BROADWAY FINANCIAL CORP DE 10-K

ITEM 9A. CONTROLS AND PROCEDURES Evaluation of disclosure controls and procedures As of December 31, 2021, an evaluation was performed under the supervision of the Company’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based on that evaluation, the Company’s CEO and CFO concluded that the Company’s disclosure controls and procedures were effective as of December 31, 2021. Management’s annual report on internal control over financial reporting The management of Broadway Financial Corporation is responsible for establishing and maintaining adequate internal control over financial reporting for the Company as defined in Rule 13a‑15(f) under the Exchange Act. This system, which management has chosen to base on the framework set forth in Internal Control‑Integrated Framework , published by the 1992 Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and which is effected by the Company’s Board of Directors, management and other personnel, is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. The Company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and the Directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, a system of internal control over financial reporting can provide only reasonable assurance and may not prevent or detect misstatements. Further, because of changes in conditions, effectiveness of internal controls over financial reporting may vary over time. With the participation of the Company’s CEO and CFO, management has conducted an evaluation of the effectiveness of the Company’s system of internal control over financial reporting. Based on this evaluation, management determined that the Company’s system of internal control over financial reporting was effective as of December 31, 2021. This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report. 46 Table of Contents Changes in internal control over financial reporting There were no significant changes in the Company’s internal control over financial reporting identified in connection with the evaluation of internal control over financial reporting that occurred during the fourth quarter of 2021 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. ITEM 9B. OTHER INFORMATION None ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICITONS THAT PREVENT INSPECTIONS Not applicable 47 Table of Contents PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE The information required by this Item is incorporated herein by reference to the definitive Proxy Statement, under the captions “Election of Directors”, “Executive Officers”, “Code of Ethics” and “Section 16(a) Beneficial Ownership Reporting Compliance”, that will be filed with the Securities and Exchange Commission in connection with the Company’s 2021 Annual Meeting of Stockholders (the “Company’s Proxy Statement”). ITEM 11. EXECUTIVE COMPENSATION The information required by this Item is incorporated herein by reference to the Company’s Proxy Statement, under the caption “Executive Compensation” and “Director Compensation.” ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS The information required by this Item is incorporated herein by reference to the Company’s Proxy Statement, under the caption “Security Ownership of Certain Beneficial Owners and Management.” ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE The information required by this Item is incorporated herein by reference to the Company’s Proxy Statement, under the caption “Certain Relationships and Related Transactions” and “Election of Directors.” ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES The information required by this Item is incorporated herein by reference to the Company’s Proxy Statement, under the caption “Ratification of the Appointment of the Independent Registered Public Accounting Firm.” 48 Table of Contents PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) 1. See Index to Consolidated Financial Statements. 2. Financial Statement Schedules have been omitted because they are not applicable or the required information is shown in the Consolidated Financial Statements or Notes thereto included under Item 8, “Financial Statements and Supplementary Data.” (b) List of Exhibits Exhibit Number* 3.1 Certificate of Incorporation of Registrant and all amendments thereto (Exhibit 3.1 to Form 10-K filed by Registrant on April 2, 2021) 3.2 Bylaws of Registrant (Exhibit 3.2 to Form 8‑K filed by Registrant on August 24, 2020) 3.3 Certificate of Designations for the Series B Junior Participating Preferred Stock (Exhibit 3.1 to Form 8-K filed by Registrant on September 10, 2019) 4.1 Description of Registrant’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934 4.2 Rights Agreement between Broadway Financial Corporation and Computershare Trust Company, N.A., as rights agent (Exhibit 4.1 to Form 8-K filed by Registrant on September 10, 2020) 4.2.1 Amendment to Rights Agreement, dated as of August 25, 2021, by and between Broadway Financial Corporation and Computershare Trust Company, N.A. (Exhibit 4.1 to Form 8-K file by Registrant on August 26, 2021) 10.1** Broadway Federal Bank Employee Stock Ownership Plan (Exhibit 10.1 to Form 10‑K filed by Registrant on March 28, 2016) 10.2** Amended and Restated Broadway Financial Corporation 2008 Long Term Incentive Plan (Exhibit 10.3 to Form 10‑Q filed by Registrant on August 12, 2016) 10.3** Amended Form of Stock Option Agreement for stock options granted pursuant to Amended and Restated Broadway Financial Corporation 2008 Long‑Term Incentive Plan (Exhibit 10.1 to Form 10‑Q filed by Registrant on August 12, 2016) 10.5** Broadway Financial Corporation 2018 Long‑Term Incentive Plan (Exhibit 10.5 to Form 10-K filed by Registrant on March 29, 2020) 10.6** Form of Award Agreement for grants of restricted stock pursuant to Broadway Financial Corporation 2018 Long‑Term Incentive Plan (Exhibit 10.6 to Form 10-K filed by Registrant on March 29, 2020) 10.7** Employment Agreement, dated as of March 22, 2017, for Wayne‑Kent A. Bradshaw (Exhibit 10.7 to Form 10-K filed by Registrant on March 29, 2020) 10.10** Award Agreement, dated as of February 27, 2020 for grant of restricted stock to Wayne‑Kent A. Bradshaw pursuant to Broadway Financial Corporation 2018 Long‑Term Incentive Plan (Exhibit 10.10 to Form 10-K filed by Registrant on March 29, 2020) 10.11** Employment Agreement, dated as of May 1, 2017, for Brenda J. Battey (Exhibit 10.11 to Form 10-K filed by Registrant on March 29, 2020) 10.11.1** Amendment to Employment Agreement for Brenda J. Battey, dated as of January 14, 2021 (Exhibit 10.1 to form 8-K filed by Registrant on January 14, 2021) 10.12** Employment Agreement, dated as of May 1, 2017, for Norman Bellefeuille (Exhibit 10.12 to Form 10-K filed by Registrant on March 29, 2020) 10.12.1** Amendment to Employment Agreement for Norman Bellefeuille, dated as of January 14, 2021 (Exhibit 10.2 to form 8-K filed by Registrant on January 14, 2021) 10.13** Employment Agreement, dated as of May 1, 2017, for Ruth McCloud (Exhibit 10.13 to Form 10-K filed by Registrant on March 29, 2020) 10.13.1** Amendment to Employment Agreement for Ruth McCloud, dated as of January 14, 2021 (Exhibit 10.3 to form 8-K filed by Registrant on January 14, 2021) 49 Table of Contents Exhibit Number* 10.14** Broadway Federal Bank Incentive Compensation Plan (Exhibit 10.14 to Form 10-K filed by the Registrant on March 29, 2019) 10.15** Employment Agreement, dated and effective as of November 17, 2021, between Registrant and Brian E. Argrett (Exhibit 10.1 to Form 8-K filed by Registrant on November 18, 2021) 10.16 Stock Purchase Agreement, dated as of December 21, 2016, entered between First Republic Bank and Registrant (Exhibit 10.8 to Form 10‑K filed by Registrant on March 27, 2017) 10.17 Stock Purchase Agreement, dated as of February 19, 2021, entered between Butterfield Trust (Bermuda) Limited as trustee of each of the following: The Lorraine Grace Will Trust, The Anne Grace Kelly Trust 99, The Gwendolyn Grace Trust 99, The Lorraine L. Grace Trust 99, and The Ruth Grace Jervis Millennium Trust and Registrant (Exhibit 10.30 to Form 10-K filed by Registrant on March 31, 2021) 10.18 ESOP Loan Agreement and ESOP Pledge Agreement, each dated as of December 19, 2016, entered into between Registrant and Miguel Paredes, as trustee for the Broadway Federal Bank, f.s.b., Employee Stock Ownership Plan Trust, and related Promissory Note, dated as of December 19, 2016 (Exhibit 10.12 to Form 10‑K filed by Registrant on March 27, 2017) 10.19 Stock Purchase Agreement, dated as of November 23, 2020, entered between Banc of America Strategic Investments Corporation and Registrant (Exhibit 10.15 to Registration Statement on S-4 filed by Registrant on January 19, 2021) 10.20 Stock Purchase Agreement, dated as of November 23, 2020, entered between Cedars-Sinai Medical Center and Registrant (Exhibit 10.14 to Registration Statement on S-4 filed by Registrant on January 19, 2021) 10.21 Stock Purchase Agreement, dated as of November 24, 2020, entered between Wells Fargo Central Pacific Holdings, Inc. and Registrant (Exhibit 10.16 to Registration Statement on S-4 filed by Registrant on January 19, 2021) 10.22 Stock Purchase Agreement, dated as of February 19, 2021, entered between Ally Ventures, a business unit of Ally Financial Inc., and Registrant (Exhibit 10.24 to Form 10-K filed by Registrant on March 31, 2021) 10.23 Stock Purchase Agreement, dated as of February 19, 2021, entered between Banner Bank and Registrant (Exhibit 10.25 to Form 10-K filed by Registrant on March 31, 2021) 10.24 Stock Purchase Agreement, dated as of February 19, 2021, entered between Citicorp Banking Corporation and Registrant (Exhibit 10.26 to Form 10-K filed by Registrant on March 31, 2021) 10.25 Stock Purchase Agreement, dated as of February 19, 2021, entered between First Republic Bank and Registrant (Exhibit 10.8 to Form 10‑K filed by Registrant on March 27, 2017) 10.26 Stock Purchase Agreement, dated as of February 19, 2021, entered between Gerald I. White and Registrant (Exhibit 10.28 to Form 10-K filed by Registrant on March 31, 2021) 10.27 Stock Purchase Agreement, dated as of February 19, 2021, entered between Gerald I. White, in his capacity as the trustee for the Grace & White, Inc. Profit Sharing Plan, and Registrant (Exhibit 10.28 to Form 10-K filed by Registrant on March 31, 2021) 10.28 Stock Purchase Agreement, dated as of February 19, 2021, entered between Registrant and Butterfield Trust (Bermuda) Limited as trustee of each of the following: The Lorraine Grace Will Trust, The Anne Grace Kelly Trust 99, The Gwendolyn Grace Trust 99, The Lorraine L. Grace Trust 99, and The Ruth Grace Jervis Millennium Trust (Exhibit 10.30 to Form 10-K filed by Registrant on March 31, 2021) 10.29 Stock Purchase Agreement, dated as of February 19, 2021, entered between Texas Capital Community Development Corporation and Registrant (Exhibit 10.31 to Form 10-K filed by Registrant on March 31, 2021) 10.30 Stock Purchase Agreement, dated as of February 20, 2021, entered between J.P. Morgan Chase Community Development Corporation and Registrant (Exhibit 10.32 to Form 10-K filed by Registrant on March 31, 2021) 21.1 List of Subsidiaries 23.1 Consent of Moss Adams LLP 31.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes‑Oxley Act of 2002 31.2 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes‑Oxley Act of 2002 32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes‑Oxley Act of 2002 50 Table of Contents Exhibit Number* 32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes‑Oxley Act of 2002 101.INS XBRL Instance Document 101.SCH XBRL Taxonomy Extension Schema Document 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF XBRL Taxonomy Extension Definitions Linkbase Document 101.LAB XBRL Taxonomy Extension Label Linkbase Document 101.PRE XBRL Taxonomy Extension Presentation Linkbase Document * Exhibits followed by a parenthetical reference are incorporated by reference herein from the document filed by the Registrant with the SEC described therein. Except as otherwise indicated, the SEC File No. for each incorporated document is 000‑27464. ** Management contract or compensatory plan or arrangement. ITEM 16. FORM 10-K SUMMARY None. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. BROADWAY FINANCIAL CORPORATION By: /s/ Brian Argrett Brian Argrett Chief Executive Officer Date: April 14, 2022 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. /s/ Brian Argrett Date: April 14, 2022 Brian Argrett Chief Executive Officer and President (Principal Executive Officer) /s/ Brenda J. Battey Date: April 14, 2022 Brenda J. Battey Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) /s/ WAYNE-KENT A. BRADSHAW Date: April 14, 2022 Wayne-Kent A. Bradshaw Chairman of the Board 51 Table of Contents /s/ MARIE C. JOHNS Date: April 14, 2022 Marie C. Johns Lead Independent Director /s/ WILLIAM A. LONGBRAKE Date: April 14, 2022 William A. Longbrake Audit Committee Chairman /s/ ROBERT C. DAVIDSON, JR. Date: April 14, 2022 Robert C. Davidson, Jr. Director /s/ MARY ANN DONOVAN Date: April 14, 2022 Mary Ann Donovan Director /s/ DAVID J. MCGRADY Date: April 14, 2022 David J. McGrady Director /s/ DUTCH C. ROSS III Date: April 14, 2022 Dutch C. Ross III Director 53 Table of Contents BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY Index to Consolidated Financial Statements Years ended December 31, 2021 and 2020 Report of Independent Registered Public Accounting Firm (PCAOB ID # 659 ) F‑1 Consolidated Statements of Financial Condition F‑4 Consolidated Statements of Operations and Comprehensive Loss F‑5 Consolidated Statements of Changes in Stockholders’ Equity F‑6 Consolidated Statements of Cash Flows F‑7 Notes to Consolidated Financial Statements F‑8 Table of Contents Report of Independent Registered Public Accounting Firm To the Shareholders and the Board of Directors of Broadway Financial Corporation Opinion on the Financial Statements We have audited the accompanying consolidated statements of financial condition of Broadway Financial Corporation and Subsidiary (the “Company”) as of December 31, 2021 and 2020, the related consolidated statements of operations and comprehensive loss, changes in stockholders’ equity and cash flows for the years then ended, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2021 and 2020, and the consolidated results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures to respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. F-1 Table of Contents Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing a separate opinion on the critical audit matters or on the accounts or disclosures to which they relate. Allowance for Loan Losses As described in Note 6 to the consolidated financial statements, the Company’s allowance for loan losses balance was $3.4 million at December 31, 2021. The allowance for loan losses is a valuation allowance for probable incurred credit losses. Loan losses are charged against the allowance when management believes the uncollectability of a loan balance is confirmed. Management estimates the allowance balance required using past loan loss experience, the nature and volume of the portfolio, information about specific borrower situations and estimated collateral values, economic conditions, and other factors. The allowance consists of general and specific components. The general component covers loans that are collectively evaluated for impairment and is based on historical loss experience adjusted for current factors. The historical loss experience is determined by portfolio segment with the use of a loss migration analysis and is based on the actual loss history experienced by the Company over the most recent five years. The Company assigns a risk rating to all loans based on historical loss experience and periodically performs detailed reviews of all such loans over a certain threshold to identify credit risks and assess overall collectability. This actual loss experience is supplemented with information about other current economic factors based on the risks present for each portfolio segment. These current economic factors include consideration of the following: levels of and trends in delinquencies and impaired loans; levels of and trends in charge‑offs and recoveries; trends in volume and terms of loans; effects of any changes in risk selection and underwriting standards; other changes in lending policies, procedures, and practices; experience, ability, and depth of lending management and other relevant staff; national and local economic trends and conditions; industry conditions; and effects of changes in credit concentrations. We identified management’s risk ratings of loans and the estimation of current economic factors, both of which are used in the allowance for loan losses calculation, as critical audit matters. These estimates and underlying assumptions require significant management judgment in the evaluation of the credit quality and the estimation of incurred losses inherent within the loan portfolio as of the balance sheet date and in turn led to a high degree of auditor judgment and subjectivity in performing the procedures and evaluating the related audit evidence. The following are primary procedures we performed to address the critical audit matters. We tested management’s process to develop the risk ratings of loans and the estimation of economic factors which involved the following: • Testing a risk-based targeted selection of loans to evaluate the risk ratings. • Performing a loan grade analysis by loan type to determine whether significant changes occurred when compared to the prior year for reasonableness. • Evaluating the significant assumptions and adjustments made to the economic factors for reasonableness. • Obtaining management’s analysis and supporting documentation related to the economic factors, and testing whether the economic factors used in the calculation of the allowance for loan losses are supported by the analysis provided by management. • Evaluating the methodology and assumptions used in the calculation of the allowance for loan losses, and testing the calculation itself, including completeness and accuracy of the data used in the calculation, application of the loan risk ratings determined by management and used in the calculation, application of the current economic factors determined by management and used in the calculation, and recalculation of the allowance for loan losses balance. F-2 Table of Contents Merger with CFBanc Corporation – Valuation of Acquired Loans As described in Note 2 to the consolidated financial statements, the Company completed its merger with merger with CFBanc Corporation on April 1, 2021, with the Company continuing as the surviving entity (the “CFBanc Merger”). Immediately following this merger, Broadway Federal Bank, f.s.b., a subsidiary of Broadway Financial Corporation, merged with and into City First Bank of D.C., National Association, with City First Bank of D.C., National Association continuing as the surviving entity (which concurrently changed its name to City First Bank, National Association). The total value of the consideration transferred to CFBanc Corporation shareholders was approximately $66.3 million. The CFBanc merger resulted in $225.9 million of acquired loans held for investment being recorded. Assets acquired and liabilities assumed have been recorded by management at their estimated fair values as of the acquisition date. The estimated fair value of acquired loans held for investment was determined using an income approach based on the discounted cash flow method. We identified the valuation of acquired loans as a critical audit matter. The process for estimating the fair value of acquired loans requires the use of significant estimates and assumptions made by management, including principal default and loss rates, prepayment rates, discount rates considering the cost of funds rate, capital charge, servicing costs, and liquidity premium and projected future cash flows. Auditing management’s judgements regarding these assumptions require a high degree of subjectivity. The following are primary procedures we performed to address this critical audit matter. We evaluated the design effectiveness of certain internal controls related to management’s estimate of the fair value of acquired loans, including: • Testing the design and implementation of internal controls related to the completeness and accuracy of acquired loan level data • Evaluating the internal controls implemented over management’s estimate of the fair value of acquired loans, including the method and assumptions used to estimate fair value We also tested management’s process to determine the reasonableness of assumptions used in the estimation of the fair value of acquired loans which involved the following: • Testing the completeness and accuracy of acquired loan level data used in the fair value estimate calculation • Utilizing an internal firm specialist to evaluate the reasonableness of significant assumptions and methods used by management, by preparing an independent fair value calculation, as well as an assessment of the overall reasonableness of the fair value estimates of all the acquired loans /s/ Moss Adams LLP Sacramento, California April 14, 2022 We have served as the Company’s auditor since 2014. F-3 Table of Contents BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY Consolidated Statements of Financial Condition December 31, 2021 December 31, 2020 (In thousands, except share and per share) Assets: Cash and due from banks $ 38,418 $ 71,110 Interest‑bearing deposits in other banks 193,102 24,999 Cash and cash equivalents 231,520 96,109 Investment securities available‑for‑sale, at fair value 156,396 10,698 Loans receivable held for investment, net of allowance of $ 3,391 and $ 3,215 648,513 360,129 Accrued interest receivable 3,372 1,202 Federal Home Loan Bank (FHLB) stock 2,573 3,431 Federal Reserve Bank (FRB) stock 693 - Office properties and equipment, net 10,344 2,540 Bank owned life insurance 3,190 3,147 Deferred tax assets, net 6,101 5,633 Core deposit intangible, net 2,936 - Goodwill 25,996 - Other assets 1,871 489 Total assets $ 1,093,505 $ 483,378 Liabilities and stockholders’ equity Liabilities: Deposits $ 788,052 $ 315,630 FHLB advances 85,952 110,500 Junior subordinated debentures - 3,315 Securities sold under agreements to repurchase 51,960 - Notes payable 14,000 - Other liabilities 12,441 5,048 Total liabilities 952,405 434,493 Commitments and Contingencies Stockholders’ Equity: Cumulative Redeemable Perpetual Preferred stock, Series A, authorized 3,000 shares at December 31, 2021 and none at December 31, 2020; issued and outstanding 3,000 shares at December 31, 2021 and none at December 31, 2020, liquidation value $ 1,000 per share 3,000 - Common stock, Class A, $ 0.01 par value, voting, authorized 75,000,000 shares at December 31, 2021 and 50,000,000 shares at December 31, 2020; issued 46,291,852 shares at December 31, 2021 and 21,899,584 shares at December 31, 2020; outstanding 43,674,026 shares at December 31, 2021 and 19,281,758 shares at December 31, 2020 463 219 Common stock, Class B, $ 0.01 par value, non-voting, authorized 15,000,000 shares at December 31, 2021 and none at December 31, 2020; issued and outstanding 11,404,618 shares at December 31, 2021 and none at December 31, 2020 114 - Common stock, Class C, $ 0.01 par value, non-voting, authorized 25,000,000 shares at December 31, 2021 and 2020; issued and outstanding 16,689,775 at December 31, 2021 and 8,756,396 shares at December 31, 2020 167 87 Additional paid‑in capital 140,289 46,851 Retained earnings 3,673 7,783 Unearned Employee Stock Ownership Plan (ESOP) shares ( 829 ) ( 893 ) Accumulated other comprehensive (loss) income, net of tax ( 551 ) 164 Treasury stock‑at cost, 2,617,826 shares at December 31, 2021 and at December 31, 2020 ( 5,326 ) ( 5,326 ) Total stockholders’ equity 141,000 48,885 Non-controlling interest 100 - Total liabilities and stockholders’ equity $ 1,093,505 $ 483,378 See accompanying notes to consolidated financial statements. F-4 Table of Contents BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY Consolidated Statements of Operations and Comprehensive Loss Year Ended December 31, 2021 2020 (In thousands, except per share) Interest Income: Interest and fees on loans receivable $ 22,831 $ 17,016 Interest on investment securities 1,396 253 Other interest income 525 375 Total interest income 24,752 17,644 Interest Expense: Interest on deposits 1,676 3,163 Interest on borrowings 2,073 2,312 Total interest expense 3,749 5,475 Net interest income before loan loss provision 21,003 12,169 Loan loss provision 176 29 Net interest income after loan loss provision 20,827 12,140 Non‑Interest Income: Service charges 249 420 Net gain on sales of loans - 276 CDFI grant 2,043 203 Other 922 126 Total non‑interest income 3,214 1,025 Non‑Interest Expense: Compensation and benefits 16,007 8,362 Occupancy expense 1,781 1,288 Information services 3,817 937 Professional services 3,701 2,299 Corporate insurance 345 126 Supervisory costs (OCC and FDIC) 493 199 Office services and supplies 284 354 Amortization of core deposit intangible 393 - Other 2,106 649 Total non‑interest expense 28,927 14,214 Loss before tax benefits ( 4,886 ) ( 1,049 ) Income tax benefits ( 937 ) ( 407 ) Net loss $ ( 3,949 ) $ ( 642 ) Less: Net income attributable to non-controlling interest 101 - Net loss attributable to Broadway Financial Corporation $ ( 4,050 ) $ ( 642 ) Other comprehensive loss, net of tax: Unrealized (loss) gains on securities available‑for‑sale arising during the period $ ( 998 ) $ 266 Income tax (benefit) expense ( 283 ) 79 Other comprehensive (loss) income, net of tax ( 715 ) 187 Comprehensive loss $ ( 4,765 ) $ ( 455 ) Loss per common share‑basic $ ( 0.07 ) $ ( 0.02 ) Loss per common share‑diluted $ ( 0.07 ) $ ( 0.02 ) See accompanying notes to consolidated financial statements F-5 Table of Contents BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY Consolidated Statements of Changes in Stockholders’ Equity (In thousands, except share and per share) Preferred Stock Non-Voting Common Stock Voting Common Stock Non-Voting Additional Paid in Capital Accmulated Other Comprehensive Loss Retained Earnings (Substantially Restricted) Unearned ESOP Shares Treasury Stock Non- Controlling Interest Total Stockholders’ Equity Balance at December 31, 2020 $ - $ 219 $ 87 $ 46,851 $ 164 $ 7,783 $ ( 893 ) $ ( 5,326 ) $ - $ 48,885 Net income for twelve months ended December 31, 2021 - - - - - ( 4,050 ) - - 101 ( 3,949 ) Preferred shares issued in business combination 3,000 - - - - - - - - 3,000 Dividends paid on preferred stock - - - - - ( 60 ) - - - ( 60 ) Common shares issued in business combination - 140 114 62,839 - - - - 164 63,257 Shares transferred from voting to non-voting after business combination - ( 7 ) 7 - - - - - - - Common shares issued in private placement - 112 73 30,652 - - - - - 30,837 Release of unearned ESOP shares - - - 45 - - 64 - - 109 Restricted stock compensation expense - - - 363 - - - - - 363 Stock awarded to directors - - - 45 - - - - - 45 Stock option compensation expense - - - 7 - - - - - 7 Common stock cancelled for payment of tax withholding - ( 1 ) - ( 513 ) - - - - - ( 514 ) Payment to non-controlling interest - - - - - - - - ( 165 ) ( 165 ) Other comprehensive loss, net of tax - - - - ( 715 ) - - - - ( 715 ) Balance at December 31, 2021 $ 3,000 $ 463 $ 281 $ 140,289 $ ( 551 ) $ 3,673 $ ( 829 ) $ ( 5,326 ) $ 100 $ 141,100 See accompanying notes to consolidated financial statements. F-6 Table of Contents BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY Consolidated Statements of Cash Flows Year Ended December 31 2021 2020 (In thousands) Cash flows from operating activities : Net loss $ ( 3,949 ) $ ( 642 ) Adjustments to reconcile net loss to net cash provided by operating activities: Loan loss provision 176 29 Depreciation 287 121 Net (accretion) amortization of deferred loan origination costs ( 229 ) 275 Net amortization of premiums on mortgage‑backed securities 643 37 Amortization of investment in affordable housing limited partnership 52 105 Amortization of core deposit intangible 393 - Amortization of premium on FHLB advances ( 38 ) - Stock‑based compensation expense 370 379 Stocks granted to directors 45 45 ESOP compensation expense 109 68 Earnings on bank owned life insurance ( 43 ) ( 47 ) Valuation allowance on deferred tax asset 369 - Originations of loans receivable held for sale - ( 118,626 ) Proceeds from sales and repayments of loans receivable held for sale - 105,211 Gain on sale of loans receivable held for sale - ( 276 ) Changes in operating assets and liabilities: Net change in deferred taxes ( 1,272 ) ( 492 ) Net change in accrued interest receivable ( 533 ) 21 Net change in other assets 856 114 Net change in accrued expenses and other liabilities 3,330 123 Net cash provided by (used in) operating activities 566 ( 13,555 ) Cash flows from investing activities: Cash acquired in business combination 84,745 - Net change in loans receivable held for investment ( 62,446 ) 51,105 Principal payments on available‑for‑sale securities 19,159 2,537 Purchases of available-for-sale securities ( 16,523 ) ( 2,000 ) Purchase of FHLB stock ( 152 ) ( 742 ) Redemption of FHLB stock 1,378 227 Additions to office properties and equipment ( 1,138 ) ( 415 ) Net cash provided by (used in) investing activities 25,023 50,712 Cash flows from financing activities: Net change in deposits 118,700 17,906 Proceeds from FHLB advances 5,000 60,000 Repayments on FHLB advances ( 32,676 ) ( 33,500 ) Net change in securities sold under agreements to repurchase ( 7,985 ) - Repayment of junior subordinated debentures ( 3,315 ) ( 1,020 ) Proceeds from issuance of common stock, net of issuance costs 30,837 - Payment for tax withholding for vesting of restricted stock ( 514 ) - Cash dividends paid on preferred stock ( 60 ) - Payment to non-controlling interest ( 165 ) - Net cash provided by financing activities 109,822 43,386 Net change in cash and cash equivalents 135,411 80,543 Cash and cash equivalents at beginning of the year 96,109 15,566 Cash and cash equivalents at end of the year $ 231,520 $ 96,109 Supplemental disclosures of cash flow information: Cash paid for interest $ 3,716 $ 5,771 Cash paid for income taxes 711 8 Supplemental disclosures of cash flow information: Transfers of loans receivable held for sale to loans receivable held for investment $ - $ 13,691 Initial recognition of right of use asset 1,119 - Initial recognition of operating lease liabilities 1,119 - Assets acquired (liabilities assumed) in acquisition: Securities available for sale, at fair value $ 149,975 $ - Loans receivable 225,885 - Accrued interest receivable 1,637 - FHLB and FRB stock 1,061 - Office property and equipment 6,953 - Goodwill 25,966 - Core deposit intangible 3,329 - Other assets 2,290 - Deposits ( 353,722 ) - FHLB advances ( 3,166 ) - Securities sold under agreements to repurchase ( 59,945 ) - Other borrowings ( 14,000 ) - Deferred taxes ( 717 ) - Accrued expenses and other liabilities ( 4,063 ) - Preferred stock ( 3,000 ) - Common stock ( 63,257 ) - F-7 Table of Contents BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY Notes to Consolidated Financial Statements December 31, 2021 and 2020 Note 1 – Summary of Significant Accounting Policies Nature of Operations and Principles of Consolidation Broadway Financial Corporation (the “Company”) was incorporated under Delaware law in 1995 for the purpose of acquiring and holding all of the outstanding capital stock of Broadway Federal Savings and Loan Association (“Broadway Federal”) as part of the Bank’s conversion from a federally chartered mutual savings association to a federally chartered stock savings bank. In connection with the conversion, the Bank’s name was changed to Broadway Federal Bank, f.s.b. The conversion was completed, and the Bank became a wholly‑owned subsidiary of the Company, in January 1996. On April 1, 2021, the Company completed its merger with CFBanc Corporation (“CFBanc”), with the Company continuing as the surviving entity. Immediately following the CFBanc Merger, Broadway Federal Bank, f.s.b. merged with and into City First Bank of D.C, National Association with City First Bank of D.C., National Association continuing as the surviving entity (combined with Broadway Federal, “City First” or the “Bank”). Concurrently with the Merger, the Bank changed its name to City First Bank, National Association. The Bank’s business is that of a financial intermediary and consists primarily of attracting deposits from the general public and using such deposits, together with borrowings and other funds, to make mortgage loans secured by residential and commercial real estate located in the Bank’s market areas. At December 31, 2021, the Bank operated three retail‑banking offices: Los Angeles and in the nearby city of Inglewood in California, and another in Washington, D.C. The Bank is subject to significant competition from other financial institutions and is also subject to regulation by certain federal agencies and undergoes periodic examinations by those regulatory authorities. The accompanying consolidated financial statements include Broadway Financial Corporation and its wholly owned subsidiary, City First Bank, National Association (together with the Company, “City First Broadway”). Also included in the consolidated financial statements are the following subsidiaries of City First Bank: 1432 U Street LLC, Broadway Service Corporation, City First Real Estate LLC, City First Real Estate II LLC, City First Real Estate III LLC, City First Real Estate IV LLC, and CF New Markets Advisors, LLC (“CFNMA”). In addition, CFNMA also consolidates CFC Fund Manager II, LLC; City First New Markets Fund II, LLC; City First Capital IX, LLC; and City First Capital 45, LLC (“CFC 45”) into its financial results. The results of Broadway Service Corporation, a wholly owned subsidiary of the Bank, are also included in the consolidated financial statements. All significant intercompany balances and transactions have been eliminated in consolidation. Use of Estimates To prepare consolidated financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”), management makes estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in the consolidated financial statements and the disclosures provided, and actual results could differ from these estimates. The allowance and provision for loan losses, specific reserves for impaired loans, fair value of acquired assets and liabilities in business combinations, fair value of real estate owned, deferred tax asset valuation allowance, and fair values of investment securities and other financial instruments are particularly subject to change. Cash and Cash Equivalents Cash and cash equivalents include cash on hand, cash items in the process of collection, amounts due from correspondent banks and the Federal Reserve Bank of San Francisco (the “Federal Reserve Bank”), and interest‑bearing deposits in other banks with initial terms of ninety days or less. The Company may be required to maintain reserve and clearing balances with the Federal Reserve Bank under the Federal Reserve Act of 1913, as amended. Effective on March 26, 2020, as a part of Federal Reserve Bank’s tools to promote maximum employment, Federal Reserve Bank Board reduced reserve requirement ratios to zero. The reserve and clearing requirement balance were no longer required at December 31, 2021. Net cash flows are reported for customer loan and deposit transactions, interest‑bearing deposits in other banks, deferred income taxes and other assets and liabilities. F-8 Table of Contents Investment Securities Securities are classified as held‑to‑maturity and carried at amortized cost when management has the positive intent and ability to hold them to maturity. Securities are classified as available‑for‑sale when they might be sold before maturity. Securities available‑for‑sale are carried at fair value, with unrealized holding gains and losses reported in other comprehensive income (loss), net of tax. Interest income includes amortization of purchase premium or discount. Premiums and discounts on securities are amortized on the level‑yield method without anticipating prepayments. Gains and losses on sales are recorded on the trade date and determined using the specific identification method. Management evaluates securities for other‑than‑temporary impairment (“OTTI”) on at least a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation. Consideration is given to the financial condition and near‑term prospects of the issuer, the length of time and the extent to which the fair value has been less than the cost, and the intent and ability of management to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. In analyzing an issuer’s financial condition, management considers whether the securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred, and the results of reviews of the issuer’s financial condition. Loans Receivable Held for Investment Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at the principal balance outstanding, net of allowance for loan losses, deferred loan fees and costs and unamortized premiums and discounts. Interest income is accrued on the unpaid principal balance. Loan origination fees, net of certain direct loan origination costs, premiums and discounts are deferred, and recognized in income using the level‑yield method without anticipating prepayments. Interest income on all loans is discontinued at the time the loan is 90 days delinquent unless the loan is well‑secured and in process of collection. Past due status is based on the contractual terms of the loan. In all cases, loans are placed on non‑accrual or charged‑off at an earlier date if collection of principal or interest is considered doubtful. All interest accrued but not received for loans placed on non‑accrual is reversed against interest income. Interest received on such loans is accounted for on the cash‑basis or cost recovery method, until qualifying for return to accrual. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. Concentration of Credit Risk Concentrations of credit risk arise when several customers are engaged in similar business activities, or activities in the same geographic region, or have similar economic features that would cause their ability to meet contractual obligations to be similarly affected by changes in economic conditions. The Company’s lending activities are predominantly in real estate loans that are secured by properties located in Southern California and in Washington D.C., and many of the borrowers reside in those areas. Therefore, the Company’s exposure to credit risk is significantly affected by changes in the economy and real estate market in the markets in which the Company operates. Loans Purchased The Bank purchases or participates in loans originated by other institutions from time to time. Subject to regulatory restrictions applicable to savings institutions, the Bank’s current loan policies allow all loan types to be purchased. The determination to purchase specific loans or pools of loans is based upon the Bank’s investment needs and market opportunities and is subject to the Bank’s underwriting policies, which require consideration of the financial condition of the borrower and the appraised value of the property, among other factors. Premiums or discounts incurred upon the purchase of loans are recognized in income using the interest method over the estimated life of the loans, adjusted for actual prepayments. No loans were purchased during 2021 and 2020. F-9 Table of Contents Purchased Credit Impaired Loans As part the Company’s merger with CFBanc, the Company acquired certain loans that have shown evidence of credit deterioration since origination; these loans are referred to as purchased credit impaired loans (“PCI loans”). These PCI loans are recorded at their fair value at acquisition, such that there is no carryover of the seller’s allowance for loan losses. Such PCI loans are accounted for individually. The Company estimates the amount and timing of expected cash flows for each PCI loan, and the expected cash flows in excess of the allocated fair value is recorded as interest income over the remaining life of the loan (accretable yield). The excess of the loan’s contractual principal and interest over expected cash flows is not recorded (non-accretable difference). Over the life of the PCI loan, expected cash flows continue to be estimated each quarter. If the present value of expected cash flows decreases from the prior estimate, a provision for loan losses is recorded and an allowance for loan losses is established. If the present value of expected cash flows increases from the prior estimate, the increase is recognized as part of future interest income. If the timing and amount of cash flows is uncertain, then cash payments received will be recognized as a reduction of the recorded investment. Allowance for Loan Losses The allowance for loan losses is a valuation allowance for probable incurred credit losses. Loan losses are charged against the allowance when management believes the uncollectability of a loan balance is confirmed. Subsequent cash recoveries, if any, are credited to the allowance. Management estimates the allowance balance required using past loan loss experience, the nature and volume of the portfolio, information about specific borrower situations and estimated collateral values, economic conditions, and other factors. Allocations of the allowance may be made for specific loans, but the entire allowance is available for any loan that, in management’s judgment, could be charged off. The allowance consists of specific and general components. The specific component relates to loans that are individually classified as impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. Loans for which the terms have been modified resulting in a concession, and for which the borrower is experiencing financial difficulties, are considered troubled debt restructurings (“TDR”) and classified as impaired. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on case‑by‑case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed. If a loan is impaired, either a portion of the allowance is allocated so that the loan is reported, net, at the present value of estimated future cash flows using the loan’s existing rate or alternatively a charge‑off is taken to record the loan at the fair value of the collateral, less estimated selling costs, if repayment is expected solely from the collateral. TDRs are individually evaluated for impairment and included in the separately identified impairment disclosures. TDRs are measured at the present value of estimated future cash flows using the loan’s effective rate at inception. If a TDR is a collateral dependent loan, the loan is reported, net, at the fair value of the collateral. For TDRs that subsequently default, the Company determines the amount of any necessary additional charge‑off based on internal analyses and appraisals of the underlying collateral securing these loans. The general component covers loans that are collectively evaluated for impairment and is based on historical loss experience adjusted for current factors. The historical loss experience is determined by portfolio segment with the use of a loss migration analysis and is based on the actual loss history experienced by the Company over the most recent five years . This actual loss experience is supplemented with information about other current economic factors based on the risks present for each portfolio segment. These current economic factors include consideration of the following: levels of and trends in delinquencies and impaired loans; levels of and trends in charge‑offs and recoveries; trends in volume and terms of loans; effects of any changes in risk selection and underwriting standards; other changes in lending policies, procedures, and practices; experience, ability, and depth of lending management and other relevant staff; national and local economic trends and conditions; industry conditions; and effects of changes in credit concentrations. The following portfolio segments have been identified: one‑to‑four units (“single family”), five or more units (“multi‑family”), commercial real estate, church, construction, commercial loans, and consumer loans. The risks in our various portfolio segments are as follows: F-10 Table of Contents Single Family – Subject to adverse employment conditions in the local economy leading to increased default rate, decreased market values from oversupply in a geographic area and incremental rate increases on adjustable rate mortgages which may impact the ability of borrowers to maintain payments. Multi‑Family – Subject to adverse various market conditions that cause a decrease in market value or lease rates, changes in personal funding sources for tenants, oversupply of units in a specific region, population shifts and reputational risks. Commercial Real Estate – Subject to adverse conditions in the local economy which may lead to reduced cash flows due to vacancies and reduced rental rates, and decreases in the value of underlying collateral. Church – Subject to adverse economic and employment conditions, which may lead to reduced cash flows from members’ donations and offerings, and the stability, quality, and popularity of church leadership. Construction – Subject to adverse conditions in the local economy, which may lead to reduced demand for new commercial, multi‑family or single family buildings or reduced lease or sale opportunities once the building is complete. Commercial – Subject to industry and economic conditions including decreases in product demand. Consumer – Subject to adverse employment conditions in the local economy, which may lead to higher default rates. Real Estate Owned Assets acquired through, or by deed in lieu of, loan foreclosure are initially recorded at fair value less estimated costs to sell when acquired, establishing a new cost basis. These assets are subsequently accounted for at lower of cost or fair value less estimated costs to sell. If fair value declines subsequent to foreclosure, a valuation allowance is recorded through a provision that is charged to non‑interest expense. Operating costs after acquisition are expensed as incurred. The Company had no REO assets as of December 31, 2021 or December 31, 2020. Business Combinations Business combinations are accounted for using the acquisition accounting method. Under the acquisition method, the Company measures the identifiable assets acquired, including identifiable intangible assets, and liabilities assumed in a business combination at fair value on the acquisition date. Goodwill is generally determined as the excess of the fair value of the consideration transferred, plus the fair value of any noncontrolling interests in the acquiree, over the fair value of the net assets acquired and liabilities assumed as of the acquisition date. 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. Core deposit intangible assets arising from mergers and acquisitions are 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. Office Properties and Equipment Land is carried at cost. Premises and equipment are stated at cost less accumulated depreciation. Buildings and related components are depreciated using the straight‑line method with useful lives ranging from 10 to 40 years. Furniture, fixtures, and equipment are depreciated using the straight‑line method with useful lives ranging from 3 to 10 years. Leasehold improvements are amortized over the lease term or the estimated useful life of the asset, whichever is shorter. Federal Home Loan Bank (FHLB) and Federal Reserve Bank (FRB) stock The Bank is a member of the FHLB and FRB systems. Members are required to own a certain amount of stock based on the level of borrowings and other factors, and may invest in additional amounts. FHLB and FRB stock are carried at cost, classified as restricted securities, and periodically evaluated for impairment based on ultimate recovery of their par value. Both cash and stock dividends are reported as income when declared. F-11 Table of Contents Bank‑Owned Life Insurance The Bank has purchased life insurance policies on a former key executive. Bank owned life insurance is recorded at the amount that can be realized under the insurance contract at the balance sheet date, which is the cash surrender value adjusted for other charges or other amounts due that are probable at settlement. Investment in Affordable Housing Limited Partnership The Bank owns a less than 5 % interest in an affordable housing limited partnership. The investment is recorded using the cost method and is being amortized over the life of the related tax credits. The tax credits are being recognized in income tax expense in the consolidated financial statements to the extent they are utilized on the Company’s income tax returns. The investment is reviewed for impairment on an annual basis or on an interim basis if an event occurs that would trigger potential impairment. Loan Commitments and Related Financial Instruments Financial instruments include off‑balance sheet credit instruments, such as commitments to make loans and commercial letters of credit, issued to meet customer financing needs. The face amount for these items represents the exposure to loss, before considering customer collateral or ability to repay. Such financial instruments are recorded when they are funded. Variable Interest Entities (“VIE”) An entity is considered to be a VIE when it does not have sufficient equity investment at risk, the equity investors as a group lack the characteristics of a controlling financial interest, or the entity is structured with disproportionate voting rights and substantially all of the entity’s activities are conducted on behalf of an investor with disproportionately few voting rights. The Company is required to consolidate a VIE when it holds a variable interest in the VIE and is also the primary beneficiary of the VIE. CFC 45 is a Community Development Entity (“CDE”), and is considered to be a VIE. The Company is the primary beneficiary because it has the power to direct activities that most significantly affect the economic performance of CFC 45 and has the obligation to absorb the majority of the losses or benefits of its financial performance. Noncontrolling Interests For consolidated subsidiaries that are less than wholly-owned, the third-party holdings of equity interests are referred to as noncontrolling interests. The portion of net income attributable to noncontrolling interests for such subsidiaries is presented as net income applicable to noncontrolling interests on the consolidated statements of operations and comprehensive income, and the portion of the stockholders’ equity of such subsidiaries is presented as noncontrolling interests on the consolidated statements of financial condition and consolidated statements of changes in stockholders’ equity. Revenue Recognition Accounting Standard Codification (“ASC”) 606, Revenue from Contracts with Customers (“ASC 606”), establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity’s contracts to provide goods or services to customers. The core principle requires the Company to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration that it expects to be entitled to receive in exchange for those goods or services recognized as performance obligations are satisfied. Most of our revenue‑generating transactions are not subject to ASC 606, including revenue generated from financial instruments, such as our loans and investment securities, as these activities are subject to other GAAP discussed elsewhere within our disclosures. The Company’s revenue stream that is within the scope of Topic 606 is primarily service charges on deposit accounts, which consist of monthly service fees, check orders, and other deposit account related fees. The Company’s performance obligation for monthly service fees is generally satisfied, and the related revenue recognized, over the period in which the service is provided. Check orders and other deposit account related fees are largely transaction based, and therefore, the Company’s performance obligation is satisfied, and related revenue recognized, at a point in time. Payment for service charges on deposit accounts is primarily received immediately or in the following month through a direct charge to customers’ accounts. F-12 Table of Contents Stock‑Based Compensation Compensation cost is recognized for stock options and restricted stock awards issued to employees, based on the fair value of these awards at the date of grant. A Black‑Scholes model is utilized to estimate the fair value of stock options, while the market price of the Company’s common stock at the date of grant is used for restricted stock awards. Compensation cost is recognized over the required service period, generally defined as the vesting period. Compensation cost is recognized on a straight‑line basis over the requisite service period for the entire award. The Company’s accounting policy is to recognize forfeitures as they occur. Income Taxes Income tax expense is the total of the current year income tax due or refundable and the change in deferred tax assets and liabilities. Deferred tax assets and liabilities are the expected future tax amounts for the temporary differences between carrying amounts and tax bases of assets and liabilities, computed using enacted tax rates. A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized. A tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. The Company recognizes interest related to income tax matters in interest expense and penalties related to tax matters in income tax expense. Retirement Plans Employee 401(k) expense is the amount of matching contributions made by the Company. Employee Stock Ownership Plan (ESOP) The cost of shares issued to the ESOP, but not yet allocated to participants, is shown as a reduction of stockholders’ equity. Compensation expense is based on the market price of shares as they are committed to be released to participant accounts. Dividends on allocated ESOP shares reduce retained earnings; dividends on unearned ESOP shares reduce debt and accrued interest. Earnings (Loss) Per Common Share Basic earnings (loss) per share of common stock is computed pursuant to the two‑class method by dividing net income available to common stockholders less dividends paid on participating securities (unvested shares of restricted common stock) and any undistributed earnings attributable to participating securities by the weighted average common shares outstanding during the period. The weighted average common shares outstanding includes the weighted average number of shares of common stock outstanding less the weighted average number of unvested shares of restricted common stock. ESOP shares are considered outstanding for this calculation unless unearned. Diluted earnings per share of common stock includes the dilutive effect of unvested stock awards using treasury stock method and additional potential common shares issuable under stock options. Because the Company recorded losses for the years ended December 31, 2021 and 2020, no unvested stock awards or potential common shares issuable under stock options were included in diluted earnings per share in either year. Comprehensive Loss Comprehensive loss consists of the net loss from operations and other comprehensive income or loss. Other comprehensive loss includes unrealized gains and losses on securities available‑for‑sale, net of tax, which are also recognized as separate components of equity. F-13 Table of Contents Loss Contingencies Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable, and an amount or range of loss can be reasonably estimated. Management does not believe that any such matters existed as of the balance sheet date that will have a material effect on the consolidated financial statements. Fair Value Measurements 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. There are three levels of inputs that may be used to measure fair values: Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date. Level 2: Significant observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data. Level 3: Significant unobservable inputs that reflect a company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability. Fair values are estimated using relevant market information and other assumptions, as more fully disclosed in Note 10. 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 particular items. Changes in assumptions or in market conditions could significantly affect the estimates. Operating Segments The Company operates as a single segment. The operating information used by management to assess performance and make operating decisions about the Company is the consolidated financial data presented in these financial statements. For the years ended 2021 and 2020, the Company has determined that banking is its one reportable business segment. Reclassifications Some items in the prior year consolidated financial statements were reclassified to conform to the current presentation. Reclassifications had no effect on prior year consolidated net income or stockholders’ equity. Accounting Pronouncements Yet to Be Adopted In June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” ASU 2016-13 replaces the incurred loss model with an expected loss model, which is referred to as the current expected credit loss (CECL) model. The CECL model is applicable to the measurement of credit losses on financial assets measured at amortized cost, including loan receivables, held-to-maturity debt securities, and reinsurance receivables. It also applies to off-balance sheet credit exposures not accounted for as insurance (such as loan commitments, standby letters of credit, financial guarantees, and other similar instruments) and net investments in leases recognized by a lessor. For debt securities with other-than-temporary impairment, the guidance will be applied prospectively. Existing PCI assets will be grandfathered and classified as purchased credit deteriorated (PCD) assets at the date of adoption. The asset will be grossed up for the allowance for expected credit losses for all PCD assets at the date of adoption and will continue to recognize the noncredit discount in interest income based on the yield of such assets as of the adoption date. Subsequent changes in expected credit losses will be recorded through the allowance. For all other assets within the scope of CECL, a cumulative-effect adjustment will be recognized in retained earnings as of the beginning of the first reporting period in which the guidance is effective. On October 16, 2019, the FASB voted to affirm the proposed amended effective date for ASU 2016-13 for smaller reporting companies (“SRCs”) as defined by the SEC. The final ASU, which was issued in November 2019, delays the implementation date for ASU 2016-13 to fiscal years beginning after December 15, 2022. SRCs are defined as companies with less than $250 million of public float or less than $100 million in annual revenues for the previous year and no public float or public float of less than $700 million. The Company qualifies as an SRC, and management will implement ASU 2016-13 in the first quarter of 2023. The estimated financial impact has not yet been determined. F-14 Table of Contents In April 2019, the FASB issued ASU No. 2019-04, Codification Improvements to Topic 326, Financial Instruments - Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments. This ASU clarifies the scope of the credit losses standard and addresses issues related to accrued interest receivable balances, recoveries, variable interest rates and prepayments, among other things. The amendments to Topic 326 have the same effective dates as ASU 2016-13. This guidance is not expected to have a significant impact on the Company’s consolidated financial statements. In March 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2019-04, Reference Rate Reform (Topic 848), Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This ASU provides optional expedients and exceptions regarding the accounting related to the modifications of certain contracts, relationships and other transactions that are affected by reference rate reform related to contracts that reference LIBOR or other reference rates that could be discontinued due to reference rate reform. This guidance was effective immediately and was adopted by the Company as of January 1, 2022. As of December 31, 2021, the Company modified all of its loan contracts that were bencmarked to the LIBOR index to SOFR, and applied the practical expedients allowed by this ASU regarding treatment of those modifications. In May 2019, the FASB issued ASU No. 2019-05, Financial Instruments - Credit Losses (Topic 326): Targeted Transition Relief. This ASU allows entities to irrevocably elect the fair value option on an instrument-by-instrument basis for eligible financial assets measured at amortized cost basis upon adoption of the credit loss standards. The effective date for this ASU is the same as for ASU 2016-13. Management will evaluate this ASU in conjunction with ASU 2016-13 to determine whether the fair value option will be elected for any eligible financial assets. In December 2020, the FASB issued ASU No. 2020-12, Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes. This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2021. The amendments in this ASU are intended to simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments are also intended to improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. Adoption of this ASU is not expected to have a material effect on the Company’s financial position or results of operations. Note 2 – Business Combination The Company completed its merger with CFBanc Corporation on April 1, 2021, with the Company continuing as the surviving entity (the “CFBanc Merger”). Immediately following this merger, Broadway Federal Bank, f.s.b., a subsidiary of Broadway Financial Corporation, merged with and into City First Bank of D.C., National Association, with City First Bank of D.C., National Association continuing as the surviving entity (which concurrently changed its name to City First Bank, National Association). The Company recorded $ 5.6 million in direct transaction costs in connection with the merger during 2021, which were comprised of $ 3.2 million in compensation costs and $ 2.4 million in professional services costs. On April 1, 2021, (1) each share of CFBanc Corporation’s Class A Common Stock, par value $ 0.50 per share, and Class B Common Stock, par value $ 0.50 per share, issued and outstanding immediately prior to the CFBanc Merger was converted into 13.626 validly issued, fully paid and nonassessable shares, respectively, of the voting common stock of the Company, par value $ 0.01 per share, which were renamed Class A Common Stock, and a new class of non-voting common stock of the Company, par value $ 0.01 per share, which was named Class B Common Stock, and (2) each share of Fixed Rate Cumulative Redeemable Perpetual Preferred Stock, Series B, par value $ 0.50 per share, of CFBanc Corporation (“CFBanc Corporation Preferred Stock”) issued and outstanding immediately prior to the effective time of the CFBanc Merger was converted into one validly issued, fully paid and non-assessable share of a new series of preferred stock of the Company, which was designated as the Company’s Fixed Rate Cumulative Redeemable Perpetual Preferred Stock, Series A, with such rights, preferences, privileges and voting powers, and limitations and restrictions thereof, which taken as a whole, are not materially less favorable to the holders of CFBanc Corporation Preferred Stock than the rights, preferences, privileges and voting powers, and limitations and restrictions thereof of CFBanc Corporation Preferred Stock. The total value of the consideration transferred to CFBanc Corporation shareholders was approximately $ 66.3 million, which was based on the closing price of the Company’s common stock on March 31, 2021, the last trading day prior to the consummation of the merger. The Company accounted for the CFBanc Merger under the acquisition method of accounting which requires purchased assets and liabilities assumed to be recorded at their respective fair values at the date of acquisition. The Company determined the fair value of the acquired assets and assumed liabilities with the assistance of third-party valuation firms. Goodwill in the amount of $ 26.0 million was recognized in the CFBanc Merger. Goodwill represents the future economic benefits arising from net assets acquired that are not individually identified and separately recognized and are attributable to synergies expected to be derived from the combination of the two entities. Goodwill is not amortized for financial reporting purposes; rather, it is tested for impairment annually, or more frequently if events or changes in circumstances indicate that it might be impaired, by comparing its carrying value to the reporting unit’s fair value. Goodwill recognized in this transaction is not deductible for income tax purposes. F-15 Table of Contents The following table represents the assets acquired and liabilities assumed in the CFBanc Merger as of April 1, 2021, and the fair value adjustments and amounts recorded by the Company as of the same date under the acquisition method of accounting: CFBanc Book Value Fair Value Adjustments Fair Value Assets acquired (In thousands) Cash and cash equivalents $ 84,745 $ - $ 84,745 Securities available-for-sale 150,052 ( 77 ) 149,975 Loans receivable held for investment: Gross loans receivable held for investment 227,669 ( 1,784 ) 225,885 Deferred fees and costs ( 315 ) 315 - Allowance for loan losses ( 2,178 ) 2,178 - 225,176 709 225,885 Accrued interest receivable 1,637 - 1,637 FHLB and FRB stock 1,061 - 1,061 Office properties and equipment 5,152 1,801 6,953 Deferred tax assets, net 890 ( 1,608 ) ( 718 ) Core deposit intangible - 3,329 3,329 Other assets 2,290 - 2,290 Total assets $ 471,003 $ 4,154 $ 475,157 Liabilities assumed Deposits $ 353,671 $ 51 $ 353,722 Securities sold under agreements to repurchase 59,945 - 59,945 FHLB advances 3,057 109 3,166 Notes payable 14,000 - 14,000 Accrued expenses and other liabilities 4,063 - 4,063 Total liabilities $ 434,736 $ 160 $ 434,896 Excess of assets acquired over liabilities assumed $ 36,267 $ 3,994 $ 40,261 Consideration paid $ 66,257 Goodwill recognized $ 25,996 The contractual amounts due, expected cash flows to be collected, the interest component, and the fair value of loans acquired from CFBanc as of the acquisition date were as follows: Acquired Loans (In thousands) Contractual amounts due $ 231,432 Cash flows not expected to be collected ( 3,666 ) Expected cash flows 227,766 Interest component of expected cash flows ( 1,881 ) Fair value of acquired loans $ 225,885 F-16 Table of Contents A component of total loans acquired from CFBanc were loans that were considered to be PCI loans. The following table presents the amounts that comprise the fair value of PCI loans as of the date of acquisition (in thousands): Contractual amounts due $ 1,825 Non-accretable difference (cash flows not expected to be collected) ( 634 ) Expected cash flows 1,191 Accretable yield ( 346 ) Fair value of acquired PCI loans $ 845 After the acquisition date, the revenues and earnings of CFBanc are included in the Company’s Consolidated Statement of Operations for the year ended December 31, 2021and standalone financial information for each entity is not available. The following table presents the net interest income, net income, and earnings per share as if the CFBanc Merger was effective as of January 1, 2020. The unaudited pro forma financial information included in the table below is based on various estimates and is presented for informational purposes only and does not indicate the financial condition or results of operations of the combined Company that would have been achieved for the periods presented had the transactions been completed as of the date indicated or that may be achieved in the future. For the Year Ended December 31 2021 2020 (Dollars in thousands, except per share amounts) Net interest income $ 23,336 $ 18,684 Net income (loss) ( 4,770 ) 110 Basic earnings per share $ ( 0.07 ) $ 0.0 Diluted earnings per share $ ( 0.07 ) $ 0.0 Note 3 – Capital Raise On April 6, 2021, the Company completed the sale of 18,474,000 shares of Broadway Financial Corporation common stock in private placements to institutional and accredited investors at a purchase price of $ 1.78 per share for an aggregate purchase price of $ 30.8 million (net of expenses). The following table shows the common stock issued on April 1, 2021 as a result of the merger and on April 6, 2021 as a result of the private placements by class: Common Shares Outstanding Voting Class A Nonvoting Class B Nonvoting Class C Total Shares Shares outstanding March 31, 2021: 19,142,498 - 8,756,396 27,898,894 Shares issued in merger 13,999,870 11,404,621 - 25,404,491 Shares exchanged post-merger ( 681,300 ) - 681,300 - Shares cancelled ( 52,105 ) - - ( 52,105 ) Shares issued in private placements 11,221,921 - 7,252,079 18,474,000 Fractional shares cancelled ( 20 ) ( 3 ) - ( 23 ) Shares outstanding April 6, 2021: 43,630,864 11,404,618 16,689,775 71,725,257 Note 4 – Securities The following table summarizes the amortized cost and fair value of the available‑for‑sale investment securities portfolios at December 31, 2021 and December 31, 2020 and the corresponding amounts of unrealized gains (losses) which are recognized in accumulated other comprehensive income: F-17 Table of Contents Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value (In thousands) December 31, 2021 : Federal agency mortgage‑backed securities $ 70,078 $ 196 $ ( 244 ) $ 70,030 Federal agency collateralized mortgage obligation (“CMO”) 9,391 11 ( 115 ) 9,287 Federal agency debt 38,152 106 ( 270 ) 37,988 Municipal bonds 4,898 40 ( 23 ) 4,915 U.S. treasuries 18,169 - ( 218 ) 17,951 SBA pools 16,241 122 ( 138 ) 16,225 Total available‑for‑sale securities $ 156,929 $ 475 $ ( 1,008 ) $ 156,396 December 31, 2020 : Federal agency mortgage‑backed securities $ 5,550 $ 257 $ - $ 5,807 Federal agency debt 2,682 190 - 2,872 Municipal bonds 2,000 19 - 2,019 Total available‑for‑sale securities $ 10,232 $ 466 $ - $ 10,698 At December 31, 2021, the Bank had 97 federal agency mortgage-backed securities with total amortized cost of $ 70.1 million, estimated total fair value of $ 70.0 million and an estimated average remaining life of 4.7 years; 11 federal agency CMO with a total amortized cost of $ 9.4 million and estimated total fair value of $ 9.3 million and an estimated average remaining life of 5.6 years; 15 federal agency debt with total amortized cost of 38.2 million, estimated total fair value of $ 38.0 million and an estimated average remaining life of 5.71 years ; 9 municipal bonds with a total amortized cost of $ 4.9 million and estimated total fair value of $ 4.9 million and an estimated average remaining life of 10.7 years; 9 U.S. treasuries with a total amortized cost of $ 18.2 million, estimated total fair value of $ 18.0 million and an estimated average remaining life of 3.6 years; and 16 SBA Pools with a total amortized cost of $ 16.2 million and an estimated average remaining life of 5.5 years. Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties. In 2021, the Bank purchased 5 federal agency mortgage-backed securities with total amortized cost of $ 9.6 million, estimated fair value of $ 9.6 million at December 31, 2021 and an estimated average remaining life of 5.4 years; 2 federal agency debt with total amortized cost of $ 4.9 million, estimated fair value of $ 4.9 million at December 31, 2021 and an estimated average remaining life of 4.7 years; and 1 federal agency CMO with total amortized cost of $ 2.0 million, estimated fair value of $ 1.9 million at December 31, 2021 and an estimated average remaining life of 5.1 years. There were no sales of securities during the years ended December 31, 2021 and 2020. The amortized cost and estimated fair value of all investment securities available-for-sale at December 31, 2021, by contractual maturities are shown below. Contractual maturities may differ from expected maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value (In thousands) Due in one year or less $ 1,014 $ - $ ( 1 ) $ 1,013 Due after one year through five years 33,613 15 ( 368 ) 33,260 Due after five years through ten years 46,437 114 ( 233 ) 46,318 Due after ten years (1) 75,865 346 ( 406 ) 75,805 $ 156,929 $ 475 $ ( 1,008 ) $ 156,396 (1) Mortgage-backed securities, collateralized mortgage obligations and SBA pools do not have a single stated maturity date and therefore have been included in the “Due after ten years” category. The Bank held 129 securities with unrealized losses of $ 1,008 thousand at December 31, 2021. None of these securities has been in a loss position for greater than one year. The Bank’s securities were primarily issued by the federal government or its agencies. The unrealized gains or losses on our available-for-sale securities at December 31, 2021 were primarily caused by movements in market interest rates subsequent to the purchase of such securities. F-18 Table of Contents Securities with a market value of $ 53.2 million were pledged as collateral for securities sold under agreements to repurchase as of December 31, 2021 and included $ 25.9 million of federal agency mortgage-backed securities, $ 13.3 million of federal agency debt, $ 9.8 million of SBA pool, and $ 4.2 million of federal agency CMO. There were no securities pledged as collateral for securities sold under agreements to repurchase as December 31, 2020. At December 31, 2021 and 2020, there were no securities pledged to secure public deposits since those public deposits are under $250 thousand which are fully insured by FDIC. At December 31, 2021 and 2020, there were no holdings of securities by any one issuer, other than the U.S. Government and its agencies, in an amount greater than 10% of stockholders’ equity. Note 5 – Loans Receivable Held for Sale The Bank had no loans held for sale as of December 31, 2021 and 2020. Multi-family loans held for sale totaling $ 13.7 million were transferred to the loans held for investment portfolio during 2020 at the lower of cost or fair value. Loan sales of $ 22.8 million in multi‑family loans were completed during 2020 for a total gain of $ 276 thousand. Note 6 – Loans Receivable Held for Investment Loans receivable held for investment were as follows as of the periods indicated: December 31, 2021 December 31, 2020 (In thousands) Real estate: Single family $ 45,372 $ 48,217 Multi‑family 393,704 272,387 Commercial real estate 93,193 24,289 Church 22,503 16,658 Construction 32,072 429 Commercial – other 46,539 57 SBA loans 18,837 - Consumer - 7 Gross loans receivable before deferred loan costs and premiums 652,220 362,044 Unamortized net deferred loan costs and premiums 1,526 1,300 653,746 363,344 Credit and interest marks on purchased loans, net ( 1,842 ) - Allowance for loan losses ( 3,391 ) ( 3,215 ) Loans receivable, net $ 648,513 $ 360,129 As of December 31, 2021, the commercial loan category above included $ 18.0 million of loans issued under the SBA’s Paycheck Protection Program (“PPP”). PPP loans have terms of two to five years and earn interest at 1 %. PPP loans are fully guaranteed by the SBA and have virtually no risk of loss. The Bank expects the vast majority of the PPP loans to be fully forgiven by the SBA. The following tables present the activity in the allowance for loan losses by loan type for the periods indicated: For the year ended December 31, 2021 Real Estate Single family Multi‑ family Commercial real estate Church Construction Commercial – other Consumer Total (In thousands) Beginning balance $ 296 $ 2,433 $ 222 $ 237 $ 22 $ 4 $ 1 $ 3,215 Provision for (recapture of) loan losses ( 151 ) 224 14 ( 134 ) 190 19 14 176 Recoveries - - - - - - - - Loans charged off - - - - - - - - Ending balance (1) $ 145 $ 2,657 $ 236 $ 103 $ 212 $ 23 $ 15 $ 3,391 (1) Loans acquirqed in the City First Merger and PPP loans originated since the merger were not considered in this analysis. F-19 Table of Contents For the year ended December 31, 2020 Real Estate Single family Multi‑ family Commercial real estate Church Construction Commercial – other Consumer Total (In thousands) Beginning balance $ 312 $ 2,319 $ 133 $ 362 $ 48 $ 7 $ 1 $ 3,182 Provision for (recapture of) loan losses ( 20 ) 114 89 ( 125 ) ( 26 ) ( 3 ) - 29 Recoveries 4 - - - - - - 4 Loans charged off - - - - - - - - Ending balance $ 296 $ 2,433 $ 222 $ 237 $ 22 $ 4 $ 1 $ 3,215 As part of the CFBanc Merger, the Company acquired loans for which there was, at acquisition, evidence of credit deterioration of credit quality since origination and for which it was probable, at acquisition, that all contractually required payments would not be collected. Prior to the CFBanc Merger, there were no such acquired loans. The carrying amount of those loans as of December 31, 2021, was as follows: (In thousands) Real estate: Single family $ 558 Commercial real estate 221 Commercial – other 104 $ 883 On the acquisition date, the amount by which the undiscounted expected cash flows of the PCI loans exceeded the estimated fair value of the loan is the accretable yield. The accretable yield is measured at each financial reporting date and represents the difference between the remaining undiscounted cash flows and the current carrying value of the PCI loan. At December 31, 2021, none of the Company’s PCI loans were classified as nonaccrual. The following table summarizes the accretable yield on the PCI loans for the year ended December 31, 2021: (In thousands) Balance on acquisition date $ - Additions 346 Accretion ( 57 ) Balance at the end of the year $ 289 The following tables present the balance in the allowance for loan losses and the recorded investment (unpaid contractual principal balance less charge‑offs, less interest applied to principal, plus unamortized deferred costs and premiums) by loan type and based on impairment method as of and for the periods indicated: December 31, 2021 Real Estate Single family Multi‑ family Commercial real estate Church Construction Commercial – other SBA Total (In thousands) Allowance for loan losses: Ending allowance balance attributable to loans: Individually evaluated for impairment $ 3 $ - $ - $ 4 $ - $ - $ - $ 7 Collectively evaluated for impairment 142 2,657 236 99 212 23 15 3,384 Total ending allowance balance $ 145 $ 2,657 $ 236 $ 103 $ 212 $ 23 $ 15 $ 3,391 Loans: Loans individually evaluated for impairment $ 65 $ 282 $ - $ 1,954 $ - $ - $ - $ 2,301 Loans collectively evaluated for impairment 32,599 353,179 25,507 9,058 24,225 3,124 - 447,692 Subtotal 32,664 353,461 25,507 11,012 24,225 3,124 - 449,993 Loans acquired in the Merger 12,708 41,769 67,686 11,491 7,847 43,415 18,837 203,753 Total ending loans balance $ 45,372 $ 395,230 $ 93,193 $ 22,503 $ 32,072 $ 46,539 $ 18,837 $ 653,746 F-20 Table of Contents December 31, 2020 Real Estate Single family Multi‑ family Commercial real estate Church Construction Commercial – other Consumer Total (In thousands) Allowance for loan losses: Ending allowance balance attributable to loans: Individually evaluated for impairment $ 89 $ - $ - $ 52 $ - $ - $ - $ 141 Collectively evaluated for impairment 207 2,433 222 185 22 4 1 3,074 Total ending allowance balance $ 296 $ 2,433 $ 222 $ 237 $ 22 $ 4 $ 1 $ 3,215 Loans: Loans individually evaluated for impairment $ 573 $ 298 $ - $ 3,813 $ - $ 47 $ - $ 4,731 Loans collectively evaluated for impairment 47,784 273,566 24,322 12,495 430 9 7 358,613 Total ending loans balance $ 48,357 $ 273,864 $ 24,322 $ 16,308 $ 430 $ 56 $ 7 $ 363,344 The following table presents information related to loans individually evaluated for impairment by loan type as of the periods indicated: December 31, 2021 December 31, 2020 Unpaid Principal Balance Recorded Investment Allowance for Loan Losses Allocated Unpaid Principal Balance Recorded Investment Allowance for Loan Losses Allocated (In thousands) With no related allowance recorded: Single‑family $ - $ - $ - $ 2 $ 1 $ - Multi‑family 282 282 - 298 298 - Church - - - 2,527 1,970 - With an allowance recorded: Single family 65 65 3 573 573 89 Church 1,954 1,954 4 1,842 1,842 52 Commercial – other - - - 47 47 - Total $ 2,301 $ 2,301 $ 7 $ 5,289 $ 4,731 $ 141 The recorded investment in loans excludes accrued interest receivable due to immateriality. For purposes of this disclosure, the unpaid principal balance is not reduced for net charge‑offs. The following tables present the monthly average of loans individually evaluated for impairment by loan type and the related interest income for the periods indicated: For the year ended December 31, 2021 For the year ended December 31, 2020 Average Recorded Investment Cash Basis Interest Income Recognized Average Recorded Investment Cash Basis Interest Income Recognized (In thousands) Single family $ 66 $ 5 $ 591 $ 29 Multi‑family 290 19 306 21 Church 2,310 176 4,033 442 Commercial – other - - 55 4 Total $ 2,666 $ 200 $ 4,985 $ 496 Cash‑basis interest income recognized represents cash received for interest payments on accruing impaired loans and interest recoveries on non‑accrual loans that were paid off. Interest payments collected on non‑accrual loans are characterized as payments of principal rather than payments of the outstanding accrued interest on the loans until the remaining principal on the non‑accrual loans is considered to be fully collectible or paid off. When a loan is returned to accrual status, the interest payments that were previously applied to principal are deferred and amortized over the remaining life of the loan. Foregone interest income that would have been recognized had loans performed in accordance with their original terms amounted to $ 71 thousand and $ 89 thousand for the years ended December 31, 2021 and 2020, respectively, and were not included in the consolidated results of operations. F-21 Table of Contents The following tables present the aging of the recorded investment in past due loans by loan type as of the periods indicated: December 31, 2021 30‑59 Days Past Due 60‑89 Days Past Due Greater than 90 Days Past Due Total Past Due Current Total (In thousands) Loans receivable held for investment: Single family $ - $ - $ - $ - $ 45,372 $ 45,372 Multi‑family - - - - 395,230 395,230 Commercial real estate - 2,423 - 2,423 90,770 93,193 Church - - - - 22,503 22,503 Construction - - - - 32,072 32,072 Commercial – other - - - - 46,539 46,539 SBA loans 18,837 18,837 Consumer - - - - - - Total $ - $ 2,423 $ - $ 2,423 $ 651,323 $ 653,746 December 31, 2020 30‑59 Days Past Due 60‑89 Days Past Due Greater than 90 Days Past Due Total Past Due Current Total (In thousands) Loans receivable held for investment: Single family $ - $ - $ - $ - $ 48,357 $ 48,357 Multi‑family - - - - 273,864 273,864 Commercial real estate - - - - 24,322 24,322 Church - - - - 16,308 16,308 Construction - - - - 430 430 Commercial – other - - - - 56 56 Consumer - - - - 7 7 Total $ - $ - $ - $ - $ 363,344 $ 363,344 The following table presents the recorded investment in non‑accrual loans by loan type as of the periods indicated: December 31, 2021 December 31, 2020 Loans receivable held for investment: (In thousands) Single family $ - $ 1 Church 684 786 Total non-accrual loans $ 684 $ 787 There were no loans 90 days or more delinquent that were accruing interest as of December 31, 2021 or December 31, 2020. Troubled Debt Restructurings At December 31, 2021, loans classified as troubled debt restructurings (“TDRs”) totaled $ 1.8 million, of which $ 188 thousand were included in non‑accrual loans and $ 1.6 million were on accrual status. At December 31, 2020, loans classified as TDRs totaled $ 4.5 million, of which $ 232 thousand were included in non‑accrual loans and $ 4.3 million were on accrual status. The Company has allocated $ 7 thousand and $ 141 thousand of specific reserves for accruing TDRs as of December 31, 2021 and 2020, respectively. TDRs on accrual status are comprised of loans that were accruing at the time of restructuring or loans that have complied with the terms of their restructured agreements for a satisfactory period and for which the Bank anticipates full repayment of both principal and interest. TDRs that are on non‑accrual status can be returned to accrual status after a period of sustained performance, generally determined to be six months of timely payments, as modified. A well‑documented credit analysis that supports a return to accrual status based on the borrower’s financial condition and prospects for repayment under the revised terms is also required. As of December 31, 2021 and 2020, the Company had no commitment to lend additional amounts to customers with outstanding loans that are classified as TDRs. No loans were modified during the years ended December 31, 2021 and 2020. F-22 Table of Contents Credit Quality Indicators The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. For single family residential, consumer and other smaller balance homogenous loans, a credit grade is established at inception, and generally only adjusted based on performance. Information about payment status is disclosed elsewhere herein. The Company analyzes all other loans individually by classifying the loans as to credit risk. This analysis is performed at least on a quarterly basis. The Company uses the following definitions for risk ratings: ● Watch. Loans classified as watch exhibit weaknesses that could threaten the current net worth and paying capacity of the obligors. Watch graded loans are generally performing and are not more than 59 days past due. A watch rating is used when a material deficiency exists, but correction is anticipated within an acceptable time frame. ● Special Mention. Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date. ● Substandard. Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well‑defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected. ● Doubtful. Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, based on currently existing facts, conditions, and values, highly questionable and improbable. ● Loss. Loans classified as loss are considered uncollectible and of such little value that to continue to carry the loan as an active asset is no longer warranted. Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass rated loans. Pass rated loans are generally well protected by the current net worth and paying capacity of the obligor and/or by the value of the underlying collateral. Pass rated loans are not more than 59 days past due and are generally performing in accordance with the loan terms. The following table shows the risk categories of loans by type excluding loans acquired in the City First Merger as of December 31, 2021: December 31, 2021 Pass Watch Special Mention Substandard Doubtful Loss Total (In thousands) Single family $ 32,664 $ - $ - $ - $ - $ - $ 32,664 Multi‑family 353,118 - - 343 - - 353,461 Commercial real estate 24,049 - - 1,458 - - 25,507 Church 8,530 - - 2,482 - - 11,012 Construction 8,275 15,950 - - - - 24,225 Commercial – other 3,124 - - - - - 3,124 Consumer - - - - - - - Total $ 429,760 $ 15,950 $ - $ 4,283 $ - $ - $ 449,993 F-23 Table of Contents The following table shows the risk categories of loans by type for loans acquired in the City First Merger as of December 31, 2021: December 31, 2021 Pass Watch Special Mention Substandard Doubtful Loss Total (In thousands) Single family $ 9,790 $ 1,343 $ 271 $ 1,304 $ - $ - $ 12,708 Multi‑family 25,023 7,987 575 8,184 - - 41,769 Commercial real estate 45,208 7,034 9,847 5,597 - - 67,686 Church 11,491 - - - - - 11,491 Construction 2,247 5,600 - - - - 7,847 Commercial – other 30,864 12,551 - - - - 43,415 SBA 18,665 - 172 - - - 18,837 Total $ 143,288 $ 34,515 $ 10,865 $ 15,085 $ - $ - $ 203,753 December 31, 2020 Pass Watch Special Mention Substandard Doubtful Loss Total (In thousands) Single family $ 48,357 $ - $ - $ - $ - $ - $ 48,357 Multi‑family 273,501 - - 363 - - 273,864 Commercial real estate 22,834 1,488 - - - - 24,322 Church 12,899 657 - 2,752 - - 16,308 Construction 430 - - - - - 430 Commercial – other 9 - - 47 - - 56 Consumer 7 - - - - - 7 Total $ 358,037 $ 2,145 $ - $ 3,162 $ - $ - $ 363,344 Note 7 – Office Properties and Equipment, net Year‑end office properties and equipment were as follows: 2021 2020 (In thousands) Land $ 5,322 $ 572 Office buildings and improvements 5,763 3,275 Rights of use assets 1,120 190 Furniture, fixtures, and equipment 2,171 2,239 14,376 6,276 Less accumulated depreciation ( 4,032 ) ( 3,736 ) Office properties and equipment, net $ 10,344 $ 2,540 Depreciation expense was $ 287 thousand and $ 121 thousand for the years 2021 and 2020, respectively. F-24 Table of Contents Note 8 – Leases Effective October 1, 2021, the Bank entered into an operating lease for its administrative offices at 4601 Wilshire Boulevard in Los Angeles. The right of use (“ROU”) asset and operating lease liability are recorded in fixed assets and other liabilities , respectively, in the consolidated statements of financial condition. The ROU asset represents our right to use the underlying asset during the lease term. Operating lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized based on the present value of the remaining lease payments using a discount rate that represents our incremental borrowing rate at the date of implementation of the new accounting standard. The operating lease has one 5 -year extension option at the then fair market rate. As this extension option is not reasonably certain of exercise, it is not included in the lease term. The Bank recorded an ROU asset of $ 1.1 million and an operating lease liability of $ 1.1 million as of December 31, 2021. The Bank has no finance leases. Rent expense under the operating lease at 4601 Wilshire Boulevard in Los Angeles was $ 61 thousand for 2021. The Company paid $ 417 thousand in rent expense in 2021 and $ 598 thousand in rent expense in 2020 for an operating lease on its previous administrative offices and branch location at 5055 Wilshire Boulevard in Los Angeles. Additional information regarding our operating leases is summarized below for the periods indicated dollars in thousands): Year Ended December 31, 2021 Cash paid for amounts included in the measurement of lease liabilities for operating leases: $ 57 ROU assets obtained in exchange for lease liabilities $ 1,119 Weighted average remaining lease term in months 57 Weighted average discount rate 1.10 % The future minimum payments for operating leases with remaining terms of one year or more as of December 31, 2021 were as follows (in thousands): Year ended December 31, 2022 $ 229 Year ended December 31, 2023 236 Year ended December 31, 2024 244 Year ended December 31, 2025 252 Year ended December 31, 2026 193 Total future minimum lease payments 1,154 Amounts representing interest ( 31 ) Present value of net future minimum lease payments $ 1,123 Note 9 – Goodwill and Core Deposit Intangible In connection with the CFBanc Merger, the Company recognized goodwill of $ 26.0 million and a core deposit intangible of $ 3.3 million. The following table presents the changes in the carrying amounts of goodwill and core deposit intangibles for the year ended December 31, 2021: Goodwill Core Deposit Intangible (In thousands) Balance at the beginning of the period $ - $ - Additions 25,996 3,329 Amortization - ( 393 ) Impairment - - Balance at the end of the period $ 25,996 $ 2,936 F-25 Table of Contents No impairment charges were recorded during 2021 for goodwill impairment. Management’s assessment of goodwill is performed in accordance with ASC 350-20 – Intangibles-Goodwill and Other, which allows the Company to perform a qualitative assessment of goodwill to determine if it is more likely than not the fair value of the Company’s equity is below its carrying value. The Company performed its qualitative assessment as of November 30, 2021. Due to the relatively short amount of time that has passed between the acquisition date, the fact that the combined Company is realizing the intended benefits of the Merger (i.e. lower cost of funds, increased ability to lend, etc.), and the Company’s stock price post-acquisition, no impairment charges were recorded during 2021 for goodwill. The following table outlines the estimated amortization expense related to the core deposit intangible during the next five fiscal years: (In thousands) 2022 $ 435 2023 390 2024 336 2025 315 2026 304 Thereafter 1,156 $ 2,936 Note 10 – Fair Value The Company used the following methods and significant assumptions to estimate fair value: The fair values of securities available‑for‑sale are determined by obtaining quoted prices on nationally recognized securities exchanges (Level 1 inputs) or matrix pricing, which is a mathematical technique to value debt securities without relying exclusively on quoted prices for the specific securities, but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2 inputs). The fair value of impaired loans that are collateral dependent is generally based upon the fair value of the collateral, which is obtained from recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value. Impaired loans are evaluated on a quarterly basis for additional impairment and adjusted accordingly. Assets acquired through or by transfer in lieu of loan foreclosure are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. These assets are subsequently accounted for at the lower of cost or fair value less estimated costs to sell. Fair value is commonly based on recent real estate appraisals which are updated every nine months. These appraisals may utilize a single valuation approach or a combination of approaches, including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value. Real estate owned properties are evaluated on a quarterly basis for additional impairment and adjusted accordingly. Appraisals for collateral‑dependent impaired loans are performed by certified general appraisers (for commercial properties) or certified residential appraisers (for residential properties) whose qualifications and licenses have been reviewed and verified by the Company. Once received, an independent third‑party licensed appraiser reviews the appraisals for accuracy and reasonableness, reviewing the assumptions and approaches utilized in the appraisal as well as the overall resulting fair value in comparison with independent data sources such as recent market data or industry‑wide statistics. F-26 Table of Contents Assets Measured on a Recurring Basis Assets measured at fair value on a recurring basis are summarized below: Fair Value Measurement Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total (In thousands) At December 31, 2021 : Securities available for sale: Federal agency mortgage‑backed securities $ - $ 70,030 $ - $ 70,030 Federal agency CMO - 9,287 - 9,287 Federal agency debt - 37,988 - 37,988 Municipal bonds - 4,915 - 4,915 U.S. Treasuries - 17,951 - 17,951 SBA Pools - 16,225 - 16,225 At December 31, 2020 : - Securities available for sale: Federal agency mortgage‑backed securities $ - $ 5,807 $ - $ 5,807 Municipal bonds - 2,019 - 2,019 Federal agency debt - 2,872 - 2,872 There were no transfers between Level 1, Level 2, or Level 3 during the years ended December 31, 2021 and 2020. Fair Values of Financial Instruments The carrying amounts and estimated fair values of financial instruments as of the periods indicated were as follows: Carrying Fair Value Measurements at December 31, 2021 Value Level 1 Level 2 Level 3 Total (In thousands) Financial Assets: Cash and cash equivalents $ 231,520 $ 231,520 $ - $ - $ 231,520 Securities available‑for‑sale 156,396 - 156,396 - 156,396 Loans receivable held for investment 648,513 - - 623,778 623,778 Accrued interest receivable 3,372 19 1,089 2,264 3,372 Bank owned life insurance 3,190 3,190 - - 3,190 Financial Liabilities: Deposits $ 788,052 $ - $ 754,181 $ - $ 754,181 Federal Home Loan Bank advances 85,952 - 87,082 - 87,082 Securities sold under agreements to repurchase 51,960 - - - 51,960 Notes payable 14,000 - - - 14,000 Accrued interest payable 119 - 119 - 119 F-27 Table of Contents Carrying Fair Value Measurements at December 31, 2020 Value Level 1 Level 2 Level 3 Total (In thousands) Financial Assets: Cash and cash equivalents $ 96,109 $ 96,109 $ - $ - $ 96,109 Securities available‑for‑sale 10,698 - 10,698 - 10,698 Loans receivable held for investment 360,129 - - 366,279 366,279 Accrued interest receivable 1,202 60 14 1,128 1,202 Bank owned life insurance 5,633 5,633 - - 5,633 Financial Liabilities: Deposits $ 315,630 $ - $ 312,725 $ - $ 312,725 Federal Home Loan Bank advances 110,500 - 113,851 - 113,851 Junior subordinated debentures 3,315 - - 2,798 2,798 Accrued interest payable 88 - 84 4 88 Note 11 – Deposits Deposits are summarized as follows: December 31, 2021 2020 (In thousands) NOW account and other demand deposits $ 90,285 $ 15,237 Non‑interest bearing demand deposits 220,152 47,269 Money market deposits 204,888 60,281 Passbook 70,750 64,127 Certificates of deposit 201,977 128,716 Total $ 788,052 $ 315,630 The Bank accepts two types of deposits from a deposit placement service called the Certificate of Deposit Account Registry Service (“CDARS”). Reciprocal deposits are the Bank’s own retail deposits in amounts in excess of the insured limits. The CDARS program allows banks to place their customers’ funds in FDIC‑insured certificates of deposit at other banks and, at the same time, receive an equal sum of funds from the customers of other banks in the CDARS Network. These deposits totaled $ 141.6 million and $ 35.8 million at December 31, 2021 and 2020, respectively and are not considered to be brokered deposits. One‑way deposits are also available using the CDARS program. With the one‑way program, the Bank accepts deposits from CDARS even though there is no customer account involved. These one-way deposits, which are considered to brokered deposits, totaled $ 223 thousand and $ 9.6 million at December 31, 2021 and 2020, respectively. At December 31, 2021 and 2020, the Bank had $ 5.0 million and $ 15.1 million in (non-CDARS) brokered deposits, respectively. Scheduled maturities of certificates of deposit for the next five years are as follows: Maturity Amount (In thousands) 2022 $ 191,943 2023 8,103 2024 834 2025 796 2026 237 Thereafter 64 $ 201,977 Certificates of deposit of $250 thousand or more totaled $ 20.4 million and $ 18.9 million at December 31, 2021 and 2020, respectively. The Company has a significant concentration of deposits with five long‑time customers that accounted for approximately 22 % of its deposits as of December 31, 2021. The Company expects to maintain the relationships with the customers for the near term. Deposits from principal officers, directors, and their affiliates totaled $ 22.7 million and $ 838 thousand at December 31, 2021 and 2020, respectively. F-28 Table of Contents Note 12 – Federal Home Loan Bank Advances The following table summarizes information relating to FHLB advances at or for the periods indicated: At or For the Year Ended 2021 2020 (Dollars in thousands) FHLB Advances: Average balance outstanding during the year $ 100,471 $ 114,020 Maximum amount outstanding at any month‑end during the year $ 113,580 $ 121,500 Balance outstanding at end of year $ 85,952 $ 110,500 Weighted average interest rate at end of year 1.85 % 1.94 % Average cost of advances during the year 1.96 % 1.91 % Weighted average contractual maturity (in months) 22 27 Each advance is subject to a prepayment penalty if paid before its maturity date. The advances were collateralized by $ 165.0 million and $ 220.0 million of first mortgage loans at December 31, 2021 and 2020, respectively, under a blanket lien arrangement. Based on collateral pledged and the Company’s holdings of FHLB stock as of December 31, 2021, the Company was eligible to borrow up to an additional $ 14.4 million at year‑end 2021. Scheduled maturities of FHLB advances over the next five years are as follows: Amount (In thousands) 2022 $ 18,140 2023 30,140 2024 5,140 2025 32,532 2026 - $ 85,952 Note 13 – Junior Subordinated Debentures On March 17, 2004, the Company issued $ 6.0 million of Floating Rate Junior Subordinated Debentures (the “Debentures”) in a private placement to a trust that was capitalized to purchase subordinated debt and preferred stock of multiple community banks. Interest on the Debentures is payable quarterly at a rate per annum equal to the 3 ‑Month LIBOR plus 2.54 %. On October 16, 2014, the Company made payments of $ 900 thousand of principal on Debentures, executed a Supplemental Indenture for the Debentures that extended the maturity of the Debentures to March 17, 2024 , and modified the payment terms of the remaining $ 5.1 million principal amount thereof. The Company made quarterly payments of interest only through March 2020 at the original rate of 3 ‑Month LIBOR plus 2.54 %. Starting in June 2020, the Company began making quarterly payments of equal amounts of principal plus interest at the original rate of 3 -Month LIBOR plus 2.54 %. On September 17, 2021, the Company fully redeemed its Floating Rate Junior Subordinated Debentures for $ 2.8 million. Note 14 – Securities Sold Under Agreements to Repurchase The Bank enters into agreements under which it sells securities subject to an obligation to repurchase the same or similar securities. Under these arrangements, the Bank may transfer legal control over the assets but still retain effective control through an agreement that both entitles and obligates the Bank 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 Banks’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. As of December 31, 2021, securities sold under agreements to repurchase totaled $ 52.0 million at an average rate of 0.10 %. These agreements mature on a daily basis. The market value of securities pledged totaled $ 53.2 million as of December 31, 2021 and included $ 13.3 million of U.S. Government Agency securities and $ 39.9 million of mortgage-backed securities. There were no securities sold under agreements to repurchase or securities pledged as of December 31, 2020. F-29 Table of Contents Note 15 – Notes Payable In connection with the New Market Tax Credit activities of City First Bank, CFC 45 is a partnership whose members include CFNMA and City First New Markets Fund II, LLC. This CDE acts in effect as a pass-through for a Merrill Lynch allocation totaling $ 14.0 million that needed to be deployed. In December 2015, Merrill Lynch made a $ 14.0 million non-recourse loan to CFC 45, whereby CFC 45 passed that loan through to a Qualified Active Low-Income Community Business (“QALICB”). The loan to the QALICB is secured by a Leasehold Deed of Trust that, due to the pass-through, non-recourse structure, is operationally and ultimately for the benefit of Merrill Lynch rather than CFC 45. Debt service payments received by CFC 45 from the QALICB are passed through to Merrill Lynch in return for which CFC 45 receives a servicing fee. The financial statements of CFC 45 are consolidated with those of the Bank and the Company. There are two notes outstanding at CFC 45. Note A is in the amount of $ 9.9 million with a fixed interest rate of 5.2 % per annum. Note B is in the amount of $ 4.1 million with a fixed interest rate of 0.24 % per annum. Quarterly interest only payments commenced in March 2016 and will continue through March 2023 for Notes A and B. Beginning in September 2023, quarterly principal and interest payments will be due for Notes A and B. Both notes will mature on December 1, 2040 . Note 16 – Employee Benefit Plans 401(k) Plans As of December 31, 2021, the Company was operating under two different 401(k) plans. Broadway Federal 401(k) Plan The Broadway Federal Bank 401(k) benefit plan allows employee contributions for substantially all employees up to 15 % of their compensation, which are matched at a rate equal to 50 % of the first 6 % of the compensation contributed. Expense totaled $ 142 thousand and $ 146 thousand for 2021 and 2020. City First Bank 401(k) Plan The City First Bank 401(k) benefit plan allows employee contributions for substantially all employees us to the IRS limit, 100 % of which is matched by the Bank up to 3 % of each employee’s contribution. In addition, City First Bank makes a non-elective safe harbor contribution of 3 % of each eligible employee’s compensation.Expense for this plan totaled $ 174 thousand for 2021. ESOP Plan Employees participate in an Employee Stock Option Plan (“ESOP”) after attaining certain age and service requirements. In December 2016, the ESOP purchased 1,493,679 shares of the Company’s common stock at $ 1.59 per share, for a total cost of $ 2.4 million, of which $ 1.2 million was funded with a loan from the Company. The loan will be repaid from the Bank’s annual discretionary contributions to the ESOP, net of dividends paid, over a period of 20 years. Shares of the Company’s common stock purchased by the ESOP are held in a suspense account until released for allocation to participants. When loan payments are made, shares are allocated to each eligible participant based on the ratio of each such participant’s compensation, as defined in the ESOP, to the total compensation of all eligible plan participants. As the unearned shares are released from the suspense account, the Company recognizes compensation expense equal to the fair value of the ESOP shares during the periods in which they become committed to be released. To the extent that the fair value of the ESOP shares released differs from the cost of such shares, the difference is charged or credited to equity as additional paid‑in capital. Dividends on allocated shares increase participant accounts. Dividends on unallocated shares will be used to repay the loan. At the end of employment, participants will receive shares for their vested balance. Compensation expense related to the ESOP was $ 109 thousand for 2021 and $ 68 thousand for 2020. F-30 Table of Contents Shares held by the ESOP were as follows: December 31, 2021 December 31, 2020 (Dollars in thousands) Allocated to participants 1,087,216 1,065,275 Committed to be released 10,064 10,236 Suspense shares 521,618 562,391 Total ESOP shares 1,618,898 1,637,902 Fair value of unearned shares $ 1,454 $ 1,040 During 2021 and 2020, 40,945 and 41,665 of ESOP shares were released for allocation to participants, respectively. The outstanding balance of unearned ESOP shares at December 31, 2021 and 2020 were $ 829 thousand and $ 893 thousand, respectively, which are shown as Unearned ESOP shares in the equity section of the consolidated statements of financial condition. Note 17 – Income Taxes The Company and its subsidiary are subject to U.S. federal and state income taxes. Income tax expense is the total of the current year income tax due or refundable and the change in deferred tax assets and liabilities. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Income tax (benefit) expense was as follows: 2021 2020 (In thousands) Current Federal $ 4 $ ( 59 ) State ( 38 ) 144 Deferred Federal ( 909 ) 7 State ( 363 ) ( 499 ) Change in Valuation Allowance 369 - Total $ ( 937 ) $ ( 407 ) Effective tax rates differ from the federal statutory rate of 21 % applied to income before income taxes due to the following: 2021 2020 (In thousands) Federal statutory rate times financial statement net loss $ ( 1,026 ) $ ( 220 ) Effect of: State taxes, net of federal benefit ( 292 ) ( 7 ) Earnings from bank owned life insurance ( 9 ) ( 10 ) Merger-related expense 195 200 Low income housing credits ( 58 ) ( 117 ) Change in valuation allowance 369 - Tax effect of stock-based compensation ( 129 ) - Tax benefit from tax positions taken in prior years - ( 273 ) Other, net 13 20 Total $ ( 937 ) $ ( 407 ) F-31 Table of Contents Year‑end deferred tax assets and liabilities were due to the following: 2021 2020 (In thousands) Deferred tax assets: Allowance for loan losses $ 677 $ 909 Accrued liabilities 954 139 State income taxes 1 58 Stock compensation 154 310 Net operating loss carryforward 3,946 3,437 Non‑accrual loan interest 51 1 Partnership investment 155 188 General business credit 2,006 1,969 Alternative minimum tax credit 5 34 Net unrealized loss on securities available-for-sale 464 - Right of use liability 319 - Fair value adjustment on acquired loans 521 - Other 363 40 Total deferred tax assets 9,616 7,085 Less: valuation allowance ( 369 ) - Total deferred tax assets , net of valuation allowance 9,247 7,085 Deferred tax liabilities: Section 481 Adjustments to bad debts ( 6 ) ( 334 ) Deferred loan fees/costs ( 750 ) ( 651 ) Basis difference on fixed assets ( 702 ) ( 18 ) Net unrealized appreciation on available‑for‑sale securities - ( 138 ) FHLB stock dividends ( 98 ) ( 266 ) Mortgage servicing rights - ( 1 ) Prepaid expenses ( 220 ) ( 44 ) Right of use assets ( 317 ) - Core deposit intangibles ( 1,053 ) - Total deferred tax liabilities ( 3,146 ) ( 1,452 ) Net deferred tax assets $ 6,101 $ 5,633 Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion, or all, of the deferred tax asset will not be realized. In assessing the realization of deferred tax assets, management evaluated both positive and negative evidence, the amount of taxes paid in available carry‑back years, and the forecasts of future income and tax planning strategies. Based on this analysis, the Company determined that, as of December 31, 2021, a valuation allowance of $ 369 thousand was required on the Company’s deferred tax assets, which totaled $ 6.1 million (net of valuation allowance). As of December 31, 2020, no valuation allowance required on the Company’s deferred tax assets, which totaled $ 5.6 million. On June 29, 2020, the Assembly Bill No. 85 (AB 85) was signed into law by California Governor Gavin Newsom to raise additional income tax revenue to assist in balancing the California budget caused by the COVID-19 pandemic. The most significant provision of this bill is the suspension of the net operating loss (NOL) deduction for tax years beginning on or after January 1, 2020 and before January 1, 2023. The existing 20-year carry forward period for NOLs (10 years for losses incurred in the tax years 2000 through 2007) would be extended for up to three years if losses are not used due to the NOL suspension. This means the Bank cannot take California NOL deductions for 2020-2022 if its California taxable income is more than $1 million. The life of the 2011 NOL will be extended for up to three years. This also means the Bank could have more cash tax liability for 2020-2022. As of December 31, 2021, the Company had federal net operating loss carryforwards of $ 7.4 million. Approximately $ 2.1 million of the federal net operating loss carryforwards can be carried forward indefinitely. The remaining $ 5.3 million will begin to expire, if not utilized, in 2032 through 2037. The Company also had California net operating loss carryforwards of $ 27.6 million which will begin to expire in 2032 through 2041 if not utilized, and D.C. net operating loss carryforwards of $ 0.6 million which can be carried forward indefinitely. The Company also had federal general business credits of $ 2.0 million, which will begin to expire in 2030 through 2041, if not utilized. Prior to 2018, the Company computed its bad debt deduction for income tax purposes under the reserve method. In 2018, the Company requested, and the IRS consented to a change in accounting method used for computing its tax bad debt deduction from the reserve method to the charge-off method as defined under Internal Revenue Code Section 166. As a result, the Company computes its tax bad debt deduction under the new method and recaptures its excess tax bad debt reserve of $ 4.3 million into taxable income evenly over a 4 year period starting in 2018. F-32 Table of Contents The Company did no t have any unrecognized tax benefits as of December 31, 2021 and 2020. Federal tax years 2018 through 2021 remain open for the assessment of Federal income tax. California tax years 2017 through 2021 remain open for the assessment of California franchise tax. The Company is not currently under examinations by any tax authorities. Note 18 – Stock‑Based Compensation Prior to July 25, 2018, the Company issued stock‑based compensation awards to its directors and employees under the 2008 Long‑Term Incentive Plan (“2008 LTIP”). The 2008 LTIP permitted the grant of non‑qualified and incentive stock options, stock appreciation rights, full value awards and cash incentive awards for up to 2,000,000 shares of common stock. As of July 25, 2018, the Company ceased granting awards under the 2008 LTIP. On July 25, 2018, the stockholders approved the 2018 Long‑Term Incentive Plan (“2018 LTIP”). As with the 2008 LTIP, the 2018 LTIP permits the grant of non‑qualified and incentive stock options, stock appreciation rights, full value awards and cash incentive awards. The plan will be in effect for ten years . The maximum number of shares that can be awarded under the plan is 1,293,109 shares of common stock. As of December 31, 2021, 481,064 shares had been awarded and 812,045 shares were available under the 2018 LTIP. No stock options were granted during the years ended December 31, 2021 and December 31, 2020. The following table summarizes stock option activity during the years ended December 31, 2021 and 2020: 2021 2020 Number Outstanding Weighted Average Exercise Price Number Outstanding Weighted Average Exercise Price Outstanding at beginning of year 450,000 $ 1.62 455,000 $ 1.67 Granted during the year - - - - Exercised during the year - - - - Forfeited or expired during the year - - ( 5,000 ) 6.00 Outstanding at end of year 450,000 $ 1.62 450,000 $ 1.62 Exercisable at end of year 450,000 $ 1.62 360,000 $ 1.62 For the years ended December 31, 2021 and 2020, the Company recorded $ 7 thousand and $ 39 thousand, respectively, of stock‑based compensation expense related to stock options. As of December 31, 2021, there was no unrecognized compensation cost related to non-vested stock options granted under the plan. Options outstanding and exercisable at year‑end 2021 were as follows: Outstanding Exercisable Grant Date Number Outstanding Weighted Average Remaining Contractual Life Weighted Average Exercise Price Aggregate Intrinsic Value Number Outstanding Weighted Average Exercise Price Aggregate Intrinsic Value February 24, 2016 450,000 4.15 years $ 1.62 450,000 $ 1.62 - 4.15 years $ 1.62 $ - 450,000 $ 1.62 $ - In February 2021 and 2020, the Company awarded 20,736 and 30,930 shares of common stock, respectively, to its directors under the 2018 LTIP, which are fully vested. The Company recorded $ 45 thousand of compensation expense in each of the years ended December 31, 2021 and December 31, 2020, based on the fair value of the stock, which was determined using the average of the high and the low price of the stock on the date of the award. F-33 Table of Contents In July of 2021, the Company awarded 64,516 shares of common stock to its Chief Executive Officer, which are fully vested. The company recorded $ 200 thousand of compensation expense for the year ended December 31, 2021 based on the fair value of the stock, which was determined using the average of the high and the low price of the stock on the date of the award. In February 2020, the Company awarded 140,218 shares of restricted stock to its officers and employees under the 2018 LTIP. Each restricted stock award was valued based on the fair value of the stock, which was determined using the average of the high and the low price of the stock on the date of the award. These awarded shares of restricted stock became fully vested on April 1, 2021, the date of the Merger, and all unrecognized compensation expense was recognized at that time. During 2021, and 2020, the Company recorded $ 153 thousand and $ 340 thousand of stock based compensation expense related to shares awarded to employees. As all restricted stock awarded to employees were fully vested as of December 31, 2021, there was no remaining unrecognized compensation cost related to non-vested restricted stock awards as of December 31, 2021. Note 19 – Capital and Regulatory Matters The Bank’s capital requirements are administered by the Office of the Comptroller of the Currency (“OCC”) and involve quantitative measures of assets, liabilities, and certain off-balance sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by the OCC. Failure to meet capital requirements can result in regulatory action. As a result of the Economic Growth, Regulatory Relief, and Consumer Protection Act, the federal banking agencies have developed a “Community Bank Leverage Ratio” (“CBLR”) (the ratio of a bank’s tier 1 capital to average total consolidated assets) for financial institutions with assets of less than $10 billion. A “qualifying community bank” that exceeds this ratio will be deemed to be in compliance with all other capital and leverage requirements, including the capital requirements to be considered “well capitalized” under Prompt Corrective Action statutes. The federal banking agencies have set the Community Bank Leverage Ratio at 9%. The CARES Act temporarily lowered this ratio to 8% beginning in the three months ended September 30, 2020. The ratio then rose to 8.5 % for 2021 and reestablished at 9% on January 1, 2022. F-34 Table of Contents City First Bank, N.A. elected to adopt the CBLR option on April 1, 2020 as reflected in its June 30, 2020 Call Report. Its CBLR as of December 31, 2021 is shown in the table below. The Company’s former subsidiary, Broadway Federal Bank, f.s.b., did not elect to adopt the CBLR and reported the December 31, 2020 capital ratios as shown in the table below. Actual Minimum Capital Requirements Minimum Required to Be Well Capitalized Under Prompt Corrective Action Provisions Amount Ratio Amount Ratio Amount Ratio (Dollars in thousands) December 31, 2021 : Community Bank Leverage Ratio (1) $ 98,590 9.32 % $ $ 89,871 8.50 % December 31, 2020 : Tier 1 (Leverage) $ 46,565 9.54 % $ 19,530 4.00 % $ 24,413 5.00 % Common Equity Tier 1 $ 46,565 18.95 % $ 11,059 4.50 % $ 15,975 6.50 % Tier 1 $ 46,565 18.95 % $ 14,746 6.00 % $ 19,661 8.00 % Total Capital $ 49,802 20.20 % $ 19,661 8.00 % $ 24,577 10.00 % (1) At the Merger on April 1, 2021, the Company’s former subsidiary, Broadway Federal Bank, f.s.b., was merged into City First Bank of D.C, N. A., with City First Bank of D.C, N.A. as the surviving entity and the resultant bank being named City First Bank, National Association, which had elected to adopt Community Bank Leverage Ratio option on April 1, 2020 as reflected in its june 30, 2020 Call Report. At December 31, 2021, the Company and the Bank met all the capital adequacy requirements to which they were subject. In addition, the Bank was “well capitalized” under the regulatory framework for prompt corrective action. Management believes that no conditions or events have occurred that would materially adversely change the Bank’s capital classifications. From time to time, we may need to raise additional capital to support the Bank’s further growth and to maintain the “well capitalized” status. The Bank’s capital requirements are administered by the OCC and involve quantitative measures of assets, liabilities, and certain off‑balance sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by the OCC. Failure to meet capital requirements can result in regulatory action. Note 20 – Loan Commitments and Other Related Activities Some financial instruments, such as loan commitments, credit lines, letters of credit, and overdraft protection, are issued to meet customer financing needs. These are agreements to provide credit or to support the credit of others, as long as conditions established in the contract are met, and usually have expiration dates. Commitments may expire without being used. Off‑balance‑sheet risk for credit loss exists up to the face amount of these instruments, although material losses are not anticipated. The same credit policies are used to make such commitments as are used for loans, including obtaining collateral at exercise of the commitment. The contractual amounts of financial instruments with off‑balance‑sheet risk at year‑end were as follows: 2021 2020 (In thousands) Commitments to make loans $ 13,384 $ - Unfunded construction loans 10,352 Unused lines of credit – variable rates 9,326 2,472 Commitments to make loans are generally made for periods of 60 days or less. At December 31, 2021, loan commitments consisted of five ( 5 ) multi‑family residential loans with initial five-year interest rates ranging from 3.125 % to 3.50 %, three (3) commercial real estate loans and with interest rates ranging from 3.25 % to 4.05 %, and two commercial loans with interest rates ranging from 4.25 % to 5 %. Unfunded construction loans and line of credit loans have variable interest rates based on prime. At December 31, 2020, the Bank did no t have any commitments to originate loans. F-35 Table of Contents Note 21 – Parent Company Only Condensed Financial Information Condensed financial information of Broadway Financial Corporation follows: Condensed Balance Sheet December 31, 2021 2020 (In thousands) Assets Cash and cash equivalents $ 6,439 $ 126 Investment in bank subsidiary 131,540 49,418 Other assets 3,604 2,735 Total assets $ 141,583 $ 52,279 Liabilities and stockholders’ equity Junior subordinated debentures $ - $ 3,315 Accrued expenses and other liabilities 583 79 Stockholders’ equity 141,000 48,885 Total liabilities and stockholders’ equity $ 141,583 $ 52,279 F-36 Table of Contents Condensed Statements of Income Years ended December 31, 2021 2020 (In thousands) Interest income $ 27 $ 23 Interest expense ( 60 ) ( 133 ) Other expense ( 1,982 ) ( 1,033 ) Loss before income tax and undistributed subsidiary income ( 2,015 ) ( 1,143 ) Income tax benefits 405 291 Equity in undistributed subsidiary (loss) income ( 2,440 ) 210 Net loss $ ( 4,050 ) $ ( 642 ) Condensed Statements of Cash Flows Years ended December 31, 2021 2020 (In thousands) Cash flows from operating activities Net loss $ ( 4,050 ) $ ( 642 ) Adjustments to reconcile net loss to net cash used in operating activities: Equity in undistributed subsidiary loss (income) 2,440 ( 210 ) Change in other assets ( 869 ) ( 223 ) Change in accrued expenses and other liabilities 504 21 Net cash used in operating activities ( 1,975 ) ( 1,054 ) Cash flows from investing activities Capital distribution to bank subsidiary ( 20,000 ) - Dividends from bank subsidiary 700 2,000 Net cash (used in) provided by investing activities ( 19,300 ) 2,000 Cash flows from financing activities Proceeds from sale of stock 30,837 - Repayments of borrowings ( 3,315 ) ( 1,020 ) Proceeds from repayment of ESOP loan 66 66 Net cash used in financing activities 27,588 ( 954 ) Net change in cash and cash equivalents 6,313 ( 8 ) Beginning cash and cash equivalents 126 134 Ending cash and cash equivalents $ 6,439 $ 126 Note 22 – Loss Per Common Share The factors used in the earnings per common share computation follow: 2021 2020 (Dollars in thousands, except share and per share) Net loss $ ( 4,050 ) $ ( 642 ) Less net income attributable to participating securities - - Loss available to common stockholders $ ( 4,050 ) $ ( 642 ) Weighted average common shares outstanding for basic earnings per common share 60,151,556 27,163,427 Add: dilutive effects of unvested restricted stock awards - - Weighted average common shares outstanding for diluted earnings per common share 60,151,556 27,163,427 Loss per common share – basic $ ( 0.07 ) $ ( 0.02 ) Loss per common share – diluted $ ( 0.07 ) $ ( 0.02 ) F-37 Table of Contents Stock options for 450,000 shares of common stock for the years ended December 31, 2021 and 2020, respectively, were not considered in computing diluted earnings per common share because they were anti‑dilutive. Basic loss per share of common stock is computed pursuant to the two-class method by dividing net loss available to common stockholders less dividends paid on participating securities (unvested shares of restricted common stock) and any undistributed loss attributable to participating securities by the weighted average common shares outstanding during the period. The weighted average common shares outstanding includes the weighted average number of shares of common stock outstanding less the weighted average number of unvested shares of restricted common stock. ESOP shares are considered outstanding for this calculation unless unearned. Because the Company recorded losses for the years ended December 31, 2021 and 2020, no unvested stock awards or potential common shares issuable under stock options were included in diluted earnings per share in either year. Note 23 – Subsequent Events Subsequent events have been evaluated through April 14, 2022, which is the date these financial statements were issued. F-38