BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Consolidated ~~Consolidated~~ Statements of Financial Condition

(In thousands, except share and per share amounts)

June 30, 2020 December 31, 2019
(Unaudited)
Assets:
Cash and due from banks $ 14,700 $ 3,016
Interest-bearing deposits in other banks 25,148 12,550
Cash and cash equivalents 39,848 15,566
Securities available-for-sale, at fair value 10,192 11,006
Loans receivable held for sale, at lower of cost or fair value 49,719 -
Loans receivable held for investment, net of allowance of $3,215 and $3,182 374,417 397,847
Accrued interest receivable 1,291 1,223
Federal Home Loan Bank (FHLB) stock, at cost 3,586 2,916
Office properties and equipment, net 2,730 2,783
Bank owned life insurance 3,123 3,100
Deferred tax assets, net 5,393 5,220
Investment in affordable housing limited partnership 111 163
Other assets 894 545
Total assets $ 491,304 $ 440,369

Liabilities and stockholders’ equity

Liabilities:
Deposits $ 315,778 $ 297,724
FHLB advances 116,500 84,000
Junior subordinated debentures 3,825 4,335
Advance payments by borrowers for taxes and insurance 1,076 1,033
Accrued expenses and other liabilities 4,605 4,429
Total liabilities 441,784 $ 391,521

Stockholders' Equity:
Preferred stock, $.01 par value, authorized 1,000,000 shares; none issued or outstanding - -
Common stock, $.01 par value, voting, authorized 50,000,000 shares at June 30, 2020 and December 31, 2019; issued 21,900,397 shares at June 30, 2020 and 21,729,249 shares at December 31, 2019; outstanding 19,282,571 shares at June 30, 2020 and 19,111,423 shares at December 31, 2019 219 218
Common stock, $.01 par value, non-voting, authorized 25,000,000 shares at June 30, 2020 and December 31, 2019; issued and outstanding 8,756,396 shares at June 30, 2020 and December 31, 2019 87 87
Additional paid-in capital 46,650 46,426
Retained earnings 8,608 8,425
Unearned Employee Stock Ownership Plan (ESOP) shares (927 ) (959 )
Accumulated other comprehensive gain (loss), net of tax 209 (23 )
Treasury stock-at cost, 2,617,826 shares at June 30, 2020 and at December 31, 2019 (5,326 ) (5,326 )
Total stockholders’ equity 49,520 48,848
Total liabilities and stockholders’ equity $ 491,304 $ 440,369

June 30, 2021 December 31, 2020
(Unaudited)
Assets:
Cash and due from banks
$
41,730

$
71,110

Interest-bearing deposits in other banks
168,653

24,999

Cash and cash equivalents
210,383

96,109

Securities available-for-sale, at fair value
158,832

10,698

Loans receivable held for investment, net of allowance of $3,296 and $3,215

614,718

360,129

Accrued interest receivable
2,572

1,202

Federal Home Loan Bank (FHLB) stock

2,896

3,431

Federal Reserve Bank (FRB) stock
693
0

Office properties and equipment, net
9,159

2,540

Bank owned life insurance
3,168

3,147

Deferred tax assets, net
5,513

5,633

Core deposit intangible, net
3,198
0

Goodwill 25,996
0

Other assets
3,870

489

Total assets $ 1,040,998 $ 483,378

Liabilities and stockholders’ equity
Liabilities:
Deposits
$
705,041

$
315,630

Securities sold under agreements to repurchase
70,660 0
FHLB advances
96,022

110,500

Junior subordinated debentures
2,805

3,315

Notes payable 14,000
0

Accrued expenses and other liabilities
8,975

5,048

Total liabilities 897,503
434,493
Cumulative Redeemable Perpetual Preferred stock, Series A, authorized 3,000 shares at June 30, 2021 and NaN at December 31, 2020; issued and outstanding 3,000 shares at June 30, 2021 and NaN at December 31, 2020, liquidation value $1,000 per share

3,000

0

Common stock, Class A, $0.01 par value, voting, authorized 75,000,000 shares at June 30, 2021 and 50,000,000 shares at December 31, 2020; issued 46,248,710 shares at June 30, 2021 and 21,899,584 shares at December 31, 2020; outstanding 43,630,884 shares at June 30, 2021 and 19,281,758 shares at December 31, 2020
462

219

Common stock, Class B, $0.01 par value, non-voting, authorized 15,000,000 shares at June 30, 2021 and 0ne at December 31, 2020; issued and outstanding 11,404,621 shares at June 30, 2021 and 0ne at December 31, 2020
114
0

Common stock, Class C, $0.01 par value, non-voting, authorized 25,000,000 shares at June 30, 2021 and December 31, 2020; issued and outstanding 16,689,775 at June 30, 2021 and 8,756,396 shares at December 31, 2020
167

87

Additional paid-in capital
140,125

46,851

Retained earnings
4,997

7,783

Unearned Employee Stock Ownership Plan (ESOP) shares
(861
)

(893
)
Accumulated other comprehensive income, net of tax
785

164

Treasury stock-at cost, 2,617,826 shares at June 30, 2021 and at December 31, 2020

(5,326
)

(5,326
)
Total Broadway Financial Corporation and Subsidiary stockholders’ equity 143,463 48,885
Non-controlling interest 32 0
Total liabilities and stockholders’ equity $ 1,040,998 $ 483,378

See accompanying notes to unaudited consolidated financial statements.

Table of Contents

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Consolidated~~Consolidated~~ Statements of Operations and Comprehensive Income (Loss)

(Unaudited)

Three Months Ended
June 30,

Six Months Ended
June 30,

2020 2019 2020 2019
(In thousands, except per share)
Interest income:
Interest and fees on loans receivable $ 4,429 $ 3,841 $ 8,788 $ 7,956
Interest on mortgage-backed and other securities 65 95 135 193
Other interest income 74 149 216 309
Total interest income 4,568 4,085 9,139 8,458

Interest expense:
Interest on deposits 967 1,097 2,022 2,124
Interest on borrowings 570 526 1,188 1,059
Total interest expense 1,537 1,623 3,210 3,183

Net interest income 3,031 2,462 5,929 5,275
Loan loss provision (recapture) - (158 ) 29 (348 )
Net interest income after loan loss provision (recapture) 3,031 2,620 5,900 5,623

Non-interest income:
Service charges 94 115 238 237
Gain on sale of loans 116 - 123 -
CDFI Grant - - - 233
Other 32 24 78 45
Total non-interest income 242 139 439 515

Non-interest expense:
Compensation and benefits 1,983 1,875 4,038 3,757
Occupancy expense 320 312 635 620
Information services 221 218 458 426
Professional services 571 235 835 574
Office services and supplies 87 67 163 135
Loan related expenses 20 47 21 58
Corporate insurance 32 34 64 69
Amortization of investment in affordable housing limited partnership 8 49 53 98
Other 160 185 284 345
Total non-interest expense 3,402 3,022 6,551 6,082

(Loss) income before income taxes (129 ) (263 ) (212 ) 56
Income tax benefit (345 ) (128 ) (395 ) (86 )
Net income (loss) $ 216 $ (135 ) $ 183 $ 142

Other comprehensive income, net of tax:
Unrealized gains on securities available-for-sale arising during the period $ 155 $ 157 $ 330 $ 353
Income tax expense 46 46 98 104
Other comprehensive income, net of tax 109 111 232 249

Comprehensive income (loss) $ 325 $ (24 ) $ 415 $ 391

Earnings (loss) per common share-basic $ 0.01 $ (0.01 ) $ 0.01 $ 0.01
Earnings (loss) per common share-diluted $ 0.01 $ (0.01 ) $ 0.01 $ 0.01

Three Months Ended
June 30,

Six Months Ended
June 30,

2021
2020
2021
2020

(In thousands, except per share)

Interest income:
Interest and fees on loans receivable $ 6,300 $ 4,429 $ 9,944 $ 8,788
Interest on available for sale securities 440 65 496 135
Other interest income 144 74 221 216
Total interest income 6,884 4,568 10,661 9,139

Interest expense:
Interest on deposits 477 967 860 2,022
Interest on borrowings 586 570 1,135 1,188
Total interest expense 1,063 1,537 1,995 3,210

Net interest income 5,821 3,031 8,666 5,929
Loan loss provision
81 0 81 29
Net interest income after loan loss provision 5,740 3,031 8,585 5,900

Non-interest income:
Service charges 36 94 129 238
Gain on sale of loans 0 116 0 123
CDFI Grant 1,826 0 1,826 0
Other 330 32 360 78
Total non-interest income 2,192 242 2,315 439

Non-interest expense:
Compensation and benefits 2,819 1,983 8,209 4,038
Occupancy expense 627 320 935 635
Information services 566 221 807 458
Professional services 513 571 2,452 835
Supervisory costs
177 95 247 112
Office services and supplies 59 87 154 163
Corporate insurance 8 32 254 64
Amortization of core deposit intangible 131 0 131 0
Other 474 93 812 246
Total non-interest expense 5,374 3,402 14,001 6,551

Income (loss) before income taxes 2,558 (129 ) (3,101 ) (212 )
Income tax expense (benefit) 1,824 (345 ) (348 ) (395 )
Net income (loss) $ 734 $ 216 $ (2,753 ) $ 183
Less: Net income attributable to non-controlling interest
(33 ) 0 (33 ) 0
Net Income (loss) Attributable to Broadway Financial Corporation
$
701 $
216 $
(2,786 ) $
183

Other comprehensive income, net of tax:
Unrealized gains on securities available-for-sale arising during the period $ 1,022 $ 155 $ 864 $ 330
Income tax expense 290 46 243 98
Other comprehensive income, net of tax 732 109 621 232

Comprehensive income (loss) $ 1,433 $ 325 $ (2,165 ) $ 415

Earnings (loss) per common share-basic $ 0.01
$
0.01
$ (0.06 ) $ 0.01
Earnings (loss) per common share-diluted $ 0.01 $ 0.01 $ (0.06 ) $ 0.01

See accompanying notes to unaudited consolidated financial statements.

Table of Contents

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Consolidated Statements of Cash Flows

(Unaudited)

Six Months Ended June 30,
2020 2019
(In thousands)
Cash flows from operating activities:

Net income $ 183 $ 142
Adjustments to reconcile net income to net cash used in operating activities:
Loan loss provision (recapture) 29 (348 )
Provision for losses on REOs - 13
Depreciation 115 115
Net amortization of deferred loan origination costs 136 95
Net amortization of premiums on mortgage-backed securities 19 13
Amortization of investment in affordable housing limited partnership 53 98
Director compensation expense-common stock 45 52
Stock-based compensation expense 179 109
ESOP compensation expense 32 28
Earnings on bank owned life insurance (23 ) (26 )
Originations of loans receivable held for sale (110,908 ) (10,280 )
Proceeds from sales of loans receivable held for sale 60,997 -
Repayments on loans receivable held for sale 315 46
Gain on sale of loans receivable held for sale (123 ) -
Change in assets and liabilities:
Net change in deferred taxes (271 ) (31 )
Net change in accrued interest receivable (68 ) (111 )
Net change in other assets (349 ) 107
Net change in advance payments by borrowers for taxes and insurance 43 29
Net change in accrued expenses and other liabilities 442 (281 )
Net cash used in operating activities (49,154 ) (10,230 )

Cash flows from investing activities:

Net change in loans receivable held for investment 23,265 (7,153 )
Principal payments on available-for-sale securities 1,125 952
Proceeds from sales of REO - 820
Purchase of FHLB stock (670 ) -
Purchase of office properties and equipment (328 ) (23 )
Net cash provided by (used in) investing activities 23,392 (5,404 )

Cash flows from financing activities:

Net change in deposits 18,054 14,384
Proceeds from FHLB advances 66,000 10,000
Repayments of FHLB advances (33,500 ) (5,000 )
Repayments of junior subordinated debentures (510 ) (255 )
Net cash provided by financing activities 50,044 19,129

Net change in cash and cash equivalents 24,282 3,495
Cash and cash equivalents at beginning of the period 15,566 16,651
Cash and cash equivalents at end of the period $ 39,848 $ 20,146

Supplemental disclosures of cash flow information:
Cash paid for interest $ 3,290 $ 2,971
Cash paid for income taxes 3 13
Supplemental disclosures of non-cash investing and financing:
Transfers of loans receivable held for sale to loans receivable held for investment $ - $ 1,064
Transfers of loans receivable held for investment to loans receivable held for sale - 10,684
Initial Recognition of Operating Lease Right-to-Use Assets - 1,120
Initial Recognition of Operating Lease Liabilities - 1,120

Six Months Ended June 30,
2021
2020

(In thousands)
Cash flows from operating activities:

Net (loss) income
$
(2,753
)

$
183

Adjustments to reconcile net income to net cash used in operating activities:
Loan loss provision

81

29

Depreciation
345

115

Net amortization of deferred loan origination costs
964

136

Net amortization of premiums on available for sale securities
231

19

Amortization of investment in affordable housing limited partnership
26
53

Amortization of core deposit intangible
131 0
Director compensation expense-common stock
45

45

Accretion of premium on FHLB advances (7 ) 0
Stock-based compensation expense
169

179

Valuation allowance on deferred tax asset
370 0
ESOP compensation expense
47

32

Earnings on bank owned life insurance
(21
)

(23
)
Originations of loans receivable held for sale
0

(110,908
)
Proceeds from sales of loans receivable held for sale
0

60,997

Repayments on loans receivable held for sale
0
315

Gain on sale of loans receivable held for sale
0

(123
)
Change in assets and liabilities:
Net change in deferred taxes
(1,210
)

(271
)
Net change in accrued interest receivable
267

(68
)
Net change in other assets
(1,118
)

(349
)
Net change in advance payments by borrowers for taxes and insurance
310

43

Net change in accrued expenses and other liabilities
(447
)

442

Net cash used in operating activities
(2,570
)

(49,154
)

Cash flows from investing activities:
Cash acquired in merger
84,745 0
Net change in loans receivable held for investment
(29,749
)

23,265

Principal payments on available-for-sale securities
6,547

1,125

Purchase of available-for-sale securities
(4,073 ) 0

Purchase of FHLB stock
(152
)

(670
)
Proceeds from redemption of FHLB stock
1,055
0

Purchase of office properties and equipment
(56
)

(328
)
Proceeds from disposals of office property and equipment 45 0
Net cash provided by investing activities
58,362

23,392

Cash flows from financing activities:
Net change in deposits
35,690

18,054

Net increase in securities sold under agreements to repurchase
10,613 0
Proceeds from sale of stock (net of costs) 30,837 0
Distributions to non-controlling interest (165 ) 0
Proceeds from FHLB advances
5,000

66,000

Repayments of FHLB advances
(22,535
)

(33,500
)
Stock cancelled for income tax withholding
(448 ) 0
Repayments of junior subordinated debentures
(510
)

(510
)
Net cash provided by financing activities
58,482

50,044

Net change in cash and cash equivalents
114,274

24,282

Cash and cash equivalents at beginning of the period
96,109

15,566

Cash and cash equivalents at end of the period
$
210,383

$
39,848

Supplemental disclosures of cash flow information:
Cash paid for interest
$
1,803

$
3,290

Cash paid for income taxes
429

3

Assets acquired (liabilities assumed) in acquisition:

Securities available for sale, at fair value
$ 149,975 $ 0
Loans receivable
225,885
0

Accrued interest receivable
1,637
0

FHLB and FRB stock
1,061
0

Office property and equipment
6,953
0

Goodwill
25,966
0

Core deposit intangible 3,329 0
Other assets 2,290 0
Deposits (353,722 ) 0
FHLB advances (3,166 ) 0
Securities sold under agreements to repurchase (59,945 ) 0
Other borrowings (14,000 ) 0
Deferred taxes (717 ) 0
Accrued expenses and other liabilities (4,063 ) 0
Preferred stock (3,000 ) 0
Common stock (63,257 ) 0

See accompanying notes to unaudited consolidated financial statements.

Table of Contents

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Consolidated S~~Consolidated Statements~~tatements of Changes in Stockholders’ Equity

(Unaudited)

Three-Month Period Ended June 30, 2020 and 2019
Common
Stock
Voting Common
Stock
Non-Voting Additional
Paid-in
Capital Accumulated
Other
Comprehensive
Income Retained
Earnings
(Substantially
Restricted) Unearned
ESOP
Shares Treasury
Stock Total
Stockholders’
Equity
(In thousands)
Balance at April 1, 2020 $ 219 $ 87 $ 46,550 $ 100 $ 8,392 $ (942 ) $ (5,326 ) $ 49,080
Net income for the three months ended June 30, 2020 - - - - 216 - - 216
Release of unearned ESOP shares - - - - - 15 - 15
Restricted stock Compensation expense - - 90 - - - - 90
Stock option compensation expense - - 10 - - - - 10
Other comprehensive income, net of tax - - - 109 - - - 109
Balance at June 30, 2020 $ 219 $ 87 $ 46,650 $ 209 $ 8,608 $ (927 ) $ (5,326 ) $ 49,520
Balance at April 1, 2019 $ 218 $ 87 $ 46,219 $ (145 ) $ 8,908 $ (1,010 ) $ (5,326 ) $ 48,951
Net income for the three months ended June 30, 2019 - - - - (135 ) - - (135 )
Release of unearned ESOP shares - - (2 ) - - 16 - 14
Restricted stock Compensation expense - - 65 - - - - 65
Stock option compensation expense - - 10 - - - - 10
Other comprehensive income, net of tax - - - 111 - - - 111
Balance at June 30, 2019 $ 218 $ 87 $ 46,292 $ (34 ) $ 8,773 $ (994 ) $ (5,326 ) $ 49,016

Three-Month Period Ended June 30, 2021 and 2020

Preferred Stock Non-Voting

Common
Stock
Voting

Common
Stock Non-Voting

Additional
Paid‑in
Capital

Accumulated Other Comprehensive Income

Retained Earnings (Substantially Restricted)

Unearned
ESOP Shares

Treasury
Stock

Non-controlling Interest

Total
Stockholders’
Equity

(In thousands)

Balance at March 31, 2021 $
0 $
218 $
87 $
46,625 $
53 $
4,296 $ (877 ) $
(5,326 ) $
0 $
45,076
Net income for the three months ended June 30, 2021
0 0 0 0 0 701 0 0
33

734

Preferred shares issued in business combination
3,000

0

0

0

0

0

0

0

0

3,000

Common shares issued in business combination
0

140

114

62,839

0

0

0

0

164

63,257

Shares transferred from voting to non-voting after business combination
0

(7

)

7

0

0

0

0

0

0

0

Common shares issued in private placement
0

112

73

30,652

0

0

0

0

0

30,837

Release of unearned ESOP shares
0

0

0

9

0

0

16

0

0

25

Common stock cancelled for payment of tax withholdings
0

(1

)

0

0

0

0

0

0

0

(1

)

Payment to non-controlling interest
0

0

0

0

0

0

0

0

(165

)

(165

)

Other comprehensive income, net of tax
0

0

0

0

732

0

0

0

0

732

Balance at June 30, 2021 $
3,000
$
462
$
281
$
140,125
$
785
$
4,997
$
(861
)
$
(5,326
)
$
32
$
143,495

Balance at March 31, 2020 $
0 $
219 $ 87 $
46,550 $
100 $
8,392 $
(942 ) $
(5,326 ) $
0 $
49,080
Net income for the three months ended June 30, 2020
0 0 0 0 0 216 0 0 0
216
Release of unearned ESOP shares 0 0 0 0 0 0 15 0 0
15
Restricted stock Compensation expense 0 0 0 90 0 0 0 0 0
90
Stock option compensation expense 0 0 0 10 0 0 0 0 0
10
Other comprehensive income, net of tax
0

0

0

0

109

0

0

0
0

109

Balance at June 30, 2020 $
0
$
219
$
87
$
46,650
$
209
$
8,608
$
(927
)
$
(5,326
)
$
0
$
49,520

See accompanying notes to unaudited consolidated financial statements.
4
4
Six-Month Period Ended June 30, 2020 and 2019
Common
Stock
Voting Common
Stock
Non-Voting Additional
Paid-in
Capital Accumulated
Other
Comprehensive
Income Retained
Earnings
(Substantially
Restricted) Unearned
ESOP
Shares Treasury
Stock Total
Stockholders’
Equity
(In thousands)
Balance at January 1, 2020 $ 218 $ 87 $ 46,426 $ (23 ) $ 8,425 $ (959 ) $ (5,326 ) $ 48,848
Net income for the six months ended June 30, 2020 - - - - 183 - - 183
Release of unearned ESOP shares - - - - - 32 - 32
Restricted stock Compensation expense 1 - 160 - - - - 161
Stock awarded to directors - - 45 - - - - 45
Stock option compensation expense - - 19 - - - - 19
Other comprehensive loss, net of tax - - - 232 - - - 232
Balance at June 30, 2020 $ 219 $ 87 $ 46,650 $ 209 $ 8,608 $ (927 ) $ (5,326 ) $ 49,520
Balance at January 1, 2019 $ 213 $ 87 $ 46,141 $ (283 ) $ 8,631 $ (1,027 ) $ (5,326 ) $ 48,436
Net income for the six months ended June 30, 2019 - - - - 142 - - 142
Release of unearned ESOP shares - - (5 ) - - 33 - 28
Restricted stock Compensation expense 5 - 85 - - - - 90
Stock awarded to directors - - 52 - - - - 52
Stock option compensation expense - - 19 - - - - 19
Other comprehensive loss, net of tax - - - 249 - - - 249
Balance at June 30, 2019 $ 218 $ 87 $ 46,292 $ (34 ) $ 8,773 $ (994 ) $ (5,326 ) $ 49,016

Table of Contents
Six-Month Period Ended June 30, 2021 and 2020

Preferred Stock Non-Voting

Common
Stock
Voting

Common
Stock Non-Voting

Additional
Paid‑in
Capital

Accumulated Other Comprehensive Income

Retained Earnings (Substantially Restricted)

Unearned
ESOP Shares

Treasury
Stock

Non-controlling interest

Total
Stockholders’
Equity

(In thousands)

Balance at January 1, 2021 $
0 $
219 $
87 $
46,851 $
164 $
7,783 $
(893 ) $
(5,326 ) $
0 $
48,885
Net income (loss) for the six months ended June 30, 2021
0 0 0 0 0 (2,786 ) 0 0 33 (2,753 )
Preferred shares issued in business combination 3,000 0 0 0 0 0 0 0 0 3,000
Common shares issued in business combination 0 140 114 62,839 0 0 0 0 164 63,257
Shares transferred from voting to non-voting after business combination 0 (7 ) 7 0 0 0 0 0 0 0
Common shares issued in private placement 0 112 73 30,652 0 0 0 0 0 30,837
Release of unearned ESOP shares 0 0 0 15 0 0 32 0 0 47
Restricted stock compensation expense 0 0 0 162 0 0 0 0 0 162
Stock awarded to directors 0 0 0 45 0 0 0 0 0 45
Stock option compensation expense 0 0 0 7 0 0 0 0 0 7
Common stock cancelled for payment of tax withholdings 0 (2 ) 0 (446 ) 0 0 0 0 0 (448 )
Payment to non-controlling interest 0 0 0 0 0 0 0 0 (165 ) (165 )
Other comprehensive income, net of tax
0

0

0

0

621

0

0

0

0

621

Balance at June 30, 2021 $
3,000
$
462
$
281
$
140,125
$
785
$
4,997
$
(861
)
$
(5,326
)
$
32
$
143,495

Balance at January 1, 2020 $
0 $
218 $
87 $
46,426 $
(23 ) $
8,425 $
(959 ) $
(5,326 ) $
0
$
48,848
Net income for the six months ended June 30, 2020
0 0 0 0 0 183 0 0 0
183
Release of unearned ESOP shares 0 0 0 0 0 0 32 0 0
32
Restricted stock compensation expense 0 1 0 160 0 0 0 0 0
161
Stock awarded to directors 0 0 0 45 0 0 0 0 0
45
Stock option compensation expense 0 0 0 19 0 0 0 0 0
19
Other comprehensive loss, net of tax
0

0

0

0

232

0

0

0
0

232

Balance at June 30, 2020 $
0
$
219
$
87
$
46,650
$
209
$
8,608
$
(927
)
$
(5,326
)
$
0
$
49,520

See accompanying notes to unaudited consolidated financial statements.
5

5
Table of Contents

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Unaudited Consolidated Financial Statements
~~June 30, 2020~~

NOTE (1) – Basis of Financial Statement Presentation

The accompanying unaudited consolidated financial statements include Broadway Financial Corporation (the “Company”) and its wholly owned subsidiary, ~~Broadway Federal~~City First Bank, ~~f.s.b.~~National Association (the “Bank” and, together with the Company, ~~“Broadway”~~“City First Broadway”). Also included in the unaudited consolidated financial statements isare 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. The results of Broadway Service Corporation, a wholly owned subsidiary of the ~~Bank.~~Bank, are also included in the unaudited consolidated financial statements. 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 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~~Company’s consolidated annual financial statements included in its Annual Report on Form 10-K for the year ended December 31, ~~2019~~2020 (“2020 Form 10-K”) and, accordingly, should be read in conjunction with such audited consolidated financial statements. In the opinion of management, all adjustments (all of which are normal and recurring in nature) considered necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, ~~2020~~2021 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2020.~~
~~Recent~~2021.

Subsequent events have been evaluated through August 23, 2021, which is the date these financial statements were issued.

Except as discussed below, our accounting policies are described in Note 1 – Summary of Significant Accounting ~~Pronouncements~~
~~In June 2016,~~Policies of our audited consolidated financial statements included in (the “2020 Form 10-K”).

Purchased Credit Impaired Loans

As part our recent merger, see Note 2 – Business Combination, the ~~FASB issued ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement~~Company acquired certain loans that have shown evidence of ~~Credit Losses on Financial Instruments.” ASU 2016-13 replaces the incurred loss model with an expected loss model, which is~~credit deterioration since origination; these loans are referred to as the current expected credit loss (CECL) model. The CECL model is applicable to the measurement of credit losses on financial assets measured at amortized cost, including loan receivables, held-to-maturity debt securities, and reinsurance receivables. It also applies to off-balance sheet credit exposures not accounted for as insurance (such as loan commitments, standby letters of credit, financial guarantees, and other similar instruments) and net investments in leases recognized by a lessor. For debt securities with other-than-temporary impairment, the guidance will be applied prospectively. Existing purchased credit impaired ~~(PCI) assets~~loans (“PCI loans”). These PCI loans are recorded at their fair value at acquisition, such that there is no carryover of the seller’s allowance for loan losses. Such PCI loans are accounted for individually. The Company estimates the amount and timing of expected cash flows for each PCI loan, and the expected cash flows in excess of the allocated fair value is recorded as interest income over the remaining life of the loan (accretable yield). The excess of the loan’s contractual principal and interest over expected cash flows is not recorded (non-accretable difference). Over the life of the PCI loan, expected cash flows continue to be estimated each quarter. If the present value of expected cash flows decreases from the prior estimate, a provision for loan losses is recorded and an allowance for loan losses is established. If the present value of expected cash flows increases from the prior estimate, the increase is recognized as part of future interest income. If the timing and amount of cash flows is uncertain, then cash payments received will be ~~grandfathered~~recognized as a reduction of the recorded investment.

Business Combinations

Business combinations are accounted for using the acquisition accounting method. Under the purchase accounting method, the Company measures the identifiable assets acquired, including identifiable intangible assets, and ~~classified as purchased credit deteriorated (PCD) assets~~liabilities assumed in a business combination at the date of adoption. The asset will be grossed up for the allowance for expected credit losses for all PCD assets at the date of adoption and will continue to recognize the noncredit discount in interest income basedfair value on the ~~yield~~acquisition date. Goodwill is generally determined as the excess of ~~such~~the fair value of the consideration transferred, plus the fair value of any noncontrolling interests in the acquiree, over the fair value of the net assets acquired and liabilities assumed as of the ~~adoption~~acquisition date. ~~Subsequent changes~~See Note 2 - Business Combination and Note 7 - Goodwill and Intangible Assets for further information.

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BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Unaudited Consolidated Financial Statements

Goodwill and intangible assets acquired in ~~expected credit losses will~~a purchase business combination and that are determined to have an indefinite useful life are not amortized, but tested for impairment at least annually or more frequently if events and circumstances exist that indicate the necessity for such impairment tests to be ~~recorded through~~performed. The Company has selected November 30th as the ~~allowance. For all other~~date to perform the annual impairment test. Intangible assets ~~within~~with definite useful lives are amortized over their estimated useful lives to their estimated residual values. Goodwill is the ~~scope~~only intangible asset with an indefinite life on the Company’s consolidated statement of ~~CECL, a cumulative-effect adjustment will be recognized in retained earnings as of~~financial condition.

Core deposit intangible assets arising from mergers and acquisitions are amortized on an accelerated basis reflecting the ~~beginning of the first reporting period~~pattern in which the ~~guidance~~economic benefits of the intangible asset are consumed or otherwise used up. The estimated life of the core deposit intangible is ~~effective.~~
~~On October 16, 2019,~~approximately 10 years.

Variable Interest Entities (“VIE”)

An entity is considered to be a VIE when it does not have sufficient equity at investment at risk, the ~~FASB voted~~equity investors as a group lack the characteristics of a controlling financial interest, or the entity is structured with disproportionate voting rights and substantially all of the entity’s activities are conducted on behalf of an investor with disproportionately few voting rights. The Company is required to ~~affirm~~consolidate a VIE when it holds a variable interest in the ~~proposed amended effective date for ASU 2016-13 for smaller reporting companies~~VIE and is also the primary beneficiary of the VIE. CFC 45 is a Community Development Entity (“~~SRCs”~~CDE”) ~~as defined by~~, and is considered to be a VIE. The Company is the ~~SEC. The final ASU, was issued in November 2019, delays~~primary beneficiary because it has the ~~implementation date for ASU 2016-13~~power to ~~fiscal years beginning after December 15, 2022. SRCs~~direct activities that most significantly affect the economic performance of CFC 45 and have the obligation to absorb the majority of the losses or benefits of its financial performance.

Noncontrolling Interests

For consolidated subsidiaries that are ~~defined as companies with~~ less than ~~$250 million~~wholly-owned, the third-party holdings of ~~public float~~equity interests are referred to as noncontrolling interests. The portion of net income attributable to noncontrolling interests for such subsidiaries is presented as net income applicable to noncontrolling interests on the consolidated statements of operations and comprehensive income, and the portion of the stockholders’ equity of such subsidiaries is presented as noncontrolling interests on the consolidated statements of financial condition and consolidated statements of changes in stockholders’ equity.

Recent Accounting Guidance

In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2020-04, Reference Rate Reform (Topic 848), Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This ASU provides optional expedients and exceptions regarding the accounting related to the modifications of certain contracts, relationships and other transactions that are affected by reference rate reform related to contracts that reference LIBOR or ~~less than $100 million in annual revenues for~~other reference rates that could be discontinued due to reference rate reform. This guidance was effective immediately and the ~~previous year and no public float or public float of less than $700 million. The Company qualifies as an SRC, and management will implement ASU 2016-13 in the first quarter of 2023.~~amendments may be applied prospectively through December 31, 2022. The estimated financial impact has not yet been determined.
In April 2019, the FASB issued ASU No. 2019-04, Codification Improvements to Topic 326, Financial Instruments - Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments. This ASU is effective January 1, 2020 and clarifies the scope of the credit losses standard and addresses issues related to accrued interest receivable balances, recoveries, variable interest rates and prepayments, among other things. The amendments to Topic 326 have the same effective dates as ASU 2016-13. This guidance did not have a significant impact on the Company's consolidated financial statements.
In May 2019, the FASB issued ASU No. 2019-05, Financial Instruments - Credit Losses (Topic 326): Targeted Transition Relief. This ASU allows entities to irrevocably elect the fair value option on an instrument-by-instrument basis for eligible financial assets measured at amortized cost basis upon adoption of the credit loss standards. The effective date for this ASU is the same as for ASU 2016-13. We will evaluate this ASU in conjunction with ASU 2016-13 to determine its impact on our financial condition and results of operations.
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~~BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY~~

~~Notes to Unaudited Consolidated Financial Statements (continued)~~

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement. The ASU was issued to improve the effectiveness of disclosures surrounding fair value measurements. The ASU removes numerous disclosures from Topic 820 including transfers between level 1 and 2 of the fair value hierarchy, the policy for timing of transfers between levels, and the valuation process for level 3 fair value measurements. The ASU also modified and added disclosure requirements regarding changes in unrealized gains and losses included in other comprehensive income, as well as the range and weighted average of unobservable inputs for level 3 fair value measurements. The ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted. The guidance did not have a significant impact on the Company's consolidated financial statements.

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes. This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. The amendments in this ASU are intended to simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments are also intended to improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. ~~We are currently in the process of evaluating the~~The guidance did not have a significant impact ~~of this ASU~~ on the Company’s consolidated financial statements.

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BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Unaudited Consolidated Financial Statements

Accounting Pronouncements Yet to Be Adopted

In ~~March 2020,~~June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” ASU 2016-13 replaces the incurred loss model with an expected loss model, which is referred to as the current expected credit loss (“CECL”) model. The CECL model is applicable to the measurement of credit losses on financial assets measured at amortized cost, including loan receivables, held-to-maturity debt securities, and reinsurance receivables. It also applies to off-balance sheet credit exposures not accounted for as insurance (such as loan commitments, standby letters of credit, financial guarantees, and other similar instruments) and net investments in leases recognized by a lessor. For debt securities with other-than-temporary impairment, the guidance will be applied prospectively. Existing purchased credit impaired (“PCI”) assets will be grandfathered and classified as purchased credit deteriorated (“PCD”) assets at the date of adoption. The asset will be grossed up for the allowance for expected credit losses for all PCD assets at the date of adoption and the noncredit discount in interest income based on the yield of such assets as of the adoption date. Subsequent changes in expected credit losses will be recorded through the allowance. For all other assets within the scope of CECL, a cumulative-effect adjustment will be recognized in retained earnings as of the beginning of the first reporting period in which the guidance is effective.

On October 16, 2019, the FASB voted to affirm the proposed amended effective date for ASU 2016-13 for smaller reporting companies (“SRCs”) as defined by the SEC. The final ASU, which was issued in November 2019, delays the implementation date for ASU 2016-13 to fiscal years beginning after December 15, 2022. SRCs are defined as companies with less than $250 million of public float or less than $100 million in annual revenues for the previous year and no public float or public float of less than $700 million. The Company qualifies as an SRC, and management will implement ASU 2016-13 in the first quarter of 2023. The estimated financial impact has not yet been determined.

In April 2019, the FASB issued ASU No. ~~2020-04, Reference Rate Reform (Topic 848), Facilitation~~2019-04, Codification Improvements to Topic 326, Financial Instruments - Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments. This ASU is effective January 1, 2020 and clarifies the scope of the ~~Effects of Reference Rate Reform on Financial Reporting. This ASU provides optional expedients~~credit losses standard and ~~exceptions regarding the accounting~~addresses issues related to accrued interest receivable balances, recoveries, variable interest rates and prepayments, among other things. The amendments to Topic 326 have the modifications of certain contracts, relationships and other transactions that are affected by reference rate reform related to contracts that reference LIBOR or other reference rates that could be discontinued due to reference rate reform. This guidance issame effective ~~immediately and the amendments may be applied prospectively through December 31, 2022.~~dates as ASU 2016-13. This guidance did not have a significant impact on the ~~Company's~~Company’s consolidated financial ~~statements~~statements.

In May 2019, the FASB issued ASU No. 2019-05, Financial Instruments - Credit Losses (Topic 326): Targeted Transition Relief. This ASU allows entities to irrevocably elect the fair value option on an instrument-by-instrument basis for eligible financial assets measured at amortized cost basis upon adoption of the credit loss standards. The effective date for this ASU is the same as for ASU 2016-13. We will evaluate this ASU in conjunction with ASU 2016-13 to determine its impact on our financial condition and results of operations.

NOTE (2) – Business Combination

The Company completed its merger with CFBanc Corporation (“CFBanc”) on April 1, 2021, with the Company continuing as the surviving entity (the “CFBanc Merger”). Immediately following this merger, Broadway Federal Bank, f.s.b., a subsidiary of Broadway Financial Corporation, merged with and into City First Bank of D.C., National Association, with City First Bank of D.C., National Association continuing as the surviving entity (which concurrently changed its name to City First Bank, National Association). As of the acquisition date, CFBanc Corporation had $471.0 million in total assets, $227.7 million in gross loans, and $353.7 million of total deposits.

On April 1, 2021, (1) each share of CFBanc Corporation’s Class A Common Stock, par value $0.50 per share, and Class B Common Stock, par value $0.50 per share, issued and outstanding immediately prior to the CFBanc Merger was converted into 13.626 validly issued, fully paid and nonassessable shares, respectively, of the voting common stock of the Company, par value $0.01 per share, which were renamed Class A Common Stock, and a new class of non-voting common stock of the Company, par value $0.01 per share, which was named Class B Common Stock, and (2) each share of Fixed Rate Cumulative Redeemable Perpetual Preferred Stock, Series B, par value $0.50 per share, of CFBanc Corporation (“CFBanc Corporation Preferred Stock”) issued and outstanding immediately prior to the effective time of the CFBanc Merger was converted into 1 validly issued, fully paid and non-assessable share of a new series of preferred stock of the Company, which was designated as the Company’s Fixed Rate Cumulative Redeemable Perpetual Preferred Stock, Series A, with such rights, preferences, privileges and voting powers, and limitations and restrictions thereof, which taken as a whole, are not materially less favorable to the holders of CFBanc Corporation Preferred Stock than the rights, preferences, privileges and voting powers, and limitations and restrictions thereof of CFBanc Corporation Preferred Stock. The total value of the consideration transferred to CFBanc Corporation shareholders was approximately $66.3 million, which was based on the closing price of the Company’s common stock on March 31, 2021, the last trading day prior to the consummation of the merger.

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BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Unaudited Consolidated Financial Statements

The Company accounted for the CFBanc Merger under the acquisition method of accounting which requires purchased assets and liabilities assumed to be recorded at their respective fair values at the date of acquisition. The Company determined the fair value of the acquired assets and assumed liabilities with the assistance of third-party valuation firms. Goodwill in the amount of $26.0 million was recognized in the CFBanc Merger. Goodwill represents the future economic benefits arising from net assets acquired that are not individually identified and separately recognized and is attributable to synergies expected to be derived from the combination of the two entities. Goodwill is not amortized for financial reporting purposes; rather, it is tested for impairment annually, or more frequently if events or changes in circumstances indicate that it might be impaired, by comparing its carrying value to the reporting unit’s fair value. Goodwill recognized in this transaction is not deductible for income tax purposes.

The following table represents the assets acquired and liabilities assumed in the CFBanc Merger as of ~~March 31,~~April 1, 2021, and the fair value adjustments and amounts recorded by the Company as of the same date under the acquisition method of accounting:

CFBanc
Book
Value

Fair Value
Adjustments
     Fair Value
Assets acquired        (In thousands)

Cash and cash equivalents
$
84,745

$
0

$
84,745

Securities available-for-sale
150,052

(77
)

149,975

Loans receivable held for investment:

Gross loans receivable held for investment
227,669

(1,784
)

225,885

Deferred fees and costs
(315
)

315

0

Allowance for loan losses
(2,178
)

2,178

0

225,176

709

225,885

Accrued interest receivable
1,637

0

1,637

FHLB and FRB stock
1,061

0

1,061

Office properties and equipment
5,152

1,801

6,953

Deferred tax assets, net
890

(1,608
)

(718
)
Core deposit intangible
0

3,329

3,329

Other assets
2,290

0

2,290

Total assets $ 471,003 $ 4,154 $ 475,157

Liabilities assumed
Deposits $
353,671
$
51
$
353,722

Securities sold under agreements to repurchase
59,945
0
59,945

FHLB advances
3,057

109

3,166

Notes payable

14,000

0

14,000

Accrued expenses and other liabilities
4,063

0

4,063

Total liabilities $
434,736 $
160 $
434,896

Excess of assets acquired over liabilities assumed $ 36,267 $ 3,994 $
40,261
Consideration paid $
66,257
Goodwill recognized $ 25,996

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BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY
Notes to Unaudited Consolidated Financial Statements

The fair values are preliminary estimates and are subject to adjustment for up to one year after the merger date or when additional information relative to the closing date fair values becomes available and such information is considered final, whichever is earlier. These changes could differ materially from what is presented above.

The contractual amounts due, expected cash flows to be collected, the interest component, and the fair value of loans acquired from CFBanc as of the acquisition date were as follows:

Acquired Loans
(In thousands)

Contractual amounts due
$
231,432

Cash flows not expected to be collected
(3,666
)
Expected cash flows 227,766
Interest component of expected cash flows
(1,881
)
Fair value of acquired loans $ 225,885

A component of total loans acquired from CFBanc were loans that were considered to be purchased credit impaired loans (PCI loans). Refer to Note 6 for additional information regarding PCI loans. The following table presents the amounts that comprise the fair value of PCI loans (in thousands):

Contractual amounts due
$
1,825

Nonaccretable difference (cash flows not expected to be collected)
(634
)
Expected cash flows 1,191
Accretable yield
(346
)
Fair value of acquired loans $ 845

In accordance with generally accepted accounting principles, there was no carryover of the allowance for loan losses that had been previously recorded on loans by CFBanc.

The operating results of CFBanc for the three and six months ended June 30, 2021 are included in the operating results of the Company since the merger date. The following table presents the amounts related to CFBanc’s operations included in the Company’s consolidated statement of operations from April 1 through June 30, 2021:

(In thousands)
Net interest income $
2,896
Net income $
966

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BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY
Notes to Unaudited Consolidated Financial Statements

The following table presents the net interest income, net income, and earnings per share as if the CFBanc Merger was effective as of January 1, 2020.
The unaudited pro forma financial information included in the table below is based on various estimates and is presented for informational purposes only and does not indicate the financial condition or results of operations of the combined Company that would have been achieved for the periods presented had the transactions been completed as of the date indicated or that may be achieved in the future.

Three Months Ended
Six Months Ended

June 30,
2021

June 30,
2020
June 30, 2021
June 30,
2020

(Dollars in thousands except per share amounts)
Net interest income $ 5,821 $ 5,173 $ 11,011 $ 10,331
Net income (loss) 723 476 (3,539 ) 189

Basic earnings per share $ 0.01 $ 0.01 $ (0.06 ) $ 0.00
Diluted earnings per share $ 0.01 $ 0.01 $ (0.06 ) $ 0.00

NOTE ~~(2)~~ (3) – Capital Raise

On April 6, 2021, the Company completed the sale of 18,474,000 shares of Broadway Financial Corporation common stock in private placements to institutional and accredited investors at a purchase price of $1.78 per share for an aggregate purchase price of $32.9 million (net of expenses).

The following table shows the common stock issued on April 1, 2021 as a result of the merger and on April 6, 2021 as a result of the private placements by class:

Common Shares Outstanding

Voting
Class A

Nonvoting
Class B

Nonvoting
Class C

Total
Shares

Shares outstanding March 31, 2021:
19,142,498
0 8,756,396 27,898,894

Shares issued in merger 13,999,870 11,404,621 0 25,404,491
Shares exchanged post-merger (681,300 ) 0 681,300 0
Shares cancelled (52,105 ) 0 0 (52,105 )
Shares issued in private placements 11,221,921 0 7,252,079 18,474,000

Shares outstanding April 6, 2021: 43,630,884 11,404,621 16,689,775 71,725,280

NOTE (4) – Earnings Per Share of Common Stock

Basic earnings per share of common stock is computed pursuant to the two-class method by dividing net income 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.

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BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Unaudited Consolidated Financial Statements

The following table shows how the Company computed basic and diluted earnings (loss) per share of common stock for the periods indicated:
For the three months ended
June 30,
For the six months ended
June 30,

2020 2019 2020 2019
(Dollars in thousands, except per share)
Net income (loss) $ 216 $ (135 ) $ 183 $ 142
Less net income (loss) attributable to participating securities 2 (2 ) 2 2
Income (loss) available to common stockholders $ 214 $ (133 ) $ 181 $ 140

Weighted average common shares outstanding for basic earnings (loss) per common share 27,143,340 26,858,018 27,055,750 26,711,043
Add: dilutive effects of unvested restricted stock awards 307,376 - 337,097 396,331
Weighted average common shares outstanding for diluted earnings (loss) per common share 27,450,716 26,858,018 27,392,847 27,107,374
��
Earnings (loss) per common share - basic $ 0.01 $ (0.01 ) $ 0.01 $ 0.01
Earnings (loss) per common share - diluted $ 0.01 $ (0.01 ) $ 0.01 $ 0.01
7

~~BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY~~
~~Notes to Unaudited Consolidated Financial Statements (continued)~~

For the three months ended
June 30,

For the six months ended
June 30,

2021
2020
2021 2020
(Dollars in thousands, except per share )

Net income (loss) attributable to Broadway Financial Corporation
$ 701 $ 216 $ (2,786 ) $ 183
Less net income (loss) attributable to participating securities 0 2 0 2
Income (loss) available to common stockholders $ 701 $ 214 $ (2,786 ) $ 181

Weighted average common shares outstanding for basic earnings (loss) per common share 70,163,639 27,143,340 48,873,496 27,055,750
Add: dilutive effects of unvested restricted stock awards
140,247 307,376 0 337,097
Weighted average common shares outstanding for diluted earnings (loss) per common share 70,303,886 27,450,716 48,873,496 27,392,847

Earnings (loss) per common share - basic $ 0.01 $ 0.01 $ (0.06 ) $ 0.01
Earnings (loss) per common share - diluted $ 0.01 $ 0.01 $ (0.06 ) $ 0.01

Stock options for 450,000 shares of common stock for the ~~three and~~ six months ended June 30, ~~2020 and stock options for 455,000 shares of common stock for the three and six months ended June 30, 2019~~2021 were not considered in computing diluted earnings per common share because they were ~~anti-dilutive.~~
anti-dilutive due to the net loss. There were 0 unvested restricted stock awards outstanding during the three months ended June 30, 2021.

NOTE ~~(3)~~ (5) – Securities

The following table summarizes the amortized cost and fair value of the available-for-sale investment securities portfolios as of the periods indicated and the corresponding amounts of unrealized gains and losses which were recognized in accumulated other comprehensive income (loss):
Amortized Cost
Gross
Unrealized
Gains

Gross
Unrealized
Losses
Fair Value
(In thousands)
June 30, 2020:
Federal agency mortgage-backed securities $ 6,812 $ 326 $ - $ 7,138
Federal agency debt 2,850 204 - 3,054
Total available-for-sale securities $ 9,662 $ 530 $ - $ 10,192
December 31, 2019:
Federal agency mortgage-backed securities $ 7,792 $ 164 $ - $ 7,956
Federal agency debt 3,014 36 - 3,050
Total available-for-sale securities $ 10,806 $ 200 $ - $ 11,006

Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value
(In thousands)
June 30, 2021:
Federal agency mortgage-backed securities $ 83,687 $ 629 $ (60 ) $ 84,256
Federal agency debt 33,207 199 0 33,406
Municipal bonds 4,914 63 (5 ) 4,972
U. S. Treasuries 18,191 24 0 18,215
SBA pools 17,581 403 (1 ) 17,983
Total available-for-sale securities $ 157,580 $ 1,318 $ (66 ) $ 158,832
December 31, 2020:
Federal agency mortgage-backed securities $ 5,550 $ 257 $ 0 $ 5,807
Federal agency debt 2,682 190 0 2,872
Municipal bonds 2,000 19 0 2,019
Total available-for-sale securities $ 10,232 $ 466 $ 0 $ 10,698

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BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Unaudited Consolidated Financial Statements

At June 30, ~~2020,~~2021, the Bank had ~~two~~13 (13) federal agency debt securities with total amortized cost of ~~$2.9~~$33.2 million, estimated total fair value of ~~$3.1~~$33.4 million and an estimated average remaining life of ~~5.5 years. The Bank also had 22~~6.1 years; NaN (94) federal agency mortgage-backed securities with total amortized cost of ~~$6.8~~$83.7 million, estimated total fair value of ~~$7.1~~$84.3 million and an estimated average remaining life of ~~3.1~~4.6 years; 9 (9) U.S. treasury securities with total amortized cost of $18.2 million, estimated total fair value of $18.2 million and an estimated average remaining life of 4.1 years; 17 (17) SBA pools securities with total amortized cost of $17.6 million, estimated total fair value of $18.0 and an estimated average remaining life of 5.4 years; 2 (2) municipal bond – taxable securities with total amortized cost of $1.2 million, estimated total fair value of $1.2 million and an estimated average remaining life of 4.1 years; 7 (7) municipal bonds – exempt pools securities with total amortized cost of $3.7 million, estimated total fair value of $3.8 million and an estimated average remaining life of 12.5 years . The entire securities portfolio at June 30, 2021, consisted of NaN securities (142) with an estimated average remaining life of 4.7 years. Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties

The amortized cost and estimated fair value of all investment securities available-for-sale at June 30, 2021, by contractual maturities are shown below. Contractual maturities may differ from expected maturities because borrowers 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 $ 0 $ 0 $ 0 $ 0
Due after one year through five years 30,244 42 0 30,286
Due after five years through ten years 23,002 294 (11 ) 23,285
Due after ten years ⁽¹⁾
104,334 982 (55 ) 105,261
$ 157,580 $ 1,318 $ (66 ) $ 158,832

(1) Mortgage-backed securities, collateralized mortgage obligations and SBA pools do not have a single stated maturity date and therefore have been included in the “Due after ten years” category.

The Bank held 32 securities with unrealized losses of $66 thousand at June 30, 2021. NaNne of these securities has been in a loss position for greater than one year. The Bank’s securities were primarily issued by the federal government or its agencies. The unrealized gains or losses on our available-for-sale securities at June 30, 2021 were primarily caused by movements in market interest rates subsequent to the purchase of such securities

Securities with a market value of $71.9 million were pledged as collateral for securities sold under agreements to repurchase as of June 30, 2021 and included $17.8 million of U.S. Government Agency securities, $47.5 million of mortgage-backed securities, and $6.6 million of collateralized mortgage obligations. (See Note 8 – Borrowings.) There were no0 securities pledged as collateral for securities sold under agreements to repurchase as December 31, 2020. There were 0 securities pledged to secure public deposits at June 30, ~~2020~~2021 or December 31, 2020.

At June 30, 2021 and December 31, ~~2019. At June 30,~~ 2020, ~~and December 31, 2019,~~ there were no0 holdings of securities by any one issuer, other than the U.S. Government and its agencies, in an amount greater than 10% of stockholders’ equity.

There were no0 sales of securities during the three and six months ended June 30, ~~2020~~2021 and ~~2019.~~
~~The Bank held 24 securities with unrealized gains at June 30, 2020 and December 31, 2019. All~~2020.

Table of the Bank's securities were issued by the federal government or its agencies. The unrealized gains on our available-for-sale securities at June 30, 2020 were primarily caused by movements in market interest rates subsequent to the purchase of such securities.
~~NOTE (4)~~ – ~~Loans Receivable Held for Sale~~
Loans receivable held for sale at June 30, 2020 totaled $49.7 million and consisted of multi-family loans. The Bank did not have any loans held for sale at December 31, 2019. During the first six months of 2020, the Bank originated $110.9 million of multi-family loans for sale and sold $60.9 million of loans held for sale. During the first six months of 2019, the Bank originated $10.3 million of multi-family loans for sale. There were no loan sales during the six months ended June 30, 2019. Loan repayments totaled $315 thousand and $46 thousand during the six months ended June 30, 2020 and 2019, respectively.
8
Contents

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY
Notes to Unaudited Consolidated Financial Statements ~~(continued)~~

NOTE ~~(5)~~ (6) – Loans Receivable Held for Investment

Loans receivable held for investment were as follows as of the dates indicated:
June 30, 2020 December 31, 2019
(In thousands)
Real estate:
Single family $ 58,826 $ 72,883
Multi-family 277,758 287,378
Commercial real estate 18,672 14,728
Church 19,489 21,301
Construction 1,409 3,128
Commercial – other 277 262
Consumer 10 21
Gross loans receivable before deferred loan costs and premiums 376,441 399,701
Unamortized net deferred loan costs and premiums 1,191 1,328
Gross loans receivable 377,632 401,029
Allowance for loan losses (3,215 ) (3,182 )
Loans receivable, net $ 374,417 $ 397,847
9
June 30, 2021 December 31, 2020
(In thousands)
Real estate:
Single family $ 53,556 $ 48,217
Multi-family 346,192 272,387
Commercial real estate 92,491 24,289
Church 15,652 16,658
Construction 22,677 429
Commercial – other 46,973 57
SBA loans⁽¹⁾
40,027 0
Consumer 73 7
Gross loans receivable before deferred loan costs and premiums 617,641 362,044
Unamortized net deferred loan costs and premiums 373 1,300
Gross loans receivable 618,014 363,344
Allowance for loan losses (3,296 ) (3,215 )
Loans receivable, net $ 614,718 $ 360,129

    (1)          Including Paycheck Protection Program (PPP) loans.

Purchased Credit Impaired (PCI) Loans

As part of the CFBanc Merger, the Company acquired loans for which there was, at acquisition, evidence of credit deterioration of credit quality since origination and for which it was probable, at acquisition, that all contractually required payments would not be collected. Prior to the CFBanc Merger, there were 0 such acquired loans. The carrying amount of those loans as of June 30,2021, is as follows:

June 30, 2021

(In thousands)

Real estate:
Single family
$
534

Commercial real estate
187

Commercial - other
84

$
805

On the acquisition date, the amount by which the undiscounted expected cash flows of the purchased credit impaired loans exceeded the estimated fair value of the loan is the accretable yield. The accretable yield is measured at each financial reporting date and represents the difference between the remaining undiscounted cash flows and the current carrying value of the purchased credit impaired loan. At June 30,2021, NaN of the Company’s purchased credit impaired loans were classified as nonaccrual.

14
Table of Contents

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY
Notes to Unaudited Consolidated Financial Statements ~~(continued)~~

The following table summarizes the accretable yield on the purchased credit impaired loans for the three and six months ended June 30,2021:

Three Months Ended
June 30, 2021

Six Months Ended
June 30, 2021

(In thousands)

Balance at the beginning of the period
$
0

$
0

Additions 346 346
Accretion
(19
)

(19
)
Balance at the end of the period
$
327

$
327

The following tables present the activity in the allowance for loan losses by loan type for the periods indicated:
Three Months Ended June 30, 2020
Real Estate
Single family Multi-family Commercial real estate Church Construction Commercial - other Consumer Total
(In thousands)
Beginning balance $ 308 $ 2,408 $ 140 $ 323 $ 24 $ 7 $ 1 $ 3,211
Provision for (recapture of) loan losses - 16 29 (41 ) (2 ) (1 ) (1 ) -
Recoveries 4 - - - - - - 4
Loans charged off - - - - - - - -
Ending balance $ 312 $ 2,424 $ 169 $ 282 $ 22 $ 6 $ - $ 3,215
Three Months Ended June 30, 2019
Real Estate
Single family Multi-family Commercial real estate Church Construction Commercial - other Consumer Total
(In thousands)
Beginning balance $ 347 $ 1,990 $ 62 $ 507 $ 18 $ 5 $ - $ 2,929
Provision for (recapture of) loan losses (19 ) (58 ) (4 ) (106 ) 26 - 3 (158 )
Recoveries - - - - - - - -
Loans charged off - - - - - - - -
Ending balance $ 328 $ 1,932 $ 58 $ 401 $ 44 $ 5 $ 3 $ 2,771
Six Months Ended June 30, 2020
Real Estate
Single family Multi-family Commercial real estate Church Construction Commercial - other Consumer Total
(In thousands)
Beginning balance $ 312 $ 2,319 $ 133 $ 362 $ 48 $ 7 $ 1 $ 3,182
Provision for (recapture of) loan losses
(4 ) 105 36 (80 ) (26 ) (1 ) (1 ) 29
Recoveries 4 - - - - - - 4
Loans charged off - - - - - - - -
Ending balance $ 312 $ 2,424 $ 169 $ 282 $ 22 $ 6 $ - $ 3,215
Six Months Ended June 30, 2019
Real Estate
Single family Multi-family Commercial real estate Church Construction Commercial - other Consumer Total
(In thousands)
Beginning balance $ 369 $ 1,880 $ 52 $ 603 $ 19 $ 6 $ - $ 2,929
Provision for (recapture of) loan losses (41 ) 52 6 (392 ) 25 (1 ) 3 (348 )
Recoveries - - - 190 - - - 190
Loans charged off - - - - - - - -
Ending balance $ 328 $ 1,932 $ 58 $ 401 $ 44 $ 5 $ 3 $ 2,771
10
Three Months Ended June 30, 2021
Real Estate

Single
family

Multi-
family

Commercial
real estate
Church Construction Commercial - other
SBA
Loans
Consumer Total
(In thousands)
Beginning balance $ 275 $ 2,473 $ 219 $ 221 $ 22 $ 5 $ 0 $ 0 $ 3,215
Provision for (recapture of) loan losses (105 ) 133 8 (13 ) 59 (1 ) 0 0 81
Recoveries 0 0 0 0 0 0 0 0 0
Loans charged off 0 0 0 0 0 0 0 0 0
Ending balance $ 170 $ 2,606 $ 227 $ 208 $ 81 $ 4 $ 0 $ 0 $ 3,296
Three Months Ended June 30, 2020
Real Estate
Single
family
Multi-
family
Commercial real estate Church Construction Commercial - other
SBA
Loans
Consumer Total
(In thousands)
Beginning balance $ 308 $ 2,408 $ 140 $ 323 $ 24 $ 7 $ 0 $ 1 $ 3,211
Provision for (recapture of) loan losses 0 16 29 (41 ) (2 ) (1 ) 0 (1 ) 0
Recoveries 4 0 0 0 0 0 0 0 4
Loans charged off 0 0 0 0 0 0 0 0 0
Ending balance $ 312 $ 2,424 $ 169 $ 282 $ 22 $ 6 $
0 $ 0 $ 3,215

Six Months Ended June 30, 2021
Real Estate
Single family Multi-family Commercial real estate Church Construction Commercial - other
SBA
Loans
Consumer Total
(In thousands)
Beginning balance $ 296 $ 2,433 $ 222 $ 237 $ 22 $ 4 $ 0 $ 1 $ 3,215
Provision for (recapture of) loan losses (126 ) 173 5 (29 ) 59 0 0 (1 ) 81
Recoveries 0 0 0 0 0 0 0 0 0
Loans charged off 0 0 0 0 0 0 0 0 0
Ending balance $ 170 $ 2,606 $ 227 $ 208 $ 81 $ 4 $ 0 $ 0 $ 3,296

15
Table of Contents

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY
Notes to Unaudited Consolidated Financial Statements ~~(continued)~~
Six Months Ended June 30, 2020
Real Estate
Single family Multi-family Commercial real estate Church Construction Commercial - other
SBA
Loans
Consumer Total
(In thousands)
Beginning balance $ 312 $ 2,319 $ 133 $ 362 $ 48 $ 7 $ 0 $ 1 $ 3,182
Provision for (recapture of) loan losses (4 ) 105 36 (80 ) (26 ) (1 ) 0 (1 ) 29
Recoveries 4 0 0 - 0 0 0 0 4
Loans charged off 0 0 0 0 0 0 0 0 0
Ending balance $ 312 $ 2,424 $ 169 $ 282 $ 22 $ 6 $ 0 $ 0 $ 3,215

The following tables present the balance in the allowance for loan losses and the recorded investment (unpaid contractual principal balance less charge-offs, less interest applied to principal, plus unamortized deferred costs and premiums) by loan type and based on impairment method as of the dates indicated:
June 30, 2020
Real Estate
Single family Multi-family Commercial real estate Church Construction Commercial  - other Consumer Total
(In thousands)
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment $ 71 $ - $ - $ 72 $ - $ 1 $ - $ 144
Collectively evaluated for impairment 241 2,424 169 210 22 5 - 3,071
Total ending allowance balance $ 312 $ 2,424 $ 169 $ 282 $ 22 $ 6 $ - $ 3,215
Loans:
Loans individually evaluated for impairment $ 592 $ 307 $ - $ 4,135 $ - $ 50 $ - $ 5,084
Loans collectively evaluated for impairment 58,409 279,017 18,742 14,733 1,409 228 10 372,548
Total ending loans balance $ 59,001 $ 279,324 $ 18,742 $ 18,868 $ 1,409 $ 278 $ 10 $ 377,632
December 31, 2019
Real Estate
Single family Multi-family Commercial real estate Church Construction Commercial  - other Consumer Total
(In thousands)
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment $ 60 $ - $ - $ 85 $ - $ 2 $ - $ 147
Collectively evaluated for impairment 252 2,319 133 277 48 5 1 3,035
Total ending allowance balance $ 312 $ 2,319 $ 133 $ 362 $ 48 $ 7 $ 1 $ 3,182
Loans:
Loans individually evaluated for impairment $ 611 $ 313 $ - $ 4,356 $ - $ 63 $ - $ 5,343
Loans collectively evaluated for impairment 72,501 288,730 14,818 16,292 3,125 199 21 395,686
Total ending loans balance $ 73,112 $ 289,043 $ 14,818 $ 20,648 $ 3,125 $ 262 $ 21 $ 401,029
11
June 30, 2021
Real Estate

Single
family

Multi-
family

Commercial
real estate
Church Construction Commercial - other SBA
Loans
Consumer Total
(In thousands)
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment $ 3 $ 0 $ 0 $ 42 $ 0 $ 0 $ 0 $ 0 $ 45
Collectively evaluated for impairment 167 2,606 227 166 81 4 0 0 3,251
Total ending allowance balance $ 170 $ 2,606 $ 227 $ 208 $ 81 $ 4 $ 0 $ 0 $ 3,296
Loans:
Loans individually evaluated for impairment $ 66 $ 290 $ 0 $ 3,718 $ 0 $ 0 $ 0 $ 0 $ 4,074
Loans collectively evaluated for impairment 53,600 347,540 92,491 11,602 22,583 46,973 39,078 73 613,940
Total ending loans balance $ 53,666 $ 347,830 $ 92,491 $ 15,320 $ 22,583 $ 46,973 $ 39,078 $ 73 $ 618,014
              December 31, 2020
Real Estate

Single
family
Multi-
family
Commercial
real estate
Church Construction Commercial - other
SBA
Loans
Consumer Total
(In thousands)
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment $ 89 $ 0 $ 0 $ 52 $ 0 $ 0 $ 0 $ 0 $ 141
Collectively evaluated for impairment 207 2,433 222 185 22 4 0 1 3,074
Total ending allowance balance $ 296 $ 2,433 $ 222 $ 237 $ 22 $ 4 $ 0 $ 1 $ 3,215
Loans:
Loans individually evaluated for impairment $ 573 $ 298 $ 0 $ 3,813 $ 0 $ 47 $ 0 $ 0 $ 4,731
Loans collectively evaluated for impairment 47,784 273,566 24,322 12,495 430 9 0 7 358,613
Total ending loans balance $ 48,357 $ 273,864 $ 24,322 $ 16,308 $ 430 $ 56 $ 0 $ 7 $ 363,344

16
Table of Contents

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY
Notes to Unaudited Consolidated Financial Statements ~~(continued)~~

The following table presents information related to loans individually evaluated for impairment by loan type as of the periods indicated:
June 30, 2020 December 31, 2019
Unpaid Principal Balance Recorded Investment Allowance for Loan Losses Allocated Unpaid Principal Balance Recorded Investment Allowance for Loan Losses Allocated
(In thousands)
With no related allowance recorded:
Single family $ 10 $ 9 $ - $ - $ - $ -
Multi-family $ 307 $ 307 $ - 313 313 -
Church $ 3,048 $ 2,259 $ - 3,491 2,446 -
With an allowance recorded:
Single family 583 583 71 593 593 60
Church 1,876 1,876 72 1,928 1,928 85
Commercial - other 50 50 1 63 63 2
Total $ 5,874 $ 5,084 $ 144 $ 6,388 $ 5,343 $ 147
June 30, 2021 December 31, 2020

Unpaid
Principal
Balance

Recorded
Investment

Allowance
for Loan
Losses
Allocated
Unpaid
Principal
Balance
Recorded
Investment

Allowance
for Loan
Losses
Allocated

(In thousands)
With no related allowance recorded:
Single family $ 0 $ 0 $ - $ 2 $ 1 $ -
Multi-family
290
290
- 298 298 -
Church
2,487
1,914
- 2,527 1,970 -
With an allowance recorded:
Single family 66 66 3 573 573 88
Church 1,804 1,804 42 1,842 1,842 52
Commercial - other 0 0 0 47 47 1
Total $ 4,647 $ 4,074 $ 45 $ 5,289 $ 4,731 $ 141
The recorded investment in loans excludes accrued interest receivable due to immateriality. For purposes of this disclosure, the unpaid principal balance is not reduced for net charge-offs.

The following tables present the monthly average of loans individually evaluated for impairment by loan type and the related interest income for the periods indicated:
Three Months Ended June 30, 2020 Three Months Ended June 30, 2019
Average
Recorded
Investment
Cash Basis
Interest
Income
Recognized
Average
Recorded
Investment
Cash Basis
Interest
Income
Recognized

(In thousands)
Single family $ 597 $ 7 $ 638 $ 5
Multi-family 308 5 320 5
Church 4,160 74 4,741 402
Commercial – other 59 1 63 -
Total $ 5,124 $ 87 $ 5,762 $ 412
Six Months Ended June 30, 2020 Six Months Ended June 30, 2019
Average
Recorded
Investment
Cash Basis
Interest
Income
Recognized
Average
Recorded
Investment
Cash Basis
Interest
Income
Recognized

(In thousands)
Single family $ 599 $ 14 $ 640 $ 15
Multi-family 309 11 321 11
Church 4,190 309 5,383 517
Commercial – other 60 2 64 2
Total $ 5,158 $ 336 $ 6,408 $ 545
12
Three Months Ended June 30, 2021 Three Months Ended June 30, 2020

Average
Recorded
Investment

Cash Basis
Interest
Income
Recognized

Average
Recorded
Investment

Cash Basis
Interest
Income
Recognized

(In thousands)
Single family $ 316 $ 4 $ 597 $ 7
Multi-family 292 5 308 5
Church 3,742 63 4,160 74
Commercial - other 11 0 59 1
Total $ 4,361 $ 72 $ 5,124 $ 87

Six Months Ended June 30, 2021 Six Months Ended June 30, 2020

Average
Recorded Investment

Cash Basis
Interest
Income
Recognized

Average
Recorded
Investment

Cash Basis
Interest
Income
Recognized

(In thousands)
Single family $ 426 $ 10 $ 599 $ 14
Multi-family 294 10 309 11
Church 3,766 126 4,190 309
Commercial - other 26 1 60 2
Total $ 4,512 $ 147 $ 5,158 $ 336

17
Table of Contents

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY
Notes to Unaudited Consolidated Financial Statements ~~(continued)~~

Cash-basis interest income recognized represents cash received for interest payments on accruing impaired loans and interest recoveries on non-accrual loans that were paid off. Interest payments collected on non-accrual loans are characterized as payments of principal rather than payments of the outstanding accrued interest on the loans until the remaining principal on the non-accrual loans is considered to be fully collectible or paid off. When a loan is returned to accrual status, the interest payments that were previously applied to principal are deferred and amortized over the remaining life of the loan. Foregone interest income that would have been recognized had loans performed in accordance with their original terms amounted to ~~$22~~$19 thousand and ~~$40~~$22 thousand for the three months ended June 30, 2021 and 2020, respectively, and ~~2019, respectively,~~$38 thousand and $45 ~~thousand and $80~~ thousand for the six months ended June 30, 2021 and 2020, ~~and 2019,~~ respectively, and were not included in the consolidated results of operations.
~~There were no loans delinquent as~~
As of June 30, ~~2020.~~ 2021, the Bank had $1.9 million in 30 to 89 days delinquencies, and 0 loans were past due 90 days or more.The following tables present the aging of the recorded investment in past due loans by loan type as of the periods indicated:
June 30, 2020

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 $ - $ - $ - $ - $ 59,001 $ 59,001
Multi-family - - - - 279,324 279,324
Commercial real estate - - - - 18,742 18,742
Church - - - - 18,868 18,868
Construction - - - - 1,409 1,409
Commercial - other - - - - 278 278
Consumer - - - - 10 10
Total $           - $         - $           - $       - $ 377,632 $ 377,632
December 31, 2019

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 $ 18 $ - $ - $ 18 $ 73,094 $ 73,112
Multi-family - - - - 289,043 289,043
Commercial real estate - - - - 14,818 14,818
Church - - - - 20,648 20,648
Construction - - - - 3,125 3,125
Commercial - other - - - - 262 262
Consumer - -         - - 21 21
Total $ 18 $      - $ - $ 18 $ 401,011 $ 401,029

June 30, 2021

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 $ 0 $ 0 $ 0 $ 0 $ 53,666 $ 53,666
Multi-family 0 0 0 0 347,830 347,830
Commercial real estate 1,554 0 0 1,554 90,937 92,491
Church 0 0 0 0 15,320 15,320
Construction 0 0 0 0 22,583 22,583
Commercial - other 0 310 0 310 46,663 46,973
SBA loans 21
0
0 21 39,057
39,078

Consumer 0 0 0 0 73 73
Total $ 1,575 $ 310 $ 0 $ 1,885 $ 616,129 $ 618,014
December 31, 2020

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 $ 0 $ 0 $ 0 $ 0 $ 48,357 $ 48,357
Multi-family 0 0 0 0 273,864 273,864
Commercial real estate 0 0 0 0 24,322 24,322
Church 0 0 0 0 16,308 16,308
Construction 0 0 0 0 430 430
Commercial - other 0 0 0 0 56 56
Consumer 0 0 0 0 7 7
Total $ 0 $ 0 $ 0 $ 0 $ 363,344 $ 363,344

The following table presents the recorded investment in non-accrual loans by loan type as of the periods indicated:
June 30, 2020 December 31, 2019
(In thousands)
Loans receivable held for investment:
Single-family residence $ 9 $ 18
Church $ 837 406
Total non-accrual loans $ 846 $ 424
June 30, 2021 December 31, 2020
(In thousands)
Loans receivable held for investment:
Single-family residence $ 0 $ 1
Church
735 786
Total non-accrual loans $ 735 $ 787

18
Table of Contents

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY
Notes to Unaudited Consolidated Financial Statements

There were no0 loans 90 days or more delinquent that were accruing interest as of June 30, ~~2020~~2021 or December 31, ~~2019. None~~2020. NaN of the church non-accrual loans were delinquent, but none qualified for accrual status as of the periods indicated.
13
~~BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY~~
~~Notes to Unaudited Consolidated Financial Statements (continued)~~
Troubled Debt Restructurings
(TDRs)

In March 2020, a joint statement was issued by federal and state regulatory agencies, after consultation with the FASB, to clarify that short-term loan modifications, such as payment deferrals, fee waivers, extensions of repayment terms or other insignificant payment delays, are not TDRs if made on a good-faith basis in response to COVID-19 to borrowers who were current prior to any relief. Under this guidance, six months or less is provided as an example of short-term, and current is defined as less than 30 days past due at the time the modification program is implemented. The guidance also provides that these modified loans generally will not be classified as non-accrual loans during the term of the modification.

The Bank has implemented a loan modification program for the effects of COVID-19 on its borrowers. At the date of this filing, ~~two~~0 borrowers have requested loan modifications. ~~Both borrowers were current at the time modification program was implemented.~~ To date, no0 modifications have been granted.

At June 30, ~~2020,~~2021, loans classified as ~~troubled debt restructurings (“TDRs”)~~TDRs totaled ~~$4.5~~$4.1 million, of which ~~$254~~$408 thousand were included in non-accrual loans and ~~$4.2~~$3.7 million were on accrual status. At December 31, ~~2019,~~2020, loans classified as TDRs totaled ~~$4.7~~$4.2 million, of which ~~$406~~$232 thousand were included in non-accrual loans and ~~$4.3~~$4.0 million were on accrual status. The Company has allocated ~~$144~~$45 thousand and ~~$147~~$141 thousand of specific reserves for accruing TDRs as of June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. TDRs on accrual status are comprised of loans that were accruing at the time of restructuring or loans that have complied with the terms of their restructured agreements for a satisfactory period of time and for which the Bank anticipates full repayment of both principal and interest. TDRs that are on non-accrual status can be returned to accrual status after a period of sustained performance, generally determined to be six months of timely payments, as modified. A well-documented credit analysis that supports a return to accrual status based on the borrower’s financial condition and prospects for repayment under the revised terms is also required. As of June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the Company had no0 commitment to lend additional amounts to customers with outstanding loans that are classified as TDRs. NoNaN loans were modified during the three or six months ended June 30, ~~2020~~2021 and ~~2019.~~
2020.
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. This analysis is performed at least on a quarterly basis. 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~~management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the ~~institution's~~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 will sustain some loss if the deficiencies are not corrected.
14
19
Table of Contents

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY
Notes to Unaudited Consolidated Financial Statements ~~(continued)~~

§◾
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, on the basis of 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.
15

~~BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY~~
~~Notes to Unaudited Consolidated Financial Statements (continued)~~
Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass rated loans. Pass rated loans are generally well protected by the current net worth and paying capacity of the obligor and/or by the value of the underlying collateral. Pass rated loans are not more than 59 days past due and are generally performing in accordance with the loan terms.Based on the most recent analysis performed, the risk categories of loans by loan type as of the periods indicated were as follows:
June 30, 2020
Pass Watch Special Mention Substandard Doubtful Loss
(In thousands)
Single family $ 58,992 $ - $ - $ 9 $ - $ -
Multi-family 278,551 401 - 372 - -
Commercial real estate 17,242 1,500 - - - -
Church 14,741 1,302 - 2,825 - -
Construction 1,409 - - - - -
Commercial - other 228 - - 50 - -
Consumer 10 - - - - -
Total $ 371,173 $ 3,203 $ - $ 3,256 $ - $ -
December 31, 2019
Pass Watch Special Mention Substandard Doubtful Loss
(In thousands)
Single family $ 73,094 $ - $ - $ 18 $ - $ -
Multi-family 288,251 411 - 381 - -
Commercial real estate 14,818 - - - - -
Church 16,546 411 - 3,691 - -
Construction 3,125 - - - - -
Commercial - other 199 - - 63 - -
Consumer 21 - - - - -
Total $ 396,054 $ 822 $ - $ 4,153 $ - $ -
~~NOTE (6)~~ – ~~Leases~~
~~The Bank has~~
June 30, 2021
Pass Watch Special Mention Substandard Doubtful Loss
(In thousands)
Single family $ 53,666 $ 0 $ 0 $ 0 $ 0 $ 0
Multi-family 347,477 0
0 353 0 0
Commercial real estate 91,018 0 0 1,473 0 0
Church 13,615 647 0 1,058 0 0
Construction 22,583 0 0 0 0 0
Commercial - other 46,973 0 0 0 0 0
SBA loans 39,078
0
0
0
0
0

Consumer 73 0 0 0 0 0
Total $ 614,483 $ 647 $ 0 $ 2,884 $ 0 $ 0

December 31, 2020

Pass Watch Special Mention Substandard Doubtful Loss
(In thousands)
Single family $ 48,357 $ 0 $
0 $
1 $ 0 $ 0
Multi-family 273,501 0 0 362 0 0
Commercial real estate 22,834 1,488 0 0 0 0
Church 12,899 657 0 2,752 0 0
Construction 430 0 0 0 0 0
Commercial - other 9 0 0 47 0 0
Consumer 7 0 0 0 0 0
Total $ 358,037 $ 2,145 $ 0 $ 3,162 $ 0 $ 0
In 2015, CFC 45 was formed to, in effect, act as a ~~combined operating lease~~pass-through entity for ~~its corporate headquarters and main retail branch and~~ a ~~photocopier lease. The ROU asset and operating lease liability are recorded~~Merrill Lynch NMTC Corp. (“Merrill Lynch”) allocation of funds in ~~office properties and equipment and other liabilities, respectively,~~connection with the Bank’s participation in the New Markets Tax Credit (“NMTC”) Program totaling $14.0 million. (See Note 8 - Borrowings.) The financial statements for CFC 45 are consolidated ~~statements of financial condition.~~
Our ROU asset represents our right to use an underlying asset during the lease term. Operating lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized based on the present valuewith those of the ~~remaining lease payments using~~Company, and as such the Company has reflected a ~~discount rate that represents our incremental borrowing rate at the date of implementation of the new accounting standard.~~
The operating lease for our corporate headquarters and main retail branch has one 5-year extension option at the then fair market rate. As this extension option is not reasonably certain of exercise, it is not included$14.0 million loan made by CFC 45 to a Qualified Active Low Income Business in ~~the lease term. The Bank had a ROU asset of $460 thousand and an operating lease liability of $468 thousand~~gross loans above as of June 30, ~~2020.~~ 2021, in connection with the NMTC Program.

Table of Contents

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Unaudited Consolidated Financial Statements

NOTE (7) – Goodwill and Intangible Assets

In connection with the CFBanc Merger (See Note 2 - Business Combination.), the Company recognized goodwill of $26.0 million and a core deposit intangible of $3.3 million. The ~~Bank has no finance leases.~~
~~The Bank recorded operating lease expense costs~~following table presents the changes in the carrying amounts of ~~$121 thousand~~goodwill and ~~$123 thousand~~core deposit intangibles for the ~~quarters~~three months ended June 30, ~~2020 and~~2021:

Goodwill

Core Deposit
Intangible

(In thousands)

Balance at the beginning of the period
$
0
$ 0
Additions 25,996
3,329

Accretion 0
(131 )
Impairment 0
0

Balance at the end of the period $ 25,996 $ 3,198

The carrying amount of the core deposit intangible consisted of the following at June 30, ~~2019, respectively, and $242 thousand and $245 thousand~~2021:

(In thousands)
Core deposit intangible acquired $ 3,329
Less: accumulated amortization (131 )

$ 3,198

The following table outlines the estimated amortization expense for the ~~first six months~~core deposit intangible during the next five fiscal years:

(In thousands)
2021 $ 262
2022 435
2023 390
2024 336
2025 315
Thereafter 1,460
$ 3,198

NOTE (8) –Borrowings

The Bank enters into agreements under which it sells securities subject to an obligation to repurchase the same or similar securities. Under these arrangements, the Bank may transfer legal control over the assets but still retain effective control through an agreement that both entitles and obligates the Bank to repurchase the assets.As a result, these repurchase agreements are accounted for as collateralized financing agreements (i.e., secured borrowings) and not as a sale and subsequent repurchase of ~~2020 and~~securities. The obligation to repurchase the ~~first six months~~securities is reflected as a liability in the Banks’s consolidated statements of ~~2019, respectively.~~
16
~~Additional information regarding our operating leases~~financial condition, while the securities underlying the repurchase agreements remain in the respective investment securities asset accounts. In other words, there is ~~summarized below as~~no offsetting or netting of ~~or for~~ the ~~periods ended~~investment securities assets with the repurchase agreement liabilities. As of June 30, ~~2020 indicated (dollars in thousands):~~
Quarter ended Six Months ended
June 30, 2020 June 30, 2020
Cash paid for amounts included in the measurement of lease liabilities for operating leases: $ 88 $ 174

Weighted average remaining lease term in months 10

Weighted average discount rate 2.75 %
2021, securities sold under agreements to repurchase totaled $70.7 million at an average rate of 0.10%. The ~~future minimum payments for operating leases with remaining terms~~market value of ~~one year or more~~securities pledged totaled $71.9 million as of June 30, ~~2020~~2021 and included $17.8 million of U.S. Government Agency securities, $47.5 million of mortgage-backed securities, and $6.6 million of collateralized mortgage obligations. There were 0 securities pledged as ~~follows (in thousands):~~
Six months ended December 31, 2020 $ 279
Year ended December 31, 2021 195
Total Future Minimum Lease Payments 474
Amounts Representing Interest (6 )
Present Value of Net Future Minimum Lease Payments $ 468
~~NOTE (7)~~ – ~~Borrowings~~
of December 31, 2020.

At June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the Bank had outstanding Advances from the Federal Home Loan Bank ~~of San Francisco~~ (“FHLB”) totaling ~~$116.5~~$96.0 million and ~~$84.0~~$110.5 million, respectively. The weighted rate interest rate was ~~1.84%~~1.95% and ~~2.32%~~1.94% as of June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. The weighted average contractual maturity was 3126 months and 1827 months as of June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. The advances were collateralized by ~~$210.4~~loans with a market value of $193.6 million ~~and $156.1 million of first mortgage loans~~ at June 30, ~~2020 and December 31, 2019, respectively.~~
2021.

Table of Contents

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Unaudited Consolidated Financial Statements

On March 17, 2004, the Company issued $6.0 million of Floating Rate Junior Subordinated Debentures (the “Debentures”) in a private placement to a trust that was capitalized to purchase subordinated debt and preferred stock of multiple community banks. Interest on the Debentures is payable quarterly at a rate per annum equal to the 3-Month LIBOR plus 2.54%. The interest rate is determined as of each March 17, June 17, September 17, and December 17, and was ~~2.86%~~2.69% at June 30, ~~2020.~~2021. On October 16, 2014, the Company made payments of $900 thousand of principal on Debentures, executed a Supplemental Indenture for the Debentures that extended the maturity of the Debentures to March 17, 2024, and modified the payment terms of the remaining $5.1 million principal amount thereof. The modified terms of the Debentures require quarterly payments of interest only through March 2019 at the original rate of 3-Month LIBOR plus 2.54%. Starting in June 2019, the Company began making quarterly payments of equal amounts of principal, plus interest, and will continue until the Debentures are fully amortized on March 17, 2024. At June 30, ~~2020,~~2021, the Company had repaid a total of ~~$1.3~~$2.2 million of the scheduled principal. The Debentures may be called for redemption at any time by the Company.
17

~~BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY~~

In connection with the New Market Tax Credit activities of City First Bank CFC 45 is a partnership whose members include CFNMA and City First New Markets Fund II, LLC. This CDE 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 is secured by a Leasehold Deed of Trust that, due to the pass-through, non-recourse structure is operationally and ultimately for the benefit of Merrill Lynch rather than CFC 45. Debt service payments received by CFC 45 from the QALICB are passed through to Merrill Lynch in return for which CFC 45 receives a servicing fee. The financial statements of CFC 45 are consolidated with those of the Bank and the Company.

There are 2 notes for CFC 45. Note A is in the amount of $9.9 million with a fixed interest rate of 5.2% per annum. Note B is in the amount of $4.1 million with a fixed interest rate of 0.24% per annum. Quarterly interest only payments commenced in March 2016 and will continue through March 2023 for Notes ~~to Unaudited Consolidated Financial Statements (continued)~~
A and B. Beginning in June 2023, quarterly principal and interest payments will be due for Notes A and B. Both notes will mature on December 1, 2040.

NOTE ~~(8)~~ (9) –Fair Value

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).

The fair value of impaired loans that are collateral dependent is generally based upon the fair value of the collateral, which is obtained from recent real estate 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. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value. Impaired loans are evaluated on a quarterly basis for additional impairment and adjusted accordingly.

Assets acquired through or by transfer in lieu of loan foreclosure are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. These assets are subsequently accounted for at the lower of cost or fair value less estimated costs to sell. Fair value is commonly based on recent real estate appraisals which are updated every nine months. 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. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value. Real estate owned properties are evaluated on a quarterly basis for additional impairment and adjusted accordingly.

Table of Contents

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Unaudited Consolidated Financial Statements

Appraisals for collateral-dependent impaired loans are performed by certified general appraisers (for commercial properties) or certified residential appraisers (for residential properties) whose qualifications and licenses have been reviewed and verified by the Company. Once received, an independent third-party licensed appraiser reviews the appraisals for accuracy and reasonableness, reviewing the assumptions and approaches utilized in the appraisal as well as the overall resulting fair value in comparison with independent data sources such as recent market data or industry-wide statistics.
18
~~BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY~~
~~Notes to Unaudited Consolidated Financial Statements (continued)~~

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 June 30, 2020:
Securities available-for-sale – federal agency mortgage-backed $ - $ 7,138 $ - $ 7,138
Securities available-for-sale – federal agency debt - 3,054 - 3,054
At December 31, 2019:
Securities available-for-sale – federal agency mortgage-backed $ - $ 7,956 $ - $ 7,956
Securities available-for-sale – federal agency debt - 3,050 - 3,050

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 June 30, 2021:

Securities available-for-sale – federal agency mortgage-backed $ 0 $ 84,256 $ 0 $ 84,256
Securities available-for-sale – federal agency debt 0 33,406 0 33,406
Municipal bonds 0 4,972 0 4,972
U. S. Treasuries 0 18,215 0 18,215
SBA pools 0 17,983 0 17,983

At December 31, 2020:

Securities available-for-sale – federal agency mortgage-backed $ 0 $ 5,807 $ 0 $ 5,807
Securities available-for-sale – federal agency debt 0 2,872 0 2,872
Municipal bonds 0 2,019 0 2,019

There were no0 transfers between Level 1, Level 2, or Level 3 during the three and six months ended June 30, ~~2020~~2021 and ~~2019.~~
2020.

Assets Measured on a Non-Recurring Basis

Assets are considered to be reflected at fair value on a non-recurring basis if the fair value measurement of the instrument does not necessarily result in a change in the amount recorded on the statements of financial condition. Generally, a non-recurring valuation is the result of the application of other accounting pronouncements that require assets to be assessed for impairment or recorded at the lower of cost or fair value.
~~The following table provides information regarding~~

As of June 30, 2021 and December 31, 2020, the ~~carrying values of our assets measured~~Bank did 0t have any impaired loans carried at fair value ~~on a non-recurring basis as~~ of ~~the periods indicated. The fair value measurement for all~~collateral.

23
Table of ~~these assets falls within Level 3 of the fair value hierarchy.~~
June 30, 2020 December 31, 2019
(In thousands)
Impaired loans carried at fair value of collateral $ - $ 130
Contents

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY
Notes to Unaudited Consolidated Financial Statements
Fair Values of Financial Instruments

The following tables present the carrying amount, fair value, and placement in the fair value hierarchy of the Company’s financial instruments not recorded at fair value on a recurring basis as of June 30, ~~2020~~2021 and December 31, ~~2019.~~2020. This table excludes financial instruments for which the carrying amount approximates fair value. For short-term financial assets such as cash and due from banks, interest-bearing deposits in other banks, and accrued interest receivable/payable, the carrying amount is a reasonable estimate of fair value due to the relatively short time between the origination of the instrument and its expected realization. For non-marketable equity securities such as Federal Home Loan Bank stock, the carrying amount is a reasonable estimate of fair value as these securities can only be redeemed or sold at their par value and only to the respective issuing government supported institution or to another member institution. For financial liabilities such as noninterest-bearing demand, interest-bearing demand, and savings deposits, the carrying amount is a reasonable estimate of fair value due to these products having no stated maturity.
19

~~BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY~~
~~Notes to Unaudited Consolidated Financial Statements (continued)~~
Fair Value Measurements at June 30, 2020
Carrying
Value Level 1 Level 2 Level 3 Total
(In thousands)
Financial Assets:
Loans receivable held for sale $ 49,719 $ - $ 49,735 $ - $ 49,735
Loans receivable held for investment 374,417 - - 377,618 377,618

Financial Liabilities:
Time Deposits $ 153,406 $ - $ 154,448 $ - $ 154,448
Federal Home Loan Bank advances 116,500 - 120,788 - 120,788
Junior subordinated debentures 3,825 - - 3,261 3,261
Fair Value Measurements at December 31, 2019
Carrying
Value Level 1 Level 2 Level 3 Total
(In thousands)
Financial Assets:
Loans receivable held for sale $ - $ - $ - $ - $ -
Loans receivable held for investment $ 397,847 - - $ 404,923 $ 404,923

Financial Liabilities:
Time Deposits $ 190,235 $ - $ 190,353 $ - $ 190,353
Federal Home Loan Bank advances 84,000 - 84,997 - 84,997
Junior subordinated debentures 4,335 - - 3,734 3,734
Fair Value Measurements at June 30, 2021

Carrying
Value
Level 1 Level 2 Level 3 Total
(In thousands)
Financial Assets:
Cash and cash equivalents $ 210,383 $ 210,383 $ 0 $ 0 $ 210,383
Securities available-for-sale
158,832
0
158,832
0
158,832

Loans receivable held for investment 614,718 0 0 612,712 612,712
Accrued interest receivables
2,572
206
282
2,084
2,572

Bank owned life insurance
3,168
3,168
0
0
3,168

Financial Liabilities:
Deposits $ 705,041 $ 0 $ 705,199 $ 0 $ 705,199
Securities sold under agreements to repurchase
70,660 0 70,063 0 70,063
Federal Home Loan Bank advances 96,022 0 98,160 0 98,160
Junior subordinated debentures 2,805 0 0 2,344 2,344
Note payable
14,000 0 0 14,000 14,000
Accrued interest payable
104
0
104
0
104

Fair Value Measurements at December 31, 2020

Carrying
Value
Level 1 Level 2 Level 3 Total
(In thousands)

Financial Assets:
Cash and cash equivalents $ 96,109 $ 96,109 $ 0 $ 0 $ 96,109
Securities available-for-sale 10,698 0 10,698 0 10,698
Loans receivable held for investment 360,129 0 0 366,279 366,279
Accrued interest receivables 1,202 60 14 1,128 1,202
Bank owned life insurance 3,147 3,147 0 0 3,147

Financial Liabilities:
Deposits $ 315,630 $ 0 $ 312,725 $ 0 $ 312,725
Federal Home Loan Bank advances 110,500 0 113,851 0 113,851
Junior subordinated debentures 3,315 0 0 2,798 2,798
Accrued interest payable
88 0 84 4 88

In accordance with ASU No. 2016-01, the fair value of certain financial assets and liabilities, including loans, time deposits, and junior subordinated debentures, as of June 30, ~~2020~~2021 and December 31, ~~2019~~2020 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.

Table of Contents

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Unaudited Consolidated Financial Statements

NOTE ~~(9)~~(10) – Stock-based Compensation
~~On July 25, 2018, the stockholders approved the 2018~~

The Long-Term Incentive Plan, (“which was adopted by the Company and approved by the stockholders in 2018 ~~LTIP”~~(the “LTIP”)~~. The 2018 LTIP~~, permits the grant of non-qualified and incentive stock options, stock appreciation rights, full value awards and cash incentive awards. The plan is in effect for ten years. The maximum number of shares that can be awarded under the plan is 1,293,109 shares of common ~~stock.~~stock as of December 31, 2018. As of June 30, ~~2020, 630,080~~2021, 490,007 shares had been awarded and ~~663,029~~803,102 shares are available under the 2018 LTIP.
~~In February 2020~~

At June 30, 2021, 0 restricted stock awards were outstanding, and ~~January 2019,~~during the first half of June 2021, the Company ~~awarded 30,930 and 42,168 shares of common~~did 0t grant any restricted stock respectively, to its directors under the 2018 LTIP, which are fully vested. The Company recorded $45 thousand and $52 thousand of compensation expense for the quarters ended March 31, 2020 and March 31, 2019, respectively, based on the fair value of the stock, which was determined using the average of the high and the low price of the stock on the date of the award.
~~In February 2020 and 2019, the Company awarded 140,218 shares and 428,797 shares, respectively, of restricted stock~~awards to its officers and employees under the 2018 LTIP. Each restricted stock award is valued based on the fair value of the stock, which was determined using the average of the high and the low price of the stock on the date of the award. These awarded shares of restricted stock are fully vested over a two-year period from their respective dates of grants. Stock based compensation expense is recognized on a straight-line basis over the vesting period. During the three and six months ended June 30, 2020, the Company recorded $90 and $161 thousand of stock based compensation expense related to these awards, respectively. As of June 30, 2020, unrecognized compensation cost related to non-vested restricted stock awards was $320 thousand which is expected to be recognized over a period of 20 months.
20
employees.
~~BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY~~
~~Notes to Unaudited Consolidated Financial Statements (continued)~~

No stock options were granted during the ~~three and~~ six months ended June 30, ~~2020~~2021 and ~~2019.~~
2020.

The following table summarizes stock option activity during the six months ended June, 2021 and 2020:

Six Months Ended
June 30, 2021

Six Months Ended
June 30, 2020

Number
Outstanding

Weighted
Average
Exercise
Price

Number
Outstanding

Weighted
Average
Exercise
Price

Outstanding at beginning of period 450,000 $ 1.62 455,000 $ 1.67
Granted during period 0 0 0 0
Exercised during period 0 0 0 0
Forfeited or expired during period 0 0 (5,000
)
6.00
Outstanding at end of period 450,000 $ 1.62 450,000 $ 1.62
Exercisable at end of period 450,000 $ 1.62 360,000 $ 1.62

The Company did 0t record any stock-based compensation expense related to stock options during the three months ended June 30, 2021 since these options became fully vested and all compensation cost was recognized in February 2021. For the six months ended June 30, 2021, the Company recorded $7 thousand expense related to stock options. During the three and six months ended June 30, 2020, ~~and 2019:~~

Six Months Ended
June 30, 2020

Six Months Ended
June 30, 2019

Number
Outstanding
Weighted
Average
Exercise
Price
Number
Outstanding
Weighted
Average
Exercise
Price

Outstanding at beginning of period 455,000 $ 1.67 537,500 $ 2.19
Granted during period - - - -
Exercised during period - - - -
Forfeited or expired during period (5,000 ) 6.00 (82,500 ) 4.89
Outstanding at end of period 450,000 $ 1.62 455,000 $ 1.67
Exercisable at end of period 360,000 $ 1.62 275,000 $ 1.70
~~The~~the Company recorded $10 thousand and $19 thousand of stock-based compensation expense related to stock options, during the three and six months ended June 30, 2020 and 2019, respectively. As of June 30, 2020, the unrecognized compensation cost related to nonvested stock options granted under the plan was $26 thousand. The cost is expected to be recognized over a period of 8 months.
respectively.

Options outstanding and exercisable at June 30, ~~2020~~2021 were as follows:
Outstanding Exercisable

Grant Date
Number
Outstanding
Weighted
Average
Remaining
Contractual
Life
Weighted
Average
Exercise
Price
Aggregate
Intrinsic
Value
Number
Outstanding Weighted
Average
Exercise
Price Aggregate
Intrinsic
Value
February 24, 2016 450,000 5.65 years $ 1.62 360,000 $ 1.62
450,000 5.65 years $ 1.62 $ 176 360,000 $ 1.62 $ 176

Outstanding Exercisable
Grant Date
Number
Outstanding

Weighted
Average
Remaining
Contractual
Life

Weighted
Average
Exercise
Price

Aggregate
Intrinsic
Value

Number
Outstanding

Weighted
Average
Exercise
Price

Aggregate
Intrinsic
Value

February 24, 2016 450,000 4.65 years $ 1.62 450,000 $ 1.62
450,000 4.65 years $ 1.62 $ 481,500 450,000 $ 1.62 $ 481,500

25
Table of Contents

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY
Notes to Unaudited Consolidated Financial Statements

NOTE ~~(10)~~(11) – ESOP Plan

Employees participate in an Employee Stock Option Plan (“ESOP”) after attaining certain age and service requirements. In December 2016, the ESOP purchased 1,493,679 shares of the Company’s common stock at $1.59 per share, for a total cost of $2.4 million, of which $1.2 million was funded with a loan 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 will receive shares for their vested balance at the end of their employment. Compensation expense related to the ESOP was ~~$15~~$25 thousand and ~~$14~~$15 thousand for the three months ended June 30, ~~2020~~2021 and ~~2019,~~2020, respectively, and ~~$32~~$47 thousand and ~~$28~~$32 thousand for the six months ended June 30, 2021 and 2020, ~~and 2019,~~ respectively.
21

~~BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY~~
~~Notes to Unaudited Consolidated Financial Statements (continued)~~

Shares held by the ESOP were as follows:
June 30, 2020 December 31, 2019
(Dollars in thousands)

Allocated to participants 1,024,429 1,024,429
Committed to be released 31,248 10,416
Suspense shares 583,044 603,876
Total ESOP shares 1,638,721 1,638,721
Fair value of unearned shares $ 1,230 $ 930

June 30, 2021 December 31, 2020
(Dollars in thousands)

Allocated to participants 1,051,088 1,065,275
Committed to be released 30,708 10,236
Suspense shares 541,919 562,391
Total ESOP shares 1,623,715 1,637,902
Fair value of unearned shares $ 1,458 $ 1,040

At June 30, 2021, 30,708 of ESOP shares were committed to be allocated to participants during 2021. During 2021 and 2020, 41,665 and 43,321 of ESOP shares were released for allocation to participants, respectively. Unearned shares, which are reported as Unearned ESOP shares in the equity section of the consolidated statements of financial condition, were ~~$927~~$861 thousand and ~~$959~~$893 thousand at June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively.
22

~~BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY~~
~~Notes to Unaudited Consolidated Financial Statements (continued)~~
NOTE ~~(11)~~(12) – 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.
~~The~~

As a result of the Economic Growth, Regulatory Relief, and Consumer Protection Act, the federal banking ~~regulators approved final capital rules~~agencies have developed a “Community Bank Leverage Ratio” (“~~Basel III Capital Rules”~~CBLR”) ~~in July 2013 implementing the Basel III framework as well as certain provisions~~(the ratio of ~~the Dodd-Frank Act. The Basel III Capital Rules prescribe~~ a standardized approach for calculating risk-weighted assets and revised the definition and calculation of Tier 1 capital and Total capital, and include a new Common Equity Tier 1 capital (“CET1”) measure. Under the Basel III Capital Rules, the currently effective minimum capital ratios are:
~~4.5% CET1 to risk-weighted assets;~~
~~6.0% Tier 1 capital (that is, CET1 plus Additional Tier 1 capital) to risk-weighted assets;~~
~~8.0% Total capital (that is, Tier 1 capital plus Tier 2 capital) to risk-weighted assets; and~~
~~4.0% Tier~~bank’s tier 1 capital to average total consolidated assets) for financial institutions with assets ~~(known as the “leverage ratio”).~~
of less than $10 billion. A ~~capital conservation buffer is also required~~“qualifying community bank” that exceeds this ratio will be deemed to be ~~maintained above~~in compliance with all other capital and leverage requirements, including the ~~regulatory minimum~~ capital ~~requirements. This capital conservation buffer was phased~~requirements to be considered “well capitalized” under Prompt Corrective Action statutes. The federal banking agencies have set the Community Bank Leverage Ratio at 9%. The CARES Act temporarily lowered this ratio to 8% beginning in ~~on a schedule that began~~the three months ended June 30, 2020. The ratio then rose to 8.5% for 2021 and reestablishes at 9% on January 1, ~~2016 at 0.625%~~2022.

26
Table of ~~risk-weighted assets and increased each subsequent year by an additional 0.625% until it reached~~Contents

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY
Notes to Unaudited Consolidated Financial Statements

City First Bank, N.A. elected to adopt the CBLR option on April 1, 2020 as reflected in its ~~final level of 2.5% on January 1, 2019.~~
The Basel III Capital rules also revised the previously existing prompt corrective action regulatory framework, which is designed to place restrictions on insured depository institutions if their capital levels begin to show signs of weakness. Under the prompt corrective action requirements, which complement the capital conservation buffer, insured depository institutions are required to meet the following increased capital level requirements in order to qualify as “well capitalized”: (i) a CET1 capital ratio of 6.5%; (ii) a Tier 1 capital ratio of 8% (increased from 6%); (iii) a total capital ratio of 10% (unchanged from previous rules); and (iv) a Tier 1 leverage ratio of 5% (unchanged from previous rules).
At June 30, 2020 Call Report. Its CBLR as of June 30, 2021 is shown in the table below. The Company’s former subsidiary, Broadway Federal Bank, f.s.b., did not elect to adopt the CBLR and reported the December 31, ~~2019, the Bank’s level of capital exceeded all regulatory capital requirements and its regulatory~~2020 capital ratios ~~were above~~as shown in the ~~minimum levels required to be considered well capitalized for regulatory purposes.~~ table below.

Actual and required capital amounts and ratios as of the periods indicated are presented below.
Actual Minimum Capital
Requirements Minimum Required To
Be Well Capitalized
Under Prompt
Corrective Action
Provisions
Amount Ratio Amount Ratio Amount Ratio
(Dollars in thousands)
June 30, 2020:
Tier 1 (Leverage) $ 48,275 9.71 % $ 19,887 4.00 % $ 24,859 5.00 %
Common Equity Tier 1 $ 48,275 16.07 % $ 13,518 4.50 % $ 19,526 6.50 %
Tier 1 $ 48,275 16.07 % $ 18,024 6.00 % $ 24,032 8.00 %
Total Capital $ 51,526 17.15 % $ 24,032 8.00 % $ 30,040 10.00 %
December 31, 2019:
Tier 1 (Leverage) $ 48,541 11.56 % $ 16,798 4.00 % $ 20,997 5.00 %
Common Equity Tier 1 $ 48,541 17.14 % $ 12,743 4.50 % $ 18,406 6.50 %
Tier 1 $ 48,541 17.14 % $ 16,990 6.00 % $ 22,654 8.00 %
Total Capital $ 51,790 18.29 % $ 22,654 8.00 % $ 28,318 10.00 %
23
~~BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY~~
~~Notes~~

Actual
Minimum Capital
Requirements

Minimum Required to
Be Well Capitalized
Under Prompt
Corrective Action
Provisions

Amount Ratio Amount
Ratio
Amount Ratio
(Dollars in thousands)
June 30, 2021:

Community Bank Leverage Ratio ⁽¹⁾
$ 97,639 10.10 % $

$ 82,171 8.50 %
December 31, 2020:

Tier 1 (Leverage) $ 46,565 9.54 % $ 19,530 4.00 % $ 24,413 5.00 %
Common Equity Tier 1 $ 46,565 18.95 % $ 11,059 4.50 % $ 15,975 6.50 %
Tier 1 $ 46,565 18.95 % $ 14,746 6.00 % $ 19,661 8.00 %
Total Capital $ 49,802 20.20 % $ 19,661 8.00 % $ 24,577 10.00 %

⁽¹⁾
^{At the Merger on April 1, 2021, the Company’s former subsidiary, Broadway Federal Bank, f.s.b., was merged into City First Bank of D.C, N. A., with City First Bank of D.C, N.A. as the surviving entity and the resultant bank being named City First Bank, National Association, which had elected to adopt Community Bank Leverage Ratio option on April 1, 2020 as reflected in its June 30, 2020 Call Report.}

At June 30, 2021, the Company and the Bank met all the capital adequacy requirements to ~~Unaudited Consolidated Financial Statements (continued)~~
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 December 31, 2020 that would materially adversely change the Bank’s capital classifications. From time to time, we may need to raise additional capital to support the Bank’s further growth and to maintain the “well capitalized” status.

NOTE ~~(12)~~(13) – Income Taxes
Income tax expense or benefit is computed by applying the statutory federal income tax rate of 21% and the California income tax rate of 10.84% to taxable income or loss. The Company recorded income tax benefits of $345 thousand and $395 thousand for the three and six months ended June 30, 2020, respectively, compared to income tax benefits of $128 thousand and $86 thousand for the three and six months ended June 30, 2019, respectively. The increase in income tax benefit during the second quarter and first six months of 2020 was primarily due to a tax adjustment of $273 thousand upon the resolution of an outstanding audit issue with the California Franchise Tax Board for tax years 2009 to 2013. In addition, the Company recorded low-income housing tax credits of $29 thousand and $58 thousand during the second quarter and six months ended June 30, 2020, compared to $50 thousand and $99 thousand during the second quarter and six months ended June 30, 2019.
~~The~~

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 carry-forwards. 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 ~~evaluates~~evaluated both positive and negative evidence, including the existence of 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. ~~Based on this analysis, the~~

The Company ~~determined that as of June 30, 2020, no valuation~~recorded a $370 thousand impairment allowance ~~was required~~ on its deferred tax assets ~~which totaled $5.4 million.~~
during the three months ended June 30, 2021 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.

27
Table of Contents

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY
Notes to Unaudited Consolidated Financial Statements

NOTE ~~(13)~~(14) – Concentration of Credit Risk

The Bank has a significant concentration of deposits with ~~a long-time~~1 customer that accounted for approximately ~~13%~~9% of its deposits as of June 30, 2021. The Bank also has a significant concentration of short term borrowings from 1 customer that accounted for 80% of the outstanding balance of securities sold under agreements to repurchase as of June 30, ~~2020.~~2021. The Bank expects to maintain ~~this relationship~~the relationships with these customers for the ~~customer.~~
24
foreseeable future.

28
Table of Contents
~~ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~
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 ofon our financial condition, results of operations, liquidity and certain other factors that may affect our future results. Our MD&A should be read in conjunction with the Consolidated Financial Statements and related Notes included in Part I “Item 1, Financial Statements,” of this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020. 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 ~~which~~that reflect our current views with respect to future events and financial performance. Forward-looking statements typically include ~~the~~ words ~~"anticipate," "believe," "estimate," "expect," "project," "plan," "forecast," "intend,"~~such as “anticipate,” “believe,” “estimate,” “expect,” “project,” “plan,” “forecast,” “intend,” and other similar expressions. These forward-looking statements are subject to risks and uncertainties, which could cause actual future results to differ materially from historical results or from those anticipated or implied by such statements. Readers should not place undue reliance on these forward-looking statements, which speak only as of their dates or, if no date is provided, then as of the date of this Form 10-Q. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except to the extent required by law.

Critical Accounting Policies and Estimates

Our significant accounting policies, which are essential to understanding ~~Management’s Discussion and Analysis of Financial Condition and Results of Operations,~~MD&A, are described in the “Notes to Consolidated Financial Statements” and in the “Critical Accounting Policies” section of ~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~MD&A in our Annual Report on Form 10-K for the year ended December 31, ~~2019. There have~~2020.

As a result of the Company’s acquisition of CFBanc Corporation on April 1, 2021, the accounting policy related to business combinations has been ~~no material changes since then~~added to our critical accounting ~~policies.~~
~~Overview~~
~~Since early March 2020,~~policies during the ~~effects from~~six months ended June 30, 2021. See Note 1 - Basis of Financial Statement Presentation in the ~~spread~~accompanying Notes to Unaudited Consolidated Financial Statements contained in Item 1. Consolidated Financial Statements (Unaudited).

COVID-19 Pandemic Impact

The Company continues to monitor the impact of the lingering COVID-19 virus (the “COVID-19 Pandemic”) permeated virtually every aspect of society, and required management to quickly plan and implement multiple changes to Broadway’s operations to protect the health and welfare of the Bank’s employees and customers, while minimizing disruptions to the Bank’s ability to provide essential services. These changes were basedpandemic on ~~guidance from various governmental entities, including the Center for Disease Control and Prevention. Among the changes that~~its operations. To date, the Bank implemented were the following: more intensive cleaning and maintenance of the branches, distribution of personal protection equipment to employees, creation of safe distancing measures within the branches and all work areas, guidance to all employees regarding other safe practices, amended benefit policies to ease the burden on employees with children at home, or those experiencing symptoms of disease, development of plans for certain employees or departments to work from home, and creation of contingency plans for potential further changes to operations. Broadway has not implemented layoffs or furloughs of any employees because of ~~our employees.~~
~~In addition, Broadway has~~the pandemic.

Although the Bank developed plans and policies for providing financial relief to borrowers that may experience difficulties in meeting the terms of their loans, ~~performed updated stress tests~~as of June 30, 2021, none of its borrowers had requested loan modifications and the ~~Bank’s loan portfolio using new assumptions reflecting potential significant impacts~~Bank had no delinquencies related to COVID-19.

As of June 30, 2021, the COVID-19 Pandemic and related governmental stay-at-home orders, created contingency plans in case various aspects of the credit markets cease to operate in a normal manner, and implemented new lending guidelines that are designed to moderate the Bank’s loan concentration and enhance liquidity. Management has been in regular communication with the Bank’s regulator regarding these new plans and policies.
~~Broadway decided not to participate as a lender~~Company participated in the Small Business Administration’s (“SBA”) Paycheck Protection Program (“PPP”) ~~because management believes that it is more important~~by way of its merger with CFBanc Corporation. The Bank originated $26.4 million in PPP loans during the three months ended June 30, 2021.

Overview

Broadway Financial Corporation (the “Company”) merged with CFBanc Corporation (“CFBanc”) on April 1, 2021, with Broadway Financial Corporation continuing as the surviving entity (the “CFBanc Merger”). Immediately following the CFBanc Merger, Broadway Federal Bank, f.s.b. merged with and ~~appropriate~~into City First Bank of D.C, National Association with City First Bank of D.C., National Association continuing as the surviving entity (which concurrently changed its name to ~~maintain~~City First Bank, National Association). The results for the ~~Bank’s focus~~three months ended June 30, 2021 reflect the contribution of the consolidated operations of CFBanc Corporation. Accordingly, results for the second quarter include the operations of Broadway Financial Corporation and its subsidiary, City First Bank, National Association (the “Bank”), whereas results for the first quarter of 2021 and the first half of 2020 include the results of Broadway Financial Corporation and its former subsidiary, Broadway Federal Bank, f.s.b., which was merged into City First Bank of D.C., National Association on ~~existing clients, markets,~~April 1, 2021 and ~~loan products. In addition,~~ the resultant bank was renamed City First Bank, ~~has historically not offered SBA loans and has not had a significant client base or portfolio~~National Association.

29
Table of ~~commercial and industrial loans for which the PPP would have represented a product line extension.~~
25
Contents
Total assets increased by ~~$50.9~~$557.6 million to ~~$491.3 million~~$1.041 billion at June 30, ~~2020~~2021 from ~~$440.4~~$483.4 million at December 31, ~~2019.~~2020. The increase in total assets was primarily ~~consisted~~due to the merger, which increased total assets by $501.2 million for the period. The increase in total assets was also the result of ~~an increase~~loan originations of ~~$49.7~~$89.1 million ~~in loans receivable held~~ for ~~sale and an increase of $24.3 million in cash and cash equivalents, offset by a decrease of $23.4 million in loans held for investment.~~
the six months ended June 30, 2021.

Total liabilities increased by ~~$50.3~~$463.0 million to ~~$441.8~~$897.5 million at June 30, ~~2020~~2021 from ~~$391.5~~$434.5 million at December 31, ~~2019.~~2020. The increase in total liabilities primarily consisted of ~~increases~~the assumption of $353.7 million of deposits, $3.2 million of FHLB advances, and $73.9 million of other borrowings in ~~advances from FHLB~~the CFBanc Merger.

We recorded net income of ~~$32.5 million, in deposits of $18.1 million, in advance payments by borrowers for taxes and insurance of $43~~$701 thousand and ~~in accrued expenses other liabilities~~a net loss of ~~$176 thousand. These were partially offset by a decrease in junior subordinated debentures of $510 thousand.~~
~~We recorded~~$2.8 million for the three and six months ended June 30, 2021, respectively, compared to net income of $216 thousand and $183 thousand for the three and six months ended June 30, 2020, ~~respectively, compared to a net loss of $135 thousand and net income of $142 thousand for the three and six months ended June 30, 2019,~~ respectively.

Our net income increased by ~~$351~~$485 thousand during the ~~second quarter of 2020~~three months ended June 30, 2021 compared to the second quarter of 2019, primarily due to an income tax adjustment of $273 thousand recorded upon the resolution of an outstanding audit issue with the California Franchise Tax Board. In addition, during the second quarter of 2020, net interest income increased by $569 thousand and gain on sale of loans increased by $116 thousand compared to the second quarter of 2019. These increases were partially offset by higher non-interest expense of $380 thousand, including $152 thousand of expenses incurred to respond to actions by a former stockholder, during the second quarter of 2020, compared to the second quarter of 2019. Also, during the second quarter of 2019, the Bank recorded net loan loss provision recaptures of $158 thousand but did not record any net loan loss provision recaptures during the second quarter of 2020.
~~For the six~~three months ended June 30, 2020 ~~our net income increased by $41 thousand compared to the six months ended June 30, 2019,~~ primarily due to ~~the income tax adjustment~~an increase of ~~$273 thousand during the second quarter of 2020. In addition, during the first six months of 2020,~~$2.7 million, or 89.4%, in net interest income increased by $654 thousand, gains on the sales of loans increased by $123 thousand, and miscellaneous loan income increased by $33 thousand compared to the first six months of 2019. These increases were offset by higher non-interest expenses of $469 thousand, including $200 thousand of expenses incurred to respond to actions by a former stockholder during the first six months of 2020, Also, during the first six months of 2019, the Bank recorded a loan loss recapture of $348 thousand compared to aafter loan loss provision, ~~of $29 thousand during the first six months of 2020,~~ and ~~the Bank received~~ a grant award of ~~$233 thousand~~$1.8 million from the U.S. Department of the Treasury’s Community Development Financial Institution (“CDFI”) ~~Fund,~~Fund. Results for the quarter were negatively impacted by an increase in non-interest expenses as a result of the merger, and an effective tax rate of 71.3%, which ~~it did not received~~reflected changes in assumptions for the Company’s estimated annualized tax expense and an increase of $370 thousand in the valuation allowance on the Company’s deferred tax assets. The issuance of 18,474,000 shares of common stock in the private placements that closed a few days after the Merger triggered a limitation on the use of the Company’s deferred tax assets. As previously disclosed in the Company’s filings with the U.S. Securities and Exchange Commission (the “SEC”), the Company raised $32.9 million in gross proceeds from the sale of common stock in the private placements in the three months ended June 30, 2021. Net proceeds after expenses were $30.8 million.

For the six months ended June 30, 2021, the Company reported a net loss of $2.8 million compared to net income of $183 thousand for the six months ended June 30, 2020. Merger-related costs of $5.6 million were recorded during the ~~first~~ six months ended June 30, which significantly impacted the results for the period. However, during the six months ended June 30, 2021, net interest income increased by $2.7 million, and a gain of ~~2020.~~
$1.8 million was recognized from the grant from the CDFI Fund discussed above. These increases were offset by an increase in non-interest expenses of $7.5 million, which included the merger-related costs discussed above and the inclusion of the non-interest expenses of CFBanc after the merger date.

Results of Operations

Net Interest Income

Three Months Ended June 30, 2021 Compared to the Three Months Ended June 30, 2021

Net interest income before loan loss provisions for the ~~second quarter of 2020~~three months ended June 30, 2021 totaled ~~$3.0~~$5.8 million, compared to ~~$2.5~~$3.0 million for the ~~second quarter of 2019.~~three months ended June 30, 2020. The increase primarily resulted from an increase in interest income of ~~$483 thousand~~$2.3 million during the ~~second quarter of 2020~~three months ended June 30, 2021 due to the higher interest income and fees on loans receivable of ~~$588~~$1.9 million and interest on investment securities of $375 thousand. These increases were primarily the result of the CFBanc Merger. Total interest expense decreased during the period by $474 thousand ~~partially offset by a~~to $1.1 million for the three months ended June 30, 2021, compared to $1.5 million for the three months ended June 30, 2020. The decrease was largely due to the decrease in interest ~~income~~expense on ~~securities of $30 thousand and a decrease in other~~ interest ~~income of $75 thousand. Also, interest expense~~bearing deposits, which decreased by ~~$86~~$490 thousand due to lower interest expense on deposits of $130 thousand, partially offset by higher interest expense on borrowings of $44 thousand. The average balance of interest-earning assets increased by $88.0 million during the second quarter of 2020 compared to the ~~second quarter of~~same period in the prior year ~~and~~as a result of a reduction in the rates offered on deposit accounts during the period. The cost of interest bearing deposits for the three months ended June 30, 2021, was 0.30% compared to 1.17% for the three months ended June 30, 2020. The net interest margin ~~increased by 3 basis points~~for the three months ended June 30, 2021 was 2.33%, compared to 2.43% for the ~~second quarter~~three months ended June 30, 2020, a change of ~~2020 compared to 2.40% for the second quarter~~10 basis points.

30
Table of ~~2019. The net interest margin increased because the average rates paid on interest-bearing liabilities decreased by more than the average rates earned on interest-earning assets.~~
Contents
Interest income and fees on loans receivable increased by ~~$588 thousand~~$1.9 million to $6.3 million for the three months ended June 30, 2021, from $4.4 million for the ~~second quarter of~~three months ended June 30, 2020 ~~from $3.8 million for the second quarter of 2019~~ due to an increase of ~~$66.6~~$166.6 million in the average balance of loans receivable, ~~(including loans held for sale),~~ which increased interest income by ~~$665 thousand. This was partially offset by a decrease of 8 basis points in the~~$1.7 million. The average yield on loans also increased by 13 basis points from the three months ended June 30, 2020 to the three months ended June 30, 2021, which ~~decreased~~increased interest income by ~~$77~~$159 thousand.
26

Interest income on securities ~~decreased~~increased by ~~$30~~$375 thousand for the ~~second quarter of 2020,~~three months ended June 30, 2021 compared to the ~~second quarter of 2019.~~three months ended June 30, 2020. The ~~decrease~~increase in interest income on securities ~~during~~was the ~~second quarter~~result of ~~2020 primarily resulted from a decrease of $3.8 million~~an increase in the average balance of securities ~~which decreased~~of $148.2 million due to the addition of the securities in the CFBanc Merger. The higher average balance of securities increased interest income by ~~$24 thousand and~~$430 thousand. This increase was partially offset by the effects of a decrease of 18138 basis points in the average ~~yield~~interest rate earned on securities, which decreased interest income by $6$55 thousand.

Other interest income ~~decreased~~increased by ~~$75~~$70 thousand for the ~~second quarter of 2020,~~three months ended June 30, 2021 compared to the ~~second quarter of 2019.~~three months ended June 30, 2020. The ~~decrease~~increase was primarily due to ~~a decrease of 202 basis points in the average yield on interest-earning deposits in other banks during the second quarter of 2020, which decreased interest income by $123 thousand, partially offset by~~ an increase ~~of $24.6 million~~ in the average balance of ~~interest-earning~~interest earnings cash deposits of $186.6 million, which resulted in an increase of $79 thousand in other ~~banks,~~interest income. Other interest income was also positively impacted by an increase in the yield of FRB and FHLB stock, which increased to 7.14% for the three months ended June 30, 2021 compared to 3.18% for the three months ended June 30, 2020, resulting in an increase in other interest income ~~by $71~~of $40 thousand. ~~In addition, there~~Offsetting these increases was a ~~decrease of $23 thousand~~reduction in ~~dividends~~the yield earned on ~~FHLB stock during~~interest earning deposits of 33 basis points, from 0.46% for the ~~second quarter~~three months ended June 30, 2020, to 0.13% for the three months ended June 30, 2021. This decrease resulted in a reduction of ~~2020, compared to the second quarter~~other interest income of ~~2019.~~
$54 thousand.

Interest expense on deposits decreased by ~~$130~~$490 thousand for the ~~second quarter of 2020,~~three months ended June 30, 2021, compared to the ~~second quarter of 2019.~~three months ended June 30, 2020. The decrease was attributable to a decrease of 3787 basis points in the average ~~cost of~~rate paid on deposits, which caused interest expense on deposits to decrease by ~~$173 thousand,~~$797 thousand. This decrease was partially offset by the effects of an increase of $306.1 million in the average balance of ~~total deposit by $45.7 million,~~deposits, primarily because of the merger, which ~~led to an increase in~~increased interest expense ~~of $43~~by $307 thousand.

Interest expense on borrowings increased by ~~$44~~$16 thousand for the ~~second quarter of 2020,~~three months ended June 30, 2021, compared to the ~~second quarter of 2019. The higher interest expense on borrowings during the second quarter of~~three months ended June 30, 2020 ~~reflected a net increase of $41.5 million in average borrowings,~~primarily due to an increase in average short term borrowings (securities sold under agreements to repurchase) of ~~$42.6~~$60.1 million and a long term borrowing of $14 million that were assumed in the Merger at an average ~~balance~~rate of ~~FHLB advances, which increased interest expense by $189 thousand, partially offset by a decrease of $1.1 million in~~0.09%.

Six Months Ended June 30, 2021 Compared to the average balance of the Company’s junior subordinated debentures, which decreased interest expense by $12 thousand. In addition, the average cost of FHLB advances decreased by 59 basis points during the second quarter ofSix Months Ended June 30, 2020 which decreased interest expense by $112 thousand, and the average cost of the Company’s junior subordinated debentures decreased by 189 basis points during the second quarter of 2020, which decreased interest expense by $21 thousand.

For the six months ended June 30, ~~2020,~~2021, net interest income before provisions increased by ~~$654 thousand~~$2.7 million to ~~$5.9~~$8.7 million compared to ~~$5.3~~$5.9 million for the six months ended June 30, ~~2019.~~2020. The increase in net interest income during the six months ended June 30, ~~2020~~2021 primarily resulted from an increase in interest income of ~~$681 thousand~~$1.5 million due to higher interest income on loans receivable due to loans added in the CFBanc Merger. The increase in net interest income was also the result of ~~$832 thousand, partially offset by~~ a decrease in total interest expense of $1.2 million due to a reduction in rates paid on interest bearing liabilities from 1.46% for the six months ended June 30, 2020, to 0.64% for the six months ended June 30, 2021.

Interest income and fees on ~~securities of $58 thousand and a decrease in other interest income of $93 thousand. Interest expense~~loans receivable increased by ~~$27 thousand~~$1.2 million during the six months ended June 30, 2021 compared to the six months ended June 30, 2020 due to an increase ~~in in interest expense on borrowings~~ of ~~$129 thousand, which was partially offset by a decrease in interest expense on deposits of $102 thousand.~~
~~Interest income and fees on loans receivable increased by $832 thousand during the first six months of 2020 due to an increase of $59.0~~$50.9 million in the average balance of loans receivable, ~~(including loans held for sale),~~primarily resulting from the Merger, which increased interest income by ~~$1.2~~over $1.0 million, ~~partially offset by a decrease~~and an increase of 195 basis points in the average loan yield, due to a higher average yield on ~~loans,~~the loan portfolio acquired from City First Bank in the Merger, which ~~decreased~~increased interest income by ~~$372~~$116 thousand. During the first half of 2020, the Bank recorded an interest recovery of $162 thousand upon the payoff of one non-accrual church loan, compared to interest recoveries of $351 thousand upon the payoff of two non-accrual church loans during the first half of 2019.

Interest income on securities ~~decreased~~increased by ~~$58~~$361 thousand for the ~~first half of 2020,~~six months ended June 30, 2021, compared to the ~~first half of 2019.~~six months ended June 30, 2020. The ~~decrease~~increase in interest income on securities ~~during the first half of 2020~~ primarily resulted from ~~a decrease~~an increase of ~~$3.7~~$73.8 million in the average balance of securities because of the merger, which ~~decreased~~increased interest income by ~~$48~~$469 thousand, ~~and~~partially offset by a decrease of 15135 basis points in the average interest yield earned on investment securities, which decreased interest income by ~~$10~~$108 thousand.

31
Table of Contents
Other interest income ~~decreased by $93~~increased $5 thousand ~~for~~during the ~~first half of 2020~~six months ended June 30, 2021 compared to the ~~first half~~six months ended June 30, 2020. The Company recorded higher interest income on regulatory stock during the six months ended June 30, 2021, primarily due to interest earned on FRB and FHLB stock acquired from the CFBanc Merger during the period, which combined with interest on Broadway Federal Bank’s holdings of ~~2019.~~FHLB stock, increased interest income by $32 thousand. This increase was partially offset by a decrease of $27 thousand in interest income generated on interest-earning cash in other banks for the six months ended June 30, 2021 compared to the six months ended June 30, 2020. The decrease was primarily due to a decrease of ~~176~~65 basis points in the average ~~yield~~rate earned on interest-earning ~~deposits in other banks during~~cash, which more than offset the ~~first half~~positive effects of ~~2020, which decreased interest income by $205 thousand, partially offset by~~ an increase of ~~$17.8~~$128.4 million in the average balance of interest-earning ~~deposits in other banks, which increased interest income by $130 thousand. In addition, there was a decrease~~cash because of ~~$18 thousand in dividends earned on FHLB stock during~~ the ~~first half of 2020, compared to the first half of 2019.~~
27
merger.

During the ~~first half of 2020,~~six months ended June 30, 2021, interest expense on deposits decreased by ~~$102 thousand~~$1.2 million due to a decrease of 2390 basis points in the average cost of deposits, ~~attributable to lower rates paid on all deposit types,~~ which ~~caused~~decreased interest expense ~~on deposits to decrease~~ by ~~$201 thousand,~~$1.3 million, partially offset by the effects of an increase of ~~$36.0~~$155.2 million in the average balance of deposits, largely because of the deposits assumed in the merger, which ~~caused~~increased interest expense ~~to increase~~ by ~~$99~~$145 thousand.

During the ~~first half of 2020,~~six months ended June 30, 2021, interest expense on borrowings ~~increased~~decreased by ~~$129~~$53 thousand, compared to the first half of ~~2019.~~2020. The ~~higher~~lower interest expense on borrowings during the first half of ~~2020~~2021 reflected a ~~net increase of $36.4 million in average borrowings, due to an increase of $37.4 million~~reduction in the average balance of FHLB advances of $2.8 million, which ~~increased~~reduced interest expense by ~~$370~~$27 thousand, ~~offset by~~as well as a ~~decrease of $932 thousand~~reduction in the ~~average balance~~interest rate paid on subordinated debt of ~~the Company’s junior subordinated debentures,~~116 basis points, which ~~decreased~~reduced interest expense by ~~$22~~$21 thousand. ~~In addition, the average cost of FHLB advances decreased~~These decreases were offset by ~~47 basis points, which decreased~~an increase in interest expense ~~by $186~~on other borrowings assumed in the merger with CFBanc of $16 thousand, ~~and~~although the ~~average cost of the Company’s junior subordinated debentures decreased by 146 basis points, which decreased interest expense by $33 thousand.~~
rate paid on these borrowings was only 0.09%.

The net interest margin decreased by 1210 basis points to ~~2.45%~~2.35% for the six months ended June 30, ~~2020~~2021 from ~~2.57%~~2.45% for the same period in ~~2019, primarily due to a lower average loan yield.~~
28
2020.

32
Table of Contents
The following tables set forth the average balances, average yields and costs, and certain other information for the periods indicated. All average balances are daily average balances. The yields set forth below include the effect of deferred loan fees, and discounts and premiums that are amortized or accreted to interest income or expense. We do not accrue interest on loans on non-accrual status, but the balance of these loans is included in the total average balance of loans receivable, which has the effect of reducing average loan yields.
For the three months ended
June 30, 2020 June 30, 2019
(Dollars in Thousands) Average
Balance Interest Average
Yield/
Cost Average
Balance Interest Average
Yield/
Cost
Assets
Interest-earning assets:
Interest-earning deposits $ 40,416 $ 46 0.46 % $ 15,810 $ 98 2.48 %

Securities 10,431 65 2.49 % 14,242 95 2.67 %
Loans receivable (1) 444,530 4,429 3.99 % 377,906 3,841 4.07 %
FHLB stock 3,518 28 3.18 % 2,916 51 7.00 %
Total interest-earning assets 498,895 $ 4,568 3.66 % 410,874 $ 4,085 3.98 %
Non-interest-earning assets 10,466 11,058
Total assets $ 509,361 $ 421,932

Liabilities and Stockholders’ Equity
Interest-bearing liabilities:
Money market deposits $ 46,364 $ 112 0.97 % $ 25,416 $ 56 0.88 %
Passbook deposits 53,167 81 0.61 % 45,346 69 0.61 %
NOW and other demand deposits 54,362 3 0.02 % 33,578 3 0.04 %
Certificate accounts 177,392 771 1.74 % 181,280 969 2.14 %
Total deposits 331,285 967 1.17 % 285,620 1,097 1.54 %
FHLB advances 119,315 536 1.80 % 76,747 459 2.39 %
Junior subordinated debentures 4,038 34 3.37 % 5,091 67 5.26 %
Total interest-bearing liabilities 454,638 $ 1,537 1.35 % 367,458 $ 1,623 1.77 %
Non-interest-bearing liabilities 5,523 5,505
Stockholders’ Equity 49,200 48,969
Total liabilities and stockholders’ equity $ 509,361 $ 421,932

Net interest rate spread (2) $ 3,031 2.31 % $ 2,462 2.21 %
Net interest rate margin (3) 2.43 % 2.40 %
Ratio of interest-earning assets to interest-bearing liabilities 109.73 % 111.82 %

For the three months ended
June 30, 2021 June 30, 2020
(Dollars in Thousands) Average Balance Interest
Average
Yield/
Cost
Average Balance Interest
Average
Yield/
Cost

Assets
Interest-earning assets:
Interest-earning deposits
$
227,043

$
71

0.13
%

$
40,416

$
46

0.46
%
Securities
158,608

440

1.11
%

10,431

65

2.49
%
Loans receivable (1)
611,092

6,300

4.12
%

444,530

4,429

3.99
%
FRB and FHLB stock
4,087

73

7.14
%

3,518

28

3.18
%
Total interest-earning assets
1,000,830

$
6,884

2.75
%

498,895

$
4,568

3.66
%
Non-interest-earning assets
33,296

10,466

Total assets
$
1,034,126

$
509,361

Liabilities and Stockholders’ Equity
Interest-bearing liabilities:
Money market deposits
$
178,819

$
223

0.50
%

$
46,364

$
112

0.97
%
Passbook deposits
69,401

57

0.33
%

53,167

81

0.61
%
NOW and other demand deposits
190,734

40

0.08
%

54,362

3

0.02
%
Certificate accounts
198,403

157

0.32
%

177,392

771

1.74
%
Total deposits
637,357

477

0.30
%

331,285

967

1.17
%
FHLB advances
111,120

549

1.98
%

119,315

536

1.80
%
Junior subordinated debentures
3,144

21

2.67
%

4,038

34

3.37
%
Other borrowings
74,136

16

0.09
%

-

-

-

Total interest-bearing liabilities
825,757

$
1,063

0.51
%

454,638

$
1,537

1.35
%
Non-interest-bearing liabilities
66,279

5,523

Stockholders’ Equity
142,090

49,200

Total liabilities and stockholders’ equity
$
1,034,126

$
509,361

Net interest rate spread (2)
$
5,821

2.24
%

$
3,031

2.31
%
Net interest rate margin (3)
2.33
%

2.43
%
Ratio of interest-earning assets to interest-bearing liabilities

121.20
%

109.73
%

(1)
Amount is net of deferred loan fees, loan discounts and loans in process, and includes deferred origination costs and loan ~~premiums and loans receivable held for sale.~~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.

33
Table of Contents
For the six months ended
June 30, 2021 June 30, 2020
(Dollars in Thousands) Average Balance Interest
Average
Yield/
Cost
Average Balance Interest
Average
Yield/
Cost

Assets
Interest-earning assets:
Interest-earning deposits
$
162,630

$
106

0.13
%

$
34,250

$
133

0.78
%
Securities
84,509

496

1.17
%

10,689

135

2.53
%
Loans receivable (1)
486,317

9,944

4.09
%

435,388

8,788

4.04
%
FHLB stock
3,759

115

6.12
%

3,320

83

5.00
%
Total interest-earning assets
737,215

$
10,661

2.89
%

483,647

$
9,139

3.78
%
Non-interest-earning assets
22,425

10,464

Total assets
$
759,640

$
494,111

Liabilities and Stockholders’ Equity
Interest-bearing liabilities:
Money market deposits
$
127,807

$
304

0.48
%

$
42,130

$
217

1.03
%
Passbook deposits
66,800

114

0.34
%

50,936

169

0.66
%
NOW and other demand deposits
122,712

47

0.08
%

48,545

6

0.02
%
Certificate accounts
159,572

395

0.50
%

180,106

1,630

1.81
%
Total deposits
476,891

860

0.36
%

321,717

2,022

1.26
%
FHLB advances
110,803

1,076

1.94
%

113,595

1,108

1.95
%
Junior subordinated debentures
3,209

43

2.68
%

4,164

80

3.84
%
Other borrowings
37,068

16

0.09
%

-

-

-

Total interest-bearing liabilities
627,971

$
1,995

0.64
%

439,476

$
3,210

1.46
%
Non-interest-bearing liabilities
36,030

5,574

Stockholders’ Equity
95,639

49,061

Total liabilities and stockholders’ equity
$
759,640

$
494,111

Net interest rate spread (2)
$
8,666

2.26
%

$
5,929

2.32
%
Net interest rate margin (3)
2.35
%

2.45
%
Ratio of interest-earning assets to interest-bearing liabilities

117.40
%

110.05
%

29
For the six months ended
June 30, 2020 June 30, 2019
(Dollars in Thousands) Average
Balance Interest Average
Yield/
Cost Average
Balance Interest Average
Yield/
Cost
Assets
Interest-earning assets:
Interest-earning deposits $ 34,250 $ 133 0.78 % $ 16,417 $ 208 2.53 %
Federal funds sold - - - - - -
Securities 10,689 135 2.53 % 14,417 193 2.68 %
Loans receivable (1) 435,388 8,788 4.04 % 376,378 7,956 4.23 %
FHLB stock 3,320 83 5.00 % 2,916 101 6.93 %
Total interest-earning assets 483,647 $ 9,139 3.78 % 410,128 $ 8,458 4.12 %
Non-interest-earning assets 10,464 10,862
Total assets $ 494,111 $ 420,990

Liabilities and Stockholders’ Equity
Interest-bearing liabilities:
Money market deposits $ 42,130 $ 217 1.03 % $ 27,226 $ 120 0.88 %
Passbook deposits 50,936 169 0.66 % 45,390 134 0.59 %
NOW and other demand deposits 48,545 6 0.02 % 33,541 6 0.04 %
Certificate accounts 180,106 1,630 1.81 % 179,567 1,864 2.08 %
Total deposits 321,717 2,022 1.26 % 285,724 2,124 1.49 %
FHLB advances 113,595 1,108 1.95 % 76,232 924 2.42 %
Junior subordinated debentures 4,164 80 3.84 % 5,096 135 5.30 %
Total interest-bearing liabilities 439,476 $ 3,210 1.46 % 367,052 $ 3,183 1.73 %
Non-interest-bearing liabilities 5,574 5,167
Stockholders’ Equity 49,061 48,771
Total liabilities and stockholders’ equity $ 494,111 $ 420,990

Net interest rate spread (2) $ 5,929 2.32 % $ 5,275 2.39 %
Net interest rate margin (3) 2.45 % 2.57 %
Ratio of interest-earning assets to interest-bearing liabilities 110.05 % 111.74 %
(1)
Amount is net of deferred loan fees, loan discounts and loans in process, and includes deferred origination costs and loan ~~premiums and loans receivable held for sale.~~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.
~~(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

34

Table of Contents
Loan loss provision ~~recapture~~

The Company recorded a loan loss provision of $81 thousand for the three months ended June 30, 2021. No loan loss provision was recorded during the first quarter of 2021, so the loan loss provision for the six months ended June 30, 2021, was also $81 thousand. The provision recorded for the three months ended June 30, 2021, was the result of growth in the loan portfolio. There were no loan charge-offs recorded during the six months ended June 30, 2021.

The Bank did not record a loan loss provision or recapture during the ~~second quarter of~~three months ended June 30, 2020 and recorded a loan loss provision of $29 thousand during the ~~first~~ six months ofended June 30, 2020. During the ~~first quarter of~~three months ended June 30, 2020 the Bank recorded additional provisions to increase the ~~ALLL~~Allowance for Loan and Lease Losses (“ALLL”) for economic uncertainties related to the COVID-19 Pandemic. During the ~~second quarter of~~three months ended June 30, 2020, the Bank maintained its ALLL at $3.2 million, after adjusting for a loan loss recovery of $4 thousand, despite a net decrease of $6.9 million in the loans held for investment portfolio during the ~~second quarter of~~three months ended June 30, 2020. No loan charge-offs were recorded during the ~~second quarter~~three months or ~~first half of 2020.~~
~~The Bank recorded loan loss provision recaptures of $158 thousand and $348 thousand, respectively, during~~ the ~~second quarter and first~~ six months of 2019. The Bank recorded no cash recoveries during the second quarter of 2019 and recorded cash recoveries of $190 thousand during the first half of 2019. No loan charge-offs were recorded during the second quarter or first half of 2019.
ended June 30, 2020.

Non-interest Income

Non-interest income for the ~~second quarter of 2020~~three months ended June 30, 2021 totaled ~~$242 thousand,~~$2.2 million compared to ~~$139~~$242 thousand for the ~~second quarter of 2019.~~three months ended June 30, 2020. Non-interest income increased by ~~$103~~$2.0 million primarily due to a grant of $1.8 million from the CDFI Fund during the second quarter. The Bank fulfilled the requirements to receive the award during the second quarter. Other income during the three months ended June 30, 2021 included $154 thousand ~~primarily because the~~in management fees related to New Market Tax Credit projects managed by City First Bank ~~recorded a~~in Washington, D.C. No gain on sale of loans was recorded during the three months and six months ended June 30, 2021 compared to gains of $116 thousand recorded during the second quarter of 2020; the Bank did not record any gain on sales of loans during the first half of 2019. This increase was partially offset by a net decrease in other components of non-interest income of $13 thousand during the second quarter of 2020, compared to the second quarter of 2019.
three months ended June 30, 2020.

For the six months ended June 30, ~~2020,~~2021, non-interest income totaled ~~$439 thousand~~$2.3 million compared to ~~$515~~$439 thousand for the same period ~~one year ago.~~in the prior year. The ~~decrease~~increase of ~~$76 thousand~~$1.9 million in non-interest income was primarily due to athe grant of ~~$233 thousand~~$1.8 million received from the CDFI Fund ~~received~~ during the ~~first quarter of 2019, offset by gain on sale of loans of $123 thousand recorded during the first half of 2020.~~
three months ended June 30, 2021.

Non-interest Expense

Non-interest expense for the ~~second quarter of 2020~~three months ended June 30, 2021 totaled ~~$3.4~~$5.4 million, compared to ~~$3.0~~$3.4 million for the ~~second quarter of 2019.~~three months ended June 30, 2020. The increase of ~~$380 thousand~~$2.0 million in non-interest expense during the ~~second quarter of 2020~~three months ended June 30, 2021 compared to the same quarter of ~~2019~~2020 was primarily due to the inclusion of the non-interest expenses for the merged Bank, which included increases of ~~$336 thousand in professional services expense, $108~~$836 thousand in compensation and benefits expense, ~~and $20~~$345 thousand in ~~office~~information services ~~and supplies, offset by decreases of $41~~expense, $307 thousand in ~~amortization of investment in affordable housing limited partnership, $27~~occupancy expense, $93 thousand in loan related expenses, and ~~$25~~$82 thousand in ~~other~~supervisory costs. In addition, non-interest ~~expenses primarily due to a lower provision~~expense for ~~off-balance sheet loan commitments. The increase of $336~~the three months ended June 30, 2021 included $207 thousand in ~~professional services expense was due to an increase of $248~~Merger-related costs and $131 thousand in ~~legal fees and an increase~~amortization of ~~$109 thousand~~the core deposit intangible that was recorded in ~~consulting services fees, offset by a decrease of $21 thousand in audit fees. The increase in legal and consulting fees during~~connection with the second quarter included $152 thousand of expenses incurred to respond to activities conducted by a former stockholder against the Company. The related litigation was subsequently withdrawn by the former stockholder early in the third quarter.
Merger.

For the six months ended June 30, ~~2020,~~2021, non-interest expense totaled ~~$6.6~~$14.0 million, compared to ~~$6.1~~$6.6 million for the same period ~~a year ago.~~in the prior year. The increase of ~~$469 thousand~~$7.4 million in non-interest expense was primarily due to ~~increases~~merger-related expenses of ~~$281 thousand~~$5.6 million in ~~compensation and benefits expense, $261 thousand in professional services~~2021, as well as the inclusion of the non-interest expenses ~~$32 thousand in information services expense, $28 thousand in office services and supplies and $15 thousand in occupancy expense, offset by decreases~~ of ~~$45 thousand in amortization~~the acquired operations of investment in affordable housing limited partnership, $37 thousand in loan related expenses, and $61 thousand in other non-interest expense, primarily due to a lower provision for off-balance sheet loan commitments. The increase of $261 thousand in professional services expense was due to an increase of $233 thousand in legal fees and an increase of $142 thousand in consulting services fees, offset by a decrease of $114 thousand in audit fees. The increase in legal and consulting fees during the ~~first half of 2020 included $200 thousand of legal expenses incurred to respond to activities conducted by a former stockholder against the Company.~~
31
Bank.

Income Taxes

Income tax expense or benefit is computed by applying the statutory federal income tax rate of 21%. State taxes are recorded at the State of California tax rate and apportioned based on an allocation schedule to reflect that a portion of the ~~California~~Company’s operations are conducted in the Washington, D.C. area. The Company recorded income tax expense of $1.8 million during the second quarter, representing an effective rate of ~~10.84%~~71.3%, and a benefit of $348 thousand during the six months ended June 30, 2021. The high effective income tax for the second quarter reflects changes in the assumptions used to ~~taxable~~estimate the Company’s annual income ~~or loss.~~ tax expense. Income tax expense for the three months and six months ended June 30, 2021 also includes an increase of $370 thousand in the valuation allowance on the Company’s deferred tax assets to record an allowance against net operating loss carryforwards for the State of California, net of federal tax benefit. This change in the valuation allowance was required because shares of common stock issued in the private placements that closed a few days after the merger triggered a limitation on the use of the deferred tax assets.

35
Table of Contents
The Company recorded income tax benefits of $345 thousand and $395 thousand for the three and six months ended June 30, 2020, ~~respectively, compared to~~respectively. The income tax ~~benefits of $128 thousand and $86 thousand for~~benefit during the three months and six months ended June 30, ~~2019, respectively. The increase in income tax benefit during the second quarter and first six months of~~ 2020 was primarily due to a tax adjustment of $273 thousand upon the resolution of an outstanding audit issue with the California Franchise Tax Board for tax years 2009 to 2013. In addition, the Company recorded low-income housing tax credits of $29 thousand and $58 thousand during the ~~second quarter~~three months and six months ended June 30, 2020, ~~compared~~respectively.

Financial Condition

Total Assets

Total assets increased by $557.6 million to ~~$50 thousand and $99 thousand during the second quarter and six months ended June 30, 2019. The Company had no valuation allowance on its deferred tax assets, which totaled $5.4 million~~$1.041 billion at June 30, ~~2020 and $5.2~~2021 from $483.4 million at December 31, ~~2019.~~
~~Financial Condition~~
~~Total Assets~~
~~Total assets increased by $50.9 million to $491.3 million at June 30, 2020 from $440.4 million at December 31, 2019.~~2020. The increase in total assets was ~~comprised~~ primarily due to the addition of ~~an increase of $49.7~~assets in the CFBanc Merger, which increased total assets by $501.2 million in loans receivable held for sale, an increase of $24.3 million in cash and cash equivalents and an increase of $670 thousand in FHLB stock. These increases were offset by a decrease of $23.4 million in loans held for investment and a decrease of $814 thousand in securities available-for-sale.
~~Loans Receivable Held for Sale~~
~~Loans receivable held for sale~~on the merger date.

Securities Available-For-Sale

Securities available-for-sale totaled ~~$49.7~~$158.8 million at June 30, 2020. There were no loans held for sale as of December 31, 2019. During the first half of 2020, the Bank originated $110.9 million of multi-family loans for sale and sold $60.9 million of loans held for sale for a gain of $123 thousand. Repayments of loans receivable held for sale totaled $315 thousand during the first half of 2020.
~~Loans Receivable Held for Investment~~
~~Loans receivable held for investment, net of the allowance for loan losses, totaled $374.4 million at June 30, 2020,~~2021, compared ~~to $397.8~~with $10.7 million at December 31, ~~2019. During the first half~~2020. The $148.1 million of ~~2020, the Bank originated $4.1 million~~increase in ~~commercial real estate loans and $728 thousand in construction loans for the loans held-for-investment portfolio. Loan repayments~~securities available-for-sale during the ~~first half~~six months ended June 30, 2021 was primarily due to the addition of ~~2020 totaled $28.2~~$150.0 million of securities as a result of the CFBanc Merger, as well as additional purchases of securities of $4.1 million.
These increases were partially offset by net amortizations and paydowns of mortgage-backed securities of $6.5 million.

Allowance for Loan Losses

As a ~~small banking institution, Broadway~~smaller reporting company as defined by the SEC, the Company is not required to adopt the ~~CECL~~current expected credit losses (“CECL”) accounting standard until 2023; consequently, the Bank’s ~~allowance for loan and lease losses (“ALLL”)~~ALLL is based on ~~evidence available~~probable incurred losses at the date of ~~preparation of its financial statements,~~the consolidated balance sheet, rather than projections of future economic conditions over the life of the loans. In determining the adequacy of the ALLL within the context of the current uncertainties posed by the COVID-19 Pandemic, management has considered the historical and current performance of the ~~Bank’s~~Company’s portfolio, as well as various measures of the quality and safety of the portfolio, such as debt servicing and loan-to-value ratios. Management is continuing to monitor the loan portfolio and regularly communicating with borrowers to determine the continuing adequacy of the ALLL.

We record a provision for loan losses as a charge to earnings when necessary in order to maintain the ALLL at a level sufficient, in management’s judgment, to absorb probable incurred losses in the loan portfolio. At least quarterly we conduct an assessment of the overall quality of the loan portfolio and general economic trends in the local market. The determination of the appropriate level for the allowance is based on that review, considering such factors as historical loss experience for each type of loan, the size and composition of our loan portfolio, the levels and composition of our loan delinquencies, non-performing loans and net loan charge-offs, the value of underlying collateral on problem loans, regulatory policies, general economic conditions, and other factors related to the collectability of loans in the portfolio.
32

~~Our~~
The ALLL was ~~$3.2~~$3.3 million or ~~0.85%~~0.53% of ~~our~~ gross loans ~~receivable~~ held for investment at June 30, ~~2020~~2021, compared to $3.2 million, or ~~0.79%~~0.88% of ~~our~~ gross loans ~~receivable~~ held for investment, at December 31, ~~2019.~~2020. The ~~levels~~decrease in the ALLL as a percentage of gross loans is because there is no ALLL atassociated with the loans acquired in the merger. The increase in balance of the ALLL during the six months ended June 30, ~~2020 and December 31, 2019 reflect~~2021 was the result of ~~our quarterly review of the adequacy of the ALLL. During the second quarter of 2020, the Bank did not record a~~additional loan loss ~~provision or recapture but recorded a~~provisions due to loan ~~loss provision of $29 thousand~~growth during the ~~first six months of 2020. During the first quarter of 2020 the Bank recorded additional provisions to increase the ALLL for economic uncertainties related to the COVID-19 Pandemic.~~
period.

As of June 30, ~~2020, we had experienced no~~2021, loan delinquencies ~~on any loans,~~totaled $1.9 million, compared to ~~$18 thousand~~$0 at December 31, ~~2019.~~ 2020. None of these loans were greater than 90 days delinquent. The increase in delinquencies was due to commercial real loans and commercial loans acquired in the merger.

Non-performing loans (“NPLs”) consist of delinquent loans that are 90 days or more past due and other loans, including troubled debt restructurings that do not qualify for accrual status. At June 30, ~~2020,~~2021, NPLs totaled ~~$846~~$735 thousand, compared to ~~$424~~$787 thousand at December 31, ~~2019.~~2020. The ~~increase~~decrease of ~~$422~~$50 thousand in NPLs was due to ~~an addition~~repayments.

36
Table of ~~a non-accrual church loan, offset partially by repayments of the existing NPL loans.~~
Contents
In connection with our review of the adequacy of our ALLL, we track the amount and percentage of our NPLs that are paying currently, but nonetheless must be classified as NPL for reasons unrelated to payments, such as lack of current financial information and an insufficient period of satisfactory performance. As of June 30, ~~2020,~~2021, all our non-performing loans were current in their payments. Also, in determining the ALLL, we considered the ratio of the ALLL to NPLs, which ~~decreased to 379.6%~~was 448.4% at June 30, ~~2020 from 750.5%~~2021 compared to 408.5% at December 31, ~~2019.~~
2020.

When reviewing the adequacy of the ALLL, we also consider the impact of charge-offs, including the changes and trends in loan charge-offs. There have been no loan charge-offs since 2015. In determining charge-offs, we update our estimates of collateral values on NPLs by obtaining new appraisals at least every twelve months. If the estimated fair value of the loan collateral less estimated selling costs is less than the recorded investment in the loan, a charge-off for the difference is recorded to reduce the loan to its estimated fair value, less estimated selling costs. Therefore, certain losses inherent in our total NPLs are recognized periodically through charge-offs. The impact of updating these estimates of collateral value and recognizing any required charge-offs is to increase charge-offs and reduce the ALLL required on these loans. ~~Due to increases in collateral values, the average~~

There were no recoveries or charge-offs recorded ~~investment in NPLs was only 38% of estimated fair value less estimated selling costs as of June 30, 2020.~~
~~Recoveries~~ during the first half of ~~2020~~2021 and ~~2019 totaled~~ $4 thousand ~~and $190 thousand, respectively. The recovery~~in recoveries were recorded during the first half of 2020 resulted from the payoff of one single-family loan that had been previously partially charged off. Recoveries during the first half of 2019 resulted from the payoff of two church loans that had been previously partially charged off.
2020.

Impaired loans at June 30, ~~2020~~2021 were ~~$5.1~~$4.1 million, compared to ~~$5.3~~$4.7 million at December 31, ~~2019.~~2020. The decrease of ~~$259~~$657 thousand in impaired loans was primarily due to the ~~sale~~payoff of a ~~non-accrual church~~$30 thousand commercial loan and loan repayments. Specific reserves for impaired loans were ~~$144~~$45 thousand, or ~~2.83%~~1.10% of the aggregate impaired loan amount at June 30, ~~2020,~~2021, compared to ~~$147~~$141 thousand, or ~~2.75%~~2.98% at December 31, ~~2019.~~
2020.

On March 27, 2020, the Coronavirus Aid Relief and Economic Security Act (“CARES Act”) was signed into law by Congress. The CARES Act provides financial institutions, under specific circumstances, the opportunity to temporarily suspend certain requirements under generally accepted accounting principles related to Troubled Debt Restructurings (“TDR’s”) for a limited period of time to account for the effects of COVID-19. In March 2020, a joint statement was issued by federal and state regulatory agencies, after consultation with the FASB, to clarify that short-term loan modifications, such as payment deferrals, fee waivers, extensions of repayment terms or other insignificant payment delays, are not TDRs if made on a good-faith basis in response to COVID-19 to borrowers who were current prior to any relief. Under this guidance, six months or less is provided as an example of short-term, and current is defined as less than 30 days past due at the time the modification program is implemented. The guidance also provides that these modified loans generally will not be classified as non-accrual loans during the term of the modification.

The Bank has implemented a loan modification program for the effects of COVID-19 on its borrowers. At the date of this filing, two borrowers have requested loan modifications. Both borrowers were current at the time modification program was implemented. To date, no modifications have been granted.
33

In July of 2020, the $600 per week Federal stimulus payments that had been granted to individuals since the start of the Pandemic were terminated. As a result, some tenants may be unable to make their monthly rent payments. However, the risk to the Bank’s multi-family loan portfolio is mitigated by the low loan-to-value ratios (less than 59%) and high debt service coverage ratios (over 1.49%) of the multi-family loan portfolio as of June 30, 2020. In addition, the Bank’s borrowers generally have high cash reserves and sufficient net worth to service their loans.
We believe that the ALLL is adequate to cover probable incurred losses in the loan portfolio as of June 30, ~~2020,~~2021, but because of the current uncertainties posed by the COVID-19 Pandemic, there can be no assurance that actual losses will not exceed the estimated amounts. In addition, the OCC and the Federal Deposit Insurance Corporation (“FDIC”) periodically review the ALLL as an integral part of their examination process. These agencies may require an increase in the ALLL based on their judgments of the information available to them at the time of their examinations.

Office Properties and Equipment

Net office properties and equipment ~~decreased~~increased by ~~$53 thousand~~$6.6 million to ~~$2.7~~$9.2 million at June 30, ~~2020~~2021 from ~~$2.8~~$2.5 million as of December 31, ~~2019. Due~~2020. The large increase was due to the ~~implementation~~result of ~~ASU 2016-02 “Leases (Topic 842)”,~~ the ~~Bank recorded a right of use (“ROU”) asset of $1.2~~merger, as CFBanc owned the land and building that in which it operates its headquarters and branch. Office properties and equipment, net increased by $7.0 million as of ~~January 1, 2019. After amortization,~~ the ~~ROU was $460 thousand as~~date of the merger.

Goodwill and Intangible Assets

37
Table of Contents
As a result of the merger, the Company recorded $26.0 million of goodwill and $3.3 million of core deposit intangible assets. Goodwill and intangible assets acquired in a purchase business combination and that are determined to have an indefinite useful life are not amortized, but tested for impairment at least annually or more frequently if events and circumstances exist that indicate the necessity for such impairment tests to be performed.

The core deposit intangible asset is amortized on an accelerated basis reflecting the pattern in which the economic benefits of the intangible asset are consumed or otherwise used up. The estimated life of the core deposit intangible is approximately 10 years. During the six months ended June 30, ~~2020.~~
2021, the Company recorded $131 thousand of amortization expense related to the core deposit intangible.

No impairment charges were recorded during 2021 for goodwill or the core deposit intangible.

Total Liabilities

Total liabilities increased by ~~$50.3~~$463.0 million to ~~$441.8~~$897.5 million at June 30, ~~2020~~2021 from ~~$391.5~~$434.5 million at December 31, ~~2019.~~2020. The increase in total liabilities was largely the result of the liabilities assumed in the CFB merger, and was primarily comprised ~~primarily~~ of an increase of ~~$32.5~~$ 389.4 million in deposits and $84.7 million of other borrowings, offset by reductions of $14.5 million in FHLB advances ~~and an increase of $18.1 million in deposits. These increases were offset by a decrease of $510 thousand in~~during the ~~Company’s junior subordinated debentures.~~
period.

Deposits

Deposits increased ~~by $18.1 million~~ to ~~$315.8~~$705.0 million at June 30, ~~2020~~2021 from ~~$297.7~~$315.6 million at December 31, ~~2019, which consisted~~2020, due to deposits of ~~an increase~~$353.7 million that were assumed in the Merger and additional growth in deposits of ~~$54.9~~$39.0 million since the Merger, primarily in ~~liquid deposits and a decrease of $36.8 million in certificates of deposit. Liquid deposits (NOW, demand,~~ money market and ~~passbook accounts) increased to $162.4 million at June 30, 2020, which represented 51% of total deposits, from $107.5 million which represented 36% of total deposits.~~
~~Certificates of~~demand deposit (“CDs”) decreased by $36.7 million during the first six months of 2020 to $153.4 million at June 30, 2020, which represented 49% of total deposits, from $190.2 million at December 31, 2019, which represented 64% of total deposits. The decrease in CDs was primarily due to net decreases in CDARS deposits of $36.2 million and a net decrease in accounts acquired through a deposit listing service of $8.9 million, offset by a net increase in retail CDs of $8.4 million. CDARS is a deposit placement service that allows us to place our customers’ funds in FDIC-insured certificates of deposit at other banks and, at the same time, receive an equal sum of funds from the customers of other banks in the CDARS Network (“CDARS Reciprocal”). We may also accept deposits from other institutions when we have no reciprocal deposit (“CDARS One-Way Buy”). At June 30, 2020, we had approximately $11.4 million in CDARS Reciprocal and $33.1 million in CDARS One-Way Buy, compared to 39.3 million in CDARS Reciprocal and $40.7 million in CDARS One-Way Buy at December 31, 2019.
~~One~~accounts.

Single customer ~~relationship~~relationships accounted for approximately ~~13%~~9% and ~~10%~~13% of our deposits at June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. We expect to maintain this relationship with ~~the customer~~these customers for the foreseeable future.

Borrowings

Total borrowings increased by ~~$32.0~~$69.7 million to ~~$120.3~~$183.5 million at June 30, ~~2020~~2021 from ~~$88.3~~$113.8 million at December 31, ~~2019 due~~2020. The increase consisted of the addition of $73.9 million of other borrowings at the merger date, which further increased to an$84.7 million as of June 30, 2021. This increase ~~of $32.5 million in advances from the FHLB,~~was offset by ~~a decrease~~reductions in FHLB advances of ~~$510 thousand~~$14.5 million and in our junior subordinated floating rate ~~debentures.~~
debentures of $510 thousand.

The Bank enters into agreements under which it sells securities subject to an obligation to repurchase the same or similar securities. Under these arrangements, the Bank may transfer legal control over the assets but still retain effective control through an agreement that both entitles and obligates the Bank to repurchase the assets. As a result, these repurchase agreements are accounted for as collateralized financing agreements (i.e., secured borrowings) and not as a sale and subsequent repurchase of securities. The obligation to repurchase the securities is reflected as a liability in the Banks’s consolidated balance sheets, 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. The securities that have been pledged as collateral include $17.6 million of U.S. Government Agency securities, $47.2 million of mortgage-backed securities, and $6.5 million of collateralized mortgage obligations as of June 30, 2021. The weighted average rate paid on repurchase agreements was 0.10% for the three months ended June 30, 2021.

The weighted average interest rate on the FHLB Advances ~~decreased to 1.84%~~was 1.95% at June 30, ~~2020 from 2.32%~~2021, compared with 1.94% at December 31, ~~2019, primarily due lower weighted average rate on new advances in replacements of the matured ones.~~2020. The weighted average interest rate on the subordinated floating rate debentures decreased to ~~2.86%~~2.69% at June 30, ~~2020~~2021 from ~~4.44%~~2.77% at December 31, ~~2019,~~2020, primarily due to decreases in LIBOR.
34

38

Table of Contents
Stockholders’ Equity
~~Stockholders'~~

Stockholders’ equity was ~~$49.5~~$143.5 million, or ~~10.08%~~13.8% of the Company’s total assets, at June 30, ~~2020,~~2021, compared to ~~$48.8~~$48.9 million, or ~~11.09%~~10.1% of the Company’s total assets at December 31, ~~2019.~~ 2020. The Company issued $63.3 million in common stock at a price per share of $2.49 and $3.0 million in preferred stock in connection with the merger. In addition, the Company raised $30.9 million in net proceeds from the sale of common stock in private placements immediately following the merger on April 6, 2021.

The Company’s book value was ~~$1.77~~$1.96 per share at June 30, 2021, and its tangible book value was $1.55 per share as of June 30, ~~2020, compared to $1.75~~2021 after adjusting for goodwill of $26.0 million and the net unamortized core deposit intangible of $3.2 million, which were both originally recorded in connection with the merger. The Company’s tangible book value per share was $1.74 per share as of December 31, ~~2019.~~
2021.

A capital contribution of $20 million was made to the Bank from the Company during the three months ended June 30, 2021. The Bank (City First Bank, N.A.) elected to adopt the Community Bank Leverage Ratio (“CBLR”) as of April 1, 2020 as reflected in its June 30, 2020 Call Report. The Bank’s CBLR was 10.10% at June 30, 2021.

Prior to Merger, the Company’s former subsidiary, Broadway Federal Bank, f.s.b., did not elect to adopt the CBLR and reported a Total Capital ratio of 20.20% and a Leverage ratio of 9.54% at December 31, 2020.

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, 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 to borrow up to ~~40%~~25% of total assets to the extent the Bank provides qualifying collateral and holds sufficient FHLB stock. This approved limit and collateral requirement would have permitted the Bank to borrow an additional ~~$44.5~~$24.6 million at June 30, ~~2020.~~2021. In addition, the Bank has ~~an $11.0 million line~~additional lines of credit of $11 million with ~~another~~other financial ~~institution.~~
institutions.

The Bank’s primary uses of funds include withdrawals of and interest payments on deposits, originations of loans, purchases of investment securities, and the payment of operating expenses. Also, when the Bank has more funds than required for reserve requirements or short-term liquidity needs, the Bank invests in federal funds with the Federal Reserve Bank or in money market accounts with other financial institutions. The Bank’s liquid assets at June 30, ~~2020~~2021 consisted of ~~$39.8~~$210.4 million in cash and cash equivalents and ~~$10.2~~$68.4 million in securities available-for-sale that were not pledged, compared to ~~$15.6~~$96.1 million in cash and cash equivalents and ~~$11.0~~$10.7 million in securities available-for-sale that were not pledged at December 31, ~~2019.~~2020. The increases were due to assets acquired in the CFBanc Merger. Currently, we believe that the Bank has sufficient liquidity to support growth over the foreseeable future.

The Company’s liquidity, separate from the Bank, is based primarily on the proceeds from financing transactions, such as the private placements completed in August 2013, October 2014, ~~and~~ December 2016, and April 2021 and dividends received from the Bank in ~~2020~~2021 and ~~2019.~~2020. The Bank is currently under no prohibition to pay dividends, 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 operating activities of $2.6 million during the six months ended June 30, 2021, compared to consolidated net cash outflows from operating activities of $49.2 million during the six months ended June 30, ~~2020, compared to consolidated net cash outflows from operating activities of $10.2 million during the six months ended June 30, 2019.~~2020. Net cash outflows from operating activities during the six months ended June 30, 2021 were primarily attributable to the Company’s net loss, whereas net cash outflows from operating activities for the six months ended June 30, 2020 were primarily ~~attributable~~due to originations of loans receivable held for sale of $110.9 million, ~~compared to $10.3 million during the six months ended June 30, 2019,~~ offset primarily by proceeds from sales of loans receivable held for sale of $61.0 ~~million during the six months ended June 30, 2020. The Company did not record any proceeds from sales of loans receivable held for sale during the six months ended June 30, 2019.~~
million.

The Company recorded consolidated net cash inflows from investing activities of $58.4 million during the six months ended June 30, 2021, compared to consolidated net cash inflows of $23.4 million during the six months ended June 30, ~~2020, compared to consolidated net cash outflows of $5.4 million during the six months ended June 30, 2019.~~2020. Net cash inflows from investing activities during the six months ended June 30, ~~2020~~2021 were primarily ~~attributable~~due to a net cash ~~inflow~~acquired in the merger with City First Bank N.A. of ~~$23.3~~$84.7 million, ~~from~~offset by cash used to fund new loans receivable held for investment ~~compared to a net cash outflow~~ of ~~$7.2 million during the six months ended June 30, 2019. Net~~$29.7 million. In comparison, cash inflows from investing activities million during the six months ended June 30, 2020 were ~~offset~~ primarily bydue to principal payments on loans receivable held for investment

39
Table of Contents
The Company recorded consolidated net cash ~~outflows~~inflows from financing activities of ~~$670 thousand for the purchase of FHLB stock and $328 thousand for the purchase of office properties and equipment. The Company did not purchase FHLB stock~~$58.5 million during the six months ended June 30, 2019 and recorded a net cash outflow of $23 thousand for the purchase of office properties and equipment during the same period. In addition, the Company recorded $820 thousand in proceeds from sales of REO during the six months ended June 30, 2019, but the Company did not record any proceeds from sales of REO during the six months ended June 30, 2020.
35
~~The Company recorded~~2021, compared to consolidated net cash inflows from financing activities of $50.0 million during the six months ended June 30, ~~2020, compared to consolidated net cash outflows from financing activities of $19.1 million during the six months ended June 30, 2019.~~2020. Net cash inflows from financing activities during the six months ended June 30, ~~2020~~2021 were primarily attributable to a net increase in deposits of ~~$18.1~~$35.9 million and proceeds from ~~FHLB advances~~the sale of ~~$66.0~~stock of $30.8 million, and $10.6 million in additional securities sold under agreements to repurchase, offset by ~~repayments~~a net decrease of $17.5 million in FHLB ~~advances of $33.5 million and repayments of junior subordinated debentures of $510 thousand.~~advances. During the six months ended June 30, ~~2019, the Company recorded~~2020, net cash inflows from financing activities were primarily due to a net increase in deposits of ~~$14.4~~$18.1 million and net proceeds from FHLB advances of ~~$10.0 million, offset by repayments of FHLB advances of $5.0 million and repayments of junior subordinated debentures of $255 thousand.~~
$32.5 million.

Capital Resources and Regulatory Capital
~~Our principal subsidiary, Broadway Federal~~

The Bank ~~must comply with capital standards established by the OCC in the conduct of its business. Failure~~is subject to ~~comply with such~~various regulatory capital requirements ~~may result in significant limitations on its business or other sanctions. The Dodd-Frank Act requires~~administered by the federal banking ~~agencies~~agencies. Failure to ~~establish consolidated risk-based and leverage~~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 ~~insured depository institutions, depository institution holding companies~~prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank’s assets, liabilities, and certain ~~non-bank financial companies that~~off-balance sheet items as calculated under regulatory accounting practices. The Bank’s capital amounts and classifications are ~~no less than those~~also subject to qualitative judgments by the regulators about components, risk-weightings, and other factors. As of June 30, 2021 and December 31, 2020, the Bank exceeded all capital adequacy requirements to which ~~insured depository institutions have been previously subject. The current regulatory capital requirements are described in~~it is subject and meets the qualifications to be considered “well capitalized.” As of April 1, 2020, the Bank elected to follow the Community Bank Leverage Ratio guidelines. (See Note ~~11 of the Notes to Consolidated Financial Statements.~~
12 – Regulatory Matters.)

~~ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK~~
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not Applicable

~~ITEM 4. CONTROLS AND PROCEDURES~~
ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives of ensuring that information we are required to disclose in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures, and is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. There is no assurance that our disclosure controls and procedures will operate effectively under all circumstances. An evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures was performed under the supervision of the Company’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) as of June 30, ~~2020.~~2021. Based on that evaluation, the Company’s CEO and CFO concluded that the Company’s disclosure controls and procedures were effective as of June 30, 2020. There were no significant changes during the quarter ended June 30, 2020 in the Company’s internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
2021.

Changes in Internal Control Over Financial Reporting

There were no changes in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the ~~quarter~~three months ended June 30, ~~2020,~~2021, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial ~~reporting.~~
36
reporting, except as noted below.

During the three months ended June 30, 2021, we completed the CFBanc Merger. (See Note 2 - Business Combination.) We are currently integrating CFBanc into our operations and internal control processes. As we complete this integration, we are analyzing, evaluating, and where necessary, making changes in control and procedures related to the CFBanc business, which we expect to complete within one year after the date of acquisition. Pursuant to the SEC’s guidance that an assessment of a recently acquired business may be omitted from the scope of an assessment in the year of acquisition, the scope of our assessment of the effectiveness of our internal controls over financial reporting at December 31, 2021 may exclude CFBanc to the extent that they are not yet integrated into our internal controls environment.

40
Table of Contents
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.

41
Table of Contents
PART II. OTHER INFORMATION

Item 1.
LEGAL PROCEEDINGS

None

Item 1A.
RISK FACTORS

Not Applicable

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
~~None~~

On August 12, 2020, the Board of Directors of the Company approved an amendment and restatement of the Bylaws of the Company to, among other things, conform the deadlines for stockholder director nominations and new business proposals under the Bylaws, such that both are due in writing to the Corporate Secretary not less than 90 days nor more than 120 days in advance of the anniversary of the previous year’s annual meeting; provided, however, that if the date of the annual meeting is more than 30 days before or more than 60 days after the anniversary date, the stockholder notice must be received by the Corporate Secretary not later than 90 days prior to the annual meeting or, if later, 10 days following the day on which public disclosure of the date of the annual meeting is first made by the Company.

Item 6.
EXHIBITS

Exhibit
Number*

3.1
Amended and Restated Certificate of Incorporation of ~~Registrant and amendments thereto~~Broadway Financial Corporation effective as of April 1, 2021 (Exhibit 3.1 to Form ~~10-Q~~8-K filed by Registrant on ~~November 13, 2014)~~April 5, 2021)
3.2
Bylaws of Registrant (Exhibit 3.2 to Form ~~10-K~~8-K filed by Registrant on ~~March 28, 2016)~~August 24, 2020)
10.1
Employment Agreement, dated as of December 29, 2017, by and among City First Bank of D.C., National Association, CFBanc Corporation and Brian Argrett. **.
10.2
City First Bank Deferred Compensation Plan for Brian Argrett.**
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
XBRL Taxonomy Extension Schema Document
101.CAL
XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF
XBRL Taxonomy Extension Definitions Linkbase Document
101.LAB
XBRL Taxonomy Extension Label Linkbase Document
101.PRE
XBRL Taxonomy Extension Presentation Linkbase Document

* 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

42
Table of Contents
* 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.
37
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: August ~~14, 2020~~23, 2021 By: /s/ ~~Wayne-Kent A. Bradshaw~~Brian Argrett
~~Wayne-Kent A. Bradshaw~~Brian Argrett
Chief Executive Officer
Date: August ~~14, 2020~~23, 2021 By: /s/ Brenda J. Battey
Brenda J. Battey
Chief Financial Officer
38

43

Delaware		95-4547287
(State or other jurisdiction of	~~(I.R.S. Employer~~
incorporation or organization)		(I.R.S. Employer Identification No.)

Title of each class:		Trading Symbol(s)		Name of each exchange on which registered:
Common Stock, par value $0.01 per share ~~(including~~ (including attached preferred stock purchase rights)		BYFC		The Nasdaq Stock Market LLC

Large accelerated filer	☐	¨	Accelerated filer	¨ ☐

Non-accelerated filer	☒	x	Smaller reporting company	x☒
			Emerging growth company	¨ ☐

TABLE OF CONTENTS
			Page
PART I.	FINANCIAL STATEMENTS		(to be updated)

	Item 1.	Consolidated Financial Statements (Unaudited)

		Consolidated Statements of Financial Condition as of June 30, ~~2020~~2021 and December 31, ~~2019~~2020	1

		Consolidated Statements of Operations and Comprehensive Income (Loss) for the three and six months ended June 30, ~~2020~~2021 and ~~2019~~2020	2

		Consolidated Statements of Cash Flows for the six months ended June 30, ~~2020~~2021 and ~~2019~~2020	3

		Consolidated Statements of Changes in Stockholders’ Equity for the three and six months ended June 30, ~~2020~~2021 and ~~2019~~ 2020	4

		Notes to Consolidated Financial Statements	6

	Item 2.	~~Management's~~Management’s Discussion and Analysis of Financial Condition and Results of Operations	2529

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3640

	Item 4.	Controls and Procedures	3640

PART II.	OTHER INFORMATION

	Item 1.	Legal Proceedings	3742

	Item 1A.	Risk Factors	3742

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3742

	Item 3.	Defaults Upon Senior Securities	3742

	Item 4.	Mine Safety Disclosures	3742

	Item 5.	Other Information	3742

	Item 6.	Exhibits	3742

	Signatures			3843

	June 30, 2020			December 31, 2019
	(Unaudited)
Assets:
Cash and due from banks	$	14,700		$	3,016
Interest-bearing deposits in other banks		25,148			12,550
Cash and cash equivalents		39,848			15,566
Securities available-for-sale, at fair value		10,192			11,006
Loans receivable held for sale, at lower of cost or fair value		49,719			-
Loans receivable held for investment, net of allowance of $3,215 and $3,182		374,417			397,847
Accrued interest receivable		1,291			1,223
Federal Home Loan Bank (FHLB) stock, at cost		3,586			2,916
Office properties and equipment, net		2,730			2,783
Bank owned life insurance		3,123			3,100
Deferred tax assets, net		5,393			5,220
Investment in affordable housing limited partnership		111			163
Other assets		894			545
Total assets	$	491,304		$	440,369

Liabilities and stockholders’ equity

Liabilities:
Deposits	$	315,778		$	297,724
FHLB advances		116,500			84,000
Junior subordinated debentures		3,825			4,335
Advance payments by borrowers for taxes and insurance		1,076			1,033
Accrued expenses and other liabilities		4,605			4,429
Total liabilities		441,784		$	391,521

Stockholders' Equity:
Preferred stock, $.01 par value, authorized 1,000,000 shares; none issued or outstanding		-			-
Common stock, $.01 par value, voting, authorized 50,000,000 shares at June 30, 2020 and December 31, 2019; issued 21,900,397 shares at June 30, 2020 and 21,729,249 shares at December 31, 2019; outstanding 19,282,571 shares at June 30, 2020 and 19,111,423 shares at December 31, 2019		219			218
Common stock, $.01 par value, non-voting, authorized 25,000,000 shares at June 30, 2020 and December 31, 2019; issued and outstanding 8,756,396 shares at June 30, 2020 and December 31, 2019		87			87
Additional paid-in capital		46,650			46,426
Retained earnings		8,608			8,425
Unearned Employee Stock Ownership Plan (ESOP) shares		(927	)		(959	)
Accumulated other comprehensive gain (loss), net of tax		209			(23	)
Treasury stock-at cost, 2,617,826 shares at June 30, 2020 and at December 31, 2019		(5,326	)		(5,326	)
Total stockholders’ equity		49,520			48,848
Total liabilities and stockholders’ equity	$	491,304		$	440,369

	June 30, 2021			December 31, 2020
	(Unaudited)
Assets:
Cash and due from banks	$	41,730		$	71,110
Interest-bearing deposits in other banks		168,653			24,999
Cash and cash equivalents		210,383			96,109
Securities available-for-sale, at fair value		158,832			10,698
Loans receivable held for investment, net of allowance of $3,296 and $3,215		614,718			360,129
Accrued interest receivable		2,572			1,202
Federal Home Loan Bank (FHLB) stock		2,896			3,431
Federal Reserve Bank (FRB) stock		693			0
Office properties and equipment, net		9,159			2,540
Bank owned life insurance		3,168			3,147
Deferred tax assets, net		5,513			5,633
Core deposit intangible, net		3,198			0
Goodwill		25,996			0
Other assets		3,870			489
Total assets	$	1,040,998		$	483,378

Liabilities and stockholders’ equity
Liabilities:
Deposits	$	705,041		$	315,630
Securities sold under agreements to repurchase		70,660			0
FHLB advances		96,022			110,500
Junior subordinated debentures		2,805			3,315
Notes payable		14,000			0
Accrued expenses and other liabilities		8,975			5,048
Total liabilities		897,503			434,493
Cumulative Redeemable Perpetual Preferred stock, Series A, authorized 3,000 shares at June 30, 2021 and NaN at December 31, 2020; issued and outstanding 3,000 shares at June 30, 2021 and NaN at December 31, 2020, liquidation value $1,000 per share		3,000			0
Common stock, Class A, $0.01 par value, voting, authorized 75,000,000 shares at June 30, 2021 and 50,000,000 shares at December 31, 2020; issued 46,248,710 shares at June 30, 2021 and 21,899,584 shares at December 31, 2020; outstanding 43,630,884 shares at June 30, 2021 and 19,281,758 shares at December 31, 2020		462			219
Common stock, Class B, $0.01 par value, non-voting, authorized 15,000,000 shares at June 30, 2021 and 0ne at December 31, 2020; issued and outstanding 11,404,621 shares at June 30, 2021 and 0ne at December 31, 2020		114			0
Common stock, Class C, $0.01 par value, non-voting, authorized 25,000,000 shares at June 30, 2021 and December 31, 2020; issued and outstanding 16,689,775 at June 30, 2021 and 8,756,396 shares at December 31, 2020		167			87
Additional paid-in capital		140,125			46,851
Retained earnings		4,997			7,783
Unearned Employee Stock Ownership Plan (ESOP) shares		(861	)		(893	)
Accumulated other comprehensive income, net of tax		785			164
Treasury stock-at cost, 2,617,826 shares at June 30, 2021 and at December 31, 2020		(5,326	)		(5,326	)
Total Broadway Financial Corporation and Subsidiary stockholders’ equity		143,463			48,885
Non-controlling interest		32			0
Total liabilities and stockholders’ equity	$	1,040,998		$	483,378

	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019
	(In thousands, except per share)
Interest income:
Interest and fees on loans receivable	$	4,429		$	3,841		$	8,788		$	7,956
Interest on mortgage-backed and other securities		65			95			135			193
Other interest income		74			149			216			309
Total interest income		4,568			4,085			9,139			8,458

Interest expense:
Interest on deposits		967			1,097			2,022			2,124
Interest on borrowings		570			526			1,188			1,059
Total interest expense		1,537			1,623			3,210			3,183

Net interest income		3,031			2,462			5,929			5,275
Loan loss provision (recapture)		-			(158	)		29			(348	)
Net interest income after loan loss provision (recapture)		3,031			2,620			5,900			5,623

Non-interest income:
Service charges		94			115			238			237
Gain on sale of loans		116			-			123			-
CDFI Grant		-			-			-			233
Other		32			24			78			45
Total non-interest income		242			139			439			515

Non-interest expense:
Compensation and benefits		1,983			1,875			4,038			3,757
Occupancy expense		320			312			635			620
Information services		221			218			458			426
Professional services		571			235			835			574
Office services and supplies		87			67			163			135
Loan related expenses		20			47			21			58
Corporate insurance		32			34			64			69
Amortization of investment in affordable housing limited partnership		8			49			53			98
Other		160			185			284			345
Total non-interest expense		3,402			3,022			6,551			6,082

(Loss) income before income taxes		(129	)		(263	)		(212	)		56
Income tax benefit		(345	)		(128	)		(395	)		(86	)
Net income (loss)	$	216		$	(135	)	$	183		$	142

Other comprehensive income, net of tax:
Unrealized gains on securities available-for-sale arising during the period	$	155		$	157		$	330		$	353
Income tax expense		46			46			98			104
Other comprehensive income, net of tax		109			111			232			249

Comprehensive income (loss)	$	325		$	(24	)	$	415		$	391

Earnings (loss) per common share-basic	$	0.01		$	(0.01	)	$	0.01		$	0.01
Earnings (loss) per common share-diluted	$	0.01		$	(0.01	)	$	0.01		$	0.01

	Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020
	(In thousands, except per share)

Interest income:
Interest and fees on loans receivable	$	6,300		$	4,429		$	9,944		$	8,788
Interest on available for sale securities		440			65			496			135
Other interest income		144			74			221			216
Total interest income		6,884			4,568			10,661			9,139

Interest expense:
Interest on deposits		477			967			860			2,022
Interest on borrowings		586			570			1,135			1,188
Total interest expense		1,063			1,537			1,995			3,210

Net interest income		5,821			3,031			8,666			5,929
Loan loss provision		81			0			81			29
Net interest income after loan loss provision		5,740			3,031			8,585			5,900

Non-interest income:
Service charges		36			94			129			238
Gain on sale of loans		0			116			0			123
CDFI Grant		1,826			0			1,826			0
Other		330			32			360			78
Total non-interest income		2,192			242			2,315			439

Non-interest expense:
Compensation and benefits		2,819			1,983			8,209			4,038
Occupancy expense		627			320			935			635
Information services		566			221			807			458
Professional services		513			571			2,452			835
Supervisory costs		177			95			247			112
Office services and supplies		59			87			154			163
Corporate insurance		8			32			254			64
Amortization of core deposit intangible		131			0			131			0
Other		474			93			812			246
Total non-interest expense		5,374			3,402			14,001			6,551

Income (loss) before income taxes		2,558			(129	)		(3,101	)		(212	)
Income tax expense (benefit)		1,824			(345	)		(348	)		(395	)
Net income (loss)	$	734		$	216		$	(2,753	)	$	183
Less: Net income attributable to non-controlling interest		(33	)		0			(33	)		0
Net Income (loss) Attributable to Broadway Financial Corporation	$	701		$	216		$	(2,786	)	$	183

Other comprehensive income, net of tax:
Unrealized gains on securities available-for-sale arising during the period	$	1,022		$	155		$	864		$	330
Income tax expense		290			46			243			98
Other comprehensive income, net of tax		732			109			621			232

Comprehensive income (loss)	$	1,433		$	325		$	(2,165	)	$	415

Earnings (loss) per common share-basic	$	0.01		$	0.01		$	(0.06	)	$	0.01
Earnings (loss) per common share-diluted	$	0.01		$	0.01		$	(0.06	)	$	0.01

	Six Months Ended June 30,
	2020			2019
	(In thousands)
Cash flows from operating activities:

Net income	$	183		$	142
Adjustments to reconcile net income to net cash used in operating activities:
Loan loss provision (recapture)		29			(348	)
Provision for losses on REOs		-			13
Depreciation		115			115
Net amortization of deferred loan origination costs		136			95
Net amortization of premiums on mortgage-backed securities		19			13
Amortization of investment in affordable housing limited partnership		53			98
Director compensation expense-common stock		45			52
Stock-based compensation expense		179			109
ESOP compensation expense		32			28
Earnings on bank owned life insurance		(23	)		(26	)
Originations of loans receivable held for sale		(110,908	)		(10,280	)
Proceeds from sales of loans receivable held for sale		60,997			-
Repayments on loans receivable held for sale		315			46
Gain on sale of loans receivable held for sale		(123	)		-
Change in assets and liabilities:
Net change in deferred taxes		(271	)		(31	)
Net change in accrued interest receivable		(68	)		(111	)
Net change in other assets		(349	)		107
Net change in advance payments by borrowers for taxes and insurance		43			29
Net change in accrued expenses and other liabilities		442			(281	)
Net cash used in operating activities		(49,154	)		(10,230	)

Cash flows from investing activities:

Net change in loans receivable held for investment		23,265			(7,153	)
Principal payments on available-for-sale securities		1,125			952
Proceeds from sales of REO		-			820
Purchase of FHLB stock		(670	)		-
Purchase of office properties and equipment		(328	)		(23	)
Net cash provided by (used in) investing activities		23,392			(5,404	)

Cash flows from financing activities:

Net change in deposits		18,054			14,384
Proceeds from FHLB advances		66,000			10,000
Repayments of FHLB advances		(33,500	)		(5,000	)
Repayments of junior subordinated debentures		(510	)		(255	)
Net cash provided by financing activities		50,044			19,129

Net change in cash and cash equivalents		24,282			3,495
Cash and cash equivalents at beginning of the period		15,566			16,651
Cash and cash equivalents at end of the period	$	39,848		$	20,146

Supplemental disclosures of cash flow information:
Cash paid for interest	$	3,290		$	2,971
Cash paid for income taxes		3			13
Supplemental disclosures of non-cash investing and financing:
Transfers of loans receivable held for sale to loans receivable held for investment	$	-		$	1,064
Transfers of loans receivable held for investment to loans receivable held for sale		-			10,684
Initial Recognition of Operating Lease Right-to-Use Assets		-			1,120
Initial Recognition of Operating Lease Liabilities		-			1,120

	Three-Month Period Ended June 30, 2020 and 2019
	Common Stock Voting		Common Stock Non-Voting		Additional Paid-in Capital			Accumulated Other Comprehensive Income			Retained Earnings (Substantially Restricted)			Unearned ESOP Shares			Treasury Stock			Total Stockholders’ Equity
								(In thousands)
Balance at April 1, 2020	$	219	$	87	$	46,550		$	100		$	8,392		$	(942	)	$	(5,326	)	$	49,080
Net income for the three months ended June 30, 2020		-		-		-			-			216			-			-			216
Release of unearned ESOP shares		-		-		-			-			-			15			-			15
Restricted stock Compensation expense		-		-		90			-			-			-			-			90
Stock option compensation expense		-		-		10			-			-			-			-			10
Other comprehensive income, net of tax		-		-		-			109			-			-			-			109
Balance at June 30, 2020	$	219	$	87	$	46,650		$	209		$	8,608		$	(927	)	$	(5,326	)	$	49,520
Balance at April 1, 2019	$	218	$	87	$	46,219		$	(145	)	$	8,908		$	(1,010	)	$	(5,326	)	$	48,951
Net income for the three months ended June 30, 2019		-		-		-			-			(135	)		-			-			(135	)
Release of unearned ESOP shares		-		-		(2	)		-			-			16			-			14
Restricted stock Compensation expense		-		-		65			-			-			-			-			65
Stock option compensation expense		-		-		10			-			-			-			-			10
Other comprehensive income, net of tax		-		-		-			111			-			-			-			111
Balance at June 30, 2019	$	218	$	87	$	46,292		$	(34	)	$	8,773		$	(994	)	$	(5,326	)	$	49,016


			Three-Month Period Ended June 30, 2021 and 2020
	Preferred Stock Non-Voting		Common Stock Voting			Common Stock Non-Voting		Additional Paid‑in Capital		Accumulated Other Comprehensive Income		Retained Earnings (Substantially Restricted)		Unearned ESOP Shares			Treasury Stock			Non-controlling Interest			Total Stockholders’ Equity
										(In thousands)
Balance at March 31, 2021	$	0	$	218		$	87	$	46,625	$	53	$	4,296	$	(877	)	$	(5,326	)	$	0		$	45,076
Net income for the three months ended June 30, 2021		0		0			0		0		0		701		0			0			33			734
Preferred shares issued in business combination		3,000		0			0		0		0		0		0			0			0			3,000
Common shares issued in business combination		0		140			114		62,839		0		0		0			0			164			63,257
Shares transferred from voting to non-voting after business combination		0		(7	)		7		0		0		0		0			0			0			0
Common shares issued in private placement		0		112			73		30,652		0		0		0			0			0			30,837
Release of unearned ESOP shares		0		0			0		9		0		0		16			0			0			25
Common stock cancelled for payment of tax withholdings		0		(1	)		0		0		0		0		0			0			0			(1	)
Payment to non-controlling interest		0		0			0		0		0		0		0			0			(165	)		(165	)
Other comprehensive income, net of tax		0		0			0		0		732		0		0			0			0			732
Balance at June 30, 2021	$	3,000	$	462		$	281	$	140,125	$	785	$	4,997	$	(861	)	$	(5,326	)	$	32		$	143,495

Balance at March 31, 2020	$	0	$	219		$	87	$	46,550	$	100	$	8,392	$	(942	)	$	(5,326	)	$	0		$	49,080
Net income for the three months ended June 30, 2020		0		0			0		0		0		216		0			0			0			216
Release of unearned ESOP shares		0		0			0		0		0		0		15			0			0			15
Restricted stock Compensation expense		0		0			0		90		0		0		0			0			0			90
Stock option compensation expense		0		0			0		10		0		0		0			0			0			10
Other comprehensive income, net of tax		0		0			0		0		109		0		0			0			0			109
Balance at June 30, 2020	$	0	$	219		$	87	$	46,650	$	209	$	8,608	$	(927	)	$	(5,326	)	$	0		$	49,520

	Six-Month Period Ended June 30, 2020 and 2019
	Common Stock Voting		Common Stock Non-Voting		Additional Paid-in Capital			Accumulated Other Comprehensive Income			Retained Earnings (Substantially Restricted)		Unearned ESOP Shares			Treasury Stock			Total Stockholders’ Equity
								(In thousands)
Balance at January 1, 2020	$	218	$	87	$	46,426		$	(23	)	$	8,425	$	(959	)	$	(5,326	)	$	48,848
Net income for the six months ended June 30, 2020		-		-		-			-			183		-			-			183
Release of unearned ESOP shares		-		-		-			-			-		32			-			32
Restricted stock Compensation expense		1		-		160			-			-		-			-			161
Stock awarded to directors		-		-		45			-			-		-			-			45
Stock option compensation expense		-		-		19			-			-		-			-			19
Other comprehensive loss, net of tax		-		-		-			232			-		-			-			232
Balance at June 30, 2020	$	219	$	87	$	46,650		$	209		$	8,608	$	(927	)	$	(5,326	)	$	49,520
Balance at January 1, 2019	$	213	$	87	$	46,141		$	(283	)	$	8,631	$	(1,027	)	$	(5,326	)	$	48,436
Net income for the six months ended June 30, 2019		-		-		-			-			142		-			-			142
Release of unearned ESOP shares		-		-		(5	)		-			-		33			-			28
Restricted stock Compensation expense		5		-		85			-			-		-			-			90
Stock awarded to directors		-		-		52			-			-		-			-			52
Stock option compensation expense		-		-		19			-			-		-			-			19
Other comprehensive loss, net of tax		-		-		-			249			-		-			-			249
Balance at June 30, 2019	$	218	$	87	$	46,292		$	(34	)	$	8,773	$	(994	)	$	(5,326	)	$	49,016

			Six-Month Period Ended June 30, 2021 and 2020
	Preferred Stock Non-Voting		Common Stock Voting			Common Stock Non-Voting		Additional Paid‑in Capital			Accumulated Other Comprehensive Income			Retained Earnings (Substantially Restricted)			Unearned ESOP Shares			Treasury Stock			Non-controlling interest			Total Stockholders’ Equity
											(In thousands)
Balance at January 1, 2021	$	0	$	219		$	87	$	46,851		$	164		$	7,783		$	(893	)	$	(5,326	)	$	0		$	48,885
Net income (loss) for the six months ended June 30, 2021		0		0			0		0			0			(2,786	)		0			0			33			(2,753	)
Preferred shares issued in business combination		3,000		0			0		0			0			0			0			0			0			3,000
Common shares issued in business combination		0		140			114		62,839			0			0			0			0			164			63,257
Shares transferred from voting to non-voting after business combination		0		(7	)		7		0			0			0			0			0			0			0
Common shares issued in private placement		0		112			73		30,652			0			0			0			0			0			30,837
Release of unearned ESOP shares		0		0			0		15			0			0			32			0			0			47
Restricted stock compensation expense		0		0			0		162			0			0			0			0			0			162
Stock awarded to directors		0		0			0		45			0			0			0			0			0			45
Stock option compensation expense		0		0			0		7			0			0			0			0			0			7
Common stock cancelled for payment of tax withholdings		0		(2	)		0		(446	)		0			0			0			0			0			(448	)
Payment to non-controlling interest		0		0			0		0			0			0			0			0			(165	)		(165	)
Other comprehensive income, net of tax		0		0			0		0			621			0			0			0			0			621
Balance at June 30, 2021	$	3,000	$	462		$	281	$	140,125		$	785		$	4,997		$	(861	)	$	(5,326	)	$	32		$	143,495

Balance at January 1, 2020	$	0	$	218		$	87	$	46,426		$	(23	)	$	8,425		$	(959	)	$	(5,326	)	$	0		$	48,848
Net income for the six months ended June 30, 2020		0		0			0		0			0			183			0			0			0			183
Release of unearned ESOP shares		0		0			0		0			0			0			32			0			0			32
Restricted stock compensation expense		0		1			0		160			0			0			0			0			0			161
Stock awarded to directors		0		0			0		45			0			0			0			0			0			45
Stock option compensation expense		0		0			0		19			0			0			0			0			0			19
Other comprehensive loss, net of tax		0		0			0		0			232			0			0			0			0			232
Balance at June 30, 2020	$	0	$	219		$	87	$	46,650		$	209		$	8,608		$	(927	)	$	(5,326	)	$	0		$	49,520

		CFBanc Book Value			Fair Value Adjustments			Fair Value
Assets acquired	(In thousands)
Cash and cash equivalents		$	84,745		$	0		$	84,745
Securities available-for-sale			150,052			(77	)		149,975
Loans receivable held for investment:
Gross loans receivable held for investment			227,669			(1,784	)		225,885
Deferred fees and costs			(315	)		315			0
Allowance for loan losses			(2,178	)		2,178			0
			225,176			709			225,885
Accrued interest receivable			1,637			0			1,637
FHLB and FRB stock			1,061			0			1,061
Office properties and equipment			5,152			1,801			6,953
Deferred tax assets, net			890			(1,608	)		(718	)
Core deposit intangible			0			3,329			3,329
Other assets			2,290			0			2,290
Total assets		$	471,003		$	4,154		$	475,157

Liabilities assumed
Deposits		$	353,671		$	51		$	353,722
Securities sold under agreements to repurchase			59,945			0			59,945
FHLB advances			3,057			109			3,166
Notes payable			14,000			0			14,000
Accrued expenses and other liabilities			4,063			0			4,063
Total liabilities		$	434,736		$	160		$	434,896

Excess of assets acquired over liabilities assumed		$	36,267		$	3,994		$	40,261
Consideration paid								$	66,257
Goodwill recognized								$	25,996

	Acquired Loans
	(In thousands)

Contractual amounts due	$	231,432
Cash flows not expected to be collected		(3,666	)
Expected cash flows		227,766
Interest component of expected cash flows		(1,881	)
Fair value of acquired loans	$	225,885

Contractual amounts due	$	1,825
Nonaccretable difference (cash flows not expected to be collected)		(634	)
Expected cash flows		1,191
Accretable yield		(346	)
Fair value of acquired loans	$	845

	Three Months Ended						Six Months Ended
	June 30, 2021			June 30, 2020			June 30, 2021			June 30, 2020
	(Dollars in thousands except per share amounts)
Net interest income		$	5,821		$	5,173	$	11,011			$	10,331
Net income (loss)			723			476		(3,539	)			189

Basic earnings per share		$	0.01		$	0.01	$	(0.06	)		$	0.00
Diluted earnings per share		$	0.01		$	0.01	$	(0.06	)		$	0.00

	Common Shares Outstanding
	Voting Class A			Nonvoting Class B		Nonvoting Class C		Total Shares

Shares outstanding March 31, 2021:		19,142,498			0		8,756,396		27,898,894

Shares issued in merger		13,999,870			11,404,621		0		25,404,491
Shares exchanged post-merger		(681,300	)		0		681,300		0
Shares cancelled		(52,105	)		0		0		(52,105	)
Shares issued in private placements		11,221,921			0		7,252,079		18,474,000

Shares outstanding April 6, 2021:		43,630,884			11,404,621		16,689,775		71,725,280

	For the three months ended June 30,						For the six months ended June 30,
	2020			2019			2020		2019
	(Dollars in thousands, except per share)
Net income (loss)	$	216		$	(135	)	$	183	$	142
Less net income (loss) attributable to participating securities		2			(2	)		2		2
Income (loss) available to common stockholders	$	214		$	(133	)	$	181	$	140


Weighted average common shares outstanding for basic earnings (loss) per common share		27,143,340			26,858,018			27,055,750		26,711,043
Add: dilutive effects of unvested restricted stock awards		307,376			-			337,097		396,331
Weighted average common shares outstanding for diluted earnings (loss) per common share		27,450,716			26,858,018			27,392,847		27,107,374
			��
Earnings (loss) per common share - basic	$	0.01		$	(0.01	)	$	0.01	$	0.01
Earnings (loss) per common share - diluted	$	0.01		$	(0.01	)	$	0.01	$	0.01

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(In thousands)
June 30, 2020:
Federal agency mortgage-backed securities	$	6,812	$	326	$	-	$	7,138
Federal agency debt		2,850		204		-		3,054
Total available-for-sale securities	$	9,662	$	530	$	-	$	10,192
December 31, 2019:
Federal agency mortgage-backed securities	$	7,792	$	164	$	-	$	7,956
Federal agency debt		3,014		36		-		3,050
Total available-for-sale securities	$	10,806	$	200	$	-	$	11,006

	Amortized Cost			Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(In thousands)
June 30, 2021:
Federal agency mortgage-backed securities		$	83,687	$	629	$	(60	)	$	84,256
Federal agency debt			33,207		199		0			33,406
Municipal bonds			4,914		63		(5	)		4,972
U. S. Treasuries			18,191		24		0			18,215
SBA pools			17,581		403		(1	)		17,983
Total available-for-sale securities		$	157,580	$	1,318	$	(66	)	$	158,832
December 31, 2020:
Federal agency mortgage-backed securities		$	5,550	$	257	$	0		$	5,807
Federal agency debt			2,682		190		0			2,872
Municipal bonds			2,000		19		0			2,019
Total available-for-sale securities		$	10,232	$	466	$	0		$	10,698

	June 30, 2021
	(In thousands)
Real estate:
Single family	$	534
Commercial real estate		187
Commercial - other		84
	$	805

	Three Months Ended June 30, 2021			Six Months Ended June 30, 2021
	(In thousands)
Balance at the beginning of the period	$	0		$	0
Additions		346			346
Accretion		(19	)		(19	)
Balance at the end of the period	$	327		$	327

	Three Months Ended June 30, 2020
	Real Estate
	Single family		Multi-family		Commercial real estate		Church			Construction			Commercial - other			Consumer			Total
	(In thousands)
Beginning balance	$	308	$	2,408	$	140	$	323		$	24		$	7		$	1		$	3,211
Provision for (recapture of) loan losses		-		16		29		(41	)		(2	)		(1	)		(1	)		-
Recoveries		4		-		-		-			-			-			-			4
Loans charged off		-		-		-		-			-			-			-			-
Ending balance	$	312	$	2,424	$	169	$	282		$	22		$	6		$	-		$	3,215

	Three Months Ended June 30, 2019
	Real Estate
	Single family			Multi-family			Commercial real estate			Church			Construction		Commercial - other		Consumer		Total
	(In thousands)
Beginning balance	$	347		$	1,990		$	62		$	507		$	18	$	5	$	-	$	2,929
Provision for (recapture of) loan losses		(19	)		(58	)		(4	)		(106	)		26		-		3		(158	)
Recoveries		-			-			-			-			-		-		-		-
Loans charged off		-			-			-			-			-		-		-		-
Ending balance	$	328		$	1,932		$	58		$	401		$	44	$	5	$	3	$	2,771

	Six Months Ended June 30, 2020
	Real Estate
	Single family			Multi-family		Commercial real estate		Church			Construction			Commercial - other			Consumer			Total
	(In thousands)
Beginning balance	$	312		$	2,319	$	133	$	362		$	48		$	7		$	1		$	3,182
Provision for (recapture of) loan losses		(4	)		105		36		(80	)		(26	)		(1	)		(1	)		29
Recoveries		4			-		-		-			-			-			-			4
Loans charged off		-			-		-		-			-			-			-			-
Ending balance	$	312		$	2,424	$	169	$	282		$	22		$	6		$	-		$	3,215

	Six Months Ended June 30, 2019
	Real Estate
	Single family			Multi-family		Commercial real estate		Church			Construction		Commercial - other			Consumer		Total
	(In thousands)
Beginning balance	$	369		$	1,880	$	52	$	603		$	19	$	6		$	-	$	2,929
Provision for (recapture of) loan losses		(41	)		52		6		(392	)		25		(1	)		3		(348	)
Recoveries		-			-		-		190			-		-			-		190
Loans charged off		-			-		-		-			-		-			-		-
Ending balance	$	328		$	1,932	$	58	$	401		$	44	$	5		$	3	$	2,771

	Three Months Ended June 30, 2021
	Real Estate
	Single family			Multi- family		Commercial real estate		Church			Construction		Commercial - other			SBA Loans		Consumer		Total
	(In thousands)
Beginning balance	$	275		$	2,473	$	219	$	221		$	22	$	5		$	0	$	0	$	3,215
Provision for (recapture of) loan losses		(105	)		133		8		(13	)		59		(1	)		0		0		81
Recoveries		0			0		0		0			0		0			0		0		0
Loans charged off		0			0		0		0			0		0			0		0		0
Ending balance	$	170		$	2,606	$	227	$	208		$	81	$	4		$	0	$	0	$	3,296

	Six Months Ended June 30, 2021
	Real Estate
	Single family			Multi-family		Commercial real estate		Church			Construction		Commercial - other		SBA Loans		Consumer			Total
				(In thousands)
Beginning balance	$	296		$	2,433	$	222	$	237		$	22	$	4	$	0	$	1		$	3,215
Provision for (recapture of) loan losses		(126	)		173		5		(29	)		59		0		0		(1	)		81
Recoveries		0			0		0		0			0		0		0		0			0
Loans charged off		0			0		0		0			0		0		0		0			0
Ending balance	$	170		$	2,606	$	227	$	208		$	81	$	4	$	0	$	0		$	3,296

	June 30, 2020						December 31, 2019
	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated		Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated
	(In thousands)
With no related allowance recorded:
Single family	$	10	$	9	$	-	$	-	$	-	$	-
Multi-family	$	307	$	307	$	-		313		313		-
Church	$	3,048	$	2,259	$	-		3,491		2,446		-
With an allowance recorded:
Single family		583		583		71		593		593		60
Church		1,876		1,876		72		1,928		1,928		85
Commercial - other		50		50		1		63		63		2
Total	$	5,874	$	5,084	$	144	$	6,388	$	5,343	$	147

	June 30, 2021						December 31, 2020
	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated		Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated
	(In thousands)
With no related allowance recorded:
Single family	$	0	$	0	$	-	$	2	$	1	$	-
Multi-family		290		290		-		298		298		-
Church		2,487		1,914		-		2,527		1,970		-
With an allowance recorded:
Single family		66		66		3		573		573		88
Church		1,804		1,804		42		1,842		1,842		52
Commercial - other		0		0		0		47		47		1
Total	$	4,647	$	4,074	$	45	$	5,289	$	4,731	$	141

	Three Months Ended June 30, 2020				Three Months Ended June 30, 2019
	Average Recorded Investment		Cash Basis Interest Income Recognized		Average Recorded Investment		Cash Basis Interest Income Recognized
	(In thousands)
Single family	$	597	$	7	$	638	$	5
Multi-family		308		5		320		5
Church		4,160		74		4,741		402
Commercial – other		59		1		63		-
Total	$	5,124	$	87	$	5,762	$	412

	Six Months Ended June 30, 2021				Six Months Ended June 30, 2020
	Average Recorded Investment		Cash Basis Interest Income Recognized		Average Recorded Investment		Cash Basis Interest Income Recognized
	(In thousands)
Single family	$	426	$	10	$	599	$	14
Multi-family		294		10		309		11
Church		3,766		126		4,190		309
Commercial - other		26		1		60		2
Total	$	4,512	$	147	$	5,158	$	336

	June 30, 2020
	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	$	-	$	-	$	-	$	-	$	59,001	$	59,001
Multi-family		-		-		-		-		279,324		279,324
Commercial real estate		-		-		-		-		18,742		18,742
Church		-		-		-		-		18,868		18,868
Construction		-		-		-		-		1,409		1,409
Commercial - other		-		-		-		-		278		278
Consumer		-		-		-		-		10		10
Total	$	-	$	-	$	-	$	-	$	377,632	$	377,632