which was partially
offset by a decrease of $92 thousand in dividend income earned on
the Bank’s investment in Federal Home Loan Bank (“FHLB”) stock.
Interest expense on deposits increased by $32 thousand to $616
thousand for the fourth quarter of 2017, from $584 thousand for the
fourth quarter of 2016. Higher interest expense on deposits for the
fourth quarter of 2017 primarily resulted from an increase of 3
basis points in the average cost of deposits, which increased
interest expense by $42 thousand. The increase in the overall rates
paid on deposits was partially offset by a change in the mix of
deposits, which decreased interest expense by $10 thousand, despite
an increase of $6.0 million in the average balance of deposits.
During the fourth quarter, the average balance of liquid deposits
(NOW, demand, money market and passbook accounts) increased $23.1
million, whereas the average balance of higher cost certificates of
deposit (“CDs”) decreased by $17.1 million.
Interest expense on borrowings increased by $5 thousand to $435
thousand for the fourth quarter of 2017, from $430 thousand for the
fourth quarter of 2016. Higher interest expense on borrowings for
the fourth quarter of 2017 primarily resulted from an increase of
55 basis points in the average cost of the Company’s junior
subordinated debentures.
For the year ended December 31, 2017, net interest income
increased by $526 thousand to $11.9 million, from $11.4 million for
the same period a year ago. Interest income on loans receivable
increased by $912 thousand to $15.4 million for the year ended
December 31, 2017, from $14.5 million for the same period a year
ago, primarily due to an increase of $40.0 million in the average
balance of loans receivable, which increased interest income by
$1.6 million. Partially offsetting this increase was the impact of
a decrease of 20 basis points in the average yield on loans
receivable to 4.04% for 2017, from 4.24% for 2016, which reduced
loan interest income by $726 thousand. Additionally, other interest
income increased by $90 thousand for the year ended December 31,
2017, primarily reflecting an increase of $205 thousand in interest
income on interest-bearing deposits, which was partially offset by
a decrease of $115 thousand in dividend income earned on the Bank’s
investment in FHLB stock.
Interest expense on deposits increased by $218 thousand to $2.4
million for the year ended December 31, 2017, from $2.2 million for
the same period a year ago, primarily due to an increase of $19.4
million in the average balance of deposits and an increase of 2
basis points in the average cost of deposits. Interest expense on
borrowings increased by $253 thousand to $2.0 million for the year
ended December 31, 2017, from $1.7 million for the same period a
year ago, primarily due to an increase of $17.3 million in the
average balance of FHLB borrowings, which was partially offset by
the impact of a decrease of 16 basis points in the average cost of
FHLB borrowings.
Loan Loss Provision Recapture
The Bank recorded a loan loss provision recapture of $150
thousand for the fourth quarter of 2017, whereas no loan loss
provision or recapture was recorded for the fourth quarter of 2016.
The loan loss provision recapture during the fourth quarter of 2017
was primarily due to a decrease in the requirements for the
allowance for loan losses (“ALLL”) on the existing portfolio as
loans paid off and as the overall credit quality of the loan
portfolio continued to improve. For calendar year 2017, the Bank
recorded loan loss provision recaptures of $1.1 million, primarily
due to payoffs and recoveries of problem loans. In comparison, the
Bank recorded loan loss provision recaptures of $550 thousand for
the year ended December 31, 2016. At December 31, 2017, the ALLL
was $4.1 million, or 1.20% of our gross loans receivable held for
investment, compared to $4.6 million, or 1.20% of our gross loans
receivable held for investment at December 31, 2016. Due to a
reduction in non-performing loans, which decreased from $2.9
million at the end of 2016 to $1.8 million at the end of 2017, the
ALLL as a percentage of non-performing loans increased to 230.4% at
the end 2017 from 156.4% at the end of 2016.
Non-interest Income
Non-interest income for the fourth quarter of 2017 totaled $544
thousand, compared to $158 thousand for the fourth quarter of 2016.
The increase in non-interest income of $386 thousand primarily
reflected a grant of $227 thousand that the Bank received from the
U.S. Department of the Treasury’s Community Development Financial
Institutions (CDFI) Fund. Additionally, the Bank recorded a gain of
$177 thousand from the sale of loans during the fourth quarter of
2017, whereas the Bank did not sell any loans during the fourth
quarter of 2016.
For the year ended December 31, 2017, non-interest income
totaled $2.5 million, compared to $1.0 million for the same period
a year ago. The increase of $1.5 million in non-interest income was
primarily due to an insurance litigation settlement of $1.2 million
and a gain of $560 thousand from the sale of loans during calendar
year 2017. These increases were partially offset by 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 that were included in the Bank’s results for
calendar year 2016.
Non-interest Expense
Total non-interest expense of $3.1 million for the fourth
quarter of 2017 was unchanged compared to the fourth quarter of
2016. While an increase in compensation and benefits expense,
higher stock-based compensation expense and a lower amount of
salary deferred as loan origination costs increased non-interest
expense by $215 thousand during the quarter, and a provision for
losses on REO, higher information services expense and increased
occupancy expense contributed an additional $127 thousand of
increased non-interest expense, these increases were largely offset
by a decrease of $346 thousand in professional services expense for
the fourth quarter of 2017 compared to the same period in 2016,
primarily because in December 2016, the Company incurred $374
thousand of legal and consulting fees in connection with the
repurchase of shares from the U.S. Treasury.
Similarly, total non-interest expense was $11.8 million for both
calendar 2017 and 2016. Overall non-interest expense increased by
$85 thousand as increases in other expense of $377 thousand,
occupancy expense of $82 thousand, and compensation and benefits
expense of $67 thousand, were partially offset by a decrease of
$438 thousand in professional services expense. Other expense
increased by $377 thousand primarily due to payments of $214
thousand for expenses related to three sales by the U.S. Treasury
of a portion of its holdings of the Company’s shares and an
increase of $152 thousand in REO provision for losses and expenses.
Professional services expense decreased by $438 thousand during
2017 primarily due to lower legal and consulting fees. As mentioned
above, the Company incurred $374 thousand in legal and consulting
fees in connection with the repurchase of shares from the U.S.
Treasury in December 2016.
Income Taxes
The Company recorded income tax expense of $643 thousand for the
fourth quarter of 2017 and $1.9 million for the year ended December
31, 2017, compared to income tax benefit of $2.2 million for the
fourth quarter and the year ended December 31, 2016. The tax
expense for the fourth quarter and year 2017 include an adjustment
of $519 thousand to record the Company’s deferred tax assets at the
lower federal corporate income tax rate of 21%. In contrast, the
Company recorded an income tax benefit of $2.2 million for the
comparable periods in 2016, which resulted from the reversal of the
remaining valuation allowance on deferred tax assets, based on an
analysis of the potential for full utilization of those assets. The
deferred tax assets totaled $5.1 million at December 31, 2017, and
$6.9 million at December 31, 2016.
Balance Sheet Summary
Total assets decreased by $15.4 million to $413.7 million at
December 31, 2017 from $429.1 million at December 31, 2016. The
decrease in total assets consisted of a decrease of $44.6 million
in net loans receivable held for investment and a decrease of $1.8
million in deferred tax assets, which were partially offset by an
increase of $22.4 million in loans receivable held for sale, an
increase of $4.3 million in securities available-for-sale, an
increase of $3.8 million in cash and cash equivalents and an
increase of $878 thousand in REO.
During 2017, we allocated $110.4 million, or 96%, of our loan
originations to loans held for sale and we transferred $9.3 million
of multi-family loans from the portfolio of loans held for
investment to the portfolio of loans held for sale as part of our
loan concentration risk management program. Also, during 2017, we
completed $96.9 million of multi-family loan sales that generated
the gain on loan sales of $560 thousand mentioned above. The Bank
had no loans receivable held for sale during 2016.
Loans receivable held for investment, net of the allowance for
loan losses, totaled $334.9 million at December 31, 2017, compared
to $379.5 million at December 31, 2016. During 2017, the Bank
originated for portfolio $5.0 million, primarily in multi-family
loans, and purchased $24.6 million in single family loans. In
comparison, during 2016, the Bank originated for portfolio $137.7
million, primarily in multi-family loans. Loan repayments during
2017 totaled $64.8 million, compared to $63.4 million during
2016.
An REO, recorded at $958 thousand during the third quarter, was
written down to $878 thousand during the fourth quarter due to a
decrease in fair value.
Deposits increased to $291.3 million at December 31, 2017 from
$287.4 million at December 31, 2016, which consisted of an increase
of $39.4 million in liquid deposits and a decrease of $35.5 million
in CDs. During 2017, a CD account of $30.3 million from one deposit
relationship was moved to a money market account. Excluding this
transfer, liquid deposits increased by $9.2 million and CDs
decreased by $5.3 million. The increase of $9.2 million in liquid
deposits consisted of an increase of $5.9 million in money market
accounts, an increase of $3.1 million in NOW accounts and an
increase of $195 thousand in passbook accounts. The decrease of
$5.3 million in CDs during 2017 was primarily due to a decrease of
$46.8 million in QwickRate CDs, which was partially offset by an
increase of $23.4 million in Certificate of Deposit Account
Registry Service (“CDARS”) accounts and an increase of $18.1
million in retail CDs.
Total borrowings at December 31, 2017 consisted of advances to
the Bank from the FHLB of $65.0 million, and subordinated
debentures issued by the Company of $5.1 million, compared to
advances from the FHLB of $85.0 million and subordinated debentures
of $5.1 million at December 31, 2016. During 2017, the Bank paid
off $49.5 million in maturing advances and borrowed $29.5 million
in new advances from the FHLB.
Stockholders' equity was $47.7 million, or 11.54% of the
Company’s total assets, at December 31, 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 $1.74 per share as of December
31, 2017, compared to $1.66 per share as of December 31, 2016.
At December 31, 2017, the Bank’s Total Capital ratio (Total
Capital to Total Risk-Weighted Assets) was 19.88% and its Leverage
ratio (Tier 1 Capital to Adjusted Total Assets) was 11.39%,
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, 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. 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) December 31,
2017 December 31, 2016 Selected Financial Condition
Data and Ratios: Cash and cash equivalents $ 22,219 $ 18,430
Securities available-for-sale, at fair value 17,494 13,202 Loans
receivable held for sale 22,370 - Loans receivable held for
investment 338,920 384,057 Allowance for loan losses (4,069
) (4,603 ) Loans receivable held for investment, net of
allowance 334,851 379,454 Total assets 413,704 429,083 Deposits
291,290 287,427 FHLB advances 65,000 85,000 Junior subordinated
debentures 5,100 5,100 Total stockholders' equity 47,731 45,526
Book value per share $ 1.74 $ 1.66 Equity to total assets
11.54 % 10.61 %
Asset Quality Ratios: Non-accrual
loans to total loans 0.49 % 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
1040.66 % 331.63 % Allowance for loan losses to non-performing
loans 230.41 % 156.35 %
Non-Performing Assets:
Non-accrual loans $ 1,766 $ 2,944 Loans delinquent 90 days or more
and still accruing - - Real estate acquired through foreclosure
878 - Total non-performing assets $
2,644 $ 2,944
Three Months
Ended December 31, Twelve Months Ended December 31,
Selected Operating Data and Ratios: 2017
2016 2017
2016 Interest income $ 3,670 $ 3,889 $ 16,287 $
15,290 Interest expense 1,051 1,014
4,348 3,877 Net interest income 2,619
2,875 11,939 11,413 Loan loss provision recapture 150
- 1,100 550 Net interest
income after loan loss provision recapture 2,769 2,875 13,039
11,963 Non-interest income 544 158 2,530 1,044 Non-interest expense
(3,069 ) (3,059 ) (11,837 ) (11,752 )
Income (loss) before income taxes 244 (26 ) 3,732 1,255 Income tax
expense (benefit) 643 (2,227 ) 1,863
(2,225 ) Net income (loss) $ (399 ) $ 2,201 $
1,869 $ 3,480 Earnings (loss) per common
share-basic and diluted $ (0.01 ) $ 0.08 $ 0.07 $ 0.12 Loan
originations (1) $ 16,008 (2) $ 46,944 $ 115,428 (2) $ 137,719 Loan
purchase $ 24,640 $ - $ 24,640 $ - Net recoveries to average
loans (0.01 )% (3) (0.01 )% (3) (0.15 )% (0.10 )% Return on average
assets (0.38 )% (3) 2.10 % (3) 0.43 % 0.86 % Return on average
equity (3.32 )% (3) 18.74 % (3) 3.96 % 7.41 % Net interest margin
2.53 % (3) 2.81 % (3) 2.79 % 2.90 %
(1) Does not include net deferred
origination costs.
(2) Includes loans held for sale
originations of $15.7 million and $110.4 million for the three and
twelve months ended December 31, 2017, respectively.
(3) Annualized
View source
version on businesswire.com: http://www.businesswire.com/news/home/20180226006440/en/
Broadway Financial CorporationBrenda J. Battey, Chief Financial
Officer, (323)
556-3264investor.relations@broadwayfederalbank.com
Broadway Financial (NASDAQ:BYFC)
Historical Stock Chart
From Mar 2024 to Apr 2024
Broadway Financial (NASDAQ:BYFC)
Historical Stock Chart
From Apr 2023 to Apr 2024