Goodwill write-down drives Broadway Financial (NASDAQ: BYFC) to $25.8M YTD loss
Filing Impact
Filing Sentiment
Form Type
10-Q
Broadway Financial Corporation reported a restated quarterly 10-Q showing a sharp swing to loss driven by a large non-cash goodwill write-down and higher credit costs. For the quarter ended September 30, 2025, the company posted a net loss attributable to the company of $23.9 million, versus net income of $0.5 million a year earlier, and a basic loss per common share of $2.86.
Results include a $25.9 million goodwill impairment, eliminating all recorded goodwill, and higher provision for credit losses, which lifted the allowance to $10.3 million. Management also restated prior periods after determining certain loan participations should be treated as secured borrowings rather than sales, modestly increasing both loan interest income and borrowing costs and revising cash flow presentation. Despite the loss, total assets were stable at about $1.34 billion, deposits rose to $849.2 million, and available-for-sale securities increased, while unrealized losses on securities narrowed, supporting positive other comprehensive income.
Positive
- None.
Negative
- Significant goodwill impairment: A non-cash goodwill impairment charge of approximately $25.9 million in Q3 2025 eliminated the company’s goodwill and was the primary driver of a $23.9 million quarterly net loss and $25.8 million nine-month net loss.
- Restatement and higher credit risk indicators: Prior-period financials were restated to reclassify certain loan participations as secured borrowings, while the allowance for credit losses rose to $10.3 million and non-accrual loans increased to $13.5 million, signaling greater recognized credit risk.
Insights
Large non-cash goodwill charge and restatement turn a modestly profitable franchise into a reported loss, with rising credit reserves and nonperforming loans.
Broadway Financial moved from small profits to a substantial accounting loss as it recognized a
The company also increased its allowance for credit losses from
Separately, management determined several loan participation agreements failed sale-accounting tests under ASC 860 and restated prior periods to treat them as secured borrowings. This adjustment increased both interest income and interest on borrowings by
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
|
For the quarterly period ended September 30, 2025
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
|
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 February 9, 2026, 6,082,532 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.
TABLE OF CONTENTS
|
Page
|
|||
|
PART I.
|
FINANCIAL STATEMENTS
|
||
|
Item 1.
|
Consolidated Financial Statements (Unaudited)
|
||
|
Consolidated Statements of Financial Condition as of September 30, 2025 and December 31, 2024
|
1
|
||
|
Consolidated Statements of Operations and Comprehensive (Loss) Income for the three and nine months ended September 30, 2025 and 2024
|
2
|
||
|
Consolidated Statements of Cash Flows for the nine months ended September 30, 2025 and 2024
|
3
|
||
|
Consolidated Statements of Changes in Equity for the three and nine months ended September 30, 2025 and 2024
|
4
|
||
|
Notes to Unaudited Consolidated Financial Statements
|
6
|
||
|
Item 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
27
|
|
|
Item 3.
|
Quantitative and Qualitative Disclosures About Market Risk
|
38 |
|
|
Item 4.
|
Controls and Procedures
|
38
|
|
|
PART II.
|
OTHER INFORMATION
|
||
|
Item 1.
|
Legal Proceedings
|
39 |
|
|
Item 1A.
|
Risk Factors
|
39 | |
|
Item 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds
|
39 | |
|
Item 3.
|
Defaults Upon Senior Securities
|
39 | |
|
Item 4.
|
Mine Safety Disclosures
|
39 |
|
|
Item 5.
|
Other Information
|
39 | |
|
Item 6.
|
Exhibits
|
39 | |
|
Signatures
|
40 |
||
EXPLANATORY NOTE
Broadway Financial Corporation (the “Company”) is restating certain information included in the Company’s Quarterly Report on Form 10-Q for the three and nine months
ended September 30, 2024, filed with the Securities and Exchange Commission (“SEC”) on November 13, 2024. As disclosed in the Company’s Current Report on Form 8-K filed with the SEC on October 17, 2025, the Company’s management, with oversight of
the Audit Committee of the Board of Directors of the Company, the holding company of City First Bank, National Association (“City First Bank”), concluded that the Company’s audited consolidated financial statements for the fiscal years ended
December 31, 2024 and 2023, and the unaudited interim consolidated financial statements for the quarters ended March 31, 2025, March 31, 2024, June 30, 2024, and September 30, 2024 (collectively, the “Restated Periods”), each as previously filed
with the SEC, should no longer be relied upon because of an error related to certain loan participation agreements and should therefore be restated. Specifically, the Company determined that several loan participation agreements originated by
City First Bank and sold to other financial institutions did not meet the requirements in Accounting Standards Codification Topic 860 - Transfers and Servicing to be treated as sales for accounting purposes, and
therefore should have been recorded as secured borrowing arrangements.
The related adjustments to the consolidated statements of operations and comprehensive (loss) income for treating such transferred interests as secured borrowing arrangements for
the nine months ended September 30, 2024, is to increase both interest and fees on loans receivable and interest on borrowings by $1.3 million. Net income for the nine months ended September 30, 2024 is also impacted by a $16 thousand increase in the allowance for credit losses and
a $111 thousand decrease in income tax expense. The related consolidated statements of cash flows adjustments for treating such transferred interests as secured borrowing arrangements for the nine months ended September 30, 2024, is to decrease
“Net change in loans receivable held for investment” by $549 thousand, to record “Proceeds from secured borrowings” of $2.4 million and to record “Repayments of secured borrowings” of $4.2 million for these adjustments.
For more information regarding the restatement and its impact on our consolidated financial statements, refer to the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section
included within Part I, Item 7 of the Amendment No. 2 on Form 10-K/A for the year ended December 31, 2024, filed with the SEC on December 23, 2025 (the “Form10-K/A”) and Note 2, Restatement of Previously Issued Consolidated Financial Statements and Note 21, Quarterly
Financial Information (Unaudited) of the Notes to Consolidated Financial Statements included within the Form 10-K/A .
Table of
Contents
BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated
Statements of
Financial Condition
(In thousands, except share and per share amounts)
|
September 30, 2025
|
December 31, 2024
|
|||||||
|
(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
|
||||||||
|
Goodwill
|
||||||||
|
Other assets
|
|
|
||||||
|
Total assets
|
$
|
|
$
|
|
||||
|
Liabilities and equity
|
||||||||
|
Liabilities:
|
||||||||
|
Deposits
|
$
|
|
$
|
|
||||
| FHLB borrowings | ||||||||
|
Securities sold under agreements to repurchase
|
||||||||
| Secured borrowings |
||||||||
|
Accrued expenses and other liabilities
|
|
|
||||||
|
Total liabilities
|
|
|
||||||
|
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) retained earnings
|
(
|
)
|
|
|||||
| Unearned Employee Stock Ownership Plan (“ESOP”) shares |
(
|
)
|
(
|
)
|
||||
|
Accumulated other comprehensive loss, net of tax
|
(
|
)
|
(
|
)
|
||||
|
Treasury stock-at cost,
|
(
|
)
|
(
|
)
|
||||
|
Total Broadway Financial Corporation and Subsidiary 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) Income
(In thousands, except per share amounts)
(Unaudited)
|
Three Months Ended
September 30,
|
Nine
Months Ended
September 30,
|
|||||||||||||||
|
2025
|
2024
|
2025
|
2024
(As Restated)
|
|||||||||||||
|
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 |
||||||||||||||||
|
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 (recovery) |
( |
) | ||||||||||||||
| Goodwill impairment |
||||||||||||||||
|
Other
|
|
|
|
|
||||||||||||
|
Total non-interest expense
|
|
|
|
|
||||||||||||
|
(Loss) income before income taxes
|
(
|
)
|
|
(
|
)
|
|
||||||||||
|
Income tax expense (benefit)
|
|
|
(
|
)
|
|
|||||||||||
|
Net (loss) income
|
$
|
(
|
)
|
$
|
|
$
|
(
|
)
|
$
|
|
||||||
|
Less: Net (loss) income attributable to non-controlling interest
|
(
|
)
|
|
(
|
)
|
|
||||||||||
|
Net (loss) income attributable to Broadway Financial Corporation
|
$
|
(
|
)
|
$
|
|
$
|
(
|
)
|
$
|
|
||||||
| Less: Preferred stock dividends |
||||||||||||||||
| Net loss attributable to common stockholders |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
|
Other comprehensive income, net of tax:
|
||||||||||||||||
|
Unrealized gains on securities available-for-sale arising during the period
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
Income tax expense
|
|
|
|
|
||||||||||||
|
Other comprehensive income, net of tax
|
|
|
|
|
||||||||||||
|
Comprehensive (loss) income
|
$
|
(
|
)
|
$
|
|
$
|
(
|
)
|
$
|
|
||||||
|
Loss per common share-basic
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
||||
|
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,
|
||||||||
|
2025
|
2024
(As Restated)
|
|||||||
|
(In thousands)
|
||||||||
|
Cash flows from operating activities:
|
||||||||
|
Net (loss) income
|
$
|
(
|
)
|
$
|
|
|||
|
Adjustments to reconcile net (loss) income to net cash used in operating activities:
|
||||||||
|
Provision for credit losses
|
|
|
||||||
|
Depreciation and amortization
|
|
|
||||||
|
Amortization 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 stock compensation expense
|
|
|
||||||
|
Accretion of premium on FHLB advances
|
|
(
|
)
|
|||||
|
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 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
|
|
|
||||||
|
Repayment of notes payable
|
|
(
|
)
|
|||||
|
Cash dividends paid - preferred
|
( |
) | ( |
) | ||||
|
Proceeds from secured borrowings
|
||||||||
| Repayments of secured borrowings |
( |
) | ( |
) | ||||
|
Proceeds from FHLB borrowings
|
|
|
||||||
|
Repayments of FHLB borrowings
|
(
|
)
|
(
|
)
|
||||
| Net cash provided by (used in) 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)
(As Restated)
|
Three Months Ended September 30, 2025 and 2024
|
||||||||||||||||||||||||||||||||||||||||
|
Preferred
Stock
Non-
Voting
|
Common
Stock Voting |
Common
Stock
Non-
Voting
|
Additional
Paid-in Capital |
Accumulated
Other
Comprehensive
Loss, Net
|
(Accumulated
deficit)
retained
earnings
|
Unearned
ESOP
Shares
|
Treasury
Stock |
Non-
Controlling
Interest
|
Total
Equity |
|||||||||||||||||||||||||||||||
|
(In thousands)
|
||||||||||||||||||||||||||||||||||||||||
|
Balance at June 30, 2025
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
$
|
|
|||||||||||||||||
|
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
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
$
|
|
||||||||||||||||
|
Balance at June 30, 2024
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
$
|
|
|||||||||||||||||
|
Net income
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||
|
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, 2024
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
$ |
$
|
|
||||||||||||||||||
See accompanying notes to unaudited consolidated financial statements.
4
Table of Contents
BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated Statements of Changes in Equity
(Unaudited)
(As Restated)
|
Nine Months Ended September 30, 2025 and 2024
|
||||||||||||||||||||||||||||||||||||||||
|
Preferred
Stock
Non-
Voting
|
Common
Stock Voting |
Common
Stock
Non-
Voting
|
Additional
Paid-in Capital |
Accumulated
Other
Comprehensive
Loss, Net
|
(Accumulated deficit)
retained
earnings
|
Unearned
ESOP
Shares
|
Treasury
Stock |
Non-
Controlling
Interest
|
Total
Equity |
|||||||||||||||||||||||||||||||
|
(In thousands)
|
||||||||||||||||||||||||||||||||||||||||
|
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
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
$
|
|
||||||||||||||||
|
Balance at December 31, 2023
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
$ |
$
|
|
||||||||||||||||||
|
Net income
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||
|
Release of unearned ESOP shares
|
( |
) | ||||||||||||||||||||||||||||||||||||||
|
Stock-based compensation expense
|
||||||||||||||||||||||||||||||||||||||||
|
Dividends declared and paid - preferred
|
( |
) | ( |
) | ||||||||||||||||||||||||||||||||||||
|
Purchase of unreleased ESOP shares
|
||||||||||||||||||||||||||||||||||||||||
|
Director stock compensation expense
|
||||||||||||||||||||||||||||||||||||||||
|
Other comprehensive income, net of tax
|
||||||||||||||||||||||||||||||||||||||||
|
Balance at September 30, 2024
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
$ |
$
|
|
||||||||||||||||||
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; City First Capital IX, LLC; and City First Capital 45, LLC (“CFC 45”)
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/A
for the year ended December 31, 2024, as amended (the “2024 Form 10-K/A”) 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 three and nine months ended September 30, 2025 are not necessarily indicative
of the results that may be expected for the year ending December 31, 2025.
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 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 income.
Our accounting policies are
described in Note 1 – Summary of Significant Accounting Policies of our audited consolidated financial statements included in the 2024 Form 10-K/A.
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 ASC 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.
6
Table of Contents
In December of 2025, the FASB issued ASU 2025-10 – Governments 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.
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.
NOTE 2 – Earnings (Loss) Per Share and Equity (as Restated)
Basic earnings (loss)
per share of common stock is computed pursuant to the two-class method by dividing net income (loss) available 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 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 loss per share of common stock for the periods indicated:
|
Three Months Ended
September 30,
|
Nine Months Ended
September 30,
|
|||||||||||||||
|
2025
|
2024
|
2025 | 2024 | |||||||||||||
|
(In thousands, except share and per share data)
|
||||||||||||||||
|
Net (loss) income attributable to Broadway Financial Corporation
|
$
|
(
|
)
|
$
|
|
$ | ( |
) | $ | |||||||
|
Net income attributable to participating securities
|
|
|
||||||||||||||
| Preferred stock dividends |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
|
Net loss available to common stockholders
|
$
|
(
|
)
|
$
|
(
|
)
|
$ | ( |
) | $ | ( |
) | ||||
|
Weighted average common shares outstanding for basic earnings per common share
|
|
|
||||||||||||||
|
Add: Effects of unvested restricted stock awards
|
|
|
||||||||||||||
|
Weighted average common shares outstanding for diluted earnings per common share
|
|
|
||||||||||||||
|
Earnings (loss) per common share - basic
|
$
|
(
|
)
|
$
|
(
|
)
|
$ | ( |
) | $ | ( |
) | ||||
|
Earnings (loss) per common share - diluted
|
$
|
(
|
)
|
$
|
(
|
)
|
$ | ( |
) | $ | ( |
) | ||||
| Anti-dilutive shares |
||||||||||||||||
Series C, Senior Non-Cumulative Perpetual Preferred Stock
On June 7, 2022, 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”).
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.
7
Table
of Contents
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 approximate to the fair value of the Series C Preferred Stock as of the date the Option Agreement is executed, calculated as set
forth in the Option Agreement, together with any accrued and unpaid dividends thereon and could represent a discount from the Preferred Stock’s liquidation amount.
The purchase option may not be exercised during the first 10 years 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 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. 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, 2028, which is the end of the sixteenth consecutive quarter following the Original Closing Date. However, the Company does not currently meet any of the Threshold Conditions to
exercise the purchase option, and there can be no assurance if and when the Threshold Conditions will be met.
In addition to the requirement that a Threshold Condition be met, the Repurchase 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 Preferred Stock, maintaining qualification as either a CDFI or an
MDI, and meeting 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 was required to begin 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 thousand and $2.3 million for the three and nine months ended September 30, 2025, respectively, with a dividend rate of 2.0 750 thousand and $817 thousand for the three and nine months ended September 30, 2024, respectively, with a dividend rate of 2.0
8
Table of
Contents
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:
|
Amortized
Cost |
Gross
Unrealized
Gains
|
Gross
Unrealized
Losses
|
Fair Value
|
|||||||||||||
|
(In thousands)
|
||||||||||||||||
|
September 30, 2025:
|
||||||||||||||||
|
Federal agency mortgage-backed securities
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||||
|
Federal agency collateralized mortgage obligations (“CMO”)
|
( |
) | ||||||||||||||
|
Federal agency debt
|
|
|
(
|
)
|
|
|||||||||||
|
Municipal bonds
|
|
|
(
|
)
|
|
|||||||||||
|
U. S. Treasuries
|
|
|
(
|
)
|
|
|||||||||||
|
U.S. Small Business Administration (“SBA”) pools
|
|
|
(
|
)
|
|
|||||||||||
| Asset-backed securities |
( |
) | ||||||||||||||
|
Total available-for-sale securities
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||||
|
December 31, 2024:
|
||||||||||||||||
|
Federal agency mortgage-backed securities
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||||
| Federal agency CMOs |
( |
) | ||||||||||||||
|
Federal agency debt
|
|
|
(
|
)
|
|
|||||||||||
|
Municipal bonds
|
|
|
(
|
)
|
|
|||||||||||
| U. S. Treasuries |
( |
) | ||||||||||||||
|
SBA pools
|
( |
) | ||||||||||||||
|
Total available-for-sale securities
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||||
As of September 30, 2025, investment securities with a fair value of $77.7 million were pledged as collateral
for securities sold under agreements to repurchase and included $43.5 million of federal agency mortgage-backed securities, $25.8 million of federal agency debt securities,
$7.0
million of U.S. Treasury securities and $1.4 million of SBA pool investments. As of December 31, 2024, investment
securities with a fair value of $83.3 million were pledged as collateral for securities sold under agreements to repurchase and
included $46.5 million of U.S. Treasuries, $27.1 million of federal agency debt, $5.5 million of federal agency mortgage-backed securities, and $4.2 million of SBA pools. Accrued interest receivable on securities was $643 thousand and $796 thousand at September 30, 2025 and December 31, 2024, respectively, and is included in accrued interest receivable on the consolidated statements of financial condition.
At September 30, 2025, and December 31,
2024, there were no
The amortized cost and estimated fair value of all investment
securities available-for-sale at September 30, 2025, 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.
|
Amortized
Cost
|
Gross
Unrealized
Gains
|
Gross
Unrealized
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
|
|
|
(
|
)
|
|
|||||||||||
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
||||||||
9
Table of
Contents
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
|
||||||||||||||||||||||
|
Fair Value
|
Unrealized
Losses
|
Fair Value
|
Unrealized
Losses
|
Fair Value
|
Unrealized
Losses
|
|||||||||||||||||||
|
(In thousands)
|
||||||||||||||||||||||||
|
September 30, 2025:
|
||||||||||||||||||||||||
|
Federal agency mortgage-backed securities
|
$
|
|
$
|
(
|
)
|
$
|
|
$
|
(
|
)
|
$
|
|
$
|
(
|
)
|
|||||||||
|
Federal agency CMOs
|
|
(
|
)
|
|
(
|
)
|
|
(
|
)
|
|||||||||||||||
|
Federal agency debt
|
|
(
|
)
|
|
(
|
)
|
|
(
|
)
|
|||||||||||||||
|
Municipal bonds
|
|
(
|
)
|
|
(
|
)
|
|
(
|
)
|
|||||||||||||||
|
U. S. Treasuries
|
|
|
|
(
|
)
|
|
(
|
)
|
||||||||||||||||
|
SBA pools
|
|
(
|
)
|
|
(
|
)
|
|
(
|
)
|
|||||||||||||||
| Asset-backed securities |
( |
) | ( |
) | ||||||||||||||||||||
|
Total unrealized loss position investment securities
|
$
|
|
$
|
(
|
)
|
$
|
|
$
|
(
|
)
|
$
|
|
$
|
(
|
)
|
|||||||||
|
December 31, 2024:
|
||||||||||||||||||||||||
|
Federal agency mortgage-backed securities
|
$
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
$
|
(
|
)
|
||||||||||
| Federal agency CMOs | ( |
) | ( |
) | ||||||||||||||||||||
|
Federal agency debt
|
|
|
|
(
|
)
|
|
(
|
)
|
||||||||||||||||
|
Municipal bonds
|
|
|
|
(
|
)
|
|
(
|
)
|
||||||||||||||||
|
U. S. Treasuries
|
|
|
|
(
|
)
|
|
(
|
)
|
||||||||||||||||
| SBA pools | ( |
) | ( |
) | ( |
) | ||||||||||||||||||
|
Total unrealized loss position investment securities
|
$
|
|
$
|
(
|
)
|
$
|
|
$
|
(
|
)
|
$
|
|
$
|
(
|
)
|
|||||||||
At
September 30, 2025, and December
31, 2024, all securities in the portfolio were current with their contractual principal and interest payments. At September 30, 2025, and December 31, 2024, there were no no
The Company’s assessment of
available-for-sale investment securities as of September 30, 2025 and December 31, 2024, indicated that an allowance for credit losses (“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 94 % and 98 %, respectively, of the securities held by the Company were issued by U.S. government-sponsored entities and agencies. Because the decline in fair
value is attributable to changes in interest rates and liquidity, and not credit quality, and because the Company does not have the intent to sell these securities, and it is likely that it will not be required to sell the securities before their
anticipated recovery, the Company did no
NOTE 4 –
Loans Receivable Held for Investment (as Restated)
Loans receivable held for investment were as follows as of the periods indicated:
|
September 30, 2025
|
December 31, 2024
|
|||||||
|
(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
|
$
|
|
$
|
|
||||
10
Table of Contents
Accrued interest receivable on loans receivable held for investment was $4.9 million and $4.0 million at September 30, 2025
and December 31, 2024, respectively, and is included in accrued interest receivable on the consolidated statements of financial condition.
The Company accounts for credit losses on loans in accordance with ASC 326 – Financial Instruments-Credit Losses. ASC 326 requires the Company to recognize
estimates for lifetime losses on loans and off-balance sheet loan commitments at the time of origination or acquisition. The recognition of losses at origination or acquisition represents the Company’s best estimate of the
lifetime expected credit loss associated with a loan given the facts and circumstances associated with the particular loan, and involves the use of significant management judgment and estimates, which are subject to change
based on management’s on-going assessment of the credit quality of the loan portfolio and changes in economic forecasts used in the model. The Company uses the WARM method when determining estimates for the ACL for each of
its portfolio segments. The weighted average remaining life, including the effect of estimated prepayments, is calculated for each loan pool on a quarterly basis. The Company then estimates a loss rate for each pool using
both its own historical loss experience and the historical losses of a group of peer institutions during the period from 2004 through the most recent quarter.
The Company’s ACL model also includes adjustments for qualitative
factors, where appropriate. 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 following
tables summarize the activity in the allowance for credit losses on loans for the nine months ended:
|
|
September 30, 2025
|
|||||||||||||||||||
|
|
Beginning
Balance
|
Charge-offs
|
Recoveries
|
Provision
(Recapture)
|
Ending
Balance
|
|||||||||||||||
|
|
(In thousands)
|
|||||||||||||||||||
|
Single-family
|
$
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||||||
|
Multi-family
|
|
|
|
|
|
|||||||||||||||
|
Commercial real estate
|
|
|
|
(
|
)
|
|
||||||||||||||
|
Church
|
|
|
|
(
|
)
|
|
||||||||||||||
|
Construction
|
|
|
|
|
|
|||||||||||||||
|
Commercial - other
|
|
|
|
|
|
|||||||||||||||
|
SBA loans
|
|
|
|
|
|
|||||||||||||||
|
Total
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||
|
September 30, 2024
|
||||||||||||||||||||
|
Beginning
Balance
|
Charge-offs
|
Recoveries
|
Provision
(Recapture)
|
Ending
Balance
|
||||||||||||||||
|
(In thousands)
|
||||||||||||||||||||
|
Single family
|
$
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||||||
|
Multi-family
|
|
|
|
|
|
|||||||||||||||
|
Commercial real estate
|
|
|
|
|
|
|||||||||||||||
|
Church
|
|
|
|
(
|
)
|
|
||||||||||||||
|
Construction
|
|
|
|
|
|
|||||||||||||||
|
Commercial - other
|
|
|
|
|
|
|||||||||||||||
|
SBA loans
|
|
|
|
|
|
|||||||||||||||
|
Total
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||
11
Table of Contents
The following tables
summarize the activity in the allowance for credit losses on loans for the three months ended:
|
|
September 30, 2025
|
|||||||||||||||||||
|
|
Beginning
Balance
|
Charge-offs
|
Recoveries
|
Provision
(Recapture)
|
Ending
Balance
|
|||||||||||||||
|
|
(In thousands)
|
|||||||||||||||||||
|
Single-family
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||
|
Multi-family
|
|
|
|
(
|
)
|
|
||||||||||||||
|
Commercial real estate
|
|
|
|
(
|
)
|
|
||||||||||||||
|
Church
|
|
|
|
(
|
)
|
|
||||||||||||||
|
Construction
|
|
|
|
|
|
|||||||||||||||
|
Commercial - other
|
|
|
|
(
|
)
|
|
||||||||||||||
|
SBA loans
|
|
|
|
|
|
|||||||||||||||
|
Total
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||
| September 30, 2024 |
||||||||||||||||||||
|
|
Beginning
Balance
|
Charge-offs
|
Recoveries
|
Provision
(Recapture)
|
Ending
Balance
|
|||||||||||||||
|
|
(In thousands)
|
|||||||||||||||||||
|
Single-family
|
$
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||||||
|
Multi-family
|
|
|
|
|
|
|||||||||||||||
|
Commercial real estate
|
|
|
|
|
|
|||||||||||||||
|
Church
|
|
|
|
(
|
)
|
|
||||||||||||||
|
Construction
|
|
|
|
|
|
|||||||||||||||
|
Commercial - other
|
|
|
|
|
|
|||||||||||||||
|
SBA loans
|
|
|
|
(
|
)
|
|
||||||||||||||
|
Total
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||
The Company recorded a provision for off-balance sheet loan commitments of $220
thousand and a recapture of provision of $24 thousand for the three months ended September 30, 2025 and 2024,
respectively. The Company recorded a provision for off-balance sheet loan commitments of $164 thousand and a
recapture of provision of $26 thousand for the nine months ended September 30, 2025 and 2024, respectively.
The ACL increased from December 31, 2024 to September 30, 2025, primarily due to an increase in specific reserves on individually evaluated loans.
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 remaining life approach, using the loan’s effective interest rate, for determining the ACL on individually evaluated loans, unless the loan is deemed collateral dependent, which requires evaluation
based on the estimated fair value of the underlying 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.
12
Table of Contents
The following
table presents individually evaluated collateral dependent loans by collateral type as of the date indicated:
|
September 30, 2025
|
||||||||||||||||||||
|
|
Single-Family
|
Multi-Family
Residential
|
Church
|
Business
Assets
|
Total
|
|||||||||||||||
|
Real estate:
|
(In thousands)
|
|||||||||||||||||||
|
Multi-family
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||
|
Construction
|
||||||||||||||||||||
|
SBA Loans
|
||||||||||||||||||||
|
Total
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||
|
December 31, 2024
|
||||||||||||||||||||
|
|
Single-Family
|
Multi-Family
Residential
|
Church
|
Business
Assets
|
Total
|
|||||||||||||||
|
Real estate:
|
(In thousands)
|
|||||||||||||||||||
|
Single-family
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||
|
Total
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||
At September 30, 2025, $12.6 million of individually evaluated loans were evaluated based on the estimated fair value of the underlying collateral. These loans had an associated
ACL of $2.4 million as of September 30, 2025. The Company had five individually evaluated loans totaling $12.9
million on non-accrual status at September 30, 2025.
At December 31, 2024, one $264 thousand individually evaluated loan was evaluated based on the estimated fair value of the underlying
collateral. This loan had no associated ACL and was on non-accrual status as of December 31, 2024.
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,
2025
|
||||||||||||||||||||||||
|
30-59 Days
Past Due
|
60-89 Days
Past Due
|
Greater than 90
Days Past Due
|
Total
Past Due
|
Current
|
Total
|
|||||||||||||||||||
|
(In thousands)
|
||||||||||||||||||||||||
|
Loans receivable held for investment:
|
||||||||||||||||||||||||
|
Single-family
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||
|
Multi-family
|
|
|
|
|
|
|
||||||||||||||||||
|
Commercial real estate
|
|
|
|
|
|
|
||||||||||||||||||
|
Church
|
|
|
|
|
|
|
||||||||||||||||||
|
Construction
|
|
|
|
|
|
|
||||||||||||||||||
|
Commercial - other
|
|
|
|
|
|
|
||||||||||||||||||
| SBA loans | ||||||||||||||||||||||||
|
Consumer
|
|
|
|
|
|
|
||||||||||||||||||
|
Total
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||
|
December 31, 2024
|
||||||||||||||||||||||||
|
30-59 Days
Past Due
|
60-89 Days
Past Due
|
Greater than 90
Days Past Due
|
Total
Past Due
|
Current
|
Total
|
|||||||||||||||||||
|
(In thousands)
|
||||||||||||||||||||||||
|
Loans receivable held for investment:
|
||||||||||||||||||||||||
|
Single-family
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||
|
Multi-family
|
|
|
|
|
|
|
||||||||||||||||||
|
Commercial real estate
|
|
|
|
|
|
|
||||||||||||||||||
|
Church
|
|
|
|
|
|
|
||||||||||||||||||
|
Construction
|
|
|
|
|
|
|
||||||||||||||||||
|
Commercial - other
|
|
|
|
|
|
|
||||||||||||||||||
| SBA loans | ||||||||||||||||||||||||
|
Consumer
|
|
|
|
|
|
|
||||||||||||||||||
|
Total
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||
13
Table of Contents
The following
tables present the recorded investment in non-accrual loans by loan type as of the dates indicated:
| September 30, 2025 | ||||||||||||
|
Non-accrual with
no Allowance for
Credit Losses
|
Non-accrual with
an Allowance for
Credit Losses
|
Total Non-accrual
Loans
|
||||||||||
|
(In thousands)
|
||||||||||||
|
Loans receivable held for investment:
|
||||||||||||
|
Commercial - other
|
$
|
|
$
|
|
$
|
|
||||||
|
SBA loans
|
|
|
|
|||||||||
| Single family |
||||||||||||
| Multi-family |
||||||||||||
| Construction | ||||||||||||
|
Total non-accrual loans
|
$
|
|
$
|
|
$
|
|
||||||
| December 31, 2024 | ||||||||||||
|
Non-accrual with
no Allowance for
Credit Losses
|
Non-accrual with
an Allowance for
Credit Losses
|
Total Non-accrual
Loans
|
||||||||||
|
(In thousands)
|
||||||||||||
| Loans receivable held for investment: | ||||||||||||
|
SBA loans
|
$
|
|
$
|
|
$
|
|
||||||
|
Total non-accrual loans
|
$
|
|
$
|
|
$
|
|
||||||
There were no
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
table presents the amortized costs basis and the financial effect of loans modified to borrowers experiencing financial difficulty during the nine months ended September 30, 2025. There were no
| Nine Months Ended September 30, 2025 | |||||||||
|
Term Extension
|
Percentage of Total
Loan Type
|
Weighted Average Term Extension
|
|||||||
|
Real estate:
|
(In Thousands)
|
||||||||
|
Commercial real estate
|
$
|
|
|
%
|
|
||||
|
Construction
|
|
|
%
|
|
|||||
|
Commercial - other
|
% | ||||||||
|
Total
|
$
|
|
|||||||
All of the modified loans are above current. None of the modified loans have defaulted and the Company has not committed to lend additional amounts to borrowers whose loans were
modified.
14
Table of Contents
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 homogenous 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:
|
|
●
|
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 that are not individually evaluated 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.
15
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, 2025
|
||||||||||||||||||||||||||||||||
|
|
2025
|
2024
|
2023
|
2022
|
2021
|
Prior
|
Revolving
Loans
|
Total
|
||||||||||||||||||||||||
|
(In thousands)
|
||||||||||||||||||||||||||||||||
|
Single-family:
|
||||||||||||||||||||||||||||||||
|
Pass
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||||||
|
Watch
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
| Substandard |
||||||||||||||||||||||||||||||||
|
Total
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Multi-family:
|
||||||||||||||||||||||||||||||||
|
Pass
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||||||
|
Watch
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
|
Special Mention
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
|
Substandard
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
| Doubtful |
||||||||||||||||||||||||||||||||
|
Total
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
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
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Consumer:
|
||||||||||||||||||||||||||||||||
|
Pass
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||||||
|
Total
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Total loans:
|
||||||||||||||||||||||||||||||||
|
Pass
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||||||
|
Watch
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
|
Special Mention
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
|
Substandard
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
| Doubtful |
||||||||||||||||||||||||||||||||
|
Total loans
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||||||
16
Table of Contents
|
Term Loans Amortized Cost Basis by Origination Year - As of December 31, 2024
|
||||||||||||||||||||||||||||||||
|
|
2024
|
2023
|
2022
|
2021
|
2020
|
Prior
|
Revolving
Loans
|
Total
|
||||||||||||||||||||||||
|
(In thousands)
|
||||||||||||||||||||||||||||||||
|
Single-family:
|
||||||||||||||||||||||||||||||||
|
Pass
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||||||
|
Watch
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
|
Total
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Multi-family:
|
||||||||||||||||||||||||||||||||
|
Pass
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||||||
|
Watch
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
|
Special Mention
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
|
Substandard
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
|
Total
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Commercial real estate:
|
||||||||||||||||||||||||||||||||
|
Pass
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||||||
|
Watch
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
|
Substandard
|
|
|
|
$
|
|
$
|
|
|
$
|
|
$
|
|
||||||||||||||||||||
|
Total
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Church:
|
||||||||||||||||||||||||||||||||
|
Pass
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||||||
|
Watch
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
|
Substandard
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
|
Total
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Construction:
|
||||||||||||||||||||||||||||||||
|
Watch
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
|
Substandard
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
|
Total
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Commercial – other:
|
||||||||||||||||||||||||||||||||
|
Pass
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||||||
|
Watch
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
|
Special Mention
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
| Substandard |
||||||||||||||||||||||||||||||||
|
Total
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
SBA:
|
||||||||||||||||||||||||||||||||
|
Pass
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||||||
|
Substandard
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
|
Total
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Consumer:
|
||||||||||||||||||||||||||||||||
|
Pass
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||||||
|
Total
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Total loans:
|
||||||||||||||||||||||||||||||||
|
Pass
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||||||
|
Watch
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
|
Special Mention
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
|
Substandard
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
|
Total loans
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||||||
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 $441 thousand and $277 thousand at September 30, 2025
and December 31, 2024, respectively.
17
Table of Contents
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, 2025 and 2024:
| September 30, 2025 | ||||||||
| Goodwill |
Core Deposit
Intangible
|
|||||||
| (In thousands) |
||||||||
|
Balance at the beginning of the period
|
$
|
|
$
|
|
||||
|
Impairment
|
( |
) |
|
|||||
|
Amortization
|
(
|
)
|
||||||
|
Balance at the end of the period
|
$ |
$
|
|
|||||
| September 30, 2024 | ||||||||
| Goodwill |
Core Deposit
Intangible
|
|||||||
| (In thousands) |
||||||||
|
Balance at the beginning of the period
|
$
|
|
$
|
|
||||
|
Amortization
|
(
|
)
|
||||||
|
Balance at the end of the period
|
$ |
$
|
|
|||||
18
Table of
Contents
The carrying amount of the core deposit intangible consisted of the following (in thousands):
|
September 30, 2025
|
December 31, 2024
|
|||||||
|
Core deposit intangible acquired
|
$
|
|
$ | |||||
| Less: Accumulated amortization | ( |
) | ( |
) | ||||
|
|
$
|
|
$ | |||||
The following table outlines the
estimated amortization expense for the core deposit intangible during the next five fiscal years (in thousands):
|
Remainder of 2025
|
$
|
|
||
|
2026
|
|
|||
|
2027
|
|
|||
|
2028
|
|
|||
|
2029
|
|
|||
|
Thereafter
|
|
|||
|
$
|
|
The
Company’s goodwill balance is tested annually for impairment. Management engaged a third-party to complete the impairment testing as of September 30, 2025. The quantitative test indicated that the carrying amount of the goodwill exceeded its
fair value by approximately $25.9 million. 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.
19
Table of
Contents
NOTE 6 – Borrowings
(as Restated)
The Company enters into agreements under which it sells securities subject to an obligation to repurchase the same or similar securities. Under these arrangements, the Company may
transfer legal control over the assets but still retain effective control through an agreement that both entitles and obligates the Company to repurchase the assets. As a result, these repurchase agreements
are accounted for as collateralized financing agreements (i.e., secured borrowings) and not as a sale and subsequent repurchase of securities. The obligation to repurchase the securities is reflected as a liability in the
Company’s consolidated statements of financial condition, while the securities underlying the repurchase agreements remain in the respective investment securities asset accounts. In other words, there is no
offsetting or netting of the investment securities assets with the repurchase agreement liabilities. These agreements mature on a daily basis. As of September 30, 2025
securities sold under agreements to repurchase totaled $76.1 million at an average rate of 3.70 %. The fair value of securities pledged totaled $77.7 million as of September 30, 2025.
As of December 31, 2024, securities sold under agreements to repurchase totaled $66.6 million at an average
rate of 3.62 %. The fair value of securities pledged totaled $83.3 million as of December 31, 2024.
At September 30, 2025 and December 31, 2024, the Company had outstanding advances from the FHLB totaling $107.5 million and $195.5
million, respectively. The weighted average interest rate was 4.53 % and 4.03 % as of September 30, 2025 and December 31, 2024, respectively. The weighted average contractual maturity was less than one month 497.6
million at September 30, 2025 and $521.7 million at December 31, 2024. The Company is currently approved by the FHLB of Atlanta to
borrow up to 25 % of total assets to the extent the Company provides qualifying collateral and holds
sufficient FHLB stock. Based on collateral pledged and FHLB stock held, the Company was eligible to borrow an additional $213.0
million as of September 30, 2025.
The Company will, from time to time, sell a portion of a loan or group of loans to third parties. In some cases, the transferred portion of the loans does not meet the requirements to be treated
as sales for accounting purposes. When that occurs, the legally transferred portion of the loan balance remains classified in gross loans receivable held for investment and a secured borrowing is recorded for the
proceeds received from the third party institution. As the transferred portion of the loan pays down, the secured borrowings are repaid. The Company has no obligation to make principal or interest payments on the secured
borrowings unless and until payments are received from the loan borrowers. The Company has secured borrowings associated with these participation loan transactions of $30.2 million and $31.4 million as of
September 30,
2025 and December 31, 2024, respectively. The weighted average interest rate on the secured borrowings was 5.63 %
and 5.54 % at September 30, 2025 and December 31, 2024, respectively.
On December 27, 2023, the Company borrowed $100.0 million from the Federal Reserve
under the BTFP. This borrowing was paid off in December 2024. The interest rate on this borrowing was fixed at 4.84 %
and the borrowing matured on December 29, 2024 .
In addition, the Company had additional lines of credit of $10.0 30 days. There were no
In connection with the New Market Tax Credit activities of the Bank, CFC 45
is a partnership whose members include CFNMA and City First New Markets Fund II, LLC. This community development entity acts in effect as a pass-through for a Merrill Lynch allocation totaling $14.0 million that needed to be deployed. In December 2015, Merrill Lynch made a $14.0 million non-recourse loan to CFC 45, whereby CFC 45 passed that loan through to a Qualified Active Low-Income
Business (“QALICB”). The loan to the QALICB was secured by a Leasehold Deed of Trust that, due to the pass-through, non-recourse structure, was operationally and ultimately for the benefit of Merrill Lynch rather
than CFC 45. Debt service payments received by CFC 45 from the QALICB were passed through to Merrill Lynch in return for which CFC 45 received a servicing fee. The financial statements of CFC 45 are consolidated with
those of the Bank and the Company.
There were two notes for CFC 45. Note A was in the amount of $9.9 5.2 % per annum. Note B was in the amount of $4.1 0.24 % per annum. Quarterly interest only payments commenced in March 2016 and continued through March 2023 for Notes A and B. These notes were paid off during
January 2024.
NOTE 7 – 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).
20
Table of Contents
Assets Measured on a Recurring Basis
Assets measured at fair value on a recurring basis are summarized below:
|
Fair Value Measurement
|
||||||||||||||||
|
Quoted Prices
in Active
Markets for
Identical
Assets (Level 1)
|
Significant
Other
Observable
Inputs (Level 2)
|
Significant
Unobservable
Inputs (Level 3)
|
Total
|
|||||||||||||
|
(In thousands)
|
||||||||||||||||
|
At September 30, 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
|
||||||||||||||||
|
At December 31, 2024:
|
||||||||||||||||
|
Securities available-for-sale:
|
||||||||||||||||
|
Federal agency mortgage-backed securities
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
Federal agency CMOs
|
|
|
|
|
||||||||||||
|
Federal agency debt
|
|
|
|
|
||||||||||||
|
Municipal bonds
|
|
|
|
|
||||||||||||
|
U.S. Treasuries
|
|
|
|
|
||||||||||||
|
SBA pools
|
|
|
|
|
||||||||||||
There were no transfers between Level 1, Level 2, or Level 3 during the three or nine months ended September 30, 2025 and 2024.
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 loan 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. As of
December 31, 2024, the Company did no
|
Fair Value Measurement
|
||||||||||||||||
|
Quoted Prices in Active Markets for Identical Assets (Level 1)
|
Significant Other Observable Inputs (Level 2)
|
Significant Unobservable Inputs (Level 3)
|
Total
|
|||||||||||||
|
(In thousands)
|
||||||||||||||||
|
At September 30, 2025:
|
||||||||||||||||
|
Individually evaluated loans:
Real estate:
|
||||||||||||||||
|
Multi-family
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
Construction
|
||||||||||||||||
|
SBA loans
|
|
|
|
|
||||||||||||
21
Table of Contents
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, 2025.
|
Fair Value
|
Valuation
Technique(s)
|
Unobservable Input(s)
|
Range
|
||||||||
|
(In thousands)
|
|||||||||||
|
At September 30, 2025:
|
$ | ||||||||||
|
Individually evaluated loans:
Real estate:
|
|||||||||||
|
Multi-family
|
$
|
|
Market approach
|
Adjustments to market data
|
|
%
|
|||||
|
Construction
|
Market approach | Adjustments to market data | % | ||||||||
|
SBA loans
|
|
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, 2025 and December 31, 2024.
|
Fair Value Measurements at September 30, 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 |
||||||||||||||||||||
|
Financial Liabilities:
|
||||||||||||||||||||
|
Non interest bearing deposits
|
$ |
$ | $ |
$ | $ | |||||||||||||||
|
Interest bearing deposits
|
||||||||||||||||||||
|
Time deposits
|
||||||||||||||||||||
|
FHLB borrowings
|
||||||||||||||||||||
| Secured borrowings |
||||||||||||||||||||
| Securities sold under agreements to repurchase |
|
|
|
|
|
|||||||||||||||
| Accrued interest payable |
||||||||||||||||||||
|
Fair Value Measurements at December 31, 2024
|
||||||||||||||||||||
|
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
|
|
|
|
|
|
|||||||||||||||
| Bank owned life insurance |
||||||||||||||||||||
|
Financial Liabilities:
|
||||||||||||||||||||
|
Deposits
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||
|
Borrowings
|
||||||||||||||||||||
| Securities sold under agreements to repurchase | ||||||||||||||||||||
| Accrued interest payable |
||||||||||||||||||||
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 8 – 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.
22
Table of Contents
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, 2025 and 2024, the Company recorded a $22 thousand reduction of stock-based compensation and $84 thousand of
stock-based compensation expense, respectively. During the nine months ended September 30, 2025 and 2024, the Company recorded $188 thousand and $199 thousand of stock-based compensation expense,
respectively. During the three months ended September 30, 2025 and 2024, the Company did no t record any
director stock compensation expense. During the nine months ended September 30, 2025 and 2024, the Company recorded $168
thousand and $96 thousand, respectively, of director stock compensation expense, which was determined
using the fair value of the stock on the dates of the awards.
As of September 30, 2025, 367,443
shares had been awarded under the Amended and Restated LTIP and 281,696 shares were available to be
awarded. The following tables present stock award activity during the three and nine months ended September 30, 2025 and 2024:
|
Three months ended
|
||||||||
|
September 30, 2025
|
September 30, 2024
|
|||||||
|
(In thousands)
|
||||||||
|
Outstanding at the beginning of the period
|
|
|
||||||
|
Granted during period
|
|
|
||||||
|
Forfeited during period
|
(
|
)
|
(
|
)
|
||||
|
Vested during period
|
(
|
)
|
|
|||||
|
Outstanding at the end of the period
|
|
|
||||||
|
Nine months ended
|
||||||||
|
September 30, 2025
|
September 30, 2024
|
|||||||
|
(In thousands)
|
||||||||
|
Outstanding at the beginning of the period
|
|
|
||||||
|
Granted during period
|
|
|
||||||
|
Forfeited during period
|
(
|
)
|
(
|
)
|
||||
|
Vested during period
|
(
|
)
|
(
|
)
|
||||
|
Outstanding at the end of the period
|
|
|
||||||
Options outstanding
and exercisable at September 30, 2025 were as follows:
|
Outstanding
|
Exercisable
|
||||||||||||||||||||||
|
Number
Outstanding
|
Weighted Average
Remaining
Contractual Life
|
Weighted
Average
Exercise Price
|
Aggregate
Intrinsic
Value
|
Number
Outstanding
|
Weighted
Average
Exercise Price
|
Aggregate
Intrinsic Value
|
|||||||||||||||||
|
|
|
$
|
|
$
|
|
|
$
|
|
$
|
|
|||||||||||||
The Company did no
NOTE 9 – ESOP Plan
Employees
participate in the 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 and during 2023, the ESOP purchased 369,958 shares of
the Company’s common stock at an average cost of $9.19 per share for a total cost of $3.4 million. These purchases were funded with a $5.0 million line
of credit from the Company. The loan will be repaid from the Bank’s annual 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. Any dividends on allocated shares increase participant accounts. Any dividends on unallocated shares will be used to repay the loan. Participants receive shares for their vested balance at the end of their employment. Compensation
expense related to the ESOP was $50 thousand and $46 thousand for the three months ended September 30, 2025 and 2024, respectively, and $149 thousand and $137 thousand for the nine months ended September 30, 2025 and 2024, respectively.
Shares held by the ESOP
were as follows:
|
September 30, 2025
|
December 31, 2024
|
|||||||
|
(Dollars in thousands)
|
||||||||
|
Allocated to participants
|
|
|
||||||
|
Committed to be released
|
|
|
||||||
|
Suspense shares
|
|
|
||||||
|
Total ESOP shares
|
|
|
||||||
|
Fair value of unearned shares
|
$
|
|
$
|
|
||||
The
book value of unearned shares, which are reported as Unearned ESOP shares in the equity section of the consolidated statements of financial condition, were $4.0
million and $4.2 million at September 30, 2025 and December 31, 2024, respectively.
23
Table of
Contents
NOTE 10 –
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.
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 have set the Community Bank Leverage
Ratio at 9%. Actual and required capital amounts and ratios as of the dates indicated are presented below:
|
Actual
|
Minimum Required to Be
Well Capitalized Under
Prompt Corrective Action
Provisions
|
|||||||||||||||
|
Amount
|
Ratio
|
Amount
|
Ratio
|
|||||||||||||
|
(Dollars in thousands)
|
||||||||||||||||
|
September 30,
2025:
|
||||||||||||||||
|
Community Bank Leverage Ratio
|
$
|
|
|
% |
$
|
|
|
% | ||||||||
|
December 31,
2024:
|
||||||||||||||||
|
Community Bank Leverage Ratio
|
$
|
|
|
%
|
$
|
|
|
% | ||||||||
At September 30, 2025, 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, 2025 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.
24
Table of Contents
NOTE 11 –
Income Taxes (as Restated)
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, 2025, 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 an income tax expense of $736 thousand for the third quarter of 2025, compared to an income tax expense of $206 thousand for the third quarter of 2024. The increase in income tax expense reflected an increase in pre-tax income of $2.0 million between the two periods, excluding goodwill impairment of $25.9 million, which is not deductible for tax purposes.
The Company recorded an income tax benefit of $54 thousand for the first nine months of 2025, compared to an income tax expense of $291 thousand for the first nine months of 2024. The decrease in income tax expense reflected a decrease of $950 thousand in pre-tax income between the two periods, excluding goodwill impairment of $25.9 million, which is not deductible for tax purposes.
25
Table of Contents
NOTE 12 –
Concentrations
The Bank has a significant concentration of deposits with five 23 % and 18 % of its deposits as of September 30, 2025 and December 31, 2024, respectively. The Bank also has a significant concentration of short-term borrowings from one 76 % and 88 % of the outstanding balance of securities sold under agreements to repurchase as of September 30, 2025 and December 31, 2024, respectively. The Company expects to maintain the relationships with these customers for the foreseeable future.
NOTE 13 – Subsequent Events
Operational Loss (Recovery)
During the first quarter of 2025, the Company recognized an operational loss of $1.9 million due to a fraudulent wire transfer. In August 2025, the Company recovered $1.6 million of the $1.9 million which was recorded in the three month period
ending September 30, 2025. In October 2025, the Company recovered $240 thousand which will be recorded in the three month period ending
December 31, 2025.
Loan Charge-off
During the fourth quarter of 2025, the Company recorded a charge-off of $1.2 million on an individually evaluated loan. Prior to the charge-off, the Company had recorded a specific allowance for credit losses for the loan that was approximately
equal to the amount charged off.
26
Table of
Contents
| ITEM 2. |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to provide a reader of our financial statements with a
narrative from the perspective of our management on our financial condition, results of operations, liquidity and certain other factors that may affect our future results. Our MD&A should be read in conjunction with the
Consolidated Financial Statements and related Notes included in Part I, Item 1 “Financial Statements,” of this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K/A for the year ended December 31, 2024, as amended (the
“2024 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. The unaudited interim consolidated financial statements for the quarter ended September 30, 2024 and consolidated financial statements for
the fiscal year ended December 31, 2024 presented herein are as restated.
Critical Accounting Policies and Estimates
Critical accounting policies are those that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on
our financial condition or results of operations under different assumptions and conditions. This discussion highlights those accounting policies that management considers critical. All accounting policies are important; therefore,
you are encouraged to review each of the policies included in Note 1 “Summary of Significant Accounting Policies” of the Notes to Consolidated Financial Statements in our 2024 Form 10-K/A to gain a better understanding of how our
financial performance is measured and reported. Management has identified the Company’s critical accounting policies as follows:
Allowance for Credit Losses (“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. The Company measures the ACL for each of its loan segments using the weighted-average remaining maturity (“WARM”) method. The weighted average remaining life, including the effect of
estimated prepayments, is calculated for each loan pool on a quarterly basis. The Company then estimates a loss rate for each pool using both its own historical loss experience and the historical losses of a group of peer
institutions. The Company’s ACL model also includes adjustments for qualitative factors, where appropriate.
Certain loans, such as those that are nonperforming or are considered to be collateral dependent, are deemed to no longer possess risk characteristics similar to other
loans in the loan portfolio, because the specific attributes and risks associated with the loan have likely become unique as the credit quality of the loan deteriorates. As such, these loans may require individual evaluation to
determine an appropriate ACL for the loan. When a loan is individually evaluated, the Company typically measures the expected credit loss for the loan based on a discounted cash flow approach, unless the loan has been deemed
collateral dependent in which case the ACL is determined using estimates of the fair value of the underlying collateral, less estimated selling costs.
Goodwill
The excess of consideration paid over fair value of net assets acquired for acquisitions is recorded as goodwill. Goodwill is not amortized but is tested at least annually for
impairment or more frequently if events occur or circumstances change that indicate impairment may exist. A goodwill impairment test is performed by comparing the fair value of the reporting unit with its carrying value. An impairment
charge is recorded for the amount by which the carrying amount exceeds the reporting unit’s fair value. A weighted average of both the market and income approaches is used in valuing the reporting unit’s fair value. Weightings are
assigned to the approaches regarding fair value and the sensitivity of other weighting scenarios is considered. The market approach incorporates comparable public company information, valuation multiples and consideration of a market
control premium along with data related to comparable observed purchase transactions in the financial services industry. The income approach consists of discounting projected future cash flows, which are derived from internal
forecasts and economic expectations for the reporting unit. The significant inputs and assumptions for the income approach include a discount rate and projected earnings of the Company in future years for which there is inherent
uncertainty. The sensitivity of a range of reasonable discount rates based on the current economic environment is considered.
27
Table of Contents
Overview
Total assets increased by $682 thousand at September 30, 2025 compared to December 31, 2024, reflecting increases in securities
available-for-sale of $40.1 million, bank owned life insurance of $20.1 million and loans receivable held for investment, net of the ACL, of $13.2 million, all primarily due to purchases, partially offset by decreases in cash and cash
equivalents of $41.6 million, goodwill of $25.9 million, as goodwill was considered to be impaired during the quarter, and FHLB stock of $3.6 million.
Loans receivable held for investment, net of the ACL, increased by $13.2 million to $1.0 billion at September 30, 2025, compared to $1.0
billion at December 31, 2024. The increase was primarily due to loan purchases.
Deposits increased by $103.8 million, or 13.9%, to $849.2 million at September 30, 2025, from $745.4 million at December 31, 2024. The increase in deposits was attributable to an
increase of $72.9 million in certificates of deposit accounts, $26.8 million in liquid deposits (demand, interest checking, and money market accounts), $8.0 million in Insured Cash Sweep (“ICS”) deposits and $4.0 million in
Certificate of Deposit Registry Service (“CDARS”) deposits, partially offset by a $7.9 million decrease in savings deposits. As of September 30, 2025, our uninsured deposits, including deposits from the
Bank and other affiliates, represented 36% of our total deposits, compared to 32% as of December 31, 2024.
Total borrowings decreased by $89.2 million to $137.7 million at September 30, 2025, from $226.9 million at
December 31, 2024, primarily due to an $88.0 million decrease in FHLB advances.
For the third quarter of 2025, the Company reported consolidated net loss attributable to common stockholders of $24.6 million after preferred
dividends of $750 thousand and goodwill impairment of $25.9 million, compared to net loss attributable to common stockholders of $234 thousand for the third quarter of 2024 after preferred dividends of $750 thousand. Loss per diluted
common share was ($3.23) for the third quarter of 2025, compared to ($0.03) of loss per diluted common share for the third quarter of 2024. Consolidated net income before preferred dividends and goodwill impairment was $2.0 million,
or $0.26 per diluted share, for the third quarter of 2025, compared to consolidated net income of $516 thousand, or $0.06 per diluted share, for the third quarter of 2024. Diluted loss per common share for the third quarter of 2025
reflects preferred dividends of ($0.10) per diluted common share and goodwill impairment of ($3.39) per diluted common share. “Net income before preferred dividends and goodwill impairment” and “Earnings per common share – diluted
before preferred dividends and goodwill impairment” are considered to be non-GAAP measures. See “Use of Non-GAAP Financial Measures” section of this Form 10-Q for a reconciliation of these amounts to the associated GAAP financial
measure.
For the first nine months of 2025, the Company reported consolidated net loss attributable to common stockholders of $28.1 million after preferred dividends of $2.3 million and
goodwill impairment of $25.9 million, compared to net loss attributable to common stockholders of $199 thousand for the first nine months of 2024 after preferred dividends of $817 thousand. Diluted loss per common share was ($3.76)
for the first nine months of 2025, compared to ($0.02) of loss per diluted common share for the first nine months of 2024. Consolidated net income before preferred dividends and goodwill impairment was $38 thousand, or $0.01 per diluted share, compared to consolidated net income before preferred dividends of $618 thousand, or $0.07 per diluted share, for the first nine months of 2024. Diluted loss per common share for the
first nine months of 2025 reflects preferred dividends of ($0.30) per diluted common share and goodwill impairment of ($3.46) per diluted common share.
28
Table of Contents
Results of Operations
Net Interest Income
Three Months Ended September 30, 2025 Compared to the Three Months Ended September 30, 2024
Net interest income before provision for credit losses for the third quarter of 2025 totaled $8.6 million,
representing an increase of $287 thousand, or 3.4%, from net interest income before provision for credit losses of $8.3 million for the third quarter of 2024. The increase resulted from a $3.3
million decrease in interest expense due to a decline in interest on borrowings as a result of a decrease in the average balance of borrowings, partially offset by a $2.2 million increase in interest expense on deposits due to an
increase in the average balance of deposits, partially offset by an $818 thousand decline in interest income on interest-bearing deposits. The Company used interest-bearing deposits and cash from principal pay downs of
available-for-sale securities to reduce borrowings to improve the net interest margin and to support capacity for future loan growth.
The net interest margin increased to 2.72% for the third quarter of 2025 from 2.43% for the third quarter of 2024, due to an increase in the average rate earned on
interest-earning assets, which increased to 4.99% for the third quarter of 2025 from 4.84% for the third quarter of 2024, and a decrease in the cost of funds, which decreased to 3.11% for the third quarter of 2025 from 3.30% for the
third quarter of 2024.
Nine Months Ended September 30, 2025 Compared to the Nine Months Ended September 30, 2024
Net interest income before provision for credit losses for the first nine months of 2025 totaled $24.4 million,
representing an increase of $645 thousand, or 2.7%, from net interest income before provision for credit losses of $23.8 million for the first nine months of 2024. The increase resulted from an
$8.7 million decrease in interest expense due to a decline in interest on borrowings as a result of a decrease in the average balance of borrowings, partially offset by a $5.3 million increase in interest expense on deposits due to
deposit growth. The Company reduced borrowings to improve the net interest margin and to support capacity for future loan growth. This increase was partially offset by a $2.8 million decrease in interest income, primarily due to a
decrease in interest on interest-bearing deposits, as a result of a decrease in the average balance of interest-bearing deposits, as well as a decline in interest income on available-for-sale securities due to a decrease in the
average balance of available-for-sale securities. These decreases in interest income were partially offset by an increase of $2.0 million in interest income on loans receivable, as new loans were brought on at a higher rate than
the existing portfolio during the period.
The net interest margin increased to 2.65% for the first nine months of 2025 from 2.34% for the first nine months of 2024, due to an increase in the average rate
earned on interest-earnings assets, which increased to 4.88% for the first nine months of 2025 from 4.70% for the first nine months of 2024, and a decrease in the cost of funds, which decreased to 3.08% for the first nine months of
2025 from 3.21% for the first nine months of 2024.
The following tables set forth the average balances, average yields and costs, and certain other information for the periods indicated. All average balances are daily
average balances. The yields set forth below include the effect of deferred loan fees, and discounts and premiums that are amortized or accreted to interest income or expense. We do not accrue interest on loans on non-accrual status,
but the balance of these loans is included in the total average balance of loans receivable, which has the effect of reducing average loan yields.
29
Table of Contents
|
For the Three Months Ended
|
||||||||||||||||||||||||
|
September 30, 2025
|
September 30, 2024
|
|||||||||||||||||||||||
|
(Dollars in thousands)
|
Average Balance
|
Interest
|
Average
Yield/Cost
|
Average Balance
|
Interest
|
Average
Yield/Cost
|
||||||||||||||||||
|
Assets
|
||||||||||||||||||||||||
|
Interest-earning assets:
|
||||||||||||||||||||||||
|
Interest-bearing deposits
|
$
|
49,348
|
$
|
556
|
4.47
|
%
|
$
|
106,569
|
$
|
1,491
|
5.57
|
%
|
||||||||||||
|
Securities
|
206,224
|
1,690
|
3.25
|
%
|
248,833
|
1,635
|
2.61
|
%
|
||||||||||||||||
|
Loans receivable (1)
|
993,090
|
13,418
|
5.36
|
%
|
996,868
|
13,239
|
5.28
|
%
|
||||||||||||||||
|
FRB and FHLB stock
|
7,461
|
127
|
6.75
|
%
|
13,835
|
244
|
7.02
|
%
|
||||||||||||||||
|
Total interest-earning assets
|
1,256,123
|
$
|
15,791
|
4.99
|
%
|
1,366,105
|
$
|
16,609
|
4.84
|
%
|
||||||||||||||
|
Non-interest-earning assets
|
50,659
|
48,980
|
||||||||||||||||||||||
|
Total assets
|
$
|
1,306,782
|
$
|
1,415,085
|
||||||||||||||||||||
|
Liabilities and Stockholders’ Equity
|
||||||||||||||||||||||||
|
Interest-bearing liabilities:
|
||||||||||||||||||||||||
|
Money market deposits
|
$
|
155,121
|
$
|
422
|
1.08
|
%
|
$
|
282,808
|
$
|
1,740
|
2.45
|
%
|
||||||||||||
|
Savings deposits
|
44,095
|
50
|
0.45
|
%
|
55,198
|
90
|
0.65
|
%
|
||||||||||||||||
|
Interest checking and other demand deposits
|
263,972
|
2,105
|
3.16
|
%
|
67,023
|
107
|
0.64
|
%
|
||||||||||||||||
|
Certificate accounts
|
282,955
|
2,786
|
3.91
|
%
|
165,483
|
1,272
|
3.06
|
%
|
||||||||||||||||
|
Total deposits
|
746,143
|
5,363
|
2.85
|
%
|
570,512
|
3,209
|
2.24
|
%
|
||||||||||||||||
|
FHLB borrowings
|
63,016
|
711
|
4.48
|
%
|
209,064
|
2,588
|
4.92
|
%
|
||||||||||||||||
|
Bank Term Funding Program borrowing
|
–
|
–
|
–
|
%
|
100,000
|
1,220
|
4.85
|
%
|
||||||||||||||||
|
Securities sold under agreements to repurchase
|
76,906
|
710
|
3.66
|
%
|
86,397
|
819
|
3.77
|
%
|
||||||||||||||||
|
Secured borrowings
|
30,253
|
390
|
5.11
|
%
|
33,019
|
443
|
5.34
|
%
|
||||||||||||||||
|
Total borrowings
|
170,175
|
1,811
|
4.22
|
%
|
428,480
|
5,070
|
4.71
|
%
|
||||||||||||||||
|
Total interest-bearing liabilities
|
916,318
|
$
|
7,174
|
3.11
|
%
|
998,992
|
$
|
8,279
|
3.30
|
%
|
||||||||||||||
|
Non-interest-bearing liabilities
|
104,006
|
131,750
|
||||||||||||||||||||||
|
Equity
|
286,458
|
284,343
|
||||||||||||||||||||||
|
Total liabilities and stockholders’ equity
|
$
|
1,306,782
|
$
|
1,415,085
|
||||||||||||||||||||
|
Net interest rate spread (2)
|
$
|
8,617
|
1.88
|
%
|
$
|
8,330
|
1.54
|
%
|
||||||||||||||||
|
Net interest rate margin (3)
|
2.72
|
%
|
2.43
|
%
|
||||||||||||||||||||
|
Ratio of interest-earning assets to interest-bearing liabilities
|
137.08
|
%
|
136.75
|
%
|
||||||||||||||||||||
|
(1)
|
Amount includes non-accrual loans.
|
|
(2)
|
Net interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities.
|
|
(3)
|
Net interest rate margin represents net interest income as a percentage of average interest-earning assets.
|
|
For the Nine Months Ended
|
||||||||||||||||||||||||
|
September 30, 2025
|
September 30, 2024
|
|||||||||||||||||||||||
|
(Dollars in thousands)
|
Average Balance
|
Interest
|
Average
Yield/Cost
|
Average Balance
|
Interest
|
Average
Yield/Cost
|
||||||||||||||||||
|
Assets
|
||||||||||||||||||||||||
|
Interest-earning assets:
|
||||||||||||||||||||||||
|
Interest-bearing deposits
|
$
|
34,221
|
$
|
1,134
|
4.43
|
%
|
$
|
102,082
|
$
|
4,024
|
5.27
|
%
|
||||||||||||
|
Securities
|
195,049
|
4,069
|
2.79
|
%
|
276,892
|
5,586
|
2.69
|
%
|
||||||||||||||||
|
Loans receivable (1)
|
995,521
|
39,360
|
5.29
|
%
|
971,685
|
37,396
|
5.16
|
%
|
||||||||||||||||
|
FRB and FHLB stock
|
8,694
|
426
|
6.55
|
%
|
13,794
|
733
|
7.10
|
%
|
||||||||||||||||
|
Total interest-earning assets
|
1,233,485
|
$
|
44,989
|
4.88
|
%
|
1,364,453
|
$
|
47,739
|
4.68
|
%
|
||||||||||||||
|
Non-interest-earning assets
|
49,799
|
50,591
|
||||||||||||||||||||||
|
Total assets
|
$
|
1,283,284
|
$
|
1,415,044
|
||||||||||||||||||||
|
Liabilities and Stockholders’ Equity
|
||||||||||||||||||||||||
|
Interest-bearing liabilities:
|
||||||||||||||||||||||||
|
Money market deposits
|
$
|
136,183
|
$
|
1,015
|
1.00
|
%
|
$
|
276,802
|
$
|
4,805
|
2.32
|
%
|
||||||||||||
|
Savings deposits
|
46,506
|
179
|
0.51
|
%
|
57,272
|
294
|
0.69
|
%
|
||||||||||||||||
|
Interest checking and other demand deposits
|
256,952
|
5,991
|
3.12
|
%
|
75,636
|
418
|
0.74
|
%
|
||||||||||||||||
|
Certificate accounts
|
259,447
|
7,256
|
3.74
|
%
|
164,718
|
3,577
|
2.90
|
%
|
||||||||||||||||
|
Total deposits
|
699,088
|
14,441
|
2.76
|
%
|
574,428
|
9,094
|
2.11
|
%
|
||||||||||||||||
|
FHLB borrowings
|
91,585
|
2,950
|
4.31
|
%
|
209,198
|
7,779
|
4.97
|
%
|
||||||||||||||||
|
Bank Term Funding Program borrowing
|
–
|
–
|
–
|
%
|
100,000
|
3,633
|
4.85
|
%
|
||||||||||||||||
|
Securities sold under agreements to repurchase
|
71,302
|
1,948
|
3.65
|
%
|
80,974
|
2,169
|
3.58
|
%
|
||||||||||||||||
|
Secured borrowings
|
30,946
|
1,233
|
5.33
|
%
|
33,019
|
1,292
|
5.23
|
%
|
||||||||||||||||
|
Total borrowings
|
193,833
|
6,131
|
4.23
|
%
|
423,191
|
14,873
|
4.70
|
%
|
||||||||||||||||
|
Total interest-bearing liabilities
|
892,921
|
$
|
20,572
|
3.08
|
%
|
997,619
|
$
|
23,967
|
3.21
|
%
|
||||||||||||||
|
Non-interest-bearing liabilities
|
104,684
|
134,455
|
||||||||||||||||||||||
|
Equity
|
285,679
|
282,970
|
||||||||||||||||||||||
|
Total liabilities and stockholders’ equity
|
$
|
1,283,284
|
$
|
1,415,044
|
||||||||||||||||||||
|
Net interest rate spread (2)
|
$
|
24,417
|
1.80
|
%
|
$
|
23,772
|
1.47
|
%
|
||||||||||||||||
|
Net interest rate margin (3)
|
2.65
|
%
|
2.34
|
%
|
||||||||||||||||||||
|
Ratio of interest-earning assets to interest-bearing liabilities
|
138.14
|
%
|
136.77
|
%
|
||||||||||||||||||||
| (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.
|
30
Table of Contents
Provision for/Recapture of Credit Losses
For the three months ended September 30, 2025, the Company recorded a provision for credit losses of $679 thousand, compared to a provision for credit losses of $408 thousand for the three months ended September 30, 2024. The increase in the provision was the result of changes in the required specific allocations of the
ACL.
For the nine months ended September 30, 2025, the Company recorded a provision for credit losses of $2.1 million, compared to $1.2 million for the nine months ended
September 30, 2024. The increase in the provision was the result of changes in the required specific allocations of the ACL.
The Company recorded a provision for off-balance sheet loan commitments of $220 thousand and a recapture of provision of $24 thousand for the three months ended September 30, 2025 and
2024, respectively. The Company recorded a provision for off-balance sheet loan commitments of $164 thousand and a recapture of provision of $26 thousand for the nine months ended September 30, 2025 and 2024, respectively.
The ACL increased to $10.3 million as of September 30, 2025, compared to $8.4 million as of December 31, 2024,
primarily due to an increase in specific reserves on individually evaluated loans.
The Company had seven non-accrual loans at September 30, 2025 with an unpaid principal balance of $13.5 million.
Credit quality remains strong with non-accrual loans as a percentage of total loans at 1.33% and non-performing assets to total assets of 1.01% despite the increase in non-accrual loans.
Non-interest Expense
Non-interest expense was $31.5 million for the third quarter of 2025, compared to $7.6 million for the third quarter of 2024, representing an
increase of $23.9 million, or 315.0%. The increase was primarily due to the $25.9 million goodwill impairment charge recorded during the quarter ended September 30, 2025, partially offset by the $1.6
million operational loss recovery of the wire fraud previously recorded.
Non-interest expense was $49.2 million for the first nine months of 2025, compared to $22.7 million for the first nine months of 2024,
representing an increase of $26.6 million, or 117.0%. The increase was primarily due to the $25.9 million goodwill impairment charge recorded during the nine months ended September 30, 2025, partially
offset by the operational loss recovery recorded during the nine months ended September 30, 2025.
Income Taxes
The Company recorded an income tax expense of $736 thousand for the third quarter of 2025, compared to an income tax expense of $206 thousand for the third quarter of 2024. The
increase in income tax expense reflected an increase in pre-tax income of $2.0 million between the two periods, excluding goodwill impairment of $25.9 million, which is not deductible for tax purposes.
The Company recorded an income tax benefit of $54 thousand for the first nine months of 2025, compared to an income tax expense of $291 thousand for the first nine months of 2024.
The decrease in income tax expense reflected a decrease of $950 million in pre-tax income between the two periods, excluding goodwill impairment of $25.9 million, which is not deductible for tax purposes.
31
Table of Contents
Financial Condition
Total Assets
Total assets increased by $682 thousand at September 30, 2025 compared to December 31, 2024, reflecting increases in securities
available-for-sale of $40.1 million, bank owned life insurance of $20.1 million and loans receivable held for investment, net of the ACL, of $13.2 million, all primarily due to purchases, partially offset by decreases in cash and cash
equivalents of $41.6 million, goodwill of $25.9 million, as goodwill was considered to be impaired during the quarter, and FHLB stock of $3.6 million.
Securities Available-For-Sale
Securities available-for-sale totaled $244.0 million at September 30, 2025, compared to $203.9 million at December 31, 2024. The $40.1 million increase in securities
available-for-sale during the nine months ended September 30, 2025 was primarily due to securities purchases.
The table below presents the carrying amount, weighted average yields and contractual maturities of our securities as of September 30, 2025. The table reflects stated
final maturities and does not reflect scheduled principal payments or expected payoffs.
|
September 30, 2025
|
||||||||||||||||||||||||||||||||||||||||
|
One Year or Less
|
More Than One Year
to Five Years
|
More Than Five
Years to Ten Years
|
More Than Ten
Years
|
Total
|
||||||||||||||||||||||||||||||||||||
|
Carrying
Amount
|
Weighted
Average
Yield
|
Carrying
Amount
|
Weighted
Average
Yield
|
Carrying
Amount
|
Weighted
Average
Yield
|
Carrying
Amount
|
Weighted
Average
Yield
|
Carrying
Amount
|
Weighted
Average
Yield
|
|||||||||||||||||||||||||||||||
|
(Dollars in thousands)
|
||||||||||||||||||||||||||||||||||||||||
|
Available‑for‑sale:
|
||||||||||||||||||||||||||||||||||||||||
|
Federal agency mortgage‑backed securities
|
$
|
6
|
0.46
|
%
|
$
|
1,800
|
1.25
|
%
|
$
|
9,815
|
1.94
|
%
|
$
|
90,190
|
3.89
|
%
|
$
|
101,811
|
3.67
|
%
|
||||||||||||||||||||
|
Federal agency CMO
|
–
|
–
|
2,465
|
4.59
|
%
|
7,224
|
3.82
|
%
|
62,968
|
5.12
|
%
|
72,657
|
4.97
|
%
|
||||||||||||||||||||||||||
|
Federal agency debt
|
14,727
|
1.64
|
%
|
18,476
|
1.96
|
%
|
3,015
|
4.86
|
%
|
–
|
–
|
36,218
|
2.07
|
%
|
||||||||||||||||||||||||||
|
Municipal bonds
|
–
|
–
|
3,026
|
1.51
|
%
|
–
|
–
|
1,466
|
1.73
|
%
|
4,492
|
1.58
|
%
|
|||||||||||||||||||||||||||
|
U.S. Treasuries
|
10,937
|
1.68
|
%
|
–
|
–
|
–
|
–
|
–
|
–
|
10,937
|
1.68
|
%
|
||||||||||||||||||||||||||||
|
SBA pools
|
–
|
–
|
1,268
|
2.50
|
%
|
–
|
–
|
6,989
|
2.39
|
%
|
8,257
|
2.40
|
%
|
|||||||||||||||||||||||||||
|
Asset-backed securities
|
–
|
–
|
–
|
–
|
–
|
–
|
9,633
|
5.21
|
%
|
9,633
|
5.21
|
%
|
||||||||||||||||||||||||||||
|
Total
|
$
|
25,670
|
1.66
|
%
|
$
|
27,035
|
2.13
|
%
|
$
|
20,054
|
3.06
|
%
|
$
|
171,246
|
4.35
|
%
|
$
|
244,005
|
3.71
|
%
|
||||||||||||||||||||
Loans Receivable Held for Investment
Loans receivable held for investment, net of the ACL, increased by $13.2 million to $1.0 billion at September 30, 2025, compared to $1.0
billion at December 31, 2024. The increase was primarily due to loan purchases. The Company has recently engaged in purchasing government guaranteed loans to complement organic loan growth.
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.
32
Table of Contents
|
September 30, 2025
|
||||||||||||||||||||
|
One Year or
Less
|
More Than
One Year to
Five Years
|
More Than
Five Years to
15 Years
|
More Than
15 Years
|
Total
|
||||||||||||||||
|
(Dollars in thousands)
|
||||||||||||||||||||
|
Loans receivable held for investment:
|
||||||||||||||||||||
|
Single-family
|
$
|
2,150
|
$
|
8,200
|
$
|
4,227
|
$
|
6,481
|
$
|
21,058
|
||||||||||
|
Multi-family
|
16,401
|
21,364
|
14,026
|
551,980
|
603,771
|
|||||||||||||||
|
Commercial real estate
|
15,002
|
88,646
|
33,683
|
22,186
|
159,517
|
|||||||||||||||
|
Church
|
2,915
|
546
|
5,643
|
–
|
9,104
|
|||||||||||||||
|
Construction
|
50,002
|
33,501
|
2,073
|
–
|
85,576
|
|||||||||||||||
|
Commercial - other
|
29,102
|
40,303
|
5,207
|
48,413
|
123,025
|
|||||||||||||||
|
SBA loans
|
34
|
316
|
9,265
|
3,243
|
12,858
|
|||||||||||||||
|
Consumer
|
28
|
–
|
–
|
–
|
28
|
|||||||||||||||
|
$
|
115,634
|
$
|
192,876
|
$
|
74,124
|
$
|
632,303
|
$
|
1,014,937
|
|||||||||||
|
Loans maturities after one year with:
|
||||||||||||||||||||
|
Fixed rates
|
||||||||||||||||||||
|
Single-family
|
$
|
7,747
|
$
|
1,542
|
$
|
–
|
$
|
9,289
|
||||||||||||
|
Multi-family
|
18,392
|
7,557
|
–
|
25,949
|
||||||||||||||||
|
Commercial real estate
|
78,321
|
26,498
|
–
|
104,819
|
||||||||||||||||
|
Church
|
–
|
–
|
–
|
–
|
||||||||||||||||
|
Construction
|
4,193
|
–
|
–
|
4,193
|
||||||||||||||||
|
Commercial - other
|
40,303
|
4,224
|
6,157
|
50,684
|
||||||||||||||||
|
SBA loans
|
–
|
3,386
|
–
|
3,386
|
||||||||||||||||
|
Consumer
|
–
|
–
|
–
|
–
|
||||||||||||||||
|
$
|
148,956
|
$
|
43,207
|
$
|
6,157
|
$
|
198,320
|
|||||||||||||
|
Variable rates
|
||||||||||||||||||||
|
Single-family
|
$
|
453
|
$
|
2,685
|
$
|
6,481
|
$
|
9,619
|
||||||||||||
|
Multi-family
|
2,972
|
6,469
|
551,980
|
561,421
|
||||||||||||||||
|
Commercial real estate
|
10,325
|
7,185
|
22,186
|
39,696
|
||||||||||||||||
|
Church
|
546
|
5,643
|
–
|
6,189
|
||||||||||||||||
|
Construction
|
29,308
|
2,073
|
–
|
31,381
|
||||||||||||||||
|
Commercial - other
|
–
|
983
|
42,256
|
43,239
|
||||||||||||||||
|
SBA loans
|
316
|
5,879
|
3,243
|
9,438
|
||||||||||||||||
|
Consumer
|
–
|
–
|
–
|
–
|
||||||||||||||||
|
$
|
43,920
|
$
|
30,917
|
$
|
626,146
|
$
|
700,983
|
|||||||||||||
|
Total
|
$
|
192,876
|
$
|
74,124
|
$
|
632,303
|
$
|
899,303
|
||||||||||||
Certain multi-family loans have adjustable-rate features based on the Secured Overnight Financing Rate but are fixed for the first five years. Our experience has shown
that these loans typically pay off during the first five years and do not reach the adjustable-rate phase. However, in the current high interest rate environment, we have seen more borrowers maintain their loans instead of paying them
off due to interest rate caps which make the adjusted interest rate on their existing loan more desirable than getting a new loan at current interest rates. Multi-family loans in their initial fixed period totaled $431.0 million or
71.4% of our loan portfolio as of September 30, 2025.
Allowance for Credit Losses
The Company accounts for credit losses on loans in accordance with ASC 326 – Financial Instruments-Credit Losses. ASC 326 requires the
Company to recognize estimates for lifetime losses on loans and off-balance sheet loan commitments at the time of origination or acquisition. The recognition of losses at origination or acquisition represents the Company’s best
estimate of the lifetime expected credit loss associated with a loan given the facts and circumstances associated with the particular loan and involves the use of significant management judgment and estimates, which are subject to
change based on management’s on-going assessment of the credit quality of the loan portfolio and changes in economic forecasts used in the model. The Company uses the WARM method when determining estimates for the ACL for each of its
portfolio segments. The weighted average remaining life, including the effect of estimated prepayments, is calculated for each loan pool on a quarterly basis. The Company then estimates a loss rate for
each pool using both its own historical loss experience and the historical losses of a group of peer institutions during the period from 2004 through the most recent quarter.
Since historical information (such as historical net losses) may not always, by itself, provide a sufficient basis for determining future expected credit losses, the
Company periodically considers the need for qualitative adjustments to the ACL.
The Company has a credit portfolio review process designed to detect problem loans. Problem loans are typically those of a substandard or worse internal risk grade,
and may consist of loans on 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.
33
Table of Contents
The estimation of the appropriate level of the ACL requires significant judgment by management. Although management uses the best information available to make these
estimates, future adjustments to the ACL may be necessary due to economic, operating, regulatory, and other conditions that may extend beyond the Company’s control. Changes in management’s estimates of forecasted net losses could
materially change the level of the ACL. Additionally, various regulatory agencies, as an integral part of their examination process, periodically review the Company’s ACL and credit review process. Such agencies may require the
Company to recognize additions to the ACL based on judgments different from those of management.
For the three months ended September 30, 2025, the Company recorded a provision for off-balance sheet loan commitments of $220 thousand and a
recapture of provision of $24 thousand for the three months ended September 30, 2025 and 2024, respectively. The Company recorded a provision for off-balance sheet loan commitments of $164 thousand and a recapture of provision of $26
thousand for the nine months ended September 30, 2025 and 2024, respectively. The Company had seven non-accrual loans at September 30, 2025 with an unpaid principal
balance of $13.5 million. Credit quality remains strong with non-accrual loans as a percentage of total loans at 1.33% and non-performing assets to total assets of 1.01% despite the increase in non-accrual loans.
Loans delinquent by 30 days or more, but less than 59 days, increased to $1.2 million at September 30, 2025, from $0 at December 31, 2024 and loan delinquencies for 60 days or more,
but less than 90 days, decreased to $0 at September 30, 2025, from $270 thousand at December 31, 2024. Loans past due greater than 90 days was $426 thousand at September 30, 2025, compared to $0 at December 31, 2024.
We believe that the ACL is adequate to cover currently expected losses in the loan portfolio as of September 30, 2025, but there can be no assurance that actual losses
will not exceed the estimated amounts. The OCC and the Federal Deposit Insurance Corporation (“FDIC”) periodically review the ACL as an integral part of their examination process. These agencies may require an increase in the ACL
based on their judgments of the information available to them at the time of their examinations.
The following table details our allocation of the ACL to the various categories of loans held for investment and the percentage of loans in each category to total
loans at the dates indicated:
|
September 30, 2025
|
December 31, 2024
|
September 30, 2024
|
||||||||||||||||||||||
|
Amount
|
Percent of
Loans in
Each
Category to
Total
Loans
|
Amount
|
Percent of
Loans in
Each
Category to
Total
Loans
|
Amount
|
Percent of
Loans in
Each
Category to
Total
Loans |
|||||||||||||||||||
|
(Dollars in thousands)
|
||||||||||||||||||||||||
|
Single-family
|
$
|
129
|
2.07
|
%
|
$
|
200
|
2.39
|
%
|
$
|
219
|
2.42
|
%
|
||||||||||||
|
Multi‑family
|
6,030
|
59.49
|
%
|
4,617
|
63.50
|
%
|
4,789
|
62.79
|
%
|
|||||||||||||||
|
Commercial real estate
|
1,155
|
15.72
|
%
|
1,188
|
16.23
|
%
|
1,363
|
17.03
|
%
|
|||||||||||||||
|
Church
|
37
|
0.90
|
%
|
54
|
0.94
|
%
|
60
|
0.95
|
%
|
|||||||||||||||
|
Construction
|
2,064
|
8.43
|
%
|
1,564
|
9.10
|
%
|
1,469
|
8.93
|
%
|
|||||||||||||||
|
Commercial - other
|
777
|
12.12
|
%
|
730
|
7.73
|
%
|
824
|
7.80
|
%
|
|||||||||||||||
|
SBA loans
|
147
|
1.27
|
%
|
11
|
0.11
|
%
|
84
|
0.08
|
%
|
|||||||||||||||
|
Total allowance for credit losses
|
$
|
10,339
|
100.00
|
%
|
$
|
8,364
|
100.00
|
%
|
$
|
8,808
|
100.00
|
%
|
||||||||||||
Total Liabilities
Total liabilities increased by $24.0 million to $1.1 billion at September 30, 2025 from December 31, 2024, primarily due to an increase of $103.8 million in
deposits, partially offset by an $88.0 million decrease in FHLB borrowings.
Deposits
Deposits increased by $103.8 million, or 13.9%, to $849.2 million at September 30, 2025, from $745.4 million at December 31, 2024. The increase in deposits was attributable to an
increase of $72.9 million in certificates of deposit accounts, $26.8 million in liquid deposits (demand, interest checking, and money market accounts), $8.0 million in Insured Cash Sweep (“ICS”) deposits and $4.0 million in
Certificate of Deposit Registry Service (“CDARS”) deposits, partially offset by a $7.9 million decrease in savings deposits. As of September 30, 2025, our uninsured deposits, including deposits from the
Bank and other affiliates, represented 36% of our total deposits, compared to 32% as of December 31, 2024.
34
Table of Contents
The following table presents the maturity of time deposits, which includes CDARS, as of the dates indicated:
|
Three
Months or
Less
|
Three to Six
Months
|
Six Months
to One Year
|
Over One
Year
|
Total
|
||||||||||||||||
|
(In thousands)
|
||||||||||||||||||||
|
September 30, 2025
|
||||||||||||||||||||
|
Time deposits of $250,000 or less
|
$
|
83,671
|
$
|
47,925
|
$
|
62,676
|
$
|
3,113
|
$
|
197,385
|
||||||||||
|
Time deposits of more than $250,000
|
43,532
|
32,538
|
8,455
|
7,805
|
92,330
|
|||||||||||||||
|
Total
|
$
|
127,203
|
$
|
80,463
|
$
|
71,131
|
$
|
10,918
|
$
|
289,715
|
||||||||||
|
Not covered by deposit insurance
|
$
|
40,282
|
$
|
29,038
|
$
|
5,205
|
$
|
6,555
|
$
|
81,080
|
||||||||||
|
December 31, 2024
|
||||||||||||||||||||
|
Time deposits of $250,000 or less
|
$
|
46,350
|
$
|
37,239
|
$
|
92,028
|
$
|
4,060
|
$
|
179,677
|
||||||||||
|
Time deposits of more than $250,000
|
3,149
|
5,712
|
16,864
|
7,437
|
33,162
|
|||||||||||||||
|
Total
|
$
|
49,499
|
$
|
42,951
|
$
|
108,892
|
$
|
11,497
|
$
|
212,839
|
||||||||||
|
Not covered by deposit insurance
|
$
|
1,399
|
$
|
3,212
|
$
|
12,363
|
$
|
6,437
|
$
|
23,411
|
||||||||||
Borrowings
The Company enters into agreements under which it sells securities subject to an obligation to repurchase the same or similar securities. Under these arrangements, the
Company may transfer legal control over the assets but still retain effective control through an agreement that both entitles and obligates the Company to repurchase the assets. As a result, these repurchase agreements are accounted
for as collateralized financing agreements (i.e., secured borrowings) and not as a sale and subsequent repurchase of securities. The obligation to repurchase the securities is reflected as a liability in the Company’s consolidated
statements of financial condition, while the securities underlying the repurchase agreements remain in the respective investment securities asset accounts. In other words, there is no offsetting or netting of the investment securities
assets with the repurchase agreement liabilities. These agreements mature on a daily basis. As of September 30, 2025 securities sold under agreements to repurchase totaled $76.1 million at an average rate of 3.70%. The fair value of
securities pledged for repurchase agreements totaled $77.7 million as of September 30, 2025. As of December 31, 2024, securities sold under agreements to repurchase totaled $66.6 million at an average rate of 3.62%. The fair value of
securities pledged for repurchase agreements totaled $83.3 million as of December 31, 2024. One relationship accounted for 76% of our balance of securities sold under agreements to repurchase as of September 30, 2025. We expect to
maintain this relationship for the foreseeable future.
At September 30, 2025 and December 31, 2024, the Company had outstanding advances from the FHLB totaling $107.5 million and $195.5 million, respectively.
The weighted average interest rate was 4.53% and 4.03% as of September 30, 2025 and December 31, 2024, respectively. The weighted average contractual maturity was less than one month as of both September 30, 2025 and December 31,
2024. The advances were collateralized by loans with an unpaid balance of $497.6 million at September 30, 2025 and $521.7 million at December 31, 2024. The Company is currently approved by the FHLB of Atlanta to borrow up to 25% of
total assets to the extent the Company provides qualifying collateral and holds sufficient FHLB stock. Based on collateral pledged and FHLB stock held, the Company was eligible to borrow an additional $213.0 million as of September 30, 2025.
The Company will, from time to time, sell a portion of a loan or group of loans to third parties. In some cases, the transferred portion of the loans does not meet the requirements to
be treated as sales for accounting purposes. When that occurs, the legally transferred portion of the loan balance remains classified in gross loans receivable held for investment and a secured borrowing is recorded for the proceeds
received from the third party institution. As the transferred portion of the loan pays down, the secured borrowings are repaid. The Company has no obligation to make principal or interest payments on the secured borrowings unless and
until payments are received from the loan borrowers. The Company has secured borrowings associated with these participation loan transactions of $30.2 million and $31.4 million as of September 30, 2025 and December 31, 2024,
respectively. The weighted average interest rate on the secured borrowings was 5.63% and 5.54% at September 30, 2025 and December 31, 2024, respectively.
In addition, the Company had additional lines of credit of $10.0 million with other financial institutions as of September 30, 2025 and December 31, 2024. These lines
of credit are unsecured, bear interest at the Federal funds rate as of the date of utilization and mature in 30 days. There were no amounts outstanding under these lines of credit as of September 30, 2025 or December 31, 2024.
Stockholders’ Equity
Broadway Financial Corporation and subsidiary equity was $261.7 million, or 19.6%, of the Company’s total assets, at September 30, 2025, compared to
$285.0 million, or 21.3% of the Company’s total assets, at December 31, 2024. Book value per share was $12.17 at September 30, 2025 and $14.80 at December 31, 2024. Capital ratios remain strong with a Community Bank
Leverage Ratio of 14.56% at September 30, 2025 compared to 13.61% at December 31, 2024.
On March 26, 2024, the Company issued 94,413 shares of restricted stock to its officers and employees under the Amended and Restated LTIP. Each restricted stock award
was valued based on the fair value of the stock on the date of the award. All the shares issued to officers and employees vest over periods ranging from 36 months to 60 months.
35
Table of Contents
On April 5, 2024, the Company issued 31,645 shares of restricted stock to an officer under the Amended and Restated LTIP.
During May of 2024 and March of 2025, the Company issued 19,832 and 23,232 shares of stock, respectively, to its directors under the Amended and Restated LTIP, which
were fully vested.
On March 24, 2025, the Company issued 88,295 shares of restricted stock to its officers and employees under the Amended and Restated LTIP. Each restricted stock award
was valued based on the fair value of the stock on the date of the award. All the shares issued to officers and employees vest over periods ranging from 36 months to 60 months.
On May 28, 2025, the Company issued 8,183 shares of restricted stock to an officer under the Amended and Restated LTIP.
Liquidity
The objective of liquidity management is to ensure that we have the continuing ability to fund operations and meet our obligations on a timely and cost-effective
basis. The Bank’s sources of funds include deposits, advances from the FHLB and other borrowings, proceeds from the sale of loans and investment securities, and payments of principal and interest on loans and investment securities.
The Bank is currently approved by the FHLB of Atlanta to borrow up to 25% of total assets to the extent the Bank provides qualifying collateral and holds sufficient FHLB stock. Based on FHLB stock held and collateral pledged as of
September 30, 2025, the Bank had the ability to borrow an additional $213.0 million from the FHLB of Atlanta. In addition, the Bank had additional lines of credit of $10.0 million with other financial institutions as of September 30,
2025.
The Bank’s primary uses of funds include originations of loans, withdrawals of and interest payments on deposits, purchases of investment securities, and the payment
of operating expenses. Also, when the Bank has more funds than required for reserve requirements or short-term liquidity needs, the Bank invests in federal funds with the Federal Reserve Bank or in money market accounts with other
financial institutions. The Bank’s liquid assets at September 30, 2025 consisted of $19.7 million in cash and cash equivalents and $154.2 million in securities available-for-sale that were not pledged, compared to $61.4 million in
cash and cash equivalents and $17.6 million in securities available-for-sale that were not pledged at December 31, 2024. Currently, we believe the Bank has sufficient liquidity to support growth over the next twelve months and in the
longer term.
The Bank had commitments to fund $25.2 million in loans that were approved but unfunded as of September 30, 2025. In addition, the bank had $3.1 million in unfunded
line of credit loans and $27.4 million in unfunded construction loans as of September 30, 2025.
The Bank has a significant concentration of deposits with five customers that accounted for approximately 23% of its deposits as of September 30, 2025. The Bank also
has a significant concentration of short-term borrowings with one customer that accounted for 76% of the outstanding balance of securities sold under agreements to repurchase as of September 30, 2025. The Bank has long-term
relationships with these customers and expects to maintain its relationships with them for the foreseeable future.
The Company’s liquidity, separate from the Bank, is based primarily on the proceeds from financing transactions, such as the private placement completed in June of
2022 and previous private placements. The Bank is currently under no prohibition from paying dividends to the Company but is subject to restrictions as to the amount of the dividends based on normal regulatory guidelines.
The Company recorded consolidated net cash outflows from investing activities of $66.0 million during the nine months ended September 30, 2025, compared to net cash
outflows from investing activities of $3.3 million during the nine months ended September 30, 2024. 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, purchases of bank owned life insurance of $20.0 million and funding of new loans, net of repayments, of $15.5 million, partially offset by $84.0 million in proceeds from principal
paydowns on available-for-sale securities. Net cash outflows from investing activities during the nine months ended September 30, 2024 were primarily due to funding of new loans, net of repayments, of $88.1 million, partially offset
by $85.1 million in proceeds from principal paydowns on available-for-sale securities.
The Company recorded consolidated net cash inflows from financing activities of $21.8 million during the nine months ended September 30, 2025, compared to consolidated
net cash outflows from financing activities of $9.1 million during the nine months ended September 30, 2024. Net cash inflows from financing activities during the nine months ended September 30, 2025 were primarily due to proceeds of
FHLB borrowings of $549.5 million and a net increase in deposits of $103.8 million, partially offset by repayments of FHLB borrowings of $637.5 million. Net cash outflows from financing activities during the nine months ended
September 30, 2024 were primarily attributable to proceeds from FHLB borrowings of $178.4 million, partially offset by the repayment of FHLB borrowings of $176.7 million and the repayment of a note of $14.0 million.
36
Table of Contents
Capital Resources and Regulatory Capital
The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate
certain mandatory and possible additional discretionary, actions by the regulators that, if undertaken, could have a direct material effect on the Company’s financial statements. Under capital adequacy guidelines and the regulatory
framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank’s assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting
practices. The Bank’s capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk-weightings, and other factors. As of September 30, 2025 and December 31, 2024, the Bank
exceeded all capital adequacy requirements to which it is subject and meets the qualifications to be considered “well capitalized.” (See Note 10 – Regulatory Matters.)
Use of Non-GAAP Financial Measures
Management uses non-GAAP measures because they provide information to investors about the underlying operational performance and trends of the Company. These disclosures should not be
considered in isolation or as a substitute for results determined in accordance with GAAP and are not necessarily comparable to non-GAAP performance measures which may be presented by other bank holding companies. Management
compensates for these limitations by providing detailed reconciliations between GAAP information and the non-GAAP financial measures. The tables below reconciles the GAAP financial measures to the associated non-GAAP financial
measures.
Tangible book value per common share is a non-GAAP measurement that excludes goodwill and the net unamortized core deposit intangible asset, which were
both originally recorded in connection with the CFBanc merger. The Company uses this non-GAAP financial measure to provide supplemental information regarding the Company’s financial condition and operational performance. A
reconciliation between common book value and tangible book value per common share is shown as follows:
|
Common Equity
Capital
|
Shares
Outstanding
|
Per Share
Amount
|
||||||||||
|
(Dollars in thousands)
|
||||||||||||
|
September 30, 2025:
|
||||||||||||
|
Common book value
|
$
|
111,687
|
9,180,760
|
$
|
12.17
|
|||||||
|
Less:
|
||||||||||||
|
Goodwill
|
–
|
|||||||||||
|
Net unamortized core deposit intangible
|
1,539
|
|||||||||||
|
Tangible book value
|
$
|
110,148
|
9,180,760
|
$
|
12.00
|
|||||||
|
December 31, 2024:
|
||||||||||||
|
Common book value
|
$
|
134,973
|
9,120,363
|
$
|
14.80
|
|||||||
|
Less:
|
||||||||||||
|
Goodwill
|
25,858
|
|||||||||||
|
Net unamortized core deposit intangible
|
1,775
|
|||||||||||
|
Tangible book value
|
$
|
107,340
|
9,120,363
|
$
|
11.77
|
|||||||
The Company calculates net income before preferred dividends and goodwill impairment by adding preferred stock dividends and goodwill impairment to net loss available to common
shareholders. Earnings per common share - diluted before preferred dividends and goodwill impairment is calculated by dividing net income before preferred dividends and goodwill impairment by the weighted average common shares
outstanding for diluted earnings per common share. The Company considers this information important to shareholders because it illustrates net income and earnings per common share - diluted excluding the impact of preferred dividends
and goodwill impairment.
|
For the Three Months Ended
September 30,
|
For the Nine Months
Ended September 30,
|
|||||||||||||||
|
2025
|
2024
|
2025
|
2024
|
|||||||||||||
|
(Dollars in thousands)
|
||||||||||||||||
|
Net loss available to common shareholders
|
$
|
(24,633
|
)
|
$
|
(234
|
)
|
$
|
(28,070
|
)
|
$
|
(199
|
)
|
||||
|
Add: Preferred stock dividends
|
750
|
750
|
2,250
|
817
|
||||||||||||
|
Add: Goodwill impairment
|
25,858
|
-
|
25,858
|
-
|
||||||||||||
|
Net income before preferred dividends and goodwill impairment
|
$
|
1,975
|
$
|
516
|
$
|
38
|
$
|
618
|
||||||||
|
Weighted average common shares outstanding for diluted earnings per common share
|
8,617,707
|
8,520,730
|
8,581,883
|
8,386,919
|
||||||||||||
|
Earnings per common share - diluted before preferred dividends and goodwill impairment
|
$
|
0.23
|
$
|
0.06
|
$
|
0.00
|
$
|
0.07
|
||||||||
37
Table of Contents
| 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, 2025 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, 2025. 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 COSO framework in the areas of control activities, information and communication process and monitoring activities that contributed to the
following material weaknesses:
| • |
The ineffective design of the management review control relating to the evaluation of the accounting for loan participations sold in accordance with generally accepted accounting principles, including the assignment of
personnel with appropriate levels of knowledge, experience and training.
|
| • |
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 begun to dedicate significant
resources, including additional employee training, toward efforts to improve our internal control over financial reporting. Management is actively engaged in the planning for, and implementation of, remediation efforts to address the
material weaknesses.
| • |
Implementation of additional control procedures, including redesigning and enhancing control activities related to preparation and review of existing and new loan participation agreements, and any amendments thereto,
|
| • |
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
|
| • |
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.
|
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, 2025 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.
38
Table of Contents
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 2024 Form 10-K and “Part II, Item 1A. Risk Factors” in the Company’s
Quarterly Report on Form 10-Q for the period ended March 31, 2025, as amended.
| 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
|
| 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 000-27464.
|
| ** |
Management contract or compensatory plan or arrangement.
|
39
Table of Contents
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: February 13, 2026
|
By:
|
/s/ Brian Argrett
|
|
Brian Argrett
|
||
|
Chief Executive Officer
|
||
|
Date: February 13, 2026
|
By:
|
/s/ Zack Ibrahim
|
|
Zack Ibrahim
|
||
|
Chief Financial Officer
|
40
FAQ
How did Broadway Financial Corporation (BYFC) perform in the quarter ended September 30, 2025?
Broadway Financial reported a net loss attributable to the company of $23.9 million for the quarter, compared with net income of $0.5 million a year earlier. The loss was driven mainly by a $25.9 million goodwill impairment and higher credit loss provisions.
What caused the large goodwill impairment at Broadway Financial (BYFC) in 2025?
An annual quantitative impairment test indicated goodwill’s carrying amount exceeded fair value by about $25.9 million. Management, with audit committee oversight, concluded goodwill was fully impaired under U.S. GAAP, recording a non-cash $25.9 million charge in Q3 2025 that does not require future cash payments.
Why did Broadway Financial (BYFC) restate prior financial statements?
Management determined several loan participation agreements did not meet sale accounting criteria under ASC 860 and should be treated as secured borrowings. For the nine months ended September 30, 2024, this increased both loan interest income and interest on borrowings by $1.3 million and changed related cash flow classifications.
How have Broadway Financial’s (BYFC) credit metrics changed in 2025?
The allowance for credit losses on loans increased from $8.4 million at December 31, 2024 to $10.3 million at September 30, 2025. Non-accrual loans rose to about $13.5 million, including multi-family, construction, SBA and single-family balances evaluated using collateral-based fair value estimates.
What is the impact of the ECIP Series C preferred stock on Broadway Financial (BYFC)?
The company has 150,000 Series C preferred shares outstanding with a $150 million liquidation value, issued under the Emergency Capital Investment Program. Dividends accrued at 2.0%, totaling $2.3 million for the nine months ended September 30, 2025, ranking ahead of common dividends.
What does Broadway Financial’s (BYFC) funding and liquidity profile look like as of September 30, 2025?
Total deposits were $849.2 million, up from $745.4 million at year-end 2024. FHLB borrowings declined to $107.5 million, and securities sold under agreements to repurchase were $76.1 million. Cash and cash equivalents stood at $19.7 million, supporting overall liquidity.
Broadway Finl Corp Del
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Banks - Regional
Savings Institution, Federally Chartered
United States
LOS ANGELES