10-Q 1 a13-19851_110q.htm 10-Q

Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

 

FORM 10-Q

 

(Mark One)

[X]                          QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2013

 

[  ]                              TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For transition period from__________ to___________

 

Commission file number      000-27464

 

BROADWAY FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)

 

Delaware

95-4547287

(State or other jurisdiction of

(I.R.S. Employer

incorporation or organization)

Identification No.)

 

5055 Wilshire Boulevard, Suite 500
Los Angeles, California

90036

(Address of principal executive offices)

(Zip Code)

 

(323) 634-1700

(Registrant’s telephone number, including area code)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 [   ]

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes [ X ]  No [   ]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated, or a smaller reporting company.  See the definition of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (Check one):

 

Large Accelerated Filer [   ]   Accelerated Filer [   ]   Non-Accelerated Filer [   ]   Smaller Reporting Company [ X]

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes [   ]   No [ X]

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:  6,145,451 shares of the Company’s Common Stock, par value $0.01 per share, were outstanding as of November 5, 2013.

 

 



Table of Contents

 

TABLE OF CONTENTS

 

 

 

 

 

Page

PART I.

FINANCIAL INFORMATION

 

 

 

 

 

 

 

 

Item 1.

Financial Statements

 

 

 

 

 

 

 

 

 

Consolidated Statements of Financial Condition as of September 30, 2013 (unaudited) and December 31, 2012

 

1

 

 

 

 

 

 

 

Consolidated Statements of Operations and Comprehensive Income (Loss) (unaudited) for the three and nine months ended September 30, 2013 and 2012

 

2

 

 

 

 

 

 

 

Consolidated Statements of Cash Flows (unaudited) for the nine months ended September 30, 2013 and 2012

 

3

 

 

 

 

 

 

 

Notes to Unaudited Consolidated Financial Statements

 

4

 

 

 

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

27

 

 

 

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 

40

 

 

 

 

 

 

Item 4.

Controls and Procedures

 

40

 

 

 

 

 

PART II.

OTHER INFORMATION

 

 

 

 

 

 

 

 

Item 1.

Legal Proceedings

 

41

 

 

 

 

 

 

Item 1A.

Risk Factors

 

41

 

 

 

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

41

 

 

 

 

 

 

Item 3.

Defaults Upon Senior Securities

 

41

 

 

 

 

 

 

Item 4.

Mine Safety Disclosures

 

41

 

 

 

 

 

 

Item 5.

Other Information

 

41

 

 

 

 

 

 

Item 6.

Exhibits

 

41

 

 

 

 

 

 

Signatures

 

 

43

 

 

 

 

 

 

3.1

Certificate of Incorporation of Registrant and amendments thereto

 

 

 

 

 

 

 

 

3.2

Bylaws of Registrant

 

 

 

 

 

 

 

 

4.3

Certificate of Designation for Series A Preferred Stock

 

 

 

 

 

 

 

 

4.5

Certificate of Designation for Series B Preferred Stock

 

 

 

 

 

 

 

 

4.7

Certificate of Designation for Series C Preferred Stock

 

 

 

 

 

 

 

 

4.9

Certificate of Designation for Fixed Rate Cumulative Perpetual Preferred Stock Series D  (Exhibit 3.3 to Form 8-K filed by the Registrant on November 19, 2008)

 

 

 

 

 

 

 

 

4.12

Certificate of Designation for Fixed Rate Cumulative Perpetual Preferred Stock Series E  (Exhibit 4.1 to Form 8-K filed by the Registrant on December 9, 2009)

 

 

 

 

 

 

 

 

4.13

Certificate of Designations of Series F Common Stock Equivalents

 

 

 

 

 

 

 

 

4.14

Certificate of Designations of Series G Non-Voting Preferred Stock

 

 

 

 

 

 

 

 

10.19

Exchange Agreement by and between the Registrant and The United States Department of the Treasury (Exhibit 10.19 to Form 10-K filed by the Registrant on April 1, 2013) and Amendment No. 1 thereto

 

 

 

 

 

 

 

 

10.20

Exchange Agreement by and among the Registrant, the Insurance Exchange of the Automobile Club and the Automobile Club of Southern California (Exhibit 10.20 to Form 10-K filed by the Registrant on April 1, 2013)

 

 

 

 

 

 

 

 

10.21.1

Exchange Agreement by and between the Registrant and BBCN Bancorp, Inc.

 

 

 

 

 

 

 

 

10.21.2

Investor Rights Letter by and between the Registrant and BBCN Bancorp, Inc.

 

 

 

 

 

 

 

 

10.22.1

Exchange Agreement by and between the Registrant and National Community Investment Fund (Series C for Series F Preferred Stock)

 

 

 

 

 

 

 

 

10.22.2

Investor Rights Letter by and between the Registrant and National Community Investment Fund

 

 

 

 

 

 

 

 

10.22.3

Exchange Agreement by and between the Registrant and National Community Investment Fund (Series F for Series G Preferred Stock)

 

 

 

 

 

 

 

 

10.23

Registration Rights Agreement between the Registrant, CJA Private Equity Financial Restructuring Master Fund I LP, National Community Investment Fund and BBCN Bancorp, Inc.

 

 

 

 

 

 

 

 

10.24

Form of Subscription Agreements entered into by the Registrant with various purchasers of the Registrant’s common stock

 

 

 

 

 

 

 

 

10.25.1

Subscription Agreement between the Registrant and CJA Private Equity Financial Restructuring Master Fund I LP

 

 

 

 

 

 

 

 

10.25.2

Investor Rights Letter between the Registrant and CJA Private Equity Financial Restructuring Master Fund I LP

 

 

 

 

 

 

 

 

10.26.1

Subscription Agreement between the Registrant and Valley Economic Development Center, Inc.

 

 

 

 

 

 

 

 

10.26.2

Investor Rights Letter between the Registrant and Valley Economic Development Center, Inc.

 

 

 

 

 

 

 

 

10.27

Agreement for Partial Satisfaction of Debt Previously Contracted by and between BBCN Bank and the Registrant

 

 

 

 

 

 

 

 

31.1

Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

 

 

 

 

 

 

 

31.2

Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

 

 

 

 

 

 

 

32.1

Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

 

 

 

 

 

 

 

32.2

Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

 

 



Table of Contents

 

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARIES

Consolidated Statements of Financial Condition

(In thousands, except share and per share amounts)

 

 

 

September 30,

 

December 31,

 

 

2013

 

2012

Assets

 

(Unaudited)

 

 

Cash

 

$

8,964

 

 

$

13,420

 

Federal funds sold

 

51,260

 

 

50,940

 

Cash and cash equivalents

 

60,224

 

 

64,360

 

Securities available-for-sale, at fair value

 

10,148

 

 

13,378

 

Loans receivable held for sale, at lower of cost or fair value

 

1,085

 

 

19,051

 

Loans receivable held for investment, net of allowance of $10,339 and $11,869

 

251,504

 

 

251,723

 

Accrued interest receivable

 

1,116

 

 

1,250

 

Federal Home Loan Bank (FHLB) stock

 

4,113

 

 

3,901

 

Office properties and equipment, net

 

2,688

 

 

2,617

 

Real estate owned (REO)

 

6,611

 

 

8,163

 

Bank owned life insurance

 

2,739

 

 

2,688

 

Investment in affordable housing limited partnership

 

1,364

 

 

1,528

 

Other assets

 

4,079

 

 

5,034

 

Total assets

 

$

345,671

 

 

$

373,693

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

Deposits

 

$

218,569

 

 

$

257,071

 

FHLB advances

 

87,500

 

 

79,500

 

Junior subordinated debentures

 

6,000

 

 

6,000

 

Other borrowings

 

2,960

 

 

5,000

 

Accrued interest payable

 

674

 

 

1,941

 

Dividends payable

 

-

 

 

2,104

 

Advance payments by borrowers for taxes and insurance

 

1,034

 

 

711

 

Other liabilities

 

3,350

 

 

3,359

 

Total liabilities

 

320,087

 

 

355,686

 

Stockholders’ Equity:

 

 

 

 

 

 

Preferred stock, $.01 par value, authorized 1,000,000 shares:

 

 

 

 

 

 

Senior preferred cumulative and non-voting stock, Series D, no shares issued and outstanding at September 30, 2013 and 9,000 shares issued and outstanding at December 31, 2012

 

-

 

 

8,963

 

Senior preferred cumulative and non-voting stock, Series E, no shares issued and outstanding at September 30, 2013 and 6,000 shares issued and outstanding at December 31, 2012

 

-

 

 

5,974

 

Preferred non-cumulative and non-voting stock, no shares issued and outstanding at September 30, 2013 and 55,199 shares of Series A, 100,000 shares of Series B and 76,950 shares of Series C issued and outstanding at December 31, 2012

 

-

 

 

2,457

 

Preferred non-cumulative voting stock, Series F, 13,997 shares issued and 13,299 shares outstanding at September 30, 2013 and no shares authorized, issued or outstanding at December 31, 2012

 

13,299

 

 

-

 

Preferred non-cumulative non-voting stock, Series G, 6,982 shares issued and outstanding at September 30, 2013 and no shares authorized, issued or outstanding at December 31, 2012

 

698

 

 

-

 

Common stock, $.01 par value, authorized 8,000,000 shares at September 30, 2013 and December 31, 2012; issued 6,249,442 shares at September 30, 2013 and 2,013,942 shares at December 31, 2012; outstanding 6,145,451 shares at September 30, 2013 and 1,917,422 shares at December 31, 2012

 

62

 

 

20

 

Preferred stock discount

 

-

 

 

(598

)

Additional paid-in capital

 

21,785

 

 

10,095

 

Accumulated deficit

 

(9,027

)

 

(7,988

)

Accumulated other comprehensive income, net of taxes of $400 at September 30, 2013 and December 31, 2012

 

96

 

 

318

 

Treasury stock-at cost, 103,991 shares at September 30, 2013 and 96,520 shares at December 31, 2012

 

(1,329

)

 

(1,234

)

Total stockholders’ equity

 

25,584

 

 

18,007

 

Total liabilities and stockholders’ equity

 

$

345,671

 

 

$

373,693

 

 

See accompanying notes to unaudited consolidated financial statements.

 

1



Table of Contents

 

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARIES

Consolidated Statements of Operations and Comprehensive Income (Loss)

(Unaudited)

 

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

 

2013

 

2012

 

2013

 

2012

 

 

(In thousands, except per share)

Interest income:

 

 

 

 

 

 

 

 

 

 

 

 

Interest and fees on loans receivable

 

$

3,637

 

 

$

4,595

 

 

$

11,420

 

 

$

14,955

 

Interest on mortgage backed and other securities

 

71

 

 

109

 

 

240

 

 

392

 

Other interest income

 

103

 

 

19

 

 

237

 

 

55

 

Total interest income

 

3,811

 

 

4,723

 

 

11,897

 

 

15,402

 

Interest expense:

 

 

 

 

 

 

 

 

 

 

 

 

Interest on deposits

 

522

 

 

707

 

 

1,728

 

 

2,562

 

Interest on borrowings

 

651

 

 

789

 

 

2,075

 

 

2,437

 

Total interest expense

 

1,173

 

 

1,496

 

 

3,803

 

 

4,999

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income before provision for loan losses

 

2,638

 

 

3,227

 

 

8,094

 

 

10,403

 

Provision for loan losses

 

414

 

 

129

 

 

414

 

 

1,190

 

Net interest income after provision for loan losses

 

2,224

 

 

3,098

 

 

7,680

 

 

9,213

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-interest income:

 

 

 

 

 

 

 

 

 

 

 

 

Service charges

 

132

 

 

149

 

 

403

 

 

440

 

Loan servicing fees, net

 

8

 

 

(6

)

 

18

 

 

(168

)

Net gains (losses) on sales of loans

 

-

 

 

(280

)

 

97

 

 

(280

)

Net gains (losses) on sales of REO

 

(8

)

 

(107

)

 

(10

)

 

288

 

Gain on sale of office properties and equipment

 

-

 

 

-

 

 

-

 

 

2,523

 

Gain on sale of securities

 

-

 

 

-

 

 

-

 

 

50

 

Gain on restructuring of debt

 

1,221

 

 

-

 

 

1,221

 

 

-

 

Other

 

14

 

 

27

 

 

113

 

 

77

 

Total non-interest income

 

1,367

 

 

(217

)

 

1,842

 

 

2,930

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-interest expense:

 

 

 

 

 

 

 

 

 

 

 

 

Compensation and benefits

 

1,479

 

 

1,534

 

 

4,428

 

 

4,661

 

Occupancy expense, net

 

269

 

 

358

 

 

932

 

 

942

 

Information services

 

213

 

 

212

 

 

636

 

 

664

 

Professional services

 

225

 

 

246

 

 

558

 

 

530

 

Provision for (recapture of) losses on loans held for sale

 

(315

)

 

(267

)

 

153

 

 

(81

)

Provision for losses on REO

 

321

 

 

427

 

 

544

 

 

739

 

FDIC insurance

 

181

 

 

229

 

 

573

 

 

662

 

Office services and supplies

 

91

 

 

113

 

 

312

 

 

330

 

Other

 

543

 

 

640

 

 

1,640

 

 

1,609

 

Total non-interest expense

 

3,007

 

 

3,492

 

 

9,776

 

 

10,056

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) before income taxes

 

584

 

 

(611

)

 

(254

)

 

2,087

 

Income tax expense

 

-

 

 

2

 

 

6

 

 

849

 

Net income (loss)

 

$

584

 

 

$

(613

)

 

$

(260

)

 

$

1,238

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gain (loss) on securities available for sale

 

$

(76

)

 

$

7

 

 

$

(222

)

 

$

(72

)

Reclassification of net gains included in net income

 

-

 

 

-

 

 

-

 

 

(50

)

Income tax effect

 

-

 

 

-

 

 

-

 

 

-

 

Other comprehensive income (loss), net of tax

 

(76

)

 

7

 

 

(222

)

 

(122

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income (loss)

 

$

508

 

 

$

(606

)

 

$

(482

)

 

$

1,116

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

584

 

 

$

(613

)

 

$

(260

)

 

$

1,238

 

Dividends and discount accretion on preferred stock

 

(127

)

 

(287

)

 

(779

)

 

(858

)

Income (loss) available to common stockholders

 

$

457

 

 

$

(900

)

 

$

(1,039

)

 

$

380

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings (loss) per common share-basic

 

$

0.05

 

 

$

(0.48

)

 

$

(0.23

)

 

$

0.21

 

Earnings (loss) per common share-diluted

 

$

0.05

 

 

$

(0.48

)

 

$

(0.23

)

 

$

0.21

 

Dividends declared per share-common stock

 

$

0.00

 

 

$

0.00

 

 

$

0.00

 

 

$

0.00

 

 

See accompanying notes to unaudited consolidated financial statements.

 

2



Table of Contents

 

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(Unaudited)

 

 

 

Nine Months Ended September 30,

 

 

2013

 

2012

 

 

(In thousands)

Cash flows from operating activities:

 

 

 

 

 

 

Net income (loss)

 

$

(260

)

 

$

1,238

 

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

 

 

 

 

 

 

Provision for loan losses

 

414

 

 

1,190

 

Provision for (recapture of) losses on loans receivable held for sale

 

153

 

 

(81

)

Provision for losses on REO

 

544

 

 

739

 

Depreciation

 

161

 

 

249

 

Net amortization of deferred loan origination costs

 

149

 

 

115

 

Net amortization of premiums on mortgage-backed securities

 

28

 

 

44

 

Amortization of investment in affordable housing limited partnership

 

164

 

 

126

 

Stock-based compensation expense

 

33

 

 

60

 

Earnings on bank owned life insurance

 

(51

)

 

(60

)

Net (gains) losses on sales of REO

 

10

 

 

(288

)

Net (gains) losses on sales of loans

 

(97

)

 

280

 

Gain on sale of office properties and equipment

 

-

 

 

(2,523

)

Gain on sale of securities

 

-

 

 

(50

)

Gain on restructuring of debt

 

(1,221

)

 

-

 

Net change in accrued interest receivable

 

134

 

 

303

 

Net change in deferred tax assets

 

-

 

 

850

 

Net change in other assets

 

955

 

 

(4

)

Net change in accrued interest payable

 

489

 

 

535

 

Net change in other liabilities

 

(9

)

 

638

 

Net cash provided by operating activities

 

1,596

 

 

3,361

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

Net change in loans receivable held for investment

 

(2,041

)

 

35,096

 

Proceeds from sales of loans receivable held for sale

 

15,502

 

 

1,486

 

Principal repayments on loans receivable held for sale

 

1,520

 

 

366

 

Available-for-sale securities:

 

 

 

 

 

 

Sales

 

-

 

 

1,050

 

Maturities, prepayments and calls

 

2,980

 

 

3,229

 

Proceeds from sales of REO

 

3,583

 

 

7,750

 

Investment in affordable housing limited partnership

 

-

 

 

(350

)

Net (purchase) redemption of Federal Home Loan Bank stock

 

(212

)

 

188

 

Proceeds from sale of office properties and equipment

 

-

 

 

4,237

 

Additions to office properties and equipment

 

(232

)

 

(9

)

Net cash provided by investing activities

 

21,100

 

 

53,043

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

Net change in deposits

 

(38,502

)

 

(31,878

)

Proceeds from FHLB advances

 

36,000

 

 

17,000

 

Repayments on FHLB advances

 

(28,000

)

 

(17,000

)

Net proceeds from issuance of common stock

 

3,347

 

 

-

 

Reissuance of treasury stock

 

-

 

 

150

 

Net change in advance payments by borrowers for taxes and insurance

 

323

 

 

272

 

Net cash used in financing activities

 

(26,832

)

 

(31,456

)

 

 

 

 

 

 

 

Net change in cash and cash equivalents

 

(4,136

)

 

24,948

 

Cash and cash equivalents at beginning of period

 

64,360

 

 

31,597

 

Cash and cash equivalents at end of period

 

$

60,224

 

 

$

56,545

 

 

 

 

 

 

 

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

 

Cash paid for interest

 

$

3,314

 

 

$

4,464

 

Cash paid for income taxes

 

$

4

 

 

$

-

 

Supplemental disclosures of non-cash investing and financing activities:

 

 

 

 

 

 

Transfers of loans receivable held for investment to REO

 

$

1,832

 

 

$

3,461

 

Transfers of loans receivable held for sale to REO

 

$

753

 

 

$

333

 

Transfers of loans receivable from held for investment to held for sale

 

$

7,259

 

 

$

616

 

Transfers of loans receivable from held for sale to held for investment

 

$

7,394

 

 

$

-

 

Exchange of other borrowings to equity

 

$

2,575

 

 

$

-

 

Exchange of dividends payable to equity

 

$

2,646

 

 

$

-

 

Transfer of accrued interest to other borrowings

 

$

535

 

 

$

-

 

 

See accompanying notes to unaudited consolidated financial statements.

 

3



Table of Contents

 

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

September 30, 2013

 

NOTE (1) – Basis of Financial Statement Presentation

 

The accompanying unaudited consolidated financial statements include Broadway Financial Corporation (the “Company”) and its wholly owned subsidiary, Broadway Federal Bank, f.s.b. (the “Bank”).  Also included in the unaudited consolidated financial statements is Broadway Service Corporation, a wholly owned subsidiary of the Bank.  All significant intercompany balances and transactions have been eliminated in consolidation.

 

The unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions for quarterly reports on Form 10-Q.  These unaudited consolidated financial statements do not include all disclosures associated with the Company’s consolidated annual financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2012 and, accordingly, should be read in conjunction with such audited consolidated financial statements.  In the opinion of management, all adjustments (all of which are normal and recurring in nature) considered necessary for a fair presentation have been included.  Operating results for the three and nine months ended September 30, 2013 are not necessarily indicative of the results that may be expected for the year ending December 31, 2013.

 

Some items in the consolidated financial statements for the prior period were reclassified to conform to the current presentation.  Reclassifications had no effect on prior period consolidated net earnings or stockholders’ equity.

 

Recent Accounting Pronouncements

 

FASB ASU No. 2013-11, “Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists.” The provisions of ASU No. 2013-11 require an entity to present an unrecognized tax benefit, or portion thereof, in the statement of financial position as a reduction to a deferred tax asset for a net operating loss carryforward or a tax credit carryforward, with certain exceptions related to availability. ASU No. 2013-11 is effective for interim and annual reporting periods beginning after December 15, 2013. The adoption of ASU No. 2013-11 is not expected to have a material impact on the Company’s consolidated financial statements.

 

NOTE (2) Going Concern, Regulatory Matters and Recapitalization of the Company

 

Going Concern

 

The Company’s financial statements have been prepared assuming that the Company will continue as a going-concern, which contemplates continuity of operations, and realization of assets and liquidation of liabilities in the ordinary course of business.  The ability of the Company to continue as a going concern is dependent on many factors, including regulatory actions. The following discussion describes matters that raise substantial doubt about the Company’s ability to continue as a going concern, as well as management’s plans for responding to these matters.

 

Holding Company Liquidity

 

The Company has limited liquidity to pay operating expenses over an extended period of time and will need to raise additional capital within the next 12 to 18 months to continue paying operating expenses, including allocations of shared expenses from the Bank, on a timely basis.  Additionally, the Company stopped paying interest expense on its $6.0 million aggregate principal amount of Floating Rate Junior Subordinated Debentures (the “Debentures”) in September 2010 and does not have sufficient capital to repay the Debentures when they mature on March 17, 2014.  Also, the Company had to restructure its $5.0 million senior line of credit, payable to another financial institution (see Note 7).  This restructuring was completed as part of the Company’s recapitalization that closed on August 22, 2013.  Pursuant to that restructuring the Company exchanged $2.6 million of common stock equivalents for $2.6 million principal amount of the line of credit and the lender forgave all of the $1.8 million of accrued interest on the entire amount of the line of credit as of the closing of the recapitalization.  The Company must obtain approval from the Federal Reserve Bank of San Francisco (the “FRB”) before making principal or interest payments on the remaining $2.4 million principal amount of the modified senior loan.  The Company has received approval from the FRB to make the first payment of interest only due in November 2013 (see Note 7).

 

The Company’s principal sources of funds have historically been dividends from the Bank and, to a lesser extent, additional capital from investors.  At the current time the Bank cannot pay dividends to the Company because of its recent operating losses and because of limitations in a Consent Order the Bank entered into with the Office of the Comptroller of the Currency (“OCC”) on October 30, 2013.  Management does not anticipate that the Bank will receive approval to pay dividends for at least the next several quarters.  Accordingly, the Company will not be able to meet its payment obligations on its debt noted above within the foreseeable future unless the Company is able to secure new capital.

 

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Table of Contents

 

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

September 30, 2013

 

Regulatory Matters

 

As a result of significant deficiencies in the Company’s and the Bank’s operations noted in a regulatory examination in early 2010, the Company and the Bank were declared to be in “troubled condition” and entered into cease and desist orders (the “Orders”) issued by the OCC’s regulatory predecessor effective September 9, 2010, requiring, among other things, that the Company and the Bank take remedial actions to improve the Bank’s loan underwriting and internal asset review procedures, to reduce the amount of its non-performing assets and to improve other aspects of the Bank’s business, as well as the Company’s management of its business and the oversight of the Company’s business by the Board of Directors.  Effective October 30, 2013, the Order for the Bank was superseded by a Consent Order entered into by the Bank and the OCC.  As part of the Consent Order, the Bank is required to attain, and thereafter maintain, a Tier 1 (Core) Capital to Adjusted Total Assets ratio of at least 9% and a Total Risk-Based Capital to Risk-Weighted Assets ratio of at least 13%, both of which ratios are greater than the respective 4% and 8% levels for such ratios that are generally required under OCC regulations.  The Bank’s regulatory capital exceeded both of these higher capital ratios at September 30, 2013 (see Note 10).

 

Additionally, the Consent Order issued by the OCC imposes certain other requirements on the Bank.  These requirements include the following, among others:

 

·

The Bank must create a Compliance Committee consisting of at least three independent Directors to monitor compliance with the Consent Order, among other matters.

·

The Board of the Bank must prepare and submit a Strategic Plan and a Capital Plan that is consistent with the Strategic Plan. The Capital Plan requirement includes requirements regarding targeted capital ratios and prior approval requirements for the payment of dividends, both of which are mentioned above.

·

The Bank must implement an enhanced set of business operational and corporate governance processes, as well as create a commercial real estate concentration risk management program and a written program to reduce the level of assets considered doubtful, substandard or special mention. This latter program requirement includes requirements to monitor the levels of such assets on an ongoing basis and prepare and implement corrective actions as deemed necessary.

·

The Bank must also implement an independent ongoing loan review system and adopt new policies with respect to maintaining an adequate allowance for loan and lease losses (“ALLL”).

 

The Consent Order does not include certain restrictions on the Bank that had been imposed by the Order, such as the specific limitation on the Bank’s ability to increase its assets during any quarter or certain limitations on employment agreements and compensation arrangements.  Management believes that the Order issued to the Company, which has been administered by the FRB since July 2012, remains in effect.  This Order imposes limitations and restriction on several matters, including the following:

 

·

The Company may not declare or pay any dividends or make any other capital distributions without the prior written approval of the FRB.

·

The Company may not make any changes in its directors or senior executive officers without prior notice to and receipt of notice of non-objection from the FRB.

·

The Company is subject to limitations on severance and indemnification payments and on entering into or amending employment agreements and compensation arrangements, and on the payment of bonuses to Bank directors and officers.

·

The Company may not incur, issue, renew, repurchase, make payments on or increase any debt or redeem any capital stock without prior notice to and receipt of written notice of non-objection from the FRB.

 

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Table of Contents

 

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (continued)

September 30, 2013

 

Recapitalization of the Company

 

Management’s plan to address the conditions described above has consisted of completing a recapitalization of the Company and then raising additional equity capital for the Company and negotiating an extension of the maturity of the Debentures.  The Company completed the recapitalization on August 22, 2013, which improved the Company’s liquidity and capital structure, and enhanced the Bank’s capital ratios as described below.  The Company’s ability to continue as a going concern is dependent on the timely implementation and success of these next steps: raising more capital and extending the maturity of the Debentures.  There can be no assurance that management’s plan will be achieved.

 

The recapitalization strengthened and simplified the Company’s capital structure through completion of the following transactions:

 

(1)          The issuance of 8,776 shares of Series F Non-cumulative Voting Preferred Stock (the “Common Stock Equivalents”) in exchange for the five series of the Company’s formerly outstanding preferred stock with an aggregate liquidation value or preference of $17.6 million, including the TARP Preferred Stock that was issued to the Treasury Department pursuant to the Capital Purchase Program component of the Treasury Department’s Troubled Asset Relief Program, which the parties agreed to value at $8.8 million based on the price at which shares of the Common Stock were sold in the Subscription Offering referred to below;

 

(2)          The issuance of 2,646 shares of Common Stock Equivalents in exchange for all of the accumulated dividends on the TARP Preferred Stock, totaling $2.6 million as of the date of the exchange;

 

(3)          The issuance of 2,575 shares of Common Stock Equivalents in exchange for $2.6 million principal amount of the Company’s bank debt (the “Debt Exchange”);

 

(4)          The modification of the terms of the remaining $2.4 million principal amount of the senior line of credit to, among other matters, extend the maturity and eliminate the default rate;

 

(5)          The forgiveness of the $1.8 million of accrued interest on the entire amount of the Company’s bank debt as of the date of the exchange;

 

(6)          The exchange of 698 shares of Common Stock Equivalents issued in the Debt Exchange for 6,982 shares of Series G Non-Voting Preferred Stock; and

 

(7)          The issuance of 4,235,500 shares of Common Stock in private sales (the “Subscription Offering”) at a price of $1.00 per share, yielding $4.2 million in gross proceeds. Of the $4.2 million in gross proceeds, $1.2 million were used to invest additional capital into the Bank and to repay all of the inter-company payables due to the Bank from the Company.  As a result, the Bank’s capital ratios increased on a pro forma basis as of June 30, 2013 from 9.48% to 9.75% for Tier 1 Capital, from 14.98% to 15.51% for Tier 1 Risk Based Capital and from 16.27% to16.80% for Total Risk Based Capital.

 

The Common Stock Equivalents are a new series of preferred stock of the Company that will automatically convert into shares of the Company’s common stock, at the rate of 1,000 shares of common stock for each of the shares of Common Stock Equivalents upon stockholder approval of an amendment to the Company’s certificate of incorporation increasing the number of shares of common stock the Company is authorized to issue so as to permit such conversion.  The Series G Non-Voting Preferred Stock will automatically convert into shares of non-voting common stock of the Company upon approval by the stockholders of an amendment of the Company’s certificate of incorporation authorizing the Company to issue non-voting common stock.  The board of directors of the Company will present the amendments required to effect such conversions at the Company’s Annual Meeting of Stockholders, which will be held on November 27, 2013.  Management believes that the conversions will improve the Company’s ability to raise additional capital.

 

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Table of Contents

 

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (continued)

September 30, 2013

 

NOTE (3) Earnings (Loss) Per Share of Common Stock

 

Basic earnings (loss) per share of common stock is computed by dividing income (loss) available to common stockholders by the weighted average number of shares of common stock outstanding for the period.  Diluted earnings (loss) per share of common stock is computed by dividing income (loss) available to common stockholders by the weighted average number of shares of common stock outstanding for the period, increased for the dilutive effect of common stock equivalents, except for the Common Stock Equivalents (defined in Note 2) and Series G Non-Voting Preferred Stock, which are both described as participating securities in the table below.  The participating securities are entitled to share in common stock dividends on an as-converted basis.

 

The following table shows how the Company computed basic and diluted earnings (loss) per share of common stock for the three and nine months ended September 30, 2013 and 2012:

 

 

 

For the three months ended
September 30,

 

For the nine months ended
September 30,

 

 

2013

 

2012

 

2013

 

2012

 

 

(Dollars in thousands, except per share)

Basic

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

584

 

 

$

(613

)

 

$

(260

)

 

$

1,238

 

Less: Preferred stock dividends and accretion

 

(127

)

 

(287

)

 

(779

)

 

(858

)

Less: Net income (loss) attributable to participating securities

 

(283

)

 

-

 

 

465

 

 

-

 

Income (loss) available to common stockholders

 

$

174

 

 

$

(900

)

 

$

(574

)

 

$

380

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding

 

3,755,695

 

 

1,858,697

 

 

2,536,913

 

 

1,782,887

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings (loss) per common share - basic

 

$

0.05

 

 

$

(0.48

)

 

$

(0.23

)

 

$

0.21

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

584

 

 

$

(613

)

 

$

(260

)

 

$

1,238

 

Less: Preferred stock dividends and accretion

 

(127

)

 

(287

)

 

(779

)

 

(858

)

Less: Net income (loss) attributable to participating securities

 

(283

)

 

-

 

 

465

 

 

-

 

Income (loss) available to common stockholders

 

$

174

 

 

$

(900

)

 

$

(574

)

 

$

380

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding

 

3,755,695

 

 

1,858,697

 

 

2,536,913

 

 

1,782,887

 

Add: dilutive effects of assumed exercises of stock options

 

-

 

 

-

 

 

-

 

 

-

 

Weighted average common shares - fully diluted

 

3,755,695

 

 

1,858,697

 

 

2,536,913

 

 

1,782,887

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings (loss) per common share - diluted

 

$

0.05

 

 

$

(0.48

)

 

$

(0.23

)

 

$

0.21

 

 

Stock options for 148,750 shares of common stock for the three and nine months ended September 30, 2013 and 227,075 shares of common stock for the three and nine months ended September 30, 2012 were not considered in computing diluted loss per common share because they were anti-dilutive.

 

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Table of Contents

 

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (continued)

September 30, 2013

 

NOTE (4) Securities

 

The following table summarizes the amortized cost and fair value of the available-for-sale investment securities portfolios at September 30, 2013 and December 31, 2012 and the corresponding amounts of unrealized gains which are recognized in accumulated other comprehensive income (loss):

 

 

 

Amortized Cost

 

Gross
Unrealized
Gains

 

Gross
Unrealized
Losses

 

Fair Value

 

 

(In thousands)

September 30, 2013:

 

 

 

 

 

 

 

 

 

 

 

 

Residential mortgage-backed

 

$

9,652

 

 

$

496

 

 

$

-

 

 

$

10,148

 

Total available-for-sale securities

 

$

9,652

 

 

$

496

 

 

$

-

 

 

$

10,148

 

December 31, 2012:

 

 

 

 

 

 

 

 

 

 

 

 

Residential mortgage-backed

 

$

12,660

 

 

$

718

 

 

$

-

 

 

$

13,378

 

Total available-for-sale securities

 

$

12,660

 

 

$

718

 

 

$

-

 

 

$

13,378

 

 

There were no securities with unrealized losses at September 30, 2013 and December 31, 2012.  At September 30, 2013, the Bank’s investment portfolio consisted of residential mortgage-backed securities with an estimated remaining life of 5.4 years.  Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties.

 

At September 30, 2013 and December 31, 2012, securities pledged to secure public deposits and FHLB advances had a carrying amount of $10.1 million and $1.5 million, respectively.  At September 30, 2013 and December 31, 2012, there were no holdings of securities of any one issuer, other than the U.S. Government and its agencies, in an amount greater than 10% of stockholders’ equity.  There were no sales of securities during the nine months ended September 30, 2013.  During the nine months ended September 30, 2012, $1.0 million of U.S federal agency bonds were sold and the Company recognized a gain of $50 thousand.

 

NOTE (5) Loans Receivable Held For Sale

 

Loans receivable held for sale totaled $1.1 million at June 30, 2013 and $19.1 million at December 31, 2012.

 

During the nine months ended September 30, 2013, certain loans held for investment were reclassified to loans receivable held for sale at the lower of cost or fair value, less estimated selling costs.  At the time of transfers, the carrying amount of these loans totaled $8.8 million, and required additional charge-offs of $1.5 million, which were reserved for at year-end 2012.

 

During the third quarter of 2013, management determined that certain loans held for sale were no longer to be marketed for sale and therefore, transferred such loans to held for investment at the lower of cost or fair value.  Loans transferred to held for investment totaled $7.4 million and consisted of $2.5 million in multi-family loans, $1.4 million in commercial real estate loans and $3.5 million in church loans.

 

Loans sold during the first nine months of 2013 totaled $15.5 million with a net gain of $97 thousand.  Additionally, a loan receivable held for sale secured by a church building was transferred to REO during the nine months ended September 30, 2013.

 

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Table of Contents

 

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (continued)

September 30, 2013

 

Loans sold during the first the nine months of 2012 totaled $1.8 million with a net loss of $280 thousand.  During the nine months ended September 30, 2012, two loans receivable held for sale were transferred to REO.  The loans were secured by commercial real estate properties, which had a total carrying amount of $333 thousand, net of charge-offs of $327 thousand.

 

NOTE (6)  Loans Receivable Held for Investment

 

Loans at September 30, 2013 and December 31, 2012 were as follows:

 

 

 

September 30, 2013

 

December 31, 2012

 

 

(In thousands)

Real estate:

 

 

 

 

 

 

One-to-four units

 

$

50,296

 

 

$

57,733

 

Five or more units

 

104,301

 

 

83,350

 

Commercial real estate

 

32,944

 

 

41,124

 

Church

 

70,720

 

 

76,254

 

Construction

 

434

 

 

735

 

Commercial:

 

 

 

 

 

 

Sports

 

1,423

 

 

1,711

 

Other

 

670

 

 

2,184

 

Consumer:

 

 

 

 

 

 

Other

 

36

 

 

35

 

Total gross loans receivable

 

260,824

 

 

263,126

 

Loans in process

 

(25

)

 

(74

)

Net deferred loan costs

 

784

 

 

557

 

Unamortized premium (discounts)

 

260

 

 

(17

)

Allowance for loan losses

 

(10,339

)

 

(11,869

)

Loans receivable, net

 

$

251,504

 

 

$

251,723

 

 

The following tables present the activity in the allowance for loan losses by portfolio segment for the three and nine months ended September 30, 2013 and 2012:

 

 

 

Three Months Ended September 30, 2013

 

 

 

One-to-
four units

 

Five or
more units

 

Commercial
real estate

 

Church

 

Construction

 

Commercial

 

Consumer

 

Total

 

 

 

(In thousands)

 

Beginning balance

 

  $

2,445

 

  $

1,169

 

  $

1,674

 

  $

5,060

 

  $

8

 

  $

213

 

  $

10

 

  $

10,579

 

Provision for loan losses

 

(315

)

351

 

72

 

523

 

(1

)

(213

)

(3

)

414

 

Recoveries

 

-

 

-

 

16

 

5

 

-

 

59

 

-

 

80

 

Loans charged off

 

(51

)

(3

)

(190

)

(490

)

-

 

-

 

-

 

(734

)

Ending balance

 

  $

2,079

 

  $

1,517

 

  $

1,572

 

  $

5,098

 

  $

7

 

  $

59

 

  $

7

 

  $

10,339

 

 

 

 

 

 

 

Nine Months Ended September 30, 2013

 

 

 

One-to-
four units

 

Five or
more units

 

Commercial
real estate

 

Church

 

Construction

 

Commercial

 

Consumer

 

Total

 

 

 

(In thousands)

 

Beginning balance

 

  $

2,060

 

  $

2,122

 

  $

2,685

 

  $

4,818

 

  $

8

 

  $

167

 

  $

9

 

  $

11,869

 

Provision for loan losses

 

(150

)

56

 

(96

)

929

 

(1

)

(322

)

(2

)

414

 

Recoveries

 

259

 

-

 

117

 

18

 

-

 

214

 

-

 

608

 

Loans charged off

 

(90

)

(661

)

(1,134

)

(667

)

-

 

-

 

-

 

(2,552

)

Ending balance

 

  $

2,079

 

  $

1,517

 

  $

1,572

 

  $

5,098

 

  $

7

 

  $

59

 

  $

7

 

  $

10,339

 

 

9



Table of Contents

 

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (continued)

September 30, 2013

 

 

 

Three Months Ended September 30, 2012

 

 

 

One-to-
four units

 

Five or
more units

 

Commercial
real estate

 

Church

 

Construction

 

Commercial

 

Consumer

 

Total

 

 

 

(In thousands)

 

Beginning balance

 

$

4,701

 

$

2,897

 

$

2,640

 

$

7,223

 

$

106

 

$

270

 

$

19

 

$

17,856

 

Provision for loan losses

 

453

 

(326

)

135

 

3

 

(1

)

(126

)

(9

)

129

 

Recoveries

 

-

 

1

 

15

 

3

 

-

 

97

 

3

 

119

 

Loans charged off

 

(539

)

(14

)

(346

)

(221

)

-

 

-

 

-

 

(1,120

)

Ending balance

 

$

4,615

 

$

2,558

 

$

2,444

 

$

7,008

 

$

105

 

$

241

 

$

13

 

$

16,984

 

 

 

 

 

 

 

Nine Months Ended September 30, 2012

 

 

 

One-to-
four units

 

Five or
more units

 

Commercial
real estate

 

Church

 

Construction

 

Commercial

 

Consumer

 

Total

 

 

 

(In thousands)

 

Beginning balance

 

$

4,855

 

$

2,972

 

$

3,108

 

$

5,742

 

$

249

 

$

316

 

$

57

 

$

17,299

 

Provision for loan losses

 

654

 

(401

)

(305

)

1,864

 

(144

)

(427

)

(51

)

1,190

 

Recoveries

 

-

 

1

 

45

 

10

 

-

 

352

 

7

 

415

 

Loans charged off

 

(894

)

(14

)

(404

)

(608

)

-

 

-

 

-

 

(1,920

)

Ending balance

 

$

4,615

 

$

2,558

 

$

2,444

 

$

7,008

 

$

105

 

$

241

 

$

13

 

$

16,984

 

 

The following tables present the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of September 30, 2013 and December 31, 2012:

 

 

 

September 30, 2013

 

 

 

One-to-
four units

 

Five or
more units

 

Commercial
real estate

 

Church

 

Construction

 

Commercial

 

Consumer

 

Total

 

 

 

(In thousands)

 

Allowance for loan losses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending allowance balance attributable to loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

Individually evaluated for impairment

 

  $

508

 

$

147

 

$

293

 

$

1,486

 

$

-

 

$

16

 

$

-

 

$

2,450

 

Collectively evaluated for impairment

 

1,571

 

1,370

 

1,279

 

3,612

 

7

 

43

 

7

 

7,889

 

Total ending allowance balance

 

  $

2,079

 

$

1,517

 

$

1,572

 

$

5,098

 

$

7

 

$

59

 

$

7

 

$

10,339

 

Loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans individually evaluated for impairment

 

  $

3,674

 

$

4,226

 

$

7,936

 

$

22,552

 

$

-

 

$

162

 

$

-

 

$

38,550

 

Loans collectively evaluated for impairment

 

46,622

 

100,075

 

25,008

 

48,168

 

434

 

1,931

 

36

 

222,274

 

Total ending loans balance

 

  $

50,296

 

$

104,301

 

$

32,944

 

$

70,720

 

$

434

 

$

2,093

 

$

36

 

$

260,824

 

 

10



Table of Contents

 

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (continued)

September 30, 2013

 

 

 

December 31, 2012

 

 

 

One-to-
four units

 

Five or
more units

 

Commercial
real estate

 

Church

 

Construction

 

Commercial

 

Consumer

 

Total

 

 

 

(In thousands)

 

Allowance for loan losses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending allowance balance attributable to loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Individually evaluated for impairment

 

$

719

 

$

125

 

$

543

 

$

1,276

 

$

-

 

$

69

 

$

-

 

$

2,732

 

Collectively evaluated for impairment

 

1,341

 

1,997

 

2,142

 

3,542

 

8

 

98

 

9

 

9,137

 

Total ending allowance balance

 

$

2,060

 

$

2,122

 

$

2,685

 

$

4,818

 

$

8

 

$

167

 

$

9

 

$

11,869

 

Loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans individually evaluated for impairment

 

$

4,576

 

$

3,766

 

$

10,364

 

$

25,328

 

$

273

 

$

69

 

$

-

 

$

44,376

 

Loans collectively evaluated for impairment

 

53,157

 

79,584

 

30,760

 

50,926

 

462

 

3,826

 

35

 

218,750

 

Total ending loans balance

 

$

57,733

 

$

83,350

 

$

41,124

 

$

76,254

 

$

735

 

$

3,895

 

$

35

 

$

263,126

 

 

The following table presents information related to loans individually evaluated for impairment by type of loans as of September 30, 2013 and December 31, 2012:

 

 

 

September 30, 2013

 

December 31, 2012

 

 

 

Unpaid
Principal
Balance

 

Recorded
Investment

 

Allowance
for Loan
Losses
Allocated

 

Unpaid
Principal
Balance

 

Recorded
Investment

 

Allowance
for Loan
Losses
Allocated

 

 

 

(In thousands)

 

With no related allowance recorded:

 

 

 

 

 

 

 

 

 

 

 

 

 

One-to-four units

 

$

2,348   

 

$

1,694   

 

$

-   

 

$

1,986   

 

$

1,484   

 

$

-   

 

Five or more units

 

2,703

 

2,647

 

-

 

2,038

 

1,819

 

-

 

Commercial real estate

 

4,869

 

1,451

 

-

 

10,184

 

6,423

 

-

 

Church

 

12,938

 

9,695

 

-

 

18,664

 

15,689

 

-

 

Construction

 

-

 

-

 

-

 

279

 

273

 

-

 

Commercial:

 

 

 

 

 

 

 

 

 

 

 

 

 

Sports

 

3,850

 

-

 

-

 

3,888

 

-

 

-

 

With an allowance recorded:

 

 

 

 

 

 

 

 

 

 

 

 

 

One-to-four units

 

1,980

 

1,980

 

508

 

3,092

 

3,092

 

719

 

Five or more units

 

1,586

 

1,579

 

147

 

1,947

 

1,947

 

125

 

Commercial real estate

 

6,491

 

6,485

 

293

 

3,941

 

3,941

 

543

 

Church

 

12,911

 

12,857

 

1,486

 

9,677

 

9,639

 

1,276

 

Commercial:

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

162

 

162

 

16

 

69

 

69

 

69

 

Total

 

$

49,838   

 

$

38,550   

 

$

2,450   

 

$

55,765   

 

$

44,376   

 

$

2,732   

 

 

The recorded investment in loans excludes accrued interest receivable and loan origination fees, net due to immateriality.  For purposes of this disclosure, the unpaid principal balance is not reduced for net charge-offs.

 

11



Table of Contents

 

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (continued)

September 30, 2013

 

The following tables present the monthly average of loans individually evaluated for impairment by type of loans and the related interest income for the three and nine months ended September 30, 2013 and 2012.

 

 

 

Three Months Ended
September 30, 2013

 

Nine Months Ended
September 30, 2013

 

 

 

Average
Recorded
Investment

 

Cash Basis
Interest
Income
Recognized

 

Average
Recorded
Investment

 

Cash Basis
Interest
Income
Recognized

 

 

 

(In thousands)

 

One-to-four units

 

$

3,699

 

 

$

30

 

 

$

3,822

 

 

$

91

 

 

Five or more units

 

3,347

 

 

15

 

 

3,215

 

 

55

 

 

Commercial real estate

 

6,986

 

 

182

 

 

7,778

 

 

405

 

 

Church

 

22,472

 

 

131

 

 

23,027

 

 

407

 

 

Construction

 

-

 

 

-

 

 

81

 

 

5

 

 

Commercial:

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

165

 

 

2

 

 

156

 

 

8

 

 

Total

 

$

36,669

 

 

$

360

 

 

$

38,079

 

 

$

971

 

 

 

 

 

Three Months Ended
September 30, 2012

 

Nine Months Ended
September 30, 2012

 

 

 

Average
Recorded
Investment

 

Cash Basis
Interest
Income
Recognized

 

Average
Recorded
Investment

 

Cash Basis
Interest
Income
Recognized

 

 

 

(In thousands)

 

One-to-four units

 

$

14,143

 

 

$

120

 

 

$

13,844

 

 

$

354

 

 

Five or more units

 

2,266

 

 

10

 

 

3,047

 

 

50

 

 

Commercial real estate

 

8,251

 

 

115

 

 

7,847

 

 

260

 

 

Church

 

31,094

 

 

237

 

 

31,709

 

 

834

 

 

Construction

 

288

 

 

3

 

 

294

 

 

12

 

 

Commercial:

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

70

 

 

2

 

 

70

 

 

4

 

 

Total

 

$

56,112

 

 

$

487

 

 

$

56,811