On August 26, 2020 CFBanc Corporation
(“City First”) in Washington, DC and Broadway Financial Corporation (“Broadway”) Nasdaq: BYFC in Los Angeles, CA announced that they have entered into a transformational Merger of Equals agreement to create the largest Black-led Minority Depository Institution (MDI) in the nation with more than $1 billion in combined assets under management and over $900 million in total depository institution assets as of December 31, 2020. The merger officially closed on April 1, 2021.
“MERGER OF EQUALS”
City First Bank of DC, National Association (“City First Bank,” a City First subsidiary)
and Broadway Federal Bank, f.s.b. (“Broadway Federal Bank,” a Broadway subsidiary) each hold a strong financial position as Community Development Financial Institutions (CDFIs), and have a longstanding history of advancing economic and social equity through the provision of capital
in low- to moderate-income communities. The new institution maintains bi-coastal headquarters and continues to serve and expand in the banks’ current geographic areas, Washington DC, and Los Angeles California, with a desire to scale to other high-potential urban markets.
Combining the two institutions has increased their collective commercial lending capacity for investments in multifamily affordable housing, small businesses, and nonprofit development in financially underserved urban areas, while creating a national platform for impact investors.
“The new combined institution strengthens our position and helps drive both sustainable economic growth and societal returns,” said Mr. Wayne-Kent A. Bradshaw, Broadway’s President and CEO. “We envision building stronger profitability and creating a multiplier effect of capital availability for our customers and for the communities we serve.”
About CFBanc Corporation
City First conducts its operations through its wholly owned subsidiary, City First Bank. Founded over 25 years ago in direct response to systemic disinvestment in our communities, City First has been an innovator and a financial first responder for equitable economic development in Washington, DC. Together with our affiliates, City First has since invested over $1.4B as of December 31,2 2020 with a vision to advance economic equity and social justice, impacting families and communities today and for
generations to come. City First is part of a dedicated network of CDFIs and certified BCorps, and is a member of the Global Alliance of Banking on Values, entities whose values are aligned with sustainable solutions, healthier families and more prosperous communities for our collective well-being. For more information, please visit www.cityfirstbank.com | www.cfenterprises.org.
About Broadway Financial Corporation (Nasdaq: BYFC)
Broadway conducts its operations through its wholly owned subsidiary, Broadway Federal Bank, which is the leading community-oriented savings bank in Southern California serving low-to-moderate-income communities. Broadway Federal Bank offers a variety of residential and commercial real estate loan products for consumers, businesses and nonprofit organizations, other loan products and a variety of deposit products, including checking, savings and money market accounts, certificates of deposits and retirement accounts. Broadway Federal Bank operates three full-service branches, two in the city of Los Angeles, and one located in the nearby city of Inglewood, California.
Shareholders, analysts and others seeking information about Broadway are invited to write to: Broadway Financial Corporation, Investor Relations, 5055 Wilshire Blvd., Suite 500, Los Angeles, CA 90036, or visit our website at www.broadwayfederalbank.com.
Mission, Margin, Moment, Magnitude
CDFIs help to close funding gaps, create jobs, expand critical social services and spur equitable economic development with a mission to strengthen the overall well-being of vulnerable communities. Since the beginning of 2015, City First
Bank and Broadway Federal Bank have collectively deployed over $1.1 billion combined in loans and investments in their communities (as of June 30, 2020).
“Given the compounding factors of a global pandemic, unprecedented unemployment and social unrest resulting from centuries of inequities, the work of CDFIs has never been more urgent and necessary,” said Brian E. Argrett, President and CEO of City First Bank and the Vice Chair and CEO of the new combined institution. “As part of this historic merger, we are demonstrating that thriving urban neighborhoods are viable markets that require a dedicated focus,
long-term commitment and critical access to capital.”
The combined nine-member board will be composed of five directors from City First and four from Broadway. Brian E. Argrett, President and CEO of City First, will be the CEO and Vice Chair of the new combined institution. Broadway’s President and CEO Wayne-Kent A. Bradshaw will lead the board of the combined institution as its chair. City First board chair Marie C. Johns will serve as the institution’s lead independent director.
The board and executive management of the combined institution will reflect minority leadership.
Board of Directors
Broadway is currently trading on Nasdaq: BYFC.
“As part of this historic merger, we are demonstrating that thriving urban neighborhoods are viable markets that require a dedicated focus, long-term commitment and critical access to capital.” said Brian E. Argrett, President and CEO of City First Bank and the Vice Chair and CEO of the new combined institution. “
The merger closed on April 1, and met with satisfaction the customary closing conditions, including receipt of necessary regulatory approvals and approval by the shareholders of each company.
At the closing of the merger, City First common shareholders will received 13.626 shares of Broadway common stock for each share of City First common stock they own, resulting in Broadway stockholders owning 52.5% and City First shareholders owning 47.5% of the combined institution. Under the terms of the merger agreement, which was unanimously approved by the boards of directors of both City First and Broadway, City First merged with and into Broadway, with Broadway as the surviving corporation. Broadway Federal Bank, the wholly owned subsidiary of Broadway, merged with and into City First Bank, the wholly owned subsidiary of City First, with City First Bank as the surviving bank.
Additional Information and Where to Find it
This communication does not constitute an offer to buy or sell or the solicitation of an offer to buy or sell any securities or a solicitation of any vote or approval. This communication relates to a proposed business combination (the “proposed transaction”) between Broadway and City First. In connection with the proposed transaction, Broadway intends to file with the Securities and Exchange Commission (the “SEC”) a registration statement on Form S-4 (the “Registration Statement”) that will include a joint proxy statement of Broadway and City First and a prospectus of Broadway (the “Joint Proxy/Prospectus”). Broadway also plans to file other relevant documents with the SEC regarding the proposed transaction. No offering of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the U.S. Securities Act of 1933, as amended, and no offer to sell or solicitation of an offer to buy shall be made in any jurisdiction in which such offer, solicitation or sale would be unlawful. Any definitive Joint Proxy/Prospectus (if and when available) will be mailed or otherwise provided to stockholders of Broadway and City First.
INVESTORS AND SECURITY HOLDERS OF BROADWAY AND CITY FIRST ARE URGED TO READ THE REGISTRATION STATEMENT, JOINT PROXY/PROSPECTUS AND OTHER DOCUMENTS THAT MAY BE FILED WITH THE SEC, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THOSE DOCUMENTS, CAREFULLY AND IN THEIR ENTIRETY IF AND WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION.
Investors and security holders will be able to obtain free copies of these documents (if and when available) and other documents containing important information about Broadway and City First, once such documents are filed with the SEC through the website maintained by the SEC at http://www.sec.gov. Copies of the documents filed with the SEC by Broadway will also be available free of charge on Broadway’s website at https://www.broadwayfederalbank.com/financial-highlights.
Copies of the Registration Statement and the
Joint Proxy/Prospectus can also be obtained,
when it becomes available, free of charge by
directing a request to:
1432 U Street NW
Washington DC, 20009
Broadway Financial Corporation
5055 Wilshire Boulevard
Los Angeles, CA 90036
Attention: Investor Relations
Chief Financial Officer
Minority Depository Institution (MDI)
Community Development Financial Institution (CDFI)
Public Benefit Corporation
Under the terms of the merger agreement, which was unanimously approved by the boards of directors of both City First and Broadway, City First merged with and into Broadway, with Broadway as the surviving corporation. Broadway Federal Bank, the wholly owned subsidiary of Broadway, merged with and into City First Bank, the wholly owned subsidiary of City First, with City First Bank as the surviving bank.
As a national bank, the combined entity continues to operate under the supervision of the Office of the Comptroller of the Currency (OCC) and is listed on the Nasdaq Capital Market. As a Community Development Financial Institution (CDFI), a Minority Depository Institution (MDI), a Benefit Corporation and a member of the Global Alliance of Banking on Values, the new institution continues to firmly anchor its work, results and values in the rapidly expanding field of social finance and accretive stakeholder benefits.
The new combined institution will be the largest Black-led Minority Depository Institution, or MDI, in the nation.
An MDI may be a federal insured depository institution for which (1) 51 percent or more of the voting stock is owned by minority individuals; or (2) a majority of the board of directors is minority and the community that the institution serves is predominantly minority. Ownership must be by U.S. citizens or permanent legal U.S. residents to be counted in determining minority ownership.
The combined institution will maintain its CDFI status, requiring it to deploy at least 60% of its lending into low- to moderate-income communities. CDFIs help to close funding gaps, create jobs, expand critical social services and spur equitable economic development with a mission to strengthen the overall well-being of vulnerable communities.
Community Development Financial Institution (CDFI) Certification is a designation given by the CDFI Fund to specialized organizations that provide financial services in low-income communities and to people who lack access to financing. CDFIs include regulated institutions such as community development banks and credit unions, and non-regulated institutions like loan and venture capital funds. By building the capacity of a nationwide network of CDFIs, the CDFI Fund works to empower low-income and underserved people and communities to enter the financial mainstream.
Benefit corporations are a new legal tool to create a solid foundation for long term mission alignment and value creation. The new combined institution intends to be a benefit corporation, with a specific public benefit of serving low- to moderate- income communities. A Public Benefit Corporation is the same as a traditional corporation, except:
Expanded corporate purpose: required ‘to operate in a responsible and sustainable manner’ AND to identify one or more public benefit purposes
Expanded accountability: required to ‘balance financial interests of shareholders with . . . the best interests of those materially affected by the corporation’s conduct (and the identified specific benefit purpose) shareholders are given a private right of action to enforce the new purpose and commitment to stakeholders
Expanded transparency: required to report biennially to shareholders about corporation’s overall impact on those interests (and that purpose)
Certain Information Concerning Participants
Broadway, City First and certain of their respective directors and executive officers may be deemed to be participants in the solicitation of proxies in respect of the proposed transaction. Information about the directors and executive officers of Broadway is set forth in Broadway’s proxy statement for its 2020 annual meeting of stockholders, which was filed with the SEC on May 20, 2020. Information regarding all of the persons who may, under the rules of the SEC, be deemed participants in the proxy solicitation and a description of their direct and indirect interests, by security holdings or otherwise, will be contained in the Joint Proxy/Prospectus and other relevant materials to be filed with the SEC when they become available. These documents, when available, can be obtained free of charge from the sources indicated above. Investors should read the Joint Proxy/Prospectus carefully when it becomes available before making any voting or investment decisions.
Cautionary Statement Regarding Forward-Looking Information
This communication includes “forward-looking statements” within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. Words such as “expect,” “estimate,” “project,” “budget,” “forecast,” “anticipate,” “intend,” “plan,” “may,” “will,” “could,” “should,” “poised,” “believes,” “predicts,” “potential,” “continue,” and similar expressions are intended to identify such forward-looking statements; however the absence of these words does not mean the statements are not forward-looking. Forward-looking statements in this communication include matters that involve known and unknown risks, uncertainties and other factors that may cause actual results, levels of activity, performance or achievements to differ materially from results expressed or implied by this communication. Such risk factors include, among others: the uncertainty as to the extent of the duration, scope and impacts of the COVID-19 pandemic; political and economic uncertainty, including any decline in global economic conditions or the stability of credit and financial markets; the expected timing and likelihood of completion of the proposed transaction, including the timing, receipt and terms and conditions of any required governmental and regulatory approvals of the proposed transaction that could reduce anticipated benefits or cause the parties to abandon the proposed transaction, the occurrence of any event, change or other circumstances that could give rise to the termination of the Merger Agreement, the possibility that stockholders of Broadway or of City First may not approve the merger agreement, the risk that the parties may not be able to satisfy the conditions to the proposed transaction in a timely manner or at all or failure to close the proposed transaction for any other reason, risks related to disruption of management time from ongoing business operations due to the proposed transaction, the risk that any announcements relating to the proposed transaction could have adverse effects on the market price of Broadway Common Stock, the risk relating to the potential dilutive effect of shares of Company Common Stock to be issued in the proposed transaction, the risk of any unexpected costs or expenses resulting from the proposed transaction, the risk of any litigation relating to the proposed transaction, the risk of possible adverse rulings, judgments, settlements and other outcomes of pending litigation, the risk that the proposed transaction and its announcement could have an adverse effect on the ability of Broadway and City First to retain customers and retain and hire key personnel and maintain relationships with their customers and on their operating results and businesses generally, the risk the pending proposed transaction could distract management of both entities and that they will incur substantial costs, the risk that problems may arise in successfully integrating the businesses of the companies, which may result in the combined company not operating as effectively and efficiently as expected, or that the entities may not be able to successfully integrate the businesses, the risk that the combined company may be unable to achieve synergies or other anticipated benefits of the proposed transaction or it may take longer than expected to achieve those synergies or benefits and other important factors that could cause actual results to differ materially from those projected. All such factors are difficult to predict and are beyond Broadway’s control. Additional factors that could cause results to differ materially from those described above can be found in Broadway’s annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K or other filings, which have been filed with the SEC and are available on Broadway’s website at https://www.broadwayfederalbank.com/financial-highlights and on the SEC’s website at http://www.sec.gov.
Actual results may differ materially from those contained in the forward-looking statements in this communication. Forward-looking statements speak only as of the date they are made and Broadway undertakes no obligation and does not intend to update these forward-looking statements to reflect events or circumstances occurring after the date of this communication. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this communication.