Broadway Financial Corporation (“Broadway”, “we” or the “Company”) (NASDAQ Capital Market: BYFC), announced that the Company completed a private placement of $150 million of Senior Non-Cumulative Perpetual Preferred Stock, Series C (the “Preferred Stock”), to the United States Department of the Treasury (the “U.S. Treasury”) pursuant to the Emergency Capital Investment Program (“ECIP”).
The ECIP investment by the U.S. Treasury is part of a program to invest over $8.7 billion into Community Development Financial Institutions and Minority Depository Institutions to provide funding for these institutions to increase access to capital for small and minority-owned businesses and consumers in traditionally underserved markets, such as low-to-moderate income communities, that may have been disproportionately impacted by the economic effects of the COVID-19 pandemic.
Dividends on the Preferred Stock are payable in cash quarterly at an annual rate that is dependent on Broadway’s investment of the proceeds within Target Communities in certain types of loans that are consistent with the types of loans that the Company has historically originated. The initial dividend rate is zero percent for the first two years after issuance, and thereafter the floor dividend rate is 0.50% and the ceiling dividend rate is 2.00%. The dividend rate after the initial two years will be reset annually until the tenth anniversary of the issuance of the Preferred Stock and will be based upon the annual change in actual qualified lending relative to a baseline level of qualified lending, expressed as a percentage of the aggregate liquidation amount of the Preferred Stock. The final reset will be based upon the average annual increase in qualified lending over the nine-year period preceding the last reset date, expressed as a percentage of the aggregate liquidation amount. The Preferred Stock has an aggregate liquidation amount of $150 million and is redeemable in whole, or in part, at the option of the Company on any dividend payment date on or after June 15, 2027, subject to certain limitations and exceptions as set forth in the Certificate of Designations for the Preferred Stock.
The investment by the U.S. Treasury is intended to qualify as Tier 1 Capital. At March 31, 2022, Broadway’s stockholders’ equity was $136.2 million, or 12.04% of the Company’s assets, and the Tier 1 Capital of its bank subsidiary, City First Bank, National Association, was $99.9 million. The issuance of the Preferred Stock will not impact Broadway’s book value per common share.
Chief Executive Officer, Brian Argrett, commented, “We are excited to report that we have raised $150 million of gross proceeds from the sale of the Preferred Stock to the U.S. Treasury, which is more than we originally reported when the U.S. Treasury announced that Broadway’s application for ECIP capital was accepted. The investment will more than double our Tier 1 Capital and allow us to greatly enhance the scale of Broadway’s operations and improve the economics of the Company’s business. In addition, this equity capital will significantly improve our ability to advance our mission and multiply the impact that we can make in the low-to-moderate income communities that we serve. Over time, the proceeds from this equity investment should allow us to more than double the size of Broadway’s loan portfolio.”
Gibson, Dunn & Crutcher LLP served as legal advisor to the Company.
Additional information regarding the Preferred Stock will be provided in a Current Report on Form 8-K that the Company will file within the next few days.