BROADWAY FINANCIAL CORP \DE\
10-Ks and 10-Qs
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
10-Q
(Mark One)
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QUARTERLY REPORT
PURSUANT TO
SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended
March 31, 2025
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TRANSITION REPORT
PURSUANT TO
SEC
TION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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For transition period from__________ to___________
Commission file number
001-39043
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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(Address of principal executive offices)
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(Zip Code)
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(
323
)
634-1700
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act
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Title of each class:
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Trading Symbol(s)
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Name of each exchange on which registered:
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(including attached preferred stock purchase rights)
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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.
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Large accelerated filer
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☐
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Accelerated filer
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☐
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☒
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Smaller reporting company
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Emerging growth company
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes
☐
No ☒
As of July 17, 2025,
6,097,773
shares of the registrant’s Class A voting
common stock,
1,425,574
shares of the registrant’s Class B non-voting common stock and
1,672,562
shares of the registrant’s Class C non-voting common stock were outstanding.
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Page
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PART I.
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FINANCIAL STATEMENTS
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Item 1.
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Consolidated Financial Statements (Unaudited)
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1
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2
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3
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4
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5
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Item 2.
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21
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Item 3.
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31 | ||
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Item 4.
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31
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PART II.
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OTHER INFORMATION
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Item 1.
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32 | ||
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Item 1A.
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32
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Item 2.
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32 | ||
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Item 3.
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32 | ||
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Item 4.
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32 | ||
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Item 5.
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32
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Item 6.
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32
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| 33 | |||
BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY
(In thousands, except share and per share amounts)
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March 31, 2025
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December 31, 2024
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(Unaudited)
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Assets:
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Cash and due from banks
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$
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$
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Interest-bearing deposits in other banks
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Cash and cash equivalents
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Securities available-for-sale, at fair value (amortized cost of $
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Loans receivable held for investment, net of allowance of $
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Accrued interest receivable
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Federal Home Loan Bank (“FHLB”) stock
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Federal Reserve Bank (“FRB”) stock
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Office properties and equipment, net
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Bank owned life insurance
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Deferred tax assets, net
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Core deposit intangible, net
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Goodwill
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Other assets
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Total assets
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$
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$
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Liabilities and equity
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Liabilities:
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Deposits
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$
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$
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Securities sold under agreements to repurchase
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Borrowings
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Accrued expenses and other liabilities
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Total liabilities
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Non-Cumulative Redeemable Perpetual Preferred stock, Series C; authorized
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Common stock, Class A, $
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Common stock, Class B, $
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Common stock, Class C, $
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Additional paid-in capital
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Retained earnings
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| Unearned Employee Stock Ownership Plan (“ESOP”) shares |
(
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(
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Accumulated other comprehensive loss, net of tax
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(
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)
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(
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)
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Treasury stock-at cost,
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(
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)
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(
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Total Broadway Financial Corporation and Subsidiary equity
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Non-controlling interest
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Total liabilities and equity
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$
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$
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See accompanying notes to unaudited consolidated financial statements.
BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY
(In thousands, except per share amounts)
(Unaudited)
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Three
Months Ended March 31,
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2025
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2024
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Interest income:
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Interest and fees on loans receivable
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$
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$
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Interest on available-for-sale securities
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Other interest income
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Total interest income
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Interest expense:
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Interest on deposits
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Interest on borrowings
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Total interest expense
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Net interest income
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Provision for credit losses
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Net interest income after provision for credit losses
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Non-interest income:
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| Service charges |
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| Grants |
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| Other |
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| Total non-interest income |
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| Non-interest expense: | ||||||||
| Compensation and benefits |
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| Occupancy expense |
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| Information services |
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| Professional services |
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| Advertising and promotional expense |
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| Supervisory costs |
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| Corporate insurance |
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| Amortization of core deposit intangible |
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| Operational loss |
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Other
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Total non-interest expense
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| Loss before income taxes |
(
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(
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| Income tax benefit |
(
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(
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| Net loss |
$
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(
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$
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(
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| Less: Net loss attributable to non-controlling interest |
(
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(
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| Net loss attributable to Broadway Financial Corporation |
$
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(
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$
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(
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| Less: Preferred stock dividends |
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| Net loss attributable to common stockholders |
$
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(
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) |
$
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(
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) | ||
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| Other comprehensive income (loss), net of tax: | ||||||||
| Unrealized gains (losses) on securities available-for-sale arising during the period |
$
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$
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(
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)
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| Income tax expense (benefit) |
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(
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)
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| Other comprehensive income (loss), net of tax |
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(
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| Comprehensive loss |
$
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(
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$
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(
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| Loss per common share-basic |
$
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(
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$
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(
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| Loss per common share-diluted |
$
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(
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)
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$
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(
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)
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See accompanying notes to unaudited consolidated financial statements.
BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY
(Unaudited)
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Three Months Ended
March 31,
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2025
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2024
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(In thousands)
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Cash flows from operating activities
:
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Net loss
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$
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(
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)
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$
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(
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Adjustments to reconcile net loss to net cash used in operating activities:
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Provision for credit losses
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Depreciation
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Net change of deferred loan origination costs
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Net accretion of premiums and discounts on available-for-sale securities
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(
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(
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Accretion of purchase accounting marks on loans
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(
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(
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Amortization of core deposit intangible
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Director compensation expense
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Accretion of premium on FHLB advances
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(
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Stock-based compensation expense
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ESOP compensation expense
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Earnings on bank owned life insurance
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(
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(
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Change in assets and liabilities:
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Net change in deferred taxes
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(
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)
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Net change in accrued interest receivable
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(
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(
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Net change in other assets
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(
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(
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Net change in accrued expenses and other liabilities
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(
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(
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| Net cash used in operating activities |
(
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(
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Cash flows from investing activities:
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Net change in loans receivable held for investment
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(
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)
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(
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Principal payments on available-for-sale securities
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Purchase of FHLB stock
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(
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)
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(
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)
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Proceeds from redemption of FHLB stock
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Purchase of office properties and equipment
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(
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(
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| Net cash provided by (used in) investing activities |
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(
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Cash flows from financing activities:
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Net change in deposits
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Net change in securities sold under agreements to repurchase
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(
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Repayment of notes payable
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(
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Cash dividends paid - preferred
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(
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) |
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Proceeds from other borrowings
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Proceeds from FHLB advances
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Repayments of FHLB advances
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(
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)
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(
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)
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| Net cash used in financing activities |
(
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)
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(
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)
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Net change in cash and cash equivalents
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(
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)
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(
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)
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||||
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Cash and cash equivalents at beginning of the period
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Cash and cash equivalents at end of the period
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$
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$
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Supplemental disclosures of cash flow information:
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Cash paid for interest
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$
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$
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Cash paid for income taxes
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See accompanying notes to unaudited consolidated financial statements.
BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY
(Unaudited)
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Three
Months Ended March
31,
2025
and
2024
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Preferred Stock Non-
Voting
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Common
Stock
Voting
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Common
Stock Non-
Voting
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Additional
Paid-in
Capital
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Accumulated Other Comprehensive Loss
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Retained Earnings
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Unearned
ESOP Shares
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Treasury
Stock
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Non-
Controlling Interest
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Total
Equity
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(In
thousand
s)
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Balance at
December 31
,
2024
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$
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$
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$
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$
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$
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(
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)
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$
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$
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(
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)
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$
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(
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)
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$
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$
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Net loss
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(
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(
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(
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Release of unearned ESOP shares
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Stock-based
compensation expense
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Director stock compensation expense
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Dividends declared and paid - preferred
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(
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) |
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(
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) | ||||||||||||||||||||||||||||
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Other comprehensive income, net of tax
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Balance at
March
31,
2025
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$
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$
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$
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$
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$
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(
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)
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$
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$
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(
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)
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$
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(
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)
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$
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$
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||||||||||||||||||||||||||||||||||||||||
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Balance at
December
31
,
2023
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$
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$
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$
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$
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$
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(
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)
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$
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$
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(
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)
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$
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(
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)
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$
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$
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Net
loss
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(
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)
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(
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(
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)
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Release of unearned ESOP shares
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(
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) |
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Stock-based
compensation expense
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||||||||||||||||||||||||||||||
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Other comprehensive loss, net of tax
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|
(
|
)
|
|
|
|
|
(
|
)
|
||||||||||||||||||||||||||||
|
Balance at
March
31,
2024
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
$
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|
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See accompanying 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. All significant intercompany balances and transactions have been eliminated in consolidation.
The unaudited consolidated
financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions for quarterly
reports on Form 10-Q. These unaudited consolidated financial statements do not include all disclosures associated with the Company’s consolidated annual financial statements included in its Annual Report on Form 10-K for
the year ended December 31, 2024 (“2024 Form 10-K”) and, accordingly, should be read in conjunction with such audited consolidated financial statements. In the opinion of management, all adjustments (all of which are
normal and recurring in nature) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2025 are not necessarily indicative of the results that may be
expected for the year ending December 31, 2025.
The Company operates
one
reportable segment — banking. The Company’s chief executive officer is its chief operating decision maker (“CODM”). The
CODM assesses operating performance and manages the allocation of resources primarily based on the Company’s consolidated operating results and financial condition. The factors considered in making this determination
include all of the banking products and services offered by the Company are available in each branch of the Company, management does not allocate resources based on the performance of different lending or transaction
activities, and how information is reviewed by the chief executive officer and other key decision makers. The CODM uses consolidated net income to benchmark the Company against its competitors and to monitor budget to
actual results. As a result, the Company determined that all services offered relate to banking. Loans, investments, and deposits provide the revenues in the banking operation. Interest expense, provisions for credit
losses and payroll provide the significant expenses in the banking operation. See the Company’s operating segment information in the unaudited consolidated statements of financial condition and the unaudited
consolidated statements of operations and comprehensive income.
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 2024 Form 10-K.
NOTE 2
–
Loss Per Share and Equity
Basic loss 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 loss per share of common stock includes the dilutive effect of unvested stock awards and additional potential common shares issuable under
stock options. Unvested restricted awards are considered outstanding for this calculation.
The following table shows how the Company computed basic and diluted loss per share of common stock for the periods indicated:
|
Three Months Ended March 31,
|
||||||||
|
2025
|
2024
|
|||||||
|
(
Dollars
in thousands, except
per share data)
|
||||||||
|
Net loss attributable to Broadway Financial Corporation
|
$
|
(
|
)
|
$
|
(
|
)
|
||
|
Less: Net income (loss) attributable to participating securities
|
|
|
(
|
)
|
||||
|
Less: Preferred stock dividends
|
(
|
) |
|
|||||
|
Net loss available to common stockholders
|
$
|
(
|
)
|
$
|
(
|
)
|
||
|
Weighted average common shares outstanding for basic loss per common share
|
|
|
||||||
| Add: Effects of unvested restricted stock awards |
|
|
||||||
|
Weighted average common shares outstanding for diluted loss per common share
|
|
|
||||||
|
Loss per common share - basic
|
$
|
(
|
)
|
$
|
(
|
)
|
||
|
Loss per common share - diluted
|
$
|
(
|
)
|
$
|
(
|
)
|
||
Series C, Senior Non-Cumulative Perpetual Preferred Stock
On June 7, 2022, the Company issued
150,000
shares of Series C Preferred Stock with a liquidation preference of $
1,000
per share for the capital investment of $
150
million from the U.S. Treasury under the Emergency Capital Investment Program (“ECIP”).
The Series C Preferred Stock accrued
no
dividend for the first 24 months following the investment date. Thereafter, the dividend rate will be adjusted based
on the qualified lending growth criteria listed in the terms of the ECIP investment with the annual dividend rate up to
2
%.
After the
anniversary of the investment date, the dividend rate will be fixed based on the average
annual amount of lending in years
2
through
10
. Dividends are payable quarterly in arrears on March 15, June 15, September 15, and December 15.
Established by the Consolidated
Appropriations Act, 2021, the ECIP was created to encourage low- and moderate-income community financial institutions and minority depository institutions to provide loans, grants, and forbearance for small
businesses, minority-owned businesses, and consumers, especially low-income and underserved communities, including persistent poverty counties, that may be disproportionately impacted by the economic effect of the
COVID-19 pandemic by providing direct and indirect capital investments in low- and moderate-income community financial institutions.
The Series C Preferred Stock may be
redeemed at the option of the Company on or after the
anniversary of issuance (or earlier in the
event of loss of regulatory capital treatment), subject to the approval of the appropriate federal banking regulator and in accordance with the federal banking agencies’ regulatory capital regulations.
On January 14, 2025, the Company entered
into the Option Agreement with the U.S. Treasury, which grants the Company the conditional option to repurchase the Series C Preferred Stock during the first
15 years
following the Company’s issuance of the Preferred Stock.
The
purchase price for the Series C Preferred Stock under the Option Agreement is based on a formula
approximate
to the
fair
value
of the Series C Preferred Stock
as of the date the Option Agreement is executed
, calculated as set forth in the Option
Agreement, together with any accrued and unpaid dividends thereon and could represent a discount from the Preferred Stock’s liquidation amount.
The purchase option may not be exercised during the first
10 years
following the Company’s sale of the Series C Preferred Stock (“the ECIP Period”) unless and until the Company meets at least one of the following three
conditions (the “Threshold Conditions”): (1) an average of at least
60
% of the Company’s loan originations
qualify as “Deep Impact Lending” over any
16
consecutive quarters, (2) an average of at least
85
% of the Company’s “total originations qualify as “Qualified Lending” over any
24
quarters or (3) the Series C Preferred Stock has a dividend rate of no more than
0.5
% at each of
six
consecutive “Reset Dates,”
in each case as defined in Option Agreement and the terms of the Series C Preferred. In addition to satisfying a Threshold Condition, the Option Agreement requires that the Company meet certain other eligibility
conditions in order to exercise the purchase option in the future, including compliance with the terms of the original ECIP purchase agreement and the terms of the Series C Preferred Stock, maintaining qualification as
either a certified community development financial institution or a minority depository institution and satisfying other legal and regulatory criteria. The Company may designate a Mission Aligned nonprofit Affiliate as
the purchaser of the Series C Preferred Stock under the terms of the option agreement.
The earliest possible date by which a Threshold Condition may be met is June 30, 2028 which is the end of the
sixteen
th consecutive quarter following the Original Closing Date. However, the Company does not currently meet any of the
Threshold Conditions to exercise the purchase option, and there can be no assurance if and when the Threshold Conditions will be met.
In addition to the requirement that a
Threshold Condition be met, the Repurchase Agreement requires that the Company meet certain other eligibility conditions in order to exercise the purchase option in the future, including compliance with the terms of
the original ECIP purchase agreement and the terms of the Preferred Stock, maintaining qualification as either a CDFI or an MDI, and meeting other legal and regulatory criteria. Although the Company currently meets
the general eligibility criteria, other than satisfying one of the Threshold Conditions, there can be no assurance that the Company will meet such criteria in the future.
The Company began paying quarterly dividends on the Series C Preferred Stock beginning in the three month period ended
June 30, 2024. Dividends on the Series C Preferred Stock totaled $
750
thousand for the three months ended
March 31, 2025 and has a current dividend rate of
2.0
%.
NOTE 3 – Securities
The
following table summarizes the amortized cost and fair value of the available-for-sale investment securities portfolios as of the dates indicated and the corresponding amounts of unrealized gains and losses which were recognized in accumulated
other comprehensive loss:
|
Amortized
Cost |
Gross
Unrealized
Gains
|
Gross
Unrealized
Losses
|
Fair Value
|
|||||||||||||
|
(In thousands)
|
||||||||||||||||
|
March 31, 2025:
|
||||||||||||||||
|
Federal agency mortgage-backed securities
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||||
|
Federal agency collateralized mortgage obligations (“CMO”)
|
|
|
(
|
) |
|
|||||||||||
|
Federal agency debt
|
|
|
(
|
)
|
|
|||||||||||
|
Municipal bonds
|
|
|
(
|
)
|
|
|||||||||||
|
U. S. Treasuries
|
|
|
(
|
)
|
|
|||||||||||
|
U.S. Small Business Administration (“SBA”) pools
|
|
|
(
|
)
|
|
|||||||||||
|
Total available-for-sale securities
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||||
|
December 31, 2024:
|
|
|||||||||||||||
|
Federal agency mortgage-backed securities
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||||
|
Federal agency CMOs
|
|
|
(
|
) |
|
|||||||||||
|
Federal agency debt
|
|
|
(
|
)
|
|
|||||||||||
|
Municipal bonds
|
|
|
(
|
)
|
|
|||||||||||
|
U. S. Treasuries
|
|
|
(
|
) |
|
|||||||||||
|
SBA pools
|
|
|
(
|
) |
|
|||||||||||
|
Total available-for-sale securities
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||||
As of March 31, 2025, investment securities with a fair value of $
78.6
million were pledged as collateral for
securities sold under agreements to repurchase and included
$
41.7
million of U.S. Treasury securities,
$
27.4
million of federal agency debt securities, $
5.5
million of federal agency mortgage-backed securities and $
4.1
million of SBA pool investments. As of December 31, 2024, investment securities with a fair value of $
83.3
million were pledged as collateral for securities sold under agreements to repurchase and included $
46.5
million of U.S. Treasuries, $
27.1
million of federal agency debt, $
5.5
million of federal agency mortgage-backed securities, and $
4.2
million of
SBA pools. Accrued interest receivable on securities was $
664
thousand and $
796
thousand at March 31, 2025 and December 31, 2024, respectively, and is included in the consolidated statements of financial condition under
.
At March 31
, 2025
, and December 31, 2024, there were
no
holdings of securities by any one issuer, other than the U.S. Government and its agencies, in an amount greater than 10% of stockholders’
equity.
The amortized cost and estimated fair value of all investment securities available-for-sale at
March
31, 2025
, 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
|
|
|
(
|
)
|
|
|||||||||||
|
Due after five years through ten years
|
|
|
(
|
)
|
|
|||||||||||
|
Due after ten years
|
|
|
(
|
)
|
|
|||||||||||
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
||||||||
The
table below indicates the length of time individual securities have been in a continuous unrealized loss position:
|
Less than 12 Months
|
12 Months or Longer
|
Total
|
||||||||||||||||||||||
|
Fair Value
|
Unrealized
Losses
|
Fair Value
|
Unrealized
Losses
|
Fair Value
|
Unrealized
Losses
|
|||||||||||||||||||
|
(In thousands)
|
||||||||||||||||||||||||
|
March 31, 2025
:
|
||||||||||||||||||||||||
|
Federal agency mortgage-backed securities
|
$
|
|
$
|
|
|
$
|
|
$
|
(
|
)
|
$
|
|
$
|
(
|
)
|
|||||||||
|
Federal agency CMOs
|
|
|
|
|
(
|
)
|
|
(
|
)
|
|||||||||||||||
|
Federal agency debt
|
|
|
|
|
(
|
)
|
|
(
|
)
|
|||||||||||||||
|
Municipal bonds
|
|
|
|
|
(
|
)
|
|
(
|
)
|
|||||||||||||||
|
U. S. Treasuries
|
|
|
|
|
(
|
)
|
|
(
|
)
|
|||||||||||||||
|
SBA pools
|
|
(
|
)
|
|
(
|
)
|
|
(
|
)
|
|||||||||||||||
|
Total unrealized loss position investment securities
|
$
|
|
$
|
(
|
)
|
$
|
|
$
|
(
|
)
|
$
|
|
$
|
(
|
)
|
|||||||||
|
December 31, 2024:
|
||||||||||||||||||||||||
|
Federal agency mortgage-backed securities
|
$
|
|
$
|
|
|
$
|
|
$
|
(
|
)
|
$
|
|
$
|
(
|
)
|
|||||||||
| Federal agency CMOs |
|
|
|
(
|
) |
|
(
|
) | ||||||||||||||||
|
Federal agency debt
|
|
|
|
|
(
|
)
|
|
(
|
)
|
|||||||||||||||
|
Municipal bonds
|
|
|
|
|
(
|
)
|
|
(
|
)
|
|||||||||||||||
|
U. S. Treasuries
|
|
|
|
|
(
|
)
|
|
(
|
)
|
|||||||||||||||
| SBA pools |
|
(
|
) |
|
(
|
) |
|
(
|
) | |||||||||||||||
|
Total unrealized loss position investment securities
|
$
|
|
$
|
(
|
)
|
$
|
|
$
|
(
|
)
|
$
|
|
$
|
(
|
)
|
|||||||||
At
March 31, 2025, and December 31, 2024, all securities in the portfolio were current with their contractual principal and interest payments. At March 31, 2025, and December 31, 2024, there were
no
securities purchased with deterioration in credit quality since their origination. At March 31, 2025, and December 31, 2024, there were
no
collateral dependent securities.
The Company’s assessment of
available-for-sale investment securities as of March 31, 2025
and December 31, 2024
, indicated that an
allowance for credit losses (“ACL”)
was not required. The Company analyzed available-for-sale investment securities that were in an unrealized loss position and determined the decline in fair value
for those securities was not related to credit, but rather related to changes in interest rates and general market conditions. As such,
no
ACL was recorded for available-for-sale securities as of March 31, 2025 or December 31,
2024. At both March 31, 2025 and December 31, 2024, approximately
98
% of the securities held by the Company were issued by U.S. government-sponsored entities and agencies. Because the decline in fair value is attributable to changes in interest rates
and liquidity, and not credit quality, and because the Company does not have the intent to sell these securities, and it is likely that it will not be required to sell the securities before their anticipated recovery, the Company did
no
t record expected credit loss during the quarters ended March 31, 2025 or
2024.
NOTE 4
–
Loans Receivable Held for Investment
Loans receivable held for investment were as follows as of the periods indicated:
|
March 31,
2025
|
December 31,
2024
|
|||||||
|
(In thousands)
|
||||||||
|
Real estate:
|
||||||||
|
Single-family
|
$
|
|
$
|
|
||||
|
Multi-family
|
|
|
||||||
|
Commercial real estate
|
|
|
||||||
|
Church
|
|
|
||||||
|
Construction
|
|
|
||||||
|
Commercial – other
|
|
|
||||||
|
SBA loans
|
|
|
||||||
|
Consumer
|
|
|
||||||
|
Gross loans receivable before deferred loan costs and premiums
|
|
|
||||||
|
Unamortized net deferred loan costs and premiums
|
|
|
||||||
|
Gross loans receivable
|
|
|
||||||
|
Credit and interest marks on purchased loans, net
|
(
|
) |
(
|
) | ||||
|
Allowance for credit losses
|
(
|
)
|
(
|
)
|
||||
|
Loans receivable, net
|
$
|
|
$
|
|
||||
The Company accounts for credit losses on loans in accordance with ASC 326 –
Financial Instruments-Credit Losses
, to determine the ACL. ASC 326
requires the Company to recognize estimates for lifetime losses on loans and off-balance sheet loan commitments at the time of origination or acquisition. The recognition of losses at origination or acquisition
represents the Company’s best estimate of the lifetime expected credit loss associated with a loan given the facts and circumstances associated with the particular loan, and involves the use of significant management
judgment and estimates, which are subject to change based on management’s on-going assessment of the credit quality of the loan portfolio and changes in economic forecasts used in the model. The Company uses the WARM
method when determining estimates for the ACL for each of its portfolio segments. The weighted average remaining life, including the effect of estimated prepayments, is calculated for each loan pool on a quarterly
basis. The Company then estimates a loss rate for each pool using both its own historical loss experience and the historical losses of a group of peer institutions during the period from 2004 through the most recent
quarter.
The Company’s ACL model also includes adjustments for qualitative factors, where appropriate. Qualitative adjustments may be related to and include, but are not limited to, factors
such as: (i) changes in lending policies and procedures, including changes in underwriting standards and collections, charge offs, and recovery practices; (ii) changes in international, national, regional, and
local conditions; (iii) changes in the nature and volume of the portfolio and terms of loans; (iv) changes in the experience, depth, and ability of lending management; (v) changes in the volume and severity of past
due loans and other similar conditions; (vi) changes in the quality of the organization’s loan review system; (vii) changes in the value of underlying collateral for collateral dependent loans; (viii) the existence
and effect of any concentrations of credit and changes in the levels of such concentrations; and (ix) the effect of other external factors (i.e., competition, legal and regulatory requirements) on the level of
estimated credit losses. These qualitative factors incorporate the concept of reasonable and supportable forecasts, as required by ASC 326.
The following tables summarize the activity in the allowance for credit losses on loans
for the periods indicated:
|
March 31, 2025
|
||||||||||||||||||||
|
Beginning
Balance
|
Charge-offs
|
Recoveries
|
Provision
(recapture)
|
Ending
Balance
|
||||||||||||||||
| ( In thousands ) | ||||||||||||||||||||
|
Loans receivable held for investment:
|
||||||||||||||||||||
|
Single-family
|
$
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||||||
|
Multi-family
|
|
|
|
|
|
|||||||||||||||
|
Commercial real estate
|
|
|
|
|
|
|||||||||||||||
|
Church
|
|
|
|
(
|
)
|
|
||||||||||||||
|
Construction
|
|
|
|
(
|
)
|
|
||||||||||||||
|
Commercial - other
|
|
|
|
|
|
|||||||||||||||
|
SBA loans
|
|
|
|
|
|
|||||||||||||||
|
Total
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||
|
March 31
, 2024
|
||||||||||||||||||||
|
Beginning
Balance
|
Charge-offs
|
Recoveries
|
Provision
(recapture)
|
Ending Balance
|
||||||||||||||||
|
(
In thousands
)
|
||||||||||||||||||||
|
Loans receivable held for investment:
|
||||||||||||||||||||
|
Single-family
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||
|
Multi-family
|
|
|
|
(
|
)
|
|
||||||||||||||
|
Commercial real estate
|
|
|
|
|
|
|||||||||||||||
|
Church
|
|
|
|
|
|
|||||||||||||||
|
Construction
|
|
|
|
|
|
|||||||||||||||
|
Commercial - other
|
|
|
|
|
|
|||||||||||||||
|
SBA loans
|
|
|
|
|
|
|||||||||||||||
|
Total
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||
The Company also recorded a provision for off-balance sheet loan commitments of $
18
thousand and $
56
thousand for
the quarters ended March 31, 2025 and 2024, respectively.
The ACL increased from March 31, 2024 to March 31, 2025, primarily due to
one
new non-accrual loan. The loan was individually evaluated and a provision was taken for the full balance as there was
no
collateral.
The Company evaluates loans collectively for purposes of determining the ACL in accordance with ASC 326. Collective evaluation is based on aggregating loans deemed to possess similar
risk characteristics. In certain instances, the Company may identify loans that it believes no longer possess risk characteristics similar to other loans in the loan portfolio. These loans are typically identified
from those that have exhibited deterioration in credit quality, since the specific attributes and risks associated with such loans tend to become unique as the credit deteriorates. Such loans are typically
nonperforming, downgraded to substandard or worse, and/or are deemed collateral dependent, where the ultimate repayment of the loan is expected to come from the operation of or eventual sale of the collateral. Loans
that are deemed by management to no longer possess risk characteristics similar to other loans in the portfolio, or that have been identified as collateral dependent, are evaluated individually for purposes of
determining an appropriate lifetime ACL. The Company uses the remaining life approach, using the loan’s effective interest rate, for determining the ACL on individually evaluated loans, unless the loan is deemed
collateral dependent, which requires evaluation based on the estimated fair value of the underlying collateral, less estimated selling costs. The Company may increase or decrease the ACL for collateral dependent
loans based on changes in the estimated fair value of the collateral.
The following
table presents collateral dependent loans by collateral type as of the date indicated:
|
March 31, 2025
|
||||||||||||||||||||
|
|
Single-Family
|
Multi-Family
Residential
|
Church
|
Business
Assets
|
Total
|
|||||||||||||||
|
|
(In thousands)
|
|||||||||||||||||||
|
Commercial - other
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||
|
SBA Loans
|
|
|
|
|
|
|||||||||||||||
|
Total
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||
|
December 31, 2024
|
||||||||||||||||||||
|
Single-Family
|
Multi-Family
Residential
|
Church
|
Business
Assets
|
Total
|
||||||||||||||||
|
|
(In thousands)
|
|||||||||||||||||||
|
SBA Loans
|
|
|
|
|
|
|||||||||||||||
|
Total
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||
At March 31, 2025, $
600
thousand of individually evaluated loans were evaluated based on the estimated fair value of the underlying collateral and
one
$
522
thousand loan was individually
evaluated using the remaining life approach. These loans had an associated ACL of $
720
thousand as
of March 31, 2025. The Company had
three
individually evaluated loans totaling $
860
thousand on nonaccrual status at March 31, 2025.
At December 31, 2024,
one
$
264
thousand individually evaluated
loan was evaluated based on the estimated fair value of the underlying collateral. This loan had
no
associated ACL and was on nonaccrual status as of December 31, 2024.
Past Due Loans
The following
tables present the aging of the recorded investment in past due loans by loan type as of the dates indicated:
|
March 31, 2025
|
||||||||||||||||||||||||
|
30-59 Days
Past Due
|
60-89 Days
Past Due
|
Greater than
90 Days Past
Due
|
Total Past
Due
|
Current
|
Total
|
|||||||||||||||||||
|
(In thousands)
|
||||||||||||||||||||||||
|
Loans receivable held for investment:
|
||||||||||||||||||||||||
|
Single-family
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||
|
Multi-family
|
|
|
|
|
|
|
||||||||||||||||||
|
Commercial real estate
|
|
|
|
|
|
|
||||||||||||||||||
|
Church
|
|
|
|
|
|
|
||||||||||||||||||
|
Construction
|
|
|
|
|
|
|
||||||||||||||||||
|
Commercial - other
|
|
|
|
|
|
|
||||||||||||||||||
| SBA loans |
|
|
|
|
|
|
||||||||||||||||||
|
Consumer
|
|
|
|
|
|
|
||||||||||||||||||
|
Total
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||
|
December 31, 2024
|
||||||||||||||||||||||||
|
30-59 Days
Past Due
|
60-89 Days
Past Due
|
Greater than
90 Days Past
Due
|
Total Past Due
|
Current
|
Total
|
|||||||||||||||||||
|
(In thousands)
|
||||||||||||||||||||||||
|
Loans receivable held for investment:
|
||||||||||||||||||||||||
|
Single-family
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||
|
Multi-family
|
|
|
|
|
|
|
||||||||||||||||||
|
Commercial real estate
|
|
|
|
|
|
|
||||||||||||||||||
|
Church
|
|
|
|
|
|
|
||||||||||||||||||
|
Construction
|
|
|
|
|
|
|
||||||||||||||||||
|
Commercial - other
|
|
|
|
|
|
|
||||||||||||||||||
| SBA loans |
|
|
|
|
|
|
||||||||||||||||||
| Consumer |
|
|
|
|
|
|
||||||||||||||||||
|
Total
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||
The following tables present the recorded investment in non-accrual loans by loan type as of the dates indicated:
| March 31, 2025 | ||||||||||||
|
Nonaccrual with
no Allowance for
Credit Losses
|
Nonaccrual with
an Allowance for
Credit Losses
|
Total Nonaccrual
Loans
|
||||||||||
|
(In thousands)
|
||||||||||||
|
Loans receivable held for investment:
|
||||||||||||
|
Commercial - other
|
$
|
|
$
|
|
$
|
|
||||||
|
SBA loans
|
|
|
|
|||||||||
|
Total non-accrual loans
|
$
|
|
$
|
|
$
|
|
||||||
| December 31, 2024 | ||||||||||||
|
Nonaccrual with
no Allowance for
Credit Losses
|
Nonaccrual with
an Allowance for
Credit Losses
|
Total Nonaccrual
Loans
|
||||||||||
|
(In thousands)
|
||||||||||||
| Loans receivable held for investment: | ||||||||||||
|
SBA loans
|
$
|
|
$
|
|
$
|
|
||||||
|
Total non-accrual loans
|
$
|
|
$
|
|
$
|
|
||||||
There were
no
loans 90 days or more delinquent that were accruing interest as
of March 31, 2025 or December 31, 2024.
Modified Loans
to Troubled Borrowers
GAAP requires that certain types of modifications of loans in response to a borrower’s financial difficulty be reported, which consist of the following: (i) principal forgiveness, (ii)
interest rate reduction, (iii) other-than-insignificant payment delay, (iv) term extension, or (v) any combination of the foregoing. The ACL for loans that were modified in response to a borrower’s financial
difficulty is measured on a collective basis, as with other loans in the loan portfolio, unless management determines that such loans no longer possess risk characteristics similar to others in the loan portfolio. In
those instances, the ACL for such loans is determined through individual evaluation. The table below shows loan modifications during the quarter.
The
following table presents the amortized costs basis as of March 31, 2025 and the financial effect of loans modified to borrowers experiencing financial difficulty during the quarter ended March 31, 2025. There were
no
loan modifications to borrowers that were experiencing financial difficulty during the quarter ended March 31, 2024.
| March 31, 2025 | |||||||||
|
Term Extension
|
Percentage of Total
Loan Type
|
Weighted Average Term Extension
|
|||||||
|
(In Thousands)
|
|||||||||
|
Real estate:
|
|||||||||
|
Commercial real estate
|
$
|
|
|
%
|
|
||||
|
Construction
|
|
|
%
|
|
|||||
|
Commercial - other
|
|
|
%
|
|
|||||
|
Total
|
$
|
|
|||||||
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. The Company uses the following definitions for risk ratings:
|
|
● |
Watch.
Loans classified as watch exhibit weaknesses that could
threaten the current net worth and paying capacity of the obligors. Watch graded loans are generally performing and are not more than 59 days past due. A watch rating is used when a material deficiency
exists, but correction is anticipated within an acceptable time frame.
|
|
|
● |
Special Mention.
Loans classified as special mention have a potential
weakness that deserves management’s close attention that appears short term in nature. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of
the institution’s credit position at some future date.
|
|
|
● |
Substandard.
Loans classified as substandard are inadequately
protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of
the debt. They are characterized by the distinct possibility that the institution may sustain some loss if the deficiencies are not corrected.
|
|
|
● |
Doubtful.
Loans classified as doubtful have all the weaknesses
inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, based on currently existing facts, conditions, and values, highly
questionable and improbable.
|
|
|
● |
Loss.
Loans classified as loss are considered uncollectible and of such little value that to continue to carry the loan as an active asset is no longer warranted.
|
Loans that are not individually analyzed as part of the above-described process are considered to be pass rated loans. Pass
rated loans are generally well protected by the current net worth and paying capacity of the obligor and/or by the value of the underlying collateral. Pass rated loans are not more than 59 days past due and are
generally performing in accordance with the loan terms.
The following
table stratifies the loans held for investment portfolio by the Company’s internal risk grading, and by year of origination as of the date indicated:
|
Term Loans Amortized Cost Basis by Origination Year - As of March 31, 2025
|
||||||||||||||||||||||||||||||||
|
|
2025
|
2024
|
2023
|
2022
|
2021
|
Prior
|
Revolving
Loans
|
Total
|
||||||||||||||||||||||||
|
(In thousands)
|
||||||||||||||||||||||||||||||||
|
Single-family:
|
||||||||||||||||||||||||||||||||
|
Pass
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||||||
|
Watch
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
|
Total
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Multi-family:
|
||||||||||||||||||||||||||||||||
|
Pass
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||||||
|
Watch
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
|
Special Mention
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
|
Substandard
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
|
Total
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Commercial real estate:
|
||||||||||||||||||||||||||||||||
|
Pass
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||||||
|
Watch
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
|
Special Mention
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
|
Substandard
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
|
Total
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Church:
|
|
|||||||||||||||||||||||||||||||
|
Pass
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||||||
|
Watch
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
|
Substandard
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
|
Total
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Construction:
|
||||||||||||||||||||||||||||||||
| Pass |
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
|
Watch
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
|
Special Mention
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
|
Substandard
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
|
Total
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Commercial – other:
|
||||||||||||||||||||||||||||||||
|
Pass
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||||||
|
Watch
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
|
Special Mention
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
|
Substandard
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
|
Total
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
SBA:
|
||||||||||||||||||||||||||||||||
|
Pass
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||||||
|
Substandard
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
|
Doubtful
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
|
Total
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Consumer:
|
||||||||||||||||||||||||||||||||
|
Pass
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||||||
|
Total
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Total loans:
|
||||||||||||||||||||||||||||||||
|
Pass
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||||||
|
Watch
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
|
Special Mention
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
|
Substandard
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
|
Doubtful
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
|
Total loans
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||||||
|
Term Loans Amortized Cost Basis by Origination Year - As of December 31, 2024
|
||||||||||||||||||||||||||||||||
|
2024
|
2023
|
2022
|
2021
|
2020
|
Prior
|
Revolving
Loans
|
Total
|
|||||||||||||||||||||||||
|
(In thousands)
|
||||||||||||||||||||||||||||||||
|
Single-family:
|
||||||||||||||||||||||||||||||||
|
Pass
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||||||
|
Watch
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
|
Total
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||||||
|
Multi-family:
|
||||||||||||||||||||||||||||||||
|
Pass
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||||||
|
Watch
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
|
Special Mention
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
|
Substandard
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
|
Total
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||||||
|
Commercial real estate:
|
||||||||||||||||||||||||||||||||
|
Pass
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||||||
|
Watch
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
|
Substandard
|
|
|
|
$
|
|
$
|
|
|
$
|
|
$
|
|
||||||||||||||||||||
|
Total
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||||||
|
Church:
|
||||||||||||||||||||||||||||||||
|
Pass
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||||||
|
Watch
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
|
Substandard
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
|
Total
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||||||
|
Construction:
|
||||||||||||||||||||||||||||||||
|
Watch
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||||||
|
Special Mention
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
|
Total
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||||||
|
Commercial – other:
|
||||||||||||||||||||||||||||||||
|
Pass
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||||||
|
Watch
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
|
Special Mention
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
| Substandard |
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
|
Total
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||||||
|
SBA:
|
||||||||||||||||||||||||||||||||
|
Pass
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||||||
|
Special Mention
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
|
Total
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||||||
|
Consumer:
|
||||||||||||||||||||||||||||||||
|
Pass
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||||||
|
Total
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||||||
|
Total loans:
|
||||||||||||||||||||||||||||||||
|
Pass
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||||||
|
Watch
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
|
Special Mention
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
|
Substandard
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
|
Total loans
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||||||
Allowance for Credit Losses for Off-Balance Sheet Commitments
The Company maintains an allowance for credit losses on off-balance sheet commitments related to unfunded loans and lines of credit, which is included in accrued expenses and other
liabilities of the consolidated statements of financial condition. Upon the Company’s adoption of ASC 326, the Company applies an expected credit loss estimation methodology for off-balance sheet commitments. This
methodology is commensurate with the methodology applied to each respective segment of the loan portfolio in determining the ACL for loans held-for-investment. The loss estimation process includes assumptions for the
probability that a loan will fund, as well as the expected amount of funding. These assumptions are based on the Company’s own historical internal loan data.
The allowance for off-balance sheet commitments was $
295
thousand and $
277
thousand at March 31, 2025 and December 31, 2024, respectively. This amount is
included in accrued expenses and other liabilities on the consolidated statements of financial condition. The provision for off-balance sheet commitments was $
18
thousand for the quarter-ended March 31, 2025.
NOTE 5
–
Goodwill and Core Deposit Intangible
The following tables present the changes in the carrying amounts of goodwill and core deposit intangibles for the three months ended March
31, 2025 and 2024
:
| March 31, 2025 | ||||||||
|
Goodwill
|
Core Deposit
Intangible
|
|||||||
|
(In thousands)
|
||||||||
|
Balance at the beginning of the period
|
$
|
|
$
|
|
||||
|
Additions
|
|
|
||||||
|
Amortization
|
|
(
|
)
|
|||||
|
Balance at the end of the period
|
$ |
|
$
|
|
||||
| March 31, 2024 | ||||||||
|
Goodwill
|
Core Deposit
Intangible
|
|||||||
|
(In thousands)
|
||||||||
|
Balance at the beginning of the period
|
$
|
|
$
|
|
||||
|
Additions
|
|
|
||||||
|
Amortization
|
|
(
|
)
|
|||||
|
Balance at the end of the period
|
$ |
|
$
|
|
||||
The carrying amount of the core deposit intangible consisted of the following
(in thousands):
|
|
March 31,
2025
|
December 31,
2024
|
||||||
|
Core deposit intangible acquired
|
$
|
|
$ |
|
||||
| Less: Accumulated amortization |
(
|
) |
(
|
) | ||||
|
|
$
|
|
$ |
|
||||
The following table outlines the
estimated amortization expense for the core deposit intangible during the next five fiscal years (in thousands):
|
Remainder of 2025
|
$
|
|
||
|
2026
|
|
|||
|
2027
|
|
|||
|
2028
|
|
|||
|
2029
|
|
|||
|
Thereafter
|
|
|||
|
$
|
|
NOTE 6
–
Borrowings
T
he Company enters into agreements under which it sells securities subject to an obligation to repurchase the same or similar securities. Under these arrangements, the Company may
transfer legal control over the assets but still retain effective control through an agreement that both entitles and obligates the Company 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 sec
urities is reflected as a liability in the
Company’s consolidated
statements of financial condition, w
hile the securities underlying the repurchase agreements remain in the respective investment securities asset accounts. In other words, there is no
offsetting or netting of the investment securities assets with the repurchase agreement liabilities.
These agreements mature on a daily basis. As of
March
31, 2025
securities sold under agreements to repurchase totaled $
80.8
million at an average rate of
3.63
%. The fair value of securities pledged totaled $
78.6
million as of
March
31
, 2025
.
As of December 31, 2024, securities sold under agreements to repurchase totaled $
66.6
million at an average
rate of
3.62
%. The fair value of securities pledged totaled $
83.3
million as of December 31, 2024.
At
March
31
, 2025 and
December 31, 2024, the Company had outstanding advances from the FHLB totaling $
78.0
million and $
195.5
million, respectively. The weighted average interest rate was
4.45
% and
4.03
% as of March
31
, 2025 and
December 31, 2024, respectively. The weighted average contractual maturity was less than
one month
as of
both March
31
, 2025 and December 31, 2024. The advances were collateralized by loans with an unpaid balance of $
521.4
million
and pledged securities with a balance of $
94.5
million at March 31, 2025 and collateralized by loans with an unpaid balance of $
521.7
million at December 31, 2024
. The Company is currently approved by the FHLB of Atlanta to borrow up to
25
% of total assets to the extent the Company provides qualifying collateral and holds sufficient FHLB stock. Based on collateral pledged and FHLB
stock held, the Company was eligible to borrow an additional $
279.5
million as of
March
31, 2025
.
The Company has secured borrowings associated with participation loan transactions of $
9.4
million as of March 31, 2025.
On December 27, 2023, the Company borrowed $
100.0
million from the Federal Reserve
under the BTFP. This borrowing was paid off in December 2024. The interest rate on this borrowing was fixed at
4.84
%
and the borrowing matured on
December 29, 2024
. Investment securities with a book value of $
107.3
million and a fair value of $
98.3
million were pledged as collateral for this borrowing as of December 31, 2023.
In addition, the Company had additional lines of credit of $
10.0
million with
other financial institutions as of
March
31, 2025 and
December 31, 2024
. These lines of credit are unsecured, bear interest at the Federal funds rate as of
the date of utilization and mature in
30
days. There were
no
amounts outstanding under these lines of credit as of
March
31, 2025 or
December 31, 2024
.
In connection with the New Market Tax Credit activities of the Bank, CFC 45
is a partnership whose members include CFNMA and City First New Markets Fund II, LLC. This community development entity 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 was secured by a Leasehold Deed of Trust that, due to the pass-through, non-recourse structure, was operationally and ultimately for the benefit of Merrill Lynch rather
than CFC 45. Debt service payments received by CFC 45 from the QALICB were passed through to Merrill Lynch in return for which CFC 45 received a servicing fee. The financial statements of CFC 45 are consolidated with
those of the Bank and the Company.
There were
two
notes for CFC 45. Note A was in the amount of $
9.9
million with a fixed interest rate of
5.2
% per annum. Note B was 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 continued through March 2023 for Notes A and B. These notes were paid off during
January 2024.
NOTE 7
–
Fair Value
Fair value is the exchange price that would be received for an asset or paid to transfer a liability
(exit price) in the principal or most advantageous market for the asset or liability in an ordinary transaction between market participants on the measurement date. There are three levels of inputs that may be used to
measure fair values:
Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the
entity has the ability to access as of the measurement date.
Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for
similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
Level 3: Significant unobservable inputs that reflect a company’s own assumptions about the
assumptions that market participants would use in pricing an asset or liability.
The Company used the following methods and significant assumptions to estimate fair value:
The fair values of securities available-for-sale are determined by obtaining quoted prices on nationally recognized securities exchanges (Level 1 inputs) or matrix pricing, which is a
mathematical technique to value debt securities without relying exclusively on quoted prices for the specific securities, but rather by relying on the securities’ relationship to other benchmark quoted securities (Level
2 inputs).
The fair value of 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. Collateral dependent
loans are evaluated on a quarterly basis for additional required calculation adjustments (taken as part of the ACL) and adjusted accordingly.
Appraisals for collateral-dependent loans and assets acquired through or by transfer of in lieu of foreclosure are performed by certified general appraisers (for commercial properties) or
certified residential appraisers (for residential properties) whose qualifications and licenses have been reviewed and verified by the Company. Once received, an independent third-party licensed appraiser reviews the
appraisals for accuracy and reasonableness, reviewing the assumptions and approaches utilized in the appraisal as well as the overall resulting fair value in comparison with independent data sources such as recent
market data or industry-wide statistics.
Assets Measured on a Recurring Basis
Assets measured at fair value on a recurring basis are summarized below:
|
Fair Value Measurement
|
||||||||||||||||
|
Quoted Prices
in Active
Markets for
Identical
Assets (Level 1)
|
Significant
Other
Observable
Inputs (Level 2)
|
Significant
Unobservable
Inputs (Level 3)
|
Total
|
|||||||||||||
|
(In thousands)
|
||||||||||||||||
|
At March 31, 2025:
|
||||||||||||||||
|
Securities available-for-sale:
|
||||||||||||||||
|
Federal agency mortgage-backed securities
|
$
|
|
$ |
|
$
|
|
$ |
|
||||||||
|
Federal agency CMOs
|
|
|
|
|
||||||||||||
|
Federal agency debt
|
|
|
|
|
||||||||||||
|
Municipal bonds
|
|
|
|
|
||||||||||||
|
U.S. Treasuries
|
|
|
|
|
||||||||||||
|
SBA pools
|
|
|
|
|
||||||||||||
|
At December 31, 2024:
|
||||||||||||||||
|
Securities available-for-sale:
|
||||||||||||||||
|
Federal agency mortgage-backed securities
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
Federal agency CMOs
|
|
|
|
|
||||||||||||
|
Federal agency debt
|
|
|
|
|
||||||||||||
|
Municipal bonds
|
|
|
|
|
||||||||||||
|
U.S. Treasuries
|
|
|
|
|
||||||||||||
|
SBA pools
|
|
|
|
|
||||||||||||
There were no transfers between Level 1, Level 2, or Level 3 during the three months ended March 31, 2025 and 2024.
As of March 31, 2025 and December 31, 2024, the Bank did
no
t have any assets
or liabilities carried at fair value on a nonrecurring basis.
Fair Values of Financial Instruments
The following tables present the carrying amount, fair value, and level within the fair value
hierarchy of the Company’s financial instruments not recorded at fair value on a recurring basis as of March 31, 2025 and December 31, 2024.
|
Fair Value Measurements at March 31, 2025
|
||||||||||||||||||||
|
Carrying Value
|
Level 1
|
Level 2
|
Level 3
|
Total
|
||||||||||||||||
|
(In thousands)
|
||||||||||||||||||||
|
Financial Assets:
|
||||||||||||||||||||
| Cash and cash equivalents | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||
|
Securities available-for-sale
|
|
|
|
|
|
|||||||||||||||
|
Loans receivable held for investment
|
|
|
|
|
|
|||||||||||||||
|
Accrued interest receivable
|
|
|
|
|
|
|||||||||||||||
|
Financial Liabilities:
|
||||||||||||||||||||
|
Non interest bearing deposits
|
$
|
|
$ |
|
$
|
|
$ |
|
$ |
|
||||||||||
|
Interest bearing deposits
|
|
|
|
|
|
|||||||||||||||
|
Time deposits
|
|
|
|
|
|
|||||||||||||||
|
Borrowings
|
|
|
|
|
|
|||||||||||||||
|
Securities sold under agreements to repurchase
|
|
|
|
|
|
|||||||||||||||
|
Accrued interest payable
|
|
|
|
|
|
|||||||||||||||
|
Fair Value Measurements at December 31, 2024
|
||||||||||||||||||||
|
Carrying Value
|
Level 1
|
Level 2
|
Level 3
|
Total
|
||||||||||||||||
|
(In thousands)
|
||||||||||||||||||||
|
Financial Assets:
|
||||||||||||||||||||
|
Cash and cash equivalents
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||
|
Securities available-for-sale
|
|
|
|
|
|
|||||||||||||||
|
Loans receivable held for investment
|
|
|
|
|
|
|||||||||||||||
|
Accrued interest receivable
|
|
|
|
|
|
|||||||||||||||
|
Bank owned life insurance
|
|
|
|
|
|
|||||||||||||||
|
Financial Liabilities:
|
||||||||||||||||||||
|
Deposits
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||
|
Borrowings
|
|
|
|
|
|
|||||||||||||||
| Securities sold under agreements to repurchase |
|
|
|
|
|
|||||||||||||||
|
Accrued interest payable
|
|
|
|
|
|
|||||||||||||||
In accordance with ASC 820, the fair value of financial assets and liabilities was measured using an exit price notion. Although the exit price notion represents the value that would be received to
sell an asset or paid to transfer a liability, the actual price received for a sale of assets or paid to transfer liabilities could be different from exit price disclosed.
NOTE 8 – Stock-based
Compensation
Prior to June 21, 2023, the Company issued stock-based compensation awards to its directors and officers under the 2018 Long Term Incentive Plan (“LTIP”) which allowed the grant of non-qualified and incentive
stock options, stock appreciation rights, full value awards and cash incentive awards. The maximum number of shares available to be awarded under the LTIP was
161,639
shares.
On June 21, 2023, stockholders approved an Amendment and Restatement of the
2018 Long Term Incentive Plan (“Amended and Restated LTIP”) which allows the issuance of
487,500
additional shares and brought the number of shares that may be issued under the Amended and Restated LTIP to
649,139
shares.
Stock-based compensation is recognized on a
straight-line basis over the vesting period. During the three months ended March 31, 2025 and 2024, the Company recorded $
99
thousand and $
77
thousand of stock-based compensation expense, respectively. During the three months
ended March 31, 2025 and 2024, the Company recorded $
168
thousand and $
0
, respectively, of director stock compensation expense, which was determined using the fair value of the stock on the
dates of the awards.
As of
March 31, 2025,
417,863
shares had been awarded under the Amended and Restated LTIP and
231,251
shares were available to be awarded.
The following tables present stock award activity during the three
months ended March 31, 2025 and 2024:
|
March 31, 2025
|
||||
|
(In thousands)
|
||||
|
Outstanding at the beginning of the period
|
|
|||
|
Granted during period
|
|
|||
|
Forfeited during period
|
(
|
)
|
||
|
Vested during period
|
(
|
)
|
||
|
Outstanding at the end of the period
|
|
|||
|
March 31, 2024
|
||||
|
(In thousands)
|
||||
|
Outstanding at the beginning of the period
|
|
|||
|
Granted during period
|
|
|||
|
Forfeited during period
|
|
|||
|
Vested during period
|
(
|
)
|
||
|
Outstanding at the end of the period
|
|
|||
|
Outstanding
|
Exercisable
|
||||||||||||||||||||||
|
Number
Outstanding
|
Weighted Average
Remaining
Contractual Life
|
Weighted
Average
Exercise Price
|
Aggregate
Intrinsic
Value
|
Number
Outstanding
|
Weighted
Average
Exercise Price
|
Aggregate
Intrinsic Value
|
|||||||||||||||||
|
|
|
$
|
|
$
|
|
|
$
|
|
$
|
|
|||||||||||||
T
he Company did
no
t record any
stock-based compensation expense related to stock options during the three months ended March 31, 2025 or March 31, 2024.
NOTE 9 – ESOP Plan
Employees
participate in an ESOP after attaining certain age and service requirements. During 2022, the ESOP purchased
58,369
shares of the
Company’s common stock at an average cost of $
8.57
per share for a total cost of $
500
thousand which was funded with a $
5
million line of credit from
the Company. During 2023, the ESOP purchased
369,953
additional shares of the Company’s common stock at an average cost of $
9.19
per share for a total cost of $
3.4
million which was funded with the line of credit. Any loans or borrowings under the line of credit will be repaid from the Bank’s discretionary contributions to the ESOP, net of dividends paid, over a period of
20
years. Shares of the Company’s common stock purchased by the ESOP are held in a suspense account until released for allocation to participants. When
loan payments are made, shares are allocated to each eligible participant based on the ratio of each such participant’s compensation, as defined in the ESOP, to the total compensation of all eligible plan participants. As the unearned shares are
released from the suspense account, the Company recognizes compensation expense equal to the fair value of the ESOP shares during the periods in which they become committed to be released. To the extent that the fair value of the ESOP shares released
differs from the cost of such shares, the difference is charged or credited to equity as additional paid-in capital. Dividends on allocated shares increase participant accounts. Dividends on unallocated shares will be used to repay the loan. At the
end of employment, participants will receive shares for their vested balance. Compensation expense related to the ESOP was $
50
thousand and
$
47
thousand for the three months ended March 31, 2025 and 2024, respectively.
Shares held by the ESOP
were as follows:
|
March 31, 2025
|
December 31, 2024
|
|||||||
|
(Dollars in thousands)
|
||||||||
|
Allocated to participants
|
|
|
|
|
||||
|
Committed to be released
|
|
|
||||||
|
Suspense shares
|
|
|
||||||
|
Total ESOP shares
|
|
|
||||||
|
Fair value of unearned shares
|
$
|
|
$
|
|
||||
The
value of unearned shares, which are reported as Unearned ESOP shares in the equity section of the consolidated statements of financial condition, was $
4.2
million at both March 31, 2025 and December 31, 2024.
NOTE 10 –
Regulatory Matters
The Bank’s capital requirements are administered by the Office of the Comptroller of the Currency (“OCC”) and involve quantitative measures of assets, liabilities, and
certain off-balance sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by the OCC. Failure to meet capital requirements can
result in regulatory action.
As a result of the Economic Growth, Regulatory Relief, and Consumer Protection Act, the federal banking agencies have developed a “Community Bank Leverage Ratio” (the ratio of a bank’s
tier 1 capital to average total consolidated assets) for financial institutions with assets of less than $10 billion. A “qualifying community bank” that exceeds this ratio will be deemed to be in compliance with all
other capital and leverage requirements, including the capital requirements to be considered “well capitalized” under Prompt Corrective Action statutes. The federal banking agencies have set the Community Bank Leverage
Ratio at 9%.
Actual and required capital amounts and ratios as of the dates indicated are presented below:
|
Actual
|
Minimum Required to Be
Well Capitalized Under
Prompt Corrective Action
Provisions
|
|||||||||||||||
|
Amount
|
Ratio
|
Amount
|
Ratio
|
|||||||||||||
|
(Dollars in thousands)
|
||||||||||||||||
|
March 31
,
2025
:
|
||||||||||||||||
|
Community Bank Leverage Ratio
|
$
|
|
|
% |
$
|
|
|
% | ||||||||
|
December 31
,
2024
:
|
||||||||||||||||
|
Community Bank Leverage Ratio
|
$
|
|
|
%
|
$
|
|
|
% | ||||||||
At March 31, 2025, the Company and the Bank met all the capital adequacy requirements to which they were subject. In addition, the Bank was “well
capitalized” under the regulatory framework for prompt corrective action. Management believes that no conditions or events have occurred since March 31, 2025 that would materially adversely change the Bank’s capital
classifications. From time to time, the Bank may need to raise additional capital to support its further growth and to maintain its “well capitalized” status.
NOTE 11 –
Income Taxes
T
he
Company and its subsidiary are subject to U.S. federal and state income taxes. Income tax expense is the total of the
current year income tax due or refundable and the change in deferred tax assets and liabilities. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date.
Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion, or all, of the deferred tax asset will not be realized.
In assessing the realization of deferred tax assets, management evaluated both positive and negative evidence, including any cumulative losses in the current year and the prior
two years
, the amount of taxes paid in available carry-back years, the forecasts of future income and tax planning strategies.
At March 31, 2025, the
Company maintained a
$
449
thousand valuation allowance on its deferred tax assets because the number of shares sold in the private placements
completed on April 6, 2021 triggered limitations on the use of certain tax attributes under the Section 382 of the federal tax code. The ability to use net operating losses (“NOLs”) to offset future taxable income will
be restricted and these NOLs could expire or otherwise be unavailable. In general, under Section 382 of the Code and corresponding provisions of state law, a corporation that undergoes an “ownership change” is subject
to limitations on its ability to utilize its pre-change NOLs to offset future taxable income. For these purposes, an ownership change generally occurs where the aggregate stock ownership of one or more stockholders or
groups of stockholders who owns at least 5% of a corporation’s stock increases its ownership by more than 50 percentage points over its lowest ownership percentage within a specified testing period.
The Company recorded an income tax benefit of $
692
thousand for the first quarter of 2025, compared to an income tax benefit of $
57
thousand for the first quarter of 2024. The increase in income tax benefit reflected an increase of $
2.3
million in pre-tax loss between the two periods. The effective tax rate was
27.11
% for the first quarter of 2025, compared to
23.75
%
for the first quarter of 2024.
NOTE 12 –
Concentrations
The Bank has a significant concentration of deposits with
five
customers that accounted for approximately
21
% and
18
% of its deposits as
of March
31, 2025 and December 31, 2024, respectively.
The Bank a
lso h
as a significant concentration of short-term borrowings from
one
customer that accounted for
90
% and
88
% of the outstanding balance of securities sold under agreements to repurchase as of
March
31, 2025 and December 31, 2024, respectively.
The Company expects to maintain the relationships with these customers for the foreseeable future.
| 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, 2024. Certain statements herein are forward-looking statements within the
meaning of Section 21E of the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”) and Section 27A of the U.S. Securities Act of 1933, as amended that reflect our current views with respect to future events and financial
performance. Forward-looking statements typically include words such as “expect,” “estimate,” “project,” “budget,” “forecast,” “anticipate,” “intend,” “plan,” “may,” “will,” “could,” “should,” “believes,” “predicts,” “potential,” “continue,”
“poised,” “optimistic,” “prospects,” “ability,” “looking,” “forward,” “invest,” “grow,” “improve,” “deliver” and other similar expressions. These forward-looking statements are subject to risks and uncertainties, which could cause actual future
results to differ materially from historical results or from those anticipated or implied by such statements. Readers should not place undue reliance on these forward-looking statements, which speak only as of their dates or, if no date is
provided, then as of the date of this Form 10-Q. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except to the extent required by law.
Critical Accounting Policies and Estimates
Critical accounting policies are those that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on our
financial condition or results of operations under different assumptions and conditions. This discussion highlights those accounting policies that management considers critical. All accounting policies are important; therefore, you are encouraged
to review each of the policies included in Note 1 “Summary of Significant Accounting Policies” of the Notes to Consolidated Financial Statements in our 2024 Form 10-K to gain a better understanding of how our financial performance is measured and
reported. Management has identified the Company’s critical accounting policies as follows:
Allowance for Credit Losses for Loans
The Company accounts for credit losses on loans in accordance with ASC 326, which requires the Company to record an estimate of expected lifetime credit losses for loans at the
time of origination or acquisition. The ACL is maintained at a level deemed appropriate by management to provide for expected credit losses in the portfolio as of the date of the consolidated statements of financial condition. Estimating expected
credit losses requires management to use relevant forward-looking information, including the use of reasonable and supportable forecasts. The measurement of the ACL is performed by collectively evaluating loans with similar risk characteristics.
The Company measures the ACL for each of its loan segments using the weighted-average remaining maturity (“WARM”) method. The weighted average remaining life, including the effect of estimated prepayments, is calculated for each loan pool on a
quarterly basis. The Company then estimates a loss rate for each pool using both its own historical loss experience and the historical losses of a group of peer institutions. The Company’s ACL model also includes adjustments for qualitative
factors, where appropriate.
Certain loans, such as those that are nonperforming or are considered to be collateral dependent, are deemed to no longer possess risk characteristics similar to other loans in
the loan portfolio, because the specific attributes and risks associated with the loan have likely become unique as the credit quality of the loan deteriorates. As such, these loans may require individual evaluation to determine an appropriate ACL
for the loan. When a loan is individually evaluated, the Company typically measures the expected credit loss for the loan based on a discounted cash flow approach, unless the loan has been deemed collateral dependent in which case the ACL is
determined using estimates of the fair value of the underlying collateral, less estimated selling costs.
Goodwill
The excess of consideration paid over fair value of net assets acquired for acquisitions is recorded as goodwill. Goodwill is not amortized but is tested at least annually for impairment or more
frequently if events occur or circumstances change that indicate impairment may exist. A goodwill impairment test is performed by comparing the fair value of the reporting unit with its carrying value. An impairment charge is recorded for the
amount by which the carrying amount exceeds the reporting unit’s fair value. A weighted average of both the market and income approaches is used in valuing the reporting unit’s fair value. Weightings are assigned to the approaches regarding fair
value and the sensitivity of other weighting scenarios is considered. The market approach incorporates comparable public company information, valuation multiples and consideration of a market control premium along with data related to comparable
observed purchase transactions in the financial services industry. The income approach consists of discounting projected future cash flows, which are derived from internal forecasts and economic expectations for the reporting unit. The significant
inputs and assumptions for the income approach include a discount rate and projected earnings of the Company in future years for which there is inherent uncertainty. The sensitivity of a range of reasonable discount rates based on the current
economic environment is considered.
Overview
Total assets decreased by $65.7 million at March 31, 2025, compared to December 31, 2024, reflecting decreases in cash and cash equivalents of $45.6
million, securities available-for-sale of $17.9 million and FHLB stock of $5.0 million, partially offset by an increase in net loans of $2.4 million.
Loans receivable held for investment, net of the ACL, increased by $2.4 million to $971.2 million at March 31, 2025, compared to $968.9 million at
December 31, 2024.
Deposits increased by $31.1 million, or 4.2%, to $776.5 million at March 31, 2025, from $745.4 million at December 31, 2024. The increase in
deposits was attributable to an increase of $53.4 million in certificates of deposit accounts, partially offset of decreases of $9.6 million in Insured Cash Sweep (“ICS”) deposits, $6.5 million in liquid deposits (demand, interest checking, and
money market accounts), $3.8 million in Certificate of Deposit Registry Service (“CDARS”) deposits, and $2.4 million in savings deposits.
Total borrowings decreased by $93.9 million to $168.2
million at
March
31, 2025
, from $262.1 million at December 31, 2024, primarily due to a $117.5 million decrease in FHLB advances, partially offset by a $14.1 million increase in
securities sold under agreements to repurchase and a $9.4 million increase in secured borrowings associated with participation loan transactions.
For the three months ended March 31, 2025, the Company reported net loss before preferred dividends of $1.9 million compared to net loss of $164 thousand for the
three months ended March 31, 2024.
Net loss attributable to common stockholders was $2.6 million during the first quarter of 2025 after deducting preferred dividends of $750 thousand, compared to net loss attributable to common
stockholders of $164 thousand for the first quarter of 2024.
During the first quarter of 2025, net interest income increased by $521 thousand, or 6.9%, to $8.0 million, compared to the first quarter of 2024
.
The
increase resulted from
lower interest expense on borrowings, due to decreases in the average balance and average cost of borrowings, and an increase in interest and fees on loans receivable, primarily due to an
increase in rates. These increases were partially offset by an increase in interest expense on deposits and decreases in interest income on interest-earning deposits and available-for-sale securities. During the first quarter of 2025,
non-interest expense increased $2.4 million, or 30.6%, compared to the first quarter of 2024, primarily due to a $1.9 million loss incurred from wire fraud, which will result in a gain if recovered. In addition, compensation and benefits expense
increased $1.0 million, which included $122 thousand of severance expense which negatively impacted diluted loss per share by $0.01, partially offset by a $710 thousand decrease in professional services expense. During the first quarter of 2025,
the provision for credit losses increased $429 thousand, from $260 thousand for the first quarter of 2024 to $689 thousand for the first quarter of 2025, primarily due to one new non-accrual loan.
The Company recorded an income tax
benefit of $692 thousand for the first quarter of 2025 and an income tax benefit of $57 thousand for the first quarter of 2024. The increase in tax benefit reflected a decrease of $2.3 million in pre-tax income between the two periods.
Results of Operations
Net Interest Income
Three Months Ended March 31, 2025 Compared to the Three Months Ended March 31, 2024
Net interest income before provision for credit losses for the first quarter of 2025 totaled $8.0 million, representing an increase of $521 thousand, or 6.9%,
from net interest income before provision for credit losses of $7.5 million for the first quarter of 2024.
The increase resulted from
a $2.3 million decrease in interest expense on borrowings, due to
decreases in the average balance and average cost of borrowings. The Company reduced borrowings to improve the net interest margin and to support capacity for future loan growth. The decrease in interest expense was complemented by a $1.6
million increase in interest and fees on loans receivable, primarily due to an increase in rates. These increases were partially offset by a $1.4 million increase in interest expense on deposits, due to increases in rates and the average balance
of deposits, a $1.1 million decrease in interest income on interest-earning deposits due to decreases in rates and the average balance of interest-earning deposits, and an $867 thousand decrease in interest income on available-for-sale securities
due to decreases in rates and the average balance of available-for-sale securities.
The net interest margin increased to 2.70% for the first quarter of 2025 from 2.27% for the first quarter of 2024, due to an
increase in the average rate earned on interest-earnings assets, which increased to 4.82% for the first quarter of 2025 from 4.45% for the first quarter of 2024, and a decrease in the cost of funds, which decreased to 2.
97
% for the first quarter of 2025 from 3.02% for the first quarter of 2024.
The following table sets 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
|
||||||||||||||||||||||||
|
March 31, 2025
|
March 31, 2024
|
|||||||||||||||||||||||
|
(Dollars in thousands)
|
Average Balance
|
Interest
|
Average
Yield/Cost
|
Average Balance
|
Interest
|
Average
Yield/Cost
|
||||||||||||||||||
|
Assets
|
||||||||||||||||||||||||
|
Interest-earning assets:
|
||||||||||||||||||||||||
|
Interest-bearing deposits
|
$
|
28,958
|
$
|
312
|
4.37
|
%
|
$
|
99,103
|
$
|
1,344
|
5.42
|
%
|
||||||||||||
|
Securities
|
196,463
|
1,208
|
2.49
|
%
|
305,615
|
2,075
|
2.72
|
%
|
||||||||||||||||
|
Loans receivable
(1)
|
972,479
|
12,690
|
5.29
|
%
|
909,965
|
11,129
|
4.89
|
%
|
||||||||||||||||
|
FRB and FHLB stock
|
11,188
|
164
|
5.94
|
%
|
13,733
|
245
|
7.14
|
%
|
||||||||||||||||
|
Total interest-earning assets
|
1,209,088
|
$
|
14,374
|
4.82
|
%
|
1,328,416
|
$
|
14,793
|
4.45
|
%
|
||||||||||||||
|
Non-interest-earning assets
|
50,360
|
52,561
|
||||||||||||||||||||||
|
Total assets
|
$
|
1,259,448
|
$
|
1,380,977
|
||||||||||||||||||||
|
Liabilities and Stockholders’ Equity
|
||||||||||||||||||||||||
|
Interest-bearing liabilities:
|
||||||||||||||||||||||||
|
Money market deposits
|
$
|
119,101
|
$
|
257
|
0.88
|
%
|
$
|
125,704
|
$
|
1,444
|
4.59
|
%
|
||||||||||||
|
Savings deposits
|
48,712
|
68
|
0.57
|
%
|
59,056
|
102
|
0.69
|
%
|
||||||||||||||||
|
Interest checking and other demand deposits
|
255,647
|
1,911
|
3.03
|
%
|
227,504
|
143
|
0.25
|
%
|
||||||||||||||||
|
Certificate accounts
|
224,317
|
1,963
|
3.55
|
%
|
163,116
|
1,110
|
2.72
|
%
|
||||||||||||||||
|
Total deposits
|
647,777
|
4,199
|
2.63
|
%
|
575,380
|
2,799
|
1.95
|
%
|
||||||||||||||||
|
FHLB advances
|
149,135
|
1,529
|
4.16
|
%
|
209,299
|
2,598
|
4.97
|
%
|
||||||||||||||||
|
Bank Term Funding Program borrowing
|
–
|
–
|
–
|
%
|
100,000
|
1,203
|
4.81
|
%
|
||||||||||||||||
|
Other borrowings
|
67,275
|
601
|
3.62
|
%
|
77,601
|
669
|
3.45
|
%
|
||||||||||||||||
|
Total borrowings
|
216,410
|
2,130
|
3.99
|
%
|
386,900
|
4,470
|
4.62
|
%
|
||||||||||||||||
|
Total interest-bearing liabilities
|
864,187
|
$
|
6,329
|
2.97
|
%
|
962,280
|
$
|
7,269
|
3.02
|
%
|
||||||||||||||
|
Non-interest-bearing liabilities
|
108,632
|
137,035
|
||||||||||||||||||||||
|
Stockholders’ equity
|
286,629
|
281,662
|
||||||||||||||||||||||
|
Total liabilities and stockholders’ equity
|
$
|
1,259,448
|
$
|
1,380,977
|
||||||||||||||||||||
|
Net interest rate spread
(2)
|
$
|
8,045
|
1.85
|
%
|
$
|
7,524
|
1.43
|
%
|
||||||||||||||||
|
Net interest rate margin
(3)
|
2.70
|
%
|
2.27
|
%
|
||||||||||||||||||||
|
Ratio of interest-earning assets to interest-bearing liabilities
|
139.90
|
%
|
138.05
|
%
|
||||||||||||||||||||
|
(1)
|
Amount includes non-accrual loans.
|
|
(2)
|
Net interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities.
|
|
(3)
|
Net interest rate margin represents net interest income as a percentage of average interest-earning assets.
|
Provision for Credit Losses
For the three months ended March 31, 2025, the Company recorded a provision for credit losses of $689
thousand
, compared to a provision for credit losses of $260 thousand for the three months ended March 31, 2024, primarily due to one new non-accrual loan.
No
loan charge-offs were
recorded during the quarters ended March 31, 2025 or 2024. The allowance for credit losses (“ACL
”) increased to $8.8 million as of
March 31, 2025, compared to $8.1 million as of December 31, 2024. The
Bank had three non-accrual
loans at March 31, 2025
with an aggregate unpaid principal balance of $860 thousand. Credit quality remains strong with non-accrual loans as a percentage of total loans at
0.09% and non-performing assets to total assets of 0.07% despite the addition of non-accrual loans.
Non-interest Expense
Total non-interest expense was $10.2 million for the first quarter of 2025, compared to $7.8 million for the first quarter of 2024, representing an increase of $2.4 million, or 30.6%. The increase
was primarily due to a $1.9 million loss incurred from wire fraud, which will result in a gain if recovered. In addition,
compensation and benefits expense increased $1.0 million, which included $122 thousand in
severance expense, partially offset by a $710 thousand decrease in professional services expense.
The increase in compensation and benefits expense was primarily attributable to the addition of full-time employees during 2024 in various
production and administrative positions as part of the Bank’s efforts to expand its operational capabilities to grow its balance sheet.
The decrease in professional services expense was primarily due to a
third-party firm reviewing certain general ledger account reconciliations, as well as other professional services, during the first quarter of 2024.
Income Taxes
The Company recorded an income tax benefit of $692 thousand for the first quarter of 2025 and income tax benefit of $57 thousand for the first quarter of 2024. The increase in income tax benefit
reflected a decrease of $2.3 million in pre-tax income between the two periods. The effective tax rate was 27.11% for the first quarter of 2025, compared to 23.75% for the first quarter of 2024.
Financial Condition
Total Assets
Total assets decreased by $65.7 million at March 31, 2025, compared to December 31, 2024, reflecting decreases in cash and cash equivalents of
$45.6 million, securities available-for-sale of $17.9 million and FHLB stock of $5.0 million, partially offset by an increase in net loans of $2.4 million.
Securities Available-For-Sale
Securities available-for-sale totaled $185.9 million at March 31, 2025, compared to $203.9 million at December 31, 2024. The $17.9 million decrease in securities
available-for-sale during the three months ended March 31, 2025 was primarily due to maturities and principal paydowns.
The table below presents the carrying amount, weighted average yields and contractual maturities of our securities as of March 31, 2025. The table reflects stated final maturities
and does not reflect scheduled principal payments or expected payoffs.
|
March 31, 2025
|
||||||||||||||||||||||||||||||||||||||||
|
One Year or Less
|
More Than One Year to Five Years
|
More Than Five Years to Ten Years
|
More Than Ten Years
|
Total
|
||||||||||||||||||||||||||||||||||||
|
Carrying
Amount
|
Weighted
Average
Yield
|
Carrying
Amount
|
Weighted
Average
Yield
|
Carrying
Amount
|
Weighted
Average
Yield
|
Carrying
Amount
|
Weighted
Average
Yield
|
Carrying
Amount
|
Weighted
Average
Yield
|
|||||||||||||||||||||||||||||||
|
(Dollars in thousands)
|
||||||||||||||||||||||||||||||||||||||||
|
Available‑for‑sale:
|
||||||||||||||||||||||||||||||||||||||||
|
Federal agency mortgage‑backed securities
|
$
|
27
|
0.25
|
%
|
$
|
1,404
|
1.28
|
%
|
$
|
7,732
|
1.67
|
%
|
$
|
43,168
|
2.59
|
%
|
$
|
52,331
|
2.42
|
%
|
||||||||||||||||||||
|
Federal agency CMO
|
–
|
–
|
311
|
0.92
|
%
|
9,845
|
4.10
|
%
|
9,099
|
3.29
|
%
|
19,255
|
3.67
|
%
|
||||||||||||||||||||||||||
|
Federal agency debt
|
17,462
|
1.47
|
%
|
20,048
|
1.92
|
%
|
3,017
|
4.85
|
%
|
–
|
–
|
40,527
|
1.94
|
%
|
||||||||||||||||||||||||||
|
Municipal bonds
|
–
|
–
|
2,964
|
1.54
|
%
|
–
|
–
|
1,454
|
1.76
|
%
|
4,418
|
1.62
|
%
|
|||||||||||||||||||||||||||
|
U.S. Treasuries
|
60,552
|
2.50
|
%
|
–
|
–
|
–
|
–
|
–
|
–
|
60,552
|
2.50
|
%
|
||||||||||||||||||||||||||||
|
SBA pools
|
–
|
–
|
1,486
|
2.61
|
%
|
–
|
–
|
7,369
|
2.48
|
%
|
8,855
|
2.50
|
%
|
|||||||||||||||||||||||||||
|
Total
|
$
|
78,041
|
2.27
|
%
|
$
|
26,213
|
1.87
|
%
|
$
|
20,594
|
3.30
|
%
|
$
|
61,090
|
2.66
|
%
|
$
|
185,938
|
2.46
|
%
|
||||||||||||||||||||
Loans Receivable Held for Investment
Loans receivable held for investment, net of the ACL, increased by $2.4 million to $971.2 million at March 31, 2025, compared to $968.9 million at
December 31, 2024.
The following table presents loan categories by maturity for the period indicated. Actual repayments historically have, and will likely in the future, differ significantly from
contractual maturities because individual borrowers generally have the right to prepay loans, with or without prepayment penalties.
|
March 31, 2025
|
||||||||||||||||||||
|
One Year or
Less
|
More Than
One Year to
Five Years
|
More Than
Five Years to
15 Years
|
More Than
15 Years
|
Total
|
||||||||||||||||
|
(Dollars in thousands)
|
||||||||||||||||||||
|
Loans receivable held for investment:
|
||||||||||||||||||||
|
Single-family
|
$
|
2,438
|
$
|
8,394
|
$
|
4,551
|
$
|
7,673
|
$
|
23,056
|
||||||||||
|
Multi-family
|
13,427
|
17,106
|
12,436
|
584,334
|
627,303
|
|||||||||||||||
|
Commercial real estate
|
21,657
|
78,465
|
38,580
|
22,354
|
161,056
|
|||||||||||||||
|
Church
|
835
|
2,694
|
5,757
|
–
|
9,286
|
|||||||||||||||
|
Construction
|
44,925
|
38,157
|
994
|
–
|
84,076
|
|||||||||||||||
|
Commercial - other
|
11,115
|
21,561
|
37,367
|
2,064
|
72,107
|
|||||||||||||||
|
SBA loans
|
54
|
338
|
735
|
–
|
1,127
|
|||||||||||||||
|
Consumer
|
125
|
–
|
–
|
–
|
125
|
|||||||||||||||
|
$
|
94,576
|
$
|
166,715
|
$
|
100,420
|
$
|
616,425
|
$
|
978,136
|
|||||||||||
|
Loans maturities after one year with:
|
||||||||||||||||||||
|
Fixed rates
|
||||||||||||||||||||
|
Single-family
|
$
|
8,003
|
$
|
1,526
|
$
|
–
|
$
|
9,529
|
||||||||||||
|
Multi-family
|
13,149
|
8,218
|
–
|
21,367
|
||||||||||||||||
|
Commercial real estate
|
70,890
|
29,057
|
–
|
99,947
|
||||||||||||||||
|
Church
|
2,138
|
–
|
–
|
2,138
|
||||||||||||||||
|
Construction
|
5,582
|
994
|
–
|
6,576
|
||||||||||||||||
|
Commercial - other
|
6,561
|
36,356
|
–
|
42,917
|
||||||||||||||||
|
SBA loans
|
–
|
–
|
–
|
–
|
||||||||||||||||
|
Consumer
|
–
|
–
|
–
|
–
|
||||||||||||||||
|
$
|
106,323
|
$
|
76,151
|
$
|
–
|
$
|
182,474
|
|||||||||||||
|
Variable rates
|
||||||||||||||||||||
|
Single-family
|
$
|
391
|
$
|
3,025
|
$
|
7,673
|
$
|
11,089
|
||||||||||||
|
Multi-family
|
3,957
|
4,218
|
584,334
|
592,509
|
||||||||||||||||
|
Commercial real estate
|
7,575
|
9,523
|
22,354
|
39,452
|
||||||||||||||||
|
Church
|
556
|
5,757
|
–
|
6,313
|
||||||||||||||||
|
Construction
|
32,575
|
–
|
–
|
32,575
|
||||||||||||||||
|
Commercial - other
|
15,000
|
1,011
|
2,064
|
18,075
|
||||||||||||||||
|
SBA loans
|
338
|
735
|
–
|
1,073
|
||||||||||||||||
|
Consumer
|
–
|
–
|
–
|
–
|
||||||||||||||||
|
$
|
60,392
|
$
|
24,269
|
$
|
616,425
|
$
|
701,086
|
|||||||||||||
|
Total
|
$
|
166,715
|
$
|
100,420
|
$
|
616,425
|
$
|
883,560
|
||||||||||||
Certain multi-family loans have adjustable-rate features based on the Secured Overnight Financing Rate but are fixed for the first five years. Our experience has shown that
these loans typically payoff during the first five years and do not reach the adjustable-rate phase. However, in the current high interest rate environment, we have seen more borrowers maintain their loans instead of paying them off due to interest
rate caps which make the adjusted interest rate on their existing loan more desirable than getting a new loan at current interest rates. Multi-family loans in their initial fixed period totaled $593.2 million or 61.2% of our loan portfolio as of
March 31, 2025.
Allowance for Credit Losses
The Company accounts for credit losses on loans in accordance with ASC 326 –
Financial Instruments-Credit Losses
. ASC 326 requires the Company to recognize
estimates for lifetime losses on loans and off-balance sheet loan commitments at the time of origination or acquisition. The recognition of losses at origination or acquisition represents the Company’s best estimate of the lifetime expected credit
loss associated with a loan given the facts and circumstances associated with the particular loan and involves the use of significant management judgment and estimates, which are subject to change based on management’s on-going assessment of the
credit quality of the loan portfolio and changes in economic forecasts used in the model. The Company uses the WARM method when determining estimates for the ACL for each of its portfolio segments.
The weighted
average remaining life, including the effect of estimated prepayments, is calculated for each loan pool on a quarterly basis. The Company then estimates a loss rate for each pool using both its own historical loss experience and the historical
losses of a group of peer institutions during the period from 2004 through the most recent quarter.
Since historical information (such as historical net losses) may not always, by itself, provide a sufficient basis for determining future expected credit losses, the Company
periodically considers the need for qualitative adjustments to the ACL.
The Company has a credit portfolio review process designed to detect problem loans. Problem loans are typically those of a substandard or worse internal risk grade, and may
consist of loans on nonaccrual status, loans that have recently been modified in response to a borrower’s deteriorating financial condition, loans where the likelihood of foreclosure on underlying collateral has increased, collateral dependent
loans, and other loans where concern or doubt over the ultimate collectability of all contractual amounts due has become elevated. Such loans may, in the opinion of management, be deemed to no longer possess risk characteristics similar to other
loans in the loan portfolio because the specific attributes and risks associated with the loan have likely become unique as the credit quality of the loan deteriorates. As such, these loans may require individual evaluation to determine an
appropriate ACL for the loan. When a loan is individually evaluated, the Company typically measures the expected credit loss for the loan based on a discounted cash flow approach, unless the loan has been deemed collateral dependent. The ACL for
collateral dependent loans is determined using estimates of the fair value of the underlying collateral, less estimated selling costs.
The estimation of the appropriate level of the ACL requires significant judgment by management. Although management uses the best information available to make these estimates,
future adjustments to the ACL may be necessary due to economic, operating, regulatory, and other conditions that may extend beyond the Company’s control. Changes in management’s estimates of forecasted net losses could materially change the level
of the ACL. Additionally, various regulatory agencies, as an integral part of their examination process, periodically review the Company’s ACL and credit review process. Such agencies may require the Company to recognize additions to the ACL based
on judgments different from those of management.
For the three months ended March 31, 2025, the Company recorded a provision for credit losses of $689
thousand
, compared to a provision for credit losses of $260 thousand for the three months ended March 31, 2024, primarily due to one new non-accrual loan.
No
loan charge-offs were
recorded during the quarters ended March 31, 2025 or 2024. The ACL
increased to $8.8 million as of
March 31, 2025, compared to $8.1 million as of December 31, 2024. The Bank had three non-accrual
loans
at March 31, 2025
with an unpaid principal balance of $860 thousand.
At March 31, 2025, $600 thousand of individually evaluated loans were evaluated based on the estimated fair value of the underlying collateral and one $522 thousand loan was individually evaluated
using the remaining life approach. These loans had an associated ACL of $720 thousand as of March 31, 2025. The Company had three individually evaluated loans totaling $860 thousand on nonaccrual status at March 31, 2025. At December 31, 2024, one
$264 thousand individually evaluated loan was evaluated based on the estimated fair value of the underlying collateral. This loan had no associated ACL as of December 31, 2024 and was on nonaccrual status.
The Bank had non-accrual
loans of $860 thousand at March 31, 2025. Loan delinquencies for 30 days or more, but less than 59 days, increased to $4.0
million at March 31, 2025, from $0 at December 31, 2024 and loan delinquencies for 60 days or more, but less than 90 days, decreased to $74 thousand at March 31, 2025, from $270 thousand at December 31, 2024. Loans past due greater than 90 days
was $264 thousand at March 31, 2025, compared to $0 at December 31, 2024.
We believe that the ACL is adequate to cover currently expected losses in the loan portfolio as of March 31, 2025, but there can be no assurance that actual losses will not
exceed the estimated amounts. The OCC and the Federal Deposit Insurance Corporation (“FDIC”) periodically review the ACL as an integral part of their examination process. These agencies may require an increase in the ACL based on their judgments of
the information available to them at the time of their examinations.
The following table details our allocation of the ACL to the various categories of loans held for investment and the percentage of loans in each category to total loans at the
dates indicated:
|
March 31, 2025
|
December 31, 2024
|
March 31, 2024
|
||||||||||||||||||||||
|
Amount
|
Percent of
Loans in
Each
Category to
Total
Loans
|
Amount
|
Percent of
Loans in
Each
Category to
Total
Loans
|
Amount
|
Percent of
Loans in
Each
Category to
Total
Loans
|
|||||||||||||||||||
|
(Dollars in thousands)
|
||||||||||||||||||||||||
|
Single-family
|
$
|
188
|
2.38
|
%
|
$
|
196
|
2.42
|
%
|
$
|
298
|
3.02
|
%
|
||||||||||||
|
Multi‑family
|
4,583
|
64.56
|
%
|
4,568
|
64.94
|
%
|
4,325
|
64.43
|
%
|
|||||||||||||||
|
Commercial real estate
|
1,184
|
16.26
|
%
|
1,129
|
16.01
|
%
|
1,109
|
13.37
|
%
|
|||||||||||||||
|
Church
|
51
|
0.96
|
%
|
54
|
0.97
|
%
|
90
|
1.35
|
%
|
|||||||||||||||
|
Construction
|
1,411
|
8.45
|
%
|
1,475
|
8.30
|
%
|
956
|
9.68
|
%
|
|||||||||||||||
|
Commercial
|
1,279
|
7.26
|
%
|
670
|
7.24
|
%
|
722
|
6.81
|
%
|
|||||||||||||||
|
SBA loans
|
78
|
0.12
|
%
|
11
|
0.12
|
%
|
52
|
1.34
|
%
|
|||||||||||||||
|
Consumer
|
–
|
0.01
|
%
|
–
|
–
|
–
|
–
|
|||||||||||||||||
|
Total allowance for loan losses
|
$
|
8,774
|
100.00
|
%
|
$
|
8,103
|
100.00
|
%
|
$
|
7,552
|
100.00
|
%
|
||||||||||||
Total Liabilities
Total liabilities decreased by $65.1 million to $953.2 million at March 31, 2025 from December 31, 2024, primarily due to a
decrease of $117.5 million in FHLB advances, partially offset by a $31.1 million increase in deposits, a $14.2 million increase in securities sold under agreements to repurchase and a $9.4 million increase in secured borrowings associated
with participation loan transactions.
Deposits
Deposits increased by $31.1 million, or 4.2%, to $776.5 million at March 31, 2025, from $745.4 million at December 31, 2024. The increase in deposits was attributable to an increase of $53.4
million in certificates of deposit accounts, partially offset of decreases of $9.6 million in Insured Cash Sweep (“ICS”) deposits (ICS deposits are the Bank’s money
market deposit accounts in excess of FDIC
insured limits whereby the Bank makes reciprocal arrangements for insurance with other banks)
, $6.5 million in liquid deposits (demand, interest checking, and money market accounts), $3.8 million in Certificate of Deposit Registry
Service (“CDARS”) deposits (CDARS deposits are similar to ICS deposits, but involve certificates of deposit, instead of money market accounts), and $2.4 million in savings deposits.
As of March 31, 2025, our uninsured deposits, including deposits from City First Bank and other affiliates, represented 34% of our total deposits, compared to 32%
as of December 31, 2024. We leverage
our long-standing partnership with IntraFi Deposit Solutions to offer deposit insurance for accounts exceeding the FDIC deposit insurance limit of $250,000.
The following table presents the maturity of time deposits as of the dates indicated:
|
Three
Months or Less
|
Three to Six Months
|
Six Months
to One Year
|
Over One Year
|
Total
|
||||||||||||||||
|
(In thousands)
|
||||||||||||||||||||
|
March 31, 2025
|
||||||||||||||||||||
|
Time deposits of $250,000 or less
|
$
|
44,262
|
$
|
46,305
|
$
|
91,894
|
$
|
3,948
|
$
|
186,409
|
||||||||||
|
Time deposits of more than $250,000
|
12,359
|
45,976
|
10,206
|
7,474
|
76,015
|
|||||||||||||||
|
Total
|
$
|
56,621
|
$
|
92,281
|
$
|
102,100
|
$
|
11,422
|
$
|
262,424
|
||||||||||
|
Not covered by deposit insurance
|
$
|
9,109
|
$
|
40,726
|
$
|
7,956
|
$
|
6,473
|
$
|
64,264
|
||||||||||
|
December 31, 2024
|
||||||||||||||||||||
|
Time deposits of $250,000 or less
|
$
|
46,350
|
$
|
37,239
|
$
|
92,028
|
$
|
4,060
|
$
|
179,677
|
||||||||||
|
Time deposits of more than $250,000
|
3,149
|
5,712
|
16,864
|
7,437
|
33,162
|
|||||||||||||||
|
Total
|
$
|
49,499
|
$
|
42,951
|
$
|
108,892
|
$
|
11,497
|
$
|
212,839
|
||||||||||
|
Not covered by deposit insurance
|
$
|
1,399
|
$
|
3,212
|
$
|
12,363
|
$
|
6,437
|
$
|
23,411
|
||||||||||
Borrowings
The Company enters into agreements under which it sells securities subject to an obligation to repurchase the same or similar securities. Under these arrangements, the Company may transfer legal control over the
assets but still retain effective control through an agreement that both entitles and obligates the Company to repurchase the assets. As a result, these repurchase agreements are accounted for as collateralized financing agreements (i.e., secured
borrowings) and not as a sale and subsequent repurchase of securities. The obligation to repurchase the securities is reflected as a liability in the Company’s consolidated statements of financial condition, while the securities underlying the
repurchase agreements remain in the respective investment securities asset accounts. In other words, there is no offsetting or netting of the investment securities assets with the repurchase agreement liabilities. These agreements mature on a
daily basis. As of March 31, 2025 securities sold under agreements to repurchase totaled $80.8 million at an average rate of 3.63%. The fair value of securities pledged totaled $78.6 million as of March 31, 2025. As of December 31, 2024,
securities sold under agreements to repurchase totaled $66.6 million at an average rate of 3.62%. The fair value of securities pledged totaled $83.3 million as of December 31, 2024.
At March 31, 2025 and December 31, 2024, the Company had
outstanding advances from the FHLB totaling $78.0 million and $195.5 million, respectively. The weighted average interest rate was 4.45% and 4.03% as of March 31, 2025 and December 31, 2024, respectively. The weighted average contractual
maturity was less than one month as of both March 31, 2025 and December 31, 2024. The advances were collateralized by loans with an unpaid balance of $521.4 million and pledged securities with a balance of $94.5 million at March 31, 2025 and
collateralized by loans with an unpaid balance of $521.7 million at December 31, 2024. The Company is currently approved by the FHLB of Atlanta to borrow up to 25% of total assets to the extent the Company provides qualifying collateral and
holds sufficient FHLB stock. Based on collateral pledged and FHLB stock held, the Company was eligible to borrow an additional $279.5
million as of March 31, 2025.
The Company has secured borrowings associated with participation loan transactions of $9.4 million as of March 31, 2025.
One relationship accounted for 90% of our balance of securities sold under agreements to repurchase as of March 31, 2025. We expect to maintain this relationship for the
foreseeable future.
On December 27, 2023, the Company borrowed $100.0 million from the Federal Reserve under the BTFP. This borrowing was paid off in December 2024. The interest rate on this borrowing was fixed at
4.84% and the borrowing matured on December 29, 2024. Investment securities with a book value of $107.3 million and a fair value of $98.3 million were pledged as collateral for this borrowing as of December 31, 2023.
In connection with the New Market Tax Credit activities of the Bank, CFC 45 is a partnership whose members include CFNMA and City First New Markets Fund II, LLC. This community
development entity 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 was secured by a Leasehold Deed of Trust that, due to the pass-through, non-recourse structure, was operationally and ultimately for the benefit of Merrill Lynch
rather than CFC 45. Debt service payments received by CFC 45 from the QALICB were passed through to Merrill Lynch in return for which CFC 45 received a servicing fee. The financial statements of CFC 45 are consolidated with those of the Bank and
the Company.
Stockholders’ Equity
Stockholders’ equity was $284.6 million, or 23.0%, of the Company’s total assets, at March 31, 2025, compared to $285.2 million, or 21.9% of the Company’s total
assets at December 31, 2024.
Stockholders’ equity decreased primarily due to a $2.6 million decrease
in retained earnings, partially offset by a $1.7 million increase in accumulated other comprehensive
loss, net of tax. Book value per share was $14.58 at March 31, 2025 and $14.82 at December 31, 2024.
Capital ratios remain strong with a Community Bank Leverage Ratio of 15.24% at March 31, 2025 compared to 13.96% at December 31,2024.
On March 26, 2024, the Company issued 94,413 shares of restricted stock to its officers and employees under the Amended and Restated LTIP. Each restricted stock award was
valued based on the fair value of the stock on the date of the award. All the shares issued to officers and employees vest over periods ranging from 36 months to 60 months.
On April 5, 2024, the Company issued 31,645 shares of restricted stock to an officer under the Amended LTIP.
During May of 2024 and March of 2025, the Company issued 19,832 and 23,232 shares of stock, respectively, to its directors under the LTIP and Amended LIP, which were fully
vested.
On March 24, 2025, the Company issued 88,295 shares of restricted stock to its officers and employees under the Amended and Restated LTIP. Each restricted stock award was
valued based on the fair value of the stock on the date of the award. All the shares issued to officers and employees vest over periods ranging from 36 months to 60 months.
Tangible
book value per common share is a non-GAAP measurement that excludes goodwill and the net unamortized core deposit intangible asset, which were both
originally recorded in connection with the CFBanc merger. The Company uses this non-GAAP financial measure to provide supplemental information regarding the Company’s financial condition and operational performance. A reconciliation between
common book value and tangible book value per common share is shown as follows:
|
Common Equity
Capital
|
Shares
Outstanding
|
Per Share
Amount
|
||||||||||
|
(Dollars in thousands)
|
||||||||||||
|
March 31, 2025:
|
||||||||||||
|
Common book value
|
$
|
134,581
|
9,231,180
|
$
|
14.58
|
|||||||
|
Less:
|
||||||||||||
|
Goodwill
|
25,858
|
|||||||||||
|
Net unamortized core deposit intangible
|
1,696
|
|||||||||||
|
Tangible book value
|
$
|
107,027
|
9,231,180
|
$
|
11.59
|
|||||||
|
December 31, 2024:
|
||||||||||||
|
Common book value
|
$
|
135,157
|
9,120,363
|
$
|
14.82
|
|||||||
|
Less:
|
||||||||||||
|
Goodwill
|
25,858
|
|||||||||||
|
Net unamortized core deposit intangible
|
1,775
|
|||||||||||
|
Tangible book value
|
$
|
107,524
|
9,120,363
|
$
|
11.79
|
|||||||
Liquidity
The objective of liquidity management is to ensure that we have the continuing ability to fund operations and meet our obligations on a timely and cost-effective basis. The
Bank’s sources of funds include deposits, advances from the FHLB and other borrowings, proceeds from the sale of loans and investment securities, and payments of principal and interest on loans and investment securities. The Bank is currently
approved by the FHLB of Atlanta to borrow up to 25% of total assets to the extent the Bank provides qualifying collateral and holds sufficient FHLB stock. Based on FHLB stock held and collateral pledged as of March 31, 2025, the Bank had the
ability to borrow an additional $279.5 million from the FHLB of Atlanta. In addition, the Bank had additional lines of credit of $10.0 million with other financial institutions as of March 31, 2025.
The Bank’s primary uses of funds include originations of loans, withdrawals of and interest payments on deposits, purchases of investment securities, and the payment of
operating expenses. Also, when the Bank has more funds than required for reserve requirements or short-term liquidity needs, the Bank invests in federal funds with the Federal Reserve Bank or in money market accounts with other financial
institutions. The Bank’s liquid assets at March 31, 2025 consisted of $15.8 million in cash and cash equivalents and $462 thousand in securities available-for-sale that were not pledged, compared to $61.4 million in cash and cash equivalents and
$17.6 million in securities available-for-sale that were not pledged at December 31, 2024. Currently, we believe the Bank has sufficient liquidity to support growth over the next twelve months and in the longer term.
The Bank had commitments to fund $1.3 million in loans that were approved but unfunded as of March 31, 2025. In addition, the bank had $3.9 million in unfunded line of credit
loans and $40.0 million in unfunded construction loans as of March 31, 2025.
The Bank has a significant concentration of deposits with five customers that accounted for approximately 21% of its deposits as of March 31, 2025. The Bank also has a
significant concentration of short-term borrowings with one customer that accounted for 90% of the outstanding balance of securities sold under agreements to repurchase as of March 31, 2025. The Bank has long-term relationships with these customers
and expects to maintain its relationships with them for the foreseeable future.
The Company’s liquidity, separate from the Bank, is based primarily on the proceeds from financing transactions, such as the private placement completed in June of 2022 and
previous private placements. The Bank is currently under no prohibition from paying dividends to the Company but is subject to restrictions as to the amount of the dividends based on normal regulatory guidelines.
The Company recorded consolidated net cash inflows from investing activities of $22.3 million during the three months ended March
31, 2025, compared to net cash outflows from investing activities of $23.4 million during the three months ended March 31, 2024. Net cash inflows from investing activities for the three months ended March 31, 2025 were primarily due to principal
paydowns on available-for-sale securities of $20.4 million. Net cash outflows from investing activities during the three months ended March 31, 2024 were primarily due to funding of new loans, net of repayments, of $46.4 million, partially offset
by $23.2 million in proceeds from principal paydowns on available-for-sale securities.
The Company recorded consolidated net cash outflows from financing activities of $63.5 million during the three months ended March
31, 2025, compared to consolidated net cash outflows of $3.0 during the three months ended March 31, 2024. Net cash outflows from financing activities during the three months ended March 31, 2025 were primarily due to repayments of FHLB advances
of $294.0 million, partially offset by proceeds from FHLB advances of $176.5 million, a net increase in deposits of $31.1 million and a net increase in securities sold under agreements to repurchase. Net cash outflows from financing activities
during the three months ended March 31, 2024 were primarily attributable to the repayment of a note of $14.0 million, partially offset by a net increase in deposits of $12.9 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 March 31, 2025 and December 31, 2024, the Bank exceeded all capital adequacy requirements to which
it is subject and meets the qualifications to be considered “well capitalized.” (See Note 10 – Regulatory Matters.)
| ITEM 3. |
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
Not Applicable
| ITEM 4. |
CONTROLS AND PROCEDURES
|
Evaluation of Disclosure Controls and Procedures
An evaluation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as of March 31, 2025 was
carried out under the supervision and with the participation of the Company’s Chief Executive Officer, Chief Financial Officer and other members of the Company’s senior management. Based on the evaluation, management identified a material
weakness related to the Company’s internal control over financial reporting and, as a result, concluded that the Company’s disclosure controls and procedures were ineffective as of March 31, 2025.
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a
material misstatement of the annual or interim financial statements would not be prevented or detected on a timely basis. Management identified the following material weakness in the Company’s internal control over financial reporting:
The Company did not have controls in place to identify unusual or infrequent equity-related con
tracts
entered into which could have a material impact on accounting and financial reporting.
Remediation Plans
Subsequent to the period covered by this Quarterly Report on Form 10-Q for the three months ended March 31, 2025, management has been developing and implementing a
remediation plan to address the material weakness, to include, thorough discussion and review of all new unusual or infrequent equity-related contracts each quarter with documentation of accounting treatment and disclosure with respect to such
transactions that could have a potential impact on the Company’s financial statements.
Changes in Internal Control over Financial Reporting
There have been no changes in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the three months
ended March 31, 2025 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
| Item 1. |
LEGAL PROCEEDINGS
|
None
| Item 1A. |
RISK FACTORS
|
Management is not aware of any material changes to the risk factors that appeared under “Part I, Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K
for the year ended December 31, 2024, other than those additional risks described below. You should carefully consider such risks and the other information in this Quarterly Report on Form 10-Q, any of which could materially and adversely affect
the Company’s business, financial condition, results of operations and stock price. The risks described in this Quarterly Report on Form 10-Q and in the Annual Report on Form 10-K are not the only risks facing the Company. Additional risks and
uncertainties not presently known to management or that management presently believes not to be material may also result in material and adverse effects on the Company’s business, financial condition, and results of operations.
The Company has identified a material weakness in its internal control over financial reporting.
As disclosed in “Part II - Item 4. Controls and Procedures,” of this Quarterly Report on Form 10-Q, management has identified a material weakness in the Company’s
internal control over financial reporting. As a result, management concluded that the Company’s internal control over financial reporting and disclosure controls and procedures were not effective as of March 31, 2025. The Company is working to
remediate the material weakness. However, there can be no assurance that these remediation efforts will be successful. In addition, these remediation efforts may place a burden on management and may result in additional expenses.
The Company cannot assure that additional significant deficiencies or material weaknesses in its internal control over financial reporting will not be identified in
the future. Any failure to maintain or implement required new or improved controls, or any difficulties the Company experiences in their implementation, could result in additional material weaknesses, cause the Company to fail to meet its
periodic SEC reporting obligations or result in material misstatements to its financial statements in future periods, any of which could cause investors or customers to lose confidence in the Company’s reported financial information, a decline in
the trading price of the Company’s common stock or a delisting of the Company’s common stock from the Nasdaq Stock Market.
The Company may not qualify to repurchase its Series C Preferred Stock on favorable terms.
On June 7, 2022, the Company sold shares of its Series C Preferred Stock to the U.S. Treasury for the purchase price of $150 million under the Emergency Capital
Investment Program, or “ECIP.” Under the ECIP program, the Treasury invested in depository institutions that are Community Development Financial Institutions or minority depository institutions (“MDIs”) to encourage lending to small businesses,
minority-owned businesses and consumers in low-income and underserved communities.
Under terms of an ECIP Securities Purchase Option Agreement by between the Company and Treasury, if the Company meets certain conditions, the Company or the
Company’s qualifying designee may repurchase the Series C Preferred Stock, potentially at a substantial discount (the “Repurchase Option”). To be eligible to exercise the Repurchase Option, the Company must, among other things, meet certain
thresholds for “deep impact lending” or “qualified lending” (as defined in the ECIP’s guidelines), comply with the ECIP agreements and rules, continue to qualify as an MDI, and be “well-capitalized” under federal Prompt Corrective Action
guidelines. The earliest possible date by which the Company could exercise the repurchase options (assuming it meets all required conditions) is June 30, 2028. There can be no assurance that the Company will ever satisfy the lending and other
requirements necessary to exercise the Repurchase Option.
| 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
|
| Item 6. |
EXHIBITS
|
|
Exhibit
Number*
|
|
|
Amended and Restated Certificate of Incorporation of Registrant effective as of April 1, 2021 (Exhibit 3.1 to Form 8-K filed by Registrant on April 5, 2021)
|
|
|
Certificate of Amendment to Certificate of Incorporation of Registrant (Exhibit 3.1 to Form 8-K filed by Registrant on November 1, 2023)
|
|
|
Bylaws of Registrant (Exhibit 3.2 to Form 8-K filed by Registrant on August 24, 2020)
|
|
|
Certificate of Designations of Senior Non-Cumulative Perpetual Preferred Stock, Series C (Exhibit 3.1 to Form 8-K filed by Registrant on June 8, 2022)
|
|
|
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
|
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
|
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
|
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
|
101.INS
|
XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
|
|
101.SCH
|
Inline XBRL Taxonomy Extension Schema Document
|
|
101.CAL
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document
|
|
101.DEF
|
Inline XBRL Taxonomy Extension Definitions Linkbase Document
|
|
101.LAB
|
Inline XBRL Taxonomy Extension Label Linkbase Document
|
|
101.PRE
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document
|
|
104
|
Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)
|
| * |
Exhibits followed by a parenthetical reference are incorporated by reference herein from the document filed by the Registrant with the SEC described therein. Except as otherwise indicated, the SEC File No.
for each incorporated document is 000-27464.
|
| ** |
Management contract or compensatory plan or arrangement.
|
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: July 24, 2025
|
By:
|
/s/ Brian Argrett
|
|
Brian Argrett
|
||
|
Chief Executive Officer
|
||
|
Date: July 24, 2025
|
By:
|
/s/ Zack Ibrahim
|
|
Zack Ibrahim
|
||
|
Chief Financial Officer
|
33
TABLE OF CONTENTS
Note 1 Basis Of Financial Statement PresentationNote 2 Loss Per Share and EquityNote 3 SecuritiesNote 4 Loans Receivable Held For InvestmentNote 5 Goodwill and Core Deposit IntangibleNote 6 BorrowingsNote 7 Fair ValueNote 8 Stock-based CompensationNote 9 Esop PlanNote 10 Regulatory MattersNote 11 Income TaxesNote 12 ConcentrationsItem 2. Management S Discussion and Analysis Of Financial Condition and Results Of OperationsItem 3. Quantitative and Qualitative Disclosures About Market RiskItem 4. Controls and ProceduresPart II. Other InformationItem 1. Legal ProceedingsItem 1A. Risk FactorsItem 2. Unregistered Sales Of Equity Securities and Use Of ProceedsItem 3. Defaults Upon Senior SecuritiesItem 4. Mine Safety DisclosuresItem 5. Other InformationItem 6. Exhibits