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]

PART I. FINANCIAL STATEMENTS [Item 1. Consolidated Financial Statements](index=2&type=section&id=Item%201.%20Consolidated%20Financial%20Statements) This section presents the unaudited consolidated financial statements for Broadway Financial Corporation as of September 30, 2023, and for the three and nine-month periods then ended [Consolidated Statements of Financial Condition](index=3&type=section&id=Consolidated%20Statements%20of%20Financial%20Condition) The company's total assets increased to **$1.238 billion** as of September 30, 2023, from **$1.184 billion** at year-end 2022 Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | **Total Assets** | **$1,237,795** | **$1,184,293** | | Cash and cash equivalents | $11,487 | $16,105 | | Loans receivable, net | $835,356 | $768,046 | | Securities available-for-sale | $316,429 | $328,749 | | **Total Liabilities** | **$962,638** | **$904,641** | | Deposits | $671,469 | $686,916 | | FHLB advances | $187,721 | $128,344 | | **Total Stockholders' Equity** | **$274,967** | **$279,482** | [Consolidated Statements of Operations and Comprehensive Income (Loss)](index=4&type=section&id=Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income%20%28Loss%29) For the nine months ended September 30, 2023, net income was **$1.9 million**, a significant decrease from **$4.1 million** in the prior-year period Statement of Operations Summary (in thousands) | Metric | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Net Interest Income | $22,315 | $23,818 | | Provision for Credit Losses | $808 | $592 | | Non-interest Income | $880 | $907 | | Non-interest Expense | $19,654 | $18,298 | | **Net Income** | **$1,927** | **$4,181** | | **EPS (diluted)** | **$0.21** | **$0.45** | Q3 Statement of Operations Summary (in thousands) | Metric | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Net Interest Income | $6,773 | $8,608 | | (Recapture of) Provision for Credit Losses | ($2) | $1,021 | | **Net Income** | **$86** | **$1,346** | | **EPS (diluted)** | **$0.01** | **$0.14** | [Notes to Unaudited Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Unaudited%20Consolidated%20Financial%20Statements) The notes detail the basis of presentation and significant accounting policies, including the adoption of the Current Expected Credit Losses (CECL) methodology under ASC 326 effective January 1, 2023 - Effective January 1, 2023, the company adopted ASC 326 (CECL), which requires estimating lifetime expected credit losses for loans and securities. The adoption resulted in a cumulative effect adjustment that decreased retained earnings by **$1.3 million**[109](index=109&type=chunk)[153](index=153&type=chunk)[155](index=155&type=chunk) - On October 31, 2023, the company executed a **1-for-8 reverse stock split** for all classes of its common stock. All share and per-share amounts in the report have been retroactively adjusted to reflect this split[125](index=125&type=chunk)[96](index=96&type=chunk) - The company identified and recorded immaterial out-of-period adjustments totaling **$8 thousand** (net of tax) during the preparation of the Q3 2023 financial statements. These adjustments were deemed immaterial to both current and prior periods[124](index=124&type=chunk)[95](index=95&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=32&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial performance, highlighting a **$53.5 million** increase in total assets to **$1.2 billion** by September 30, 2023, driven by **$67.3 million** in net loan growth [Financial Condition](index=39&type=section&id=Financial%20Condition) As of September 30, 2023, total assets grew to **$1.2 billion**, up **$53.5 million** from year-end 2022, mainly from a **$67.3 million** increase in net loans held for investment Balance Sheet Changes (Sep 30, 2023 vs. Dec 31, 2022) | Account | Change (in millions) | Reason | | :--- | :--- | :--- | | Total Assets | +$53.5 | Loan growth offset by lower securities and cash | | Net Loans | +$67.3 | Primarily from $112.2 million in new originations | | Deposits | -$15.4 | Customers seeking higher rates elsewhere | | Total Borrowings | +$71.7 | Increased FHLB advances and repurchase agreements | - The Allowance for Credit Losses (ACL) increased to **$6.9 million** at September 30, 2023, from **$4.4 million** at December 31, 2022. The increase was primarily driven by a **$1.8 million** adjustment upon adopting the CECL methodology and an additional **$808 thousand** provision due to loan growth[10](index=10&type=chunk)[63](index=63&type=chunk)[220](index=220&type=chunk) - Loan delinquencies greater than 30 days but less than 90 days increased to **$1.2 million** at September 30, 2023, from zero at year-end 2022. However, there were no non-accrual loans as of September 30, 2023[11](index=11&type=chunk)[274](index=274&type=chunk) [Results of Operations](index=35&type=section&id=Results%20of%20Operations) For the nine months ended September 30, 2023, net interest income decreased by **6.3%** to **$22.3 million** year-over-year, as a **332 basis point** increase in the average cost of funds outpaced an **87 basis point** rise in the yield on earning assets Net Interest Income and Margin (Nine Months Ended Sep 30) | Metric | 2023 | 2022 | Change | | :--- | :--- | :--- | :--- | | Net Interest Income | $22.3M | $23.8M | -6.3% | | Net Interest Margin | 2.60% | 2.93% | -33 bps | | Avg. Cost of Funds | 2.00% | 0.29% | +171 bps | - The provision for credit losses for the nine months ended September 30, 2023, was **$808 thousand**, an increase from **$592 thousand** in the same period of 2022. This was due to an increase in loans rated as 'watch' and 'special mention'[245](index=245&type=chunk) - Non-interest expense for the first nine months of 2023 increased by **$1.4 million** (**7.4%**) to **$19.7 million**, primarily due to a **$1.5 million** increase in compensation and benefits from hiring additional staff to support strategic growth[276](index=276&type=chunk)[246](index=246&type=chunk) [Liquidity and Capital Resources](index=44&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains liquidity through deposits, FHLB advances, and cash flows from its loan and securities portfolios - The Bank has significant available liquidity, including the ability to borrow an additional **$154.3 million** from the FHLB and access to **$10.0 million** in other credit lines as of September 30, 2023[265](index=265&type=chunk)[304](index=304&type=chunk) - The Bank is subject to concentration risk, with five customers accounting for **21% of total deposits** and one customer accounting for **77% of securities sold under agreements to repurchase** as of September 30, 2023[292](index=292&type=chunk)[230](index=230&type=chunk) Regulatory Capital Ratios | Ratio | Sep 30, 2023 | Minimum to be Well Capitalized | | :--- | :--- | :--- | | Community Bank Leverage Ratio | 15.13% | 9.00% | [Controls and Procedures](index=46&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that as of September 30, 2023, the company's disclosure controls and procedures were not effective due to material weaknesses in internal control over financial reporting - Management identified material weaknesses in internal control over financial reporting, rendering disclosure controls and procedures ineffective as of September 30, 2023[295](index=295&type=chunk)[36](index=36&type=chunk) - The identified weaknesses relate to the control environment, risk assessment, control activities (including account reconciliations), and monitoring, which led to a delay in filing the Form 10-Q[33](index=33&type=chunk)[269](index=269&type=chunk)[308](index=308&type=chunk) - A remediation plan is underway, involving hiring experienced personnel, engaging a third-party firm to assist with reconciliations, and implementing enhanced review processes for general ledger accounts[296](index=296&type=chunk)[34](index=34&type=chunk) PART II. OTHER INFORMATION [Risk Factors](index=47&type=page&id=Item%201A.%20Risk%20Factors) This section introduces a new risk factor related to the material weakness in internal control over financial reporting - A new risk factor has been added concerning the identified material weakness in internal control over financial reporting[298](index=298&type=chunk)[36](index=36&type=chunk) - Failure to remediate the material weakness could adversely affect the company's ability to prepare financial statements, harm its reputation, and negatively impact investor confidence[310](index=310&type=chunk)[36](index=36&type=chunk)

[PART I. FINANCIAL STATEMENTS](index=3&type=section&id=PART%20I.%20FINANCIAL%20STATEMENTS) [Item 1. Consolidated Financial Statements](index=3&type=section&id=Item%201.%20Consolidated%20Financial%20Statements) Unaudited consolidated financial statements show asset growth, reduced net income from higher credit loss provisions and interest expense, and CECL adoption impact [Consolidated Statements of Financial Condition](index=3&type=section&id=Consolidated%20Statements%20of%20Financial%20Condition) Total assets increased to **$1.23 billion** by June 30, 2023, driven by loan growth, funded by increased borrowings despite deposit decreases, with slight equity reduction Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2023 (Unaudited) | December 31, 2022 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $10,742 | $16,105 | | Securities available-for-sale | $322,516 | $328,749 | | Loans receivable, net | $824,621 | $768,046 | | Goodwill | $25,858 | $25,858 | | **Total assets** | **$1,231,372** | **$1,184,293** | | **Liabilities & Equity** | | | | Deposits | $646,063 | $686,916 | | FHLB advances | $210,268 | $128,344 | | **Total liabilities** | **$953,888** | **$904,641** | | **Total stockholders' equity** | **$277,289** | **$279,482** | [Consolidated Statements of Operations and Comprehensive Income (Loss)](index=4&type=section&id=Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income%20%28Loss%29) Net income for the six months ended June 30, 2023, decreased to **$1.84 million**, primarily due to higher credit loss provisions and increased interest expense outpacing income growth Key Performance Indicators (in thousands, except EPS) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Total Interest Income | $11,640 | $8,501 | $22,683 | $16,380 | | Total Interest Expense | $4,372 | $463 | $7,141 | $1,170 | | **Net Interest Income** | **$7,268** | **$8,038** | **$15,542** | **$15,210** | | Provision for (recapture of) credit losses | $768 | ($577) | $810 | ($429) | | Total Non-interest Expense | $6,421 | $6,266 | $12,673 | $12,226 | | **Net Income** | **$246** | **$1,853** | **$1,841** | **$2,835** | | **EPS - diluted** | **$0.00** | **$0.03** | **$0.03** | **$0.04** | [Consolidated Statements of Cash Flows](index=5&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Cash and cash equivalents decreased by **$5.4 million** for the six months ended June 30, 2023, with operating inflows offset by significant investing outflows for loans, partially funded by financing activities Cash Flow Summary (Six Months Ended June 30, in thousands) | Cash Flow Category | 2023 | 2022 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $2,135 | ($359) | | Net cash used in investing activities | ($53,685) | ($91,466) | | Net cash provided by financing activities | $46,187 | $140,442 | | **Net change in cash and cash equivalents** | **($5,363)** | **$48,617** | | Cash and cash equivalents at end of period | $10,742 | $280,137 | [Notes to Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Notes detail accounting policies, including CECL adoption impacting retained earnings, loan portfolio growth, unrealized securities losses, and the bank's 'well capitalized' status - Effective January 1, 2023, the Company adopted ASU 2016-13 (CECL), which replaces the incurred loss model with a lifetime expected credit loss model. This resulted in a **$1.3 million** net decrease to the beginning balance of retained earnings[58](index=58&type=chunk)[79](index=79&type=chunk) Impact of CECL Adoption on Jan 1, 2023 (in thousands) | Account | Pre-CECL Adoption | Impact of CECL Adoption | As Reported Under CECL | | :--- | :--- | :--- | :--- | | Allowance for credit losses on loans | $4,388 | $1,809 | $6,197 | | Deferred tax assets | $11,872 | $508 | $12,380 | | Retained earnings | $9,294 | ($1,256) | $8,038 | - The gross loan portfolio grew to **$832.5 million** at June 30, 2023, from **$773.4 million** at year-end 2022, with multi-family loans representing the largest portion at **$529.2 million**[51](index=51&type=chunk) - The allowance for credit losses (ACL) on loans increased to **$7.0 million** at June 30, 2023, from **$4.4 million** at December 31, 2022, primarily due to the CECL adoption and loan portfolio growth[51](index=51&type=chunk)[43](index=43&type=chunk) - The company's available-for-sale securities portfolio had a fair value of **$322.5 million** with gross unrealized losses of **$24.5 million** as of June 30, 2023, which management attributes to changes in interest rates and not credit-related issues[77](index=77&type=chunk)[33](index=33&type=chunk) - The Bank was deemed "well capitalized" under the Community Bank Leverage Ratio (CBLR) framework, with a ratio of **15.35%** as of June 30, 2023, well above the **9.00%** minimum requirement[194](index=194&type=chunk)[276](index=276&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=29&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses decreased net income due to higher credit loss provisions and net interest margin compression, alongside asset growth driven by loans funded by increased borrowings despite deposit declines - Net income for the first six months of 2023 decreased to **$1.8 million** from **$2.8 million** in the prior-year period. The decline was primarily due to an **$810 thousand** provision for credit losses (compared to a **$429 thousand** recapture in 2022) and a **$447 thousand** increase in non-interest expense[209](index=209&type=chunk) - Net interest margin for the six months ended June 30, 2023, compressed to **2.74%** from **2.89%** in the prior year period. This was caused by the average cost of funds increasing by **149 basis points**, outpacing the **88 basis point** increase in the yield on interest-earning assets[236](index=236&type=chunk) - Total assets grew by **$47.1 million** to **$1.2 billion**, driven by a **$56.6 million** increase in net loans. This growth was funded by an **$89.8 million** increase in total borrowings, as deposits decreased by **$40.9 million**[207](index=207&type=chunk)[208](index=208&type=chunk)[234](index=234&type=chunk) - The Allowance for Credit Losses (ACL) stood at **$7.0 million**, or **0.85%** of gross loans, at June 30, 2023, up from **$4.4 million**, or **0.57%**, at December 31, 2022. The increase is mainly attributed to the adoption of the CECL methodology[140](index=140&type=chunk)[262](index=262&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=42&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section is marked 'Not Applicable' for the period, indicating no new or materially changed market risk disclosures since the last annual report - The company has indicated that this item is not applicable for this quarterly report[277](index=277&type=chunk) [Item 4. Controls and Procedures](index=42&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls and procedures were effective as of June 30, 2023, with no material changes to internal control over financial reporting during the quarter - Based on an evaluation as of June 30, 2023, the CEO and CFO concluded that the Company's disclosure controls and procedures were effective[283](index=283&type=chunk) - No changes in internal control over financial reporting occurred during the quarter ended June 30, 2023, that have materially affected, or are reasonably likely to materially affect, the Company's internal controls[284](index=284&type=chunk) [PART II. OTHER INFORMATION](index=43&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=43&type=section&id=Item%201.%20Legal%20Proceedings) The company reported no material legal proceedings during the period - There are no legal proceedings to report[285](index=285&type=chunk) [Item 1A. Risk Factors](index=43&type=section&id=Item%201A.%20Risk%20Factors) This section is marked 'Not Applicable', indicating no material changes from previously disclosed risk factors in the Annual Report on Form 10-K - This item is not applicable for this quarterly report[285](index=285&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=43&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered sales of equity securities during the period - There were no unregistered sales of equity securities to report[275](index=275&type=chunk) [Item 6. Exhibits](index=43&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including CEO and CFO certifications and XBRL data files - The report lists several exhibits, including Sarbanes-Oxley Act certifications (31.1, 31.2, 32.1, 32.2) and various XBRL filings[285](index=285&type=chunk)