Broadway Financial (BYFC) - 2021 Q3 - Quarterly Report

PART I. FINANCIAL STATEMENTS Item 1. Consolidated Financial Statements The consolidated financial statements reflect significant post-merger growth, with total assets reaching $1.06 billion and stockholders' equity at $143.3 million Consolidated Statements of Financial Condition The company's financial condition expanded significantly post-merger, with total assets reaching $1.06 billion and stockholders' equity at $143.3 million | Financial Metric (in thousands) | September 30, 2021 (Unaudited) | December 31, 2020 | | :--- | :--- | :--- | | Total Assets | $1,063,561 | $483,378 | | Cash and cash equivalents | $208,687 | $96,109 | | Loans receivable, net | $642,198 | $360,129 | | Securities available-for-sale | $157,628 | $10,698 | | Goodwill | $25,996 | $0 | | Total Liabilities | $920,182 | $434,493 | | Deposits | $749,645 | $315,630 | | FHLB advances | $91,070 | $110,500 | | Total Stockholders' Equity | $143,323 | $48,885 | Consolidated Statements of Operations and Comprehensive Income (Loss) The company reported Q3 2021 net income of $206 thousand, a reversal from a prior-year loss, but a nine-month net loss of $2.5 million due to merger expenses | Metric (in thousands) | Q3 2021 | Q3 2020 | Nine Months 2021 | Nine Months 2020 | | :--- | :--- | :--- | :--- | :--- | | Net Interest Income | $5,991 | $3,377 | $14,657 | $9,306 | | Loan loss provision | $365 | $0 | $446 | $29 | | Total non-interest income | $609 | $206 | $2,924 | $645 | | Total non-interest expense | $5,978 | $3,732 | $19,979 | $10,283 | | Net Income (Loss) | $206 | ($244) | ($2,547) | ($61) | | Earnings (loss) per share-basic | $0.00 | ($0.01) | ($0.05) | $0.00 | Consolidated Statements of Cash Flows Cash and cash equivalents increased by $112.6 million for the nine months ended September 30, 2021, driven by positive contributions from operating, investing, and financing activities | Cash Flow Activity (in thousands) | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :--- | :--- | :--- | | Net cash from operating activities | $3,913 | ($39,763) | | Net cash from investing activities | $31,197 | $35,566 | | Net cash from financing activities | $77,468 | $58,347 | | Net change in cash and cash equivalents | $112,578 | $54,150 | | Cash acquired in merger | $84,745 | $0 | Consolidated Statements of Changes in Stockholders' Equity Stockholders' equity dramatically increased from $48.9 million to $143.4 million, primarily driven by stock issuance for the CFBanc merger and a private placement - Total stockholders' equity grew from $48.9 million at the end of 2020 to $143.4 million as of September 30, 2021[20] - Key drivers of the equity increase were the issuance of common stock ($63.3 million) and preferred stock ($3.0 million) for the business combination, and proceeds from a private placement ($30.8 million)[20] Notes to Consolidated Financial Statements The notes detail significant accounting policies and events, primarily the CFBanc merger, which led to goodwill and intangible asset recognition, a private placement, and the company maintaining a "well capitalized" status - The merger with CFBanc Corporation was completed on April 1, 2021, adding approximately $471.0 million in total assets, $227.7 million in gross loans, and $353.7 million in total deposits[39] - The merger was accounted for as an acquisition, resulting in the recognition of $26.0 million in goodwill and a $3.3 million core deposit intangible asset[43][99] - On April 6, 2021, the company completed a private placement, selling 18.47 million shares of common stock for an aggregate purchase price of $32.9 million[52] - As of September 30, 2021, the Bank was "well capitalized" with a Community Bank Leverage Ratio (CBLR) of 9.41%, exceeding the 8.50% minimum requirement[130] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management's discussion highlights the transformative CFBanc merger, increasing total assets to over $1 billion, despite a nine-month net loss of $2.6 million due to merger costs, while maintaining a strong capital position Overview and COVID-19 Impact The CFBanc merger fundamentally altered the company's financial position, increasing total assets to $1.064 billion, with a nine-month net loss of $2.6 million due to merger costs, while COVID-19 had no impact on loan modifications or delinquencies - Total assets increased by $580.2 million to $1.064 billion at September 30, 2021, primarily due to the CFBanc merger[145] - The net loss for the first nine months of 2021 was $2.6 million, primarily due to $5.6 million in merger-related costs[149] - As of September 30, 2021, the Bank had no loan modification requests or delinquencies related to COVID-19[142] Results of Operations Net interest income for Q3 2021 rose to $6.0 million, though net interest margin declined to 2.43%, while non-interest expenses significantly increased to $6.0 million due to merger-related operating costs - Q3 2021 net interest income increased by $2.6 million year-over-year to $6.0 million, driven by growth in average interest-earning assets from the merger[150] - The net interest margin for Q3 2021 decreased to 2.43% from 2.82% in Q3 2020, primarily due to lower rates earned on significantly higher cash balances[158] - Non-interest expense for Q3 2021 increased by $2.3 million year-over-year to $6.0 million, due to the inclusion of the acquired bank's operations and one-time data processing conversion costs[175] Financial Condition The company's balance sheet expanded significantly post-merger, with loans receivable increasing to $642.2 million, deposits growing to $749.6 million, and stockholders' equity rising to $143.3 million - Loans receivable increased by $282.1 million in the first nine months of 2021, mainly due to $225.9 million in loans acquired in the merger[181] - The ALLL was $3.7 million, or 0.57% of gross loans, at September 30, 2021, compared to $3.2 million, or 0.88%, at year-end 2020. The ratio decrease is due to merger accounting for acquired loans[184] - Deposits increased to $749.6 million from $315.6 million, driven by $353.7 million assumed in the merger and $83.6 million in organic growth[201] - Stockholders' equity increased to $143.3 million, with tangible book value per share at $1.55, adjusted for goodwill and intangible assets from the merger[208][209] Liquidity and Capital Resources The company maintains strong liquidity with $208.7 million in cash and $49.7 million in unpledged securities, and robust capital resources, being classified as "well capitalized" with a 9.41% CBLR - Liquid assets at September 30, 2021, consisted of $208.7 million in cash and cash equivalents and $49.7 million in unpledged securities available-for-sale[213] - The Bank had additional borrowing capacity of $16.9 million from the FHLB and $11.0 million in lines of credit with other institutions[212] - The Bank is considered "well capitalized," with a Community Bank Leverage Ratio (CBLR) of 9.41% as of September 30, 2021, exceeding all regulatory requirements[218] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section on market risk disclosures is stated as not applicable for the current quarterly report filing - The company states that Quantitative and Qualitative Disclosures About Market Risk are not applicable to this report[219] Item 4. Controls and Procedures As of September 30, 2021, management concluded that disclosure controls and procedures were effective, with ongoing integration of CFBanc's internal controls following the merger - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of September 30, 2021[219] - The company is in the process of integrating CFBanc's operations and internal controls following the merger, which may be excluded from the scope of the year-end internal control assessment[221] PART II. OTHER INFORMATION Items 1-6. Other Information This section reports no material events, including no legal proceedings, unregistered sales of equity securities, or defaults on senior securities, with risk factors and mine safety disclosures noted as not applicable - The company reported no information for the following items: Legal Proceedings, Unregistered Sales of Equity Securities and Use of Proceeds, and Defaults Upon Senior Securities[225] - Risk Factors and Mine Safety Disclosures were noted as not applicable[225]