BROADWAY FINANCIAL CORP DE 10-K

ITEM 9A. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures As of December 31, 2023, an evaluation was performed under the supervision of the Company’s Principal Executive Officer (“PEO”) and Principal Financial Officer (“PFO”) of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based on that evaluation, the Company’s PEO and PFO concluded that the Company’s disclosure controls and procedures were not effective as of December 31, 2023 due to a material weakness in the Company’s internal control over financial reporting, as further described below. 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 criteria for effective internal control over financial reporting established in “Internal Control — Integrated Framework (2013),” issued by the 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 GAAP. 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 PEO and PFO, 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 not effective as of December 31, 2023. A material weakness is a control deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. The Company did not maintain a sufficient complement of personnel with appropriate levels of knowledge, experience, and training in internal control matters to perform assigned responsibilities and have appropriate accountability for the design and operation of internal control over financial reporting. The lack of sufficient appropriately skilled and trained personnel contributed to the Company’s failure to: (i) design and implement certain internal controls; and (ii) consistently operate its internal controls. This matter was considered to be a material weakness in the Company’s control environment. The control environment material weaknesses contributed to other material weaknesses within the Company’s system of internal control over financial reporting in the following COSO Framework components such that the Company did not design and implement effective controls, including the following: ● Risk assessment – The Company did not appropriately identify and analyze risks to achieve its control objectives. This ineffective risk assessment process limited the Company’s ability to identify and remediate the weaknesses in the control activities, as described below. ● Control activities – The Company did not design and implement effective controls over the consolidation, financial statement reporting, and the monthly close processes, including the lack of effectively designed and implemented controls related to the preparation and review of account reconciliations with appropriate supporting documentation. Specifically, several general ledger account reconciliations were discovered to have unidentified or stale reconciling items. The investigation and resolution of this matter caused the Company to delay its filing of the required Form 10-K for the fiscal year ended December 31, 2023, past its due date. ● Monitoring activities – The Company’s ongoing evaluation of internal controls failed to detect the issues described above, and as a result limited management’s ability to correct and remediate the internal control issues in a timely manner. 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 SEC that permit the Company to provide only management’s report in this annual report. 38 Table of Contents Remediation Plan In response to the material weakness that was identified, the Company has hired additional senior personnel with relevant experience and training in finance and accounting that will be able to assist the Company with appropriately assessing the risks of the Company and designing, implementing, and monitoring a system of internal control over financial reporting to address those risks. Related to the control over account reconciliations, the Company engaged a third-party firm to assist with reviewing general ledger account reconciliations to identify the population of account balance differences that were in need of correction. Such corrections have been made to the consolidated financial statements. Going forward, the Company’s controls over general ledger account reconciliations will be strengthened to require the use of a reconciliation checklist, with a formal signoff by the preparer and reviewer on each reconciliation, as well as by a separate member of management as evidence that every account reconciliation was reviewed each month. In addition, the Company will also request that its internal audit firm perform additional testing on the enhanced controls over general ledger account reconciliation during its audits. Management is actively engaged in the planning for, and implementation of, remediation efforts to address the material weakness. Additional time is required to complete the design and test the operating effectiveness of the applicable controls to demonstrate the effectiveness of the remediation efforts. The material weakness cannot be considered remediated until the applicable remedial controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. Changes in Internal Control Over Financial Reporting There were no other changes in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the year ended December 31, 2023, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. However, management did implement changes in internal controls over financial reporting during the fourth quarter of 2023 while preparing the interim financial information for the third quarter of 2023, designed to remediate the material weakness that was identified. Inherent Limitations on Effectiveness of Controls Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives as specified above. Management does not expect, however, that our disclosure controls and procedures will prevent or detect all error and fraud. Any control system, no matter how well designed and operated, is based upon certain assumptions, and can provide only reasonable, not absolute, assurance that its objectives will be met. Further, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected. ITEM 9B. OTHER INFORMATION None . ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS Not applicable. 39 Table of Contents PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE The Company’s certificate of incorporation provides that the board of directors of the Company (the “Board”) shall be divided into three classes of directors, with the term of one class of directors to expire each year. The class whose terms expire in 2024, currently consisting of Mr. Wayne-Kent A. Bradshaw, Ms. Marie C. Johns and Mr. David J. McGrady, is to be elected at the Company’s 2024 Annual Meeting of Shareholders. The membership of the Board and the membership of the board of directors of the Company’s wholly-owned banking subsidiary, City First Bank, National Association (the “Bank”) are identical. Information Concerning Directors The following table sets forth the names and information regarding the persons who are currently members of the Board. Name ​ ​ Age as of March 31, 2024 ​ ​ Director Since ​ ​ Current Term Expires ​ ​ Positions Currently Held with the Company and the Bank DIRECTORS ​ ​ ​ ​ ​ ​ ​ ​ Wayne-Kent A. Bradshaw ​ ​ 77 ​ ​ 2012 ​ ​ 2024 ​ ​ Director, Vice Chair Marie C. Johns ​ ​ 72 ​ ​ 2014* ​ ​ 2024 ​ ​ Lead Independent Director David J. McGrady ​ ​ 68 ​ ​ 1997* ​ ​ 2024 ​ ​ Director Brian E. Argrett (1) ​ ​ 60 ​ ​ 2011* ​ ​ 2026 ​ ​ Chair of the Board, President and Chief Executive Officer Mary Ann Donovan ​ ​ 59 ​ ​ 2020* ​ ​ 2026 ​ ​ Director William A. Longbrake ​ ​ 81 ​ ​ 2011* ​ ​ 2026 ​ ​ Director Robert C. Davidson, Jr. ​ ​ 78 ​ ​ 2003 ​ ​ 2025 ​ ​ Director Dutch C. Ross III ​ ​ 77 ​ ​ 2016 ​ ​ 2025 ​ ​ Director John M. Driver ​ ​ 59 ​ ​ 2022 ​ ​ 2025 ​ ​ Director * Including service as a director of CFBanc Corporation prior to the Merger. (1) Mr. Argrett was elected as Chair of the Board, effective April 1, 2023. Directors Wayne-Kent A. Bradshaw was President and Chief Executive Officer of the Company and Broadway Federal Bank until the Merger of the Company with CFBanc, whereupon he became Chair of the Board of the Company and City First Bank, National Association. He relinquished his position as Chair of the Company in March 2023 and became Vice Chair effective April 1, 2023. Mr. Bradshaw joined the Company in February of 2009 as President and Chief Operating Officer and was appointed Chief Executive Officer in January 2012. He was elected to serve as a director of both the Company and Broadway Federal Bank in September 2012. Prior to joining the Company, Mr. Bradshaw was the Regional President for Community and External Affairs of Washington Mutual Bank from 2003 to 2009. He was President and Chief Executive Officer of Los Angeles-based Family Savings Bank from 1989 until 2002 and Chief Deputy Superintendent for the California State Banking Department from 1981 to 1983. Mr. Bradshaw has served on many community and educational boards. He most recently served on the boards of directors of California State University Northridge, Northridge Hospital Medical Center, California Community Reinvestment Corporation, and the Western Bankers Association. He currently serves on the boards of the Federal Reserve Bank of San Francisco - Los Angeles Branch and Louisville High School. Mr. Bradshaw has over 52 years of experience in financial management and banking. He has the proven ability to plan and implement programs that optimize opportunities to accelerate profitable growth in highly competitive environments. Mr. Bradshaw has extensive experience in community banking, commercial banking, and as a bank regulator, and his knowledge and experience qualify him to serve on the Board and as its Vice Chair. 40 Table of Contents Marie C. Johns has over 30 years’ experience as a leader in business, civic, and government service. Ms. Johns focuses on community service in the areas of education and economic development. She served as President of Verizon Washington and was nominated by President Barack Obama to serve as Deputy Administrator of the U.S. Small Business Administration, (“SBA”). In 2011, under Ms. Johns’ leadership and initiatives, the SBA lent more than $30 billion to more than 60,000 small businesses, a record in the history of the SBA. Over 10 years ago, Ms. Johns founded L&L Consulting, LLC (now PPC-Leftwich LLC), a business development, organizational effectiveness and public policy consulting practice, which is based in Washington, D.C. and where she continues to serve as CEO. Ms. Johns has served on several boards of directors, including the Federal City Council, the Economic Club of Washington, D.C., the Washington, D.C. Chamber of Commerce, WLR Foods (a poultry producer), Kaiser Permanente of the Mid-Atlantic Region, Hager Sharp (a communications and marketing firm), Document Systems Inc. (a document imaging and storage firm) and Harvest Bank of Maryland. Ms. Johns is a Trustee of Howard University where she chairs the Student Life Committee and serves as vice chair of the Governance Committee. Ms. Johns is a member of the Greater Washington, D.C. Business Hall of Fame, one of the Greater Washington Board of Trade’s “Leaders of the Year” and the recipient of over 100 awards from different organizations for her community service. Ms. Johns received her B.S. and M.P.A. degrees from the O’Neill School of Public and Environmental Affairs at Indiana University where she currently serves as a member of the Dean’s Council and she formerly served as a Board member for the Tobias Center for Leadership Excellence. Prior to the Merger, Ms. Johns, served as a Director of CFBanc since 2014 and as Chair of the Board of CFBanc since 2018. She was appointed to be the Lead Independent Director of the Company in 2021. Ms. Johns has over 30 years executive management experience in the public and corporate sectors. She has served on a variety of private company and not-for-profit boards and her expertise in governance, regulatory issues, business development, and the Washington D.C. market qualify her to serve on the Board as our Lead Independent Director. David J. McGrady is a consultant specializing in community development issues and is a nationally recognized expert on the New Markets Tax Credit program. He has been a key advisor on more than 30 successful New Markets Tax Credit applications, with allocations totaling more than $1.7 billion, and has assisted those recipients in developing and implementing capitalization and deployment plans in their respective markets. He also advises banks, investors, foundations, municipalities and CDFIs, on a range of issues, including corporate structure and governance, capitalization, market and risk assessment, product development, underwriting loans and investments, portfolio management, and tax credit programs. Mr. McGrady was Director of Commercial Programs for the Center for Community Self-Help in Durham, North Carolina. Under his leadership, the Center for Community Self-Help originated over 1,300 higher risk business loans totaling more than $80 million. He is also a director of City First Enterprises, which is the bank holding company of the Company, chair of City First Enterprises’ Directors Loan Committee and a member of Calvert Impact Capital’s Investment Committee. Mr. McGrady received his bachelor’s degree from King University and law degree from Harvard University. Prior to the completion of the Merger, Mr. McGrady, served as a Director on the Board of CFBanc since 1998, and was appointed to be a director of the Company upon completion of the Merger. Mr. McGrady’s experience in corporate governance and community development matters and legal expertise, as well as his background in finance and the real estate, mortgage, and tax credit industries, qualify him to serve as a member of the Board. Brian E. Argrett was Director, President and Chief Executive Officer of CFBanc and its wholly owned banking subsidiary from 2011 until the completion of the Merger, at which time he became Vice Chair, President and Chief Executive Officer of both the Company and the Bank. Effective April 1, 2023, he became Chair of the Company and the Bank. Formerly, Mr. Argrett was founder and managing partner of both Fulcrum Capital Group, an investment manager, and Fulcrum Capital Partners, L.P., an institutionally-backed private equity limited partnership. He also served as President, Chief Executive Officer, and director of Fulcrum Venture Capital Corporation, a federally licensed and regulated Small Business Investment Company. Prior to joining the Fulcrum entities, Mr. Argrett was an attorney with the real estate law firm of Pircher, Nichols & Meeks in Los Angeles, California. Mr. Argrett has served as chair, been a member, or held observer rights on numerous Fulcrum portfolio company boards, as well as having served on the boards of directors of other financial industry companies. Mr. Argrett was a presidential appointee to the Community Development Advisory Board of the U.S. Treasury Department under the Obama administration. Mr. Argrett has held leadership positions at the National Association of Investment Companies and the National Conference for Community and Justice and has been an elder at the Knox Presbyterian Church. Currently, Mr. Argrett serves as Chairman of the Board of Directors of City First Enterprises, which is a bank holding company that holds equity in the Company. Mr. Argrett is a recent appointee to the Board of IntraFi Network, and he also serves on the Board of the California Bankers Association. Mr. Argrett is a past Chairman and continues to serve on the Board of Directors of the Community Development Bankers Association. He also serves as a member of the Global Alliance on Banking on Values, and is a member of the Board of the Expanding Black Business Credit Initiative. Mr. Argrett served as a director of the Board of Directors of the Federal Home Loan Bank of Atlanta from 2016 through December of 2021, during which time he served as the Vice Chair of the Board, Chair of its Enterprise Risk and Operations Committee, as well as a member of its Finance Committee and its Audit and Compliance Committee. 41 Table of Contents Mr. Argrett is a member of The Economic Club of Washington, D.C., the Federal City Council, and the Leadership Greater Washington Class of 2014. In addition, Mr. Argrett is a 2014 recipient of the Washington Business Journal Minority Business Leader Award. Mr. Argrett holds J.D. and M.B.A. degrees from the University of California, Berkeley, and a bachelor’s degree from the McIntire School of Commerce at the University of Virginia. Mr. Argrett’s extensive experience in the financial services and banking industries, public and private company board experience, knowledge and experience in the Washington D.C. and Southern California markets, and knowledge of the Bank’s business, history, organization, and mission, and executive management experience qualify him to serve as a member of the Board. Mary Ann Donovan has served as President and Chief Executive Officer of Raza Development Fund, a Latino-led and focused Community Development Financial Institution, since August 1, 2022. Prior positions held by Ms. Donovan include Chief Operating Officer of Local Initiatives Support Corporation, Director of the United States Department of the Treasury’s Community Development Financial Institutions (“CDFI”) Fund, CEO of CoMetrics, Inc. (a social enterprise that provides affordable business intelligence tools to small businesses and nonprofit entities), Senior Policy Advisor to the White House from 2012-2013, working collaboratively with the Office of Social Innovation and the Council on Environmental Quality, and Chief Operating Officer of Capital Impact Partners, a certified CDFI. Ms. Donovan has been a thought leader and a board member of many of the highest performing organizations in the community development sector. Ms. Donovan has been a Senior Fellow at the Center for Community Investment. She has published papers and articles for the National Academy for Public Administration, the Federal Reserve Bank of San Francisco, the Federal Reserve Bank of Boston, Forbes, the Skoll World Forum on Social Entrepreneurship, and the Milken Review. Ms. Donovan has a B.A. degree in Economics from Allegheny College and an M.B.A. degree from the University of Maryland. Prior to the completion of the Merger, Ms. Donovan was a director of CFBanc, and was appointed to be a director of the Company upon completion of the Merger. Ms. Donovan’s operational experience, federal government public service, and community development knowledge and expertise, as well has her experience with corporate governance, marketing, and business development matters, all qualify her to serve on the Board. William A. Longbrake has served as an Executive in Residence at the Robert H. Smith School of Business at the University of Maryland since June 2009 where he participates in the Center for Financial Policy, the Ed Snider Center and the Smith Enterprise Risk Consortium and writes a monthly economic newsletter for “Brain Trust.” Dr. Longbrake is active in numerous academic, business, and community service organizations, particularly those involving issues surrounding affordable housing and education. He is a current director of City First Enterprises. Dr. Longbrake is a former Chairman of the Board of Trustees of the College of Wooster, a residential four-year liberal arts college, and a former Chairman of the Board of HOPE LoanPort, a not-for-profit organization that provided a data management and communications web portal to housing counselors and home mortgage servicers. Dr. Longbrake is a director of the Boeing Employees Credit Union, President of the Seattle First Foundation, and a member of the Mortgage Markets Committee of the American Bankers Association. Dr. Longbrake was a Director of First Financial Northwest, a community bank located in Renton, Washington, from 2008-2010; a Director of the Federal Home Loan Bank of Seattle from 2002-2010; a Director of the Washington Financial League from 2002-2010 and a Director of the Washington State Investment Board from 2010-2023. He taught courses in business administration and finance at the University of Maryland and Seattle University. In 2007 Dr. Longbrake received the Distinguished Alumnus of the Year award from the Robert H. Smith School of Business of the University of Maryland. Dr. Longbrake began his career in Washington, D.C. where he served in various government positions, including Acting Senior Deputy Comptroller for Policy and Senior Deputy Comptroller for Resource Management for the Office of the Comptroller of the Currency and financial economist, chief financial officer, and deputy to the Chairman of the FDIC. He earned his B.A. degree in Economics from the College of Wooster and earned his master’s degree in Monetary Economics and his M.B.A. degree from the University of Wisconsin. He received his Ph.D. degree in finance from the University of Maryland. Prior to the completion of the Merger, Dr. Longbrake was a director of CFBanc, and was appointed to be a director of the Company upon completion of the Merger. Dr. Longbrake has extensive experience in finance and investments, macroeconomics and monetary policy, risk management, housing, and public policy. His extensive experience in accounting, banking, community development, and corporate governance experience, along with his regulatory, finance, and capital markets experience with both public and private companies qualify him to serve as a member of the Board. Robert C. Davidson, Jr. served, until his retirement in 2007, in the position of Chairman and Chief Executive Officer of Surface Protection Industries, a paint and specialty coatings manufacturing company he founded in 1978, that became one of the leading African American-owned manufacturing companies in the United States and the largest in California. Previously, from 1972 to 1974, he co-founded and served as Vice President of Urban National Corporation, a private venture capital corporation that was focused specifically on investing in minority-controlled businesses. Mr. Davidson currently also serves on the boards of directors of Smithsonian American Art Museum (Chairman-Elect), Diversity Advisory Board at Toyota Motor North America, Morehouse College (Chairman Emeritus), Art Center College of Design (Chairman Emeritus), Cedars-Sinai Medical Center (Lifetime Member), and the University of Chicago Graduate School of Business Advisory Council. 42 Table of Contents Mr. Davidson has extensive entrepreneurial experience in developing and managing small and medium-sized businesses. He has hands-on experience in marketing and sales, human resources and strategic planning and implementation. He has a long history with, and extensive knowledge of the Company and of the markets and communities in which the Company operates. We believe that this history, knowledge, and overall experience qualify him to serve on the Board. Dutch C. Ross III is the former President and Chief Executive Officer of Economic Resources Corporation (“ERC”), a non-profit corporation with a mission of promoting economic development and job creation in underserved communities. Mr. Ross served in that capacity from 1996 until his retirement in August 2020. Prior to joining ERC, Mr. Ross held a variety of managerial, financial, and planning positions in the corporate headquarters, divisional, and subsidiary operations of Atlantic Richfield Company (“ARCO”) from January 1975 to December 1995. From 1971 to 1975, Mr. Ross was employed in financial analysis positions with The Wickes Corporation. Mr. Ross has been active in a number of community organizations in the Los Angeles area that are devoted to building stronger communities and has served on the board of directors of several such organizations, including Genesis L.A. Economic Growth Corporation, where he currently serves on the Audit and Finance Committees. He has served on the Board since 2016. Mr. Ross received his B.S. degree in Industrial Economics and a Masters in Industrial Management from Purdue University. Mr. Ross is a financial executive with over 45 years of managerial experience with Fortune 500 companies and non-profit economic development organizations and has extensive knowledge of the Company. Mr. Ross’ knowledge and experience qualifies him to serve on the Board. John M. Driver is a technology entrepreneur and innovator with leadership experience in large, public and privately-held multinational companies and early-stage startups. He has a foundation in software marketing & sales and direct experience in new product launches for first-to-market categories. Navigating complexity, delivering innovation, and creating new opportunities within the IoT (Internet-of-Things) market are hallmarks of his career. As CEO, he currently leads Lynx Technology, a digital media technology company he founded through a management buyout of the multinational Connected Home operations of PacketVideo, a subsidiary of NTT DoCoMo. Previously, Mr. Driver served as Chief Operating Officer and Chief Marketing Officer of PacketVideo, co-founder and Chief Executive Officer of JoynIn and in senior marketing leadership roles for Serena Software and Sun Microsystems. Mr. Driver is currently an Independent Director at Vital Energy, Inc. (NYSE: VTLE). Additionally, he serves as Chair of the Board of Trustees of the Fleet Science Center in San Diego and is a former Board Member of the San Diego YMCA Overnight Camps. He is actively involved with Stanford University, serving as former Chair of the Stanford Associates Board of Governors, a guest lecturer for Stanford’s Department of Management Science and Engineering, is the former President of the Stanford Multicultural Alumni Club of San Diego and a recipient of the Stanford Governor’s Award in recognition of exemplary and long-standing volunteer service. He is NACD Directorship Certified TM and earned the NACD Certificate in Cybersecurity Oversight. Mr. Driver earned a Bachelor of Science in Industrial Engineering from Stanford University and a Master of Business Administration from The Tuck School of Business at Dartmouth College. Mr. Driver has expertise in corporate governance, strategy, finance, acquisitions, international operations; enterprise, consumer, and mobile application software; enterprise computer systems & services, Internet-of-Things, global sales & marketing strategy, developing and patenting award-winning technologies, and corporate governance. Mr. Driver’s knowledge and experience qualifies him to serve on the Board. EXECUTIVE OFFICERS The following table sets forth information with respect to current executive officers of the Company and the Bank who are not directors. Except as noted, all references to the Bank refer to City First Bank, National Association. Officers of the Company and the Bank serve at the discretion of, and are elected annually by, the respective Boards of Directors. Name ​ ​ Age (1) ​ ​ Principal Occupation during the Past Five Years Brenda J. Battey ​ ​ 66 ​ ​ Executive Vice President and Chief Financial Officer of the Company since June 2013 and the Bank (2) since April 2013. Senior Vice President and Senior Controller of the Bank of Manhattan from September 2011 to June 2012. ​ ​ ​ ​ Ruth McCloud ​ ​ 75 ​ ​ Executive Vice President and Chief Operating Officer of the Company and Bank since April 2021. Previously Executive Vice President of the Company, and Executive Vice President and Chief Retail Banking Officer of the Bank (2) since July 2014. ​ ​ ​ ​ John Tellenbach ​ ​ 57 ​ ​ Executive Vice President, West Commercial Regional Executive of the Company since February of 2023. Senior Vice President and Chief Credit Officer of Malaga Bank beginning in 2015. ​ ​ ​ ​ LaShanya Washington ​ ​ 49 ​ ​ Executive Vice President, Chief Credit Officer of the Company since April 2023 and Senior Vice President, Deputy Chief Credit Officer since August 2022. Senior Vice President and Senior Credit Officer of the Bank since April 2022 and Credit Risk Officer since February 2019. Senior Credit Analyst at United Bank from November 2018 to February 2019, and Manager for Loan Servicing and Accounting for Capital Impact Partners from November 2015 until August 2018. ​ ​ ​ ​ Sonja S. Wells ​ ​ 69 ​ ​ Executive Vice President, East Commercial Regional Executive of the Company, and of the Bank since April 2023. Previously Executive Vice President and Chief Lending Officer of the Bank since January of 2021. Senior Vice President and Interim Chief Lending Officer of the Bank from May 2020 to January 2021 and prior to that Senior Vice President and Relationship Manager of the Bank from July 2015. (1) As of March 31, 2024. (2) Refers to Broadway Federal until April 1, 2021, the date on which Broadway Federal merged with and into City First, and to City First from and after that date. 43 Table of Contents Code of Ethics We have adopted a Code of Ethics that applies to all of our directors, officers and employees, including our principal executive, principal financial and principal accounting officers, or persons performing similar functions. Our Code of Ethics is posted on our website at www.cityfirstbank.com . We intend to disclose future amendments to certain provisions of the Code of Ethics, and waivers of the Code of Ethics granted to executive officers and directors, on the website within four business days following the date of the amendment or waiver. Audit Committee The Audit Committee consists of Dr. Longbrake (Chair), Ms. Donovan, Mr. Driver, and Ms. Johns. This committee is responsible for the engagement and oversight of the Company’s independent registered public accounting firm. The Audit Committee, together with the corresponding committee of the Bank’s Board of Directors, is also responsible for oversight of the internal audit function of the Company, and assessment of accounting and internal control policies. All the members of the Audit Committee are independent directors as defined under the Nasdaq listing standards. In addition, the Board has determined that Dr. Longbrake’s experience with accounting principles, financial reporting and evaluation of financial results qualifies him as an “audit committee financial expert,” as defined by the SEC. ITEM 11. EXECUTIVE COMPENSATION The Summary Compensation Table includes information concerning the compensation paid to or earned by our Chief Executive Officer (“CEO”) and our two other most highly compensated executive officers. Each executive is referred to herein as a named executive officer (“NEO”). Name and Principal Position Year ​ Salary Stock Awards (1) Non-Equity Incentive Plan Compensation (2) All Other Compensation (3) ​ Total ($) Brian E. Argrett, Chief Executive Officer 2023 ​ $ 577,500 $ 275,000 $ 114,883 $ 75,876 ​ $ 1,043,259 2022 ​ $ 550,000 $ 210,000 $ 206,250 $ 66,463 ​ $ 1,032,713 Brenda J. Battey Chief Financial Officer 2023 ​ $ 278,250 $ 75,286 $ 43,858 $ 54,710 ​ $ 452,104 2022 ​ $ 265,000 $ 61,900 $ 75,287 $ 40,206 ​ $ 442,393 Ruth McCloud Chief Operating Officer 2023 ​ $ 270,000 $ 73,736 $ 42,621 $ 38,263 ​ $ 424,620 2022 ​ $ 260,000 $ 52,700 $ 73,736 $ 26,270 ​ $ 412,706 (1) This column reports the grant date fair value of restricted stock granted during each year reported. The amounts reported in this column have been calculated in accordance with FASB ASC Topic 718. A description of the methodologies and assumptions we use to value equity awards and the manner in which we recognize the related expense are described in Note 17 to our consolidated financial statements, Stock-Based Compensation. (2) The amounts shown represent the cash incentive compensation awards earned by each NEO under the Bank’s Incentive Plan for Management (“Incentive Plan”), based on the objective criteria established by the Board at the beginning of each year. The Company’s achievement of such objective criteria is determined by the Board’s compensation and benefits committee (“Compensation Committee”). The Compensation Committee evaluates the performance results at the beginning of the following year and approves the amounts of bonuses to be paid. (3) Includes amounts paid by the Company to the 401(k) account of the NEO and allocations under the City First Bank, National Association Employee Stock Ownership Plan. Also includes perquisites and other benefits consisting of automobile and telephone allowances, health benefits and life insurance premiums. 44 Table of Contents Employment Agreements Brian Argrett The Company and Mr. Argrett are parties to an employment agreement effective November 17, 2021 (the “Employment Agreement”), providing for Mr. Argrett’s continued service as the Company’s President and Chief Executive Officer and a member of the Board and the board of directors of the Bank. The Employment Agreement has a five-year term beginning on April 1, 2021, subject to annual one-year automatic extensions thereafter unless the Company or Mr. Argrett provides at least 90-days’ prior written notice. Under the agreement, Mr. Argrett was entitled to a base salary of $520,000 per year for the 2021 calendar year, which increased to $550,000 effective January 1, 2022, and $577,500 effective January 1, 2023, which may be further increased but not decreased (other than in connection with an across-the-board reduction in salary applicable to other executive officers) in the Board’s discretion. Mr. Argrett’s target bonus is equal to 30% of his base salary based on the degree of achievement of specified business plan objectives as evaluated annually by the Compensation Committee. No bonus will be paid if the degree of achievement of the business plan objectives is less than 80%. The cash bonus will range from 24% of base salary if the degree of achievement of the business plan objectives is 80% up to a maximum of 37.5% of base salary if the degree of achievement of the business plan objectives is 125% or more. Mr. Argrett is eligible for annual opportunities to receive grants of restricted stock, with the grant date value determined by the Compensation Committee based on the degree of achievement of specified performance metrics determined by the Company. The target grant date value of such grants for each year is 40% of base salary. No equity grants will be made if the degree of achievement of specified business plan objectives is less than 80%, and the grants will range in grant date value from 32% of base salary if the degree of achievement of the business plan objectives is 80% up to a maximum of 50% of base salary if the degree of achievement of the business plan objectives is 125% or more. All such awards will vest as to 33% on the first anniversary of grant, with the remainder vesting in equal monthly installments over the following 24 months, or in full in the event of Mr. Argrett’s death, disability, termination for Good Reason, or termination by the Company without Cause. “Cause” includes Mr. Argrett’s failure to substantially perform duties or material breach of the Employment Agreement or Company policy by Mr. Argrett (each after a permitted cure period); willful violation of law or regulation; conviction of a felony and certain other events of a comparable nature. “Good Reason” includes the demotion of Mr. Argrett or reduction of his authority or responsibilities; reduction of his salary (other than a reduction described above); failure to reelect him to the Board or the board of directors of the Bank; relocation of his current primary work location by more than 20 miles; or the Company’s material breach of the Employment Agreement (after a permitted cure period). Under the Employment Agreement, Mr. Argrett is entitled to: (i) vacation of 30 days annually, with right to carry over up to 15 days of vacation; (ii) automobile allowance of $1,500 per month; (iii) medical, dental, life and long-term disability insurance, and other benefit programs provided to other senior executives of the Company; (iv) 401(k) plan participation with current Company matching contribution policy; and (v) social club dues in accordance with Company policy, including dues currently paid by the Company of $1,500 per month. Mr. Argrett would be entitled to receive the following severance payments upon termination of his employment by the Company without Cause, by Mr. Argrett for Good Reason, or due to Disability. “Disability” under the agreement means that either (A) Mr. Argrett is deemed disabled for purposes of any group or individual long-term disability policy maintained by the Company that covers Mr. Argrett, or (B) in the good faith judgment of the Board, Mr. Argrett is substantially unable to perform his duties under the Employment Agreement for more than one hundred twenty (120) days, whether or not consecutive, in any twelve (12) -month period, by reason of a physical or mental illness or injury. Such payments would include the amount of any earned but unpaid bonus for services rendered by Mr. Argrett during the previous calendar year, plus 36 months of the base salary and other benefits summarized above (to the extent permitted under the applicable benefit plans) payable over that period in accordance with the Company’s normal payroll practices. If Mr. Argrett’s employment is terminated by the Company upon his death or due to Disability, Mr. Argrett will also receive any earned but unpaid bonus for services rendered during the calendar year of termination, provided that he was employed by the Company for at least six months during the calendar year of termination. If he is employed by the Company for less than the full calendar year in which the termination occurs, the bonus will be prorated based on the ratio of the number of days he is employed during the calendar year to 365 days. Payment of the severance payment is conditioned on the execution of a release of claims against the Company. If Mr. Argrett’s employment is terminated by the Company without Cause or by Mr. Argrett for Good Reason within two years after a Change in Control (as defined in the Employment Agreement), he will be entitled to receive the discounted present value of the severance in a lump sum payable within 10 days after a release of claims against the Company becomes effective. The Employment Agreement also contains customary prohibitions against solicitation of customers and employees and prohibitions against disclosure of confidential information of the Company. 45 Table of Contents The Employment Agreement replaced in its entirety the prior employment agreement, dated December 29, 2017, by and among the Bank, CFBanc Corporation, and Mr. Argrett that was assumed by the Company in connection with the Merger. Brenda Battey and Ruth McCloud Each of Brenda Battey and Ruth McCloud serve in their respective positions pursuant to employment agreements (the “Executive Employment Agreements”) entered into with the Company and the Bank effective in May 2017 and subsequently amended in certain respects. The Executive Employment Agreements provided for an initial term of employment of three years, subject to annual one-year extensions by mutual agreement of the parties. The Executive Employment Agreements provide for the payment of an annual base salary, which is currently $278,250 for Ms. Battey, and $270,000 for Ms. McCloud, which are subject to annual review and possible increase by the Board. The Executive Employment Agreements also provide for participation in the Bank’s Employee Stock Ownership Plan, eligibility to receive equity-based awards pursuant to the Company’s 2018 Long-Term Incentive Plan of such types and in such amounts as are determined by the Board, and eligibility to participate in all employee benefit plans applicable to senior executive officers, including the Bank’s Incentive Plan, the Company’s 401(k) plan (with continuation of the Company’s employee contribution matching policy as of the effective date of the employment agreements), and medical, dental, life and long-term disability programs. Each Executive Employment Agreement may be terminated by the Company with or without Cause (including failure by the Company to request an annual extension of an agreement’s term) and following the Merger may be terminated by the executive for any reason and will also terminate in the event of the death or Disability (as defined in the Executive Employment Agreement) of the executive. “Cause” is defined in each Executive Employment Agreement to include the executive’s failure substantially to perform her duties, or material breach by her of her employment agreement or any material written policy of the Company, in each case if not cured within 30 days after notice from the Board requiring such cure; willful violation of any law, rule or regulation (excluding traffic violations and similar offenses); entry of a final regulatory cease and desist order against her; and other offenses involving fraud, moral turpitude, or dishonesty involving personal profit. In the event of any termination of employment by the Company of the executive’s employment (excluding a termination of employment for Cause), or any termination by the executive, the executive would be entitled to receive all amounts accrued for payment to her to the date of termination and not previously paid, including base salary, unreimbursed business expenses, vested amounts under the Company’s 401(k) Plan and other employee benefit plans (collectively, the “Accrued Obligations”). The executive would also be entitled to continue to receive an amount equal to her monthly base salary for a specified period (the “Severance Period”) and would continue during the Severance Period to be entitled to receive her automobile allowance and payment by the Company of her life, long-term disability, medical and dental insurance premiums provided for in her employment agreement (such payments during the Severance Period being collectively referred to as the “Severance Payments”). The Severance Periods specified in the Executive Employment Agreements are 24 months for Ms. Battey, and 18 months for Ms. McCloud. In the event of termination of employment for Cause or due to death, the executive’s estate would only be entitled to receive payment of the Accrued Obligations. Each Executive Employment Agreement provides that if the executive’s employment is terminated by the Company without Cause, or by the executive for any reason, within two years after a Change in Control of the Company has occurred, she will be entitled to receive a single lump sum payment equal to the present value of the Severance Payments described above, subject to execution of a general release. The present value of the Severance Payments would be calculated using the Applicable Federal Rate published by the Internal Revenue Service from time to time. “Change in Control” is defined in each Executive Employment Agreement to include: events that would be required to be reported as such pursuant to the Exchange Act or federal banking laws and regulations; any person or entity acquiring beneficial ownership of 50% or more of the Company’s outstanding securities; and changes in the composition of the Board that result, with certain exceptions, in directors who were members of the board as of the effective date of the employment agreements ceasing to constitute a majority of the Board. Each Executive Employment Agreement contains post-employment non-solicitation provisions pursuant to which, for a period of twelve months following termination the executive is prohibited from (i) attempting to influence any customer of the Company or the Bank to discontinue use of the Company’s or the Bank’s services, or (ii) attempting to disrupt the relationship between the Company or the Bank and any of their respective employees, customers or other persons having specified relationships with the Company or the Bank. 46 Table of Contents Incentive Compensation The Bank’s Incentive Plan is designed to reward management for productivity, high performance, and implementing the business plan and vision of the Bank. The Compensation and Benefits Committee establishes performance objectives in advance of each year. These performance objectives are derived from the Company’s Strategic Plan, which is reviewed and approved by the Board annually, and typically covers the ensuing three years. The compensation payable under the Incentive Plan is tied directly to the attainment of the pre-established performance objectives. The Incentive Plan provides for a minimum, target, and maximum incentive opportunity equal to cash awards of 24%, 30%, and 37.5%, respectively, of base salary for the CEO, and cash awards of 20%, 25%, and 31%, respectively, of base salary for the other senior executive officers, and lower percentages of base salary for other managers. In order for the Incentive Plan participants to receive any form of payout, a minimum financial threshold of 80% of the Board approved consolidated net earnings for the Incentive Plan year must be achieved. For each year, the Board establishes specific objectives in the following areas: • Net Earnings • Capital • Compliance • Net Loan Growth • Asset Quality • Core Deposit Growth For 2023 and 2022, the specific goals related to Net Earnings, Mission Execution, Asset Quality, Net Portfolio Growth, Operational Efficiency, Net Interest Margin Improvement, Capital Management, and Compliance Risk Management. At the end of the Incentive Plan year, each goal is assessed, and results calculated. The Compensation Committee, pursuant to the terms of the Incentive Plan, determined that the pre-established objectives for 2023 and 2022 were achieved at least in part, and those achievements were used by the Committee to determine the payouts for the annual incentive awards for the respective year and the restricted stock awards that were granted in 2023 and 2022. Grants of Plan-Based Awards in 2023 and 2022 During 2023, a restricted stock award totaling 32,126 Class A shares was granted to Mr. Argrett under the Amended and Restated 2018 Long Term Incentive Plan. During 2022, a restricted stock award totaling 17,156 Class A shares was granted to Mr. Argrett under the 2018 Long Term Incentive Plan. During 2023, restricted stock awards totaling 8,795 and 8,614 shares were granted to each of Ms. Battey and Ms. McCloud, respectively, under the Amended and Restated 2018 Long Term Incentive Plan. During 2022, restricted stock awards totaling 5,057 and 4,305 shares were granted to each of Ms. Battey and Ms. McCloud, respectively, under the 2018 Long Term Incentive Plan. There were no grants of restricted stock units or stock options to the NEOs for the years ended December 31, 2023 or 2022. Outstanding Equity Awards at Fiscal Year-End The following table sets forth information concerning outstanding equity awards held by each NEO as of December 31, 2023. ​ ​ Option Awards ​ ​ Restricted Stock Awards Name ​ Number of Securities Underlying Unexercised Options (#) (Exercisable) ​ ​ Number of Securities Underlying Unexercised Options (#) (Unexercisable) (1) ​ ​ Option Exercise Price ($) (2) ​ ​ Option Expiration Date (3) ​ ​ Number of Shares That Have Not Vested (#) ​ ​ Market Value of Shares That Have Not Vested ($) Brian E. Argrett ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 45,851 ​ ​ $ 311,328 Brenda J. Battey ​ 18,750 ​ ​ — ​ ​ 12.96 ​ ​ 02/24/2026 ​ ​ 12,841 ​ ​ $ 87,190 Ruth McCloud ​ 12,500 ​ ​ — ​ ​ 12.96 ​ ​ 02/24/2026 ​ ​ 12,058 ​ ​ $ 81,874 (1) Options became fully vested on February 24, 2021. (2) Based upon the fair market value of a share of Company common stock on the date of grant. (3) Terms of outstanding stock options are for a period of ten years from the date the option is granted. (4) 7,149 of these shares vest ratably over the following 15 months after December 31, 2023, and 32,126 of these shares vest 33.3% on the one year anniversary of the grant date of June 21, 2023, and the remaining 66.6% of these shares vest ratably over the succeeding 24 months after the anniversary date. (5) 4,046 of the shares for Ms. Battey and 3,444 of the shares for Ms. McCloud vest on each of March 16, 2024, 2025, 2026, and 2027 and 8,795 of the shares for Ms. Battey and 8,614 of the shares for Ms. McCloud vest in five equal annual installments on each anniversary of June 21, 2023. 47 Table of Contents Anti-Hedging Policy Our employees, officers, and directors are prohibited from engaging in any kind of hedging transaction that could reduce or limit such person’s holdings, ownership, or interest in or to any securities of the Company. Prohibited transactions include the purchase of financial instruments such as prepaid variable forward contracts, instruments for short sale or purchase or sale of call or put options, equity swaps, collars, or units of exchangeable funds, that are designed to, or that may reasonably be expected to, have the effect of hedging or offsetting a decrease in the market value of any securities of the Company. Clawback Policy In October of 2023, we adopted a clawback policy intended to comply with the requirements of Nasdaq Listing Standard 5608 implementing Rule 10D-1 under the Exchange Act. In the event the Company is required to prepare an accounting restatement of the Company’s financial statements due to material non-compliance with any financial reporting requirement under the federal securities laws, the Company will seek to recover, on a reasonably prompt basis, the excess incentive-based compensation received by any covered executive, including our named executive officers, during the prior three fiscal years that exceeds the amount that the executive otherwise would have received had the incentive-based compensation been determined based on the restated financial statements. DIRECTOR COMPENSATION Effective January 1, 2022, the non-employee directors of the Company are entitled to a quarterly fee of $12,500 (“Board Service Retainer”). In addition, outside directors who serve as Chair of one or more committees receive an additional quarterly fee of $1,500 (“Committee Chair Service Retainer”). In lieu of the Board Service Retainer payments, any outside director who serves as Lead Independent Director receives a quarterly fee of $14,000, and any outside director who serves as Chair of the Board receives a quarterly fee of $15,000. In addition, each calendar year the Company issues $12,000 in unrestricted stock to each outside director for service during such year. Members of the Board do not receive separate compensation for their service on the board of directors of the Bank. The following table summarizes the compensation paid to non-employee directors for the year ended December 31, 2023. . Name ​ Fees Earned or Paid in Cash (1) Stock Awards (2) Total Wayne-Kent A. Bradshaw ​ $ 58,500 $ 12,000 $ 70,500 Robert C. Davidson ​ $ 56,000 $ 12,000 $ 68,000 Mary Ann Donovan ​ $ 50,000 $ 12,000 $ 62,000 John Driver ​ $ 50,000 $ 12,000 $ 62,000 Marie C. Johns ​ $ 62,000 $ 12,000 $ 74,000 William A. Longbrake ​ $ 56,000 $ 12,000 $ 68,000 David J. McGrady ​ $ 56,000 $ 12,000 $ 68,000 Dutch C. Ross III ​ $ 56,000 $ 12,000 $ 68,000 (1) Includes payments of annual retainer fees, and retainer fees paid to chairs of Board committees. (2) The amounts shown reflect the aggregate fair value of stock awards on the grant date, as determined in accordance with FASB ASC Topic 718. For each director, the number of shares of Common Stock was determined by dividing the grant date value of the award, $12,000, by $10.40, the closing price of the Company’s Common Stock on February 21, 2023, the date of grant (adjusted for the reverse stock split on October 31, 2023.) As of December 31, 2023, none of the directors held any outstanding equity awards. 48 Table of Contents ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS (NOT FULLY UPDATED) The following table sets forth information as of April 30, 2024 concerning the shares of the Company’s common stock owned by each person known to the Company to be a beneficial owner of more than 5% of the Company’s Voting Common Stock, each director or director nominee, each Named Executive Officer, and all current directors and executive officers as a group. Except as otherwise indicated, and subject to any interests of the reporting person’s spouse, we believe that the beneficial owners of common stock listed below, based on information furnished by such owners, have sole voting and investment power with respect to such shares. As of April 30, 2024, we had 6,033,212 shares of Voting Common Stock outstanding. Beneficial Owner ​ Number of Shares of Voting Common Stock Beneficially Owned Percent of Voting Common Stock Number of Shares of Non-Voting Common Stock, Class B Beneficially Owned (1) Number of Shares of Non-Voting Common Stock, Class C Beneficially Owned (2) Percent of Total Common Stock Outstanding (3) 5% Beneficial Owners: ​ City First Enterprises (4) ​ 827,778 13.72 % — — 9.07 % City First Bank, National Association Employee Stock Ownership Trust (5) ​ 607,608 10.07 % — — 6.65 % Cedars-Sinai Medical Center (6) ​ 351,123 5.82 % — — 3.85 % The Vanguard Group 326,102 5.41 % 3.57 % Directors and Executive Officers (7) : ​ Brian E. Argrett (8) ​ 80,464 1.33 % — — * Wayne-Kent A. Bradshaw ​ 35,746 * — — * Robert C. Davidson (9) ​ 13,069 * — — * Mary Ann Donovan ​ 2,165 * — — * John M. Driver ​ 1,153 * — — * Marie C. Johns ​ 2,165 * — — * William A. Longbrake ​ 9,665 * — — * David J. McGrady ​ 2,165 * — — * Dutch C. Ross III ​ 6,004 * — — * Brenda J. Battey (10) ​ 49,254 * — — * Ruth McCloud (11) ​ 40,782 * — — * John F. Tellenbach ​ 5,298 * — — * LaShanya D. Washington (12) ​ 12,177 * — — * Sonja S. Wells (13) ​ 23,940 * — — * Current directors and executive officers as a group (15 persons) ​ 284,047 4.70 % — — 3.11 % * Less than 1%. (1) The Class B non-voting common stock may not be converted to Voting Common Stock. (2) The Class C non-voting common stock may be converted to Voting Common Stock only upon the occurrence of certain prescribed forms of sales to third parties that are not affiliated with the holders thereof. (3) The total number of outstanding common shares as of April 30, 2024 was 9,131,348, which includes all outstanding shares of Class A voting common stock, Class B non-voting common stock, and Class C non-voting common stock. (4) The address for City First Enterprises is 1 Thomas Circle, NW, Suite 700, Washington, D.C. 20005. (5) The address for the City First Bank, National Association Employee Stock Ownership Trust (“ESOP”) is 1432 U Street, N.W. Washington, DC 20009-3916. (6) The address for Cedars-Sinai Medical Center is 8700 Beverly Boulevard, TRES 6500, Los Angeles, CA 90048. (7) The address for each of the directors and named executive officers is 4601 Wilshire Boulevard, Suite 150, Los Angeles, CA 90010. (8) Includes 1,798 allocated shares under the ESOP. (9) Includes [[8,750]] shares that are held by the Robert and Alice Davidson Trust, dated August 11, 1982. Robert Davidson and Alice Davidson share investment and voting power with respect to the shares held by the Robert and Alice Davidson Trust in their capacities as trustees of the trust. (10) Includes 5,488 allocated shares under the ESOP and 18,750 shares subject to options granted under the LTIP, which options are all currently exercisable. (11) Includes 4,969 allocated shares under the ESOP and 12,500 shares subject to options granted under the LTIP, which options are all currently exercisable. (12) Includes 1,286 allocated shares under the ESOP. (13) Includes 1,678 allocated shares under the ESOP. 49 Table of Contents ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE Certain Relationships and Related Transactions Transactions by us with related persons are subject to formal written policies, as well as regulatory requirements and restrictions. These requirements and restrictions include Sections 23A and 23B of the Federal Reserve Act and the Federal Reserve’s Regulation W (which govern certain transactions by us with our affiliates) and the Federal Reserve’s Regulation O (which governs certain loans by the Bank to its executive officers, directors, and principal stockholders). We have adopted policies to comply with these regulatory requirements and restrictions. The Company’s current loan policy provides that all loans made by the Company or its subsidiary to its directors and executive officers or their associates must be made on substantially the same terms, including interest rates, collateral and repayment terms, as those prevailing at the time for comparable transactions with other persons of similar creditworthiness who are not related to the Company and must not involve more than the normal risk of collectability or present other unfavorable features. As of December 31, 2023, the Company did not have any loans to related parties or affiliates. Loans to insiders and their related interests require approval by the Board, or a Board designated committee. We also apply the same standards to any other transactions with an insider. Personal loans made to any executive officer or director must comply with Regulation O. Additionally, loans and other related party transactions are subject to Audit Committee review and approval requirements. From time to time, City First Enterprises and the Bank will each make an investment in the same community development project. These loans by the Bank are made in the ordinary course of business on substantially the same terms, including interest rate and collateral, as those prevailing at the time for comparable loans with persons not related to the Bank, and do not involve more than the normal risk of collectability or present other unfavorable features. All such loans are reviewed, approved, or ratified by the Director’s Loan Committee of the Bank and are made in accordance with the Bank’s lending and credit policies. Parents of Smaller Reporting Company City First Enterprises is the owner of 827,778 shares of our Voting Common Stock, which represents approximately 13.72% of our Voting Common Stock outstanding. In addition, four members of our board – Mr. Argrett, our President and CEO, Dr. Longbrake, Mr. McGrady, and Ms. Donovan – are also members of the Board of Directors of City First Enterprises. Director Independence We have adopted standards for director independence pursuant to the Nasdaq listing standards. The Board has considered relationships, transactions, and/or arrangements with each of its directors, and has determined that all of the Company’s non-employee directors (Mr. Bradshaw, Mr. Davidson, Ms. Donovan, Mr. Driver, Ms. Johns, Dr. Longbrake, Mr. McGrady, and Mr. Ross) are “independent” under applicable Nasdaq listing standards and Securities and Exchange Commission (“SEC”) rules. 50 Table of Contents ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES The Audit Committee reviews and pre-approves all audit and non-audit services performed by its independent registered public accounting firm, as well as the fees charged for such services, in accordance with the pre-approval policies and procedures that have been established by the Audit Committee. All fees incurred in the years ended December 31, 2023 and 2022 for services rendered by Moss Adams were approved by the Audit Committee. No non-audit services were provided by Moss Adams for the years indicated. The following table sets forth the aggregate fees billed to us by Moss Adams for the years indicated, inclusive of out-of-pocket expenses. ​ 2023 2022 ​ (In thousands) Audit fees (1) $ 474 $ 409 Audit-related fees — — Tax fees — — All other fees — — Total fees $ 474 $ 409 (1) Aggregate fees billed for professional services rendered for the audit of the Company’s consolidated annual financial statements included in the Company’s Annual Report on Form 10-K and for the reviews of the Company’s consolidated financial statements included in the Company’s Quarterly Reports on Form 10-Q. The services provided by the independent accounts are for SEC-related filings only. 51 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 Amended and Restated Certificate of Incorporation of Registrant (Exhibit 3.1 to Form 8-K filed by Registrant on April 5, 2021) 3.2 Certificate of Amendment to Certificate of Incorporation of Registrant (Exhibit 3.1 to Form 8-K filed by the Registrant on November 1, 2023) 3.3 Bylaws of Registrant (Exhibit 3.2 to Form 8‑K filed by Registrant on August 24, 2020) 3.4 Certificate of Designations for the Series B Junior Participating Preferred Stock (Exhibit 3.1 to Form 8-K filed by Registrant on September 11, 2019) 3.5 Certificate of Designations of Senior Non-Cumulative Perpetual Preferred Stock, Series C (Exhibit 3.1 to Form 8-K filed by Registrant on June 8, 2022) 4.1 Description of Registrant’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934 (Exhibit 4.1 to Form 10-K filed by Registrant on April 15, 2022) 4.2 Rights Agreement, dated as of September 10, 2019, entered 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 11, 2019) 4.3 Amendment to Rights Agreement, dated as of August 25, 2020, entered between Broadway Financial Corporation and Computershare Trust Company, N.A. (Exhibit 4.1 to Form 8-K file by Registrant on August 26, 2020) 4.4 Registration Rights Agreement (Exhibit 10.2 to Form 8-K filed by Registrant on June 8, 2022) 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 Award 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) 10.4** Broadway Financial Corporation Amended and Restated 2018 Long‑Term Incentive Plan 10.5** Form of Award Agreement for restricted stock granted pursuant to Broadway Financial Corporation Amended and Restated 2018 Long‑Term Incentive Plan 10.6** 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, 2019) 10.7** Award Agreement, dated as of February 27, 2019 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, 2019) 10.8** 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, 2019) 10.9** 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) 10.10** Employment Agreement, dated as of May 1, 2017, for Norman Bellefeuille (Exhibit 10.12 to Form 10-K filed by Registrant on March 29, 2019) 10.11** Amendment to Employment Agreement for Norman Bellefeuille, dated as of January 14, 2020 (Exhibit 10.2 to form 8-K filed by Registrant on January 14, 2021) 10.12** Employment Agreement, dated as of May 1, 2017, for Ruth McCloud (Exhibit 10.13 to Form 10-K filed by Registrant on March 29, 2019) 10.13** Amendment to Employment Agreement for Ruth McCloud, dated as of January 14, 2020 (Exhibit 10.3 to form 8-K filed by Registrant on January 14, 2021) 10.14** Broadway Federal Bank Incentive Compensation Plan (Exhibit 10.14 to Form 10-K filed by the Registrant on March 31, 2021) 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) 52 Table of Contents 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 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) 10.18 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) 10.19 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) 10.20 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) 10.21 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) 10.22 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) 10.23 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) 10.24 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 31, 2021) 10.25 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) 10.26 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 10.29 to Form 10-K filed by Registrant on March 31, 2021) 10.27 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) 10.28 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) 10.29 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) 10.30 Letter Agreement and Securities Purchase Agreement, dated June 7, 2022 (Exhibit 10.1 to Form 8-K filed by Registrant on June 8, 2022) 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 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 97.1 Compensation Clawback Policy 101.INS Inline XBRL Instance Document 101.SCH Inline XBRL Taxonomy Extension Schema Document 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF Inline XBRL Taxonomy Extension Definitions Linkbase Document 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document 104 The cover page from this Annual Report on Form 10-K, formatted in Inline XBRL (included as Exhibit 101). ** Management contract or compensatory plan or arrangement. ITEM 16. FORM 10-K SUMMARY None. 53 Table of Contents 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: May 20, 2024 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: May 20, 2024 Brian Argrett Chief Executive Officer and President (Principal Executive Officer) /s/ BRENDA J. BATTEY Date: May 20, 2024 Brenda J. Battey Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) /s/ WAYNE-KENT A. BRADSHAW Date: May 20, 2024 Wayne-Kent A. Bradshaw Chairman of the Board /s/ MARIE C. JOHNS Date: May 20, 2024 Marie C. Johns Lead Independent Director /s/ WILLIAM A. LONGBRAKE Date: May 20, 2024 William A. Longbrake Audit Committee Chairman /s/ ROBERT C. DAVIDSON, JR. Date: May 20, 2024 Robert C. Davidson, Jr. Director /s/ MARY ANN DONOVAN Date: May 20, 2024 Mary Ann Donovan Director /s/ DAVID J. MCGRADY Date: May 20, 2024 David J. McGrady Director /s/ DUTCH C. ROSS III Date: May 20, 2024 Dutch C. Ross III Director /s/ JOHN M. DRIVER Date: May 20, 2024 John M. Driver Director 54 Table of Contents BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY Index to Consolidated Financial Statements Years ended December 31, 2023 and 2022 Report of Independent Registered Public Accounting Firm (PCAOB ID # 659 ) F‑1 Consolidated Statements of Financial Condition F‑3 Consolidated Statements of Operations and Comprehensive Income (Loss) F‑4 Consolidated Statements of Changes in Stockholders’ Equity F‑5 Consolidated Statements of Cash Flows F‑6 Notes to Consolidated Financial Statements F‑7 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 subsidiaries (the “Company”) as of December 31, 2023 and 2022 , the related consolidated statements of operations and comprehensive income (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, 2023 and 2022, 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. Change in Accounting Principle As discussed in Note 1 to the consolidated financial statements, the Company changed its method of accounting for the allowance for credit losses in the year ended December 31, 2023 due to the adoption of Accounting Standards Update 2016-13 Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Statements. The Company adopted the new credit loss standard using the modified retrospective approach such that prior period amounts are not adjusted and continue to be reported in accordance with previously applicable generally accepted accounting principles. 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 in accordance with the standards of the PCAOB. 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 in accordance with the standards of the PCAOB. 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 Matter The critical audit matter 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) relate 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 matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. As described in Note 1 and 4 to the consolidated financial statements, the Company’s allowance for credit losses for loans balance was $7.3 million at December 31, 2023. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of loans held for investment to present the net carrying value at the amount expected to be collected. The allowance for credit losses for loans is maintained at a level sufficient to provide for expected credit losses over the lives of the loans based on evaluating historical credit loss experience and making qualitative reserve factor adjustments to historical loss information for each loan category for differences in the specific risk characteristics in the current loan portfolio based on reasonable and supportable forecasts. These qualitative reserve factors include (i) changes in lending policies and procedures, including changes in underwriting standards and collections, charge offs, and recovery practices; (ii) changes in international, national, regional, and local conditions; (iii) changes in the nature and volume of the portfolio and terms of loans; (iv) changes in the experience, depth, and ability of lending management; (v) changes in the volume and severity of past due loans and other similar conditions; (vi) changes in the quality of the organization’s loan review system; (vii) changes in the value of underlying collateral for collateral dependent loans; (viii) the existence and effect of any concentrations of credit and changes in the levels of such concentrations; and (ix) the effect of other external factors (i.e., competition, legal and regulatory requirements) on the level of estimated credit losses. We identified the estimation of the qualitative reserve factors used in the allowance for credit losses for loans receivable held for investment, as a critical audit matter. The qualitative reserve factors are used to estimate credit losses related to matters that are not captured in the historical loss component of the allowance for credit losses for loans receivable held for investment and require significant management judgement based on management’s evaluation of available internal and external data. Auditing management’s judgements regarding the qualitative reserve factors applied to the allowance for credit losses for loans receivable held for investment involved challenging and subjective auditor judgement when performing audit procedures and evaluating the results of those procedures. The primary procedures we performed to address this critical audit matter included: • Obtaining management’s analysis and supporting documentation related to the qualitative reserve factors, and testing whether the qualitative reserve factors used in the calculation of the allowance for credit losses for loans are supported by the analysis provided by management. • Evaluating the reasonableness of the assumptions used for adjustments to the qualitative reserve factors. • Evaluating the methodology and assumptions used in the calculation of the allowance for credit losses for loans, and testing the calculation itself, including completeness and accuracy of the data used in the calculation, application of the qualitative reserve factors determined by management and used in the calculation, and recalculation of the allowance for credit losses balance. /s/ Moss Adams LLP Sacramento, California May 20, 2024 We have served as the Company’s auditor since 2014. F-2 Table of Contents BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY Consolidated Statements of Financial Condition December 31, 2023 December 31, 2022 (In thousands, except share and per share) Assets: Cash and due from banks $ 5,460 $ 7,459 Interest-bearing deposits in other banks 99,735 8,646 Cash and cash equivalents 105,195 16,105 Securities available-for-sale, at fair value 316,950 328,749 Loans receivable held for investment, net of allowance of $ 7,348 and $ 4,388 880,457 768,046 Accrued interest receivable 4,938 3,973 Federal Home Loan Bank (FHLB) stock 10,156 5,535 Federal Reserve Bank (FRB) stock 3,543 5,264 Office properties and equipment, net 9,840 10,291 Bank owned life insurance 3,275 3,233 Deferred tax assets, net 9,538 11,872 Core deposit intangible, net 2,111 2,501 Goodwill 25,858 25,858 Other assets 3,543 2,866 Total assets $ 1,375,404 $ 1,184,293 Liabilities and stockholders’ equity Liabilities: Deposits $ 682,635 $ 686,916 Securities sold under agreements to repurchase 73,475 63,471 FHLB advances 209,319 128,344 Bank Term Funding Program borrowing 100,000 – Notes payable 14,000 14,000 Accrued expenses and other liabilities 13,878 11,910 Total liabilities 1,093,307 904,641 Stockholders’ equity: Non-Cumulative Redeemable Perpetual Preferred stock, Series C; authorized 150,000 shares at December 31, 2023 and December 31, 2022; issued and outstanding 150,000 shares at December 31, 2023 and December 31, 2022; liquidation value $ 1,000 per share 150,000 150,000 Common stock, Class A, $ 0.01 par value, voting; authorized 75,000,000 shares at December 31, 2023 and December 31, 2022; issued 6,230,705 shares at December 31, 2023 and 6,408,151 (1) shares at December 31, 2022; outstanding 5,914,861 shares at December 31, 2023 and 6,080,745 (1) shares at December 31, 2022 62 64 Common stock, Class B, $ 0.01 par value, non-voting; authorized 15,000,000 shares at December 31, 2023 and December 31, 2022; issued and outstanding 1,425,574 (1) shares at December 31, 2023 and December 31, 2022 14 14 Common stock, Class C, $ 0.01 par value, non-voting; authorized 25,000,000 shares at December 31, 2023 and December 31, 2022; issued and outstanding 1,672,562 (1) at December 31, 2023 and December 31, 2022 17 17 Additional paid-in capital 142,601 144,157 Retained earnings 12,552 9,294 Unearned Employee Stock Ownership Plan (ESOP) shares ( 4,492 ) ( 1,265 ) Accumulated other comprehensive loss, net of tax ( 13,525 ) ( 17,473 ) Treasury stock-at cost, 327,228 (1) shares at December 31, 2023 and at December 31, 2022 ( 5,326 ) ( 5,326 ) Total Broadway Financial Corporation and Subsidiary stockholders’ equity 281,903 279,482 Non-controlling interest 194 170 Total liabilities and stockholders’ equity $ 1,375,404 $ 1,184,293 (1) Retroactively adjusted, as applicable, for the 1-for-8 reverse stock split effective November 1, 2023 - see Note 2 See accompanying notes to consolidated financial statements. F-3 Table of Contents BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY Consolidated Statements of Operations and Comprehensive Income (Loss) Years Ended December 31, 2023 2022 (In thousands, except per share) Interest income: Interest and fees on loans receivable $ 37,143 $ 28,732 Interest on available-for-sale securities 8,697 5,596 Other interest income 1,388 1,941 Total interest income 47,228 36,269 Interest expense: Interest on deposits 7,512 2,104 Interest on borrowings 10,254 1,305 Total interest expense 17,766 3,409 Net interest income 29,462 32,860 Provision for credit losses 933 997 Net interest income after provision for credit losses 28,529 31,863 Non-interest income: Service charges 179 145 Grants 4,156 - Other 1,022 1,050 Total non-interest income 5,357 1,195 Non-interest expense: Compensation and benefits 15,653 14,303 Occupancy expense 1,870 1,615 Information services 2,777 2,933 Professional services 3,126 2,758 Supervisory costs 613 413 Office services and supplies 101 174 Corporate insurance 245 231 Amortization of core deposit intangible 390 435 Advertising and promotional expense 168 137 Travel expense 221 188 Other 2,199 1,752 Total non-interest expense 27,363 24,939 Income before income taxes 6,523 8,119 Income tax expense 1,985 2,413 Net income $ 4,538 $ 5,706 Less: Net income attributable to non-controlling interest 24 70 Net income attributable to Broadway Financial Corporation $ 4,514 $ 5,636 Other comprehensive income (loss), net of tax: Unrealized gains (losses) on securities available-for-sale arising during the period $ 5,552 $ ( 24,047 ) Income tax expense (benefit) 1,604 ( 7,125 ) Other comprehensive income (loss), net of tax 3,948 ( 16,922 ) Comprehensive income (loss) $ 8,462 $ ( 11,286 ) Earnings per common share-basic $ 0.52 $ 0.62 Earnings per common share-diluted $ 0.51 $ 0.62 See accompanying notes to consolidated financial statements F-4 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 Accumulated Other Comprehensive Loss Retained Earnings Unearned ESOP Shares Treasury Stock Non- Controlling Interest Total Stockholders’ Equity Balance at December 31, 2021 $ 3,000 $ 58 $ 35 $ 140,940 $ ( 551 ) $ 3,673 $ ( 829 ) $ ( 5,326 ) $ 100 $ 141,100 Net income – – – – – 5,636 – – 70 5,706 Preferred shares issued 150,000 – – – – – – – – 150,000 Increase in unreleased shares – – – – – – ( 500 ) – – ( 500 ) Release of unearned ESOP shares – – – 2 – – 64 – – 66 Stock-based compensation expense – – – 133 – – – – – 133 Director stock compensation expense – – – 84 – – – – – 84 Conversion of preferred shares to common shares ( 3,000 ) 2 – 2,998 – – – – – – Conversion of non-voting shares into voting shares – 4 ( 4 ) – – – – – – – Dividends paid on preferred stock – – – – – ( 15 ) – – – ( 15 ) Other comprehensive loss, net of tax – – – – ( 16,922 ) – – – – ( 16,922 ) Balance at December 31, 2022 150,000 64 31 144,157 ( 17,473 ) 9,294 ( 1,265 ) ( 5,326 ) 170 279,652 Cumulative effect of change related to adoption of ASU 2016-13 – – – – – ( 1,256 ) – – – ( 1,256 ) Adjusted balance, January 1, 2023 150,000 64 31 144,157 ( 17,473 ) 8,038 ( 1,265 ) ( 5,326 ) 170 278,396 Net income – – – – – 4,514 – – 24 4,538 Release of unearned ESOP shares – – – ( 80 ) – – 173 – – 93 Increase in unreleased shares – – – – – – ( 3,400 ) – – ( 3,400 ) Stock-based compensation expense – ( 2 ) – 210 – – – – – 208 Director stock compensation expense – – – 95 – – – – – 95 Share repurchase - FDIC – – – ( 1,781 ) – – – – – ( 1,781 ) Other comprehensive income, net of tax – – – – 3,948 – – – – 3,948 Balance at December 31, 2023 $ 150,000 $ 62 $ 31 $ 142,601 $ ( 13,525 ) $ 12,552 $ ( 4,492 ) $ ( 5,326 ) $ 194 $ 282,097 See accompanying notes to consolidated financial statements. F-5 Table of Contents BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY Consolidated Statements of Cash Flows Years Ended December 31 2023 2022 (In thousands) Cash flows from operating activities: Net income $ 4,538 $ 5,706 Adjustments to reconcile net income to net cash provided by operating activities: Provision for credit losses 933 997 Depreciation and amortization 385 376 Net change of deferred loan origination costs 413 229 Net amortization of premiums & discounts on available-for-sale securities ( 1,044 ) ( 225 ) Accretion of purchase accounting marks on loans ( 235 ) ( 831 ) Amortization of core deposit intangible 390 435 Director compensation expense-common stock 95 84 Accretion of premium on FHLB advances ( 23 ) ( 38 ) Stock-based compensation expense 208 133 ESOP compensation expense 93 66 Earnings on bank owned life insurance ( 42 ) ( 43 ) Net change in assets and liabilities: Deferred tax assets 1,238 1,492 Accrued interest receivable ( 965 ) ( 601 ) Other assets ( 677 ) ( 995 ) Accrued expenses and other liabilities 2,287 ( 461 ) Net cash provided by operating activities 7,594 6,324 Cash flows from investing activities: Net change in loans receivable held for investment ( 115,331 ) ( 119,928 ) Principal payments and maturities on available-for-sale securities 18,395 19,325 Purchase of available-for-sale securities – ( 215,500 ) Purchase of FRB stock – ( 4,571 ) Purchase of FHLB stock ( 13,287 ) ( 5,414 ) Proceeds from redemption of FHLB stock 8,667 2,452 Proceeds from redemption of FRB stock 1,720 – Purchase of office properties and equipment ( 208 ) ( 323 ) Net cash used in investing activities ( 100,044 ) ( 323,959 ) Cash flows from financing activities: Net change in deposits ( 4,281 ) ( 101,136 ) Net change in securities sold under agreements to repurchase 10,004 11,511 Increase in unreleased ESOP shares ( 3,400 ) ( 500 ) Proceeds from issuance of preferred stock – 150,000 Proceeds from Bank Term Funding Program 100,000 – Dividends paid on preferred stock – ( 15 ) Share repurchase - FDIC ( 1,781 ) – Proceeds from FHLB advances 456,138 95,500 Repayments of FHLB advances ( 375,140 ) ( 53,140 ) Net cash provided by financing activities 181,540 102,220 Net change in cash and cash equivalents 89,090 ( 215,415 ) Cash and cash equivalents at beginning of the period 16,105 231,520 Cash and cash equivalents at end of the period $ 105,195 $ 16,105 Supplemental disclosures of cash flow information: Cash paid for interest $ 16,921 $ 3,053 Cash paid for income taxes 2,036 332 Supplemental non-cash disclosures: Common stock issued in exchange for preferred stock $ – $ 3,000 Assets acquired (liabilities assumed) in acquisition: Goodwill – ( 138 ) Deferred taxes – 138 See accompanying notes to consolidated financial statements. F-6 Table of Contents BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY Notes to Consolidated Financial Statements December 31, 2023 and 2022 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 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. (“Broadway Federal”). The conversion was completed, and Broadway Federal became a wholly‑owned subsidiary of the Company, in January 1996. On April 1, 2021, the Company completed its merger with CFBanc Corporation, with the Company continuing as the surviving entity. Immediately following the CFBanc Merger, Broadway Federal merged with and into City First Bank of D.C, National Association with City First Bank of D.C., National Association (the “Bank”) continuing as the surviving entity (combined with Broadway Federal). 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, 2023, 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. Out-of-Period Adjustments Following the quarter ended September 30, 2023, the Company performed a review of internal controls over financial reporting, encompassing an examination of financial reporting processes. During this assessment and while preparing financial statements for the three and nine months ended September 30, 2023, certain previously unrecorded adjustments totaling $ 8 thousand, net of tax expense, increasing net income were identified pertaining to prior periods. In accordance with SEC Staff Accounting Bulletin Nos. 99 and 108, these adjustments were evaluated both individually and collectively. Following this assessment, management determined these adjustments were immaterial to both historical and current reporting periods. Consequently, the Company determined that no amendment to the previously filed reports was warranted. However, recognizing the importance of transparency and accuracy, the Company addressed these prior period adjustments and incorporated them into its financial statements for the three and nine months ended September 30, 2023. These adjustments are included in the Other Expense line item on the Consolidated Statements of Operations and Comprehensive Income (Loss). Use of Estimates To prepare consolidated financial statements in conformity with U.S. generally accepted accounting principles, 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 credit losses, 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, 2023. 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. Investment Securities Debt 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. Debt 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. F-7 Table of Contents 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. Effective January 1, 2023, the Company accounts for the allowance for credit losses (“ACL”) on securities in accordance with Accounting Standards Codification Topic 326 (“ASC 326”) – Financial Instruments-Credit Losses. The ACL on securities is recorded at the time of purchase or acquisition, representing the Company’s best estimate of current expected credit losses (“CECL”) as of the date of the consolidated statements of financial condition. For available-for-sale investment securities, the Company performs a qualitative evaluation for those securities that are in an unrealized loss position to determine if the decline in fair value is credit related or non-credit related. In determining whether a security’s decline in fair value is credit related, the Company considers a number of factors including, but not limited to: (i) the extent to which the fair value of the investment is less than its amortized cost; (ii) the financial condition and near-term prospects of the issuer; (iii) any downgrades in credit ratings; (iv) the payment structure of the security; (v) the ability of the issuer of the security to make scheduled principal and interest payments; and (vi) general market conditions which reflect prospects for the economy as a whole, including interest rates and sector credit spreads. For investment securities where the Company has reason to believe the credit loss exposure is remote, a zero credit loss assumption is applied. Such investment securities typically consist of those guaranteed by the U.S. government or other government enterprises, where there is an explicit or implicit guarantee by the U.S. government, that are highly rated by rating agencies, and historically have had no credit loss experience. If it is determined that the unrealized loss, or a portion thereof, is credit related, the Company records the amount of credit loss through a charge to the provision for credit losses in current period earnings. However, the amount of credit loss recorded in current period earnings is limited to the amount of the total unrealized loss on the security, which is measured as the amount by which the security’s fair value is below its amortized cost. If the Company intends to sell a security that is in an unrealized loss position, or if it is more likely than not the Company will be required to sell a security in an unrealized loss position, the total amount of the unrealized loss is recognized in current period earnings through the provision for credit losses. Unrealized losses deemed non-credit related are recorded, net of tax, in accumulated other comprehensive income (loss). The Company’s assessment of available-for-sale investment securities as of December 31, 2023, indicated that an ACL was not required. The Company analyzed available-for-sale investment securities that were in an unrealized loss position and determined the decline in fair value for those securities was not related to credit, but rather related to changes in interest rates and general market conditions. As such, no ACL was recorded for available-for-sale securities as of December 31, 2023. 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 credit 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. F-8 Table of Contents Purchased Credit Deteriorated Loans Prior to the adoption of ASC 326, loans that were purchased in a business combination that showed evidence of credit deterioration since their origination and for which it was probable, at acquisition, that not all contractually required payments would be collected were classified as purchased-credit impaired (“PCI”). The Company accounted for PCI loans and associated income recognition in accordance with ASC Subtopic 310-30 – Receivables-Loans and Debt Securities Acquired with Deteriorated Credit Quality. Upon acquisition, the Company measured the amount by which the undiscounted expected future cash flows on PCI loans exceeded the estimated fair value of the loan as the “accretable yield,” representing the amount of estimated future interest income on the loan. The amount of accretable yield was re-measured at each financial reporting date, representing the difference between the remaining undiscounted expected cash flows and the current carrying value of the PCI loan. The accretable yield on PCI loans was recognized in interest income using the interest method. Following the adoption of ASC 326 on January 1, 2023, the Company analyzes all acquired loans at the time of acquisition for more-than-insignificant deterioration in credit quality since their origination date. Such loans are classified as purchased credit deteriorated (“PCD”) loans. Acquired loans classified as PCD are recorded at an initial amortized cost, which is comprised of the purchase price of the loans and the initial ACL determined for the loans, which is added to the purchase price, and any resulting discount or premium related to factors other than credit. PCI loans were considered to be PCD loans at the date of adoption of ASC 326. The Company accounts for interest income on PCD loans using the interest method, whereby any purchase discounts or premiums are accreted or amortized into interest income as an adjustment of the loan’s yield. An accretable yield is not determined for PCD loans. Allowance for Credit Losses - Loans Effective January 1, 2023, the Company accounts for credit losses on loans in accordance with ASC 326, which requires the Company to record an estimate of expected lifetime credit losses for loans at the time of origination or acquisition. The ACL is maintained at a level deemed appropriate by management to provide for expected credit losses in the portfolio as of the date of the consolidated statements of financial condition. Estimating expected credit losses requires management to use relevant forward-looking information, including the use of reasonable and supportable forecasts. The measurement of the ACL is performed by collectively evaluating loans with similar risk characteristics. The Company measures the ACL for each of its loan segments using the weighted-average remaining maturity (“WARM”) method. The weighted average remaining life, including the effect of estimated prepayments, is calculated for each loan pool on a quarterly basis. The Company then estimates a loss rate for each pool using both its own historical loss experience and the historical losses of a group of peer institutions during the period from 2004 through the most recent quarter. The Company’s ACL model also includes adjustments for qualitative factors, where appropriate. Since historical information (such as historical net losses) may not always, by itself, provide a sufficient basis for determining future expected credit losses, the Company periodically considers the need for qualitative adjustments to the ACL. Qualitative adjustments may include, but are not limited to factors such as: (i) changes in lending policies and procedures, including changes in underwriting standards and collections, charge offs, and recovery practices; (ii) changes in international, national, regional, and local conditions; (iii) changes in the nature and volume of the portfolio and terms of loans; (iv) changes in the experience, depth, and ability of lending management; (v) changes in the volume and severity of past due loans and other similar conditions; (vi) changes in the quality of the organization’s loan review system; (vii) changes in the value of underlying collateral for collateral dependent loans; (viii) the existence and effect of any concentrations of credit and changes in the levels of such concentrations; and (ix) the effect of other external factors (i.e., competition, legal and regulatory requirements) on the level of estimated credit losses. The Company has a credit portfolio review process designed to detect problem loans. Problem loans are typically those of a substandard or worse internal risk grade, and may consist of loans on nonaccrual status, loans that have recently been modified in response to a borrower’s deteriorating financial condition, loans where the likelihood of foreclosure on underlying collateral has increased, collateral dependent loans, and other loans where concern or doubt over the ultimate collectability of all contractual amounts due has become elevated. Such loans may, in the opinion of management, be deemed to no longer possess risk characteristics similar to other loans in the loan portfolio, because the specific attributes and risks associated with the loan have likely become unique as the credit quality of the loan deteriorates. As such, these loans may require individual evaluation to determine an appropriate ACL for the loan. When a loan is individually evaluated, the Company typically measures the expected credit loss for the loan based on a discounted cash flow approach, unless the loan has been deemed collateral dependent. Collateral dependent loans are loans where the repayment of the loan is expected to come from the operation of and/or eventual liquidation of the underlying collateral. The ACL for collateral dependent loans is determined using estimates of the fair value of the underlying collateral, less estimated selling costs. F-9 Table of Contents The estimation of the appropriate level of the ACL requires significant judgment by management. Although management uses the best information available to make these estimates, future adjustments to the ACL may be necessary due to economic, operating, regulatory, and other conditions that may extend beyond the Company’s control. Changes in management’s estimates of forecasted net losses could materially change the level of the ACL. Additionally, various regulatory agencies, as an integral part of their examination process, periodically review the Company’s ACL and credit review process. Such agencies may require the Company to recognize additions to the ACL based on judgments different from those of management. The Company has segmented the loan portfolio according to loans that share similar attributes and risk characteristics. Each segment possesses varying degrees of risk based on, among other things, the type of loan, the type of collateral, and the sensitivity of the borrower or industry to changes in external factors such as economic conditions. The Company determines the ACL for loans based on this more detailed loan segmentation and classification. These segments, and the risks associated with each segment, are as follows: Real Estate: 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 . Real Estate: 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. Real Estate: 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. Real Estate: 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. Real Estate: 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 and SBA Loans– 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. Modified Loans to Borrowers Experiencing Financial Difficulty In certain instances, the Company makes modifications to loans in order to alleviate temporary difficulties in the borrower’s financial condition and/or constraints on the borrower’s ability to repay the loan, and to minimize potential losses to the Company. Modifications include: changes in the amortization terms of the loan, reductions in interest rates, acceptance of interest only payments, and reductions to the outstanding loan balance (or any combination of such changes). Such loans are typically placed on nonaccrual status when there is doubt concerning the full repayment of principal and interest or the loan has been in default for a period of 90 days or more. Such loans may be returned to accrual status when all contractual amounts past due have been brought current, and the borrower’s performance under the modified terms of the loan agreement and the ultimate collectability of all contractual amounts due under the modified terms is no longer in doubt. The Company typically measures the ACL on these loans on an individual basis as the loans are deemed to no longer have risk characteristics that are similar to other loans in the portfolio. The determination of the ACL for these loans is based on a discounted cash flow approach, unless the loan is deemed collateral dependent, which requires measurement of the ACL based on the estimated expected fair value of the underlying collateral, less selling costs. 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 December 31st 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. F-10 Table of Contents 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. 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 (loss), 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-11 Table of Contents Stock‑Based Compensation Compensation cost is recognized for stock options and restricted stock awards issued to employees and directors, 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 Per Common Share Basic earnings 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. It also includes the dilutive effect of additional potential common shares issuable under stock options using the treasury method. Comprehensive Income (Loss) Comprehensive income (loss) consists of the net income from operations and other comprehensive income (loss). Other comprehensive income (loss) includes unrealized gains and losses on securities available‑for‑sale, net of tax, which are also recognized as separate components of equity. F-12 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. L eases The Company determines if an arrangement is a lease at inception. Operating lease right-of-use (“ROU”) assets and operating lease liabilities are included in the Company’s consolidated financial statements. ROU assets represent the Company’s right-of-use of an underlying asset for the lease term, and lease liabilities represent the Company’s obligation to make lease payments pursuant to the Company’s leases. The ROU assets and liabilities are recognized at commencement of the lease based on the present value of lease payments over the lease term. To determine the present value of lease payments, the Company uses its incremental borrowing rate. The lease term may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense is recognized on a straight-line basis over the lease term. 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 8 “Fair Value”. 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 2023 and 2022, the Company has determined that banking is its one reportable business segment. Accounting Pronouncements Recently Adopted In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13 – Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This ASU replaces the incurred loss impairment model in previous GAAP with a model that reflects current expected credit losses. The CECL model is applicable to the measurement of credit losses on financial assets measured at amortized cost, including loan receivables and held-to-maturity debt securities. CECL also requires credit losses on available-for-sale debt securities be measured through an allowance for credit losses when the fair value is less than the amortized cost basis. The new guidance also applies to off-balance sheet credit exposures. The ASU requires that all expected credit losses for financial assets held at the reporting date be measured based on historical experience, current conditions, and reasonable and supportable forecasts. The ASU also requires enhanced disclosures, including qualitative and quantitative disclosures that provide additional information about significant estimates and judgments used in estimating credit losses. The provisions of this ASU became effective for the Company for all annual and interim periods beginning January 1, 2023. In April 2019, the FASB issued ASU 2019-04 – Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815-Derivatives and Hedging, and Topic 825-Financial Instruments. This ASU was issued as part of an ongoing project on the FASB’s agenda for improving the Codification or correcting for its unintended application. The amendments in this ASU became effective for all interim and annual reporting periods for the Company on January 1, 2023. The Company adopted the provisions within this ASU in conjunction with the implementation of ASC 326, including: (i) the election to not measure credit losses on accrued interest receivable when such balances are written-off in a timely manner when deemed uncollectable and (ii) the election to not include the balance of accrued interest receivable as part of the amortized cost of a loan or security. F-13 Table of Contents In May 2019, the FASB issued ASU 2019-05 - Financial Instruments-Credit Losses (Topic 326): Targeted Transition Relief. This ASU was issued to allow entities that have certain financial instruments within the scope of ASC 326-20 - Financial Instruments-Credit Losses-Measured at Amortized Cost to make an irrevocable election to elect the fair value option for those instruments in accordance with ASC 825 – Financial Instruments upon the adoption of ASC 326, which for the Company was January 1, 2023. The fair value option is not applicable to held-to-maturity debt securities. Entities are required to make this election on an instrument-by-instrument basis. The Company did not elect the fair value option for any of its financial assets upon the adoption of ASC 326. Effective January 1, 2023, the Company adopted the provisions of ASC 326 through the application of the modified retrospective transition approach, and recorded a net decrease of $ 1.3 million to the beginning balance of retained earnings as of January 1, 2023 for the cumulative effect adjustment. The following table illustrates the impact of the adoption of the CECL model under ASC 326 on the Company’s consolidated statements of financial position as of January 1, 2023: Pre-CECL Adoption Impact of CECL Adoption As Reported Under CECL (In thousands) Assets: Allowance for credit losses on available-for-sale securities $ – $ – $ – Allowance for credit losses on loans 4,388 1,809 6,197 Deferred tax assets 11,872 508 12,380 Liabilities: Allowance for credit losses on off-balance sheet exposures 412 ( 45 ) 367 Stockholders’ equity: Retained earnings 9,294 ( 1,256 ) 8,038 The Company’s assessment of available-for-sale investment securities as of January 1, 2023 indicated that an ACL was not required. The Company analyzed available-for-sale investment securities that were in an unrealized loss position as of the date of adoption and determined the decline in fair value for those securities was not related to credit, but rather related to changes in interest rates and general market conditions. As such, no ACL was recorded for available-for-sale securities as of January 1, 2023. Upon the adoption of ASC 326, the Company did not reassess purchased loans with credit deterioration (previously classified as purchased credit impaired loans under ASC 310-30). In February 2019, the U.S. federal bank regulatory agencies approved a final rule modifying their regulatory capital rules and providing an option to phase in the adverse regulatory capital effects of the impact of adoption of ASC 326 over a three-year period. As a result, entities have the option to gradually phase in the full effect of CECL on regulatory capital over a three-year transition period. The Company implemented its CECL model commencing January 1, 2023 and elected to phase in the effect of CECL on regulatory capital over the three-year transition period. In March 2022, the FASB issued ASU 2022-02 – Financial Instruments-Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures. The FASB issued this ASU in response to feedback the FASB received from various stakeholders in its post-implementation review process related to the issuance of ASU 2016-13. The amendments in this ASU include the elimination of accounting guidance for troubled debt restructurings (“TDRs”) in Subtopic 310-40 – Receivables-Troubled Debt Restructurings by Creditors, and introduce new disclosures and enhance existing disclosures concerning certain loan refinancings and restructurings when a borrower is experiencing financial difficulty. Under the provisions of this ASU, an entity must determine whether a modification results in a new loan or the continuation of an existing loan. Further, the amendments in this ASU require that an entity disclose current period gross charge-offs on financing receivables within the scope of ASC 326 by year of origination and class of financing receivable. The amendments in this ASU became effective for the Company on January 1, 2023, for all interim and annual periods. The adoption of the provisions in this ASU are applied prospectively and have resulted in additional disclosures concerning modifications of loans to borrowers experiencing financial difficulty, as well as disaggregated disclosure of charge-offs on loans. Accounting Pronouncements Yet to Be Adopted In March 2023, the FASB issued ASU 2023-02 – Investments-Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method, a Consensus of the Emerging Issues Task Force. The amendments in this ASU allow the option for an entity to apply the proportional amortization method of accounting to other equity investments that are made for the primary purpose of receiving tax credits or other income tax benefits, if certain conditions are met. Prior to this ASU, the application of the proportional amortization method of accounting was limited to investments in low-income housing tax credit structures. The proportional amortization method of accounting results in the amortization of applicable investments, as well as the related income tax credits or other income tax benefits received, being presented on a single line in the consolidated statements of operations and comprehensive loss (within income tax expense). Under this ASU, an entity has the option to apply the proportional amortization method of accounting to applicable investments on a tax-credit-program-by-tax-credit-program basis. In addition, the amendments in this ASU require that all tax equity investments accounted for using the proportional amortization method use the delayed equity contribution guidance in paragraph 323-740-25-3, requiring a liability be recognized for delayed equity contributions that are unconditional and legally binding or for equity contributions that are contingent upon a future event when that contingent event becomes probable. Under this ASU, low-income housing tax credit investments for which the proportional amortization method is not applied can no longer be accounted for using the delayed equity contribution guidance. Further, this ASU specifies that impairment of low-income housing tax credit investments not accounted for using the equity method must apply the impairment guidance in Topic 323 – Investments-Equity Method and Joint Ventures. This ASU also clarifies that for low-income housing tax credit investments not accounted for under the proportional amortization method or the equity method, an entity shall account for them under Topic 321 – Investments-Equity Securities. The amendments in this ASU also require additional disclosures in interim and annual periods concerning investments for which the proportional amortization method is applied, including the nature of tax equity investments and the effect of tax equity investments and related income tax credits and other income tax benefits on the consolidated statements of financial position and results of operations. The provisions of this ASU are effective for the Company for interim and annual periods beginning after December 15, 2023. Early adoption is permitted. The Company is currently evaluating the impact of this ASU on its consolidated financial statements. F-14 Table of Contents In November 2023, the FASB issued ASU 2023-07 – Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The amendments in this ASU improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The new ASU adds required disclosure of significant segments expenses that are regularly provided to the chief operating decision maker (“CODM”) and included within each reported measure of segment profit or loss, as well as the title and position of the CODM and an explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing segment performance. The ASU also clarifies that if the CODM uses more than one measure of a segment’s profit or loss in assessing segment performance, an entity may report one or more of those additional measures of segment profit; however, at least one of the reported segment profit or loss measures should be the measure that is most consistent with the measurement principals used in measuring the corresponding amounts in the entity’s consolidated financial statements. Finally, the new ASU requires that an entity that has only one reportable segment provide all of the disclosures required by this ASU and all existing segment disclosures in Topic 280. The provisions of this ASU are effective, on a prospective basis, for the Company for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The amendments in this ASU will not affect the Company’s consolidated statements of financial condition or consolidated statements of operations and comprehensive loss; however, the required disclosures will be added to the Company’s consolidated financial statements after the ASU is adopted. In December 2023, the FASB issued ASU 2023-09 – Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The amendments in this ASU address investor requests for more transparency about income tax information through improvements to income tax disclosures. The ASU enhances existing requirements that an entity disclose a tabular reconciliation, using both reporting currency amounts and percentages, of the entity’s reported income tax expense and the amount computed by multiplying income from continuing operations before income taxes by the applicable statutory Federal income tax rate by including specific categories in the rate reconciliation table and requiring additional information for reconciling items that meet a quantitative threshold (if the effect of those reconciling items is equal to or greater than 5% of the amount computed by multiplying pretax income or loss by the applicable statutory income tax rate). The ASU also includes requirements to disclose the amount of income taxes paid (net of refunds received) disaggregated by Federal, state, and foreign taxes and the amount of income taxes paid (net of refunds received) disaggregated by individual jurisdictions in which income taxes paid are equal to or greater than 5% of total income taxes paid. The amendments in this ASU are effective, on a prospective basis, for annual periods beginning after December 31, 2024. Early adoption is permitted. The amendments in this ASU will not affect the Company’s consolidated statements of financial condition or consolidated statements of operations and comprehensive loss; however, the required disclosures will be added to the Company’s consolidated financial statements after the ASU is adopted. Note 2 – Capital On June 7, 2022, the Company closed a private placement of shares of the Company’s Senior Non-Cumulative Perpetual Preferred Stock, Series C, par value $ 0.01 , pursuant to a Letter Agreement, dated as of June 7, 2022, with the United States Department of the Treasury. The Purchase Agreement was entered into pursuant to the Purchaser’s Emergency Capital Investment Program. Pursuant to the Purchase Agreement, the Purchaser acquired an aggregate of 150,000 shares of Series C Preferred Stock, for an aggregate purchase price equal to $ 150.0 million in cash. The liquidation value of the Series C Preferred Stock is $ 1,000 per share. This is non-cumulative redeemable perpetual preferred stock which does not have any voting rights, with the exception of voting rights on certain matters. The holders of Series C Preferred Stock will be entitled to a dividend payable in cash quarterly at an annual rate dependent on certain factors as reported by the Company to the Purchaser in a quarterly supplemental report, as set forth in the Purchase Agreement. The initial dividend rate is zero percent for the first two years after issuance, and thereafter the floor dividend rate is 0.50 % and the ceiling dividend rate is 2.00 %. During the first quarter of 2022, the Company completed the exchange of all the Series A Fixed Rate Cumulative Redeemable Preferred Stock, with an aggregate liquidation value of $ 3.0 million, plus accrued dividends, for 149,164 shares of Class A Common Stock at an exchange price of $ 20.08 per share of Class A Common Stock. F-15 Table of Contents On October 31, 2023, the Company effected a reverse stock split of the Company’s outstanding shares of Class A common stock, Class B common stock, and Class C common stock, par value $ 0.01 per share, at a ratio of 1-for-8 (the “Reverse Stock Split”). The shares of Class A Common Stock listed on The Nasdaq Capital Market commenced trading on The Nasdaq Capital Market on a post-Reverse Stock Split adjusted basis at the open of business on November 1, 2023. As a result of the Reverse Stock Split, the number of issued and outstanding shares of common stock immediately prior to the Reverse Stock Split was reduced, such that every eight shares of common stock held by a stockholder immediately prior to the Reverse Stock Split were combined and reclassified into one share of common stock. A ll common stock share amounts and per share numbers discussed herein have been adjusted f or the Reverse Stock Split. On October 31, 2023 the Company purchased 244,771 shares of its Class A (voting) Common Stock (adjusted for the 1-for-8 reverse stock split effective November 1, 2023) from the Federal Deposit Insurance Corporation (“FDIC”), which obtained the shares when it was appointed receiver for First Republic Bank upon its closure earlier in 2023. The purchased shares represented just under 4.0 % of the Company’s total voting shares prior to the purchase, and over 2.6 % of the Company’s total common equity. The Company purchased the shares at a price of $ 7.2760 per share (adjusted for the 1-for-8 reverse stock split effective November 1, 2023), which represented the 20 -day volume weighted average price for the Class A shares over the period ended October 24, 2023. The purchase was financed from cash on hand and the shares were retired. Note 3 – Securities The following table summarizes the amortized cost and fair value of the available‑for‑sale investment securities portfolios at December 31, 2023 and December 31, 2022 and the corresponding amounts of unrealized gains (losses) which are recognized in accumulated other comprehensive income (loss): Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value (In thousands) December 31, 2023: Federal agency mortgage-backed securities $ 76,091 $ 3 $ ( 9,316 ) $ 66,778 Federal agency Collateralized Mortgage Obligations “CMOs” 24,720 – ( 1,381 ) 23,339 Federal agency debt 50,893 – ( 3,057 ) 47,836 Municipal bonds 4,833 – ( 460 ) 4,373 U. S. Treasuries 167,055 – ( 3,175 ) 163,880 SBA pools 12,386 4 ( 1,646 ) 10,744 Total available-for-sale securities $ 335,978 $ 7 $ ( 19,035 ) $ 316,950 December 31, 2022: Federal agency mortgage-backed securities $ 84,955 $ 2 $ ( 10,788 ) $ 74,169 Federal agency CMOs 27,776 – ( 1,676 ) 26,100 Federal agency debt 55,687 26 ( 4,288 ) 51,425 Municipal bonds 4,866 – ( 669 ) 4,197 U. S. Treasuries 165,997 – ( 5,408 ) 160,589 SBA pools 14,048 9 ( 1,788 ) 12,269 Total available-for-sale securities $ 353,329 $ 37 $ ( 24,617 ) $ 328,749 There were no sales of securities during the years ended December 31, 2023 or 2022. The amortized cost and estimated fair value of all investment securities available-for-sale at December 31, 2023, 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 $ 103,441 $ – $ ( 1,179 ) $ 102,262 Due after one year through five years 119,530 – ( 5,231 ) 114,299 Due after five years through ten years 29,078 2 ( 1,802 ) 27,278 Due after ten years (1) 83,929 5 ( 10,823 ) 73,111 $ 335,978 $ 7 $ ( 19,035 ) $ 316,950 (1) Mortgage-backed securities, CMOs and SBA pools do not have a single stated maturity date and therefore have been included in the “Due after ten years” category. F-16 Table of Contents The table below indicates the length of time individual securities had been in a continuous unrealized loss position: Less than 12 Months 12 Months or Longer Total Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses December 31, 2023: (In thousands) Federal agency mortgage-backed securities $ – $ – $ 66,575 $ ( 9,316 ) $ 66,575 $ ( 9,316 ) Federal agency CMOs – – 23,339 ( 1,381 ) 23,339 ( 1,381 ) Federal agency debt 3,018 ( 37 ) 44,818 ( 3,020 ) 47,836 ( 3,057 ) Municipal bonds – – 4,373 ( 460 ) 4,373 ( 460 ) U. S. Treasuries – – 163,880 ( 3,175 ) 163,880 ( 3,175 ) SBA pools 286 ( 1 ) 9,439 ( 1,645 ) 9,725 ( 1,646 ) Total $ 3,304 $ ( 38 ) 312,424 $ ( 18,997 ) $ 315,728 $ ( 19,035 ) December 31, 2022: Federal agency mortgage-backed securities $ 38,380 $ ( 4,807 ) $ 35,526 $ ( 5,981 ) $ 73,906 $ ( 10,788 ) Federal agency CMOs 20,997 ( 885 ) 5,103 ( 791 ) 26,100 ( 1,676 ) Federal agency debt 26,383 ( 1,529 ) 21,956 ( 2,759 ) 48,339 ( 4,288 ) Municipal bonds 2,176 ( 315 ) 2,021 ( 354 ) 4,197 ( 669 ) U. S. Treasuries 143,989 ( 3,884 ) 16,600 ( 1,524 ) 160,589 ( 5,408 ) SBA pools 3,743 ( 365 ) 6,763 ( 1,423 ) 10,506 ( 1,788 ) Total $ 235,668 $ ( 11,785 ) $ 87,969 $ ( 12,832 ) $ 323,637 $ ( 24,617 ) Securities with a market value of $ 89.0 million were pledged as collateral for securities sold under agreements to repurchase as of December 31, 2023 and included $ 47.8 million of U.S. Treasuries, $ 30.2 million of federal agency debt, and $ 11.0 million of federal agency mortgage-backed securities. Securities with a market value of $ 64.4 million were pledged as collateral for securities sold under agreements to repurchase as of December 31, 2022 and included $ 33.3 million of federal agency debt, $ 19.2 million of U.S. Treasuries and $ 11.9 million of federal agency mortgage-backed securities. Investment securities with a book value of $ 107.3 million and a fair value of $ 98.3 million were pledged as collateral to the Federal Reserve as of December 31, 2023 for borrowings under the Bank Term Funding Program . At December 31, 2023 and 2022, 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, 2023 and 2022, 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. Accrued interest receivable on securities was $ 1.2 million at December 31, 2023 and 2022, and is included in the consolidated statement of financial condition in accrued interest receivable . At December 31, 2023 and 2022, there were no securities in nonaccrual status. All securities in the portfolio were current with their contractual principal and interest payments. At December 31, 2023 and 2022, there were no securities purchased with deterioration in credit quality since their origination, and there were no collateral dependent securities. Note 4 – Loans Receivable Held for Investment Loans receivable held for investment were as follows as of the periods indicated: December 31, 2023 December 31, 2022 (In thousands) Real estate: Single-family $ 24,702 $ 30,038 Multi-family 561,447 502,141 Commercial real estate 119,436 114,574 Church 12,717 15,780 Construction 89,887 40,703 Commercial – other 63,450 64,841 SBA loans (1) 14,954 3,601 Consumer 13 11 Gross loans receivable before deferred loan costs and premiums 886,606 771,689 Unamortized net deferred loan costs and premiums 1,971 1,755 888,577 773,444 Credit and interest marks on purchased loans, net ( 772 ) ( 1,010 ) Allowance for credit losses (2) ( 7,348 ) ( 4,388 ) Loans receivable, net $ 880,457 $ 768,046 (1) Including Paycheck Protection Program (PPP) loans. (2) The allowance for credit losses as of December 31, 2022 was accounted for under ASC 450 and ASC 310, which is reflective of probable incurred losses as of the date of the consolidated statement of financial condition. Effective January 1, 2023, the allowance for credit losses is accounted for under ASC 326, which is reflective of estimated expected lifetime credit losses. F-17 Table of Contents As of December 31, 2023 and 2022, the commercial loan category above included $ 2.5 million and $ 2.7 million of loans issued under the SBA’s Paycheck Protection Program. 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. Effective January 1, 2023, the Company accounts for credit losses on loans in accordance with ASC 326. ASC 326 requires the Company to recognize estimates for lifetime losses on loans and off-balance sheet loan commitments at the time of origination or acquisition. The recognition of losses at origination or acquisition represents the Company’s best estimate of the lifetime expected credit loss associated with a loan given the facts and circumstances associated with the particular loan, and involves the use of significant management judgment and estimates, which are subject to change based on management’s on-going assessment of the credit quality of the loan portfolio and changes in economic forecasts used in the model. The Company uses the WARM method when determining estimates for the ACL for each of its portfolio segments. The weighted average remaining life, including the effect of estimated prepayments, is calculated for each loan pool on a quarterly basis. The Company then estimates a loss rate for each pool using both its own historical loss experience and the historical losses of a group of peer institutions during the period from 2004 through the most recent quarter. The Company’s ACL model also includes adjustments for qualitative factors, where appropriate. Qualitative adjustments may include, but are not limited to factors such as: (i) changes in lending policies and procedures, including changes in underwriting standards and collections, charge offs, and recovery practices; (ii) changes in international, national, regional, and local conditions; (iii) changes in the nature and volume of the portfolio and terms of loans; (iv) changes in the experience, depth, and ability of lending management; (v) changes in the volume and severity of past due loans and other similar conditions; (vi) changes in the quality of the organization’s loan review system; (vii) changes in the value of underlying collateral for collateral dependent loans; (viii) the existence and effect of any concentrations of credit and changes in the levels of such concentrations; and (ix) the effect of other external factors (i.e., competition, legal and regulatory requirements) on the level of estimated credit losses. These qualitative factors incorporate the concept of reasonable and supportable forecasts, as required by ASC 326. The following table summarizes the activity in the allowance for credit losses on loans for the period indicated: For the Year Ended December 31, 2023 Beginning Balance Impact of CECL Adoption Charge-offs Recoveries Provision (Recapture) Ending Balance (In thousands) Loans receivable held for investment: Real estate: Single-family $ 109 $ 214 $ – $ – $ ( 63 ) $ 260 Multi-family 3,273 603 – 109 428 4,413 Commercial real estate 449 466 – 107 72 1,094 Church 65 37 – – ( 30 ) 72 Construction 313 219 – – 400 932 Commercial - other 175 254 – – 100 529 SBA loans – 20 – – 28 48 Consumer 4 ( 4 ) – – – – Total $ 4,388 $ 1,809 $ – $ 216 $ 935 $ 7,348 F-18 Table of Contents The following table presents the activity in the allowance for loan losses by loan type for the period indicated: For the Year Ended December 31, 2022 Real Estate Single- family Multi‑ family Commercial real estate Church Construction Commercial– other Consumer Total (In thousands) Beginning balance $ 145 $ 2,657 $ 236 $ 103 $ 212 $ 23 $ 15 $ 3,391 Provision for (recapture of) loan losses ( 36 ) 616 213 ( 38 ) 101 152 ( 11 ) 997 Recoveries – – – – – – – – Loans charged off – – – – – – – – Ending balance $ 109 $ 3,273 $ 449 $ 65 $ 313 $ 175 $ 4 $ 4,388 The ACL increased to $ 7.3 million as of December 31, 2023, compared to $ 4.4 million as of December 31, 2022. The increase was primarily due to the implementation of the CECL methodology adopted by the Bank effective January 1, 2023, which increased the ACL by $ 1.8 million. In addition, the Bank recorded an additional provision for credit losses of $ 935 thousand for the twelve months ended December 31, 2023 due to loan growth of $ 114.9 million. The CECL methodology includes estimates of expected loss rates in the future, whereas the former ALLL methodology did not. Prior to the Company’s adoption of ASC 326 on January 1, 2023, the Company maintained ALLL in accordance with ASC 310 and ASC 450 that covered estimated credit losses on individually evaluated loans that were determined to be impaired, as well as estimated probable incurred losses inherent in the remainder of the loan portfolio. Beginning on January 1, 2023, the Company evaluates loans collectively for purposes of determining the ACL in accordance with ASC 326. Collective evaluation is based on aggregating loans deemed to possess similar risk characteristics. In certain instances, the Company may identify loans that it believes no longer possess risk characteristics similar to other loans in the loan portfolio. These loans are typically identified from those that have exhibited deterioration in credit quality, since the specific attributes and risks associated with such loans tend to become unique as the credit deteriorates. Such loans are typically nonperforming, downgraded to substandard or worse, and/or are deemed collateral dependent, where the ultimate repayment of the loan is expected to come from the operation of or eventual sale of the collateral. Loans that are deemed by management to no longer possess risk characteristics similar to other loans in the portfolio, or that have been identified as collateral dependent, are evaluated individually for purposes of determining an appropriate lifetime ACL. The Company uses a discounted cash flow approach, using the loan’s effective interest rate, for determining the ACL on individually evaluated loans, unless the loan is deemed collateral dependent, which requires evaluation based on the estimated fair value of the underlying collateral, less estimated selling costs. The Company may increase or decrease the ACL for collateral dependent loans based on changes in the estimated fair value of the collateral. The following table presents collateral dependent loans by collateral type as of the date indicated: December 31, 2023 Single-Family Multi-Family Residential Church Business Assets Total Real estate: (In thousands) Single-family $ 45 $ – $ – $ – $ 45 Multi-family – 5,672 – – 5,672 Commercial real estate – – 65 – 65 Church – – 391 – 391 Commercial – other – – – 268 268 Total $ 45 $ 5,672 $ 456 $ 268 $ 6,441 At December 31, 2023, $ 6.4 million of individually evaluated loans were evaluated based on the underlying value of the collateral and no individually evaluated loans were evaluated using a discounted cash flow approach. These loans had an associated ACL of $ 112 thousand as of December 31, 2023. None of these collateral dependent loans were on nonaccrual status at December 31, 2023. F-19 Table of Contents As part of the CFBanc merger on April 1, 2021, the Company acquired PCD loans. Prior to the CFBanc merger, there were no such acquired loans. The carrying amount of those loans was as follows: December 31, 2023 December 31, 2022 (In thousands) Real estate: Single-family $ – $ 68 Commercial real estate – – Commercial – other 47 57 $ 47 $ 125 The following table summarizes the discount on the PCD loans for the periods indicated: December 31, 2023 December 31, 2022 (In thousands) Balance at the beginning of the period $ 27 $ 289 Deductions due to payoffs ( 13 ) – Accretion ( 12 ) ( 262 ) Balance at the end of the period $ 2 $ 27 Prior to the adoption of ASC 326 on January 1, 2023, the Company classified loans as impaired when, based on current information and events, it was probable that the Company would be unable to collect all amounts due according to the contractual terms of the loan agreement or it was determined that the likelihood of the Company receiving all scheduled payments, including interest, when due was remote. Credit losses on impaired loans were determined separately based on the guidance in ASC 310. Beginning January 1, 2023, the Company accounts for credit losses on all loans in accordance with ASC 326, which eliminates the concept of an impaired loan within the context of determining credit losses, and requires all loans to be evaluated for credit losses collectively based on similar risk characteristics. Loans are only evaluated individually when they are deemed to no longer possess similar risk characteristics with other loans in the loan portfolio. The following table presents 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 the impairment method as of the date indicated: December 31, 2022 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 $ 3 $ – $ – $ 4 $ – $ – $ – $ 7 Collectively evaluated for impairment 106 3,273 449 61 313 175 4 4,381 Total ending allowance balance $ 109 $ 3,273 $ 449 $ 65 $ 313 $ 175 $ 4 $ 4,388 Loans: Loans individually evaluated for impairment $ 57 $ – $ – $ 1,655 $ – $ – $ – $ 1,712 Loans collectively evaluated for impairment 20,893 462,539 63,929 9,008 38,530 29,558 11 624,468 Subtotal 20,950 462,539 63,929 10,663 38,530 29,558 11 626,180 Loans acquired in the Merger 9,088 41,357 50,645 5,117 2,173 38,884 – 147,264 Total ending loans balance $ 30,038 $ 503,896 $ 114,574 $ 15,780 $ 40,703 $ 68,442 $ 11 $ 773,444 F-20 Table of Contents The following table presents information related to loans individually evaluated for impairment by loan type as of the period indicated: December 31, 2022 Unpaid Principal Balance Recorded Investment Allowance for Loan Losses Allocated (In thousands) With no related allowance recorded: Multi-family $ – $ – $ – Church 1,572 1,572 – With an allowance recorded: Single-family 57 57 3 Church 83 83 4 Total $ 1,712 $ 1,712 $ 7 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 table presents 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, 2022 Average Recorded Investment Cash Basis Interest Income Recognized (In thousands) Single-family $ 83 $ 3 Multi-family – – Church 2,381 103 Total $ 2,464 $ 106 Past Due Loans The following tables present the aging of the recorded investment in past due loans by loan type as of the periods indicated: December 31, 2023 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: Real estate: Single-family $ – $ – $ – $ – $ 24,702 $ 24,702 Multi-family – 401 – 401 563,017 563,418 Commercial real estate – – – – 119,436 119,436 Church – – – – 12,717 12,717 Construction – – – – 89,887 89,887 Commercial - other – – – – 63,450 63,450 SBA loans 379 – – 379 14,575 14,954 Consumer – – – – 13 13 Total $ 379 $ 401 $ – $ 780 $ 887,797 $ 888,577 December 31, 2022 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: Real estate: Single-family $ – $ – $ – $ – $ 30,038 $ 30,038 Multi-family – – – – 503,896 503,896 Commercial real estate – – – – 114,574 114,574 Church – – – – 15,780 15,780 Construction – – – – 40,703 40,703 Commercial - other – – – – 64,841 64,841 SBA loans – – – – 3,601 3,601 Consumer – – – – 11 11 Total $ – $ – $ – $ – $ 773,444 $ 773,444 F-21 Table of Contents The following table presents the recorded investment in non‑accrual loans by loan type as of the periods indicated: December 31, 2023 December 31, 2022 Loans receivable held for investment: (In thousands) Church - 144 Total non-accrual loans $ - $ 144 There were no loans 90 days or more delinquent that were accruing interest as of December 31, 2023 or December 31, 2022. None of the church non-accrual loans were delinquent, but none qualified for accrual status as of the dates indicated. 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 $ 31 thousand for the year ended December 31, 2022, and was not included in the consolidated results of operations. Modified Loans to Troubled Borrowers On January 1, 2023, the Company adopted ASU 2022-02, which introduces new reporting requirements for modifications of loans to borrowers experiencing financial difficulty. GAAP requires that certain types of modifications of loans in response to a borrower’s financial difficulty be reported, which consist of the following: (i) principal forgiveness, (ii) interest rate reduction, (iii) other-than-insignificant payment delay, (iv) term extension, or (v) any combination of the foregoing. The ACL for loans that were modified in response to a borrower’s financial difficulty is measured on a collective basis, as with other loans in the loan portfolio, unless management determines that such loans no longer possess risk characteristics similar to others in the loan portfolio. In those instances, the ACL for such loans is determined through individual evaluation. There were no loan modifications to borrowers that were experiencing financial difficulty during the year-ended December 30, 2023. Troubled Debt Restructurings (TDRs) Prior to the adoption of ASU 2022-02 – Financial Instruments-Credit Losses: Troubled Debt Restructurings and Vintage Disclosures on January 1, 2023, the Company accounted for TDRs in accordance with ASC 310-40. When a loan to a borrower that was experiencing financial difficulty was modified in response to that difficulty, the loan was classified as a TDR. At December 31, 2022, loans classified as TDRs totaled $ 1.7 million, of which $ 144 thousand were included in non-accrual loans and $ 1.6 million were on accrual status. The Company had allocated $ 7 thousand of specific reserves for accruing TDRs as of December 31, 2022. TDRs on accrual status were 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 of time and for which the Company anticipates full repayment of both principal and interest. TDRs that were on non-accrual status could be returned to accrual status after a period of sustained performance, generally determined to be six months of timely payments, as modified. ASU 2022-02 eliminated the concept of TDRs in current GAAP, and therefore, beginning January 1, 2023, the Company no longer reports loans modified as TDRs except for those loans modified and reported as TDRs in prior period financial information under previous GAAP. 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. F-22 Table of Contents The following table stratifies the loans held for investment portfolio by the Company’s internal risk grading, and by year of origination as of December 31, 2023: Term Loans Amortized Cost Basis by Origination Year 2023 2022 2021 2020 2019 Prior Revolving Loans Total (In thousands) Single-family: Pass $ – $ 2,474 $ 1,862 $ 2,940 $ 1,485 $ 12,374 $ – $ 21,135 Watch – – 750 – – 999 – 1,749 Special Mention – – – – – 116 – 116 Substandard – – – 1,365 – 337 – 1,702 Total $ – $ 2,474 $ 2,612 $ 4,305 $ 1,485 $ 13,826 $ – $ 24,702 Multi-family: Pass $ 81,927 $ 183,295 $ 145,652 $ 27,356 $ 44,511 $ 47,119 $ – $ 529,860 Watch – 4,686 6,203 – 1,186 6,474 – 18,549 Special Mention – – 899 – – 1,344 – 2,243 Substandard – – – – 363 12,403 – 12,766 Total $ 81,927 $ 187,981 $ 152,754 $ 27,356 $ 46,060 $ 67,340 $ – $ 563,418 Commercial real estate: Pass $ 9,881 $ 22,131 $ 26,019 $ 24,684 $ 6,718 $ 15,106 $ – $ 104,539 Watch – 442 – 5,286 – 2,599 – 8,327 Special Mention – – – – 325 – – 325 Substandard – – – $ – $ – 6,245 – $ 6,245 Total $ 9,881 $ 22,573 $ 26,019 $ 29,970 $ 7,043 $ 23,950 $ – $ 119,436 Church: Pass $ 2,923 $ – $ 2,210 $ 1,748 $ – $ 2,704 $ – $ 9,585 Watch – – – – 636 1,525 – 2,161 Special Mention – – – – – – – – Substandard – – – – – 971 – 971 Total $ 2,923 $ – $ 2,210 $ 1,748 $ 636 $ 5,200 $ – $ 12,717 Construction: Pass $ – $ 1,109 $ 1,198 $ – $ – $ – $ – $ 2,307 Watch 42,300 35,179 5,484 – – 2,097 – 85,060 Special Mention – – 2,520 – – – – 2,520 Substandard – – – – – – – – Total $ 42,300 $ 36,288 $ 9,202 $ – $ – $ 2,097 $ – $ 89,887 Commercial – other: Pass $ 15,000 $ 9,077 $ 87 $ 5,600 $ – $ 25,154 $ – $ 54,918 Watch – 312 – 1,500 6,550 – – 8,362 Special Mention – – 170 – – – – 170 Substandard – – – – – – – – Total $ 15,000 $ 9,389 $ 257 $ 7,100 $ 6,550 $ 25,154 $ – $ 63,450 SBA: Pass $ 11,809 $ 109 $ 2,453 $ – $ 16 $ 100 $ – $ 14,487 Watch – – – – – – – – Special Mention – – – 467 – – – 467 Substandard – – – – – – – – Total $ 11,809 $ 109 $ 2,453 $ 467 $ 16 $ 100 $ – $ 14,954 Consumer: Pass $ 13 $ – $ – $ – $ – $ – $ – $ 13 Watch – – – – – – – – Special Mention – – – – – – – – Substandard – – – – – – – – Total $ 13 $ – $ – $ – $ – $ – $ – $ 13 Total loans: Pass $ 121,553 $ 218,195 $ 179,481 $ 62,328 $ 52,730 $ 102,557 $ – $ 736,844 Watch 42,300 40,619 12,437 6,786 8,372 13,694 – 124,208 Special Mention – – 3,589 467 325 1,460 – 5,841 Substandard – – – 1,365 363 19,956 – 21,684 Total loans $ 163,853 $ 258,814 $ 195,507 $ 70,946 $ 61,790 $ 137,667 $ – $ 888,577 F-23 Table of Contents Based on the most recent analysis performed, the risk categories of loans by loan type as of the dates indicated were as follows: December 31, 2022 Pass Watch Special Mention Substandard Doubtful Loss Total (In thousands) Single-family $ 29,022 $ 354 $ 260 $ 402 $ – $ – $ 30,038 Multi-family 479,182 9,855 14,859 – – – 503,896 Commercial real estate 104,066 4,524 1,471 4,513 – – 114,574 Church 14,505 728 – 547 – – 15,780 Construction 2,173 38,530 – – – – 40,703 Commercial – others 53,396 11,157 – 288 – – 64,841 SBA 3,032 569 – – – – 3,601 Consumer 11 – – – – – 11 Total $ 685,387 $ 65,717 $ 16,590 $ 5,750 $ – $ – $ 773,444 Allowance for Credit Losses for Off-Balance Sheet Commitments The Company maintains an allowance for credit losses on off-balance sheet commitments related to unfunded loans and lines of credit, which is included in other liabilities of the consolidated statements of financial condition. Upon the Company’s adoption of ASC 326 on January 1, 2023, the Company applies an expected credit loss estimation methodology for off-balance sheet commitments. This methodology is commensurate with the methodology applied to each respective segment of the loan portfolio in determining the ACL for loans held-for-investment. The loss estimation process includes assumptions for the probability that a loan will fund, as well as the expected amount of funding. These assumptions are based on the Company’s own historical internal loan data. The allowance for off-balance sheet commitments was $ 364 thousand and $ 412 thousand at December 31, 2023 and 2022, respectively. These amounts are included in accrued expenses and other liabilities on the consolidated statements of condition. The recovery of credit losses for off-balance sheet commitments was $ 2 thousand for the year ended December 31, 2023. Note 5 – Office Properties and Equipment, net Year‑end office properties and equipment were as follows: December 31, 2023 December 31, 2022 (In thousands) Land $ 5,322 $ 5,322 Office buildings and improvements 6,433 6,303 Right of use assets 655 889 Furniture, fixtures, and equipment 2,318 2,185 14,728 14,699 Less accumulated depreciation ( 4,888 ) ( 4,408 ) Office properties and equipment, net $ 9,840 $ 10,291 Depreciation expense was $ 385 thousand and $ 376 thousand for the years 2023 and 2022, respectively. Note 6 – Leases Effective October 1, 2021, the Bank entered into an operating lease for its administrative offices at 4601 Wilshire Boulevard in Los Angeles. 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 ROU asset totaled $ 655 thousand as of December 31, 2023 and was included in office properties and equipment, net , on the consolidated statements of financial condition. The lease liability totaled $ 655 thousand as of December 31, 2023 and was included in accrued expenses and other liabilities on the consolidated statements of financial condition. 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 has no finance leases. The Company recognized rent expense of $ 305 thousand in 2023 and $ 214 thousand in 2022. Additional information regarding our operating leases is summarized below for the periods indicated (dollars in thousands): Year Ended December 31, 2023 Year Ended December 31, 2022 Cash paid for amounts included in the measurement of lease liabilities for operating leases: $ 242 $ 229 ROU assets obtained in exchange for lease liabilities – – Weighted average remaining lease term in months 33 45 Weighted average discount rate 1.1 % 1.1 % F-24 Table of Contents The future minimum payments for operating leases with remaining terms of one year or more as of December 31, 2023 were as follows (in thousands): Year ended December 31, 2024 $ 242 Year ended December 31, 2025 242 Year ended December 31, 2026 181 Total future minimum lease payments 665 Amounts representing interest ( 10 ) Present value of net future minimum lease payments $ 655 Note 7 – Goodwill and Core Deposit Intangible The Company recognized goodwill of $ 25.9 million and a core deposit intangible of $ 2.1 million. The following table presents the changes in the carrying amounts of goodwill and core deposit intangibles for the year ended December 31, 2023 and 2022: December 31, 2023 Goodwill Core Deposit Intangible (In thousands) Balance at the beginning of the period $ 25,858 $ 2,501 Additions – – Change in deferred tax estimate – – Amortization – ( 390 ) Balance at the end of the period $ 25,858 $ 2,111 December 31, 2022 Goodwill Core Deposit Intangible (In thousands) Balance at the beginning of the period $ 25,996 $ 2,936 Additions – – Change in deferred tax estimate ( 138 ) – Amortization – ( 435 ) Balance at the end of the period $ 25,858 $ 2,501 No impairment charges were recorded during 2023 or 2022 for goodwill. 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 December 31, 2023 as well as a quantitative assessment as of December 31, 2023 due to concerns regarding declines in the Company’s stock price. No impairment charges were necessary as a result of the quantitative assessment. The carrying value and accumulated amortization related to the Company’s core deposit intangible consisted of the following at December 31, 2023 and 2022: December 31, 2023 December 31, 2022 (In thousands) Core deposit intangible acquired $ 3,329 $ 3,329 Less: accumulated amortization ( 1,218 ) ( 828 ) $ 2,111 $ 2,501 The following table outlines the estimated amortization expense related to the core deposit intangible during the next five fiscal years: (In thousands) 2024 $ 336 2025 315 2026 304 2027 291 2028 279 Thereafter 586 $ 2,111 Note 8 – 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). F-25 Table of Contents The fair value of 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. Collateral dependent loans are evaluated on a quarterly basis for additional required calculation adjustments (taken as part of the ACL) and adjusted accordingly. Appraisals for collateral-dependent loans and assets acquired through or by transfer of in lieu of foreclosure 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. 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, 2023 : Securities available-for-sale: Federal agency mortgage-backed securities $ – $ 66,778 $ – $ 66,778 Federal agency CMOs – 23,339 – 23,339 Federal agency debt – 47,836 – 47,836 Municipal bonds – 4,373 – 4,373 U.S. Treasuries 163,880 – – 163,880 SBA pools – 10,744 – 10,744 At December 31, 2022 : Securities available-for-sale: Federal agency mortgage-backed $ – $ 74,169 $ – $ 74,169 Federal agency CMO – 26,100 – 26,100 Federal agency debt – 51,425 – 51,425 Municipal bonds – 4,197 – 4,197 U.S. Treasuries 160,589 – – 160,589 SBA pools – 12,269 – 12,269 There were no transfers between Level 1, Level 2, or Level 3 during the years ended December 31, 2023 and 2022. 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, 2023 Value Level 1 Level 2 Level 3 Total (In thousands) Financial Assets: Cash and cash equivalents $ 105,195 $ 105,195 $ – $ – $ 105,195 Securities available-for-sale 316,950 163,880 153,070 – 316,950 Loans receivable held for investment 880,457 – – 746,539 746,539 Accrued interest receivable 4,938 306 1,301 3,331 4,938 Bank owned life insurance 3,275 3,275 – – 3,275 Financial Liabilities: Deposits $ 682,635 $ – $ 536,171 $ – $ 536,171 FHLB advances 209,319 – 208,107 – 208,107 Securities sold under agreements to repurchase 73,475 – 72,597 – 72,597 Bank Term Funding Program borrowing 100,000 – 100,000 – 100,000 Note payable 14,000 – – 14,000 14,000 Accrued interest payable 1,420 – 1,420 – 1,420 F-26 Table of Contents Carrying Fair Value Measurements at December 31, 2022 Value Level 1 Level 2 Level 3 Total (In thousands) Financial Assets: Cash and cash equivalents $ 16,105 $ 16,105 $ – $ – $ 16,105 Securities available-for-sale 328,749 160,589 168,160 – 328,749 Loans receivable held for investment 768,046 – – 641,088 641,088 Accrued interest receivable 3,973 442 793 2,738 3,973 Bank owned life insurance 3,233 3,233 – – 3,233 Financial Liabilities: Deposits $ 686,916 $ – $ 673,615 $ – $ 673,615 FHLB advances 128,344 – 126,328 – 126,328 Securities sold under agreements to repurchase 63,471 – 60,017 – 60,017 Note payable 14,000 – – 14,000 14,000 Accrued interest payable 453 – 453 – 453 Note 9 – Deposits Deposits are summarized as follows: December 31, 2023 December 31, 2022 (In thousands) Interest checking and other demand deposits $ 219,138 $ 244,562 Non‑interest-bearing demand deposits 107,891 89,779 Money market deposits 127,590 155,200 Savings deposits 59,981 62,322 Certificates of deposit 168,035 135,053 Total $ 682,635 $ 686,916 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 $ 114.8 million and $ 74.6 million at December 31, 2023 and 2022, respectively and are not considered to be brokered deposits. The other type of deposit that may be accepted under the CDARS program is nonreciprocal deposits which are considered to be brokered funds. As of December 31, 2023, the Bank had no such deposits. At December 31, 2023 and 2022, the Bank had $ 0 and $ 4.3 million in (non-CDARS) brokered deposits, respectively. As of December 31, 2023 and 2022, approximately $ 286.4 million and $ 212.9 million of our total deposits (including deposits from affiliates) were not insured by FDIC insurance, which represented 37 % and 31 % of total deposits, respectively. Scheduled maturities of certificates of deposit for the next five years are as follows: Maturity Amount (In thousands) 2024 $ 141,705 2025 20,002 2026 6,000 2027 178 2028 10 Thereafter 140 $ 168,035 F-27 Table of Contents Certificates of deposit of $250 thousand or more totaled $ 23.5 million and $ 30.2 million at December 31, 2023 and 2022, respectively. The Company has a significant concentration of deposits with five long‑time customers that accounted for approximately 28 % and 27 % of its deposits as of December 31, 2023 and 2022, respectively. The Company expects to maintain the relationships with the customers for the near term. Deposits from principal officers, directors, and their affiliates totaled $ 21.3 million and $ 24.3 million at December 31, 2023 and 2022, respectively. Note 10 – Borrowings The following table summarizes information relating to FHLB advances at or for the periods indicated: At or For the Year Ended December 31, 2023 2022 (Dollars in thousands) FHLB Advances: Average balance outstanding during the year $ 177,261 $ 61,593 Maximum amount outstanding at any month‑end during the year $ 210,242 $ 128,823 Balance outstanding at end of year $ 209,319 $ 128,344 Weighted average interest rate at end of year 4.91 % 3.74 % Average cost of advances during the year 4.70 % 1.74 % Weighted average maturity (in months) 2 7 Each advance is subject to a prepayment penalty if paid before its maturity date. The advances were collateralized by $ 435.4 million and $ 328.1 million of commercial real estate loans at December 31, 2023 and 2022, respectively, under a blanket lien arrangement. Based on collateral pledged and the Company’s holdings of FHLB stock as of December 31, 2023, the Company was eligible to borrow up to an additional $ 117.0 million at year‑end 2023. Scheduled maturities of FHLB advances are as follows: Amount (In thousands) 2024 $ 176,638 2025 32,681 $ 209,319 On December 27, 2023, the Company borrowed $ 100.0 million from the Federal Reserve under the Bank Term Funding Program (“BTFP”). As of December 31, 2023, $ 100.0 million was outstanding. The interest rate on this borrowing is fixed at 4.84 % and the borrowing matures on December 29, 2024 . Investment securities with a book value of $ 107.3 million and a fair value of $ 98.3 million were pledged as collateral for this borrowing as of December 31, 2023. There are no prepayment penalties for early payoff. As the BTFP ended on March 11, 2024, no additional borrowings can be made under the program. In addition, the Bank had additional lines of credit of $ 10.0 million with other financial institutions as of December 31, 2023. Note 11 – 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 Bank’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, 2023, securities sold under agreements to repurchase totaled $ 73.5 million at an average rate of 2.60 %. These agreements mature on a daily basis, but management expects the agreements to be available in the foreseeable future. The fair value of securities pledged totaled $ 89.0 million as of December 31, 2023 and included $ 47.8 million of U.S. Treasuries, $ 30.2 million of federal agency debt, and $ 11.0 million of federal agency mortgage-backed securities. As of December 31, 2022, securities sold under agreements to repurchase totaled $ 63.5 million at an average rate of 0.38 %. The fair value of securities pledged totaled $ 64.4 million as of December 31, 2022 and included $ 33.3 million of federal agency debt, $ 19.2 million of U.S. Treasuries and $ 11.9 million of federal agency mortgage-backed securities. F-28 Table of Contents Note 12 – 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. 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 were two notes outstanding at CFC 45 as of December 31, 2023. Note A was in the amount of $ 9.9 million with a fixed interest rate of 5.2 % per annum. Note B was 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 continued through March 2023 for Notes A and B. Beginning in September 2023, quarterly principal and interest payments were due for Notes A and B. Both notes would have matured on December 1, 2040 , but were paid off during January 2024. Note 13 – Employee Benefit Plans 401(k) Plans In July of 2022, the Broadway Federal Bank 401(k) benefit plan and the City First Bank 401(k) benefit plan were combined into one plan called “the City First Bank 401(k) benefit plan” (the “401(k) Plan”). The 401(k) 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 compensation contributed. In addition, the 401(k) Plan makes a non-elective safe harbor contribution of 3 % of each eligible employee’s compensation. Expenses related to the 401(k) plans totaled $ 447 thousand in 2023 and $ 309 thousand for 2022. ESOP Plan Employee s participate in an Employee Stock Ownership Plan (“ESOP”) after attaining certain age and service requirements. During 2022, the ESOP purchased 58,369 shares of the Company’s common stock at an average cost of $ 8.57 per share for a total cost of $ 500 thousand which was funded with a $ 5 million line of credit from the Company. During 2023, the ESOP purchased 369,958 additional shares of the Company’s common stock at an average cost of $ 9.19 per share for a total cost of $ 3.4 million which was funded with the line of credit. Any loans or borrowings under the line of credit will be repaid from the Bank’s 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 $ 307 thousand for 2023 and $ 66 thousand for 2022 . Shares held by the ESOP were as follows: December 31, 2023 December 31, 2022 (Dollars in thousands) Allocated to participants 134,444 132,188 Committed to be released 28,669 1,237 Suspense shares 458,829 118,561 Total ESOP shares 621,942 251,986 Fair value of unearned shares $ 4,217 $ 1,016 F-29 Table of Contents During 2023 and 2022, 28,669 and 5,032 of ESOP shares were released for allocation to participants, respectively. The outstanding book balance of unearned ESOP shares at December 31, 2023 and 2022 was $ 4.5 million and $ 1.3 million, respectively, which is shown as unearned ESOP shares in the equity section of the consolidated statements of financial condition. During December of 2022, the Company issued a $ 5 million line of credit to the ESOP Plan for the purchase of additional shares. As of December 31, 2023, the trustee for the ESOP had purchased 428,327 shares at a total cost of $ 3.9 million. As of December 31, 2022, the trustee for the ESOP had purchased 58,369 shares at a total cost of $ 500 thousand . All common stock share amounts and per share amounts above have been retroactively adjusted, as applicable, for the 1-for-8 reverse stock split effective November 1, 2023. See Note 2. Note 14 – 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 expense was as follows: 2023 2022 (In thousands) Current Federal $ 300 $ 700 State 398 218 Deferred Federal 1,046 944 State 241 551 Total $ 1,985 $ 2,413 Effective tax rates differ from the federal statutory rate of 21 % applied to income before income taxes due to the following: 2023 2022 (In thousands) Federal statutory rate times pre-tax net income $ 1,370 $ 1,705 Effect of: State taxes, net of federal benefit 512 623 Earnings from bank owned life insurance ( 9 ) ( 9 ) Low-income housing credits – ( 6 ) Change in valuation allowance 80 – Tax effect of stock-based compensation 14 25 Other, net 18 75 Total $ 1,985 $ 2,413 F-30 Table of Contents Year‑end deferred tax assets and liabilities were due to the following: 2023 2022 (In thousands) Deferred tax assets: Allowance for credit losses $ 2,008 $ 1,063 Accrued liabilities 580 555 State income taxes 30 45 Stock compensation 196 226 Net operating loss carryforward 1,982 2,616 Partnership investment 340 257 General business credit 1,962 1,962 Alternative minimum tax credit 11 5 Net unrealized loss on securities available-for-sale 5,815 7,388 Right of use liability 196 266 Fair value adjustment on acquired loans 223 291 Other 212 332 Total deferred tax assets 13,555 15,006 Less: valuation allowance ( 449 ) ( 369 ) Total deferred tax assets , net of valuation allowance 13,106 14,637 Deferred tax liabilities: Section 481 adjustments to bad debts – ( 7 ) Deferred loan fees/costs ( 1,743 ) ( 776 ) Basis difference on fixed assets ( 748 ) ( 723 ) FHLB stock dividends ( 98 ) ( 90 ) Nonaccrual loan interest – ( 8 ) Prepaid expenses ( 180 ) ( 186 ) Right of use assets ( 189 ) ( 256 ) Core deposit intangibles ( 610 ) ( 719 ) Total deferred tax liabilities ( 3,568 ) ( 2,765 ) Net deferred tax assets $ 9,538 $ 11,872 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, management determined that, as of December 31, 2023, a valuation allowance of $ 449 thousand was required on the Company’s deferred tax assets, which totaled $ 9.5 million (net of valuation allowance). As of December 31, 2022, a valuation allowance of $ 369 thousand was required on the Company’s deferred tax assets, which totaled $ 11.9 million (net of valuation allowance). As of December 31, 2023, the Company had federal net operating loss carryforwards of $ 536 thousand, all of which can be carried forward indefinitely. The Company also had California net operating loss carryforwards of $ 21.8 million which will expire in 2031 through 2041, if not utilized. The Company also had federal general business credits of $ 2.0 million, which will expire in 2030 through 2041, if not utilized. The Company did no t have any unrecognized tax benefits as of December 31, 2023 or 2022. 2022 is the most recent tax year for which the Company has filed federal and state income or franchise tax returns. Federal tax years 2020 through 2022 remain open for the assessment of Federal income tax. California tax years 2019 through 2022 remain open for the assessment of California franchise tax. Washington, D.C. tax years 2020 through 2022 remain open for the assessment of D.C. franchise tax. The Company is not currently under examination by any tax authorities . Note 15 – Stock‑Based Compensation Prior to June 21, 2023, the Company issued stock-based compensation awards to its directors and officers under the 2018 Long Term Incentive Plan (“LTIP”) which allowed the grant of non-qualified and incentive stock options, stock appreciation rights, full value awards and cash incentive awards. The maximum number of shares that could be awarded under that plan was 161,639 shares. On June 21, 2023, stockholders approved the Amended and Restated 2018 Long Term Incentive Plan (“Amended and Restated LTIP”) which allows the issuance of 487,500 additional shares and brought the number of shares that may be issued under the Amended and Restated LTIP to 649,139 shares. No stock options were granted during the year ended December 31, 2023. F-31 Table of Contents The following table summarizes stock option activity during the year ended December 31, 2023: 2023 Number Outstanding Weighted Average Exercise Price Outstanding at beginning of year 31,250 $ 12.96 Granted during the year – – Exercised during the year – – Forfeited or expired during the year – – Outstanding at end of year 31,250 $ 12.96 Exercisable at end of year 31,250 $ 12.96 There was no stock-based compensation expense related to stock options during 2022 or 2023 as there was no remaining unrecognized compensation cost related to non-vested options granted under the plan as of December 31, 2021. Options outstanding and exercisable at year‑end 2023 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 31,250 $ 12.96 31,250 $ 12.96 31,250 2.13 years $ 12.96 $ – 31,250 $ 12.96 $ – Stock Awards to Directors In February 2023 and 2022, the Company awarded 9,230 and 5,898 shares of common stock, respectively, to its directors under the LTIP, which are fully vested. The Company recorded $ 95 thousand and $ 84 thousand of compensation expense in the years ended December 31, 2023 and December 31, 2022, respectively, based on the fair value of the stock on the date of the award. Restricted Stock Awards to Employees In March of 2022, the Company issued 61,908 shares of restricted stock to its officers and employees under the LTIP, of which 17,012 shares have been forfeited as of December 31, 2023. Each restricted stock award was valued based on the fair value of the stock on the date of the award. These awarded shares of restricted stock fully vest over periods ranging from 36 months to 60 months from their respective dates of grant. Stock-based compensation is recognized on a straight-line basis over the vesting period. During 2023 and 2022, the Company recorded $ 106 thousand and $ 133 thousand of stock-based compensation expense related to shares awarded to employees. On June 21, 2023, the Company issued 92,720 shares of restricted stock to its officers and employees under the Amended and Restated LTIP, of which 11,237 shares have been forfeited as of December 31, 2023. Each restricted stock award was valued based on the fair value of the stock on the date of the award. These awarded shares of restricted stock fully vest over periods ranging from 36 months to 60 months from their respective dates of grant. Stock-based compensation is recognized on a straight-line basis over the vesting period. During the year ended December 31, 2023, the Company recorded $ 104 thousand of stock-based compensation expense related to these restricted stock awards. As of December 31, 2023, 199,268 shares had been awarded under the Amended and Restated LTIP and 449,871 shares were available to be awarded. A summary of restricted stock unit activity for the year ended December 31, 2023 is as follows: Restricted Stock Units (In thousands) Weighted Average Grant Date Fair Value Remaining Contractual Life (months) Unvested at December 31, 2022 52,949 12.24 43 Granted during period 92,720 $ 8.56 52 Vested during period 11,848 – – Forfeited or expired during period ( 19,290 ) – – Unvested at December 31, 2023 114,531 $ 9.12 39 As of December 31, 2023, there was $ 1.1 million of total unrecognized equity-based compensation expense that the Company expects to recognize over the remaining contractual life. All common stock share amounts above have been retroactively adjusted, as applicable, for the 1-for-8 reverse stock split effective November 1, 2023. See Note 2. F-32 Table of Contents Note 16 – 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%. Actual and required capital amounts and ratios as of the dates indicated are presented below: Actual Minimum Required to be Well Capitalized Under Prompt Corrective Action Provisions Amount Ratio Amount Ratio (Dollars in thousands) December 31, 2023 : Community Bank Leverage Ratio $ 185,773 14.97 % $ 111,696 9.00 % December 31, 2022 : Community Bank Leverage Ratio $ 181,304 15.75 % $ 103,591 9.00 % At December 31, 2023, 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. Note 17 – 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: 2023 2022 (In thousands) Commitments to make loans $ 7,560 $ 15,160 Unfunded construction loans 42,678 27,811 Unused lines of credit – variable rates 3,302 13,341 Commitments to make loans are generally made for periods of 60 days or less. Note 18 – Parent Company Only Condensed Financial Information Condensed financial information of Broadway Financial Corporation follows: Condensed Balance Sheets December 31, 2023 2022 (In thousands) Assets Cash and cash equivalents $ 77,457 $ 84,015 Investment in bank subsidiary 200,830 192,977 Other assets 4,003 2,725 Total assets $ 282,290 $ 279,717 Liabilities and stockholders’ equity Accrued expenses and other liabilities $ 387 $ 235 Stockholders’ equity 281,903 279,482 Total liabilities and stockholders’ equity $ 282,290 $ 279,717 F-33 Table of Contents Condensed Statements of Income Years Ended December 31, 2023 2022 (In thousands) Interest income $ 268 $ 88 Interest expense – – Other expense ( 1,099 ) ( 877 ) Income (loss) before income tax and undistributed subsidiary income ( 831 ) ( 789 ) Income tax benefits 196 85 Equity in undistributed subsidiary income 5,149 6,340 Net income $ 4,514 $ 5,636 Condensed Statements of Cash Flows Years Ended December 31, 2023 2022 (In thousands) Cash flows from operating activities Net income $ 4,514 $ 5,636 Adjustments to reconcile net loss to net cash used in operating activities: Equity in undistributed subsidiary income ( 5,149 ) ( 6,340 ) Change in other assets ( 1,222 ) 1,196 Change in accrued expenses and other liabilities 152 ( 348 ) Net cash (used in) provided by operating activities ( 1,705 ) 144 Cash flows from investing activities Capital distribution to bank subsidiary – ( 75,000 ) Net cash used in investing activities – ( 75,000 ) Cash flows from financing activities Share repurchase - FDIC ( 1,781 ) – Proceeds from issuance of preferred stock – 150,000 Increase in unreleased ESOP shares ( 3,400 ) ( 500 ) Proceeds from repayment of ESOP loan 328 66 Net cash (used in) provided by financing activities ( 4,853 ) 149,566 Net change in cash and cash equivalents ( 6,558 ) 74,710 Beginning cash and cash equivalents 84,015 9,305 Ending cash and cash equivalents $ 77,457 $ 84,015 There was $ 3.0 million of non-cash financing activities for the exchange of preferred stock for common stock in 2022. Note 19 – Earnings Per Common Share The factors used in the earnings per common share computation follow: 2023 2022 (Dollars in thousands, except share and per share) Net income attributable to Broadway Financial Corporation $ 4,514 $ 5,636 Less net income attributable to participating securities 59 27 Income available to common stockholders $ 4,455 $ 5,609 Weighted average common shares outstanding for basic earnings per common share 8,627,071 9,051,128 Add: dilutive effects of unvested restricted stock awards 114,599 51,737 Weighted average common shares outstanding for diluted earnings per common share 8,741,670 9,102,865 Earnings per common share - basic $ 0.52 $ 0.62 Earnings per common share - diluted $ 0.51 $ 0.62 F-34 Table of Contents Stock options for 31,250 shares of common stock for the year ended December 31, 2023, were not considered in computing diluted earnings per common share because they were anti‑dilutive. Basic earnings 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. Diluted earnings per share of common stock includes the dilutive effect of unvested stock awards and additional potential common shares issuable under stock options. No unvested stock awards or potential common shares issuable under stock options were included in diluted earnings per share in either year. All common stock share amounts above have been retroactively adjusted, as applicable, for the 1-for-8 reverse stock split effective November 1, 2023. See Note 2. Note 20 – Subsequent Events The Company evaluated its December 31, 2023 consolidated financial statements for subsequent events through the date these financial statements were issued. F-35