BROADWAY FINANCIAL CORP DE 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to provide a reader of our financial statements with a narrative from the perspective of our management on our financial condition, results of operations, liquidity and certain other factors that may affect our future results. Our MD&A should be read in conjunction with the Consolidated Financial Statements and related Notes included in Part I, Item 1 “Financial Statements,” of this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K/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 performance. Forward-looking statements typically include words such as “expect,” “estimate,” “project,” “budget,” “forecast,” “anticipate,” “intend,” “plan,” “may,” “will,” “could,” “should,” “believes,” “potential,” “continue,” “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. 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/A to gain a better understanding of how our financial performance is measured and reported. Management has identified the Company’s critical accounting policies as follows: Allowance for Credit Losses for Loans The Company accounts for credit losses on loans in accordance with ASC 326, which requires the Company to record an estimate of expected lifetime credit losses for loans at the time of origination or acquisition. The ACL is maintained at a level deemed appropriate by management to provide for expected credit losses in the portfolio as of the date of the consolidated statements of financial condition. Estimating expected credit losses requires management to use relevant forward-looking information, including the use of reasonable and supportable forecasts. The measurement of the ACL is performed by collectively evaluating loans with similar risk characteristics. The Company measures the ACL for each of its loan segments using the weighted-average remaining maturity (“WARM”) method. The weighted average remaining life, including the effect of estimated prepayments, is calculated for each loan pool on a quarterly basis. The Company then estimates a loss rate for each pool using both its own historical loss experience and the historical losses of a group of peer institutions. The Company’s ACL model also includes adjustments for qualitative factors, where appropriate. Certain loans, such as those that are nonperforming or are considered to be collateral dependent, are deemed to no longer possess risk characteristics similar to other loans in the loan portfolio, because the specific attributes and risks associated with the loan have likely become unique as the credit quality of the loan deteriorates. As such, these loans may require individual evaluation to determine an appropriate ACL for the loan. When a loan is individually evaluated, the Company typically measures the expected credit loss for the loan based on a discounted cash flow approach, unless the loan has been deemed collateral dependent in which case the ACL is determined using estimates of the fair value of the underlying collateral, less estimated selling costs. Goodwill 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. Weightings 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. The sensitivity of a range of reasonable discount rates based on the current economic environment is considered. 28 Table of Contents Overview 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 31, 2024. 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. Diluted 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. 29 Table of Contents Results of Operations Net Interest Income 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. This 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 balances. The yields set forth below include the effect of deferred loan fees, and discounts and premiums that are amortized or accreted to interest income or expense. We do not accrue interest on loans on non-accrual status, but the balance of these loans is included in the total average balance of loans receivable, which has the effect of reducing average loan yields. For the Three Months Ended June 30, 2025 June 30, 2024 (Dollars in thousands) Average Balance Interest Average Yield/Cost Average Balance Interest Average Yield/Cost Assets Interest-earning assets: Interest-bearing deposits $ 24,132 $ 266 4.42 % $ 88,294 $ 1,189 5.42 % Securities 182,351 1,171 2.58 % 276,457 1,876 2.73 % Loans receivable (1) 989,861 12,825 5.20 % 975,788 12,613 5.20 % FRB and FHLB stock 7,473 135 7.25 % 13,835 244 7.09 % Total interest-earning assets 1,203,817 $ 14,397 4.80 % 1,354,374 $ 15,922 4.73 % Non-interest-earning assets 48,563 53,507 Total assets $ 1,252,380 $ 1,407,881 Liabilities and Stockholders’ Equity Interest-bearing liabilities: Money market deposits $ 133,930 $ 336 1.01 % $ 274,915 $ 1,623 2.37 % Savings deposits 46,762 61 0.52 % 57,684 102 0.71 % Interest checking and other demand deposits 251,146 1,975 3.15 % 73,853 166 0.90 % Certificate accounts 270,424 2,507 3.72 % 163,237 1,195 2.94 % Total deposits 702,262 4,879 2.79 % 569,689 3,086 2.18 % Borrowings 94,795 1,126 4.76 % 209,261 2,593 4.98 % Bank Term Funding Program borrowing – – – % 100,000 1,210 4.87 % Securities sold under agreements to repurchase 69,721 637 3.66 % 107,238 1,115 4.18 % Total borrowings 164,516 1,763 4.30 % 416,499 4,918 4.70 % Total interest-bearing liabilities 866,778 $ 6,642 3.07 % 986,188 $ 8,004 3.26 % Non-interest-bearing liabilities 101,461 139,900 Stockholders’ equity 284,141 281,793 Total liabilities and stockholders’ equity $ 1,252,380 $ 1,407,881 Net interest rate spread (2) $ 7,755 1.72 % $ 7,918 1.47 % Net interest rate margin (3) 2.58 % 2.35 % Ratio of interest-earning assets to interest-bearing liabilities 138.88 % 137.33 % (1) Amount includes non-accrual loans. (2) Net interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities. (3) Net interest rate margin represents net interest income as a percentage of average interest-earning assets. 30 Table of Contents For the Six Months Ended June 30, 2025 June 30, 2024 (Dollars in thousands) Average Balance Interest Average Yield/Cost Average Balance Interest Average Yield/Cost Assets Interest-earning assets: Interest-bearing deposits $ 26,532 $ 578 4.39 % $ 97,640 $ 2,533 5.22 % Securities 189,368 2,379 2.53 % 290,721 3,951 2.73 % Loans receivable (1) 996,757 25,942 5.25 % 958,761 24,157 5.08 % FRB and FHLB stock 9,320 299 6.47 % 13,777 489 7.14 % Total interest-earning assets 1,221,977 $ 29,198 4.82 % 1,360,899 $ 31,130 4.61 % Non-interest-earning assets 49,364 51,988 Total assets $ 1,271,341 $ 1,412,887 Liabilities and Stockholders’ Equity Interest-bearing liabilities: Money market deposits $ 126,557 $ 593 0.94 % $ 272,290 $ 3,065 2.26 % Savings deposits 47,732 129 0.54 % 58,377 204 0.70 % Interest checking and other demand deposits 253,384 3,886 3.09 % 78,772 311 0.79 % Certificate accounts 247,498 4,470 3.64 % 164,319 2,305 2.82 % Total deposits 675,171 9,078 2.71 % 573,758 5,885 2.06 % Borrowings 137,406 3,082 4.52 % 209,280 5,191 5.00 % Bank Term Funding Program borrowing – – – % 100,000 2,413 4.87 % Securities sold under agreements to repurchase 68,453 1,238 3.65 % 110,006 2,199 4.03 % Total borrowings 205,859 4,320 4.23 % 419,286 9,803 4.71 % Total interest-bearing liabilities 881,030 $ 13,398 3.07 % 993,044 $ 15,688 3.19 % Non-interest-bearing liabilities 105,028 138,012 Stockholders’ equity 285,283 281,831 Total liabilities and stockholders’ equity $ 1,271,341 $ 1,412,887 Net interest rate spread (2) $ 15,800 1.75 % $ 15,442 1.42 % Net interest rate margin (3) 2.61 % 2.29 % Ratio of interest-earning assets to interest- bearing liabilities 138.70 % 137.04 % (1) Amount is net of deferred loan fees, loan discounts and loans in process, and includes deferred origination costs and loan premiums. (2) Net interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities. (3) Net interest rate margin represents net interest income as a percentage of average interest-earning assets. 31 Table of Contents 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. The 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 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. Income Taxes 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 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. 32 Table of Contents Securities Available-For-Sale 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. 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 Total Carrying Amount Weighted Average Yield Carrying Amount Weighted Average Yield Carrying Amount Weighted Average Yield Carrying Amount Weighted Average Yield Carrying Amount Weighted Average Yield (Dollars in thousands) Available‑for‑sale: Federal agency mortgage‑backed securities $ 16 0.33 % $ 1,664 1.23 % $ 9,710 1.93 % $ 49,028 3.09 % $ 60,418 2.85 % Federal agency CMO – – 2,511 4.50 % 7,406 3.84 % 20,760 4.39 % 30,677 4.26 % Federal agency debt 17,614 1.46 % 20,250 1.89 % 3,016 4.85 % – – 40,880 1.93 % Municipal bonds – – 3,000 1.53 % – – 1,441 1.77 % 4,441 1.60 % U.S. Treasuries 32,816 2.52 % – – – – – – 32,816 2.52 % SBA pools – – 1,472 2.58 % – – 7,273 2.41 % 8,745 2.44 % Total $ 50,446 2.15 % $ 28,897 2.08 % $ 20,132 3.07 % $ 78,502 3.35 % $ 177,977 2.77 % Loans Receivable Held for Investment 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 31, 2024. The decrease was primarily due to loan paydowns. The following table presents loan categories by maturity for the period indicated. Actual repayments historically have, and will likely in the future, differ significantly from contractual maturities because individual borrowers generally have the right to prepay loans, with or without prepayment penalties. June 30, 2025 One Year or Less More Than One Year to Five Years More Than Five Years to 15 Years More Than 15 Years Total (Dollars in thousands) Loans receivable held for investment: Single-family $ 3,230 $ 7,785 $ 4,382 $ 7,528 $ 22,925 Multi-family 16,882 21,037 12,587 572,889 623,395 Commercial real estate 15,934 85,092 34,486 22,271 157,783 Church 2,949 550 5,700 – 9,199 Construction 50,940 28,410 1,480 – 80,830 Commercial - other 29,580 22,369 22,914 9,902 84,765 SBA loans 44 316 4,481 – 4,841 Consumer 19 – – – 19 $ 119,578 $ 165,559 $ 86,030 $ 612,590 $ 983,757 Loans maturities after one year with: Fixed rates Single-family $ 7,427 $ 1,556 $ – $ 8,983 Multi-family 18,016 8,424 – 26,440 Commercial real estate 75,114 26,682 – 101,796 Church – – – – Construction 4,190 – – 4,190 Commercial - other 22,369 21,931 2,162 46,462 SBA loans – – – – Consumer – – – – $ 127,116 $ 58,593 $ 2,162 $ 187,871 Variable rates Single-family $ 358 $ 2,826 $ 7,528 $ 10,712 Multi-family 3,021 4,163 572,889 580,073 Commercial real estate 9,978 7,804 22,271 40,053 Church 550 5,700 – 6,250 Construction 24,220 1,480 – 25,700 Commercial - other – 983 7,740 8,723 SBA loans 316 4,481 – 4,797 Consumer – – – – $ 38,443 $ 27,437 $ 610,428 $ 676,308 Total $ 165,559 $ 86,030 $ 612,590 $ 864,179 33 Table of Contents Certain multi-family loans have adjustable-rate features based on the Secured Overnight Financing Rate but are fixed for the first five years. Our experience has shown that these loans typically payoff during the first five years and do not reach the adjustable-rate phase. However, in the current high interest rate environment, we have seen more borrowers maintain their loans instead of paying them off due to interest rate caps which make the adjusted interest rate on their existing loan more desirable than getting a new loan at current interest rates. Multi-family loans in their initial fixed period totaled $439.9 million or 44.7% of our loan portfolio as of 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. The Company uses the WARM method when determining estimates for the ACL for each of its portfolio segments. The weighted average remaining life, including the effect of estimated prepayments, is calculated for each loan pool on a quarterly basis. The Company then estimates a loss rate for each pool using both its own historical loss experience and the historical losses of a group of peer institutions during the period from 2004 through the most recent quarter. Since historical information (such as historical net losses) may not always, by itself, provide a sufficient basis for determining future expected credit losses, the Company periodically considers the need for qualitative adjustments to the ACL. 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. 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 estimates, future adjustments to the ACL may be necessary due to economic, operating, regulatory, and other conditions that may extend beyond the Company’s control. Changes in management’s estimates of forecasted net losses could materially change the level of the ACL. Additionally, various regulatory agencies, as an integral part of their examination process, periodically review the Company’s ACL and credit review process. Such agencies may require the Company to recognize additions to the ACL based on judgments different from those of management. 34 Table of Contents 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. 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. The following table details our allocation of the ACL to the various categories of loans held for investment and the percentage of loans in each category to total loans at the dates indicated: June 30, 2025 December 31, 2024 June 30, 2024 Amount Percent of Loans in Each Category to Total Loans Amount Percent of Loans in Each Category to Total Loans Amount Percent of Loans in Each Category to Total Loans (Dollars in thousands) Single-family $ 122 2.33 % $ 200 2.39 % $ 305 2.84 % Multi‑family 6,288 63.36 % 4,617 63.50 % 4,741 63.46 % Commercial real estate 1,235 16.04 % 1,188 16.23 % 1,241 13.70 % Church 55 0.94 % 54 0.94 % 84 1.21 % Construction 1,291 8.22 % 1,564 9.10 % 1,196 10.64 % Commercial - other 814 8.62 % 730 7.73 % 679 6.83 % SBA loans 75 0.49 % 11 0.11 % 130 1.32 % Total allowance for loan losses $ 9,880 100.00 % $ 8,364 100.00 % $ 8,376 100.00 % Total Liabilities 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 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. 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. 35 Table of Contents The following table presents the maturity of time deposits, which includes CDARS, as of the dates indicated: Three Months or Less Three to Six Months Six Months to One Year Over One Year Total (In thousands) June 30, 2025 Time deposits of $250,000 or less $ 56,379 $ 63,626 $ 65,882 $ 3,680 $ 189,567 Time deposits of more than $250,000 47,497 25,703 6,410 7,778 87,388 Total $ 103,876 $ 89,329 $ 72,292 $ 11,458 $ 276,955 Not covered by deposit insurance $ 41,246 $ 24,204 $ 3,160 $ 7,778 $ 76,388 December 31, 2024 Time deposits of $250,000 or less $ 46,350 $ 37,239 $ 92,028 $ 4,060 $ 179,677 Time deposits of more than $250,000 3,149 5,712 16,864 7,437 33,162 Total $ 49,499 $ 42,951 $ 108,892 $ 11,497 $ 212,839 Not covered by deposit insurance $ 1,399 $ 3,212 $ 12,363 $ 6,437 $ 23,411 Borrowings 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 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. The weighted 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. This community 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. 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 Company. Stockholders’ Equity 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. 36 Table of Contents 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. 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 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 vested. 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. All the shares issued to officers and employees vest over periods ranging from 36 months to 60 months. On May 28, 2025, the Company issued 8,183 shares of restricted stock to an officer under the Amended and Restated LTIP. Liquidity 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 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 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 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 $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 $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 previous private placements. The Bank is currently under no prohibition from paying dividends to the Company but is subject to restrictions as to the amount of the dividends based on normal regulatory guidelines. The Company recorded consolidated net cash 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. 37 Table of Contents Capital Resources and Regulatory Capital The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possible additional discretionary, actions by the regulators that, if undertaken, could have a direct material effect on the Company’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank’s assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The Bank’s capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk-weightings, and other factors. 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 Capital Shares Outstanding Per Share Amount (Dollars in thousands) June 30, 2025: Common book value $ 134,679 9,195,909 $ 14.65 Less: Goodwill 25,858 Net unamortized core deposit intangible 1,618 Tangible book value $ 107,203 9,195,909 $ 11.66 December 31, 2024: Common book value $ 134,973 9,120,363 $ 14.80 Less: Goodwill 25,858 Net unamortized core deposit intangible 1,775 Tangible book value $ 107,340 9,120,363 $ 11.77 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 June 30, For the Six Months Ended June 30, 2025 2024 2025 2024 (Dollars in thousands) Net income (loss) available to common shareholders $ 2 $ 185 $ (3,519 ) $ 34 Add: Preferred stock dividends 750 67 1,500 67 Add: Net income (loss) attributable to participating securities - 4 82 1 Net income (loss) before preferred dividends $ 752 $ 256 $ (1,937 ) $ 102 Weighted average common shares outstanding for diluted loss per common share 8,808,467 8,596,985 8,557,745 8,513,262 Earnings (loss) per common share - diluted before preferred dividends $ 0.09 $ 0.03 $ (0.23 ) $ 0.01 38 Table of Contents ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not Applicable