10-Q 1 brhc10024528_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 March 31, 2021

☐	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.)

5055 Wilshire Boulevard, Suite 500 Los Angeles, California		90036
(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:
Class A Common Stock, par value $0.01 per share (including attached preferred stock purchase rights)		BYFC		The Nasdaq Stock Market LLC

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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post 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 May 11, 2021, 43,630,884 shares of the Registrant’s Class A Common Stock, 11,404,621 shares of the Registrants Class B Common Stock and 16,689,775 shares of the Registrant’s Class C Common Stock were outstanding.

TABLE OF CONTENTS
			Page
PART I.	FINANCIAL STATEMENTS

	Item 1.	Consolidated Financial Statements (Unaudited)

		Consolidated Statements of Financial Condition as of March 31, 2021 and December 31, 2020	1

		Consolidated Statements of Operations and Comprehensive Loss for the three months ended March 31, 2021 and 2020	2

		Consolidated Statements of Cash Flows for the three months ended March 31, 2021 and 2020	3

		Consolidated Statements of Changes in Stockholders’ Equity three months ended March 31, 2021 and 2020	4

		Notes to Consolidated Financial Statements	5

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	30

	Item 4.	Controls and Procedures	30

PART II.	OTHER INFORMATION

	Item 1.	Legal Proceedings	30

	Item 1A.	Risk Factors	30

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	30

	Item 3.	Defaults Upon Senior Securities	30

	Item 4.	Mine Safety Disclosures	30

	Item 5.	Other Information	30

	Item 6.	Exhibits	31

	Signatures		32

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BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Consolidated Statements of Financial Condition

(In thousands, except share and per share amounts)

	March 31, 2021			December 31, 2020
	(Unaudited)
Assets:
Cash and due from banks	$	70,600		$	71,110
Interest-bearing deposits in other banks		17,556			24,999
Cash and cash equivalents		88,156			96,109
Securities available-for-sale, at fair value		10,023			10,698
Loans receivable held for investment, net of allowance of $3,215 and $3,215		362,520			360,129
Accrued interest receivable		1,157			1,202
Federal Home Loan Bank (FHLB) stock		3,431			3,431
Office properties and equipment, net		2,366			2,540
Bank owned life insurance		3,157			3,147
Deferred tax assets, net		7,093			5,633
Other assets		1,691			489
Total assets	$	479,594		$	483,378

Liabilities and stockholders’ equity

Liabilities:
Deposits	$	312,315		$	315,630
FHLB advances		110,500			110,500
Junior subordinated debentures		3,060			3,315
Accrued expenses and other liabilities		8,643			5,048
Total liabilities		434,518		$	434,493

Stockholders’ Equity:
Preferred stock, $.01 par value, authorized 1,000,000 shares; none issued or outstanding		-			-
Common stock, $.01 par value, voting, authorized 50,000,000 shares at March 31, 2021 and December 31, 2020; issued 21,760,324 shares at March 31, 2021 and 21,899,584 shares at December 31, 2020; outstanding 19,142,498 shares at March 31, 2021 and 19,281,758 shares at December 31, 2020		218			219
Common stock, $.01 par value, non-voting, authorized 25,000,000 shares at March 31, 2021 and December 31, 2020; issued and outstanding 8,756,396 shares at March 31, 2021 and December 31, 2020		87			87
Additional paid-in capital		46,625			46,851
Retained earnings		4,296			7,783
Unearned Employee Stock Ownership Plan (ESOP) shares		(877	)		(893	)
Accumulated other comprehensive income, net of tax		53			164
Treasury stock-at cost, 2,617,826 shares at March 31, 2021 and at December 31, 2020		(5,326	)		(5,326	)
Total stockholders’ equity		45,076			48,885
Total liabilities and stockholders’ equity	$	479,594		$	483,378

See accompanying notes to unaudited consolidated financial statements.

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BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Consolidated Statements of Operations and Comprehensive (Loss) Income

(Unaudited)

	Three Months Ended March 31,
	2021			2020
	(In thousands, except per share)

Interest income:
Interest and fees on loans receivable	$	3,644		$	4,359
Interest on investment securities		56			70
Other interest income		77			142
Total interest income		3,777			4,571

Interest expense:
Interest on deposits		383			1,055
Interest on borrowings		549			618
Total interest expense		932			1,673

Net interest income		2,845			2,898
Loan loss provision		-			(29	)
Net interest income after loan loss provision		2,845			2,869

Non-interest income:
Service charges		93			144
Net gain on sale of loans		-			7
Other		30			46
Total non-interest income		123			197

Non-interest expense:
Compensation and benefits		5,390			2,055
Occupancy expense		308			315
Information services		241			237
Professional services		1,939			264
Office services and supplies		95			76
Corporate insurance		246			32
Amortization of investment in affordable housing limited partnership		26			45
Other		382			125
Total non-interest expense		8,627			3,149

Loss before income taxes		(5,659	)		(83	)
Income tax benefit		(2,172	)		(50	)
Net loss	$	(3,487	)	$	(33	)

Other comprehensive (loss) income, net of tax:
Unrealized (losses) gains on securities available-for-sale arising during the period	$	(158	)	$	175
Income tax (benefit) expense		(47	)		52
Other comprehensive (loss) income, net of tax		(111	)		123

Comprehensive (loss) income	$	(3,598	)	$	90

Loss per common share-basic	$	(0.13	)	$	-
Loss per common share-diluted	$	(0.13	)	$	-

See accompanying notes to unaudited consolidated financial statements.

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BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Consolidated Statements of Cash Flows

(Unaudited)

	Three Months Ended March 31,
	2021			2020
	(In thousands)

Cash flows from operating activities:

Net loss	$	(3,487	)	$	(33	)
Adjustments to reconcile net loss to net cash used in operating activities:
Loan loss provision		-			29
Depreciation		53			191
Net amortization of deferred loan origination costs and loan premiums		(21	)		59
Net amortization of premiums on mortgage-backed securities		10			9
Director compensation expense-common stock		45			45
Stock-based compensation expense		168			80
ESOP compensation expense		23			17
Earnings on bank owned life insurance		(10	)		(12	)
Originations of loans receivable held for sale		-			(65,986	)
Proceeds from sales and repayments of loans receivable held for sale		-			20,512
Gain on sale of loans receivable held for sale		-			(7	)
Change in assets and liabilities:
Net change in deferred taxes		(1,413	)		7
Net change in accrued interest receivable		45			(126	)
Net change in other assets		(1,202	)		(222	)
Net change in advance payments by borrowers for taxes and insurance		(532	)		(548	)
Net change in accrued expenses and other liabilities		4,263			(184	)
Net cash used in operating activities		(2,058	)		(46,169	)

Cash flows from investing activities:

Net change in loans receivable held for investment		(2,370	)		16,425
Principal payments on available-for-sale securities		507			466
Purchase of FHLB stock		-			(594	)
Purchase of office properties and equipment		(15	)		(139	)
Net cash (used in) provided by investing activities		(1,878	)		16,158

Cash flows from financing activities:

Net change in deposits		(3,315	)		35,425
Proceeds from FHLB advances		-			55,000
Repayments of FHLB advances		-			(24,000	)
Stock cancelled for payment of tax withholdings		(447	)		-
Repayments of junior subordinated debentures		(255	)		(255	)
Net cash (used in) provided by financing activities		(4,017	)		66,170

Net change in cash and cash equivalents		(7,953	)		36,159
Cash and cash equivalents at beginning of the period		96,109			15,566
Cash and cash equivalents at end of the period	$	88,156		$	51,725

Supplemental disclosures of cash flow information:
Cash paid for interest	$	809		$	1,747
Cash paid for income taxes		39			-

See accompanying notes to unaudited consolidated financial statements.

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BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Consolidated Statements of Changes in Stockholders’ Equity

(Unaudited)

	Three-Month Period Ended March 31, 2021 and 2020
	Common Stock Voting			Common Stock Non-Voting		Additional Paid‑in Capital			Accumulated Other Comprehensive (Loss) Income			Retained Earnings (Substantially Restricted)			Unearned ESOP Shares			Treasury Stock			Total Stockholders’ Equity
									(In thousands)
Balance at January 1, 2021	$	219		$	87	$	46,851		$	164		$	7,783		$	(893	)	$	(5,326	)	$	48,885
Net loss for the three months ended March 31, 2021	‑			‑		‑				-			(3,487	)	‑			‑				(3,487	)
Release of unearned ESOP shares		-			-		7		‑			‑				16		‑				23
Restricted stock Compensation expense				‑			162		‑			‑			‑			‑				162
Common stock cancelled for payment of tax withholdings		(1	)		-		(446	)		-			-			-			-			(447	)
Stock awarded to directors				‑			45		‑				-		‑			‑				45
Stock option compensation expense	‑			‑			6		‑				-		‑			‑				6
Other comprehensive loss, net of tax	‑			‑			-			(111	)	‑			‑			‑				(111	)
Balance at March 31, 2021	$	218		$	87	$	46,625		$	53		$	4,296		$	(877	)	$	(5,326	)	$	45,076

Balance at January 1, 2020	$	218		$	87	$	46,426		$	(23	)	$	8,425		$	(959	)	$	(5,326	)	$	48,848
Net loss for the three months ended March 31, 2020	‑			‑		‑				-			(33	)	‑			‑				(33	)
Release of unearned ESOP shares		-			-		-		‑			‑				17		‑