Broadway Financial Corporation (the “Company”) (NASDAQ Capital
Market: BYFC), parent company of Broadway Federal Bank, f.s.b. (the
“Bank”), today reported net income of $751 thousand, or $0.03
per diluted share, for the third quarter of 2018, compared to
net income of $503 thousand, or $0.02 per diluted share, for
the third quarter of 2017.
The higher net income during the third quarter of 2018 compared
to the third quarter of 2017 primarily resulted from an increase of
$700 thousand in loan loss provision recapture, receipt of a grant
for $233 thousand from the U.S. Department of the Treasury’s
Community Development Financial Institutions (“CDFI”) Fund, and a
reduction of $256 thousand in non-interest expense. The increase in
net income was partially offset by a decrease of $735 thousand in
net interest income and a decrease of $151 thousand in gain on sale
of loans.
For the nine months ended September 30, 2018, the Company
reported net income of $540 thousand, or $0.02 per diluted share,
compared to $2.3 million, or $0.08 per diluted share, for the nine
months ended September 30, 2017.
The decrease in net income for the nine months ended September
30, 2018 compared to the nine months ended September 30, 2017 was
primarily due to a decrease of $1.3 million in non-interest income,
which resulted from an insurance settlement of $1.2 million that
was received during 2017, a decrease of $1.5 million in net
interest income, and a decrease of $363 thousand in gain on sale of
loans. These decreases were offset in part by the grant for $233
thousand that was received from the CDFI Fund in the third quarter
of 2018 and an increase of $50 thousand in loan loss provision
recapture compared to the prior year.
Chief Executive Officer, Wayne Bradshaw, commented, “I am
pleased to announce that Broadway reported positive earnings for
the third quarter, and that we made important progress in executing
our plan. Specifically, at the end of the third quarter the Bank’s
regulator did not object to our request to increase the loan
concentration limits for the Bank’s multi-family loans and
commercial real estate loans, which will allow Broadway to
significantly increase its portfolio of loans held for investment.
This increase in concentration limits was made possible by the
dedication and ongoing commitment of our team to create and
implement best in class policies, procedures, and practices for
originating and monitoring loans, and will help Broadway in its
pursuit of economies of scale and improved operating
efficiency.
“During 2018 we have been originating new multi-family loans at
rates that are more attractive than the originations that we
generated over the prior two years, and generally higher than the
rates that can be obtained by underwriting or purchasing prime
single-family residential loans. We expect those trends to continue
as we expand our portfolio of new multi-family loans in the fourth
quarter and beyond. Also, we expect to augment the growth in the
Bank’s portfolio of multi-family loans by building a pipeline of
construction and commercial real estate loans, which will leverage
our existing customer base and relationships. These types of loans
generally yield higher rates of interest than single-family or
multi-family loans. We expect these efforts will result in
completed loan originations starting in early 2019; however, we
will continue to maintain our credit standards as we expand and
seek to improve the overall yield of our interest earning assets.
Over the past five and one-half years, Broadway has originated over
$570 million of new multi-family loans without experiencing any
delinquencies. As a result, the Bank’s non-performing assets
continued to decline during the third quarter to a level
representing just 0.48% of total assets. In addition, the Bank’s
capital base remains very strong with a Total Capital ratio of
19.34% and Tier 1 Leverage ratio of 11.83% at the end of
September.
“As always, we wish to thank our stockholders for their
continuing support of our strategy, which remains focused on
addressing the persistent demand for affordable housing,
particularly within our target market of low to moderate income
communities in Southern California.”
Net Interest Income
Net interest income for the third quarter of 2018 totaled $2.5
million, compared to $3.2 million for the third quarter of 2017.
The decrease of $735 thousand in net interest income primarily
resulted from lower interest income on loans and other interest
earning assets, and higher interest expense on deposits and
borrowings. The average balance of interest earning assets for the
third quarter decreased by $20.6 million, and net interest margin
for the third quarter decreased to 2.46% from 3.03%, for the same
period in 2017.
Interest income on loans decreased by $437 thousand to $3.7
million for the third quarter of 2018, from $4.1 million for the
third quarter of 2017. Lower interest income on loans for the third
quarter of 2018 resulted from a decrease of $6.7 million in the
average balance of loans receivable, which decreased interest
income by $71 thousand. In addition, the average yield on loans
during the third quarter of 2018 decreased by 39 basis points
compared to the third quarter of 2017, which reduced interest
income by $366 thousand. The decrease in the average yield on loans
primarily resulted from the payoffs of loans with higher rates than
those originated over the last year.
Interest expense on deposits increased by $210 thousand to $821
thousand for the third quarter of 2018, from $611 thousand for the
third quarter of 2017. Higher interest expense on deposits for the
third quarter of 2018 primarily resulted from an increase of 36
basis points in the average cost of deposits, which increased
interest expense by $271 thousand. This increase was partially
offset by a decrease of $61 thousand in interest expense due to a
decrease of $17.2 million in the average balance of deposits.
Interest expense on borrowings increased by $84 thousand to $578
thousand for the third quarter of 2018, from $494 thousand for the
third quarter of 2017. Higher interest expense on borrowings for
the third quarter of 2018 primarily resulted from an increase of 38
basis points in the average cost of advances from the Federal Home
Loan Bank (“FHLB”), which increased interest expense by $84
thousand, offset in part by a decrease of $2.6 million in the
average balance of FHLB advances, which decreased interest expense
by $12 thousand. Additionally, the interest rate on the Company’s
junior subordinated debentures increased by 94 basis points during
the third quarter of 2018, resulting in additional interest expense
of $12 thousand.
For the nine months ended September 30, 2018, net interest
income decreased by approximately $1.5 million to $7.8 million from
$9.3 million for the same period a year ago. Average
interest-earning assets decreased by $32.9 million to $399.7
million for the nine months ended September 30, 2018 from $432.6
million for the same period in 2017 which decreased net interest
income by $354 thousand. The net interest margin decreased by 25
basis points to 2.62% for the nine months ended September 30, 2018
from 2.87% for the same period in 2017, primarily due to a decline
in loan yield and an increase in the cost of deposits. The decline
in net interest margin decreased net interest income by $1.1
million for the nine-month period.
Loan Loss Provision Recapture
The Company recorded a loan loss provision recapture of $1.0
million for the third quarter of 2018, compared to a loan loss
provision recapture of $300 thousand for the third quarter of 2017.
The larger loan loss provision recapture during the third quarter
of 2018 was primarily due to continued improvement in the loan
portfolio due to payoffs and recoveries of problem loans, which had
a favorable impact on the environmental factors used in the Bank’s
analysis of the allowance for loan and lease losses (“ALLL”). At
September 30, 2018, the ALLL was $3.2 million, or 0.89% of our
gross loans receivable held for investment, compared to $4.1
million, or 1.20% of our gross loans receivable held for investment
at December 31, 2017. The ratio of the ALLL to total non-performing
loans increased to 268.2% at September 30, 2018, from 230.4% at the
end of 2017, and the ratio of the ALLL to delinquent loans
increased to 8,162% at September 30, 2018 from 552% at the end of
2017. The Bank had one delinquent single family loan with a balance
of $39 thousand at the end of the third quarter of 2018.
Non-interest Income
Non-interest income for the third quarter of 2018 totaled $380
thousand, compared to $305 thousand for the third quarter of 2017.
The increase in non-interest income of $75 thousand primarily
reflected a grant for $233 thousand received from the CDFI Fund
during the third quarter of 2018, offset by a decrease of $151
thousand in gain on sale of loans compared to the third quarter of
last year.
For the nine months ended September 30, 2018, non-interest
income totaled $681 thousand, compared to $2.0 million for the same
period a year ago. The decrease of $1.3 million in non-interest
income was primarily due to an insurance litigation settlement of
$1.2 million during 2017 and a decrease of $363 thousand in gain on
sale of loans compared to the same period last year. These
decreases were partially offset by the grant for $233 thousand
received from the CDFI Fund during the nine months ended September
30, 2018.
Non-interest Expense
Non-interest expense for the third quarter of 2018 totaled $2.8
million, compared to $3.1 million for the third quarter of 2017.
The decrease of $256 thousand in non-interest expense during the
third quarter of 2018 was primarily due to a decrease of $157
thousand in compensation and benefits expense, primarily reflecting
lower staffing levels and lower stock-related salary costs compared
to the third quarter of last year. Additionally, other expense
decreased by $137 thousand during the third quarter of 2018
compared to the third quarter of last year primarily due to a
decrease of $73 thousand in the reserve for off balance sheet
commitments, a decrease of $75 thousand in prior year costs
associated with the sale of a portion the U.S. Treasury’s holdings
in the Company’s shares, and a decrease of $16 thousand in
corporate insurance, offset by an increase of $34 thousand in REO
expense. The Bank had one REO property as of September 30,
2018.
For the nine months ended September 30, 2018, non-interest
expense totaled $8.8 million, which is comparable to the same
period one year ago. Although comparable, the components of
non-interest expense changed. Compensation and benefits increased
by $184 thousand, REO expense increased by $122 thousand, and
marketing costs increased by $64 thousand. These increases were
primarily offset by a decrease of $30 thousand in corporate
insurance expense, a decrease of $28 thousand in professional
services, primarily legal fees, a decrease of $36 thousand in the
reserve for off balance sheet commitments, a decrease of $28
thousand in FDIC insurance premiums, a decrease of $29 thousand in
other miscellaneous loan expenses, primarily appraisal fees, and a
decrease of $214 thousand in prior year costs associated with sales
of the U.S. Treasury’s holdings in the Company’s shares.
Income Taxes
Income taxes are computed by applying the statutory federal
income tax rate of 21.0% and the California income tax rate of
10.84% to taxable income. The Company recorded income tax expense
of $332 thousand during the third quarter and $235 thousand for the
nine months ended September 30, 2018, compared to $284 thousand and
$1.2 million for the comparable periods in 2017. The Company’s
effective income tax rate was 30.7% and 30.3% for the three and
nine months ended September 30, 2018, respectively, compared to
36.1% and 35.0% for the comparable periods in 2017. The Company had
no valuation allowance on its deferred tax assets, which totaled
$4.9 million and $5.1 million at September 30, 2018 and December
31, 2017, respectively.
Balance Sheet Summary
Total assets increased by $5.8 million to $419.5 million at
September 30, 2018 from $413.7 million at December 31, 2017. The
growth in assets primarily included an increase of $20.4 million in
net loans receivable held for investment, which was partially
offset by a decrease of $8.8 million in cash and cash equivalents,
a decrease of $3.3 million in loans receivable held for sale, and a
decrease of $2.3 million in securities available-for-sale.
Loans receivable held for investment, net of the allowance for
loan losses, totaled $355.3 million at September 30, 2018, compared
to $334.9 million at December 31, 2017. During the nine months
ended September 30, 2018, the Bank originated $57.5 million in
loans for its portfolio, compared to $4.7 million originated for
its portfolio during the nine months ended September 30, 2017. In
addition, the Bank transferred $16.9 million in loans from loans
receivable held for sale to loans receivable held for investment
during 2018. Loan repayments during the nine months ended September
30, 2018 totaled $54.8 million, compared to $54.1 million during
the nine months ended September 30, 2017.
Deposits decreased by $12.4 million to $278.9 million at
September 30, 2018 from $291.3 million at December 31, 2017, which
consisted of a decrease of $30.2 million in core deposits (NOW,
demand, money market and passbook accounts) and an increase of
$17.8 million in certificates of deposit.
FHLB advances increased by $17.0 million to $82.0 million at
September 30, 2018 from $65.0 million at December 31, 2017.
Stockholders' equity was $48.0 million, or 11.45% of the
Company’s total assets, at September 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 $1.75 per share as of September
30, 2018, compared to $1.74 per share as of December 31, 2017.
At September 30, 2018, the Bank’s Total Capital ratio was 19.34%
and its Leverage ratio (Tier 1 Capital to adjusted total assets)
was 11.83%, 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, 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, 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)
September 30, 2018
December 31, 2017
Selected Financial Condition Data and Ratios: Cash and cash
equivalents $ 13,414 $ 22,219 Securities available-for-sale, at
fair value 15,243 17,494 Loans receivable held for sale 19,087
22,370 Loans receivable held for investment 358,455 338,920
Allowance for loan losses (3,183 ) (4,069 ) Loans
receivable held for investment, net of allowance 355,272 334,851
Total assets 419,481 413,704 Deposits 278,900 291,290 FHLB advances
82,000 65,000 Junior subordinated debentures 5,100 5,100 Total
stockholders' equity 48,013 47,731 Book value per share $
1.75 $ 1.74 Equity to total assets 11.45 % 11.54 %
Asset
Quality Ratios: Non-accrual loans to total loans 0.31 % 0.49 %
Non-performing assets to total assets 0.48 % 0.64 % Allowance for
loan losses to total gross loans 0.89 % 1.20 % Allowance for loan
losses to total delinquent loans 8161.54 % 552.10 % Allowance for
loan losses to non-performing loans 268.16 % 230.41 %
Non-Performing Assets: Non-accrual loans $ 1,187 $ 1,766
Loans delinquent 90 days or more and still accruing - - Real estate
acquired through foreclosure 833 878
Total non-performing assets $ 2,020 $ 2,644
Three Months Ended September 30, Nine
Months Ended September 30, Selected Operating Data and
Ratios: 2018 2017 2018 2017
Interest income $ 3,903 $ 4,344 $ 11,295 $ 12,617 Interest expense
1,399 1,105 3,445
3,297 Net interest income 2,504 3,239 7,850 9,320 Loan loss
provision recapture 1,000 300
1,000 950 Net interest income after loan loss
provision recapture 3,504 3,539 8,850 10,270 Non-interest income
380 305 681 1,986 Non-interest expense (2,801 )
(3,057 ) (8,756 ) (8,768 ) Income before income taxes
1,083 787 775 3,488 Income tax expense 332 284
235 1,220 Net income $ 751
$ 503 $ 540 $ 2,268 Earnings per
common share-diluted $ 0.03 $ 0.02 $ 0.02 $ 0.08 Loan
originations (1) $ 20,995
(2)
$ 9,277
(3)
$ 77,790
(2)
$ 99,420 (3) Net recoveries to average loans (0.00 )%
(4)
(0.28 )%
(4)
(0.04 )%
(4)
(0.19 )% (4) Return on average assets 0.72 %
(4)
0.46 %
(4)
0.53 %
(4)
0.68 % (4) Return on average equity 6.34 %
(4)
4.22 %
(4)
4.55 %
(4)
6.46 % (4) Net interest margin 2.46 %
(4)
3.03 %
(4)
2.62 %
(4)
2.87 % (4) (1) Does not include net deferred
origination costs. (2) Includes loans held for sale originations of
$20.2 million for the three and nine months ended September 30,
2018. (3) Includes loans held for sale originations of $8.8 million
and $94.7 million for the three and nine months ended September 30,
2017, respectively. (4) Annualized
View source
version on businesswire.com: https://www.businesswire.com/news/home/20181106005321/en/
Broadway Financial CorporationBrenda J. Battey, Chief Financial
Officer(323) 556-3264investor.relations@broadwayfederalbank.com
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