BROADWAY FINANCIAL CORP \DE\

Broadway Financial Corporation operates as a public benefit corporation and a bank holding company, with its wholly-owned subsidiary City First Bank, National Association, a Community Development Financial Institution (CDFI) and certified B Corp, serving historically excluded communities through equitable economic development. The company's principal business consists of attracting deposits from the general public and deploying those funds primarily in loans secured by multi-family residential properties with five or more units and commercial real estate, with a mission to strengthen the overall well-being of historically excluded communities. The retail banking network includes three full-service banking offices as of December 31, 2025: two in California (in Los Angeles and the nearby city of Inglewood) and one in Washington, D.C. The company is headquartered in Los Angeles, California.

The company faces significant competition in both the Washington, D.C. and Los Angeles metropolitan areas from mortgage banking companies, commercial banks, and savings and loan associations, most of which are significantly larger and have greater financial resources, with many having a regional, statewide, or national presence. City First's competitive advantages include its status as a CDFI and certified B Corp, its mission-driven focus on underserved communities, and its outstanding Community Reinvestment Act performance rating from the OCC in their most recent CRA examination completed in 2025. The company's primary lending emphasis has been on the origination of loans secured by multi-family residential properties with five or more units, which amounted to $593.2 million ¹ at December 31, 2025, representing 58.41% ² of the gross loan portfolio.

Revenue is derived primarily from interest income on loans and investments, with principal costs being interest expenses on deposits and borrowings together with general and administrative expenses. The company emphasizes the origination of adjustable-rate loans, most of which are hybrid loans having an initial fixed rate period of five years followed by an adjustable-rate period, and at December 31, 2025, more than 82% ³ of loans had adjustable-rate features. Deposits are the primary source of funds for supporting lending and other investment activities, supplemented by amortization and prepayment of loans and investment securities, advances from the FHLB, and cash flows generated by operations.

The loan portfolio is comprised primarily of commercial mortgage loans secured by multi-family residential properties, single-family residential properties, and commercial real estate, including charter schools, community facilities, and churches, with the remainder consisting of commercial business loans, loans guaranteed by the Small Business Administration, and construction-to-permanent loans. At December 31, 2025, the net loan portfolio totaled $1.0 billion ⁴, or 75.5% ⁵ of total assets. Multi-family loans amounted to $593.2 million ⁶ at December 31, 2025, compared to $639.2 million ⁷ at December 31, 2024, and represented 58.41% ⁸ of the gross loan portfolio at December 31, 2025 compared to 63.50% ⁹ at December 31, 2024. Commercial real estate loans amounted to $162.6 million ¹⁰ at December 31, 2025, compared to $163.3 million ¹¹ at December 31, 2024, representing 16.01% ¹² and 16.23% ¹³ of gross loan portfolios, respectively. Church loans totaled $9.0 million ¹⁴ at December 31, 2025, representing 0.89% ¹⁵ of the gross loan portfolio. Construction loans totaled $73.0 million ¹⁶ at December 31, 2025, representing 7.19% ¹⁷ of the gross loan portfolio. Non-real estate commercial loans totaled $140.0 million ¹⁸ at December 31, 2025, representing 13.79% ¹⁹ of the loan portfolio. SBA loans totaled $17.1 million ²⁰ at December 31, 2025. Single-family loans totaled $20.6 million ²¹ at December 31, 2025.

The securities portfolio, consisting primarily of federal agency debt, mortgage-backed securities, bonds issued by the United States Treasury and the SBA, and municipal bonds, totaled $256.8 million ²², or 19.1% ²³ of total assets at December 31, 2025. The company classifies all securities as available-for-sale and had no securities classified as held-to-maturity. Deposits at December 31, 2025 were $917.6 million ²⁴ compared to $745.4 million ²⁵ at December 31, 2024. Total borrowings at December 31, 2025 consisted of advances from the FHLB of $72.0 million ²⁶ and repurchase agreements of $80.8 million ²⁷, compared to advances from the FHLB of $195.5 million ²⁸, repurchase agreements of $66.6 million ²⁹, and secured borrowings of $31.4 million ³⁰ at December 31, 2024.

During the year ended December 31, 2025, the company originated $45.6 million ³¹ in new loans and purchased $78.0 million ³² of loans, which included $59.1 million ³³ of other commercial loans and $18.9 million ³⁴ of SBA loans. During the second half of the year ended December 31, 2025, the company exited the origination of wholesale lending. The company recorded a non-cash goodwill impairment charge of $25.9 million ³⁵ for the quarter ended September 30, 2025, based on a quantitative assessment that the fair value of the reporting unit was less than its carrying amount. The company also recorded $315 thousand ³⁶ of amortization expense related to the core deposit intangible asset during the year ended December 31, 2025.

For the year ended December 31, 2025, the company reported consolidated net loss attributable to common stockholders of $27.8 million ³⁷ after preferred dividends of $3.0 million ³⁸ and goodwill impairment of $25.9 million ³⁹, compared to net income attributable to common stockholders of $362 thousand ⁴⁰ for the year ended December 31, 2024 after preferred dividends of $1.6 million ⁴¹. Loss per diluted common share was ($3.23) ⁴² for the year ended December 31, 2025, compared to $0.04 ⁴³ of earnings per diluted common share for the year ended December 31, 2024. Consolidated net income before preferred dividends and goodwill impairment was $1.1 million ⁴⁴, or $0.12 ⁴⁵ per diluted share, for the year ended December 31, 2025, compared to consolidated net income of $1.9 million ⁴⁶, or $0.22 ⁴⁷ per diluted share, for the year ended December 31, 2024. Net interest income before provision for credit losses increased by $1.4 million ⁴⁸, or 4.3% ⁴⁹, to $33.1 million ⁵⁰, compared to $31.8 million ⁵¹ for the year ended December 31, 2024. Total assets increased by $10.7 million ⁵² to $1.3 billion ⁵³ at December 31, 2025, compared to $1.3 billion ⁵⁴ at December 31, 2024.

A key growth vector is the expansion of the commercial lending portfolio, which increased significantly during the year. Non-real estate commercial loans grew to $140.0 million ⁵⁵ at December 31, 2025 from $77.8 million ⁵⁶ at December 31, 2024, representing 13.79% ⁵⁷ of the loan portfolio compared to 7.73% ⁵⁸ in the prior year. For the year ended December 31, 2025, the company originated $16.1 million ⁵⁹ of commercial loans and purchased $59.1 million ⁶⁰ of commercial loans at a premium of $7.3 million ⁶¹. The company also purchased $18.9 million ⁶² of SBA loans at a premium of $1.4 million ⁶³ during the year ended December 31, 2025. City First is an approved SBA lender originating loans in Washington, D.C., Maryland, Virginia, and California under the SBA's 7(a), SBA Express, International Trade, and 504(a) loan programs.

Another growth vector is the company's focus on construction lending for affordable housing developments where rents are subsidized by housing authority agencies. During 2025, the company originated $6.8 million ⁶⁴ of construction loans, compared to $8.9 million ⁶⁵ of construction loan originations during 2024. The company specializes in the origination of construction loans for affordable housing developments. Additionally, the company's status as a CDFI and its outstanding CRA rating support its mission-driven growth strategy, with the Bank having received over $6.3 million ⁶⁶ in grants and awards from the CDFI Fund over the last five years, which has been reinvested in the communities served.

The net interest margin increased to 2.64% ⁶⁷ for the year ended December 31, 2025 from 2.34% ⁶⁸ for the year ended December 31, 2024, due to an increase in the average yield earned on average interest-earning assets from 4.70% ⁶⁹ for the year ended December 31, 2024 to 4.88% ⁷⁰ for the year ended December 31, 2025, while the average cost of funds decreased from 3.23% ⁷¹ for the year ended December 31, 2024 to 3.07% ⁷² for the year ended December 31, 2025. The average cost of deposits increased to 2.77% ⁷³ for 2025, compared to 2.24% ⁷⁴ for 2024. Interest expense on borrowings decreased by $10.8 million ⁷⁵ to $8.2 million ⁷⁶ during the year ended December 31, 2025, compared to $19.0 million ⁷⁷ during the year ended December 31, 2024.

The company employed 98 ⁷⁸ full-time employees as of December 31, 2025 across corporate offices, branch locations, and operational facilities, with primary offices in Los Angeles, California, and Washington, D.C., and additional employees working remotely in various locations across the United States. The company's human capital strategy is centered on attracting, selecting, retaining, and developing top-tier talent whose personal values align with the organization's mission and principles. The company provides a comprehensive Total Rewards program including competitive compensation and incentives, comprehensive health and wellness benefits, retirement and financial security programs including a 401(k) with employer matching contributions, paid time off, and employee assistance programs.

The company's capital allocation strategy is reflected in its regulatory capital position, with the Bank's Community Bank Leverage Ratio at 14.09% ⁷⁹ at December 31, 2025, compared to 13.61% ⁸⁰ at December 31, 2024, well above the 9.00% ⁸¹ minimum required to be considered well capitalized. The company has not declared or paid cash dividends on its common stock since June 2010 and has not determined to pay cash dividends at any time in the near future. The company recorded $168 thousand ⁸² and $96 thousand ⁸³ of compensation expense for stock awards to directors in the years ended December 31, 2025 and December 31, 2024, respectively. During the year ended December 31, 2025, the company recorded $114 thousand ⁸⁴ of stock-based compensation expense related to restricted stock awards to officers and employees.

A significant headwind is the company's exposure to the real estate market in Southern California and Washington, D.C., as most of the loan portfolio consists of loans secured by various types of real estate located in these areas. A downturn in the real estate market could seriously impair the loan portfolio and operating results. The company's non-performing loans totaled $11.2 million ⁸⁵ at December 31, 2025 compared to $264 thousand ⁸⁶ at December 31, 2024, and non-performing assets as a percentage of total assets were 0.83% ⁸⁷ at December 31, 2025 compared to 0.02% ⁸⁸ at December 31, 2024. The company had five NPAs at December 31, 2025 and one NPA at December 31, 2024.

Another constraint is the company's reliance on a concentrated deposit base and borrowing relationships. Five customer relationships accounted for approximately 28% ⁸⁹ of deposit balances at December 31, 2025. One customer relationship accounted for 91% ⁹⁰ of the balance of securities sold under agreements to repurchase. As of December 31, 2025, approximately $413.5 million ⁹¹ of total deposits were not insured by FDIC insurance, which represented 41% ⁹² of total deposits. The company also faces risks related to changes in interest rates, as changes in prevailing interest rates adversely affect the business, and the company's ability to accurately forecast and react to future losses may be impaired by significant uncertainties.

The company faces material credit risk from its concentrated real estate loan portfolio, with non-performing loans increasing to $11.2 million ⁹³ at December 31, 2025 from $264 thousand ⁹⁴ at December 31, 2024, and criticized assets (Watch and Special Mention loans) totaling $170.2 million ⁹⁵ at December 31, 2025. The allowance for credit losses of $9.4 million ⁹⁶ may not be adequate to cover actual loan losses, particularly given the company's reliance on historical loss data from peer institutions rather than its own experience. Interest rate risk is significant as changes in prevailing interest rates affect profitability, with the net interest margin at 2.64% ⁹⁷ for 2025. The company has a material concentration risk with five customer relationships accounting for approximately 28% ⁹⁸ of deposit balances and one customer accounting for 91% ⁹⁹ of securities sold under agreements to repurchase, while $413.5 million ¹⁰⁰ of total deposits were uninsured as of December 31, 2025. The company identified material weaknesses in internal control over financial reporting related to controls over unusual equity-related contracts and subsequent appraisals for collateral dependent loans, which could result in material misstatements of financial statements.

Management's message emphasizes the company's mission-driven focus as a public benefit corporation and CDFI, working to spur equitable economic development and strengthen the overall well-being of historically excluded communities. The strategic priorities emphasized include maintaining the Bank's well-capitalized status, with the Community Bank Leverage Ratio at 14.09% ¹⁰¹ at December 31, 2025, and managing through the impact of the $25.9 million ¹⁰² goodwill impairment charge recorded in the third quarter of 2025. Management highlights the company's focus on originating adjustable-rate loans to reduce exposure to interest rate risk, with more than 82% ¹⁰³ of loans having adjustable-rate features at December 31, 2025, and emphasizes the company's outstanding CRA performance rating from the OCC completed in 2025. Management also notes the remediation of the previously identified material weakness related to the accounting for loan participations as of December 31, 2025, while continuing to address newly identified material weaknesses in internal control over financial reporting.