Broadway Financial Corporation (“Broadway” or the “Company”) (NASDAQ: BYFC), parent company of City First Bank, National Association (the “Bank”, and collectively with the Company, “we” or “City First Broadway”), reported net income attributable to Broadway of $1.3 million for the fourth quarter of 2024 compared to $2.6 million for the fourth quarter of 2023, a decrease of $1.3 million. Net income attributable to common stockholders was $550 thousand during the fourth quarter of 2024, after deducting preferred dividends of $750 thousand, compared to net income attributable to common stockholders of $2.6 million for the fourth quarter of 2023. Diluted earnings per common share was $0.06 for the fourth quarter of 2024, compared to $0.31 per diluted common share for the fourth quarter of 2023, which reflected grant income of $3.7 million received from the Equitable Recovery Program administered by the U.S. Treasury's Community Development Financial Institutions (“CDFI”) Fund. Diluted earnings per common share for the fourth quarter of 2024 reflects preferred dividends of $0.09 per diluted common share.
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During the fourth quarter of 2024, net interest income increased by $850 thousand, or 11.9%, to $8.0 million, compared to $7.1 million for the fourth quarter of 2023. The increase resulted from higher interest income of $3.1 million, primarily due to an increase in interest on loans and interest-bearing deposits at other banks, partially offset by higher interest expense of $2.3 million, primarily due to an increase in the cost of borrowings and deposits.
For the year ended December 31, 2024, the Company reported net incomeattributable to Broadway of $1.9 million compared to $4.5 million for the year ended December 31, 2023. Net income attributable to common stockholders was $359 thousand for the year ended December 31, 2024 after deducting preferred dividends of $1.6 million, compared to net income attributable to common stockholders of $4.5 million for the year ended December 31, 2023. Diluted earnings per common share was $0.04 for the year ended December 31, 2024 compared to $0.51 of earnings per diluted common share for the year ended December 31, 2023. Diluted earnings per share for the year ended December 31, 2024 reflects preferred dividends of $0.18 per diluted common share.
The decrease in net income attributable to the Company during the year ended December 31, 2024, compared to the year ended December 31, 2023, primarily resulted from a decrease in non-interest income of $3.8 million, related to the grant income in 2023 described above, and an increase in non-interest expense of $2.5 million, partially offset by an increase in net interest income after provision for credit losses of $2.6 million, and a decrease in tax expense of $1.2 million.
Fourth Quarter and Year End 2024 Highlights:
— During the fourth quarter of 2024, total interest income increased by $3.1 million, or 24.9%, compared to the fourth quarter of 2023. For calendar year 2024, total interest income increased by $15.0 million, or 31.7%, compared to calendar 2023.
— The yield on average interest-earning assets increased by 55 basis points to 4.78% for the fourth quarter of 2024, compared to 4.23% for the fourth quarter of 2023.
— Total gross loans receivable increased by $89.2 million, or 10.0%, to $977.0 million at December 31, 2024, compared to $887.8 million at December 31, 2023.
— The value of the Company's portfolio of securities available-for-sale increased by $3.2 million during the year ended December 31, 2024 and resulted in other comprehensive income of $2.3 million, net of taxes.
Chief Executive Officer, Brian Argrett commented, “2024 was full of accomplishments and challenges for City First Broadway. Our team continues to work diligently to meet our strategic goals, while improving our operating performance as we serve our communities. We experienced significant loan and deposit growth while maintaining strong credit quality within the loan portfolio. During the year, we were able to grow net loans by $88.4 million, or 10%, increase deposits by $62.8 million, or 9.2%, and reduce borrowings by almost $135 million, or over one-third. Importantly, we were able to replace over half of those borrowings with much lower cost deposits, and I am pleased to report that we grew deposits by over $73 million in the fourth quarter. Net interest income after provision for credit losses improved by almost $2.6 million in 2024, compared to 2023, notwithstanding an increase in our cost of funds of 101 basis points during the year. I am optimistic that the re-shifting of our funding mix from higher cost borrowings to lower cost deposits will help improve performance in 2025.”
“I am also pleased to report favorable trends for net income for the year and a noteworthy fourth quarter. Net income attributable to common shareholders increased $788 thousand during the fourth quarter compared to the third quarter of 2024. The increase was due to a reduction in interest expense, recovery on the loan provision, higher non-interest income, and a decline in non-interest expenses. Similarly, for the full calendar year, we generated increased interest income, net interest income, and net interest income after provision for credit losses.”
“We are excited about 2025 and the positive impact we can achieve for our customers and shareholders as we remain committed to our mission. We believe that we have the necessary talent, capital and liquidity to execute our strategy and meet the needs of the communities we serve.”
Net Interest Income
Fourth Quarter of 2024 Compared to Fourth Quarter of 2023
Net interest income before recovery of credit losses for the fourthquarter of 2024totaled $8.0 million, representing an increaseof $850 thousand, or 11.9%, from net interest income before provision for credit losses of $7.1 million for the fourthquarter of 2023. The increase resulted from higher interest income of $3.1 million, partially offset by an increase in interest expense of $2.3 million. The increase in interest income was primarily due to an increase of 55 basis points in the overall rate earned on interest-earning assets in the fourth quarter of 2024, compared to the fourth quarter of 2023, as the Bank earned higher rates on the loan portfolio, interest-earning deposits and stock investments with the Federal Reserve and Federal Home Loan Bank. In addition, the increase in interest income was due to growth of $127.4 million in average loans receivable and $86.1 million in average interest-earning deposits in other banks, which were partially offset by a decline of $93.4 million in average securities during the fourth quarter of 2024, compared to the fourth quarter of 2023. The increase in interest income was partially offset by an increase in the average cost of funds, which increased to 3.23% for the fourth quarter of 2024 from 2.56% for the fourth quarter of 2023, due to higher rates paid on borrowings and deposits and a shift in the mix of average balances of borrowings, relative to deposits. Net interest margin increased to 2.42% for the fourth quarter of 2024 from 2.40% for the fourth quarter of 2023.
Full Calendar Year 2024 Compared to Full Calendar Year 2023
Net interest income before provision for credit losses for the year ended December 31, 2024totaled $31.8 million, representing an increaseof $2.3 million, or 7.8%, from net interest income before provision for credit losses of $29.5 million for the year ended December 31, 2023. The increase resulted from higher interest income of $15.0 million, partially offset by an increase in interest expense of $12.7 million. The increase in interest income was primarily due to an increase of 61 basis points in the overall rate earned on interest-earning assets during the year ended December 31, 2024, compared to the year ended December 31, 2023, as the Bank earned higher rates on the loan portfolio, interest-bearing deposits, and stock investments with the Federal Reserve and Federal Home Loan Bank. In addition, the increase in interest income was due to an increase of $138.8 million in the average balance of loans receivable and an increase of $87.9 million in average interest-bearing deposits in other banks, which were partially offset by a decrease of $59.5 million in average securities. The increase in interest income was partially offset by an increase in the average cost of funds, which increased to 3.16% for the year ended December 31, 2024, from 2.15% for the year ended December 31, 2023, due to higher rates paid on borrowings and deposits, and a shift in the mix of average balances of borrowings, relative to deposits. Net interest margin decreased to 2.40% for the year ended December 31, 2024, compared to 2.55% for the year ended December 31, 2023.
Provision for Credit Losses
For the fourth quarter of 2024, the Company recorded a recovery of credit losses of $489 thousand, compared to a provision for credit losses of $125 thousand for the fourth quarter of 2023. For the year ended December 31, 2024, the Company recorded a provision for credit losses of $664 thousand, compared to a provision for credit losses of $933 thousand for the year ended December 31, 2023. The recovery of credit losses during the fourth quarter of 2024 and the decrease in the provision for credit losses during the year ended December 31, 2024 were primarily due to a reduction in approved loans that were not funded. The recovery of credit losses during the fourth quarter of 2024, and the provision for credit losses during the year ended December 31, 2024, include recoveries of provisions for credit losses for off-balance sheet loan commitments of $65 thousand and $91 thousand, respectively.
The allowance for credit losses (“ACL”) increased to $8.1 million as of December 31, 2024, compared to $7.3 million as of December 31, 2023, due to growth in the loan portfolio.
The Bank had one non-accrual loan at December 31, 2024 with an unpaid principal balance of $264 thousand. No loan charge-offs were recorded during the quarters or years ended December 31, 2024 or 2023.
Non-interest Income
Non-interest income for the fourth quarter of 2024 totaled $560 thousand, compared to $4.5 million for the fourth quarter of 2023. For the year ended December 31, 2024, non-interest income totaled $1.6 million, compared to $5.4 million for the same period in the prior year. During the fourth quarter of 2023, the Company recognized a grant of $3.7 million from the CDFI Fund's Equitable Recovery Program.
Non-interest Expense
Total non-interest expense was $7.2 million for the fourth quarter of 2024, compared to $7.7 million for the fourth quarter of 2023, representing a decrease of $499 thousand, or 6.5%. The decrease was primarily due to a decrease of $891 thousand in professional services expense during the fourth quarter of 2024, compared to the fourth quarter of 2023. During the fourth quarter of 2023, the Company incurred professional, accounting, and legal expenses in connection with the Company's remediation efforts of the weaknesses in internal controls that were identified during preparation of the financial statements for the third quarter of 2023. This decrease was partially offset by an increase of $474 thousand in compensation and benefits expense, which reflects the investment in additional executives and staff to support growth and strengthen overall controls and management depth. As previously reported, the Company hired a new Chief Financial Officer in May 2024. The Company also hired a General Counsel and Chief Risk Officer, Chief Accounting Officer, and Treasurer during the first six months of 2024.
For the year ended December 31, 2024, non-interest expense totaled$29.9million, representing an increase of $2.5 million, or 9.3%, from $27.4 million for the same period in the prior year.The increase primarily resulted from increases in compensation and benefits expense of $1.9 million and professional services expense of $323 thousand. The increase in compensation and benefits expense reflects the investment in additional executives and staff to support growth and strengthen overall controls and management depth, as noted above. The increase in professional services expense was primarily due to the costs associated with third-party professionals that were retained in connection with the Company's remediation efforts of the weaknesses in internal controls that were identified during preparation of the financial statements for the third quarter of 2023.
Income Taxes
The Company recorded an income tax expense of $516 thousand for the fourth quarter of 2024, compared to $1.2 million for the fourth quarter of 2023. The decrease in income tax expense reflected a decrease of $2.0 million in pre-tax income between the two periods. The effective tax rate was 28.1% for the fourth quarter of 2024, compared to 31.1% for the fourth quarter of 2023.
For the year ended December 31, 2024, income tax expense was $814 thousand, compared to $2.0 million for the year ended December 31, 2023. The decrease in income tax expense reflected a decrease in pretax earnings of $3.8 million between the two periods, primarily related to the grant received from the CDFI Fund's Equitable Recovery Program in the fourth quarter of 2023. The effective tax rate was 29.4% for the year ended December 31, 2024, compared to 30.4% for the year ended December 31, 2023.
Balance Sheet Summary
Total assets decreased by $71.7 million at December 31, 2024, compared to December 31, 2023, reflecting decreases in securities available-for-sale of $113.1 million, primarily due to maturities and paydowns, and cash and cash equivalents of $43.8 million, primarily due to repayments of borrowings in the fourth quarter. These decreases were partially offset by growth in net loans of $88.4 million during the year ended December 31, 2024.
Loans held for investment, net of the ACL, increased by $88.4 million to $968.9 million at December 31, 2024, compared to $880.5 million at December 31, 2023. The increase was primarily due to loan originations of $157.7 million during the year ended December 31, 2024, which consisted of $80.9 million in multi-family loans, $50.8 million in commercial real estate loans, $17.6 million in other commercial loans, $7.6 million in construction loans, and $800 thousand in SBA loans, partially offset by loan payoffs and repayments of $69.3 million.
The value of the Company's portfolio of securities available-for-sale appreciated by $3.2 million during the year ended December 31, 2024 and resulted in other comprehensive income of $2.3 million, net of taxes. The unrealized appreciation reflected the lower short-term interest rates that occurred after the Federal Reserve lowered its benchmark range by 50 basis points during September 2024, followed by additional cuts of 25 basis points in November and December 2024. The average maturity for the Bank's portfolio of securities available-for-sale was 3.2 years as of December 31, 2024.
Deposits increased by $62.8 million to $745.4 million at December 31, 2024, from $682.6 million at December 31, 2023. The increase in deposits was attributable to an increase of $61.2 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), an increase of $30.2 million in Certificate of Deposit Registry Service (“CDARS”) deposits (CDARS deposits are certificates of deposit in excess of FDIC insured limits whereby the Bank makes reciprocal arrangements for insurance with other banks), and an increase of $14.6 million in other certificates of deposit accounts, partially offset by a decrease of $33.4 million in liquid deposits (demand, interest checking, and money market accounts) and a decrease of $9.8 million in savings deposits. 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. As of December 31, 2024, the Bank's uninsured deposits, including deposits from Broadway and other affiliates, represented 32% of the Bank's total deposits, compared to 37% as of December 31, 2023.
Total borrowings decreased by $134.7 million to $262.1 million at December 31, 2024, from $396.8 million at December 31, 2023, primarily due to the payoff of a loan of $100.0 million under the Federal Reserve's Bank Term Funding Program during December 2024, the payoff of two notes payable totaling $14.0 million during January 2024, a reduction of $13.8 million in Federal Home Loan Bank advances, and a decrease of $6.9 million in securities sold under agreements to repurchase.
Stockholders' equity was $285.2 million, or 21.9% of the Company's total assets, at December 31, 2024, compared to $281.9 million, or 20.5% of the Company's total assets, at December 31, 2023. Book value per share was $14.82 at December 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 credit 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 Board; (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 general 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 athttp://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.
The following table sets forth selected financial data and ratios as of and for the three and twelve months ended December 31, 2024 and 2023.
The following table sets forth the consolidated statements of financial condition as of December 31, 2024 and 2023.
The following table sets forth the consolidated statements of operations and comprehensive income (loss) for the three months ended December 31, 2024 and 2023, and for the years ended December 31, 2024 and 2023.
The following tables set 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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