UNITED STATES
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 June 30, 2002
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE 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 or other jurisdiction of incorporation or
(IRS Employer Identification No.)organization)
4800 Wilshire Boulevard, Los Angeles, California 90010
(Address of principal executive offices)
(323) 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: 904,738 shares of the Company's
Common Stock, par value $0.01 per share, were issued and outstanding as of July
31, 2002.
Transitional Small Business Disclosure Format (Check one):
Yes [ ] No [x]
1
INDEX
Page
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets (unaudited)
as of June 30, 2002 and December 31, 2001 3
Consolidated Statements of Operations
and Comprehensive Earnings (unaudited)
for the three months and six months ended June 30,
2002 and June 30, 2001 4
Consolidated Statements of Cash Flows
(unaudited) for the six months ended
June 30, 2002 and June 30, 2001 5
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 2. Changes in Securities 14
Item 3. Defaults Upon Senior Securities 14
Item 4. Submission of Matters to a Vote of
Security Holders 14
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
2
BROADWAY FINANCIAL CORPORATION
AND SUBSIDIARIES
Consolidated Balance Sheets
(Dollars in thousands, except share amounts)
(Unaudited)
June 30, December 31,
2002 2001
Assets:
Cash $ 4,317 $ 2,639
Fed funds sold 500 2,600
Interest bearing deposits 3,002 5,028
Investment securities held to maturity 2,000 -
Investment securities available for sale 8,669 4,604
Mortgage-backed securities held to maturity 13,650 13,931
Loans receivable, net 134,086 133,937
Loans receivable held for sale, at lower of cost or fair value 4,311 7,362
Accrued interest receivable 935 943
Real estate acquired through foreclosure, net 107 -
Federal Home Loan Bank Stock, at cost 1,439 1,399
Office properties and equipment, net 5,903 6,001
Other assets 488 457
Total assets $ 179,407 $ 178,901
Liabilities and stockholders' equity
Deposits $ 150,981 $ 151,156
Advances from Federal Home Loan Bank 10,750 11,000
Advance payments by borrowers for taxes and insurance 262 224
Deferred income taxes 572 556
Other liabilities 1,689 1,337
Total liabilities 164,254 164,273
Stockholders' Equity:
Preferred non-convertible, non-cumulative, and non-voting stock, $.01
par value, authorized 1,000,000 shares; issued and outstanding 55,199
shares at June 30,2002 and December 31, 2001 1 1
Common stock, $.01 par value, authorized 3,000,000 shares; issued
and outstanding 904,738 shares at June 30, 2002 and 910,538 shares at
December 31, 2001. 10 10
Additional paid-in capital 9,494 9,481
Accumulated other comprehensive earnings, net of taxes 24 2
Retained earnings-substantially restricted 6,350 5,804
Treasury stock-at cost, 56,997 shares at June 30, 2002 and 51,197
shares at December 31, 2001 (553) (469)
Unearned Employee Stock Ownership Plan shares (173) (201)
Total stockholders' equity 15,153 14,628
Total liabilities and stockholders' equity $ 179,407 $ 178,901
See Notes to Consolidated Financial Statements
3
BROADWAY FINANCIAL CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Operations and Comprehensive Earnings
(Dollars in thousands, except per share amounts)
(Unaudited)
Three Months ended June 30, Six Months ended June 30,
2002 2001 2002 2001
Interest on loans receivable $ 2,753 $ 2,860 $ 5,576 $ 5,595
Interest on investment securities held to maturity 21 42 26 137
Interest on investment securities available for sale 56 36 96 36
Interest on mortgage-backed securities 202 175 404 345
Other interest income 63 192 152 426
Total interest income 3,095 3,305 6,254 6,539
Interest on deposits 966 1,475 2,013 2,965
Interest on borrowings 122 146 251 312
Total interest expense 1,088 1,621 2,264 3,277
Net interest income before provision for loan losses 2,007 1,684 3,990 3,262
Provision for loan losses - 45 - 75
Net interest income after provision for loan losses 2,007 1,639 3,990 3,187
Noninterest income:
Service charges 211 175 432 320
Gain on loans receivable held for sale 1 - - -
Other 18 23 33 52
Total noninterest income 230 198 465 372
Noninterest expense:
Compensation and benefits 876 807 1,804 1,638
Occupancy expense, net 343 309 645 563
Advertising and promotional expense 41 37 61 87
Professional services 106 72 199 113
Real estate operations, net (5) - (5) -
Contracted security services 42 41 82 80
Telephone and postage 32 58 77 114
Stationary, printing and supplies 28 30 59 54
Other 241 227 446 339
Total noninterest expense 1,704 1,581 3,368 2,988
Earnings before income taxes 533 256 1,087 571
Income taxes 211 100 439 234
Net earnings 322 156 648 337
Other comprehensive income (loss):
Unrealized income (loss) on securties available for sale 47 (5) 37 (5)
Income tax (expenses) benefits (20) 2 (15) 2
Other comprehensive income (loss) 27 (3) 22 (3)
Comprehensive earnings $ 349 $ 153 $ 670 $ 334
Net earnings $ 322 $ 156 $ 648 $ 337
Dividends paid on preferred stock (7) (7) (14) (14)
Earnings available to common shareholders $ 315 $ 149 $ 634 $ 323
Earnings per share-basic 0.35 0.17 0.71 0.37
Earnings per share-diluted 0.35 0.17 0.70 0.37
Dividend declared per share-common stock 0.05 0.05 0.10 0.10
Basic weighted average shares outstanding 890,284 876,349 890,722 875,538
Diluted weighted average shares outstanding 902,858 876,349 902,077 875,538
See Notes to Consolidated Financial Statements
4
BROADWAY FINANCIAL CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Dollars in thousands)
(Unaudited)
Six months ended June 30,
2002 2001
Cash flows from operating activities
Net earnings $ 648 $ 337
Adjustments to reconcile net earnings to net cash provided by
(used in) operating activities:
Depreciation 216 185
Amortization of premiums and discounts on loans purchased (110) 2
Amortization of net deferred loan origination fees (175) 40
Amortization of discounts and premium on investment securities
and mortgage-backed securities 83 (2)
Amortization of deferred compensation 42 31
Gain on sale of securities available for sale (5) -
Loss (gain) on disposal of fixed assets 63 (15)
Provision for loan losses - 75
Loans originated for sale (557) (126)
Proceeds from sale of loans receivable held for sale 645 185
Purchases of loans held for sale - (8,001)
Principal repayment on loans held for sale 2,963 1,106
Changes in operating assets and liabilities:
Accrued interest receivable 8 76
Other assets (31) 186
Accrual for branch closure - 50
Deferred income taxes - (2)
Other liabilities 352 (466)
Total adjustments 3,494 (6,676)
Net cash provided by (used in) operating activities 4,142 (6,339)
Cash flows from investing activities
Loans originated, net of refinances (12,002) (11,177)
Principal repayment on loans 12,031 7,882
Purchases of investment securities held-to-maturity (2,000) (2,000)
Purchases of mortgage-backed securities held-to-maturity (2,093) (1,323)
Purchases of securities available for sale (8,028) (4,600)
Proceeds from maturities of interest bearing deposits 2,026 -
Proceeds from maturities of investment securities held-to-maturity - 10,624
Proceeds from maturities of mortgage-backed securities held-to-maturity 2,291 1,572
Proceeds from sale of securities available for sale 4,005 -
Purchase of Federal Home Loan Bank stock (40) (44)
Proceeds from sale of fixed assets - 210
Capital expenditures for office properties and equipment (181) (136)
Net cash provided by (used in) investing activities (3,991) 1,008
See Notes to Consolidated Financial Statements
5
BROADWAY FINANCIAL CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Dollars in thousands)
(Unaudited)
Six months ended June 30,
2002 2001
Cash flows from financing activities
Net increase (decrease) in deposits $ (175) $ 10,599
Decrease in advances from Federal Home Loan Bank (250) (1,750)
Dividends paid (102) (101)
Purchases of treasury stock (84) -
Increase (decrease) in advances by borrowers
for taxes and insurance 38 (17)
Net cash provided by (used in) financing activities (573) 8,731
Net increase (decrease) in cash and cash equivalents (422) 3,400
Cash and cash equivalents at beginning of period 5,239 10,267
Cash and cash equivalents at end of period $ 4,817 $ 13,667
Supplemental disclosures of cash flow information:
Cash paid for interest $ 2,387 $ 3,286
Cash paid for income taxes $ 309 $ 649
Supplemental disclosure of noncash investing and
financing activities
Transfers of loans to real estate acquired through foreclosure $ 107 $ -
See Notes to Consolidated Financial Statements
6
BROADWAY FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
JUNE 30, 2002
NOTE (1) - Basis of Financial Statement Presentation
The unaudited consolidated financial statements included herein have been
prepared in accordance with accounting principles generally accepted in the
United States of America for interim financial statements and pursuant to the
instructions for Form 10-QSB and rules and regulations of the Securities and
Exchange Commission. In the opinion of the management of Broadway Financial
Corporation (the "Company"), the preceding unaudited consolidated financial
statements contain all material adjustments, consisting solely of normal
recurring accruals, necessary to present fairly the consolidated financial
position of the Company and its subsidiaries at June 30, 2002 and the results of
their operations and comprehensive earnings for the three months and six months
ended June 30, 2002 and 2001, and their cash flows for the six months ended June
30, 2002 and 2001. These 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-KSB for the year ended
December 31, 2001 and, accordingly, should be read in conjunction with such
audited statements. The results of operations for the three months and six
months ended June 30, 2002 are not necessarily indicative of the results to be
expected for the full year.
NOTE (2) - Earnings Per Share
Basic earnings per share were computed by dividing net earnings available to
common shareholders by the weighted average number of shares of Common Stock
outstanding for the period (890,284 and 876,349 shares for the three months
ended June 30, 2002 and 2001, and 890,722 and 875,538 shares for the six months
ended June 30, 2002 and 2001, respectively). Diluted earnings per shares reflect
the potential dilution that could occur if securities or other contracts to
issue common stock were exercised or converted into common stock. Diluted
earnings per share additionally included the dilutive effect of Common Stock
equivalents (902,858 and 876,349 shares for the three months ended June 30, 2002
and 2001 and 902,077 and 875,538 shares for the six months ended 2002 and 2001,
respectively).
NOTE (3) - Cash and Cash Equivalents
For purposes of reporting cash flows in the "Consolidated Statements of Cash
Flows", cash and cash equivalents include cash and fed funds sold.
7
NOTE (4) - Current Accounting Issues
In April 2002, the FASB issued SFAB No. 145. Statement of Financial Accounting
Standards No. 145, "Rescission of SFAS Statements No. 4, 44, and 64, Amendment
of SFAS Statement No. 13, and Technical Corrections" ("SFAS 145"), updates,
clarifies and simplifies existing accounting pronouncements. SFAS 145 rescinds
SFAS No. 4, "Reporting Gains and Losses from Extinguishment of Debt." SFAS 145
amends SFAS No. 13, "Accounting for Leases," to eliminate an inconsistency
between the required accounting for sale-leaseback transactions and the required
accounting for certain lease modifications that have economic effects that are
similar to sale-leaseback transactions. The provisions of SFAS 145 related to
SFAS No. 4 and SFAS No. 13 are effective for fiscal years beginning and
transactions occurring after May 15, 2002, respectively. Management anticipates
the adoption of SFAS 145 will not have a material impact on the Company's
consolidated financial statement.
In June 2002, the FASB issued SFAS No. 146. Accounting for Costs Associated with
Exit or Disposal Activities" ("SFAS 146") which requires the recognition of
costs associated with exit or disposal activities when they are incurred rather
than at the date of a commitment to an exit or disposal plan. SFAS 146 replaces
Emerging Issues Task Force ("EITF") Issue No. 94-3 "Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an Activity
(Including Certain Costs Incurred in a Restructuring)." The provisions of SFAS
146 are to be applied to prospectively to exit or disposal activities initiated
after December 31, 2002. Management anticipates the adoption of SFAS 146 will
not have a material impact on the Company's consolidated financial statement.
NOTE (5) - Critical Accounting Policy
Accounting for the allowance for loan losses involves significant judgments and
assumptions by management, which have a material impact on the carrying value of
net loans. Management considers this accounting policy to be a critical
accounting policy. The judgments and assumptions used by management are based on
historical experience, current economic trends, the borrowers ability to repay
and repayment performance and other factors, which are believed to be reasonable
under the circumstances as described under the heading "Loans Receivable and the
Allowance for Loan Losses" in the Note to Consolidated Financial Statements
included in the Company's Annual Report on Form 10-KSB for the year ended
December 31, 2001.
8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Certain statements under this caption may constitute "forward-looking
statements" under the Private Securities Litigation Reform Act of 1995 which
involve risks and uncertainties. Actual results may differ significantly from
the results discussed in such forward-looking statements. Factors that might
cause such a difference include, but are not limited to, economic conditions,
competition in the geographic and business areas in which we conduct our
operations, fluctuations in the interest rates, credit quality and government
regulation.
General
Broadway Financial Corporation (the "Company") is primarily engaged in the
savings and loan business through its wholly owned subsidiary, Broadway Federal
Bank, f.s.b. ("Broadway Federal" or "the Bank"). Broadway Federal is a
community-oriented savings institution dedicated to serving the African
American, Hispanic and other communities of Mid and South Los Angeles,
California. Broadway Federal's business is that of a financial intermediary and
consists primarily of attracting deposits from the general public and using such
deposits, together with borrowings and other funds, to make mortgage loans
secured by residential real estate located in Southern California. At June 30,
2002, Broadway Federal operated four retail banking offices in Mid-City and
South Central Los Angeles. Broadway Federal is subject to significant
competition from other financial institutions, and is also subject to regulation
by federal agencies and undergoes periodic examinations by those regulatory
agencies.
The accompanying consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries, Broadway Federal and BankSmart, Inc.
(a dormant company). All significant inter-company balances and transactions
have been eliminated in consolidation.
The Company's principal business is serving as a holding company for Broadway
Federal. The Company's results of operations are dependent primarily on its 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 paid 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 affected by the amount of provisions for loan losses and
the Bank's non-interest expenses, which consist principally of employee
compensation and benefits, occupancy expenses, technology and communication
costs. 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.
9
Comparison of Operating Results for the Three Months and Six Months ended June
30, 2002 and June 30, 2001
General
The Company recorded net earnings of $322,000 and $648,000, or $ 0.35 and $0.70
per diluted common share, respectively, for the three months and six months
ended June 30, 2002, compared to net earnings of $156,000 and $337,000, or $0.17
and $0.37 per diluted common share, respectively, for the three months and six
months ended June 30, 2001. The increase in net earnings from 2001 to 2002
resulted primarily from higher net interest income, offset by higher
non-interest expense.
Net Interest Income
Net interest income after provision for loan losses increased by $368,000 and
$803,000, or 22.45% and 25.20%, respectively, from $1,639,000 and $3,187,000 for
the three months and six months ended June 30, 2001, respectively, to $2,007,000
and $3,990,000 for the same periods in 2002. The increase was attributable
primarily to increases in average interest-earning assets of $6.9 million and
$7.7 million, respectively, increases in the net interest rate spread of 61
basis points and 68 basis points, respectively and the absence of a provision
for loan losses for the three months and six months ended June 30, 2002 as
compared to the same periods in 2001.
The net interest rate spreads for the three months and six months ended June 30,
2002 were 4.52% and 4.51%, respectively, compared to 3.91% and 3.83%,
respectively, for the same periods in 2001. The increase in spread was
attributable to the rapid decline in deposit cost of funds, and a slower decline
in yield on the loan portfolio. The primary spread (weighted average interest
rate on loans minus weighted average interest rate on deposits) for the six
months ended June 30, 2002 was 5.37% compared to 4.77% for the same period in
2001.
Non-interest Income
Non-interest income increased by $32,000 and $93,000, or 16.16% and 25.00%,
respectively, from $198,000 and $372,000 for the three months and six months
ended June 30, 2001, to $230,000 and $465,000, respectively, for the same
periods in 2002. The increase in non-interest income was primarily attributable
to a higher volume of service charges.
Non-interest Expense
Total non-interest expense increased from $1,581,000 and $2,988,000 for the
three months and six months ended June 30, 2001, respectively, to $1,704,000 and
$3,368,000 for the same periods in 2002. The increase was primarily attributable
to higher compensation and benefits expense, higher occupancy expense, higher
professional service fees and higher other expense offset by lower advertising
and promotional expense and telephone and postage.
10
Compensation and benefits expense increased by $69,000 and $166,000,
respectively, for three months and six months ended June 30, 2002, as compared
to the same periods in 2001. The increase was principally due to the addition of
several management level personnel, higher incentive bonus accruals and other
compensation benefits.
Occupancy expense, which includes furniture, fixture and equipment expense,
increased by $34,000 and $82,000, respectively, for the three months and six
months ended June 30, 2002 as compared to the same periods in 2001. The increase
was primarily due to higher leasing and computer equipment costs during the
current year.
Professional services increased by $34,000 and $86,000, respectively, for the
three months and six months ended June 30, 2002, as compared to the same periods
in 2001. For the six months ended June 30, 2002, the increase was primarily due
to a $12,000 increase in legal fees, a $53,000 increase in operational
consulting fees and a $21,000 increase in audit fees as compared to 2001.
Other non-interest expense increased by $14,000 and $107,000, respectively, for
the three months and six months ended June 30, 2002, as compared to the same
periods in 2001. The increase in other non-interest expense was primarily due to
the write off of obsolete furniture, fixtures and equipment, and an increase in
item processing fees, offset by decreases in savings losses, loan expenses, FDIC
premium and courier service expense.
Provision for Loan Losses
The provision for loan losses decreased by $45,000 and $75,000, respectively,
from $45,000 and $75,000, respectively, for the three months and six months
ended June 30, 2001 to zero for the same periods in 2002.
As of June 30, 2002 the Company's allowance for loan losses totaled $1.6
million, unchanged from the balance at December 31, 2001. The allowance for loan
losses represents 1.11% of gross loans at June 30, 2002 compared to 1.10% at
December 31, 2001. The allowance for loan losses was 187.02% of non-accrual
loans at June 30, 2002, compared to 335.68% at December 31, 2001.
Total non-performing assets, consisting of non-accrual loans and real estate
acquired through foreclosure ("REO"), increased by $479,000, from $468,000 at
December 31, 2001 to $947,000 at June 30, 2002. The increase in non-accrual
loans was primarily due to a loan secured by a church property. Non-accrual
loans at June 30, 2002 included two loans totaling $90,000 secured by one- to
four-unit properties, one loan for $608,000 secured by a church property and two
unsecured loans totaling $142,000. There was one REO for $107,000 as of June 30,
2002. As a percentage of total assets, non-performing assets were 0.53% at June
30, 2002, compared to 0.26% at December 31, 2001.
11
The lack of a provision for loan losses for the quarter ended June 30, 2002
results from management's ongoing assessment of the Company's level of credit
risk inherent in the portfolio and changes within the loan categories resulting
from various factors, including new loan originations, loan repayments,
prepayments and changes in asset classifications. Management will continue to
monitor the allowance for loan losses and adjust the Company's provision for
loan losses based on the risks inherent in the loan portfolio.
Management believes that the allowance for loan losses is adequate to cover
inherent losses in its loan portfolio as of June 30, 2002, but there can be no
assurance that actual losses will not exceed the estimated amounts. In addition,
the Office of Thrift Supervision and the Federal Deposit Insurance Corporation
periodically review the Company's allowance for loan losses as an integral part
of their examination process. These agencies may require the Company to increase
the allowance for loan losses based on their judgments of the information
available to them at the time of the examination.
Income Taxes
The Company's effective tax rate was approximately 40%, for the three months and
six months ended June 30, 2002, compared to 39% and 41% for the same period in
the prior year. Broadway Federal computed income taxes by applying the statutory
federal income tax rate of 34% and California income tax rate of 10.84% to
earnings before income taxes. California income taxes are reduced by tax credits
relating to the Los Angeles Revitalization Zone.
Comparison of Financial Condition at June 30, 2002 and December 31, 2001
Total assets at June 30, 2002 were $179.4 million, compared to $178.9 million at
December 31, 2001, representing an increase of $500,000. Net loans receivable
(excluding loans held for sale) increased from $133.9 million at December 31,
2001 to $134.1 million at June 30, 2002 as a result of $12.0 million in new loan
originations, and a decrease in discounts and deferred loan fees of $285,000,
offset by $12.1 million in principal repayments.
Loans held for sale at June 30, 2002 were $4.3 million, as compared to $7.4
million at December 31, 2001. During the period, loans originated that were
classified as held-for-sale totaled $557,000, principal repayments totaled $3.0
million and loans sold totaled $645,000.
Total liabilities at June 30, 2002 and December 31, 2001 amounted to $164.3
million. Deposits decreased $175,000, or 0.12%, from $151.2 million at December
31, 2001 to $151.0 million at June 30, 2002. The Bank has targeted and has been
able to increase core deposits (NOW, Demand, Money Market, and Passbook
accounts) by $6.0 million, while managing rates paid on CD accounts, including
Jumbo CDs, resulting in a decline in CD accounts of $6.2 million. Core deposits
amounted to 40.01% of total deposits at June 30, 2002, compared to 35.95% at
December 31, 2001.
12
FHLB advances decreased by $250,000 since December 31, 2001 as a result of
pay-offs of advances with a interest rate of 6.76%, off-set by new advances with
lower interest rates of 2.21%.
Total capital at June 30, 2002 was $15.2 million, compared to $14.6 million at
December 31, 2001. The $525,000 increase was primarily due to net earnings for
the period and the allocation of ESOP shares, offset by cash dividends declared.
Liquidity, Capital Resources and Market Risk
Sources of liquidity and capital for the Company on a stand-alone basis
primarily include distributions from the Bank. Dividends and other capital
distributions from the Bank are subject to regulatory restrictions.
The Bank's primary sources of funds are deposits, principal and interest
payments on loans, mortgage backed securities and investments, and advances from
the FHLB. At June 30, 2002 and December 31, 2001, FHLB advances totaled $10.8
million and $11.0 million, respectively. Other sources of liquidity include
principal repayments on mortgage-backed securities and other investments.
Since December 31, 2001 there has been no material change in the Company's
interest rate sensitivity as of June 30, 2002. For a discussion on the Company's
interest rate sensitivity and market risk, see the Company's annual report for
the year ended December 31, 2001, including the Company's audited financial
statements and the notes thereto.
Regulatory Capital
The OTS capital regulations include three separate minimum capital requirements
for savings institutions that are subject to OTS supervision. First, the
tangible capital requirement mandates that the Bank's stockholder's equity, less
intangible assets, be at least 1.50% of adjusted total assets as defined in the
capital regulations. Second, the core capital requirement currently mandates
that core capital (tangible capital plus certain qualifying intangible assets)
be at least 4.00% of adjusted total assets as defined in the capital
regulations. Third, the risk-based capital requirement presently mandates that
core capital plus supplemental capital (as defined by the OTS) be at least 8.00%
of risk-weighted assets as prescribed in the capital regulations. The capital
regulations assign specific risk weightings to all assets and off-balance sheet
items.
Broadway Federal was in compliance with all capital requirements in effect at
June 30, 2002, and meets all standards necessary to be considered
"well-capitalized" under the prompt corrective action regulations adopted by the
OTS pursuant to the Federal Deposit Insurance Corporation Improvement Act of
1991 (FDICIA). The following table reflects the required and actual regulatory
capital ratios of Broadway Federal at the date indicated:
13
FIRREA FDICIA Actual
Regulatory Capital Ratios Minimum "Well-capitalized" At June 30,
for Broadway Federal Requirement Requirement 2002
-------------------------- ------------- -------------------- --------------
Tangible capital 1.50% N/A 7.51%
Core capital 4.00% 5.00% 7.51%
Risk-based capital 8.00% 10.00% 13.07%
Tier 1 Risk-based capital N/A 6.00% 11.82%
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
None
Item 2. CHANGES IN SECURITIES
None
Item 3. DEFAULTS UPON SENIOR SECURITIES
None
Item 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
The Annual Meeting of Stockholders of the Company was held on June
19, 2002 for the following purposes:
(a) To elect three directors to serve until the Annual Meeting to
be held in the year 2005 and or until their successors are
elected and have been qualified.
The Stockholders re-elected Mr. Stephen N. Rippe, Mr. Albert
Odell Maddox and Mr. Daniel A. Medina to serve as directors for
terms of three years each. The number of votes for each of the
directors is detailed below:
Mr. Stephen N. Rippe
For 803,067
Abstain 3,762
14
Mr. Albert Odell Maddox
For 802,740
Abstain 4,089
Mr. Daniel A. Medina
For 803,118
Abstain 3,711
(b) To ratify the appointment of KPMG LLP as the Company's
independent auditors for 2002.
The Stockholders ratified the appointment of KPMG LLP as the
Company's independent auditors based upon total votes for of
800,029, votes of 462 against and 6,338 Abstentions.
(c) To amend the Long Term Incentive Plan.
The Stockholders approved the amendment to the Long Term
Incentive Plan based upon total votes for of 747,500, votes of
53,951 against and 5,378 abstentions.
Item 5. OTHER INFORMATION
None
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
None
15
SIGNATURES
In accordance with the requirements of the Exchange Act of 1934, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Date: August 14, 2002
By: /s/ PAUL C. HUDSON
Paul C. Hudson
President and Chief Executive Officer
Broadway Financial Corporation
Date: August 14, 2002
By: /s/ ALVIN D. KANG
Alvin D. Kang
Chief Financial Officer
Broadway Financial Corporation
16
Section 906 Certification
The following statement is provided by the undersigned to accompany the
foregoing Report on Form 10-QSB pursuant to 18 U.S.C. Section 1350 as adopted
pursuant to section 906 of the Sarbanes-Oxley Act of 2002, and shall not be
deemed filed pursuant to any provision of the Exchange Act of 1934 or any other
securities law.
Each of the undersigned certifies that the foregoing Report on Form 10-QSB fully
complies with the requirements of Section 13(a) of the Securities Exchange Act
of 1934 (15 U.S.C. Section 78m) and that the information contained in the Form
10-QSB fairly presents, in all material respects, the financial condition and
results of operations of Broadway Financial Corporation as of and for the three
and six months ended June 30, 2002.
Date: August 14, 2002
By: /s/ PAUL C. HUDSON
Paul C. Hudson
President and Chief Executive Officer
Broadway Financial Corporation
Date: August 14, 2002
By: /s/ ALVIN D. KANG
Alvin D. Kang
Chief Financial Officer
Broadway Financial Corporation
17