10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2018

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

For transition period from__________ to___________

Commission file number      000-27464

BROADWAY FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)

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

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

(323) 634-1700

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yesx   No     o

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

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

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

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

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

Yes      o    No      x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:  As of May 4, 2018, 18,662,402 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 March 31, 2018 and December 31, 2017	1
		Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) for the three months ended March 31, 2018 and 2017	2
		Consolidated Statements of Cash Flows for the three months ended March 31, 2018 and 2017	3
		Notes to Consolidated Financial Statements	4
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	28
	Item 4.	Controls and Procedures	28
PART II.	OTHER INFORMATION
	Item 1.	Legal Proceedings	28
	Item 1A.	Risk Factors	28
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	28
	Item 3.	Defaults Upon Senior Securities	28
	Item 4.	Mine Safety Disclosures	28
	Item 5.	Other Information	28
	Item 6.	Exhibits	28
	Signatures		30

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Consolidated Statements of Financial Condition

(In thousands, except share and per share amounts)

	March 31, 2018		December 31, 2017
	(Unaudited)
Assets:
Cash and due from banks	$	2,535	$	3,420
Interest-bearing deposits in other banks	13,712		18,799
Cash and cash equivalents	16,247		22,219
Securities available-for-sale, at fair value	16,694		17,494
Loans receivable held for sale, at lower of cost or fair value	5,428		22,370
Loans receivable held for investment, net of allowance of $4,183 and $4,069	346,218		334,851
Accrued interest receivable	1,161		1,073
Federal Home Loan Bank (FHLB) stock	2,916		2,916
Office properties and equipment, net	2,355		2,406
Bank owned life insurance	3,007		2,994
Deferred tax assets, net	5,125		5,110
Investment in affordable housing limited partnership	489		537
Real estate owned (REO)	833		878
Other assets	1,025		856
Total assets	$	401,498	$	413,704
Liabilities and stockholders’ equity
Liabilities:
Deposits	$	280,330	$	291,290
FHLB advances	65,000		65,000
Junior subordinated debentures	5,100		5,100
Advance payments by borrowers for taxes and insurance	594		1,071
Accrued expenses and other liabilities	3,029		3,512
Total liabilities	354,053		365,973
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 March 31, 2018 and December 31, 2017; issued 21,280,228 shares at March 31, 2018 and 21,312,649 shares at December 31, 2017; outstanding 18,662,402 shares at March 31, 2018 and 18,694,823 shares at December 31, 2017	213		213
Common stock, $.01 par value, non-voting, authorized 25,000,000 shares at March 31, 2018 and December 31, 2017; issued and outstanding 8,756,396 shares at March 31, 2018 and December 31, 2017	87		87
Additional paid-in capital	46,098		46,117
Retained earnings	7,732		7,816
Unearned Employee Stock Ownership Plan (ESOP) shares	(1,078)		(1,095)
Accumulated other comprehensive loss	(281)		(81)
Treasury stock-at cost, 2,617,826 shares at March 31 2018 and at December 31, 2017	(5,326)		(5,326)
Total stockholders’ equity	47,445		47,731
Total liabilities and stockholders’ equity	$	401,498	$	413,704

See accompanying notes to unaudited consolidated financial statements.

1

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)

(Unaudited)

	Three Months Ended March 31,
	2018		2017
	(In thousands, except per share)
Interest income:
Interest and fees on loans receivable	$	3,509	$	3,964
Interest on mortgage-backed and other securities	109		75
Other interest income	140		98
Total interest income	3,758		4,137
Interest expense:
Interest on deposits	631		574
Interest on borrowings	353		484
Total interest expense	984		1,058
Net interest income	2,774		3,079
Loan loss provision recapture	-		350
Net interest income after loan loss provision recapture	2,774		3,429
Non-interest income:
Service charges	115		121
Gain on sale of loans	-		27
Income from litigation settlement	-		1,183
Other	16		28
Total non-interest income	131		1,359
Non-interest expense:
Compensation and benefits	1,905		1,987
Occupancy expense	316		305
Information services	214		200
Professional services	188		174
Office services and supplies	82		72
REO expense	62		(2)
Marketing expense	50		40
Corporate insurance	42		47
Amortization of investment in affordable housing limited partnership	48		49
Other	125		171
Total non-interest expense	3,032		3,043
(Loss) income before income taxes	(127)		1,745
Income tax (benefit) expense	(43)		513
Net (loss) income	$	(84)	$	1,232
Other comprehensive loss, net of tax:
Unrealized losses on securities available-for-sale arising during the period	$	(283)	$	(6)
Income tax benefit	(83)		(2)
Other comprehensive loss, net of tax	(200)		(4)
Comprehensive (loss) income	$	(284)	$	1,228
(Loss) earnings per common share-basic	$	(0.00)	$	0.05
(Loss) earnings per common share-diluted	$	(0.00)	$	0.05

See accompanying notes to unaudited consolidated financial statements.

2

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Consolidated Statements of Cash Flows

(Unaudited)

	Three Months Ended March 31,
	2018		2017
	(In thousands)
Cash flows from operating activities:
Net (loss) income	$	(84)	$	1,232
Adjustments to reconcile net (loss) income to net cash used in operating activities:
Loan loss provision recapture	-		(350)
Provision for losses on REOs	45		-
Depreciation	62		65
Net amortization of deferred loan origination costs	152		50
Net amortization of premiums on mortgage-backed securities	10		9
Amortization of investment in affordable housing limited partnership	48		49
Director compensation expense-common stock	45		-
Stock-based compensation expense	36		115
ESOP compensation expense	25		22
Earnings on bank owned life insurance	(13)		(13)
Originations of loans receivable held for sale	-		(48,694)
Proceeds from sales of loans receivable held for sale	-		14,876
Repayments on loans receivable held for sale	71		89
Gain on sale of loans receivable held for sale	-		(27)
Change in assets and liabilities:
Net change in deferred taxes	68		505
Net change in accrued interest receivable	(88)		8
Net change in other assets	(169)		(1,151)
Net change in advance payments by borrowers for taxes and insurance	(477)		(327)
Net change in accrued expenses and other liabilities	(483)		(1,123)
Net cash used in operating activities	(752)		(34,665)
Cash flows from investing activities:
Net change in loans receivable held for investment	5,352		18,016
Principal payments on available-for-sale securities	507		633
Purchase of FHLB stock	-		(262)
Purchase of office properties and equipment	(11)		(80)
Net cash provided by investing activities	5,848		18,307
Cash flows from financing activities:
Net change in deposits	(10,960)		9,137
Proceeds from FHLB advances	-		26,000
Repayments of FHLB advances	-		(10,000)
Payment for tax withholding for vesting of restricted stock	(108)		-
Net cash (used in) provided by financing activities	(11,068)		25,137
Net change in cash and cash equivalents	(5,972)		8,779
Cash and cash equivalents at beginning of the period	22,219		18,430
Cash and cash equivalents at end of the period	$	16,247	$	27,209
Supplemental disclosures of cash flow information:
Cash paid for interest	$	930	$	1,088
Cash paid for income taxes	-		-
Supplemental disclosures of non-cash investing and financing:
Transfers of loans receivable held for sale to loans receivable held for investment	$	16,871	$	-
Stock issued to directors	45		-
Stock cancelled for payment of tax withholding	108		-

See accompanying notes to unaudited consolidated financial statements.

3

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Unaudited Consolidated Financial Statements

March 31, 2018

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, 2017 and, accordingly, should be read in conjunction with such audited consolidated financial statements.  In the opinion of management, all adjustments (all of which are normal and recurring in nature) considered necessary for a fair presentation have been included.  Operating results for the three months ended March 31, 2018 are not necessarily indicative of the results that may be expected for the year ending December 31, 2018.

Accounting Pronouncement Adopted

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers (Topic 606)”.  ASU 2014-09 supersedes and replaces nearly all existing revenue recognition guidance, including industry-specific guidance, establishes a new control-based revenue recognition model, changes the basis for deciding when revenue is recognized over time or at a point in time, provides new and more detailed guidance on specific topics and expands and improves disclosures about revenue.  In addition, this amendment specifies the accounting for some costs to obtain or fulfill a contract with a customer.  These amendments are effective for public business entities for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period.  On January 1, 2018, the Company adopted ASU No. 2014-09 and all subsequent ASUs that modified Topic 606.  The adoption did not have a material impact on the measurement or recognition of revenue; as such, a modified retrospective cumulative effect adjustment to beginning retained earnings was not deemed necessary.  Results for reporting periods beginning after January 1, 2018 are presented under Topic 606, while prior period amounts were not adjusted and continue to be reported in accordance with our historic accounting under Topic 605.

Topic 606 does not apply to revenue associated with financial instruments, including revenue from loans and securities.  In addition, certain non-interest income streams such as fees associated with mortgage servicing rights, financial guarantees, derivatives, and certain credit card fees are also not in scope of the new guidance.  Topic 606 is applicable to non-interest revenue streams such as trust and asset management income, deposit related fees, interchange fees, merchant income, and annuity and insurance commissions.  The Company’s revenue streams that are within the scope of Topic 606 are primarily services charges on deposit accounts, which consist of monthly service fees, check orders, and other deposit account related fees.  The Company’s performance obligation for monthly service fees is generally satisfied, and the related revenue recognized, over the period in which the service is provided.  Check orders and other deposit account related fees are largely transactional based, and therefore, the Company’s performance obligation is satisfied, and related revenue recognized, at a point in time.  Payment for service charges on deposit accounts is primarily received immediately or in the following month through a direct charge to customers’ accounts.

In January 2016, the FASB issued ASU 2016-01, “Financial Instruments – Overall (Subtopic 825-10) - Recognition and Measurement of Financial Assets and Financial Liabilities”.  ASU 2016-01 (i) amends existing guidance that requires equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income.  It requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes.  It requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (i.e., securities or loans and receivables).  It eliminates the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost.  These amendments are effective for public business entities for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years.  Adoption of this standard did not have a material impact on the Company’s consolidated financial statements.  In accordance with this standard, the Company measured the fair value of its loan portfolio as of March 31, 2018 using an exit price notion (see Note 7 Fair Value).

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BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Unaudited Consolidated Financial Statements (continued)

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

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

In February 2018, the FASB issued Accounting Standards Update (“ASU”) 2018-02, “Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (Topic 220)”, which allows an entity to elect a reclassification from accumulated other comprehensive income (AOCI) to retained earnings for the stranded tax effects resulting from the Tax Cuts and Jobs Act.  The amount of that reclassification should include the effect of changes of tax rate on the deferred tax amount, any related valuation allowance and other income tax effects on the items in AOCI.  The standard requires an entity to state if an election to reclassify the tax effect to retained earnings is made along with the description of other income tax effects that are reclassified from AOCI.  The guidance is effective for public business entities for annual periods beginning on or after December 15, 2018 and interim periods within those annual periods with early adoption permitted. The Company early adopted this amendment and has elected to reclassify $66 thousand from AOCI to retained earnings at December 31, 2017.

Recent Accounting Pronouncements

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)”, which is intended to increase transparency and comparability in the accounting for lease transactions.  Under ASU 2016-02, lessees will be required to recognize all leases longer than twelve months on the Consolidated Statements of Financial Condition as lease assets and lease liabilities and quantitative and qualitative disclosures regarding key information about leasing arrangements.  Under the new guidance, lessor accounting is largely unchanged.  These amendments are effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years.  Early adoption is permitted.  ASU 2016-02 will be effective for us on January 1, 2019 and will require transition using a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the consolidated financial statements.  Based on leases outstanding at December 31, 2017, the Company does not expect the standard to have a material impact on the Company’s Consolidated Statements of Income or Cash Flows, but does anticipate recording a liability for the remaining obligation under the lease agreements and a corresponding right-of-use asset in the Consolidated Statements of Financial Condition, which may have a minor impact on the Bank’s regulatory capital ratios.

5

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Unaudited Consolidated Financial Statements (continued)

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 (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 will result in an increase to the allowance for loan losses balance.

NOTE (2) – Earnings Per Share of Common Stock

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

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

	For the three months ended March 31,
	2018		2017
	(In thousands, except share and per share)
Net (loss) income	$	(84)	$	1,232
Less net (loss) income attributable to participating securities	-		(2)
(Loss) income available to common stockholders	$	(84)	$	1,230
Weighted average common shares outstanding for basic earnings per common share	26,766,158		26,616,704
Add: dilutive effects of assumed exercises of stock options	-		-
Add: dilutive effects of unvested restricted stock awards	-		70,759
Weighted average common shares outstanding for diluted earnings per common share	26,766,158		26,687,463
(Loss) earnings per common share - basic	$	(0.00)	$	0.05
(Loss) earnings per common share - diluted	$	(0.00)	$	0.05

Unvested restricted stock award of 13,931 shares and stock options for 537,500 shares of common stock for the three months ended March 31, 2018 and stock options for 540,625 shares of common stock for the three months ended March 31, 2017 were not considered in computing diluted earnings per common share because they were anti-dilutive.

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BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Unaudited Consolidated Financial Statements (continued)

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)
March 31, 2018:
Federal agency mortgage-backed securities	$	11,357	$	118	$	(170)	$	11,305
Federal agency debt	5,498		-		(109)		5,389
Total available-for-sale securities	$	16,855	$	118	$	(279)	$	16,694
December 31, 2017:
Federal agency mortgage-backed securities	$	11,877	$	168	$	(37)	$	12,008
Federal agency debt	5,495		2		(11)		5,486
Total available-for-sale securities	$	17,372	$	170	$	(48)	$	17,494

At March 31, 2018, the Bank had three federal agency debt securities with total amortized cost of $5.5 million, estimated total fair value of $5.4 million and an estimated average remaining life of 4.1 years.  The Bank also had 26 federal agency mortgage-backed securities with total amortized cost of $11.4 million, estimated total fair value of $11.3 million and an estimated average remaining life of 4.7 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 March 31, 2018 and December 31, 2017, 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)
March 31, 2018:
Federal agency mortgage-backed securities	$	7,089	$	(140)	$	771	$	(30)	$	7,860	$	(170)
Federal agency debt	5,389		(109)		-		-		5,389		(109)
Total temporarily impaired	$	12,478	$	(249)	$	771	$	(30)	$	13,249	$	(279)
December 31, 2017:
Federal agency mortgage-backed securities	$	4,130	$	(20)	$	812	$	(17)	$	4,942	$	(37)
Federal agency debt	3,510		(11)		-				3,510		(11)
Total temporarily impaired	$	7,640	$	(31)	$	812	$	(17)	$	8,452	$	(48)

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 March 31, 2018 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.

There were no securities pledged to secure public deposits at March 31, 2018.  Securities pledged to secure public deposits had a carrying amount of $526 thousand at December 31, 2017.  At March 31, 2018 and December 31, 2017, 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 months ended March 31, 2018 and 2017.

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BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Unaudited Consolidated Financial Statements (continued)

NOTE (4) – Loans Receivable Held for Sale

Loans receivable held for sale at March 31, 2018 and December 31, 2017 totaled $5.4 million and $22.4 million, respectively, and consisted of multi-family loans.  The Bank transferred $16.9 million of multi-family loans from the held-for-sale portfolio to the held-for-investment portfolio during the three months ended March 31, 2018.  There were no loan sales during the three months ended March 31, 2018.  Loan repayments totaled $71 thousand during the three months ended March 31, 2018.

NOTE (5) – Loans Receivable Held for Investment

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

	March 31, 2018		December 31, 2017
	(In thousands)
Real estate:
Single family	$	108,443	$	111,085
Multi-family	203,100		187,455
Commercial real estate	5,820		6,089
Church	30,210		30,848
Construction	1,097		1,678
Commercial – other	195		192
Consumer	4		7
Gross loans receivable before deferred loan costs and premiums	348,869		337,354
Unamortized net deferred loan costs and premiums	1,532		1,566
Gross loans receivable	350,401		338,920
Allowance for loan losses	(4,183)		(4,069)
Loans receivable, net	$	346,218	$	334,851

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

	Three Months Ended March 31, 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	(6)			208		(6)			(190)			(6)			-		-			-
Recoveries	-			-		-			114			-			-		-			114
Loans charged off	-			-		-			-			-			-		-			-
Ending balance	$	588		$	2,508	$	65		$	1,005		$		11	$	6	$	-		$		4,183
	Three Months Ended March 31, 2017
	Real Estate
	Single family			Multi- family		Commercial real estate			Church			Construction			Commercial - other		Consumer				Total
	(In thousands)
Beginning balance	$	367		$	2,659	$	215		$	1,337		$		8	$	17	$		-		$		4,603
Provision for (recapture of) loan losses	(37)			52		(140)			(226)			1			(1)		1			(350)
Recoveries	-			-		-			139			-			-		-			139
Loans charged off	-			-		-			-			-			-		-			-
Ending balance	$		330	$	2,711	$		75	$		1,250	$	9		$	16	$		1	$				4,392

8

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 and for the periods indicated:

	March 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	$	84	$	1	$	-	$	440	$	-	$	5	$	-	$	530
Collectively evaluated for impairment	504		2,507		65		565		11		1		-		3,653
Total ending allowance balance	$	588	$	2,508	$	65	$	1,005	$	11	$	6	$	-	$	4,183
Loans:
Loans individually evaluated for impairment	$	622	$	331	$	-	$	7,873	$	-	$	64	$	-	$	8,890
Loans collectively evaluated for impairment	108,248		204,162		5,826		22,048		1,092		131		4		341,511
Total ending loans balance	$	108,870	$	204,493	$	5,826	$	29,921	$	1,092	$	195	$	4	$	350,401

	December 31, 2017
	Real Estate
	Single family		Multi- family		Commercial real estate		Church		Construction		Commercial - other		Consumer		Total
	(In thousands)
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	100	$	1	$	-	$	479	$	-	$	5	$	-	$	585
Collectively evaluated for impairment	494		2,299		71		602		17		1		-		3,484
Total ending allowance balance	$	594	$	2,300	$	71	$	1,081	$	17	$	6	$	-	$	4,069
Loans:
Loans individually evaluated for impairment	$	627	$	333	$	-	$	8,280	$	-	$	65	$	-	$	9,305
Loans collectively evaluated for impairment	110,897		188,585		6,096		22,232		1,671		127		7		329,615
Total ending loans balance	$	111,524	$	188,918	$	6,096	$	30,512	$	1,671	$	192	$	7	$	338,920

9

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:

	March 31, 2018						December 31, 2017
	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:
Church	$	4,947	$	3,207	$	-	$	5,140	$	3,291	$	-
With an allowance recorded:
Single family	622		622		84		627		627		100
Multi-family	331		331		1		333		333		1
Church	4,666		4,666		440		5,028		4,989		479
Commercial - other	64		64		5		65		65		5
Total	$	10,630	$	8,890	$	530	$	11,193	$	9,305	$	585

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 March 31, 2018						Three Months Ended March 31, 2017
	Average Recorded Investment			Cash Basis Interest Income Recognized			Average Recorded Investment			Cash Basis Interest Income Recognized
					(In thousands)
Single family		$	625		$	8		$	642		$	7
Multi-family		332			6			640			11
Commercial real estate		-			-			331			-
Church		7,981			174			10,471			227
Commercial – other		65			1			66			1
Total		$	9,003		$	189		$	12,150		$	246

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 $10 thousand and $46 thousand for the three months ended March 31, 2018 and 2017, respectively, and were not included in the consolidated results of operations.

10

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Unaudited Consolidated Financial Statements (continued)

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

	March 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	$	56	$	46	$	-	$	102	$	108,768	$	108,870
Multi-family	-		-		-		-		204,493		204,493
Commercial real estate	-		-		-		-		5,826		5,826
Church	-		-		-		-		29,921		29,921
Construction	-		-		-		-		1,092		1,092
Commercial - other	-		-		-		-		195		195
Consumer	-		-		-		-		4		4
Total	$	56	$	46	$	-	$	102	$	350,299	$	350,401
	December 31, 2017
	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	$	-	$	50	$	-	$	50	$	111,474	$	111,524
Multi-family	-		-		-		-		188,918		188,918
Commercial real estate	-		-		-		-		6,096		6,096
Church	341		-		-		341		30,171		30,512
Construction	-		-		-		-		1,671		1,671
Commercial - other	-		-		-		-		192		192
Consumer	-		-		-		-		7		7
Total	$	341	$	50	$	-	$	391	$	338,529	$	338,920

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

	March 31, 2018			December 31, 2017
	(In thousands)
Loans receivable held for investment:
Church		$	1,686		$	1,766
Total non-accrual loans		$	1,686		$	1,766

There were no loans 90 days or more delinquent that were accruing interest as of March 31, 2018 or December 31, 2017.

11

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Unaudited Consolidated Financial Statements (continued)

Troubled Debt Restructurings

At March 31, 2018, loans classified as troubled debt restructurings (“TDRs”) totaled $8.5 million, of which $1.3 million were included in non-accrual loans and $7.2 million were on accrual status.  At December 31, 2017, loans classified as TDRs totaled $8.9 million, of which $1.4 million were included in non-accrual loans and $7.5 million were on accrual status.  The Company has allocated $530 thousand and $585 thousand of specific reserves for accruing TDRs as of March 31, 2018 and December 31, 2017, 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 March 31, 2018 and December 31, 2017, the Company had no commitment to lend additional amounts to customers with outstanding loans that are classified as TDRs.  No loans were modified during the three months ended March 31, 2018 and 2017.

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.

12

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Unaudited Consolidated Financial Statements (continued)

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:

	March 31, 2018
	Pass		Watch		Special Mention		Substandard		Doubtful		Loss
	(In thousands)
Single family	$	108,859	$	-	$	-	$	11	$	-	$	-
Multi-family	203,528		-		-		965		-		-
Commercial real estate	5,704		122		-		-		-		-
Church	23,985		686		-		5,250		-		-
Construction	1,092		-		-		-		-		-
Commercial - other	131		-		-		64		-		-
Consumer	4		-		-		-		-		-
Total	$	343,303	$	808	$	-	$	6,290	$	-	$	-
	December 31, 2017
	Pass		Watch		Special Mention		Substandard		Doubtful		Loss
	(In thousands)
Single family	$	111,513	$	-	$	-	$	11	$	-	$	-
Multi-family	187,946		-		-		972		-		-
Commercial real estate	5,974		122		-		-		-		-
Church	24,474		691		-		5,347		-		-
Construction	1,671		-		-		-		-		-
Commercial - other	127		-		-		65		-		-
Consumer	7		-		-		-		-		-
Total	$	331,712	$	813	$	-	$	6,395	$	-	$	-

NOTE (6) – Junior Subordinated Debentures

On March 17, 2004, the Company issued $6.0 million of Floating Rate Junior Subordinated Debentures (the “Debentures”) in a private placement to a trust that was capitalized to purchase subordinated debt and preferred stock of multiple community banks.  Interest on the Debentures is payable quarterly at a rate per annum equal to the 3-Month LIBOR plus 2.54%.  The interest rate is determined as of each March 17, June 17, September 17, and December 17, and was 4.72% at March 31, 2018.  On October 16, 2014, the Company made payments of $900 thousand of principal on Debentures, executed a Supplemental Indenture for the Debentures that extended the maturity of the Debentures to March 17, 2024, and modified the payment terms of the remaining $5.1 million principal amount thereof.  The modified terms of the Debentures require quarterly payments of interest only through March 2019 at the original rate of 3-Month LIBOR plus 2.54%.  Starting in June 2019, the Company will be required to make quarterly payments of equal amounts of principal, plus interest, until the Debentures are fully amortized on March 17, 2024.  The Debentures may be called for redemption at any time by the Company.

NOTE (7) – Fair Value

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

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

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

13

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Unaudited Consolidated Financial Statements (continued)

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 Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
	(In thousands)
At March 31, 2018:
Securities available-for-sale – federal agency mortgage-backed	$	-	$	11,305	$	-	$	11,305
Securities available-for-sale – federal agency debt	1,970		3,419		-		5,389
At December 31, 2017:
Securities available-for-sale – federal agency mortgage-backed	$	-	$	12,008	$	-	$	12,008
Securities available-for-sale – federal agency debt	1,976		3,510		-		5,486

There were no transfers between Level 1, Level 2, or Level 3 during the three months ended March 31, 2018 and 2017.

14

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Unaudited Consolidated Financial Statements (continued)

Assets Measured on a Non-Recurring Basis

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

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

	March 31, 2018		December 31, 2017
	(In thousands)
Impaired loans carried at fair value of collateral	$	702	$	742
Real estate owned		833		878

The following table provides information regarding losses recognized on assets measured at fair value on a non-recurring basis for the three months ended March 31, 2018 and 2017.

	Three Months Ended March 31,
	2018		2017
	(In thousands)
Impaired loans carried at fair value of collateral	$	-	$	-
Real estate owned		45		-
Total	$	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 March 31, 2018 and December 31, 2017:

	Valuation Technique(s)	Unobservable Input(s)	Range	Weighted Average
March 31, 2018:
Impaired loans	Third Party Appraisals	Adjustment for differences between the comparable sales	-16% to 7%	-3%
Real estate owned – church	Third Party Appraisals	Adjustment for differences between the comparable sales	-6%	-6%
December 31, 2017:
Impaired loans	Third Party Appraisals	Adjustment for differences between the comparable sales	-16% to 7%	-4%
Real estate owned – church	Third Party Appraisals	Adjustment for differences between the comparable sales	-6%	-6%

15

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Unaudited Consolidated Financial Statements (continued)

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 March 31, 2018 and December 31, 2017.  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 March 31, 2018
	Carrying Value		Level 1		Level 2		Level 3		Total
	(In thousands)
Financial Assets:
Loans receivable held for sale	$	5,428	$	-	$	5,449	$	-	$	5,449
Loans receivable held for investment	346,218		-		-		339,529		339,529
Financial Liabilities:
Time Deposits	$	163,816	$	-	$	162,699	$	-	$	162,699
Federal Home Loan Bank advances	65,000		-		64,546		-		64,546
Junior subordinated debentures	5,100		-		-		4,526		4,526

			Fair Value Measurements at December 31, 2017
	Carrying Value		Level 1		Level 2		Level 3		Total
	(In thousands)
Financial Assets:
Loans receivable held for sale	$	22,370	$	-	$	22,626	$	-	$	22,626
Loans receivable held for investment	334,851		-		-		333,231		333,231
Financial Liabilities:
Time Deposits	$	150,789	$	-	$	150,240	$	-	$	150,240
Federal Home Loan Bank advances	65,000		-		64,887		-		64,887
Junior subordinated debentures	5,100		-		-		4,503		4,503

In accordance with the prospective 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 March 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.

16

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Unaudited Consolidated Financial Statements (continued)

NOTE (8) – Stock-based Compensation

The Company issues stock-based compensation awards to its directors and employees under the 2008 Long-Term Incentive Plan (“2008 LTIP”).  The 2008 LTIP permits the grant of non-qualified and incentive stock options, stock appreciation rights, full value awards and cash incentive awards for up to 2,000,000 shares of common stock.  As of March 31, 2018, there were 1,293,109 shares available for future awards under the 2008 LTIP.

No stock options were granted during the three months ended March 31, 2018 and 2017.

The following table summarizes stock option activity during the three months ended March 31, 2018 and 2017:

	Three Months Ended March 31, 2018			Three Months Ended March 31, 2017
	Number Outstanding	Weighted Average Exercise Price		Number Outstanding	Weighted Average Exercise Price
Outstanding at beginning of period	537,500	$	2.19	540,625	$	2.18
Granted during period	-	-		-	-
Exercised during period	-	-		-	-
Forfeited or expired during period	-	-		-	-
Outstanding at end of period	537,500	$	2.19	540,625	$	2.18
Exercisable at end of period	267,500	$	2.71	180,625	$	3.29

The Company recorded $10 thousand of stock-based compensation expense related to stock options during the three months ended March 31, 2018 and 2017.  As of March 31, 2018, unrecognized compensation cost related to nonvested stock options granted under the plan was $113 thousand.  The cost is expected to be recognized over a period of 2.90 years.

Options outstanding and exercisable at March 31, 2018 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, 2009	7,500	0.81 years	$	4.00			7,500	$	4.00
March 18, 2009	75,000	0.96 years	$	4.98			75,000	$	4.98
January 21, 2010	5,000	1.81 years	$	6.00			5,000	$	6.00
February 24, 2016	450,000	7.90 years	$	1.62			180,000	$	1.62
	537,500	6.78 years	$	2.19	$	221,000	267,500	$	2.71	$	88,000

In March 2016, the Company awarded 120,483 shares of restricted stock to its Chief Executive Officer (“CEO”) under the 2008 LTIP.  A restricted stock award is valued at the closing price of the Company’s stock on the date of such award.  Subject to certain performance restrictions, 100,000 shares of restricted stock shall vest over a two-year period and the remaining 20,483 shares shall vest over a three-year period.  Stock-based compensation expense is recognized over the vesting period.  The Company recorded $26 thousand of stock-based compensation expense related to this award during the three months ended March 31, 2018 and 2017.  As of March 31, 2018, unrecognized compensation cost related to non-vested restricted stock award was $13 thousand, which is expected to be recognized over a period of 12 months.

17

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Unaudited Consolidated Financial Statements (continued)

In March 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 based on the fair value of the stock, which was determined using the average of the high and the low price of the stock on the date of the award.  In April 2017, the Company’s directors were awarded 30,002 shares of common stock, which were fully vested, and the Company recorded $53 thousand of compensation expense related to such award.

In February 2018, the Company awarded 97,195 of cash-settled restricted stock units (“RSUs”) to its CEO under the 2008 LTIP.  The Company also awarded 129,270 of cash-settled RSU to its CEO in April 2017.  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.  During the three months ended March 31, 2018, the Company recorded compensation expense related to these awards of $32 thousand.

NOTE (9) – ESOP Plan

Employees participate in an Employee Stock Option Plan (“ESOP”) after attaining certain age and service requirements.  In December 2016, the ESOP purchased 1,493,679 shares of the Company’s common stock at $1.59 per share, for a total cost of $2.4 million, of which $1.2 million was funded with a loan from the Company.  The loan will be repaid from the Bank’s annual discretionary contributions to the ESOP, net of dividends paid, over a period of 20 years.  Shares of the Company’s common stock purchased by the ESOP are held in a suspense account until released for allocation to participants.  When loan payments are made, shares are allocated to each eligible participant based on the ratio of each such participant’s compensation, as defined in the ESOP, to the total compensation of all eligible plan participants.  As the unearned shares are released from the suspense account, the Company recognizes compensation expense equal to the fair value of the ESOP shares during the periods in which they become committed to be released.  To the extent that the fair value of the ESOP shares released differs from the cost of such shares, the difference is charged or credited to equity as additional paid-in capital.  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 $25 thousand and $22 thousand for the three months ended March 31, 2018 and 2017, respectively.

Shares held by the ESOP were as follows:

	March  31, 2018		December 31, 2017
	(Dollars in thousands)
Allocated to participants	1,108,382		1,108,382
Committed to be released	21,504		10,752
Suspense shares	678,118		688,870
Total ESOP shares	1,808,004		1,808,004
Fair value of unearned shares	$	1,431	$	1,626

In September 2017, the Company received its first loan payment from the ESOP and 40,126 shares were released for allocation to participants.  The outstanding balance of unearned shares at March 31, 2018 and December 31, 2017, was $1.1 million, which is shown as Unearned ESOP shares in the equity section of the consolidated statements of financial condition.

18

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Unaudited Consolidated Financial Statements (continued)

NOTE (10) – Regulatory Matters

The Bank’s capital requirements are administered by the Office of the Comptroller of the Currency (“OCC”) and involve quantitative measures of assets, liabilities, and certain off-balance sheet items calculated under regulatory accounting practices.  Capital amounts and classifications are also subject to qualitative judgments by the OCC.  Failure to meet capital requirements can result in regulatory action.

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

·4.5% CET1 to risk-weighted assets;

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

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

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

A capital conservation buffer is also required to be maintained above the regulatory minimum capital requirements.  This capital conservation buffer is being phased in on a schedule that began on January 1, 2016 at 0.625% of risk-weighted assets and will increase each subsequent year by an additional 0.625% until it reaches its final level of 2.5% on January 1, 2019.

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

The Basel III Capital Rules became effective for the Bank on January 1, 2015 (subject to a phase-in period for certain provisions).  At March 31, 2018 and December 31, 2017, 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)
March 31, 2018:
Tier 1 (Leverage)	$	48,015	11.88%	$	16,165	4.0%	$	20,206	5.0%
Common Equity Tier 1	$	48,015	18.97%	$	11,389	4.5%	$	16,450	6.5%
Tier 1	$	48,015	18.97%	$	15,185	6.0%	$	20,246	8.0%
Total Capital	$	51,192	20.23%	$	20,246	8.0%	$	25,308	10.0%
December 31, 2017:
Tier 1 (Leverage)	$	47,838	11.39%	$	16,798	4.0%	$	20,997	5.0%
Common Equity Tier 1	$	47,838	18.63%	$	11,557	4.5%	$	16,693	6.5%
Tier 1	$	47,838	18.63%	$	15,409	6.0%	$	20,545	8.0%
Total Capital	$	51,059	19.88%	$	20,545	8.0%	$	25,681	10.0%

19

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Unaudited Consolidated Financial Statements (continued)

NOTE (11) – Income Taxes

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

Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion, or all, of the deferred tax asset will not be realized.  In assessing the realization of deferred tax assets, management evaluated both positive and negative evidence, including the existence of cumulative losses in the current year and the prior two years, the amount of taxes paid in available carry-back years, the forecasts of future income and tax planning strategies.  Based on this analysis, the Company determined that as of March 31, 2018, no valuation allowance was required on its deferred tax assets, which totaled $5.1 million.  As of December 31, 2017, the Company recorded no valuation allowance on its deferred tax assets of $5.1 million.

NOTE (12) – Concentration of Credit Risk

The Bank has a significant concentration of deposits with a long-time customer that accounted for approximately 11% of its deposits as of March 31, 2018.  The Bank expects to maintain this relationship with the customer.

20

ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to provide a reader of our financial statements with a narrative from the perspective of our management on our financial condition, results of operations, liquidity and certain other factors that may affect our future results.  Our MD&A should be read in conjunction with the Consolidated Financial Statements and related Notes included in Part I “Item 1, Financial Statements,” of this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2017.  Certain statements herein are forward-looking statements within the meaning of Section 21E of the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”) and Section 27A of the U.S. Securities Act of 1933, as amended, that reflect our current views with respect to future events and financial performance.  Forward-looking statements typically include the words “anticipate,” “believe,” “estimate,” “expect,” “project,” “plan,” “forecast,” “intend,” and other similar expressions.  These forward-looking statements are subject to risks and uncertainties, which could cause actual future results to differ materially from historical results or from those anticipated or implied by such statements.  Readers should not place undue reliance on these forward-looking statements, which speak only as of their dates or, if no date is provided, then as of the date of this Form 10-Q.  We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except to the extent required by law.

Critical Accounting Policies and Estimates

Our significant accounting policies, which are essential to understanding Management’s Discussion and Analysis of Financial Condition and Results of Operations, are described in the “Notes to Consolidated Financial Statements” and in the “Critical Accounting Policies” section of Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2017.  There have been no material changes to our critical accounting policies.

Overview

Total assets decreased by $12.2 million to $401.5 million at March 31, 2018 from $413.7 million at December 31, 2017.  The decrease in total assets primarily consisted of a decrease of $16.9 million in loans receivable held for sale, a decrease of $6.0 million in cash and cash equivalents and a decrease of $800 thousand in securities available-for-sale, which were partially offset by an increase of $11.3 million in net loans receivable held for investment.

Total borrowings at March 31, 2018 remained unchanged from December 31, 2017, and consisted of advances to the Bank from the FHLB of $65.0 million, and subordinated debentures issued by the Company of $5.1 million.

We recorded net loss of ($84) thousand for the first quarter of 2018, compared to net income of $1.2 million for the first quarter of 2017.  The lower earnings during the first quarter of 2018 resulted from a decrease of $1.2 million in non-interest income as the prior year’s first quarter included an insurance litigation settlement of $1.2 million.  In addition, in the first quarter of 2017 the Company’s reported income was enhanced by a loan loss provision recapture of $350 thousand.  During the first quarter of 2018, the Bank did not report any loan loss provision or recapture.

21

Results of Operations

Net Interest Income

For the first quarter of 2018, net interest income decreased by $305 thousand to $2.8 million from $3.1 million for the same period a year ago, primarily because of a decrease of $29.7 million in average interest-earning assets, combined with a decrease of 9 basis points in the net interest margin.  The decline in average interest-earning assets consisted of a decrease of $39.7 million in the average balance of loans receivable compared to the prior year’s first quarter, which resulted from the sale of multi-family loans throughout 2017 to maintain compliance with regulatory loan concentration guidelines, and was partially offset by an increase of $10.0 million in securities and other interest-earning assets.

Interest income on loans receivable decreased by $455 thousand to $3.5 million for the first quarter of 2018, from $4.0 million for the first quarter of 2017.  Lower interest income on loans receivable for the first quarter of 2018 resulted from the decrease in the average balance of loans receivable, which decreased interest income by $392 thousand.  Additionally, the average yield on loans receivable during the first quarter of 2018 decreased by 6 basis points compared to the first quarter of 2017, which reduced interest income by $63 thousand.  The decrease in the average yield on loans receivable primarily resulted from the payoff of loans with higher rates than those originated over the last year.

Interest income on securities increased by $34 thousand to $109 thousand for the first quarter of 2018, from $75 thousand for the first quarter of 2017, due to an increase of $4.2 million in the average balance of securities and an increase of 22 basis points in the average yield on securities.  Other interest income increased by $42 thousand to $140 thousand for the first quarter of 2018, from $98 thousand for the first quarter of 2017.  The increase of $42 thousand in other interest income was due to an increase of $52 thousand in interest income on interest-bearing deposits in other banks, primarily reflecting a higher average yield and a higher average balance for the first quarter of 2018, and was partially offset by a decrease of $10 thousand in dividend income earned on the Bank’s investment in FHLB stock.

Interest expense on deposits increased by $57 thousand to $631 thousand for the first quarter of 2018, from $574 thousand for the first quarter of 2017.  Higher interest expense on deposits for the first quarter of 2018 primarily resulted from an increase of 9 basis points in the average cost of deposits, which increased interest expense by $97 thousand.  The average balance of deposits decreased by $4.5 million, which decreased interest expense by $40 thousand.

Interest expense on borrowings decreased by $131 thousand to $353 thousand for the first quarter of 2018, from $484 thousand for the first quarter of 2017.  Lower interest expense on borrowings for the first quarter of 2018 primarily resulted from a decrease of $26.7 million in the average balance of FHLB advances, which decreased interest expense by $123 thousand.  The average cost of FHLB advances decreased by 7 basis points, which reduced interest expense by $16 thousand, whereas the interest rate on the Company’s junior subordinated debentures increased during the first quarter of 2018, resulting in additional interest expense of $8 thousand.

22

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

	For the three months ended
	March 31, 2018					March 31, 2017
(Dollars in Thousands)	Average Balance		Interest		Average Yield/ Cost	Average Balance		Interest		Average Yield/ Cost
Assets
Interest-earning assets:
Interest-earning deposits	$	22,550	$	90	1.60%	$	17,034	$	38	0.89%
Securities	17,170		109		2.54%	12,954		75		2.32%
Loans receivable (1)	355,715		3,509		3.95%	395,388		3,964		4.01%
FHLB stock	2,916		50		6.86%	2,629		60		9.13%
Total interest-earning assets	398,351		$	3,758	3.77%	428,005		$	4,137	3.87%
Non-interest-earning assets	10,212					10,994
Total assets	$	408,563				$	438,999
Liabilities and Stockholders’ Equity
Interest-bearing liabilities:
Money market deposits	$	49,382	$	99	0.80%	$	31,655	$	49	0.62%
Passbook deposits	39,128		31		0.32%	39,604		31		0.31%
NOW and other demand deposits	35,706		7		0.08%	30,752		4		0.05%
Certificate accounts	161,731		494		1.22%	188,438		490		1.04%
Total deposits	285,947		631		0.88%	290,449		574		0.79%
FHLB advances	65,000		299		1.84%	91,717		438		1.91%
Junior subordinated debentures	5,100		54		4.24%	5,100		46		3.61%
Total interest-bearing liabilities	356,047		$	984	1.11%	387,266		$	1,058	1.09%
Non-interest-bearing liabilities	4,808					6,146
Stockholders’ Equity	47,708					45,587
Total liabilities and stockholders’ equity	$	408,563				$	438,999
Net interest rate spread (2)			$	2,774	2.66%			$	3,079	2.78%
Net interest rate margin (3)					2.79%					2.88%
Ratio of interest-earning assets to interest-bearing liabilities					111.88%					110.52%

(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.

23

Loan loss provision recapture

During the first quarter of 2018, we did not record any loan loss provisions or recaptures, compared to $350 thousand of loan loss provision recaptures for the first quarter of 2017.  The requirements for the allowance for loan losses (“ALLL”) on loan originations and loans transferred from held for sale during the first quarter of 2018 were offset by payoffs, recoveries of problem loans, and continued improvement in the overall credit quality of the loan portfolio.  See “Allowance for Loan Losses” below for additional information.

Non-interest Income

Non-interest income for the first quarter of 2018 totaled $131 thousand, compared to $1.4 million for the first quarter of 2017.  The decrease in non-interest income of $1.2 million was primarily due to an insurance litigation settlement that was included in the Bank’s results for the first quarter of 2017.

Non-interest Expense

Total non-interest expense was $3.0 million for both the first quarters of 2018 and 2017.  Overall non-interest expense decreased by $11 thousand, primarily reflecting a decrease of $82 thousand in compensation and benefits expense, partially offset by an increase of $64 thousand in REO expense.  Compensation and benefits expense decreased primarily due to a higher amount of salary deferred as loan origination costs and lower salary expense, which were partially offset by higher stock based compensation expense.  REO expense increased due to a $45 thousand write down of the Bank’s sole REO property to reflect the estimated net sale proceeds, after estimated selling expenses, from a pending sale of the property.

Income Taxes

Income taxes are computed by applying the statutory federal income tax rate of 21% and the California income tax rate of 10.84% to taxable income.  We recorded income tax benefit of $43 thousand for the first quarter of 2018 and income tax expense of $513 thousand for the first quarter of 2017.  Our effective income tax rate was 33.86% for the first quarter of 2018 compared to 29.40% for the comparable period in 2017.  The effective tax rate for the first quarter of 2018 was higher than the statutory rate due to adjustment for year-to-date discrete items such as stock-based compensation windfall.  We eliminated the balance of our valuation allowance on deferred tax assets at the end of 2016.  Deferred tax assets totaled $5.1 million at March 31, 2018 and December 31, 2017.

Financial Condition

Total Assets

Total assets decreased by $12.2 million to $401.5 million at March 31, 2018 from $413.7 million at December 31, 2017.  The decrease in total assets primarily consisted of a decrease of $16.9 million in loans receivable held for sale, a decrease of $6.0 million in cash and cash equivalents and a decrease of $800 thousand in securities available-for-sale, which were partially offset by an increase of $11.3 million in net loans receivable held for investment.

Loans Receivable Held for Sale

Loans receivable held for sale at March 31, 2018 and December 31, 2017 totaled $5.4 million and $22.4 million, respectively, and consisted of multi-family loans.  During the first quarter of 2018, we transferred $16.9 million of multi-family loans from loans receivable held for sale to loans receivable held for investment as we had capacity to add more multi-family loans to our portfolio under the current regulatory guidelines for loan concentration.   We received $71 thousand in principal repayments on loans receivable held for sale during the first quarter of 2018, compared to $89 thousand during the first quarter of 2017.

24

Loans Receivable Held for Investment

Loans receivable held for investment, net of ALLL increased by $11.3 million to $346.2 million at March 31, 2018, from $334.9 million at December 31, 2017.  The increase in loans receivable held for investment during the first quarter of 2018 was primarily due to the $16.9 million of loans transferred from held for sale mentioned above.  During the first quarter of 2018, we originated for portfolio $15.0 million in multi-family loans, compared to $1.9 million during the first quarter of 2017.  Loan repayments during the first quarter of 2018 totaled $20.4 million, compared to $19.8 million during the first quarter of 2017.

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

Our ALLL increased by $114 thousand to $4.2 million, or 1.19% of our gross loans receivable held for investment, at March 31, 2018, from $4.1 million, or 1.20% of our gross loans receivable held for investment, at December 31, 2017, primarily reflecting recoveries of $114 thousand.  The levels of ALLL at March 31, 2018 and December 31, 2017 reflect the result 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.

As of March 31, 2018, we had total delinquencies of $102 thousand, compared to $391 thousand at December 31, 2017.  Non-performing loans (“NPLs”) consist of delinquent loans that are 90 days or more past due and other loans, including troubled debt restructurings that do not qualify for accrual status.  At March 31, 2018, NPLs totaled $1.7 million, compared to $1.8 million at December 31, 2017.  The decrease of $80 thousand in NPLs was due to repayments.

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 March 31, 2018, all of our NPLs were current in their payments, compared to $1.4 million, or 81% of our NPLs, that were current in their payments at December 31, 2017.  Also, in determining the ALLL, we consider the ratio of the ALLL to NPLs, which increased to 248.10% at March 31, 2018 from 230.41% at December 31, 2017.

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 since 2015.  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 March 31, 2018.

Recoveries during the first quarter of 2018 and 2017 totaled $114 thousand and $139 thousand, respectively.  Recoveries primarily resulted from payoffs of loans which had been previously partially charged off.

25

Impaired loans at March 31, 2018 were $8.9 million, compared to $9.3 million at December 31, 2017.  The decrease of $414 thousand in impaired loans was due to repayments.  Specific reserves for impaired loans were $530 thousand, or 5.96% of the aggregate impaired loan amount at March 31, 2018, compared to $585 thousand, or 6.29%, at December 31, 2017.  Excluding specific reserves for impaired loans, our coverage ratio (general allowance as a percentage of total non-impaired loans) was 1.07% at March 31, 2018, compared to 1.06% at December 31, 2017.

We believe that the ALLL is adequate to cover probable incurred losses in the loan portfolio as of March 31, 2018, but there can be no assurance that actual losses will not exceed the estimated amounts.  In addition, the OCC and the FDIC periodically review the ALLL as an integral part of their examination process.  These agencies may require an increase in the ALLL based on their judgments of the information available to them at the time of their examinations.

Deposits

Deposits decreased by $11.0 million to $280.3 million at March 31, 2018 from $291.3 million at December 31, 2017.  Liquid deposits (NOW, demand, money market and passbook accounts) decreased by $24.0 million during the first quarter of 2018 and represented 42% and 48% of total deposits at March 31, 2018 and December 31, 2017, respectively.  The decrease in liquid deposits primarily resulted from a transfer of $25.0 million from a money market account to the Certificate of Deposit Account Registry Service (“CDARS”) by a long-time depositor.

Certificates of deposit (“CDs”) increased by $13.0 million during the first quarter of 2018 and represented 58% and 52% of total deposits at March 31, 2018 and December 31, 2017, respectively.  The increase in CDs was primarily due to the $25.0 million transfer to CDARS mentioned above and a $2.3 million net increase in retail CDs, which were partially offset by net maturities of $12.3 million and $2.0 million in CDARS and QwickRate CDs, respectively.  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 March 31, 2018, we had approximately $34.7 million in CDARS Reciprocal and $31.2 million in CDARS One-Way Buy, compared to $9.5 million in CDARS Reciprocal and $43.3 million in CDARS One-Way Buy at December 31, 2017.

One customer relationship accounted for approximately 11% of our deposits at March 31, 2018 and December 31, 2017.  We expect to maintain this relationship with the customer for the foreseeable future.

Borrowings

At March 31, 2018 and December 31, 2017, FHLB advances totaled $65.0 million, with a weighted average interest rate of 1.86%.

Subordinated debentures issued by the Company remained unchanged at $5.1 million at March 31, 2018 and December 31, 2017.  The weighted average interest rate on the subordinated debentures increased to 4.72% at March 31, 2018 from 4.15% at December 31, 2017, primarily due to increases in LIBOR.

Stockholders’ Equity

Stockholders’ equity was $47.4 million, or 11.82% of the Company’s total assets, at March 31, 2018, compared to $47.7 million, or 11.54% of the Company’s total assets, at December 31, 2017.  The Company’s book value was $1.73 and $1.74 per share as of March 31, 2018 and December 31, 2017, respectively.

26

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 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 $33.7 million at March 31, 2018.  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 invests in federal funds with the Federal Reserve Bank or in money market accounts with other financial institutions.  The Bank’s liquid assets at March 31, 2018 consisted of $2.5 million in cash and due from banks, $13.7 million in interest-bearing deposits in other banks, and $16.7 million in securities available-for-sale that were not pledged, compared to $3.4 million in cash and due from banks, $18.8 million in interest-bearing deposits in other banks, and $17.0 million in securities available-for-sale that were not pledged at December 31, 2017.  Currently, we believe that the Bank has sufficient liquidity to support growth over the foreseeable future.

The Company’s liquidity, separate from the Bank, is based primarily on the proceeds from financing transactions, such as the private placements completed in August 2013, October 2014 and December 2016 and dividend received from the Bank in 2017 and 2016.  The Bank is currently under no prohibition to pay dividends, but is subject to restrictions as to the amount of the dividends based on normal regulatory guidelines.

The Company recorded consolidated net cash outflows from operating activities of $752 thousand and $34.7 million during the three months ended March 31, 2018 and 2017, respectively.  Net cash outflows from operating activities during the three months ended March 31, 2018 were primarily attributable to payments of accrued expenses and other liabilities.  Net cash outflows from operating activities during the first quarter of 2017 were primarily attributable to originations of multi-family loans for the Bank’s loans held for sale portfolio.

The Company recorded consolidated net cash inflows from investing activities of $5.8 million and $18.3 million during the three months ended March 31, 2018 and 2017, respectively.  Net cash inflows from investing activities during the three months ended March 31, 2018 were primarily attributable to repayments on loans held for investment and securities available-for-sale and withdrawals from our interest-bearing deposits in other banks.

The Company recorded consolidated net cash outflows from financing activities of $11.1 million during the three months ended March 31, 2018, compared to consolidated net cash inflows from financing activities of $25.1 million during the three months ended March 31 2017.  Net cash outflows from financing activities during the three months ended March 31, 2018 were primarily attributable to decreases in deposits.

Capital Resources and Regulatory Capital

Our principal subsidiary, Broadway Federal Bank, must comply with capital standards established by the OCC in the conduct of its business.  Failure to comply with such capital requirements may result in significant limitations on its business or other sanctions.  The Dodd-Frank Act requires the federal banking agencies to establish consolidated risk-based and leverage capital requirements for insured depository institutions, depository institution holding companies and certain non-bank financial companies that are no less than those to which insured depository institutions have been previously subject.  The current regulatory capital requirements are described in Note 10 of the Notes to Consolidated Financial Statements.

27

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not Applicable

ITEM 4.  CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

An evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures was performed under the supervision of the Company’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) as of March 31, 2018.  Based on that evaluation, the Company’s CEO and CFO concluded that the Company’s disclosure controls and procedures were effective as of March 31, 2018.  There were no significant changes during the quarter ended March 31, 2018 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.

Changes in Internal Control Over Financial Reporting

There were no changes in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended March 31, 2018, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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

28

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.  The SEC File No. for each incorporated document is 000-27464.

29

SIGNATURES

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

Date:	May 15, 2018	By:	/s/ Wayne-Kent A. Bradshaw
			Wayne-Kent A. Bradshaw
			Chief Executive Officer
Date:	May 15, 2018	By:	/s/ Brenda J. Battey
			Brenda J. Battey
			Chief Financial Officer

30

EX-31.1

Exhibit 31.1

SECTION 302 CERTIFICATION

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

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

Date:	May 15, 2018	By:	/s/ Wayne-Kent A. Bradshaw
			Wayne-Kent A. Bradshaw
			Chief Executive Officer

EX-31.2

Exhibit 31.2

SECTION 302 CERTIFICATION

I, Brenda J. Battey, certify that:

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

Date:	May 15, 2018	By:	/s/  Brenda J. Battey
			Brenda J. Battey
			Chief Financial Officer

EX-32.1

Exhibit 32.1

SECTION 906 CERTIFICATION

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

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

Date:	May 15, 2018	By:	/s/ Wayne-Kent A. Bradshaw
			Wayne-Kent A. Bradshaw
			Chief Executive Officer

EX-32.2

Exhibit 32.2

SECTION 906 CERTIFICATION

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

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

Date:	May 15, 2018	By:	/s/ Brenda J. Battey
			Brenda J. Battey
			Chief Financial Officer

XML

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2018	May 04, 2018
Entity Registrant Name	BROADWAY FINANCIAL CORP \DE\
Entity Central Index Key	0001001171
Document Type	10-Q
Document Period End Date	Mar. 31, 2018
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Smaller Reporting Company
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q1
Voting common stock
Entity Common Stock, Shares Outstanding		18,662,402
Non-voting common stock
Entity Common Stock, Shares Outstanding		8,756,396

XML

Consolidated Statements of Financial Condition - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Assets:
Cash and due from banks	$ 2,535	$ 3,420
Interest-bearing deposits in other banks	13,712	18,799
Cash and cash equivalents	16,247	22,219
Securities available-for-sale, at fair value	16,694	17,494
Loans receivable held for sale, at lower of cost or fair value	5,428	22,370
Loans receivable held for investment, net of allowance of $4,183 and $4,069	346,218	334,851
Accrued interest receivable	1,161	1,073
Federal Home Loan Bank (FHLB) stock	2,916	2,916
Office properties and equipment, net	2,355	2,406
Bank owned life insurance	3,007	2,994
Deferred tax assets, net	5,125	5,110
Investment in affordable housing limited partnership	489	537
Real estate owned (REO)	833	878
Other assets	1,025	856
Total assets	401,498	413,704
Liabilities:
Deposits	280,330	291,290
FHLB advances	65,000	65,000
Junior subordinated debentures	5,100	5,100
Advance payments by borrowers for taxes and insurance	594	1,071
Accrued expenses and other liabilities	3,029	3,512
Total liabilities	354,053	365,973
Stockholders' Equity:
Preferred stock, $.01 par value, authorized 1,000,000 shares; none issued or outstanding
Additional paid-in capital	46,098	46,117
Retained earnings	7,732	7,816
Unearned Employee Stock Ownership Plan (ESOP) shares	(1,078)	(1,095)
Accumulated other comprehensive loss	(281)	(81)
Treasury stock-at cost, 2,617,826 shares at March 31 2018 and at December 31, 2017	(5,326)	(5,326)
Total stockholders' equity	47,445	47,731
Total liabilities and stockholders' equity	401,498	413,704
Common Stock | Voting common stock
Stockholders' Equity:
Common stock	213	213
Common Stock | Non-voting common stock
Stockholders' Equity:
Common stock	$ 87	$ 87

XML

Consolidated Statements of Financial Condition (Parenthetical) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Allowance for loan losses (in dollars)	$ 4,183	$ 4,069
Stockholders' Equity:
Treasury stock, shares	2,617,826	2,617,826
Preferred stock
Stockholders' Equity:
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized	1,000,000	1,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common Stock | Voting common stock
Stockholders' Equity:
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized	50,000,000	50,000,000
Common stock, shares issued	21,280,228	21,312,649
Common stock, shares outstanding	18,662,402	18,694,823
Common Stock | Non-voting common stock
Stockholders' Equity:
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized	25,000,000	25,000,000
Common stock, shares issued	8,756,396	8,756,396
Common stock, shares outstanding	8,756,396	8,756,396

XML

Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Interest income:
Interest and fees on loans receivable	$ 3,509	$ 3,964
Interest on mortgage-backed and other securities	109	75
Other interest income	140	98
Total interest income	3,758	4,137
Interest expense:
Interest on deposits	631	574
Interest on borrowings	353	484
Total interest expense	984	1,058
Net interest income	2,774	3,079
Loan loss provision recapture		350
Net interest income after loan loss provision recapture	2,774	3,429
Non-interest income:
Gain on sale of loans		27
Income from litigation settlement		1,183
Other	16	28
Total non-interest income	131	1,359
Non-interest expense:
Compensation and benefits	1,905	1,987
Occupancy expense	316	305
Information services	214	200
Professional services	188	174
Office services and supplies	82	72
REO expense	62	(2)
Marketing expense	50	40
Corporate insurance	42	47
Amortization of investment in affordable housing limited partnership	48	49
Other	125	171
Total non-interest expense	3,032	3,043
(Loss) income before income taxes	(127)	1,745
Income tax (benefit) expense	(43)	513
Net (loss) income	(84)	1,232
Other comprehensive loss, net of tax:
Unrealized losses on securities available-for-sale arising during the period	(283)	(6)
Income tax benefit	83	2
Other comprehensive loss, net of tax	(200)	(4)
Comprehensive (loss) income	$ (284)	$ 1,228
(Loss) earnings per common share-basic (in dollars per share)	$ 0.00	$ 0.05
(Loss) earnings per common share-diluted (in dollars per share)	$ 0.00	$ 0.05
Service charges
Non-interest income:
Revenue	$ 115	$ 121

XML

Consolidated Statements of Cash Flows - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Cash flows from operating activities:
Net (loss) income	$ (84)	$ 1,232
Adjustments to reconcile net (loss) income to net cash used in operating activities:
Loan loss provision recaptures		(350)
Provision for losses on REOs	45
Depreciation	62	65
Net amortization of deferred loan origination costs	152	50
Net amortization of premiums on mortgage-backed securities	10	9
Amortization of investment in affordable housing limited partnership	48	49
ESOP compensation expense	25	22
Earnings on bank owned life insurance	(13)	(13)
Originations of loans receivable held for sale		(48,694)
Proceeds from sales of loans receivable held for sale		14,876
Repayments on loans receivable held for sale	71	89
Gain on sale of loans receivable held for sale		(27)
Change in assets and liabilities:
Net change in deferred taxes	68	505
Net change in accrued interest receivable	(88)	8
Net change in other assets	(169)	(1,151)
Net change in advance payments by borrowers for taxes and insurance	(477)	(327)
Net change in accrued expenses and other liabilities	(483)	(1,123)
Net cash used in operating activities	(752)	(34,665)
Cash flows from investing activities:
Net change in loans receivable held for investment	5,352	18,016
Principal payments on available-for-sale securities	507	633
Purchase of FHLB stock		(262)
Purchase of office properties and equipment	(11)	(80)
Net cash provided by investing activities	5,848	18,307
Cash flows from financing activities:
Net change in deposits	(10,960)	9,137
Proceeds from FHLB advances		26,000
Repayments on FHLB advances		(10,000)
Payment for tax withholding for vesting of restricted stock	(108)
Net cash (used in) provided by financing activities	(11,068)	25,137
Net change in cash and cash equivalents	(5,972)	8,779
Cash and cash equivalents at beginning of the period	22,219	18,430
Cash and cash equivalents at end of the period	16,247	27,209
Supplemental disclosures of cash flow information:
Cash paid for interest	930	1,088
Supplemental disclosures of non-cash investing and financing:
Transfers of loans receivable held for sale to loans receivable held for investment	16,871
Stock cancelled for payment of tax withholding	108
Directors
Supplemental disclosures of non-cash investing and financing:
Stock issued to directors	45
Directors | Common Stock
Adjustments to reconcile net (loss) income to net cash used in operating activities:
Stock-based compensation expense	45
Employees, excluding Directors
Adjustments to reconcile net (loss) income to net cash used in operating activities:
Stock-based compensation expense	$ 36	$ 115

XML

Basis of Financial Statement Presentation

3 Months Ended

Mar. 31, 2018

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, 2017 and, accordingly, should be read in conjunction with such audited consolidated financial statements.  In the opinion of management, all adjustments (all of which are normal and recurring in nature) considered necessary for a fair presentation have been included.  Operating results for the three months ended March 31, 2018 are not necessarily indicative of the results that may be expected for the year ending December 31, 2018.

Accounting Pronouncement Adopted

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers (Topic 606)”.  ASU 2014-09 supersedes and replaces nearly all existing revenue recognition guidance, including industry-specific guidance, establishes a new control-based revenue recognition model, changes the basis for deciding when revenue is recognized over time or at a point in time, provides new and more detailed guidance on specific topics and expands and improves disclosures about revenue.  In addition, this amendment specifies the accounting for some costs to obtain or fulfill a contract with a customer.  These amendments are effective for public business entities for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period.  On January 1, 2018, the Company adopted ASU No. 2014-09 and all subsequent ASUs that modified Topic 606.  The adoption did not have a material impact on the measurement or recognition of revenue; as such, a modified retrospective cumulative effect adjustment to beginning retained earnings was not deemed necessary.  Results for reporting periods beginning after January 1, 2018 are presented under Topic 606, while prior period amounts were not adjusted and continue to be reported in accordance with our historic accounting under Topic 605.

Topic 606 does not apply to revenue associated with financial instruments, including revenue from loans and securities.  In addition, certain non-interest income streams such as fees associated with mortgage servicing rights, financial guarantees, derivatives, and certain credit card fees are also not in scope of the new guidance.  Topic 606 is applicable to non-interest revenue streams such as trust and asset management income, deposit related fees, interchange fees, merchant income, and annuity and insurance commissions.  The Company’s revenue streams that are within the scope of Topic 606 are primarily services charges on deposit accounts, which consist of monthly service fees, check orders, and other deposit account related fees.  The Company’s performance obligation for monthly service fees is generally satisfied, and the related revenue recognized, over the period in which the service is provided.  Check orders and other deposit account related fees are largely transactional based, and therefore, the Company’s performance obligation is satisfied, and related revenue recognized, at a point in time.  Payment for service charges on deposit accounts is primarily received immediately or in the following month through a direct charge to customers’ accounts.

In January 2016, the FASB issued ASU 2016-01, “Financial Instruments – Overall (Subtopic 825-10) - Recognition and Measurement of Financial Assets and Financial Liabilities”.  ASU 2016-01 (i) amends existing guidance that requires equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income.  It requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes.  It requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (i.e., securities or loans and receivables).  It eliminates the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost.  These amendments are effective for public business entities for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years.  Adoption of this standard did not have a material impact on the Company’s consolidated financial statements.  In accordance with this standard, the Company measured the fair value of its loan portfolio as of March 31, 2018 using an exit price notion (see Note 7 Fair Value).

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

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

In February 2018, the FASB issued Accounting Standards Update (“ASU”) 2018-02, “Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (Topic 220)”, which allows an entity to elect a reclassification from accumulated other comprehensive income (AOCI) to retained earnings for the stranded tax effects resulting from the Tax Cuts and Jobs Act.  The amount of that reclassification should include the effect of changes of tax rate on the deferred tax amount, any related valuation allowance and other income tax effects on the items in AOCI.  The standard requires an entity to state if an election to reclassify the tax effect to retained earnings is made along with the description of other income tax effects that are reclassified from AOCI.  The guidance is effective for public business entities for annual periods beginning on or after December 15, 2018 and interim periods within those annual periods with early adoption permitted. The Company early adopted this amendment and has elected to reclassify $66 thousand from AOCI to retained earnings at December 31, 2017.

Recent Accounting Pronouncements

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)”, which is intended to increase transparency and comparability in the accounting for lease transactions.  Under ASU 2016-02, lessees will be required to recognize all leases longer than twelve months on the Consolidated Statements of Financial Condition as lease assets and lease liabilities and quantitative and qualitative disclosures regarding key information about leasing arrangements.  Under the new guidance, lessor accounting is largely unchanged.  These amendments are effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years.  Early adoption is permitted.  ASU 2016-02 will be effective for us on January 1, 2019 and will require transition using a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the consolidated financial statements.  Based on leases outstanding at December 31, 2017, the Company does not expect the standard to have a material impact on the Company’s Consolidated Statements of Income or Cash Flows, but does anticipate recording a liability for the remaining obligation under the lease agreements and a corresponding right-of-use asset in the Consolidated Statements of Financial Condition, which may have a minor impact on the Bank’s regulatory capital ratios.

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 (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 will result in an increase to the allowance for loan losses balance.

XML

Earnings Per Share of Common Stock

3 Months Ended

Mar. 31, 2018

Earnings Per Share of Common Stock

Earnings Per Share of Common Stock

NOTE (2) – Earnings Per Share of Common Stock

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

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

	For the three months ended March 31,
	2018		2017
	(In thousands, except share and per share)
Net (loss) income	$	(84)	$	1,232
Less net (loss) income attributable to participating securities	-		(2)
(Loss) income available to common stockholders	$	(84)	$	1,230
Weighted average common shares outstanding for basic earnings per common share	26,766,158		26,616,704
Add: dilutive effects of assumed exercises of stock options	-		-
Add: dilutive effects of unvested restricted stock awards	-		70,759
Weighted average common shares outstanding for diluted earnings per common share	26,766,158		26,687,463
(Loss) earnings per common share - basic	$	(0.00)	$	0.05
(Loss) earnings per common share - diluted	$	(0.00)	$	0.05

Unvested restricted stock award of 13,931 shares and stock options for 537,500 shares of common stock for the three months ended March 31, 2018 and stock options for 540,625 shares of common stock for the three months ended March 31, 2017 were not considered in computing diluted earnings per common share because they were anti-dilutive.

XML

Securities

3 Months Ended

Mar. 31, 2018

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):

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(In thousands)
March 31, 2018:
Federal agency mortgage-backed securities	$	11,357	$	118	$	(170)	$	11,305
Federal agency debt	5,498		-		(109)		5,389
Total available-for-sale securities	$	16,855	$	118	$	(279)	$	16,694
December 31, 2017:
Federal agency mortgage-backed securities	$	11,877	$	168	$	(37)	$	12,008
Federal agency debt	5,495		2		(11)		5,486
Total available-for-sale securities	$	17,372	$	170	$	(48)	$	17,494

At March 31, 2018, the Bank had three federal agency debt securities with total amortized cost of $5.5 million, estimated total fair value of $5.4 million and an estimated average remaining life of 4.1 years.  The Bank also had 26 federal agency mortgage-backed securities with total amortized cost of $11.4 million, estimated total fair value of $11.3 million and an estimated average remaining life of 4.7 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 March 31, 2018 and December 31, 2017, 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)
March 31, 2018:
Federal agency mortgage-backed securities	$	7,089	$	(140)	$	771	$	(30)	$	7,860	$	(170)
Federal agency debt	5,389		(109)		-		-		5,389		(109)
Total temporarily impaired	$	12,478	$	(249)	$	771	$	(30)	$	13,249	$	(279)
December 31, 2017:
Federal agency mortgage-backed securities	$	4,130	$	(20)	$	812	$	(17)	$	4,942	$	(37)
Federal agency debt	3,510		(11)		-				3,510		(11)
Total temporarily impaired	$	7,640	$	(31)	$	812	$	(17)	$	8,452	$	(48)

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 March 31, 2018 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.

There were no securities pledged to secure public deposits at March 31, 2018.  Securities pledged to secure public deposits had a carrying amount of $526 thousand at December 31, 2017.  At March 31, 2018 and December 31, 2017, 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 months ended March 31, 2018 and 2017.

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Loans Receivable Held for Sale

3 Months Ended

Mar. 31, 2018

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 March 31, 2018 and December 31, 2017 totaled $5.4 million and $22.4 million, respectively, and consisted of multi-family loans.  The Bank transferred $16.9 million of multi-family loans from the held-for-sale portfolio to the held-for-investment portfolio during the three months ended March 31, 2018.  There were no loan sales during the three months ended March 31, 2018.  Loan repayments totaled $71 thousand during the three months ended March 31, 2018.

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Loans Receivable Held for Investment

3 Months Ended

Mar. 31, 2018

Loans Receivable Held for Investment

Loans Receivable Held for Investment

Loans Receivable Held for Investment

NOTE (5) – Loans Receivable Held for Investment

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

	March 31, 2018		December 31, 2017
	(In thousands)
Real estate:
Single family	$	108,443	$	111,085
Multi-family	203,100		187,455
Commercial real estate	5,820		6,089
Church	30,210		30,848
Construction	1,097		1,678
Commercial – other	195		192
Consumer	4		7
Gross loans receivable before deferred loan costs and premiums	348,869		337,354
Unamortized net deferred loan costs and premiums	1,532		1,566
Gross loans receivable	350,401		338,920
Allowance for loan losses	(4,183)		(4,069)
Loans receivable, net	$	346,218	$	334,851

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

	Three Months Ended March 31, 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	(6)		208		(6)			(190)		(6)		-		-			-
Recoveries	-		-		-			114		-		-		-			114
Loans charged off	-		-		-			-		-		-		-			-
Ending balance	$	588	$	2,508	$	65		$	1,005	$	11	$	6	$	-		$	4,183
	Three Months Ended March 31, 2017
	Real Estate
	Single family		Multi- family		Commercial real estate			Church		Construction		Commercial - other		Consumer			Total
	(In thousands)
Beginning balance	$	367	$	2,659	$	215		$	1,337	$	8	$	17	$		-	$	4,603
Provision for (recapture of) loan losses	(37)		52		(140)			(226)		1		(1)		1			(350)
Recoveries	-		-		-			139		-		-		-			139
Loans charged off	-		-		-			-		-		-		-			-
Ending balance	$	330	$	2,711	$		75	$	1,250	$	9	$	16	$		1	$		4,392

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

	March 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	$	84	$	1	$	-	$	440	$	-	$	5	$	-	$	530
Collectively evaluated for impairment	504		2,507		65		565		11		1		-		3,653
Total ending allowance balance	$	588	$	2,508	$	65	$	1,005	$	11	$	6	$	-	$	4,183
Loans:
Loans individually evaluated for impairment	$	622	$	331	$	-	$	7,873	$	-	$	64	$	-	$	8,890
Loans collectively evaluated for impairment	108,248		204,162		5,826		22,048		1,092		131		4		341,511
Total ending loans balance	$	108,870	$	204,493	$	5,826	$	29,921	$	1,092	$	195	$	4	$	350,401

	December 31, 2017
	Real Estate
	Single family		Multi- family		Commercial real estate		Church		Construction		Commercial - other		Consumer		Total
	(In thousands)
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	100	$	1	$	-	$	479	$	-	$	5	$	-	$	585
Collectively evaluated for impairment	494		2,299		71		602		17		1		-		3,484
Total ending allowance balance	$	594	$	2,300	$	71	$	1,081	$	17	$	6	$	-	$	4,069
Loans:
Loans individually evaluated for impairment	$	627	$	333	$	-	$	8,280	$	-	$	65	$	-	$	9,305
Loans collectively evaluated for impairment	110,897		188,585		6,096		22,232		1,671		127		7		329,615
Total ending loans balance	$	111,524	$	188,918	$	6,096	$	30,512	$	1,671	$	192	$	7	$	338,920

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

	March 31, 2018						December 31, 2017
	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:
Church	$	4,947	$	3,207	$	-	$	5,140	$	3,291	$	-
With an allowance recorded:
Single family	622		622		84		627		627		100
Multi-family	331		331		1		333		333		1
Church	4,666		4,666		440		5,028		4,989		479
Commercial - other	64		64		5		65		65		5
Total	$	10,630	$	8,890	$	530	$	11,193	$	9,305	$	585

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 March 31, 2018						Three Months Ended March 31, 2017
	Average Recorded Investment			Cash Basis Interest Income Recognized			Average Recorded Investment			Cash Basis Interest Income Recognized
					(In thousands)
Single family		$	625		$	8		$	642		$	7
Multi-family		332			6			640			11
Commercial real estate		-			-			331			-
Church		7,981			174			10,471			227
Commercial – other		65			1			66			1
Total		$	9,003		$	189		$	12,150		$	246

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 $10 thousand and $46 thousand for the three months ended March 31, 2018 and 2017, 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:

	March 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	$	56	$	46	$	-	$	102	$	108,768	$	108,870
Multi-family	-		-		-		-		204,493		204,493
Commercial real estate	-		-		-		-		5,826		5,826
Church	-		-		-		-		29,921		29,921
Construction	-		-		-		-		1,092		1,092
Commercial - other	-		-		-		-		195		195
Consumer	-		-		-		-		4		4
Total	$	56	$	46	$	-	$	102	$	350,299	$	350,401
	December 31, 2017
	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	$	-	$	50	$	-	$	50	$	111,474	$	111,524
Multi-family	-		-		-		-		188,918		188,918
Commercial real estate	-		-		-		-		6,096		6,096
Church	341		-		-		341		30,171		30,512
Construction	-		-		-		-		1,671		1,671
Commercial - other	-		-		-		-		192		192
Consumer	-		-		-		-		7		7
Total	$	341	$	50	$	-	$	391	$	338,529	$	338,920

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

	March 31, 2018			December 31, 2017
	(In thousands)
Loans receivable held for investment:
Church		$	1,686		$	1,766
Total non-accrual loans		$	1,686		$	1,766

There were no loans 90 days or more delinquent that were accruing interest as of March 31, 2018 or December 31, 2017.

Troubled Debt Restructurings

At March 31, 2018, loans classified as troubled debt restructurings (“TDRs”) totaled $8.5 million, of which $1.3 million were included in non-accrual loans and $7.2 million were on accrual status.  At December 31, 2017, loans classified as TDRs totaled $8.9 million, of which $1.4 million were included in non-accrual loans and $7.5 million were on accrual status.  The Company has allocated $530 thousand and $585 thousand of specific reserves for accruing TDRs as of March 31, 2018 and December 31, 2017, 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 March 31, 2018 and December 31, 2017, the Company had no commitment to lend additional amounts to customers with outstanding loans that are classified as TDRs.  No loans were modified during the three months ended March 31, 2018 and 2017.

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:

	March 31, 2018
	Pass		Watch		Special Mention		Substandard		Doubtful		Loss
	(In thousands)
Single family	$	108,859	$	-	$	-	$	11	$	-	$	-
Multi-family	203,528		-		-		965		-		-
Commercial real estate	5,704		122		-		-		-		-
Church	23,985		686		-		5,250		-		-
Construction	1,092		-		-		-		-		-
Commercial - other	131		-		-		64		-		-
Consumer	4		-		-		-		-		-
Total	$	343,303	$	808	$	-	$	6,290	$	-	$	-
	December 31, 2017
	Pass		Watch		Special Mention		Substandard		Doubtful		Loss
	(In thousands)
Single family	$	111,513	$	-	$	-	$	11	$	-	$	-
Multi-family	187,946		-		-		972		-		-
Commercial real estate	5,974		122		-		-		-		-
Church	24,474		691		-		5,347		-		-
Construction	1,671		-		-		-		-		-
Commercial - other	127		-		-		65		-		-
Consumer	7		-		-		-		-		-
Total	$	331,712	$	813	$	-	$	6,395	$	-	$	-

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Junior Subordinated Debentures

3 Months Ended

Mar. 31, 2018

Junior Subordinated Debentures

Junior Subordinated Debentures

NOTE (6) – Junior Subordinated Debentures

On March 17, 2004, the Company issued $6.0 million of Floating Rate Junior Subordinated Debentures (the “Debentures”) in a private placement to a trust that was capitalized to purchase subordinated debt and preferred stock of multiple community banks.  Interest on the Debentures is payable quarterly at a rate per annum equal to the 3-Month LIBOR plus 2.54%.  The interest rate is determined as of each March 17, June 17, September 17, and December 17, and was 4.72% at March 31, 2018.  On October 16, 2014, the Company made payments of $900 thousand of principal on Debentures, executed a Supplemental Indenture for the Debentures that extended the maturity of the Debentures to March 17, 2024, and modified the payment terms of the remaining $5.1 million principal amount thereof.  The modified terms of the Debentures require quarterly payments of interest only through March 2019 at the original rate of 3-Month LIBOR plus 2.54%.  Starting in June 2019, the Company will be required to make quarterly payments of equal amounts of principal, plus interest, until the Debentures are fully amortized on March 17, 2024.  The Debentures may be called for redemption at any time by the Company.

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Fair Value

3 Months Ended

Mar. 31, 2018

Fair Value

Fair Value

NOTE (7) – Fair Value

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

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

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

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

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

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

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

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 Markets for Identical Assets(Level 1)		Significant Other Observable Inputs(Level 2)		Significant Unobservable Inputs(Level 3)		Total
	(In thousands)
At March 31, 2018:
Securities available-for-sale – federal agency mortgage-backed	$	-	$	11,305	$	-	$	11,305
Securities available-for-sale – federal agency debt	1,970		3,419		-		5,389
At December 31, 2017:
Securities available-for-sale – federal agency mortgage-backed	$	-	$	12,008	$	-	$	12,008
Securities available-for-sale – federal agency debt	1,976		3,510		-		5,486

There were no transfers between Level 1, Level 2, or Level 3 during the three months ended March 31, 2018 and 2017.

Assets Measured on a Non-Recurring Basis

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

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

	March 31, 2018		December 31, 2017
	(In thousands)
Impaired loans carried at fair value of collateral	$	702	$	742
Real estate owned		833		878

The following table provides information regarding losses recognized on assets measured at fair value on a non-recurring basis for the three months ended March 31, 2018 and 2017.

	Three Months Ended March 31,
	2018		2017
	(In thousands)
Impaired loans carried at fair value of collateral	$	-	$	-
Real estate owned		45		-
Total	$	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 March 31, 2018 and December 31, 2017:

	Valuation Technique(s)	Unobservable Input(s)	Range	Weighted Average
March 31, 2018:
Impaired loans	Third Party Appraisals	Adjustment for differences between the comparable sales	-16% to 7%	-3%
Real estate owned – church	Third Party Appraisals	Adjustment for differences between the comparable sales	-6%	-6%
December 31, 2017:
Impaired loans	Third Party Appraisals	Adjustment for differences between the comparable sales	-16% to 7%	-4%
Real estate owned – church	Third Party Appraisals	Adjustment for differences between the comparable sales	-6%	-6%

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 March 31, 2018 and December 31, 2017.  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 March 31, 2018
	Carrying Value		Level 1		Level 2		Level 3		Total
	(In thousands)
Financial Assets:
Loans receivable held for sale	$	5,428	$	-	$	5,449	$	-	$	5,449
Loans receivable held for investment	346,218		-		-		339,529		339,529
Financial Liabilities:
Time Deposits	$	163,816	$	-	$	162,699	$	-	$	162,699
Federal Home Loan Bank advances	65,000		-		64,546		-		64,546
Junior subordinated debentures	5,100		-		-		4,526		4,526

			Fair Value Measurements at December 31, 2017
	Carrying Value		Level 1		Level 2		Level 3		Total
	(In thousands)
Financial Assets:
Loans receivable held for sale	$	22,370	$	-	$	22,626	$	-	$	22,626
Loans receivable held for investment	334,851		-		-		333,231		333,231
Financial Liabilities:
Time Deposits	$	150,789	$	-	$	150,240	$	-	$	150,240
Federal Home Loan Bank advances	65,000		-		64,887		-		64,887
Junior subordinated debentures	5,100		-		-		4,503		4,503

In accordance with the prospective 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 March 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

3 Months Ended

Mar. 31, 2018

Stock-based Compensation

Stock-based Compensation

NOTE (8) – Stock-based Compensation

The Company issues stock-based compensation awards to its directors and employees under the 2008 Long-Term Incentive Plan (“2008 LTIP”).  The 2008 LTIP permits the grant of non-qualified and incentive stock options, stock appreciation rights, full value awards and cash incentive awards for up to 2,000,000 shares of common stock.  As of March 31, 2018, there were 1,293,109 shares available for future awards under the 2008 LTIP.

No stock options were granted during the three months ended March 31, 2018 and 2017.

The following table summarizes stock option activity during the three months ended March 31, 2018 and 2017:

	Three Months Ended March 31, 2018			Three Months Ended March 31, 2017
	Number Outstanding	Weighted Average Exercise Price		Number Outstanding	Weighted Average Exercise Price
Outstanding at beginning of period	537,500	$	2.19	540,625	$	2.18
Granted during period	-	-		-	-
Exercised during period	-	-		-	-
Forfeited or expired during period	-	-		-	-
Outstanding at end of period	537,500	$	2.19	540,625	$	2.18
Exercisable at end of period	267,500	$	2.71	180,625	$	3.29

The Company recorded $10 thousand of stock-based compensation expense related to stock options during the three months ended March 31, 2018 and 2017.  As of March 31, 2018, unrecognized compensation cost related to nonvested stock options granted under the plan was $113 thousand.  The cost is expected to be recognized over a period of 2.90 years.

Options outstanding and exercisable at March 31, 2018 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, 2009	7,500	0.81 years	$	4.00			7,500	$	4.00
March 18, 2009	75,000	0.96 years	$	4.98			75,000	$	4.98
January 21, 2010	5,000	1.81 years	$	6.00			5,000	$	6.00
February 24, 2016	450,000	7.90 years	$	1.62			180,000	$	1.62
	537,500	6.78 years	$	2.19	$	221,000	267,500	$	2.71	$	88,000

In March 2016, the Company awarded 120,483 shares of restricted stock to its Chief Executive Officer (“CEO”) under the 2008 LTIP.  A restricted stock award is valued at the closing price of the Company’s stock on the date of such award.  Subject to certain performance restrictions, 100,000 shares of restricted stock shall vest over a two-year period and the remaining 20,483 shares shall vest over a three-year period.  Stock-based compensation expense is recognized over the vesting period.  The Company recorded $26 thousand of stock-based compensation expense related to this award during the three months ended March 31, 2018 and 2017.  As of March 31, 2018, unrecognized compensation cost related to non-vested restricted stock award was $13 thousand, which is expected to be recognized over a period of 12 months.

In March 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 based on the fair value of the stock, which was determined using the average of the high and the low price of the stock on the date of the award.  In April 2017, the Company’s directors were awarded 30,002 shares of common stock, which were fully vested, and the Company recorded $53 thousand of compensation expense related to such award.

In February 2018, the Company awarded 97,195 of cash-settled restricted stock units (“RSUs”) to its CEO under the 2008 LTIP.  The Company also awarded 129,270 of cash-settled RSU to its CEO in April 2017.  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.  During the three months ended March 31, 2018, the Company recorded compensation expense related to these awards of $32 thousand.

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ESOP Plan

3 Months Ended

Mar. 31, 2018

ESOP Plan

ESOP Plan

NOTE (9) – ESOP Plan

Employees participate in an Employee Stock Option Plan (“ESOP”) after attaining certain age and service requirements.  In December 2016, the ESOP purchased 1,493,679 shares of the Company’s common stock at $1.59 per share, for a total cost of $2.4 million, of which $1.2 million was funded with a loan from the Company.  The loan will be repaid from the Bank’s annual discretionary contributions to the ESOP, net of dividends paid, over a period of 20 years.  Shares of the Company’s common stock purchased by the ESOP are held in a suspense account until released for allocation to participants.  When loan payments are made, shares are allocated to each eligible participant based on the ratio of each such participant’s compensation, as defined in the ESOP, to the total compensation of all eligible plan participants.  As the unearned shares are released from the suspense account, the Company recognizes compensation expense equal to the fair value of the ESOP shares during the periods in which they become committed to be released.  To the extent that the fair value of the ESOP shares released differs from the cost of such shares, the difference is charged or credited to equity as additional paid-in capital.  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 $25 thousand and $22 thousand for the three months ended March 31, 2018 and 2017, respectively.

Shares held by the ESOP were as follows:

	March  31, 2018		December 31, 2017
	(Dollars in thousands)
Allocated to participants	1,108,382		1,108,382
Committed to be released	21,504		10,752
Suspense shares	678,118		688,870
Total ESOP shares	1,808,004		1,808,004
Fair value of unearned shares	$	1,431	$	1,626

In September 2017, the Company received its first loan payment from the ESOP and 40,126 shares were released for allocation to participants.  The outstanding balance of unearned shares at March 31, 2018 and December 31, 2017, was $1.1 million, which is shown as Unearned ESOP shares in the equity section of the consolidated statements of financial condition.

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Regulatory Matters

3 Months Ended

Mar. 31, 2018

Regulatory Matters

Regulatory Matters

NOTE (10) – Regulatory Matters

The Bank’s capital requirements are administered by the Office of the Comptroller of the Currency (“OCC”) and involve quantitative measures of assets, liabilities, and certain off-balance sheet items calculated under regulatory accounting practices.  Capital amounts and classifications are also subject to qualitative judgments by the OCC.  Failure to meet capital requirements can result in regulatory action.

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

· 4.5% CET1 to risk-weighted assets;

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

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

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

A capital conservation buffer is also required to be maintained above the regulatory minimum capital requirements.  This capital conservation buffer is being phased in on a schedule that began on January 1, 2016 at 0.625% of risk-weighted assets and will increase each subsequent year by an additional 0.625% until it reaches its final level of 2.5% on January 1, 2019.

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

The Basel III Capital Rules became effective for the Bank on January 1, 2015 (subject to a phase-in period for certain provisions).  At March 31, 2018 and December 31, 2017, 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)
March 31, 2018:
Tier 1 (Leverage)	$	48,015	11.88%	$	16,165	4.0%	$	20,206	5.0%
Common Equity Tier 1	$	48,015	18.97%	$	11,389	4.5%	$	16,450	6.5%
Tier 1	$	48,015	18.97%	$	15,185	6.0%	$	20,246	8.0%
Total Capital	$	51,192	20.23%	$	20,246	8.0%	$	25,308	10.0%
December 31, 2017:
Tier 1 (Leverage)	$	47,838	11.39%	$	16,798	4.0%	$	20,997	5.0%
Common Equity Tier 1	$	47,838	18.63%	$	11,557	4.5%	$	16,693	6.5%
Tier 1	$	47,838	18.63%	$	15,409	6.0%	$	20,545	8.0%
Total Capital	$	51,059	19.88%	$	20,545	8.0%	$	25,681	10.0%

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Income Taxes

3 Months Ended

Mar. 31, 2018

Income Taxes

Income Taxes

NOTE (11) – Income Taxes

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

Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion, or all, of the deferred tax asset will not be realized.  In assessing the realization of deferred tax assets, management evaluated both positive and negative evidence, including the existence of cumulative losses in the current year and the prior two years, the amount of taxes paid in available carry-back years, the forecasts of future income and tax planning strategies.  Based on this analysis, the Company determined that as of March 31, 2018, no valuation allowance was required on its deferred tax assets, which totaled $5.1 million.  As of December 31, 2017, the Company recorded no valuation allowance on its deferred tax assets of $5.1 million.

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Concentration of Credit Risk

3 Months Ended

Mar. 31, 2018

Concentration of Credit Risk

Concentration of Credit Risk

NOTE (12) – Concentration of Credit Risk

The Bank has a significant concentration of deposits with a long-time customer that accounted for approximately 11% of its deposits as of March 31, 2018.  The Bank expects to maintain this relationship with the customer.

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Basis of Financial Statement Presentation (Policies)

3 Months Ended

Mar. 31, 2018

Basis of Financial Statement Presentation

Accounting Pronouncements

Accounting Pronouncement Adopted

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers (Topic 606)”.  ASU 2014-09 supersedes and replaces nearly all existing revenue recognition guidance, including industry-specific guidance, establishes a new control-based revenue recognition model, changes the basis for deciding when revenue is recognized over time or at a point in time, provides new and more detailed guidance on specific topics and expands and improves disclosures about revenue.  In addition, this amendment specifies the accounting for some costs to obtain or fulfill a contract with a customer.  These amendments are effective for public business entities for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period.  On January 1, 2018, the Company adopted ASU No. 2014-09 and all subsequent ASUs that modified Topic 606.  The adoption did not have a material impact on the measurement or recognition of revenue; as such, a modified retrospective cumulative effect adjustment to beginning retained earnings was not deemed necessary.  Results for reporting periods beginning after January 1, 2018 are presented under Topic 606, while prior period amounts were not adjusted and continue to be reported in accordance with our historic accounting under Topic 605.

Topic 606 does not apply to revenue associated with financial instruments, including revenue from loans and securities.  In addition, certain non-interest income streams such as fees associated with mortgage servicing rights, financial guarantees, derivatives, and certain credit card fees are also not in scope of the new guidance.  Topic 606 is applicable to non-interest revenue streams such as trust and asset management income, deposit related fees, interchange fees, merchant income, and annuity and insurance commissions.  The Company’s revenue streams that are within the scope of Topic 606 are primarily services charges on deposit accounts, which consist of monthly service fees, check orders, and other deposit account related fees.  The Company’s performance obligation for monthly service fees is generally satisfied, and the related revenue recognized, over the period in which the service is provided.  Check orders and other deposit account related fees are largely transactional based, and therefore, the Company’s performance obligation is satisfied, and related revenue recognized, at a point in time.  Payment for service charges on deposit accounts is primarily received immediately or in the following month through a direct charge to customers’ accounts.

In January 2016, the FASB issued ASU 2016-01, “Financial Instruments – Overall (Subtopic 825-10) - Recognition and Measurement of Financial Assets and Financial Liabilities”.  ASU 2016-01 (i) amends existing guidance that requires equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income.  It requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes.  It requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (i.e., securities or loans and receivables).  It eliminates the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost.  These amendments are effective for public business entities for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years.  Adoption of this standard did not have a material impact on the Company’s consolidated financial statements.  In accordance with this standard, the Company measured the fair value of its loan portfolio as of March 31, 2018 using an exit price notion (see Note 7 Fair Value).

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

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

In February 2018, the FASB issued Accounting Standards Update (“ASU”) 2018-02, “Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (Topic 220)”, which allows an entity to elect a reclassification from accumulated other comprehensive income (AOCI) to retained earnings for the stranded tax effects resulting from the Tax Cuts and Jobs Act.  The amount of that reclassification should include the effect of changes of tax rate on the deferred tax amount, any related valuation allowance and other income tax effects on the items in AOCI.  The standard requires an entity to state if an election to reclassify the tax effect to retained earnings is made along with the description of other income tax effects that are reclassified from AOCI.  The guidance is effective for public business entities for annual periods beginning on or after December 15, 2018 and interim periods within those annual periods with early adoption permitted. The Company early adopted this amendment and has elected to reclassify $66 thousand from AOCI to retained earnings at December 31, 2017.

Recent Accounting Pronouncements

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)”, which is intended to increase transparency and comparability in the accounting for lease transactions.  Under ASU 2016-02, lessees will be required to recognize all leases longer than twelve months on the Consolidated Statements of Financial Condition as lease assets and lease liabilities and quantitative and qualitative disclosures regarding key information about leasing arrangements.  Under the new guidance, lessor accounting is largely unchanged.  These amendments are effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years.  Early adoption is permitted.  ASU 2016-02 will be effective for us on January 1, 2019 and will require transition using a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the consolidated financial statements.  Based on leases outstanding at December 31, 2017, the Company does not expect the standard to have a material impact on the Company’s Consolidated Statements of Income or Cash Flows, but does anticipate recording a liability for the remaining obligation under the lease agreements and a corresponding right-of-use asset in the Consolidated Statements of Financial Condition, which may have a minor impact on the Bank’s regulatory capital ratios.

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 (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 will result in an increase to the allowance for loan losses balance.

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Earnings Per Share of Common Stock (Tables)

3 Months Ended

Mar. 31, 2018

Earnings Per Share of Common Stock

Schedule of basic and diluted earnings per share of common stock

	For the three months ended March 31,
	2018		2017
	(In thousands, except share and per share)
Net (loss) income	$	(84)	$	1,232
Less net (loss) income attributable to participating securities	-		(2)
(Loss) income available to common stockholders	$	(84)	$	1,230
Weighted average common shares outstanding for basic earnings per common share	26,766,158		26,616,704
Add: dilutive effects of assumed exercises of stock options	-		-
Add: dilutive effects of unvested restricted stock awards	-		70,759
Weighted average common shares outstanding for diluted earnings per common share	26,766,158		26,687,463
(Loss) earnings per common share - basic	$	(0.00)	$	0.05
(Loss) earnings per common share - diluted	$	(0.00)	$	0.05

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Securities (Tables)

3 Months Ended

Mar. 31, 2018

Securities

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

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(In thousands)
March 31, 2018:
Federal agency mortgage-backed securities	$	11,357	$	118	$	(170)	$	11,305
Federal agency debt	5,498		-		(109)		5,389
Total available-for-sale securities	$	16,855	$	118	$	(279)	$	16,694
December 31, 2017:
Federal agency mortgage-backed securities	$	11,877	$	168	$	(37)	$	12,008
Federal agency debt	5,495		2		(11)		5,486
Total available-for-sale securities	$	17,372	$	170	$	(48)	$	17,494

Summary of securities in unrealized loss positions

	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)
March 31, 2018:
Federal agency mortgage-backed securities	$	7,089	$	(140)	$	771	$	(30)	$	7,860	$	(170)
Federal agency debt	5,389		(109)		-		-		5,389		(109)
Total temporarily impaired	$	12,478	$	(249)	$	771	$	(30)	$	13,249	$	(279)
December 31, 2017:
Federal agency mortgage-backed securities	$	4,130	$	(20)	$	812	$	(17)	$	4,942	$	(37)
Federal agency debt	3,510		(11)		-				3,510		(11)
Total temporarily impaired	$	7,640	$	(31)	$	812	$	(17)	$	8,452	$	(48)

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Loans Receivable Held for Investment (Tables)

3 Months Ended

Mar. 31, 2018

Loans Receivable Held for Investment

Schedule of loans receivable held for investment

	March 31, 2018		December 31, 2017
	(In thousands)
Real estate:
Single family	$	108,443	$	111,085
Multi-family	203,100		187,455
Commercial real estate	5,820		6,089
Church	30,210		30,848
Construction	1,097		1,678
Commercial – other	195		192
Consumer	4		7
Gross loans receivable before deferred loan costs and premiums	348,869		337,354
Unamortized net deferred loan costs and premiums	1,532		1,566
Gross loans receivable	350,401		338,920
Allowance for loan losses	(4,183)		(4,069)
Loans receivable, net	$	346,218	$	334,851

Activity in the allowance for loan losses by loan type

	Three Months Ended March 31, 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	(6)		208		(6)			(190)		(6)		-		-			-
Recoveries	-		-		-			114		-		-		-			114
Loans charged off	-		-		-			-		-		-		-			-
Ending balance	$	588	$	2,508	$	65		$	1,005	$	11	$	6	$	-		$	4,183
	Three Months Ended March 31, 2017
	Real Estate
	Single family		Multi- family		Commercial real estate			Church		Construction		Commercial - other		Consumer			Total
	(In thousands)
Beginning balance	$	367	$	2,659	$	215		$	1,337	$	8	$	17	$		-	$	4,603
Provision for (recapture of) loan losses	(37)		52		(140)			(226)		1		(1)		1			(350)
Recoveries	-		-		-			139		-		-		-			139
Loans charged off	-		-		-			-		-		-		-			-
Ending balance	$	330	$	2,711	$		75	$	1,250	$	9	$	16	$		1	$		4,392

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

	March 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	$	84	$	1	$	-	$	440	$	-	$	5	$	-	$	530
Collectively evaluated for impairment	504		2,507		65		565		11		1		-		3,653
Total ending allowance balance	$	588	$	2,508	$	65	$	1,005	$	11	$	6	$	-	$	4,183
Loans:
Loans individually evaluated for impairment	$	622	$	331	$	-	$	7,873	$	-	$	64	$	-	$	8,890
Loans collectively evaluated for impairment	108,248		204,162		5,826		22,048		1,092		131		4		341,511
Total ending loans balance	$	108,870	$	204,493	$	5,826	$	29,921	$	1,092	$	195	$	4	$	350,401

	December 31, 2017
	Real Estate
	Single family		Multi- family		Commercial real estate		Church		Construction		Commercial - other		Consumer		Total
	(In thousands)
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	100	$	1	$	-	$	479	$	-	$	5	$	-	$	585
Collectively evaluated for impairment	494		2,299		71		602		17		1		-		3,484
Total ending allowance balance	$	594	$	2,300	$	71	$	1,081	$	17	$	6	$	-	$	4,069
Loans:
Loans individually evaluated for impairment	$	627	$	333	$	-	$	8,280	$	-	$	65	$	-	$	9,305
Loans collectively evaluated for impairment	110,897		188,585		6,096		22,232		1,671		127		7		329,615
Total ending loans balance	$	111,524	$	188,918	$	6,096	$	30,512	$	1,671	$	192	$	7	$	338,920

Loans individually evaluated for impairment by loan type

	March 31, 2018						December 31, 2017
	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:
Church	$	4,947	$	3,207	$	-	$	5,140	$	3,291	$	-
With an allowance recorded:
Single family	622		622		84		627		627		100
Multi-family	331		331		1		333		333		1
Church	4,666		4,666		440		5,028		4,989		479
Commercial - other	64		64		5		65		65		5
Total	$	10,630	$	8,890	$	530	$	11,193	$	9,305	$	585

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

	Three Months Ended March 31, 2018						Three Months Ended March 31, 2017
	Average Recorded Investment			Cash Basis Interest Income Recognized			Average Recorded Investment			Cash Basis Interest Income Recognized
					(In thousands)
Single family		$	625		$	8		$	642		$	7
Multi-family		332			6			640			11
Commercial real estate		-			-			331			-
Church		7,981			174			10,471			227
Commercial – other		65			1			66			1
Total		$	9,003		$	189		$	12,150		$	246

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

	March 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	$	56	$	46	$	-	$	102	$	108,768	$	108,870
Multi-family	-		-		-		-		204,493		204,493
Commercial real estate	-		-		-		-		5,826		5,826
Church	-		-		-		-		29,921		29,921
Construction	-		-		-		-		1,092		1,092
Commercial - other	-		-		-		-		195		195
Consumer	-		-		-		-		4		4
Total	$	56	$	46	$	-	$	102	$	350,299	$	350,401
	December 31, 2017
	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	$	-	$	50	$	-	$	50	$	111,474	$	111,524
Multi-family	-		-		-		-		188,918		188,918
Commercial real estate	-		-		-		-		6,096		6,096
Church	341		-		-		341		30,171		30,512
Construction	-		-		-		-		1,671		1,671
Commercial - other	-		-		-		-		192		192
Consumer	-		-		-		-		7		7
Total	$	341	$	50	$	-	$	391	$	338,529	$	338,920

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

	March 31, 2018			December 31, 2017
	(In thousands)
Loans receivable held for investment:
Church		$	1,686		$	1,766
Total non-accrual loans		$	1,686		$	1,766

Risk categories of loans by loan type

	March 31, 2018
	Pass		Watch		Special Mention		Substandard		Doubtful		Loss
	(In thousands)
Single family	$	108,859	$	-	$	-	$	11	$	-	$	-
Multi-family	203,528		-		-		965		-		-
Commercial real estate	5,704		122		-		-		-		-
Church	23,985		686		-		5,250		-		-
Construction	1,092		-		-		-		-		-
Commercial - other	131		-		-		64		-		-
Consumer	4		-		-		-		-		-
Total	$	343,303	$	808	$	-	$	6,290	$	-	$	-
	December 31, 2017
	Pass		Watch		Special Mention		Substandard		Doubtful		Loss
	(In thousands)
Single family	$	111,513	$	-	$	-	$	11	$	-	$	-
Multi-family	187,946		-		-		972		-		-
Commercial real estate	5,974		122		-		-		-		-
Church	24,474		691		-		5,347		-		-
Construction	1,671		-		-		-		-		-
Commercial - other	127		-		-		65		-		-
Consumer	7		-		-		-		-		-
Total	$	331,712	$	813	$	-	$	6,395	$	-	$	-

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Fair Value (Tables)

3 Months Ended

Mar. 31, 2018

Fair Value

Summary of assets measured at fair value on a recurring basis

	Fair Value Measurement
	Quoted Prices in Active Markets for Identical Assets(Level 1)		Significant Other Observable Inputs(Level 2)		Significant Unobservable Inputs(Level 3)		Total
	(In thousands)
At March 31, 2018:
Securities available-for-sale – federal agency mortgage-backed	$	-	$	11,305	$	-	$	11,305
Securities available-for-sale – federal agency debt	1,970		3,419		-		5,389
At December 31, 2017:
Securities available-for-sale – federal agency mortgage-backed	$	-	$	12,008	$	-	$	12,008
Securities available-for-sale – federal agency debt	1,976		3,510		-		5,486

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

	March 31, 2018		December 31, 2017
	(In thousands)
Impaired loans carried at fair value of collateral	$	702	$	742
Real estate owned		833		878

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

	Three Months Ended March 31,
	2018		2017
	(In thousands)
Impaired loans carried at fair value of collateral	$	-	$	-
Real estate owned		45		-
Total	$	45	$	-

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

	Valuation Technique(s)	Unobservable Input(s)	Range	Weighted Average
March 31, 2018:
Impaired loans	Third Party Appraisals	Adjustment for differences between the comparable sales	-16% to 7%	-3%
Real estate owned – church	Third Party Appraisals	Adjustment for differences between the comparable sales	-6%	-6%
December 31, 2017:
Impaired loans	Third Party Appraisals	Adjustment for differences between the comparable sales	-16% to 7%	-4%
Real estate owned – church	Third Party Appraisals	Adjustment for differences between the comparable sales	-6%	-6%

Schedule of carrying amount, fair values and placement in the fair value hierarchy of financial instruments

			Fair Value Measurements at March 31, 2018
	Carrying Value		Level 1		Level 2		Level 3		Total
	(In thousands)
Financial Assets:
Loans receivable held for sale	$	5,428	$	-	$	5,449	$	-	$	5,449
Loans receivable held for investment	346,218		-		-		339,529		339,529
Financial Liabilities:
Time Deposits	$	163,816	$	-	$	162,699	$	-	$	162,699
Federal Home Loan Bank advances	65,000		-		64,546		-		64,546
Junior subordinated debentures	5,100		-		-		4,526		4,526

			Fair Value Measurements at December 31, 2017
	Carrying Value		Level 1		Level 2		Level 3		Total
	(In thousands)
Financial Assets:
Loans receivable held for sale	$	22,370	$	-	$	22,626	$	-	$	22,626
Loans receivable held for investment	334,851		-		-		333,231		333,231
Financial Liabilities:
Time Deposits	$	150,789	$	-	$	150,240	$	-	$	150,240
Federal Home Loan Bank advances	65,000		-		64,887		-		64,887
Junior subordinated debentures	5,100		-		-		4,503		4,503

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Stock-based Compensation (Tables)

3 Months Ended

Mar. 31, 2018

Stock-based Compensation

Summary of stock option activity

	Three Months Ended March 31, 2018			Three Months Ended March 31, 2017
	Number Outstanding	Weighted Average Exercise Price		Number Outstanding	Weighted Average Exercise Price
Outstanding at beginning of period	537,500	$	2.19	540,625	$	2.18
Granted during period	-	-		-	-
Exercised during period	-	-		-	-
Forfeited or expired during period	-	-		-	-
Outstanding at end of period	537,500	$	2.19	540,625	$	2.18
Exercisable at end of period	267,500	$	2.71	180,625	$	3.29

Summary of options outstanding and exercisable

	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, 2009	7,500	0.81 years	$	4.00			7,500	$	4.00
March 18, 2009	75,000	0.96 years	$	4.98			75,000	$	4.98
January 21, 2010	5,000	1.81 years	$	6.00			5,000	$	6.00
February 24, 2016	450,000	7.90 years	$	1.62			180,000	$	1.62
	537,500	6.78 years	$	2.19	$	221,000	267,500	$	2.71	$	88,000

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ESOP Plan (Tables)

3 Months Ended

Mar. 31, 2018

ESOP Plan

Schedule of shares held by the ESOP

	March  31, 2018		December 31, 2017
	(Dollars in thousands)
Allocated to participants	1,108,382		1,108,382
Committed to be released	21,504		10,752
Suspense shares	678,118		688,870
Total ESOP shares	1,808,004		1,808,004
Fair value of unearned shares	$	1,431	$	1,626

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Regulatory Matters (Tables)

3 Months Ended

Mar. 31, 2018

Regulatory Matters

Schedule of actual and required capital amounts and ratios

	Actual			Minimum Capital Requirements			Minimum Required To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio	Amount		Ratio	Amount		Ratio
	(Dollars in thousands)
March 31, 2018:
Tier 1 (Leverage)	$	48,015	11.88%	$	16,165	4.0%	$	20,206	5.0%
Common Equity Tier 1	$	48,015	18.97%	$	11,389	4.5%	$	16,450	6.5%
Tier 1	$	48,015	18.97%	$	15,185	6.0%	$	20,246	8.0%
Total Capital	$	51,192	20.23%	$	20,246	8.0%	$	25,308	10.0%
December 31, 2017:
Tier 1 (Leverage)	$	47,838	11.39%	$	16,798	4.0%	$	20,997	5.0%
Common Equity Tier 1	$	47,838	18.63%	$	11,557	4.5%	$	16,693	6.5%
Tier 1	$	47,838	18.63%	$	15,409	6.0%	$	20,545	8.0%
Total Capital	$	51,059	19.88%	$	20,545	8.0%	$	25,681	10.0%

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Basis of Financial Statement Presentation - Accounting Pronouncement Adopted (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2017 USD ($)
ASU 2018-02
Reclassification from accumulated other comprehensive income to retained earnings	$ 66

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Earnings Per Share of Common Stock (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Basic and diluted earnings per share of common stock
Net (loss) income	$ (84)	$ 1,232
Less net (loss) income attributable to participating securities		(2)
(Loss) income available to common stockholders	$ (84)	$ 1,230
Weighted average common shares outstanding for basic earnings per common share	26,766,158	26,616,704
Add: dilutive effects of unvested restricted stock awards		70,759
Weighted average common shares outstanding for diluted earnings per common share	26,766,158	26,687,463
(Loss) earnings per common share - basic (in dollars per share)	$ 0.00	$ 0.05
(Loss) earnings per common share - diluted (in dollars per share)	$ 0.00	$ 0.05
Unvested restricted stock award
Earnings Per Share of Common Stock
Anti-dilutive stock not considered in computing diluted earnings per common share	13,931
Stock Options
Earnings Per Share of Common Stock
Anti-dilutive stock not considered in computing diluted earnings per common share	537,500	540,625

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Securities - Amortized Cost and Fair Value (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2018 USD ($) security	Dec. 31, 2017 USD ($)
Securities
Amortized Cost	$ 16,855	$ 17,372
Gross Unrealized Gains	118	170
Gross Unrealized Losses	(279)	(48)
Fair Value	16,694	17,494
Federal agency mortgage-backed securities
Securities
Amortized Cost	11,357	11,877
Gross Unrealized Gains	118	168
Gross Unrealized Losses	(170)	(37)
Fair Value	$ 11,305	12,008
Number of securities held | security	26
Estimated remaining term	4 years 8 months 12 days
Federal agency debt
Securities
Amortized Cost	$ 5,498	5,495
Gross Unrealized Gains		2
Gross Unrealized Losses	(109)	(11)
Fair Value	$ 5,389	$ 5,486
Number of securities held | security	3
Estimated remaining term	4 years 1 month 6 days

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Securities - Securities in Unrealized Loss Positions (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Estimated Fair Value
Less than 12 months	$ 12,478	$ 7,640
12 months or more	771	812
Total	13,249	8,452
Gross Unrealized Losses
Less than 12 months	(249)	(31)
12 months or more	(30)	(17)
Total	(279)	(48)
Federal agency mortgage-backed securities
Estimated Fair Value
Less than 12 months	7,089	4,130
12 months or more	771	812
Total	7,860	4,942
Gross Unrealized Losses
Less than 12 months	(140)	(20)
12 months or more	(30)	(17)
Total	(170)	(37)
Federal agency debt
Estimated Fair Value
Less than 12 months	5,389	3,510
Total	5,389	3,510
Gross Unrealized Losses
Less than 12 months	(109)	(11)
Total	$ (109)	$ (11)

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Securities - Additional Disclosures (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017	Dec. 31, 2017
Securities
Securities of any one issuer, other than U.S. Government, greater than 10% of stockholders' equity	$ 0		$ 0
Sales of securities	0	$ 0
Pledged Collateral
Securities
Securities pledged to secure public deposits	$ 0		$ 526

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Loans Receivable Held for Sale (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017	Dec. 31, 2017
Loans Receivable Held for Sale
Loans receivable held for sale	$ 5,428		$ 22,370
Transfers of loans receivable held for sale to loans receivable held for investment	16,871
Loan sales	0
Loan repayments	71	$ 89
Multi-family
Loans Receivable Held for Sale
Loans receivable held for sale	5,400		$ 22,400
Transfers of loans receivable held for sale to loans receivable held for investment	$ 16,900

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Loans Receivable Held for Investment - Summary (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017	Mar. 31, 2017	Dec. 31, 2016
Loans Receivable Held for Investment
Gross loans receivable before deferred loan costs and premiums	$ 348,869	$ 337,354
Unamortized net deferred loan costs and premiums	1,532	1,566
Gross loans receivable after deferred loan costs and premiums	350,401	338,920
Allowance for loan losses	(4,183)	(4,069)	$ (4,392)	$ (4,603)
Loans receivable, net	346,218	334,851
Single family
Loans Receivable Held for Investment
Gross loans receivable before deferred loan costs and premiums	108,443	111,085
Gross loans receivable after deferred loan costs and premiums	108,870	111,524
Allowance for loan losses	(588)	(594)	(330)	(367)
Multi-family
Loans Receivable Held for Investment
Gross loans receivable before deferred loan costs and premiums	203,100	187,455
Gross loans receivable after deferred loan costs and premiums	204,493	188,918
Allowance for loan losses	(2,508)	(2,300)	(2,711)	(2,659)
Commercial real estate
Loans Receivable Held for Investment
Gross loans receivable before deferred loan costs and premiums	5,820	6,089
Gross loans receivable after deferred loan costs and premiums	5,826	6,096
Allowance for loan losses	(65)	(71)	(75)	(215)
Church
Loans Receivable Held for Investment
Gross loans receivable before deferred loan costs and premiums	30,210	30,848
Gross loans receivable after deferred loan costs and premiums	29,921	30,512
Allowance for loan losses	(1,005)	(1,081)	(1,250)	(1,337)
Construction
Loans Receivable Held for Investment
Gross loans receivable before deferred loan costs and premiums	1,097	1,678
Gross loans receivable after deferred loan costs and premiums	1,092	1,671
Allowance for loan losses	(11)	(17)	(9)	(8)
Commercial - other
Loans Receivable Held for Investment
Gross loans receivable before deferred loan costs and premiums	195	192
Gross loans receivable after deferred loan costs and premiums	195	192
Allowance for loan losses	(6)	(6)	(16)	$ (17)
Consumer
Loans Receivable Held for Investment
Gross loans receivable before deferred loan costs and premiums	4	7
Gross loans receivable after deferred loan costs and premiums	$ 4	$ 7
Allowance for loan losses			$ (1)

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Loans Receivable Held for Investment - Activity in the Allowance for Loan Losses by Loan Type (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Allowance for loan losses:
Beginning balance	$ 4,069	$ 4,603
Provision for (recapture of) loan losses		(350)
Recoveries	114	139
Ending balance	4,183	4,392
Single family
Allowance for loan losses:
Beginning balance	594	367
Provision for (recapture of) loan losses	(6)	(37)
Ending balance	588	330
Multi-family
Allowance for loan losses:
Beginning balance	2,300	2,659
Provision for (recapture of) loan losses	208	52
Ending balance	2,508	2,711
Commercial real estate
Allowance for loan losses:
Beginning balance	71	215
Provision for (recapture of) loan losses	(6)	(140)
Ending balance	65	75
Church
Allowance for loan losses:
Beginning balance	1,081	1,337
Provision for (recapture of) loan losses	(190)	(226)
Recoveries	114	139
Ending balance	1,005	1,250
Construction
Allowance for loan losses:
Beginning balance	17	8
Provision for (recapture of) loan losses	(6)	1
Ending balance	11	9
Commercial - other
Allowance for loan losses:
Beginning balance	6	17
Provision for (recapture of) loan losses		(1)
Ending balance	$ 6	16
Consumer
Allowance for loan losses:
Provision for (recapture of) loan losses		1
Ending balance		$ 1

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Loans Receivable Held for Investment - Allowance for Loan Losses and Recorded Investment in Loans by Type of Loans and Based on Impairment Method (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017	Mar. 31, 2017	Dec. 31, 2016
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$ 530	$ 585
Collectively evaluated for impairment	3,653	3,484
Total ending allowance balance	4,183	4,069	$ 4,392	$ 4,603
Loans:
Loans individually evaluated for impairment	8,890	9,305
Loans collectively evaluated for impairment	341,511	329,615
Gross loans receivable after deferred loan costs and premiums	350,401	338,920
Single family
Ending allowance balance attributable to loans:
Individually evaluated for impairment	84	100
Collectively evaluated for impairment	504	494
Total ending allowance balance	588	594	330	367
Loans:
Loans individually evaluated for impairment	622	627
Loans collectively evaluated for impairment	108,248	110,897
Gross loans receivable after deferred loan costs and premiums	108,870	111,524
Multi-family
Ending allowance balance attributable to loans:
Individually evaluated for impairment	1	1
Collectively evaluated for impairment	2,507	2,299
Total ending allowance balance	2,508	2,300	2,711	2,659
Loans:
Loans individually evaluated for impairment	331	333
Loans collectively evaluated for impairment	204,162	188,585
Gross loans receivable after deferred loan costs and premiums	204,493	188,918
Commercial real estate
Ending allowance balance attributable to loans:
Collectively evaluated for impairment	65	71
Total ending allowance balance	65	71	75	215
Loans:
Loans collectively evaluated for impairment	5,826	6,096
Gross loans receivable after deferred loan costs and premiums	5,826	6,096
Church
Ending allowance balance attributable to loans:
Individually evaluated for impairment	440	479
Collectively evaluated for impairment	565	602
Total ending allowance balance	1,005	1,081	1,250	1,337
Loans:
Loans individually evaluated for impairment	7,873	8,280
Loans collectively evaluated for impairment	22,048	22,232
Gross loans receivable after deferred loan costs and premiums	29,921	30,512
Construction
Ending allowance balance attributable to loans:
Collectively evaluated for impairment	11	17
Total ending allowance balance	11	17	9	8
Loans:
Loans collectively evaluated for impairment	1,092	1,671
Gross loans receivable after deferred loan costs and premiums	1,092	1,671
Commercial - other
Ending allowance balance attributable to loans:
Individually evaluated for impairment	5	5
Collectively evaluated for impairment	1	1
Total ending allowance balance	6	6	16	$ 17
Loans:
Loans individually evaluated for impairment	64	65
Loans collectively evaluated for impairment	131	127
Gross loans receivable after deferred loan costs and premiums	195	192
Consumer
Ending allowance balance attributable to loans:
Total ending allowance balance			$ 1
Loans:
Loans collectively evaluated for impairment	4	7
Gross loans receivable after deferred loan costs and premiums	$ 4	$ 7

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Loans Receivable Held for Investment - Loans Individually Evaluated for Impairment by Loan Type (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Impaired loans
Unpaid Principal Balance	$ 10,630	$ 11,193
Recorded Investment	8,890	9,305
Allowance for Loan Losses Allocated, With an allowance recorded	530	585
Single family
Impaired loans
Unpaid Principal Balance, With an allowance recorded	622	627
Recorded Investment, With an allowance recorded	622	627
Allowance for Loan Losses Allocated, With an allowance recorded	84	100
Multi-family
Impaired loans
Unpaid Principal Balance, With an allowance recorded	331	333
Recorded Investment, With an allowance recorded	331	333
Allowance for Loan Losses Allocated, With an allowance recorded	1	1
Church
Impaired loans
Unpaid Principal Balance, With no related allowance recorded	4,947	5,140
Unpaid Principal Balance, With an allowance recorded	4,666	5,028
Recorded Investment, With no related allowance recorded	3,207	3,291
Recorded Investment, With an allowance recorded	4,666	4,989
Allowance for Loan Losses Allocated, With an allowance recorded	440	479
Commercial - other
Impaired loans
Unpaid Principal Balance, With an allowance recorded	64	65
Recorded Investment, With an allowance recorded	64	65
Allowance for Loan Losses Allocated, With an allowance recorded	$ 5	$ 5

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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
	Mar. 31, 2018	Mar. 31, 2017
Impaired loans
Average Recorded Investment	$ 9,003	$ 12,150
Cash Basis Interest Income Recognized	189	246
Foregone interest income if impaired loans had performed according to terms	10	46
Single family
Impaired loans
Average Recorded Investment	625	642
Cash Basis Interest Income Recognized	8	7
Multi-family
Impaired loans
Average Recorded Investment	332	640
Cash Basis Interest Income Recognized	6	11
Commercial real estate
Impaired loans
Average Recorded Investment		331
Church
Impaired loans
Average Recorded Investment	7,981	10,471
Cash Basis Interest Income Recognized	174	227
Commercial - other
Impaired loans
Average Recorded Investment	65	66
Cash Basis Interest Income Recognized	$ 1	$ 1

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Loans Receivable Held for Investment - Aging of Recorded Investment in Past Due Loans by Loan Type (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Past due receivable
Total Past Due	$ 102	$ 391
Current	350,299	338,529
Gross loans receivable after deferred loan costs and premiums	350,401	338,920
30-59 Days Past Due
Past due receivable
Total Past Due	56	341
60-89 Days Past Due
Past due receivable
Total Past Due	46	50
Single family
Past due receivable
Total Past Due	102	50
Current	108,768	111,474
Gross loans receivable after deferred loan costs and premiums	108,870	111,524
Single family | 30-59 Days Past Due
Past due receivable
Total Past Due	56
Single family | 60-89 Days Past Due
Past due receivable
Total Past Due	46	50
Multi-family
Past due receivable
Current	204,493	188,918
Gross loans receivable after deferred loan costs and premiums	204,493	188,918
Commercial real estate
Past due receivable
Current	5,826	6,096
Gross loans receivable after deferred loan costs and premiums	5,826	6,096
Church
Past due receivable
Total Past Due		341
Current	29,921	30,171
Gross loans receivable after deferred loan costs and premiums	29,921	30,512
Church | 30-59 Days Past Due
Past due receivable
Total Past Due		341
Construction
Past due receivable
Current	1,092	1,671
Gross loans receivable after deferred loan costs and premiums	1,092	1,671
Commercial - other
Past due receivable
Current	195	192
Gross loans receivable after deferred loan costs and premiums	195	192
Consumer
Past due receivable
Current	4	7
Gross loans receivable after deferred loan costs and premiums	$ 4	$ 7

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Loans Receivable Held for Investment - Recorded Investment in Non-accrual Loans by Loan Type (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Investment in non-accrual loans by type of loans
Total non-accrual loans	$ 1,686	$ 1,766
Loans 90 days or more delinquent that were accruing interest	0	0
Church
Investment in non-accrual loans by type of loans
Total non-accrual loans	$ 1,686	$ 1,766

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Loans Receivable Held for Investment - Troubled Debt Restructurings (Details) $ in Thousands	3 Months Ended		12 Months Ended
	Mar. 31, 2018 USD ($) loan	Mar. 31, 2017 loan	Dec. 31, 2017 USD ($)
Troubled debt restructuring
Loans classified as Troubled Debt Restructurings	$ 8,500		$ 8,900
Specific reserves allocated to TDRs	$ 530		$ 585
Timely payment period for return to accrual status	6 months		6 months
Commitments to lend additional amounts to customers with TDRs	$ 0		$ 0
Number of loans modified | loan	0	0
Non-accrual status
Troubled debt restructuring
Loans classified as Troubled Debt Restructurings	$ 1,300		1,400
Accrual status
Troubled debt restructuring
Loans classified as Troubled Debt Restructurings	$ 7,200		$ 7,500

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Loans Receivable Held for Investment - Risk Category of Loans by Loan Type (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Credit Quality Indicators
Loans receivable	$ 350,401	$ 338,920
Single family
Credit Quality Indicators
Loans receivable	108,870	111,524
Multi-family
Credit Quality Indicators
Loans receivable	204,493	188,918
Commercial real estate
Credit Quality Indicators
Loans receivable	5,826	6,096
Church
Credit Quality Indicators
Loans receivable	29,921	30,512
Construction
Credit Quality Indicators
Loans receivable	1,092	1,671
Commercial - other
Credit Quality Indicators
Loans receivable	195	192
Consumer
Credit Quality Indicators
Loans receivable	4	7
Pass
Credit Quality Indicators
Loans receivable	343,303	331,712
Pass | Single family
Credit Quality Indicators
Loans receivable	108,859	111,513
Pass | Multi-family
Credit Quality Indicators
Loans receivable	203,528	187,946
Pass | Commercial real estate
Credit Quality Indicators
Loans receivable	5,704	5,974
Pass | Church
Credit Quality Indicators
Loans receivable	23,985	24,474
Pass | Construction
Credit Quality Indicators
Loans receivable	1,092	1,671
Pass | Commercial - other
Credit Quality Indicators
Loans receivable	131	127
Pass | Consumer
Credit Quality Indicators
Loans receivable	4	7
Watch
Credit Quality Indicators
Loans receivable	808	813
Watch | Commercial real estate
Credit Quality Indicators
Loans receivable	122	122
Watch | Church
Credit Quality Indicators
Loans receivable	686	691
Substandard
Credit Quality Indicators
Loans receivable	6,290	6,395
Substandard | Single family
Credit Quality Indicators
Loans receivable	11	11
Substandard | Multi-family
Credit Quality Indicators
Loans receivable	965	972
Substandard | Church
Credit Quality Indicators
Loans receivable	5,250	5,347
Substandard | Commercial - other
Credit Quality Indicators
Loans receivable	$ 64	$ 65

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Junior Subordinated Debentures (Details) - USD ($) $ in Thousands		3 Months Ended
	Oct. 16, 2014	Mar. 31, 2018	Dec. 31, 2017	Mar. 17, 2004
Junior Subordinated Debentures
Junior subordinated debentures		$ 5,100	$ 5,100
Floating Rate Junior Subordinated Debentures
Junior Subordinated Debentures
Junior subordinated debentures	$ 5,100
Effective interest rate on debentures (as a percent)		4.72%
Payment of principal amount at face value required to extend maturity	$ 900
Floating Rate Junior Subordinated Debentures | 3-month LIBOR
Junior Subordinated Debentures
Debt instrument interest rate description		3-Month LIBOR
Basis spread (as a percent)		2.54%
Floating Rate Junior Subordinated Debentures | Private Placement
Junior Subordinated Debentures
Junior subordinated debentures				$ 6,000

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Fair Value - Assets Measured at Fair Value on a Recurring Basis (Details) - USD ($)	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017	Dec. 31, 2017
Fair Value
Transfer between level 1 and level 2	$ 0	$ 0
Transfer between level 2 and level 1	0	0
Transfer into level 3	0	0
Transfer out of level 3	0	$ 0
Recurring Basis | Federal agency mortgage-backed securities | Available-for-sale Securities
Fair Value
Securities available-for-sale, at fair value	11,305,000		$ 12,008,000
Recurring Basis | Federal agency debt | Available-for-sale Securities
Fair Value
Securities available-for-sale, at fair value	5,389,000		5,486,000
Recurring Basis | Quoted Prices in Active Markets for Identical Assets (Level 1) | Federal agency debt | Available-for-sale Securities
Fair Value
Securities available-for-sale, at fair value	1,970,000		1,976,000
Recurring Basis | Significant Other Observable Inputs (Level 2) | Federal agency mortgage-backed securities | Available-for-sale Securities
Fair Value
Securities available-for-sale, at fair value	11,305,000		12,008,000
Recurring Basis | Significant Other Observable Inputs (Level 2) | Federal agency debt | Available-for-sale Securities
Fair Value
Securities available-for-sale, at fair value	$ 3,419,000		$ 3,510,000

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Fair Value - Assets Measured at Fair Value on Non-recurring Basis (Details) - Non-Recurring Basis - Significant Unobservable Inputs (Level 3) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Dec. 31, 2017
Fair Value
Total losses recognized on assets measured at fair value on a non-recurring basis	$ 45
Impaired loans carried at fair value of collateral
Fair Value
Assets, fair value	702	$ 742
Real estate owned
Fair Value
Assets, fair value	833	$ 878
Total losses recognized on assets measured at fair value on a non-recurring basis	$ 45

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Fair Value - Valuation Methodology and Unobservable Inputs (Details) - Non-Recurring Basis - Significant Unobservable Inputs (Level 3) - Third Party Appraisals	3 Months Ended	12 Months Ended
	Mar. 31, 2018	Dec. 31, 2017
Impaired loans carried at fair value of collateral | Minimum
Fair value quantitative information
Adjustment for differences between the comparable sales (as a percent)	(16.00%)	(16.00%)
Impaired loans carried at fair value of collateral | Maximum
Fair value quantitative information
Adjustment for differences between the comparable sales (as a percent)	7.00%	7.00%
Impaired loans carried at fair value of collateral | Weighted Average
Fair value quantitative information
Adjustment for differences between the comparable sales (as a percent)	(3.00%)	(4.00%)
Real estate owned
Fair value quantitative information
Adjustment for differences between the comparable sales (as a percent)	(6.00%)	(6.00%)
Real estate owned | Weighted Average
Fair value quantitative information
Adjustment for differences between the comparable sales (as a percent)	(6.00%)	(6.00%)

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Fair Value - Fair Values of Financial Instruments (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Carrying Value
Financial Assets:
Loans receivable held for sale	$ 5,428	$ 22,370
Loans receivable held for investment	346,218	334,851
Financial Liabilities:
Time Deposits	163,816	150,789
Federal Home Loan Bank advances	65,000	65,000
Junior subordinated debentures	5,100	5,100
Fair Value
Financial Assets:
Loans receivable held for sale	5,449	22,626
Loans receivable held for investment	339,529	333,231
Financial Liabilities:
Time Deposits	162,699	150,240
Federal Home Loan Bank advances	64,546	64,887
Junior subordinated debentures	4,526	4,503
Significant Other Observable Inputs (Level 2) | Fair Value
Financial Assets:
Loans receivable held for sale	5,449	22,626
Financial Liabilities:
Time Deposits	162,699	150,240
Federal Home Loan Bank advances	64,546	64,887
Significant Unobservable Inputs (Level 3) | Fair Value
Financial Assets:
Loans receivable held for investment	339,529	333,231
Financial Liabilities:
Junior subordinated debentures	$ 4,526	$ 4,503

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Stock-based Compensation - Stock Option Activity (Details) - 2008 LTIP - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Stock-based compensation
Shares authorized to be granted under stock compensation plan	2,000,000
Shares available for future awards	1,293,109
Stock Options
Number Outstanding
Outstanding at beginning of period (in shares)	537,500	540,625
Granted during period (in shares)	0	0
Outstanding at end of period (in shares)	537,500	540,625
Exercisable at end of period (in shares)	267,500	180,625
Weighted Average Exercise Price
Outstanding at beginning of period (in dollars per share)	$ 2.19	$ 2.18
Outstanding at end of period (in dollars per share)	2.19	2.18
Exercisable at end of period (in dollars per share)	$ 2.71	$ 3.29
Additional disclosures
Stock based compensation expense	$ 10	$ 10
Unrecognized compensation cost, options	$ 113
Period for recognizing unrecognized compensation cost	2 years 10 months 24 days

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Stock-based Compensation - Options Outstanding and Exercisable (Details) - 2008 LTIP - USD ($)	1 Months Ended				3 Months Ended
	Mar. 31, 2018	Feb. 28, 2018	Apr. 30, 2017	Mar. 31, 2016	Mar. 31, 2018	Mar. 31, 2017	Dec. 31, 2017	Dec. 31, 2016
Common Stock | Directors
Additional disclosures
Shares issued for services	18,906		30,002
Stock based compensation expense related to shares issued for services	$ 45,000		$ 53,000
Stock Options
Outstanding
Number Outstanding	537,500				537,500	540,625	537,500	540,625
Weighted Average Remaining Contractual Life					6 years 9 months 11 days
Weighted Average Exercise Price	$ 2.19				$ 2.19	$ 2.18	$ 2.19	$ 2.18
Aggregate Intrinsic Value	$ 221,000				$ 221,000
Exercisable
Number Outstanding (Exercisable)	267,500				267,500	180,625
Weighted Average Exercise Price (Exercisable)	$ 2.71				$ 2.71	$ 3.29
Aggregate Intrinsic Value (Exercisable)	$ 88,000				$ 88,000
Additional disclosures
Stock based compensation expense					$ 10,000	$ 10,000
Period for recognizing unrecognized compensation cost					2 years 10 months 24 days
Stock Options | January 21, 2009
Outstanding
Number Outstanding	7,500				7,500
Weighted Average Remaining Contractual Life					9 months 22 days
Weighted Average Exercise Price	$ 4.00				$ 4.00
Exercisable
Number Outstanding (Exercisable)	7,500				7,500
Weighted Average Exercise Price (Exercisable)	$ 4.00				$ 4.00
Stock Options | March 18, 2009
Outstanding
Number Outstanding	75,000				75,000
Weighted Average Remaining Contractual Life					11 months 16 days
Weighted Average Exercise Price	$ 4.98				$ 4.98
Exercisable
Number Outstanding (Exercisable)	75,000				75,000
Weighted Average Exercise Price (Exercisable)	$ 4.98				$ 4.98
Stock Options | January 21, 2010
Outstanding
Number Outstanding	5,000				5,000
Weighted Average Remaining Contractual Life					1 year 9 months 22 days
Weighted Average Exercise Price	$ 6.00				$ 6.00
Exercisable
Number Outstanding (Exercisable)	5,000				5,000
Weighted Average Exercise Price (Exercisable)	$ 6.00				$ 6.00
Stock Options | February 24, 2016
Outstanding
Number Outstanding	450,000				450,000
Weighted Average Remaining Contractual Life					7 years 10 months 24 days
Weighted Average Exercise Price	$ 1.62				$ 1.62
Exercisable
Number Outstanding (Exercisable)	180,000				180,000
Weighted Average Exercise Price (Exercisable)	$ 1.62				$ 1.62
Restricted stock | Chief Executive Officer
Additional disclosures
Restricted stock award (in shares)				120,483
Stock based compensation expense					$ 26,000	$ 26,000
Unrecognized compensation cost, restricted stock	$ 13,000				$ 13,000
Period for recognizing unrecognized compensation cost					12 months
Restricted stock | Two-year period | Chief Executive Officer
Additional disclosures
Restricted stock award (in shares)				100,000
Vesting period of stock award				2 years
Restricted stock | Three-year period | Chief Executive Officer
Additional disclosures
Restricted stock award (in shares)				20,483
Vesting period of stock award				3 years
Cash-settled restricted stock units | Chief Executive Officer
Additional disclosures
Restricted stock award (in shares)		97,195	129,270
Vesting period of stock award			2 years
Stock based compensation expense					$ 32,000

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ESOP Plan (Details) - USD ($) $ / shares in Units, $ in Thousands	1 Months Ended		3 Months Ended
	Sep. 30, 2017	Dec. 31, 2016	Mar. 31, 2018	Mar. 31, 2017	Dec. 31, 2017
ESOP Plan
Number of common stock purchased by ESOP (in shares)		1,493,679
Purchase price of common stock		$ 1.59
Total cost of shares purchased by ESOP		$ 2,400
Loan to ESOP		$ 1,200
Term of ESOP loan (in years)		20 years
Compensation expense			$ 25	$ 22
Summary of shares held by the ESOP
Allocated to participants			1,108,382		1,108,382
Committed to be released			21,504		10,752
Suspense shares			678,118		688,870
Total ESOP shares			1,808,004		1,808,004
Fair value of unearned shares			$ 1,431		$ 1,626
Shares released for allocation	40,126
Unearned ESOP shares			$ 1,078		$ 1,095

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Regulatory Matters (Details)	Mar. 31, 2018	Dec. 31, 2017
Capital and 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
Capital and Regulatory Matters
Capital conservation buffer annual increase (as a percent)	0.625%
Conservation Buffer Rule Subsequent to 2016
Capital and Regulatory Matters
Capital conservation buffer annual increase (as a percent)	0.625%
Maximum | Conservation Buffer Rule
Capital and 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	Mar. 31, 2018	Dec. 31, 2017
Regulatory Matters
Tier-1 Leverage	$ 48,015	$ 47,838
Tier 1 Leverage, ratio (as a percent)	11.88%	11.39%
Common Equity Tier 1	$ 48,015	$ 47,838
Common Equity Tier 1, ratio (as a percent)	18.97%	18.63%
Tier 1	$ 48,015	$ 47,838
Tier 1, ratio (as a percent)	18.97%	18.63%
Total Capital	$ 51,192	$ 51,059
Total Capital, ratio (as a percent)	20.23%	19.88%
Leverage required for capital adequacy purposes	$ 16,165	$ 16,798
Leverage required for capital adequacy purposes, ratio (as a percent)	4.00%	4.00%
Common Equity Tier 1 required for capital adequacy purposes	$ 11,389	$ 11,557
Common Equity Tier 1 required for capital adequacy purposes, ratio (as a percent)	4.50%	4.50%
Tier 1 required for capital adequacy purposes	$ 15,185	$ 15,409
Tier 1 required for capital adequacy purposes, ratio (as a percent)	6.00%	6.00%
Total capital required for capital adequacy purposes	$ 20,246	$ 20,545
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) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Basel III and Dodd Frank Rules
Tier 1 Leverage required to be Well Capitalized	$ 20,206	$ 20,997
Tier 1 Leverage required to be Well Capitalized (as a percent)	5.00%	5.00%
Common Equity Tier I required to be Well Capitalized	$ 16,450	$ 16,693
Common Equity Tier I required to be Well Capitalized (as a percent)	6.50%	6.50%
Tier I Capital required to be Well Capitalized	$ 20,246	$ 20,545
Tier I Capital required to be Well Capitalized (as a percent)	8.00%	8.00%
Total Capital required to be Well Capitalized	$ 25,308	$ 25,681
Total Capital required to be Well Capitalized (as a percent)	10.00%	10.00%

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Income Taxes (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2018	Dec. 31, 2017
Income Taxes
Period for which prior cumulative losses considered in assessing the realization of deferred tax assets	2 years
Valuation allowance	$ 0.0	$ 0.0
Net deferred tax assets	$ 5.1	$ 5.1

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Concentration of Credit Risk (Details)	3 Months Ended
	Mar. 31, 2018
Long-time Customer | Deposits
Concentration of Credit Risk
Percentage of concentration of risk	11.00%