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, 2019

[  ]       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)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class:	Trading Symbol(s)	Name of each exchange on which registered:
Common Stock, par value $0.01 per share	BYFC	The NASDAQ Stock Market, LLC

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 every Interactive Data File required to be submitted 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 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	x	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. ¨

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 2, 2019, 19,111,422 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 STATEMENTS
	Item 1.	Consolidated Financial Statements (Unaudited)
		Consolidated Statements of Financial Condition as of June 30, 2019 and December 31, 2018	1
		Consolidated Statements of Operations and Comprehensive (Loss) Income for the three and six months ended June 30, 2019 and 2018	2
		Consolidated Statements of Cash Flows for the six months ended June 30, 2019 and 2018	3
		Consolidated Statements of Changes in Stockholders’ Equity three and six months ended June 30, 2019 and 2018	4
		Notes to Consolidated Financial Statements	5
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	32
	Item 4.	Controls and Procedures	32
PART II.	OTHER INFORMATION
	Item 1.	Legal Proceedings	33
	Item 1A.	Risk Factors	33
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	33
	Item 3.	Defaults Upon Senior Securities	33
	Item 4.	Mine Safety Disclosures	33
	Item 5.	Other Information	33
	Item 6.	Exhibits	33
	Signatures		34

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Consolidated Statements of Financial Condition

(In thousands, except share and per share amounts)

	June 30, 2019		December 31, 2018
	(Unaudited)
Assets:
Cash and due from banks	$	2.587	$	4,124
Interest-bearing deposits in other banks	17,559		12,527
Cash and cash equivalents	20,146		16,651
Securities available-for-sale, at fair value	14,110		14,722
Loans receivable held for sale, at lower of cost or fair value	26,085		6,231
Loans receivable held for investment, net of allowance of $2,771 and $2,929	353,342		355,556
Accrued interest receivable	1,254		1,143
Federal Home Loan Bank (FHLB) stock, at cost	2,916		2,916
Office properties and equipment, net	3,140		2,242
Bank owned life insurance	3,073		3,047
Deferred tax assets, net	4,972		5,045
Investment in affordable housing limited partnership	244		342
Real estate owned (REO)	-		833
Other assets	562		669
Total assets	$	429,844	$	409,397
Liabilities and stockholders’ equity
Liabilities:
Deposits	$	295,798	$	281,414
FHLB advances	75,000		70,000
Junior subordinated debentures	4,845		5,100
Advance payments by borrowers for taxes and insurance	1,084		1,055
Accrued expenses and other liabilities	4,101		3,392
Total liabilities	380,828		360,961
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, 2019 and December 31, 2018; issued 21,732,500 shares at June 30, 2019 and 21,280,228 shares at December 31, 2018; outstanding 19,114,674 shares at June 30, 2019 and 18,662,402 shares at December 31, 2018	218		213
Common stock, $.01 par value, non-voting, authorized 25,000,000 shares at June 30, 2019 and  December 31, 2018; issued and outstanding 8,756,396 shares at June 30, 2019 and December 31, 2018	87		87
Additional paid-in capital	46,292		46,141
Retained earnings	8,773		8,631
Unearned Employee Stock Ownership Plan (ESOP) shares	(994)		(1,027)
Accumulated other comprehensive loss, net of tax	(34)		(283)
Treasury stock-at cost, 2,617,826 shares at June 30, 2019 and at December 31, 2018	(5,326)		(5,326)
Total stockholders’ equity	49,016		48,436
Total liabilities and stockholders’ equity	$	429,844	$	409,397

See accompanying notes to unaudited consolidated financial statements.

1

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Consolidated Statements of Operations and Comprehensive (Loss) Income

(Unaudited)

	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
	(In thousands, except per share)
Interest income:
Interest and fees on loans receivable	$	3,841	$	3,415	$	7,956	$	6,924
Interest on mortgage-backed and other securities	95		104		193		213
Other interest income	149		115		309		255
Total interest income	4,085		3,634		8,458		7,392
Interest expense:
Interest on deposits	1,097		685		2,124		1,316
Interest on borrowings	526		377		1,059		730
Total interest expense	1,623		1,062		3,183		2,046
Net interest income	2,462		2,572		5,275		5,346
Loan loss provision recapture	158		-		348		-
Net interest income after loan loss provision recapture	2,620		2,572		5,623		5,346
Non-interest income:
Service charges	115		111		237		226
Gain on sale of loans	-		11		-		11
CDFI Grant	-		-		233		-
Other	24		48		45		64
Total non-interest income	139		170		515		301
Non-interest expense:
Compensation and benefits	1,875		1,751		3,757		3,656
Occupancy expense	312		317		620		633
Information services	218		206		426		420
Professional services	235		183		574		371
Office services and supplies	67		66		135		148
REO expense	(6)		24		25		86
Marketing expense	33		87		72		137
Corporate insurance	34		36		69		78
Amortization of investment in affordable housing limited partnership	49		49		98		97
Other	205		204		306		329
Total non-interest expense	3,022		2,923		6,082		5,955
(Loss) income before income taxes	(263)		(181)		56		(308)
Income tax benefit	(128)		(54)		(86)		(97)
Net (loss) income	$	(135)	$	(127)	$	142	$	(211)
Other comprehensive income (loss), net of tax:
Unrealized gains (losses) on securities available-for-sale arising during the period	$	157	$	(76)	$	353	$	(360)
Income tax expense (benefit)	46		(23)		104		(107)
Other comprehensive income (loss), net of tax	111		(53)		249		(253)
Comprehensive (loss) income	$	(24)	$	(180)	$	391	$	(464)
(Loss) earnings per common share-basic	$	(0.01)	$	(0.00)	$	0.01	$	(0.01)
(Loss) earnings per common share-diluted	$	(0.01)	$	(0.00)	$	0.01	$	(0.01)

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,
	2019			2018
	(In thousands)
Cash flows from operating activities:
Net income (loss)	$	142			$	(211	)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Loan loss provision recapture	(348		)		-
Provision for losses on REOs	13				45
Depreciation	115				121
Net amortization of deferred loan origination costs	95				276
Net amortization of premiums on mortgage-backed securities	13				20
Amortization of investment in affordable housing limited partnership	98				97
Director compensation expense-common stock	52				45
Stock-based compensation expense	109				49
ESOP compensation expense	28				48
Earnings on bank owned life insurance	(26		)		(26		)
Originations of loans receivable held for sale	(10,280		)		-
Proceeds from sales of loans receivable held for sale	-				4,349
Repayments on loans receivable held for sale	46				82
Gain on sale of loans receivable held for sale	-				(11		)
Change in assets and liabilities:
Net change in deferred taxes	(31		)		15
Net change in accrued interest receivable	(111		)		(43		)
Net change in other assets	107				113
Net change in advance payments by borrowers for taxes and insurance	29				(160		)
Net change in accrued expenses and other liabilities	(281		)		(30		)
Net cash (used in) provided by operating activities	(10,230		)		4,779
Cash flows from investing activities:
Net change in loans receivable held for investment	(7,153		)		(13,362		)
Principal payments on available-for-sale securities	952				1,137
Proceeds from sales of REO	820				-
Purchase of office properties and equipment	(23		)		(43		)
Net cash used in investing activities	(5,404		)		(12,268		)
Cash flows from financing activities:
Net change in deposits	14,384				(20,024		)
Proceeds from FHLB advances	10,000				36,500
Repayments of FHLB advances	(5,000		)		(17,500		)
Payment for tax withholding for vesting of restricted stock	-				(108		)
Repayments of junior subordinated debentures	(255		)		-
Net cash provided by (used in) financing activities	19,129				(1,132		)
Net change in cash and cash equivalents	3,495				(8,621		)
Cash and cash equivalents at beginning of the period	16,651				22,219
Cash and cash equivalents at end of the period	$	20,146			$	13,598
Supplemental disclosures of cash flow information:
Cash paid for interest	$	2,971			$	2,048
Cash paid for income taxes	13				-
Supplemental disclosures of non-cash investing and financing:
Transfers of loans receivable held for sale to loans receivable held for investment	$	1,064			$	16,871
Transfers of loans receivable held for investment to loans receivable held for sale	10,684				-
Common stock exchanged for payment of tax withholding	-				108
Initial Recognition of Operating Lease Right-to-Use Assets	1,120				-
Initial Recognition of Operating Lease Liabilities	1,120				-

See accompanying notes to unaudited consolidated financial statements.

3

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Consolidated Statements of Changes in Stockholders’ Equity

(Unaudited)

	Three-Month Period Ended June 30, 2018 and 2019
	Common Stock Voting		Common Stock Non- Voting		Additional Paid-in Capital		Accumulated Other Comprehensive Income		Retained Earnings (Substantially Restricted)		Unearned ESOP Shares		Treasury Stock		Total Stockholders’ Equity
							(In thousands)
Balance at April 1, 2018	$	213	$	87	$	46,098	$	(281)	$	7,732	$	(1,078)	$	(5,326)	$	47,445
Net income for the three months ended June 30, 2018		-		-		-		-		(127)		-		-		(127)
Release of unearned ESOP shares		-		-		5		-		-		18		-		23
Restricted stock Compensation expense		-		-		4		-		-		-		-		4
Stock awarded to directors		-		-		-		-		-		-		-		-
Stock option compensation expense		-		-		9		-		-		-		-		9
Other comprehensive income, net of tax		-		-		-		(53)		-		-		-		(53)
Balance at June 30, 2018	$	213	$	87	$	46,116	$	(334)	$	7,605	$	(1,060)	$	(5,326)	$	47,301
Balance at April 1, 2019	$	218	$	87	$	46,219	$	(145)	$	8,908	$	(1,010)	$	(5,326)	$	48,951
Net income for the three months ended June 30, 2019		-		-		-		-		(135)		-		-		(135)
Release of unearned ESOP shares		-		-		(2)		-		-		16		-		14
Restricted stock Compensation expense		-		-		65		-		-		-		-		65
Stock awarded to directors		-		-		-		-		-		-		-		-
Stock option compensation expense		-		-		10		-		-		-		-		10
Other comprehensive income, net of tax		-		-		-		111		-		-		-		111
Balance at June 30, 2019	$	218	$	87	$	46,292	$	(34)	$	8,773	$	(994)	$	(5,326)	$	49,016

	Six-Month Period Ended June 30, 2018 and 2019
	Common Stock Voting		Common Stock Non- Voting		Additional Paid-in Capital		Accumulated Other Comprehensive Income		Retained Earnings (Substantially Restricted)		Unearned ESOP Shares		Treasury Stock		Total Stockholders’ Equity
							(In thousands)
Balance at January 1, 2018	$	213	$	87	$	46,117	$	(81)	$	7,816	$	(1,095)	$	(5,326)	$	47,731
Net income for the six months ended June 30, 2018		-		-		-		-		(211)		-		-		(211)
Release of unearned ESOP shares		-		-		13		-		-		35		-		48
Restricted stock Compensation expense		-		-		30		-		-		-		-		30
Stock awarded to directors		-		-		45		-		-		-		-		45
Stock option compensation expense		-		-		19		-		-		-		-		19
Cancellation of shares issued to CEO		-		-		(108)		-		-		-		-		(108)
Other comprehensive loss, net of tax		-		-		-		(253)		-		-		-		(253)
Balance at June 30, 2018	$	213	$	87	$	46,116	$	(334)	$	7,605	$	(1,060)	$	(5,326)	$	47,301
Balance at January 1, 2019	$	213	$	87	$	46,141	$	(283)	$	8,631	$	(1,027)	$	(5,326)	$	48,436
Net income for the six months ended June 30, 2019		-		-		-		-		142		-		-		142
Release of unearned ESOP shares		-		-		(5)		-		-		33		-		28
Restricted stock Compensation expense		5		-		85		-		-		-		-		90
Stock awarded to directors		-		-		52		-		-		-		-		52
Stock option compensation expense		-		-		19		-		-		-		-		19
Cancellation of shares issued to CEO		-		-		-		-		-		-		-		-
Other comprehensive loss, net of tax		-		-		-		249		-		-		-		249
Balance at June 30, 2019	$	218	$	87	$	46,292	$	(34)	$	8,773	$	(994)	$	(5,326)	$	49,016

See accompanying notes to unaudited consolidated financial statements.

4

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Unaudited Consolidated Financial Statements

June 30, 2019

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, 2018 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, 2019 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019.

Recently Adopted Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-02, “Leases (Topic 842)”, which is intended to increase transparency and comparability in the accounting for lease transactions.  ASU 2016-02 became effective as of January 1, 2019 and provides for a modified retrospective transition approach requiring lessees to recognize and measure leases on the balance sheet at either the earliest period presented or the beginning of the period of adoption with the option to elect certain practical expedients. We have elected to apply ASU 2016-02 as of the beginning of the period of adoption, which was January 1, 2019 and we have elected not to restate comparative periods. Of the practical expedients available under ASU 2016-02, all have been adopted.

The Bank has a combined operating lease for its corporate headquarters and main retail branch and a photocopier lease. As a result of implementing ASU 2016-02, we recognized an operating lease right-of-use (“ROU”) asset of $1.2 million and an operating lease liability of $1.2 million as of January 1, 2019, with no impact on our consolidated statements of operations or consolidated statements of cash flows compared to the prior lease accounting model. The ROU asset and operating lease liability are recorded in fixed assets and other liabilities, respectively, in the consolidated statements of financial condition. See Note 6 – Leases for additional information. The implementation of this standard had a minor impact on our regulatory capital ratios.

Recent Accounting Pronouncements Yet to Be Adopted

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 replaces the incurred loss model with an expected loss model, which is referred to as the current expected credit loss (CECL) model.  The CECL model is applicable to the measurement of credit losses on financial assets measured at amortized cost, including loan receivables, held-to-maturity debt securities, and reinsurance receivables. It also applies to off-balance sheet credit exposures not accounted for as insurance (such as loan commitments, standby letters of credit, financial guarantees, and other similar instruments) and net investments in leases recognized by a lessor.  For public business entities that meet the definition of an SEC filer, the standard will be effective for fiscal years beginning after Dec. 15, 2019, including interim periods in those fiscal years.  All entities may early adopt for fiscal years beginning after Dec. 15, 2018, including interim periods in those fiscal years.  For debt securities with other-than-temporary impairment, the guidance will be applied prospectively.  Existing purchased credit impaired (PCI) assets will be grandfathered and classified as purchased credit deteriorated (PCD) assets at the date of adoption.  The asset will be grossed up for the allowance for expected credit losses for all PCD assets at the date of adoption and will continue to recognize the noncredit discount in interest income based on the yield of such assets as of the adoption date.  Subsequent changes in expected credit losses will be recorded through the allowance.  For all other assets within the scope of CECL, a cumulative-effect adjustment will be recognized in retained earnings as of the beginning of the first reporting period in which the guidance is effective.  The Company has begun its implementation efforts by identifying key interpretive issues, assessing its processes and identifying the system requirements against the new guidance to determine

5

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Unaudited Consolidated Financial Statements (continued)

what modifications may be required.  While the Company is still evaluating the overall impact on the new standard on its consolidated financial statements, the Company expects the adoption may result in an increase to the allowance for loan losses balance.

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement. The ASU was issued to improve the effectiveness of disclosures surrounding fair value measurements. The ASU removes numerous disclosures from Topic 820 including; transfers between level 1 and 2 of the fair value hierarchy, the policy for timing of transfers between levels, and the valuation process for level 3 fair value measurements. The ASU also modified and added disclosure requirements in regards to changes in unrealized gains and losses included in other comprehensive income, as well as the range and weighted average of unobservable inputs for level 3 fair value measurements. The ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted. The guidance is not expected to have a significant impact on the Company’s consolidated financial statements.

In April 2019, the FASB issued ASU No. 2019-04, Codification Improvements to Topic 326, Financial Instruments - Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments.  This ASU is effective January 1, 2020 and clarifies the scope of the credit losses standard and addresses issues related to accrued interest receivable balances, recoveries, variable interest rates and prepayments, among other things. The amendments to Topic 326 have the same effective dates as ASU 2016-13. We will evaluate this ASU in conjunction with ASU 2016-13 to determine its impact on our financial condition and results of operations.

In May 2019, the FASB issued ASU No. 2019-05, Financial Instruments - Credit Losses (Topic 326): Targeted Transition Relief. This ASU allows entities to irrevocably elect the fair value option on an instrument-by-instrument basis for eligible financial assets measured at amortized cost basis upon adoption of the credit loss standards. The effective date for this ASU is the same as for ASU 2016-13. We will evaluate this ASU in conjunction with ASU 2016-13 to determine its impact on our financial condition and results of operations.

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 (loss) earnings per share of common stock for the periods indicated:

	For the three months ended June 30,				For the six months ended June 30,
	2019		2018		2019		2018
	(Dollars in thousands, except per share)
Net (loss) income	$	(135)	$	(127)	$	142	$	(211)
Less net (loss) income attributable to participating securities	(2)		-		2		-
(Loss) income available to common stockholders	$	(133)	$	(127)	$	140	$	(211)
Weighted average common shares outstanding for basic earnings (loss) per common share	26,858,018		26,740,082		26,711,043		26,752,550
Add: dilutive effects of assumed exercises of stock options	-		-		-		-
Add: dilutive effects of unvested restricted stock awards	-		-		396,331		-
Weighted average common shares outstanding for diluted earnings (loss) per common share	26,858,018		26,740,082		27,107,374		26,752,550
(Loss) Earnings per common share - basic	$	(0.01)	$	(0.00)	$	0.01	$	(0.01)
(Loss) Earnings per common share - diluted	$	(0.01)	$	(0.00)	$	0.01	$	(0.01)

6

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Unaudited Consolidated Financial Statements (continued)

Unvested restricted stock awards of 388,215 shares of common stock and stock options for 455,000 shares of common stock for the three months ended June 30, 2019 and unvested restricted stock awards of 10,399 shares of common stock and stock options for 537,500 shares of common stock for the three and six months ended June 30, 2018 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 were recognized in accumulated other comprehensive income (loss):

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(In thousands)
June 30, 2019:
Federal agency mortgage-backed securities	$	8,752	$	129	$	(6)	$	8,875
Federal agency debt	5,175		61		(1)		5,235
Total available-for-sale securities	$	13,927	$	190	$	(7)	$	14,110
December 31, 2018:
Federal agency mortgage-backed securities	$	9,575	$	88	$	(155)	$	9,508
Federal agency debt	5,317		-		(103)		5,214
Total available-for-sale securities	$	14,892	$	88	$	(258)	$	14,722

At June 30, 2019, the Bank had 3 federal agency debt securities with total amortized cost of $5.2 million, estimated total fair value of $5.2 million and an estimated average remaining life of 3.6 years.  The Bank also had 22 federal agency mortgage-backed securities with total amortized cost of $8.8 million, estimated total fair value of $8.9 million and an estimated average remaining life of 4.1 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.

Securities with unrealized losses at June 30, 2019 and December 31, 2018, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, were as follows:

	Less than 12 months					12 months or more				Total
	Estimated Fair Value			Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value			Gross Unrealized Losses
	(In thousands)
June 30, 2019:
Federal agency mortgage-backed securities	$		-	$	-	$	4,054	$	(6)	$		4,054	$	(6)
Federal agency debt	1,995			(1)		—		—		1,995			(1)
Total temporarily impaired	$	1,995		$	(1)	$	4,054	$	(6)	$	6,049		$	(7)
December 31, 2018:
Federal agency mortgage-backed securities	$	2,649		$	(25)	$	4,213	$	(130)	$	6,862		$	(155)
Federal agency debt	1,979			(10)		3,235		(93)		5,214			(103)
Total temporarily impaired	$	4,628		$	(35)	$	7,448	$	(223)	$	12,076		$	(258)

7

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Unaudited Consolidated Financial Statements (continued)

At June 30, 2019 and December 31, 2018, there were no securities pledged to secure public deposits since those public deposits are under $250 thousand and are fully insured by FDIC.  At June 30, 2019 and December 31, 2018, 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, 2019 and 2018.

The Bank held 5 securities with unrealized losses at June 30, 2019 compared to 10 securities with unrealized losses at December 31, 2018. Securities in unrealized loss positions are analyzed as part of our ongoing assessment of other-than-temporary impairment. Consideration is given to the financial condition and near-term prospects of the issuer, the length of time and the extent to which the fair value has been less than the cost, and our intent and ability to retain our investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. All of the Bank’s securities were issued by the federal government or its agencies. The unrealized losses on our available-for-sale securities at June 30, 2019 were primarily caused by movements in market interest rates subsequent to the purchase of such securities. We do not consider these unrealized losses to be other than temporary impairment.

NOTE (4) – Loans Receivable Held for Sale

Loans receivable held for sale at June 30, 2019 and December 31, 2018 totaled $26.1 million and $6.2 million, respectively, and consisted of multi-family loans.  The Bank transferred $1.1 million and $16.9 million of multi-family loans from the held-for-sale portfolio to the held-for-investment portfolio during the first half of 2019 and 2018, respectively.  During the first six months of 2019, $10.7 million in loans receivable held for investment were transferred to loans receivable held for sale.  There were no loan sales during the six months ended June 30, 2019.  Sales of multi-family loans during the six months ended June 30, 2018 totaled $4.3 million.  Loan repayments totaled $46 thousand and $82 thousand during the six months ended June 30, 2019 and 2018, respectively.

8

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 dates indicated:

	June 30, 2019		December 31, 2018
	(In thousands)
Real estate:
Single family	$	85,107	$	91,835
Multi-family	238,718		231,870
Commercial real estate	6,429		5,802
Church	22,553		25,934
Construction	2,246		1,876
Commercial – other	264		226
Consumer	12		5
Gross loans receivable before deferred loan costs and premiums	355,329		357,548
Unamortized net deferred loan costs and premiums	784		937
Gross loans receivable	356,113		358,485
Allowance for loan losses	(2,771)		(2,929)
Loans receivable, net	$	353,342	$	355,556

9

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Unaudited Consolidated Financial Statements (continued)

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

	Three Months Ended June 30, 2019
	Real Estate
	Single family		Multi- family		Commercial real estate		Church		Construction		Commercial - other		Consumer		Total
	(In thousands)
Beginning balance	$	347	$	1,990	$	62	$	507	$	18	$	5	$	-	$	2,929
Provision for (recapture of) loan losses	(19)		(58)		(4)		(106)		26		-		3		(158)
Recoveries	-		-		-		-		-		-		-		-
Loans charged off	-		-		-		-		-		-		-		-
Ending balance	$	328	$	1,932	$	58	$	401	$	44	$	5	$	3	$	2,771

	Three Months Ended June 30,  2018
	Real Estate
	Single family		Multi- family		Commercial real estate		Church		Construction		Commercial - other		Consumer		Total
	(In thousands)
Beginning balance	$	588	$	2,508	$	65	$	1,005	$	11	$	6	$	-	$	4,183
Provision for (recapture of) loan losses	(71)		148		(4)		(80)		7		-		-		-
Recoveries	-		-		-		-		-		-		-		-
Loans charged off	-		-		-		-		-		-		-		-
Ending balance	$	517	$	2,656	$	61	$	925	$	18	$	6	$	-	$	4,183

	Six Months Ended June 30, 2019
	Real Estate
	Single family		Multi- family		Commercial real estate		Church		Construction		Commercial - other		Consumer		Total
	(In thousands)
Beginning balance	$	369	$	1,880	$	52	$	603	$	19	$	6	$	-	$	2,929
Provision for (recapture of) loan losses	(41)		52		6		(392)		25		(1)		3		(348)
Recoveries	-		-		-		190		-		-		-		190
Loans charged off	-		-		-		-		-		-		-		-
Ending balance	$	328	$	1,932	$	58	$	401	$	44	$	5	$	3	$	2,771

	Six Months Ended June 30, 2018
	Real Estate
	Single family		Multi- family		Commercial real estate		Church		Construction		Commercial - other		Consumer		Total
	(In thousands)
Beginning balance	$	594	$	2,300	$	71	$	1,081	$	17	$	6	$	-	$	4,069
Provision for (recapture of) loan losses	(77)		356		(10)		(270)		1		-		-		-
Recoveries	-		-		-		114		-		-		-		114
Loans charged off	-		-		-		-		-		-		-		-
Ending balance	$	517	$	2,656	$	61	$	925	$	18	$	6	$	-	$	4,183

10

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Unaudited Consolidated Financial Statements (continued)

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 the dates indicated:

	June 30, 2019
	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	$		37	$	-			$		-	$	96	$		-		$		3		$		-		$	136
Collectively evaluated for impairment	291			1,932				58			305		44				2				3				2,635
Total ending allowance balance	$		328	$	1,932			$		58	$	401	$		44		$		5		$		3		$	2,771
Loans:
Loans individually evaluated for impairment	$		636	$	318			$		-	$	4,703	$		-		$		63		$		-		$	5,720
Loans collectively evaluated for impairment	84,755			239,582				6,436			17,165		2,242				201				12				350,393
Total ending loans balance	$		85,391	$	239,900			$		6,436	$	21,868	$		2,242		$		264		$		12		$	356,113
	December 31, 2018
	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	$	53		$		-	$		-		$	170	$	-		$		4		$		-		$		227
Collectively evaluated for impairment	316			1,880			52				433		19			2				-				2,702
Total ending allowance balance	$	369		$		1,880	$		52		$	603	$	19		$		6		$		-		$		2.929
Loans:
Loans individually evaluated for impairment	$	610		$		323	$		-		$	5,383	$	-		$		64		$		-		$		6,380
Loans collectively evaluated for impairment	91,567			232,986			5,800				19,713		1,872			162				5				352,105
Total ending loans balance	$	92,177		$		233,309	$		5,800		$	25,096	$	1,872		$		226		$		5		$		358,485

11

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Unaudited Consolidated Financial Statements (continued)

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

	June 30, 2019						December 31, 2018
	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:
Single family	$	34	$	34	$	-	$	-	$	-	$	-
Multi-family	$	318	$	318	$	-	$	323	$	323	$	-
Church	$	4,079	$	2,723	$	-	$	4,666	$	2,803	$	-
With an allowance recorded:
Single family	602		602		37		610		610		53
Church	1,980		1,980		96		2,580		2,580		170
Commercial - other	63		63		3		64		64		4
Total	$	7,076	$	5,720	$	136	$	8,243	$	6,380	$	227

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, 2019						Three Months Ended June 30, 2018
	Average Recorded Investment			Cash Basis Interest Income Recognized			Average Recorded Investment			Cash Basis Interest Income Recognized
	(In thousands)
Single family		$	638		$	5		$	620		$	7
Multi-family		320			5			331			6
Church		4,741			402			7,692			112
Commercial – other		63			-			65			1
Total		$	5,762		$	412		$	8,708		$	126

	Six Months Ended June 30, 2019						Six Months Ended June 30, 2018
	Average Recorded Investment			Cash Basis Interest Income Recognized			Average Recorded Investment			Cash Basis Interest Income Recognized
	(In thousands)
Single family		$	640		$	15		$	622		$	15
Multi-family		321			11			331			12
Church		5,383			517			7,849			286
Commercial – other		64			2			65			2
Total		$	6,408		$	545		$	8,867		$	315

12

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Unaudited Consolidated Financial Statements (continued)

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 $40 thousand and $67 thousand for the three months ended June 30, 2019 and 2018, respectively, and $80 thousand and $77 thousand for the six months ended June 30, 2019 and 2018, 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, 2019
	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Current		Total
	(In thousands)
Loans receivable held for investment:
Single family	$	36	$	-	$	34	$	70	$	85,321	$	85,391
Multi-family	-		-		-		-		239,900		239,900
Commercial real estate	-		-		-		-		6,436		6,436
Church	-		-		-		-		21,868		21,868
Construction	-		-		-		-		2,242		2,242
Commercial - other	-		-		-		-		264		264
Consumer	-		-		-		-		12		12
Total	$	36	$	-	$	34	$	70	$	356,043	$	356,113
	December 31, 2018
	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Current		Total
	(In thousands)
Loans receivable held for investment:
Single family	$	35	$	-	$	-	$	35	$	92,142	$	92,177
Multi-family	-		-		-		-		233,309		233,309
Commercial real estate	-		-		-		-		5,800		5,800
Church	-		-		-		-		25,096		25,096
Construction	-		-		-		-		1,872		1,872
Commercial - other	-		-		-		-		226		226
Consumer	-		-		-		-		5		5
Total	$	35	$	-	$	-	$	35	$	358,450	$	358,485

The following table presents the recorded investment in non-accrual loans by loan type as of the periods indicated:

	June 30, 2019			December 31, 2018
	(In thousands)
Loans receivable held for investment:
Single-family residence		$	34		$	-
Church		$	694		$	911
Total non-accrual loans		$	728		$	911

There were no loans 90 days or more delinquent that were accruing interest as of June 30, 2019 or December 31, 2018.  None of the church non-accrual loans were delinquent, but none qualified for accrual status as of the periods indicated.

13

Troubled Debt Restructurings

At June 30, 2019, loans classified as troubled debt restructurings (“TDRs”) totaled $5.1 million, of which $694 thousand were included in non-accrual loans and $4.3 million were on accrual status.  At December 31, 2018, loans classified as TDRs totaled $6.4 million, of which $591 thousand were included in non-accrual loans and $5.8 million were on accrual status.  The Company has allocated $136 thousand and $227 thousand of specific reserves for accruing TDRs as of June 30, 2019 and December 31, 2018, 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, 2019 and December 31, 2018, 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, 2019 and 2018.

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.

14

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, 2019
	Pass		Watch		Special Mention		Substandard		Doubtful		Loss
	(In thousands)
Single family	$	85,348	$	-	$	-	$	43	$	-	$	-
Multi-family	238,714		-		532		654		-		-
Commercial real estate	6,436		-		-		-		-		-
Church	17,179		418		255		4,016		-		-
Construction	2,242		-		-		-		-		-
Commercial - other	201		-		-		63		-		-
Consumer	12		-		-		-		-		-
Total	$	350,132	$	418	$	787	$	4,776	$	-	$	-

	December 31, 2018
	Pass		Watch		Special Mention		Substandard		Doubtful		Loss
	(In thousands)
Single family	$	92,132	$	-	$	35	$	10	$	-	$	-
Multi-family	232,642		-		-		667		-		-
Commercial real estate	5,800		-		-		-		-		-
Church	19,678		672		-		4,746		-		-
Construction	1,872		-		-		-		-		-
Commercial - other	162		-		-		64		-		-
Consumer	5		-		-		-		-		-
Total	$	352,291	$	672	$	35	$	5,487	$	-	$	-

NOTE (6) – Leases

The Bank has a combined operating lease for its corporate headquarters and main retail branch and a photocopier lease. The ROU asset and operating lease liability are recorded in fixed assets and other liabilities, respectively, in the consolidated statements of financial condition.

Our ROU asset represents our right to use an underlying asset during the lease term. Operating lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized based on the present value of the remaining lease payments using a discount rate that represents our incremental borrowing rate at the date of implementation of the new accounting standard.

The operating lease for our corporate headquarters and main retail branch has one 5-year extension option at the then fair market rate. As this extension option is not reasonably certain of exercise, it is not included in the lease term. The Bank recorded a ROU asset of $990 thousand and an operating lease liability of $990 thousand as of June 30, 2019. The Bank has no finance leases.

The Bank recorded operating lease expense costs of $123 thousand and $121 thousand for the quarters ended June 30, 2019 and June 30, 2018, respectively, and $245 thousand and $242 thousand for the first six months of 2019 and the first six months of 2018, respectively.

15

Additional information regarding our operating leases is summarized below for the periods indicated dollars in thousands):

	Quarter ended	Six Months ended
	June 30, 2019	June 30, 2019
Cash paid for amounts included in the measurement of lease liabilities for operating leases:	$135	$269
ROU assets obtained in exchange for lease liabilities		$990
Weighted average remaining lease term in months		22
Weighted average discount rate		2.75%

The future minimum payments for operating leases with remaining terms of one year or more as of June 30, 2019 were as follows (in thousands):

Six months ended December 31, 2019	$   273
Year ended December 31, 2020	555
Year ended December 31, 2021	195
Total Future Minimum Lease Payments	1,023
Amounts Representing Interest	(27	)
Present Value of Net Future Minimum Lease Payments	$   996

NOTE (7) – 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 4.95% at June 30, 2019.  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 made its first principal payment of $255 thousand in addition to the required interest payment.  Quarterly principal payments of $255 thousand are required until the Debentures are fully repaid on March 17, 2024.  The Debentures may be called for redemption at any time by the Company.

16

NOTE (8) – Fair Value

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.  There are three levels of inputs that may be used to measure fair values:

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2: Significant observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3: Significant unobservable inputs that reflect a company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

The Company used the following methods and significant assumptions to estimate fair value:

The fair values of securities available-for-sale are determined by obtaining quoted prices on nationally recognized securities exchanges (Level 1 inputs) or matrix pricing, which is a mathematical technique to value debt securities without relying exclusively on quoted prices for the specific securities, but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2 inputs).

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

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

17

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, 2019:
Securities available-for-sale – federal agency mortgage-backed	$	-	$	8,875	$	-	$	8,875
Securities available-for-sale – federal agency debt	1,995		3,240		-		5,235
At December 31, 2018:
Securities available-for-sale – federal agency mortgage-backed	$	-	$	9,508	$	-	$	9,508
Securities available-for-sale – federal agency debt	1,979		3,235		-		5,214

There were no transfers between Level 1, Level 2, or Level 3 during the three and six months ended June 30, 2019 and 2018.

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 statements of financial 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, 2019		December 31, 2018
	(In thousands)
Impaired loans carried at fair value of collateral	$	396	$	591
Real estate owned		-		833

The following table provides information regarding losses recognized on assets measured at fair value on a non-recurring basis for the three and six months ended June 30, 2019 and 2018.

	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
	(In thousands)
Impaired loans carried at fair value of collateral	$	-	$	-	$	-	$	-
Real estate owned – church	-		45		13		45
Total	$	-	$	45	$	13	$	45

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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, 2019 and December 31, 2018:

	Valuation Technique(s)	Unobservable Input(s)	Range	Weighted Average
June 30, 2019:
Impaired loans	Third Party Appraisals	Adjustment for differences between the comparable sales	-3% to -1%	2.53%
Real estate owned – church	Third Party Appraisals	Adjustment for differences between the comparable sales	0%	0%
December 31, 2018:
Impaired loans	Third Party Appraisals	Adjustment for differences between the comparable sales	-3% to -1%	-2.83%
Real estate owned – church	Third Party Appraisals	Adjustment for differences between the comparable sales	-11%	-10.85%

Fair Values of Financial Instruments

The following tables present the carrying amount, fair value, and placement in the fair value hierarchy of the Company’s financial instruments not recorded at fair value on a recurring basis as of June 30, 2019 and December 31, 2018.  This table excludes financial instruments for which the carrying amount approximates fair value.  For short-term financial assets such as cash and due from banks, interest-bearing deposits in other banks, and accrued interest receivable/payable, the carrying amount is a reasonable estimate of fair value due to the relatively short time between the origination of the instrument and its expected realization.  For non-marketable equity securities such as Federal Home Loan Bank stock, the carrying amount is a reasonable estimate of fair value as these securities can only be redeemed or sold at their par value and only to the respective issuing government supported institution or to another member institution.  For financial liabilities such as noninterest-bearing demand, interest-bearing demand, and savings deposits, the carrying amount is a reasonable estimate of fair value due to these products having no stated maturity.

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			Fair Value Measurements at June 30, 2019
	Carrying Value		Level 1		Level 2		Level 3		Total
	(In thousands)
Financial Assets:
Loans receivable held for sale	$	26,085	$	-	$	26,085	$	-	$	26,085
Loans receivable held for investment	355,342		-		-		355,826		355,826
Financial Liabilities:
Time Deposits	$	192,856	$	-	$	192,992	$	-	$	192,992
Federal Home Loan Bank advances	75,000		-		76,128		-		76,128
Junior subordinated debentures	4,845		-		-		4,215		4,215

			Fair Value Measurements at December 31, 2018
	Carrying Value		Level 1		Level 2		Level 3		Total
	(In thousands)
Financial Assets:
Loans receivable held for sale	$	6,231	$	-	$	6,270	$	-	$	6,270
Loans receivable held for investment	355,556		-		-		354,792		354,792
Financial Liabilities:
Time Deposits	$	172,564	$	-	$	171,725	$	-	$	171,725
Federal Home Loan Bank advances	70,000		-		69,933		-		69,933
Junior subordinated debentures	5,100		-		-		4,481		4,481

In accordance with the adoption of ASU No. 2016-01, the fair value of certain financial assets and liabilities, including loans, time deposits, and junior subordinated debentures, as of June 30, 2019 and December 31, 2018 was measured using an exit price notion.  Although the exit price notion represents the value that would be received to sell an asset or paid to transfer a liability, the actual price received for a sale of assets or paid to transfer liabilities could be different from exit price disclosed.

NOTE (9) – Stock-based Compensation

Prior to July 25, 2018, the Company issued stock-based compensation awards to its directors and employees under the 2008 Long-Term Incentive Plan (“2008 LTIP”).  The 2008 LTIP permitted 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 July 25, 2018, the Company ceased granting awards under the 2008 LTIP.

On July 25, 2018, the stockholders approved the 2018 Long-Term Incentive Plan (“2018 LTIP”).  As with the 2008 LTIP, the 2018 LTIP permits the grant of non-qualified and incentive stock options, stock appreciation rights, full value awards and cash incentive awards. The plan is in effect for ten years.  The maximum number of shares that can be awarded under the plan is 1,293,109 shares of common stock as of December 31, 2018.

In February 2019, the Company awarded 428,796 shares of restricted stock to its employees under the 2018 LTIP.  A restricted stock award is valued at the average of the high and the low price of the Company’s stock on the date of the award.  These shares of restricted stock vest over a two-year period.  Stock-based compensation expense is recognized over the vesting period.  The Company recorded $64 thousand and $86 thousand of stock-based compensation expense related to this award during the three and six months ended June 30, 2019, respectively.  As of June 30, 2019, the unrecognized compensation cost related to nonvested restricted-stock awards under the plan was $439 thousand.  The cost is expected to be recognized over a period of 1.67 years.

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In January 2019, the Company awarded 42,168 shares of common stock to its directors under the 2018 LTIP which are fully vested.  The Company recorded $52 thousand of compensation expense for the quarter ended March 31, 2019 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.  Additionally, in January 2018, the Company awarded 18,906 shares of common stock to its directors under the 2008 LTIP, all of which are fully vested.  The Company recorded $45 thousand of compensation expense for the quarter ended March 31, 2018 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 February 2018 and April 2017, the Company also awarded 97,195 and 129,270 of cash-settled restricted stock units (“RSUs”) to its CEO under the 2008 LTIP.  All RSUs 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 and is classified as a liability in the consolidated statements of financial condition.  The Company recorded $10 thousand and $64 thousand of compensation expense related to these awards during the quarters ended June 30, 2019 and 2018, respectively.

No stock options were granted during the six months ended June 30, 2019 and 2018.

The following table summarizes stock option activity during the six months ended June 2019 and 2018:

	Six Months Ended June 30, 2019			Six Months Ended June 30, 2018
	Number Outstanding	Weighted Average Exercise Price		Number Outstanding	Weighted Average Exercise Price
Outstanding at beginning of period	537,500	$	2.19	537,500	$	2.19
Granted during period	-	-		-	-
Exercised during period	-	-		-	-
Forfeited or expired during period	(82,500)	4.89		-	-
Outstanding at end of period	455,000	$	1.67	537,500	$	2.19
Exercisable at end of period	275,000	$	1.70	267,500	$	2.71

The Company recorded $10 thousand and $19 thousand of stock-based compensation expense related to stock options during the three and six months ended June 30, 2019 and 2018, respectively.  As of June 30, 2019, the unrecognized compensation cost related to nonvested stock options granted under the plan was $65 thousand.  The cost is expected to be recognized over a period of 1.65 years.

Options outstanding and exercisable at June 30, 2019 were as follows:

	Outstanding						Exercisable
Grant Date	Number Outstanding	Weighted Average Remaining Contractual Life	Weighted Average Exercise Price		Aggregate Intrinsic Value		Number Outstanding	Weighted Average Exercise Price		Aggregate Intrinsic Value
January 21, 2010	5,000	0.56 years	$	6.00			5,000	$	6.00
February 24, 2016	450,000	6.65 years	$	1.62			270,000	$	1.62
	455,000	6.59 years	$	1.67	$	-	275,000	$	1.70	$	-

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NOTE (10) – 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.  Any dividends on allocated shares increase participant accounts.  Any dividends on unallocated shares will be used to repay the loan.  Participants will receive shares for their vested balance at the end of their employment.  Compensation expense related to the ESOP was $14 thousand and $23 thousand for the three months ended June 30, 2019 and 2018, respectively, and $28 thousand and $48 thousand for the six months ended June 30, 2019 and 2018, respectively.

Shares held by the ESOP were as follows:

	June 30, 2019		December 31, 2018
	(Dollars in thousands)
Allocated to participants	1,032,128		1,036,809
Committed to be released	31,740		10,580
Suspense shares	624,873		646,033
Total ESOP shares	1,688,741		1,693,422
Fair value of unearned shares	$	887	$	678

The outstanding balance of unearned shares was $994 thousand and $1.1 million at June 30, 2019 and December 31, 2018, respectively, which are shown as Unearned ESOP shares in the equity section of the consolidated statements of financial condition.

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NOTE (11) – 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 capital conservation buffer is also required to be maintained above the regulatory minimum capital requirements.  This capital conservation buffer was phased in on a schedule that began on January 1, 2016 at 0.625% of risk-weighted assets and increased each subsequent year by an additional 0.625% until it reached its final level of 2.5% on January 1, 2019.

The Basel III Capital rules also revised the previously existing prompt corrective action regulatory 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 complement the capital conservation buffer, insured depository institutions are 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).

At June 30, 2019 and December 31, 2018, 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, 2019:
Tier 1 (Leverage)	$    49,434	11.83%	$      16,715	4.0%	$      20,894	5.0%
Common Equity Tier 1	$    49,434	18.79%	$      18,805	4.5%	$       17101	6.5%
Tier 1	$    49,434	18.79%	$      25,073	6.0%	$      21,048	8.0%
Total Capital	$    52,263	19.86%	$      33,430	8.0%	$      26,310	10.0%
December 31, 2018:
Tier 1 (Leverage)	$    49,433	12.03%	$      16,439	4.0%	$      20,549	5.0%
Common Equity Tier 1	$    49,433	19.32%	$      18,494	4.5%	$      16,634	6.5%
Tier 1	$    49,433	19.32%	$      24,659	6.0%	$      20,472	8.0%
Total Capital	$    52,417	20.48%	$      32,879	8.0%	$      25,590	10.0%

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NOTE (12) – 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 evaluates both positive and negative evidence, including the existence of cumulative losses in the current year and the prior two years, the amount of taxes paid in available carry-back years, the forecasts of future income and tax planning strategies.  Based on this analysis, the Company determined that as of June 30, 2019, no valuation allowance was required on its deferred tax assets, which totaled $5.0 million.

NOTE (13) – Concentration of Credit Risk

The Bank has a significant concentration of deposits with a long-time customer that accounted for approximately 10% of its deposits as of June 30, 2019.  The Bank expects to maintain this relationship with the customer.

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 of 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, 2018.  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, which 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, 2018.  There have been no material changes since then to our critical accounting policies.

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Overview

Total assets increased by $20.4 million to $429.8 million at June 30, 2019 from $409.4 million at December 31, 2018, primarily reflecting increases of $19.9 million in loans receivable held for sale and $3.5 million in cash and cash equivalents, offset by a decrease of $2.2 million in loans held for investment and a decrease of $833 thousand in REO.

Total liabilities increased by $19.9 million to $380.8 million at June 30, 2019 from $361.0 million at December 31, 2018, primarily reflecting an increase in total deposits of $14.4 million and an increase in FHLB advances of $5.0 million.

We recorded a net loss of $135 thousand for the second quarter of 2019 and net income of $142 thousand for the six months ended June 30, 2019, compared to net losses of $127 thousand and $211 thousand for the three and six months ended June 30, 2018, respectively.

Our net loss of $135 thousand during the second quarter of 2019 primarily reflected an increase in interest expense of $561 thousand, which offset the higher interest income of $451 thousand during the quarter. Second quarter results were also impacted by higher compensation costs of $124 thousand and higher professional services fees of $52 thousand, which were offset by a loan loss provision recapture of $158 thousand and a decrease in marketing expense of $54 thousand compared to the second quarter of last year.

Our net income of $142 thousand for the six months ended June 30, 2019 primarily resulted from a loan loss provision recapture of $348 thousand, and a grant of $233 thousand from the U.S. Department of the Treasury’s Community Development Financial Institutions (“CDFI”) Fund. These additional earnings were offset by a decrease of $71 thousand in net interest income, an increase of $203 thousand in professional fees, and an increase of $101 thousand in compensation costs compared to the prior year. In addition, marketing expense decreased by $61 thousand, REO expense decreased by $65 thousand and the provision for off balance sheet commitments decreased by $35 thousand during the first half of 2019 compared to the first half of 2018.

Results of Operations

Net Interest Income

Net interest income for the second quarter of 2019 totaled $2.5 million, compared to $2.6 million for the second quarter of 2018.  The $110 thousand decrease in net interest income primarily resulted from an increase in interest expense of $561 thousand during the quarter primarily due to higher interest expense on all deposits and borrowings types, which offset an increase in interest income of $451 thousand during the quarter primarily due to higher interest income on loans receivable.

During the second quarter of 2019, interest and fees on loans receivable increased by $426 thousand due to an increase of $17.8 million in the average balance of loans receivable (including loans held for sale), which increased interest income by $174 thousand, and an increase of 28 basis points in loan yield, which increased interest income by $252 thousand.

Interest on deposits increased by $412 thousand during the second quarter of 2019 compared to the second quarter of 2018.  The increase was attributable to higher rates paid on all deposit types, which caused interest expense on deposits to increase by $371 thousand.  In addition, the average total deposit balance increased by $6.5 million, which led to an increase in interest expense of $41 thousand.

Interest expense on FHLB advances increased by $145 thousand during the second quarter of 2019 compared to the second quarter of 2018.  The increase in interest expense on FHLB advances was primarily due to an increase of $9.6 million in the average balance of FHLB advances, which increased interest expense by $49 thousand, and an increase of 51 basis points in the average cost of FHLB advances, which increased interest expense by $96 thousand.

For the six months ended June 30, 2019, net interest income decreased by $71 thousand to $5.3 million.  The decrease in net interest income during the period primarily resulted from an increase in interest income of $1.1 million primarily due to higher interest income on loans receivable, which more than offset an increase in interest expense of $1.1 million primarily due to higher interest expense on deposits and borrowings.

During the first half of 2019, interest and fees on loans receivable increased by $1.0 million due to an increase of $18.5 million in the average balance of loans receivable (including loans held for sale), which increased interest income by $369 thousand, and an increase of 36 basis points in loan yield, which increased interest income by $666 thousand.

During the first half of 2019, interest on deposits increased by $808 thousand due to an increase of $3.2 million in the average balance of deposits, which caused interest expense to increase by $54 thousand, and an increase of 56 basis points attributable to higher rates paid on all deposit types, which caused interest expense on deposits to increase by $754 thousand.

During the first half of 2019, interest expense on FHLB advances increased by $309 thousand due to an increase of $10.1 million in the average balance of FHLB advances, which increased interest expense by $101 thousand, and an increase of 56 basis points in the average cost of FHLB advances, which increased interest expense by $208 thousand.

The net interest margin decreased by 13 basis points to 2.57% for the six months ended June 30, 2019 from 2.70% for the same period in 2018, primarily due to higher rates paid on certificates of deposit and FHLB advances, which offset higher rates earned on the loan portfolio.

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The following tables set forth the 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, but 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, 2019					June 30, 2018
(Dollars in Thousands)	Average Balance		Interest		Average Yield/ Cost	Average Balance		Interest		Average Yield/ Cost
Assets
Interest-earning assets:
Interest-earning deposits	$	15,810	$	98	2.48%	$	13,682	$	64	1.87%
Securities	14,242		95		2.67%	16,318		104		2.55%
Loans receivable (1)	377,906		3,841		4.07%	360,101		3,415		3.79%
FHLB stock	2,916		51		7.00%	2,916		51		7.00%
Total interest-earning assets	410,874		$	4,085	3.98%	393,017		$	3,634	3.70%
Non-interest-earning assets	11,058					9,949
Total assets	$	421,932				$	402,966
Liabilities and Stockholders’ Equity
Interest-bearing liabilities:
Money market deposits	$	25,416	$	56	0.88%	$	36,850	$	74	0.80%
Passbook deposits	45,346		69		0.61%	40,338		34		0.34%
NOW and other demand deposits	33,578		3		0.04%	37,209		9		0.10%
Certificate accounts	181,280		969		2.14%	164,711		568		1.38%
Total deposits	285,620		1,097		1.54%	294,108		685		0.93%
FHLB advances	76,747		459		2.39%	67,167		315		1.88%
Junior subordinated debentures	5,091		67		5.26%	5,100		62		4.86%
Total interest-bearing liabilities	367,458		$	1,623	1.77%	351,375		$	1,062	1.21%
Non-interest-bearing liabilities	5,505					4,172
Stockholders’ Equity	48,969					47,419
Total liabilities and stockholders’ equity	$	421,932				$	402,966
Net interest rate spread (2)			$	2,462	2.21%			$	2,572	2.49%
Net interest rate margin (3)					2.40%					2.62%
Ratio of interest-earning assets to interest-bearing liabilities					111.82%					111.85%

(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.

(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, 2019					June 30, 2018
(Dollars in Thousands)	Average Balance		Interest		Average Yield/ Cost	Average Balance		Interest		Average Yield/ Cost
Assets
Interest-earning assets:
Interest-earning deposits	$	16,417	$	208	2.53%	$	18,092	$	154	1.70%
Federal funds sold	-		-		-	-		-		-
Securities	14,417		193		2.68%	16,742		213		2.54%
Loans receivable (1)	376,378		7,956		4.23%	357,920		6,924		3.87%
FHLB stock	2,916		101		6.93%	2,916		101		6.93%
Total interest-earning assets	410,128		$	8,458	4.12%	395,670		$	7,392	3.74%
Non-interest-earning assets	10,862					10,080
Total assets	$	420,990				$	405,750
Liabilities and Stockholders’ Equity
Interest-bearing liabilities:
Money market deposits	$	27,226	$	120	0.88%	$	43,081	$	173	0.80%
Passbook deposits	45,390		134		0.59%	39,761		65		0.33%
NOW and other demand deposits	33,541		6		0.04%	36,436		16		0.09%
Certificate accounts	179,567		1,864		2.08%	163,230		1,062		1.30%
Total deposits	285,724		2,124		1.49%	282,508		1,316		0.93%
FHLB advances	76,232		924		2.42%	66,090		614		1.86%
Junior subordinated debentures	5,096		135		5.30%	5,100		116		4.55%
Total interest-bearing liabilities	367,052		$	3,183	1.73%	353,698		$	2,046	1.16%
Non-interest-bearing liabilities	5,167					4,490
Stockholders’ Equity	48,771					47,562
Total liabilities and stockholders’ equity	$	420,990				$	405,750
Net interest rate spread (2)			$	5,275	2.39%			$	5,346	2.58%
Net interest rate margin (3)					2.57%					2.70%
Ratio of interest-earning assets to interest-bearing liabilities					111.74%					111.87%

(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.

(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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Loan loss provision recapture

We recorded loan loss provision recaptures of $158 thousand during the second quarter of 2019 and $348 thousand during the first six months of 2019. No loan loss provision or recapture was recorded during the second quarter or first six months of 2018.  The loan loss provision recaptures recorded during the second quarter and first six months of 2019 were primarily due to recoveries of problem loans, payoffs of loans held for investment and reductions in the loss rate applied to impaired loans.  See “Allowance for Loan Losses (ALLL)” below for additional information.

Non-interest Income

Non-interest income for the second quarter of 2019 totaled $ 139 thousand compared to $170 thousand for the second quarter of 2018.  Non-interest income decreased by $31 thousand primarily because the Bank recorded lower miscellaneous loan fees during the second quarter of 2019 compared to the second quarter of 2018.  Also, no loan sales occurred during 2019, whereas the Bank recorded a gain on sale of loans of $11 thousand during the second quarter of 2018.

For the six months ended June 30, 2019, non-interest income totaled $515 thousand compared to $301 thousand for the same period one year ago.  The increase of $214 thousand in non-interest income was primarily due to a grant of $233 thousand from the CDFI Fund.

Non-interest Expense

Non-interest expense for the second quarter of 2019 totaled $3.0 million, compared to $2.9 million for the second quarter of 2018.  The increase of $99 thousand in non-interest expense during the second quarter of 2019 compared to the same quarter of 2018 was primarily due to increases of $124 thousand in compensation and benefits expense and $52 thousand in professional services expense, offset by decreases of $54 thousand in marketing expense and $30 thousand in REO expense.

Compensation and benefits expense increased by $124 thousand during the second quarter of 2019 compared to the second quarter of 2018 largely because we deferred a lower amount of compensation costs associated with loans originated for the portfolio. Professional services expenses increased due to increases in legal and audit expenses in the normal course of business.

For the six months ended June 30, 2019, non-interest expense totaled $6.1 million, compared to $6.0 million for the same period a year ago.  The increase of $127 thousand in non-interest expense was primarily due to an increase of $101 thousand in compensation and benefits expense and an increase of $203 thousand in professional services expense, offset by lower REO expense of $61 thousand, lower marketing expense of $65 thousand, a lower provision for off balance sheet loan commitments of $35 thousand and lower occupancy and office related expenses of $26 thousand.

Income Taxes

Income tax expense or benefit is computed by applying the statutory federal income tax rate of 21% and the California income tax rate of 10.84% to taxable income.  The Company recorded income tax benefits of $128 thousand and $86 thousand for the three and six months ended June 30, 2019, respectively, compared to income tax benefits of $54 thousand and $97 thousand for the three and six months ended June 30, 2018, respectively.  The Company’s effective income tax benefits were 48.7% and 29.8% of our pretax losses for the three months ended June 30, 2019 and 2018, respectively.  For the six months ended June 30, 2019 and 2018, the income tax benefits were 153.6% and 31.5% of our taxable income and pretax losses, respectively.  The variations in the effective benefit rates are attributable to the Company’s low-income housing tax credits.  The Company had no valuation allowance on its deferred tax assets, which totaled $5.0 million at both June 30, 2019 and December 31, 2018.

28

Financial Condition

Total Assets

Total assets increased by $20.4 million to $429.8 million at June 30, 2019 from $409.4 million at December 31, 2018.  The increase in total assets was primarily comprised of an increase of $19.9 million in loans receivable held for sale, an increase of $3.5 million in cash and cash equivalents and an increase of $898 thousand in office properties and equipment, net.  These increases were offset by a decrease of $2.2 million in loans held for investment and a decrease of $833 thousand in REO.

Loans Receivable Held for Sale

Loans receivable held for sale totaled to $26.1 million at June 30, 2019, compared to $6.2 million at December 31, 2018.  The increase was primarily due to $10.2 million of new loan originations for sale during the second quarter of 2019 and $10.7 million of loans transferred from the loans held for investment portfolio during the second quarter of 2019 for loan concentration management purposes.  In addition, one loan which totaled $1.1 million was transferred to the loans held for investment portfolio at fair value during the first quarter of 2019. Repayments of loans receivable held for sale totaled $57 thousand during the first half of 2019.

Loans Receivable Held for Investment

Loans receivable held for investment, net of the allowance for loan losses, totaled $353.3 million at June 30, 2019, compared to $355.6 million at December 31, 2018.  During the first half of 2019, the Bank originated $27.0 million in loans held for investment, and transferred a net balance of $9.6 million to loans held for sale.  Repayments of loans receivable held for investment during the first half of 2019 totaled $20.1 million.

Allowance for Loan Losses

We record a provision for loan losses as a charge to earnings when necessary in order to maintain the ALLL at a level sufficient, in management’s judgment, to absorb losses inherent 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 was $2.8 million as of June 30, 2019, which amounted to 0.78% of our gross loans receivable held for investment, at June 30, 2019. This compares to $2.9 million, or 0.82% of our gross loans receivable held for investment, at December 31, 2018. The levels of ALLL at June 30, 2019 and December 31, 2018 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 continued improvement in our asset credit quality metrics and the high quality of our loan originations.

Delinquent loans as of June 30, 2019 were comprised of two single family loans which totaled $70 thousand, compared to one single family delinquent loan of $35 thousand as of December 31, 2018.  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, 2019, NPLs were comprised of one single family loan and three church loans which totaled $728 thousand or 0.17% of the Company’s total assets.

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, 2019, 95% of our NPLs were current in their payments.  In determining the ALLL, we also consider the ratio of the ALLL to NPLs, which was 380.6% at June 30, 2019, compared to 321.5% at December 31, 2018.

29

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 2019 or 2018.  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 35% of estimated fair value less estimated selling costs as of June 30, 2019.

Recoveries during the first half of 2019 and 2018 totaled $190 thousand and $114 thousand, respectively.  Recoveries during the first half of 2019 resulted from the payoff of two church loans that had been previously partially charged off.  The recovery during the first half of 2018 resulted from the payoff of one church loan.

Impaired loans at June 30, 2019 were $5.7 million compared to $6.4 million at December 31, 2018.  The decrease of $660 thousand in impaired loans was primarily due to the payoff of three loans for $1.2 million, two newly impaired loans totaling $645 thousand and loan repayments of $151 thousand.  Specific reserves for impaired loans were $136 thousand, or 2.37% of the aggregate impaired loan amount at June 30, 2019, compared to $227 thousand, or 3.56%, at December 31, 2018.  Excluding specific reserves for impaired loans, our coverage ratio (general allowance as a percentage of total non-impaired loans) was 0.75% at June 30, 2019, compared to 0.77% at December 31, 2018.

We believe that the ALLL is adequate to cover probable incurred losses in the loan portfolio as of June 30, 2019, 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.

Office Properties and Equipment

Net office properties and equipment increased by $898 thousand to $3.1 million at June 30, 2019 from $2.2 million as of December 31, 2018. Due to the implementation of ASU 2016-02 “Leases (Topic 842)”, the Bank recorded a right of use (“ROU”) asset of $1.2 million as of January 1, 2019. After amortization, the ROU was $990 thousand as of June 30, 2019.

Deposits

Deposits increased by $14.4 million to $295.8 million at June 30, 2019 from $281.4 million at December 31, 2018, primarily due to a $13.0 million increase in retail certificates of deposit, an increase of $6.6 million in two-way CDARS and a $602 thousand increase in accounts acquired through a deposit listing service, offset by a decrease of $5.9 million in liquid deposits (NOW, demand, money market and passbook accounts).

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, 2019, we had approximately $40.6 million in CDARS Reciprocal and $32.1 million in CDARS One-Way Buy, compared to $33.7 million in CDARS Reciprocal and $32.6 million in CDARS One-Way Buy at December 31, 2018.

One customer relationship accounted for approximately 10% of our deposits at June 30, 2019.  We expect to maintain this relationship with the customer for the foreseeable future.

Borrowings

During the first half of 2019, we increased our borrowings from the FHLB to $75.0 million at June 30, 2019 from $70.0 million at December 31, 2018.  The weighted average interest rate on FHLB advances was 2.40% at June 30, 2019 compared to 2.51% at December 31, 2018.

30

Subordinated debentures issued by the Company decreased by $255 thousand during the second quarter to $4.8 million from $5.1 million due to a required principal repayment. The interest rate paid on subordinated debentures decreased to 4.95% at June 30, 2019 from 5.34% at December 31, 2018 due to due to decreases in 3-month LIBOR,

Stockholders’ Equity

Stockholders’ equity was $49.0 million, or 11.40% of the Company’s total assets, at June 30, 2019, compared to $48.4 million, or 11.83% of the Company’s total assets, at December 31, 2018.  The Company’s book value was $1.76 per share as of June 30, 2019, compared to $1.77 per share as of December 31, 2018.

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 $50.6 million at June 30, 2019.  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, 2019 consisted of $2.6 million in cash and due from banks, $17.6 million in interest-bearing deposits in other banks, and $14.1 million in securities available-for-sale that were not pledged, compared to $4.1 million in cash and due from banks, $12.5 million in interest-bearing deposits in other banks, and $14.7 million in securities available-for-sale that were not pledged at December 31, 2018. At June 30, 2019, the Bank’s cash and cash equivalents increased by $3.5 million from December 31, 2018, primarily due to an increase in interest-bearing deposits in other banks.  During the first half of 2019, securities available-for-sale decreased by $612 thousand due to principal reductions offset by increases in market value.

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 dividends received from the Bank.  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 $10.2 million during the six months ended June 30, 2019, compared to consolidated net cash inflows from operating activities of $4.8 million during the six months ended June 30, 2018.  Net cash outflows from operating activities during the first half of 2019 were primarily attributable to originations of loans receivable held for sale (net of payoffs), which totaled $10.3 million.

The Company recorded consolidated net cash outflows from investing activities of $5.4 million during the first six months of 2019, compared to consolidated net cash outflows from investing activities of $12.3 million during the six months ended June 30, 2018.  Net cash outflows from investing activities during the first half of 2019 were primarily attributable to originations of loans held for investment (net of payoffs), which totaled $7.2 million.

The Company recorded consolidated net cash inflows from financing activities of $19.1 million during the six months ended June 30, 2019, compared to consolidated net cash outflows from financing activities of $1.1million during the six months ended June 30, 2018.  Net cash inflows from financing activities during the first half of 2019 were primarily attributable to a net increase in deposits of $14.4 million and a net increase in advances from the FHLB of $5 million.

31

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 11 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, 2019.  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, 2019.  There were no significant changes during the quarter ended June 30, 2019 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.

32

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.

33

SIGNATURES

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

Date:   August 14, 2019	By:	/s/ Wayne-Kent A. Bradshaw
		Wayne-Kent A. Bradshaw
		Chief Executive Officer
Date:   August 14, 2019	By:	/s/ Brenda J. Battey
		Brenda J. Battey
		Chief Financial Officer

34

EX-31.1

Exhibit 31.1

SECTION 302 CERTIFICATION

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

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

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

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

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

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

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

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

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

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

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

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

Date:    August 14, 2019	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 14, 2019	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 14, 2019	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 14, 2019	By:	/s/ Brenda J. Battey
		Brenda J. Battey
		Chief Financial Officer

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2019	Aug. 02, 2019
Entity Registrant Name	BROADWAY FINANCIAL CORP \DE\
Document Type	10-Q
Document Period End Date	Jun. 30, 2019
Entity Current Reporting Status	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Central Index Key	0001001171
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q2
Amendment Flag	false
Common Stock, Voting
Entity Common Stock, Shares Outstanding		19,111,422
Common Stock, Non-Voting
Entity Common Stock, Shares Outstanding		8,756,396

XML

Consolidated Statements of Financial Condition - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Assets:
Cash and due from banks	$ 2,587	$ 4,124
Interest-bearing deposits in other banks	17,559	12,527
Cash and cash equivalents	20,146	16,651
Securities available-for-sale, at fair value	14,110	14,722
Loans receivable held for sale, at lower of cost or fair value	26,085	6,231
Loans receivable held for investment, net of allowance of $2,771 and $2,929	353,342	355,556
Accrued interest receivable	1,254	1,143
Federal Home Loan Bank (FHLB) stock, at cost	2,916	2,916
Office properties and equipment, net	3,140	2,242
Bank owned life insurance	3,073	3,047
Deferred tax assets, net	4,972	5,045
Investment in affordable housing limited partnership	244	342
Real estate owned (REO)		833
Other assets	562	669
Total assets	429,844	409,397
Liabilities:
Deposits	295,798	281,414
FHLB advances	75,000	70,000
Junior subordinated debentures	4,845	5,100
Advance payments by borrowers for taxes and insurance	1,084	1,055
Accrued expenses and other liabilities	4,101	3,392
Total liabilities	380,828	360,961
Stockholders' Equity:
Preferred stock, $.01 par value, authorized 1,000,000 shares; none issued or outstanding
Additional paid-in capital	46,292	46,141
Retained earnings	8,773	8,631
Unearned Employee Stock Ownership Plan (ESOP) shares	(994)	(1,027)
Accumulated other comprehensive loss, net of tax	(34)	(283)
Treasury stock-at cost, 2,617,826 shares at June 30, 2019 and at December 31, 2018	(5,326)	(5,326)
Total stockholders' equity	49,016	48,436
Total liabilities and stockholders' equity	429,844	409,397
Common Stock | Common Stock, Voting
Stockholders' Equity:
Common stock	218	213
Total stockholders' equity	218	213
Common Stock | Common Stock, Non-Voting
Stockholders' Equity:
Common stock	87	87
Total stockholders' equity	$ 87	$ 87

XML

Consolidated Statements of Financial Condition (Parenthetical) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Allowance for loan losses (in dollars)	$ 2,771	$ 2,929
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 | Common Stock, Voting
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	21,732,500	21,280,228
Common stock, shares outstanding	19,114,674	18,662,402
Common Stock | Common Stock, Non-Voting
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 Operations and Comprehensive (Loss) Income - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Interest income:
Interest and fees on loans receivable	$ 3,841	$ 3,415	$ 7,956	$ 6,924
Interest on mortgage-backed and other securities	95	104	193	213
Other interest income	149	115	309	255
Total interest income	4,085	3,634	8,458	7,392
Interest expense:
Interest on deposits	1,097	685	2,124	1,316
Interest on borrowings	526	377	1,059	730
Total interest expense	1,623	1,062	3,183	2,046
Net interest income	2,462	2,572	5,275	5,346
Loan loss provision recapture	158		348
Net interest income after loan loss provision recapture	2,620	2,572	5,623	5,346
Non-interest income:
Service charges	115	111	237	226
Gain on sale of loans		11		11
CDFI grant			233
Other	24	48	45	64
Total non-interest income	139	170	515	301
Non-interest expense:
Compensation and benefits	1,875	1,751	3,757	3,656
Occupancy expense	312	317	620	633
Information services	218	206	426	420
Professional services	235	183	574	371
Office services and supplies	67	66	135	148
REO expense	(6)	24	25	86
Marketing expense	33	87	72	137
Corporate insurance	34	36	69	78
Amortization of investment in affordable housing limited partnership	49	49	98	97
Other	205	204	306	329
Total non-interest expense	3,022	2,923	6,082	5,955
(Loss) income before income taxes	(263)	(181)	56	(308)
Income tax benefit	(128)	(54)	(86)	(97)
Net (loss) income	(135)	(127)	142	(211)
Other comprehensive income (loss), net of tax:
Unrealized gains (losses) on securities available-for-sale arising during the period	157	(76)	353	(360)
Income tax expense (benefit)	46	(23)	104	(107)
Other comprehensive income (loss), net of tax	111	(53)	249	(253)
Comprehensive (loss) income	$ (24)	$ (180)	$ 391	$ (464)
(Loss) earnings per common share-basic	$ (0.01)	$ 0.00	$ 0.01	$ (0.01)
(Loss) earnings per common share-diluted	$ (0.01)	$ 0.00	$ 0.01	$ (0.01)

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Consolidated Statements of Cash Flows - USD ($) $ in Thousands	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018
Cash flows from operating activities:
Net income (loss)			$ 142	$ (211)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Loan loss provision recapture			(348)
Provision for losses on REOs			13	45
Depreciation			115	121
Net amortization of deferred loan origination costs			95	276
Net amortization of premiums on mortgage-backed securities			13	20
Amortization of investment in affordable housing limited partnership	$ 49	$ 49	98	97
ESOP compensation expense	14	23	28	48
Earnings on bank owned life insurance			(26)	(26)
Originations of loans receivable held for sale			(10,280)
Proceeds from sales of loans receivable held for sale				4,349
Repayments on loans receivable held for sale			46	82
Gain on sale of loans receivable held for sale				(11)
Change in assets and liabilities:
Net change in deferred taxes			(31)	15
Net change in accrued interest receivable			(111)	(43)
Net change in other assets			107	113
Net change in advance payments by borrowers for taxes and insurance			29	(160)
Net change in accrued expenses and other liabilities			(281)	(30)
Net cash (used in) provided by operating activities			(10,230)	4,779
Cash flows from investing activities:
Net change in loans receivable held for investment			(7,153)	(13,362)
Principal payments on available-for-sale securities			952	1,137
Proceeds from sales of REO			820
Purchase of office properties and equipment			(23)	(43)
Net cash (used in) provided by investing activities			(5,404)	(12,268)
Cash flows from financing activities:
Net change in deposits			14,384	(20,024)
Proceeds from FHLB advances			10,000	36,500
Repayments of FHLB advances			(5,000)	(17,500)
Payment for tax withholding for vesting of restricted stock				(108)
Repayments of junior subordinated debentures			(255)
Net cash provided by (used in) financing activities			19,129	(1,132)
Net change in cash and cash equivalents			3,495	(8,621)
Cash and cash equivalents at beginning of the period			16,651	22,219	$ 22,219
Cash and cash equivalents at end of the period	$ 20,146	$ 13,598	20,146	13,598	$ 16,651
Supplemental disclosures of cash flow information:
Cash paid for interest			2,971	2,048
Cash paid for income taxes			13
Supplemental disclosures of non-cash investing and financing:
Transfers of loans receivable held for sale to loans receivable held for investment			1,064	16,871
Transfers of loans receivable held for investment to loans receivable held for sale			10,684
Common stock exchanged for payment of tax withholding				108
Initial Recognition of Operating Lease Right-to-Use Assets			1,120
Initial Recognition of Operating Lease Liabilities			1,120
Directors
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Stock-based compensation expense			52	45
Employees, excluding Directors
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Stock-based compensation expense			$ 109	$ 49

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Consolidated Statements of Changes in Stockholders' Equity - USD ($) $ in Thousands	Common Stock Common Stock, Voting	Common Stock Common Stock, Non-Voting	Additional Paid-in Capital	Accumulated Other Comprehensive Income	Retained Earnings (Substantially Restricted)	Unearned ESOP shares	Treasury Stock	Total
Balance at Dec. 31, 2017	$ 213	$ 87	$ 46,117	$ (81)	$ 7,816	$ (1,095)	$ (5,326)	$ 47,731
Balance at Mar. 31, 2018	213	87	46,098	(281)	7,732	(1,078)	(5,326)	47,445
Balance at Dec. 31, 2017	213	87	46,117	(81)	7,816	(1,095)	(5,326)	47,731
Increase (Decrease) in Stockholders' Equity
Net income for the period					(211)			(211)
Release of unearned ESOP shares			13			35		48
Restricted stock Compensation expense			30					30
Stock awarded to directors			45					45
Stock option compensation expense			19					19
Cancellation of shares issued to CEO			(108)					(108)
Other comprehensive income (loss), net of tax				(253)				(253)
Balance at Jun. 30, 2018	213	87	46,116	(334)	7,605	(1,060)	(5,326)	47,301
Balance at Mar. 31, 2018	213	87	46,098	(281)	7,732	(1,078)	(5,326)	47,445
Increase (Decrease) in Stockholders' Equity
Net income for the period					(127)			(127)
Release of unearned ESOP shares			5			18		23
Restricted stock Compensation expense			4					4
Stock option compensation expense			9					9
Other comprehensive income (loss), net of tax				(53)				(53)
Balance at Jun. 30, 2018	213	87	46,116	(334)	7,605	(1,060)	(5,326)	47,301
Balance at Dec. 31, 2018	213	87	46,141	(283)	8,631	(1,027)	(5,326)	48,436
Balance at Mar. 31, 2019	218	87	46,219	(145)	8,908	(1,010)	(5,326)	48,951
Balance at Dec. 31, 2018	213	87	46,141	(283)	8,631	(1,027)	(5,326)	48,436
Increase (Decrease) in Stockholders' Equity
Net income for the period					142			142
Release of unearned ESOP shares			(5)			33		28
Restricted stock Compensation expense	5		85					90
Stock awarded to directors			52					52
Stock option compensation expense			19					19
Other comprehensive income (loss), net of tax				249				249
Balance at Jun. 30, 2019	218	87	46,292	(34)	8,773	(994)	(5,326)	49,016
Balance at Mar. 31, 2019	218	87	46,219	(145)	8,908	(1,010)	(5,326)	48,951
Increase (Decrease) in Stockholders' Equity
Net income for the period					(135)			(135)
Release of unearned ESOP shares			(2)			16		14
Restricted stock Compensation expense			65					65
Stock option compensation expense			10					10
Other comprehensive income (loss), net of tax				111				111
Balance at Jun. 30, 2019	$ 218	$ 87	$ 46,292	$ (34)	$ 8,773	$ (994)	$ (5,326)	$ 49,016

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Basis of Financial Statement Presentation

6 Months Ended

Jun. 30, 2019

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, 2018 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, 2019 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019.  

Recently Adopted Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-02, “Leases (Topic 842)”, which is intended to increase transparency and comparability in the accounting for lease transactions.  ASU 2016-02 became effective as of January 1, 2019 and provides for a modified retrospective transition approach requiring lessees to recognize and measure leases on the balance sheet at either the earliest period presented or the beginning of the period of adoption with the option to elect certain practical expedients. We have elected to apply ASU 2016-02 as of the beginning of the period of adoption, which was January 1, 2019 and we have elected not to restate comparative periods. Of the practical expedients available under ASU 2016-02, all have been adopted.  

The Bank has a combined operating lease for its corporate headquarters and main retail branch and a photocopier lease. As a result of implementing ASU 2016-02, we recognized an operating lease right-of-use (“ROU”) asset of $1.2 million and an operating lease liability of $1.2 million as of January 1, 2019, with no impact on our consolidated statements of operations or consolidated statements of cash flows compared to the prior lease accounting model. The ROU asset and operating lease liability are recorded in fixed assets and other liabilities, respectively, in the consolidated statements of financial condition. See Note 6 – Leases for additional information. The implementation of this standard had a minor impact on our regulatory capital ratios.

Recent Accounting Pronouncements Yet to Be Adopted

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 replaces the incurred loss model with an expected loss model, which is referred to as the current expected credit loss (CECL) model.  The CECL model is applicable to the measurement of credit losses on financial assets measured at amortized cost, including loan receivables, held-to-maturity debt securities, and reinsurance receivables. It also applies to off-balance sheet credit exposures not accounted for as insurance (such as loan commitments, standby letters of credit, financial guarantees, and other similar instruments) and net investments in leases recognized by a lessor.  For public business entities that meet the definition of an SEC filer, the standard will be effective for fiscal years beginning after Dec. 15, 2019, including interim periods in those fiscal years.  All entities may early adopt for fiscal years beginning after Dec. 15, 2018, including interim periods in those fiscal years.  For debt securities with other-than-temporary impairment, the guidance will be applied prospectively.  Existing purchased credit impaired (PCI) assets will be grandfathered and classified as purchased credit deteriorated (PCD) assets at the date of adoption.  The asset will be grossed up for the allowance for expected credit losses for all PCD assets at the date of adoption and will continue to recognize the noncredit discount in interest income based on the yield of such assets as of the adoption date.  Subsequent changes in expected credit losses will be recorded through the allowance.  For all other assets within the scope of CECL, a cumulative-effect adjustment will be recognized in retained earnings as of the beginning of the first reporting period in which the guidance is effective.  The Company has begun its implementation efforts by identifying key interpretive issues, assessing its processes and identifying the system requirements against the new guidance to determine what modifications may be required.  While the Company is still evaluating the overall impact on the new standard on its consolidated financial statements, the Company expects the adoption may result in an increase to the allowance for loan losses balance.

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement. The ASU was issued to improve the effectiveness of disclosures surrounding fair value measurements. The ASU removes numerous disclosures from Topic 820 including; transfers between level 1 and 2 of the fair value hierarchy, the policy for timing of transfers between levels, and the valuation process for level 3 fair value measurements. The ASU also modified and added disclosure requirements in regards to changes in unrealized gains and losses included in other comprehensive income, as well as the range and weighted average of unobservable inputs for level 3 fair value measurements. The ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted. The guidance is not expected to have a significant impact on the Company's consolidated financial statements.

In April 2019, the FASB issued ASU No. 2019-04, Codification Improvements to Topic 326, Financial Instruments - Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments.  This ASU is effective January 1, 2020 and clarifies the scope of the credit losses standard and addresses issues related to accrued interest receivable balances, recoveries, variable interest rates and prepayments, among other things. The amendments to Topic 326 have the same effective dates as ASU 2016-13. We will evaluate this ASU in conjunction with ASU 2016-13 to determine its impact on our financial condition and results of operations.

In May 2019, the FASB issued ASU No. 2019-05, Financial Instruments - Credit Losses (Topic 326): Targeted Transition Relief. This ASU allows entities to irrevocably elect the fair value option on an instrument-by-instrument basis for eligible financial assets measured at amortized cost basis upon adoption of the credit loss standards. The effective date for this ASU is the same as for ASU 2016-13. We will evaluate this ASU in conjunction with ASU 2016-13 to determine its impact on our financial condition and results of operations.

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Earnings Per Share of Common Stock

6 Months Ended

Jun. 30, 2019

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 (loss) earnings per share of common stock for the periods indicated:

	For the three months ended June 30,				For the six months ended June 30,
	2019		2018		2019		2018
	(Dollars in thousands, except per share)
Net (loss) income	$	(135)	$	(127)	$	142	$	(211)
Less net (loss) income attributable to participating securities		(2)		—		2		—
(Loss) income available to common stockholders	$	(133)	$	(127)	$	140	$	(211)
Weighted average common shares outstanding for basic earnings (loss) per common share		26,858,018		26,740,082		26,711,043		26,752,550
Add: dilutive effects of assumed exercises of stock options		—		—		—		—
Add: dilutive effects of unvested restricted stock awards		—		—		396,331		—
Weighted average common shares outstanding for diluted earnings (loss) per common share		26,858,018		26,740,082		27,107,374		26,752,550
(Loss) Earnings per common share - basic	$	(0.01)	$	(0.00)	$	0.01	$	(0.01)
(Loss) Earnings per common share - diluted	$	(0.01)	$	(0.00)	$	0.01	$	(0.01)

Unvested restricted stock awards of 388,215 shares of common stock and stock options for 455,000 shares of common stock for the three months ended June 30, 2019 and unvested restricted stock awards of 10,399 shares of common stock and stock options for 537,500 shares of common stock for the three and six months ended June 30, 2018 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, 2019

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 were recognized in accumulated other comprehensive income (loss):

			Gross		Gross
			Unrealized		Unrealized
	Amortized Cost		Gains		Losses		Fair Value
	(In thousands)
June 30, 2019:
Federal agency mortgage-backed securities	$	8,752	$	129	$	(6)	$	8,875
Federal agency debt		5,175		61		(1)		5,235
Total available-for-sale securities	$	13,927	$	190	$	(7)	$	14,110
December 31, 2018:
Federal agency mortgage-backed securities	$	9,575	$	88	$	(155)	$	9,508
Federal agency debt		5,317		—		(103)		5,214
Total available-for-sale securities	$	14,892	$	88	$	(258)	$	14,722

At June 30, 2019, the Bank had 3 federal agency debt securities with total amortized cost of $5.2 million, estimated total fair value of $5.2 million and an estimated average remaining life of 3.6 years. The Bank also had 22 federal agency mortgage-backed securities with total amortized cost of $8.8 million, estimated total fair value of $8.9 million and an estimated average remaining life of 4.1 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.

Securities with unrealized losses at June 30, 2019 and December 31, 2018, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, were as follows:

	Less than 12 months				12 months or more				Total
			Gross				Gross		Estimated		Gross
	Estimated		Unrealized		Estimated		Unrealized		Fair		Unrealized
	Fair Value		Losses		Fair Value		Losses		Value		Losses
	(In thousands)
June 30, 2019:
Federal agency mortgage-backed securities	$	—	$	—	$	4,054	$	(6)	$	4,054	$	(6)
Federal agency debt		1,995		(1)		—		—		1,995		(1)
Total temporarily impaired	$	1,995	$	(1)	$	4,054	$	(6)	$	6,049	$	(7)
December 31, 2018:
Federal agency mortgage-backed securities	$	2,649	$	(25)	$	4,213	$	(130)	$	6,862	$	(155)
Federal agency debt		1,979		(10)		3,235		(93)		5,214		(103)
Total temporarily impaired	$	4,628	$	(35)	$	7,448	$	(223)	$	12,076	$	(258)

At June 30, 2019 and December 31, 2018, there were no securities pledged to secure public deposits since those public deposits are under $250 thousand and are fully insured by FDIC.  At June 30, 2019 and December 31, 2018, 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, 2019 and 2018. 

The Bank held 5 securities with unrealized losses at June 30, 2019 compared to 10 securities with unrealized losses at December 31, 2018. Securities in unrealized loss positions are analyzed as part of our ongoing assessment of other-than-temporary impairment.  Consideration is given to the financial condition and near-term prospects of the issuer, the length of time and the extent to which the fair value has been less than the cost, and our intent and ability to retain our investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.  All of the Bank’s securities were issued by the federal government or its agencies. The unrealized losses on our available-for-sale securities at June 30, 2019 were primarily caused by movements in market interest rates subsequent to the purchase of such securities.  We do not consider these unrealized losses to be other than temporary impairment.

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Loans Receivable Held for Sale

6 Months Ended

Jun. 30, 2019

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, 2019 and December 31, 2018 totaled $26.1 million and $6.2 million, respectively, and consisted of multi-family loans. The Bank transferred $1.1 million and $16.9 million of multi-family loans from the held-for-sale portfolio to the held-for-investment portfolio during the first half of 2019 and  2018, respectively. During the first six months of 2019, $10.7 million in loans receivable held for investment were transferred to loans receivable held for sale.  There were no loan sales during the six months ended June 30, 2019.Sales of multi-family loans during the six months ended June 30, 2018 totaled  $4.3 million. Loan repayments totaled $46 thousand and $82 thousand during the six months ended June 30, 2019 and 2018, respectively.

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Loans Receivable Held for Investment

6 Months Ended

Jun. 30, 2019

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 dates indicated:

	June 30, 2019		December 31, 2018
	(In thousands)
Real estate:
Single family	$	85,107	$	91,835
Multi-family		238,718		231,870
Commercial real estate		6,429		5,802
Church		22,553		25,934
Construction		2,246		1,876
Commercial – other		264		226
Consumer		12		5
Gross loans receivable before deferred loan costs and premiums		355,329		357,548
Unamortized net deferred loan costs and premiums		784		937
Gross loans receivable		356,113		358,485
Allowance for loan losses		(2,771)		(2,929)
Loans receivable, net	$	353,342	$	355,556

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

	Three Months Ended June 30, 2019
	Real Estate
	Single		Multi-		Commercial						Commercial
	family		family		real estate		Church		Construction		- other		Consumer		Total
	(In thousands)
Beginning balance	$	347	$	1,990	$	62	$	507	$	18	$	5	$	—	$	2,929
Provision for (recapture of) loan losses		(19)		(58)		(4)		(106)		26		—		3		(158)
Recoveries		—		—		—		—		—		—		—		—
Loans charged off		—		—		—		—		—		—		—		—
Ending balance	$	328	$	1,932	$	58	$	401	$	44	$	5	$	3	$	2,771

	Three Months Ended June 30, 2018
	Real Estate
	Single		Multi-		Commercial						Commercial
	family		family		real estate		Church		Construction		- other		Consumer		Total
	(In thousands)
Beginning balance	$	588	$	2,508	$	65	$	1,005	$	11	$	6	$	—	$	4,183
Provision for (recapture of) loan losses		(71)		148		(4)		(80)		7		—		—		—
Recoveries		—		—		—		—		—		—		—		—
Loans charged off		—		—		—		—		—		—		—		—
Ending balance	$	517	$	2,656	$	61	$	925	$	18	$	6	$	—	$	4,183

	Six Months Ended June 30, 2019
	Real Estate
	Single		Multi-		Commercial						Commercial
	family		family		real estate		Church		Construction		- other		Consumer		Total
	(In thousands)
Beginning balance	$	369	$	1,880	$	52	$	603	$	19	$	6	$	—	$	2,929
Provision for (recapture of) loan losses		(41)		52		6		(392)		25		(1)		3		(348)
Recoveries		—		—		—		190		—		—		—		190
Loans charged off		—		—		—		—		—		—		—		—
Ending balance	$	328	$	1,932	$	58	$	401	$	44	$	5	$	3	$	2,771

	Six Months Ended June 30, 2018
	Real Estate
	Single		Multi-		Commercial						Commercial
	family		family		real estate		Church		Construction		- other		Consumer		Total
	(In thousands)
Beginning balance	$	594	$	2,300	$	71	$	1,081	$	17	$	6	$	—	$	4,069
Provision for (recapture of) loan losses		(77)		356		(10)		(270)		1		—		—		—
Recoveries		—		—		—		114		—		—		—		114
Loans charged off		—		—		—		—		—		—		—		—
Ending balance	$	517	$	2,656	$	61	$	925	$	18	$	6	$	—	$	4,183

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  the dates indicated:

	June 30, 2019
	Real Estate
	Single		Multi-		Commercial						Commercial
	family		family		real estate		Church		Construction		- other		Consumer		Total
	(In thousands)
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	37	$	—	$	—	$	96	$	—	$	3	$	—	$	136
Collectively evaluated for impairment		291		1,932		58		305		44		2		3		2,635
Total ending allowance balance	$	328	$	1,932	$	58	$	401	$	44	$	5	$	3	$	2,771
Loans:
Loans individually evaluated for impairment	$	636	$	318	$	—	$	4,703	$	—	$	63	$	—	$	5,720
Loans collectively evaluated for impairment		84,755		239,582		6,436		17,165		2,242		201		12		350,393
Total ending loans balance	$	85,391	$	239,900	$	6,436	$	21,868	$	2,242	$	264	$	12	$	356,113

	December 31, 2018
	Real Estate
	Single		Multi-		Commercial						Commercial
	family		family		real estate		Church		Construction		- other		Consumer		Total
	(In thousands)
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	53	$	—	$	—	$	170	$	—	$	4	$	—	$	227
Collectively evaluated for impairment		316		1,880		52		433		19		2		—		2,702
Total ending allowance balance	$	369	$	1,880	$	52	$	603	$	19	$	6	$	—	$	2,929
Loans:
Loans individually evaluated for impairment	$	610	$	323	$	—	$	5,383	$	—	$	64	$	—	$	6,380
Loans collectively evaluated for impairment		91,567		232,986		5,800		19,713		1,872		162		5		352,105
Total ending loans balance	$	92,177	$	233,309	$	5,800	$	25,096	$	1,872	$	226	$	5	$	358,485

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

	June 30, 2019						December 31, 2018
					Allowance						Allowance
	Unpaid				for Loan		Unpaid				for Loan
	Principal		Recorded		Losses		Principal		Recorded		Losses
	Balance		Investment		Allocated		Balance		Investment		Allocated
	(In thousands)
With no related allowance recorded:
Single family	$	34	$	34	$	—	$	—	$	—	$	—
Multi-family	$	318	$	318	$	—	$	323	$	323	$	—
Church	$	4,079	$	2,723	$	—	$	4,666	$	2,803	$	—
With an allowance recorded:
Single family		602		602		37		610		610		53
Church		1,980		1,980		96		2,580		2,580		170
Commercial - other		63		63		3		64		64		4
Total	$	7,076	$	5,720	$	136	$	8,243	$	6,380	$	227

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, 2019				Three Months Ended June 30, 2018
			Cash Basis				Cash Basis
	Average		Interest		Average		Interest
	Recorded		Income		Recorded		Income
	Investment		Recognized		Investment		Recognized
	(In thousands)
Single family	$	638	$	5	$	620	$	7
Multi-family		320		5		331		6
Church		4,741		402		7,692		112
Commercial – other		63		—		65		1
Total	$	5,762	$	412	$	8,708	$	126

	Six Months Ended June 30, 2019				Six Months Ended June 30, 2018
			Cash Basis				Cash Basis
	Average		Interest		Average		Interest
	Recorded		Income		Recorded		Income
	Investment		Recognized		Investment		Recognized
	(In thousands)
Single family	$	640	$	15	$	622	$	15
Multi-family		321		11		331		12
Church		5,383		517		7,849		286
Commercial – other		64		2		65		2
Total	$	6,408	$	545	$	8,867	$	315

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 $40 thousand and $67 thousand for the three months ended June 30, 2019 and 2018, respectively, and $80 thousand and $77 thousand for the six months ended June 30, 2019 and 2018, 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, 2019
					Greater
	30-59		60-89		than
	Days		Days		90 Days		Total
	Past Due		Past Due		Past Due		Past Due		Current		Total
	(In thousands)
Loans receivable held for investment:
Single family	$	36	$	—	$	34	$	70	$	85,321	$	85,391
Multi-family		—		—		—		—		239,900		239,900
Commercial real estate		—		—		—		—		6,436		6,436
Church		—		—		—		—		21,868		21,868
Construction		—		—		—		—		2,242		2,242
Commercial - other		—		—		—		—		264		264
Consumer		—		—		—		—		12		12
Total	$	36	$	—	$	34	$	70	$	356,043	$	356,113

	December 31, 2018
					Greater
	30-59		60-89		than
	Days		Days		90 Days		Total
	Past Due		Past Due		Past Due		Past Due		Current		Total
	(In thousands)
Loans receivable held for investment:
Single family	$	35	$	—	$	—	$	35	$	92,142	$	92,177
Multi-family		—		—		—		—		233,309		233,309
Commercial real estate		—		—		—		—		5,800		5,800
Church		—		—		—		—		25,096		25,096
Construction		—		—		—		—		1,872		1,872
Commercial - other		—		—		—		—		226		226
Consumer		—		—		—		—		5		5
Total	$	35	$	—	$	—	$	35	$	358,450	$	358,485

The following table presents the recorded investment in non-accrual loans by loan type as of the periods indicated:

	June 30, 2019		December 31, 2018
	(In thousands)
Loans receivable held for investment:
Single-family residence	$	34	$	—
Church	$	694	$	911
Total non-accrual loans	$	728	$	911

There were no loans 90 days or more delinquent that were accruing interest as of June 30, 2019 or December 31, 2018. None of the church non-accrual loans were delinquent, but none qualified for accrual status as of the periods indicated.

Troubled Debt Restructurings

At June 30, 2019, loans classified as troubled debt restructurings (“TDRs”) totaled $5.1 million, of which $694 thousand were included in non-accrual loans and $4.3 million were on accrual status.  At December 31, 2018, loans classified as TDRs totaled $6.4 million, of which $591 thousand were included in non-accrual loans and $5.8 million were on accrual status. The Company has allocated $136 thousand and $227 thousand of specific reserves for accruing TDRs as of June 30, 2019 and December 31, 2018, 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, 2019 and December 31, 2018, 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, 2019 and 2018.

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, 2019
	Pass		Watch		Special Mention		Substandard		Doubtful		Loss
	(In thousands)
Single family	$	85,348	$	—	$	—	$	43	$	—	$	—
Multi-family		238,714		—		532		654		—		—
Commercial real estate		6,436		—		—		—		—		—
Church		17,179		418		255		4,016		—		—
Construction		2,242		—		—		—		—		—
Commercial - other		201		—		—		63		—		—
Consumer		12		—		—		—		—		—
Total	$	350,132	$	418	$	787	$	4,776	$	—	$	—

	December 31, 2018
	Pass		Watch		Special Mention		Substandard		Doubtful		Loss
	(In thousands)
Single family	$	92,132	$	—	$	35	$	10	$	—	$	—
Multi-family		232,642		—		—		667		—		—
Commercial real estate		5,800		—		—		—		—		—
Church		19,678		672		—		4,746		—		—
Construction		1,872		—		—		—		—		—
Commercial - other		162		—		—		64		—		—
Consumer		5		—		—		—		—		—
Total	$	352,291	$	672	$	35	$	5,487	$	—	$	—

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Leases

6 Months Ended

Jun. 30, 2019

Leases

Leases

NOTE (6) - Leases

The Bank has a combined operating lease for its corporate headquarters and main retail branch and a photocopier lease. The ROU asset and operating lease liability are recorded in fixed assets and other liabilities, respectively, in the consolidated statements of financial condition.

Our ROU asset represents our right to use an underlying asset during the lease term. Operating lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized based on the present value of the remaining lease payments using a discount rate that represents our incremental borrowing rate at the date of implementation of the new accounting standard.

The operating lease for our corporate headquarters and main retail branch has one 5-year extension option at the then fair market rate. As this extension option is not reasonably certain of exercise, it is not included in the lease term. The Bank recorded a ROU asset of $990 thousand and an operating lease liability of $990 thousand as of June 30, 2019. The Bank has no finance leases.

The Bank recorded operating lease expense costs of $123 thousand and $121 thousand for the quarters ended June 30, 2019 and June 30, 2018, respectively, and $245 thousand and $242 thousand for the first six months of 2019 and the first six months of 2018, respectively.

Additional information regarding our operating leases is summarized below for the periods indicated dollars in thousands):

	Quarter ended		Six Months ended
	June 30, 2019		June 30, 2019
Cash paid for amounts included in the measurement of lease liabilities for operating leases:	$	135	$	269
ROU assets obtained in exchange for lease liabilities			$	990
Weighted average remaining lease term in months				22
Weighted average discount rate				2.75	%

The future minimum payments for operating leases with remaining terms of one year or more as of June 30, 2019 were as follows (in thousands):

Six months ended December 31, 2019	$	273
Year ended December 31, 2020		555
Year ended December 31, 2021		195
Total Future Minimum Lease Payments		1,023
Amounts Representing Interest		(27)
Present Value of Net Future Minimum Lease Payments	$	996

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Junior Subordinated Debentures

6 Months Ended

Jun. 30, 2019

Junior Subordinated Debentures

Junior Subordinated Debentures

NOTE (7) – 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 4.95% at June 30, 2019. 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 made its first principal payment of $255 thousand in addition to the required interest payment.  Quarterly principal payments of $255 thousand are required until the Debentures are fully repaid 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, 2019

Fair Value

Fair Value

NOTE (8) – Fair Value

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There are three levels of inputs that may be used to measure fair values:

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2: Significant observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3: Significant unobservable inputs that reflect a company's own assumptions about the assumptions that market participants would use in pricing an asset or liability.

The Company used the following methods and significant assumptions to estimate fair value:

The fair values of securities available-for-sale are determined by obtaining quoted prices on nationally recognized securities exchanges (Level 1 inputs) or matrix pricing, which is a mathematical technique to value debt securities without relying exclusively on quoted prices for the specific securities, but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2 inputs).

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

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

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		Significant
	Markets for		Other		Significant
	Identical		Observable		Unobservable
	Assets		Inputs		Inputs
	(Level 1)		(Level 2)		(Level 3)		Total
	(In thousands)
At June 30, 2019:
Securities available-for-sale - federal agency mortgage-backed	$	—	$	8,875	$	—	$	8,875
Securities available-for-sale - federal agency debt		1,995		3,240		—		5,235
At December 31, 2018:
Securities available-for-sale - federal agency mortgage-backed	$	—	$	9,508	$	—	$	9,508
Securities available-for-sale - federal agency debt		1,979		3,235		—		5,214

There were no transfers between Level 1, Level 2, or Level 3 during the three and six months ended June 30, 2019 and 2018.

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 statements of financial 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, 2019		December 31, 2018
	(In thousands)
Impaired loans carried at fair value of collateral	$	396	$	591
Real estate owned		—		833

The following table provides information regarding losses recognized on assets measured at fair value on a non-recurring basis for the three and six months ended June 30, 2019 and 2018.

	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
	(In thousands)
Impaired loans carried at fair value of collateral	$	—	$	—	$	—	$	—
Real estate owned - church		—		45		13		45
Total	$	—	$	45	$	13	$	45

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, 2019 and December 31, 2018:

	Valuation			Weighted
	Technique(s)	Unobservable Input(s)	Range	Average
June 30, 2019:
Impaired loans	Third Party	Adjustment for differences
	Appraisals	between the comparable sales	-3% to -1%	2.53%
Real estate owned - church	Third Party	Adjustment for differences
	Appraisals	between the comparable sales	0%	0%
December 31, 2018:
Impaired loans	Third Party	Adjustment for differences
	Appraisals	between the comparable sales	-3% to -1%	-2.83%
Real estate owned - church	Third Party	Adjustment for differences
	Appraisals	between the comparable sales	-11%	-10.85%

Fair Values of Financial Instruments

The following tables present the carrying amount, fair value, and placement in the fair value hierarchy of the Company’s financial instruments not recorded at fair value on a recurring basis as of June 30, 2019 and December 31, 2018.  This table excludes financial instruments for which the carrying amount approximates fair value.  For short-term financial assets such as cash and due from banks, interest-bearing deposits in other banks, and accrued interest receivable/payable, the carrying amount is a reasonable estimate of fair value due to the relatively short time between the origination of the instrument and its expected realization.  For non-marketable equity securities such as Federal Home Loan Bank stock, the carrying amount is a reasonable estimate of fair value as these securities can only be redeemed or sold at their par value and only to the respective issuing government supported institution or to another member institution.  For financial liabilities such as noninterest-bearing demand, interest-bearing demand, and savings deposits, the carrying amount is a reasonable estimate of fair value due to these products having no stated maturity.

			Fair Value Measurements at June 30, 2019
	Carrying
	Value		Level 1		Level 2		Level 3		Total
	(In thousands)
Financial Assets:
Loans receivable held for sale	$	26,085	$	—	$	26,085	$	—	$	26,085
Loans receivable held for investment		355,342		—		—		355,826		355,826
Financial Liabilities:
Time Deposits	$	192,856	$	—	$	192,992	$	—	$	192,992
Federal Home Loan Bank advances		75,000		—		76,128		—		76,128
Junior subordinated debentures		4,845		—		—		4,215		4,215

			Fair Value Measurements at December 31, 2018
	Carrying
	Value		Level 1		Level 2		Level 3		Total
	(In thousands)
Financial Assets:
Loans receivable held for sale	$	6,231	$	—	$	6,270	$	—	$	6,270
Loans receivable held for investment		355,556		—		—		354,792		354,792
Financial Liabilities:
Time Deposits	$	172,564	$	—	$	171,725	$	—	$	171,725
Federal Home Loan Bank advances		70,000		—		69,933		—		69,933
Junior subordinated debentures		5,100		—		—		4,481		4,481

In accordance with the adoption of ASU No. 2016-01, the fair value of certain financial assets and liabilities, including loans, time deposits, and junior subordinated debentures, as of June 30, 2019 and December 31, 2018 was measured using an exit price notion.  Although the exit price notion represents the value that would be received to sell an asset or paid to transfer a liability, the actual price received for a sale of assets or paid to transfer liabilities could be different from exit price disclosed.

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Stock-based Compensation

6 Months Ended

Jun. 30, 2019

Stock-based Compensation

Stock-based Compensation

NOTE (9) – Stock-based Compensation

Prior to July 25, 2018, the Company issued stock-based compensation awards to its directors and employees under the 2008 Long-Term Incentive Plan (“2008 LTIP”).  The 2008 LTIP permitted 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 July 25, 2018, the Company ceased granting awards under the 2008 LTIP.

On July 25, 2018, the stockholders approved the 2018 Long-Term Incentive Plan ("2018 LTIP"). As with the 2008 LTIP, the 2018 LTIP  permits the grant of non-qualified and incentive stock options, stock appreciation rights, full value awards and cash incentive awards. The plan is in effect for ten years. The maximum number of shares that can be awarded under the plan is 1,293,109 shares of common stock as of December 31, 2018.

In February 2019, the Company awarded 428,796 shares of restricted stock to its employees under the 2018 LTIP.  A restricted stock award is valued at the average of the high and the low price of the Company’s stock on the date of the award.  These shares of restricted stock vest over a two-year period.  Stock-based compensation expense is recognized over the vesting period.  The Company recorded $64 thousand and $86 thousand of stock-based compensation expense related to this award during the three and six months ended June 30, 2019, respectively.  As of June 30, 2019, the unrecognized compensation cost related to nonvested restricted-stock awards under the plan was $439 thousand.  The cost is expected to be recognized over a period of 1.67 years.

In January 2019, the Company awarded 42,168 shares of common stock to its directors under the 2018 LTIP which are fully vested.  The Company recorded $52 thousand of compensation expense for the quarter ended March 31, 2019 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.  Additionally, in January 2018, the Company awarded 18,906 shares of common stock to its directors under the 2008 LTIP, all of which are fully vested.  The Company recorded $45 thousand of compensation expense for the quarter ended March 31, 2018 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 February 2018 and April 2017, the Company also awarded 97,195 and 129,270 of cash-settled restricted stock units (“RSUs”) to its CEO under the 2008 LTIP.  All RSUs 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 and is classified as a liability in the consolidated statements of financial condition.  The Company recorded $10 thousand and $64 thousand of compensation expense related to these awards during the quarters ended June 30, 2019 and 2018, respectively.

No stock options were granted during the six months ended June 30, 2019 and 2018.

The following table summarizes stock option activity during the six months ended June 2019 and 2018:

	Six Months Ended			Six Months Ended
	June 30, 2019			June 30, 2018
		Weighted			Weighted
		Average			Average
	Number	Exercise		Number	Exercise
	Outstanding	Price		Outstanding	Price
Outstanding at beginning of period	537,500	$	2.19	537,500	$	2.19
Granted during period	—		—	—		—
Exercised during period	—		—	—		—
Forfeited or expired during period	(82,500)		4.89	—		—
Outstanding at end of period	455,000	$	1.67	537,500	$	2.19
Exercisable at end of period	275,000	$	1.70	267,500	$	2.71

The Company recorded $10 thousand and $19 thousand of stock-based compensation expense related to stock options during thethree and six months ended June 30, 2019 and 2018, respectively. As of June 30, 2019, the unrecognized compensation cost related to nonvested stock options granted under the plan was  $65 thousand.  The cost is expected to be recognized over a period of 1.65 years.

Options outstanding and exercisable at June 30, 2019 were as follows:

	Outstanding						Exercisable
		Weighted
		Average	Weighted					Weighted
		Remaining	Average		Aggregate			Average		Aggregate
	Number	Contractual	Exercise		Intrinsic		Number	Exercise		Intrinsic
Grant Date	Outstanding	Life	Price		Value		Outstanding	Price		Value
January 21, 2010	5,000	0.56 years	$	6.00			5,000	$	6.00
February 24, 2016	450,000	6.65 years	$	1.62			270,000	$	1.62
	455,000	6.59 years	$	1.67	$	—	275,000	$	1.70	$	—

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ESOP Plan

6 Months Ended

Jun. 30, 2019

ESOP Plan

ESOP Plan

NOTE (10) – 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.  Any dividends on allocated shares increase participant accounts.  Any dividends on unallocated shares will be used to repay the loan.  Participants will receive shares for their vested balance at the end of their employment.  Compensation expense related to the ESOP was $14 thousand and $23 thousand for the three months ended June 30, 2019 and 2018, respectively, and $28 thousand and $48 thousand for the six months ended June 30, 2019 and 2018, respectively.

Shares held by the ESOP were as follows:

	June 30, 2019		December 31, 2018
	(Dollars in thousands)
Allocated to participants		1,032,128		1,036,809
Committed to be released		31,740		10,580
Suspense shares		624,873		646,033
Total ESOP shares		1,688,741		1,693,422
Fair value of unearned shares	$	887	$	678

The outstanding balance of unearned shares was $994 thousand and $1.1 million at June 30, 2019 and December 31, 2018, respectively, which are shown as Unearned ESOP shares in the equity section of the consolidated statements of financial condition.

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Regulatory Matters

6 Months Ended

Jun. 30, 2019

Regulatory Matters

Regulatory Matters

NOTE (11) – 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 capital conservation buffer is also required to be maintained above the regulatory minimum capital requirements.  This capital conservation buffer was phased in on a schedule that began on January 1, 2016 at 0.625% of risk-weighted assets and increased each subsequent year by an additional 0.625% until it reached its final level of 2.5% on January 1, 2019.

The Basel III Capital rules also revised the previously existing prompt corrective action regulatory 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 complement the capital conservation buffer, insured depository institutions are 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).

At June 30, 2019 and December 31, 2018, 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.

									Minimum Required To
									Be Well Capitalized
									Under Prompt
					Minimum Capital				Corrective Action
	Actual				Requirements				Provisions
	Amount		Ratio		Amount		Ratio		Amount		Ratio
	(Dollars in thousands)
June 30, 2019:
Tier 1 (Leverage)	$	49,434	11.83	%	$	16,715	4.0	%	$	20,894	5.0	%
Common Equity Tier 1	$	49,434	18.79	%	$	18,805	4.5	%	$	17,101	6.5	%
Tier 1	$	49,434	18.79	%	$	25,073	6.0	%	$	21,048	8.0	%
Total Capital	$	52,263	19.86	%	$	33,430	8.0	%	$	26,310	10.0	%
December 31, 2018:
Tier 1 (Leverage)	$	49,433	12.03	%	$	16,439	4.0	%	$	20,549	5.0	%
Common Equity Tier 1	$	49,433	19.32	%	$	18,494	4.5	%	$	16,634	6.5	%
Tier 1	$	49,433	19.32	%	$	24,659	6.0	%	$	20,472	8.0	%
Total Capital	$	52,417	20.48	%	$	32,879	8.0	%	$	25,590	10.0	%

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Income Taxes

6 Months Ended

Jun. 30, 2019

Income Taxes

Income Taxes

NOTE (12) – 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 evaluates both positive and negative evidence, including the existence of cumulative losses in the current year and the prior two years, the amount of taxes paid in available carry-back years, the forecasts of future income and tax planning strategies. Based on this analysis, the Company determined that as of June 30, 2019, no valuation allowance was required on its deferred tax assets, which totaled $5.0 million.

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Concentration of Credit Risk

6 Months Ended

Jun. 30, 2019

Concentration of Credit Risk

Concentration of Credit Risk

NOTE (13) – Concentration of Credit Risk

The Bank has a significant concentration of deposits with a long-time customer that accounted for approximately 10% of its deposits as of June 30, 2019. 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, 2019

Basis of Financial Statement Presentation

Recently Adopted Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-02, “Leases (Topic 842)”, which is intended to increase transparency and comparability in the accounting for lease transactions.  ASU 2016-02 became effective as of January 1, 2019 and provides for a modified retrospective transition approach requiring lessees to recognize and measure leases on the balance sheet at either the earliest period presented or the beginning of the period of adoption with the option to elect certain practical expedients. We have elected to apply ASU 2016-02 as of the beginning of the period of adoption, which was January 1, 2019 and we have elected not to restate comparative periods. Of the practical expedients available under ASU 2016-02, all have been adopted.  

The Bank has a combined operating lease for its corporate headquarters and main retail branch and a photocopier lease. As a result of implementing ASU 2016-02, we recognized an operating lease right-of-use (“ROU”) asset of $1.2 million and an operating lease liability of $1.2 million as of January 1, 2019, with no impact on our consolidated statements of operations or consolidated statements of cash flows compared to the prior lease accounting model. The ROU asset and operating lease liability are recorded in fixed assets and other liabilities, respectively, in the consolidated statements of financial condition. See Note 6 – Leases for additional information. The implementation of this standard had a minor impact on our regulatory capital ratios.

Recent Accounting Pronouncements Yet to Be Adopted

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 replaces the incurred loss model with an expected loss model, which is referred to as the current expected credit loss (CECL) model.  The CECL model is applicable to the measurement of credit losses on financial assets measured at amortized cost, including loan receivables, held-to-maturity debt securities, and reinsurance receivables. It also applies to off-balance sheet credit exposures not accounted for as insurance (such as loan commitments, standby letters of credit, financial guarantees, and other similar instruments) and net investments in leases recognized by a lessor.  For public business entities that meet the definition of an SEC filer, the standard will be effective for fiscal years beginning after Dec. 15, 2019, including interim periods in those fiscal years.  All entities may early adopt for fiscal years beginning after Dec. 15, 2018, including interim periods in those fiscal years.  For debt securities with other-than-temporary impairment, the guidance will be applied prospectively.  Existing purchased credit impaired (PCI) assets will be grandfathered and classified as purchased credit deteriorated (PCD) assets at the date of adoption.  The asset will be grossed up for the allowance for expected credit losses for all PCD assets at the date of adoption and will continue to recognize the noncredit discount in interest income based on the yield of such assets as of the adoption date.  Subsequent changes in expected credit losses will be recorded through the allowance.  For all other assets within the scope of CECL, a cumulative-effect adjustment will be recognized in retained earnings as of the beginning of the first reporting period in which the guidance is effective.  The Company has begun its implementation efforts by identifying key interpretive issues, assessing its processes and identifying the system requirements against the new guidance to determine what modifications may be required.  While the Company is still evaluating the overall impact on the new standard on its consolidated financial statements, the Company expects the adoption may result in an increase to the allowance for loan losses balance.

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement. The ASU was issued to improve the effectiveness of disclosures surrounding fair value measurements. The ASU removes numerous disclosures from Topic 820 including; transfers between level 1 and 2 of the fair value hierarchy, the policy for timing of transfers between levels, and the valuation process for level 3 fair value measurements. The ASU also modified and added disclosure requirements in regards to changes in unrealized gains and losses included in other comprehensive income, as well as the range and weighted average of unobservable inputs for level 3 fair value measurements. The ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted. The guidance is not expected to have a significant impact on the Company's consolidated financial statements.

In April 2019, the FASB issued ASU No. 2019-04, Codification Improvements to Topic 326, Financial Instruments - Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments.  This ASU is effective January 1, 2020 and clarifies the scope of the credit losses standard and addresses issues related to accrued interest receivable balances, recoveries, variable interest rates and prepayments, among other things. The amendments to Topic 326 have the same effective dates as ASU 2016-13. We will evaluate this ASU in conjunction with ASU 2016-13 to determine its impact on our financial condition and results of operations.

In May 2019, the FASB issued ASU No. 2019-05, Financial Instruments - Credit Losses (Topic 326): Targeted Transition Relief. This ASU allows entities to irrevocably elect the fair value option on an instrument-by-instrument basis for eligible financial assets measured at amortized cost basis upon adoption of the credit loss standards. The effective date for this ASU is the same as for ASU 2016-13. We will evaluate this ASU in conjunction with ASU 2016-13 to determine its impact on our financial condition and results of operations.

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Earnings Per Share of Common Stock (Tables)

6 Months Ended

Jun. 30, 2019

Earnings Per Share of Common Stock

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

	For the three months ended June 30,				For the six months ended June 30,
	2019		2018		2019		2018
	(Dollars in thousands, except per share)
Net (loss) income	$	(135)	$	(127)	$	142	$	(211)
Less net (loss) income attributable to participating securities		(2)		—		2		—
(Loss) income available to common stockholders	$	(133)	$	(127)	$	140	$	(211)
Weighted average common shares outstanding for basic earnings (loss) per common share		26,858,018		26,740,082		26,711,043		26,752,550
Add: dilutive effects of assumed exercises of stock options		—		—		—		—
Add: dilutive effects of unvested restricted stock awards		—		—		396,331		—
Weighted average common shares outstanding for diluted earnings (loss) per common share		26,858,018		26,740,082		27,107,374		26,752,550
(Loss) Earnings per common share - basic	$	(0.01)	$	(0.00)	$	0.01	$	(0.01)
(Loss) Earnings per common share - diluted	$	(0.01)	$	(0.00)	$	0.01	$	(0.01)

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Securities (Tables)

6 Months Ended

Jun. 30, 2019

Securities

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

			Gross		Gross
			Unrealized		Unrealized
	Amortized Cost		Gains		Losses		Fair Value
	(In thousands)
June 30, 2019:
Federal agency mortgage-backed securities	$	8,752	$	129	$	(6)	$	8,875
Federal agency debt		5,175		61		(1)		5,235
Total available-for-sale securities	$	13,927	$	190	$	(7)	$	14,110
December 31, 2018:
Federal agency mortgage-backed securities	$	9,575	$	88	$	(155)	$	9,508
Federal agency debt		5,317		—		(103)		5,214
Total available-for-sale securities	$	14,892	$	88	$	(258)	$	14,722

Summary of securities in unrealized loss position

	Less than 12 months				12 months or more				Total
			Gross				Gross		Estimated		Gross
	Estimated		Unrealized		Estimated		Unrealized		Fair		Unrealized
	Fair Value		Losses		Fair Value		Losses		Value		Losses
	(In thousands)
June 30, 2019:
Federal agency mortgage-backed securities	$	—	$	—	$	4,054	$	(6)	$	4,054	$	(6)
Federal agency debt		1,995		(1)		—		—		1,995		(1)
Total temporarily impaired	$	1,995	$	(1)	$	4,054	$	(6)	$	6,049	$	(7)
December 31, 2018:
Federal agency mortgage-backed securities	$	2,649	$	(25)	$	4,213	$	(130)	$	6,862	$	(155)
Federal agency debt		1,979		(10)		3,235		(93)		5,214		(103)
Total temporarily impaired	$	4,628	$	(35)	$	7,448	$	(223)	$	12,076	$	(258)

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Loans Receivable Held for Investment (Tables)

6 Months Ended

Jun. 30, 2019

Loans Receivable Held for Investment

Schedule of loans receivable held for investment

	June 30, 2019		December 31, 2018
	(In thousands)
Real estate:
Single family	$	85,107	$	91,835
Multi-family		238,718		231,870
Commercial real estate		6,429		5,802
Church		22,553		25,934
Construction		2,246		1,876
Commercial – other		264		226
Consumer		12		5
Gross loans receivable before deferred loan costs and premiums		355,329		357,548
Unamortized net deferred loan costs and premiums		784		937
Gross loans receivable		356,113		358,485
Allowance for loan losses		(2,771)		(2,929)
Loans receivable, net	$	353,342	$	355,556

Schedule of activity in the allowance for loan losses by loan type

	Three Months Ended June 30, 2019
	Real Estate
	Single		Multi-		Commercial						Commercial
	family		family		real estate		Church		Construction		- other		Consumer		Total
	(In thousands)
Beginning balance	$	347	$	1,990	$	62	$	507	$	18	$	5	$	—	$	2,929
Provision for (recapture of) loan losses		(19)		(58)		(4)		(106)		26		—		3		(158)
Recoveries		—		—		—		—		—		—		—		—
Loans charged off		—		—		—		—		—		—		—		—
Ending balance	$	328	$	1,932	$	58	$	401	$	44	$	5	$	3	$	2,771

	Three Months Ended June 30, 2018
	Real Estate
	Single		Multi-		Commercial						Commercial
	family		family		real estate		Church		Construction		- other		Consumer		Total
	(In thousands)
Beginning balance	$	588	$	2,508	$	65	$	1,005	$	11	$	6	$	—	$	4,183
Provision for (recapture of) loan losses		(71)		148		(4)		(80)		7		—		—		—
Recoveries		—		—		—		—		—		—		—		—
Loans charged off		—		—		—		—		—		—		—		—
Ending balance	$	517	$	2,656	$	61	$	925	$	18	$	6	$	—	$	4,183

	Six Months Ended June 30, 2019
	Real Estate
	Single		Multi-		Commercial						Commercial
	family		family		real estate		Church		Construction		- other		Consumer		Total
	(In thousands)
Beginning balance	$	369	$	1,880	$	52	$	603	$	19	$	6	$	—	$	2,929
Provision for (recapture of) loan losses		(41)		52		6		(392)		25		(1)		3		(348)
Recoveries		—		—		—		190		—		—		—		190
Loans charged off		—		—		—		—		—		—		—		—
Ending balance	$	328	$	1,932	$	58	$	401	$	44	$	5	$	3	$	2,771

	Six Months Ended June 30, 2018
	Real Estate
	Single		Multi-		Commercial						Commercial
	family		family		real estate		Church		Construction		- other		Consumer		Total
	(In thousands)
Beginning balance	$	594	$	2,300	$	71	$	1,081	$	17	$	6	$	—	$	4,069
Provision for (recapture of) loan losses		(77)		356		(10)		(270)		1		—		—		—
Recoveries		—		—		—		114		—		—		—		114
Loans charged off		—		—		—		—		—		—		—		—
Ending balance	$	517	$	2,656	$	61	$	925	$	18	$	6	$	—	$	4,183

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

	June 30, 2019
	Real Estate
	Single		Multi-		Commercial						Commercial
	family		family		real estate		Church		Construction		- other		Consumer		Total
	(In thousands)
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	37	$	—	$	—	$	96	$	—	$	3	$	—	$	136
Collectively evaluated for impairment		291		1,932		58		305		44		2		3		2,635
Total ending allowance balance	$	328	$	1,932	$	58	$	401	$	44	$	5	$	3	$	2,771
Loans:
Loans individually evaluated for impairment	$	636	$	318	$	—	$	4,703	$	—	$	63	$	—	$	5,720
Loans collectively evaluated for impairment		84,755		239,582		6,436		17,165		2,242		201		12		350,393
Total ending loans balance	$	85,391	$	239,900	$	6,436	$	21,868	$	2,242	$	264	$	12	$	356,113

	December 31, 2018
	Real Estate
	Single		Multi-		Commercial						Commercial
	family		family		real estate		Church		Construction		- other		Consumer		Total
	(In thousands)
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	53	$	—	$	—	$	170	$	—	$	4	$	—	$	227
Collectively evaluated for impairment		316		1,880		52		433		19		2		—		2,702
Total ending allowance balance	$	369	$	1,880	$	52	$	603	$	19	$	6	$	—	$	2,929
Loans:
Loans individually evaluated for impairment	$	610	$	323	$	—	$	5,383	$	—	$	64	$	—	$	6,380
Loans collectively evaluated for impairment		91,567		232,986		5,800		19,713		1,872		162		5		352,105
Total ending loans balance	$	92,177	$	233,309	$	5,800	$	25,096	$	1,872	$	226	$	5	$	358,485

Schedule of loans individually evaluated for impairment by loan type

	June 30, 2019						December 31, 2018
					Allowance						Allowance
	Unpaid				for Loan		Unpaid				for Loan
	Principal		Recorded		Losses		Principal		Recorded		Losses
	Balance		Investment		Allocated		Balance		Investment		Allocated
	(In thousands)
With no related allowance recorded:
Single family	$	34	$	34	$	—	$	—	$	—	$	—
Multi-family	$	318	$	318	$	—	$	323	$	323	$	—
Church	$	4,079	$	2,723	$	—	$	4,666	$	2,803	$	—
With an allowance recorded:
Single family		602		602		37		610		610		53
Church		1,980		1,980		96		2,580		2,580		170
Commercial - other		63		63		3		64		64		4
Total	$	7,076	$	5,720	$	136	$	8,243	$	6,380	$	227

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

	Three Months Ended June 30, 2019				Three Months Ended June 30, 2018
			Cash Basis				Cash Basis
	Average		Interest		Average		Interest
	Recorded		Income		Recorded		Income
	Investment		Recognized		Investment		Recognized
	(In thousands)
Single family	$	638	$	5	$	620	$	7
Multi-family		320		5		331		6
Church		4,741		402		7,692		112
Commercial – other		63		—		65		1
Total	$	5,762	$	412	$	8,708	$	126

	Six Months Ended June 30, 2019				Six Months Ended June 30, 2018
			Cash Basis				Cash Basis
	Average		Interest		Average		Interest
	Recorded		Income		Recorded		Income
	Investment		Recognized		Investment		Recognized
	(In thousands)
Single family	$	640	$	15	$	622	$	15
Multi-family		321		11		331		12
Church		5,383		517		7,849		286
Commercial – other		64		2		65		2
Total	$	6,408	$	545	$	8,867	$	315

Schedule of aging of the recorded investment in past due loans by loan type

	June 30, 2019
					Greater
	30-59		60-89		than
	Days		Days		90 Days		Total
	Past Due		Past Due		Past Due		Past Due		Current		Total
	(In thousands)
Loans receivable held for investment:
Single family	$	36	$	—	$	34	$	70	$	85,321	$	85,391
Multi-family		—		—		—		—		239,900		239,900
Commercial real estate		—		—		—		—		6,436		6,436
Church		—		—		—		—		21,868		21,868
Construction		—		—		—		—		2,242		2,242
Commercial - other		—		—		—		—		264		264
Consumer		—		—		—		—		12		12
Total	$	36	$	—	$	34	$	70	$	356,043	$	356,113

	December 31, 2018
					Greater
	30-59		60-89		than
	Days		Days		90 Days		Total
	Past Due		Past Due		Past Due		Past Due		Current		Total
	(In thousands)
Loans receivable held for investment:
Single family	$	35	$	—	$	—	$	35	$	92,142	$	92,177
Multi-family		—		—		—		—		233,309		233,309
Commercial real estate		—		—		—		—		5,800		5,800
Church		—		—		—		—		25,096		25,096
Construction		—		—		—		—		1,872		1,872
Commercial - other		—		—		—		—		226		226
Consumer		—		—		—		—		5		5
Total	$	35	$	—	$	—	$	35	$	358,450	$	358,485

Schedule of recorded investment in non-accrual loans by loan type

	June 30, 2019		December 31, 2018
	(In thousands)
Loans receivable held for investment:
Single-family residence	$	34	$	—
Church	$	694	$	911
Total non-accrual loans	$	728	$	911

Schedule of risk categories of loans by loan type

	June 30, 2019
	Pass		Watch		Special Mention		Substandard		Doubtful		Loss
	(In thousands)
Single family	$	85,348	$	—	$	—	$	43	$	—	$	—
Multi-family		238,714		—		532		654		—		—
Commercial real estate		6,436		—		—		—		—		—
Church		17,179		418		255		4,016		—		—
Construction		2,242		—		—		—		—		—
Commercial - other		201		—		—		63		—		—
Consumer		12		—		—		—		—		—
Total	$	350,132	$	418	$	787	$	4,776	$	—	$	—

	December 31, 2018
	Pass		Watch		Special Mention		Substandard		Doubtful		Loss
	(In thousands)
Single family	$	92,132	$	—	$	35	$	10	$	—	$	—
Multi-family		232,642		—		—		667		—		—
Commercial real estate		5,800		—		—		—		—		—
Church		19,678		672		—		4,746		—		—
Construction		1,872		—		—		—		—		—
Commercial - other		162		—		—		64		—		—
Consumer		5		—		—		—		—		—
Total	$	352,291	$	672	$	35	$	5,487	$	—	$	—

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Leases (Tables)

6 Months Ended

Jun. 30, 2019

Leases

Schedule of additional information related to operating leases

Additional information regarding our operating leases is summarized below for the periods indicated dollars in thousands):

	Quarter ended		Six Months ended
	June 30, 2019		June 30, 2019
Cash paid for amounts included in the measurement of lease liabilities for operating leases:	$	135	$	269
ROU assets obtained in exchange for lease liabilities			$	990
Weighted average remaining lease term in months				22
Weighted average discount rate				2.75	%

Schedule of maturity of the bank's remaining lease liabilities

The future minimum payments for operating leases with remaining terms of one year or more as of June 30, 2019 were as follows (in thousands):

Six months ended December 31, 2019	$	273
Year ended December 31, 2020		555
Year ended December 31, 2021		195
Total Future Minimum Lease Payments		1,023
Amounts Representing Interest		(27)
Present Value of Net Future Minimum Lease Payments	$	996

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Fair Value (Tables)

6 Months Ended

Jun. 30, 2019

Fair Value

Summary of assets measured at fair value on a recurring basis

	Fair Value Measurement
	Quoted Prices
	in Active		Significant
	Markets for		Other		Significant
	Identical		Observable		Unobservable
	Assets		Inputs		Inputs
	(Level 1)		(Level 2)		(Level 3)		Total
	(In thousands)
At June 30, 2019:
Securities available-for-sale - federal agency mortgage-backed	$	—	$	8,875	$	—	$	8,875
Securities available-for-sale - federal agency debt		1,995		3,240		—		5,235
At December 31, 2018:
Securities available-for-sale - federal agency mortgage-backed	$	—	$	9,508	$	—	$	9,508
Securities available-for-sale - federal agency debt		1,979		3,235		—		5,214

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

	June 30, 2019		December 31, 2018
	(In thousands)
Impaired loans carried at fair value of collateral	$	396	$	591
Real estate owned		—		833

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

	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
	(In thousands)
Impaired loans carried at fair value of collateral	$	—	$	—	$	—	$	—
Real estate owned - church		—		45		13		45
Total	$	—	$	45	$	13	$	45

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

	Valuation			Weighted
	Technique(s)	Unobservable Input(s)	Range	Average
June 30, 2019:
Impaired loans	Third Party	Adjustment for differences
	Appraisals	between the comparable sales	-3% to -1%	2.53%
Real estate owned - church	Third Party	Adjustment for differences
	Appraisals	between the comparable sales	0%	0%
December 31, 2018:
Impaired loans	Third Party	Adjustment for differences
	Appraisals	between the comparable sales	-3% to -1%	-2.83%
Real estate owned - church	Third Party	Adjustment for differences
	Appraisals	between the comparable sales	-11%	-10.85%

Schedule of carrying amounts and estimated fair values of financial instruments

			Fair Value Measurements at June 30, 2019
	Carrying
	Value		Level 1		Level 2		Level 3		Total
	(In thousands)
Financial Assets:
Loans receivable held for sale	$	26,085	$	—	$	26,085	$	—	$	26,085
Loans receivable held for investment		355,342		—		—		355,826		355,826
Financial Liabilities:
Time Deposits	$	192,856	$	—	$	192,992	$	—	$	192,992
Federal Home Loan Bank advances		75,000		—		76,128		—		76,128
Junior subordinated debentures		4,845		—		—		4,215		4,215

			Fair Value Measurements at December 31, 2018
	Carrying
	Value		Level 1		Level 2		Level 3		Total
	(In thousands)
Financial Assets:
Loans receivable held for sale	$	6,231	$	—	$	6,270	$	—	$	6,270
Loans receivable held for investment		355,556		—		—		354,792		354,792
Financial Liabilities:
Time Deposits	$	172,564	$	—	$	171,725	$	—	$	171,725
Federal Home Loan Bank advances		70,000		—		69,933		—		69,933
Junior subordinated debentures		5,100		—		—		4,481		4,481

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Stock-based Compensation (Tables)

6 Months Ended

Jun. 30, 2019

Stock-based Compensation

Summary of stock option activity

	Six Months Ended			Six Months Ended
	June 30, 2019			June 30, 2018
		Weighted			Weighted
		Average			Average
	Number	Exercise		Number	Exercise
	Outstanding	Price		Outstanding	Price
Outstanding at beginning of period	537,500	$	2.19	537,500	$	2.19
Granted during period	—		—	—		—
Exercised during period	—		—	—		—
Forfeited or expired during period	(82,500)		4.89	—		—
Outstanding at end of period	455,000	$	1.67	537,500	$	2.19
Exercisable at end of period	275,000	$	1.70	267,500	$	2.71

Summary of options outstanding and exercisable

	Outstanding						Exercisable
		Weighted
		Average	Weighted					Weighted
		Remaining	Average		Aggregate			Average		Aggregate
	Number	Contractual	Exercise		Intrinsic		Number	Exercise		Intrinsic
Grant Date	Outstanding	Life	Price		Value		Outstanding	Price		Value
January 21, 2010	5,000	0.56 years	$	6.00			5,000	$	6.00
February 24, 2016	450,000	6.65 years	$	1.62			270,000	$	1.62
	455,000	6.59 years	$	1.67	$	—	275,000	$	1.70	$	—

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ESOP Plan (Tables)

6 Months Ended

Jun. 30, 2019

ESOP Plan

Schedule of shares held by the ESOP

	June 30, 2019		December 31, 2018
	(Dollars in thousands)
Allocated to participants		1,032,128		1,036,809
Committed to be released		31,740		10,580
Suspense shares		624,873		646,033
Total ESOP shares		1,688,741		1,693,422
Fair value of unearned shares	$	887	$	678

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Regulatory Matters (Tables)

6 Months Ended

Jun. 30, 2019

Regulatory Matters

Schedule of actual and required capital amounts and ratios

									Minimum Required To
									Be Well Capitalized
									Under Prompt
					Minimum Capital				Corrective Action
	Actual				Requirements				Provisions
	Amount		Ratio		Amount		Ratio		Amount		Ratio
	(Dollars in thousands)
June 30, 2019:
Tier 1 (Leverage)	$	49,434	11.83	%	$	16,715	4.0	%	$	20,894	5.0	%
Common Equity Tier 1	$	49,434	18.79	%	$	18,805	4.5	%	$	17,101	6.5	%
Tier 1	$	49,434	18.79	%	$	25,073	6.0	%	$	21,048	8.0	%
Total Capital	$	52,263	19.86	%	$	33,430	8.0	%	$	26,310	10.0	%
December 31, 2018:
Tier 1 (Leverage)	$	49,433	12.03	%	$	16,439	4.0	%	$	20,549	5.0	%
Common Equity Tier 1	$	49,433	19.32	%	$	18,494	4.5	%	$	16,634	6.5	%
Tier 1	$	49,433	19.32	%	$	24,659	6.0	%	$	20,472	8.0	%
Total Capital	$	52,417	20.48	%	$	32,879	8.0	%	$	25,590	10.0	%

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Basis of Financial Statement Presentation (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2019	Jan. 01, 2019
Basis of Financial Statement Presentation
Election of practical expedients package	true
Election of Use of Hindsight practical expedient	true
Operating lease liability	$ 996
ASU 2016-02 | Adjustment
Basis of Financial Statement Presentation
Operating lease, ROU asset		$ 1,200
Operating lease, ROU asset, Statement of Financial Position		us-gaap:PropertyPlantAndEquipmentNet
Operating lease liability		$ 1,200
Operating lease, liability, Statement of Financial Position		us-gaap:AccruedLiabilitiesAndOtherLiabilities

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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, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Earnings Per Share of Common Stock
Net (loss) income	$ (135)	$ (127)	$ 142	$ (211)
Less net income attributable to participating securities	(2)		2
(Loss) income available to common stockholders	$ (133)	$ (127)	$ 140	$ (211)
Weighted average common shares outstanding for basic earnings (loss) per common share	26,858,018	26,740,082	26,711,043	26,752,550
Add: dilutive effects of unvested restricted stock awards			396,331
Weighted average common shares outstanding for diluted earnings (loss) per common share	26,858,018	26,740,082	27,107,374	26,752,550
(Loss) Earnings per common share - basic (in dollars per share)	$ (0.01)	$ 0.00	$ 0.01	$ (0.01)
(Loss) Earnings) per common share - diluted (in dollars per share)	$ (0.01)	$ 0.00	$ 0.01	$ (0.01)
Unvested restricted stock award
Earnings Per Share of Common Stock
Anti-dilutive stock not considered in computing diluted earnings per common share	388,215	10,399		10,399
Stock Options
Earnings Per Share of Common Stock
Anti-dilutive stock not considered in computing diluted earnings per common share	455,000	537,500		537,500

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Securities - Amortized Cost and Fair Value (Details) $ in Thousands	6 Months Ended
	Jun. 30, 2019 USD ($) security	Dec. 31, 2018 USD ($)
Securities
Amortized Cost	$ 13,927	$ 14,892
Gross Unrealized Gains	190	88
Gross Unrealized Losses	(7)	(258)
Fair Value	14,110	14,722
Federal agency mortgage-backed securities
Securities
Amortized Cost	8,752	9,575
Gross Unrealized Gains	129	88
Gross Unrealized Losses	(6)	(155)
Fair Value	$ 8,875	9,508
Number of securities held | security	22
Estimated remaining term	4 years 1 month 6 days
Federal agency debt
Securities
Amortized Cost	$ 5,175	5,317
Gross Unrealized Gains	61
Gross Unrealized Losses	(1)	(103)
Fair Value	$ 5,235	$ 5,214
Number of securities held | security	3
Estimated remaining term	3 years 7 months 6 days

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Securities - Securities in Unrealized Loss Position (Details) $ in Thousands	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2019 USD ($) security	Jun. 30, 2018 USD ($)	Jun. 30, 2019 USD ($) security	Jun. 30, 2018 USD ($)	Dec. 31, 2018 USD ($) security
Securities
Number of securities held with unrealized losses | security	5		5		10
Estimated Fair Value
Less than 12 months	$ 1,995		$ 1,995		$ 4,628
12 months or more	4,054		4,054		7,448
Total	6,049		6,049		12,076
Gross Unrealized Losses
Less than 12 months	(1)		(1)		(35)
12 months or more	(6)		(6)		(223)
Total	(7)		(7)		(258)
Securities pledged to secure public deposits	$ 0		$ 0		$ 0
Securities pledged to secure public deposits	us-gaap:AssetPledgedAsCollateralMember		us-gaap:AssetPledgedAsCollateralMember		us-gaap:AssetPledgedAsCollateralMember
Securities of any one issuer, other than U.S. Government, greater than 10% of stockholders' equity			0.00%		0.00%
Sales of securities	$ 0	$ 0	$ 0	$ 0
Federal agency mortgage-backed securities
Estimated Fair Value
Less than 12 months					$ 2,649
12 months or more	4,054		4,054		4,213
Total	4,054		4,054		6,862
Gross Unrealized Losses
Less than 12 months					(25)
12 months or more	(6)		(6)		(130)
Total	(6)		(6)		(155)
Federal agency debt
Estimated Fair Value
Less than 12 months	1,995		1,995		1,979
12 months or more					3,235
Total	1,995		1,995		5,214
Gross Unrealized Losses
Less than 12 months	(1)		(1)		(10)
12 months or more					(93)
Total	$ (1)		$ (1)		$ (103)

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Loans Receivable Held for Sale (Details) - USD ($) $ in Thousands	6 Months Ended		12 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018
Loans Receivable Held for Sale
Loans receivable held for sale	$ 26,085		$ 6,231
Transfers of loans receivable held for sale to loans receivable held for investment	1,064	$ 16,871
Transfers of loans receivable held for investment to loans receivable held for sale	10,684
Loan sales	0
Loan repayments	46	82
Multi-family
Loans Receivable Held for Sale
Loans receivable held for sale	26,100		6,200
Transfers of loans receivable held for sale to loans receivable held for investment	$ 1,100		$ 16,900
Loan sales		$ 4,300

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Loans Receivable Held for Investment - Summary (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2017
Loans Receivable Held for Investment
Gross loans receivable before deferred loan costs and premiums	$ 355,329		$ 357,548
Unamortized net deferred loan costs and premiums	784		937
Gross loans receivable after deferred loan costs and premiums	356,113		358,485
Allowance for loan losses	(2,771)	$ (2,929)	(2,929)	$ (4,183)	$ (4,183)	$ (4,069)
Loans receivable, net	353,342		355,556
Single family
Loans Receivable Held for Investment
Gross loans receivable before deferred loan costs and premiums	85,107		91,835
Gross loans receivable after deferred loan costs and premiums	85,391		92,177
Allowance for loan losses	(328)	(347)	(369)	(517)	(588)	(594)
Multi-family
Loans Receivable Held for Investment
Gross loans receivable before deferred loan costs and premiums	238,718		231,870
Gross loans receivable after deferred loan costs and premiums	239,900		233,309
Allowance for loan losses	(1,932)	(1,990)	(1,880)	(2,656)	(2,508)	(2,300)
Commercial real estate
Loans Receivable Held for Investment
Gross loans receivable before deferred loan costs and premiums	6,429		5,802
Gross loans receivable after deferred loan costs and premiums	6,436		5,800
Allowance for loan losses	(58)	(62)	(52)	(61)	(65)	(71)
Church
Loans Receivable Held for Investment
Gross loans receivable before deferred loan costs and premiums	22,553		25,934
Gross loans receivable after deferred loan costs and premiums	21,868		25,096
Allowance for loan losses	(401)	(507)	(603)	(925)	(1,005)	(1,081)
Construction
Loans Receivable Held for Investment
Gross loans receivable before deferred loan costs and premiums	2,246		1,876
Gross loans receivable after deferred loan costs and premiums	2,242		1,872
Allowance for loan losses	(44)	(18)	(19)	(18)	(11)	(17)
Commercial - other
Loans Receivable Held for Investment
Gross loans receivable before deferred loan costs and premiums	264		226
Gross loans receivable after deferred loan costs and premiums	264		226
Allowance for loan losses	(5)	$ (5)	(6)	$ (6)	$ (6)	$ (6)
Consumer
Loans Receivable Held for Investment
Gross loans receivable before deferred loan costs and premiums	12		5
Gross loans receivable after deferred loan costs and premiums	12		$ 5
Allowance for loan losses	$ (3)

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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, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Allowance for loan losses:
Beginning balance	$ 2,929	$ 4,183	$ 2,929	$ 4,069
Provision for (recapture of) loan losses	(158)		(348)
Recoveries			190	114
Ending balance	2,771	4,183	2,771	4,183
Single family
Allowance for loan losses:
Beginning balance	347	588	369	594
Provision for (recapture of) loan losses	(19)	(71)	(41)	(77)
Ending balance	328	517	328	517
Multi-family
Allowance for loan losses:
Beginning balance	1,990	2,508	1,880	2,300
Provision for (recapture of) loan losses	(58)	148	52	356
Ending balance	1,932	2,656	1,932	2,656
Commercial real estate
Allowance for loan losses:
Beginning balance	62	65	52	71
Provision for (recapture of) loan losses	(4)	(4)	6	(10)
Ending balance	58	61	58	61
Church
Allowance for loan losses:
Beginning balance	507	1,005	603	1,081
Provision for (recapture of) loan losses	(106)	(80)	(392)	(270)
Recoveries			190	114
Ending balance	401	925	401	925
Construction
Allowance for loan losses:
Beginning balance	18	11	19	17
Provision for (recapture of) loan losses	26	7	25	1
Ending balance	44	18	44	18
Commercial - other
Allowance for loan losses:
Beginning balance	5	6	6	6
Provision for (recapture of) loan losses			(1)
Ending balance	5	$ 6	5	$ 6
Consumer
Allowance for loan losses:
Provision for (recapture of) loan losses	3		3
Ending balance	$ 3		$ 3

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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, 2019	Mar. 31, 2019	Dec. 31, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2017
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$ 136		$ 227
Collectively evaluated for impairment	2,635		2,702
Total ending allowance balance	2,771	$ 2,929	2,929	$ 4,183	$ 4,183	$ 4,069
Loans:
Loans individually evaluated for impairment	5,720		6,380
Loans collectively evaluated for impairment	350,393		352,105
Gross loans receivable after deferred loan costs and premiums	356,113		358,485
Single family
Ending allowance balance attributable to loans:
Individually evaluated for impairment	37		53
Collectively evaluated for impairment	291		316
Total ending allowance balance	328	347	369	517	588	594
Loans:
Loans individually evaluated for impairment	636		610
Loans collectively evaluated for impairment	84,755		91,567
Gross loans receivable after deferred loan costs and premiums	85,391		92,177
Multi-family
Ending allowance balance attributable to loans:
Collectively evaluated for impairment	1,932		1,880
Total ending allowance balance	1,932	1,990	1,880	2,656	2,508	2,300
Loans:
Loans individually evaluated for impairment	318		323
Loans collectively evaluated for impairment	239,582		232,986
Gross loans receivable after deferred loan costs and premiums	239,900		233,309
Commercial real estate
Ending allowance balance attributable to loans:
Collectively evaluated for impairment	58		52
Total ending allowance balance	58	62	52	61	65	71
Loans:
Loans collectively evaluated for impairment	6,436		5,800
Gross loans receivable after deferred loan costs and premiums	6,436		5,800
Church
Ending allowance balance attributable to loans:
Individually evaluated for impairment	96		170
Collectively evaluated for impairment	305		433
Total ending allowance balance	401	507	603	925	1,005	1,081
Loans:
Loans individually evaluated for impairment	4,703		5,383
Loans collectively evaluated for impairment	17,165		19,713
Gross loans receivable after deferred loan costs and premiums	21,868		25,096
Construction
Ending allowance balance attributable to loans:
Collectively evaluated for impairment	44		19
Total ending allowance balance	44	18	19	18	11	17
Loans:
Loans collectively evaluated for impairment	2,242		1,872
Gross loans receivable after deferred loan costs and premiums	2,242		1,872
Commercial - other
Ending allowance balance attributable to loans:
Individually evaluated for impairment	3		4
Collectively evaluated for impairment	2		2
Total ending allowance balance	5	$ 5	6	$ 6	$ 6	$ 6
Loans:
Loans individually evaluated for impairment	63		64
Loans collectively evaluated for impairment	201		162
Gross loans receivable after deferred loan costs and premiums	264		226
Consumer
Ending allowance balance attributable to loans:
Collectively evaluated for impairment	3
Total ending allowance balance	3
Loans:
Loans collectively evaluated for impairment	12		5
Gross loans receivable after deferred loan costs and premiums	$ 12		$ 5

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Loans Receivable Held for Investment - Loans Individually Evaluated for Impairment by Loan Type (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Impaired loans
Unpaid Principal Balance	$ 7,076	$ 8,243
Recorded Investment	5,720	6,380
Allowance for Loan Losses Allocated, With an allowance recorded	136	227
Single family
Impaired loans
Unpaid Principal Balance, With no related allowance recorded	34
Unpaid Principal Balance, With an allowance recorded	602	610
Recorded Investment, With no related allowance recorded	34
Recorded Investment, With an allowance recorded	602	610
Allowance for Loan Losses Allocated, With an allowance recorded	37	53
Multi-family
Impaired loans
Unpaid Principal Balance, With no related allowance recorded	318	323
Recorded Investment, With no related allowance recorded	318	323
Church
Impaired loans
Unpaid Principal Balance, With no related allowance recorded	4,079	4,666
Unpaid Principal Balance, With an allowance recorded	1,980	2,580
Recorded Investment, With no related allowance recorded	2,723	2,803
Recorded Investment, With an allowance recorded	1,980	2,580
Allowance for Loan Losses Allocated, With an allowance recorded	96	170
Commercial - other
Impaired loans
Unpaid Principal Balance, With an allowance recorded	63	64
Recorded Investment, With an allowance recorded	63	64
Allowance for Loan Losses Allocated, With an allowance recorded	$ 3	$ 4

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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, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Impaired loans
Average Recorded Investment	$ 5,762	$ 8,708	$ 6,408	$ 8,867
Cash Basis Interest Income Recognized	412	126	545	315
Foregone interest income if impaired loans had performed according to terms	40	67	80	77
Single family
Impaired loans
Average Recorded Investment	638	620	640	622
Cash Basis Interest Income Recognized	5	7	15	15
Multi-family
Impaired loans
Average Recorded Investment	320	331	321	331
Cash Basis Interest Income Recognized	5	6	11	12
Church
Impaired loans
Average Recorded Investment	4,741	7,692	5,383	7,849
Cash Basis Interest Income Recognized	402	112	517	286
Commercial - other
Impaired loans
Average Recorded Investment	$ 63	65	64	65
Cash Basis Interest Income Recognized		$ 1	$ 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, 2019	Dec. 31, 2018
Past due receivable
Total Past Due	$ 70	$ 35
Current	356,043	358,450
Gross loans receivable after deferred loan costs and premiums	356,113	358,485
30-59 Days Past Due
Past due receivable
Total Past Due	36	35
Greater than 90 Days Past Due
Past due receivable
Total Past Due	34
Single family
Past due receivable
Total Past Due	70	35
Current	85,321	92,142
Gross loans receivable after deferred loan costs and premiums	85,391	92,177
Single family | 30-59 Days Past Due
Past due receivable
Total Past Due	36	35
Single family | Greater than 90 Days Past Due
Past due receivable
Total Past Due	34
Multi-family
Past due receivable
Current	239,900	233,309
Gross loans receivable after deferred loan costs and premiums	239,900	233,309
Commercial real estate
Past due receivable
Current	6,436	5,800
Gross loans receivable after deferred loan costs and premiums	6,436	5,800
Church
Past due receivable
Current	21,868	25,096
Gross loans receivable after deferred loan costs and premiums	21,868	25,096
Construction
Past due receivable
Current	2,242	1,872
Gross loans receivable after deferred loan costs and premiums	2,242	1,872
Commercial - other
Past due receivable
Current	264	226
Gross loans receivable after deferred loan costs and premiums	264	226
Consumer
Past due receivable
Current	12	5
Gross loans receivable after deferred loan costs and premiums	$ 12	$ 5

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Loans Receivable Held for Investment - Recorded Investment in Non-accrual Loans by Loan Type (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Investment in non-accrual loans by type of loans
Total non-accrual loans	$ 728	$ 911
Loans 90 days or more delinquent that were accruing interest	0	0
Single family
Investment in non-accrual loans by type of loans
Total non-accrual loans	34
Church
Investment in non-accrual loans by type of loans
Total non-accrual loans	$ 694	$ 911

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Loans Receivable Held for Investment - Troubled Debt Restructurings (Details)	3 Months Ended		6 Months Ended
	Jun. 30, 2019 USD ($)	Jun. 30, 2018 USD ($)	Jun. 30, 2019 USD ($)	Jun. 30, 2018 USD ($)	Dec. 31, 2018 USD ($)	Dec. 31, 2017 USD ($)
Troubled debt restructuring
Loans classified as Troubled Debt Restructurings	$ 5,100,000		$ 5,100,000		$ 6,400,000
Specific reserves allocated to TDRs	136,000		$ 136,000		227,000
Timely payment period for return to accrual status			6 months
Commitments to lend additional amounts to customers with TDRs	$ 0		$ 0		0
Number of loans modified	0	0	0	0
Non-accrual status
Troubled debt restructuring
Loans classified as Troubled Debt Restructurings	$ 694,000		$ 694,000		$ 591,000
Accrual status
Troubled debt restructuring
Loans classified as Troubled Debt Restructurings	$ 4,300,000		$ 4,300,000			$ 5,800,000

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Loans Receivable Held for Investment - Risk Category of Loans by Loan Type (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Credit Quality Indicators
Loans receivable	$ 356,113	$ 358,485
Single family
Credit Quality Indicators
Loans receivable	85,391	92,177
Multi-family
Credit Quality Indicators
Loans receivable	239,900	233,309
Commercial real estate
Credit Quality Indicators
Loans receivable	6,436	5,800
Church
Credit Quality Indicators
Loans receivable	21,868	25,096
Construction
Credit Quality Indicators
Loans receivable	2,242	1,872
Commercial - other
Credit Quality Indicators
Loans receivable	264	226
Consumer
Credit Quality Indicators
Loans receivable	12	5
Pass
Credit Quality Indicators
Loans receivable	350,132	352,291
Pass | Single family
Credit Quality Indicators
Loans receivable	85,348	92,132
Pass | Multi-family
Credit Quality Indicators
Loans receivable	238,714	232,642
Pass | Commercial real estate
Credit Quality Indicators
Loans receivable	6,436	5,800
Pass | Church
Credit Quality Indicators
Loans receivable	17,179	19,678
Pass | Construction
Credit Quality Indicators
Loans receivable	2,242	1,872
Pass | Commercial - other
Credit Quality Indicators
Loans receivable	201	162
Pass | Consumer
Credit Quality Indicators
Loans receivable	12	5
Watch
Credit Quality Indicators
Loans receivable	418	672
Watch | Church
Credit Quality Indicators
Loans receivable	418	672
Special Mention
Credit Quality Indicators
Loans receivable	787	35
Special Mention | Single family
Credit Quality Indicators
Loans receivable		35
Special Mention | Multi-family
Credit Quality Indicators
Loans receivable	532
Special Mention | Church
Credit Quality Indicators
Loans receivable	255
Substandard
Credit Quality Indicators
Loans receivable	4,776	5,487
Substandard | Single family
Credit Quality Indicators
Loans receivable	43	10
Substandard | Multi-family
Credit Quality Indicators
Loans receivable	654	667
Substandard | Church
Credit Quality Indicators
Loans receivable	4,016	4,746
Substandard | Commercial - other
Credit Quality Indicators
Loans receivable	$ 63	$ 64

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Leases - Summary (Details) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019 USD ($) item	Jun. 30, 2018 USD ($)	Jun. 30, 2019 USD ($) item	Jun. 30, 2018 USD ($)
Leases
Operating lease, liability	$ 996		$ 996
Lease expense	123	$ 121	245	$ 242
Cash paid for amounts included in the measurement of lease liabilities for operating leases:	$ 135		269
ROU assets obtained in exchange for lease liabilities			$ 990
Weighted average remaining lease term in months	22 months		22 months
Weighted average discount rate	2.75%		2.75%
Corporate headquarters and main retail branch
Leases
Number of options to extend | item	1		1
Extension term	5 years		5 years
Option to extend lease term			true
Operating lease, Right-of-use asset	$ 990		$ 990
Operating lease, liability	$ 990		$ 990

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Leases - Future Minimum Payments (Details) $ in Thousands	Jun. 30, 2019 USD ($)
Schedule of maturity of the Bank's remaining lease liabilities
Six months ended December 31, 2019	$ 273
Year ended December 31, 2020	555
Year ended December 31, 2021	195
Total Future Minimum Lease Payments	1,023
Amounts Representing Interest	(27)
Present Value of Net Future Minimum Lease Payments	$ 996

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Junior Subordinated Debentures (Details) - USD ($) $ in Thousands		1 Months Ended	6 Months Ended
	Oct. 16, 2014	Jun. 30, 2019	Jun. 30, 2019	Dec. 31, 2018	Mar. 17, 2004
Junior Subordinated Debentures
Junior subordinated debentures		$ 4,845	$ 4,845	$ 5,100
Floating Rate Junior Subordinated Debentures
Junior Subordinated Debentures
Junior subordinated debentures	$ 5,100
Effective interest rate on debentures (as a percent)		4.95%	4.95%
Payment of principal amount at face value required to extend maturity	$ 900
First principal payment		$ 255
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%
Private Placement | Floating Rate Junior Subordinated Debentures
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 ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018
Fair Value Pending Completion
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 | Federal agency mortgage-backed securities
Fair Value Pending Completion
Securities available-for-sale, at fair value	8,875		8,875		$ 9,508
Recurring Basis | Federal agency debt
Fair Value Pending Completion
Securities available-for-sale, at fair value	5,235		5,235		5,214
Recurring Basis | Quoted Prices in Active Markets for Identical Assets (Level 1) | Federal agency debt
Fair Value Pending Completion
Securities available-for-sale, at fair value	1,995		1,995		1,979
Recurring Basis | Significant Other Observable Inputs (Level 2) | Federal agency mortgage-backed securities
Fair Value Pending Completion
Securities available-for-sale, at fair value	8,875		8,875		9,508
Recurring Basis | Significant Other Observable Inputs (Level 2) | Federal agency debt
Fair Value Pending Completion
Securities available-for-sale, at fair value	$ 3,240		$ 3,240		$ 3,235

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Fair Value - Assets Measured at Fair Value on Non-recurring Basis (Details) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018
Fair Value Pending Completion
Total losses recognized on assets measured at fair value on a non-recurring basis	$ 45	$ 13	$ 45
Real estate owned
Fair Value Pending Completion
Total losses recognized on assets measured at fair value on a non-recurring basis	$ 45	13	$ 45
Non-Recurring Basis | Impaired loans carried at fair value of collateral | Significant Unobservable Inputs (Level 3)
Fair Value Pending Completion
Assets, fair value		$ 396		$ 591
Non-Recurring Basis | Real estate owned | Significant Unobservable Inputs (Level 3)
Fair Value Pending Completion
Assets, fair value				$ 833

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Fair Value - Valuation Methodology and Unobservable Inputs (Details) - Non-Recurring Basis - Significant Unobservable Inputs (Level 3) - item	Jun. 30, 2019	Dec. 31, 2018
Impaired loans carried at fair value of collateral
Fair Value Pending Completion
Valuation Technique(s)	gaap:MeasurementInputAppraisedValueMember	gaap:MeasurementInputAppraisedValueMember
Unobservable Input(s)	gaap:MarketApproachValuationTechniqueMember	gaap:MarketApproachValuationTechniqueMember
Impaired loans carried at fair value of collateral | Minimum
Fair Value Pending Completion
Adjustment for differences between the comparable sales (as a percent)	(0.03)	(0.03)
Impaired loans carried at fair value of collateral | Maximum
Fair Value Pending Completion
Adjustment for differences between the comparable sales (as a percent)	(0.01)	(0.01)
Impaired loans carried at fair value of collateral | Weighted Average
Fair Value Pending Completion
Adjustment for differences between the comparable sales (as a percent)	0.0253	(0.0283)
Real estate owned
Fair Value Pending Completion
Adjustment for differences between the comparable sales (as a percent)	0.00	(0.11)
Valuation Technique(s)	gaap:MeasurementInputAppraisedValueMember	gaap:MeasurementInputAppraisedValueMember
Unobservable Input(s)	gaap:MarketApproachValuationTechniqueMember	gaap:MarketApproachValuationTechniqueMember
Real estate owned | Weighted Average
Fair Value Pending Completion
Adjustment for differences between the comparable sales (as a percent)	0.00	(0.1085)

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Fair Value - Fair Values of Financial Instruments (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Carrying Value
Financial Assets:
Loans receivable held for sale	$ 26,085	$ 6,231
Loans receivable held for investment	355,342	355,556
Financial Liabilities:
Time Deposits	192,856	172,564
Federal Home Loan Bank advances	75,000	70,000
Junior subordinated debentures	4,845	5,100
Fair Value
Financial Assets:
Loans receivable held for sale	26,085	6,270
Loans receivable held for investment	355,826	354,792
Financial Liabilities:
Time Deposits	192,992	171,725
Federal Home Loan Bank advances	76,128	69,933
Junior subordinated debentures	4,215	4,481
Significant Other Observable Inputs (Level 2) | Fair Value
Financial Assets:
Loans receivable held for sale	26,085	6,270
Financial Liabilities:
Time Deposits	192,992	171,725
Federal Home Loan Bank advances	76,128	69,933
Significant Unobservable Inputs (Level 3) | Fair Value
Financial Assets:
Loans receivable held for investment	355,826	354,792
Financial Liabilities:
Junior subordinated debentures	$ 4,215	$ 4,481

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Stock-based Compensation - Summary of plans (Details) - USD ($) $ in Thousands		1 Months Ended					3 Months Ended				6 Months Ended
	Jul. 25, 2018	Feb. 28, 2019	Jan. 31, 2019	Feb. 28, 2018	Jan. 31, 2018	Apr. 30, 2017	Jun. 30, 2019	Mar. 31, 2019	Jun. 30, 2018	Mar. 31, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018	Jul. 24, 2018
Stock-based Compensation
Stock based compensation expense related to shares issued for services											$ 52	$ 45
2008 LTIP
Stock-based Compensation
Shares authorized to be granted under stock compensation plan														2,000,000
2008 LTIP | Cash-settled restricted stock units
Stock-based Compensation
Stock based compensation expense (reversal of expense)							$ 10		$ 64
2008 LTIP | Chief Executive Officer | Cash-settled restricted stock units | Two-year period
Stock-based Compensation
Restricted stock award (in shares)				97,195		129,270
Vesting period of stock award				2 years		2 years
2018 LTIP
Stock-based Compensation
Shares authorized to be granted under stock compensation plan													1,293,109
Contractual term of option awards	10 years
2018 LTIP | Restricted stock
Stock-based Compensation
Unrecognized compensation cost, restricted stock							439				$ 439
Period for recognizing unrecognized compensation cost											1 year 8 months 1 day
2018 LTIP | Stock Options
Stock-based Compensation
Stock based compensation expense (reversal of expense)							10		$ 10		$ 19	$ 19
Period for recognizing unrecognized compensation cost											1 year 7 months 24 days
Number of stock options granted (in shares)											0	0
2018 LTIP | Employees | Restricted stock
Stock-based Compensation
Stock based compensation expense (reversal of expense)							$ 64				$ 86
2018 LTIP | Employees | Restricted stock | Two-year period
Stock-based Compensation
Restricted stock award (in shares)		428,796
Vesting period of stock award		2 years
2018 LTIP | Directors | Common Stock
Stock-based Compensation
Shares issued for services			42,168		18,906
Stock based compensation expense related to shares issued for services								$ 52		$ 45

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Stock-based Compensation - Stock Option Activity (Details) - 2018 LTIP - Stock Options - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Number Outstanding
Outstanding at beginning of period (in shares)			537,500	537,500
Granted during period (in shares)			0	0
Exercised during period (in shares)			0	0
Forfeited or expired during period (in shares)			(82,500)	0
Outstanding at end of period (in shares)	455,000	537,500	455,000	537,500
Exercisable at end of period (in shares)	275,000	267,500	275,000	267,500
Weighted Average Exercise Price
Outstanding at beginning of period (in dollars per share)			$ 2.19	$ 2.19
Forfeited or expired during period (in dollars per share)			4.89
Outstanding at end of period (in dollars per share)	$ 1.67	$ 2.19	1.67	2.19
Exercisable at end of period (in dollars per share)	$ 1.70	$ 2.71	$ 1.70	$ 2.71
Additional disclosures
Stock based compensation expense (reversal of expense)	$ 10	$ 10	$ 19	$ 19
Unrecognized compensation cost, options	$ 65		$ 65
Period for recognizing unrecognized compensation cost			1 year 7 months 24 days

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Stock-based Compensation - Options Outstanding and Exercisable (Details) - 2008 LTIP - Stock Options	6 Months Ended
	Jun. 30, 2019 $ / shares shares
Outstanding
Number Outstanding | shares	455,000
Weighted Average Remaining Contractual Life	6 years 7 months 2 days
Weighted Average Exercise Price | $ / shares	$ 1.67
Exercisable
Number Outstanding | shares	275,000
Weighted Average Exercise Price | $ / shares	$ 1.70
Grant Date January 21, 2010
Outstanding
Number Outstanding | shares	5,000
Weighted Average Remaining Contractual Life	6 months 22 days
Weighted Average Exercise Price | $ / shares	$ 6.00
Exercisable
Number Outstanding | shares	5,000
Weighted Average Exercise Price | $ / shares	$ 6.00
Grant Date February 24, 2016
Outstanding
Number Outstanding | shares	450,000
Weighted Average Remaining Contractual Life	6 years 7 months 24 days
Weighted Average Exercise Price | $ / shares	$ 1.62
Exercisable
Number Outstanding | shares	270,000
Weighted Average Exercise Price | $ / shares	$ 1.62

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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, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018
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		$ 14	$ 23	$ 28	$ 48
Summary of shares held by the ESOP
Allocated to participants		1,032,128		1,032,128		1,036,809
Committed to be released		31,740		31,740		10,580
Suspense shares		624,873		624,873		646,033
Total ESOP shares		1,688,741		1,688,741		1,693,422
Fair value of unearned shares		$ 887		$ 887		$ 678
Unearned ESOP shares		$ 994		$ 994		$ 1,027

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Regulatory Matters (Details)	Jun. 30, 2019	Dec. 31, 2018
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, 2019	Dec. 31, 2018
Regulatory Matters
Tier-1 Leverage	$ 49,434	$ 49,433
Tier 1 Leverage, ratio (as a percent)	11.83%	12.03%
Common Equity Tier 1	$ 49,434	$ 49,433
Common Equity Tier 1, ratio (as a percent)	18.79%	19.32%
Tier 1	$ 49,434	$ 49,433
Tier 1, ratio (as a percent)	18.79%	19.32%
Total Capital	$ 52,263	$ 52,417
Total Capital, ratio (as a percent)	19.86%	20.48%
Leverage required for capital adequacy purposes	$ 16,715	$ 16,439
Leverage required for capital adequacy purposes, ratio (as a percent)	4.00%	4.00%
Common Equity Tier 1 required for capital adequacy purposes	$ 18,805	$ 18,494
Common Equity Tier 1 required for capital adequacy purposes, ratio (as a percent)	4.50%	4.50%
Tier 1 required for capital adequacy purposes	$ 25,073	$ 24,659
Tier 1 required for capital adequacy purposes, ratio (as a percent)	6.00%	6.00%
Total capital required for capital adequacy purposes	$ 33,430	$ 32,879
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 - Basel III and Dodd Frank Rules (Details) - Corrective Action Rules - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Basel III and Dodd Frank Rules
Tier 1 Leverage required to be Well Capitalized	$ 20,894	$ 20,549
Tier 1 Leverage required to be Well Capitalized (as a percent)	5.00%	5.00%
Common Equity Tier I required to be Well Capitalized	$ 17,101	$ 16,634
Common Equity Tier I required to be Well Capitalized (as a percent)	6.50%	6.50%
Tier I Capital required to be Well Capitalized	$ 21,048	$ 20,472
Tier I Capital required to be Well Capitalized (as a percent)	8.00%	8.00%
Total Capital required to be Well Capitalized	$ 26,310	$ 25,590
Total Capital required to be Well Capitalized (as a percent)	10.00%	10.00%

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Income Taxes (Details) $ in Millions	6 Months Ended
	Jun. 30, 2019 USD ($)
Income Taxes
Period for which prior cumulative losses considered in assessing the realization of deferred tax assets	2 years
Valuation allowance	$ 0.0
Net deferred tax assets	$ 5.0

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Concentration of Credit Risk (Details)	6 Months Ended
	Jun. 30, 2019
Long-time Customer | Deposits
Concentration of Credit Risk
Percentage of concentration of risk	10.00%