BROADWAY FINANCIAL CORP DE
For the period ended Jun 30, 2024. Filed Aug 14, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 14, 2024
BYFC$11.60+0.7%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-24.
0001140361-24-027470
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-14.
0001140361-24-037316
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 89 previous paragraphs and 87 current paragraphs.
42 unchanged; 30 reworded; 14 added; 15 removed; 2 previous and 1 current paragraphs rearranged.
Tables are not compared: 7 previous and 11 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (14)
Current report
Loans held for investment, net of the ACL, increased by $58.3 million to $938.7 million at June 30, 2024, compared to $880.5 million at December 31, 2023. The increase was primarily due to loan originations of $97.0 million which consisted of $53.8 million in multi-family loans, $21.5 million in commercial real estate loans, $17.5 million in other commercial loans, $3.7 million in construction loans, and $500 thousand in SBA loans, partially offset by loan payoffs and repayments of $38.7 million.
Current report
Total borrowings decreased by $14.9 million to $381.9 million at June 30, 2024, from $396.8 million at December 31, 2023, primarily due to the payoff of two notes payable totaling $14.0 million during January 2024.
Current report
For the three months ended June 30, 2024, the Company reported net income of $269 thousand compared to net income of $243 thousand for the three months ended June 30, 2023. The increase resulted from an increase in net interest income of $650 thousand and a $274 thousand decrease in the provision for credit losses during the three months ended June 30, 2024 compared to the three months ended June 30, 2023, partially offset by an increase in non-interest expense of $859 thousand during the three months ended June 30, 2024 compared to the three months ended June 30, 2023. The increase in non-interest expense was primarily due to a $735 thousand increase in compensation and benefits expense.
Current report
For the six months ended June 30, 2024, the Company reported net income of $105 thousand compared to net income of $1.8 million for the six months ended June 30, 2023. The decrease resulted from an increase in non-interest expense of $2.4 million during the first six months of 2024 compared to the first six months of 2023. The increase in non-interest expense was primarily due to a $1.4 million increase in compensation and benefits expense and an $861 thousand increase in professional services expense.
Current report
Six Months Ended June 30, 2024 Compared to the Six Months Ended June 30, 2023
Current report
Net interest income before provision for credit losses for the six months ended June 30, 2024, totaled $15.4 million, representing a decrease of $100 thousand, or 0.6%, from net interest income before provision for credit losses of $15.5 million for the six months ended June 30, 2023. The decrease resulted from a $7.7 million increase in interest expense, primarily due to an increase in the average cost of funds, which increased to 3.11% for the first six months of 2024 from 1.76% for the first six months of 2023, due to higher interest rates on deposits and borrowings. This decrease was partially offset by a $7.6 million increase in interest income for the six months ended June 30, 2024, compared to the six months ended June 30, 2023, primarily due to a 60 basis point increase in the overall rate earned on interest-earning assets as the Bank earned higher rates on interest-earning deposits, the loan portfolio, and, to a lesser extent, securities, and due to growth of $143.3 million in average loans receivable during the six months ended June 30, 2024, compared to the six months ended June 30, 2023. The net interest margin decreased to 2.34% for the six months ended June 30, 2024, compared to 2.74% for the six months ended June 30, 2023.
Current report
Provision for Credit Losses
Current report
For the three months ended June 30, 2024, the Company recorded a provision for credit losses of $494 thousand, compared to $768 thousand for the three months ended June 30, 2023. For the six months ended June 30, 2024, the Company recorded a provision for credit losses of $754 thousand, compared to $810 thousand for the six months ended June 30, 2023. The provisions for credit losses during the three and six months ended June 30, 2024 include recoveries of provisions for credit losses for off-balance sheet loan commitments of $58 thousand and $2 thousand, respectively. The provisions for credit losses during the three and six months ended June 30, 2023 include provisions for credit losses for off-balance sheet loan commitments of $83 thousand and $37 thousand, respectively. The decreases in the provisions for credit losses were primarily due to lower loan originations and declines in the provision for credit losses for off-balance sheet loan commitments.
Current report
The Bank had two non-accrual loans at June 30, 2024 with total unpaid principal balances of $328 thousand. Noloan charge-offs were recorded during the quarters or six months ended June 30, 2024 or 2023.
Current report
For the first six months of 2024, non-interest income totaled $579 thousand, compared to $549 thousand for the same period in the prior year. The increase was primarily due to an increase in fees from a revenue sharing agreement with another financial institution.
Current report
For the first six months of 2024, non-interest expense totaled $15.1 million, representing an increase of $2.4 million, or 19.1%, from $12.7 million for the same period in the prior year. The increase of $2.4 million primarily resulted from increases in compensation and benefits expense of $1.4 million and professional services expense of $861 thousand. The increase in professional service expense was primarily due to hiring a third-party firm to assist with reviewing certain general ledger account reconciliations, as well as other professionals, in connection with the Company’s investigation of the weaknesses in internal controls that were identified during preparation of the financial statements for the third quarter of 2023.
Current report
For the six months ended June 30, 2024, income tax expense was $89 thousand, compared to $767 thousand for the six months ended June 30, 2023. The decrease in tax expense reflected a decrease in pretax earnings of $2.4 million between the two periods. The effective tax rate was 50.28% for the six months ended June 30, 2024, compared to 29.41%for the six months ended June 30, 2023. The increase in the effective tax rate was primarily due to the vesting of stock awards.
Current report
On December 27, 2023, the Company borrowed $100.0 million from the Federal Reserve under the BTFP. As of both June 30, 2024 and December 31, 2023, $100.0 million was outstanding. The interest rate on this borrowing is fixed at 4.84% and the borrowing matures on December 29, 2024. Investment securities with a fair value of $94.0 million and $98.3 million were pledged as collateral for this borrowing as of June 30, 2024 and December 31, 2023, respectively. There are no prepayment penalties for early payoff. As the BTFP ended on March 11, 2024, no additional borrowings can be made under the program.
Current report
On April 5, 2024, the Company issued 31,645 shares of restricted stock to an officer under the Amended LTIP.
Removed paragraphs (15)
Previous report
Goodwill and Intangible Assets
Previous report
Goodwill and intangible assets acquired in a purchase business combination and that are determined to have an indefinite useful life are not amortized but tested for impairment at least annually or more frequently if events and circumstances exist that indicate the necessity for such impairment tests to be performed. The Company has selected November 30th as the date to perform the annual impairment test. Intangible assets with definite useful lives are amortized over their estimated useful lives to their estimated residual values. Goodwill is the only intangible asset with an indefinite life on the Company’s consolidated statement of financial condition.
Previous report
Deferred tax assets and liabilities are determined using the liability (or balance sheet) method. Under this method, the net deferred tax asset or liability is determined based on the tax effects of the temporary differences between the book and tax bases of the various balance sheet assets and liabilities and gives current recognition to changes in tax rates and laws. A valuation allowance is established against deferred tax assets when, based upon the available evidence including historical and projected taxable income, it is more likely than not that some or all the deferred tax asset will not be realized. In assessing the realization of deferred tax assets, management evaluates both positive and negative evidence, including the existence of any cumulative losses in the current year and the prior two years, the amount of taxes paid in available carry‑back years, forecasts of future income and available tax planning strategies. This analysis is updated quarterly.
Previous report
Fair Value Measurements
Previous report
Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.
Previous report
Fair values are estimated using relevant market information and other assumptions, as more fully disclosed in Note 7 “Fair Value” of the Notes to Consolidated Financial Statements of this Quarterly Report on Form 10-Q. Fair value estimates involve uncertainties and matters of significant judgment regarding interest rates, credit risk, prepayments, and other factors, especially in the absence of broad markets for items. Changes in assumptions or in market conditions could significantly affect the estimates.
Previous report
During the first quarter of 2024, net interest income decreased by $750 thousand, or 9.1%, compared to the first quarter of 2023. This decrease resulted from additional interest expense, primarily due to an overall increase of 156 basis points in the average cost of funds, which reflected the higher rates that the Bank paid on deposits and borrowings because of the interest rate increases implemented by the FRB as well as to growth of $165.8 million in average interest-earning liabilities from the quarter ended March 31, 2023. This decrease was partially offset by an increase in interest income due to a 46 basis point increase in the overall rate earned on interest-earning assets as the Bank earned higher rates on interest-earning deposits, securities and the loan portfolio.
Previous report
In addition, total non-interest expense increased by $1.6 million during the first quarter of 2024 compared to the first quarter of 2023, primarily due to increases of $905 thousand in non-recurring professional services and $648 thousand in compensation and benefits. Partially offsetting this increase was a decrease in income tax expense of $731 thousand, which reflected a decrease of $2.5 million in pre-tax income between the two periods.
Previous report
For the first quarter of 2024, the Company reported a net loss of $162 thousand compared to net income of $1.6 million for the first quarter of 2023.
Previous report
Credit Loss Provision
Previous report
For the three months ended March 31, 2024, the Company recorded a provision for credit losses of $260 thousand, compared to a provision for credit losses of $88 thousand for the three months ended March 31, 2023. The provision for credit losses during the quarter ended March 31, 2024 increased by $172 thousand compared to the quarter ended March 31, 2023, due to an increase in loan origination volume. Since the Company has no historical loss rates of its own, it uses peer historical loss rates, which decreased during the first quarter of 2024 and caused the Company to decrease the factor for historical losses in its computation, causing a decrease in the provision on certain loan categories. The provision for credit losses during the quarter-ended March 31, 2024, included provisions for off-balance sheet loan commitments of $56 thousand.
Previous report
Income Taxes
Previous report
Goodwill and Intangible Assets
Previous report
The core deposit intangible asset is amortized on an accelerated basis reflecting the pattern in which the economic benefits of the intangible asset are consumed or otherwise used up. The estimated life of the core deposit intangible is approximately 10 years. During the three months ended March 31, 2024 and 2023, the Company recorded $84 thousand and $98 thousand, respectively, of amortization expense related to the core deposit intangible.
Previous report
An assessment of goodwill impairment was performed by a third party as of December 31, 2023, in which no impairment was determined. No impairment charges were recorded during the three months ended March 31, 2024 or 2023, for goodwill or the core deposit intangible.
Reworded paragraphs (30)
Previous wording
Total assets decreased by $4.9 million to $1.4 billion at March 31, 2024 from December 31, 2023, primarily due to decreases in cash and cash equivalents of $38.1 million and securities available-for-sale of $23.7 million, partially offset by growth in loans receivable held for investment of $46.0 million and other assets of $9.9 million.
Current wording
Total assets decreased by $8.1 million to $1.4 billion at June 30, 2024 from December 31, 2023, primarily due to decreases in securities available-for-sale of $55.5 million and cash and cash equivalents of $15.4 million, partially offset by growth in net loans of $58.3 million and other assets of $4.1 million.
Previous wording
Deposits increased by $12.9 million to $695.5 million at March 31, 2024, from $682.6 million at December 31, 2023. The increase in deposits was attributable to increases of $15.0 million in liquid deposits (demand, interest checking and money market accounts) and $12.4 million in Insured Cash Sweep (“ICS”) deposits (ICS deposits are the Bank’s money market deposit accounts in excess of FDIC insured limits whereby the Bank makes reciprocal arrangements for insurance with other banks), partially offset by decreases of $12.2 million in Certificate of Deposit Registry Services (“CDARS”) deposits(CDARS deposits are similar to ICS deposits, but involve certificates of deposit, instead of money market accounts), $1.7 million of savings deposits and $596 thousand in other certificates of deposit accounts. As of March 31, 2024, our uninsured deposits, including deposits from affiliates, represented approximately 38% of our total deposits, as compared to approximately 37% as of December 31, 2023.
Current wording
Deposits increased by $4.7 million to $687.4 million at June 30, 2024, from $682.6 million at December 31, 2023. The increase in deposits was attributable to an increase of $19.4 million in Insured Cash Sweep (“ICS”) deposits, partially offset by decreases of $8.4 million in liquid deposits (demand, interest checking, and money market accounts), $3.2 million in savings deposits, $1.7 million in other certificates of deposit accounts and $1.4 million in Certificate of Deposit Registry Service (“CDARS”) deposits. As of June 30, 2024, our uninsured deposits, including deposits from affiliates, represented 35% of our total deposits, as compared to 37% as of December 31, 2023.
Previous wording
Net interest income before provision for credit losses for the first quarter of 2024 totaled $7.5 million, representing a decrease of $750 thousand, or 9.1%, from net interest income before loan loss provision of $8.3 million for the first quarter of 2023. The decrease resulted from additional interest expense, primarily due to an increase in the cost of average borrowings of 1.65% and an increase in the cost of average deposits of 1.05% during the first quarter of 2024, compared to the first quarter of 2023. In addition, the decrease in net interest income before provision for credit losses was caused by an increase in average borrowings of $165.8 million during the first quarter of 2024, compared to the first quarter of 2023, which was due to the $100.0 million BTFP borrowing in December 2023 and an increase of $64.1 million in average FHLB advances during the first quarter of 2024. The net interest margin decreased to 2.27% for the first quarter of 2024, compared to 2.96% for the first quarter of 2023, primarily due to an overall increase of 156 basis points in the average cost of funds, which reflected higher rates paid on deposits and borrowings because of the increases in interest rates implemented by the Federal Open Market Committee of the Federal Reserve (the “Federal Reserve” or “FRB”) between March 2022 and September 2023. The impact of the rising cost of funds was partially offset by an increase in the yield on interest-earnings assets of 46 basis points, primarily due to higher rates earned on interest-bearing deposits in other banks, securities and the loan portfolio.
Current wording
Net interest income before provision for credit losses for the second quarter of 2024 totaled $7.9 million, representing an increase of $650 thousand, or 8.9%, from net interest income before provision for credit losses of $7.3 million for the second quarter of 2023. The increase resulted from higher interest income, primarily due to an increase in interest on loans, partially offset by an increase in interest expense, due to increases in the cost of borrowings and deposits. The increase in interest income was primarily due to growth of $145.5 million in average loans receivable during the second quarter of 2024, compared to the second quarter of 2023. In addition, the overall rate earned on interest-earning assets increased by 67 basis points as the Bank earned higher rates on interest-earning deposits, securities, and the loan portfolio. The net interest margin decreased to 2.41% for the second quarter of 2024 from 2.52% for the second quarter of 2023, primarily due to an increase in the average cost of funds, which increased to 3.19% for the second quarter of 2024 from 2.12% for the second quarter of 2023, due to higher rates paid on deposits and borrowings after eleven rate increases by the Federal Open Market Committee of the Federal Reserve (the “FRB”) from March 2022 through December 2023.
Previous wording
The ACL increased to $7.6 million as of March 31, 2024, compared to $7.3 million as of December 31, 2023.
Current wording
The allowance for credit losses (“ACL”) increased to $8.1 million as of June 30, 2024, compared to $7.3 million as of December 31, 2023 due to growth in the loan portfolio.
Previous wording
Non-interest income for the first quarter of 2024 totaled $306 thousand, compared to $289 thousand for the first quarter of 2023.
Current wording
Non-interest income for the second quarter of 2024 totaled $273 thousand, compared to $260 thousand for the second quarter of 2023.
Previous wording
Total non-interest expense was $7.8 million for the first quarter of 2024, representing an increase of $1.6 million, or 25.8%, from $6.2 million for the first quarter of 2023. The increase was primarily due to higher non-recurring professional services expense of $905 thousand, and compensation and benefits expense of $648 thousand.
Current wording
Total non-interest expense was $7.3 million for the second quarter of 2024, compared to $6.4 million for the second quarter of 2023, representing an increase of $859 thousand, or 13.4%. The increase was primarily due to an increase of $735 thousand in compensation and benefits expense.
Previous wording
The increase in professional services was primarily due to hiring a third party firm to assist with reviewing certain general ledger account reconciliations. The increase in compensation and benefits expense was primarily attributable to additional full-time employees that the Bank hired over the past twelve months in various production and administrative support positions. These hires were part of the Company’s overall efforts to expand its operational capabilities to strategically grow its balance sheet and fulfill the intersecting lending objectives of the Company’s mission and the funding received from the Emergency Capital Investment Program of the United States Department of the Treasury.
Current wording
The increases in compensation and benefits expense were primarily attributable to the addition of full-time employees during 2023 in various production and administrative positions as part of the Bank’s efforts to expand its operational capabilities to grow its balance sheet and fulfill the intersecting lending objectives of the Company’s mission and the ECIP funding received in June 2022.
Previous wording
Income taxes are computed by applying the statutory federal income tax rate of 21% and the combined California and Washington, D.C. income tax rate of 9.75% to taxable income. The Company recorded an income tax benefit of $57 thousand for the first quarter of 2024 and income tax expense of $674 thousand for the first quarter of 2023. The decrease in tax expense reflected a decrease of $2.5 million in pre-tax income between the two periods. The effective tax rate was 23.75% for the first quarter of 2024, compared to 29.70% for the first quarter of 2023.
Current wording
Income taxes are computed by applying the statutory federal income tax rate of 21% and the combined California and Washington, D.C. income tax rate of 9.75% to taxable income. The Company recorded an income tax expense of $146 thousand for the second quarter of 2024 and $93 thousand for the second quarter of 2023. The increase in tax expense reflected an increase of $78 thousand in pre-tax income between the two periods. The effective tax rate was 35.01% for the second quarter of 2024, compared to 27.43% for the second quarter of 2023. The increase in the effective tax rate was primarily due to the vesting of stock awards.
Previous wording
Total assets decreased by $4.9 million at March 31, 2024, compared to December 31, 2023, prima rily due to decreases in cash and cash equivalents of $38.1 million and securities available-for-sale of $23.7 million, partially offset by growth in loans receivable held for investment of $46.0 million and other assets of $9.9 million.
Current wording
Total assets decreased by $8.1 million at June 30, 2024, compared to December 31, 2023, prima rily due to decreases in securities available-for-sale of $55.5 million and cash and cash equivalents of $15.4 million, partially offset by growth in net loans of $58.3 million and other assets of $4.1 million.
Previous wording
Securities available-for-sale totaled $293.2 million at March 31, 2024, compared with $317.0 million at December 31, 2023. The $23.7 million decrease in securities available-for-sale during the three months ended March 31, 2024 was primarily due to principal paydowns of $23.2 million.
Current wording
Securities available-for-sale totaled $261.5 million at June 30, 2024, compared with $317.0 million at December 31, 2023. The $55.5 million decrease in securities available-for-sale during the six months ended June 30, 2024 was primarily due to maturities and principal paydowns.
Previous wording
Loans receivable held for investment, net of the ACL, increased by $46.0 million to $926.5 million at March 31, 2024, compared to $880.5 million at December 31, 2023. The increase was primarily due to loan originations of $71.5 million during the first three months of 2024, which consisted of $38.0 million of multi-family loans, $17.5 million of other commercial loans, $15.0 million of commercial real estate loans and $1.0 million of construction loans, offset in part by loan payoffs and repayments of $25.5 million.
Current wording
Loans receivable held for investment, net of the ACL, increased by $58.3 million to $938.7 million at June 30, 2024, compared to $880.5 million at December 31, 2023. The increase was primarily due to loan originations of $97.0 million which consisted of $53.8 million in multi-family loans, $21.5 million in commercial real estate loans, $17.5 million in other commercial loans, $3.7 million in construction loans, and $500 thousand in SBA loans, partially offset by loan payoffs and repayments of $38.7 million.
Previous wording
The following tables presents loan categories by maturity for the period indicated. Actual repayments historically have, and will likely in the future, differ significantly from contractual maturities because individual borrowers generally have the right to prepay loans, with or without prepayment penalties.
Current wording
The following table presents loan categories by maturity for the period indicated. Actual repayments historically have, and will likely in the future, differ significantly from contractual maturities because individual borrowers generally have the right to prepay loans, with or without prepayment penalties.
Previous wording
Certain multi-family loans have adjustable-rate features based on the Secured Overnight Financing Rate but are fixed for the first five years. Our experience has shown that these loans typically payoff during the first five years and do not reach the adjustable-rate phase. However, in the current high interest rate environment, we have seen more borrowers maintain their loans instead of paying them off due to interest rate caps which make the adjusted interest rate on their existing loan more desirable than getting a new loan at current interest rates. Multi-family loans in their initial fixed period totaled $575.9 million or 61.7% of our loan portfolio as of March 31, 2024.
Current wording
Certain multi-family loans have adjustable-rate features based on the Secured Overnight Financing Rate but are fixed for the first five years. Our experience has shown that these loans typically payoff during the first five years and do not reach the adjustable-rate phase. However, in the current high interest rate environment, we have seen more borrowers maintain their loans instead of paying them off due to interest rate caps which make the adjusted interest rate on their existing loan more desirable than getting a new loan at current interest rates. Multi-family loans in their initial fixed period totaled $585.9 million or 62.0% of our loan portfolio as of June 30, 2024.
Previous wording
The ACL was $7.6 million, or 0.81% of gross loans held for investment at March 31, 2024, compared to an ACL of $7.3 million, or .83% of gross loans held for investment, at December 31, 2023.
Current wording
The ACL was $8.1 million, or 0.86% of gross loans held for investment at June 30, 2024, compared to an ACL of $7.3 million, or 0.83% of gross loans held for investment, at December 31, 2023.
Previous wording
There were no recoveries or charge-offs recorded during the three month periods ending March 31, 2024 and 2023.
Current wording
There were no recoveries or charge-offs recorded during the three or six month periods ending June 30, 2024 and 2023.
Previous wording
Collateral dependent loans at both March 31, 2024 and December 31, 2023 totaled $6.4 million, which had an associated ACL of $112 thousand.
Current wording
Collateral dependent loans at June 30, 2024 and December 31, 2023 totaled $481 thousand and $6.4 million, respectively. These loans had an ACL of $0 and $112 thousand as of June 30, 2024 and December 31, 2023, respectively.
Previous wording
The Bank had non-accrual loans of $401 thousand at March 31, 2024, which were greater than 90 days past due. Loan delinquencies for 30 days or more, but less than 90 days, decreased to $369 thousand at March 31, 2024, compared to $780 thousand at December 31, 2023. There wereno loans past due by greater than 90 days at December 31, 2023. Noloan charge-offs were recorded during the three months ended March 31, 2024 or 2023.
Current wording
The Bank had non-accrual loans of $328 thousand at June 30, 2024. Loan delinquencies for 30 days or more, but less than 90 days, decreased to $710 thousand at June 30, 2024, compared to $780 thousand at December 31, 2023. There was one $5 thousand loan past due by greater than 90 days at June 30, 2024. There wereno loans past due by greater than 90 days at December 31, 2023.
Previous wording
Total liabilities decreased by $4.3 million to $1.1 billion at March 31, 2024 from December 31, 2023, largely due to decreases of $14.0 million in notes payable, $1.8 million in securities sold under agreements to repurchase, and $1.3 million in accrued expenses and other liabilities, which were partially offset by an increase in deposits of $12.9 million.
Current wording
Total liabilities decreased by $8.5 million to $1.1 billion at June 30, 2024 from December 31, 2023, largely due to decreases of $14.0 million in notes payable and $817 thousand in securities sold under agreements to repurchase, partially offset by increases in deposits of $4.7 million and $1.7 million in accrued expenses and other liabilities.
Previous wording
At March 31, 2024 and December 31, 2023, the Company had outstanding advances from the FHLB totaling $209.3 million. The weighted interest rate was 4.91% as of both March 31, 2024 and December 31, 2023. The weighted average contractual maturity was 2 months as of both March 31, 2024 and December 31, 2023. The advances were collateralized by loans with a fair value of $419.2 million at March 31, 2024 and $435.4 million at December 31, 2023. The Company is currently approved by the FHLB of Atlanta to borrow up to 25% of total assets to the extent the Company provides qualifying collateral and holds sufficient FHLB stock. Based on collateral pledged and FHLB stock as of March 31, 2024, the Company was eligible to borrow an additional $105.0 million as of March 31, 2024.
Current wording
At June 30, 2024 and December 31, 2023, the Company had outstanding advances from the FHLB totaling $209.2 million. and $209.3 million, respectively. The weighted interest rate was 4.91% as of both June 30, 2024 and December 31, 2023. The weighted average contractual maturity was one month as of June 30, 2024 and two months as of December 31, 2023. The advances were collateralized by loans with an unpaid balance of $506.2 million at June 30, 2024 and $435.4 million at December 31, 2023. The Company is currently approved by the FHLB of Atlanta to borrow up to 25% of total assets to the extent the Company provides qualifying collateral and holds sufficient FHLB stock. Based on collateral pledged and FHLB stock as of June 30, 2024, the Company was eligible to borrow an additional $171.4 million as of June 30, 2024.
Previous wording
The Company enters into agreements under which it sells securities subject to an obligation to repurchase the same or similar securities. Under these arrangements, the Company may transfer legal control over the assets but still retain effective control through an agreement that both entitles and obliges the Company to repurchase the assets. As a result, these repurchase agreements are accounted for as collateralized financing agreements (i.e., secured borrowings) and not as a sale and subsequent repurchase of securities. The obligation to repurchase the securities is reflected as a liability in the Company’s consolidated statements of financial condition, while the securities underlying the repurchase agreements remain in the respective investment securities asset accounts. In other words, there is no offsetting or netting of the investment securities assets with the repurchase agreement liabilities. These agreements mature on a daily basis. As of March 31, 2024 securities sold under agreements to repurchase totaled $71.7 million at an average rate of 3.62%. The fair value of securities pledged totaled $78.6 million as of March 31, 2024. As of December 31, 2023, securities sold under agreements to repurchase totaled $73.5 million at an average rate of 2.60%. The fair value of securities pledged totaled $89.0 million as of December 31, 2023.
Current wording
The Company enters into agreements under which it sells securities subject to an obligation to repurchase the same or similar securities. Under these arrangements, the Company may transfer legal control over the assets but still retain effective control through an agreement that both entitles and obliges the Company to repurchase the assets. As a result, these repurchase agreements are accounted for as collateralized financing agreements (i.e., secured borrowings) and not as a sale and subsequent repurchase of securities. The obligation to repurchase the securities is reflected as a liability in the Company’s consolidated statements of financial condition, while the securities underlying the repurchase agreements remain in the respective investment securities asset accounts. In other words, there is no offsetting or netting of the investment securities assets with the repurchase agreement liabilities. These agreements mature on a daily basis. As of June 30, 2024 securities sold under agreements to repurchase totaled $72.7 million at an average rate of 3.68%. The fair value of securities pledged totaled $70.9 million as of June 30, 2024. As of December 31, 2023, securities sold under agreements to repurchase totaled $73.5 million at an average rate of 3.64%. The fair value of securities pledged totaled $89.0 million as of December 31, 2023.
Previous wording
One relationship accounted for 86% of our balance of securities sold under agreements to repurchase as of March 31, 2024. We expect to maintain this relationship for the foreseeable future.
Current wording
One relationship accounted for 95% of our balance of securities sold under agreements to repurchase as of June 30, 2024. We expect to maintain this relationship for the foreseeable future.
Previous wording
Stockholders’ equity was $281.3 million, or 20.5%, of the Company’s total assets, at March 31, 2024, compared to $281.9 million, or 20.5% of the Company’s total assets at December 31, 2023. Stockholders’ equity decreased primarily due to an increase of $571 thousand in accumulated other comprehensive loss, net of tax. Book value per share was $14.59 at March 31, 2024 and $14.65 at December 31, 2023.
Current wording
Stockholders’ equity was $282.3 million, or 20.6%, of the Company’s total assets, at June 30, 2024, compared to $281.9 million, or 20.5% of the Company’s total assets at December 31, 2023. Book value per share was $14.49 at June 30, 2024 and $14.65 at December 31, 2023.
Previous wording
During the first quarter of 2023, the Company issued 9,230 shares of stock to its directors which were fully vested.
Current wording
During February of 2023 and May of 2024, the Company issued 9,230 and 19,832 shares of stock, respectively, to its directors under the LTIP and Amended LIP, which were fully vested.
Previous wording
The objective of liquidity management is to ensure that we have the continuing ability to fund operations and meet our obligations on a timely and cost-effective basis. The Bank’s sources of funds include deposits, advances from the FHLB and other borrowings, proceeds from the sale of loans and investment securities, and payments of principal and interest on loans and investment securities. The Bank is currently approved by the FHLB of Atlanta to borrow up to 25% of total assets, or $284.3 million, to the extent the Bank provides qualifying collateral and holds sufficient FHLB stock. Based on FHLB stock held and collateral pledged as of March 31, 2024, the Bank had the ability to borrow an additional $105.0 million from the FHLB of Atlanta. In addition, the Bank had additional lines of credit of $10.0 million with other financial institutions as of March 31, 2024. The Bank had unpledged securities of $107.5 million as of March 31, 2024 which could be used as collateral for borrowings from the Federal Reserve Bank under the BTFP.
Current wording
The objective of liquidity management is to ensure that we have the continuing ability to fund operations and meet our obligations on a timely and cost-effective basis. The Bank’s sources of funds include deposits, advances from the FHLB and other borrowings, proceeds from the sale of loans and investment securities, and payments of principal and interest on loans and investment securities. The Bank is currently approved by the FHLB of Atlanta to borrow up to 25% of total assets, or $284.3 million, to the extent the Bank provides qualifying collateral and holds sufficient FHLB stock. Based on FHLB stock held and collateral pledged as of June 30, 2024, the Bank had the ability to borrow an additional $171.4 million from the FHLB of Atlanta. In addition, the Bank had additional lines of credit of $10.0 million with other financial institutions as of June 30, 2024.
Previous wording
The Bank’s primary uses of funds include originations of loans, withdrawals of and interest payments on deposits, purchases of investment securities, and the payment of operating expenses. Also, when the Bank has more funds than required for reserve requirements or short-term liquidity needs, the Bank invests in federal funds with the Federal Reserve Bank or in money market accounts with other financial institutions. The Bank’s liquid assets at March 31, 2024 consisted of $67.1 million in cash and cash equivalents and $107.5 million in securities available-for-sale that were not pledged, compared to $105.2 million in cash and cash equivalents and $173.3 million in securities available-for-sale that were not pledged at December 31, 2023. Currently, we believe the Bank has sufficient liquidity to support growth over the next twelve months and in the longer term.
Current wording
The Bank’s primary uses of funds include originations of loans, withdrawals of and interest payments on deposits, purchases of investment securities, and the payment of operating expenses. Also, when the Bank has more funds than required for reserve requirements or short-term liquidity needs, the Bank invests in federal funds with the Federal Reserve Bank or in money market accounts with other financial institutions. The Bank’s liquid assets at June 30, 2024 consisted of $89.8 million in cash and cash equivalents and $85.0 million in securities available-for-sale that were not pledged, compared to $105.2 million in cash and cash equivalents and $173.3 million in securities available-for-sale that were not pledged at December 31, 2023. Currently, we believe the Bank has sufficient liquidity to support growth over the next twelve months and in the longer term.
Previous wording
The Bank had commitments to fund $448 thousand in loans that were approved but unfunded as of March 31, 2024. In addition, the bank had $5.7 million in unfunded line of credit loans and $49.3 million in unfunded construction loans as of March 31, 2024.
Current wording
The Bank had commitments to fund $408 thousand in loans that were approved but unfunded as of June 30, 2024. In addition, the bank had $3.1 million in unfunded line of credit loans and $49.2 million in unfunded construction loans as of June 30, 2024.
Previous wording
The Bank has a significant concentration of deposits with two customers that accounted for approximately 12% of its deposits as of March 31, 2024. The Bank also has a significant concentration of short-term borrowings with one customer that accounted for 86% of the outstanding balance of securities sold under agreements to repurchase as of March 31, 2024. The Bank has long-term relationships with these customers and expects to maintain its relationships with them for the foreseeable future.
Current wording
The Bank has a significant concentration of deposits with two customers that accounted for approximately 12% of its deposits as of June 30, 2024. The Bank also has a significant concentration of short-term borrowings with one customer that accounted for 95% of the outstanding balance of securities sold under agreements to repurchase as of June 30, 2024. The Bank has long-term relationships with these customers and expects to maintain its relationships with them for the foreseeable future.
Previous wording
The Company recorded consolidated net cash outflows from investing activities of $23.4 million during the three months ended March 31, 2024, compared to consolidated net cash outflows from investing activities of $6.3 million during the three months ended March 31, 2023. Net cash outflows from investing activities for the three months ended March 31, 2024 were primarily due to the funding of new loans, net of repayments, of $46.4 million, partially offset by proceeds from principal paydowns on available-for-sale securities of $23.2 million. Net cash outflows from investing activities during the three months ended March 31, 2023 were primarily due to funding of new loans, net of repayments, of $9.7 million, partially offset by $3.4 million in proceeds from principal paydowns on available-for-sale securities.
Current wording
The Company recorded consolidated net cash outflows from investing activities of $3.3 million during the six months ended June 30, 2024, compared to $53.7 million during the six months ended June 30, 2023. Net cash outflows from investing activities for the six months ended June 30, 2024 were primarily due to the funding of new loans, net of repayments, of $59.1 million, partially offset by proceeds from principal paydowns on available-for-sale securities of $56.0 million. Net cash outflows from investing activities during the six months ended June 30, 2023 were primarily due to funding of new loans, net of repayments, of $58.7 million, partially offset by $6.8 million in proceeds from principal paydowns on available-for-sale securities.
Previous wording
The Company recorded consolidated net cash outflows from financing activities of $3.0 million during the three months ended March 31, 2024, compared to consolidated net cash inflows of $16.1 million during the three months ended March 31, 2023. Net cash outflows from financing activities during the three months ended March 31, 2024 were primarily due to the $14.0 million repayment of notes payable, partially offset by a net increase in deposits of $12.9 million. Net cash inflows from financing activities during the three months ended March 31, 2023 were primarily attributable to proceeds from FHLB advances of $40.5 million, partially offset by a net decrease in deposits of $29.4 million.
Current wording
The Company recorded consolidated net cash outflows from financing activities of $10.2 million during the six months ended June 30, 2024, compared to consolidated net cash inflows of $46.2 million during the six months ended June 30, 2023. Net cash outflows from financing activities during the six months ended June 30, 2024 were primarily due to the $14.0 million repayment of notes payable, partially offset by a net increase in deposits of $4.7 million. Net cash inflows from financing activities during the six months ended June 30, 2023 were primarily attributable to proceeds from FHLB advances of $82.0 million, partially offset by a net decrease in deposits of $40.9 million.
Previous wording
The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possible additional discretionary, actions by the regulators that, if undertaken, could have a direct material effect on the Company’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank’s assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The Bank’s capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk-weightings, and other factors. As of March 31, 2024 and December 31, 2023, the Bank exceeded all capital adequacy requirements to which it is subject and meets the qualifications to be considered “well capitalized.” (See Note 10 – Stockholders’ Equity and Regulatory Matters.)
Current wording
The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possible additional discretionary, actions by the regulators that, if undertaken, could have a direct material effect on the Company’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank’s assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The Bank’s capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk-weightings, and other factors. As of June 30, 2024 and December 31, 2023, the Bank exceeded all capital adequacy requirements to which it is subject and meets the qualifications to be considered “well capitalized.” (See Note 10 – Regulatory Matters.)
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
Deposits increased by $4.7 million to $687.4 million at June 30, 2024, from $682.6 million at December 31, 2023. The increase in deposits was attributable to an increase of $19.4 million in ICS deposits, partially offset by decreases of $8.4 million in liquid deposits (demand, interest checking, and money market accounts), $3.2 million in savings deposits, $1.7 million in other certificates of deposit accounts and $1.4 million in CDARS deposits. As of June 30, 2024, our uninsured deposits, including deposits from affiliates, represented 35% of our total deposits, as compared to 37% as of December 31, 2023.
Rearranged previous paragraphs (2)
Previous report — wording carried elsewhere
Total liabilities decreased by $4.3 million to $1.1 billion at March 31, 2024 from December 31, 2023. The decrease in total liabilities primarily consisted of decreases of $14.0 million in notes payable, $1.8 million in securities sold under agreements to repurchase, and $1.3 million in accrued expenses and other liabilities, which were partially offset by an increase in deposits of $12.9 million.
Previous report — wording carried elsewhere
The Bank had non-accrual loans of $401 thousand at March 31, 2024, which were greater than 90 days past due. Loan delinquencies for 30 days or more, but less than 90 days, decreased to $369 thousand at March 31, 2024, compared to $780 thousand at December 31, 2023. There wereno loans past due by greater than 90 days at December 31, 2023. Noloan charge-offs were recorded during the three months ended March 31, 2024 or 2023.