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) May 1, 2003
Broadway Financial Corporation
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(Exact name of registrant as specified in its charter)
Delaware 95-4547287
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(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 5. Information required under Item 12.
See Press Release on earnings for the three months ended
March 31, 2003.
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: May 1, 2003 /s/ Alvin D. Kang
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(Signature)
Name: Alvin D. Kang
Chief Financial Officer
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 12% Increase in Net Earnings
LOS ANGELES, CA (BUSINESS WIRE) April 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 $364,000 or $0.18 per
diluted share for the three months ended March 31, 2003, compared to $326,000 or
$0.17 per diluted share for the three months ended March 31, 2002, an 11.66%
increase.
Net Earnings
The increase in net earnings was primarily attributable to the increase in net
interest income and non-interest income, offset by an increase in non-interest
expense. Net interest income after provision for loan losses increased $71,000
or 3.58% for first quarter 2003 compared to first quarter 2002. Non-interest
income increased $53,000 or 22.46% for first quarter 2003 compared to first
quarter 2002, and non-interest expense increased $83,000 or 4.98% for first
quarter 2003 compared to first quarter 2002.
Net Interest Income
Net interest income after provision for loan losses increased to $2,055,000 for
the three months ended March 31, 2003, from $1,984,000 for the same period in
2002. A rate/volume analysis indicates that the $71,000 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).
Gross loan originations were $7.7 million for first quarter 2003 compared to
$5.0 million for first quarter 2002. Loan and mortgage-backed securities (MBS)
purchases were $16.0 million for first quarter 2003 compared to none for first
quarter 2002. Loan prepayments amounted to $8.8 million for first quarter 2003
compared to $7.1 million for first quarter 2002. Management anticipates that
prepayments will continue at a comparable rate in this current low rate
environment, and is focused on increasing lending volume and continuing
purchases of loans and MBSs. Interest-bearing liabilities increased due to the
growth in deposits of $16.3 million and the growth in FHLB advances of $15.7
million comparing March 31, 2003 and 2002 balances.
The net interest rate spread for the three months ended March 31, 2003 and 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.
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Non-interest Income
Total non-interest income increased to $289,000 for the three months ended March
31, 2003, from $236,000 for the same period in 2002. The $53,000 increase 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 $83,000 increase
was primarily attributable to higher professional services costs (legal and
investment banking fees) of $82,000.
Loans Receivable, Net
Loans receivable, net increased $16.1 million, or 11.49%, to $156.2 million at
March 31, 2003 from $140.1 million at December 31, 2002. Loans held for sale of
$3.2 million at March 31, 2003 were reclassified to the held to maturity
portfolio at cost, which was lower than market value. During February 2003, the
Bank purchased $14.2 million of adjustable rate mortgage loans having an initial
fixed rate period, hybrid ARMs. This purchase 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 0.90% at March
31, 2003 compared to 0.98% at December 31, 2002 and 1.12% at March 31, 2002. The
Banks non-performing assets to total assets ratio improved to 0.04 % at March
31, 2003 compared to 0.07% at December 31, 2002 and 0.19% at March 31, 2002. At
March 31, 2003, the Bank had no loans in foreclosure or REO (real estate owned)
properties.
Deposits
Total deposits increased $13.4 million, or 8.58% to $169.5 million 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 42.3% of total deposits, compared to
40.4% at December 31, 2002, and 39.8% at March 31, 2002.
Performance Ratios
For the three months ended March 31, 2003 the Companys return on average equity
declined slightly to 8.60% compared to 8.73% for the same period in 2002. During
the first quarter of 2003, the Company contributed $1 million to the Bank, which
was raised from its issuance of preferred stock to Fannie Mae. The return on
average assets also declined slightly to 0.70% for the three months ended March
31, 2003 compared to 0.73% for the same period in 2002. The ratio of
non-interest expense to average assets improved to 3.36% for the three months
ended March 31, 2003 compared to 3.72% for the same period in 2002. The
efficiency ratio also improved to 74.62% in first quarter 2003 compared to
75.05% in first quarter 2002.
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Significant Events
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 Companys option, may be converted to a
four-year term loan at the same rate of interest.
On January 31, 2003 the Companys Board of Directors adopted a Shareholder Rights
Plan, the Rights Plan. The Boards 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.
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 March 31, 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, California 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)
March 31, March 31,
2003 2002
Assets:
Cash $ 4,658 $ 3,859
Fed 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 - 5,007
Mortgage-backed securities available for sale 9,581 10,843
Mortgage-backed securities held to maturity 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, 2002 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
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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 income (loss) on securties available for sale $ 116 $ (5)
Income tax (expense) benefit (43) 2
Other comprehensive income (loss) 73 (3)
Comprehensive earnings $ 437 $ 323
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
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BROADWAY FINANCIAL CORPORATION
AND SUBSIDIARIES
Selected Ratios and Data
(Dollars in thousands)
As of March 31, Well-Capitalized
2003 2002 Requirement
Broadway Federal Bank, f.s.b.
Regulatory Capital Ratios:
Leverage/Tangible Ratio 7.28% 7.12% 5.00%
Tier1 Risk-Based Ratio 12.24% 10.92% 6.00%
Total Risk-Based Ratio 13.15% 12.09% 10.00%
Asset Quality Ratios and Data:
Non-performing loans as a percentage
of total gross loans 0.06% 0.17%
Non-performing assets as a percentage
of total assets 0.04% 0.19%
Allowance for loan losses as a percentage
of total gross loans 0.90% 1.12%
Allowance for loan losses as a percentage
of non-performing loans 1623.86% 662.87%
Allowance for losses as a percentage
of non-performing assets 1623.86% 455.36%
Non-performing Assets:
Non-accrual loans $ 88 $ 237
Real estate acquired through foreclosure $ - $ 108
Total non-performing assets $ 88 $ 345
Balance Sheet Data:
Total assets $ 217,314 $ 181,986
Total gross loans $ 158,789 $ 140,298
Total equity $ 17,261 $ 14,916
Average assets $ 208,438 $ 179,189
Average loans $ 146,638 $ 139,536
Average deposits $ 162,215 $ 145,191
Average equity $ 16,922 $ 14,930
Average interest-earning assets $ 200,076 $ 171,856
Average interest-bearing liabilities $ 188,575 $ 154,730
Non-accrual loans $ 88 $ 237
REO, net $ - $ 108
ALLL $ 1,429 $ 1,571
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BROADWAY FINANCIAL CORPORATION
AND SUBSIDIARIES
Selected Ratios and Data
(Dollars in thousands)
March 31,
2003 2002
Performance Ratios:
Return on average assets 0.70% 0.73%
Return on average equity 8.60% 8.73%
Average equity to average assets 8.12% 8.33%
Non-interest expense to average assets 3.36% 3.72%
Efficiency ratio (1) 74.62% 75.05%
Net interest rate spread (2) 3.99% 4.31%
Effective net interest rate spread (3) 4.11% 4.62%
(1) The "efficiency ratio" is calculated by dividing total non-interest expense
by total interest income before provision for loan losses plus total
non-interest income (total income).
(2) The "net interest rate spread" represents the difference between the yield
on average interest-earning assets before provision for loan losses and the
cost of average interest-bearing liabilities.
(3) The "effective net interest rate spread" represents net interest income
before provision for loan losses as a percentage of average
interest-earning assets.
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