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Item 2. Management’s Discussion and Analysis

2025-12-31 compared with 2025-07-24 · 326 added, 246 removed, 175 unchanged (77% of the section changed)

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

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

and related Notes included in Part I, Item 1 “Financial Statements,” of this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2024.

Certain statements herein are forward-looking statements within the

meaning of Section 21E of the U.S.

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

Statements and related Notes included in Part I, Item 1 “Financial Statements,” of this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K/A for the year ended December 31, 2024.

Certain statements herein are forward-looking

statements within the meaning of Section 21E of the U.S.

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

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

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

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

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

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

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

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

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

and financial performance.

“prospects,” “ability,” “looking,” “forward,” “invest,” “grow,” “improve,” “likely” and other similar expressions.

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

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

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

date of this Form 10-Q.

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

Critical Accounting Policies and Estimates

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

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

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

condition or results of operations under different assumptions and conditions.

This discussion highlights those accounting policies that management considers critical.

All accounting policies are important;

therefore, you are encouraged

to review each of the policies included in Note 1 “Summary of Significant Accounting Policies” of the Notes to Consolidated Financial Statements in our 2024 Form 10-K to gain a better understanding of how our financial performance is measured 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 in our 2024 Form 10-K/A to gain a better understanding of how our financial performance is measured and

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

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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.

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 in which case the ACL is

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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.

The sensitivity of a range of reasonable discount rates based on the current

economic environment is considered.

Total assets decreased by $65.7 million at March 31, 2025, compared to December 31, 2024, reflecting decreases in cash and cash equivalents of $45.6

million, securities available-for-sale of $17.9 million and FHLB stock of $5.0 million, partially offset by an increase in net loans of $2.4 million.

Loans receivable held for investment, net of the ACL, increased by $2.4 million to $971.2 million at March 31, 2025, compared to $968.9 million at

December 31, 2024.

Deposits increased by $31.1 million, or 4.2%, to $776.5 million at March 31, 2025, from $745.4 million at December 31, 2024.

The increase in

deposits was attributable to an increase of $53.4 million in certificates of deposit accounts, partially offset of decreases of $9.6 million in Insured Cash Sweep (“ICS”) deposits, $6.5 million in liquid deposits (demand, interest checking, and

money market accounts), $3.8 million in Certificate of Deposit Registry Service (“CDARS”) deposits, and $2.4 million in savings deposits.

Total borrowings decreased by $93.9 million to $168.2 million at March

31, 2025 , from $262.1 million at December 31, 2024, primarily due to a $117.5 million decrease in FHLB advances, partially offset by a $14.1 million increase in

securities sold under agreements to repurchase and a $9.4 million increase in secured borrowings associated with participation loan transactions.

For the three months ended March 31, 2025, the Company reported net loss before preferred dividends of $1.9 million compared to net loss of $164 thousand for the

three months ended March 31, 2024.

Net loss attributable to common stockholders was $2.6 million during the first quarter of 2025 after deducting preferred dividends of $750 thousand, compared to net loss attributable to common

stockholders of $164 thousand for the first quarter of 2024.

During the first quarter of 2025, net interest income increased by $521 thousand, or 6.9%, to $8.0 million, compared to the first quarter of 2024 .

increase resulted from lower interest expense on borrowings, due to decreases in the average balance and average cost of borrowings, and an increase in interest and fees on loans receivable, primarily due to an

increase in rates.

These increases were partially offset by an increase in interest expense on deposits and decreases in interest income on interest-earning deposits and available-for-sale securities.

During the first quarter of 2025,

non-interest expense increased $2.4 million, or 30.6%, compared to the first quarter of 2024, primarily due to a $1.9 million loss incurred from wire fraud, which will result in a gain if recovered.

In addition, compensation and benefits expense

increased $1.0 million, which included $122 thousand of severance expense which negatively impacted diluted loss per share by $0.01, partially offset by a $710 thousand decrease in professional services expense.

During the first quarter of 2025,

the provision for credit losses increased $429 thousand, from $260 thousand for the first quarter of 2024 to $689 thousand for the first quarter of 2025, primarily due to one new non-accrual loan.

The Company recorded an income tax

benefit of $692 thousand for the first quarter of 2025 and an income tax benefit of $57 thousand for the first quarter of 2024.

The increase in tax benefit reflected a decrease of $2.3 million in pre-tax income between the two periods.

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.

The sensitivity of a range of reasonable discount rates based on the

current economic environment is considered.

Total assets decreased by $87.4 million at June 30, 2025 compared to December 31, 2024, reflecting decreases in cash and cash equivalents of $31.9 million,

securities available-for-sale of $25.9 million, loans receivable held for investment, net of the ACL, of $22.9 million and FHLB stock of $5.9 million.

The reduction in securities available-for-sale was mainly due to maturities and paydowns, and

the cash from the securities in addition to the cash on hand was used to reduce borrowings, leading to the decrease in stock held with FHLB.

Loans receivable held for investment, net of the ACL , decreased by $22.9 million to $977.1 million at June 30, 2025, compared to $1.0 billion at December

The decrease was primarily due to loan paydowns.

Deposits increased by $53.5 million, or 7.2%, to $798.9 million at June 30, 2025, from $745.4 million at December 31, 2024.

The increase in deposits was attributable to an increase of $67.7

million in certificates of deposit accounts, partially offset by decreases of $4.5 million in savings deposits, $3.5 million in Certificate of Deposit Registry Service (“CDARS”) deposits, $3.3 million in liquid deposits (demand, interest

checking, and money market accounts), and $2.9 million in Insured Cash Sweep (“ICS”) deposits.

As of June 30, 2025, our uninsured deposits, including deposits from the Bank and other affiliates, represented 35% of

our total deposits, compared to 32% as of December 31, 2024.

Total borrowings decreased by $139.4 million to $154.1 million at June 30, 2025 , from $293.5 million at December 31, 2024,

primarily due to a $135.5 million decrease in FHLB advances.

Net income attributable to common stockholders was $2 thousand during the second quarter of 2025 after deducting preferred dividends of $750 thousand, compared to net income attributable to

common stockholders of $185 thousand for the second quarter of 2024 after deducting preferred dividends of $67 thousand.

Diluted earnings per common share was $0.00 for the second quarter of 2025, compared to $0.02 per diluted common share for

the second quarter of 2024.

Diluted earnings per common share for the second quarter of 2025 reflects preferred dividends of $0.09 per diluted common share.

For the second quarter of 2025, the Company reported

consolidated net income before preferred dividends, a non-GAAP measure, of $752 thousand, or $0.

09 per diluted share, compared to consolidated net income of $256 thousand, or $0.03 per diluted share, for the

second quarter of 2024.

Net loss attributable to common stockholders was $3.5 million during the first six months of 2025 after deducting preferred dividends of $1.5 million, compared to net income attributable to

common stockholders of $34 thousand for the first six months of 2024.

Diluted loss per common share was $0.41 for the first six months of 2025, compared to $0.00 of earnings per diluted common share for the first six months of 2024.

loss per common share for the first six months of 2025 reflects preferred dividends of ($0.18) per diluted common share.

For the first six months of 2025, the Company reported consolidated net loss before preferred dividends of $1.9 million, a

non-GAAP measure, or ($0.

23) per diluted share, compared to consolidated net income before preferred dividends of $102 thousand, or $0.01 per diluted share, for the first six months of 2024.

Refer to the “Use of Non-GAAP” Financial Measures” section for additional detail and a reconciliation of GAAP to non-GAAP financial measures.

Results of Operations

Net Interest Income

Three Months Ended March 31, 2025 Compared to the Three Months Ended March 31, 2024

Net interest income before provision for credit losses for the first quarter of 2025 totaled $8.0 million, representing an increase of $521 thousand, or 6.9%,

from net interest income before provision for credit losses of $7.5 million for the first quarter of 2024.

The increase resulted from a $2.3 million decrease in interest expense on borrowings, due to

decreases in the average balance and average cost of borrowings.

Three Months Ended June 30, 2025 Compared to the Three Months Ended June 30, 2024

Net interest income before provision for credit losses for the second quarter of 2025 totaled $7.8 million, representing a

decrease of $163 thousand, or 2.1%, from net interest income before provision for credit losses of $7.9 million for the second quarter of 2024.

The decrease resulted from a $1.5 million decrease in

interest income, primarily due to a decrease in interest on interest-bearing deposits, as a result of a decrease in the average balance of interest-bearing deposits, as well as a decline in interest income on available-for-sale securities due

to a decrease in the average balance of available-for-sale securities.

These decreases were partially offset by a $1.4 million decrease in interest expense due to a decline in interest on borrowings as a result of a decrease in the average

balance of borrowings.

The Company used interest-bearing deposits and cash from principal pay downs of available-for-sale securities to reduce borrowings to improve the net interest margin and to support capacity for future loan growth.

The net interest margin increased to 2.58% for the second quarter of 2025 from 2.35% for the second quarter of 2024, due to an increase in the average rate earned on

interest-earning assets, which increased to 4.80% for the second quarter of 2025 from 4.73% for the second quarter of 2024, and a decrease in the cost of funds, which decreased to 3.07% for the second quarter of 2025 from 3.26% for the second

quarter of 2024.

Six Months Ended June 30, 2025 Compared to the Six Months Ended June 30, 2024

Net interest income before provision for credit losses for the first six months of 2025 totaled $15.8 million, representing

an increase of $358 thousand, or 2.3%, from net interest income before provision for credit losses of $15.4 million for the first six months of 2024.

The increase resulted from a $2.3 million decrease in

interest expense due to a decline in interest on borrowings as a result of a decrease in the average balance of borrowings.

The Company reduced borrowings to improve the net interest margin and to support capacity for future loan growth.

The decrease in interest expense was complemented by a $1.6

million increase in interest and fees on loans receivable, primarily due to an increase in rates.

These increases were partially offset by a $1.4 million increase in interest expense on deposits, due to increases in rates and the average balance

of deposits, a $1.1 million decrease in interest income on interest-earning deposits due to decreases in rates and the average balance of interest-earning deposits, and an $867 thousand decrease in interest income on available-for-sale securities

due to decreases in rates and the average balance of available-for-sale securities.

The net interest margin increased to 2.70% for the first quarter of 2025 from 2.27% for the first quarter of 2024, due to an

increase in the average rate earned on interest-earnings assets, which increased to 4.82% for the first quarter of 2025 from 4.45% for the first quarter of 2024, and a decrease in the cost of funds, which decreased to 2.

97 % for the first quarter of 2025 from 3.02% for the first quarter of 2024.

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

increase was partially offset by a $1.9 million decrease in interest income, primarily due to a decrease in interest on interest-bearing deposits, as a result of a decrease in the average balance of interest-bearing deposits, as well as a

decline in interest income on available-for-sale securities due to a decrease in the average balance of available-for-sale securities.

The net interest margin increased to 2.61% for the first six months of 2025 from 2.29% for the first six months of 2024, due to an increase in the average rate earned on

interest-earnings assets, which increased to 4.82% for the first six months of 2025 from 4.61% for the first six months of 2024, and a decrease in the cost of funds, which decreased to 3.07% for the first six months of 2025 from 3.19% for the

first six months of 2024.

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

All average balances are daily average

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For the Three Months Ended

March 31, 2025

March 31, 2024

June 30, 2025

June 30, 2024

(Dollars in thousands)

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Total deposits

FHLB advances

Bank Term Funding Program borrowing

Other borrowings

Securities sold under agreements to repurchase

Total borrowings

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Amount includes non-accrual loans.

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

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

For the Six Months Ended

June 30, 2025

June 30, 2024

(Dollars in thousands)

Average Balance

Interest-earning assets:

Interest-bearing deposits

Loans receivable (1)

FRB and FHLB stock

Total interest-earning assets

Non-interest-earning assets

Liabilities and Stockholders’ Equity

Interest-bearing liabilities:

Money market deposits

Savings deposits

Interest checking and other demand deposits

Certificate accounts

Total deposits

Bank Term Funding Program borrowing

Securities sold under agreements to repurchase

Total borrowings

Total interest-bearing liabilities

Non-interest-bearing liabilities

Stockholders’ equity

Total liabilities and stockholders’ equity

Net interest rate spread (2)

Net interest rate margin (3)

Ratio of interest-earning assets to interest-

bearing liabilities

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

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

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

Provision for Credit Losses

For the three months ended March 31, 2025, the Company recorded a provision for credit losses of $689 thousand , compared to a provision for credit losses of $260 thousand for the three months ended March 31, 2024, primarily due to one new non-accrual loan.

No loan charge-offs were

recorded during the quarters ended March 31, 2025 or 2024.

The allowance for credit losses (“ACL ”) increased to $8.8 million as of March 31, 2025, compared to $8.1 million as of December 31, 2024.

Bank had three non-accrual loans at March 31, 2025 with an aggregate unpaid principal balance of $860 thousand.

Credit quality remains strong with non-accrual loans as a percentage of total loans at

0.09% and non-performing assets to total assets of 0.07% despite the addition of non-accrual loans.

Recapture of/Provision for Credit Losses

For the three months ended June 30, 2025, the Company recorded a recapture of credit losses of $454 thousand , compared to a provision for credit losses of $514 thousand for the three months ended June 30, 2024.

This decrease was mainly due to the decrease in loans.

For the six months ended June 30, 2025, the Company recorded a provision for credit losses of $1.5 million, compared to $761 thousand for the six months ended June 30, 2024.

increase in the provision was the result of changes in the required specific allocations of the allowance for credit losses (“ACL”).

The Company recorded a recapture of provision for off-balance sheet loan commitments of $74 thousand and $58 thousand for the three months ended June 30, 2025 and 2024,

respectively.

The Company recorded a recapture of provision for off-balance sheet loan commitments of $56 thousand and $2 thousand for the six months ended June 30, 2025 and 2024, respectively.

The ACL increased to $9.9 million as of June 30, 2025, compared to $8.4 million as of December 31, 2024.

The Bank had four non-accrual loans at June 30, 2025 with an unpaid principal balance of $5.0 million.

Credit quality remains

strong with non-accrual loans as a percentage of total loans at 0.51% and non-performing assets to total assets of 0.40% despite the increase in non-accrual loans.

Non-interest Expense

Total non-interest expense was $10.2 million for the first quarter of 2025, compared to $7.8 million for the first quarter of 2024, representing an increase of $2.4 million, or 30.6%.

was primarily due to a $1.9 million loss incurred from wire fraud, which will result in a gain if recovered.

In addition, compensation and benefits expense increased $1.0 million, which included $122 thousand in

severance expense, partially offset by a $710 thousand decrease in professional services expense.

The increase in compensation and benefits expense was primarily attributable to the addition of full-time employees during 2024 in various

production and administrative positions as part of the Bank’s efforts to expand its operational capabilities to grow its balance sheet.

The decrease in professional services expense was primarily due to a

third-party firm reviewing certain general ledger account reconciliations, as well as other professional services, during the first quarter of 2024.

The Company recorded an income tax benefit of $692 thousand for the first quarter of 2025 and income tax benefit of $57 thousand for the first quarter of 2024.

The increase in income tax benefit

reflected a decrease of $2.3 million in pre-tax income between the two periods.

The effective tax rate was 27.11% for the first quarter of 2025, compared to 23.75% for the first quarter of 2024.

Non-interest expense was $7.5 million for the second quarter of 2025, compared to $7.3 million for the second quarter of 2024, representing an increase of

$242 thousand, or 3.3%.

The increase was primarily due to increases of $225 thousand in professional services and $111 thousand in information services, partially offset by a $60 thousand decrease in supervisory

costs and a $57 thousand decrease in compensation and benefits expense.

Non-interest expense was $17.7 million for the first six months of 2025, compared to $15.1 million for the first six months of 2024, representing an

increase of $2.6 million, or 17.4%.

The increase was primarily due to a $1.9 million loss incurred from wire fraud, which resulted in a gain when recovered, as well as an $830 thousand increase in compensation and

benefits expense.

The increase in compensation and benefits expense was primarily attributable to the addition of full-time employees during 2024 in various production and administrative positions as part of the Bank’s efforts to expand

its operational capabilities to grow its balance sheet.

These increases were partially offset by a $485 thousand decrease in professional services expense.

The Company recorded an income tax expense of $296 thousand for the second quarter of 2025, compared to an income tax expense of $139 thousand for the second quarter of 2024.

The increase in

income tax expense reflected an increase of $645 thousand in pre-tax income between the two periods.

The effective tax rate was 28.41% for the second quarter of 2025, compared to 35.01% for the second quarter of 2024.

The Company recorded an income tax benefit of $790 thousand for the first six months of 2025, compared to an income tax expense of $85 thousand for the first six months of 2024.

The decrease in

income tax expense reflected a decrease of $2.9 million in pre-tax income between the two periods.

The effective tax rate was 28.87% for the first six months of 2025, compared to 50.00% for the first six months of 2024.

Financial Condition

Total assets decreased by $65.7 million at March 31, 2025, compared to December 31, 2024, reflecting decreases in cash and cash equivalents of

$45.6 million, securities available-for-sale of $17.9 million and FHLB stock of $5.0 million, partially offset by an increase in net loans of $2.4 million.

Total assets decreased by $87.4 million at June 30, 2025, compared to December 31, 2024, reflecting decreases in cash and cash equivalents of $31.9 million, securities available-for-sale of $25.9

million, loans receivable held for investment, net of the ACL, of $22.9 million and FHLB stock of $5.9 million.

Securities Available-For-Sale

Securities available-for-sale totaled $185.9 million at March 31, 2025, compared to $203.9 million at December 31, 2024.

The $17.9 million decrease in securities

available-for-sale during the three months ended March 31, 2025 was primarily due to maturities and principal paydowns.

The table below presents the carrying amount, weighted average yields and contractual maturities of our securities as of March 31, 2025.

Securities available-for-sale totaled $178.0 million at June 30, 2025, compared to $203.9 million at December 31, 2024.

The $25.9 million decrease in securities available-for-sale

during the six months ended June 30, 2025 was primarily due to maturities and principal paydowns.

The table below presents the carrying amount, weighted average yields and contractual maturities of our securities as of June 30, 2025.

The table reflects stated final maturities

and does not reflect scheduled principal payments or expected payoffs.

March 31, 2025

June 30, 2025

One Year or Less

More Than One Year to Five Years

More Than Five Years to Ten Years

More Than Ten Years

More Than Five

Years to Ten Years

More Than Ten

Carrying Amount

Average Yield

Carrying Amount

Weighted Average Yield

Carrying Amount

Weighted Average Yield

Carrying Amount

Weighted Average Yield

Carrying Amount

Weighted Average Yield

(Dollars in thousands)

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Loans Receivable Held for Investment

Loans receivable held for investment, net of the ACL, increased by $2.4 million to $971.2 million at March 31, 2025, compared to $968.9 million at

December 31, 2024.

Loans receivable held for investment, net of the ACL , decreased by $22.9 million to $977.1 million at June 30, 2025, compared to $1.0 billion at December

The decrease was primarily due to loan paydowns.

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

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

March 31, 2025

June 30, 2025

Five Years to

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

Our experience has shown that

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

Our experience has shown that these

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

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

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Multi-family loans in their initial fixed period totaled $439.9 million or 44.7% of our loan portfolio as of

March 31, 2025.

June 30, 2025.

Allowance for Credit Losses

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

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.

ASC 326 requires the Company to

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

The recognition of losses at origination or acquisition represents the Company’s best estimate of the lifetime

expected credit loss associated with a loan given the facts and circumstances associated with the particular loan and involves the use of significant management judgment and estimates, which are subject to change based on management’s on-going

assessment of the credit quality of the loan portfolio and changes in economic forecasts used in the model.

The Company uses the WARM method when determining estimates for the ACL for each of its portfolio segments.

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.

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.

Since historical information (such as historical net losses) may not always, by itself, provide a sufficient basis for determining future expected credit losses, the Company

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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.

No loan charge-offs were

recorded during the quarters ended March 31, 2025 or 2024.

The ACL increased to $8.8 million as of March 31, 2025, compared to $8.1 million as of December 31, 2024.

The Bank had three non-accrual loans

at March 31, 2025 with an unpaid principal balance of $860 thousand.

At March 31, 2025, $600 thousand of individually evaluated loans were evaluated based on the estimated fair value of the underlying collateral and one $522 thousand loan was individually evaluated

using the remaining life approach.

These loans had an associated ACL of $720 thousand as of March 31, 2025.

The Company had three individually evaluated loans totaling $860 thousand on nonaccrual status at March 31, 2025.

At December 31, 2024, one

$264 thousand individually evaluated loan was evaluated based on the estimated fair value of the underlying collateral.

This loan had no associated ACL as of December 31, 2024 and was on nonaccrual status.

The Bank had non-accrual loans of $860 thousand at March 31, 2025.

Loan delinquencies for 30 days or more, but less than 59 days, increased to $4.0

million at March 31, 2025, from $0 at December 31, 2024 and loan delinquencies for 60 days or more, but less than 90 days, decreased to $74 thousand at March 31, 2025, from $270 thousand at December 31, 2024.

Loans past due greater than 90 days

was $264 thousand at March 31, 2025, compared to $0 at December 31, 2024.

We believe that the ACL is adequate to cover currently expected losses in the loan portfolio as of March 31, 2025, but there can be no assurance that actual losses will not

exceed the estimated amounts.

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

based on judgments different from those of management.

This decrease was mainly due to the decrease in loans.

For the six months ended June 30, 2025, the Company recorded

a provision for credit losses of $1.5 million, compared to $761 thousand for the six months ended June 30, 2024.

The increase in the provision was the result of changes in the required specific allocations of the ACL.

The Bank had four

non-accrual loans at June 30, 2025 with an unpaid principal balance of $5.0 million.

Credit quality remains strong with non-accrual loans as a percentage of total loans at 0.51% and non-performing assets

to total assets of 0.40% despite the increase in non-accrual loans.

Loan delinquencies for 30 days or more, but less than 59 days, increased to $1.2 million at June 30, 2025, from $0 at December 31, 2024 and loan delinquencies for 60 days or more, but less than

90 days, increased to $271 thousand at June 30, 2025, from $270 thousand at December 31, 2024.

Loans past due greater than 90 days was $4.0 million at June 30, 2025, compared to $0 at December 31, 2024.

We believe that the ACL is adequate to cover currently expected losses in the loan portfolio as of June 30, 2025, but there can be no assurance that actual losses will not exceed

the estimated amounts.

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

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

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

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

information available to them at the time of their examinations.

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

dates indicated:

March 31, 2025

June 30, 2025

December 31, 2024

March 31, 2024

June 30, 2024

(Dollars in thousands)

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Commercial real estate

Commercial - other

Total allowance for loan losses

Total Liabilities

Total liabilities decreased by $65.1 million to $953.2 million at March 31, 2025 from December 31, 2024, primarily due to a

decrease of $117.5 million in FHLB advances, partially offset by a $31.1 million increase in deposits, a $14.2 million increase in securities sold under agreements to repurchase and a $9.4 million increase in secured borrowings associated

with participation loan transactions.

Deposits increased by $31.1 million, or 4.2%, to $776.5 million at March 31, 2025, from $745.4 million at December 31, 2024.

Total liabilities decreased by $87.1 million to $962.6 million at June 30, 2025 from December 31, 2024, primarily due to a decrease of $136.6 million in borrowings, partially

offset by a $53.5 million increase in deposits.

Deposits increased by $53.5 million, or 7.2%, to $798.9 million at June 30, 2025, from $745.4 million at December 31, 2024.

The increase in deposits was attributable to an increase of $67.7

million in certificates of deposit accounts, partially offset of decreases of $9.6 million in Insured Cash Sweep (“ICS”) deposits (ICS deposits are the Bank’s money market deposit accounts in excess of FDIC

insured limits whereby the Bank makes reciprocal arrangements for insurance with other banks) , $6.5 million in liquid deposits (demand, interest checking, and money market accounts), $3.8 million in Certificate of Deposit Registry

Service (“CDARS”) deposits (CDARS deposits are similar to ICS deposits, but involve certificates of deposit, instead of money market accounts), and $2.4 million in savings deposits.

As of March 31, 2025, our uninsured deposits, including deposits from City First Bank and other affiliates, represented 34% of our total deposits, compared to 32%

as of December 31, 2024.

checking, and money market accounts), and $2.9 million in Insured Cash Sweep (“ICS”) deposits.

As of June 30, 2025, our uninsured deposits, including deposits from the Bank and other affiliates, represented 35% of

our total deposits, compared to 32% as of December 31, 2024.

We leverage our long-standing partnership with IntraFi Deposit Solutions to offer deposit insurance for accounts exceeding the FDIC deposit insurance limit of $250,000.

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

Months or Less

Three to Six Months

Over One Year

The following table presents the maturity of time deposits, which includes CDARS, as of the dates indicated:

(In thousands)

March 31, 2025

June 30, 2025

Time deposits of $250,000 or less

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

Under these arrangements, the Company may transfer legal control over the

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

As a result, these repurchase agreements are accounted for as collateralized financing agreements (i.e., secured

borrowings) and not as a sale and subsequent repurchase of securities.

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

repurchase agreements remain in the respective investment securities asset accounts.

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

These agreements mature on a

As of March 31, 2025 securities sold under agreements to repurchase totaled $80.8 million at an average rate of 3.63%.

The fair value of securities pledged totaled $78.6 million as of March 31, 2025.

As of December 31, 2024,

securities sold under agreements to repurchase totaled $66.6 million at an average rate of 3.62%.

The fair value of securities pledged totaled $83.3 million as of December 31, 2024.

At March 31, 2025 and December 31, 2024, the Company had

outstanding advances from the FHLB totaling $78.0 million and $195.5 million, respectively.

The weighted average interest rate was 4.45% and 4.03% as of March 31, 2025 and December 31, 2024, respectively.

The weighted average contractual

maturity was less than one month as of both March 31, 2025 and December 31, 2024.

The advances were collateralized by loans with an unpaid balance of $521.4 million and pledged securities with a balance of $94.5 million at March 31, 2025 and

collateralized by loans with an unpaid balance of $521.7 million at December 31, 2024.

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

holds sufficient FHLB stock.

Based on collateral pledged and FHLB stock held, the Company was eligible to borrow an additional $279.5 million as of March 31, 2025.

The Company has secured borrowings associated with participation loan transactions of $9.4 million as of March 31, 2025.

One relationship accounted for 90% of our balance of securities sold under agreements to repurchase as of March 31, 2025.

We expect to maintain this relationship for the

foreseeable future.

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

This borrowing 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.

Under these arrangements, the Company may

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

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

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

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

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

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

These agreements mature on a daily basis.

As of June 30, 2025 securities sold under agreements to repurchase totaled $63.8 million at an average rate of 5.10%.

The fair value of securities pledged for repurchase agreements totaled

$69.9 million as of June 30, 2025.

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

The fair value of securities pledged for repurchase agreements totaled $83.3 million as

of December 31, 2024.

One relationship accounted for 90% of our balance of securities sold under agreements to repurchase as of June 30, 2025.

We expect to maintain this relationship for the foreseeable future.

At June 30, 2025 and December 31, 2024, the Company had outstanding advances from the FHLB totaling $60.0 million and $195.5 million, respectively.

average interest rate was 4.38% and 4.03% as of June 30, 2025 and December 31, 2024, respectively.

The weighted average contractual maturity was less than one month as of both June 30, 2025 and December 31, 2024.

The advances were

collateralized by loans with an unpaid balance of $509.0 million at June 30, 2025 and $521.7 million at December 31, 2024.

The Company is currently approved by the FHLB of Atlanta to borrow up to 25% of total assets to the extent the Company

provides qualifying collateral and holds sufficient FHLB stock.

Based on collateral pledged and FHLB stock held, the Company was eligible to borrow an additional $298.7 million

as of June 30, 2025.

The Company will, from time to time, sell a portion of a loan or group of loans to third parties.

In some cases, the transferred portion of the loans does not meet the requirements to be treated

as sales for accounting purposes.

When that occurs, the legally transferred portion of the loan balance remains classified in gross loans receivable held for investment and a secured borrowing is recorded for the proceeds received from the third

party institution.

As the transferred portion of the loan pays down, the secured borrowings are repaid.

The Company has no obligation to make principal or interest payments on the secured borrowings unless and until payments are received from the

loan borrowers.

The Company has secured borrowings associated with these participation loan transactions of $30.3 million and $31.4 million as of June 30, 2025 and December 31, 2024, respectively.

The weighted average interest rate on the secured

borrowings was 5.51% and 5.54% at June 30, 2025 and December 31, 2024, respectively.

In 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.

1 unchanged sentence

development entity acts in effect as a pass-through for a Merrill Lynch allocation totaling $14.0 million that needed to be deployed.

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

through to a Qualified Active Low-Income Business (“QALICB”).

The 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.

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

loan through to a Qualified Active Low-Income Business (“QALICB”).

The 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.

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

The financial statements of CFC 45 are consolidated with those of the

Bank and the Company.

Stockholders’ Equity

Stockholders’ equity was $284.6 million, or 23.0%, of the Company’s total assets, at March 31, 2025, compared to $285.2 million, or 21.9% of the Company’s total

assets at December 31, 2024.

Stockholders’ equity decreased primarily due to a $2.6 million decrease in retained earnings, partially offset by a $1.7 million increase in accumulated other comprehensive

loss, net of tax.

Book value per share was $14.58 at March 31, 2025 and $14.82 at December 31, 2024.

Capital ratios remain strong with a Community Bank Leverage Ratio of 15.24% at March 31, 2025 compared to 13.96% at December 31,2024.

Broadway Financial Corporation and subsidiary equity was $284.7 million, or 22.8%, of the Company’s total assets, at June 30, 2025, compared to $285.0 million, or

21.4% of the Company’s total assets, at December 31, 2024.

Book value per share was $14.65 at June 30, 2025 and $14.80 at December 31, 2024.

Capital ratios remain strong with a Community Bank Leverage Ratio of 15.34% at June 30, 2025

compared to 13.61% at December 31, 2024.

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

Each restricted stock award was

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

Each restricted stock award was valued

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

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

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

During May of 2024 and March of 2025, the Company issued 19,832 and 23,232 shares of stock, respectively, to its directors under the LTIP and Amended LIP, which were fully

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

During May of 2024 and March of 2025, the Company issued 19,832 and 23,232 shares of stock, respectively, to its directors under the Amended and Restated LTIP, which were fully

On March 24, 2025, the Company issued 88,295 shares of restricted stock to its officers and employees under the Amended and Restated LTIP.

Each restricted stock award was

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

Each restricted stock award was valued

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

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

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

originally recorded in connection with the CFBanc merger.

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

A reconciliation between

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

Common Equity

(Dollars in thousands)

March 31, 2025:

Common book value

Net unamortized core deposit intangible

Tangible book value

December 31, 2024:

Common book value

Net unamortized core deposit intangible

Tangible book value

On May 28, 2025, the Company issued 8,183 shares of restricted stock to an officer under the Amended and Restated LTIP.

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.

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

The Bank is currently

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

Based on FHLB stock held and collateral pledged as of March 31, 2025, the Bank had the

ability to borrow an additional $279.5 million from the FHLB of Atlanta.

In addition, the Bank had additional lines of credit of $10.0 million with other financial institutions as of March 31, 2025.

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

operating expenses.

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

institutions.

The Bank’s liquid assets at March 31, 2025 consisted of $15.8 million in cash and cash equivalents and $462 thousand in securities available-for-sale that were not pledged, compared to $61.4 million in cash and cash equivalents and

$17.6 million in securities available-for-sale that were not pledged at December 31, 2024.

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

The Bank is currently approved

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

Based on FHLB stock held and collateral pledged as of June 30, 2025, the Bank had the ability to

borrow an additional $298.7 million from the FHLB of Atlanta.

In addition, the Bank had additional lines of credit of $10.0 million with other financial institutions as of June 30, 2025.

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

Bank’s liquid assets at June 30, 2025 consisted of $29.5 million in cash and cash equivalents and $95.7 million in securities available-for-sale that were not pledged, compared to $61.4 million in cash and cash equivalents and $17.6 million in

securities available-for-sale that were not pledged at December 31, 2024.

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

The Bank had commitments to fund $1.3 million in loans that were approved but unfunded as of March 31, 2025.

The Bank had commitments to fund $4.9 million in loans that were approved but unfunded as of June 30, 2025.

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

loans and $40.0 million in unfunded construction loans as of March 31, 2025.

The Bank has a significant concentration of deposits with five customers that accounted for approximately 21% of its deposits as of March 31, 2025.

The Bank also has a

significant concentration of short-term borrowings with one customer that accounted for 90% of the outstanding balance of securities sold under agreements to repurchase as of March 31, 2025.

The Bank has long-term relationships with these customers

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

loans and $18.6 million in unfunded construction loans as of June 30, 2025.

The Bank has a significant concentration of deposits with six customers that accounted for approximately 25% of its deposits as of June 30, 2025.

The Bank also has a significant

concentration of short-term borrowings with one customer that accounted for 90% of the outstanding balance of securities sold under agreements to repurchase as of June 30, 2025.

The Bank has long-term relationships with these customers and

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

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

1 unchanged sentence

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

The Company recorded consolidated net cash inflows from investing activities of $22.3 million during the three months ended March

31, 2025, compared to net cash outflows from investing activities of $23.4 million during the three months ended March 31, 2024.

Net cash inflows from investing activities for the three months ended March 31, 2025 were primarily due to principal

paydowns on available-for-sale securities of $20.4 million.

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

by $23.2 million in proceeds from principal paydowns on available-for-sale securities.

The Company recorded consolidated net cash outflows from financing activities of $63.5 million during the three months ended March

31, 2025, compared to consolidated net cash outflows of $3.0 during the three months ended March 31, 2024.

Net cash outflows from financing activities during the three months ended March 31, 2025 were primarily due to repayments of FHLB advances

of $294.0 million, partially offset by proceeds from FHLB advances of $176.5 million, a net increase in deposits of $31.1 million and a net increase in securities sold under agreements to repurchase.

Net cash outflows from financing activities

during the three months ended March 31, 2024 were primarily attributable to the repayment of a note of $14.0 million, partially offset by a net increase in deposits of $12.9 million.

The Company recorded consolidated net cash inflows from investing activities of $56.9 million during the six months ended June 30, 2025, compared to net cash outflows from

investing activities of $3.5 million during the six months ended June 30, 2024.

Net cash inflows from investing activities for the six months ended June 30, 2025 were primarily due to principal paydowns on available-for-sale securities of $51.4

million and net paydowns of loans of $21.4 million, partially offset by purchases of available-for-sale securities of $21.6.

Net cash outflows from investing activities during the six months ended June 30, 2024 were primarily due to funding of

new loans, net of repayments, of $59.3 million, partially offset by $56.1 million in proceeds from principal paydowns on available-for-sale securities.

The Company recorded consolidated net cash outflows from financing activities of $87.4 million during the six months ended June 30, 2025, compared to consolidated net cash

outflows from financing activities of $10.0 during the six months ended June 30, 2024.

Net cash outflows from financing activities during the six months ended June 30, 2025 were primarily due to repayments of FHLB borrowings of $512.0 million,

partially offset by proceeds from FHLB borrowings of $376.5 million and a net increase in deposits of $53.5 million.

Net cash outflows from financing activities during the six months ended June 30, 2024 were primarily attributable to the

repayment of a note of $14.0 million.

Capital Resources and Regulatory Capital

6 unchanged sentences

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

As of March 31, 2025 and December 31, 2024, the Bank exceeded all capital adequacy requirements to which

As of June 30, 2025 and December 31, 2024, the Bank exceeded all capital adequacy requirements to which

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

Use of Non-GAAP Financial Measures

Management uses non-GAAP measures because they provide information to investors about the underlying operational performance and trends of the Company.

These disclosures should not be considered

in isolation or as a substitute for results determined in accordance with GAAP and are not necessarily comparable to non-GAAP performance measures which may be presented by other bank holding companies.

Management compensates for these

limitations by providing detailed reconciliations between GAAP information and the non-GAAP financial measures.

The tables below reconciles the GAAP financial measures to the associated non-GAAP financial measures.

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

originally recorded in connection with the CFBanc merger.

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

A reconciliation between

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

Common Equity

(Dollars in thousands)

June 30, 2025:

Common book value

Net unamortized core deposit intangible

Tangible book value

December 31, 2024:

Common book value

Net unamortized core deposit intangible

Tangible book value

The Company calculates net income (loss) before preferred dividends by adding preferred stock dividends and net income (loss) attributable to participating securities to net income (loss)

available to common shareholders.

Earnings (loss) per common share - diluted before preferred dividends is calculated by dividing net income (loss) before preferred dividends by the weighted average common shares outstanding for diluted loss per

common share.

The Company considers this information important to shareholders because it illustrates net income (loss) and earnings (loss) per common share - diluted excluding the impact of preferred dividends.

For the Three Months Ended

For the Six Months Ended

(Dollars in thousands)

Net income (loss) available to common shareholders

Preferred stock dividends

Net income (loss) attributable to participating securities

Net income (loss) before preferred dividends

Weighted average common shares outstanding for diluted loss per common share

Earnings (loss) per common share - diluted before preferred dividends

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

1 unchanged sentence

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis