UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-QSB
(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, 2003
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For transition period from__________ to___________
Commission file number 0-27464
BROADWAY FINANCIAL CORPORATION
------------------------------
(Exact name of small business issuer as specified in its charter)
Delaware 95-4547287
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
4800 Wilshire Boulevard, Los Angeles, California 90010
(Address of principal executive offices)
(323) 634-1700
(Issuer's telephone number, including area code)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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 [ ]
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 1,819,934 shares of the Company's
Common Stock, par value $0.01 per share, were issued and outstanding as of April
30, 2003.
Transitional Small Business Disclosure Format (Check one):
Yes [ ] No [x]
1
INDEX
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets (unaudited)
as of March 31, 2003 and December 31, 2002 3
Consolidated Statements of Operations and
Comprehensive Earnings (unaudited) for the
Three months ended March 31, 2003 and 2002 4
Consolidated Statements of Cash Flows
(unaudited) for the three months ended
March 31, 2003 and 2002 5
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
Item 3. Disclosure Controls and Procedures 13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 2. Changes in Securities 14
Item 3. Defaults Upon Senior Securities 14
Item 4. Submission of Matters to a Vote of
Security Holders 14
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 16
Section 302 Certifications 17
2
BROADWAY FINANCIAL CORPORATION
AND SUBSIDIARIES
Consolidated Balance Sheets
(Dollars in thousands, except share amounts)
(Unaudited)
March 31, December 31,
2003 2002
Assets:
Cash $ 4,658 $ 3,859
Federal funds sold 5,500 1,500
Interest bearing deposits 1,028 1,028
Investment securities held to maturity 2,000 2,000
Investment securities available for sale, at fair value - 5,007
Mortgage-backed securities held to maturity 9,581 10,843
Mortgage-backed securities available for sale 28,633 27,697
Loans receivable, net 156,156 140,085
Loans receivable held for sale, at lower of cost or fair value 480 3,770
Accrued interest receivable 1,023 995
Investments in capital stock of Federal Home Loan Bank, at cost 1,582 1,561
Office properties and equipment, net 5,797 5,811
Other assets 876 750
Total assets $ 217,314 $ 204,906
Liabilities and stockholders' equity
Deposits $ 169,509 $ 156,148
Advances from Federal Home Loan Bank 25,181 28,724
Advance payments by borrowers for taxes and insurance 18 311
Deferred income taxes 932 931
Other liabilities 4,413 1,871
Total liabilities 200,053 187,985
Stockholders' Equity:
Preferred non-convertible, non-cumulative, and non-voting
stock, $.01 par value, authorized 1,000,000 shares; issued
and outstanding 155,199 shares at March 31, 2003 and at
December 31, 2002 2 2
Common stock, $.01 par value, authorized 3,000,000 shares;
issued and outstanding 1,818,934 shares at March 31, 2003
and 1,815,294 shares at December 31, 2002 10 10
Additional paid-in capital 10,514 10,512
Accumulated other comprehensive gain, net of taxes 73 57
Retained earnings-substantially restricted 7,279 7,005
Treasury stock-at cost, 50,008 shares at March 31, 2003 and
53,648 shares at December 31, 2002 (485) (520)
Unearned Employee Stock Ownership Plan shares (132) (145)
Total stockholders' equity 17,261 16,921
Total liabilities and stockholders' equity $ 217,314 $ 204,906
See accompanying notes to consolidated financial statements
3
BROADWAY FINANCIAL CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Operations and Comprehensive Earnings
(Dollars in thousands, except per share amounts)
(Unaudited)
Three Months ended March 31
2003 2002
Interest on loans receivable $ 2,544 $ 2,824
Interest on investment securities held to maturity 30 49
Interest on investment securities available for sale 36 40
Interest on mortgage-backed securities 404 202
Other interest income 38 45
Total interest income 3,052 3,160
Interest on deposits 821 1,047
Interest on borrowings 176 129
Total interest expense 997 1,176
Net interest income before provision for loan losses 2,055 1,984
Provision for loan losses - -
Net interest income after provision for loan losses 2,055 1,984
Non-interest income:
Service charges 270 226
Gain (loss) on loans receivable held for sale 13 (1)
Other 6 11
Total non-interest income 289 236
Non-interest expense:
Compensation and benefits 914 928
Occupancy expense, net 258 241
Information services 130 134
Professional services 161 93
Office services and supplies 102 79
Other 184 191
Total non-interest expense 1,749 1,666
Earnings before income taxes 595 554
Income taxes 231 228
Net earnings $ 364 $ 326
Other comprehensive income (loss):
Unrealized gain (loss) on securities available for sale $ 16 $ (10)
Income tax (expense) benefit - 5
Other comprehensive income (loss) 16 (5)
Comprehensive earnings $ 380 $ 321
Net earnings 364 326
Dividends paid on preferred stock (19) (7)
Earnings available to common shareholders $ 345 $ 319
Earnings per share-basic $ 0.19 $ 0.18
Earnings per share-diluted $ 0.18 $ 0.17
Dividend declared per share-common stock $ 0.04 $ 0.03
Basic weighted average shares outstanding 1,787,662 1,782,330
Diluted weighted average shares outstanding 1,878,512 1,800,972
See accompanying notes to consolidated financial statements
4
BROADWAY FINANCIAL CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Dollars in thousands)
(Unaudited)
Three months ended March 31,
2003 2002
Cash flows from operating activities
Net earnings $ 364 $ 326
Adjustments to reconcile net earnings to net cash provided by
(used in) operating activities:
Depreciation 92 33
Amortization of premiums and discounts on loans purchased - (44)
Amortization of net deferred loan origination fees (16) (102)
Amortization of discounts and premiums on investment securities
and mortgage-backed securities 105 40
Amortization of deferred compensation 31 22
Gain on sale of securities available for sale - 1
Gain on sale of loans receivable held for sale (13) -
Gain on disposal of fixed assets - 46
Loans originated for sale (480) (376)
Proceeds from sale of loans receivable held for sale 596 613
Changes in operating assets and liabilities:
Accrued interest receivable (28) 1
Other assets (126) (427)
Deferred income taxes 1 (4)
Other liabilities 2,542 2,395
Total adjustments 2,704 2,198
Net cash provided by operating activities 3,068 2,524
Cash flows from investing activities
Loans originated, net of refinances (7,455) (4,658)
Principal repayments on loans 8,758 7,066
Purchase of loans (14,171) -
Purchases of investment securities held to maturity - (1,000)
Purchases of investment securities available for sale (9,500) -
Purchases of mortgage-backed securities available for sale (2,000) -
Proceeds from maturities of mortgage-backed securities held to maturity 1,197 1,260
Proceeds from sale of securities available for sale 14,502 -
Proceeds from principal paydowns of mortgage backed securities
available for sale 1,045 -
Purchase of Federal Home Loan Bank stock (21) (21)
Capital expenditures for office properties and equipment (78) (29)
Net cash provided by (used in) investing activities (7,723) 2,618
See accompanying notes to consolidated financial statements
5
BROADWAY FINANCIAL CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Cash Flows (continued)
(Dollars in thousands)
(Unaudited)
Three months ended March 31,
2003 2002
----------------------------
Cash flows from financing activities
Net increase in deposits $ 13,361 $ 2,054
Decrease in advances from Federal Home Loan Bank (3,543) (1,500)
Dividends paid (90) (51)
Stock options exercised 19 -
Decrease in advances by borrowers
for taxes and insurance (293) (183)
---------- -----------
Net cash provided by financing activities 9,454 320
---------- -----------
Net increase in cash and cash equivalents 4,799 5,462
Cash and cash equivalents at beginning of period 5,359 5,239
---------- -----------
Cash and cash equivalents at end of period $ 10,158 $ 10,701
========== ============
Supplemental disclosures of cash flow information:
Cash paid for interest $ 1,002 $ 1,245
Cash paid for income taxes - -
========== ============
Supplemental disclosure of non-cash investing and
financing activities
Transfers of loans to real estate acquired through foreclosure $ - $ 73
Transfers of loans from held for sale to loans receivable 3,184 -
========== ============
See accompanying notes to consolidated financial statements
6
BROADWAY FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
MARCH 31, 2003
NOTE (1) - Basis of Financial Statement Presentation
The unaudited consolidated financial statements included herein have been
prepared in accordance with accounting principles generally accepted in the
United States of America for interim financial statements and pursuant to the
instructions for Form 10-QSB and rules and regulations of the Securities and
Exchange Commission. In the opinion of the management of Broadway Financial
Corporation (the "Company"), the preceding unaudited consolidated financial
statements contain all material adjustments, consisting solely of normal
recurring accruals, necessary to present fairly the consolidated financial
position of the Company and its subsidiaries at March 31, 2003 and the results
of their operations and comprehensive earnings for the three months ended March
31, 2003 and 2002, and their cash flows for the three months ended March 31,
2003 and 2002. These 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-KSB for the year ended
December 31, 2002 and, accordingly, should be read in conjunction with such
audited statements. The results of operations for the three months ended March
31, 2003 are not necessarily indicative of the results to be expected for the
full year.
NOTE (2) - Earnings Per Share
Basic earnings per share is determined by dividing net earnings available to
common shareholders by the weighted average number of shares of Common Stock
outstanding for the period (1,787,662 and 1,782,330 shares for the three months
ended March 31, 2003 and 2002, respectively). Diluted earnings per share is
determined by dividing net earnings available to common shareholders by the
weighted average number of shares of Common Stock outstanding for the period,
adjusted for the dilutive effect of Common Stock equivalents, (1,878,512 and
1,800,972 shares for the three months ended March 31, 2003 and 2002,
respectively).
NOTE (3) - Cash and Cash Equivalents
For purposes of reporting cash flows in the "Consolidated Statements of Cash
Flows", cash and cash equivalents include cash and federal funds sold.
NOTE (4) - Current Accounting Pronouncements
In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities". SFAS 149 amends and clarifies
accounting for derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities under SFAS 133. In
particular, this Statement clarifies under what circumstances a contract with an
initial net investment meets the characteristic of a derivative and when a
derivative contains a financing component that warrants special reporting in the
statement of cash flows. This Statement is generally effective for contracts
entered into or modified after June 30, 2003. Management anticipates the
adoption of SFAS No. 149 will have no impact on the Company's consolidated
financial statements.
7
NOTE (5) - Stock-based Compensation Plans
The Company has stock-based compensation plans (the "Plans"), which provide for
the granting of stock options, stock appreciation rights and restricted stock to
employees and directors. The Plans authorize 422,693 (adjusted for stock
dividends and splits) of Common Stock to be available for issuance under the
Plans. Stock options granted under the Plans are exercisable over vesting
periods specified in each Plan and, unless exercised, the options terminate ten
years from the date of the grant. The option price must be no less than the fair
market value of such shares on the date the options are granted. At March 31,
2003, the Company had 50,008 shares of treasury stock that may be issued on the
exercise of options or for payment of other awards.
The Company measures its employee stock-based compensation arrangements under
the provisions of Accounting Principles Board Option No. 25, "Accounting for
Stock Issued to Employees ("APB 25"). Accordingly, no compensation expense has
been recognized for the Plans, as stock options were granted at fair value at
the date of grant. Had compensation expense for the Company's Plans been
determined based on their estimated fair value using the Black-Scholes model at
the grant date for previous awards, the Company's net earnings and earnings per
share would have been reduced to the pro forma amounts indicated for the
quarters below:
March 31, March 31,
2003 2002
--------- ---------
Net Earnings:
As reported $ 364,000 $ 326,000
Stock-based compensation
expense, net of tax 13,000 10,000
--------- ---------
Pro forma $ 351,000 $ 316,000
========= =========
Earnings per share - Basic:
As reported $ 0.19 $ 0.18
Pro forma $ 0.19 $ 0.17
Earnings per share - Diluted:
As reported $ 0.18 $ 0.17
Pro forma $ 0.18 $ 0.17
NOTE (6) - Line of Credit
On January 17, 2003, the Company entered into an unsecured $5.0 million
revolving line of credit agreement with First Federal Bank of California.
Interest is at the prime rate, if the loan proceeds are used for CRA lending,
and at prime plus one percent if the loan proceeds are used for any other
purpose. The line of credit is renewable annually, and at the Company's option,
may be converted to a four-year term loan at the same rate of interest.
NOTE (7) - Shareholder Rights Plan
On January 31, 2003, the Company's Board of Directors adopted a Shareholder
Rights Plan (the "Rights Plan"). The Board's purpose in adopting the Rights Plan
is to protect shareholder value in the event of an unsolicited offer to acquire
the Company, particularly one that does not provide equitable treatment to all
shareholders. Adoption of the Rights Plan is intended to encourage a potential
acquirer of the Company to negotiate directly with the Board. In connection with
the adoption of the Rights Plan, the Board declared a dividend distribution of
one right for each outstanding common share held by shareholders of record on
February 13, 2003.
8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Certain statements under this caption may constitute "forward-looking
statements" under the Private Securities Litigation Reform Act of 1995 which
involve risks and uncertainties. Actual results may differ significantly from
the results discussed in such forward-looking statements. Factors that may cause
such a difference include, but are not limited to, economic conditions,
competition in the geographic and business areas in which we conduct our
operations, fluctuations in the interest rates, credit quality and government
regulation.
General
Broadway Financial Corporation (the "Company") is primarily engaged in the
savings and loan business through its wholly owned subsidiary, Broadway Federal
Bank, f.s.b. ("Broadway Federal" or "the Bank"). Broadway Federal is a
community-oriented savings institution dedicated to serving the African
American, Hispanic and other communities of Mid-City and South Los Angeles,
California. Broadway Federal's business is that of a financial intermediary and
consists primarily of attracting deposits from the general public and using such
deposits, together with borrowings and other funds, to make mortgage loans
secured by residential real estate located in Southern California. At March 31,
2003, Broadway Federal operated four retail banking offices in Mid-City and
South Los Angeles. Broadway Federal is subject to significant competition from
other financial institutions, and is also subject to regulation by federal
agencies and undergoes periodic examinations by those regulatory agencies.
The accompanying consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries, Broadway Federal and BankSmart, Inc.
(a dormant company). All significant inter-company balances and transactions
have been eliminated in consolidation.
The Company's principal business is serving as a holding company for Broadway
Federal. The Company's results of operations are dependent primarily on Broadway
Federal's net interest income, which is the difference between the interest
income earned on its interest-earning assets, such as loans and investments, and
the interest expense paid on its interest-bearing liabilities, such as deposits
and borrowings. Broadway Federal also generates recurring non-interest income,
such as transactional fees on its loan and deposit portfolios. The Company's
operating results are affected by the amount of provisions for loan losses and
the Bank's non-interest expenses, which consist principally of employee
compensation and benefits, occupancy expenses, and technology and communication
costs. More generally, the results of operations of thrift and banking
institutions are also affected by prevailing economic conditions, competition,
and the monetary and fiscal policies of governmental agencies.
9
Critical Accounting Policy
Accounting for the allowance for loan losses involves significant judgments and
assumptions by management, which have a material impact on the carrying value of
net loans receivable. Management considers this accounting policy to be a
critical accounting policy. The judgments and assumptions used by management are
based on historical experience, current economic trends, the Company's
assessment of the borrowers' ability to repay and repayment performance, and
other factors, which are believed to be reasonable under the circumstances as
described under the heading "Loans Receivable and the Allowance for Loan Losses"
in the Notes to Consolidated Financial Statements included in the Company's
Annual Report on Form 10-KSB for the year ended December 31, 2002.
Comparison of Operating Results for the Three Months ended March 31, 2003 and
March 31, 2002
General
The Company recorded net earnings of $364,000, or $ 0.18 per diluted common
share, for the three months ended March 31, 2003, compared to net earnings of
$326,000, or $0.17 per diluted common share, for the three months ended March
31, 2002. The increase in net earnings from 2002 to 2003 resulted primarily from
higher net interest income, offset by higher non-interest expense.
Net Interest Income
Net interest income after provision for loan losses increased by $71,000, or
3.58%, to $2,055,000 for the three months ended March 31, 2003, from $1,984,000
for the same period in 2002. The increase was primarily attributable to the
impact of the growth in average interest-earning assets of $28.2 million, or
16.42%, and interest-bearing liabilities of $33.8 million, or 21.9%, which
resulted in an increase in net interest income of $251,000 (volume impact),
offset by the impact of a decrease in the net interest rate spread of 32 basis
points, which resulted in a decrease in net interest income of $180,000 (rate
impact).
The net interest rate spread for the three months ended March 31, 2003 and March
31, 2002, was 3.99% and 4.31%, respectively. The 32 basis point decrease in
spread was attributable to the larger decline in the weighted average yield on
the loan portfolio, compared to the decline in the weighted average cost of
funds on interest-bearing liabilities. The yield on interest-earning assets
declined 125 basis points to 6.10% for first quarter 2003 from 7.35% for first
quarter 2002. The weighted average cost of funds declined to 2.11% for first
quarter 2003, compared to 3.04% for first quarter 2002. The primary spread
(weighted average interest rate on loans minus weighted average interest rate on
deposits) at March 31, 2003, was 4.92%, compared to 4.72% at March 31, 2002.
10
Non-interest Income
Non-interest income increased by $53,000, or 22.46%, to $289,000 for the three
months ended March 31, 2003, from $236,000 for the same period in 2002. The
increase in non-interest income was primarily attributable to an increase in
service charges.
Non-interest Expense
Total non-interest expense increased to $1,749,000 for the three months ended
March 31, 2003, from $1,666,000 for the same period in 2002. The increase was
primarily attributable to higher professional services costs (legal and
investment banking fees) of $82,000.
Provision for Loan Losses
As of March 31, 2003, the Company's allowance for loan losses totaled $1.4
million, unchanged from the balance at December 31, 2002. The allowance for loan
losses represents 0.90% of gross loans at March 31, 2003, compared to 0.98% at
December 31, 2002.
Total non-performing assets, consisting of non-accrual loans and real estate
acquired through foreclosure ("REO"), decreased by $47,000, to $88,000 at March
31, 2003 from $135,000 at December 31, 2002. Non-accrual loans at March 31, 2003
included two loans totaling $88,000 secured by one- to-four unit properties.
There was no REO as of March 31, 2003. As a percentage of total assets,
non-performing assets were 0.04% at March 31, 2003, compared to 0.07% at
December 31, 2002.
Management believes that the allowance for loan losses is adequate to cover
inherent losses in Broadway Federal's loan portfolio as of March 31, 2003, but
there can be no assurance that actual losses will not exceed the estimated
amounts. In addition, the Office of Thrift Supervision ("OTS") and the Federal
Deposit Insurance Corporation periodically review Broadway Federal's allowance
for loan losses as an integral part of their examination process. These agencies
may require Broadway Federal to increase the allowance for loan losses based on
their judgments of the information available to them at the time of their
examination.
Income Taxes
The Company's effective tax rate was approximately 39% for the three months
ended March 31, 2003, compared to 41% for the same period in the prior year.
Income taxes are computed by applying the statutory federal income tax rate of
34% and the California income tax rate of 10.84% to earnings before income
taxes. California income taxes are reduced by tax credits relating to the
Enterprise Zone Incentive.
11
Comparison of Financial Condition at March 31, 2003 and December 31, 2002
Total assets at March 31, 2003 were $217.3 million, compared to $204.9 million
at December 31, 2002, representing an increase of $12.4 million. Net loans
receivable (excluding loans held for sale) increased to $156.2 million at March
31, 2003 from $140.1 million at December 31, 2002 as a result of $7.5 million in
new loan originations, $14.2 million in loans purchased, $3.2 million in loans
transferred from loans held for sale, offset by $8.8 million in principal
repayments.
Loans held for sale at March 31, 2003 were $480,000, as compared to $3.8 million
at December 31, 2002. During the period, $3.2 million of loans classified as
held for sale were transferred to the held to maturity portfolio.
Total liabilities at March 31, 2003 were $200.1 million as compared to $188.0
million at December 31, 2002. Deposits increased $13.4 million, or 8.58%, to
$169.5 million at March 31, 2003 from $156.1 million at December 31, 2002. Core
deposits (NOW, demand, money market, and passbook accounts) increased by $7.9
million during the first quarter of 2003. At March 31, 2003, core deposits
represented 42.30% of total deposits, compared to 40.40% at December 31, 2002.
Total capital at March 31, 2003 was $17.3 million, compared to $16.9 million at
December 31, 2002. The increase was primarily due to net earnings for the
period.
Liquidity, Capital Resources and Market Risk
Sources of liquidity and capital for the Company on a stand-alone basis include
distributions from the Bank and the issuance of equity securities such as the
preferred stock issued in 2002. Dividends and other capital distributions from
the Bank are subject to regulatory restrictions. In addition, the Company has a
$5 million unsecured line of credit agreement with a bank as more fully
described in Note 6 to the consolidated financial statements.
The Bank's primary sources of funds are deposits, principal and interest
payments on loans, mortgage backed securities and investments, and advances from
the Federal Home Loan Bank of San Francisco. Other sources of liquidity include
principal repayments on mortgage-backed securities and other investments, and
contributions of capital by the Company. During the first quarter of 2003, the
Company contributed $1 million to the Bank, which was raised from the issuance
of preferred stock to Fannie Mae.
Since December 31, 2002, there has been no material change in the Company's
interest rate sensitivity. For a discussion on the Company's interest rate
sensitivity and market risk, see the Company's annual report on Form 10-KSB for
the year ended December 31, 2002, including the Company's audited financial
statements and the notes thereto.
12
Regulatory Capital
The OTS capital regulations include three separate minimum capital requirements
for savings institutions that are subject to OTS supervision. First, the
tangible capital requirement mandates that the Bank's stockholder's equity, less
intangible assets, be at least 1.50% of adjusted total assets as defined in the
capital regulations. Second, the core capital requirement currently mandates
that core capital (tangible capital plus certain qualifying intangible assets)
be at least 4.00% of adjusted total assets as defined in the capital
regulations. Third, the risk-based capital requirement presently mandates that
core capital plus supplemental capital (as defined by the OTS) be at least 8.00%
of risk-weighted assets as prescribed in the capital regulations. The capital
regulations assign specific risk weightings to all assets and off-balance sheet
items.
Broadway Federal was in compliance with all capital requirements in effect at
March 31, 2003, and met all standards necessary to be considered
"well-capitalized" under the prompt corrective action regulations adopted by the
OTS pursuant to the Federal Deposit Insurance Corporation Improvement Act of
1991 ("FDICIA").
The following table reflects the required and actual regulatory capital ratios
of Broadway Federal at the date indicated:
FIRREA FDICIA Actual
Regulatory Capital Ratios Minimum "Well-capitalized" At March 31,
for Broadway Federal Requirement Requirement 2003
--------------------------- ------------ ------------------ -------------
Tangible capital 1.50% N/A 7.28%
Core capital 4.00% 5.00% 7.28%
Risk-based capital 8.00% 10.00% 13.15%
Tier 1 risk-based capital N/A 6.00% 12.24%
ITEM 3. DISCLOSURE CONTROLS AND PROCEDURES
As of March 31, 2003, an evaluation was performed under the supervision of the
Company's Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO") of
the effectiveness of the design and operation of the Company's disclosure
controls and procedures. Based on that evaluation, the Company's CEO and CFO
concluded that the Company's disclosure controls and procedures were effective
as of March 31, 2003. There have been no significant changes in the Company's
internal controls or in other factors that could significantly affect internal
controls subsequent to March 31, 2003.
13
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
None
Item 2. CHANGES IN SECURITIES
None
Item 3. DEFAULTS UPON SENIOR SECURITIES
None
Item 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
None
Item 5. OTHER INFORMATION
None
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 99 - Certifications pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
(b) Reports on Form 8-K
None
14
Exhibit 99
Section 906 Certification
The following statement is provided by the undersigned to accompany the
foregoing Report on Form 10-QSB pursuant to 18 U.S.C. Section 1350 as adopted
pursuant to section 906 of the Sarbanes-Oxley Act of 2002, and shall not be
deemed filed pursuant to any provision of the Exchange Act of 1934 or any other
securities law.
Each of the undersigned certifies that the foregoing Report on Form 10-QSB fully
complies with the requirements of Section 13(a) of the Securities Exchange Act
of 1934 (15 U.S.C. Section 78m) and that the information contained in the Form
10-QSB fairly presents, in all material respects, the financial condition and
results of operations of Broadway Financial Corporation as of and for the three
months ended March 31, 2003.
Date: May 15, 2003 By: /s/ PAUL C. HUDSON
Paul C. Hudson
President and Chief Executive Officer
Broadway Financial Corporation
Date: May 15, 2003 By: /s/ ALVIN D. KANG
Alvin D. Kang
Chief Financial Officer
Broadway Financial Corporation
15
SIGNATURES
In accordance with the requirements of the Exchange Act of 1934, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Date: May 15, 2003 By: /s/ PAUL C. HUDSON
------------------
Paul C. Hudson
President and Chief Executive Officer
Broadway Financial Corporation
Date: May 15, 2003 By: /s/ ALVIN D. KANG
----------------
Alvin D. Kang
Chief Financial Officer
Broadway Financial Corporation
16
SECTION 302 CERTIFICATION
I, Paul C. Hudson, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Broadway Financial
Corporation.
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: May 15, 2003
/s/ Paul C. Hudson
Signature
Paul C. Hudson
Chief Executive Officer
Broadway Financial Corporation
17
SECTION 302 CERTIFICATION
I, Alvin D. Kang, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Broadway Financial
Corporation.
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: May 15, 2003
/s/ Alvin D. Kang
Signature
Alvin D. Kang
Chief Financial Officer
Broadway Financial Corporation
18