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 March 31, 2014

[  ]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: 

As of May 5, 2014, 19,548,959 shares of the Registrant’s common stock and 698,200 shares of the Registrant’s non-voting common stock were outstanding.

TABLE OF CONTENTS

			Page
PART I.	FINANCIAL INFORMATION
	Item 1.	Financial Statements
		Consolidated Statements of Financial Condition as of March 31, 2014 (unaudited) and December 31, 2013	1
		Consolidated Statements of Operations and Comprehensive Income (Loss) (unaudited) for the three months ended March 31, 2014 and 2013	2
		Consolidated Statements of Cash Flows (unaudited) for the three months ended March 31, 2014 and 2013	3
		Notes to Unaudited Consolidated Financial Statements	4
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	30
	Item 4.	Controls and Procedures	30
PART II.	OTHER INFORMATION
	Item 1.	Legal Proceedings	31
	Item 1A.	Risk Factors	31
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	31
	Item 3.	Defaults Upon Senior Securities	31
	Item 4.	Mine Safety Disclosures	31
	Item 5.	Other Information	31
	Item 6.	Exhibits	31
	Signatures		34

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARIES

Consolidated Statements of Financial Condition

(In thousands, except share and per share amounts)

	March 31, 2014		December 31, 2013
	(Unaudited)
Assets
Cash and due from banks	$	6,940	$	8,241
Federal funds	40,550		49,955
Cash and cash equivalents	47,490		58,196
Securities available-for-sale, at fair value	19,366		9,397
Loans receivable held for investment, net of allowance of $10,091 and $10,146	249,954		247,847
Accrued interest receivable	1,149		1,107
Federal Home Loan Bank (FHLB) stock	3,737		3,737
Office properties and equipment, net	2,842		2,725
Real estate owned (REO)	2,482		2,084
Bank owned life insurance	2,772		2,756
Investment in affordable housing limited partnership	1,261		1,309
Other assets	4,026		3,323
Total assets	$	335,079	$	332,481
Liabilities and stockholders’ equity
Liabilities:
Deposits	$	209,671	$	214,405
FHLB advances	79,500		79,500
Junior subordinated debentures	6,000		6,000
Senior debt	2,885		2,923
Accrued interest payable	731		718
Advance payments by borrowers for taxes and insurance	379		776
Other liabilities	9,344		2,569
Total liabilities	308,510		306,891
Stockholders’ Equity:
Preferred Stock, $.01 par value, authorized 1,000,000 shares	$	-	$	-
Common stock, $.01 par value, voting, authorized 50,000,000 shares at March 31, 2014 and December 31, 2013; issued 19,630,473 shares at March 31, 2014 and December 31, 2013; outstanding 19,526,482 shares at March 31, 2014 and December 31, 2013	196		196
Common stock, $.01 par value, non-voting, authorized 5,000,000 shares at March 31, 2014 and December 31, 2013; issued and outstanding 698,200 shares at March 31, 2014 and December 31, 2013	7		7
Additional paid-in capital	35,715		35,704
Accumulated deficit	(8,079)		(9,068)
Accumulated other comprehensive income, net of taxes of $400 at March 31, 2014 and December 31, 2013	59		80
Treasury stock-at cost, 103,991 shares at March 31, 2014 and December 31, 2013	(1,329)		(1,329)
Total stockholders’ equity	26,569		25,590
Total liabilities and stockholders’ equity	$	335,079	$	332,481

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 March 31,
	2014		2013
	(In thousands, except per share)
Interest income:
Interest and fees on loans receivable	$	3,626	$	3,887
Interest on mortgage backed and other securities	64		89
Other interest income	106		48
Total interest income	3,796		4,024
Interest expense:
Interest on deposits	461		624
Interest on borrowings	537		712
Total interest expense	998		1,336
Net interest income before provision for (recapture of) loan losses	2,798		2,688
Provision for (recapture of) loan losses	(1,082)		-
Net interest income after provision for (recapture of) loan losses	3,880		2,688
Non-interest income:
Service charges	118		142
Loan servicing fees, net	(6)		6
Net gains on sales of loans	-		16
Net gains (losses) on sales of REO	(3)		8
Other	224		49
Total non-interest income	333		221
Non-interest expense:
Compensation and benefits	1,588		1,454
Occupancy expense, net	284		340
Information services	219		217
Professional services	424		182
Provision for losses on loans held for sale	-		470
Provision for losses on REO	4		-
FDIC insurance	174		202
Office services and supplies	102		105
Other	426		550
Total non-interest expense	3,221		3,520
Income (loss) before income taxes	992		(611)
Income tax expense	3		5
Net income (loss)	$	989	$	(616)
Other comprehensive income (loss), net of tax:
Change in unrealized gains on securities available for sale	$	(21)	$	(18)
Income tax effect	-		-
Other comprehensive income (loss), net of tax	(21)		(18)
Comprehensive income (loss)	$	968	$	(634)
Net income (loss)	$	989	$	(616)
Dividends and discount accretion on preferred stock	-		(315)
Income (loss) available to common shareholders	$	989	$	(931)
Earnings (loss) per common share-basic	$	0.05	$	(0.49)
Earnings (loss) per common share-diluted	$	0.05	$	(0.49)
Dividends declared per share-common stock	$	0.00	$	0.00

See accompanying notes to unaudited consolidated financial statements.

2

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(Unaudited)

	Three Months Ended March 31,
	2014		2013
	(In thousands)
Cash flows from operating activities:
Net income (loss)	$	989	$	(616)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Provision for (recapture of) loan losses	(1,082)		-
Provision for losses on loans held for sale	-		470
Provision for losses on REO	4		-
Depreciation	55		52
Net amortization of deferred loan origination costs	34		62
Net amortization of premiums on mortgage-backed securities	5		10
Amortization of investment in affordable housing limited partnership	48		55
Stock-based compensation expense	11		20
Earnings on bank owned life insurance	(16)		(16)
Net losses (gains) on sales of REO	3		(8)
Net gains on sales of loans	-		(16)
Net change in accrued interest receivable	(42)		74
Net change in other assets	(703)		1,269
Net change in accrued interest payable	13		230
Net change in other liabilities	282		(393)
Net cash provided by (used in) operating activities	(399)		1,193
Cash flows from investing activities:
Net change in loans receivable held for investment	(2,630)		9,104
Proceeds from sales of loans receivable held for sale	-		9,322
Principal repayments on loans receivable held for sale	-		143
Available-for-sale securities:
Purchases	(3,970)		-
Maturities, prepayments and calls	468		1,170
Proceeds from sales of REO	1,166		152
Net redemption of FHLB stock	-		164
Additions to office properties and equipment	(172)		(32)
Net cash provided by (used in) investing activities	(5,138)		20,023
Cash flows from financing activities:
Net change in deposits	(4,734)		(9,423)
Repayments on FHLB advances	(8,000)		-
Proceeds from FHLB advances	8,000		-
Repayments on senior debt	(38)		-
Net change in advance payments by borrowers for taxes and insurance	(397)		(379)
Net cash used in financing activities	(5,169)		(9,802)
Net change in cash and cash equivalents	(10,706)		11,414
Cash and cash equivalents at beginning of period	58,196		64,360
Cash and cash equivalents at end of period	$	47,490	$	75,774
Supplemental disclosures of cash flow information:
Cash paid for interest	$	984	$	1,106
Cash paid for income taxes	$	-	$	3
Supplemental disclosures of non-cash investing and financing activities:
Transfers of loans receivable held for investment to REO	$	1,571	$	1,275
Transfers of loans receivable from held for investment to held for sale	$	-	$	6,174
Payable for purchases of securities	$	6,493	$	-

See accompanying notes to unaudited consolidated financial statements.

3

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

March 31, 2014

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, 2013 and, accordingly, should be read in conjunction with such audited consolidated financial statements.  In the opinion of management, all adjustments (all of which are normal and recurring in nature) considered necessary for a fair presentation have been included.  Operating results for the three months ended March 31, 2014 are not necessarily indicative of the results that may be expected for the year ending December 31, 2014.

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 stockholders’ equity.

Recent Accounting Pronouncements

In July 2013, the FASB amended existing guidance related to the presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss or a tax credit carryforward exists.  These amendments provide that an unrecognized tax benefit, or a portion thereof, be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except that to the extent that a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date to settle any additional income taxes that would result from disallowance of a tax position, or the tax law does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, then the unrecognized tax benefit should be presented as a liability.  These amendments are effective for interim and annual reporting periods beginning after December 15, 2013.  Adopting this standard did not have a material effect on the Company’s operating results or financial condition.

4

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (continued)

March 31, 2014

NOTE (2) – Earnings (Loss) Per Share of Common Stock

Basic earnings (loss) per share of common stock is computed by dividing income (loss) available to common stockholders by the weighted average number of shares of common stock outstanding for the period.  Diluted earnings (loss) per share of common stock is computed by dividing income (loss) available to common stockholders 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 share of common stock for the three months ended March 31, 2014 and 2013:

	For the three months ended March 31,
	2014		2013
	(In thousands, except share and per share)
Basic
Net income (loss)	$	989	$	(616)
Less: Preferred stock dividends and accretion	-		(315)
Income (loss) available to common stockholders	$	989	$	(931)
Weighted average common shares outstanding	20,224,682		1,917,422
Earnings (loss) per common share - basic	$	0.05	$	(0.49)
Diluted
Net income (loss)	$	989	$	(616)
Less: Preferred stock dividends and accretion	-		(315)
Income (loss) available to common stockholders	$	989	$	(931)
Weighted average common shares outstanding	20,224,682		1,917,422
Add: dilutive effects of assumed exercises of stock options	-		-
Weighted average common shares - fully diluted	20,224,682		1,917,422
Earnings (loss) per common share - diluted	$	0.05	$	(0.49)

Stock options for 93,750 and 164,178 shares of common stock were not considered in computing diluted earnings (loss) per common share for the three months ended March 31, 2014 and 2013 because they were anti-dilutive.

5

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (continued)

March 31, 2014

NOTE (3) – Securities

The following table summarizes the amortized cost and fair value of the available-for-sale investment securities portfolios at March 31, 2014 and December 31, 2013 and the corresponding amounts of unrealized gains and losses which are recognized in accumulated other comprehensive income (loss):

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
March 31, 2014:	(In thousands)
Residential mortgage-backed	$	16,985	$	507	$	(42)	$	17,450
U.S. Government and federal agency	$	1,922	$	-	$	(6)	$	1,916
Total available-for-sale securities	$	18,907	$	507	$	(48)	$	19,366
December 31, 2013:
Residential mortgage-backed	$	8,917	$	480	$	-	$	9,397
Total available-for-sale securities	$	8,917	$	480	$	-	$	9,397

The amortized cost and fair value of the investment securities portfolios are shown by contractual maturity at March 31, 2014.  Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties.  Securities not due at a single maturity date, primarily residential mortgage-backed securities, are shown separately.

	Available-for-Sale
Maturity	Amortized Cost		Fair Value
	(In thousands)
Within one year	$	-	$	-
One to five years	-		-
Five to ten years	1,922		1,916
Beyond ten years	-		-
Residential mortgage-backed	16,985		17,450
Total	$	18,907	$	19,366

At March 31, 2014 and December 31, 2013, securities pledged to secure public deposits and FHLB advances had a carrying amount of $1.3 million and $9.4 million, respectively.  At March 31, 2014 and December 31, 2013, 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 stockholders’ equity.

During the three months ended March 31, 2014, $8.6 million of residential mortgage-backed securities and $1.9 million of U.S. Government and federal agency securities were purchased and were classified as available-for-sale.  There were no sales of securities during the three months ended March 31, 2014 and 2013.

As of March 31, 2014, the Company’s investment securities portfolio consisted of $19.4 million of available-for-sale securities, $7.9 million of which were in an unrealized loss position for less than 12 months.  The majority of unrealized losses are related to the Company’s mortgage-backed securities, which were all issued by U.S. government-sponsored entities and agencies, primarily Fannie Mae and Freddie Mac, institutions which the government has affirmed its commitment to support.  Because the decline in fair value is attributable to changes in interest rates and not credit quality, and because the Company does not have the intent to sell these mortgage-backed securities and it is likely that it will not be required to sell the securities before their anticipated recovery, the Company does not consider these securities to be other-than-temporarily impaired at March 31, 2014.

6

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (continued)

March 31, 2014

NOTE (4) – Loans Receivable Held for Investment

Loans at March 31, 2014 and December 31, 2013 were as follows:

	March 31, 2014		December 31, 2013
	(In thousands)
Real estate:
One-to-four units	$	45,501	$	46,459
Five or more units	125,062		113,268
Commercial real estate	24,352		26,697
Church	62,774		67,934
Construction	418		424
Commercial:
Sports	-		1,408
Other	617		659
Consumer	21		38
Total gross loans receivable	258,745		256,887
Loans in process	(60)		(50)
Net deferred loan costs	1,109		901
Unamortized premium	251		255
Allowance for loan losses	(10,091)		(10,146)
Loans receivable, net	$	249,954	$	247,847

The following tables present the activity in the allowance for loan losses by portfolio segment for the three months ended March 31, 2014 and 2013:

	Three Months Ended March 31, 2014
	One-to- four units			Five or more units		Commercial real estate			Church			Construction		Commercial			Consumer			Total
	(In thousands)
Beginning balance	$	1,930		$	1,726	$	1,473		$	4,949		$	7	$	55		$	6		$	10,146
Provision for (recapture of) loan losses	(55		)	381		(252		)	(55		)	-		(1,099		)	(2		)	(1,082		)
Recoveries	2			-		-			156			-		1,082			-			1,240
Loans charged off	(3		)	-		(9		)	(183		)	-		(18		)	-			(213		)
Ending balance	$	1,874		$	2,107	$	1,212		$	4,867		$	7	$	20		$	4		$	10,091

	Three Months Ended March 31, 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	$	167		$	9	$	11,869
Provision for (recapture of) loan losses	(449		)	(361		)	(207		)	1,029			-		(12		)	-		-
Recoveries	259			-			15			7			-		95			-		376
Loans charged off	(36		)	(638		)	(944		)	(177		)	-		-			-		(1,795		)
Ending balance	$	1,834		$	1,123		$	1,549		$	5,677		$	8	$	250		$	9	$	10,450

7

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (continued)

March 31, 2014

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 March 31, 2014 and December 31, 2013:

	March 31, 2014
	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	$	377	$	141	$	194	$	1,160	$	-	$	12	$	-	$	1,884
Collectively evaluated for impairment	1,497		1,966		1,018		3,707		7		8		4		8,207
Total ending allowance balance	$	1,874	$	2,107	$	1,212	$	4,867	$	7	$	20	$	4	$	10,091
Loans:
Loans individually evaluated for impairment	$	2,880	$	3,556	$	4,863	$	17,419	$	-	$	138	$	-	$	28,856
Loans collectively evaluated for impairment	42,621		121,506		19,489		45,355		418		479		21		229,889
Total ending loans balance	$	45,501	$	125,062	$	24,352	$	62,774	$	418	$	617	$	21	$	258,745

	December 31, 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	$	382	$	143	$	206	$	1,444	$	-	$	12	$	-	$	2,187
Collectively evaluated for impairment	1,548		1,583		1,267		3,505		7		43		6		7,959
Total ending allowance balance	$	1,930	$	1,726	$	1,473	$	4,949	$	7	$	55	$	6	$	10,146
Loans:
Loans individually evaluated for impairment	$	3,053	$	4,163	$	4,894	$	21,243	$	-	$	150	$	-	$	33,503
Loans collectively evaluated for impairment	43,406		109,105		21,803		46,691		424		1,917		38		223,384
Total ending loans balance	$	46,459	$	113,268	$	26,697	$	67,934	$	424	$	2,067	$	38	$	256,887

8

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (continued)

March 31, 2014

The following table presents information related to loans individually evaluated for impairment by type of loans as of March 31, 2014 and December 31, 2013:

	March 31, 2014						December 31, 2013
	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	$	1,962	$	1,276	$	-	$	2,114	$	1,441	$	-
Five or more units	1,783		1,698		-		2,690		2,598		-
Commercial real estate	4,864		1,368		-		4,867		1,391		-
Church	10,613		7,432		-		11,806		8,446		-
Commercial:
Sports	-		-		-		3,850		-		-
Other	18		-		-		-		-		-
With an allowance recorded:
One-to-four units	1,604		1,604		377		1,612		1,612		382
Five or more units	1,897		1,858		141		1,578		1,565		143
Commercial real estate	3,495		3,495		194		3,503		3,503		206
Church	10,064		9,987		1,160		12,862		12,797		1,444
Commercial:
Other	138		138		12		150		150		12
Total	$	36,438	$	28,856	$	1,884	$	45,032	$	33,503	$	2,187

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 months ended March 31, 2014 and 2013.

	Three Months Ended
	March 31, 2014				March 31, 2013
	Average Recorded Investment		Cash Basis Interest Income Recognized		Average Recorded Investment		Cash Basis Interest Income Recognized
	(In thousands)
One-to-four units	$	3,000	$	17	$	3,987	$	32
Five or more units	3,861		23		3,507		16
Commercial real estate	4,881		93		9,154		81
Church	19,719		141		24,139		137
Construction	-		-		202		5
Commercial:
Other	144		3		142		-
Total	$	31,605	$	277	$	41,131	$	271

Cash-basis interest income recognized represents cash received for interest payments on accruing impaired loans.  Interest income that would have been recognized for the three months ended March 31, 2014 and 2013 had loans performed in accordance with their original terms were $770 thousand and $762 thousand.

9

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (continued)

March 31, 2014

The following tables present the aging of the recorded investment in past due loans as of March 31, 2014 and December 31, 2013 by type of loans:

	March 31, 2014
	30-59DaysPast Due		60-89DaysPast Due		Greater than90 DaysPast Due		TotalPast Due		Total Loans Not Past Due
	(In thousands)
One-to-four units	$	957	$	-	$	457	$	1,414	$	44,087
Five or more units	-		-		-		-		125,062
Commercial real estate	-		-		1,007		1,007		23,345
Church	162		-		1,760		1,922		60,852
Construction	-		-		-		-		418
Commercial:
Other	70		-		-		70		547
Consumer	-		-		-		-		21
Total	$	1,189	$	-	$	3,224	$	4,413	$	254,332

	December 31, 2013
	30-59DaysPast Due		60-89DaysPast Due		Greater than90 DaysPast Due		TotalPast Due		Total Loans Not Past Due
	(In thousands)
One-to-four units	$	802	$	-	$	585	$	1,387	$	45,072
Five or more units	-		-		545		545		112,723
Commercial real estate	346		-		1,016		1,362		25,335
Church	2,557		323		4,877		7,757		60,177
Construction	-		-		-		-		424
Commercial:
Sports	-		-		-		-		1,408
Other	82		-		-		82		577
Consumer	-		-		-		-		38
Total	$	3,787	$	323	$	7,023	$	11,133	$	245,754

The following table presents the recorded investment in non-accrual loans by type of loans as of March 31, 2014 and December 31, 2013:

	March 31, 2014		December 31, 2013
	(In thousands)
One-to-four units	$	1,291	$	1,441
Five or more units	2,083		2,985
Commercial real estate	1,366		1,391
Church	8,269		11,735
Commercial:
Other	138		150
Total non-accrual loans	$	13,147	$	17,702

There were no loans 90 days or more delinquent that were accruing interest as of March 31, 2014 and December 31, 2013.

10

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (continued)

March 31, 2014

Troubled Debt Restructurings

At March 31, 2014, loans classified as troubled debt restructurings (“TDRs”) totaled $24.4 million, of which $8.7 million were included in non-accrual loans and $15.7 million were on accrual status.  At December 31, 2013, loans classified as TDRs totaled $27.3 million, of which $11.5 million were included in non-accrual loans and $15.8 million were on accrual status.  The Company has allocated $1.9 million of specific reserves for accruing TDRs as of March 31, 2014 and December 31, 2013.  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.  A well-documented credit analysis that supports a return to accrual status based on the borrower’s financial condition and prospects for repayment under the revised terms is also required.  As of March 31, 2014 and December 31, 2013, the Company had no commitment to lend additional amounts to customers with outstanding loans that are classified as TDRs.

No loans were modified during the three months ended March 31, 2014. The terms of certain loans were modified as TDRs during the three months ended March 31, 2013. 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. The following tables present loans by type modified as troubled debt restructurings during the three months ended March 31, 2014 and 2013:

	Three Months Ended March 31, 2014					Three Months Ended March 31, 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	$	715	$	765
Total	-	$	-	$	-	5	$	715	$	765

The troubled debt restructurings described above increased the allowance for loan losses by $23 thousand for the three months ended March 31, 2013 and resulted in charge-offs of $23 thousand during the first quarter of 2013.

At March 31, 2014 and 2013, none of the loans modified as troubled debt restructurings within the previous 12 months experienced a payment default.  A loan is considered to be in payment default once it is 90 days contractually past due under the modified terms.

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.

11

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (continued)

March 31, 2014

·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 March 31, 2014 and December 31, 2013 is as follows:

	March 31, 2014
	Pass		Special Mention		Substandard		Doubtful		Loss
	(In thousands)
One-to-four units	$	40,699	$	3,521	$	1,281	$	-	$	-
Five or more units	117,196		2,940		4,926		-		-
Commercial real estate	18,054		527		5,771		-		-
Church	33,072		17,591		12,111		-		-
Construction	418		-		-		-		-
Commercial:
Other	479		-		138		-		-
Consumer	21		-		-		-		-
Total	$	209,939	$	24,579	$	24,227	$	-	$	-

	December 31, 2013
	Pass		Special Mention		Substandard		Doubtful		Loss
	(In thousands)
One-to-four units	$	41,481	$	3,537	$	1,441	$	-	$	-
Five or more units	105,427		2,305		5,536		-		-
Commercial real estate	18,154		529		8,014		-		-
Church	34,367		17,657		15,910		-		-
Construction	424		-		-		-		-
Commercial:
Sports	-		1,408		-		-		-
Other	490		19		150		-		-
Consumer	38		-		-		-		-
Total	$	200,381	$	25,455	$	31,051	$	-	$	-

12

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (continued)

March 31, 2014

NOTE (5) – Junior Subordinated Debentures and Senior Debt

On March 17, 2004, the Company issued $6.0 million of Floating Rate Junior Subordinated Debentures (the “Debentures”) in a private placement to a trust that was capitalized to purchase subordinated debt and preferred stock of multiple community banks.  Interest on the Debentures 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 2.77% at March 31, 2014.  The Company stopped paying interest on the Debentures in September 2010 and was not able to pay the principal or accrued interest on the Debentures at their March 17, 2014 maturity date. The accrued interest on the Debentures was $703 thousand as of March 31, 2014.  Under the Cease and Desist Order applicable to the Company, 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 Board of Governors of the Federal Reserve System (“FRB”).  In addition, under the terms of the Debentures, the Company is not allowed to make payments on the Debentures if the Company is in default on any of its senior indebtedness, which term includes the senior debt described below.  In January 2014, the Company submitted a proposal to the trustee for the trust that holds the Debentures to extend the maturity of the Debentures to March 17, 2024 in return for paying all accrued interest on the Debentures and up to $900 thousand, or 15%, of the principal amount of the Debentures.  This proposal was approved by the requisite holders of senior securities of the trust on February 28, 2014, subject to several conditions, including approval by the Company’s regulators and senior lender, raising at least $6 million of additional equity capital that will be used in part to make the proposed payments of accrued interest and principal and preparation of a suitable supplemental indenture providing for the modifications to the terms of the Debentures and other applicable documentation.  There is no assurance that the Company will be successful in raising the necessary additional capital, obtaining approvals from its regulators and senior lender and satisfying the other conditions to completion of the proposal.

As part of the Recapitalization that closed in August 2013, the Company exchanged shares of common stock with an agreed upon value of $2.6 million for $2.6 million principal amount of its $5.0 million senior debt.  The modified terms for the remaining $2.4 million principal amount of the senior debt include, among others items, an extension of the maturity of the senior debt to February 22, 2019.  In addition the interest rate on the remaining loan has been increased to the Wall Street Journal Prime Rate plus 2%, with a floor (minimum) rate of 6%, from the original loan interest rate of the Wall Street Journal Prime Rate plus 1%, with a floor rate of 6%.  The repayment schedule specifies six quarterly payments of interest only beginning three months following the closing of the Recapitalization, followed by 48 monthly payments of principal and interest on the loan beginning 19 months after the closing of the Recapitalization; provided, that each payment on the loan must receive prior approval from the FRB.  Failure to make such any payment due to an inability to obtain such approval despite the exercise by the Company of required efforts to obtain such approval will not constitute an additional event of default under the revised loan terms.  The Company obtained approval from the FRB and paid the interest payments due in November 2013 and February 2014.

13

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (continued)

March 31, 2014

NOTE (6) – 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 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.  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 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.

14

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (continued)

March 31, 2014

Assets Measured on a Recurring Basis

Assets measured at fair value on a recurring basis are summarized below:

	Fair Value Measurements at March 31, 2014 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	$	-	$	17,450	$	-	$	17,450
Securities available-for-sale - U.S. Government and federal agency	-		1,916		-		1,916

	Fair Value Measurements at December 31, 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	$	-	$	9,397	$	-	$	9,397

There were no transfers between Level 1, Level 2, or Level 3 during the three months ended March 31, 2014 and 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.

	March 31, 2014		December 31, 2013
	(In thousands)
Assets:
Impaired loans carried at fair value of collateral:
One-to-four units	$	1,090	$	1,245
Five or more units	347		900
Commercial real estate	1,368		1,391
Church	5,808		9,024
Real estate owned:
Five or more units	549		-
Commercial real estate	-		151
Church	1,933		1,933

15

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (continued)

March 31, 2014

The following table provides information regarding losses recognized on assets measured at fair value on a non-recurring basis for the three months ended March 31, 2014 and 2013.

	Three Months Ended March 31,
	2014		2013
Non-performing loans receivable held-for-sale	$	-	$	471
Impaired loans carried at fair value of collateral	157		34
Real estate owned	4		-
Total	$	161	$	505

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 March 31, 2014 and December 31, 2013:

	March 31, 2014
	Fair Value		Valuation Technique(s)	Unobservable Input(s)	Range (Weighted Average)
	(Dollars in thousands)
Impaired loans – one-to-four units	$	1,090	Sales comparison approach	Adjustment for differences between the comparable sales	-6% to 6% (0%)
Impaired loans – five or more units	347		Sales comparison approach	Adjustment for differences between the comparable sales	1%
			Income approach	Capitalization rate	8%
Impaired loans – commercial real estate	1,368		Sales comparison approach	Adjustment for differences between the comparable sales	-1% to 0% (-1%)
			Income approach	Capitalization rate	4.5% to 8% (7.08%)
Impaired loans – church	5,808		Sales comparison approach	Adjustment for differences between the comparable sales	-21% to 9% (0%)
			Income approach	Capitalization rate	6.75%
Real estate owned – five or more units	549		Sales comparison approach	Adjustment for differences between the comparable sales	-15%
			Income approach	Capitalization rate	9%
Real estate owned – church	1,933		Sales comparison approach	Adjustment for differences between the comparable sales	-7% to 7% (0%)

16

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (continued)

March 31, 2014

	December 31, 2013
	Fair Value		Valuation Technique(s)	Unobservable Input(s)	Range (Weighted Average)
	(Dollars in thousands)
Impaired loans – one-to-four units	$	1,245	Sales comparison approach	Adjustment for differences between the comparable sales	-6% to 6% (-1%)
Impaired loans – five or more units	900		Sales comparison approach	Adjustment for differences between the comparable sales	-15% to 1% (-9%)
			Income approach	Capitalization rate	8% to 9% (8.59%)
Impaired loans – commercial real estate	1,391		Sales comparison approach	Adjustment for differences between the comparable sales	-1% to 0% (-1%)
			Income approach	Capitalization rate	4.5% to 8% (7.06%)
Impaired loans – church	9,024		Sales comparison approach	Adjustment for differences between the comparable sales	-21% to 9% (-1%)
			Income approach	Capitalization rate	6.75%
Real estate owned – commercial real estate	151		Sales comparison approach	Adjustment for differences between the comparable sales	3% (3%)
			Income approach	Capitalization rate	10%
Real estate owned – church	1,933		Sales comparison approach	Adjustment for differences between the comparable sales	-7% to 7% (0%)

17

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (continued)

March 31, 2014

Fair Values of Financial Instruments

The carrying amounts and estimated fair values of financial instruments, at March 31, 2014 and December 31, 2013 were as follows:

			Fair Value Measurements at March 31, 2014 Using
	Carrying Value		Level 1		Level 2		Level 3		Total
	(In thousands)
Financial Assets:
Cash and cash equivalents	$	47,490	$	47,490	$	-	$	-	$	47,490
Securities available-for-sale	19,366		-		19,366		-		19,366
Loans receivable held for investment	249,954		-		-		250,277		250,277
Federal Home Loan Bank stock	3,737		N/A		N/A		N/A		N/A
Accrued interest receivable	1,149		-		50		1,099		1,149
Financial Liabilities:
Deposits	$	(209,671)	$	-	$	(200,777)	$	-	$	(200,777)
Federal Home Loan Bank advances	(79,500)		-		(82,580)		-		(82,580)
Junior subordinated debentures	(6,000)		-		-		(2,222)		(2,222)
Senior debt	(2,885)		-		-		(2,074)		(2,074)
Accrued interest payable	(731)		-		(28)		(664)		(692)
Advance payments by borrowers for taxes and insurance	(379)		-		(379)		-		(379)

			Fair Value Measurements at December 31, 2013 Using
	Carrying Value		Level 1		Level 2		Level 3		Total
	(In thousands)
Financial Assets:
Cash and cash equivalents	$	58,196	$	58,196	$	-	$	-	$	58,196
Securities available-for-sale	9,397		-		9,397		-		9,397
Loans receivable held for investment	247,847		-		-		248,167		248,167
Federal Home Loan Bank stock	3,737		N/A		N/A		N/A		N/A
Accrued interest receivable	1,107		-		27		1,080		1,107
Financial Liabilities:
Deposits	$	(214,405)	$	-	$	(209,656)	$	-	$	(209,656)
Federal Home Loan Bank advances	(79,500)		-		(82,840)		-		(82,840)
Junior subordinated debentures	(6,000)		-		-		(2,167)		(2,167)
Senior debt	(2,923)		-		-		(1,429)		(1,429)
Accrued interest payable	(718)		-		(63)		(608)		(671)
Advance payments by borrowers for taxes and insurance	(776)		-		(776)		-		(776)

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 investment

Fair values of loans 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.

18

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (continued)

March 31, 2014

(c) FHLB Stock

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

(d) 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.

(e) 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 Senior Debt

The fair values of the Company’s Debentures and senior debt 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 Debentures and senior debt 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.

NOTE (7) – Stock-based Compensation

In 2008, we adopted the 2008 Long-Term Incentive Plan (“2008 LTIP”), which was approved by the stockholders.  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 2,000,000 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; the option awards have vesting periods ranging from immediate vesting to 5 years and have 10-year contractual terms.

No options were granted during the three months ended March 31, 2014 and 2013, respectively.  The Company recorded $11 thousand and $20 thousand of stock-based compensation expense during the first three months of 2014 and 2013.

19

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

March 31, 2014

NOTE (8) – Regulatory Matters

Effective September 9, 2010, the Company and the Bank agreed to the issuance to them of cease and desist orders (the “Orders”) by the Office of Thrift Supervision, which was the regulatory predecessor of the Office of the Comptroller of the Currency (“OCC”).  The Order applicable to the Company prohibits the Company from paying dividends to its stockholders without the prior written approval of the Board of Governors of the Federal Reserve System (“FRB”), which is now the federal regulator for savings and loan holding companies.  In addition, the Company is not permitted to 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.

Effective October 30, 2013, the Bank entered into a Consent Order with the OCC, which superseded the Order applicable to the Bank.  The Bank’s capital requirements are administered by the OCC and involve quantitative measures of assets, liabilities, and certain off-balance sheet items calculated under regulatory accounting practices.  Capital amounts and classifications are also subject to qualitative judgments by the OCC.  Failure to meet capital requirements can result in regulatory action.

As part of the Consent Order, the Bank is required to maintain a Tier 1 (Core) Capital to Adjusted Total Assets ratio of at least 9% and a Total Risk-Based Capital to Risk-Weighted Assets ratio of at least 13%, both of which ratios are greater than the respective 4% and 8% levels for such ratios that are generally required under OCC regulations.

The Bank met the minimum capital requirements under the Consent Order at March 31, 2014 and December 31, 2013.  Actual required capital amounts and ratios at March 31, 2014 and December 31, 2013, together with the higher capital requirements that the Bank is required to meet under the Consent Order applicable to it, are presented below.

	Actual			Required for Capital Adequacy Purposes			Capital Requirements under Consent Order
	Amount		Ratio	Amount		Ratio	Amount		Ratio
	(Dollars in thousands)
March 31, 2014:
Tangible Capital to adjusted total assets	$	35,387	10.56%	$	5,025	1.50%	N/A		N/A
Tier 1(Core) Capital to adjusted total assets	$	35,387	10.56%	$	13,399	4.00%	$	30,148	9.00%
Tier 1(Core) Capital to risk weighted assets	$	35,387	16.11%	N/A		N/A	N/A		N/A
Total Capital to risk weighted assets	$	38,225	17.40%	$	17,577	8.00%	$	28,562	13.00%
December 31, 2013:
Tangible Capital to adjusted total assets	$	34,035	10.24%	$	4,986	1.50%	N/A		N/A
Tier 1(Core) Capital to adjusted total assets	$	34,035	10.24%	$	13,295	4.00%	$	29,914	9.00%
Tier 1(Core) Capital to risk weighted assets	$	34,035	15.65%	N/A		N/A	N/A		N/A
Total Capital to risk weighted assets	$	36,845	16.95%	$	17,394	8.00%	$	28,286	13.00%

NOTE (9) – 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 $9.3 million was required as of March 31, 2014, resulting in $0 net deferred tax assets.  The Company had recorded a valuation allowance of $9.7 million and $0 net deferred tax assets as of December 31, 2013.

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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, 2013.

Overview

In order to generate net interest income, we continued to rebuild our loan portfolio by originating $16.7 million in multi-family loans during the first quarter.  Since the end of the year, we have further reduced our non-performing assets, primarily through payoffs.  Also, we achieved aggregate recoveries of approximately $1.2 million, primarily from payoffs of $3.7 million on non-performing loans.  In addition, we obtained conditional approval from the holder of the Debentures of our proposal to extend the maturity of our Debentures to March 17, 2024, in exchange for payment of a portion of the principal of the Debentures and payment of all accrued interest on the Debentures through the effective date of the extension.  We are now moving forward with efforts to satisfy the conditions for the extension, including requirements to raise at least $6.0 million of equity capital, obtain approvals from our regulators and senior lender, and prepare an appropriate supplemental indenture and other related documentation.

Total assets increased by $2.6 million during the three months ended March 31, 2014, primarily reflecting a $10.0 increase in our securities portfolio, a $2.1 million increase in our loan portfolio and a $10.7 million decrease in cash and cash equivalents as we invested our excess liquidity into mortgage backed securities and multi-family loans in order to improve the yield on interest-earning assets and grow total interest income

During the three months ended March 31, 2014, total deposits decreased by $4.7 million while FHLB borrowings and senior debt remained the same during 2014.

We recorded net income of $989 thousand for the three months ended March 31, 2014, compared to a net loss of $616 thousand for the three months ended March 31, 2013.  Results during the first quarter of 2014 included a recapture of loan losses of $1.1 million and a grant of $200 thousand received from the U.S. Department of the Treasury’s Community Development Financial Institutions (CDFI) Fund.

Results of Operations

Net Income (Loss)

For the three months ended March 31, 2014, we recorded net income of $989 thousand, or $0.05 earnings per diluted common share.  For the same period in 2013, we recorded a net loss of $616 thousand, or $0.49 loss per diluted common share.

The change from a net loss for the first quarter of 2013 to net income for the first quarter of 2014 was primarily due to a recapture of loan losses of $1.1 million and a CDFI grant of $200 thousand.  In addition, the increase during the first quarter of 2014 was attributable to higher net interest income before recapture of loan losses and lower non-interest expenses for the three months ended March 31, 2014 as compared to the comparable period in 2013.

Net Interest Income

For the first quarter of 2014, net interest income before recapture of loan losses totaled $2.8 million, up $110 thousand, or 4%, from $2.7 million of net interest income before provision for loan losses for the first quarter of 2013.  The increase of $110 thousand in net interest income primarily resulted from an increase of 43 basis points in net interest margin to 3.46% for the latest quarter.

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Interest income decreased $228 thousand, or 6%, to $3.8 million for the first quarter of 2014 from $4.0 million for the first quarter of 2013.  The decrease in interest income was primarily due to a decrease of $15.7 million in the average balance of loans receivable.  The decrease in average loans receivable from $274.5 million for the first quarter of 2013 to $258.9 million for the first quarter of 2014 resulted in a reduction of $220 thousand in interest income.  The average yield on loans decreased from 5.66% for the first quarter of 2013 to 5.60% for the first quarter of 2014 primarily due to payoffs of loans which carried a higher average yield than the average yield of loans receivable, and lower yields on loan originations as a result of the low interest rate environment.  The decrease of 6 basis points in the average yield on loans resulted in a reduction of $41 thousand in interest income.  Partially offsetting the $261 thousand decrease in interest income were higher FHLB stock dividend and interest income on federal funds.  The overall average yield on total interest-earning assets increased from 4.54% for the first quarter of 2013 to 4.70% for the first quarter of 2014, primarily reflecting higher yields on federal funds and FHLB stock.

Total interest expense decreased $338 thousand, or 25%, to $998 thousand for the first quarter of 2014 from $1.3 million for the first quarter of 2013.  The decrease in deposit interest expense of $163 thousand was comprised of a $41.7 million decline in the average balance of deposits and a 12 basis point decrease in the cost of deposits.  The decreases in the average balance and average cost of deposits reflect the maturities of certificates of deposit bearing higher rates.  Also contributing to the decrease in interest expense during 2014 was a lower average cost of FHLB advances and a lower average cost of senior debt.  The average cost of FHLB advances decreased 21 basis points, from 2.68% for the first quarter of 2013 to 2.47% for the first quarter of 2014 due to the refinancing of $28.0 million of higher costing FHLB advances in the second quarter of 2013 and $8.0 million in the first quarter of 2014.  The average cost of our senior debt decreased from 10.96% during the first quarter of 2013 to 0% during the first quarter of 2014 because of the modified terms of the senior debt and the amortization of the deferred gain on debt restructuring, which offsets the interest expense on the remaining modified senior debt during 2014.

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.

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	For the three months ended March 31,
	2014					2013
(Dollars in Thousands)	Average Balance		Interest		Average Yield/ Cost (1)	Average Balance		Interest		Average Yield/ Cost (1)
Assets
Interest-earning assets:
Interest-earning deposits	$	3,066	$	3	0.39%	$	6,301	$	5	0.32%
Federal Funds and other short-term investments	47,664		27		0.23%	57,670		23		0.16%
Securities	9,949		64		2.60%	12,200		89		2.92%
Loans receivable (2)	258,850		3,626		5.60%	274,517		3,887		5.66%
FHLB stock	3,737		76		8.13%	3,890		20		2.06%
Total interest-earning assets	323,266		$	3,796	4.70%	354,578		$	4,024	4.54%
Non-interest-earning assets	7,630					15,699
Total assets	$	330,896				$	370,277
Liabilities and Stockholders’ Equity
Interest-bearing liabilities:
Money market deposits	$	15,987	$	16	0.40%	$	17,224	$	17	0.39%
Passbook deposits	37,344		30		0.32%	37,202		29		0.31%
NOW and other demand deposits	30,658		7		0.09%	35,557		6		0.07%
Certificate accounts	127,522		408		1.28%	163,190		572		1.40%
Total deposits	211,511		461		0.87%	253,173		624		0.99%
FHLB advances	79,500		490		2.47%	79,500		532		2.68%
Junior subordinated debentures (3)	6,000		47		3.13%	6,000		43		2.87%
Senior debt (4)	2,904		-		-	5,000		137		10.96%
Total interest-bearing liabilities	299,915		$	998	1.33%	343,673		$	1,336	1.56%
Non-interest-bearing liabilities	5,075					8,879
Stockholders’ Equity	25,906					17,725
Total liabilities and stockholders’ equity	$	330,896				$	370,277
Net interest rate spread (5)			$	2,798	3.37%			$	2,688	2.98%
Net interest rate margin (6)					3.46%					3.03%

(1)Average yields and costs have been annualized.

(2)Amount is net of deferred loan costs, unamortized premiums, and loans in process, and includes loans held for sale.

(3)Includes compounding on past due interest.

(4)Includes default rate margin that was in effect to August 22, 2013.  No interest expense was recognized on the senior debt post restructuring because the floating interest rate on the remaining modified loan did not exceed the floor rate of 6% during 2014.

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

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

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Provision for (Recapture of) Loan Losses

For the first quarter of 2014, we recorded a recapture of $1.1 million of previously recognized loan losses.  We did not record a provision or recapture of loan losses during the first quarter of 2013.  The recapture of loan losses during the first quarter of 2014 primarily reflected recoveries on the payoff of two previously charged-off loans secured by a sports franchise.

Non-interest Income

Non-interest income for the first quarter of 2014 increased $112 thousand from $221 thousand for the first quarter of 2013 to $333 thousand for the first quarter of 2014.  The increase in non-interest income during the first quarter of 2014 primarily reflected a $200 thousand grant from CDFI which was partially offset by a decrease of $24 thousand in service charges, a reduction of $16 thousand in net gains on sales of loans, a reduction of $11 thousand in net gains on sales of REOs and a reduction of $12 thousand in loan servicing fees.  The change from loan servicing fees of $6 thousand to loan servicing expense of $6 thousand was due to higher amortization expense on mortgage servicing rights assets resulting from payoffs of investor loans.

Non-interest Expense

Non-interest expense for the first quarter of 2014 decreased $299 thousand from $3.5 million for the first quarter of 2013 to $3.2 million for the first quarter of 2014.  The decrease of $299 thousand in non-interest expense was primarily due to a reduction of $470 thousand in provision for losses on loans held for sale, a decrease of $124 thousand in other expenses, primarily REO and appraisal expenses, a decrease of $56 thousand in occupancy expense and a decrease of $28 thousand in FDIC insurance.  These decreases in non-interest expense were partially offset by an increase of $134 thousand in compensation and benefits expense and an increase of $242 thousand in professional services expense primarily reflecting higher legal and consulting fees related to our efforts to raise additional capital and our request for an extension of the maturity of the Debentures.

Income Taxes

The Company’s income tax expense was $3 thousand for the three months ended March 31, 2014 compared to $5 thousand for the three months ended March 31, 2013.  The tax expense for the first quarter of 2014 and 2013 primarily reflected the minimum taxes paid to the state of California.

Financial Condition

Total Assets

Total assets were $335.1 million at March 31, 2014, which represented an increase of $2.6 million, or 1%, from December 31, 2013.  During the first quarter of 2014, securities increased by $10.0 million, net loans held for investment increased by $2.1 million and other assets increased by $703 thousand.  Partially offsetting these increases was a decrease of $10.7 million in cash and cash equivalents.

Securities Available for Sale

In order to grow total interest income and improve the yield on interest-earning assets, we invested excess Federal Funds in $8.6 million of mortgaged-backed securities and $1.9 million of U.S. government and federal agency securities with an average yield of 2.26% during the first quarter of 2014.

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Loans Receivable Held for Investment

Our gross loan portfolio increased by $1.8 million to $258.7 million at March 31, 2014 from $256.9 million at December 31, 2013.  The increase of $1.8 million in our loan portfolio since the end of 2013 consisted of an increase of $11.8 million in our multi-family residential real estate loan portfolio which was partially offset by a decrease of $958 thousand in our one-to-four family residential real estate loan portfolio, a decrease of $2.3 million in our commercial real estate loan portfolio, a decrease of $5.2 million in our church loan portfolio and a decrease of $1.5 million in our commercial loan portfolio.

Loan originations for the three months ended March 31, 2014 totaled $16.7 million, compared to $1.4 million for the three months ended March 31, 2013.  Loan repayments for the three months ended March 31, 2014 totaled $13.1 million, compared to $10.1 million for the three months ended March 31, 2013.  Loan charge-offs during the first quarter of 2014 totaled $213 thousand, compared to charge-offs of $1.8 million during the first quarter of 2013.  Loans transferred to REO during the first quarter of 2014 totaled $1.6 million, compared to $1.3 million during the first quarter of 2013.

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 (“ALLL”) 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 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.

Our ALLL decreased by $55 thousand from $10.1 million, or 3.95% of our loans receivable held for investment, at December 31, 2013, to $10.1 million, or 3.90% of our loans receivable held for investment, at March 31, 2014.

During the first quarter of 2014, we received $2.6 million for payoffs of two non-accrual loans secured by church properties, which resulted in a recovery of $148 thousand and a reversal of $168 thousand in specific reserves.  Additionally, we received $1.1 million for payoffs of two non-accrual loans which had been fully written off in late 2011, resulting in a recovery of $1.1 million.

Loan charge-offs during first quarter of 2014 were $213 thousand, or 0.03% of average loans, compared to $1.8 million, or 2.62% of average loans, during the first quarter of 2013.  Charge-offs during the first quarter of 2014 were related to losses on impaired loans and consisted of a charge-off of $183 thousand on a church loan, a charge-off of $18 thousand on a commercial loan, a charge-off of $9 thousand on a commercial real estate loan and a charge-off of $3 thousand on a one-to-four family residential real estate loan.

Our asset quality continues to show signs of improvement as our loan delinquencies and non-performing loans are at their lowest levels since December 2009.  As of March 31, 2014, we had total delinquencies of $4.4 million, compared to total delinquencies of $11.1 million at December 31, 2013.  Loan delinquencies decreased by $6.7 million during the first quarter of 2014 as $2.9 million of delinquent loans were brought current, $2.6 million were paid off and $1.6 million were fore closed and transferred to REO.  Of the $4.4 million delinquent loans at March 31, 2014, $3.2 million were greater than 90 days delinquent.

Non-performing loans (“NPLs”) consist of delinquent loans that are 90 days or more past due and other loans, including troubled debt restructurings that do not qualify for accrual status.  At March 31, 2014, NPLs totaled $13.1 million, compared to $17.7 million at December 31, 2013.   The $4.6 million decrease in NPLs was primarily due to repayments of $2.8 million, including payoffs of $2.5 million, and the transfer of $1.6 million of NPLs to REO.

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The ratio of the ALLL to NPLs increased to 76.76% at March 31, 2014 from 57.32% at December 31, 2013, primarily due to the $4.6 million decrease in NPLs.  When reviewing the adequacy of the ALLL as a percentage of NPLs, we consider the impact of charge-offs.  Also, we update our estimates of collateral values on NPLs 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.  The impact of updating these estimates of collateral value and recognizing any required charge-offs is to increase charge-offs and reduce the ALLL required on these loans.  As of March 31, 2014, we had written down 71% of our NPLs to estimated fair value less estimated selling costs.  The remaining 29% of our NPLs at March 31, 2014 had specific reserves or were reported at cost because 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 ALLL, we track the amount and percentage of our NPLs that are paying currently, but nonetheless must be classified as NPL for reasons unrelated to payments.  As of March 31, 2014, $9.7 million, or 74%, of our total NPLs of $13.1 million were current in their payments.

Impaired loans at March 31, 2014 were $28.9 million, compared to $33.5 million at December 31, 2013.  Specific reserves for impaired loans were $1.9 million, or 6.53% of the aggregate impaired loan amount at March 31, 2014, compared to $2.2 million, or 6.53%, at December 31, 2013.  Excluding specific reserves for impaired loans, our coverage ratio (general allowance as a percentage of total non-impaired loans) was 3.57% at March 31, 2014, compared to 3.56% at December 31, 2013.  Of the $28.9 million in impaired loans, $17.1 million had specific reserves recorded as of March 31, 2014.  Of the $17.1 million of impaired loans with specific reserves, $1.3 million were collateral dependent loans measured at fair value with a valuation allowance of $153 thousand and $15.8 million were evaluated based on the loans’ present value of expected cash flows with a valuation allowance of $1.7 million.  On $4.3 million of the remaining 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 $7.5 million of impaired loans had been written down to fair value after cumulative charge-offs of $6.4 million, including $6.2 million of charge-offs that were recorded in prior years.

Management believes that the ALLL is adequate to cover probable incurred losses in the loan portfolio as of March 31, 2014, 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 ALLL as an integral part of their examination process.  These agencies may require an increase in the ALLL based on their judgments of the information available to them at the time of their examinations.

Real Estate Owned

During the three months ended March 31, 2014, REO increased by $398 thousand to $2.5 million at March 31, 2014, from $2.1 million at December 31, 2013.  At March 31, 2014, the Bank’s REO consisted of one multi-family and four commercial real estate properties, all of which are church buildings.  During the first quarter of 2014, a loan secured by a multi-family residential property and a loan secured by a church building totaling $1.6 million were foreclosed and transferred to REO.  The newly foreclosed church property was sold immediately at a loss of $2 thousand.  Another commercial real estate property was sold during the first quarter of 2014 at a loss of $1 thousand.

Deposits

Deposits totaled $209.7 million at March 31, 2014, down $4.7 million, or 2%, from December 31, 2013.  This reflects our efforts to improve our net interest margin by reducing higher costing certificates of deposit.  During the first quarter of 2014, certificates of deposit decreased by $5.7 million and represented 59% of total deposits at March 31, 2014, compared to 61% of total deposits at December 31, 2013.  Core deposits (NOW, demand, money market and passbook accounts) increased by $933 thousand during the first quarter of 2014 and represented 41% of total deposits at March 31, 2014, compared to 39% of total deposits at December 31, 2013.

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Borrowings

At March 31, 2014, borrowings consisted of advances from the FHLB of $79.5 million, Debentures of $6.0 million and our modified senior debt of $2.4 million, excluding the unamortized deferred gain on debt restructuring of $460 thousand.

At March 31, 2014, advances from the FHLB remained unchanged from $79.5 million, or 24% of total assets, at year-end 2013.  The weighted average cost of advances decreased 5 basis points from 2.49% at December 31, 2013 to 2.44% at March 31, 2014 primarily because we refinanced $8.0 million of advances in February 2014.

Our $6.0 million Debentures matured on March 17, 2014.  On February 28, 2014, we were notified by the trustee for the trust which holds the Debentures that the requisite percentage of the holders of the trust’s senior securities had indicated their approval of our proposal to extend the maturity until March 17, 2024, in return for a partial redemption of up to $900 thousand aggregate principal amount of the Debentures at face value and payment of all interest accrued on the Debentures to the date of such redemption, subject to certain conditions, including requirements to raise at least $6.0 million of equity capital, obtain approvals from our regulators and senior lender and prepare an appropriate supplemental indenture and other required documentation.  No assurance can be given that we will be successful in raising the additional equity, obtaining the necessary approvals or satisfying the other conditions to the proposal.  As of March 31, 2014, the accrued interest on the Debentures was $703 thousand.  The Company is not permitted to make payments on any debt without prior notice to and receipt of written notice of non-objection from the FRB.  In addition, under the terms of the Debentures, the Company is not allowed to make payments on the Debentures if the Company is in default on any of its senior indebtedness, which term includes the senior debt described below.

Senior debt of $2.9 million at March 31, 2014 consisted of $2.4 million of principal, unchanged from December 31, 2013 and $460 thousand of unamortized deferred gain on restructuring, which decreased by $38 thousand during the first quarter of 2014 primarily due to the amortization of the deferred gain on restructuring to offset the interest payment made in February 2014.

Information regarding the Debentures and senior debt is included in Note 5 “Junior Subordinated Debentures and Senior Debt” of the Notes to Consolidated Financial Statements.

Stockholders’ Equity

Stockholders’ equity was $26.6 million, or 7.93% of the Company’s total assets, at March 31, 2014, compared to $25.6 million, or 7.70% of the Company’s total assets, at December 31, 2013.

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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 primary sources of funds include deposits, advances from the FHLB and payments of principal and interest on loans and investment securities.  The Bank’s primary uses of funds include withdrawal of and interest payments on deposits, originations of loans, purchases of investment securities, and payment of operating expenses.

Currently, we believe that the Bank has sufficient liquidity to support growth over the foreseeable future.  We do not expect, however, that the Bank will be able to pay dividends to the Company for at least the next several quarters or such longer period as may be required to achieve profitable operations.  The Company has limited liquidity to pay operating expenses over an extended period of time and will need to raise additional capital within the next 12 to 18 months to continue paying its operating expenses, including allocations of shared expenses from the Bank, on a timely basis.  As a result, our immediate priority for enhancing the Company’s liquidity is to raise additional equity capital. 

As discussed above under “-- Borrowings”, we have been notified by the trustee for the trust which holds the Debentures that the requisite percentage of the holders of the trust’s senior securities have indicated their approval of our proposal to extend the maturity of the Company’s Debentures, which matured on March 17, 2014, in return for a partial redemption of up to $900 thousand aggregate principal amount of the Debentures at face value and payment of all interest accrued on the Debentures to the date of such redemption.  This approval is subject to various conditions, including raising at least $6.0 million of additional equity capital and approvals from our regulators and senior lender.  We believe that the approval of our proposal to the Debenture holders will significantly improve our ability to raise the necessary capital.  We intend to use any additional capital raised by the Company to reduce the Company’s senior debt, make the negotiated payments of interest and principal on the Company’s Debentures, increase the Bank’s capital, and enhance the Company’s liquidity.

The Company recorded consolidated net cash outflows from operating activities of $399 thousand during the first quarter of 2014, compared to net consolidated cash inflows from operating activities of $1.2 million during the first quarter of 2013.  Net cash outflows from operating activities during the first quarter of 2014 were primarily attributable to prepayment fees on the restructuring of FHLB advances.

The Company recorded consolidated net cash outflows from investing activities of $5.1 million during the first quarter of 2014, compared to net cash inflows from investing activities of $20.0 million during the first quarter of 2013.  Net cash outflows from investing activities during the first quarter of 2014 were attributable primarily to purchases of securities and originations of loans.

The Company recorded consolidated net cash outflows from financing activities of $5.2 million and $9.8 million during the first quarter of 2014 and 2013, respectively.  Net cash outflows from financing activities during the first quarter of 2014 were attributable primarily to a 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 March 31, 2014 consisted of $47.5 million in cash and cash equivalents and $18.1 million in securities available-for-sale that were not pledged, compared to liquid assets of $58.2 million in cash and cash equivalents at December 31, 2013.

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 March 31, 2014, to borrow an additional $20.5 million.

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Capital Resources

Our principal subsidiary, Broadway Federal, must comply with capital standards established by the OCC in the conduct of its business.  Failure to comply with such capital requirements may result in significant limitations on its business or other sanctions.  We are not currently subject to separate holding company capital requirements, but by July 2015 the Dodd-Frank Act will, among other things, impose specific capital requirements on us as a savings and loan holding company as well.  These requirements must be no less than those to which federally insured depository institutions are currently subject.  The current regulatory capital requirements are described in Note 8 of the Notes to Consolidated Financial Statements and in Regulatory Capital below.

Regulatory Capital

The capital regulations applicable to the Bank, which are administered by the OCC, include three separate minimum capital requirements.  First, the tangible capital requirement mandates that the Bank’s stockholder’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 current regulatory capital requirements will change effective January 2015. In general, the new capital regulations will require higher levels of capital than those currently in effect for most institutions.

The Bank is subject to higher capital requirements under the Consent Order entered into by the Bank with the OCC on October 30, 2013. The Consent Order raised the Bank’s minimum capital requirements to 9% for Tier I (Core) Capital and 13% for Total Capital to risk weighted assets.  The Bank was in compliance with all capital requirements in effect at March 31, 2014 and December 31, 2013.

Actual required capital amounts and ratios at March 31, 2014 and December 31, 2013, together with the higher capital requirements that the Bank is required to meet under the Consent Order applicable to it, are presented below.

	Actual		Required for Capital Adequacy Purposes			Capital Requirements under Consent Order
	Amount	Ratio	Amount		Ratio	Amount		Ratio
	(Dollars in thousands)
March 31, 2014:
Tangible Capital to adjusted total assets	$  35,387	10.56%	$	5,025	1.50%	N/A		N/A
Tier 1(Core) Capital to adjusted total assets	$  35,387	10.56%	$	13,399	4.00%	$	30,148	9.00%
Tier 1(Core) Capital to risk weighted assets	$  35,387	16.11%	N/A		N/A	N/A		N/A
Total Capital to risk weighted assets	$  38,225	17.40%	$	17,577	8.00%	$	28,562	13.00%
December 31, 2013:
Tangible Capital to adjusted total assets	$  34,035	10.24%	$	4,986	1.50%	N/A		N/A
Tier 1(Core) Capital to adjusted total assets	$  34,035	10.24%	$	13,295	4.00%	$	29,914	9.00%
Tier 1(Core) Capital to risk weighted assets	$  34,035	15.65%	N/A		N/A	N/A		N/A
Total Capital to risk weighted assets	$  36,845	16.95%	$	17,394	8.00%	$	28,286	13.00%

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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 March 31, 2014.  Based on that evaluation, the Company’s CEO and CFO concluded that the Company’s disclosure controls and procedures were effective as of March 31, 2014.  There were no significant changes during the quarter ended March 31, 2014 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.

30

PART II.  OTHER INFORMATION

Item 1.LEGAL PROCEEDINGS

None

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*
3.1	Certificate of Incorporation of Registrant and amendments thereto (Exhibit 3.1 to Form 10-Q filed by the Registrant on November 14, 2013)
3.2	Bylaws of Registrant (Exhibit 3.2 to Form 10-Q filed by the Registrant on November 14, 2013)
4.1	Certificate of Designation for Series A Preferred Stock (Exhibit 4.3 to Form 10-Q filed by the Registrant on November 14, 2013)
4.2	Certificate of Designation for Series B Preferred Stock (Exhibit 4.5 to Form 10-Q filed by the Registrant on November 14, 2013)
4.3	Certificate of Designation for Series C Preferred Stock (Exhibit 4.7 to Form 10-Q filed by the Registrant on November 14, 2013)
4.4	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)
4.5	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)
4.6	Certificate of Designations of Series F Common Stock Equivalents (Exhibit 4.13 to Form 10-Q filed by the Registrant on November 14, 2013)
4.7	Certificate of Designations of Series G Non-Voting Preferred Stock (Exhibit 4.14 to Form 10-Q filed by the Registrant on November 14, 2013)
10.1	Broadway Federal Bank Employee Stock Ownership Plan (Exhibit 4.1 to Registration Statement on Form S-1, No. 33-96814, filed by the Registrant on September 12, 1995)
10.2	Broadway Financial Corporation 2008 Long Term Incentive Plan (Exhibit A to Proxy Statement filed by Registrant on Schedule 14A on November 17, 2009)

31

Exhibit Number*
10.3	Deferred Compensation Plan (Exhibit 10.14 to Registration Statement on Form S-1 filed by the Registrant on November 20, 2013)
10.4	Salary Continuation Agreement Between Broadway Federal Bank and former Chief Executive Officer Paul C. Hudson (Exhibit 10.15 to Registration Statement on Form S-1 filed by the Registrant on November 20, 2013)
10.5	Securities Purchase Agreement Between Broadway Financial Corporation and United States Department of the Treasury (Exhibit 10.16 to Form 8-K filed by the Registrant on November 19, 2008)
10.6	Letter Agreement, dated December 4, 2009, which includes the Securities Purchase Agreement Between Broadway Financial Corporation and United States Department of the Treasury (Exhibit 10.1 to Form 8-K filed by the Registrant on December 9, 2009)
10.7	Business Loan Agreement between Broadway Financial Corporation and Nara Bank, dated July 31, 2009 (Exhibit 10.18 to Form 10-K filed by the Registrant for the fiscal year ended December 31, 2009)
10.8.1	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)
10.8.2	Amendment No. 1 to Exchange Agreement by and between the Registrant and The United States Department of the Treasury (Exhibit 10.19.2 to Registration Statement on Form S-1 filed by the Registrant on November 20, 2013)
10.9	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)
10.10.1	Exchange Agreement by and between the Registrant and BBCN Bancorp, Inc. (Exhibit 10.21.1 to Form 10-Q filed by the Registrant on November 14, 2013)
10.10.2	Investor Rights Letter by and between the Registrant and BBCN Bancorp, Inc. (Exhibit 10.21.2 to Form 10-Q filed by the Registrant on November 14, 2013)
10.11.1	Exchange Agreement by and between the Registrant and National Community Investment Fund (Series C for Series F Preferred Stock) (Exhibit 10.22.1 to Form 10-Q filed by the Registrant on November 14, 2013)
10.11.2	Investor Rights Letter by and between the Registrant and National Community Investment Fund (Exhibit 10.22.2 to Form 10-Q filed by the Registrant on November 14, 2013)
10.11.3	Exchange Agreement by and between the Registrant and National Community Investment Fund (Series F for Series G Preferred Stock) (Exhibit 10.22.3 to Form 10-Q filed by the Registrant on November 14, 2013)
10.12	Registration Rights Agreement between the Registrant, CJA Private Equity Financial Restructuring Master Fund I LP, National Community Investment Fund and BBCN Bancorp, Inc. (Exhibit 10.23 to Form 10-Q filed by the Registrant on November 14, 2013)
10.13	Form of Subscription Agreements entered into by the Registrant with various purchasers of the Registrant’s common stock (Exhibit 10.24 to Form 10-Q filed by the Registrant on November 14, 2013)
10.14.1	Subscription Agreement between the Registrant and CJA Private Equity Financial Restructuring Master Fund I LP (Exhibit 10.25.1 to Form 10-Q filed by the Registrant on November 14, 2013)
10.14.2	Investor Rights Letter between the Registrant and CJA Private Equity Financial Restructuring Master Fund I LP (Exhibit 10.25.2 to Form 10-Q filed by the Registrant on November 14, 2013)
10.15.1	Subscription Agreement between the Registrant and Valley Economic Development Center, Inc. (Exhibit 10.26.1 to Form 10-Q filed by the Registrant on November 14, 2013)
10.15.2	Investor Rights Letter between the Registrant and Valley Economic Development Center, Inc. (Exhibit 10.26.2 to Form 10-Q filed by the Registrant on November 14, 2013)
10.16	Agreement for Partial Satisfaction of Debt Previously Contracted by and between BBCN Bank and

32

Exhibit Number*
	the Registrant (Exhibit 10.27 to Form 10-Q filed by the Registrant on November 14, 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
99.1	Order to Cease and Desist, issued by Office of Thrift Supervision to Broadway Financial Corporation, Order No.: WN-10-026, effective September 9, 2010 (Exhibit 99.1 to Form 8-K filed by the Registrant on September 16, 2010)
99.2	Order to Cease and Desist, issued by Office of Thrift Supervision to Broadway Federal Bank, f.s.b., Order No.: WN-10-025, effective September 9, 2010 (Exhibit 99.2 to Form 8-K filed by the Registrant on September 16, 2010)
99.3	Consent Order, issued by Office of Comptroller of the Currency to Broadway Federal Bank, f.s.b., Order No.: AA-EC-2013-XX, effective October 30, 2013 (Exhibit 99.1 to Form 8-K filed by the Registrant on November 5, 2013)
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.

33

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:	May 14, 2014	By:	/s/ Wayne-Kent A. Bradshaw
			Wayne-Kent A. Bradshaw
			Chief Executive Officer
Date:	May 14, 2014	By:	/s/ Brenda J. Battey
			Brenda J. Battey
			Chief Financial Officer

34

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:	May 14, 2014	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:	May 14, 2014	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: May 14, 2014	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: May 14, 2014	By:	/s/ Brenda J. Battey
		Brenda J. Battey
		Chief Financial Officer

XML

Regulatory Matters (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013	Oct. 30, 2013
Regulatory Matters
Tangible capital to adjusted total assets	$ 35,387	$ 34,035
Tier 1(Core) capital to adjusted total assets	35,387	34,035
Tier 1(Core) capital to risk weighted assets	35,387	34,035
Total capital to risk weighted assets	38,225	36,845
Tangible capital to adjusted total assets, ratio (as a percent)	10.56%	10.24%
Tier 1(Core) capital to adjusted total assets, ratio (as a percent)	10.56%	10.24%
Tier 1(Core) capital to risk weighted assets, ratio (as a percent)	16.11%	15.65%
Total capital to risk weighted assets, ratio (as a percent)	17.40%	16.95%
Tangible capital required for capital adequacy purposes	5,025	4,986
Tier 1(Core) capital to adjusted total assets required for capital adequacy purposes	13,399	13,295
Total capital to risk weighted assets required for capital adequacy purposes	17,577	17,394
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 consent order	30,148	29,914
Total capital to risk weighted assets required under consent order	$ 28,562	$ 28,286
Tier 1(Core) capital to adjusted total assets required under consent order, ratio (as a percent)	9.00%	9.00%	9.00%
Total Risk-Based Capital to Risk-Weighted Assets, ratio per consent order (as a percent)	13.00%	13.00%	13.00%

XML

Junior Subordinated Debentures and Senior Debt (Details) (USD $)			0 Months Ended	3 Months Ended		0 Months Ended
	Mar. 31, 2014	Dec. 31, 2013	Feb. 28, 2014 Floating Rate Junior Subordinated Debentures	Mar. 31, 2014 Floating Rate Junior Subordinated Debentures	Mar. 17, 2004 Floating Rate Junior Subordinated Debentures	Feb. 28, 2014 Floating Rate Junior Subordinated Debentures Minimum	Feb. 28, 2010 Senior debt	Aug. 22, 2013 Senior debt Recapitalization of the Company payment	Aug. 22, 2013 Senior debt Recapitalization of the Company Common Stock
Junior subordinated debentures and other borrowings
Face amount of debt issued	$ 6,000,000	$ 6,000,000			$ 6,000,000
Accrued interest	731,000	718,000		703,000
Maximum payment of principal amount at face value required to extend maturity			900,000
Percent of principal at face value required to be paid to extend maturity			15.00%
Amount of additional equity capital to be raised as a condition under proposal to extend maturity of the Debentures						6,000,000
Principal amount of loan	2,885,000	2,923,000					2,400,000		2,400,000
Value of shares issued in the Debt Exchange									2,600,000
Principal amount of debt converted									2,600,000
Amount of debt									$ 5,000,000
Debt instrument interest rate description				3-month LIBOR			Prime Rate	Prime Rate
Basis spread (as a percent)				2.54%			1.00%	2.00%
Effective interest rate on debentures (as a percent)				2.77%
Floor rate (as a percent)							6.00%	6.00%
Number of quarterly payments of interest only, beginning three months following the closing of the recapitalization								6
Period following closing of recapitalization for commencement of quarterly interest only payments								3 months
Number of fully amortizing monthly payments of principal and interest, beginning 19 months following the closing of the recapitalization								48
Period following closing of recapitalization for commencement of fully amortizing equal monthly payments of principal and interest								19 months

XML

Loans Receivable Held for Investment (Details 2) (USD $) In Thousands, unless otherwise specified	3 Months Ended														3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013	Mar. 31, 2014 One-to-four units	Mar. 31, 2013 One-to-four units	Mar. 31, 2014 Five or more units	Mar. 31, 2013 Five or more units	Mar. 31, 2014 Commercial real estate	Mar. 31, 2013 Commercial real estate	Mar. 31, 2014 Church	Mar. 31, 2013 Church	Mar. 31, 2014 Construction	Dec. 31, 2013 Construction	Mar. 31, 2013 Construction	Dec. 31, 2012 Construction	Mar. 31, 2014 Commercial	Mar. 31, 2013 Commercial	Mar. 31, 2014 Consumer	Mar. 31, 2013 Consumer	Dec. 31, 2012 Consumer
Allowance for loan losses
Beginning balance	$ 10,146	$ 11,869	$ 1,930	$ 2,060	$ 1,726	$ 2,122	$ 1,473	$ 2,685	$ 4,949	$ 4,818	$ 7	$ 7	$ 8	$ 8	$ 55	$ 167	$ 6	$ 9	$ 9
Provision for (recapture of) loan losses	(1,082)		(55)	(449)	381	(361)	(252)	(207)	(55)	1,029					(1,099)	(12)	(2)
Recoveries	1,240	376	2	259				15	156	7					1,082	95
Loans charged off	(213)	(1,795)	(3)	(36)		(638)	(9)	(944)	(183)	(177)					(18)
Ending balance	$ 10,091	$ 10,450	$ 1,874	$ 1,834	$ 2,107	$ 1,123	$ 1,212	$ 1,549	$ 4,867	$ 5,677	$ 7	$ 7	$ 8	$ 8	$ 20	$ 250	$ 4	$ 9	$ 9

XML

Fair Value (Details 4) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Level 1
Financial Assets:
Cash and cash equivalents	$ 47,490	$ 58,196
Level 2
Financial Assets:
Securities available-for-sale	19,366	9,397
Accrued interest receivable	50	27
Financial Liabilities:
Deposits	(200,777)	(209,656)
Federal Home Loan Bank advances	(82,580)	(82,840)
Accrued interest payable	(28)	(63)
Advance payments by borrowers for taxes and insurance	(379)	(776)
Level 3
Financial Assets:
Loans receivable held for investment	250,277	248,167
Accrued interest receivable	1,099	1,080
Financial Liabilities:
Junior subordinated debentures	(2,222)	(2,167)
Senior debt	(2,074)	(1,429)
Accrued interest payable	(664)	(608)
Total
Financial Assets:
Cash and cash equivalents	47,490	58,196
Securities available-for-sale	19,366	9,397
Loans receivable held for investment	250,277	248,167
Accrued interest receivable	1,149	1,107
Financial Liabilities:
Deposits	(200,777)	(209,656)
Federal Home Loan Bank advances	(82,580)	(82,840)
Junior subordinated debentures	(2,222)	(2,167)
Senior debt	(2,074)	(1,429)
Accrued interest payable	(692)	(671)
Advance payments by borrowers for taxes and insurance	(379)	(776)
Carrying Value
Financial Assets:
Cash and cash equivalents	47,490	58,196
Securities available-for-sale	19,366	9,397
Loans receivable held for investment	249,954	247,847
Federal Home Loan Bank stock	3,737	3,737
Accrued interest receivable	1,149	1,107
Financial Liabilities:
Deposits	(209,671)	(214,405)
Federal Home Loan Bank advances	(79,500)	(79,500)
Junior subordinated debentures	(6,000)	(6,000)
Senior debt	(2,885)	(2,923)
Accrued interest payable	(731)	(718)
Advance payments by borrowers for taxes and insurance	$ (379)	$ (776)

XML

Loans Receivable Held for Investment

3 Months Ended

Mar. 31, 2014

Loans Receivable Held for Investment

Loans Receivable Held for Investment

NOTE (4) – Loans Receivable Held for Investment

Loans at March 31, 2014 and December 31, 2013 were as follows:

	March 31, 2014		December 31, 2013
	(In thousands)
Real estate:
One-to-four units	$	45,501	$	46,459
Five or more units	125,062		113,268
Commercial real estate	24,352		26,697
Church	62,774		67,934
Construction	418		424
Commercial:
Sports	-		1,408
Other	617		659
Consumer	21		38
Total gross loans receivable	258,745		256,887
Loans in process	(60)		(50)
Net deferred loan costs	1,109		901
Unamortized premium	251		255
Allowance for loan losses	(10,091)		(10,146)
Loans receivable, net	$	249,954	$	247,847

The following tables present the activity in the allowance for loan losses by portfolio segment for the three months ended March 31, 2014 and 2013:

	Three Months Ended March 31, 2014
	One-to- four units			Five or more units		Commercial real estate			Church			Construction		Commercial			Consumer			Total
	(In thousands)
Beginning balance	$	1,930		$	1,726	$	1,473		$	4,949		$	7	$	55		$	6		$	10,146
Provision for (recapture of) loan losses	(55		)	381		(252		)	(55		)	-		(1,099		)	(2		)	(1,082		)
Recoveries	2			-		-			156			-		1,082			-			1,240
Loans charged off	(3		)	-		(9		)	(183		)	-		(18		)	-			(213		)
Ending balance	$	1,874		$	2,107	$	1,212		$	4,867		$	7	$	20		$	4		$	10,091

	Three Months Ended March 31, 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	$	167		$	9	$	11,869
Provision for (recapture of) loan losses	(449		)	(361		)	(207		)	1,029			-		(12		)	-		-
Recoveries	259			-			15			7			-		95			-		376
Loans charged off	(36		)	(638		)	(944		)	(177		)	-		-			-		(1,795		)
Ending balance	$	1,834		$	1,123		$	1,549		$	5,677		$	8	$	250		$	9	$	10,450

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 March 31, 2014 and December 31, 2013:

	March 31, 2014
	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	$	377	$	141	$	194	$	1,160	$	-	$	12	$	-	$	1,884
Collectively evaluated for impairment	1,497		1,966		1,018		3,707		7		8		4		8,207
Total ending allowance balance	$	1,874	$	2,107	$	1,212	$	4,867	$	7	$	20	$	4	$	10,091
Loans:
Loans individually evaluated for impairment	$	2,880	$	3,556	$	4,863	$	17,419	$	-	$	138	$	-	$	28,856
Loans collectively evaluated for impairment	42,621		121,506		19,489		45,355		418		479		21		229,889
Total ending loans balance	$	45,501	$	125,062	$	24,352	$	62,774	$	418	$	617	$	21	$	258,745

	December 31, 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	$	382	$	143	$	206	$	1,444	$	-	$	12	$	-	$	2,187
Collectively evaluated for impairment	1,548		1,583		1,267		3,505		7		43		6		7,959
Total ending allowance balance	$	1,930	$	1,726	$	1,473	$	4,949	$	7	$	55	$	6	$	10,146
Loans:
Loans individually evaluated for impairment	$	3,053	$	4,163	$	4,894	$	21,243	$	-	$	150	$	-	$	33,503
Loans collectively evaluated for impairment	43,406		109,105		21,803		46,691		424		1,917		38		223,384
Total ending loans balance	$	46,459	$	113,268	$	26,697	$	67,934	$	424	$	2,067	$	38	$	256,887

The following table presents information related to loans individually evaluated for impairment by type of loans as of March 31, 2014 and December 31, 2013:

	March 31, 2014						December 31, 2013
	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	$	1,962	$	1,276	$	-	$	2,114	$	1,441	$	-
Five or more units	1,783		1,698		-		2,690		2,598		-
Commercial real estate	4,864		1,368		-		4,867		1,391		-
Church	10,613		7,432		-		11,806		8,446		-
Commercial:
Sports	-		-		-		3,850		-		-
Other	18		-		-		-		-		-
With an allowance recorded:
One-to-four units	1,604		1,604		377		1,612		1,612		382
Five or more units	1,897		1,858		141		1,578		1,565		143
Commercial real estate	3,495		3,495		194		3,503		3,503		206
Church	10,064		9,987		1,160		12,862		12,797		1,444
Commercial:
Other	138		138		12		150		150		12
Total	$	36,438	$	28,856	$	1,884	$	45,032	$	33,503	$	2,187

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 months ended March 31, 2014 and 2013.

	Three Months Ended
	March 31, 2014				March 31, 2013
	Average Recorded Investment		Cash Basis Interest Income Recognized		Average Recorded Investment		Cash Basis Interest Income Recognized
	(In thousands)
One-to-four units	$	3,000	$	17	$	3,987	$	32
Five or more units	3,861		23		3,507		16
Commercial real estate	4,881		93		9,154		81
Church	19,719		141		24,139		137
Construction	-		-		202		5
Commercial:
Other	144		3		142		-
Total	$	31,605	$	277	$	41,131	$	271

Cash-basis interest income recognized represents cash received for interest payments on accruing impaired loans.  Interest income that would have been recognized for the three months ended March 31, 2014 and 2013 had loans performed in accordance with their original terms were $770 thousand and $762 thousand.

The following tables present the aging of the recorded investment in past due loans as of March 31, 2014 and December 31, 2013 by type of loans:

	March 31, 2014
	30-59DaysPast Due		60-89DaysPast Due		Greater than90 DaysPast Due		TotalPast Due		Total Loans Not Past Due
	(In thousands)
One-to-four units	$	957	$	-	$	457	$	1,414	$	44,087
Five or more units	-		-		-		-		125,062
Commercial real estate	-		-		1,007		1,007		23,345
Church	162		-		1,760		1,922		60,852
Construction	-		-		-		-		418
Commercial:
Other	70		-		-		70		547
Consumer	-		-		-		-		21
Total	$	1,189	$	-	$	3,224	$	4,413	$	254,332

	December 31, 2013
	30-59DaysPast Due		60-89DaysPast Due		Greater than90 DaysPast Due		TotalPast Due		Total Loans Not Past Due
	(In thousands)
One-to-four units	$	802	$	-	$	585	$	1,387	$	45,072
Five or more units	-		-		545		545		112,723
Commercial real estate	346		-		1,016		1,362		25,335
Church	2,557		323		4,877		7,757		60,177
Construction	-		-		-		-		424
Commercial:
Sports	-		-		-		-		1,408
Other	82		-		-		82		577
Consumer	-		-		-		-		38
Total	$	3,787	$	323	$	7,023	$	11,133	$	245,754

The following table presents the recorded investment in non-accrual loans by type of loans as of March 31, 2014 and December 31, 2013:

	March 31, 2014		December 31, 2013
	(In thousands)
One-to-four units	$	1,291	$	1,441
Five or more units	2,083		2,985
Commercial real estate	1,366		1,391
Church	8,269		11,735
Commercial:
Other	138		150
Total non-accrual loans	$	13,147	$	17,702

There were no loans 90 days or more delinquent that were accruing interest as of March 31, 2014 and December 31, 2013.

Troubled Debt Restructurings

At March 31, 2014, loans classified as troubled debt restructurings (“TDRs”) totaled $24.4 million, of which $8.7 million were included in non-accrual loans and $15.7 million were on accrual status.  At December 31, 2013, loans classified as TDRs totaled $27.3 million, of which $11.5 million were included in non-accrual loans and $15.8 million were on accrual status.  The Company has allocated $1.9 million of specific reserves for accruing TDRs as of March 31, 2014 and December 31, 2013.  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.  A well-documented credit analysis that supports a return to accrual status based on the borrower’s financial condition and prospects for repayment under the revised terms is also required.  As of March 31, 2014 and December 31, 2013, the Company had no commitment to lend additional amounts to customers with outstanding loans that are classified as TDRs.

No loans were modified during the three months ended March 31, 2014. The terms of certain loans were modified as TDRs during the three months ended March 31, 2013. 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. The following tables present loans by type modified as troubled debt restructurings during the three months ended March 31, 2014 and 2013:

	Three Months Ended March 31, 2014					Three Months Ended March 31, 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	$	715	$	765
Total	-	$	-	$	-	5	$	715	$	765

The troubled debt restructurings described above increased the allowance for loan losses by $23 thousand for the three months ended March 31, 2013 and resulted in charge-offs of $23 thousand during the first quarter of 2013.

At March 31, 2014 and 2013, none of the loans modified as troubled debt restructurings within the previous 12 months experienced a payment default.  A loan is considered to be in payment default once it is 90 days contractually past due under the modified terms.

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 March 31, 2014 and December 31, 2013 is as follows:

	March 31, 2014
	Pass		Special Mention		Substandard		Doubtful		Loss
	(In thousands)
One-to-four units	$	40,699	$	3,521	$	1,281	$	-	$	-
Five or more units	117,196		2,940		4,926		-		-
Commercial real estate	18,054		527		5,771		-		-
Church	33,072		17,591		12,111		-		-
Construction	418		-		-		-		-
Commercial:
Other	479		-		138		-		-
Consumer	21		-		-		-		-
Total	$	209,939	$	24,579	$	24,227	$	-	$	-

	December 31, 2013
	Pass		Special Mention		Substandard		Doubtful		Loss
	(In thousands)
One-to-four units	$	41,481	$	3,537	$	1,441	$	-	$	-
Five or more units	105,427		2,305		5,536		-		-
Commercial real estate	18,154		529		8,014		-		-
Church	34,367		17,657		15,910		-		-
Construction	424		-		-		-		-
Commercial:
Sports	-		1,408		-		-		-
Other	490		19		150		-		-
Consumer	38		-		-		-		-
Total	$	200,381	$	25,455	$	31,051	$	-	$	-

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Loans Receivable Held for Investment (Details 6) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Past due receivable
30-59 Days Past Due, Loans receivable	$ 1,189	$ 3,787
60-89 Days Past Due, Loans receivable		323
Greater than 90 Days Past Due, Loans receivable	3,224	7,023
Total Past Due, Loans receivable	4,413	11,133
Total Loans Not Past Due, Loans receivable	254,332	245,754
One-to-four units
Past due receivable
30-59 Days Past Due, Loans receivable	957	802
Greater than 90 Days Past Due, Loans receivable	457	585
Total Past Due, Loans receivable	1,414	1,387
Total Loans Not Past Due, Loans receivable	44,087	45,072
Five or more units
Past due receivable
Greater than 90 Days Past Due, Loans receivable		545
Total Past Due, Loans receivable		545
Total Loans Not Past Due, Loans receivable	125,062	112,723
Commercial real estate
Past due receivable
30-59 Days Past Due, Loans receivable		346
Greater than 90 Days Past Due, Loans receivable	1,007	1,016
Total Past Due, Loans receivable	1,007	1,362
Total Loans Not Past Due, Loans receivable	23,345	25,335
Church
Past due receivable
30-59 Days Past Due, Loans receivable	162	2,557
60-89 Days Past Due, Loans receivable		323
Greater than 90 Days Past Due, Loans receivable	1,760	4,877
Total Past Due, Loans receivable	1,922	7,757
Total Loans Not Past Due, Loans receivable	60,852	60,177
Construction
Past due receivable
Total Loans Not Past Due, Loans receivable	418	424
Commercial Sports
Past due receivable
Total Loans Not Past Due, Loans receivable		1,408
Commercial Other
Past due receivable
30-59 Days Past Due, Loans receivable	70	82
Total Past Due, Loans receivable	70	82
Total Loans Not Past Due, Loans receivable	547	577
Consumer
Past due receivable
Total Loans Not Past Due, Loans receivable	$ 21	$ 38

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Loans Receivable Held for Investment (Details 5) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Impaired loans
Average Recorded Investment	$ 31,605	$ 41,131
Cash Basis Interest Income Recognized	277	271
Interest income if impaired loans had performed according to terms	770	762
One-to-four units
Impaired loans
Average Recorded Investment	3,000	3,987
Cash Basis Interest Income Recognized	17	32
Five or more units
Impaired loans
Average Recorded Investment	3,861	3,507
Cash Basis Interest Income Recognized	23	16
Commercial real estate
Impaired loans
Average Recorded Investment	4,881	9,154
Cash Basis Interest Income Recognized	93	81
Church
Impaired loans
Average Recorded Investment	19,719	24,139
Cash Basis Interest Income Recognized	141	137
Construction
Impaired loans
Average Recorded Investment		202
Cash Basis Interest Income Recognized		5
Commercial Other
Impaired loans
Average Recorded Investment	144	142
Cash Basis Interest Income Recognized	$ 3

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Loans Receivable Held for Investment (Details 7) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Investment in non-accrual loans by class of loans
Total non-accrual loans	$ 13,147	$ 17,702
Loans 90 days or more delinquent that were accruing interest	0	0
One-to-four units
Investment in non-accrual loans by class of loans
Total non-accrual loans	1,291	1,441
Five or more units
Investment in non-accrual loans by class of loans
Total non-accrual loans	2,083	2,985
Commercial real estate
Investment in non-accrual loans by class of loans
Total non-accrual loans	1,366	1,391
Church
Investment in non-accrual loans by class of loans
Total non-accrual loans	8,269	11,735
Commercial Other
Investment in non-accrual loans by class of loans
Total non-accrual loans	$ 138	$ 150

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Loans Receivable Held for Investment (Details 8) (USD $)	3 Months Ended
	Mar. 31, 2014 loan	Mar. 31, 2013 loan	Dec. 31, 2013
Troubled debt restructuring
Loans classified as Troubled Debt Restructurings	$ 24,400,000		$ 27,300,000
Specific reserves allocated to TDRs	1,900,000		1,900,000
Timely payment period for return to accrual status	6 months
Commitments to lend additional amounts to customers with TDRs	0		0
Number of Loans	0	5
Pre-Modification Outstanding Recorded Investment	0	715,000
Post- Modification Outstanding Recorded Investment		765,000
Increase in allowance for loan losses due to troubled debt restructurings		23,000
Troubled debt restructurings, charge offs		23,000
Number of Loans	0	0
Past due period for loan to be in payment default	90 days
Maximum
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	8,700,000		11,500,000
Accrual status
Troubled debt restructuring
Loans classified as Troubled Debt Restructurings	15,700,000		15,800,000
One-to-four units
Troubled debt restructuring
Number of Loans		5
Pre-Modification Outstanding Recorded Investment		715,000
Post- Modification Outstanding Recorded Investment		$ 765,000

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Securities

3 Months Ended

Mar. 31, 2014

Securities

Securities

NOTE (3) – Securities

The following table summarizes the amortized cost and fair value of the available-for-sale investment securities portfolios at March 31, 2014 and December 31, 2013 and the corresponding amounts of unrealized gains and losses which are recognized in accumulated other comprehensive income (loss):

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
March 31, 2014:	(In thousands)
Residential mortgage-backed	$	16,985	$	507	$	(42)	$	17,450
U.S. Government and federal agency	$	1,922	$	-	$	(6)	$	1,916
Total available-for-sale securities	$	18,907	$	507	$	(48)	$	19,366
December 31, 2013:
Residential mortgage-backed	$	8,917	$	480	$	-	$	9,397
Total available-for-sale securities	$	8,917	$	480	$	-	$	9,397

The amortized cost and fair value of the investment securities portfolios are shown by contractual maturity at March 31, 2014.  Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties.  Securities not due at a single maturity date, primarily residential mortgage-backed securities, are shown separately.

	Available-for-Sale
Maturity	Amortized Cost		Fair Value
	(In thousands)
Within one year	$	-	$	-
One to five years	-		-
Five to ten years	1,922		1,916
Beyond ten years	-		-
Residential mortgage-backed	16,985		17,450
Total	$	18,907	$	19,366

At March 31, 2014 and December 31, 2013, securities pledged to secure public deposits and FHLB advances had a carrying amount of $1.3 million and $9.4 million, respectively.  At March 31, 2014 and December 31, 2013, 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 stockholders’ equity.

During the three months ended March 31, 2014, $8.6 million of residential mortgage-backed securities and $1.9 million of U.S. Government and federal agency securities were purchased and were classified as available-for-sale.  There were no sales of securities during the three months ended March 31, 2014 and 2013.

As of March 31, 2014, the Company’s investment securities portfolio consisted of $19.4 million of available-for-sale securities, $7.9 million of which were in an unrealized loss position for less than 12 months.  The majority of unrealized losses are related to the Company’s mortgage-backed securities, which were all issued by U.S. government-sponsored entities and agencies, primarily Fannie Mae and Freddie Mac, institutions which the government has affirmed its commitment to support.  Because the decline in fair value is attributable to changes in interest rates and not credit quality, and because the Company does not have the intent to sell these mortgage-backed securities and it is likely that it will not be required to sell the securities before their anticipated recovery, the Company does not consider these securities to be other-than-temporarily impaired at March 31, 2014.

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Loans Receivable Held for Investment (Details 9) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Credit Quality Indicators
Loans receivable	$ 258,745	$ 256,887
One-to-four units
Credit Quality Indicators
Loans receivable	45,501	46,459
Five or more units
Credit Quality Indicators
Loans receivable	125,062	113,268
Commercial real estate
Credit Quality Indicators
Loans receivable	24,352	26,697
Church
Credit Quality Indicators
Loans receivable	62,774	67,934
Construction
Credit Quality Indicators
Loans receivable	418	424
Commercial Sports
Credit Quality Indicators
Loans receivable		1,408
Commercial Other
Credit Quality Indicators
Loans receivable	617	659
Consumer
Credit Quality Indicators
Loans receivable	21	38
Pass
Credit Quality Indicators
Loans receivable	209,939	200,381
Pass | One-to-four units
Credit Quality Indicators
Loans receivable	40,699	41,481
Pass | Five or more units
Credit Quality Indicators
Loans receivable	117,196	105,427
Pass | Commercial real estate
Credit Quality Indicators
Loans receivable	18,054	18,154
Pass | Church
Credit Quality Indicators
Loans receivable	33,072	34,367
Pass | Construction
Credit Quality Indicators
Loans receivable	418	424
Pass | Commercial Other
Credit Quality Indicators
Loans receivable	479	490
Pass | Consumer
Credit Quality Indicators
Loans receivable	21	38
Special Mention
Credit Quality Indicators
Loans receivable	24,579	25,455
Special Mention | One-to-four units
Credit Quality Indicators
Loans receivable	3,521	3,537
Special Mention | Five or more units
Credit Quality Indicators
Loans receivable	2,940	2,305
Special Mention | Commercial real estate
Credit Quality Indicators
Loans receivable	527	529
Special Mention | Church
Credit Quality Indicators
Loans receivable	17,591	17,657
Special Mention | Commercial Sports
Credit Quality Indicators
Loans receivable		1,408
Special Mention | Commercial Other
Credit Quality Indicators
Loans receivable		19
Substandard
Credit Quality Indicators
Loans receivable	24,227	31,051
Substandard | One-to-four units
Credit Quality Indicators
Loans receivable	1,281	1,441
Substandard | Five or more units
Credit Quality Indicators
Loans receivable	4,926	5,536
Substandard | Commercial real estate
Credit Quality Indicators
Loans receivable	5,771	8,014
Substandard | Church
Credit Quality Indicators
Loans receivable	12,111	15,910
Substandard | Commercial Other
Credit Quality Indicators
Loans receivable	$ 138	$ 150

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Income Taxes (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Dec. 31, 2013
Income Taxes
Period for which prior cumulative losses considered in assessing the realization of deferred tax assets	2 years
Valuation allowance	$ 9.3	$ 9.7
Net deferred tax assets	$ 0	$ 0

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Consolidated Statements of Financial Condition (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Assets
Cash and due from banks	$ 6,940	$ 8,241
Federal funds	40,550	49,955
Cash and cash equivalents	47,490	58,196
Securities available-for-sale, at fair value	19,366	9,397
Loans receivable held for investment, net of allowance of $10,091 and $10,146	249,954	247,847
Accrued interest receivable	1,149	1,107
Federal Home Loan Bank (FHLB) stock	3,737	3,737
Office properties and equipment, net	2,842	2,725
Real estate owned (REO)	2,482	2,084
Bank owned life insurance	2,772	2,756
Investment in affordable housing limited partnership	1,261	1,309
Other assets	4,026	3,323
Total assets	335,079	332,481
Liabilities:
Deposits	209,671	214,405
FHLB advances	79,500	79,500
Junior subordinated debentures	6,000	6,000
Senior debt	2,885	2,923
Accrued interest payable	731	718
Advance payments by borrowers for taxes and insurance	379	776
Other liabilities	9,344	2,569
Total liabilities	308,510	306,891
Stockholders' Equity:
Preferred Stock, $.01 par value, authorized 1,000,000 shares
Additional paid-in capital	35,715	35,704
Accumulated deficit	(8,079)	(9,068)
Accumulated other comprehensive income, net of taxes of $400 at March 31, 2014 and December 31, 2013	59	80
Treasury stock-at cost, 103,991 shares at March 31, 2014 and December 31, 2013	(1,329)	(1,329)
Total stockholders' equity	26,569	25,590
Total liabilities and stockholders' equity	335,079	332,481
Common Stock | Voting common stock
Stockholders' Equity:
Common stock	196	196
Common Stock | Non-voting common stock
Stockholders' Equity:
Common stock	$ 7	$ 7

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Basis of Financial Statement Presentation

3 Months Ended

Mar. 31, 2014

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, 2013 and, accordingly, should be read in conjunction with such audited consolidated financial statements.  In the opinion of management, all adjustments (all of which are normal and recurring in nature) considered necessary for a fair presentation have been included.  Operating results for the three months ended March 31, 2014 are not necessarily indicative of the results that may be expected for the year ending December 31, 2014.

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 stockholders’ equity.

Recent Accounting Pronouncements

In July 2013, the FASB amended existing guidance related to the presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss or a tax credit carryforward exists.  These amendments provide that an unrecognized tax benefit, or a portion thereof, be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except that to the extent that a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date to settle any additional income taxes that would result from disallowance of a tax position, or the tax law does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, then the unrecognized tax benefit should be presented as a liability.  These amendments are effective for interim and annual reporting periods beginning after December 15, 2013.  Adopting this standard did not have a material effect on the Company’s operating results or financial condition.

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Fair Value (Details 2) (USD $) In Thousands, unless otherwise specified			3 Months Ended
	Mar. 31, 2014 Level 3	Dec. 31, 2013 Level 3	Mar. 31, 2014 Non-recurring basis	Mar. 31, 2013 Non-recurring basis	Mar. 31, 2013 Non-recurring basis Non-performing loans receivable held-for-sale	Mar. 31, 2014 Non-recurring basis Impaired loans carried at fair value of collateral	Mar. 31, 2013 Non-recurring basis Impaired loans carried at fair value of collateral	Mar. 31, 2014 Non-recurring basis Real estate owned	Mar. 31, 2014 Non-recurring basis Level 3 One-to-four units Impaired loans carried at fair value of collateral	Dec. 31, 2013 Non-recurring basis Level 3 One-to-four units Impaired loans carried at fair value of collateral	Mar. 31, 2014 Non-recurring basis Level 3 Five or more units Impaired loans carried at fair value of collateral	Dec. 31, 2013 Non-recurring basis Level 3 Five or more units Impaired loans carried at fair value of collateral	Mar. 31, 2014 Non-recurring basis Level 3 Five or more units Real estate owned	Mar. 31, 2014 Non-recurring basis Level 3 Commercial real estate Impaired loans carried at fair value of collateral	Dec. 31, 2013 Non-recurring basis Level 3 Commercial real estate Impaired loans carried at fair value of collateral	Dec. 31, 2013 Non-recurring basis Level 3 Commercial real estate Real estate owned	Mar. 31, 2014 Non-recurring basis Level 3 Church Impaired loans carried at fair value of collateral	Dec. 31, 2013 Non-recurring basis Level 3 Church Impaired loans carried at fair value of collateral	Mar. 31, 2014 Non-recurring basis Level 3 Church Real estate owned	Dec. 31, 2013 Non-recurring basis Level 3 Church Real estate owned
Fair Value
Loans receivable, fair value	$ 250,277	$ 248,167							$ 1,090	$ 1,245	$ 347	$ 900		$ 1,368	$ 1,391		$ 5,808	$ 9,024
Assets, fair value													549			151			1,933	1,933
Losses recognized on assets measured at fair value			$ 161	$ 505	$ 471	$ 157	$ 34	$ 4

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Securities (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Securities
Amortized Cost	$ 18,907	$ 8,917
Gross Unrealized Gains	507	480
Gross Unrealized Losses	(48)
Fair Value	19,366	9,397
Residential mortgage-backed
Securities
Amortized Cost	16,985	8,917
Gross Unrealized Gains	507	480
Gross Unrealized Losses	(42)
Fair Value	17,450	9,397
U.S. Government and federal agency
Securities
Amortized Cost	1,922
Gross Unrealized Losses	(6)
Fair Value	$ 1,916

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Fair Value (Details 3) (Significant Unobservable Inputs (Level 3), USD $) In Thousands, unless otherwise specified	3 Months Ended	12 Months Ended
	Mar. 31, 2014	Dec. 31, 2013
Fair value quantitative information
Fair Value	$ 250,277	$ 248,167
Fair Value, Measurements, Nonrecurring | Impaired loans | One-to-four units
Fair value quantitative information
Fair Value	1,090	1,245
Fair Value, Measurements, Nonrecurring | Impaired loans | Five or more units
Fair value quantitative information
Fair Value	347	900
Fair Value, Measurements, Nonrecurring | Impaired loans | Commercial real estate
Fair value quantitative information
Fair Value	1,368	1,391
Fair Value, Measurements, Nonrecurring | Impaired loans | Church
Fair value quantitative information
Fair Value	5,808	9,024
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)	(6.00%)	(6.00%)
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)	6.00%	6.00%
Fair Value, Measurements, Nonrecurring | Impaired loans | Sales comparison approach | One-to-four units | Weighted Average
Fair value quantitative information
Adjustment for differences between the comparable sales (as a percent)	0.00%	(1.00%)
Fair Value, Measurements, Nonrecurring | Impaired loans | Sales comparison approach | Five or more units
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 | Five or more units | Minimum
Fair value quantitative information
Adjustment for differences between the comparable sales (as a percent)		(15.00%)
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)		1.00%
Fair Value, Measurements, Nonrecurring | Impaired loans | Sales comparison approach | Five or more units | Weighted Average
Fair value quantitative information
Adjustment for differences between the comparable sales (as a percent)		(9.00%)
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)	(1.00%)	(1.00%)
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)	0.00%	0.00%
Fair Value, Measurements, Nonrecurring | Impaired loans | Sales comparison approach | Commercial real estate | Weighted Average
Fair value quantitative information
Adjustment for differences between the comparable sales (as a percent)	(1.00%)	(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)	(21.00%)	(21.00%)
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)	9.00%	9.00%
Fair Value, Measurements, Nonrecurring | Impaired loans | Sales comparison approach | Church | Weighted Average
Fair value quantitative information
Adjustment for differences between the comparable sales (as a percent)	0.00%	(1.00%)
Fair Value, Measurements, Nonrecurring | Impaired loans | Income approach | Five or more units
Fair value quantitative information
Capitalization rate (as a percent)	8.00%
Fair Value, Measurements, Nonrecurring | Impaired loans | Income approach | Five or more units | Minimum
Fair value quantitative information
Capitalization rate (as a percent)		8.00%
Fair Value, Measurements, Nonrecurring | Impaired loans | Income approach | Five or more units | Maximum
Fair value quantitative information
Capitalization rate (as a percent)		9.00%
Fair Value, Measurements, Nonrecurring | Impaired loans | Income approach | Five or more units | Weighted Average
Fair value quantitative information
Capitalization rate (as a percent)		8.59%
Fair Value, Measurements, Nonrecurring | Impaired loans | Income approach | Commercial real estate | Minimum
Fair value quantitative information
Capitalization rate (as a percent)	4.50%	4.50%
Fair Value, Measurements, Nonrecurring | Impaired loans | Income approach | Commercial real estate | Maximum
Fair value quantitative information
Capitalization rate (as a percent)	8.00%	8.00%
Fair Value, Measurements, Nonrecurring | Impaired loans | Income approach | Commercial real estate | Weighted Average
Fair value quantitative information
Capitalization rate (as a percent)	7.08%	7.06%
Fair Value, Measurements, Nonrecurring | Impaired loans | Income approach | Church
Fair value quantitative information
Capitalization rate (as a percent)	6.75%	6.75%
Fair Value, Measurements, Nonrecurring | Real estate owned | Five or more units
Fair value quantitative information
Fair Value	549
Fair Value, Measurements, Nonrecurring | Real estate owned | Commercial real estate
Fair value quantitative information
Fair Value		151
Fair Value, Measurements, Nonrecurring | Real estate owned | Church
Fair value quantitative information
Fair Value	$ 1,933	$ 1,933
Fair Value, Measurements, Nonrecurring | Real estate owned | Sales comparison approach | Five or more units
Fair value quantitative information
Adjustment for differences between the comparable sales (as a percent)	(15.00%)
Fair Value, Measurements, Nonrecurring | Real estate owned | Sales comparison approach | Commercial real estate
Fair value quantitative information
Adjustment for differences between the comparable sales (as a percent)		3.00%
Fair Value, Measurements, Nonrecurring | Real estate owned | Sales comparison approach | Commercial real estate | Weighted Average
Fair value quantitative information
Adjustment for differences between the comparable sales (as a percent)		3.00%
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)	(7.00%)	(7.00%)
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%
Fair Value, Measurements, Nonrecurring | Real estate owned | Sales comparison approach | Church | Weighted Average
Fair value quantitative information
Adjustment for differences between the comparable sales (as a percent)	0.00%	0.00%
Fair Value, Measurements, Nonrecurring | Real estate owned | Income approach | Five or more units
Fair value quantitative information
Capitalization rate (as a percent)	9.00%
Fair Value, Measurements, Nonrecurring | Real estate owned | Income approach | Commercial real estate
Fair value quantitative information
Capitalization rate (as a percent)		10.00%

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Loans Receivable Held for Investment (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013	Mar. 31, 2013	Dec. 31, 2012
Loans Receivable Held for Investment
Total gross loans receivable	$ 258,745	$ 256,887
Loans in process	(60)	(50)
Net deferred loan costs	1,109	901
Unamortized premium	251	255
Allowance for loan losses	(10,091)	(10,146)	(10,450)	(11,869)
Loans receivable, net	249,954	247,847
One-to-four units
Loans Receivable Held for Investment
Total gross loans receivable	45,501	46,459
Allowance for loan losses	(1,874)	(1,930)	(1,834)	(2,060)
Five or more units
Loans Receivable Held for Investment
Total gross loans receivable	125,062	113,268
Allowance for loan losses	(2,107)	(1,726)	(1,123)	(2,122)
Commercial real estate
Loans Receivable Held for Investment
Total gross loans receivable	24,352	26,697
Allowance for loan losses	(1,212)	(1,473)	(1,549)	(2,685)
Church
Loans Receivable Held for Investment
Total gross loans receivable	62,774	67,934
Allowance for loan losses	(4,867)	(4,949)	(5,677)	(4,818)
Construction
Loans Receivable Held for Investment
Total gross loans receivable	418	424
Allowance for loan losses	(7)	(7)	(8)	(8)
Commercial Sports
Loans Receivable Held for Investment
Total gross loans receivable		1,408
Commercial Other
Loans Receivable Held for Investment
Total gross loans receivable	617	659
Consumer
Loans Receivable Held for Investment
Total gross loans receivable	21	38
Allowance for loan losses	$ (4)	$ (6)	$ (9)	$ (9)

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Earnings (Loss) Per Share of Common Stock

3 Months Ended

Mar. 31, 2014

Earnings (Loss) Per Share of Common Stock

Earnings (Loss) Per Share of Common Stock

NOTE (2) – Earnings (Loss) Per Share of Common Stock

Basic earnings (loss) per share of common stock is computed by dividing income (loss) available to common stockholders by the weighted average number of shares of common stock outstanding for the period.  Diluted earnings (loss) per share of common stock is computed by dividing income (loss) available to common stockholders 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 share of common stock for the three months ended March 31, 2014 and 2013:

	For the three months ended March 31,
	2014		2013
	(In thousands, except share and per share)
Basic
Net income (loss)	$	989	$	(616)
Less: Preferred stock dividends and accretion	-		(315)
Income (loss) available to common stockholders	$	989	$	(931)
Weighted average common shares outstanding	20,224,682		1,917,422
Earnings (loss) per common share - basic	$	0.05	$	(0.49)
Diluted
Net income (loss)	$	989	$	(616)
Less: Preferred stock dividends and accretion	-		(315)
Income (loss) available to common stockholders	$	989	$	(931)
Weighted average common shares outstanding	20,224,682		1,917,422
Add: dilutive effects of assumed exercises of stock options	-		-
Weighted average common shares - fully diluted	20,224,682		1,917,422
Earnings (loss) per common share - diluted	$	0.05	$	(0.49)

Stock options for 93,750 and 164,178 shares of common stock were not considered in computing diluted earnings (loss) per common share for the three months ended March 31, 2014 and 2013 because they were anti-dilutive.

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Consolidated Statements of Financial Condition (Parenthetical) (USD $) In Thousands, except Share data, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Allowance for loan losses (in dollars)	$ 10,091	$ 10,146
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized	1,000,000	1,000,000
Accumulated other comprehensive income, tax (in dollars)	$ 400	$ 400
Treasury stock, shares	103,991	103,991
Common Stock | Voting common stock
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized	50,000,000	50,000,000
Common stock, shares issued	19,630,473	19,630,473
Common stock, shares outstanding	19,526,482	19,526,482
Common Stock | Non-voting common stock
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized	5,000,000	5,000,000
Common stock, shares issued	698,200	698,200
Common stock, shares outstanding	698,200	698,200

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Securities (Tables)

3 Months Ended

Mar. 31, 2014

Securities

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

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
March 31, 2014:	(In thousands)
Residential mortgage-backed	$	16,985	$	507	$	(42)	$	17,450
U.S. Government and federal agency	$	1,922	$	-	$	(6)	$	1,916
Total available-for-sale securities	$	18,907	$	507	$	(48)	$	19,366
December 31, 2013:
Residential mortgage-backed	$	8,917	$	480	$	-	$	9,397
Total available-for-sale securities	$	8,917	$	480	$	-	$	9,397

Schedule of amortized cost and fair value of the investment securities portfolios by contractual maturity

	Available-for-Sale
Maturity	Amortized Cost		Fair Value
	(In thousands)
Within one year	$	-	$	-
One to five years	-		-
Five to ten years	1,922		1,916
Beyond ten years	-		-
Residential mortgage-backed	16,985		17,450
Total	$	18,907	$	19,366

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Document and Entity Information	3 Months Ended
	Mar. 31, 2014	May 05, 2014 Voting common stock	May 05, 2014 Non-voting common stock
Entity Registrant Name	BROADWAY FINANCIAL CORP \DE\
Entity Central Index Key	0001001171
Document Type	10-Q
Document Period End Date	Mar. 31, 2014
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		19,548,959	698,200
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q1

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Loans Receivable Held for Investment (Tables)

3 Months Ended

Mar. 31, 2014

Loans Receivable Held for Investment

Schedule of loans receivable

	March 31, 2014		December 31, 2013
	(In thousands)
Real estate:
One-to-four units	$	45,501	$	46,459
Five or more units	125,062		113,268
Commercial real estate	24,352		26,697
Church	62,774		67,934
Construction	418		424
Commercial:
Sports	-		1,408
Other	617		659
Consumer	21		38
Total gross loans receivable	258,745		256,887
Loans in process	(60)		(50)
Net deferred loan costs	1,109		901
Unamortized premium	251		255
Allowance for loan losses	(10,091)		(10,146)
Loans receivable, net	$	249,954	$	247,847

Activity in the Allowance for Loan Losses by Portfolio Segment

	Three Months Ended March 31, 2014
	One-to- four units			Five or more units		Commercial real estate			Church			Construction		Commercial			Consumer			Total
	(In thousands)
Beginning balance	$	1,930		$	1,726	$	1,473		$	4,949		$	7	$	55		$	6		$	10,146
Provision for (recapture of) loan losses	(55		)	381		(252		)	(55		)	-		(1,099		)	(2		)	(1,082		)
Recoveries	2			-		-			156			-		1,082			-			1,240
Loans charged off	(3		)	-		(9		)	(183		)	-		(18		)	-			(213		)
Ending balance	$	1,874		$	2,107	$	1,212		$	4,867		$	7	$	20		$	4		$	10,091

	Three Months Ended March 31, 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	$	167		$	9	$	11,869
Provision for (recapture of) loan losses	(449		)	(361		)	(207		)	1,029			-		(12		)	-		-
Recoveries	259			-			15			7			-		95			-		376
Loans charged off	(36		)	(638		)	(944		)	(177		)	-		-			-		(1,795		)
Ending balance	$	1,834		$	1,123		$	1,549		$	5,677		$	8	$	250		$	9	$	10,450

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

	March 31, 2014
	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	$	377	$	141	$	194	$	1,160	$	-	$	12	$	-	$	1,884
Collectively evaluated for impairment	1,497		1,966		1,018		3,707		7		8		4		8,207
Total ending allowance balance	$	1,874	$	2,107	$	1,212	$	4,867	$	7	$	20	$	4	$	10,091
Loans:
Loans individually evaluated for impairment	$	2,880	$	3,556	$	4,863	$	17,419	$	-	$	138	$	-	$	28,856
Loans collectively evaluated for impairment	42,621		121,506		19,489		45,355		418		479		21		229,889
Total ending loans balance	$	45,501	$	125,062	$	24,352	$	62,774	$	418	$	617	$	21	$	258,745

	December 31, 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	$	382	$	143	$	206	$	1,444	$	-	$	12	$	-	$	2,187
Collectively evaluated for impairment	1,548		1,583		1,267		3,505		7		43		6		7,959
Total ending allowance balance	$	1,930	$	1,726	$	1,473	$	4,949	$	7	$	55	$	6	$	10,146
Loans:
Loans individually evaluated for impairment	$	3,053	$	4,163	$	4,894	$	21,243	$	-	$	150	$	-	$	33,503
Loans collectively evaluated for impairment	43,406		109,105		21,803		46,691		424		1,917		38		223,384
Total ending loans balance	$	46,459	$	113,268	$	26,697	$	67,934	$	424	$	2,067	$	38	$	256,887

Loans Individually Evaluated for Impairment by Type of Loans

	March 31, 2014						December 31, 2013
	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	$	1,962	$	1,276	$	-	$	2,114	$	1,441	$	-
Five or more units	1,783		1,698		-		2,690		2,598		-
Commercial real estate	4,864		1,368		-		4,867		1,391		-
Church	10,613		7,432		-		11,806		8,446		-
Commercial:
Sports	-		-		-		3,850		-		-
Other	18		-		-		-		-		-
With an allowance recorded:
One-to-four units	1,604		1,604		377		1,612		1,612		382
Five or more units	1,897		1,858		141		1,578		1,565		143
Commercial real estate	3,495		3,495		194		3,503		3,503		206
Church	10,064		9,987		1,160		12,862		12,797		1,444
Commercial:
Other	138		138		12		150		150		12
Total	$	36,438	$	28,856	$	1,884	$	45,032	$	33,503	$	2,187

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

	Three Months Ended
	March 31, 2014				March 31, 2013
	Average Recorded Investment		Cash Basis Interest Income Recognized		Average Recorded Investment		Cash Basis Interest Income Recognized
	(In thousands)
One-to-four units	$	3,000	$	17	$	3,987	$	32
Five or more units	3,861		23		3,507		16
Commercial real estate	4,881		93		9,154		81
Church	19,719		141		24,139		137
Construction	-		-		202		5
Commercial:
Other	144		3		142		-
Total	$	31,605	$	277	$	41,131	$	271

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

	March 31, 2014
	30-59DaysPast Due		60-89DaysPast Due		Greater than90 DaysPast Due		TotalPast Due		Total Loans Not Past Due
	(In thousands)
One-to-four units	$	957	$	-	$	457	$	1,414	$	44,087
Five or more units	-		-		-		-		125,062
Commercial real estate	-		-		1,007		1,007		23,345
Church	162		-		1,760		1,922		60,852
Construction	-		-		-		-		418
Commercial:
Other	70		-		-		70		547
Consumer	-		-		-		-		21
Total	$	1,189	$	-	$	3,224	$	4,413	$	254,332

	December 31, 2013
	30-59DaysPast Due		60-89DaysPast Due		Greater than90 DaysPast Due		TotalPast Due		Total Loans Not Past Due
	(In thousands)
One-to-four units	$	802	$	-	$	585	$	1,387	$	45,072
Five or more units	-		-		545		545		112,723
Commercial real estate	346		-		1,016		1,362		25,335
Church	2,557		323		4,877		7,757		60,177
Construction	-		-		-		-		424
Commercial:
Sports	-		-		-		-		1,408
Other	82		-		-		82		577
Consumer	-		-		-		-		38
Total	$	3,787	$	323	$	7,023	$	11,133	$	245,754

Recorded Investment in Nonaccrual Loans by Type of Loans

	March 31, 2014		December 31, 2013
	(In thousands)
One-to-four units	$	1,291	$	1,441
Five or more units	2,083		2,985
Commercial real estate	1,366		1,391
Church	8,269		11,735
Commercial:
Other	138		150
Total non-accrual loans	$	13,147	$	17,702

Loans by Type Modified as Troubled Debt Restructurings

	Three Months Ended March 31, 2014					Three Months Ended March 31, 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	$	715	$	765
Total	-	$	-	$	-	5	$	715	$	765

Risk Category of Loans by Type of Loans

	March 31, 2014
	Pass		Special Mention		Substandard		Doubtful		Loss
	(In thousands)
One-to-four units	$	40,699	$	3,521	$	1,281	$	-	$	-
Five or more units	117,196		2,940		4,926		-		-
Commercial real estate	18,054		527		5,771		-		-
Church	33,072		17,591		12,111		-		-
Construction	418		-		-		-		-
Commercial:
Other	479		-		138		-		-
Consumer	21		-		-		-		-
Total	$	209,939	$	24,579	$	24,227	$	-	$	-

	December 31, 2013
	Pass		Special Mention		Substandard		Doubtful		Loss
	(In thousands)
One-to-four units	$	41,481	$	3,537	$	1,441	$	-	$	-
Five or more units	105,427		2,305		5,536		-		-
Commercial real estate	18,154		529		8,014		-		-
Church	34,367		17,657		15,910		-		-
Construction	424		-		-		-		-
Commercial:
Sports	-		1,408		-		-		-
Other	490		19		150		-		-
Consumer	38		-		-		-		-
Total	$	200,381	$	25,455	$	31,051	$	-	$	-

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Consolidated Statements of Operations and Comprehensive Income (Loss) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Interest income:
Interest and fees on loans receivable	$ 3,626	$ 3,887
Interest on mortgage backed and other securities	64	89
Other interest income	106	48
Total interest income	3,796	4,024
Interest expense:
Interest on deposits	461	624
Interest on borrowings	537	712
Total interest expense	998	1,336
Net interest income before provision for (recapture of) loan losses	2,798	2,688
Provision for (recapture of) loan losses	(1,082)
Net interest income after provision for (recapture of) loan losses	3,880	2,688
Non-interest income:
Service charges	118	142
Loan servicing fees, net	(6)	6
Net gains on sales of loans		16
Net gains (losses) on sales of REO	(3)	8
Other	224	49
Total non-interest income	333	221
Non-interest expense:
Compensation and benefits	1,588	1,454
Occupancy expense, net	284	340
Information services	219	217
Professional services	424	182
Provision for losses on loans held for sale		470
Provision for losses on REO	4
FDIC insurance	174	202
Office services and supplies	102	105
Other	426	550
Total non-interest expense	3,221	3,520
Income (loss) before income taxes	992	(611)
Income tax expense	3	5
Net income (loss)	989	(616)
Other comprehensive income (loss), net of tax:
Change in unrealized gains on securities available for sale	(21)	(18)
Other comprehensive income (loss), net of tax	(21)	(18)
Comprehensive income (loss)	968	(634)
Net income (loss)	989	(616)
Dividends and discount accretion on preferred stock		(315)
Income (loss) available to common shareholders	$ 989	$ (931)
Earnings (loss) per common share-basic (in dollars per share)	$ 0.05	$ (0.49)
Earnings (loss) per common share-diluted (in dollars per share)	$ 0.05	$ (0.49)
Dividends declared per share-common stock (in dollars per share)	$ 0.00	$ 0.00

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Stock-based Compensation

3 Months Ended

Mar. 31, 2014

Stock-based Compensation

Stock-based Compensation

NOTE (7) –Stock-based Compensation

In 2008, we adopted the 2008 Long-Term Incentive Plan (“2008 LTIP”), which was approved by the stockholders.  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 2,000,000 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; the option awards have vesting periods ranging from immediate vesting to 5 years and have 10-year contractual terms.

No options were granted during the three months ended March 31, 2014 and 2013, respectively.  The Company recorded $11 thousand and $20 thousand of stock-based compensation expense during the first three months of 2014 and 2013.

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Fair Value

3 Months Ended

Mar. 31, 2014

Fair Value

Fair Value

NOTE (6) – 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 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.  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 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 March 31, 2014 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	$	-	$	17,450	$	-	$	17,450
Securities available-for-sale - U.S. Government and federal agency	-		1,916		-		1,916

	Fair Value Measurements at December 31, 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	$	-	$	9,397	$	-	$	9,397

There were no transfers between Level 1, Level 2, or Level 3 during the three months ended March 31, 2014 and 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.

	March 31, 2014		December 31, 2013
	(In thousands)
Assets:
Impaired loans carried at fair value of collateral:
One-to-four units	$	1,090	$	1,245
Five or more units	347		900
Commercial real estate	1,368		1,391
Church	5,808		9,024
Real estate owned:
Five or more units	549		-
Commercial real estate	-		151
Church	1,933		1,933

The following table provides information regarding losses recognized on assets measured at fair value on a non-recurring basis for the three months ended March 31, 2014 and 2013.

	Three Months Ended March 31,
	2014		2013
Non-performing loans receivable held-for-sale	$	-	$	471
Impaired loans carried at fair value of collateral	157		34
Real estate owned	4		-
Total	$	161	$	505

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 March 31, 2014 and December 31, 2013:

	March 31, 2014
	Fair Value		Valuation Technique(s)	Unobservable Input(s)	Range (Weighted Average)
	(Dollars in thousands)
Impaired loans – one-to-four units	$	1,090	Sales comparison approach	Adjustment for differences between the comparable sales	-6% to 6% (0%)
Impaired loans – five or more units	347		Sales comparison approach	Adjustment for differences between the comparable sales	1%
			Income approach	Capitalization rate	8%
Impaired loans – commercial real estate	1,368		Sales comparison approach	Adjustment for differences between the comparable sales	-1% to 0% (-1%)
			Income approach	Capitalization rate	4.5% to 8% (7.08%)
Impaired loans – church	5,808		Sales comparison approach	Adjustment for differences between the comparable sales	-21% to 9% (0%)
			Income approach	Capitalization rate	6.75%
Real estate owned – five or more units	549		Sales comparison approach	Adjustment for differences between the comparable sales	-15%
			Income approach	Capitalization rate	9%
Real estate owned – church	1,933		Sales comparison approach	Adjustment for differences between the comparable sales	-7% to 7% (0%)

	December 31, 2013
	Fair Value		Valuation Technique(s)	Unobservable Input(s)	Range (Weighted Average)
	(Dollars in thousands)
Impaired loans – one-to-four units	$	1,245	Sales comparison approach	Adjustment for differences between the comparable sales	-6% to 6% (-1%)
Impaired loans – five or more units	900		Sales comparison approach	Adjustment for differences between the comparable sales	-15% to 1% (-9%)
			Income approach	Capitalization rate	8% to 9% (8.59%)
Impaired loans – commercial real estate	1,391		Sales comparison approach	Adjustment for differences between the comparable sales	-1% to 0% (-1%)
			Income approach	Capitalization rate	4.5% to 8% (7.06%)
Impaired loans – church	9,024		Sales comparison approach	Adjustment for differences between the comparable sales	-21% to 9% (-1%)
			Income approach	Capitalization rate	6.75%
Real estate owned – commercial real estate	151		Sales comparison approach	Adjustment for differences between the comparable sales	3% (3%)
			Income approach	Capitalization rate	10%
Real estate owned – church	1,933		Sales comparison approach	Adjustment for differences between the comparable sales	-7% to 7% (0%)

Fair Values of Financial Instruments

The carrying amounts and estimated fair values of financial instruments, at March 31, 2014 and December 31, 2013 were as follows:

			Fair Value Measurements at March 31, 2014 Using
	Carrying Value		Level 1		Level 2		Level 3		Total
	(In thousands)
Financial Assets:
Cash and cash equivalents	$	47,490	$	47,490	$	-	$	-	$	47,490
Securities available-for-sale	19,366		-		19,366		-		19,366
Loans receivable held for investment	249,954		-		-		250,277		250,277
Federal Home Loan Bank stock	3,737		N/A		N/A		N/A		N/A
Accrued interest receivable	1,149		-		50		1,099		1,149
Financial Liabilities:
Deposits	$	(209,671)	$	-	$	(200,777)	$	-	$	(200,777)
Federal Home Loan Bank advances	(79,500)		-		(82,580)		-		(82,580)
Junior subordinated debentures	(6,000)		-		-		(2,222)		(2,222)
Senior debt	(2,885)		-		-		(2,074)		(2,074)
Accrued interest payable	(731)		-		(28)		(664)		(692)
Advance payments by borrowers for taxes and insurance	(379)		-		(379)		-		(379)

			Fair Value Measurements at December 31, 2013 Using
	Carrying Value		Level 1		Level 2		Level 3		Total
	(In thousands)
Financial Assets:
Cash and cash equivalents	$	58,196	$	58,196	$	-	$	-	$	58,196
Securities available-for-sale	9,397		-		9,397		-		9,397
Loans receivable held for investment	247,847		-		-		248,167		248,167
Federal Home Loan Bank stock	3,737		N/A		N/A		N/A		N/A
Accrued interest receivable	1,107		-		27		1,080		1,107
Financial Liabilities:
Deposits	$	(214,405)	$	-	$	(209,656)	$	-	$	(209,656)
Federal Home Loan Bank advances	(79,500)		-		(82,840)		-		(82,840)
Junior subordinated debentures	(6,000)		-		-		(2,167)		(2,167)
Senior debt	(2,923)		-		-		(1,429)		(1,429)
Accrued interest payable	(718)		-		(63)		(608)		(671)
Advance payments by borrowers for taxes and insurance	(776)		-		(776)		-		(776)

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 investment

Fair values of loans 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.

(c) FHLB Stock

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

(d) 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.

(e) 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 Senior Debt

The fair values of the Company’s Debentures and senior debt 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 Debentures and senior debt 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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Securities (Details 2) (USD $)	3 Months Ended		12 Months Ended
	Mar. 31, 2014	Mar. 31, 2013	Dec. 31, 2013
Amortized Cost
Five to ten years	$ 1,922,000
Residential mortgage-backed	16,985,000
Total	18,907,000
Fair Value
Five to ten years	1,916,000
Residential mortgage-backed	17,450,000
Total	19,366,000
Securities pledged	1,300,000		9,400,000
Purchase of available for sale securities	3,970,000
Sales of securities	0	0
Securities of any one issuer, other than U.S. Government, greater than 10% of shareholders equity	0		0
Shareholders equity representing a concentration risk for any one securities investment (as a percent)	10.00%		10.00%
Securities with unrealized loss position for less than 12 months	7,900,000
Residential mortgage-backed
Fair Value
Purchase of available for sale securities	8,600,000
U.S. Government and federal agency
Fair Value
Purchase of available for sale securities	$ 1,900,000

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Fair Value (Tables)

3 Months Ended

Mar. 31, 2014

Fair Value

Summary of assets measured at fair value on recurring basis

	Fair Value Measurements at March 31, 2014 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	$	-	$	17,450	$	-	$	17,450
Securities available-for-sale - U.S. Government and federal agency	-		1,916		-		1,916

	Fair Value Measurements at December 31, 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	$	-	$	9,397	$	-	$	9,397

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

	March 31, 2014		December 31, 2013
	(In thousands)
Assets:
Impaired loans carried at fair value of collateral:
One-to-four units	$	1,090	$	1,245
Five or more units	347		900
Commercial real estate	1,368		1,391
Church	5,808		9,024
Real estate owned:
Five or more units	549		-
Commercial real estate	-		151
Church	1,933		1,933

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

	Three Months Ended March 31,
	2014		2013
Non-performing loans receivable held-for-sale	$	-	$	471
Impaired loans carried at fair value of collateral	157		34
Real estate owned	4		-
Total	$	161	$	505

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

	March 31, 2014
	Fair Value		Valuation Technique(s)	Unobservable Input(s)	Range (Weighted Average)
	(Dollars in thousands)
Impaired loans – one-to-four units	$	1,090	Sales comparison approach	Adjustment for differences between the comparable sales	-6% to 6% (0%)
Impaired loans – five or more units	347		Sales comparison approach	Adjustment for differences between the comparable sales	1%
			Income approach	Capitalization rate	8%
Impaired loans – commercial real estate	1,368		Sales comparison approach	Adjustment for differences between the comparable sales	-1% to 0% (-1%)
			Income approach	Capitalization rate	4.5% to 8% (7.08%)
Impaired loans – church	5,808		Sales comparison approach	Adjustment for differences between the comparable sales	-21% to 9% (0%)
			Income approach	Capitalization rate	6.75%
Real estate owned – five or more units	549		Sales comparison approach	Adjustment for differences between the comparable sales	-15%
			Income approach	Capitalization rate	9%
Real estate owned – church	1,933		Sales comparison approach	Adjustment for differences between the comparable sales	-7% to 7% (0%)

	December 31, 2013
	Fair Value		Valuation Technique(s)	Unobservable Input(s)	Range (Weighted Average)
	(Dollars in thousands)
Impaired loans – one-to-four units	$	1,245	Sales comparison approach	Adjustment for differences between the comparable sales	-6% to 6% (-1%)
Impaired loans – five or more units	900		Sales comparison approach	Adjustment for differences between the comparable sales	-15% to 1% (-9%)
			Income approach	Capitalization rate	8% to 9% (8.59%)
Impaired loans – commercial real estate	1,391		Sales comparison approach	Adjustment for differences between the comparable sales	-1% to 0% (-1%)
			Income approach	Capitalization rate	4.5% to 8% (7.06%)
Impaired loans – church	9,024		Sales comparison approach	Adjustment for differences between the comparable sales	-21% to 9% (-1%)
			Income approach	Capitalization rate	6.75%
Real estate owned – commercial real estate	151		Sales comparison approach	Adjustment for differences between the comparable sales	3% (3%)
			Income approach	Capitalization rate	10%
Real estate owned – church	1,933		Sales comparison approach	Adjustment for differences between the comparable sales	-7% to 7% (0%)

Schedule of carrying amounts and estimated fair values of financial instruments

			Fair Value Measurements at March 31, 2014 Using
	Carrying Value		Level 1		Level 2		Level 3		Total
	(In thousands)
Financial Assets:
Cash and cash equivalents	$	47,490	$	47,490	$	-	$	-	$	47,490
Securities available-for-sale	19,366		-		19,366		-		19,366
Loans receivable held for investment	249,954		-		-		250,277		250,277
Federal Home Loan Bank stock	3,737		N/A		N/A		N/A		N/A
Accrued interest receivable	1,149		-		50		1,099		1,149
Financial Liabilities:
Deposits	$	(209,671)	$	-	$	(200,777)	$	-	$	(200,777)
Federal Home Loan Bank advances	(79,500)		-		(82,580)		-		(82,580)
Junior subordinated debentures	(6,000)		-		-		(2,222)		(2,222)
Senior debt	(2,885)		-		-		(2,074)		(2,074)
Accrued interest payable	(731)		-		(28)		(664)		(692)
Advance payments by borrowers for taxes and insurance	(379)		-		(379)		-		(379)

			Fair Value Measurements at December 31, 2013 Using
	Carrying Value		Level 1		Level 2		Level 3		Total
	(In thousands)
Financial Assets:
Cash and cash equivalents	$	58,196	$	58,196	$	-	$	-	$	58,196
Securities available-for-sale	9,397		-		9,397		-		9,397
Loans receivable held for investment	247,847		-		-		248,167		248,167
Federal Home Loan Bank stock	3,737		N/A		N/A		N/A		N/A
Accrued interest receivable	1,107		-		27		1,080		1,107
Financial Liabilities:
Deposits	$	(214,405)	$	-	$	(209,656)	$	-	$	(209,656)
Federal Home Loan Bank advances	(79,500)		-		(82,840)		-		(82,840)
Junior subordinated debentures	(6,000)		-		-		(2,167)		(2,167)
Senior debt	(2,923)		-		-		(1,429)		(1,429)
Accrued interest payable	(718)		-		(63)		(608)		(671)
Advance payments by borrowers for taxes and insurance	(776)		-		(776)		-		(776)

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Basis of Financial Statement Presentation (Policies)

3 Months Ended

Mar. 31, 2014

Basis of Financial Statement Presentation

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In July 2013, the FASB amended existing guidance related to the presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss or a tax credit carryforward exists.  These amendments provide that an unrecognized tax benefit, or a portion thereof, be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except that to the extent that a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date to settle any additional income taxes that would result from disallowance of a tax position, or the tax law does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, then the unrecognized tax benefit should be presented as a liability.  These amendments are effective for interim and annual reporting periods beginning after December 15, 2013.  Adopting this standard did not have a material effect on the Company’s operating results or financial condition.

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Regulatory Matters

3 Months Ended

Mar. 31, 2014

Regulatory Matters

Regulatory Matters

NOTE (8) –Regulatory Matters

Effective September 9, 2010, the Company and the Bank agreed to the issuance to them of cease and desist orders (the “Orders”) by the Office of Thrift Supervision, which was the regulatory predecessor of the Office of the Comptroller of the Currency (“OCC”).  The Order applicable to the Company prohibits the Company from paying dividends to its stockholders without the prior written approval of the Board of Governors of the Federal Reserve System (“FRB”), which is now the federal regulator for savings and loan holding companies.  In addition, the Company is not permitted to 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.

Effective October 30, 2013, the Bank entered into a Consent Order with the OCC, which superseded the Order applicable to the Bank.  The Bank’s capital requirements are administered by the OCC and involve quantitative measures of assets, liabilities, and certain off-balance sheet items calculated under regulatory accounting practices.  Capital amounts and classifications are also subject to qualitative judgments by the OCC.  Failure to meet capital requirements can result in regulatory action.

As part of the Consent Order, the Bank is required to maintain a Tier 1 (Core) Capital to Adjusted Total Assets ratio of at least 9% and a Total Risk-Based Capital to Risk-Weighted Assets ratio of at least 13%, both of which ratios are greater than the respective 4% and 8% levels for such ratios that are generally required under OCC regulations.

The Bank met the minimum capital requirements under the Consent Order at March 31, 2014 and December 31, 2013.  Actual required capital amounts and ratios at March 31, 2014 and December 31, 2013, together with the higher capital requirements that the Bank is required to meet under the Consent Order applicable to it, are presented below.

	Actual			Required for Capital Adequacy Purposes			Capital Requirements under Consent Order
	Amount		Ratio	Amount		Ratio	Amount		Ratio
	(Dollars in thousands)
March 31, 2014:
Tangible Capital to adjusted total assets	$	35,387	10.56%	$	5,025	1.50%	N/A		N/A
Tier 1(Core) Capital to adjusted total assets	$	35,387	10.56%	$	13,399	4.00%	$	30,148	9.00%
Tier 1(Core) Capital to risk weighted assets	$	35,387	16.11%	N/A		N/A	N/A		N/A
Total Capital to risk weighted assets	$	38,225	17.40%	$	17,577	8.00%	$	28,562	13.00%
December 31, 2013:
Tangible Capital to adjusted total assets	$	34,035	10.24%	$	4,986	1.50%	N/A		N/A
Tier 1(Core) Capital to adjusted total assets	$	34,035	10.24%	$	13,295	4.00%	$	29,914	9.00%
Tier 1(Core) Capital to risk weighted assets	$	34,035	15.65%	N/A		N/A	N/A		N/A
Total Capital to risk weighted assets	$	36,845	16.95%	$	17,394	8.00%	$	28,286	13.00%

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Income Taxes

3 Months Ended

Mar. 31, 2014

Income Taxes

Income Taxes

NOTE (9) –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 $9.3 million was required as of March 31, 2014, resulting in $0 net deferred tax assets.  The Company had recorded a valuation allowance of $9.7 million and $0 net deferred tax assets as of December 31, 2013.

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Earnings (Loss) Per Share of Common Stock (Tables)

3 Months Ended

Mar. 31, 2014

Earnings (Loss) Per Share of Common Stock

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

	For the three months ended March 31,
	2014		2013
	(In thousands, except share and per share)
Basic
Net income (loss)	$	989	$	(616)
Less: Preferred stock dividends and accretion	-		(315)
Income (loss) available to common stockholders	$	989	$	(931)
Weighted average common shares outstanding	20,224,682		1,917,422
Earnings (loss) per common share - basic	$	0.05	$	(0.49)
Diluted
Net income (loss)	$	989	$	(616)
Less: Preferred stock dividends and accretion	-		(315)
Income (loss) available to common stockholders	$	989	$	(931)
Weighted average common shares outstanding	20,224,682		1,917,422
Add: dilutive effects of assumed exercises of stock options	-		-
Weighted average common shares - fully diluted	20,224,682		1,917,422
Earnings (loss) per common share - diluted	$	0.05	$	(0.49)

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Fair Value (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013	Mar. 31, 2014 Significant Other Observable Inputs (Level 2)	Dec. 31, 2013 Significant Other Observable Inputs (Level 2)	Mar. 31, 2014 Total	Dec. 31, 2013 Total	Mar. 31, 2014 Recurring basis Significant Other Observable Inputs (Level 2) Residential mortgage-backed	Dec. 31, 2013 Recurring basis Significant Other Observable Inputs (Level 2) Residential mortgage-backed	Mar. 31, 2014 Recurring basis Significant Other Observable Inputs (Level 2) U.S. Government and federal agency	Mar. 31, 2014 Recurring basis Total Residential mortgage-backed	Dec. 31, 2013 Recurring basis Total Residential mortgage-backed	Mar. 31, 2014 Recurring basis Total U.S. Government and federal agency
Fair Value
Securities available-for-sale, at fair value			$ 19,366	$ 9,397	$ 19,366	$ 9,397	$ 17,450	$ 9,397	$ 1,916	$ 17,450	$ 9,397	$ 1,916
Transfers between levels	$ 0	$ 0

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Earnings (Loss) Per Share of Common Stock (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Basic
Net income (loss)	$ 989	$ (616)
Less: Preferred stock dividends and accretion		(315)
Income (loss) available to common shareholders	989	(931)
Weighted average common shares outstanding	20,224,682	1,917,422
Earnings (loss) per common share - basic (in dollars per share)	$ 0.05	$ (0.49)
Diluted
Net income (loss)	989	(616)
Less: Preferred stock dividends and accretion		(315)
Income (loss) available to common shareholders	$ 989	$ (931)
Weighted average common shares outstanding	20,224,682	1,917,422
Weighted average common shares - fully diluted	20,224,682	1,917,422
Earnings (loss) per common share - diluted (in dollars per share)	$ 0.05	$ (0.49)
Anti-dilutive stock options not considered in computing diluting earnings (loss) per common share	93,750	164,178

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Loans Receivable Held for Investment (Details 3) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013	Mar. 31, 2013	Dec. 31, 2012
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$ 1,884	$ 2,187
Collectively evaluated for impairment	8,207	7,959
Total ending allowance balance	10,091	10,146	10,450	11,869
Loans:
Loans individually evaluated for impairment	28,856	33,503
Loans collectively evaluated for impairment	229,889	223,384
Total ending loans balance	258,745	256,887
One-to-four units
Ending allowance balance attributable to loans:
Individually evaluated for impairment	377	382
Collectively evaluated for impairment	1,497	1,548
Total ending allowance balance	1,874	1,930	1,834	2,060
Loans:
Loans individually evaluated for impairment	2,880	3,053
Loans collectively evaluated for impairment	42,621	43,406
Total ending loans balance	45,501	46,459
Five or more units
Ending allowance balance attributable to loans:
Individually evaluated for impairment	141	143
Collectively evaluated for impairment	1,966	1,583
Total ending allowance balance	2,107	1,726	1,123	2,122
Loans:
Loans individually evaluated for impairment	3,556	4,163
Loans collectively evaluated for impairment	121,506	109,105
Total ending loans balance	125,062	113,268
Commercial real estate
Ending allowance balance attributable to loans:
Individually evaluated for impairment	194	206
Collectively evaluated for impairment	1,018	1,267
Total ending allowance balance	1,212	1,473	1,549	2,685
Loans:
Loans individually evaluated for impairment	4,863	4,894
Loans collectively evaluated for impairment	19,489	21,803
Total ending loans balance	24,352	26,697
Church
Ending allowance balance attributable to loans:
Individually evaluated for impairment	1,160	1,444
Collectively evaluated for impairment	3,707	3,505
Total ending allowance balance	4,867	4,949	5,677	4,818
Loans:
Loans individually evaluated for impairment	17,419	21,243
Loans collectively evaluated for impairment	45,355	46,691
Total ending loans balance	62,774	67,934
Construction
Ending allowance balance attributable to loans:
Collectively evaluated for impairment	7	7
Total ending allowance balance	7	7	8	8
Loans:
Loans collectively evaluated for impairment	418	424
Total ending loans balance	418	424
Commercial
Ending allowance balance attributable to loans:
Individually evaluated for impairment	12	12
Collectively evaluated for impairment	8	43
Total ending allowance balance	20	55	250	167
Loans:
Loans individually evaluated for impairment	138	150
Loans collectively evaluated for impairment	479	1,917
Total ending loans balance	617	2,067
Consumer
Ending allowance balance attributable to loans:
Collectively evaluated for impairment	4	6
Total ending allowance balance	4	6	9	9
Loans:
Loans collectively evaluated for impairment	21	38
Total ending loans balance	$ 21	$ 38

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Consolidated Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Cash flows from operating activities:
Net income (loss)	$ 989	$ (616)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Provision for (recapture of) loan losses	(1,082)
Provision for losses on loans held for sale		470
Provision for losses on REO	4
Depreciation	55	52
Net amortization of deferred loan origination costs	34	62
Net amortization of premiums on mortgage-backed securities	5	10
Amortization of investment in affordable housing limited partnership	48	55
Stock-based compensation expense	11	20
Earnings on bank owned life insurance	(16)	(16)
Net losses (gains) on sales of REO	3	(8)
Net gains on sales of loans		(16)
Net change in accrued interest receivable	(42)	74
Net change in other assets	(703)	1,269
Net change in accrued interest payable	13	230
Net change in other liabilities	282	(393)
Net cash provided by (used in) operating activities	(399)	1,193
Cash flows from investing activities:
Net change in loans receivable held for investment	(2,630)	9,104
Proceeds from sales of loans receivable held for sale		9,322
Principal repayments on loans receivable held for sale		143
Available-for-sale securities:
Purchases	(3,970)
Maturities, prepayments and calls	468	1,170
Proceeds from sales of REO	1,166	152
Net redemption of FHLB stock		164
Additions to office properties and equipment	(172)	(32)
Net cash provided by (used in) investing activities	(5,138)	20,023
Cash flows from financing activities:
Net change in deposits	(4,734)	(9,423)
Repayments on FHLB advances	(8,000)
Proceeds from FHLB advances	8,000
Repayments on senior debt	(38)
Net change in advance payments by borrowers for taxes and insurance	(397)	(379)
Net cash used in financing activities	(5,169)	(9,802)
Net change in cash and cash equivalents	(10,706)	11,414
Cash and cash equivalents at beginning of period	58,196	64,360
Cash and cash equivalents at end of period	47,490	75,774
Supplemental disclosures of cash flow information:
Cash paid for interest	984	1,106
Cash paid for income taxes		3
Supplemental disclosures of non-cash investing and financing activities:
Transfers of loans receivable held for investment to REO	1,571	1,275
Transfers of loans receivable from held for investment to held for sale		6,174
Payable for purchases of securities	$ 6,493

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Junior Subordinated Debentures and Senior Debt

3 Months Ended

Mar. 31, 2014

Junior Subordinated Debentures and Senior Debt

Junior Subordinated Debentures and Senior Debt

NOTE (5) – Junior Subordinated Debentures and Senior Debt

On March 17, 2004, the Company issued $6.0 million of Floating Rate Junior Subordinated Debentures (the “Debentures”) in a private placement to a trust that was capitalized to purchase subordinated debt and preferred stock of multiple community banks.  Interest on the Debentures 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 2.77% at March 31, 2014.  The Company stopped paying interest on the Debentures in September 2010 and was not able to pay the principal or accrued interest on the Debentures at their March 17, 2014 maturity date. The accrued interest on the Debentures was $703 thousand as of March 31, 2014.  Under the Cease and Desist Order applicable to the Company, 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 Board of Governors of the Federal Reserve System (“FRB”).  In addition, under the terms of the Debentures, the Company is not allowed to make payments on the Debentures if the Company is in default on any of its senior indebtedness, which term includes the senior debt described below.  In January 2014, the Company submitted a proposal to the trustee for the trust that holds the Debentures to extend the maturity of the Debentures to March 17, 2024 in return for paying all accrued interest on the Debentures and up to $900 thousand, or 15%, of the principal amount of the Debentures.  This proposal was approved by the requisite holders of senior securities of the trust on February 28, 2014, subject to several conditions, including approval by the Company’s regulators and senior lender, raising at least $6 million of additional equity capital that will be used in part to make the proposed payments of accrued interest and principal and preparation of a suitable supplemental indenture providing for the modifications to the terms of the Debentures and other applicable documentation.  There is no assurance that the Company will be successful in raising the necessary additional capital, obtaining approvals from its regulators and senior lender and satisfying the other conditions to completion of the proposal.

As part of the Recapitalization that closed in August 2013, the Company exchanged shares of common stock with an agreed upon value of $2.6 million for $2.6 million principal amount of its $5.0 million senior debt.  The modified terms for the remaining $2.4 million principal amount of the senior debt include, among others items, an extension of the maturity of the senior debt to February 22, 2019.  In addition the interest rate on the remaining loan has been increased to the Wall Street Journal Prime Rate plus 2%, with a floor (minimum) rate of 6%, from the original loan interest rate of the Wall Street Journal Prime Rate plus 1%, with a floor rate of 6%.  The repayment schedule specifies six quarterly payments of interest only beginning three months following the closing of the Recapitalization, followed by 48 monthly payments of principal and interest on the loan beginning 19 months after the closing of the Recapitalization; provided, that each payment on the loan must receive prior approval from the FRB.  Failure to make such any payment due to an inability to obtain such approval despite the exercise by the Company of required efforts to obtain such approval will not constitute an additional event of default under the revised loan terms.  The Company obtained approval from the FRB and paid the interest payments due in November 2013 and February 2014.

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Loans Receivable Held for Investment (Details 4) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Impaired loans
Unpaid principal balance	$ 36,438	$ 45,032
Recorded investment	28,856	33,503
Allowance for loan losses allocated, with an allowance recorded	1,884	2,187
One-to-four units
Impaired loans
Unpaid principal balance, with no related allowance recorded	1,962	2,114
Unpaid principal balance, with an allowance recorded	1,604	1,612
Recorded investment, with no related allowance recorded	1,276	1,441
Recorded investment, with an allowance recorded	1,604	1,612
Allowance for loan losses allocated, with an allowance recorded	377	382
Five or more units
Impaired loans
Unpaid principal balance, with no related allowance recorded	1,783	2,690
Unpaid principal balance, with an allowance recorded	1,897	1,578
Recorded investment, with no related allowance recorded	1,698	2,598
Recorded investment, with an allowance recorded	1,858	1,565
Allowance for loan losses allocated, with an allowance recorded	141	143
Commercial real estate
Impaired loans
Unpaid principal balance, with no related allowance recorded	4,864	4,867
Unpaid principal balance, with an allowance recorded	3,495	3,503
Recorded investment, with no related allowance recorded	1,368	1,391
Recorded investment, with an allowance recorded	3,495	3,503
Allowance for loan losses allocated, with an allowance recorded	194	206
Church
Impaired loans
Unpaid principal balance, with no related allowance recorded	10,613	11,806
Unpaid principal balance, with an allowance recorded	10,064	12,862
Recorded investment, with no related allowance recorded	7,432	8,446
Recorded investment, with an allowance recorded	9,987	12,797
Allowance for loan losses allocated, with an allowance recorded	1,160	1,444
Commercial Sports
Impaired loans
Unpaid principal balance, with no related allowance recorded		3,850
Commercial Other
Impaired loans
Unpaid principal balance, with no related allowance recorded	18
Unpaid principal balance, with an allowance recorded	138	150
Recorded investment, with an allowance recorded	138	150
Allowance for loan losses allocated, with an allowance recorded	$ 12	$ 12

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Stock-based Compensation (Details) (2008 LTIP, USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Stock-based compensation
Shares authorized to be granted under stock compensation plan	2,000,000
Stock Options
Stock-based compensation
Contractual term of option awards	10 years
Stock options granted (in shares)	0	0
Stock based compensation expense	$ 11	$ 20
Stock Options | Maximum
Stock-based compensation
Vesting period of option awards	5 years

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Regulatory Matters (Tables)

3 Months Ended

Mar. 31, 2014

Regulatory Matters

Schedule of actual and required capital amounts and ratios

	Actual			Required for Capital Adequacy Purposes			Capital Requirements under Consent Order
	Amount		Ratio	Amount		Ratio	Amount		Ratio
	(Dollars in thousands)
March 31, 2014:
Tangible Capital to adjusted total assets	$	35,387	10.56%	$	5,025	1.50%	N/A		N/A
Tier 1(Core) Capital to adjusted total assets	$	35,387	10.56%	$	13,399	4.00%	$	30,148	9.00%
Tier 1(Core) Capital to risk weighted assets	$	35,387	16.11%	N/A		N/A	N/A		N/A
Total Capital to risk weighted assets	$	38,225	17.40%	$	17,577	8.00%	$	28,562	13.00%
December 31, 2013:
Tangible Capital to adjusted total assets	$	34,035	10.24%	$	4,986	1.50%	N/A		N/A
Tier 1(Core) Capital to adjusted total assets	$	34,035	10.24%	$	13,295	4.00%	$	29,914	9.00%
Tier 1(Core) Capital to risk weighted assets	$	34,035	15.65%	N/A		N/A	N/A		N/A
Total Capital to risk weighted assets	$	36,845	16.95%	$	17,394	8.00%	$	28,286	13.00%