Equibles

10-Q

BROADWAY FINANCIAL CORP DE (BYFC)

10-Q 2021-08-23 For: 2021-06-30
View Original
Added on April 06, 2026

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2021

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

For transition period from__________ to___________

Commission file number      001-39043

BROADWAY FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)

Delaware 95-4547287
(State or other jurisdiction of<br><br> <br>incorporation or organization) (I.R.S. Employer<br><br> <br>Identification No.)
5055 Wilshire Boulevard, Suite 500<br><br> <br>Los Angeles, California 90036
--- ---
(Address of principal executive offices) (Zip Code)

(323) 634-1700

(Registrant’s telephone number, including area code)

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

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

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

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

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

Large accelerated filer ☐ Accelerated filer ☐
Non-accelerated filer ☒ Smaller reporting company ☒
Emerging growth company ☐

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

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

Yes ☐   No ☒

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

TABLE OF CONTENTS
Page
PART I. FINANCIAL STATEMENTS (to be updated)
Item 1. Consolidated Financial Statements (Unaudited)
Consolidated Statements of Financial Condition as of June 30, 2021 and December 31, 2020 1
Consolidated Statements of Operations and Comprehensive Income (Loss) for the three and six months ended June 30, 2021 and 2020 2
Consolidated Statements of Cash Flows for the six months ended June 30, 2021 and 2020 3
Consolidated Statements of Changes in Stockholders’ Equity for the three and six months ended June 30, 2021 and 2020 4
Notes to Consolidated Financial Statements 6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 29
Item 3. Quantitative and Qualitative Disclosures About Market Risk 40
Item 4. Controls and Procedures 40
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 42
Item 1A. Risk Factors 42
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 42
Item 3. Defaults Upon Senior Securities 42
Item 4. Mine Safety Disclosures 42
Item 5. Other Information 42
Item 6. Exhibits 42
Signatures 43

Table of Contents

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Consolidated Statements of Financial Condition

(In thousands, except share and per share amounts)

December 31, 2020
Assets:
Cash and due from banks 41,730 $ 71,110
Interest-bearing deposits in other banks 168,653 24,999
Cash and cash equivalents 210,383 96,109
Securities available-for-sale, at fair value 158,832 10,698
Loans receivable held for investment, net of allowance of 3,296<br> and 3,215 614,718 360,129
Accrued interest receivable 2,572 1,202
Federal Home Loan Bank (FHLB) stock 2,896 3,431
Federal Reserve Bank (FRB) stock 693 -
Office properties and equipment, net 9,159 2,540
Bank owned life insurance 3,168 3,147
Deferred tax assets, net 5,513 5,633
Core deposit intangible, net 3,198 -
Goodwill 25,996 -
Other assets 3,870 489
Total assets 1,040,998 $ 483,378
Liabilities and stockholders’ equity
Liabilities:
Deposits 705,041 $ 315,630
Securities sold under agreements to repurchase 70,660 -
FHLB advances 96,022 110,500
Junior subordinated debentures 2,805 3,315
Notes payable 14,000 -
Accrued expenses and other liabilities 8,975 5,048
Total liabilities 897,503 434,493
Cumulative Redeemable Perpetual Preferred stock, Series A, authorized 3,000<br> shares at June 30, 2021 and none at December 31, 2020; issued and outstanding 3,000 shares at June 30, 2021 and none<br> at December 31, 2020, liquidation value 1,000 per share 3,000 -
Common stock, Class A, 0.01<br> par value, voting, authorized 75,000,000 shares at June 30, 2021 and 50,000,000 shares at December 31, 2020; issued 46,248,710 shares at June 30,<br> 2021 and 21,899,584 shares at December 31, 2020; outstanding 43,630,884<br> shares at June 30, 2021 and 19,281,758 shares at December 31, 2020 462 219
Common stock, Class B, 0.01 par value,<br> non-voting, authorized 15,000,000 shares at June 30, 2021 and  none at December 31,<br> 2020; issued and outstanding 11,404,621 shares at June 30,<br> 2021 and none at December 31, 2020 114 -
Common stock, Class C, 0.01<br> par value, non-voting, authorized 25,000,000 shares at June 30, 2021 and December 31, 2020;<br> issued and outstanding 16,689,775 at June 30, 2021 and 8,756,396 shares at December 31, 2020 167 87
Additional paid-in capital 140,125 46,851
Retained earnings 4,997 7,783
Unearned Employee Stock Ownership Plan (ESOP) shares (861 ) (893 )
Accumulated other comprehensive income, net of tax 785 164
Treasury stock-at cost, 2,617,826 shares at June 30, 2021<br> and at December 31, 2020 (5,326 ) (5,326 )
Total Broadway Financial Corporation and Subsidiary stockholders’ equity 143,463 48,885
Non-controlling interest 32 -
Total liabilities and stockholders’ equity 1,040,998 $ 483,378

All values are in US Dollars.

See accompanying notes to unaudited consolidated financial statements.

1

Table of Contents

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Consolidated Statements of Operations and Comprehensive Income (Loss)

(Unaudited)

Three Months Ended<br><br> <br>June 30, Six Months Ended<br><br> <br>June 30,
2021 2020 2021 2020
(In thousands, except per share)
Interest income:
Interest and fees on loans receivable $ 6,300 $ 4,429 $ 9,944 $ 8,788
Interest on available for sale securities 440 65 496 135
Other interest income 144 74 221 216
Total interest income 6,884 4,568 10,661 9,139
Interest expense:
Interest on deposits 477 967 860 2,022
Interest on borrowings 586 570 1,135 1,188
Total interest expense 1,063 1,537 1,995 3,210
Net interest income 5,821 3,031 8,666 5,929
Loan loss provision 81 - 81 29
Net interest income after loan loss provision 5,740 3,031 8,585 5,900
Non-interest income:
Service charges 36 94 129 238
Gain on sale of loans - 116 - 123
CDFI Grant 1,826 - 1,826 -
Other 330 32 360 78
Total non-interest income 2,192 242 2,315 439
Non-interest expense:
Compensation and benefits 2,819 1,983 8,209 4,038
Occupancy expense 627 320 935 635
Information services 566 221 807 458
Professional services 513 571 2,452 835
Supervisory costs 177 95 247 112
Office services and supplies 59 87 154 163
Corporate insurance 8 32 254 64
Amortization of core deposit intangible 131 - 131 -
Other 474 93 812 246
Total non-interest expense 5,374 3,402 14,001 6,551
Income (loss) before income taxes 2,558 (129 ) (3,101 ) (212 )
Income tax expense (benefit) 1,824 (345 ) (348 ) (395 )
Net income (loss) $ 734 $ 216 $ (2,753 ) $ 183
Less: Net income attributable to non-controlling interest (33 ) - (33 ) -
Net Income (loss) Attributable to Broadway Financial Corporation $ 701 $ 216 $ (2,786 ) $ 183
Other comprehensive income, net of tax:
Unrealized gains on securities available-for-sale arising during the period $ 1,022 $ 155 $ 864 $ 330
Income tax expense 290 46 243 98
Other comprehensive income, net of tax 732 109 621 232
Comprehensive income (loss) $ 1,433 $ 325 $ (2,165 ) $ 415
Earnings (loss) per common share-basic $ 0.01 $ 0.01 $ (0.06 ) $ 0.01
Earnings (loss) per common share-diluted $ 0.01 $ 0.01 $ (0.06 ) $ 0.01

See accompanying notes to unaudited consolidated financial statements.

2

Table of Contents

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Consolidated Statements of Cash Flows

(Unaudited)

Six Months Ended June 30,
2021 2020
(In thousands)
Cash flows from operating activities:
Net (loss) income $ (2,753 ) $ 183
Adjustments to reconcile net income to net cash used in operating activities:
Loan loss provision 81 29
Depreciation 345 115
Net amortization of deferred loan origination costs 964 136
Net amortization of premiums on available for sale securities 231 19
Amortization of investment in affordable housing limited partnership 26 53
Amortization of core deposit intangible 131 -
Director compensation expense-common stock 45 45
Accretion of premium on FHLB advances (7 ) -
Stock-based compensation expense 169 179
Valuation allowance on deferred tax asset 370 -
ESOP compensation expense 47 32
Earnings on bank owned life insurance (21 ) (23 )
Originations of loans receivable held for sale - (110,908 )
Proceeds from sales of loans receivable held for sale - 60,997
Repayments on loans receivable held for sale - 315
Gain on sale of loans receivable held for sale - (123 )
Change in assets and liabilities:
Net change in deferred taxes (1,210 ) (271 )
Net change in accrued interest receivable 267 (68 )
Net change in other assets (1,118 ) (349 )
Net change in advance payments by borrowers for taxes and insurance 310 43
Net change in accrued expenses and other liabilities (447 ) 442
Net cash used in operating activities (2,570 ) (49,154 )
Cash flows from investing activities:
Cash acquired in merger 84,745 -
Net change in loans receivable held for investment (29,749 ) 23,265
Principal payments on available-for-sale securities 6,547 1,125
Purchase of available-for-sale securities (4,073 ) -
Purchase of FHLB stock (152 ) (670 )
Proceeds from redemption of FHLB stock 1,055 -
Purchase of office properties and equipment (56 ) (328 )
Proceeds from disposals of office property and equipment 45 -
Net cash provided by investing activities 58,362 23,392
Cash flows from financing activities:
Net change in deposits 35,690 18,054
Net increase in securities sold under agreements to repurchase 10,613 -
Proceeds from sale of stock (net of costs) 30,837 -
Distributions to non-controlling interest (165 ) -
Proceeds from FHLB advances 5,000 66,000
Repayments of FHLB advances (22,535 ) (33,500 )
Stock cancelled for income tax withholding (448 ) -
Repayments of junior subordinated debentures (510 ) (510 )
Net cash provided by financing activities 58,482 50,044
Net change in cash and cash equivalents 114,274 24,282
Cash and cash equivalents at beginning of the period 96,109 15,566
Cash and cash equivalents at end of the period $ 210,383 $ 39,848
Supplemental disclosures of cash flow information:
Cash paid for interest $ 1,803 $ 3,290
Cash paid for income taxes 429 3
Assets acquired (liabilities assumed) in acquisition:
Securities available for sale, at fair value $ 149,975 $ -
Loans receivable 225,885 -
Accrued interest receivable 1,637 -
FHLB and FRB stock 1,061 -
Office property and equipment 6,953 -
Goodwill 25,966 -
Core deposit intangible 3,329 -
Other assets 2,290 -
Deposits (353,722 ) -
FHLB advances (3,166 ) -
Securities sold under agreements to repurchase (59,945 ) -
Other borrowings (14,000 ) -
Deferred taxes (717 ) -
Accrued expenses and other liabilities (4,063 ) -
Preferred stock (3,000 ) -
Common stock (63,257 ) -

See accompanying notes to unaudited consolidated financial statements.

3

Table of Contents

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Consolidated Statements of Changes in Stockholders’ Equity

(Unaudited)

Three-Month Period Ended June 30,<br> 2021 and 2020
Preferred Stock Non-Voting Common<br><br> Stock<br><br> Voting Common<br><br> Stock Non-Voting Additional<br><br> Paid‑in<br><br> Capital Accumulated Other Comprehensive Income Retained Earnings (Substantially Restricted) Unearned<br><br> ESOP Shares Treasury<br><br> Stock Non-controlling Interest Total<br><br> Stockholders’<br><br> Equity
(In thousands)
Balance at March 31, 2021 $ - $ 218 $ 87 $ 46,625 $ 53 $ 4,296 $ (877 ) $ (5,326 ) $ - $ 45,076
Net income for the three months ended June 30, 2021 - - - - - 701 - - 33 734
Preferred shares issued in  business combination 3,000 - - - - - - - - 3,000
Common shares issued in business combination - 140 114 62,839 - - - - 164 63,257
Shares transferred from voting to non-voting after business combination - (7 ) 7 - - - - - - -
Common shares issued in private placement - 112 73 30,652 - - - - - 30,837
Release of unearned ESOP shares - - - 9 - - 16 - - 25
Common stock cancelled for payment of tax withholdings - (1 ) - - - - - - - (1 )
Payment to non-controlling interest - - - - - - - - (165 ) (165 )
Other comprehensive income, net of tax - - - - 732 - - - - 732
Balance at June 30, 2021 $ 3,000 $ 462 $ 281 $ 140,125 $ 785 $ 4,997 $ (861 ) $ (5,326 ) $ 32 $ 143,495
Balance at March 31, 2020 $ - $ 219 $ 87 $ 46,550 $ 100 $ 8,392 $ (942 ) $ (5,326 ) $ - $ 49,080
Net income for the three months ended June 30, 2020 - - - - - 216 - - - 216
Release of unearned ESOP shares - - - - - - 15 - - 15
Restricted stock Compensation expense - - - 90 - - - - - 90
Stock option compensation expense - - - 10 - - - - - 10
Other comprehensive income, net of tax - - - - 109 - - - - 109
Balance at June 30, 2020 $ - $ 219 $ 87 $ 46,650 $ 209 $ 8,608 $ (927 ) $ (5,326 ) $ - $ 49,520

See accompanying notes to unaudited consolidated financial statements.

4

Table of Contents

Six-Month Period Ended June 30, 2021 and 2020
Preferred Stock Non-Voting Common<br><br> Stock<br><br> Voting Common<br><br> Stock Non-Voting Additional<br><br> Paid‑in<br><br> Capital Accumulated Other Comprehensive Income Retained Earnings (Substantially Restricted) Unearned<br><br> ESOP Shares Treasury<br><br> Stock Non-controlling interest Total<br><br> Stockholders’<br><br> Equity
(In thousands)
Balance<br><br><br><br><br><br><br><br><br><br><br><br><br><br><br><br><br><br><br> at January 1, 2021 $ - $ 219 $ 87 $ 46,851 $ 164 $ 7,783 $ (893 ) $ (5,326 ) $ - $ 48,885
Net income (loss) for the six months ended June 30, 2021 - - - - - (2,786 ) - - 33 (2,753 )
Preferred shares issued in  business combination 3,000 - - - - - - - - 3,000
Common shares issued in business combination - 140 114 62,839 - - - - 164 63,257
Shares transferred from voting to non-voting after business combination - (7 ) 7 - - - - - - -
Common shares issued in private placement - 112 73 30,652 - - - - - 30,837
Release of unearned ESOP shares - - - 15 - - 32 - - 47
Restricted stock compensation expense - - - 162 - - - - - 162
Stock awarded to directors - - - 45 - - - - - 45
Stock option compensation expense - - - 7 - - - - - 7
Common stock cancelled for payment of tax withholdings - (2 ) - (446 ) - - - - - (448 )
Payment to non-controlling interest - - - - - - - - (165 ) (165 )
Other comprehensive income, net of tax - - - - 621 - - - - 621
Balance<br><br><br><br><br><br><br><br><br><br><br><br><br><br><br><br><br><br><br> at June 30, 2021 $ 3,000 $ 462 $ 281 $ 140,125 $ 785 $ 4,997 $ (861 ) $ (5,326 ) $ 32 $ 143,495
Balance at January 1, 2020 $ - $ 218 $ 87 $ 46,426 $ (23 ) $ 8,425 $ (959 ) $ (5,326 ) $ - $ 48,848
Net income for the six<br> months ended June 30, 2020 - - - - - 183 - - - 183
Release of unearned ESOP shares - - - - - - 32 - - 32
Restricted stock compensation expense - 1 - 160 - - - - - 161
Stock awarded to directors - - - 45 - - - - - 45
Stock option compensation expense - - - 19 - - - - - 19
Other comprehensive loss, net of tax - - - - 232 - - - - 232
Balance<br><br><br><br><br><br><br><br><br><br><br><br><br><br><br><br><br><br><br> at June 30, 2020 $ - $ 219 $ 87 $ 46,650 $ 209 $ 8,608 $ (927 ) $ (5,326 ) $ - $ 49,520

See accompanying notes to unaudited consolidated financial statements.

5

Table of Contents

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; City First Capital IX, LLC; and City First Capital 45, LLC (“CFC 45”) into its financial results. The results of Broadway Service Corporation, a wholly owned subsidiary of the Bank, are also included in the unaudited consolidated financial statements. All significant intercompany balances and transactions have been eliminated in consolidation.

The unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions for quarterly reports on Form 10-Q.  These unaudited consolidated financial statements do not include all disclosures associated with the Company’s consolidated annual financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2020 (“2020 Form 10-K”) and, accordingly, should be read in conjunction with such audited consolidated financial statements.  In the opinion of management, all adjustments (all of which are normal and recurring in nature) considered necessary for a fair presentation have been included.  Operating results for the three and six months ended June 30, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021.

Subsequent events have been evaluated through August 23, 2021, which is the date these financial statements were issued.

Except as discussed below, our accounting policies are described in Note 1 – Summary of Significant Accounting Policies of our audited consolidated financial statements included in (the “2020 Form 10-K”).

Purchased Credit Impaired Loans

As part our recent merger, see Note 2 – Business Combination, the Company acquired certain loans that have shown evidence of credit deterioration since origination; these loans are referred to as purchased credit impaired loans (“PCI loans”). These PCI loans are recorded at their fair value at acquisition, such that there is no carryover of the seller’s allowance for loan losses. Such PCI loans are accounted for individually. The Company estimates the amount and timing of expected cash flows for each PCI loan, and the expected cash flows in excess of the allocated fair value is recorded as interest income over the remaining life of the loan (accretable yield). The excess of the loan’s contractual principal and interest over expected cash flows is not recorded (non-accretable difference). Over the life of the PCI loan, expected cash flows continue to be estimated each quarter. If the present value of expected cash flows decreases from the prior estimate, a provision for loan losses is recorded and an allowance for loan losses is established. If the present value of expected cash flows increases from the prior estimate, the increase is recognized as part of future interest income. If the timing and amount of cash flows is uncertain, then cash payments received will be recognized as a reduction of the recorded investment.

Business Combinations

Business combinations are accounted for using the acquisition accounting method. Under the purchase accounting method, the Company measures the identifiable assets acquired, including identifiable intangible assets, and liabilities assumed in a business combination at fair value on the acquisition date. Goodwill is generally determined as the excess of the fair value of the consideration transferred, plus the fair value of any noncontrolling interests in the acquiree, over the fair value of the net assets acquired and liabilities assumed as of the acquisition date. See Note 2 - Business Combination and Note 7 - Goodwill and Intangible Assets for further information.

6

Table of Contents

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Unaudited Consolidated Financial Statements

Goodwill and intangible assets acquired in a purchase business combination and that are determined to have an indefinite useful life are not amortized, but tested for impairment at least annually or more frequently if events and circumstances exist that indicate the necessity for such impairment tests to be performed. The Company has selected November 30th as the date to perform the annual impairment test. Intangible assets with definite useful lives are amortized over their estimated useful lives to their estimated residual values. Goodwill is the only intangible asset with an indefinite life on the Company’s consolidated statement of financial condition.

Core deposit intangible assets arising from mergers and acquisitions are amortized on an accelerated basis reflecting the pattern in which the economic benefits of the intangible asset are consumed or otherwise used up. The estimated life of the core deposit intangible is approximately 10 years.

Variable Interest Entities (“VIE”)

An entity is considered to be a VIE when it does not have sufficient equity at investment at risk, the equity investors as a group lack the characteristics of a controlling financial interest, or the entity is structured with disproportionate voting rights and substantially all of the entity’s activities are conducted on behalf of an investor with disproportionately few voting rights. The Company is required to consolidate a VIE when it holds a variable interest in the VIE and is also the primary beneficiary of the VIE. CFC 45 is a Community Development Entity (“CDE”), and is considered to be a VIE. The Company is the primary beneficiary because it has the power to direct activities that most significantly affect the economic performance of CFC 45 and have the obligation to absorb the majority of the losses or benefits of its financial performance.

Noncontrolling Interests

For consolidated subsidiaries that are less than wholly-owned, the third-party holdings of equity interests are referred to as noncontrolling interests. The portion of net income attributable to noncontrolling interests for such subsidiaries is presented as net income applicable to noncontrolling interests on the consolidated statements of operations and comprehensive income, and the portion of the stockholders’ equity of such subsidiaries is presented as noncontrolling interests on the consolidated statements of financial condition and consolidated statements of changes in stockholders’ equity.

Recent Accounting Guidance

In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2020-04, Reference Rate Reform (Topic 848), Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This ASU provides optional expedients and exceptions regarding the accounting related to the modifications of certain contracts, relationships and other transactions that are affected by reference rate reform related to contracts that reference LIBOR or other reference rates that could be discontinued due to reference rate reform.  This guidance was effective immediately and the amendments may be applied prospectively through December 31, 2022.  The estimated financial impact has not yet been determined.

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes. This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. The amendments in this ASU are intended to simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments are also intended to improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. The guidance did not have a significant impact on the Company’s consolidated financial statements.

7

Table of Contents

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Unaudited Consolidated Financial Statements

Accounting Pronouncements Yet to Be Adopted

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.”  ASU 2016-13 replaces the incurred loss model with an expected loss model, which is referred to as the current expected credit loss (“CECL”) model.  The CECL model is applicable to the measurement of credit losses on financial assets measured at amortized cost, including loan receivables, held-to-maturity debt securities, and reinsurance receivables. It also applies to off-balance sheet credit exposures not accounted for as insurance (such as loan commitments, standby letters of credit, financial guarantees, and other similar instruments) and net investments in leases recognized by a lessor.  For debt securities with other-than-temporary impairment, the guidance will be applied prospectively.  Existing purchased credit impaired (“PCI”) assets will be grandfathered and classified as purchased credit deteriorated (“PCD”) assets at the date of adoption.  The asset will be grossed up for the allowance for expected credit losses for all PCD assets at the date of adoption and the noncredit discount in interest income based on the yield of such assets as of the adoption date.  Subsequent changes in expected credit losses will be recorded through the allowance.  For all other assets within the scope of CECL, a cumulative-effect adjustment will be recognized in retained earnings as of the beginning of the first reporting period in which the guidance is effective.

On October 16, 2019, the FASB voted to affirm the proposed amended effective date for ASU 2016-13 for smaller reporting companies (“SRCs”) as defined by the SEC. The final ASU, which was issued in November 2019, delays the implementation date for ASU 2016-13 to fiscal years beginning after December 15, 2022. SRCs are defined as companies with less than $250 million of public float or less than $100 million in annual revenues for the previous year and no public float or public float of less than $700 million.  The Company qualifies as an SRC, and management will implement ASU 2016-13 in the first quarter of 2023.  The estimated financial impact has not yet been determined.

In April 2019, the FASB issued ASU No. 2019-04, Codification Improvements to Topic 326, Financial Instruments - Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments.  This ASU is effective January 1, 2020 and clarifies the scope of the credit losses standard and addresses issues related to accrued interest receivable balances, recoveries, variable interest rates and prepayments, among other things. The amendments to Topic 326 have the same effective dates as ASU 2016-13. This guidance did not have a significant impact on the Company’s consolidated financial statements.

In May 2019, the FASB issued ASU No. 2019-05, Financial Instruments - Credit Losses (Topic 326): Targeted Transition Relief. This ASU allows entities to irrevocably elect the fair value option on an instrument-by-instrument basis for eligible financial assets measured at amortized cost basis upon adoption of the credit loss standards. The effective date for this ASU is the same as for ASU 2016-13. We will evaluate this ASU in conjunction with ASU 2016-13 to determine its impact on our financial condition and results of operations.

NOTE (2) – Business Combination

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

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

8

Table of Contents

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Unaudited Consolidated Financial Statements

The Company accounted for the CFBanc Merger under the acquisition method of accounting which requires purchased assets and liabilities assumed to be recorded at their respective fair values at the date of acquisition. The Company determined the fair value of the acquired assets and assumed liabilities with the assistance of third-party valuation firms.  Goodwill in the amount of $26.0 million was recognized in the CFBanc Merger. Goodwill represents the future economic benefits arising from net assets acquired that are not individually identified and separately recognized and is attributable to synergies expected to be derived from the combination of the two entities. Goodwill is not amortized for financial reporting purposes; rather, it is tested for impairment annually, or more frequently if events or changes in circumstances indicate that it might be impaired, by comparing its carrying value to the reporting unit’s fair value. Goodwill recognized in this transaction is not deductible for income tax purposes.

The following table represents the assets acquired and liabilities assumed in the CFBanc Merger as of April 1, 2021, and the fair value adjustments and amounts recorded by the Company as of the same date under the acquisition method of accounting:

CFBanc<br><br> <br>Book<br><br> <br>Value Fair Value<br><br> <br>Adjustments Fair Value
Assets acquired (In<br> thousands)
Cash and cash equivalents $ 84,745 $ - $ 84,745
Securities available-for-sale 150,052 (77 ) 149,975
Loans receivable held for investment:
Gross loans receivable held for investment 227,669 (1,784 ) 225,885
Deferred fees and costs (315 ) 315 -
Allowance for loan losses (2,178 ) 2,178 -
225,176 709 225,885
Accrued interest receivable 1,637 - 1,637
FHLB and FRB stock 1,061 - 1,061
Office properties and equipment 5,152 1,801 6,953
Deferred tax assets, net 890 (1,608 ) (718 )
Core deposit intangible - 3,329 3,329
Other assets 2,290 - 2,290
Total assets $ 471,003 $ 4,154 $ 475,157
Liabilities assumed
Deposits $ 353,671 $ 51 $ 353,722
Securities sold under agreements to repurchase 59,945 - 59,945
FHLB advances 3,057 109 3,166
Notes payable 14,000 - 14,000
Accrued expenses and other liabilities 4,063 - 4,063
Total liabilities $ 434,736 $ 160 $ 434,896
Excess of assets acquired over liabilities assumed $ 36,267 $ 3,994 $ 40,261
Consideration paid $ 66,257
Goodwill recognized $ 25,996

9

Table of Contents

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Unaudited Consolidated Financial Statements

The fair values are preliminary estimates and are subject to adjustment for up to one year after the merger date or when additional information relative to the closing date fair values becomes available and such information is considered final, whichever is earlier. These changes could differ materially from what is presented above.

The contractual amounts due, expected cash flows to be collected, the interest component, and the fair value of loans acquired from CFBanc as of the acquisition date were as follows:

Acquired Loans
(In thousands)
Contractual amounts due $ 231,432
Cash flows not expected to be collected (3,666 )
Expected cash flows 227,766
Interest component of expected cash flows (1,881 )
Fair value of acquired loans $ 225,885

A component of total loans acquired from CFBanc were loans that were considered to be purchased credit impaired loans (PCI loans). Refer to Note 6 for additional information regarding PCI loans. The following table presents the amounts that comprise the fair value of PCI loans (in thousands):

Contractual amounts due $ 1,825
Nonaccretable difference (cash flows not expected to be collected) (634 )
Expected cash flows 1,191
Accretable yield (346 )
Fair value of acquired loans $ 845

In accordance with generally accepted accounting principles, there was no carryover of the allowance for loan losses that had been previously recorded on loans by CFBanc.

The operating results of CFBanc for the three and six months ended June 30, 2021 are included in the operating results of the Company since the merger date. The following table presents the amounts related to CFBanc’s operations included in the Company’s consolidated statement of operations from April 1 through June 30, 2021:

(In thousands)
Net interest income $ 2,896
Net income $ 966

10

Table of Contents

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Unaudited Consolidated Financial Statements

The following table presents the net interest income, net income, and earnings per share as if the CFBanc Merger was effective as of January 1, 2020. The unaudited pro forma financial information included in the table below is based on various estimates and is presented for informational purposes only and does not indicate the financial condition or results of operations of the combined Company that would have been achieved for the periods presented had the transactions been completed as of the date indicated or that may be achieved in the future.

Three Months Ended Six Months Ended
June 30,<br><br> <br>2021 June 30,<br><br> <br>2020 June 30, 2021 June 30,<br><br> <br>2020
(Dollars in thousands except per share amounts)
Net interest income $ 5,821 $ 5,173 $ 11,011 $ 10,331
Net income (loss) 723 476 (3,539 ) 189
Basic earnings per share $ 0.01 $ 0.01 $ (0.06 ) $ 0.00
Diluted earnings per share $ 0.01 $ 0.01 $ (0.06 ) $ 0.00

NOTE (3) – Capital Raise

On April 6, 2021, the Company completed the sale of 18,474,000 shares of Broadway Financial Corporation common stock in private placements to institutional and accredited investors at a purchase price of $1.78 per share for an aggregate purchase price of $32.9 million (net of expenses).

The following table shows the common stock issued on April 1, 2021 as a result of the merger and on April 6, 2021 as a result of the private placements by class:

Common Shares Outstanding
Voting<br><br> <br>Class A Nonvoting<br><br> Class B Nonvoting<br><br> Class C Total<br><br> <br>Shares
Shares outstanding March 31, 2021: 19,142,498 - 8,756,396 27,898,894
Shares issued in merger 13,999,870 11,404,621 - 25,404,491
Shares exchanged post-merger (681,300 ) - 681,300 -
Shares cancelled (52,105 ) - - (52,105 )
Shares issued in private placements 11,221,921 - 7,252,079 18,474,000
Shares outstanding April 6, 2021: 43,630,884 11,404,621 16,689,775 71,725,280

NOTE (4) – Earnings Per Share of Common Stock

Basic earnings per share of common stock is computed pursuant to the two-class method by dividing net income available to common stockholders less dividends paid on participating securities (unvested shares of restricted common stock) and any undistributed earnings attributable to participating securities by the weighted average common shares outstanding during the period.  The weighted average common shares outstanding includes the weighted average number of shares of common stock outstanding less the weighted average number of unvested shares of restricted common stock.  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.

11

Table of Contents

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Unaudited Consolidated Financial Statements

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

For the three months ended<br><br> <br>June 30, For the six months ended<br><br> <br>June 30,
2021 2020 2021 2020
(Dollars in thousands, except per share )
Net income (loss) attributable to Broadway Financial Corporation $ 701 $ 216 $ (2,786 ) $ 183
Less net income (loss) attributable to participating securities - 2 - 2
Income (loss) available to common stockholders $ 701 $ 214 $ (2,786 ) $ 181
Weighted average common shares outstanding for basic earnings (loss) per common share 70,163,639 27,143,340 48,873,496 27,055,750
Add: dilutive effects of unvested restricted stock awards 140,247 307,376 - 337,097
Weighted average common shares outstanding for diluted earnings (loss) per common share 70,303,886 27,450,716 48,873,496 27,392,847
Earnings (loss) per common share - basic $ 0.01 $ 0.01 $ (0.06 ) $ 0.01
Earnings (loss) per common share - diluted $ 0.01 $ 0.01 $ (0.06 ) $ 0.01

Stock

      options for 450,000 shares of common stock for the six months ended June 30, 2021 were not considered in computing diluted earnings
      per common share because they were anti-dilutive due to the net loss. There were no unvested restricted stock awards outstanding
      during the three months ended June 30, 2021.

NOTE (5) – Securities

The

      following table summarizes the amortized cost and fair value of the available-for-sale investment securities portfolios as of the periods indicated and the corresponding amounts of unrealized gains and losses which were recognized in accumulated
      other comprehensive income \(loss\):
Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value
(In thousands)
June 30, 2021:
Federal agency mortgage-backed securities $ 83,687 $ 629 $ (60 ) $ 84,256
Federal agency debt 33,207 199 - 33,406
Municipal bonds 4,914 63 (5 ) 4,972
U. S. Treasuries 18,191 24 - 18,215
SBA pools 17,581 403 (1 ) 17,983
Total available-for-sale securities $ 157,580 $ 1,318 $ (66 ) $ 158,832
December 31, 2020:
Federal agency mortgage-backed securities $ 5,550 $ 257 $ - $ 5,807
Federal agency debt 2,682 190 - 2,872
Municipal bonds 2,000 19 - 2,019
Total available-for-sale securities $ 10,232 $ 466 $ - $ 10,698

12

Table of Contents

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Unaudited Consolidated Financial Statements

At June 30, 2021, the Bank had thirteen (13) federal agency debt securities with total amortized cost of $33.2 million, estimated total fair value of $33.4 million and an estimated average remaining life of 6.1 years; ninety-four (94) federal agency mortgage-backed securities with total amortized cost of $83.7 million, estimated total fair value of $84.3 million and an estimated average remaining life of 4.6 years; nine (9) U.S. treasury securities with total amortized cost of $18.2 million, estimated total fair value of $18.2 million and an estimated average remaining life of 4.1 years; seventeen (17) SBA pools securities with total amortized cost of $17.6 million, estimated total fair value of $18.0 and an estimated average remaining life of 5.4 years; two (2) municipal bond – taxable securities with total amortized cost of $1.2 million, estimated total fair value of $1.2 million and an estimated average remaining life of 4.1 years; seven (7) municipal bonds – exempt  pools  securities with total amortized cost of $3.7 million, estimated total fair value of $3.8 million and an estimated average remaining life of 12.5 years . The entire securities portfolio at June 30, 2021, consisted of one hundred forty-two securities (142) with an estimated average remaining life of 4.7 years.  Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties

The amortized cost and estimated fair value of all investment securities available-for-sale at June 30, 2021, by contractual maturities are shown below.  Contractual maturities may differ from expected maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value
(In thousands)
Due in one year or less $ - $ - $ - $ -
Due after one year through five years 30,244 42 - 30,286
Due after five years through ten years 23,002 294 (11 ) 23,285
Due after ten years ^(1)^ 104,334 982 (55 ) 105,261
$ 157,580 $ 1,318 $ (66 ) $ 158,832
(1) Mortgage-backed securities, collateralized<br> mortgage obligations and SBA pools do not have a single stated maturity date and  therefore have been included in the “Due after ten years” category.
--- ---

The Bank held 32 securities with unrealized losses of $66 thousand at June 30, 2021. None of these securities has been in a loss position for greater than one year.  The Bank’s securities were primarily issued by the federal government or its agencies. The unrealized gains or losses on our available-for-sale securities at June 30, 2021 were primarily caused by movements in market interest rates subsequent to the purchase of such securities

Securities with a market value of $71.9 million were pledged as collateral for securities sold under agreements to repurchase as of June 30, 2021 and included $17.8 million of U.S. Government Agency securities, $47.5 million of mortgage-backed securities, and $6.6 million of collateralized mortgage obligations. (See Note 8 – Borrowings.) There were no securities pledged as collateral for securities sold under agreements to repurchase as December 31, 2020. There were no securities pledged to secure public deposits at June 30, 2021 or December 31, 2020.

At June 30, 2021 and December 31, 2020, 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.

There were no sales of securities during the three and six months ended June 30, 2021 and 2020.

13

Table of Contents

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Unaudited Consolidated Financial Statements

NOTE (6) – Loans Receivable Held for Investment

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

June 30,<br> 2021 December 31, 2020
(In thousands)
Real estate:
Single family $ 53,556 $ 48,217
Multi-family 346,192 272,387
Commercial real estate 92,491 24,289
Church 15,652 16,658
Construction 22,677 429
Commercial – other 46,973 57
SBA loans^(1)^ 40,027 -
Consumer 73 7
Gross loans receivable before deferred loan costs and premiums 617,641 362,044
Unamortized net deferred loan costs and premiums 373 1,300
Gross loans receivable 618,014 363,344
Allowance for loan losses (3,296 ) (3,215 )
Loans receivable, net $ 614,718 $ 360,129

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

Purchased Credit Impaired (PCI) Loans

As part of the CFBanc Merger, the Company acquired loans for which there was, at acquisition, evidence of credit deterioration of credit quality since origination and for which it was probable, at acquisition, that all contractually required payments would not be collected. Prior to the CFBanc Merger, there were no such acquired loans. The carrying amount of those loans as of June 30, 2021, is as follows:

June 30, 2021
(In thousands)
Real estate:
Single family $ 534
Commercial real estate 187
Commercial - other 84
$ 805

On the acquisition date, the amount by which the undiscounted expected cash flows of the purchased credit impaired loans exceeded the estimated fair value of the loan is the accretable yield. The accretable yield is measured at each financial reporting date and represents the difference between the remaining undiscounted cash flows and the current carrying value of the purchased credit impaired loan. At June 30, 2021, none of the Company’s purchased credit impaired loans were classified as nonaccrual.

14

Table of Contents

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Unaudited Consolidated Financial Statements

The following table summarizes the accretable yield on the purchased credit impaired loans for the three and six months ended June 30, 2021:

Three Months Ended<br><br> <br>June 30, 2021 Six Months Ended<br><br> <br>June 30, 2021
(In thousands)
Balance at the beginning of the period $ - $ -
Additions 346 346
Accretion (19 ) (19 )
Balance at the end of the period $ 327 $ 327

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

Three Months Ended June 30, 2021
Real Estate
Single<br><br> <br>family Multi-<br><br> <br>family Commercial<br><br> <br>real estate Church Construction Commercial - other SBA<br><br> <br>Loans Consumer Total
(In thousands)
Beginning balance $ 275 $ 2,473 $ 219 $ 221 $ 22 $ 5 $ - $ - $ 3,215
Provision for (recapture of) loan losses (105 ) 133 8 (13 ) 59 (1 ) - - 81
Recoveries - - - - - - - - -
Loans charged off - - - - - - - - -
Ending balance $ 170 $ 2,606 $ 227 $ 208 $ 81 $ 4 $ - $ - $ 3,296
Three Months Ended June 30,<br> 2020
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Real Estate
Single <br><br> family Multi-<br><br> <br>family Commercial real estate Church Construction Commercial - other SBA<br><br> <br>Loans Consumer Total
(In thousands)
Beginning balance $ 308 $ 2,408 $ 140 $ 323 $ 24 $ 7 $ - $ 1 $ 3,211
Provision for (recapture of) loan losses - 16 29 (41 ) (2 ) (1 ) - (1 ) -
Recoveries 4 - - - - - - - 4
Loans charged off - - - - - - - - -
Ending balance $ 312 $ 2,424 $ 169 $ 282 $ 22 $ 6 $ - $ - $ 3,215
Six Months Ended June 30, 2021
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Real Estate
Single family Multi-family Commercial real estate Church Construction Commercial - other SBA<br><br> <br>Loans Consumer Total
(In thousands)
Beginning balance $ 296 $ 2,433 $ 222 $ 237 $ 22 $ 4 $ - $ 1 $ 3,215
Provision for (recapture of)    loan losses (126 ) 173 5 (29 ) 59 - - (1 ) 81
Recoveries - - - - - - - - -
Loans charged off - - - - - - - - -
Ending balance $ 170 $ 2,606 $ 227 $ 208 $ 81 $ 4 $ - $ - $ 3,296

15

Table of Contents

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Unaudited Consolidated Financial Statements

Six Months Ended June 30, 2020
Real Estate
Single family Multi-family Commercial real estate Church Construction Commercial - other SBA<br><br> <br>Loans Consumer Total
(In thousands)
Beginning balance $ 312 $ 2,319 $ 133 $ 362 $ 48 $ 7 $ - $ 1 $ 3,182
Provision for (recapture of)    loan losses (4 ) 105 36 (80 ) (26 ) (1 ) - (1 ) 29
Recoveries 4 - - - - - - - 4
Loans charged off - - - - - - - - -
Ending balance $ 312 $ 2,424 $ 169 $ 282 $ 22 $ 6 $ - $ - $ 3,215

The following tables present the balance in the allowance for loan losses and the recorded investment (unpaid contractual principal balance less charge-offs, less interest applied to principal, plus unamortized deferred costs and premiums) by loan type and based on impairment method as of the dates indicated:

June 30,<br> 2021
Real Estate
Single<br><br> <br>family Multi-<br><br> <br>family Commercial<br><br> <br>real estate Church Construction Commercial - other SBA <br><br> Loans Consumer Total
(In thousands)
Allowance for loan losses:
Ending allowance balance attributable to<br> loans:
Individually evaluated for impairment $ 3 $ - $ - $ 42 $ - $ - $ - $ - $ 45
Collectively evaluated for impairment 167 2,606 227 166 81 4 - - 3,251
Total ending allowance balance $ 170 $ 2,606 $ 227 $ 208 $ 81 $ 4 $ - $ - $ 3,296
Loans:
Loans individually evaluated for impairment $ 66 $ 290 $ - $ 3,718 $ - $ - $ - $ - $ 4,074
Loans collectively evaluated for impairment 53,600 347,540 92,491 11,602 22,583 46,973 39,078 73 613,940
Total ending loans balance $ 53,666 $ 347,830 $ 92,491 $ 15,320 $ 22,583 $ 46,973 $ 39,078 $ 73 $ 618,014
December 31, 2020
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Real Estate
Single<br><br> <br>family Multi-<br><br> family Commercial<br><br> <br>real estate Church Construction Commercial - other SBA<br><br> <br>Loans Consumer Total
(In thousands)
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment $ 89 $ - $ - $ 52 $ - $ - $ - $ - $ 141
Collectively evaluated for impairment 207 2,433 222 185 22 4 - 1 3,074
Total ending allowance balance $ 296 $ 2,433 $ 222 $ 237 $ 22 $ 4 $ - $ 1 $ 3,215
Loans:
Loans individually evaluated for impairment $ 573 $ 298 $ - $ 3,813 $ - $ 47 $ - $ - $ 4,731
Loans collectively evaluated for impairment 47,784 273,566 24,322 12,495 430 9 - 7 358,613
Total ending loans balance $ 48,357 $ 273,864 $ 24,322 $ 16,308 $ 430 $ 56 $ - $ 7 $ 363,344

16

Table of Contents

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Unaudited Consolidated Financial Statements

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

June 30,<br> 2021 December 31, 2020
Unpaid<br><br> <br>Principal <br><br> Balance Recorded<br><br> <br>Investment Allowance<br><br> <br>for Loan<br><br> <br>Losses<br><br> <br>Allocated Unpaid <br><br> Principal <br><br> Balance Recorded<br><br> <br>Investment Allowance<br><br> <br>for Loan<br><br> <br>Losses<br><br> <br>Allocated
(In thousands)
With no related allowance recorded:
Single family $ - $ - $ - $ 2 $ 1 $ -
Multi-family 290 290 - 298 298 -
Church 2,487 1,914 - 2,527 1,970 -
With an allowance recorded:
Single family 66 66 3 573 573 88
Church 1,804 1,804 42 1,842 1,842 52
Commercial - other - - - 47 47 1
Total $ 4,647 $ 4,074 $ 45 $ 5,289 $ 4,731 $ 141

The recorded investment in loans excludes accrued interest receivable due to immateriality.  For purposes of this disclosure, the unpaid principal balance is not reduced for net charge-offs.

The following tables present the monthly average of loans individually evaluated for impairment by loan type and the related interest income for the periods indicated:

Three Months Ended June 30, 2021 Three Months Ended June 30, 2020
Average<br><br> <br>Recorded<br><br> <br>Investment Cash Basis<br><br> <br>Interest<br><br> <br>Income<br><br> <br>Recognized Average<br><br> <br>Recorded<br><br> <br>Investment Cash Basis<br><br> <br>Interest<br><br> <br>Income<br><br> <br>Recognized
(In thousands)
Single family $ 316 $ 4 $ 597 $ 7
Multi-family 292 5 308 5
Church 3,742 63 4,160 74
Commercial - other 11 - 59 1
Total $ 4,361 $ 72 $ 5,124 $ 87
Six<br> Months Ended June 30, 2021 Six<br> Months Ended June 30, 2020
--- --- --- --- --- --- --- --- ---
Average<br><br> <br>Recorded Investment Cash Basis<br><br> <br>Interest<br><br> <br>Income<br><br> <br>Recognized Average<br><br> <br>Recorded<br><br> <br>Investment Cash Basis<br><br> <br>Interest<br><br> <br>Income <br><br> Recognized
(In thousands)
Single family $ 426 $ 10 $ 599 $ 14
Multi-family 294 10 309 11
Church 3,766 126 4,190 309
Commercial - other 26 1 60 2
Total $ 4,512 $ 147 $ 5,158 $ 336

17

Table of Contents

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Unaudited Consolidated Financial Statements

Cash-basis interest income recognized represents cash received for interest payments on accruing impaired loans and interest recoveries on non-accrual loans that were paid off.  Interest payments collected on non-accrual loans are characterized as payments of principal rather than payments of the outstanding accrued interest on the loans until the remaining principal on the non-accrual loans is considered to be fully collectible or paid off.  When a loan is returned to accrual status, the interest payments that were previously applied to principal are deferred and amortized over the remaining life of the loan.  Foregone interest income that would have been recognized had loans performed in accordance with their original terms amounted to $19 thousand and $22 thousand for the three months ended June 30, 2021 and 2020, respectively, and $38 thousand and $45 thousand for the six months ended June 30, 2021 and 2020, respectively, and were not included in the consolidated results of operations.

As of June 30, 2021, the Bank had $1.9 million in 30 to 89 days delinquencies, and no loans were past due 90 days or more. The following tables present the aging of the recorded investment in past due loans by loan type as of the periods indicated:

June 30,<br> 2021
30-59<br><br> <br>Days<br><br> <br>Past Due 60-89<br><br> <br>Days<br><br> <br>Past Due Greater<br><br> <br>than<br><br> <br>90 Days<br><br> <br>Past Due Total<br><br> <br>Past Due Current Total
(In thousands)
Loans receivable held for investment:
Single family $ - $ - $ - $ - $ 53,666 $ 53,666
Multi-family - - - - 347,830 347,830
Commercial real estate 1,554 - - 1,554 90,937 92,491
Church - - - - 15,320 15,320
Construction - - - - 22,583 22,583
Commercial - other - 310 - 310 46,663 46,973
SBA loans 21 - - 21 39,057 39,078
Consumer - - - - 73 73
Total $ 1,575 $ 310 $ - $ 1,885 $ 616,129 $ 618,014
December 31, 2020
--- --- --- --- --- --- --- --- --- --- --- --- ---
30-59<br><br> <br>Days<br><br> <br>Past Due 60-89<br><br> <br>Days<br><br> <br>Past Due Greater<br><br> <br>than<br><br> <br>90 Days<br><br> <br>Past Due Total<br><br> <br>Past Due Current Total
(In thousands)
Loans receivable held for investment:
Single family $ - $ - $ - $ - $ 48,357 $ 48,357
Multi-family - - - - 273,864 273,864
Commercial real estate - - - - 24,322 24,322
Church - - - - 16,308 16,308
Construction - - - - 430 430
Commercial - other - - - - 56 56
Consumer - - - - 7 7
Total $ - $ - $ - $ - $ 363,344 $ 363,344

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

June 30,<br> 2021 December 31, 2020
(In thousands)
Loans receivable held for investment:
Single-family residence $ - $ 1
Church 735 786
Total non-accrual loans $ 735 $ 787

18

Table of Contents

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Unaudited Consolidated Financial Statements

There were no loans 90 days or more delinquent that were accruing interest as of June 30, 2021 or December 31, 2020. None of the church non-accrual loans were delinquent, but none qualified for accrual status as of the periods indicated.

Troubled Debt Restructurings (TDRs)

In March 2020, a joint statement was issued by federal and state regulatory agencies, after consultation with the FASB, to clarify that short-term loan modifications, such as payment deferrals, fee waivers, extensions of repayment terms or other insignificant payment delays, are not TDRs if made on a good-faith basis in response to COVID-19 to borrowers who were current prior to any relief. Under this guidance, six months  or less is provided as an example of short-term, and current is defined as less than 30 days past due at the time the modification program is implemented.  The guidance also provides that these modified loans generally will not be classified as non-accrual loans during the term of the modification.

The Bank has implemented a loan modification program for the effects of COVID-19 on its borrowers. At the date of this filing, no borrowers have requested loan modifications. To date, no modifications have been granted.

At June 30, 2021, loans classified as TDRs totaled $4.1 million, of which $408 thousand were included in non-accrual loans and $3.7 million were on accrual status.  At December 31, 2020, loans classified as TDRs totaled $4.2 million, of which $232 thousand were included in non-accrual loans and $4.0 million were on accrual status.  The Company has allocated $45 thousand and $141 thousand of specific reserves for accruing TDRs as of June 30, 2021 and December 31, 2020, respectively.  TDRs on accrual status are comprised of loans that were accruing at the time of restructuring or loans that have complied with the terms of their restructured agreements for a satisfactory period of time and for which the Bank anticipates full repayment of both principal and interest.  TDRs that are on non-accrual status can be returned to accrual status after a period of sustained performance, generally determined to be six months of timely payments, as modified.  A well-documented credit analysis that supports a return to accrual status based on the borrower’s financial condition and prospects for repayment under the revised terms is also required.  As of June 30, 2021 and December 31, 2020, the Company had no commitment to lend additional amounts to customers with outstanding loans that are classified as TDRs.  No loans were modified during the three or six months ended June 30, 2021 and 2020.

Credit Quality Indicators

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as:  current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors.  For single family residential, consumer and other smaller balance homogenous loans, a credit grade is established at inception, and generally only adjusted based on performance.  Information about payment status is disclosed elsewhere herein.  The Company analyzes all other loans individually by classifying the loans as to credit risk.  This analysis is performed at least on a quarterly basis.  The Company uses the following definitions for risk ratings:

◾ Watch.  Loans classified as watch exhibit<br> 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<br> deficiency exists, but correction is anticipated within an acceptable time frame.
◾ Special Mention.  Loans classified as<br> special mention have a potential weakness that deserves management’s close attention.  If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the<br> institution’s credit position at some future date.
--- ---
◾ Substandard.  Loans classified as<br> 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<br> jeopardize the liquidation of the debt.  They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.
--- ---

19

Table of Contents

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Unaudited Consolidated Financial Statements

◾ Doubtful.  Loans classified as doubtful<br> have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions,<br> 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.  Based on the most recent analysis performed, the risk categories of loans by loan type as of the periods indicated were as follows:

June 30,<br> 2021
Pass Watch Special Mention Substandard Doubtful Loss
(In thousands)
Single family $ 53,666 $ - $ - $ - $ - $ -
Multi-family 347,477 - - 353 - -
Commercial real estate 91,018 - - 1,473 - -
Church 13,615 647 - 1,058 - -
Construction 22,583 - - - - -
Commercial - other 46,973 - - - - -
SBA loans 39,078 - - - - -
Consumer 73 - - - - -
Total $ 614,483 $ 647 $ - $ 2,884 $ - $ -
December 31,<br> 2020
--- --- --- --- --- --- --- --- --- --- --- --- ---
Pass Watch Special Mention Substandard Doubtful Loss
(In thousands)
Single family $ 48,357 $ - $ - $ 1 $ - $ -
Multi-family 273,501 - - 362 - -
Commercial real estate 22,834 1,488 - - - -
Church 12,899 657 - 2,752 - -
Construction 430 - - - - -
Commercial - other 9 - - 47 - -
Consumer 7 - - - - -
Total $ 358,037 $ 2,145 $ - $ 3,162 $ - $ -

In 2015, CFC 45 was formed to, in effect, act as a pass-through entity for a Merrill Lynch NMTC Corp. (“Merrill Lynch”) allocation of funds in connection with the Bank’s participation in the New Markets Tax Credit (“NMTC”) Program totaling $14.0 million. (See Note 8 - Borrowings.) The financial statements for CFC 45 are consolidated with those of the Company, and as such the Company has reflected a $14.0 million loan made by CFC 45 to a Qualified Active Low Income Business in gross loans above as of June 30, 2021, in connection with the NMTC Program.

20

Table of Contents

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Unaudited Consolidated Financial Statements

NOTE (7) – Goodwill and Intangible Assets

In connection with the CFBanc Merger (See Note 2 - Business Combination.), the Company recognized goodwill of $26.0 million and a core deposit intangible of $3.3 million. The following table presents the changes in the carrying amounts of goodwill and core deposit intangibles for the three months ended June 30, 2021:

Goodwill Core Deposit<br><br> <br>Intangible
(In thousands)
Balance at the beginning of the period $ - $ -
Additions 25,996 3,329
Accretion - (131 )
Impairment - -
Balance at the end of the period $ 25,996 $ 3,198

The carrying amount of the core deposit intangible consisted of the following at June 30, 2021:

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

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

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

NOTE (8) – 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 Banks’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. As of June 30, 2021, securities sold under agreements to repurchase totaled $70.7 million at an average rate of 0.10%. The market value of securities pledged totaled $71.9 million as of June 30, 2021 and included $17.8 million of U.S. Government Agency securities, $47.5 million of mortgage-backed securities,  and $6.6 million of collateralized mortgage obligations. There were no securities pledged as of December 31, 2020.

At June 30, 2021 and December 31, 2020, the Bank had outstanding Advances from the Federal Home Loan Bank (“FHLB”) totaling $96.0 million and $110.5 million, respectively. The weighted rate interest rate was 1.95% and 1.94% as of June 30, 2021 and December 31, 2020, respectively. The weighted average contractual maturity was 26 months and 27 months as of June 30, 2021 and December 31, 2020, respectively. The advances were collateralized by loans with a market value of $193.6 million at June 30, 2021.

21

Table of Contents

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Unaudited Consolidated Financial Statements

On March 17, 2004, the Company issued $6.0 million of Floating Rate Junior Subordinated Debentures (the “Debentures”) in a private placement to a trust that was capitalized to purchase subordinated debt and preferred stock of multiple community banks.  Interest on the Debentures is payable quarterly at a rate per annum equal to the 3-Month LIBOR plus 2.54%.  The interest rate is determined as of each March 17, June 17, September 17, and December 17, and was 2.69% at June 30, 2021.  On October 16, 2014, the Company made payments of $900 thousand of principal on Debentures, executed a Supplemental Indenture for the Debentures that extended the maturity of the Debentures to March 17, 2024, and modified the payment terms of the remaining $5.1 million principal amount thereof.  The modified terms of the Debentures require quarterly payments of interest only through March 2019 at the original rate of 3-Month LIBOR plus 2.54%.  Starting in June 2019, the Company began making quarterly payments of equal amounts of principal, plus interest, and will continue until the Debentures are fully amortized on March 17, 2024. At June 30, 2021, the Company had repaid a total of $2.2 million of the scheduled principal. The Debentures may be called for redemption at any time by the Company.

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

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

NOTE (9) – Fair Value

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

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

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

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

22

Table of Contents

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Unaudited Consolidated Financial Statements

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

Assets Measured on a Recurring Basis

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

Fair Value Measurement
Quoted Prices<br><br> <br>in Active<br><br> <br>Markets for<br><br> <br>Identical<br><br> <br>Assets<br><br> <br>(Level 1) Significant<br><br> <br>Other<br><br> <br>Observable<br><br> <br>Inputs<br><br> <br>(Level 2) Significant Unobservable<br><br> <br>Inputs<br><br> <br>(Level 3) Total
(In thousands)
At June 30,<br> 2021:
Securities available-for-sale – federal agency mortgage-backed $ - $ 84,256 $ - $ 84,256
Securities available-for-sale – federal agency debt - 33,406 - 33,406
Municipal bonds - 4,972 - 4,972
U. S. Treasuries - 18,215 - 18,215
SBA pools - 17,983 - 17,983
At December 31, 2020:
Securities available-for-sale – federal agency mortgage-backed $ - $ 5,807 $ - $ 5,807
Securities available-for-sale – federal agency debt - 2,872 - 2,872
Municipal bonds - 2,019 - 2,019

There were no transfers between Level 1, Level 2, or Level 3 during the three and six months ended June 30, 2021 and 2020.

Assets Measured on a Non-Recurring Basis

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

As of June 30, 2021 and December 31, 2020, the Bank did not have any impaired loans carried at fair value of collateral.

23

Table of Contents

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Unaudited Consolidated Financial Statements

Fair Values of Financial Instruments

The following tables present the carrying amount, fair value, and placement in the fair value hierarchy of the Company’s financial instruments not recorded at fair value on a recurring basis as of June 30, 2021 and December 31, 2020.  This table excludes financial instruments for which the carrying amount approximates fair value.  For short-term financial assets such as cash and due from banks, interest-bearing deposits in other banks, and accrued interest receivable/payable, the carrying amount is a reasonable estimate of fair value due to the relatively short time between the origination of the instrument and its expected realization.  For non-marketable equity securities such as Federal Home Loan Bank stock, the carrying amount is a reasonable estimate of fair value as these securities can only be redeemed or sold at their par value and only to the respective issuing government supported institution or to another member institution.  For financial liabilities such as noninterest-bearing demand, interest-bearing demand, and savings deposits, the carrying amount is a reasonable estimate of fair value due to these products having no stated maturity.

Fair Value Measurements at June 30,<br> 2021
Carrying<br><br> <br>Value Level 1 Level 2 Level 3 Total
(In thousands)
Financial Assets:
Cash and cash equivalents $ 210,383 $ 210,383 $ - $ - $ 210,383
Securities available-for-sale 158,832 - 158,832 - 158,832
Loans receivable held for investment 614,718 - - 612,712 612,712
Accrued interest receivables 2,572 206 282 2,084 2,572
Bank owned life insurance 3,168 3,168 - - 3,168
Financial Liabilities:
Deposits $ 705,041 $ - $ 705,199 $ - $ 705,199
Securities sold under agreements to repurchase 70,660 - 70,063 - 70,063
Federal Home Loan Bank advances 96,022 - 98,160 - 98,160
Junior subordinated debentures 2,805 - - 2,344 2,344
Note payable 14,000 - - 14,000 14,000
Accrued interest payable 104 - 104 - 104
Fair Value Measurements at December 31, 2020
--- --- --- --- --- --- --- --- --- --- ---
Carrying<br><br> <br>Value Level 1 Level 2 Level 3 Total
(In thousands)
Financial Assets:
Cash and cash equivalents $ 96,109 $ 96,109 $ - $ - $ 96,109
Securities available-for-sale 10,698 - 10,698 - 10,698
Loans receivable held for investment 360,129 - - 366,279 366,279
Accrued interest receivables 1,202 60 14 1,128 1,202
Bank owned life insurance 3,147 3,147 - - 3,147
Financial Liabilities:
Deposits $ 315,630 $ - $ 312,725 $ - $ 312,725
Federal Home Loan Bank advances 110,500 - 113,851 - 113,851
Junior subordinated debentures 3,315 - - 2,798 2,798
Accrued interest payable 88 - 84 4 88

In accordance with ASU No. 2016-01, the fair value of certain financial assets and liabilities, including loans, time deposits, and junior subordinated debentures, as of June 30, 2021 and December 31, 2020 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.

24

Table of Contents

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Unaudited Consolidated Financial Statements

NOTE (10) – Stock-based Compensation

The Long-Term Incentive Plan, which was adopted by the Company and approved by the stockholders in 2018 (the “LTIP”), permits the grant of non-qualified and incentive stock options, stock appreciation rights, full value awards and cash incentive awards. The plan is in effect for ten years.  The maximum number of shares that can be awarded under the plan is 1,293,109 shares of common stock as of December 31, 2018.  As of June 30, 2021, 490,007 shares had been awarded and 803,102 shares are available under the 2018 LTIP.

At June 30, 2021, no restricted stock awards were outstanding, and during the first half of June 2021, the Company did not grant any restricted stock awards to its officers and employees.

No stock options were granted during the six months ended June 30, 2021 and 2020.

The following table summarizes stock option activity during the six months ended June, 2021 and 2020:

Six Months Ended<br><br> <br>June 30, 2021 Six Months Ended<br><br> <br>June 30, 2020
Number<br><br> <br>Outstanding Weighted<br><br> <br>Average<br><br> <br>Exercise<br><br> <br>Price Number<br><br> <br>Outstanding Weighted<br><br> <br>Average<br><br> <br>Exercise<br><br> <br>Price
Outstanding at beginning of period 450,000 $ 1.62 455,000 $ 1.67
Granted during period - - - -
Exercised during period - - - -
Forfeited or expired during period - - (5,000 ) 6.00
Outstanding at end of period 450,000 $ 1.62 450,000 $ 1.62
Exercisable at end of period 450,000 $ 1.62 360,000 $ 1.62

The Company did not record any stock-based compensation expense related to stock options during the three months ended June 30, 2021 since these options became fully vested and all compensation cost was recognized in February 2021.  For the six months ended June 30, 2021, the Company recorded $7 thousand expense related to stock options. During the three and six months ended June 30, 2020, the Company recorded $10 thousand and $19 thousand of stock-based compensation expense related to stock options, respectively.

Options outstanding and exercisable at June 30, 2021 were as follows:

Outstanding Exercisable
Grant Date Number<br><br> <br>Outstanding Weighted<br><br> <br>Average<br><br> <br>Remaining<br><br> <br>Contractual<br><br> <br>Life Weighted<br><br> <br>Average<br><br> <br>Exercise<br><br> <br>Price Aggregate<br><br> <br>Intrinsic<br><br> <br>Value Number<br><br> <br>Outstanding Weighted<br><br> <br>Average<br><br> <br>Exercise<br><br> <br>Price Aggregate<br><br> <br>Intrinsic<br><br> <br>Value
February 24, 2016 450,000 4.65 years $ 1.62 450,000 $ 1.62
450,000 4.65 years $ 1.62 $ 481,500 450,000 $ 1.62 $ 481,500

25

Table of Contents

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Unaudited Consolidated Financial Statements

NOTE (11) – ESOP Plan

Employees

  participate in an Employee Stock Option Plan \(“ESOP”\) after attaining certain age and service requirements.  In December 2016, the ESOP purchased 1,493,679
  shares of the Company’s common stock at $1.59 per share, for a total cost of $2.4 million, of which $1.2 million was funded with a loan from the
  Company.  The loan will be repaid from the Bank’s annual discretionary contributions to the ESOP, net of dividends paid, over a period of 20 years. 

  Shares of the Company’s common stock purchased by the ESOP are held in a suspense account until released for allocation to participants.  When loan payments are made, shares are allocated to each eligible participant based on the ratio of each such
  participant’s compensation, as defined in the ESOP, to the total compensation of all eligible plan participants.  As the unearned shares are released from the suspense account, the Company recognizes compensation expense equal to the fair value of
  the ESOP shares during the periods in which they become committed to be released.  To the extent that the fair value of the ESOP shares released differs from the cost of such shares, the difference is charged or credited to equity as additional
  paid-in capital.  Any dividends on allocated shares increase participant accounts.  Any dividends on unallocated shares will be used to repay the loan.  Participants will receive shares for their vested balance at the end of their employment. 
  Compensation expense related to the ESOP was $25 thousand and $15 thousand for the  three months ended June 30, 2021 and 2020, respectively, and $47
  thousand and $32 thousand for the six months ended June 30, 2021 and 2020, respectively.

Shares held by the ESOP were as follows:

June 30, 2021 December 31, 2020
(Dollars in thousands)
Allocated to participants 1,051,088 1,065,275
Committed to be released 30,708 10,236
Suspense shares 541,919 562,391
Total ESOP shares 1,623,715 1,637,902
Fair value of unearned shares $ 1,458 $ 1,040

At June 30, 2021, 30,708 of ESOP shares were committed to be allocated to participants during 2021.  During 2021 and 2020, 41,665 and 43,321 of ESOP shares were released for allocation to participants, respectively.  Unearned shares, which are reported as Unearned ESOP shares in the equity section of the consolidated statements of financial condition, were $861 thousand and $893 thousand at June 30, 2021 and December 31, 2020, respectively.

NOTE (12) – Regulatory Matters

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

As a result of the Economic Growth, Regulatory Relief, and Consumer Protection Act, the federal banking agencies have developed a “Community Bank Leverage Ratio” (“CBLR”) (the ratio of a bank’s tier 1 capital to average total consolidated assets) for financial institutions with assets of less than $10 billion. A “qualifying community bank” that exceeds this ratio will be deemed to be in compliance with all other capital and leverage requirements, including the capital requirements to be considered “well capitalized” under Prompt Corrective Action statutes. The federal banking agencies have set the Community Bank Leverage Ratio at 9%. The CARES Act temporarily lowered this ratio to 8% beginning in the three months ended June 30, 2020. The ratio then rose to 8.5% for 2021 and reestablishes at 9% on January 1, 2022.

26

Table of Contents

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Unaudited Consolidated Financial Statements

City First Bank, N.A. elected to adopt the CBLR option on April 1, 2020 as reflected in its June 30, 2020  Call Report. Its CBLR as of June 30, 2021 is shown in the table below. The  Company’s former subsidiary, Broadway Federal Bank, f.s.b., did not elect to adopt the CBLR and reported the December 31, 2020 capital ratios as shown in the table below.

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

Actual Minimum Capital <br> Requirements Minimum Required to<br><br> <br>Be Well Capitalized<br><br> <br>Under Prompt<br><br> <br>Corrective Action<br><br> <br>Provisions
Amount Ratio Amount Ratio^^ Amount Ratio
(Dollars in thousands)
June 30,<br> 2021:
Community Bank Leverage Ratio ^(1)^ $ 97,639 10.10 % $ 82,171 8.50 %
December 31,<br> 2020:
Tier 1 (Leverage) $ 46,565 9.54 % 4.00 % $ 24,413 5.00 %
Common Equity Tier 1 $ 46,565 18.95 % 4.50 % $ 15,975 6.50 %
Tier 1 $ 46,565 18.95 % 6.00 % $ 19,661 8.00 %
Total Capital $ 49,802 20.20 % 8.00 % $ 24,577 10.00 %

All values are in US Dollars.

^(1)^ ^At the Merger on April 1, 2021, the Company’s former subsidiary, Broadway Federal Bank, f.s.b., was merged into City First Bank of D.C, N. A., with City First Bank of D.C, N.A. as the surviving entity and the resultant bank being named City First Bank, National Association, which had elected to adopt Community Bank Leverage Ratio option on April 1, 2020 as reflected in its June 30, 2020 Call Report.^

At June 30, 2021, the Company and the Bank met all the capital adequacy requirements to which they were subject. In addition, the Bank was “well capitalized” under the regulatory framework for prompt corrective action. Management believes that no conditions or events have occurred since December 31, 2020 that would materially adversely change the Bank’s capital classifications. From time to time, we may need to raise additional capital to support the Bank’s further growth and to maintain the “well capitalized” status.

NOTE (13) – Income Taxes

The Company and its subsidiary are subject to U.S. federal and state income taxes.  Income tax expense is the total of the current year income tax due or refundable and the change in deferred tax assets and liabilities.  Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry-forwards.  Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.  The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion, or all, of the deferred tax asset will not be realized.  In assessing the realization of deferred tax assets, management evaluated both positive and negative evidence, including the existence of cumulative losses in the current year and the prior two years, the amount of taxes paid in available carry-back years, the forecasts of future income and tax planning strategies.

The Company recorded a $370 thousand impairment allowance on its deferred tax assets during the three months ended June 30, 2021 because the number of shares sold in the private placements completed on April 6, 2021 triggered limitations on the use of certain tax attributes under the Section 382 of the federal tax code. The ability to use net operating losses (“NOLs”) to offset future taxable income will be restricted and these NOLs could expire or otherwise be unavailable. In general, under Section 382 of the Code and corresponding provisions of state law, a corporation that undergoes an “ownership change” is subject to limitations on its ability to utilize its pre-change NOLs to offset future taxable income. For these purposes, an ownership change generally occurs where the aggregate stock ownership of one or more stockholders or groups of stockholders who owns at least 5% of a corporation’s stock increases its ownership by more than 50 percentage points over its lowest ownership percentage within a specified testing period.

27

Table of Contents

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Unaudited Consolidated Financial Statements

NOTE (14) – Concentration of Credit Risk

The Bank has a significant concentration of deposits with one customer that accounted for approximately 9% of its deposits as of June 30, 2021. The Bank also has a significant concentration of short term borrowings from one customer that accounted for 80% of the outstanding balance of securities sold under agreements to repurchase as of June 30, 2021. The Bank expects to maintain the relationships with these customers for the foreseeable future.

28

Table of Contents

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to provide a reader of our financial statements with a narrative from the perspective of our management 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, 2020.  Certain statements herein are forward-looking statements within the meaning of Section 21E of the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”) and Section 27A of the U.S. Securities Act of 1933, as amended that reflect our current views with respect to future events and financial performance.  Forward-looking statements typically include words such as “anticipate,” “believe,” “estimate,” “expect,” “project,” “plan,” “forecast,” “intend,” and other similar expressions.  These forward-looking statements are subject to risks and uncertainties, which could cause actual future results to differ materially from historical results or from those anticipated or implied by such statements.  Readers should not place undue reliance on these forward-looking statements, which speak only as of their dates or, if no date is provided, then as of the date of this Form 10-Q.  We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except to the extent required by law.

Critical Accounting Policies and Estimates

Our significant accounting policies, which are essential to understanding MD&A, are described in the “Notes to Consolidated Financial Statements” and in the “Critical Accounting Policies” section of MD&A in our Annual Report on Form 10-K for the year ended December 31, 2020.

As a result of the Company’s acquisition of CFBanc Corporation on April 1, 2021, the accounting policy related to business combinations has been added to our critical accounting policies during the six months ended June 30, 2021. See Note 1 - Basis of Financial Statement Presentation in the accompanying Notes to Unaudited Consolidated Financial Statements contained in Item 1. Consolidated Financial Statements (Unaudited).

COVID-19 Pandemic Impact

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

Although the Bank developed plans and policies for providing financial relief to borrowers that may experience difficulties in meeting the terms of their loans, as of June 30, 2021, none of its borrowers had requested loan modifications and the Bank had no delinquencies related to COVID-19.

As of June 30, 2021, the Company participated in the Small Business Administration’s (“SBA”) Paycheck Protection Program (“PPP”) by way of its merger with CFBanc Corporation. The Bank originated $26.4 million in PPP loans during the three months ended June 30, 2021.

Overview

Broadway Financial Corporation (the “Company”) merged with CFBanc Corporation (“CFBanc”) on April 1, 2021, with Broadway Financial Corporation continuing as the surviving entity (the “CFBanc Merger”).  Immediately following the CFBanc Merger, Broadway Federal Bank, f.s.b. merged with and into City First Bank of D.C, National Association with City First Bank of D.C., National Association continuing as the surviving entity (which concurrently changed its name to City First Bank, National Association). The results for the three months ended June 30, 2021 reflect the contribution of the consolidated operations of CFBanc Corporation.  Accordingly, results for the second quarter include the operations of Broadway Financial Corporation and its subsidiary, City First Bank, National Association (the “Bank”), whereas results for the first quarter of 2021 and the first half of 2020 include the results of Broadway Financial Corporation and its former subsidiary, Broadway Federal Bank, f.s.b., which was merged into City First Bank of D.C., National Association on April 1, 2021 and the resultant bank was renamed City First Bank, National Association.

29

Table of Contents

Total assets increased by $557.6 million to $1.041 billion at June 30, 2021 from $483.4 million at December 31, 2020.  The increase in total assets was primarily due to the merger, which increased total assets by $501.2 million for the period. The increase in total assets was also the result of loan originations of $89.1 million for the six months ended June 30, 2021.

Total liabilities increased by $463.0 million to $897.5 million at June 30, 2021 from $434.5 million at December 31, 2020. The increase in total liabilities primarily consisted of the assumption of $353.7 million of deposits, $3.2 million of FHLB advances, and $73.9 million of other borrowings in the CFBanc Merger.

We recorded net income of $701 thousand and a net loss of $2.8 million for the three and six months ended June 30, 2021, respectively, compared to net income of $216 thousand and $183 thousand for the three and six months ended June 30, 2020, respectively.

Our net income increased by $485 thousand during the three months ended June 30, 2021 compared to the three months ended June 30, 2020 primarily due to an increase of $2.7 million, or 89.4%, in net interest income after loan loss provision, and a grant award of $1.8 million from the U.S. Department of the Treasury’s Community Development Financial Institution (“CDFI”) Fund.  Results for the quarter were negatively impacted by an increase in non-interest expenses as a result of the merger, and an effective tax rate of 71.3%, which reflected changes in assumptions for the Company’s estimated annualized tax expense and an increase of $370 thousand in the valuation allowance on the Company’s deferred tax assets.  The issuance of 18,474,000 shares of common stock in the private placements that closed a few days after the Merger triggered a limitation on the use of the Company’s deferred tax assets.  As previously disclosed in the Company’s filings with the U.S. Securities and Exchange Commission (the “SEC”), the Company raised $32.9 million in gross proceeds from the sale of common stock in the private placements in the three months ended June 30, 2021. Net proceeds after expenses were $30.8 million.

For the six months ended June 30, 2021, the Company reported a net loss of $2.8 million compared to net income of $183 thousand for the six months ended June 30, 2020.  Merger-related costs of $5.6 million were recorded during the six months ended June 30, which significantly impacted the results for the period. However, during the six months ended June 30, 2021, net interest income increased by $2.7 million, and a gain of $1.8 million was recognized from the grant from the CDFI Fund discussed above. These increases were offset by an increase in non-interest expenses of $7.5 million, which included the merger-related costs discussed above and the inclusion of the non-interest expenses of CFBanc after the merger date.

Results of Operations

Net Interest Income

Three Months Ended June 30, 2021 Compared to the Three Months Ended June 30, 2021

Net interest income before loan loss provisions for the three months ended June 30, 2021 totaled $5.8 million, compared to $3.0 million for the three months ended June 30, 2020.  The increase primarily resulted from an increase in interest income of $2.3 million during the three months ended June 30, 2021 due to the higher interest income and fees on loans receivable of $1.9 million and interest on investment securities of $375 thousand. These increases were primarily the result of the CFBanc Merger. Total interest expense decreased during the period by $474 thousand to $1.1 million for the three months ended June 30, 2021, compared to $1.5 million for the three months ended June 30, 2020. The decrease was largely due to the decrease in interest expense on interest bearing deposits, which decreased by $490 thousand compared to the same period in the prior year as a result of a reduction in the rates offered on deposit accounts during the period. The cost of interest bearing deposits for the three months ended June 30, 2021, was 0.30% compared to 1.17% for the three months ended June 30, 2020. The net interest margin for the three months ended June 30, 2021 was 2.33%, compared to 2.43% for the three months ended June 30, 2020, a change of 10 basis points.

30

Table of Contents

Interest income and fees on loans receivable increased by $1.9 million to $6.3 million for the three months ended June 30, 2021, from $4.4 million for the three months ended June 30, 2020 due to an increase of $166.6 million in the average balance of loans receivable, which increased interest income by $1.7 million. The average yield on loans also increased by 13 basis points from the three months ended June 30, 2020 to the three months ended June 30, 2021, which increased interest income by $159 thousand.

Interest income on securities increased by $375 thousand for the three months ended June 30, 2021 compared to the three months ended June 30, 2020.  The increase in interest income on securities was the result of an increase in the average balance of securities of $148.2 million due to the addition of the securities in the CFBanc Merger. The higher average balance of securities increased interest income by $430 thousand. This increase was partially offset by the effects of a decrease of 138 basis points in the average interest rate earned on securities, which decreased interest income by $55 thousand.

Other interest income increased by $70 thousand for the three months ended June 30, 2021 compared to the three months ended June 30, 2020.  The increase was primarily due to an increase in the average balance of interest earnings cash deposits of $186.6 million, which resulted in an increase of $79 thousand in other interest income. Other interest income was also positively impacted by an increase in the yield of FRB and FHLB stock, which increased to 7.14% for the three months ended June 30, 2021 compared to 3.18% for the three months ended June 30, 2020, resulting in an increase in other interest income of $40 thousand. Offsetting these increases was a reduction in the yield earned on interest earning deposits of 33 basis points, from 0.46% for the three months ended June 30, 2020, to 0.13% for the three months ended June 30, 2021. This decrease resulted in a reduction of other interest income of $54 thousand.

Interest expense on deposits decreased by $490 thousand for the three months ended June 30, 2021, compared to the three months ended June 30, 2020.  The decrease was attributable to a decrease of 87 basis points in the average rate paid on deposits, which caused interest expense on deposits to decrease by $797 thousand.  This decrease was partially offset by the effects of an increase of $306.1 million in the average balance of deposits, primarily because of the merger, which increased interest expense by $307 thousand.

Interest expense on borrowings increased by $16 thousand for the three months ended June 30, 2021, compared to the three months ended June 30, 2020 primarily due to an increase in average short term borrowings (securities sold under agreements to repurchase) of $60.1 million and a long term borrowing of $14 million that were assumed in the Merger at an average rate of 0.09%.

Six Months Ended June 30, 2021 Compared to the Six Months Ended June 30, 2020

For the six months ended June 30, 2021, net interest income before provisions increased by $2.7 million to $8.7 million compared to $5.9 million for the six months ended June 30, 2020.  The increase in net interest income during the six months ended June 30, 2021 primarily resulted from an increase in interest income of $1.5 million due to higher interest income on loans receivable due to loans added in the CFBanc Merger. The increase in net interest income was also the result of a decrease in total interest expense of $1.2 million due to a reduction in rates paid on interest bearing liabilities from 1.46% for the six months ended June 30, 2020, to 0.64% for the six months ended June 30, 2021.

Interest income and fees on loans receivable increased by $1.2 million during the six months ended June 30, 2021 compared to the six months ended June 30, 2020 due to an increase of $50.9 million in the average balance of loans receivable, primarily resulting from the Merger, which increased interest income by over $1.0 million, and an increase of 5 basis points in the average loan yield, due to a higher average yield on the loan portfolio acquired from City First Bank in the Merger, which increased interest income by $116 thousand.

Interest income on securities increased by $361 thousand for the six months ended June 30, 2021, compared to the six months ended June 30, 2020.  The increase in interest income on securities primarily resulted from an increase of $73.8 million in the average balance of securities because of the merger, which increased interest income by $469 thousand, partially offset by a decrease of 135 basis points in the average interest yield earned on investment securities, which decreased interest income by $108 thousand.

31

Table of Contents

Other interest income increased $5 thousand during the six months ended June 30, 2021 compared to the six months ended June 30, 2020.  The Company recorded higher interest income on regulatory stock during the six months ended June 30, 2021, primarily due to interest earned on FRB and FHLB stock acquired from the CFBanc Merger during the period, which combined with interest on Broadway Federal Bank’s holdings of FHLB stock, increased interest income by $32 thousand.  This increase was partially offset by a decrease of $27 thousand in interest income generated on interest-earning cash in other banks for the six months ended June 30, 2021 compared to the six months ended June 30, 2020.  The decrease was primarily due to a decrease of 65 basis points in the average rate earned on interest-earning cash, which more than offset the positive effects of an increase of $128.4 million in the average balance of interest-earning cash because of the merger.

During the six months ended June 30, 2021, interest expense on deposits decreased by $1.2 million due to a decrease of 90 basis points in the average cost of deposits, which decreased interest expense by $1.3 million, partially offset by the effects of an increase of $155.2 million in the average balance of deposits, largely because of the deposits assumed in the merger, which increased interest expense by $145 thousand.

During the six months ended June 30, 2021, interest expense on borrowings decreased by $53 thousand, compared to the first half of 2020.  The lower interest expense on borrowings during the first half of 2021 reflected a reduction in the average balance of FHLB advances of $2.8 million, which reduced interest expense by $27 thousand, as well as a reduction in the interest rate paid on subordinated debt of 116 basis points, which reduced interest expense by $21 thousand. These decreases were offset by an increase in interest expense on other borrowings assumed in the merger with CFBanc of $16 thousand, although the rate paid on these borrowings was only 0.09%.

The net interest margin decreased by 10 basis points to 2.35% for the six months ended June 30, 2021 from 2.45% for the same period in 2020.

32

Table of Contents

The following tables set forth the average balances, average yields and costs, and certain other information for the periods indicated.  All average balances are daily average balances.  The yields set forth below include the effect of deferred loan fees, and discounts and premiums that are amortized or accreted to interest income or expense.  We do not accrue interest on loans on non-accrual status, but the balance of these loans is included in the total average balance of loans receivable, which has the effect of reducing average loan yields.

For the three months ended
June 30, 2021 June 30, 2020
(Dollars in Thousands) Average Balance Interest Average<br><br> <br>Yield/<br><br> <br>Cost Average Balance Interest Average<br><br> <br>Yield/<br><br> <br>Cost
Assets
Interest-earning assets:
Interest-earning deposits $ 227,043 $ 71 0.13 % $ 40,416 $ 46 0.46 %
Securities 158,608 440 1.11 % 10,431 65 2.49 %
Loans receivable (1) 611,092 6,300 4.12 % 444,530 4,429 3.99 %
FRB and FHLB stock 4,087 73 7.14 % 3,518 28 3.18 %
Total interest-earning assets 1,000,830 $ 6,884 2.75 % 498,895 $ 4,568 3.66 %
Non-interest-earning assets 33,296 10,466
Total assets $ 1,034,126 $ 509,361
Liabilities and Stockholders’ Equity
Interest-bearing liabilities:
Money market deposits $ 178,819 $ 223 0.50 % $ 46,364 $ 112 0.97 %
Passbook deposits 69,401 57 0.33 % 53,167 81 0.61 %
NOW and other demand deposits 190,734 40 0.08 % 54,362 3 0.02 %
Certificate accounts 198,403 157 0.32 % 177,392 771 1.74 %
Total deposits 637,357 477 0.30 % 331,285 967 1.17 %
FHLB advances 111,120 549 1.98 % 119,315 536 1.80 %
Junior subordinated debentures 3,144 21 2.67 % 4,038 34 3.37 %
Other borrowings 74,136 16 0.09 % - - -
Total interest-bearing liabilities 825,757 $ 1,063 0.51 % 454,638 $ 1,537 1.35 %
Non-interest-bearing liabilities 66,279 5,523
Stockholders’ Equity 142,090 49,200
Total liabilities and stockholders’ equity $ 1,034,126 $ 509,361
Net interest rate spread (2) $ 5,821 2.24 % $ 3,031 2.31 %
Net interest rate margin (3) 2.33 % 2.43 %
Ratio of interest-earning assets to interest-bearing liabilities 121.20 % 109.73 %
(1) Amount is net of deferred loan fees, loan discounts and loans in process, and includes deferred origination costs and loan premiums.
--- ---
(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.
--- ---

33

Table of Contents

For the six months ended
June 30, 2021 June 30, 2020
(Dollars in Thousands) Average Balance Interest Average<br><br> <br>Yield/<br><br> <br>Cost Average Balance Interest Average<br><br> <br>Yield/<br><br> <br>Cost
Assets
Interest-earning assets:
Interest-earning deposits $ 162,630 $ 106 0.13 % $ 34,250 $ 133 0.78 %
Securities 84,509 496 1.17 % 10,689 135 2.53 %
Loans receivable (1) 486,317 9,944 4.09 % 435,388 8,788 4.04 %
FHLB stock 3,759 115 6.12 % 3,320 83 5.00 %
Total interest-earning assets 737,215 $ 10,661 2.89 % 483,647 $ 9,139 3.78 %
Non-interest-earning assets 22,425 10,464
Total assets $ 759,640 $ 494,111
Liabilities and Stockholders’ Equity
Interest-bearing liabilities:
Money market deposits $ 127,807 $ 304 0.48 % $ 42,130 $ 217 1.03 %
Passbook deposits 66,800 114 0.34 % 50,936 169 0.66 %
NOW and other demand deposits 122,712 47 0.08 % 48,545 6 0.02 %
Certificate accounts 159,572 395 0.50 % 180,106 1,630 1.81 %
Total deposits 476,891 860 0.36 % 321,717 2,022 1.26 %
FHLB advances 110,803 1,076 1.94 % 113,595 1,108 1.95 %
Junior subordinated debentures 3,209 43 2.68 % 4,164 80 3.84 %
Other borrowings 37,068 16 0.09 % - - -
Total interest-bearing liabilities 627,971 $ 1,995 0.64 % 439,476 $ 3,210 1.46 %
Non-interest-bearing liabilities 36,030 5,574
Stockholders’ Equity 95,639 49,061
Total liabilities and stockholders’ equity $ 759,640 $ 494,111
Net interest rate spread (2) $ 8,666 2.26 % $ 5,929 2.32 %
Net interest rate margin (3) 2.35 % 2.45 %
Ratio of interest-earning assets to interest-bearing liabilities 117.40 % 110.05 %
(1) Amount is net of deferred loan fees, loan discounts and loans in process, and includes deferred origination costs and loan premiums.

(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.

34

Table of Contents

Loan loss provision

The Company recorded a loan loss provision of $81 thousand for the three months ended June 30, 2021. No loan loss provision was recorded during the first quarter of 2021, so the loan loss provision for the six months ended June 30, 2021, was also $81 thousand. The provision recorded for the three months ended June 30, 2021, was the result of growth in the loan portfolio. There were no loan charge-offs recorded during the six months ended June 30, 2021.

The Bank did not record a loan loss provision or recapture during the three months ended June 30, 2020 and recorded a loan loss provision of $29 thousand during the six months ended June 30, 2020.  During the three months ended June 30, 2020 the Bank recorded additional provisions to increase the Allowance for Loan and Lease Losses (“ALLL”) for economic uncertainties related to the COVID-19 Pandemic.  During the three months ended June 30, 2020, the Bank maintained its ALLL at $3.2 million, after adjusting for a loan loss recovery of $4 thousand, despite a net decrease of $6.9 million in the loans held for investment portfolio during the three months ended June 30, 2020.  No loan charge-offs were recorded during the three months or the six months ended June 30, 2020.

Non-interest Income

Non-interest income for the three months ended June 30, 2021 totaled $2.2 million compared to $242 thousand for the three months ended June 30, 2020.  Non-interest income increased by $2.0 million primarily due to a grant of $1.8 million from the CDFI Fund during the second quarter.  The Bank fulfilled the requirements to receive the award during the second quarter.  Other income during the three months ended June 30, 2021 included $154 thousand in management fees related to New Market Tax Credit projects managed by City First Bank in Washington, D.C.  No gain on sale of loans was recorded during the three months and six months ended June 30, 2021 compared to gains of $116 thousand recorded during the three months ended June 30, 2020.

For the six months ended June 30, 2021, non-interest income totaled $2.3 million compared to $439 thousand for the same period in the prior year.  The increase of $1.9 million in non-interest income was primarily due to the grant of $1.8 million received from the CDFI Fund during the three months ended June 30, 2021.

Non-interest Expense

Non-interest expense for the three months ended June 30, 2021 totaled $5.4 million, compared to $3.4 million for the three months ended June 30, 2020.  The increase of $2.0 million in non-interest expense during the three months ended June 30, 2021 compared to the same quarter of 2020 was primarily due to the inclusion of the non-interest expenses for the merged Bank, which included increases of $836 thousand in compensation and benefits expense, $345 thousand in information services expense, $307 thousand in occupancy expense, $93 thousand in loan related expenses, and $82 thousand in supervisory costs.  In addition, non-interest expense for the three months ended June 30, 2021 included $207 thousand in Merger-related costs and $131 thousand in amortization of the core deposit intangible that was recorded in connection with the Merger.

For the six months ended June 30, 2021, non-interest expense totaled $14.0 million, compared to $6.6 million for the same period in the prior year.  The increase of $7.4 million in non-interest expense was primarily due to merger-related expenses of $5.6 million in 2021, as well as the inclusion of the non-interest expenses of the acquired operations of the Bank.

Income Taxes

Income tax expense or benefit is computed by applying the statutory federal income tax rate of 21%.  State taxes are recorded at the State of California tax rate and apportioned based on an allocation schedule to reflect that a portion of the Company’s operations are conducted in the Washington, D.C. area.  The Company recorded income tax expense of $1.8 million during the second quarter, representing an effective rate of 71.3%, and a benefit of $348 thousand during the six months ended June 30, 2021.  The high effective income tax for the second quarter reflects changes in the assumptions used to estimate the Company’s annual income tax expense.  Income tax expense for the three months and six months ended June 30, 2021 also includes an increase of $370 thousand in the valuation allowance on the Company’s deferred tax assets to record an allowance against net operating loss carryforwards for the State of California, net of federal tax benefit.  This change in the valuation allowance was required because shares of common stock issued in the private placements that closed a few days after the merger triggered a limitation on the use of the deferred tax assets.

35

Table of Contents

The Company recorded income tax benefits of $345 thousand and $395 thousand for the three and six months ended June 30, 2020, respectively. The income tax benefit during the three months and six months ended June 30, 2020 was primarily due to a tax adjustment of $273 thousand upon the resolution of an outstanding audit issue with the California Franchise Tax Board for tax years 2009 to 2013. In addition, the Company recorded low-income housing tax credits of $29 thousand and $58 thousand during the three months and six months ended June 30, 2020, respectively.

Financial Condition

Total Assets

Total assets increased by $557.6 million to $1.041 billion at June 30, 2021 from $483.4 million at December 31, 2020.  The increase in total assets was primarily due to the addition of assets in the CFBanc Merger, which increased total assets by $501.2 million on the merger date.

Securities Available-For-Sale

Securities available-for-sale totaled $158.8 million at June 30, 2021, compared with $10.7 million at December 31, 2020. The $148.1 million of increase in securities available-for-sale during the six months ended June 30, 2021 was primarily due to the addition of $150.0 million of securities as a result of the CFBanc Merger, as well as additional purchases of securities of $4.1 million. These increases were partially offset by net amortizations and paydowns of mortgage-backed securities of $6.5 million.

Allowance for Loan Losses

As a smaller reporting  company as defined by the SEC, the Company is not required to adopt the current expected credit losses (“CECL”) accounting standard until 2023; consequently, the Bank’s ALLL is based on probable incurred losses at the date of the consolidated balance sheet, rather than projections of future economic conditions over the life of the loans.  In determining the adequacy of the ALLL within the context of the current uncertainties posed by the COVID-19 Pandemic, management has considered the historical and current performance of the Company’s portfolio, as well as various measures of the quality and safety of the portfolio, such as debt servicing and loan-to-value ratios.  Management is continuing to monitor the loan portfolio and regularly communicating with borrowers to determine the continuing adequacy of the ALLL.

We record a provision for loan losses as a charge to earnings when necessary in order to maintain the ALLL at a level sufficient, in management’s judgment, to absorb probable incurred losses in the loan portfolio.  At least quarterly we conduct an assessment of the overall quality of the loan portfolio and general economic trends in the local market.  The determination of the appropriate level for the allowance is based on that review, considering such factors as historical loss experience for each type of loan, the size and composition of our loan portfolio, the levels and composition of our loan delinquencies, non-performing loans and net loan charge-offs, the value of underlying collateral on problem loans, regulatory policies, general economic conditions, and other factors related to the collectability of loans in the portfolio.

The ALLL was $3.3 million or 0.53% of gross loans held for investment at June 30, 2021, compared to $3.2 million, or 0.88% of gross loans held for investment, at December 31, 2020.  The decrease in the ALLL as a percentage of gross loans is because there is no ALLL associated with the loans acquired in the merger.  The increase in balance of the ALLL during the six months ended June 30, 2021 was the result of additional loan loss provisions due to loan growth during the period.

As of June 30, 2021, loan delinquencies totaled $1.9 million, compared to $0 at December 31, 2020.  None of these loans were greater than 90 days delinquent. The increase in delinquencies was due to commercial real loans and commercial loans acquired in the merger.

Non-performing loans (“NPLs”) consist of delinquent loans that are 90 days or more past due and other loans, including troubled debt restructurings that do not qualify for accrual status.  At June 30, 2021, NPLs totaled $735 thousand, compared to $787 thousand at December 31, 2020.  The decrease of $50 thousand in NPLs was due to repayments.

36

Table of Contents

In connection with our review of the adequacy of our ALLL, we track the amount and percentage of our NPLs that are paying currently, but nonetheless must be classified as NPL for reasons unrelated to payments, such as lack of current financial information and an insufficient period of satisfactory performance.  As of June 30, 2021, all our non-performing loans were current in their payments.  Also, in determining the ALLL, we considered the ratio of the ALLL to NPLs, which was 448.4% at June 30, 2021 compared to 408.5% at December 31, 2020.

When reviewing the adequacy of the ALLL, we also consider the impact of charge-offs, including the changes and trends in loan charge-offs.  There have been no loan charge-offs since 2015.  In determining charge-offs, we update our estimates of collateral values on NPLs by obtaining new appraisals at least every twelve months.  If the estimated fair value of the loan collateral less estimated selling costs is less than the recorded investment in the loan, a charge-off for the difference is recorded to reduce the loan to its estimated fair value, less estimated selling costs.  Therefore, certain losses inherent in our total NPLs are recognized periodically through charge-offs.  The impact of updating these estimates of collateral value and recognizing any required charge-offs is to increase charge-offs and reduce the ALLL required on these loans.

There were no recoveries or charge-offs recorded during the first half of 2021 and $4 thousand in recoveries were recorded during the first half of 2020.

Impaired loans at June 30, 2021 were $4.1 million, compared to $4.7 million at December 31, 2020.  The  decrease of $657 thousand in impaired loans was primarily due to the payoff of a $30 thousand commercial loan and loan repayments.  Specific reserves for impaired loans were $45 thousand, or 1.10% of the aggregate impaired loan amount at June 30, 2021, compared to $141 thousand, or 2.98% at December 31, 2020.

On March 27, 2020, the Coronavirus Aid Relief and Economic Security Act (“CARES Act”) was signed into law by Congress. The CARES Act provides financial institutions, under specific circumstances, the opportunity to temporarily suspend certain requirements under generally accepted accounting principles related to Troubled Debt Restructurings (“TDR’s”) for a limited period of time to account for the effects of COVID-19.  In March 2020, a joint statement was issued by federal and state regulatory agencies, after consultation with the FASB, to clarify that short-term loan modifications, such as payment deferrals, fee waivers, extensions of repayment terms or other insignificant payment delays, are not TDRs if made on a good-faith basis in response to COVID-19 to borrowers who were current prior to any relief. Under this guidance, six months or less is provided as an example of short-term, and current is defined as less than 30 days past due at the time the modification program is implemented.  The guidance also provides that these modified loans generally will not be classified as non-accrual loans during the term of the modification.

The Bank has implemented a loan modification program for the effects of COVID-19 on its borrowers. At the date of this filing, two borrowers have requested loan modifications. Both borrowers were current at the time modification program was implemented.  To date, no modifications have been granted.

We believe that the ALLL is adequate to cover probable incurred losses in the loan portfolio as of June 30, 2021, but because of the current uncertainties posed by the COVID-19 Pandemic, there can be no assurance that actual losses will not exceed the estimated amounts.  In addition, the OCC and the Federal Deposit Insurance Corporation (“FDIC”) periodically review the ALLL as an integral part of their examination process.  These agencies may require an increase in the ALLL based on their judgments of the information available to them at the time of their examinations.

Office Properties and Equipment

Net office properties and equipment increased by $6.6 million to $9.2 million at June 30, 2021 from $2.5 million as of December 31, 2020.  The large increase was due to the result of the merger, as CFBanc owned the land and building that in which it operates its headquarters and branch. Office properties and equipment, net increased by $7.0 million as of the date of the merger.

Goodwill and Intangible Assets

37

Table of Contents

As a result of the merger, the Company recorded $26.0 million of goodwill and $3.3 million of core deposit intangible assets. Goodwill and intangible assets acquired in a purchase business combination and that are determined to have an indefinite useful life are not amortized, but tested for impairment at least annually or more frequently if events and circumstances exist that indicate the necessity for such impairment tests to be performed.

The core deposit intangible asset is amortized on an accelerated basis reflecting the pattern in which the economic benefits of the intangible asset are consumed or otherwise used up. The estimated life of the core deposit intangible is approximately 10 years. During the six months ended June 30, 2021, the Company recorded $131 thousand of amortization expense related to the core deposit intangible.

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

Total Liabilities

Total liabilities increased by $463.0 million to $897.5 million at June 30, 2021 from $434.5 million at December 31, 2020.  The increase in total liabilities was largely the result of the liabilities assumed in the CFB merger, and was primarily comprised of an increase of $ 389.4 million in deposits and $84.7 million of other borrowings, offset by reductions of $14.5 million in FHLB advances during the period.

Deposits

Deposits increased to $705.0 million at June 30, 2021 from $315.6 million at December 31, 2020, due to deposits of $353.7 million that were assumed in the Merger and additional growth in deposits of $39.0 million since the Merger, primarily in money market and demand deposit accounts.

Single customer relationships accounted for approximately 9% and 13% of our deposits at June 30, 2021 and December 31, 2020, respectively.  We expect to maintain this relationship with these customers for the foreseeable future.

Borrowings

Total borrowings increased by $69.7 million to $183.5 million at June 30, 2021 from $113.8 million at December 31, 2020. The increase consisted of the addition of $73.9 million of other borrowings at the merger date, which further increased to $84.7 million as of June 30, 2021.  This increase was offset by reductions in FHLB advances of $14.5 million and in our junior subordinated floating rate debentures of $510 thousand.

The Bank enters into agreements under which it sells securities subject to an obligation to repurchase the same or similar securities. Under these arrangements, the Bank may transfer legal control over the assets but still retain effective control through an agreement that both entitles and obligates the Bank to repurchase the assets.  As a result, these repurchase agreements are accounted for as collateralized financing agreements (i.e., secured borrowings) and not as a sale and subsequent repurchase of securities. The obligation to repurchase the securities is reflected as a liability in the Banks’s consolidated balance sheets, while the securities underlying the repurchase agreements remain in the respective investment securities asset accounts. In other words, there is no offsetting or netting of the investment securities assets with the repurchase agreement liabilities. The securities that have been pledged as collateral include $17.6 million of U.S. Government Agency securities, $47.2 million of mortgage-backed securities,  and $6.5 million of collateralized mortgage obligations as of June 30, 2021.   The weighted average rate paid on repurchase agreements was 0.10% for the three months ended June 30, 2021.

The weighted average interest rate on the FHLB Advances was 1.95% at June 30, 2021, compared with 1.94% at December 31, 2020. The weighted average interest rate on the subordinated floating rate debentures decreased to 2.69% at June 30, 2021 from 2.77% at December 31, 2020, primarily due to decreases in LIBOR.

38

Table of Contents

Stockholders’ Equity

Stockholders’ equity was $143.5 million, or 13.8% of the Company’s total assets, at June 30, 2021, compared to $48.9 million, or 10.1% of the Company’s total assets at December 31, 2020.  The Company issued $63.3 million in common stock at a price per share of $2.49 and $3.0 million in preferred stock in connection with the merger.  In addition, the Company raised $30.9 million in net proceeds from the sale of common stock in private placements immediately following the merger on April 6, 2021.

The Company’s book value was $1.96 per share at June 30, 2021, and its tangible book value was $1.55 per share as of June 30, 2021 after adjusting for goodwill of $26.0 million and the net unamortized core deposit intangible of $3.2 million, which were both originally recorded in connection with the merger. The Company’s tangible book value per share was $1.74 per share as of December 31, 2021.

A capital contribution of $20 million was made to the Bank from the Company during the three months ended June 30, 2021.  The Bank (City First Bank, N.A.) elected to adopt the Community Bank Leverage Ratio (“CBLR”) as of April 1, 2020 as reflected in its June 30, 2020 Call Report. The Bank’s CBLR was 10.10% at June 30, 2021.

Prior to Merger, the Company’s former subsidiary, Broadway Federal Bank, f.s.b., did not elect to adopt the CBLR and reported a Total Capital ratio of 20.20% and a Leverage ratio of 9.54% at December 31, 2020.

Liquidity

The objective of liquidity management is to ensure that we have the continuing ability to fund operations and meet our obligations on a timely and cost-effective basis.  The Bank’s sources of funds include deposits, advances from the FHLB, other borrowings, proceeds from the sale of loans and investment securities, and payments of principal and interest on loans and investment securities.  The Bank is currently approved by the FHLB to borrow up to 25% of total assets to the extent the Bank provides qualifying collateral and holds sufficient FHLB stock.  This approved limit and collateral requirement would have permitted the Bank to borrow an additional $24.6 million at June 30, 2021.  In addition, the Bank has additional lines of credit of  $11 million with other financial institutions.

The Bank’s primary uses of funds include withdrawals of and interest payments on deposits, originations of loans, purchases of investment securities, and the payment of operating expenses.  Also, when the Bank has more funds than required for reserve requirements or short-term liquidity needs, the Bank invests in federal funds with the Federal Reserve Bank or in money market accounts with other financial institutions.  The Bank’s liquid assets at June 30, 2021 consisted of $210.4 million in cash and cash equivalents and $68.4 million in securities available-for-sale that were not pledged, compared to $96.1 million in cash and cash equivalents and $10.7 million in securities available-for-sale that were not pledged at December 31, 2020.  The increases were due to assets acquired in the CFBanc Merger. Currently, we believe that the Bank has sufficient liquidity to support growth over the foreseeable future.

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

The Company recorded consolidated net cash outflows from operating activities of $2.6 million during the six months ended June 30, 2021, compared to consolidated net cash outflows from operating activities of $49.2 million during the six months ended June 30, 2020.  Net cash outflows from operating activities during the six months ended June 30, 2021 were primarily attributable to the Company’s net loss, whereas net cash outflows from operating activities for the six months ended June 30, 2020 were primarily due to originations of loans receivable held for sale of $110.9 million, offset primarily by proceeds from sales of loans receivable held for sale of $61.0 million.

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

39

Table of Contents

The Company recorded consolidated net cash inflows from financing activities of $58.5 million during the six months ended June 30, 2021, compared to consolidated net cash inflows from financing activities of $50.0 million during the six months ended June 30, 2020.  Net cash inflows from financing activities during the six months ended June 30, 2021 were primarily attributable to a net increase in deposits of $35.9 million and proceeds from the sale of stock of $30.8 million, and $10.6 million in additional securities sold under agreements to repurchase, offset by a net decrease of $17.5 million in FHLB advances. During the six months ended June 30, 2020, net cash inflows from financing activities were primarily due to a net increase in deposits of $18.1 million and net proceeds from FHLB advances of $32.5 million.

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 June 30, 2021 and December 31, 2020, the Bank exceeded all capital adequacy requirements to which it is subject and meets the qualifications to be considered “well capitalized.” As of April 1, 2020, the Bank elected to follow the Community Bank Leverage Ratio guidelines. (See Note 12 – Regulatory Matters.)

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not Applicable

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives of ensuring that information we are required to disclose in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures, and is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. There is no assurance that our disclosure controls and procedures will operate effectively under all circumstances. An evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures was performed under the supervision of the Company’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) as of June 30, 2021.  Based on that evaluation, the Company’s CEO and CFO concluded that the Company’s disclosure controls and procedures were effective as of June 30, 2021.

Changes in Internal Control Over Financial Reporting

There were no changes in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the three months ended June 30, 2021, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting, except as noted below.

During the three months ended June 30, 2021, we completed the CFBanc Merger.  (See Note 2 - Business Combination.)  We are currently integrating CFBanc into our operations and internal control processes. As we complete this integration, we are analyzing, evaluating, and where necessary, making changes in control and procedures related to the CFBanc business, which we expect to complete within one year after the date of acquisition. Pursuant to the SEC’s guidance that an assessment of a recently acquired business may be omitted from the scope of an assessment in the year of acquisition, the scope of our assessment of the effectiveness of our internal controls over financial reporting at December 31, 2021 may exclude CFBanc to the extent that they are not yet integrated into our internal controls environment.

40

Table of Contents

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.

41

Table of Contents

PART II.  OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

None

Item 1A. RISK FACTORS

Not Applicable

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

None

Item 3. DEFAULTS UPON SENIOR SECURITIES

None

Item 4. MINE SAFETY DISCLOSURES

Not Applicable

Item 5. OTHER INFORMATION

On August 12, 2020, the Board of Directors of the Company approved an amendment and restatement of the Bylaws of the Company to, among other things, conform the deadlines for stockholder director nominations and new business proposals under the Bylaws, such that both are due in writing to the Corporate Secretary not less than 90 days nor more than 120 days in advance of the anniversary of the previous year’s annual meeting; provided, however, that if the date of the annual meeting is more than 30 days before or more than 60 days after the anniversary date, the stockholder notice must be received by the Corporate Secretary not later than 90 days prior to the annual meeting or, if later, 10 days following the day on which public disclosure of the date of the annual meeting is first made by the Company.

Item 6. EXHIBITS
Exhibit<br><br> <br>Number*
--- ---
3.1 Amended and Restated Certificate of Incorporation of Broadway Financial Corporation effective as of April 1, 2021 (Exhibit 3.1 to Form 8-K filed by Registrant on April 5, 2021)
3.2 Bylaws of Registrant (Exhibit 3.2 to Form 8-K filed by Registrant on August 24, 2020)
10.1 Employment Agreement, dated as of December 29, 2017, by and among City First Bank of D.C., National Association, CFBanc Corporation and Brian Argrett. **.
10.2 City First Bank Deferred Compensation Plan for Brian Argrett.**
31.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH XBRL Taxonomy Extension Schema Document
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF XBRL Taxonomy Extension Definitions Linkbase Document
101.LAB XBRL Taxonomy Extension Label Linkbase Document
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document
* Exhibits followed by a parenthetical reference are incorporated by reference herein from the document filed by the Registrant with the SEC described therein.  Except as otherwise indicated, the SEC File No.<br> for each incorporated document is 000-27464.
** Management contract or compensatory plan or arrangement
--- ---

42

Table of Contents

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:    August 23, 2021 By: /s/ Brian Argrett
Brian Argrett
Chief Executive Officer
Date:    August 23, 2021 By: /s/ Brenda J. Battey
Brenda J. Battey
Chief Financial Officer

43

Exhibit 10.1

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT, dated as of this 29^th^ day of December, 2017 (the "Agreement Date"), is by and among CITY FIRST BANK OF D.C., NATIONAL ASSOCIATION (the "Bank"), CFBANC CORPORATION ("CF Bancorp") and BRIAN ARGRETT ("Executive").

RECITALS

The Bank and CF Bancorp each desire to employ Executive and to have the benefit of his skills and services, and Executive desires to be employed with the Bank and CF Bancorp, on the terms and conditions set forth herein.

NOW, THEREFORE, in consideration of the mutual promises, terms, covenants and conditions set forth herein, and the performance of each, the parties hereto, intending legally to be bound, hereby agree as follows:

AGREEMENTS

1.           Employment. The Bank hereby continues to employ Executive to perform the duties described herein, and Executive hereby accepts employment with the Bank, for a five-year term beginning January l, 2018 ("Effective Date") and continuing through December 3 1, 2022 (the "Employment Period"), unless earlier ended as set forth below. Each period from January I to December 31 shall be known as a "Calendar Year." This Agreement may be extended, modified, or renewed upon the written agreement of the parties. To the extent this Agreement has not been otherwise extended or renewed by mutual agreement, the parties hereto agree to meet no later than December 31, 2021, prior to the beginning of the final Calendar Year of the Agreement, to determine in good faith their mutual intentions upon expiration of the initial term of the Agreement. The relevant terms of this Agreement shall apply during the entire Employment Period unless otherwise stated herein.

2.           Position and Duties. The Bank hereby continues to employ Executive as President and Chief Executive Officer of the Bank, and Executive shall continue to serve as a voting director on the Bank's Board of Directors. Executive also will continue to serve as President and Chief Executive Officer of CF Bancorp, and shall serve as a voting director on CF Bancorp's Board of Directors. As such, Executive shall have responsibilities, duties and authority set forth in the position description attached as Exhibit A as well as the responsibilities and duties reasonably assigned to Executive by the Board of Directors of the Bank and CF Bancorp (the "Board") from time to time. Executive will report directly to the Bank's Board of Directors, and shall act in accordance with the Bank's Bylaws, budget, applicable regulatory authority, and policies, as they may be amended from time to time. Executive accepts this employment upon the terms and conditions contained in this Agreement, and, subject to Section 5 below, agrees to devote substantially all his professional time, attention, and efforts to promote and further the business of the Bank. Executive shall faithfully adhere to, execute, and fulfill all written policies established by the Bank.

  • 1 -

3.           Compensation. For all services rendered by Executive, the Bank shall compensate Executive as follows:

(a)          Base Salary. The Bank shall pay Executive a base annual salary ("Base Salary") of $432,600.00, payable in equal amounts on a biweekly basis or as otherwise provided by the Bank's standard payroll procedures. On at least an annual basis, the Board will review Executive's performance and may make increases to such Base Salary if, in the Board's sole discretion, any such increase is warranted.

(b)          Short Term Incentive Compensation. Executive may receive such short-term incentive compensation as the Board may determine from time to time. The targeted amount of such short term incentive compensation for which Executive may be eligible shall be set by the Board in its sole discretion in all instances, but shall generally target 20% of Executive's Base Salary on an annual basis. In no event shall the target for Executive be a lessor percentage than is targeted for any other officers of the Bank or CF Bancorp. Executive has no legally binding right to any short-term incentive compensation until it is paid, and must be an employee on the date it is paid to receive any payment (except with regard to any short-term incentive compensation earned for Calendar Year 2022, the final year of this Agreement, but paid in the following year, 2023). In no event shall the payment be made later than March 15 following the calendar year in which the right to the payment is no longer subject to a substantial risk of forfeiture.

(c)          Deferred Compensation. The Bank shall establish a nonqualified deferred compensation plan (or similar long-term compensation plan) for Executive to which it shall credit a percentage of Base Salary determined annually to a bookkeeping account on the last day of each Calendar Year of the Employment Period. The targeted amount of such deferred compensation to which Executive may be eligible shall be established by the Board in its sole discretion in all instances. The amount credited to the account and any earnings thereon as of the Vesting Date described below shall be referred to as the "Deferred Compensation". The Deferred Compensation shall vest upon the earliest to occur of the following (the earliest date to occur being the "Vesting Date"): (i) December 31, 2022, (ii) Executive's disability as defined in Section 3(b) of this Agreement, (iii) Executive's death, (iv) Executive's involuntary termination without "Cause" (as defined below), or (v) Executive's resignation for "Good Reason" (as defined below) upon or following a change in the ownership or effective control in CF Bancorp or Bank, or the ownership of a substantial portion of Bank's or CF Bancorp's assets as defined in Treas. Reg. section 1.409A-3(i)(5) ("Change in Control"). Subject to the execution of a release in accordance with Section 6(i) below, the Deferred Compensation shall be paid to Executive in a lump sum within sixty (60) days following the Vesting Date.

  • 2 -

(d)          Executive Benefits. During the Employment Period, Executive shall be entitled to receive the Bank's employee benefits, which currently include employer contributions to a group health/medical/vision plan through CareFirst; bank-paid Group Short Term and Long Term Disability Insurance; participation in the Bank's 401(k) plan, to which the Bank currently contributes 3% of salary, and matches 100% of employee contributions on the next 3% of salary (up to applicable limits), Flexible Spending Accounts, 30 business days of paid vacation annually, up to 10 business days paid sick leave, 10 paid holidays, one discretionary leave day, a monthly automobile allowance payment of $500, and such additional perquisites or benefits as may be specified from time to time by the Board. Except for the number of vacation days, sick leave days, holidays and discretionary leave days, these employee benefits are subject in each case to the generally applicable terms and conditions of any such plan or program in question, to the determinations of any person or committee administering any such plan or program, and to such changes, additions, or deletions as the Bank may make from time to time and disclose to Executive.

4.           Expense Reimbursement. Subject to Section 22, the Bank shall reimburse Executive for all business travel and other out-of-pocket expenses reasonably incurred by Executive in the performance of his services hereunder in accordance with the Bank's policies and procedures as in effect from time to time.

5.           No Other Employment. While employed by the Bank, Executive agrees not to, directly or indirectly, provide services to any person or organization from which Executive receives compensation or otherwise to engage in activities that would conflict or interfere with the faithful performance of Executive's duties to the Bank. Notwithstanding the provisions of this Section 5, it is understood Executive may serve as a paid or unpaid director of other organizations with the prior written consent from the Chairman of the Board of the Bank. Provided, however, that such services cannot violate Sections 7 and 8 below.

6.           Termination: Rights on Termination. Executive's employment may be terminated early pursuant to this Section 6.

(a)             Death. In the event of Executive's death, this Agreement shall terminate automatically, except for the provisions that survive termination. Within sixty (60) days following the termination of Executive's employment for death, his estate shall receive (i) any accrued and then unpaid Base Salary up to the date of death, (ii) any declared, but unpaid short-term incentive compensation, earned and accrued as a result of his service during the previous Contract Year, (iii) any accrued, unused vacation time, and (iv) the Deferred Compensation credited to his account as of the date of death pursuant to Section 3(c). In addition, Executive's estate shall be entitled to any other vested benefits under any welfare or benefit plan maintained by the Bank in accordance with its terms and applicable law.

(b)       Disability. If, because of incapacity due to physical or mental illness or injury, Executive is unable to perform the material duties of his position on a full-time basis for one hundred and twenty (120) days or more within a twelve-month period, the Bank may terminate Executive's employment hereunder. Within sixty (60) days following the termination of Executive's employment for disability, he shall receive (i) any accrued and then unpaid Base Salary up to the date of termination, (ii) any declared, but unpaid short-term incentive compensation, earned and accrued as a result of his service during the previous Calendar Year, (iii) any accrued, unused vacation time, and (iv) the Deferred Compensation credited to his account as of the date of the termination of the Executive's employment for disability. In addition, Executive shall be entitled to any other vested benefits under any welfare or benefit plan maintained by the Bank in accordance with its terms and applicable law.

  • 3 -

(c)     Termination by the Bank for "Cause." The Bank may terminate this Agreement and Executive's employment hereunder effective immediately for "Cause," which shall be one or more of only the following events: (i) Executive's material breach of this Agreement, which breach is not cured within thirty (30) days of receipt by Executive of 'Mitten notice from the Bank specifying the breach; (ii) Executive's gross negligence or willful misconduct in the performance of his material duties hereunder, material misperformance of such duties, or willful or repeated refusal to abide by or comply with lawful directives of the Board or the Bank's policies and procedures, any of which conduct is not cured within thirty (30) days of receipt by Executive of written notice from the Bank specifying the conduct to be cured; (iii) Executive's fraud, embezzlement, or theft with respect to the business or affairs of the Bank, upon notice from the Bank specifying such fraud, embezzlement, or theft; (iv) Executive's dishonesty or misconduct with respect to the financial affairs of the Bank, that in the reasonable judgment of the Board materially and adversely affects the operations or reputation of the Banki (v) Executive's conviction of a felony or of any misdemeanor involving fraud, dishonesty, misappropriation of funds or any property or assets of the Bank or its "affiliates" (as defined in Section 7(d)); (vi) Executive's abuse of alcohol or drugs (legal or illegal) that, in the Board's reasonable judgment, substantially impairs Executive's ability to perform his duties hereunder after notice and at least thirty (30) days' opportunity to cure; or (vii) based on Regulatory Action, as described in Section 6(e) below. Should Executive's employment be terminated by the Bank for Cause, he shall be entitled within sixty (60) days following such termination only to (i) Base Salary, (ii) any accrued, unused vacation time, and (iii) any other vested benefits under any welfare or benefit plan maintained by the Bank in accordance with its terms and applicable law. In the event of the Executive's termination for Cause, all Deferred Compensation shall be forfeited.

(d)             Termination by the Bank Without Cause. The Bank may terminate this Agreement and Executive's employment, effective immediately, without Cause. Upon such termination without Cause, Executive shall receive (i) any accrued and then unpaid Base Salary up to the date of termination, (ii) any declared, but unpaid short-term incentive compensation, earned and accrued as a result of his service during the previous Calendar Year, (iii) any accrued, unused vacation time, and (iv) the Deferred Compensation credited to his account as of the date of termination of employment in accordance with and subject to Section 3(c). In addition, Executive shall be eligible to receive payments equal to eighteen (18) months of his then-current Base Salary, less applicable withholdings and deductions (any such amount referred to hereafter as,  "Severance"), paid out in accordance with and subject to Section 6(i) below, and Executive shall be entitled to any other vested benefits under any welfare or benefit plan maintained by the Bank in accordance with its terms and applicable law.

(e)     Regulatory Action. The Bank retains the right to terminate Executive's employment and suspend or terminate all of its obligations under this Agreement in the event that (i) Executive is suspended and/or temporarily prohibited from participating in the conduct of the Bank's affairs by a notice served under Section 8(e)(3) or (g)(l) of the Federal Deposit Insurance Act ("FDIA"), 12 U.S.C. §§ 1818(e)(3) and (g)(l); (ii) Executive is removed and/or permanently prohibited from participating in the conduct of the Bank's affairs by an order issued under Section

  • 4 -

8(e)(4) or (g)(l) of the FDIA, 12 U.S.C. §§ 1818(e)(4) and (g)(l); (iii) Executive is subject to any other order or action pursuant to Section 8 of the FDIA; or (iv) Executive is subject to any order or final regulatory action related to his conduct pursuant to any rule of any federal banking agency. If Executive is terminated based on Regulatory Action, he shall be entitled within sixty (60) days following such termination only to (i) Base Salary, (ii) any accrued, unused vacation time, and (iii) any other vested benefits under any welfare or benefit plan maintained by the Bank in accordance with its terms and applicable law. In the event of Executive's termination under this section, all Deferred Compensation shall be forfeited.

(f)              Resignation for Good Reason Upon or Following Change in Control. The Executive may resign his employment under this Agreement for "Good Reason" upon or following a Change in Control. Upon such resignation for Good Reason upon or following a Change in Control, Executive shall receive (i) any accrued and then unpaid Base Salary up to the date of termination, (ii) any declared, but unpaid short-term incentive compensation, earned and accrued as a result of his service during the previous Calendar Year, (iii) any accrued, unused vacation time, and (iv) the Deferred Compensation credited to his account as of the date of termination of employment in accordance with and subject to Section 3(c). In addition, Executive shall be entitled to any other vested benefits under any welfare or employee benefit plan maintained by the Bank in accordance with its terms and applicable law. Executive shall also receive Severance as though terminated without Cause pursuant to Section 6(d) above, paid out in accordance with and subject to Section 6(i) below. For this Agreement, "Good Reason" shall mean that, without Executive's consent, the Bank (i) substantially diminishes his authority, duties, or responsibilities (other than temporarily, while physically or mentally incapacitated), (ii) reduces his Base Salary by a material amount, (iii) relocates his principal place of employment, without consent, more than fifty (50) miles; or (iv) commits a material breach of this Agreement. Executive agrees that this employment relationship does not contemplate any grounds for constructive termination other than Good Reason. Executive must give notice to the Bank of his intention to resign for Good Reason within 60 days after the occurrence of the event that he asserts entitles him to resign for Good Reason. In that notice, he must state the condition that he considers provides him with Good Reason and he must give the Bank an opportunity to cure the condition within 30 days after his notice. If the Bank fails to cure the condition, his resignation will be effective on the 45th day after his initial notice (unless the Board has previously waived such notice period in writing or agreed to a shorter notice period). Executive will not be treated as resigning for Good Reason if the Bank already had given him written notice of its intention to terminate his employment for Cause as of the date of his notice of resignation.

(g)             Incentive Compensation Recoupment. Any incentive compensation as defined under of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and such regulations as are promulgated thereunder from time to time ("Dodd-Frank"), payable to Executive under the Bank's bonus plans, this Agreement or any other plan, arrangement or program established or maintained by the Bank shall be subject to any claw back policy adopted or implemented by the Bank in respect of Dodd-Frank, or in respect of any other applicable law or regulation.

  • 5 -

(h)             Resignation. Executive agrees to provide one hundred eighty (180) days' advance written notice of resignation. Upon receipt of such notice of resignation, the Bank may, in its discretion, modify Executive's duties at any time during the notice period, so long as the Bank pays Executive's Base Salary in accordance with this Agreement, and pays the cost of his then existing employment benefits for any remaining portion of the one hundred eighty-day notice period. If Executive resigns or otherwise terminates his employment for any reason, he shall receive no severance compensation and shall forfeit all Deferred Compensation. Within sixty (60) days following the Executive's resignation, Executive shall be paid (i) any accrued and then unpaid Base Salary up to the last date of employment, (ii) any declared, but unpaid short-term incentive compensation, earned and accrued as a result of his service during the previous Calendar Year, and (iii) for any accrued, unused vacation time. In addition, Executive shall be entitled to any other vested benefits under any welfare or benefit plan maintained by the Bank in accordance with its terms and applicable law.

(i)              Release of Claims and Timing of Payments. To the extent required by Section 6(d) or 6(f), Bank shall pay Executive the Severance in up to eighteen (18) equal monthly installments of his then-current Base Salary commencing sixty (60) days after the date of Executive's termination, provided that Executive has executed and does not revoke a mutually binding release of all claims by such date against the Bank, CF Bancorp, their subsidiaries and affiliates, and their directors, officers, employees, and agents (or Executive), including mutual non-disparagement and confidentiality covenants, in the form then provided by the Bank and CF Bancorp.

(j)             Effects of Termination. Except as set forth above, all other rights and obligations of the Bank and Executive under this Agreement shall cease as of the effective date of termination, except that Sections 7, 8, 9, 10 and 17-22 shall survive termination of this Agreement.

7.           Restriction on Competition.

(a)             During the Employment Period and for a period of one year after

Executive's separation from the Bank for any reason, Executive shall not, directly or indirectly, for himself or on behalf of or in conjunction with any other person, company, partnership, corporation, business, group, or other entity:

(i)              Call upon for the purpose or with the intent of hiring or hire any person who is at that time or who has been within the 6 months preceding Executive's date of termination, a sales, or management employee of the Bank, provided that Internet postings or general advertisements of job opportunities shall not constitute a breach of this clause (i); or

(ii)             Call upon any person who is at that time or has been within the twelve (12) months preceding Executive's date of termination, a customer or prospective customer of the Bank for the purpose of soliciting or selling products or services in direct competition with the Bank, where "prospective customers" are those individuals or entities with respect to which the Bank has taken specific steps to solicit sales or in the selling of which Executive has been personally involved.

  • 6 -

(b)             The foregoing covenants shall not be deemed to prohibit Executive during the relevant restrictive period from acquiring as an investment not more than five percent (5%) of the capital stock of a competing business if Executive has no other involvement in such business.

(c)             If Executive has no actual knowledge that his actions violate the terms of   this Section 7, Executive shall not be deemed to have breached the restrictive covenants contained herein if, promptly after being notified by the Bank of such breach, Executive ceases the prohibited actions.

(d)             For purposes of this Section 7, references to "Bank" shall mean City First Bank of D.C., N.A., CF Bancorp, City First Enterprises, and their affiliates.

(e)             The covenants in this Section 7 are severable and separate, and the unenforceability of any specific covenant shall not affect the provisions of any other covenant. If any provision of this Section 7 relating to the time period or geographic area of the restrictive covenants shall be declared by a court of competent jurisdiction to exceed the maximum time period or geographic area, as applicable, that such court deems reasonable and enforceable, said time period or geographic area shall be deemed to be, and thereafter shall become, the maximum time period or largest geographic area that such court deems reasonable and enforceable and this Agreement shall automatically be considered to have been amended and revised to reflect such determination.

(f)              All of the covenants in this Section 7 shall be construed as an agreement independent of any other provision in this Agreement, and the existence of any claim or cause of action of Executive against the Bank, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Bank of such covenants; provided, that upon the failure of the Bank to make any payments required under this Agreement, Executive may, upon thirty (30) days' prior written notice to the Bank, waive his right to receive any additional compensation pursuant to this Agreement and engage in any activity prohibited by the covenants of this Section 7.

(g)             Executive has carefully read and considered the provisions of this Section 7 and, having done so, agrees that the restrictive covenants in this Section 7 impose a fair and reasonable restraint on Executive and are reasonably required to protect the interests of the Bank, and its respective officers, directors, employees, and stockholders.It is further agreed that the Bank and Executive intend that such covenants be construed and enforced in accordance with the activities, business, and locations of the Bank as of the date of termination of Executive's employment.

  • 7 -

8.           Confidential Information. From and after the date of this Agreement, Executive hereby agrees to hold in strict confidence and not to disclose to any third party any of the valuable, confidential, or proprietary business, financial, technical, economic, sales, and/or types of proprietary business information relating to the Bank (including all trade secrets), in whatever form, whether oral, written, or electronic (collectively, the "Confidential Information"), to which Executive has, or is given (or has had or been given), access as a result of his employment by the Bank. It is agreed that the Confidential Information is confidential and proprietary to the Bank because such Confidential Information encompasses technical know-how, trade secrets, or technical, financial, organizational, sales, or other valuable aspects ofthe Bank's business and trade, including, without limitation, technologies, products, processes, plans, clients, personnel, operations, and business activities. This restriction shall not apply to any Confidential Information that (a) is known or becomes known, or is disclosed generally, to the public through no fault of Executive; (b) becomes known or is disclosed to Executive as an owner of shares of an affiliate of the Bank (other than in situations that impose their own confidentiality restrictions), or (c) is required by applicable law, legal processes, or any order or mandate of a court or other governmental authority to be disclosed in defense of a lawsuit or other legal or administrative action brought against Executive; provided, that in the case of clause (c), Executive shall give the Bank reasonable advance written notice (at least 48 hours) of the Confidential Information intended to be disclosed and the reasons and circumstances surrounding such disclosure, in order to permit the Bank to seek a protective order or other appropriate request for confidential treatment of the applicable Confidential Information. For purposes of this Section 8, references to "Bank" shall mean City First Bank of D.C., N.A., together with its parent, affiliates, and subsidiaries.

Nothing in this Agreement is intended to or shall prohibit or limit Executive from: (a) reporting to or cooperating with any government agency or regulatory authority with regard to any matter involving the Bank or CF Bancorp within such agency's or authority's jurisdiction, with or without first seeking permission from the Bank or CF Bancorp, or (b) complying with any subpoena or other legal obligation. Executive is hereby notified that, pursuant to 18 USC ss 1833(b), an individual may not be held criminally or civilly liable under any federal or state trade secret law for disclosure of a trade secret made: (i) in confidence to a government official, either directly or indirectly, or to an attorney, solely for the purpose of reporting or investigating a suspected violation of law; and/or (ii) in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. Additionally, an individual suing an employer for retaliation based on the reporting of a suspected violation of law may disclose a trade secret to his or her attorney anduse the trade secret information in the court proceeding, so long as any document containing the trade secret is filed under seal and the individual does not disclose the trade secret except pursuant to court order.

9.           Return of Bank Property. Promptly upon termination of Executive's employment by the Bank for any reason or no reason, Executive or Executive's personal representative shall return to the Bank (a) all Confidential Information; and (b) all keys, credit cards, security cards, passwords, equipment, vehicles, and other property and materials of the Bank. Executive shall not retain or cause to be retained any copies of the foregoing. Executive hereby agrees that all of the foregoing shall be and remain the property of the Bank, as the case may be, and be subject at all times to the Bank's discretion and control. For purposes of this Section 9, references to "Bank" shall mean City First Bank of D.C., N.A., together with its parent, affiliates, and subsidiaries.

  • 8 -

10.         Indemnification. In the event Executive is made a party to any threatened or pending action, suit, or proceeding, whether civil, criminal, administrative, regulatory or investigative (other than an action by the Bank against Executive, and excluding any action by Executive against the Bank), by reason of the fact that he is or was performing services under this Agreement or as an officer or director of the Bank or CF Bancorp, then, to the fullest extent permitted by applicable law and the Articles of Association and bylaws of the Bank and the charter documents of CF Bancorp, the Bank shall indemnify and defend Executive against all expenses (including reasonable attorneys' fees), judgments, fines, and amounts paid in settlement, as actually and reasonably incurred by Executive in connection therewith. Provided, however, that the Bank shall not indemnify Executive in relation to matters as to which there has been a final judicial or administrative adjudication that (i) the Executive failed to act in good faith and for a purpose which he reasonably believed to be in the best interests of the Bank; (ii) in the case of a criminal matter, Executive had reasonable cause to believe that his conduct was unlawful, or (iii) Executive is liable for misconduct in the performance of a duty.

11.         No Prior Agreements. Executive hereby represents and warrants to the Bank that the execution of this Agreement by Executive, his employment by the Bank and CF Bancorp (it being understood that Executive is not employed by any affiliates of the Bank except CF Bancorp), and the performance of his duties hereunder will not violate or be a breach of any agreement with a former employer, client, or any other person. Further, Executive agrees to indemnify and hold harmless the Bank and its officers, directors, and representatives for any claim, including, but not limited to, reasonable attorneys' fees and expenses of investigation, of any such third party that such third party may now have or may hereafter come to have against the Bank or such other persons, based upon or arising out of any non-competition agreement, invention, secrecy, or other agreement between Executive and such third party. This Agreement supersedes any prior oral or written employment agreement or understanding with the Bank, and upon execution of this Agreement by Executive and the Bank, such prior agreement or understanding shall be deemed to have been terminated and shall be null and void. For purposes of this Section 1 1, references to "Bank" shall mean City First Bank of D.C., N.A., together with its parent and subsidiaries.

12.         Assignment: Binding Effect. Executive understands that he has been selected for employment by the Bank on the basis of his personal qualifications, experience, and skills. Executive agrees, therefore, that he cannot assign all or any portion of his performance under this Agreement. This Agreement may not be assigned or transferred by the Bank to any person, without the prior written consent of Executive. Subject to the preceding two sentences, this Agreement shall be binding upon, inure to the benefit of, and be enforceable by the parties hereto and their respective heirs, legal representatives, successors, and assigns. If the Bank is merged with or into another entity and the successor Bank is engaged in substantially the same business as the Bank, such action shall not be considered to cause an assignment of this Agreement and the surviving or successor entity shall become the beneficiary of this Agreement and all references to the "Bank" shall be deemed to refer to such surviving or successor entity. No other person other than CF Bancorp shall be a third- party beneficiary under this Agreement.

13.         Complete Agreement: Waiver; Amendment. Executive has no oral representations, understandings, or agreements with the Bank or any of its officers, directors, or representatives covering the same subject matter as this Agreement. This Agreement is the final, complete, and exclusive statement and expression of the agreement between the Bank and Executive with respect to the subject matter hereof and thereof, and cannot be varied, contradicted, or supplemented by evidence of any prior or contemporaneous oral or written agreements. This written Agreement may not be later modified except by a further writing signed by a duly authorized officer of the Bank and Executive, and no term of this Agreement may be waived except by a writing signed by the party waiving the benefit of such term.

  • 9 -

14.         Notice. All notices, demands, requests or other communications required or permitted to be given pursuant to this Agreement shall be in writing and shall be delivered by hand or sent by Federal Express or other reputable carrier (in each case with evidence of delivery), with a copy via electronic mail, to Executive, at the principal offices of the Bank while he is in the Bank's employ and to his then or last known principal residence as shown in the records of the Bank and, to the Bank at:

City First Bank of D.C., N.A.

1432 U street, NW

Washington, DC 20009

Attn: Chairman of Board

Notice under this agreement shall be deemed given when actually received as evidenced by delivery service receipt. Either party may change the address for notice by notice the other party of such change in accordance with this Section 15.

15.             Severability, Headings. If any portion of this Agreement is held invalid or inoperative, the other portions of this Agreement shall be deemed valid and operative, and so far as is reasonable and possible, effect shall be given to the intent manifested by the portion held invalid or inoperative. This severability provision shall be in addition to, and not in place of, the provisions of Section 7(e) above. The paragraph headings herein are for reference purposes only and are not intended in any way to describe, interpret, define or limit the extent or intent of the Agreement or of any part hereof.

16.             Equitable Remedy. Because of the difficulty of measuring economic losses to the Bank as a result of a breach of the restrictive covenants set forth in Sections 7, 8 and 9, and because of the immediate and irreparable damage that would be caused to the Bank for which monetary damages would not be a sufficient remedy, it is hereby agreed that in addition to all other remedies that may be available to the Bank at law or in equity, the Bank shall be entitled to seek specific performance and any injunctive or other equitable relief as a remedy for any breach or threatened breach of the aforementioned restrictive covenants set forth in Section 7, 8 and 9 of this Agreement. For purposes of this Section 16, references to "Bank" shall mean City First Bank of D.C., N.A., together with its parent and subsidiaries.

17.             Arbitration. Except for actions initiated by the Bank to enjoin a breach by, and/or recover damages from, Executive related to violation of any of the provisions in Sections 7, 8 and 9, which the Bank may bring in an appropriate court of law or equity, any other unresolved dispute or controversy arising under or in connection with Executive's employment and/or this Agreement shall be settled or resolved exclusively by arbitration conducted before a single arbitrator in Washington, D.C., selected from a panel of retired judges from and in accordance with the JAMS Rules for Employment Disputes then in effect. This includes all federal, state and/or local claims based upon statute, common law and/or local ordinance, including, but not limited to claim under Title VIl of the Civil Rights Act of 1964, as amended, the Age Discrimination in Employment Act, the Family and Medical Leave Act, and the Americans with Disabilities Act. The arbitrator shall not have the authority to add to, detract from or modify this Agreement except as permitted by the Agreement. The arbitrator's decision shall be final and binding, and judgment may be entered on the decision in any court having competent jurisdiction. The direct expense of the arbitration shall be borne by the Bank but each party will bear its own expenses and legal fees. The arbitration shall be held in the District of Columbia. For purposes of this Sectionl 7, references to "Bank" shall mean City First Bank of D.C., N.A., together with its parent and subsidiaries.

  • 10 -

18.         Equitable Relief: Jurisdiction and Venue: Waiver of Jury Trial. Executive acknowledges that the Bank's principal corporate office is in Washington, D.C. Upon due consideration of any effects created hereby, Executive hereby irrevocably submits to the jurisdiction and venue of a court of competent civil jurisdiction sitting in Washington, D.C., in any action or proceeding brought by the Bank arising out of, or relating to, the provisions in Sections 7, 8 and 9 of this Agreement. Executive hereby irrevocably agrees that any such action or proceeding may, at the Bank's option, be heard and determined in such court. Executive agrees that a final order or judgment in any such action or proceeding shall, to the extent permitted by applicable law, be conclusive and may be enforced in other jurisdictions by suit on the order or judgment, or in any other manner provided by applicable law related to the enforcement of judgments. THE PARTIES HERETO WAIVE ANY RIGHTS TO A TRIAL BY JURY, OTHER THAN WITH RESPECT TO MATTERS AS TO WHICH THAT RIGHT CANNOT BE LEGALLY WAIVED. For purposes of this Section 18, references to "Bank" shall mean City First Bank of D.C., N.A., together with its parent and subsidiaries.

19.         Survival. Any provision of this Agreement which by its terms is intended to have effect after the termination shall survive the termination of this Agreement, including, without limitation, Sections 7-11, and 17-22, which shall survive termination of this Agreement.

20.         Governing Law. This Agreement shall in all respects be construed according to the laws of the District of Columbia, without regard to its conflict of laws principles.

21.         Withholding: Payment Timing. The Bank will reduce its compensatory payments to Executive for any taxes and other withholdings and contributions required by law.

22.         Section 409A Compliance. Executive, the Bank, and CF Bancorp intend that the payments and benefits provided for in this Agreement either be exempt from Section 409A of the Internal Revenue Code of 1986, as amended (the "Code") or be provided for in a manner that complies with Section 409A of the Code, and any ambiguity herein shall be interpreted so as to be consistent with the intent of this Section 22. In no event whatsoever shall the Company be liable for any additional tax, interest or penalty that may be imposed on Executive under Code section 409A. Each installment of Severance payable hereunder shall constitute a separate payment for purposes of

Code section 409A. With regard to any provision herein that provides for reimbursement to Executive of costs and expenses or in-kind benefits, (i) the right to reimbursement or in-kind benefits is not subject to liquidation or exchange for another benefit, (ii) the amount of expenses eligible for reimbursement, or in-kind benefits, provided during any taxable year shall not affect the expenses eligible for reimbursement, or in-kind benefits to be provided to Executive, in any other taxable year, provided that the foregoing clause (ii) shall not be violated with regard to expenses reimbursed under any arrangement covered by Code section 105(b) solely because such expenses are subject to a limit related to the period the arrangement is in effect and (iii) such payments shall be made on or before the last day of Executive's taxable year following the taxable year in which the expense was incurred.

  • 11 -

23.         Joint and Several Obligations. Each and every obligation of the Bank hereunder shall be the joint and several obligations of CF Bancorp. CF Bancorp is the 100% shareholder of the Bank.

Signatures on Page Following

  • 12 -

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first written above.

CITY FIRST BANK OF D.C., N.A.
By: /s/ C.F. Muckenfuss, III
Name: C.F. Muckenfuss, III
Its:  Chairman
BRIAN ARGRETT
--- ---
By: /s/ Brian Argrett
Brian Argrett
CF BANC CORPORATION
--- ---
By: /s/ C.F. Muckenfuss, III
Name: C.F. Muckenfuss, III
Its:  Chairman
  • 13 -

E X H I B I T A

City First Bank of DC

Job Description President and Chief Executive Officer

PURPOSE

The Chief Executive Officer (CEO) has responsibility for the overall strategic direction and execution of the Bank's programs and services in accordance with safe and sound banking practices and the Bank's community development mission. In this role, the CEO ensures the integrated and balanced management of all banking activities and risks.

Providing the highest level of customer relations, the CEO is charged with maximizing profits of the Bank in accordance with the community development strategies set forth by the Board of Directors, and with ensuring that the best interests of the various constituencies (shareholders, customers, employees, regulators and the public), of both the City First Bank and CFBC are met. As the highest-ranking official of the organization, the CEO reports to the Board of Directors of both City First Bank and CFBC.

The CEO manages key investor relations and institutional partnerships. The CEO represents the Bank's and the holding company's interests in various affiliated organizations, including City First Enterprises.

ESSENTIAL FUNCTIONS AND RESPONSIBILITIES

• Provide leadership for the Bank and related entities, both internally and in the Bank's market. Create an atmosphere within the organization<br> that attains and maintains a high level of morale and embraces the Bank's Vision, Values, Mission, Goals and Team Expectations, and effectively represent the Bank's Vision, Values and Mission to the public.
• Lead the strategic development of the Bank, working with both Bank staff and the Board to identify, develop and implement the business activities of<br> the Bank and related entities to grow the bank and accomplish the Bank's community development mission in a sustainably profitable manner consistent with sound banking practice.
--- ---
• Maintain and further develop the Bank's risk management culture and competencies, and develop strong working relationships with all regulatory<br> agencies supervising the Bank and the holding company.
--- ---
• Ensure the overall growth and health of the organization through the development and implementation of new products and markets consistent with safe<br> and sound banking practices. Maintain current innovative community development activities (e.g., New Markets Tax Credits) and identify new private, philanthropic and governmental opportunities that enable the bank to increase profitability,<br> build its capital and expand its impact.
--- ---
  • 14 -
• Ensure that the Board of Directors is fully informed on the conditions and operations of the bank, the factors influencing operations and the<br> decisions made by Senior Management. Work with the Board to ensure appropriate Director involvement and sound governance procedures.
• Build strong relationships to work effectively across affiliated companies.
--- ---
• Ensure sound management of key investor relationships and institutional partnerships. Work with current and new investors to bring in additional<br> capital to the Bank and holding company to ensure that regulatory ratio standards are exceeded.
--- ---
• Ensure strong representation of the Bank while providing strong leadership in key community activities, civic and community reinvestment functions.<br> Expand the Bank's partnership with other organizations through mutually profitable business relationships.
--- ---
  • 15 -

Exhibit 10.2

CITY FIRST BANK

DEFERRED COMPENSATION PLAN

FOR BRIAN ARGRETT

(Effective September __, 2018)

The City First Bank Deferred Compensation Plan for Brian Argrett is hereby adopted effective September __, 2018 by City First Bank of D.C., National Association (the “Bank”) to permit Executive to defer receipt of certain compensation pursuant to the terms and provisions set forth below.

The Plan is intended (1) to comply with Code section 409A and official guidance issued thereunder, and (2) to be “a plan which is unfunded and is maintained by an employer primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees” within the meaning of sections 201(2), 301(a)(3) and 401(a)(1) of ERISA.  Notwithstanding any other provision of this Plan, this Plan shall be interpreted, operated and administered in a manner consistent with these intentions.

ARTICLE I

DEFINITIONS

Wherever used herein the following terms shall have the meanings hereinafter set forth:

“Account” means a bookkeeping account established by the Bank for Executive.

“Bank” means City First Bank of D.C., National Association.

“Base Salary” means the regular base salary paid to Executive by the Bank.

“Board” means the Board of Directors of the Bank and CF Bancorp.

“Cause” means one or more of only the following events: (i) Executive’s material breach of the Employment Agreement, which breach is not cured within thirty (30) days of receipt by Executive of written notice from the Bank specifying the breach; (ii) Executive’s gross negligence or willful misconduct in the performance of his material duties hereunder, material misperformance of such duties, or willful or repeated refusal to abide by or comply with lawful directives of the Board or the Bank’s policies and procedures, any of which conduct is not cured within thirty (30) days of receipt by Executive of written notice from the Bank specifying the conduct to be cured; (iii) Executive’s fraud, embezzlement, or theft with respect to the business or affairs of the Bank, upon notice from the Bank specifying such fraud, embezzlement, or theft; (iv) Executive’s dishonesty or misconduct with respect to the financial affairs of the Bank, that in the reasonable judgment of the Board materially and adversely affects the operations or reputation of the Bank; (v) Executive’s conviction of a felony or of any misdemeanor involving fraud, dishonesty, misappropriation of funds or any property or assets of the Bank, CF Bancorp, City First Enterprises, or any of their affiliates; (vi) Executive’s abuse of alcohol or drugs (legal or illegal) that, in the Board’s reasonable judgment, substantially impairs Executive’s ability to perform his duties hereunder after notice and at least thirty (30) days’ opportunity to cure; or (vii) a Regulatory Action.

“CF Bancorp” means CFBanc Corporation.

“Change in Control” means a change in the ownership or effective control in CF Bancorp or the Bank, or the ownership of a substantial portion of the Bank’s or CF Bancorp’s assets as defined in Treas. Reg. section 1.409A-3(i)(5).

“Code” means the Internal Revenue Code of 1986, as amended.

“Committee” means the Compensation Committee of the Board or such other committee as may be appointed by the Board from time to time.

“Disability” means Executive’s incapacity due to physical or mental illness or injury, pursuant to which Executive is unable to perform the material duties of his position on a fulltime basis for one hundred and twenty (120) days or more within a twelve-month period.

“Employment Agreement” means the Employment Agreement dated December 29, 2017 by and among the Bank, CFBancorp, and Executive, as it may be amended from time to time.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

“Executive” means Brian Argrett.

“Good Reason” means that, without Executive’s consent, the Bank (i) substantially diminishes his authority, duties, or responsibilities (other than temporarily, while physically or mentally incapacitated), (ii) reduces his Base Salary by a material amount, (iii) relocates his principal place of employment, without consent, more than fifty (50) miles; or (iv) commits a material breach of the Employment Agreement.  Executive must give notice to the Bank of his intention to resign for Good Reason within 60 days after the occurrence of the event that he asserts entitles him to resign for Good Reason. In that notice, he must state the condition that he considers provides him with Good Reason and he must give the Bank an opportunity to cure the condition within 30 days after his notice. If the Bank fails to cure the condition, his resignation will be effective on the 45^th^ day after his initial notice (unless the Board has previously waived such notice period in writing or agreed to a shorter notice period). Executive will not be treated as resigning for Good Reason if the Bank already had given him written notice of its intention to terminate his employment for Cause as of the date of his notice of resignation.

“Plan” means the City First Bank Deferred Compensation Plan for Brian Argrett, as set forth herein and as amended from time to time.

“Plan Year” means January 1 through December 31.

2

“Regulatory Action” means (i) Executive is suspended and/or temporarily prohibited from participating in the conduct of the Bank’s affairs by a notice served under Section 8(e)(3) or (g)(1) of the Federal Deposit Insurance Act (“FDIA”), 12 U.S.C. §§ 1818(e)(3) and (g)(1); (ii) Executive is removed and/or permanently prohibited from participating in the conduct of the Bank’s affairs by an order issued under Section 8(e)(4) or (g)(1) of the FDIA, 12 U.S.C. §§ 1818(e)(4) and (g)(1); (iii) Executive is subject to any other order or action pursuant to Section 8 of the FDIA; or (iv) Executive is subject to any order or final regulatory action related to his conduct pursuant to any rule of any federal banking agency.

“Separation from Service” or “Separate from Service” means a “separation from service” within the meaning of Code section 409A.

“Vesting Date” means the earliest to occur of the following: (i) December 31, 2022; (ii) Executive’s Disability; (iii) Executive’s death; (iv) Executive’s Separation from Service due to involuntary termination without Cause, or (v) Executive’s Separation from Service due to resignation for Good Reason upon or following a Change in Control.

ARTICLE II

ACCOUNT

2.1         Discretionary Contributions. For each Plan Year, the Bank shall credit to Executive’s Account a discretionary contribution equal to a percentage of Executive’s Base Salary for such Plan Year, which percentage shall be established by the Board in its sole discretion and may be zero. Such discretionary contributions shall be credited to Executive’s Account on the last day of the Plan Year to which the discretionary contribution relates.

2.2       Vesting.  Executive shall become 100% vested in his Account if Executive remains employed through the Vesting Date; provided that if the Vesting Date occurs as a result of Executive’s termination without Cause or resignation for Good Reason upon or following a Change in Control, Executive shall become vested in his Account only if, within sixty (60) days after the date of Executive’s termination, Executive has executed and does not revoke a mutually binding release of all claims against the Bank, CF Bancorp, their subsidiaries and affiliates, and their directors, officers, employees, and agents (or Executive), including mutual non-disparagement and confidentiality covenants, in the form then provided by the Bank and CF Bancorp.  If Executive’s employment terminates for any reason prior to the Vesting Date, Executive’s entire interest in his Account shall be forfeited.

2.3         Payment to Beneficiary.  If Executive dies before full distribution of his Account balance, any remaining balance shall be paid to Executive’s beneficiary.  Executive shall designate his beneficiary in a writing delivered to the Committee prior to death in accordance with procedures established by the Committee.  If Executive has not properly designated a beneficiary or if no designated beneficiary is living on the date of distribution, such amount shall be distributed to Executive’s estate.

3

2.4         Interest Credits.  As of December 31 of each Plan Year until the full balance of the Account has been distributed, the Bank shall credit Executive’s Account with interest at a reasonable rate, equal to the published coupon yield of the long-term credit component of the Bloomberg Barclays Aggregate Index for December of the current Plan Year, multiplied by the Account balance on January 1 of such Plan Year.  Nothing in this Section or otherwise in the Plan will require the Bank to actually invest any amounts in any investments.

ARTICLE III

DISTRIBUTION OF ACCOUNT BALANCE

Executive’s vested Account balance, shall be distributed to him in a lump sum payment within sixty (60) days following the earliest to occur of the following: (i) December 31, 2022; (ii) Executive’s death; or (iii) Executive’s Separation from Service.

Notwithstanding the foregoing, if Executive is treated as a “specified employee” as of his Separation from Service under Code section 409A(a)(2)(B)(i), distributions may not be made to Executive upon a Separation from Service before the date which is six months after the date of Executive’s Separation from Service (or, if earlier, the date of Executive’s death).  In such event, Executive’s Account balance shall be paid on the first day of the seventh month following Executive’s Separation from Service (or, if earlier, the first day of the month after Executive’s death).

ARTICLE IV

ADMINISTRATION

4.1        General Administration.  The Committee shall be responsible for the operation and administration of the Plan and for carrying out the provisions hereof.  The Committee shall have the full authority and discretion to make, amend, interpret, and enforce all appropriate rules and regulations for the administration of this Plan and decide or resolve any and all questions, including interpretations of this Plan, as may arise in connection with this Plan.  Any such action taken by the Committee shall be final and conclusive on any party.  To the extent the Committee has been granted discretionary authority under the Plan, the Committee’s prior exercise of such authority shall not obligate it to exercise its authority in a like fashion thereafter.  The Committee shall be entitled to rely conclusively upon all tables, valuations, certificates, opinions and reports furnished by any actuary, accountant, controller, counsel or other person employed or engaged by the Bank with respect to the Plan.  The Committee may, from time to time, employ agents and delegate to such agents, including employees of the Bank, such administrative or other duties as it sees fit.

4

4.2         Claims for Benefits.

(a)      Filing a Claim.  Executive or his beneficiary (the “claimant”) or his authorized representative may file a claim for benefits under the Plan.  Any claim must be in writing and submitted to the Committee at such address as may be specified from time to time. The claimant will be notified in writing of approved claims, which will be processed as claimed. A claim is considered approved only if its approval is communicated in writing to the claimant.

(b)      Denial of Claim. In the case of the denial of a claim respecting benefits paid or payable with respect to Executive, a written notice will be furnished to the claimant within 90 days of the date on which the claim is received by the Committee.  If special circumstances (such as for a hearing) require a longer period, the claimant will be notified in writing, prior to the expiration of the 90-day period, of the reasons for an extension of time; provided, however, that no extensions will be permitted beyond 90 days after the expiration of the initial 90-day period.

(c)       Reasons for Denial.  A denial or partial denial of a claim will be dated and will clearly set forth:

(i) the specific reason or reasons for the denial;
(ii) specific reference to pertinent Plan provisions on which the denial is based;
--- ---
(iii) a description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or<br> information is necessary; and
--- ---
(iv) an explanation of the procedure for review of the denied or partially denied claim set forth below, including the claimant’s right to bring a<br> civil action under ERISA section 502(a) following an adverse benefit determination on review.
--- ---

(d)         Review of Denial.  Upon denial of a claim, in whole or in part, the claimant or his authorized representative will have the right to submit a written request to the Committee for a full and fair review of the denied claim by filing a written notice of appeal with the Committee within 60 days of the receipt by the claimant of written notice of the denial of the claim.  The claimant or the claimant’s authorized representative will have, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the claimant’s claim for benefits and may submit issues and comments in writing.  The review will take into account all comments, documents, records, and other information submitted by the claimant relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination.

5

If the claimant fails to file a request for review within 60 days of the denial notification, the claim will be deemed abandoned and the claimant precluded from reasserting it.  If the claimant does file a request for review, his request must include a description of the issues and evidence he deems relevant.  Failure to raise issues or present evidence on review will preclude those issues or evidence from being presented in any subsequent proceeding or judicial review of the claim.

(e)     Decision Upon Review.  The Committee will provide a prompt written decision on review.  If the claim is denied on review, the decision shall set forth:

(i) the specific reason or reasons for the adverse determination;
(ii) specific reference to pertinent Plan provisions on which the adverse determination is based;
--- ---
(iii) a statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records,<br> and other information relevant to the claimant’s claim for benefits; and
--- ---
(iv) a statement describing any voluntary appeal procedures offered by the Plan and the claimant’s right to obtain the information about such procedures,<br> as well as a statement of the claimant’s right to bring an action under ERISA section 502(a).
--- ---

A decision will be rendered no more than 60 days after the Committee’s receipt of the request for review, except that such period may be extended for an additional 60 days if the Committee determines that special circumstances (such as for a hearing) require such extension.  If an extension of time is required, written notice of the extension will be furnished to the claimant before the end of the initial 60-day period.

(f)       Finality of Determinations; Exhaustion of Remedies.  To the extent permitted by law, decisions reached under the claims procedures set forth in this Section shall be final and binding on all parties. No legal action for benefits under the Plan shall be brought unless and until the claimant has exhausted his remedies under this Section. In any such legal action, the claimant may only present evidence and theories which the claimant presented during the claims procedure. Any claims which the claimant does not in good faith pursue through the review stage of the procedure shall be treated as having been irrevocably waived. Judicial review of the claimant’s denied claim shall be limited to a determination of whether the denial was an abuse of discretion based on the evidence and theories the claimant presented during the claims procedure.

(g)      Limitations Period.  Any suit or legal action initiated by the claimant under the Plan must be brought by the claimant no later than one year following a final decision on the claim for benefits by the Committee.  The one-year limitation on suits for benefits will apply in any forum where the claimant initiates such suit or legal action.

6

(h)      Disability Claims.  Claims for disability benefits shall be determined under DOL Regulation section 2560.503-1 which is hereby incorporated by reference.

4.3       Indemnification.  To the extent not covered by insurance, the Bank shall indemnify the Committee, each employee, officer, director, and agent of the Bank, and all persons formerly serving in such capacities, against any and all liabilities or expenses, including all legal fees relating thereto, arising in connection with the exercise of their duties and responsibilities with respect to the Plan, provided however that the Bank shall not indemnify any person for liabilities or expenses due to that person’s own gross negligence or willful    misconduct.

ARTICLE V

AMENDMENT AND TERMINATION

5.1        Amendment or Termination.  The Bank reserves the right to amend or terminate the Plan when, in the sole discretion of the Bank, such amendment or termination is advisable, pursuant to a resolution or other action taken by the Committee.

5.2         Effect of Amendment or Termination.  Except as provided in the next sentence, no amendment or termination of the Plan shall adversely affect the rights of Executive to amounts credited to his Account as of the effective date of such amendment or termination.  Upon termination of the Plan, distribution of balances in Executive’s Account shall be made to Executive or his beneficiary in the manner and at the time described in Article IV, unless the Bank determines in its sole discretion that all such amounts shall be distributed upon termination in accordance with the requirements under Code section 409A.  Upon termination of the Plan, interest shall continue to be credited to Executive’s Account in accordance with Article III until the Account balances are fully distributed.

ARTICLE VI

GENERAL PROVISIONS

6.1        Rights Unsecured.  The right of Executive or his beneficiary to receive a distribution hereunder shall be an unsecured (but legally enforceable) claim against the general assets of the Bank, and neither Executive nor his beneficiary shall have any rights in or against any amount credited to his Account or any other specific assets of the Bank.  Thus, the Plan at all times shall be considered entirely unfunded for ERISA and tax purposes.  Any funds set aside by the Bank for the purpose of meeting its obligations under the Plan, including any amounts held by a trustee, shall continue for all purposes to be part of the general assets of the Bank and shall be available to its general creditors in the event of the Bank’s bankruptcy or insolvency.  The Bank’s obligation under this Plan shall be that of an unfunded and unsecured promise to pay money in the future.

7

6.2        No Guarantee of Benefits.  Nothing contained in the Plan shall constitute a guarantee by the Bank or any other person or entity that the assets of the Bank will be sufficient to pay any benefits hereunder.

6.3       No Enlargement of Rights.  Neither Executive nor his beneficiary shall have any right to receive a distribution under the Plan except in accordance with the terms of the Plan.  Establishment of the Plan shall not be construed to give Executive the right to continue to be employed by or provide services to the Bank.

6.4       Spendthrift Provision.  No interest of any person in, or right to receive a distribution under, the Plan shall be subject in any manner to sale, transfer, assignment, pledge, attachment, garnishment, or other alienation or encumbrance of any kind; nor may such interest or right to receive a distribution be taken, either voluntarily or involuntarily for the satisfaction of the debts of, or other obligations or claims against, such person.

6.5         Applicable Law.  To the extent not preempted by federal law, the Plan shall be governed by the laws of the District of Columbia.

6.6        Incapacity of Recipient.  If any person entitled to a distribution under the Plan is deemed by the Committee to be incapable of personally receiving and giving a valid receipt for such payment, then, unless and until a claim for such payment shall have been made by a duly appointed guardian or other legal representative of such person, the Committee may provide for such payment or any part thereof to be made to any other person or institution then contributing toward or providing for the care and maintenance of such person.  Any such payment shall be a payment for the account of such person and a complete discharge of any liability of the Bank and the Plan with respect to the payment.

6.7         Taxes.  The Bank or other payor may withhold from a benefit payment under the Plan or Executive’s wages in order to meet any federal, state, or local tax withholding obligations with respect to Plan benefits.  The Bank may also accelerate and pay a portion of Executive’s benefits in a lump sum equal to the Federal Insurance Contributions Act (“FICA”) tax imposed and the income tax withholding related to such FICA amounts.

6.8         Corporate Successors.  The Plan and the obligations of the Bank under the Plan shall become the responsibility of any successor to the Bank by reason of a transfer or sale of substantially all of the assets of the Bank or by the merger or consolidation of the Bank into or with any other corporation or other entity.

6.9      Unclaimed Benefits.  Executive shall keep the Committee informed of his current address and the current address of his designated beneficiary.  The Committee shall not be obligated to search for the whereabouts of any person if the location of a person is not made known to the Committee.

8

6.10      Severability.  In the event any provision of the Plan shall be held invalid or illegal for any reason, any illegality or invalidity shall not affect the remaining parts of the Plan, but the Plan shall be construed and enforced as if the illegal or invalid provision had never been inserted.

6.11      Words and Headings.  Words in the masculine gender shall include the feminine and the singular shall include the plural, and vice versa, unless qualified by the context.  Any headings used herein are included for ease of reference only, and are not to be construed so as to alter the terms hereof.

[signature page follows]

9

IN WITNESS WHEREOF, CITY FIRST BANK OF D.C., NATIONAL ASSOCIATION has caused this City First Bank Deferred Compensation Plan for Brian Argrett to be executed by its duly authorized officer on this ____ day of _____________, 2018.

CITY FIRST BANK OF D.C.,
NATIONAL ASSOCIATION

10

Exhibit 31.1

SECTION 302 CERTIFICATION

I, Brian Argrett, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Broadway Financial Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not<br> misleading with respect to the period covered by this report;
--- ---
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and<br> for, the periods presented in this report;
--- ---
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting<br> (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
--- ---
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated<br> subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
--- ---
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and<br> the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
--- ---
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by<br> this report based on such evaluation; and
--- ---
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially<br> affect, the registrant’s internal control over financial reporting; and
--- ---
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors<br> (or persons performing the equivalent functions):
--- ---
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and<br> report financial information; and
--- ---
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
--- ---
Date: August 23, 2021 By: /s/  Brian Argrett
--- --- --- ---
Brian Argrett
---
Chief Executive Officer

Exhibit 31.2

SECTION 302 CERTIFICATION

I, Brenda J. Battey, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Broadway Financial Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not<br> misleading with respect to the period covered by this report;
--- ---
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and<br> for, the periods presented in this report;
--- ---
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting<br> (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
--- ---
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated<br> subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
--- ---
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and<br> the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
--- ---
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by<br> this report based on such evaluation; and
--- ---
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially<br> affect, the registrant’s internal control over financial reporting; and
--- ---
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors<br> (or persons performing the equivalent functions):
--- ---
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and<br> report financial information; and
--- ---
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
--- ---
Date: August 23, 2021 By: /s/  Brenda J. Battey
--- --- --- ---
Brenda J. Battey
---
Chief Financial Officer

Exhibit 32.1

SECTION 906 CERTIFICATION

The following statement is provided by the undersigned to accompany the foregoing Report on Form 10-Q pursuant to Title 18, Chapter 63, Section 1350 of the United States Code, as amended by Section 906 of the Sarbanes-Oxley Act of 2002, and shall not be deemed filed pursuant to any provision of the Securities Exchange Act of 1934 or any other securities law.

The undersigned certifies that the foregoing Report on Form 10-Q fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that the information contained in the report fairly presents, in all material respects, the financial condition and results of operations of Broadway Financial Corporation at the dates and for the periods indicated.

Date: August 23, 2021 By: /s/ Brian Argrett
Brian Argrett
---
Chief Executive Officer

Exhibit 32.2

SECTION 906 CERTIFICATION

The following statement is provided by the undersigned to accompany the foregoing Report on Form 10-Q pursuant to Title 18, Chapter 63, Section 1350 of the United States Code, as amended by Section 906 of the Sarbanes-Oxley Act of 2002, and shall not be deemed filed pursuant to any provision of the Securities Exchange Act of 1934 or any other securities law.

The undersigned certifies that the foregoing Report on Form 10-Q fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that the information contained in the report fairly presents, in all material respects, the financial condition and results of operations of Broadway Financial Corporation at the dates and for the periods indicated.

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

Report a Problem

Category
Description
Email (optional, for follow-up)