Core Insights - Broadway Financial Corporation reported a net income of $1.3 million for Q4 2024, down from $2.6 million in Q4 2023, reflecting a decrease of $1.3 million [1][3] - The company experienced a significant decline in net income attributable to common stockholders, which was $550 thousand in Q4 2024 compared to $2.6 million in Q4 2023 [1][3] - The diluted earnings per common share decreased to $0.06 in Q4 2024 from $0.31 in Q4 2023, influenced by a grant income of $3.7 million received in the previous year [1][3] Financial Performance - Net interest income for Q4 2024 increased by $850 thousand, or 11.9%, to $8.0 million compared to $7.1 million in Q4 2023, driven by higher interest income [2][7] - Total interest income rose by $3.1 million, or 24.9%, in Q4 2024 compared to Q4 2023, with a yield on average interest-earning assets increasing by 55 basis points to 4.78% [8][10] - For the full year 2024, net interest income before provision for credit losses totaled $31.8 million, an increase of $2.3 million, or 7.8%, from $29.5 million in 2023 [10] Non-Interest Income and Expenses - Non-interest income for Q4 2024 was $560 thousand, a significant drop from $4.5 million in Q4 2023, primarily due to the absence of the prior year's grant [13] - Total non-interest expense decreased to $7.2 million in Q4 2024 from $7.7 million in Q4 2023, mainly due to reduced professional services expenses [14] - For the year ended December 31, 2024, non-interest expense totaled $29.9 million, an increase of $2.5 million, or 9.3%, from $27.4 million in 2023 [15] Balance Sheet Highlights - Total assets decreased by $71.7 million to $1.3 billion as of December 31, 2024, primarily due to declines in securities available-for-sale and cash equivalents [19] - Loans held for investment increased by $88.4 million to $968.9 million at December 31, 2024, driven by loan originations of $157.7 million [20] - Deposits rose by $62.8 million to $745.4 million at December 31, 2024, with significant growth in Insured Cash Sweep and Certificate of Deposit Registry Service deposits [22] Credit Quality and Allowance for Credit Losses - The allowance for credit losses increased to $8.1 million as of December 31, 2024, compared to $7.3 million a year earlier, reflecting growth in the loan portfolio [12] - The company recorded a recovery of credit losses of $489 thousand in Q4 2024, contrasting with a provision for credit losses of $125 thousand in Q4 2023 [11] Income Taxes - The income tax expense for Q4 2024 was $516 thousand, down from $1.2 million in Q4 2023, reflecting a decrease in pre-tax income [16] - For the year ended December 31, 2024, income tax expense was $814 thousand, compared to $2.0 million in 2023, due to a decrease in pretax earnings [17]

Company Leadership Changes - Ruth McCloud, Chief Operating Officer of Broadway Financial Corporation, will retire on March 31, 2025, after 10 years of service, contributing significantly to the Bank's growth and success [1][2] - John A. Allen has been appointed as Chief Banking Officer of City First Bank, effective January 13, 2025, in a newly created position to oversee key operational areas [3][4] Leadership Transition - Brian Argrett, President and CEO of Broadway, expressed gratitude for Ruth McCloud's contributions and emphasized the importance of a seamless transition of her responsibilities [2] - John A. Allen brings over 30 years of experience in the financial services industry, having held leadership roles at notable institutions such as Wells Fargo, Santander Bank, and Capital One Bank [4] Company Overview - Broadway Financial Corporation operates through its subsidiary, City First Bank, which focuses on serving low-to-moderate income communities in Southern California and the Washington, D.C. market [5][6] - City First Bank offers various commercial real estate loan products and services aimed at supporting investments in affordable housing and small businesses [6]

Total Assets and Liabilities - Total assets decreased by $2.3 million at September 30, 2024 compared to December 31, 2023, primarily due to decreases in securities available-for-sale of $78.5 million, cash and cash equivalents of $8.1 million, other assets of $1.3 million, and deferred tax assets of $1.1 million, partially offset by growth in net loans of $86.3 million[100] - Total liabilities decreased by $6.8 million to $1.1 billion at September 30, 2024, driven by reductions in notes payable and deposits[136] - Total assets decreased by $2.3 million as of September 30, 2024, primarily due to a $78.5 million decrease in securities available-for-sale, partially offset by an $86.3 million increase in net loans[120] Loans and Loan Portfolio - Loans held for investment, net of the ACL, increased by $86.3 million to $966.8 million at September 30, 2024, compared to $880.5 million at December 31, 2023, driven by loan originations of $136.2 million during the first nine months of 2024[101] - Loans receivable grew to $963,849 thousand with an average yield of 5.28% for the three months ended September 30, 2024, up from $822,031 thousand with an average yield of 4.58% for the same period in 2023[110] - Loans receivable held for investment increased by $86.3 million to $966.8 million as of September 30, 2024, driven by $136.2 million in loan originations, partially offset by $49.9 million in payoffs and repayments[123] - Multi-family loans in their initial fixed period totaled $592.4 million, representing 60.8% of the loan portfolio as of September 30, 2024[125] Deposits - Deposits decreased by $10.4 million to $672.2 million at September 30, 2024, from $682.6 million at December 31, 2023, with uninsured deposits representing 34% of total deposits, down from 37% at the end of 2023[102] - Total deposits increased to $570,512 thousand with an average cost of 2.24% for the three months ended September 30, 2024, compared to $572,104 thousand with an average cost of 1.49% for the same period in 2023[110] - Deposits decreased by $10.4 million to $672.2 million at September 30, 2024, with uninsured deposits representing 34% of total deposits, down from 37% at December 31, 2023[137] - Two customers accounted for approximately 12% of the Bank's deposits as of September 30, 2024[155] Net Income and Profitability - Net income attributable to Broadway Financial Corporation increased by $431 thousand to $522 thousand for the three months ended September 30, 2024, compared to $91 thousand for the same period in 2023[104] - Net income attributable to Broadway decreased to $627 thousand for the nine months ended September 30, 2024, compared to $1.9 million for the same period in 2023, primarily due to a $3.0 million increase in non-interest expense[105] Net Interest Income and Margin - Net interest income before provision for credit losses increased by $1.5 million, or 23.0%, to $8.3 million for the third quarter of 2024, driven by higher interest income of $4.2 million, partially offset by a $2.7 million increase in interest expense[107] - Net interest margin increased to 2.49% for the third quarter of 2024 from 2.33% for the third quarter of 2023, reflecting higher rates earned on interest-earning assets[107] - Net interest income before provision for credit losses for the nine months ended September 30, 2024 totaled $23.8 million, an increase of $1.5 million, or 6.5%, from the same period in 2023, driven by higher interest income of $11.8 million[108] - Net interest margin decreased to 2.38% for the nine months ended September 30, 2024, compared to 2.60% for the same period in 2023[108] - Net interest rate margin improved to 2.49% for the three months ended September 30, 2024, up from 2.33% for the same period in 2023[110] Interest-Earning Assets and Costs - Total interest-earning assets increased to $1,333,086 thousand with an average yield of 4.82% for the three months ended September 30, 2024, compared to $1,165,064 thousand with an average yield of 4.09% for the same period in 2023[110] - The average cost of funds increased to 3.14% for the nine months ended September 30, 2024, from 2.00% for the same period in 2023, due to higher average balances of borrowings and higher rates paid on borrowings and deposits[108] Credit Losses and Allowance - The company recorded a provision for credit losses of $399 thousand for the three months ended September 30, 2024, compared to a recovery of $2 thousand for the same period in 2023[113] - The allowance for credit losses increased to $8.5 million as of September 30, 2024, compared to $7.3 million as of December 31, 2023, due to growth in the loan portfolio[114] - The company recorded a provision for credit losses of $1.2 million for the nine months ended September 30, 2024, compared to $808 thousand for the same period in 2023[113] - The ACL (Allowance for Credit Losses) was $8.5 million, or 0.87% of gross loans held for investment at September 30, 2024, compared to $7.3 million, or 0.83% at December 31, 2023[131] - Collateral dependent loans totaled $36 thousand at September 30, 2024, down from $6.4 million at December 31, 2023, with an ACL of $0 and $112 thousand respectively[132] - Non-accrual loans were $291 thousand at September 30, 2024, while loan delinquencies for 30-90 days increased to $1.7 million from $780 thousand at December 31, 2023[133] Non-Interest Income and Expense - Non-interest income for the third quarter of 2024 totaled $416 thousand, compared to $331 thousand for the third quarter of 2023[114] - Total non-interest expense increased by $613 thousand, or 8.8%, to $7.6 million for the third quarter of 2024, primarily due to higher professional and accounting fees[116] - Non-interest income for the first nine months of 2024 totaled $995 thousand, compared to $880 thousand for the same period in the prior year[115] - Non-interest expense for the first nine months of 2024 increased by $3.0 million (15.4%) to $22.7 million, driven by higher compensation and benefits ($1.4 million) and professional services ($1.2 million) expenses[117] Income Tax - Income tax expense for Q3 2024 was $209 thousand, up from $39 thousand in Q3 2023, with an effective tax rate of 27.76% compared to 31.20%[118] - Income tax expense for the nine months ended September 30, 2024, decreased to $298 thousand from $806 thousand in the same period in 2023, with an effective tax rate of 32.04% compared to 29.49%[119] Securities and Investments - Securities available-for-sale decreased by $78.5 million to $238.5 million as of September 30, 2024, mainly due to maturities and principal paydowns[120] - Securities sold under repurchase agreements totaled $89.8 million at an average rate of 3.68% as of September 30, 2024, up from $73.5 million at 2.60% at December 31, 2023[141] Borrowings and Liquidity - The Company had outstanding FHLB advances of $208.6 million at September 30, 2024, with a weighted interest rate of 4.35% and a weighted average maturity of two months[140] - The Company borrowed $100.0 million from the Federal Reserve under the BTFP, with an interest rate of 4.84% and a maturity date of December 29, 2024[143] - The Bank had the ability to borrow an additional $133.9 million from the FHLB of Atlanta as of September 30, 2024[152] - Liquid assets at September 30, 2024 included $97.1 million in cash and cash equivalents and $35.0 million in unpledged securities available-for-sale[153] Commitments and Funding - The Bank had commitments to fund $923 thousand in approved but unfunded loans, $3.7 million in unfunded line of credit loans, and $47.5 million in unfunded construction loans as of September 30, 2024[154] Stockholders' Equity and Capital - Stockholders' equity was $286.4 million, or 20.9% of total assets, at September 30, 2024, compared to $281.9 million, or 20.5%, at December 31, 2023[145] - The Company issued 94,413 shares of restricted stock to officers and employees under the Amended and Restated LTIP on March 26, 2024[148] - Common book value increased to $136,392 thousand as of September 30, 2024, up from $131,903 thousand at December 31, 2023[151] - Tangible book value rose to $108,675 thousand as of September 30, 2024, compared to $103,934 thousand at December 31, 2023[151] - The Bank exceeded all capital adequacy requirements and was considered "well capitalized" as of September 30, 2024[159] Cash Flows - Consolidated net cash outflows from investing activities were $2.7 million for the nine months ended September 30, 2024, compared to $61.5 million for the same period in 2023[157] - Consolidated net cash outflows from financing activities were $9.6 million for the nine months ended September 30, 2024, compared to net cash inflows of $52.9 million for the same period in 2023[158] Internal Controls and Remediation - The Company identified material weaknesses in internal control over financial reporting and has implemented a remediation plan, including hiring additional senior personnel and engaging a third-party firm to review general ledger account reconciliations[164][166] - The company's disclosure controls and procedures were not effective as of September 30, 2024, due to material weaknesses in internal control over financial reporting[162] - A material weakness was identified due to insufficient personnel with appropriate knowledge and experience in internal control matters, leading to failures in designing and implementing certain internal controls[164] - The company did not effectively design and implement controls over consolidation, financial statement reporting, and monthly close processes, resulting in unidentified or stale reconciling items in general ledger account reconciliations[165] - The company hired additional senior personnel with relevant experience and training to address the material weaknesses and engaged a third-party firm to review general ledger account reconciliations[166] - Remediation efforts are ongoing, and the material weaknesses cannot be considered remediated until the controls operate effectively for a sufficient period and are tested by management[167] - No other changes in internal control over financial reporting occurred during the three months ended September 30, 2024, except for the remediation activities discussed[169]

Financial Performance - Net income attributable to Broadway for Q3 2024 was $522 thousand, an increase of $431 thousand from $91 thousand in Q3 2023[1] - Net loss attributable to common stockholders was $228 thousand in Q3 2024 after deducting preferred dividends of $750 thousand, compared to net income of $91 thousand in Q3 2023[1] - Non-interest income for Q3 2024 totaled $416 thousand, an increase from $331 thousand in Q3 2023, and $995 thousand for the first nine months of 2024, compared to $880 thousand for the same period in 2023[16] - The net income for the quarter was $544,000, a substantial increase from $86,000 in the prior year[33] Interest Income and Margin - Net interest income for Q3 2024 increased by $1.5 million, or 23.0%, to $8.3 million compared to $6.8 million in Q3 2023[2] - Total interest income rose by $4.2 million, or 35.5%, in Q3 2024 compared to Q3 2023[4] - Net interest margin increased to 2.49% in Q3 2024 from 2.33% in Q3 2023[7] - Net interest income after provision for credit losses was $7,931,000, compared to $6,775,000 in the previous year, representing an increase of 17%[33] Loan and Asset Growth - Total gross loans receivable increased by $87.5 million, or 9.9%, to $975.3 million as of September 30, 2024[4] - Loans held for investment increased by $86.3 million to $966.8 million at September 30, 2024, driven by loan originations of $136.2 million during the first nine months of 2024[21] - Loans receivable held for investment increased to $975,315,000 from $887,805,000, reflecting a growth of approximately 9.8%[30] - Loan originations for the quarter reached $39,195,000, significantly higher than $14,016,000 in the same quarter last year, marking a growth of 179%[33] Credit Losses and Allowance - The Company recorded a provision for credit losses of $399 thousand for Q3 2024, compared to a recovery of $2 thousand in Q3 2023, and $1.2 million for the nine months ended September 30, 2024, up from $808 thousand in the same period last year[14] - The allowance for credit losses increased to $8.5 million as of September 30, 2024, compared to $7.3 million as of December 31, 2023, due to growth in the loan portfolio[15] - The allowance for credit losses rose to $8,527,000, up from $7,348,000, indicating a proactive approach to managing credit risk[30] Expenses and Costs - Non-interest expense increased by $3.0 million in the first nine months of 2024 compared to the same period in 2023, primarily due to higher compensation and benefits[3] - Total non-interest expense was $7.6 million for Q3 2024, an increase of 8.8% from $7.0 million in Q3 2023, primarily due to professional and accounting fees related to remediation efforts[17] Asset and Equity Position - Total assets decreased by $2.3 million to $1.382 billion at September 30, 2024, reflecting a decrease in securities available-for-sale of $78.5 million[20] - Stockholders' equity was $286.4 million, or 20.9% of total assets, at September 30, 2024, up from $281.9 million, or 20.5% of total assets, at December 31, 2023[25] - The equity to total assets ratio improved to 20.86% from 20.50%, indicating a stronger capital position[30] Tax and Profitability - The effective tax rate was 27.76% for Q3 2024, down from 31.20% in Q3 2023, reflecting an increase in pre-tax income[19] - The return on average assets was 0.16%, up from 0.03% year-over-year, reflecting improved profitability[33] Non-Performing Loans - The company reported only one non-performing loan as of September 30, 2024, representing less than $300 thousand, or 0.03% of total loans[5] - Non-performing assets totaled $291,000, with a non-accrual loans ratio of 0.03% to total loans[31]

Financial Position - Total assets decreased by $8.1 million to $1.4 billion at June 30, 2024, primarily due to decreases in securities available-for-sale of $55.5 million and cash and cash equivalents of $15.4 million[81]. - Total liabilities decreased by $8.5 million to $1.1 billion at June 30, 2024, primarily due to a $14.0 million decrease in notes payable[106]. - Stockholders' equity was $282.3 million, or 20.6% of total assets, at June 30, 2024, compared to $281.9 million, or 20.5%, at December 31, 2023[112]. - The Company had liquid assets of $89.8 million in cash and cash equivalents and $85.0 million in securities available-for-sale as of June 30, 2024, compared to $105.2 million and $173.3 million respectively at December 31, 2023[114]. Loans and Credit - Loans held for investment, net of the Allowance for Credit Losses (ACL), increased by $58.3 million to $938.7 million at June 30, 2024, driven by loan originations of $97.0 million[81]. - Multi-family loans accounted for $585.9 million or 62.0% of the loan portfolio as of June 30, 2024, with many having adjustable-rate features based on the Secured Overnight Financing Rate[99]. - The allowance for credit losses (ACL) increased to $8.1 million as of June 30, 2024, from $7.3 million as of December 31, 2023, due to growth in the loan portfolio[92]. - Non-accrual loans amounted to $328 thousand at June 30, 2024, with loan delinquencies for 30 days or more decreasing to $710 thousand[104]. Income and Expenses - For the three months ended June 30, 2024, net income was $269 thousand, an increase from $243 thousand for the same period in 2023, attributed to a $650 thousand increase in net interest income[83]. - For the six months ended June 30, 2024, net income decreased to $105 thousand from $1.8 million for the same period in 2023, primarily due to a $2.4 million increase in non-interest expense[84]. - Total non-interest expense for Q2 2024 was $7.3 million, an increase of $859 thousand or 13.4% from $6.4 million in Q2 2023, primarily due to a $735 thousand rise in compensation and benefits[92]. - For the first six months of 2024, non-interest expense totaled $15.1 million, representing a $2.4 million increase or 19.1% from $12.7 million in the same period last year[93]. Interest Income and Margin - Net interest income before provision for credit losses for the second quarter of 2024 totaled $7.9 million, an increase of 8.9% from $7.3 million in the second quarter of 2023[86]. - The net interest margin decreased to 2.41% for the second quarter of 2024 from 2.52% for the second quarter of 2023, due to an increase in the average cost of funds[86]. - For the six months ended June 30, 2024, net interest income before provision for credit losses totaled $15.4 million, a decrease of 0.6% from $15.5 million for the same period in 2023[87]. - The average cost of funds increased to 3.11% for the first six months of 2024 from 1.76% for the same period in 2023, contributing to the decrease in net interest income[87]. Deposits - Deposits increased by $4.7 million to $687.4 million at June 30, 2024, with a notable increase of $19.4 million in Insured Cash Sweep (ICS) deposits[82]. - The total deposits for the three months ended June 30, 2024, were $569,689 thousand, with an average cost of 2.18%[88]. Tax and Regulatory Compliance - The effective tax rate for Q2 2024 was 35.01%, compared to 27.43% in Q2 2023, primarily due to the vesting of stock awards[94]. - The Company is currently under no prohibition from paying dividends, but is subject to restrictions based on regulatory guidelines[116]. - The Bank exceeded all capital adequacy requirements as of June 30, 2024, qualifying as "well capitalized"[119]. Internal Controls and Remediation - The Company has identified material weaknesses in internal control over financial reporting, impacting the reliability of financial statements[123]. - A remediation plan is in place, including hiring additional personnel and engaging a third-party firm to improve internal controls[124]. - Management is actively engaged in planning and implementing remediation efforts, requiring additional time to test the effectiveness of controls[125]. - No other changes in internal control over financial reporting occurred during the three months ended June 30, 2024, that materially affected the Company's internal control[127].

Financial Performance - Total consolidated net earnings for the second quarter of 2024 were $269 thousand, or $0.03 per diluted share, compared to $243 thousand, or $0.03 per diluted share for the same period in 2023[8]. - For the first six months of 2024, consolidated net earnings were $105 thousand, or $0.01 per diluted share, compared to $1.8 million, or $0.20 per diluted share for the same period in 2023[11]. - Net income for 2024 was $271 million, compared to $246 million in 2023, marking a 10.2% increase[57]. Interest Income and Loans - Total interest income increased by $3.8 million, or 33.1%, in the second quarter of 2024 compared to the second quarter of 2023[9]. - Interest income for 2024 was $15,488 million, up from $11,640 million in 2023, representing a 32% increase[57]. - Net interest income for the second quarter of 2024 increased by $650 thousand, or 8.9%, to $7.9 million, compared to $7.3 million for the second quarter of 2023[35]. - Net interest income after provision for credit losses increased to $7,424 million in 2024 from $6,500 million in 2023, a growth of 14.2%[57]. - Loans held for investment increased by $58.3 million to $938.7 million at June 30, 2024, compared to $880.5 million at December 31, 2023, driven by loan originations of $97.0 million[27]. - Loan originations decreased to $25,510 million in 2024 from $63,983 million in 2023, a decline of 60%[57]. Expenses - Non-interest expense for the second quarter of 2024 was $7.3 million, an increase of $859 thousand, or 13.4%, from $6.4 million in the second quarter of 2023[1]. - For the first six months of 2024, non-interest expense totaled $15.1 million, an increase of $2.4 million, or 19.1%, from $12.7 million in the same period last year[24]. - Non-interest expense rose to $7,280 million in 2024 compared to $6,421 million in 2023, reflecting a 13.4% increase[57]. Assets and Deposits - Total gross loans receivable increased by $59.0 million, or 6.6%, to $946.8 million at June 30, 2024, compared to $887.8 million at December 31, 2023[9]. - Total deposits increased by $4.7 million during the first six months of 2024 to $687.4 million, compared to $682.6 million at December 31, 2023[9]. - Deposits increased by $4.7 million to $687.4 million at June 30, 2024, from $682.6 million at December 31, 2023, with a notable increase in Insured Cash Sweep deposits[51]. - Total assets decreased by $8.1 million at June 30, 2024, reflecting a decrease in securities available-for-sale of $55.5 million[50]. Credit Losses and Allowance - The allowance for credit losses increased to $8.1 million as of June 30, 2024, compared to $7.3 million as of December 31, 2023[4]. - The company reported a decrease in provisions for credit losses to $494 thousand for the second quarter of 2024, compared to $768 thousand for the same period in 2023[22]. Tax and Equity - The effective tax rate for the second quarter of 2024 was 35.01%, up from 27.43% in the same quarter of 2023, primarily due to the vesting of stock awards[25]. - Stockholders' equity was $282.3 million, or 20.7% of total assets, as of June 30, 2024, compared to $281.9 million, or 20.5% of total assets, at December 31, 2023[58]. - Book value per share decreased to $14.49 at June 30, 2024, down from $14.65 at December 31, 2023[58]. Returns - Return on average assets improved to 0.08% in 2024 from 0.06% in 2023[57]. - Return on average equity increased to 0.38% in 2024 from 0.24% in 2023[57]. Strategic Focus - The company is focused on expanding its community development financial services, particularly in affordable housing and small business support[59].

Financial Performance - In Q1 2024, net interest income decreased by $750 thousand, or 9.1%, to $7.5 million compared to Q1 2023, primarily due to higher interest expenses [3]. - The company reported a consolidated net loss of $164 thousand, or ($0.02) per diluted share, for Q1 2024, compared to net earnings of $1.6 thousand, or $0.17 per diluted share, for Q1 2023 [6]. - Total non-interest expense increased by $1.6 million, or 25.8%, to $7.8 million in Q1 2024 compared to Q1 2023, driven by higher professional services and compensation expenses [17]. - Non-interest income for Q1 2024 totaled $306 thousand, compared to $289 thousand for Q1 2023 [16]. - The effective tax rate decreased to 23.75% in Q1 2024 from 29.70% in Q1 2023, with an income tax benefit of $57 thousand in Q1 2024 [19]. Interest and Loans - Total interest income increased by $3.6 million, or 32.4%, compared to Q1 2023, marking the twelfth consecutive quarter of growth since the merger [4]. - The net interest margin decreased to 2.27% for Q1 2024 from 2.96% for Q1 2023, due to an increase in the average cost of funds to 3.02% [10]. - The yield on average interest-earning assets increased by 46 basis points to 4.45% for Q1 2024, driven by growth in the yield on average loan balances [4]. - Loans held for investment increased by $46.0 million to $926.5 million at March 31, 2024, primarily due to loan originations of $71.5 million [21]. - Total gross loans receivable increased by $46.2 million, or 5.2%, to $934.8 million at March 31, 2024, with a growth of 43.7% since the U.S. Treasury's $150 million investment in June 2022 [4]. Deposits and Assets - Total deposits increased by $12.9 million during Q1 2024 to $695.5 million, representing a growth of $38 million, or 5.8%, since Q1 2023 [4]. - Deposits rose by $12.9 million to $695.5 million at March 31, 2024, with increases in liquid deposits and Insured Cash Sweep deposits [23]. - Total assets decreased by $4.9 million to $1.37 billion at March 31, 2024, reflecting declines in cash and securities, partially offset by growth in net loans [20]. - Stockholders' equity was $281.3 million, or 20.5% of total assets, at March 31, 2024, down from $281.9 million at December 31, 2023 [25]. Credit and Risk Management - The allowance for credit losses increased to $7.6 million as of March 31, 2024, compared to $7.3 million as of December 31, 2023 [15]. - The company experienced substantial non-recurring costs of almost $700 thousand related to an investigation of internal control weaknesses [9]. - Uninsured deposits represented 38% of total deposits as of March 31, 2024, compared to 37% at December 31, 2023 [23]. Operational Strategy - The increase in compensation and benefits expense was mainly due to the addition of full-time employees to expand operational capabilities [18]. - The company is focused on expanding its operational capabilities to grow its balance sheet and fulfill lending objectives [18]. - Total borrowings decreased by $15.8 million to $380.9 million at March 31, 2024, primarily due to the payoff of two notes payable [24].

Financial Reporting and Controls - The company identified material weaknesses in risk assessment, control activities, and monitoring activities related to financial reporting[238] - Remediation efforts are ongoing to address material weaknesses, including hiring additional senior personnel and engaging a third-party firm to review general ledger account reconciliations[244] - The company's disclosure controls and procedures are designed to provide reasonable assurance of timely and accurate financial reporting, but there is no assurance they will operate effectively under all circumstances[236] Capital and Regulatory Compliance - The company and the bank met all capital adequacy requirements and the bank was "well capitalized" under regulatory frameworks as of March 31, 2024[148] Deferred Tax Assets and Liabilities - The company maintained a $449 thousand valuation allowance on its deferred tax assets due to limitations triggered by private placements completed on April 6, 2021[150] - The company's deferred tax assets and liabilities are determined using the liability method, with a valuation allowance established when it is more likely than not that some or all deferred tax assets will not be realized[251] Customer Concentration - Two customers accounted for approximately 12% of the bank's deposits as of March 31, 2024[151] - One customer accounted for 86% of the outstanding balance of securities sold under agreements to repurchase as of March 31, 2024[151] ESOP and Share Valuation - The value of unearned ESOP shares was $4.4 million at March 31, 2024, compared to $4.5 million at December 31, 2023[146] Credit Loss Estimation - The company's ACL model uses the weighted-average remaining maturity (WARM) method to estimate expected credit losses, incorporating historical loss experience and qualitative factors[142]

Net Interest Income Net interest income before provision for credit losses for the nine months ended September 30, 2023, totaled $22.3 million, representing a decrease of $1.5 million, or 6.3%, from net interest income before loan loss provision of $23.8 million for the nine months ended September 30, 2022. The decrease resulted from higher interest expense, primarily due to an increase in the cost of borrowings and deposits, and to a lesser extent, from an increase in average borrowings, which was needed t ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) ☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 ☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 001-39043 Delaware 95-4547287 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) (323) 634-1700 (Registrant's telephone number, including area code) Indicate by check mark whether the regi ...