BROADWAY FINANCIAL CORP \DE\

Previous wording

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.

Current wording

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/A 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,” “potential,” “continue,” “prospects,” “ability,” “looking,” “forward,” “invest,” “grow,” “improve,” “likely” and other similar expressions. These forward-looking statements are subject to risks and uncertainties, which could cause actual future results to differ materially from historical results or from those anticipated or implied by such statements. Readers should not place undue reliance on these forward-looking statements, which speak only as of their dates or, if no date is provided, then as of the date of this Form 10-Q. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except to the extent required by law.

Previous wording

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:

Current wording

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/A 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:

Previous wording

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.

Current wording

Deposits increased by $53.5 million, or 7.2%, to $798.9 million at June 30, 2025, from $745.4 million at December 31, 2024. The increase in deposits was attributable to an increase of $67.7 million in certificates of deposit accounts, partially offset by decreases of $4.5 million in savings deposits, $3.5 million in Certificate of Deposit Registry Service (“CDARS”) deposits, $3.3 million in liquid deposits (demand, interest checking, and money market accounts), and $2.9 million in Insured Cash Sweep (“ICS”) deposits. As of June 30, 2025, our uninsured deposits, including deposits from the Bank and other affiliates, represented 35% of our total deposits, compared to 32% as of December 31, 2024.

Previous wording

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.

Current wording

Net loss attributable to common stockholders was $3.5 million during the first six months of 2025 after deducting preferred dividends of $1.5 million, compared to net income attributable to common stockholders of $34 thousand for the first six months of 2024. Diluted loss per common share was $0.41 for the first six months of 2025, compared to $0.00 of earnings per diluted common share for the first six months of 2024. Diluted loss per common share for the first six months of 2025 reflects preferred dividends of ($0.18) per diluted common share. For the first six months of 2025, the Company reported consolidated net loss before preferred dividends of $1.9 million, a non-GAAP measure, or ($0.23)per diluted share, compared to consolidated net income before preferred dividends of $102 thousand, or $0.01 per diluted share, for the first six months of 2024.

Previous wording

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.

Current wording

The net interest margin increased to 2.58% for the second quarter of 2025 from 2.35% for the second quarter of 2024, due to an increase in the average rate earned on interest-earning assets, which increased to 4.80% for the second quarter of 2025 from 4.73% for the second quarter of 2024, and a decrease in the cost of funds, which decreased to 3.07% for the second quarter of 2025 from 3.26% for the second quarter of 2024.

Previous wording

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 froma $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.

Current wording

Net interest income before provision for credit losses for the first six months of 2025 totaled $15.8 million, representing an increase of $358 thousand, or 2.3%, from net interest income before provision for credit losses of $15.4 million for the first six months of 2024. The increase resulted froma $2.3 million decrease in interest expense due to a decline in interest on borrowings as a result of a decrease in the average balance of borrowings. The Company reduced borrowings to improve the net interest margin and to support capacity for future loan growth. This increase was partially offset by a $1.9 million decrease in interest income, primarily due to a decrease in interest on interest-bearing deposits, as a result of a decrease in the average balance of interest-bearing deposits, as well as a decline in interest income on available-for-sale securities due to a decrease in the average balance of available-for-sale securities.

Previous wording

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.

Current wording

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

Previous wording

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.

Current wording

Non-interest expense was $17.7 million for the first six months of 2025, compared to $15.1 million for the first six months of 2024, representing an increase of $2.6 million, or 17.4%. The increase wasprimarily due to a $1.9 million loss incurred from wire fraud, which resulted in a gain when recovered, as well as an $830 thousand increase in compensation and benefits 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. These increases were partially offset by a $485 thousand decrease in professional services expense.

Previous wording

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.

Current wording

The Company recorded an income tax benefit of $790 thousand for the first six months of 2025, compared to an income tax expense of $85 thousand for the first six months of 2024. The decrease in income tax expense reflected a decrease of $2.9 million in pre-tax income between the two periods. The effective tax rate was 28.87% for the first six months of 2025, compared to 50.00% for the first six months of 2024.

Previous wording

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.

Current wording

Total assets decreased by $87.4 million at June 30, 2025, compared to December 31, 2024, reflecting decreases in cash and cash equivalents of $31.9 million, securities available-for-sale of $25.9 million, loans receivable held for investment, net of the ACL, of $22.9 million and FHLB stock of $5.9 million.

Previous wording

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.

Current wording

Securities available-for-sale totaled $178.0 million at June 30, 2025, compared to $203.9 million at December 31, 2024. The $25.9 million decrease in securities available-for-sale during the six months ended June 30, 2025 was primarily due to maturities and principal paydowns.

Previous wording

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.

Current wording

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 $439.9 million or 44.7% of our loan portfolio as of June 30, 2025.

Previous wording

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. Noloan 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.

Current wording

For the three months ended June 30, 2025, the Company recorded a recapture of credit losses of $454 thousand, compared to a provision for credit losses of $514 thousand for the three months ended June 30, 2024. This decrease was mainly due to the decrease in loans. For the six months ended June 30, 2025, the Company recorded a provision for credit losses of $1.5 million, compared to $761 thousand for the six months ended June 30, 2024. The increase in the provision was the result of changes in the required specific allocations of the ACL. The Bank had four non-accrual loans at June 30, 2025 with an unpaid principal balance of $5.0 million. Credit quality remains strong with non-accrual loans as a percentage of total loans at 0.51% and non-performing assets to total assets of 0.40% despite the increase in non-accrual loans.

Previous wording

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.

Current wording

Loan delinquencies for 30 days or more, but less than 59 days, increased to $1.2 million at June 30, 2025, from $0 at December 31, 2024 and loan delinquencies for 60 days or more, but less than 90 days, increased to $271 thousand at June 30, 2025, from $270 thousand at December 31, 2024. Loans past due greater than 90 days was $4.0 million at June 30, 2025, compared to $0 at December 31, 2024.

Previous wording

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.

Current wording

Total liabilities decreased by $87.1 million to $962.6 million at June 30, 2025 from December 31, 2024, primarily due to a decrease of $136.6 million in borrowings, partially offset by a $53.5 million increase in deposits.

Previous wording

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.

Current wording

Deposits increased by $53.5 million, or 7.2%, to $798.9 million at June 30, 2025, from $745.4 million at December 31, 2024. The increase in deposits was attributable to an increase of $67.7 million in certificates of deposit accounts, partially offset by decreases of $4.5 million in savings deposits, $3.5 million in Certificate of Deposit Registry Service (“CDARS”) deposits, $3.3 million in liquid deposits (demand, interest checking, and money market accounts), and $2.9 million in Insured Cash Sweep (“ICS”) deposits. As of June 30, 2025, our uninsured deposits, including deposits from the Bank and other affiliates, represented 35% of our total deposits, compared to 32% as of December 31, 2024. We leverageour long-standing partnership with IntraFi Deposit Solutions to offer deposit insurance for accounts exceeding the FDIC deposit insurance limit of $250,000.

Previous wording

The following table presents the maturity of time deposits as of the dates indicated:

Current wording

The following table presents the maturity of time deposits, which includes CDARS, as of the dates indicated:

Previous wording

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.

Current wording

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 June 30, 2025 securities sold under agreements to repurchase totaled $63.8 million at an average rate of 5.10%. The fair value of securities pledged for repurchase agreements totaled $69.9 million as of June 30, 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 for repurchase agreements totaled $83.3 million as of December 31, 2024. One relationship accounted for 90% of our balance of securities sold under agreements to repurchase as of June 30, 2025. We expect to maintain this relationship for the foreseeable future.

Previous wording

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.

Current wording

At June 30, 2025 and December 31, 2024, the Company had outstanding advances from the FHLB totaling $60.0 million and $195.5 million, respectively. The weighted average interest rate was 4.38% and 4.03% as of June 30, 2025 and December 31, 2024, respectively. The weighted average contractual maturity was less than one month as of both June 30, 2025 and December 31, 2024. The advances were collateralized by loans with an unpaid balance of $509.0 million at June 30, 2025 and $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 $298.7 million as of June 30, 2025.

Previous wording

The Company has secured borrowings associated with participation loan transactions of $9.4 million as of March 31, 2025.

Current wording

The Company will, from time to time, sell a portion of a loan or group of loans to third parties. In some cases, the transferred portion of the loans does not meet the requirements to be treated as sales for accounting purposes. When that occurs, the legally transferred portion of the loan balance remains classified in gross loans receivable held for investment and a secured borrowing is recorded for the proceeds received from the third party institution. As the transferred portion of the loan pays down, the secured borrowings are repaid. The Company has no obligation to make principal or interest payments on the secured borrowings unless and until payments are received from the loan borrowers. The Company has secured borrowings associated with these participation loan transactions of $30.3 million and $31.4 million as of June 30, 2025 and December 31, 2024, respectively. The weighted average interest rate on the secured borrowings was 5.51% and 5.54% at June 30, 2025 and December 31, 2024, respectively.

Previous wording

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 decreasein 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.

Current wording

Broadway Financial Corporation and subsidiary equity was $284.7 million, or 22.8%, of the Company’s total assets, at June 30, 2025, compared to $285.0 million, or 21.4% of the Company’s total assets, at December 31, 2024. Book value per share was $14.65 at June 30, 2025 and $14.80 at December 31, 2024. Capital ratios remain strong with a Community Bank Leverage Ratio of 15.34% at June 30, 2025 compared to 13.61% at December 31, 2024.

Previous wording

On April 5, 2024, the Company issued 31,645 shares of restricted stock to an officer under the Amended LTIP.

Current wording

On April 5, 2024, the Company issued 31,645 shares of restricted stock to an officer under the Amended and Restated LTIP.

Previous wording

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.

Current wording

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 Amended and Restated LTIP, which were fully vested.

Previous wording

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.

Current wording

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 June 30, 2025, the Bank had the ability to borrow an additional $298.7 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 June 30, 2025.

Previous wording

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.

Current wording

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 June 30, 2025 consisted of $29.5 million in cash and cash equivalents and $95.7 million 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.

Previous wording

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.

Current wording

The Bank had commitments to fund $4.9 million in loans that were approved but unfunded as of June 30, 2025. In addition, the bank had $3.1 million in unfunded line of credit loans and $18.6 million in unfunded construction loans as of June 30, 2025.

Previous wording

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.

Current wording

The Bank has a significant concentration of deposits with six customers that accounted for approximately 25% of its deposits as of June 30, 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 June 30, 2025. The Bank has long-term relationships with these customers and expects to maintain its relationships with them for the foreseeable future.

Previous wording

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.

Current wording

The Company recorded consolidated net cash inflows from investing activities of $56.9 million during the six months ended June 30, 2025, compared to net cash outflows from investing activities of $3.5 million during the six months ended June 30, 2024. Net cash inflows from investing activities for the six months ended June 30, 2025 were primarily due to principal paydowns on available-for-sale securities of $51.4 million and net paydowns of loans of $21.4 million, partially offset by purchases of available-for-sale securities of $21.6. Net cash outflows from investing activities during the six months ended June 30, 2024 were primarily due to funding of new loans, net of repayments, of $59.3 million, partially offset by $56.1 million in proceeds from principal paydowns on available-for-sale securities.

Previous wording

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.

Current wording

The Company recorded consolidated net cash outflows from financing activities of $87.4 million during the six months ended June 30, 2025, compared to consolidated net cash outflows from financing activities of $10.0 during the six months ended June 30, 2024. Net cash outflows from financing activities during the six months ended June 30, 2025 were primarily due to repayments of FHLB borrowings of $512.0 million, partially offset by proceeds from FHLB borrowings of $376.5 million and a net increase in deposits of $53.5 million. Net cash outflows from financing activities during the six months ended June 30, 2024 were primarily attributable to the repayment of a note of $14.0 million.