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Item 1. Business

2025-03-31 compared with 2024-05-20 · 674 added, 440 removed, 525 unchanged (68% of the section changed)

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

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,

(“Broadway Federal”).

The conversion was completed, and the Broadway Federal became a wholly‑owned subsidiary of the Company, in January 1996.

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 (the “Merger”) with CFBanc Corporation (“CFBanc”), with the Company continuing as the surviving entity.

Immediately following the Merger,

Broadway Federal merged with and into City First Bank of D.C, National Association with City First Bank of D.C., National Association continuing as the surviving entity (combined with Broadway Federal, “City First” or the “Bank”).

with the Merger, the Bank changed its name to City First Bank, National Association.

Immediately following the Merger, Broadway

Federal merged with and into City First Bank of D.C, National Association with City First Bank of D.C., National Association continuing as the surviving entity (combined with Broadway Federal, “City First” or the “Bank”).

Concurrently with the

Merger, the Bank changed its name to City First Bank, National Association.

Concurrently with the completion of the Merger, the Company converted to become a public benefit corporation.

The Company works to spur equitable economic development with a mission to

strengthen the overall well-being of historically excluded communities and has deployed loans and investments in the communities we serve that we believe has helped close funding gaps, preserved or increased access to affordable housing,

created and preserved jobs, and expanded critical social services.

We believe our status as a Delaware public benefit corporation aligns our business model of creating social, economic, and environmental value for underserved communities with a

stakeholder governance model that allows us to give careful consideration to the impact of our decisions on workers, customers, suppliers, community, the environment, and our impact on society;

The Company works to spur equitable economic development with a mission to strengthen

the overall well-being of historically excluded communities and has deployed loans and investments in the communities we serve that we believe has helped close funding gaps, preserved or increased access to affordable housing, created and

preserved jobs, and expanded critical social services.

We believe our status as a Delaware public benefit corporation aligns our business model of creating social, economic, and environmental value for underserved communities with a stakeholder

governance model that allows us to give careful consideration to the impact of our decisions on workers, customers, suppliers, community, the environment, and our impact on society;

and to align further our mission and values to our

organizational documents.

On June 7, 2022, the Company closed a private placement (the “Private Placement”) of shares of the Company’s Senior Non-Cumulative Perpetual Preferred Stock, Series C (the “Series C

Preferred Stock”), pursuant to a Letter Agreement (collectively with the annexes, exhibits and schedules thereto, including the Securities Purchase Agreement - Standard Terms, the “Purchase Agreement”), dated as of June 7, 2022, with the

United States Department of the Treasury (the “Purchaser”).

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.

liquidation value of the Series C Preferred Stock is $1,000 per share.

In June 2022, the Company down streamed $75.0 million of the proceeds from the Private Placement to the Bank to enhance capital of the Bank.

Reverse Stock Split

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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 8 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.

All common stock share amounts and per share numbers discussed herein have been retroactively adjusted, as applicable,

for 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.

immediately prior to the Reverse Stock Split were combined and reclassified into one share of common stock.

All common stock share amounts and per share numbers discussed herein have been retroactively adjusted, as applicable, for the Reverse

Share Repurchase

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.

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 - for more information about the reverse stock

split, see Note 2) 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.

The Company is currently regulated by the Board of Governors of the Federal Reserve System (the “FRB”).

The Bank is currently regulated by the Office of the Comptroller of the Currency (the

“OCC”) and the Federal Deposit Insurance Corporation (the “FDIC”).

The Bank is currently regulated by the Office of the Comptroller of the Currency (the “OCC”)

and the Federal Deposit Insurance Corporation (the “FDIC”).

The Bank’s deposits are insured up to applicable limits by the FDIC.

The Bank is also a member of the Federal Home Loan Bank of Atlanta (the “FHLB”).

See “Regulation” for

further descriptions of the regulatory systems to which the Company and the Bank are subject.

See “Regulation” for further

descriptions of the regulatory systems to which the Company and the Bank are subject.

Available Information

Our internet website address is www.cityfirstbank.com.

Our annual reports on Form 10‑K, quarterly reports on Form 10‑Q, current reports on Form 8‑K and all amendments to those reports are

available on our website as soon as reasonably practicable after we file such material with, or furnish such material to, the Securities and Exchange Commission (the “SEC”) and can be obtained free of charge by sending a written request to

Our annual reports on Form 10‑K, quarterly reports on Form 10‑Q, current reports on Form 8‑K and all amendments to those reports

are available on our website as soon as reasonably practicable after we file such material with, or furnish such material to, the Securities and Exchange Commission (the “SEC”) and can be obtained free of charge by sending a written request to

Broadway Financial Corporation, 4601 Wilshire Boulevard, Suite 150, Los Angeles, California 90010 Attention:

Audrey Phillips.

The SEC also maintains an internet site at www.sec.gov that contains reports, proxy and information

statements, and other information filed electronically by us with the SEC.

The SEC also maintains an internet site at www.sec.gov that contains

reports, proxy and information statements, and other information filed electronically by us with the SEC.

Business Overview

The Company is headquartered in Los Angeles, California and our principal business is the operation of our wholly‑owned subsidiary, City First, which has three offices:

two in California (in

Los Angeles and the nearby city of Inglewood) and one in Washington, D.C.

City First’s principal business consists of attracting deposits from the general public in the areas surrounding our branch offices, loan customers, large non-profit

entities, local municipalities, and depositors who believe in the Bank’s mission-driven focus.

These deposits, together with funds generated from operations and borrowings, primarily in loans secured by residential properties with five or more

units (“multi‑family”) and commercial real estate.

two in California (in Los

Angeles and the nearby city of Inglewood) and one in Washington, D.C.

City First’s principal business consists of attracting deposits from the general public in the areas surrounding our branch offices, loan customers, large non-profit entities,

local municipalities, and depositors who believe in the Bank’s mission-driven focus.

These deposits, together with funds generated from operations and borrowings, primarily in loans secured by residential properties with five or more units

(“multi‑family”) and commercial real estate.

Our assets also include loans secured by commercial business assets as well as residential properties with one‑to‑four units (“single-family”).

In addition, we invest in securities issued by

federal government agencies, residential mortgage‑backed securities and other investments.

In addition, we invest in securities issued by federal

government agencies, residential mortgage‑backed securities and other investments.

Our revenue is derived primarily from interest income on loans and investments.

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administrative expenses.

Our earnings are significantly affected by general economic and competitive conditions, particularly monetary trends, and conditions, including changes in market interest rates and the differences in market interest

rates for the interest-bearing deposits and borrowings that are our principal funding sources and the interest yielding assets in which we invest, as well as government policies and actions of regulatory authorities.

for the interest-bearing deposits and borrowings that are our principal funding sources and the interest yielding assets in which we invest, as well as government policies and actions of regulatory authorities.

Lending Activities

Our loan portfolio is comprised primarily of mortgage loans which are secured by multi‑family residential properties, single-family residential properties and commercial real estate,

Our loan portfolio is comprised primarily of commercial mortgage loans which are secured by multi‑family residential properties, single-family residential properties and commercial real estate,

including charter schools, community facilities, and churches.

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December 31, 2024, our net loan portfolio totaled $968.9 million, or 74.3% of total assets.

We emphasize the origination of adjustable‑rate loans, most of which are hybrid loans (loans having an initial fixed rate period which are initially 5 years, followed by an adjustable rate

We emphasize the origination of adjustable‑rate loans, most of which are hybrid loans (loans having an initial fixed rate period which are initially five years, followed by an adjustable-rate

period), for our portfolio of loans held for investment.

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The types of loans that we originate are subject to federal laws and regulations.

The interest rates that we charge on loans are affected by the demand for such loans, the supply of money

available for lending purposes and the rates offered by competitors.

The interest rates that we charge on loans are affected by the demand for such loans, the supply of money available

for lending purposes and the rates offered by competitors.

These factors are in turn affected by, among other things, economic conditions, monetary policies of the federal government, including the FRB, and legislative tax policies.

See “Regulation” for more information on the government regulations to which we are subject.

“Regulation” for more information on the government regulations to which we are subject.

The following table details the composition of our portfolio of loans held for investment by type, dollar amount and percentage of loan portfolio at the dates indicated:

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Commercial real estate

Commercial - other

Premiums on loans purchased

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December 31, 2024

One Year or Less

More Than One Year to Five Years

More Than Five Years to 15 Years

More Than 15 Years

Five Years to

(Dollars in thousands)

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Our primary lending emphasis has been on the origination of loans for multi-family with five or more units.

These multi‑family loans amounted to $561.4 million and $502.1

million at December 31, 2023 and 2022, respectively.

These multi‑family loans amounted to $633.3 million and $561.4 million at December 31,

2024 and 2023, respectively.

Multi‑family loans represented 64.94% of our gross loan portfolio at December 31, 2024 compared to 63.33% of our gross loan portfolio at December 31, 2023.

Most of our multi‑family loans

amortize over 30 years.

As of December 31, 2023, our single largest multi‑family credit had an outstanding balance of $11.6 million, was current, and was collateralized by a 53-unit apartment complex in Downey, California .

At December 31, 2023, the average balance of a loan in our multi‑family portfolio was $1.3 million.

Most of our multi‑family loans amortize over 30 years.

December 31, 2024, our single largest multi‑family credit had an outstanding balance of $11.4 million, was current, and was collateralized by a 53-unit apartment complex in Downey, California.

At December 31, 2024, the average balance of a loan

in our multi‑family portfolio was $1.3 million.

Our commercial real estate loans amounted to $156.2 million and $119.4 million at December 31, 2024 and 2023, respectively.

Commercial real estate loans represented 13.47% and 14.85% of our

gross loan portfolios at December 31, 2023 and 2022, respectively.

Commercial real estate loans represented 16.01% and 13.47% of our gross

loan portfolios at December 31, 2024 and 2023, respectively.

Most commercial real estate loans are originated with principal repayments on a 25- to 30-year amortization schedule but are due in 5 years or 10 years.

As of December 31, 2023,

our single largest commercial real estate credit had an outstanding principal balance of $10.6 million, was current, and was collateralized by a charter school located in Washington, D.C.

At December 31, 2023, the average balance of a loan in

our commercial real estate portfolio was $2.0 million.

As of December 31, 2024, our

single largest commercial real estate credit had an outstanding principal balance of $15.0 million, was current, and was collateralized by a charter school located in Washington, D.C.

At December 31, 2024, the average balance of a loan in our

commercial real estate portfolio was $2.9 million.

The interest rates on multi‑family and commercial adjustable-rate mortgage loans (“ARM Loans”) are based on the Secured Overnight Financing Rate (“SOFR”).

rates on commercial real estate loans are based on a variety of indices, including two-year Treasury, five-year Treasury, seven-year Treasury and ten-year Treasury and the 5-year FHLB (Federal Home Loan

Bank of Atlanta).

The interest rates on

commercial real estate loans are based on a variety of indices, including two-year Treasury, five-year Treasury, seven-year Treasury and ten-year Treasury and the five-year FHLB.

All loans previously indexed to LIBOR were converted to SOFR as of December 31, 2022.

We currently offer adjustable rate loans with interest rates that adjust either semi‑annually or

semi‑annually upon expiration of an initial three‑ or five‑year fixed rate period.

We currently offer adjustable-rate loans with interest rates that adjust either semi‑annually or semi‑annually

upon expiration of an initial three‑ or five‑year fixed rate period.

Borrowers are required to make monthly payments under the terms of such loans.

Loans secured by multi‑family and commercial properties are granted based on the income producing potential of the property and the financial strength of the borrower.

The primary factors

considered include, among other things, the net operating income of the mortgaged premises before debt service and depreciation, the debt service coverage ratio (the ratio of net operating income to required principal and interest payments, or

debt service), and the ratio of the loan amount to the lower of the purchase price or the appraised value of the collateral.

We seek to mitigate the risks associated with multi‑family and commercial real estate loans by applying appropriate underwriting requirements, which include limitations on loan‑to‑value

ratios and debt service coverage ratios.

Under our underwriting policies, loan‑to‑value ratios on our multi‑family and commercial real estate loans usually do not exceed 75% of the lower of the purchase price or the appraised value of the

underlying property.

The primary factors considered

include, among other things, the net operating income of the mortgaged premises before debt service and depreciation, the debt service coverage ratio (the ratio of net operating income to required principal and interest payments, or debt

service), and the ratio of the loan amount to the lower of the purchase price or the appraised value of the collateral.

We seek to mitigate the risks associated with multi‑family and commercial real estate loans by applying appropriate underwriting requirements, which include limitations on loan‑to‑value ratios and

debt service coverage ratios.

We also generally require minimum debt service coverage ratios of 120% for multi‑family loans and commercial real estate loans.

Properties securing multi‑family and commercial real estate loans are appraised by

management‑approved independent appraisers.

Properties securing multi‑family and commercial real estate loans are appraised by management‑approved

independent appraisers.

Title insurance is required on all loans.

Multi‑family and commercial real estate loans are generally viewed as exposing the lender to a greater risk of loss than single-family residential loans and typically involve higher loan

principal amounts than loans secured by single-family residential real estate.

Because payments on loans secured by multi‑family and commercial real properties are often dependent on the successful operation or management of the properties,

repayment of such loans may be subject to adverse conditions in the real estate market or general economy.

Adverse economic conditions in our primary lending market area could result in reduced cash flows on multi‑family and commercial real

estate loans, vacancies and reduced rental rates on such properties.

Multi‑family and commercial real estate loans are generally viewed as exposing the lender to a greater risk of loss than single-family residential loans and typically involve higher loan principal

amounts than loans secured by single-family residential real estate.

Because payments on loans secured by multi‑family and commercial real properties are often dependent on the successful operation or management of the properties, repayment of

such loans may be subject to adverse conditions in the real estate market or general economy.

Adverse economic conditions in our primary lending market area could result in reduced cash flows on multi‑family and commercial real estate loans,

vacancies and reduced rental rates on such properties.

We seek to reduce these risks by originating such loans on a selective basis and generally restrict such loans to our general market area.

In 2008, Broadway Federal ceased

out‑of‑state lending for all types of loans.

In 2008, Broadway Federal ceased out‑of‑state

lending for all types of loans.

As a result of the Merger, in 2021 we resumed out-of-state lending on a selective basis;

however, we currently do not have any loans outstanding that are outside of our market area, which consists of

Southern California and the Washington, D.C.

however, we currently do not have any loans outstanding that are outside of our market area, which consists of Southern

California and the Washington, D.C.

area (including parts of Maryland and Virginia).

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

Depending on interest rate trends, some multi-family loans may pay-off during

the first five years, while others continue into the adjustable rate phase.

Depending on interest rate trends, some multi-family loans may pay-off during the first

five years, while others continue into the adjustable-rate phase.

The interest rates on loans that continue into the adjustable-rate phase are adjusted semi-annually subject to interest rate caps.

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our single largest church loan had an outstanding balance of $2.2 million, was current, and was collateralized by a church building and parcel of land in Baltimore, Maryland.

At December 31, 2023, the average balance of a loan in our

church loan portfolio was $636 thousand.

At December 31, 2024, the average balance of a loan in our church loan

portfolio was $631 thousand.

Single-Family Mortgage Lending

While we have historically been primarily a multi‑family and commercial real estate lender, we also have purchased or originated loans secured by single-family residential properties,

including investor‑owned properties, with maturities of up to 30 years.

While we have historically been primarily a multi‑family and commercial real estate lender, we also have purchased or originated loans secured by single-family residential properties, including

investor‑owned properties, with maturities of up to 30 years.

Single-family loans totaled $23.6 million and $24.7 million at December 31, 2024 and 2023, respectively.

Of the single-family residential mortgage loans outstanding at

December 31, 2023, more than 23% had adjustable rate features.

We did not purchase any single-family loans during 2023 and 2022.

Of the $24.7 million of single-family loans at December 31, 2023, $17.7 million are secured by investor‑owned

Of the single-family residential mortgage loans outstanding at December 31,

2024, more than 26% had adjustable-rate features.

We did not purchase any single-family loans during 2024 or 2023.

Of the $23.6 million of single-family loans at December 31, 2024, $17.6 million are secured by investor‑owned properties.

The interest rates for our single-family ARM Loans are indexed to COFI, SOFR, 12‑MTA and 1‑Yr.

All loans previously indexed to LIBOR were converted to SOFR as of December 31, 2022.

currently offer loans with interest rates that adjust either semi‑annually or semi‑annually upon expiration of an initial three‑ or five‑year fixed rate period.

offer loans with interest rates that adjust either semi‑annually or semi‑annually upon expiration of an initial three or five‑year fixed rate period.

Borrowers are required to make monthly payments under the terms of such loans.

of our single-family adjustable rate loans behave like fixed rate loans because the loans are still in their initial fixed rate period or are subject to interest rate floors.

single-family adjustable-rate loans behave like fixed rate loans because the loans are still in their initial fixed rate period or are subject to interest rate floors.

We qualify our ARM Loan borrowers based upon the fully indexed interest rate (SOFR or other index plus an applicable margin) provided by the terms of the loan.

However, we may discount the

initial rate paid by the borrower to adjust for market and other competitive factors.

However, we may discount the initial

rate paid by the borrower to adjust for market and other competitive factors.

The ARM Loans that we offer have a lifetime adjustment limit that is set at the time that the loan is approved.

In addition, because of interest rate caps and

floors, market rates may exceed or go below the respective maximum or minimum rates payable on our ARM Loans.

The mortgage loans that we originate generally include due‑on‑sale clauses, which provide us with the contractual right to declare the loan immediately due and payable if the borrower

transfers ownership of the property.

In addition, because of interest rate caps and floors,

market rates may exceed or go below the respective maximum or minimum rates payable on our ARM Loans.

The mortgage loans that we originate generally include due‑on‑sale clauses, which provide us with the contractual right to declare the loan immediately due and payable if the borrower transfers

ownership of the property.

Construction Lending

Construction loans totaled $80.9 million and $89.9 million at December 31, 2024 and 2023, respectively, and represented 8.30% and 10.14% of our gross loan portfolio at December 31, 2024 and 2023,

respectively.

We provide loans for the construction of quality, affordable single-family, multi‑family and commercial real estate projects and for land development.

We generally make construction and land loans at variable interest rates based upon

the applicable Treasury Index plus a margin.

We generally make construction and land loans at variable interest rates based

upon the applicable Treasury Index plus a margin.

Generally, we require a loan‑to‑value ratio not exceeding 75% and a loan‑to‑cost ratio not exceeding 85% on construction loans.

Construction loans involve risks that are different from those for completed project lending because we advance loan funds based upon the security and estimated value at completion of the

project under construction.

Construction loans involve risks that are different from those for completed project lending because we advance loan funds based upon the security and estimated value at completion of the project

under construction.

If the borrower defaults on the loan, we may have to advance additional funds to finance the project’s completion before the project can be sold.

Moreover, construction projects are affected by uncertainties inherent

in estimating construction costs, potential delays in construction schedules due to supply chain or other issues, market demand and the accuracy of estimates of the value of the completed project considered in the loan approval process.

addition, construction projects can be risky as they transition to completion and lease‑up.

Tenants who may have been interested in leasing a unit or apartment may not be able to afford the space when the building is completed, or may fail to

lease the space for other reasons such as more attractive terms offered by competing lessors, making it difficult for the building to generate enough cash flow for the owner to obtain permanent financing.

We specialize in the origination of

construction loans for affordable housing developments where rents are subsidized by housing authority agencies.

Moreover, construction projects are affected by uncertainties inherent in

estimating construction costs, potential delays in construction schedules due to supply chain or other issues, market demand and the accuracy of estimates of the value of the completed project considered in the loan approval process.

construction projects can be risky as they transition to completion and lease‑up.

Tenants who may have been interested in leasing a unit or apartment may not be able to afford the space when the building is completed or may fail to lease the

space for other reasons such as more attractive terms offered by competing lessors, making it difficult for the building to generate enough cash flow for the owner to obtain permanent financing.

We specialize in the origination of construction

loans for affordable housing developments where rents are subsidized by housing authority agencies.

During 2024, we originated $7.6 million of construction loans, compared to $40.0 million of construction loan originations during 2023.

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As of December 31, 2024 and 2023, non-real estate commercial loans totaled $70.6 million and $63.5 million, respectively.

Commercial loans represented 7.16% of our loan portfolio as of December 31, 2023.

For the year ended December

31, 2023, we originated $43.3 million of commercial loans.

Commercial loans represented 7.24% and 7.16% of our loan portfolio as of December 31, 2024 and 2023,

respectively.

For the year ended December 31, 2024, we originated $17.6 million of commercial loans.

As of December 31, 2024, our single largest commercial loan had an outstanding balance of $15.0 million.

At December 31, 2023, the average balance of a loan in our non-real estate

commercial loan portfolio was $2.0 million.

The risks related to commercial loans differ from loans secured by real estate and relate to the ability of borrowers to successfully operate their businesses and the difference between

expected and actual cash flows of the borrowers.

At December 31, 2024, the average

balance of a loan in our non-real estate commercial loan portfolio was $3.4 million.

The risks related to commercial loans differ from loans secured by real estate and relate to the ability of borrowers to successfully operate their businesses and the difference between expected and

actual cash flows of the borrowers.

In addition, the recoverability of our investment in these loans is also dependent on other factors primarily dictated by the type of collateral securing these loans.

The fair value of the

collateral securing these loans may fluctuate as market conditions change.

The fair value of the collateral securing

these loans may fluctuate as market conditions change.

In the case of loans secured by accounts receivable, the recovery of our investment is dependent upon the borrower’s ability to collect amounts due from customers.

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City First is an approved SBA lender.

We originate loans in Washington, D.C, Maryland, and Virginia under the SBA’s 7(a), SBA Express, International Trade and 504(a) loan programs, in conformity

with SBA underwriting and documentation standards.

We originate loans in Washington, D.C, Maryland, Virginia and California under the SBA’s 7(a), SBA Express, International Trade and 504(a) loan programs, in

conformity with SBA underwriting and documentation standards.

SBA loans are similar to commercial business loans but have additional credit enhancement provided by the U.S.

Federal Government with guarantees between 50-85%.

Certain loans classified as SBA

are secured by commercial real estate property.

Certain loans

classified as SBA are secured by commercial real estate property.

All other SBA loans are secured by business assets.

As of December 31, 2024 and 2023, SBA loans totaled $1.1 million and $15.0 million, respectively.

Our December 31, 2023 SBA loans included $2.5

million of loans issued under the Paycheck Protection Program (“PPP”) loans.

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.

SBA loans totaled 1.68% of our total loan portfolio as of December 31, 2023.

Loan Originations, Purchases and Sales

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Beginning balance

Loans acquired in the Merger

Loans originated:

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Principal repayments

Sales of loans

Ending balance

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2023 and 2022 were sourced from wholesale loan brokers.

All commercial real estate loans, construction loans, commercial loans and SBA loans were derived from our loan personnel, except that we partner with a third-party certified

development company to originate and underwrite certain SBA 504 loans.

All commercial real estate loans, construction loans, commercial loans and SBA loans were derived from our loan personnel, except that we partner with a third-party certified development

company to originate and underwrite certain SBA 504 loans.

No single-family or consumer loans were originated during the last three years.

For all loans that we originate, upon receipt of a loan application from a prospective

borrower, a credit report is ordered, and certain other information is verified by an independent credit agency.

For all loans that we originate, upon receipt of a loan application from a prospective borrower, a credit report is ordered, and certain other information is verified by an independent credit

If necessary, additional financial information is requested.

An appraisal of the real estate intended to secure the proposed loan

is required to be performed by an independent licensed or certified appraiser designated and approved by us.

An appraisal of the real estate intended to secure the proposed loan is required to be performed by an independent licensed or certified appraiser designated and approved by

The Bank’s Board of Directors (the “Board”) annually reviews our appraisal policy.

Management reviews annually the qualifications and

performance of independent appraisers that we use.

It is our policy to obtain title insurance on collateral for all real estate loans.

Borrowers must also obtain hazard insurance naming the Bank as a loss payee prior to loan closing.

original loan amount exceeds 80% on a sale or refinance of a first trust deed loan, we may require private mortgage insurance and the borrower is required to make payments to a mortgage impound account from which we make disbursements to pay

private mortgage insurance premiums, property taxes and hazard and flood insurance as required.

Management reviews annually the qualifications and performance of independent appraisers that we use.

It is our policy to obtain title insurance on real estate secured loans.

Borrowers must also obtain hazard insurance naming the Bank as a loss payee prior to loan closing and they have the option

to escrow for taxes and insurance.

If the property is located in a flood zone, the borrower must obtain flood insurance and provide proof of coverage prior to closing.

Each loan requires at least two signatures for approval.

The Board has authorized loan approval limits for various management team members up to $7 million per individual, and up to $12

million for the Chief Executive.

Loans in excess of $7 million require review and approval by members of the Board’s Loan Committee.

In addition, it is our practice that all loans approved be reported to the Loan Committee no later than the

month following their approval and be ratified by the Board.

The Board has authorized loan approval limits for various management team members up to $7 million per individual, and up to $12 million

for the Chief Executive.

Loans in excess of $7 million require review and approval by members of the Director’s Loan Committee.

From time to time, we purchase loans originated by other institutions based upon our investment needs and market opportunities.

The determination to purchase specific loans or pools of loans

is subject to our underwriting policies, which consider, among other factors, the financial condition of the borrowers, the location of the underlying collateral properties and the appraised value of the collateral properties.

purchase any loans during the years ended December 31, 2023, 2022 or 2021.

The determination to purchase specific loans or pools of loans is

subject to our underwriting policies, which consider, among other factors, the financial condition of the borrowers, the location of the underlying collateral properties and the appraised value of the collateral properties.

We did not purchase

any loans during the years ended December 31, 2024, 2023 or 2022.

During 2024 and 2023, we did not originate or sell any loans that were classified as held for sale.

Asset Quality

The underlying credit quality of our loan portfolio is dependent primarily on each borrower’s ability to continue to make required loan payments and, in the event a borrower is unable to

continue to do so, the value of the collateral securing the loan, if any.

A borrower’s ability to pay, in the case of single-family residential loans and consumer loans, typically is dependent primarily on employment and other sources of

The underlying credit quality of our loan portfolio is dependent primarily on each borrower’s ability to continue to make required loan payments and, in the event a borrower is unable to continue

to do so, the value of the collateral securing the loan, if any.

A borrower’s ability to pay, in the case of single-family residential loans and consumer loans, typically is dependent primarily on employment and other sources of income.

Multi‑family and commercial real estate loan borrowers’ ability to pay is typically dependent on the cash flow generated by the property, which in turn is impacted by general economic conditions.

Commercial business and SBA loan

borrowers’ ability to pay is typically dependent on the successful operation of their businesses or their ability to collect amounts due from their customers.

Other factors, such as unanticipated expenditures or changes in the financial

markets, may also impact a borrower’s ability to make loan payments.

Collateral values, particularly real estate values, are also impacted by a variety of factors, including general economic conditions, demographics, property maintenance and

collection or foreclosure delays.

Commercial business and SBA loan borrowers’

ability to pay is typically dependent on the successful operation of their businesses or their ability to collect amounts due from their customers.

Other factors, such as unanticipated expenditures or changes in the financial markets, may also

impact a borrower’s ability to make loan payments.

Collateral values, particularly real estate values, are also impacted by a variety of factors, including general economic conditions, demographics, property maintenance and collection or

foreclosure delays.

Delinquencies

We perform a weekly review of all delinquent loans and a monthly loan delinquency report is made to the Internal Asset Review Committee of the Board of Directors.

When a borrower fails to

make a required payment on a loan, we take several steps to induce the borrower to cure the delinquency and restore the loan to current status.

The procedures we follow with respect to delinquencies vary depending on the type of loan, the type

of property securing the loan, and the period of delinquency.

We perform a weekly review of all delinquent loans and a monthly loan delinquency report is made to the Internal Asset Review Committee of the Board.

When a borrower fails to make a required

payment on a loan, we take several steps to induce the borrower to cure the delinquency and restore the loan to current status.

The procedures we follow with respect to delinquencies vary depending on the type of loan, the type of property

securing the loan, and the period of delinquency.

In the case of residential mortgage loans, we generally send the borrower a written notice of non‑payment promptly after the loan becomes past due.

In the event payment is not

received promptly thereafter, additional letters are sent, and telephone calls are made.

If the loan is still not brought current and it becomes necessary for us to take legal action, we generally commence foreclosure proceedings on all real

property securing the loan.

In the event payment is not received promptly

thereafter, additional letters are sent, and telephone calls are made.

If the loan is still not brought current and it becomes necessary for us to take legal action, we generally commence foreclosure proceedings on all real property securing

In the case of commercial real estate loans, we generally contact the borrower by telephone and send a written notice of intent to foreclose upon expiration of the applicable grace period.

Decisions not to commence

foreclosure upon expiration of the notice of intent to foreclose for commercial real estate loans are made on a case‑by‑case basis.

Decisions not to commence foreclosure upon

expiration of the notice of intent to foreclose for commercial real estate loans are made on a case‑by‑case basis.

We may consider loan workout arrangements with commercial real estate borrowers in certain circumstances.

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(Dollars in thousands)

Commercial real estate

Single-family

Multi- family

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Non‑performing assets (“NPAs”) include non‑accrual loans and real estate owned through foreclosure or deed in lieu of foreclosure (“REO”).

We had no NPAs at December

31, 2023 compared to $ 144 thousand, or 0.01% of total assets, at December 31, 2022.

Non-accrual loans consist of delinquent loans that are 90 days or more past due and other loans, including loans modified in response to a borrower’s financial difficulty, that do not qualify

for accrual status.

The $144 thousand decrease in non‑accrual loans during the year ended December 31, 2023 was the result of the payoff of one non-accrual loan.

We had one NPA at December 31,

2024 and no NPAs at December 31, 2023.

Non-accrual loans consist of delinquent loans that are 90 days or more past due and other loans, including loans modified in response to a borrower’s financial difficulty,

that do not qualify for accrual status.

The following table provides information regarding our non‑performing assets at the dates indicated:

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While loans are in non‑accrual status, interest received on such loans is credited to principal, until the loans qualify for return to accrual status.

Loans are returned

to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

Classification of Assets

Federal regulations and our internal policies require that we utilize an asset classification system as a means of monitoring and reporting problem and potential problem assets.

incorporated asset classifications as a part of our credit monitoring system and thus classify potential problem assets as “Watch” and “Special Mention,” and problem assets as “Substandard,” “Doubtful” or “Loss.” An asset is considered “Watch”

if the loan is current but temporarily presents higher than average risk and warrants greater than routine attention and monitoring.

An asset is considered “Special Mention” if the loan is current but there are some potential weaknesses that

deserve management’s close attention.

“Watch” if the loan is current but temporarily presents higher than average risk and warrants greater than routine attention and monitoring.

An asset is considered “Special Mention” if the loan is current but there are some potential

weaknesses that deserve management’s close attention.

An asset is considered “Substandard” if it is inadequately protected by the current net worth and paying capacity of the obligor or the collateral pledged, if any.

“Substandard” assets include those

characterized by the “distinct possibility” that the insured institution will sustain “some loss” if the deficiencies are not corrected.

Assets classified as “Doubtful” have all the weaknesses inherent in those classified “Substandard” with the

added characteristic that the weaknesses make “collection or liquidation in full,” on the basis of currently existing facts, conditions, and values, “highly questionable and improbable.” Assets classified as “Loss” are those considered

“uncollectible” and of such little value that their continuance as assets without the establishment of a specific loss allowance is not warranted.

Assets which do not currently expose us to sufficient risk to warrant classification in one of

the aforementioned categories, but that are considered to possess some weaknesses, are designated “Special Mention.” Our Internal Asset Review Department reviews and classifies our assets and independently reports the results of its reviews to

the Internal Asset Review Committee of our Board of Directors monthly.

“Substandard” assets

include those characterized by the “distinct possibility” that the insured institution will sustain “some loss” if the deficiencies are not corrected.

Assets classified as “Doubtful” have all the weaknesses inherent in those classified

“Substandard” with the added characteristic that the weaknesses make “collection or liquidation in full,” on the basis of currently existing facts, conditions, and values, “highly questionable and improbable.” Assets classified as “Loss” are

those considered “uncollectible” and of such little value that their continuance as assets without the establishment of a specific loss allowance is not warranted.

Assets which do not currently expose us to sufficient risk to warrant

classification in one of the aforementioned categories, but that are considered to possess some weaknesses, are designated “Special Mention.” Our Internal Asset Review Department reviews and classifies our assets and independently reports the

results of its reviews to the Internal Asset Review Committee of our Board monthly.

The following table provides information regarding our criticized loans (Watch and Special Mention) and classified assets (Substandard) at the dates indicated:

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Watch loans until a history of loan performance can be established or until the construction project is complete, which is the main driver for the increase in total criticized loans of $20.3 million during 2024.

In addition, certain loans were

downgraded as part of the internal review process, which also caused the increase in substandard loans of $15.9 million.

In addition, certain loans

were downgraded as part of the internal review process, which also caused the increase in substandard loans of $38.0 million.

Allowance for Credit Losses

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creditworthiness of the borrower, general economic conditions and, in the case of a secured loan, the quality of the collateral for the loan.

Effective January 1, 2023, the Company accounts for the ACL on loans in accordance with ASC 326.

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 weighted-average remaining maturity (“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.

Effective January 1, 2023, the Company accounts for the ACL on loans in accordance with Accounting

Standards Codification Topic 326 (“ASC 326”), which 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 weighted-average

remaining maturity (“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;

(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;

(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;

(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;

the effect of other external factors (i.e., competition, legal and regulatory requirements) on the level of estimated credit losses.

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 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

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.

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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.

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 the remaining life 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

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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.

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.

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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.

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:

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.

Single-Family – Subject to adverse employment conditions in the local economy leading to increased default rate,

decreased market values from oversupply in a geographic area and incremental rate increases on adjustable-rate mortgages which may impact the ability of borrowers to maintain payments.

Multi‑Family – Subject to adverse various market conditions that cause a decrease in market value or lease rates, changes

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Consumer – Subject to adverse employment conditions in the local economy, which may lead to higher default rates.

We determined that an ACL of $7.3 million, or 0.84% of net loans held for investment, was appropriate at December 31, 2023, compared to the allowance for loan and lease losses “ALLL”) of $4.4

million, or 0.57% of loans held for investment at December 31, 2022.

We determined that an ACL of $8.1 million, or 0.83% of gross loans held for investment, was appropriate at December 31, 2024, compared to the allowance for loan and lease losses (“ALLL”) of $7.3

million, or 0.83% of gross loans held for investment at December 31, 2023.

Prior to the Company’s adoption of ASC 326 on January 1, 2023, the Company maintained an ALLL in accordance with ASC 310 and ASC 450 that covered estimated credit losses on individually

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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

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 the remaining life

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

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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.

At December 31, 2022, impaired loans totaled $1.7 million and had an aggregate specific allowance allocation of $7 thousand.

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.

A federally chartered bank’s determination as to the classification of its assets and the amount of its valuation allowances is subject to review by the OCC.

The OCC, in conjunction with the

other federal banking agencies, provides guidance for financial institutions on the responsibilities of management for the assessment and establishment of adequate valuation allowances, as well as guidance for banking agency examiners to use in

determining the adequacy of valuation allowances.

It is required that all institutions have effective systems and controls to identify, monitor and address asset quality problems, analyze all significant factors that affect the collectability

of the portfolio in a reasonable manner and establish acceptable allowance evaluation processes that meet the objectives of the guidelines issued by federal regulatory agencies.

While we believe that the ACL has been established and maintained

at adequate levels, future adjustments may be necessary if economic or other conditions differ materially from the conditions on which we based our estimates at December 31, 2023.

In addition, there can be no assurance that the OCC or other

regulators, as a result of reviewing our loan portfolio and/or allowance, will not require us to materially increase our ACL, thereby affecting our financial condition and earnings.

in determining the adequacy of valuation allowances.

It is required that all institutions have effective systems and controls to identify, monitor and address asset quality problems, analyze all significant factors that affect the

collectability of the portfolio in a reasonable manner and establish acceptable allowance evaluation processes that meet the objectives of the guidelines issued by federal regulatory agencies.

While we believe that the ACL has been

established and maintained at adequate levels, future adjustments may be necessary if economic or other conditions differ materially from the conditions on which we based our estimates at December 31, 2024.

In addition, there can be no

assurance that the OCC or other regulators, as a result of reviewing our loan portfolio and/or allowance, will not require us to materially increase our ACL, thereby affecting our financial condition and earnings.

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

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Impact of CECL adoption

Loan loss provision (recapture)

Credit/loan loss provision (2)

Allowance balance at end of year

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respectively.

The Company also recorded a recovery of provision for off-balance sheet loan commitments of $91 thousand and $2 thousand for the years ended December 31, 2024 and 2023,

respectively.

Investment Activities

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return on investments without incurring undue interest rate or credit risk.

Subject to various restrictions, our investment policy generally permits investments in money market instruments such as federal funds sold, certificates of deposit of

insured banks and savings institutions, direct obligations of the U.S.

Treasury, securities issued by federal and other government agencies and mortgage‑backed securities, mutual funds, municipal obligations, corporate bonds, and marketable

equity securities.

Mortgage‑backed securities consist principally of securities issued by the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation and the Government National Mortgage Association which are backed by

30‑year amortizing hybrid ARM Loans, structured with fixed interest rates for periods of three to seven years, after which time the loans convert to one‑year or six‑month adjustable rate mortgage loans.

At December 31, 2023, our securities

portfolio, consisting primarily of federal agency debt, mortgage‑backed securities, bonds issued by the United States Treasury and the SBA, and municipal bonds, totaled $317.0 million, or 23.0% of total assets.

Subject to various restrictions, our investment policy generally permits investments in money market instruments such as federal funds sold, certificates of deposit

of insured banks and savings institutions, direct obligations of the U.S.

Treasury, securities issued by federal and other government agencies and mortgage‑backed securities, mutual funds, municipal obligations, corporate bonds, and

marketable equity securities.

are backed by 30‑year amortizing hybrid ARM Loans, structured with fixed interest rates for periods of three to seven years, after which time the loans convert to one‑year or six‑month adjustable rate mortgage loans.

At December 31, 2024, our

securities portfolio, consisting primarily of federal agency debt, mortgage‑backed securities, bonds issued by the United States Treasury and the SBA, and municipal bonds, totaled $203.9 million, or 15.6% of total assets.

We classify investments as held‑to‑maturity or available‑for‑sale at the date of purchase based on our assessment of our internal liquidity requirements.

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Deposits are our primary source of funds for supporting our lending and other investment activities and general business purposes.

In addition to deposits, we obtain funds from the

amortization and prepayment of loans and investment securities, sales of loans and investment securities, advances from the FHLB, and cash flows generated by operations.

In addition to deposits, we obtain funds from the amortization

and prepayment of loans and investment securities, sales of loans and investment securities, advances from the FHLB, and cash flows generated by operations.

We offer a variety of deposit accounts featuring a range of interest rates and terms.

Our deposits principally consist of savings accounts, checking accounts, interest checking accounts,

money market accounts, and fixed‑term certificates of deposit.

Our deposits principally consist of savings accounts, checking accounts, interest checking accounts, money

market accounts, and fixed‑term certificates of deposit.

The maturities of term certificates generally range from one month to five years.

We accept deposits from customers within our market area based primarily on posted rates, but from

time to time we will negotiate the rate based on the amount of the deposit.

We accept deposits from customers within our market area based primarily on posted rates, but from time

to time we will negotiate the rate based on the amount of the deposit.

We primarily rely on customer service and long‑standing customer relationships to attract and retain deposits.

We seek to maintain and increase our retail “core”

deposit relationships, consisting of savings accounts, checking accounts and money market accounts because we believe these deposit accounts tend to be a stable funding source and are available at a lower cost than term deposits.

market interest rates, including rates offered by competing financial institutions, the availability of other investment alternatives, and general economic conditions significantly affect our ability to attract and retain deposits.

We seek to maintain and increase our retail “core” deposit

relationships, consisting of savings accounts, checking accounts and money market accounts because we believe these deposit accounts tend to be a stable funding source and are available at a lower cost than term deposits.

However, market

interest rates, including rates offered by competing financial institutions, the availability of other investment alternatives, and general economic conditions significantly affect our ability to attract and retain deposits.

We participate in a deposit program called the Certificate of Deposit Account Registry Service (“CDARS”).

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December 31, 2024 and 2023, respectively and are not considered to be brokered deposits.

As of December 31, 2023 and 2022, approximately $286.4 million and $212.9 million of our total deposits were not insured by FDIC insurance.

As of December 31, 2024 and 2023, approximately $268.8 million and $286.4 million, respectively, of our total deposits were not insured by FDIC insurance.

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

Months or Less

Three to Six Months

Over One Year

(In thousands)

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For the Years Ended December 31,

Cost of Funds

(Dollars in thousands)

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from time to time in accordance with the policies of the FHLB.

At December 31, 2023, we had $209.3 million in outstanding FHLB advances and had the ability to borrow up to an additional $117.0 million based on available and pledged collateral.

At December 31, 2024, we had $195.5 million in outstanding FHLB advances and had the ability to borrow up to an additional $174.3 million based on available and pledged

The following table summarizes information concerning our FHLB advances at or for the periods indicated:

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Weighted average maturity (in months)

On December 27, 2023, the Bank borrowed $100 million from the Federal Reserve under the Bank Term Funding Program (“BTFP”), all of which was outstanding as of December 31, 2023.

The interest rate on this

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

On December 27, 2023, the Bank borrowed $100.0 million from the Federal Reserve under the Bank Term Funding Program (“BTFP”), which was paid off in December 2024.

The interest rate on this borrowing was fixed

at 4.84% and the borrowing matured 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.

are no prepayment penalties for early payoff.

As the BTFP ended on March 11, 2024, no additional borrowings can be made under the program.

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

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2024 and included $46.5 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

Treasuries, $27.1 million of federal agency debt, $5.5 million of federal agency mortgage-backed securities, and $4.2 million of SBA pools.

As of December 31, 2023, securities sold under agreements to

repurchase totaled $73.5 million at an average rate of 2.60%.

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.

We participate in and have previously been an “Allocatee” of the New Markets Tax Credit Program of the U.S.

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connection with the New Market Tax Credit activities of the Bank, CFC 45 is a partnership whose members include CFNMA and City First New Markets Fund II, LLC.

In December 2015, a national brokerage firm made a $14.0 million non-recourse loan to

CFC 45, whereby CFC 45 was the beneficiary of the loan from the brokerage firm and passed the proceeds from that loan through to a Qualified Active Low-Income Community Business (“QALICB”).

The loan to the QALICB is secured by a Leasehold Deed

of Trust from which the funds for repayment of the loan will be derived.

In December 2015, a national brokerage firm made a $14.0 million non-recourse loan

to CFC 45, whereby CFC 45 was the beneficiary of the loan from the brokerage firm and passed the proceeds from that loan through to a Qualified Active Low-Income Community Business (“QALICB”).

The loan to the QALICB is secured by a Leasehold

Deed of Trust from which the funds for repayment of the loan will be derived.

Debt service payments received by CFC 45 from the QALICB are passed through to the brokerage firm, less a servicing fee which is retained by CFC 45.

This note was paid

off during January 2024.

This note was

paid off during January 2024.

The financial statements of CFC 45 are consolidated with those of the Bank and the Company.

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Human Capital

We are a unified, commercial CDFI with a focused vision, mission, and strategy that equitably drives economic, social, and environmental justice for our clients and communities in which we

work making them better places to be.

We believe that employees are one of our most important resources and in order to fulfill future and sustainable growth, our key objectives include attracting, selecting, retaining, and developing top

talent in the marketplace that closely align our employees’ personal values with the organization’s values.

As such, our culture is defined by our Shared Values principles:

and Communities First”;

“We Think Big”;

“We Model Excellence”;

and “ONE City First.”

City First’s Shared Values principles are derived from critical beliefs and ingrained principles that guide the organization’s actions, behaviors, and culture towards our primary objectives.

Our Shared Values mean that we stand for something in how we view each other, the world, and our place of service in it.

With these values centered in all that we do, we work collaboratively with mission-aligned customers looking to make an

impact in under-resourced communities through affordable housing, charter schools, community health centers, nonprofits, and small to medium-sized businesses.

Our employees behave in a manner that is consistent with these beliefs.

While the Board of Directors oversees the strategic management of our human capital management, our internal Human Resources team drives the day-to-day management of our human capital

operations and strategy.

As of December 31, 2023, we employed 98 full-time employees.

Our employees are primarily located in Los Angeles, California and Washington, D.C.

in our corporate offices, branches, and

operating facilities.

We also employ several remote workers who are in various locations throughout the U.S.

Compensation and Benefits

Our market competitive total employee compensation (salaries, bonuses and all benefits and rewards) is a critical tool enabling us to attract and retain talented people.

In addition to base

compensation, these programs include commission-based incentives, corporate incentive compensation plans, restricted stock awards, a 401(k) Plan with an employer matching contribution, an employee stock ownership plan, healthcare, and insurance

benefits including telehealth connection services, health savings accounts, employee assistance program, will prep services, college tuition benefit programs, and vacation/sick/family leave.

Our methodology is to provide pay levels and pay opportunities that are internally fair, cost-effective, and externally competitive to market-based salaries.

To determine competitive market

compensation levels, we use market surveys and economic research to benchmark our positions utilizing salary and compensation data of companies with similar positions, asset size and geographical locations.

We annually review our salary

structures and grade ranges to keep pace with changes in the marketplace.

With the support of third-party experts in this field and within the banking industry, we conduct regular job evaluations to meet changing business needs or when the

scope of existing positions or organizational changes occur.

Our standard pay practices are designed to honor and adhere to pay equity analysis.

Diversity, Equity, and Inclusion

At City First Bank, N.A., we are a unified, commercial Community Development Financial Institution (CDFI) with a mission-driven approach that advances economic, social, and environmental solutions.

deeply rooted in creating attractive opportunities for the clients and communities we serve, making them stronger, more resilient places to live and work.

We recognize that our employees are our greatest asset.

To ensure long-term growth and

sustainability, our human capital strategy is centered on attracting, selecting, retaining, and developing top-tier talent whose personal values align with our organization’s mission and principles.

Culture & Shared Values

Our Shared Values serve as the foundation of our corporate culture, guiding our actions, behaviors, and decision-making.

As such, these principles of “ Clients and Communities First, ” “ We Think Big, ” “ We Model Excellence, ” and “ ONE City First ” shape how we engage with one another, our

customers, and the broader community.

Through a shared commitment to impact-driven financial services, our employees collaborate with mission-aligned partners to support affordable housing, charter schools, community health centers,

nonprofits, and small to medium-sized businesses in under invested and low- and moderate-income communities.

We are intentional about fostering a purpose-driven workplace, where employees feel empowered, valued, and connected to the greater

mission and purpose of the organization.

Our legacy and history matter at City First.

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Our founders in Los Angeles and Washington, D.C.

leaders who saw a need in the community for a bank that addressed the lack of access to capital for historically excluded and disinvested urban majority minority communities.

The Merger formed one of the largest Black-led Minority Depository Institutions (“MDI”) in the nation in the midst of a national reawakening to the systemic racial and economic disparities

persisting and growing in our society.

The Merger maintains the legacy of the constituents and honors the legacy of African American-led MDI’s across the country that were founded to address the unmet financing needs of the community.

intent, purpose, and execution are grounded in our 75-year history of deep commitment to economic justice through the targeted provision of capital for historically excluded and disinvested urban majority minority communities.

Our ownership, responsibility, and commitment to diversity, equity, and inclusion is reflected in the composition of our workforce, executive leadership team, and board of directors.

December 31, 2023, more than 80% of the Company’s employees self-identified as minority, approximately 62% of our employees were women, and other diverse groups such as veterans and people with disabilities were also represented.

Workforce Training and Development

We align our talent strategy with our business strategy to provide guidance on the proper mix of skills, emerging talent and business needs or issues.

This investment to allow employees to

learn, grow, and be fulfilled in their work stems from our development of providing a multi-dimensional approach to curriculum design and competency-based learning centered around culture and technical skills.

Learning and development play a

critical and strategic role as we prepare our organization for the future by recognizing continuous needs to upskill or reskill in order to scale our business.

Our employees receive continuing education courses relevant to their respective roles within the organization, as well as access to on-demand learning solutions to enhance leadership

capabilities, advance communications skills and techniques, college credit courses, seminars, and training deeply embedded in cultural dynamics and awareness.

To support employees who wish to continue their development and education, we provide

reimbursement to employees who seek development to upskill or reskill while employed at the company.

were local leaders who saw a

need in the community for a bank that addressed the lack of access to capital for under invested communities.

Our ownership, responsibility, and commitment to these Shared Values and legacy is reflected in the composition of our workforce,

executive leadership team, and Board.

Workforce Learning & Development

We are dedicated to cultivating a culture of continuous learning and professional growth where employees can learn, grow, and be fulfilled in the work that they do.

Our learning & development strategy

provides employees with the tools, training, and experiences they need to excel in their roles and advance within the organization.

Key initiatives include:

Structured Onboarding & Role-Specific Training to ensure new hires and internal transitions are set up for success.

Leadership Development Programs designed to identify and cultivate future leaders within the organization.

Skills-Based Learning through digital learning platforms, workshops, and external partnerships.

Mentorship & Career Pathing to support employees in navigating career progression within the company.

Our commitment to workforce development ensures that our employees not only contribute to the success of the organization but also grow personally and professionally.

Total Rewards & Employee Well-Being

We provide a co mprehensive Total Rewards program designed to support the well-being and financial security of our employees.

Our offerings include:

Competitive Compensation & Incentives aligned with market benchmarks and performance outcomes.

Comprehensive Health & Wellness Benefits , including medical, dental, and vision coverage, as well as mental health and wellness initiatives.

Retirement & Financial Security programs, including a 401(k) with employer matching contributions.

Paid Time Off & Work-Life Balance initiatives, including generous PTO, parental leave, and flexible work arrangements.

Employee Assistance Programs (EAPs) and wellness initiatives to support physical, mental, and financial well-being.

Our Total Rewards philosophy ensures that our employees feel valued, supported, and motivated to contribute to the organization’s success while maintaining a strong sense of personal and financial well-being.

Governance & Workforce Overview

Our Board provides strategic oversight of our human capital management, ensuring alignment with the organization’s long-term objectives.

The Human Resources team leads the execution of our talent strategy,

workforce planning, employee engagement, and organizational development initiatives.

As of December 31, 2024, we employed 106 full-time employees across our corporate offices, branch locations, and operational facilities.

Our primary offices

are located in Los Angeles, California, and Washington, D.C., with additional employees working remotely in various locations across the United States.

City First and Broadway Financial Corporation are subject to comprehensive regulation and supervision by several different federal agencies.

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determines violations of the fair lending laws may have occurred.

Changes in applicable laws or the regulations of the OCC, the FDIC, the FRB, the CFPB, or other regulatory authorities, or changes in interpretations of such regulations or in agency policies

or priorities, could have a material adverse impact on the Bank and our Company, our operations, and the value of our debt and equity securities.

Changes in applicable laws or the regulations of the OCC, the FDIC, the FRB, the CFPB, or other regulatory authorities, or changes in interpretations of such regulations or in agency policies or

priorities, could have a material adverse impact on the Bank and our Company, our operations, and the value of our debt and equity securities.

We and our stock are also subject to rules issued by The Nasdaq Stock Market LLC (“Nasdaq”), the

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The following paragraphs summarize certain laws and regulations that apply to the Company and the Bank.

These descriptions of statutes and regulations and their possible effects do not

purport to be complete descriptions of all the provisions of those statutes and regulations and their possible effects on us, nor do they purport to identify every statute and regulation that applies to us.

In addition, the statutes and

regulations that apply to the Company and the Bank are subject to change, which can affect the scope and cost of their compliance obligations.

These descriptions of statutes and regulations and their possible effects do not purport

to be complete descriptions of all the provisions of those statutes and regulations and their possible effects on us, nor do they purport to identify every statute and regulation that applies to us.

In addition, the statutes and regulations

that apply to the Company and the Bank are subject to change, which can affect the scope and cost of their compliance obligations.

Dodd‑Frank Wall Street Reform and Consumer Protection Act

In July 2010, the Dodd‑Frank Wall Street Reform and Consumer Protection Act (the “Dodd‑Frank Act”) was signed into law.

The Dodd‑Frank Act is intended to address perceived weaknesses in the

The Dodd‑Frank Act is intended to address perceived weaknesses in the U.S.

financial regulatory system and prevent future economic and financial crises.

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In particular, pursuant to the Dodd-Frank Act, the federal banking agencies

(comprising the FRB, the OCC, and the FDIC) substantially revised their consolidated and bank-level risk‑based and leverage capital requirements applicable to insured depository institutions, depository institution holding companies and certain

non‑bank financial companies.

Under an existing FRB policy statement, bank holding companies with less than $3 billion in total consolidated assets are not subject to consolidated capital requirements provided they satisfy the conditions in the

policy statement.

The Dodd‑Frank Act requires bank holding companies to serve as a source of financial strength for any subsidiary of the holding company that is a depository institution by providing financial assistance in the event of the

financial distress of the depository institution.

certain non‑bank financial companies.

Under an existing FRB policy statement, bank holding companies with less than $3 billion in total consolidated assets are not subject to consolidated capital requirements provided they satisfy the

conditions in the policy statement.

the event of the financial distress of the depository institution.

The Dodd‑Frank Act also established the CFPB.

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including the authority to prohibit “unfair, deceptive or abusive” acts and practices.

At times during the past several years, the CFPB has been active in bringing enforcement actions against banks and nonbank financial institutions to enforce

federal consumer financial laws and has developed a number of new enforcement theories and applications of these laws.

The CFPB’s supervisory authority does not generally extend to insured depository institutions, such as the Bank, that have

less than $10 billion in assets.

At times during the past several years, the CFPB has been active in bringing enforcement actions against banks and nonbank financial institutions to

enforce federal consumer financial laws and has developed a number of new enforcement theories and applications of these laws.

The CFPB’s supervisory authority does not generally extend to insured depository institutions, such as the Bank,

that have less than $10 billion in assets.

The federal banking agencies, however, have authority to examine for compliance, and bring enforcement action for non-compliance, with respect to the CFPB’s regulations.

State attorneys general and state banking

agencies and other state financial regulators also may have authority to enforce applicable consumer laws with respect to institutions over which they have jurisdiction.

State attorneys general and

state banking agencies and other state financial regulators also may have authority to enforce applicable consumer laws with respect to institutions over which they have jurisdiction.

Capital Requirements

The Bank’s capital requirements are administered by the OCC and involve quantitative measures of assets, liabilities, and certain off-balance sheet items calculated under applicable

regulatory accounting practices.

The Bank’s capital requirements are administered by the OCC and involve quantitative measures of assets, liabilities, and certain off-balance sheet items calculated under applicable 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.

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 and required capital amounts

and ratios as of the dates indicated are presented below:

Minimum Required to be

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At December 31, 2024, 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.

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.

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.

Deposit Insurance

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calculated by multiplying its assessment rate by the assessment base, which is defined as the average consolidated total assets less the average tangible equity of the Bank.

The initial base assessment rate is based on an institution’s capital

level, and capital adequacy, asset quality, management, earnings, liquidity, and sensitivity (“CAMELS”) ratings, certain financial measures to assess an institution’s ability to withstand asset related stress and funding related stress, and in

some cases, additional discretionary adjustments by the FDIC to reflect additional risk factors.

The initial base assessment rate is based on an institution’s

capital level, and capital adequacy, asset quality, management, earnings, liquidity, and sensitivity (“CAMELS”) ratings, certain financial measures to assess an institution’s ability to withstand asset related stress and funding related

stress, and in some cases, additional discretionary adjustments by the FDIC to reflect additional risk factors.

The FDIC’s overall premium rate structure is subject to change from time to time to reflect its actual and anticipated loss experience.

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The Bank did not receive any assessment credits during 2024 or 2023.

Although it rarely does so, the FDIC has the authority to terminate a depository institution’s deposit insurance upon a finding that the institution’s financial condition is unsafe or unsound

or that the institution has engaged in unsafe or unsound practices that pose a risk to the DIF or that may prejudice the interest of a bank’s depositors.

Although it rarely does so, the FDIC has the authority to terminate a depository institution’s deposit insurance upon a finding that the institution’s financial condition is unsafe or unsound or

that the institution has engaged in unsafe or unsound practices that pose a risk to the DIF or that may prejudice the interest of a bank’s depositors.

Guidance on Commercial Real Estate Lending

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The banking agencies previously issued guidance

titled “Prudent Commercial Real Estate Loan Workouts” which provides guidance for financial institutions that are working with commercial real estate (“CRE”) borrowers who are experiencing diminished operating cash flows, depreciated collateral

values, or prolonged delays in selling or renting commercial properties and details risk‑management practices for loan workouts that support prudent and pragmatic credit and business decision‑making within the framework of financial accuracy,

transparency, and timely loss recognition.

The banking agencies had also issued previous guidance titled “Interagency Guidance on Concentrations in Commercial Real Estate” stating that a banking institution will be considered to be potentially

exposed to significant CRE concentration risk, and should employ enhanced risk management practices, if total CRE loans represent 300% or more of its total capital and the outstanding balance of the institution’s CRE loan portfolio has

increased by 50% or more during the preceding 36 months.

In October 2009, the federal banking agencies adopted a policy statement supporting workouts of CRE loans, which is referred to as the “CRE Policy Statement.” The CRE Policy Statement

provides guidance for examiners, and for financial institutions that are working with CRE borrowers who are experiencing diminished operating cash flows, depreciated collateral values, or prolonged delays in selling or renting commercial

The CRE Policy Statement details risk‑management practices for loan workouts that support prudent and pragmatic credit and business decision‑making within the framework of financial accuracy, transparency, and timely loss

The CRE Policy Statement states that financial institutions that implement prudent loan workout arrangements after performing comprehensive reviews of the financial condition of borrowers will not be subject to criticism for

engaging in these efforts, even if the restructured loans have weaknesses that result in adverse credit classifications.

In addition, performing loans, including those renewed or restructured on reasonable modified terms, made to creditworthy

borrowers, will not be subject to adverse classification solely because the value of the underlying collateral declined.

The CRE Policy Statement reiterates existing guidance that examiners are expected to take a balanced approach in assessing

an institution’s risk‑management practices for loan workout activities.

In October 2018, the OCC provided Broadway Federal with a letter of “no supervisory objection” permitting it to increase the non‑multi-family commercial real estate loan concentration limit

to 100% of Tier 1 Capital plus ALLL, including a sublimit of 50% for land/construction loans, which brought the total CRE loan concentration limit to 600% of Tier 1 Capital plus ALLL.

collateral values, or prolonged delays in selling or renting commercial properties and details risk‑management practices for loan workouts that support prudent and pragmatic credit and business decision‑making within the framework of

financial accuracy, transparency, and timely loss recognition.

The banking agencies had also issued previous guidance titled “Interagency Guidance on Concentrations in Commercial Real Estate” stating that a banking institution will be

considered to be potentially exposed to significant CRE concentration risk, and should employ enhanced risk management practices, if total CRE loans represent 300% or more of its total capital and the outstanding balance of the institution’s

CRE loan portfolio has increased by 50% or more during the preceding 36 months.

In October 2009, the federal banking agencies adopted a policy statement supporting workouts of CRE loans, which is referred to as the “CRE Policy Statement.” The CRE Policy Statement provides

guidance for examiners, and for financial institutions that are working with CRE borrowers who are experiencing diminished operating cash flows, depreciated collateral values, or prolonged delays in selling or renting commercial properties.

Policy Statement states that financial institutions that implement prudent loan workout arrangements after performing comprehensive reviews of the financial condition of borrowers will not be subject to criticism for engaging in these

efforts, even if the restructured loans have weaknesses that result in adverse credit classifications.

In addition, performing loans, including those renewed or restructured on reasonable modified terms, made to creditworthy borrowers, will

not be subject to adverse classification solely because the value of the underlying collateral declined.

The CRE Policy Statement reiterates existing guidance that examiners are expected to take a balanced approach in assessing an

institution’s risk‑management practices for loan workout activities.

In October 2018, the OCC provided Broadway Federal with a letter of “no supervisory objection” permitting it to increase the non‑multi-family commercial real estate loan concentration limit to

100% of Tier 1 Capital plus ALLL, including a sublimit of 50% for land/construction loans, which brought the total CRE loan concentration limit to 600% of Tier 1 Capital plus ALLL.

Loans to One Borrower

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Community Reinvestment Act and Fair Lending

The Community Reinvestment Act, as implemented by OCC regulations (“CRA”), requires each national bank to make efforts to meet the credit needs of the communities it serves, including low‑

and moderate‑income neighborhoods.

The Community Reinvestment Act, as implemented by OCC regulations (“CRA”), requires each national bank to make efforts to meet the credit needs of the communities it serves, including low‑ and

moderate‑income neighborhoods.

The CRA requires the OCC to assess an institution’s performance in meeting the credit needs of its communities as part of its examination of the institution, and to take such assessments into consideration in

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Community groups have successfully protested applications on CRA grounds.

In connection with the

assessment of a savings institution’s CRA performance, the OCC assigns ratings of “outstanding,” “satisfactory,” “needs to improve” or “substantial noncompliance.” The Company’s CRA performance was rated by the OCC as “outstanding” in their

most recent CRA examination which was completed in 2022.

In connection with

the assessment of a savings institution’s CRA performance, the OCC assigns ratings of “outstanding,” “satisfactory,” “needs to improve” or “substantial noncompliance.” The Company’s CRA performance was rated by the OCC as “outstanding” in

their most recent CRA examination which was completed in 2022.

The Bank is also subject to federal fair lending laws, including the Equal Credit Opportunity Act (“ECOA”) and the Federal Housing Act (“FHA”), which prohibit discrimination in credit and

residential real estate transactions on prohibited bases, including race, color, national origin, gender, and religion, among others.

A lender may be liable under one or both acts in the event of overt discrimination, disparate treatment, or a

disparate impact on a prohibited basis.

A lender may be liable under one or both acts in the event of overt discrimination, disparate treatment, or

a disparate impact on a prohibited basis.

The compliance of national banks with these acts is primarily supervised and enforced by the OCC.

If the OCC determines that a lender has engaged in a pattern or practice of discrimination in violation of

ECOA, the OCC refers the matter to the DOJ.

If the OCC determines that a lender has engaged in a pattern or practice of discrimination in

violation of ECOA, the OCC refers the matter to the DOJ.

Similarly, HUD is notified of violations of the FHA.

The USA Patriot Act, Bank Secrecy Act (“BSA”), and Anti‑Money Laundering (“AML”) Requirements

The USA PATRIOT Act, Bank Secrecy Act ( “ BSA ” ), and

Anti‑Money Laundering ( “ AML ” ) Requirements

The USA PATRIOT Act was enacted after September 11, 2001 to provide the federal government with powers to prevent, detect, and prosecute terrorism and international money laundering, and has

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(i) a program to manage BSA/AML risk;

a customer identification program designed to determine the true identity of customers, document and verify the information, and determine whether the customer appears on any federal government list of known or suspected terrorists or terrorist

organizations;

(ii) a customer identification program designed to determine the true identity of customers, document and verify the information, and determine whether the customer appears on any federal government list of known or suspected terrorists or

terrorist organizations;

and (iii) a program for monitoring for the timely detection and reporting of suspicious activity and reportable transactions.

Failure to comply with these requirements may result in regulatory action, including the issuance of

cease and desist orders, impositions of civil money penalties and adverse changes in an institution’s regulatory ratings, which could adversely affect its ability to obtain regulatory approvals for business combinations or other desired

business objectives.

Failure to comply with these requirements may result in regulatory action, including the

issuance of cease and desist orders, impositions of civil money penalties and adverse changes in an institution’s regulatory ratings, which could adversely affect its ability to obtain regulatory approvals for business combinations or other

desired business objectives.

Privacy Protection

City First is subject to OCC regulations implementing the privacy protection provisions of federal law.

These regulations require the Bank to disclose its privacy policy, including

identifying with whom it shares “nonpublic personal information,” to customers at the time of establishing the customer relationship and annually thereafter.

The regulations also require City First to provide its customers with initial and

annual notices that accurately reflect its privacy policies and practices.

In addition, to the extent its sharing of such information is not covered by an exception, the Bank is required to provide its customers with the ability to “opt‑out” of

having City First share their nonpublic personal information with unaffiliated third parties.

These regulations require the Bank to disclose its privacy policy, including identifying

with whom it shares “nonpublic personal information,” to customers at the time of establishing the customer relationship and annually thereafter.

The regulations also require City First to provide its customers with initial and annual notices

that accurately reflect its privacy policies and practices.

In addition, to the extent its sharing of such information is not covered by an exception, the Bank is required to provide its customers with the ability to “opt‑out” of having City

First share their nonpublic personal information with unaffiliated third parties.

City First is also subject to regulatory guidelines establishing standards for safeguarding customer information.

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implementation, and maintenance of an information security program, which would include administrative, technical, and physical safeguards appropriate to the size and complexity of the institution and the nature and scope of its activities.

standards set forth in the guidelines are intended to promote the security and confidentiality of customer records and information, protect against any anticipated threats or hazards to the security or integrity of such records and protect

against unauthorized access to or use of such records or information that could result in substantial harm or inconvenience to any customer.

The standards set forth in the guidelines are intended to promote the security and confidentiality of customer records and information, protect against any anticipated threats or hazards to the security or integrity of such records and

protect against unauthorized access to or use of such records or information that could result in substantial harm or inconvenience to any customer.

Bank Holding Company Regulation

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any depository or depository holding company that is not a subsidiary of the Company.

The Change in Bank Control Act prohibits a person, acting directly or indirectly or in concert with one or more persons, from acquiring control of a bank holding company unless the FRB has

been given 60 days prior written notice of such proposed acquisition and within that time period the FRB has not issued a notice disapproving the proposed acquisition or extending for up to another 30 days the period during which a disapproval

may be issued.

The Change in Bank Control Act prohibits a person, acting directly or indirectly or in concert with one or more persons, from acquiring control of a bank holding company unless the FRB has been

given 60 days prior written notice of such proposed acquisition and within that time period the FRB has not issued a notice disapproving the proposed acquisition or extending for up to another 30 days the period during which a disapproval may

The term “control” is defined for this purpose to include ownership or control of, or holding with power to vote, 25% or more of any class of a bank holding company’s voting securities.

Under a rebuttable presumption contained in

the regulations of the FRB, ownership or control of, or holding with power to vote, 10% or more of any class of voting securities of a bank company will be deemed control for purposes of the Change in Bank Control Act if the institution (i) has

registered securities under Section 12 of the Exchange Act, or (ii) no person will own, control, or have the power to vote a greater percentage of that class of voting securities immediately after the transaction.

has registered securities under Section 12 of the Exchange Act, or (ii) no person will own, control, or have the power to vote a greater percentage of that class of voting securities immediately after the transaction.

In addition, any company

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For this purpose, a company is deemed to have control of a bank holding company if the company (i) owns, controls, holds with power to vote, or holds proxies representing, 25% or more of any class of voting shares of the

holding company, (ii) contributes more than 25% of the holding company’s capital, (iii) controls in any manner the election of a majority of the holding company’s directors, or (iv) directly or indirectly exercises a controlling influence over

the management or policies of the national bank or other company.

over the management or policies of the national bank or other company.

The FRB may also determine, based on the relevant facts and circumstances, that a company has otherwise acquired control of a bank holding company.

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An application to the OCC for approval to pay a dividend is required if:

(i) the total of all capital distributions made during that calendar year (including the proposed distribution)

exceeds the sum of the institution’s year‑to‑date net income and its retained income for the preceding two years;

(ii) the institution is not entitled under OCC regulations to “expedited treatment” (which is generally available to institutions

the OCC regards as well run and adequately capitalized);

(i) the total of all capital distributions made during that calendar year (including the proposed distribution) exceeds

the sum of the institution’s year‑to‑date net income and its retained income for the preceding two years;

(ii) the institution is not entitled under OCC regulations to “expedited treatment” (which is generally available to institutions the

OCC regards as well run and adequately capitalized);

(iii) the institution would not be at least “adequately capitalized” following the proposed capital distribution;

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franchise tax returns on a combined basis with its subsidiaries, the Company is subject to Washington, D.C.

franchise tax at the rate

applicable to “financial corporations.” The applicable statutory tax rate is 8.25%.

franchise tax at the rate applicable

to “financial corporations.” The applicable statutory tax rate is 8.25%.

We are exposed to a variety of risks, some of which are inherent to the financial services industry and others of which are more specific to our businesses.

The discussion

below addresses material factors, of which we are currently aware, that could have a material and adverse effect on our businesses, results of operations, and financial condition.

Moreover, some of the factors, events and contingencies

discussed below may have occurred in the past, but the disclosures below are not representations as to whether or not the factors, events or contingencies have occurred in the past, and instead reflect our beliefs and opinions as to the

factors, events, or contingencies that could materially and adversely affect us in the future.

These risk factors and other forward-looking statements that relate to future events, expectations, trends and operating periods involve certain

factors that are subject to change, and important risks and uncertainties that could cause actual results to differ materially.

These risks and uncertainties should not be considered a complete discussion of all the risks and uncertainties

that we might face.

Although the risks are organized by headings and each risk is discussed separately, many are interrelated.

Risks Relating to Our Business

The macroeconomic environment could pose significant challenges for the Company and could adversely affect our financial condition and results of operations.

Inflation poses risk to the economy overall and could indirectly pose challenges to our clients and to our business.

Elevated inflation can impact our business customers through loss of

purchasing power for their customers, leading to lower sales.

Rising inflation can also increase input and inventory costs for our customers, forcing them to raise their prices or lower their profitability.

Supply chain disruption, also

leading to inflation, can delay our customers’ shipping ability, or timing on receiving inputs for their production or inventory.

Inflation can lead to higher wages for our commercial customers, increasing costs.

All of these inflationary

risks for our commercial customer base can be financially detrimental, leading to increased likelihood that the customer may default on a loan.

For example, sustained inflationary pressure led the Federal Reserve to raise interest rates seven times in 2022, and four times in 2023, which increased our interest rate risk.

have been monitoring the level of uninsured deposits in banks due to the liquidity risk associated with high levels of uninsured deposits.

To the extent such conditions exist or worsen, we could experience

adverse effects on our business, financial condition, and results of operations.

Additionally, financial markets may be adversely affected by the current or anticipated impact of military conflict, including hostilities between Russia and Ukraine and the conflict in the Middle East, terrorism,

or other geopolitical events.

Our future success will depend on our ability to compete effectively in the highly competitive financial services industry in the greater Washington, D.C.

and Los Angeles

metropolitan areas.

We face strong competition in the Washington, D.C.

metropolitan area and the Southern California Market.

We compete with many different types of financial institutions, including commercial

banks, credit unions, savings and loan associations, mortgage banking firms, consumer finance companies, insurance companies, and money market funds, as well as other local and community, super-regional, national, and international financial

institutions that operate offices in our primary market areas and elsewhere.

Our future growth and success will depend on our ability to compete effectively in this highly competitive financial services environment.

Many of our competitors in

the greater Washington, D.C.

and Los Angeles metropolitan areas are well-established, larger financial institutions that have greater name recognition and market presence that benefit them in attracting business.

Failure to compete

effectively and to attract new or to retain existing clients may have an adverse effect on our financial condition, results of operations, assets, or business.

A downturn in the real estate market could seriously impair our loan portfolio and operating results.

Most of our loan portfolio consists of loans secured by various types of real estate located in Southern California and in Washington, D.C., and surrounding areas.

If economic factors cause real

estate values in the markets we serve to decline, higher vacancies to occur, or the deterioration of other factors, then the financial condition of the Bank’s borrowers could be harmed, and the collateral for loans will provide less security.

In addition, a decline in real estate values in the regions served could result in the Bank experiencing increases in loan delinquencies and defaults, which result in increases in the amounts of nonperforming assets and which would likely

cause the Bank to suffer losses.

Our allowance for credit losses may not be adequate to cover actual loan losses.

Our provision for credit losses is based on estimates of expected lifetime credit losses for loans at the time of origination which may not cover actual future credit losses.

utilizes a variety of inputs in the calculation of its estimate, including historical losses based on peer data, economic conditions and trends, the value and adequacy of collateral, volume and mix of the portfolio, and internal loan

We use historical loss data provided by our third-party service provider in the calculation of our ACL which may not approximate our own historical loss data.

Our ability to accurately forecast and react to future losses may be

impaired by significant uncertainties which could result in loan losses and other exposures that could exceed our allowance.

Furthermore, if the models, estimates and assumptions we use to establish our ACL or the judgments we make in

extending credit to our borrowers prove inaccurate in predicting future events, the result may also be losses in excess of our ACL.

As economic conditions change, we may have to increase our ACL, which could adversely affect our results of

operations, earnings, and financial condition.

Changes in interest rates affect profitability.

Changes in prevailing interest rates adversely affect our business.

We derive income mainly from the difference or “spread” between the interest earned on loans, securities and

other interest-earning assets, and interest paid on deposits, borrowings and other interest-bearing liabilities.

In general, the wider the spread, the more we will earn.

When market rates of interest change, the interest the Bank receives

on assets and the interest paid on liabilities will fluctuate.

In addition, the timing and rate of change in the interest that the Bank earns on assets do not necessarily match the timing and rate of change in the interest that it must pay

on deposits and other interest-bearing liabilities, even though most of the loans have adjustable-rate features .

This causes increases or decreases in the spread and can greatly affect income.

interest rates paid on deposits and borrowings increase faster than the interest rates earned on loans and securities, the Bank’s spread decreases which has a negative impact on profitability.

Also, the carrying value of our

available-for-sale investment portfolio will continue to decrease due to increases in interest rates.

In addition, interest rate fluctuations can affect how much money the Bank may be able to lend and its ability to attract and retain

customer deposits, which are an important source of funds for making and holding loans.

Changes in governmental regulation may impair operations or restrict growth.

We are subject to substantial governmental supervision and regulation, which are intended primarily for the protection of depositors rather than our stockholders.

Statutes and regulations

affecting our business may be changed at any time, and the interpretation of existing statutes and regulations by examining authorities may also change.

Within the last several years, Congress and the federal bank regulatory authorities have

made significant changes to these statutes and regulations.

There can be no assurance that such changes to the statutes and regulations or in their interpretation will not adversely affect our business.

Moreover, as a community bank operating

as a Community Development Financial Institution (CDFI), we face a complex and evolving regulatory and political landscape, and changes in laws, regulations, initiatives, or regulatory policies could adversely affect our business, financial

condition, and results of operations.

We are also subject to changes in other federal and state laws, including changes in tax laws, which could materially affect the banking industry.

If we fail to comply with federal bank regulations, our

regulators may limit our activities or growth, assess civil money penalties against us or place the Bank into conservatorship or receivership.

Bank regulations can hinder our ability to compete with financial services companies that are not

regulated or are less regulated.

Negative public opinion regarding us or the failure to maintain our reputation in the communities we serve could adversely affect our business and prevent us from growing our

Our reputation within the communities we serve is critical to our success.

We believe we have built strong personal and professional relationships with our customers and are an active member of

the communities we serve.

If our reputation is negatively affected, including as a result of actions of our employees or otherwise, we may be less successful in attracting new customers or talent or may lose existing customers, and our

business, financial condition and earnings could be adversely affected.

We may not be successful in retaining key employees.

Our success will depend in part on its ability to retain the talents and dedication of key employees.

If key employees unexpectedly terminate their employment, our business activities may be

adversely affected and management’s attention may be diverted from successfully integrating operating our business to hiring suitable replacements, which may cause our business to suffer.

In addition, we may not be able to identify or recruit

suitable replacements in a timely manner if at all for any key employees who leave the Company.

General Risk Factors

Ineffective internal control over financial reporting could affect our ability to record, process, and report financial

information accurately, impair our ability to prepare financial statements, negatively affect investor confidence, and cause reputational harm.

Effective internal controls are necessary for the Company to provide reliable and accurate financial reporting and financial statements for

external purposes in accordance with generally accepted accounting principles.

A failure to maintain effective internal control over financial reporting could lead to violations, unintentional or otherwise, of laws and regulations.

disclosed in Part I, Item 4 “Controls and Procedures,” of our Quarterly Report on Form 10-Q for the Quarter Ended September 30, 2023, we determined that there were material weaknesses in our internal control over financial reporting.

determined that the material weaknesses were remediated and that our internal control over financial reporting was effective as of December 31, 2024.

If the additional controls and procedures that we have implemented to remediate the material

weaknesses prove to be insufficient or we identify other control deficiencies that individually or together constitute significant deficiencies or material weaknesses, the Company’s ability to record, process, and report financial information

accurately, and to prepare financial statements within required time periods, could be adversely affected.

Litigation, government investigations, or regulatory enforcement actions arising out of any such failure or alleged failure could

subject us to civil and criminal penalties that could materially and adversely affect our reputation, financial condition, and operating results.

Similarly, the control deficiency, remediation efforts, and any related litigation, government

investigations, or regulatory enforcement actions will require management attention and resources and cause us to incur unanticipated costs, and could negatively affect investor confidence in our financial statements, cause us reputational

harm, and raise other risks to our operations.

Our failure to meet the continued listing requirements of Nasdaq could result in a delisting of our common stock, which would negatively impact the market price and liquidity of our common stock

and our ability to access the capital markets.

If we fail to satisfy the continued listing requirements of Nasdaq, such as the $1.00 minimum closing bid price or timely periodic financial reporting requirements, Nasdaq may take steps to

delist the Company’s securities.

For example, on May 14, 2024, we received a Staff Delisting Determination letter (the “Staff Determination”) from Nasdaq that it had initiated the delisting process with respect to the Company’s securities.

Following the filing of the Company’s Quarterly Report on Form 10-Q for the three and nine months ended September 30, 2023 and Annual Report on From 10-K for the year ended December 31, 2023, we received a letter from Nasdaq on May 20, 2024,

stating that the Company had regained compliance with Nasdaq continued listing requirements and the matter was closed.

Any delisting of the Company’s securities, or threat of such delisting, would have a negative effect on the price of our

common stock, impair the ability to sell or purchase our common stock when persons wish to do so, and any delisting materially adversely affect our ability to raise capital or pursue financing or other transactions on acceptable terms, or at

Delisting from the Nasdaq Capital Market could also have other negative results, including the potential loss of institutional investor interest and fewer business development opportunities.

In the event of a delisting, we would attempt

to take actions to restore our compliance with Nasdaq’s listing requirements, but we can provide no assurance that any such action taken by us would allow our common stock to become listed again, stabilize the market price or improve the

liquidity of our common stock, prevent our common stock from dropping below the Nasdaq minimum bid price requirement or prevent future non-compliance with Nasdaq’s listing requirements.

The market price of our common stock is volatile.

Stockholders may not be able to resell shares of our common stock at times or at prices they find attractive.

The trading price of our common stock has historically and will likely in the future fluctuate significantly as a result of a number of factors, including the following:

actual or anticipated changes in our operating results and financial condition;

actions by our stockholders, including sales of common stock by substantial stockholders and/or directors and executive officers, or perceptions that such actions may occur;

the limited number of shares of our common stock that are held by the general public, commonly called the “public float,” and our small market capitalization;

failure to meet stockholder or market expectations regarding loan and deposit volume, revenue, asset quality or earnings;

failure to meet Nasdaq listing requirements, including failure to satisfy the $1.00 minimum closing bid price requirement;

speculation in the press or the investment community relating to the Company or the financial services industry generally;

fluctuations in the stock price and operating results of our competitors;

proposed or adopted regulatory changes or developments;

investigations, proceedings, or litigation that involve or affect us;

the performance of the national, California and Washington, D.C.

economies and the real estate markets in Southern California and Washington, D.C.;

general market conditions and, in particular, developments related to market conditions for the financial services industry;

additions or departures of key personnel;

changes in financial estimates or publication of research reports and recommendations by financial analysts with respect to our common stock or those of other financial institutions;

actions taken by bank regulatory authorities, including required additions to our loan loss reserves or the issuance of cease and desist orders, based on adverse evaluations of our loans and other assets,

operating results, or management practices and procedures or other aspects of our business.

We have not paid cash dividends on our common stock since 2010 and we may not pay any cash dividends on our common stock for the foreseeable future.

We have not declared or paid cash dividends on our common stock since June 2010, initially due, in part, to regulatory restrictions and the operating losses we have previously experienced.

have not determined to pay cash dividends on our common stock at any time in the near future.

Stock sales by us or other dilution of our equity may adversely affect the market price of our common stock.

The issuance of additional shares of our common stock, or securities that are convertible into our common stock, may be determined to be necessary or advisable at times when our stock price is

below book value, which could be substantially dilutive to existing holders of our common stock.

The market value of our common stock could also decline as a result of sales by us of a large number of shares of our common stock or any future

class or series of stock or the perception that such sales could occur.

Anti-takeover provisions of our certificate of incorporation and bylaws, federal and state law and our stockholder rights plan may limit the ability of another party to

acquire the Company, which could depress our stock price.

Various provisions of our certificate of incorporation and bylaws and certain other actions that we have taken could delay or prevent a third-party from acquiring control of the Company even if

such a transaction might be considered beneficial by our stockholders.

These include, among others, our classified board of directors, the fact that directors may only be removed for cause, advance notice requirements for stockholder

nominations of director candidates or presenting proposals at our annual stockholder meetings, super-majority stockholder voting requirements for amendments to our certificate of incorporation and bylaws, and for certain business combination

transactions, and the authorization to issue “blank check” preferred stock by action of our board of directors, without obtaining stockholder approval.

In addition, we approved a stockholder rights plan in September 2019, the purpose of which

was to protect our stockholders against the possibility of attempts to acquire control of or influence over the Company through open market or privately negotiated purchases of our common stock without payment of a fair price to all of our

stockholders or through other tactics that do not provide fair treatment to all stockholders.

These provisions and the stockholder rights plan could be used by our board of directors to prevent a merger or acquisition that would be attractive

to stockholders and could limit the price investors would be willing to pay in the future for our common stock.

Our common stock is not insured and stockholders could lose the value of their entire investment.

An investment in shares of our common stock is not a deposit and is not insured against loss or guaranteed by the Federal Deposit Insurance Corporation (the “FDIC”) or any other government

agency or authority.

If we were to lose our status as a CDFI, our ability to obtain grants and awards as a CDFI similar to those received in the past may be lost.

The Bank and the Company are certified as CDFIs by the United States Department of the Treasury.

CDFI status increases a financial institution’s potential for receiving grants and awards that,

in turn, enable the financial institution to increase the level of community development financial services that it provides to communities.

Broadway Federal Bank received over $3 million in Bank Enterprise Awards from the CDFI Fund over the

last ten years.

We reinvest the proceeds from CDFI-related grants and awards back into the communities we serve.

While we believe we will be able to meet the certification criteria required to continue our CDFI status, there is no certainty

that we will be able to do so.

If we do not meet one or more of the criteria, the CDFI Fund, in its sole discretion, may provide an opportunity for us to cure deficiencies prior to issuing a notice of termination of certification.

CDFI status, and the resulting inability to obtain certain grants and awards received in the past, could have an adverse effect on our financial condition, results of operations or business.

Systems failures, interruptions and cybersecurity breaches in our information technology and telecommunications systems and of third-party service providers could have a

material adverse effect on us.

Our business is dependent on the successful and uninterrupted functioning of our information technology and telecommunications systems and the systems of its third-party service providers.

failure of these systems, or the termination of a third-party software license or service agreement on which any of these systems is based, could interrupt our operations.

Because our information technology and telecommunications systems

interface with and depend on third-party systems, we could experience service denials if demand for such services exceeds capacity, or such third-party systems fail or experience interruptions.

If significant, sustained, or repeated, a system

failure or service denial could compromise our ability to operate effectively, damage our reputation, result in a loss of customer business, and/or subject us to additional regulatory scrutiny and possible financial liability, any of which

could have a material adverse effect on our business, financial condition and results of operations.

Our information technology systems and of our third-party service providers may be vulnerable to unauthorized access, computer viruses, phishing schemes and other security breaches.

will expend additional resources to protect against the threat of such cybersecurity incident, or to alleviate problems caused by such cybersecurity incident.

However, there can be no certainty that these measures will be sufficient in

safeguarding against any such threats.

Security breaches and viruses potentially exposing sensitive data, including our proprietary business information and that of our customers, suppliers and business partners, as well as personally

identifiable information about our customers and employees, could expose us to claims, regulatory scrutiny, litigation costs and other possible liabilities and reputational harm.

Further, there can be no assurance that our insurance coverage

will be sufficient to cover any losses that may result from a cybersecurity incident or breach of our systems.

The financial services industry is undergoing rapid technological change, and we may not have the resources to effectively implement new technology or may experience

operational challenges when implementing new technology.

The financial services industry is undergoing rapid technological changes with frequent introductions of new technology-driven products and services.

The effective use of technology increases

efficiency and enables financial institutions to reduce costs while increasing customer service and convenience.

Our future success will depend, at least in part, upon our ability to address the needs of our customers by using technology to

provide products and services that will satisfy customer demands for convenience, as well as create additional efficiencies in our operations as we continue to grow and expand our products and service offerings.

We may experience operational

challenges as we implement these new technology enhancements or products, which could result in us not fully realizing the anticipated benefits from such new technology or incurring significant costs to remedy any such challenges in a timely

Many of our larger competitors have substantially greater resources to invest in technological improvements.

As a result, they may be able to offer additional or superior products compared to

those that we are able to provide, which may put us at a competitive disadvantage.

Accordingly, we may lose customers seeking new technology-driven products and services to the extent we are unable to provide such products and services.

The markets in which we operate are susceptible to natural disasters, including earthquakes, fires, drought, flooding, extreme heat, and other severe weather or catastrophic

events, any of which could result in a disruption of our operations and increases in loan losses.

A significant portion of our business is generated from markets that have been, and will continue to be, susceptible to damage by earthquakes, fires, drought, major seasonal flooding, and other

severe weather or catastrophic events.

In addition, natural disasters and other adverse external events can disrupt our operations, cause widespread property damage, and severely depress the local economies in which we operate.

real estate or other collateral that secures our loans could be materially and adversely affected by a disaster, resulting in decreased revenue and loan losses that could have a material adverse effect on our business, financial condition or

results of operations.

If the economies in our primary markets experience an overall decline as a result of a natural disaster, severe weather, or other catastrophic event, demand for loans and our other products and services could be

In addition, the rates of delinquencies, foreclosures, bankruptcies, and loan losses may increase substantially, as uninsured property losses or sustained job interruption or loss may materially impair the ability of borrowers to

repay their loans.

Risks Relating to the Company Being a Public Benefit Corporation

We cannot provide any assurance that we will achieve our public benefit purposes.

As a public benefit corporation, we are required to seek to produce a public benefit or benefits and to operate in a responsible and sustainable manner, balancing our stockholders’ pecuniary

interests, the best interests of those materially affected by our conduct, and the public benefit or benefits identified by our certificate of incorporation.

There is no assurance that we will achieve our public benefit purposes or that the

expected positive impact from being a public benefit corporation will be realized, which could have a material adverse effect on our reputation, which in turn may have a material adverse effect on our financial condition, results of

operations, assets, or business.

As a public benefit corporation, we are required to report publicly at least biennially on the overall public benefit performance and on the assessment of our success in achieving our specific public benefit

If we are not timely in providing this report or are unable to provide this report, or if the report is not viewed favorably by parties doing business with us or who are regulators or others reviewing its credentials, our reputation

and status as a public benefit corporation may be harmed.

As a Delaware public benefit corporation, our focus on specific public benefit purposes and producing a positive effect for society can negatively impact our financial

Unlike traditional corporations, which have a fiduciary duty to focus primarily on maximizing stockholder value, directors of the Company (as a public benefit corporation) have a fiduciary duty

to consider not only our stockholders’ interests, but also the Company’s specific public benefit purposes and the interests of other stakeholder constituencies and to balance those interests in making business decisions.

As a result, actions

we take that we believe to be in the best interests of those stakeholders and to help achieve our specific benefit purposes do not always fully align with our stockholder’s pecuniary interests.

While we intend our status as a public benefit

corporation to provide an overall net benefit to the Company, our customers, employees, community, and stockholders, this could result in actions or decisions that may not maximize the income generated from our business.

In addition, our

pursuit of longer-term or non-pecuniary benefits may not materialize within the timeframe we expect or at all.

Accordingly, our corporate form as a public benefit corporation and compliance with the related obligations can have an adverse

effect on our financial condition, results of operations, assets or business.

Furthermore, as a public benefit corporation, we may be less attractive as a takeover target than a traditional company would be and, therefore, our stockholders’ ability to realize their

investment through an acquisition may be reduced.

Public benefit corporations may also not be attractive targets for activists or hedge fund investors because directors are required to balance our stockholders’ pecuniary interests, the best

interests of those materially affected by our Company’s conduct, and the public benefit or benefits identified by the Company’s certificate of incorporation, and stockholders committed to the public benefit can bring a suit to enforce this

balancing requirement.

Further, because the board of directors of a public benefit corporation considers additional constituencies rather than just maximizing stockholder value, Delaware public benefit corporation law could make it easier for

a board to reject a hostile bid, even if the takeover would provide the greatest short-term financial gain to stockholders.

As a Delaware public benefit corporation, the Company’s directors have a fiduciary duty to consider not only our stockholders’ interests, but also the specific public benefit

purposes we have committed to promote and the interests of other stakeholder constituencies.

If a conflict between such interests arises, there is no guarantee such conflict would be resolved in favor of the interests of our stockholders.

While directors of traditional corporations are required to make decisions they believe to be in the best interests of their stockholders, directors of a public benefit corporation have a

fiduciary duty to consider not only the stockholders’ interests, but also the company’s specific public benefit purposes and the interests of other stakeholder constituencies.

Under Delaware law, directors are shielded from liability for

breach of their fiduciary duties if they make informed and disinterested decisions that serve a rational purpose.

Unlike traditional corporations which must focus exclusively on stockholder value, as a public benefit corporation, our

directors are not merely permitted, but obligated, to consider, in addition to the interests of stockholders, the Company’s specific public benefit purposes and the interests of other stakeholder constituencies in making business decisions.

In the event of a conflict between the interests of our stockholders and the specific public benefit purposes, we have a commitment to consider the interests of other stakeholder constituencies, and therefore, our directors are obligated to

balance those interests, and are deemed to have satisfied their fiduciary duties as long as their decisions are informed and disinterested and are not decisions that no person of ordinary, sound judgment would approve.

As a result, there is

no certainty that a conflict would be resolved in favor of our stockholders, which could have a material adverse effect on our financial condition, results of operations, assets or business.

As a Delaware public benefit corporation, we may be subject to increased derivative litigation concerning our duty to balance stockholder and public benefit interests, the

occurrence of which may have an adverse impact on its financial condition and results of operations.

Stockholders of a Delaware public benefit corporation (if they, individually or collectively, own at least two percent of the company’s outstanding shares or, in the case of a corporation with

shares listed on a national securities exchange, the lesser of such percentage or shares with a market value of at least $2 million as of the date the action is filed) are entitled to file a lawsuit (individual, derivative, or any other type

of action) claiming the directors failed to balance stockholder and public benefit interests.

This potential claim does not exist for traditional corporations.

Therefore, we are subject to the possibility of increased derivative litigation,

which would require the attention of our management, and, as a result, may adversely impact management’s ability to effectively execute our strategy.

Additionally, such derivative litigation may be costly, which may have an adverse impact on

our financial condition, results of operations, assets, or business.

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-K

Item 1. Business