Wayne-Kent Bradshaw, president and CEO of Broadway Federal Bank, discusses how the institution has changed over the past 70-plus years -- and why that can be hard to talk about.
Walking along Wilshire Boulevard in Mid-City, it’s easy to miss the narrow window sign that says “Broadway Federal Bank” in green letters. But despite its unassuming appearance, this small bank is one of LA’s most historically significant financial institutions. Founded more than 70 years ago to serve the region’s African American community, it currently stands as the only black-owned bank headquartered in the Western U.S.
Over the past several decades, however, Broadway’s business model has shifted away from focusing specifically on black customers. “That makes it very hard for me to talk about what we do,” said Broadway President and CEO Wayne-Kent Bradshaw during a recent interview. On the one hand, he said, he wants to avoid pigeonholing Broadway as a “black bank” because its clientele has diversified. On the other, he’s wary of coming off like he’s rejecting or ignoring the bank’s history.
“We’re very proud of [what we do],” Bradshaw said, “but it doesn’t fit into the image of, ‘so what are you doing for the community, or what are you doing for your blackness?’ But I also know that when someone thinks about Broadway they say, ‘oh yeah, Broadway is your traditional black bank.’”
The early days
Broadway Federal Bank’s origins go back to the 1940s, when African Americans were routinely denied loans to purchase property in neighborhoods throughout LA. These racist mortgage lending policies are also known as redlining.
In response, a group of African American civic leaders -- including the architect Paul R. Williams -- started the Broadway Federal Savings and Loan Association, the organization that eventually morphed into Broadway Federal Bank.
In its earliest days, “Broadway...provided the financing for black people that wanted to move into the western part of the city, which in today’s world is more like along Adams Boulevard and Western [Avenue],” said Bradshaw.
It was one of several black-owned banks to open around the country in the decades before and after. But more recently, as the banking industry in general has consolidated, their numbers have dwindled. There are now 22 black banks in the U.S., down from 48 in 2001, despite attention a few years ago from a hashtag campaign to raise awareness about the institutions. Today, Broadway is the only one left west of Dallas.
For many years, Bradshaw says, Broadway kept a tight focus on serving the region’s African American community, and not just through individual mortgage lending. A large part of its business came from financing black churches, Bradshaw says.
“That’s been the traditional Broadway, probably for the first 60 years or so,” he said. “My situation is different.”
A turning point
When Bradshaw first came to Broadway in 2009, the bank -- unlike many others collapsing from the mortgage meltdown -- was in good shape. That changed, however, as the recession dragged on and the bank started struggling under the weight of delinquent loans. Many of those loans were tied to the churches that had been so central to its early business.
“That’s a very delicate subject,” said Bradshaw. “How do you say that church loans were a problem?”
The story of how Broadway Federal Bank’s church loans became problematic is long and complicated, and involved one of the bank’s own employees being sent to prison for approving bad loans in exchange for bribes.
In the end, Bradshaw was left with a daunting job: “I had to get rid of maybe $100 million in church loans, fix those situations and then find a way to become a viable institution.”
He did that by honing in on a new niche: providing loans to small real estate investors in the multifamily housing business.
A new business model
Broadway Federal Bank today specializes in financing the purchase of so-called Class C apartment buildings. These are not slum properties, but aren’t luxury buildings either; they’re often the older, low-rise properties you see all over Los Angeles.
The bank’s particular sweet spot is buildings that contain between five and 25 units, and cost between about $500,000 and $2.5 million. It’s an area overlooked by larger banks, Bradshaw says.
“When you're a small bank...you have to pick something that the big bank doesn't want to do,” he said. And why doesn’t Wells Fargo or JP Morgan Chase want to finance these types of deals? “Because they work in increments of billions of dollars,” said Bradshaw. “It’s too small.”
The typical Brodaway Federal client is a small player within the world of real estate investment, but definitely well-off, says Bradshaw.
“Our buildings are owned by very wealthy people,” he said. “Our average borrower probably has a net worth of $7 million.”
Bradshaw argues that the bank still ultimately serves the region’s low- and moderate-income residents, however, because that’s who rents in these properties.
To be clear, Broadway Federal Bank is not an affordable housing financier. The properties it works with aren’t subsidized buildings, but ones that tend to naturally fall to the lower end of market-rate. At the same time, the bank doesn’t finance flips or speculative deals. It focuses on fully leased properties with reliable, existing rental income.
“You don’t have to have a graduate degree to realize...almost nobody who’s a regular person can afford [to buy] a house in Los Angeles,” Bradshaw said. “So where would those people live? They would live in a decent apartment building that’s affordable. If we have a product where we finance those buildings, I’m not sure what else you could do that would be any better.”