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) August 13, 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)
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Item 7. Exhibits
(c) Exhibit 99.1
Copy of Press Release on earnings for the quarter ended June 30, 2003.
Item 12. Results of Operations and Financial Condition
On July 29, 2003, Broadway Financial Corporation issued a Press Release on
earnings for the quarter ended June 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: August 13, 2003
/s/ Alvin D. Kang
---------------------------------------
(Signature)
Name: Alvin D. Kang
Chief Financial Officer
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EXHIBIT INDEX
Exhibit No. Exhibit Page No.
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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 11% Increase in Net Earnings
LOS ANGELES, CA - (BUSINESS WIRE) - July 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
$356,000 and $720,000 or $0.18 and $0.36 per diluted share for the three and six
months ended June 30, 2003, compared to $322,000 and $648,000, or $0.18 and
$0.35 per diluted share, respectively for the three and six months ended June
30, 2002. Compared to 2002, second quarter earnings increased 10.56% and net
earnings for the six months increased 11.11%.
President Paul C. Hudson stated, "We improved net interest income by increasing
interest-earning assets, which offset margin compression and accelerated loan
prepayments. Going forward management continues to be focused on growing net
loan originations."
Net Earnings
The increase in net earnings in 2003 over 2002 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 $92,000 and $163,000, or 4.59% and 4.09%, respectively, for the three
and six months ended June 30, 2003 compared to the same periods in 2002.
Non-interest income increased $125,000 and $178,000, or 56.56% and 38.95%,
respectively, for the three and six months ended June 30, 2003 compared to the
same periods in 2002. Non-interest expense increased $168,000 and $251,000, or
9.92% and 7.47%, respectively, for the three and six months ended June 30, 2003
compared to the same periods in 2002.
Net Interest Income
Net interest income after provision for loan losses increased to $2,097,000 and
$4,152,000 for the three and six months ended June 30, 2003, from $2,005,000 and
$3,989,000 for the same periods in 2002. A six month rate/volume analysis
indicates that the $163,000 increase in net interest income in 2003 over 2002
was primarily attributable to the impact of the growth in average
interest-earning assets of $33.8 million, or 19.71%, and interest-bearing
liabilities of $30.9 million, or 19.08%, which resulted in an increase in net
interest income of $731,000 (volume impact), offset by the impact of a decrease
in the net interest rate spread of 58 basis points, which resulted in a decrease
in net interest income of $568,000 (rate impact).
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Loan originations were $6.6 million and $19.0 million for the three and six
months ended June 30, 2003 compared to $8.3 million and $13.4 million for the
same periods in 2002. Loan purchases totaled $14.2 million in the first quarter
of 2003. No loans were purchased in the 2002 periods or in the second quarter of
2003. Mortgage-backed securities ("MBS") purchases were $10.0 million and $12.0
million for the three and six months ended June 30, 2003 compared to $4.0
million for the second quarter of 2002. Loan prepayments amounted to $14.4
million and $23.1 million for the three and six months ended June 30, 2003
compared to $8.0 million and $15.0 million for the same periods in 2002.
Management anticipates that prepayments will continue at a comparable rate in
the current low rate environment, and is focused on increasing lending volume
and continuing purchases of loans and MBSs.
Interest-bearing liabilities increased $900,000 during the second quarter of
2003 and such increase was primarily attributable to the net effect of a
decrease in deposits of $6.0 million and an increase in FHLB advances of $6.9
million. For the six months ended June 30, 2003, interest-bearing liabilities
increased $10.8 million, resulting from a $7.4 million increase in deposits and
a $3.4 million increase in FHLB advances.
The net interest rate spread for the three and six months ended June 30, 2003
was 3.88% and 3.93%, respectively, compared to 4.52% and 4.51%, respectively,
for the same periods in 2002. The 64 and 58 basis point decrease in spread was
attributable to the fact that the weighted average yield on the loan portfolio
declined more than the weighted average cost of funds on interest-bearing
liabilities. The yield on interest-earning assets declined 139 and 135 basis
points to 5.81% and 5.95%, respectively, for the three and six months ended June
30, 2003 from 7.20% and 7.30%, respectively, for first the same periods in 2002.
The weighted average cost of funds declined to 1.93% and 2.02%, respectively,
for the three and six months ended June 30, 2003 compared to 2.68% and 2.80% for
the same periods in 2002. The primary spread (weighted average interest rate on
loans minus weighted average interest rate on deposits) at June 30, 2003 was
4.88% compared to 5.36% at June 30, 2002.
Non-interest Income
Total non-interest income increased to $346,000 and $635,000 for the three and
six months ended June 30, 2003, from $221,000 and $457,000 for the same periods
in 2002. The $125,000 increase for the second quarter was primarily attributable
to an increase in service charges.
Non-interest Expense
Total non-interest expense increased to $1,861,000 and $3,610,000 for the three
and six months ended June 30, 2003, from $1,693,000 and $3,359,000 for the same
periods in 2002. The $168,000 increase in the second quarter from 2002 to 2003
was primarily attributable to an increase in compensation and benefits costs.
Loans Receivable, Net
Loans receivable, net increased $12.8 million, or 9.2%, to $152.9 million at
June 30, 2003 from $140.1 million at December 31, 2002. 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.
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The allowance for loan losses as a percentage of total loans was 0.90% at June
30, 2003 compared to 0.98% at December 31, 2002 and 1.11% at June 30, 2002. The
Bank's non-performing assets to total assets ratio improved to 0.04 % at June
30, 2003 compared to 0.07% at December 31, 2002 and 0.53% at June 30, 2002. At
June 30, 2003, the Bank had no loans in foreclosure or REO (real estate owned)
properties.
Deposits
Total deposits increased $7.4 million, or 4.73%, to $163.5 million from $156.1
million at December 31, 2002. Core deposits (NOW, demand, money market and
passbook accounts) increased by $2.1 million during the second quarter of 2003.
At June 30, 2003 core deposits represented 44.6% of total deposits, compared to
40.4% at December 31, 2002, and 40.0% at June 30, 2002.
Performance Ratios
For the three months ended June 30, 2003, the Company's return on average equity
declined slightly to 8.03% compared to 8.51% for the same period in 2002. The
return on average assets also declined slightly to 0.65% for the three months
ended June 30, 2003 compared to 0.72% for the same period in 2002. The ratio of
non-interest expense to average assets improved to 3.41% for the three months
ended June 30, 2003 compared to 3.76% for the same period in 2002. The
efficiency ratio (total non-interest expense divided by the sum of net interest
income before provision for loan losses and non-interest income) also increased
slightly to 76.18% in second quarter 2003 compared to 76.06% in second quarter
2002.
Forward Looking Statements
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 of 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 and
other risks detailed in the Company's reports filed with the Securities Exchange
Commission, including the Company's Annual Reports on Form 10-KSB and Quarterly
Reports on Form 10-QSB.
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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 June 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 per share amounts)
(Unaudited)
June 30, December 31,
2003 2002
Assets:
Cash $ 3,516 $ 3,859
Fed funds sold 1,600 1,500
Interest bearing deposits - 1,028
Investment securities held to maturity 2,000 2,000
Investment securities available for sale 2,000 5,007
Mortgage-backed securities held to maturity 8,446 10,843
Mortgage-backed securities available for sale 36,276 27,697
Loans receivable, net 152,911 140,085
Loans receivable held for sale, at lower of
cost or fair value 142 3,770
Accrued interest receivable 1,408 995
Investments in capital stock of Federal
Home Loan Bank, at cost 1,657 1,561
Office properties and equipment, net 5,751 5,811
Other assets 786 750
Total assets $ 216,493 $ 204,906
Liabilities and stockholders' equity
Deposits $ 163,532 $ 156,148
Advances from Federal Home Loan Bank 32,130 28,724
Advance payments by borrowers for taxes and insurance 244 311
Deferred income taxes 1,085 931
Other liabilities 1,697 1,871
Total liabilities 198,688 187,985
Stockholders' Equity:
Preferred non-convertible, non-cumulative, and
non-voting stock, $.01 par value, authorized
1,000,000 shares; issued and outstanding 55,199
shares at June 30, 2003 and December 31, 2002 2 2
Common stock, $.01 par value, authorized 3,000,000
shares; issued and outstanding 1,819,934 shares
at June 30, 2003 and 1,815,294 shares at
December 31, 2002 10 10
Additional paid-in capital 10,528 10,512
Accumulated other comprehensive gain, net of taxes 307 57
Retained earnings-substantially restricted 7,552 7,005
Treasury stock-at cost, 49,008 shares at June 30, 2003
and 53,648 shares at December 31, 2002 (475) (520)
Unearned Employee Stock Ownership Plan shares (119) (145)
Total stockholders' equity 17,805 16,921
Total liabilities and stockholders' equity $ 216,493 $ 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 Six Months Ended
June 30, 2003 June 30, 2003
2003 2002 2003 2002
Interest on loans receivable $2,569 $2,752 $5,113 $5,576
Interest on investment securities held to maturity 40 58 89
Interest on investment securities available for sale 50 45 90
Interest on mortgage-backed securities 202 808 404
Other interest income 37 49 75 94
Total interest income 3,047 3,093 6,099 6,253
Interest on deposits 764 966 1,585 2,013
Interest on borrowings 186 122 362 251
Total interest expense 950 1,088 1,947 2,264
Net interest income before provision for loan losses 2,005 4,152 3,989
Provision for loan losses - - - -
Net interest income after provision for loan losses 2,005 4,152 3,989
Non-interest income:
Service charges 331 206 601 432
Gain on loans receivable held for sale 1 18 -
Other 10 14 16 25
Total non-interest income 346 221 635 457
Non-interest expense:
Compensation and benefits 1,020 876 1,934 1,804
Occupancy expense, net 251 272 509 513
Information services 126 145 256 279
Professional services 107 106 268 199
Office services and supplies 108 94 210 173
Other 249 200 433 391
Total non-interest expense 1,861 1,693 3,610 3,359
Earnings before income taxes 582 533 1,177 1,087
Income taxes 226 211 457 439
Net earnings $ 356 $ 322 $ $ 720 $ 648
Other comprehensive income:
Unrealized gain on securities available for sale $ 387 $ 47 $ $ 404 $ 37
Income tax expense (153) (20) (154) (15)
Other comprehensive income 234 27 250 22
Comprehensive earnings $ 590 $ $ 349 $ $ 970 $ 670
Net earnings $ 356 $ $ 322 $ $ 720 $ 648
Dividends paid on preferred stock (19) (7) (38) (14)
earnings available to common shar$holders $ 337 $ 315 $ $ 682 $ 634
Earnings per share-basic $ 0.19 $ 0.18 $ 0.38 $ 0.36
Earnings per share-diluted $ 0.18 $ 0.18 $ 0.36 $ 0.35
Dividend declared per share-common stock $ 0.04 $ 0.03 $ 0.08 $ 0.05
Basic weighted average shares outstanding 1,794,153 1,780,568 1,790,925 1,781,444
Diluted weighted average shares outstanding 1,889,539 1,805,716 1,884,063 1,804,154
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BROADWAY FINANCIAL CORPORATION
AND SUBSIDIARIES
Selected Ratios and Data
(Dollars in thousands)
As of June 30, Well-Capitalized
2003 2002 Requirement
Broadway Federal Bank, f.s.b.
Regulatory Capital Ratios:
Tangible capital 7.52% 7.52% 5.00%
Core capital 7.52% 7.52% 6.00%
Total Risk-Based Capital 14.02% 12.68% 10.00%
Asset Quality Ratios and Data:
Non-performing loans as a percentage
of total gross loans 0.05% 0.59%
Non-performing assets as a percentage
of total assets 0.04% 0.53%
Allowance for loan losses as a percentage
of total gross loans 0.92% 1.11%
Allowance for loan losses as a percentage
of non-performing loans 1786.25% 187.02%
Allowance for losses as a percentage
of non-performing assets 1786.25% 165.89%
Non-performing assets:
Non-accrual loans $ 80 $ 840
Real estate acquired through foreclosure - 107
Total non-performing assets $ 80 $ 947
Three Months Ended Six Months Ended
June 30, June 30,
2003 2002 2003 2002
Performance Ratios:
Return on average assets 0.65% 0.72% 0.67% 0.72%
Return on average equity 8.03% 8.51% 8.31% 8.62%
Average equity to average assets 8.12% 8.41% 8.12% 8.38%
Non-interest expense to average assets 3.41% 3.76% 3.38% 3.74%
Efficiency ratio 76.18% 76.06% 75.41% 75.55%
Net interest rate spread (1) 3.88% 4.52% 3.93% 4.51%
Effective net interest rate spread (2) 4.00% 4.67% 4.05% 4.66%
(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.
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BROADWAY FINANCIAL CORPORATION
AND SUBSIDIARIES
Selected Data
(Dollars in thousands)
Three Months Ended Six Months Ended
June 30, June 30,
2003 2002 2003 2002
Average assets $ 218,376 $ 180,025 $ 213,434 $ 179,528
Average loans $ 154,259 $ 139,379 $ 150,470 $ 139,461
Average equity $ 17,741 $ 15,139 $ 17,334 $ 15,037
Average interest-earning assets $ 209,901 $ 171,852 $ 205,016 $ 171,255
Average interest-bearing liabilities $ 196,910 $ 162,271 $ 192,763 $ 161,880
Non-accrual loans $ 80 $ 840 $ 80 $ 840
REO, net $ - $ 107 $ - $ 107
ALLL $ 1,429 $ 1,571 $ 1,429 $ 1,571
REO-Allowance $ - $ - $ - $ -
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