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 $127 thousand, or $0.00
per diluted share, for the second quarter of 2018, compared to
net income of $533 thousand, or $0.02 per diluted share, for
the second quarter of 2017.
During the second quarter of 2018, our results were impacted by
a decline of $430 thousand in net interest income due to lower
average interest-earning assets, and a lower net interest margin
compared to the second quarter of last year. The decrease in
average interest-earning assets, which was the primary contributor
to the decrease in net interest income during the quarter, resulted
primarily from the sale of $101 million of performing multi-family
loans over the past 18 months to maintain compliance with loan
concentration guidelines set by the Bank’s primary regulator.
During the second quarter, the Bank had available capacity to add
loans to its portfolio and used that capacity to originate $41.8
million of new loans to replenish interest-earning assets. As a
result, gains on loan sales decreased by $185 thousand in the
second quarter of 2018, compared to the second quarter of 2017. In
addition, results for the second quarter of 2017 included a
favorable adjustment to earnings from the reversal of a liability
of $700 thousand for deferred compensation, as well as recaptures
of $300 thousand in loan loss provisions.
For the six months ended June 30, 2018, the Company reported a
net loss of $211 thousand, or $0.01 per share, compared to net
earnings of $1.8 million, or $0.07 per diluted share for the six
months ended June 30, 2017.
During the first half of 2018 net interest income decreased by
$735 thousand compared to the first half of 2017, primarily because
of the sale of loans mentioned above, $97 million of which occurred
in 2017. In addition, net income during the first six months of
2017 included recaptures of loan loss provisions of $650 thousand,
and gains on loan sales of $223 thousand, as well as non-recurring
income of $1.2 million from an insurance litigation settlement, and
the reversal of the $700 thousand deferred compensation liability
mentioned above. The Company did not have any loan loss provisions
or recaptures during the first half of 2018, and reported total
gains on loan sales of $11 thousand.
Chief Executive Officer, Wayne Bradshaw, commented, “I am
pleased to report that Broadway is on plan for 2018, and, I
believe, approaching an inflection point for improved operating
performance. As of the end of June the Bank had a Total Capital
ratio of 19.28%, a Tier 1 Leverage ratio of almost 12% and no
delinquencies in the entire loan portfolio. Moreover, over the past
five and one-half years, we have originated over $550 million of
new multi-family loans without experiencing any delinquencies,
demonstrating that Broadway has established, what we believe are,
best in class service and procedures for originating and
administering multi-family loans. Based on our track record, I am
optimistic that our efforts over the past year or so to obtain
authorization to increase our capacity to hold multi-family loans,
and develop platforms to offer other loan products that can
leverage our existing customer base and relationships, will bear
fruit in the near future so that we can increase our base of
interest-earning assets, develop economies of scale, and improve
operating efficiency. We are working diligently to put our capital
to work and remain committed to addressing the unrelenting demand
for affordable housing, particularly within our target market of
low to moderate income communities in Southern California.
“I wish to thank our team for their dedication and tireless
efforts to build value, and Broadway’s stockholders for their
continuing support of our mission and business plan.”
Net Interest Income
Net interest income for the second quarter of 2018 totaled $2.6
million, compared to $3.0 million for the second quarter of 2017.
The $430 thousand decrease in net interest income primarily
resulted from lower interest income on loans, offset by lower
interest expense on FHLB advances.
During the second quarter of 2018, interest income on loans
decreased by $529 thousand due to a decline of $36.1 million in the
average balance of loans receivable (including loans held for
sale), which decreased interest income by $349 thousand, and a
decrease of 19 basis points in loan yield, which reduced interest
income by $180 thousand. The decrease in the average balance of
loans receivable was the result of loan sales and payoffs over the
18 months. The decrease in loan yield primarily resulted from
payments received on church loans that have higher rates than the
multi-family loans originated over the last year.
Interest expense on FHLB advances decreased by $174 thousand
during the second quarter of 2018 compared to the second quarter of
2017. The decrease in interest on FHLB advances was primarily due
to a decrease of $33.3 million in the average balance of FHLB
advances, which decreased interest expense by $157 thousand, and an
8 basis points decrease in the average cost of FHLB advances, which
decreased interest expense by $17 thousand.
Interest on deposits increased by $88 thousand during the second
quarter of 2018 compared to the second quarter of 2017. The
increase was attributable to higher rates paid on all deposit
types, which caused interest expense on deposits to increase by
$153 thousand. However, the average total deposit balance decreased
by $15.4 million, which led to a decrease in interest expense of
$65 thousand.
For the six months ended June 30, 2018, net interest income
decreased by $735 thousand to $5.3 million from $6.1 million for
the same period a year ago. Average interest-earning assets
decreased by $39.2 million during the first six months of 2018
compared to the first six months of 2017, which decreased net
interest income by $715 thousand. The net interest margin decreased
by 10 basis points to 2.70% for the six months ended June 30, 2018
from 2.80% for the same period in 2017, primarily due to a decline
in loan yield and an increase in the cost of deposits.
Loan Loss Provision
The Company neither recorded nor recaptured any loan loss
provision for the second quarter or the first six months of 2018,
compared to recaptures of $300 thousand for the second quarter of
2017 and $650 thousand for the first six months of 2017. At June
30, 2018, the allowance for loan losses (“ALLL”) was $4.2 million,
or 1.13% of our gross loans receivable held for investment compared
to 1.20% at December 31, 2017. The Company did not have any
delinquent loans at June 30, 2018.
Non-interest Income
Non-interest income for the second quarter of 2018 totaled $170
thousand, compared to $322 thousand for the second quarter of 2017.
Non-interest income decreased by $152 thousand primarily because
the Bank recorded $185 thousand less in gain from the sale of loans
during the second quarter of 2018 compared to the same period last
year. This decrease was partially offset by an increase of $20
thousand in miscellaneous loan fees and an increase of $11 thousand
in service charges on deposits during the second quarter of 2018
compared to the second quarter of 2017.
For the six months ended June 30, 2018, non-interest income
totaled $301 thousand, compared to $1.7 million for the same period
a year ago. The decrease of $1.4 million in non-interest income was
primarily due to a gain of $1.2 million from an insurance
litigation settlement recorded in the first half of 2017 and a
decrease of $212 thousand in the amount of gains on sales of loans
during the first half of 2018 due to a decrease of $42.5 million in
loan sales.
Non-interest Expense
Non-interest expense for the second quarter of 2018 totaled $2.9
million, compared to $2.7 million for the second quarter of 2017.
The increase of $255 thousand in non-interest expense during the
second quarter of 2018 was primarily due to an increase of $423
thousand in compensation and benefits expense and an increase of
$24 thousand in REO expense, offset by a decrease of $147 thousand
in other expense and a decrease of $48 thousand in professional
services expense, primarily legal expenses.
Compensation and benefits expense increased by $423 thousand
during the second quarter of 2018 compared to the second quarter of
2017 primarily because compensation expense during the 2017 period
included a reversal of $700 thousand of deferred compensation
expense related to a former executive. The following items of
compensation expense decreased during the second quarter of 2018
compared to the second quarter of 2017: bonus accruals were lower
by $90 thousand, compensation allocated as deferred loan
origination costs was higher by $136 thousand, stock award expense
was lower by $31 thousand, and other compensation related expenses
were lower by $20 thousand.
REO expense increased during the quarter due to property taxes
of $24 thousand for the Bank’s sole REO property. Other expenses
decreased by $147 thousand during the second quarter of 2018
compared to the second quarter of 2017 primarily because results
for the second quarter of 2017 included expenses of $139 thousand
associated with the U.S. Treasury’s sale of a portion of its
holdings in the Company.
For the six months ended June 30, 2018, non-interest expense
totaled $6.0 million, compared to $5.7 million for the same period
a year ago. The increase of $244 thousand in non-interest expense
was primarily due to an increase of $341 thousand in compensation
and benefits expense, an increase of $88 thousand in REO expense,
and an increase of $36 thousand in marketing expense, which were
partially offset by decreases of $34 thousand in professional
services expense and $193 thousand in other expenses, of which $139
thousand related to the U.S. Treasury’s 2017 stock sales.
The increase of $341 thousand in compensation and benefits
expense during the first six months of 2018 compared to the first
six months of 2017 primarily resulted from the $700 thousand
reversal of deferred compensation expense in 2017 described above.
The following items of compensation expense decreased during the
first six months of 2018 compared to first six months of 2017:
bonus accruals were lower by $124 thousand, compensation allocated
as deferred loan origination costs was higher by $176 thousand,
commission expense was lower by $48 thousand, and other
compensation related expenses were lower by $11 thousand.
Income Taxes
Income tax expense or benefit 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 benefits of $54 thousand and $97 thousand for the three and six
months ended June 30, 2018, respectively, compared to income tax
expense of $423 thousand and $936 thousand for the three and six
months ended June 30, 2017, respectively. The Company’s effective
income tax benefits were 29.8% and 31.5% of our pretax losses for
the three and six months ended June 30, 2018, respectively,
compared to income tax expenses of 44.2% and 34.7% of our taxable
income for the comparable periods in 2017. The Company had no
valuation allowance on its deferred tax assets, which totaled $5.2
million and $5.1 million at June 30, 2018 and December 31, 2017,
respectively.
Balance Sheet Summary
Total assets decreased by $1.6 million to $412.1 million at June
30, 2018 from $413.7 million at December 31, 2017. The decline in
total assets was comprised of a decrease of $8.6 million decrease
in cash and cash equivalents, a decrease of $1.5 million in
securities available for sale, and a decrease of $21.3 million in
loans receivable held for sale, of which $16.9 million represented
a transfer to loans held for investment in the first quarter of
2018. Offsetting these decreases was an increase of $29.9 million
in loans receivable held for investment.
Loans receivable held for investment, net of the allowance for
loan losses, totaled $364.8 million at June 30, 2018, compared to
$334.9 million at December 31, 2017. During the first half of 2018,
the Bank originated for portfolio $56.8 million in loans, compared
to $4.2 million originated for the portfolio during the first half
of 2017. Total originations of all loans were $41.8 million for the
second quarter of 2018, compared to $39.5 million for the second
quarter of 2017. Loan repayments during the first half of 2018
totaled $43.6 million, compared to $33.9 million during the first
half of 2017.
Deposits decreased to $271.3 million at June 30, 2018 from
$291.3 million at December 31, 2017, which consisted primarily of a
decrease of $29.1 million in liquid deposits (NOW, demand, money
market and passbook accounts), offset by an increase of $8.8
million in certificates of deposit. The decrease was primarily
caused by one customer with large deposit balances transferring
funds from core deposits to CDARs, offset in part by the Bank
eliminating some higher cost CDs held by other customers. FHLB
advances increased to $84.0 million at June 30, 2018 from $65.0
million at December 31, 2017, as the Bank borrowed multiple
advances across different maturities to fund loans that were
originated during the latter part of the second quarter.
Stockholders' equity was $47.3 million, or 11.48% of the
Company’s total assets, at June 30, 2018, compared to $47.7
million, or 11.54% of the Company’s total assets, at December 31,
2017. The Company’s book value was $1.73 per share as of June 30,
2018, compared to $1.74 per share as of December 31, 2017.
At June 30, 2018, the Bank’s Total Capital ratio was 19.28% and
its Leverage ratio (Tier 1 Capital to adjusted total assets) was
11.98%, compared to a Total Capital ratio of 19.88% and a Leverage
ratio of 11.39% at December 31, 2017.
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, 2018 December 31, 2017
Selected Financial Condition Data and Ratios: Cash and cash
equivalents $ 13,598 $ 22,219 Securities available-for-sale, at
fair value 15,977 17,494 Loans receivable held for sale 1,079
22,370 Loans receivable held for investment 368,991 338,920
Allowance for loan losses (4,183 ) (4,069 ) Loans
receivable held for investment, net of allowance 364,808 334,851
Total assets 412,060 413,704 Deposits 271,266 291,290 FHLB advances
84,000 65,000 Junior subordinated debentures 5,100 5,100 Total
stockholders' equity 47,301 47,731 Book value per share $
1.73 $ 1.74 Equity to total assets 11.48 % 11.54 %
Asset
Quality Ratios: Non-accrual loans to total loans 0.34 % 0.49 %
Non-performing assets to total assets 0.50 % 0.64 % Allowance for
loan losses to total gross loans 1.13 % 1.20 % Allowance for loan
losses to total delinquent loans N/A 243.65 % Allowance for loan
losses to non-performing loans 335.45 % 230.41 %
Non-Performing Assets: Non-accrual loans $ 1,247 $ 1,766
Loans delinquent 90 days or more and still accruing - - Real estate
acquired through foreclosure 833 878
Total non-performing assets $ 2,080 $ 2,644
Three Months Ended June 30, Six Months
Ended June 30, Selected Operating Data and Ratios:
2018 2017 2018 2017 Interest income $
3,634 $ 4,136 $ 7,392 $ 8,273 Interest expense 1,062
1,134 2,046 2,192 Net
interest income 2,572 3,002 5,346 6,081 Loan loss provision
recapture - 300 -
650 Net interest income after loan loss provision recapture
2,572 3,302 5,346 6,731 Non-interest income 170 322 301 1,681
Non-interest expense (2,923 ) (2,668 ) (5,955
) (5,711 ) (Loss) income before income taxes (181 ) 956 (308
) 2,701 Income tax (benefit) expense (54 ) 423
(97 ) 936 Net (loss) income $ (127 ) $ 533
$ (211 ) $ 1,765 (Loss) earnings per common
share-basic and diluted $ - $ 0.02 $ (0.01 ) $ 0.07 Loan
originations (1) $ 41,783 $ 39,498 (2 ) $ 56,795 $ 90,143
Net recoveries to average loans (0.00 )% (3 ) (0.16 )% (3 ) (0.06
)% (3 ) (0.15 )% Return on average assets (0.13 )% (3 ) 0.47 % (3 )
(0.10 )% (3 ) 0.79 % Return on average equity (1.07 )% (3 ) 4.51 %
(3 ) (0.89 )% (3 ) 7.60 % Net interest margin 2.62 % (3 ) 2.72 % (3
) 2.70 % (3 ) 2.80 % (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: https://www.businesswire.com/news/home/20180806005496/en/
Broadway Financial CorporationBrenda J. Battey, Chief Financial
Officer, (323)
556-3264investor.relations@broadwayfederalbank.com
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