10-Q 1 ef20027714_10q.htm 10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For transition period from__________ to___________

Commission file number      001-39043

BROADWAY FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)

Delaware
 
95-4547287
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)

4601 Wilshire Boulevard, Suite 150
Los Angeles, California
 
90010
(Address of principal executive offices)
 
(Zip Code)

(323) 634-1700
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class:
 
Trading Symbol(s)
 
Name of each exchange on which registered:
Common Stock, par value $0.01 per share
(including attached preferred stock purchase rights)
 
BYFC
 
Nasdaq Capital Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ☒   No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes ☒   No ☐

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

Large accelerated filer
Accelerated filer
       
Non-accelerated filer
Smaller reporting company

   
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. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes   No ☒  

As of April 30, 2024, 6,033,212 shares of the registrant’s Class A voting common stock, 1,425,574 shares of the registrant’s Class B non-voting common stock and 1,672,562 shares of the registrant’s Class C non-voting common stock were outstanding.



TABLE OF CONTENTS
   
Page
PART I.
FINANCIAL STATEMENTS
 
       
 
Item 1.
Consolidated Financial Statements (Unaudited)
 
       
   
1
       
   
2
       
   
3
       
   
4
       
   
5
       
 
Item 2.
21
       
 
Item 3.
32
       
 
Item 4.
32
       
PART II.
OTHER INFORMATION
 
       
 
Item 1.
33
       
 
Item 1A.
33
       
 
Item 2.
33
       
 
Item 3.
33
       
 
Item 4.
33
       
 
Item 5.
33
       
 
Item 6.
33
       
 
34

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated Statements of Financial Condition
(In thousands, except share and per share amounts)

   
March 31, 2024
   
December 31, 2023
 
   
(Unaudited)
       
Assets:
           
Cash and due from banks
 
$
6,037
   
$
5,460
 
Interest-bearing deposits in other banks
   
61,085
     
99,735
 
Cash and cash equivalents
   
67,122
     
105,195
 
Securities available-for-sale, at fair value
   
293,243
     
316,950
 
Loans receivable held for investment, net of allowance of $7,552 and $7,348
   
926,497
     
880,457
 
Accrued interest receivable
   
5,638
     
4,938
 
Federal Home Loan Bank (“FHLB”) stock
   
10,292
     
10,156
 
Federal Reserve Bank (“FRB”) stock
    3,543
      3,543
 
Office properties and equipment, net
   
9,731
     
9,840
 
Bank owned life insurance, net
   
3,286
     
3,275
 
Deferred tax assets, net
   
9,827
     
9,538
 
Core deposit intangible, net
    2,027
      2,111
 
Goodwill
    25,858
      25,858
 
Other assets
   
13,400
     
3,543
 
Total assets
 
$
1,370,464
   
$
1,375,404
 
                 
Liabilities and stockholders’ equity
               
Liabilities:
               
Deposits
 
$
695,494
   
$
682,635
 
Securities sold under agreements to repurchase
    71,681       73,475  
FHLB advances
   
209,280
     
209,319
 
Bank Term Funding Program (“BTFP”) borrowing
    100,000       100,000  
Notes payable
   
      14,000
 
Accrued expenses and other liabilities
   
12,542
     
13,878
 
Total liabilities
   
1,088,997
     
1,093,307
 
Non-Cumulative Redeemable Perpetual Preferred stock, Series C; authorized 150,000 shares at March 31, 2024 and December 31, 2023; issued and outstanding 150,000 shares at March 31, 2024 and December 31, 2023; liquidation value $1,000 per share
    150,000       150,000  
Common stock, Class A, $0.01 par value, voting; authorized 75,000,000 shares at March 31, 2024 and December 31, 2023; issued 6,230,705 shares at March 31, 2024 and December 31, 2023; outstanding 6,009,274 shares at March 31, 2024 and 5,914,861 shares at December 31, 2023
   
62
     
62
 
Common stock, Class B, $0.01 par value, non-voting; authorized 15,000,000 shares at March 31, 2024 and December 31, 2023; issued and outstanding 1,425,574 shares at March 31, 2024 and December 31, 2023
    14
      14
 
Common stock, Class C, $0.01 par value, non-voting; authorized 25,000,000 shares at March 31, 2024 and December 31, 2023; issued and outstanding 1,672,562 at March 31, 2024 and December 31, 2023
   
17
     
17
 
Additional paid-in capital
   
142,653
     
142,601
 
Retained earnings
   
12,388
     
12,552
 
Unearned Employee Stock Ownership Plan (“ESOP”) shares    
(4,420
)
   
(4,492
)
Accumulated other comprehensive loss, net of tax
   
(14,096
)
   
(13,525
)
Treasury stock-at cost, 327,228 shares at March 31, 2024 and at December 31, 2023
   
(5,326
)
   
(5,326
)
Total Broadway Financial Corporation and Subsidiary stockholders’ equity
   
281,292
     
281,903
 
Non-controlling interest
    175       194  
Total liabilities and stockholders’ equity
 
$
1,370,464
   
$
1,375,404
 

See accompanying notes to unaudited consolidated financial statements.

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated Statements of Operations and Comprehensive (Loss) Income
(In thousands, except per share amounts)
 (Unaudited)

 
 
Three Months Ended March 31,
 
 
 
2024
   
2023
 
Interest income:
           
Interest and fees on loans receivable
 
$
11,129
   
$
8,666
 
Interest on available-for-sale securities
   
2,075
     
2,180
 
Other interest income
   
1,589
     
328
 
Total interest income
   
14,793
     
11,174
 
 
               
Interest expense:
               
Interest on deposits
   
2,799
     
1,303
 
Interest on borrowings
   
4,470
     
1,597
 
Total interest expense
   
7,269
     
2,900
 
 
               
Net interest income
   
7,524
     
8,274
 
Provision for credit losses
   
260
     
88
 
Net interest income after provision for credit losses
   
7,264
     
8,186
 
 
               
Non-interest income:
               
Service charges
   
40
     
61
 
Other
   
266
     
228
 
Total non-interest income
   
306
     
289
 
 
               
Non-interest expense:
               
Compensation and benefits
   
4,397
     
3,749
 
Occupancy expense
   
435
     
303
 
Information services
   
707
     
715
 
Professional services
   
1,410
     
505
 
Supervisory costs
   
177
     
94
 
Office services and supplies
   
34
     
22
 
Advertising and promotional expense     28       68  
Corporate insurance
   
61
     
62
 
Appraisal and other loan expense
          43  
Amortization of core deposit intangible
   
84
     
98
 
Travel expense
    79       78  
Other expense
   
398
     
469
 
Total non-interest expense
   
7,810
     
6,206
 
 
               
(Loss) income before income taxes
   
(240
)
   
2,269
 
Income tax (benefit) expense
   
(57
)
   
674
 
Net (loss) income
 
$
(183
)
 
$
1,595
 
Less: Net (loss) income attributable to non-controlling interest
   
(19
)
   
22
 
Net (loss) income attributable to Broadway Financial Corporation
 
$
(164
)
 
$
1,573
 
 
               
Other comprehensive (loss) income, net of tax:
               
Unrealized (losses) income on securities available-for-sale arising during the period
 
$
(803
)
 
$
3,433
 
Income tax (benefit) expense
   
(232
)
   
988
 
Other comprehensive (loss) income, net of tax
   
(571
)
   
2,445
 
 
               
Comprehensive (loss) income
 
$
(735
)
 
$
4,018
 
 
               
(Loss) earnings per common share-basic(1)
 
$
(0.02
)
 
$
0.18
 
(Loss) earnings per common share-diluted(1)
 
$
(0.02
)
 
$
0.17
 

(1)  Retroactively adjusted, as applicable, for the 1-for-8 reverse stock split effective November 1, 2023 - see Note 1

See accompanying notes to unaudited consolidated financial statements.

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated Statements of Cash Flows
(Unaudited)

   
Three Months Ended
March 31,
 
   
2024
   
2023
 
   
(In thousands)
 
Cash flows from operating activities:
           
Net (loss) income
 
$
(183
)
 
$
1,595
 
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
               
Provision for credit losses
   
260
     
88
 
Depreciation
   
164
     
172
 
Net change of deferred loan origination costs
   
137
     
(223
)
Net amortization of premiums and discounts on available-for-sale securities
   
(253
)
   
(253
)
Accretion of purchase accounting marks on loans
   
(32
)
   
 
Amortization of core deposit intangible
   
84
     
98
 
Director compensation expense-common stock
   
     
96
 
(Accretion) amortization of premium on FHLB advances
   
(4
)
   
1
 
Stock-based compensation expense
   
77
     
38
 
ESOP compensation expense
   
47
     
(202
)
Earnings on bank owned life insurance
   
(11
)
   
(9
)
Change in assets and liabilities:
               
Net change in deferred taxes
   
(57
)
   
569
 
Net change in accrued interest receivable
    (700 )     (246 )
Net change in other assets
   
(9,857
)
   
42
 
Net change in accrued expenses and other liabilities
   
(1,336
)
   
2,035
 
Net cash (used in) provided by operating activities
   
(11,664
)
   
3,801
 
                 
Cash flows from investing activities:
               
Net change in loans receivable held for investment
   
(46,405
)
   
(9,681
)
Principal payments on available-for-sale securities
   
23,157
     
3,409
 
Purchase of FHLB stock
   
(136
)
   
(1,765
)
Proceeds from redemption of FRB stock
          1,721  
Purchase of office properties and equipment
   
(55
)
   
(3
)
Net cash used in investing activities
   
(23,439
)
   
(6,319
)
                 
Cash flows from financing activities:
               
Net change in deposits
   
12,859
     
(29,374
)
Net change in securities sold under agreements to repurchase
   
(1,794
)
   
7,470
 
Purchase of unreleased ESOP shares
   
     
(2,500
)
Repayment of notes payable
   
(14,000
)
   

 
Proceeds from FHLB advances
   
     
40,500
 
Repayments of FHLB advances
   
(35
)
   
(35
)
Net cash (used in) provided by financing activities
   
(2,970
)
   
16,061
 
Net change in cash and cash equivalents
   
(38,073
)
   
13,543
 
Cash and cash equivalents at beginning of the period
   
105,195
     
16,105
 
Cash and cash equivalents at end of the period
 
$
67,122
   
$
29,648
 
Supplemental disclosures of cash flow information:
               
Cash paid for interest
 
$
5,913
   
$
2,882
 
Cash paid for income taxes
   
48
     
 

See accompanying notes to unaudited consolidated financial statements.

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated Statements of Changes in Stockholders’ Equity
(Unaudited)

 
 
Three-Month Periods Ended March 31, 2024 and 2023
 
 
 
Preferred Stock Non-
Voting
   
Common
Stock
Voting
   
Common
Stock Non-
Voting
   
Additional
Paid-in
Capital
   
Accumulated Other Comprehensive Loss
   
Retained Earnings
   
Unearned
ESOP Shares
   
Treasury
Stock
   
Non-
Controlling Interest
   
Total
Stockholders’
Equity
 
 
 
(In thousands)
 
Balance at December 31, 2023
 
$
150,000
   
$
62
   
$
31
   
$
142,601
   
$
(13,525
)
 
$
12,552
   
$
(4,492
)
 
$
(5,326
)
 
$
194
   
$
282,097
 
Net loss
   
     
     
     
     
     
(164
)
   
     
     
(19
)
   
(183
)
Release of unearned ESOP shares
   
     
     
     
(25
)
   
     
     
72
     
     
     
47
 
Stock-based compensation expense
   

     

     

     
77
     

     

     
     

     

     
77
 
Other comprehensive loss, net of tax
   
     
     
     
     
(571
)
   
     
     
     
     
(571
)
Balance at March 31, 2024
 
$
150,000
   
$
62
   
$
31
   
$
142,653
   
$
(14,096
)
 
$
12,388
   
$
(4,420
)
 
$
(5,326
)
 
$
175
   
$
281,467
 
 
                                                                               
Balance at December 31, 2022
 
$
150,000
   
$
64
   
$
31
   
$
144,157
   
$
(17,473
)
 
$
9,294
   
$
(1,265
)
 
$
(5,326
)
 
$
170
   
$
279,652
 
Cumulative effect of change related to adoption of ASU 2016-13
                                  (1,256 )                       (1,256 )
Adjusted balance, January 1, 2023
    150,000       64       31       144,157       (17,473 )     8,038       (1,265 )     (5,326 )     170       278,396  
Net income
   
     
     
     
     
     
1,573
     
     
     
22
     
1,595
 
Release of unearned ESOP shares
                      (4 )                 (198 )                 (202 )
Increase in unreleased shares
                                        (2,500 )                 (2,500 )
Stock-based compensation expense
   
     
     
     
38
     
     
     
     
     
     
38
 
Director stock compensation expense
          1             95                                     96  
Other comprehensive income, net of tax
   
     
     
     
     
2,445
     
     
     
     
     
2,445
 
Balance at March 31, 2023
 
$
150,000
   
$
65
   
$
31
   
$
144,286
   
$
(15,028
)
 
$
9,611
   
$
(3,963
)
 
$
(5,326
)
 
$
192
   
$
279,868
 

See accompanying notes to unaudited consolidated financial statements.

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY
Notes to Unaudited Consolidated Financial Statements

NOTE 1 – Basis of Financial Statement Presentation


The accompanying unaudited consolidated financial statements include Broadway Financial Corporation (the “Company”) and its wholly owned subsidiary, City First Bank, National Association (the “Bank” and, together with the Company, “City First Broadway”). Also included in the unaudited consolidated financial statements are the following subsidiaries of City First Bank: 1432 U Street LLC, Broadway Service Corporation, City First Real Estate LLC, City First Real Estate II LLC, City First Real Estate III LLC, City First Real Estate IV LLC, and CF New Markets Advisors, LLC (“CFNMA”). In addition, CFNMA also consolidates CFC Fund Manager II, LLC; City First New Markets Fund II, LLC; City First Capital IX, LLC; and City First Capital 45, LLC (“CFC 45”) into its financial results. All significant intercompany balances and transactions have been eliminated in consolidation.


The unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions for quarterly reports on Form 10-Q. These unaudited consolidated financial statements do not include all disclosures associated with the Company’s consolidated annual financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2023 (“2023 Form 10-K”) and, accordingly, should be read in conjunction with such audited consolidated financial statements. In the opinion of management, all adjustments (all of which are normal and recurring in nature) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024.

Reverse Stock Split


On October 30, 2023, the Company effected a reverse stock split of the Company’s outstanding shares of Class A common stock, Class B common stock, and Class C common stock, par value $0.01 per share at a ratio of 1-for-8 (the “Reverse Stock Split”). The shares of Class A common stock listed on The Nasdaq Capital Market commenced trading on The Nasdaq Capital Market on a post-Reverse Stock Split adjusted basis at the open of business on November 1, 2023.  As a result of the Reverse Stock Split, the number of issued and outstanding shares of common stock immediately prior to the Reverse Stock Split was reduced such that every 8 shares of common stock held by a stockholder immediately prior to the Reverse Stock Split were combined and reclassified into one share of common stock.  All common stock share amounts and per share numbers discussed herein have been retroactively adjusted for the Reverse Stock Split.


Except as discussed below, our accounting policies are described in Note 1 – Summary of Significant Accounting Policies of our audited consolidated financial statements included in the 2023 Form 10-K.

NOTE 2 Earnings Per Share of Common Stock