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 March 31, 20222023

☐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

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.)

4601 Wilshire Boulevard, Suite 150
Los Angeles, California
 90010
(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
 
Nasdaq Capital Market

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

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

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

Large accelerated filer
☐
Accelerated filer
☐
    
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 May 9, 2022, 46,837,6952023, 48,710,335 shares of the Registrant’s Class A voting common stock, 11,404,618 shares of the Registrant’s Class B non-voting common stock and 15,261,87213,380,516 shares of the Registrant’s Class C non-voting common stock were outstanding.


TABLE OF CONTENTS
  Page
PART I.FINANCIAL STATEMENTS 
    
 
Item 1.
Consolidated Financial Statements (Unaudited)
 
    
  
Consolidated Statements of Financial Condition as of March 31, 20222023 and December 31, 20212022
1
    
  
Consolidated Statements of Operations and Comprehensive LossIncome (Loss) for the three months ended March 31, 20222023 and 20212022
2
    
  
Consolidated Statements of Cash Flows for the three months ended March 31, 20222023 and 20212022
3
    
  
Consolidated Statements of Changes in Stockholders’ Equity for the three months ended March 31, 20222023 and 20212022
4
    
  
Notes to Consolidated Financial Statements
5
    
 
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
2025
    
 
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
2933
    
 
Item 4.
Controls and Procedures
29
33
    
PART II.OTHER INFORMATION 
    
 
Item 1.
Legal Proceedings
30
34
    
 
Item 1A.
Risk Factors
3034
    
 
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
3034
    
 
Item 3.
Defaults Upon Senior Securities
3034
    
 
Item 4.
Mine Safety Disclosures
3034
    
 
Item 5.
Other Information
3034
    
 
Item 6.
Exhibits
3034
    
 
Signatures
3135

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated Statements of Financial Condition
(In thousands, except share and per share amounts)

 March 31, 2022  December 31, 2021  March 31, 2023  December 31, 2022 
 (Unaudited)     (Unaudited)    
Assets:            
Cash and due from banks 
$
37,925
  
$
38,418
  
$
8,432
  
$
7,459
 
Interest-bearing deposits in other banks  
208,181
   
193,102
   
21,216
   
8,646
 
Cash and cash equivalents  
246,106
   
231,520
   
29,648
   
16,105
 
Securities available-for-sale, at fair value  
170,308
   
156,396
   
329,026
   
328,749
 
Loans receivable held for investment, net of allowance of $3,539 and $3,391
  
653,375
   
648,513
 
Loans receivable held for investment, net of allowance of $6,285 and $4,388
  
776,053
   
768,046
 
Accrued interest receivable  
2,449
   
3,372
   
4,219
   
3,973
 
Federal Home Loan Bank (“FHLB”) stock
  
2,222
   
2,573
 
Federal Home Loan Bank (FHLB) stock
  
7,300
   
5,535
 
Federal Reserve Bank (FRB) stock
  693
   693
   3,543
   5,264
 
Office properties and equipment, net  
10,380
   
10,344
   
10,122
   
10,291
 
Bank owned life insurance  
3,200
   
3,190
   
3,242
   
3,233
 
Deferred tax assets, net  
8,312
   
6,101
   
10,823
   
11,872
 
Core deposit intangible, net
  2,827
   2,936
   2,403
   2,501
 
Goodwill  25,858
   25,996
   25,858
   25,858
 
Other assets  
5,395
   
1,871
   
2,824
   
2,866
 
Total assets $1,131,125  $1,093,505  $1,205,061  $1,184,293 
                
Liabilities and stockholders’ equity                
Liabilities:                
Deposits 
$
839,714
  
$
788,052
  
$
657,542
  
$
686,916
 
Securities sold under agreements to repurchase
  56,003   51,960   70,941   63,471 
FHLB advances  
73,001
   
85,952
   
168,810
   
128,344
 
Notes payable  14,000
   14,000
   14,000
   14,000
 
Accrued expenses and other liabilities  
12,070
   
12,441
   
13,900
   
11,910
 
Total liabilities  994,788   952,405   925,193   904,641 
Cumulative Redeemable Perpetual Preferred stock, Series A, authorized 3,000 shares at March 31, 2022 and December 31, 2021; issued and outstanding NaN at March 31, 2022 and 3,000 shares at December 31, 2021, liquidation value $1,000 per share
  
0
   
3,000
 
Common stock, Class A, $0.01 par value, voting, authorized 75,000,000 shares at March 31, 2022 and December 31, 2021; issued 48,949,221 at March 31, 2022 and 46,291,852 shares at December 31, 2021; outstanding 46,194,148 shares at March 31, 2022 and 43,674,026 shares at December 31, 2021  
489
   
463
 
Common stock, Class B, $0.01 par value, non-voting, authorized 15,000,000 shares at March 31, 2022 and December 31, 2021; issued and outstanding 11,404,618 shares at March 31, 2022 and December 31, 2021
  114
   114
 
Common stock, Class C, $0.01 par value, non-voting, authorized 25,000,000 shares at March 31, 2022 and December 31, 2021; issued 15,768,172 shares at March 31, 2022 and 16,689,775 shares at December 31, 2021; outstanding 15,768,172 shares at March 31, 2022 and 16,689,775 shares at December 31, 2021
  
158
   
167
 
Non-Cumulative Redeemable Perpetual Preferred stock, Series C; authorized 150,000 shares at March 31, 2023 and December 31, 2022; issued and outstanding 150,000 shares at March 31, 2023 and December 31, 2022; liquidation value $1,000 per share
  150,000   150,000 
Common stock, Class A, $0.01 par value, voting; authorized 75,000,000 shares at March 31, 2023 and December 31, 2022; issued 51,335,981 shares at March 31, 2023 and 51,265,209 shares at December 31, 2022; outstanding 48,718,155 shares at March 31, 2023 and 48,647,383 shares at December 31, 2022
  
513
   
513
 
Common stock, Class B, $0.01 par value, non-voting; authorized 15,000,000 shares at March 31, 2023 and December 31, 2022; issued and outstanding 11,404,618 shares at March 31, 2023 and December 31, 2022
  114
   114
 
Common stock, Class C, $0.01 par value, non-voting; authorized 25,000,000 shares at March 31, 2023 and December 31, 2022; issued and outstanding 13,380,516 at March 31, 2023 and December 31, 2022
  
134
   
134
 
Additional paid-in capital  
143,373
   
140,289
   
143,621
   
143,491
 
Retained earnings  
4,616
   
3,673
   
9,611
   
9,294
 
Unearned Employee Stock Ownership Plan (ESOP) shares  
(813
)
  
(829
)
  
(3,963
)
  
(1,265
)
Accumulated other comprehensive loss, net of tax
  
(6,398
)
  
(551
)
  
(15,028
)
  
(17,473
)
Treasury stock-at cost, 2,617,826 shares at March 31, 2022 and at December 31, 2021
  
(5,326
)
  
(5,326
)
Treasury stock-at cost, 2,617,826 shares at March 31, 2023 and at December 31, 2022
  
(5,326
)
  
(5,326
)
Total Broadway Financial Corporation and Subsidiary stockholders’ equity
  136,213   141,000   279,676   279,482 
Non-controlling interest  124   100   192   170 
Total liabilities and stockholders’ equity
 $1,131,125  $1,093,505  $1,205,061  $1,184,293 

See accompanying notes to unaudited consolidated financial statements.

1

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated Statements of Operations and Comprehensive Lossincome (loss)
(In thousands, except per share amounts)
 (Unaudited)

 
Three Months Ended
March 31,
 
 2022
  2021
  
Three Months Ended
March 31,
 
 
(In thousands, except per share)
  2023
  2022
 
Interest income:            
Interest and fees on loans receivable $7,336  $3,644  $8,666  $7,336 
Interest on investment securities  591   56 
Interest on available-for-sale securities  2,180   591 
Other interest income  84   77   328   84 
Total interest income  8,011   3,777   11,174   8,011 
                
Interest expense:                
Interest on deposits  350   383   1,303   350 
Interest on borrowings  489   549   1,597   489 
Total interest expense  839   932   2,900   839 
                
Net interest income  7,172   2,845   8,274   7,172 
Loan loss provision  148   0 
Net interest income after loan loss provision  7,024   2,845 
Provision for credit losses
  88   148 
Net interest income after provision for credit losses
  8,186   7,024 
                
Non-interest income:                
Service charges  64   93   61   64 
Other  217   30   228   217 
Total non-interest income  281   123   289   281 
                
Non-interest expense:                
Compensation and benefits  3,619   5,390   3,749   3,619 
Occupancy expense  442   308   303   442 
Information services  865   241   715   865 
Professional services  364   1,939   505   364 
Supervisory costs  94   157 
Office services and supplies  157   95   22   61 
Advertising and promotional expense  68   50 
Corporate insurance  61   246   62   53 
Amortization of investment in affordable housing limited partnership  53   26 
Appraisal and other loan expense
  43   30 
Amortization of core deposit intangible  109   0   98   109 
Travel expense
  78   27 
Other  290   382   469   183 
Total non-interest expense  5,960   8,627   6,206   5,960 
                
Income (loss) before income taxes  1,345   (5,659)
Income before income taxes  2,269   1,345 
Income tax expense
  674   363 
Net income
 $1,595  $982 
Less: Net income attributable to non-controlling interest  22   24 
Net income attributable to Broadway Financial Corporation $1,573  $958 
        
Other comprehensive income, net of tax:        
Unrealized gains (losses) on securities available-for-sale arising during the period $3,433  $(8,154)
Income tax expense (benefit)  363   (2,172)  988   (2,307)
Net income (loss) $982  $(3,487)
Less: Net income attributable to non-controlling interest  24   0 
Net income (loss) attributable to Broadway Financial Corporation $958  $(3,487)
Other comprehensive income (loss), net of tax  2,445   (5,847)
                
Other comprehensive loss, net of tax:        
Unrealized loss on securities available-for-sale arising during the period $(8,154) $(158)
Income tax benefit  (2,307)  (47)
Other comprehensive loss, net of tax  (5,847)  (111)
Comprehensive income (loss) $4,018  $(4,889)
                
Comprehensive loss $(4,889) $(3,598)
        
Income (loss) per common share-basic $0.01  $(0.13)
Income (loss) per common share-diluted $0.01  $(0.13)
Earnings per common share-basic $0.02  $0.01 
Earnings per common share-diluted $0.02  $0.01 

See accompanying notes to unaudited consolidated financial statements.

2
BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated Statements of Cash Flows
(Unaudited)

 
Three Months Ended
March 31,
  Three Months Ended
March 31,		 
 2022
  2021
  2023  2022 
 
(In thousands)
  (In thousands) 
Cash flows from operating activities:
            
Net income (loss) $982  $(3,487)
Adjustments to reconcile net income (loss) to net cash used in operating activities:        
Loan loss provision  148   0 
Net income $1,595  $982 
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
        
Provision for credit losses
  88   148 
Depreciation  30   53   172   30 
Net change in amortization of deferred loan origination costs  (148)  (21)
Net amortization of premiums on available for sale securities  118   10 
Net change of deferred loan origination costs  (223)  (148)
Net amortization of premiums & discounts on available-for-sale securities  (253)  118 
Amortization of purchase accounting marks on loans  –   (465)
Amortization of core deposit intangible  109   0   98   109 
Amortization of purchase accounting marks on loans  (465)  0 
Director compensation expense-common stock  84   45   96   84 
Accretion of premium on FHLB advances  (11)  0   1   (11)
Stock-based compensation expense  15   168   38   15 
ESOP compensation expense  18   23   (202)  18 
Change in deferred taxes on goodwill  138   0 
Earnings on bank owned life insurance  (10)  (10)  (9)  (10)
Change in assets and liabilities:                
Net change in deferred taxes  96   (1,413)  569   234 
Net change in accrued interest receivable  923   45   (246)  923
 
Net change in other assets  (3,524)  (1,176)  42   (3,524)
Net change in other liabilities  (311)  3,705 
Net cash used in operating activities  (1,808)  (2,058)
Net change in accrued expenses and other liabilities  2,035   (311)
Net cash provided by (used in) operating activities  3,801   (1,808)
                
Cash flows from investing activities:                
Net change in loans receivable held for investment  (4,396)  (2,370)  (9,681)  (4,396)
Principal payments on available-for-sale securities  4,724   507   3,409   4,724 
Purchase of available-for-sale securities  (26,908)  0   –   (26,908)
Purchase of FHLB stock  (1,765)  – 
Proceeds from redemption of FHLB stock  351   0   –   351 
Proceeds from redemption of FRB stock
  1,721   – 
Purchase of office properties and equipment  (67)  (15)  (3)  (67)
        
Net cash used in investing activities  (26,296)  (1,878)  (6,319)  (26,296)
                
Cash flows from financing activities:                
Net change in deposits  51,662   (3,315)  (29,374)  51,662 
Net increase in securities sold under agreements to repurchase  4,043   0 
Net change in securities sold under agreements to repurchase  7,470   4,043 
Increase in unreleased ESOP shares  (2,500)  –
 
Dividends paid on preferred stock  (15)  0
   –   (15)
Proceeds from FHLB advances  40,500   – 
Repayments of FHLB advances  (13,000)  0   (35)  (13,000)
Stock cancelled for income tax withholding  0   (447)
Repayments of junior subordinated debentures  0   (255)
Net cash provided by (used in) financing activities  42,690   (4,017)
Net cash provided by financing activities  16,061   42,690 
Net change in cash and cash equivalents  14,586   (7,953)  13,543   14,586 
Cash and cash equivalents at beginning of the period  231,520   96,109   16,105   231,520 
Cash and cash equivalents at end of the period $246,106  $88,156  $29,648  $246,106 
                
Supplemental disclosures of cash flow information:                
Cash paid for interest $822  $809  $2,882  $822 
Cash paid for income taxes  0   39   –   – 
Supplemental disclosures of non-cash investing and financing activities:        
Conversion of preferred shares into Class A common shares  3,000
   0
 
        
Supplemental non-cash disclosures:
        
Common stock issued in exchange for preferred stock
  –   3,000 

See accompanying notes to unaudited consolidated financial statements.

3

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated Statements of Changes in Stockholders’ Equity
(Unaudited)

  
Three Months Ended March 31, 2022 and 2021
 
  Preferred Stock Non-Voting  
Common
Stock
Voting
  
Common
Stock Non-Voting
  
Additional
Paid‑in
Capital
  Accumulated Other Comprehensive Income (Loss)  Retained Earnings (Substantially Restricted)  
Unearned
ESOP Shares
  
Treasury
Stock
  Non-controlling Interest  
Total
Stockholders’
Equity
 
              
(In thousands)
                
                               
Balance at January 1, 2022
 $3,000  $463  $281  $140,289  $(551) $3,673  $(829) $(5,326) $100  $141,100 
Net income for the three months ended March 31, 2022
  0   0   0   0   0   958   0   0   24   982 
Conversion of preferred stock into common stock  (3,000)  12   0   2,988                       0 
Conversion of non-voting common shares into voting common shares      9   (9)                          0 
Release of unearned ESOP shares  0   0   0   2   0   0   16   0   0   18 
Dividends paid on preferred stock  0   0   0   0   0   (15)  0   0   0   (15)
Stock awarded to directors  0   0   0
   84   0   0   0   0   0   84 
Restricted stock compensation expense  0   5   0   10   0   0   0   0   0   15 
Other comprehensive loss, net of tax  0   0   0   0   (5,847)  0   0   0   0   (5,847)
Balance at March 31, 2022
 $0  $489  $272  $143,373  $(6,398) $4,616  $(813) $(5,326) $124  $136,337 
                                         
Balance at January 1, 2021
 $0  $219  $87  $46,851  $164  $7,783  $(893) $(5,326) $0  $48,885 
Net loss for the three months ended March 31, 2021
  0   0   0   0   0   (3,487)  0   0   0   (3,487)
Release of unearned ESOP shares  0   0   0   7   0   0   16   0   0   23 
Restricted stock compensation expense  0   0   0   162   0   0   0   0   0   162 
Common stock cancelled for payment of tax withholding  0   (1)  0   (446)  0   0   0   0   0   (447)
Stock awarded to directors  0   0   0   45   0   0   0   0   0   45 
Stock option compensation expense  0   0   0   6   0   0   0   0   0   6 
Other comprehensive loss, net of tax  0   0   0   0   (111)  0   0   0   0   (111)
Balance at March 31, 2021
 $0  $218  $87  $46,625  $53  $4,296  $(877) $(5,326) $0  $45,076 
  
Three-Month Period Ended March 31, 2023 and 2022
 
  Preferred Stock Non-Voting  
Common
Stock
Voting
  
Common
Stock Non-Voting
  
Additional
Paid-in
Capital
  Accumulated Other Comprehensive  (Loss)  Retained Earnings  
Unearned
ESOP Shares
  
Treasury
Stock
  Non-Controlling Interest  
Total
Stockholders’
Equity
 
  
(In thousands)
 
Balance at January 1, 2023
 $150,000  $513  $248  $143,491  $(17,473) $9,294  $(1,265) $(5,326) $170  $279,652 
Cumulative effect of change related to adoption of ASU 2016-13
  –   –   –   –   –   (1,256)  –   –   –   (1,256)
Adjusted balance, January 1, 2023
  150,000   513   248   143,491   (17,473)  8,038   (1,265)  (5,326)  170   278,396 
Net income
  –   –   –   –   –   1,573   –   –   22   1,595 
Release of unearned ESOP shares  –   –   –   (4)  –   –   (198)  –   –   (202)
Increase in unreleased shares
  –   –   –   –   –   –   (2,500)  –   –   (2,500)
Stock-based compensation expense
  –
   –
   –
   38
   –
   –
   –
   –
   –
   38
 
Director stock compensation expense
  –   –   –   96   –   –   –   –   –   96 
Other comprehensive income, net of tax  –   –   –   –   2,445   –   –   –   –   2,445 
Balance at March 31, 2023
 $150,000  $513  $248  $143,621  $(15,028) $9,611  $(3,963) $(5,326) $192  $279,868 
                                         
Balance at January 1, 2022
 $3,000  $463  $281  $140,289  $(551) $3,673  $(829) $(5,326) $100  $141,100 
Net income
  –   –   –   –   –   958   –   –   24   982 
Conversion of preferred stock into common stock  (3,000)  12   –   2,988   –   –   –   –   –   – 
Conversion of non-voting common shares into voting common shares
  –   9   (9)  –   –   –   –   –   –   – 
Release of unearned ESOP shares  –   –   –   2   –   –   16   –   –   18 
Dividends paid on preferred stock
  –   –   –   –   –   (15)  –   –   –   (15)
Director stock compensation expense
  –   –   –   84   –   –   –   –   –   84 
Stock-based compensation expense
  –   5   –   10   –   –   –   –   –   15 
Other comprehensive loss, net of tax  –   –   –   –   (5,847)  –   –   –   –   (5,847)
Balance at March 31, 2022
 $
–  $
489  $
272  $
143,373  $
(6,398) $
4,616  $
(813) $
(5,326) $
124  $
136,337 

See accompanying notes to unaudited consolidated financial statements.

4
BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY
Notes to Unaudited Consolidated Financial Statements

NOTE (1)1 – Basis of Financial Statement Presentation


The accompanying unaudited consolidated financial statements include Broadway Financial Corporation (the “Company”) and its wholly owned subsidiary, City First Bank, National Association (the “Bank” and, together with the Company, “City First Broadway”). Also included in the unaudited consolidated financial statements are the following subsidiaries of City First Bank: 1432 U Street LLC, Broadway Service Corporation, City First Real Estate LLC, City First Real Estate II LLC, City First Real Estate III LLC, City First Real Estate IV LLC, and CF New Markets Advisors, LLC (“CFNMA”). In addition, CFNMA also consolidates CFC Fund Manager II, LLC; City First New Markets Fund II, LLC; City First Capital IX, LLC; and City First Capital 45, LLC (“CFC 45”) into its financial results. All significant intercompany balances and transactions have been eliminated in consolidation.


The unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America 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, 20212022 (“20212022 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 months ended March 31, 20222023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022.2023.


Subsequent events have been evaluated through May 16, 2022, 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 20212022 Form 10-K.



Allowance for Credit Losses – Securities



Effective January 1, 2023, the Company accounts for the allowance for credit losses (“ACL”) on securities in accordance with Accounting Standards Codification Topic 326 (“ASC 326”) – Financial Instruments-Credit Losses. The ACL on securities is recorded at the time of purchase or acquisition, representing the Company’s best estimate of current expected credit losses (“CECL”) as of the date of the consolidated statements of financial condition.


For available-for-sale investment securities, the Company performs a qualitative evaluation for those securities that are in an unrealized loss position to determine if the decline in fair value is credit related or non-credit related. In determining whether a security’s decline in fair value is credit related, the Company considers a number of factors including, but not limited to: (i) the extent to which the fair value of the investment is less than its amortized cost; (ii) the financial condition and near-term prospects of the issuer; (iii) any downgrades in credit ratings; (iv) the payment structure of the security, (v) the ability of the issuer of the security to make scheduled principal and interest payments, and (vi) general market conditions which reflect prospects for the economy as a whole, including interest rates and sector credit spreads. For investment securities where the Company has reason to believe the credit loss exposure is remote, a zero credit loss assumption is applied. Such investment securities typically consist of those guaranteed by the U.S. government or other government enterprises, where there is an explicit or implicit guarantee by the U.S. government, that are highly rated by rating agencies, and historically have had no credit loss experience.


If it is determined that the unrealized loss, or a portion thereof, is credit related, the Company records the amount of credit loss through a charge to the provision for credit losses in current period earnings. However, the amount of credit loss recorded in current period earnings is limited to the amount of the total unrealized loss on the security, which is measured as the amount by which the security’s fair value is below its amortized cost. If the Company intends to sell a security that is in an unrealized loss position, or if it is more likely than not the Company will be required to sell a security in an unrealized loss position, the total amount of the unrealized loss is recognized in current period earnings through the provision for credit losses. Unrealized losses deemed non-credit related are recorded, net of tax, in accumulated other comprehensive income (loss).


The Company’s assessment of available-for-sale investment securities as of March 31, 2023, indicated that an ACL was not required. The Company analyzed available-for-sale investment securities that were in an unrealized loss position and determined the decline in fair value for those securities was not related to credit, but rather related to changes in interest rates and general market conditions. As such, no ACL was recorded for available-for-sale securities as of March 31, 2023.

Newly Adopted Accounting Pronouncements
5
Allowance for Credit Losses - Loans


Effective January 1, 2023, the Company accounts for credit losses on loans in accordance with ASC 326, which requires the Company to record an estimate of expected lifetime credit losses for loans at the time of origination or acquisition. The ACL is maintained at a level deemed appropriate by management to provide for expected credit losses in the portfolio as of the date of the consolidated statements of financial condition. Estimating expected credit losses requires management to use relevant forward-looking information, including the use of reasonable and supportable forecasts. The measurement of the ACL is performed by collectively evaluating loans with similar risk characteristics. The Company measures the ACL for each of its loan segments using the weighted-average remaining maturity (“WARM”) method. The weighted average remaining life, including the effect of estimated prepayments, is calculated for each loan pool on a quarterly basis. The Company then estimates a loss rate for each pool using both its own historical loss experience and the historical losses of a group of peer institutions during the period from 2004 through the most recent quarter.


The Company’s ACL model also includes adjustments for qualitative factors, where appropriate. Since historical information (such as historical net losses) may not always, by itself, provide a sufficient basis for determining future expected credit losses, the Company periodically considers the need for qualitative adjustments to the ACL. Qualitative adjustments may be related to and include, but not limited to factors such as: (i) changes in lending policies and procedures, including changes in underwriting standards and collections, charge offs, and recovery practices; (ii) changes in international, national, regional, and local conditions; (iii) changes in the nature and volume of the portfolio and terms of loans; (iv) changes in the experience, depth, and ability of lending management; (v) changes in the volume and severity of past due loans and other similar conditions; (vi) changes in the quality of the organization’s loan review system; (vii) changes in the value of underlying collateral for collateral dependent loans; (viii) the existence and effect of any concentrations of credit and changes in the levels of such concentrations; and (ix) the effect of other external factors (i.e., competition, legal and regulatory requirements) on the level of estimated credit losses.


The Company has a credit portfolio review process designed to detect problem loans. Problem loans are typically those of a substandard or worse internal risk grade, and may consist of loans on nonaccrual status, loans that have recently been modified in response to a borrower’s deteriorating financial condition, loans where the likelihood of foreclosure on underlying collateral has increased, collateral dependent loans, and other loans where concern or doubt over the ultimate collectability of all contractual amounts due has become elevated. Such loans may, in the opinion of management, be deemed to no longer possess risk characteristics similar to other loans in the loan portfolio, because the specific attributes and risks associated with the loan have likely become unique as the credit quality of the loan deteriorates. As such, these loans may require individual evaluation to determine an appropriate ACL for the loan. When a loan is individually evaluated, the Company typically measures the expected credit loss for the loan based on a discounted cash flow approach, unless the loan has been deemed collateral dependent. Collateral dependent loans are loans where the repayment of the loan is expected to come from the operation of and/or eventual liquidation of the underlying collateral. The ACL for collateral dependent loans is determined using estimates of the fair value of the underlying collateral, less estimated selling costs.


The estimation of the appropriate level of the ACL requires significant judgment by management. Although management uses the best information available to make these estimations, future adjustments to the ACL may be necessary due to economic, operating, regulatory, and other conditions that may extend beyond the Company’s control. Changes in management’s estimates of forecasted net losses could materially change the level of the ACL. Additionally, various regulatory agencies, as an integral part of their examination process, periodically review the Company’s ACL and credit review process. Such agencies may require the Company to recognize additions to the ACL based on judgments different from those of management.


The Company has segmented the loan portfolio according to loans that share similar attributes and risk characteristics. Each segment possesses varying degrees of risk based on, among other things, the type of loan, the type of collateral, and the sensitivity of the borrower or industry to changes in external factors such as economic conditions. The Company determines the ACL for loans based on this more detailed loan segmentation and classification. These segments, and the risks associated with each segment, are as follows:


Real Estate: Single Family – Subject to adverse employment conditions in the local economy leading to increased default rate, decreased market values from oversupply in a geographic area and incremental rate increases on adjustable-rate mortgages which may impact the ability of borrowers to maintain payments.


Real Estate: Multi‑Family – Subject to adverse various market conditions that cause a decrease in market value or lease rates, changes in personal funding sources for tenants, oversupply of units in a specific region, population shifts and reputational risks.


Real Estate: Commercial Real Estate – Subject to adverse conditions in the local economy which may lead to reduced cash flows due to vacancies and reduced rental rates, and decreases in the value of underlying collateral.


Real Estate: Church – Subject to adverse economic and employment conditions, which may lead to reduced cash flows from members’ donations and offerings, and the stability, quality, and popularity of church leadership.

6

Real Estate: Construction – Subject to adverse conditions in the local economy, which may lead to reduced demand for new commercial, multi‑family, or single family buildings or reduced lease or sale opportunities once the building is complete.


Commercial and SBA Loans – Subject to industry and economic conditions including decreases in product demand.


Consumer – Subject to adverse employment conditions in the local economy, which may lead to higher default rates.



Modified Loans to Borrowers Experiencing Financial Difficulty



In March 2020,certain instances, the Company makes modifications to loans in order to alleviate temporary difficulties in the borrower’s financial condition and/or constraints on the borrower’s ability to repay the loan, and to minimize potential losses to the Company. Modifications may include: changes in the amortization terms of the loan, reductions in interest rates, acceptance of interest only payments, and reductions to the outstanding loan balance. Such loans are typically placed on nonaccrual status when there is doubt concerning the full repayment of principal and interest or the loan has been in default for a period of 90 days or more. Such loans may be returned to accrual status when all contractual amounts past due have been brought current, and the borrower’s performance under the modified terms of the loan agreement and the ultimate collectability of all contractual amounts due under the modified terms is no longer in doubt. The Company typically measures the ACL on these loans on an individual basis as the loans are deemed to no longer have risk characteristics that are similar to other loans in the portfolio. The determination of the ACL for these loans is based on a discounted cash flow approach, unless the loan is deemed collateral dependent, which requires measurement of the ACL based on the estimated expected fair value of the underlying collateral, less selling costs.


Accounting Pronouncements Recently Adopted


In June 2016, 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 2016-13 – 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 adopted by the Company as of January 1, 2022. As of January 1, 2022, the Company modified all of its loan contracts that were benchmarked to the LIBOR index to SOFR, and applied the practical expedients allowed by this ASU regarding treatment of those modifications.

Accounting Pronouncements Yet to Be Adopted


In June 2016, the FASB issued ASU 2016-13, Financial Instruments – CreditInstruments-Credit Losses (Topic 326)326): Measurement of Credit Losses on Financial Instruments.Instruments. This ASU 2016-13 replaces the incurred loss impairment model in previous GAAP with an expected lossa model which is referred to as thethat reflects current expected credit loss (“CECL”) model.losses. The CECL model is applicable to the measurement of credit losses on financial assets measured at amortized cost, including loan receivables and held-to-maturity debt securities. CECL also requires credit losses on available-for-sale debt securities and reinsurance receivables. Itbe measured through an allowance for credit losses when the fair value is less than the amortized cost basis. The new guidance 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 purchase credit impaired (“PCI”) assets will be grandfathered and classified as purchased credit deteriorated (“PCD”) assets at the date of adoption.exposures. The asset will be grossed up for the allowance forASU requires that all expected credit losses for all PCDfinancial assets held at the reporting date of adoption and will continue to recognize the noncredit discount in interest incomebe measured based on the yieldhistorical experience, current conditions, and reasonable and supportable forecasts. The ASU also requires enhanced disclosure, including qualitative and quantitative disclosures that provide additional information about significant estimates and judgments used in estimating credit losses. The provisions 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 amendedthis ASU became 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 yearCompany for all annual 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 ofinterim periods beginning January 1, 2023.
The estimated financial impact has not yet been determined.


5

In April 2019, the FASB issued ASU No. 2019-04 – Codification Improvements to Topic 326, Financial Instruments - CreditInstruments-Credit Losses, Topic 815, Derivatives815-Derivatives and Hedging, and Topic 825, Financial Instruments.825-Financial Instruments. This ASU clarifieswas issued as part of an ongoing project on the scopeFASB’s agenda for improving the Codification or correcting for its unintended application. The amendments in this ASU became effective for all interim and annual reporting periods for the Company on January 1, 2023. The Company adopted the provisions within this ASU in conjunction with the implementation of ASC 326, including: (i) the election to not measure credit losses standard and addresses issues related toon accrued interest receivable when such balances recoveries, variableare written-off in a timely manner when deemed uncollectable and (ii) the election to not include the balance of accrued interest rates and prepayments, among other things. The amendments to Topic 326 havereceivable as part of the same effective dates as ASU 2016-13. This guidance is not expected to haveamortized cost of a significant impact on the Company’s consolidated financial statements.loan.


In May 2019, the FASB issued ASU No. 2019-05 - Financial Instruments - CreditInstruments-Credit Losses (Topic 326): Targeted Transition Relief.Relief. This ASU allowswas issued to allow entities that have certain financial instruments within the scope of ASC 326-20 - Financial Instruments-Credit Losses-Measured at Amortized Costto irrevocablymake an irrevocable election to elect the fair value option for those instruments in accordance with ASC 825 – Financial Instruments upon the adoption of ASC 326, which for the Company was January 1, 2023. The fair value option is not applicable to held-to-maturity debt securities. Entities are required to make this election on an instrument-by-instrument basis for eligible financial assets measured at amortized cost basis upon adoption of the credit loss standards.basis. The effective date for this ASU is the same as for ASU 2016-13. Management will evaluate this ASU in conjunction with ASU 2016-13 to determine whetherCompany did not elect the fair value option will be elected for any eligibleof its financial assets.assets upon the adoption of ASC 326.


7

Effective January 1, 2023, the Company adopted the provisions of ASC 326 through the application of the modified retrospective transition approach, and recorded a net decrease of $1.3 million to the beginning balance of retained earnings as of January 1, 2023 for the cumulative effect adjustment. The following table illustrates the impact of the adoption of the CECL model under ASC 326 on the Company’s consolidated statements of financial position as of January 1, 2023:


  Pre-CECL Adoption  
Impact of
CECL Adoption
  
As Reported
Under CECL
 
  (In thousands) 
Assets:         
Allowance for credit losses on available-for-sale securities $–  $–  $– 
Allowance for credit losses on loans  4,388   1,809   6,197 
Deferred tax assets  11,872   508  12,380 
Liabilities:            
Allowance for credit losses on off-balance sheet exposures  412   (45)  367 
Stockholders’ equity:            
Retained earnings  9,294   (1,256)  8,038 


The Company’s assessment of available-for-sale investment securities as of January 1, 2023 indicated that an ACL was not required. The Company analyzed available-for-sale investment securities that were in an unrealized loss position as of the date of adoption and determined the decline in fair value for those securities was not related to credit, but rather related to changes in interest rates and general market conditions. As such, no ACL was recorded for available-for-sale securities as of January 1, 2023.


Upon the adoption of ASC 326, the Company did not reassess purchased loans with credit deterioration (previously classified as purchased credit impaired loans under ASC 310-30).


In February 2019, the U.S. federal bank regulatory agencies approved a final rule modifying their regulatory capital rules and providing an option to phase in the adverse regulatory capital effects of the impact of adoption of ASC 326 over a three-year period. As a result, entities have the option to gradually phase in the full effect of CECL on regulatory capital over a three-year transition period. The Company implemented its CECL model commencing January 1, 2023 and elected to phase in the full effect of CECL on regulatory capital over the three-year transition period.


In March 2022, the FASB issued ASU No. 2022-02 – Financial Instruments—CreditInstruments-Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures. This new accounting standard pertainsDisclosures. The FASB issued this ASU in response to eliminating certain existingfeedback the FASB received from various stakeholders in its post-implementation review process related to the issuance of ASU 2016-13. The amendments in this ASU include the elimination of accounting guidance for troubled debt restructurings (“TDRs”) in Subtopic 310-40 – Receivables-Troubled Debt Restructurings by creditorsCreditors, and addingintroduce new disclosures and enhance existing disclosures concerning certain loan refinancings and restructurings when a borrower is experiencing financial difficulty. Under the provisions of this ASU, an entity must determine whether a modification results in a new loan or the continuation of an existing loan. Further, the amendments in this ASU require that an entity disclose current period gross charge-offs on financing receivables within the scope of ASC 326 by year of origination and class of financing receivable. The amendments in this ASU became effective for the Company on January 1, 2023, for all interim and annual periods. The adoption of the provisions in this ASU are applied prospectively and have resulted in additional disclosures related to the nature and characteristics ofconcerning modifications of loans to borrowers experiencing financial difficultiesdifficulty, as well as disaggregated disclosure of charge-offs on loans.

Accounting Pronouncements Yet to Be Adopted


In March 2023, the FASB issued ASU 2023-02 – Investments-Equity Method and vintage disclosuresJoint Ventures (Topic 323): Accounting for gross write-offs.Investments in Tax Credit Structures Using the Proportional Amortization Method, a Consensus of the Emerging Issues Task Force. The amendments in this ASU allow the option for an entity to Topic 326 haveapply the same effective datesproportional amortization method of accounting to other equity investments that are made for the primary purpose of receiving tax credits or other income tax benefits, if certain conditions are met. Prior to this ASU, the application of the proportional amortization method of accounting was limited to investments in low-income housing tax credit structures. The proportional amortization method of accounting results in the amortization of applicable investments, as well as the related income tax credits or other income tax benefits received, being presented on a single line in the consolidated statements of operations and comprehensive loss (within income tax expense). Under this ASU, 2016-13. Thisan entity has the option to apply the proportional amortization method of accounting to applicable investments on a tax-credit-program-by-tax-credit-program basis. In addition, the amendments in this ASU require that all tax equity investments accounted for using the proportional amortization method use the delayed equity contribution guidance in paragraph 323-740-25-3, requiring a liability be recognized for delayed equity contributions that are unconditional and legally binding or for equity contributions that are contingent upon a future event when that contingent event becomes probable. Under this ASU, low-income housing tax credit investments for which the proportional amortization method is not expected to have a significant impactapplied can no longer be accounted for using the delayed equity contribution guidance. Further, this ASU specifies that impairment of low-income housing tax credit investments not accounted for using the equity method must apply the impairment guidance in Subtopic 323 – Investments-Equity Method and Joint Ventures. This ASU also clarifies that for low-income housing tax credit investments not accounted for under the proportional amortization method or the equity method, an entity shall account for them under Topic 321 – Investments-Equity Securities. The amendments in this ASU also require additional disclosures in interim and annual periods concerning investments for which the proportional amortization method is applied, including the nature of tax equity investments and the effect of tax equity investments and related income tax credits and other income tax benefits on the Company’sconsolidated statements of financial position and results of operations. The provisions of this ASU are effective for the Company for interim and annual periods beginning after December 15, 2023. Early adoption is permitted. The Company is currently evaluating the impact of this ASU on its consolidated financial statements.

8
NOTE (2) – Business Combination


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


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



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 are 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.

6
Table of Contents


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 




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 PCI loans. Refer to Note 5 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 
Non-accretable difference (cash flows not expected to be collected)  (634
)
Expected cash flows  1,191 
Accretable yield  (346
)
Fair value of PCI acquired loans $845 

7

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 following table presents the net interest income, net income, and earnings per share as if the CFBanc Merger was effective as of January 1, 2021. The unaudited pro forma financial information included in the table below is based on various estimates and is presented for informational purposes only and does not indicate the financial condition or results of operations of the combined Company that would have been achieved for the periods presented had the transactions been completed as of the date indicated or that may be achieved in the future.

  Three months Ended 
  
March 31,
2022
  
March 31,
2021
 
  (Dollars in thousands, except per share amounts) 
Net interest income $7,172  $5,197 
Net income (loss)
  958   (4,277)
         
Basic earnings per share $0.01  $(0.08)
Diluted earnings per share $0.01  $(0.08)

NOTE (3)2 – Earnings Per Share of Common Stock


Basic earnings per share of common stock is computed pursuant to the two-class method by dividing net income available to common stockholders less dividends paid on participating securities (unvested shares of restricted common stock) and any undistributed earnings attributable to participating securities by the weighted average common shares outstanding during the period.  The weighted average common shares outstanding includes the weighted average number of shares of common stock outstanding less the weighted average number of unvested shares of restricted common stock. Employee Stock OwnershipOption Plan (“ESOP”) shares are considered outstanding for this calculation unless unearned.  Diluted earnings per share of common stock includes the dilutive effect of unvested stock awards and additional potential common shares issuable under stock options.



The following table shows how the Company computed basic and diluted earnings (loss) per share of common stock for the periods indicated:

  
For the three months ended
March 31,
 
  2022
  2021
 
  
(In thousands, except share and
per share data)
 
       
Net income (loss) attributable to Broadway Financial Corporation $958  $(3,487
)
Less net income attributable to participating securities  7   0 
Income (loss) available to common stockholders $951  $(3,487
)
         
         
Weighted average common shares outstanding for basic earnings (loss) per common share  72,039,378   27,357,750 
Add: dilutive effects of stock options
  50,195   0 
Add: dilutive effects of unvested restricted stock awards  490,372   0 
Weighted average common shares outstanding for diluted earnings (loss) per common share  72,579,945   27,357,750 
         
Income (loss) per common share - basic $0.01  $(0.13)
Income (loss) per common share - diluted $0.01  $(0.13)
  
Three Months Ended
March 31,
 
  2023
  2022
 
  
(Dollars in thousands, except
share and per share data)
 
Net income attributable to Broadway Financial Corporation $1,573  $958 
Less net income attributable to participating securities  7   7 
Income available to common stockholders $1,566  $951 
         
         
Weighted average common shares outstanding for basic earnings per common share  71,442,163   72,039,378 
Add: dilutive effects of unvested restricted stock awards  323,024   50,195 
Add: dilutive effects of assumed exercise of stock options
  –   490,372 
Weighted average common shares outstanding for diluted earnings per common share  71,765,187   72,579,945 
         
Earnings per common share - basic $0.02  $0.01 
Earnings per common share - diluted $0.02  $0.01 



Stock options for 450,000 shares of common stock for the three months ended March 31, 2021 were not considered in computing diluted earnings per common share because they were anti-dilutive due to the net loss. There were 0 unvested restricted stock awards as of March 31, 2021.

8
NOTE (4)3 – Securities

 

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


 Amortized
Cost		  Gross Unrealized Gains  Gross Unrealized Losses  Fair Value  Amortized
Cost		  
Gross
Unrealized Gains
  
Gross
Unrealized Losses
  
Fair
Value
 
 (In thousands)  (In thousands) 
March 31, 2022:   
March 31, 2023:   
Federal agency mortgage-backed securities $79,222  $31  $(4,368) $74,885  $82,834  $2  $(9,819) $73,017 
Federal agency collateralized mortgage obligations (“CMO”)  8,910   11   (373)  8,548   27,077   –   (1,328)  25,749 
Federal agency debt  42,035   58   (1,826)  40,267   55,734   –   (3,704)  52,030 
Municipal bonds  4,890   0   (354)  4,536   4,858   –   (559)  4,299 
U. S. Treasuries  28,168   0   (1,104)  27,064 
U.S. Treasuries  166,255   –   (4,159)  162,096 
SBA pools  15,770   18   (780)  15,008   13,415   9   (1,589)  11,835 
Total available-for-sale securities $178,995  $118  $(8,805) $170,308  $350,173  $11  $(21,158) $329,026 
December 31, 2021: 
 
December 31, 2022: 
 
Federal agency mortgage-backed securities $70,078  $196  $(244) $70,030  $84,955  $2  $(10,788) $74,169 
Federal agency CMOs
  9,391   11   (115)  9,287   27,776   –   (1,676)  26,100 
Federal agency debt  38,152   106   (270)  37,988   55,687   26   (4,288)  51,425 
Municipal bonds  4,898   40   (23)  4,915   4,866   –   (669)  4,197 
U.S. Treasuries
  18,169   0   (218)  17,951   165,997   –   (5,408)  160,589 
SBA pools  16,241   122   (138)  16,225   14,048   9   (1,788)  12,269 
Total available-for-sale securities $156,929  $475  $(1,008) $156,396  $353,329  $37  $(24,617) $328,749 


9
Table of Contents

The Bank held 129 securities with unrealized lossesAs of $8.8 million at March 31, 2022. NaN of these2023, investment securities has been in a loss position for greater than one year.  The Bank’s securities were primarily issued by the federal government or its agencies. The unrealized gains or losses on our available-for-sale securities at March 31, 2022 were primarily caused by movements in market interest rates subsequent to the purchase of such securities.


The Bank held 129 securities with unrealized losses of $1.0 million at December 31, 2021. NaN of these securities has been in a loss position for greater than one year.  The Bank’s securities were primarily issued by the federal government or its agencies. The unrealized gains or losses on our available-for-sale securities at December 31, 2021 were primarily caused by movements in market interest rates subsequent to the purchase of such securities.


Securities with a market value of $61.9$87.6 million were pledged as collateral for securities sold under agreements to repurchase as of March 31, 2022, and included $22.3$33.9 million of U.S. Treasuries, $26.0 million of U.S. Government Agency securities, $33.5$22.2 million of mortgage-backed securities, $4.1$5.3 million of U.S. Small Business Administration (the“SBA”) pool securities and $273 thousand of federal agency CMO and $2.0 millionCMO. As of Small Business Administration (“SBA”) pool securities. SecuritiesDecember 31, 2022 investment securities with a market value of $53.2$64.4 million were pledged as collateral for securities sold under agreements to repurchase as of December 31, 2021 and included $25.9$33.3 million of federal agency debt, $19.2 million of U.S. Treasuries and $11.9 million of federal agency mortgage-backed securities $13.3 million of federal agency debt, $9.8 million of SBA pool, and $4.2 million of federal agency CMO. (See Note 76 – Borrowings). There were 0 no securities pledged to secure public deposits at March 31, 20222023 or December 31, 2021.2022.


At March 31, 2023, and December 31, 2022, there were no holdings of securities by any one issuer, other than the U.S. Government and its agencies, in an amount greater than 10% of stockholders’ equity.



The amortized cost and estimated fair value of all investment securities available-for-sale at March 31, 2022,2023, by contractual maturities are shown below.  Contractual maturities may differ from expected maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.


 
Amortized
Cost
  Gross Unrealized Gains  Gross Unrealized Losses  Fair Value 
 (In thousands)  
Amortized
Cost
  
Gross
Unrealized Gains
  
Gross
Unrealized Losses
  
Fair
Value
 
    (In thousands) 
Due in one year or less $1,009  $0  $(5) $1,004  $24,876  $–  $(493) $24,383 
Due after one year through five years  49,938   0   (2,086)  47,852   194,958   –   (6,682)  188,276 
Due after five years through ten years  19,373   8   (1,075)  18,306   35,270   –   (2,839)  32,431 
Due after ten years (1)
  108,675   110   (5,639)  103,146   95,069   11   (11,144)  83,936 
 $178,995  $118  $(8,805) $170,308  $350,173  $11  $(21,158) $329,026 

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


The table below indicates the length of time individual securities had been in a continuous unrealized loss position:

  Less than 12 Months  12 Months or Longer  Total 
  
Fair
Value
  
Unrealized
Losses
  
Fair
Value
  
Unrealized
Losses
  
Fair
Value
  
Unrealized
Losses
 
  (In thousands) 
March 31, 2023:
                  
Federal agency mortgage-backed securities $13,826  $(562) $58,935  $(9,257) $72,761  $(9,819)
Federal agency CMOs  20,691   (663)  5,058   (665)  25,749   (1,328)
Federal agency debt  23,548   (580)  28,482   (3,124)  52,030   (3,704)
Municipal bonds  –   –   4,299   (559)  4,299   (559)
U. S. Treasuries  135,522   (2,615)  26,574   (1,544)  162,096   (4,159)
SBA pools  –   –   10,106   (1,589)  10,106   (1,589)
Total unrealized loss position investment securities $193,587  $(4,420) $133,454  $(16,738) $327,041  $(21,158)
                         
December 31, 2022:                        
Federal agency mortgage-backed securities $38,380  $(4,807) $35,526  $(5,981) $73,906  $(10,788)
Federal agency CMOs
  20,997   (885)  5,103   (791)  26,100   (1,676)
Federal agency debt  26,383   (1,529)  21,956   (2,759)  48,339   (4,288)
Municipal bonds  2,176   (315)  2,021   (354)  4,197   (669)
U. S. Treasuries  143,989   (3,884)  16,600   (1,524)  160,589   (5,408)
SBA pools
  3,743   (365)  6,763   (1,423)  10,506   (1,788)
Total unrealized loss position investment securities $235,668  $
(11,785
) $87,969  $
(12,832
) $323,637  $
(24,617
)


At March 31, 20222023, and December 31, 2021,2022, there were 0 holdings ofno securities by any one issuer, other thanin nonaccrual status. All securities in the U.S. Governmentportfolio were current with their contractual principal and its agencies, in an amount greater than 10% of stockholders’ equity. There were 0 sales of securities during the three months endedinterest payments. At March 31, 2022.
2023, and December 31, 2022, there were no securities purchased with deterioration in credit quality since their origination. At March 31, 2023, and December 31, 2022, there were no collateral dependent securities.

9
Table of Contents
10
NOTE (5)4 – Loans Receivable Held for Investment


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

 March 31, 2022  December 31, 2021  March 31, 2023  December 31, 2022 
 (In thousands)  (In thousands) 
Real estate:            
Single family $40,145  $45,372  $29,216  $30,038 
Multi-family  401,252   393,704   509,514   502,141 
Commercial real estate  90,402   93,193   129,031   114,574 
Church  21,365   22,503   13,983   15,780 
Construction  33,938   32,072   59,143   40,703 
Commercial – other  53,880   46,539   37,354   64,841 
SBA loans
  15,488   18,837 
SBA loans (1)
  3,565   3,601 
Consumer  146   0   10   11 
Gross loans receivable before deferred loan costs and premiums  656,616   652,220   781,816   771,689 
Unamortized net deferred loan costs and premiums  1,674   1,526   1,532   1,755 
Gross loans receivable  658,290   653,746   783,348   773,444 
Credit and interest marks on purchased loans, net
  (1,376)  (1,842)  (1,010)  (1,010)
Allowance for loan losses  (3,539
)
  (3,391
)
Allowance for credit losses (2)
  (6,285
)
  (4,388
)
Loans receivable, net $653,375  $648,513  $776,053  $768,046 

(1)
Including Paycheck Protection Program (PPP) loans.
(2)
The allowance for credit losses as of December 31, 2022 was accounted for under ASC 450 and ASC 310, which is reflective of probable incurred losses as of the date of the consolidated statement of financial condition. Effective January 1, 2023, the allowance for credit losses is accounted for under ASC 326, which is reflective of estimated expected lifetime credit losses.


As of both March 31, 20222023 and December 31, 2021,2022, the commercial loan category above included $14.7$2.7 million and $18.0 million, respectively, of loans issued under the SBA’s Paycheck Protection Program (PPP).PPP. PPP loans have terms of two to five years and earn interest at 1%. PPP loans are fully guaranteed by the SBA and have virtually no risk of loss. The BankCompany expects the vast majority of the PPP loans to be fully forgiven by the SBA.


As partPrior to the adoption of the CFBanc Merger, the Company acquiredASC 326, loans for which there was, at acquisition,that were purchased in a business combination that showed evidence of credit deterioration of credit quality since their origination and for which it was probable, at acquisition, that not all contractually required payments would not be collected. Prior tocollected were classified as purchased-credit impaired (“PCI”). The Company accounted for PCI loans and associated income recognition in accordance with ASC Subtopic 310-30 – Receivables-Loans and Debt Securities Acquired with Deteriorated Credit Quality. Upon acquisition, the CFBanc Merger, there were 0 such acquired loans. The carrying amount of those loans as of March 31, 2022, and December 31, 2021, was as follows:

  March 31, 2022  December 31, 2021 
  (In thousands) 
Real estate:      
Single family $56  $558 
Commercial real estate  0   221 
Commercial – other  109   104 
  $165  $883 


On the acquisition date,Company measured the amount by which the undiscounted expected cash future flows of theon PCI loans exceeded the estimated fair value of the loan isas the accretable yield.“accretable yield,” representing the amount of estimated future interest income on the loan. The amount of accretable yield is measuredwas re-measured at each financial reporting date, and representsrepresenting the difference between the remaining undiscounted expected cash flows and the current carrying value of the PCI loan. At March 31, 2022, and December 31, 2021, NaNThe accretable yield on PCI loans was recognized in interest income using the interest method.



Following the adoption of ASC 326 on January 1, 2023, the Company analyzes all acquired loans at the time of acquisition for more-than-insignificant deterioration in credit quality since their origination date. Such loans are classified as purchased credit deteriorated (“PCD”) loans. Acquired loans classified as PCD are recorded at an initial amortized cost, which is comprised of the Company’spurchase price of the loans and the initial ACL determined for the loans, which is added to the purchase price, and any resulting discount or premium related to factors other than credit. PCI loans were classifiedconsidered to be PCD loans at the date of adoption of ASC 326. The Company accounts for interest income on PCD loans using the interest method, whereby any purchase discounts or premiums are accreted or amortized into interest income as nonaccrual.an adjustment of the loan’s yield. An accretable yield is not determined for PCD loans.



As part of the CFBanc merger, the Company acquired PCI loans. Prior to the CFBanc merger, there were no such acquired loans. The carrying amount of those loans was as follows:



 
March 31, 2023
  December 31, 2022 
Real estate:
 (In thousands)
 
Single family $68  $68 
Commercial – other  57   57 
  $125  $125 

11

The following table summarizes the accretable yielddiscount on the PCI loans for the three months ended March 31, 2022:ended:

 March 31, 2022 
 (In thousands)  March 31, 2023  March 31, 2022 
    (In thousands)
 
Balance at the beginning of the period $883  $165  $883 
Deduction due to Payoffs  (707)
Deduction due to payoffs  –   (707)
Accretion  11   –   (11)
Balance at the end of the period $165  $165  $165 

10
Effective January 1, 2023, the Company accounts for credit losses on loans in accordance with ASC 326 – Financial Instruments-Credit Losses, to determine the ACL. ASC 326 requires the Company to recognize estimates for lifetime losses on loans and off-balance sheet loan commitments at the time of origination or acquisition. The recognition of losses at origination or acquisition represents the Company’s best estimate of the lifetime expected credit loss associated with a loan given the facts and circumstances associated with the particular loan, and involves the use of significant management judgement and estimates, which are subject to change based on management’s on-going assessment of the credit quality of the loan portfolio and changes in economic forecasts used in the model. The Company uses the WARM method when determining estimates for the ACL for each of its portfolio segments. The weighted average remaining life, including the effect of estimated prepayments, is calculated for each loan pool on a quarterly basis. The Company then estimates a loss rate for each pool using both its own historical loss experience and the historical losses of a group of peer institutions during the period from 2004 through the most recent quarter.

The Company’s ACL model also includes adjustments for qualitative factors, where appropriate. Qualitative adjustments may be related to and include, but are not limited to factors such as: (i) changes in lending policies and procedures, including changes in underwriting standards and collections, charge offs, and recovery practices; (ii) changes in international, national, regional, and local conditions; (iii) changes in the nature and volume of Contentsthe portfolio and terms of loans; (iv) changes in the experience, depth, and ability of lending management; (v) changes in the volume and severity of past due loans and other similar conditions; (vi) changes in the quality of the organization’s loan review system; (vii) changes in the value of underlying collateral for collateral dependent loans; (viii) the existence and effect of any concentrations of credit and changes in the levels of such concentrations; and (ix) the effect of other external factors (i.e., competition, legal and regulatory requirements) on the level of estimated credit losses. These qualitative factors incorporate the concept of reasonable and supportable forecasts, as required by ASC 326.


The following tables summarize the activity in the allowance for credit losses on loans for the period indicated:


  
March 31, 2023
 
  
Beginning
Balance
  
Impact of
CECL
Adoption
  Charge-offs  Recoveries  
Provision
(benefit)
  Ending Balance 
  
(In thousands)
 
Loans receivable held for investment:                  
Single family $109  $214  $–  $–  $
(62
) $261 
Multi-family  3,273   603   –   –   56   3,932 
Commercial real estate  449   466   –   –   97   1,012 
Church  65   37   –   –   
(10
)  92 
Construction  313   219   –   –   61   593 
Commercial - other  175   254   –   –   
(72
)  357 
SBA loans  –   20   –   –   18   38 
Consumer  4   
(4
)  –   –   –   – 
Total $4,388  $1,809  $–  $–  $88  $6,285 


The following tables present the activity in the allowance for loan losses by loan type for the periodsperiod indicated:

 For the Three Months Ended March 31, 2022 
 For the three months ended March 31, 2022  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  Consumer  Total                        (In thousands)
 
Beginning balance $145  $2,657  $236  $103  $212  $23  $15  $3,391  $145  $2,657  $236  $103  $212  $23  $15  $3,391 
Provision for (recapture of) loan losses  12
  114   (20
)
  (40
)
  25   57   0
  148   12   114   (20)  (40)  25   57   –   148 
Recoveries  0   0   0   0   0   0   0   0   –   –   –   –   –   –   –   – 
Loans charged off  0   0   0   0   0   0   0   0   –   –   –   –   –   –   –   – 
Ending balance $157  $2,771  $217  $63  $236  $95  $0  $3,539  $157  $2,771  $216  $63  $237  $80  
15  
3,539 

12
  For the three months ended March 31, 2021 
  Real Estate          
  Single
family		  
Multi-
family
  Commercial real estate  Church  Construction  Commercial - other  Consumer  Total 
Beginning balance $296  $2,433  $222  $237  $22  $4  $1  $3,215 
Provision for (recapture of) loan losses  (21
)
  40   (3)  (16
)
  0   1   (1)  0 
Recoveries  0   0   0   0   0   0   0   0 
Loans charged off  0   0   0   0   0   0   0   0 
Ending balance $275  $2,473  $219  $221  $0  $5  $0  $3,215 

The increase in ACL during the quarter was due to the implementation of the CECL methodology adopted by the Bank effective January 1, 2023, which increased the ACL by $1.8 million. In addition, the Bank recorded an additional increase in the provision for credit losses of $88 thousand during the first quarter of 2023 related to growth in the portfolio. The CECL methodology includes estimates of expected loss rates in the future, whereas the former Allowance for Loan and Lease methodology did not.



Prior to the Company’s adoption of ASC 326 on January 1, 2023, the Company maintained an allowance for loan losses (“ALLL”) in accordance with ASC 310 and ASC 450 that covered estimated credit losses on individually evaluated loans that were determined to be impaired, as well as estimated probable incurred losses inherent in the remainder of the loan portfolio.



Beginning on January 1, 2023, the Company evaluates loans collectively for purposes of determining the ACL in accordance with ASC 326. Collective evaluation is based on aggregating loans deemed to possess similar risk characteristics. In certain instances, the Company may identify loans that it believes no longer possess risk characteristics similar to other loans in the loan portfolio. These loans are typically identified from those that have exhibited deterioration in credit quality, since the specific attributes and risks associated with such loans tend to become unique as the credit deteriorates. Such loans are typically nonperforming, downgraded to substandard or worse, and/or are deemed collateral dependent, where the ultimate repayment of the loan is expected to come from the operation of or eventual sale of the collateral. Loans that are deemed by management to no longer possess risk characteristics similar to other loans in the portfolio, or that have been identified as collateral dependent, are evaluated individually for purposes of determining an appropriate lifetime ACL. The Company uses a discounted cash flow approach, using the loan’s effective interest rate, for determining the ACL on individually evaluated loans, unless the loan is deemed collateral dependent, which requires evaluation based on the estimated fair value of the underlying collateral, less estimated selling costs. The Company may increase or decrease the ACL for collateral dependent loans based on changes in the estimated fair value of the collateral.



The following table presents collateral dependent loans by collateral type as of the date indicated:
 
  March 31, 2023 
  Single Family  Condominium  Church  Business Assets  Total 
Real estate: (In thousands) 
Single family $53  $112  $–  $–  $165 
Commercial real estate  –   –   78   –   78 
Church  –   –   695   –   695 
Commercial – other  –   –   –   281   281 
Total $53  $112  $773  $281  $1,219 


At March 31, 2023, $1.2 million of individually evaluated loans were evaluated based on the underlying value of the collateral and no individually evaluated loans were evaluated using a discounted cash flow approach. The Company had no individually evaluated loans on nonaccrual status at March 31, 2023.



Prior to the adoption of ASC 326 on January 1, 2023, the Company classified loans as impaired when, based on current information and events, it was probable that the Company would be unable to collect all amounts due according to the contractual terms of the loan agreement or it was determined that the likelihood of the Company receiving all scheduled payments, including interest, when due was remote. Credit losses on impaired loans were determined separately based on the guidance in ASC 310. Beginning January 1, 2023, the Company accounts for credit losses on all loans in accordance with ASC 326, which eliminates the concept of an impaired loan within the context of determining credit losses, and requires all loans to be evaluated for credit losses collectively based on similar risk characteristics. Loans are only evaluated individually when they are deemed to no longer possess similar risk characteristics with other loans in the loan portfolio.


13

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 datesdate indicated:

  March 31, 2022 
  Real Estate          
  
Single
family
  
Multi-
family
  
Commercial
real estate
  Church  Construction  Commercial - other  SBA
  Total 
  (In thousands) 
Allowance for loan losses:                        
Ending allowance balance attributable to loans:                   
Individually evaluated for impairment $3  $0  $0  $4  $0  $0  $0  $7 
Collectively evaluated for impairment  154   2,771   217   59   236   95   0   3,532 
Total ending allowance balance $157  $2,771  $217  $63  $236  $95  $0  $3,539 
Loans:                                
Loans individually evaluated for impairment $64  $277  $0  $1,907  $0  $0  $0  $2,248 
Loans collectively evaluated for impairment  31,151   368,647   24,594   8,062   26,606   17,281   0   476,341 
Subtotal
  31,215   368,924   24,594   9,969   26,606   17,281   0   478,589 
Loans acquired in the Merger
  8,930   34,002   65,808   11,396   7,332   36,599   15,488   179,701 
Total ending loans balance $40,145  $402,926  $90,402  $21,365  $33,938  $53,880  $15,488  $658,290 

 December 31, 2021  December 31, 2022 
 Real Estate           Real Estate          
 
Single
family
  Multi-
family		  
Commercial
real estate
  Church  Construction  Commercial - other  SBA
  Total  
Single
Family
  Multi-
Family		  
Commercial
Real Estate
  Church  Construction  Commercial - Other  Consumer  Total 
 (In thousands)                        (In thousands) 
Allowance for loan losses:                                                
Ending allowance balance attributable to loans:Ending allowance balance attributable to loans:                   Ending allowance balance attributable to loans:                   
Individually evaluated for impairment $3  $0  $0  $4  $0  $0  $0  $7  $3  $–  $–  $4  $–  $–  $–  $7 
Collectively evaluated for impairment  142  2,657  236  99  212  23  15  3,384   106   3,273   449   61   313   175   4   4,381 
Total ending allowance balance $145  $2,657  $236  $103  $212  $23  $15  $3,391  $109  $3,273  $449  $65  $313  $175  $4  $4,388 
Loans:                                                
Loans individually evaluated for impairment $65  $282  $0  $1,954  $0  $0  $0  $2,301  $57  $–  $–  $1,655  $–  $–  $–  $1,712 
Loans collectively evaluated for impairment  32,599  353,179  25,507  9,058  24,225  3,124  0  447,692   20,893   462,539   63,929   9,008   38,530   29,558   11   624,468 
Subtotal 32,664  353,461  25,507  11,012  24,225  3,124  0  449,993  20,950  462,539  63,929  10,663  38,530  29,558  11  626,180 
Loans acquired in the Merger  12,708  41,769  67,686  11,491  7,847  43,415  18,837  203,753   9,088   41,357   50,645   5,117   2,173   38,884   –   147,264 
Total ending loans balance $45,372  $395,230  $93,193  $22,503  $32,072  $46,539  $18,837  $653,746  $30,038  $503,896  $114,574  $15,780  $40,703  $68,442  $11  $773,444 


11

The following table presents information related to loans individually evaluated for impairment by loan type as of the datesdate indicated:

 March 31, 2022  December 31, 2021  December 31, 2022 
 
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:                           
Multi-family $
277  $
277  $
-  $
282  $
282  $
- 
Church  1,811   1,810   -   1,854   1,854   -  $1,572  $1,572  $– 
With an allowance recorded:                                    
Single family  64   64   3   65   65   3   57   57   3 
Church  96   96   4   100   100   4   83   83   4 
Total $2,248  $2,248  $7  $2,301  $2,301  $7  $1,712  $1,712  $7 


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 table presentstables present the monthly average of loans individually evaluated for impairment by loan type and the related interest income for the periodsperiod indicated:

 Three Months Ended March 31, 2022  Three Months Ended March 31, 2021  
Three Months Ended March
31, 2022
 
 
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 $64  $1  $571  $7  $64  $1 
Multi-family 279  5  296  5   279   5 
Church 2,535  25  3,789  63   2,535   25 
Commercial – other  0   0   46   1 
Total $2,878  $31  $4,702  $76  $2,878  $31 

14

The following tables present the aging of the recorded investment in past due loans by loan type as of the dates indicated:

  March 31, 2023 
  
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 $–  $–  $–  $–  $29,216  $29,216 
Multi-family  406   –   –   406   510,640   511,046 
Commercial real estate  –   –   –   –   129,031   129,031 
Church  –   –   –   –   13,983   13,983 
Construction  –   –   –   –   59,143   59,143 
Commercial - other  –   –   –   –   37,354   37,354 
SBA loans
  –   –   –   –   3,565   3,565 
Consumer  –   –   –   –   10   10 
Total $406  $–  $–  $406  $782,942  $783,348 

  December 31, 2022 
  
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 $–  $–  $–  $–  $30,038  $30,038 
Multi-family  –   –   –   –   503,896   503,896 
Commercial real estate  –   –   –   –   114,574   114,574 
Church  –   –   –   –   15,780   15,780 
Construction  –   –   –   –   40,703   40,703 
Commercial - other  –   –   –   –   64,841   64,841 
SBA loans
  –   –   –   –   3,601   3,601 
Consumer  –
   –
   –
   –
   11
   11
 
Total $–  $–  $–  $–  $773,444  $773,444 


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

  March 31, 2023  December 31, 2022 
  (In thousands) 
Loans receivable held for investment:      
Church $
–  $
144 
Total non-accrual loans $–  $144 


Cash-basis interest income recognized represents interest recoveries on non-accrual loans that were paid off and, prior to the adoption of ASC 326, cash received for interest payments on accruing impaired loans and interest recoveries on non-accrual loans that were paid off.loans. 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 $17 thousand and $19 thousand for the three months ended March 31, 2022, and 2021, respectively and were not included in the consolidated resultsstatement of operations.



The following tables present the aging of the recorded investment in past due loans by loan type as of the dates indicated:

  March 31, 2022 
  
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  $40,145  $40,145 
Multi-family  0   0   0   0   402,926   402,926 
Commercial real estate  2,944   0   0   2,944   87,458   90,402 
Church  0   0   0   0   21,365   21,365 
Construction  0   0   0   0   33,938   33,938 
Commercial - other  0   0   0   0   53,880   53,880 
SBA loans
  0   0   0   0   15,488   15,488 
Consumer  0   0   0   0   146   146 
Total $2,944  $0  $0  $2,944  $655,346  $658,290 

12
  December 31, 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  $45,372  $45,372 
Multi-family  0   0   0   0   395,230   395,230 
Commercial real estate  0   2,423   0   2,423   90,770   93,193 
Church  0   0   0   0   22,503   22,503 
Construction  0   0   0   0   32,072   32,072 
Commercial - other  0   0   0   0   46,539   46,539 
SBA
  0   0   0   0   18,837   18,837 
Total $0  $2,423  $0  $2,423  $651,323  $653,746 


The following table presents the recorded investment inoperations and comprehensive loss. There was no foregone interest income on non-accrual loans by loan type asfor the three months ended March 31, 2023. The Company recognized interest income on nonaccrual loans of $286 thousand during the dates indicated:
three months ended March 31, 2023. The Company did not recognize any interest income on nonaccrual loans during the three months ended March 31, 2022.

  March 31, 2022  December 31, 2021 
  (In thousands) 
Loans receivable held for investment:      
Church  653   684 
Total non-accrual loans $653  $684 


There were 0no loans 90 days or more delinquent that were accruing interest as of March 31, 20222023 or December 31, 2021. NaN2022.

15
Modified Loans to Troubled Borrowers



On January 1, 2023, the Company adopted ASU 2022-02, which introduces new reporting requirements for modifications of loans to borrowers experiencing financial difficulty. GAAP requires that certain types of modifications of loans in response to a borrower’s financial difficulty be reported, which consist of the church non-accrual loans were delinquent, but none qualified for accrual status asfollowing: (i) principal forgiveness, (ii) interest rate reduction, (iii) other-than-insignificant payment delay, (iv) term extension, or (v) any combination of the periods indicated.foregoing. The ACL for loans that were modified in response to a borrower’s financial difficulty is measured on a collective basis, as with other loans in the loan portfolio, unless management determines that such loans no longer possess risk characteristics similar to others in the loan portfolio. In those instances, the ACL for such loans is determined through individual evaluation. There were no loan modifications to borrowers that were experiencing financial difficulty during the three months ended March 31, 2023.

Troubled Debt Restructurings (TDRs)


Prior to the adoption of ASU 2022-02 – Financial Instruments-Credit Losses: Troubled Debt Restructurings and Vintage Disclosures on January 1, 2023, the Company accounted for TDRs in accordance with ASC 310-40. When a loan to a borrower that was experiencing financial difficulty was modified in response to that difficulty, the loan was classified as a TDR. At MarchDecember 31, 2022, loans classified as TDRs totaled $1.8$1.7 million, of which $177 thousand were included in non-accrual loans and $1.6 million were on accrual status.  At December 31, 2021, loans classified as TDRs totaled $1.8 million, of which $188$144 thousand were included in non-accrual loans and $1.6 million were on accrual status.  The Company hashad allocated $7 thousand of specific reserves for accruing TDRs as of March 31, 2022 and December 31, 2021.2022.  TDRs on accrual status arewere 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 BankCompany anticipates full repayment of both principal and interest.  TDRs that arewere on non-accrual status cancould 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



ASU 2022-02 eliminated the borrower’s financial conditionconcept of TDRs in current GAAP, and prospects for repayment under the revised terms is also required.  As of March 31, 2022 and December 31, 2021,therefore, beginning January 1, 2023, the Company had 0 commitment to lend additional amounts to customers with outstandingno longer reports loans that are classifiedmodified as TDRs.  NaNTDRs except for those loans were modified during the three month periods ended March 31, 2022 and 2021.reported as TDRs in prior period financial information under previous GAAP.

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: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 within this footnote.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.


●
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.

13

Loans not meeting the criteria above that are analyzed individually as part of the above describedabove-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. 


16

The following table stratifies the most recent analysis performed,loans held for investment portfolio by the Company’s internal risk categoriesgrading, and by year of loans by loan typeorigination as of the periods indicated weredate indicated:

  Term Loans Amortized Cost Basis by Origination Year - As of March 31, 2023       
  2023  2022  2021  2020  2019  Prior  Revolving Loans  Total 
  (In thousands) 
Single family:                        
Pass $–  $2,517  $2,663  $4,399  $1,833  $16,798  $–  $28,210 
Watch  –   –   –   –   –   349   –   349 
Special Mention  –   –   –   –   –   258   –   258 
Substandard  –   –   –   –   –   399   –   399 
Total $–  $2,517  $2,663  $4,399  $1,833  $17,804  $–  $29,216 
                                 
Multi-family:                                
Pass $13,179  $187,621  $154,166  $27,839  $46,232  $57,980  $–  $487,017 
Watch  –   3,300   915   –   –   3,453   –   7,668 
Special Mention  –   –   –   –   –   1,775   –   1,775 
Substandard  –   –   –   –   760   13,826   –   14,586 
Total $13,179  $190,921  $155,081  $27,839  $46,992  $77,034  $–  $511,046 
                                 
Commercial real estate:                                
Pass $2,835  $22,571  $26,181  $30,678  $6,430  $32,719  $–  $121,414 
Watch  –   432   –   –   740   1,101   –   2,273 
Special Mention  –   –   –   –   –   –   –   – 
Substandard  –   –   –  $–  $–   5,344  $–  $5,344 
Total $2,835  $23,003  $26,181  $30,678  $7,170  $39,164  $–  $129,031 
                                 
Church:                                
Pass $–  $–  $2,247  $1,785  $–  $7,188  $–  $11,220 
Watch  –   –   –   –   649   1,120   –   1,769 
Special Mention  –   –   –   –   –   –   –   – 
Substandard  –   –   –   –   –   994   –   994 
Total $–  $–  $2,247  $1,785  $649  $9,302  $–  $13,983 
                                 
Construction:                                
Pass $995  $–  $1,219  $–  $–  $2,154  $–  $4,368 
Watch  17,495   30,012   7,268   –   –   –   –   54,775 
Special Mention  –   –   –   –   –   –   –   – 
Substandard  –   –   –   –   –   –   –   – 
Total $18,490  $30,012  $8,487  $–  $–  $2,154  $–  $59,143 
                                 
Commercial – others:                                
Pass $–  $7,611  $175  $1,404  $4,300  $5,784  $6,568  $25,842 
Watch  –   1,205   107   1,500   2,250   5,532   637   11,231 
Special Mention  –   –   –   –   –   –   –   – 
Substandard  –   –   –   –   –   281   –   281 
Total $–  $8,816  $282  $2,904  $6,550  $11,597  $7,205  $37,354 
                                 
SBA:                                
Pass $–  $148  $2,723  $–  $28  $128  $–  $3,027 
Watch  –   –   –   –   –   –   –   – 
Special Mention  –   –   –   538   –   –   –   538 
Substandard  –   –   –   –   –   –   –   – 
Total $–  $148  $2,723  $538  $28  $128  $–  $3,565 
                                 
Consumer:                                
Pass $10  $–  $–  $–  $–  $–  $–  $10 
Watch  –   –   –   –   –   –   –   – 
Special Mention  –   –   –   –   –   –   –   – 
Substandard  –   –   –   –   –   –   –   – 
Total $10  $–  $–  $–  $–  $–  $–  $10 
                                 
Total loans:                                
Pass $17,019  $220,468  $189,374  $66,105  $58,823  $122,751  $6,568  $681,108 
Watch  17,495   34,949   8,290   1,500   3,639   11,555   637   78,065 
Special Mention  –   –   –   538   –   2,033   –   2,571 
Substandard  –   –   –   –   760   20,844   –   21,604 
Total loans $34,514  $255,417  $197,664  $68,143  $63,222  $157,183  $7,205  $783,348 

17

The following table stratifies the loan portfolio by the Company’s internal risk rating as follows:of the date indicated:

 March 31, 2022 
 Pass  Watch  Special Mention  Substandard  Doubtful  Loss   Total  December 31, 2022 
 (In thousands)  Pass  Watch  Special Mention  Substandard  Doubtful  Loss  Total 
Single family $38,135  $1,328  $268  $414  $0  $0 $
40,145  $29,022  $354  $260  $402  $–  $–  $30,038 
Multi-family  385,748   6,428
   2,540   8,210   0   0 402,926   479,182   9,855   14,859   –   –   –   503,896 
Commercial real estate  70,078   9,589   5,970   4,765   0   0 90,402   104,066   4,524   1,471   4,513   –   –   114,574 
Church  16,795   931   0   3,639   0   0 21,365   14,505   728   –   547   –   –   15,780 
Construction  9,158   24,780   0   0   0   0 33,938   2,173   38,530   –   –   –   –   40,703 
Commercial - other  41,397   12,167   0   307   9   0 53,880 
Commercial – others
  53,396   11,157   –   288   –   –   64,841 
SBA
  14,668   657   163   0   0   0 15,488   3,032   569   –   –   –   –   3,601 
Consumer  146   0   0   0   0   0  146   11   –   –   –   –   –   11 
Total $576,125  $55,880  $8,941  $17,335  $9  $0 $
658,290  $685,387  $65,717  $16,590  $5,750  $–  $–  $773,444 

Allowance for Credit Losses for Off-Balance Sheet Commitments


  December 31, 2021 
  Pass  Watch  Special Mention  Substandard  Doubtful  Loss    Total 
  (In thousands) 
Single family $42,454  $1,343  $271  $1,304  $0  $0  $
45,372 
Multi-family  378,141   7,987   575   8,527   0   0   395,230 
Commercial real estate  69,257   7,034   9,847   7,055   0   0   93,193 
Church  20,021   0   0   2,482   0   0   22,503 
Construction  10,522   21,550   0   0   0   0   32,072 
Commercial - other  33,988   12,551   0   0   0   0   46,539 
SBA
  18,665   0   172   0   0   0   18,837 
Total $573,048  $50,465  $10,865  $19,368  $0  $0  $
653,746 
The Company maintains an allowance for credit losses on off-balance sheet commitments related to unfunded loans and lines of credit, which is included in other liabilities of the consolidated statements of financial condition. Upon the Company’s adoption of ASC 326 on January 1, 2023, the Company applies an expected credit loss estimation methodology for off-balance sheet commitments. This methodology is commensurate with the methodology applied to each respective segment of the loan portfolio in determining the ACL for loans held-for-investment. The loss estimation process includes assumptions for the probability that a loan will fund, as well as the expected amount of funding. These assumptions are based on the Company’s own historical internal loan data.


The allowance for off-balance sheet commitments was $367 thousand and $412 thousand at March 31, 2023 and December 31, 2022, respectively.


NOTE (6)5 – Goodwill and Core Deposit Intangible Assets



In connection with the CFBanc Merger completed as of April 1, 2021 (See Note 2 - Business Combination), theThe Company recognized goodwillgoodwill of $26.025.9 million and a core deposit intangible of $3.32.4 million. An assessment of goodwill impairment was performed as of December 31, 2022, in which no impairment was determined. The following table presents the changes in the carrying amounts of goodwill and core deposit intangibles for the three months ended March 31, 2022:2023:


 Goodwill
  
Core Deposit
Intangible
  Goodwill
  
Core Deposit
Intangible
 
 (In thousands)
  (In thousands)
 
Balance at the beginning of the period 
$
25,996
  $2,936  
$
25,858
  $2,501 
Additions  0   0   –   – 
Change in deferred tax estimate  (138)  (109)  –  – 
Impairment  0   0 
Amortization  –   (98)
Balance at the end of the period $25,858  $2,827  $25,858  $2,403 


 



14The carrying amount of the core deposit intangible consisted of the following at March 31, 2023 (in thousands):

Core deposit intangible acquired $3,329 
Less: accumulated amortization  (926)

 $2,403 

18

The following table outlines the estimated amortization expense for the core deposit intangible during the next five fiscal years:years (in thousands):


 (In thousands) 
2022 $326 
2023  390  $292 
2024  336   336 
2025  315   315 
2026  304   304 
2027
  291 
Thereafter  1,156   865 
 $2,827  $2,403 

NOTE (7)6 – Borrowings


TThe Bankhe Company enters into agreements under which it sells securities subject to an obligation to repurchase the same or similar securities. Under these arrangements, the BankCompany may transfer legal control over the assets but still retain effective control through an agreement that both entitles and obligates the BankCompany 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’sCompany’s consolidated statements of financial condition, whilewhile the securities underlying the repurchase agreements remain in the respective investment securities asset accounts. In other words, there is no offsetting or netting of the investment securities assets with the repurchase agreement liabilities. These agreements mature on a daily basis. As of March 31, 2022, securities with a market value of $61.9 million were pledged as collateral for securities sold under agreements to repurchase and included $22.3 million of U.S. Government Agency securities, $33.5 million of mortgage-backed securities, $4.1 million of federal agency CMO and $2.0 million of SBA pool securities. As of December 31, 2021,2023 securities sold under agreements to repurchase totaled $52.0$70.9 million at an average rate of 0.10%0.24%. The market value of securities pledged totaled $53.2$87.6 million as of DecemberMarch 31, 20212023, and included $13.3$33.9 million of U.S. Treasuries, $26.0 million of U.S. Government Agency securities, and $39.9$22.2 million of mortgage-backed securities, $5.3 million of SBA pool securities and $273 thousand of federal agency CMO. As of December 31, 2022, securities sold under agreements to repurchase totaled $63.5 million at an average rate of 0.38%. The market value of securities pledged totaled $64.4 million as of December 31, 2022, and included $33.3 million of federal agency debt, $19.2 million of U.S. Treasuries and $11.9 million of federal agency mortgage-backed securities.


 

At March 31, 20222023 and December 31, 2021,2022, the BankCompany had outstanding advances from the FHLB of San FranciscoFederal Home Loan Bank (“FHLB”) totaling $73.0$168.8 million and $86.0$128.3 million, respectively. The weighted interest rate was 1.66%4.35% and 1.85%3.74% as of March 31, 20222023 and December 31, 2021,2022, respectively. The weighted average contractual maturity was 22nine months and 2213 months as of March 31, 20222023 and December 31, 2021,2022, respectively. The advances were collateralized by loans with a marketfair value of $106.5$329.1 million at March 31, 20222023 and $165.0$328.1 million at December 31, 2021.2.  The Bank also had $2.9 million in outstanding borrowings fromCompany is currently approved by the FHLB of Atlanta to borrow up to 25% of total assets to the extent the Company provides qualifying collateral and holds sufficient FHLB stock. Based on collateral pledged and FHLB stock as of March 31, 2023, the Company was eligible to borrow an additional $157.2 million as of March 31, 2023.



In addition, the Company had additional lines of credit of $10.0 million with other financial institutions as of March 31, 20222023. These lines of credit are unsecured, bear interest at an averagethe Federal funds rate of 2.60%. Principal repayments of $12 thousand per month are required until January 6, 2025 when the advance fully matures.  The advances were collateralized by loans with a market value of $22.4 million as of March 31, 2022.the date of utilization, and mature in 30 days.



In connection with the New Market Tax Credit activities of the Bank, CFC 45 is a partnership whose members include CFNMA and City First New Markets Fund II, LLC. This community development entity (“CDE”) acts in effect as a pass-through for a Merrill Lynch allocation totaling $14.0 million that needed to be deployed. In December 2015, Merrill Lynch made a $14.0 million non-recourse loan to CFC 45, whereby CFC 45 passed that loan through to a Qualified Active Low-Income Business (“QALICB”). The loan to the QALICB is secured by a Leasehold Deed of Trust that, due to the pass-through, non-recourse structure, is operationally and ultimately for the benefit of Merrill Lynch rather than CFC 45. Debt service payments received by CFC 45 from the QALICB are passed through to Merrill Lynch in return for which CFC 45 receives a servicing fee. The financial statements of CFC 45 are consolidated with those of the Bank and the Company.


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

19
NOTE (8)7 – Fair Value


The Company used the following methods and significant assumptions to estimate fair value:



The fair values of securities available-for-sale are determined by obtaining quoted prices on nationally recognized securities exchanges (Level 1 inputs) or matrix pricing, which is a mathematical technique to value debt securities without relying exclusively on quoted prices for the specific securities, but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2 inputs).


The fair value of impaired loans that are collateral dependent is generally based upon the fair value of the collateral, which is obtained from recent real estate appraisals.  These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach.  Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available.  Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value.  ImpairedCollateral dependent loans are evaluated on a quarterly basis for additional impairmentrequired calculation adjustments (taken as part of the ACL) and adjusted accordingly.


Assets acquired through or by transfer in lieu of loan foreclosure are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. These assets are subsequently accounted for at the lower of cost or fair value less estimated costs to sell. Fair value is commonly based on recent real estate appraisals which are updated every threenine months. These appraisals may utilize a single valuation approach or a combination of approaches, including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value. Real estate owned properties are evaluated on a quarterly basis for additional impairment and adjusted accordingly.

15

Appraisals for collateral-dependent impaired loans and assets acquired through or by transfer of in lieu of foreclosure are performed by certified general appraisers (for commercial properties) or certified residential appraisers (for residential properties) whose qualifications and licenses have been reviewed and verified by the Company. Once received, an independent third-party licensed appraiser reviews the appraisals for accuracy and reasonableness, reviewing the assumptions and approaches utilized in the appraisal as well as the overall resulting fair value in comparison with independent data sources such as recent market data or industry-wide statistics.

Assets Measured on a Recurring Basis


Assets measured at fair value on a recurring basis are summarized below:

 Fair Value Measurement  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  
Quoted Prices
in Active Markets
for Identical
Assets
(Level 1)
  
Significant
Other
Observable
Inputs
(Level 2)
  
Significant
Unobservable
Inputs
(Level 3)
  Total 
 (In thousands)  (In thousands) 
At March 31, 2022:            
Securities available for sale:            
At March 31, 2023:            
Securities available-for-sale:            
Federal agency mortgage-backed $0  $79,222  $0  $79,222  $–  $73,017  $–  $73,017 
Federal agency CMO  0   8,910   0   8,910   –   25,749   –   25,749 
Federal agency debt  0   42,035   0   42,035   –   52,030   –   52,030 
Municipal bonds  0   4,890   0   4,890   –   4,299   –   4,299 
U. S. Treasuries  0   26,168   0   26,168 
U.S. Treasuries  162,096   –   –   162,096 
SBA pools  0   15,770   0   15,770   –   11,835   –   11,835 
                                
At December 31, 2021:                
Securities available for sale:  
             
At December 31, 2022:                
Securities available-for-sale:                
Federal agency mortgage-backed $0  $70,030  $0  $70,030  $–  $74,169  $–  $74,169 
Federal agency CMO  0   9,287   0   9,287   –   26,100   –   26,100 
Federal agency debt  0   37,988   0   37,988   –   51,425   –   51,425 
Municipal bonds  0   4,915   0   4,915   –   4,197   –   4,197 
U. S. Treasuries  0   17,951   0   17,951 
U.S. Treasuries  160,589   –   –   160,589 
SBA pools  0   16,225   0   16,225   –   12,269   –   12,269 


There were no transfers between Level 1, Level 2, or Level 3 during the three months ended March 31, 20222023 and 2021.

Assets Measured on a Non-Recurring Basis


Assets are considered to be reflected at fair value on a non-recurring basis if the fair value measurement of the instrument does not necessarily result in a change in the amount recorded on the statements of financial condition.  Generally, a non-recurring valuation is the result of the application of other accounting pronouncements that require assets to be assessed for impairment or recorded at the lower of cost or fair value.2022.


As of March 31, 20222023 and December 31, 2021,2022, the Bank did 0tnot have any impaired loansassets or liabilities carried at fair value of collateral.on a nonrecurring basis.


16
20
Fair Values of Financial Instruments



The following tables present the carrying amount, fair value, and level withinplacement in the fair value hierarchy of the Company’s financial instruments not recorded at fair value on a recurring basis as of March 31, 20222023 and December 31, 2021.2022.

    Fair Value Measurements at March 31, 2022     Fair Value Measurements at March 31, 2023 
 
Carrying
Value
  Level 1  Level 2  Level 3  Total  
Carrying
Value
  Level 1  Level 2  Level 3  Total 
 (In thousands)  (In thousands) 
Financial Assets:                              
Cash and cash equivalents $246,106  $246,106  $0  $0  $246,106  $29,648  $29,648  $–  $–  $29,648 
Securities available-for-sale
  170,308
   0
   170,308
   0
   170,308
   329,026
   162,096
   166,930
   –
   329,026
 
Loans receivable held for investment  653,375   0   0   598,354   598,354   776,053   –   –   636,286   636,286 
Accrued interest receivable
  2,449
   1
   266
   2,182
   2,449
 
Accrued interest receivables
  4,219
   612
   635
   2,972
   4,219
 
Bank owned life insurance
  3,200
   3,200
   0
   0
   3,200
   3,242
   3,242
   –
   –
   3,242
 
                                        
Financial Liabilities:                                        
Deposits $839,714  $0  $784,698  $0  $784,698  $657,542  $–  $596,064  $–  $596,064 
Federal Home Loan Bank advances  73,001   0   72,037   0   72,037 
FHLB advances  168,810   –   167,175   –   167,175 
Securities sold under agreements to repurchase
  56,003   0   52,873   0   52,873   70,941   –   67,423   –   67,423 
Notes payable
  14,000   0   14,000   0   14,000 
Note payable
  14,000   –   –   14,000   14,000 
Accrued interest payable
  135
   0
   135
   0
   135
   368
   –
   368
   –
   368
 

    Fair Value Measurements at December 31, 2021     Fair Value Measurements at December 31, 2022 
 
Carrying
Value
  Level 1  Level 2  Level 3  Total  
Carrying
Value
  Level 1  Level 2  Level 3  Total 
 (In thousands)  (In thousands) 
Financial Assets:                              
Cash and cash equivalents $231,520  $231,520  $0  $0  $231,520  $16,105  $16,105  $–  $–  $16,105 
Securities available-for-sale  156,396   0   156,396   0   156,396   328,749   160,589   168,160   –   328,749 
Loans receivable held for investment�� 648,513   0   0   623,778   623,778   768,046   –   –   641,088   641,088 
Accrued interest receivable  3,372   19   1,089   2,264   3,372 
Accrued interest receivables  3,973   442   793   2,738   3,973 
Bank owned life insurance  3,190   3,190   0   0   3,190   3,233   3,233   –   –   3,233 
                                        
Financial Liabilities:                                        
Deposits $788,052  $0  $754,181  $0  $754,181  $686,916  $–  $673,615  $–  $673,615 
Federal Home Loan Bank advances  85,952   0   87,082   0   87,082 
FHLB advances  128,344   –   126,328   –   126,328 
Securities sold under agreements to repurchase  51,960   0   51,960   0   51,960   63,471   –   60,017   –   60,017 
Notes payable  14,000   0   14,000   0   14,000 
Note payable  14,000   –   –   14,000   14,000 
Accrued interest payable
  119   0   119   0   119   453   –   453   –   453 


In accordance with ASU No. 2016-01, the fair value of financial assets and liabilities was measured using an exit price notion.  Although the exit price notion represents the value that would be received to sell an asset or paid to transfer a liability, the actual price received for a sale of assets or paid to transfer liabilities could be different from exit price disclosed.

NOTE (9)8 – Stock-based Compensation


The Long-Term Incentive Plan, which was adopted by the Company and approved by the stockholders in 2018 (the “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 March 31, 20222023, there were 1,023,513968,572 shares that had been awarded and 269,596324,537 shares that wereare available to be issued under the LTIP.


During February of 20222023 and 2021,2022, the Company issued 47,18773,840 and 20,73647,187 shares of stock, respectively, to its directors under the 2018 LTIP, which were fully vested. The Company recorded $84$96 thousand and $45$84 thousand of compensation expense during the quartersthree months ended March 31, 2023 and 2022, and March 31, 2021,respectively, based on the fair value of the stock, which was determined using the fair value of the stock on the date of the award.


21

During March of 2022, the Company issued 495,262 shares to its officers and employees under the 2018 LTIP.LTIP of which 74,736 shares have been forfeited as of March 31, 2023. Each restricted stock award is valued based on the fair value of the stock on the date of the award. These awarded shares of restricted stock fully vest over periods ranging from 36 months to 60 months from their respective dates of grant. Stock based compensation is recognized on a straight-line basis over the vesting period. There were 0 shares issued to officers and employees during 2021. During the quarter endedthree months ending March 31, 2021,2023 and 2022, the company recorded $119$38 thousand and $15 thousand of stock basedstock-based compensation expense, related to awards granted previously to 2021.respectively.


NaNNo stock options were granted during the three months ended March 31, 20222023 and 2021.2022.

17


The following table summarizes stock option activity during the three months ended March 31, 2022 and 2021:2023:


 
Three months Ended
March 31, 2022
  
Three months Ended
March 31, 2021
  March 31, 2023 
 
Number
Outstanding
  
Weighted
Average
Exercise
Price
  
Number
Outstanding
  
Weighted
Average
Exercise
Price
  
Number
Outstanding
  
Weighted
Average
Exercise Price
 
Outstanding at beginning of period  450,000  $1.62   450,000  $1.62   250,000  $1.62 
Granted during period  0   0   0   0   –   – 
Exercised during period  0   0   0   0   –   – 
Forfeited or expired during period  0   0   0
  0   –  – 
Outstanding at end of period  450,000  $1.62   450,000  $1.62   250,000  $1.62 
Exercisable at end of period  450,000  $1.62   450,000  $1.62   250,000  $1.62 


The Company did 0tnot record any stock-based compensation expense related to stock options during the three months ended March 31, 2023 and 2022. For the three months ended March 31, 2021, the Company recorded $6 thousand of expense related to stock options.



Options outstanding and exercisable at March 31, 20222023 were as follows:

 Outstanding  Exercisable 
 
Number
Outstanding
 
Weighted
Average
Remaining
Contractual
Life
 
Weighted
Average
Exercise
Price
  
Aggregate
Intrinsic
Value
  
Number
Outstanding
  
Weighted
Average
Exercise
Price
  
 
 
Aggregate
Intrinsic
Value
 
  450,000 
 $1.62      450,000  $1.62    
  450,000 4.40 years $1.62  $0   450,000  $1.62  $0 
Outstanding  Exercisable 
Number
Outstanding
 
Weighted Average
Remaining
Contractual Life
 
Weighted
Average
Exercise Price
  
Aggregate
Intrinsic
Value
  
Number
Outstanding
  
Weighted
Average
Exercise Price
  
Aggregate
Intrinsic
Value
 
 250,000 2.88 years $1.62  $–   250,000  $1.62  $– 

NOTE (10)9 – ESOP Plan


Employees participate in an ESOP after attaining certain age and service requirements.  In December 2016,2022, the ESOP purchased 1,493,679466,955 shares of the Company’s common stock at $1.59a cost of $1.07 per share for a total cost of $2.4 million, of$500 thousand which $1.2 million was funded with a loan$5.0 million line of credit from the Company. During the first quarter of 2023, the ESOP purchased 2,065,342 additional shares of the Company’s common stock at an average cost of $1.21 per share for a total cost of $2.5 million which was funded with the line of credit. 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$12 thousand and $23$18 thousand for the three months ended March 31, 2023 and 2022, and 2021.respectively.


Shares held by the ESOP were as follows:

 March 31, 2022  December 31, 2021  March 31, 2023  December 31, 2022 
 (Dollars in thousands)  (Dollars in thousands) 
            
Allocated to participants  1,087,216   1,087,216   1,057,504   1,057,504 
Committed to be released  20,128   10,064   19,784   9,892 
Suspense shares  512,554   521,618   3,003,938   948,488 
Total ESOP shares  1,619,898   1,618,898   4,081,226   2,015,884 
Fair value of unearned shares $933  $1,454  $3,545  $1,015 


UnearnedThe value of unearned shares, which are reported as Unearned ESOP shares in the equity section of the consolidated statements of financial condition, were $813 thousand$4.0 million and $829 thousand$1.3 million at March 31, 20222023 and December 31, 2021,2022, respectively.

18
22
Table of Contents
NOTE (11)10 – Stockholders’ Equity and Regulatory Matters and Stockholders’ Equity


On June 7, 2022, the Company issued 150,000 shares of Senior Non-Cumulative Perpetual Preferred stock, Series C (“Series C Preferred Stock”), for the capital investment of $150.0 million from the U.S. Treasury under the Emergency Capital Investment Program (“ECIP”).  ECIP investment is treated as Tier 1 Capital for the regulatory capital treatment.


The Series C Preferred stock may be redeemed at the option of the Company on or after the fifth anniversary of issuance (or earlier in the event of loss of regulatory capital treatment), subject to the approval of the appropriate federal banking regulator in accordance with the federal banking agencies’ regulatory capital regulations.


The initial dividend rate of the Series C Preferred Stock is zero percent for the first two years after issuance, and thereafter the floor dividend rate is 0.50% and the ceiling dividend rate is 2.00%.



During the first quarter of 2022 the Company completed the exchange of all the Series A Fixed Rate Cumulative Redeemable Preferred Stock, with an aggregate liquidation rate of $3 million, plus accrued dividends, for 1,193,317 shares of Class A Common Stock at an exchange price of $2.51 per share of Class A Common Stock.


The Bank’s capital requirements are administered by the Office of the Comptroller of the Currency (“OCC”) and involve quantitative measures of assets, liabilities, and certain off-balance sheet items calculated under regulatory accounting practices.  Capital amounts and classifications are also subject to qualitative judgments by the OCC.  Failure to meet capital requirements can result in regulatory action.


As a result of the Economic Growth, Regulatory Relief, and Consumer Protection Act, the federal banking agencies have developed a “Community Bank Leverage Ratio” (“CBLR”) (the ratio of a bank’s tier 1 capital to average total consolidated assets) for financial institutions with assets of less than $10 billion. A “qualifying community bank” that exceeds this ratio will be deemed to be in compliance with all other capital and leverage requirements, including the capital requirements to be considered “well capitalized” under Prompt Corrective Action statutes. The federal banking agencies have set the Community Bank Leverage Ratio at 9%. The CARES Act temporarily lowered this ratio to 8% beginning in the three months ended March 31, 2020. The ratio then rose to 8.5% for 2021 and was reestablished at 9% on January 1, 2022. City First Bank, N.A. elected to adopt the CBLR option on April 1, 2020 as reflected in its March 31, 2020  Call Report.


Actual and required capital amounts and ratios as of the dates indicated are presented below.
below:

 Actual  
Minimum Required to
Be Well Capitalized
Under Prompt
Corrective Action
Provisions
  Actual  
Minimum Required to
Be Well Capitalized
Under Prompt Corrective
Action Provisions
 
 Amount  Ratio  Amount  Ratio  Amount  Ratio  Amount  Ratio 
 (Dollars in thousands)  (Dollars in thousands) 
March 31, 2022:
            
March 31, 2023:
            
Community Bank Leverage Ratio
 $99,993   9.45% $95,129   9.00% $181,562   15.69% $104,174   9.00%
December 31, 2021:
                
December 31, 2022:
                
Community Bank Leverage Ratio $98,590   9.32% $89,871   8.50% $181,304   15.75% $103,591   9.00%


At March 31, 2022,2023, 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 March 31 2022, 2023 that would materially adversely change the Bank’s capital classifications. From time to time, wethe Bank may need to raise additional capital to support the Bank’sits further growth and to maintain theits “well capitalized” status.


During the first quarter of 2022 the Company completed the exchange of all the Series A Fixed Rate Cumulative Redeemable Preferred Stock, with an aggregate liquidation value of $3 million, plus accrued dividends, for 1,193,317 shares of Class A Common Stock at an exchange price of $2.51 per share of Class A Common Stock.

NOTE (12)11 – Income Taxes


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.carryforwards.  Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.  The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.



Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion, or all, of the deferred tax asset will not be realized.  In assessing the realization of deferred tax assets, management evaluated both positive and negative evidence, including 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.


23

At March 31, 2022,2023, the Company maintained a $369 thousand valuation allowance on its deferred tax assets because the number of shares sold in the private placements completed on April 6, 2021 triggered limitations on the use of certain tax attributes under the Section 382 of the federal tax code. The ability to use net operating losses (“NOLs”) to offset future taxable income will be restricted and these NOLs could expire or otherwise be unavailable. In general, under Section 382 of the Code and corresponding provisions of state law, a corporation that undergoes an “ownership change” is subject to limitations on its ability to utilize its pre-change NOLs to offset future taxable income. For these purposes, an ownership change generally occurs where the aggregate stock ownership of one or more stockholders or groups of stockholders who owns at least 5% of a corporation’s stock increases its ownership by more than 50 percentage points over its lowest ownership percentage within a specified testing period.

NOTE (13)12 – Concentration of Credit Risk
  

The Bank has a significant concentration of deposits with 1one customer that accounted for approximately 16%10% of its deposits as of March 31, 2022.2023. The Bank also has a significant concentration of short termshort-term borrowings from 1one customer that accounted for 74%75% of the outstanding balance of securities sold under agreements to repurchase as of MarchMarch 31, 2022.2023. The BankCompany expects to maintain the relationships with these customers for the foreseeable future.

19
24

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 theour financial statements of Broadway Financial Corporation (the “Company,” “us,” “we,” or “our,”) with a narrative from the perspective of our management on our financial condition, results of operations, liquidity and certain other factors that may affect our future results. Our MD&A should be read in conjunction with the Consolidated Financial Statements and related Notes included in Part I Item“Item 1, “Consolidated Financial Statements, (Unaudited)” of this Quarterly Report on Form 10-Q and Item 8 of Part II, “Financial Statements and Supplementary Data” of our 2021Annual Report on Form 10-K.10-K for the year ended December 31, 2022. Certain statements herein are forward-looking statements within the meaning of Section 21E of the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”) and Section 27A of the U.S. Securities Act of 1933, as amended that reflect our current views with respect to future events and financial performance. Forward-looking statements typically include words such as “anticipate,” “believe,“expect,” “estimate,” “expect,“project,” “project,“budget,” “forecast,” “anticipate,” “intend,” “plan,” “forecast,“may,” “intend,“will,” “could,” “should,” “believes,” “predicts,” “potential,” “continue,” “poised,” “optimistic,” “prospects,” “ability,” “looking,” “forward,” “invest,” “grow,” “improve,” “deliver” 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

Critical accounting policies are those that involve a significant judgmentslevel of estimation uncertainty and assessments by management, and which could potentially result in materially differenthave had or are reasonably likely to have a material impact on our financial condition or results of operations under different assumptions and conditions. This discussion highlights those accounting policies that management considers critical. All accounting policies are important,important; however, and therefore you are encouraged to review each of the policies included in Note 1 “Summary of Significant Accounting Principles” of the Notes to Consolidated Financial Statements in our 20212022 Form 10-K to gain a better understanding of how our financial performance is measured and reported. Management has identified the Company’s critical accounting policies as follows:

Allowance for Credit Losses

Effective January 1, 2023, the Company accounts for credit losses on loans in accordance with ASC 326, which requires the Company to record an estimate of expected lifetime credit losses for loans at the time of origination or acquisition. The allowance for credit losses (“ACL”) is maintained at a level deemed appropriate by management to provide for expected credit losses in the portfolio as of the date of the consolidated statements of financial condition. Estimating expected credit losses requires management to use relevant forward-looking information, including the use of reasonable and supportable forecasts. The measurement of the ACL is performed by collectively evaluating loans with similar risk characteristics. The Company measures the ACL for each of its loan segments using the weighted-average remaining maturity (“WARM”) method. The weighted average remaining life, including the effect of estimated prepayments, is calculated for each loan pool on a quarterly basis. The Company then estimates a loss rate for each pool using both its own historical loss experience and the historical losses of a group of peer institutions. The Company’s ACL model also includes adjustments for qualitative factors, where appropriate.

Certain loans, such as those that are nonperforming or are considered to be collateral dependent, are deemed to no longer possess risk characteristics similar to other loans in the loan portfolio, because the specific attributes and risks associated with the loan have likely become unique as the credit quality of the loan deteriorates. As such, these loans may require individual evaluation to determine an appropriate ACL for the loan. When a loan is individually evaluated, the Company typically measures the expected credit loss for the loan based on a discounted cash flow approach, unless the loan has been deemed collateral dependent in which case the ACL is determined using estimates of the fair value of the underlying collateral, less estimated selling costs.

Allowance for Loan Losses

Prior to the adoption of ASC 326 on January 1, 2023, the ALLL was accounted for under the guidance of ASC 310 and 450. The determination of the allowance for loan losses isALLL was considered a critical estimate due to the high degree of judgment involved, the subjectivity of the underlying assumptions used, and the potential for changes in the economic environment that could resulthave resulted in material changes in the amount of the allowance for loan lossesALLL considered necessary. The allowance isALLL was evaluated on a regular basis by management and the Board of Directors and iswas based on a periodic review of the collectability of the loans in light of historical experience, the nature and size of the loan portfolio, adverse situations that may affect borrowers’ ability to repay, the estimated value of any underlying collateral, prevailing economic conditions, and feedback from regulatory examinations.

Business Combinations

Business combinations are accounted for using the acquisition accounting method. Under the acquisition 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. Changes to the acquisition date fair values of assets acquired and liabilities assumed may be made as adjustments to goodwill over a 12-month measurement period following the date of acquisition. Such adjustments are attributable to additional information obtained related to fair value estimates of the assets acquired and liabilities assumed.

Acquired Loans

Acquired loans that are not considered to be PCI loans are recognized at fair value at the acquisition date, with the resulting credit and non-credit discount or premium being amortized or accreted into interest income using the level yield method. Acquired loans that in management’s judgement have shown evidence of deterioration in credit quality since origination are classified as PCI loans. Factors that indicate a loan may have shown evidence of credit deterioration include delinquency, downgrades in credit rating, non-accrual status, and other negative factors identified by management at the time of initial assessment. The Company estimates the amount and timing of expected cash flows for each PCI loan, and the expected cash flows in excess of the allocated fair value is recorded as interest income over the remaining life of the loan (accretable yield). The excess of the loan’s contractual principal and interest over expected cash flows is not recorded (non-accretable difference). Over the life of the PCI loan, expected cash flows continue to be estimated each quarter. If the present value of expected cash flows decreases from the prior estimate, a provision for loan losses is recorded and an allowance for loan losses is established. If the present value of expected cash flows increases from the prior estimate, the increase is recognized as part of future interest income.

20
The estimates used to determine the fair values of non-PCI and PCI acquired loans can be complex and require significant judgment regarding items such as default rates, timing and amount of future cash flows, prepayment rates and other factors.

25
Goodwill and 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 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.

Income Taxes

Deferred tax assets and liabilities are determined using the liability (or balance sheet) method. Under this method, the net deferred tax asset or liability is determined based on the tax effects of the temporary differences between the book and tax bases of the various balance sheet assets and liabilities and gives current recognition to changes in tax rates and laws. A valuation allowance is established against deferred tax assets when, based upon the available evidence including historical and projected taxable income, it is more likely than not that some or all the deferred tax asset will not be realized. In assessing the realization of deferred tax assets, management evaluates both positive and negative evidence, including the existence of any cumulative losses in the current year and the prior two years, the amount of taxes paid in available carry‑back years, forecasts of future income and available tax planning strategies. This analysis is updated quarterly.

Fair Value Measurements

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There are three levels of inputs that may be used to measure fair values:

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2: Significant observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3: Significant unobservable inputs that reflect a company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

Fair values are estimated using relevant market information and other assumptions, as more fully disclosed in Note 87 of the Notes to Consolidated Financial Statements of this Quarterly Report on Form 10-Q. Fair value estimates involve uncertainties and matters of significant judgment regarding interest rates, credit risk, prepayments, and other factors, especially in the absence of broad markets for items. Changes in assumptions or in market conditions could significantly affect the estimates.

COVID-19 Pandemic Impact

The Company continues to monitor the impact of the lingering COVID-19 pandemic on its operations.  To date, the Bank has not implemented layoffs or furloughs of any employees because of the pandemic.

Although the Bank developed plans and policies for providing financial relief to borrowers that may experience difficulties in meeting the terms of their loans, as of March 31, 2022, none of its borrowers had requested loan modifications and the Bank had no delinquencies related to COVID-19.

The Company participated in the Small Business Administration’s (“SBA”) Paycheck Protection Program (“PPP”) by way of its merger with CFBanc Corporation. The Bank has originated $26.5 million in PPP since the merger. No PPP loans were originated during the three months ended March 31, 2022 as the program ended in June of 2021.

21
Overview

The Company merged with CFBanc on April 1, 2021, with Broadway Financial Corporation continuing as the surviving entity.  Immediately following the CFBanc Merger, Broadway Federal Bank, f.s.b. merged with and into City First Bank of D.C, National Association with City First Bank of D.C., National Association continuing as the surviving entity (which concurrently changed its name to City First Bank, National Association). Accordingly, results for the first quarter of 2022 include the operations of Broadway Financial Corporation and its subsidiary, City First Bank, National Association. Results for the three months ended March 31, 2021 include the operations of Broadway Financial Corporation and the results of Broadway Federal Bank, f.s.b., its former subsidiary.

Total assets increased by $37.6$20.8 million during the first quarter endedto $1.2 billion at March 31, 2023 from December 31, 2022, primarily due to growth in cash and cash equivalents of $14.6$13.5 million, growth in investment securities available-for-sale of $13.9$8.0 million a net increase in loans receivable held for investment, net of $4.9 million, growth in other assets of $3.5 million,allowance, and a netan increase in theFHLB stock of $1.8 million. These increases were partially offset by decreases of $1.7 million in Federal Reserve Bank (“FRB”) stock and $1.0 million in deferred tax asset of $2.2 million.  Total assets, increased by $652 million compared to March 31, 2021, primarily because of the assets, totaling $475 million, that were acquired in the Merger.net.

Total liabilities increased by $42.4$20.6 million to $994.8$925.2 million at March 31, 20222023 from $952.4$904.6 million at December 31, 2021.2022. The increase in total liabilities primarily consisted of net increases of $40.5 million in deposits of $51.7FHLB advances and $7.5 million and net increases in securities sold under agreements to repurchase, which were partially offset by decreases in deposits of $4.0$29.4 million.

During the first quarter of 2023, net interest income increased by $1.1 million or 15.4% compared to the first quarter of 2022. This increase resulted from additional interest income, primarily generated from growth of $81.4 million in average interest-earning assets. The increase in the net interest margin was attributable to the investment of the proceeds from the sale of the Series C Preferred Stock, which outweighed a $13.0increased interest earning assets without any associated interest cost. Also, the net interest margin increased to 2.96% for the first quarter of 2023, compared to 2.76% for the first quarter of 2022, primarily due to an increase of 86 basis points in the average yield earned on interest-earning assets due to higher rates earned on investments in the increasing interest rate environment.

Partially offsetting these improvements was an increase in income tax expense of $311 thousand and an increase in non-interest expenses of $246 thousand during the three months ended March 31, 2023, compared to the same period in 2022. The increase in tax expense reflected an increase of $924 thousand in pre-tax income between the two periods.

26
For the first quarter of 2023, the Company reported net income of $1.6 million decrease in FHLB advances.compared to $982 thousand for the first quarter of 2022.

Results of Operations

Net Interest Income

Three Months Ended March 31, 2023 Compared to the Three Months Ended March 31, 2022

Net interest income for the first quarter of 2022 increased to $958 thousand compared to a2023 totaled $8.3 million, representing an increase of $1.1 million, or 15.4%, over net lossinterest income of $3.5$7.2 million for the first quarter of 2021 primarily due to an increase in net interest income before loan provision of $4.3 million due to interest income from the acquired interest-earning assets of CFB and growth in interest-earning assets since the Merger.  Non-interest expense decreased by $2.7 million during the first quarter of 2022 compared to the first quarter of 2021, primarily because the results for the first quarter of 2021 included non-recurring costs of $5.4 million related to the Merger, partially offset by increases from including the operations of CFB in the results for the first quarter of 2022 and higher data processing costs after the merger.
Net Interest Income

First Quarter of 2022 Compared to First Quarter of 2021

Net interest income before loan loss provision for the first quarter of 2022 totaled $7.2 million, representing an increase of $4.3 million over net interest income before loan loss provision of $2.8 million for the first quarter of 2021.2022. The increase resulted from additional interest income, primarily generated from growth of $564.3$81.4 million in average interest-earning assets during the first quarter of 20222023, compared to the first quarter of 2021 due to the acquisition of loans, securities, and cash equivalents in the Merger on April 1, 2021.  Net interest income in the first quarter of 2022 also benefited from a reduction in the overall rates paid on interest-bearing liabilities of 48 basis points.2022.

Interest income and fees on loans receivable increased by $3.7$1.2 million, or 16.3%, to $8.5 million for the first quarter of 2023, from $7.3 million for the first quarter of 2022 from $3.6 million for the first quarter of 2021 due to an increase of $292.0$109.2 million in the average balance of loans receivable, which increased interest income by $3.2 million, and an increase of 46 basis points in the average yield on loans, which increased interest income by $455 thousand. The increase in the average balance of loans receivable was primarily the result of the addition of $225.9 million of loans in the Merger, as well as additional organic loan growth of the combined entity after the date of the Merger. In addition, the increase in the average yield on loans receivable in the first quarter of 2022 was primarily the result of higher yields earned on the commercial loan portfolio acquired in the Merger.$1.2 million.

Interest income on securities increased by $497 thousand$1.6 million, or 294.2%, for the first quarter of 2022 to $553 thousand,2023, compared to $56 thousand in the first quarter of 2021.2022. The increase in interest income on securities primarily resulted from growthan increase of $150.6 million in the average balance of securities, which resulted from securities of $150.0 million acquired in the Merger.  The higher average balance of securities increased interest income by $524 thousand.  This increase was partially offset by the effects of a decrease of 78128 basis points in the average interest rate earned on securities, which reducedincreased interest income by $27$767 thousand, and an increase of $167.8 million in the average balance of securities, which increased interest income by $860 thousand. The increase in the average balance of securities resulted from the investment of funds received from the sale of the Series C Preferred Stock pursuant to the ECIP award. We also made a concerted effort to deploy assets from federal funds to higher yielding investment securities.

Other interestInterest income on interest-earning cash in other banks increased by $45$35 thousand during the first quarter of 2022 compared to the first quarter of 2021 primarily due to an increase of $122.1 million264 basis points in the average balance of interest-earninginterest rate earned on cash deposits, and other short-term investments, which increased interest income by $49 thousand.  This increase$180 thousand, and was partially offset by a decrease of $4 thousand$203.2 million in the dividendaverage cash deposits, which reduced interest income by $145 thousand. Dividend income on FHLB and FRB stock also increased by $171 thousand between the two periods.

Interest expense on deposits increased by $953 thousand, or 272.3%, for the first quarter of 2022 decreased by $93 thousand2023, compared to the first quarter of 2021 due2022. The increase was attributable to a decreasean increase of 4870 basis points in the Company’s cost of interest-bearing liabilities.  The lower rates paid offset the impact of $421.6 million in average interest-bearing liabilities assumed in the Merger.

22
Interest expense on deposits decreased by $33 thousand for the first quarter of 2022 compared to the first quarter of 2021.  The decrease was primarily attributable to a decrease of 28 basis points in the average rate paid on interest-bearing deposits, which caused interest expense on deposits to decreaseincrease by $316 thousand.$1.0 million. This decrease was partially offset by the effectsa decrease of an increase of $389.5$124.2 million in the average balance of interest-bearing deposits primarily because of the Merger, which increasedreduced interest expense by $283$72 thousand.

Interest expense on borrowings decreasedincreased by $60$977 thousand, or 199.8%, for the first quarter of 2022,2023, compared to the first quarter of 2021.  The decrease was attributable to a decrease of 59 basis points in2022. Interest expense on FHLB advances increased by $981 thousand between the average borrowing rate, which decreased interest expense by $192 thousand, offset by an increase in average borrowings of $32.1 million during the period, which increased interest expense by $132 thousand.  The increase in the average balance of borrowings wastwo periods due to an increase of $68.0$67.4 million in the average balance of short-term borrowings (primarily, securities sold under agreements to repurchase that were assumed in the Merger), offsetFHLB advances, which increased interest expense by a decrease$438 thousand, and an increase of $32.7 million in average borrowings from the FHLB and a decrease of $3.3 million189 basis points in the average rate paid, which increased interest expense by $543 thousand. Interest expense on other borrowings decreased by $4 thousand between the two periods. The average rate on other borrowings increased by 4 basis points, which increased interest expense by $7 thousand and the average balance increased by $1.6 million, which increased interest expense by $3 thousand.

As a result of the Company’s junior subordinated debentures, which were paid off in the third quarter of 2021.

Thechanges discussed above, net interest margin increased to 2.96% for the first quarter of 2023 from 2.76% for the first quarter of 2022 from 2.40%2022.

The following tables set forth the average balances, average yields and costs, and certain other information for the first quarterperiods indicated. All average balances are daily average balances. The yields set forth below include the effect of 2021 primarily duedeferred loan fees, and discounts and premiums that are amortized or accreted to an increaseinterest income or expense. We do not accrue interest on loans on non-accrual status, but the balance of these loans is included in the volume of interest-earning assets (mainly due to an increase in thetotal average balance of loans receivable),receivable, which has the contributioneffect of higherreducing average loan yields earned on the commercial loan portfolio acquired in the Merger and a decrease in the average rate paid on interest-bearing liabilities of 48 basis points.
yields.

  For the three months ended 
  March 31, 2022  March 31, 2021 
(Dollars in Thousands) Average Balance  Interest  
Average
Yield/
Cost
  Average Balance  Interest  
Average
Yield/
Cost
 
Assets                  
Interest-earning assets:                  
Interest-earning deposits $220,266  $84   0.15% $98,183  $35   0.14%
Securities  160,968   553   1.37%  10,414   56   2.15%
Loans receivable (1)
  653,493   7,336   4.49%  361,487   3,644   4.03%
FRB and FHLB stock  3,046   38   4.99%  3,431   42   4.90%
Total interest-earning assets  1,037,773  $8,011   3.09%  473,515  $3,777   3.19%
Non-interest-earning assets  74,542           11,064         
Total assets $1,112,315          $484,579         
                         
Liabilities and Stockholders’ Equity                        
Interest-bearing liabilities:                        
Money market deposits $207,078  $189   0.37% $76,750  $81   0.42%
Passbook deposits  66,825   8   0.05%  64,044   57   0.36%
NOW and other demand deposits  230,461   39   0.07%  54,650   7   0.05%
Certificate accounts  201,446   114   0.23%  120,857   238   0.79%
Total deposits  705,810   350   0.20%  316,301   383   0.48%
FHLB advances  77,849   342   1.76%  110,500   527   1.91%
Junior subordinated debentures  -   -   0.00%  3,275   22   2.69%
Other borrowings  68,019   147   0.86%  -   -   0.00%
Total borrowings  145,868   489   1.34%  113,775   549   1.93%
Total interest-bearing liabilities  851,678  $839   0.39%  430,076  $932   0.87%
Non-interest-bearing liabilities  121,912           5,832         
Stockholders’ equity  138,725           48,671         
Total liabilities and stockholders’ equity $1,112,315          $484,579         
                         
Net interest rate spread (2)
     $7,172   2.70%     $2,845   2.32%
Net interest rate margin (3)
          2.76%          2.40%
Ratio of interest-earning assets to interest-bearing liabilities          121.85%          110.10%
27
  For the Three Months Ended 
  March 31, 2023  March 31, 2022 
(Dollars in Thousands) Average Balance  Interest  Average Yield/Cost  Average Balance  Interest  Average Yield/Cost 
Assets                  
Interest-earning assets:                  
Interest-earning deposits 
$
17,044
  
$
119
   
2.79
%
 
$
220,266
  
$
84
   
0.15
%
Securities  
328,767
   
2,180
   
2.65
%
  
160,968
   
553
   
1.37
%
Loans receivable (1)
  
762,669
   
8,535
   
4.48
%
  
653,493
   
7,336
   
4.49
%
FRB and FHLB stock  
10,665
   
209
   
7.84
%
  
3,046
   
38
   
4.99
%
Total interest-earning assets  
1,119,145
  
$
11,043
   
3.95
%
  
1,037,773
  
$
8,011
   
3.09
%
Non-interest-earning assets  
67,947
           
74,542
         
Total assets 
$
1,187,092
          
$
1,112,315
         
                         
Liabilities and Stockholders’ Equity                        
Interest-bearing liabilities:                        
Money market deposits 
$
134,047
  
$
771
   
2.30
%
 
$
207,078
  
$
189
   
0.37
%
Savings deposits  
61,317
   
13
   
0.08
%
  
66,825
   
8
   
0.05
%
Interest checking and other demand deposits  
239,024
   
77
   
0.13
%
  
230,461
   
39
   
0.07
%
Certificate accounts  
147,260
   
442
   
1.20
%
  
201,446
   
114
   
0.23
%
Total deposits  
581,648
   
1,303
   
0.90
%
  
705,810
   
350
   
0.20
%
FHLB advances  
145,201
   
1,323
   
3.64
%
  
77,849
   
342
   
1.76
%
Other borrowings  
69,618
   
143
   
0.82
%
  
68,019
   
147
   
0.86
%
Total borrowings  
214,819
   
1,466
   
2.73
%
  
145,868
   
489
   
1.34
%
Total interest-bearing liabilities  
796,467
  
$
2,769
   
1.39
%
  
851,678
  
$
839
   
0.39
%
Non-interest-bearing liabilities  
109,955
           
121,912
         
Stockholders’ equity  
280,670
           
138,725
         
Total liabilities and stockholders’ equity 
$
1,187,092
          
$
1,112,315
         
                         
Net interest rate spread (2)
     
$
8,274
   
2.56
%
     
$
7,172
   
2.69
%
Net interest rate margin (3)
          
2.96
%
          
2.76
%
Ratio of interest-earning assets to interest-bearing liabilities          
140.51
%
          
121.85
%

(1)Amount is net of deferred loan fees, loan discounts and loans in process, and includes deferred origination costs and loan premiums.
(2)Net interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities.
(3)Net interest rate margin represents net interest income as a percentage of average interest-earning assets.

23
Loan Loss ProvisionCredit loss provision

TheFor the quarter ended March 31, 2023, the Company recorded a provision for credit losses under CECL of $88 thousand, compared to a loan loss provision under the previously used incurred loss model of $148thousand for the first quarter of  2022 due to growth in the loan portfolio. There was no loan loss provision during the first quarter of 2021. ended March 31, 2022.  No loan charge-offs were recorded during the first quarter of 2022quarters ended March 31, 2023 or 2021.March 31, 2022. The Allowance for Loan and Lease Losses (“ALLL”)ACL increased to $3.5$6.3 million as of March 31, 20222023, compared to $3.4$4.4 million as of December 31, 2021.2022. The increase was due to the implementation of the CECL methodology adopted by the Company effective January 1, 2023, which increased the ACL by $1.8 million. In addition, the Company recorded an additional increase in the provision for credit losses of $88 thousand during the first quarter of 2023 as a result of growth in the loan portfolio.

Non-interest Income

Non-interest income for the first quarter of 2022three months ended March 31, 2023 totaled $280$289 thousand compared to $123$281 thousand for the first quarter of 2021.three months ended March 31, 2022. The increase in non-interest income was primarily due to fees earned from the remaining  New Market Tax Credit ventures on the books of City First Bank and an increase in ATM exchange fees.other non-interest income of $11 thousand, partially offset by a decrease in service charges of $3 thousand.

Non-interest Expense

Total non-interest expense was $6.2 million for the first quarter of 2023, compared to $6.0 million for the first quarter of 2022, compared to $8.6 million for the first quarter of 2021.2022. The decreaseincrease in non-interest expense was primarily due to non-recurring compensation costs andan increase in other non-interest expense of $286 thousand, an increase in professional services fees associated with the CFBanc merger on April 1, 2021,of $141 thousand and in increase of compensation and benefits of $130 thousand, partially offset by higherdecreases $150 thousand in information services costs.  Compensation costs and professional services fees decreased by $1.8 million and $1.6 million, respectively, during the first quarter of 2022 compared to the first quarter of 2021, while information services costs increased by $624 thousand.  In addition, during the first quarter of 2022 the Company recorded $109$139 thousand of expense to amortize the core deposit intangible asset that was recorded in connection with the Merger.occupancy expense.

Income Tax Expense or BenefitTaxes

Income tax expense or benefit is computed by applying the statutory federal income tax rate of 21%. to the Company’s pre-tax net income. State taxes are recorded at the State of California tax rate and apportioned based on an allocation schedule to reflect that a portion of the Bank’sCompany’s operations are conducted in the Washington, D.C. area. The Company recorded income tax expense of $674 thousand during the first quarter of 2023, representing an effective rate of 29.7%, and a tax expense of $363thousand during the first quarter of 2022, representing an effective rate of 27.0%, and a tax benefit of $2.2 million during the first quarter of 2021, representing an effective tax rate of 38.4%27.0%.

28
Financial Condition

Total Assets

Total assets increased by $37.6$20.8 million to $1131 billion at March 31, 2022 from $1.094 billion million at2023, compared to December 31, 2021, primarily due to2022, reflecting growth in cash and cash equivalents of $14.6$13.5 million and growth in investment securities available-for-salenet loans of $13.9 million,  a net increase in loans held for investment of $4.9 million, growth in other assets of $3.5 million and a net increase in the deferred tax asset of $2.2$8.0 million.

Securities Available-For-Sale

Securities available-for-sale totaled $170.3$329.0 million at March 31, 2022,2023, compared with $156.4$328.7 million at December 31, 2021.2022. The $13.9$0.3 million of increase in securities available-for-sale during the three months ended March 31, 20222023 was primarily due to additional purchasesan increase of $3.4 million in the fair value of the securities as a result of $26.9 million.favorable changes in interest rates during the quarter. These increases were partially offset by net amortizations andproceeds from principal paydowns on the balance of investmentthese securities of $4.7 million.$3.4 million during the quarter.

Loans Receivable

Loans receivable increased by $4.9$8.0 million during the first quarterthree months of 20222023 primarily due to loan originations of $32.9 million which consisted of $18.5 million in excess of payoffs. The Bank originated $41.5construction loans, $11.6 million in multi-family loans, $2.9and $2.8 million of commercial real estate loans, $9.5 million ofin other commercial loans, and $756 thousandoffset in construction loans. Loan advances on pre-existing construction loans totaled $6.5 million. Loanpart by loan payoffs and repayments totaled $56.9 million during the first quarter of 2022, of which $33 million were PPP loans.
$24.9 million.

Allowance for LoanCredit Losses

As a smaller reporting  company as defined by the SEC,Effective January 1, 2023, the Company is not required to adopt the CECL accounting standard until 2023; consequently, the Bank’s ALLL is basedaccounts for credit losses on probable incurred losses at the date of the consolidated statement of financial position, 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 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 communicatingloans in accordance with borrowersASC 326 – Financial Instruments-Credit Losses, to determine the continuing adequacyACL. ASC 326 requires the Company to recognize estimates for lifetime losses on loans and off-balance sheet loan commitments at the time of origination or acquisition. The recognition of losses at origination or acquisition represents the Company’s best estimate of the ALLL.

24
We record a provision for loan losses as a chargesignificant management judgement and estimates, which are subject to earnings, when necessary, in order to maintainchange based on management’s on-going assessment of the ALLL at a level sufficient, in management’s judgment, to absorb probable incurred losses in the loan portfolio.  At least quarterly we assess the overallcredit quality of the loan portfolio and generalchanges in economic trendsforecasts used in the local marketsmodel. The Company uses the WARM method when determining estimates for the ACL for each of its portfolio segments. The weighted average remaining life, including the effect of estimated prepayments, is calculated for each loan pool on a quarterly basis. The Company then estimates a loss rate for each pool using both its own historical loss experience and the historical losses of a group of peer institutions during the period from 2004 through the most recent quarter.

Since historical information (such as historical net losses) may not always, by itself, provide a sufficient basis for determining future expected credit losses, the Company periodically considers the need for qualitative adjustments to the ACL.

The Company has a credit portfolio review process designed to detect problem loans. Problem loans are typically those of a substandard or worse internal risk grade, and may consist of loans on nonaccrual status, loans that have recently been modified in which we operate.response to a borrower’s deteriorating financial condition, loans where the likelihood of foreclosure on underlying collateral has increased, collateral dependent loans, and other loans where concern or doubt over the ultimate collectability of all contractual amounts due has become elevated. Such loans may, in the opinion of management, be deemed to no longer possess risk characteristics similar to other loans in the loan portfolio, because the specific attributes and risks associated with the loan have likely become unique as the credit quality of the loan deteriorates. As such, these loans may require individual evaluation to determine an appropriate ACL for the loan. When a loan is individually evaluated, the Company typically measures the expected credit loss for the loan based on a discounted cash flow approach, unless the loan has been deemed collateral dependent. The determinationACL for collateral dependent loans is determined using estimates of the fair value of the underlying collateral, less estimated selling costs.

The estimation of the appropriate level forof the ACL requires significant judgment by management. Although management uses the best information available to make these estimations, future adjustments to the ACL may be necessary due to economic, operating, regulatory, and other conditions that may extend beyond the Company’s control. Changes in management’s estimates of forecasted net losses could materially change the level of the ACL. Additionally, various regulatory agencies, as an integral part of their examination process, periodically review the Company’s ACL and credit review process. Such agencies may require the Company to recognize additions to the ACL based on judgments different from those of management.

The ACL, formerly known as the allowance is based on these reviews, 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.
The ALLLlosses, was $3.5$6.3 million or 0.54%0.80% of gross loans held for investment at March 31, 2022,2023, compared to $3.4an ALLL of $4.4 million, or 0.52%0.57% of gross loans held for investment, at December 31, 2021.  The increase in the dollar amount2022.

29
There were no recoveries or charge-offs recorded during the first quarter of  2022 was the result of additional loan loss provisions due to loan growth during the period.
As ofthree month period ending March 31, 2022, loan delinquencies totaled $2.92023 and 2022.

Collateral dependent loans at March 31, 2023 were $1.2 million, compared to $2.4 millionwhich had an associated ACL of $53 thousand.

Impaired loans at December 31, 2021.  No2022 were $1.7 million which had specific reserves of $7 thousand of the aggregate impaired loan wasamount.

Delinquent loans greater than 90 days delinquent. There was one commercial real estate loan that was 30 days delinquent as of March 31, 2022 and one commercial real estate loan2023, were $406 thousand as compared to a different borrower that was 84none at December 31, 2022. The $406 thousand of loans delinquent 30-59 days delinquent as of DecemberMarch 31, 2021.2023 consisted primarily of multi-family loans.

Non-performing loans (NPLs)(“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 March 31, 2022, NPLs totaled $653thousand, compared to $684 thousand at December 31, 2021.  The decrease of $78 thousand in NPLs during the three months ended March 31, 2022 was due to loan repayments. The Bank didCompany did not have any real estate owned from foreclosures (REO) at March 31, 2022 or December 31, 2021.
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 March 31, 2022 and2023. NPLs as of December 31, 2022 all our non-performing loans were current in their payments.  Also, in determining the ALLL, we evaluate the ratio of the ALLL to NPLs, which was 541.96% at March 31, 2022 compared to 495.8% at December 31, 2021.totaled $144 thousand.
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.
There were no recoveries or charge-offs recorded during the first quarter of  2022 or 2021.
Impaired loans at March 31, 2022 were $2.2 million, compared to $2.3 million at December 31, 2021.  The  decrease of $52 thousand in impaired loans during the first quarter of  2022 was primarily due to loan repayments.  Specific reserves for impaired loans were $7 thousand, or 0.31% of the aggregate impaired loan amount at March 31, 2022, compared to $7 thousand, or 0.30% of the aggregate impaired loan amount at December 31, 2021.
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, three 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 a loan modification program for the effects of COVID-19 on its borrowers. At the date of this filing, two borrowers have requested applications, but no applications for loan modifications have been formally submitted. Both borrowers were current at the time the modification program was implemented.  To date, no modifications have been granted.

We believe that the ALLLACL is adequate to cover probable incurredcurrently expected losses in the loan portfolio as of March 31, 2022,2023, but because of the uncertainties posed by the COVID-19 Pandemic and other economic uncertainties, there can be no assurance that actual losses will not exceed the estimated amounts. In addition, theThe OCC and the Federal Deposit Insurance Corporation (“FDIC”) periodically review the ALLLACL as an integral part of their examination process. These agencies may require an increase in the ALLLACL based on their judgments of the information available to them at the time of their examinations.

25
Goodwill and Intangible Assets

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 are 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.

Goodwill decreased by $138 thousand from $26.0 million to $25.9 million due to a recalculation of deferred taxes on the assets and liabilities acquired as of the merger date.

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, with 9 years remaining as of March 31, 2022.years. During the three months ended March 31, 2023 and 2022, the Company recorded $98 thousand and $109 thousand, respectively, of amortization expense related to the core deposit intangible.

As the Company’s stock was recently trading at a discount to tangible book value, an assessment of goodwill impairment was performed as of December 31, 2022, in which no impairment was determined. No impairment charges were recorded during the three months ended March 31, 2023 or 2022, related tofor goodwill or the core deposit intangible.

Total LiabilitiesDeposits

Total liabilities increased Deposits decreased by $42.4$29.4 million to $994.8$657.5 million at March 31, 20222023, from $952.4$686.9 million at December 31, 2021, largely due2022. The decrease in deposits was attributable to growth in deposits.

Deposits

Deposits increased by $51.6 million to $839.7 million at March 31, 2022 from $788.1 million at December 31, 2021, which consisteddecreases of increases of $76.0$50.0 million in ICSliquid deposits (demand, interest checking and money market accounts), $2.2 million in savings deposits, $1.5 million in other certificates of deposit accounts, and $226 thousand in Insured Cash Sweep (“ICS”) deposits (ICS deposits are the Bank’s ownCompany’s money market deposit accounts in excess of FDIC insured limits whereby the BankCompany makes reciprocal arrangements for insurance with other banks), $6.4partially offset by an increase of $24.5 million in CDARSCertificate of Deposit Registry Service (“CDARS”) deposits (CDARS deposits are similar to ICS deposits, but involve certificates of deposit, instead of money market accounts), and $1.3 million in other certificates of deposit accounts.. The above increasesdecrease in deposits were offset by a decreasewas primarily due to customers who left the Company for higher interest rates available elsewhere, even after management made reasonable attempts to be responsive to the higher interest rate environment. As of $32.1 million in liquidMarch 31, 2023, our uninsured deposits (NOW, demand, money market, and passbook accounts).  Five customer relationships accounted forrepresented approximately 26%25% of our total deposits, as compared to approximately 31% as of December 31, 2022.

Borrowings

Total borrowings increased by $47.9 million to $253.8 million at March 31, 2022. We expect to maintain these relationships for the foreseeable future.

Borrowings

Total borrowings2023, from $205.8 million at MarchDecember 31, 2022, consisted ofprimarily due to $40.5 million in advances to the Bank from the FHLB of $73.0Atlanta and $7.5 million repurchasein additional securities sold under agreements of $56.0 million, and borrowings associated with our Qualified Active Low-Income Business lending activities of $14.0 million compared to advances to the Bank from the FHLB of $86.0 million, repurchase agreements of $52.0 million, and borrowings associated with our Qualified Active Low-Income Business lending activities of $14.0 million as of December 31, 2021.repurchase.

Balances of outstanding FHLB advances decreasedFrom time to $73.0 million at March 31, 2022, compared to $86.0 million at December 31, 2021 due to the payoff of $13.0 million in advances that matured during the year.  The weighted average rate on FHLB advances decreased to 1.66% at March 31, 2022, compared to 1.85% at December 31, 2021 due to the maturity of higher rate advances.

The Bank enterstime we enter into agreements under which itthe Company sells securities subject to an obligation to repurchase the same or similar securities. Under these arrangements, the BankCompany may transfer legal control over the assets but still retain effective control through an agreement that both entitles and obligates the BankCompany 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 available-for-sale accounts. In other words, there is no offsetting or netting of the investment securities assets with the repurchase agreement liabilities. The outstanding balance of these borrowings totaled $59.0$70.9 million and $52.0$63.5 million as of March 31, 20222023 and December 31, 2021,2022, respectively, and the interest rate was 0.10% during both periods.paid on the borrowings were 0.24% and 0.38%, respectively. These agreements mature on a daily basis. As of March 31, 2022,2023, securities with a market value of $61.9$87.6 million were pledged as collateral for securities sold under agreements to repurchase and included $22.3$33.9 million of U.S. Treasuries, $26.0 million of U.S. Government Agency securities, $33.5$22.2 million of mortgage-backed securities, $4.1$5.3 million of SBA pool securities and $273 thousand of federal agency CMO and $2.0 million of SBA Pool securities. CMO. The market value of securities pledged totaled $53.2$64.4 million as of December 31, 20212022 and included $13.3$33.3 million of federal agency debt, $19.2 million of U.S. Government Agency securitiesTreasuries and $39.9$11.9 million of federal agency mortgage-backed securities.

2630
One relationship accounted for 74%75% of our balance of securities sold under agreements to repurchase as of March 31, 2022.2023. We expect to maintain this relationship for the foreseeable future.

In connection with the New Market Tax Credit activities of the Bank,Company, CFC 45 is a partnership whose members include CFNMA and City First New Markets Fund II, LLC. This CDE acts in effect as a pass-through for a Merrill Lynch allocation totaling $14.0 million that needed to be deployed. In December 2015, Merrill Lynch made a $14.0 million non-recourse loan to CFC 45, whereby CFC 45 passed that loan through to a QALICB. The loan to the QALICB is secured by a Leasehold Deed of Trust that, due to the pass-through, non-recourse structure, is operationally and ultimately for the benefit of Merrill Lynch rather than CFC 45. Debt service payments received by CFC 45 from the QALICB are passed through to Merrill Lynch in return for which CFC 45 receives a servicing fee. The financial statements of CFC 45 are consolidated with those of the Bank and the Company.

Stockholders’ Equity

Stockholders’ equity was $136.2$279.7 million, or 12.04%23.2%, of Broadway’sthe Company’s total assets, at March 31, 2022,2023, compared to $141.0$279.5 million, or 12.89%23.6% of Broadway’sthe Company’s total assets at December 31, 2021.2022. The decreaseincrease in total stockholders’ equity was primarily due to a decrease in accumulated other comprehensive loss, net of tax of $2.4 million, and net income for the quarter of $1.6 million, offset by an increase of $5.7$2.5 million of unearned shares in unrealized loss on available-for-sale securities,the employee stock ownership plan and the $1.3 million charge, net of taxes, which resulted from increases in market interest rates that adversely affectedtax, to retained earnings for the valueimplementation of the securities portfolio during the first quarter of 2022.  There was no deterioration in the credit quality of the investment portfolio during the first quarter of 2022.CECL.

AtThe Bank’s Community Bank Leverage Ratio (“CBLR”) was 15.69% at March 31, 2022, CBLR was 9.45% compared to 9.32% as of2023 and 15.75% at December 31, 2021.  The increase in CBLR was due to growth in the Bank’s net earnings.2022.

During the first quarter of 2022, the Company completed the exchange of all the Series A Fixed Rate Cumulative Redeemable Preferred Stock, with an aggregate liquidation value of $3 million, plus accrued dividends, for 1,193,317 shares of Class A Common Stock at an exchange price of $2.51 per share of Class A Common Stock. In addition, during the first quarter of 2022, the Company issued 542,449 shares of Class A Common Stock to directors, executive officers, and certain employees, including 495,262 shares of restricted stock to executive officers and certain employees, which vest over periods ranging from 36 months to 60 months, and 47,187 shares of unrestricted stock to directors which vested immediately.

The Company’s book value per share was $1.85$1.76 per share as of both March 31, 2022 compared to $1.92 per share as of2023 and December 31, 2021. The decrease in book value per share during the first quarter of 2022 was primarily due to an increase in unrealized losses on available for sale securities.2022.

Tangible book value per common share is a non-GAAP measurement that excludes goodwill and the net unamortized core deposit intangible asset, which were both originally recorded in connection with the Merger.merger. The Company uses this non-GAAP financial measure to provide supplemental information regarding the Company’s financial condition and operational performance. A reconciliation between book value and tangible book value per common share is shown as follows:

 Common Equity Capital  Shares Outstanding  Per Share Amount  
Common Equity
Capital
  Shares Outstanding 
Per Share
Amount
 
 (Dollars in thousands)  (Dollars in thousands) 
         
March 31, 2022:         
March 31, 2023:        
Common book value $136,213   73,504,185  $1.85  
$
129,385
  
73,503,292
 
$
1.76
 
Less:                    
Goodwill  25,858          
25,858
      
Net unamortized core deposit intangible  2,827           
2,403
        
Tangible book value $107,541   73,504,185  $1.46  
$
101,124
  
73,503,292
 
$
1.38
 
                    
December 31, 2021:            
December 31, 2022:        
Common book value $138,000   71,768,419  $1.92  
$
129,482
  
73,432,517
 
$
1.76
 
Less:                    
Goodwill  25,996          
25,858
      
Net unamortized core deposit intangible  2,936           
2,501
        
Tangible book value $109,068   71,768,419  $1.52  
$
101,123
  
$
73,432,517
 
$
1.38
 

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 of Atlanta to borrow up to 25% of total assets, or $301.4 million, to the extent the Bank provides qualifying collateral and holds sufficient FHLB stock. This approved limitBased on FHLB stock held and collateral requirement would have permittedpledged as of March 31, 2023, the Bank had the ability to borrow an additional $13.6$157.2 million at March 31, 2022 based on pledged collateral.from the FHLB of Atlanta. In addition, the Bank had additional lines of credit of $11.0$10.0 million with other financial institutions as of that date.March 31, 2023.

2731
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 March 31, 20222023 consisted of $246.1$29.6 million in cash and cash equivalents and $82.5$242.7 million in securities available-for-sale that were not pledged, compared to $231.5$16.1 million in cash and cash equivalents and $52.4$250.3 million in securities available-for-sale that were not pledged at December 31, 2021.2022. Currently, we believe that the Bank has sufficient liquidity to support growth over the next twelve months.

The Bank has a significant concentration of deposits with one customer that accounted for approximately 10% of its deposits as of March 31, 2023. The Bank also has a significant concentration of short-term borrowings from one customer that accounted for 75% of the outstanding balance of securities sold under agreements to repurchase as of March 31, 2023. The Bank expects to maintain the relationships with these customers for the foreseeable future. The increase in liquid assets during the first quarter of 2022 resulted from an increase in deposits.

The Company’s liquidity, separate from the Bank, is based primarily on the proceeds from financing transactions, such as the private placementsplacement completed in August 2013, October 2014, December 2016,June of 2022 and April 2021 and dividends received from the Bank in 2021 and 2020.previous private placements. The Bank is currently under no prohibition to pay dividends to the Company, but is subject to restrictions as to the amount of the dividends based on normal regulatory guidelines.

On a consolidated basis, the Company recorded net cash inflows from operating activities of $3.8 million the three months ended March 31, 2023, compared to consolidated net cash outflows from operating activities of $1.8 million during the three months ended March 31, 2022, compared to consolidated net cash outflows from operating activities of $2.1 million during the three months ended March 31, 2021.2022. Net cash inflows from operating activities during the three months ended March 31, 20222023 were primarily attributable increases in other assets, whereasto net income during the quarter.

The Company recorded consolidated net cash outflows from operatinginvesting activities forof $6.3 million during the three months ended March 31, 2021 were primarily due2023, compared to reductions in deferred tax assets and other assets, offset by an increase in accrued expenses and other liabilities.

The Company recorded consolidated net cash outflows from investing activities of $26.3 million during the three months ended March 31, 2022, compared to consolidated net2022. Net cash outflows from investing activities of $1.9 million duringfor the three months ended March 31, 2021.2023 were primarily due to the funding of new loans, offset by repayments of principal on loan balances of $9.7 million and purchases of FHLB stock of $1.8 million, partially offset by proceeds from principal paydowns from available-for-sale securities of $3.4 million. Net cash inflowsoutflows from investing activities during the three months ended March 31, 2022 were primarily due to purchases of investment securities of $26.9 million. In comparison, cash outflows from investing activities million during the three months ended March 31, 2021 were primarily due to principal payments on loans receivable held for investment, offset by funds used to originate new loans.

The Company recorded consolidated net cash inflows from financing activities of $16.1 million during the three months ended March 31, 2023, compared to consolidated net cash inflows of $42.7 million during the three months ended March 31, 2022, compared to consolidated net2022. Net cash outflowsinflows from financing activities of $4.0 million during the three months ended March 31, 2021.2023 were primarily due to proceeds from FHLB advances of $40.5 million along with an increase in securities sold under agreements to repurchase of $7.5 million cash, partially offset by a decrease in deposits of $29.4 million. Net cash inflows from financing activities during the three months ended March 31, 2022 were primarily attributable to a net increase in deposits of $51.7 million and a net increase of $4.0 million in securities sold under agreements to repurchase, net of repayments of FHLB advances of $13.0 million.  During the three months ended March 31, 2021, net cash outflows from financing activities were primarily due to a $3.3 million decrease in deposit balances.

Capital Resources and Regulatory Capital

The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possible additional discretionary, actions by the regulators that, if undertaken, could have a direct material effect on the Company’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank’s assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The Bank’s capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk-weightings, and other factors. As of March 31, 20222023 and December 31, 2021,2022, the Bank exceeded all capital adequacy requirements to which it is subject and meets the qualifications to be considered “well capitalized.” (See Note 1110 – Stockholders’ Equity and Regulatory Matters.)

2832
ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicableApplicable

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 March 31, 2022.2023. Based on that evaluation, the Company’s CEO and CFO concluded that the Company’s disclosure controls and procedures were effective as of March 31, 2022.2023.

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 three months ended March 31, 2022,2023, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives as specified above. Management does not expect, however, that our disclosure controls and procedures will prevent or detect all error and fraud. Any control system, no matter how well designed and operated, is based upon certain assumptions, and can provide only reasonable, not absolute, assurance that its objectives will be met. Further, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected.

2933
PART II. OTHER INFORMATION

Item 1.LEGAL PROCEEDINGS

None

Item 1A.RISK FACTORS

Not applicableApplicable

Item 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

On January 3, 2022, pursuant to an Exchange Agreement, the Company issued 1,193,317 shares of the Company’s Class A Common Stock to the holder of the Company’s Series A Fixed Rate Cumulative Redeemable Preferred Stock (the “Series A Preferred”), with an aggregate liquidation value of $3 million, plus accrued dividends, in exchange for all of the outstanding shares of the Series A Preferred, at an exchange price of $2.51 per share of Class A Common Stock, in a private placement transaction that included accredited investor representations and limitations on transfer, and was exempt from registration pursuant to Section 4(2) of the Securities Act of 1933, as amended.
None

Item 3.DEFAULTS UPON SENIOR SECURITIES

None

Item 4.MINE SAFETY DISCLOSURES

Not applicableApplicable

Item 5.OTHER INFORMATION

None .

Item 6.EXHIBITS

Exhibit
Number*
 
Amended and Restated Certificate of Incorporation of Broadway Financial CorporationRegistrant effective as of April 1, 20212022 (Exhibit 3.1 to Form 8-K filed by Registrant on April 5, 2021).
Bylaws of Registrant (Exhibit 3.2 to Form 8-K filed by Registrant on August 24, 2020)
Certificate of Designations of Senior Non-Cumulative Perpetual Preferred Stock, Series C (Exhibit 3.1 to Form 8-K filed by Registrant on June 8, 2022)
Certification of Chief Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.2002
Certification of Chief Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.2002
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 2002.2002
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 2002.2002
101.INS
XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH
Inline XBRL Taxonomy Extension Schema Document
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF
Inline XBRL Taxonomy Extension Definitions Linkbase Document
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document
104
The cover page from this Quarterly Report on Form 10-Q for the quarter ended March 31, 2022, formattedCover Page Interactive Data File (formatted as inline XBRL and contained in Inline XBRL (included as Exhibit 101)


*
Exhibits followed by a parenthetical reference are incorporated by reference herein from the document filed by the Registrant with the SEC described therein. Except as otherwise indicated, the SEC File No. for each incorporated document is 000-27464.
**
Management contract or compensatory plan or arrangement.

3034
SIGNATURESSIGNATURES

Pursuant toIn accordance with the requirements of the Securities Exchange Act, of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Broadway Financial Corporation
Date: May 16, 20222023By:/s/ Brian Argrett
  Brian Argrett
  Chief Executive Officer
   
Date: May 16, 20222023By:/s/ Brenda J. Battey
  Brenda J. Battey
  Chief Financial Officer


3135