UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September~~June 30, ~~2020~~2021

☐	TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For transition period from__________ to___________

Commission file number 001-39043

~~Commission file number~~

~~001-39043~~

BROADWAY FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)

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

5055 Wilshire Boulevard, Suite 500 Los Angeles, California		90036
(Address of principal executive offices)		(Zip Code)

(323) 634-1700

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated, a smaller reporting company, or an emerging growth company. See the definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐

Non-accelerated filer	☒	Smaller reporting company	☒

		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: As of ~~November 12, 2020, 19,281,758~~August 16, 2021, 43,674,046 shares of the Registrant’s Class A voting common stock, ~~and 8,756,396~~11,404,621 shares of the Registrant’s Class B non-voting common stock and 16,689,775 shares of the Registrant’s Class C non-voting common stock were outstanding.

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

	Item 1.	Consolidated Financial Statements (Unaudited)

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

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

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

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

		Notes to Consolidated Financial Statements	6

	Item 2.	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	3740

PART II.	OTHER INFORMATION

	Item 1.	Legal Proceedings	3842

	Item 1A.	Risk Factors	3842

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3842

	Item 3.	Defaults Upon Senior Securities	3842

	Item 4.	Mine Safety Disclosures	3842

	Item 5.	Other Information	3842

	Item 6.	Exhibits	3842

	Signatures			39 43

Table of Contents

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Consolidated ~~Consolidated~~ Statements of Financial Condition

(In thousands, except share and per share amounts)

	September 30, 2020			December 31, 2019			June 30, 2021			December 31, 2020
	(Unaudited)						(Unaudited)
Assets:
Cash and due from banks	$	44,740		$	3,016		$	41,730		$	71,110
Interest-bearing deposits in other banks		24,976			12,550			168,653			24,999
Cash and cash equivalents		69,716			15,566			210,383			96,109
Securities available-for-sale, at fair value		10,372			11,006			158,832			10,698
Loans receivable held for sale, at lower of cost or fair value		40,653			-
Loans receivable held for investment, net of allowance of $3,215 and $3,182		361,793			397,847
Loans receivable held for investment, net of allowance of $3,296 and $3,215								614,718			360,129
Accrued interest receivable		1,325			1,223			2,572			1,202
Federal Home Loan Bank (FHLB) stock, at cost		3,586			2,916
Federal Home Loan Bank (FHLB) stock								2,896			3,431
Federal Reserve Bank (FRB) stock								693			0
Office properties and equipment, net		2,714			2,783			9,159			2,540
Bank owned life insurance		3,135			3,100			3,168			3,147
Deferred tax assets, net		5,309			5,220			5,513			5,633
Investment in affordable housing limited partnership		84			163
Core deposit intangible, net								3,198			0
Goodwill								25,996			0
Other assets		530			545			3,870			489
Total assets	$	499,217		$	440,369		$	1,040,998		$	483,378

Liabilities and stockholders’ equity

Liabilities:
Deposits	$	325,336		$	297,724		$	705,041		$	315,630
Securities sold under agreements to repurchase								70,660			0
FHLB advances		115,500			84,000			96,022			110,500
Junior subordinated debentures		3,570			4,335			2,805			3,315
Advance payments by borrowers for taxes and insurance		1,541			1,033
Notes payable								14,000			0
Accrued expenses and other liabilities		3,904			4,429			8,975			5,048
Total liabilities		449,851			391,521			897,503			434,493

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 September 30, 2020 and December 31, 2019; issued 21,899,584 shares at September 30, 2020 and 21,729,249 shares at December 31, 2019; outstanding 19,281,758 shares at September 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 September 30, 2020 and December 31, 2019; issued and outstanding 8,756,396 shares at September 30, 2020 and December 31, 2019		87			87
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		46,750			46,426			140,125			46,851
Retained earnings		8,364			8,425			4,997			7,783
Unearned Employee Stock Ownership Plan (ESOP) shares		(909	)		(959	)		(861	)		(893	)
Accumulated other comprehensive income (loss), net of tax		181			(23	)
Treasury stock-at cost, 2,617,826 shares at September 30, 2020 and at December 31, 2019		(5,326	)		(5,326	)
Total stockholders’ equity		49,366			48,848
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	$	499,217		$	440,369		$	1,040,998		$	483,378

See accompanying notes to unaudited consolidated financial statements.

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BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Consolidated Statements of Operations and Comprehensive Income (Loss)

(Unaudited)

	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.

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BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

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

(Unaudited)

Three Months Ended
September 30,

Nine Months Ended
September 30,

2020 2019 2020 2019
(In thousands, except per share)

Interest income:
Interest and fees on loans receivable $ 4,438 $ 3,731 $ 13,226 $ 11,687
Interest on mortgage-backed and other securities 59 90 194 283
Other interest income 77 194 293 503
Total interest income 4,574 4,015 13,713 12,473

Interest expense:
Interest on deposits 631 1,105 2,653 3,229
Interest on borrowings 566 518 1,754 1,577
Total interest expense 1,197 1,623 4,407 4,806

Net interest income 3,377 2,392 9,306 7,667
Loan loss provision (recapture) - 47 29 (301 )
Net interest income after loan loss provision (recapture) 3,377 2,345 9,277 7,968

Non-interest income:
Service charges 93 116 331 353
Gain on sale of loans 76 204 199 204
CDFI Grant - - - 233
Other 37 24 115 69
Total non-interest income 206 344 645 859

Non-interest expense:
Compensation and benefits 1,909 1,876 5,947 5,633
Occupancy expense 332 325 967 945
Information services 242 231 700 657
Professional services 840 335 1,675 909
Office services and supplies 97 72 260 207
Loan related expenses 41 58 62 116
Corporate insurance 30 32 94 101
Amortization of investment in affordable housing limited partnership 26 36 79 134
Other 215 179 499 524
Total non-interest expense 3,732 3,144 10,283 9,226

Loss before income taxes (149 ) (455 ) (361 ) (399 )
Income tax expense (benefit) 95 (176 ) (300 ) (262 )
Net loss $ (244 ) $ (279 ) $ (61 ) $ (137 )

Other comprehensive (loss) income, net of tax:
Unrealized (losses) gains on securities available-for-sale arising during the period $ (40 ) $ 64 $ 290 $ 417
Income tax (benefit) expense (12 ) 19 86 123
Other comprehensive (loss) income, net of tax (28 ) 45 204 294

Comprehensive (loss) income $ (272 ) $ (234 ) $ 143 $ 157

Loss earnings per common share-basic $ (0.01 ) $ (0.01 ) $ - $ (0.01 )
Loss earnings per common share-diluted $ (0.01 ) $ (0.01 ) $ - $ (0.01 )

	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.

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BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Consolidated Statements of Changes in Stockholders’ Equity

(Unaudited)


			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.

Table of Contents

~~BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY~~

			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

~~Consolidated Statements of Cash Flows~~

~~(Unaudited)~~

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

Net loss $ (61 ) $ (137 )
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Loan loss provision (recapture) 29 (301 )
Provision for losses on REOs - 13
Depreciation 170 171
Net amortization of deferred loan origination costs 183 160
Net amortization of premiums on mortgage-backed securities 30 19
Amortization of investment in affordable housing limited partnership 79 134
Director compensation expense-common stock 45 52
Stock-based compensation expense 279 182
ESOP compensation expense 50 47
Earnings on bank owned life insurance (35 ) (39 )
Originations of loans receivable held for sale (118,626 ) (15,182 )
Proceeds from sales of loans receivable held for sale 77,642 22,970
Repayments on loans receivable held for sale 530 103
Gain on sale of loans receivable held for sale (199 ) (204 )
Change in assets and liabilities:
Net change in deferred taxes (175 ) (209 )
Net change in accrued interest receivable (102 ) (39 )
Net change in other assets 15 5
Net change in advance payments by borrowers for taxes and insurance 508 473
Net change in accrued expenses and other liabilities (125 ) 322
Net cash (used in) provided by operating activities (39,763 ) 8,540

Cash flows from investing activities:
Net change in loans receivable held for investment 35,843 (8,735 )
Principal payments on available-for-sale securities 1,744 1,450
Purchases of available-for-sale municipal bonds (850 ) -
Proceeds from sales of REO - 820
Purchase of FHLB stock (670 ) -
Purchase of office properties and equipment (501 ) (33 )
Net cash provided by (used in) investing activities 35,566 (6,498 )

Cash flows from financing activities:
Net change in deposits 27,612 (1,347 )
Proceeds from FHLB advances 66,000 13,000
Repayments of FHLB advances (34,500 ) (8,000 )
Payment for tax withholding for vesting of restricted stock - (14 )
Repayments of junior subordinated debentures (765 ) (510 )
Net cash provided by financing activities 58,347 3,129

Net change in cash and cash equivalents 54,150 5,171
Cash and cash equivalents at beginning of the period 15,566 16,651
Cash and cash equivalents at end of the period $ 69,716 $ 21,822

Supplemental disclosures of cash flow information:
Cash paid for interest $ 4,530 $ 4,710
Cash paid for income taxes 8 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
Common stock exchanged for payment of tax withholding - 14
Initial Recognition of Operating Lease Right-to-Use Assets - 1,120
Initial Recognition of Operating Lease Liabilities - 1,120

See accompanying notes to unaudited consolidated financial statements.

Table of Contents

~~BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY~~

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

~~(Unaudited)~~

Three-Month Period Ended September 30, 2020 and 2019

Common
Stock
Voting

Common
Stock
Non-
Voting

Additional
Paid‑in
Capital

Accumulated Other Comprehensive (Loss) Income

Retained Earnings (Substantially Restricted)

Unearned
ESOP
Shares

Treasury
Stock

Total
Stockholders’
Equity

(In thousands)
Balance at July 1, 2020 $ 219 $ 87 $ 46,650 $ 209 $ 8,608 $ (927 ) $ (5,326 ) $ 49,520
Net loss for the three months ended September 30, 2020 ‑ ‑ ‑ - (244 ) ‑ ‑ (244 )
Release of unearned ESOP shares - - - ‑ ‑ 18 ‑ 18
Restricted stock Compensation expense - ‑ 90 ‑ ‑ ‑ ‑ 90
Stock option compensation expense ‑ ‑ 10 ‑ - ‑ ‑ 10
Other comprehensive loss, net of tax
‑

‑

-

(28
)

‑

‑

‑

(28
)
Balance at September 30, 2020
$
219

$
87

$
46,750

$
181

$
8,364

$
(909
)

$
(5,326
)

$
49,366

Balance at July 1, 2019 $ 218 $ 87 $ 46,292 $ (34 ) $ 8,773 $ (994 ) $ (5,326 ) $ 49,016
Net loss for the three months ended September 30, 2019 ‑ ‑ ‑ - (279 ) ‑ ‑ (279 )
Release of unearned ESOP shares - - 2 ‑ ‑ 17 ‑ 19
Restricted stock Compensation expense - ‑ 63 ‑ ‑ ‑ ‑ 63
Stock option compensation expense ‑ ‑ 10 ‑ - ‑ ‑ 10
Common stock repurchased for tax withholdings ‑ ‑ (14 ) ‑ ‑ - ‑ (14 )
Other comprehensive income, net of tax
‑

‑

-

45

‑

‑

‑

45

Balance at September 30, 2019
$
218

$
87

$
46,353

$
11

$
8,494

$
(977
)

$
(5,326
)

$
48,860

~~See accompanying notes to unaudited consolidated financial statements.~~

~~Table of Contents~~

Nine-Month Period Ended September 30, 2020 and 2019

Common
Stock
Voting

Common
Stock
Non-
Voting

Additional
Paid‑in
Capital

Accumulated Other Comprehensive (Loss) 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 loss for the nine months ended September 30, 2020 ‑ ‑ ‑ - (61 ) ‑ ‑ (61 )
Release of unearned ESOP shares - - - ‑ ‑ 50 ‑ 50
Restricted stock Compensation expense 1 ‑ 250 ‑ ‑ ‑ ‑ 251
Stock awarded to directors ‑ ‑ 45 ‑ ‑ ‑ - 45
Stock option compensation expense ‑ ‑ 29 ‑ - ‑ ‑ 29
Other comprehensive income, net of tax
‑

‑

-

204

‑

‑

‑

204

Balance at September 30, 2020
$
219

$
87

$
46,750

$
181

$
8,364

$
(909
)

$
(5,326
)

$
49,366

Balance at January 1, 2019 $ 213 $ 87 $ 46,141 $ (283 ) $ 8,631 $ (1,027 ) $ (5,326 ) $ 48,436
Net loss for the nine months ended September 30, 2019 ‑ ‑ ‑ - (137 ) ‑ ‑ (137 )
Release of unearned ESOP shares - - (3 ) ‑ ‑ 50 ‑ 47
Restricted stock Compensation expense 5 ‑ 148 ‑ ‑ ‑ ‑ 153
Stock awarded to directors ‑ ‑ 52 ‑ ‑ ‑ - 52
Stock option compensation expense ‑ ‑ 29 ‑ - ‑ ‑ 29
Common stock repurchased for tax withholdings ‑ ‑ (14 ) ‑ ‑ - ‑ (14 )
Other comprehensive loss, net of tax
‑

‑

-

294

‑

‑

‑

294

Balance at September 30, 2019
$
218

$
87

$
46,353

$
11

$
8,494

$
(977
)

$
(5,326
)

$
48,860

~~See accompanying notes to unaudited consolidated financial statements.~~

~~Table of Contents~~

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Unaudited Consolidated Financial Statements

~~September 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, “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 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 ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2020.~~

2021.

Subsequent events have been evaluated through August ~~25, 2020,~~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 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 Company ~~entered into~~acquired certain loans that have shown evidence of credit deterioration since origination; these loans are referred to as purchased credit impaired 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 ~~definitive agreement to merge with CFBanc Corporation,~~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 recognized as a ~~District~~reduction of ~~Columbia benefit corporation (“City First”).~~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 liabilities assumed in a business combination at fair value on the acquisition date. Goodwill is generally determined as the excess of 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 acquisition date. See Note 2 - Business Combination and Note 7 - Goodwill and Intangible Assets for ~~more~~further information.

~~Recently Adopted~~

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BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Unaudited Consolidated Financial Statements

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 Company has selected November 30th as the date to perform the annual impairment test. Intangible assets with definite useful lives are amortized over their estimated useful lives to their estimated residual values. Goodwill is the only intangible asset with an indefinite life on the Company’s consolidated statement of financial condition.

Core deposit intangible assets arising from mergers and acquisitions are 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.

Variable Interest Entities (“VIE”)

An entity is considered to be a VIE when it does not have sufficient equity at investment at risk, the 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 consolidate a VIE when it holds a variable interest in the VIE and is also the primary beneficiary of the VIE. CFC 45 is a Community Development Entity (“CDE”), and is considered to be a VIE. The Company is the primary beneficiary because it has the power to 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 less than wholly-owned, the third-party holdings of 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 other reference rates that could be discontinued due to reference rate reform. This guidance was effective immediately and the amendments may be applied prospectively through December 31, 2022. The estimated financial impact has not yet been determined.

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. The guidance did not have a significant impact 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 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)~~(“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)~~(“PCI”) assets will be grandfathered and classified as purchased credit deteriorated ~~(PCD)~~(“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 ~~will continue to recognize~~ 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. 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.

~~Table of Contents~~

~~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 impact of this ASU on the Company’s consolidated financial statements.

In March 2020, the FASB issued 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 other reference rates that could be discontinued due to reference rate reform. This guidance is effective immediately and the amendments may be applied prospectively through December 31, 2022. This guidance did not have a significant impact on the Company’s consolidated financial statements as of September 30, 2020.

NOTE (2) – ~~Pending Acquisition~~Business Combination

~~On August 25, 2020, the~~

The Company ~~entered into an Agreement and Plan of Merger (the “Merger Agreement”~~completed its merger with CFBanc Corporation (“CFBanc”) with City First. The Merger Agreement provides that, among other things and subject to the terms and conditions of the Merger Agreement, City First will merge with and into the Company (the “City First Merger”),on April 1, 2021, with the Company ~~surviving and~~ continuing as the surviving ~~entity. At~~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 ~~effective time~~surviving entity (which concurrently changed its name to City First Bank, National Association). As of the ~~City First Merger,~~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 ~~City First’s~~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 ~~Effective Time (other than any shares owned by City First or the Company and any Dissenting Shares (as defined in the~~CFBanc Merger ~~Agreement)) will be~~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 ~~will be~~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 ~~will be~~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 ~~City First~~CFBanc Corporation (“~~City First~~CFBanc Corporation Preferred Stock”) issued and outstanding immediately prior to the effective time of the ~~City First~~CFBanc Merger ~~will be~~was converted into ~~one~~1 validly issued, fully paid and non-assessable share of a new series of preferred stock of the Company, which ~~new series will be~~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 ~~City First~~CFBanc Corporation Preferred Stock than the rights, preferences, privileges and voting powers, and limitations and restrictions thereof of ~~City First~~CFBanc Corporation Preferred Stock. ~~Immediately following~~The total value of the ~~City First Merger,~~consideration transferred to CFBanc Corporation shareholders was approximately $66.3 million, which was based on the ~~Bank will merge with and into City First Bank~~closing price of ~~D.C., National Association (“CFB”), a wholly owned subsidiary~~the Company’s common stock on March 31, 2021, the last trading day prior to the consummation of ~~City First, with CFB continuing as~~ the ~~surviving entity.~~merger.

Table of Contents

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

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

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 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

Table of Contents

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

Table of Contents

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 ~~following~~ table below is ~~intended~~based on various estimates and is presented for informational purposes only and isdoes not ~~necessarily indicative~~indicate the financial condition or results of ~~future operating results or operating results~~operations of the combined Company that would have ~~occurred~~been achieved for the periods presented had the ~~mergers~~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 (6) – Loans Receivable Held for Investment

Loans receivable held for investment were as follows as of the dates indicated:

	September 30, 2020			December 31, 2019			June 30, 2021			December 31, 2020
	(In thousands)						(In thousands)
Real estate:
Single family	$	53,976		$	72,883		$	53,556		$	48,217
Multi-family		269,874			287,378			346,192			272,387
Commercial real estate		20,025			14,728			92,491			24,289
Church		17,789			21,301			15,652			16,658
Construction		1,672			3,128			22,677			429
Commercial – other		302			262			46,973			57
SBA loans⁽¹⁾								40,027			0
Consumer		8			21			73			7
Gross loans receivable before deferred loan costs and premiums		363,646			399,701			617,641			362,044
Unamortized net deferred loan costs and premiums		1,362			1,328			373			1,300
Gross loans receivable		365,008			401,029			618,014			363,344
Allowance for loan losses		(3,215	)		(3,182	)		(3,296	)		(3,215	)
Loans receivable, net	$	361,793		$	397,847		$	614,718		$	360,129

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

10Purchased 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.

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 September 30, 2020																		Three Months Ended June 30, 2021
	Real Estate																		Real Estate
	Single family		Multi- family		Commercial real estate		Church			Construction		Commercial - other			Consumer		Total		Single family			Multi- family		Commercial real estate		Church			Construction		Commercial - other			SBA Loans		Consumer		Total
	(In thousands)																		(In thousands)
Beginning balance	$	312	$	2,424	$	169	$	282		$	22	$	6		$	-	$	3,215	$	275		$	2,473	$	219	$	221		$	22	$	5		$	0	$	0	$	3,215
Provision for (recapture of) loan losses		9		1		17		(28	)		-		(1	)		2		-		(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	$	321	$	2,425	$	186	$	254		$	22	$	5		$	2	$	3,215	$	170		$	2,606	$	227	$	208		$	81	$	4		$	0	$	0	$	3,296

	Three Months Ended September 30, 2019																		Three Months Ended June 30, 2020
	Real Estate																		Real Estate
	Single family		Multi- family		Commercial real estate		Church			Construction		Commercial - other		Consumer			Total		Single family		Multi- family		Commercial real estate		Church			Construction			Commercial - other			SBA Loans		Consumer			Total
	(In thousands)																		(In thousands)
Beginning balance	$	328	$	1,932	$	58	$	401		$	44	$	5	$	3		$	2,771	$	308	$	2,408	$	140	$	323		$	24		$	7		$	0	$	1		$	3,211
Provision for (recapture of) loan losses		-		66		-		(24	)		6		-		(1	)		47		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	$	328	$	1,998	$	58	$	377		$	50	$	5	$	2		$	2,818	$	312	$	2,424	$	169	$	282		$	22		$	6		$	0	$	0		$	3,215

	Nine Months Ended September 30, 2020																			Six Months Ended June 30, 2021
	Real Estate																			Real Estate
	Single family		Multi- family		Commercial real estate		Church			Construction			Commercial - other			Consumer		Total		Single family			Multi-family		Commercial real estate		Church			Construction		Commercial - other		SBA Loans		Consumer			Total
	(In thousands)																						(In thousands)
Beginning balance	$	312	$	2,319	$	133	$	362		$	48		$	7		$	1	$	3,182	$	296		$	2,433	$	222	$	237		$	22	$	4	$	0	$	1		$	3,215
Provision for (recapture of) loan losses		5		106		53		(108	)		(26	)		(2	)		1		29		(126	)		173		5		(29	)		59		0		0		(1	)		81
Recoveries		4		-		-		-			-			-			-		4		0			0		0		0			0		0		0		0			0
Loans charged off		-		-		-		-			-			-			-		-		0			0		0		0			0		0		0		0			0
Ending balance	$	321	$	2,425	$	186	$	254		$	22		$	5		$	2	$	3,215	$	170		$	2,606	$	227	$	208		$	81	$	4	$	0	$	0		$	3,296

Nine Months Ended September 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
)

118

6

(416
)

31

(1
)

2

(301
)
Recoveries
-

-

-

190

-

-

-

190

Loans charged off
-

-

-

-

-

-

-

-

Ending balance
$
328

$
1,998

$
58

$
377

$
50

$
5

$
2

$
2,818

1115

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:

		September 30, 2020																June 30, 2021
		Real Estate																Real Estate
		Single family		Multi- family		Commercial real estate		Church		Construction		Commercial - other		Consumer		Total		Single family		Multi- family		Commercial real estate		Church		Construction		Commercial - other		SBA Loans		Consumer		Total
		(In thousands)																(In thousands)
Allowance for loan losses:
Ending allowance balance attributable to loans:	Ending allowance balance attributable to loans:
Individually evaluated for impairment		$	91	$	-	$	-	$	56	$	-	$	1	$	-	$	148	$	3	$	0	$	0	$	42	$	0	$	0	$	0	$	0	$	45
Collectively evaluated for impairment			230		2,425		186		198		22		4		2		3,067		167		2,606		227		166		81		4		0		0		3,251
Total ending allowance balance		$	321	$	2,425	$	186	$	254	$	22	$	5	$	2	$	3,215	$	170	$	2,606	$	227	$	208	$	81	$	4	$	0	$	0	$	3,296
Loans:
Loans individually evaluated for impairment		$	586	$	304	$	-	$	3,860	$	-	$	49	$	-	$	4,799	$	66	$	290	$	0	$	3,718	$	0	$	0	$	0	$	0	$	4,074
Loans collectively evaluated for impairment			53,548		271,071		20,086		13,571		1,672		253		8		360,209		53,600		347,540		92,491		11,602		22,583		46,973		39,078		73		613,940
Total ending loans balance		$	54,134	$	271,375	$	20,086	$	17,431	$	1,672	$	302	$	8	$	365,008	$	53,666	$	347,830	$	92,491	$	15,320	$	22,583	$	46,973	$	39,078	$	73	$	618,014

		December 31, 2019																December 31, 2020
		Real Estate																Real Estate
		Single family		Multi- family		Commercial real estate		Church		Construction		Commercial - other		Consumer		Total		Single family		Multi- family		Commercial real estate		Church		Construction		Commercial - other			SBA Loans	Consumer		Total
		(In thousands)																(In thousands)
Allowance for loan losses:
Ending allowance balance attributable to loans:	Ending allowance balance attributable to loans:
Individually evaluated for impairment		$	60	$	-	$	-	$	85	$	-	$	2	$	-	$	147	$	89	$	0	$	0	$	52	$	0	$	0	$	0	$	0	$	141
Collectively evaluated for impairment			252		2,319		133		277		48		5		1		3,035		207		2,433		222		185		22		4		0		1		3,074
Total ending allowance balance		$	312	$	2,319	$	133	$	362	$	48	$	7	$	1	$	3,182	$	296	$	2,433	$	222	$	237	$	22	$	4	$	0	$	1	$	3,215
Loans:
Loans individually evaluated for impairment		$	611	$	313	$	-	$	4,356	$	-	$	63	$	-	$	5,343	$	573	$	298	$	0	$	3,813	$	0	$	47	$	0	$	0	$	4,731
Loans collectively evaluated for impairment			72,501		288,730		14,818		16,292		3,125		199		21		395,686		47,784		273,566		24,322		12,495		430		9		0		7		358,613
Total ending loans balance		$	73,112	$	289,043	$	14,818	$	20,648	$	3,125	$	262	$	21	$	401,029	$	48,357	$	273,864	$	24,322	$	16,308	$	430	$	56	$	0	$	7	$	363,344

1216

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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:

	September 30, 2020						December 31, 2019						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		Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated		Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated
	(In thousands)												(In thousands)
With no related allowance recorded:
Single family	$	9	$	8	$	-	$	-	$	-	$	-	$	0	$	0	$	-	$	2	$	1	$	-
Multi-family	$	304	$	304	$	-		313		313		-		290		290		-		298		298		-
Church	$	2,546	$	1,999	$	-		3,491		2,446		-		2,487		1,914		-		2,527		1,970		-
With an allowance recorded:
Single family		578		578		91		593		593		60		66		66		3		573		573		88
Church		1,861		1,861		56		1,928		1,928		85		1,804		1,804		42		1,842		1,842		52
Commercial - other		50		49		1		63		63		2		0		0		0		47		47		1
Total	$	5,348	$	4,799	$	148	$	6,388	$	5,343	$	147	$	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 September 30, 2020				Three Months Ended September 30, 2019				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		Average Recorded Investment		Cash Basis Interest Income Recognized		Average Recorded Investment		Cash Basis Interest Income Recognized
	(In thousands)								(In thousands)
Single family	$	589	$	7	$	625	$	7	$	316	$	4	$	597	$	7
Multi-family		305		5		317		6		292		5		308		5
Church		3,938		67		4,678		76		3,742		63		4,160		74
Commercial – other		50		1		63		1
Commercial - other										11		0		59		1
Total	$	4,882	$	80	$	5,683	$	90	$	4,361	$	72	$	5,124	$	87

	Nine Months Ended September 30, 2020				Nine Months Ended September 30, 2019				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		Average Recorded Investment		Cash Basis Interest Income Recognized		Average Recorded Investment		Cash Basis Interest Income Recognized
	(In thousands)								(In thousands)
Single family	$	596	$	22	$	631	$	22	$	426	$	10	$	599	$	14
Multi-family		308		16		320		17		294		10		309		11
Church		4,094		376		5,206		594		3,766		126		4,190		309
Commercial – other		57		3		63		3
Commercial - other										26		1		60		2
Total	$	5,055	$	417	$	6,220	$	636	$	4,512	$	147	$	5,158	$	336

1317

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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 ~~$41~~$22 thousand for the three months ended ~~September~~June 30, 2021 and 2020, respectively, and ~~2019, respectively, and $67~~$38 thousand and ~~$121~~$45 thousand for the ~~nine~~six months ended ~~September~~June 30, 2021 and 2020, ~~and 2019,~~ respectively, and were not included in the consolidated results of operations.

As of June 30,2021, 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:

September 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
$
76

$
8

$
-

$
84

$
54,050

$
54,134

Multi-family
-

-

-

-

271,375

271,375

Commercial real estate
-

-

-

-

20,086

20,086

Church
-

-

-

-

17,431

17,431

Construction
-

-

-

-

1,672

1,672

Commercial - other
-

-

-

-

302

302

Consumer
-

-

-

-

8

8

Total
$
76

$
8

$
-

$
84

$
364,924

$
365,008

	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

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

The following table presents the recorded investment in non-accrual loans by loan type as of the periods indicated:

	September 30, 2020		December 31, 2019		June 30, 2021		December 31, 2020
	(In thousands)				(In thousands)
Loans receivable held for investment:
Single-family residence	$	8	$	18	$	0	$	1
Church	$	812		406		735		786
Total non-accrual loans	$	820	$	424	$	735	$	787

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 ~~September~~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.

~~Table of Contents~~

~~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, no0 borrowers have requested loan ~~modifications, and no~~modifications. To date, 0 modifications have been granted.

At ~~September~~June 30, 2021, loans classified as TDRs totaled $4.1 million, of which $408 thousand were included in non-accrual loans and $3.7 million were on accrual status. At December 31, 2020, loans classified as ~~troubled debt restructurings (“TDRs”)~~TDRs totaled $4.2 million, of which ~~$243~~$232 thousand were included in non-accrual loans and $4.0 million were on accrual status. ~~At December 31, 2019, loans classified as TDRs totaled $4.7 million, of which $406 thousand were included in non-accrual loans and $4.3 million were on accrual status.~~ The Company has allocated ~~$148~~$45 thousand and ~~$147~~$141 thousand of specific reserves for accruing TDRs as of ~~September~~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 ~~September~~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 ~~nine~~six months ended ~~September~~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 close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date.

◾

Substandard. Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Table of Contents

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Unaudited Consolidated Financial Statements

◾

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.

~~Table of Contents~~

~~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:

	September 30, 2020												June 30, 2021
	Pass		Watch		Special Mention		Substandard		Doubtful		Loss		Pass		Watch		Special Mention		Substandard		Doubtful		Loss
	(In thousands)												(In thousands)
Single family	$	54,127	$	-	$	-	$	7	$	-	$	-	$	53,666	$	0	$	0	$	0	$	0	$	0
Multi-family		271,008		-		-		367		-		-		347,477		0		0		353		0		0
Commercial real estate		18,590		1,496		-		-		-		-		91,018		0		0		1,473		0		0
Church		13,982		662		-		2,787		-		-		13,615		647		0		1,058		0		0
Construction		1,672		-		-		-		-		-		22,583		0		0		0		0		0
Commercial - other		252		-		-		50		-		-		46,973		0		0		0		0		0
SBA loans														39,078		0		0		0		0		0
Consumer		8		-		-		-		-		-		73		0		0		0		0		0
Total	$	359,639	$	2,158	$	-	$	3,211	$	-	$	-	$	614,483	$	647	$	0	$	2,884	$	0	$	0

	December 31, 2019												December 31, 2020
	Pass		Watch		Special Mention		Substandard		Doubtful		Loss		Pass		Watch		Special Mention		Substandard		Doubtful		Loss
	(In thousands)												(In thousands)
Single family	$	73,094	$	-	$	-	$	18	$	-	$	-	$	48,357	$	0	$	0	$	1	$	0	$	0
Multi-family		288,251		411		-		381		-		-		273,501		0		0		362		0		0
Commercial real estate		14,818		-		-		-		-		-		22,834		1,488		0		0		0		0
Church		16,546		411		-		3,691		-		-		12,899		657		0		2,752		0		0
Construction		3,125		-		-		-		-		-		430		0		0		0		0		0
Commercial - other		199		-		-		63		-		-		9		0		0		47		0		0
Consumer		21		-		-		-		-		-		7		0		0		0		0		0
Total	$	396,054	$	822	$	-	$	4,153	$	-	$	-	$	358,037	$	2,145	$	0	$	3,162	$	0	$	0

~~NOTE (7)~~ – ~~Leases~~

~~The Bank has~~ 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 recorded a ROU asset of $326 thousand and an operating lease liability of $332 thousand~~gross loans above as of ~~September~~June 30, ~~2020. The Bank has no finance leases.~~2021, in connection with the NMTC Program.

NOTE (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 ~~September~~June 30, ~~2020, 629,267~~2021, 490,007 shares had been awarded and ~~663,842~~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,~~awards to its ~~directors under~~officers and employees.

No stock options were granted during the ~~2018 LTIP, which are~~six months ended June 30, 2021 and 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. The~~vested and all compensation cost was recognized in February 2021. For the six months ended June 30, 2021, the Company recorded ~~$45~~$7 thousand expense related to stock options. During the three and six months ended June 30, 2020, the Company recorded $10 thousand and ~~$52~~$19 thousand of stock-based compensation expense ~~for the quarters ended March 31, 2020~~related to stock options, respectively.

Options outstanding 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.~~exercisable at June 30, 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	4.65 years	$	1.62				450,000	$	1.62
		450,000	4.65 years	$	1.62	$	481,500		450,000	$	1.62	$	481,500

2025

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BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

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

In February 2020 and 2019, the Company awarded 140,218 shares and 428,797 shares, respectively, of restricted stock 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 nine months ended September 30, 2020, the Company recorded $90 and $251 thousand of stock based compensation expense related to these awards, respectively. As of September 30, 2020, unrecognized compensation cost related to non-vested restricted stock awards was $251 thousand which is expected to be recognized over a period of 17 months.

~~No stock options were granted during the three and nine months ended September 30, 2020 and 2019.~~

~~The following table summarizes stock option activity during the nine months ended September 2020 and 2019:~~

Nine Months Ended
September 30, 2020

Nine Months Ended
September 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 Company recorded $10 thousand and $29 thousand of stock-based compensation expense related to stock options during the three and nine months ended September 30, 2020 and 2019, respectively.~~ ~~As of September 30, 2020, the unrecognized compensation cost related to non-vested stock options granted under the plan was $16 thousand. The cost is expected to be recognized over a period of 5 months.~~

~~Options outstanding and exercisable at September 30, 2020 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

5.40 years

$
1.62

360,000

$
1.62

450,000

5.40 years

$
1.62

$
22,000

360,000

$
1.62

$
22,000

~~Table of Contents~~

~~BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY~~

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

NOTE (11) – ESOP Plan

Employees participate in an Employee Stock ~~Ownership~~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 ~~$18~~$25 thousand and $15 thousand for ~~both~~ the three months ended ~~September~~June 30, 2021 and 2020, ~~and 2019,~~ respectively, ~~and was $50 thousand~~ and $47 thousand and $32 thousand for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively.

Shares held by the ESOP were as follows:

	September 30, 2020		December 31, 2019		June 30, 2021		December 31, 2020
	(Dollars in thousands)				(Dollars in thousands)

Allocated to participants		1,065,275		1,024,429		1,051,088		1,065,275
Committed to be released		-		10,416		30,708		10,236
Suspense shares		572,627		603,876		541,919		562,391
Total ESOP shares		1,637,902		1,638,721		1,623,715		1,637,902
Fair value of unearned shares	$	962	$	930	$	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 ~~$909~~$861 thousand and ~~$959~~$893 thousand at ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively.

~~Table of Contents~~

~~BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY~~

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

NOTE (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.

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 September~~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)
September 30, 2020:
Tier 1 (Leverage)
$
47,779

9.84
%

$
19,429

4.00
%

$
24,286

5.00
%
Common Equity Tier 1
$
47,779

16.94
%

$
12,693

4.50
%

$
18,334

6.50
%
Tier 1
$
47,779

16.94
%

$
16,924

6.00
%

$
22,565

8.00
%
Total Capital
$
51,053

18.10
%

$
22,565

8.00
%

$
28,206

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
%

	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	%

~~Table of Contents~~

⁽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 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.

~~BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY~~

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

NOTE (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 expense of $95 thousand and income tax benefits of $300 thousand for the three and nine months ended September 30, 2020, respectively, compared to income tax benefits of $176 thousand and $262 thousand for the three and nine months ended September 30, 2019, respectively. The increase in income tax expense during the third quarter of 2020 was primarily due to non-deductible expenses of $556 thousand related to the City First Merger. The income tax benefit recorded during the nine months ended September 30, 2020 included 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, offset by the additional tax expense associated with the non-deductible merger related expenses. In addition, the Company recorded low-income housing tax credits of $29 thousand and $87 thousand during the third quarter and nine months of 2020, compared to $50 thousand and $149 thousand during the third quarter and nine months of 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 September 30, 2020, no valuation~~recorded a $370 thousand impairment allowance ~~was required~~ on its deferred tax assets ~~which totaled $5.3 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.

Table of Contents

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Unaudited Consolidated Financial Statements

NOTE (14) – Concentration of Credit Risk

~~As of September 30, 2020, the~~

The Bank has a significant concentration of deposits with ~~two customers~~1 customer that accounted for approximately ~~13%~~9% of its deposits as of ~~which 8% belongs~~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 ~~one customer who has been banking with the Bank for more than 15 years.~~repurchase as of June 30, 2021. The Bank expects to maintain ~~this relationship~~the relationships with ~~this long-time customer.~~these customers for the foreseeable future.

2428

Table of Contents

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to provide a reader of our financial statements with a narrative from the perspective of our management 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 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.~~policies during the six months ended June 30, 2021. See Note 1 - Basis of Financial Statement Presentation in the accompanying Notes to Unaudited Consolidated Financial Statements contained in Item 1. Consolidated Financial Statements (Unaudited).

~~Overview~~COVID-19 Pandemic Impact

~~Since early March 2020,~~The Company continues to monitor the ~~effects from the spread~~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 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 the creation of contingency plans for potential further changes toits operations. To date, ~~Broadway~~the Bank has not implemented layoffs or furloughs of any employees because of ~~our employees.~~the pandemic.

~~In addition, Broadway has~~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 ~~the Bank’s~~June 30, 2021, none of its borrowers had requested loan ~~portfolio using new assumptions reflecting potential significant impacts of the COVID-19 Pandemic~~modifications and related governmental stay-at-home orders, created contingency plans to respond if 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. To date, the Bank ~~has~~ had no delinquencies related to ~~COVID-19 and has not received any formal requests for loan modifications.~~COVID-19.

~~Table~~As of ~~Contents~~

~~Broadway decided not to participate as a lender~~June 30, 2021, the Company participated in the Small Business Administration’s (“SBA”) Paycheck Protection Program (“PPP”) ~~because management believes that it is more important and appropriate to maintain~~by way of its merger with CFBanc Corporation. The Bank originated $26.4 million in PPP loans during the Bank’s focus on existing clients, markets, and loan products. In addition, the Bank has historically not offered SBA loans and has not had a significant client base or portfolio of commercial and industrial loans for which the PPP would have represented a product line extension.three months ended June 30, 2021.

~~On August 25, 2020, the Company entered into an Agreement and Plan of Merger~~Overview

Broadway Financial Corporation (the ~~“Merger Agreement”~~“Company”) merged with CFBanc Corporation ~~a District of Columbia Benefit corporation~~ (“~~City First”~~CFBanc”)~~. The Merger Agreement provides that, among other things and subject to the terms and conditions of the Merger Agreement, City First will merge~~ on April 1, 2021, with ~~and into the Company (the “City First Merger”), with the Company surviving and~~Broadway Financial Corporation continuing as the surviving entity. At the effective time of the City First Merger, (1) each share of City First’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 Effective Time (other than any shares owned by City First or the Company and any Dissenting Shares (as defined in the Merger Agreement)entity (the “CFBanc Merger”) will be 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 will be renamed Class A Common Stock, and a new class of non-voting common stock of the Company, par value $0.01 per share, which will be 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 City First (“City First Preferred Stock”) issued and outstanding immediately prior to the effective time of the City First Merger will be converted into one validly issued, fully paid and non-assessable share of a new series of preferred stock of the Company, which new series will be 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 City First Preferred Stock than the rights, preferences, privileges and voting powers, and limitations and restrictions thereof of City First Preferred Stock.. Immediately following the CFBanc Merger, Broadway Federal Bank, f.s.b. merged with and into City First ~~Merger,~~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, ~~will merge with~~National Association). The results for the 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 ~~(“CFB”), a wholly owned subsidiary of~~on April 1, 2021 and the resultant bank was renamed City First ~~with CFB continuing as the surviving entity.~~Bank, National Association.

~~The Company’s total~~

Table of Contents

Total assets increased by ~~$58.8~~$557.6 million to ~~$499.2 million~~$1.041 billion at ~~September~~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 ~~$54.2~~$89.1 million ~~in cash and cash equivalents and an increase of $40.7 million in loans receivable held~~ for sale and an increase of $670 thousand in FHLB stock, offset by a decrease of $36.1 million in loans receivable held for investment and a net decrease of $634 thousand in securities available-for-sale.the six months ended June 30, 2021.

Total liabilities increased by ~~$58.4~~$463.0 million to ~~$449.9~~$897.5 million at ~~September~~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 $31.5 million, in deposits of $27.6 million and in advance payments by borrowers for taxes and insurance of $508 thousand. These increases were partially offset by a decrease in junior subordinated debentures of $765$701 thousand and ~~a decrease in accrued expenses and other liabilities of $525 thousand.~~

~~The Company recorded~~ a net loss of ~~$244~~$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 ~~third quarter of~~three and six months ended June 30, 2020, ~~compared to a~~respectively.

Our net ~~loss of $279 thousand for the third quarter of 2019. Net interest~~ income increased by ~~$985~~$485 thousand during the ~~third quarter of 2020~~three months ended June 30, 2021 compared to the ~~third quarter~~three months ended June 30, 2020 primarily due to an increase of 2019 due in part to growth in the loan portfolio, and a decrease in the cost of funds. No loan loss provision was recorded during the third quarter of 2020, but a provision of $47 thousand was recorded during the third quarter of 2019. The increase$2.7 million, or 89.4%, in net interest income was more than offset by an increase in non-interest expense of $588 thousand, a decrease in non-interest income of $138 thousand, and an increase in income tax expense of $271 thousand. During the quarter, professional services expense increased to $840 thousand from $335 thousand during the third quarter of 2019, of which $595 thousand was associated with the pending City First Merger. As the merger-related expenses are non-deductible, income tax expense was higher than expected by $167 thousand during the third quarter.

For the nine months ended September 30, 2020, the Company reported a net loss of $61 thousand compared to a net loss of $137 thousand for the nine months ended September 30, 2019. During the nine months ended September 30, 2020, the Company recorded an increase in net interest income of $1.6 million compared to the same period of 2019 due in part to growth in the loan portfolio and a decrease in the cost of funds. The Company recorded aafter loan loss provision, of $29 thousand during the nine months ended September 30, 2020 compared to a loan loss recapture of $301 thousand recorded during the same period of 2019. The increase in net interest income was more than offset by a $1.1 million increase in non-interest expense and a ~~$214 thousand decrease in non-interest income. Professional services expense for the nine months ended September 30, 2020 included $718 thousand~~grant award of expenses related to the City First Merger, as well as $210 thousand of expenses incurred to respond to actions by a former stockholder. Non-interest income decreased because the Bank received a grant of $233 thousand$1.8 million from the U.S. Department of the Treasury’s Community Development Financial Institution (“CDFI”) ~~Fund during the nine months ended September 30, 2019, but did not receive a CDFI grant during the nine months ended September 30, 2020.~~Fund. Results for the ~~nine~~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 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 ~~September~~June 30, ~~2020 included an~~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 ~~tax credit adjustment~~ of ~~$273~~$183 thousand for the six months ended June 30, 2020. Merger-related costs of $5.6 million were recorded during the 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 ~~tax settlement with~~gain of $1.8 million was recognized from the ~~California Franchise Tax Board,~~grant from the CDFI Fund discussed above. These increases were offset by an increase in non-interest expenses of $7.5 million, which ~~more than offset~~included the ~~additional tax expense~~merger-related costs discussed above and the inclusion of ~~$167 thousand associated with non-deductible~~the non-interest expenses of CFBanc after the merger ~~costs.~~date.

~~Table of Contents~~

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 ~~third quarter of 2020~~three months ended June 30, 2021 totaled ~~$3.4~~$5.8 million, compared to ~~$2.4~~$3.0 million for the ~~third quarter of 2019.~~three months ended June 30, 2020. The increase primarily resulted from an increase in interest income of ~~$559 thousand~~$2.3 million during the ~~third quarter of 2020~~three months ended June 30, 2021 due to the higher interest income and fees on loans receivable of ~~$707~~$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 $31 thousand and a decrease in other~~ interest ~~income of $117 thousand. Also, interest expense~~bearing deposits, which decreased by ~~$426~~$490 thousand due to lower interest expense on deposits of $474 thousand, partially offset by higher interest expense on borrowings of $48 thousand. The average balance of interest-earning assets increased by $68.9 million during the third quarter of 2020 compared to the ~~third quarter of~~same period in the prior year ~~and~~as a result of a reduction in the ~~net~~rates offered on deposit accounts during the period. The cost of interest ~~margin increased by 49 basis points to 2.82%~~bearing deposits for the ~~third quarter of 2020~~three months ended June 30, 2021, was 0.30% compared to ~~2.33%~~1.17% for the ~~third quarter of 2019.~~three months ended June 30, 2020. The net interest margin ~~increased because average rates paid on interest-bearing liabilities decreased by more than~~for the ~~average rates earned on interest-earning assets.~~three months ended June 30, 2021 was 2.33%, compared to 2.43% for the three months ended June 30, 2020, a change of 10 basis points.

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Interest income and fees on loans receivable increased by ~~$707 thousand~~$1.9 million to $6.3 million for the three months ended June 30, 2021, from $4.4 million for the ~~third quarter of~~three months ended June 30, 2020 ~~from $3.7 million for the third quarter of 2019~~ due to an increase of ~~$54.4~~$166.6 million in the average balance of loans receivable, ~~(including loans held for sale),~~ which increased interest income by ~~$566 thousand and an increase of 14 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 increased interest income by ~~$141~~$159 thousand.

Interest income on ~~mortgage-backed and other~~ securities ~~decreased~~increased by ~~$31~~$375 thousand for the ~~third quarter of 2020,~~three months ended June 30, 2021 compared to the ~~third quarter of 2019.~~three months ended June 30, 2020. The ~~decrease~~increase in interest income on securities ~~during~~was the ~~third quarter~~result of ~~2020 primarily resulted from a decrease of $3.7 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 ~~$22 thousand and~~$430 thousand. This increase was partially offset by the effects of a decrease of 28138 basis points in the average ~~yield~~interest rate earned on securities, which decreased interest income by $9$55 thousand.

Other interest income ~~decreased~~increased by ~~$117~~$70 thousand for the ~~third quarter of 2020,~~three months ended June 30, 2021 compared to the ~~third quarter of 2019.~~three months ended June 30, 2020. The ~~decrease~~increase was primarily due to ~~a decrease of 198 basis points in the average yield on interest-earning deposits in other banks during the third quarter of 2020, which decreased interest income by $171 thousand, partially offset by~~ an increase ~~of $17.5 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, which increased~~interest income. Other interest income ~~by $61 thousand. In addition, there~~ was a decrease of $7 thousand in dividends earned on FHLB stock during the third quarter of 2020, compared to the third quarter of 2019 due to a decrease of 200 basis points in the average rate earned on FHLB stock, offsetalso positively impacted by an increase in ~~average balance~~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 of ~~$670~~$40 thousand. Offsetting these increases was a reduction in the yield earned on interest earning deposits of 33 basis points, from 0.46% for the three months ended June 30, 2020, to 0.13% for the three months ended June 30, 2021. This decrease resulted in a reduction of other interest income of $54 thousand.

Interest expense on deposits decreased by ~~$474~~$490 thousand for the ~~third quarter of 2020,~~three months ended June 30, 2021, compared to the ~~third quarter of 2019.~~three months ended June 30, 2020. The decrease was attributable to a decrease of 7487 basis points in the average ~~cost of~~rate paid on deposits, which caused interest expense on deposits to decrease by ~~$357 thousand and a~~$797 thousand. This decrease was partially offset by the effects of an increase of $306.1 million in the average balance of ~~certificates~~deposits, primarily because of ~~deposit of $38.5 million, which decreased interest expense on certificates of deposit by $177 thousand. These decreases were partially offset by an increase in~~ the ~~average balance of money market deposits of $27.0 million, an increase in the average balance of passbook deposits of $13.2 million and an increase in NOW and other demand deposits of $27.4 million,~~merger, which increased interest expense by ~~$60~~$307 thousand.

~~Table of Contents~~

Interest expense on borrowings increased by ~~$48~~$16 thousand for the ~~third quarter of 2020,~~three months ended June 30, 2021, compared to the ~~third quarter of 2019. The higher interest expense on borrowings during the third quarter of~~three months ended June 30, 2020 ~~reflected a net increase of $39.5 million in average borrowings,~~primarily due to an increase in average short term borrowings (securities sold under agreements to repurchase) of ~~$40.5~~$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 $207 thousand, partially offset by a decrease of $1.0 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 $20 thousand. In addition, the average cost of FHLB advances decreased by 59 basis points during the third quarter ofSix Months Ended June 30, 2020 which decreased interest expense by $128 thousand, and the average cost of the Company’s junior subordinated debentures decreased by 196 basis points during the third quarter of 2020, which decreased interest expense by $11 thousand.

For the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, net interest income before provisions increased by ~~$1.6~~$2.7 million to ~~$9.3~~$8.7 million compared to ~~$7.7~~$5.9 million for the ~~nine~~six months ended ~~September~~June 30, ~~2019.~~2020. The increase in net interest income during the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 primarily resulted from an increase in interest income of ~~$1.2~~$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 ~~$1.5 million, partially offset by~~ a decrease in total interest ~~income on securities~~expense of ~~$89 thousand and a decrease in other interest income of $210 thousand. Interest expense decreased by $399 thousand during the nine months ended September 30, 2020~~$1.2 million due to a ~~decrease~~reduction in rates paid on interest ~~expense on deposits of $576 thousand, which was partially offset by an increase in interest expense on borrowings of $177 thousand.~~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 loans receivable increased by ~~$1.5~~$1.2 million during the ~~nine~~six months ofended June 30, 2021 compared to the six months ended June 30, 2020 due to an increase of ~~$57.5~~$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 ~~$1.8~~over $1.0 million, ~~partially offset by a decrease~~and an increase of 85 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 ~~$227~~$116 thousand. During the nine months ended September 30, 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 nine months ended September 30, 2019.

Interest income on ~~mortgage-backed and other~~ securities ~~decreased~~increased by ~~$89~~$361 thousand for the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, compared to the ~~same period of 2019.~~six months ended June 30, 2020. The ~~decrease~~increase in interest income on securities ~~during the nine months ended September 30, 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 ~~$70~~$469 thousand, ~~and~~partially offset by a decrease of 20135 basis points in the average interest yield earned on investment securities, which decreased interest income by ~~$19~~$108 thousand.

Table of Contents

Other interest income ~~decreased by $210~~increased $5 thousand ~~for~~during the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 compared to the ~~same~~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 183 basis points in the average yield on interest-earning deposits in other banks during the nine months ended September 30, 2020, which decreased interest income by $374 thousand, partially offset by an increase of $17.7 million in the average balance of interest-earning deposits in other banks, which increased interest income by $189 thousand. In addition, there was a decrease of $25 thousand in dividends earned on FHLB stock during the nine months ended September 30, 2020, compared to the same period of 2019 due to a decrease of 20065 basis points in the average rate earned on ~~FHLB stock,~~interest-earning cash, which more than offset bythe positive effects of an increase of $128.4 million in the average balance of ~~FHLB stock~~interest-earning cash because of ~~$494 thousand.~~the merger.

During the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, interest expense on deposits decreased by ~~$576 thousand compared to the same period of 2019. The decrease was attributable~~$1.2 million due to a decrease of 4090 basis points in the average cost of deposits, which ~~caused~~decreased interest expense ~~on deposits to decrease~~ by ~~$547 thousand, and a decrease~~$1.3 million, partially offset by the effects of an increase of $155.2 million in the average balance of ~~certificates~~deposits, largely because of ~~deposit of $12.6 million, which decreased interest expense on certificates of deposit by $187 thousand. These decreases were partially offset by an increase~~the deposits assumed in the average balance of money market deposits of $19.0 million, an increase in the average balance of passbook deposits of $8.1 million and an increase in the average balance of NOW and other demand deposits of $19.1 million,merger, which increased interest expense by ~~$158~~$145 thousand.

During the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, interest expense on borrowings ~~increased~~decreased by ~~$177~~$53 thousand, compared to the ~~nine months ended September 30, 2019.~~first half of 2020. The ~~higher~~lower interest expense on borrowings during the ~~nine months ended September 30, 2020~~first half of 2021 reflected a ~~net increase of $37.5 million in average borrowings, due to an increase of $38.4 million~~reduction in the average balance of FHLB advances of $2.8 million, which ~~increased~~reduced interest expense by ~~$577~~$27 thousand, ~~offset by~~as well as a ~~decrease of $957 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 ~~$33~~$21 thousand. ~~The~~These decreases were offset by an increase in interest expense ~~was partially offset by a decrease~~on other borrowings assumed in the ~~average cost~~merger with CFBanc of ~~FHLB advances of 51 basis points, which decreased interest expense by $313~~$16 thousand, ~~and a decrease in~~although the ~~average cost of the Company’s junior subordinated debentures of 164 basis points, which decreased interest expense by $54 thousand.~~rate paid on these borrowings was only 0.09%.

~~Table of Contents~~

The net interest margin ~~for the nine months ended September 30, 2020~~ decreased by 810 basis points to ~~2.57%~~2.35% for the six months ended June 30, 2021 from ~~2.49%~~2.45% for the same period in ~~2019, primarily due to lower average rates paid on all deposit types.~~2020.

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															For the three months ended
		September 30, 2020							September 30, 2019								June 30, 2021							June 30, 2020
(Dollars in Thousands)		Average Balance		Interest		Average Yield/ Cost			Average Balance		Interest		Average Yield/ Cost				Average Balance		Interest		Average Yield/ Cost			Average Balance		Interest		Average Yield/ Cost
Assets
Interest-earning assets:
Interest-earning deposits		$	42,406	$	32		0.30	%	$	24,870	$	142		2.28	%		$	227,043	$	71		0.13	%	$	40,416	$	46		0.46	%
Securities			10,242		59		2.30	%		13,966		90		2.58	%			158,608		440		1.11	%		10,431		65		2.49	%
Loans receivable (1)			423,305		4,438		4.19	%		368,930		3,731		4.05	%			611,092		6,300		4.12	%		444,530		4,429		3.99	%
FHLB stock			3,586		45		5.02	%		2,916		52		7.13	%
FRB and FHLB stock																		4,087		73		7.14	%		3,518		28		3.18	%
Total interest-earning assets			479,539	$	4,574		3.82	%		410,682	$	4,015		3.91	%			1,000,830	$	6,884		2.75	%		498,895	$	4,568		3.66	%
Non-interest-earning assets			10,663							10,861								33,296							10,466
Total assets		$	490,202						$	421,543							$	1,034,126						$	509,361

Liabilities and Stockholders’ Equity
Interest-bearing liabilities:
Money market deposits		$	50,238	$	60		0.48	%	$	23,194	$	51		0.88	%		$	178,819	$	223		0.50	%	$	46,364	$	112		0.97	%
Passbook deposits			58,377		55		0.38	%		45,137		71		0.63	%			69,401		57		0.33	%		53,167		81		0.61	%
NOW and other demand deposits			60,835		5		0.03	%		33,517		4		0.05	%			190,734		40		0.08	%		54,362		3		0.02	%
Certificate accounts			146,469		511		1.40	%		184,943		979		2.12	%			198,403		157		0.32	%		177,392		771		1.74	%
Total deposits			315,919		631		0.80	%		286,791		1,105		1.54	%			637,357		477		0.30	%		331,285		967		1.17	%
FHLB advances			115,500		538		1.86	%		75,021		459		2.45	%			111,120		549		1.98	%		119,315		536		1.80	%
Junior subordinated debentures			3,783		28		2.96	%		4,792		59		4.92	%			3,144		21		2.67	%		4,038		34		3.37	%
Other borrowings																		74,136		16		0.09	%		-		-		-
Total interest-bearing liabilities			435,202	$	1,197		1.10	%		366,604	$	1,623		1.77	%			825,757	$	1,063		0.51	%		454,638	$	1,537		1.35	%
Non-interest-bearing liabilities			5,281							5,894								66,279							5,523
Stockholders’ Equity			49,719							49,045								142,090							49,200
Total liabilities and stockholders’ equity		$	490,202						$	421,543							$	1,034,126						$	509,361

Net interest rate spread (2)				$	3,377		2.72	%			$	2,392		2.14	%				$	5,821		2.24	%			$	3,031		2.31	%
Net interest rate margin (3)							2.82	%						2.33	%							2.33	%						2.43	%
Ratio of interest-earning assets to interest-bearing liabilities	Ratio of interest-earning assets to interest-bearing liabilities						110.19	%						112.02	%	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.

2933

Table of Contents

For the nine months ended
September 30, 2020 September 30, 2019
(Dollars in Thousands)
Average
Balance

Interest

Average
Yield/
Cost

Average
Balance

Interest

Average
Yield/
Cost

Assets
Interest-earning assets:
Interest-earning deposits
$
36,989

$
165

0.59
%

$
19,265

$
350

2.42
%
Securities
10,539

194

2.45
%

14,265

283

2.65
%
Loans receivable (1)
431,330

13,226

4.09
%

373,869

11,687

4.17
%
FHLB stock
3,410

128

5.00
%

2,916

153

7.00
%
Total interest-earning assets
482,268

$
13,713

3.79
%

410,315

$
12,473

4.05
%
Non-interest-earning assets
10,530

10,861

Total assets
$
492,798

$
421,176

Liabilities and Stockholders’ Equity
Interest-bearing liabilities:
Money market deposits
$
44,853

$
277

0.82
%

$
25,867

$
171

0.88
%
Passbook deposits
53,451

224

0.56
%

45,332

205

0.60
%
NOW and other demand deposits
52,655

12

0.03
%

33,506

10

0.04
%
Certificate accounts
168,812

2,140

1.69
%

181,379

2,843

2.09
%
Total deposits
319,771

2,653

1.11
%

286,084

3,229

1.51
%
FHLB advances
114,234

1,646

1.92
%

75,824

1,382

2.43
%
Junior subordinated debentures
4,036

108

3.57
%

4,993

195

5.21
%
Total interest-bearing liabilities
438,041

$
4,407

1.34
%

366,901

$
4,806

1.75
%
Non-interest-bearing liabilities
5,476

5,412

Stockholders’ Equity
49,281

48,863

Total liabilities and stockholders’ equity
$
492,798

$
421,176

Net interest rate spread (2)
$
9,306

2.45
%

$
7,667

2.31
%
Net interest rate margin (3)
2.57
%

2.49
%
Ratio of interest-earning assets to interest-bearing liabilities
110.10
%

111.83
%

	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	%

(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.

3034

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Loan loss ~~provision/recapture~~provision

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 ~~any~~a loan loss provision or recapture during the ~~third quarter of~~three months ended June 30, 2020 and recorded a loan loss provision of $29 thousand during the ~~nine~~six months ended ~~September~~June 30, 2020. During the three months ended June 30, 2020 the Bank recorded additional provisions to increase the Allowance for Loan and Lease Losses (“ALLL”) for economic uncertainties related to the COVID-19 Pandemic. During the ~~nine~~three months ended ~~September 30, 2020, the Bank recorded a loan loss recovery of $4 thousand. At September~~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 ~~$36.1~~$6.9 million in the loans held for investment portfolio during the ~~nine~~three months ended ~~September~~June 30, 2020. No loan charge-offs were recorded during the ~~third quarter and~~three months or the ~~nine months of 2020.~~

The Bank recorded a loan loss provision of $47 thousand and loan loss provision recaptures of $301 thousand during the third quarter and nine months of 2019. Cash recoveries of $190 thousand were recorded during the ninesix months ended ~~September~~June 30, ~~2019. No loan charge-offs were recorded during the third quarter or the nine months of 2019.~~2020.

Non-interest Income

Non-interest income for the ~~third quarter of 2020~~three months ended June 30, 2021 totaled ~~$206 thousand,~~$2.2 million compared to ~~$344~~$242 thousand for the ~~third quarter of 2019.~~three months ended June 30, 2020. Non-interest income ~~decreased~~increased by ~~$138~~$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 lower~~in Washington, D.C. No gain on sale of loans ~~of $128 thousand~~was recorded during the ~~third quarter of 2020~~three months and six months ended June 30, 2021 compared to ~~the third quarter~~gains of ~~2019. In addition,~~$116 thousand recorded during the ~~third quarter of 2020, income from service charges decreased by $23 thousand, offset by an increase of $13 thousand in other income, compared to the third quarter of 2019.~~three months ended June 30, 2020.

For the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, non-interest income totaled ~~$645 thousand~~$2.3 million compared to ~~$859~~$439 thousand for the same period ~~one year ago.~~in the prior year. The ~~decrease~~increase of ~~$214 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, as well as a decrease in income from service charges of $22 thousand, offset by an increase in other income of $46 thousand.~~three months ended June 30, 2021.

Non-interest Expense

Non-interest expense for the ~~third quarter of 2020~~three months ended June 30, 2021 totaled ~~$3.7~~$5.4 million, compared to ~~$3.1~~$3.4 million for the ~~third quarter of 2019.~~three months ended June 30, 2020. The increase of ~~$588 thousand~~$2.0 million in non-interest expense during the ~~third quarter of 2020~~three months ended June 30, 2021 compared to the same quarter of ~~2019~~2020 was primarily due to ~~an increase~~the inclusion of ~~$505 thousand in professional services expense, as well as~~the non-interest expenses for the merged Bank, which included increases of ~~$33~~$836 thousand in compensation and benefits expense, ~~$25 thousand in office services and supplies expense, $11~~$345 thousand in information services expense, ~~and $36~~$307 thousand in ~~other~~occupancy expense, $93 thousand in loan related expenses, ~~items, primarily due to higher FDIC insurance expense. These increases were partially offset by decreases of $10~~and $82 thousand in supervisory costs. In addition, non-interest expense for the three months ended June 30, 2021 included $207 thousand in Merger-related costs and $131 thousand in amortization of ~~investment~~the core deposit intangible that was recorded in ~~affordable housing limited partnership and $17 thousand in loan related expenses.~~connection with the Merger.

The increase of $505 thousand in professional services expense was due to increases of $439 thousand of legal fees and $156 thousand of financial advisory and consulting fees related to the pending City First Merger, and legal and consulting fees of $10 thousand incurred to respond to activities conducted by a former stockholder against the Company. The activities and related litigation were subsequently withdrawn by the former stockholder early in the third quarter of 2020. These increases in professional services expense were partially offset by a decrease of $128 thousand in legal fees related to matters other than the merger or stockholder activities and a decrease of $2 thousand in audit fees.

For the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, non-interest expense totaled ~~$10.3~~$14.0 million, compared to ~~$9.2~~$6.6 million for the same period ~~a year ago.~~in the prior year. The increase of ~~$1.1~~$7.4 million in non-interest expense was primarily due to ~~increases~~merger-related expenses of ~~$766 thousand~~$5.6 million in professional services expense, $314 thousand in compensation and benefits expense, $153 thousand in office services and supplies, $43 thousand in information services expense and $22 thousand in occupancy expense. These increases were partially offset by decreases2021, as well as the inclusion of ~~$55 thousand in amortization~~the non-interest expenses of ~~investment in affordable housing limited partnership, $54 thousand in loan related expenses and $25 thousand in other expense.~~the acquired operations of the Bank.

~~Table of Contents~~

The increase of $766 thousand in professional services expense was primarily due to an increase of $582 thousand in legal fees, of which $470 thousand related to the pending City First Merger and $210 thousand related to legal expenses incurred to respond to activities conducted by a former stockholder against the Company, offset by a decrease of $98 thousand in legal fees related to other matters. Also, financial advisory and consulting services fees increased by $300 thousand during the nine months ended September 30, 2020 compared to the same period a year ago due primarily to $248 thousand in expenses related to the pending merger. These increases were offset by a decrease of $116 thousand in outsourced audit fees. The increase of $314 thousand in compensation and benefits expense was primarily due to increases in salary costs of $265 thousand, increases in vacation expense of $44 thousand and lower deferred loan origination costs of $68 thousand as there were fewer multi-family loans originated for the loan portfolio during 2020 compared to 2019. These increases were offset by lower employee stock costs of $32 thousand and lower temporary help expense of $29 thousand.

Income Taxes

Income tax expense or benefit is computed by applying the statutory federal income tax rate of 21% ~~and~~. State taxes are recorded at the State of California ~~income~~ tax rate and apportioned based on an allocation schedule to reflect that a portion of ~~10.84% to taxable income or loss.~~the Company’s operations are conducted in the Washington, D.C. area. The Company recorded income tax expense of ~~$95~~$1.8 million during the second quarter, representing an effective rate of 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 estimate the Company’s annual income 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.

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The Company recorded income tax benefits of $345 thousand and ~~an income tax benefit of $300~~$395 thousand for the three and ~~nine~~six months ended ~~September~~June 30, 2020, ~~respectively, compared to an income tax benefit of $176 thousand and $262 thousand for the three and nine months ended September 30, 2019,~~ respectively. ~~The increase in income tax expense during the third quarter of 2020 was primarily due to non-deductible expenses related to the City First Merger.~~ The income tax benefit ~~recorded~~ during the ~~nine~~three months and six months ended ~~September~~June 30, 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, offset by the additional tax expense associated with the non-deductible merger related expenses.~~2013. In addition, the Company recorded low-income housing tax credits of $29 thousand and ~~$87~~$58 thousand during the ~~third quarter~~three months and ~~nine~~six months ended ~~September~~June 30, 2020, compared to $50 thousand and $149 thousand during the third quarter and nine months ended September 30, 2019. The Company had no valuation allowance on its deferred tax assets, which totaled $5.3 million at September 30, 2020 and $5.2 million at December 31, 2019.respectively.

Financial Condition

Total Assets

Total assets increased by ~~$58.8~~$557.6 million to ~~$499.2 million~~$1.041 billion at ~~September~~June 30, ~~2020~~2021 from ~~$440.4~~$483.4 million at December 31, ~~2019.~~2020. The increase in total assets was ~~comprised~~ primarily due to the addition of ~~an increase of $54.2~~assets in the CFBanc Merger, which increased total assets by $501.2 million in cash and cash equivalents, an increase of $40.7 million in loans receivable held for sale and an increase of $670 thousand in FHLB stock. These increases were offset by a decrease of $36.1 million in loans held for investment and a net decrease of $634 thousand in securities available-for-sale.on the merger date.

~~Loans Receivable Held for Sale~~Securities Available-For-Sale

~~Loans receivable held for sale~~Securities available-for-sale totaled ~~$40.7~~$158.8 million at ~~September~~June 30, 2020. There were no loans held for sale as of December 31, 2019. During the nine months ended September 30, 2020, the Bank originated $118.6 million of multi-family loans for sale and sold $77.4 million of loans held for sale for a gain of $199 thousand. Repayments of loans receivable held for sale totaled $529 thousand during the nine months ended September 30, 2020.

~~Loans Receivable Held for Investment~~

~~Loans receivable held for investment, net of the allowance for loan losses, totaled $361.8 million at September 30, 2020,~~2021, compared ~~to $397.8~~with $10.7 million at December 31, ~~2019. During~~2020. The $148.1 million of increase in securities available-for-sale during the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021 was primarily due to the ~~Bank originated $6.2~~addition of $150.0 million ~~in commercial real estate loans, $2.6 multi-family loans~~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 ~~$728 thousand in construction loans for the loans held-for-investment portfolio. Loan repayments during the nine months ended September 30, 2020 totaled $45.5~~paydowns of mortgage-backed securities of $6.5 million.

Allowance for Loan ~~and Lease~~ 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.

~~Table of Contents~~

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.

~~Our~~The ALLL was $3.3 million or 0.53% of gross loans held for investment at June 30, 2021, compared to $3.2 million, or 0.88% of ~~our~~ gross loans ~~receivable held for investment at September 30, 2020 compared to $3.2 million or 0.79% 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 ~~at September~~associated 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 third 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 ~~nine months ended September 30, 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 ~~September~~June 30, ~~2020, we had experienced $84 thousand in less than 90-day~~2021, loan delinquencies ~~on two single-family 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 ~~September~~June 30, ~~2020,~~2021, NPLs totaled ~~$820~~$735 thousand, compared to ~~$424~~$787 thousand at December 31, ~~2019.~~2020. The ~~increase~~decrease of ~~$396~~$50 thousand in NPLs was due to ~~an addition~~repayments.

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 ~~September~~June 30, ~~2020,~~2021, all our non-performing loans ~~except one single-family loan with $8 thousand unpaid balance,~~ were current in their payments. Also, in determining the ALLL, we considered the ratio of the ALLL to NPLs, which ~~decreased~~was 448.4% at June 30, 2021 compared to ~~392.1% at September 30, 2020 from 750.5%~~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 37% of estimated fair value less estimated selling costs as of September 30, 2020.~~

~~Recoveries~~ during the ~~nine months ended September 30, 2020~~first half of 2021 and ~~2019 totaled~~ $4 thousand ~~and $190 thousand, respectively. The recovery~~in recoveries were recorded during the ~~nine months ended September 30, 2020 resulted from the payoff~~first half of one single-family loan that had been previously partially charged off. Recoveries during the nine months ended September 30, 2019 resulted from the payoff of two church loans that had been previously partially charged off.2020.

Impaired loans at ~~September~~June 30, ~~2020~~2021 were ~~$4.8~~$4.1 million, compared to ~~$5.3~~$4.7 million at December 31, ~~2019.~~2020. The decrease of ~~$543~~$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 ~~$148~~$45 thousand, or ~~3.08%~~1.10% of the aggregate impaired loan amount at ~~September~~June 30, ~~2020,~~2021, compared to ~~$147~~$141 thousand, or ~~2.75%~~2.98% at December 31, ~~2019.~~2020.

~~Table of Contents~~

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, notwo borrowers have requested loan modifications. Both borrowers were current at the time modification program was implemented. To date, no modifications have been ~~granted to any borrowers.~~granted.

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 58%) and high debt service coverage ratios (over 1.54%) of the multi-family loan portfolio as of September 30, 2020. In addition, the Bank’s borrowers generally have high cash reserves and sufficient net worth to service their loans.

We believe that ~~our~~the ALLL is adequate to cover probable incurred losses in the loan portfolio as of ~~September~~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 ~~$69 thousand~~$6.6 million to ~~$2.7~~$9.2 million at ~~September~~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~~the date of the merger.

Goodwill and Intangible Assets

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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, 2021, the Company recorded $131 thousand of amortization expense related to the ~~ROU was $326 thousand as of September 30, 2020.~~core deposit intangible.

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

Total Liabilities

Total liabilities increased by ~~$58.3~~$463.0 million to ~~$449.9~~$897.5 million at ~~September~~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 ~~$31.5~~$ 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 $27.6 million in deposits. These increases were offset by a decrease of $765 thousand in~~during the ~~Company’s junior subordinated debentures.~~period.

Deposits

Deposits increased ~~by $27.6 million~~ to ~~$325.3~~$705.0 million at ~~September~~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 ~~$70.1~~$39.0 million since the Merger, primarily in ~~liquid deposits and a decrease of $42.5 million in certificates of deposit. Total liquid deposits (NOW, demand,~~ money market and ~~passbook accounts) increased to $177.6 million at September 30, 2020, which represented 55% of total deposits, from $107.5 million at December 31, 2019 which represented 36% of total deposits.~~demand deposit accounts.

~~Table of Contents~~

Certificates of deposit (“CDs”) decreased by $42.5 million during the nine months of 2020 to $147.7 million at September 30, 2020, which represented 45% 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 $24.5 million and a net decrease in accounts acquired through a deposit listing service of $9.9 million and a net decrease in retail CDs of $8.1 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 September 30, 2020, we had approximately $25.0 million in CDARS Reciprocal and $31.1 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.

~~As of September 30, 2020, the Bank had a significant concentration of deposits with two customers that~~Single customer relationships accounted for approximately 9% and 13% of ~~its~~our deposits ~~of which 8% belongs to one customer who has been banking with the Bank for more than 15 years. The Bank expects~~at June 30, 2021 and December 31, 2020, respectively. We expect to maintain this relationship with ~~our long-time customer.~~these customers for the foreseeable future.

Borrowings

Total borrowings increased by ~~$30.7~~$69.7 million to ~~$119.1~~$183.5 million at ~~September~~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 $31.5 million in advances from the FHLB,~~was offset by ~~a decrease~~reductions in FHLB advances of ~~$765 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 1.86%~~was 1.95% at ~~September~~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 ~~2.96%~~2.69% at ~~September~~June 30, ~~2020~~2021 from ~~4.44%~~2.77% at December 31, ~~2019,~~2020, primarily due to decreases in LIBOR.

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Stockholders’ Equity

Stockholders’ equity was ~~$49.4~~$143.5 million, or ~~9.89%~~13.8% of the Company’s total assets, at ~~September~~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 ~~$1.76~~$1.96 per share at June 30, 2021, and its tangible book value was $1.55 per share as of ~~September~~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 ~~$31.1~~$24.6 million at ~~September~~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 ~~September~~June 30, ~~2020~~2021 consisted of ~~$69.7~~$210.4 million in cash and cash equivalents and ~~$10.4~~$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.

~~Table of Contents~~

The Company recorded consolidated net cash outflows from operating activities of ~~$39.8~~$2.6 million during the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, compared to consolidated net cash ~~inflows~~outflows from operating activities of ~~$8.5~~$49.2 million during the ~~nine~~six months ended ~~September~~June 30, ~~2019.~~2020. Net cash outflows from operating activities during the ~~nine~~six months ended ~~September~~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 ~~$118.6~~$110.9 million, ~~compared to $15.2 million during the nine months ended September 30, 2019,~~ offset primarily by proceeds from sales of loans receivable held for sale of ~~$77.6 million during the nine months ended September 30, 2020, compared to $23.0 million during the nine months ended September 30, 2019.~~$61.0 million.

The Company recorded consolidated net cash inflows from investing activities of ~~$35.6~~$58.4 million during the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, compared to consolidated net cash ~~outflows~~inflows of ~~$6.5~~$23.4 million during the ~~nine~~six months ended ~~September~~June 30, ~~2019.~~2020. Net cash inflows from investing activities during the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 were primarily ~~attributable~~due to a net cash ~~inflow~~acquired in the merger with City First Bank N.A. of ~~$35.8~~$84.7 million, ~~from~~offset by cash used to fund new loans receivable held for investment ~~compared to a net cash outflow~~ of ~~$8.7 million during the nine months ended September 30, 2019. Net~~$29.7 million. In comparison, cash inflows from investing activities million during the ~~nine~~six months ended ~~September~~June 30, 2020 were ~~offset~~ primarily ~~by net cash outflows~~due to principal payments on loans receivable held for investment

Table of $850 thousand for purchases of available-for-sale municipal bonds, $670 thousand for the purchase of FHLB stock and $501 thousand for the purchase of office properties and equipment. The Company did not purchase FHLB stock during the nine months ended September 30, 2019 and recorded a net cash outflow of $33 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 nine months ended September 30, 2019, but the Company did not record any proceeds from sales of REO during the nine months ended September 30, 2020.Contents

The Company recorded consolidated net cash inflows from financing activities of ~~$58.3~~$58.5 million during the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, compared to consolidated net cash inflows from financing activities of ~~$3.1~~$50.0 million during the ~~nine~~six months ended ~~September~~June 30, ~~2019.~~2020. Net cash inflows from financing activities during the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 were primarily attributable to a net increase in deposits of ~~$27.6~~$35.9 million and proceeds from the sale of stock of $30.8 million, and $10.6 million in additional securities sold under agreements to repurchase, offset by a net decrease of $17.5 million in FHLB advances. During the six months ended June 30, 2020, net cash inflows from financing activities were primarily due to a net increase in deposits of $18.1 million and net proceeds from FHLB advances of $66.0 million, offset by repayments of FHLB advances of $34.5 million and repayments of junior subordinated debentures of $765 thousand. During the nine months ended September 30, 2019, the Company recorded a net increase in proceeds from FHLB advances of $13.0 million, offset by repayments of FHLB advances of $8.0 million, a net decrease in deposits of $1.3 million and repayments of junior subordinated debentures of $510 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 12 ~~of the Notes to Consolidated Financial Statements.~~– Regulatory Matters.)

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not Applicable

~~Table of Contents~~

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 ~~September~~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 ~~September~~June 30, 2020. There were no significant changes during the quarter ended September 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 ~~September~~June 30, ~~2020,~~2021, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial ~~reporting.~~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.

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~~PART II.~~

~~OTHER INFORMATION~~

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.

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*
~~2.1~~3.1	~~Agreement~~ Amended and ~~Plan~~Restated Certificate of ~~Merger, dated August 25, 2020, by and between~~Incorporation of Broadway Financial Corporation ~~and CFBanc Corporation~~effective as of April 1, 2021 (Exhibit ~~2.1to~~3.1 to Form 8-K filed by Registrant on ~~August 26, 2020, Commission file number 001-39043)~~April 5, 2021)
~~3.1~~3.2	~~Certificate of Incorporation of Registrant and amendments thereto (Exhibit 3.1 to Form 10-Q filed by Registrant on November 13, 2014, Commission file number 000-27464)~~
~~3.2.1~~	Bylaws of Registrant ~~(Exhibit 3.2 to Form 10-K filed by Registrant on March 28, 2016, Commission file number 000-27464)~~
~~3.2.2~~	~~Bylaws of Registrant, as amended~~ (Exhibit 3.2 to Form 8-K filed by Registrant on August 24, ~~2020, Commission file number 001-39043)~~2020)
~~4.1~~10.1	~~Amendment to Rights~~ Employment Agreement, dated as of ~~August 25, 2020,~~December 29, 2017, by and ~~between Broadway Financial~~among City First Bank of D.C., National Association, CFBanc Corporation and ~~Computershare Trust Company, N.A. (Exhibit 4.1 to Form 8-K filed by Registrant on August 26, 2020, Commission file number 001-39043)~~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

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SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: ~~November 16, 2020~~August 23, 2021	By:	/s/ ~~Wayne-Kent A. Bradshaw~~ Brian Argrett
		~~Wayne-Kent A. Bradshaw~~Brian Argrett
		Chief Executive Officer

Date: ~~November 16, 2020~~August 23, 2021	By:	/s/ Brenda J. Battey
		Brenda J. Battey
		Chief Financial Officer

	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 September 30,						For the nine months ended September 30,
	2020			2019			2020			2019
	(Dollars in thousands, except per share)

Net loss	$	(244	)	$	(279	)	$	(61	)	$	(137	)
Less net loss attributable to participating securities		(2	)		(4	)		(1	)		(2	)
Loss available to common stockholders	$	(242	)	$	(275	)	$	(60	)	$	(135	)

Weighted average common shares outstanding for basic loss per common share		27,224,344			26,907,546			27,114,022			26,782,325
Add: dilutive effects of assumed exercises of stock options		-			-			-			-
Add: dilutive effects of unvested restricted stock awards		-			-			-			-
Weighted average common shares outstanding for diluted loss per common share		27,224,344			26,907,546			27,114,022			26,782,325

Loss per common share - basic	$	(0.01	)	$	(0.01	)	$	(0.00	)	$	(0.01	)
Loss per common share - diluted	$	(0.01	)	$	(0.01	)	$	(0.00	)	$	(0.01	)

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(In thousands)
September 30, 2020:
Federal agency mortgage-backed securities	$	6,182	$	278	$	-	$	6,460
Federal agency debt		2,850		208		-		3,058
Municipal bonds		850		4		-		854
Total available-for-sale securities	$	9,882	$	490	$	-	$	10,372
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

	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

	Three Months Ended September 30,						Nine Months Ended September 30,
	2020			2019			2020			2019
	(In thousands, except per share)

Interest income:
Interest and fees on loans receivable	$	4,438		$	3,731		$	13,226		$	11,687
Interest on mortgage-backed and other securities		59			90			194			283
Other interest income		77			194			293			503
Total interest income		4,574			4,015			13,713			12,473

Interest expense:
Interest on deposits		631			1,105			2,653			3,229
Interest on borrowings		566			518			1,754			1,577
Total interest expense		1,197			1,623			4,407			4,806

Net interest income		3,377			2,392			9,306			7,667
Loan loss provision (recapture)		-			47			29			(301	)
Net interest income after loan loss provision (recapture)		3,377			2,345			9,277			7,968

Non-interest income:
Service charges		93			116			331			353
Gain on sale of loans		76			204			199			204
CDFI Grant		-			-			-			233
Other		37			24			115			69
Total non-interest income		206			344			645			859

Non-interest expense:
Compensation and benefits		1,909			1,876			5,947			5,633
Occupancy expense		332			325			967			945
Information services		242			231			700			657
Professional services		840			335			1,675			909
Office services and supplies		97			72			260			207
Loan related expenses		41			58			62			116
Corporate insurance		30			32			94			101
Amortization of investment in affordable housing limited partnership		26			36			79			134
Other		215			179			499			524
Total non-interest expense		3,732			3,144			10,283			9,226

Loss before income taxes		(149	)		(455	)		(361	)		(399	)
Income tax expense (benefit)		95			(176	)		(300	)		(262	)
Net loss	$	(244	)	$	(279	)	$	(61	)	$	(137	)

Other comprehensive (loss) income, net of tax:
Unrealized (losses) gains on securities available-for-sale arising during the period	$	(40	)	$	64		$	290		$	417
Income tax (benefit) expense		(12	)		19			86			123
Other comprehensive (loss) income, net of tax		(28	)		45			204			294

Comprehensive (loss) income	$	(272	)	$	(234	)	$	143		$	157

Loss earnings per common share-basic	$	(0.01	)	$	(0.01	)	$	-		$	(0.01	)
Loss earnings per common share-diluted	$	(0.01	)	$	(0.01	)	$	-		$	(0.01	)

	Nine Months Ended September 30,
	2020			2019
	(In thousands)
Cash flows from operating activities:
Net loss	$	(61	)	$	(137	)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Loan loss provision (recapture)		29			(301	)
Provision for losses on REOs		-			13
Depreciation		170			171
Net amortization of deferred loan origination costs		183			160
Net amortization of premiums on mortgage-backed securities		30			19
Amortization of investment in affordable housing limited partnership		79			134
Director compensation expense-common stock		45			52
Stock-based compensation expense		279			182
ESOP compensation expense		50			47
Earnings on bank owned life insurance		(35	)		(39	)
Originations of loans receivable held for sale		(118,626	)		(15,182	)
Proceeds from sales of loans receivable held for sale		77,642			22,970
Repayments on loans receivable held for sale		530			103
Gain on sale of loans receivable held for sale		(199	)		(204	)
Change in assets and liabilities:
Net change in deferred taxes		(175	)		(209	)
Net change in accrued interest receivable		(102	)		(39	)
Net change in other assets		15			5
Net change in advance payments by borrowers for taxes and insurance		508			473
Net change in accrued expenses and other liabilities		(125	)		322
Net cash (used in) provided by operating activities		(39,763	)		8,540

Cash flows from investing activities:
Net change in loans receivable held for investment		35,843			(8,735	)
Principal payments on available-for-sale securities		1,744			1,450
Purchases of available-for-sale municipal bonds		(850	)		-
Proceeds from sales of REO		-			820
Purchase of FHLB stock		(670	)		-
Purchase of office properties and equipment		(501	)		(33	)
Net cash provided by (used in) investing activities		35,566			(6,498	)

Cash flows from financing activities:
Net change in deposits		27,612			(1,347	)
Proceeds from FHLB advances		66,000			13,000
Repayments of FHLB advances		(34,500	)		(8,000	)
Payment for tax withholding for vesting of restricted stock		-			(14	)
Repayments of junior subordinated debentures		(765	)		(510	)
Net cash provided by financing activities		58,347			3,129

Net change in cash and cash equivalents		54,150			5,171
Cash and cash equivalents at beginning of the period		15,566			16,651
Cash and cash equivalents at end of the period	$	69,716		$	21,822

Supplemental disclosures of cash flow information:
Cash paid for interest	$	4,530		$	4,710
Cash paid for income taxes		8			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
Common stock exchanged for payment of tax withholding		-			14
Initial Recognition of Operating Lease Right-to-Use Assets		-			1,120
Initial Recognition of Operating Lease Liabilities		-			1,120

	Three-Month Period Ended September 30, 2020 and 2019
	Common Stock Voting		Common Stock Non- Voting		Additional Paid‑in Capital			Accumulated Other Comprehensive (Loss) Income			Retained Earnings (Substantially Restricted)			Unearned ESOP Shares			Treasury Stock			Total Stockholders’ Equity
								(In thousands)
Balance at July 1, 2020	$	219	$	87	$	46,650		$	209		$	8,608		$	(927	)	$	(5,326	)	$	49,520
Net loss for the three months ended September 30, 2020	‑		‑		‑				-			(244	)	‑			‑				(244	)
Release of unearned ESOP shares		-		-		-		‑			‑				18		‑				18
Restricted stock Compensation expense		-	‑			90		‑			‑			‑			‑				90
Stock option compensation expense	‑		‑			10		‑				-		‑			‑				10
Other comprehensive loss, net of tax	‑		‑			-			(28	)	‑			‑			‑				(28	)
Balance at September 30, 2020	$	219	$	87	$	46,750		$	181		$	8,364		$	(909	)	$	(5,326	)	$	49,366

Balance at July 1, 2019	$	218	$	87	$	46,292		$	(34	)	$	8,773		$	(994	)	$	(5,326	)	$	49,016
Net loss for the three months ended September 30, 2019	‑		‑		‑				-			(279	)	‑			‑				(279	)
Release of unearned ESOP shares		-		-		2		‑			‑				17		‑				19
Restricted stock Compensation expense		-	‑			63		‑			‑			‑			‑				63
Stock option compensation expense	‑		‑			10		‑				-		‑			‑				10
Common stock repurchased for tax withholdings	‑		‑			(14	)	‑			‑				-		‑				(14	)
Other comprehensive income, net of tax	‑		‑			-			45		‑			‑			‑				45
Balance at September 30, 2019	$	218	$	87	$	46,353		$	11		$	8,494		$	(977	)	$	(5,326	)	$	48,860

	Period ended,
	September 30, 2020		December 31, 2019
	(Dollars in thousands, except per share)

Net interest income	$	17,817	$	23,606
Net income	$	2,090	$	3,241

Basic earnings per share	$	0.04	$	0.06
Diluted earnings per share	$	0.04	$	0.06

	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

	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

	(In thousands)
Core deposit intangible acquired	$	3,329
Less: accumulated amortization		(131	)
	$	3,198

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

	Quarter ended September 30, 2020		Nine Months ended September 30, 2020
Cash paid for amounts included in the measurement of lease liabilities for operating leases:	$	88	$	262

Weighted average remaining lease term in months				7

Weighted average discount rate				2.75	%

Three months ended December 31, 2020	$	140
Year ended December 31, 2021		195
Total Future Minimum Lease Payments		335
Amounts Representing Interest		(3	)
Present Value of Net Future Minimum Lease Payments	$	332

	Fair Value Measurement
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
	(In thousands)
At September 30, 2020:
Securities available-for-sale – federal agency mortgage-backed	$	-	$	6,460	$	-	$	6,460
Securities available-for-sale – federal agency debt		-		3,058		-		3,058
Municipal bonds		-		854		-		854
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 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

			Fair Value Measurements at September 30, 2020
	Carrying Value		Level 1		Level 2		Level 3		Total
	(In thousands)
Financial Assets:
Loans receivable held for sale	$	40,653	$	-	$	40,667	$	-	$	40,667
Loans receivable held for investment		361,793		-		-		366,160		366,160

Financial Liabilities:
Time Deposits	$	147,703	$	-	$	148,380	$	-	$	148,380
Federal Home Loan Bank advances		115,500		-		119,334		-		119,334
Junior subordinated debentures		3,570		-		-		3,029		3,029

	Nine Months Ended September 30, 2020					Nine Months Ended September 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

	For the nine months ended
	September 30, 2020							September 30, 2019
(Dollars in Thousands)	Average Balance		Interest		Average Yield/ Cost			Average Balance		Interest		Average Yield/ Cost
Assets
Interest-earning assets:
Interest-earning deposits	$	36,989	$	165		0.59	%	$	19,265	$	350		2.42	%
Securities		10,539		194		2.45	%		14,265		283		2.65	%
Loans receivable (1)		431,330		13,226		4.09	%		373,869		11,687		4.17	%
FHLB stock		3,410		128		5.00	%		2,916		153		7.00	%
Total interest-earning assets		482,268	$	13,713		3.79	%		410,315	$	12,473		4.05	%
Non-interest-earning assets		10,530							10,861
Total assets	$	492,798						$	421,176

Liabilities and Stockholders’ Equity
Interest-bearing liabilities:
Money market deposits	$	44,853	$	277		0.82	%	$	25,867	$	171		0.88	%
Passbook deposits		53,451		224		0.56	%		45,332		205		0.60	%
NOW and other demand deposits		52,655		12		0.03	%		33,506		10		0.04	%
Certificate accounts		168,812		2,140		1.69	%		181,379		2,843		2.09	%
Total deposits		319,771		2,653		1.11	%		286,084		3,229		1.51	%
FHLB advances		114,234		1,646		1.92	%		75,824		1,382		2.43	%
Junior subordinated debentures		4,036		108		3.57	%		4,993		195		5.21	%
Total interest-bearing liabilities		438,041	$	4,407		1.34	%		366,901	$	4,806		1.75	%
Non-interest-bearing liabilities		5,476							5,412
Stockholders’ Equity		49,281							48,863
Total liabilities and stockholders’ equity	$	492,798						$	421,176

Net interest rate spread (2)			$	9,306		2.45	%			$	7,667		2.31	%
Net interest rate margin (3)						2.57	%						2.49	%
Ratio of interest-earning assets to interest-bearing liabilities						110.10	%						111.83	%