10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2017

[  ]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    o

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     o

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

Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer	o  (Do not check if a smaller reporting company)	Smaller reporting company	x
		Emerging growth company	o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    o

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

Yes      o    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 August 4, 2017, 18,694,823 shares of the Registrant’s voting common stock and 8,756,396 shares of the Registrant’s non-voting common stock were outstanding.

TABLE OF CONTENTS

			Page
PART I.	FINANCIAL INFORMATION
	Item 1.	Consolidated Financial Statements (Unaudited)
		Consolidated Statements of Financial Condition as of June 30, 2017 and December 31, 2016	1
		Consolidated Statements of Income and Comprehensive Income for the three and six months ended June 30, 2017 and 2016	2
		Consolidated Statements of Cash Flows for the three and six months ended June 30, 2017 and 2016	3
		Notes to Consolidated Financial Statements	4
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
	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		32

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Consolidated Statements of Financial Condition

(In thousands, except share and per share amounts)

	June 30, 2017			December 31, 2016
	(Unaudited)
Assets
Cash and due from banks	$	2,379		$	1,516
Interest-bearing deposits in other banks	14,456			16,914
Cash and cash equivalents	16,835			18,430
Securities available-for-sale, at fair value	12,029			13,202
Loans receivable held for sale, at lower of cost or fair value	39,037			-
Loans receivable held for investment, net of allowance of $4,246 and $4,603, respectively	350,308			379,454
Accrued interest receivable	1,103			1,178
Federal Home Loan Bank (FHLB) stock	2,916			2,573
Office properties and equipment, net	2,509			2,479
Bank owned life insurance	2,967			2,940
Deferred tax assets, net	5,975			6,907
Other assets	1,816			1,920
Total assets	$	435,495		$	429,083
Liabilities and stockholders’ equity
Liabilities:
Deposits	$	273,847		$	287,427
FHLB advances	104,000			85,000
Junior subordinated debentures	5,100			5,100
Advance payments by borrowers for taxes and insurance	1,009			828
Accrued expenses and other liabilities	3,995			5,202
Total liabilities	387,951			383,557
Stockholders’ Equity:
Preferred stock, $.01 par value, authorized 1,000,000 shares; none issued or outstanding	-			-
Common stock, $.01 par value, voting, authorized 50,000,000 shares at June 30, 2017 and December 31, 2016; issued 21,312,649 shares at June 30, 2017 and 21,282,647 shares at December 31, 2016; outstanding 18,694,823 shares at June 30, 2017 and 18,664,821 shares at December 31, 2016	213			212
Common stock, $.01 par value, non-voting, authorized 25,000,000 shares at June 30, 2017 and December 31, 2016; issued and outstanding 8,756,396 shares at June 30, 2017 and December 31, 2016	87			87
Additional paid-in capital	46,026			45,819
Retained earnings	7,778			6,013
Unearned Employee Stock Ownership Plan (ESOP) shares	(1,133		)	(1,176		)
Accumulated other comprehensive income (loss)	(101		)	(103		)
Treasury stock-at cost, 2,617,826 shares at June 30, 2017 and December 31, 2016	(5,326		)	(5,326		)
Total stockholders’ equity	47,544			45,526
Total liabilities and stockholders’ equity	$	435,495		$	429,083

See accompanying notes to unaudited consolidated financial statements.

1

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Consolidated Statements of Income and Comprehensive Income

(Unaudited)

	Three Months Ended June 30,				Six Months Ended June 30,
	2017		2016		2017		2016
	(In thousands, except per share)
Interest income:
Interest and fees on loans receivable	$	3,944	$	3,591	$	7,908	$	7,020
Interest on mortgage-backed and other securities	73		84		148		167
Other interest income	119		98		217		201
Total interest income	4,136		3,773		8,273		7,388
Interest expense:
Interest on deposits	597		511		1,171		1,028
Interest on borrowings	537		421		1,021		848
Total interest expense	1,134		932		2,192		1,876
Net interest income	3,002		2,841		6,081		5,512
Loan loss provision recapture	300		250		650		550
Net interest income after loan loss provision recapture	3,302		3,091		6,731		6,062
Non-interest income:
Service charges	100		120		221		246
Gain on sale of loans	196		-		223		-
CDFI grant	-		-		-		265
Income from litigation settlement	-		-		1,183		-
Other	26		79		54		231
Total non-interest income	322		199		1,681		742
Non-interest expense:
Compensation and benefits	1,328		1,709		3,315		3,612
Occupancy expense	315		289		620		582
Information services	208		180		408		386
Professional services	231		320		405		447
Office services and supplies	81		72		153		142
FDIC assessments	41		58		84		83
Other	464		343		726		598
Total non-interest expense	2,668		2,971		5,711		5,850
Income before income taxes	956		319		2,701		954
Income taxes	423		-		936		2
Net income	$	533	$	319	$	1,765	$	952
Other comprehensive income, net of tax:
Unrealized gains on securities available-for-sale arising during the period	$	9	$	43	$	3	$	163
Income tax	3		38		1		67
Other comprehensive income, net of tax	6		5		2		96
Comprehensive income	$	539	$	324	$	1,767	$	1,048
Earnings per common share-basic	$	0.02	$	0.01	$	0.07	$	0.03
Earnings per common share-diluted	$	0.02	$	0.01	$	0.07	$	0.03

See accompanying notes to unaudited consolidated financial statements.

2

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Consolidated Statements of Cash Flows

(Unaudited)

	Six Months Ended June 30,
	2017			2016
	(In thousands)
Cash flows from operating activities:
Net income	$	1,765		$	952
Adjustments to reconcile net income to net cash used in (provided by) operating activities:
Loan loss provision recapture	(650		)	(550		)
Depreciation	129			124
Net amortization of deferred loan origination costs	134			92
Net amortization of premiums on mortgage-backed securities	17			23
Amortization of investment in affordable housing limited partnership	98			97
Stock-based compensation expense	204			13
ESOP compensation expense	47			45
Earnings on bank owned life insurance	(27		)	(29		)
Originations of loans receivable held for sale	(86,002		)	-
Repayments on loans receivable held for sale	200			-
Proceeds from sales of loans receivable held for sale	46,988			-
Gain on sale of loans receivable held for sale	(223		)	-
Net gain on sale of REOs	-			(22		)
Net change in deferred taxes	931			-
Net change in accrued interest receivable	75			(63		)
Net change in other assets	6			246
Net change in advance payments by borrowers for taxes and insurance	181			-
Net change in accrued expenses and other liabilities	(1,207		)	(783		)
Net cash (used in) provided by operating activities	(37,334		)	145
Cash flows from investing activities:
Net change in loans receivable held for investment	29,662			(36,635		)
Purchase of available-for-sale securities	-			(2,505		)
Prepayments on available-for-sale securities	1,159			1,332
Proceeds from sales of REO	-			382
Purchase of FHLB stock	(343		)	-
Additions to office properties and equipment	(159		)	(26		)
Net cash provided by (used in) investing activities	30,319			(37,452		)
Cash flows from financing activities:
Net change in deposits	(13,580		)	7,158
Proceeds from FHLB advances	44,000			-
Repayments of FHLB advances	(25,000		)	(2,000		)
Net cash provided by financing activities	5,420			5,158
Net change in cash and cash equivalents	(1,595		)	(32,149		)
Cash and cash equivalents at beginning of the period	18,430			67,839
Cash and cash equivalents at end of the period	$	16,835		$	35,690
Supplemental disclosures of cash flow information:
Cash paid for interest	$	2,241		$	1,872
Cash paid for income taxes	20			8

See accompanying notes to unaudited consolidated financial statements.

3

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Unaudited Consolidated Financial Statements

June 30, 2017

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, 2016 and, accordingly, should be read in conjunction with such audited consolidated financial statements.  In the opinion of management, all adjustments (all of which are normal and recurring in nature) considered necessary for a fair presentation have been included.  Operating results for the three and six months ended June 30, 2017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017.

Recently Adopted Accounting Pronouncement

In March 2016, the FASB issued ASU 2016-09, “Compensation — Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting”.  ASU 2016-09 includes provisions intended to simplify various aspects related to how share-based payments are accounted for and presented in the financial statements.  The areas for simplification include income tax consequences, forfeitures, classification of awards as either equity or liabilities and classification on the statement of cash flows.  Under the new guidance, all excess tax benefits and deficiencies that occur when an award vests, is exercised, or expires are recognized in income tax expense as discrete period items.  Previously, these transactions were typically recorded directly within equity.  Consistent with this change, excess tax benefits and deficiencies are no longer included within estimated proceeds when performing the calculation for diluted earnings per share.  The presentation of excess tax benefits in the statement of cash flows shifted to an operating activity from the prior classification as a financing activity.  ASU 2016-09 also provides an accounting policy election to recognize forfeitures of awards as they occur when estimating stock-based compensation expense rather than the previous requirement to estimate forfeitures from inception.  ASU 2016-09 became effective for the Company for reporting periods after January 1, 2017.  The actual effects of adoption in 2017 will primarily depend upon the share price of the Company’s stock, probability of exercise of certain stock options and the magnitude of windfalls for all awards upon either vesting or exercise.  The effects on earnings per share calculations and election to account for forfeitures as incurred have not been significant.

Recently Issued Accounting Pronouncements (Not Yet Effective)

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)”.  ASU 2014-09 replaced existing revenue recognition guidance for contracts to provide goods or services to customers.  The new guidance clarifies the principles for recognizing revenue and replaces nearly all existing revenue recognition guidance in U.S. GAAP.  Quantitative and qualitative disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers are also required.  ASU 2014-09 as amended by ASU 2015-14, ASU 2016-08, ASU 2016-10, ASU 2016-12 and ASU 2016-20, is effective for interim and annual periods beginning after December 15, 2017 and is applied on either a modified retrospective or full retrospective basis.  Early adoption is permitted for interim and annual periods beginning after December 15, 2016.  The Company’s revenue is mainly comprised of net interest income from financial assets and liabilities and to a lesser degree, noninterest income.  The scope of ASU 2014-09 explicitly excludes net interest income as well as other revenues associated with financial assets and liabilities, including loans and securities.  Accordingly, the majority of the Company’s revenues will not be affected.  The Company will continue to evaluate the effect that this guidance will have on other revenue streams within its scope, as well as changes in disclosures required by the new guidance.  However, adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements.

4

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Unaudited Consolidated Financial Statements (continued)

In January 2016, the FASB issued ASU 2016-01, “Financial Instruments – Overall (Subtopic 825-10) - Recognition and Measurement of Financial Assets and Financial Liabilities”.  ASU 2016-01 (i) requires equity investments, with certain exceptions, to be measured at fair value with changes in fair value recognized in net income; (ii) simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment; (iii) eliminates the requirement for public business entities to disclose the methods and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet; (iv) requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; (v) requires an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments; (vi) requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the balance sheet or the accompanying notes to the financial statements; and (vii) clarifies that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities.  For public business entities, the amendments in ASU 2016-01 are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years.  Early application by public business entities to financial statements of fiscal years or interim periods that have not yet been issued are permitted as of the beginning of the fiscal year of adoption.  While the Company is currently evaluating the impact of this standard, the Company does not expect its adoption to have a material impact on the Company’s consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)”.  Under ASU 2016-02, lessees will be required to recognize the following for all leases (with the exception of short-term leases, as defined) at the commencement date: (i) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and (ii) a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term.  Under the new guidance, lessor accounting is largely unchanged.  Public business entities should apply the amendments in ASU 2016-02 for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years.  Early adoption is permitted.  Lessees (for capital and operating leases) and lessors (for sales-type, direct financing, and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements.  The Company has identified certain contracts with respect to leased real estate and office equipment that are within the scope of ASU 2016-02.  As a lessee in operating lease arrangements that are not considered short-tem, effective January 1, 2019, the Company expects a gross-up of its Consolidated Statements of Condition as a result of recognizing lease liabilities and right of use assets.  However, it will likely not have a significant impact on the Company’s Consolidated Statements of Income and Comprehensive Income or Cash Flows.

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”.  ASU 2016-13 requires an organization to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts.  Financial institutions and other organizations will now use forward-looking information to form their credit loss estimates.  Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses over the life of the related financial assets.  Organizations will continue to use judgment to determine which loss estimation method is appropriate for their circumstances.  Additionally, the ASU amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. For public business entities, ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years.  Early adoption is permitted.  While the Company is still evaluating the impact on its consolidated financial statements, the Company expects that ASU 2016-13 may result in an increase in the allowance for credit losses due to the following factors: 1) the allowance for credit losses will increase to provide for expected credit losses over the remaining expected life of the loan portfolio, and will consider expected future changes in macroeconomic conditions; and 2) an allowance may be established for estimated credit losses on available-for-sale debt securities.  The amount of increase will be impacted by the portfolio composition and quality, as well as the economic conditions and forecasts as of the adoption date.  While the Company has begun its implementation efforts by identifying key interpretive issues, and assessing its processes and identifying the system requirements against the new guidance to determine what modifications may be required, the Company cannot yet determine the overall impact of the new standard on its consolidated financial statements.

5

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Unaudited Consolidated Financial Statements (continued)

In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments”.  ASU 2016-15 provides guidance on the classification of certain cash receipts and payments on the consolidated statement of cash flows in order to reduce diversity in practice.  ASU 2016-15 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years.  Early adoption is permitted.  Adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements.

In November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash”.  ASU 2016-18 requires entities to show the changes in the total of cash, cash equivalents, restricted cash and restricted cash equivalents in the statement of cash flows.  As a result, entities will no longer present transfers between cash and cash equivalents and restricted cash and restricted cash equivalents in the statement of cash flows.  ASU 2016-18 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, where the guidance should be applied using a retrospective transition method to each period presented.  Early adoption is permitted. Adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements.

NOTE (2) – Earnings Per Share of Common Stock

Basic earnings per share of common stock is computed pursuant to the two-class method by dividing net income available to common stockholders less dividends paid on participating securities (unvested shares of restricted common stock) and any undistributed earnings attributable to participating securities by the weighted average common shares outstanding during the period.  The weighted average common shares outstanding includes the weighted average number of shares of common stock outstanding less the weighted average number of unvested shares of restricted common stock.  ESOP shares are considered outstanding for this calculation unless unearned.  Diluted earnings per share of common stock includes the dilutive effect of unvested stock awards and additional potential common shares issuable under stock options.

The following table shows how the Company computed basic and diluted earnings per share of common stock for the periods indicated:

	For the three months ended June 30,					For the six months ended June 30,
	2017			2016		2017			2016
	(Dollars in thousands, except per share)
Net income	$	533		$	319	$	1,765		$	952
Less net income attributable to participating securities	(1		)	-		(4		)	-
Income available to common stockholders	$	532		$	319	$	1,761		$	952
Weighted average common shares outstanding for basic earnings per common share	26,666,740			29,076,708		26,642,129			29,076,708
Add: dilutive effects of unvested restricted stock awards	56,552			-		63,655			-
Weighted average common shares outstanding for diluted earnings per common share	26,723,292			29,076,708		26,705,784			29,076,708
Earnings per common share - basic	$	0.02		$	0.01	$	0.07		$	0.03
Earnings per common share - diluted	$	0.02		$	0.01	$	0.07		$	0.03

6

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Unaudited Consolidated Financial Statements (continued)

Stock options for 540,625 shares of common stock for the three and six months ended June 30, 2017 and 2016 were not considered in computing diluted earnings per common share because they were anti-dilutive.

NOTE (3) – Securities

The following table summarizes the amortized cost and fair value of the available-for-sale investment securities portfolios as of the periods indicated 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
	(In thousands)
June 30, 2017:
Residential mortgage-backed	$	9,839	$	201	$	-	$	10,040
U.S. Government and federal agency	1,967		22		-		1,989
Total available-for-sale securities	$	11,806	$	223	$	-	$	12,029
December 31, 2016:
Residential mortgage-backed	$	11,022	$	192	$	-	$	11,214
U.S. Government and federal agency	1,960		28		-		1,988
Total available-for-sale securities	$	12,982	$	220	$	-	$	13,202

At June 30, 2017, the Bank had one U.S. Government and federal agency security with an amortized cost and an estimated fair value of $2.0 million and a contractual maturity of October 2, 2019.   At June 30, 2017, the Bank had 24 residential mortgage-backed securities with an amortized cost of $9.8 million, an estimated fair value of $10.0 million and an estimated average remaining life of 4.0 years.  Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties.

At June 30, 2017 and December 31, 2016, securities pledged to secure public deposits had a carrying amount of $537 thousand and $629 thousand, respectively.  At June 30, 2017 and December 31, 2016, there were no holdings of securities by any one issuer, other than the U.S. Government and its agencies, in an amount greater than 10% of stockholders’ equity.

There were no sales of securities during the three and six months ended June 30, 2017 and 2016.

NOTE (4) – Loans Receivable Held for Sale

Loans receivable held for sale at June 30, 2017 totaled $39.0 million and consisted of multi-family loans.  During the three and six months ended June 30, 2017, multi-family loans originated for sale totaled $37.2 million and $85.9 million, respectively.  Sales of multi-family loans during the three and six months ended June 30, 2017 totaled $31.8 million and $46.6 million, respectively.  There were no loans held for sale at December 31, 2016.

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BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Unaudited Consolidated Financial Statements (continued)

NOTE (5) – Loans Receivable Held for Investment

Loans receivable held for investment were as follows as of the periods indicated:

	June 30, 2017		December 31, 2016
	(In thousands)
Real estate:
Single family (1)	$	95,828	$	104,807
Multi-family	214,652		229,566
Commercial real estate	6,404		8,914
Church	34,449		37,826
Construction	950		837
Commercial – other	344		308
Consumer	4		6
Gross loans receivable before deferred loan costs and premiums	352,631		382,264
Unamortized net deferred loan costs and premiums	1,923		1,793
Gross loans receivable	354,554		384,057
Allowance for loan losses	(4,246)		(4,603)
Loans receivable, net	$	350,308	$	379,454

__

(1)Includes $77.0 million and $81.9 million of non-impaired purchased loans at June 30, 2017 and December 31, 2016, respectively, with no allowance for loan losses.

The following tables present the activity in the allowance for loan losses by loan type for the periods indicated:

	Three Months Ended June 30, 2017
	Real Estate
	Single family		Multi- family		Commercial real estate		Church		Construction		Commercial - other		Consumer		Total
	(In thousands)
Beginning balance	$	330	$	2,711	$	75	$	1,250	$	9	$	16	$	1	$	4,392
Provision for (recapture of) loan losses	(40)		8		2		(270)		-		1		(1)		(300)
Recoveries	30		-		-		124		-		-		-		154
Loans charged off	-		-		-		-		-		-		-		-
Ending balance	$	320	$	2,719	$	77	$	1,104	$	9	$	17	$	-	$	4,246

	Three Months Ended June 30, 2016
	Real Estate
	Single family		Multi- family		Commercial real estate		Church		Construction		Commercial - other		Consumer		Total
	(In thousands)
Beginning balance	$	528	$	1,866	$	444	$	1,676	$	3	$	17	$	-	$	4,534
Provision for (recapture of) loan losses	(87)		381		(452)		(86)		-		(7)		1		(250)
Recoveries	-		-		248		6		-		7		-		261
Loans charged off	-		-		-		-		-		-		-		-
Ending balance	$	441	$	2,247	$	240	$	1,596	$	3	$	17	$	1	$	4,545

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BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Unaudited Consolidated Financial Statements (continued)

	Six Months Ended June 30, 2017
	Real Estate
	Single family		Multi- family		Commercial real estate		Church		Construction		Commercial - other		Consumer		Total
	(In thousands)
Beginning balance	$	367	$	2,659	$	215	$	1,337	$	8	$	17	$	-	$	4,603
Provision for (recapture of) loan losses	(77)		60		(138)		(496)		1		-		-		(650)
Recoveries	30		-		-		263		-		-		-		293
Loans charged off	-		-		-		-		-		-		-		-
Ending balance	$	320	$	2,719	$	77	$	1,104	$	9	$	17	$	-	$	4,246

	Six Months Ended June 30, 2016
	Real Estate
	Single family		Multi- family		Commercial real estate		Church		Construction		Commercial - other		Consumer		Total
	(In thousands)
Beginning balance	$	597	$	1,658	$	469	$	2,083	$	3	$	18	$	-	$	4,828
Provision for (recapture of) loan losses	(156)		589		(477)		(499)		-		(8)		1		(550)
Recoveries	-		-		248		12		-		7		-		267
Loans charged off	-		-		-		-		-		-		-		-
Ending balance	$	441	$	2,247	$	240	$	1,596	$	3	$	17	$	1	$	4,545

The following tables present the balance in the allowance for loan losses and the recorded investment (unpaid contractual principal balance less charge-offs, less interest applied to principal, plus unamortized deferred costs and premiums) by loan type and based on impairment method as of and for the periods indicated:

	June 30, 2017
	Real Estate
	Single family		Multi- family		Commercial real estate		Church		Construction		Commercial - other		Consumer		Total
	(In thousands)
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	117	$	-	$	-	$	452	$	-	$	14	$	-	$	583
Collectively evaluated for impairment	203		2,719		77		652		9		3		-		3,663
Total ending allowance balance	$	320	$	2,719	$	77	$	1,104	$	9	$	17	$	-	$	4,246
Loans:
Loans individually evaluated for impairment	$	636	$	632	$	-	$	9,399	$	-	$	65	$	-	$	10,732
Loans collectively evaluated for impairment	95,682		215,788		6,410		24,712		947		279		4		343,822
Total ending loans balance	$	96,318	$	216,420	$	6,410	$	34,111	$	947	$	344	$	4	$	354,554

9

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Unaudited Consolidated Financial Statements (continued)

	December 31, 2016
	Real Estate
	Single family		Multi- family		Commercial real estate		Church		Construction		Commercial - other		Consumer		Total
	(In thousands)
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	125	$	-	$	-	$	516	$	-	$	15	$	-	$	656
Collectively evaluated for impairment	242		2,659		215		821		8		2		-		3,947
Total ending allowance balance	$	367	$	2,659	$	215	$	1,337	$	8	$	17	$	-	$	4,603
Loans:
Loans individually evaluated for impairment	$	644	$	642	$	-	$	10,545	$	-	$	66	$	-	$	11,897
Loans collectively evaluated for impairment	104,688		230,798		8,921		26,678		827		242		6		372,160
Total ending loans balance	$	105,332	$	231,440	$	8,921	$	37,223	$	827	$	308	$	6	$	384,057

The following table presents information related to loans individually evaluated for impairment by loan type as of the periods indicated:

	June 30, 2017						December 31, 2016
	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:
Multi-family	$	632	$	632	$	-	$	642	$	642	$	-
Church	6,068		3,819		-		5,946		3,589		-
With an allowance recorded:
Single family	636		636		117		644		644		125
Church	5,739		5,580		452		7,330		6,956		516
Commercial - other	65		65		14		66		66		15
Total	$	13,140	$	10,732	$	583	$	14,628	$	11,897	$	656

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

10

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Unaudited Consolidated Financial Statements (continued)

The following tables present the monthly average of loans individually evaluated for impairment by loan type and the related interest income for the periods indicated.

	Three Months Ended June 30, 2017						Six Months Ended June 30, 2017
	Average Recorded Investment			Cash Basis Interest Income Recognized			Average Recorded Investment			Cash Basis Interest Income Recognized
	(In thousands)
Single family		$	638		$	7		$	640		$	14
Multi-family		635			12			638			23
Commercial real estate		992			104			567			104
Church		9,625			109			9,998			336
Commercial – other		66			1			66			2
Total		$	11,956		$	233		$	11,909		$	479

	Three Months Ended June 30, 2016						Six Months Ended June 30, 2016
	Average Recorded Investment			Cash Basis Interest Income Recognized			Average Recorded Investment			Cash Basis Interest Income Recognized
	(In thousands)
Single family		$	927		$	7		$	939		$	14
Multi-family		966			11			1,102			52
Commercial real estate		1,746			211			1,825			267
Church		10,915			121			11,061			247
Commercial -other		66			2			67			2
Total		$	14,620		$	352		$	14,994		$	582

Cash-basis interest income recognized represents cash received for interest payments on accruing impaired loans and interest recoveries on non-accrual loans that were paid off.  Interest payments collected on non-accrual loans are characterized as payments of principal rather than payments of the outstanding accrued interest on the loans until the remaining principal on the non-accrual loans is considered to be fully collectible or paid off.  When a loan is returned to accrual status, the interest payments that were previously applied to principal are deferred and amortized over the remaining life of the loan.  Foregone interest income that would have been recognized had loans performed in accordance with their original terms amounted to $28 thousand and $0 for the three months ended June 30, 2017 and 2016, respectively, and $74 thousand and $97 thousand for the six months ended June 30, 2017 and 2016, respectively, and were not included in the consolidated results of operations.

The following tables present the aging of the recorded investment in past due loans by loan type as of the periods indicated:

	June 30, 2017
	30-59 Days Past Due			60-89 Days Past Due			Greater than 90 Days Past Due			Total Past Due			Current
	(In thousands)
Loans receivable held for investment:
Single family		$	-		$	57		$	-		$	57		$	96,261
Multi-family		-			-			-			-			216,420
Commercial real estate		-			-			-			-			6,410
Church		371			-			1,242			1,613			32,498
Construction		-			-			-			-			947
Commercial - other		-			-			-			-			344
Consumer		-			-			-			-			4
Total		$	371		$	57		$	1,242		$	1,670		$	352,884

11

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Unaudited Consolidated Financial Statements (continued)

	December 31, 2016
	30-59 Days Past Due			60-89 Days Past Due			Greater than 90 Days Past Due			Total Past Due			Current
	(In thousands)
Loans receivable held for investment:
Single family		$	-		$	64		$	-		$	64		$	105,268
Multi-family		-			-			-			-			231,440
Commercial real estate		1,324			-			-			1,324			7,597
Church		-			-			-			-			37,223
Construction		-			-			-			-			827
Commercial - other		-			-			-			-			308
Consumer		-			-			-			-			6
Total		$	1,324		$	64		$	-		$	1,388		$	382,669

As of June 30, 2017 and December 31, 2016, the recorded investment in non-accrual loans totaled $2.8 million and $2.9 million, respectively, and consisted entirely of church loans.  There were no loans 90 days or more delinquent that were accruing interest as of June 30, 2017 or December 31, 2016.

Troubled Debt Restructurings

At June 30, 2017, loans classified as troubled debt restructurings (“TDRs”) totaled $10.3 million, of which $2.4 million were included in non-accrual loans and $7.9 million were on accrual status.  At December 31, 2016, loans classified as TDRs totaled $11.5 million, of which $2.5 million were included in non-accrual loans and $9.0 million were on accrual status.  The Company has allocated $583 thousand and $656 thousand of specific reserves for accruing TDRs as of June 30, 2017 and December 31, 2016, respectively.  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 June 30, 2017 and December 31, 2016, 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 or six months ended June 30, 2017 and 2016.

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 single 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 herein.  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:

·Watch.  Loans classified as watch exhibit weaknesses that could threaten the current net worth and paying capacity of the obligors.  Watch graded loans are generally performing and are not more than 59 days past due. A watch rating is used when a material deficiency exists but correction is anticipated within an acceptable time frame.

·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.

12

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Unaudited Consolidated Financial Statements (continued)

·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.  Pass rated loans are generally well protected by the current net worth and paying capacity of the obligor and/or by the value of the underlying collateral.  Pass rated loans are not more than 59 days past due and are generally performing in accordance with the loan terms.  Based on the most recent analysis performed, the risk categories of loans by loan type as of the periods indicated were as follows:

	June 30, 2017
	Pass		Watch		Special Mention		Substandard		Doubtful		Loss
	(In thousands)
Single family	$	96,318	$	-	$	-	$	-	$	-	$	-
Multi-family	215,138		-		-		1,282		-		-
Commercial real estate	6,287		123		-		-		-		-
Church	26,998		446		269		6,398		-		-
Construction	947		-		-		-		-		-
Commercial - other	279		-		-		65		-		-
Consumer	4		-		-		-		-		-
Total	$	345,971	$	569	$	269	$	7,745	$	-	$	-
	December 31, 2016
	Pass		Watch		Special Mention		Substandard		Doubtful		Loss
	(In thousands)
Single family	$	105,332	$	-	$	-	$	-	$	-	$	-
Multi-family	228,522		1,274		342		1,302		-		-
Commercial real estate	6,965		-		-		1,956		-		-
Church	27,560		1,143		823		7,697		-		-
Construction	827		-		-		-		-		-
Commercial - other	242		-		-		66		-		-
Consumer	6		-		-		-		-		-
Total	$	369,454	$	2,417	$	1,165	$	11,021	$	-	$	-

13

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Unaudited Consolidated Financial Statements (continued)

NOTE (6) – Junior Subordinated Debentures

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 3.81% at June 30, 2017.  On October 16, 2014, the Company made payments of $900 thousand of principal on Debentures, executed a Supplemental Indenture for the Debentures that extended the maturity of the Debentures to March 17, 2024, and modified the payment terms of the remaining $5.1 million principal amount thereof.  The modified terms of the Debentures require quarterly payments of interest only through March 2019 at the original rate of 3-Month LIBOR plus 2.54%.  Starting in June 2019, the Company will be required to make quarterly payments of equal amounts of principal, plus interest, until the Debentures are fully amortized on March 17, 2024.  The Debentures may be called for redemption at any time by the Company.

NOTE (7) – 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 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.

Appraisals for collateral-dependent impaired loans 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 SUBSIDIARY

Notes to Unaudited Consolidated Financial Statements (continued)

Assets Measured on a Recurring Basis

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

	Fair Value Measurement
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
	(In thousands)
At June 30, 2017:
Securities available-for-sale - residential mortgage-backed	$	-	$	10,040	$	-	$	10,040
Securities available-for-sale - U.S. Government and federal agency	1,989		-		-		1,989
At December 31, 2016:
Securities available-for-sale - residential mortgage-backed	$	-	$	11,214	$	-	$	11,214
Securities available-for-sale - U.S. Government and federal agency	1,988		-		-		1,988

There were no transfers between Level 1, Level 2, or Level 3 during the three and six months ended June 30, 2017 and 2016.

Assets Measured on a Non-Recurring Basis

Assets are considered to be reflected at fair value on a non-recurring basis if the fair value measurement of the instrument does not necessarily result in a change in the amount recorded on the statement of condition.  Generally, a non-recurring valuation is the result of the application of other accounting pronouncements that require assets to be assessed for impairment or recorded at the lower of cost or fair value.

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

	June 30, 2017		December 31, 2016
	(In thousands)
Impaired loans carried at fair value of collateral	$	1,652	$	1,744

There were no losses recognized on assets measured at fair value on a non-recurring basis for the three and six months ended June 30, 2017 and 2016.

15

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Unaudited Consolidated Financial Statements (continued)

The following table presents the valuation methodology and unobservable inputs for Level 3 assets measured at fair value on a nonrecurring basis as of June 30, 2017 and December 31, 2016:

	Valuation Technique(s)	Unobservable Input(s)	Range	Weighted Average
June 30, 2017:
Impaired loans	Third Party Appraisals	Adjustment for differences between the comparable sales	-16% to 0%	-3%
December 31, 2016:
Impaired loans	Third Party Appraisals	Adjustment for differences between the comparable sales	-2% to 0%	-1%

Fair Values of Financial Instruments

The carrying amounts and estimated fair values of financial instruments as of the periods indicated were as follows:

			Fair Value Measurements at June 30, 2017
	Carrying Value		Level 1		Level 2		Level 3		Total
	(In thousands)
Financial Assets:
Cash and cash equivalents	$	16,835	$	16,835	$	-	$	-	$	16,835
Securities available-for-sale	12,029		1,989		10,040		-		12,029
Loans receivable held for sale	39,037		-		39,597		-		39,597
Loans receivable held for investment	350,308		-		-		351,238		351,238
Accrued interest receivable	1,103		57		71		975		1,103
Federal Home Loan Bank stock	2,916		2,916		-		-		2,916
Financial Liabilities:
Deposits	$	273,847	$	-	$	264,619	$	-	$	264,619
Federal Home Loan Bank advances	104,000		-		104,418		-		104,418
Junior subordinated debentures	5,100		-		-		4,458		4,458
Accrued interest payable	105		-		98		7		105
			Fair Value Measurements at December 31, 2016
	Carrying Value		Level 1		Level 2		Level 3		Total
	(In thousands)
Financial Assets:
Cash and cash equivalents	$	18,430	$	18,430	$	-	$	-	$	18,430
Securities available-for-sale	13,202		1,988		11,214		-		13,202
Loans receivable held for investment	379,454		-		-		382,717		382,717
Accrued interest receivable	1,178		64		29		1,085		1,178
Federal Home Loan Bank stock	2,573		2,573		-		-		2,573
Financial Liabilities:
Deposits	$	287,427	$	-	$	278,254	$	-	$	278,254
Federal Home Loan Bank advances	85,000		-		85,748		-		85,748
Junior subordinated debentures	5,100		-		-		4,414		4,414
Accrued interest payable	154		-		147		7		154

16

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Unaudited Consolidated Financial Statements (continued)

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

(a) Cash and Cash Equivalents

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

(b) Loans Receivable Held For Sale

The Company’s loans receivable held for sale are carried at the lower of cost or fair value.  The fair value of loans receivable held for sale is determined by pricing for comparable assets or by outstanding commitments from third party investors, resulting in a Level 2 classification.

(c) 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.

(d) FHLB Stock

The carrying value of FHLB stock approximates its fair value as the shares can only be redeemed by the FHLB at par.

(e) Accrued Interest Receivable/Payable

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

(f) Deposits

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.

(g) 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.

(h) Junior Subordinated Debentures

The fair values of the Debentures 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.

17

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Unaudited Consolidated Financial Statements (continued)

NOTE (8) – Stock-based Compensation

The Company issues stock-based compensation awards to its directors and employees under the 2008 Long-Term Incentive Plan (“2008 LTIP”).  The 2008 LTIP permits the grant of non-qualified and incentive stock options, stock appreciation rights, full value awards and cash incentive awards for up to 2,000,000 shares of common stock.  As of June 30, 2017, there were 1,308,890 shares available for future awards under the 2008 LTIP.

No stock options were granted during the six months ended June 30, 2017, compared to 450,000 stock options granted to senior executive officers under the 2008 LTIP during the six months ended June 30, 2016.  These options have an exercise price of $1.62 per share, vest over five years and expire ten years from the grant date.  The Company estimated the compensation costs and fair value per share of these stock options to be $194 thousand and $0.43 per share, respectively, using the Black-Scholes option pricing model and the following assumptions: (i) expected volatility of 27.36%; (ii) risk free interest rate of 1.21%; (iii) expected option term of five years; and (iv) 0% dividend yield.

The following table summarizes stock option activity during the six months ended June 30, 2017 and 2016:

	Shares	Weighted Average Exercise Price	Weighted Average Remaining Contractual Term (years)	Aggregate Intrinsic Value
Six Months Ended June 30, 2017:
Outstanding at January 1, 2017	540,625	$    2.18
Granted	-	-
Exercised	-	-
Forfeited	-	-
Outstanding at June 30, 2017	540,625	$    2.18	7.50	$  225,000
Exercisable at June 30, 2017	180,625	$    3.29	5.19	$   45,000
Six Months Ended June 30, 2016:
Outstanding at January 1, 2016	90,625	$    4.95
Granted	450,000	1.62
Exercised	-	-
Forfeited	-	-
Outstanding at June 30, 2016	540,625	$    2.18	8.50	$  86,000
Exercisable at June 30, 2016	90,625	$    4.95	2.75	$             -

18

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Unaudited Consolidated Financial Statements (continued)

The Company recorded $10 thousand of stock-based compensation expense related to stock options during the three months ended June 30, 2017 and 2016, respectively, and $19 thousand and $13 thousand during the six months ended June 30, 2017 and 2016, respectively.  As of June 30, 2017, unrecognized compensation cost related to non-vested stock options granted under the plan was $142 thousand.  The cost is expected to be recognized over a period of 3.65 years.

In March 2016, the Company awarded 120,483 shares of restricted stock to its Chief Executive Officer (“CEO”) under the 2008 LTIP.  A restricted stock award is valued at the closing price of the Company’s stock on the date of such award.  Subject to certain performance restrictions, 100,000 shares of restricted stock shall vest over a two-year period and the remaining 20,483 shares shall vest over a three-year period.  Stock-based compensation expense is recognized on a straight-line basis over the vesting period.  The Company recorded $27 thousand and $26 thousand of stock-based compensation expense related to this award during the three months ended June 30, 2017 and 2016, respectively, and $53 thousand and $26 thousand during the six months ended June 30, 2017 and 2016, respectively.  As of June 30, 2017, unrecognized compensation cost related to non-vested restricted stock award was $92 thousand, of which $79 thousand is expected to be recognized over a period of 9 months and $13 thousand is expected to be recognized over a period of 12  months.

In April 2017, the Company awarded 30,002 shares of common stock to its directors under the 2008 LTIP, all of which are fully vested.  The Company recorded $52 thousand of compensation expense based on the fair value of the stock, which was determined using the average of the high and the low price of the stock on the date of the award.

In April 2017, the Company also awarded 129,270 of cash-settled restricted stock units (“RSUs”) to its CEO under the 2008 LTIP.  The RSUs cliff vest at the end of two years from the date of the grant and are subject to forfeiture until vested.  Each RSU entitles the CEO to receive cash equal to the fair market value of one share of common stock on the applicable payout date.  Compensation expense is determined based on the fair value of the award and is re-measured at each reporting period.  The Company recorded $23 thousand of compensation expense related to this award during the three months ended June 30, 2017.

NOTE (9) – ESOP Plan

Employees participate in an Employee Stock Option Plan (“ESOP”) after attaining certain age and service requirements.  In December 2016, the ESOP purchased 1,493,679 shares of the Company’s common stock at $1.59 per share, for a total cost of $2.4 million, of which $1.2 million was funded with a loan from the Company.  The loan will be repaid from the Bank’s annual discretionary contributions to the ESOP, net of dividends paid, over a period of 20 years.  Shares of the Company’s common stock purchased by the ESOP are held in a suspense account until released for allocation to participants.  When loan payments are made, shares are allocated to each eligible participant based on the ratio of each such participant’s compensation, as defined in the ESOP, to the total compensation of all eligible plan participants.  As the unearned shares are released from the suspense account, the Company recognizes compensation expense equal to the fair value of the ESOP shares during the periods in which they become committed to be released.  To the extent that the fair value of the ESOP shares released differs from the cost of such shares, the difference is charged or credited to equity as additional paid-in capital.  Dividends on allocated shares increase participant accounts.  At the end of employment, participants will receive shares for their vested balance.  Compensation expense related to the ESOP was $25 thousand and $19 thousand for the three months ended June 30, 2017 and 2016, respectively, and $47 thousand and $45 thousand for the six months ended June 30, 2017 and 2016, respectively.

19

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Unaudited Consolidated Financial Statements (continued)

Shares held by the ESOP were as follows:

	June 30, 2017		December 31, 2016
	(Dollars in thousands)
Allocated to participants	1,114,683		1,114,683
Suspense shares	739,748		739,748
Total ESOP shares	1,854,431		1,854,431
Fair value of unearned shares	$	1,512	$	1,213

The outstanding balance of unallocated shares at June 30, 2017 and December 31, 2016, was $1.1 million and $1.2 million, respectively, which is shown as Unearned ESOP shares in the equity section of the consolidated statements of financial condition.  As of June 30, 2017, 26,750 shares were committed to be released.

NOTE (10) – Regulatory Matters

The Bank’s capital requirements are administered by the Office of the Comptroller of the Currency (“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.

The federal banking regulators approved final capital rules (“Basel III Capital Rules”) in July 2013 implementing the Basel III framework as well as certain provisions of the Dodd-Frank Act.  The Basel III Capital Rules prescribe a standardized approach for calculating risk-weighted assets and revised the definition and calculation of Tier 1 capital and Total capital, and include a new Common Equity Tier 1 capital (“CET1”) measure.  Under the Basel III Capital Rules, the currently effective minimum capital ratios are:

·4.5% CET1 to risk-weighted assets;

·6.0% Tier 1 capital (that is, CET1 plus Additional Tier 1 capital) to risk-weighted assets;

·8.0% Total capital (that is, Tier 1 capital plus Tier 2 capital) to risk-weighted assets; and

·4.0% Tier 1 capital to average consolidated assets (known as the “leverage ratio”).

A new capital conservation buffer was also established above the regulatory minimum capital requirements.  This capital conservation buffer was phased in beginning January 1, 2016 at 0.625% of risk-weighted assets and will increase each subsequent year by an additional 0.625% until it reaches its final level of 2.5% on January 1, 2019.

The Basel III Capital rules also contain revisions to the prompt corrective action framework, which is designed to place restrictions on insured depository institutions if their capital levels begin to show signs of weakness.  Under the prompt corrective action requirements, which are designed to complement the capital conservation buffer, insured depository institutions are now required to meet the following increased capital level requirements in order to qualify as “well capitalized”: (i) a CET1 capital ratio of 6.5%; (ii) a Tier 1 capital ratio of 8% (increased from 6%); (iii) a total capital ratio of 10% (unchanged from previous rules); and (iv) a Tier 1 leverage ratio of 5% (unchanged from previous rules).

The Basel III Capital Rules became effective for the Bank on January 1, 2015 (subject to a phase-in period for certain provisions).  At June 30, 2017 and December 31, 2016, the Bank’s level of capital exceeded all regulatory capital requirements and its regulatory capital ratios were above the minimum levels required to be considered well capitalized for regulatory purposes.  Actual and required capital amounts and ratios as of the periods indicated are presented below.

20

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Unaudited Consolidated Financial Statements (continued)

	Actual			Minimum Capital Requirements			Minimum Required To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio	Amount		Ratio	Amount		Ratio
	(Dollars in thousands)
June 30, 2017:
Tier 1 (Leverage)	$	47,009	10.51%	$	17,884	4.0%	$	22,356	5.0%
Common Equity Tier 1	$	47,009	15.87%	$	13,333	4.5%	$	19,258	6.5%
Tier 1	$	47,009	15.87%	$	17,777	6.0%	$	23,703	8.0%
Total Capital	$	50,720	17.12%	$	23,703	8.0%	$	29,628	10.0%
December 31, 2016:
Tier 1 (Leverage)	$	43,954	10.60%	$	16,594	4.0%	$	20,742	5.0%
Common Equity Tier 1	$	43,954	15.36%	$	12,875	4.5%	$	18,597	6.5%
Tier 1	$	43,954	15.36%	$	17,166	6.0%	$	22,888	8.0%
Total Capital	$	47,544	16.62%	$	22,888	8.0%	$	28,610	10.0%

Effective as of May 15, 2015, the Federal Reserve Board (“FRB”) adopted a final rule that exempts bank holding companies and savings and loan holding companies with less than $1 billion in consolidated assets, such as the Company, from FRB’s consolidated regulatory capital requirements.

NOTE (11) – Income Taxes

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

Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion, or all, of the deferred tax asset will not be realized.  In assessing the realization of deferred tax assets, management evaluated both positive and negative evidence, 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.  Based on this analysis, the Company determined that as of June 30, 2017, no valuation allowance was required on its deferred tax assets, which totaled $6.0 million.  As of December 31, 2016, the Company recorded no valuation allowance on its deferred tax assets of $6.9 million.

NOTE (12) – Concentration of Credit Risk

The Bank has a significant concentration of deposits with a long-time customer that accounted for approximately 12% of its deposits as of June 30, 2017.  The Bank expects to maintain this relationship with the customer.

21

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, 2016.  Certain statements herein are forward-looking statements within the meaning of Section 21E of the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”) and Section 27A of the U.S. Securities Act of 1933, as amended, that reflect our current views with respect to future events and financial performance.  Forward-looking statements typically include the words “anticipate,” “believe,” “estimate,” “expect,” “project,” “plan,” “forecast,” “intend,” and other similar expressions.  These forward-looking statements are subject to risks and uncertainties, which could cause actual future results to differ materially from historical results or from those anticipated or implied by such statements.  Readers should not place undue reliance on these forward-looking statements, which speak only as of their dates or, if no date is provided, then as of the date of this Form 10-Q.  We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except to the extent required by law.

Critical Accounting Policies and Estimates

Our significant accounting policies, which are essential to understanding Management’s Discussion and Analysis of Financial Condition and Results of Operations, are described in the “Notes to Consolidated Financial Statements” and in the “Critical Accounting Policies” section of Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2016.  There have been no material changes to our critical accounting policies.

Overview

Total assets increased by $6.4 million during the first half of 2017, primarily reflecting an increase of $39.0 million in loans receivable held for sale, which was partially offset by a decrease of $29.1 million in loans receivable held for investment, a decrease of $1.6 million in cash and cash equivalents, a decrease of $1.2 million in securities available-for-sale and a decrease of $932 thousand in deferred tax assets.

During the first half of 2017, total deposits decreased by $13.6 million and FHLB advances increased by $19.0 million.

We recorded net income of $533 thousand and $1.8 million for the three and six months ended June 30, 2017, respectively, compared to $319 thousand and $952 thousand for the three and six months ended June 30, 2016, respectively.  The increase in net income during the three months ended June 30, 2017 compared to the second quarter of 2016 primarily resulted from higher net interest income, higher recaptures of loan loss provisions, higher non-interest income (primarily from gains on sales of loans), and lower non-interest expense, which were partially offset by higher income tax expense.

The increase in net income for the six months ended June 30, 2017 compared to the first half of 2016 primarily reflected higher non-interest income, which reflected an insurance litigation settlement and higher gains on sales of loans.  In addition, net income increased during the first half of 2017 because of higher net interest income, higher recaptures of loan loss provisions, and lower non-interest expense, partially offset by higher income tax expense.

22

Results of Operations

Net Interest Income

Net interest income for the second quarter of 2017 totaled $3.0 million, compared to $2.8 million for the second quarter of 2016.  The slight increase in net interest income of $161 thousand primarily resulted from an increase in the average balance of loans receivable (including loans held for sale), which was partially offset by a decrease in net interest margin.

During the second quarter of 2017, the average balance of loans receivable increased by $64.1 million, which increased interest income by $654 thousand.  However, the average yield on loans decreased by 34 basis points compared to the second quarter of 2016, which reduced interest income by $301 thousand.  The decrease in the average yield on loans primarily resulted from the payoff of loans with higher interest rates than those originated over the last year.  The lower interest rates on loan originations primarily reflect the overall continued low interest rate environment and competitive market conditions.

The increase of $353 thousand in interest income on loans was partially offset by higher interest expense on deposits and FHLB advances for the second quarter of 2017 compared to the second quarter of 2016.  Interest expense on deposits increased by $86 thousand, primarily due to an increase of $34.2 million in the average balance of deposits and an increase of 2 basis points in the average cost of deposits compared to the second quarter of 2016.  The higher average balance of deposits increased interest expense by $71 thousand and the higher average cost of deposits increased interest expense by $15 thousand.  Interest expense on FHLB advances increased by $109 thousand, primarily due to an increase of $29.4 million in the average balance of FHLB advances, which increased interest expense by $148 thousand, offset in part by a decrease of 20 basis points in the average cost of FHLB advances, which reduced interest expense by $39 thousand.

For the six months ended June 30, 2017, net interest income increased by $569 thousand to $6.1 million from $5.5 million for the same period a year ago, as the impact of a higher average balance of loans receivable more than offset the impact of a lower net interest margin.

During the first half of 2017, the average balance of loans receivable increased by $71.2 million, which increased interest income by $1.5 million.  However, the average yield on loans decreased by 33 basis points compared to the first half of 2016, which reduced interest income by $565 thousand.

The increase of $888 thousand in interest income on loans was partially offset by higher interest expense on deposits and borrowings for the first half of 2017 compared to the first half of 2016.  Interest expense on deposits increased by $143 thousand, primarily due to an increase of $31.9 million in the average balance of deposits and an increase of one basis point in the average cost of deposits compared to the second quarter of 2016.  The higher average balance of deposits increased interest expense by $132 thousand and the higher average cost of deposits increased interest expense by $11 thousand.  Interest expense on borrowings increased by $173 thousand, primarily due to an increase of $24.6 million in the average balance of FHLB advances, which increased interest expense by $246 thousand, offset in part by a decrease of 22 basis points in the average cost of FHLB advances, which reduced interest expense by $86 thousand.  Additionally, the cost of Debentures increased by 51 basis points and resulted in additional interest expense of $13 thousand.

Our net interest margin decreased by 9 basis points to 2.80% for the six months ended June 30, 2017 from 2.89% for the same period in 2016, primarily due to a lower average yield on interest earning assets.

23

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

	For the three months ended
	June 30, 2017					June 30, 2016
(Dollars in Thousands)	Average Balance		Interest		Average Yield/ Cost	Average Balance		Interest		Average Yield/ Cost
Assets
Interest-earning assets:
Interest-earning deposits	$	30,195	$	83	1.10%	$	6,480	$	6	0.37%
Federal funds sold	-		-		-	24,325		29		0.48%
Securities	12,363		73		2.36%	15,057		84		2.23%
Loans receivable (1)	396,244		3,944		3.98%	332,184		3,591		4.32%
FHLB stock	2,878		36		5.00%	2,573		63		9.79%
Total interest-earning assets	441,680		$	4,136	3.75%	380,619		$	3,773	3.97%
Non-interest-earning assets	10,803					9,032
Total assets	$	452,483				$	389,651
Liabilities and Stockholders’ Equity
Interest-bearing liabilities:
Money market deposits	$	33,143	$	54	0.65%	$	25,860	$	36	0.56%
Passbook deposits	39,970		32		0.32%	36,444		29		0.32%
NOW and other demand deposits	31,718		3		0.04%	29,804		5		0.07%
Certificate accounts	189,647		508		1.07%	168,140		441		1.05%
Total deposits	294,478		597		0.81%	260,248		511		0.79%
FHLB advances	100,418		490		1.95%	71,044		381		2.15%
Junior subordinated debentures	5,100		47		3.69%	5,100		40		3.14%
Total interest-bearing liabilities	399,996		$	1,134	1.13%	336,392		$	932	1.11%
Non-interest-bearing liabilities	5,222					6,200
Stockholders’ Equity	47,265					47,059
Total liabilities and stockholders’ equity	$	452,483				$	389,651
Net interest rate spread (2)			$	3,002	2.62%			$	2,841	2.86%
Net interest rate margin (3)					2.72%					2.99%
Ratio of interest-earning assets to interest-bearing liabilities					110.42%					113.15%

(1)Amount is net of deferred loan fees, loan discounts and loans in process, and includes deferred origination costs, loan premiums and loans receivable held for sale.  The Company did not have any loans receivable held for sale during the three months ended June 30, 2016.

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

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

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	For the six months ended
	June 30, 2017					June 30, 2016
(Dollars in Thousands)	Average Balance		Interest		Average Yield/ Cost	Average Balance		Interest		Average Yield/ Cost
Assets
Interest-earning assets:
Interest-earning deposits	$	23,651	$	121	1.02%	$	6,168	$	10	0.32%
Federal funds sold	-		-		-	33,679		82		0.49%
Securities	12,656		148		2.34%	14,676		167		2.28%
Loans receivable (1)	395,819		7,908		4.00%	324,621		7,020		4.33%
FHLB stock	2,754		96		6.97%	2,573		109		8.47%
Total interest-earning assets	434,880		$	8,273	3.80%	381,717		$	7,388	3.87%
Non-interest-earning assets	10,882					9,233
Total assets	$	445,762				$	390,950
Liabilities and Stockholders’ Equity
Interest-bearing liabilities:
Money market deposits	$	32,403	$	103	0.64%	$	25,169	$	68	0.54%
Passbook deposits	39,788		63		0.32%	36,277		58		0.32%
NOW and other demand deposits	31,237		7		0.04%	29,801		10		0.07%
Certificate accounts	189,046		998		1.06%	169,356		892		1.05%
Total deposits	292,474		1,171		0.80%	260,603		1,028		0.79%
FHLB advances	96,091		928		1.93%	71,522		768		2.15%
Junior subordinated debentures	5,100		93		3.65%	5,100		80		3.14%
Total interest-bearing liabilities	393,665		$	2,192	1.11%	337,225		$	1,876	1.11%
Non-interest-bearing liabilities	5,666					6,962
Stockholders’ Equity	46,431					46,763
Total liabilities and stockholders’ equity	$	445,762				$	390,950
Net interest rate spread (2)			$	6,081	2.69%			$	5,512	2.76%
Net interest rate margin (3)					2.80%					2.89%
Ratio of interest-earning assets to interest-bearing liabilities					110.47%					113.19%

(1)Amount is net of deferred loan fees, loan discounts and loans in process, and includes deferred origination costs, loan premiums and loans receivable held for sale.  The Company did not have any loans receivable held for sale during the six months ended June 30, 2016.

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

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

25

Loan loss provision recapture

We recorded a loan loss provision recapture of $300 thousand for the second quarter of 2017, compared to $250 thousand for the second quarter of 2016.  The loan loss provision recaptures during both quarters were primarily due to payoffs and recoveries of problem loans, as well as continued improvement in the overall quality of our loan portfolio.  See “Allowance for Loan Losses (ALLL)” below for additional information.

Non-interest Income

Non-interest income for the second quarter of 2017 totaled $322 thousand, compared to $199 thousand for the second quarter of 2016.  Non-interest income increased by $123 thousand primarily because we recorded a gain of $196 thousand from the sale of loans during the second quarter of 2017, whereas we did not sell any loans during the second quarter of 2016.  This increase was partially offset by a decrease of $20 thousand in service charges on deposit accounts and a decrease of $50 thousand in loan extension fees, compared to the second quarter of 2016.

For the six months ended June 30, 2017, non-interest income totaled $1.7 million, compared to $742 thousand for the same period a year ago.  The increase of $939 thousand in non-interest income was primarily due to an insurance litigation settlement of $1.2 million and a gain of $223 thousand from the sale of loans during the first half of 2017.  These increases were partially offset by several items included in the results for the first half of 2016: a $265 thousand grant received from the U.S. Department of the Treasury’s Community Development Financial Institutions (CDFI) Fund, an unusually large early withdrawal fee income of $80 thousand, a loan extension fee of $50 thousand, and a foreclosure forbearance fee of $38 thousand.

Non-interest Expense

Non-interest expense for the second quarter of 2017 totaled $2.7 million, compared to $3.0 million for the second quarter of 2016.  The decrease of $303 thousand in non-interest expense during the second quarter of 2017 was primarily due to a decrease of $381 thousand in compensation and benefits expense, primarily resulting from a $700 thousand reduction in the amount of deferred compensation liability owed to a former executive, which was partially offset by an increase of $81 thousand in stock based compensation expense and a net increase of $228 thousand in salary expense.  Additionally, professional services expense decreased by $89 thousand during the second quarter of 2017 compared to the second quarter of 2016, primarily because we incurred $60 thousand of expenses related to a third-party review of our loan portfolio in 2016.  These decreases in non-interest expense during the second quarter of 2017 were partially offset by a payment of $139 thousand of expenses related to the U.S. Treasury’s sale of a portion of its holdings of the Company’s shares to two Southern California based banks.

For the six months ended June 30, 2017, non-interest expense totaled $5.7 million, compared to $5.9 million for the same period a year ago.  The decrease of $139 thousand in non-interest expense was primarily due to a decrease of $297 thousand in compensation and benefits expense which was partially offset by an increase of $128 thousand in other non-interest expenses, as discussed above.

Income Taxes

Income taxes are computed by applying the statutory federal income tax rate of 34% and the California income tax rate of 10.84% to the taxable income of the Company.  We recorded income tax expense of $423 thousand and $936 thousand for the three and six months ended June 30, 2017, respectively, compared to $0 and $2 thousand for the three and six months ended June 30, 2016, respectively.  The Company’s effective income tax rate was 44.2% and 34.7% for the three and six months ended June 30, 2017, respectively, compared to 0% for the comparable periods in 2016.  The tax expense for 2016 primarily reflected the statutory minimum taxes payable to the State of California and the existence of and adjustment to the valuation allowance on deferred tax assets.  We had no valuation allowance on our deferred tax assets, which totaled $6.0 million and $6.9 million at June 30, 2017 and December 31, 2016, respectively.

26

Financial Condition

Total Assets

Total assets were $435.5 million at June 30, 2017, which represented an increase of $6.4 million, or 1%, from total assets of $429.1 million at December 31, 2016.  The increase in assets during the first half of 2017 primarily consisted of an increase of $39.0 million in loans receivable held for sale, which was partially offset by a decrease of $29.1 million in loans receivable held for investment, a decrease of $1.6 million in cash and cash equivalents, a decrease of $1.2 million in securities available-for-sale and a decrease of $932 thousand in deferred tax assets.

Loans Receivable Held for Sale

Loans receivable held for sale at June 30, 2017 totaled $39.0 million and consisted of multi-family residential (“MFR”) loans.  During the first half of 2017, we allocated $85.9 million, or 95%, of our loan originations to the held-for-sale portfolio to maintain compliance with the loan concentration guidelines established by our primary regulator.  We sold $46.6 million of those loans, generating a gain of $223 thousand during the first half of 2017.  Loan repayments on loans receivable held for sale totaled $200 thousand during the first half of 2017.  We had no loans receivable held for sale during 2016.

Loans Receivable Held for Investment

Our gross loan portfolio (loans receivable held for investment before net deferred loan costs and premiums and ALLL) decreased by $29.7 million to $352.6 million at June 30, 2017 from $382.3 million at December 31, 2016, primarily due to loan repayments.  The decrease in our loan portfolio during the first half of 2017 consisted of a decrease of $14.9 million in our multi-family residential real estate loan portfolio, a decrease of $9.0 million in our single family residential real estate loan portfolio, a decrease of $3.4 million in our church loan portfolio and a decrease of $2.5 million in our commercial real estate loan portfolio.

In order to comply with regulatory loan concentration guidelines, we decreased our MFR portfolio during the first half of 2017 by originating loans for sale and allowing repayments to exceed originations in our held for investment portfolio.  We originated $4.2 million in multi-family loans for that portfolio during the first half of 2017, compared to $59.9 million during the first half of 2016.  Loan repayments during the first half of 2017 totaled $33.9 million, compared to $23.5 million during the first half of 2016.

There were no loan charge-offs or loans transferred to REO during the first half of 2017 and 2016.

Allowance for Loan Losses

The ALLL is adjusted through provisions for loan losses charged or credited to earnings to increase or decrease the ALLL to 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 to $4.2 million, or 1.20% of our gross loans receivable held for investment, at June 30, 2017, from $4.6 million, or 1.20% of our gross loans receivable held for investment, at December 31, 2016, primarily due to loan loss provision recaptures of $650 thousand, which was partially offset by recoveries of $293 thousand.  Our loan portfolio as of June 30, 2017 included $77.4 million of single family residential loans that were purchased in November 2015, for which there was no assigned allowance for loan losses.  We purchased these loans at fair value and we have not identified or incurred any deterioration of credit quality in these loans since purchase.  The reduction in ALLL at June 30, 2017 compared to December 31, 2016, and the loan loss provision recaptures during the first half of 2017, reflect the results of our quarterly review of the adequacy of the ALLL.  We continue to maintain our ALLL at a level that we believe is appropriate, given the significant reduction in delinquencies and non-performing loans, the size of our loan portfolio, the continued improvement in our asset credit quality metrics and the high quality of our loan originations.

27

As of June 30, 2017, delinquent loans totaled $1.7 million, compared to $1.4 million at December 31, 2016.  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 June 30, 2017, NPLs totaled $2.8 million, compared to $2.9 million at December 31, 2016.  The decrease in NPLs was primarily due to loan repayments during the first half of 2017.

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, such as lack of current financial information and an insufficient period of satisfactory performance.  As of June 30, 2017, $1.2 million, or 42%, of our NPLs were current in their payments, compared to $2.9 million, or 100% of our NPLs, that were current at December 31, 2016.  Also, in determining the ALLL, we consider the ratio of the ALLL to NPLs, which was 152.84% at June 30, 2017, compared to 156.35% at December 31, 2016.

When reviewing the adequacy of the ALLL, we also consider the impact of charge-offs, including the changes and trends in loan charge-offs.  There were no loan charge-offs during the first half of 2017 and 2016.  In determining charge-offs, we update our estimates of collateral values on NPLs by obtaining new appraisals at least every nine months.  If the estimated fair value of the loan collateral less estimated selling costs is less than the recorded investment in the loan, a charge-off for the difference is recorded to reduce the loan to its estimated fair value, less estimated selling costs.  Therefore, certain losses inherent in our total NPLs are recognized periodically through charge-offs.  The impact of updating these estimates of collateral value and recognizing any required charge-offs is to increase charge-offs and reduce the ALLL required on these loans.  Due to prior charge-offs and increases in collateral values, the average recorded investment in NPLs was only 43% of estimated fair value less estimated selling costs as of June 30, 2017.

Recoveries during the first half of 2017 and 2016 totaled $293 thousand and $267 thousand, respectively.  Recoveries during the first half of 2017 primarily resulted from payoffs of loans that had been previously partially charged off.

Impaired loans at June 30, 2017 were $10.7 million, compared to $11.9 million at December 31, 2016.  The decrease of $1.2 million in impaired loans was primarily due to repayments, including payoffs of $889 thousand.  Specific reserves for impaired loans were $583 thousand, or 5.43% of the aggregate impaired loan amount at June 30, 2017, compared to $656 thousand, or 5.51%, at December 31, 2016.  Excluding specific reserves for impaired loans, our coverage ratio (general allowance as a percentage of total non-impaired loans) was 1.07% at June 30, 2017, compared to 1.06% at December 31, 2016.

We believe that the ALLL is adequate to cover probable incurred losses in the loan portfolio as of June 30, 2017, 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.

Deposits

Deposits decreased by $13.6 million to $273.8 million at June 30, 2017 from $287.4 million at December 31, 2016.  Core deposits (NOW, demand, money market and passbook accounts) increased by $8.2 million during the first half of 2017 and represented 40% and 35% of total deposits at June 30, 2017 and December 31, 2016, respectively.  During the first half of 2017, certificates of deposit (“CDs”) decreased by $21.8 million and represented 60% and 65% of total deposits at June 30, 2017 and December 31, 2016, respectively.  The decrease in CDs during the first half of 2017 was primarily due to a decrease of $44.2 million in QwickRate CDs which was partially offset by an increase of $16.4 million in Certificate of Deposit Account Registry Service (“CDARS”) accounts and an increase of $6.0 million in regular CDs.  CDARS is a deposit placement service that allows us to place our customers’ funds in FDIC-insured certificates of deposit at other banks and, at the same time, receive an equal sum of funds from the customers of other banks in the CDARS Network (“CDARS Reciprocal”).  We may also accept deposits from other institutions when we have no reciprocal deposit (“CDARS One-Way Buy”).  At June 30, 2017, we had approximately $13.8 million in CDARS Reciprocal and $31.1 million in CDARS One-Way Buy, compared to $6.9 million in CDARS Reciprocal and $21.7 million in CDARS One-Way Buy at December 31, 2016.

28

One customer relationship accounted for approximately 12% of our deposits at June 30, 2017.  We expect to maintain this relationship with the customer for the foreseeable future.

Borrowings

During the first half of 2017, we increased our borrowings from the FHLB to $104.0 million at June 30, 2017, from $85.0 million at December 31, 2016, in order to fund loan originations and payment of maturing deposits.  The weighted average interest rate on FHLB advances decreased 12 basis points to 1.82% at June 30, 2017, from 1.94% at December 31, 2016 primarily due to new advances totaling $44.0 million with an average interest rate of 1.55% and payoff of $25.0 million of advances with an average interest rate of 1.75%.

Subordinated debentures issued by the Company remained unchanged at $5.1 million at June 30, 2017 and December 31, 2016.

Stockholders’ Equity

Stockholders’ equity was $47.5 million, or 10.92% of the Company’s total assets, at June 30, 2017, compared to $45.5 million, or 10.61% of the Company’s total assets, at December 31, 2016.  The Company’s book value was $1.73 per share as of June 30, 2017, compared to $1.66 per share as of December 31, 2016.

Liquidity

The objective of liquidity management is to ensure that we have the continuing ability to fund operations and meet our obligations on a timely and cost-effective basis.  The Bank’s sources of funds include deposits, advances from the FHLB, other borrowings, proceeds from the sale of loans, REO, and investment securities, and payments of principal and interest on loans and investment securities.  The Bank is currently approved by the FHLB to borrow up to 30% of total assets to the extent the Bank provides qualifying collateral and holds sufficient FHLB stock.  This approved limit and collateral requirement would have permitted the Bank to borrow an additional $16.6 million at June 30, 2017.  In addition, the Bank has an $11.0 million line of credit with another financial institution.

The Bank’s primary uses of funds include withdrawals of and interest payments on deposits, originations of loans, purchases of investment securities, and the payment of operating expenses.  Also, when the Bank has more funds than required for reserve requirements or short-term liquidity needs, the Bank sells federal funds to the Federal Reserve Bank or other financial institutions.  The Bank’s liquid assets at June 30, 2017 consisted of $16.8 million in cash and cash equivalents and $11.5 million in securities available-for-sale that were not pledged, compared to $18.4 million in cash and cash equivalents and $12.6 million in securities available-for-sale that were not pledged at December 31, 2016.

The Company’s liquidity, separate from the Bank, is based primarily on the proceeds from financing transactions, such as the private placements completed in August 2013, October 2014 and December 2016 and dividend received from the Bank in December 2016.  The Bank is currently under no prohibition to pay dividends, but is subject to restrictions as to the amount of the dividends based on normal regulatory guidelines.

The Company recorded consolidated net cash outflows from operating activities of $37.3 million during the six months ended June 30, 2017, compared to consolidated net cash inflows from operating activities of $145 thousand during the six months ended June 30, 2016.  Net cash outflows from operating activities during the first half of 2017 were primarily attributable to originations of multi-family loans for the Bank’s loans held for sale portfolio.

The Company recorded consolidated net cash inflows from investing activities of $30.3 million during the six months ended June 30, 2017, compared to consolidated net cash outflows from investing activities of $37.5 million during the six months ended June 30, 2016.  Net cash inflows from investing activities during the first half of 2017 were primarily attributable to repayments on loans held for investment and securities available-for-sale.

29

The Company recorded consolidated net cash inflows from financing activities of $5.4 million during the six months ended June 30, 2017, compared to consolidated net cash inflows from financing activities of $5.2 million during the six months ended June 30, 2016.  Net cash inflows from financing activities during the first half of 2017 were primarily attributable to the increase in advances from the FHLB.

Capital Resources and Regulatory Capital

Our principal subsidiary, Broadway Federal Bank, 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.  The Dodd-Frank Act requires the federal banking agencies to establish consolidated risk-based and leverage capital requirements for insured depository institutions, depository institution holding companies and certain non-bank financial companies that are no less than those to which insured depository institutions have been previously subject.  The current regulatory capital requirements are described in Note 10 of the Notes to Consolidated Financial Statements.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not Applicable

ITEM 4.  CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

An evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures was performed under the supervision of the Company’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) as of June 30, 2017.  Based on that evaluation, the Company’s CEO and CFO concluded that the Company’s disclosure controls and procedures were effective as of June 30, 2017.  There were no significant changes during the quarter ended June 30, 2017 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 Registrant on November 13, 2014)
3.2	Bylaws of Registrant (Exhibit 3.2 to Form 10-K filed by Registrant on March 28, 2016)
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definitions Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

___________

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

31

SIGNATURES

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

Date:	August 11, 2017	By:	/s/ Wayne-Kent A. Bradshaw
			Wayne-Kent A. Bradshaw
			Chief Executive Officer
Date:	August 11, 2017	By:	/s/ Brenda J. Battey
			Brenda J. Battey
			Chief Financial Officer

32

EX-31.1

Exhibit 31.1

SECTION 302 CERTIFICATION

I, Wayne-Kent A. Bradshaw, certify that:
1.	I have reviewed this quarterly report on Form 10-Q of Broadway Financial Corporation;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
	a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
	a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
	b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:August 11, 2017	By: /s/ Wayne-Kent A. Bradshaw
	Wayne-Kent A. Bradshaw
	Chief Executive Officer

EX-31.2

Exhibit 31.2

SECTION 302 CERTIFICATION

I, Brenda J. Battey, certify that:
1.	I have reviewed this quarterly report on Form 10-Q of Broadway Financial Corporation;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
	a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
	a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
	b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:August 11, 2017	By:  /s/  Brenda J. Battey
	Brenda J. Battey
	Chief Financial Officer

EX-32.1

Exhibit 32.1

SECTION 906 CERTIFICATION

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

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

Date: August 11, 2017	By:	/s/ Wayne-Kent A. Bradshaw
		Wayne-Kent A. Bradshaw
		Chief Executive Officer

EX-32.2

Exhibit 32.2

SECTION 906 CERTIFICATION

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

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

Date: August 11, 2017	By:	/s/ Brenda J. Battey
		Brenda J. Battey
		Chief Financial Officer

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2017	Aug. 04, 2017
Entity Registrant Name	BROADWAY FINANCIAL CORP \DE\
Entity Central Index Key	0001001171
Document Type	10-Q
Document Period End Date	Jun. 30, 2017
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Smaller Reporting Company
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	Q2
Voting common stock
Entity Common Stock, Shares Outstanding		18,694,823
Non-voting common stock
Entity Common Stock, Shares Outstanding		8,756,396

XML

Consolidated Statements of Financial Condition - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Assets
Cash and due from banks	$ 2,379	$ 1,516
Interest-bearing deposits in other banks	14,456	16,914
Cash and cash equivalents	16,835	18,430
Securities available-for-sale, at fair value	12,029	13,202
Loans receivable held for sale, at lower of cost or fair value	39,037	0
Loans receivable held for investment, net of allowance of $4,246 and $4,603, respectively	350,308	379,454
Accrued interest receivable	1,103	1,178
Federal Home Loan Bank (FHLB) stock	2,916	2,573
Office properties and equipment, net	2,509	2,479
Bank owned life insurance	2,967	2,940
Deferred tax assets, net	5,975	6,907
Other assets	1,816	1,920
Total assets	435,495	429,083
Liabilities:
Deposits	273,847	287,427
FHLB advances	104,000	85,000
Junior subordinated debentures	5,100	5,100
Advance payments by borrowers for taxes and insurance	1,009	828
Accrued expenses and other liabilities	3,995	5,202
Total liabilities	387,951	383,557
Stockholders' Equity:
Preferred stock, $.01 par value, authorized 1,000,000 shares; none issued or outstanding
Additional paid-in capital	46,026	45,819
Retained earnings	7,778	6,013
Unearned Employee Stock Ownership Plan (ESOP) shares	(1,133)	(1,176)
Accumulated other comprehensive income (loss)	(101)	(103)
Treasury stock-at cost, 2,617,826 shares at June 30, 2017 and December 31, 2016	(5,326)	(5,326)
Total stockholders' equity	47,544	45,526
Total liabilities and stockholders' equity	435,495	429,083
Common Stock | Voting common stock
Stockholders' Equity:
Common stock	213	212
Common Stock | Non-voting common stock
Stockholders' Equity:
Common stock	$ 87	$ 87

XML

Consolidated Statements of Financial Condition (Parenthetical) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Allowance for loan losses (in dollars)	$ 4,246	$ 4,603
Stockholders' Equity:
Treasury stock, shares	2,617,826	2,617,826
Preferred stock
Stockholders' Equity:
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized	1,000,000	1,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common Stock | Voting common stock
Stockholders' Equity:
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	21,312,649	21,282,647
Common stock, shares outstanding	18,694,823	18,664,821
Common Stock | Non-voting common stock
Stockholders' Equity:
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized	25,000,000	25,000,000
Common stock, shares issued	8,756,396	8,756,396
Common stock, shares outstanding	8,756,396	8,756,396

XML

Consolidated Statements of Income and Comprehensive Income - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Interest income:
Interest and fees on loans receivable	$ 3,944	$ 3,591	$ 7,908	$ 7,020
Interest on mortgage-backed and other securities	73	84	148	167
Other interest income	119	98	217	201
Total interest income	4,136	3,773	8,273	7,388
Interest expense:
Interest on deposits	597	511	1,171	1,028
Interest on borrowings	537	421	1,021	848
Total interest expense	1,134	932	2,192	1,876
Net interest income	3,002	2,841	6,081	5,512
Loan loss provision recapture	300	250	650	550
Net interest income after loan loss provision recapture	3,302	3,091	6,731	6,062
Non-interest income:
Service charges	100	120	221	246
Gain on sale of loans	196		223
CDFI grant				265
Income from litigation settlement			1,183
Other	26	79	54	231
Total non-interest income	322	199	1,681	742
Non-interest expense:
Compensation and benefits	1,328	1,709	3,315	3,612
Occupancy expense	315	289	620	582
Information services	208	180	408	386
Professional services	231	320	405	447
Office services and supplies	81	72	153	142
FDIC assessments	41	58	84	83
Other	464	343	726	598
Total non-interest expense	2,668	2,971	5,711	5,850
Income before income taxes	956	319	2,701	954
Income taxes	423		936	2
Net income	533	319	1,765	952
Other comprehensive income, net of tax:
Unrealized gains on securities available-for-sale arising during the period	9	43	3	163
Income tax	3	38	1	67
Other comprehensive income, net of tax	6	5	2	96
Comprehensive income	$ 539	$ 324	$ 1,767	$ 1,048
Earnings per common share-basic (in dollars per share)	$ 0.02	$ 0.01	$ 0.07	$ 0.03
Earnings per common share-diluted (in dollars per share)	$ 0.02	$ 0.01	$ 0.07	$ 0.03

XML

Consolidated Statements of Cash Flows - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016
Cash flows from operating activities:
Net income	$ 1,765	$ 952
Adjustments to reconcile net income to net cash used in (provided by) operating activities:
Loan loss provision recapture	(650)	(550)
Depreciation	129	124
Net amortization of deferred loan origination costs	134	92
Net amortization of premiums on mortgage-backed securities	17	23
Amortization of investment in affordable housing limited partnership	98	97
Stock-based compensation expense	204	13
ESOP compensation expense	47	45
Earnings on bank owned life insurance	(27)	(29)
Originations of loans receivable held for sale	(86,002)
Repayments on loans receivable held for sale	200
Proceeds from sales of loans receivable held for sale	46,988
Gain on sale of loans receivable held for sale	(223)
Net gain on sale of REOs		(22)
Net change in deferred taxes	931
Net change in accrued interest receivable	75	(63)
Net change in other assets	6	246
Net change in advance payments by borrowers for taxes and insurance	181
Net change in accrued expenses and other liabilities	(1,207)	(783)
Net cash (used in) provided by operating activities	(37,334)	145
Cash flows from investing activities
Net change in loans receivable held for investment	29,662	(36,635)
Purchase of available-for-sale securities		(2,505)
Prepayments on available-for-sale securities	1,159	1,332
Proceeds from sales of REO		382
Purchase of FHLB stock	(343)
Additions to office properties and equipment	(159)	(26)
Net cash provided by (used in) investing activities	30,319	(37,452)
Cash flows from financing activities
Net change in deposits	(13,580)	7,158
Proceeds from FHLB advances	44,000
Repayments of FHLB advances	(25,000)	(2,000)
Net cash provided by financing activities	5,420	5,158
Net change in cash and cash equivalents	(1,595)	(32,149)
Cash and cash equivalents at beginning of the period	18,430	67,839
Cash and cash equivalents at end of the period	16,835	35,690
Supplemental disclosures of cash flow information:
Cash paid for interest	2,241	1,872
Cash paid for income taxes	$ 20	$ 8

XML

Basis of Financial Statement Presentation

6 Months Ended

Jun. 30, 2017

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, 2016 and, accordingly, should be read in conjunction with such audited consolidated financial statements.  In the opinion of management, all adjustments (all of which are normal and recurring in nature) considered necessary for a fair presentation have been included.  Operating results for the three and six months ended June 30, 2017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017.

Recently Adopted Accounting Pronouncement

In March 2016, the FASB issued ASU 2016-09, “Compensation — Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting”.  ASU 2016-09 includes provisions intended to simplify various aspects related to how share-based payments are accounted for and presented in the financial statements.  The areas for simplification include income tax consequences, forfeitures, classification of awards as either equity or liabilities and classification on the statement of cash flows.  Under the new guidance, all excess tax benefits and deficiencies that occur when an award vests, is exercised, or expires are recognized in income tax expense as discrete period items.  Previously, these transactions were typically recorded directly within equity.  Consistent with this change, excess tax benefits and deficiencies are no longer included within estimated proceeds when performing the calculation for diluted earnings per share.  The presentation of excess tax benefits in the statement of cash flows shifted to an operating activity from the prior classification as a financing activity.  ASU 2016-09 also provides an accounting policy election to recognize forfeitures of awards as they occur when estimating stock-based compensation expense rather than the previous requirement to estimate forfeitures from inception.  ASU 2016-09 became effective for the Company for reporting periods after January 1, 2017.  The actual effects of adoption in 2017 will primarily depend upon the share price of the Company’s stock, probability of exercise of certain stock options and the magnitude of windfalls for all awards upon either vesting or exercise.  The effects on earnings per share calculations and election to account for forfeitures as incurred have not been significant.

Recently Issued Accounting Pronouncements (Not Yet Effective)

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)”.  ASU 2014-09 replaced existing revenue recognition guidance for contracts to provide goods or services to customers.  The new guidance clarifies the principles for recognizing revenue and replaces nearly all existing revenue recognition guidance in U.S. GAAP.  Quantitative and qualitative disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers are also required.  ASU 2014-09 as amended by ASU 2015-14, ASU 2016-08, ASU 2016-10, ASU 2016-12 and ASU 2016-20, is effective for interim and annual periods beginning after December 15, 2017 and is applied on either a modified retrospective or full retrospective basis.  Early adoption is permitted for interim and annual periods beginning after December 15, 2016.  The Company’s revenue is mainly comprised of net interest income from financial assets and liabilities and to a lesser degree, noninterest income.  The scope of ASU 2014-09 explicitly excludes net interest income as well as other revenues associated with financial assets and liabilities, including loans and securities.  Accordingly, the majority of the Company’s revenues will not be affected.  The Company will continue to evaluate the effect that this guidance will have on other revenue streams within its scope, as well as changes in disclosures required by the new guidance.  However, adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements.

In January 2016, the FASB issued ASU 2016-01, “Financial Instruments – Overall (Subtopic 825-10) - Recognition and Measurement of Financial Assets and Financial Liabilities”.  ASU 2016-01 (i) requires equity investments, with certain exceptions, to be measured at fair value with changes in fair value recognized in net income; (ii) simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment; (iii) eliminates the requirement for public business entities to disclose the methods and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet; (iv) requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; (v) requires an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments; (vi) requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the balance sheet or the accompanying notes to the financial statements; and (vii) clarifies that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities.  For public business entities, the amendments in ASU 2016-01 are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years.  Early application by public business entities to financial statements of fiscal years or interim periods that have not yet been issued are permitted as of the beginning of the fiscal year of adoption.  While the Company is currently evaluating the impact of this standard, the Company does not expect its adoption to have a material impact on the Company’s consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)”.  Under ASU 2016-02, lessees will be required to recognize the following for all leases (with the exception of short-term leases, as defined) at the commencement date: (i) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and (ii) a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term.  Under the new guidance, lessor accounting is largely unchanged.  Public business entities should apply the amendments in ASU 2016-02 for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years.  Early adoption is permitted.  Lessees (for capital and operating leases) and lessors (for sales-type, direct financing, and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements.  The Company has identified certain contracts with respect to leased real estate and office equipment that are within the scope of ASU 2016-02.  As a lessee in operating lease arrangements that are not considered short-tem, effective January 1, 2019, the Company expects a gross-up of its Consolidated Statements of Condition as a result of recognizing lease liabilities and right of use assets.  However, it will likely not have a significant impact on the Company’s Consolidated Statements of Income and Comprehensive Income or Cash Flows.

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”.  ASU 2016-13 requires an organization to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts.  Financial institutions and other organizations will now use forward-looking information to form their credit loss estimates.  Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses over the life of the related financial assets.  Organizations will continue to use judgment to determine which loss estimation method is appropriate for their circumstances.  Additionally, the ASU amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. For public business entities, ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years.  Early adoption is permitted.  While the Company is still evaluating the impact on its consolidated financial statements, the Company expects that ASU 2016-13 may result in an increase in the allowance for credit losses due to the following factors: 1) the allowance for credit losses will increase to provide for expected credit losses over the remaining expected life of the loan portfolio, and will consider expected future changes in macroeconomic conditions; and 2) an allowance may be established for estimated credit losses on available-for-sale debt securities.  The amount of increase will be impacted by the portfolio composition and quality, as well as the economic conditions and forecasts as of the adoption date.  While the Company has begun its implementation efforts by identifying key interpretive issues, and assessing its processes and identifying the system requirements against the new guidance to determine what modifications may be required, the Company cannot yet determine the overall impact of the new standard on its consolidated financial statements.

In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments”.  ASU 2016-15 provides guidance on the classification of certain cash receipts and payments on the consolidated statement of cash flows in order to reduce diversity in practice.  ASU 2016-15 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years.  Early adoption is permitted.  Adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements.

In November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash”.  ASU 2016-18 requires entities to show the changes in the total of cash, cash equivalents, restricted cash and restricted cash equivalents in the statement of cash flows.  As a result, entities will no longer present transfers between cash and cash equivalents and restricted cash and restricted cash equivalents in the statement of cash flows.  ASU 2016-18 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, where the guidance should be applied using a retrospective transition method to each period presented.  Early adoption is permitted. Adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements.

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Earnings Per Share of Common Stock

6 Months Ended

Jun. 30, 2017

Earnings Per Share of Common Stock

Earnings Per Share of Common Stock

NOTE (2) – Earnings Per Share of Common Stock

Basic earnings per share of common stock is computed pursuant to the two-class method by dividing net income available to common stockholders less dividends paid on participating securities (unvested shares of restricted common stock) and any undistributed earnings attributable to participating securities by the weighted average common shares outstanding during the period.  The weighted average common shares outstanding includes the weighted average number of shares of common stock outstanding less the weighted average number of unvested shares of restricted common stock.  ESOP shares are considered outstanding for this calculation unless unearned.  Diluted earnings per share of common stock includes the dilutive effect of unvested stock awards and additional potential common shares issuable under stock options.

The following table shows how the Company computed basic and diluted earnings per share of common stock for the periods indicated:

	For the three months ended June 30,					For the six months ended June 30,
	2017			2016		2017			2016
	(Dollars in thousands, except per share)
Net income	$	533		$	319	$	1,765		$	952
Less net income attributable to participating securities	(1		)	-		(4		)	-
Income available to common stockholders	$	532		$	319	$	1,761		$	952
Weighted average common shares outstanding for basic earnings per common share	26,666,740			29,076,708		26,642,129			29,076,708
Add: dilutive effects of unvested restricted stock awards	56,552			-		63,655			-
Weighted average common shares outstanding for diluted earnings per common share	26,723,292			29,076,708		26,705,784			29,076,708
Earnings per common share - basic	$	0.02		$	0.01	$	0.07		$	0.03
Earnings per common share - diluted	$	0.02		$	0.01	$	0.07		$	0.03

Stock options for 540,625 shares of common stock for the three and six months ended June 30, 2017 and 2016 were not considered in computing diluted earnings per common share because they were anti-dilutive.

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Securities

6 Months Ended

Jun. 30, 2017

Securities

Securities

NOTE (3) – Securities

The following table summarizes the amortized cost and fair value of the available-for-sale investment securities portfolios as of the periods indicated 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
	(In thousands)
June 30, 2017:
Residential mortgage-backed	$	9,839	$	201	$	-	$	10,040
U.S. Government and federal agency	1,967		22		-		1,989
Total available-for-sale securities	$	11,806	$	223	$	-	$	12,029
December 31, 2016:
Residential mortgage-backed	$	11,022	$	192	$	-	$	11,214
U.S. Government and federal agency	1,960		28		-		1,988
Total available-for-sale securities	$	12,982	$	220	$	-	$	13,202

At June 30, 2017, the Bank had one U.S. Government and federal agency security with an amortized cost and an estimated fair value of $2.0 million and a contractual maturity of October 2, 2019.   At June 30, 2017, the Bank had 24 residential mortgage-backed securities with an amortized cost of $9.8 million, an estimated fair value of $10.0 million and an estimated average remaining life of 4.0 years.  Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties.

At June 30, 2017 and December 31, 2016, securities pledged to secure public deposits had a carrying amount of $537 thousand and $629 thousand, respectively.  At June 30, 2017 and December 31, 2016, there were no holdings of securities by any one issuer, other than the U.S. Government and its agencies, in an amount greater than 10% of stockholders’ equity.

There were no sales of securities during the three and six months ended June 30, 2017 and 2016.

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Loans Receivable Held for Sale

6 Months Ended

Jun. 30, 2017

Loans Receivable Held for Sale

Loans Receivable Held for Sale

Loans Receivable Held for Sale

NOTE (4) – Loans Receivable Held for Sale

Loans receivable held for sale at June 30, 2017 totaled $39.0 million and consisted of multi-family loans.  During the three and six months ended June 30, 2017, multi-family loans originated for sale totaled $37.2 million and $85.9 million, respectively.  Sales of multi-family loans during the three and six months ended June 30, 2017 totaled $31.8 million and $46.6 million, respectively.  There were no loans held for sale at December 31, 2016.

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Loans Receivable Held for Investment

6 Months Ended

Jun. 30, 2017

Loans Receivable Held for Investment

Loans Receivable Held for Investment

Loans Receivable Held for Investment

NOTE (5) – Loans Receivable Held for Investment

Loans receivable held for investment were as follows as of the periods indicated:

	June 30, 2017		December 31, 2016
	(In thousands)
Real estate:
Single family (1)	$	95,828	$	104,807
Multi-family	214,652		229,566
Commercial real estate	6,404		8,914
Church	34,449		37,826
Construction	950		837
Commercial – other	344		308
Consumer	4		6
Gross loans receivable before deferred loan costs and premiums	352,631		382,264
Unamortized net deferred loan costs and premiums	1,923		1,793
Gross loans receivable	354,554		384,057
Allowance for loan losses	(4,246)		(4,603)
Loans receivable, net	$	350,308	$	379,454

__

(1) Includes $77.0 million and $81.9 million of non-impaired purchased loans at June 30, 2017 and December 31, 2016, respectively, with no allowance for loan losses.

The following tables present the activity in the allowance for loan losses by loan type for the periods indicated:

	Three Months Ended June 30, 2017
	Real Estate
	Single family		Multi- family		Commercial real estate		Church		Construction		Commercial - other		Consumer		Total
	(In thousands)
Beginning balance	$	330	$	2,711	$	75	$	1,250	$	9	$	16	$	1	$	4,392
Provision for (recapture of) loan losses	(40)		8		2		(270)		-		1		(1)		(300)
Recoveries	30		-		-		124		-		-		-		154
Loans charged off	-		-		-		-		-		-		-		-
Ending balance	$	320	$	2,719	$	77	$	1,104	$	9	$	17	$	-	$	4,246

	Three Months Ended June 30, 2016
	Real Estate
	Single family		Multi- family		Commercial real estate		Church		Construction		Commercial - other		Consumer		Total
	(In thousands)
Beginning balance	$	528	$	1,866	$	444	$	1,676	$	3	$	17	$	-	$	4,534
Provision for (recapture of) loan losses	(87)		381		(452)		(86)		-		(7)		1		(250)
Recoveries	-		-		248		6		-		7		-		261
Loans charged off	-		-		-		-		-		-		-		-
Ending balance	$	441	$	2,247	$	240	$	1,596	$	3	$	17	$	1	$	4,545

	Six Months Ended June 30, 2017
	Real Estate
	Single family		Multi- family		Commercial real estate		Church		Construction		Commercial - other		Consumer		Total
	(In thousands)
Beginning balance	$	367	$	2,659	$	215	$	1,337	$	8	$	17	$	-	$	4,603
Provision for (recapture of) loan losses	(77)		60		(138)		(496)		1		-		-		(650)
Recoveries	30		-		-		263		-		-		-		293
Loans charged off	-		-		-		-		-		-		-		-
Ending balance	$	320	$	2,719	$	77	$	1,104	$	9	$	17	$	-	$	4,246

	Six Months Ended June 30, 2016
	Real Estate
	Single family		Multi- family		Commercial real estate		Church		Construction		Commercial - other		Consumer		Total
	(In thousands)
Beginning balance	$	597	$	1,658	$	469	$	2,083	$	3	$	18	$	-	$	4,828
Provision for (recapture of) loan losses	(156)		589		(477)		(499)		-		(8)		1		(550)
Recoveries	-		-		248		12		-		7		-		267
Loans charged off	-		-		-		-		-		-		-		-
Ending balance	$	441	$	2,247	$	240	$	1,596	$	3	$	17	$	1	$	4,545

The following tables present the balance in the allowance for loan losses and the recorded investment (unpaid contractual principal balance less charge-offs, less interest applied to principal, plus unamortized deferred costs and premiums) by loan type and based on impairment method as of and for the periods indicated:

	June 30, 2017
	Real Estate
	Single family		Multi- family		Commercial real estate		Church		Construction		Commercial - other		Consumer		Total
	(In thousands)
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	117	$	-	$	-	$	452	$	-	$	14	$	-	$	583
Collectively evaluated for impairment	203		2,719		77		652		9		3		-		3,663
Total ending allowance balance	$	320	$	2,719	$	77	$	1,104	$	9	$	17	$	-	$	4,246
Loans:
Loans individually evaluated for impairment	$	636	$	632	$	-	$	9,399	$	-	$	65	$	-	$	10,732
Loans collectively evaluated for impairment	95,682		215,788		6,410		24,712		947		279		4		343,822
Total ending loans balance	$	96,318	$	216,420	$	6,410	$	34,111	$	947	$	344	$	4	$	354,554

	December 31, 2016
	Real Estate
	Single family		Multi- family		Commercial real estate		Church		Construction		Commercial - other		Consumer		Total
	(In thousands)
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	125	$	-	$	-	$	516	$	-	$	15	$	-	$	656
Collectively evaluated for impairment	242		2,659		215		821		8		2		-		3,947
Total ending allowance balance	$	367	$	2,659	$	215	$	1,337	$	8	$	17	$	-	$	4,603
Loans:
Loans individually evaluated for impairment	$	644	$	642	$	-	$	10,545	$	-	$	66	$	-	$	11,897
Loans collectively evaluated for impairment	104,688		230,798		8,921		26,678		827		242		6		372,160
Total ending loans balance	$	105,332	$	231,440	$	8,921	$	37,223	$	827	$	308	$	6	$	384,057

The following table presents information related to loans individually evaluated for impairment by loan type as of the periods indicated:

	June 30, 2017						December 31, 2016
	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:
Multi-family	$	632	$	632	$	-	$	642	$	642	$	-
Church	6,068		3,819		-		5,946		3,589		-
With an allowance recorded:
Single family	636		636		117		644		644		125
Church	5,739		5,580		452		7,330		6,956		516
Commercial - other	65		65		14		66		66		15
Total	$	13,140	$	10,732	$	583	$	14,628	$	11,897	$	656

The recorded investment in loans excludes accrued interest receivable 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 loan type and the related interest income for the periods indicated.

	Three Months Ended June 30, 2017						Six Months Ended June 30, 2017
	Average Recorded Investment			Cash Basis Interest Income Recognized			Average Recorded Investment			Cash Basis Interest Income Recognized
	(In thousands)
Single family		$	638		$	7		$	640		$	14
Multi-family		635			12			638			23
Commercial real estate		992			104			567			104
Church		9,625			109			9,998			336
Commercial – other		66			1			66			2
Total		$	11,956		$	233		$	11,909		$	479

	Three Months Ended June 30, 2016						Six Months Ended June 30, 2016
	Average Recorded Investment			Cash Basis Interest Income Recognized			Average Recorded Investment			Cash Basis Interest Income Recognized
	(In thousands)
Single family		$	927		$	7		$	939		$	14
Multi-family		966			11			1,102			52
Commercial real estate		1,746			211			1,825			267
Church		10,915			121			11,061			247
Commercial -other		66			2			67			2
Total		$	14,620		$	352		$	14,994		$	582

Cash-basis interest income recognized represents cash received for interest payments on accruing impaired loans and interest recoveries on non-accrual loans that were paid off.  Interest payments collected on non-accrual loans are characterized as payments of principal rather than payments of the outstanding accrued interest on the loans until the remaining principal on the non-accrual loans is considered to be fully collectible or paid off.  When a loan is returned to accrual status, the interest payments that were previously applied to principal are deferred and amortized over the remaining life of the loan.  Foregone interest income that would have been recognized had loans performed in accordance with their original terms amounted to $28 thousand and $0 for the three months ended June 30, 2017 and 2016, respectively, and $74 thousand and $97 thousand for the six months ended June 30, 2017 and 2016, respectively, and were not included in the consolidated results of operations.

The following tables present the aging of the recorded investment in past due loans by loan type as of the periods indicated:

	June 30, 2017
	30-59 Days Past Due			60-89 Days Past Due			Greater than 90 Days Past Due			Total Past Due			Current
	(In thousands)
Loans receivable held for investment:
Single family		$	-		$	57		$	-		$	57		$	96,261
Multi-family		-			-			-			-			216,420
Commercial real estate		-			-			-			-			6,410
Church		371			-			1,242			1,613			32,498
Construction		-			-			-			-			947
Commercial - other		-			-			-			-			344
Consumer		-			-			-			-			4
Total		$	371		$	57		$	1,242		$	1,670		$	352,884

	December 31, 2016
	30-59 Days Past Due			60-89 Days Past Due			Greater than 90 Days Past Due			Total Past Due			Current
	(In thousands)
Loans receivable held for investment:
Single family		$	-		$	64		$	-		$	64		$	105,268
Multi-family		-			-			-			-			231,440
Commercial real estate		1,324			-			-			1,324			7,597
Church		-			-			-			-			37,223
Construction		-			-			-			-			827
Commercial - other		-			-			-			-			308
Consumer		-			-			-			-			6
Total		$	1,324		$	64		$	-		$	1,388		$	382,669

As of June 30, 2017 and December 31, 2016, the recorded investment in non-accrual loans totaled $2.8 million and $2.9 million, respectively, and consisted entirely of church loans.  There were no loans 90 days or more delinquent that were accruing interest as of June 30, 2017 or December 31, 2016.

Troubled Debt Restructurings

At June 30, 2017, loans classified as troubled debt restructurings (“TDRs”) totaled $10.3 million, of which $2.4 million were included in non-accrual loans and $7.9 million were on accrual status.  At December 31, 2016, loans classified as TDRs totaled $11.5 million, of which $2.5 million were included in non-accrual loans and $9.0 million were on accrual status.  The Company has allocated $583 thousand and $656 thousand of specific reserves for accruing TDRs as of June 30, 2017 and December 31, 2016, respectively.  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 June 30, 2017 and December 31, 2016, 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 or six months ended June 30, 2017 and 2016.

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 single 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 herein.  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:

· Watch.  Loans classified as watch exhibit weaknesses that could threaten the current net worth and paying capacity of the obligors.  Watch graded loans are generally performing and are not more than 59 days past due. A watch rating is used when a material deficiency exists but correction is anticipated within an acceptable time frame.

· 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.  Pass rated loans are generally well protected by the current net worth and paying capacity of the obligor and/or by the value of the underlying collateral.  Pass rated loans are not more than 59 days past due and are generally performing in accordance with the loan terms.  Based on the most recent analysis performed, the risk categories of loans by loan type as of the periods indicated were as follows:

	June 30, 2017
	Pass		Watch		Special Mention		Substandard		Doubtful		Loss
	(In thousands)
Single family	$	96,318	$	-	$	-	$	-	$	-	$	-
Multi-family	215,138		-		-		1,282		-		-
Commercial real estate	6,287		123		-		-		-		-
Church	26,998		446		269		6,398		-		-
Construction	947		-		-		-		-		-
Commercial - other	279		-		-		65		-		-
Consumer	4		-		-		-		-		-
Total	$	345,971	$	569	$	269	$	7,745	$	-	$	-
	December 31, 2016
	Pass		Watch		Special Mention		Substandard		Doubtful		Loss
	(In thousands)
Single family	$	105,332	$	-	$	-	$	-	$	-	$	-
Multi-family	228,522		1,274		342		1,302		-		-
Commercial real estate	6,965		-		-		1,956		-		-
Church	27,560		1,143		823		7,697		-		-
Construction	827		-		-		-		-		-
Commercial - other	242		-		-		66		-		-
Consumer	6		-		-		-		-		-
Total	$	369,454	$	2,417	$	1,165	$	11,021	$	-	$	-

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Junior Subordinated Debentures

6 Months Ended

Jun. 30, 2017

Junior Subordinated Debentures

Junior Subordinated Debentures

NOTE (6) – Junior Subordinated Debentures

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 3.81% at June 30, 2017.  On October 16, 2014, the Company made payments of $900 thousand of principal on Debentures, executed a Supplemental Indenture for the Debentures that extended the maturity of the Debentures to March 17, 2024, and modified the payment terms of the remaining $5.1 million principal amount thereof.  The modified terms of the Debentures require quarterly payments of interest only through March 2019 at the original rate of 3-Month LIBOR plus 2.54%.  Starting in June 2019, the Company will be required to make quarterly payments of equal amounts of principal, plus interest, until the Debentures are fully amortized on March 17, 2024.  The Debentures may be called for redemption at any time by the Company.

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Fair Value

6 Months Ended

Jun. 30, 2017

Fair Value

Fair Value

NOTE (7) – 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 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.

Appraisals for collateral-dependent impaired loans 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 Measurement
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
	(In thousands)
At June 30, 2017:
Securities available-for-sale - residential mortgage-backed	$	-	$	10,040	$	-	$	10,040
Securities available-for-sale - U.S. Government and federal agency	1,989		-		-		1,989
At December 31, 2016:
Securities available-for-sale - residential mortgage-backed	$	-	$	11,214	$	-	$	11,214
Securities available-for-sale - U.S. Government and federal agency	1,988		-		-		1,988

There were no transfers between Level 1, Level 2, or Level 3 during the three and six months ended June 30, 2017 and 2016.

Assets Measured on a Non-Recurring Basis

Assets are considered to be reflected at fair value on a non-recurring basis if the fair value measurement of the instrument does not necessarily result in a change in the amount recorded on the statement of condition.  Generally, a non-recurring valuation is the result of the application of other accounting pronouncements that require assets to be assessed for impairment or recorded at the lower of cost or fair value.

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

	June 30, 2017		December 31, 2016
	(In thousands)
Impaired loans carried at fair value of collateral	$	1,652	$	1,744

There were no losses recognized on assets measured at fair value on a non-recurring basis for the three and six months ended June 30, 2017 and 2016.

The following table presents the valuation methodology and unobservable inputs for Level 3 assets measured at fair value on a nonrecurring basis as of June 30, 2017 and December 31, 2016:

	Valuation Technique(s)	Unobservable Input(s)	Range	Weighted Average
June 30, 2017:
Impaired loans	Third Party Appraisals	Adjustment for differences between the comparable sales	-16% to 0%	-3%
December 31, 2016:
Impaired loans	Third Party Appraisals	Adjustment for differences between the comparable sales	-2% to 0%	-1%

Fair Values of Financial Instruments

The carrying amounts and estimated fair values of financial instruments as of the periods indicated were as follows:

			Fair Value Measurements at June 30, 2017
	Carrying Value		Level 1		Level 2		Level 3		Total
	(In thousands)
Financial Assets:
Cash and cash equivalents	$	16,835	$	16,835	$	-	$	-	$	16,835
Securities available-for-sale	12,029		1,989		10,040		-		12,029
Loans receivable held for sale	39,037		-		39,597		-		39,597
Loans receivable held for investment	350,308		-		-		351,238		351,238
Accrued interest receivable	1,103		57		71		975		1,103
Federal Home Loan Bank stock	2,916		2,916		-		-		2,916
Financial Liabilities:
Deposits	$	273,847	$	-	$	264,619	$	-	$	264,619
Federal Home Loan Bank advances	104,000		-		104,418		-		104,418
Junior subordinated debentures	5,100		-		-		4,458		4,458
Accrued interest payable	105		-		98		7		105
			Fair Value Measurements at December 31, 2016
	Carrying Value		Level 1		Level 2		Level 3		Total
	(In thousands)
Financial Assets:
Cash and cash equivalents	$	18,430	$	18,430	$	-	$	-	$	18,430
Securities available-for-sale	13,202		1,988		11,214		-		13,202
Loans receivable held for investment	379,454		-		-		382,717		382,717
Accrued interest receivable	1,178		64		29		1,085		1,178
Federal Home Loan Bank stock	2,573		2,573		-		-		2,573
Financial Liabilities:
Deposits	$	287,427	$	-	$	278,254	$	-	$	278,254
Federal Home Loan Bank advances	85,000		-		85,748		-		85,748
Junior subordinated debentures	5,100		-		-		4,414		4,414
Accrued interest payable	154		-		147		7		154

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

(a) Cash and Cash Equivalents

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

(b) Loans Receivable Held For Sale

The Company’s loans receivable held for sale are carried at the lower of cost or fair value.  The fair value of loans receivable held for sale is determined by pricing for comparable assets or by outstanding commitments from third party investors, resulting in a Level 2 classification.

(c) 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.

(d) FHLB Stock

The carrying value of FHLB stock approximates its fair value as the shares can only be redeemed by the FHLB at par.

(e) Accrued Interest Receivable/Payable

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

(f) Deposits

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.

(g) 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.

(h) Junior Subordinated Debentures

The fair values of the Debentures 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.

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Stock-based Compensation

6 Months Ended

Jun. 30, 2017

Stock-based Compensation

Stock-based Compensation

NOTE (8) – Stock-based Compensation

The Company issues stock-based compensation awards to its directors and employees under the 2008 Long-Term Incentive Plan (“2008 LTIP”).  The 2008 LTIP permits the grant of non-qualified and incentive stock options, stock appreciation rights, full value awards and cash incentive awards for up to 2,000,000 shares of common stock.  As of June 30, 2017, there were 1,308,890 shares available for future awards under the 2008 LTIP.

No stock options were granted during the six months ended June 30, 2017, compared to 450,000 stock options granted to senior executive officers under the 2008 LTIP during the six months ended June 30, 2016.  These options have an exercise price of $1.62 per share, vest over five years and expire ten years from the grant date.  The Company estimated the compensation costs and fair value per share of these stock options to be $194 thousand and $0.43 per share, respectively, using the Black-Scholes option pricing model and the following assumptions: (i) expected volatility of 27.36%; (ii) risk free interest rate of 1.21%; (iii) expected option term of five years; and (iv) 0% dividend yield.

The following table summarizes stock option activity during the six months ended June 30, 2017 and 2016:

	Shares	Weighted Average Exercise Price	Weighted Average Remaining Contractual Term (years)	Aggregate Intrinsic Value
Six Months Ended June 30, 2017:
Outstanding at January 1, 2017	540,625	$    2.18
Granted	-	-
Exercised	-	-
Forfeited	-	-
Outstanding at June 30, 2017	540,625	$    2.18	7.50	$  225,000
Exercisable at June 30, 2017	180,625	$    3.29	5.19	$   45,000
Six Months Ended June 30, 2016:
Outstanding at January 1, 2016	90,625	$    4.95
Granted	450,000	1.62
Exercised	-	-
Forfeited	-	-
Outstanding at June 30, 2016	540,625	$    2.18	8.50	$  86,000
Exercisable at June 30, 2016	90,625	$    4.95	2.75	$             -

The Company recorded $10 thousand of stock-based compensation expense related to stock options during the three months ended June 30, 2017 and 2016, respectively, and $19 thousand and $13 thousand during the six months ended June 30, 2017 and 2016, respectively.  As of June 30, 2017, unrecognized compensation cost related to non-vested stock options granted under the plan was $142 thousand.  The cost is expected to be recognized over a period of 3.65 years.

In March 2016, the Company awarded 120,483 shares of restricted stock to its Chief Executive Officer (“CEO”) under the 2008 LTIP.  A restricted stock award is valued at the closing price of the Company’s stock on the date of such award.  Subject to certain performance restrictions, 100,000 shares of restricted stock shall vest over a two-year period and the remaining 20,483 shares shall vest over a three-year period.  Stock-based compensation expense is recognized on a straight-line basis over the vesting period.  The Company recorded $27 thousand and $26 thousand of stock-based compensation expense related to this award during the three months ended June 30, 2017 and 2016, respectively, and $53 thousand and $26 thousand during the six months ended June 30, 2017 and 2016, respectively.  As of June 30, 2017, unrecognized compensation cost related to non-vested restricted stock award was $92 thousand, of which $79 thousand is expected to be recognized over a period of 9 months and $13 thousand is expected to be recognized over a period of 12  months.

In April 2017, the Company awarded 30,002 shares of common stock to its directors under the 2008 LTIP, all of which are fully vested.  The Company recorded $52 thousand of compensation expense based on the fair value of the stock, which was determined using the average of the high and the low price of the stock on the date of the award.

In April 2017, the Company also awarded 129,270 of cash-settled restricted stock units (“RSUs”) to its CEO under the 2008 LTIP.  The RSUs cliff vest at the end of two years from the date of the grant and are subject to forfeiture until vested.  Each RSU entitles the CEO to receive cash equal to the fair market value of one share of common stock on the applicable payout date.  Compensation expense is determined based on the fair value of the award and is re-measured at each reporting period.  The Company recorded $23 thousand of compensation expense related to this award during the three months ended June 30, 2017.

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ESOP Plan

6 Months Ended

Jun. 30, 2017

ESOP Plan

ESOP Plan

NOTE (9) – ESOP Plan

Employees participate in an Employee Stock Option Plan (“ESOP”) after attaining certain age and service requirements.  In December 2016, the ESOP purchased 1,493,679 shares of the Company’s common stock at $1.59 per share, for a total cost of $2.4 million, of which $1.2 million was funded with a loan from the Company.  The loan will be repaid from the Bank’s annual discretionary contributions to the ESOP, net of dividends paid, over a period of 20 years.  Shares of the Company’s common stock purchased by the ESOP are held in a suspense account until released for allocation to participants.  When loan payments are made, shares are allocated to each eligible participant based on the ratio of each such participant’s compensation, as defined in the ESOP, to the total compensation of all eligible plan participants.  As the unearned shares are released from the suspense account, the Company recognizes compensation expense equal to the fair value of the ESOP shares during the periods in which they become committed to be released.  To the extent that the fair value of the ESOP shares released differs from the cost of such shares, the difference is charged or credited to equity as additional paid-in capital.  Dividends on allocated shares increase participant accounts.  At the end of employment, participants will receive shares for their vested balance.  Compensation expense related to the ESOP was $25 thousand and $19 thousand for the three months ended June 30, 2017 and 2016, respectively, and $47 thousand and $45 thousand for the six months ended June 30, 2017 and 2016, respectively.

Shares held by the ESOP were as follows:

	June 30, 2017		December 31, 2016
	(Dollars in thousands)
Allocated to participants	1,114,683		1,114,683
Suspense shares	739,748		739,748
Total ESOP shares	1,854,431		1,854,431
Fair value of unearned shares	$	1,512	$	1,213

The outstanding balance of unallocated shares at June 30, 2017 and December 31, 2016, was $1.1 million and $1.2 million, respectively, which is shown as Unearned ESOP shares in the equity section of the consolidated statements of financial condition.  As of June 30, 2017, 26,750 shares were committed to be released.

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Regulatory Matters

6 Months Ended

Jun. 30, 2017

Regulatory Matters

Regulatory Matters

NOTE (10) – Regulatory Matters

The Bank’s capital requirements are administered by the Office of the Comptroller of the Currency (“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.

The federal banking regulators approved final capital rules (“Basel III Capital Rules”) in July 2013 implementing the Basel III framework as well as certain provisions of the Dodd-Frank Act.  The Basel III Capital Rules prescribe a standardized approach for calculating risk-weighted assets and revised the definition and calculation of Tier 1 capital and Total capital, and include a new Common Equity Tier 1 capital (“CET1”) measure.  Under the Basel III Capital Rules, the currently effective minimum capital ratios are:

· 4.5% CET1 to risk-weighted assets;

· 6.0% Tier 1 capital (that is, CET1 plus Additional Tier 1 capital) to risk-weighted assets;

· 8.0% Total capital (that is, Tier 1 capital plus Tier 2 capital) to risk-weighted assets; and

· 4.0% Tier 1 capital to average consolidated assets (known as the “leverage ratio”).

A new capital conservation buffer was also established above the regulatory minimum capital requirements.  This capital conservation buffer was phased in beginning January 1, 2016 at 0.625% of risk-weighted assets and will increase each subsequent year by an additional 0.625% until it reaches its final level of 2.5% on January 1, 2019.

The Basel III Capital rules also contain revisions to the prompt corrective action framework, which is designed to place restrictions on insured depository institutions if their capital levels begin to show signs of weakness.  Under the prompt corrective action requirements, which are designed to complement the capital conservation buffer, insured depository institutions are now required to meet the following increased capital level requirements in order to qualify as “well capitalized”: (i) a CET1 capital ratio of 6.5%; (ii) a Tier 1 capital ratio of 8% (increased from 6%); (iii) a total capital ratio of 10% (unchanged from previous rules); and (iv) a Tier 1 leverage ratio of 5% (unchanged from previous rules).

The Basel III Capital Rules became effective for the Bank on January 1, 2015 (subject to a phase-in period for certain provisions).  At June 30, 2017 and December 31, 2016, the Bank’s level of capital exceeded all regulatory capital requirements and its regulatory capital ratios were above the minimum levels required to be considered well capitalized for regulatory purposes.  Actual and required capital amounts and ratios as of the periods indicated are presented below.

	Actual			Minimum Capital Requirements			Minimum Required To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio	Amount		Ratio	Amount		Ratio
	(Dollars in thousands)
June 30, 2017:
Tier 1 (Leverage)	$	47,009	10.51%	$	17,884	4.0%	$	22,356	5.0%
Common Equity Tier 1	$	47,009	15.87%	$	13,333	4.5%	$	19,258	6.5%
Tier 1	$	47,009	15.87%	$	17,777	6.0%	$	23,703	8.0%
Total Capital	$	50,720	17.12%	$	23,703	8.0%	$	29,628	10.0%
December 31, 2016:
Tier 1 (Leverage)	$	43,954	10.60%	$	16,594	4.0%	$	20,742	5.0%
Common Equity Tier 1	$	43,954	15.36%	$	12,875	4.5%	$	18,597	6.5%
Tier 1	$	43,954	15.36%	$	17,166	6.0%	$	22,888	8.0%
Total Capital	$	47,544	16.62%	$	22,888	8.0%	$	28,610	10.0%

Effective as of May 15, 2015, the Federal Reserve Board (“FRB”) adopted a final rule that exempts bank holding companies and savings and loan holding companies with less than $1 billion in consolidated assets, such as the Company, from FRB’s consolidated regulatory capital requirements.

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Income Taxes

6 Months Ended

Jun. 30, 2017

Income Taxes

Income Taxes

NOTE (11) – Income Taxes

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

Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion, or all, of the deferred tax asset will not be realized.  In assessing the realization of deferred tax assets, management evaluated both positive and negative evidence, 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.  Based on this analysis, the Company determined that as of June 30, 2017, no valuation allowance was required on its deferred tax assets, which totaled $6.0 million.  As of December 31, 2016, the Company recorded no valuation allowance on its deferred tax assets of $6.9 million.

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Concentration of Credit Risk

6 Months Ended

Jun. 30, 2017

Concentration of Credit Risk

Concentration of Credit Risk

NOTE (12) – Concentration of Credit Risk

The Bank has a significant concentration of deposits with a long-time customer that accounted for approximately 12% of its deposits as of June 30, 2017.  The Bank expects to maintain this relationship with the customer.

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Basis of Financial Statement Presentation (Policies)

6 Months Ended

Jun. 30, 2017

Basis of Financial Statement Presentation

Recently Adopted Accounting Pronouncement

Recently Adopted Accounting Pronouncement

In March 2016, the FASB issued ASU 2016-09, “Compensation — Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting”.  ASU 2016-09 includes provisions intended to simplify various aspects related to how share-based payments are accounted for and presented in the financial statements.  The areas for simplification include income tax consequences, forfeitures, classification of awards as either equity or liabilities and classification on the statement of cash flows.  Under the new guidance, all excess tax benefits and deficiencies that occur when an award vests, is exercised, or expires are recognized in income tax expense as discrete period items.  Previously, these transactions were typically recorded directly within equity.  Consistent with this change, excess tax benefits and deficiencies are no longer included within estimated proceeds when performing the calculation for diluted earnings per share.  The presentation of excess tax benefits in the statement of cash flows shifted to an operating activity from the prior classification as a financing activity.  ASU 2016-09 also provides an accounting policy election to recognize forfeitures of awards as they occur when estimating stock-based compensation expense rather than the previous requirement to estimate forfeitures from inception.  ASU 2016-09 became effective for the Company for reporting periods after January 1, 2017.  The actual effects of adoption in 2017 will primarily depend upon the share price of the Company’s stock, probability of exercise of certain stock options and the magnitude of windfalls for all awards upon either vesting or exercise.  The effects on earnings per share calculations and election to account for forfeitures as incurred have not been significant.

Recently Issued Accounting Pronouncements (Not Yet Effective)

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)”.  ASU 2014-09 replaced existing revenue recognition guidance for contracts to provide goods or services to customers.  The new guidance clarifies the principles for recognizing revenue and replaces nearly all existing revenue recognition guidance in U.S. GAAP.  Quantitative and qualitative disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers are also required.  ASU 2014-09 as amended by ASU 2015-14, ASU 2016-08, ASU 2016-10, ASU 2016-12 and ASU 2016-20, is effective for interim and annual periods beginning after December 15, 2017 and is applied on either a modified retrospective or full retrospective basis.  Early adoption is permitted for interim and annual periods beginning after December 15, 2016.  The Company’s revenue is mainly comprised of net interest income from financial assets and liabilities and to a lesser degree, noninterest income.  The scope of ASU 2014-09 explicitly excludes net interest income as well as other revenues associated with financial assets and liabilities, including loans and securities.  Accordingly, the majority of the Company’s revenues will not be affected.  The Company will continue to evaluate the effect that this guidance will have on other revenue streams within its scope, as well as changes in disclosures required by the new guidance.  However, adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements.

In January 2016, the FASB issued ASU 2016-01, “Financial Instruments – Overall (Subtopic 825-10) - Recognition and Measurement of Financial Assets and Financial Liabilities”.  ASU 2016-01 (i) requires equity investments, with certain exceptions, to be measured at fair value with changes in fair value recognized in net income; (ii) simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment; (iii) eliminates the requirement for public business entities to disclose the methods and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet; (iv) requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; (v) requires an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments; (vi) requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the balance sheet or the accompanying notes to the financial statements; and (vii) clarifies that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities.  For public business entities, the amendments in ASU 2016-01 are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years.  Early application by public business entities to financial statements of fiscal years or interim periods that have not yet been issued are permitted as of the beginning of the fiscal year of adoption.  While the Company is currently evaluating the impact of this standard, the Company does not expect its adoption to have a material impact on the Company’s consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)”.  Under ASU 2016-02, lessees will be required to recognize the following for all leases (with the exception of short-term leases, as defined) at the commencement date: (i) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and (ii) a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term.  Under the new guidance, lessor accounting is largely unchanged.  Public business entities should apply the amendments in ASU 2016-02 for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years.  Early adoption is permitted.  Lessees (for capital and operating leases) and lessors (for sales-type, direct financing, and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements.  The Company has identified certain contracts with respect to leased real estate and office equipment that are within the scope of ASU 2016-02.  As a lessee in operating lease arrangements that are not considered short-tem, effective January 1, 2019, the Company expects a gross-up of its Consolidated Statements of Condition as a result of recognizing lease liabilities and right of use assets.  However, it will likely not have a significant impact on the Company’s Consolidated Statements of Income and Comprehensive Income or Cash Flows.

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”.  ASU 2016-13 requires an organization to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts.  Financial institutions and other organizations will now use forward-looking information to form their credit loss estimates.  Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses over the life of the related financial assets.  Organizations will continue to use judgment to determine which loss estimation method is appropriate for their circumstances.  Additionally, the ASU amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. For public business entities, ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years.  Early adoption is permitted.  While the Company is still evaluating the impact on its consolidated financial statements, the Company expects that ASU 2016-13 may result in an increase in the allowance for credit losses due to the following factors: 1) the allowance for credit losses will increase to provide for expected credit losses over the remaining expected life of the loan portfolio, and will consider expected future changes in macroeconomic conditions; and 2) an allowance may be established for estimated credit losses on available-for-sale debt securities.  The amount of increase will be impacted by the portfolio composition and quality, as well as the economic conditions and forecasts as of the adoption date.  While the Company has begun its implementation efforts by identifying key interpretive issues, and assessing its processes and identifying the system requirements against the new guidance to determine what modifications may be required, the Company cannot yet determine the overall impact of the new standard on its consolidated financial statements.

In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments”.  ASU 2016-15 provides guidance on the classification of certain cash receipts and payments on the consolidated statement of cash flows in order to reduce diversity in practice.  ASU 2016-15 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years.  Early adoption is permitted.  Adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements.

In November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash”.  ASU 2016-18 requires entities to show the changes in the total of cash, cash equivalents, restricted cash and restricted cash equivalents in the statement of cash flows.  As a result, entities will no longer present transfers between cash and cash equivalents and restricted cash and restricted cash equivalents in the statement of cash flows.  ASU 2016-18 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, where the guidance should be applied using a retrospective transition method to each period presented.  Early adoption is permitted. Adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements.

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Earnings Per Share of Common Stock (Tables)

6 Months Ended

Jun. 30, 2017

Earnings Per Share of Common Stock

Schedule of basic and diluted earnings per share of common stock

	For the three months ended June 30,					For the six months ended June 30,
	2017			2016		2017			2016
	(Dollars in thousands, except per share)
Net income	$	533		$	319	$	1,765		$	952
Less net income attributable to participating securities	(1		)	-		(4		)	-
Income available to common stockholders	$	532		$	319	$	1,761		$	952
Weighted average common shares outstanding for basic earnings per common share	26,666,740			29,076,708		26,642,129			29,076,708
Add: dilutive effects of unvested restricted stock awards	56,552			-		63,655			-
Weighted average common shares outstanding for diluted earnings per common share	26,723,292			29,076,708		26,705,784			29,076,708
Earnings per common share - basic	$	0.02		$	0.01	$	0.07		$	0.03
Earnings per common share - diluted	$	0.02		$	0.01	$	0.07		$	0.03

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Securities (Tables)

6 Months Ended

Jun. 30, 2017

Securities

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

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(In thousands)
June 30, 2017:
Residential mortgage-backed	$	9,839	$	201	$	-	$	10,040
U.S. Government and federal agency	1,967		22		-		1,989
Total available-for-sale securities	$	11,806	$	223	$	-	$	12,029
December 31, 2016:
Residential mortgage-backed	$	11,022	$	192	$	-	$	11,214
U.S. Government and federal agency	1,960		28		-		1,988
Total available-for-sale securities	$	12,982	$	220	$	-	$	13,202

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Loans Receivable Held for Investment (Tables)

6 Months Ended

Jun. 30, 2017

Loans Receivable Held for Investment

Schedule of loans receivable

	June 30, 2017		December 31, 2016
	(In thousands)
Real estate:
Single family (1)	$	95,828	$	104,807
Multi-family	214,652		229,566
Commercial real estate	6,404		8,914
Church	34,449		37,826
Construction	950		837
Commercial – other	344		308
Consumer	4		6
Gross loans receivable before deferred loan costs and premiums	352,631		382,264
Unamortized net deferred loan costs and premiums	1,923		1,793
Gross loans receivable	354,554		384,057
Allowance for loan losses	(4,246)		(4,603)
Loans receivable, net	$	350,308	$	379,454

__

(1) Includes $77.0 million and $81.9 million of non-impaired purchased loans at June 30, 2017 and December 31, 2016, respectively, with no allowance for loan losses.

Activity in the allowance for loan losses by loan type

	Three Months Ended June 30, 2017
	Real Estate
	Single family		Multi- family		Commercial real estate		Church		Construction		Commercial - other		Consumer		Total
	(In thousands)
Beginning balance	$	330	$	2,711	$	75	$	1,250	$	9	$	16	$	1	$	4,392
Provision for (recapture of) loan losses	(40)		8		2		(270)		-		1		(1)		(300)
Recoveries	30		-		-		124		-		-		-		154
Loans charged off	-		-		-		-		-		-		-		-
Ending balance	$	320	$	2,719	$	77	$	1,104	$	9	$	17	$	-	$	4,246

	Three Months Ended June 30, 2016
	Real Estate
	Single family		Multi- family		Commercial real estate		Church		Construction		Commercial - other		Consumer		Total
	(In thousands)
Beginning balance	$	528	$	1,866	$	444	$	1,676	$	3	$	17	$	-	$	4,534
Provision for (recapture of) loan losses	(87)		381		(452)		(86)		-		(7)		1		(250)
Recoveries	-		-		248		6		-		7		-		261
Loans charged off	-		-		-		-		-		-		-		-
Ending balance	$	441	$	2,247	$	240	$	1,596	$	3	$	17	$	1	$	4,545

	Six Months Ended June 30, 2017
	Real Estate
	Single family		Multi- family		Commercial real estate		Church		Construction		Commercial - other		Consumer		Total
	(In thousands)
Beginning balance	$	367	$	2,659	$	215	$	1,337	$	8	$	17	$	-	$	4,603
Provision for (recapture of) loan losses	(77)		60		(138)		(496)		1		-		-		(650)
Recoveries	30		-		-		263		-		-		-		293
Loans charged off	-		-		-		-		-		-		-		-
Ending balance	$	320	$	2,719	$	77	$	1,104	$	9	$	17	$	-	$	4,246

	Six Months Ended June 30, 2016
	Real Estate
	Single family		Multi- family		Commercial real estate		Church		Construction		Commercial - other		Consumer		Total
	(In thousands)
Beginning balance	$	597	$	1,658	$	469	$	2,083	$	3	$	18	$	-	$	4,828
Provision for (recapture of) loan losses	(156)		589		(477)		(499)		-		(8)		1		(550)
Recoveries	-		-		248		12		-		7		-		267
Loans charged off	-		-		-		-		-		-		-		-
Ending balance	$	441	$	2,247	$	240	$	1,596	$	3	$	17	$	1	$	4,545

Allowance for loan losses and recorded investment in loans by type of loans and based on impairment method

	June 30, 2017
	Real Estate
	Single family		Multi- family		Commercial real estate		Church		Construction		Commercial - other		Consumer		Total
	(In thousands)
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	117	$	-	$	-	$	452	$	-	$	14	$	-	$	583
Collectively evaluated for impairment	203		2,719		77		652		9		3		-		3,663
Total ending allowance balance	$	320	$	2,719	$	77	$	1,104	$	9	$	17	$	-	$	4,246
Loans:
Loans individually evaluated for impairment	$	636	$	632	$	-	$	9,399	$	-	$	65	$	-	$	10,732
Loans collectively evaluated for impairment	95,682		215,788		6,410		24,712		947		279		4		343,822
Total ending loans balance	$	96,318	$	216,420	$	6,410	$	34,111	$	947	$	344	$	4	$	354,554

	December 31, 2016
	Real Estate
	Single family		Multi- family		Commercial real estate		Church		Construction		Commercial - other		Consumer		Total
	(In thousands)
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	125	$	-	$	-	$	516	$	-	$	15	$	-	$	656
Collectively evaluated for impairment	242		2,659		215		821		8		2		-		3,947
Total ending allowance balance	$	367	$	2,659	$	215	$	1,337	$	8	$	17	$	-	$	4,603
Loans:
Loans individually evaluated for impairment	$	644	$	642	$	-	$	10,545	$	-	$	66	$	-	$	11,897
Loans collectively evaluated for impairment	104,688		230,798		8,921		26,678		827		242		6		372,160
Total ending loans balance	$	105,332	$	231,440	$	8,921	$	37,223	$	827	$	308	$	6	$	384,057

Loans individually evaluated for impairment by loan type

	June 30, 2017						December 31, 2016
	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:
Multi-family	$	632	$	632	$	-	$	642	$	642	$	-
Church	6,068		3,819		-		5,946		3,589		-
With an allowance recorded:
Single family	636		636		117		644		644		125
Church	5,739		5,580		452		7,330		6,956		516
Commercial - other	65		65		14		66		66		15
Total	$	13,140	$	10,732	$	583	$	14,628	$	11,897	$	656

Average of loans individually evaluated for impairment by loan type and related interest income

	Three Months Ended June 30, 2017						Six Months Ended June 30, 2017
	Average Recorded Investment			Cash Basis Interest Income Recognized			Average Recorded Investment			Cash Basis Interest Income Recognized
	(In thousands)
Single family		$	638		$	7		$	640		$	14
Multi-family		635			12			638			23
Commercial real estate		992			104			567			104
Church		9,625			109			9,998			336
Commercial – other		66			1			66			2
Total		$	11,956		$	233		$	11,909		$	479

	Three Months Ended June 30, 2016						Six Months Ended June 30, 2016
	Average Recorded Investment			Cash Basis Interest Income Recognized			Average Recorded Investment			Cash Basis Interest Income Recognized
	(In thousands)
Single family		$	927		$	7		$	939		$	14
Multi-family		966			11			1,102			52
Commercial real estate		1,746			211			1,825			267
Church		10,915			121			11,061			247
Commercial -other		66			2			67			2
Total		$	14,620		$	352		$	14,994		$	582

Aging of the recorded investment in past due loans by loan type

	June 30, 2017
	30-59 Days Past Due			60-89 Days Past Due			Greater than 90 Days Past Due			Total Past Due			Current
	(In thousands)
Loans receivable held for investment:
Single family		$	-		$	57		$	-		$	57		$	96,261
Multi-family		-			-			-			-			216,420
Commercial real estate		-			-			-			-			6,410
Church		371			-			1,242			1,613			32,498
Construction		-			-			-			-			947
Commercial - other		-			-			-			-			344
Consumer		-			-			-			-			4
Total		$	371		$	57		$	1,242		$	1,670		$	352,884

	December 31, 2016
	30-59 Days Past Due			60-89 Days Past Due			Greater than 90 Days Past Due			Total Past Due			Current
	(In thousands)
Loans receivable held for investment:
Single family		$	-		$	64		$	-		$	64		$	105,268
Multi-family		-			-			-			-			231,440
Commercial real estate		1,324			-			-			1,324			7,597
Church		-			-			-			-			37,223
Construction		-			-			-			-			827
Commercial - other		-			-			-			-			308
Consumer		-			-			-			-			6
Total		$	1,324		$	64		$	-		$	1,388		$	382,669

Risk categories of loans by loan type

	June 30, 2017
	Pass		Watch		Special Mention		Substandard		Doubtful		Loss
	(In thousands)
Single family	$	96,318	$	-	$	-	$	-	$	-	$	-
Multi-family	215,138		-		-		1,282		-		-
Commercial real estate	6,287		123		-		-		-		-
Church	26,998		446		269		6,398		-		-
Construction	947		-		-		-		-		-
Commercial - other	279		-		-		65		-		-
Consumer	4		-		-		-		-		-
Total	$	345,971	$	569	$	269	$	7,745	$	-	$	-
	December 31, 2016
	Pass		Watch		Special Mention		Substandard		Doubtful		Loss
	(In thousands)
Single family	$	105,332	$	-	$	-	$	-	$	-	$	-
Multi-family	228,522		1,274		342		1,302		-		-
Commercial real estate	6,965		-		-		1,956		-		-
Church	27,560		1,143		823		7,697		-		-
Construction	827		-		-		-		-		-
Commercial - other	242		-		-		66		-		-
Consumer	6		-		-		-		-		-
Total	$	369,454	$	2,417	$	1,165	$	11,021	$	-	$	-

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Fair Value (Tables)

6 Months Ended

Jun. 30, 2017

Fair Value

Summary of assets measured at fair value on a recurring basis

	Fair Value Measurement
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
	(In thousands)
At June 30, 2017:
Securities available-for-sale - residential mortgage-backed	$	-	$	10,040	$	-	$	10,040
Securities available-for-sale - U.S. Government and federal agency	1,989		-		-		1,989
At December 31, 2016:
Securities available-for-sale - residential mortgage-backed	$	-	$	11,214	$	-	$	11,214
Securities available-for-sale - U.S. Government and federal agency	1,988		-		-		1,988

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

	June 30, 2017		December 31, 2016
	(In thousands)
Impaired loans carried at fair value of collateral	$	1,652	$	1,744

Schedule of valuation methodology and unobservable inputs for Level 3 assets measured at fair value on a nonrecurring basis

	Valuation Technique(s)	Unobservable Input(s)	Range	Weighted Average
June 30, 2017:
Impaired loans	Third Party Appraisals	Adjustment for differences between the comparable sales	-16% to 0%	-3%
December 31, 2016:
Impaired loans	Third Party Appraisals	Adjustment for differences between the comparable sales	-2% to 0%	-1%

Schedule of carrying amounts and estimated fair values of financial instruments

			Fair Value Measurements at June 30, 2017
	Carrying Value		Level 1		Level 2		Level 3		Total
	(In thousands)
Financial Assets:
Cash and cash equivalents	$	16,835	$	16,835	$	-	$	-	$	16,835
Securities available-for-sale	12,029		1,989		10,040		-		12,029
Loans receivable held for sale	39,037		-		39,597		-		39,597
Loans receivable held for investment	350,308		-		-		351,238		351,238
Accrued interest receivable	1,103		57		71		975		1,103
Federal Home Loan Bank stock	2,916		2,916		-		-		2,916
Financial Liabilities:
Deposits	$	273,847	$	-	$	264,619	$	-	$	264,619
Federal Home Loan Bank advances	104,000		-		104,418		-		104,418
Junior subordinated debentures	5,100		-		-		4,458		4,458
Accrued interest payable	105		-		98		7		105
			Fair Value Measurements at December 31, 2016
	Carrying Value		Level 1		Level 2		Level 3		Total
	(In thousands)
Financial Assets:
Cash and cash equivalents	$	18,430	$	18,430	$	-	$	-	$	18,430
Securities available-for-sale	13,202		1,988		11,214		-		13,202
Loans receivable held for investment	379,454		-		-		382,717		382,717
Accrued interest receivable	1,178		64		29		1,085		1,178
Federal Home Loan Bank stock	2,573		2,573		-		-		2,573
Financial Liabilities:
Deposits	$	287,427	$	-	$	278,254	$	-	$	278,254
Federal Home Loan Bank advances	85,000		-		85,748		-		85,748
Junior subordinated debentures	5,100		-		-		4,414		4,414
Accrued interest payable	154		-		147		7		154

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Stock-based Compensation (Tables)

6 Months Ended

Jun. 30, 2017

Stock-based Compensation

Summary of stock option activity

	Shares	Weighted Average Exercise Price	Weighted Average Remaining Contractual Term (years)	Aggregate Intrinsic Value
Six Months Ended June 30, 2017:
Outstanding at January 1, 2017	540,625	$    2.18
Granted	-	-
Exercised	-	-
Forfeited	-	-
Outstanding at June 30, 2017	540,625	$    2.18	7.50	$  225,000
Exercisable at June 30, 2017	180,625	$    3.29	5.19	$   45,000
Six Months Ended June 30, 2016:
Outstanding at January 1, 2016	90,625	$    4.95
Granted	450,000	1.62
Exercised	-	-
Forfeited	-	-
Outstanding at June 30, 2016	540,625	$    2.18	8.50	$  86,000
Exercisable at June 30, 2016	90,625	$    4.95	2.75	$             -

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ESOP Plan (Tables)

6 Months Ended

Jun. 30, 2017

ESOP Plan

Schedule of shares held by the ESOP

	June 30, 2017		December 31, 2016
	(Dollars in thousands)
Allocated to participants	1,114,683		1,114,683
Suspense shares	739,748		739,748
Total ESOP shares	1,854,431		1,854,431
Fair value of unearned shares	$	1,512	$	1,213

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Regulatory Matters (Tables)

6 Months Ended

Jun. 30, 2017

Regulatory Matters

Schedule of actual and required capital amounts and ratios

	Actual			Minimum Capital Requirements			Minimum Required To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio	Amount		Ratio	Amount		Ratio
	(Dollars in thousands)
June 30, 2017:
Tier 1 (Leverage)	$	47,009	10.51%	$	17,884	4.0%	$	22,356	5.0%
Common Equity Tier 1	$	47,009	15.87%	$	13,333	4.5%	$	19,258	6.5%
Tier 1	$	47,009	15.87%	$	17,777	6.0%	$	23,703	8.0%
Total Capital	$	50,720	17.12%	$	23,703	8.0%	$	29,628	10.0%
December 31, 2016:
Tier 1 (Leverage)	$	43,954	10.60%	$	16,594	4.0%	$	20,742	5.0%
Common Equity Tier 1	$	43,954	15.36%	$	12,875	4.5%	$	18,597	6.5%
Tier 1	$	43,954	15.36%	$	17,166	6.0%	$	22,888	8.0%
Total Capital	$	47,544	16.62%	$	22,888	8.0%	$	28,610	10.0%

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Earnings Per Share of Common Stock (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Earnings Per Share of Common Stock
Net income	$ 533	$ 319	$ 1,765	$ 952
Less net income attributable to participating securities	(1)		(4)
Income available to common stockholders	$ 532	$ 319	$ 1,761	$ 952
Weighted average common shares outstanding for basic earnings per common share	26,666,740	29,076,708	26,642,129	29,076,708
Add: dilutive effects of unvested restricted stock awards	56,552		63,655
Weighted average common shares outstanding for diluted earnings per common share	26,723,292	29,076,708	26,705,784	29,076,708
Earnings per common share - basic (in dollars per share)	$ 0.02	$ 0.01	$ 0.07	$ 0.03
Earnings per common share - diluted (in dollars per share)	$ 0.02	$ 0.01	$ 0.07	$ 0.03
Anti-dilutive stock options not considered in computing diluting earnings per common share	540,625	540,625	540,625	540,625

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Securities (Details) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017 USD ($) security	Jun. 30, 2016 USD ($)	Jun. 30, 2017 USD ($) security	Jun. 30, 2016 USD ($)	Dec. 31, 2016 USD ($)
Securities
Amortized Cost	$ 11,806		$ 11,806		$ 12,982
Gross Unrealized Gains	223		223		220
Fair Value	12,029		12,029		13,202
Securities pledged	537		537		629
Sales of securities	0	$ 0	0	$ 0
Residential mortgage-backed
Securities
Amortized Cost	9,839		9,839		11,022
Gross Unrealized Gains	201		201		192
Fair Value	$ 10,040		$ 10,040		11,214
Number of securities held | security	24		24
Estimated remaining term			4 years
U.S. Government and federal agency
Securities
Amortized Cost	$ 1,967		$ 1,967		1,960
Gross Unrealized Gains	22		22		28
Fair Value	$ 1,989		$ 1,989		1,988
Number of securities held | security	1		1
Stockholders' Equity
Securities
Securities of any one issuer, other than U.S. Government, greater than 10% of stockholders' equity	$ 0		$ 0		$ 0

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Loans Receivable Held for Sale (Details) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2017	Jun. 30, 2017	Dec. 31, 2016
Loans Receivable Held for Sale
Loans receivable held for sale	$ 39,037	$ 39,037	$ 0
Loans originated		86,002
Multi-family
Loans Receivable Held for Sale
Loans receivable held for sale	39,000	39,000
Loans originated	37,200	85,900
Loan sales	$ 31,800	$ 46,600

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Loans Receivable Held for Investment - Summary (Details) - USD ($) $ in Thousands	Jun. 30, 2017	Mar. 31, 2017	Dec. 31, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015
Loans Receivable Held for Investment
Gross loans receivable before deferred loan costs and premiums	$ 352,631		$ 382,264
Unamortized net deferred loan costs and premiums	1,923		1,793
Total ending loans balance	354,554		384,057
Allowance for loan losses	(4,246)	$ (4,392)	(4,603)	$ (4,545)	$ (4,534)	$ (4,828)
Loans receivable, net	350,308		379,454
Single family
Loans Receivable Held for Investment
Gross loans receivable before deferred loan costs and premiums	95,828		104,807
Total ending loans balance	96,318		105,332
Allowance for loan losses	(320)	(330)	(367)	(441)	(528)	(597)
Non-impaired purchased loans	77,000		81,900
Allowance for non-impaired purchased loans	0		0
Multi-family
Loans Receivable Held for Investment
Gross loans receivable before deferred loan costs and premiums	214,652		229,566
Total ending loans balance	216,420		231,440
Allowance for loan losses	(2,719)	(2,711)	(2,659)	(2,247)	(1,866)	(1,658)
Commercial real estate
Loans Receivable Held for Investment
Gross loans receivable before deferred loan costs and premiums	6,404		8,914
Total ending loans balance	6,410		8,921
Allowance for loan losses	(77)	(75)	(215)	(240)	(444)	(469)
Church
Loans Receivable Held for Investment
Gross loans receivable before deferred loan costs and premiums	34,449		37,826
Total ending loans balance	34,111		37,223
Allowance for loan losses	(1,104)	(1,250)	(1,337)	(1,596)	(1,676)	(2,083)
Construction
Loans Receivable Held for Investment
Gross loans receivable before deferred loan costs and premiums	950		837
Total ending loans balance	947		827
Allowance for loan losses	(9)	(9)	(8)	(3)	(3)	(3)
Commercial - other
Loans Receivable Held for Investment
Gross loans receivable before deferred loan costs and premiums	344		308
Total ending loans balance	344		308
Allowance for loan losses	(17)	(16)	(17)	(17)	$ (17)	$ (18)
Consumer
Loans Receivable Held for Investment
Gross loans receivable before deferred loan costs and premiums	4		6
Total ending loans balance	$ 4		$ 6
Allowance for loan losses		$ (1)		$ (1)

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Loans Receivable Held for Investment - Activity in the Allowance for Loan Losses by Loan Type (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Allowance for loan losses:
Beginning balance	$ 4,392	$ 4,534	$ 4,603	$ 4,828
Provision for (recapture of) loan losses	(300)	(250)	(650)	(550)
Recoveries	154	261	293	267
Ending balance	4,246	4,545	4,246	4,545
Single family
Allowance for loan losses:
Beginning balance	330	528	367	597
Provision for (recapture of) loan losses	(40)	(87)	(77)	(156)
Recoveries	30		30
Ending balance	320	441	320	441
Multi-family
Allowance for loan losses:
Beginning balance	2,711	1,866	2,659	1,658
Provision for (recapture of) loan losses	8	381	60	589
Ending balance	2,719	2,247	2,719	2,247
Commercial real estate
Allowance for loan losses:
Beginning balance	75	444	215	469
Provision for (recapture of) loan losses	2	(452)	(138)	(477)
Recoveries		248		248
Ending balance	77	240	77	240
Church
Allowance for loan losses:
Beginning balance	1,250	1,676	1,337	2,083
Provision for (recapture of) loan losses	(270)	(86)	(496)	(499)
Recoveries	124	6	263	12
Ending balance	1,104	1,596	1,104	1,596
Construction
Allowance for loan losses:
Beginning balance	9	3	8	3
Provision for (recapture of) loan losses			1
Ending balance	9	3	9	3
Commercial - other
Allowance for loan losses:
Beginning balance	16	17	17	18
Provision for (recapture of) loan losses	1	(7)		(8)
Recoveries		7		7
Ending balance	17	17	$ 17	17
Consumer
Allowance for loan losses:
Beginning balance	1
Provision for (recapture of) loan losses	$ (1)	1		1
Ending balance		$ 1		$ 1

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Loans Receivable Held for Investment - Allowance for Loan Losses and Recorded Investment in Loans by Type of Loans and Based on Impairment Method (Details) - USD ($) $ in Thousands	Jun. 30, 2017	Mar. 31, 2017	Dec. 31, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$ 583		$ 656
Collectively evaluated for impairment	3,663		3,947
Total ending allowance balance	4,246	$ 4,392	4,603	$ 4,545	$ 4,534	$ 4,828
Loans:
Loans individually evaluated for impairment	10,732		11,897
Loans collectively evaluated for impairment	343,822		372,160
Total ending loans balance	354,554		384,057
Single family
Ending allowance balance attributable to loans:
Individually evaluated for impairment	117		125
Collectively evaluated for impairment	203		242
Total ending allowance balance	320	330	367	441	528	597
Loans:
Loans individually evaluated for impairment	636		644
Loans collectively evaluated for impairment	95,682		104,688
Total ending loans balance	96,318		105,332
Multi-family
Ending allowance balance attributable to loans:
Collectively evaluated for impairment	2,719		2,659
Total ending allowance balance	2,719	2,711	2,659	2,247	1,866	1,658
Loans:
Loans individually evaluated for impairment	632		642
Loans collectively evaluated for impairment	215,788		230,798
Total ending loans balance	216,420		231,440
Commercial real estate
Ending allowance balance attributable to loans:
Collectively evaluated for impairment	77		215
Total ending allowance balance	77	75	215	240	444	469
Loans:
Loans collectively evaluated for impairment	6,410		8,921
Total ending loans balance	6,410		8,921
Church
Ending allowance balance attributable to loans:
Individually evaluated for impairment	452		516
Collectively evaluated for impairment	652		821
Total ending allowance balance	1,104	1,250	1,337	1,596	1,676	2,083
Loans:
Loans individually evaluated for impairment	9,399		10,545
Loans collectively evaluated for impairment	24,712		26,678
Total ending loans balance	34,111		37,223
Construction
Ending allowance balance attributable to loans:
Collectively evaluated for impairment	9		8
Total ending allowance balance	9	9	8	3	3	3
Loans:
Loans collectively evaluated for impairment	947		827
Total ending loans balance	947		827
Commercial - other
Ending allowance balance attributable to loans:
Individually evaluated for impairment	14		15
Collectively evaluated for impairment	3		2
Total ending allowance balance	17	16	17	17	$ 17	$ 18
Loans:
Loans individually evaluated for impairment	65		66
Loans collectively evaluated for impairment	279		242
Total ending loans balance	344		308
Consumer
Ending allowance balance attributable to loans:
Total ending allowance balance		$ 1		$ 1
Loans:
Loans collectively evaluated for impairment	4		6
Total ending loans balance	$ 4		$ 6

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Loans Receivable Held for Investment - Loans Individually Evaluated for Impairment by Loan Type (Details) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Impaired loans
Unpaid Principal Balance	$ 13,140	$ 14,628
Recorded Investment	10,732	11,897
Allowance for Loan Losses Allocated, With an allowance recorded	583	656
Single family
Impaired loans
Unpaid Principal Balance, With an allowance recorded	636	644
Recorded Investment, With an allowance recorded	636	644
Allowance for Loan Losses Allocated, With an allowance recorded	117	125
Multi-family
Impaired loans
Unpaid Principal Balance, With no related allowance recorded	632	642
Recorded Investment, With no related allowance recorded	632	642
Church
Impaired loans
Unpaid Principal Balance, With no related allowance recorded	6,068	5,946
Unpaid Principal Balance, With an allowance recorded	5,739	7,330
Recorded Investment, With no related allowance recorded	3,819	3,589
Recorded Investment, With an allowance recorded	5,580	6,956
Allowance for Loan Losses Allocated, With an allowance recorded	452	516
Commercial - other
Impaired loans
Unpaid Principal Balance, With an allowance recorded	65	66
Recorded Investment, With an allowance recorded	65	66
Allowance for Loan Losses Allocated, With an allowance recorded	$ 14	$ 15

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Loans Receivable Held for Investment - Average of Loans Individually Evaluated for Impairment by Loan Type and Related Interest Income (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Impaired loans
Average Recorded Investment	$ 11,956	$ 14,620	$ 11,909	$ 14,994
Cash Basis Interest Income Recognized	233	352	479	582
Foregone interest income if impaired loans had performed according to terms	28	0	74	97
Single family
Impaired loans
Average Recorded Investment	638	927	640	939
Cash Basis Interest Income Recognized	7	7	14	14
Multi-family
Impaired loans
Average Recorded Investment	635	966	638	1,102
Cash Basis Interest Income Recognized	12	11	23	52
Commercial real estate
Impaired loans
Average Recorded Investment	992	1,746	567	1,825
Cash Basis Interest Income Recognized	104	211	104	267
Church
Impaired loans
Average Recorded Investment	9,625	10,915	9,998	11,061
Cash Basis Interest Income Recognized	109	121	336	247
Commercial - other
Impaired loans
Average Recorded Investment	66	66	66	67
Cash Basis Interest Income Recognized	$ 1	$ 2	$ 2	$ 2

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Loans Receivable Held for Investment - Aging of Recorded Investment in Past Due Loans by Loan Type (Details) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Past due receivable
Total Past Due	$ 1,670	$ 1,388
Current	352,884	382,669
30-59 Days Past Due
Past due receivable
Total Past Due	371	1,324
60-89 Days Past Due
Past due receivable
Total Past Due	57	64
Greater than 90 Days Past Due
Past due receivable
Total Past Due	1,242
Single family
Past due receivable
Total Past Due	57	64
Current	96,261	105,268
Single family | 60-89 Days Past Due
Past due receivable
Total Past Due	57	64
Multi-family
Past due receivable
Current	216,420	231,440
Commercial real estate
Past due receivable
Total Past Due		1,324
Current	6,410	7,597
Commercial real estate | 30-59 Days Past Due
Past due receivable
Total Past Due		1,324
Church
Past due receivable
Total Past Due	1,613
Current	32,498	37,223
Church | 30-59 Days Past Due
Past due receivable
Total Past Due	371
Church | Greater than 90 Days Past Due
Past due receivable
Total Past Due	1,242
Construction
Past due receivable
Current	947	827
Commercial - other
Past due receivable
Current	344	308
Consumer
Past due receivable
Current	$ 4	$ 6

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Loans Receivable Held for Investment - Recorded Investment in Non-accrual Loans by Loan Type (Details) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Investment in non-accrual loans by type of loans
Loans 90 days or more delinquent that were accruing interest	$ 0	$ 0
Church
Investment in non-accrual loans by type of loans
Total non-accrual loans	$ 2,800	$ 2,900

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Loans Receivable Held for Investment - Troubled Debt Restructuring (Details) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017 USD ($) loan	Jun. 30, 2016 loan	Jun. 30, 2017 USD ($) loan	Jun. 30, 2016 loan	Dec. 31, 2016 USD ($)
Troubled debt restructuring
Loans classified as Troubled Debt Restructurings	$ 10,300		$ 10,300		$ 11,500
Specific reserves allocated to TDRs	583		$ 583		656
Timely payment period for return to accrual status			6 months
Commitments to lend additional amounts to customers with TDRs	$ 0		$ 0		0
Number of loans modified | loan	0	0	0	0
Non-accrual status
Troubled debt restructuring
Loans classified as Troubled Debt Restructurings	$ 2,400		$ 2,400		2,500
Accrual status
Troubled debt restructuring
Loans classified as Troubled Debt Restructurings	$ 7,900		$ 7,900		$ 9,000

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Loans Receivable Held for Investment - Risk Category of Loans by Loan Type (Details) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Credit Quality Indicators
Loans receivable	$ 354,554	$ 384,057
Single family
Credit Quality Indicators
Loans receivable	96,318	105,332
Multi-family
Credit Quality Indicators
Loans receivable	216,420	231,440
Commercial real estate
Credit Quality Indicators
Loans receivable	6,410	8,921
Church
Credit Quality Indicators
Loans receivable	34,111	37,223
Construction
Credit Quality Indicators
Loans receivable	947	827
Commercial - other
Credit Quality Indicators
Loans receivable	344	308
Consumer
Credit Quality Indicators
Loans receivable	4	6
Pass
Credit Quality Indicators
Loans receivable	345,971	369,454
Pass | Single family
Credit Quality Indicators
Loans receivable	96,318	105,332
Pass | Multi-family
Credit Quality Indicators
Loans receivable	215,138	228,522
Pass | Commercial real estate
Credit Quality Indicators
Loans receivable	6,287	6,965
Pass | Church
Credit Quality Indicators
Loans receivable	26,998	27,560
Pass | Construction
Credit Quality Indicators
Loans receivable	947	827
Pass | Commercial - other
Credit Quality Indicators
Loans receivable	279	242
Pass | Consumer
Credit Quality Indicators
Loans receivable	4	6
Watch
Credit Quality Indicators
Loans receivable	569	2,417
Watch | Multi-family
Credit Quality Indicators
Loans receivable		1,274
Watch | Commercial real estate
Credit Quality Indicators
Loans receivable	123
Watch | Church
Credit Quality Indicators
Loans receivable	446	1,143
Special Mention
Credit Quality Indicators
Loans receivable	269	1,165
Special Mention | Multi-family
Credit Quality Indicators
Loans receivable		342
Special Mention | Church
Credit Quality Indicators
Loans receivable	269	823
Substandard
Credit Quality Indicators
Loans receivable	7,745	11,021
Substandard | Multi-family
Credit Quality Indicators
Loans receivable	1,282	1,302
Substandard | Commercial real estate
Credit Quality Indicators
Loans receivable		1,956
Substandard | Church
Credit Quality Indicators
Loans receivable	6,398	7,697
Substandard | Commercial - other
Credit Quality Indicators
Loans receivable	$ 65	$ 66

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Junior Subordinated Debentures (Details) - USD ($) $ in Thousands		6 Months Ended
	Oct. 16, 2014	Jun. 30, 2017	Dec. 31, 2016	Mar. 17, 2004
Junior Subordinated Debentures
Junior subordinated debentures		$ 5,100	$ 5,100
Floating Rate Junior Subordinated Debentures
Junior Subordinated Debentures
Junior subordinated debentures	$ 5,100
Effective interest rate on debentures (as a percent)		3.81%
Payment of principal amount at face value required to extend maturity	$ 900
Floating Rate Junior Subordinated Debentures | 3-month LIBOR
Junior Subordinated Debentures
Debt instrument interest rate description		3-Month LIBOR
Basis spread (as a percent)		2.54%
Floating Rate Junior Subordinated Debentures | Private Placement
Junior Subordinated Debentures
Junior subordinated debentures				$ 6,000

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Fair Value - Assets Measured at Fair Value on a Recurring Basis (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016	Dec. 31, 2016
Fair Value
Transfer between level 1 and level 2	$ 0	$ 0	$ 0	$ 0
Transfer between level 2 and level 1	0	0	0	0
Transfer into level 3	0	0	0	0
Transfer out of level 3	0	$ 0	0	$ 0
Recurring Basis | Residential mortgage-backed
Fair Value
Securities available-for-sale, at fair value	10,040,000		10,040,000		$ 11,214,000
Recurring Basis | U.S. Government and federal agency
Fair Value
Securities available-for-sale, at fair value	1,989,000		1,989,000		1,988,000
Recurring Basis | Quoted Prices in Active Markets for Identical Assets (Level 1) | U.S. Government and federal agency
Fair Value
Securities available-for-sale, at fair value	1,989,000		1,989,000		1,988,000
Recurring Basis | Significant Other Observable Unobservable Inputs (Level 2) | Residential mortgage-backed
Fair Value
Securities available-for-sale, at fair value	$ 10,040,000		$ 10,040,000		$ 11,214,000

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Fair Value - Assets Measured at Fair Value on Non-recurring Basis (Details) - Non-Recurring Basis - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016	Dec. 31, 2016
Fair Value
Losses recognized on loans	$ 0	$ 0	$ 0	$ 0
Impaired loans carried at fair value of collateral | Significant Unobservable Inputs (Level 3)
Fair Value
Impaired loans carried at fair value of collateral	$ 1,652		$ 1,652		$ 1,744

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Fair Value - Valuation Methodology and Unobservable Inputs (Details) - Non-Recurring Basis - Significant Unobservable Inputs (Level 3) - Impaired loans carried at fair value of collateral - Third Party Appraisal	6 Months Ended	12 Months Ended
	Jun. 30, 2017	Dec. 31, 2016
Minimum
Fair value quantitative information
Adjustment for differences between the comparable sales (as a percent)	(16.00%)	(2.00%)
Maximum
Fair value quantitative information
Adjustment for differences between the comparable sales (as a percent)	0.00%	0.00%
Weighted Average
Fair value quantitative information
Adjustment for differences between the comparable sales (as a percent)	(3.00%)	(1.00%)

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Fair Value - Fair Value - Fair Values of Financial Instruments (Details) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Financial Assets:
Securities available-for-sale	$ 12,029	$ 13,202
Carrying Value
Financial Assets:
Cash and cash equivalents	16,835	18,430
Securities available-for-sale	12,029	13,202
Loans receivable held for sale	39,037
Loans receivable held for investment	350,308	379,454
Accrued interest receivable	1,103	1,178
Federal Home Loan Bank stock	2,916	2,573
Financial Liabilities:
Deposits	273,847	287,427
Federal Home Loan Bank advances	104,000	85,000
Junior subordinated debentures	5,100	5,100
Accrued interest payable	105	154
Fair Value
Financial Assets:
Cash and cash equivalents	16,835	18,430
Securities available-for-sale	12,029	13,202
Loans receivable held for sale	39,597
Loans receivable held for investment	351,238	382,717
Accrued interest receivable	1,103	1,178
Federal Home Loan Bank stock	2,916	2,573
Financial Liabilities:
Deposits	264,619	278,254
Federal Home Loan Bank advances	104,418	85,748
Junior subordinated debentures	4,458	4,414
Accrued interest payable	105	154
Quoted Prices in Active Markets for Identical Assets (Level 1) | Fair Value
Financial Assets:
Cash and cash equivalents	16,835	18,430
Securities available-for-sale	1,989	1,988
Accrued interest receivable	57	64
Federal Home Loan Bank stock	2,916	2,573
Significant Other Observable Unobservable Inputs (Level 2) | Fair Value
Financial Assets:
Securities available-for-sale	10,040	11,214
Loans receivable held for sale	39,597
Accrued interest receivable	71	29
Financial Liabilities:
Deposits	264,619	278,254
Federal Home Loan Bank advances	104,418	85,748
Accrued interest payable	98	147
Significant Unobservable Inputs (Level 3) | Fair Value
Financial Assets:
Loans receivable held for investment	351,238	382,717
Accrued interest receivable	975	1,085
Financial Liabilities:
Junior subordinated debentures	4,458	4,414
Accrued interest payable	$ 7	$ 7

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Stock-based Compensation (Details) - 2008 LTIP - USD ($)	1 Months Ended		3 Months Ended		6 Months Ended
	Apr. 30, 2017	Mar. 31, 2016	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Stock-based compensation
Shares authorized to be granted under stock compensation plan			2,000,000		2,000,000
Shares available for future awards under stock compensation plan			1,308,890		1,308,890
Directors | Common Stock
Stock-based compensation
Stock based compensation expense	$ 52,000
Shares
Granted (in shares)	30,002
Stock Options
Shares
Outstanding at beginning of the period (in shares)					540,625	90,625
Granted (in shares)						450,000
Outstanding at end of the period (in shares)			540,625	540,625	540,625	540,625
Exercisable at end of the period (in shares)			180,625	90,625	180,625	90,625
Weighted Average Exercise Price
Outstanding at beginning of period (in dollars per share)					$ 2.18	$ 4.95
Granted price (in dollars per share)						1.62
Outstanding at end of period (in dollars per share)			$ 2.18	$ 2.18	2.18	2.18
Exercisable at end of period (in dollars per share)			$ 3.29	$ 4.95	$ 3.29	$ 4.95
Additional disclosures
Weighted Average Remaining Contractual Term, Outstanding (in years)					7 years 6 months	8 years 6 months
Weighted Average Remaining Contractual Term, Exercisable (in years)					5 years 2 months 9 days	2 years 9 months
Aggregate Intrinsic Value			$ 225,000	$ 86,000	$ 225,000	$ 86,000
Aggregate Intrinsic Value (Exercisable)			45,000		45,000
Stock Options | Senior Executive Officers
Stock-based compensation
Vesting period of stock award						5 years
Contractual term of option awards						10 years
Fair value of stock options						$ 194,000
Stock option per shares (in dollars per share)						$ 0.43
Volatility						27.36%
Risk free interest rate						1.21%
Expected option term						5 years
Dividend yield						0.00%
Stock based compensation expense			10,000	10,000	$ 19,000	$ 13,000
Shares
Granted (in shares)					0	450,000
Weighted Average Exercise Price
Exercised price (in dollars per share)						$ 1.62
Additional disclosures
Unrecognized compensation cost			142,000		$ 142,000
Period for recognizing unrecognized compensation cost					3 years 7 months 24 days
Restricted stock | Chief Executive Officer
Stock-based compensation
Restricted stock award (in shares)		120,483
Stock based compensation expense			27,000	$ 26,000	$ 53,000	$ 26,000
Additional disclosures
Unrecognized compensation cost			92,000		92,000
Restricted stock | Chief Executive Officer | Expected Recognition Period: 9 months
Additional disclosures
Unrecognized compensation cost			79,000		$ 79,000
Period for recognizing unrecognized compensation cost					9 months
Restricted stock | Chief Executive Officer | Expected Recognition Period: 12 months
Additional disclosures
Unrecognized compensation cost			13,000		$ 13,000
Period for recognizing unrecognized compensation cost					12 months
Cash-settled restricted stock units | Chief Executive Officer
Stock-based compensation
Restricted stock award (in shares)	129,270
Vesting period of stock award	2 years
Stock based compensation expense			$ 23,000
Two-year period | Restricted stock | Chief Executive Officer
Stock-based compensation
Restricted stock award (in shares)		100,000
Vesting period of stock award		2 years
Three-year period | Restricted stock | Chief Executive Officer
Stock-based compensation
Restricted stock award (in shares)		20,483
Vesting period of stock award		3 years

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ESOP Plan (Details) - USD ($) $ / shares in Units, $ in Thousands	1 Months Ended	3 Months Ended		6 Months Ended
	Dec. 31, 2016	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
ESOP Plan
Number of common stock purchased by ESOP (in shares)	1,493,679
Purchase price of common stock	$ 1.59
Total cost of shares purchased by ESOP	$ 2,400
Loan to ESOP	$ 1,200
Term of ESOP loan (in years)	20 years
Compensation expense		$ 25	$ 19	$ 47	$ 45
Unearned ESOP shares	$ 1,176	$ 1,133		$ 1,133
Shares committed to be released		26,750		26,750
Summary of shares held by the ESOP
Allocated to participants	1,114,683	1,114,683		1,114,683
Suspense shares	739,748	739,748		739,748
Total ESOP shares	1,854,431	1,854,431		1,854,431
Fair value of unearned shares	$ 1,213	$ 1,512		$ 1,512

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Regulatory Matters (Details)	Jun. 30, 2017	Dec. 31, 2016
Regulatory Matters
Common Equity Tier 1 required for capital adequacy purposes, ratio (as a percent)	4.50%	4.50%
Tier 1 required for capital adequacy purposes, ratio (as a percent)	6.00%	6.00%
Total capital required for capital adequacy purposes, ratio (as a percent)	8.00%	8.00%
Leverage required for capital adequacy purposes, ratio (as a percent)	4.00%	4.00%
Conservation Buffer Rule Starting January 2016
Regulatory Matters
Capital conservation buffer annual increase (as a percent)	0.625%
Conservation Buffer Rule Subsequent to 2016
Regulatory Matters
Capital conservation buffer annual increase (as a percent)	0.625%
Maximum | Conservation Buffer Rule
Regulatory Matters
Capital conservation buffer (as a percent)	2.50%

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Regulatory Matters - Schedule of Actual and Required Capital Amounts and Ratios (Details) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Regulatory Matters
Tier-1 Leverage	$ 47,009	$ 43,954
Tier 1 Leverage, ratio (as a percent)	10.51%	10.60%
Common Equity Tier 1	$ 47,009	$ 43,954
Common Equity Tier 1, ratio (as a percent)	15.87%	15.36%
Tier 1	$ 47,009	$ 43,954
Tier 1, ratio (as a percent)	15.87%	15.36%
Total Capital	$ 50,720	$ 47,544
Total Capital, ratio (as a percent)	17.12%	16.62%
Leverage required for capital adequacy purposes	$ 17,884	$ 16,594
Leverage required for capital adequacy purposes, ratio (as a percent)	4.00%	4.00%
Common Equity Tier 1 required for capital adequacy purposes	$ 13,333	$ 12,875
Common Equity Tier 1 required for capital adequacy purposes, ratio (as a percent)	4.50%	4.50%
Tier 1 required for capital adequacy purposes	$ 17,777	$ 17,166
Tier 1 required for capital adequacy purposes, ratio (as a percent)	6.00%	6.00%
Total capital required for capital adequacy purposes	$ 23,703	$ 22,888
Total capital required for capital adequacy purposes, ratio (as a percent)	8.00%	8.00%

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Regulatory Matters - Schedule of Actual and Required Capital Amounts and Ratios (Details) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Basel III and Dodd Frank Rules
Tier 1 Leverage required to be Well Capitalized	$ 22,356	$ 20,742
Tier 1 Leverage required to be Well Capitalized (as a percent)	5.00%	5.00%
Common Equity Tier I required to be Well Capitalized	$ 19,258	$ 18,597
Common Equity Tier I required to be Well Capitalized (as a percent)	6.50%	6.50%
Tier I Capital required to be Well Capitalized	$ 23,703	$ 22,888
Tier I Capital required to be Well Capitalized (as a percent)	8.00%	8.00%
Total Capital required to be Well Capitalized	$ 29,628	$ 28,610
Total Capital required to be Well Capitalized (as a percent)	10.00%	10.00%

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Income Taxes (Details) - USD ($) $ in Millions	6 Months Ended
	Jun. 30, 2017	Dec. 31, 2016
Income Taxes
Period for which prior cumulative losses considered in assessing the realization of deferred tax assets	2 years
Valuation allowance	$ 0.0	$ 0.0
Net deferred tax assets	$ 6.0	$ 6.9

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Concentration of Credit Risk (Details)	6 Months Ended
	Jun. 30, 2017
Long-time Customer | Deposits
Concentration of Credit Risk
Percentage of concentration of risk	12.00%