BYFC Restates Financials, Cites Loan Accounting Error & Control Weaknesses

Ticker: BYFC · Form: 10-K/A · Filed: Dec 23, 2025 · CIK: 1001171

Sentiment: bearish

Topics: Restatement, Accounting Error, Internal Controls, Financial Reporting, Banking Sector, Loan Participation, SEC Filing

Related Tickers: BYFC

TL;DR

**BYFC's restatement due to loan accounting errors and control weaknesses is a red flag, signaling deeper issues than just a balance sheet tweak.**

AI Summary

BROADWAY FINANCIAL CORP (BYFC) filed a 10-K/A Amendment No. 2 on December 23, 2025, to restate its financial statements for fiscal years ended December 31, 2024, and 2023, and interim periods in 2024. The restatement was due to an error in accounting for loan participation agreements, which were incorrectly treated as sales instead of secured borrowing arrangements. This correction resulted in an increase of "Loans Receivable Held for Investment" by $31.1 million for 2024 and $31.2 million for 2023, with a corresponding increase in "Secured Borrowing" liabilities. Interest and fees on loans receivable and interest on borrowings increased by $1.7 million and $1.6 million for 2024 and 2023, respectively. Net income for 2024 decreased by $4 thousand, while for 2023 it increased by $265 thousand, primarily due to adjustments in the Allowance for Credit Losses (ACL) and income taxes. Management also identified material weaknesses in internal control over financial reporting (ICFR) and disclosure controls and procedures (DCPs) as of December 31, 2024, and is implementing a remediation plan.

Why It Matters

This restatement by BROADWAY FINANCIAL CORP (BYFC) signals significant accounting control deficiencies, impacting investor confidence and the reliability of past financial reports. The reclassification of $31.1 million in loan participation agreements from sales to secured borrowings fundamentally alters the balance sheet and income statement, affecting key financial ratios and potentially the company's perceived risk profile. For investors, this raises questions about management oversight and the accuracy of future financial disclosures, especially given the identified material weaknesses in internal controls. Competitively, such errors can erode trust among partners and customers in the banking sector, where financial integrity is paramount.

Risk Assessment

Risk Level: high — The risk level is high due to the restatement of audited financial statements for two fiscal years (2024 and 2023) and multiple interim periods in 2024, stemming from a material error in accounting for loan participation agreements totaling over $31 million. Furthermore, management explicitly identified "material weaknesses in our internal control over financial reporting" and concluded that "disclosure controls and procedures and internal control over financial reporting were not effective as of December 31, 2024." This indicates systemic control failures that could lead to future misstatements.

Analyst Insight

Investors should exercise extreme caution and thoroughly review the restated financials, focusing on the impact on BYFC's leverage and profitability ratios. Given the identified material weaknesses in internal controls, investors should await clear evidence of successful remediation before considering any new investment or increasing existing positions. Monitor future filings closely for updates on the remediation plan and any further accounting adjustments.

Key Numbers

Key Players & Entities

FAQ

Why did Broadway Financial Corporation (BYFC) file a 10-K/A Amendment No. 2?

Broadway Financial Corporation (BYFC) filed this 10-K/A Amendment No. 2 to amend and restate its Annual Report on Form 10-K for the year ended December 31, 2024, and other interim financial statements. This was necessary due to an error in accounting for certain loan participation agreements, which were incorrectly treated as sales instead of secured borrowing arrangements, impacting financial statements for 2024 and 2023.

What was the specific accounting error identified by Broadway Financial Corporation (BYFC)?

The specific accounting error identified by Broadway Financial Corporation (BYFC) was that several loan participation agreements originated by City First Bank and sold to other financial institutions did not meet the requirements in Accounting Standards Codification Topic 860 - Transfers and Servicing to be treated as sales. Consequently, these agreements should have been recorded as secured borrowing arrangements.

How did the restatement impact Broadway Financial Corporation's (BYFC) balance sheet for December 31, 2024?

For December 31, 2024, the restatement increased "Loans Receivable Held for Investment" by $31.1 million and recorded a corresponding "Secured Borrowing" liability for the same amount. This adjustment reflects the reclassification of previously misaccounted loan participation agreements.

What was the effect of the restatement on Broadway Financial Corporation's (BYFC) net income for 2024 and 2023?

The restatement resulted in a $4 thousand decrease in net income for the year ended December 31, 2024. For the year ended December 31, 2023, net income increased by $265 thousand, primarily due to related adjustments in the Allowance for Credit Losses (ACL) and income taxes.

Did Broadway Financial Corporation (BYFC) identify any issues with its internal controls?

Yes, in connection with the restatement, Broadway Financial Corporation (BYFC) management reassessed the effectiveness of its disclosure controls and procedures and identified material weaknesses in its internal control over financial reporting. As a result, the CEO and CFO concluded that these controls were not effective as of December 31, 2024.

What is Broadway Financial Corporation's (BYFC) plan to address the identified material weaknesses?

Broadway Financial Corporation (BYFC) management has taken and is taking additional steps, as described under "Remediation Plan" in Part II, Item 9A of this Form 10-K/A, to remediate these material weaknesses in its internal control over financial reporting. The filing indicates a commitment to resolving these control deficiencies.

What is the primary business of Broadway Financial Corporation (BYFC) and its subsidiary City First Bank?

Broadway Financial Corporation's (BYFC) primary business is the operation of its wholly-owned subsidiary, City First Bank, which attracts deposits and primarily invests in loans secured by multifamily residential properties and commercial real estate. The company also emphasizes its mission to strengthen historically excluded communities.

What was the aggregate market value of Broadway Financial Corporation's (BYFC) common stock held by nonaffiliates as of June 30, 2024?

As of June 30, 2024, the aggregate market value of the voting and nonvoting common stock held by nonaffiliates of Broadway Financial Corporation (BYFC) was $38.1 million. This figure provides insight into the public float of the company's shares.

How many shares of Broadway Financial Corporation's (BYFC) Class A voting common stock were outstanding as of March 21, 2025?

As of March 21, 2025, there were 6,022,227 shares of Broadway Financial Corporation's (BYFC) Class A voting common stock outstanding. This number is adjusted for the 1-for-8 reverse stock split effected on October 31, 2023.

What regulatory bodies oversee Broadway Financial Corporation (BYFC) and City First Bank?

Broadway Financial Corporation (BYFC) is regulated by the Board of Governors of the Federal Reserve System (FRB). Its subsidiary, City First Bank, National Association, is regulated by the Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC).

Risk Factors

Industry Context

Broadway Financial Corporation operates in the banking sector, specifically focusing on community development and serving historically excluded communities. The industry is characterized by increasing regulatory scrutiny, evolving technological demands, and a competitive landscape that includes traditional banks and newer fintech players. The company's mission-driven approach as a public benefit corporation differentiates it, but it must navigate the same economic and interest rate environments as its peers.

Regulatory Implications

The restatement due to accounting errors highlights potential weaknesses in financial reporting controls, which could attract further regulatory attention from bodies like the SEC and banking regulators. Compliance with accounting standards, particularly for complex financial instruments like loan participations, is critical. The identification of material weaknesses in internal controls also necessitates robust remediation plans to satisfy regulatory expectations.

What Investors Should Do

  1. Monitor Remediation Progress
  2. Analyze Impact of Restatement on Trends
  3. Assess Management's Effectiveness
  4. Review Capital Adequacy Post-Restatement

Key Dates

Glossary

Loan Participation Agreements
Agreements where a lender (seller) sells a portion of a loan to another financial institution (buyer). The accounting treatment depends on whether the transfer qualifies as a sale or a secured borrowing. (An error in classifying these agreements as sales instead of secured borrowings led to a restatement of the company's financial statements.)
Secured Borrowing
A loan that is backed by collateral. In this context, loan participations that did not qualify as sales were reclassified as secured borrowings, increasing liabilities. (The restatement involved reclassifying loan participations as secured borrowings, impacting the balance sheet and income statement.)
Allowance for Credit Losses (ACL)
An estimate of the amount of uncollectible loans in a company's loan portfolio. Adjustments to ACL can impact net income. (Adjustments to the ACL were a factor in the net income changes resulting from the restatement.)
Internal Control Over Financial Reporting (ICFR)
A process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. (Material weaknesses were identified in the company's ICFR, necessitating a restatement and remediation efforts.)
Public Benefit Corporation
A type of for-profit corporate entity that includes promoting a positive impact (social, environmental, etc.) alongside profit as its legally defined goals. (Broadway Financial Corporation converted to a public benefit corporation, aligning its business model with equitable economic development for underserved communities.)
Reverse Stock Split
A corporate action to reduce the number of outstanding shares of stock by consolidating them. This typically increases the per-share market price. (The company executed a 1-for-8 reverse stock split on October 31, 2023, which has been retroactively applied to historical share amounts.)

Year-Over-Year Comparison

This 10-K/A filing amends the original 2024 10-K due to a significant accounting error related to loan participation agreements. This restatement increased 'Loans Receivable Held for Investment' by $31.1 million for 2024 and $31.2 million for 2023, while also increasing 'Secured Borrowing' liabilities. The net income impact was a decrease of $4 thousand for 2024 and an increase of $265 thousand for 2023. Furthermore, material weaknesses in internal controls were identified as of December 31, 2024, which were not detailed in the original filing.

Filing Stats: 4,555 words · 18 min read · ~15 pages · Grade level 13.3 · Accepted 2025-12-23 17:22:47

Key Financial Figures

Filing Documents

Business

Business 1 Item 1A.

Risk Factors

Risk Factors 21 Item 1B. Unresolved Staff Comments 26 Item 1C. Cybersecurity 26 Item 2.

Properties

Properties 27 Item 3.

Legal Proceedings

Legal Proceedings 28 Item 4. Mine Safety Disclosure 28 PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 28 Item 6. Reserved 29 Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations 29 Item 7A.

Quantitative and Qualitative Disclosures About Market Risk

Quantitative and Qualitative Disclosures About Market Risk 39 Item 8.

Financial Statements and Supplementary Data

Financial Statements and Supplementary Data 39 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 39 Item 9A.

Controls and Procedures

Controls and Procedures 39 Item 9B. Other Information 40 Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 40 PART III Item 10. Directors, Executive Officers and Corporate Governance 41 Item 11.

Executive Compensation

Executive Compensation 41 Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 41 Item 13. Certain Relationships and Related Transactions, and Director Independence 41 Item 14. Principal Accountant Fees and Services 41 PART IV Item 15. Exhibits and Financial Statement Schedules 41 Item 16. Form 10-K/A Summary 43

Signatures

Signatures 44 Table of Contents ForwardLooking Statements Certain statements herein, including without limitation, certain matters discussed under "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of this Form 10K, are forwardlooking statements, within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and Section 27A of the Securities Act of 1933, as amended, that reflect our current views with respect to future events and financial performance. Forwardlooking statements typically include the words "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 similar expressions, but the absence of such words or expressions does not mean a statement is not forward-looking. These forwardlooking statements are subject to risks and uncertainties, including those identified below, 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 forwardlooking statements, which speak only as of their dates or, if no date is provided, then as of the date of this Form 10K. We undertake no obligation to update or revise any forwardlooking statements, whether as a result of new information, future events or otherwise, except to the extent required by law. The following factors, among others, could cause future results to differ materially from historical results or from those indicated by forwardlooking statements included in this Form 10K: (1) the level of demand for mortgage and commercial loans, which is affected by such external factors as general economic conditions, market interest rate levels, tax laws and the demog

"Management's Discussion and Analysis of Financial Condition and Results of Operations."

Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations." Table of Contents EXPLANATORY NOTE Broadway Financial Corporation (the "Company") is filing this Amendment No. 2 on Form 10-K/A (this "Form 10-K/A") to amend and restate certain information included in the Company's Annual Report on Form 10-K for the year ended December 31, 2024, filed with the Securities and Exchange Commission ("SEC") on March 31, 2025 (the "Original Form 10-K"), as amended by Amendment No. 1 on Form 10-K/A filed with the SEC on April 30, 2025. As disclosed in the Company's Current Report on Form 8-K filed with the SEC on October 17, 2025, the Company's management, with oversight of the Audit Committee of the Board of Directors of the Company, the holding company of City First Bank, National Association ("City First Bank"), concluded that the Company's audited consolidated financial statements for the fiscal years ended December 31, 2024 and 2023, and the unaudited interim consolidated financial statements for the quarters ended March 31, 2024, June 30, 2024, and September 30, 2024 (collectively, the "Restated Periods"), each as previously filed with the SEC, should no longer be relied upon because of an error related to certain loan participation agreements and should therefore be restated. Specifically, the Company determined that several loan participation agreements originated by City First Bank and sold to other financial institutions did not meet the requirements in Accounting Standards Codification Topic 860 - Transfers and Servicing to be treated as sales for accounting purposes, and therefore should have been recorded as secured borrowing arrangements. The related adjustment to the consolidated statements of financial condition for treating such transferred interests as secured borrowing arrangements as of December 31, 2024 and December 31, 2023, is to increase "Loans Receivable Held for Investment" by $31.1 million and $31.2 million, res

, Item 1. Business

Part I, Item 1. Business

, Item 1A. Risk Factors

Part I, Item 1A. Risk Factors

, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

, Item 8. Financial Statements and Supplementary Data

Part II, Item 8. Financial Statements and Supplementary Data

, Item 9A. Controls and Procedures

Part II, Item 9A. Controls and Procedures

, Item 15. Exhibits and Financial Statement Schedules

Part IV, Item 15. Exhibits and Financial Statement Schedules Table of Contents The exhibit list included in Part IV, Item 15 "Exhibits and Financial Statement Schedules" herein has been amended to contain currently dated certifications from the Company's Chief Executive Officer and Chief Financial Officer, as required by Sections 302 and 906 of the Sarbanes-Oxley Act of 2002, as well as updated Consent of Independent Registered Public Accounting Firm. In accordance with applicable SEC rules, this Form 10-K/A also includes an updated signature page and Report of Independent Registered Public Accounting Firm. Except as expressly provided herein, this Form 10-K/A speaks only as of the date the Original Form 10-K was filed, and we have not undertaken herein to amend, supplement or update any information contained in the Original Form 10-K to give effect to any subsequent events. Among other things, forward-looking statements made in the Original Form 10-K have not been revised to reflect events, results or developments that occurred or facts that became known to us after the date of the Original Form 10-K. Accordingly, this Form 10-K/A should be read in conjunction with our filings made with the SEC subsequent to the filing of the Original Form 10-K. Internal Control Considerations In connection with the restatement noted above, management has reassessed the effectiveness of our disclosure controls and procedures and has included applicable disclosure in Part II, Item 9A of this Form 10-K/A, "Controls and Procedures." Management identified material weaknesses in our internal control over financial reporting as described under "Management's Report on Internal Control over Financial Reporting" in Part II, Item 9A of this Form 10-K/A, resulting in the conclusion by our Chief Executive Officer and Chief Financial Officer that our disclosure controls and procedures and internal control over financial reporting were not effective as of December 31, 2024. Management has

BUSINESS

BUSINESS General Broadway Financial Corporation (the "Company") was incorporated under Delaware law in 1995 for the purpose of acquiring and holding all of the outstanding capital stock of Broadway Federal Savings and Loan Association as part of the bank's conversion from a federally chartered mutual savings association to a federally chartered stock savings bank. In connection with the conversion, the bank's name was changed to Broadway Federal Bank, f.s.b. ("Broadway Federal"). The conversion was completed, and Broadway Federal became a whollyowned subsidiary of the Company, in January 1996. On April 1, 2021, the Company completed its merger (the "Merger") with CFBanc Corporation ("CFBanc"), with the Company continuing as the surviving entity. Immediately following the Merger, Broadway Federal merged with and into City First Bank of D.C, National Association with City First Bank of D.C., National Association continuing as the surviving entity (combined with Broadway Federal, "City First" or the "Bank"). Concurrently with the Merger, the Bank changed its name to City First Bank, National Association. Concurrently with the completion of the Merger, the Company converted to become a public benefit corporation. The Company works to spur equitable economic development with a mission to strengthen the overall well-being of historically excluded communities and has deployed loans and investments in the communities we serve that we believe has helped close funding gaps, preserved or increased access to affordable housing, created and preserved jobs, and expanded critical social services. We believe our status as a Delaware public benefit corporation aligns our business model of creating social, economic, and environmental value for underserved communities with a stakeholder governance model that allows us to give careful consideration to the impact of our decisions on workers, customers, suppliers, community, the environment, and our impact on society; and to align fu

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