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) February 5, 2004
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)
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Item 7. Exhibits
(c) Exhibit 99.1
Copy of Press Release on earnings for the quarter and year ended
December 31, 2003.
Item 12. Results of Operations and Financial Condition
On February 5, 2004, Broadway Financial Corporation issued a Press
Release on earnings for the quarter and year ended December 31, 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: February 9 2004 /s/ Alvin D. Kang
(Signature)
Name: Alvin D. Kang
Chief Financial Officer
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EXHIBIT INDEX
Exhibit No. Exhibit Page No.
99.1 Press Release 4
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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 Record Earnings
LOS ANGELES, CA - (BUSINESS WIRE) - February 5, 2004 - Broadway Financial
Corporation (the "Company") (NASDAQ Small-Cap: BYFC), the holding company of
Broadway Federal Bank, f.s.b. (the "Bank"), today reported record net earnings
of $1,549,000, or $0.77 per diluted share, for the year ended December 31, 2003,
compared to $1,441,000, or $0.77 per diluted share, for the year ended December
31, 2002, an increase of 7.49%. Fourth quarter 2003 net earnings amounted to
$450,000, or $0.22 per diluted share, compared to $353,000, or $0.18 per diluted
share, for the fourth quarter of 2002, an increase of 27.48%
President and CEO Paul C. Hudson stated, "Sound asset/liability management and
solid loan growth were the keys to our success in 2003." Hudson also noted, "In
our 2002 annual report, we stated that in 2003 we would focus on growing the
loan portfolio, and managing our liabilities and expenses. We were successful in
producing a 37% increase in loans, and a 15% increase in deposits, including a
22% increase in core deposits, which offset a 51 basis point decrease in the
primary spread."
During the year, management focused on managing the mix of assets and
liabilities, and on increasing interest-earning assets to offset anticipated
margin compression. The following was achieved:
Net loans receivable increased $52.0 million or 37.14% from $140.1 million
at December 31, 2002 to $192.1 million at December 31, 2003. Gross loan
originations grew from $31.3 million in 2002 to $83.0 million in 2003, with
fourth quarter gross loan originations growing from $10.9 million in 2002
to $45.2 in 2003. The record level of originations was tempered by the
increase in loan repayments, which increased from $29.6 million in 2002 to
$51.5 million in 2003. Management augmented loan originations in 2003 by
purchasing loans amounting to $17.8 million. The weighted average interest
rate ("WAIR") on loans decreased from 6.84% at December 31, 2002 to 6.04%
at December 31, 2003, a decline of 80 basis points.
Agency mortgage-backed securities ("MBS") decreased from $38.5 million at
December 31, 2002 to $15.4 million at December 31, 2003. During 2002 hybrid
adjustable rate loan MBS were purchased to put excess liquidity to work
while the loan volume was being ramped up. During 2003, as loan volume
increased, the MBS were sold and the proceeds were used to fund loan
originations. MBS investments were primarily five and seven year hybrid
adjustable rate securities that provided higher yields than other short
term investments, and also generated net gains on sale of $99,000 in 2003.
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Total deposits grew by $23.8 million, from $156.1 million at December 31,
2002 to $179.9 million at December 31, 2003. Core deposits (NOW, money
market, and passbook accounts) increased by $15.2 million, while Jumbo
certificates of deposit (CDs) increased by $1.4 million, and other CDs
increased by $7.2 million. Management focused on extending CD maturities in
the current low interest rate environment, and was able to increase the
weighted average term of CD maturities from 18 months at year-end 2002 to
25 months at year-end 2003. The WAIR on deposits decreased from 2.12% at
December 31, 2002 to 1.72% at December 31, 2003, a decline of 40 basis
points.
FHLB advances remained flat as this facility was used primarily for
short-term needs since deposit growth and MBS sales were sufficient to fund
loan growth. The WAIR decreased from 2.67% at December 31, 2002 to 2.46% at
December 31, 2003 a 21 basis point decrease.
Our asset/liability management strategies described above, resulted in the
following:
Net interest income before recovery of loan losses increased from $7.9
million in 2002 to $8.4 million in 2003. The increase of $0.5 million
resulted from a $1.2 million increase in net interest income attributable
to the effect of a $29.4 million increase in average net interest earning
assets, offset by a $0.7 million decrease in net interest income
attributable to a 35 basis point decrease in the WAIR spread from 4.24%
during 2002 compared to 3.89% during 2003.
Average interest-earning assets increased by $29.4 million or 16.37%, from
$179.6 million in 2002 to $209.0 million in 2003, due to increasing loan
originations and an increase in purchased mortgage-backed securities.
Deposit cost of funds declined more slowly than the yield on the loan
portfolio in the low interest rate environment experienced in 2003,
resulting in a decrease in the primary spread (WAIR on loans minus WAIR on
deposits) from 5.32% during 2002 to 4.81% during 2003, a decrease of 51
basis points.
The WAIR on deposits decreased from 2.42% during 2002 to 1.83% during 2003,
a decline of 59 basis points.
The WAIR on loans decreased from 7.74% during 2002 to 6.64% during 2003, a
decline of 110 basis points.
The WAIR on MBS decreased from 5.34% during 2002 to 3.78% during 2003, a
decline of 156 basis points. The WAIR on other investments increased from
3.99% during 2002 to 4.08% during 2003, an increase of 9 basis points.
The WAIR on FHLB advances decreased from 5.41% during 2002 to 2.49% during
2003, or 292 basis points.
The allowance for loan losses as a percentage of total loans decreased from
0.98% at December 31, 2002 to 0.67% at December 31, 2003. During 2003 and 2002
no additional provisions for loan losses were considered necessary based on
periodic analyses of the credit quality of the loan portfolio. During the fourth
quarter of 2003, $826,000 of loans classified as substandard, were paid in full.
As a primary result, classified assets decreased from $1,046,000 at December 31,
2002 to $94,000 at December 31, 2003. The Bank had no foreclosed real estate
assets at December 31, 2003 and 2002.
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Non-performing assets to total assets improved from 0.07 % at December 31, 2002,
to 0.03% at December 31, 2003. Total non-performing assets at December 31, 2003
were $80,000 compared to $135,000 at December 31, 2002. Delinquent loans 60 or
more days past due were $80,000 at December 31, 2003 compared to $149,000 at
December 31, 2002.
The return on average equity decreased from 9.32% in 2002 to 9.08% in 2003, due
in part to the Company's issuance of $1 million in Series B non-cumulative,
non-voting Preferred Stock to Fannie Mae in the fourth quarter of 2002. The
return on average assets decreased from 0.77% in 2002 to 0.71% in 2003 as
average assets increased 15.98%. The efficiency ratio decreased from 74.35% in
2002 to 74.01% in 2003. The ratio of non-interest expense to average assets
decreased from 3.53% in 2002 to 3.28% in 2003. Comparing fourth quarter 2003 and
2002, the performance ratios all improved, with the return on average equity
improving to 9.84% from 8.76%, and the efficiency ratio improving to 71.52% from
75.09%. At December 31, 2003, the Bank met the capital requirements necessary to
be deemed "well capitalized" for regulatory capital purposes.
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.
Certain matters discussed in this news release may constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. These forward-looking statements relate to, among other things,
expectations regarding the business environment in which the Company operates,
projections of future performance, perceived opportunities in the market, and
statements regarding strategic objectives. These forward-looking statements are
based upon current management expectations, and involve risks and uncertainties.
Actual results or performance may differ materially from those suggested,
expressed, or implied by 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-KSB and
Quarterly Reports on Form 10-QSB.
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)
December 31, December 31,
2003 2002
Assets:
Cash $ 5,029 $ 3,859
Fed funds sold 2,600 1,500
Interest bearing deposits - 1,028
Investment securities available for sale - 5,007
Investment securities held to maturity 3,996 2,000
Mortgage-backed securities available for sale 9,122 27,697
Mortgage-backed securities held to maturity 6,317 10,843
Loans receivable held for sale, at lower of cost or fair value 1,671 3,770
Loans receivable, net 192,116 140,085
Accrued interest receivable 883 995
Investments in capital stock of Federal Home Loan Bank, at cost 1,789 1,561
Office properties and equipment, net 5,603 5,811
Other assets 689 750
Total assets $ 229,815 $ 204,906
Liabilities and stockholders' equity
Deposits $ 179,907 $ 156,148
Advances from Federal Home Loan Bank 28,502 28,724
Advance payments by borrowers for taxes and insurance 324 311
Deferred income taxes 846 931
Other liabilities 2,045 1,871
Total liabilities 211,624 187,985
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 December 31, 2003 and December 31, 2002 2 2
Common stock, $.01 par value, authorized 3,000,000 shares; issued
and outstanding 1,832,507 shares at December 31, 2003 and
1,815,294 shares at December 31, 2002 10 10
Additional paid-in capital 10,507 10,512
Accumulated other comprehensive gain (loss), net of taxes (68) 57
Retained earnings-substantially restricted 8,207 7,005
Treasury stock-at cost, 36,435 shares at December 31, 2003 and
53,684 shares at December 31, 2002 (375) (520)
Unearned Employee Stock Ownership Plan shares (92) (145)
Total stockholders' equity 18,191 16,921
Total liabilities and stockholders' equity $ 229,815 $ 204,906
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BROADWAY FINANCIAL CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Operations
(Dollars in thousands, except per share amounts)
(Unaudited)
Three Months Ended Year Ended
December 31, December 31,
2003 2002 2003 2002
Interest on loans receivable $ 2,757 $ 2,564 $ 10,426 $ 10,784
Interest on investment securities 58 98 194 409
Interest on mortgage-backed securities 286 497 1,438 1,109
Other interest income 8 36 111 167
Total interest income 3,109 3,195 12,169 12,469
Interest on deposits 746 852 3,061 3,752
Interest on borrowings 185 431 741 817
Total interest expense 931 1,283 3,802 4,569
Net interest income before recovery of loan losses 2,178 1,912 8,367 7,900
Recovery of loan losses (117) (142) (117) (142)
Net interest income after recovery of loan losses 2,295 2,054 8,484 8,042
Non-interest income:
Service charges 248 171 1,021 745
Gain on sale of loans and mortgage-backed securities 23 66 126 80
Other 4 5 31 53
Total non-interest income 275 242 1,178 878
Non-interest expense:
Compensation and benefits 1,014 937 4,000 3,654
Occupancy expense, net 237 261 1,032 1,026
Information services 154 154 588 626
Professional services 97 133 469 455
Office services and supplies 93 80 408 375
Other 243 159 654 496
Total non-interest expense 1,838 1,724 7,151 6,632
Earnings before income taxes 732 572 2,511 2,288
Income taxes 282 219 962 847
Net earnings $ 450 $ 353 $ 1,549 $ 1,441
Other comprehensive income (loss):
Unrealized gain (loss) on securities available for sale $ (163) $ 15 $ (304) $ 4
Reclassification of realized net gains included
in net earnings 9 66 94 90
Income tax benefit (expense) 60 (34) 85 (39)
Other comprehensive income (loss) (94) 47 (125) 55
Comprehensive earnings $ 356 $ 400 $ 1,424 $ 1,496
Net earnings 450 353 1,549 1,441
Dividends paid on preferred stock (19) (19) (78) (40)
Earnings available to common shareholders $ 431 $ 334 $ 1,471 $ 1,401
Earnings per share-basic $ 0.24 $ 0.19 $0.82 $ 0.79
Earnings per share-diluted $ 0.22 $ 0.18 $0.77 $ 0.77
Dividend declared per share-common stock $ 0.04 $ 0.04 $0.15 $ 0.11
Basic weighted average shares outstanding 1,813,527 1,783,600 1,799,465 1,780,617
Diluted weighted average shares outstanding 1,918,989 1,845,276 1,900,794 1,820,351
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BROADWAY FINANCIAL CORPORATION
AND SUBSIDIARIES
Selected Ratios and Data
(Dollars in thousands)
As of December 31, Well-Capitalized
2003 2002 Requirement
Broadway Federal Bank, f.s.b.
Regulatory Capital Ratios:
Tangible capital 7.52% 7.01% 5.00%
Core capital 7.52% 7.01% 6.00%
Total Risk-Based Capital 11.92% 13.15% 10.00%
Asset Quality Ratios and Data:
Non-performing loans as a percentage
of total gross loans 0.04% 0.09%
Non-performing assets as a percentage
of total assets 0.03% 0.07%
Allowance for loan losses as a percentage
of total gross loans 0.67% 0.98%
Allowance for loan losses as a percentage
of non-performing loans 1640.00% 1058.52%
Allowance for losses as a percentage
of non-performing assets 1640.00% 1058.52%
Non-performing assets:
Non-accrual loans $ 80 $ 135
Real estate acquired through foreclosure - -
Total non-performing assets $ 80 $ 135
Three Months Ended Year Ended
December 31 December 31
2003 2002 2003 2002
Performance Ratios:
Return on average assets 0.79% 0.68% 0.71% 0.77%
Return on average equity 9.84% 8.76% 9.08% 9.32%
Average equity to average assets 7.99% 7.78% 7.83% 8.23%
Non-interest expense to average assets 3.21% 3.33% 3.28% 3.53%
Efficiency ratio (3) 71.52% 75.09% 74.01% 74.35%
Net interest rate spread (1) 3.87% 3.65% 3.89% 4.24%
Effective net interest rate spread (2) 3.99% 3.84% 4.00% 4.40%
(1) Net interest rate spread represents the difference between the yield on
average interest-earning assets and the cost of interest-bearing
liabilities before recovery of loan losses.
(2) Effective net interest rate spread represents net interest income before
recovery of loan losses as a percentage of average interest-earning assets.
(3) Efficiency ratio represents non-interest expense divided by net interest
income after recovery of loan losses plus non-interest income.
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BROADWAY FINANCIAL CORPORATION
AND SUBSIDIARIES
Support for Calculations
(Dollars in thousands)
Three Months Ended Year Ended
December 31 December 31
2003 2002 2003 2002
Total assets $ 229,815 $ 204,906 $ 229,815 $ 204,906
Total gross loans $ 195,691 $ 146,455 $ 195,691 $ 146,455
Total equity $ 18,191 $ 16,921 $ 18,191 $ 16,921
Average assets $ 228,772 $ 207,385 $ 217,799 $ 187,789
Average loans $ 173,224 $ 140,204 $ 156,902 $ 139,349
Average equity $ 18,285 $ 16,126 $ 17,051 $ 15,454
Average interest-earning assets $ 218,386 $ 199,394 $ 209,003 $ 179,609
Average interest-bearing liabilities $ 204,372 $ 186,116 $ 196,629 $ 169,076
Net income $ 450 $ 353 $ 1,549 $ 1,441
Total income $ 2,570 $ 2,296 $ 9,662 $ 8,920
Non-interest expense $ 1,838 $ 1,724 $ 7,151 $ 6,632
Efficiency ratio 71.52% 75.09% 74.01% 74.35%
Non-accrual loans $ 80 $ 135 $ 80 $ 135
REO, net $ - $ - $ - $ -
ALLL $ 1,312 $ 1,429 $ 1,312 $ 1,429
REO-Allowance $ - $ - $ - $ -
Interest income $ 3,109 $ 3,195 $ 12,169 $ 12,469
Interest expense $ 931 $ 1,283 $ 3,802 $ 4,569
Net interest income before provision $ 2,178 $ 1,912 $ 8,367 $ 7,900
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