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:
- 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.
- 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.
- 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.
- The Bank had only one non-performing loan, totaling $401
thousand, at March 31, 2024 and total delinquencies remained at
less than $800 thousand.
- 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.
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.
For the Three Months
Ended
March 31, 2024
March 31, 2023
(Dollars in thousands)
Average Balance
Interest
Average Yield
Average Balance
Interest
Average Yield
Assets
Interest-earning assets:
Interest-earning deposits
$
99,103
$
1,344
5.42
%
$
17,044
$
119
2.79
%
Securities
305,615
2,075
2.72
%
328,767
2,180
2.65
%
Loans receivable (1)
909,965
11,129
4.89
%
762,669
8,535
4.48
%
FRB and FHLB stock (2)
13,733
245
7.14
%
10,665
209
7.84
%
Total interest-earning assets
1,328,416
$
14,793
4.45
%
1,119,145
$
11,174
3.99
%
Non-interest-earning assets
52,561
67,947
Total assets
$
1,380,977
$
1,187,092
Liabilities and Stockholders’
Equity
Interest-bearing liabilities:
Money market deposits
$
125,704
$
1,444
4.59
%
$
134,047
$
771
2.30
%
Savings deposits
59,056
102
0.69
%
61,317
13
0.08
%
Interest checking and other demand
deposits
227,504
143
0.25
%
239,024
77
0.13
%
Certificate accounts
163,116
1,110
2.72
%
147,260
442
1.20
%
Total deposits
575,380
2,799
1.95
%
581,648
1,303
0.90
%
FHLB advances
209,299
2,598
4.97
%
145,201
1,454
4.01
%
Bank Term Funding Program borrowing
100,000
1,203
4.81
%
-
-
-
%
Other borrowings
77,601
669
3.45
%
69,618
143
0.82
%
Total borrowings
386,900
4,470
4.62
%
214,819
1,597
2.97
%
Total interest-bearing liabilities
962,280
$
7,269
3.02
%
796,467
$
2,900
1.46
%
Non-interest-bearing liabilities
137,035
109,955
Stockholders’ equity
281,662
280,670
Total liabilities and stockholders’
equity
$
1,380,977
$
1,187,092
Net interest rate spread (3)
$
7,524
1.43
%
$
8,274
2.54
%
Net interest rate margin (4)
2.27
%
2.96
%
Ratio of interest-earning assets to
interest-bearing liabilities
138.05
%
140.51
%
(1)
Amount is net of deferred loan fees, loan discounts and loans in
process, and includes deferred origination costs and loan
premiums.
(2)
FHLB is Federal Home Loan Bank.
(3)
Net interest rate spread represents the
difference between the yield on average interest-earning assets and
the cost of average interest-bearing liabilities.
(4)
Net interest rate margin represents net
interest income as a percentage of average interest-earning
assets.
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.
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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240610469309/en/
Investor Relations Zack Ibrahim, Chief Financial Officer, (202)
243-7100 Investor.relations@cityfirstbroadway.com
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