Broadway Financial (BYFC) - 2024 Q3 - Quarterly Report

Total Assets and Liabilities - Total assets decreased by $2.3 million at September 30, 2024 compared to December 31, 2023, primarily due to decreases in securities available-for-sale of$78.5 million, cash and cash equivalents of $8.1 million, other assets of$1.3 million, and deferred tax assets of $1.1 million, partially offset by growth in net loans of$86.3 million[100] - Total liabilities decreased by $6.8 million to$1.1 billion at September 30, 2024, driven by reductions in notes payable and deposits[136] - Total assets decreased by $2.3 million as of September 30, 2024, primarily due to a$78.5 million decrease in securities available-for-sale, partially offset by an $86.3 million increase in net loans[120] Loans and Loan Portfolio - Loans held for investment, net of the ACL, increased by$86.3 million to $966.8 million at September 30, 2024, compared to$880.5 million at December 31, 2023, driven by loan originations of $136.2 million during the first nine months of 2024[101] - Loans receivable grew to$963,849 thousand with an average yield of 5.28% for the three months ended September 30, 2024, up from $822,031 thousand with an average yield of 4.58$86.3 million to $966.8 million as of September 30, 2024, driven by$136.2 million in loan originations, partially offset by $49.9 million in payoffs and repayments[123] - Multi-family loans in their initial fixed period totaled$592.4 million, representing 60.8% of the loan portfolio as of September 30, 2024[125] Deposits - Deposits decreased by $10.4 million to$672.2 million at September 30, 2024, from $682.6 million at December 31, 2023, with uninsured deposits representing 34$570,512 thousand with an average cost of 2.24% for the three months ended September 30, 2024, compared to $572,104 thousand with an average cost of 1.49$10.4 million to $672.2 million at September 30, 2024, with uninsured deposits representing 34$431 thousand to $522 thousand for the three months ended September 30, 2024, compared to$91 thousand for the same period in 2023[104] - Net income attributable to Broadway decreased to $627 thousand for the nine months ended September 30, 2024, compared to$1.9 million for the same period in 2023, primarily due to a $3.0 million increase in non-interest expense[105] Net Interest Income and Margin - Net interest income before provision for credit losses increased by$1.5 million, or 23.0%, to $8.3 million for the third quarter of 2024, driven by higher interest income of$4.2 million, partially offset by a $2.7 million increase in interest expense[107] - Net interest margin increased to 2.49$23.8 million, an increase of $1.5 million, or 6.5$11.8 million[108] - Net interest margin decreased to 2.38% for the nine months ended September 30, 2024, compared to 2.60% for the same period in 2023[108] - Net interest rate margin improved to 2.49% for the three months ended September 30, 2024, up from 2.33% for the same period in 2023[110] Interest-Earning Assets and Costs - Total interest-earning assets increased to $1,333,086 thousand with an average yield of 4.82$1,165,064 thousand with an average yield of 4.09% for the same period in 2023[110] - The average cost of funds increased to 3.14% for the nine months ended September 30, 2024, from 2.00% for the same period in 2023, due to higher average balances of borrowings and higher rates paid on borrowings and deposits[108] Credit Losses and Allowance - The company recorded a provision for credit losses of $399 thousand for the three months ended September 30, 2024, compared to a recovery of$2 thousand for the same period in 2023[113] - The allowance for credit losses increased to $8.5 million as of September 30, 2024, compared to$7.3 million as of December 31, 2023, due to growth in the loan portfolio[114] - The company recorded a provision for credit losses of $1.2 million for the nine months ended September 30, 2024, compared to$808 thousand for the same period in 2023[113] - The ACL (Allowance for Credit Losses) was $8.5 million, or 0.87$7.3 million, or 0.83% at December 31, 2023[131] - Collateral dependent loans totaled $36 thousand at September 30, 2024, down from$6.4 million at December 31, 2023, with an ACL of $0 and$112 thousand respectively[132] - Non-accrual loans were $291 thousand at September 30, 2024, while loan delinquencies for 30-90 days increased to$1.7 million from $780 thousand at December 31, 2023[133] Non-Interest Income and Expense - Non-interest income for the third quarter of 2024 totaled$416 thousand, compared to $331 thousand for the third quarter of 2023[114] - Total non-interest expense increased by$613 thousand, or 8.8%, to $7.6 million for the third quarter of 2024, primarily due to higher professional and accounting fees[116] - Non-interest income for the first nine months of 2024 totaled$995 thousand, compared to $880 thousand for the same period in the prior year[115] - Non-interest expense for the first nine months of 2024 increased by$3.0 million (15.4%) to $22.7 million, driven by higher compensation and benefits ($1.4 million) and professional services ($1.2 million) expenses[117] Income Tax - Income tax expense for Q3 2024 was$209 thousand, up from $39 thousand in Q3 2023, with an effective tax rate of 27.76$298 thousand from $806 thousand in the same period in 2023, with an effective tax rate of 32.04$78.5 million to $238.5 million as of September 30, 2024, mainly due to maturities and principal paydowns[120] - Securities sold under repurchase agreements totaled$89.8 million at an average rate of 3.68% as of September 30, 2024, up from $73.5 million at 2.60$208.6 million at September 30, 2024, with a weighted interest rate of 4.35% and a weighted average maturity of two months[140] - The Company borrowed $100.0 million from the Federal Reserve under the BTFP, with an interest rate of 4.84$133.9 million from the FHLB of Atlanta as of September 30, 2024[152] - Liquid assets at September 30, 2024 included $97.1 million in cash and cash equivalents and$35.0 million in unpledged securities available-for-sale[153] Commitments and Funding - The Bank had commitments to fund $923 thousand in approved but unfunded loans,$3.7 million in unfunded line of credit loans, and $47.5 million in unfunded construction loans as of September 30, 2024[154] Stockholders' Equity and Capital - Stockholders' equity was$286.4 million, or 20.9% of total assets, at September 30, 2024, compared to $281.9 million, or 20.5$136,392 thousand as of September 30, 2024, up from $131,903 thousand at December 31, 2023[151] - Tangible book value rose to$108,675 thousand as of September 30, 2024, compared to $103,934 thousand at December 31, 2023[151] - The Bank exceeded all capital adequacy requirements and was considered "well capitalized" as of September 30, 2024[159] Cash Flows - Consolidated net cash outflows from investing activities were$2.7 million for the nine months ended September 30, 2024, compared to $61.5 million for the same period in 2023[157] - Consolidated net cash outflows from financing activities were$9.6 million for the nine months ended September 30, 2024, compared to net cash inflows of $52.9 million for the same period in 2023[158] Internal Controls and Remediation - The Company identified material weaknesses in internal control over financial reporting and has implemented a remediation plan, including hiring additional senior personnel and engaging a third-party firm to review general ledger account reconciliations[164][166] - The company's disclosure controls and procedures were not effective as of September 30, 2024, due to material weaknesses in internal control over financial reporting[162] - A material weakness was identified due to insufficient personnel with appropriate knowledge and experience in internal control matters, leading to failures in designing and implementing certain internal controls[164] - The company did not effectively design and implement controls over consolidation, financial statement reporting, and monthly close processes, resulting in unidentified or stale reconciling items in general ledger account reconciliations[165] - The company hired additional senior personnel with relevant experience and training to address the material weaknesses and engaged a third-party firm to review general ledger account reconciliations[166] - Remediation efforts are ongoing, and the material weaknesses cannot be considered remediated until the controls operate effectively for a sufficient period and are tested by management[167] - No other changes in internal control over financial reporting occurred during the three months ended September 30, 2024, except for the remediation activities discussed[169]