UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): June 11, 2024
BROADWAY FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
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Delaware
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001-39043
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95-4547287
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(State or other jurisdiction of
incorporation or organization)
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(Commission
File Number)
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(I.R.S. Employer Identification Number)
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4601 Wilshire Boulevard Suite 150, Los Angeles, California
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90010
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(Address of principal executive offices)
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(Zip Code)
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Registrant’s telephone number, including area code: (323) 634-1700
NOT
APPLICABLE
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following
provisions:
☐
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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☐
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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☐
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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☐
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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Securities registered pursuant to Section 12(b) of the Act:
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Title of each class
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Trading Symbol(s)
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Name of each exchange on which registered
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Class A Common Stock, par value $0.01 per share (including attached preferred stock purchase rights)
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BYFC
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Nasdaq Capital Market
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Indicate by check mark whether the registrant is an emerging growth company in as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule
12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised
financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.☐
| Item 2.02 |
Results of Operations and Financial Condition.
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On June 11, 2024, Broadway Financial Corporation (the “Company”) issued a press release announcing results for the quarter ended March 31, 2024. A copy of the press
release is attached as Exhibit 99.1.
The information set forth in this Current Report, including Exhibit 99.1 attached hereto, is being furnished and shall not be deemed “filed” for purposes of Section 18
of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of such section. The information in this Current Report, including Exhibits 99.1 attached hereto, shall not be incorporated by reference
into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such a filing to this Current Report.
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Item 9.01
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Financial Statements and Exhibits.
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(d) Exhibits
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Press Release dated June 11, 2024, announcing results for the quarter ended March 31, 2024.
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104
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The cover page from this Current Report on Form 8-K, formatted in Inline XBRL (included as Exhibit 101).
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
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BROADWAY FINANCIAL CORPORATION
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Name: Zack Ibrahim
Title: Chief Financial Officer
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FOR IMMEDIATE RELEASE
Broadway Financial Corporation Announces Results for
First Quarter 2024
LOS ANGELES, CA – (BUSINESS WIRE) – June 11, 2024 – Broadway Financial Corporation (“Broadway”,
“we”, or the “Company”) (NASDAQ: BYFC), parent company of City First Bank, National Association (the “Bank”, and collectively, with the Company, “Broadway” or “City First Broadway”), reported consolidated net loss of $164 thousand, or ($0.02) per diluted share, for the first quarter of 2024, compared to consolidated net earnings of $1.6 thousand, or $0.17 per diluted share, for the first quarter of 2023.
During the first quarter of 2024, net interest income decreased by $750 thousand, or 9.1%, to $7.5 million, compared to the first quarter of 2023. The decrease resulted from higher interest expense, primarily due to an increase in the cost of borrowings
and deposits. During the first quarter of 2024, non-interest expense increased $1.6 million, or 25.8%, compared to the first quarter of 2023 due to increases of $905 thousand in professional services expense and $648 thousand in compensation and
benefits expense. The increase in professional services expense was primarily related to the Company’s investigation of the weaknesses in internal controls that were identified during preparation of the financial statements for the third quarter
of 2023. The increase in non-interest expense was partially offset by a decrease in income tax expense of $731 thousand due to a decrease in pre-tax income of $2.5 million between the two periods.
First Quarter 2024 Highlights:
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Total interest income increased for the twelfth consecutive
quarter since the merger of CFBanc Corporation with the Company on April 1, 2021 (the “Merger”). During the first quarter of 2024, interest income increased by $3.6 million, or 32.4%, compared to the first quarter of 2023, and by $2.3
million, or 18.5%, compared to the fourth quarter of 2023.
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The yield on average interest-earning assets increased by 46 basis points to 4.45% for the first quarter of 2024, compared to 3.99% for the first quarter of 2023. This increase was driven largely by
growth in the yield on average loan balances of 41 basis points during that period.
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Total gross loans receivable increased by $46.2 million, or
5.2%, to $934.8 million at March 31, 2024, compared to $887.6 million at December 31, 2023. Total loans have grown 43.7% since the United States Department of the Treasury invested $150 million in Broadway’s preferred stock pursuant to the
Emergency Capital Investment Program (“ECIP”) in June 2022, and 57.9% since the Merger.
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The Bank had only one non-performing loan, totaling $401 thousand, at March 31, 2024 and total delinquencies remained at less than $800 thousand.
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Total deposits increased by $12.9 million during the first quarter of 2024 to $695.5 million, representing growth of $38 million, or 5.8%, since the first quarter of 2023.
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Chief Executive Officer, Brian Argrett commented,
“During the first quarter of 2024, we experienced an acceleration in the growth of our interest income, which has increased in each of the twelve quarters since the merger of Broadway and CFBanc Corporation, demonstrating the benefits of the
Company’s enhanced scale and commitment to growth. The increase in interest income reflects an increase of almost 58% in our loan portfolio since the merger, and approximately 44% since receipt of the equity investment under the U.S. Treasury’s
Emergency Capital Investment Program in June 2022. In addition, this growth in interest income reflects improving yields on our interest-earning assets, which have increased by 136 basis points, or 44%, since the end of March 2022 when the Federal
Open Market Committee of the Federal Reserve began implementing interest rate hikes to curb inflation. I am pleased to report that we have been able to achieve these increases while maintaining the quality of the Bank’s loan portfolio, as our
delinquencies remain modest.”
“Notwithstanding the growth in our balance sheet and interest income, our overall performance has continued to suffer from higher costs of deposits and borrowings, which
are a direct result of the rate hikes implemented by the Federal Reserve.”
“In addition, our results for the first quarter of 2024 were adversely affected
by substantial non-recurring costs of almost $700 thousand associated with our investigation of material weaknesses in internal controls that we had identified while preparing our financial statements for the third quarter of 2023 and initiating
corrective actions to remediate those weaknesses. As a result of those costs, we reported a pretax loss of $240 thousand for the quarter. We are using the results of the investigation, however, to strengthen our controls and financial and
accounting team, which will provide us with better financial information with which to properly manage our business and inform our stockholders, depositors, and other stakeholders.”
“Also, results for the first quarter of 2024 were impacted by the investments in people that we have been undertaking over the past twelve months to support our
operational capabilities to professionally manage our business, improve our efficiency, and promote our continued growth.”
“We remain optimistic in our ability to continue growing and improving profitability and are focused on serving low-to-moderate income communities within our target
markets. The Company has a strong base of equity capital to execute its plans, which is being complemented by the increase in the Bank’s deposits during each of the past three consecutive quarters. At the end of March 2024, the Bank’s deposits were
$12.9 million higher than at the beginning of the year and almost $50.0 million higher than at the end of June last year. Also, during the first quarter of 2024, we reduced our higher cost borrowings as part of our efforts to lower our cost of
funds.”
“Finally, I wish to thank our employees for their tremendous dedication to our mission and operating performance, and our stockholders and depositors for their continued
support of our broader strategy and growth. Your efforts and financial support are fundamental to our ability to expand, serve, and support our communities, customers, and broader stakeholders.”
Net Interest Income
Net interest income before loan loss provision for the first quarter of 2024 totaled $7.5 million, representing a decrease of $750 thousand, or 9.1%,
from net interest income before loan loss provision of $8.3 million for the first quarter of 2023. The decrease resulted from higher interest expense, primarily due to an increase in the cost of borrowings and deposits. The net interest margin
decreased to 2.27% for the first quarter of 2024 from 2.96% for the first quarter of 2023, primarily due to an increase in the average cost of funds, which increased to 3.02% for the first quarter of 2024 from 1.46% for the first quarter of 2023, due
to higher rates paid on deposits and borrowings after eleven rate increases by the Federal Open Market Committee of the Federal Reserve (the “FRB”) from March 2022 through December 2023. The decrease in net interest income before provision for
credit losses was partially offset by growth of $209.3 million in average interest-earning assets during the first quarter of 2024, compared to the first quarter of 2023. In addition, the overall rate earned on interest-earning assets increased by
46 basis points as the Bank earned higher rates on interest-earning deposits, securities, and the loan portfolio.
The following table sets forth the average balances, average yields and costs, and certain other information for the periods indicated. All average balances are daily
average balances. The yields set forth below include the effect of deferred loan fees, and discounts and premiums that are amortized or accreted to interest income or expense.
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For the Three Months Ended
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March 31, 2024
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March 31, 2023
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(Dollars in thousands)
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Average
Balance
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Interest
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Average
Yield
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Average
Balance
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Interest
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Average
Yield
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Assets
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Interest-earning assets:
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Interest-earning deposits
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$
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99,103
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$
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1,344
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5.42
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%
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$
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17,044
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$
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119
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2.79
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%
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Securities
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305,615
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2,075
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2.72
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%
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328,767
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2,180
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2.65
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%
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Loans receivable (1)
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909,965
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11,129
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4.89
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%
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762,669
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8,535
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4.48
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%
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FRB and FHLB stock (2)
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13,733
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245
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7.14
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%
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10,665
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209
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7.84
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%
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Total interest-earning assets
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1,328,416
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$
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14,793
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4.45
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%
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1,119,145
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$
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11,174
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3.99
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%
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Non-interest-earning assets
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52,561
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67,947
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Total assets
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$
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1,380,977
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$
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1,187,092
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Liabilities and Stockholders’ Equity
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Interest-bearing liabilities:
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Money market deposits
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$
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125,704
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$
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1,444
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4.59
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%
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$
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134,047
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$
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771
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2.30
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%
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Savings deposits
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59,056
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102
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0.69
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%
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61,317
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13
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0.08
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%
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Interest checking and other demand deposits
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227,504
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143
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0.25
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%
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239,024
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77
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0.13
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%
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Certificate accounts
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163,116
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1,110
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2.72
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%
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147,260
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442
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1.20
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%
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Total deposits
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575,380
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2,799
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1.95
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%
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581,648
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1,303
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0.90
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%
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FHLB advances
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209,299
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2,598
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4.97
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%
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145,201
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1,454
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4.01
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%
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Bank Term Funding Program borrowing
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100,000
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1,203
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4.81
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%
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-
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-
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-
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%
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Other borrowings
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77,601
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669
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3.45
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%
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69,618
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143
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0.82
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%
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Total borrowings
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386,900
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4,470
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4.62
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%
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214,819
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1,597
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2.97
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%
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Total interest-bearing liabilities
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962,280
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$
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7,269
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3.02
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%
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796,467
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$
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2,900
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1.46
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%
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Non-interest-bearing liabilities
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137,035
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109,955
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Stockholders’ equity
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281,662
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280,670
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Total liabilities and stockholders’ equity
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$
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1,380,977
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$
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1,187,092
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Net interest rate spread (3)
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$
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7,524
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1.43
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%
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$
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8,274
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2.54
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%
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Net interest rate margin (4)
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2.27
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%
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2.96
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%
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Ratio of interest-earning assets to interest-bearing liabilities
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138.05
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%
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140.51
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%
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(1) |
Amount is net of deferred loan fees, loan discounts and loans in process, and includes deferred origination costs and loan premiums.
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(2) |
FHLB is Federal Home Loan Bank.
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(3) |
Net interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities.
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(4) |
Net interest rate margin represents net interest income as a percentage of average interest-earning assets.
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Credit Loss Provision
For the three months ended March 31, 2024, the Company recorded a credit loss provision
under the Current Expected Credit Loss methodology of $260 thousand, compared to a credit loss provision of $88 thousand for the three months ended March 31, 2023. No loan charge-offs were recorded during the quarters
ended March 31, 2024 or 2023. The allowance for credit losses (“ACL”) increased to $7.6 million as of March 31, 2024, compared to $7.3 million as of December 31, 2023.
The Bank had one non-accrual loan at March 31, 2024 with an unpaid principal balance of $401 thousand.
Non-interest Income
Non-interest income for the first quarter of 2024 totaled $306 thousand, compared to $289 thousand for the first quarter of 2023.
Non-interest Expense
Total non-interest expense was $7.8 million for the first quarter of 2024, compared to $6.2 million for the first quarter of 2023, representing an increase of $1.6
million, or 25.8%. The increase was due to an increase of $905 thousand in professional services expense and an increase of $648 thousand in compensation and benefits expense. The
increase in professional services was primarily due to hiring a third-party firm to assist with reviewing certain general ledger account reconciliations, as well as other professionals, in connection with the Company’s investigation of the
weaknesses in internal controls that were identified during preparation of the financial statements for the third quarter of 2023.
The increase in compensation and benefits expense was primarily attributable to the addition of full-time employees during 2023 in various production and administrative
positions as part of the Bank’s efforts to expand it operational capabilities to grow its balance sheet and fulfill the intersecting lending objectives of the Company’s mission and the ECIP funding received in June 2022. A portion of the increase in
compensation expenses during the first quarter of 2024 pertained to recruiting expenses.
Income Taxes
Income taxes are computed by applying the statutory federal income tax rate of 21% and the combined California and Washington, D.C. income tax rate of 9.75% to taxable
income. The Company recorded an income tax benefit of $57 thousand for the first quarter of 2024 and income tax expense of $674 thousand for the first quarter of 2023. The decrease in tax expense reflected a decrease of $2.5 million in pre-tax
income between the two periods. The effective tax rate was 23.75% for the first quarter of 2024, compared to 29.70% for the first quarter of 2023.
Balance Sheet Summary
Total assets decreased by $4.9 million at March 31, 2024, compared to December 31, 2023, reflecting decreases in cash and cash equivalents of $38.1 million and
securities available-for-sale of $23.7 million, partially offset by growth in net loans of $46.0 million and other assets of $9.9 million.
Loans held for investment, net of the ACL, increased by $46.0 million to $926.5 million at March 31, 2024, compared to $880.5 million at December 31, 2023. The increase
was primarily due to loan originations of $71.5 million which consisted of $38.0 million in multi-family loans, $17.5 million in other commercial loans, $15.0 million in commercial real estate loans, and $0.9 million in construction loans, offset in
part by loan payoffs and repayments of $25.5 million.
Deposits increased by $12.9 million to $695.5 million at March 31, 2024, from $682.6 million at December 31, 2023. The increase in deposits was attributable to
increases of $15.0 million in liquid deposits (demand, interest checking, and money market accounts) and $12.4 million in Insured Cash Sweep (“ICS”) deposits (ICS deposits are the Bank’s money market deposit accounts in excess of FDIC insured limits whereby the Bank makes reciprocal arrangements for insurance with other banks), partially offset by decreases of $12.2 million in Certificate of Deposit Registry Service
(“CDARS”) deposits (CDARS deposits are similar to ICS deposits, but involve certificates of deposit, instead of money market accounts), $1.7 million in savings deposits and $596 thousand in other certificates of deposit accounts. As of March 31, 2024, our uninsured deposits represented 38% of our total deposits, compared to 37% as of December 31, 2023. We leverage our long-standing partnership with
IntraFi Deposit Solutions to offer deposit insurance for accounts exceeding the FDIC deposit insurance limit of $250,000.
Total borrowings decreased by $15.8 million to $380.9 million at March 31, 2024, from $396.8 million at December 31, 2023, primarily due to the payoff of two notes payable totaling $14.0 million during January 2024. The notes payable had a blended interest cost of
approximately 3.75%.
Stockholders’ equity was $281.3 million, or 20.5% of the Company’s total assets, at March 31, 2024, compared to $281.9 million, or 20.5% of the Company’s total assets,
at December 31, 2023. Stockholders’ equity decreased primarily due to an increase in accumulated other comprehensive loss, net of tax of $571 thousand. Book value per share was
$14.42 at March 31, 2024, compared to $14.65 at December 31, 2023.
About Broadway Financial Corporation
Broadway Financial Corporation operates through its wholly-owned banking subsidiary, City First Bank, National Association, which is a leading
mission-driven bank that serves low-to-moderate income communities within urban areas in Southern California and the Washington, D.C. market.
About the City First Branded Family
City First Bank offers a variety of commercial real estate loan products, services, and depository accounts that support investments in affordable
housing, small businesses, and nonprofit community facilities located within low-to-moderate income neighborhoods. City First Bank is a Community Development Financial Institution, Minority Depository Institution, Certified B Corp, and a member of
the Global Alliance of Banking on Values. The Bank and the City First network of nonprofits, City First Enterprises, Homes By
CFE, and City First Foundation, represent the City First branded family of community
development financial institutions, which offer a robust lending and deposit platform.
Stockholders, analysts, and others seeking information about the Company are invited to write to: Broadway Financial Corporation, Investor Relations,
4601 Wilshire Boulevard, Suite 150, Los Angeles, CA 90010 or contact Investor Relations at the phone number or email address below.
Contacts
Investor Relations
Zack Ibrahim, Chief Financial Officer, (202) 243-7100
Investor.relations@cityfirstbroadway.com
Cautionary Statement Regarding Forward-Looking Information
This press release includes “forward-looking statements” within the meaning of the safe harbor provisions of the United States Private Securities
Litigation Reform Act of 1995. All statements other than statements of historical facts contained in this press release, including statements regarding our future results of operations or financial condition, business strategy and plans and
objectives of management for future operations and capital allocation and structure, are forward-looking statements. Forward‑looking statements typically include the words “expect,” “estimate,” “project,” “budget,” “forecast,” “anticipate,”
“intend,” “plan,” “may,” “will,” “could,” “should,” “believes,” “predicts,” “potential,” “continue,” “poised,” “optimistic,” “prospects,” “ability,” “looking,” “forward,” “invest,” “grow,” “improve,” “deliver” and similar expressions, but the
absence of such words or expressions does not mean a statement is not forward-looking. These forward‑looking statements are subject to risks and uncertainties, including those identified below, which could cause actual future results to differ
materially from historical results or from those anticipated or implied by such statements. The following factors, among others, could cause future results to differ materially from historical results or from those indicated by forward‑looking
statements included in this press release: (1) the level of demand for mortgage and commercial loans, which is affected by such external factors as general economic conditions, market interest rate levels, tax laws, and the demographics of our
lending markets; (2) the direction and magnitude of changes in interest rates and the relationship between market interest rates and the yield on our interest‑earning assets and the cost of our interest‑bearing liabilities; (3) the rate and amount
of loan losses incurred and projected to be incurred by us, increases in the amounts of our nonperforming assets, the level of our loss reserves and management’s judgments regarding the collectability of loans; (4) changes in the regulation of
lending and deposit operations or other regulatory actions, whether industry-wide or focused on our operations, including increases in capital requirements or directives to increase allowances for credit losses or make other changes in our business
operations; (5) legislative or regulatory changes, including those that may be implemented by the current administration in Washington, D.C. and the Federal Reserve; (6) possible adverse rulings, judgments, settlements and other outcomes of
litigation; (7) actions undertaken by both current and potential new competitors; (8) the possibility of adverse trends in property values or economic trends in the residential and commercial real estate markets in which we compete; (9) the effect
of changes in economic conditions; (10) the effect of geopolitical uncertainties; (11) the impact of health crises on our future financial condition and operations; (12) the impact of any volatility in the banking sector due to the failure of
certain banks due to high levels of exposure to liquidity risk, interest rate risk, uninsured deposits and cryptocurrency risk; and (13) other risks and uncertainties. All such factors are difficult to predict and are beyond our control.
Additional factors that could cause results to differ materially from those described above can be found in our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K or other filings made with the SEC and are
available on our website at http://www.cityfirstbank.com and on the SEC’s website at http://www.sec.gov.
Forward-looking statements in this press release speak only as of the date they are made, and we undertake no obligation, and do not intend, to update
these forward-looking statements to reflect events or circumstances occurring after the date of this press release, except to the extent required by law. You are cautioned not to place undue reliance on these forward-looking statements, which
speak only as of the date of this press release.