The global pandemic has brought a lot of changes to the world of work and has inadvertently affected the finances of many individuals. The situation has disproportionately affected the livelihoods of Black people. The role of community lenders has been pivotal in getting relief funds to the people who need it the most.
As such, it is great timing that two Black-owned banks are merging to form “the largest minority-owned depository institution in the United States” with assets of over $1 billion, Federal Deposit Insurance Corporation (FDIC) data reveals.
The two banks joining forces, Broadway Federal Bank, a Los Angeles-based commercial lender founded in 1946, and City First Bank in Washington, which opened in 1998, are on opposite coasts and the deal will be finalized early next year.
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Brian E. Argrett, chief executive of City First, will be the chief executive of the newly formed depository institution, and Wayne-Kent A. Bradshaw, Broadway’s chief executive, will be the chairman of the combined company.
The merger will close with Broadway stockholders having 52.5 percent ownership of the new company and City First shareholders with 47.5 percent ownership.
City First will be the banking brand of the transformational Merger of Equals agreement whiles the publicly traded Broadway Financial Corporation will be its bank holding company.
According to Argrett, the bank will specialize in financing multifamily affordable housing, small businesses, and non-profit development in financially underserved urban areas all the while creating a national platform for impact investors.
Community Development Financial Institutions (CDFIs) like City First and Broadway have an excellent reputation for advancing economic and social equity through the provision of capital in low-to-moderate-income communities. They intend to do just that with the merger as they will be deploying about 60% of their lending into low-to-moderate-income communities.
“We need to scale up our impact,” he said. “Having a larger capital base is important so we can direct more resources into underserved communities,” Argrett said.
According to a study by FDIC, minority-owned institutions are thriving more than traditional banks with regards to federally backed small business loans to borrowers in low-and moderate-income census tracts and in originating mortgages.
According to the company’s website, Los Angeles-based Broadway Federal is a community-oriented savings bank dedicated to providing conventional loans to minority consumers who often are ignored by mainstream commercial banks.
Based in Washington, DC, City First also defines itself as an “impact-driven” institution that focuses on lending to underprivileged people and communities.
They say two heads are better than one and Argrett believes the combination of the resources of the two institutions will create a bigger impact than them working as separate intuitions.
“It gives us more lending power,” Argrett said. “It brings additional financial capacity to be able to serve Black-owned businesses.”
“The new combined institution will strengthen our position and will help drive both sustainable economic growth and societal returns,” said Bradshaw also added.
“We envision building stronger profitability and creating a multiplier effect of capital availability for our customers and for the communities we serve.”
There are only 20 Black-led Minority Depository Institutions in the United States out of a total of 143 in the country. It is however important to note that, the economic shocks of the coronavirus pandemic and the role of these CDFIs should not be underrated.
“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.
“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.”
Last Wednesday when the merger was announced, shares of Broadway Financial were up 17 percent. This goes to prove the needed gap this merger has come to fill in the sector.