10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2013

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

For transition period from__________ to___________

Commission file number      000-27464

BROADWAY FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	95-4547287
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

5055 Wilshire Boulevard, Suite 500 Los Angeles, California	90036
(Address of principal executive offices)	(Zip Code)

(323) 634-1700

(Registrant’s telephone number, including area code)

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 [ X ]   No [   ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes [ X ]  No [   ]

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

Large Accelerated Filer [   ]   Accelerated Filer [   ]   Non-Accelerated Filer [   ]   Smaller Reporting Company [ X]

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

Yes [   ]   No [ X]

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:  1,917,422 shares of the Company’s Common Stock, par value $0.01 per share, were outstanding as of August 5, 2013.

TABLE OF CONTENTS
			Page
PART I.	FINANCIAL INFORMATION
	Item 1.	Financial Statements
		Consolidated Statements of Financial Condition as of June 30, 2013 (unaudited) and December 31, 2012	1
		Consolidated Statements of Operations and Comprehensive Income (Loss) (unaudited) for the three and six months ended June 30, 2013 and 2012	2
		Consolidated Statements of Cash Flows (unaudited) for the six months ended June 30, 2013 and 2012	3
		Notes to Unaudited Consolidated Financial Statements	4
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	39
	Item 4.	Controls and Procedures	39
PART II.	OTHER INFORMATION
	Item 1.	Legal Proceedings	40
	Item 1A.	Risk Factors	40
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	40
	Item 3.	Defaults Upon Senior Securities	40
	Item 4.	Mine Safety Disclosures	40
	Item 5.	Other Information	40
	Item 6.	Exhibits	40
	Signatures		42
	Ex 31.1	Section 302 Certification of CEO
	Ex 31.2	Section 302 Certification of CFO
	Ex 32.1	Section 906 Certification of CEO
	Ex 32.2	Section 906 Certification of CFO

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARIES

Consolidated Statements of Financial Condition

	June 30, 2013		December 31, 2012
	(Unaudited)
Assets	(In thousands, except share and per share amounts)
Cash	$	15,188	$	13,420
Federal funds sold	59,280		50,940
Cash and cash equivalents	74,468		64,360
Securities available-for-sale, at fair value	11,117		13,378
Loans receivable held for sale, at lower of cost or fair value	9,126		19,051
Loans receivable held for investment, net of allowance of $10,579 and $11,869	225,391		251,723
Accrued interest receivable	1,141		1,250
Federal Home Loan Bank (FHLB) stock	3,737		3,901
Office properties and equipment, net	2,692		2,617
Real estate owned (REO)	6,227		8,163
Bank owned life insurance	2,722		2,688
Investment in affordable housing limited partnership	1,418		1,528
Other assets	7,160		5,034
Total assets	$	345,199	$	373,693
Liabilities and shareholders’ equity
Liabilities:
Deposits	$	229,365	$	257,071
FHLB advances	79,500		79,500
Junior subordinated debentures	6,000		6,000
Other borrowings	5,000		5,000
Accrued interest payable	2,308		1,941
Dividends payable	2,554		2,104
Advance payments by borrowers for taxes and insurance	552		711
Other liabilities	3,331		3,359
Total liabilities	328,610		355,686
Shareholders’ Equity:
Senior preferred cumulative and non-voting stock, $.01 par value, authorized, issued and outstanding 9,000 shares of Series D at June 30, 2013 and December 31, 2012; liquidation preference of $10,532 at June 30, 2013 and $10,262 at December 31, 2012	8,963		8,963
Senior preferred cumulative and non-voting stock, $.01 par value, authorized, issued and outstanding 6,000 shares of Series E at June 30, 2013 and December 31, 2012; liquidation preference of $7,022 at June 30, 2013 and $6,842 at December 31, 2012	5,974		5,974
Preferred non-cumulative and non-voting stock, $.01 par value, authorized 985,000 shares; issued and outstanding 55,199 shares of Series A, 100,000 shares of Series B and 76,950 shares of Series C at June 30, 2013 and December 31, 2012; liquidation preference of $552 for Series A, $1,000 for Series B and $1,000 for Series C at June 30, 2013 and December 31, 2012	2,457		2,457
Preferred stock discount	(396)		(598)
Common stock, $.01 par value, authorized 8,000,000 shares at June 30, 2013 and December 31, 2012; issued 2,013,942 shares at June 30, 2013 and December 31, 2012; outstanding 1,917,422 shares at June 30, 2013 and December 31, 2012	20		20
Additional paid-in capital	10,117		10,095
Accumulated deficit	(9,484)		(7,988)
Accumulated other comprehensive income, net of taxes of $400 at June 30, 2013 and December 31, 2012	172		318
Treasury stock-at cost, 96,520 shares at June 30, 2013 and December 31, 2012	(1,234)		(1,234)
Total shareholders’ equity	16,589		18,007
Total liabilities and shareholders’ equity	$	345,199	$	373,693

See accompanying notes to unaudited consolidated financial statements.

1

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARIES

Consolidated Statements of Operations and Comprehensive Income (Loss)

(Unaudited)

	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
	(In thousands, except per share)
Interest income:
Interest and fees on loans receivable	$	3,896	$	5,030	$	7,783	$	10,360
Interest on mortgage backed and other securities	80		135		169		283
Other interest income	86		20		134		36
Total interest income	4,062		5,185		8,086		10,679
Interest expense:
Interest on deposits	582		880		1,206		1,855
Interest on borrowings	712		815		1,424		1,648
Total interest expense	1,294		1,695		2,630		3,503
Net interest income before provision for loan losses	2,768		3,490		5,456		7,176
Provision for loan losses	-		102		-		1,061
Net interest income after provision for loan losses	2,768		3,388		5,456		6,115
Non-interest income:
Service charges	129		147		271		292
Loan servicing fees, net	4		4		10		(162)
Net gains on sales of loans	81		-		97		-
Net gains (losses) on sales of REO	(10)		(17)		(2)		395
Gain on sale of office properties and equipment	-		2,523		-		2,523
Gain on sale of securities	-		50		-		50
Other	50		17		99		49
Total non-interest income	254		2,724		475		3,147
Non-interest expense:
Compensation and benefits	1,495		1,538		2,949		3,127
Occupancy expense, net	323		297		663		584
Information services	206		239		423		452
Professional services	151		176		333		284
Provision for (recapture of) losses on loans held for sale	(2)		188		468		186
Provision for losses on REO	223		331		223		312
FDIC insurance	190		216		392		433
Office services and supplies	116		108		221		217
Other	547		550		1,097		969
Total non-interest expense	3,249		3,643		6,769		6,564
Income (loss) before income taxes	(227)		2,469		(838)		2,698
Income tax expense	1		772		6		847
Net income (loss)	$	(228)	$	1,697	$	(844)	$	1,851
Other comprehensive income (loss), net of tax:
Unrealized loss on securities available for sale	$	(128)	$	(86)	$	(146)	$	(79)
Reclassification of net gains included in net earnings	-		(50)		-		(50)
Income tax effect	-		-		-		-
Other comprehensive income (loss), net of tax	(128)		(136)		(146)		(129)
Comprehensive income (loss)	$	(356)	$	1,561	$	(990)	$	1,722
Net income (loss)	$	(228)	$	1,697	$	(844)	$	1,851
Dividends and discount accretion on preferred stock	(337)		(285)		(652)		(571)
Income (loss) available to common shareholders	$	(565)	$	1,412	$	(1,496)	$	1,280
Earnings (loss) per common share-basic	$	(0.29)	$	0.81	$	(0.78)	$	0.73
Earnings (loss) per common share-diluted	$	(0.29)	$	0.81	$	(0.78)	$	0.73
Dividends declared per share-common stock	$	0.00	$	0.00	$	0.00	$	0.00

See accompanying notes to unaudited consolidated financial statements.

2

 BROADWAY FINANCIAL CORPORATION AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(Unaudited)

	Six Months Ended June 30,
	2013		2012
	(In thousands)
Cash flows from operating activities:
Net income (loss)	$	(844)	$	1,851
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Provision for loan losses	-		1,061
Provision for losses on loans receivable held for sale	468		186
Provision for losses on REO	223		312
Depreciation	106		149
Net amortization of deferred loan origination costs	125		58
Net amortization of premiums on mortgage-backed securities	19		31
Amortization of investment in affordable housing limited partnership	110		89
Stock-based compensation expense	22		40
Earnings on bank owned life insurance	(34)		(40)
Net (gains) losses on sales of REO	2		(395)
Net gains on sales of loans	(97)		-
Gain on sale of office properties and equipment	-		(2,523)
Gain on sale of securities	-		(50)
Net change in accrued interest receivable	109		222
Net change in deferred tax assets	-		850
Net change in other assets	1,048		(77)
Net change in accrued interest payable	367		362
Net change in other liabilities	(28)		(183)
Net cash provided by operating activities	1,596		1,943
Cash flows from investing activities:
Net change in loans receivable held for investment	15,277		23,626
Proceeds from sales of loans receivable held for sale	15,502		-
Principal repayments on loans receivable held for sale	226		223
Available-for-sale securities:
Sales	-		1,050
Maturities, prepayments and calls	2,096		2,114
Proceeds from sales of REO	3,293		5,914
Net redemption of Federal Home Loan Bank stock	164		188
Proceeds from sale of office properties and equipment	-		4,237
Additions to office properties and equipment	(181)		(9)
Net cash provided by investing activities	36,377		37,343
Cash flows from financing activities:
Net change in deposits	(27,706)		(24,639)
Proceeds from FHLB advances	28,000		13,500
Repayments on FHLB advances	(28,000)		(13,500)
Net change in advance payments by borrowers for taxes and insurance	(159)		(108)
Net cash used in financing activities	(27,865)		(24,747)
Net change in cash and cash equivalents	10,108		14,539
Cash and cash equivalents at beginning of period	64,360		31,597
Cash and cash equivalents at end of period	$	74,468	$	46,136
Supplemental disclosures of cash flow information:
Cash paid for interest	$	2,263	$	3,142
Cash paid for income taxes	$	4	$	-
Supplemental disclosures of non-cash investing and financing activities:
Transfers of loans receivable held for investment to other assets	$	3,174	$	-
Transfers of loans receivable held for investment to REO	$	1,582	$	2,662
Transfers of loans receivable from loans receivable held for investment to loans receivable held for sale	$	6,174	$	-

See accompanying notes to unaudited consolidated financial statements.

3

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

June 30, 2013

NOTE (1) – Basis of Financial Statement Presentation

The accompanying unaudited consolidated financial statements include Broadway Financial Corporation (the “Company”) and its wholly owned subsidiary, Broadway Federal Bank, f.s.b. (the “Bank”).  Also included in the unaudited consolidated financial statements is Broadway Service Corporation, a wholly owned subsidiary of the Bank.  All significant intercompany balances and transactions have been eliminated in consolidation.

The unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions for quarterly reports on Form 10-Q. These unaudited consolidated financial statements do not include all disclosures associated with the Company’s consolidated annual financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2012 and, accordingly, should be read in conjunction with such audited consolidated financial statements.  In the opinion of management, all adjustments (all of which are normal and recurring in nature) considered necessary for a fair presentation have been included.  Operating results for the three and six months ended June 30, 2013 are not necessarily indicative of the results that may be expected for the year ending December 31, 2013.

Some items in the consolidated financial statements for the prior period were reclassified to conform to the current presentation. Reclassifications had no effect on prior period consolidated net earnings or shareholders’ equity.

NOTE (2) – Going Concern, Regulatory Matters and Management’s Plan for Recapitalization of the Company

Going Concern

The Company’s financial statements have been prepared assuming that the Company will continue as a going-concern, which contemplates continuity of operations, and realization of assets and liquidation of liabilities in the ordinary course of business.  The ability of the Company to continue as a going concern is dependent on many factors, one of which is regulatory action, including acceptance of its capital plan. The following discussion describes matters that raise substantial doubt about the Company’s ability to continue as a going concern as well as management’s plans for responding to these matters.

Holding Company Liquidity

The Company has a tax sharing liability to the Bank which, together with other operating expenses, exceeds operating cash at the Company level. The Company used its cash available at the holding company level to pay a substantial portion of this liability pursuant to the terms of the Tax Allocation Agreement between the Bank and the Company on March 30, 2012 and does not have cash available to pay its operating expenses.  Additionally, the Company is deferring interest payments on its $6.0 million aggregate principal amount of Floating Rate Junior Subordinated Debentures that mature in March 17, 2014, and is in default under the terms of a $5.0 million line of credit with another financial institution lender (see Note 7).

The Company’s principal source of funds for the payment of operating expenses, as well as for the declaration and payment of dividends, is dividends received from the Bank. The Office of the Comptroller of the Currency (“OCC”) regulations limit the amount of dividends that may be paid by the Bank without prior approval of the OCC.  Under these regulations, the amount of dividends that may be paid in any calendar year is limited to the current year’s net profits, combined with the retained net profits of the preceding two years, subject to compliance with the capital requirements described below.  Based on the above limitation and further regulatory restrictions on dividends described below, the Bank may not declare dividends during the year 2013 without OCC approval, and such approval is not likely to be given.  Accordingly, the Company will not be able to meet its payment obligations noted above within the foreseeable future unless the Company is able to secure new capital.

4

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (continued)

June 30, 2013

Regulatory Matters

As a result of significant deficiencies in the Company’s and the Bank’s operations noted in a regulatory examination, the Company and the Bank were declared to be in “troubled condition” and entered into cease and desist orders (the “Orders”) issued by the OCC’s regulatory predecessor effective September 9, 2010,  requiring, among other things, that the Company and the Bank take remedial actions to improve the Bank’s loan underwriting and internal asset review procedures, to reduce the amount of its non-performing assets and to improve other aspects of the Bank’s business, as well as the Company’s management of its business and the oversight of the Company’s business by the Board.  Furthermore, the Orders, which are now administered by the OCC with respect to the Bank and the Board of Governors of the Federal Reserve System (“FRB”) with respect to the Company,  require the Bank to attain, and thereafter maintain, a Tier 1 (Core) Capital to Adjusted Total Assets ratio of at least 8% and a Total Risk-Based Capital to Risk-Weighted Assets ratio of at least 12%, both of which ratios are greater than the respective 5% and 10% levels for such ratios that are generally required under OCC regulations.

Additionally, the Orders issued by the OTS have imposed certain limitations on the Company and the Bank.  These limitations include the following, among others:

·The Bank may not increase its total assets during any quarter in excess of an amount equal to the net interest credited on deposit liabilities during the prior quarter without the prior written notice to and receipt of notice of non-objection from the OCC.

·Neither the Company nor the Bank may declare or pay any dividends or make any other capital distributions without the prior written approval of the FRB and the OCC.

·Neither the Company nor the Bank may make any changes in its directors or senior executive officers without prior notice to and receipt of notice of non-objection from the FRB and the OCC.

·The Company and the Bank are subject to limitations on severance and indemnification payments and on entering into or amending employment agreements and compensation arrangements, and on the payment of bonuses to Bank directors and officers.

·The Company may not incur, issue, renew, repurchase, make payments on or increase any debt or redeem any capital stock without prior notice to and receipt of written notice of non-objection from the FRB.

·The Bank is not permitted to increase the amount of its brokered deposits beyond the amount of interest credited without prior notice to and receipt of notice of non-objection from the OCC.

The Orders require the submission of a capital plan that is acceptable to the FRB and the OCC.  The capital plan of the Company and the Bank has been preliminarily approved by the FRB and OCC subject to the successful completion of the Company’s recapitalization plan described below.

Management’s Plans for Recapitalization of the Company and the Bank

Management’s plan to address the conditions described above is to raise additional equity capital for the Company and exchange senior securities for common equity.  The Company’s ability to continue as a going concern is dependent on the timely implementation and success of this plan.  There can be no assurance that management’s plan will be achieved.

Management of the Company is pursuing a comprehensive recapitalization plan to strengthen and simplify the Company’s capital structure.  To date, the Company has entered into a written agreement with the U.S. Department of the Treasury pursuant to which the U.S. Treasury will exchange its holdings of the Company’s Series D and Series E Fixed Rate Cumulative Perpetual Preferred Stock for common stock (or initially common stock equivalents) at a discount of 50% of the liquidation amount, plus an undiscounted exchange of the accumulated but unpaid dividends on such preferred stock, for common stock (or initially common stock equivalents).  The exchange by the U.S. Treasury is subject to various conditions, including the exchange of the Company’s other outstanding series of preferred stock at discounts of 50% of the aggregate liquidation values, the placement of at least $5 million of new common equity capital, and other conditions.  The exchange by the U.S. Treasury is expected to close contemporaneously with the closing of separate placements of common stock and the exchange transactions with the holders of each of the other series of the Company’s preferred stock.  In addition, the Company has entered into a written agreement with the holder of its Series A Perpetual Preferred Stock pursuant to which the holder will exchange its holdings of Series A Preferred for common stock (or initially common stock equivalents) at a discount of 50% of the liquidation amount.  This exchange is subject to various conditions, including the exchange of the Company’s other outstanding series of preferred stock, the placement of new common equity capital, and other conditions.

5

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (continued)

June 30, 2013

The Company has reached agreements in principle with the holders of its Series B Perpetual Preferred Stock and Series C Noncumulative Perpetual Convertible Preferred Stock to exchange their holdings for common stock (or initially common stock equivalents) at a discount of 50% of the liquidation amount.  Also, the Company has reached agreements in principle with its senior lender, pursuant to which the lender will exchange a portion of the line of credit, which is currently in default, for common stock (or initially equivalents) at 100% of the face amount to be exchanged; forgive the accrued interest on the entire amount of the line of credit to the date of the exchange; and enter into a modified credit agreement for the remainder of the existing loan that would be outstanding after the exchange.  As presently contemplated, the series of transactions related to the exchange of a portion of the existing loan will reduce the Company’s senior debt by approximately $2.5 million and eliminate the accrued interest on the line of credit, which totaled $1.7 million at August 1, 2013.

As a condition to consummating these exchanges, the Company plans to concurrently complete private placements of the Company’s common stock aggregating approximately $4 million in gross proceeds.  Based on various assumptions, including, for illustrative purposes only, a placement price of $1.00 per share, the Company projects that these exchanges and placements and sales of common stock and common stock equivalents would, if completed, result in the issuance of approximately 18.2 million new shares of the Company’s common stock or equivalents, which would constitute approximately 90.5% of the pro forma outstanding shares of the Company’s total equity.  If the placement price is materially closer to our current stock price, then the number of shares to be issued in the recapitalization, and the percentage ownership represented by such shares, will be significantly higher.  The 18.2 million new shares of common stock would exceed the Company’s current unissued authorized shares.  Accordingly, the Company plans to issue a form of common stock equivalent to the lender and holders of preferred stock in exchange for their securities to consummate the recapitalization, after which the Company plans to seek shareholder approval to increase the Company’s authorized shares, and issue a portion of such authorized shares to replace the common stock equivalents issued in the recapitalization.

As noted above, there can be no assurance that management’s capital plan will be achieved.  Failure to maintain capital sufficient to meet the higher capital requirements required by the Orders to which the Company and the Bank are currently subject, or future increases in capital requirements, could result in further regulatory action, which could include seizure of the Bank through the appointment of a conservator or receiver.

6

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (continued)

June 30, 2013

NOTE (3) – Earnings (Loss) Per Common Share

Basic earnings (loss) per common share is computed by dividing income (loss) available to common shareholders by the weighted average number of shares of common stock outstanding for the period.  Diluted earnings (loss) per common share is computed by dividing income (loss) available to common shareholders by the weighted average number of shares of common stock outstanding for the period, increased for the dilutive effect of common stock equivalents.

The following table shows how the Company computed basic and diluted earnings (loss) per common share for the three and six months ended June 30, 2013 and 2012:

	For the three months ended June 30,				For the six months ended June 30,
	2013		2012		2013		2012
	(Dollars in thousands, except per share)
Basic
Net income (loss)	$	(228)	$	1,697	$	(844)	$	1,851
Less: Preferred stock dividends and accretion	(337)		(285)		(652)		(571)
Income (loss) available to common shareholders	$	(565)	$	1,412	$	(1,496)	$	1,280
Weighted average common shares outstanding	1,917,422		1,744,565		1,917,422		1,744,565
Earnings (loss) per common share - basic	$	(0.29)	$	0.81	$	(0.78)	$	0.73
Diluted
Net income (loss)	$	(228)	$	1,697	$	(844)	$	1,851
Less: Preferred stock dividends and accretion	(337)		(285)		(652)		(571)
Income (loss) available to common shareholders	$	(565)	$	1,412	$	(1,496)	$	1,280
Weighted average common shares outstanding	1,917,422		1,744,565		1,917,422		1,744,565
Add: dilutive effects of assumed exercises of stock options	-		-		-		-
Average shares and dilutive potential common shares	1,917,422		1,744,565		1,917,422		1,744,565
Earnings (loss) per common share - diluted	$	(0.29)	$	0.81	$	(0.78)	$	0.73

Stock options for 148,750 shares of common stock for the three and six months ended June 30, 2013 and 227,075 shares of common stock for the three and six months ended June 30, 2012 were not considered in computing diluted loss per common share because they were anti-dilutive.

7

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (continued)

June 30, 2013

NOTE (4) – Securities

The following table summarizes the amortized cost and fair value of the available-for-sale investment securities portfolios at June 30, 2013 and December 31, 2012 and the corresponding amounts of unrealized gains which are recognized in accumulated other comprehensive income (loss):

	Amortized Cost		Gross  Unrealized  Gains		Gross  Unrealized  Losses		Fair Value
	(In thousands)
June 30, 2013:
Residential mortgage-backed	$	10,545	$	572	$	-	$	11,117
Total available-for-sale securities	$	10,545	$	572	$	-	$	11,117
December 31, 2012:
Residential mortgage-backed	$	12,660	$	718	$	-	$	13,378
Total available-for-sale securities	$	12,660	$	718	$	-	$	13,378

There were no securities with unrealized losses at June 30, 2013 and December 31, 2012.  At June 30, 2013, the Bank’s investment portfolio consisted of residential mortgage-backed securities with an estimated remaining life of 4.9 years.  Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties.

At June 30, 2013 and December 31, 2012, securities pledged to secure public deposits and FHLB advances had a carrying amount of $11.1 million and $1.5 million, respectively.  At June 30, 2013 and December 31, 2012, there were no holdings of securities of any one issuer, other than the U.S. Government and its agencies, in an amount greater than 10% of shareholders’ equity.  There were no sales of securities during the six months ended June 30, 2013.  During the six months ended June 30, 2012, $1.0 million of U.S federal agency bonds were sold and the Company recognized a gain of $50 thousand.

NOTE (5) – Loans Receivable Held For Sale

Loans receivable held for sale at June 30, 2013 and December 31, 2012 were as follows:

	June 30, 2013		December 31, 2012
	(In thousands)
One-to-four units	$	-	$	7,916
Five or more units	3,808		5,795
Commercial real estate	1,349		1,358
Church	4,283		4,300
Valuation allowance for unrealized losses	(314)		(318)
Loans receivable held for sale, net	$	9,126	$	19,051
Non-performing loans receivable held for sale (1)	$	1,904	$	10,168
Valuation allowance	-		-
Non-performing loans receivable held for sale, net	$	1,904	$	10,168
Performing loans receivable held for sale	$	7,536	$	9,201
Valuation allowance	(314)		(318)
Performing loans receivable held for sale, net	$	7,222	$	8,883

______

(1)Net of charge-offs of $679 thousand and $2.5 million at June 30, 2013 and December 31, 2012.

8

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (continued)

June 30, 2013

When management decides to sell certain loans held in portfolio, we reclassify them to held for sale at the lower of cost or fair value, less estimated selling costs.  During the first quarter of 2013, eight non-performing loans secured by five or more units, seven non-performing loans secured by commercial real estate and two non-performing loans secured by churches, were transferred to held-for-sale.  At the time of transfer, these loans had a carrying amount of $7.7 million and required additional charge-offs of $1.5 million, which were reserved for at year-end 2012.  These loans were sold during the second quarter of 2013 with a net gain of $81 thousand.  Additionally, $9.3 million of delinquent and non-performing loans secured by one-to-four units and church properties were sold at a net gain of $16 thousand during the first quarter of 2013.  There were no loan sales during the first half of 2012.  No loans receivable held for sale were transferred to REO during the six months ended June 30, 2013 and 2012.

Net write-downs on non-performing loans receivable held for sale to lower of cost or fair value totaled $471 thousand for the six months ended June 30, 2013, compared to $187 thousand for the same period in 2012. Additionally, during the first half of 2013 and 2012, we decreased our valuation allowance by $3 thousand and $1 thousand on loans held for sale that are considered performing loans.

NOTE (6) – Loans Receivable Held for Investment

Loans at June 30, 2013 and December 31, 2012 were as follows:

	June 30, 2013		December 31, 2012
	(In thousands)
Real estate:
One-to-four units	$	51,998	$	57,733
Five or more units	77,870		83,350
Commercial real estate	32,740		41,124
Church	70,231		76,254
Construction	443		735
Commercial:
Sports	1,438		1,711
Other	562		2,115
Consumer:
Other	129		104
Total gross loans receivable	235,411		263,126
Loans in process	(17)		(74)
Net deferred loan costs	593		557
Unamortized discounts	(17)		(17)
Allowance for loan losses	(10,579)		(11,869)
Loans receivable, net	$	225,391	$	251,723

9

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (continued)

June 30, 2013

The following tables present the activity in the allowance for loan losses by portfolio segment for the three and six months ended June 30, 2013 and 2012:

	Three Months Ended June 30, 2013
	One-to- four units			Five or more units			Commercial real estate		Church			Construction		Commercial			Consumer		Total
	(In thousands)
Beginning balance	$	1,834		$	1,123		$	1,549	$	5,677		$	8	$	181		$	78	$	10,450
Provision for loan losses	614			66			39		(623		)	-		(97		)	1		-
Recoveries	-			-			86		6			-		60			-		152
Loans charged off	(3		)	(20		)	-		-			-		-			-		(23		)
Ending balance	$	2,445		$	1,169		$	1,674	$	5,060		$	8	$	144		$	79	$	10,579

	Six Months Ended June 30, 2013
	One-to- four units			Five or  more units			Commercial real estate			Church			Construction		Commercial			Consumer		Total
	(In thousands)
Beginning balance	$	2,060		$	2,122		$	2,685		$	4,818		$	8	$	98		$	78	$	11,869
Provision for loan losses	165			(295		)	(168		)	406			-		(109		)	1		-
Recoveries	259			-			101			13			-		155			-		528
Loans charged off	(39		)	(658		)	(944		)	(177		)	-		-			-		(1,818		)
Ending balance	$	2,445		$	1,169		$	1,674		$	5,060		$	8	$	144		$	79	$	10,579

	Three Months Ended June 30, 2012
	One-to- four units			Five or more units			Commercial real estate			Church			Construction			Commercial			Consumer		Total
	(In thousands)
Beginning balance	$	4,836		$	3,013		$	2,859		$	6,494		$	233		$	231		$	86	$	17,752
Provision for loan losses	(135		)	(116		)	(234		)	882			(127		)	(168		)	-		102
Recoveries	-			-			15			3			-			138			2		158
Loans charged off	-			-			-			(156		)	-			-			-		(156		)
Ending balance	$	4,701		$	2,897		$	2,640		$	7,223		$	106		$	201		$	88	$	17,856

	Six Months Ended June 30, 2012
	One-to- four units			Five or more units			Commercial real estate			Church			Construction			Commercial			Consumer			Total
	(In thousands)
Beginning balance	$	4,855		$	2,972		$	3,108		$	5,742		$	249		$	247		$	126		$	17,299
Provision for loan losses	201			(75		)	(440		)	1,861			(143		)	(301		)	(42		)	1,061
Recoveries	-			-			30			7			-			255			4			296
Loans charged off	(355		)	-			(58		)	(387		)	-			-			-			(800		)
Ending balance	$	4,701		$	2,897		$	2,640		$	7,223		$	106		$	201		$	88		$	17,856

10

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (continued)

June 30, 2013

The following tables present the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of June 30, 2013 and December 31, 2012:

	June 30, 2013
	One-to-four units		Five or more units		Commercial real estate		Church		Construction		Commercial		Consumer		Total
	(In thousands)
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	636	$	60	$	182	$	1,588	$	-	$	97	$	69	$	2,632
Collectively evaluated for impairment	1,809		1,109		1,492		3,472		8		47		10		7,947
Total ending allowance balance	$	2,445	$	1,169	$	1,674	$	5,060	$	8	$	144	$	79	$	10,579
Loans:
Loans individually evaluated for impairment	$	3,713	$	2,911	$	6,566	$	22,111	$	-	$	97	$	69	$	35,467
Loans collectively evaluated for impairment	48,285		74,959		26,174		48,120		443		1,903		60		199,944
Total ending loans balance	$	51,998	$	77,870	$	32,740	$	70,231	$	443	$	2,000	$	129	$	235,411

	December 31, 2012
	One-to-four units		Five or more units		Commercial real estate		Church		Construction		Commercial		Consumer		Total
	(In thousands)
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	719	$	125	$	543	$	1,276	$	-	$	-	$	69	$	2,732
Collectively evaluated for impairment	1,341		1,997		2,142		3,542		8		98		9		9,137
Total ending allowance balance	$	2,060	$	2,122	$	2,685	$	4,818	$	8	$	98	$	78	$	11,869
Loans:
Loans individually evaluated for impairment	$	4,576	$	3,766	$	10,364	$	25,328	$	273	$	-	$	69	$	44,376
Loans collectively evaluated for impairment	53,157		79,584		30,760		50,926		462		3,826		35		218,750
Total ending loans balance	$	57,733	$	83,350	$	41,124	$	76,254	$	735	$	3,826	$	104	$	263,126

11

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (continued)

June 30, 2013

The following table presents information related to loans individually evaluated for impairment by type of loans as of June 30, 2013 and December 31, 2012:

	June 30, 2013						December 31, 2012
	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated		Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated
	(In thousands)
With no related allowance recorded:
One-to-four units	$	1,784	$	1,211	$	-	$	1,986	$	1,484	$	-
Five or more units	1,835		1,806		-		2,038		1,819		-
Commercial real estate	3,623		403		-		10,184		6,423		-
Church	11,227		9,190		-		18,664		15,689		-
Construction	-		-		-		279		273		-
Commercial:
Sports	3,850		-		-		3,888		-		-
With an allowance recorded:
One-to-four units	2,506		2,502		636		3,092		3,092		719
Five or more units	1,105		1,105		60		1,947		1,947		125
Commercial real estate	6,163		6,163		182		3,941		3,941		543
Church	12,958		12,921		1,588		9,677		9,639		1,276
Commercial:
Other	97		97		97		-		-		-
Consumer:
Other	69		69		69		69		69		69
Total	$	45,217	$	35,467	$	2,632	$	55,765	$	44,376	$	2,732

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

The following tables present the monthly average of loans individually evaluated for impairment by type of loans and the related interest income for the three and six months ended June 30, 2013 and 2012.

	Three Months Ended June 30, 2013				Six Months Ended June 30, 2013
	Average Recorded Investment		Cash Basis Interest Income Recognized		Average Recorded Investment		Cash Basis Interest Income Recognized
	(In thousands)
One-to-four units	$	3,737	$	29	$	3,877	$	61
Five or more units	2,508		24		3,097		40
Commercial real estate	6,481		142		8,058		223
Church	22,041		139		23,213		276
Construction	-		-		115		5
Commercial:
Other	97		4		83		4
Consumer:
Other	69		2		69		2
Total	$	34,933	$	340	$	38,512	$	611

12

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (continued)

June 30, 2013

	Three Months Ended June 30, 2012				Six Months Ended June 30, 2012
	Average Recorded Investment		Cash Basis Interest Income Recognized		Average Recorded Investment		Cash Basis Interest Income Recognized
	(In thousands)
One-to-four units	$	13,998	$	110	$	13,696	$	234
Five or more units	3,050		18		3,384		40
Commercial real estate	7,784		61		7,600		145
Church	32,834		306		32,215		597
Construction	294		4		297		9
Consumer:
Other	70		1		70		2
Total	$	58,030	$	500	$	57,262	$	1,027

Cash-basis interest income recognized represents cash received for interest payments on accruing impaired loans.  Interest income that would have been recognized for the six months ended June 30, 2013 and 2012 had loans performed in accordance with their original terms were $1.4 million and $2.3 million.

The following table presents the recorded investment in non-accrual loans by type of loans as of June 30, 2013 and December 31, 2012:

	June 30, 2013		December 31, 2012
	(In thousands)
Loans receivable held for sale:
One-to-four units	$	-	$	6,656
Five or more units	-		1,956
Commercial real estate	348		-
Church	1,556		1,556
Loans receivable held for investment:
One-to-four units	1,406		1,489
Five or more units	2,208		2,312
Commercial real estate	404		7,090
Church	12,519		15,689
Construction	-		273
Commercial:
Other	97		-
Consumer:
Other	69		69
Total non-accrual loans	$	18,607	$	37,090

There were no loans 90 days or more delinquent that were accruing interest as of June 30, 2013 or December 31, 2012.

13

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (continued)

June 30, 2013

The following tables present the aging of the recorded investment in past due loans, including loans receivable held for sale, as of June 30, 2013 and December 31, 2012 by type of loans:

	June 30, 2013
	30-59DaysPast Due		60-89DaysPast Due		Greater than90 DaysPast Due		TotalPast Due		Total Loans Not Past Due
	(In thousands)
Loans receivable held for sale:
Five or more units	$	-	$	-	$	-	$	-	$	3,808
Commercial real estate	-		-		348		348		1,001
Church	-		-		1,556		1,556		2,727
Loans receivable held for investment:
One-to-four units	1,181		-		1,406		2,587		49,411
Five or more units	-		-		2,208		2,208		75,662
Commercial real estate	-		-		404		404		32,336
Church	439		-		12,519		12,958		57,273
Construction	-		-		-		-		443
Commercial:
Sports	-		-		-		-		1,438
Other	20		-		97		117		445
Consumer:
Other	-		-		69		69		60
Total	$	1,640	$	-	$	18,607	$	20,247	$	224,604

	December 31, 2012
	30-59DaysPast Due		60-89DaysPast Due		Greater than90 DaysPast Due		TotalPast Due		Total Loans Not Past Due
	(In thousands)
Loans receivable held for sale:
One-to-four units	$	-	$	871	$	6,656	$	7,527	$	389
Five or more units	-		-		1,956		1,956		3,839
Commercial real estate	-		-		-		-		1,358
Church	-		-		1,556		1,556		2,744
Loans receivable held for investment:
One-to-four units	1,077		-		1,489		2,566		55,167
Five or more units	587		554		2,312		3,453		79,897
Commercial real estate	-		-		7,090		7,090		34,034
Church	1,617		-		15,689		17,306		58,948
Construction	-		-		273		273		462
Commercial:
Sports	-		-		-		-		1,711
Other	-		-		-		-		2,115
Consumer:
Other	-		-		69		69		35
Total	$	3,281	$	1,425	$	37,090	$	41,796	$	240,699

14

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (continued)

June 30, 2013

Troubled Debt Restructurings

During the six months ended June 30, 2013, the terms of certain loans were modified as troubled debt restructurings (“TDRs”).  The modification of the terms of such loans included payments of delinquent property taxes, which the borrower would be required to repay over a period greater than six months.

At June 30, 2013, loans classified as TDRs totaled $32.8 million, of which $13.5 million were included in non-accrual loans and $19.3 million were on accrual status.  At December 31, 2012, loans classified as TDRs totaled $41.1 million, of which $22.8 million were included in non-accrual loans and $18.3 million were on accrual status.  The Company has allocated $2.2 million and $2.5 million of specific reserves for accruing TDRs as of June 30, 2013 and December 31, 2012.  TDRs on accrual status are comprised of loans that were accruing at the time of restructuring or loans that have complied with the terms of their restructured agreements for a satisfactory period of time, and for which the Bank anticipates full repayment of both principal and interest. TDRs that are on non-accrual status can be returned to accrual status after a period of sustained performance, generally determined to be six months of timely payments as modified.  As of June 30, 2013 and December 31, 2012, the Company has no commitment to lend additional amounts to customers with outstanding loans that are classified as TDRs.

The following tables present loans by type modified as troubled debt restructurings during the three and six months ended June 30, 2013 and 2012:

	Three Months Ended June 30,2013					Six Months Ended June 30,2013
	Number of Loans	Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment		Number of Loans	Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment
	(Dollars in thousands)
One-to-four units	-	$	-	$	-	5	$	739	$	789
Commercial real estate	1	1,456		1,497		1	1,456		1,497
Total	1	$	1,456	$	1,497	6	$	2,195	$	2,286
	Three Months Ended June 30,2012					Six Months Ended June 30,2012
	Number of Loans	Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment		Number of Loans	Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment
	(Dollars in thousands)
One-to-four units	1	$	36	$	36	1	$	36	$	36
Commercial real estate	1	505		511		2	734		740
Church	5	2,386		2,391		8	3,399		3,404
Total	7	$	2,927	$	2,938	11	$	4,169	$	4,180

The troubled debt restructurings described above increased the allowance for loan losses by $96 thousand and $119 thousand for the three and six months ended June 30, 2013 and by $144 thousand and $231 thousand for the same periods in 2012.  These TDRs resulted in charge-offs of $23 thousand during the six months ended June 30, 2013, compared to $100 thousand for the same period in 2012.

15

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (continued)

June 30, 2013

At June 30, 2013, there were no loans modified as troubled debt restructurings within the previous 12 months for which there was a payment default.  A loan is considered to be in payment default once it is 90 days contractually past due under the modified terms.

All loan modifications during the six months ended June 30, 2013 were considered troubled debt restructurings.  The terms of certain other loans were modified during the six months ended June 30, 2012 that did not meet the definition of a troubled debt restructuring.  These loans had a total recorded investment of $1.2 million as of June 30, 2012.  The modification of these loans involved either a modification of the terms of a loan to borrowers who were not experiencing financial difficulties or a delay in a payment that was considered to be insignificant.

In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed to determine the likelihood that the borrower will be in payment default on any of its debt in the foreseeable future without the modification.  This evaluation is performed under the Company’s internal underwriting policy.

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 one-to-four 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.  The Company analyzes all other loans individually by classifying the loans as to credit risk. This analysis is performed at least on a quarterly basis.  The Company uses the following definitions for risk ratings:

·Special Mention.  Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the 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 will 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, on the basis of 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.

16

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (continued)

June 30, 2013

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass rated loans.  Based on the most recent analysis performed, the risk category of loans by type of loans as of June 30, 2013 and December 31, 2012 is as follows:

	June 30, 2013
	Pass		Special Mention		Substandard		Doubtful		Loss
					(In thousands)
One-to-four units	$	46,651	$	3,941	$	1,406	$	-	$	-
Five or more units	70,646		1,876		5,348		-		-
Commercial real estate	23,124		1,637		7,979		-		-
Church	33,922		16,660		19,557		92		-
Construction	443		-		-		-		-
Commercial:
Sports	-		1,438		-		-		-
Other	445		20		97		-		-
Consumer:
Other	60		-		69		-		-
Total	$	175,291	$	25,572	$	34,456	$	92	$	-
	December 31, 2012
	Pass		Special Mention		Substandard		Doubtful		Loss
					(In thousands)
One-to-four units	$	55,613	$	631	$	1,489	$	-	$	-
Five or more units	73,673		5,250		4,427		-		-
Commercial real estate	25,605		2,541		12,921		57		-
Church	33,532		19,502		23,220		-		-
Construction	462		-		273		-		-
Commercial:
Sports	-		1,711		-		-		-
Other	1,877		141		97		-		-
Consumer:
Other	35		-		69		-		-
Total	$	190,797	$	29,776	$	42,496	$	57	$	-

NOTE (7) – Junior Subordinated Debentures and Other Borrowings

On March 17, 2004, the Company issued $6.0 million of Floating Rate Junior Subordinated Debentures in a private placement.  The subordinated debentures mature in 10 years and interest is payable quarterly at a rate per annum equal to the 3-month LIBOR plus 2.54%.  The interest rate is determined as of each March 17, June 17, September 17, and December 17, and was 2.81% at June 30, 2013.  The Company stopped paying interest on the debentures in September 2010.  The accrued interest on the subordinated debentures was $540 thousand as of June 30, 2013.  Under the Order applicable to the Company discussed in Note 2, the Company is not permitted to make payments on its debt without prior notice to and receipt of written notice of non-objection from the FRB, acting through the Federal Reserve Bank of San Francisco.  In addition, under the terms of the subordinated debentures, the Company is not allowed to make payments on the subordinated debentures if the Company is in default on any of its senior indebtedness, which term includes the senior line of credit described below.

17

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (continued)

June 30, 2013

On February 28, 2010, the Company borrowed an aggregate of $5.0 million under its $5.0 million line of credit with another financial institution, and invested all of the proceeds in the equity capital of the Bank.  The interest rate on the line of credit adjusts annually, subject to a minimum of 6.00% and increases by an additional 5% in the event of default.  Borrowings under this line of credit are secured by the Company’s investment in the Bank.  The full amount of this borrowing became due and payable on July 31, 2010.  This line of credit has not been repaid and the Company is in default under the line of credit agreement.  On April 7, 2011, the lender agreed to forbear from exercising its rights (other than increasing the interest rate by the default rate margin) pursuant to the line of credit agreement until January 1, 2012, subject to certain conditions.  The lender has declined to extend the forbearance agreement.  The accrued interest on the line of credit was $1.7 million as of June 30, 2013.

Management’s plans to address these matters are described in Note 2 to these consolidated financial statements.

NOTE (8) – 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 orderly 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 non-performing loans receivable held-for-sale and impaired loans that are collateral dependent is generally based upon the fair value of the collateral which is obtained from recent real estate appraisals.  These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach.  Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available.  Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value.  Non-performing loans held for sale and impaired loans are evaluated on a quarterly basis for additional impairment and adjusted accordingly.

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

18

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (continued)

June 30, 2013

Appraisals for collateral-dependent impaired loans, non-performing loans held for sale and real estate owned 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 Measurements at June 30, 2013 Using
	Quoted Prices in Active  Markets for  Identical  Assets  (Level 1)		Significant  Other  Observable  Inputs  (Level 2)		Significant  Unobservable Inputs  (Level 3)		Total
	(In thousands)
Assets:
Securities available-for-sale - residential mortgage-backed	$	-	$	11,117	$	-	$	11,117
	Fair Value Measurements at December 31, 2012 Using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
	(In thousands)
Assets:
Securities available-for-sale - residential mortgage-backed	$	-	$	13,378	$	-	$	13,378

There were no transfers between Level 1, Level 2, or Level 3 during the three and six months ended June 30, 2013 and 2012.

19

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (continued)

June 30, 2013

Assets Measured on a Non-Recurring Basis

The following table provides information regarding the carrying values of our assets measured at fair value on a non-recurring basis at the dates indicated.  The fair value measurement for all of these assets falls within Level 3 of the fair value hierarchy.

	June 30, 2013		December 31, 2012
	(In thousands)
Assets:
Non-performing loans receivable held-for-sale:
One-to-four units	$	-	$	6,656
Five or more units	-		1,956
Commercial real estate	348		-
Church	1,556		1,556
Impaired loans carried at fair value of collateral:
One-to-four units	1,349		1,284
Five or more units	920		1,679
Commercial real estate	403		3,385
Church	7,079		6,649
Real estate owned:
Commercial real estate	1,792		2,752
Church	4,435		5,411

The following table provides information regarding gains (losses) recognized on assets measured at fair value on a non-recurring basis for the three and six months ended June 30, 2013 and 2012.

	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
	(In thousands)
Non-performing loans receivable held-for-sale	$	2	$	(188)	$	(468)	$	(187)
Impaired loans carried at fair value of collateral	(366)		174		(400)		(916)
Real estate owned	(223)		(331)		(223)		(312)
Total	$	(587)	$	(345)	$	(1,091)	$	(1,415)

20

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (continued)

June 30, 2013

The following tables present quantitative information about level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis at June 30, 2013 and December 31, 2012:

	June 30, 2013
	Fair Value		Valuation Technique(s)	Unobservable Input(s)	Range
	(Dollars in thousands)
Non-performing loans held for sale – commercial real estate	$	348	Sales comparison approach	Adjustment for differences between the comparable sales	1%
			Income approach	Capitalization rate	8.2%
Non-performing loans held for sale – church	1,556		Sales comparison approach	Adjustment for differences between the comparable sales	11% to 29%
Impaired loans – one-to-four units	1,349		Sales comparison approach	Adjustment for differences between the comparable sales	-5% to 18%
Impaired loans – five or more units	920		Sales comparison approach	Adjustment for differences between the comparable sales	-10% to 0%
			Income approach	Capitalization rate	7.25% to 9%
Impaired loans – commercial real estate	403		Sales comparison approach	Adjustment for differences between the comparable sales	2%
			Income approach	Capitalization rate	4.5%
Impaired loans – church	7,079		Sales comparison approach	Adjustment for differences between the comparable sales	-45% to 16%
			Income approach	Capitalization rate	8%
Real estate owned – commercial real estate	1,792		Sales comparison approach	Adjustment for differences between the comparable sales	-67% to 1%
			Income approach	Capitalization rate	10%
Real estate owned – church	4,435		Sales comparison approach	Adjustment for differences between the comparable sales	-24% to 7%
			Income approach	Capitalization rate	6.5% to 11.5%

21

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (continued)

June 30, 2013

	December 31, 2012
	Fair Value		Valuation Technique(s)	Unobservable Input(s)	Range
	(Dollars in thousands)
Nonperforming loans held for sale – one-to-four units	$	6,656	Sales comparison approach	Adjustment for differences between the comparable sales	-30% to 23%
Nonperforming loans held for sale – five or more units	1,956		Sales comparison approach	Adjustment for differences between the comparable sales	-13% to 17%
			Income approach	Capitalization rate	6% to 8.5%
Nonperforming loans held for sale – church	1,556		Sales comparison approach	Adjustment for differences between the comparable sales	-27% to 29%
Impaired loans – one-to-four units	1,284		Sales comparison approach	Adjustment for differences between the comparable sales	-5% to 18%
Impaired loans – five or more units	1,679		Sales comparison approach	Adjustment for differences between the comparable sales	-26% to 16%
			Income approach	Capitalization rate	6.5% to 9%
Impaired loans – commercial real estate	3,385		Sales comparison approach	Adjustment for differences between the comparable sales	-17% to -1%
			Income approach	Capitalization rate	7% to 9%
Impaired loans – church	6,649		Sales comparison approach	Adjustment for differences between the comparable sales	-45% to 8%
			Income approach	Capitalization rate	6.75% to 8%
Real estate owned – commercial real estate	2,752		Sales comparison approach	Adjustment for differences between the comparable sales	-67% to 1%
			Income approach	Capitalization rate	8% to 11%
Real estate owned – church	5,411		Sales comparison approach	Adjustment for differences between the comparable sales	-12% to 7%
			Income approach	Capitalization rate	11.5%

22

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (continued)

June 30, 2013

Fair Values of Financial Instruments

The carrying amounts and estimated fair values of financial instruments, at June 30, 2013 and December 31, 2012 were as follows:

			Fair Value Measurements at June 30, 2013 Using
	Carrying Value		Level 1		Level 2		Level 3		Total
	(In thousands)
Financial Assets:
Cash and cash equivalents	$	74,468	$	74,468	$	-	$	-	$	74,468
Securities available-for-sale	11,117		-		11,117		-		11,117
Loans receivable held for sale	9,126		-		-		9,126		9,126
Loans receivable held for investment	225,391		-		-		225,136		225,136
Federal Home Loan Bank stock	3,737		N/A		N/A		N/A		N/A
Accrued interest receivable	1,141		-		34		1,107		1,141
Financial Liabilities:
Deposits	$	(229,365)	$	-	$	(222,271)	$	-	$	(222,271)
Federal Home Loan Bank advances	(79,500)		-		(83,231)		-		(83,231)
Junior subordinated debentures	(6,000)		-		-		(5,281)		(5,281)
Other borrowings	(5,000)		-		-		(4,507)		(4,507)
Accrued interest payable	(2,308)		-		(94)		(1,984)		(2,078)
Advance payments by borrowers for taxes and insurance	(552)		-		(552)		-		(552)
			Fair Value Measurements at December 31, 2012 Using
	Carrying Value		Level 1		Level 2		Level 3		Total
	(In thousands)
Financial Assets:
Cash and cash equivalents	$	64,360	$	64,360	$	-	$	-	$	64,360
Securities available-for-sale	13,378		-		13,378		-		13,378
Loans receivable held for sale	19,051		-		-		19,051		19,051
Loans receivable held for investment	251,723		-		-		252,043		252,043
Federal Home Loan Bank stock	3,901		N/A		N/A		N/A		N/A
Accrued interest receivable	1,250		-		42		1,208		1,250
Financial Liabilities:
Deposits	$	(257,071)	$	-	$	(253,155)	$	-	$	(253,155)
Federal Home Loan Bank advances	(79,500)		-		(84,769)		-		(84,769)
Junior subordinated debentures	(6,000)		-		-		(4,852)		(4,852)
Other borrowings	(5,000)		-		-		(4,205)		(4,205)
Accrued interest payable	(1,941)		-		(87)		(1,527)		(1,614)
Advance payments by borrowers for taxes and insurance	(711)		-		(711)		-		(711)

The methods and assumptions, not previously presented, used to estimate fair values are described as follows:

(a) Cash and Cash Equivalents

The carrying amounts of cash and cash equivalents approximate fair values and are classified as Level 1.

(b) Loans receivable held for sale

The fair value of loans held for sale is estimated based upon binding contracts and quotes from third party investors or appraisal reports adjusted by sales commission assumptions resulting in a Level 3 classification.

23

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

June 30, 2013

(c) Loans receivable held for investment

Fair values of loans, excluding loans held for sale, are estimated as follows:  For variable rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values resulting in a Level 3 classification.  Fair values for other loans are estimated using discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality resulting in a Level 3 classification.  Impaired loans are valued at the lower of cost or fair value as described previously.  The methods utilized to estimate the fair value of loans do not necessarily represent an exit price.

(d) FHLB Stock

It is not practical to determine the fair value of FHLB stock due to restrictions placed on its transferability.

(e) Deposits and Advance Payments by Borrowers for Taxes and Insurance

The fair values disclosed for demand deposits (e.g., interest and non-interest checking, passbook savings, and certain types of money market accounts) are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amount) resulting in Level 2 classification.  Fair values for fixed rate certificates of deposit are estimated using discounted cash flow calculations that apply interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits resulting in a Level 2 classification.

(f) Federal Home Loan Bank Advances

The fair values of the Federal Home Loan Bank advances are estimated using discounted cash flow analyses based on the current borrowing rates for similar types of borrowing arrangements resulting in a Level 2 classification.

(g) Junior Subordinated Debentures and Other Borrowings

The fair values of the Company’s Junior subordinated debentures and other borrowings are estimated using discounted cash flow analyses based on the current borrowing rates for similar types of borrowing arrangements resulting in a Level 3 classification.

(h) Accrued Interest Receivable

The carrying amounts of accrued interest receivable approximate their fair value and are classified the same as the related asset.

(i) Accrued Interest Payable

The carrying amounts of accrued interest on deposits and Federal Home Loan Bank advances approximate their fair value.  The carrying amounts of accrued interest on junior subordinated debentures and other borrowings are estimated by applying a discount similar to the related debt.  The fair values of accrued interest are classified the same as the related liability.

24

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (continued)

June 30, 2013

NOTE (9) – Stock-based Compensation

In 2008, we adopted the 2008 Long-Term Incentive Plan (“2008 LTIP”), which was approved by the shareholders.  The 2008 LTIP replaced the Company’s 1996 Long-Term Incentive Plan (“1996 LTIP”) and 1996 Stock Option Plan (“Stock Option Plan”), which have expired and are no longer effective except as to outstanding awards. The 2008 LTIP permits the grant of non-qualified and incentive stock options, stock appreciation rights, full value awards and cash incentive awards to the Company’s non-employee directors and certain officers and employees for up to 437,390 shares of common stock.  Option awards are generally granted with an exercise price equal to the market price of the Company’s common stock at the date of grant; those option awards have vesting periods ranging from immediate vesting to 5 years and have 10-year contractual terms.  The Company has a policy of using shares held as treasury stock to satisfy share option exercises.  Currently, the Company has a sufficient number of treasury shares to satisfy expected share option exercises on outstanding options.

No options were granted during the six months ended June 30, 2013 and 2012.  The Company recorded $22 thousand and $40 thousand of stock-based compensation expense, net of tax, during the first half of 2013 and 2012.

NOTE (10) – Regulatory Capital

The Bank is subject to regulatory capital requirements now administered by the Office of the Comptroller of the Currency, or OCC, which is the statutory successor under the Dodd-Frank Act to the former Office of Thrift Supervision, or OTS.  The capital requirements, which remain the same as when administered by the OTS, 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.

Prompt corrective action regulations also administered by the OCC provide five classifications: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms are not used to represent overall financial condition. If only adequately capitalized, regulatory approval is required to accept brokered deposits.  If undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required.

The Bank met the minimum capital requirements under the cease and desist order at June 30, 2013 and December 31, 2012.  Actual required capital amounts and ratios at June 30, 2013 and December 31, 2012, together with the higher capital requirements that the Bank is required to meet under the cease and desist order applicable to it, are presented below.

	Actual		Required for Capital Adequacy Purposes		Capital Requirements under Cease and Desist Order
	Amount	Ratio	Amount	Ratio	Amount	Ratios
	(Dollars in thousands)
June 30, 2013:
Tangible Capital to adjusted total assets	$ 32,749	9.48%	$   5,179	1.50%	N/A	N/A
Tier 1(Core) Capital to adjusted total assets	$ 32,749	9.48%	$ 13,812	4.00%	$ 27,624	8.00%
Tier 1(Core) Capital to risk weighted assets	$ 32,749	14.98%	N/A	N/A	N/A	N/A
Total Capital to risk weighted assets	$ 35,579	16.27%	$ 17,494	8.00%	$ 26,240	12.00%
December 31, 2012:
Tangible Capital to adjusted total assets	$ 32,936	8.82%	$  5,603	1.50%	N/A	N/A
Tier 1(Core) Capital to adjusted total assets	$ 32,936	8.82%	$ 14,940	4.00%	$ 29,881	8.00%
Tier 1(Core) Capital to risk weighted assets	$ 32,936	13.12%	N/A	N/A	N/A	N/A
Total Capital to risk weighted assets	$ 36,183	14.41%	$ 20,090	8.00%	$ 30,135	12.00%

25

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (continued)

June 30, 2013

NOTE (11) – Income Taxes

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

Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion, or all, of the deferred tax asset will not be realized. In assessing the realization of deferred tax assets, management evaluates both positive and negative evidence, including the existence of cumulative losses in the current year and the prior two years, the amount of taxes paid in available carry-back years, the forecasts of future income and tax planning strategies. This analysis is updated quarterly.  Based on this analysis, the Company determined that a valuation allowance of $9.7 million was required as of June 30, 2013, resulting in $0 net deferred tax assets.  The Company had recorded a valuation allowance of $9.0 million and $0 net deferred tax assets as of December 31, 2012.

26

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, 2012.

Overview

Total assets decreased $28.5 million during the first six months of 2013 primarily due to a decrease in our loan portfolio resulting from loan payoffs and the implementation of our strategy to sell non-performing and classified loans.  During the first six months of 2013, we sold approximately $15.5 million in non-performing and classified loans.  The decrease in our loan portfolio, including loans held for sale, consisted of a $13.6 million decrease in our one-to-four family residential real estate loan portfolio, a $7.5 million decrease in our five or more units (multi-family) residential real estate loan portfolio, a $8.4 million decrease in our commercial real estate loan portfolio, a $6.0 million decrease in our church loan portfolio, a $292 thousand decrease in our construction loan portfolio and a $1.8 million decrease in our commercial loan portfolio.

Total deposits decreased $27.7 million during the first six months of 2013, while FHLB borrowings, subordinated debentures and other borrowings remained unchanged.

Our net loss for the three and six months ended June 30, 2013 was $228 thousand and $844 thousand, respectively, compared to net income of $1.7 million and $1.9 million for the same periods a year ago.  The decrease from net income in the first half of 2012 to net loss for the first half of 2013 was primarily due to a gain of $2.5 million from the sale of our former headquarters building during the second quarter of 2012.  In addition, during 2013 we generated lower net interest income before provision for loan losses because of payoffs of our loan portfolio.

Going Concern and Regulatory Matters

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.  As discussed in Note 2 to the financial statements, the Company has a tax sharing liability to its consolidated subsidiary which, together with other operating expenses, exceeds its available cash, the Company is in default under the terms of a $5 million line of credit with another financial institution lender in which the stock of the Bank is held as collateral for the line of credit and the Company and the Bank are both under formal regulatory agreements.  The Company and the Bank are not in compliance with these agreements but management believes that the recapitalization plan that the Company is pursuing will allow it to address many of the areas of non-compliance.  Failure to comply with these agreements exposes the Company and the Bank to further regulatory sanctions.  These matters raise substantial doubt about the ability of the Company to continue as a going concern.  The ability of the Company to continue as a going concern is dependent on many factors, one of which is regulatory action, including acceptance of its capital plan.  Management's plans in regard to these matters are also described in Note 2.  The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Results of Operations

Net Income (Loss)

For the three and six months ended June 30, 2013, we recorded net loss of $228 thousand, or $0.29 loss per diluted common share, and $844 thousand, or $0.78 loss per diluted common share, respectively.  For the same periods a year ago, we recorded net income of $1.7 million, or $0.81 earnings per diluted common share, and $1.9 million, or $0.73 earnings per diluted common share.  The decrease from net income to net loss was primarily due to the inclusion of a gain of $2.5 million on the sale of our former headquarters building in the second quarter of 2012.  In addition, during the first half of 2013, we earned less net interest income before provision for loan losses which was partially offset by lower provisions for loan losses for the three and six months ended June 30, 2013 as compared to the comparable periods in 2012.

27

Net Interest Income

For the second quarter of 2013, net interest income before provision for loan losses totaled $2.8 million, down $722 thousand, or 21%, from $3.5 million of net interest income before provision for loan losses for the second quarter of 2012.  The decrease in net interest income primarily resulted from a $56.3 million decrease in average interest-earning assets and a 26 basis point decrease in net interest margin.

Interest income decreased $1.1 million, or 22%, to $4.1 million for the second quarter of 2013 from $5.2 million for the second quarter of 2012. The decrease in interest income was primarily due to a decrease of $56.3 million in average interest-earning assets, primarily reflecting a decrease of $81.7 million in the average balance of loans receivable, and a decrease of $4.5 million in the average balance of securities available-for-sale, offset by an increase of $31.5 million in the average balance of federal funds sold.  The decrease of $81.7 million in average loans receivable from $334.3 million for the second quarter of 2012 to $252.6 million for the second quarter of 2013 resulted in a reduction of $1.3 million in interest income.  The average yield on loans increased from 6.02% for the second quarter of 2012 to 6.17% for the second quarter of 2013, primarily because certain non-accrual loans were returned to accruing status during the second quarter of 2013 which resulted in interest recoveries of $159 thousand. Additionally, the average yield on loans was improved by the sale of $15.5 million of non-performing loans. The average yield on total interest-earning assets decreased from 5.25% for the second quarter of 2012 to 4.79% for the second quarter of 2013, as a higher percentage of our total interest-earning assets were invested in lower yielding federal funds sold. Recently we have begun refocusing on loan originations and rebuilding our loan portfolio to improve the yield on interest-earning assets and grow total interest income. We intend to finance loan growth in the near term by using excess federal funds sold.

Interest expense decreased $401 thousand, or 24%, to $1.3 million for the second quarter of 2013 from $1.7 million for the second quarter of 2012.  The decrease in interest expense was primarily attributable to a 28 basis point decrease in the average cost of deposits, from 1.25% for the second quarter of 2012 to 0.97% for the second quarter of 2013, which resulted in a reduction of $154 thousand in interest expense. Additionally, the average balance of deposits decreased from $282.7 million for the second quarter of 2012 to $240.8 million for the second quarter of 2013, which resulted in a reduction of $144 thousand in interest expense.  The 28 basis point decrease in the average cost of deposits reflects the maturities of certificates of deposit that offered higher rates.  Also contributing to the decrease in interest expense during 2013 was lower average balance and average cost of FHLB advances.  The average balance of FHLB advances decreased $3.5 million, from $83.0 million for the second quarter of 2012 to $79.5 million for the second quarter of 2013, which resulted in a decrease of $26 thousand in interest expense.  The average cost of FHLB advances decreased 35 basis points, from 3.03% for the second quarter of 2012 to 2.68% for the second quarter of 2013, which resulted in a decrease of $71 thousand in interest expense.  The decrease in the average cost of FHLB advances was primarily due to the restructuring of $20.0 million of higher costing FHLB advances in the second and fourth quarters of 2012.

For the six months ended June 30, 2013, net interest income before provision for loan losses totaled $5.5 million, down $1.7 million, or 24%, from $7.2 million of net interest income before provision for loan losses for the same period a year ago.  The decrease of $1.7 million in net interest income primarily resulted from a decrease of $51.7 million in average interest-earning assets and a decrease of 45 basis points in net interest margin.

28

The following tables set forth average balance sheets, 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; however, the balance of these loans is included in the total average balance of loans receivable, which has the effect of reducing average loan yields.

	For the three months ended June 30,
	2013					2012
(Dollars in Thousands)	Average Balance		Interest		Average Yield/ Cost (1)	Average Balance		Interest		Average Yield/ Cost (1)
Assets
Interest-earning assets:
Interest-earning deposits	$	6,220	$	6	0.39%	$	6,736	$	6	0.36%
Federal Funds sold and other short-term investments	65,308		38		0.23%	33,850		8		0.09%
Investment securities	-		-		-	934		12		5.14%
Residential mortgage-backed securities	11,065		80		2.89%	15,570		123		3.16%
Loans receivable (2)(3)	252,608		3,896		6.17%	334,268		5,030		6.02%
FHLB stock	3,736		42		4.50%	3,901		6		0.62%
Total interest-earning assets	338,937		$	4,062	4.79%	395,259		$	5,185	5.25%
Non-interest-earning assets	17,256					6,807
Total assets	$	356,193				$	402,066
Liabilities and Shareholders’ Equity
Interest-bearing liabilities:
Money market deposits	$	16,840	$	16	0.38%	$	19,146	$	21	0.44%
Passbook deposits	37,431		31		0.33%	37,492		30		0.32%
NOW and other demand deposits	34,405		6		0.07%	38,153		7		0.07%
Certificate accounts	152,166		529		1.39%	187,938		822		1.75%
Total deposits	240,842		582		0.97%	282,729		880		1.25%
FHLB advances	79,500		532		2.68%	83,000		629		3.03%
Junior subordinated debentures and other borrowings	11,000		180		6.55%	11,000		186		6.76%
Total interest-bearing liabilities	331,342		$	1,294	1.56%	376,729		$	1,695	1.80%
Non-interest-bearing liabilities	8,047					6,759
Shareholders’ Equity	16,804					18,578
Total liabilities and shareholders’ equity	$	356,193				$	402,066
Net interest rate spread (4)			$	2,768	3.23%			$	3,490	3.45%
Net interest rate margin (5)					3.27%					3.53%

(1)Average yields and costs have been annualized.

(2)Amount is net of deferred loan fees, loan discounts, and loans in process, and includes loans held for sale.

(3)Amount excludes interest on non-performing loans.

(4)Net interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities.

(5)Net interest rate margin represents net interest income as a percentage of average interest-earning assets.

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	For the six months ended June 30,
	2013					2012
(Dollars in Thousands)	Average Balance		Interest		Average Yield/ Cost (1)	Average Balance		Interest		Average Yield/ Cost (1)
Assets
Interest-earning assets:
Interest-earning deposits	$	6,261	$	11	0.35%	$	6,552	$	10	0.31%
Federal Funds sold and other short-term investments	61,510		61		0.20%	30,855		14		0.09%
Investment securities	-		-		-	967		24		4.96%
Residential mortgage-backed securities	11,629		169		2.91%	16,065		259		3.22%
Loans receivable (2)(3)	263,502		7,783		5.91%	340,035		10,360		6.09%
FHLB stock	3,813		62		3.25%	3,978		12		0.60%
Total interest-earning assets	346,715		$	8,086	4.66%	398,452		$	10,679	5.36%
Non-interest-earning assets	16,474					8,267
Total assets	$	363,189				$	406,719
Liabilities and Shareholders’ Equity
Interest-bearing liabilities:
Money market deposits	$	17,031	$	33	0.39%	$	20,047	$	43	0.43%
Passbook deposits	37,317		60		0.32%	36,938		60		0.32%
NOW and other demand deposits	34,978		12		0.07%	38,642		14		0.07%
Certificate accounts	157,647		1,101		1.40%	191,732		1,738		1.81%
Total deposits	246,973		1,206		0.98%	287,359		1,855		1.29%
FHLB advances	79,500		1,064		2.68%	83,000		1,276		3.07%
Junior subordinated debentures and other borrowings	11,000		360		6.55%	11,000		372		6.76%
Total interest-bearing liabilities	337,473		$	2,630	1.56%	381,359		$	3,503	1.84%
Non-interest-bearing liabilities	8,440					6,825
Shareholders’ Equity	17,276					18,535
Total liabilities and shareholders’ equity	$	363,189				$	406,719
Net interest rate spread (4)			$	5,456	3.10%			$	7,176	3.52%
Net interest rate margin (5)					3.15%					3.60%

(1)Average yields and costs have been annualized.

(2)Amount is net of deferred loan fees, loan discounts, and loans in process, and includes loans held for sale.

(3)Amount excludes interest on non-performing loans.

(4)Net interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities.

(5)Net interest rate margin represents net interest income as a percentage of average interest-earning assets.

Provision and Allowance for Loan Losses

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

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We did not record a provision for loan losses during the second quarter of 2013 because we continued to shrink our loan portfolio and improve the quality of our assets.  Our total delinquent loans, which include non-accruing loans and all other loans that are past due at least 30 days, totaled $20.2 million as of June 30, 2013, as compared to $41.8 million as of December 31, 2012, $52.7 million as of June 30, 2012 and $70.7 million as of December 31, 2010.  The $21.6 million decrease in delinquent loans during the first half of 2013 was primarily due to the sale of $15.5 million of non-performing and classified loans, as well as the transfer to REO of $1.6 million of loans that were foreclosed, the pay-off of $1.0 million of loans and the reclassification of $3.5 million of loans that were made current.

During the second quarter of 2013, decreases in the provision for loan losses on church and commercial loans were offset by increases in the provision for loan losses on one-to-four family residential, multi-family residential and commercial real estate loans, resulting in no provision for the quarter. The decrease in the provision for loan losses on church loans was primarily due to a $3.2 million pay-off of a loan classified as special mention. The decrease in the provision for loan losses on commercial loans was primarily due to recoveries on previously charged-off loans and payoff of a $1.4 million loan. The increase in the provision for loan losses on one-to-four-units residential loans was primarily due to the adoption of OCC Bulletin 2012-27 which required the identification and segmentation of investor-owned one-to-four-family residential loans (IORR) from owner-occupied one-to-four-family residential loans, as the primary source of repayment for IORR is the rental income from the financed property and therefore IORR has credit risk similar to that associated with loans for income-producing commercial real estate. The increases in the provision for loan losses on multi-family residential and commercial real estate loans were primarily due to classification downgrades.  During the second quarter of 2012, we recorded a provision for loan losses of $102 thousand.

For the six months ended June 30, 2013, we did not record a provision for loan losses.  In contrast, we recorded a provision for loan losses of $1.1 million for the same period a year-ago. The decrease in loan loss provision was primarily due to a decrease of $77.2 million in our gross loan portfolio from one year ago and improving asset quality.

At June 30, 2013 our allowance for loan losses was $10.6 million, or 4.49% of our loans receivable held for investment, compared to $11.9 million, or 4.51% of our loans receivable held for investment, at December 31, 2012.  The decrease in the allowance for loan losses reflects the decrease in the size of our loan portfolio and the charge-offs taken to write down the loans transferred to loans held for sale to their estimated fair values.  The ratio of the allowance for loan losses to non-performing loans, excluding loans held for sale, increased to 63.34% at June 30, 2013 from 44.09% at December 31, 2012, due to the sale of $15.5 million of non-performing loans.

When reviewing the adequacy of the allowance for loan losses as a percentage of non-performing loans, the impact of charge-offs is considered.  We update our estimates of collateral values on non-performing loans at least every nine months.  If the estimated fair value of the loan collateral less estimated selling costs is less than the recorded investment in the loan, a charge-off for the difference is recorded to reduce the loan to its estimated fair value less estimated selling costs.  Therefore certain losses inherent in our non-performing loans are being recognized periodically through charge-offs.  The impact of updating these estimates of collateral value and recognizing any required charge-offs is to increase charge-offs and reduce the allowance for loan losses required on these loans.  As of June 30, 2013, 56% of our non-performing loans had already been written down to their estimated fair value less estimated selling costs.  The remaining 44% of non-performing loans have specific reserves or are reported at cost as the fair value of collateral less estimated selling costs exceeded the recorded investment in the loan.  Also, in connection with our review of the adequacy of our allowance for loan losses, we track the amount and percentage of our non-performing loans that are paying currently, but nonetheless must be classified as non-performing loans for reasons unrelated to payments.  As of June 30, 2013, approximately $8.7 million of our total non-performing loans of $18.6 million (including loans held for sale) were current in their payments.

Loan charge-offs during the first six months of 2013 were $1.8 million, or 1.38% of average loans held for investment, compared to $800 thousand, or 0.47% of average loans held for investment, during the first half of 2012.  Of the $1.8 million of charge-offs, $1.3 million charge-offs were related to the write down of certain classified loans that were transferred to loans held for sale in the first quarter of 2013 and subsequently sold in April 2013.  Another $177 thousand of charge-offs were related to non-performing church loans that were sold in February and April 2013.  The remaining $306 thousand of charge-offs were related to losses on impaired loans.  Charge-offs on commercial real estate loans totaled $944 thousand and represented 52% of charge-offs during the first half of 2013.  Charge-offs on multi-family residential real estate loans totaled $658 thousand and represented 36% of charge-offs during the first half of 2013.  Charge-offs on church loans totaled $177 thousand million and represented 10% of charge-offs during the first half of 2013.  Charge-offs on one-to-four family residential real estate loans totaled $39 thousand and represented 2% of charge-offs during the first half of 2013.

Impaired loans at June 30, 2013 were $35.5 million, compared to $44.4 million at December 31, 2012.  Specific reserves for impaired loans were $2.6 million, or 7.426% of the aggregate impaired loan amount at June 30, 2013, compared to $2.7 million, or 6.16%, at December 31, 2012.  Excluding specific reserves for impaired loans, our coverage ratio (general allowance as a percentage of total non-impaired loans) was 3.97% at June 30, 2013, compared to 4.18% at December 31, 2012.  Of the $35.5 million impaired loans, $22.9 million had specific reserves recorded as of June 30, 2013.  Of the $22.9 million impaired loans with specific reserves, $4.1 million were collateral dependent loans measured at fair value with a valuation allowance of $534 thousand and $18.8 million were evaluated based on the loans’ present value of expected cash flows with a valuation allowance of $2.1 million.  On $6.4 million of impaired loans, the fair value of collateral less estimated selling costs exceeded the recorded investment in the loan and did not require a specific reserve or charge-off.  The remaining $6.2 million of impaired loans had been written down to fair value after charge-offs of $5.8 million.

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Classified loans at June 30, 2013 were $34.5 million, compared to $42.6 million at December 31, 2012.  The decrease of $8.1 million in classified loans primarily consisted of a decrease of $4.9 million in substandard commercial real estate loans, a decrease of $3.7 million in substandard church loans and a decrease of $273 thousand in substandard construction loan, offset in part by an increase of $921 thousand in substandard multi-family residential real estate loans.  Of the $8.6 million decrease in substandard commercial real estate and church loans, $5.5 million resulted from loan sales, $1.6 million resulted from loans transferred to REO and $942 thousand resulted from loan repayments.  The $921 thousand increase in substandard multi-family loans was due to asset classification downgrades of $3.4 million, offset in part by $2.2 million in loan sales and $253 thousand in payoff.

Management believes that the allowance for loan losses is adequate to cover probable incurred losses in the loan portfolio as of June 30, 2013, but there can be no assurance that actual losses will not exceed the estimated amounts.  In addition, the OCC and the FDIC periodically review the allowance for loan losses as an integral part of their examination process.  These agencies may require an increase in the allowance for loan losses based on their judgments of the information available to them at the time of their examinations.

Non-interest Income

Non-interest income for the second quarter of 2013 decreased $2.5 million from $2.7 million for the second quarter of 2012 to $254 thousand for the second quarter of 2013.  The decrease of $2.5 million in non-interest income was due to a gain of $2.5 million from the sale of our headquarters building during the second quarter of 2012.  During the second quarter of 2012, non-interest income also benefited from a $50 thousand gain on sale of securities.  These decreases in non-interest income were partially offset by an $81 thousand gain on sale of loans during the second quarter of 2013.

For the six months ended June 30, 2013, non-interest income totaled $475 thousand compared to $3.1 million for the same period a year ago.  The decrease primarily reflects the gain on the sale of our headquarters building in the year 2012.

Non-interest Expense

Non-interest expense for the second quarter of 2013 decreased $394 thousand from $3.6 million for the second quarter of 2012 to $3.2 million for the second quarter of 2013.  The decrease of $394 thousand in non-interest expense was primarily due to a decrease of $190 thousand in provision for losses on loans held for sale, a decrease of $108 thousand in provision for losses on REO and a decrease of $43 thousand in compensation and benefits expense.

For the six months ended June 30, 2013, non-interest expense totaled $6.8 million compared to $6.6 million for the same period a year ago.  The increase in non-interest expense during the first half of 2013 primarily reflected a higher provision for losses on loans held for sale, a lower provision for losses on REO and higher occupancy expense.

Income Taxes

The Company’s income tax expense was $1 thousand and $6 thousand for the three and six months ended June 30, 2013 compared to $772 thousand and $847 thousand for the three and six months ended June 30, 2012.  The tax expense for the first six months of 2013 primarily reflects the minimum taxes paid to the state of California.  For the first six months of 2012, income taxes were computed by applying the projected annual effective income tax rate for the year to the year-to-date earnings plus discrete items (items incurred in the quarter).  The projected effective tax rate incorporates certain non-taxable federal and state income items and expected increases to the valuation allowance for projected deferred tax assets.

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Financial Condition

Total Assets

Total assets were $345.2 million at June 30, 2013, which represented a decrease of $28.5 million, or 8%, from December 31, 2012.  During the first six months of 2013, net loans decreased by $26.3 million, loans held for sale decreased by $10.0 million, securities decreased by $2.3 million and REO decreased by $2.0 million while cash and cash equivalents increased by $10.1 million and other assets increased by $2.1 million, primarily reflecting a $3.2 million receivable for loan payoff proceeds.

The Orders issued to us by the OTS effective September 9, 2010, which are now administered by the OCC with respect to the Bank, limit the increase in the Bank’s total assets during any quarter to an amount equal to the net interest credited on deposit liabilities during the prior quarter without the prior written notice to and receipt of notice of non-objection from the OCC.

Loans Receivable Held for Investment

Our gross loan portfolio decreased by $27.7 million to $235.4 million at June 30, 2013 from $263.1 million at December 31, 2012, primarily due to loan repayments and the transfer of certain loans held for investment to loans held for sale as we continued to implement our strategy to sell non-performing and classified loans.  The decrease of $27.7 million in our loan portfolio consisted of a decrease of $5.7 million in our one-to-four family residential real estate loan portfolio, a decrease of $5.5 million in our multi-family residential real estate loan portfolio, a decrease of $8.4 million in our commercial real estate loan portfolio, a decrease of $6.0 million in our church loan portfolio, a decrease of $292 thousand in our construction loan portfolio and a decrease of $1.8 million in our commercial loan portfolio.

Loan originations for the six months ended June 30, 2013 totaled $8.4 million, compared to $11.3 million for the six months ended June 30, 2012.  Loan repayments for the six months ended June 30, 2013 totaled $26.5 million, compared to $34.7 million for the six months ended June 30, 2012.  Loan charge-offs during the first half of 2013 totaled $1.8 million, compared to charge-offs of $800 thousand during the first half of 2012.  Loans transferred to REO during the first half of 2013 totaled $1.6 million, compared to $2.7 million during the first half of 2012.  Loans transferred to loans held for sale during the first half of 2013 totaled $6.2 million, which represented multi-family and commercial real estate loans that we sold in a bulk sale consummated in the second quarter.  There were no loans transferred to loans held for sale during the first half of 2012.

Loans Receivable Held for Sale

Loans held for sale decreased from $19.1 million at December 31, 2012 to $9.1 million at June 30, 2013.  The $10.0 million decrease during the first half of 2013 was primarily due to the sales of non-performing and classified loans totaling $15.5 million, repayments of $227 thousand and charge-offs of $470 thousand, which were partially offset by the transfer of $6.2 million of non-performing classified multi-family and commercial real estate loans from the held for investment loan portfolio to the held for sale portfolio.

Non-Performing Assets

Non-performing assets (“NPAs”) include loans that are 90 days or more delinquent and still accruing, non-accrual loans and real estate owned through foreclosure or deed in lieu of foreclosure (“REO”).  NPAs at June 30, 2013 were $24.8 million, or 7.19% of total assets, compared to $45.3 million, or 12.11% of total assets, at December 31, 2012.

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At June 30, 2013, non-accrual loans were $18.6 million compared to $37.1 million at December 31, 2012.  These loans consist of delinquent loans that are 90 days or more past due and troubled debt restructurings that do not qualify for accrual status.  The non-accrual loans at June 30, 2013 included 22 church loans totaling $14.1 million, 5 multi-family residential real estate loans totaling $2.2 million, 9 one-to-four family residential real estate loans totaling $1.4 million, 2 commercial real estate loans totaling $752 thousand, a commercial loan for $97 thousand, and a consumer loan for $69 thousand.

During the first half of 2013, REO decreased by $2.0 million to $6.2 million at June 30, 2013, from $8.2 million at December 31, 2012.  At June 30, 2013 the Bank’s REO consisted of ten commercial real estate properties, five of which are church buildings.  During the first half of 2013, three church loans totaling $1.6 million were foreclosed and transferred to REO and six REO properties were sold for net proceeds of $3.3 million and a net gain of $97 thousand.

Deposits

Deposits totaled $229.4 million at June 30, 2013, down $27.7 million, or 11%, from December 31, 2012.  During the first half of 2013, certificates of deposit (“CDs”) decreased by $28.5 million and represented 62% of total deposits at June 30, 2013, compared to 66% of total deposits at December 31, 2012.  Of the $28.5 million decrease in CDs during the first half of 2013, $21.5 million represented higher rate deposits from QwickRate, a deposit listing service, and $599 thousand were from brokered deposits.  Additionally, core deposits (NOW, demand, money market and passbook accounts) increased by $788 thousand during the first half of 2013 and represented 38% of total deposits at June 30, 2013, compared to 34% of total deposits at December 31, 2012.  Brokered deposits represented 1% of total deposits at June 30, 2013 and December 31, 2012.

The Order issued to us by the OTS effective September 9, 2010, which are now administered by the OCC with respect to the Bank, prohibits the Bank from accepting brokered deposits.

Borrowings

At June 30, 2013, borrowings consisted of advances from the FHLB of $79.5 million, junior subordinated debentures of $6.0 million and other borrowings of $5.0 million, unchanged from December 31, 2012.  At June 30, 2013 and December 31, 2012, FHLB advances were 23% and 21%, respectively, of total assets.  The weighted average cost of advances decreased 20 basis points from 2.67% at December 31, 2012 to 2.47% at June 30, 2013 as we restructured $28.0 million of advances in June 2013.

Shareholders’ Equity

Shareholders' equity was $16.6 million, or 4.81% of the Company’s total assets, at June 30, 2013, compared to $18.0 million, or 4.82% of the Company’s total assets, at December 31, 2012.  At June 30, 2013, the Bank’s Total Risk-Based Capital ratio was 16.27%, its Tier 1 Risk-Based Capital ratio was 14.98%, and its Core Capital and Tangible Capital ratios were 9.48%.  The Company is currently pursuing a Recapitalization Plan, described under “Capital Resources” below, to increase equity capital, reduce debt and senior securities, and to further strengthen the Company’s capital ratios and position the Bank for future growth.

Liquidity

The objective of liquidity management is to ensure that we have the continuing ability to fund operations and meet other 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, REOs, and investment securities, and payments of principal and interest on loans and investment securities.  Primary uses of funds include withdrawal of and interest payments on deposits, originations of loans, purchases of investment securities, and payment of operating expenses.

Net cash inflows from operating activities totaled $1.6 million and $1.9 million during the six months ended June 30, 2013 and 2012, respectively.  Net cash inflows from operating activities for the first six months of 2013 were primarily attributable to interest payments received on loans and securities and federal income tax refunds.

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Net cash inflows from investing activities totaled $36.4 million and $37.3 million during the six months ended June 30, 2013 and 2012, respectively.  Net cash inflows from investing activities for the first six months of 2013 were attributable primarily to proceeds from sales of loans receivable held for sale, principal repayments on loans and securities, proceeds from sales of REOs and proceeds from redemption of FHLB stock.

Net cash outflows from financing activities totaled $27.9 million and $24.7 million during the six months ended June 30, 2013 and 2012, respectively.  Net cash outflows from financing activities for the first six months of 2013 were attributable primarily to the net decrease in deposits.

When the Bank has more funds than required for reserve requirements or short-term liquidity needs, the Bank sells federal funds to the Federal Reserve Bank or other financial institutions and maintains a portion of its liquid assets in interest-bearing cash deposits with other banks and in securities available-for-sale that are not pledged.  The Bank’s liquid assets at June 30, 2013 consisted of $74.5 million in cash and cash equivalents, compared to liquid assets $64.4 million in cash and cash equivalents and $11.9 million in securities available-for-sale that were not pledged at December 31, 2012.

Additionally, the Bank is currently approved by the FHLB to borrow up to $100.0 million to the extent the Bank provides qualifying collateral and holds sufficient FHLB stock.  That approved limit and collateral requirement would have permitted the Bank, as of June 30, 2013, to borrow an additional $6.4 million.

The Company has a tax sharing liability to the Bank which exceeds operating cash at the Company level. The liability was partially settled pursuant to the terms of the Tax Allocation Agreement between the Bank and the Company on March 30, 2012, which settlement consumed the Company’s operating cash.  During the second half of 2012, the Company sold 172,857 shares of its common stock held as treasury shares to certain directors and officers for $200,000.  This capital was retained by the Company to help pay operating expenses.

Our ability to service our debt obligations and pay dividends and holding company expenses is dependent primarily on the recapitalization plan discussed herein under the caption “Capital Resources”.  The Company’s debt obligations, which are included in other borrowings, are described below.

On March 17, 2004, the Company issued $6.0 million of Floating Rate Junior Subordinated Debentures in a private placement.  The debentures mature in 10 years and interest is payable quarterly at a rate per annum equal to the 3-month LIBOR plus 2.54%.  The interest rate is determined as of each March 17, June 17, September 17, and December 17, and was 2.81% at June 30, 2013.  The Company stopped paying interest on the debentures in September 2010.  The accrued interest on the subordinated debentures was $540 thousand as of June 30, 2013 and $555 thousand as of August 1, 2013.  As disclosed previously, the Company is not permitted to make payments on any debts without prior notice to and receipt of written notice of non-objection from the FRB.  In addition, under the terms of the subordinated debentures, the Company is not allowed to make payments on the subordinated debentures if the Company is in default on any of its senior indebtedness, which term includes the senior line of credit described below.

On February 28, 2010, the Company borrowed an aggregate of $5.0 million under its $5.0 million line of credit with another financial institution, and invested all of the proceeds in the equity capital of the Bank.  Borrowings under this line of credit are secured by the Company’s assets.  The interest rate on the line of credit adjusts annually, subject to a minimum of 6.00%, and increases by an additional 5% in the event of default.  The full amount of this borrowing became due and payable on July 31, 2010.  This senior line of credit has not been repaid and the Company is in default under the line of credit agreement.  The Company does not have sufficient cash available to repay the borrowing at this time and would require approval of the FRB to make any payment on this senior line of credit or to obtain a dividend from the Bank for such purpose.  On April 7, 2011, the lender agreed to forbear from exercising its rights (other than increasing the interest rate by the default rate margin) pursuant to the line of credit agreement until January 1, 2012 subject to certain conditions.  The lender has declined to extend the forbearance agreement.  The accrued interest on the line of credit was $1.7 million as of August 1, 2013.  Further information regarding this borrowing is included in Note 7 “Junior Subordinated Debentures and Other Borrowings” of the Notes to Consolidated Financial Statements.

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Due to the current regulatory Orders that are in effect, the Bank is not allowed to make distributions to the Company without regulatory approval, and such approval is not likely to be given.  Accordingly, the Company will not be able to meet its payment obligations within the foreseeable future unless the Company is able to secure new capital.

These conditions and the Company’s operating losses raise substantial doubt about the Company’s ability to continue as a going concern.  These and related matters are discussed in Note 2 “Going Concern, Regulatory Matters and Management’s Plan for Recapitalization of the Company” of the Notes to Consolidated Financial Statements.

Capital Resources

On November 14, 2008, the Company issued 9,000 shares of the Company’s Fixed Rate Cumulative Perpetual Preferred Stock, Series D, having a liquidation preference of $1,000 per share, together with a ten-year warrant to purchase 183,175 shares of Company common stock at $7.37 per share, to the U.S. Treasury Department for gross proceeds of $9.0 million.  The warrant was subsequently retired without cost because of our status as a Certified Community Development Financial Institution.  The sale of the Series D Preferred Stock was made pursuant to the U.S. Treasury Department’s TARP Capital Purchase Program.

On December 8, 2009, the Company issued 6,000 shares of the Company’s Fixed Rate Cumulative Perpetual Preferred Stock, Series E, having a liquidation preference of $1,000 per share, to the U.S. Treasury Department for gross proceeds of $6.0 million.  The sale of the Series E Preferred Stock was made pursuant to the U.S. Treasury Department’s TARP Capital Purchase Program.

We are pursuing a comprehensive recapitalization plan to improve the Company’s capital structure.  To date, we:

·Have obtained the agreement of the U.S. Treasury Department to exchange the shares of our Series D and E Fixed Rate Cumulative Perpetual Preferred Stock held by it for our common stock  (or initially common stock equivalents) at a discount of 50% of the liquidation amount, plus an undiscounted exchange of the accumulated but unpaid dividends on such preferred stock for common stock;

·Have obtained the agreement of the holder of our Series A Perpetual Preferred Stock to exchange its holdings for common stock (or initially common stock equivalents) at a discount of 50% of the liquidation amount, subject to certain terms and conditions and have reached agreements in principle with the holders of our Series B and Series C Preferred Stock regarding exchanges of their holdings for common stock  (or initially common stock equivalents) on a similar basis;

·Have reached an agreement in principle with our senior bank lender regarding exchanging a portion of the $5 million outstanding amount borrowed under our line of credit, which is currently in default, for common stock  (or initially common stock equivalents) at 100% of the face amount to be exchanged; forgiving the accrued interest on the entire amount of the line of credit to the date of the exchange; and amending our credit agreement for the remainder of this debt that would be outstanding after the exchange.

The conditions to each of the above proposed exchanges include that we concurrently complete private placements or other sales of our new shares of common stock.  Based on various assumptions, including, for illustrative purposes only, a placement price of $1.00 per share, we project that these exchanges and placements and sales of common stock and common stock equivalents would, if completed, result in the issuance of approximately 18.2 million new shares of the Company’s common stock or equivalents, which would constitute approximately 90.5% of the pro forma outstanding shares of the Company’s total equity.  If the placement price is materially closer to our current stock price, then the number of shares to be issued in the recapitalization, and the percentage ownership represented by such shares, will be significantly higher.  The 18.2 million new shares of common stock would exceed the Company’s current unissued authorized shares.  We plan to seek approval from shareholders to increase the Company’s authorized shares of common stock, and issue a portion of the newly authorized shares as replacements for the equivalents issued in the exchanges at the closing for the recapitalization.

There can be no assurance that our recapitalization plan will be achieved on the currently contemplated terms, or at all.  Failure to maintain capital sufficient to meet the higher capital requirements required by the Orders to which the Company and the Bank are currently subject, or future increases in capital requirements could result in further regulatory action, which could include the appointment of a conservator or receiver for the Bank.

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Regulatory Capital

The capital regulations applicable to the Bank, which are now administered by the OCC, include three separate minimum capital requirements.  First, the tangible capital requirement mandates that the Bank’s shareholder’s equity, less intangible assets, be at least 1.50% of adjusted total assets as defined in the capital regulations.  Second, the core capital requirement mandates that core capital (tangible capital plus certain qualifying intangible assets) be at least 4.00% of adjusted total assets as defined in the capital regulations.  Third, the risk-based capital requirement mandates that core capital plus supplemental capital (as defined by the OCC) be at least 8.00% of risk-weighted assets as prescribed in the capital regulations.  The capital regulations assign specific risk weightings to all assets and off-balance- sheet items for this purpose.

The Bank was in compliance with all capital requirements in effect at June 30, 2013, and met the generally applicable capital ratio standards necessary to be considered “well-capitalized” under the prompt corrective action regulations adopted pursuant to the Federal Deposit Insurance Corporation Improvement Act of 1991. However, in March 2010, the Company and the Bank were determined to be “in troubled condition” by the OTS and they consented to the issuance of cease and desist orders by the OTS effective September 9, 2010, which orders remain in effect and are now administered by the OCC with respect to the Bank and the FRB with respect to the Company. The cease and desist orders require the Bank to achieve and maintain higher levels of regulatory capital than normally required. Under the applicable regulations, the Bank is therefore precluded from being considered to be more than "adequately capitalized" until such special capital requirements are terminated and the Company and the Bank are no longer considered to be "in troubled condition."

The Bank met the minimum capital requirements under the cease and desist order at June 30, 2013 and December 31, 2012.  Actual required capital amounts and ratios at June 30, 2013 and December 31, 2012, together with the higher capital requirements that the Bank is required to meet under the cease and desist order applicable to it, are presented below.

	Actual		Required for Capital Adequacy Purposes		Capital Requirements under Cease and Desist Order
	Amount	Ratio	Amount	Ratio	Amount	Ratios
	(Dollars in thousands)
June 30, 2013:
Tangible Capital to adjusted total assets	$32,749	9.48%	$  5,179	1.50%	N/A	N/A
Tier 1(Core) Capital to adjusted total assets	$32,749	9.48%	$13,812	4.00%	$27,624	8.00%
Tier 1(Core) Capital to risk weighted assets	$32,749	14.98%	N/A	N/A	N/A	N/A
Total Capital to risk weighted assets	$35,579	16.27%	$17,494	8.00%	$26,240	12.00%
December 31, 2012:
Tangible Capital to adjusted total assets	$ 32,936	8.82%	$   5,603	1.50%	N/A	N/A
Tier 1(Core) Capital to adjusted total assets	$ 32,936	8.82%	$ 14,940	4.00%	$29,881	8.00%
Tier 1(Core) Capital to risk weighted assets	$ 32,936	13.12%	N/A	N/A	N/A	N/A
Total Capital to risk weighted assets	$ 36,183	14.41%	$ 20,090	8.00%	$30,135	12.00%

37

Phase-in of Increased Regulatory Capital Requirements

In July 2013, the Federal banking regulators amended their capital adequacy regulations to reflect the new capital standards recommended by the Basel Committee on Banking Supervision, commonly called Basel III, and to implement provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act).  The amended regulations change the definition of regulatory capital, increase risk-based capital requirements, make selected changes to the calculation of risk-weighted assets, and adjust the prompt corrective action thresholds.  Community banking organizations, such as the Company and the Bank, become subject to the new rule on January 1, 2015 and certain provisions of the amended regulations will be phased in over the period of 2015 through 2019. The amended regulations:

¡Require a minimum ratio of “common equity Tier 1 capital” (a new capital measure) to risk-weighted assets of 4.5%.

¡Increase the minimum Tier 1 capital to risk-weighted assets ratio requirement from 4% to 6%.

¡Retain the minimum total capital to risk-weighted assets ratio requirement of 8%.

¡Establish a minimum leverage ratio requirement of 4%.

¡Retain the existing regulatory capital framework for 1-4 family residential mortgage exposures.

¡Permit smaller, less complex banking organizations, such as the Company and the Bank, to retain, through a one-time election, the existing treatment for most accumulated other comprehensive income, such that unrealized gains and losses on securities available for sale will not affect regulatory capital amounts and ratios.

¡Implement a new “capital conservation buffer” requirement pursuant to which a banking organization must maintain a common equity capital ratio that is more than 2.5% above the minimum common equity Tier 1 capital, Tier 1 capital and total risk-based capital ratios in order to avoid limitations on capital distributions, including dividend payments, and certain discretionary bonus payments. The capital conservation buffer requirement will be phased in beginning on January 1, 2016 at 0.625% and will be fully phased in at 2.50% by January 1, 2019.  A banking organization with a buffer of less than the required amount would be subject to increasingly stringent limitations on such distributions and payments as the buffer (the amount of its capital exceeding regulatory minimums) approaches zero. The new rule also generally prohibits a banking organization from making such distributions or payments during any quarter if its eligible retained income is negative and its capital conservation buffer ratio was 2.5% or less at the end of the previous quarter. The eligible retained income of a banking organization is defined as its net income for the four calendar quarters preceding the current calendar quarter, based on the organization’s quarterly regulatory reports, net of any distributions and associated tax effects not already reflected in net income.

¡Increase capital requirements for past-due loans, high volatility commercial real estate exposures, and certain short-term commitments and securitization exposures.

¡Expand the recognition of collateral and guarantors in determining risk-weighted assets.

¡Remove references to credit ratings consistent with the Dodd Frank Act and establish due diligence requirements for securitization exposures.

¡Permit banking organizations that had less than $15 billion in total consolidated assets as of December 31, 2009 to include in Tier 1 capital trust preferred securities and cumulative perpetual preferred stock issued and included in Tier 1 capital prior to May 19, 2010, subject to a limit of 25% of Tier 1 capital elements, excluding any non-qualifying capital instruments and after all regulatory capital deductions and adjustments have been applied to Tier 1 capital.

¡Establish new qualifying criteria for regulatory capital, including new limitations on the inclusion of deferred tax assets and mortgage servicing rights.

The Company’s management is currently evaluating the provisions of the final rule and their expected impact on the Company.

38

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 effectiveness of the design and operation of the Company’s disclosure controls and procedures was performed under the supervision of the Company’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) as of June 30, 2013.  Based on that evaluation, the Company’s CEO and CFO concluded that the Company’s disclosure controls and procedures were effective as of June 30, 2013.  There were no significant changes during the quarter ended June 30, 2013 in the Company’s internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

39

PART II.  OTHER INFORMATION

Item 1.LEGAL PROCEEDINGS

OTS Investigation

In 2010, the OTS notified us that it had initiated a formal investigation of the activities of a former loan officer of the Bank whose employment was terminated in March 2010.  In connection with the investigation, the OTS issued subpoenas to the chief lending officer and chief executive officer requesting documents relating to our former loan officer and loans he originated while employed by the Bank.  The subpoenas also contemplate taking oral testimony from the officers.  While the OTS did not inform us of the scope of its investigation,  we believe the investigation includes, but may not be limited to, inquiry into whether documentation submitted in connection with loan applications for loans originated by the loan officer contained inaccurate or deliberately falsified information and whether the loan officer received unauthorized direct or indirect benefits from payments made by the borrowers on such loans to loan brokers or other persons associated with the lending process.  All of the loans originated by the former loan officer have been reviewed by us and by the independent loan review firm we engaged to perform a general review of our loan portfolio pursuant to the Orders issued to us by the OTS.  We have taken the results of these loan reviews into account, along with all other relevant information known to us, in determining the amounts of our loan loss provisions and the level of our allowance for loan losses as of June 30, 2013.

Item 1A.RISK FACTORS

Not Applicable

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

None

Item 3.DEFAULTS UPON SENIOR SECURITIES

None

Item 4.MINE SAFETY DISCLOSURES

Not Applicable

Item 5.OTHER INFORMATION

None

Item 6.EXHIBITS

Exhibit Number*
2	.1	Plan of Conversion, including Certificate of Incorporation and Bylaws of the Registrant and Federal Stock Charter and Bylaws of Broadway Federal (Exhibit 2.1 to Amendment No. 2 to Registration Statement on Form S-1, No. 33-96814, filed by Registrant on November 13, 1995)
3	.1	Certificate of Incorporation of Registrant (contained in Exhibit 2.1)
3	.2	Bylaws of Registrant
3	.3	Certificate of Amendment of Certificate of Incorporation of Registrant
4	.1	Form of Common Stock Certificate (Exhibit 4.1 to Registration Statement on Form S-1, No. 33-96814, filed by the Registrant on September 12, 1995)

40

Exhibit Number*
4	.2	Form of Series A Preferred Stock Certificate (Exhibit 4.2 to Amendment No. 1 to Registration Statement on Form S-1, No. 33-96814, filed by the Registrant on November 6, 1995)
4	.3	Form of Certificate of Designation for Series A Preferred Stock (contained in Exhibit 2.1)
4	.4	Form of Series B Preferred Stock Certificate (Exhibit 4.4 to Form 10-KSB filed by the Registrant for the fiscal year ended December 31, 2003)
4	.5	Form of Certificate of Designation for Series B Preferred Stock (Exhibit 4.5 to Form 10-KSB filed by the Registrant for the fiscal year ended December 31, 2003)
4	.6	Form of Series C Preferred Stock Certificate (Exhibit 4.6 to Form 10-KSB filed by the Registrant for the fiscal year ended December 31, 2006)
4	.7	Form of Certificate of Designation for Series C Preferred Stock (Exhibit 4.7 to Form 10-KSB filed by the Registrant for the fiscal year ended December 31, 2006)
4	.8	Form of Series D Preferred Stock Certificate (Exhibit 4.8 to Form 8-K filed by the Registrant on November 19, 2008)
4	.9	Form of Certificate of Designation for Fixed Rate Cumulative Perpetual Preferred Stock Series D  (Exhibit 3.3 to Form 8-K filed by the Registrant on November 19, 2008)
4	.11	Form of Series E Preferred Stock Certificate (Exhibit 4.2 to Form 8-K filed by the Registrant on December 9, 2009)
4	.12	Form of Certificate of Designation for Fixed Rate Cumulative Perpetual Preferred Stock Series E  (Exhibit 4.1 to Form 8-K filed by the Registrant on December 9, 2009)
10	.19	Exchange Agreement by and between Broadway Financial Corporation and The United States Department of the Treasury (Exhibit 10.19 to Form 10-K filed by the Registrant on April 1, 2013)
10	.20	Exchange Agreement by and among Broadway Financial Corporation, the Insurance Exchange of the Automobile Club and the Automobile Club of Southern California (Exhibit 10.20 to Form 10-K filed by the Registrant on April 1, 2013)
31	.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31	.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32	.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32	.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101	.INS	XBRL Instance Document **
101	.SCH	XBRL Taxonomy Extension Schema Document **
101	.CAL	XBRL Taxonomy Extension Calculation Linkbase Document **
101	.DEF	XBRL Taxonomy Extension Definitions Linkbase Document **
101	.LAB	XBRL Taxonomy Extension Label Linkbase Document **
101	.PRE	XBRL Taxonomy Extension Presentation Linkbase Document **

______________

*Exhibits followed by a parenthetical reference are incorporated by reference herein from the document filed by the Registrant with the SEC described therein.  Except as otherwise indicated, the SEC File No. for each incorporated document is 000-27464.

**Pursuant to SEC rules, these interactive data file exhibits shall not be deemed filed for purposes of Section 11 or 12 of the Securities Act or Section 18 of the Exchange Act or otherwise subject to the liability of those sections.

41

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date:	August 13, 2013	By:	/s/ Wayne-Kent A. Bradshaw
			Wayne-Kent A. Bradshaw
			Chief Executive Officer
Date:	August 13, 2013	By:	/s/ Brenda J. Battey
			Brenda J. Battey
			Chief Financial Officer

42

EX-3.2

Exhibit 3.2

BYLAWS OF

BROADWAY FINANCIAL CORPORATION

ARTICLE I.

NAME

Section 1.1 Name.  The name of this corporation shall be “Broadway Financial Corporation.”

ARTICLE II.

OFFICES

Section 2.1 Registered Office.  The corporation shall at all times maintain a registered office in the State of Delaware, which, except as otherwise determined by the Board of Directors of the corporation (the “Board”), shall be in the City of Dover, County of Kent.

Section 2.2Principal Office.  The principal office of the corporation shall be maintained at such place within or without the State of Delaware as the Board shall designate.

Section 2.3Other Offices.  The corporation may also have offices at such other places within or without the State of Delaware as the Board shall from time to time designate or the business of the corporation shall require.

ARTICLE III.

MEETINGS OF STOCKHOLDERS

Section 3.1Place of Meetings.  All annual and special meetings of stockholders shall be held at such places within or without the State of Delaware as the Board may determine.

Section 3.2Annual Meetings.

3.2.1  Time and Place.  The regular annual meeting of stockholders for the election of directors and for the transaction of any other business of the corporation shall be held each year at 2:00 p.m. on the third Wednesday of June, if not a legal holiday, or, if a legal holiday, then on the next succeeding day not a Saturday, Sunday or legal holiday, or at such other time, date or place as the Board may determine.

3.2.2  New Business.  At the annual meetings, directors shall be elected and any other business properly proposed and filed with the Secretary of the corporation as in these Bylaws provided may be transacted which is within the powers of the stockholders.

Any new business to be conducted at the annual meeting of the stockholders shall be stated in writing and filed with the Secretary of the corporation on or before 30 days in advance of the date (month and day) of the previous year’s annual meeting, and all business so stated, proposed and filed shall, unless prior action thereon is required by the Board, be considered at the annual meeting.  Any stockholder may make any other proposal at the annual meeting and the same may be discussed and considered, but unless stated in writing and filed with the Secretary of the corporation on or before 30 days in advance of the date (month and day) of the previous year’s annual meeting, such proposal may only be voted upon at a meeting held at least 30 days after the annual meeting at which it is presented.  No other proposal may be acted upon at the annual meeting.  This provision shall not prevent the consideration, approval or disapproval at the annual meeting of the reports of officers and committees, but in connection with such reports no business shall be acted upon at such annual meeting unless stated and filed as herein provided.

Section 3.3Notice.  Written notice stating the place, day and hour of the meeting and the purpose or purposes for which the meeting of the stockholders is called shall be given not less than 10 nor more than 60 days before the date of the meeting, either personally or by mail, to each stockholder of record entitled to vote at such meeting.  If mailed, such notice shall be deemed to be given when deposited in the U.S. mail, postage prepaid, and addressed to the stockholder at his or her address as it appears on the records of the corporation as of the record date prescribed in Section 3.9.1 and Section 10.1.1 of these Bylaws.

Section 3.4Nominations For Director.  Nominations of candidates for election as directors at any meeting of stockholders may be made (a) by, or at the direction of, a majority of the Board, or (b) by any stockholder of record entitled to vote at such meeting; provided, that only persons nominated in accordance with procedures set forth in this Section 3.4 shall be eligible for election as directors.

Nominations, other than those made by, or at the direction of, the Board, may only be made pursuant to timely notice in writing to the Secretary of the corporation as set forth in this Section 3.4.  To be timely, a stockholder’s notice shall be delivered to, or mailed and received by the Secretary of the corporation, for an annual meeting, not less than 60 days nor more than 90 days in advance of the date (month and day) of the previous year’s annual meeting, and for a special meeting, not less than 60 days nor more than 90 days in advance of the date (month and day) of the special meeting, regardless of any postponement or adjournments of that meeting to a later date.  Such stockholder notice shall set forth (a) as to each person whom the stockholder proposes to nominate for election as a director, (i) the name, age, business address and residential address of such person, (ii) the principal occupation or employment of such person, (iii) the class and number of shares of the corporation’s stock which are beneficially owned

by such person on the date of such stockholder notice and (iv) any other information relating to such person that would be required to be disclosed on Schedule 13D pursuant to Regulation 13D-G under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), in connection with the acquisition of stock, and pursuant to Regulation 14A under the Exchange Act, in connection with solicitation of proxies with respect to nominees for election as directors, regardless of whether such person is subject to the provisions of such regulations, including, but not limited to, information required to be disclosed by Items 4(b) and 6 of Schedule 14A of Regulation 14A with the Securities and Exchange Commission; and (ii) as to the stockholder giving the notice (a) the name and address, as they appear on the corporation’s books, of such stockholder and the name and principal business or residential address of any other beneficial stockholders known by such stockholder to support such nominees and (b) the class and number of shares of the corporation’s stock which are beneficially owned by such stockholder on the date of such stockholder notice and the number of shares owned beneficially by any other record or beneficial stockholders known by such stockholder to be supporting such nominees on the date of such stockholder notice.  At the request of the Board, any person nominated by, or at the request of the Board for election as a director shall furnish to the Secretary of the corporation that information required to be set forth in a stockholder’s notice of nomination which pertains to the nominee.

The Board may reject any nomination by a stockholder not timely made in accordance with the requirements of this Section 3.4.  If the Board, or a committee designated by the Board, determines that the information provided in a stockholder’s notice does not satisfy the information requirements of this Section 3.4 in any material respect, the Secretary of the corporation shall promptly notify such stockholder of the deficiency of time, not less than five days from the date such deficiency notice is given to the stockholder, as the Board or such committee shall determine.  If the deficiency is not cured within such period, or if the Board or such committee determines that the additional information provided by the stockholder, together with information previously provided, does not satisfy the requirements of this Section 3.4 in any material respect, then the Board may reject such stockholder’s notice and the proposed nominations shall not be accepted if presented at the stockholder meeting to which the notice relates.  The Secretary of the corporation shall notify a stockholder in writing whether his or her nomination has been made in accordance with the time and informational requirements of this Section 3.4.  Notwithstanding the procedure set forth in this Section 3.4, if neither the Board nor such committee makes a determination as to the validity of any nominations by a stockholder, the presiding officer of the stockholder’s meeting shall determine and declare at the meeting whether a nomination was not made in accordance with the terms of this Section 3.4.  If the presiding officer determines that a nomination was not made in accordance with

the terms of this Section 3.4 he or she shall so declare at the meeting and the defective nomination shall not be accepted.

Section 3.5  Special Meetings.  Special meetings of stockholders for the purpose of taking any action permitted the stockholders by law and the certificate of incorporation of this corporation may be called at any time by the Board.  Except in special cases where other express provision is made by statute, notice of such special meetings shall be given in the same manner as for annual meetings of stockholders.

Section 3.6 Voting Lists.  The officer having charge of the stock transfer books for shares of the capital stock of the corporation shall make, at least 10 days before each meeting of the stockholders, a complete list of the stockholders entitled to vote at such meeting, with the address of and the number of shares registered in the name of, each stockholder.  Such list shall be subject to inspection by any stockholder, for any purpose germane to the meeting, at any time during the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified in the notice of the meeting, at the place where the meeting is to be held.  Such list shall also be produced and kept open at the time and place of the meeting and shall be subject to the inspection of any stockholder during the whole time of the meeting.  The original stock transfer books shall be prima facie evidence as to who are the stockholders entitled to examine such list or transfer books or to vote at any meeting of stockholders.

Section 3.7Quorum.  A majority of the shares entitled to vote, represented in person or by proxy, shall constitute a quorum for the transaction of business at a meeting of the stockholders.  The stockholders present at a duly called or held meeting at which a quorum is present may continue to transact business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum, if any action taken (other than adjournment) is approved by at least a majority of the shares required to constitute a quorum.

Section 3.8 Adjourned Meeting and Notice Thereof.  Any stockholders’ meeting, annual or special, whether or not a quorum is present, may be adjourned from time to time by the vote of a majority of the shares present, whether in person or represented by proxy, but in the absence of a quorum no other business may be transacted at such meeting, except as provided in Section 3.7 above.  When any stockholders’ meeting, either annual or special, is adjourned for more than 30 days, or if after the adjournment a new record date is fixed for the adjourned meeting, notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.  Except as provided above, it shall not be necessary to give any notice of the adjourned meeting if the

time and place thereof are announced at the meeting at which such adjournment is taken.

Section 3.9 Voting.

3.9.1  Record Date.  Unless a record date for voting purposes be fixed as provided in Section 10.1.1 of these Bylaws then, subject to the provisions of Section 217 of the General Corporation Law of the State of Delaware (the “General Corporation Law”) (relating to voting of shares held by fiduciaries, pledgors and joint owners), only persons in whose names shares entitled to vote stand on the stock records of the corporation at the close of business on the business day next preceding the day on which notice of the meeting is given or, if such notice is waived, at the close of business on the business day next preceding the day on which the meeting of stockholders is held, shall be entitled to vote at such meeting, and such day shall be the record date for such meeting.

3.9.2  Method; Vote Required.  Unless otherwise required by law, voting may be oral or by written ballot; provided, however, that all elections for directors must be by ballot if demanded by a stockholder before such voting begins.  Except as provided in Section 3.7 and except with respect to election of directors, the affirmative vote of the majority of the shares represented and voting at a duly held meeting at which a quorum is present (which shares voting affirmatively also constitute at least a majority of the required quorum) shall be the act of the stockholders, unless the vote of a greater number or voting by classes is required by the General Corporation Law or the certificate of incorporation or these bylaws.  Directors shall be elected by a plurality of the votes of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of directors.

3.9.3  Voting of Shares by Certain Holders.  Shares standing in the name of another corporation may be voted by any officer, agent or proxy as the bylaws of such corporation may prescribe, or, in the absence of such provision, as the board of directors of such corporation may determine.  Shares held by an administrator, executor, guardian or conservator may be voted by him or her, either in person or by proxy, without a transfer of such shares into his or her name.  Shares standing in the name of a trustee may be voted by him or her, either in person or by proxy, but no trustee shall be entitled to vote shares held by him or her without a transfer of such shares into his or her name.

Neither treasury shares of its own stock held by the corporation, nor shares held by another corporation, if a majority of the shares entitled to vote for the election of directors of such other corporation are held directly or indirectly by the corporation, shall be voted at any meeting or counted in determining the total number of outstanding shares at any given time for purposes of any meeting.

Section 3.10Conduct of Meeting.  The presiding officer at any meeting of stockholders, either annual or special, shall be the Chairman of the Board or, in his or her absence, the President or, in the absence of both the Chairman of the Board and the President, anyone selected by a majority of the Board.  The secretary at such meetings shall be the Secretary of the corporation or, in his or her absence, anyone appointed by the presiding officer.

Section 3.11Proxies.  At all meetings of the stockholders, every stockholder having the right to vote shall be entitled to vote in person or by proxy appointed by an instrument in writing and complying with the requirements of the General Corporation Law.  No proxy shall be valid after the expiration of three years from the date thereof unless otherwise provided in the proxy.  A duly executed proxy shall be irrevocable and if, and only so long as, it is coupled with an interest in the stock of the corporation or in the corporation generally which is sufficient in law to support an irrevocable power.

Section 3.12Informal Action by Stockholders.  Unless otherwise stated in the certificate of incorporation, any action required to be taken or which may be taken at any annual or special meeting of the stockholders of the corporation may only be taken by written consent without a meeting if a consent in writing, setting forth the action so taken, shall be signed by all of the stockholders of the corporation entitled to vote thereon.

Section 3.13Inspectors of Election.  In advance of any meeting of stockholders, the Board may appoint any persons other than nominees for office as inspectors of election to act at such meeting or any adjournment thereof.  If inspectors of election be not so appointed, or if any persons so appointed fail to appear or refuse to act, the presiding officer of any such meeting may, and on the request of any stockholder or a stockholder’s proxy shall, make such appointment at the meeting. The number of inspectors shall be either one or three. If appointed at a meeting on the request of one or more stock-holders or proxies, the majority of shares represented in person or by proxy shall determine whether one or three inspectors are to be appointed.  The duties of such inspectors shall include:  determining the number of shares of stock and the voting power of each share, the shares of stock represented at the meeting, the existence of a quorum, and the authenticity, validity and effect of the proxies; receiving votes, ballots or consents; hearing and determining all challenges and questions in any way arising in connection with the right to vote; counting and tabulating all votes or consents; determining the result, and such acts as may be proper to conduct the election or vote with fairness to all stockholders.

ARTICLE IV.

DIRECTORS

Section 4.1Powers.  Subject to any limitations imposed by law, the certificate of incorporation and these Bylaws as to actions which shall be authorized or approved by the stockholders, and subject to the duties of directors as prescribed thereby, the business and affairs of the corporation shall be managed and all corporate powers shall be exercised by or under the direction of the Board.

Section 4.2Number of Directors.  The exact number of directors shall be fixed from time to time by the Board pursuant to a resolution adopted by the affirmative vote of a majority of the full Board.

Section 4.3  Election and Term of Office.  The directors shall be divided into three classes: the first class, the second class and the third class.  Each director shall serve for a term ending on the third annual meeting following the annual meeting at which such director was elected; provided, however, that the directors first elected to the first class shall serve for a term ending upon the election of directors at the annual meeting next following the end of the calendar year 1995, the directors first elected to the second class shall serve for a term ending upon the election of directors at the second annual meeting next following the end of the calendar year 1995, and the directors first elected to the third class shall serve for a term ending upon the election of directors at the third annual meeting next following the end of the calendar year 1995.  At each annual election commencing at the first annual meeting of stockholders, the successors to the class of directors whose term expires at the time shall be elected by the stockholders to hold office for a term of three years to succeed those directors whose term expires, so that the term of one class of directors shall expire each year.

In the event of any change in the authorized number of directors, each director then continuing to serve as such shall continue as a director of the class of which he or she is a member until the expiration of his or her current term, or his or her prior resignation, disqualification, disability or removal.

Section 4.4Newly Created Directorships and Vacancies.  Any vacancies on the Board resulting from death, resignation, retirement, disqualification, removal from office or other cause may only be filled by the affirmative vote of a majority of directors then in office, although less than a quorum, or by the sole remaining director, or, in the event of the failure of the directors or the sole remaining director so to act, by the stockholders at the next annual meeting which occurs after the expiration of a 90-day period commencing on the day the vacancy is created.  Directors so chosen shall hold office for a term expiring at the annual meeting of stockholders at which the term of the class to which they have been elected expires.  A director elected to fill a vacancy by

reason of an increase in the number of directorships may be elected by a majority vote of the directors then in office, although less than a quorum of the Board, to serve until the next election of the class for which such director shall have been chosen.  If the number of directors is changed, any increase or decrease may be allocated to any such class the Board selects in its discretion.  No decrease in the number of directors constituting the Board shall shorten the term of any incumbent director.

Section 4.5Regular Meetings.  The Board shall meet regularly at the time and place designated in a resolution of the Board or by written consent of all members of the Board, whether within or without the State of Delaware, and no notice of such regular meetings need be given to the directors.

Section 4.6Organization Meeting.  Following each annual meeting of stockholders, the Board shall hold a regular meeting at the place of said annual meeting or at such other place as shall be fixed by the Board, for the purpose of organization, election of officers, and the transaction of other business.  Call and notice of such meetings are hereby dispensed with.

Section 4.7Special Meetings.  Special meetings of the Board may be called by the Chairman of the Board, the President, the Chief Executive Officer, the Secretary, or any two directors. Notice of each such meeting shall be given to each director by the secretary or by the person or persons calling the meeting. Such notice shall specify the time and place of the meeting, which may be within or without the State of Delaware, and the general nature of the business to be transacted, and no other business may be transacted at the meeting.  Such notice shall be deposited in the mail, postage prepaid at least four days prior to the meeting, directed to the address of the director on the records of the corporation or delivered in person or by telephone or telegram, telecopy or other means of electronic transmission to the director at least 48 hours before the meeting.  Notice of a meeting need not be given to any director who signs a waiver of notice or a consent to holding the meeting, or an approval of the minutes thereof, whether before or after such meeting, or who attends the meeting without protesting, prior thereto or at its commencement, the lack of notice to such director.  All such waivers, consents and approvals shall be filed with the corporate records or made a part of the minutes of the meeting.

Section 4.8 Quorum; Majority Action.  A majority of the authorized number of directors shall constitute a quorum for the transaction of business at any meeting of the Board, but if less than such majority is present at a meeting, a majority of the directors present may adjourn the meeting from time to time. Notice of any adjourned meeting shall be given in the same manner as prescribed in Section 4.7 of these Bylaws.  Every act or decision of a majority of the directors present at a meeting at which a quorum is present, made or done at a meeting duly

held, shall be valid as the act of the Board, unless a greater number is required by law or the certificate of incorporation or these Bylaws.

Section 4.9 Action Without Meeting.  Any action required or permitted to be taken by the Board may be taken without a meeting if all members of the Board shall individually or collectively consent in writing to such action.  Such written consent or consents shall be filed with the minutes of the proceedings of the Board and shall have the same force and effect as an unanimous vote of the Board.

Section 4.10 Telephonic Meetings.  Members of the Board may participate in any regular or special meeting, including meetings of committees of the Board, through use of conference telephone or similar communications equipment, so long as all members participating in such meeting can hear one another.  Participation in a meeting pursuant to this section constitutes presence in person at such meeting.

Section 4.11Fees and Compensation.  Fees and compensation of directors and members of committees for their services, and reimbursement for expenses, shall be fixed or determined by a resolution of the Board.  Nothing herein contained shall be construed to preclude any director from serving the corporation in any other capacity as an officer, employee, agent or otherwise, and receiving compensation therefor.

Section 4.12Removal.  A director may be removed only for cause as determined by the affirmative vote of the holders of at least a majority of the shares then entitled to vote in an election of directors, which vote may only be taken at an annual meeting or a special meeting.  Cause for removal shall be deemed to exist only if the director whose removal is proposed has been convicted of a felony by a court of competent jurisdiction or has been adjudged by a court of competent jurisdiction to be liable for gross negligence or misconduct in the performance of such director’s duty to the corporation and such adjudication is not longer subject to direct appeal.

Section 4.13Directors Emeritus/Advisory Directors.  The board of directors may by resolution appoint directors emeritus or advisory directors who shall have such authority and receive such compensation and reimbursement as the board of directors shall provide.  Directors emeritus or advisory directors shall not have the authority to participate by vote in the transaction of business.

ARTICLE V.

OFFICERS

Section 5.1Executive Officers.  The executive officers of the Corporation shall be the Chairman of the Board, the Chief Executive Officer, the

President, each Senior Executive Vice President, each Executive Vice President, the Secretary, the Treasurer, the Chief Financial Officer and any other individual performing functions similar to those performed by the foregoing persons, including any Senior Vice President or Vice President designated by the Board as performing such functions.

Section 5.2 Election. The Officers of the Corporation, except such Officers as may be appointed in accordance with the provisions of Section 5.3 or Section 5.5, shall be chosen annually by the Board.  Each officer shall hold his or her office until he or she shall resign or shall be removed or otherwise disqualified to serve, or his or her successor shall be elected and qualified, and shall perform such duties as are prescribed in the Bylaws or as the Board may from time to time determine.

Section 5.3Subordinate Officers.  The corporation may have, at the discretion of the Board, one or more Senior Vice presidents, Vice Presidents and Assistant Vice Presidents, one or more Assistant Secretaries, one or more Assistant Financial Officers and such other officers as the Board may appoint, each of whom shall hold office for such period, have such authority and perform such duties as the Board may from time to time determine.  The Board may delegate the authority to appoint, and to fix the compensation of, any subordinate officer or officers to any executive officer of the corporation.  Any person may hold more than one office, executive or subordinate.

Section 5.4Removal and Resignation.  Any officer may be removed, either with or without cause, by the Board, at any regular or special meeting thereof, or by any officer upon whom such power of removal may be conferred by the Board (without prejudice, however, to the rights, if any, of an officer under any contract of employment with the corporation).

Any officer may resign at any time by giving written notice to the Board or to the president or to the Secretary of the corporation, without prejudice, however, to the rights, if any, of the corporation under any contract to which such officer is a party.  Any such resignation shall take effect at the date of the receipt or at any later time specified therein.

Section 5.5 Vacancies.  A vacancy in any office because of death, resignation, removal, disqualification or any other cause shall be filled by the Board for the unexpired portion of the term.

Section 5.6 Compensation. The Board shall fix the compensation of all of the officers of the corporation, except in the case of subordinate officers with respect to whom the authority to fix compensation has been delegated pursuant to Section 5.3 of these Bylaws.

Section 5.7Chairman of the Board.  The Chairman of the Board, if there shall be such an officer, shall, if present, preside at all meetings of the Board and exercise and perform such other powers and duties as may be from time to time assigned to him or her by the Board or prescribed by these Bylaws.

Section 5.8  Chief Executive Officer.  Subject to any powers that may be given by the Board to the Chairman of the Board, the Chief Executive Officer shall be the chief executive officer of the corporation and shall have general supervision, direction and control of the business and affairs of the corporation.

Section 5.9 President.  Subject to any powers that may be given by the Board to the Chairman of the Board and to the Chief Executive Officer, the President shall be the chief operating officer of the corporation and shall, subject to the control of the Board, have the general powers and duties of management usually vested in the office of the president of a corporation, and shall have such other powers and duties as the Board shall from time to time prescribe.

Section 5.10Secretary. The Secretary shall keep, or cause to be kept, minutes of all meetings of the stockholders and Board in a book to be provided for that purpose, and shall attend to the giving and serving of all notices of meetings of stockholders and directors, and any other notices required by lain to be given.  The Secretary shall be custodian of the corporate seal, if any, and shall affix the seal to all documents and papers requiring such seal.  The Secretary shall have such other powers and duties as the Board from time to time shall prescribe.

Section 5.11Chief Financial Officer. The Chief Financial Officer shall keep and maintain, or cause to be kept and maintained, adequate and correct accounts of the properties and business transactions of the corporation, shall receive and keep all the funds of the corporation and shall pay out corporate funds on the check of the corporation, signed in such manner as shall be authorized by the Board.  The Chief Financial Officer shall have such other powers and duties as the Board shall from time to time prescribe.

ARTICLE VI.

COMMITTEES

Section 6.1 Executive Committee.  The Board may, by a resolution adopted by a majority of the authorized number of directors, but shall not be required to, designate an executive committee consisting of four or more directors, one of which shall be the Chairman of the Board or the Chief Executive Officer, to serve at the pleasure of the Board.  If an executive committee is designated, it shall have, to the extent provided if the resolution of the Board or in these Bylaws, all the authority of the Board, except with respect to:

(a)The approval of any action for which approval of the stockholders is also required by law;

(b)The filling of vacancies of the Board or on any committee;

(c)The fixing of compensation of the directors for serving on the Board or on any committee;

(d)The amendment or repeal of Bylaws or the adoption of new Bylaws;

(e)The amendment or repeal of any resolution of the Board which by its express terms is not so amendable or repealable;

(f)A distribution to the stockholders of the corporation, except at a rate or in a periodic amount or within a price range determined by the Board;

(g)The appointment of other committees of the Board or the members thereof; and

(h)The election, removal or fixing of the compensation of the Chairman of the Board, the Chief Executive Officer or the President.

The Board may, by resolution, fix the regular meeting date of the executive committee, and notice of any such regular meeting date shall be dispensed with.  Special meetings of the executive committee may be held at the principal office of the corporation, or at any place which has been designated from time to time by resolution of the executive committee or by written consent of all members thereof and may be called by the Chairman of the Board, the president, any Vice president who is a member of the executive committee, or any two members thereof, upon written notice to the members of the executive committee of the time and place of such special meeting given in the manner provided for the giving of written notice to members of the Board of the time and place of special meetings of the Board.  Vacancies in the membership of the executive committee nay be filled by the Board.  A majority of the authorized number of members of the executive committee shall constitute a quorum for the transaction of business; and transactions of any meeting of the executive committee, however, called and noticed, or wherever held, shall be as valid as though at a meeting duly held after regular call and notice, if a quorum is present and if, either before or after the meeting, each of the members not present signs a written waiver of notice or a consent to holding such meeting or an approval of the minutes thereof.  All such waivers, consents or approvals shall be filed with the corporation’s records or made a part of the minutes of the meeting.

Any action required or permitted to be taken by the executive committee may be taken without a meeting, if all members of the executive

committee shall individually or collectively consent in writing to such action.  Such written consent or consents shall be filed with the minutes of the proceedings of the executive committee.  Such action by written consent shall have the same force and effect as a unanimous vote of such members of the executive committee.  Any certificate or other document filed under any provision of the General Corporation Law which relates to action so taken shall state that the action was taken by unanimous written consent of the executive committee without meeting, and that these Bylaws authorize the members of the executive committee to so act.

Section 6.2Other Committees.  The Board may, but shall not be required to, designate any other committee consisting of two or more directors, to serve at the pleasure of the Board.  Any such committee shall possess such powers of the Board as the Board shall by its resolution provide, except that it shall not in any event have authority with respect to any of the transactions which are prohibited to the executive committee by Section 6.1.

Unless the Board shall otherwise prescribe the manner of proceedings of any other committee, meetings of such committee may be regularly scheduled in advance and may be called at any time by the Chairman of the Board, or the President, or any two members of the committee; otherwise, the provisions of these Bylaws with respect to notice and conduct of meetings of the Board shall govern.

ARTICLE VII.

RECORDS AND REPORTS

Section 7.1Records.  The corporation shall maintain adequate and correct books and records of account of its business and properties.

Section 7.2Checks and Drafts.  All checks, drafts and other orders for payment of money, notes or other evidences of indebtedness, issued in the name of or payable to the corporation, shall be signed or endorsed by such person or persons and in such manner as shall be determined from time to time by resolution of the Board.

Section 7.3Execution of Instruments.  The Board may authorize any officer or officers or agent or agents to enter into any contract or execute any instrument in the name of and on behalf of the corporation.  Such authority may be general or confined to specific instances.  Unless so authorized by the Board, no officer, agent or employee shall have any power or to pledge its credit, or to render it liable for any purpose or for any amount.

Section 7.4Fiscal Year.  The fiscal year of the corporation shall be a December 31 fiscal year.

Section 7.5Annual Audit.  The corporation shall be subject to an annual audit as of the end of its fiscal year by independent public accountants appointed by, and responsible to, the Board.  The appointment of such accountants shall be subject to annual ratification by the stockholders.

ARTICLE VIII.

DIVIDENDS ON STOCK

Section 8.1Dividends on Stock.  Subject to applicable law, the certificate of incorporation and these Bylaws, the Board may, from time to time, declare, and the corporation may pay, dividends on the outstanding shares of capitol stock of the corporation.

ARTICLE IX.

SHARES; CERTIFICATES

Section 9.1Issuance.  The corporation, as authorized by the Board, may issue shares in uncertificated form and may also issue any and all forms of certificates of stock not inconsistent with law.

Section 9.2Certificates for Shares.  Every holder of shares of the stock of the corporation or shares of any other class or series of stock that may be validly authorized and issued by the corporation shall be entitled to have a certificate signed in the name of the corporation by the Chairman of the Board or the President or a Vice President and by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary, certifying the number of shares and the class or series of shares owned by the stockholder.  Any of the signatures on the certificate may be a facsimile.  In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if such person were an officer, transfer agent or registrar at the date of issue.

Section 9.3Statements on Certificates.  Any certificates for shares of stock shall contain such legend or other statement as may be required by law or applicable rule or regulation, by these Bylaws or by any agreements between the corporation and the issuee thereof.

Section 9.4Lost or Destroyed Certificates.  In case any certificate for stock or other security issued by this corporation is lost or destroyed, the Board may authorize the issuance of a new certificate or instrument therefor, on such terms and conditions as it may determine, after proof of such loss or destruction satisfactory to the Board.  The Board may require a bond or other security in an adequate amount as indemnity for any such certificate or instrument when, in the Board’s judgment, it is proper to do so.

Section 9.5Transfer.  Stock of the corporation shall be transferable on the books of the corporation by the person named in the certificate, or by the person entitled thereto, on surrender, in the case of shares issued in certificated form,  of the certificate for cancellation, accompanied by proper evidence of succession, assignment or authority to transfer.  The corporation shall be entitled to treat the holder of record of any stock certificate as owner thereof, and, accordingly, shall not be bound to recognize any equitable or other claim to, or interest In, such stock on the part of any other person, whether or not It shall have express or other notice thereof, save as expressly provided by the laws of the State of Delaware.

Section 9.6  Shares To Be Issued In Uncertificated Form.Except as otherwise provided in a resolution of the Board of Directors, or authorized by an officer of the corporation, all shares of the corporation shall be uncertificated shares beginning on April 3, 2010. Nothwithstanding the foregoing, shares represented by a certificate issued prior to April 3, 2010, shall be certificated shares until such certificate is surrendered to this corporation.

ARTICLE X.

MISCELLANEOUS

Section 10.1 Record Date.

10.1.1  Stockholders Meetings.  In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or adjournment thereof, the Board may fix, in advance, a record date, which shall not be more than 60 nor less than 10 days before the date of such meeting.  A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; providing, however, that the Board may fix a new record date for the adjourned meeting.

10.1.2  Other Actions.  In order that the corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, the Board may fix, in advance, a record date, which shall not be more than 60 days prior to such action.

10.1.3  Subsequent Transfers and Closing Transfer Books.  When a record date is fixed, only stockholders of record at the close of business on that date are entitled to notice and to vote or to receive the dividend, distribution or allotment of rights or to exercise the rights, as the case may be, notwithstanding any transfer of any shares on the books of the corporation after the record date, except as otherwise provided in the certificate of incorporation or by agreement or

in the General Corporation Law.  The Board may close the books of the corporation against transfers of shares during the whole, or any part, of any such period.

Section 10.2Inspection of Corporate Records.

10.2.1  By Stockholders.  Any stockholder, in person or by attorney or other agent, shall, upon written demand under oath stating the purpose thereof, have the right during the usual hours of business to inspect for any proper purpose the corporation’s stock ledger, a list of its stockholders, and its other books and records, and to make copies or extracts therefrom.  A proper purpose shall mean a purpose reasonably related to such person’s interest as a stockholder.  In every instance where an attorney or other agent shall be the person who seeks the right to inspection, the demand under oath shall be accompanied by a power of attorney or such other writing which authorizes the attorney or other agent to so act on behalf of the stockholder.

10.2.2  By Directors.  Each director shall have the right at any reasonable time to inspect all books, records, documents of every kind, and the physical properties of the corporation.  The inspection may be made in person or by agent or attorney, and the right of inspection includes the right to make extracts and copies thereof.

Section 10.3Corporate Seal.  The corporate seal of the corporation, if any, shall be in such form as the Board shall prescribe.

ARTICLE XI.

AMENDMENT OF BYLAWS

These Bylaws may be adopted, amended or repealed by the affirmative vote of the holders of at least two-thirds of the total votes eligible to be cast at a legal meeting of the stockholders or by a resolution adopted by a majority of the directors then in office.

EX-3.3

Exhibit 3.3

   PAGE 1

I, JEFFREY W. BULLOCK, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF AMENDMENT OF “BROADWAY FINANCIAL CORPORATION”, FILED IN THIS OFFICE ON THE TWENTY-FIFTH DAY OF AUGUST, A.D. 2011, AT 1:58 O’CLOCK P.M.

A FILED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW CASTLE COUNTY RECORDER OF DEEDS.

		/s/ Jeffrey W. Bullock
2545755    8100		Jeffrey W. Bullock, Secretary of State
		AUTHENTICATION: 8994382
110953393		DATE: 08-26-11
You may verify this certificate online at corp.delaware.gov/authver.shtml

State of Delaware

Secretary of State

Division of Corporations

Delivered 02:05 PM 08/25/2011

FILED 01:58 PM 08/25/2011

SRV 110953393 - 2545755 FILE

CERTIFICATE OF AMENDMENT

OF

CERTIFICATE OF INCORPORATION

OF

BROADWAY FINANCIAL CORPORATION

Broadway Financial Corporation, a corporation organized and existing under and by virtue of the laws of the State of Delaware (the “Corporation”), hereby certifies that:

1.Article FOURTH of the Certificate of Incorporation of the Corporation is hereby amended and restated in its entirety to read as follows:

FOURTH:  The total number of shares of all classes of stock which this corporation shall have authority to issue is nine million (9,000,000), of which eight million (8,000,000) shall be common stock, par value $0.01 per share, and one million (1,000,000) shall be serial preferred stock, par value $0.01 per share.

The shares of preferred stock may be issued from time to time in one or more series.  The board of directors of this corporation shall have authority to fix by resolution or resolutions the designations and the powers, preferences and relative, participating, optional or other special rights and qualifications, limitations or restrictions thereof, including without limitation the voting rights, the dividend rate, conversion rights, redemption price and liquidation preference, of any series of shares of preferred stock, to fix the number of shares constituting any such series and to increase or decrease the number of shares of any such series (but not below the number of shares thereof then outstanding).  In case the number of shares of any such series shall  be so decreased the shares constituting such decrease shall resume the status which they had prior to the adoption of the resolution or resolutions originally fixing the number of shares of such series.

2.The foregoing amendment has been duly adopted in accordance with the provisions of Section 242 of the Delaware General Corporation Law.

In Witness Whereof, Broadway Financial Corporation has caused this Certificate of Amendment to Certificate of Incorporation to be signed by its duly authorized officer on this 17th day of August 2011.

BROADWAY FINANCIAL CORPORATION
By:	/s/ Daniele Johnson
	Daniele Johnson Secretary

EX-31.1

Exhibit 31.1

SECTION 302 CERTIFICATION

I, Wayne-Kent A. Bradshaw, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Broadway Financial Corporation;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:    August 13, 2013	By: /s/ Wayne-Kent A. Bradshaw
	Wayne-Kent A. Bradshaw
	Chief Executive Officer

EX-31.2

Exhibit 31.2

SECTION 302 CERTIFICATION

I, Brenda J. Battey, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Broadway Financial Corporation;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:     August 13, 2013	By:  /s/  Brenda J. Battey
	Brenda J. Battey
	Chief Financial Officer

EX-32.1

Exhibit 32.1

SECTION 906 CERTIFICATION

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

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

Date:  August 13, 2013	By: /s/ Wayne-Kent A. Bradshaw
	Wayne-Kent A. Bradshaw
	Chief Executive Officer

EX-32.2

Exhibit 32.2

SECTION 906 CERTIFICATION

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

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

Date:  August 13, 2013	By: /s/ Brenda J. Battey
	Brenda J. Battey
	Chief Financial Officer

XML

Earnings (Loss) Per Common Share (Tables)

6 Months Ended

Jun. 30, 2013

Earnings (Loss) Per Common Share

Schedule of basic and diluted earnings (loss) per common share

	For the three months ended June 30,				For the six months ended June 30,
	2013		2012		2013		2012
	(Dollars in thousands, except per share)
Basic
Net income (loss)	$	(228)	$	1,697	$	(844)	$	1,851
Less: Preferred stock dividends and accretion	(337)		(285)		(652)		(571)
Income (loss) available to common shareholders	$	(565)	$	1,412	$	(1,496)	$	1,280
Weighted average common shares outstanding	1,917,422		1,744,565		1,917,422		1,744,565
Earnings (loss) per common share - basic	$	(0.29)	$	0.81	$	(0.78)	$	0.73
Diluted
Net income (loss)	$	(228)	$	1,697	$	(844)	$	1,851
Less: Preferred stock dividends and accretion	(337)		(285)		(652)		(571)
Income (loss) available to common shareholders	$	(565)	$	1,412	$	(1,496)	$	1,280
Weighted average common shares outstanding	1,917,422		1,744,565		1,917,422		1,744,565
Add: dilutive effects of assumed exercises of stock options	-		-		-		-
Average shares and dilutive potential common shares	1,917,422		1,744,565		1,917,422		1,744,565
Earnings (loss) per common share - diluted	$	(0.29)	$	0.81	$	(0.78)	$	0.73

XML

Consolidated Statements of Operations and Comprehensive Income (Loss) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Interest income:
Interest and fees on loans receivable	$ 3,896	$ 5,030	$ 7,783	$ 10,360
Interest on mortgage backed and other securities	80	135	169	283
Other interest income	86	20	134	36
Total interest income	4,062	5,185	8,086	10,679
Interest expense:
Interest on deposits	582	880	1,206	1,855
Interest on borrowings	712	815	1,424	1,648
Total interest expense	1,294	1,695	2,630	3,503
Net interest income before provision for loan losses	2,768	3,490	5,456	7,176
Provision for loan losses		102		1,061
Net interest income after provision for loan losses	2,768	3,388	5,456	6,115
Non-interest income:
Service charges	129	147	271	292
Loan servicing fees, net	4	4	10	(162)
Net gains on sales of loans	81		97
Net gains (losses) on sales of REO	(10)	(17)	(2)	395
Gain on sale of office properties and equipment		2,523		2,523
Gain on sale of securities		50		50
Other	50	17	99	49
Total non-interest income	254	2,724	475	3,147
Non-interest expense:
Compensation and benefits	1,495	1,538	2,949	3,127
Occupancy expense, net	323	297	663	584
Information services	206	239	423	452
Professional services	151	176	333	284
Provision for (recapture of) losses on loans held for sale	(2)	188	468	186
Provision for losses on REO	223	331	223	312
FDIC insurance	190	216	392	433
Office services and supplies	116	108	221	217
Other	547	550	1,097	969
Total non-interest expense	3,249	3,643	6,769	6,564
Income (loss) before income taxes	(227)	2,469	(838)	2,698
Income tax expense	1	772	6	847
Net income (loss)	(228)	1,697	(844)	1,851
Other comprehensive income (loss), net of tax:
Unrealized loss on securities available for sale	(128)	(86)	(146)	(79)
Reclassification of net gains included in net earnings		(50)		(50)
Other comprehensive income (loss), net of tax	(128)	(136)	(146)	(129)
Comprehensive income (loss)	(356)	1,561	(990)	1,722
Net income (loss)	(228)	1,697	(844)	1,851
Dividends and discount accretion on preferred stock	(337)	(285)	(652)	(571)
Income (loss) available to common shareholders	$ (565)	$ 1,412	$ (1,496)	$ 1,280
Earnings (loss) per common share-basic (in dollars per share)	$ (0.29)	$ 0.81	$ (0.78)	$ 0.73
Earnings (loss) per common share-diluted (in dollars per share)	$ (0.29)	$ 0.81	$ (0.78)	$ 0.73
Dividends declared per share-common stock (in dollars per share)	$ 0.00	$ 0.00	$ 0.00	$ 0.00

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Loans Receivable Held For Sale (Loans receivable held for sale)

6 Months Ended

Jun. 30, 2013

Loans receivable held for sale

Loans receivable held for sale

Loans Receivable

NOTE (5) – Loans Receivable Held For Sale

Loans receivable held for sale at June 30, 2013 and December 31, 2012 were as follows:

	June 30, 2013		December 31, 2012
	(In thousands)
One-to-four units	$	-	$	7,916
Five or more units	3,808		5,795
Commercial real estate	1,349		1,358
Church	4,283		4,300
Valuation allowance for unrealized losses	(314)		(318)
Loans receivable held for sale, net	$	9,126	$	19,051
Non-performing loans receivable held for sale (1)	$	1,904	$	10,168
Valuation allowance	-		-
Non-performing loans receivable held for sale, net	$	1,904	$	10,168
Performing loans receivable held for sale	$	7,536	$	9,201
Valuation allowance	(314)		(318)
Performing loans receivable held for sale, net	$	7,222	$	8,883

______

(1) Net of charge-offs of $679 thousand and $2.5 million at June 30, 2013 and December 31, 2012.

When management decides to sell certain loans held in portfolio, we reclassify them to held for sale at the lower of cost or fair value, less estimated selling costs.  During the first quarter of 2013, eight non-performing loans secured by five or more units, seven non-performing loans secured by commercial real estate and two non-performing loans secured by churches, were transferred to held-for-sale.  At the time of transfer, these loans had a carrying amount of $7.7 million and required additional charge-offs of $1.5 million, which were reserved for at year-end 2012.  These loans were sold during the second quarter of 2013 with a net gain of $81 thousand.  Additionally, $9.3 million of delinquent and non-performing loans secured by one-to-four units and church properties were sold at a net gain of $16 thousand during the first quarter of 2013.  There were no loan sales during the first half of 2012.  No loans receivable held for sale were transferred to REO during the six months ended June 30, 2013 and 2012.

Net write-downs on non-performing loans receivable held for sale to lower of cost or fair value totaled $471 thousand for the six months ended June 30, 2013, compared to $187 thousand for the same period in 2012. Additionally, during the first half of 2013 and 2012, we decreased our valuation allowance by $3 thousand and $1 thousand on loans held for sale that are considered performing loans.

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Earnings (Loss) Per Common Share (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Basic
Net income (loss)	$ (228)	$ 1,697	$ (844)	$ 1,851
Less: Preferred stock dividends and accretion	(337)	(285)	(652)	(571)
Income (loss) available to common shareholders	(565)	1,412	(1,496)	1,280
Weighted average common shares outstanding	1,917,422	1,744,565	1,917,422	1,744,565
Earnings (loss) per common share - basic (in dollars per share)	$ (0.29)	$ 0.81	$ (0.78)	$ 0.73
Diluted
Net income (loss)	(228)	1,697	(844)	1,851
Less: Preferred stock dividends and accretion	(337)	(285)	(652)	(571)
Income (loss) available to common shareholders	$ (565)	$ 1,412	$ (1,496)	$ 1,280
Weighted average common shares outstanding	1,917,422	1,744,565	1,917,422	1,744,565
Average shares and dilutive potential common shares	1,917,422	1,744,565	1,917,422	1,744,565
Earnings (loss) per common share - diluted (in dollars per share)	$ (0.29)	$ 0.81	$ (0.78)	$ 0.73
Anti-dilutive stock options not considered in computing diluting earnings (loss) per common share	148,750	227,075	148,750	227,075

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Securities (Tables)

6 Months Ended

Jun. 30, 2013

Securities

Summary of amortized cost and fair value of available-for-sale investment and corresponding amounts of unrealized gains

	Amortized Cost		Gross  Unrealized  Gains		Gross  Unrealized  Losses		Fair Value
	(In thousands)
June 30, 2013:
Residential mortgage-backed	$	10,545	$	572	$	-	$	11,117
Total available-for-sale securities	$	10,545	$	572	$	-	$	11,117
December 31, 2012:
Residential mortgage-backed	$	12,660	$	718	$	-	$	13,378
Total available-for-sale securities	$	12,660	$	718	$	-	$	13,378

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Junior Subordinated Debentures and Other Borrowings (Details) (USD $)			0 Months Ended	6 Months Ended	0 Months Ended
	Jun. 30, 2013	Dec. 31, 2012	Mar. 17, 2004 Floating Rate Junior Subordinated Debentures	Jun. 30, 2013 Floating Rate Junior Subordinated Debentures	Feb. 28, 2010 Line of Credit	Jun. 30, 2013 Line of Credit
Junior subordinated debentures and other borrowings
Face amount of debt issued	$ 6,000,000	$ 6,000,000	$ 6,000,000
Maturity of debentures			10 years
Interest rate margin on debentures (as a percent)				2.54%
Debt instrument interest rate description				3-month LIBOR
Effective interest rate on debentures (as a percent)				2.81%
Line of credit outstanding	5,000,000				5,000,000
Line of credit borrowing capacity					5,000,000
Minimum interest rate on line of credit (as a percent)					6.00%
Increase in interest rate in event of default (as a percent)					5.00%
Accrued interest	$ 2,308,000	$ 1,941,000		$ 540,000		$ 1,700,000

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Loans Receivable Held For Sale (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Loans receivable held for sale
Valuation allowance	$ (314)	$ (318)
Loans receivable held for sale, net	9,126	19,051
Charge-offs, Non-performing loans	679	2,500
Non-performing
Loans receivable held for sale
Loans receivable held for sale, Gross	1,904	10,168
Loans receivable held for sale, net	1,904	10,168
Performing
Loans receivable held for sale
Loans receivable held for sale, Gross	7,536	9,201
Valuation allowance	(314)	(318)
Loans receivable held for sale, net	7,222	8,883
One-to-four units
Loans receivable held for sale
Loans receivable held for sale, Gross		7,916
Five or more units
Loans receivable held for sale
Loans receivable held for sale, Gross	3,808	5,795
Commercial real estate
Loans receivable held for sale
Loans receivable held for sale, Gross	1,349	1,358
Church
Loans receivable held for sale
Loans receivable held for sale, Gross	$ 4,283	$ 4,300

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Securities (Details 2) (USD $)	3 Months Ended	6 Months Ended
	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012	Dec. 31, 2012
Securities
Securities pledged		$ 11,100,000		$ 1,500,000
Sales of securities		0
Gain on sale of securities	50,000		50,000
Residential mortgage-backed
Securities
Estimated remaining term		4 years 10 months 24 days
U.S. Government and federal agency bonds
Securities
Sales of securities			1,000,000
Gain on sale of securities			$ 50,000

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Loans Receivable Held for Investment (Details 6) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Investment in non-accrual loans by class of loans
Total non-accrual loans	$ 18,607	$ 37,090
Loans 90 days or more delinquent that were accruing interest	0	0
Loans receivable held for sale | One-to-four units
Investment in non-accrual loans by class of loans
Total non-accrual loans		6,656
Loans receivable held for sale | Five or more units
Investment in non-accrual loans by class of loans
Total non-accrual loans		1,956
Loans receivable held for sale | Commercial real estate
Investment in non-accrual loans by class of loans
Total non-accrual loans	348
Loans receivable held for sale | Church
Investment in non-accrual loans by class of loans
Total non-accrual loans	1,556	1,556
Loans receivable held for investment | One-to-four units
Investment in non-accrual loans by class of loans
Total non-accrual loans	1,406	1,489
Loans receivable held for investment | Five or more units
Investment in non-accrual loans by class of loans
Total non-accrual loans	2,208	2,312
Loans receivable held for investment | Commercial real estate
Investment in non-accrual loans by class of loans
Total non-accrual loans	404	7,090
Loans receivable held for investment | Church
Investment in non-accrual loans by class of loans
Total non-accrual loans	12,519	15,689
Loans receivable held for investment | Construction
Investment in non-accrual loans by class of loans
Total non-accrual loans		273
Loans receivable held for investment | Commercial Other
Investment in non-accrual loans by class of loans
Total non-accrual loans	97
Loans receivable held for investment | Consumer Other
Investment in non-accrual loans by class of loans
Total non-accrual loans	$ 69	$ 69

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Fair Value (Details 2) (USD $) In Thousands, unless otherwise specified			3 Months Ended		6 Months Ended		3 Months Ended		6 Months Ended		3 Months Ended		6 Months Ended		3 Months Ended		6 Months Ended
	Jun. 30, 2013 Level 3	Dec. 31, 2012 Level 3	Jun. 30, 2013 Non-recurring basis	Jun. 30, 2012 Non-recurring basis	Jun. 30, 2013 Non-recurring basis	Jun. 30, 2012 Non-recurring basis	Jun. 30, 2013 Non-recurring basis Non-performing loans receivable held-for-sale	Jun. 30, 2012 Non-recurring basis Non-performing loans receivable held-for-sale	Jun. 30, 2013 Non-recurring basis Non-performing loans receivable held-for-sale	Jun. 30, 2012 Non-recurring basis Non-performing loans receivable held-for-sale	Jun. 30, 2013 Non-recurring basis Impaired loans carried at fair value of collateral	Jun. 30, 2012 Non-recurring basis Impaired loans carried at fair value of collateral	Jun. 30, 2013 Non-recurring basis Impaired loans carried at fair value of collateral	Jun. 30, 2012 Non-recurring basis Impaired loans carried at fair value of collateral	Jun. 30, 2013 Non-recurring basis Real estate owned	Jun. 30, 2012 Non-recurring basis Real estate owned	Jun. 30, 2013 Non-recurring basis Real estate owned	Jun. 30, 2012 Non-recurring basis Real estate owned	Dec. 31, 2012 Non-recurring basis Level 3 One-to-four units Non-performing loans receivable held-for-sale	Jun. 30, 2013 Non-recurring basis Level 3 One-to-four units Impaired loans carried at fair value of collateral	Dec. 31, 2012 Non-recurring basis Level 3 One-to-four units Impaired loans carried at fair value of collateral	Dec. 31, 2012 Non-recurring basis Level 3 Five or more units Non-performing loans receivable held-for-sale	Jun. 30, 2013 Non-recurring basis Level 3 Five or more units Impaired loans carried at fair value of collateral	Dec. 31, 2012 Non-recurring basis Level 3 Five or more units Impaired loans carried at fair value of collateral	Jun. 30, 2013 Non-recurring basis Level 3 Commercial real estate Non-performing loans receivable held-for-sale	Jun. 30, 2013 Non-recurring basis Level 3 Commercial real estate Impaired loans carried at fair value of collateral	Dec. 31, 2012 Non-recurring basis Level 3 Commercial real estate Impaired loans carried at fair value of collateral	Jun. 30, 2013 Non-recurring basis Level 3 Commercial real estate Real estate owned	Dec. 31, 2012 Non-recurring basis Level 3 Commercial real estate Real estate owned	Jun. 30, 2013 Non-recurring basis Level 3 Church Non-performing loans receivable held-for-sale	Dec. 31, 2012 Non-recurring basis Level 3 Church Non-performing loans receivable held-for-sale	Jun. 30, 2013 Non-recurring basis Level 3 Church Impaired loans carried at fair value of collateral	Dec. 31, 2012 Non-recurring basis Level 3 Church Impaired loans carried at fair value of collateral	Jun. 30, 2013 Non-recurring basis Level 3 Church Real estate owned	Dec. 31, 2012 Non-recurring basis Level 3 Church Real estate owned
Fair Value
Loans receivable, fair value	$ 225,136	$ 252,043																	$ 6,656	$ 1,349	$ 1,284	$ 1,956	$ 920	$ 1,679	$ 348	$ 403	$ 3,385			$ 1,556	$ 1,556	$ 7,079	$ 6,649
Assets, fair value																												1,792	2,752					4,435	5,411
Gains (losses) recognized on assets measured at fair value			$ (587)	$ (345)	$ (1,091)	$ (1,415)	$ 2	$ (188)	$ (468)	$ (187)	$ (366)	$ 174	$ (400)	$ (916)	$ (223)	$ (331)	$ (223)	$ (312)

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Loans Receivable Held for Investment (Details 3) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Mar. 31, 2013	Dec. 31, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2011
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$ 2,632		$ 2,732
Collectively evaluated for impairment	7,947		9,137
Total ending allowance balance	10,579	10,450	11,869	17,856	17,752	17,299
Loans:
Loans individually evaluated for impairment	35,467		44,376
Loans collectively evaluated for impairment	199,944		218,750
Total ending loans balance	235,411		263,126
One-to-four units
Ending allowance balance attributable to loans:
Individually evaluated for impairment	636		719
Collectively evaluated for impairment	1,809		1,341
Total ending allowance balance	2,445	1,834	2,060	4,701	4,836	4,855
Loans:
Loans individually evaluated for impairment	3,713		4,576
Loans collectively evaluated for impairment	48,285		53,157
Total ending loans balance	51,998		57,733
Five or more units
Ending allowance balance attributable to loans:
Individually evaluated for impairment	60		125
Collectively evaluated for impairment	1,109		1,997
Total ending allowance balance	1,169	1,123	2,122	2,897	3,013	2,972
Loans:
Loans individually evaluated for impairment	2,911		3,766
Loans collectively evaluated for impairment	74,959		79,584
Total ending loans balance	77,870		83,350
Commercial real estate
Ending allowance balance attributable to loans:
Individually evaluated for impairment	182		543
Collectively evaluated for impairment	1,492		2,142
Total ending allowance balance	1,674	1,549	2,685	2,640	2,859	3,108
Loans:
Loans individually evaluated for impairment	6,566		10,364
Loans collectively evaluated for impairment	26,174		30,760
Total ending loans balance	32,740		41,124
Church
Ending allowance balance attributable to loans:
Individually evaluated for impairment	1,588		1,276
Collectively evaluated for impairment	3,472		3,542
Total ending allowance balance	5,060	5,677	4,818	7,223	6,494	5,742
Loans:
Loans individually evaluated for impairment	22,111		25,328
Loans collectively evaluated for impairment	48,120		50,926
Total ending loans balance	70,231		76,254
Construction
Ending allowance balance attributable to loans:
Collectively evaluated for impairment	8		8
Total ending allowance balance	8	8	8	106	233	249
Loans:
Loans individually evaluated for impairment			273
Loans collectively evaluated for impairment	443		462
Total ending loans balance	443		735
Commercial
Ending allowance balance attributable to loans:
Individually evaluated for impairment	97
Collectively evaluated for impairment	47		98
Total ending allowance balance	144	181	98	201	231	247
Loans:
Loans individually evaluated for impairment	97
Loans collectively evaluated for impairment	1,903		3,826
Total ending loans balance	2,000		3,826
Consumer
Ending allowance balance attributable to loans:
Individually evaluated for impairment	69		69
Collectively evaluated for impairment	10		9
Total ending allowance balance	79	78	78	88	86	126
Loans:
Loans individually evaluated for impairment	69		69
Loans collectively evaluated for impairment	60		35
Total ending loans balance	$ 129		$ 104

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Stock-based Compensation (Details) (2008 LTIP, USD $) In Thousands, except Share data, unless otherwise specified	6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
Stock-based Compensation
Shares authorized to be granted under stock compensation plan	437,390
Stock based compensation expense, net of tax	$ 22	$ 40
Stock Options
Stock-based Compensation
Stock options granted (in shares)	0	0
Contractual term of option awards	10 years
Stock Options | Maximum
Stock-based Compensation
Vesting period of option awards	5 years

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Securities (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Securities
Amortized Cost	$ 10,545	$ 12,660
Gross Unrealized Gains	572	718
Fair Value	11,117	13,378
Residential mortgage-backed
Securities
Amortized Cost	10,545	12,660
Gross Unrealized Gains	572	718
Fair Value	$ 11,117	$ 13,378

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Basis of Financial Statement Presentation

6 Months Ended

Jun. 30, 2013

Basis of Financial Statement Presentation

Basis of Financial Statement Presentation

NOTE (1) – Basis of Financial Statement Presentation

The accompanying unaudited consolidated financial statements include Broadway Financial Corporation (the “Company”) and its wholly owned subsidiary, Broadway Federal Bank, f.s.b. (the “Bank”).  Also included in the unaudited consolidated financial statements is Broadway Service Corporation, a wholly owned subsidiary of the Bank.  All significant intercompany balances and transactions have been eliminated in consolidation.

The unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions for quarterly reports on Form 10-Q. These unaudited consolidated financial statements do not include all disclosures associated with the Company’s consolidated annual financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2012 and, accordingly, should be read in conjunction with such audited consolidated financial statements.  In the opinion of management, all adjustments (all of which are normal and recurring in nature) considered necessary for a fair presentation have been included.  Operating results for the three and six months ended June 30, 2013 are not necessarily indicative of the results that may be expected for the year ending December 31, 2013.

Some items in the consolidated financial statements for the prior period were reclassified to conform to the current presentation. Reclassifications had no effect on prior year consolidated net earnings or shareholders’ equity.

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Earnings (Loss) Per Common Share

6 Months Ended

Jun. 30, 2013

Earnings (Loss) Per Common Share

Earnings (Loss) Per Common Share

NOTE (3) – Earnings (Loss) Per Common Share

Basic earnings (loss) per common share is computed by dividing income (loss) available to common shareholders by the weighted average number of shares of common stock outstanding for the period.  Diluted earnings (loss) per common share is computed by dividing income (loss) available to common shareholders by the weighted average number of shares of common stock outstanding for the period, increased for the dilutive effect of common stock equivalents.

The following table shows how the Company computed basic and diluted earnings (loss) per common share for the three and six months ended June 30, 2013 and 2012:

	For the three months ended June 30,				For the six months ended June 30,
	2013		2012		2013		2012
	(Dollars in thousands, except per share)
Basic
Net income (loss)	$	(228)	$	1,697	$	(844)	$	1,851
Less: Preferred stock dividends and accretion	(337)		(285)		(652)		(571)
Income (loss) available to common shareholders	$	(565)	$	1,412	$	(1,496)	$	1,280
Weighted average common shares outstanding	1,917,422		1,744,565		1,917,422		1,744,565
Earnings (loss) per common share - basic	$	(0.29)	$	0.81	$	(0.78)	$	0.73
Diluted
Net income (loss)	$	(228)	$	1,697	$	(844)	$	1,851
Less: Preferred stock dividends and accretion	(337)		(285)		(652)		(571)
Income (loss) available to common shareholders	$	(565)	$	1,412	$	(1,496)	$	1,280
Weighted average common shares outstanding	1,917,422		1,744,565		1,917,422		1,744,565
Add: dilutive effects of assumed exercises of stock options	-		-		-		-
Average shares and dilutive potential common shares	1,917,422		1,744,565		1,917,422		1,744,565
Earnings (loss) per common share - diluted	$	(0.29)	$	0.81	$	(0.78)	$	0.73

Stock options for 148,750 shares of common stock for the three and six months ended June 30, 2013 and 227,075 shares of common stock for the three and six months ended June 30, 2012 were not considered in computing diluted loss per common share because they were anti-dilutive.

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Loans Receivable Held for Investment (Loans receivable held for investment)

6 Months Ended

Jun. 30, 2013

Loans receivable held for investment

Loans receivable held for investment

Loans Receivable

NOTE (6) – Loans Receivable Held for Investment

Loans at June 30, 2013 and December 31, 2012 were as follows:

	June 30, 2013		December 31, 2012
	(In thousands)
Real estate:
One-to-four units	$	51,998	$	57,733
Five or more units	77,870		83,350
Commercial real estate	32,740		41,124
Church	70,231		76,254
Construction	443		735
Commercial:
Sports	1,438		1,711
Other	562		2,115
Consumer:
Other	129		104
Total gross loans receivable	235,411		263,126
Loans in process	(17)		(74)
Net deferred loan costs	593		557
Unamortized discounts	(17)		(17)
Allowance for loan losses	(10,579)		(11,869)
Loans receivable, net	$	225,391	$	251,723

The following tables present the activity in the allowance for loan losses by portfolio segment for the three and six months ended June 30, 2013 and 2012:

	Three Months Ended June 30, 2013
	One-to- four units			Five or more units			Commercial real estate		Church			Construction		Commercial			Consumer		Total
	(In thousands)
Beginning balance	$	1,834		$	1,123		$	1,549	$	5,677		$	8	$	181		$	78	$	10,450
Provision for loan losses	614			66			39		(623		)	-		(97		)	1		-
Recoveries	-			-			86		6			-		60			-		152
Loans charged off	(3		)	(20		)	-		-			-		-			-		(23		)
Ending balance	$	2,445		$	1,169		$	1,674	$	5,060		$	8	$	144		$	79	$	10,579

	Six Months Ended June 30, 2013
	One-to- four units			Five or  more units			Commercial real estate			Church			Construction		Commercial			Consumer		Total
	(In thousands)
Beginning balance	$	2,060		$	2,122		$	2,685		$	4,818		$	8	$	98		$	78	$	11,869
Provision for loan losses	165			(295		)	(168		)	406			-		(109		)	1		-
Recoveries	259			-			101			13			-		155			-		528
Loans charged off	(39		)	(658		)	(944		)	(177		)	-		-			-		(1,818		)
Ending balance	$	2,445		$	1,169		$	1,674		$	5,060		$	8	$	144		$	79	$	10,579

	Three Months Ended June 30, 2012
	One-to- four units			Five or more units			Commercial real estate			Church			Construction			Commercial			Consumer		Total
	(In thousands)
Beginning balance	$	4,836		$	3,013		$	2,859		$	6,494		$	233		$	231		$	86	$	17,752
Provision for loan losses	(135		)	(116		)	(234		)	882			(127		)	(168		)	-		102
Recoveries	-			-			15			3			-			138			2		158
Loans charged off	-			-			-			(156		)	-			-			-		(156		)
Ending balance	$	4,701		$	2,897		$	2,640		$	7,223		$	106		$	201		$	88	$	17,856

	Six Months Ended June 30, 2012
	One-to- four units			Five or more units			Commercial real estate			Church			Construction			Commercial			Consumer			Total
	(In thousands)
Beginning balance	$	4,855		$	2,972		$	3,108		$	5,742		$	249		$	247		$	126		$	17,299
Provision for loan losses	201			(75		)	(440		)	1,861			(143		)	(301		)	(42		)	1,061
Recoveries	-			-			30			7			-			255			4			296
Loans charged off	(355		)	-			(58		)	(387		)	-			-			-			(800		)
Ending balance	$	4,701		$	2,897		$	2,640		$	7,223		$	106		$	201		$	88		$	17,856

The following tables present the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of June 30, 2013 and December 31, 2012:

	June 30, 2013
	One-to-four units		Five or more units		Commercial real estate		Church		Construction		Commercial		Consumer		Total
	(In thousands)
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	636	$	60	$	182	$	1,588	$	-	$	97	$	69	$	2,632
Collectively evaluated for impairment	1,809		1,109		1,492		3,472		8		47		10		7,947
Total ending allowance balance	$	2,445	$	1,169	$	1,674	$	5,060	$	8	$	144	$	79	$	10,579
Loans:
Loans individually evaluated for impairment	$	3,713	$	2,911	$	6,566	$	22,111	$	-	$	97	$	69	$	35,467
Loans collectively evaluated for impairment	48,285		74,959		26,174		48,120		443		1,903		60		199,944
Total ending loans balance	$	51,998	$	77,870	$	32,740	$	70,231	$	443	$	2,000	$	129	$	235,411

	December 31, 2012
	One-to-four units		Five or more units		Commercial real estate		Church		Construction		Commercial		Consumer		Total
	(In thousands)
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	719	$	125	$	543	$	1,276	$	-	$	-	$	69	$	2,732
Collectively evaluated for impairment	1,341		1,997		2,142		3,542		8		98		9		9,137
Total ending allowance balance	$	2,060	$	2,122	$	2,685	$	4,818	$	8	$	98	$	78	$	11,869
Loans:
Loans individually evaluated for impairment	$	4,576	$	3,766	$	10,364	$	25,328	$	273	$	-	$	69	$	44,376
Loans collectively evaluated for impairment	53,157		79,584		30,760		50,926		462		3,826		35		218,750
Total ending loans balance	$	57,733	$	83,350	$	41,124	$	76,254	$	735	$	3,826	$	104	$	263,126

The following table presents information related to loans individually evaluated for impairment by type of loans as of June 30, 2013 and December 31, 2012:

	June 30, 2013						December 31, 2012
	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated		Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated
	(In thousands)
With no related allowance recorded:
One-to-four units	$	1,784	$	1,211	$	-	$	1,986	$	1,484	$	-
Five or more units	1,835		1,806		-		2,038		1,819		-
Commercial real estate	3,623		403		-		10,184		6,423		-
Church	11,227		9,190		-		18,664		15,689		-
Construction	-		-		-		279		273		-
Commercial:
Sports	3,850		-		-		3,888		-		-
With an allowance recorded:
One-to-four units	2,506		2,502		636		3,092		3,092		719
Five or more units	1,105		1,105		60		1,947		1,947		125
Commercial real estate	6,163		6,163		182		3,941		3,941		543
Church	12,958		12,921		1,588		9,677		9,639		1,276
Commercial:
Other	97		97		97		-		-		-
Consumer:
Other	69		69		69		69		69		69
Total	$	45,217	$	35,467	$	2,632	$	55,765	$	44,376	$	2,732

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

The following tables present the monthly average of loans individually evaluated for impairment by type of loans and the related interest income for the three and six months ended June 30, 2013 and 2012.

	Three Months Ended June 30, 2013				Six Months Ended June 30, 2013
	Average Recorded Investment		Cash Basis Interest Income Recognized		Average Recorded Investment		Cash Basis Interest Income Recognized
	(In thousands)
One-to-four units	$	3,737	$	29	$	3,877	$	61
Five or more units	2,508		24		3,097		40
Commercial real estate	6,481		142		8,058		223
Church	22,041		139		23,213		276
Construction	-		-		115		5
Commercial:
Other	97		4		83		4
Consumer:
Other	69		2		69		2
Total	$	34,933	$	340	$	38,512	$	611

	Three Months Ended June 30, 2012				Six Months Ended June 30, 2012
	Average Recorded Investment		Cash Basis Interest Income Recognized		Average Recorded Investment		Cash Basis Interest Income Recognized
	(In thousands)
One-to-four units	$	13,998	$	110	$	13,696	$	234
Five or more units	3,050		18		3,384		40
Commercial real estate	7,784		61		7,600		145
Church	32,834		306		32,215		597
Construction	294		4		297		9
Consumer:
Other	70		1		70		2
Total	$	58,030	$	500	$	57,262	$	1,027

Cash-basis interest income recognized represents cash received for interest payments on accruing impaired loans.  Interest income that would have been recognized for the six months ended June 30, 2013 and 2012 had loans performed in accordance with their original terms were $1.4 million and $2.3 million.

The following table presents the recorded investment in non-accrual loans by type of loans as of June 30, 2013 and December 31, 2012:

	June 30, 2013		December 31, 2012
	(In thousands)
Loans receivable held for sale:
One-to-four units	$	-	$	6,656
Five or more units	-		1,956
Commercial real estate	348		-
Church	1,556		1,556
Loans receivable held for investment:
One-to-four units	1,406		1,489
Five or more units	2,208		2,312
Commercial real estate	404		7,090
Church	12,519		15,689
Construction	-		273
Commercial:
Other	97		-
Consumer:
Other	69		69
Total non-accrual loans	$	18,607	$	37,090

There were no loans 90 days or more delinquent that were accruing interest as of June 30, 2013 or December 31, 2012.

The following tables present the aging of the recorded investment in past due loans, including loans receivable held for sale, as of June 30, 2013 and December 31, 2012 by type of loans:

	June 30, 2013
	30-59DaysPast Due		60-89DaysPast Due		Greater than90 DaysPast Due		TotalPast Due		Total Loans Not Past Due
	(In thousands)
Loans receivable held for sale:
Five or more units	$	-	$	-	$	-	$	-	$	3,808
Commercial real estate	-		-		348		348		1,001
Church	-		-		1,556		1,556		2,727
Loans receivable held for investment:
One-to-four units	1,181		-		1,406		2,587		49,411
Five or more units	-		-		2,208		2,208		75,662
Commercial real estate	-		-		404		404		32,336
Church	439		-		12,519		12,958		57,273
Construction	-		-		-		-		443
Commercial:
Sports	-		-		-		-		1,438
Other	20		-		97		117		445
Consumer:
Other	-		-		69		69		60
Total	$	1,640	$	-	$	18,607	$	20,247	$	224,604

	December 31, 2012
	30-59DaysPast Due		60-89DaysPast Due		Greater than90 DaysPast Due		TotalPast Due		Total Loans Not Past Due
	(In thousands)
Loans receivable held for sale:
One-to-four units	$	-	$	871	$	6,656	$	7,527	$	389
Five or more units	-		-		1,956		1,956		3,839
Commercial real estate	-		-		-		-		1,358
Church	-		-		1,556		1,556		2,744
Loans receivable held for investment:
One-to-four units	1,077		-		1,489		2,566		55,167
Five or more units	587		554		2,312		3,453		79,897
Commercial real estate	-		-		7,090		7,090		34,034
Church	1,617		-		15,689		17,306		58,948
Construction	-		-		273		273		462
Commercial:
Sports	-		-		-		-		1,711
Other	-		-		-		-		2,115
Consumer:
Other	-		-		69		69		35
Total	$	3,281	$	1,425	$	37,090	$	41,796	$	240,699

Troubled Debt Restructurings

During the six months ended June 30, 2013, the terms of certain loans were modified as troubled debt restructurings (“TDRs”).  The modification of the terms of such loans included payments of delinquent property taxes, which the borrower would be required to repay over a period greater than six months.

At June 30, 2013, loans classified as TDRs totaled $32.8 million, of which $13.5 million were included in non-accrual loans and $19.3 million were on accrual status.  At December 31, 2012, loans classified as TDRs totaled $41.1 million, of which $22.8 million were included in non-accrual loans and $18.3 million were on accrual status.  The Company has allocated $2.2 million and $2.5 million of specific reserves for accruing TDRs as of June 30, 2013 and December 31, 2012.  TDRs on accrual status are comprised of loans that were accruing at the time of restructuring or loans that have complied with the terms of their restructured agreements for a satisfactory period of time, and for which the Bank anticipates full repayment of both principal and interest. TDRs that are on non-accrual status can be returned to accrual status after a period of sustained performance, generally determined to be six months of timely payments as modified.  As of June 30, 2013 and December 31, 2012, the Company has no commitment to lend additional amounts to customers with outstanding loans that are classified as TDRs.

The following tables present loans by type modified as troubled debt restructurings during the three and six months ended June 30, 2013 and 2012:

	Three Months Ended June 30,2013					Six Months Ended June 30,2013
	Number of Loans	Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment		Number of Loans	Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment
	(Dollars in thousands)
One-to-four units	-	$	-	$	-	5	$	739	$	789
Commercial real estate	1	1,456		1,497		1	1,456		1,497
Total	1	$	1,456	$	1,497	6	$	2,195	$	2,286
	Three Months Ended June 30,2012					Six Months Ended June 30,2012
	Number of Loans	Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment		Number of Loans	Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment
	(Dollars in thousands)
One-to-four units	1	$	36	$	36	1	$	36	$	36
Commercial real estate	1	505		511		2	734		740
Church	5	2,386		2,391		8	3,399		3,404
Total	7	$	2,927	$	2,938	11	$	4,169	$	4,180

The troubled debt restructurings described above increased the allowance for loan losses by $96 thousand and $119 thousand for the three and six months ended June 30, 2013 and by $144 thousand and $231 thousand for the same periods in 2012.  These TDRs resulted in charge-offs of $23 thousand during the six months ended June 30, 2013, compared to $100 thousand for the same period in 2012.

At June 30, 2013, there were no loans modified as troubled debt restructurings within the previous 12 months for which there was a payment default.  A loan is considered to be in payment default once it is 90 days contractually past due under the modified terms.

All loan modifications during the six months ended June 30, 2013 were considered troubled debt restructurings.  The terms of certain other loans were modified during the six months ended June 30, 2012 that did not meet the definition of a troubled debt restructuring.  These loans had a total recorded investment of $1.2 million as of June 30, 2012.  The modification of these loans involved either a modification of the terms of a loan to borrowers who were not experiencing financial difficulties or a delay in a payment that was considered to be insignificant.

In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed to determine the likelihood that the borrower will be in payment default on any of its debt in the foreseeable future without the modification.  This evaluation is performed under the Company’s internal underwriting policy.

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 one-to-four 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.  The Company analyzes all other loans individually by classifying the loans as to credit risk. This analysis is performed at least on a quarterly basis.  The Company uses the following definitions for risk ratings:

· Special Mention.  Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the 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 will 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, on the basis of 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 not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass rated loans.  Based on the most recent analysis performed, the risk category of loans by type of loans as of June 30, 2013 and December 31, 2012 is as follows:

	June 30, 2013
	Pass		Special Mention		Substandard		Doubtful		Loss
					(In thousands)
One-to-four units	$	46,651	$	3,941	$	1,406	$	-	$	-
Five or more units	70,646		1,876		5,348		-		-
Commercial real estate	23,124		1,637		7,979		-		-
Church	33,922		16,660		19,557		92		-
Construction	443		-		-		-		-
Commercial:
Sports	-		1,438		-		-		-
Other	445		20		97		-		-
Consumer:
Other	60		-		69		-		-
Total	$	175,291	$	25,572	$	34,456	$	92	$	-
	December 31, 2012
	Pass		Special Mention		Substandard		Doubtful		Loss
					(In thousands)
One-to-four units	$	55,613	$	631	$	1,489	$	-	$	-
Five or more units	73,673		5,250		4,427		-		-
Commercial real estate	25,605		2,541		12,921		57		-
Church	33,532		19,502		23,220		-		-
Construction	462		-		273		-		-
Commercial:
Sports	-		1,711		-		-		-
Other	1,877		141		97		-		-
Consumer:
Other	35		-		69		-		-
Total	$	190,797	$	29,776	$	42,496	$	57	$	-

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Securities

6 Months Ended

Jun. 30, 2013

Securities

Securities

NOTE (4) – Securities

The following table summarizes the amortized cost and fair value of the available-for-sale investment securities portfolios at June 30, 2013 and December 31, 2012 and the corresponding amounts of unrealized gains which are recognized in accumulated other comprehensive income (loss):

	Amortized Cost		Gross  Unrealized  Gains		Gross  Unrealized  Losses		Fair Value
	(In thousands)
June 30, 2013:
Residential mortgage-backed	$	10,545	$	572	$	-	$	11,117
Total available-for-sale securities	$	10,545	$	572	$	-	$	11,117
December 31, 2012:
Residential mortgage-backed	$	12,660	$	718	$	-	$	13,378
Total available-for-sale securities	$	12,660	$	718	$	-	$	13,378

There were no securities with unrealized losses at June 30, 2013 and December 31, 2012.  At June 30, 2013, the Bank’s investment portfolio consisted of residential mortgage-backed securities with an estimated remaining life of 4.9 years.  Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties.

At June 30, 2013 and December 31, 2012, securities pledged to secure public deposits and FHLB advances had a carrying amount of $11.1 million and $1.5 million, respectively.  At June 30, 2013 and December 31, 2012, there were no holdings of securities of any one issuer, other than the U.S. Government and its agencies, in an amount greater than 10% of shareholders’ equity.  There were no sales of securities during the six months ended June 30, 2013.  During the six months ended June 30, 2012, $1.0 million of U.S federal agency bonds were sold and the Company recognized a gain of $50 thousand.

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Fair Value (Details 3) (Significant Unobservable Inputs (Level 3), USD $) In Thousands, unless otherwise specified	6 Months Ended	12 Months Ended
	Jun. 30, 2013	Dec. 31, 2012
Fair value quantitative information
Fair Value	$ 225,136	$ 252,043
Fair Value, Measurements, Nonrecurring | Non-performing loans receivable held-for-sale | One-to-four units
Fair value quantitative information
Fair Value		6,656
Fair Value, Measurements, Nonrecurring | Non-performing loans receivable held-for-sale | Five or more units
Fair value quantitative information
Fair Value		1,956
Fair Value, Measurements, Nonrecurring | Non-performing loans receivable held-for-sale | Commercial real estate
Fair value quantitative information
Fair Value	348
Fair Value, Measurements, Nonrecurring | Non-performing loans receivable held-for-sale | Church
Fair value quantitative information
Fair Value	1,556	1,556
Fair Value, Measurements, Nonrecurring | Non-performing loans receivable held-for-sale | Income approach | Five or more units | Minimum
Fair value quantitative information
Capitalization rate (as a percent)		6.00%
Fair Value, Measurements, Nonrecurring | Non-performing loans receivable held-for-sale | Income approach | Five or more units | Maximum
Fair value quantitative information
Capitalization rate (as a percent)		8.50%
Fair Value, Measurements, Nonrecurring | Non-performing loans receivable held-for-sale | Income approach | Commercial real estate
Fair value quantitative information
Capitalization rate (as a percent)	8.20%
Fair Value, Measurements, Nonrecurring | Non-performing loans receivable held-for-sale | Sales comparison approach | One-to-four units | Minimum
Fair value quantitative information
Adjustment for differences between the comparable sales (as a percent)		(30.00%)
Fair Value, Measurements, Nonrecurring | Non-performing loans receivable held-for-sale | Sales comparison approach | One-to-four units | Maximum
Fair value quantitative information
Adjustment for differences between the comparable sales (as a percent)		23.00%
Fair Value, Measurements, Nonrecurring | Non-performing loans receivable held-for-sale | Sales comparison approach | Five or more units | Minimum
Fair value quantitative information
Adjustment for differences between the comparable sales (as a percent)		(13.00%)
Fair Value, Measurements, Nonrecurring | Non-performing loans receivable held-for-sale | Sales comparison approach | Five or more units | Maximum
Fair value quantitative information
Adjustment for differences between the comparable sales (as a percent)		17.00%
Fair Value, Measurements, Nonrecurring | Non-performing loans receivable held-for-sale | Sales comparison approach | Commercial real estate
Fair value quantitative information
Adjustment for differences between the comparable sales (as a percent)	1.00%
Fair Value, Measurements, Nonrecurring | Non-performing loans receivable held-for-sale | Sales comparison approach | Church | Minimum
Fair value quantitative information
Adjustment for differences between the comparable sales (as a percent)	11.00%	(27.00%)
Fair Value, Measurements, Nonrecurring | Non-performing loans receivable held-for-sale | Sales comparison approach | Church | Maximum
Fair value quantitative information
Adjustment for differences between the comparable sales (as a percent)	29.00%	29.00%
Fair Value, Measurements, Nonrecurring | Impaired loans | One-to-four units
Fair value quantitative information
Fair Value	1,349	1,284
Fair Value, Measurements, Nonrecurring | Impaired loans | Five or more units
Fair value quantitative information
Fair Value	920	1,679
Fair Value, Measurements, Nonrecurring | Impaired loans | Commercial real estate
Fair value quantitative information
Fair Value	403	3,385
Fair Value, Measurements, Nonrecurring | Impaired loans | Church
Fair value quantitative information
Fair Value	7,079	6,649
Fair Value, Measurements, Nonrecurring | Impaired loans | Income approach | Five or more units | Minimum
Fair value quantitative information
Capitalization rate (as a percent)	7.25%	6.50%
Fair Value, Measurements, Nonrecurring | Impaired loans | Income approach | Five or more units | Maximum
Fair value quantitative information
Capitalization rate (as a percent)	9.00%	9.00%
Fair Value, Measurements, Nonrecurring | Impaired loans | Income approach | Commercial real estate
Fair value quantitative information
Capitalization rate (as a percent)	4.50%
Fair Value, Measurements, Nonrecurring | Impaired loans | Income approach | Commercial real estate | Minimum
Fair value quantitative information
Capitalization rate (as a percent)		7.00%
Fair Value, Measurements, Nonrecurring | Impaired loans | Income approach | Commercial real estate | Maximum
Fair value quantitative information
Capitalization rate (as a percent)		9.00%
Fair Value, Measurements, Nonrecurring | Impaired loans | Income approach | Church
Fair value quantitative information
Capitalization rate (as a percent)	8.00%
Fair Value, Measurements, Nonrecurring | Impaired loans | Income approach | Church | Minimum
Fair value quantitative information
Capitalization rate (as a percent)		6.75%
Fair Value, Measurements, Nonrecurring | Impaired loans | Income approach | Church | Maximum
Fair value quantitative information
Capitalization rate (as a percent)		8.00%
Fair Value, Measurements, Nonrecurring | Impaired loans | Sales comparison approach | One-to-four units | Minimum
Fair value quantitative information
Adjustment for differences between the comparable sales (as a percent)	(5.00%)	(5.00%)
Fair Value, Measurements, Nonrecurring | Impaired loans | Sales comparison approach | One-to-four units | Maximum
Fair value quantitative information
Adjustment for differences between the comparable sales (as a percent)	18.00%	18.00%
Fair Value, Measurements, Nonrecurring | Impaired loans | Sales comparison approach | Five or more units | Minimum
Fair value quantitative information
Adjustment for differences between the comparable sales (as a percent)	(10.00%)	(26.00%)
Fair Value, Measurements, Nonrecurring | Impaired loans | Sales comparison approach | Five or more units | Maximum
Fair value quantitative information
Adjustment for differences between the comparable sales (as a percent)	0.00%	16.00%
Fair Value, Measurements, Nonrecurring | Impaired loans | Sales comparison approach | Commercial real estate
Fair value quantitative information
Adjustment for differences between the comparable sales (as a percent)	2.00%
Fair Value, Measurements, Nonrecurring | Impaired loans | Sales comparison approach | Commercial real estate | Minimum
Fair value quantitative information
Adjustment for differences between the comparable sales (as a percent)		(17.00%)
Fair Value, Measurements, Nonrecurring | Impaired loans | Sales comparison approach | Commercial real estate | Maximum
Fair value quantitative information
Adjustment for differences between the comparable sales (as a percent)		(1.00%)
Fair Value, Measurements, Nonrecurring | Impaired loans | Sales comparison approach | Church | Minimum
Fair value quantitative information
Adjustment for differences between the comparable sales (as a percent)	(45.00%)	(45.00%)
Fair Value, Measurements, Nonrecurring | Impaired loans | Sales comparison approach | Church | Maximum
Fair value quantitative information
Adjustment for differences between the comparable sales (as a percent)	16.00%	8.00%
Fair Value, Measurements, Nonrecurring | Real estate owned | Commercial real estate
Fair value quantitative information
Fair Value	1,792	2,752
Fair Value, Measurements, Nonrecurring | Real estate owned | Church
Fair value quantitative information
Fair Value	$ 4,435	$ 5,411
Fair Value, Measurements, Nonrecurring | Real estate owned | Income approach | Commercial real estate
Fair value quantitative information
Capitalization rate (as a percent)	10.00%
Fair Value, Measurements, Nonrecurring | Real estate owned | Income approach | Commercial real estate | Minimum
Fair value quantitative information
Capitalization rate (as a percent)		8.00%
Fair Value, Measurements, Nonrecurring | Real estate owned | Income approach | Commercial real estate | Maximum
Fair value quantitative information
Capitalization rate (as a percent)		11.00%
Fair Value, Measurements, Nonrecurring | Real estate owned | Income approach | Church
Fair value quantitative information
Capitalization rate (as a percent)		11.50%
Fair Value, Measurements, Nonrecurring | Real estate owned | Income approach | Church | Minimum
Fair value quantitative information
Capitalization rate (as a percent)	6.50%
Fair Value, Measurements, Nonrecurring | Real estate owned | Income approach | Church | Maximum
Fair value quantitative information
Capitalization rate (as a percent)	11.50%
Fair Value, Measurements, Nonrecurring | Real estate owned | Sales comparison approach | Commercial real estate | Minimum
Fair value quantitative information
Adjustment for differences between the comparable sales (as a percent)	(67.00%)	(67.00%)
Fair Value, Measurements, Nonrecurring | Real estate owned | Sales comparison approach | Commercial real estate | Maximum
Fair value quantitative information
Adjustment for differences between the comparable sales (as a percent)	1.00%	1.00%
Fair Value, Measurements, Nonrecurring | Real estate owned | Sales comparison approach | Church | Minimum
Fair value quantitative information
Adjustment for differences between the comparable sales (as a percent)	(24.00%)	(12.00%)
Fair Value, Measurements, Nonrecurring | Real estate owned | Sales comparison approach | Church | Maximum
Fair value quantitative information
Adjustment for differences between the comparable sales (as a percent)	7.00%	7.00%

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Loans Receivable Held For Sale (Details 2) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Mar. 31, 2013	Jun. 30, 2013	Jun. 30, 2012
Loans receivable held for sale
Transfers of loans held in portfolio to held-for-sale			$ 6,174,000
Additional charge-offs required for transfers of loans to held-for-sale		1,500,000
Sale of non-performing loans				0
Net gain on sale of loans	81,000		97,000
Transfer of loans receivable held for sale to REO			0	0
Write-downs, net of recoveries, on non-performing loans held for sale			471,000	187,000
Change in valuation allowance on performing loans receivable held for sale			3,000	1,000
Non-performing
Loans receivable held for sale
Transfers of loans held in portfolio to held-for-sale, before additional charge-offs		7,700,000
Five or more units | Non-performing
Loans receivable held for sale
Number of non-performing loans transferred to held for sale		8
Commercial real estate | Non-performing
Loans receivable held for sale
Number of non-performing loans transferred to held for sale		7
Church | Non-performing
Loans receivable held for sale
Number of non-performing loans transferred to held for sale		2
One-to-four units and Church | Non-performing
Loans receivable held for sale
Sale of non-performing loans		9,300,000
Net gain on sale of loans		$ 16,000

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Loans Receivable Held for Investment (Details 4) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Impaired loans
Unpaid principal balance	$ 45,217	$ 55,765
Recorded investment	35,467	44,376
Allowance for loan losses allocated, with an allowance recorded	2,632	2,732
One-to-four units
Impaired loans
Unpaid principal balance, with no related allowance recorded	1,784	1,986
Unpaid principal balance, with an allowance recorded	2,506	3,092
Recorded investment, with no related allowance recorded	1,211	1,484
Recorded investment, with an allowance recorded	2,502	3,092
Allowance for loan losses allocated, with an allowance recorded	636	719
Five or more units
Impaired loans
Unpaid principal balance, with no related allowance recorded	1,835	2,038
Unpaid principal balance, with an allowance recorded	1,105	1,947
Recorded investment, with no related allowance recorded	1,806	1,819
Recorded investment, with an allowance recorded	1,105	1,947
Allowance for loan losses allocated, with an allowance recorded	60	125
Commercial real estate
Impaired loans
Unpaid principal balance, with no related allowance recorded	3,623	10,184
Unpaid principal balance, with an allowance recorded	6,163	3,941
Recorded investment, with no related allowance recorded	403	6,423
Recorded investment, with an allowance recorded	6,163	3,941
Allowance for loan losses allocated, with an allowance recorded	182	543
Church
Impaired loans
Unpaid principal balance, with no related allowance recorded	11,227	18,664
Unpaid principal balance, with an allowance recorded	12,958	9,677
Recorded investment, with no related allowance recorded	9,190	15,689
Recorded investment, with an allowance recorded	12,921	9,639
Allowance for loan losses allocated, with an allowance recorded	1,588	1,276
Construction
Impaired loans
Unpaid principal balance, with no related allowance recorded		279
Recorded investment, with no related allowance recorded		273
Commercial Sports
Impaired loans
Unpaid principal balance, with no related allowance recorded	3,850	3,888
Commercial Other
Impaired loans
Unpaid principal balance, with an allowance recorded	97
Recorded investment, with an allowance recorded	97
Allowance for loan losses allocated, with an allowance recorded	97
Consumer Other
Impaired loans
Unpaid principal balance, with an allowance recorded	69	69
Recorded investment, with an allowance recorded	69	69
Allowance for loan losses allocated, with an allowance recorded	$ 69	$ 69

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Loans Receivable Held for Investment (Details 9) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Credit Quality Indicators
Loans receivable	$ 235,411	$ 263,126
One-to-four units
Credit Quality Indicators
Loans receivable	51,998	57,733
Five or more units
Credit Quality Indicators
Loans receivable	77,870	83,350
Commercial real estate
Credit Quality Indicators
Loans receivable	32,740	41,124
Church
Credit Quality Indicators
Loans receivable	70,231	76,254
Construction
Credit Quality Indicators
Loans receivable	443	735
Commercial Sports
Credit Quality Indicators
Loans receivable	1,438	1,711
Commercial Other
Credit Quality Indicators
Loans receivable	562	2,115
Consumer Other
Credit Quality Indicators
Loans receivable	129	104
Pass
Credit Quality Indicators
Loans receivable	175,291	190,797
Pass | One-to-four units
Credit Quality Indicators
Loans receivable	46,651	55,613
Pass | Five or more units
Credit Quality Indicators
Loans receivable	70,646	73,673
Pass | Commercial real estate
Credit Quality Indicators
Loans receivable	23,124	25,605
Pass | Church
Credit Quality Indicators
Loans receivable	33,922	33,532
Pass | Construction
Credit Quality Indicators
Loans receivable	443	462
Pass | Commercial Other
Credit Quality Indicators
Loans receivable	445	1,877
Pass | Consumer Other
Credit Quality Indicators
Loans receivable	60	35
Special Mention
Credit Quality Indicators
Loans receivable	25,572	29,776
Special Mention | One-to-four units
Credit Quality Indicators
Loans receivable	3,941	631
Special Mention | Five or more units
Credit Quality Indicators
Loans receivable	1,876	5,250
Special Mention | Commercial real estate
Credit Quality Indicators
Loans receivable	1,637	2,541
Special Mention | Church
Credit Quality Indicators
Loans receivable	16,660	19,502
Special Mention | Commercial Sports
Credit Quality Indicators
Loans receivable	1,438	1,711
Special Mention | Commercial Other
Credit Quality Indicators
Loans receivable	20	141
Substandard
Credit Quality Indicators
Loans receivable	34,456	42,496
Substandard | One-to-four units
Credit Quality Indicators
Loans receivable	1,406	1,489
Substandard | Five or more units
Credit Quality Indicators
Loans receivable	5,348	4,427
Substandard | Commercial real estate
Credit Quality Indicators
Loans receivable	7,979	12,921
Substandard | Church
Credit Quality Indicators
Loans receivable	19,557	23,220
Substandard | Construction
Credit Quality Indicators
Loans receivable		273
Substandard | Commercial Other
Credit Quality Indicators
Loans receivable	97	97
Substandard | Consumer Other
Credit Quality Indicators
Loans receivable	69	69
Doubtful
Credit Quality Indicators
Loans receivable	92	57
Doubtful | Commercial real estate
Credit Quality Indicators
Loans receivable		57
Doubtful | Church
Credit Quality Indicators
Loans receivable	$ 92

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Income Taxes (Details) (USD $)	6 Months Ended
	Jun. 30, 2013	Dec. 31, 2012
Income Taxes
Prior period considered in determining tax asset valuation allowance	2 years
Deferred tax asset valuation allowance	$ 9,700,000	$ 9,000,000
Net deferred tax asset	$ 0	$ 0

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Consolidated Statements of Financial Condition (Parenthetical) (USD $) In Thousands, except Share data, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Allowance for loan losses (in dollars)	$ 10,579	$ 11,869
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized	8,000,000	8,000,000
Common stock, shares issued	2,013,942	2,013,942
Common stock, shares outstanding	1,917,422	1,917,422
Accumulated other comprehensive income, tax (in dollars)	400	400
Treasury stock, shares	96,520	96,520
Cumulative Preferred Stock | Series D Fixed Rate Cumulative Perpetual Preferred Stock
Preferred non-voting stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred non-voting stock, shares authorized	9,000	9,000
Preferred non-voting stock, shares issued	9,000	9,000
Preferred non-voting stock, shares outstanding	9,000	9,000
Preferred stock, liquidation preference (in dollars)	10,532	10,262
Cumulative Preferred Stock | Series E Fixed Rate Cumulative Perpetual Preferred Stock
Preferred non-voting stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred non-voting stock, shares authorized	6,000	6,000
Preferred non-voting stock, shares issued	6,000	6,000
Preferred non-voting stock, shares outstanding	6,000	6,000
Preferred stock, liquidation preference (in dollars)	7,022	6,842
Noncumulative preferred stock
Preferred non-voting stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred non-voting stock, shares authorized	985,000	985,000
Noncumulative preferred stock | Series A Preferred Stock
Preferred non-voting stock, shares issued	55,199	55,199
Preferred non-voting stock, shares outstanding	55,199	55,199
Preferred stock, liquidation preference (in dollars)	552	552
Noncumulative preferred stock | Series B Perpetual Preferred Stock
Preferred non-voting stock, shares issued	100,000	100,000
Preferred non-voting stock, shares outstanding	100,000	100,000
Preferred stock, liquidation preference (in dollars)	1,000	1,000
Noncumulative preferred stock | Series C Noncumulative Perpetual Convertible Preferred Stock
Preferred non-voting stock, shares issued	76,950	76,950
Preferred non-voting stock, shares outstanding	76,950	76,950
Preferred stock, liquidation preference (in dollars)	$ 1,000	$ 1,000

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Stock-based Compensation

6 Months Ended

Jun. 30, 2013

Stock-based Compensation

Stock-based Compensation

NOTE (9) –Stock-based Compensation

In 2008, we adopted the 2008 Long-Term Incentive Plan (“2008 LTIP”), which was approved by the shareholders.  The 2008 LTIP replaced the Company’s 1996 Long-Term Incentive Plan (“1996 LTIP”) and 1996 Stock Option Plan (“Stock Option Plan”), which have expired and are no longer effective except as to outstanding awards. The 2008 LTIP permits the grant of non-qualified and incentive stock options, stock appreciation rights, full value awards and cash incentive awards to the Company’s non-employee directors and certain officers and employees for up to 437,390 shares of common stock.  Option awards are generally granted with an exercise price equal to the market price of the Company’s common stock at the date of grant; those option awards have vesting periods ranging from immediate vesting to 5 years and have 10-year contractual terms.  The Company has a policy of using shares held as treasury stock to satisfy share option exercises.  Currently, the Company has a sufficient number of treasury shares to satisfy expected share option exercises on outstanding options.

No options were granted during the six months ended June 30, 2013 and 2012.  The Company recorded $22 thousand and $40 thousand of stock-based compensation expense, net of tax, during the first half of 2013 and 2012.

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Consolidated Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
Cash flows from operating activities:
Net income (loss)	$ (844)	$ 1,851
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Provision for loan losses		1,061
Provision for losses on loans receivable held for sale	468	186
Provision for losses on REO	223	312
Depreciation	106	149
Net amortization of deferred loan origination costs	125	58
Net amortization of premiums on mortgage-backed securities	19	31
Amortization of investment in affordable housing limited partnership	110	89
Stock-based compensation expense	22	40
Earnings on bank owned life insurance	(34)	(40)
Net (gains) losses on sales of REO	2	(395)
Net gains on sales of loans	(97)
Gain on sale of office properties and equipment		(2,523)
Gain on sale of securities		(50)
Net change in accrued interest receivable	109	222
Net change in deferred tax assets		850
Net change in other assets	1,048	(77)
Net change in accrued interest payable	367	362
Net change in other liabilities	(28)	(183)
Net cash provided by operating activities	1,596	1,943
Cash flows from investing activities:
Net change in loans receivable held for investment	15,277	23,626
Proceeds from sales of loans receivable held for sale	15,502
Principal repayments on loans receivable held for sale	226	223
Available-for-sale securities:
Sales		1,050
Maturities, prepayments and calls	2,096	2,114
Proceeds from sales of REO	3,293	5,914
Net redemption of Federal Home Loan Bank stock	164	188
Proceeds from sale of office properties and equipment		4,237
Additions to office properties and equipment	(181)	(9)
Net cash provided by investing activities	36,377	37,343
Cash flows from financing activities:
Net change in deposits	(27,706)	(24,639)
Proceeds from FHLB advances	28,000	13,500
Repayments on FHLB advances	(28,000)	(13,500)
Net change in advance payments by borrowers for taxes and insurance	(159)	(108)
Net cash used in financing activities	(27,865)	(24,747)
Net change in cash and cash equivalents	10,108	14,539
Cash and cash equivalents at beginning of period	64,360	31,597
Cash and cash equivalents at end of period	74,468	46,136
Supplemental disclosures of cash flow information:
Cash paid for interest	2,263	3,142
Cash paid for income taxes	4
Supplemental disclosures of non-cash investing and financing activities:
Transfers of loans receivable held for investment to other assets	3,174
Transfers of loans receivable held for investment to REO	1,582	2,662
Transfers of loans receivable from loans receivable held for investment to loans receivable held for sale	$ 6,174

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Consolidated Statements of Financial Condition (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Assets
Cash	$ 15,188	$ 13,420
Federal funds sold	59,280	50,940
Cash and cash equivalents	74,468	64,360
Securities available-for-sale, at fair value	11,117	13,378
Loans receivable held for sale, at lower of cost or fair value	9,126	19,051
Loans receivable held for investment, net of allowance of $10,579 and $11,869	225,391	251,723
Accrued interest receivable	1,141	1,250
Federal Home Loan Bank (FHLB) stock	3,737	3,901
Office properties and equipment, net	2,692	2,617
Real estate owned (REO)	6,227	8,163
Bank owned life insurance	2,722	2,688
Investment in affordable housing limited partnership	1,418	1,528
Other assets	7,160	5,034
Total assets	345,199	373,693
Liabilities:
Deposits	229,365	257,071
FHLB advances	79,500	79,500
Junior subordinated debentures	6,000	6,000
Other borrowings	5,000	5,000
Accrued interest payable	2,308	1,941
Dividends payable	2,554	2,104
Advance payments by borrowers for taxes and insurance	552	711
Other liabilities	3,331	3,359
Total liabilities	328,610	355,686
Shareholders' Equity:
Preferred stock discount	(396)	(598)
Common stock, $.01 par value, authorized 8,000,000 shares at June 30, 2013 and December 31, 2012; issued 2,013,942 shares at June 30, 2013 and December 31, 2012; outstanding 1,917,422 shares at June 30, 2013 and December 31, 2012	20	20
Additional paid-in capital	10,117	10,095
Accumulated deficit	(9,484)	(7,988)
Accumulated other comprehensive income, net of taxes of $400 at June 30, 2013 and December 31, 2012	172	318
Treasury stock-at cost, 96,520 shares at June 30, 2013 and December 31, 2012	(1,234)	(1,234)
Total shareholders' equity	16,589	18,007
Total liabilities and shareholders' equity	345,199	373,693
Cumulative Preferred Stock | Series D Fixed Rate Cumulative Perpetual Preferred Stock
Shareholders' Equity:
Preferred Stock	8,963	8,963
Cumulative Preferred Stock | Series E Fixed Rate Cumulative Perpetual Preferred Stock
Shareholders' Equity:
Preferred Stock	5,974	5,974
Noncumulative preferred stock
Shareholders' Equity:
Preferred Stock	$ 2,457	$ 2,457

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Loans Receivable Held for Investment (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Loans receivable held for investment
Total gross loans receivable	$ 235,411	$ 263,126
Loans in process	(17)	(74)
Net deferred loan costs	593	557
Unamortized discounts	(17)	(17)
Allowance for loan losses	(10,579)	(11,869)
Loans receivable, net	225,391	251,723
One-to-four units
Loans receivable held for investment
Total gross loans receivable	51,998	57,733
Five or more units
Loans receivable held for investment
Total gross loans receivable	77,870	83,350
Commercial real estate
Loans receivable held for investment
Total gross loans receivable	32,740	41,124
Church
Loans receivable held for investment
Total gross loans receivable	70,231	76,254
Construction
Loans receivable held for investment
Total gross loans receivable	443	735
Commercial Sports
Loans receivable held for investment
Total gross loans receivable	1,438	1,711
Commercial Other
Loans receivable held for investment
Total gross loans receivable	562	2,115
Consumer Other
Loans receivable held for investment
Total gross loans receivable	$ 129	$ 104

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Going Concern, Regulatory Matters and Management's Plan for Recapitalization of the Company (Details) (USD $) Share data in Millions, except Per Share data, unless otherwise specified				6 Months Ended
	Jun. 30, 2013	Dec. 31, 2012	Feb. 28, 2010 Line of Credit	Jun. 30, 2013 Management's Plans for Recapitalization	Jun. 30, 2013 Management's Plans for Recapitalization Series D Fixed Rate Cumulative Perpetual Preferred Stock	Jun. 30, 2013 Management's Plans for Recapitalization Series E Fixed Rate Cumulative Perpetual Preferred Stock	Jun. 30, 2013 Management's Plans for Recapitalization Series A Preferred Stock	Jun. 30, 2013 Management's Plans for Recapitalization Series B Perpetual Preferred Stock	Jun. 30, 2013 Management's Plans for Recapitalization Series C Noncumulative Perpetual Convertible Preferred Stock	Aug. 01, 2013 Management's Plans for Recapitalization Line of Credit	Jun. 30, 2013 Management's Plans for Recapitalization Line of Credit
Going Concern, Regulatory Matters and Management's Plan for Recapitalization of the Company
Aggregate principal amount of Floating Rate Junior Subordinated Debentures	$ 6,000,000	$ 6,000,000
Line of credit	5,000,000		5,000,000
Tier 1(Core) capital to adjusted total assets required under cease and desist order, ratio (as a percent)	8.00%	8.00%
Total Risk-Based Capital to Risk-Weighted Assets, ratio per cease and desist orders (as a percent)	12.00%	12.00%
Tier 1 (Core) Capital to Adjusted Total Assets, general ratio to be well capitalized (as a percent)	5.00%
Total Risk-Based Capital to Risk-Weighted Assets, general ratio to be well capitalized (as a percent)	10.00%
Discount rate on preferred stock liquidation amount (as a percent)					50.00%	50.00%	50.00%	50.00%	50.00%
Discount rate on preferred stock liquidation amount required on other series of preferred stock (as a percent)					50.00%	50.00%
Required placement of new common equity capital					5,000,000	5,000,000
Exchange rate of a portion of the company's senior line of credit (as a percent)											100.00%
Expected reduction in line of credit facility											2,500,000
Accrued interest to be eliminated										1,700,000
Expected private placements or other sales of the company's common stock				$ 4,000,000
Expected placement price (in dollars per share)				$ 1.00
Stock expected to be issued (in shares)				18.2
Expected new shares as percentage of resulting total outstanding shares				90.50%

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Regulatory Capital (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Regulatory Capital
Tangible capital to adjusted total assets	$ 32,749	$ 32,936
Tier 1(Core) capital to adjusted total assets	32,749	32,936
Tier 1(Core) capital to risk weighted assets	32,749	32,936
Total capital to risk weighted assets	35,579	36,183
Tangible capital to adjusted total assets, ratio (as a percent)	9.48%	8.82%
Tier 1(Core) capital to adjusted total assets, ratio (as a percent)	9.48%	8.82%
Tier 1(Core) capital to risk weighted assets, ratio (as a percent)	14.98%	13.12%
Total capital to risk weighted assets, ratio (as a percent)	16.27%	14.41%
Tangible capital required for capital adequacy purposes	5,179	5,603
Tier 1(Core) capital to adjusted total assets required for capital adequacy purposes	13,812	14,940
Total capital to risk weighted assets required for capital adequacy purposes	17,494	20,090
Tangible capital required for capital adequacy purposes, ratio (as a percent)	1.50%	1.50%
Tier 1(Core) capital to adjusted total assets required for capital adequacy purposes, ratio (as a percent)	4.00%	4.00%
Total capital to risk weighted assets required for capital adequacy purposes, ratio (as a percent)	8.00%	8.00%
Tier 1(Core) capital to adjusted total assets required under cease and desist order	27,624	29,881
Total capital to risk weighted assets required under cease and desist order	$ 26,240	$ 30,135
Tier 1(Core) capital to adjusted total assets required under cease and desist order, ratio (as a percent)	8.00%	8.00%
Total Risk-Based Capital to Risk-Weighted Assets, ratio per cease and desist orders (as a percent)	12.00%	12.00%

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Fair Value (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012	Dec. 31, 2012
Fair Value
Securities available-for-sale, at fair value	$ 11,117		$ 11,117		$ 13,378
Transfers between levels	0	0	0	0
Residential mortgage-backed
Fair Value
Securities available-for-sale, at fair value	11,117		11,117		13,378
Significant Other Observable Inputs (Level 2)
Fair Value
Securities available-for-sale, at fair value	11,117		11,117		13,378
Total
Fair Value
Securities available-for-sale, at fair value	11,117		11,117		13,378
Recurring basis | Significant Other Observable Inputs (Level 2) | Residential mortgage-backed
Fair Value
Securities available-for-sale, at fair value	11,117		11,117		13,378
Recurring basis | Total | Residential mortgage-backed
Fair Value
Securities available-for-sale, at fair value	$ 11,117		$ 11,117		$ 13,378

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Loans Receivable Held for Investment (Details 7) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Past due receivable
30-59 Days Past Due, Loans receivable	$ 1,640	$ 3,281
60-89 Days Past Due, Loans receivable		1,425
Greater than 90 Days Past Due, Loans receivable	18,607	37,090
Total Past Due, Loans receivable	20,247	41,796
Total Loans Not Past Due, Loans receivable	224,604	240,699
Loans receivable held for sale | One-to-four units
Past due receivable
60-89 Days Past Due, Loans receivable		871
Greater than 90 Days Past Due, Loans receivable		6,656
Total Past Due, Loans receivable		7,527
Total Loans Not Past Due, Loans receivable		389
Loans receivable held for sale | Five or more units
Past due receivable
Greater than 90 Days Past Due, Loans receivable		1,956
Total Past Due, Loans receivable		1,956
Total Loans Not Past Due, Loans receivable	3,808	3,839
Loans receivable held for sale | Commercial real estate
Past due receivable
Greater than 90 Days Past Due, Loans receivable	348
Total Past Due, Loans receivable	348
Total Loans Not Past Due, Loans receivable	1,001	1,358
Loans receivable held for sale | Church
Past due receivable
Greater than 90 Days Past Due, Loans receivable	1,556	1,556
Total Past Due, Loans receivable	1,556	1,556
Total Loans Not Past Due, Loans receivable	2,727	2,744
Loans receivable held for investment | One-to-four units
Past due receivable
30-59 Days Past Due, Loans receivable	1,181	1,077
Greater than 90 Days Past Due, Loans receivable	1,406	1,489
Total Past Due, Loans receivable	2,587	2,566
Total Loans Not Past Due, Loans receivable	49,411	55,167
Loans receivable held for investment | Five or more units
Past due receivable
30-59 Days Past Due, Loans receivable		587
60-89 Days Past Due, Loans receivable		554
Greater than 90 Days Past Due, Loans receivable	2,208	2,312
Total Past Due, Loans receivable	2,208	3,453
Total Loans Not Past Due, Loans receivable	75,662	79,897
Loans receivable held for investment | Commercial real estate
Past due receivable
Greater than 90 Days Past Due, Loans receivable	404	7,090
Total Past Due, Loans receivable	404	7,090
Total Loans Not Past Due, Loans receivable	32,336	34,034
Loans receivable held for investment | Church
Past due receivable
30-59 Days Past Due, Loans receivable	439	1,617
Greater than 90 Days Past Due, Loans receivable	12,519	15,689
Total Past Due, Loans receivable	12,958	17,306
Total Loans Not Past Due, Loans receivable	57,273	58,948
Loans receivable held for investment | Construction
Past due receivable
Greater than 90 Days Past Due, Loans receivable		273
Total Past Due, Loans receivable		273
Total Loans Not Past Due, Loans receivable	443	462
Loans receivable held for investment | Commercial Sports
Past due receivable
Total Loans Not Past Due, Loans receivable	1,438	1,711
Loans receivable held for investment | Commercial Other
Past due receivable
30-59 Days Past Due, Loans receivable	20
Greater than 90 Days Past Due, Loans receivable	97
Total Past Due, Loans receivable	117
Total Loans Not Past Due, Loans receivable	445	2,115
Loans receivable held for investment | Consumer Other
Past due receivable
Greater than 90 Days Past Due, Loans receivable	69	69
Total Past Due, Loans receivable	69	69
Total Loans Not Past Due, Loans receivable	$ 60	$ 35

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Loans Receivable Held for Investment (Details 8) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2013 loan	Jun. 30, 2012 loan	Jun. 30, 2013 loan	Jun. 30, 2012 loan	Dec. 31, 2012
Troubled debt restructuring
Loans classified as Troubled Debt Restructurings	$ 32,800,000		$ 32,800,000		$ 41,100,000
Specific reserves allocated to TDRs	2,200,000		2,200,000		2,500,000
Timely payment period for return to accrual status			6 months
Commitments to lend additional amounts to customers with TDRs	0		0		0
Number of Loans	1	7	6	11
Pre-Modification Outstanding Recorded Investment	1,456,000	2,927,000	2,195,000	4,169,000
Post- Modification Outstanding Recorded Investment	1,497,000	2,938,000	2,286,000	4,180,000
Increase in allowance for loan losses due to troubled debt restructurings	96,000	144,000	119,000	231,000
Troubled debt restructurings, charge-offs			23,000	100,000
Number of loans modified as TDRs in last 12 months, with payment default			0
Past due period for loan to be in payment default			90 days
Loan modifications other than TDRs		1,200,000		1,200,000
Minimum
Troubled debt restructuring
Period for repayment of delinquent property taxes for TDRs			6 months
Non-accrual status
Troubled debt restructuring
Loans classified as Troubled Debt Restructurings	13,500,000		13,500,000		22,800,000
Accrual status
Troubled debt restructuring
Loans classified as Troubled Debt Restructurings	19,300,000		19,300,000		18,300,000
One-to-four units
Troubled debt restructuring
Number of Loans		1	5	1
Pre-Modification Outstanding Recorded Investment		36,000	739,000	36,000
Post- Modification Outstanding Recorded Investment		36,000	789,000	36,000
Commercial real estate
Troubled debt restructuring
Number of Loans	1	1	1	2
Pre-Modification Outstanding Recorded Investment	1,456,000	505,000	1,456,000	734,000
Post- Modification Outstanding Recorded Investment	1,497,000	511,000	1,497,000	740,000
Church
Troubled debt restructuring
Number of Loans		5		8
Pre-Modification Outstanding Recorded Investment		2,386,000		3,399,000
Post- Modification Outstanding Recorded Investment		$ 2,391,000		$ 3,404,000

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Fair Value

6 Months Ended

Jun. 30, 2013

Fair Value

Fair Value

NOTE (8) – 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 orderly 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 non-performing loans receivable held-for-sale and impaired loans that are collateral dependent is generally based upon the fair value of the collateral which is obtained from recent real estate appraisals.  These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach.  Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available.  Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value.  Non-performing loans held for sale and impaired loans are evaluated on a quarterly basis for additional impairment and adjusted accordingly.

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

Appraisals for collateral-dependent impaired loans, non-performing loans held for sale and real estate owned 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 Measurements at June 30, 2013 Using
	Quoted Prices in Active  Markets for  Identical  Assets  (Level 1)		Significant  Other  Observable  Inputs  (Level 2)		Significant  Unobservable Inputs  (Level 3)		Total
	(In thousands)
Assets:
Securities available-for-sale - residential mortgage-backed	$	-	$	11,117	$	-	$	11,117
	Fair Value Measurements at December 31, 2012 Using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
	(In thousands)
Assets:
Securities available-for-sale - residential mortgage-backed	$	-	$	13,378	$	-	$	13,378

There were no transfers between Level 1, Level 2, or Level 3 during the three and six months ended June 30, 2013 and 2012.

Assets Measured on a Non-Recurring Basis

The following table provides information regarding the carrying values of our assets measured at fair value on a non-recurring basis at the dates indicated.  The fair value measurement for all of these assets falls within Level 3 of the fair value hierarchy.

	June 30, 2013		December 31, 2012
	(In thousands)
Assets:
Non-performing loans receivable held-for-sale:
One-to-four units	$	-	$	6,656
Five or more units	-		1,956
Commercial real estate	348		-
Church	1,556		1,556
Impaired loans carried at fair value of collateral:
One-to-four units	1,349		1,284
Five or more units	920		1,679
Commercial real estate	403		3,385
Church	7,079		6,649
Real estate owned:
Commercial real estate	1,792		2,752
Church	4,435		5,411

The following table provides information regarding gains (losses) recognized on assets measured at fair value on a non-recurring basis for the three and six months ended June 30, 2013 and 2012.

	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
	(In thousands)
Non-performing loans receivable held-for-sale	$	2	$	(188)	$	(468)	$	(187)
Impaired loans carried at fair value of collateral	(366)		174		(400)		(916)
Real estate owned	(223)		(331)		(223)		(312)
Total	$	(587)	$	(345)	$	(1,091)	$	(1,415)

The following tables present quantitative information about level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis at June 30, 2013 and December 31, 2012:

	June 30, 2013
	Fair Value		Valuation Technique(s)	Unobservable Input(s)	Range
	(Dollars in thousands)
Non-performing loans held for sale – commercial real estate	$	348	Sales comparison approach	Adjustment for differences between the comparable sales	1%
			Income approach	Capitalization rate	8.2%
Non-performing loans held for sale – church	1,556		Sales comparison approach	Adjustment for differences between the comparable sales	11% to 29%
Impaired loans – one-to-four units	1,349		Sales comparison approach	Adjustment for differences between the comparable sales	-5% to 18%
Impaired loans – five or more units	920		Sales comparison approach	Adjustment for differences between the comparable sales	-10% to 0%
			Income approach	Capitalization rate	7.25% to 9%
Impaired loans – commercial real estate	403		Sales comparison approach	Adjustment for differences between the comparable sales	2%
			Income approach	Capitalization rate	4.5%
Impaired loans – church	7,079		Sales comparison approach	Adjustment for differences between the comparable sales	-45% to 16%
			Income approach	Capitalization rate	8%
Real estate owned – commercial real estate	1,792		Sales comparison approach	Adjustment for differences between the comparable sales	-67% to 1%
			Income approach	Capitalization rate	10%
Real estate owned – church	4,435		Sales comparison approach	Adjustment for differences between the comparable sales	-24% to 7%
			Income approach	Capitalization rate	6.5% to 11.5%

	December 31, 2012
	Fair Value		Valuation Technique(s)	Unobservable Input(s)	Range
	(Dollars in thousands)
Nonperforming loans held for sale – one-to-four units	$	6,656	Sales comparison approach	Adjustment for differences between the comparable sales	-30% to 23%
Nonperforming loans held for sale – five or more units	1,956		Sales comparison approach	Adjustment for differences between the comparable sales	-13% to 17%
			Income approach	Capitalization rate	6% to 8.5%
Nonperforming loans held for sale – church	1,556		Sales comparison approach	Adjustment for differences between the comparable sales	-27% to 29%
Impaired loans – one-to-four units	1,284		Sales comparison approach	Adjustment for differences between the comparable sales	-5% to 18%
Impaired loans – five or more units	1,679		Sales comparison approach	Adjustment for differences between the comparable sales	-26% to 16%
			Income approach	Capitalization rate	6.5% to 9%
Impaired loans – commercial real estate	3,385		Sales comparison approach	Adjustment for differences between the comparable sales	-17% to -1%
			Income approach	Capitalization rate	7% to 9%
Impaired loans – church	6,649		Sales comparison approach	Adjustment for differences between the comparable sales	-45% to 8%
			Income approach	Capitalization rate	6.75% to 8%
Real estate owned – commercial real estate	2,752		Sales comparison approach	Adjustment for differences between the comparable sales	-67% to 1%
			Income approach	Capitalization rate	8% to 11%
Real estate owned – church	5,411		Sales comparison approach	Adjustment for differences between the comparable sales	-12% to 7%
			Income approach	Capitalization rate	11.5%

Fair Values of Financial Instruments

The carrying amounts and estimated fair values of financial instruments, at June 30, 2013 and December 31, 2012 were as follows:

			Fair Value Measurements at June 30, 2013 Using
	Carrying Value		Level 1		Level 2		Level 3		Total
	(In thousands)
Financial Assets:
Cash and cash equivalents	$	74,468	$	74,468	$	-	$	-	$	74,468
Securities available-for-sale	11,117		-		11,117		-		11,117
Loans receivable held for sale	9,126		-		-		9,126		9,126
Loans receivable held for investment	225,391		-		-		225,136		225,136
Federal Home Loan Bank stock	3,737		N/A		N/A		N/A		N/A
Accrued interest receivable	1,141		-		34		1,107		1,141
Financial Liabilities:
Deposits	$	(229,365)	$	-	$	(222,271)	$	-	$	(222,271)
Federal Home Loan Bank advances	(79,500)		-		(83,231)		-		(83,231)
Junior subordinated debentures	(6,000)		-		-		(5,281)		(5,281)
Other borrowings	(5,000)		-		-		(4,507)		(4,507)
Accrued interest payable	(2,308)		-		(94)		(1,984)		(2,078)
Advance payments by borrowers for taxes and insurance	(552)		-		(552)		-		(552)
			Fair Value Measurements at December 31, 2012 Using
	Carrying Value		Level 1		Level 2		Level 3		Total
	(In thousands)
Financial Assets:
Cash and cash equivalents	$	64,360	$	64,360	$	-	$	-	$	64,360
Securities available-for-sale	13,378		-		13,378		-		13,378
Loans receivable held for sale	19,051		-		-		19,051		19,051
Loans receivable held for investment	251,723		-		-		252,043		252,043
Federal Home Loan Bank stock	3,901		N/A		N/A		N/A		N/A
Accrued interest receivable	1,250		-		42		1,208		1,250
Financial Liabilities:
Deposits	$	(257,071)	$	-	$	(253,155)	$	-	$	(253,155)
Federal Home Loan Bank advances	(79,500)		-		(84,769)		-		(84,769)
Junior subordinated debentures	(6,000)		-		-		(4,852)		(4,852)
Other borrowings	(5,000)		-		-		(4,205)		(4,205)
Accrued interest payable	(1,941)		-		(87)		(1,527)		(1,614)
Advance payments by borrowers for taxes and insurance	(711)		-		(711)		-		(711)

The methods and assumptions, not previously presented, used to estimate fair values are described as follows:

(a) Cash and Cash Equivalents

The carrying amounts of cash and cash equivalents approximate fair values and are classified as Level 1.

(b) Loans receivable held for sale

The fair value of loans held for sale is estimated based upon binding contracts and quotes from third party investors or appraisal reports adjusted by sales commission assumptions resulting in a Level 3 classification.

(c) Loans receivable held for investment

Fair values of loans, excluding loans held for sale, are estimated as follows:  For variable rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values resulting in a Level 3 classification.  Fair values for other loans are estimated using discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality resulting in a Level 3 classification.  Impaired loans are valued at the lower of cost or fair value as described previously.  The methods utilized to estimate the fair value of loans do not necessarily represent an exit price.

(d) FHLB Stock

It is not practical to determine the fair value of FHLB stock due to restrictions placed on its transferability.

(e) Deposits and Advance Payments by Borrowers for Taxes and Insurance

The fair values disclosed for demand deposits (e.g., interest and non-interest checking, passbook savings, and certain types of money market accounts) are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amount) resulting in Level 2 classification.  Fair values for fixed rate certificates of deposit are estimated using discounted cash flow calculations that apply interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits resulting in a Level 2 classification.

(f) Federal Home Loan Bank Advances

The fair values of the Federal Home Loan Bank advances are estimated using discounted cash flow analyses based on the current borrowing rates for similar types of borrowing arrangements resulting in a Level 2 classification.

(g) Junior Subordinated Debentures and Other Borrowings

The fair values of the Company’s Junior subordinated debentures and other borrowings are estimated using discounted cash flow analyses based on the current borrowing rates for similar types of borrowing arrangements resulting in a Level 3 classification.

(h) Accrued Interest Receivable

The carrying amounts of accrued interest receivable approximate their fair value and are classified the same as the related asset.

(i) Accrued Interest Payable

The carrying amounts of accrued interest on deposits and Federal Home Loan Bank advances approximate their fair value.  The carrying amounts of accrued interest on junior subordinated debentures and other borrowings are estimated by applying a discount similar to the related debt.  The fair values of accrued interest are classified the same as the related liability.

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Loans Receivable Held for Investment (Details 2) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended		3 Months Ended		6 Months Ended		3 Months Ended		6 Months Ended		3 Months Ended		6 Months Ended		3 Months Ended		6 Months Ended		3 Months Ended	6 Months Ended				3 Months Ended		6 Months Ended		3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013 One-to-four units	Jun. 30, 2012 One-to-four units	Jun. 30, 2013 One-to-four units	Jun. 30, 2012 One-to-four units	Jun. 30, 2013 Five or more units	Jun. 30, 2012 Five or more units	Jun. 30, 2013 Five or more units	Jun. 30, 2012 Five or more units	Jun. 30, 2013 Commercial real estate	Jun. 30, 2012 Commercial real estate	Jun. 30, 2013 Commercial real estate	Jun. 30, 2012 Commercial real estate	Jun. 30, 2013 Church	Jun. 30, 2012 Church	Jun. 30, 2013 Church	Jun. 30, 2012 Church	Jun. 30, 2012 Construction	Jun. 30, 2012 Construction	Jun. 30, 2013 Construction	Mar. 31, 2013 Construction	Dec. 31, 2012 Construction	Jun. 30, 2013 Commercial	Jun. 30, 2012 Commercial	Jun. 30, 2013 Commercial	Jun. 30, 2012 Commercial	Jun. 30, 2013 Consumer	Jun. 30, 2012 Consumer	Jun. 30, 2013 Consumer	Jun. 30, 2012 Consumer
Allowance for loan losses
Beginning balance	$ 10,450	$ 17,752	$ 11,869	$ 17,299	$ 1,834	$ 4,836	$ 2,060	$ 4,855	$ 1,123	$ 3,013	$ 2,122	$ 2,972	$ 1,549	$ 2,859	$ 2,685	$ 3,108	$ 5,677	$ 6,494	$ 4,818	$ 5,742	$ 233	$ 249	$ 8	$ 8	$ 8	$ 181	$ 231	$ 98	$ 247	$ 78	$ 86	$ 78	$ 126
Provision for loan losses		102		1,061	614	(135)	165	201	66	(116)	(295)	(75)	39	(234)	(168)	(440)	(623)	882	406	1,861	(127)	(143)				(97)	(168)	(109)	(301)	1		1	(42)
Recoveries	152	158	528	296			259						86	15	101	30	6	3	13	7						60	138	155	255		2		4
Loans charged off	(23)	(156)	(1,818)	(800)	(3)		(39)	(355)	(20)		(658)				(944)	(58)		(156)	(177)	(387)
Ending balance	$ 10,579	$ 17,856	$ 10,579	$ 17,856	$ 2,445	$ 4,701	$ 2,445	$ 4,701	$ 1,169	$ 2,897	$ 1,169	$ 2,897	$ 1,674	$ 2,640	$ 1,674	$ 2,640	$ 5,060	$ 7,223	$ 5,060	$ 7,223	$ 106	$ 106	$ 8	$ 8	$ 8	$ 144	$ 201	$ 144	$ 201	$ 79	$ 88	$ 79	$ 88

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Fair Value (Details 4) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Financial Assets:
Securities available-for-sale	$ 11,117	$ 13,378
Level 1
Financial Assets:
Cash and cash equivalents	74,468	64,360
Level 2
Financial Assets:
Securities available-for-sale	11,117	13,378
Accrued interest receivable	34	42
Financial Liabilities:
Deposits	(222,271)	(253,155)
Federal Home Loan Bank advances	(83,231)	(84,769)
Accrued interest payable	(94)	(87)
Advance payments by borrowers for taxes and insurance	(552)	(711)
Level 3
Financial Assets:
Loans receivable held for sale	9,126	19,051
Loans receivable held for investment	225,136	252,043
Accrued interest receivable	1,107	1,208
Financial Liabilities:
Junior subordinated debentures	(5,281)	(4,852)
Other borrowings	(4,507)	(4,205)
Accrued interest payable	(1,984)	(1,527)
Total
Financial Assets:
Cash and cash equivalents	74,468	64,360
Securities available-for-sale	11,117	13,378
Loans receivable held for sale	9,126	19,051
Loans receivable held for investment	225,136	252,043
Accrued interest receivable	1,141	1,250
Financial Liabilities:
Deposits	(222,271)	(253,155)
Federal Home Loan Bank advances	(83,231)	(84,769)
Junior subordinated debentures	(5,281)	(4,852)
Other borrowings	(4,507)	(4,205)
Accrued interest payable	(2,078)	(1,614)
Advance payments by borrowers for taxes and insurance	(552)	(711)
Carrying Value
Financial Assets:
Cash and cash equivalents	74,468	64,360
Securities available-for-sale	11,117	13,378
Loans receivable held for sale	9,126	19,051
Loans receivable held for investment	225,391	251,723
Federal Home Loan Bank stock	3,737	3,901
Accrued interest receivable	1,141	1,250
Financial Liabilities:
Deposits	(229,365)	(257,071)
Federal Home Loan Bank advances	(79,500)	(79,500)
Junior subordinated debentures	(6,000)	(6,000)
Other borrowings	(5,000)	(5,000)
Accrued interest payable	(2,308)	(1,941)
Advance payments by borrowers for taxes and insurance	$ (552)	$ (711)

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Income Taxes

6 Months Ended

Jun. 30, 2013

Income Taxes

Income Taxes

NOTE (11) –Income Taxes

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

Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion, or all, of the deferred tax asset will not be realized. In assessing the realization of deferred tax assets, management evaluates both positive and negative evidence, including the existence of cumulative losses in the current year and the prior two years, the amount of taxes paid in available carry-back years, the forecasts of future income and tax planning strategies. This analysis is updated quarterly.  Based on this analysis, the Company determined that a valuation allowance of $9.7 million was required as of June 30, 2013, resulting in $0 net deferred tax assets.  The Company had recorded a valuation allowance of $9.0 million and $0 net deferred tax assets as of December 31, 2012.

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Junior Subordinated Debentures and Other Borrowings

6 Months Ended

Jun. 30, 2013

Junior Subordinated Debentures and Other Borrowings

Junior Subordinated Debentures and Other Borrowings

NOTE (7) – Junior Subordinated Debentures and Other Borrowings

On March 17, 2004, the Company issued $6.0 million of Floating Rate Junior Subordinated Debentures in a private placement.  The subordinated debentures mature in 10 years and interest is payable quarterly at a rate per annum equal to the 3-month LIBOR plus 2.54%.  The interest rate is determined as of each March 17, June 17, September 17, and December 17, and was 2.81% at June 30, 2013.  The Company stopped paying interest on the debentures in September 2010.  The accrued interest on the subordinated debentures was $540 thousand as of June 30, 2013.  Under the Order applicable to the Company discussed in Note 2, the Company is not permitted to make payments on its debt without prior notice to and receipt of written notice of non-objection from the FRB, acting through the Federal Reserve Bank of San Francisco.  In addition, under the terms of the subordinated debentures, the Company is not allowed to make payments on the subordinated debentures if the Company is in default on any of its senior indebtedness, which term includes the senior line of credit described below.

On February 28, 2010, the Company borrowed an aggregate of $5.0 million under its $5.0 million line of credit with another financial institution, and invested all of the proceeds in the equity capital of the Bank.  The interest rate on the line of credit adjusts annually, subject to a minimum of 6.00% and increases by an additional 5% in the event of default.  Borrowings under this line of credit are secured by the Company’s investment in the Bank.  The full amount of this borrowing became due and payable on July 31, 2010.  This line of credit has not been repaid and the Company is in default under the line of credit agreement.  On April 7, 2011, the lender agreed to forbear from exercising its rights (other than increasing the interest rate by the default rate margin) pursuant to the line of credit agreement until January 1, 2012, subject to certain conditions.  The lender has declined to extend the forbearance agreement.  The accrued interest on the line of credit was $1.7 million as of June 30, 2013.

Management’s plans to address these matters are described in Note 2 to these consolidated financial statements.

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Going Concern, Regulatory Matters and Management's Plan for Recapitalization of the Company

6 Months Ended

Jun. 30, 2013

Going Concern, Regulatory Matters and Management's Plan for Recapitalization of the Company

Going Concern, Regulatory Matters and Management's Plan for Recapitalization of the Company

NOTE (2) – Going Concern, Regulatory Matters and Management’s Plan for Recapitalization of the Company

Going Concern

The Company’s financial statements have been prepared assuming that the Company will continue as a going-concern, which contemplates continuity of operations, and realization of assets and liquidation of liabilities in the ordinary course of business.  The ability of the Company to continue as a going concern is dependent on many factors, one of which is regulatory action, including acceptance of its capital plan. The following discussion describes matters that raise substantial doubt about the Company’s ability to continue as a going concern as well as management’s plans for responding to these matters.

Holding Company Liquidity

The Company has a tax sharing liability to the Bank which, together with other operating expenses, exceeds operating cash at the Company level. The Company used its cash available at the holding company level to pay a substantial portion of this liability pursuant to the terms of the Tax Allocation Agreement between the Bank and the Company on March 30, 2012 and does not have cash available to pay its operating expenses.  Additionally, the Company is deferring interest payments on its $6.0 million aggregate principal amount of Floating Rate Junior Subordinated Debentures that mature in March 17, 2014, and is in default under the terms of a $5.0 million line of credit with another financial institution lender (see Note 7).

The Company’s principal source of funds for the payment of operating expenses, as well as for the declaration and payment of dividends, is dividends received from the Bank. The Office of the Comptroller of the Currency (“OCC”) regulations limit the amount of dividends that may be paid by the Bank without prior approval of the OCC.  Under these regulations, the amount of dividends that may be paid in any calendar year is limited to the current year’s net profits, combined with the retained net profits of the preceding two years, subject to compliance with the capital requirements described below.  Based on the above limitation and further regulatory restrictions on dividends described below, the Bank may not declare dividends during the year 2013 without OCC approval, and such approval is not likely to be given.  Accordingly, the Company will not be able to meet its payment obligations noted above within the foreseeable future unless the Company is able to secure new capital.

Regulatory Matters

As a result of significant deficiencies in the Company’s and the Bank’s operations noted in a regulatory examination, the Company and the Bank were declared to be in “troubled condition” and entered into cease and desist orders (the “Orders”) issued by the OCC’s regulatory predecessor effective September 9, 2010,  requiring, among other things, that the Company and the Bank take remedial actions to improve the Bank’s loan underwriting and internal asset review procedures, to reduce the amount of its non-performing assets and to improve other aspects of the Bank’s business, as well as the Company’s management of its business and the oversight of the Company’s business by the Board.  Furthermore, the Orders, which are now administered by the OCC with respect to the Bank and the Board of Governors of the Federal Reserve System (“FRB”) with respect to the Company,  require the Bank to attain, and thereafter maintain, a Tier 1 (Core) Capital to Adjusted Total Assets ratio of at least 8% and a Total Risk-Based Capital to Risk-Weighted Assets ratio of at least 12%, both of which ratios are greater than the respective 5% and 10% levels for such ratios that are generally required under OCC regulations.

Additionally, the Orders issued by the OTS have imposed certain limitations on the Company and the Bank.  These limitations include the following, among others:

· The Bank may not increase its total assets during any quarter in excess of an amount equal to the net interest credited on deposit liabilities during the prior quarter without the prior written notice to and receipt of notice of non-objection from the OCC.

· Neither the Company nor the Bank may declare or pay any dividends or make any other capital distributions without the prior written approval of the FRB and the OCC.

· Neither the Company nor the Bank may make any changes in its directors or senior executive officers without prior notice to and receipt of notice of non-objection from the FRB and the OCC.

· The Company and the Bank are subject to limitations on severance and indemnification payments and on entering into or amending employment agreements and compensation arrangements, and on the payment of bonuses to Bank directors and officers.

· The Company may not incur, issue, renew, repurchase, make payments on or increase any debt or redeem any capital stock without prior notice to and receipt of written notice of non-objection from the FRB.

· The Bank is not permitted to increase the amount of its brokered deposits beyond the amount of interest credited without prior notice to and receipt of notice of non-objection from the OCC.

The Orders require the submission of a capital plan that is acceptable to the FRB and the OCC.  The capital plan of the Company and the Bank has been preliminarily approved by the FRB and OCC subject to the successful completion of the Company’s recapitalization plan described below.

Management’s Plans for Recapitalization of the Company and the Bank

Management’s plan to address the conditions described above is to raise additional equity capital for the Company and exchange senior securities for common equity.  The Company’s ability to continue as a going concern is dependent on the timely implementation and success of this plan.  There can be no assurance that management’s plan will be achieved.

Management of the Company is pursuing a comprehensive recapitalization plan to strengthen and simplify the Company’s capital structure.  To date, the Company has entered into a written agreement with the U.S. Department of the Treasury pursuant to which the U.S. Treasury will exchange its holdings of the Company’s Series D and Series E Fixed Rate Cumulative Perpetual Preferred Stock for common stock (or initially common stock equivalents) at a discount of 50% of the liquidation amount, plus an undiscounted exchange of the accumulated but unpaid dividends on such preferred stock, for common stock (or initially common stock equivalents).  The exchange by the U.S. Treasury is subject to various conditions, including the exchange of the Company’s other outstanding series of preferred stock at discounts of 50% of the aggregate liquidation values, the placement of at least $5 million of new common equity capital, and other conditions.  The exchange by the U.S. Treasury is expected to close contemporaneously with the closing of separate placements of common stock and the exchange transactions with the holders of each of the other series of the Company’s preferred stock.  In addition, the Company has entered into a written agreement with the holder of its Series A Perpetual Preferred Stock pursuant to which the holder will exchange its holdings of Series A Preferred for common stock (or initially common stock equivalents) at a discount of 50% of the liquidation amount.  This exchange is subject to various conditions, including the exchange of the Company’s other outstanding series of preferred stock, the placement of new common equity capital, and other conditions.

The Company has reached agreements in principle with the holders of its Series B Perpetual Preferred Stock and Series C Noncumulative Perpetual Convertible Preferred Stock to exchange their holdings for common stock (or initially common stock equivalents) at a discount of 50% of the liquidation amount.  Also, the Company has reached agreements in principle with its senior lender, pursuant to which the lender will exchange a portion of the line of credit, which is currently in default, for common stock (or initially equivalents) at 100% of the face amount to be exchanged; forgive the accrued interest on the entire amount of the line of credit to the date of the exchange; and enter into a modified credit agreement for the remainder of the existing loan that would be outstanding after the exchange.  As presently contemplated, the series of transactions related to the exchange of a portion of the existing loan will reduce the Company’s senior debt by approximately $2.5 million and eliminate the accrued interest on the line of credit, which totaled $1.7 million at August 1, 2013.

As a condition to consummating these exchanges, the Company plans to concurrently complete private placements of the Company’s common stock aggregating approximately $4 million in gross proceeds.  Based on various assumptions, including, for illustrative purposes only, a placement price of $1.00 per share, the Company projects that these exchanges and placements and sales of common stock and common stock equivalents would, if completed, result in the issuance of approximately 18.2 million new shares of the Company’s common stock or equivalents, which would constitute approximately 90.5% of the pro forma outstanding shares of the Company’s total equity.  If the placement price is materially closer to our current stock price, then the number of shares to be issued in the recapitalization, and the percentage ownership represented by such shares, will be significantly higher.  The 18.2 million new shares of common stock would exceed the Company’s current unissued authorized shares.  Accordingly, the Company plans to issue a form of common stock equivalent to the lender and holders of preferred stock in exchange for their securities to consummate the recapitalization, after which the Company plans to seek shareholder approval to increase the Company’s authorized shares, and issue a portion of such authorized shares to replace the common stock equivalents issued in the recapitalization.

As noted above, there can be no assurance that management’s capital plan will be achieved.  Failure to maintain capital sufficient to meet the higher capital requirements required by the Orders to which the Company and the Bank are currently subject, or future increases in capital requirements, could result in further regulatory action, which could include seizure of the Bank through the appointment of a conservator or receiver.

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Loans Receivable Held for Investment (Details 5) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Impaired loans
Average Recorded Investment	$ 34,933,000	$ 58,030,000	$ 38,512,000	$ 57,262,000
Cash Basis Interest Income Recognized	340,000	500,000	611,000	1,027,000
Interest income if impaired loans had performed according to terms			1,400,000	2,300,000
One-to-four units
Impaired loans
Average Recorded Investment	3,737,000	13,998,000	3,877,000	13,696,000
Cash Basis Interest Income Recognized	29,000	110,000	61,000	234,000
Five or more units
Impaired loans
Average Recorded Investment	2,508,000	3,050,000	3,097,000	3,384,000
Cash Basis Interest Income Recognized	24,000	18,000	40,000	40,000
Commercial real estate
Impaired loans
Average Recorded Investment	6,481,000	7,784,000	8,058,000	7,600,000
Cash Basis Interest Income Recognized	142,000	61,000	223,000	145,000
Church
Impaired loans
Average Recorded Investment	22,041,000	32,834,000	23,213,000	32,215,000
Cash Basis Interest Income Recognized	139,000	306,000	276,000	597,000
Construction
Impaired loans
Average Recorded Investment		294,000	115,000	297,000
Cash Basis Interest Income Recognized		4,000	5,000	9,000
Commercial Other
Impaired loans
Average Recorded Investment	97,000		83,000
Cash Basis Interest Income Recognized	4,000		4,000
Consumer Other
Impaired loans
Average Recorded Investment	69,000	70,000	69,000	70,000
Cash Basis Interest Income Recognized	$ 2,000	$ 1,000	$ 2,000	$ 2,000

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Loans Receivable Held For Sale (Tables) (Loans receivable held for sale)

6 Months Ended

Jun. 30, 2013

Loans receivable held for sale

Loans receivable held for sale

Schedule of loans receivable

	June 30, 2013		December 31, 2012
	(In thousands)
One-to-four units	$	-	$	7,916
Five or more units	3,808		5,795
Commercial real estate	1,349		1,358
Church	4,283		4,300
Valuation allowance for unrealized losses	(314)		(318)
Loans receivable held for sale, net	$	9,126	$	19,051
Non-performing loans receivable held for sale (1)	$	1,904	$	10,168
Valuation allowance	-		-
Non-performing loans receivable held for sale, net	$	1,904	$	10,168
Performing loans receivable held for sale	$	7,536	$	9,201
Valuation allowance	(314)		(318)
Performing loans receivable held for sale, net	$	7,222	$	8,883

______

(1) Net of charge-offs of $679 thousand and $2.5 million at June 30, 2013 and December 31, 2012.

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Regulatory Capital

6 Months Ended

Jun. 30, 2013

Regulatory Capital

Regulatory Capital

NOTE (10) –Regulatory Capital

The Bank is subject to regulatory capital requirements now administered by the Office of the Comptroller of the Currency, or OCC, which is the statutory successor under the Dodd-Frank Act to the former Office of Thrift Supervision, or OTS.  The capital requirements, which remain the same as when administered by the OTS, 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.

Prompt corrective action regulations also administered by the OCC provide five classifications: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms are not used to represent overall financial condition. If only adequately capitalized, regulatory approval is required to accept brokered deposits.  If undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required.

The Bank met the minimum capital requirements under the cease and desist order at June 30, 2013 and December 31, 2012.  Actual required capital amounts and ratios at June 30, 2013 and December 31, 2012, together with the higher capital requirements that the Bank is required to meet under the cease and desist order applicable to it, are presented below.

	Actual		Required for Capital Adequacy Purposes		Capital Requirements under Cease and Desist Order
	Amount	Ratio	Amount	Ratio	Amount	Ratios
	(Dollars in thousands)
June 30, 2013:
Tangible Capital to adjusted total assets	$ 32,749	9.48%	$   5,179	1.50%	N/A	N/A
Tier 1(Core) Capital to adjusted total assets	$ 32,749	9.48%	$ 13,812	4.00%	$ 27,624	8.00%
Tier 1(Core) Capital to risk weighted assets	$ 32,749	14.98%	N/A	N/A	N/A	N/A
Total Capital to risk weighted assets	$ 35,579	16.27%	$ 17,494	8.00%	$ 26,240	12.00%
December 31, 2012:
Tangible Capital to adjusted total assets	$ 32,936	8.82%	$  5,603	1.50%	N/A	N/A
Tier 1(Core) Capital to adjusted total assets	$ 32,936	8.82%	$ 14,940	4.00%	$ 29,881	8.00%
Tier 1(Core) Capital to risk weighted assets	$ 32,936	13.12%	N/A	N/A	N/A	N/A
Total Capital to risk weighted assets	$ 36,183	14.41%	$ 20,090	8.00%	$ 30,135	12.00%

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Regulatory Capital (Tables)

6 Months Ended

Jun. 30, 2013

Regulatory Capital

Schedule of actual and required capital amounts and ratios

	Actual		Required for Capital Adequacy Purposes		Capital Requirements under Cease and Desist Order
	Amount	Ratio	Amount	Ratio	Amount	Ratios
	(Dollars in thousands)
June 30, 2013:
Tangible Capital to adjusted total assets	$ 32,749	9.48%	$   5,179	1.50%	N/A	N/A
Tier 1(Core) Capital to adjusted total assets	$ 32,749	9.48%	$ 13,812	4.00%	$ 27,624	8.00%
Tier 1(Core) Capital to risk weighted assets	$ 32,749	14.98%	N/A	N/A	N/A	N/A
Total Capital to risk weighted assets	$ 35,579	16.27%	$ 17,494	8.00%	$ 26,240	12.00%
December 31, 2012:
Tangible Capital to adjusted total assets	$ 32,936	8.82%	$  5,603	1.50%	N/A	N/A
Tier 1(Core) Capital to adjusted total assets	$ 32,936	8.82%	$ 14,940	4.00%	$ 29,881	8.00%
Tier 1(Core) Capital to risk weighted assets	$ 32,936	13.12%	N/A	N/A	N/A	N/A
Total Capital to risk weighted assets	$ 36,183	14.41%	$ 20,090	8.00%	$ 30,135	12.00%

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Loans Receivable Held for Investment (Tables)

6 Months Ended

Jun. 30, 2013

Loans receivable held for investment

Activity in the Allowance for Loan Losses by Portfolio Segment

	Three Months Ended June 30, 2013
	One-to- four units			Five or more units			Commercial real estate		Church			Construction		Commercial			Consumer		Total
	(In thousands)
Beginning balance	$	1,834		$	1,123		$	1,549	$	5,677		$	8	$	181		$	78	$	10,450
Provision for loan losses	614			66			39		(623		)	-		(97		)	1		-
Recoveries	-			-			86		6			-		60			-		152
Loans charged off	(3		)	(20		)	-		-			-		-			-		(23		)
Ending balance	$	2,445		$	1,169		$	1,674	$	5,060		$	8	$	144		$	79	$	10,579

	Six Months Ended June 30, 2013
	One-to- four units			Five or  more units			Commercial real estate			Church			Construction		Commercial			Consumer		Total
	(In thousands)
Beginning balance	$	2,060		$	2,122		$	2,685		$	4,818		$	8	$	98		$	78	$	11,869
Provision for loan losses	165			(295		)	(168		)	406			-		(109		)	1		-
Recoveries	259			-			101			13			-		155			-		528
Loans charged off	(39		)	(658		)	(944		)	(177		)	-		-			-		(1,818		)
Ending balance	$	2,445		$	1,169		$	1,674		$	5,060		$	8	$	144		$	79	$	10,579

	Three Months Ended June 30, 2012
	One-to- four units			Five or more units			Commercial real estate			Church			Construction			Commercial			Consumer		Total
	(In thousands)
Beginning balance	$	4,836		$	3,013		$	2,859		$	6,494		$	233		$	231		$	86	$	17,752
Provision for loan losses	(135		)	(116		)	(234		)	882			(127		)	(168		)	-		102
Recoveries	-			-			15			3			-			138			2		158
Loans charged off	-			-			-			(156		)	-			-			-		(156		)
Ending balance	$	4,701		$	2,897		$	2,640		$	7,223		$	106		$	201		$	88	$	17,856

	Six Months Ended June 30, 2012
	One-to- four units			Five or more units			Commercial real estate			Church			Construction			Commercial			Consumer			Total
	(In thousands)
Beginning balance	$	4,855		$	2,972		$	3,108		$	5,742		$	249		$	247		$	126		$	17,299
Provision for loan losses	201			(75		)	(440		)	1,861			(143		)	(301		)	(42		)	1,061
Recoveries	-			-			30			7			-			255			4			296
Loans charged off	(355		)	-			(58		)	(387		)	-			-			-			(800		)
Ending balance	$	4,701		$	2,897		$	2,640		$	7,223		$	106		$	201		$	88		$	17,856

Allowance for Loan Losses and Recorded Investment in Loans By Portfolio Segment and Based on Impairment Method

	June 30, 2013
	One-to-four units		Five or more units		Commercial real estate		Church		Construction		Commercial		Consumer		Total
	(In thousands)
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	636	$	60	$	182	$	1,588	$	-	$	97	$	69	$	2,632
Collectively evaluated for impairment	1,809		1,109		1,492		3,472		8		47		10		7,947
Total ending allowance balance	$	2,445	$	1,169	$	1,674	$	5,060	$	8	$	144	$	79	$	10,579
Loans:
Loans individually evaluated for impairment	$	3,713	$	2,911	$	6,566	$	22,111	$	-	$	97	$	69	$	35,467
Loans collectively evaluated for impairment	48,285		74,959		26,174		48,120		443		1,903		60		199,944
Total ending loans balance	$	51,998	$	77,870	$	32,740	$	70,231	$	443	$	2,000	$	129	$	235,411

	December 31, 2012
	One-to-four units		Five or more units		Commercial real estate		Church		Construction		Commercial		Consumer		Total
	(In thousands)
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	719	$	125	$	543	$	1,276	$	-	$	-	$	69	$	2,732
Collectively evaluated for impairment	1,341		1,997		2,142		3,542		8		98		9		9,137
Total ending allowance balance	$	2,060	$	2,122	$	2,685	$	4,818	$	8	$	98	$	78	$	11,869
Loans:
Loans individually evaluated for impairment	$	4,576	$	3,766	$	10,364	$	25,328	$	273	$	-	$	69	$	44,376
Loans collectively evaluated for impairment	53,157		79,584		30,760		50,926		462		3,826		35		218,750
Total ending loans balance	$	57,733	$	83,350	$	41,124	$	76,254	$	735	$	3,826	$	104	$	263,126

Loans Individually Evaluated for Impairment by Type of Loans

	June 30, 2013						December 31, 2012
	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated		Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated
	(In thousands)
With no related allowance recorded:
One-to-four units	$	1,784	$	1,211	$	-	$	1,986	$	1,484	$	-
Five or more units	1,835		1,806		-		2,038		1,819		-
Commercial real estate	3,623		403		-		10,184		6,423		-
Church	11,227		9,190		-		18,664		15,689		-
Construction	-		-		-		279		273		-
Commercial:
Sports	3,850		-		-		3,888		-		-
With an allowance recorded:
One-to-four units	2,506		2,502		636		3,092		3,092		719
Five or more units	1,105		1,105		60		1,947		1,947		125
Commercial real estate	6,163		6,163		182		3,941		3,941		543
Church	12,958		12,921		1,588		9,677		9,639		1,276
Commercial:
Other	97		97		97		-		-		-
Consumer:
Other	69		69		69		69		69		69
Total	$	45,217	$	35,467	$	2,632	$	55,765	$	44,376	$	2,732

Average of Loans Individually Evaluated for Impairment by Type of Loans and Related Interest Income

	Three Months Ended June 30, 2013				Six Months Ended June 30, 2013
	Average Recorded Investment		Cash Basis Interest Income Recognized		Average Recorded Investment		Cash Basis Interest Income Recognized
	(In thousands)
One-to-four units	$	3,737	$	29	$	3,877	$	61
Five or more units	2,508		24		3,097		40
Commercial real estate	6,481		142		8,058		223
Church	22,041		139		23,213		276
Construction	-		-		115		5
Commercial:
Other	97		4		83		4
Consumer:
Other	69		2		69		2
Total	$	34,933	$	340	$	38,512	$	611

	Three Months Ended June 30, 2012				Six Months Ended June 30, 2012
	Average Recorded Investment		Cash Basis Interest Income Recognized		Average Recorded Investment		Cash Basis Interest Income Recognized
	(In thousands)
One-to-four units	$	13,998	$	110	$	13,696	$	234
Five or more units	3,050		18		3,384		40
Commercial real estate	7,784		61		7,600		145
Church	32,834		306		32,215		597
Construction	294		4		297		9
Consumer:
Other	70		1		70		2
Total	$	58,030	$	500	$	57,262	$	1,027

Recorded Investment in Nonaccrual Loans by Type of Loans

	June 30, 2013		December 31, 2012
	(In thousands)
Loans receivable held for sale:
One-to-four units	$	-	$	6,656
Five or more units	-		1,956
Commercial real estate	348		-
Church	1,556		1,556
Loans receivable held for investment:
One-to-four units	1,406		1,489
Five or more units	2,208		2,312
Commercial real estate	404		7,090
Church	12,519		15,689
Construction	-		273
Commercial:
Other	97		-
Consumer:
Other	69		69
Total non-accrual loans	$	18,607	$	37,090

Aging of Recorded Investment in Past Due Loans, Including Loans Receivable Held For Sale

	June 30, 2013
	30-59DaysPast Due		60-89DaysPast Due		Greater than90 DaysPast Due		TotalPast Due		Total Loans Not Past Due
	(In thousands)
Loans receivable held for sale:
Five or more units	$	-	$	-	$	-	$	-	$	3,808
Commercial real estate	-		-		348		348		1,001
Church	-		-		1,556		1,556		2,727
Loans receivable held for investment:
One-to-four units	1,181		-		1,406		2,587		49,411
Five or more units	-		-		2,208		2,208		75,662
Commercial real estate	-		-		404		404		32,336
Church	439		-		12,519		12,958		57,273
Construction	-		-		-		-		443
Commercial:
Sports	-		-		-		-		1,438
Other	20		-		97		117		445
Consumer:
Other	-		-		69		69		60
Total	$	1,640	$	-	$	18,607	$	20,247	$	224,604

	December 31, 2012
	30-59DaysPast Due		60-89DaysPast Due		Greater than90 DaysPast Due		TotalPast Due		Total Loans Not Past Due
	(In thousands)
Loans receivable held for sale:
One-to-four units	$	-	$	871	$	6,656	$	7,527	$	389
Five or more units	-		-		1,956		1,956		3,839
Commercial real estate	-		-		-		-		1,358
Church	-		-		1,556		1,556		2,744
Loans receivable held for investment:
One-to-four units	1,077		-		1,489		2,566		55,167
Five or more units	587		554		2,312		3,453		79,897
Commercial real estate	-		-		7,090		7,090		34,034
Church	1,617		-		15,689		17,306		58,948
Construction	-		-		273		273		462
Commercial:
Sports	-		-		-		-		1,711
Other	-		-		-		-		2,115
Consumer:
Other	-		-		69		69		35
Total	$	3,281	$	1,425	$	37,090	$	41,796	$	240,699

Loans by Type Modified as Troubled Debt Restructurings

	Three Months Ended June 30,2013					Six Months Ended June 30,2013
	Number of Loans	Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment		Number of Loans	Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment
	(Dollars in thousands)
One-to-four units	-	$	-	$	-	5	$	739	$	789
Commercial real estate	1	1,456		1,497		1	1,456		1,497
Total	1	$	1,456	$	1,497	6	$	2,195	$	2,286
	Three Months Ended June 30,2012					Six Months Ended June 30,2012
	Number of Loans	Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment		Number of Loans	Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment
	(Dollars in thousands)
One-to-four units	1	$	36	$	36	1	$	36	$	36
Commercial real estate	1	505		511		2	734		740
Church	5	2,386		2,391		8	3,399		3,404
Total	7	$	2,927	$	2,938	11	$	4,169	$	4,180

Risk Category of Loans by Type of Loans

	June 30, 2013
	Pass		Special Mention		Substandard		Doubtful		Loss
					(In thousands)
One-to-four units	$	46,651	$	3,941	$	1,406	$	-	$	-
Five or more units	70,646		1,876		5,348		-		-
Commercial real estate	23,124		1,637		7,979		-		-
Church	33,922		16,660		19,557		92		-
Construction	443		-		-		-		-
Commercial:
Sports	-		1,438		-		-		-
Other	445		20		97		-		-
Consumer:
Other	60		-		69		-		-
Total	$	175,291	$	25,572	$	34,456	$	92	$	-
	December 31, 2012
	Pass		Special Mention		Substandard		Doubtful		Loss
					(In thousands)
One-to-four units	$	55,613	$	631	$	1,489	$	-	$	-
Five or more units	73,673		5,250		4,427		-		-
Commercial real estate	25,605		2,541		12,921		57		-
Church	33,532		19,502		23,220		-		-
Construction	462		-		273		-		-
Commercial:
Sports	-		1,711		-		-		-
Other	1,877		141		97		-		-
Consumer:
Other	35		-		69		-		-
Total	$	190,797	$	29,776	$	42,496	$	57	$	-

Loans receivable held for investment

Loans receivable held for investment

Schedule of loans receivable

	June 30, 2013		December 31, 2012
	(In thousands)
Real estate:
One-to-four units	$	51,998	$	57,733
Five or more units	77,870		83,350
Commercial real estate	32,740		41,124
Church	70,231		76,254
Construction	443		735
Commercial:
Sports	1,438		1,711
Other	562		2,115
Consumer:
Other	129		104
Total gross loans receivable	235,411		263,126
Loans in process	(17)		(74)
Net deferred loan costs	593		557
Unamortized discounts	(17)		(17)
Allowance for loan losses	(10,579)		(11,869)
Loans receivable, net	$	225,391	$	251,723

XML

Document and Entity Information	6 Months Ended
	Jun. 30, 2013	Aug. 05, 2013
Document and Entity Information
Entity Registrant Name	BROADWAY FINANCIAL CORP \DE\
Entity Central Index Key	0001001171
Document Type	10-Q
Document Period End Date	Jun. 30, 2013
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		1,917,422
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q2

XML

Fair Value (Tables)

6 Months Ended

Jun. 30, 2013

Fair Value

Summary of assets measured at fair value on recurring basis

	Fair Value Measurements at June 30, 2013 Using
	Quoted Prices in Active  Markets for  Identical  Assets  (Level 1)		Significant  Other  Observable  Inputs  (Level 2)		Significant  Unobservable Inputs  (Level 3)		Total
	(In thousands)
Assets:
Securities available-for-sale - residential mortgage-backed	$	-	$	11,117	$	-	$	11,117
	Fair Value Measurements at December 31, 2012 Using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
	(In thousands)
Assets:
Securities available-for-sale - residential mortgage-backed	$	-	$	13,378	$	-	$	13,378

Schedule of carrying values of assets measured at fair value on non-recurring basis

	June 30, 2013		December 31, 2012
	(In thousands)
Assets:
Non-performing loans receivable held-for-sale:
One-to-four units	$	-	$	6,656
Five or more units	-		1,956
Commercial real estate	348		-
Church	1,556		1,556
Impaired loans carried at fair value of collateral:
One-to-four units	1,349		1,284
Five or more units	920		1,679
Commercial real estate	403		3,385
Church	7,079		6,649
Real estate owned:
Commercial real estate	1,792		2,752
Church	4,435		5,411

Schedule of gains (losses) recognized on assets measured at fair value on non-recurring basis

	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
	(In thousands)
Non-performing loans receivable held-for-sale	$	2	$	(188)	$	(468)	$	(187)
Impaired loans carried at fair value of collateral	(366)		174		(400)		(916)
Real estate owned	(223)		(331)		(223)		(312)
Total	$	(587)	$	(345)	$	(1,091)	$	(1,415)

Schedule of quantitative information on financial instruments measured on non-recurring basis

	June 30, 2013
	Fair Value		Valuation Technique(s)	Unobservable Input(s)	Range
	(Dollars in thousands)
Non-performing loans held for sale – commercial real estate	$	348	Sales comparison approach	Adjustment for differences between the comparable sales	1%
			Income approach	Capitalization rate	8.2%
Non-performing loans held for sale – church	1,556		Sales comparison approach	Adjustment for differences between the comparable sales	11% to 29%
Impaired loans – one-to-four units	1,349		Sales comparison approach	Adjustment for differences between the comparable sales	-5% to 18%
Impaired loans – five or more units	920		Sales comparison approach	Adjustment for differences between the comparable sales	-10% to 0%
			Income approach	Capitalization rate	7.25% to 9%
Impaired loans – commercial real estate	403		Sales comparison approach	Adjustment for differences between the comparable sales	2%
			Income approach	Capitalization rate	4.5%
Impaired loans – church	7,079		Sales comparison approach	Adjustment for differences between the comparable sales	-45% to 16%
			Income approach	Capitalization rate	8%
Real estate owned – commercial real estate	1,792		Sales comparison approach	Adjustment for differences between the comparable sales	-67% to 1%
			Income approach	Capitalization rate	10%
Real estate owned – church	4,435		Sales comparison approach	Adjustment for differences between the comparable sales	-24% to 7%
			Income approach	Capitalization rate	6.5% to 11.5%

	December 31, 2012
	Fair Value		Valuation Technique(s)	Unobservable Input(s)	Range
	(Dollars in thousands)
Nonperforming loans held for sale – one-to-four units	$	6,656	Sales comparison approach	Adjustment for differences between the comparable sales	-30% to 23%
Nonperforming loans held for sale – five or more units	1,956		Sales comparison approach	Adjustment for differences between the comparable sales	-13% to 17%
			Income approach	Capitalization rate	6% to 8.5%
Nonperforming loans held for sale – church	1,556		Sales comparison approach	Adjustment for differences between the comparable sales	-27% to 29%
Impaired loans – one-to-four units	1,284		Sales comparison approach	Adjustment for differences between the comparable sales	-5% to 18%
Impaired loans – five or more units	1,679		Sales comparison approach	Adjustment for differences between the comparable sales	-26% to 16%
			Income approach	Capitalization rate	6.5% to 9%
Impaired loans – commercial real estate	3,385		Sales comparison approach	Adjustment for differences between the comparable sales	-17% to -1%
			Income approach	Capitalization rate	7% to 9%
Impaired loans – church	6,649		Sales comparison approach	Adjustment for differences between the comparable sales	-45% to 8%
			Income approach	Capitalization rate	6.75% to 8%
Real estate owned – commercial real estate	2,752		Sales comparison approach	Adjustment for differences between the comparable sales	-67% to 1%
			Income approach	Capitalization rate	8% to 11%
Real estate owned – church	5,411		Sales comparison approach	Adjustment for differences between the comparable sales	-12% to 7%
			Income approach	Capitalization rate	11.5%

Schedule of carrying amounts and estimated fair values of financial instruments

			Fair Value Measurements at June 30, 2013 Using
	Carrying Value		Level 1		Level 2		Level 3		Total
	(In thousands)
Financial Assets:
Cash and cash equivalents	$	74,468	$	74,468	$	-	$	-	$	74,468
Securities available-for-sale	11,117		-		11,117		-		11,117
Loans receivable held for sale	9,126		-		-		9,126		9,126
Loans receivable held for investment	225,391		-		-		225,136		225,136
Federal Home Loan Bank stock	3,737		N/A		N/A		N/A		N/A
Accrued interest receivable	1,141		-		34		1,107		1,141
Financial Liabilities:
Deposits	$	(229,365)	$	-	$	(222,271)	$	-	$	(222,271)
Federal Home Loan Bank advances	(79,500)		-		(83,231)		-		(83,231)
Junior subordinated debentures	(6,000)		-		-		(5,281)		(5,281)
Other borrowings	(5,000)		-		-		(4,507)		(4,507)
Accrued interest payable	(2,308)		-		(94)		(1,984)		(2,078)
Advance payments by borrowers for taxes and insurance	(552)		-		(552)		-		(552)
			Fair Value Measurements at December 31, 2012 Using
	Carrying Value		Level 1		Level 2		Level 3		Total
	(In thousands)
Financial Assets:
Cash and cash equivalents	$	64,360	$	64,360	$	-	$	-	$	64,360
Securities available-for-sale	13,378		-		13,378		-		13,378
Loans receivable held for sale	19,051		-		-		19,051		19,051
Loans receivable held for investment	251,723		-		-		252,043		252,043
Federal Home Loan Bank stock	3,901		N/A		N/A		N/A		N/A
Accrued interest receivable	1,250		-		42		1,208		1,250
Financial Liabilities:
Deposits	$	(257,071)	$	-	$	(253,155)	$	-	$	(253,155)
Federal Home Loan Bank advances	(79,500)		-		(84,769)		-		(84,769)
Junior subordinated debentures	(6,000)		-		-		(4,852)		(4,852)
Other borrowings	(5,000)		-		-		(4,205)		(4,205)
Accrued interest payable	(1,941)		-		(87)		(1,527)		(1,614)
Advance payments by borrowers for taxes and insurance	(711)		-		(711)		-		(711)