Broadway Financial Merger Makes History

Broadway Financial Merger Makes History
Broadway Financial will be nation's largest Black-led bank.

Social unrest and an increased focus on racial inequality have thrust financial inequities into the spotlight. The attention has spurred a new focus on Black-led banks, which many see as key players in the fight to narrow the racial wealth gap. 

Among these is Hancock Park-based Broadway Financial Corp., which is set to become the largest Black-led bank in American history. The company made headlines in late August for its 
decision to merge with CFBanc Corp. While the move’s timing coincides with broader social movements, Broadway’s leadership says the deal has been in the making for much longer.

Broadway deals mainly in small multifamily residential real estate loans. It has served primarily Black and brown communities in Los Angeles for nearly 75 years. “We focus on the working poor,” said Broadway President and Chief Executive Wayne Bradshaw. “What they need more than anything is a place to live.”

That focus has become increasingly limiting in recent years, according to Bradshaw, particularly in light of regulations that discourage Broadway from holding such a large percentage of its portfolio in one asset class. 

“We end up having concentration limits on us that force us to sell off our loans in an unprofitable manner,” he said. “We needed to find a solution. … It was either sell the institution or find a partner to join with.”

That partner ended up being City First Bank — a Washington, D.C.-based institution that provides loans to a broader variety of clients, albeit at a significantly lower volume than Broadway does. 

According to Bradshaw, the two banks will balance each other out, combining City First’s breadth of service, with Broadway’s speed of execution. 

The combined institutions will have roughly $1 billion in assets under management when the merger concludes in the first quarter of next year, according to the banks. At that time, City First President and CEO Brian Argrett will become CEO of the new institution while Bradshaw will become chairman.

“Brian is the perfect successor to me,” Bradshaw said. “It’s a marriage made in heaven.”

Both Broadway and City First are minority depository institutions, or MDIs — a federal designation indicating that they are majority owned or controlled by a member of a minority group. There are among only 20 such Black-led institutions in the country, according to the Federal Deposit Insurance Corp.

These institutions are key to ensuring minority communities have access to adequate financial services, according to Everett Sands, founder and chief executive of downtown-based B.S.D. Capital, which does business as Lendistry. 

Sands’ company provides commercial real estate and small-business loans, primarily to customers in underserved communities. Prior to founding his business, Sands worked at two Black-led banks. 

“Those institutions are going to understand the communities they serve much better,” he said. “They will naturally build products that are more appropriate for those communities’ specific environments.”

Sands said minority-led institutions also help the communities they are based in by creating well-paying, stable jobs and providing training for employees to upskill. 

“Generally speaking, an institution is going to build a team that looks like their community,” he said. “It’s about jobs, technical assistance, financial education.”

The lender said he is hopeful that the Broadway merger will help spur other Black-led banks to consider how they can more effectively grow and support their communities. “It is setting a tone for African American institutions to start thinking about how they can get larger,” he said.

For its part, Broadway intends to continue to grow, following the business combination, according to Bradshaw, eventually becoming the first national Black-led bank.

“The merger is just the first step,” Bradshaw said. “Wherever there is an urban center, we want to be there.”

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