BYFC 10-K & 10-Q changes, risk factors and insider trading

We are exposed to a variety of risks, some of which are inherent to the financial services industry and others of which are more specific to our businesses. The discussion below addresses material factors, of which we are currently aware, that could have a material and adverse effect on our businesses, results of operations, and financial condition. Moreover, some of the factors, events and contingencies discussed below may have occurred in the past, but theThe disclosures below are not representations as to whether or not the factors, events or contingencies have occurred in the past, and instead reflect our beliefs and opinions as to the factors, events, or contingencies that could materially and adversely affect us in the future. References to past events are provided by way of example only and are not intended to be a complete listing or a representation as to whether or not such factors, events, or contingencies have occurred in the past or their likelihood of occurring in the future. These risk factors and other forward-looking statements that relate to future events, expectations, trends and operating periods involve certain factors that are subject to change, and important risks and uncertainties that could cause actual results or outcomes to differ materially. These risks and uncertainties should not be considered a complete discussion of all the risks and uncertainties that we might face. Although the risks are organized by headings and each risk is discussed separately, many are interrelated.

We are subject to substantial governmental supervision and regulation, which are intended primarily for the protection of depositors rather than our stockholders. Statutes and regulations affecting our business may be changed at any time, and the interpretation of existing statutes and regulations by examining authorities may also change. Within the last several years, Congress and the federal bank regulatory authorities have made significant changes to these statutes and regulations. There can be no assurance that such changes to the statutes and regulations or in their interpretation will not adversely affect our business. Moreover, asthe aBank communityoperates bank operating as a Community Development Financial Institution (CDFI), and as a result, we face a complex and evolving regulatory and political landscape, and changes in laws, regulations, initiatives, or regulatory policies could adversely affect our business, financial condition, and results of operations. We are also subject to changes in other federal and state laws, including changes in tax laws, which could materially affect the banking industry. If we fail to comply with federal bank regulations, our regulators may limit our activities or growth, assess civil money penalties against us or place the Bank into conservatorship or receivership. Bank regulations can hinder our ability to compete with financial services companies that are not regulated or are less regulated.

Our success will depend in part on its ability to retain the talents and dedication of key employees. If key employees unexpectedly terminate their employment, our business activities may be adversely affected and management’s attention may be diverted from successfully integrating operating our business to hiring suitable replacements, which may cause our business to suffer. In addition, we may not be able to identify or recruit suitable replacements in a timely mannermanner, if at allall, for any key employees who leave the Company.

Effective internal controls are necessary for the Company to provide reliable and accurate financial reporting and financial statements for external purposes in accordance with generally accepted accounting principles. A failure to maintain effective internal control over financial reporting could lead to violations, unintentional or otherwise, of laws and regulations. As disclosed in Part I, Item 4 “Controls and Procedures,” of our Quarterly Report on Form 10-Q for the Quarter Ended September 30, 2023, we determined that there were material weaknesses in our internal control over financial reporting. We have determined that the material weaknesses were remediated and that our internal control over financial reporting was effective as of December 31, 2024. If the additional controls and procedures that we have implemented to remediate the material weaknesses prove to be insufficient or we identify other control deficiencies that individually or together constitute significant deficiencies or material weaknesses, the Company’s ability to record, process, and report financial information accurately, and to prepare financial statements within required time periods, could be adversely affected. Litigation, government investigations, or regulatory enforcement actions arising out of any such failure or alleged failure could subject us to civil and criminal penalties that could materially and adversely affect our reputation, financial condition, and operating results. Similarly, the control deficiency, remediation efforts, and any related litigation, government investigations, or regulatory enforcement actions will require management attention and resources and cause us to incur unanticipated costs,costs and could negatively affect investor confidence in our financial statements, cause us reputational harm, and raise other risks to our operations.

If we fail to satisfy the continued listing requirements of Nasdaq, such as the $1.00 minimum closing bid price or timely periodic financial reporting requirements, Nasdaq may take steps to delist the Company’s securities. For example, on MayAugust 14,21, 2024,2025, we received a Staff Delisting Determination letter (the “Staff Determination”) from Nasdaq that it had initiated the delisting process with respect to the Company’s securities. Following the filing of the Company’s Quarterly ReportReports on Form 10-Q for the threequarterly periods ended June 30, 2025 and nine months ended September 30, 2023 and Annual Report on From 10-K for the year ended December 31, 2023,2025, we received a letter from Nasdaq on MayFebruary 20,17, 2024, 2026, stating that the Company had regained compliance with Nasdaq continued listing requirements and the matter was closed. Any delisting of the Company’s securities, or threat of such delisting, would have a negative effect on the price of our common stock, impair the ability to sell or purchase our common stock when persons wish to do so, and any delisting materially adversely affect our ability to raise capital or pursue financing or other transactions on acceptable terms, or at all. Delisting from the Nasdaq Capital Market could also have other negative results, including the potential loss of institutional investor interest and fewer business development opportunities. In the event of a delisting, we would attempt to take actions to restore our compliance with Nasdaq’s listing requirements, but we can provide no assurance that any such action taken by us would allow our common stock to become listed again, stabilize the market price or improve the liquidity of our common stock, prevent our common stock from dropping below the Nasdaq minimum bid price requirement or prevent future non-compliance with Nasdaq’s listing requirements.

If we were to lose ourCDFI statuscertification asat athe CDFI,Bank level or fail to obtain CDFI certification at the holding company level, our ability to obtain certain grants and awards as a CDFI similar to those received in the past may be lost.adversely affected.

Our information technology systems and of our third-party service providers may be vulnerable to unauthorized access, computer viruses, phishing schemes and other security breaches. We likely will expend additional resources to protect against the threat of such cybersecurity incident, or to alleviate problems caused by such cybersecurity incident. However, there can be no certaintyassurance that these measures will be sufficient in safeguarding against any such threats. Security breaches and viruses potentially exposing sensitive data, including our proprietary business information and that of our customers, suppliers and business partners, as well as personally identifiable information about our customers and employees, could expose us to claims, regulatory scrutiny, litigation costs and other possible liabilities and reputational harm. Further, there can be no assurance that our insurance coverage will be sufficient to cover any losses that may result from a cybersecurity incident or breach of our systems.

Total assets decreasedincreased by $71.7$10.7 million to $1.3 billion at December 31, 2024,2025, compared to $1.4$1.3 billion at December 31, 2023,2024, reflecting decreasesan increase in securities available-for-sale of $113.1 $53.0 million, primarily due to maturitiespurchases, an increase in bank owned life insurance of $20.3 million, due to purchases, and paydowns,an andincrease in loans held for investment, net of $16.6 million, primarily due to loan purchases. These increases were partially offset by a decrease in cash and cash equivalents of $43.8$50.9 million, primarily due to repayments of borrowings.borrowings, Thesea decreases$25.9 weremillion partiallygoodwill offsetimpairment bycharge growthrecorded in netthe loansthird quarter of $88.42025, millionand duringa decrease thein yearFHLB ended Decemberstock 31,of 2024.$5.2 million.

Total liabilities decreasedincreased by $75.0$32.9 million to $1.1 billion at December 31, 2025 from $1.0 billion at December 31, 2024 from $1.1 billion at December 31, 2023.2024. The decreaseincrease in total liabilities during 20242025 resulted primarily from decreases an increase in borrowingsdeposits of $100.0$172.2 million fromand thea Bank Fund Term Program, as well as decreases of $14.0$14.2 million in notes payable, $13.8 million in FHLB advances and $6.9 millionincrease in securities sold under agreements to repurchase, partially offset by a net $62.8$154.9 million increasedecrease in total deposits.borrowings.

The $28.2 million decrease in consolidated net income attributable to thecommon Companystockholders during the year ended December 31, 2024,2025, compared to the year ended December 31, 2023,2024, primarily resulted from athe decreasegoodwill in non-interest incomeimpairment of $3.8$25.9 million, related to grant income received from the Equitable Recovery Program administered by the U.S. Treasury’s Community Development Financial Institutions (“CDFI”) Fund in 2023,million and an increase in non-interestpreferred expensedividends of $2.5 million, partially offset by an increase in net interest income after provision for credit losses of $2.6 million, and a decrease in tax expense of $1.2$1.4 million.

For the year ended December 31, 2024,2025, net interest income before provision for credit losses increased by $2.3$1.4 million, or 7.8%,4.3%, to $31.8$33.1 million, compared to $29.5$31.8 million for the year ended December 31, 2023.2024. The increase resulted from higherlower interest incomeexpense of $15.0$4.0 million, partially offset by ana increasedecrease in interest expenseincome of $12.7$2.7 million.

Interest income on securities decreased by $1.7$622 millionthousand to $7.0$6.4 million for the year ended December 31, 2024,2025, compared to $8.7$7.0 million for the year ended December 31, 2023.2024. The decrease in interest income on securities primarily resulted from a decrease of $59.5$55.2 million in the average balance of securities, which decreased interest income by $1.6$2.4 million. In addition, we had aThis decrease was partially offset by an increase of 241 basis points in the average interest yield earned on investment securities during 2024,2025, which decreasedincreased interest income by $71$1.7 thousand.million.

Other interest income increaseddecreased by $5.0$4.5 million in 2024,2025, compared to the same period in 2023,2024, primarily due to ana increasedecrease of $87.9$72.8 million in the average balance of interest-earnings deposits, which increaseddecreased interest income by $4.6$3.3 million during the year ended December 31, 2024,2025, compared to the year ended December 31, 2023.2024, as well as a 96 basis points decrease in the average interest yield earned on interest-earnings deposits, which decreased other income by $837 thousand.

Interest expense on deposits increased by $5.7$6.7 million during the year ended December 31, 2024,2025, compared to the year ended December 31, 2023,2024, primarily due to toa $128.9 million increase in the average balance of deposits, which increased interest expense by $4.1 million, as well as an increase of 9453 basis points in the average cost of deposits. The average cost of deposits increased to 2.77% for 2025, compared to 2.24% for 2024, compared to 1.30% for 2023, which increased interest expense by $5.0$2.7 million.

During the year ended December 31, 2024,2025, we recorded a provision for credit losses of $664$2.2 thousand,million, compared to a provision for credit losses of $933 $660 thousand during the same period in 2023. 2024. During the year ended December 31, 2025, we recorded loan charge-offs of $1.2 million. No loan charge-offs were recorded during the year ended December 31, 2024 or 2023. The Bank recorded a recovery of $216 thousand during the fourth quarter of 2023.2024. We also recorded a recovery of provision for off-balance sheet loan commitments of $91$53 thousand and $2$91 thousand for the years ended December 31, 20242025 and 2023,2024, respectively. See “Allowance for Credit Losses” for additional information.

For the year ended December 31, 2024,2025, non-interest income totaled $1.6$1.8 million, compared to $5.4$1.6 million for the year-ended December 31, 2023. The decrease of $3.8 million in non-interest income was primarily the result of non-recurring income of $3.7 million from a grant from the CDFI Fund’s Equitable Recovery Program recognized during 2023.2024.

Non-interest expenses totaled $57.2 million for the year ended December 31, 2025, compared to $29.9 million for the year ended December 31, 2024. 2024,This compared to $27.4$27.3 million forincrease the year ended December 31, 2023,was primarily due to increases the $25.9 million goodwill impairment and a $1.3 million increase in compensation and benefits expenses of $1.9 million and professional fees of $323 thousand.expense.

Income tax expense or benefit is computed by applying the statutory federal income tax rate of 21%. State and local taxes are recorded at the State of California tax rate and Washington, D.C. tax rate, according to the state apportionment calculation as the Bank’s operations are conducted in both California and the Washington, D.C. area. The Company recorded an income tax expense of $814$338 thousand for the year ended December 31, 2025, representing an effective tax rate of (1.4)%, compared to an income tax expense of $815 thousand for the year ended December 31, 2024, representing an effective tax rate of 29.4%, compared to an income tax expense of $2.0 million for the year ended December 31, 2023, representing an effective tax rate of 30.4%.29.4%. The effective tax rate for each year differs from the 21% federal statutory rate due to the impact of state and local taxes as well as various permanent tax differences, vesting of stock-based compensation and other discrete items.

Our deferred tax assetassets totaled $8.8$6.7 million at December 31, 20242025 and $9.5$8.9 million at December 31, 2023.2024. See Note 1 “Summary of Significant Accounting Policies” and Note 14 “Income Taxes” of the Notes to Consolidated Financial Statements for a further discussion of income taxes and a reconciliation of income tax at the federal statutory tax rate to the actual income tax benefit.expense.

As of December 31, 2024,2025, we had $203.9$256.8 million of investment securities classified as available-for-sale, compared to $317.0$203.9 million at December 31, 2023. 2024. The decreaseincrease during 20242025 was primarily due to principalpurchases paymentsof andinvestment maturities.securities.

Loans receivable held for investment, net of the allowance for credit losses, totaled $968.9$1.0 millionbillion at December 31, 2024,2025, compared to $880.5$1.0 millionbillion at December 31, 2023.2024. The increase of $88.4 $16.6 million in loans receivable held for investment during 20242025 was primarily due to originations of $157.7$45.6 million in new loans,loans. $80.9The Bank also purchased $78.0 of loans during the year ended December 31, 2025, which included $59.1 million of which were multi-family loans, $50.8 million in commercial real estate loans, $17.6 million in other commercial loans,loans $7.6and $18.9 million in construction loans, and $800 thousand inof SBA loans. Loan repayments during 20242025 totaled $69.1$36.6 million.

During 2023,2024, the Bank originated $162.1$160.9 million in new loans, $78.9$80.9 million of which were multi-family loans, $40.0$50.8 million of which were commercial real estate loans, $19.4 million of which were other commercial loans, $8.9 million of which were construction loans, $28.3 million of which were commercial real estate loans, and $15.0$800 millionthousand of which were other commercialSBA loans. Loan repayments during 20232024 totaled $47.2$72.4 million.

Effective January 1, 2023, theThe 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. 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 WARM method. The weighted average remaining life, including the effect of estimated prepayments, is calculated for each loan pool on a quarterly 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.

Our ACL was $8.1$9.4 million or 0.83%0.92% of our gross loans receivable held for investment at December 31, 20242025 compared to $7.3$8.4 million, or 0.83% of our gross loans receivable held for investment at December 31, 2023.2024. The increase was primarily due to growthan increase in thespecific loanreserves portfolio.on collateral dependent loans.

Our non-performing loans (“NPLs”) consist of delinquent loans that are 90 days or more past due and othernon-accrual loans, including loans modified in response to a borrower’s financial difficulty, that do not qualify for accrual status.loans. At December 31, 2024,2025, NPLsnon-performing loans totaled $264$11.2 thousandmillion compared to $0$264 thousand at December 31, 2023.2024. The Bank did not have any REO at December 31, 20242025 or 2023.2024. ThereDuring werethe noyears ended December 31, 2025 and 2024, loans thatof $3.1 million and $5.9 million, respectively, were modified in response to a borrower’s financial difficulty during 2024 or 2023.difficulty.

Net office properties and equipment decreased by $286$167 thousand to $8.9$8.7 million at December 31, 20242025 from $9.2$8.9 million as of December 31, 2023.2024. Depreciation expense was $424$410 thousand and $385 $424 thousand for the years 2024ended December 31, 2025 and 2023,2024, respectively.

As a result of the Merger, the Company recorded $25.9 million of goodwill. Goodwill acquired in a purchase business combination that is determinedconsidered to have an indefinite useful life and is not amortized, but is tested for impairment at least annually or more frequently if events andor changes in circumstances existindicate that indicateimpairment may exist. The Company engaged a third-party valuation specialist to perform its annual goodwill impairment test as of September 30, 2025. Based on the necessityquantitative assessment, the fair value of the reporting unit was less than its carrying amount, resulting in a full impairment of goodwill. On October 15, 2025, management, with oversight from the Audit Committee of the Board of Directors, concluded that the Company’s goodwill was fully impaired. Accordingly, the Company recorded a non-cash goodwill impairment charge of $25.9 million for suchthe impairmentquarter testsended toSeptember 30, be performed.2025.

Deposits at December 31, 20242025 were $745.4$917.6 million compared to $682.6$745.4 million at December 31, 2023.2024. The increase in deposits of $62.8$172.2 million was primarily caused by an increaseincreases in Insuredmoney Cash Sweepmarket (“ICS”)deposits deposits.and certificates of deposit.

Total borrowings at December 31, 20242025 consisted of advances to the Bank from the FHLB of $195.5$72.0 million and repurchase agreements of $66.6 $80.8 million, compared to advances from the FHLB of $209.3 $195.5 million, repurchase agreements of $73.5 million$66.6, and secured borrowings associated with the BTFP of $100.0$31.4 million at December 31, 2023.2024.

Balances of outstanding FHLB advances decreased to $72.0 million at December 31, 2025, from $195.5 million at December 31, 2024, from $209.3 million at December 31, 2023, primarily due to repayments of FHLB advances of $352.8 million,$1.1 billion, partially offset by $339.0$955.8 million in advances from the FHLB. The weighted average rate on FHLB advances was 3.79% at December 31, 2025, compared to 4.03% at December 31, 2024, compared to 4.91% at December 31, 2023.2024.

The Bank enters into agreements under which it sells securities subject to an obligation to repurchase the same or similar securities. Under these arrangements, the Bank may transfer legal control over the assets but still retain effective control through an agreement that both entitles and obligates the Bank to repurchase the assets. As a result, these repurchase agreements are accounted for as collateralized financing agreements (i.e., secured borrowings) and not as a sale and subsequent repurchase of securities. The obligation to repurchase the securities is reflected as a liability in the Bank’s consolidated statements of financial condition, condition, while the securities underlying the repurchase agreements remain in the respective investment securities asset accounts. In other words, there is no offsetting or netting of the investment securities assets with the repurchase agreement liabilities. As of December 31, 2025, securities sold under agreements to repurchase totaled $80.8 million at an average rate of 3.66%. These agreements mature on a daily basis. The fair value of securities pledged totaled $83.7 million as of December 31, 2025. As of December 31, 2024, securities sold under agreements to repurchase totaled $66.6 million at an average rate of 3.62%. These agreements mature on a daily basis. The fair value of securities pledged totaled $83.3 million as of December 31, 2024 and included $46.5 million of U.S. Treasuries, $27.1 million of federal agency debt, $5.5 million of federal agency mortgage-backed securities, and $4.2 million of SBA pools. As of December 31, 2023, securities sold under agreements to repurchase totaled $73.5 million at an average rate of 2.60%. The fair value of securities pledged totaled $89.0 million as of December 31, 2023 and included $47.8 million of U.S. Treasuries, $30.2 million of federal agency debt, and $11.0 million of federal agency mortgage-backed securities.

The Company’s book value per common share was $14.82$12.28 at December 31, 2024,2025, and its tangible book value per common share was $11.79$12.12 at December 31, 2024.2025. 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.CFBanc merger. The Company uses this non-GAAP financial measure to provide meaningful supplemental information regarding the Company’s financial condition and operational performance, and to enhance comparability with banks that have not recorded goodwill and core deposit intangibles in a merger transaction.performance. A reconciliation between common book value (calculated in accordance with GAAP) and tangible book value per common share December 31, 2024 is shown as follows:

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 to the extent the Bank provides qualifying collateral and holds sufficient FHLB stock. ThisAt approvedDecember limit31, and collateral requirement would have permitted2025, the Bank tohad borrow$243.3 an additional $174.3 million atof Decembercredit 31, 2024 based on pledged collateral.available. In addition, the Bank had additional lines of credit of $10.0 million with other financial institutions as of that date.

The Company recorded consolidated net cash inflows from operating activities of $1.4$230 millionthousand and $7.6$1.4 million during the years ended December 31, 20242025 and 2023,2024, respectively. Net cash inflows from operating activities during 2025 were primarily attributable to the addback of the goodwill impairment of $25.9 million, which more than offset the net loss of $24.8 million. Net cash inflows from operating activities during 2024 were primarily attributable to net income of $2.0 million, a $1.4 million increasedecrease in other assets and a $641 thousand net change in deferred loan origination costs, partially offset by a $3.1 million net decrease in accrued expenses and other liabilities. Net cash inflows from operating activities during 2023 were primarily attributable to net income of $4.5 million and a $2.3 million net increase in accrued expenses and other liabilities.

The Company recorded consolidated net cash outflows from investing activities of $79.4 million and inflows from investing activities of $28.2 $28.3 million during the years ended December 31, 2025 and 2024, respectively. Net cash outflows from investing activities ofduring $100.02025 were primarily attributable to $150.5 million duringof thepurchases yearsof endedavailable-for-sale securities, $20.0 million of bank Decemberowned 31,life 2024insurance purchases, and 2023,$19.0 respectively.million of net loan originations, partially offset by $105.1 million of principal payments and maturities of available-for-sale securities. Net cash inflows from investing activities during 2024 were primarily attributable to $117.1 of principal payments and maturities on available-for-sale securities, partially offset by $89.3 million of net loan originations. Net cash outflows from investing activities during 2023 were primarily attributable to $115.3$89.2 million of net loan originations.

The Company recorded consolidated net cash inflows from financing activities of $28.3 million and outflows from financing activities of $73.4 $73.5 million during the years ended December 31, 2025 and 2024, respectively. Net cash inflows from financing activities ofduring $181.52025 were primarily attributable to $955.8 million duringof theproceeds yearsfrom ended DecemberFHLB 31, 2024advances and 2023,a respectively.$172.2 million increase in deposits, partially offset by $1.1 billion of FHLB repayments and $31.4 million of repayments of other borrowings. Net cash outflows from financing activities during 2024 were primarily attributable to $352.8 million of FHLB repayments, $100.0 million of BTFP repayments, and $14.0 million notes payable repayments, partially offset by $339.0 million of proceeds from FHLB advances and a $62.8 million net increase in deposits. Net cash inflows from financing activities during 2023 were primarily attributable to $456.1 million of proceeds from FHLB advances and $100.0 million of proceeds from the BTFP, partially offset by $375.1 million of FHLB repayments.

In originating loans, we recognize that losses may be experienced on loans and that the risk of loss may vary as a result of many factors, including the type of loan being made, the creditworthiness of the borrower, general economic conditions and, in the case of a secured loan, the quality of the collateral for the loan. Effective January 1, 2023, theThe Company accounts for the ACL on loans in accordance with ASC 326, which 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 judgment 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 weighted-average remaining maturity (“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 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.

OurThe quantitativeCompany engaged a third-party valuation specialist to perform its annual goodwill impairment teststest as of September 30, 20242025. andBased 2023 did not result in impairment. However, changing economic conditions that may adversely affecton the Company’s performance,quantitative assessment, the fair value of itsthe assetsreporting andunit liabilities,was orless than its stockcarrying priceamount, could resultresulting in futurea impairment. Any resultingfull impairment lossof couldgoodwill. haveOn October 15, 2025, management, with oversight from the Audit Committee of the Board of Directors, concluded that the Company’s goodwill was fully impaired. Accordingly, the Company recorded a materialnon-cash adversegoodwill impactimpairment oncharge of $25.9 million for the Company’squarter financial conditionended andSeptember results30, of operations. Management will continue to monitor events that could influence this conclusion in the future.2025. See Note 7 to the Consolidated Financial Statements in “Item 8. Financial Statements and Supplementary Data” for further information.

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 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 the 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 increaseadd ora decreasespecific the ACLreserve for collateral dependent loans based on changes in the estimated fair value of the collateral.

Total assetsAssets increased by $80.5$218.1 million at MarchJune 31,30, 2026, compared to December 31, 2025, reflecting increases in net loans of $42.7$110.0 million, securities available-for-sale of $27.3 $70.2 million and cash and cash equivalents of $16.1$38.4 million. The increasesincrease in net loans was due to loan growth and loan purchases and the increase in securities available-for-sale were mainlywas due to purchases of loans and securities available-for-sale.

Loans heldHeld for investment,Investment, netNet of the ACL, increased by $42.7$110.0 million to $1.1 billion at MarchJune 31,30, 2026, compared to $1.0 billion at December 31, 2025. The increase was primarilydue due to loan purchases.purchases and growth.

Total Borrowings decreasedincreased by$22.0 million to $94.0 million at June 30, 2026, from $72.0 million fromat December 31, 2025 to March 31, 2026,2025, due to paying offadditional FHLB advances.

Net income attributable to common stockholders increasedwas to$218 $409 thousand, or $0.05 per diluted share,thousand during the firstsecond quarter of 2026 after deducting preferred dividends of $750 thousand,2026, compared to net lossincome attributable to common stockholders of $3.4$2 million, or ($0.39) per diluted share, thousand for the first quarter of 2025 after deducting preferred dividends of $750 thousand. Diluted income per common share was $0.05 for the first quarter of 2026, compared to ($0.39) of loss per diluted common share for the firstsecond quarter of 2025. Diluted income per common share was $0.02 for both the firstsecond quarter of 20262026, andcompared to $0.00 for the firstsecond quarter of 2025 reflects preferred dividends of $0.09 per diluted common share.2025.

For the threefirst six months ended March 31,of 2026, the Company reported consolidated net income before preferred dividends of $1.2$2.1 million, or $0.13$0.24 per diluted common share, compared to consolidated net loss before preferred dividends of $2.7$1.9 million, or ($0.31$0.23) per diluted common share, for the first quartersix months of 2025, representing an improvement of $3.9 million. “Net income before preferred dividends” and “Earnings per common share – diluted before preferred dividends” are considered to be non-GAAP measures. See “Use of Non-GAAP Financial Measures” section of this Form 10-Q for a reconciliation of these amounts to the associated GAAP financial measure.2025.

Three Months Ended MarchJune 31,30, 2026 Compared to the Three Months Ended MarchJune 31,30, 2025

Net interest income totaled $9.1$9.5 million, representing an increase of $1.0$1.7 million, or 12.5%,22.4%, from net interest income of $8.0 $7.8 million for the first second quarter of 2025. The increase resulted from a $1.4$3.4 million increase in interest income, primarily due to a $1.4$2.0 million increase in interest income on available-for-sale securitiessecurities, due to an increase in the average balance of available-for-sale securities, and a $1.5 million increase in interest income on loans receivable as a result of an increase in the average balance of available-for-saleloans securities and the average rate earned on available-for-sale securities. Further, interest expense on borrowings decreased $1.4 million due to a decrease in the average balance of borrowings.receivable. These increases in net interest income were partially offset by a $1.8$2.1 million increase in interest expense on depositsdeposits, dueas toa result of an increase in the average deposits balance ofand depositsan andincrease in the average ratecost paid onof deposits.

The net interest margin increased to 2.75%2.65% for the firstsecond quarter of 2026 from 2.63%2.58% for the firstsecond quarter of 2025, due to an increase in the average rate earned on interest-earning assets, which increased to 4.93%4.98% for the firstsecond quarter of 2026 from 4.84%4.80% for the firstsecond quarter of 2025, andas awell as an decrease in the cost of funds, which decreased to 2.91%3.02% for the firstsecond quarter of 2026 from 3.06%3.07% for the the firstsecond quarter of 2025.

For the three months ended March 31, 2026, theThe Company recorded a provision for credit losses of $200$1.5 thousand,million for the three months ended June 30, 2026, compared to $1.9 million$200 thousand for the three months ended March 31, 2025.2026. This decreaseincrease was largelyprimarily attributeddue to the establishment of a reductionspecific reserve on a non-accrual loan, in requiredaddition reservesto onloan individuallygrowth. evaluated loans, asAlthough a specific reserve was recorded on a non‑accrual loanestablished during the quarter, firstbroader quarterportfolio metrics remained relatively stable, with non-performing assets representing 0.71% of 2025.total assets and non-accrual loans at 0.98% of total loans.

The Company recorded a provision for off-balancecredit sheet loan commitmentslosses of $78$1.7 thousand and $18 thousandmillion for the threefirst six months endedof March2026, 31,compared 2026to and$1.5 2025,million respectively.for the first six months of 2025.

The ACL increased from $9.4 million at December 31, 2025 to $9.5$10.8 million at MarchJune 31,30, 2026. This increase was primarily due to loan portfolio growth, including an increase in the commercial-other portfolio, and a shift toward higher-risk loans, including an increase in substandard loans within the construction and CRE portfoliosportfolio and higher past-due levels in construction. These factors were evaluated in the context of current conditions and reasonable and supportable forecasts for the Company’s loan classes (single family, multifamily, CRE, church, construction, SBA, consumer, and commercial-other).

The Company had six non-accrual loans at MarchJune 31,30, 2026 with an unpaid principal balance of $11.5$11.2 million. Credit quality remains strongstable with non-accrual loans as a percentage of total loans at 1.07%0.98% and non-performing assets to total assets of 0.80%.0.71%.

Non-interest expense was $8.0$15.5 million for the first quartersix months of 2026, compared to $10.2$17.7 million for the first quartersix months of 2025, representing a decrease of $2.2 million, or 21.4%.12.6%. The decrease was primarily due to thea $1.9 million operational loss incurred in the first quartersix months of 2025 as well as a $398$557 thousand decrease in compensation and benefits expense and a $331 thousand decrease in professional services expense. These decreases in non-interest expenses were partially offset by an increase of $264 thousand in information services expenses and a $264 thousand increase in loan expenses.

The Company recorded incomeIncome tax expense ofwas $282$330 thousand for the firstsecond quarter of 2026,2026 compared to an$296 income tax benefit of $1.1 millionthousand for the firstsecond quarter of 2025. The increase in income tax expense reflected an increase increaseof $441 thousand in pre-tax income of $5.2 million between the two periods. The effective tax rate was 19.76%22.25% for the firstsecond quarter of 2026, compared to 28.75%28.41% for the firstsecond quarter of 2025.

Total assetsAssets increased by $80.5$218.1 million at MarchJune 31,30, 20262026, compared to December 31, 2025, reflecting increases in net loans of $42.7$110.0 million, securities securities available-for-sale of $27.3$70.2 million and cash and cash equivalents of $16.1$38.4 million. The increase in net loans was due to loan growth and loan purchases and the increase in securities available-for-sale was due to purchases of securities available-for-sale.

Securities available-for-sale totaled $284.1$327.0 million at MarchJune 31,30, 2026, compared to $256.8 million at December 31, 2025. The $27.3$70.2 million increase in securities available-for-sale during the threesix months ended MarchJune 31,30, 2026 was primarily due to securities purchases.

The table below presents the carrying amount, weighted average yields and contractual maturities of our securities as of MarchJune 31,30, 2026. The table reflects stated final final maturities and does not reflect scheduled principal payments or expected payoffs.

Loans receivable heldHeld for investment,Investment, netNet of the ACL, increased by $42.7$110.0 million to $1.1 billion at MarchJune 31,30, 2026, compared to $1.0 billion at December 31, 2025. The increase was comprised primarilyof due$84.8 tomillion loanin purchases.purchased loans and $26.6 in organic growth, net of paydowns and an increase in the ACL of $1.4 million.

Certain multi-family loans have adjustable-rate features based on the Secured Overnight Financing Rate but are fixed for the first five years. Our experience has shown that these loans typically pay off during the first five years and do not reach the adjustable-rate phase. However, in the current high interest rate environment, we have seen more borrowers maintain their loans instead of paying them off due to interest rate caps which make the adjusted interest rate on their existing loan more desirable than getting a new loan at current interest rates. Multi-family loans in their initial fixed period totaled $408.4$362.9 million or 69.7%63.7% of our multi-family loan portfolio as of MarchJune 31,30, 2026.

Loans delinquent by 30 days or more, but less than 60 days, increased to $17.5$15.2 million at MarchJune 31,30, 2026, from $11.8 million at December 31, 2025, primarily due to one CRE loan and one construction loan, and loan delinquencies for 60 days or more, but less than 90 days, increased to $19.1$7.8 million at MarchJune 31,30, 2026, from $367 thousand at December 31, 2025, primarily due to one construction loan and one CRE loan. Loans past due due greater than 90 days werewas $11.5$11.1 million at MarchJune 31,30, 2026, compared to $3.0 million at December 31, 2025.2025, primarily due to one construction loan.

We believe the ACL is adequate to cover expected losses in the loan portfolio as of MarchJune 31,30, 2026, but there can be no assurance that actual losses will not exceed the the estimated amounts. The OCC and the Federal Deposit Insurance Corporation (“FDIC”) periodically review the ACL as an integral part of their examination process. These agencies may require an increase in the ACL based on their judgments of the information available to them at the time of their examinations.

Total liabilities increased by $80.8$218.6 million to $1.2$1.3 billion at MarchJune 31,30, 2026 from December 31, 2025, primarily due to an increase of $155.5$197.0 million in deposits, partiallydeposits offset byand a $72.0 $22.0 million decreaseincrease in FHLB borrowings.

Deposits increased by $155.5$197.0 million, or 16.9%,21.5%, to $1.1 billion at MarchJune 31,30, 2026, from $917.6 million at December 31, 2025. The increase in deposits was attributable to increases increases of $198.1$186.8 million in savings depositsdeposits, and $11.1$50.2 million in certificates of deposit accounts, and $9.2 million in CDARS deposits, partially offset by decreases of $48.5$42.9 million in liquid deposits (demand, interest checking, and money market accounts), $4.8and $6.3 million in ICS deposits, and $319 thousand in CDARS deposits. As of MarchJune 31,30, 2026, our uninsured deposits, including deposits fromrepresented the Bank and other affiliates, represented 46%47% of our total deposits, compared to 41% as of December 31, 2025.

The Bank enters into agreements under which it sells securities subject to an obligation to repurchase the same or similar securities. Under these arrangements, the Bank may transfer legal control over the assets but still retain effective control through an agreement that both entitles and obligates the Bank to repurchase the assets. As a result, these repurchase agreements are accounted for as collateralized financing agreements (i.e., secured borrowings) and not as a sale and subsequent repurchase of securities. The obligation to repurchase the securities is reflected as a liability in the Company’s consolidated statements of financial condition, while the securities underlying the repurchase agreements remain in the respective investment securities asset accounts. In other words, there is no offsetting or netting of the investment securities assets with the repurchase agreement liabilities. These agreements mature on a daily basis. As of MarchJune 31,30, 2026,2026 securities sold under agreements to repurchase totaled $81.2$81.9 million at an average rate of 3.67%.3.69%. The fair value of securities pledged for repurchase agreements totaled $83.0 $85.7 million as of MarchJune 31,30, 2026. As of December 31, 2025, securities sold under agreements to repurchase totaled $80.8 million at an average rate of 3.66%. The fair value of securities pledged for repurchase agreements totaled $83.7 million as of December 31, 2025. One customer relationship accounted for 92% of our balance of securities sold under agreements to repurchase as of March 31, 2026. We expect to maintain this relationship for the foreseeable future.

At June 30, 2026, the Company had outstanding advances from the FHLB totaling $94.0 million. At December 31, 2025, the Company had outstanding advances from the FHLB totaling $72.0 million. There were no advances from the FHLB outstanding as of March 31, 2026. The weighted average interest rate was 3.83% and 3.79% as of June 30, 2026 and December 31, 2025.2025, respectively. The weighted average contractual maturity was less than one month as of both June 30, 2026 and December 31, 2025. Loans with unpaid balances of $443.1$437.8 million and $448.6 million at MarchJune 31,30, 2026 and December 31, 2025, respectively, were pledged to secure FHLB advances. The Company 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 held, the Company was eligible to borrow $246.0an additional $148.4 million as of MarchJune 31,30, 2026.

In addition, the Company had additional lines of credit of $10.0 million with other financial institutions as of MarchJune 31,30, 2026 and December 31, 2025. These lines of credit are unsecured, bear interest at the Federal funds rate as of the date of utilization and mature in 30 days. There were no amounts outstanding under these lines of credit as of MarchJune 31,30, 2026 or December 31, 2025.

Broadway Financial Corporation and subsidiary equity was $262.5$262.3 million, or 18.4%,16.8%, of the Company’s total assets, at MarchJune 31,30, 2026, compared to $262.8 million, or 19.5% of the Company’s total assets, at December 31, 2025. Book value per share was $12.10$12.11 at MarchJune 31,30, 2026 and $12.28 at December 31, 2025. Capital ratios remain strong with a Community Bank Leverage Ratio of 14.06%13.20% at MarchJune 31,30, 2026 and 14.09% at December 31, 2025.

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 and 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 to the extent the Bank provides qualifying collateral and holds sufficient FHLB stock. Based on FHLB stock held and collateral pledged as of March 31,June 30, 2026, the Bank had the ability to borrow $246.0an additional $148.4 million from the FHLB of Atlanta. In addition, the Bank had additional lines of credit of $10.0 million with other financial institutions as of March 31, 2026. institutions.

The Bank’s primary uses of funds include originations of loans, withdrawals of and interest payments on deposits, 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 excess cash with the Federal Reserve Bank or other financial institutions. The Bank’s liquid assets at June March 31,30, 2026 consisted of $26.6$48.9 million in cash and cash equivalents and $189.4$229.9 million in securities available-for-sale that were not pledged, compared to $10.5 million in cash and cash equivalents and $161.1 million in securities available-for-sale that were not pledged at December 31, 2025. Currently, we believe the Bank has sufficient liquidity to support growth over the next twelve months and in the longer term.

The Bank had commitments to fund $17.7$1.4 million in loans that were approved but unfunded as of MarchJune 31,30, 2026. In addition, the Bank had $3.1$3.4 million in unfunded line of credit loans and $22.0 $31.6 million in unfunded construction loans as of MarchJune 31,30, 2026.

The Bank has a significant concentration of deposits with five customers that accounted for approximately 40%41% of its deposits as of MarchJune 31,30, 2026. The Bank also has a significant concentration of short-term borrowings withfrom one customer that accounted for 92%93% of the outstanding balance of securities sold under agreements to repurchase as of MarchJune 31,30, 2026. The Bank has long-term relationships with these customers and expects to maintain its relationships with them for the foreseeable future.

The Company recorded consolidated net cash outflows from investing activities of $68.2$185.3 million during the threesix months ended MarchJune 31,30, 2026, compared to net cash inflows from investing activities of $31.8$56.9 million during the threesix months ended MarchJune 31,30, 2025. Net cash outflows from investing activities for the threesix months ended MarchJune 31,30, 2026 were primarily due to purchases of available-for-sale securities of $46.9 million and funding of new loans, net of repayments, of $43.0$111.9 million and purchases of available-for-sale securities of $100.9 million, partially offset by $18.3$28.9 million of principal payments on and maturities of available-for sale-securities. Net cash inflows from investing activities for the threesix months ended June March 31,30, 2025 were primarily due to principal paydowns on available-for-sale securities of $20.4$51.4 million and proceeds from theloan redemptionrepayments of FHLB$21.3 stockmillion, partially offset by purchases of $7.7available-for-securities of $21.6 million.

The Company recorded consolidated net cash inflows from financing activities of $83.2$218.5 million during the threesix months ended MarchJune 31,30, 2026, compared to consolidated net cash outflows from financing activities of $73.1$87.4 million during the threesix months ended MarchJune 31,30, 2025. Net cash inflows from financing activities during the threesix months ended MarchJune 31,30, 2026 were primarily due to proceeds of FHLB borrowings of $183.3$449.3 million and a net increase in deposits of $155.5$197.0 million, partially offset by repayments of FHLB borrowings of $255.3$427.3 million. Net cash outflows from financing activities during the threesix months ended March 31,June 30, 2025 were primarily due to repayments of FHLB advances of $294.0$512.0 million, partially offset by proceeds from FHLB advances of $176.5$376.5 million,million and a net increase in deposits of $31.1$53.5 million and a $14.2 million net increase in securities sold under agreements to repurchase.million.