Broadway Financial earns $1.11M in Q3 2026
Sentiment and the balance of points
Rhea-AI Sentiment reads the wording of the document, how positive or negative its language is on a 1 to 5 scale. The balance of points shown with the takes weighs what the document actually discloses, so the two can disagree, for example when a trial that missed its main goal is described in upbeat language.
Form Type
10-Q
Broadway Financial Corporation (BYFC) reported third-quarter 2026 net income of $1.114 million, versus a $23.894 million net loss in 2025; the earlier quarter included a $25.858 million noncash goodwill impairment charge. Net interest income was $9.896 million, compared with $8.617 million, and provision for credit losses was $668,000 versus $679,000. Net income attributable to common stockholders was $392,000, or $0.04 per basic and diluted share. For the first nine months, net income was $3.412 million, versus a $25.840 million net loss in 2025.
At September 30, 2026, assets were $1,556.923 million, deposits $1,109.962 million and net loans $1,132.690 million, compared with $1,345.569 million, $917.603 million and $1,016.540 million, respectively, at December 31, 2025. Non-accrual loans were $13.727 million, up from $11.169 million. The Bank’s Community Bank Leverage Ratio was 12.83%, above the 8.00% requirement. Nine-month operating cash flow was $4.004 million, compared with $2.487 million.
3 points · 0 major0 major · 0 points
How this balance works
Rhea-AI gives every point it takes from this document a weight. Minor counts 1, Moderate 3 and Major 9, so one Major point outweighs several Minor ones. The bar adds up the weights on each side, and when neither side holds more than 65% of the total the balance reads Mixed.
It reads the document as published, with the same rules for every company, and it does not look at what the market expected or at how the stock traded, so a point can be objectively good on a day the stock falls.
Rhea-AI Sentiment measures something else, the tone of the wording.
Positive
- Moderate pointThird-quarter net income was $1.114 million, versus a $23.894 million loss.
- Moderate pointThird-quarter interest income was $18.798 million, compared with $15.791 million.
- Minor pointNine-month operating cash flow was $4.004 million, versus $2.487 million.
Negative
- None.
Filing Explained
At September 30, 2026, $88.7 million of additional FHLB borrowing was eligible based on pledged collateral and FHLB stock held.
The Form 10-Q is an unaudited quarterly report, and this filing reports Broadway Financial's financial position at
An additional
Four customers accounted for approximately
Key Figures
Third-quarter net income: $1.114 million
Interest income: $18.798 million
Net interest income: $9.896 million
+5 more
8 metrics
Third-quarter net income
$1.114 million
Three months ended September 30, 2026; compared with a net loss of $23.894 million in 2025.
Interest income
$18.798 million
Three months ended September 30, 2026; compared with $15.791 million in 2025.
Net interest income
$9.896 million
Three months ended September 30, 2026; compared with $8.617 million in 2025.
Total assets
$1,556.923 million
As of September 30, 2026; $1,345.569 million as of December 31, 2025.
Deposits
$1,109.962 million
As of September 30, 2026; $917.603 million as of December 31, 2025.
Net loans held for investment
$1,132.690 million
As of September 30, 2026; $1,016.540 million as of December 31, 2025.
Non-accrual loans
$13.727 million
As of September 30, 2026; compared with $11.169 million as of December 31, 2025.
Community Bank Leverage Ratio
12.83%
The Bank’s ratio at September 30, 2026; the requirement was 8.00%.
Key Terms
Community Bank Leverage Ratio, allowance for credit losses, discounted cash flow, weighted average remaining maturity, +2 more
6 terms
Community Bank Leverage Ratio regulatory
"the Bank’s CBLR was 12.83%"
Community bank leverage ratio is a regulatory measure that compares a bank’s core capital (its safety cushion) to the size of its balance sheet, showing what share of assets is backed by tangible equity rather than borrowed money. Investors use it like a health check: a higher ratio means the bank has more buffer to absorb losses, support lending and dividends, and face fewer regulatory limits, while a lower ratio signals greater risk.
allowance for credit losses financial
"record an estimate of expected lifetime credit losses"
Allowance for credit losses is a reserve set aside by a financial institution to cover potential losses from borrowers who may not repay their loans. It acts like a safety net, helping the institution prepare for loans that might turn sour. For investors, it signals how cautious the institution is about the quality of its loans and potential risks to its financial health.
discounted cash flow technical
"transitioned from using the WARM method ... to a DCF method"
Discounted cash flow is a way to estimate what a business is worth by forecasting the money it will generate in the future and converting those future dollars into today’s terms, acknowledging that money now is worth more and future receipts are uncertain. Like comparing the value of an apple today versus a promised apple next year, it helps investors judge whether a stock’s market price is cheaper or pricier than the company’s estimated intrinsic value.
weighted average remaining maturity technical
"using the weighted average remaining maturity (WARM) method"
collateral-dependent loans financial
"loans that have been identified as collateral dependent"
non-accrual loans financial
"Total non-accrual loans"
A non-accrual loan is a loan a lender has decided is unlikely to produce the scheduled interest payments, so the lender stops counting future interest as income and may record the loan at a reduced value. Think of it like renting out a house where the tenant has stopped paying: you stop counting future rent as earnings because it’s uncertain you’ll get it. For investors, a rise in non-accrual loans signals worsening credit quality, lower reported income and higher potential losses that can weaken a bank’s capital and share price.
FAQ
AI-generated questions and answers. How Rhea-AI works. Not financial advice.
How much did BYFC earn in the third quarter of 2026?
BYFC reported net income of $1.114 million for the three months ended September 30, 2026, compared with a net loss of $23.894 million in the 2025 quarter. The 2025 quarter included a $25.858 million noncash goodwill impairment charge.
What was BYFC’s interest income in the third quarter of 2026?
Total interest income was $18.798 million for the three months ended September 30, 2026, compared with $15.791 million in the 2025 quarter. Interest and fees on loans were $15.120 million, and interest on available-for-sale securities was $3.380 million.
What credit-loss method did BYFC adopt in 2026?
During the quarter ended March 31, 2026, BYFC transitioned from the weighted average remaining maturity method to the discounted cash flow method and changed how qualitative factors are applied. The company said these estimation changes did not materially affect its results of operations or financial condition.
AI-generated analysis. How Rhea-AI works. Not financial advice.
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
For the quarterly period ended September 30, 2026
For transition period from__________ to___________
Commission file number 001-39043
(Exact name of registrant as specified in its charter)
| | | |
| (State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) |
| | | |
| (Address of principal executive offices) | | (Zip Code) |
(323 ) 634-1700
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act
| Title of each class: | | Trading Symbol(s) | | Name of each exchange on which registered: |
| (including attached preferred stock purchase rights) | | | | |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated, a smaller reporting company, or an emerging growth company. See the definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| | | | |
| | ☒ | Smaller reporting company | |
| | | Emerging growth company | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No ☒
As of November 6, 2026, 6,178,351 shares of the registrant’s Class A voting common stock, 1,425,404 shares of the registrant’s Class B non-voting common stock and 1,672,562 shares of the registrant’s Class C non-voting common stock were outstanding.
1
TABLE OF CONTENTS
| Page | |||
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PART I.
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FINANCIAL STATEMENTS
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Item 1.
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Consolidated Financial Statements (Unaudited)
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||
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Consolidated Statements of Financial Condition as of September 30, 2026 and December 31, 2025
|
1 | ||
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Consolidated Statements of Operations and Comprehensive Income for the three and nine months ended September 30, 2026 and 2025
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2 | ||
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Consolidated Statements of Cash Flows for the nine months ended September 30, 2026 and 2025
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3 | ||
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Consolidated Statements of Changes in Equity for the three and nine months ended September 30, 2026 and 2025
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4 | ||
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Notes to Unaudited Consolidated Financial Statements
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6 | ||
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Item 2.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations | 28 | |
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Item 3.
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Quantitative and Qualitative Disclosures About Market Risk | 38 | |
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Item 4.
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Controls and Procedures
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38 | |
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PART II.
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OTHER INFORMATION
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Item 1.
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Legal Proceedings | 39 | |
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Item 1A.
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Risk Factors | 39 | |
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Item 2.
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Unregistered Sales of Equity Securities and Use of Proceeds | 39 | |
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Item 3.
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Defaults Upon Senior Securities | 39 | |
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Item 4.
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Mine Safety Disclosures | 39 | |
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Item 5.
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Other Information | 39 | |
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Item 6.
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Exhibits | 40 | |
| Signatures | 41 | ||
2
Table of Contents
BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated Statements of Financial Condition
(In thousands, except share and per share amounts)
| September 30, 2026 | December 31, 2025 | ||||||
| (Unaudited) | |||||||
| Assets: | |||||||
| Cash and due from banks | $ | $ | |||||
| Interest-bearing deposits in other banks | |||||||
| Cash and cash equivalents | |||||||
| Securities available-for-sale, at fair value (amortized cost of $ | |||||||
| Loans receivable held for investment, net of allowance of $ | |||||||
| Accrued interest receivable | |||||||
| Federal Home Loan Bank (“FHLB”) stock | |||||||
| Federal Reserve Bank (“FRB”) stock | |||||||
| Office properties and equipment, net | |||||||
| Bank owned life insurance | |||||||
| Deferred tax assets, net | |||||||
| Core deposit intangible, net | |||||||
| Other assets | |||||||
| Total assets | $ | $ | |||||
| Liabilities and equity | |||||||
| Liabilities: | |||||||
| Deposits | $ | $ | |||||
| Borrowings | |||||||
| Securities sold under agreements to repurchase | |||||||
| Accrued expenses and other liabilities | |||||||
| Total liabilities | |||||||
| Equity: | |||||||
| Non-Cumulative Redeemable Perpetual Preferred stock, Series C; authorized | |||||||
| Common stock, Class A, $ | |||||||
| Common stock, Class B, $ | |||||||
| Common stock, Class C, $ | |||||||
| Additional paid-in capital | |||||||
| Accumulated deficit | ( | ) | ( | ) | |||
| Unearned Employee Stock Ownership Plan (“ESOP”) shares | ( | ) | ( | ) | |||
| Accumulated other comprehensive loss, net of tax | ( | ) | ( | ) | |||
| Treasury stock-at cost, | ( | ) | ( | ) | |||
| Total Broadway Financial Corporation and Subsidiary stockholders' equity | |||||||
| Non-controlling interest | |||||||
| Total liabilities and equity | $ | $ |
See accompanying notes to unaudited consolidated financial statements.
1
Table of Contents
BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated Statements of Operations and Comprehensive Loss
(In thousands, except per share amounts)
(Unaudited)
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||
| Interest income: | |||||||||||||||
| Interest and fees on loans receivable | $ | $ | $ | $ | |||||||||||
| Interest on available-for-sale securities | |||||||||||||||
| Other interest income | |||||||||||||||
| Total interest income | |||||||||||||||
| Interest expense: | |||||||||||||||
| Interest on deposits | |||||||||||||||
| Interest on borrowings | |||||||||||||||
| Total interest expense | |||||||||||||||
| Net interest income | |||||||||||||||
| Provision for credit losses | |||||||||||||||
| Net interest income after provision for credit losses | |||||||||||||||
| Non-interest income: | |||||||||||||||
| Service charges | |||||||||||||||
| Grants | |||||||||||||||
| Earnings on bank owned life insurance | |||||||||||||||
| Management fees | |||||||||||||||
| Other | |||||||||||||||
| Total non-interest income | |||||||||||||||
| Non-interest expense: | |||||||||||||||
| Compensation and benefits | |||||||||||||||
| Occupancy expense | |||||||||||||||
| Information services | |||||||||||||||
| Professional services | |||||||||||||||
| Advertising and promotional expense | |||||||||||||||
| Supervisory costs | |||||||||||||||
| Corporate insurance | |||||||||||||||
| Amortization of core deposit intangible | |||||||||||||||
| Operational loss | ( | ) | |||||||||||||
| Goodwill impairment | |||||||||||||||
| Other | |||||||||||||||
| Total non-interest expense | |||||||||||||||
| Income (loss) before income taxes | ( | ) | ( | ) | |||||||||||
| Income tax expense (benefit) | ( | ) | |||||||||||||
| Net income (loss) | $ | $ | ( | ) | $ | $ | ( | ) | |||||||
| Less: Net (loss) income attributable to non-controlling interest | ( | ) | ( | ) | ( | ) | |||||||||
| Net income (loss) attributable to Broadway Financial Corporation | $ | $ | ( | ) | $ | $ | ( | ) | |||||||
| Less: Preferred stock dividends | |||||||||||||||
| Net income (loss) attributable to common stockholders | $ | $ | ( | ) | $ | $ | ( | ) | |||||||
| Other comprehensive (loss) income, net of tax: | |||||||||||||||
| Net income (loss) | $ | $ | ( | ) | $ | $ | ( | ) | |||||||
| Unrealized (losses) gains on securities available-for-sale arising during the period | ( | ) | ( | ) | |||||||||||
| Income tax effect | ( | ) | ( | ) | |||||||||||
| Other comprehensive (loss) income, net of tax | ( | ) | ( | ) | |||||||||||
| Comprehensive loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Less: Net (loss) income attributable to non-controlling interest | ( | ) | ( | ) | ( | ) | |||||||||
| Comprehensive loss attributable to Broadway Financial Corporation | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Earnings (loss) per common share-basic | $ | $ | ( | ) | $ | $ | ( | ) | |||||||
| Earnings (loss) per common share-diluted | $ | $ | ( | ) | $ | $ | ( | ) | |||||||
See accompanying notes to unaudited consolidated financial statements.
2
Table of Contents
BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated Statements of Cash Flows
(Unaudited)
| Nine Months Ended September 30, | |||||||
| 2026 | 2025 | ||||||
| (In thousands) | |||||||
| Cash flows from operating activities: | |||||||
| Net income (loss) | $ | $ | ( | ) | |||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||||||
| Provision for credit losses | |||||||
| Depreciation and amortization | |||||||
| Loss on disposal of office properties and equipment | |||||||
| Net change of deferred loan origination costs | |||||||
| Net accretion of premiums and discounts on available-for-sale securities | ( | ) | ( | ) | |||
| Accretion of purchase accounting marks on loans | ( | ) | ( | ) | |||
| Amortization of core deposit intangible | |||||||
| Director compensation expense-common stock | |||||||
| Stock-based compensation expense | |||||||
| ESOP compensation expense | |||||||
| Earnings on bank owned life insurance | ( | ) | ( | ) | |||
| Goodwill impairment | |||||||
| Change in assets and liabilities: | |||||||
| Net change in deferred taxes | ( | ) | ( | ) | |||
| Net change in accrued interest receivable | ( | ) | ( | ) | |||
| Net change in other assets | ( | ) | |||||
| Net change in accrued expenses and other liabilities | ( | ) | |||||
| Net cash provided by operating activities | |||||||
| Cash flows from investing activities: | |||||||
| Net change in loans receivable held for investment | ( | ) | ( | ) | |||
| Principal payments on and maturities of available-for-sale securities | |||||||
| Purchases of available-for-sale securities | ( | ) | ( | ) | |||
| Purchase of FHLB stock | ( | ) | ( | ) | |||
| Proceeds from redemption of FHLB stock | |||||||
| Purchase of office properties and equipment | ( | ) | ( | ) | |||
| Purchases of bank owned life insurance | ( | ) | |||||
| Net cash used in investing activities | ( | ) | ( | ) | |||
| Cash flows from financing activities: | |||||||
| Net change in deposits | |||||||
| Net change in securities sold under agreements to repurchase | ( | ) | |||||
| City First Bank Fund Manager II distribution | ( | ) | |||||
| Dividends paid on ECIP preferred stock | ( | ) | ( | ) | |||
| Repayments of secured borrowings | ( | ) | |||||
| Proceeds from FHLB borrowings | |||||||
| Repayments of FHLB borrowings | ( | ) | ( | ) | |||
| Net cash provided by financing activities | |||||||
| Net change in cash and cash equivalents | ( | ) | |||||
| Cash and cash equivalents at beginning of the period | |||||||
| Cash and cash equivalents at end of the period | $ | $ | |||||
| Supplemental disclosures of cash flow information: | |||||||
| Cash paid for interest | $ | $ | |||||
| Cash paid for income taxes | |||||||
See accompanying notes to unaudited consolidated financial statements.
3
Table of Contents
BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated Statements of Changes in Equity
(Unaudited)
| Three Month Periods Ended September 30, 2026 and 2025 | |||||||||||||||||||||||||||||||||||||||
| Accumulated | (Accumulated | ||||||||||||||||||||||||||||||||||||||
| Preferred | Common | Common | Additional | Other | Deficit) | Unearned | Non- | ||||||||||||||||||||||||||||||||
| Stock Non- | Stock | Stock Non- | Paid-in | Comprehensive | Retained | ESOP | Treasury | Controlling | Total | ||||||||||||||||||||||||||||||
| Voting | Voting | Voting | Capital | Loss, Net | Earnings | Shares | Stock | Interest | Equity | ||||||||||||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||||||||||||||||||
| Balance at June 30, 2026 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||||||||
| Net income | ( | ) | |||||||||||||||||||||||||||||||||||||
| Release of unearned ESOP shares | |||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | |||||||||||||||||||||||||||||||||||||||
| Dividends declared and paid - preferred | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||
| Other comprehensive loss, net of tax | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||
| Balance at September 30, 2026 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||||||||
| Balance at June 30, 2025 | $ | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||||||||||
| Net loss | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| Release of unearned ESOP shares | ( | ) | |||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||
| Dividends declared and paid - preferred | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||
| Other comprehensive income, net of tax | |||||||||||||||||||||||||||||||||||||||
| Balance at September 30, 2025 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||||||||
4
Table of Contents
| Nine Month Periods Ended September 30, 2026 and 2025 | |||||||||||||||||||||||||||||||||||||||
| Accumulated | (Accumulated | ||||||||||||||||||||||||||||||||||||||
| Preferred | Common | Common | Additional | Other | Deficit) | Unearned | Non- | ||||||||||||||||||||||||||||||||
| Stock Non- | Stock | Stock Non- | Paid-in | Comprehensive | Retained | ESOP | Treasury | Controlling | Total | ||||||||||||||||||||||||||||||
| Voting | Voting | Voting | Capital | Loss, Net | Earnings | Shares | Stock | Interest | Equity | ||||||||||||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2025 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||||||||
| Net income | |||||||||||||||||||||||||||||||||||||||
| Release of unearned ESOP shares | |||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | |||||||||||||||||||||||||||||||||||||||
| Director stock compensation expense | |||||||||||||||||||||||||||||||||||||||
| Dividends declared and paid - preferred | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||
| City First Bank Fund Manager II Distribution | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||
| Other comprehensive loss, net of tax | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||
| Balance at September 30, 2026 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||||||||
| Balance at December 31, 2024 | $ | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||||||||||
| Net loss | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| Release of unearned ESOP shares | ( | ) | |||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | |||||||||||||||||||||||||||||||||||||||
| Director stock compensation expense | |||||||||||||||||||||||||||||||||||||||
| Dividends declared and paid - preferred | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||
| Other comprehensive income, net of tax | |||||||||||||||||||||||||||||||||||||||
| Balance at September 30, 2025 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||||||||
See accompanying notes to unaudited consolidated financial statements.
5
Table of Contents
BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY
Notes to Unaudited Consolidated Financial Statements
NOTE 1 – Basis of Financial Statement Presentation
The accompanying unaudited consolidated financial statements include Broadway Financial Corporation (the “Company”) and its wholly owned subsidiary, City First Bank, National Association (the “Bank” and, together with the Company, “City First Broadway”). Also included in the unaudited consolidated financial statements are the following subsidiaries of City First Bank: 1432 U Street LLC, Broadway Service Corporation, City First Real Estate LLC, City First Real Estate II LLC, City First Real Estate III LLC, City First Real Estate IV LLC, and CF New Markets Advisors, LLC (“CFNMA”). In addition, CFNMA also consolidates CFC Fund Manager II, LLC; City First New Markets Fund II, LLC; and City First Capital IX, LLC into its financial results. All significant intercompany balances and transactions have been eliminated in consolidation.
The unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions for quarterly reports on Form 10-Q. These unaudited consolidated financial statements do not include all disclosures associated with the Company’s consolidated annual financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2025, (the “2025 Form 10-K”) and, accordingly, should be read in conjunction with such audited consolidated financial statements. In the opinion of management, all adjustments (all of which are normal and recurring in nature) considered necessary for a fair presentation have been included. Operating results for the nine months ended September 30, 2026 are not necessarily indicative of the results that may be expected for the year ending December 31, 2026.
The Company operates one reportable segment — banking. The Company’s chief executive officer is its chief operating decision maker (“CODM”). The CODM assesses operating performance and manages the allocation of resources primarily based on the Company’s consolidated operating results and financial condition. The factors considered in making this determination include that all of the banking products and services offered by the Company are available in each branch of the Company, management does not allocate resources based on the performance of different lending or transaction activities, and how information is reviewed by the chief executive officer and other key decision makers. The CODM uses consolidated net income to benchmark the Company against its competitors and to monitor budget to actual results. As a result, the Company determined that all services offered relate to banking. Loans, investments, and deposits provide the revenues in the banking operation. Interest expense, provisions for credit losses and payroll provide the significant expenses in the banking operation. See the Company’s operating segment information in the unaudited consolidated statements of financial condition and the unaudited consolidated statements of operations and comprehensive loss.
Accounting Pronouncements Recently Issued
In November of 2025, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2025-08 – Financial Instruments-Credit Losses (Topic 326): Purchased Loans. The amendments in this ASU expand the population of acquired financial assets subject to the “gross-up” approach in Accounting Standards Codification (“ASC”) Topic 326. In accordance with this ASC, loans (excluding credit card loans) acquired without evidence of credit deterioration since their origination that are deemed to be “seasoned” (as defined in the Codification) are determined to be “purchased seasoned loans” and are to be accounted for using the gross-up approach at acquisition. Prior to this ASU, for loans that were not determined to be purchased credit deteriorated loans, GAAP required that an allowance for credit losses be established for purchased loans through a provision for credit losses at the acquisition date. The gross-up approach allows an entity to record the acquisition-date allowance for credit losses for purchased seasoned loans through an offsetting addition to the amortized cost basis of the loan (rather than through the provision for credit losses). The ASU does not impact the accounting for loans that were acquired in periods prior to adoption of the ASU. The amendments in ASU 2025-08 will become effective for the Company in the first quarter of 2027; early adoption is permitted. The amendments in the ASU will not affect the Company’s accounting for loans in its portfolio on the date of adoption; however, loans acquired after the adoption date will be accounted for in accordance with the provisions of this ASU.
In December of 2025, the FASB issued ASU 2025-10 – Government Grants (Topic 832): Accounting for Government Grants Received by Business Entities. Prior to the issuance of this ASU, GAAP did not provide authoritative guidance about the recognition, measurement, and presentation of a grant received by a business entity from a government. The amendments in this ASU establish the accounting for a government grant received by a business entity, including guidance for (1) a grant related to an asset and (2) a grant related to income. The newly issued guidance requires that a government grant received by a business entity should not be recognized until: (1) it is probable that a business entity will comply with the conditions attached to the grant and that the grant will be received; and (2) a business entity meets the recognition guidance for a grant related to an asset or a grant related to income. The ASU also prescribes requirements for the subsequent income recognition, presentation matters, and financial statement disclosures related to government grants. The guidance in this ASU will be effective for the Company beginning on January 1, 2029. Early adoption is permitted. The requirements in this ASU are similar to the guidance that the Company has been applying for accounting for government grants by analogy to guidance issued by other accounting standard setters and authoritative bodies. The Company does not expect that the adoption of this guidance will materially impact its financial condition or results of operations.
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In December of 2025, the FASB issued ASU 2025-11 – Interim Reporting (Topic 270): Narrow-Scope Improvements. The amendments in this guidance clarify interim disclosure requirements and the applicability of ASC 270 by providing a comprehensive list of interim period disclosures that are required by GAAP. The updates in ASU 2025-11 also include a disclosure principal that requires entities to disclose events since the end of the last annual reporting period that have a material impact on the entity. The amendments in ASU 2025-11 will become effective for the Company for interim reporting periods beginning in the first quarter of 2028. Early adoption is permitted. The amendments in this ASU are not expected to have a material effect on the Company’s financial position or results of operations; however, the required disclosures will be added to the Company’s interim financial statements issued after the effective date.
Except as discussed below, our accounting policies are described in Note 1 – Summary of Significant Accounting Policies of our audited consolidated financial statements included in the 2025 Form 10-K.
Allowance for Credit Losses - 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 allowance for credit losses (“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.
During the quarter ended March 31, 2026, the Company transitioned from using the weighted average remaining maturity (“WARM”) method for measuring the ACL to a discounted cash flow (“DCF”) method. Concurrently, the Company also changed the way that qualitative factors are applied in the estimation of the ACL. These changes are intended to improve the precision of the expected credit loss calculations. These changes are considered a change in accounting estimate, rather than a change in accounting principle, as they result from an improved estimation methodology rather than a fundamental change in the underlying accounting framework. The changes in estimation techniques and certain related inputs and assumptions used to estimate expected credit losses on the Company’s loan portfolio and unfunded commitments did not materially impact the Company’s results of operations or financial condition.
The Company’s DCF methodology incorporates a probability of default (“PD”) and loss given default (“LGD”) model, whereby PDs and LGDs are forecasted using economic scenarios over a reasonable and supportable period to generate estimates for cash flows expected to be collected over the estimated life of a loan. Estimates of future expected cash flows ultimately reflect assumptions made concerning net credit losses over the life of a loan. The model also incorporates management’s assumptions regarding prepayments and curtailments. The use of reasonable and supportable forecasts, including the determination of the appropriate length of the forecast horizon, requires significant judgment. Management leverages peer data as well as economic projections from an independent third party to inform and provide its reasonable and supportable economic forecasts. Other internal and external indicators of economic forecasts may also be considered by management when developing the forecast metrics.
The Company’s ACL model forecasts PD and LGD over a one-year time horizon, which the Company believes is a reasonable and supportable period. Beyond the one-year forecast time horizon, the Company’s ACL model reverts to historical long-term average loss rates over the remaining contractual periods. The duration of the forecast horizon, the period over which forecasts revert to long-term averages, the economic forecasts that management utilizes, as well as additional internal and external indicators of economic forecasts that management considers, may change over time depending on the nature and composition of the Company’s loan portfolio. Changes in economic forecasts, in conjunction with changes in loan specific attributes, impact a loan’s PD and LGD, which can drive changes in the determination of the ACL.
Expectations of future cash flows are discounted at the loan’s effective interest rate. The resulting ACL for a loan represents the amount by which the loan’s amortized cost exceeds the net present value of a loan’s discounted cash flows. The ACL is recorded through a charge to provision for credit losses and is reduced by charge-offs, net of recoveries on loans previously charged-off. It is the Company’s policy to charge-off loan balances at the time they have been deemed uncollectible.
Prior to March 31, 2026, the Company measured the ACL for each of its loan segments using the WARM method. The weighted average remaining life, including the effect of estimated prepayments, was calculated for each loan pool on a quarterly basis. The Company then estimated 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.
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In conjunction with the conversion to DCF methodology, the bank has adopted a new scorecard-based methodology for estimating the qualitative reserve factors. The purpose of the qualitative scorecard is to provide a framework to reliably and consistently determine reasonable and supportable qualitative estimates of the expected credit losses in the current loan portfolio compared to losses expected from the quantitative analysis. The appropriate qualitative reserve is derived by loan segment from incremental risk statuses for each qualitative factor. The risk statuses in the scorecard range from “very low risk” to “critical risk.” A qualitative reserve allocation is made to each portfolio based on the risk assessment. All inputs and assumptions in the qualitative scorecard were individually assessed to determine the proper risk status, and all decisions were made independently of the previous qualitative analysis. Qualitative
adjustments may be related to and include, but are not limited to, factors such as: (i) changes in lending policies and procedures, including changes in underwriting standards and collections, charge-offs, and recapture practices; (ii) changes in international, national, regional, and local conditions; (iii) changes in the nature and volume of the portfolio and terms of loans; (iv) changes in the experience, depth, and ability of lending management; (v) changes in the volume and severity of past due loans and other similar conditions; (vi) changes in the quality of the organization’s loan review system; (vii) changes in the value of underlying collateral for collateral dependent loans; (viii) the existence and effect of any concentrations of credit and changes in the levels of such concentrations; and (ix) the effect of other external factors (i.e., competition, legal and regulatory requirements) on the level of estimated credit losses. These qualitative factors incorporate the concept of reasonable and supportable forecasts, as required by ASC 326.
The Company evaluates loans collectively for purposes of determining the ACL in accordance with ASC 326. Collective evaluation is based on aggregating loans deemed to possess similar risk characteristics. In certain instances, the Company may identify loans that it believes no longer possess risk characteristics similar to other loans in the loan portfolio. These loans are typically identified from those that have exhibited deterioration in credit quality, since the specific attributes and risks associated with such loans tend to become unique as the credit deteriorates. Such loans are typically nonperforming, downgraded to substandard or worse, and/or are deemed collateral dependent, where the ultimate repayment of the loan is expected to come from the operation of or eventual sale of the collateral. Loans that are deemed by management to no longer possess risk characteristics similar to other loans in the portfolio, or that have been identified as collateral dependent, are evaluated individually for purposes of determining an appropriate lifetime ACL. The Company uses the discounted cash flow approach, using the loan’s effective interest rate, for determining the ACL on individually evaluated loans, unless the loan is deemed collateral dependent, which requires evaluation based on the estimated fair value of the underlying collateral, less estimated selling costs. The Company may increase or decrease the ACL for collateral dependent loans based on changes in the estimated fair value of the collateral.
NOTE 2 – Earnings (Loss) Per Share and Equity
Basic earnings (loss) per share of common stock is computed pursuant to the two-class method by dividing net income (loss) attributable to common stockholders less dividends paid on participating securities (unvested shares of restricted common stock) and any undistributed earnings attributable to participating securities by the weighted average common shares outstanding during the period. The weighted average common shares outstanding includes the weighted average number of shares of common stock outstanding less the weighted average number of unvested shares of restricted common stock. ESOP shares are considered outstanding for this calculation unless unearned. Diluted earnings (loss) per share of common stock includes the dilutive effect of unvested stock awards and additional potential common shares issuable under stock options. Unvested restricted awards are considered outstanding for this calculation.
The following table shows how the Company computed basic and diluted earnings (loss) per share of common stock for the periods indicated:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||
| (Dollars in thousands, except share and per share data) | |||||||||||||||
| Net income (loss) attributable to Broadway Financial Corporation | $ | $ | ( | ) | $ | $ | ( | ) | |||||||
| Net (income) loss attributable to participating securities | ( | ) | ( | ) | |||||||||||
| Preferred stock dividends | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
| Net income (loss) allocated to common stock | $ | $ | ( | ) | $ | $ | ( | ) | |||||||
| Weighted average common shares outstanding for basic earnings (loss) per common share | |||||||||||||||
| Add: Effects of unvested restricted stock awards | |||||||||||||||
| Weighted average common shares outstanding for diluted earnings (loss) per common share | |||||||||||||||
| Earnings (loss) per common share - basic | $ | $ | ( | ) | $ | $ | ( | ) | |||||||
| Earnings (loss) per common share - diluted | $ | $ | ( | ) | $ | $ | ( | ) | |||||||
Series C, Senior Non-Cumulative Perpetual Preferred Stock
On June 7, 2022 (the “Original Closing Date”), the Company issued 150,000 shares of Series C Preferred Stock with a liquidation preference of $1,000 per share for the capital investment of $150 million from the U.S. Treasury under the Emergency Capital Investment Program (“ECIP”).
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The Series C Preferred Stock accrued no dividend for the first 24 months following the investment date. Thereafter, the dividend rate will be adjusted based on the qualified lending growth criteria listed in the terms of the ECIP investment with the annual dividend rate up to 2 %. After the tenth anniversary of the investment date, the dividend rate will be fixed based on the average annual amount of lending in years 2 through 10 . Dividends are payable quarterly in arrears on March 15, June 15, September 15, and December 15.
Established by the Consolidated Appropriations Act, 2021, the ECIP was created to encourage low- and moderate-income community financial institutions and minority depository institutions to provide loans, grants, and forbearance for small businesses, minority-owned businesses, and consumers, especially low-income and underserved communities, including persistent poverty counties, that may be disproportionately impacted by the economic effect of the COVID-19 pandemic by providing direct and indirect capital investments in low- and moderate-income community financial institutions.
The Series C Preferred Stock may be redeemed at the option of the Company on or after the fifth anniversary of issuance (or earlier in the event of loss of regulatory capital treatment), subject to the approval of the appropriate federal banking regulator and in accordance with the federal banking agencies’ regulatory capital regulations.
On January 14, 2025, the Company entered into a Securities Purchase Option Agreement (the “Option Agreement”) with the U.S. Treasury, which grants the Company the conditional option to repurchase the Series C Preferred Stock during the first 15 years following the Company’s issuance of the Preferred Stock. The purchase price for the Series C Preferred Stock under the Option Agreement is based on a formula equal to the present value of the Series C Preferred Stock as of the closing date, calculated as set forth in the Option Agreement, together with any accrued and unpaid dividends thereon and could represent a substantial discount from the Preferred Stock’s liquidation amount.
The purchase option may not be exercised during the first 10 years following the Company’s sale of the Series C Preferred Stock unless and until the Company meets at least one of the following three conditions (the “Threshold Conditions”): (1) an average of at least 60 % of the Company’s loan originations qualify as “Deep Impact Lending” over any 16 consecutive quarters, (2) an average of at least 85 % of the Company’s total originations qualify as “Qualified Lending” over any 24 consecutive quarters or (3) the Series C Preferred Stock has a dividend rate of no more than 0.5 % at each of six consecutive “Reset Dates,” in each case as defined in the Option Agreement and the terms of the Series C Preferred Stock. In addition to satisfying a Threshold Condition, the Option Agreement requires that the Company meet certain other eligibility conditions in order to exercise the purchase option in the future, including compliance with the terms of the original ECIP purchase agreement and the terms of the Series C Preferred Stock, maintaining qualification as either a certified community development financial institution or a minority depository institution and satisfying other legal and regulatory criteria. Although the Company currently meets the general eligibility criteria, other than satisfying one of the Threshold Conditions, there can be no assurance that the Company will meet such criteria in the future. The Company may designate a mission aligned nonprofit affiliate as the purchaser of the Series C Preferred Stock under the terms of the Option Agreement.
The earliest possible date by which a Threshold Condition may be met is June 30, 2026 which is the end of the sixteenth consecutive quarter following the Original Closing Date. The Company has not met a Threshold Condition as of September 30, 2026, and there can be no assurance if and when a Threshold Condition will be met.
The Company began paying quarterly dividends on the Series C Preferred Stock in the three month period ended June 30, 2024. Dividends on the Series C Preferred Stock totaled $750 2.3 2.0
NOTE 3 – Securities
The following table summarizes the amortized cost and fair value of the available-for-sale investment securities portfolios as of the dates indicated and the corresponding amounts of unrealized gains and losses which were recognized in accumulated other comprehensive loss:
| Gross | Gross | ||||||||||||||
| Amortized | Unrealized | Unrealized | |||||||||||||
| Cost | Gains | Losses | Fair Value | ||||||||||||
| (In thousands) | |||||||||||||||
| September 30, 2026 | |||||||||||||||
| Federal agency mortgage-backed securities | $ | $ | $ | ( | ) | $ | |||||||||
| Federal agency collateralized mortgage obligations (“CMO”) | ( | ) | |||||||||||||
| Federal agency debt | ( | ) | |||||||||||||
| Municipal bonds | ( | ) | |||||||||||||
| U.S. Small Business Administration (“SBA”) pools | ( | ) | |||||||||||||
| Asset-backed securities | ( | ) | |||||||||||||
| Corporate bonds | ( | ) | |||||||||||||
| Total available-for-sale securities | $ | $ | $ | ( | ) | $ | |||||||||
| December 31, 2025: | |||||||||||||||
| Federal agency mortgage-backed securities | $ | $ | $ | ( | ) | $ | |||||||||
| Federal agency CMOs | ( | ) | |||||||||||||
| Federal agency debt | ( | ) | |||||||||||||
| Municipal bonds | ( | ) | |||||||||||||
| U.S. Treasuries | ( | ) | |||||||||||||
| SBA pools | ( | ) | |||||||||||||
| Asset-backed securities | ( | ) | |||||||||||||
| Corporate bonds | ( | ) | |||||||||||||
| Total available-for-sale securities | $ | $ | $ | ( | ) | $ | |||||||||
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As of September 30, 2026, securities with a fair value of $82.3 million were pledged as collateral for securities sold under agreements to repurchase, securities with a fair value of $6.9 million were pledged as collateral for D.C. Housing, securities with a fair value of $3.9 million were pledged as collateral for D.C. Government, and securities with a fair value of $114 thousand were pledged as collateral for FRB discount window.
As of December 31, 2025, securities with a fair value of $83.7 million were pledged as collateral for securities sold under agreements to repurchase, securities with a fair value of $7.7 million were pledged as collateral for D.C. Housing, securities with a fair value of $4.2 million were pledged as collateral for D.C. Government, and securities with a fair value of $157 thousand were pledged as collateral for FRB discount window.
Accrued interest receivable on securities was $1.3 million and $745 thousand at September 30, 2026 and December 31, 2025, respectively, and is included in accrued interest receivable on the consolidated statements of financial condition.
At September 30, 2026, and December 31, 2025, there were no
The amortized cost and estimated fair value of all investment securities available-for-sale at September 30, 2026, by contractual maturities, are shown below. Contractual maturities may differ from expected maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.
| Gross | Gross | ||||||||||||||
| Amortized | Unrealized | Unrealized | |||||||||||||
| Cost | Gains | Losses | Fair Value | ||||||||||||
| (In thousands) | |||||||||||||||
| Due in one year or less | $ | $ | $ | ( | ) | $ | |||||||||
| Due after one year through five years | ( | ) | |||||||||||||
| Due after five years through ten years | ( | ) | |||||||||||||
| Due after ten years | ( | ) | |||||||||||||
| $ | $ | $ | ( | ) | $ | ||||||||||
The table below indicates the length of time individual securities have been in a continuous unrealized loss position:
| Less than 12 Months | 12 Months or Longer | Total | |||||||||||||||||||||
| Unrealized | Unrealized | Unrealized | |||||||||||||||||||||
| Fair Value | Losses | Fair Value | Losses | Fair Value | Losses | ||||||||||||||||||
| September 30, 2026 | (In thousands) | ||||||||||||||||||||||
| Federal agency mortgage-backed securities | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) | |||||||||||
| Federal agency CMOs | ( | ) | ( | ) | ( | ) | |||||||||||||||||
| Federal agency debt | ( | ) | ( | ) | |||||||||||||||||||
| Municipal bonds | ( | ) | ( | ) | |||||||||||||||||||
| SBA pools | ( | ) | ( | ) | |||||||||||||||||||
| Asset-backed securities | ( | ) | ( | ) | |||||||||||||||||||
| Corporate bonds | ( | ) | ( | ) | |||||||||||||||||||
| Total unrealized loss position investment securities | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) | |||||||||||
| December 31, 2025 | |||||||||||||||||||||||
| Federal agency mortgage-backed securities | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) | |||||||||||
| Federal agency CMOs | ( | ) | ( | ) | ( | ) | |||||||||||||||||
| Federal agency debt | ( | ) | ( | ) | ( | ) | |||||||||||||||||
| Municipal bonds | ( | ) | ( | ) | |||||||||||||||||||
| U.S. Treasuries | ( | ) | ( | ) | |||||||||||||||||||
| SBA pools | ( | ) | ( | ) | ( | ) | |||||||||||||||||
| Asset-backed securities | ( | ) | ( | ) | |||||||||||||||||||
| Corporate bonds | ( | ) | ( | ) | |||||||||||||||||||
| Total unrealized loss position investment securities | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) | |||||||||||
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At September 30, 2026, and December 31, 2025, all securities in the portfolio were current with their contractual principal and interest payments. At September 30, 2026, and December 31, 2025, there were no no
The Company’s assessment of available-for-sale investment securities as of September 30, 2026 and December 31, 2025, indicated that an ACL was not required. The Company analyzed available-for-sale investment securities that were in an unrealized loss position and determined the decline in fair value for those securities was not related to credit, but rather related to changes in interest rates and general market conditions. As such, no 90 no
NOTE 4 – Loans Receivable Held for Investment
Loans receivable held for investment were as follows as of the periods indicated:
| September 30, | December 31 | ||||||
| 2026 | 2025 | ||||||
| (In thousands) | |||||||
| Real estate: | |||||||
| Single-family | $ | $ | |||||
| Multi-family | |||||||
| Commercial real estate | |||||||
| Church | |||||||
| Construction | |||||||
| Commercial – other | |||||||
| SBA loans | |||||||
| Consumer | |||||||
| Gross loans receivable before deferred loan costs and premiums | |||||||
| Unamortized net deferred loan costs and premiums | |||||||
| Gross loans receivable | |||||||
| Credit and interest marks on purchased loans, net | ( | ) | ( | ) | |||
| Allowance for credit losses | ( | ) | ( | ) | |||
| Loans receivable, net | $ | $ | |||||
Accrued interest receivable on loans receivable held for investment was $6.0 million and $5.2 million at September 30, 2026 and December 31, 2025, respectively, and is included in accrued interest receivable on the consolidated statements of financial condition.
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The following tables summarize the activity in the allowance for credit losses on loans for the three months ended:
| September 30, 2026 | |||||||||||||||||||
| Beginning | Provision | Ending | |||||||||||||||||
| Balance | Charge-offs | Recoveries | (Recapture) | Balance | |||||||||||||||
| (In thousands) | |||||||||||||||||||
| Real estate: | |||||||||||||||||||
| Single-family | $ | $ | $ | $ | $ | ||||||||||||||
| Multi-family | ( | ) | ( | ) | |||||||||||||||
| Commercial real estate | |||||||||||||||||||
| Church | ( | ) | |||||||||||||||||
| Construction | |||||||||||||||||||
| Commercial - other | ( | ) | |||||||||||||||||
| SBA loans | |||||||||||||||||||
| Total | $ | $ | ( | ) | $ | $ | $ | ||||||||||||
| September 30, 2025 | |||||||||||||||||||
| Beginning | Provision | Ending | |||||||||||||||||
| Balance | Charge-offs | Recoveries | (Recapture) | Balance | |||||||||||||||
| (In thousands) | |||||||||||||||||||
| Real estate: | |||||||||||||||||||
| Single-family | $ | $ | $ | $ | $ | ||||||||||||||
| Multi-family | ( | ) | |||||||||||||||||
| Commercial real estate | ( | ) | |||||||||||||||||
| Church | ( | ) | |||||||||||||||||
| Construction | |||||||||||||||||||
| Commercial - other | ( | ) | |||||||||||||||||
| SBA loans | |||||||||||||||||||
| Total | $ | $ | $ | $ | $ | ||||||||||||||
The following tables summarize the activity in the allowance for credit losses on loans for the nine months ended:
| September 30, 2026 | |||||||||||||||||||
| Beginning | Provision | Ending | |||||||||||||||||
| Balance | Charge-offs | Recoveries | (Recapture) | Balance | |||||||||||||||
| (In thousands) | |||||||||||||||||||
| Real estate: | |||||||||||||||||||
| Single-family | $ | $ | $ | $ | ( | ) | $ | ||||||||||||
| Multi-family | ( | ||||||||||||||||||
| Commercial real estate | |||||||||||||||||||
| Church | |||||||||||||||||||
| Construction | |||||||||||||||||||
| Commercial - other | ( | ||||||||||||||||||
| SBA loans | ( | ( | ) | ||||||||||||||||
| Total | $ | $ | ( | ) | $ | $ | $ | ||||||||||||
| September 30, 2025 | |||||||||||||||||||
| Beginning | Provision | Ending | |||||||||||||||||
| Balance | Charge-offs | Recoveries | (Recapture) | Balance | |||||||||||||||
| (In thousands) | |||||||||||||||||||
| Real estate: | |||||||||||||||||||
| Single-family | $ | $ | $ | $ | ( | ) | $ | ||||||||||||
| Multi-family | |||||||||||||||||||
| Commercial real estate | ( | ) | |||||||||||||||||
| Church | ( | ) | |||||||||||||||||
| Construction | |||||||||||||||||||
| Commercial - other | |||||||||||||||||||
| SBA loans | |||||||||||||||||||
| Total | $ | $ | $ | $ | $ | ||||||||||||||
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The Company recorded a provision for off-balance sheet loan commitments of $43 thousand and $220 thousand for the three months ended September 30, 2026 and 2025, respectively. The Company recorded a provision for off-balance sheet loan commitments of $22 thousand and $164 thousand for the nine months ended September 30, 2026 and 2025, respectively.
The ACL increased from $9.4 million at December 31, 2025 to $10.0 million at September 30, 2026. This increase was primarily due to loan portfolio growth, including increases in the commercial-other portfolio and the commercial real estate portfolio, and additional specific reserves.
The following tables present individually evaluated collateral dependent loans by collateral type as of the date indicated:
| September 30, 2026 | |||||||||||||||||||||||
| Multi-Family | Developed | Business | |||||||||||||||||||||
| Single-Family | Residential | Retail | Land | Assets | Total | ||||||||||||||||||
| Real estate: | (in thousands) | ||||||||||||||||||||||
| Single-family | $ | $ | $ | $ | $ | $ | |||||||||||||||||
| Multi-family | |||||||||||||||||||||||
| Commercial real estate | |||||||||||||||||||||||
| Construction | |||||||||||||||||||||||
| Commercial - other | |||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | |||||||||||||||||
| December 31, 2025 | |||||||||||||||
| Multi-Family | Business | ||||||||||||||
| Single-Family | Residential | Assets | Total | ||||||||||||
| Real estate: | (in thousands) | ||||||||||||||
| Single-family | $ | $ | $ | $ | |||||||||||
| Multi-family | |||||||||||||||
| Construction | |||||||||||||||
| Commercial - other | |||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||
At September 30, 2026, $13.9 million of individually evaluated loans were evaluated based on the estimated fair value of the underlying collateral. These loans had an associated ACL of $1.9 million as of September 30, 2026. $13.7 million of these collateral dependent loans were on non-accrual status at September 30, 2026.
At December 31, 2025, $10.9 million of individually evaluated loans were evaluated based on the estimated fair value of the underlying collateral. These loans had an associated ACL of $1.1 million as of December 31, 2025. All of these collateral dependent loans were on non-accrual status at December 31, 2025.
Past Due Loans
The following tables present the aging of the recorded investment in past due loans by loan type as of the dates indicated:
| September 30, 2026 | |||||||||||||||||||||||
| Greater than | |||||||||||||||||||||||
| 30-59 Days | 60-89 Days | 90 Days Past | Total Past | ||||||||||||||||||||
| Past Due | Past Due | Due | Due | Current | Total | ||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
| Loans receivable held for investment: | |||||||||||||||||||||||
| Real estate: | |||||||||||||||||||||||
| Single-family | $ | $ | $ | $ | $ | $ | |||||||||||||||||
| Multi-family | |||||||||||||||||||||||
| Commercial real estate | |||||||||||||||||||||||
| Church | |||||||||||||||||||||||
| Construction | |||||||||||||||||||||||
| Commercial - other | |||||||||||||||||||||||
| SBA loans | |||||||||||||||||||||||
| Consumer | |||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | |||||||||||||||||
13
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| December 31, 2025 | |||||||||||||||||||||||
| Greater than | |||||||||||||||||||||||
| 30-59 Days | 60-89 Days | 90 Days Past | Total Past | ||||||||||||||||||||
| Past Due | Past Due | Due | Due | Current | Total | ||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
| Loans receivable held for investment: | |||||||||||||||||||||||
| Real estate: | |||||||||||||||||||||||
| Single-family | $ | $ | $ | $ | $ | $ | |||||||||||||||||
| Multi-family | |||||||||||||||||||||||
| Commercial real estate | |||||||||||||||||||||||
| Church | |||||||||||||||||||||||
| Construction | |||||||||||||||||||||||
| Commercial - other | |||||||||||||||||||||||
| SBA loans | |||||||||||||||||||||||
| Consumer | |||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | |||||||||||||||||
The following tables present the recorded investment in non-accrual loans by loan type as of the dates indicated:
| September 30, 2026 | |||||||||||
| Non-accrual with | Non-accrual with | ||||||||||
| no Allowance for | an Allowance for | Total Non-accrual | |||||||||
| Credit Losses | Credit Losses | Loans | |||||||||
| (In thousands) | |||||||||||
| Loans receivable held for investment: | |||||||||||
| Real estate: | |||||||||||
| Single-family | $ | $ | $ | ||||||||
| Multi-family | |||||||||||
| Commercial real estate | |||||||||||
| Construction | |||||||||||
| Commercial - other | |||||||||||
| SBA loans | |||||||||||
| Total non-accrual loans | $ | $ | $ | ||||||||
| December 31, 2025 | |||||||||||
| Non-accrual with | Non-accrual with | ||||||||||
| no Allowance for | an Allowance for | Total Non-accrual | |||||||||
| Credit Losses | Credit Losses | Loans | |||||||||
| (In thousands) | |||||||||||
| Loans receivable held for investment: | |||||||||||
| Real estate: | |||||||||||
| Single-family | $ | $ | $ | ||||||||
| Multi-family | |||||||||||
| Construction | |||||||||||
| Commercial - other | |||||||||||
| SBA loans | |||||||||||
| Total non-accrual loans | $ | $ | $ | ||||||||
There were no
14
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Modified Loans to Troubled Borrowers
GAAP requires that certain types of modifications of loans in response to a borrower’s financial difficulty be reported, which consist of the following: (i) principal forgiveness, (ii) interest rate reduction, (iii) other-than-insignificant payment delay, (iv) term extension, or (v) any combination of the foregoing. The ACL for loans that were modified in response to a borrower’s financial difficulty is measured on a collective basis, as with other loans in the loan portfolio, unless management determines that such loans no longer possess risk characteristics similar to others in the loan portfolio. In those instances, the ACL for such loans is determined through individual evaluation.
The following tables present the amortized cost basis and the weighted average financial effect of loans modified to borrowers experiencing financial difficulty during the three and nine months ended September 30, 2026 and 2025.
| Three Months Ended September 30, 2026 | ||||||||||||||
| Interest Rate Reduction and Term Extension | Interest Rate Reduction | Term Extension | Percentage of Total Loan Type | |||||||||||
| (in thousands) | ||||||||||||||
| Construction | $ | % | | % | ||||||||||
| Total | $ | |||||||||||||
| Nine Months Ended September 30, 2026 | ||||||||||||||||||||||||||||||||
| Term Extension | Term Extension | Interest Rate Reduction and Term Extension | Interest Rate Reduction | Term Extension | Payment Delay | Payment Delay Period | Percentage of Total Loan Type | |||||||||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||||||||||
| Real estate: | ||||||||||||||||||||||||||||||||
| Construction | $ | $ | % | | % | |||||||||||||||||||||||||||
| Commercial - other | | % | ||||||||||||||||||||||||||||||
| Total | $ | $ | $ | |||||||||||||||||||||||||||||
| Nine Months Ended September 30, 2025 | |||||||||||
| Percentage of Total | |||||||||||
| Term Extension | Loan Type | Term Extension | |||||||||
| (in thousands) | |||||||||||
| Real estate: | |||||||||||
| Commercial real estate | $ | % | |||||||||
| Construction | % | ||||||||||
| Commercial - other | % | | |||||||||
| Total | $ | ||||||||||
There were no loan modifications during the three months ended September 30, 2025. None of the modified loans have defaulted during the three or nine months ended September 30, 2026 or September 30, 2025. As of September 30, 2026, the Company has not committed to lend any additional funds to any borrower whose loan was modified.
Credit Quality Indicators
The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. For single-family residential, consumer, and other smaller balance homogeneous loans, a credit grade is established at inception, and generally only adjusted based on performance. Information about payment status is disclosed elsewhere herein. The Company analyzes all other loans individually by classifying the loans as to credit risk. The Company uses the following definitions for risk ratings:
15
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-
Watch. Loans classified as watch exhibit weaknesses that could threaten the current net worth and paying capacity of the obligors. Watch graded loans are generally performing and are not more than 59 days past due. A watch rating is used when a material deficiency exists, but correction is anticipated within an acceptable time frame.
-
Special Mention. Loans classified as special mention have a potential weakness that deserves management’s close attention that appears short term in nature. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date.
-
Substandard. Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution may sustain some loss if the deficiencies are not corrected.
-
Doubtful. Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, based on currently existing facts, conditions, and values, highly questionable and improbable.
-
Loss. Loans classified as loss are considered uncollectible and of such little value that to continue to carry the loan as an active asset is no longer warranted.
Loans not meeting the criteria above that are analyzed individually as part of the above-described process are considered to be pass rated loans. Pass rated loans are generally well protected by the current net worth and paying capacity of the obligor and/or by the value of the underlying collateral. Pass rated loans are not more than 59 days past due and are generally performing in accordance with the loan terms.
16
Table of Contents
The following table stratifies the loans held for investment portfolio by the Company’s internal risk grading, and by year of origination as of the date indicated:
| Term Loans Amortized Cost Basis by Origination Year - As of September 30, 2026 | |||||||||||||||||||||||||||||||
| 2026 | 2025 | 2024 | 2023 | 2022 | Prior | Revolving Loans | Total | ||||||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||||||||||
| Single-family: | |||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Watch | |||||||||||||||||||||||||||||||
| Special Mention | |||||||||||||||||||||||||||||||
| Substandard | |||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Multi-family: | |||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Watch | |||||||||||||||||||||||||||||||
| Special Mention | |||||||||||||||||||||||||||||||
| Substandard | |||||||||||||||||||||||||||||||
| Doubtful | | ||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| YTD gross charge-offs | $ | $ | $ | $ | $ | ( | ) | $ | $ | $ | ( | ) | |||||||||||||||||||
| Commercial real estate: | |||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Watch | |||||||||||||||||||||||||||||||
| Special Mention | |||||||||||||||||||||||||||||||
| Substandard | |||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Church: | |||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Watch | |||||||||||||||||||||||||||||||
| Substandard | |||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Construction: | |||||||||||||||||||||||||||||||
| Watch | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Special Mention | |||||||||||||||||||||||||||||||
| Substandard | |||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Commercial – other: | |||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Watch | |||||||||||||||||||||||||||||||
| Special Mention | |||||||||||||||||||||||||||||||
| Substandard | |||||||||||||||||||||||||||||||
| Doubtful | |||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| YTD gross charge-offs | $ | $ | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | |||||||||||||||||||
| SBA: | |||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Watch | |||||||||||||||||||||||||||||||
| Substandard | |||||||||||||||||||||||||||||||
| Doubtful | |||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| YTD gross charge-offs | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | |||||||||||||||||
| Consumer: | |||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Total loans: | |||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Watch | |||||||||||||||||||||||||||||||
| Special Mention | |||||||||||||||||||||||||||||||
| Substandard | |||||||||||||||||||||||||||||||
| Doubtful | |||||||||||||||||||||||||||||||
| Total loans | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Total YTD gross charge-offs | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | |||||||||||||||||
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Table of Contents
| Term Loans Amortized Cost Basis by Origination Year - As of December 31, 2025 | |||||||||||||||||||||||||||||||
| Revolving | |||||||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | 2022 | 2021 | Prior | Loans | Total | ||||||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||||||||||
| Single-family: | |||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Watch | |||||||||||||||||||||||||||||||
| Substandard | |||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Multi-family: | |||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Watch | |||||||||||||||||||||||||||||||
| Special Mention | |||||||||||||||||||||||||||||||
| Substandard | |||||||||||||||||||||||||||||||
| Doubtful | |||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| YTD gross charge-offs | $ | $ | $ | $ | ( | ) | $ | $ | $ | $ | ( | ) | |||||||||||||||||||
| Commercial real estate: | |||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Watch | |||||||||||||||||||||||||||||||
| Special Mention | |||||||||||||||||||||||||||||||
| Substandard | |||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Church: | |||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Watch | |||||||||||||||||||||||||||||||
| Substandard | |||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Construction: | |||||||||||||||||||||||||||||||
| Watch | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Special Mention | |||||||||||||||||||||||||||||||
| Substandard | |||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Commercial – other: | |||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Watch | |||||||||||||||||||||||||||||||
| Special Mention | |||||||||||||||||||||||||||||||
| Substandard | |||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| SBA: | |||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Substandard | |||||||||||||||||||||||||||||||
| Doubtful | |||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| YTD gross charge-offs | $ | $ | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | |||||||||||||||||||
| Consumer: | |||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Total loans: | |||||||||||||||||||||||||||||||
| Pass | |||||||||||||||||||||||||||||||
| Watch | |||||||||||||||||||||||||||||||
| Special Mention | |||||||||||||||||||||||||||||||
| Substandard | |||||||||||||||||||||||||||||||
| Doubtful | |||||||||||||||||||||||||||||||
| Total loans | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Total YTD gross charge-offs | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) | |||||||||||||||||
18
Table of Contents
Allowance for Credit Losses for Off-Balance Sheet Commitments
The Company maintains an allowance for credit losses on off-balance sheet commitments related to unfunded loans and lines of credit, which is included in accrued expenses and other liabilities of the consolidated statements of financial condition. The Company applies an expected credit loss estimation methodology for off-balance sheet commitments. This methodology is commensurate with the methodology applied to each respective segment of the loan portfolio in determining the ACL for loans held-for-investment. The loss estimation process includes assumptions for the probability that a loan will fund, as well as the expected amount of funding. These assumptions are based on the Company’s own historical internal loan data.
The allowance for off-balance sheet commitments was $246 thousand and $224 thousand at September 30, 2026 and December 31, 2025, respectively, and was classified within accrued expenses and other liabilities on the consolidated statements of financial condition.
NOTE 5 – Goodwill and Core Deposit Intangible
The following tables present the changes in the carrying amounts of goodwill and core deposit intangibles for the nine months ended September 30, 2026 and 2025:
| September 30, 2026 | |||
| Core Deposit | |||
| Intangible | |||
| (In thousands) | |||
| Balance at the beginning of the period | $ | ||
| Amortization | ( | ) | |
| Balance at the end of the period | $ | ||
| September 30, 2025 | |||||||
| Core Deposit | |||||||
| Goodwill | Intangible | ||||||
| (In thousands) | |||||||
| Balance at the beginning of the period | $ | $ | |||||
| Amortization | ( | ) | ( | ) | |||
| Balance at the end of the period | $ | $ | |||||
On October 15, 2025, the Company’s management,
with oversight of the Audit Committee of the Board of Directors of the Company,
concluded that, based on its annual impairment analysis, the Company’s goodwill
was impaired in accordance with U.S. GAAP. Consequently, the Company recorded a
non-cash $25.9 million goodwill impairment charge for the quarter ended
September 30, 2025. The Company does not expect that this charge will result in
future cash expenditures.
The carrying amount of the core deposit intangible consisted of the following (in thousands):
| September 30, 2026 | December 31, 2025 | ||||||
| (In thousands) | |||||||
| Core deposit intangible acquired | $ | $ | |||||
| Less: Accumulated amortization | ( | ) | ( | ) | |||
| $ | $ | ||||||
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Table of Contents
The following table outlines the estimated amortization expense for the core deposit intangible during the next five fiscal years (in thousands):
| (In thousands) | |||
| Remainder of 2026 | $ | ||
| 2027 | |||
| 2028 | |||
| 2029 | |||
| 2030 | |||
| Thereafter | |||
| $ |
NOTE 6 – Derivatives
The Company utilizes interest rate swap agreements with commercial banking customers to facilitate their interest rate management strategies. The Company entered into corresponding offsetting derivatives with third parties. While these derivatives represent economic hedges, they do not qualify as hedges for accounting purposes.
The Company presents derivatives on a gross basis on the consolidated statements of financial condition. The notional amount of the interest rate swaps does not represent amounts exchanged by the parties. The amount exchanged is determined by reference to the notional amount and the other terms of the individual interest rate swap agreements. The following tables present the amounts recorded on the consolidated statements of financial condition related to the Company’s interest rate swaps.
| As of September 30, 2026 | ||||||||||
| Consolidated Statements of Financial Condition Category | ||||||||||
| Notional Amount | Fair Value | |||||||||
| (In thousands) | ||||||||||
| Derivatives in an asset position: | ||||||||||
| Derivatives not designated as hedging instruments: | ||||||||||
| Interest rate swaps related to loan customers | $ | $ | Other Assets | |||||||
| Total derivatives in an asset position | $ | $ | ||||||||
| Derivatives in a liability position: | ||||||||||
| Derivatives not designated as hedging instruments: | ||||||||||
| Interest rate swaps related to loan customers | $ | $ | Accrued Expenses and Other Liabilities | |||||||
| Total derivatives in a liability position | $ | $ | ||||||||
| As of December 31, 2025 | ||||||||||
| Consolidated Statements of Financial Condition Category | ||||||||||
| Notional Amount | Fair Value | |||||||||
| (In thousands) | ||||||||||
| Derivatives in an asset position: | ||||||||||
| Derivatives not designated as hedging instruments: | ||||||||||
| Interest rate swaps related to loan customers | $ | $ | Other Assets | |||||||
| Total derivatives in an asset position | $ | $ | ||||||||
| Derivatives in a liability position: | ||||||||||
| Derivatives not designated as hedging instruments: | ||||||||||
| Interest rate swaps related to loan customers | $ | $ | Accrued Expenses and Other Liabilities | |||||||
| Total derivatives in a liability position | $ | $ | ||||||||
20
Table of Contents
NOTE 7 – Borrowings
The Bank enters into agreements under which it sells securities subject to an obligation to repurchase the same or similar securities. Under these arrangements, the Bank may transfer legal control over the assets but still retain effective control through an agreement that both entitles and obligates the Bank to repurchase the assets. As a result, these repurchase agreements are accounted for as collateralized financing agreements (i.e., secured borrowings) and not as a sale and subsequent repurchase of securities. The obligation to repurchase the securities is reflected as a liability in the 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 September 30, 2026 securities sold under agreements to repurchase totaled $80.0 million at an average rate of 3.69 %. The fair value of securities pledged totaled $82.3 million as of September 30, 2026. As of December 31, 2025, securities sold under agreements to repurchase totaled $80.8 million at an average rate of 3.66 %. The fair value of securities pledged totaled $83.7 million as of December 31, 2025.
At September 30, 2026, the Company had outstanding advances from the FHLB totaling $99.0 million. At December 31, 2025, the Company had outstanding advances from the FHLB totaling $72.0 million. The weighted average interest rate was 4.13 % and 3.79 % as of September 30, 2026 and December 31, 2025, respectively. The weighted average contractual maturity was less than one month 431.8 million and $448.6 million at September 30, 2026 and December 31, 2025, respectively, were pledged to secure FHLB advances. 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 $88.7 million as of September 30, 2026.
In addition, the Company had additional lines of credit of $10.0 30 days. There were no
NOTE 8 – Fair Value
Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an ordinary transaction between market participants on the measurement date. There are three levels of inputs that may be used to measure fair values:
Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.
Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
Level 3: Significant unobservable inputs that reflect a company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.
The Company used the following methods and significant assumptions to estimate fair value:
The fair values of securities available-for-sale are determined by obtaining quoted prices on nationally recognized securities exchanges (Level 1 inputs) or matrix pricing, which is a mathematical technique to value debt securities without relying exclusively on quoted prices for the specific securities, but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2 inputs).
21
Table of Contents
Assets and Liabilities Measured on a Recurring Basis
Assets and liabilities measured at fair value on a recurring basis are summarized below:
| Fair Value Measurement | |||||||||||||||
| Quoted Prices | |||||||||||||||
| in Active | Significant | ||||||||||||||
| Markets for | Other | Significant | |||||||||||||
| Identical | Observable | Unobservable | |||||||||||||
| Assets (Level 1) | Inputs (Level 2) | Inputs (Level 3) | Total | ||||||||||||
| (In thousands) | |||||||||||||||
| At September 30, 2026 | |||||||||||||||
| Securities available-for-sale: | |||||||||||||||
| Federal agency mortgage-backed securities | $ | $ | $ | $ | |||||||||||
| Federal agency CMOs | |||||||||||||||
| Federal agency debt | |||||||||||||||
| Municipal bonds | |||||||||||||||
| SBA pools | |||||||||||||||
| Asset-backed securities | |||||||||||||||
| Corporate bonds | | | |||||||||||||
| Interest rate swap asset | |||||||||||||||
| Interest rate swap liability | ( | ) | ( | ) | |||||||||||
| At December 31, 2025 | |||||||||||||||
| Securities available-for-sale: | |||||||||||||||
| Federal agency mortgage-backed securities | $ | $ | $ | $ | |||||||||||
| Federal agency CMOs | |||||||||||||||
| Federal agency debt | |||||||||||||||
| Municipal bonds | |||||||||||||||
| U.S. Treasuries | |||||||||||||||
| SBA pools | |||||||||||||||
| Asset-backed securities | |||||||||||||||
| Corporate bonds | |||||||||||||||
| Interest rate swap asset | |||||||||||||||
| Interest rate swap liability | ( | ) | ( | ) | |||||||||||
There were no transfers between Level 1, Level 2, or Level 3 during the three or nine months ended September 30, 2026 or 2025.
Assets Measured on a Nonrecurring Basis
The Company measures certain assets at fair value on a nonrecurring basis and the following is a general description of the methods used to value such assets.
Collateral-Dependent Loans - The fair value of collateral-dependent loans with specific allocations of the allowance for credit losses is generally based on recent appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available for similar loans and collateral underlying loans and result in a Level 3 classification.
The table below presents assets measured at fair value on a nonrecurring basis.
| Fair Value Measurement | |||||||||||||||
| Quoted Prices in Active Markets | Significant Other Observable | Significant Unobservable Inputs | |||||||||||||
| for Identical Assets (Level 1) | Inputs (Level 2) | (Level 3) | Total | ||||||||||||
| (In thousands) | |||||||||||||||
| At September 30, 2026: | |||||||||||||||
| Collateral dependent loans: | |||||||||||||||
| Real estate: | |||||||||||||||
| Single-family | $ | $ | $ | $ | |||||||||||
| Multi-family | |||||||||||||||
| Commercial real estate | |||||||||||||||
| Construction | |||||||||||||||
| Commercial - other | |||||||||||||||
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The following table represents quantitative information about Level 3 fair value assumptions for assets measured at fair value on a non-recurring basis at September 30, 2026.
| Fair Value | Valuation Technique(s) | Unobservable Input(s) | Range | |||||||
| (In thousands) | ||||||||||
| At September 30, 2026: | ||||||||||
| Collateral dependent loans: | ||||||||||
| Real estate: | ||||||||||
| Single-family | $ | Market approach | Adjustments to market data | |||||||
| Multi-family | Market approach | Adjustments to market data | ||||||||
| Commercial real estate | Market approach | Adjustments to market data | ||||||||
| Construction | Market approach | Adjustments to market data | ||||||||
| Commercial - other | Market approach | Adjustments to market data | ||||||||
The table below presents assets measured at fair value on a nonrecurring basis.
| Fair Value Measurement | |||||||||||||||
| Quoted Prices in Active Markets | Significant Other Observable | Significant Unobservable Inputs | |||||||||||||
| for Identical Assets (Level 1) | Inputs (Level 2) | (Level 3) | Total | ||||||||||||
| (In thousands) | |||||||||||||||
| At December 31, 2025: | |||||||||||||||
| Collateral dependent loans: | |||||||||||||||
| Real estate: | |||||||||||||||
| Single-family | $ | $ | $ | $ | |||||||||||
| Multi-family | |||||||||||||||
| Construction | |||||||||||||||
| Commercial - other | |||||||||||||||
The following table represents quantitative information about Level 3 fair value assumptions for assets measured at fair value on a non-recurring basis at December 31, 2025.
| Fair Value | Valuation Technique(s) | Unobservable Input(s) | Range | |||||||
| (In thousands) | ||||||||||
| At December 31, 2025: | ||||||||||
| Collateral dependent loans: | ||||||||||
| Real estate: | ||||||||||
| Single-family | $ | Market approach | Adjustments to market data | |||||||
| Multi-family | Market approach | Adjustments to market data | ||||||||
| Construction | Market approach | Adjustments to market data | ||||||||
| Commercial - other | Market approach | Adjustments to market data | ||||||||
Fair Values of Financial Instruments
The following tables present the carrying amount, fair value, and level within the fair value hierarchy of the Company’s financial instruments as of September 30, 2026 and December 31, 2025.
| Fair Value Measurements at September 30, 2026 | |||||||||||||||||||
| Carrying Value | Level 1 | Level 2 | Level 3 | Total | |||||||||||||||
| (In thousands) | |||||||||||||||||||
| Financial Assets: | |||||||||||||||||||
| Cash and cash equivalents | $ | $ | $ | $ | $ | ||||||||||||||
| Securities available-for-sale | |||||||||||||||||||
| Loans receivable held for investment | |||||||||||||||||||
| Accrued interest receivable | |||||||||||||||||||
| Interest rate swaps | |||||||||||||||||||
| Financial Liabilities: | |||||||||||||||||||
| Non-interest-bearing demand deposits | $ | $ | $ | $ | $ | ||||||||||||||
| Interest-bearing demand deposits | |||||||||||||||||||
| Time deposits | |||||||||||||||||||
| Borrowings | | ||||||||||||||||||
| Securities sold under agreements to repurchase | | ||||||||||||||||||
| Accrued interest payable | |||||||||||||||||||
| Interest rate swaps | |||||||||||||||||||
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| Fair Value Measurements at December 31, 2025 | |||||||||||||||||||
| Carrying Value | Level 1 | Level 2 | Level 3 | Total | |||||||||||||||
| (In thousands) | |||||||||||||||||||
| Financial Assets: | |||||||||||||||||||
| Cash and cash equivalents | $ | $ | $ | $ | $ | ||||||||||||||
| Securities available-for-sale | |||||||||||||||||||
| Loans receivable held for investment | |||||||||||||||||||
| Accrued interest receivable | |||||||||||||||||||
| Interest rate swaps | |||||||||||||||||||
| Financial Liabilities: | |||||||||||||||||||
| Non-interest-bearing demand deposits | $ | $ | $ | $ | $ | ||||||||||||||
| Interest-bearing demand deposits | |||||||||||||||||||
| Time deposits | |||||||||||||||||||
| FHLB borrowings | |||||||||||||||||||
| Securities sold under agreements to repurchase | |||||||||||||||||||
| Accrued interest payable | |||||||||||||||||||
| Interest rate swaps | |||||||||||||||||||
In accordance with ASC 820, the fair value of financial assets and liabilities was measured using an exit price notion. Although the exit price notion represents the value that would be received to sell an asset or paid to transfer a liability, the actual price received for a sale of assets or paid to transfer liabilities could be different from exit price disclosed.
NOTE 9 – Stock-based Compensation
Prior to June 21, 2023, the Company issued stock-based compensation awards to its directors and officers under the 2018 Long Term Incentive Plan (“LTIP”) which allowed the grant of non-qualified and incentive stock options, stock appreciation rights, full value awards and cash incentive awards. The maximum number of shares available to be awarded under the LTIP was 161,639 shares.
On June 21, 2023, stockholders approved an Amendment and Restatement of the 2018 Long Term Incentive Plan (“Amended and Restated LTIP”) which allows the issuance of 487,500 additional shares and brought the number of shares that may be issued under the Amended and Restated LTIP to 649,139 shares.
Stock-based compensation is recognized on a straight-line basis over the vesting period. During the three months ended September 30, 2026 and 2025, the Company recorded $151 thousand of stock-based compensation expense and a $22 thousand reduction of stock-based compensation expense, respectively. During the nine months ended September 30, 2026 and 2025, the Company recorded $264 thousand and $188 thousand of stock-based compensation expense, respectively. The Company did not 168
As of September 30, 2026, 463,000 shares had been awarded under the Amended and Restated LTIP and 186,139 shares were available to be awarded. The following tables present unvested stock award activity during the three and nine months ended September 30, 2026 and 2025:
| Three months ended | |||||||
| September 30, 2026 | September 30, 2025 | ||||||
| Outstanding at beginning of period | |||||||
| Granted during period | |||||||
| Forfeited during period | ( | ) | ( | ) | |||
| Vested during period | ( | ) | |||||
| Outstanding at end of period | |||||||
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| Nine months ended | |||||||
| September 30, 2026 | September 30, 2025 | ||||||
| Outstanding at beginning of period | |||||||
| Granted during period | |||||||
| Forfeited during period | ( | ) | ( | ) | |||
| Vested during period | ( | ) | ( | ) | |||
| Outstanding at end of period | |||||||
NOTE 10 – ESOP Plan
Employees participate in an ESOP after attaining certain age and service requirements. During 2022, the ESOP purchased 58,369 shares of the Company’s common stock at an average cost of $8.57 per share for a total cost of $500 thousand which was funded with a $5.0 million line of credit from the Company. During 2023, the ESOP purchased 369,953 additional shares of the Company’s common stock at an average cost of $9.19 per share for a total cost of $3.4 million, which was funded with the line of credit. Any loans or borrowings under the line of credit will be repaid from the Bank’s discretionary contributions to the ESOP, net of dividends paid, over a period of 20 years. Shares of the Company’s common stock purchased by the ESOP are held in a suspense account until released for allocation to participants. When loan payments are made, shares are allocated to each eligible participant based on the ratio of each such participant’s compensation, as defined in the ESOP, to the total compensation of all eligible plan participants. As the unearned shares are released from the suspense account, the Company recognizes compensation expense equal to the fair value of the ESOP shares during the periods in which they become committed to be released. To the extent that the fair value of the ESOP shares released differs from the cost of such shares, the difference is charged or credited to equity as additional paid‑in capital. Dividends on allocated shares increase participant accounts. Dividends on unallocated shares will be used to repay the loan. At the end of employment, participants will receive shares for their vested balance. Compensation expense related to the ESOP was $71 thousand and $50 thousand for the three months ended September 30, 2026 and 2025, respectively, and $217 thousand and $149 thousand for the nine months ended September 30, 2026 and 2025, respectively.
Shares held by the ESOP were as follows:
| September 30, 2026 | December 31, 2025 | ||||||
| (Dollars in thousands) | |||||||
| Allocated to participants | |||||||
| Committed to be released | |||||||
| Suspense shares | |||||||
| Total ESOP shares | |||||||
| Fair value of unearned shares | $ | $ | |||||
The value of unearned shares, which are reported as Unearned ESOP shares in the equity section of the consolidated statements of financial condition, was $3.7 million and $3.9 million at September 30, 2026 and December 31, 2025, respectively.
NOTE 11 – Regulatory Matters
The Bank’s capital requirements are administered by the Office of the Comptroller of the Currency (“OCC”) and involve quantitative measures of assets, liabilities, and certain off-balance sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by the OCC. Failure to meet capital requirements can result in regulatory action.
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As a result of the Economic Growth, Regulatory Relief, and Consumer Protection Act, the federal banking agencies have developed a “Community Bank Leverage Ratio” (the ratio of a bank’s tier 1 capital to average total consolidated assets) for financial institutions with assets of less than $10 billion. A “qualifying community bank” that exceeds this ratio will be deemed to be in compliance with all other capital and leverage requirements, including the capital requirements to be considered “well capitalized” under Prompt Corrective Action statutes. The federal banking agencies previously set the Community Bank Leverage Ratio (“CBLR”) at 9.0% to be considered “well capitalized.” Effective July 1, 2026, pursuant to a final rule issued by the federal banking agencies, the minimum CBLR requirement was reduced from 9.0% to 8.0%.
At September 30, 2026, the Bank’s CBLR was 12.83 %, which exceeded the CBLR requirement. Actual and required capital amounts and ratios as of the dates indicated are presented below:
| Minimum Required to Be | |||||||||||||||
| Well Capitalized Under | |||||||||||||||
| Prompt Corrective Action | |||||||||||||||
| Actual | Provisions | ||||||||||||||
| Amount | Ratio | Amount | Ratio | ||||||||||||
| (Dollars in thousands) | |||||||||||||||
| September 30, 2026 | |||||||||||||||
| Community Bank Leverage Ratio | $ | % | $ | % | |||||||||||
| December 31, 2025 | |||||||||||||||
| Community Bank Leverage Ratio | $ | % | $ | % | |||||||||||
At September 30, 2026, the Company and the Bank met all the capital adequacy requirements to which they were subject. In addition, the Bank was “well capitalized” under the regulatory framework for prompt corrective action. Management believes that no conditions or events have occurred since September 30, 2026 that would materially adversely change the Bank’s capital classifications. From time to time, the Bank may need to raise additional capital to support its further growth and to maintain its “well capitalized” status.
NOTE 12 – Income Taxes
The Company and its subsidiary are subject to U.S. federal and state income taxes. Income tax expense is the total of the current year income tax due or refundable and the change in deferred tax assets and liabilities. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion, or all, of the deferred tax asset will not be realized. In assessing the realization of deferred tax assets, management evaluated both positive and negative evidence, including any cumulative losses in the current year and the prior two years , the amount of taxes paid in available carry-back years, the forecasts of future income and tax planning strategies.
At September 30, 2026, the Company maintained a $449 thousand valuation allowance on its deferred tax assets because the number of shares sold in the private placements completed on April 6, 2021 triggered limitations on the use of certain tax attributes under the Section 382 of the federal tax code. The ability to use net operating losses (“NOLs”) to offset future taxable income will be restricted and these NOLs could expire or otherwise be unavailable. In general, under Section 382 of the Code and corresponding provisions of state law, a corporation that undergoes an “ownership change” is subject to limitations on its ability to utilize its pre-change NOLs to offset future taxable income. For these purposes, an ownership change generally occurs where the aggregate stock ownership of one or more stockholders or groups of stockholders who owns at least 5% of a corporation’s stock increases its ownership by more than 50 percentage points over its lowest ownership percentage within a specified testing period.
The Company recorded income tax expense of $279 thousand for the third quarter of 2026, compared to $736 thousand for the third quarter of 2025. The decrease in income tax expense reflected a decrease in income before taxes, excluding goodwill impairment, of $1.3 million between the two periods. The effective tax rate was 20.03 % for the third quarter of 2026, compared to a benefit of 3.18 % for the third quarter of 2025.
The Company recorded income tax expense of $891 thousand for the first nine months of 2026, compared to income tax benefit of $54 thousand for the first nine months of 2025. The increase in income tax expense reflected an increase in pre-tax income, excluding goodwill impairment, of $4.3 million between the two periods. The effective tax rate was 20.71 % for the first nine months of 2026, compared to 0.21 % for the first nine months of 2025.
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NOTE 13 – Concentrations
The Bank has a significant concentration of deposits with four customers that accounted for approximately 18 % of its deposits as of September 30, 2026, and a significant concentration of deposits with five customers that accounted for approximately 28 % of its deposits as of December 31, 2025. The Bank also has a significant concentration of short-term borrowings from one 90 % and 91 % of the outstanding balance of securities sold under agreements to repurchase as of September 30, 2026 and December 31, 2025, respectively.
The Company’s lending activities are predominantly in real estate loans that are secured by properties located in Southern California and in Washington, D.C. and surrounding areas, and many of the borrowers reside in those areas. Therefore, the Company’s exposure to credit risk is significantly affected by changes in the economy and real estate market in the markets in which the Company operates.
Multi‑family loans represented 49.94 % of our gross loan portfolio at September 30, 2026 compared to 58.41 % of our gross loan portfolio at December 31, 2025. We seek to mitigate the risks associated with multi‑family loans by applying appropriate underwriting requirements, which include limitations on loan‑to‑value ratios and debt service coverage ratios. Under our underwriting policies, loan‑to‑value ratios on our multi‑family loans usually do not exceed 75 % of the lower of the purchase price or the appraised value of the underlying property. We also generally require minimum debt service coverage ratios of 120 % for multi‑family loans. Properties securing multi‑family loans are appraised by management‑approved independent appraisers. Title insurance is required on all loans.
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|
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 for the year ended December 31, 2025 (the “2025 Form 10-K”). 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.
General
Broadway Financial Corporation (the “Company”) is
a Delaware public benefit corporation and the holding company for City First
Bank, National Association (the “Bank”). The Company is dedicated to
promoting fair economic development and increasing access to capital in
historically underinvested communities through its lending, investment, and
banking activities. As a public benefit corporation, the Company seeks to align
its mission-driven objectives with the achievement of sustainable financial
performance.
In April 2021, the Company completed its merger with CFBanc
Corporation, forming a combined institution with a shared commitment to serving
low-to-moderate-income and historically underserved communities. Following the
merger, Broadway Federal merged with and into City First Bank of D.C., National
Association, and the surviving institution was subsequently renamed City First
Bank, National Association.
The Company's financial performance is driven primarily by
net interest income generated from its loan and investment portfolios, the
quality and performance of its earning assets, funding and liquidity management
activities, and noninterest income and expense trends.
The Company is regulated by the Board of Governors of the
Federal Reserve System, while the Bank is regulated by the Office of the
Comptroller of the Currency and the Federal Deposit Insurance Corporation.
Deposits at the Bank are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to applicable limits.
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 2025 Form 10-K 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 (“ACL”) 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.
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During the quarter ended March 31, 2026, the Company transitioned from using the weighted average remaining maturity (“WARM”) method for measuring the ACL to a discounted cash flow (“DCF”) method. Concurrently, the Company also changed the way that qualitative factors are applied in the estimation of the ACL. These changes are intended to improve the precision of the expected credit loss calculations. These changes are considered a change in accounting estimate, rather than a change in accounting principle, as they result from an improved estimation methodology rather than a fundamental change in the underlying accounting framework. The changes in estimation techniques and certain related inputs and assumptions used to estimate expected credit losses on the Company’s loan portfolio and unfunded commitments did not materially impact the Company’s results of operations or financial condition.
The Company’s DCF methodology incorporates a probability of default (“PD”) and loss given default (“LGD”) model, whereby PDs and LGDs are forecasted using economic scenarios over a reasonable and supportable period to generate estimates for cash flows expected to be collected over the estimated life of a loan. Estimates of future expected cash flows ultimately reflect assumptions made concerning net credit losses over the life of a loan. The model also incorporates management’s assumptions regarding prepayments and curtailments. The use of reasonable and supportable forecasts, including the determination of the appropriate length of the forecast horizon, requires significant judgment. Management leverages peer data as well as economic projections from an independent third party to inform and provide its reasonable and supportable economic forecasts. Other internal and external indicators of economic forecasts may also be considered by management when developing the forecast metrics.
The Company’s ACL model forecasts PD and LGD over a one-year time horizon, which the Company believes is a reasonable and supportable period. Beyond the one-year forecast time horizon, the Company’s ACL model reverts to historical long-term average loss rates over the remaining contractual periods. The duration of the forecast horizon, the period over which forecasts revert to long-term averages, the economic forecasts that management utilizes, as well as additional internal and external indicators of economic forecasts that management considers, may change over time depending on the nature and composition of the Company’s loan portfolio. Changes in economic forecasts, in conjunction with changes in loan specific attributes, impact a loan’s PD and LGD, which can drive changes in the determination of the ACL.
Expectations of future cash flows are discounted at the loan’s effective interest rate. The resulting ACL for a loan represents the amount by which the loan’s amortized cost exceeds the net present value of a loan’s discounted cash flows. The ACL is recorded through a charge to provision for credit losses and is reduced by charge-offs, net of recoveries on loans previously charged-off. It is the Company’s policy to charge-off loan balances at the time they have been deemed uncollectible.
Prior to March 31, 2026, the Company measured the ACL for each of its loan segments using the WARM method. The weighted average remaining life, including the effect of estimated prepayments, was calculated for each loan pool on a quarterly basis. The Company then estimated 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.
In conjunction with the conversion to DCF methodology, the bank has adopted a new scorecard-based methodology for estimating the qualitative reserve factors. The purpose of the qualitative scorecard is to provide a framework to reliably and consistently determine reasonable and supportable qualitative estimates of the expected credit losses in the current loan portfolio compared to losses expected from the quantitative analysis. The appropriate qualitative reserve is derived by loan segment from incremental risk statuses for each qualitative factor. The risk statuses in the scorecard range from “very low risk” to “critical risk.” A qualitative reserve allocation is made to each portfolio based on the risk assessment. All inputs and assumptions in the qualitative scorecard were individually assessed to determine the proper risk status, and all decisions were made independently of the previous WARM qualitative analysis. Qualitative adjustments may be related to and include, but are not limited to, factors such as: (i) changes in lending policies and procedures, including changes in underwriting standards and collections, charge-offs, and recapture practices; (ii) changes in international, national, regional, and local conditions; (iii) changes in the nature and volume of the portfolio and terms of loans; (iv) changes in the experience, depth, and ability of lending management; (v) changes in the volume and severity of past due loans and other similar conditions; (vi) changes in the quality of the organization’s loan review system; (vii) changes in the value of underlying collateral for collateral dependent loans; (viii) the existence and effect of any concentrations of credit and changes in the levels of such concentrations; and (ix) the effect of other external factors (i.e., competition, legal and regulatory requirements) on the level of estimated credit losses. These qualitative factors incorporate the concept of reasonable and supportable forecasts, as required by ASC 326.
The Company evaluates loans collectively for purposes of determining the ACL in accordance with ASC 326. Collective evaluation is based on aggregating loans deemed to possess similar risk characteristics. In certain instances, the Company may identify loans that it believes no longer possess risk characteristics similar to other loans in the loan portfolio. These loans are typically identified from those that have exhibited deterioration in credit quality, since the specific attributes and risks associated with such loans tend to become unique as the credit deteriorates. Such loans are typically nonperforming, downgraded to substandard or worse, and/or are deemed collateral dependent, where the ultimate repayment of the loan is expected to come from the sale of the collateral. Loans that are deemed by management to no longer possess risk characteristics similar to other loans in the portfolio, or that have been identified as collateral dependent, are evaluated individually for purposes of determining an appropriate lifetime ACL. The Company uses the discounted cash flow approach, using the loan’s effective interest rate, for determining the ACL on individually evaluated loans, unless the loan is deemed collateral dependent, which requires evaluation based on the estimated fair value of the underlying collateral, less estimated selling costs. The Company may add a specific reserve for collateral dependent loans based on changes in the estimated fair value of the collateral.
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Overview
Net income attributable to common stockholders was $392 thousand during the third quarter of 2026,
compared to net loss attributable to common stockholders
of $24.6 million for the third quarter of 2025.
Diluted earnings per common share was $0.04 for the third quarter of
2026, compared to a loss of ($2.86) for the third quarter of 2025.
For the first nine months of 2026, the Company reported consolidated net income before preferred dividends of $3.3 million, or $0.37 per diluted common share, compared to consolidated net income before preferred dividends and goodwill impairment of $38 thousand, or $0.00 per diluted common share, for the first nine months of 2025.
The Company reported consolidated net income before preferred
dividends1 of $1.1 million, or $0.13 per diluted common share, for the third quarter
of 2026, compared to consolidated
net income before preferred dividends and goodwill impairment1 of $2.0 million, or $0.23 per diluted common share, for the third quarter of 2025.
Net
income attributable to common stockholders was $1.0 million during the first nine
months of 2026 after deducting preferred dividends of $2.3 million, compared to
net loss attributable to common stockholders of $28.1 million for the first nine
months of 2025 after deducting goodwill impairment of $25.9 million and preferred
dividends of $2.3 million. Diluted earnings per common share was $0.11 for the first
nine months of 2026, compared to ($3.27) of diluted loss per common share for
the first nine months of 2025. Diluted earnings per common share for the first nine
months of 2026 reflects preferred dividends of $0.25 per diluted common share,
compared to ($0.26) of diluted loss per common share for the first nine months of 2025.
1 “Net income before preferred dividends” and “net
income before preferred dividends and goodwill impairment” are non-GAAP financial
measures. A reconciliation of these non-GAAP financial measures and the
nearest GAAP measures is provided in the “Use of Non-GAAP Financial Measures” section.
Results of Operations
Net Interest Income
Three Months Ended September 30, 2026 Compared to the Three Months Ended September 30, 2025
Net interest income totaled $9.9 million, representing an increase of $1.3 million, or 14.8%, from net interest income of $8.6 million for the third quarter
of 2025. The increase resulted from a $3.0 million increase
in interest income, primarily due to a $1.7 million increase in interest income on available-for-sale securities, due to an increase in the average balance of available-for-sale securities, and a $1.7 million increase in interest income
on loans receivable as a result of an increase in the average balance of loans receivable. These increases in net interest income were partially offset by a
$1.6 million increase in interest expense on deposits, as a result of an increase in the average
deposits balance. The net interest margin decreased to 2.64% for the third quarter
of 2026 from 2.72% for the third quarter of 2025.
Nine Months Ended September 30, 2026 Compared to the Nine Months Ended September 30, 2025
Net interest income totaled $28.4 million for the
first nine months of 2026, representing an increase of $4.0 million, or 16.5%, from
net interest income of $24.4 million for the first nine months of 2025. The
increase resulted from a $7.8 million increase in
interest income, primarily due to a $5.1 million increase in interest income on
available-for-sale securities, due to increases in the average rate and balance
of available-for-sale securities, and a $3.4 million increase in interest
income on loans receivable as a result of an increase in the average balance of
loans receivable. Further, interest on borrowings decreased $1.7 million due to
decreases in the average rate and balance of borrowings. The increases in net
interest income were partially offset by a $5.5 million increase in interest
expense on deposits due to increases in the average deposit rate and balance.
The net interest margin increased
to 2.68% for the first nine months of 2026 from 2.65% for the first nine months
of 2025, due to an increase in the average rate earned on interest-earning
assets, which increased to 4.97% for the first nine months of 2026 from 4.88%
for the first nine months of 2025, and a decrease in the cost of funds, which
decreased to 3.00% for the first nine months of 2026 from 3.08% for the first nine
months of 2025.
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, deferred origination costs, and discounts and premiums that are amortized or accreted to interest income or expense. We do not accrue interest on loans that are on non-accrual status; however, the balance of these loans is included in the total average balance of loans receivable, which has the effect of reducing average loan yields.
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| For the Three Months Ended | |||||||||||||||||||||||
| September 30, 2026 | September 30, 2025 | ||||||||||||||||||||||
| (Dollars in thousands) | Average Balance | Interest | Average Yield/Cost (Annualized) | Average Balance | Interest | Average Yield/Cost (Annualized) | |||||||||||||||||
| Assets | |||||||||||||||||||||||
| Interest-earning assets: | |||||||||||||||||||||||
| Interest-bearing deposits | $ | 16,416 | $ | 150 | 3.63 | % | $ | 49,348 | $ | 556 | 4.47 | % | |||||||||||
| Securities | 320,693 | 3,380 | 4.18 | % | 206,224 | 1,690 | 3.25 | % | |||||||||||||||
| Loans receivable, net(1) | 1,140,585 | 15,120 | 5.26 | % | 993,090 | 13,418 | 5.36 | % | |||||||||||||||
| FRB and FHLB stock | 10,117 | 148 | 5.80 | % | 7,461 | 127 | 6.75 | % | |||||||||||||||
| Total interest-earning assets | 1,487,811 | $ | 18,798 | 5.01 | % | 1,256,123 | $ | 15,791 | 4.99 | % | |||||||||||||
| Non-interest-earning assets | 42,971 | 50,659 | |||||||||||||||||||||
| Total assets | $ | 1,530,782 | $ | 1,306,782 | |||||||||||||||||||
| Liabilities and Equity | |||||||||||||||||||||||
| Interest-bearing liabilities: | |||||||||||||||||||||||
| Money market deposits | $ | 184,743 | $ | 1,049 | 2.25 | % | $ | 155,121 | $ | 422 | 1.08 | % | |||||||||||
| Savings deposits | 197,914 | 1,743 | 3.49 | % | 44,095 | 50 | 0.45 | % | |||||||||||||||
| Interest checking and other demand deposits | 256,432 | 1,448 | 2.24 | % | 263,972 | 2,105 | 3.16 | % | |||||||||||||||
| Certificate accounts | 318,644 | 2,733 | 3.40 | % | 282,955 | 2,786 | 3.91 | % | |||||||||||||||
| Total deposits | 957,733 | 6,973 | 2.89 | % | 746,143 | 5,363 | 2.85 | % | |||||||||||||||
| FHLB borrowings | 117,213 | 1,166 | 3.95 | % | 63,016 | 711 | 4.48 | % | |||||||||||||||
| Securities sold under agreements to repurchase | 82,126 | 763 | 3.69 | % | 76,906 | 710 | 3.66 | % | |||||||||||||||
| Secured borrowings | - | - | - | % | 30,253 | 390 | 5.11 | % | |||||||||||||||
| Total borrowings | 199,339 | 1,929 | 3.84 | % | 170,175 | 1,811 | 4.22 | % | |||||||||||||||
| Total interest-bearing liabilities | 1,157,072 | 8,902 | 3.05 | % | 916,318 | 7,174 | 3.11 | % | |||||||||||||||
| Non-interest-bearing liabilities | 111,468 | 104,006 | |||||||||||||||||||||
| Equity | 262,242 | 286,458 | |||||||||||||||||||||
| Total liabilities and equity | $ | 1,530,782 | $ | 1,306,782 | |||||||||||||||||||
| Net interest rate spread(2) | $ | 9,896 | 1.96 | % | $ | 8,617 | 1.88 | % | |||||||||||||||
| Net interest rate margin(3) | 2.64 | % | 2.72 | % | |||||||||||||||||||
| Ratio of interest-earning assets to interest-bearing liabilities | 128.58 | % | 137.08 | % | |||||||||||||||||||
(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.
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| For the Nine Months Ended | |||||||||||||||||||||||
| September 30, 2026 | September 30, 2025 | ||||||||||||||||||||||
| (Dollars in thousands) | Average Balance | Interest | Average Yield/Cost (Annualized) | Average Balance | Interest | Average Yield/Cost (Annualized) | |||||||||||||||||
| Assets | |||||||||||||||||||||||
| Interest-earning assets: | |||||||||||||||||||||||
| Interest-bearing deposits | $ | 17,430 | $ | 470 | 3.61 | % | $ | 34,221 | $ | 1,134 | 4.43 | % | |||||||||||
| Securities | 299,634 | 9,203 | 4.11 | % | 195,049 | 4,069 | 2.79 | % | |||||||||||||||
| Loans receivable, net(1) | 1,094,214 | 42,760 | 5.22 | % | 995,521 | 39,360 | 5.29 | % | |||||||||||||||
| FRB and FHLB stock | 8,109 | 377 | 6.22 | % | 8,694 | 426 | 6.55 | % | |||||||||||||||
| Total interest-earning assets | 1,419,387 | $ | 52,810 | 4.97 | % | 1,233,485 | $ | 44,989 | 4.88 | % | |||||||||||||
| Non-interest-earning assets | 42,533 | 49,799 | |||||||||||||||||||||
| Total assets | $ | 1,461,920 | $ | 1,283,284 | |||||||||||||||||||
| Liabilities and Equity | |||||||||||||||||||||||
| Interest-bearing liabilities: | |||||||||||||||||||||||
| Money market deposits | $ | 183,674 | $ | 3,037 | 2.21 | % | $ | 136,183 | $ | 1,015 | 1.00 | % | |||||||||||
| Savings deposits | 182,073 | 4,586 | 3.37 | % | 46,506 | 179 | 0.51 | % | |||||||||||||||
| Interest checking and other demand deposits | 261,191 | 4,515 | 2.31 | % | 256,952 | 5,991 | 3.12 | % | |||||||||||||||
| Certificate accounts | 304,356 | 7,810 | 3.43 | % | 259,447 | 7,256 | 3.74 | % | |||||||||||||||
| Total deposits | 931,294 | 19,948 | 2.86 | % | 699,088 | 14,441 | 2.76 | % | |||||||||||||||
| FHLB borrowings | 74,991 | 2,201 | 3.92 | % | 91,585 | 2,950 | 4.31 | % | |||||||||||||||
| Securities sold under agreements to repurchase | 80,678 | 2,222 | 3.68 | % | 71,302 | 1,948 | 3.65 | % | |||||||||||||||
| Secured borrowings | - | - | - | 30,946 | 1,233 | 5.33 | % | ||||||||||||||||
| Total borrowings | 155,669 | 4,423 | 3.80 | % | 193,833 | 6,131 | 4.23 | % | |||||||||||||||
| Total interest-bearing liabilities | 1,086,963 | $ | 24,371 | 3.00 | % | 892,921 | $ | 20,572 | 3.08 | % | |||||||||||||
| Non-interest-bearing liabilities | 111,614 | 104,684 | |||||||||||||||||||||
| Equity | 263,343 | 285,679 | |||||||||||||||||||||
| Total liabilities and equity | $ | 1,461,920 | $ | 1,283,284 | |||||||||||||||||||
| Net interest rate spread(2) | $ | 28,439 | 1.98 | % | $ | 24,417 | 1.80 | % | |||||||||||||||
| Net interest rate margin(3) | 2.68 | % | 2.65 | % | |||||||||||||||||||
| Ratio of interest-earning assets to interest-bearing liabilities | 130.58 | % | 138.14 | % | |||||||||||||||||||
(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.
Provision for Credit Losses
The Company recorded a provision for credit losses of $668 thousand for the three months ended September 30,
2026, compared to $697 thousand for the three months
ended September 30, 2025.
The Company recorded a provision for credit losses of $2.3 million for the first nine months of 2026, compared to $2.1 million for the first nine months of
2025.
The Company recorded a provision for off-balance sheet loan commitments of $43 thousand and $220 thousand for the three months ended September 30, 2026 and 2025, respectively. The Company recorded a provision for off-balance sheet loan commitments of $22 thousand and $164 thousand for the nine months ended September 30, 2026 and 2025, respectively.
Non-interest Income
Non-interest income was $496 thousand
for the third quarter of 2026, compared to $422 thousand for the third quarter
of 2025, representing an increase of $74 thousand, or 17.5%. The increase was primarily due to $203 thousand of additional earnings on bank owned life insurance.
Non-interest income was $2.0
million for the first nine months of 2026, compared to $1.1 million for the
first nine months of 2025, representing an increase of $970 thousand, or 91.1%.
The increase was primarily due to $697 thousand of additional earnings on bank
owned life insurance and a $450 thousand loan fee
related to the New Market Tax Credit allocation earned in the first nine months
of 2026.
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Non-interest Expense
Non-interest expense was $8.3 million for the third quarter of 2026, compared to $31.5 million for the third quarter of 2025, a decrease of $23.2 million, or 73.6%. The decrease was primarily due to a $25.9 million
goodwill impairment charge recorded in the third quarter of 2025.
Non-interest expense was $23.8
million for the first nine months of 2026, compared to $49.2 million for the
first nine months of 2025, representing a decrease of $25.4 million, or 51.6%.
The decrease was primarily due to a $25.9 million
goodwill impairment charge recorded in the first nine months of 2025.
Income Taxes
The Company recorded income tax expense of $279 thousand for the third quarter of 2026, compared to $736 thousand for the third quarter of 2025. The decrease in income tax expense reflected a decrease in income before taxes, excluding goodwill impairment, of $1.3 million between the two periods. The effective tax rate was 20.03% for the third quarter of 2026, compared to a benefit of 3.18% for the third quarter of 2025.
Income tax expense (benefit) was
income tax expense of $891 thousand for the
first nine months of 2026 compared to income tax benefit of $54 thousand for the
first nine months of 2025. The increase
in tax expense reflected an increase of $4.3 million in pre-tax income between
the two periods, excluding the $25.9 million goodwill impairment in the first nine months of 2025.
Financial Condition
Total Assets
Total assets increased
by $211.4 million at September 30, 2026, compared to December 31, 2025, reflecting
increases in net loans of $116.2 million, securities available-for-sale of $48.6
million and cash and cash equivalents of $38.8 million. The increase in net
loans was due to organic loan growth and loan purchases and the increase in securities
available-for-sale was due to purchases of securities available-for-sale.
Loans Receivable Held for Investment
Loans held for investment, net of the ACL, increased by $116.2 million
to $1.1 billion at September 30, 2026, compared to $1.0 billion at December 31, 2025.
The increase was
comprised of purchased loans and organic growth, net of paydowns. Loan growth during the nine months ended September 30, 2026 was primarily driven by originations in commercial lending, commercial real estate and construction lending activities within the Company's target markets. Growth was achieved within established underwriting standards and risk parameters and was supported by continued demand for mission-oriented lending products.
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.
| September 30, 2026 | |||||||||||||||||||
| More Than | More Than | ||||||||||||||||||
| One Year or | One Year to | Five Years to | More Than | ||||||||||||||||
| Less | Five Years | 15 Years | 15 Years | Total | |||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||
| Loans receivable held for investment: | |||||||||||||||||||
| Single-family | $ | 3,115 | $ | 7,049 | $ | 2,394 | $ | 6,244 | $ | 18,802 | |||||||||
| Multi-family | 14,753 | 29,472 | 6,880 | 508,791 | 559,896 | ||||||||||||||
| Commercial real estate | 14,610 | 106,185 | 22,376 | 35,385 | 178,556 | ||||||||||||||
| Church | 2,621 | 2,329 | 3,378 | - | 8,328 | ||||||||||||||
| Construction | 61,678 | 32,215 | - | - | 93,893 | ||||||||||||||
| Commercial - other | 17,211 | 53,875 | 19,441 | 155,879 | 246,406 | ||||||||||||||
| SBA loans | 50 | - | 4,115 | 10,966 | 15,131 | ||||||||||||||
| Consumer | 99 | 99 | |||||||||||||||||
| $ | 114,137 | $ | 231,125 | $ | 58,584 | $ | 717,265 | $ | 1,121,111 | ||||||||||
Certain wholesale 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 pay off during the first five years and do not reach the adjustable-rate phase. However, in the current 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. Wholesale multi-family loans in their initial fixed period totaled $311.6 million or 55.7% of our multi-family loan portfolio as of September 30, 2026.
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Allowance for Credit Losses
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.
During the quarter ended March 31, 2026, the Company transitioned from using the WARM method for measuring the ACL to a DCF method. Concurrently, the Company also changed the way that qualitative factors are applied in the estimation of the ACL. These changes are intended to improve the precision of the expected credit loss calculations.
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 non-accrual 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 ACL increased from $9.4 million at December 31, 2025 to $10.0 million at September 30, 2026. This increase was primarily due to loan portfolio growth, including increases in the commercial-other portfolio and the commercial real estate (“CRE”) portfolio, as well as challenges in the D.C. market, resulting in an increase in substandard loans. These factors were evaluated in the context of current conditions and reasonable and supportable forecasts for the Company’s loan classes (single- family, multi-family, CRE, church, construction, SBA, consumer, and commercial-other).
Loans delinquent by 30 days or more, but less than 60 days, decreased to $2.1 million at September 30, 2026, from $11.8 million at December 31, 2025, primarily due to one construction loan and one multi-family loan, which were current at September 30, 2026. Loans delinquent by 60 days or more, but less than 90 days, increased to $4.6 million at September 30, 2026, from $367 thousand at December 31, 2025, primarily due to one multi-family loan and one CRE loan. Loans delinquent by greater than 90 days were $9.3 million at September 30, 2026, compared to $3.0 million at December 31, 2025, primarily due to one construction loan.
The Company had eight non-accrual loans at September 30, 2026 with an unpaid principal balance of $13.7 million. Credit quality remains stable with non-accrual loans as a percentage of gross loans at 1.20% and non-performing assets to total assets of 0.88%.
We believe the ACL is adequate to cover expected losses in the loan portfolio as of September 30, 2026, but there can be no assurance that actual losses will not exceed the estimated amounts. The OCC and the FDIC periodically review the ACL as an integral part of their examination process. These agencies may require an increase in the ACL based on their judgments of the information available to them at the time of their examinations.
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:
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| September 30, 2026 | December 31, 2025 | September 30, 2025 | |||||||||||||||||||||
| Percent of | Percent of | Percent of | |||||||||||||||||||||
| Loans in | Loans in | Loans in | |||||||||||||||||||||
| Each | Each | Each | |||||||||||||||||||||
| Category to | Category to | Category to | |||||||||||||||||||||
| Total | Total | Total | |||||||||||||||||||||
| Amount | Loans | Amount | Loans | Amount | Loans | ||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||
| Single-family | $ | 121 | 1.68 | % | $ | 132 | 2.03 | % | $ | 129 | 2.07 | % | |||||||||||
| Multi‑family | 3,963 | 49.95 | % | 4,782 | 58.41 | % | 6,030 | 59.49 | % | ||||||||||||||
| Commercial real estate | 1,788 | 15.93 | % | 1,193 | 16.01 | % | 1,155 | 15.72 | % | ||||||||||||||
| Church | 60 | 0.74 | % | 36 | 0.89 | % | 37 | 0.90 | % | ||||||||||||||
| Construction | 2,730 | 8.37 | % | 2,039 | 7.19 | % | 2,064 | 8.43 | % | ||||||||||||||
| Commercial - other | 1,277 | 21.98 | % | 900 | 13.79 | % | 777 | 12.12 | % | ||||||||||||||
| SBA loans | 25 | 1.35 | % | 342 | 1.68 | % | 147 | 1.27 | % | ||||||||||||||
| Total allowance for credit losses | $ | 9,964 | 100.00 | % | $ | 9,424 | 100.00 | % | $ | 10,339 | 100.00 | % | |||||||||||
Deposits
The following table presents the maturity of time deposits, which includes Certificate of Deposit Registry Service (“CDARS”), as of the dates indicated:
| Three | |||||||||||||||||||
| Months or | Three to Six | Six Months | Over One | ||||||||||||||||
| Less | Months | to One Year | Year | Total | |||||||||||||||
| (In thousands) | |||||||||||||||||||
| September 30, 2026 | |||||||||||||||||||
| Time deposits of $250,000 or less | $ | 96,562 | $ | 91,602 | $ | 98,294 | $ | 2,663 | $ | 289,121 | |||||||||
| Time deposits of more than $250,000 | 17,014 | 13,027 | 8,002 | 1,531 | 39,574 | ||||||||||||||
| Total | $ | 113,576 | $ | 104,629 | $ | 106,296 | $ | 4,194 | $ | 328,695 | |||||||||
| Not covered by deposit insurance | $ | 12,764 | $ | 7,277 | $ | 5,502 | $ | 1,031 | $ | 26,574 | |||||||||
| December 31, 2025 | |||||||||||||||||||
| Time deposits of $250,000 or less | $ | 65,681 | $ | 42,989 | $ | 83,129 | $ | 2,849 | $ | 194,648 | |||||||||
| Time deposits of more than $250,000 | 79,939 | 4,491 | 18,413 | 2,243 | 105,086 | ||||||||||||||
| Total | $ | 145,620 | $ | 47,480 | $ | 101,542 | $ | 5,092 | $ | 299,734 | |||||||||
| Not covered by deposit insurance | $ | 74,439 | $ | 2,491 | $ | 14,913 | $ | 1,743 | $ | 93,586 | |||||||||
Borrowings
As of September 30, 2026 securities sold under agreements to
repurchase totaled $80.0 million at an average rate of 3.69%. The fair value of
securities pledged totaled $82.3 million as of September 30, 2026. As of
December 31, 2025, securities sold under agreements to repurchase totaled $80.8
million at an average rate of 3.66%. The fair value of securities pledged
totaled $83.7 million as of December 31, 2025.
At September 30, 2026, the Company had outstanding advances
from the FHLB totaling $99.0 million. At December 31, 2025, the
Company had outstanding advances from the FHLB totaling $72.0 million. The
weighted average interest rate was 4.13% and 3.79% as of September 30, 2026 and
December 31, 2025, respectively. The weighted average contractual maturity was
less than one month as of both September 30, 2026 and December 31, 2025. Loans
with unpaid balances of $431.8 million and $448.6 million at September 30, 2026
and December 31, 2025, respectively, were pledged to secure FHLB advances. 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 $88.7 million as of September 30,
2026.
In addition, the Company had additional lines of credit of $10.0 million with other financial institutions as of September 30, 2026 and December 31, 2025.
Stockholders’ Equity
Broadway Financial Corporation and subsidiary equity was $255.5 million, or 16.4%, of the Company’s total assets, at September 30, 2026, compared to $262.8 million, or 19.6% of the Company’s total assets, at December 31, 2025. Book value per share was $11.37 at September 30, 2026, compared to $12.28 at December 31, 2025. Capital ratios remain strong with a Community Bank Leverage Ratio of 12.83% at September 30, 2026 and 14.09% at December 31, 2025.
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.
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During the first nine months of 2026, the Company's
balance sheet increased significantly due to growth in both loans and deposits.
Loan growth was driven by a combination of organic production, including
commercial and construction lending activities, and the purchase of
government-guaranteed loans. Deposit growth was driven in part by utilizing marketplace deposits, which provided access to additional funding sources to
support loan growth and enhance liquidity.
During the nine months ended September 30, 2026, the Bank purchased $113.4 million of
government-guaranteed loans, obtained $238.4 million of marketplace deposits, and purchased $100.0 million in brokered CDs.
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 September 30, 2026, the Bank had the ability to borrow an additional $88.7 million
from the FHLB of Atlanta. In addition, the Bank had additional lines of credit
of $10.0 million with other financial institutions.
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 excess cash with the Federal
Reserve Bank or other financial institutions. The Bank’s liquid assets at September 30, 2026 consisted of $49.3 million in cash and cash equivalents and $211.2 million in securities available-for-sale
that were not pledged, compared to $10.5 million in cash and cash equivalents
and $161.1 million in securities available-for-sale that were not pledged at
December 31, 2025. Currently, we believe the Bank has sufficient liquidity to
support growth over the next twelve months and in the longer term.
The investment portfolio reflects
unrealized losses primarily as a result of changes in market interest rates.
Management has both the intent and ability to hold these securities until
recovery of their amortized cost basis and does not believe such unrealized
losses adversely impact the bank’s liquidity position.
Deposits increased by $192.4 million, or 21.0%, to $1.1 billion at September 30, 2026, from $917.6 million at December 31, 2025. The increase in deposits was attributable to increases of $157.9 million in savings deposits, $33.4 million in certificates of deposit accounts, and $8.5 million in liquid deposits (demand, interest checking, and money market accounts), partially offset by decreases of $4.4 million in CDARS and $3.0 million in Insured Cash Sweep deposits. As of September 30, 2026, our uninsured deposits represented 34% of our total deposits, consistent with December 31, 2025.
Management actively monitors depositor
concentrations, uninsured deposit balances, and liquidity stress metrics as
part of its liquidity management framework. Management believes its liquidity position remains supported by a
diversified funding base, available borrowing capacity, and established
depositor relationships.
Deposit
growth during the first nine months of 2026 included funding obtained through marketplace deposits. While
deposits obtained through deposit placement platforms generally carry higher
funding costs than certain traditional core deposit relationships, management
believes they provide an efficient source of funding to support balance sheet
growth, diversify funding sources and maintain liquidity. Management continues
to monitor deposit pricing, concentrations, retention characteristics and
overall funding costs associated with these deposits.
The Bank had commitments to fund $16.8 million in loans that were approved but unfunded as of September 30, 2026. In
addition, the Bank had $3.6 million in unfunded line of credit loans and $26.3 million in unfunded construction loans as of September 30, 2026.
The Bank has a significant
concentration of deposits with four customers that accounted for approximately 18% of
its deposits as of September 30, 2026. The Bank also has a significant concentration
of short-term borrowings from one customer that accounted for 90% of the
outstanding balance of securities sold under agreements to repurchase as of September 30, 2026. 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 preferred stock sold to the U.S. Treasury in 2022 and the previous private
placements completed in December 2016 and April 2021, and dividends received
from the Bank in 2024 and 2025. 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.
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The Company
recorded consolidated net cash outflows from investing activities of $181.3
million during the nine months ended September 30, 2026, compared to net cash outflows
from investing activities of $66.0 million during the nine months ended September 30,
2025. Net cash outflows from investing activities for the nine months ended September 30, 2026 were primarily due to funding of new loans, net of repayments, of
$118.9 million, purchases of available-for-sale securities of $100.9
million, and purchases of FHLB stock of $24.9 million, partially offset by $40.1 million of principal payments on and
maturities of available-for sale-securities and $23.5 million of proceeds from FHLB stock redemptions. Net cash outflows from investing
activities for the nine months ended September 30, 2025 were primarily due to purchases of available-for-sale securities of $117.9 million, funding of new loans, net of repayments, of $15.5 million, and purchases of bank owned life insurance of $20.0 million, partially offset by principal payments on and maturities of available-for-sale securities of $84.0 million.
The Company recorded consolidated net cash
inflows from financing activities of $216.1 million during the nine months ended September 30, 2026, compared to consolidated net cash inflows from financing
activities of $21.8 million during the nine months ended September 30, 2025. Net cash
inflows from financing activities during the nine months ended September 30, 2026
were primarily due to proceeds of FHLB borrowings of $939.5 million and a net
increase in deposits of $192.4 million, partially offset by repayments of FHLB
borrowings of $912.5 million. Net cash inflows from financing activities
during the nine months ended September 30, 2025 were primarily due to proceeds of
FHLB advances of $549.5 million and a net increase in deposits of $103.8 million, partially offset by repayments of FHLB
advances of $637.5 million.
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 September 30, 2026 and December 31, 2025, the Bank exceeded all capital adequacy requirements to which it is subject and meets the qualifications to be considered “well capitalized.” (See Note 11 – 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 reconcile the GAAP financial measures to the associated non-GAAP financial measures.
Tangible book value per common share is a non-GAAP measurement that excludes the net unamortized core deposit intangible asset, which was 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. Management
believes this measure is useful to investors as tangible equity is a measure
that is consistent with the calculation of capital for bank regulatory
purposes, which excludes intangible assets from the calculation of risk based
ratios, and provides a meaningful assessment of capital adequacy and facilitates
comparisons with other financial institutions. A reconciliation between common book value and tangible book value per common share is shown as follows:
| Common Equity | Shares | Per Share | |||||||||
| Capital | Outstanding | Amount | |||||||||
| (Dollars in thousands) | |||||||||||
| September 30, 2026 | |||||||||||
| Common book value | $ | 105,468 | 9,276,317 | $ | 11.37 | ||||||
| Less: | |||||||||||
| Net unamortized core deposit intangible | 1,232 | ||||||||||
| Tangible book value | 104,236 | 9,276,317 | 11.24 | ||||||||
| December 31, 2025 | |||||||||||
| Common book value | 112,751 | 9,180,498 | 12.28 | ||||||||
| Less: | |||||||||||
| Net unamortized core deposit intangible | 1,460 | ||||||||||
| Tangible book value | $ | 111,291 | 9,180,498 | $ | 12.12 |
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The Company calculates net income before preferred dividends and goodwill impairment by adding preferred stock dividends and goodwill impairment to net income (loss) attributable to common stockholders. Earnings per common share - diluted before preferred dividends and goodwill impairment is calculated by dividing net income (loss) before preferred dividends and goodwill impairment by the weighted average common shares outstanding for diluted earnings per common share. Management considers this information important to stockholders because it provides additional perspective on the earnings available from the
Company’s operating activities and facilitates comparisons across reporting
periods.
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||
| (Dollars in thousands) | (Dollars in thousands) | ||||||||||||||
| Net income (loss) attributable to common stockholders | $ | 392 | $ | (24,633 | ) | $ | 1,019 | $ | (28,070 | ) | |||||
| Net loss attributable to participating securities | 8 | - | 24 | - | |||||||||||
| Add: Preferred stock dividends | 750 | 750 | 2,250 | 2,250 | |||||||||||
| Net income before preferred dividends | 1,150 | (23,883 | ) | 3,293 | (25,820 | ) | |||||||||
| Add: Goodwill impairment | - | 25,858 | - | 25,858 | |||||||||||
| Net income before preferred dividends and goodwill impairment | $ | 1,150 | $ | 1,975 | $ | 3,293 | $ | 38 | |||||||
| Weighted average common shares outstanding for diluted earnings per common share | 8,871,913 | 8,617,707 | 8,854,549 | 8,581,883 | |||||||||||
| Earnings per common share - diluted before preferred dividends and goodwill impairment | $ | 0.13 | $ | 0.23 | $ | 0.37 | $ | 0.00 | |||||||
|
ITEM 3.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
Not Applicable
|
ITEM 4.
|
CONTROLS AND PROCEDURES |
Evaluation of Disclosure Controls and Procedures
An evaluation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) as of September 30, 2026 was carried out under the supervision and with the participation of the Company’s Chief Executive Officer, Chief Financial Officer and other members of the Company’s senior management. Based on the evaluation, management identified material weaknesses related to the Company’s internal control over financial reporting and, as a result, concluded that the Company’s disclosure controls and procedures were ineffective as of September 30, 2026. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements would not be prevented or detected on a timely basis.
Management identified the following material weaknesses in the Company’s internal control over financial reporting:
The Company did not maintain effective components of the Committee of Sponsoring Organizations of the Treadway Commission framework in the areas of control activities, information and communication process and monitoring activities that contributed to the following material weaknesses:
- The Company did not have controls in place to identify unusual or infrequent equity-related contracts entered into which could have a material impact on accounting and financial reporting.
- The Company did not maintain controls to consider subsequent appraisals for collateral dependent loans.
Remediation Plans
In response to the identified material weaknesses, the Company’s management, with the oversight of the Audit Committee of our Board of Directors, has dedicated significant resources, including additional employee training, toward efforts to improve our internal control over financial reporting. Management is actively engaged in the implementation of remediation efforts to address the material weaknesses.
- Thorough discussion and review of all new unusual or infrequent equity-related contracts each quarter with documentation of accounting treatment and disclosure with respect to such transactions that could have a potential impact on the Company’s financial statements, and
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- An enhancement of the controls over the allowance for credit losses at each quarter end to evaluate that all appraisals for collateral dependent loans that are received prior to the date that the financial statements are issued have been evaluated by management and considered in the estimate of the allowance for credit losses.
Management
continues implementation of remediation activities, including enhanced
technical accounting review procedures for unusual and infrequent transactions,
expanded management-level review controls, strengthened quarterly review
procedures, and enhanced processes surrounding the identification and
evaluation of collateral-dependent loans and updated appraisals. Management
will continue to evaluate the effectiveness of these remediation efforts and
implement additional enhancements as necessary.
Changes in Internal Control over Financial Reporting
There have been no changes in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the three months ended September 30, 2026 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
Inherent Limitations on Effectiveness of Controls
Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives as specified above. Management does not expect, however, that our disclosure controls and procedures will prevent or detect all error and fraud. Any control system, no matter how well designed and operated, is based upon certain assumptions, and can provide only reasonable, not absolute, assurance that its objectives will be met. Further, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected.
PART II. OTHER INFORMATION
|
Item 1.
|
LEGAL PROCEEDINGS
|
None
|
Item 1A.
|
RISK FACTORS
|
Management is not aware of any material changes to the risk factors that appeared under “Part I, Item 1A. Risk Factors” in the 2025 Form 10-K.
|
Item 2.
|
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
None
|
Item 3.
|
DEFAULTS UPON SENIOR SECURITIES
|
None
|
Item 4.
|
MINE SAFETY DISCLOSURES
|
Not Applicable
|
Item 5.
|
OTHER INFORMATION
|
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Table of Contents
|
Item 6.
|
EXHIBITS
|
|
Exhibit
Number*
|
|
|
3.1
|
Amended and Restated Certificate of Incorporation of Registrant effective as of April 1, 2021 (Exhibit 3.1 to Form 8-K filed by Registrant on April 5, 2021)
|
|
3.2
|
Certificate of Amendment to Certificate of Incorporation of Registrant (Exhibit 3.1 to Form 8-K filed by Registrant on November 1, 2023)
|
|
3.3
|
Bylaws of Registrant (Exhibit 3.2 to Form 8-K filed by Registrant on August 24, 2020)
|
|
3.4
|
Certificate of Designations of Senior Non-Cumulative Perpetual Preferred Stock, Series C (Exhibit 3.1 to Form 8-K filed by Registrant on June 8, 2022)
|
|
31.1
|
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
31.2
|
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
32.1
|
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
32.2
|
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
101.INS
|
XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
|
|
101.SCH
|
Inline XBRL Taxonomy Extension Schema Document
|
|
101.CAL
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document
|
|
101.DEF
|
Inline XBRL Taxonomy Extension Definitions Linkbase Document
|
|
101.LAB
|
Inline XBRL Taxonomy Extension Label Linkbase Document
|
|
101.PRE
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document
|
|
104
|
Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)
|
*
Exhibits followed by a parenthetical reference are incorporated by reference herein from the document filed by the Registrant with the SEC described therein. Except as otherwise indicated, the SEC File No. for each incorporated document is 001-39043.
**
Management contract or compensatory plan or arrangement.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
Date: November 13, 2026
|
By:
|
/s/ Brian Argrett
|
|
|
|
Brian Argrett
|
|
|
|
Chief Executive Officer
|
|
|
|
|
|
Date: November 13, 2026
|
By:
|
/s/ Zack Ibrahim
|
|
|
|
Zack Ibrahim
|
|
|
|
Chief Financial Officer
|
41