UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2026
| ☐ | TRANSITION REPORT PURSUANT TO 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 ☒
As of May 8, 2026, 6,180,445 shares of the registrant’s Class A voting common stock, 1,425,404 shares of the registrant’s Class B non-voting common stock and 1,672,562 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) | ||
| 1 | |||
| 2 | |||
| 3 | |||
| 4 | |||
| 5 | |||
| Item 2. | 26 | ||
| Item 3. | 36 | ||
| Item 4. | 36 | ||
| PART II. | OTHER INFORMATION | ||
| Item 1. | 37 | ||
| Item 1A. | 37 | ||
| Item 2. | 37 | ||
| Item 3. | 37 | ||
| Item 4. | 37 | ||
| Item 5. | 37 | ||
| Item 6. | 37 | ||
| 38 | |||
BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated Statements of Financial Condition
(In thousands, except share and per share amounts)
| March 31, 2026 | December 31, 2025 | |||||||
| (Unaudited) | ||||||||
| Assets: | ||||||||
| Cash and due from banks | $ | 1,748 | $ | 1,676 | ||||
| Interest-bearing deposits in other banks | 24,858 | 8,831 | ||||||
| Cash and cash equivalents | 26,606 | 10,507 | ||||||
| Securities available-for-sale, at fair value (amortized cost of $294,145 and $265,371) | 284,103 | 256,835 | ||||||
| Loans receivable held for investment, net of allowance of $9,509 and $9,424 | 1,059,262 | 1,016,540 | ||||||
| Accrued interest receivable | 6,676 | 5,999 | ||||||
| Federal Home Loan Bank (“FHLB”) stock | 999 | 4,417 | ||||||
| Federal Reserve Bank (“FRB”) stock | 3,543 | 3,543 | ||||||
| Office properties and equipment, net | 8,657 | 8,732 | ||||||
| Bank owned life insurance | 23,918 | 23,663 | ||||||
| Deferred tax assets, net | 6,781 | 6,711 | ||||||
| Core deposit intangible, net | 1,384 | 1,460 | ||||||
| Other assets | 4,136 | 7,162 | ||||||
| Total assets | $ | 1,426,065 | $ | 1,345,569 | ||||
| Liabilities and equity | ||||||||
| Liabilities: | ||||||||
| Deposits | $ | 1,073,056 | $ | 917,603 | ||||
| Borrowings | – | 72,000 | ||||||
| Securities sold under agreements to repurchase | 81,249 | 80,773 | ||||||
| Accrued expenses and other liabilities | 9,088 | 12,236 | ||||||
| Total liabilities | 1,163,393 | 1,082,612 | ||||||
| Non-Cumulative Redeemable Perpetual Preferred stock, Series C; authorized 150,000 shares at March 31, 2026 and December 31, 2025; issued and outstanding 150,000 shares at March 31, 2026 and December 31, 2025; 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, 2026 and December 31, 2025; issued 6,528,211 shares at March 31, 2026 and 6,409,760 shares at December 31, 2025; outstanding 6,200,983 shares at March 31, 2026 and 6,082,532 shares at December 31, 2025 | 65 | 64 | ||||||
| Common stock, Class B, $0.01 par value, non-voting; authorized 15,000,000 shares at March 31, 2026 and December 31, 2025; issued and outstanding 1,425,404 shares at March 31, 2026 and December 31, 2025 | 14 | 14 | ||||||
| Common stock, Class C, $0.01 par value, non-voting; authorized 25,000,000 shares at March 31, 2026 and December 31, 2025; issued and outstanding 1,672,562 at March 31, 2026 and December 31, 2025 | 17 | 17 | ||||||
| Additional paid-in capital | 143,520 | 143,194 | ||||||
| Accumulated deficit | (14,829 | ) | (15,238 | ) | ||||
| Unearned Employee Stock Ownership Plan (“ESOP”) shares | (3,806 | ) | (3,869 | ) | ||||
| Accumulated other comprehensive loss, net of tax | (7,175 | ) | (6,105 | ) | ||||
| Treasury stock-at cost, 327,228 shares at March 31, 2026 and at December 31, 2025 | (5,326 | ) | (5,326 | ) | ||||
| Total Broadway Financial Corporation and Subsidiary stockholders’ equity | 262,480 | 262,751 | ||||||
| Non-controlling interest | 192 | 206 | ||||||
| Total liabilities and equity | $ | 1,426,065 | $ | 1,345,569 | ||||
See accompanying notes to unaudited consolidated financial statements.
BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated Statements of Operations and Comprehensive Loss
(In thousands, except per share amounts)
(Unaudited)
| | Three Months Ended March 31, | |||||||
| | 2026 | 2025 | ||||||
| Interest income: | ||||||||
| Interest and fees on loans receivable | $ | 13,287 | $ | 13,117 | ||||
| Interest on available-for-sale securities | 2,613 | 1,208 | ||||||
| Other interest income | 309 | 476 | ||||||
| Total interest income | 16,209 | 14,801 | ||||||
| | ||||||||
| Interest expense: | ||||||||
| Interest on deposits | 5,990 | 4,199 | ||||||
| Interest on borrowings | 1,166 | 2,557 | ||||||
| Total interest expense | 7,156 | 6,756 | ||||||
| | ||||||||
| Net interest income | 9,053 | 8,045 | ||||||
| Provision for credit losses | 200 | 1,914 | ||||||
| Net interest income after provision for credit losses | 8,853 | 6,131 | ||||||
| | ||||||||
| Non-interest income: | ||||||||
| Service charges | 44 | 43 | ||||||
| Grants | 107 | 25 | ||||||
| Earnings on bank owned life insurance | 255 | 11 | ||||||
| Other | 183 | 209 | ||||||
| Total non-interest income | 589 | 288 | ||||||
| Non-interest expense: | ||||||||
| Compensation and benefits | 4,886 | 5,284 | ||||||
| Occupancy expense | 508 | 540 | ||||||
| Information services | 940 | 706 | ||||||
| Professional services | 586 | 700 | ||||||
| Advertising and promotional expense | 124 | 46 | ||||||
| Supervisory costs | 185 | 193 | ||||||
| Corporate insurance | 55 | 67 | ||||||
| Amortization of core deposit intangible | 76 | 79 | ||||||
| Operational loss | – | 1,943 | ||||||
| Other | 655 | 639 | ||||||
| Total non-interest expense | 8,015 | 10,197 | ||||||
| | ||||||||
| Income (loss) before income taxes | 1,427 | (3,778 | ) | |||||
| Income tax expense (benefit) | 282 | (1,086 | ) | |||||
| Net income (loss) | $ | 1,145 | $ | (2,692 | ) | |||
| Less: Net loss attributable to non-controlling interest | (14 | ) | (3 | ) | ||||
| Net income (loss) attributable to Broadway Financial Corporation | $ | 1,159 | $ | (2,689 | ) | |||
| Less: Preferred stock dividends | 750 | 750 | ||||||
| Net income (loss) attributable to common stockholders | $ | 409 | $ | (3,439 | ) | |||
| | ||||||||
| Other comprehensive (loss) income, net of tax: | ||||||||
| Unrealized (losses) gains on securities available-for-sale arising during the period | $ | (1,506 | ) | $ | 2,416 | |||
| Income tax effect | (436 | ) | 701 | |||||
| Other comprehensive (loss) income, net of tax | (1,070 | ) | 1,715 | |||||
| | ||||||||
| Comprehensive loss | $ | (661 | ) | $ | (1,724 | ) | ||
| | ||||||||
| Earnings (loss) per common share-basic | $ | 0.05 | $ | (0.39 | ) | |||
| Earnings (loss) per common share-diluted | $ | 0.05 | $ | (0.39 | ) | |||
See accompanying notes to unaudited consolidated financial statements.
BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated Statements of Cash Flows
(Unaudited)
| Three Months Ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| (In thousands) | ||||||||
| Cash flows from operating activities: | ||||||||
| Net income (loss) | $ | 1,145 | $ | (2,692 | ) | |||
| Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||||||||
| Provision for credit losses | 200 | 1,914 | ||||||
| Depreciation and amortization | 108 | 102 | ||||||
| Net change of deferred loan origination costs | 126 | 114 | ||||||
| Net accretion of premiums and discounts on available-for-sale securities | (166 | ) | (57 | ) | ||||
| Accretion of purchase accounting marks on loans | (64 | ) | (103 | ) | ||||
| Amortization of core deposit intangible | 76 | 79 | ||||||
| Director compensation expense-common stock | 168 | 168 | ||||||
| Stock-based compensation expense | 134 | 99 | ||||||
| ESOP compensation expense | 88 | 50 | ||||||
| Earnings on bank owned life insurance | (255 | ) | (11 | ) | ||||
| Change in assets and liabilities: | ||||||||
| Net change in deferred taxes | 366 | (1,113 | ) | |||||
| Net change in accrued interest receivable | (677 | ) | (623 | ) | ||||
| Net change in other assets | 3,026 | 102 | ||||||
| Net change in accrued expenses and other liabilities | (3,148 | ) | (2,377 | ) | ||||
| Net cash provided by (used in) operating activities | 1,127 | (4,348 | ) | |||||
| Cash flows from investing activities: | ||||||||
| Net change in loans receivable held for investment | (42,984 | ) | 6,445 | |||||
| Principal payments on and maturities of available-for-sale securities | 18,266 | 20,396 | ||||||
| Purchases of available-for-sale securities | (46,874 | ) | – | |||||
| Purchase of FHLB stock | (4,647 | ) | (2,684 | ) | ||||
| Proceeds from redemption of FHLB stock | 8,065 | 7,705 | ||||||
| Purchase of office properties and equipment | (33 | ) | (15 | ) | ||||
| Net cash (used in) provided by investing activities | (68,207 | ) | 31,847 | |||||
| Cash flows from financing activities: | ||||||||
| Net change in deposits | 155,453 | 31,144 | ||||||
| Net change in securities sold under agreements to repurchase | 476 | 14,168 | ||||||
| Dividends paid on ECIP preferred stock | (750 | ) | (750 | ) | ||||
| Repayments of secured borrowings | – | (100 | ) | |||||
| Proceeds from FHLB borrowings | 183,250 | 176,500 | ||||||
| Repayments of FHLB borrowings | (255,250 | ) | (294,032 | ) | ||||
| Net cash provided by (used in) financing activities | 83,179 | (73,070 | ) | |||||
| Net change in cash and cash equivalents | 16,099 | (45,571 | ) | |||||
| Cash and cash equivalents at beginning of the period | 10,507 | 61,365 | ||||||
| Cash and cash equivalents at end of the period | $ | 26,606 | $ | 15,794 | ||||
| Supplemental disclosures of cash flow information: | ||||||||
| Cash paid for interest | $ | 7,185 | $ | 6,402 | ||||
See accompanying notes to unaudited consolidated financial statements.
BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated Statements of Changes in Equity
(Unaudited)
| | Three Months Ended March 31, 2026 and 2025 | |||||||||||||||||||||||||||||||||||||||
| | Preferred Stock Non- Voting | Common Stock Voting | Common Stock Non- Voting | Additional Paid-in Capital | Accumulated Other Comprehensive Loss, Net | (Accumulated Deficit) Retained Earnings | Unearned ESOP Shares | Treasury Stock | Non- Controlling Interest | Total Equity | ||||||||||||||||||||||||||||||
| | (In thousands) | |||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2025 | $ | 150,000 | $ | 64 | $ | 31 | $ | 143,194 | $ | (6,105 | ) | $ | (15,238 | ) | $ | (3,869 | ) | $ | (5,326 | ) | $ | 206 | $ | 262,957 | ||||||||||||||||
| Net income (loss) | – | – | – | – | – | 1,159 | – | – | (14 | ) | 1,145 | |||||||||||||||||||||||||||||
| Release of unearned ESOP shares | – | – | – | 25 | – | – | 63 | – | – | 88 | ||||||||||||||||||||||||||||||
| Stock-based compensation expense | – | 1 | – | 133 | – | – | – | – | – | 134 | ||||||||||||||||||||||||||||||
| Director stock compensation expense | – | – | – | 168 | – | – | – | – | – | 168 | ||||||||||||||||||||||||||||||
| Dividends declared and paid - preferred | – | – | – | – | – | (750 | ) | – | – | – | (750 | ) | ||||||||||||||||||||||||||||
| Other comprehensive loss, net of tax | – | – | – | – | (1,070 | ) | – | – | – | – | (1,070 | ) | ||||||||||||||||||||||||||||
| Balance at March 31, 2026 | $ | 150,000 | $ | 65 | $ | 31 | $ | 143,520 | $ | (7,175 | ) | $ | (14,829 | ) | $ | (3,806 | ) | $ | (5,326 | ) | $ | 192 | $ | 262,672 | ||||||||||||||||
| | ||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2024 | $ | 150,000 | $ | 63 | $ | 31 | $ | 142,902 | $ | (11,223 | ) | $ | 12,727 | $ | (4,201 | ) | $ | (5,326 | ) | $ | 219 | $ | 285,192 | |||||||||||||||||
| Net loss | – | – | – | – | – | (2,689 | ) | – | – | (3 | ) | (2,692 | ) | |||||||||||||||||||||||||||
| Release of unearned ESOP shares | – | – | – | 1 | – | – | 49 | – | – | 50 | ||||||||||||||||||||||||||||||
| Stock-based compensation expense | – | 1 | – | 98 | – | – | – | – | – | 99 | ||||||||||||||||||||||||||||||
| Director stock compensation expense | – | – | – | 168 | – | – | – | – | – | 168 | ||||||||||||||||||||||||||||||
| Dividends declared and paid - preferred | – | – | – | – | – | (750 | ) | – | – | – | (750 | ) | ||||||||||||||||||||||||||||
| Other comprehensive income, net of tax | – | – | – | – | 1,715 | – | – | – | – | 1,715 | ||||||||||||||||||||||||||||||
| Balance at March 31, 2025 | $ | 150,000 | $ | 64 | $ | 31 | $ | 143,169 | $ | (9,508 | ) | $ | 9,288 | $ | (4,152 | ) | $ | (5,326 | ) | $ | 216 | $ | 283,782 | |||||||||||||||||
See accompanying notes to unaudited consolidated financial statements.
BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY
Notes to Unaudited Consolidated Financial Statements
NOTE 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; and City First Capital IX, LLC 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 (“GAAP”) 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, 2025, (the “2025 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, 2026 are not necessarily indicative of the results that may be expected for the year ending December 31, 2026.
The Company operates one reportable segment — banking. The Company’s chief executive officer is its chief operating decision maker (“CODM”). The CODM assesses operating performance and manages the allocation of resources primarily based on the Company’s consolidated operating results and financial condition. The factors considered in making this determination include that all of the banking products and services offered by the Company are available in each branch of the Company, management does not allocate resources based on the performance of different lending or transaction activities, and how information is reviewed by the chief executive officer and other key decision makers. The CODM uses consolidated net income to benchmark the Company against its competitors and to monitor budget to actual results. As a result, the Company determined that all services offered relate to banking. Loans, investments, and deposits provide the revenues in the banking operation. Interest expense, provisions for credit losses and payroll provide the significant expenses in the banking operation. See the Company’s operating segment information in the unaudited consolidated statements of financial condition and the unaudited consolidated statements of operations and comprehensive income.
Accounting Pronouncements Recently Issued
In November of 2025, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2025-08 – Financial Instruments-Credit Losses (Topic 326): Purchased Loans. The amendments in this ASU expand the population of acquired financial assets subject to the “gross-up” approach in Accounting Standards Codification (“ASC”) Topic 326. In accordance with this ASC, loans (excluding credit card loans) acquired without evidence of credit deterioration since their origination that are deemed to be “seasoned” (as defined in the Codification) are determined to be “purchased seasoned loans” and are to be accounted for using the gross-up approach at acquisition. Prior to this ASU, for loans that were not determined to be purchased credit deteriorated loans, GAAP required that an allowance for credit losses be established for purchased loans through a provision for credit losses at the acquisition date. The gross-up approach allows an entity to record the acquisition-date allowance for credit losses for purchased seasoned loans through an offsetting addition to the amortized cost basis of the loan (rather than through the provision for credit losses). The ASU does not impact the accounting for loans that were acquired in periods prior to adoption of the ASU. The amendments in ASU 2025-08 will become effective for the Company in the first quarter of 2027; early adoption is permitted. The amendments in the ASU will not affect the Company’s accounting for loans in its portfolio on the date of adoption; however, loans acquired after the adoption date will be accounted for in accordance with the provisions of this ASU.
In December of 2025, the FASB issued ASU 2025-10 – Government Grants (Topic 832): Accounting for Government Grants Received by Business Entities. Prior to the issuance of this ASU, GAAP did not provide authoritative guidance about the recognition, measurement, and presentation of a grant received by a business entity from a government. The amendments in this ASU establish the accounting for a government grant received by a business entity, including guidance for (1) a grant related to an asset and (2) a grant related to income. The newly issued guidance requires that a government grant received by a business entity should not be recognized until: (1) it is probable that a business entity will comply with the conditions attached to the grant and that the grant will be received; and (2) a business entity meets the recognition guidance for a grant related to an asset or a grant related to income. The ASU also prescribes requirements for the subsequent income recognition, presentation matters, and financial statement disclosures related to government grants. The guidance in this ASU will be effective for the Company beginning on January 1, 2029. Early adoption is permitted. The requirements in this ASU are similar to the guidance that the Company has been applying for accounting for government grants by analogy to guidance issued by other accounting standard setters and authoritative bodies. The Company does not expect that the adoption of this guidance will materially impact its financial condition or results of operations.
In December of 2025, the FASB issued ASU 2025-11 – Interim Reporting (Topic 270): Narrow-Scope Improvements. The amendments in this guidance clarify interim disclosure requirements and the applicability of ASC 270 by providing a comprehensive list of interim period disclosures that are required by GAAP. The updates in ASU 2025-11 also include a disclosure principal that requires entities to disclose events since the end of the last annual reporting period that have a material impact on the entity. The amendments in ASU 2025-11 will become effective for the Company for interim reporting periods beginning in the first quarter of 2028. Early adoption is permitted. The amendments in this ASU are not expected to have a material effect on the Company’s financial position or results of operations; however, the required disclosures will be added to the Company’s interim financial statements issued after the effective date.
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 2025 Form 10-K.
Allowance for Credit Losses - Loans
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.
During the quarter ended March 31, 2026, the Company transitioned from using the weighted average remaining maturity (“WARM”) method for measuring the ACL to a discounted cash flow (“DCF”) method. Concurrently, the Company also changed the way that qualitative factors are applied in the estimation of the ACL. These changes are intended to improve the precision of the expected credit loss calculations. These changes are considered a change in accounting estimate, rather than a change in accounting principle, as they result from an improved estimation methodology rather than a fundamental change in the underlying accounting framework. The changes in estimation techniques and certain related inputs and assumptions used to estimate expected credit losses on the Company’s loan portfolio and unfunded commitments did not materially impact the Company’s results of operations or financial condition.
The Company’s DCF methodology incorporates a probability of default (“PD”) and loss given default (“LGD”) model, whereby PDs and LGDs are forecasted using economic scenarios over a reasonable and supportable period to generate estimates for cash flows expected to be collected over the estimated life of a loan. Estimates of future expected cash flows ultimately reflect assumptions made concerning net credit losses over the life of a loan. The model also incorporates management’s assumptions regarding prepayments and curtailments. The use of reasonable and supportable forecasts, including the determination of the appropriate length of the forecast horizon, requires significant judgment. Management leverages peer data as well as economic projections from an independent third party to inform and provide its reasonable and supportable economic forecasts. Other internal and external indicators of economic forecasts may also be considered by management when developing the forecast metrics.
The Company’s ACL model forecasts PD and LGD over a one-year time horizon, which the Company believes is a reasonable and supportable period. Beyond the one-year forecast time horizon, the Company’s ACL model reverts to historical long-term average loss rates over the remaining contractual periods. The duration of the forecast horizon, the period over which forecasts revert to long-term averages, the economic forecasts that management utilizes, as well as additional internal and external indicators of economic forecasts that management considers, may change over time depending on the nature and composition of the Company’s loan portfolio. Changes in economic forecasts, in conjunction with changes in loan specific attributes, impact a loan’s PD and LGD, which can drive changes in the determination of the ACL.
Expectations of future cash flows are discounted at the loan’s effective interest rate. The resulting ACL for a loan represents the amount by which the loan’s amortized cost exceeds the net present value of a loan’s discounted cash flows. The ACL is recorded through a charge to provision for credit losses and is reduced by charge-offs, net of recoveries on loans previously charged-off. It is the Company’s policy to charge-off loan balances at the time they have been deemed uncollectible.
Prior to March 31, 2026, the Company measured the ACL for each of its loan segments using the WARM method. The weighted average remaining life, including the effect of estimated prepayments, was calculated for each loan pool on a quarterly basis. The Company then estimated 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.
In conjunction with the conversion to DCF methodology, the bank has adopted a new scorecard-based methodology for estimating the qualitative reserve factors. The purpose of the qualitative scorecard is to provide a framework to reliably and consistently determine reasonable and supportable qualitative estimates of the expected credit losses in the current loan portfolio compared to losses expected from the quantitative analysis. The appropriate qualitative reserve is derived by loan segment from incremental risk statuses for each qualitative factor. The risk statuses in the scorecard range from “very low risk” to “critical risk.” A qualitative reserve allocation is made to each portfolio based on the risk assessment. All inputs and assumptions in the qualitative scorecard were individually assessed to determine the proper risk status, and all decisions were made independently of the previous qualitative analysis.
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 recapture 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. These qualitative factors incorporate the concept of reasonable and supportable forecasts, as required by ASC 326.
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 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 increase or decrease the ACL for collateral dependent loans based on changes in the estimated fair value of the collateral.
NOTE 2 – Earnings (Loss) Per Share and Equity
Basic earnings (loss) per share of common stock is computed pursuant to the two-class method by dividing net income (loss) available to common stockholders less dividends paid on participating securities (unvested shares of restricted common stock) and any undistributed earnings attributable to participating securities by the weighted average common shares outstanding during the period. The weighted average common shares outstanding includes the weighted average number of shares of common stock outstanding less the weighted average number of unvested shares of restricted common stock. ESOP shares are considered outstanding for this calculation unless unearned. Diluted earnings per share of common stock includes the dilutive effect of unvested stock awards and additional potential common shares issuable under stock options. Unvested restricted awards are considered outstanding for this calculation.
The following table shows how the Company computed basic and diluted earnings (loss) per share of common stock for the periods indicated:
| Three Months Ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| (Dollars in thousands, except share and per share data) | ||||||||
| Net income (loss) attributable to Broadway Financial Corporation | $ | 1,159 | $ | (2,689 | ) | |||
| Net (income) loss attributable to participating securities | (10 | ) | 64 | |||||
| Preferred stock dividends | (750 | ) | (750 | ) | ||||
| Net income (loss) available to common stockholders | $ | 399 | $ | (3,375 | ) | |||
| Weighted average common shares outstanding for basic earnings (loss) per common share | 8,597,291 | 8,547,460 | ||||||
| Add: Effects of unvested restricted stock awards | 218,897 | – | ||||||
| Weighted average common shares outstanding for diluted earnings (loss) per common share | 8,816,188 | 8,547,460 | ||||||
| Earnings (loss) per common share - basic | $ | 0.05 | $ | (0.39 | ) | |||
| Earnings (loss) per common share - diluted | $ | 0.05 | $ | (0.39 | ) | |||
Series C, Senior Non-Cumulative Perpetual Preferred Stock
On June 7, 2022, the Company issued 150,000 shares of Series C Preferred Stock with a liquidation preference of $1,000 per share for the capital investment of $150 million from the U.S. Treasury under the Emergency Capital Investment Program (“ECIP”).
The Series C Preferred Stock accrued no dividend for the first 24 months following the investment date. Thereafter, the dividend rate will be adjusted based on the qualified lending growth criteria listed in the terms of the ECIP investment with the annual dividend rate up to 2%. After the tenth anniversary of the investment date, the dividend rate will be fixed based on the average annual amount of lending in years 2 through 10. Dividends are payable quarterly in arrears on March 15, June 15, September 15, and December 15.
Established by the Consolidated Appropriations Act, 2021, the ECIP was created to encourage low- and moderate-income community financial institutions and minority depository institutions to provide loans, grants, and forbearance for small businesses, minority-owned businesses, and consumers, especially low-income and underserved communities, including persistent poverty counties, that may be disproportionately impacted by the economic effect of the COVID-19 pandemic by providing direct and indirect capital investments in low- and moderate-income community financial institutions.
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 and in accordance with the federal banking agencies’ regulatory capital regulations.
On January 14, 2025, the Company entered into a Securities Purchase Option Agreement (the “Option Agreement”) with the U.S. Treasury, which grants the Company the conditional option to repurchase the Series C Preferred Stock during the first 15 years following the Company’s issuance of the Preferred Stock. The purchase price for the Series C Preferred Stock under the Option Agreement is based on a formula approximate to the fair value of the Series C Preferred Stock as of the date the Option Agreement is executed, calculated as set forth in the Option Agreement, together with any accrued and unpaid dividends thereon and could represent a discount from the Preferred Stock’s liquidation amount.
The purchase option may not be exercised during the first 10 years following the Company’s sale of the Series C Preferred Stock (“ECIP Period”) unless and until the Company meets at least one of the following three conditions (the “Threshold Conditions”): (1) an average of at least 60% of the Company’s loan originations qualify as “Deep Impact Lending” over any 16 consecutive quarters, (2) an average of at least 85% of the Company’s total originations qualify as “Qualified Lending” over any 24 quarters or (3) the Series C Preferred Stock has a dividend rate of no more than 0.5% at each of six consecutive “Reset Dates,” in each case as defined in the Option Agreement and the terms of the Series C Preferred Stock. In addition to satisfying a Threshold Condition, the Option Agreement requires that the Company meet certain other eligibility conditions in order to exercise the purchase option in the future, including compliance with the terms of the original ECIP purchase agreement and the terms of the Series C Preferred Stock, maintaining qualification as either a certified community development financial institution or a minority depository institution and satisfying other legal and regulatory criteria. Although the Company currently meets the general eligibility criteria, other than satisfying one of the Threshold Conditions, there can be no assurance that the Company will meet such criteria in the future. The Company may designate a mission aligned nonprofit affiliate as the purchaser of the Series C Preferred Stock under the terms of the Option Agreement.
The earliest possible date by which a Threshold Condition may be met is June 30, 2028 which is the end of the sixteenth consecutive quarter following the Original Closing Date and there can be no assurance if and when a Threshold Condition will be met.
The Company began paying quarterly dividends on the Series C Preferred Stock in the three month period ended June 30, 2024. Dividends on the Series C Preferred Stock totaled $750 thousand for both the three months ended March 31, 2026 and 2025, at a dividend rate of 2.0%.
NOTE 3 – Securities
The following table summarizes the amortized cost and fair value of the available-for-sale investment securities portfolios as of the dates indicated and the corresponding amounts of unrealized gains and losses which were recognized in accumulated other comprehensive loss:
| Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | |||||||||||||
| (In thousands) | ||||||||||||||||
| March 31, 2026: | ||||||||||||||||
| Federal agency mortgage-backed securities | $ | 146,969 | $ | 405 | $ | (7,552 | ) | $ | 139,822 | |||||||
| Federal agency collateralized mortgage obligations (“CMO”) | 80,696 | 257 | (890 | ) | 80,063 | |||||||||||
| Federal agency debt | 24,416 | 14 | (778 | ) | 23,652 | |||||||||||
| Municipal bonds | 4,757 | – | (247 | ) | 4,510 | |||||||||||
| U.S. Small Business Administration (“SBA”) pools | 8,834 | 5 | (1,090 | ) | 7,749 | |||||||||||
| Asset-backed securities | 8,973 | – | (88 | ) | 8,885 | |||||||||||
| Corporate bonds | 19,500 | 30 | (108 | ) | 19,422 | |||||||||||
| Total available-for-sale securities | $ | 294,145 | $ | 711 | $ | (10,753 | ) | $ | 284,103 | |||||||
| December 31, 2025: | ||||||||||||||||
| Federal agency mortgage-backed securities | $ | 120,372 | $ | 1,109 | $ | (7,051 | ) | $ | 114,430 | |||||||
| Federal agency CMOs | 69,742 | 367 | (652 | ) | 69,457 | |||||||||||
| Federal agency debt | 29,259 | – | (846 | ) | 28,413 | |||||||||||
| Municipal bonds | 4,766 | – | (244 | ) | 4,522 | |||||||||||
| U. S. Treasuries | 4,993 | – | (6 | ) | 4,987 | |||||||||||
| SBA pools | 9,387 | 3 | (1,115 | ) | 8,275 | |||||||||||
| Asset-backed securities | 9,352 | 3 | (86 | ) | 9,269 | |||||||||||
| Corporate bonds | 17,500 | 57 | (75 | ) | 17,482 | |||||||||||
| Total available-for-sale securities | $ | 265,371 | $ | 1,539 | $ | (10,075 | ) | $ | 256,835 | |||||||
As of March 31, 2026, securities with a fair value of $83.0 million were pledged as collateral for securities sold under agreements to repurchase, securities with a market value of $7.5 million were pledged as collateral for D.C. Housing, securities with a market value of $4.1 million were pledged as collateral for D.C. Government, and securities with a market value of $142 thousand were pledged as collateral for FRB discount window.
As of December 31, 2025, securities with a fair value of $83.7 million were pledged as collateral for securities sold under agreements to repurchase, securities with a market value of $7.7 million were pledged as collateral for D.C. Housing, securities with a market value of $4.2 million were pledged as collateral for D.C. Government, and securities with a market value of $157 thousand were pledged as collateral for FRB discount window.
Accrued interest receivable on securities was $1.1 million and $745 thousand at March 31, 2026 and December 31, 2025, respectively, and is included in accrued interest receivable on the consolidated statements of financial condition.
At March 31, 2026, and December 31, 2025, 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, 2026, by contractual maturities, are shown below. Contractual maturities may differ from expected maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.
| Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | |||||||||||||
| (In thousands) | ||||||||||||||||
| Due in one year or less | $ | 5,011 | $ | – | $ | (88 | ) | $ | 4,923 | |||||||
| Due after one year through five years | 25,108 | 3 | (970 | ) | 24,141 | |||||||||||
| Due after five years through ten years | 39,002 | 50 | (860 | ) | 38,192 | |||||||||||
| Due after ten years | 225,024 | 658 | (8,835 | ) | 216,847 | |||||||||||
| $ | 294,145 | $ | 711 | $ | (10,753 | ) | $ | 284,103 | ||||||||
The table below indicates the length of time individual securities have 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, 2026: | ||||||||||||||||||||||||
| Federal agency mortgage-backed securities | $ | 46,104 | $ | (488 | ) | $ | 46,021 | $ | (7,064 | ) | $ | 92,125 | $ | (7,552 | ) | |||||||||
| Federal agency CMOs | 22,924 | (173 | ) | 11,906 | (717 | ) | 34,830 | (890 | ) | |||||||||||||||
| Federal agency debt | 2,510 | (2 | ) | 18,085 | (776 | ) | 20,595 | (778 | ) | |||||||||||||||
| Municipal bonds | – | – | 4,510 | (247 | ) | 4,510 | (247 | ) | ||||||||||||||||
| SBA pools | 183 | (1 | ) | 7,103 | (1,089 | ) | 7,286 | (1,090 | ) | |||||||||||||||
| Asset-backed securities | 8,885 | (88 | ) | – | – | 8,885 | (88 | ) | ||||||||||||||||
| Corporate bonds | 11,393 | (108 | ) | – | – | 11,393 | (108 | ) | ||||||||||||||||
| Total unrealized loss position investment securities | $ | 91,999 | $ | (860 | ) | $ | 87,625 | $ | (9,893 | ) | $ | 179,624 | $ | (10,753 | ) | |||||||||
| December 31, 2025: | ||||||||||||||||||||||||
| Federal agency mortgage-backed securities | $ | 7,197 | $ | (26 | ) | $ | 47,717 | $ | (7,025 | ) | $ | 54,914 | $ | (7,051 | ) | |||||||||
| Federal agency CMOs | 1,488 | (2 | ) | 14,804 | (650 | ) | 16,292 | (652 | ) | |||||||||||||||
| Federal agency debt | 2,512 | (3 | ) | 25,901 | (843 | ) | 28,413 | (846 | ) | |||||||||||||||
| Municipal bonds | – | – | 4,522 | (244 | ) | 4,522 | (244 | ) | ||||||||||||||||
| U. S. Treasuries | – | – | 4,987 | (6 | ) | 4,987 | (6 | ) | ||||||||||||||||
| SBA pools | 185 | (1 | ) | 7,621 | (1,114 | ) | 7,806 | (1,115 | ) | |||||||||||||||
| Asset-backed securities | 7,208 | (86 | ) | – | – | 7,208 | (86 | ) | ||||||||||||||||
| Corporate bonds | 7,425 | (75 | ) | – | – | 7,425 | (75 | ) | ||||||||||||||||
| Total unrealized loss position investment securities | $ | 26,015 | $ | (193 | ) | $ | 105,552 | $ | (9,882 | ) | $ | 131,567 | $ | (10,075 | ) | |||||||||
At March 31, 2026, and December 31, 2025, all securities in the portfolio were current with their contractual principal and interest payments. At March 31, 2026, and December 31, 2025, there were no securities purchased with deterioration in credit quality since their origination. At March 31, 2026, and December 31, 2025, there were no collateral dependent securities.
The Company’s assessment of available-for-sale investment securities as of March 31, 2026 and December 31, 2025, 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, 2026 or December 31, 2025. At March 31, 2026 and December 31, 2025, approximately 90% of the securities held by the Company were issued by U.S. government-sponsored entities and agencies. Because the decline in fair value is attributable to changes in interest rates and liquidity, and not credit quality, and because the Company does not have the intent to sell these securities, and it is likely that it will not be required to sell the securities before their anticipated recovery, the Company did not record a provision for expected credit loss during the three months ended March 31, 2026 or 2025.
NOTE 4 – Loans Receivable Held for Investment
Loans receivable held for investment were as follows as of the periods indicated:
| March 31, 2026 | December 31, 2025 | |||||||
| (In thousands) | ||||||||
| Real estate: | ||||||||
| Single-family | $ | 19,735 | $ | 20,607 | ||||
| Multi-family | 586,211 | 593,187 | ||||||
| Commercial real estate | 168,127 | 162,618 | ||||||
| Church | 8,922 | 9,015 | ||||||
| Construction | 71,286 | 72,979 | ||||||
| Commercial – other | 182,288 | 140,019 | ||||||
| SBA loans | 16,864 | 17,067 | ||||||
| Consumer | 17 | 38 | ||||||
| Gross loans receivable before deferred loan costs and premiums | 1,053,450 | 1,015,530 | ||||||
| Unamortized net deferred loan costs and premiums | 15,352 | 10,529 | ||||||
| Gross loans receivable | 1,068,802 | 1,026,059 | ||||||
| Credit and interest marks on purchased loans, net | (31 | ) | (95 | ) | ||||
| Allowance for credit losses | (9,509 | ) | (9,424 | ) | ||||
| Loans receivable, net | $ | 1,059,262 | $ | 1,016,540 | ||||
Accrued interest receivable on loans receivable held for investment was $5.5 million and $5.2 million at March 31, 2026 and December 31, 2025, respectively, and is included in accrued interest receivable on the consolidated statements of financial condition.
The following tables summarize the activity in the allowance for credit losses on loans for the three months ended:
| March 31, 2026 | ||||||||||||||||||||
| Beginning Balance | Charge-offs | Recoveries | Provision (Recapture) | Ending Balance | ||||||||||||||||
| (In thousands) | ||||||||||||||||||||
| | ||||||||||||||||||||
| Single-family | $ | 132 | $ | – | $ | – | $ | – | $ | 132 | ||||||||||
| Multi-family | 4,782 | – | – | (399 | ) | 4,383 | ||||||||||||||
| Commercial real estate | 1,193 | – | – | 510 | 1,703 | |||||||||||||||
| Church | 36 | – | – | 28 | 64 | |||||||||||||||
| Construction | 2,039 | – | – | (353 | ) | 1,686 | ||||||||||||||
| Commercial - other | 900 | – | – | 558 | 1,458 | |||||||||||||||
| SBA loans | 342 | (37 | ) | – | (222 | ) | 83 | |||||||||||||
| Total | $ | 9,424 | $ | (37 | ) | $ | – | $ | 122 | $ | 9,509 | |||||||||
| March 31, 2025 | ||||||||||||||||||||
| Beginning Balance | Charge-offs | Recoveries | Provision (Recapture) | Ending Balance | ||||||||||||||||
| (In thousands) | ||||||||||||||||||||
| | ||||||||||||||||||||
| Single-family | $ | 200 | $ | – | $ | – | $ | (7 | ) | $ | 193 | |||||||||
| Multi-family | 4,617 | – | – | 1,444 | 6,061 | |||||||||||||||
| Commercial real estate | 1,188 | – | – | 97 | 1,285 | |||||||||||||||
| Church | 54 | – | – | (6 | ) | 48 | ||||||||||||||
| Construction | 1,564 | – | – | (169) | 1,395 | |||||||||||||||
| Commercial - other | 730 | – | – | 470 | 1,200 | |||||||||||||||
| SBA loans | 11 | – | – | 67 | 78 | |||||||||||||||
| Total | $ | 8,364 | $ | – | $ | – | $ | 1,896 | $ | 10,260 | ||||||||||
The Company recorded a provision for off-balance sheet loan commitments of $78 and $18 thousand for the three months ended March 31, 2026 and 2025, respectively.
The ACL increased from $9.4 million at December 31, 2025 to $9.5 million at March 31, 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 portfolios 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 following tables present individually evaluated collateral dependent loans by collateral type as of the date indicated:
| March 31, 2026 | ||||||||||||||||||||
| | Single-Family | Multi-Family Residential | Church | Business Assets | Total | |||||||||||||||
| Real estate: | (In thousands) | |||||||||||||||||||
| Single-family | $ | 424 | $ | – | $ | – | $ | – | $ | 424 | ||||||||||
| Multi-family | | – | | 2,094 | – | | – | | 2,094 | |||||||||||
| Construction | – | 8,168 | – | – | 8,168 | |||||||||||||||
| Commercial - other | – | – | – | 261 | 261 | |||||||||||||||
| Total | $ | 424 | $ | 10,262 | $ | – | $ | 261 | $ | 10,947 | ||||||||||
| December 31, 2025 | ||||||||||||||||||||
| Single-Family | Multi-Family Residential | Church | Business Assets | Total | ||||||||||||||||
| Real estate: | (In thousands) | |||||||||||||||||||
| Single-family | $ | 424 | $ | – | $ | – | $ | – | $ | 424 | ||||||||||
| Multi-family | – | 2,094 | – | – | 2,094 | |||||||||||||||
| Construction | – | 8,168 | – | – | 8,168 | |||||||||||||||
| Commercial - other | – | – | – | 261 | 261 | |||||||||||||||
| Total | $ | 424 | $ | 10,262 | $ | – | $ | 261 | $ | 10,947 | ||||||||||
At March 31, 2026, $10.9 million of individually evaluated loans were evaluated based on the estimated fair value of the underlying collateral. These loans had an associated ACL of $1.2 million as of March 31, 2026. All of these collateral dependent loans were on non-accrual status at March 31, 2026.
At December 31, 2025, $10.9 million of individually evaluated loans were evaluated based on the estimated fair value of the underlying collateral. These loans had an associated ACL of $1.1 million as of December 31, 2025. All of these collateral dependent loans were on non-accrual status at December 31, 2025.
Past Due Loans
The following tables present the aging of the recorded investment in past due loans by loan type as of the dates indicated:
| March 31, 2026 | ||||||||||||||||||||||||
| 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 | $ | 259 | $ | – | $ | 424 | $ | 683 | $ | 19,075 | $ | 19,758 | ||||||||||||
| Multi-family | 6,737 | – | 2,094 | 8,831 | 579,912 | 588,743 | ||||||||||||||||||
| Commercial real estate | 2,568 | – | – | 2,568 | 165,402 | 167,970 | ||||||||||||||||||
| Church | – | – | – | – | 8,932 | 8,932 | ||||||||||||||||||
| Construction | 7,920 | 15,675 | 8,168 | 31,763 | 39,307 | 71,070 | ||||||||||||||||||
| Commercial - other | – | 3,421 | 628 | 4,049 | 190,074 | 194,123 | ||||||||||||||||||
| SBA loans | – | – | 148 | 148 | 18,041 | 18,189 | ||||||||||||||||||
| Consumer | – | – | – | – | 17 | 17 | ||||||||||||||||||
| Total | $ | 17,484 | $ | 19,096 | $ | 11,462 | $ | 48,042 | $ | 1,020,760 | $ | 1,068,802 | ||||||||||||
| December 31, 2025 | ||||||||||||||||||||||||
| 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 | $ | 133 | $ | – | $ | 424 | $ | 557 | $ | 20,070 | $ | 20,627 | ||||||||||||
| Multi-family | 6,162 | – | 2,094 | 8,256 | 587,535 | 595,791 | ||||||||||||||||||
| Commercial real estate | – | – | – | – | 162,445 | 162,445 | ||||||||||||||||||
| Church | – | – | – | – | 9,024 | 9,024 | ||||||||||||||||||
| Construction | 5,533 | – | – | 5,533 | 67,139 | 72,672 | ||||||||||||||||||
| Commercial - other | – | 367 | 261 | 628 | 146,366 | 146,994 | ||||||||||||||||||
| SBA loans | – | – | 222 | 222 | 18,246 | 18,468 | ||||||||||||||||||
| Consumer | – | – | – | – | 38 | 38 | ||||||||||||||||||
| Total | $ | 11,828 | $ | 367 | $ | 3,001 | $ | 15,196 | $ | 1,010,863 | $ | 1,026,059 | ||||||||||||
The following tables present the recorded investment in non-accrual loans by loan type as of the dates indicated:
| March 31, 2026 | ||||||||||||
| Non-accrual with no Allowance for Credit Losses | Non-accrual with an Allowance for Credit Losses | Total Non-accrual Loans | ||||||||||
| (In thousands) | ||||||||||||
| Loans receivable held for investment: | ||||||||||||
| Commercial - other | $ | 261 | $ | 367 | $ | 628 | ||||||
| SBA loans | – | 148 | 148 | |||||||||
| Single family | 424 | – | 424 | |||||||||
| Multi-family | 2,094 | – | 2,094 | |||||||||
| Construction | – | 8,168 | 8,168 | |||||||||
| Total non-accrual loans | $ | 2,779 | $ | 8,683 | $ | 11,462 | ||||||
| December 31, 2025 | ||||||||||||
| Non-accrual with no Allowance for Credit Losses | Non-accrual with an Allowance for Credit Losses | Total Non-accrual Loans | ||||||||||
| (In thousands) | ||||||||||||
| Loans receivable held for investment: | ||||||||||||
| Real Estate: | ||||||||||||
| Single-family | $ | 424 | $ | – | $ | 424 | ||||||
| Multi-family | 2,094 | – | 2,094 | |||||||||
| Construction | – | 8,168 | 8,168 | |||||||||
| Commercial - other | 261 | – | 261 | |||||||||
| SBA loans | – | 222 | 222 | |||||||||
| Total non-accrual loans | $ | 2,779 | $ | 8,390 | $ | 11,169 | ||||||
There were no loans 90 days or more delinquent that were accruing interest as of March 31, 2026 or December 31, 2025.
Modified Loans to Troubled Borrowers
GAAP requires that certain types of modifications of loans in response to a borrower’s financial difficulty be reported, which consist of the following: (i) principal forgiveness, (ii) interest rate reduction, (iii) other-than-insignificant payment delay, (iv) term extension, or (v) any combination of the 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.
The following tables present the amortized cost basis and the financial effect of loans modified to borrowers experiencing financial difficulty during the three months ended March 31, 2026 and 2025.
| Three Months Ended March 31, 2026 | ||||||||||||
| Term Extension | Percentage of Total Loan Type | Weighted Average Term Extension | ||||||||||
| (In Thousands) | ||||||||||||
| Real estate: | ||||||||||||
| Construction | $ | 4,808 | 6.74 | % | 6 months | |||||||
| Total | $ | 4,808 | ||||||||||
| Three Months Ended March 31, 2025 | ||||||||||||
| Term Extension | Percentage of Total Loan Type | Weighted Average Term Extension | ||||||||||
| (In Thousands) | ||||||||||||
| Real estate: | ||||||||||||
| Commercial real estate | $ | 792 | 0.48 | % | 8 months | |||||||
| Construction | 2,039 | 2.20 | % | 8 months | ||||||||
| Total | $ | 2,831 | ||||||||||
None of the modified loans have defaulted during the three months ended March 31, 2026 or March 31, 2025. As of March 31, 2026, the Company has committed to lend an additional $237 thousand to one borrower whose loan was modified.
Credit Quality Indicators
The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. For single-family residential, consumer, and other smaller balance homogeneous loans, a credit grade is established at inception, and generally only adjusted based on performance. Information about payment status is disclosed elsewhere herein. The Company analyzes all other loans individually by classifying the loans as to credit risk. 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 that appears short term in nature. 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 may 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, based on 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. |
Loans not meeting the criteria above that are analyzed individually as part of the above-described process are considered to be pass rated loans. Pass rated loans are generally well protected by the current net worth and paying capacity of the obligor and/or by the value of the underlying collateral. Pass rated loans are not more than 59 days past due and are generally performing in accordance with the loan terms.
The following table stratifies the loans held for investment portfolio by the Company’s internal risk grading, and by year of origination as of the date indicated:
| Term Loans Amortized Cost Basis by Origination Year - As of March 31, 2026 | ||||||||||||||||||||||||||||||||
| | 2026 | 2025 | 2024 | 2023 | 2022 | Prior | Revolving Loans | Total | ||||||||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||||||||||
| Single-family: | ||||||||||||||||||||||||||||||||
| Pass | $ | – | $ | – | $ | – | $ | 530 | $ | 2,767 | $ | 13,876 | $ | – | $ | 17,173 | ||||||||||||||||
| Watch | – | – | – | – | – | 861 | – | 861 | ||||||||||||||||||||||||
| Special Mention | – | – | – | – | – | 134 | – | 134 | ||||||||||||||||||||||||
| Substandard | – | – | – | – | 1,166 | 424 | – | 1,590 | ||||||||||||||||||||||||
| Total | $ | – | $ | – | $ | – | $ | 530 | $ | 3,933 | $ | 15,295 | $ | – | $ | 19,758 | ||||||||||||||||
| | ||||||||||||||||||||||||||||||||
| Multi-family: | ||||||||||||||||||||||||||||||||
| Pass | $ | – | $ | 2,512 | $ | 63,367 | $ | 60,014 | $ | 169,336 | $ | 204,341 | $ | – | $ | 499,570 | ||||||||||||||||
| Watch | 1,989 | – | 13,126 | 19,958 | 8,532 | 22,090 | – | 65,695 | ||||||||||||||||||||||||
| Special Mention | – | – | – | – | – | 7,375 | – | 7,375 | ||||||||||||||||||||||||
| Substandard | – | – | – | 1,139 | 6,561 | 6,324 | – | 14,024 | ||||||||||||||||||||||||
| Doubtful | – | – | – | – | 2,079 | – | – | 2,079 | ||||||||||||||||||||||||
| Total | $ | 1,989 | $ | 2,512 | $ | 76,493 | $ | 81,111 | $ | 186,508 | $ | 240,130 | $ | – | $ | 588,743 | ||||||||||||||||
| | ||||||||||||||||||||||||||||||||
| Commercial real estate: | ||||||||||||||||||||||||||||||||
| Pass | $ | 2,571 | $ | 23,909 | $ | 44,507 | $ | 13,690 | $ | 21,305 | $ | 42,976 | $ | – | $ | 148,958 | ||||||||||||||||
| Watch | – | – | 4,147 | 2,360 | – | 1,200 | – | 7,707 | ||||||||||||||||||||||||
| Special Mention | – | – | – | – | – | 3,446 | – | 3,446 | ||||||||||||||||||||||||
| Substandard | – | – | – | 850 | – | 7,009 | – | 7,859 | ||||||||||||||||||||||||
| Total | $ | 2,571 | $ | 23,909 | $ | 48,654 | $ | 16,900 | $ | 21,305 | $ | 54,631 | $ | – | $ | 167,970 | ||||||||||||||||
| | ||||||||||||||||||||||||||||||||
| Church: | ||||||||||||||||||||||||||||||||
| Pass | $ | – | $ | – | $ | – | $ | 2,300 | $ | – | $ | 5,697 | $ | – | $ | 7,997 | ||||||||||||||||
| Watch | – | – | – | 352 | – | 583 | – | 935 | ||||||||||||||||||||||||
| Substandard | – | – | – | – | – | – | – | – | ||||||||||||||||||||||||
| Total | $ | – | $ | – | $ | – | $ | 2,652 | $ | – | $ | 6,280 | $ | – | $ | 8,932 | ||||||||||||||||
| | ||||||||||||||||||||||||||||||||
| Construction: | ||||||||||||||||||||||||||||||||
| Watch | $ | 1,069 | $ | 3,487 | $ | 10,280 | $ | – | $ | – | $ | – | $ | – | $ | 14,836 | ||||||||||||||||
| Special Mention | – | – | – | 12,696 | – | – | – | 12,696 | ||||||||||||||||||||||||
| Substandard | – | – | – | 13,149 | 25,882 | 4,507 | – | 43,538 | ||||||||||||||||||||||||
| Total | $ | 1,069 | $ | 3,487 | $ | 10,280 | $ | 25,845 | $ | 25,882 | $ | 4,507 | $ | – | $ | 71,070 | ||||||||||||||||
| | ||||||||||||||||||||||||||||||||
| Commercial – other: | ||||||||||||||||||||||||||||||||
| Pass | $ | 15,015 | $ | 62,981 | $ | 21,264 | $ | 31,286 | $ | 8,682 | $ | 7,307 | $ | – | $ | 146,535 | ||||||||||||||||
| Watch | – | 9,989 | 17,475 | 14,999 | 974 | 1,171 | – | 44,608 | ||||||||||||||||||||||||
| Special Mention | – | – | – | – | – | 2,250 | – | 2,250 | ||||||||||||||||||||||||
| Substandard | – | – | – | – | – | 730 | – | 730 | ||||||||||||||||||||||||
| Total | $ | 15,015 | $ | 72,970 | $ | 38,739 | $ | 46,285 | $ | 9,656 | $ | 11,458 | $ | – | $ | 194,123 | ||||||||||||||||
| | ||||||||||||||||||||||||||||||||
| SBA: | ||||||||||||||||||||||||||||||||
| Pass | $ | – | $ | 3,732 | $ | 12,270 | $ | 1,417 | $ | – | $ | 57 | $ | – | $ | 17,476 | ||||||||||||||||
| Watch | – | – | 565 | – | – | – | – | 565 | ||||||||||||||||||||||||
| Substandard | – | – | – | – | 148 | – | – | 148 | ||||||||||||||||||||||||
| Doubtful | – | – | – | – | – | – | – | – | ||||||||||||||||||||||||
| Total | $ | – | $ | 3,732 | $ | 12,835 | $ | 1,417 | $ | 148 | $ | 57 | $ | – | $ | 18,189 | ||||||||||||||||
| YTD gross charge-offs | – | – | – | – | – | (37 | ) | – | (37 | ) | ||||||||||||||||||||||
| | ||||||||||||||||||||||||||||||||
| Consumer: | ||||||||||||||||||||||||||||||||
| Pass | $ | 17 | $ | – | $ | – | $ | – | $ | – | $ | – | $ | – | $ | 17 | ||||||||||||||||
| Total | $ | 17 | $ | – | $ | – | $ | – | $ | – | $ | – | $ | – | $ | 17 | ||||||||||||||||
| | ||||||||||||||||||||||||||||||||
| Total loans: | ||||||||||||||||||||||||||||||||
| Pass | $ | 17,603 | $ | 93,134 | $ | 141,408 | $ | 109,237 | $ | 202,090 | $ | 274,254 | $ | – | $ | 837,726 | ||||||||||||||||
| Watch | 3,058 | 13,476 | 45,593 | 37,669 | 9,506 | 25,905 | – | 135,207 | ||||||||||||||||||||||||
| Special Mention | – | – | – | 12,696 | – | 13,205 | – | 25,901 | ||||||||||||||||||||||||
| Substandard | – | – | – | 15,138 | 33,757 | 18,994 | – | 67,889 | ||||||||||||||||||||||||
| Doubtful | – | – | – | – | 2,079 | – | – | 2,079 | ||||||||||||||||||||||||
| Total loans | $ | 20,661 | $ | 106,610 | $ | 187,001 | $ | 174,740 | $ | 247,432 | $ | 332,358 | $ | – | $ | 1,068,802 | ||||||||||||||||
| Term Loans Amortized Cost Basis by Origination Year - As of December 31, 2025 | ||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | 2022 | 2021 | Prior | Revolving Loans | Total | |||||||||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||||||||||
| Single-family: | ||||||||||||||||||||||||||||||||
| Pass | $ | – | $ | – | $ | 533 | $ | 2,785 | $ | 2,464 | $ | 12,806 | $ | – | $ | 18,588 | ||||||||||||||||
| Watch | – | – | – | – | – | 867 | – | 867 | ||||||||||||||||||||||||
| Substandard | – | – | – | 1,172 | – | – | – | 1,172 | ||||||||||||||||||||||||
| Total | $ | – | $ | – | $ | 533 | $ | 3,957 | $ | 2,464 | $ | 13,673 | $ | – | $ | 20,627 | ||||||||||||||||
| Multi-family: | ||||||||||||||||||||||||||||||||
| Pass | $ | 2,519 | $ | 63,728 | $ | 64,468 | $ | 164,533 | $ | 122,938 | $ | 82,514 | $ | – | $ | 500,700 | ||||||||||||||||
| Watch | – | 13,169 | 16,343 | 14,299 | 9,979 | 23,162 | – | 76,952 | ||||||||||||||||||||||||
| Special Mention | – | – | – | – | 1,774 | 1,235 | – | 3,009 | ||||||||||||||||||||||||
| Substandard | – | – | 1,343 | 6,572 | 4,332 | 804 | – | 13,051 | ||||||||||||||||||||||||
| Doubtful | – | – | – | 2,079 | – | – | – | 2,079 | ||||||||||||||||||||||||
| Total | $ | 2,519 | $ | 76,897 | $ | 82,154 | $ | 187,483 | $ | 139,023 | $ | 107,715 | $ | – | $ | 595,791 | ||||||||||||||||
| YTD gross charge-offs | $ | – | $ | – | $ | – | $ | (1,143 | ) | $ | – | $ | – | $ | – | $ | (1,143 | ) | ||||||||||||||
| Commercial real estate: | ||||||||||||||||||||||||||||||||
| Pass | $ | 20,019 | $ | 48,758 | $ | 13,741 | $ | 21,476 | $ | 24,284 | $ | 20,415 | $ | – | $ | 148,693 | ||||||||||||||||
| Watch | – | – | 2,363 | – | – | – | – | 2,363 | ||||||||||||||||||||||||
| Special Mention | – | – | 854 | – | – | 3,475 | – | 4,329 | ||||||||||||||||||||||||
| Substandard | – | – | – | $ | – | $ | 6,288 | 772 | $ | – | $ | 7,060 | ||||||||||||||||||||
| Total | $ | 20,019 | $ | 48,758 | $ | 16,958 | $ | 21,476 | $ | 30,572 | $ | 24,662 | $ | – | $ | 162,445 | ||||||||||||||||
| Church: | ||||||||||||||||||||||||||||||||
| Pass | $ | – | $ | – | $ | 2,330 | $ | – | $ | 2,091 | $ | 3,652 | $ | – | $ | 8,073 | ||||||||||||||||
| Watch | – | – | 357 | – | – | 594 | – | 951 | ||||||||||||||||||||||||
| Substandard | – | – | – | – | – | – | – | – | ||||||||||||||||||||||||
| Total | $ | – | $ | – | $ | 2,687 | $ | – | $ | 2,091 | $ | 4,246 | $ | – | $ | 9,024 | ||||||||||||||||
| Construction: | ||||||||||||||||||||||||||||||||
| Watch | $ | 6,700 | $ | 9,232 | $ | – | $ | – | $ | – | $ | – | $ | – | $ | 15,932 | ||||||||||||||||
| Special Mention | – | – | 12,983 | 5,533 | – | – | – | 18,516 | ||||||||||||||||||||||||
| Substandard | – | – | 12,634 | 21,073 | 2,519 | 1,998 | – | 38,224 | ||||||||||||||||||||||||
| Total | $ | 6,700 | $ | 9,232 | $ | 25,617 | $ | 26,606 | $ | 2,519 | $ | 1,998 | $ | – | $ | 72,672 | ||||||||||||||||
| Commercial – other: | ||||||||||||||||||||||||||||||||
| Pass | $ | 43,037 | $ | 21,347 | $ | 18,837 | $ | 8,834 | $ | – | $ | 7,341 | $ | – | $ | 99,396 | ||||||||||||||||
| Watch | 9,984 | 17,469 | 14,993 | 1,000 | – | 1,171 | – | 44,617 | ||||||||||||||||||||||||
| Special Mention | – | – | – | – | – | 2,617 | – | 2,617 | ||||||||||||||||||||||||
| Substandard | – | – | – | – | 103 | 261 | – | 364 | ||||||||||||||||||||||||
| Total | $ | 53,021 | $ | 38,816 | $ | 33,830 | $ | 9,834 | $ | 103 | $ | 11,390 | $ | – | $ | 146,994 | ||||||||||||||||
| SBA: | ||||||||||||||||||||||||||||||||
| Pass | $ | 3,789 | $ | 12,415 | $ | 1,452 | $ | – | $ | – | $ | 19 | $ | – | $ | 17,675 | ||||||||||||||||
| Substandard | – | 571 | – | 148 | – | – | – | 719 | ||||||||||||||||||||||||
| Doubtful | – | – | – | – | – | 74 | – | 74 | ||||||||||||||||||||||||
| Total | $ | 3,789 | $ | 12,986 | $ | 1,452 | $ | 148 | $ | – | $ | 93 | $ | – | $ | 18,468 | ||||||||||||||||
| YTD gross charge-offs | $ | – | $ | – | $ | – | $ | – | $ | – | $ | (36 | ) | $ | – | $ | (36 | ) | ||||||||||||||
| Consumer: | ||||||||||||||||||||||||||||||||
| Pass | $ | 38 | $ | – | $ | – | $ | – | $ | – | $ | – | $ | – | $ | 38 | ||||||||||||||||
| Total | $ | 38 | $ | – | $ | – | $ | – | $ | – | $ | – | $ | – | $ | 38 | ||||||||||||||||
| Total loans: | ||||||||||||||||||||||||||||||||
| Pass | $ | 69,402 | $ | 146,248 | $ | 101,361 | $ | 197,628 | $ | 151,777 | $ | 126,747 | $ | – | $ | 793,163 | ||||||||||||||||
| Watch | 16,684 | 39,870 | 34,056 | 15,299 | 9,979 | 25,794 | – | 141,682 | ||||||||||||||||||||||||
| Special Mention | – | – | 13,837 | 5,533 | 1,774 | 7,327 | – | 28,471 | ||||||||||||||||||||||||
| Substandard | – | 571 | 13,977 | 28,965 | 13,242 | 3,835 | – | 60,590 | ||||||||||||||||||||||||
| Doubtful | – | – | – | 2,079 | – | 74 | – | 2,153 | ||||||||||||||||||||||||
| Total loans | $ | 86,086 | $ | 186,689 | $ | 163,231 | $ | 249,504 | $ | 176,772 | $ | 163,777 | $ | – | $ | 1,026,059 | ||||||||||||||||
Allowance for Credit Losses for Off-Balance Sheet Commitments
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 accrued expenses and other liabilities of the consolidated statements of financial condition. 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 $302 thousand and $224 thousand at March 31, 2026 and December 31, 2025, respectively.
NOTE 5 – Goodwill and Core Deposit Intangible
The following tables present the changes in the carrying amounts of goodwill and core deposit intangibles for the three months ended March 31, 2026 and 2025:
| March 31, 2026 | |||
| Core Deposit Intangible | |||
| (In thousands) | |||
| Balance at the beginning of the period | $ | 1,460 | |
| Impairment | – | ||
| Amortization | (76 | ) | |
| Balance at the end of the period | $ | 1,384 | |
| March 31, 2025 | ||||||||
| Goodwill | Core Deposit Intangible | |||||||
| (In thousands) | ||||||||
| Balance at the beginning of the period | $ | 25,858 | $ | 1,775 | ||||
| Amortization | – | (79 | ) | |||||
| Balance at the end of the period | $ | 25,858 | $ | 1,696 | ||||
The carrying amount of the core deposit intangible consisted of the following (in thousands):
| March 31, 2026 | December 31, 2025 | |||||||
| Core deposit intangible acquired | $ | 3,329 | $ | 3,329 | ||||
| Less: Accumulated amortization | (1,945 | ) | (1,869 | ) | ||||
| | $ | 1,384 | $ | 1,460 | ||||
The following table outlines the estimated amortization expense for the core deposit intangible during the next five fiscal years (in thousands):
| Remainder of 2026 | $ | 228 | ||
| 2027 | 291 | |||
| 2028 | 279 | |||
| 2029 | 267 | |||
| 2030 | 256 | |||
| Thereafter | 63 | |||
| $ | 1,384 |
Management engaged a third party to complete the goodwill impairment testing as of September 30, 2025 which indicated that goodwill was impaired and a $25.9 million goodwill impairment charge was recorded in the quarter ending September 30, 2025.
Note 6 – Derivatives
The Company utilizes interest rate swap agreements with commercial banking customers to facilitate their interest rate management strategies. The Company entered into corresponding offsetting derivatives with third parties. While these derivatives represent economic hedges, they do not qualify as hedges for accounting purposes.
The Company presents derivatives on a gross basis on the consolidated statements of financial condition. The notional amount of the interest rate swaps does not represent amounts exchanged by the parties. The amount exchanged is determined by reference to the notional amount and the other terms of the individual interest rate swap agreements. The following tables present the amounts recorded on the consolidated statements of financial condition related to the Company’s interest rate swaps.
| As of March 31, 2026 | |||||||||
| Notional Amount | Fair Value | Consolidated Statements of Financial Condition Category | |||||||
| (In thousands) | |||||||||
| Derivatives in an asset position: | |||||||||
| Derivatives not designated as hedging instruments: | |||||||||
| Interest rate swaps related to customer loans | $ | 17,000 | $ | 17 | Other Assets | ||||
| Total derivatives in an asset position | $ | 17,000 | $ | 17 | |||||
| Derivatives in a liability position: | |||||||||
| Derivatives not designated as hedging instruments: | |||||||||
| Interest rate swaps related to customer loans | $ | 17,000 | $ | 17 | |||||
| Total derivatives in a liability position | $ | 17,000 | $ | 17 | Accrued Expenses and Other Liabilities | ||||
| As of December 31, 2025 | |||||||||
| Notional Amount | Fair Value | Consolidated Statements of Financial Condition Category | |||||||
| (In thousands) | |||||||||
| Derivatives in an asset position: | |||||||||
| Derivatives not designated as hedging instruments: | |||||||||
| Interest rate swaps related to customer loans | $ | 17,000 | $ | 105 | Other Assets | ||||
| Total derivatives in an asset position | $ | 17,000 | $ | 105 | |||||
| Derivatives in a liability position: | |||||||||
| Derivatives not designated as hedging instruments: | |||||||||
| Interest rate swaps related to customer loans | $ | 17,000 | $ | 105 | |||||
| Total derivatives in a liability position | $ | 17,000 | $ | 105 | Accrued Expenses and Other Liabilities | ||||
NOTE 7 – Borrowings
The Bank enters into agreements under which it sells securities subject to an obligation to repurchase the same or similar securities. Under these arrangements, the Bank may transfer legal control over the assets but still retain effective control through an agreement that both entitles and obligates the Bank to repurchase the assets. As a result, these repurchase agreements are accounted for as collateralized financing agreements (i.e., secured borrowings) and not as a sale and subsequent repurchase of 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 March 31, 2026 securities sold under agreements to repurchase totaled $81.2 million at an average rate of 3.67%. The fair value of securities pledged totaled $83.0 million as of March 31, 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 totaled $83.7 million as of December 31, 2025.
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 3.79% as of December 31, 2025. The weighted average contractual maturity was less than one month as of December 31, 2025. Loans with unpaid balances of $443.1 million and $448.6 million at March 31, 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 $246.0 million as of March 31, 2026.
In addition, the Company had additional lines of credit of $10.0 million with other financial institutions as of March 31, 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 March 31, 2026 or December 31, 2025.
NOTE 8 – Fair Value
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 ordinary 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 other 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.
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).
Assets and Liabilities Measured on a Recurring Basis
Assets and liabilities measured at fair value on a recurring basis are summarized below:
| Fair Value Measurement | ||||||||||||||||
| Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total | |||||||||||||
| (In thousands) | ||||||||||||||||
| At March 31, 2026: | ||||||||||||||||
| Securities available-for-sale: | ||||||||||||||||
| Federal agency mortgage-backed securities | $ | – | $ | 139,822 | $ | – | $ | 139,822 | ||||||||
| Federal agency CMOs | – | 80,063 | – | 80,063 | ||||||||||||
| Federal agency debt | – | 23,652 | – | 23,652 | ||||||||||||
| Municipal bonds | – | 4,510 | – | 4,510 | ||||||||||||
| U.S. Treasuries | – | – | – | – | ||||||||||||
| SBA pools | – | 7,749 | – | 7,749 | ||||||||||||
| Asset-backed securities | – | 8,885 | – | 8,885 | ||||||||||||
| Corporate bonds | – | 19,422 | – | 19,422 | ||||||||||||
| Interest rate swap asset | – | 17 | – | 17 | ||||||||||||
| Interest rate swap liability | – | (17 | ) | – | (17 | ) | ||||||||||
| At December 31, 2025: | ||||||||||||||||
| Securities available-for-sale: | ||||||||||||||||
| Federal agency mortgage-backed securities | $ | – | $ | 114,430 | $ | – | $ | 114,430 | ||||||||
| Federal agency CMOs | – | 69,457 | – | 69,457 | ||||||||||||
| Federal agency debt | – | 28,413 | – | 28,413 | ||||||||||||
| Municipal bonds | – | 4,522 | – | 4,522 | ||||||||||||
| U.S. Treasuries | 4,987 | – | – | 4,987 | ||||||||||||
| SBA pools | – | 8,275 | – | 8,275 | ||||||||||||
| Asset-backed securities | – | 9,269 | – | 9,269 | ||||||||||||
| Corporate bonds | – | 17,482 | – | 17,482 | ||||||||||||
| Interest rate swap asset | – | 105 | – | 105 | ||||||||||||
| Interest rate swap liability | – | (105 | ) | – | (105 | ) | ||||||||||
There were no transfers between Level 1, Level 2, or Level 3 during the three months ended March 31, 2026 and 2025.
Assets Measured on a Nonrecurring Basis
The Company measures certain assets at fair value on a nonrecurring basis and the following is a general description of the methods used to value such assets.
Collateral-Dependent Loans - The fair value of collateral-dependent loans with specific allocations of the allowance for credit losses is generally based on recent 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 for similar loans and collateral underlying loans and result in a Level 3 classification.
The table below presents assets measured at fair value on a nonrecurring basis.
| Fair Value Measurement | ||||||||||||||||
| Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total | |||||||||||||
| (In thousands) | ||||||||||||||||
| At March 31, 2026: | ||||||||||||||||
| Collateral dependent loans: Real estate: | ||||||||||||||||
| Single-family | $ | – | $ | – | $ | 424 | $ | 424 | ||||||||
| Multi-family | – | – | 2,094 | 2,094 | ||||||||||||
| Construction | – | – | 7,435 | 7,435 | ||||||||||||
| Commercial - other | – | – | 261 | 261 | ||||||||||||
The following table represents quantitative information about Level 3 fair value assumptions for assets measured at fair value on a non-recurring basis at March 31, 2026.
| Fair Value | Valuation Technique(s) | Unobservable Input(s) | Range | ||||||||
| (In thousands) | |||||||||||
| At March 31, 2026: | |||||||||||
| Collateral dependent loans: Real estate: | |||||||||||
| Single-family | $ | 424 | Market approach | Adjustments to market data | 5% - 10 | % | |||||
| Multi-family | 2,094 | Market approach | Adjustments to market data | 5% - 10 | % | ||||||
| Construction | 7,435 | Market approach | Adjustments to market data | 5% - 10 | % | ||||||
| Commercial - other | 261 | Market approach | Adjustments to market data | 5% - 10 | % | ||||||
The table below presents assets measured at fair value on a nonrecurring basis.
| Fair Value Measurement | |||||||||||||||||
| Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total | ||||||||||||||
| (In thousands) | |||||||||||||||||
| At December 31, 2025: | |||||||||||||||||
| Collateral dependent loans: Real estate: | |||||||||||||||||
| Single-family | $ | – | $ | – | $ | 424 | $ | 424 | |||||||||
| Multi-family | – | – | 2,094 | 2,094 | |||||||||||||
| Construction | – | – | 7,435 | 7,435 | |||||||||||||
| Commercial - other | – | – | 138 | 138 | |||||||||||||
The following table represents quantitative information about Level 3 fair value assumptions for assets measured at fair value on a non-recurring basis at December 31, 2025.
| Fair Value | Valuation Technique(s) | Unobservable Input(s) | Range | |||||||||
| (In thousands) | ||||||||||||
| At December 31, 2025: | ||||||||||||
| Collateral dependent loans: Real estate: | ||||||||||||
| Single-family | $ | 424 | Market approach | Adjustments to market data | 5% - 10 | % | ||||||
| Multi-family | 2,094 | Market approach | Adjustments to market data | 5% - 10 | % | |||||||
| Construction | 7,435 | Market approach | Adjustments to market data | 5% - 10 | % | |||||||
| Commercial - other | 138 | Market approach | Adjustments to market data | 5% - 10 | % | |||||||
Fair Values of Financial Instruments
The following tables present the carrying amount, fair value, and level within the fair value hierarchy of the Company’s financial instruments as of March 31, 2026 and December 31, 2025.
| Fair Value Measurements at March 31, 2026 | ||||||||||||||||||||
| Carrying Value | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
| (In thousands) | ||||||||||||||||||||
| Financial Assets: | ||||||||||||||||||||
| Cash and cash equivalents | $ | 26,606 | $ | 26,606 | $ | – | $ | – | $ | 26,606 | ||||||||||
| Securities available-for-sale | 284,103 | – | 284,103 | – | 284,103 | |||||||||||||||
| Loans receivable held for investment | 1,059,262 | – | – | 1,021,921 | 1,021,921 | |||||||||||||||
| Accrued interest receivable | 6,676 | 84 | 1,130 | 5,462 | 6,676 | |||||||||||||||
| Interest rate swaps | 17 | – | 17 | – | 17 | |||||||||||||||
| Financial Liabilities: | ||||||||||||||||||||
| Non interest bearing demand deposits | $ | 98,245 | $ | – | $ | 98,245 | $ | – | $ | 98,245 | ||||||||||
| Interest bearing demand deposits | 664,334 | – | 664,334 | – | 664,334 | |||||||||||||||
| Time deposits | 310,477 | – | 310,136 | – | 310,136 | |||||||||||||||
| FHLB borrowings | – | – | – | – | – | |||||||||||||||
| Secured borrowings | – | – | – | – | – | |||||||||||||||
| Securities sold under agreements to repurchase | 81,249 | – | 81,249 | – | 81,249 | |||||||||||||||
| Accrued interest payable | 1,604 | – | 1,604 | – | 1,604 | |||||||||||||||
| Interest rate swaps | 17 | – | 17 | – | 17 | |||||||||||||||
| Fair Value Measurements at December 31, 2025 | ||||||||||||||||||||
| Carrying Value | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
| (In thousands) | ||||||||||||||||||||
| Financial Assets: | ||||||||||||||||||||
| Cash and cash equivalents | $ | 10,507 | $ | 10,507 | $ | – | $ | – | $ | 10,507 | ||||||||||
| Securities available-for-sale | 256,835 | 4,987 | 251,848 | – | 256,835 | |||||||||||||||
| Loans receivable held for investment | 1,016,540 | – | – | 1,002,049 | 1,002,049 | |||||||||||||||
| Accrued interest receivable | 5,999 | 36 | 800 | 5,163 | 5,999 | |||||||||||||||
| Interest rate swaps | 105 | – | 105 | – | 105 | |||||||||||||||
| Financial Liabilities: | ||||||||||||||||||||
| Non-interest-bearing demand deposits | $ | 105,835 | $ | – | $ | 105,835 | $ | – | $ | 105,835 | ||||||||||
| Interest-bearing demand deposits | | 512,034 | | – | | 512,034 | | – | | 512,034 | ||||||||||
| Time deposits | 299,734 | – | 299,434 | – | 299,434 | |||||||||||||||
| FHLB advances | 72,000 | – | 72,019 | – | 72,019 | |||||||||||||||
| Securities sold under agreements to repurchase | 80,773 | – | 80,773 | – | 80,773 | |||||||||||||||
| Accrued interest payable | 1,633 | – | 1,633 | – | 1,633 | |||||||||||||||
| Interest rate swaps | 105 | – | 105 | – | 105 | |||||||||||||||
In accordance with ASC 820, 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 – Stock-based Compensation
Prior to June 21, 2023, the Company issued stock-based compensation awards to its directors and officers under the 2018 Long Term Incentive Plan (“LTIP”) which allowed the grant of non-qualified and incentive stock options, stock appreciation rights, full value awards and cash incentive awards. The maximum number of shares available to be awarded under the LTIP was 161,639 shares.
On June 21, 2023, stockholders approved an Amendment and Restatement of the 2018 Long Term Incentive Plan (“Amended and Restated LTIP”) which allows the issuance of 487,500 additional shares and brought the number of shares that may be issued under the Amended and Restated LTIP to 649,139 shares.
Stock-based compensation is recognized on a straight-line basis over the vesting period. During the three months ended March 31, 2026 and 2025, the Company recorded $134 thousand and $99 thousand of stock-based compensation expense, respectively. During both the three months ended March 31, 2026 and 2025, the Company recorded $168 thousand of director stock compensation expense, which was determined using the fair value of the stock on the dates of the awards.
As of March 31, 2026, 485,632 shares had been awarded under the Amended and Restated LTIP and 163,507 shares were available to be awarded. The following tables present unvested stock award activity during the three months ended March 31, 2026 and 2025:
| Three months ended | ||||||||
| March 31, 2026 | March 31, 2025 | |||||||
| | ||||||||
| Outstanding at the beginning of the period | 149,705 | 184,874 | ||||||
| Granted during period | 123,634 | 111,527 | ||||||
| Forfeited during period | (5,183 | ) | (710 | ) | ||||
| Vested during period | (55,186 | ) | (62,827 | ) | ||||
| Outstanding at the end of the period | 212,970 | 232,864 | ||||||
During the three months ended March 31, 2026, 12,500 stock options were forfeited. No stock options were granted, exercised or expired during the three months ended March 31, 2025.
No stock options were outstanding or exercisable at March 31, 2026. The Company did not record any stock-based compensation expense related to stock options during the three months ended March 31, 2026 or 2025.
NOTE 10 – ESOP Plan
Employees participate in an ESOP after attaining certain age and service requirements. During 2022, the ESOP purchased 58,369 shares of the Company’s common stock at an average cost of $8.57 per share for a total cost of $500 thousand which was funded with a $5 million line of credit from the Company. During 2023, the ESOP purchased 369,953 additional shares of the Company’s common stock at an average cost of $9.19 per share for a total cost of $3.4 million which was funded with the line of credit. Any loans or borrowings under the line of credit will be repaid from the Bank’s 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. Dividends on allocated shares increase participant accounts. Dividends on unallocated shares will be used to repay the loan. At the end of employment, participants will receive shares for their vested balance. Compensation expense related to the ESOP was $88 thousand and $50 thousand for the three months ended March 31, 2026 and 2025, respectively.
Shares held by the ESOP were as follows:
| March 31, 2026 | December 31, 2025 | |||||||
| (Dollars in thousands) | ||||||||
| Allocated to participants | 118,478 | 124,968 | ||||||
| Committed to be released | 62,058 | 55,568 | ||||||
| Suspense shares | 406,108 | 406,108 | ||||||
| Total ESOP shares | 586,644 | 586,644 | ||||||
| Fair value of unearned shares | $ | 2,948 | $ | 3,005 | ||||
The value of unearned shares, which are reported as Unearned ESOP shares in the equity section of the consolidated statements of financial condition, was $3.8 million and $3.9 million at March 31, 2026 and December 31, 2025, respectively.
NOTE 11 – Regulatory Matters
The Bank’s capital requirements are administered by the Office of the Comptroller of the Currency (“OCC”) and involve quantitative measures of assets, liabilities, and certain off-balance sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by the OCC. Failure to meet capital requirements can result in regulatory action.
As a result of the Economic Growth, Regulatory Relief, and Consumer Protection Act, the federal banking agencies have developed a “Community Bank Leverage Ratio” (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%. Actual and required capital amounts and ratios as of the dates indicated are presented below:
| Actual | Minimum Required to Be Well Capitalized Under Prompt Corrective Action Provisions | |||||||||||||||
| Amount | Ratio | Amount | Ratio | |||||||||||||
| (Dollars in thousands) | ||||||||||||||||
| March 31, 2026: | ||||||||||||||||
| Community Bank Leverage Ratio | $ | 193,077 | 14.06 | % | $ | 123,597 | 9.00 | % | ||||||||
| December 31, 2025: | ||||||||||||||||
| Community Bank Leverage Ratio | $ | 191,336 | 14.09 | % | $ | 122,184 | 9.00 | % | ||||||||
At March 31, 2026, 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, 2026 that would materially adversely change the Bank’s capital classifications. From time to time, the Bank may need to raise additional capital to support its further growth and to maintain its “well capitalized” status.
NOTE 12 – 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 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 any 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.
At March 31, 2026, the Company maintained a $449 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.
The Company recorded income tax expense of $282 thousand for the first quarter of 2026, compared to an income tax benefit of $1.1 million for the first quarter of 2025. The increase in income tax expense reflected an increase in pre-tax income of $5.2 million between the two periods. The effective tax rate was 19.76% for the first quarter of 2026, compared to 28.75% for the first quarter of 2025.
NOTE 13 – Concentrations
The Bank has a significant concentration of deposits with five customers that accounted for approximately 40% and 28% of its deposits as of March 31, 2026 and December 31, 2025, respectively. The Bank also has a significant concentration of short-term borrowings from one customer that accounted for 92% and 91% of the outstanding balance of securities sold under agreements to repurchase as of March 31, 2026 and December 31, 2025, respectively.
The Company’s lending activities are predominantly in real estate loans that are secured by properties located in Southern California and in Washington, D.C. and surrounding areas, and many of the borrowers reside in those areas. Therefore, the Company’s exposure to credit risk is significantly affected by changes in the economy and real estate market in the markets in which the Company operates.
Multi‑family loans represented 55.65% of our gross loan portfolio at March 31, 2026 compared to 58.41% of our gross loan portfolio at December 31, 2025. We seek to mitigate the risks associated with multi‑family loans by applying appropriate underwriting requirements, which include limitations on loan‑to‑value ratios and debt service coverage ratios. Under our underwriting policies, loan‑to‑value ratios on our multi‑family loans usually do not exceed 75% of the lower of the purchase price or the appraised value of the underlying property. We also generally require minimum debt service coverage ratios of 120% for multi‑family loans. Properties securing multi‑family loans are appraised by management‑approved independent appraisers. Title insurance is required on all loans.
| ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to provide a reader of our financial statements with a narrative from the perspective of our management 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 1 “Financial Statements,” of this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2025 (the “2025 Form 10-K”). 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 “expect,” “estimate,” “project,” “budget,” “forecast,” “anticipate,” “intend,” “plan,” “may,” “will,” “could,” “should,” “believes,” “potential,” “continue,” “prospects,” “ability,” “looking,” “forward,” “invest,” “grow,” “improve,” “likely” 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 level of estimation uncertainty and have 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; therefore, you are encouraged to review each of the policies included in Note 1 “Summary of Significant Accounting Policies” of the Notes to Consolidated Financial Statements in our 2025 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 (“ACL”) for Loans
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.
During the quarter ended March 31, 2026, the Company transitioned from using the weighted average remaining maturity (“WARM”) method for measuring the ACL to a discounted cash flow (“DCF”) method. Concurrently, the Company also changed the way that qualitative factors are applied in the estimation of the ACL. These changes are intended to improve the precision of the expected credit loss calculations. These changes are considered a change in accounting estimate, rather than a change in accounting principle, as they result from an improved estimation methodology rather than a fundamental change in the underlying accounting framework. The changes in estimation techniques and certain related inputs and assumptions used to estimate expected credit losses on the Company’s loan portfolio and unfunded commitments did not materially impact the Company’s results of operations or financial condition.
The Company’s DCF methodology incorporates a probability of default (“PD”) and loss given default (“LGD”) model, whereby PDs and LGDs are forecasted using economic scenarios over a reasonable and supportable period to generate estimates for cash flows expected to be collected over the estimated life of a loan. Estimates of future expected cash flows ultimately reflect assumptions made concerning net credit losses over the life of a loan. The model also incorporates management’s assumptions regarding prepayments and curtailments. The use of reasonable and supportable forecasts, including the determination of the appropriate length of the forecast horizon, requires significant judgment. Management leverages peer data as well as economic projections from an independent third party to inform and provide its reasonable and supportable economic forecasts. Other internal and external indicators of economic forecasts may also be considered by management when developing the forecast metrics.
The Company’s ACL model forecasts PD and LGD over a one-year time horizon, which the Company believes is a reasonable and supportable period. Beyond the one-year forecast time horizon, the Company’s ACL model reverts to historical long-term average loss rates over the remaining contractual periods. The duration of the forecast horizon, the period over which forecasts revert to long-term averages, the economic forecasts that management utilizes, as well as additional internal and external indicators of economic forecasts that management considers, may change over time depending on the nature and composition of the Company’s loan portfolio. Changes in economic forecasts, in conjunction with changes in loan specific attributes, impact a loan’s PD and LGD, which can drive changes in the determination of the ACL.
Expectations of future cash flows are discounted at the loan’s effective interest rate. The resulting ACL for a loan represents the amount by which the loan’s amortized cost exceeds the net present value of a loan’s discounted cash flows. The ACL is recorded through a charge to provision for credit losses and is reduced by charge-offs, net of recoveries on loans previously charged-off. It is the Company’s policy to charge-off loan balances at the time they have been deemed uncollectible.
Prior to March 31, 2026, the Company measured the ACL for each of its loan segments using the WARM method. The weighted average remaining life, including the effect of estimated prepayments, was calculated for each loan pool on a quarterly basis. The Company then estimated 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.
In conjunction with the conversion to DCF methodology, the bank has adopted a new scorecard-based methodology for estimating the qualitative reserve factors. The purpose of the qualitative scorecard is to provide a framework to reliably and consistently determine reasonable and supportable qualitative estimates of the expected credit losses in the current loan portfolio compared to losses expected from the quantitative analysis. The appropriate qualitative reserve is derived by loan segment from incremental risk statuses for each qualitative factor. The risk statuses in the scorecard range from “very low risk” to “critical risk.” A qualitative reserve allocation is made to each portfolio based on the risk assessment. All inputs and assumptions in the qualitative scorecard were individually assessed to determine the proper risk status, and all decisions were made independently of the previous WARM qualitative analysis.
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 recapture 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. These qualitative factors incorporate the concept of reasonable and supportable forecasts, as required by ASC 326.
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 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 increase or decrease the ACL for collateral dependent loans based on changes in the estimated fair value of the collateral.
Overview
Total assets increased by $80.5 million at March 31, 2026, compared to December 31, 2025, reflecting increases in net loans of $42.7 million, securities available-for-sale of $27.3 million and cash and cash equivalents of $16.1 million. The increases in net loans and securities available-for-sale were mainly due to purchases of loans and securities available-for-sale.
Loans held for investment, net of the ACL, increased by $42.7 million to $1.1 billion at March 31, 2026, compared to $1.0 billion at December 31, 2025. The increase was primarily due to loan purchases.
Deposits increased by $155.5 million, or 16.9%, to $1.1 billion at March 31, 2026, from $917.6 million at December 31, 2025, due to participation in an online financial platform that serves as a marketplace for high-yield savings and CD accounts. The increase in deposits was attributable to increases of $198.1 million in savings deposits and $11.1 million in certificates of deposit accounts, partially offset by decreases of $48.5 million in liquid deposits (demand, interest checking, and money market accounts), $4.8 million in Insured Cash Sweep (“ICS”) deposits (ICS deposits are the Bank’s money market deposit accounts in excess of Federal Deposit Insurance Corporation (“FDIC”) insured limits whereby the Bank makes reciprocal arrangements for insurance with other banks), and $319 thousand in Certificate of Deposit Registry Service (“CDARS”) deposits (CDARS deposits are similar to ICS deposits, but involve certificates of deposit, instead of money market accounts).
Borrowings decreased by $72.0 million from December 31, 2025 to March 31, 2026, due to paying off FHLB advances.
Net income attributable to common stockholders increased to $409 thousand, or $0.05 per diluted share, during the first quarter of 2026 after deducting preferred dividends of $750 thousand, compared to net loss attributable to common stockholders of $3.4 million, or ($0.39) per diluted share, 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 first quarter of 2025. Diluted income per common share for both the first quarter of 2026 and the first quarter of 2025 reflects preferred dividends of $0.09 per diluted common share.
For the three months ended March 31, 2026, the Company reported consolidated net income before preferred dividends of $1.2 million, or $0.13 per diluted share, compared to consolidated net loss before preferred dividends of $2.7 million, or ($0.31) per diluted share, for the first quarter 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.
Results of Operations
Net Interest Income
Three Months Ended March 31, 2026 Compared to the Three Months Ended March 31, 2025
Net interest income totaled $9.1 million, representing an increase of $1.0 million, or 12.5%, from net interest income of $8.0 million for the first quarter of 2025. The increase resulted from a $1.4 million increase in interest income, due to a $1.4 million increase in interest income on available-for-sale securities due to an increase in the average balance of available-for-sale 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. These increases in net interest income were partially offset by a $1.8 million increase in interest expense on deposits due to an increase in the average balance of deposits and the average rate paid on deposits.
The net interest margin increased to 2.75% for the first quarter of 2026 from 2.63% for the first quarter of 2025, due to an increase in the average rate earned on interest-earning assets, which increased to 4.93% for the first quarter of 2026 from 4.84% for the first quarter of 2025, and a decrease in the cost of funds, which decreased to 2.91% for the first quarter of 2026 from 3.06% for the first quarter of 2025.
The following tables set forth the average balances, average yields and costs, and certain other information for the periods indicated. All average balances are daily average balances. The yields set forth below include the effect of deferred loan fees, deferred origination costs, and discounts and premiums that are amortized or accreted to interest income or expense. We do not accrue interest on loans that are on non-accrual status; however, the balance of these loans is included in the total average balance of loans receivable, which has the effect of reducing average loan yields.
| For the Three Months Ended | ||||||||||||||||||||||||
| March 31, 2026 | March 31, 2025 | |||||||||||||||||||||||
| (Dollars in thousands) | Average Balance | Interest | Average Yield/Cost | Average Balance | Interest | Average Yield/Cost | ||||||||||||||||||
| Assets | ||||||||||||||||||||||||
| Interest-earning assets: | ||||||||||||||||||||||||
| Interest-bearing deposits | $ | 22,560 | $ | 201 | 3.61 | % | $ | 28,958 | $ | 312 | 4.37 | % | ||||||||||||
| Securities | 265,415 | 2,613 | 3.99 | % | 196,463 | 1,208 | 2.49 | % | ||||||||||||||||
| Loans receivable, net (1) | 1,039,076 | 13,287 | 5.19 | % | 1,003,730 | 13,117 | 5.30 | % | ||||||||||||||||
| FRB and FHLB stock | 6,642 | 108 | 6.59 | % | 11,188 | 164 | 5.94 | % | ||||||||||||||||
| Total interest-earning assets | 1,333,693 | $ | 16,209 | 4.93 | % | 1,240,339 | $ | 14,801 | 4.84 | % | ||||||||||||||
| Non-interest-earning assets | 42,377 | 50,173 | ||||||||||||||||||||||
| Total assets | $ | 1,376,070 | $ | 1,290,512 | ||||||||||||||||||||
| Liabilities and Equity | ||||||||||||||||||||||||
| Interest-bearing liabilities: | ||||||||||||||||||||||||
| Money market deposits | $ | 191,248 | $ | 1,047 | 2.22 | % | $ | 119,101 | $ | 257 | 0.88 | % | ||||||||||||
| Savings deposits | 102,463 | 631 | 2.50 | % | 48,712 | 68 | 0.57 | % | ||||||||||||||||
| Interest checking and other demand deposits | 264,446 | 1,619 | 2.48 | % | 255,647 | 1,911 | 3.03 | % | ||||||||||||||||
| Certificate accounts | 313,330 | 2,693 | 3.49 | % | 224,317 | 1,963 | 3.55 | % | ||||||||||||||||
| Total deposits | 871,487 | 5,990 | 2.79 | % | 647,777 | 4,199 | 2.63 | % | ||||||||||||||||
| FHLB borrowings | 44,072 | 421 | 3.87 | % | 149,135 | 1,529 | 4.16 | % | ||||||||||||||||
| Other borrowings | 82,359 | 745 | 3.67 | % | 98,525 | 1,028 | 4.23 | % | ||||||||||||||||
| Total borrowings | 126,431 | 1,166 | 3.74 | % | 247,660 | 2,557 | 4.19 | % | ||||||||||||||||
| Total interest-bearing liabilities | 997,918 | $ | 7,156 | 2.91 | % | 895,437 | $ | 6,756 | 3.06 | % | ||||||||||||||
| Non-interest-bearing liabilities | 113,688 | 108,638 | ||||||||||||||||||||||
| Equity | 264,464 | 286,437 | ||||||||||||||||||||||
| Total liabilities and equity | $ | 1,376,070 | $ | 1,290,512 | ||||||||||||||||||||
| Net interest rate spread (2) | $ | 9,053 | 2.02 | % | $ | 8,045 | 1.78 | % | ||||||||||||||||
| Net interest rate margin (3) | 2.75 | % | 2.63 | % | ||||||||||||||||||||
| Ratio of interest-earning assets to interest-bearing liabilities | 133.65 | % | 138.52 | % | ||||||||||||||||||||
| (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. |
Provision for Credit Losses
For the three months ended March 31, 2026, the Company recorded a provision for credit losses of $200 thousand, compared to $1.9 million for the three months ended March 31, 2025. This decrease was largely attributed to a reduction in required reserves on individually evaluated loans, as a specific reserve was recorded on a non‑accrual loan during the first quarter of 2025.
The Company recorded a provision for off-balance sheet loan commitments of $78 thousand and $18 thousand for the three months ended March 31, 2026 and 2025, respectively.
The ACL increased from $9.4 million at December 31, 2025 to $9.5 million at March 31, 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 portfolios 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 March 31, 2026 with an unpaid principal balance of $11.5 million. Credit quality remains strong with non-accrual loans as a percentage of total loans at 1.07% and non-performing assets to total assets of 0.80%.
Non-interest Expense
Non-interest expense was $8.0 million for the first quarter of 2026, compared to $10.2 million for the first quarter of 2025, representing a decrease of $2.2 million, or 21.4%. The decrease was primarily due to the $1.9 million operational loss incurred in the first quarter of 2025 as well as a $398 thousand decrease in compensation and benefits expense.
Income Taxes
The Company recorded income tax expense of $282 thousand for the first quarter of 2026, compared to an income tax benefit of $1.1 million for the first quarter of 2025. The increase in income tax expense reflected an increase in pre-tax income of $5.2 million between the two periods. The effective tax rate was 19.76% for the first quarter of 2026, compared to 28.75% for the first quarter of 2025.
Financial Condition
Total Assets
Total assets increased by $80.5 million at March 31, 2026 compared to December 31, 2025, reflecting increases in net loans of $42.7 million, securities available-for-sale of $27.3 million and cash and cash equivalents of $16.1 million.
Securities Available-For-Sale
Securities available-for-sale totaled $284.1 million at March 31, 2026, compared to $256.8 million at December 31, 2025. The $27.3 million increase in securities available-for-sale during the three months ended March 31, 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 March 31, 2026. The table reflects stated final maturities and does not reflect scheduled principal payments or expected payoffs.
| March 31, 2026 | ||||||||||||||||||||||||||||||||||||||||
| One Year or Less | More Than One Year to Five Years | More Than Five Years to Ten Years | More Than Ten Years | Total | ||||||||||||||||||||||||||||||||||||
| Carrying Amount | Weighted Average Yield | Carrying Amount | Weighted Average Yield | Carrying Amount | Weighted Average Yield | Carrying Amount | Weighted Average Yield | Carrying Amount | Weighted Average Yield | |||||||||||||||||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||||||||||||||||||||||
| Available‑for‑sale: | ||||||||||||||||||||||||||||||||||||||||
| Federal agency mortgage‑backed securities | $ | 11 | 3.01 | % | $ | 2,032 | 1.17 | % | $ | 8,968 | 1.98 | % | $ | 128,811 | 4.14 | % | $ | 139,822 | 3.96 | % | ||||||||||||||||||||
| Federal agency CMOs | – | – | 2,371 | 4.05 | % | 6,746 | 3.76 | % | 70,946 | 4.67 | % | 80,063 | 4.58 | % | ||||||||||||||||||||||||||
| Federal agency debt | 4,912 | 1.39 | % | 15,684 | 1.91 | % | 3,056 | 4.14 | % | – | – | 23,652 | 2.09 | % | ||||||||||||||||||||||||||
| Municipal bonds | – | – | 3,054 | 1.50 | % | – | – | 1,456 | 1.72 | % | 4,510 | 1.57 | % | |||||||||||||||||||||||||||
| U.S. Treasuries | – | – | – | – | – | – | – | – | – | – | ||||||||||||||||||||||||||||||
| SBA pools | – | – | 1,000 | 2.38 | % | – | – | 6,749 | 2.26 | % | 7,749 | 2.27 | % | |||||||||||||||||||||||||||
| Asset-backed securities | – | – | – | – | – | – | 8,885 | 5.12 | % | 8,885 | 5.12 | % | ||||||||||||||||||||||||||||
| Corporate bonds | – | – | – | – | 19,422 | 6.18 | % | – | – | 19,422 | 6.18 | % | ||||||||||||||||||||||||||||
| Total | $ | 4,923 | 1.39 | % | $ | 24,141 | 2.03 | % | $ | 38,192 | 4.60 | % | $ | 216,847 | 4.28 | % | $ | 284,103 | 4.08 | % | ||||||||||||||||||||
Loans Receivable Held for Investment
Loans receivable held for investment, net of the ACL, increased by $42.7 million to $1.1 billion at March 31, 2026, compared to $1.0 billion at December 31, 2025. The increase was primarily due to loan purchases.
The following table presents loan categories by maturity for the period indicated. Actual repayments historically have, and will likely in the future, differ significantly from contractual maturities because individual borrowers generally have the right to prepay loans, with or without prepayment penalties.
| March 31, 2026 | ||||||||||||||||||||
| One Year or Less | More Than One Year to Five Years | More Than Five Years to 15 Years | More Than 15 Years | Total | ||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||
| Loans receivable held for investment: | ||||||||||||||||||||
| Single-family | $ | 4,059 | $ | 6,012 | $ | 3,264 | $ | 6,400 | $ | 19,735 | ||||||||||
| Multi-family | 16,350 | 24,912 | 10,965 | 533,984 | 586,211 | |||||||||||||||
| Commercial real estate | 11,193 | 96,960 | 34,568 | 25,406 | 168,127 | |||||||||||||||
| Church | 2,857 | 2,169 | 3,896 | – | 8,922 | |||||||||||||||
| Construction | 53,372 | 17,914 | – | – | 71,286 | |||||||||||||||
| Commercial - other | 27,938 | 37,124 | 21,432 | 95,794 | 182,288 | |||||||||||||||
| SBA loans | 57 | – | 9,248 | 7,559 | 16,864 | |||||||||||||||
| Consumer | 17 | – | – | – | 17 | |||||||||||||||
| $ | 115,843 | $ | 185,091 | $ | 83,373 | $ | 669,143 | $ | 1,053,450 | |||||||||||
| Loans maturities after one year with: | ||||||||||||||||||||
| Fixed rates | ||||||||||||||||||||
| Single-family | $ | 5,889 | $ | 656 | $ | – | $ | 6,545 | ||||||||||||
| Multi-family | 23,255 | 4,633 | – | 27,888 | ||||||||||||||||
| Commercial real estate | 73,536 | 23,542 | – | 97,078 | ||||||||||||||||
| Church | – | – | – | – | ||||||||||||||||
| Construction | 1,988 | – | – | 1,988 | ||||||||||||||||
| Commercial - other | 37,124 | 16,449 | 20,620 | 74,193 | ||||||||||||||||
| SBA loans | – | 3,359 | – | 3,359 | ||||||||||||||||
| Consumer | – | – | – | – | ||||||||||||||||
| $ | 141,792 | $ | 48,639 | $ | 20,620 | $ | 211,051 | |||||||||||||
| Variable rates | ||||||||||||||||||||
| Single-family | $ | 123 | $ | 2,608 | $ | 6,400 | $ | 9,131 | ||||||||||||
| Multi-family | 1,657 | 6,332 | 533,984 | 541,973 | ||||||||||||||||
| Commercial real estate | 23,424 | 11,026 | 25,406 | 59,856 | ||||||||||||||||
| Church | 2,169 | 3,896 | – | 6,065 | ||||||||||||||||
| Construction | 15,926 | – | – | 15,926 | ||||||||||||||||
| Commercial - other | – | 4,983 | 75,174 | 80,157 | ||||||||||||||||
| SBA loans | – | 5,889 | 7,559 | 13,448 | ||||||||||||||||
| Consumer | – | – | – | – | ||||||||||||||||
| $ | 43,299 | $ | 34,734 | $ | 648,523 | $ | 726,556 | |||||||||||||
| Total | $ | 185,091 | $ | 83,373 | $ | 669,143 | $ | 937,607 | ||||||||||||
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 million or 69.7% of our multi-family loan portfolio as of March 31, 2026.
Allowance for Credit Losses
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.
During the quarter ended March 31, 2026, the Company transitioned from using the WARM method for measuring the ACL to a DCF method. Concurrently, the Company also changed the way that qualitative factors are applied in the estimation of the ACL. These changes are intended to improve the precision of the expected credit loss calculations.
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 non-accrual 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. The ACL for collateral dependent loans is determined using estimates of the fair value of the underlying collateral, less estimated selling costs.
Loans delinquent by 30 days or more, but less than 60 days, increased to $17.5 million at March 31, 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 million at March 31, 2026, from $367 thousand at December 31, 2025, primarily due to one construction loan. Loans past due greater than 90 days were $11.5 million at March 31, 2026, compared to $3.0 million at December 31, 2025.
We believe the ACL is adequate to cover expected losses in the loan portfolio as of March 31, 2026, but there can be no assurance that actual losses will not exceed 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.
The following table details our allocation of the ACL to the various categories of loans held for investment and the percentage of loans in each category to total loans at the dates indicated:
| March 31, 2026 | December 31, 2025 | March 31, 2025 | ||||||||||||||||||||||
| Amount | Percent of Loans in Each Category to Total Loans | Amount | Percent of Loans in Each Category to Total Loans | Amount | Percent of Loans in Each Category to Total Loans | |||||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||||||
| Single-family | $ | 132 | 1.87 | % | $ | 132 | 2.03 | % | $ | 193 | 2.34 | % | ||||||||||||
| Multi‑family | 4,383 | 55.65 | % | 4,782 | 58.41 | % | 6,061 | 63.12 | % | |||||||||||||||
| Commercial real estate | 1,703 | 15.96 | % | 1,193 | 16.01 | % | 1,285 | 16.48 | % | |||||||||||||||
| Church | 64 | 0.85 | % | 36 | 0.89 | % | 48 | 0.93 | % | |||||||||||||||
| Construction | 1,686 | 6.77 | % | 2,039 | 7.19 | % | 1,395 | 9.26 | % | |||||||||||||||
| Commercial - other | 1,458 | 17.30 | % | 900 | 13.79 | % | 1,200 | 7.75 | % | |||||||||||||||
| SBA loans | 83 | 1.60 | % | 342 | 1.68 | % | 78 | 0.12 | % | |||||||||||||||
| Total allowance for credit losses | $ | 9,509 | 100.00 | % | $ | 9,424 | 100.00 | % | $ | 10,260 | 100.00 | % | ||||||||||||
Total Liabilities
Total liabilities increased by $80.8 million to $1.2 billion at March 31, 2026 from December 31, 2025, primarily due to an increase of $155.5 million in deposits, partially offset by a $72.0 million decrease in FHLB borrowings.
Deposits
Deposits increased by $155.5 million, or 16.9%, to $1.1 billion at March 31, 2026, from $917.6 million at December 31, 2025. The increase in deposits was attributable to increases of $198.1 million in savings deposits and $11.1 million in certificates of deposit accounts, partially offset by decreases of $48.5 million in liquid deposits (demand, interest checking, and money market accounts), $4.8 million in ICS deposits, and $319 thousand in CDARS deposits. As of March 31, 2026, our uninsured deposits, including deposits from the Bank and other affiliates, represented 46% of our total deposits, compared to 41% as of December 31, 2025.
The following table presents the maturity of time deposits, which includes CDARS, as of the dates indicated:
| Three Months or Less | Three to Six Months | Six Months to One Year | Over One Year | Total | ||||||||||||||||
| (In thousands) | ||||||||||||||||||||
| March 31, 2026 | ||||||||||||||||||||
| Time deposits of $250,000 or less | $ | 61,453 | $ | 79,402 | $ | 52,942 | $ | 34,034 | $ | 227,831 | ||||||||||
| Time deposits of more than $250,000 | 41,612 | 16,290 | 13,893 | 10,851 | 82,646 | |||||||||||||||
| Total | $ | 103,065 | $ | 95,692 | $ | 66,835 | $ | 44,885 | $ | 310,477 | ||||||||||
| Not covered by deposit insurance | $ | 37,612 | $ | 6,040 | $ | 11,893 | $ | 7,850 | $ | 63,395 | ||||||||||
| December 31, 2025 | ||||||||||||||||||||
| Time deposits of $250,000 or less | $ | 65,681 | $ | 42,989 | $ | 83,129 | $ | 2,849 | $ | 194,648 | ||||||||||
| Time deposits of more than $250,000 | 79,939 | 4,491 | 18,413 | 2,243 | 105,086 | |||||||||||||||
| Total | $ | 145,620 | $ | 47,480 | $ | 101,542 | $ | 5,092 | $ | 299,734 | ||||||||||
| Not covered by deposit insurance | $ | 74,439 | $ | 2,491 | $ | 14,913 | $ | 1,743 | $ | 93,586 | ||||||||||
Borrowings
The Bank enters into agreements under which it sells securities subject to an obligation to repurchase the same or similar securities. Under these arrangements, the Bank may transfer legal control over the assets but still retain effective control through an agreement that both entitles and obligates the Bank to repurchase the assets. As a result, these repurchase agreements are accounted for as collateralized financing agreements (i.e., secured borrowings) and not as a sale and subsequent repurchase of 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 March 31, 2026, securities sold under agreements to repurchase totaled $81.2 million at an average rate of 3.67%. The fair value of securities pledged for repurchase agreements totaled $83.0 million as of March 31, 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 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 3.79% as of December 31, 2025. The weighted average contractual maturity was less than one month as of December 31, 2025. Loans with unpaid balances of $443.1 million and $448.6 million at March 31, 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 $246.0 million as of March 31, 2026.
In addition, the Company had additional lines of credit of $10.0 million with other financial institutions as of March 31, 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 March 31, 2026 or December 31, 2025.
Stockholders’ Equity
Broadway Financial Corporation and subsidiary equity was $262.5 million, or 18.4%, of the Company’s total assets, at March 31, 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 at March 31, 2026 and $12.28 at December 31, 2025. Capital ratios remain strong with a Community Bank Leverage Ratio of 14.06% at March 31, 2026 and 14.09% at December 31, 2025.
In March 2025, the Company issued 88,295 shares of restricted stock to its officers and employees under the Amended and Restated LTIP. Each restricted stock award was valued based on the fair value of the stock on the date of the award. All the shares issued to officers and employees vest over periods ranging from 36 months to 60 months.
In March 2025, the Company awarded 23,232 shares of common stock to its directors under the LTIP, which are fully vested.
In May 2025, the Company issued 8,183 shares of restricted stock to an officer under the Amended and Restated LTIP.
In February 2026, the Company issued 4,936 shares of restricted stock to an officer under the Amended and Restated LTIP.
In March 2026, the Company issued 97,298 shares of restricted stock to its officers and employees under the Amended and Restated LTIP. Each restricted stock award was valued based on the fair value of the stock on the date of the award. All the shares issued to officers and employees vest over periods ranging from 36 months to 48 months.
In March 2026, the Company awarded 21,400 shares of common stock to its directors under the LTIP, which are fully vested.
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 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, 2026, the Bank had the ability to borrow $246.0 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.
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 March 31, 2026 consisted of $26.6 million in cash and cash equivalents and $189.4 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 million in loans that were approved but unfunded as of March 31, 2026. In addition, the Bank had $3.1 million in unfunded line of credit loans and $22.0 million in unfunded construction loans as of March 31, 2026.
The Bank has a significant concentration of deposits with five customers that accounted for approximately 40% of its deposits as of March 31, 2026. The Bank also has a significant concentration of short-term borrowings with one customer that accounted for 92% of the outstanding balance of securities sold under agreements to repurchase as of March 31, 2026. The Bank has long-term relationships with these customers and expects to maintain its relationships with them for the foreseeable future.
The Company’s liquidity, separate from the Bank, is based primarily on the proceeds from financing transactions, such as the preferred stock sold to the U.S. Treasury in 2022 and the previous private placements completed in December 2016 and April 2021, and dividends received from the Bank in 2024 and 2025. The Bank is currently under no prohibition from paying dividends to the Company but is subject to restrictions as to the amount of the dividends based on normal regulatory guidelines.
The Company recorded consolidated net cash outflows from investing activities of $68.2 million during the three months ended March 31, 2026, compared to net cash inflows from investing activities of $31.8 million during the three months ended March 31, 2025. Net cash outflows from investing activities for the three months ended March 31, 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 million, partially offset by $18.3 million of principal payments on available-for sale-securities. Net cash inflows from investing activities for the three months ended March 31, 2025 were primarily due to principal paydowns on available-for-sale securities of $20.4 million and proceeds from the redemption of FHLB stock of $7.7 million.
The Company recorded consolidated net cash inflows from financing activities of $83.2 million during the three months ended March 31, 2026, compared to consolidated net cash outflows from financing activities of $73.1 million during the three months ended March 31, 2025. Net cash inflows from financing activities during the three months ended March 31, 2026 were primarily due to proceeds of FHLB borrowings of $183.3 million and a net increase in deposits of $155.5 million, partially offset by repayments of FHLB borrowings of $255.3 million. Net cash outflows from financing activities during the three months ended March 31, 2025 were primarily due to repayments of FHLB advances of $294.0 million, partially offset by proceeds from FHLB advances of $176.5 million, a net increase in deposits of $31.1 million and a $14.2 million net increase in securities sold under agreements to repurchase.
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, 2026 and December 31, 2025, the Bank exceeded all capital adequacy requirements to which it is subject and meets the qualifications to be considered “well capitalized.” (See Note 11 – Regulatory Matters.)
Use of Non-GAAP Financial Measures
Management uses non-GAAP measures because they provide information to investors about the underlying operational performance and trends of the Company. These disclosures should not be considered in isolation or as a substitute for results determined in accordance with GAAP and are not necessarily comparable to non-GAAP performance measures which may be presented by other bank holding companies. Management compensates for these limitations by providing detailed reconciliations between GAAP information and the non-GAAP financial measures. The tables below reconcile the GAAP financial measures to the associated non-GAAP financial measures.
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 CFBanc 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 common book value and tangible book value per common share is shown as follows:
| Common Equity Capital | Shares Outstanding | Per Share Amount | ||||||||||
| (Dollars in thousands) | ||||||||||||
| March 31, 2026: | ||||||||||||
| Common book value | $ | 112,480 | 9,298,949 | $ | 12.10 | |||||||
| Less: | ||||||||||||
| Net unamortized core deposit intangible | 1,384 | |||||||||||
| Tangible book value | $ | 111,096 | 9,298,949 | $ | 11.95 | |||||||
| December 31, 2025: | ||||||||||||
| Common book value | $ | 112,751 | 9,180,498 | $ | 12.28 | |||||||
| Less: | ||||||||||||
| Net unamortized core deposit intangible | 1,460 | |||||||||||
| Tangible book value | $ | 111,291 | 9,180,498 | $ | 12.12 | |||||||
The Company calculates net income (loss) before preferred dividends by adding preferred stock dividends to net income (loss) available to common shareholders. Earnings (loss) per common share - diluted before preferred dividends is calculated by dividing net income (loss) before preferred dividends by the weighted average common shares outstanding for diluted earnings (loss) per common share. The Company considers this information important to shareholders because it illustrates net income and earnings per common share - diluted excluding the impact of preferred dividends.
| For the Three Months Ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| (Dollars in thousands) | ||||||||
| Net income (loss) available to common shareholders | $ | 409 | $ | (3,439 | ) | |||
| Add: Preferred stock dividends | 750 | 750 | ||||||
| Net income (loss) before preferred dividends | $ | 1,159 | $ | (2,689 | ) | |||
| Weighted average common shares outstanding for diluted earnings (loss) per common share | 8,816,188 | 8,547,460 | ||||||
| Earnings (loss) per common share - diluted before preferred dividends | $ | 0.13 | $ | (0.31 | ) | |||
| ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
Not Applicable
| ITEM 4. | CONTROLS AND PROCEDURES |
Evaluation of Disclosure Controls and Procedures
An evaluation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) as of March 31, 2026 was carried out under the supervision and with the participation of the Company’s Chief Executive Officer, Chief Financial Officer and other members of the Company’s senior management. Based on the evaluation, management identified material weaknesses related to the Company’s internal control over financial reporting and, as a result, concluded that the Company’s disclosure controls and procedures were ineffective as of March 31, 2026. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements would not be prevented or detected on a timely basis.
Management identified the following material weaknesses in the Company’s internal control over financial reporting:
The Company did not maintain effective components of the COSO framework in the areas of control activities, information and communication process and monitoring activities that contributed to the following material weaknesses:
| • | The Company did not have controls in place to identify unusual or infrequent equity-related contracts entered into which could have a material impact on accounting and financial reporting. |
| • | The Company did not maintain controls to consider subsequent appraisals for collateral dependent loans. |
Remediation Plans
In response to the identified material weaknesses, the Company’s management, with the oversight of the Audit Committee of our Board of Directors, has begun to dedicate significant resources, including additional employee training, toward efforts to improve our internal control over financial reporting. Management is actively engaged in the planning for, and implementation of, remediation efforts to address the material weaknesses.
| • | Thorough discussion and review of all new unusual or infrequent equity-related contracts each quarter with documentation of accounting treatment and disclosure with respect to such transactions that could have a potential impact on the Company’s financial statements, and |
| • | An enhancement of the controls over the allowance for credit losses at each quarter end to evaluate that all appraisals for collateral dependent loans that are received prior to the date that the financial statements are issued have been evaluated by management and considered in the estimate of the allowance for credit losses. |
Changes in Internal Control over Financial Reporting
There have been no changes in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the three months ended March 31, 2026 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.
PART II. OTHER INFORMATION
| Item 1. | LEGAL PROCEEDINGS |
None
| Item 1A. | RISK FACTORS |
Management is not aware of any material changes to the risk factors that appeared under “Part I, Item 1A. Risk Factors” in the 2025 Form 10-K.
| Item 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
None
| Item 3. | DEFAULTS UPON SENIOR SECURITIES |
None
| Item 4. | MINE SAFETY DISCLOSURES |
Not Applicable
| Item 5. | OTHER INFORMATION |
None
| Item 6. | EXHIBITS |
| Exhibit Number* | |
| Amended and Restated Certificate of Incorporation of Registrant effective as of April 1, 2021 (Exhibit 3.1 to Form 8-K filed by Registrant on April 5, 2021) | |
| Certificate of Amendment to Certificate of Incorporation of Registrant (Exhibit 3.1 to Form 8-K filed by Registrant on November 1, 2023) | |
| 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 Section 302 of the Sarbanes-Oxley Act of 2002 | |
| Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 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 | |
| Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| 101.INS | XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document |
| 101.SCH | 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 | Cover Page Interactive Data File (formatted as inline XBRL and contained in 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 001-39043. |
| ** | Management contract or compensatory plan or arrangement. |
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Date: May 15, 2026 | By: | /s/ Brian Argrett |
| Brian Argrett | ||
| Chief Executive Officer | ||
| Date: May 15, 2026 | By: | /s/ Zack Ibrahim |
| Zack Ibrahim | ||
| Chief Financial Officer |
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