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Item 2. Management’s Discussion and Analysis

2024-08-14 compared with 2024-05-24 · 312 added, 257 removed, 147 unchanged (79% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to provide a reader of our financial statements with a narrative from

the perspective of our management on our financial condition, results of operations, liquidity and certain other factors that may affect our future results.

Our MD&A should be read in conjunction with the Consolidated Financial Statements and

related Notes included in Part I, Item 1 “Financial Statements,” of this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2023.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to provide a reader of our financial statements with a narrative

from the perspective of our management on our financial condition, results of operations, liquidity and certain other factors that may affect our future results.

Our MD&A should be read in conjunction with the Consolidated Financial Statements

and related Notes included in Part I, Item 1 “Financial Statements,” of this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2023.

Certain statements herein are forward-looking statements within the

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Securities Exchange Act of 1934, as amended (the “Exchange Act”) and Section 27A of the U.S.

Securities Act of 1933, as amended that reflect our current views with respect to future events and financial performance.

Forward-looking statements typically include words such as “expect,” “estimate,” “project,” “budget,” “forecast,” “anticipate,” “intend,” “plan,” “may,” “will,” “could,” “should,”

“believes,” “predicts,” “potential,” “continue,” “poised,” “optimistic,” “prospects,” “ability,” “looking,” “forward,” “invest,” “grow,” “improve,” “deliver” and other similar expressions.

These forward-looking statements are subject to

risks and uncertainties, which could cause actual future results to differ materially from historical results or from those anticipated or implied by such statements.

Readers should not place undue reliance on these forward-looking statements, which

speak only as of their dates or, if no date is provided, then as of the date of this Form 10-Q.

We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except

to the extent required by law.

Securities Act of 1933, as amended that reflect our current views with respect to future events and financial

“poised,” “optimistic,” “prospects,” “ability,” “looking,” “forward,” “invest,” “grow,” “improve,” “deliver” and other similar expressions.

These forward-looking statements are subject to risks and uncertainties, which could cause actual future

results to differ materially from historical results or from those anticipated or implied by such statements.

Readers should not place undue reliance on these forward-looking statements, which speak only as of their dates or, if no date is

provided, then as of the date of this Form 10-Q.

We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except to the extent required by law.

Critical Accounting Policies and Estimates

Critical accounting policies are those that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on our financial

condition or results of operations under different assumptions and conditions.

Critical accounting policies are those that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on our

financial condition or results of operations under different assumptions and conditions.

This discussion highlights those accounting policies that management considers critical.

All accounting policies are important;

therefore, you are encouraged to review

each of the policies included in Note 1 “Summary of Significant Accounting Policies” of the Notes to Consolidated Financial Statements in our 2023 Form 10-K to gain a better understanding of how our financial performance is measured and reported.

therefore, you are encouraged

to review each of the policies included in Note 1 “Summary of Significant Accounting Policies” of the Notes to Consolidated Financial Statements in our 2023 Form 10-K to gain a better understanding of how our financial performance is measured and

Management has identified the Company’s critical accounting policies as follows:

Allowance for Credit Losses for Loans

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 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.

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.

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 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.

The Company’s ACL model also includes adjustments for qualitative factors, where

Certain loans, such as those that are nonperforming or are considered to be collateral dependent, are 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

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 in which case the ACL is determined

using estimates of the fair value of the underlying collateral, less estimated selling costs.

Goodwill and Intangible Assets

Goodwill and intangible assets acquired in a purchase business combination and that are determined to have an indefinite useful life are not amortized but tested for impairment at

least annually or more frequently if events and circumstances exist that indicate the necessity for such impairment tests to be performed.

The Company has selected November 30th as the date to perform the annual impairment test.

Intangible assets

with definite useful lives are amortized over their estimated useful lives to their estimated residual values.

Goodwill is the only intangible asset with an indefinite life on the Company’s consolidated statement of financial condition.

Deferred tax assets and liabilities are determined using the liability (or balance sheet) method.

Under this method, the net deferred tax asset or liability is determined based on the

tax effects of the temporary differences between the book and tax bases of the various balance sheet assets and liabilities and gives current recognition to changes in tax rates and laws.

A valuation allowance is established against deferred tax

assets when, based upon the available evidence including historical and projected taxable income, it is more likely than not that some or all the deferred tax asset will not be realized.

In assessing the realization of deferred tax assets, management

evaluates both positive and negative evidence, including the existence of any cumulative losses in the current year and the prior two years, the amount of taxes paid in available carry‑back years, forecasts of future income and available tax planning

This analysis is updated quarterly.

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.

Fair values are estimated using relevant market information and other assumptions, as more fully disclosed in Note 7 “Fair Value” of the Notes to Consolidated Financial Statements of

this Quarterly Report on Form 10-Q.

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 items.

assumptions or in market conditions could significantly affect the estimates.

Total assets decreased by $4.9 million to $1.4 billion at March 31, 2024 from December 31, 2023, primarily due to decreases in cash and cash equivalents of $38.1

million and securities available-for-sale of $23.7 million, partially offset by growth in loans receivable held for investment of $46.0 million and other assets of $9.9 million.

Total liabilities decreased by $4.3 million to $1.1 billion at March 31, 2024 from December 31, 2023.

The decrease in total liabilities primarily consisted of decreases of $14.0

million in notes payable, $1.8 million in securities sold under agreements to repurchase, and $1.3 million in accrued expenses and other liabilities, which were partially offset by an increase in deposits of $12.9 million.

During the first quarter of 2024, net interest income decreased by $750 thousand, or 9.1%, compared to the first quarter of 2023.

This decrease resulted from additional interest

expense, primarily due to an overall increase of 156 basis points in the average cost of funds, which reflected the higher rates that the Bank paid on deposits and borrowings because of the interest rate increases implemented by the FRB as well as to

growth of $165.8 million in average interest-earning liabilities from the quarter ended March 31, 2023.

This decrease was partially offset by an increase in interest income due to a 46 basis point increase in the overall rate earned on

interest-earning assets as the Bank earned higher rates on interest-earning deposits, securities and the loan portfolio.

In addition, total non-interest expense increased by $1.6 million during the first quarter of 2024 compared to the first quarter of 2023, primarily due to increases of

$905 thousand in non-recurring professional services and $648 thousand in compensation and benefits.

Partially offsetting this increase was a decrease in income tax expense of $731 thousand, which reflected a decrease of $2.5 million in

pre-tax income between the two periods.

For the first quarter of 2024, the Company reported a net loss of $162 thousand compared to net income of $1.6 million for the first quarter of 2023.

The Company’s ACL model also includes adjustments for qualitative

factors, where appropriate.

Certain loans, such as those that are nonperforming or are considered to be collateral dependent, are 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.

determined using estimates of the fair value of the underlying collateral, less estimated selling costs.

Total assets decreased by $8.1 million to $1.4 billion at June 30, 2024 from December 31, 2023, primarily due to decreases in securities

available-for-sale of $55.5 million and cash and cash equivalents of $15.4 million, partially offset by growth in net loans of $58.3 million and other assets of $4.1 million.

Loans held for investment, net of the ACL, increased by $58.3 million to $938.7 million at June 30, 2024, compared to $880.5 million at December 31, 2023.

The increase was primarily due to loan

originations of $97.0 million which consisted of $53.8 million in multi-family loans, $21.5 million in commercial real estate loans, $17.5 million in other commercial loans, $3.7 million in construction loans, and $500 thousand in SBA loans,

partially offset by loan payoffs and repayments of $38.7 million.

Deposits increased by $4.7 million to $687.4 million at June 30, 2024, from $682.6 million at December 31, 2023.

The increase in deposits was attributable to an increase of $19.4 million in Insured

Cash Sweep (“ICS”) deposits, partially offset by decreases of $8.4 million in liquid deposits (demand, interest checking, and money market accounts), $3.2 million in savings deposits, $1.7 million in other certificates of deposit accounts and $1.4

million in Certificate of Deposit Registry Service (“CDARS”) deposits.

As of June 30, 2024, our uninsured deposits, including deposits from affiliates, represented 35% of our total deposits, as compared to 37% as of

December 31, 2023.

Total borrowings decreased by $14.9 million to $381.9 million at June 30, 2024, from $396.8 million at December 31, 2023, primarily due to the payoff of two notes

payable totaling $14.0 million during January 2024.

For the three months ended June 30, 2024, the Company reported net income of $269 thousand compared to net income of $243 thousand for the three months ended June 30, 2023.

increase resulted from an increase in net interest income of $650 thousand and a $274 thousand decrease in the provision for credit losses during the three months ended June 30, 2024 compared to the three months ended June 30, 2023, partially

offset by an increase in non-interest expense of $859 thousand during the three months ended June 30, 2024 compared to the three months ended June 30, 2023.

The increase in non-interest expense was primarily due to a $735 thousand increase in

compensation and benefits expense.

For the six months ended June 30, 2024, the Company reported net income of $105 thousand compared to net income of $1.8 million for the six months ended June 30, 2023.

decrease resulted from an increase in non-interest expense of $2.4 million during the first six months of 2024 compared to the first six months of 2023.

The increase in non-interest expense was primarily due to a $1.4 million increase in

compensation and benefits expense and an $861 thousand increase in professional services expense.

Results of Operations

Net Interest Income

Three Months Ended March 31, 2024 Compared to the Three Months Ended March 31, 2023

Net interest income before provision for credit losses for the first quarter of 2024 totaled $7.5 million, representing a decrease of $750 thousand, or 9.1%, from net interest income

before loan loss provision of $8.3 million for the first quarter of 2023.

The decrease resulted from additional interest expense, primarily due to an increase in the cost of average borrowings of 1.65% and an increase in the cost of average deposits

of 1.05% during the first quarter of 2024, compared to the first quarter of 2023.

In addition, the decrease in net interest income before provision for credit losses was caused by an increase in average borrowings of $165.8 million during the first

quarter of 2024, compared to the first quarter of 2023, which was due to the $100.0 million BTFP borrowing in December 2023 and an increase of $64.1 million in average FHLB advances during the first quarter of 2024.

The net interest margin decreased

to 2.27% for the first quarter of 2024, compared to 2.96% for the first quarter of 2023, primarily due to an overall increase of 156 basis points in the average cost of funds, which reflected higher rates paid on deposits and borrowings because of

the increases in interest rates implemented by the Federal Open Market Committee of the Federal Reserve (the “Federal Reserve” or “FRB”) between March 2022 and September 2023.

The impact of the rising cost of funds was partially offset by an

increase in the yield on interest-earnings assets of 46 basis points, primarily due to higher rates earned on interest-bearing deposits in other banks, securities and the loan portfolio.

Three Months Ended June 30, 2024 Compared to the Three Months Ended June 30, 2023

Net interest income before provision for credit losses for the second quarter of 2024 totaled $7.9 million, representing an increase of $650 thousand, or 8.9%, from net

interest income before provision for credit losses of $7.3 million for the second quarter of 2023.

The increase resulted from higher interest income, primarily due to an increase in interest on loans, partially offset by an increase in interest

expense, due to increases in the cost of borrowings and deposits.

The increase in interest income was primarily due to growth of $145.5 million in average loans receivable during the second quarter of 2024, compared to the second quarter of 2023.

In addition, the overall rate earned on interest-earning assets increased by 67 basis points as the Bank earned higher rates on interest-earning deposits, securities, and the loan portfolio.

The net interest margin decreased to 2.41% for the

second quarter of 2024 from 2.52% for the second quarter of 2023, primarily due to an increase in the average cost of funds, which increased to 3.19% for the second quarter of 2024 from 2.12% for the second quarter of 2023, due to higher rates paid

on deposits and borrowings after eleven rate increases by the Federal Open Market Committee of the Federal Reserve (the “FRB”) from March 2022 through December 2023.

Six Months Ended June 30, 2024 Compared to the Six Months Ended June 30, 2023

Net interest income before provision for credit losses for the six months ended June 30, 2024, totaled $15.4 million, representing a decrease of $100 thousand, or 0.6%, from

net interest income before provision for credit losses of $15.5 million for the six months ended June 30, 2023.

The decrease resulted from a $7.7 million increase in interest expense, primarily due to an increase in the average cost of funds,

which increased to 3.11% for the first six months of 2024 from 1.76% for the first six months of 2023, due to higher interest rates on deposits and borrowings.

This decrease was partially offset by a $7.6 million increase in interest income for

the six months ended June 30, 2024, compared to the six months ended June 30, 2023, primarily due to a 60 basis point increase in the overall rate earned on interest-earning assets as the Bank earned higher rates on interest-earning deposits, the

loan portfolio, and, to a lesser extent, securities, and due to growth of $143.3 million in average loans receivable during the six months ended June 30, 2024, compared to the six months ended June 30, 2023.

The net interest margin decreased to

2.34% for the six months ended June 30, 2024, compared to 2.74% for the six months ended June 30, 2023.

The following tables set forth the average balances, average yields and costs, and certain other information for the periods indicated.

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The yields set forth below include the effect of deferred loan fees, and discounts and premiums that are amortized or accreted to interest income or expense.

We do not accrue interest on loans on non-accrual status, but the balance of these

loans is included in the total average balance of loans receivable, which has the effect of reducing average loan yields.

We do not accrue interest on loans on non-accrual status, but the balance of

these loans is included in the total average balance of loans receivable, which has the effect of reducing average loan yields.

For the Three Months Ended

March 31, 2024

March 31, 2023

June 30, 2024

June 30, 2023

(Dollars in Thousands)

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(3) Net interest rate margin represents net interest income as a percentage of average interest-earning assets.

Credit Loss Provision

For the three months ended March 31, 2024, the Company recorded a provision for credit losses of $260 thousand , compared to a provision for credit losses of $88 thousand for the three months ended March 31, 2023.

The provision for credit losses during the quarter ended March 31, 2024 increased by $172 thousand compared to the

quarter ended March 31, 2023, due to an increase in loan origination volume.

Since the Company has no historical loss rates of its own, it uses peer historical loss rates, which decreased during the first quarter of 2024 and caused the

Company to decrease the factor for historical losses in its computation, causing a decrease in the provision on certain loan categories.

The provision for credit losses during the quarter-ended March 31, 2024, included

provisions for off-balance sheet loan commitments of $56 thousand.

The ACL increased to $7.6 million as of March 31, 2024, compared to $7.3 million as of December 31, 2023.

The Bank had non-accrual loans of $401 thousand at March 31, 2024, which were greater than 90 days past due.

Loan delinquencies for 30 days or more, but less

than 90 days, decreased to $369 thousand at March 31, 2024, compared to $780 thousand at December 31, 2023.

There were no loans past due by greater than 90 days at December 31, 2023.

No loan charge-offs were recorded during the three months ended March 31, 2024 or 2023.

For the Six Months Ended

June 30, 2024

June 30, 2023

(Dollars in Thousands)

Average Balance

Average Yield/Cost

Average Balance

Average Yield/Cost

Interest-earning assets:

Interest-bearing deposits

Loans receivable (1)

FRB and FHLB stock

Total interest-earning assets

Non-interest-earning assets

Liabilities and Stockholders’ Equity

Interest-bearing liabilities:

Money market deposits

Savings deposits

Interest checking and other demand deposits

Certificate accounts

Total deposits

FHLB advances

Bank Term Funding Program borrowing

Other borrowings

Total borrowings

Total interest-bearing liabilities

Non-interest-bearing liabilities

Stockholders’ equity

Total liabilities and stockholders’ equity

Net interest rate spread (2)

Net interest rate margin (3)

Ratio of interest-earning assets to interest-bearing liabilities

Amount is net of deferred loan fees, loan discounts and loans in process, and includes deferred origination costs and loan premiums.

Net interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities.

Net interest rate margin represents net interest income as a percentage of average interest-earning assets.

Provision for Credit Losses

For the three months ended June 30, 2024, the Company recorded a provision for credit losses of $494 thousand , compared to $768 thousand for the three months ended June 30, 2023.

For the six months ended June 30, 2024, the Company recorded a provision for credit losses of $754 thousand , compared to $810 thousand for the six months ended June 30, 2023.

The provisions for credit losses during the three and six months ended June 30, 2024 include recoveries of provisions for credit losses for off-balance

sheet loan commitments of $58 thousand and $2 thousand, respectively.

The provisions for credit losses during the three and six months ended June 30, 2023 include provisions for credit losses for off-balance sheet loan commitments of $83

thousand and $37 thousand, respectively.

The decreases in the provisions for credit losses were primarily due to lower loan originations and declines in the provision for credit losses for off-balance sheet loan commitments.

The allowance for credit losses (“ACL ”) increased to $8.1 million as of June 30, 2024, compared to $7.3 million as of

December 31, 2023 due to growth in the loan portfolio.

The Bank had two non-accrual loans at June 30, 2024 with total unpaid principal balances of $328 thousand.

No loan charge-offs were recorded during the quarters or six months ended June 30, 2024 or 2023.

Non-interest Income

Non-interest income for the first quarter of 2024 totaled $306 thousand, compared to $289

thousand for the first quarter of 2023.

Non-interest income for the second quarter of 2024 totaled $273 thousand,

compared to $260 thousand for the second quarter of 2023.

For the first six months of 2024, non-interest income totaled $579 thousand, compared to $549 thousand for the same period in the prior year.

The increase was primarily due to

an increase in fees from a revenue sharing agreement with another financial institution.

Non-interest Expense

Total non-interest expense was $7.8 million for the first quarter of 2024, representing an increase of $1.6 million, or 25.8%, from $6.2 million for the first quarter of 2023.

The increase was

primarily due to higher non-recurring professional services expense of $905 thousand, and compensation and benefits expense of $648 thousand.

The increase in professional services was primarily due to hiring a third party firm to assist with reviewing certain general ledger account reconciliations.

increase in compensation and benefits expense was primarily attributable to additional full-time employees that the Bank hired over the past twelve months in various production and administrative support positions.

These hires were part of the

Company’s overall efforts to expand its operational capabilities to strategically grow its balance sheet and fulfill the intersecting lending objectives of the Company’s mission and the funding received from the Emergency Capital Investment Program

of the United States Department of the Treasury.

Total non-interest expense was $7.3 million for the second quarter of 2024, compared to $6.4 million for the second quarter of 2023, representing an increase of $859 thousand, or 13.4%.

increase was primarily due to an increase of $735 thousand in compensation and benefits expense.

For the first six months of 2024, non-interest expense totaled $15.1 million, representing an increase of $2.4 million, or 19.1%, from $12.7 million for the same period in the

The increase of $2.4 million primarily resulted from increases in compensation and benefits expense of $1.4 million and professional services expense of $861 thousand.

The increase in professional service expense was primarily due to

hiring a third-party firm to assist with reviewing certain general ledger account reconciliations, as well as other professionals, in connection with the Company’s investigation of the weaknesses in internal controls that were identified during

preparation of the financial statements for the third quarter of 2023.

The increases in compensation and benefits expense were primarily attributable to the addition of full-time employees during 2023 in various production and administrative positions as part of the

Bank’s efforts to expand its operational capabilities to grow its balance sheet and fulfill the intersecting lending objectives of the Company’s mission and the ECIP funding received in June 2022.

Income taxes are computed by applying the statutory federal income tax rate of 21% and the combined California and Washington, D.C.

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The Company recorded

an income tax benefit of $57 thousand for the first quarter of 2024 and income tax expense of $674 thousand for the first quarter of 2023.

The decrease in tax expense reflected a decrease of $2.5 million in pre-tax income between the two periods.

The effective tax rate was 23.75% for the first quarter of 2024, compared to 29.70% for the first quarter of 2023.

an income tax expense of $146 thousand for the second quarter of 2024 and $93 thousand for the second quarter of 2023.

The increase in tax expense reflected an increase of $78 thousand in pre-tax income between the two periods.

The effective tax

rate was 35.01% for the second quarter of 2024, compared to 27.43% for the second quarter of 2023.

The increase in the effective tax rate was primarily due to the vesting of stock awards.

For the six months ended June 30, 2024, income tax expense was $89 thousand, compared to $767 thousand for the six months ended June 30, 2023.

The decrease in

tax expense reflected a decrease in pretax earnings of $2.4 million between the two periods.

The effective tax rate was 50.28% for the six months ended June 30, 2024 , compared to 29.41% for the six months

ended June 30, 2023 .

The increase in the effective tax rate was primarily due to the vesting of stock awards.

Financial Condition

Total assets decreased by $4.9 million at March 31, 2024, compared to December 31, 2023, prima rily due to decreases in cash and cash equivalents of $38.1 million

and securities available-for-sale of $23.7 million, partially offset by growth in loans receivable held for investment of $46.0 million and other assets of $9.9 million.

Total assets decreased by $8.1 million at June 30, 2024, compared to December 31, 2023, prima rily due to decreases in securities available-for-sale of $55.5

million and cash and cash equivalents of $15.4 million, partially offset by growth in net loans of $58.3 million and other assets of $4.1 million.

Securities Available-For-Sale

Securities available-for-sale totaled $293.2 million at March 31, 2024, compared with $317.0 million at December 31, 2023.

The $23.7 million decrease in securities available-for-sale

during the three months ended March 31, 2024 was primarily due to principal paydowns of $23.2 million.

The table below presents the carrying amount, weighted average yields and contractual maturities of our securities as of March 31, 2024.

The table reflects stated final maturities and

does not reflect scheduled principal payments or expected payoffs.

March 31, 2024

Securities available-for-sale totaled $261.5 million at June 30, 2024, compared with $317.0 million at December 31, 2023.

The $55.5 million decrease in securities

available-for-sale during the six months ended June 30, 2024 was primarily due to maturities and principal paydowns.

The table below presents the carrying amount, weighted average yields and contractual maturities of our securities as of June 30, 2024.

The table reflects stated final

maturities and does not reflect scheduled principal payments or expected payoffs.

June 30, 2024

One Year or Less

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to Five Years

More Than Five

Years to Ten Years

More Than Ten

More Than Five Years to Ten Years

More Than Ten Years

Carrying Amount

Weighted Average Yield

Carrying Amount

Weighted Average Yield

Carrying Amount

Weighted Average Yield

Carrying Amount

Weighted Average Yield

Carrying Amount

Weighted Average Yield

(Dollars in thousands)

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Loans Receivable

Loans receivable held for investment, net of the ACL, increased by $46.0 million to $926.5 million at March 31, 2024, compared to $880.5 million at December 31, 2023.

increase was primarily due to loan originations of $71.5 million during the first three months of 2024, which consisted of $38.0 million of multi-family loans, $17.5 million of other commercial loans, $15.0 million of commercial real estate loans and

$1.0 million of construction loans, offset in part by loan payoffs and repayments of $25.5 million.

The following tables presents loan categories by maturity for the period indicated.

Actual repayments historically have, and will likely in the future, differ significantly from

contractual maturities because individual borrowers generally have the right to prepay loans, with or without prepayment penalties.

March 31, 2024

Loans receivable held for investment, net of the ACL, increased by $58.3 million to $938.7 million at June 30, 2024, compared to $880.5 million at December 31,

The increase was primarily due to loan originations of $97.0 million which consisted of $53.8 million in multi-family loans, $21.5 million in commercial real estate loans, $17.5 million in other commercial loans, $3.7 million in

construction loans, and $500 thousand in SBA loans, partially offset by loan payoffs and repayments of $38.7 million.

The following table presents loan categories by maturity for the period indicated.

Actual repayments historically have, and will likely in the future, differ significantly from contractual

maturities because individual borrowers generally have the right to prepay loans, with or without prepayment penalties.

June 30, 2024

One Year or Less

More Than One Year to Five Years

Five Years to

13 unchanged sentences

Certain multi-family loans have adjustable-rate features based on the Secured Overnight Financing Rate but are fixed for the first five years.

Our experience has shown that these

loans typically payoff during the first five years and do not reach the adjustable-rate phase.

However, in the current high interest rate environment, we have seen more borrowers maintain their loans instead of paying them off due to interest rate

caps which make the adjusted interest rate on their existing loan more desirable than getting a new loan at current interest rates.

Multi-family loans in their initial fixed period totaled $575.9 million or 61.7% of our loan portfolio as of March 31,

Our experience has shown that

these loans typically payoff during the first five years and do not reach the adjustable-rate phase.

However, in the current high interest rate environment, we have seen more borrowers maintain their loans instead of paying them off due to interest

rate caps which make the adjusted interest rate on their existing loan more desirable than getting a new loan at current interest rates.

Multi-family loans in their initial fixed period totaled $585.9 million or 62.0% of our loan portfolio as of

June 30, 2024.

Allowance for Credit Losses

The Company accounts for credit losses on loans in accordance with ASC 326 – Financial Instruments-Credit Losses , to determine the ACL.

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.

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

3 unchanged sentences

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 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.

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

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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

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.

The ACL for collateral dependent loans

is determined using estimates of the fair value of the underlying collateral, less estimated selling costs.

collateral dependent loans is determined using estimates of the fair value of the underlying collateral, less estimated selling costs.

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

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

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 ACL was $7.6 million, or 0.81% of gross loans held for investment at March 31, 2024, compared to an ACL of $7.3 million, or .83% of gross loans held for investment, at December

There were no recoveries or charge-offs recorded during the three month periods ending March 31, 2024 and 2023.

Collateral dependent loans at both March 31, 2024 and December 31, 2023 totaled $6.4 million, which had an associated ACL of $112 thousand.

The Bank had non-accrual loans of $401 thousand at March 31, 2024, which were greater than 90 days past due.

Loan delinquencies for 30 days or more, but less

than 90 days, decreased to $369 thousand at March 31, 2024, compared to $780 thousand at December 31, 2023.

There were no loans past due by greater than 90 days at December 31, 2023.

No loan charge-offs were recorded during the three months ended March 31, 2024 or 2023.

We believe that the ACL is adequate to cover currently expected losses in the loan portfolio as of March 31, 2024, but there can be no assurance that actual losses will not exceed the

estimated amounts.

Such agencies may require the Company to recognize additions to the ACL based

on judgments different from those of management.

The ACL was $8.1 million, or 0.86% of gross loans held for investment at June 30, 2024, compared to an ACL of $7.3 million, or 0.83% of gross loans held for investment, at

December 31, 2023.

There were no recoveries or charge-offs recorded during the three or six month periods ending June 30, 2024 and 2023.

Collateral dependent loans at June 30, 2024 and December 31, 2023 totaled $481 thousand and $6.4 million, respectively.

These loans had an ACL of $0 and $112 thousand as of

June 30, 2024 and December 31, 2023, respectively.

The Bank had non-accrual loans of $328 thousand at June 30, 2024.

Loan delinquencies for 30 days or more, but less than 90 days, decreased to $710

thousand at June 30, 2024, compared to $780 thousand at December 31, 2023.

There was one $5 thousand loan past due by greater than 90 days at June 30, 2024.

There were no loans past due by greater than 90

days at December 31, 2023.

We believe that the ACL is adequate to cover currently expected losses in the loan portfolio as of June 30, 2024, but there can be no assurance that actual losses will not

exceed the estimated amounts.

The OCC and the Federal Deposit Insurance Corporation (“FDIC”) periodically review the ACL as an integral part of their examination process.

These agencies may require an increase in the ACL based on their judgments of the

information available to them at the time of their examinations.

The following table details our allocation of the ACL to the various categories of loans held for investment and the percentage of loans in each category to total loans at the dates indicated:

March 31, 2024

These agencies may require an increase in the ACL based on their judgments of

the information available to them at the time of their examinations.

The following table details our allocation of the ACL to the various categories of loans held for investment and the percentage of loans in each category to total loans at the

dates indicated:

June 30, 2024

December 31, 2023

March 31, 2023

June 30, 2023

(Dollars in thousands)

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Total allowance for loan losses

Goodwill and Intangible Assets

The core deposit intangible asset is 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.

During the three months ended March 31, 2024 and 2023, the Company recorded $84 thousand and $98 thousand, respectively, of amortization expense related to the core deposit

An assessment of goodwill impairment was performed by a third party as of December 31, 2023, in which no impairment was determined.

No impairment charges were recorded during the

three months ended March 31, 2024 or 2023, for goodwill or the core deposit intangible.

Total Liabilities

Total liabilities decreased by $4.3 million to $1.1 billion at March 31, 2024 from December 31, 2023, largely due to decreases of $14.0 million in notes payable, $1.8 million in

securities sold under agreements to repurchase, and $1.3 million in accrued expenses and other liabilities, which were partially offset by an increase in deposits of $12.9 million.

Deposits increased by $12.9 million to $695.5 million at March 31, 2024, from $682.6 million at December 31, 2023.

The increase in deposits was attributable to increases of $15.0 million in liquid

deposits (demand, interest checking and money market accounts) and $12.4 million in Insured Cash Sweep (“ICS”) deposits (ICS deposits are the Bank’s money market deposit accounts in excess of FDIC insured limits whereby

the Bank makes reciprocal arrangements for insurance with other banks), partially offset by decreases of $12.2 million in Certificate of Deposit Registry Services (“CDARS”) deposits (CDARS deposits are similar to ICS deposits, but involve

certificates of deposit, instead of money market accounts), $1.7 million of savings deposits and $596 thousand in other certificates of deposit accounts .

As of March 31, 2024, our uninsured deposits, including deposits from affiliates, represented approximately 38% of our total deposits, as compared to approximately 37% as of December 31, 2023.

Total liabilities decreased by $8.5 million to $1.1 billion at June 30, 2024 from December 31, 2023, largely due to decreases of $14.0 million in notes payable and $817

thousand in securities sold under agreements to repurchase, partially offset by increases in deposits of $4.7 million and $1.7 million in accrued expenses and other liabilities.

Deposits increased by $4.7 million to $687.4 million at June 30, 2024, from $682.6 million at December 31, 2023.

The increase in deposits was attributable to an increase of $19.4 million in ICS

deposits, partially offset by decreases of $8.4 million in liquid deposits (demand, interest checking, and money market accounts), $3.2 million in savings deposits, $1.7 million in other certificates of deposit accounts and $1.4 million in CDARS

As of June 30, 2024, our uninsured deposits, including deposits from affiliates, represented 35% of our total deposits, as compared to 37% as of December 31, 2023.

The following table presents the maturity of time deposits as of the dates indicated:

(In thousands)

March 31, 2024

June 30, 2024

Time deposits of $250,000 or less

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Not covered by deposit insurance

At March 31, 2024 and December 31, 2023, the Company had outstanding advances from the FHLB totaling $209.3 million.

The weighted interest rate was 4.91% as of both March 31, 2024 and

December 31, 2023.

The weighted average contractual maturity was 2 months as of both March 31, 2024 and December 31, 2023.

The advances were collateralized by loans with a fair value of $419.2 million at March 31, 2024 and $435.4 million at December

The Company is currently approved by the FHLB of Atlanta to borrow up to 25% of total assets to the extent the Company provides qualifying collateral and holds sufficient FHLB stock.

Based on collateral pledged and FHLB stock as of March

31, 2024, the Company was eligible to borrow an additional $105.0 million as of March 31, 2024.

At June 30, 2024 and December 31, 2023, the Company had outstanding advances from the FHLB totaling $209.2 million.

and $209.3 million, respectively.

The weighted interest rate

was 4.91% as of both June 30, 2024 and December 31, 2023.

The weighted average contractual maturity was one month as of June 30, 2024 and two months as of December 31, 2023.

The advances were collateralized by loans with an unpaid balance of

$506.2 million at June 30, 2024 and $435.4 million at December 31, 2023.

The Company is currently approved by the FHLB of Atlanta to borrow up to 25% of total assets to the extent the Company provides qualifying collateral and holds sufficient FHLB

Based on collateral pledged and FHLB stock as of June 30, 2024, the Company was eligible to borrow an additional $171.4 million as of June 30, 2024.

The Company enters into agreements under which it sells securities subject to an obligation to repurchase the same or similar securities.

Under these arrangements, the Company may

transfer legal control over the assets but still retain effective control through an agreement that both entitles and obliges the Company 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 Company’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.

agreements mature on a daily basis.

As of March 31, 2024 securities sold under agreements to repurchase totaled $71.7 million at an average rate of 3.62%.

The fair value of securities pledged totaled $78.6 million as of March 31, 2024.

December 31, 2023, securities sold under agreements to repurchase totaled $73.5 million at an average rate of 2.60%.

Under these arrangements, the Company

may transfer legal control over the assets but still retain effective control through an agreement that both entitles and obliges the Company 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 Company’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

These agreements mature on a daily basis.

As of June 30, 2024 securities sold under agreements to repurchase totaled $72.7 million at an average rate of 3.68%.

The fair value of securities pledged totaled $70.9 million as of June 30,

As of December 31, 2023, securities sold under agreements to repurchase totaled $73.5 million at an average rate of 3.64%.

The fair value of securities pledged totaled $89.0 million as of December 31, 2023.

One relationship accounted for 86% of our balance of securities sold under agreements to repurchase as of March 31, 2024.

We expect to maintain this relationship for the foreseeable

One relationship accounted for 95% of our balance of securities sold under agreements to repurchase as of June 30, 2024.

We expect to maintain this relationship for the

foreseeable future.

On December 27, 2023, the Company borrowed $100.0 million from the Federal Reserve under the BTFP.

As of both June 30, 2024 and December 31, 2023, $100.0 million was outstanding.

rate on this borrowing is fixed at 4.84% and the borrowing matures on December 29, 2024.

Investment securities with a fair value of $94.0 million and $98.3 million were pledged as collateral for this borrowing as of June 30, 2024 and December 31,

2023, respectively.

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 connection with the New Market Tax Credit activities of the Company, 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 QALICB.

to the QALICB was 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.

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

The loan to the QALICB was 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.

This loan was paid off on January 18, 2024.

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Stockholders’ Equity

Stockholders’ equity was $281.3 million, or 20.5%, of the Company’s total assets, at March 31, 2024, compared to $281.9 million, or 20.5% of the Company’s total assets

at December 31, 2023.

S tockholders’ equity decreased primarily due to an increase of $571 thousand in accumulated other comprehensive loss, net of tax.

Book value per share was $14.59 at March 31, 2024 and

$14.65 at December 31, 2023.

Stockholders’ equity was $282.3 million, or 20.6%, of the Company’s total assets, at June 30, 2024, compared to $281.9 million, or 20.5% of the Company’s total assets at

December 31, 2023.

Book value per share was $14.49 at June 30, 2024 and $14.65 at December 31, 2023.

During the second quarter of 2023, the Company issued 92,720 shares of restricted stock to its officers and employees based on performance during 2022 under the Amended LTIP.

shares issued to officers and employees vest over periods ranging from 36 months to 60 months.

All the shares issued to officers and employees vest over periods ranging from 36 months to 60 months.

On March 26, 2024, the Company issued 94,413 shares of restricted stock to its officers and employees under the Amended and Restated LTIP.

Each restricted stock award was valued based

on the fair value of the stock on the date of the award.

During the first quarter of 2023, the Company issued 9,230 shares of stock to its directors which were fully vested.

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.

Each restricted stock award was

valued based on the fair value of the stock on the date of the award.

During February of 2023 and May of 2024, the Company issued 9,230 and 19,832 shares of stock, respectively, to its directors under the LTIP and Amended LIP, which were fully

On April 5, 2024, the Company issued 31,645 shares of restricted stock to an officer under the Amended LTIP.

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.

Tangible book value per common share is a non-GAAP measurement that excludes goodwill and the net unamortized core deposit intangible asset, which were both originally

1 unchanged sentence

The Company uses this non-GAAP financial measure to provide supplemental information regarding the Company’s financial condition and operational performance.

A reconciliation between common book value

and tangible book value per common share is shown as follows:

A reconciliation between common book

value and tangible book value per common share is shown as follows:

Common Equity

Shares Outstanding

(Dollars in thousands)

March 31, 2024:

June 30, 2024:

Common book value

6 unchanged sentences

The objective of liquidity management is to ensure that we have the continuing ability to fund operations and meet our obligations on a timely and cost-effective basis.

sources of funds include deposits, advances from the FHLB and other borrowings, proceeds from the sale of loans and investment securities, and payments of principal and interest on loans and investment securities.

The Bank is currently approved by

the FHLB of Atlanta to borrow up to 25% of total assets, or $284.3 million, to the extent the Bank provides qualifying collateral and holds sufficient FHLB stock.

Based on FHLB stock held and collateral pledged as of March 31, 2024, the Bank had the

ability to borrow an additional $105.0 million from the FHLB of Atlanta.

In addition, the Bank had additional lines of credit of $10.0 million with other financial institutions as of March 31, 2024.

The Bank had unpledged securities of $107.5

million as of March 31, 2024 which could be used as collateral for borrowings from the Federal Reserve Bank under the BTFP.

The Bank’s primary uses of funds include originations of loans, withdrawals of and interest payments on deposits, purchases of investment securities, and the payment of operating

Also, when the Bank has more funds than required for reserve requirements or short-term liquidity needs, the Bank invests in federal funds with the Federal Reserve Bank or in money market accounts with other financial institutions.

Bank’s liquid assets at March 31, 2024 consisted of $67.1 million in cash and cash equivalents and $107.5 million in securities available-for-sale that were not pledged, compared to $105.2 million in cash and cash equivalents and $173.3 million in

securities available-for-sale that were not pledged at December 31, 2023.

Bank’s sources of funds include deposits, advances from the FHLB and other borrowings, proceeds from the sale of loans and investment securities, and payments of principal and interest on loans and investment securities.

The Bank is currently

approved by the FHLB of Atlanta to borrow up to 25% of total assets, or $284.3 million, to the extent the Bank provides qualifying collateral and holds sufficient FHLB stock.

Based on FHLB stock held and collateral pledged as of June 30, 2024, the

Bank had the ability to borrow an additional $171.4 million from the FHLB of Atlanta.

In addition, the Bank had additional lines of credit of $10.0 million with other financial institutions as of June 30, 2024.

The Bank’s primary uses of funds include originations of loans, withdrawals of and interest payments on deposits, purchases of investment securities, and the payment of

operating expenses.

institutions.

The Bank’s liquid assets at June 30, 2024 consisted of $89.8 million in cash and cash equivalents and $85.0 million in securities available-for-sale that were not pledged, compared to $105.2 million in cash and cash equivalents and

$173.3 million in securities available-for-sale that were not pledged at December 31, 2023.

Currently, we believe the Bank has sufficient liquidity to support growth over the next twelve months and in the longer term.

The Bank had commitments to fund $448 thousand in loans that were approved but unfunded as of March 31, 2024.

In addition, the bank had $5.7 million in unfunded line of credit loans

and $49.3 million in unfunded construction loans as of March 31, 2024.

The Bank has a significant concentration of deposits with two customers that accounted for approximately 12% of its deposits as of March 31, 2024.

The Bank also has a significant

concentration of short-term borrowings with one customer that accounted for 86% of the outstanding balance of securities sold under agreements to repurchase as of March 31, 2024.

The Bank has long-term relationships with these customers and expects

to maintain its relationships with them for the foreseeable future.

The Company’s liquidity, separate from the Bank, is based primarily on the proceeds from financing transactions, such as the private placement completed in June of 2022 and previous

private placements.

The Bank had commitments to fund $408 thousand in loans that were approved but unfunded as of June 30, 2024.

In addition, the bank had $3.1 million in unfunded line of credit

loans and $49.2 million in unfunded construction loans as of June 30, 2024.

The Bank has a significant concentration of deposits with two customers that accounted for approximately 12% of its deposits as of June 30, 2024.

The Bank also has a

significant concentration of short-term borrowings with one customer that accounted for 95% of the outstanding balance of securities sold under agreements to repurchase as of June 30, 2024.

The Bank has long-term relationships with these customers

and expects to maintain its relationships with them for the foreseeable future.

The Company’s liquidity, separate from the Bank, is based primarily on the proceeds from financing transactions, such as the private placement completed in June of 2022 and

previous private placements.

The Bank is currently under no prohibition from paying dividends to the Company but is subject to restrictions as to the amount of the dividends based on normal regulatory guidelines.

The Company recorded consolidated net cash outflows from investing activities of $23.4 million during the three months ended March 31, 2024, compared to consolidated net cash outflows

from investing activities of $6.3 million during the three months ended March 31, 2023.

Net cash outflows from investing activities for the three months ended March 31, 2024 were primarily due to the funding of new loans, net of repayments, of $46.4

million, partially offset by proceeds from principal paydowns on available-for-sale securities of $23.2 million.

Net cash outflows from investing activities during the three months ended March 31, 2023 were primarily due to funding of new loans, net

of repayments, of $9.7 million, partially offset by $3.4 million in proceeds from principal paydowns on available-for-sale securities.

The Company recorded consolidated net cash outflows from financing activities of $3.0 million during the three months ended March 31, 2024, compared to consolidated net cash inflows

of $16.1 million during the three months ended March 31, 2023.

Net cash outflows from financing activities during the three months ended March 31, 2024 were primarily due to the $14.0 million repayment of notes payable, partially offset by a net

The Company recorded consolidated net cash outflows from investing activities of $3.3 million during the six months ended June 30, 2024, compared to $53.7 million during the

six months ended June 30, 2023.

Net cash outflows from investing activities for the six months ended June 30, 2024 were primarily due to the funding of new loans, net of repayments, of $59.1 million, partially offset by proceeds from principal

paydowns on available-for-sale securities of $56.0 million.

Net cash outflows from investing activities during the six months ended June 30, 2023 were primarily due to funding of new loans, net of repayments, of $58.7 million, partially offset by

$6.8 million in proceeds from principal paydowns on available-for-sale securities.

The Company recorded consolidated net cash outflows from financing activities of $10.2 million during the six months ended June 30, 2024, compared to consolidated net cash

inflows of $46.2 million during the six months ended June 30, 2023.

Net cash outflows from financing activities during the six months ended June 30, 2024 were primarily due to the $14.0 million repayment of notes payable, partially offset by a net

increase in deposits of $4.7 million.

Net cash inflows from financing activities during the three months ended March 31, 2023 were primarily attributable to proceeds from FHLB advances of $40.5 million, partially offset by a net decrease in deposits

Net cash inflows from financing activities during the six months ended June 30, 2023 were primarily attributable to proceeds from FHLB advances of $82.0 million, partially offset by a net decrease in deposits

of $40.9 million.

7 unchanged sentences

amounts and classifications are also subject to qualitative judgments by the regulators about components, risk-weightings, and other factors.

As of March 31, 2024 and December 31, 2023, the Bank exceeded all capital adequacy requirements to which it

is subject and meets the qualifications to be considered “well capitalized.” (See Note 10 – Stockholders’ Equity and Regulatory Matters.)

As of June 30, 2024 and December 31, 2023, the Bank exceeded all capital adequacy requirements to which it

is subject and meets the qualifications to be considered “well capitalized.” (See Note 10 – Regulatory Matters.)

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis