The merger establishing CityFirstBroadway as the country’s largest Black-owned bank occurred just over half a year ago, but its leaders say the real consolidation work took a little bit longer.

The company was formed after the Washington, D.C.-based CFC Banc Corp. merged its operations into downtown-based Broadway Financial Corp. in April.

CityFirstBroadway Executive Vice President Tom Nida described it as a genuine merger of equals that benefited from friendly prior relations, similar structures and aligning cultures and goals.

“Part of the cultural piece was probably set at the very top — the two CEOs have known each other and worked together for years before the notion of a merger even came up,” Nida said.

This foundation helped the now-bicoastal bank hit the ground running on the merger, but Nida said the real nuts-and-bolts work of a consolidation remained, like the core conversion of the two former companies’ IT systems.
 
“It’s one of those things that people don’t think about unless they’re directly involved,” he said. “But so much is driven by technology these days, especially in banking. And for a bank with a bicoastal presence, technology will be the lynchpin.”
 
That core conversion was just recently completed, said Nida, who regards it as one of the company’s most significant milestones to date. Between that and embarking this week from his Washington office for his first official visit of the company’s Los Angeles branch, Nida has good reason to be optimistic about the work that’s being done to join the two coasts.

“The geographic distance is one of the realities of a merger like this, but we’ve gotten very accustomed to having our staff working remotely by Zoom or some equivalent,” he said. “Eight months into the merger, and this will be my first trip to meet the Los Angeles team. It’s a big deal to be able to sit in a room with people and have a cup of coffee with them, a conversation.”

Post-merger gains

A community-oriented bank primarily servicing low-to-moderate-income clients, the company offers a variety of residential and commercial real estate loan products for consumers, businesses and nonprofit organizations. Its recently published third quarter report was positive as revenue and income remained largely flat despite the difficulties of integration and the uncertainties of operating amid a global pandemic.

CityFirstBroadway reported a consolidated net income of $182,000 for the third quarter — a decrease from the $701,000 reported for the second quarter of 2021 but an increase of $426,000 over the previous year’s third quarter. Net interest income totaled $6 million, representing an increase of $2.6 million from the third quarter of 2020.

In its report, the company said the improvement over the previous year was primarily driven by gains in loan loss provision and income from grants and fees. But these gains were partially offset by $1.7 million in operating expenses related to the combining of bank operations. The merged bank also incurred $383,000 in data processing costs in the third quarter related to the migration of its IT systems.

Total assets grew $22.6 million to almost $1.1 billion during the third quarter, representing an increase of $82.8 million post-merger and $580 million since Dec. 31, 2020. Total loans receivable and net allowances increased $27.5 million to $642 million during the third quarter, representing an increase of $53.8 million since the merger and $282 million, or 78.3%, since Dec. 31, 2020. The company acquired $226 million worth of loans in the merger, according to the report.

It retired the remaining outstanding balance of its junior subordinated debentures of $2.8 million during the third quarter of 2021, which was the most expensive source of funds for Broadway at a cost of 2.66% on the date of payoff.

In a statement on the report, Chief Executive Brian Argrett said the company has continued to grow its loan portfolio with mission-oriented multifamily residential and commercial real estate loans while expanding its deposit base. He said the company is exploring new opportunities, like the Emergency Capital Investment Program offered by the Treasury Department, “in an effort to continue to enhance the scale of our operations and improve the economics of our business.”

Lending growth

Speaking to the Business Journal, Argrett declined to provide additional direct comment on the third quarter report citing policy. But like Nida, he lauded the efforts to consolidate the teams culturally, technologically and otherwise.

“These are the major foundational things, and we need to make sure we get it right, so we can move forward as a combined institution. And so far, we’re quite pleased with how things are progressing,” Argrett said.

But he added that the newly merged entity’s productivity hasn’t just been limited to its efforts to integrate its East Coast and West Coast teams.

“We have had a very productive year of lending and lending growth, which is the main way we serve the community. It was also a very good year for deposit growth and aggregate capital growth, which is how we fund the business and our lending. We’re very proud of that and very cognizant of the responsibilities that places on us to deliver,” said Argrett.

Deposits increased $44.6 million during the third quarter to $750 million as of Sept. 30, reflecting a growth of $84 million, or 13%, since the merger.

Argrett said the trend is particularly encouraging to CityFirstBroadway as the country’s largest Black-led Minority Depository Institution, which are federally insured depositories with 51% or more voting stock owned by minority individuals. The banks’ assets account for nearly one-fifth of the $5 billion-plus held last year by Black-owned financial institutions in the United States. As a result, many of the communities the company serves have been some of the hardest hit by economic distress, Argrett said.

“If you step back, it’s been a difficult two years, but there have been many more years of difficulty for the communities we serve, which are very heavily and negatively impacted by large systemic events like an economic crisis and a global pandemic,” he said. “Residents and businesses within these communities often suffer multiples of how the general economy suffers. There’s a saying, when America gets a cold, our communities get pneumonia.”

Despite those challenges, Argrett said, there’s also been an awakening around the economy’s racial disparities. This awareness has led to a large influx of capital and partners interested in closing the economic gaps, leading to increases in capital and deposit growth at many minority-serving institutions. That, in turn, has led to more robust lending to minority businesses.

“So, it’s been good and bad, a mixed bag,” Argrett said. “There are more resources, but it’s important that these resources are sustained over time.”