-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DGluDa6o94TBd+Trd0EUiRKsbGn2F3gQDWLUHwX0HiRb5k3Vfgg9R5AA2Cq5JLYS 6txy3fpUUDJFoa93AE8wEw== 0001047469-98-019730.txt : 19980514 0001047469-98-019730.hdr.sgml : 19980514 ACCESSION NUMBER: 0001047469-98-019730 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980513 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: BROADWAY FINANCIAL CORP \DE\ CENTRAL INDEX KEY: 0001001171 STANDARD INDUSTRIAL CLASSIFICATION: SAVINGS INSTITUTION, FEDERALLY CHARTERED [6035] IRS NUMBER: 954547287 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-27464 FILM NUMBER: 98618011 BUSINESS ADDRESS: STREET 1: 4835 W VENICE BLVD CITY: LOS ANGELES STATE: CA ZIP: 90019 BUSINESS PHONE: 2139311886 MAIL ADDRESS: STREET 1: 4835 WEST VENICE BLVD CITY: LOS ANGELES STATE: CA ZIP: 90019 10QSB 1 FORM 10-QSB U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON D.C. 20549 FORM 10-QSB (Mark One) [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1998 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT For transition period from__________ to___________ Commission file number 0-27464 ------- BROADWAY FINANCIAL CORPORATION ------------------------------ (Exact Name of Small Business Issuer 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) (213) 634-1700 -------------- (Issuer's Telephone Number, Including Area Code) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [x] No [ ] State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: 863,447 shares of the Company's Common Stock, par value $.01 per share, were issued and outstanding as of May 01, 1998. Transitional Small Business Disclosure Format (Check one): Yes [ ] No [x] 1 INDEX PART I-- FINANCIAL INFORMATION Item 1. Financial Statements Page Consolidated Balance Sheets as of March 31, 1998 (unaudited) and December 31, 1997 3 Consolidated Statements of Operations (unaudited) for the three months ended March 31, 1998 and March 31, 1997 4 Consolidated Statement of Cash Flows (unaudited) for the three months ended March 31, 1998 and March 31, 1997 5 Notes to Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Operations 9 2 BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS (DOLLARS IN THOUSANDS)
March 31, 1998 December 31, (Unaudited) 1997 ------------- -------------- ASSETS: Cash and Federal funds sold........................................... $ 6,565 $ 4,831 Investment securities, held to maturity............................... 8,638 9,207 Loans receivable, net................................................. 105,365 103,689 Loans receivable held for sale........................................ 816 222 Accrued interest receivable........................................... 766 834 Real estate acquired through foreclosure.............................. 515 1,144 Investments in capital stock of Federal Home Loan Bank, at cost....... 945 931 Office properties & equipment, net.................................... 4,290 3,995 Other assets.......................................................... 544 263 ------------- -------------- Total Assets..................................................... $ 128,444 $ 125,116 ------------- -------------- ------------- -------------- LIABILITIES AND STOCKHOLDERS' EQUITY Savings deposits...................................................... $ 113,554 $ 109,867 Advance payments by borrowers for taxes and insurance................. 17 199 Deferred income taxes................................................. 450 463 Other liabilities..................................................... 861 1,148 ------------- -------------- Total Liabilities................................................ 114,882 111,677 Stockholders' equity: Preferred nonconvertible, non-cumulative, and non-voting stock, $.01 par value, authorized 1,000,000 shares; issued and outstanding 55,199 shares at March 31, 1998..................... 1 1 Common Stock, $.01 par value, authorized 3,000,000 shares; issued and outstanding 863,447 shares at March 31, 1998......... 9 9 Additional paid-in capital......................................... 8,833 8,820 Retained Earnings-substantially restricted......................... 5,522 5,427 Treasury Stock, at cost............................................ (318) (318) Unearned Employee Stock Ownership Plan shares...................... (485) (500) ------------- -------------- Total stockholders' equity....................................... 13,562 13,439 ------------- -------------- Total liabilities and stockholders' equity.................... $ 128,444 $ 125,116 ------------- -------------- ------------- --------------
See Notes to Consolidated Financial Statements 3 BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS (DOLLARS IN THOUSANDS)
Three Months Ended March 31, 1998 1997 (Unaudited) (Unaudited) --------------- --------------- Interest Income: Interest on loans receivable.............................. $ 2,172 $ 2,039 Interest on investment securities......................... 91 157 Interest on mortgage backed securities.................... 49 6 Other interest income..................................... 15 14 --------------- --------------- Total interest income.................................. 2,327 2,216 Interest expense: Interest on savings deposits.............................. 1,042 935 Interest on borrowings.................................... 3 - --------------- --------------- Total interest expense................................. 1,045 935 Net interest income before provision for loan losses... 1,282 1,281 Provision for loan losses...................................... 75 30 --------------- --------------- Net interest income after provision for loan losses.... 1,207 1,251 Noninterest income: Service charges........................................... 102 83 Gain on sale of mortgage loans............................ 19 - Gain on sale of office properties and equipment........... 6 - Other noninterest income.................................. 181 5 --------------- --------------- 308 88 --------------- --------------- Noninterest expense: Compensation and benefits................................. 693 575 Occupancy expense, net.................................... 280 222 Advertising and promotional expense....................... 37 45 Professional services..................................... 22 23 Federal insurance premiums................................ 25 12 Insurance bond premiums................................... 26 29 Real estate operations, net............................... 6 15 Contracted security services.............................. 36 27 Net operational losses.................................... 10 138 Other noninterest expense................................. 130 142 --------------- --------------- 1,265 1,228 --------------- --------------- Earnings before income taxes.............................. 250 111 Income taxes................................................... 105 48 --------------- --------------- Net earnings.............................................. $ 145 $ 63 --------------- --------------- --------------- --------------- Per share information Number of shares.......................................... 863,477 892,688 Earnings per share........................................ $.16 $.06 Earnings per share -assuming dilution..................... .16 .06
See Notes to Consolidated Financial Statements 4 BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS (DOLLARS IN THOUSANDS)
Three Months Ended March 31, March 31, 1998 1997 (Unaudited) (Unaudited) --------------- --------------- OPERATING ACTIVITIES Net earnings $145 $63 --------------- -------------- Adjustments to reconcile net earnings to net cash provided by (used in) operating activities: Depreciation 31 41 Amortization of net deferred loan origination fees (92) 12 Amortization of discounts and premium on securities 1 (2) Federal Home Loan Bank stock dividends (14) (14) Loss (Gain) on sale of real estate owned (25) 1 Gain on sale of loans receivable held for sale (25) - Changes in operating assets and liabilities: Provision for loan losses 75 30 Provision for write-downs and losses on real estate 17 10 Loans originated for sale, net of refinances (1,713) - Proceeds from sale of loans receivable 1,144 - Accrued interest receivable 68 (26) Income tax receivable - 92 Other assets (281) 41 Deferred income taxes 119 - Other liabilities (425) 120 --------------- -------------- Total adjustments (1,120) 305 --------------- -------------- Net cash (used in) provided by operating activities (975) 368 --------------- -------------- INVESTING ACTIVITIES Loans originated, net of refinances (1,808) (3,765) Loans purchased (4,780) (1,833) Principal repayment on loans 4,736 2,667 Increase in investment in real estate - (99) Proceeds from sale of office properties and equipment 132 - Gain on sale of office properties and equipment (6) - Purchases of investment securities held to maturity (3,125) - Proceeds from maturities of investment securities held to maturity 3,693 1,499 Capital expenditures for office properties and equipment (452) (241) Proceeds from sale of real estate acquired through foreclosure 836 47 --------------- -------------- Net cash used in investing activities (774) (1,725) --------------- --------------
(Continued) 5 BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS (DOLLARS IN THOUSANDS)
Three Months Ended March 31, March 31, 1998 1997 (Unaudited) (Unaudited) --------------- --------------- FINANCING ACTIVITIES Net increase in savings deposits 3,687 1,730 Additional paid-in capital 12 - Dividends declared (50) (56) Unearned Employee Stock Ownership Plan 16 - Increase in advances by borrowers for taxes and insurance (182) (157) --------------- --------------- Net cash provided by financing activities 3,483 1,517 --------------- --------------- Net increase in cash and cash equivalents 1,734 160 Cash and cash equivalents at beginning of period 4,831 5,180 --------------- --------------- Cash and cash equivalents at end of period $6,565 $5,340 --------------- --------------- --------------- --------------- Supplemental disclosure of cash flow information: Cash paid for interest expense $1,049 $937 Cash paid for income taxes - - --------------- --------------- --------------- --------------- Supplemental disclosure of noncash investing and financing activities: Additions to real estate acquired through foreclosure 245 356 Loans to facilitate the sale of real estate acquired through foreclosure - -
See Notes to Consolidated Financial Statements 6 BROADWAY FINANCIAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 1998 1. In the opinion of management of Broadway Financial Corporation (the "Company"), the preceding unaudited consolidated financial statements contain all material adjustments (consisting solely of normal recurring accruals and standard allowance for loan losses) necessary to present fairly the consolidated financial position of the Company at March 31, 1998 and the results of its operations for the three months ended March 31, 1998 and 1997, and its cash flows for the three months ended March 31, 1998 and 1997. These consolidated financial statements do not include all disclosures associated with the Company's annual financial statements included in its annual report on Form 10-KSB for the year ended December 31, 1997 and, accordingly, should be read in conjunction with such audited statements. 2. The results of operations for the three months ended March 31, 1998 are not necessarily indicative of the results to be expected for the full year. 3. RECENT ACCOUNTING PRONOUNCEMENTS EARNINGS PER SHARE - In February 1997, the Financial Accounting Standards Board issued Statement No. 128, "Earnings per Share" ("SFAS No. 128"). SFAS No. 128 establishes standards for computing and presenting earnings per share (EPS) and applies to entities with publicly held common stock. SFAS No. 128 simplifies the standards for computing earnings per share previously found in APB Opinion No. 15 and makes them comparable to international EPS standards. It replaces the presentation of primary EPS with a presentation of basic EPS. It also requires dual presentation of basic and diluted EPS on the face of the statement of earnings for all entities with complex capital structures and requires a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation. SFAS No. 128 is effective for financial statements issued for periods ending after December 15, 1997. The Company adopted SFAS No. 128 effective December 31, 1997. Adoption had no impact on the basic EPS computation. The EPS-assuming dilution computation was impacted only by stock-based employee compensation. All EPS amounts for all periods have been presented, and where appropriate, restated, to conform to the SFAS No. 128 requirements. COMPREHENSIVE INCOME - In June 1997, the Financial Accounting Standards Board issued Statement No. 130, "Reporting Comprehensive Income" ("SFAS No. 130"). SFAS No. 130 establishes new rules for the reporting and display of comprehensive income and its components in a full set of general purpose 7 financial statements. SFAS No. 130 requires companies to (a) display items of other comprehensive income either below the total for net income in the income statement, or in a statement of changes in equity, and (b) disclose the accumulated balance of other comprehensive income separately from retained earnings and additional paid-in-capital in the equity section of the balance sheet. Other comprehensive income includes unrealized gains and losses on available-for-sale securities and foreign currency translation adjustments. SFAS No. 130 is effective for the fiscal years beginning after December 15, 1997, although earlier application is permitted. Reclassification of financial statements for earlier periods provided for comparative purposes is required. Disclosure of total comprehensive income is required in interim period financial statements. The Company does not believe that such adoption has any adverse impact on its financial condition or results of operations. 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS GENERAL Broadway Financial Corporation (the "Company") was incorporated under Delaware law on September 25, 1995 for the purpose of acquiring and holding all of the outstanding capital stock of Broadway Federal Bank, f.s.b. ("Broadway Federal" or "Bank") as part of the Bank's conversion from a federally chartered mutual savings association to a federally chartered stock savings bank (the "Conversion"). The Conversion was completed, and the Bank became a wholly owned subsidiary of the Company, on January 8, 1996. The Company's principal business is serving as a holding company for Broadway Federal. The Company's results of operations are dependent primarily on Broadway Federal's 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 its interest-bearing liabilities, such as deposits and borrowings. Broadway Federal also generates recurring non-interest income such as transactional fees on its loan and deposit portfolios. The Company's operating results are also affected by the amount of the Bank's general and administrative expenses, which consist principally of employee compensation and benefits, occupancy expense, and federal deposit insurance premiums, and by its periodic provisions for loan losses. More generally, the results of operations of thrift and banking institutions are also affected by prevailing economic conditions, competition, and the monetary and fiscal policies of governmental agencies. COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND MARCH 31, 1997 GENERAL The Company recorded net earnings of $145,000 for the three months ended March 31, 1998, as compared to net earnings of $63,000 for the three months ended March 31, 1997. The first quarter net earnings as of March 31, 1998 resulted from a number of offsetting factors which included higher interest income, higher interest expense on savings deposits, higher provision for loan losses, higher noninterest income, higher noninterest expense and higher income taxes. INTEREST INCOME Interest income increased by $111,000 during the three months ended March 31, 9 1998 as compared to the same period a year ago. This increase was primarily the result of an increase in average assets of $9.0 million, to $127.0 million for the three months ended March 31, 1998 from $118.0 million for the same period in the prior year. The increase in assets during the three months ended March 31, 1998 was funded by an increase in savings deposits for the period. The increase in average assets primarily resulted from the Company's continued focus on increasing its loan portfolio. INTEREST ON SAVINGS DEPOSITS Interest on savings deposits and borrowings increased by $110,000 during the three months ended March 31, 1998 as compared to the same period a year ago. The increase in interest on savings deposits was due to an increase in average deposits of $9.0 million, to $111.7 million for the three months ended March 31, 1998 from $102.7 million during the same period a year ago. The increase in interest on savings deposits also reflects the more competitive interest rate environment as the average cost of deposits increased 8-basis points, from 3.65% for the three months ended March 31, 1997 to 3.73% for the three months ended March 31, 1998. PROVISION FOR LOAN LOSSES The provision for loan losses increased by $45,000, from $30,000 for the three months ended March 31, 1997 to $75,000 for the three months ended March 31, 1998. Total non-performing assets, consisting of non-accrual loans and real estate acquired through foreclosure ("REO"), decreased by $1.3 million, from $2.8 million at March 31, 1997 to $1.5 million at March 31, 1998. The $1.3 million decrease resulted from a decrease in non-accrual loans of $600,000 and a decrease in REO of $700,000. As a percentage of total assets, non-performing assets were 1.22% at March 31, 1998, compared to 2.42% and 1.65% at March 31, 1997 and December 31, 1997, respectively. Since December 1997, non-accrual loans have increased by $129,000, to $1.0 million and REO has decreased by $629,000, to $500,000. Non-accrual loans at March 31, 1998 included four loans totaling $406,000 secured by one- to four-unit properties, three loans totaling $581,000 secured by multi-family properties and two unsecured loans totaling$63,000. REO at March 31, 1998 included four one- to four-unit properties totaling $292,000, one commercial property totaling $93,000 and one parcel of land totaling $265,000. As of March 31, 1998 the Company's allowance for loan losses totaled $1.1 million, representing a $27,000 increase from the balance at December 31, 1997. The allowance for loan losses represents 1.00% of total loans at March 31, 1998, consistent with allowance for loan losses at December 31, 1997. The allowance for 10 loan losses was 102.97% of non-accrual loans at March 31, 1998, compared to 114.44% at December 31, 1997. Net charge-offs as a percentage of the beginning allowance for loan losses in 1998 represented 18.22% annualized, as compared to 32.88% for 1997. As of March 31, 1998 management believes that, given the improved asset quality, the allowance for loan losses is adequate to cover inherent losses in its loan portfolio, however, there can be no assurance that such losses will not exceed the estimated amounts. NONINTEREST INCOME Noninterest income increased by $220,000, from $88,000 for the three months ended March 31, 1997 to $308,000 for the same period during 1998. Service charges increased by $19,000 during the three-month period ended March 31, 1998 as compared to the same period a year ago. The increase resulted primarily from increased fees charged on various savings products and from a greater number of checking accounts at March 31, 1998 as compared to March 31, 1997, resulting in more fees earned. The Company also reports a gain on sale of mortgage loans of $19,000 for the three months ended March 31, 1998, which was due to the sale of twelve mortgage loans to other lenders. At March 31, 1998 loans held for sale totaled $816,000 and are recorded at the lower of amortized cost or market value; there were no loans held for sale at March 31, 1997. The Company realizes a gain on sale of office properties and equipment of $6,000 for the three months ended March 31, 1998 which was attributable to the sale of property located at 8467 South Van Ness Avenue, Inglewood, California. Finally, other noninterest income increased by $176,000, from $5,000 for the three months ended March 31, 1997 to $181,000 for the same period in 1998. The increase primarily resulted from the reversal of a $170,000 accrual that had been set up for interest and penalties on funds escheated to the State of California in 1992. It was determined that interest and penalties are not due. NONINTEREST EXPENSE Noninterest expense increased by $37,000 during the three-month period ended March 31, 1998 as compared to the same period in 1997. The increase in noninterest expense was due primarily to increases in compensation and benefits, occupancy expense, federal insurance premiums and contracted security services, offset by decreases in advertising expense, professional services, insurance bond premiums, real estate operations, operational losses and other noninterest expense. Compensation and benefits increased by $118,000 for the three-month period ended March 31, 1998 as compared to the same period a year ago. The increases resulted from general salary increases during the year and an increase in the number of staff. Occupancy expense, including depreciation and repair and maintenance costs on fixed assets, increased by $58,000 for the three-month period ended March 31, 1998, as compared to the same 11 period during 1997. The increase was primarily due to increases in computer expenses, rent and utilities, maintenance and repair and property taxes on office buildings. Contracted security services increased by $9,000 during the three-month period ended March 31, 1998 as compared to the same period in 1997. The increase was due to security services provided to the new branch office at 4800 Wilshire Boulevard. Real estate operations decreased by $9,000 for the three-month period ended March 31, 1998 as compared to the same period a year ago. The decrease was mainly due to gain on sale of REO offset by loss provisions and other maintenance costs. Net operational losses decreased by $128,000 for the three-month period ended March 31, 1998 as compared to the same period during 1997. The first quarter of 1997 had included losses resulting from a branch burglary in February, 1997. Other noninterest expense decreased by $12,000 for the three-month period ended March 31, 1998 as compared to the same period during 1997. The decrease was primarily caused by the decrease in legal fees and audit fees. Advertising and promotional expense decreased by $8,000 for the three-month period ended March 31, 1998 as compared to the same period during 1997. The decrease was mainly due to higher expenses in 1997 associated with various business activities. Federal deposit insurance premiums increased by $13,000 for the three-month period ended March 31, 1998 as compared to the same period a year ago, due to an increase in deposits. INCOME TAXES Income tax expense increased by $58,000 for the three-month period ended March 31, 1998, as compared to the same period in 1997. The increase in income taxes was the result of higher earnings before income taxes during the first quarter of 1998 as compared to the same period during 1997. COMPARISON OF FINANCIAL CONDITION AT MARCH 31, 1998 AND DECEMBER 31, 1997 Total assets at March 31, 1998 were $128.4 million compared to $125.1 million at December 31, 1997, representing an increase of $3.3 million. Net loans receivable increased from $103.7 million at December 31, 1997 to $105.4 million at March 31, 1998 as a result of $3.6 million in new loan originations and $4.8 million in loan purchases, offset by $4.7 million in principal repayments, $200,000 in loans transferred to foreclosure, $1.7 million in loans transferred to held for sale and $100,000 in allowance for loan losses. Loans held for sale at March 31, 1998 totaled $800,000 as compared to $200,000 at December 31, 1997. Office properties & equipment increased from $4.0 million at December 31, 1997 to $4.3 million at March 31, 1998, primarily as a result of renovation costs incurred for the Bank's branch and administrative office located in the City of Los Angeles. The new Wilshire Boulevard facility was acquired to replace the Bank's administrative office lost by fire in 1992 during the civil disturbance in Los Angeles. Since that time Bank administrative 12 operations have been operated from Broadway Federal's branch office sites. Total liabilities at March 31, 1998 were $114.9 million compared to $111.7 million at December 31, 1997. The $3.2 million increase is primarily attributable to the increase in savings deposits and deferred income taxes offset by the decrease in advance payments by borrowers and other liabilities. Total capital at March 31, 1998 was $13.5 million as compared to $13.4 million at December 31, 1997, representing an increase of $123,000. This increase resulted from the net of: 1) dividends declared totaling $50,000; 2) net earnings of $145,000 for three months ended March 31, 1998; 3) additional paid-in-capital totaling $13,000, resulting from interest earned on a loan to the employee stock ownership plan ("ESOP"); and 4) a decrease of $15,000 in the unearned ESOP account resulting from principal payments received on the loan to the ESOP. 13 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 thereunto duly authorized. BROADWAY FINANCIAL CORPORATION Date: May 8, 1998 By: /s/ PAUL C. HUDSON ----------------- ------------------ Paul C. Hudson President and Chief Executive Officer By: /s/ BOB ADKINS -------------- Bob Adkins Secretary and Chief Financial Officer 14 EX-27.1 2 EXHIBIT 27.1 FDS
9 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE PRECEDING FINANICAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS DEC-31-1998 JAN-01-1998 MAR-31-1998 2,103 62 4,400 0 0 8,638 8,595 107,262 (1,081) 128,444 113,554 0 1,328 0 0 552 8,290 (802) 128,444 2,172 140 15 2,327 1,042 1,045 1,282 75 0 0 251 251 0 0 145 0.16 0.16 0.081 1,050 0 0 0 (1,054) 48 0 (1,081) (1,081) 0 179
-----END PRIVACY-ENHANCED MESSAGE-----