BROADWAY FINANCIAL CORP \DE\BYFC
BROADWAY FINANCIAL CORP \DE\ Income Taxes Disclosure
Note 14 – Income Taxes
The Company and its subsidiary are subject to U.S. federal and state income taxes. Income tax expense is the total of the current year income tax due or refundable
and the change in deferred tax assets and liabilities. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
The Company adopted the disclosure requirements in ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, on a retrospective basis as of January 1, 2025. The adoption primarily impacted the presentation and disaggregation of the Company’s
income tax disclosures and did not affect the Company’s consolidated financial condition, results of operations, or cash flows.
The components of income tax expense (benefit) from continuing operations consisted of the following:
|
2025
|
2024
|
|||||||
|
(In thousands)
|
||||||||
|
Current
|
||||||||
|
Federal
|
$
|
118
|
$
|
505
|
||||
|
State
|
270 |
504
|
||||||
| Foreign |
– | – | ||||||
|
Deferred
|
||||||||
|
Federal
|
(245
|
)
|
12
|
|||||
|
State
|
195
|
(206
|
)
|
|||||
| Foreign |
– | – | ||||||
|
Total
|
$
|
338
|
$
|
815
|
||||
Income taxes paid, net of refunds received was as follows:
|
2025
|
2024
|
|||||||
|
|
(In thousands)
|
|||||||
|
Federal
|
$
|
–
|
$
|
150
|
||||
|
California
|
215
|
200
|
||||||
|
Washington, D.C.
|
110
|
66
|
||||||
|
Total
|
$
|
325
|
$
|
416
|
||||
Effective tax rates differ from the federal statutory rate of 21%
applied to income before income taxes due to the following:
|
2025
|
2024
|
|||||||||||||||
|
(In thousands)
|
(In thousands) | |||||||||||||||
|
U. S. Federal statutory income tax
|
$
|
(5,139
|
)
|
21.00 | % |
$
|
581
|
21.00 | % | |||||||
|
State and local taxes, net of federal benefit*
|
367 | (1.50 | )% | 211 | 7.62 | % | ||||||||||
|
Nontaxable or nondeductible items
|
||||||||||||||||
|
Earnings from bank owned life insurance
|
(72
|
)
|
0.29 | % |
(10
|
)
|
(0.36 | )% | ||||||||
|
Tax-exempt interest, net of TEFRA disallowance
|
(7
|
)
|
0.03 | % |
(5
|
)
|
(0.18 | )% | ||||||||
|
Goodwill impairment
|
5,430 |
(22.19 | )% | – | 0.00 | % | ||||||||||
|
Stock-based compensation
|
7 | (0.03 | )% | 38 | 1.37 | % | ||||||||||
|
Other, net
|
(248
|
)
|
1.02 | % |
–
|
0.00 | % | |||||||||
|
Effective tax rate
|
$
|
338
|
(1.38 | )% |
$
|
815
|
29.43 | % | ||||||||
|
*
|
State and local taxes in California
and Washington, D.C. made up the majority (greater than 50 percent) of the tax effect in this category.
|
Year‑end deferred tax assets and liabilities were due to the following:
|
2025
|
2024
|
|||||||
|
(In thousands)
|
||||||||
|
Deferred tax assets:
|
||||||||
|
Allowance for credit losses
|
$
|
2,658
|
$
|
2,408
|
||||
|
Accrued liabilities
|
851
|
483
|
||||||
|
State income taxes
|
56
|
108
|
||||||
|
Stock compensation
|
239
|
196
|
||||||
|
Tax loss carryforwards
|
1,900
|
1,880
|
||||||
|
Partnership investment
|
252
|
292
|
||||||
|
General business credit
|
1,007
|
1,544
|
||||||
|
Net unrealized loss on securities available-for-sale
|
2,403 | 4,864 | ||||||
|
Lease liability
|
424 | 127 | ||||||
|
Fair value adjustment on acquired loans
|
27 | 100 | ||||||
|
Other
|
316
|
166
|
||||||
|
Total deferred tax assets
|
10,133
|
12,168
|
||||||
|
Less: valuation allowance
|
(449 | ) | (449 | ) | ||||
|
Total deferred tax assets, net of valuation allowance
|
9,684 | 11,719 | ||||||
|
Deferred tax liabilities:
|
||||||||
|
Deferred loan fees/costs
|
(1,152
|
)
|
(1,273
|
)
|
||||
|
Basis difference on fixed assets
|
(726
|
)
|
(708
|
)
|
||||
|
FHLB stock dividends
|
(1
|
)
|
(54
|
)
|
||||
|
Prepaid expenses
|
(261
|
)
|
(172
|
)
|
||||
|
Right of use assets
|
(421 | ) | (121 | ) | ||||
|
Core deposit intangibles
|
(412 | ) | (511 | ) | ||||
|
Total deferred tax liabilities
|
(2,973
|
)
|
(2,839
|
)
|
||||
|
Net deferred tax assets
|
$
|
6,711
|
$
|
8,880
|
||||
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, the amount of taxes paid in available carry‑back years, and the forecasts of future income and tax planning strategies. Based on this analysis, management determined that, as of December 31, 2025, a
valuation allowance of $449 thousand was required on the Company’s net deferred tax assets, which totaled $6.7 million (net of valuation allowance). As of December 31, 2024, a valuation allowance of $449 thousand was required on the Company’s net deferred tax assets, which totaled $8.9 million (net of valuation allowance).
As of December 31,
2025, the Company had California net operating loss carryforwards of $22.0 million which will begin to expire in 2032 if not
utilized. The Company also had federal general business credits of $1.0 million, which will begin to expire in 2033 if not utilized.
The Company did not have any unrecognized tax benefits as of December 31, 2025 or 2024.
Federal tax years 2022 through 2025 remain open for the assessment of Federal income tax.
California tax years 2021 through 2025 remain open for the assessment of California franchise tax. Washington, D.C. tax years 2022 through 2025 remain open for the assessment of D.C. franchise tax. The Company is not currently under
examination by any tax authorities.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 31, 2026 | Showing above |
| 2024 | Mar 31, 2025 | |
| 2023 | May 20, 2024 | |
| 2022 | Apr 11, 2023 | |
| 2021 | Apr 15, 2022 | |
| 2020 | Mar 31, 2021 | |
| 2019 | Mar 27, 2020 | |
| 2018 | Mar 29, 2019 | |
| 2017 | Mar 26, 2018 | |
| 2016 | Mar 27, 2017 | |
| 2015 | Mar 28, 2016 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.