Broadway Financial Corporation · NASDAQ:BYFC
Broadway Financial — Shareholder Meeting (June 2020)
30 slides from Broadway Financial's shareholder meeting presentation, Jun 26, 2020
Slide 1: June 24, 2020 Annual Meeting Presentation
June 24, 2020 Annual Meeting Presentation
Slide 2: Broadway Financial Corporation
1 Broadway Financial Corporation ▪ Leading community bank serving the low - to - moderate (“LMI”) income communities in Southern California » Bank holding company with 100% - owned sub, Broadway Federal Bank, f.s.b. » $500 mm in assets with three branches; two in Los Angeles and one in Inglewood ▪ F
Slide 3: Mission Statement
2 Mission Statement The Bank’s mission is to serve the real estate, business and financial needs of customers in underserved urban communities within Southern California with a commitment to excellent service, profitability and sustained growth. Broadway also has a broader commitment to employ, trai
Slide 4: Application of the Mission
3 Application of the Mission ▪ Serving a large, growing market across ethnic groups » Major banks find low - to - moderate communities difficult to serve profitably » Broadway addresses almost 50% of the 22 million people in Southern California ▪ Certified Community Development Financial Institution
Slide 5: The situation in early 2012
4 The situation in early 2012 ▪ Loan portfolio had a disproportionate number of non - performing loans: » Overly concentrated in church loans, particularly to small congregations □ Most borrowers were unsophisticated and vulnerable to drops in donations » Compounded by an untimely expansion into out
Slide 6: Management's Solutions
5 Management’s Solutions ▪ Phase 1: Stabilize the Bank - DONE » Ensured adequate liquidity for survival » Changed underwriting and loan administration policies to address problems ▪ Phase 2: Fix the Balance Sheet - DONE » Restructured BYFC’s Balance Sheet to reduce debt and improve access to capital
Slide 7: Restructured Balance Sheet
6 Restructured Balance Sheet (1) Total Debt includes Deposits, FHLB Advances, and Funded Debt, but excludes accrued interest (2) Funded Debt includes senior debt and subordinated debentures, but excludes accrued interest (3) Broadway repurchased 2.5 million shares from the U.S. Treasury and two othe
Slide 8: Re-Built Capital Base
7 Re - Built Capital Base 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20% 12/31/2011 12/31/2019 7.3% 11.6% 11.6% 18.3% Regulatory Capital Tier 1 Leverage Ratio Total Risk-Based Capital Ratio Increased Tier 1 Capital 57% and Total Risk - Based Capital 48% since 2011
Slide 9: Strong Capital Base
8 Strong Capital Base $0 $10 $20 $30 $40 $50 $60 12/31/2011 12/31/2013 12/31/2015 12/31/2017 12/31/2019 $ mms Regulatory Capital Tier 1 $ Total Risk-Based $ Have Exceeded “Well Capitalized” Tier 1 Capital $ by over 100% since 2015
Slide 10: Slashed Problem Loans
9 Slashed Problem Loans $0 $10 $20 $30 $40 $50 12/31/2011 12/31/2013 12/31/2015 12/31/2017 12/31/2019 $44.7 $37.1 $17.7 $8.9 $4.2 $2.9 $1.8 $0.9 $0.4 $0.3 $ mms Nonperforming Loans The borrowers were current in their payments for at least 95% of the NPLs at December 31, 2019 and 2018, as well as at
Slide 11: Slashed Problem Assets
10 Slashed Problem Assets 0.0% 5.0% 10.0% 15.0% 12/31/2011 12/31/2013 12/31/2015 12/31/2017 12/31/2019 12.43% 12.11% 5.95% 3.12% 1.14% 0.69% 0.64% 0.43% 0.10% 0.06% NPAs as % Total Assets Since April 2019 Broadway has not had any REO properties
Slide 12: Recent Financial Results
Recent Financial Results 11 During 2019 Broadway completed a transition from a banking institution that has generated a substantial portion of its income through loan recaptures and recoveries, created by cleansing the loan portfolio, to a financial organization that has its results tied to loan gro
Slide 13: Other Recent Results
12 Other Recent Results Year Ended December 31, 1st Quarter 2015 2016 2017 2018 2019 2019 2020 Interest income on loans 14,230$ 14,485$ 15,397$ 14,279$ 15,845$ 4,115$ 4,359$ Net int. inc. before (provisions) recaptures 11,291$ 11,413$ 11,939$ 10,308$ 10,461$ 2,813$ 2,898$ Loan originations (excludin
Slide 14: Book Value Per Share
13 Book Value Per Share Broadway completed a recapitalization in 2013 and debt restructuring in 2014 $0.00 $0.50 $1.00 $1.50 $2.00 12/31/2012 12/31/2014 12/31/2016 12/31/2018 3/31/2020 $0.63 $1.27 $1.28 $1.59 $1.66 $1.74 $1.77 $1.75 $1.75 Book Value Per Share
Slide 15: The Challenges Ahead
14 The Challenges Ahead ▪ Impact of COVID - 19 ▪ Difficult interest rate environment ▪ Funding costs ▪ Cost structure / operating efficiency ▪ Loan concentration guidelines still require periodic loan sales ▪ Overall scale of operations
Slide 16: Recent Trends in Delinquencies
15 Recent Trends in Delinquencies Notwithstanding the government shutdown of large sections of the economy, Broadway’s portfolio continues to perform well; as of May 31, 2020 Broadway had only one loan that was delinquent – a church loan for less than $600 K 0.00% 0.25% 0.50% 0.75% 1.00% 12/31/2019
Slide 17: Difficult Interest Rate Environment
Difficult Interest Rate Environment 16 0.00 0.50 1.00 1.50 2.00 2.50 3.00 3.50 1/2/2017 2/2/2017 3/2/2017 4/2/2017 5/2/2017 6/2/2017 7/2/2017 8/2/2017 9/2/2017 10/2/2017 11/2/2017 12/2/2017 1/2/2018 2/2/2018 3/2/2018 4/2/2018 5/2/2018 6/2/2018 7/2/2018 8/2/2018 9/2/2018 10/2/2018 11/2/2018 12/2/2018
Slide 18: Interest Spread Compression
Interest Spread Compression 17 -1.00 -0.50 0.00 0.50 1.00 1.50 U.S. Treasury Rate Spread - 5 yr. vs. 1 yr.
Slide 19: Managing through a Difficult Rate Environment
Managing through a Difficult Rate Environment 18 0.00% 0.50% 1.00% 1.50% 2.00% 2.50% 3.00% 3.50% 3/31/2017 9/30/2017 3/31/2018 9/30/2018 3/31/2019 9/30/2019 3/31/2020 Broadway’s Net Interest Margin
Slide 20: Funding Costs
19 Funding Costs 0.00% 0.50% 1.00% 1.50% 2.00% 2.50% 3.00% Bank Funding Costs Deposits FHLB Advances Total interest bearing liabilities Average Yield for 1 Yr Treasuries Cost of FHLB Advances declined from 2.12% for 1 st Qtr 2020 to 1.690% by mid June Cost of Deposits declined from 1.35% for 1 st Qt
Slide 21: Loan Sales to Comply with Concentration Guidelines
Loan Sales to Comply with Concentration Guidelines 20 $- $20.0 $40.0 $60.0 $80.0 $100.0 $120.0 $140.0 $160.0 $180.0 2015 2016 2017 2018 2019 Q1 2019 Q1 2020 $167.4 $ - $98.4 $19.6 $23.1 $ - $20.5 $ mms Loan Sales Broadway expects to continue selling loans in the next quarter or two of 2020; historic
Slide 22: The Path Ahead - Fulfilling Broadway's Mission
21 The Path Ahead - Fulfilling Broadway’s Mission ▪ Maintain commitment to best - in - class service and processes ▪ Expand product line ▪ Reduce cost structure to improve efficiency ▪ Improve the Bank’s scale
Slide 23: Committed to Best-in-Class Service and Processes
22 Committed to Best - in - Class Service and Processes ▪ Best path for strong, positive relationships with key constituents » Regulators and customers ▪ Key component for Broadway’s success » Broadway has received two increases in concentration guidelines since 09/18 □ Has allowed management to gro
Slide 24: Commitment to Asset Quality
23 Commitment to Asset Quality $- $10.0 $20.0 $30.0 $40.0 $50.0 12/31/2011 12/31/2013 12/31/2015 12/31/2017 12/31/2019 $42.2 $27.1 $11.1 $2.5 $1.4 $1.4 $0.4 $0.0 $0.0 $0.0 $ mms Delinquencies
Slide 25: Leads to Growth in Loan Portfolio
24 Leads to Growth in Loan Portfolio $0 $100 $200 $300 $400 $500 12/31/2011 12/31/2013 12/31/2015 12/31/2017 12/31/2019 $ mms Investment in Loans Loans Held For Investment Loans Held For Sale $353 $283 $258 $305 $309 $384 $361 $365 $401 $430
Slide 26: Growth Driven by Strong Origination Capabilities
25 Growth Driven by Strong Origination Capabilities $0 $20 $40 $60 $80 $100 $120 $140 2011 2012 2013 2014 2015 2016 2017 2018 2019 1st Qtr 2019 1st Qtr 2020 $5.1 $20.6 $38.5 $95.6 $112.5 $137.7 $115.4 $99.0 $114.4 $19.5 $65.9 $ in mms Loan Originations Broadway has originated $779 million of loans s
Slide 27: Expanding Product Line
26 Expanding Product Line ▪ Originating CRE and construction loans » Leverages existing customer relationships and expertise of lending staff » Improves net interest margin for the Bank » Enhances commitment to LMI communities in Southern California » Originated $14.2 million of CRE and construction
Slide 28: Increasing Efficiency
27 Increasing Efficiency ▪ Have initiated a plan to reduce the Bank’s cost structure » Estimate annualized savings of over $1.1 million beginning Q3 2021 ▪ Also, continuing to seek ways to lower the Bank’s cost of funds Compensation reductions 334,000$ Facilities expenses 590,000 Equipment and utili
Slide 29: Improving Broadway's Scale
28 Improving Broadway’s Scale ▪ The Company is implementing steps to improve the Bank’s scale » Designed to enhance long - term viability by spreading fixed costs over greater volume and a larger base of interest earning assets » Will allow the Bank to retain more recurring income from loan originat
Slide 30: Growing the Asset Base to Improve Scale
29 Growing the Asset Base to Improve Scale $0 $100 $200 $300 $400 $500 $600 $414 $374 $332 $351 $403 $429 $414 $409 $440 $506 $ mms Total Assets Broadway has organically increased assets over 50%, and loans receivable held for investment almost 70%, since beginning to re - build the portfolio in mid
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