What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-03-31 compared with 2024-05-20 · 257 added, 246 removed, 208 unchanged (71% of the section changed)

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Financial Statements and related Notes included in Item 8 “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K.

Total assets increased by $191.1 million to $1.4 billion at December 31, 2023, compared to $1.2 billion at December 31, 2022, primarily due to growth in net loans of $112.4 million and growth in

interest-bearing deposits in other banks of $91.1 million, partially offset by a decrease of $12.0 million in investment securities available-for-sale.

Total liabilities increased by $188.7 million to $1.1 billion at December 31, 2023 from $904.6 million at December 31, 2022.

The increase in total liabilities during 2023 resulted primarily from

increases in borrowings of $100.0 million from the Bank Fund Term Program, as well as increases of $81.0 million in FHLB advances and $10.0 million in securities sold under agreements to repurchase, offset by a net $4.3 million decrease in total

We recorded net income of $4.5 million for the year ended December 31, 2023 or $0.51 per share compared to net income of $5.6 million or $0.62 per share for the year ended December 31, 2022.

$1.6 million decrease in pretax net income during the year ended December 31, 2023 compared to the prior year was primarily due to a decline in net interest income of $3.4 million and an increase in non-interest expense of $2.4 million, which

were primarily offset by an increase in grant income of $4.2 million.

Total assets decreased by $71.7 million to $1.3 billion at December 31, 2024, compared to $1.4 billion at December 31, 2023, reflecting decreases in securities available-for-sale of $113.1

million, primarily due to maturities and paydowns, and cash and cash equivalents of $43.8 million, primarily due to repayments of borrowings.

These decreases were partially offset by growth in net loans of $88.4 million during the year ended

December 31, 2024.

Total liabilities decreased by $75.0 million to $1.0 billion at December 31, 2024 from $1.1 billion at December 31, 2023.

The decrease in total liabilities during 2024 resulted primarily from

decreases in borrowings of $100.0 million from the Bank Fund Term Program, as well as decreases of $14.0 million in notes payable, $13.8 million in FHLB advances and $6.9 million in securities sold under agreements to repurchase, offset by a

net $62.8 million increase in total deposits.

We recorded net income attributable to Broadway of $1.9 million for the year ended December 31, 2024 or $0.04 per share compared to net income of $4.5 million or $0.52 per share

for the year ended December 31, 2023.

Net income attributable to common stockholders was $359 thousand for the year ended December 31, 2024 after deducting preferred dividends of $1.6 million, compared to net income attributable to common

stockholders of $4.5 million for the year ended December 31, 2023.

Diluted earnings per common share was $0.04 for the year ended December 31, 2024 compared to $0.51 of earnings per diluted common share for the year ended December 31,

Diluted earnings per share for the year ended December 31, 2024 reflects preferred dividends of $0.18 per diluted common share.

The decrease in net income attributable to the Company during the year ended December 31, 2024, compared to the year ended December 31, 2023, primarily resulted from a decrease in

non-interest income of $3.8 million, related to grant income received from the Equitable Recovery Program administered by the U.S.

Treasury’s Community Development Financial Institutions (“CDFI”) Fund in

2023, and an increase in non-interest expense of $2.5 million, partially offset by an increase in net interest income after provision for credit losses of $2.6 million, and a decrease in tax expense of $1.2 million.

The following table summarizes the return on average assets, the return on average equity and the average equity to average assets ratios for the periods indicated:

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Our most significant source of income is net interest income, which is the difference between our interest income and our interest expense.

Generally, interest income is generated from our loans and

investments (interest earning assets) and interest expense is incurred from deposits and borrowings (interest-bearing liabilities).

Typically, our results of operations are also affected by our provision for credit losses, non-interest income

generated from service charges and fees on loan and deposit accounts, gains or losses on the sale of loans and REO, non-interest expenses, and income taxes.

Generally, interest income is generated from our loans

and investments (interest earning assets) and interest expense is incurred from deposits and borrowings (interest-bearing liabilities).

Typically, our results of operations are also affected by our provision for credit losses, non-interest

income generated from service charges and fees on loan and deposit accounts, non-interest expenses, and income taxes.

Net Interest Income

For the year ended December 31, 2023, net interest income before provision for credit losses decreased by $3.4 million, or 10.3%, to $29.5 million, compared to $32.9 million for the year ended

For the year ended December 31, 2024, net interest income before provision for credit losses increased by $2.3 million, or 7.8%, to $31.8 million, compared to $29.5 million for the year ended

December 31, 2023.

The decrease resulted from higher interest expense, primarily due to an increase in the cost of borrowings and deposits.

The increase resulted from higher interest income of $15.0 million, partially offset by an increase in interest expense of $12.7 million.

Interest income and fees on loans receivable increased by $11.7 million during the year ended December 31, 2024, compared to the year ended December 31, 2023.

This increase was primarily due to an

increase of $134.0 million in the average balance of loans receivable which increased interest income by $6.0 million.

In addition, there was an increase in the average loan yield from 4.26% for the year ended December 31, 2022, to 4.59% for the

year ended December 31, 2023, which increased interest income by $2.4 million.

Interest income on securities increased by $3.1 million to $8.7 million for the year ended December 31, 2023, compared to $5.6 million for the year ended December 31, 2022.

The increase in interest

income on securities primarily resulted from an increase of $70.5 million in the average balance of securities, which increased interest income by $1.8 million.

In addition, we had an increase of 47 basis points in the average interest yield

earned on investment securities during 2023, which reflected the rising interest rate environment and increased interest income by $1.3 million.

Other interest income decreased by $0.6 million in 2023, compared to the same period in 2022, primarily due to a decrease of $133.5 million in the average balances of

interest-earning deposits which was partially offset by a 2.95% increase in the average yield on interest-earning deposits during the year ended December 31, 2023, compared to the year ended December 31, 2022.

Company also recorded $551 thousand in higher interest income on regulatory stock during 2023, primarily due to an $8.1 million increase in average balances of FRB & FHLB stock.

Interest expense on deposits increased by $5.4 million during calendar 2023, compared to calendar 2022, due to an increase of 99 basis points in the average cost of deposits.

The average cost of

deposits increased to 1.30% for 2023, compared to 0.31% for 2022, which increased interest expense by $6.1 million.

This increase was offset by a decrease of $104.1 million in the average balance of deposits, which decreased interest expense by

$684 thousand.

This increase was primarily due to

a $138.8 million increase in the average balance of loans receivable which increased interest income by $6.9 million.

In addition, the average loan yield increased from 4.59% for the year ended December 31, 2023, to 5.15% for the year ended

December 31, 2024, which increased interest income by $4.8 million.

Interest income on securities decreased by $1.7 million to $7.0 million for the year ended December 31, 2024, compared to $8.7 million for the year ended December 31, 2023.

The decrease in

interest income on securities primarily resulted from a decrease of $59.5 million in the average balance of securities, which decreased interest income by $1.6 million.

In addition, we had a decrease of 2 basis points in the average interest

yield earned on investment securities during 2024, which decreased interest income by $71 thousand.

Other interest income increased by $5.0 million in 2024, compared to the same period in 2023, primarily due to an increase of $87.9 million in the average balance of

interest-earnings deposits, which increased interest income by $4.6 million during the year ended December 31, 2024, compared to the year ended December 31, 2023.

Interest expense on deposits increased by $5.7 million during the year ended December 31, 2024, compared to the year ended December 31, 2023, primarily due to an increase of 94 basis points in

the average cost of deposits.

The average cost of deposits increased to 2.24% for 2024, compared to 1.30% for 2023, which increased interest expense by $5.0 million.

Interest expense on borrowings increased by $7.0 million to $17.3 million during the year ended December 31, 2024, compared to $10.3 million during the year ended December 31, 2023.

The increase was

primarily due to an increase in the average balance of outstanding FHLB advances of $115.7 million, which increased interest expense by $3.8 million, and a 296 basis point increase in the average rate paid on FHLB advances which increased

interest expense by $3.5 million.

Further, an increase in the average rate paid on securities sold under agreements to repurchase of 229 basis points compared to the prior year increased interest expense by $1.7 million.

The net interest margin decreased to 2.55% for the year ended 2023 from 3.05% for the year ended 2022, primarily due to the average cost of funds increasing to 2.15% for the year ended 2023 from

0.42% for the year ended 2022 due to rate increases by the Federal Reserve.

This increase was partially offset by an improvement of 72 basis points in the average yield earned on average interest-earning assets.

was primarily due to an increase in the average balance of outstanding Bank Fund Term Program borrowings of $91.5 million, which increased interest expense by $4.7 million, and a $22.6 million increase in the average balance of FHLB advances,

which increased interest expense by $1.1 million.

Further, a 102 basis point increase in the average rate paid on securities sold under agreements to repurchase increased interest expense by $803 thousand.

The net interest margin decreased to 2.40% for the year ended December 31, 2024 from 2.55% for the year ended December 31, 2023, primarily due to the average cost of funds increasing to 3.16%

for the year ended December 31, 2024 from 2.15% for the year ended December 31, 2023 due to rate increases by the Federal Reserve.

This increase was partially offset by an improvement of 61 basis points in the average yield earned on

average interest-earning assets.

Analysis of Net Interest Income

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The following table sets forth average balances, average yields and costs, and certain other information for the years indicated.

All average balances

are daily average balances.

balances are daily average balances.

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

We do not accrue interest on

loans that are on non-accrual status;

We do not accrue

interest on loans that are on non-accrual status;

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

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Interest-earning deposits

Loans receivable (1)

Loans receivable, net (1)

FRB and FHLB stock

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FHLB advances

Junior subordinated debentures

BTFP borrowing

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Includes non‑accrual interest of $102 thousand, reflecting interest recoveries on non‑accrual loans that were paid off for the year ended December 31, 2022.

Includes non‑accrual interest of $162 thousand, reflecting interest recoveries on non‑accrual loans that were paid off for the year ended December 31, 2021.

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

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attributable to changes in rate (changes in rate multiplied by prior volume), and (iii) the total change.

The changes attributable to the combined impact of volume and rate have been allocated proportionately to the changes due to volume and the

changes due to rate.

The changes attributable to the combined impact of volume and rate have been allocated proportionately to the changes due to volume and

the changes due to rate.

Year Ended December 31, 2024

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Interest‑earning assets:

Interest‑earning deposits and other short‑term investments

Interest‑earning deposits

Loans receivable, net

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BTFP borrowing

Junior subordinated debentures

Other borrowings

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Provision for Credit Losses

During the year ended December 31, 2023, we recorded a provision for credit losses under the Current Expected Credit Loss (“CECL”) methodology of $933 thousand, compared to a loan loss provision

under the previously used incurred loss model of $997 thousand during the same period in 2022.

During the year ended December 31, 2024, we recorded a provision for credit losses of $664 thousand, compared to a provision for credit losses of $933 thousand during the same period in 2023.

No loan charge-offs were recorded during the year ended December 31, 2024 or 2023.

The Bank recorded a recovery of $216 thousand during the fourth

quarter of 2023.

The Bank recorded a recovery of $216 thousand during the fourth quarter of 2023.

We 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.

See “Allowance for Credit Losses” for additional information.

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For the year ended December 31, 2024, non-interest income totaled $1.6 million, compared to $5.4 million for the year-ended December 31, 2023.

The increase of $4.2 million in

non-interest income was primarily the result of non-recurring income of $3.7 million from a special grant from the U.S.

Treasury’s Community Development Financial Institutions Fund recognized during 2023 and a $437 thousand recurring

Bank Enterprise Award grant.

The decrease of $3.8 million in

non-interest income was primarily the result of non-recurring income of $3.7 million from a grant from the CDFI Fund’s Equitable Recovery Program recognized during 2023.

Non‑Interest Expense

Non-interest expenses totaled $27.4 million for the year ended December 31, 2023, compared to $24.9 million for the year ended December 31, 2022, primarily due to increases in

compensation and benefits expenses of $1.4 million, professional fees of $368 thousand, occupancy expense of $255 thousand and supervisory costs of $200 thousand, partially offset by a decrease in information services expense of $156 thousand.

The increase of $1.4 million in compensation and benefits expense during 2023 compared to 2022 was primarily attributable to additional full-time employees that the Bank hired

over the past twelve months in various production and administrative support positions.

These hires were part of the Company’s overall efforts to expand its operational capabilities to strategically grow its balance sheet and fulfill the

intersecting lending objectives of the Company’s mission and the funding received from the Emergency Capital Investment Program of the United States Department of the Treasury.

A portion of the increase in compensation expenses during the year

ended December 31, 2023 pertained to recruiting expenses.

Non-interest expenses totaled $29.9 million for the year ended December 31, 2024, compared to $27.4 million for the year ended December 31, 2023, primarily due to increases

in compensation and benefits expenses of $1.9 million and professional fees of $323 thousand.

The increase of $1.9 million in compensation and benefits expense during 2024 compared to 2023 reflects the investment in additional executives and staff to support growth and strengthen overall

controls and management depth.

The increase in professional services expense was primarily due to the costs associated with third-party professionals that were retained in connection with the Company’s remediation efforts of the weaknesses

in internal controls that were identified during preparation of the financial statements for the third quarter of 2023.

Income tax expense or benefit is computed by applying the statutory federal income tax rate of 21%.

State taxes are recorded at the State of California tax rate and Washington, D.C.

according to the state apportionment calculation as Bank’s operations are conducted in both California and the Washington, D.C.

The Company recorded an income tax expense of $2.0 million for the year ended December 31, 2023, representing an

effective tax rate of 30.4%, compared to an income tax expense of $2.4 million for the year ended December 31, 2022, representing an effective tax rate of 29.7%.

The effective tax rate for each year differs from the 21% federal statutory rate

due to the impact of state taxes as well as various permanent tax differences, vesting of stock-based compensation and other discrete items.

The effective tax rate for 2023 increased from 2022 primarily due to the effect of certain permanent tax differences and discrete items.

according to the state apportionment calculation as the Bank’s operations are conducted in both California and the Washington, D.C.

The Company recorded an income tax expense of $814 thousand for the year ended December 31, 2024,

representing an effective tax rate of 29.4%, compared to an income tax expense of $2.0 million for the year ended December 31, 2023, representing an effective tax rate of 30.4%.

The effective tax rate for each year differs from the 21%

federal statutory rate due to the impact of state taxes as well as various permanent tax differences, vesting of stock-based compensation and other discrete items.

Our deferred tax asset totaled $8.8 million at December 31, 2024 and $9.5 million at December 31, 2023.

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As of December 31, 2024, we had $203.9 million of investment securities classified as available-for-sale, compared to $317.0 million at December 31, 2023.

The decrease during 2023 was primarily due

to $18.4 million of principal payments and maturities, partially offset by a $5.6 million increase in the fair value of investment securities available-for-sale during the year ended December 31, 2023.

The decrease during 2024 was primarily

due to principal payments and maturities.

Loans Receivable Held for Investment

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The increase of $88.4

million in loans receivable held for investment during 2023 was primarily due to originations of $162.1 million in new loans, $78.9 million of which were multi-family loans, $40 million of which were construction loans, $26.8 million of which

were commercial loans, and $16.4 million of which were commercial real estate loans.

million in loans receivable held for investment during 2024 was primarily due to originations of $157.7 million in new loans, $80.9 million of which were multi-family loans, $50.8 million in commercial real estate loans, $17.6 million in

other commercial loans, $7.6 million in construction loans, and $800 thousand in SBA loans.

Loan repayments during 2024 totaled $69.1 million.

During 2022, the Bank originated $273.4 million in new loans, $141.6 million of which were multi-family loans, $75.3 million of which were commercial real estate loans, $29.6 million of which

construction loans, and $26.6 million of which were commercial loans.

During 2023, the Bank originated $162.1 million in new loans, $78.9 million of which were multi-family loans, $40.0 million of which were construction loans, $28.3 million of which were

commercial real estate loans, and $15.0 million of which were other commercial loans.

Loan repayments during 2023 totaled $47.2 million.

Allowance for Credit Losses

Effective January 1, 2023, the Company accounts for credit losses on loans in accordance with ASC 326, which requires the Company to record an estimate of expected lifetime credit losses for loans

at the time of origination or acquisition.

Effective January 1, 2023, the Company accounts for credit losses on loans in accordance with ASC 326, which requires the Company to record an estimate of expected lifetime credit losses for

loans at the time of origination or acquisition.

The ACL is maintained at a level deemed appropriate by management to provide for expected credit losses in the portfolio as of the date of the consolidated statements of financial condition.

expected credit losses requires management to use relevant forward-looking information, including the use of reasonable and supportable forecasts.

The measurement of the ACL is performed by collectively evaluating loans with similar risk

characteristics.

Estimating expected credit losses requires management to use relevant forward-looking information, including the use of reasonable and supportable forecasts.

The measurement of the ACL is performed by collectively evaluating loans with

similar risk characteristics.

The Company measures the ACL for each of its loan segments using the WARM method.

The weighted average remaining life, including the effect of estimated prepayments, is calculated for each loan pool on a quarterly basis.

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 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.

Our ACL was $8.1 million or 0.83% of our gross loans receivable held for investment at December 31, 2024 compared to $7.3 million, or 0.83% of our gross loans receivable held for investment at

December 31, 2023.

The increase was primarily due to the implementation of the CECL methodology adopted by the Bank effective January 1, 2023, which increased the ACL by $1.8 million.

In addition, the Bank recorded an additional provision for

credit losses of $935 thousand for the twelve months ended December 31, 2023.

CECL methodology includes estimates of expected loss rates in the future, whereas the former ALLL methodology did not.

Our non-performing 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.

At December 31, 2023, NPLs totaled $0 compared to $144 thousand (or 0.02% of gross loans) at December 31, 2022.

The decrease in NPLs was the result of payments received from borrowers that were applied to the outstanding

principal balance.

The increase was primarily due to growth in the loan portfolio.

Our non-performing 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.

At December 31, 2024, NPLs totaled $264 thousand compared to $0 at December 31, 2023.

The Bank did not have any REO at December 31, 2024 or 2023.

There were no loans that were modified in response to a borrower’s financial difficulty during 2023.

We believe the ACL is adequate to cover expected losses in the loan portfolio as of December 31, 2023, but because of uncertainty regarding the future value of the loan portfolio, there can be no

assurance that actual losses will not exceed the estimated amounts.

There were no loans that were modified in response to a borrower’s

financial difficulty during 2024 or 2023.

We believe the ACL is adequate to cover expected losses in the loan portfolio as of December 31, 2024, but because of uncertainty regarding the future value of the loan portfolio, there can be

no assurance that actual losses will not exceed the estimated amounts.

In addition, the OCC and the FDIC periodically review the ACL as an integral part of their examination process.

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

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

These agencies may require an increase in the ACL based on

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

See Note 1 “Summary of Significant Accounting Policies” to the Company’s Consolidated Financial Statements for further discussion.

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As a result of the Merger, the Company recorded $25.9 million of goodwill.

Goodwill acquired in a purchase business combination that is determined to have an indefinite useful life is not amortized,

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

During the year ended December 31, 2023, the Company recorded no change in

the deferred tax estimate expense related to the goodwill asset.

Goodwill acquired in a purchase business combination that is determined to have an indefinite useful life is not

amortized, but is tested for impairment at least annually or more frequently if events and circumstances exist that indicate the necessity for such impairment tests to be performed.

No impairment charges were recorded during 2024 for goodwill impairment.

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The Company performed its qualitative

assessment as of December 31, 2023.

and quantitative assessment as of September 30, 2024.

The Company recorded $3.3 million of core deposit intangible asset as a result of the Merger.

The core deposit intangible asset is amortized on an accelerated basis reflecting the pattern in which

the economic benefits of the intangible asset are consumed or otherwise used up.

The core deposit intangible asset is amortized on an accelerated basis reflecting the pattern in

which the economic benefits of the intangible asset are consumed or otherwise used up.

The estimated life of the core deposit intangible is approximately 10 years.

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Deposits at December 31, 2024 were $745.4 million compared to $682.6 million at December 31, 2023.

The decrease in deposits of $4.3 million was primarily caused by some depositors leaving the Bank

for higher interest rates available elsewhere, even after management made reasonable attempts to be responsive to the higher interest rate environment.

The increase in deposits of $62.8 million was primarily caused by an increase in Insured Cash

Sweep (“ICS”) deposits.

Five customer relationships accounted for approximately 18% of our deposit balances at December 31, 2024.

We expect to maintain these relationships with these customers for the foreseeable future.

We expect to maintain these relationships with these customers for the foreseeable

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

Total borrowings at December 31, 2023 consisted of advances to the Bank from the FHLB of $209.3 million, repurchase agreements of $73.5 million, and borrowings associated with the BTFP borrowing

activities of $100.0 million, compared to advances from the FHLB of $128.3 million and repurchase agreements of $63.5 million at December 31, 2022.

Balances of outstanding FHLB advances increased to $209.3 million at December 31, 2023, from $128.3 million at December 31, 2022, primarily due to $456.1 million in advances

from the FHLB of Atlanta, offset by repayments of $375.1 million of advances from the FHLB of Atlanta.

Total borrowings at December 31, 2024 consisted of advances to the Bank from the FHLB of $195.5 million and repurchase agreements of $66.6 million, compared to advances from the FHLB of $209.3

million, repurchase agreements of $73.5 million and borrowings associated with the BTFP of $100.0 million at December 31, 2023.

Balances of outstanding FHLB advances decreased to $195.5 million at December 31, 2024, from $209.3 million at December 31, 2023, primarily due to repayments of FHLB advances of

$352.8 million, partially offset by $339.0 million in advances from the FHLB.

The weighted average rate on FHLB advances was 4.03% at December 31, 2024, compared to 4.91% at December 31, 2023.

Borrowings under the BTFP with the Federal Reserve were $100.0 million as of December 31, 2023.

The interest rate was fixed at 4.84% and the borrowing matures on December 29, 2024.

Investment securities with a book

value of $107.3 million and a fair value of $98.3 million were pledged as collateral for this borrowing as of December 31, 2023.

There are no prepayment penalties for early payoff.

As the BTFP ended on March 11, 2024, no additional borrowings

can be made under the program.

This borrowing was paid off in December 2024.

The interest rate 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.

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

Under these arrangements, the Bank may transfer

legal control over the assets but still retain effective control through an agreement that both entitles and obligates the Bank to repurchase the assets.

As a result, these repurchase agreements are accounted for as collateralized financing

agreements (i.e., secured borrowings) and not as a sale and subsequent repurchase of securities.

The obligation to repurchase the securities is reflected as a liability in the Bank’s consolidated statements of financial condition, while the

securities underlying the repurchase agreements remain in the respective investment securities asset accounts.

In other words, there is no offsetting or netting of the investment securities assets with the repurchase agreement liabilities.

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

Under these arrangements, the Bank may

transfer legal control over the assets but still retain effective control through an agreement that both entitles and obligates the Bank to repurchase the assets.

As a result, these repurchase agreements are accounted for as collateralized

financing agreements (i.e., secured borrowings) and not as a sale and subsequent repurchase of securities.

The obligation to repurchase the securities is reflected as a liability in the Bank’s consolidated statements of financial condition,

while the securities underlying the repurchase agreements remain in the respective investment securities asset accounts.

In other words, there is no offsetting or netting of the investment securities assets with the repurchase agreement

As of December 31, 2024, securities sold under agreements to repurchase totaled $66.6 million at an average rate of 3.62%.

These agreements mature on a daily basis.

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

and included $47.8 million of U.S.

The fair value of securities pledged totaled $83.3 million as

of December 31, 2024 and included $46.5 million of U.S.

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.

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.

One customer relationship accounted for 88% of our balance of securities sold under agreements to repurchase.

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

This CDE acts in effect as a

pass-through for a Merrill Lynch allocation totaling $14.0 million that needed to be deployed.

This CDE acts in effect

as a pass-through for a Merrill Lynch allocation totaling $14.0 million that needed to be deployed.

In December 2015, Merrill Lynch made a $14.0 million non-recourse loan to CFC 45, whereby CFC 45 passed that loan through to a QALICB.

The loan to the

QALICB is secured by a Leasehold Deed of Trust that, due to the pass-through, non-recourse structure, is operationally and ultimately for the benefit of Merrill Lynch rather than CFC 45.

Debt service payments received by CFC 45 from the QALICB

are passed through to Merrill Lynch in return for which CFC 45 receives a servicing fee.

loan to the QALICB was secured by a Leasehold Deed of Trust that, due to the pass-through, non-recourse structure, was operationally and ultimately for the benefit of Merrill Lynch rather than CFC 45.

Debt service payments received by CFC 45

from the QALICB were passed through to Merrill Lynch in return for which CFC 45 received a servicing fee.

This note was paid off during January 2024.

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Stockholders’ equity was $285.2 million, or 21.9% of the Company’s total assets, at December 31, 2024, compared to $281.9 million, or 20.5% of the Company’s total assets, at December 31, 2023.

2022, the Company sold $150 million in preferred stock to the U.S.

Government under the ECIP Program.

During the first quarter of 2022, the Company completed the exchange of all the Series A Fixed Rate Cumulative Redeemable Preferred Stock, with an aggregate liquidation value of $3.0 million, plus

accrued dividends, for 149,164 shares of Class A Common Stock at an exchange price of $2.51 per share of Class A Common Stock.

During December of 2022, the Company issued a $5 million line of credit to the ESOP Plan for the purchase of additional shares.

As of December 31, 2023, the trustee for the ESOP had purchased

428,327 shares at a total cost of $3.9 million.

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.

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 Company’s book value per common share was $14.82 at December 31, 2024, and its tangible book value per common share was $11.79 at December 31, 2024.

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As a “small bank holding company,” we are not subject to consolidated capital requirements under the new Basel III capital rules.

The current regulatory capital requirements and possible

consequences of failure to maintain compliance are described in Part I, Item 1 “Business‑Regulation” and in Note 16 “Regulatory Matters” of the Notes to Consolidated Financial Statements.

The current regulatory capital requirements and

possible consequences of failure to maintain compliance are described in Part I, Item 1 “Business‑Regulation” and in Note 16 “Regulatory Matters” of the Notes to Consolidated Financial Statements.

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

The Bank’s sources of funds

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

The Bank is currently approved by the FHLB of

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

This approved limit and collateral requirement would have permitted the Bank to borrow an additional $117.0 million

at December 31, 2023 based on pledged collateral.

The Bank’s sources of

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

The Bank is currently approved by the FHLB

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

This approved limit and collateral requirement would have permitted the Bank to borrow an additional $174.3

million at December 31, 2024 based on pledged collateral.

In addition, the Bank had additional lines of credit of $10.0 million with other financial institutions as of that date.

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significant concentration of short-term borrowings from one customer that accounted for 88% of out the outstanding balance of securities sold under agreements to repurchase as of December 31, 2024.

The Bank expects to maintain these relationships

with the customers for the foreseeable future.

The Bank expects to maintain these

relationships with the customers for the foreseeable future.

As of December 31, 2024, approximately $268.8 million of our total deposits (including deposits from affiliates) were not insured by FDIC insurance, which represented 32% of total deposits.

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when the Bank has more funds than required for reserve requirements or short‑term liquidity needs, the Bank invests excess cash with the Federal Reserve Bank or other financial institutions.

The Bank’s liquid assets at December 31, 2023 consisted

of $105.2 million in cash and cash equivalents and $186.0 million in securities available‑for‑sale that were not pledged, compared to $16.1 million in cash and cash equivalents and $250.3 million in securities available‑for‑sale that were not

pledged at December 31, 2022.

The Bank’s liquid assets at December 31, 2024

consisted of $61.4 million in cash and cash equivalents and $17.6 million in securities available‑for‑sale that were not pledged, compared to $105.2 million in cash and cash equivalents and $186.0 million in securities available‑for‑sale that

were not pledged at December 31, 2023.

We believe that the Bank has sufficient liquidity to support growth over the foreseeable future.

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The Company recorded consolidated net cash inflows from operating activities of $1.4 million and $7.6 million during the years ended December 31, 2024 and 2023, respectively.

inflows from operating activities during 2023 were primarily attributable to net income of $4.5 million and a $2.3 million net increase in accrued expenses and other liabilities .

Net cash inflows from

operating activities during 2022 were primarily attributable to net income of $5.7 million and a $1.5 million increase in deferred taxes.

The Company recorded consolidated net cash outflows from investing activities of $100.0 million and $324.0 million during the years ended December 31, 2023 and 2022, respectively.

cash outflows from investing activities during 2023 were primarily attributable to $115.3 million of net loan originations.

Net cash outflows from investing activities during 2022 were primarily attributable to $215.5 million of

purchases of available-for-sale securities and $120.0 of net loan originations .

The Company recorded consolidated net cash inflows from financing activities of $181.5 million and $102.2 million during the years ended December 31, 2023 and 2022, respectively.

cash inflows from financing activities during 2023 were primarily attributable to $456.1 million of proceeds from FHLB advances and $100.0 million of proceeds from the BTFP, partially offset by $375.1 million of FHLB repayments.

Net cash inflows from financing activities during 2022 were primarily attributable to $150.0 million from the issuance of preferred stock and $95.5 million of proceeds from FHLB advances, offset by $101.1

million of net outflow of deposits and $53.1 million of FHLB repayments

cash inflows from operating activities during 2024 were primarily attributable to net income of $2.0 million, a $1.4 million increase in other assets and a $641 thousand net change in deferred loan origination costs, partially

offset by a $3.1 million net decrease in accrued expenses and other liabilities .

Net cash inflows from operating activities during 2023 were primarily attributable to net income of $4.5 million and a $2.3

million net increase in accrued expenses and other liabilities .

The Company recorded consolidated net cash inflows from investing activities of $28.2 million and outflows from investing activities of $100.0 million during the years ended

December 31, 2024 and 2023, respectively.

Net cash inflows from investing activities during 2024 were primarily attributable to $117.1 of principal payments and maturities on available-for-sale securities, partially offset by $89.3 million

of net loan originations.

Net cash outflows from investing activities during 2023 were primarily attributable to $115.3 million of net loan originations .

The Company recorded consolidated net cash outflows from financing activities of $73.4 million and inflows from financing activities of $181.5 million during the years ended

December 31, 2024 and 2023, respectively.

Net cash outflows from financing activities during 2024 were primarily attributable to $352.8 million of FHLB repayments, $100.0 million of BTFP repayments, and $14.0 million notes payable

repayments, partially offset by $339.0 million of proceeds from FHLB advances and a $62.8 million net increase in deposits.

Net cash inflows from financing activities during 2023 were primarily attributable to

$456.1 million of proceeds from FHLB advances and $100.0 million of proceeds from the BTFP, partially offset by $375.1 million of FHLB repayments.

We believe that the Company’s existing cash, cash equivalents and marketable securities will be sufficient to meet our liquidity requirements and capital expenditure needs over at least the next

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We are party to financial instruments with off‑balance‑sheet risk in the normal course of our business, primarily in order to meet the financing needs of our customers.

These instruments involve, to

varying degrees, elements of credit, interest rate and liquidity risk.

In accordance with GAAP, these instruments are either not recorded in the consolidated financial statements or are recorded in amounts that differ from the notional amounts.

These instruments

involve, to varying degrees, elements of credit, interest rate and liquidity risk.

In accordance with GAAP, these instruments are either not recorded in the consolidated financial statements or are recorded in amounts that differ from the

notional amounts.

Such instruments primarily include lending commitments and lease commitments as described below.

Lending commitments include commitments to originate loans and to fund lines of credit.

Commitments to extend credit are agreements to lend to a customer if there is no violation of any condition

established in the commitment.

Commitments to extend credit are agreements to lend to a customer if there is no violation of any

condition established in the commitment.

Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee by the borrower.

Since some of the commitments are expected to expire without being drawn upon, the

total commitment amounts do not necessarily represent future cash requirements.

Since some of the commitments are expected to expire without being drawn

upon, the total commitment amounts do not necessarily represent future cash requirements.

We evaluate creditworthiness on a case‑by‑case basis.

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In addition to our lending commitments, we have contractual obligations related to operating lease commitments.

Operating lease commitments are obligations under various non‑cancellable operating

leases on buildings and land used for office space and banking purposes.

Operating lease commitments are obligations under various non‑cancellable

operating leases on buildings and land used for office space and banking purposes.

The following table details our contractual obligations at December 31, 2024.

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Impact of Inflation and Changing Prices

Our consolidated financial statements, including accompanying notes, have been prepared in accordance with GAAP which require the measurement of financial position and operating results primarily in

terms of historical dollars without considering the changes in the relative purchasing power of money over time due to inflation.

Our consolidated financial statements, including accompanying notes, have been prepared in accordance with GAAP which require the measurement of financial position and operating results

primarily in terms of historical dollars without considering the changes in the relative purchasing power of money over time due to inflation.

The impact of inflation is reflected in increased costs of our operations.

Unlike industrial companies, nearly all

our assets and liabilities are monetary in nature.

Unlike industrial

companies, nearly all our assets and liabilities are monetary in nature.

As a result, interest rates have a greater impact on our performance than do the effects of general levels of inflation.

Interest rates do not necessarily move in the same direction or to the

same extent as the price of goods and services.

As a result, the Bank’s performance is influenced by general macroeconomic conditions, both domestic and foreign, the monetary and fiscal policies of the federal government, and the policies of the

regulatory agencies.

Interest rates do not necessarily move in the

same direction or to the same extent as the price of goods and services.

As a result, the Bank’s performance is influenced by general macroeconomic conditions, both domestic and foreign, the monetary and fiscal policies of the federal government, and the policies of

the regulatory agencies.

The Federal Reserve implements national monetary policies (such as seeking to curb inflation and combat recession) by its open-market operations in U.S.

government securities, by adjusting the required level of reserves for

financial institutions subject to its reserve requirements, and by varying the discount rate applicable to borrowings by banks from the Federal Reserve Banks.

The actions of the Federal Reserve in these areas can influence the growth of loans,

investments, and deposits, and also affect interest rates charged on loans, and deposits.

government securities, by adjusting the required level of

reserves for financial institutions subject to its reserve requirements, and by varying the discount rate applicable to borrowings by banks from the Federal Reserve Banks.

The actions of the Federal Reserve in these areas can influence the

growth of loans, investments, and deposits, and also affect interest rates charged on loans and deposits.

The nature and impact of any future changes in monetary policies cannot be predicted.

Critical Accounting Estimates

Critical accounting estimates are those that involve a significant level of estimation uncertainty , and which have had or are reasonably likely to have a material impact on the financial condition

or results of operations of the registrant.

Critical accounting estimates are those that involve a significant level of estimation uncertainty, and which have had or are reasonably likely to have a material impact on the financial

condition or results of operations of the registrant.

This discussion highlights those accounting estimates that management considers critical.

All accounting policies are important, however, and therefore you are encouraged to review each of the policies

included in Note 1 “Summary of Significant Accounting Principles” of the Notes to Consolidated Financial Statements to gain a better understanding of how our financial performance is measured and reported.

Management has identified the Company’s

critical accounting estimates as follows:

All accounting policies are important, however, and therefore you are encouraged to review each of

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

Management has identified

the Company’s critical accounting estimates as follows:

Allowance for Credit Losses

In originating loans, we recognize that losses may be experienced on loans and that the risk of loss may vary as a result of many

factors, including the type of loan being made, the 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.

ASC 326 requires the Company to recognize estimates for lifetime losses on loans and off-balance sheet loan commitments at the time of origination or acquisition.

The recognition of losses at

origination or acquisition represents the Company’s best estimate of the lifetime expected credit loss associated with a loan, given the facts and circumstances associated with the particular loan, and involves the use of significant

management judgment and estimates, which are subject to change based on management’s on-going assessment of the credit quality of the loan portfolio and changes in economic forecasts used in the model.

The Company uses the 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

In originating loans, we recognize that losses may be experienced on loans and that the risk of loss may vary as a result of many factors, including the type of loan being made, the

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,

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;

(ii) changes in international, national, regional, and

local conditions;

(iii) changes in the nature and volume of the portfolio and terms of loans;

Qualitative adjustments may include, but are not limited to, factors such as:

(i) changes in lending

policies and procedures, including changes in underwriting standards and collections, charge offs, and recovery practices;

(ii) changes in international, national, regional, and local conditions;

(iii) changes in the nature and volume of the

portfolio and terms of loans;

(iv) changes in the experience, depth, and ability of lending management;

(v) changes in the volume and severity of past due loans and other similar

(vi) changes in the quality of the organization’s loan review system;

(v) changes in the volume and severity of past due loans and other similar conditions;

(vi) changes in the quality of the organization’s

loan review system;

(vii) changes in the value of underlying collateral for collateral dependent loans;

(viii) the existence and effect of any concentrations of credit and changes in

the levels of such concentrations;

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

These qualitative factors incorporate the concept of reasonable and

supportable forecasts, as required by ASC 326.

(viii) the existence and effect of any concentrations of credit and changes in the levels of such concentrations;

and (ix) the effect of

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

These qualitative factors incorporate the concept of reasonable and supportable forecasts, as required by ASC 326.

The Company has a credit portfolio review process designed to detect problem loans.

Problem loans are typically those of a

substandard or worse internal risk grade, and may consist of loans on nonaccrual status, loans that have recently been modified in response to a borrower’s deteriorating financial condition, loans where the likelihood of foreclosure on

underlying collateral has increased, collateral dependent loans, and other loans where concern or doubt over the ultimate collectability of all contractual amounts due has become elevated.

Such loans may, in the opinion of management, be deemed

to no longer possess risk characteristics similar to other loans in the loan portfolio, because the specific attributes and risks associated with the loan have likely become unique as the credit quality of the loan deteriorates.

As such, these

loans may require individual evaluation to determine an appropriate ACL for the loan.

When a loan is individually evaluated, the Company typically measures the expected credit loss for the loan based on a discounted cash flow approach, unless

the loan has been deemed collateral dependent.

Collateral dependent loans are loans where the repayment of the loan is expected to come from the operation of and/or eventual liquidation of the underlying collateral.

The ACL for collateral

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

Problem loans are typically those of a substandard or worse internal risk grade, and may consist of loans on

nonaccrual status, loans that have recently been modified in response to a borrower’s deteriorating financial condition, loans where the likelihood of foreclosure on underlying collateral has increased, collateral dependent loans, and other

loans where concern or doubt over the ultimate collectability of all contractual amounts due has become elevated.

Such loans may, in the opinion of management, be deemed to no longer possess risk characteristics similar to other loans in the

loan portfolio, because the specific attributes and risks associated with the loan have likely become unique as the credit quality of the loan deteriorates.

As such, these loans may require individual evaluation to determine an appropriate

ACL for the loan.

When a loan is individually evaluated, the Company typically measures the expected credit loss for the loan based on a discounted cash flow approach, unless the loan has been deemed collateral dependent.

Collateral dependent

loans are loans where the repayment of the loan is expected to come from the operation of and/or eventual liquidation of the underlying collateral.

The ACL for collateral dependent loans is determined using estimates of the fair value of the

underlying collateral, less estimated selling costs.

The estimation of the appropriate level of the ACL requires significant judgment by management.

Although management uses the best

information available to make these estimations, future adjustments to the ACL may be necessary due to economic, operating, regulatory, and other conditions that may extend beyond the Company’s control.

Changes in management’s estimates of

forecasted net losses could materially change the level of the ACL.

Although management uses the best information available to make these estimations, future

adjustments to the ACL may be necessary due to economic, operating, regulatory, and other conditions that may extend beyond the Company’s control.

Changes in management’s estimates of forecasted net losses could materially change the level of

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 excess of consideration paid over fair value of net assets acquired for acquisitions is recorded as goodwill.

Goodwill is not amortized but is tested at

least annually for impairment or more frequently if events occur or circumstances change that indicate impairment may exist.

A goodwill impairment test is performed by comparing the fair value of the reporting unit with its carrying value.

An impairment charge is recorded for the amount by which the carrying amount exceeds the reporting unit’s fair value.

A weighted average of both the market and income approaches is used in valuing the reporting unit’s fair value.

are assigned to the approaches regarding fair value and the sensitivity of other weighting scenarios is considered.

The market approach incorporates comparable public company information, valuation multiples and consideration of a market

control premium along with data related to comparable observed purchase transactions in the financial services industry.

The income approach consists of discounting projected future cash flows, which are derived from internal forecasts and

economic expectations for the reporting unit.

The significant inputs and assumptions for the income approach include a discount rate and projected earnings of the Company in future years for which there is inherent uncertainty.

sensitivity of a range of reasonable discount rates based on the current economic environment is considered.

Our quantitative annual impairment tests as of September 30, 2024 and 2023 did not result in impairment.

However, changing economic conditions that may

adversely affect the Company’s performance, the fair value of its assets and liabilities, or its stock price could result in future impairment.

Any resulting impairment loss could have a material adverse impact on the Company’s financial

condition and results of operations.

Management will continue to monitor events that could influence this conclusion in the future.

See Note 7 to the Consolidated Financial Statements in “Item 8.

Financial Statements and Supplementary Data”

for further information.

The Company’s accounting policies and discussion of recent accounting pronouncements is included in Note 1 to the Consolidated Financial Statements in “Item 8.

Financial Statements and Supplementary Data.”

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

What changed 10-K

Item 7. Management’s Discussion and Analysis