Broadway Financial Corp. (BYFC, Financial) filed Quarterly Report for the period ended 2009-09-30.
Broadway Financial Corporation's principal business is serving as a holding company for Broadway Federal. The company's and Broadway Federal's results of operations are dependent primarily on net interest income, which is the difference between the interest income earned on its interest-earning assets, such as loans and investments, and the interest expense on interest-bearing liabilities, such as deposits and borrowings. Broadway Financial Corp. has a market cap of $11.4 million; its shares were traded at around $6.534 with a P/E ratio of 14.8 and P/S ratio of 0.5. The dividend yield of Broadway Financial Corp. stocks is 3.1%. Broadway Financial Corp. had an annual average earning growth of 25.9% over the past 10 years. GuruFocus rated Broadway Financial Corp. the business predictability rank of 3.5-star.
Non-interest income totaled $34 thousand for the third quarter of 2009, down $551 thousand, or 94.19%, from the third quarter a year ago, primarily due to $267 thousand higher provision for losses on loans held for sale, net losses of $11 thousand on mortgage banking activities in 2009 compared to net gains of $222 thousand on mortgage banking activities in 2008 and $51 thousand lower service charges in 2009 compared to 2008. During the third quarter of 2009, a loan held for sale that was modified during the first quarter of 2009 became delinquent under the modified terms. As the value of the property securing such loan had declined significantly, we increased our specific loss allocation related to this loan by $270 thousand. Net gains on mortgage banking activities was lower in the third quarter of 2009 compared to the third quarter of 2008 as the prior year quarter was positively impacted by a $198 thousand valuation adjustment on our mortgage servicing rights asset. The decrease in service charges primarily reflects lower retail banking fees in the third quarter of 2009 as compared to the third quarter of 2008.
For the nine months ended September 30, 2009, non-interest income totaled $447 thousand, down $800 thousand, or 64.15%, from a year ago. The decrease primarily reflected $617 thousand higher provision for losses on loans held for sale and $251 thousand lower net gains on mortgage banking activities which were partially offset by $66 thousand higher service charges. Due to increased delinquency on several loans held for sale and decreasing values of the underlying real estate collateral, it became necessary to increase the allowance for losses on loans held for sale by $617 thousand, from $260 thousand at December 31, 2008 to $877 thousand at September 30, 2009. The $251 thousand decrease in net gains on mortgage banking activities was primarily due to the 2008 valuation adjustment on mortgage servicing assets as discussed above. The $66 thousand increase in non-interest income from service charges resulted from increased late fee income charged for delinquent loan payments and increased loan servicing fee income with the growth in our serviced loan portfolio.
Non-interest expense totaled $2.8 million for the third quarter of 2009, up $192 thousand, or 7.32%, from the third quarter a year ago. The increase in non-interest expense was primarily due to increases in FDIC insurance premium expense, compensation and benefits expense and professional services expense. Partially offsetting these increases was lower other expense. FDIC insurance premium expense increased $98 thousand, or 188.46%, as the regular assessment rate was increased over the prior year rate. The increase in FDIC assessments became necessary to recapitalize the FDIC insurance fund as the result of insurance claims paid for numerous bank failures in 2008 and year-to-date in 2009. Management expects FDIC insurance premiums to remain at elevated levels through at least 2011. Compensation and benefits expense increased $88 thousand, or 6.07%, primarily due to higher salaries expense and payroll tax expense resulting from annual pay increases and staff addition, higher health insurance expense, and higher stock option compensation expense related to new option grants, which was partially offset by lower bonus expense. Professional services expense increased $65 thousand, or 41.40%, primarily due to a $121 thousand increase in legal expenses which was partially offset by a $37 thousand reversal of accrued SOX consulting fees. Other expense decreased $61 thousand, or 21.40%, primarily due to decreases in donations, sponsorships, and promotions.
At September 30, 2009, assets totaled $520.0 million, up $112.0 million, or 27.47%, from year-end 2008. During the first nine months of 2009, net loans, including loans held for sale, increased $102.7 million, or 28.70%, and securities available for sale and held to maturity increased $6.0 million, or 22.36%. Other increases in assets were in real estate owned (REO) which increased $1.1 million and deferred tax assets, net which increased $1.3 million due to an increase in our allowance for loan losses which is not currently deductible for tax purposes.
At September 30, 2009, non-performing assets, consisting of non-accrual and delinquent loans 90 or more days past due and REO, were $14.8 million, or 2.84% of total assets, compared to $3.5 million, or 0.85% of total assets, at December 31, 2008. Non-accrual loans at September 30, 2009 totaled $13.7 million, of which $3.8 million represented one-to-four family loans, $1.5 million represented multi-family loans, $6.0 million represented commercial real estate loans, primarily church loans, and $2.4 million represented commercial and unsecured consumer loans. This compares to $3.5 million of non-accrual loans at December 31, 2008, of which $0.2 million represented a multi-family loan, $3.1 million represented commercial real estate loans, including church loans, and $0.2 million represented commercial and unsecured consumer loans. At September 30, 2009, real estate owned totaled $1.1 million, consisting of two one-to-four family residential properties and a residential lot. The Bank had no loans in foreclosure or REO at December 31, 2008.
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Broadway Financial Corporation's principal business is serving as a holding company for Broadway Federal. The company's and Broadway Federal's results of operations are dependent primarily on net interest income, which is the difference between the interest income earned on its interest-earning assets, such as loans and investments, and the interest expense on interest-bearing liabilities, such as deposits and borrowings. Broadway Financial Corp. has a market cap of $11.4 million; its shares were traded at around $6.534 with a P/E ratio of 14.8 and P/S ratio of 0.5. The dividend yield of Broadway Financial Corp. stocks is 3.1%. Broadway Financial Corp. had an annual average earning growth of 25.9% over the past 10 years. GuruFocus rated Broadway Financial Corp. the business predictability rank of 3.5-star.
Highlight of Business Operations:
Net earnings for the third quarter of 2009 were $333 thousand, or $0.10 per diluted common share, down $296 thousand, or 47.06%, when compared with net earnings of $629 thousand, or $0.34 per diluted common share, in the third quarter of 2008. The decrease in net earnings was primarily due to a $1.2 million increase in the provision for loan losses and a $0.6 million decrease in non-interest income, which were partially offset by a $1.4 million increase in net interest income before provision for loan losses.Non-interest income totaled $34 thousand for the third quarter of 2009, down $551 thousand, or 94.19%, from the third quarter a year ago, primarily due to $267 thousand higher provision for losses on loans held for sale, net losses of $11 thousand on mortgage banking activities in 2009 compared to net gains of $222 thousand on mortgage banking activities in 2008 and $51 thousand lower service charges in 2009 compared to 2008. During the third quarter of 2009, a loan held for sale that was modified during the first quarter of 2009 became delinquent under the modified terms. As the value of the property securing such loan had declined significantly, we increased our specific loss allocation related to this loan by $270 thousand. Net gains on mortgage banking activities was lower in the third quarter of 2009 compared to the third quarter of 2008 as the prior year quarter was positively impacted by a $198 thousand valuation adjustment on our mortgage servicing rights asset. The decrease in service charges primarily reflects lower retail banking fees in the third quarter of 2009 as compared to the third quarter of 2008.
For the nine months ended September 30, 2009, non-interest income totaled $447 thousand, down $800 thousand, or 64.15%, from a year ago. The decrease primarily reflected $617 thousand higher provision for losses on loans held for sale and $251 thousand lower net gains on mortgage banking activities which were partially offset by $66 thousand higher service charges. Due to increased delinquency on several loans held for sale and decreasing values of the underlying real estate collateral, it became necessary to increase the allowance for losses on loans held for sale by $617 thousand, from $260 thousand at December 31, 2008 to $877 thousand at September 30, 2009. The $251 thousand decrease in net gains on mortgage banking activities was primarily due to the 2008 valuation adjustment on mortgage servicing assets as discussed above. The $66 thousand increase in non-interest income from service charges resulted from increased late fee income charged for delinquent loan payments and increased loan servicing fee income with the growth in our serviced loan portfolio.
Non-interest expense totaled $2.8 million for the third quarter of 2009, up $192 thousand, or 7.32%, from the third quarter a year ago. The increase in non-interest expense was primarily due to increases in FDIC insurance premium expense, compensation and benefits expense and professional services expense. Partially offsetting these increases was lower other expense. FDIC insurance premium expense increased $98 thousand, or 188.46%, as the regular assessment rate was increased over the prior year rate. The increase in FDIC assessments became necessary to recapitalize the FDIC insurance fund as the result of insurance claims paid for numerous bank failures in 2008 and year-to-date in 2009. Management expects FDIC insurance premiums to remain at elevated levels through at least 2011. Compensation and benefits expense increased $88 thousand, or 6.07%, primarily due to higher salaries expense and payroll tax expense resulting from annual pay increases and staff addition, higher health insurance expense, and higher stock option compensation expense related to new option grants, which was partially offset by lower bonus expense. Professional services expense increased $65 thousand, or 41.40%, primarily due to a $121 thousand increase in legal expenses which was partially offset by a $37 thousand reversal of accrued SOX consulting fees. Other expense decreased $61 thousand, or 21.40%, primarily due to decreases in donations, sponsorships, and promotions.
At September 30, 2009, assets totaled $520.0 million, up $112.0 million, or 27.47%, from year-end 2008. During the first nine months of 2009, net loans, including loans held for sale, increased $102.7 million, or 28.70%, and securities available for sale and held to maturity increased $6.0 million, or 22.36%. Other increases in assets were in real estate owned (REO) which increased $1.1 million and deferred tax assets, net which increased $1.3 million due to an increase in our allowance for loan losses which is not currently deductible for tax purposes.
At September 30, 2009, non-performing assets, consisting of non-accrual and delinquent loans 90 or more days past due and REO, were $14.8 million, or 2.84% of total assets, compared to $3.5 million, or 0.85% of total assets, at December 31, 2008. Non-accrual loans at September 30, 2009 totaled $13.7 million, of which $3.8 million represented one-to-four family loans, $1.5 million represented multi-family loans, $6.0 million represented commercial real estate loans, primarily church loans, and $2.4 million represented commercial and unsecured consumer loans. This compares to $3.5 million of non-accrual loans at December 31, 2008, of which $0.2 million represented a multi-family loan, $3.1 million represented commercial real estate loans, including church loans, and $0.2 million represented commercial and unsecured consumer loans. At September 30, 2009, real estate owned totaled $1.1 million, consisting of two one-to-four family residential properties and a residential lot. The Bank had no loans in foreclosure or REO at December 31, 2008.
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