Broadway Financial (BYFC) - 2019 Q1 - Quarterly Report

PART I. FINANCIAL STATEMENTS This section presents the unaudited consolidated financial statements for Broadway Financial Corporation, including balance sheets, income statements, cash flows, and equity changes Item 1. Consolidated Financial Statements (Unaudited) This section presents the unaudited consolidated financial statements for Broadway Financial Corporation as of March 31, 2019, and for the three months then ended, along with detailed notes Consolidated Statements of Financial Condition Total assets increased to $421.1 million as of March 31, 2019, primarily driven by a $9.5 million increase in net loans receivable Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2019 | December 31, 2018 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $19,225 | $16,651 | | Loans receivable, net | $365,015 | $355,556 | | Total Assets | $421,146 | $409,397 | | Liabilities & Equity | | | | Deposits | $286,654 | $281,414 | | FHLB advances | $75,000 | $70,000 | | Total Liabilities | $372,195 | $360,961 | | Total Stockholders' Equity | $48,951 | $48,436 | Consolidated Statements of Operations and Comprehensive Income (Loss) The company reported a net income of $277 thousand for Q1 2019, a significant turnaround from a net loss of $84 thousand in Q1 2018, driven by a loan loss provision recapture and increased non-interest income Q1 2019 vs Q1 2018 Performance (in thousands, except per share data) | Metric | Q1 2019 | Q1 2018 | | :--- | :--- | :--- | | Total Interest Income | $4,373 | $3,758 | | Net Interest Income | $2,813 | $2,774 | | Loan loss provision recapture | $190 | $0 | | Non-interest Income | $376 | $131 | | Non-interest Expense | $3,060 | $3,032 | | Net Income (Loss) | $277 | ($84) | | Earnings (Loss) Per Share (Diluted) | $0.01 | ($0.00) | Consolidated Statements of Cash Flows For Q1 2019, the company generated $229 thousand in cash from operating activities, while investing activities used $7.9 million and financing activities provided $10.2 million, resulting in a net increase in cash of $2.6 million Cash Flow Summary (in thousands) | Activity | Three Months Ended March 31, 2019 | Three Months Ended March 31, 2018 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $229 | ($752) | | Net cash (used in) provided by investing activities | ($7,895) | $5,848 | | Net cash provided by (used in) financing activities | $10,240 | ($11,068) | | Net change in cash and cash equivalents | $2,574 | ($5,972) | Consolidated Statements of Changes in Stockholders' Equity Stockholders' equity increased from $48.4 million at year-end 2018 to $49.0 million at March 31, 2019, primarily due to net income and other comprehensive income - Total stockholders' equity increased by approximately $515 thousand during the first quarter of 2019, driven by net income and other comprehensive income[22] Notes to Unaudited Consolidated Financial Statements The notes detail the basis of financial statement presentation and significant accounting policies, including new accounting standards, loan portfolios, credit quality, fair value measurements, and regulatory capital adequacy - The company adopted ASU 2016-02, "Leases (Topic 842)", on January 1, 2019, resulting in the recognition of a right-of-use (ROU) asset and an operating lease liability of $1.2 million each[28][29] - The company is preparing for the adoption of the Current Expected Credit Loss (CECL) model (ASU 2016-13), which is expected to increase the allowance for loan losses[36] - At March 31, 2019, the Bank's capital levels exceeded all regulatory requirements to be considered 'well capitalized'[124][125] - A significant concentration of credit risk exists, with one customer accounting for approximately 11% of total deposits as of March 31, 2019[130] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial performance for Q1 2019, covering key drivers of improved net income, balance sheet changes, loan growth, credit quality, deposit composition, liquidity, and capital resources Overview Total assets grew by $11.8 million in Q1 2019, driven by a $9.4 million increase in net loans, leading to a net income of $277 thousand compared to a net loss in Q1 2018 - Total assets increased by $11.8 million to $421.2 million at March 31, 2019[134] - Net income for Q1 2019 was $277 thousand, compared to a net loss of $84 thousand for Q1 2018[137] Results of Operations Net interest income remained stable at $2.8 million, while a $190 thousand loan loss provision recapture and a $233 thousand CDFI grant significantly boosted non-interest income, offsetting a minor increase in non-interest expense - Net interest income was $2.8 million, largely unchanged from the prior year, as an increase in average earning assets was offset by a 4 basis point decrease in the net interest margin[139] - A loan loss provision recapture of $190 thousand was recorded in Q1 2019, primarily from recoveries on two fully paid-off, previously charged-off church loans[149] - Non-interest income increased by $245 thousand, mainly due to a $233 thousand grant from the U.S. Department of the Treasury's Community Development Financial Institution (CDFI) Fund[150] - Non-interest expense increased slightly by $28 thousand, primarily due to a $151 thousand rise in professional services, offset by decreases in other expense categories[151] Financial Condition Net loans held for investment grew to $365.0 million, with improved credit quality as non-performing loans decreased to $782 thousand, while deposits increased by $5.3 million and borrowings by $5.0 million - During Q1 2019, the Bank originated $18.0 million of multi-family loans and $1.1 million of commercial real estate loans[155] Credit Quality Metrics | Metric | March 31, 2019 | December 31, 2018 | | :--- | :--- | :--- | | Non-Performing Loans (NPLs) | $782 thousand | $911 thousand | | ALLL as % of Gross Loans | 0.80% | 0.82% | | ALLL to NPLs Ratio | 374.55% | 321.51% | - Deposits increased by $5.3 million, with certificates of deposit (CDs) growing by $8.0 million, partially through the CDARS network[165][166] Liquidity and Capital Resources The company maintains a strong liquidity position with $53.1 million in additional FHLB borrowing capacity and an $11.0 million line of credit, while stockholders' equity stands at $49.0 million, exceeding all regulatory capital requirements - The Bank has sufficient liquidity, with access to an additional $53.1 million in FHLB borrowings and an $11.0 million line of credit with another institution as of March 31, 2019[173] - Book value per share was $1.76 as of March 31, 2019, compared to $1.77 at December 31, 2018[172] - The Bank's capital is strong, with all regulatory capital ratios exceeding the 'well capitalized' thresholds[180] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section is not applicable for the reporting period - Not Applicable[182] Item 4. Controls and Procedures Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of March 31, 2019, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that the Company's disclosure controls and procedures were effective as of March 31, 2019[182] - No significant changes were made to internal controls over financial reporting during the quarter ended March 31, 2019[183] PART II. OTHER INFORMATION This section provides other required information, including legal proceedings, risk factors, unregistered sales of equity securities, and a list of exhibits Legal Proceedings The company reported no material legal proceedings during the period - None[184] Risk Factors This section is not applicable for the reporting period - Not Applicable[184] Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities during the period - None[184] Exhibits This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications and XBRL data files - Exhibits filed include certifications under Sections 302 and 906 of the Sarbanes-Oxley Act, and XBRL interactive data files[185]