8-K 1 form8k06-03earnings.txt FORM 8-K 2QTR EARNINGS2003 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) 1 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 2 EXHIBIT INDEX Exhibit No. Exhibit Page No. ----------- ------- -------- 99.1 Press Release 4 3 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). 4 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. 5 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. 6 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. 7 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
8 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
9 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. 10 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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