UNITED STATES
SECURITITES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) October 29, 2003
Broadway Financial Corporation
(Exact name of registrant as specified in its charter)
Delaware 95-4547287
(State of Incorporation) (IRS Employer Identification No.)
4800 Wilshire Boulevard, Los Angeles, California 90010
(Address of Principal Executive Offices)
(323) 634-1700
(Issuer's Telephone Number, Including Area Code)
NOT APPLICABLE
(Former name or former address, if changed since last report)
Item 7. Exhibits
(c) Exhibit 99.1
Copy of Press Release on earnings for the quarter ended
September 30, 2003.
Item 12. Results of Operations and Financial Condition
On October 29, 2003, Broadway Financial Corporation issued a
Press Release on earnings for the quarter ended September 30,
2003. A copy of the Press Release is attached as Exhibit 99.1.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
BROADWAY FINANCIAL CORPORATION
(Registrant)
Date: October 29, 2003 /s/ Alvin D. Kang
(Signature)
Name: Alvin D. Kang
Chief Financial Officer
EXHIBIT INDEX
Exhibit No. Exhibit Page No.
99.1 Press Release 4
News Release
FOR IMMEDIATE RELEASE Contact: Paul C. Hudson, President/CEO
Alvin D. Kang, CFO
(323) 634-1700
www.broadwayfed.com
Broadway Financial Corporation Reports Third Quarter Net Earnings
LOS ANGELES, CA - (BUSINESS WIRE) - October 29, 2003 - Broadway Financial
Corporation (the "Company") (NASDAQ Small-Cap: BYFC), the holding company of
Broadway Federal Bank, f.s.b. (the "Bank"), today reported net earnings of
$379,000 and $1,099,000 or $0.19 and $0.55 per diluted share for the three and
nine months ended September 30, 2003, compared to $440,000 and $1,088,000, or
$0.24 and $0.59 per diluted share, respectively, for the three and nine months
ended September 30, 2002. Compared to 2002, third quarter net earnings decreased
13.86% and net earnings for the nine months increased 1.01%.
President Paul C. Hudson stated, "The last two months have been encouraging as
our loan origination volume has increased, and we have had net loan growth in
spite of continuing heavy loan prepayments. Our pipeline of loans in process is
also growing, which bodes well for the next quarter". Hudson explained, "We
expected net earnings for the current quarter to be less than last year due to
the effective tax rate in third quarter 2002 being 7% lower than the current
quarter. In 2002, we benefited from a higher California Enterprise Zone tax
incentive that reduced California taxable income."
Net Earnings
The change in net earnings, comparing 2003 to 2002, was primarily attributable
to the increase in net interest income and non-interest income, offset by an
increase in non-interest expense. Additionally, the effective tax rate was lower
in 2002 as a result of higher interest income exclusions relating to loans made
in California Enterprise Zones. Net interest income after provision for loan
losses increased $39,000 and $201,000 or 1.95% and 3.36%, respectively, for the
three and nine months ended September 30, 2003 compared to the same periods in
2002. Non-interest income increased $133,000 and $267,000 or 59.38% and 41.98%,
respectively, for the three and nine months ended September 30, 2003 compared to
the same periods in 2002. Non-interest expense increased $200,000 and $405,000,
or 12.55% and 8.25%, respectively, for the three and nine months ended September
30, 2003 compared to the same periods in 2002.
Net Interest Income
Net interest income after provision for loan losses increased to $2,037,000 and
$6,189,000 for the three and nine months ended September 30, 2003, from
$1,998,000 and $5,988,000 for the same periods in 2002. A nine month rate/volume
analysis indicates that the $201,000 increase was primarily attributable to the
impact of the growth in average interest-earning assets of $32.9 million or
19.02%, and interest-bearing liabilities of $30.8 million or 18.85%, which
resulted in an increase in net interest income of $1,080,000 (volume impact),
offset by the impact of a decrease in the net interest rate spread of 57 basis
points, which resulted in a decrease in net interest income of $879,000 (rate
impact).
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Loan originations were $18.8 million and $37.8 million for the three and nine
months ended September 30, 2003 compared to $7.0 million and $20.4 million for
the same periods in 2002. Loan purchases were $3.8 million and $17.8 million for
the three and nine months ended September 30, 2003, compared to $820,000 and
$820,000 for the same periods in 2002. Mortgage-backed securities ("MBS")
purchases were $3.4 million and $15.4 million for the three and nine months
ended September 30, 2003 compared to 5.0 million and $9.0 million for the same
periods in 2002. Loan prepayments amounted to $12.9 million and $36.0 million
for the three and nine months ended September 30, 2003 compared to $6.8 million
and $21.8 million for the same periods in 2002. In the current low interest rate
environment, prepayments are not expected to abate until interest rates rise
significantly, and therefore management is focused on increasing loan volume
through originations and purchases. Loans receivable, net grew $20.5 million
since December 31, 2002, and reflects the improvements made by Management in the
Bank's loan product offerings as well as in its efficiency in service to new
loan customers.
Interest-bearing liabilities increased $2.7 million during the third quarter.
This was attributable to the net effect of an increase in deposits of $3.8
million and a decrease in FHLB advances of $1.1 million. For the nine months
ended September 30, 2003, interest-bearing liabilities increased $13.5 million,
comprised of an $11.1 million increase in deposits and $2.4 million increase in
FHLB advances.
The net interest rate spread for the three and nine months ended September 30,
2003 was 3.78% and 3.90% respectively, compared to 4.39% and 4.47%,
respectively, for the same periods in 2002. The 61 and 57 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 120 and 128 basis points to 5.65% and 5.87%, respectively, for the
three and nine months ended September 30, 2003 from 6.85% and 7.15%,
respectively, for the same periods in 2002. The weighted average cost of funds
declined to 1.88% and 1.97%, respectively, for the three and nine months ended
September 30, 2003 compared to 2.46% and 2.68% for the same periods in 2002. The
primary spread (weighted average interest rate on loans minus weighted average
interest rate on deposits) at September 30, 2003 was 4.62% compared to 4.76% at
September 30, 2002, a decline of 14 basis points.
Non-interest Income
Total non-interest income increased to $357,000 and $903,000 for the three and
nine months ended September 30, 2003, from $224,000 and $636,000 for the same
periods in 2002. The $133,000 increase in the third quarter from 2002 to 2003
was primarily attributable to an increase in loan fees and service charges, and
net gains on sale of investments and MBS available for sale.
Non-interest Expense
Total non-interest expense increased to $1,793,000 and $5,313,000 for the three
and nine months ended September 30, 2003 from $1,593,000 and 4,908,000 for the
same periods in 2002. The $200,000 increase in the third quarter from 2002 to
2003 was primarily attributable to increases in compensation and benefits costs
and occupancy expenses.
2
Loans Receivable, Net
Loans receivable, net increased $20.5 million or 14.6% to $160.6 million at
September 30, 2003 from $140.1 million at December 31, 2002. During the nine
months ended September 30, 2003, the Bank purchased $17.8 million of adjustable
rate mortgage loans having an initial fixed rate period ("hybrid ARMs"). These
purchases of hybrid ARMs, along with loan originations offset the combined
negative effect of a decline in the yield on the loan portfolio and the
continuing high level of loan prepayments.
The allowance for loan losses as a percentage of total loans was 0.87% at
September 30, 2003 compared to 0.98% at December 31, 2002 and 1.10% at September
30, 2002. The Bank's non-performing assets to total assets ratio improved to
0.04% at September 30, 2003 compared to 0.07% at December 31, 2002 and 0.18% at
September 30, 2002. At September 30, 2003, the Bank had no loans in foreclosure
or REO (real estate owned) properties.
Deposits
Total deposits increased $11.1 million or 7.11% to $167.2 million from $156.1
million at December 31, 2002. Core deposits (NOW, demand, money market, and
passbook accounts) increased by $1.2 million during the third quarter of 2003.
At September 30, 2003 core deposits represented 44.6% of total deposits,
compared to 40.4% at December 31, 2002, and 39.4% at September 30, 2002.
Management has focused on increasing core deposit customers and closely managing
its cost of deposits. Management expects deposit growth to be the primary source
of funds for loan growth and plans to aggressively market deposit products to
targeted customers.
Performance Ratios
For the three months ended September 30, 2003 the Company's return on average
equity declined to 8.49% compared to 11.39% for the same period in 2002. The
return on average assets also declined to 0.69% for the three months ended
September 30, 2003 compared to 0.95% for the same period in 2002. The ratio of
non-interest expense to average assets improved to 3.28% for the three months
ended September 30, 2003 compared to 3.46% for the same period in 2002. The
efficiency ratio increased to 74.90% in third quarter 2003 compared to 71.69% in
third quarter 2002.
About us
Broadway Federal Bank, f.s.b. is a community-oriented savings bank, which
primarily originates residential mortgage loans and conducts funds acquisition
in the geographic areas known as Mid-City and South Los Angeles. The Bank
operates four full service branches, three in the city of Los Angeles, and one
located in the nearby city of Inglewood, California. At September 30, 2003, the
Bank met the capital requirements necessary to be deemed "well capitalized" for
regulatory capital purposes.
Shareholders, analysts and others seeking information about the Company are
invited to write to: Broadway Financial Corporation, Investor Relations, 4800
Wilshire Blvd., Los Angeles, CA 90010, or visit our website at
www.broadwayfed.com.
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BROADWAY FINANCIAL CORPORATION
AND SUBSIDIARIES
Consolidated Balance Sheets
(Dollars in thousands, except share amounts)
(Unaudited)
September 30, December 31,
2003 2002
Assets
Cash $ 4,264 $ 3,859
Federal funds sold 6,900 1,500
Interest bearing deposits - 1,028
Investment securities held to maturity 2,996 2,000
Investment securities available for sale - 5,007
Mortgage-backed securities held to maturity 7,327 10,843
Mortgage-backed securities available for sale 20,843 27,697
Loans receivable, net 160,585 140,085
Loans receivable held for sale, at lower of cost or fair value 1,852 3,770
Accrued interest receivable 932 995
Investments in capital stock of Federal Home Loan Bank, at cost 1,771 1,561
Office properties and equipment, net 5,664 5,811
Other assets 8,579 750
Total assets $ 221,713 $ 204,906
Liabilities and stockholders' equity
Deposits $ 167,285 $ 156,148
Advances from Federal Home Loan Bank 31,071 28,724
Advance payments by borrowers for taxes and insurance 533 311
Deferred income taxes 906 931
Other liabilities 4,004 1,871
Total liabilities 203,799 187,985
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 September 30, 2003 and
December 31, 2002 2 2
Common stock, $.01 par value, authorized 3,000,000 shares; issued
and outstanding 1,831,485 shares at September 30, 2003 and
1,815,294 at December 31, 2002 10 10
Additional paid-in capital 10,501 10,512
Accumulated other comprehensive gain, net of taxes 26 57
Retained earnings-substantially restricted 7,844 7,005
Treasury stock-at cost, 37,457 shares at September 30, 2003
and 53,648 shares at December 31, 2002 (363) (520)
Unearned Employee Stock Ownership Plan shares (106) (145)
Total stockholders' equity 17,914 16,921
Total liabilities and stockholders' equity $ 221,713 $ 204,906
4
BROADWAY FINANCIAL CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Operations
(Dollars in thousands, except per share amounts)
(Unaudited)
Three Months ended Nine Months ended
September 30, September 30,
2003 2002 2003 2002
Interest on loans receivable $ 2,556 $ 2,644 $ 7,669 $ 8,220
Interest on investment securities held to maturity 26 40 84 129
Interest on investment securities available for sale 7 92 52 182
Interest on mortgage-backed securities 345 208 1,153 612
Other interest income 27 36 102 131
Total interest income 2,961 3,020 9,060 9,274
Interest on deposits 730 887 2,315 2,900
Interest on borrowings 194 135 556 386
Total interest expense 924 1,022 2,871 3,286
Net interest income before provision for loan losses 2,037 1,998 6,189 5,988
Provision for loan losses - - - -
Net interest income after provision for loan losses 2,037 1,998 6,189 5,988
Noninterest income:
Service charges 255 186 773 574
Gain on loans receivable held for sale - - 18 -
Other 102 38 112 62
Total noninterest income 357 224 903 636
Noninterest expense:
Compensation and benefits 1,038 898 2,986 2,717
Occupancy expense, net 152 108 795 765
Information services 267 282 434 472
Professional services 104 123 372 322
Office service and supplies 103 100 315 295
Other 129 82 411 337
Total noninterest expense 1,793 1,593 5,313 4,908
Earnings before income taxes 601 629 1,779 1,716
Income taxes 222 189 680 628
Net earnings $ 379 $ 440 $ 1,099 $ 1,088
Other comprehensive income (loss):
Unrealized income (loss) on securties available for sale $ (460) $ (24) $ (56) $ 13
Income tax benefit (expense) 179 10 25 (5)
Total other comprehensive income (loss) (281) (14) (31) 8
Comprehensive earnings $ 98 $ 426 $ 1,068 $ 1,096
Net earnings 379 440 1,099 1,088
Dividends paid on preferred stock (19) (7) (58) (21)
Earnings available to common shareholders $ 360 $ 433 $ 1,041 $ 1,067
Earnings per share-basic $0.20 $0.25 $0.58 $0.60
Earnings per share-diluted $0.19 $0.24 $0.55 $0.59
Dividend declared per share-common stock $0.04 $0.03 $0.11 $0.08
Basic weighted average shares outstanding 1,802,204 1,776,008 1,794,726 1,779,612
Diluted weighted average shares outstanding 1,908,887 1,813,192 1,894,614 1,805,718
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BROADWAY FINANCIAL CORPORATION
AND SUBSIDIARIES
Selected Ratios and Data
(Dollars in thousands)
As of September 30, Well-Capitalized
2003 2002 Requirement
Tangible capital 7.53% 7.32% 5.00%
Core capital 7.53% 7.32% 6.00%
Total Risk-Based Capital 13.19% 13.38% 10.00%
Non-performing loans as a percentage
of total gross loans 0.05% 0.17%
Non-performing assets as a percentage
of total assets 0.04% 0.18%
Allowance for loan losses as a percentage
of total gross loans 0.87% 1.10%
Allowance for loan losses as a percentage
of non-performing loans 1786.25% 660.08%
Allowance for losses as a percentage
of non-performing assets 1786.25% 455.36%
Non-accrual loans $ 80 $ 238
Real estate acquired through foreclosure - 107
Total non-performing assets $ 80 $ 345
Three Months Ended Nine Months Ended
September 30, September 30,
2003 2002 2003 2002
Performance Ratios:
Return on average assets 0.69% 0.95% 0.68% 0.80%
Return on average equity 8.49% 11.39% 8.70% 9.56%
Average equity to average assets 8.18% 8.38% 7.86% 8.38%
Non-interest expense to average assets 3.28% 3.46% 3.30% 3.61%
Efficiency ratio 74.90% 71.69% 74.92% 74.09%
Net interest rate spread (1) 3.78% 4.39% 3.90% 4.47%
Effective net interest rate spread (2) 3.89% 4.53% 4.01% 4.62%
(1) Net interest rate spread represents the difference between the yield on
average interest-earning assets and the cost of interest-bearing
liabilities before provision for loan losses.
(2) Effective net interest rate spread represents net interest income before
provision for loan losses as a percentage of average interest-earning
assets.
6
BROADWAY FINANCIAL CORPORATION
AND SUBSIDIARIES
Support for Calculations
(Dollars in thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
2003 2002 2003 2002
Total assets $ 221,713 $ 190,747 $ 221,713 $ 190,747
Total gross loans $ 164,535 $ 142,521 $ 164,535 $ 142,521
Total equity $ 17,914 $ 15,578 $ 17,914 $ 15,578
Average assets $ 218,383 $ 184,300 $ 214,460 $ 181,135
Average loans $ 155,143 $ 138,274 $ 151,401 $ 139,061
Average equity $ 17,862 $ 15,451 $ 16,851 $ 15,175
Average interest-earning assets $ 209,463 $ 176,258 $ 205,842 $ 172,941
Average interest-bearing liabilities $ 196,794 $ 166,197 $ 194,120 $ 163,334
Net income $ 379 $ 440 $ 1,099 $ 1,088
Total income $ 2,394 $ 2,222 $ 7,092 $ 6,624
Non-interest expense $ 1,793 $ 1,593 $ 5,313 $ 4,908
Efficiency ratio 74.90% 71.69% 74.92% 74.09%
Non-accrual loans $ 80 $ 238 $ 80 $ 238
REO, net $ - $ 107 $ - $ 107
ALLL $ 1,429 $ 1,571 $ 1,429 $ 1,571
REO-Allowance $ - $ - $ - $ -
Interest income $ 2,961 $ 3,020 $ 9,060 $ 9,274
Interest expense $ 924 $ 1,022 $ 2,871 $ 3,286
Net interest income before provision $ 2,037 $ 1,998 $ 6,189 $ 5,988
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