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 $275 thousand, or $0.01
per diluted share, for the fourth quarter of 2018 compared to a net
loss of $399 thousand, or ($0.01) per diluted share, for the
fourth quarter of 2017. Results for the fourth quarter of 2018
included a tax benefit of $208 thousand for low income tax credits.
Results for the fourth quarter of 2017 included tax expense of $519
thousand to adjust the Company’s deferred tax asset for the
decrease in the federal corporate tax rate to 21% from 34% due to
the enactment of the Tax Cuts and Jobs Act of 2017.
Pretax earnings for the fourth quarter of 2018 were $96 thousand
compared to $244 thousand for the fourth quarter of 2017. Results
for the fourth quarter of 2018 included an increase of $104
thousand in loan loss provision recapture and a decrease of $269
thousand in non-interest expense compared to the fourth quarter of
2017. These items were offset by lower net interest income of $161
thousand and lower gain on sale of loans of $127 thousand in the
fourth quarter of 2018 compared to the fourth quarter of 2017.
Also, the Bank received a grant of $227 thousand from the U.S.
Department of the Treasury’s Community Development Financial
Institutions (“CDFI”) Fund during the fourth quarter of 2017, while
no grants were received during the fourth quarter of 2018.
For the year ended December 31, 2018, the Company reported net
income of $815 thousand, or $0.03 per diluted share, compared to
$1.9 million, or $0.07 per diluted share for the year ended
December 31, 2017. Pretax earnings were $871 thousand during
calendar year 2018, compared to $3.7 million in 2017. The lower
pretax earnings during 2018 were attributable to a decrease of $1.6
million in net interest income and a decrease of $1.7 million in
non-interest income, partially offset by a decrease of $281
thousand in non-interest expense and an increase of $154 thousand
in loan loss provision recapture. Non-interest income for 2017
included an insurance litigation settlement of $1.2 million and a
higher gain on the sale of loans of $490 thousand. Non-interest
expense decreased for the year 2018 compared to 2017 because 2017
expenses included costs of $214 thousand associated with the U.S.
Treasury’s sale of a portion of its holdings of the Company’s
shares. Also, professional services costs decreased by $63 thousand
in 2018 compared to 2017.
Chief Executive Officer, Wayne Bradshaw, commented, “I am
pleased to announce that Broadway was profitable during the fourth
quarter of 2018 and the full calendar year, despite a difficult
interest rate environment that has compressed net interest margins
for the banking industry. Furthermore, I am very pleased to report
that the Bank had only one delinquent loan at year end, which had a
balance of just $35 thousand.”
“As of the start of 2019, we have capacity to increase our loan
portfolio by approximately 19% under our current regulatory loan
concentration guidelines, which were increased during the final few
months of the year. We continue to be focused on building our loan
portfolio with new multi-family loans and non-multi-family
commercial real estate loans, including construction loans, which
typically generate superior margins to those earned from the Bank’s
prime single-family residential loans. These types of loans should
generate improved economics for the Company, as the increase in the
Bank’s portfolio of more profitable loans receivable should
increase total net interest income without requiring significant
increases in operating expenses. As I have stated previously, these
types of loans also leverage our lending relationships and
expertise, and continue Broadway’s focus on addressing the
unrelenting demand for affordable housing, particularly within the
Bank’s target market of low to moderate income communities in
Southern California.”
“I wish to thank our team again 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 2018, net interest income decreased by
$161 thousand compared to the same period a year ago, primarily due
to higher rates paid on deposits and borrowings, which outweighed
increases in the average balance of loans receivable and the rates
earned on loans receivable and investments.
Interest income on loans receivable increased by $303 thousand
for the fourth quarter of 2018 compared to the fourth quarter of
2017. The increase in interest income on loans receivable resulted
from an increase of $22.4 million in the average balance of loans
receivable, which increased interest income by $219 thousand and an
increase of 10 basis points in the yield on loans receivable
compared to the fourth quarter of 2017, which increased interest
income by $84 thousand.
Interest income on securities decreased slightly to $100
thousand for the fourth quarter of 2018 from $101 thousand for the
fourth quarter of 2017 due to a decrease of $1.6 million in the
average balance of securities, which offset an increase of 23 basis
points in the average yield on securities.
Other interest income decreased by $30 thousand for the fourth
quarter of 2018 compared to the fourth quarter of 2017. The
decrease was primarily due to a decrease of $77 thousand in
interest earned on interest-earning deposits, which reflected a
decline of $30.8 million in the average balance, offset by an
increase of 85 basis points in the average rate earned. In
addition, the Bank received a special dividend of $47 thousand from
the FHLB.
Interest expense on deposits increased by $336 thousand for the
fourth quarter of 2018 compared to the fourth quarter of 2017. The
higher interest expense on deposits primarily resulted from an
increase of 52 basis points in the average cost of deposits, which
increased interest expense by $373 thousand. This was offset by a
$13.6 million decrease in the average deposit balance, which
decreased interest expense by $37 thousand.
Interest expense on borrowings increased by $97 thousand for the
fourth quarter of 2018 compared to the fourth quarter of 2017.
Interest expense on borrowings reflected an increase of $3.9
million in average borrowings from the FHLB, which increased
interest expense by $20 thousand, and an increase of 36 basis
points in the overall cost of borrowings, which increased interest
expense by $77 thousand.
For the year ended December 31, 2018, net interest income
decreased by $1.6 million compared to the year ended December 31,
2017.
Interest income on loans receivable decreased by $1.1 million
for the year ended December 31, 2018 compared to the same period a
year ago, primarily due to a decrease of $14.8 million in the
average balance of loans receivable, which decreased interest
income by $588 thousand, and a decrease of 14 basis points in the
average yield on loans receivable, which reduced loan interest
income by $530 thousand. The decrease in the average balance of
loans receivable during 2018 reflected loan sales that the Bank
completed in the second half of 2017 and early 2018 to maintain
compliance with the lower loan concentration limits that existed
during that period.
Interest income on securities increased by $95 thousand for the
year ended December 31, 2018 compared to the prior year due to an
increase of $2.6 million in the average securities balance, which
increased interest income by $66 thousand, and an increase of 21
basis points in the average yield on securities, which increased
interest income by $29 thousand.
Other interest income decreased by $27 thousand for the year
ended December 31, 2018 compared to the prior year, primarily
reflecting a decrease of $79 thousand in interest income from
interest-earning deposits. Those deposits generated less income
because the average balance during the year was lower by $15.0
million, which decreased interest income by $232 thousand. This
decrease was partially offset by an increase of 68 basis points in
the rate earned on interest-earning deposits, which increased other
interest income by $153 thousand. Dividends earned on FHLBSF stock
increased by $52 thousand, primarily due to the $47 thousand
special dividend received during the fourth quarter of 2018.
Interest expense on deposits increased by $691 thousand for the
year ended December 31, 2018 compared to the prior year, primarily
due to an increase of 29 basis points in the average cost of
deposits, which increased interest expense by $888 thousand. This
increase was partially offset by the effects of a decrease of $12.7
million in the average balance of deposits, which decreased
interest expense by $197 thousand.
Interest expense on borrowings decreased by $110 thousand for
the year ended December 31, 2018 compared to the prior year,
primarily due to a decrease of $166 thousand in interest on FHLB
advances. The interest expense on these advances decreased because
of a decrease of $14.6 million in the average balance of FHLB
borrowings, which was partially offset by the impact of an increase
of 16 basis points in the average cost of FHLB borrowings. Interest
expense on the Company’s subordinated debt increased by $56
thousand due to an increase of 110 basis points in rate.
Loan Loss Provision Recapture
The Bank recorded a loan loss provision recapture of $254
thousand for the fourth quarter of 2018 compared to a loan loss
provision recapture of $150 thousand for the fourth quarter of
2017. The loan loss provision recapture for the fourth quarter of
2018 was primarily due to the removal of a specific allowance of
$183 thousand upon the payoff of an impaired loan. In addition, the
recapture in the fourth quarter of 2018 reflected continued
improvement in the credit quality of the Bank’s loans due to
upgrades of non-performing church loans and improvement in
historical loss factors.
For calendar year 2018, the Bank recorded a loan loss provision
recapture of $1.3 million compared to $1.1 million for calendar
year 2017. The loan loss provision recapture for calendar year 2018
was due to the overall improvement in the loan portfolio, 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 December 31, 2018, the ALLL was $2.9 million, or 0.82% 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. Due to a reduction in non-performing loans
from $1.8 million at the end of 2017 to $911 thousand at the end of
2018, ALLL, as a percentage of non-performing loans, increased to
321.5% at the end 2018 from 230.4% at the end of 2017. Also,
delinquent loans fell to $35 thousand at December 31, 2018 from
$391 thousand at December 31, 2017, as substantially all of the
Bank’s non-performing loans are current in payments.
Non-interest Income
Non-interest income for the fourth quarter of 2018 totaled $184
thousand compared to $544 thousand for the fourth quarter of 2017.
The decrease in non-interest income of $360 thousand primarily
reflected a lower gain on the sale of loans of $127 thousand and a
grant of $227 thousand received during the fourth quarter of 2017
from the CDFI Fund. No grant was received during the fourth quarter
of 2018.
For the year ended December 31, 2018, non-interest income
totaled $865 thousand compared to $2.5 million for the same period
a year ago. The decrease of $1.7 million in non-interest income was
primarily due to a one-time insurance litigation settlement of $1.2
million received during 2017. In addition, gain on the sale of
loans decreased by $490 thousand during the year 2018 compared to
2017.
Non-interest Expense
Non-interest expense decreased to $2.8 million during the fourth
quarter of 2018 from $3.1 million during the fourth quarter of 2017
primarily due to decreases in compensation costs of $221 thousand,
professional services costs of $35 thousand, REO costs of $34
thousand, and insurance costs of $19 thousand, partially offset by
an increase in provisions for off-balance sheet items of $52
thousand. The decrease in compensation costs was primarily
attributable to lower bonus accruals and lower stock-related
costs.
Non-interest expense decreased to $11.6 million during calendar
year 2018 from $11.8 million during calendar year 2017 primarily
because 2017 expenses included $214 thousand in costs associated
with the sale of a portion of the U.S. Treasury’s holdings of the
Company’s shares. In addition, professional services costs
decreased by $63 thousand, corporate insurance decreased by $49
thousand, and compensation expense decreased by $37 thousand during
the year 2018 compared to 2017. These decreases were partially
offset by an increase in expenses of $88 thousand associated with
the Bank’s one foreclosed property, which was sold in early
2019.
Income Taxes
The Company recorded an income tax benefit of $179 thousand for
the fourth quarter of 2018 and income tax expense of $56 thousand
for the year 2018. The tax benefit for the fourth quarter resulted
from available tax credits of $208 thousand, partially offset by a
standard tax provision of $29 thousand. Income tax expense for the
year 2018 resulted from a standard tax provision of $261 thousand,
offset by tax credits of $205 thousand.
The Company recorded income tax expense of $643 thousand for the
fourth quarter of 2017 and income tax expense of $1.9 million for
the year of 2017. The tax expense for the fourth quarter and year
2017 included an adjustment of $519 thousand to record the
Company’s deferred tax assets at the lower federal corporate income
tax rate of 21%.
The deferred tax asset totaled $5.0 million at December 31, 2018
and $5.1 million at December 31, 2017.
Balance Sheet Summary
Total assets decreased by $4.3 million to $409.4 million at
December 31, 2018 from $413.7 million at December 31, 2017. The
decline in total assets was primarily due to a decrease of $16.1
million in loans receivable held for sale, a decrease of $5.9
million in interest-bearing deposits in other banks, and a decrease
in securities available for sale of $2.8 million, offset by an
increase of $20.7 million in net loans receivable held for
investment.
Loans receivable held for investment, net of the allowance for
loan losses, totaled $355.6 million at December 31, 2018, compared
to $334.9 million at December 31, 2017.
During 2018, the Bank originated $99.0 million in new loans,
$96.0 million of which were multi-family loans. Of the multi-family
loans originated, we allocated $75.8 million, or 79%, to loans held
for investment and $20.2 million, or 21%, to loans held for sale.
In addition, during 2018, we transferred $16.9 million of loans to
loans held for investment from loans held for sale. At the end of
the third quarter, the Bank received written non-objection from its
primary regulator to the Bank’s request to increase its
concentration of multi-family residential loans, and subsequently,
to increase its concentration of non-multifamily commercial real
estate loans, including the sublimit for commercial
land/construction loans.
Loans receivable held for sale totaled $6.2 million as of
December 31, 2018 compared to $22.4 million as of December 31,
2017. The Bank originated $20.2 million in loans held for sale
during 2018, transferred $16.9 million to loans held for
investment, sold $19.3 million in loans held for sale and received
$159 thousand in loan repayments.
An REO, recorded at $878 thousand at the beginning of the year,
was written down to $833 thousand during the first quarter of 2018
due to a decrease in fair value.
Deposits decreased by $9.9 million to $281.4 million at December
31, 2018 from $291.3 million at December 31, 2017, which consisted
of a decrease of $35.7 million in liquid deposits and an increase
of $25.8 million in CDs. During 2018, one deposit relationship of
$25.0 million was moved to CDs from a money market account.
Excluding this transfer, liquid deposits decreased by $10.7 million
and CDs increased by $775 thousand during 2018.
Total borrowings at December 31, 2018 consisted of advances to
the Bank from the FHLB of $70.0 million, and subordinated
debentures issued by the Company of $5.1 million, compared to
advances from the FHLB of $65.0 million and subordinated debentures
of $5.1 million at December 31, 2017. During 2018, the Bank paid
off $27.5 million in maturing advances and borrowed $32.5 million
in new advances from the FHLB.
Stockholders' equity was $48.4 million, or 11.83% of the
Company’s total assets, at December 31, 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 $1.77 per share as of December
31, 2018, compared to $1.74 per share as of December 31, 2017.
At December 31, 2018, the Bank’s Total Capital ratio (Total
Capital to Total Risk-Weighted Assets) was 20.48% and its Leverage
ratio (Tier 1 Capital to Adjusted Total Assets) was 12.03%,
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, 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, 2018 December 31, 2017
Selected Financial Condition Data and Ratios: Cash and cash
equivalents $ 16,651 $ 22,219 Securities available-for-sale, at
fair value 14,722 17,494 Loans receivable held for sale 6,231
22,370 Loans receivable held for investment 358,485 338,920
Allowance for loan losses (2,929 ) (4,069 ) Loans
receivable held for investment, net of allowance 355,556 334,851
Total assets 409,397 413,704 Deposits 281,414 291,290 FHLB advances
70,000 65,000 Junior subordinated debentures 5,100 5,100 Total
stockholders' equity 48,436 47,731 Book value per share $
1.77 $ 1.74 Equity to total assets 11.83 % 11.54 %
Asset
Quality Ratios: Non-accrual loans to total loans 0.25 % 0.49 %
Non-performing assets to total assets 0.43 % 0.64 % Allowance for
loan losses to total gross loans 0.82 % 1.20 % Allowance for loan
losses to total delinquent loans 8368.57 % 1040.66 % Allowance for
loan losses to non-performing loans 321.51 % 230.41 %
Non-Performing Assets: Non-accrual loans $ 911 $ 1,766 Loans
delinquent 90 days or more and still accruing - - Real estate
acquired through foreclosure 833 878
Total non-performing assets $ 1,744 $ 2,644
Three Months Ended December 31, Twelve
Months Ended December 31, Selected Operating Data and
Ratios: 2018 2017
2018 2017 Interest income
$ 3,942 $ 3,670 $ 15,237 $ 16,287 Interest expense 1,484
1,051 4,929 4,348
Net interest income 2,458 2,619 10,308 11,939 Loan loss provision
recapture 254 150 1,254
1,100 Net interest income after loan loss provision
recapture 2,712 2,769 11,562 13,039 Non-interest income 184 544 865
2,530 Non-interest expense (2,800 ) (3,069 )
(11,556 ) (11,837 ) Income before income taxes 96 244 871
3,732 Income tax expense (179 ) 643 56
1,863 Net income $ 275 $ (399 ) $ 815
$ 1,869 Earnings per common share-diluted $
0.01 $ (0.01 ) $ 0.03 $ 0.07 Loan originations (1) $ 21,170
$ 16,008 (3 ) $ 98,960 (2 ) $ 115,428 (3 ) Loan purchase $ 24,640 $
- $ 24,640 Net recoveries to average loans (0.00 )% (4 )
(0.01 )% (4 ) (0.03 )% (4 ) (0.15 )% (4 ) Return on average assets
0.27 % (4 ) -0.38 % (4 ) 0.20 % (4 ) 0.43 % (4 ) Return on average
equity 2.29 % (4 ) -3.32 % (4 ) 1.71 % (4 ) 3.96 % (4 ) Net
interest margin 2.43 % (4 ) 2.53 % (4 ) 2.57 % (4 ) 2.79 % (4 )
(1) Does not include net deferred origination costs.
(2) Includes loans held for sale originations of $20.2 million for
the twelve months ended December 31, 2018. (3) 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. (4)
Annualized
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version on businesswire.com: https://www.businesswire.com/news/home/20190313005229/en/
Brenda J. Battey, Chief Financial Officer(323)
556-3264investor.relations@broadwayfederalbank.com
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