L.A.'s Broadway Federal seeks new capital, plans to close 2 branches
Broadway Financial Corp., the parent company of Broadway Federal Bank, is closing two of the bank's five branches and trying to raise $10 million in new investment, saying it must retrench now to better serve its inner-city customers when the economy recovers.
"It's the same thing Bank of America is doing, just on a smaller scale," Paul C. Hudson, chairman and chief executive of the Los Angeles savings and loan, said in an interview Tuesday.
Broadway Federal, founded in 1946 in South L.A. by a group of prominent African Americans, continues to focus on urban neighborhoods with large minority populations.
It said it would close its Wilshire Boulevard and Leimert Park branches, its least busy retail offices, on Nov. 7.
Its Midtown, Inglewood and Exposition Park offices will stay open for business and its headquarters will remain on Wilshire. All depositors remain insured by the federal government for at least $250,000.
Broadway Federal lost $6.5 million in 2009 and turned a $1.9-million profit in 2010, but has lost $1.8 million during the first half of this year.
The bank's specialties include loans made to apartment owners, which have held up relatively well despite the economy's downdrafts, and to inner-city churches, which have not done so well.
Compounding the church loan problems was a sizable commercial loan that soured in the economic downdraft, Hudson said.
Broadway Federal had to set aside $3 million in the second quarter to cover potential losses on the loan, causing a loss for the quarter despite fewer overall delinquencies on loans.
Bank regulators have ordered Broadway Federal to raise its capital by about $5 million, but Hudson said he wants to double that amount. He said he has commitments for about 25% of his $10-million goal so far.
"We definitely plan to manage through this period and come out stronger once the economy rebounds," he said.
-- E. Scott Reckard
Photo: The mural "Sunrise on Central Avenue" by artist Richard Wyatt is featured at Broadway Federal's Exposition Park branch, which will remain open for business. Credit: Broadway Federal Bank.