10-Q 1 brhc10044096_10q.htm 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2022

☐
TRANSITION REPORT UNDER 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 ☒  

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:  As of November 7, 2022, 48,186,828 shares of the Registrant’s Class A voting common stock, 11,404,618 shares of the Registrant’s Class B non-voting common stock and 16,689,775 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
 
 
 
 
 
 
6
 
 
 
 
 
Item 2.
23
 
 
 
 
 
Item 3.
35
 
 
 
 
 
Item 4.
35
 
 
 
 
PART II.
OTHER INFORMATION
 
 
 
 
 
 
Item 1.
 36
 
 
 
 
 
Item 1A.
36
 
 
 
 
 
Item 2.
 36
 
 
 
 
 
Item 3.
36
 
 
 
 
 
Item 4.
36
 
 
 
 
 
Item 5.
36
 
 
 
 
 
Item 6.
 36
 
 
 
 
 
37
BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated Statements of Financial Condition
(In thousands, except share and per share amounts)

   
September 30, 2022
    
December 31, 2021
  
   
(Unaudited)
        
Assets:
            
Cash and due from banks
  
$
12,630
    
$
38,418
  
Interest-bearing deposits in other banks
    
39,587
      
193,102
  
Cash and cash equivalents
    
52,217
      
231,520
  
Securities available-for-sale, at fair value
    
332,745
      
156,396
  
Loans receivable held for investment, net of allowance of $3,983 and $3,391
    
722,685
      
648,513
  
Accrued interest receivable
    
3,467
      
3,372
  
Federal Home Loan Bank (FHLB) stock
    
1,470
      
2,573
  
Federal Reserve Bank (FRB) stock
     697
       693
  
Office properties and equipment, net
    
10,530
      
10,344
  
Bank owned life insurance
    
3,222
      
3,190
  
Deferred tax assets, net
    
11,871
      
6,101
  
Core deposit intangible, net
     2,610
       2,936
  
Goodwill
     25,858
       25,996
  
Other assets
    
2,262
      
1,871
  
Total assets
  
$
1,169,634
    
$
1,093,505
  
                 
Liabilities and stockholders’ equity
                
Liabilities:
                
Deposits
  
$
768,511
    
$
788,052
  
Securities sold under agreements to repurchase
     65,407       51,960  
FHLB advances
    
32,888
      
85,952
  
Notes payable
     14,000
       14,000
  
Accrued expenses and other liabilities
    
11,246
      
12,441
  
Total liabilities
    
892,052
      
952,405
  
Cumulative Perpetual Preferred stock, Series A; authorized 3,000 shares at September 30, 2022 and December 31, 2021; issued and outstanding no shares at September 30, 2022 and 3,000 at December 31, 2021; liquidation value $1,000 per share
   
–
      
3,000
  
Non-Cumulative Redeemable Perpetual Preferred stock, Series C; authorized 150,000 shares at September 30, 2022 and no shares as of December 31, 2021; issued and outstanding 150,000 shares at September 30, 2022 and no shares at December 31, 2021; liquidation value $1,000 per share
     150,000       –  
Common stock, Class A, $0.01 par value, voting; authorized 75,000,000 shares at September 30, 2022 and December 31, 2021; issued 50,806,999 shares at September 30, 2022 and 46,291,852 shares at December 31, 2021; outstanding 48,189,173 shares at September 30, 2022 and 43,674,026 shares at December 31, 2021
    
508
      
463
  
Common stock, Class B, $0.01 par value, non-voting; authorized 15,000,000 shares at September 30, 2022 and December 31, 2021; issued and outstanding 11,404,618 shares at September 30, 2022 and December 31, 2021
     114
       114
  
Common stock, Class C, $0.01 par value, non-voting; authorized 25,000,000 shares at September 30, 2022 and December 31, 2021; issued and outstanding 13,842,710 at September 30, 2022 and 16,689,775 shares at December 31, 2021
    
139
      
167
  
Additional paid-in capital
    
143,457
      
140,289
  
Retained earnings
    
7,788
      
3,673
  
Unearned Employee Stock Ownership Plan (ESOP) shares
    
(781
)
    
(829
)
Accumulated other comprehensive loss, net of tax
    
(18,468
)
    
(551
)
Treasury stock-at cost, 2,617,826 shares at September 30, 2022 and at December 31, 2021
    
(5,326
)
    
(5,326
)
Total Broadway Financial Corporation and Subsidiary stockholders’ equity
    
277,431
      
141,000
  
Non-controlling interest
     151       100  
Total liabilities and stockholders’ equity
  
$
1,169,634
    
$
1,093,505
  

See accompanying notes to unaudited consolidated financial statements.

1
BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated Statements of Operations and Comprehensive Income (Loss)
(In thousands, except per share amounts)
 (Unaudited)

   
Three Months Ended
September 30,
    
Nine Months Ended
September 30,
  
   
2022
    
2021
    
2022
    
2021
  
                         
Interest income:
                        
Interest and fees on loans receivable
  
$
6,520
    
$
6,296
    
$
20,603
    
$
16,240
  
Interest on available-for-sale securities
    
2,069
      
457
      
3,416
      
953
  
Other interest income
    
639
      
156
      
1,589
      
377
  
Total interest income
    
9,228
      
6,909
      
25,608
      
17,570
  
                                 
Interest expense:
                                
Interest on deposits
    
474
      
446
      
1,173
      
1,306
  
Interest on borrowings
    
146
      
472
      
617
      
1,607
  
Total interest expense
    
620
      
918
      
1,790
      
2,913
  
                                 
Net interest income
    
8,608
      
5,991
      
23,818
      
14,657
  
Loan loss provision
    
1,021
      
365
      
592
      
446
  
Net interest income after loan loss provision
    
7,587
      
5,626
      
23,226
      
14,211
  
                                 
Non-interest income:
                                
Service charges
    
21
      
76
      
106
      
205
  
CDFI Grant
    
–
      
217
      
–
      
2,043
  
Other
    
344
      
316
      
801
      
676
  
Total non-interest income
    
365
      
609
      
907
      
2,924
  
                                 
Non-interest expense:
                                
Compensation and benefits
    
3,440
      
3,334
      
10,366
      
11,543
  
Occupancy expense
    
367
      
392
      
1,209
      
1,327
  
Information services
    
732
      
787
      
2,364
      
1,594
  
Professional services
    
861
      
616
      
2,183
      
3,068
  
Supervisory costs
    
4
      
139
      
261
      
386
  
Office services and supplies
    
38
      
65
      
153
      
219
  
Corporate insurance
    
49
      
47
      
164
      
301
  
Amortization of core deposit intangible
    
109
      
131
      
326
      
262
  
Other
    
472
      
467
      
1,272
      
1,279
  
Total non-interest expense
    
6,072
      
5,978
      
18,298
      
19,979
  
                                 
Income (loss) before income taxes
    
1,880
      
257
      
5,835
      
(2,844
)
Income tax expense (benefit)
    
534
      
51
      
1,654
      
(297
)
Net income (loss)
  
$
1,346
    
$
206
    
$
4,181
    
$
(2,547
)
Less: Net income attributable to non-controlling interest
    
28
      
24
      
51
      
57
  
Net income (loss) attributable to Broadway Financial Corporation
  
$
1,318
    
$
182
    
$
4,130
    
$
(2,604
)
                                 
Other comprehensive income, net of tax:
                                
Unrealized gains (losses) on securities available-for-sale arising during the period
  
$
(11,949
)
  
$
(640
)
  
$
(25,281
)
  
$
224
  
Income tax (benefit) expense
    
(3,382
)
    
(180
)
    
(7,364
)
    
63
  
Other comprehensive income (loss), net of tax
    
(8,567
)
    
(460
)
    
(17,917
)
    
161
  
                                 
Comprehensive income (loss)
  
$
(7,249
)
  
$
(278
)
  
$
(13,787
)
  
$
(2,443
)
                                 
Earnings (loss) per common share-basic
  
$
0.02
    
$
–
    
$
0.06
    
$
(0.05
)
Earnings (loss) per common share-diluted
  
$
0.02
    
$
–
    
$
0.06
    
$
(0.05
)

See accompanying notes to unaudited consolidated financial statements.

2
BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated Statements of Cash Flows
(Unaudited)

   
Nine Months Ended
September 30,
  
   
2022
    
2021
  
   
(In thousands)
  
Cash flows from operating activities:
            
Net income (loss)
  
$
4,181
    
$
(2,547
)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
                
Loan loss provision
    
592
      
446
  
Depreciation
    
630
      
198
  
Net change of deferred loan origination costs
    
38
   
457
  
Net amortization of premiums & discounts on available-for-sale securities
    
20
      
705
  
Amortization of investment in affordable housing limited partnership
    
–
      
39
  
Amortization of purchase accounting marks on loans
    
(647
)
    
56
  
Amortization of core deposit intangible
    
326
      
262
  
Director compensation expense-common stock
    
84
      
46
  
Accretion of premium on FHLB advances
    
(64
)
    
(26
)
Stock-based compensation expense
    
93
      
368
  
Valuation allowance on deferred tax asset
    
–
      
370
  
ESOP compensation expense
    
56
      
81
  
Earnings on bank owned life insurance
    
(32
)
    
(32
)
Change in assets and liabilities:
                
Net change in deferred taxes
    
1,732
      
(1,162
)
Net change in accrued interest receivable
     (95 )     274
  
Net change in other assets
    
(391
)
    
765
  
Net change in accrued expenses and other liabilities
    
(1,195
)
    
3,669
  
Net cash provided by operating activities
    
5,328
      
3,969
  
                 
Cash flows from investing activities:
                
Cash acquired in merger
    
–
      
84,745
  
Net change in loans receivable held for investment
    
(74,155
)
    
(57,143
)
Principal payments on available-for-sale securities
    
13,850
      
12,662
  
Purchase of available-for-sale securities
    
(215,500
)
    
(10,098
)
Purchase of FHLB stock
    
(332
)
    
(152
)
Proceeds from redemption of FHLB stock
    
1,431
      
1,243
  
Purchase of office properties and equipment
    
(816
)
    
(119
)
Proceeds from disposals of office properties and equipment
    
–
      
3
  
Net cash (used in) provided by investing activities
    
(275,522
)
    
31,141
  
                 
Cash flows from financing activities:
                
Net change in deposits
    
(19,541
)
    
80,294
  
Net change in securities sold under agreements to repurchase
    
13,447
      
(7,069
)
Proceeds from sale of stock (net of costs)
    
–
      
30,837
  
Proceeds from issuance of preferred stock
    
150,000
      
–
  
Dividends paid on preferred stock
    
(15
)
    
(30
)
Distributions to non-controlling interest
    
–
      
(165
)
Proceeds from FHLB advances
    
–
      
5,000
  
Repayments of FHLB advances
    
(53,000
)
    
(27,570
)
Stock cancelled for income tax withholding
    
–
      
(514
)
Repayments of junior subordinated debentures
    
–
      
(3,315
)
Net cash provided by financing activities
    
90,891
      
77,468
  
Net change in cash and cash equivalents
    
(179,303
)
    
112,578
  
Cash and cash equivalents at beginning of the period
    
231,520
      
96,109
  
Cash and cash equivalents at end of the period
  
$
52,217
    
$
208,687
  
                 
Supplemental disclosures of cash flow information:
                
Cash paid for interest
  
$
1,758
    
$
2,424
  
Cash paid for income taxes
    
42
      
454
  
                 
Assets acquired (liabilities assumed) in acquisition:
                
Securities available-for-sale, at fair value
  
$
–
    
$
149,975
  
Loans receivable
    
–
      
225,885
  
Accrued interest receivable
    
–
      
1,637
  
FHLB and FRB stock
    
–
      
1,061
  
Office property and equipment
    
–
      
6,953
  
Goodwill
    
(138
)
    
25,966
  
Core deposit intangible
    
–
      
3,329
  
Other assets
    
–
      
2,290
  
Deposits
    
–
      
(353,722
)
FHLB advances
    
–
      
(3,166
)
Securities sold under agreements to repurchase
    
–
      
(59,945
)
Other borrowings
    
–
      
(14,000
)
Deferred taxes
    
138
      
(717
)
Accrued expenses and other liabilities
    
–
      
(4,063
)
Preferred stock
    
–
      
(3,000
)
Common stock
    
–
      
(63,257
)

See accompanying notes to unaudited consolidated financial statements.

3
BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated Statements of Changes in Stockholders’ Equity
(Unaudited)

   
Three-Month Period Ended September 30, 2022 and 2021
  
   

Preferred Stock Non-Voting
    
Common
Stock
Voting
    
Common
Stock Non-Voting
    
Additional
Paid‑in
Capital
    
Accumulated Other Comprehensive Income (Loss)
    
Retained Earnings
    
Unearned
ESOP Shares
    
Treasury
Stock
    
Non-Controlling Interest
    
Total
Stockholders’
Equity
  
   
(In thousands)
  
Balance at July 1, 2022
  
$
150,000
    
$
504
    
$
257
    
$
143,427
    
$
(9,901
)
  
$
6,470
    
$
(797
)
  
$
(5,326
)
  
$
123
    
$
284,757
  
Net income
    
–
      
–
      
–
      
–
      
–
      
1,318
      
–
      
–
       28       1,346  
Release of unearned ESOP shares
     –       –       –       (5 )     –       –       16       –       –       11  
Restricted stock compensation expense
     –       –       –       35       –       –       –       –       –       35  
Conversion of non-voting shares into voting shares
     –       4       (4 )     –       –       –       –       –       –       –  
Other comprehensive loss, net of tax
     –       –       –       –       (8,567 )     –       –       –       –       (8,567 )
Balance at September 30, 2022
  
$
150,000
    
$
508
    
$
253
    
$
143,457
    
$
(18,468
)
  
$
7,788
    
$
(781
)
  
$
(5,326
)
  
$
151
    
$
277,582
  
                                                                                 
Balance at July 1, 2021
  
$
3,000
    
$
462
    
$
281
    
$
140,125
    
$
785
    
$
4,997
    
$
(861
)
  
$
(5,326
)
  
$
32
    
$
143,495
  
Net income
    
–
      
–
      
–
      
–
      
–
      
182
      
–
      
–
       24      
206
  
Preferred shares issued in business combination
     –
      
–
      
–
      
–
      
–
      
(30
)
    
–
      
–
       –      
(30
)
Release of unearned ESOP shares
     –       –       –       17       –       –       17       –       –       34  
Common stock cancelled for payment of tax withholding
     –       –       –       (66 )     –