UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-K

(Mark one)

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2010

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

Commission file number 0-27464

BROADWAY FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	95-4547287
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
4800 Wilshire Boulevard, Los Angeles, California	90010
(Address of principal executive offices)	(Zip Code)

(323) 634-1700

(Registrant’s Telephone Number, Including Area Code)

Securities registered under Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
Common Stock, par value $0.01 per share	The NASDAQ Stock Market, LLC
(including attached preferred stock purchase rights)

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes  ¨    No   x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes  ¨    No   x

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

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x

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

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter: $2,684,000

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date: As of March 31, 2011, 1,743,965 shares of the Registrant’s common stock were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

TABLE OF CONTENTS

PART I
Item 1.     Business	1
Item 2.     Properties	26
Item 3.     Legal Proceedings	26
Item 4.     Removed and Reserved	28
PART II
Item 5.      Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	29
Item 7.      Management’s Discussion and Analysis of Financial Condition and Results of Operations	31
Item 8.     Financial Statements and Supplementary Data	41
Item 9.      Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	41
Item 9A.  Controls and Procedures	41
Item 9B.  Other Information	42
PART III
Item 10.  Directors, Executive Officers and Corporate Governance	43
Item 11.  Executive Compensation	46
Item 12.   Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	48
Item 13.  Certain Relationships and Related Transactions, and Director Independence	49
Item 14.  Principal Accountant Fees and Services	50
PART IV
Item 15.  Exhibits and Financial Statement Schedules	50
Signatures	53

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Forward-Looking Statements

Certain statements herein, including without limitation, matters discussed under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of this Form 10-K, are forward-looking statements, within the meaning of Section 21E of the Securities Exchange Act of 1934 and Section 27A of the Securities Act of 1933, 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, including those identified below, 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-K. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

The following factors, among others, could cause future results to differ materially from historical results or from those anticipated by forward-looking statements included in this Form 10-K: (1) the level of demand for mortgage loans, which is affected by such external factors as general economic conditions, interest rate levels, tax laws, and the demographics of our lending markets; (2) the direction and magnitude of changes in interest rates and the relationship between market interest rates and the yield on our interest-earning assets and the cost of our interest-bearing liabilities; (3) the rate of loan losses incurred and projected to be incurred by us, the level of our loss reserves and management’s judgments regarding the collectability of loans; (4) changes in the regulation of lending and deposit operations or other regulatory actions, whether industry wide or focused on our operations, including increases in capital requirements or directives to increase loan loss allowances; (5) actions undertaken by both current and potential new competitors; (6) the possibility of continuing adverse trends in property values or economic trends in the residential and commercial real estate markets in which we compete; (7) the effect of changes in economic conditions; (8) the effect of geopolitical uncertainties; and (9) other risks and uncertainties detailed in this Form 10-K, including those described in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

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PART I

ITEM 1. BUSINESS

General

Broadway Financial Corporation (the “Company”) was incorporated under Delaware law in 1995 for the purpose of acquiring and holding all of the outstanding capital stock of Broadway Federal Savings and Loan Association (“Broadway Federal” or the “Bank”) as part of the Bank’s conversion from a federally chartered mutual savings association to a federally chartered stock savings bank. In connection with the conversion, the Bank’s name was changed to Broadway Federal Bank, f.s.b. The conversion was completed, and the Bank became a wholly owned subsidiary of the Company, in January 1996.

We are headquartered in Los Angeles, California and our principal business is the operation of our wholly-owned subsidiary, Broadway Federal. Broadway Federal’s principal business consists of attracting retail deposits from the general public in the areas surrounding our branch offices and investing those deposits, together with funds generated from operations and borrowings, primarily in multi-family mortgage loans, commercial real estate loans and one to four-family mortgage loans. In addition, we invest in securities issued by the federal government and federal agencies, residential mortgage-backed securities and other investments.

Our primary sources of revenue are interest income we earn on our loans and securities. Our principal expenses are interest expense we incur on our interest-bearing liabilities, including deposits and borrowings, together with general and administrative expenses. Our earnings are significantly affected by general economic and competitive conditions, particularly changes in market interest rates and U.S. Treasury yield curves, government policies and actions of regulatory authorities.

The Bank is currently regulated by the Office of Thrift Supervision (“OTS”) and the Federal Deposit Insurance Corporation (“FDIC”). The Bank’s deposits are insured up to applicable limits by the Deposit Insurance Fund (“DIF”) of the FDIC. The Bank is also a member of the Federal Home Loan Bank (“FHLB”) of San Francisco. See “Regulation” for further descriptions of the existing regulatory system and of pending changes to that system.

Lending Activities

General

Our loan portfolio is comprised primarily of mortgage loans which are secured by multi-family properties, commercial real estate, including churches, and one to four-family properties. The remainder of the loan portfolio consists of commercial business loans, construction loans and consumer and other loans. At December 31, 2010, our net loan portfolio totaled $382.6 million, or 79% of total assets.

We emphasize the origination of adjustable-rate loans (“ARMs”) and hybrid ARM loans (ARM loans having an initial fixed rate period) primarily for retention in our portfolio. We retain these loans in order to increase the percentage of our loans that have more frequent repricing, thereby reducing our exposure to interest rate risk. At December 31, 2010, approximately 96% of our mortgage loans had adjustable rates. To a lesser extent, we also originate fixed rate mortgage loans to meet customer demand but we sell the majority of these loans in the secondary market, primarily to other financial institutions. The decision as to whether the loans will be retained in our portfolio or sold is generally made at the time of loan origination or purchase. At December 31, 2010, we had 38 loans totaling $29.4 million held for sale.

The types of loans that we originate are subject to federal laws and regulations. The interest rates that we charge on loans are affected by the demand for such loans, the supply of money available for lending purposes and the rates offered by competitors. These factors are in turn affected by, among other things, economic

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conditions, monetary policies of the federal government, including the Federal Reserve Board, and legislative tax policies. Federal savings associations and savings banks are not subject to usury or other interest rate limitations.

The following table sets forth the composition of our loan portfolio in dollar amounts and as a percentage of the total loan portfolio (including loans held for investment and loans held for sale) by loan type at the dates indicated.

	December 31,
	2010						2009						2008						2007					2006
	Amount			Percent of total			Amount			Percent of total			Amount			Percent of total			Amount		Percent of total			Amount		Percent of total
	(Dollars in thousands)
One to four-units	$	82,764			20.56	%	$	90,747			20.03	%	$	68,478			20.25	%	$	35,313		11.59	%	$	25,233		10.08	%
Five or more units		128,534			31.92	%		146,291			32.28	%		87,679			25.93	%		113,395		37.21	%		131,305		52.42	%
Commercial real estate		72,770			18.08	%		82,276			18.16	%		66,861			19.77	%		59,797		19.62	%		60,401		24.11	%
Church		97,634			24.25	%		101,007			22.29	%		84,041			24.85	%		70,793		23.23	%		17,671		7.06	%
Construction		5,421			1.35	%		5,547			1.22	%		5,505			1.63	%		2,033		0.67	%		2,090		0.83	%
Commercial		12,178			3.02	%		23,166			5.11	%		22,357			6.61	%		22,630		7.43	%		12,247		4.89	%
Consumer		3,288			0.82	%		4,110			0.91	%		3,246			0.96	%		784		0.25	%		1,530		0.61	%
Gross loans		402,589			100.00	%		453,144			100.00	%		338,167			100.00	%		304,745		100.00	%		250,477		100.00	%
Plus: Premiums on loans purchased		-						-						2						4					12
Less:
Loans in process		371						822						1,499						2,356					872
Deferred loan fees (costs), net		(889	)					(817	)					(213	)					258					162
Unamortized discounts		33						39						51						60					68
Allowance for loan losses		20,458						20,460						3,559						2,051					1,730
Total loans held for investment	$	382,616					$	432,640					$	333,273					$	300,024				$	247,657
Loans held for sale	$	29,411					$	20,940					$	24,576					$	3,554				$	-

Multi-Family and Commercial Real Estate Lending

Our primary lending emphasis has been on the origination of multi-family and commercial real estate loans, including loans secured by church properties. These loans are secured primarily by multi-family dwellings or by properties used for business or religious purposes, such as small office buildings, health care facilities and retail facilities located in our primary market area and church buildings located in various communities throughout the United States. We suspended our lending to churches in 2010 as further described below.

Our multi-family loans amounted to $128.5 million and $146.3 million at December 31, 2010 and 2009, respectively. At December 31, 2010 and 2009, multi-family loans represented 32% of our gross loan portfolio. All of the multi-family residential mortgage loans outstanding at December 31, 2010 were ARMs. The vast majority of our multi-family loans amortize over and mature in 30 years. As of December 31, 2010, our single largest multi-family credit had an outstanding balance of $3.2 million, was current and was secured by a 38-unit apartment complex in Montebello, California. At December 31, 2010, the average balance of loans in our multi-family portfolio was approximately $370 thousand. Our ten largest multi-family loans at December 31, 2010, aggregated $18.0 million.

Our commercial real estate loans amounted to $170.4 million and $183.3 million at December 31, 2010 and 2009, respectively. At December 31, 2010, commercial real estate lending represented 42% of our gross loan portfolio, compared to 40% at December 31, 2009. Of the commercial real estate loans outstanding at

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December 31, 2010, 4% were fixed rate loans and 96% were ARMs. Most commercial real estate loans are originated with principal repayments on a 30 year amortization schedule but are due in 15 years. As of December 31, 2010, our single largest commercial real estate credit had an outstanding principal balance of $3.8 million, was current and was secured by a church building located in Los Angeles, California. At December 31, 2010, the average balance of loans in our commercial real estate portfolio was approximately $598 thousand. Our ten largest commercial real estate loans at December 31, 2010, aggregated $29.5 million.

The interest rates on multi-family and commercial ARM loans are based on a variety of indices, including the 6-Month London InterBank Offered Rate Index (“6-Month LIBOR”), the 1-Year Constant Maturity Treasury Index (“1-Yr CMT”), the 12-Month Treasury Average Index (“12-MTA”), the 11th District Cost of Funds Index (“COFI”), and the Wall Street Journal Prime Rate (“Prime Rate”). We currently offer loans with interest rates that adjust monthly, semi-annually, and annually. Borrowers are required to make monthly payments under the terms of such loans.

Loan secured by multi-family and commercial real properties are granted based on the income producing potential of the property and the financial strength of the borrower. The primary factors considered include, among other things, the net operating income of the mortgaged premises before debt service and depreciation, the debt service coverage ratio (the ratio of net operating income to required principal and interest payments, or debt service), and the ratio of the loan amount to the lower of the selling price or the appraised value.

We seek to mitigate the risks associated with multi-family and commercial real estate loans described below by applying appropriate underwriting requirements, which include limitations on loan-to-value ratios and debt service coverage ratios. Under our underwriting policies, loan-to-value ratios on our multi-family and commercial real estate loans usually do not exceed 75% of the lower of the selling price or the appraised value of the underlying property. We also generally require minimum debt service ratios of 115% for multi-family loans and 125% for commercial real estate loans. Properties securing multi-family and commercial real estate loans are appraised by a management-approved independent appraiser and title insurance is required on all loans.

Multi-family and commercial real estate loans are generally viewed as exposing the lender to a greater risk of loss than single-family residential loans and typically involve higher loan principal amounts than loans secured by single-family residential real estate. Because payments on loans secured by multi-family and commercial real properties are often dependent on the successful operation or management of the properties, repayment of such loans may be subject to adverse conditions in the real estate market or general economy, such as we are experiencing with the current economic downturn. Continued adverse economic conditions in our primary lending market area could result in reduced cash flows on multi-family and commercial real estate loans, vacancies and reduced rental rates on such properties. We seek to reduce these risks by originating such loans on a selective basis and generally restrict such loans to our general market area. In 2008, we ceased out-of-state lending for all types of lending.

Originating loans secured by church properties is a market niche in which we have been active since our inception. We believe that the importance of church organizations in the social and economic structure of the communities we serve makes church lending an important aspect of our community orientation. We further believe that the importance of churches in the lives of the individual members of the respective congregations encourages donations even in difficult economic times, thereby providing somewhat greater assurance of financial resources to repay such church loans compared to other types of commercial properties. Nonetheless, adverse economic conditions can result in risks to loan repayment that are similar to those encountered in other types of commercial lending, and such church lending is subject to other risks not necessarily directly related to economic factors such as the stability, quality and popularity of church leadership. Because of these factors, we do not believe the current real estate market and economic environment support pursuing the origination of additional church loans. Additionally, the cease and desist order issued to Broadway Federal by the OTS, described below under the caption “—Regulation”, restricts us from originating church loans. As a result, we

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have suspended the origination of church loans. We intend to resume church lending when economic conditions improve and regulatory limitations are removed. Church loans included in our commercial real estate portfolio totaled $97.6 million and $101.0 million at December 31, 2010 and 2009, respectively.

The underwriting standards for loans secured by church properties are different than for other commercial real estate properties in that the ratios used in evaluating the loans are based upon the level and history of church member contributions as a repayment source rather than income generated by rents or leases.

One to Four-Family Mortgage Lending

While we are primarily a multi-family and commercial real estate lender, we also originate ARMs and fixed rate loans secured by one to four-family (“single-family”) residences, with maturities of up to 30 years. Substantially all of our single-family loans are secured by properties located in Southern California, with most being in our primary market areas of Mid-City and South Los Angeles. Loan originations are generally obtained from our loan representatives or third party brokers, existing or past customers, and referrals from members of churches or other organizations in the local communities where we operate. Single-family loans totaled $82.8 million and $90.7 million at December 31, 2010 and 2009, respectively. Single-family loans represented 21% of our gross loan portfolio at December 31, 2010, compared to 20% at December 31, 2009. Of the single-family residential mortgage loans outstanding at December 31, 2010, 3% were fixed rate loans and 97% were ARMs.

The interest rates for our single-family ARMs are indexed to COFI, 6-Month LIBOR, 12-MTA and 1-Yr. CMT. We currently offer loans with interest rates that adjust monthly, semi-annually, and annually. Borrowers are required to make monthly payments under the terms of such loans.

We qualify our ARM borrowers based upon the fully indexed interest rate (LIBOR or other index plus an applicable margin, rounded to the nearest one-eighth of 1%) provided by the terms of the loan. However, the initial rate paid by the borrower may be discounted to a rate we determine to adjust for market and other competitive factors. The ARMs that we offer have a lifetime adjustment limit that is set at the time the loan is approved. In addition, because of interest rate caps and floors, market rates may exceed or go below the respective maximum or minimum rates payable on our ARMs.

Our policy is to originate one to four-family residential mortgage loans in amounts of up to 90% of the lower of the appraised value or the selling price of the property securing the loan. Any loan in excess of 80% of the appraised value or selling price of the property securing the loan generally requires private mortgage insurance or the Bank charges a higher interest rate to cover the additional risk associated with making a loan with a loan to value ratio higher than 80%. Under certain circumstances, we may originate loans of up to 97% of the selling price if private mortgage insurance is obtained. We may originate loans based on other parameters for loans that are originated for committed sales to other investors. Properties securing a single-family loan are appraised by an approved independent appraiser and title insurance is required on all such loans.

Mortgage loans that we originate generally include due-on-sale clauses, which provide us with the contractual right to declare the loan immediately due and payable in the event the borrower transfers ownership of the property. Due-on-sale clauses are an important means of adjusting the rates on our fixed rate mortgage loan portfolio.

Commercial Lending

We originate and purchase non-real estate commercial loans that are secured by business assets, the franchise value of the business, if applicable, and individual assets such as deposit accounts, securities and automobiles. Most of these loans are originated with maturities of up to 5 years. Commercial loans amounted to $12.2 million and $23.2 million at December 31, 2010 and 2009, respectively. At December 31, 2010,

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commercial loans represented 3% of our gross loan portfolio, compared to 5% at December 31, 2009. Of the commercial loans outstanding at December 31, 2010, 8% were fixed rate loans and 92% were ARMs. As of December 31, 2010, our single largest commercial credit had a total outstanding principal balance of $3.7 million.

In 2007, management and the Board of Directors decided to terminate the Bank’s prior strategy of lending to sports franchises and reduced its participation in nationally syndicated corporate loan facilities in order to focus on financing opportunities within our market area. The Board of Directors approved a sports finance policy that restricts lending to national professional sports franchises. Sports loans are generally perceived to be risky due to the large amount of intangible value of a professional sports franchise. To offset risk, Broadway Federal’s policy imposes the following underwriting requirements: (1) maximum loan to franchise value maintenance covenants; (2) operating support agreements that require funding of any potential losses by a credit worthy third party (usually a high net worth member of the sports franchise ownership group); and (3) 12 months of interest reserve. The interest rate on sports loans is variable and is based on the three-month LIBOR or the Prime Rate.

We also participate to a limited degree as a direct lender in selected large nationally syndicated credits. The Bank is one of several lenders that lend relatively small amounts that in aggregate create one large loan to a major borrower. These corporate credits are typically rated by a credit rating service and are secured by the assets of the borrowers, primarily real estate and accounts receivable. These nationally syndicated credits are typically floating interest rate loans based on three-month LIBOR.

Construction Lending

At December 31, 2010 and 2009, we had $5.4 million and $5.5 million in construction loans, representing 1% of our gross loan portfolio. We provide loans for construction of single-family, multi-family and commercial real estate projects and for land development. We generally make construction and land loans at variable interest rates based upon the Prime Rate. Generally, we require a loan-to-value ratio not exceeding 75% to 80% on a purchase and a loan-to-cost ratio of 80% to 90% on a refinance of construction loans.

Construction loans involve risks that are different from those for completed project lending because we advance loan funds based upon the security of the completed project under construction. If the borrower defaults on the loan, we may have to advance additional funds to finance the project’s completion before the project can be sold. Moreover, construction projects are affected by uncertainties inherent in estimating construction costs, potential delays in construction schedules, market demand and the accuracy of estimates of the value of the completed project considered in the loan approval process. In addition, construction projects can be risky as they transition to completion and lease-up. Tenants who may have been interested in leasing a unit or apartment may not be able to afford the space when the building is completed, or may fail to lease the space for other reasons such as more attractive terms offered by competing lessors, making it difficult for the building to generate enough cash flow for the owner to obtain permanent financing. Many construction project owners are faced with these risks given the current economic downturn. Consequently, we are not originating construction loans at this time.

Consumer Lending

Our consumer loans primarily consist of loans secured by savings accounts. At December 31, 2010 and 2009, loans secured by savings accounts totaled $3.3 million and $4.0 million, respectively, representing 1% of our gross loan portfolio. Loans secured by depositors’ accounts are generally made up to 90% of the current value of the pledged account, at an interest rate between 2% and 4% above the rate paid on the deposit account, depending on the type of account, and for a term expiring upon the earlier of one year from origination or the maturity of the deposit account.

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Loan Originations, Purchases and Sales

We source loan originations from our loan personnel, local mortgage brokers, advertising and referrals from customers. For all loans that we originate, upon receipt of a loan application from a prospective borrower, a credit report is ordered and certain other information is verified by an independent credit agency and, if necessary, additional financial information is requested. An appraisal of the real estate intended to secure the proposed loan is required, which appraisal is performed by an independent licensed or certified appraiser designated and approved by us. The Board annually reviews our appraisal policy. Management reviews annually the qualifications and performance of independent appraisers that we use.

It is our policy to obtain title insurance on all real estate loans. Borrowers must also obtain hazard insurance naming Broadway Federal as a loss payee prior to loan closing. If the original loan amount exceeds 80% on a sale or refinance of a first trust deed loan, we may require private mortgage insurance and the borrower is required to make payments to a mortgage impound account from which we make disbursements to pay private mortgage insurance premiums, property taxes and hazard and flood insurance as required.

Our Board of Directors has authorized the following loan approval limits: if the total of the borrower’s existing loans and the loan under consideration is $500,000 or less, the new loan may be approved by the Chief Operating Officer or the Chief Lending Officer; if the total of the borrower’s existing loans and the loan under consideration is from $500,001 to $1,000,000, the new loan must be approved by two Loan Committee members; if the total of the borrower’s existing loans and the loan under consideration is from $1,000,001 up to $1,750,000, the new loan must be approved by three Loan Committee members, two of whom must be non-management Loan Committee members; and if the total of existing loans and the loan under consideration is more than $1.75 million, the new loan must be approved by four Loan Committee members, two of whom must be non-management Loan Committee members or by the Executive Committee of the Board of Directors. In addition, it is our practice that all loans approved only by management be reported to the Loan Committee by the following month, and be ratified by the Board of Directors.

From time to time, we purchase loans originated by other institutions based upon our investment needs and market opportunities. The determination to purchase specific loans or pools of loans is subject to our underwriting policies, which consider, among other factors, the financial condition of the borrower, the location of the underlying collateral property and the appraised value of the collateral property. We did not purchase any loans during the year ended December 31, 2010, compared to $21.8 million of loans purchased during the year ended December 31, 2009.

We originate and purchase loans for investment and for sale. Loan sales are made from the loans held for sale portfolio and from loans originated during the period that are designated as held for sale. It is our current practice to sell most single-family conforming fixed rate mortgage loans that we originate, retaining a limited amount in our portfolio. “Conforming loans” are loans that qualify in terms of maximum loan size and other criteria for purchase by FNMA and FHLMC. We also may sell commercial real estate and multi-family ARMs that we originate based upon our investment and liquidity needs and market opportunities. At December 31, 2010, we had 38 loans totaling $29.4 million held for sale. We typically retain the servicing rights associated with loans that are sold. The servicing rights are recorded and carried as assets based upon their fair values. At December 31, 2010 and 2009, we had $487 thousand and $450 thousand, respectively, in mortgage servicing rights.

We receive monthly loan servicing fees on loans sold and serviced for others, primarily insured financial institutions, that are payable by the loan purchaser out of loan collections in an amount equal to an agreed percentage of the monthly loan installments collected, plus late charges and certain other fees paid by the borrowers. Loan servicing activities include monthly loan payment collection, monitoring of insurance and tax payment status, responses to borrower information requests and dealing with loan delinquencies and defaults, including conducting loan foreclosures. At December 31, 2010 and 2009, we were servicing $46.5 million and $43.1 million, respectively, of loans for others.

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The following table sets forth our loan originations, purchases, sales and principal repayments for the periods indicated, including loans held for sale.

	2010		2009		2008
	(In thousands)
Gross loans:
Beginning balance	$	475,078	$	363,003	$	308,299
Loans originated:
One to four-units		2,369		35,635		38,656
Five or more units		10,683		41,567		9,702
Commercial real estate		1,056		26,786		28,456
Church		395		19,847		37,038
Construction		-		381		553
Commercial		2,817		7,047		13,009
Consumer		133		1,619		3,118
Total loans originated		17,453		132,882		129,572
Loan purchased:
Five or more units		-		21,813		-
Commercial real estate		-		-		984
Total loans purchased		-		21,813		984
Less:
Principal repayments		37,463		34,928		50,112
Sales of loans		11,410		2,892		25,737
Loan charge-offs		5,372		2,728		3
Transfer of loans receivable to real estate owned		5,005		2,072		-
Ending balance (1)	$	433,281	$	475,078	$	363,003

(1) Includes loans held-for-sale totaling $30.7 million, $21.9 million and $24.8 million at December 31, 2010, 2009 and 2008, respectively, exclusive of a $1.3 million, $994 thousand and $260 thousand valuation allowance at December 31, 2010, 2009 and 2008, respectively.

Loan Maturity and Repricing

The following table sets forth the contractual maturities of our gross loans receivable at December 31, 2010 and does not reflect the effect of prepayments or scheduled principal amortization.

	One to four- units		Five or more units		Commercial real estate		Church		Construction		Commercial		Consumer		Gross loans receivable
	(In thousands)
Amounts Due:
One year or less	$	491	$	1,186	$	4,567	$	1,222	$	2,450	$	8,900	$	3,275	$	22,091
After one year:
One year to five years		281		1,163		5,819		4,817		2,971		3,182		13		18,246
After five years		81,992		126,185		62,384		91,595		-		96		-		362,252
Total due after one year		82,273		127,348		68,203		96,412		2,971		3,278		13		380,498
Total	$	82,764	$	128,534	$	72,770	$	97,634	$	5,421	$	12,178	$	3,288	$	402,589

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The following table sets forth the dollar amount of gross loans receivable, excluding loans held for sale, at December 31, 2010 which are contractually due after December 31, 2011, and whether such loans have fixed interest rates or adjustable interest rates.

	December 31, 2010
	Adjustable			Fixed			Total
	(Dollars in thousands)
One to four-units	$	79,967		$	2,306		$	82,273
Five or more units		127,348			-			127,348
Commercial real estate		64,704			3,498			68,202
Church		96,413			-			96,413
Construction		138			2,833			2,971
Commercial		2,252			1,026			3,278
Consumer		13			-			13
Total	$	370,835		$	9,663		$	380,498
% of total		97.46	%		2.54	%		100.00	%

Asset Quality

General

The underlying credit quality of our loan portfolio is dependent primarily on each borrower’s ability to continue to make required loan payments and, in the event a borrower is unable to continue to do so, the value of the collateral securing the loan, if any. A borrower’s ability to pay typically is dependent, in the case of one to four-family mortgage loans and consumer loans, primarily on employment and other sources of income, and in the case of multi-family and commercial real estate loans, on the cash flow generated by the property, which in turn is impacted by general economic conditions. Other factors, such as unanticipated expenditures or changes in the financial markets, may also impact a borrower’s ability to make loan payments. Collateral values, particularly real estate values, are also impacted by a variety of factors including general economic conditions, demographics, property maintenance and collection or foreclosure delays.

Delinquencies

We perform a monthly review of all delinquent loans and reports are made monthly to the Internal Asset Review Committee of the Board of Directors. When a borrower fails to make a required payment on a loan, we take a number of steps to induce the borrower to cure the delinquency and restore the loan to current status. The procedures we follow with respect to delinquencies vary depending on the nature of the loan and the period of delinquency. In the case of residential mortgage loans, we generally send the borrower a written notice of nonpayment promptly after the loan becomes past due. In the event payment is not received promptly thereafter, additional letters are sent and telephone calls are made. If the loan is still not brought current and it becomes necessary for us to take legal action, we generally commence foreclosure proceedings against all real property that secures the loan. In the case of commercial real estate loans, we generally contact the borrower by telephone and send a written notice of non-payment upon expiration of the applicable grace period. Decisions as to when to commence foreclosure actions for commercial real estate loans are made on a case-by-case basis. We may consider loan workout arrangements with these types of borrowers in certain circumstances.

8

The following table sets forth our loan delinquencies by type and amount at the dates indicated.

	December 31, 2010										December 31, 2009										December 31, 2008
	60-89 Days					90 Days or more					60-89 Days					90 Days or more					60-89 Days					90 Days or more
	Number of loans		Principal balance Of loans			Number of loans		Principal balance of loans			Number of loans		Principal balance of loans			Number of loans		Principal balance of loans			Number of loans		Principal balance of loans			Number of loans		Principal balance of loans
	(Dollars in thousands)
One to four-units		3	$	71			15	$	6,227			8	$	4,194			10	$	4,756			2	$	196			-	$	-
Five or more units		4		1,068			4		2,250			5		2,622			4		1,644			1		450			1		200
Commercial real estate		1		1,287			14		10,321			4		2,527			6		6,061			-		-			2		541
Church		7		5,230			23		18,281			7		5,149			20		12,942			-		-			3		2,578
Construction		-		-			1		320			-		-			-		-			-		-			-		-
Commercial		-		-			2		3,768			-		-			4		7,269			1		591			2		110
Consumer		-		-			2		2,265			-		-			1		2,249			-		-			1		34
Total		15	$	7,656			61	$	43,432			24	$	14,492			45	$	34,921			4	$	1,237			9	$	3,463
Delinquent loans to total gross loans, including loans held for sale				1.77	%				10.02	%				3.05	%				7.35	%				0.34	%				0.95	%

Non-Performing Assets

Non-performing assets, consisting of nonaccrual loans (delinquent loans 90 days or more past due and troubled debt restructurings that do not qualify for accrual status) and real estate owned (“REO”), at December 31, 2010 were $46.5 million, or 9.60% of total assets, compared to $37.0 million or 7.10% of total assets, at December 31, 2009. Nonaccrual loans, the most significant component of non-performing assets, increased by $8.5 million to $43.4 million at December 31, 2010, from $34.9 million at December 31, 2009. This increase was due to the continued weakness in the housing and real estate markets and overall economy which resulted in continued elevated levels of delinquencies and non-performing loans during the year ended December 31, 2010.

The following table provides information regarding our non-performing assets at the dates indicated.

	December 31,
	2010			2009			2008			2007			2006
	(Dollars in thousands)
Nonaccrual loans:
One to four-units	$	6,227		$	4,756		$	-		$	-		$	-
Five or more units		2,250			1,644			200			-			-
Commercial real estate		10,321			6,061			541			-			-
Church		18,281			12,942			2,578			-			-
Construction		320			-			-			-			-
Commercial		3,768			7,269			110			-			-
Consumer		2,265			2,249			34			34			34
Total nonaccrual loans		43,432			34,921			3,463			34			34
Loans delinquent 90 days or more and still accruing		-			-			-			-			-
Real estate owned acquired through foreclosure		3,036			2,072			-			-			-
Total non-performing assets	$	46,468		$	36,993		$	3,463		$	34		$	34
Nonaccrual loans as a percentage of gross loans, including loans held for sale		10.02	%		7.35	%		0.95	%		0.01	%		0.01	%
Non-performing assets as a percentage of total assets		9.60	%		7.10	%		0.85	%		0.01	%		0.01	%

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We discontinue accruing interest on loans when the loans become 90 days delinquent as to their payment due date (missed three payments), unless the timing of collections are reasonably estimable and collection is probable. In addition, we reverse all previously accrued and uncollected interest through a charge to interest income. While loans are in nonaccrual status, interest due is monitored and income is recognized only to the extent cash is received until a return to accrual status is warranted. Interest income of $1.1 million for the year ended December 31, 2010 was recognized on nonaccrual loans, whereas interest income of $2.9 million would have been recognized under their original loan terms. We had no commitments to lend additional funds to borrowers whose loans were on nonaccrual status at December 31, 2010. No accruing loans were contractually past due by 90 days or more at December 31, 2010 or 2009.

From time to time, we agree to modify the contractual terms of a borrower’s loan. In cases where such modifications represent a concession to a borrower experiencing financial difficulty, the modification is considered a troubled debt restructuring. Loans modified in a troubled debt restructuring are placed on nonaccrual status until we determine that future collection of principal and interest is reasonably assured, which requires that the borrower demonstrate performance according to the restructured terms generally for a period of at least six months. Loans modified in a troubled debt restructuring which are included in nonaccrual loans totaled $14.6 million at December 31, 2010 and $11.0 million at December 31, 2009. Excluded from nonaccrual loans are restructured loans that have complied with the terms of their restructured agreement for six months or such longer period as management deems appropriate for particular loans, and have therefore, been returned to accruing status. Restructured accruing loans totaled $22.5 million at December 31, 2010 and $21.5 million at December 31, 2009.

We update our estimates of collateral value for non-performing loans which are 90 days or more delinquent, at least annually, and for certain other loans when the Internal Asset Review Committee believes repayment of such loans may be dependent on the value of the underlying collateral. For one to four-family mortgage loans, updated estimates of collateral value are obtained through appraisals, automated valuation models and broker price opinions. For multi-family and commercial real estate properties, we estimate collateral value through appraisals, broker price opinions, or internal cash flow analyses when current financial information is available, coupled with, in most cases, an inspection of the property. When the collateral value is less than the recorded investment in the loan, we establish a valuation allowance equal to the amount of the deficiency. See “Allowance for Loan Losses” for full discussion of the allowance for loan losses.

REO is real estate acquired as a result of foreclosure or by deed in lieu of foreclosure and is carried at the lower of cost or fair value less estimated selling costs. Any excess of carrying value over fair value at the time of acquisition is charged to the allowance for loan losses. Thereafter, we maintain an allowance for losses representing decreases in the properties’ estimated fair value through provisions which are charged to income along with any additional property maintenance and protection expenses incurred as a result of owning the property. At December 31, 2010, we had $3.0 million in REO which consisted of three one to four-family residential properties, three multi-family residential properties and five commercial real estate properties, three of which were secured by church buildings. We had $2.1 million in REO at December 31, 2009.

If recent trends in the housing and commercial real estate markets continue, loan delinquencies and credit losses may also continue. Although we believe our underwriting and loan review procedures are appropriate for the various kinds of loans we originate or purchase, our results of operations and financial condition will be adversely affected in the event the quality of our loan portfolio continues to deteriorate. Therefore, one of our most important operating objectives is to improve asset quality. Management is using a number of strategies to achieve this goal, including maintaining what we believe to be sound credit standards in loan originations, monitoring the loan portfolio through independent internal loan reviews, and employing active collection and workout processes for delinquent or problem loans.

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Classification of Assets

Federal regulations and our internal policies require that we utilize an asset classification system as a means of monitoring and reporting problem and potential problem assets. We have incorporated asset classifications as a part of our credit monitoring system and thus classify problem assets and potential problem assets as “Substandard,” “Doubtful” or “Loss” assets. An asset is considered “Substandard” if it is inadequately protected by the current net worth and paying capacity of the obligor or the collateral pledged, if any. “Substandard” assets include those characterized by the “distinct possibility” that the insured institution will sustain “some loss” if the deficiencies are not corrected. Assets classified as “Doubtful” have all of the weaknesses inherent in those classified “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.” Assets classified as “Loss” are those considered “uncollectible” and of such little value that their continuance as assets without the establishment of a specific loss allowance is not warranted. Assets which do not currently expose us to sufficient risk to warrant classification in one of the aforementioned categories, but that are considered to possess some weaknesses, are designated “Special Mention.”

The following table provides information regarding our classified assets at the dates indicated.

	December 31, 2010				December 31, 2009
	Number of loans		Principal balance of loans		Number of loans		Principal balance of loans
	(Dollars in thousands)
Special Mention		72	$	38,333		13	$	7,720
Substandard		118		94,054		68		53,985
Doubtful		1		270		2		4,000
Loss		2		16		12		4,431
Total		193	$	132,673		95	$	70,136

Allowance for Loan Losses

In originating loans, we recognize that losses will be experienced on loans and that the risk of loss may vary as a result of many factors, including the type of loan being made, the creditworthiness of the borrower, general economic conditions and, in the case of a secured loan, the quality of the collateral for the loan. We maintain an allowance for loan losses to absorb losses inherent in our loan portfolio. This allowance represents management’s best estimate of the probable incurred and inherent credit losses in our loan portfolio as of the date of the consolidated financial statements.

The allowance for loan losses is evaluated on a monthly basis by management and the Board of Directors and is based upon management’s periodic review of the collectability of the loans in light of historical loss experience, portfolio volume and mix, geographic concentrations, estimated credit losses based on internal and external portfolio reviews for a select segment of our loan portfolio, adverse situations that may affect the borrower’s ability to repay, the estimated value of the underlying collateral and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as circumstances change or as more information becomes available.

The allowance consists of specific and general components. The specific component relates to loans that are individually classified as impaired.

A loan is considered impaired when, based on current information and events, it is probable that the Bank will be unable to collect the scheduled payments of principal or interest when due according to the contractual

11

terms of the loan agreement. Loans, for which the terms have been modified, and for which the borrower is experiencing financial difficulties, are considered troubled debt restructurings (“TDR”) and classified as impaired. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed.

Impairment is measured on a loan by loan basis. If a loan is impaired, a portion of the allowance is allocated to the loan so that the loan is reported, net, at the present value of estimated future cash flows using the loan’s existing rate or at the fair value of collateral if repayment is expected solely from the collateral. Large groups of smaller balance homogeneous loans, such as consumer and residential real estate loans, are collectively evaluated for impairment and, accordingly, they are not separately identified for impairment disclosures. Troubled debt restructurings are separately identified for impairment disclosures and are measured at the present value of estimated future cash flows using the loan’s effective rate at inception. If a troubled debt restructuring is considered to be a collateral dependent loan, the loan is reported, net, at the fair value of the collateral. For troubled debt restructurings that subsequently default, the Company determines the amount of reserve in accordance with the accounting policy for the allowance for loan losses. At December 31, 2010, impaired loans totaled $58.0 million and had an aggregate specific allowance allocation of $6.0 million.

The general component covers non impaired loans and is based on historical loss experience adjusted for current factors. The historical loss experience is determined by portfolio segment and is based on the actual loss history experienced by the Company over the most recent 18 months. We believe that using the loss experience for the most recent 18 months is reflective of the current economic downturn and weakness in the real estate market. This actual loss experience is supplemented with other economic factors based on the risks present for each portfolio segment. These economic factors include consideration of the following: levels of and trends in delinquencies and impaired loans; levels of and trends in charge-offs and recoveries; trends in volume and terms of loans; effects of any changes in risk selection and underwriting standards; other changes in lending policies, procedures, and practices; experience, ability, and depth of lending management and other relevant staff; national and local economic trends and conditions; industry conditions; and effects of changes in credit concentrations.

Based on our evaluation of the continued weakness in the housing and real estate markets and overall economy, in particular, the continued high unemployment rate in the communities we serve and the increase in and composition of our delinquencies, non-performing loans and net loan charge-offs and feedback from OTS and FDIC examination and an independent third party review of our loan portfolio, we determined that an allowance for loan losses of $20.5 million was required at December 31, 2010, unchanged from $20.5 million at December 31, 2009.

In addition to the requirements of U.S. generally accepted accounting principles (“GAAP”) related to loss contingencies, a federally chartered savings association’s determination as to the classification of its assets and the amount of its valuation allowances is subject to review by the OTS. While we believe that the allowance for loan losses has been established and maintained at adequate levels, future adjustments may be necessary if economic or other conditions differ materially from the conditions on which we based our estimates at December 31, 2010. In addition, there can be no assurance that the OTS or other regulators, as a result of reviewing our loan portfolio and/or allowance, will not require us to materially increase our allowance for loan losses, thereby affecting our financial condition and earnings.

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The following table sets forth the activity in our allowance for loan losses for the years indicated.

	2010			2009			2008			2007			2006
	(Dollars in thousands)
Allowance balance at beginning of year	$	20,460		$	3,559		$	2,051		$	1,730		$	1,455
Charge-offs		(4,472	)		(2,728	)		(3	)		-			(5	)
Recoveries		5			-			139			-			-
Provision charged to earnings		4,465			19,629			1,372			321			280
Allowance balance at end of year	$	20,458		$	20,460		$	3,559		$	2,051		$	1,730
Net charge-offs (recoveries) to average loans, excluding loans held for sale		0.97	%		0.64	%		(0.04	%)		0.00	%		0.00	%
Allowance for loan losses as a percentage of gross loans, excluding loans held for sale		5.08	%		4.52	%		1.06	%		0.68	%		0.69	%
Allowance for loan losses as a percentage of total nonaccrual loans		47.10	%		58.59	%		102.77	%		6,032.35	%		5,088.24	%
Allowance for loan losses as a percentage of total non-performing assets		44.03	%		55.31	%		102.77	%		6,032.35	%		5,088.24	%

The following table sets forth our allocation of the allowance for loan losses to the various categories of loans and the percentage of loans in each category to total loans at the dates indicated. The allocations are for management’s analytical purposes only. The entire allowance is available for losses on any type of loan.

	December 31,
	2010					2009					2008					2007					2006
	Amount		Percent of loans in each category to total loans			Amount		Percent of loans in each category to total loans			Amount		Percent of loans in each category to total loans			Amount		Percent of loans in each category to total loans			Amount		Percent of loans in each category to total loans
	(Dollars in thousands)
One to four-units	$	3,619		20.56	%	$	4,292		20.03	%	$	239		20.25	%	$	89		11.59	%	$	71		10.08	%
Five or more units		1,728		31.92	%		1,650		32.28	%		688		25.93	%		612		37.21	%		709		52.42	%
Commercial real estate		3,257		18.08	%		1,877		18.16	%		745		19.77	%		644		19.62	%		663		24.11	%
Church		8,662		24.25	%		9,257		22.29	%		809		24.85	%		360		23.23	%		87		7.06	%
Construction		168		1.35	%		87		1.22	%		58		1.63	%		54		0.67	%		23		0.83	%
Commercial		1,373		3.02	%		2,018		5.11	%		621		6.61	%		245		7.43	%		132		4.89	%
Consumer		1,651		0.82	%		1,279		0.91	%		265		0.96	%		47		0.25	%		45		0.61	%
Unallocated		-		-			-		-			134		-			-		-			-		-
Total allowance for loan losses	$	20,458		100.00	%	$	20,460		100.00	%	$	3,559		100.00	%	$	2,051		100.00	%	$	1,730		100.00	%

Investment Activities

The main objectives of our investment strategy are to provide a source of liquidity for deposit outflows, repayment of borrowings and loan fundings, and to generate a favorable return on investments without incurring undue interest rate or credit risk. Subject to various restrictions, our investment policy generally permits investments in money market instruments such as Federal Funds Sold, certificates of deposit of insured banks and savings institutions, direct obligations of the U. S. Treasury, Federal Agency securities, Agency-issued securities and mortgage-backed securities, mutual funds, municipal obligations, corporate bonds and marketable equity securities. Mortgage-backed securities consist principally of FNMA, FHLMC and GNMA securities backed by 30-year amortizing hybrid ARM loans, structured with fixed interest rates for periods of three to seven

13

years, after which time the loans convert to one-year or six-month adjustable rate mortgage loans. At December 31, 2010, our securities portfolio consisted primarily of residential mortgage-backed securities and totaled $23.2 million, or 5% of total assets.

We classify investments as held-to-maturity or available-for-sale at the date of purchase based on our assessment of our internal liquidity requirements. Securities in the held-to-maturity category consist of securities purchased for long-term investment in order to enhance our ongoing stream of net interest income. Securities deemed held-to-maturity are classified as such because we have both the intent and ability to hold these securities to maturity. Securities purchased to meet investment-related objectives such as liquidity management or interest rate risk and which may be sold as necessary to implement management strategies, are designated as available-for-sale at the time of purchase. Held-to-maturity securities are reported at cost, adjusted for amortization of premium and accretion of discount. Available-for-sale securities are reported at fair market value. We currently have no securities classified as trading securities.

The following table sets forth information regarding the carrying amount and fair values of our securities at the dates indicated.

	December 31,
	2010				2009				2008
	Carrying amount		Fair value		Carrying amount		Fair value		Carrying amount		Fair value
	(In thousands)
Held-to-maturity:
Residential mortgage-backed securities	$	11,737	$	12,162	$	15,285	$	15,745	$	21,792	$	21,701
U.S. Government and federal agency		1,000		1,099		1,000		1,093		1,000		1,104
Available-for-sale:
Residential mortgage-backed securities		10,524		10,524		14,961		14,961		4,222		4,222
Total	$	23,261	$	23,785	$	31,246	$	31,799	$	27,014	$	27,027

The table below sets forth certain information regarding the carrying amount, weighted average yields and contractual maturities of our securities as of December 31, 2010. The table reflects stated final maturities and does not reflect scheduled principal payments.

	At December 31, 2010
	One Year or less					More than one year to five years					More than five years to ten years					More than ten years					Total
	Carrying amount		Weighted average yield			Carrying amount		Weighted average yield			Carrying amount		Weighted average yield			Carrying amount		Weighted average yield			Carrying amount		Weighted average yield
	(Dollars in thousands)
Held-to-maturity:
Residential mortgage-backed securities	$	-		-	%	$	-		-	%	$	-		-	%	$	11,737		2.38	%	$	11,737		2.38	%
U.S. Government and federal agency		-		-	%		1,000		5.00	%		-		-	%		-		-	%		1,000		5.00	%
Available-for-sale:
Residential mortgage-backed securities	$	-		-	%	$	-		-	%	$	4,786		3.49	%	$	5,738		5.09	%	$	10,524		4.36	%
Total	$	-		-	%	$	1,000		5.00	%	$	4,786		3.49	%	$	17,475		3.27	%	$	23,261		3.39	%

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Sources of Funds

General

Deposits are our primary source of funds for supporting our lending and other investment activities and general business purposes. In addition to deposits, we obtain funds from the amortization and prepayment of loans and residential mortgage-backed securities, sales of loans and residential mortgage-backed securities, advances from the FHLB, and cash flows generated by operations.

Deposits

We offer a variety of deposit accounts with a range of interest rates and terms. Our deposits principally consist of passbook savings accounts, non-interest bearing checking accounts, NOW and other demand accounts, money market accounts, and fixed-term certificates of deposit. The maturities of term certificates generally range from one month to five years. We accept deposits from customers within our market area based primarily on posted rates but from time to time negotiate the rate on these instruments commensurate with the size of the deposit. We rely primarily on customer service and long-standing relationships with customers to attract and retain deposits. We seek to maintain and increase our retail “core” deposit relationships, consisting of customers with passbook accounts, checking accounts, non-interest bearing demand accounts and money market accounts, which we believe tend to be more stable and available at a lower cost than other, longer term types of deposits. However, market interest rates, including rates offered by competing financial institutions, the availability of other investment alternatives, and general economic conditions significantly affect our ability to attract and retain deposits.

In late 2008, we began to open deposit accounts through the internet for customers in the United States. We also generate term certificates through the use of brokers and internet-based network deposits. We participate in a deposit program called Certificate of Deposit Account Registry Service (“CDARS”). CDARS is a deposit placement service that allows us to place our customers’ funds in FDIC-insured certificates of deposits at other banks and, at the same time, receive an equal sum of funds from the customers of other banks in the CDARS Network. The majority of CDARS deposits are gathered within our geographic footprint through established customer relationships. At December 31, 2010, we had approximately $18.2 million in brokered deposits, of which $8.9 million were CDARS. This compared to $101.0 million in brokered deposits at December 31, 2009, of which $71.2 million were CDARS.

In March 2010, the OTS directed that the Bank not increase the dollar amount of its brokered deposits above the amount that it had as of March 1, 2010 without the prior written non-objection of the OTS Regional Director. Under applicable regulations, the term “brokered deposits” includes both deposits acquired through third party brokers and deposits that an institution solicits by offering rates of interest that are significantly higher than the prevailing rates of interest on deposits offered by other insured depository institutions in the institution’s normal market area.

The following table sets forth the maturity periods of our certificates of deposit in amounts of $100 thousand or more at December 31, 2010.

	December 31, 2010
	Amount		Weighted average rate
	(Dollars in thousands)
Certificates maturing:
Less than three months	$	40,087		0.87	%
Three to six months		15,450		1.40	%
Six to twelve months		32,376		2.43	%
Over twelve months		72,134		2.62	%
Total	$	160,047		2.02	%

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The following table sets forth the distribution of our average deposits for the years indicated and the weighted average interest rates during the year for each category of deposits presented.

	For the Year Ended December 31,
	2010								2009								2008
	Average balance		Percent of total			Weighted average rate			Average balance		Percent of total			Weighted average rate			Average balance		Percent of total			Weighted average rate
	(Dollars in thousands)
Money market deposits	$	27,701		7.16	%		0.66	%	$	33,719		9.41	%		1.57	%	$	29,035		10.98	%		2.43	%
Passbook deposits		37,574		9.71	%		0.43	%		37,763		10.54	%		0.82	%		39,378		14.89	%		1.39	%
NOW and other demand deposits		47,077		12.16	%		0.22	%		64,967		18.13	%		1.17	%		39,853		15.07	%		0.76	%
Certificates of deposits		274,641		70.97	%		1.99	%		221,863		61.92	%		2.40	%		156,228		59.06	%		3.60	%
Total	$	386,993		100.00	%		1.53	%	$	358,312		100.00	%		1.93	%	$	264,494		100.00	%		2.71	%

Borrowings

We utilize short-term and long-term advances from the FHLB of San Francisco as an alternative to retail deposits as a funding source for asset growth. FHLB advances are generally secured by mortgage loans and mortgage-backed securities. Such advances are made pursuant to several different credit programs, each of which has its own interest rate and range of maturities. The maximum amount that the FHLB will advance to member institutions fluctuates from time to time in accordance with the policies of the FHLB. At December 31, 2010, we had outstanding $87.0 million in FHLB advances and had the ability to borrow up to an additional $35.4 million based on available and pledged collateral. However, on February 18, 2011, the Company’s general borrowing limit was reduced to $100.0 million, which decreased our remaining borrowing capacity to $13.0 million as of February 18, 2011.

The following table sets forth information concerning our FHLB advances at or for the periods indicated.

	At or For the Year Ended
	2010			2009			2008
	(Dollars in thousands)
FHLB Advances:
Average balance outstanding during the year	$	87,897		$	76,433		$	89,404
Maximum amount outstanding at any month-end during the year	$	88,000		$	91,600		$	114,000
Balance outstanding at end of year	$	87,000		$	91,600		$	74,000
Weighted average interest rate during the year		3.33	%		3.70	%		3.99	%
Weighted average interest rate at end of year		3.24	%		3.23	%		3.74	%

In March 2004, the Company issued $6.0 million of Floating Rate Junior Subordinated Debentures, in a private placement which, subject to limitations, are includable as secondary capital for certain regulatory capital measures. The debentures mature 10 years from the issue date and interest is payable quarterly at a rate per annum equal to the 3-month LIBOR plus 2.54%. The interest rate is determined as of each March 17, June 17, September 17, and December 17, and was 2.84% at December 31, 2010. The Company has not paid interest on the debentures since September 2010. As disclosed in Note 15 “Regulatory Capital Matters and Capital Purchase Program” of the Notes to Consolidated Financial Statements, the Company is not permitted to make payments on any debts without prior notice to and receipt of written notice of non-objection from the OTS Regional Director. In addition, under the terms of the subordinated debentures, the Company is not allowed to make payments on the subordinated debentures if the Company is in default on any of its senior indebtedness, which term includes the senior line of credit described below.

On February 28, 2010, we borrowed an aggregate of $5.0 million under our $5.0 million line of credit with another financial institution and invested all of the proceeds in the equity capital of the Bank. The interest rate on

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the line of credit adjusts annually, subject to a minimum of 6.00% and to an increase by the addition of 5% on default. Borrowings under the line of credit are secured by the Company’s assets. This senior line of credit became due and payable on July 31, 2010 and has not been repaid and we are now in default under the line of credit agreement. Under the terms of the cease and desist order issued to us and the Bank by the OTS, we are not permitted to make any payments on this senior line of credit, or to obtain dividends from the Bank for that purpose or any other purpose without the prior approval of the OTS. See “Item 7 Management’s Discussion and Analysis—Liquidity” in Part II of this Report for further information.

Market Area and Competition

Broadway Federal is a community-oriented savings institution offering a variety of financial services to meet the needs of the communities it serves. Our retail banking network includes full service banking offices, automated teller machines and internet banking capabilities. We have four banking offices in Los Angeles, one banking office located in the nearby City of Inglewood and two loan production offices in the Cities of Irvine and Torrance.

The Los Angeles metropolitan area is a highly competitive market in which we face significant competition in making loans and in attracting deposits. Although our offices are primarily located in low and moderate income minority areas that have historically been under-served by other financial institutions, we are facing increasing competition for deposits and residential mortgage lending in our immediate market areas, including direct competition from mortgage banking companies, commercial banks and savings and loan associations. Most of these financial institutions are significantly larger than we are and have greater financial resources, and many have a regional, statewide or national presence.

Personnel

At December 31, 2010, we had 81 employees, which consisted of 71 full-time and 10 part-time employees. We believe that we have good relations with our employees and none are represented by a collective bargaining group.

Regulation

General

Broadway Federal Bank is regulated by the OTS and the Company is registered with and subject to examination by the OTS as a savings and loan holding company. The Bank is subject to regulation and examination by the OTS with respect to most of its business activities, including, among other things, capital standards, general investment authority, deposit taking and borrowing authority, mergers and other business combination transactions, establishment of branch offices, and permitted subsidiary investments and activities. The OTS’s operations, including examination activities, are funded by assessments levied on its regulated institutions.

Our customer deposits are insured by the Deposit Insurance Fund (“DIF”) of the FDIC to the extent provided by applicable federal law. Insurance on deposits may be terminated by the FDIC if it finds that the Bank has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC or the OTS as the Bank’s primary regulator.

Broadway Federal is a federally chartered savings bank and a member of the FHLB System. We are further subject to the regulations of the Board of Governors of the Federal Reserve System (“FRB”) concerning reserves required to be maintained against deposits, transactions with affiliates, Truth in Lending and other consumer protection requirements and certain other matters. The Company is also required to file certain reports with and otherwise comply with the rules and regulations of the Securities and Exchange Commission (“SEC”) under the federal securities laws.

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Changes in the applicable laws or regulations of the OTS, the FDIC or other regulatory authorities could have a material adverse impact on the Bank and the Company, their operations, and the value of the Company’s debt and equity securities.

The following paragraphs summarize certain of the laws and regulations that apply to us and to the Bank. These descriptions of statutes and regulations and their possible effects do not purport to be complete descriptions of all of the provisions of those statutes and regulations and their possible effects on us, nor do they purport to identify every statute and regulation that may apply to us.

Cease and Desist Orders

In March 2010, based on information obtained during a regulatory examination of the Bank, the Company and Bank were determined to be “in troubled condition” and agreed to the issuance of cease and desist orders to them by the OTS effective September 09, 2010. We refer to these orders collectively as the “C&D.” The C&D imposes limitations on the Company and the Bank, including the following, among others:

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

• Neither the Company nor the Bank may declare or pay any dividends or make any other capital distributions without the prior written approval of the OTS Regional Director.

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

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

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

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

Consistent with the C&D, we have taken actions to address the concerns expressed by the OTS, including the following:

• Improved our regulatory capital so the our capital now exceeds the required Core Capital ratio of 8.00% and Total Risk Based Capital ratio of 12.00%; the Bank’s Core Capital ratio was 8.82% and its Total Risk Based Capital ratio was 13.05% at December 31, 2010, compared to 6.69% and 10.19%, respectively, at December 31, 2009;

• Increased liquidity by $10.1 million, from $22.4 million at December 31, 2009 to $32.5 million at December 31, 2010, and increased liquid assets to 179% of brokered deposits at December 31, 2010 from 22% at December 31, 2009;

• Substantially reduced brokered deposits, by $82.8 million, to $18.2 million at year end;

• Completed a comprehensive external review of our loan portfolio—Over 76% of the dollar amount of the gross loan portfolio was reviewed by an independent loan review firm in the fourth quarter, including 100% of our church loan portfolio;

• Substantially revised the Bank’s loan underwriting and internal asset review procedures and other aspects of the Bank’s business, as well as the Company’s management of its business and the oversight of the Company’s business by the Board;

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• Developed and are pursuing a capital plan for increasing our common equity base, as described under Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Capital Resources.”

Recent Regulatory Reform Legislation

In July 2010, President Obama signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act), which is intended to address perceived weaknesses in the U.S. financial regulatory system and prevent future economic and financial crises.

As a result of the Dodd-Frank Act, on July 21, 2011, or a date within six months thereafter selected by the Secretary of the Treasury, the OTS will be eliminated and the Office of the Comptroller of the Currency (“OCC”), will become the regulator of all federal savings associations, such as Broadway Federal. The FRB will acquire the OTS’s regulatory authority over all savings and loan holding companies, such as Broadway Financial Corporation. As a result, we will become subject to regulation, supervision and examination by the OCC and the FRB, rather than the OTS as is currently the case.

The Dodd-Frank Act also provides for the creation of the Bureau of Consumer Financial Protection (“CFPB”). The CFPB will have the authority to implement and enforce a variety of existing consumer protection statutes and to issue new regulations.

The Dodd-Frank Act requires the federal banking agencies to establish consolidated risk-based and leverage capital requirements for depository institution holding companies in addition to those for insured depository institutions. These requirements must be no less than those to which insured depository institutions are currently subject to. As a result, in July 2015 we will become subject for the first time to consolidated capital requirements of the types to which bank holding companies have been subject.

The Dodd-Frank Act also includes provision that will change the assessment base for federal deposit insurance from the amount of insured deposits to consolidated assets less tangible capital and make permanent the $250,000 limit for federal deposit insurance and provide unlimited federal deposit insurance until January 1, 2013 for non-interest bearing demand transaction accounts at all insured depository institutions.

The Dodd-Frank Act also includes other provisions, subject to further rulemaking by the federal bank regulatory agencies that may affect our future operations. We will not be able to determine the impact of these provisions until final rules are promulgated to implement these provisions and other regulatory guidance is provided interpreting these provisions.

Capital Requirements

The Bank must meet regulatory capital standards to be deemed in compliance with the OTS capital requirements: (1) tangible capital must equal at least 1.5% of total adjusted assets; (2) “core capital” must generally equal at least 4.0% of total adjusted assets (this ratio is referred to as the “leverage ratio”); and (3) risk-based capital must equal at least 8.0% of total risk-based assets. In assessing an institution’s capital adequacy, the OTS takes into consideration not only these numeric factors but also qualitative factors as well, and has the authority to establish higher capital requirements for individual institutions to the extent it considers necessary.

The core capital requirement generally requires a savings institution to maintain a ratio of core capital to adjusted total assets of not less than 4% (3% for certain highly evaluated institutions not experiencing or anticipating significant growth). “Core capital” includes common stockholders’ equity (including retained earnings), non-cumulative perpetual preferred stock and any related surplus and minority interests in the equity accounts of fully consolidated subsidiaries. The amount of an institution’s core capital is, in general, calculated in accordance GAAP, with certain exceptions. Intangible assets must be deducted from core capital, with certain exceptions and limitations for mortgage servicing rights and certain other intangibles, which may be included on a limited basis.

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A savings institution is required to maintain “tangible capital” in an amount not less than 1.5% of adjusted total assets. “Tangible capital” is defined for this purpose to mean core capital less any intangible assets, plus mortgage servicing rights, subject to certain limitations.

The risk-based capital requirements provide that the capital ratios applicable to various classes of assets are to be adjusted to reflect the degree of risk associated with such assets. In addition, the asset base for computing a savings institution’s capital requirement includes off-balance sheet items, including assets sold with recourse. Generally, the OTS capital regulations require savings institutions to maintain “total capital” equal to 8.00% of risk-weighted assets. “Total capital” for these purposes consists of core capital and supplementary capital. Supplementary capital includes, among other things, certain types of preferred stock and subordinated debt, subject to limitations, and, subject to certain limitations, loan and lease general valuation allowances. At December 31, 2010 and 2009, the general valuation allowance included in our supplementary capital was $4.7 million and $5.0 million, respectively. A savings institution’s supplementary capital may be used to satisfy the risk-based capital requirement only to the extent of that institution’s core capital.

At December 31, 2010, Broadway Federal exceeded each of these capital requirements as shown in the following table:

	As of December 31,
	2010									2009
	Tangible Capital			Tier 1 (Core) Capital			Total Risk- Based Capital			Tangible Capital			Tier 1 (Core) Capital			Total Risk- Based Capital
	(In thousands)
Equity capital-Broadway Federal (1)	$	43,166		$	43,166		$	43,166		$	35,514		$	35,514		$	35,514
Additional supplementary capital:
General valuation allowance		-			-			4,669			-			-			5,009
Disallowed mortgage servicing rights assets		(49	)		(49	)		(49	)		(45	)		(45	)		(45	)
Disallowed deferred tax assets		(487	)		(487	)		(487	)		(672	)		(672	)		(672	)
Regulatory capital balances		42,630			42,630			47,299			34,797			34,797			39,806
Minimum requirement		7,252			19,338			29,006			7,803			20,809			31,257
Excess over requirement	$	35,378		$	23,292		$	18,293		$	26,994		$	13,988		$	8,549

(1) Excluding accumulated other comprehensive income, net of taxes.

Prompt Corrective Action

The Bank is also subject to the prompt corrective action (“PCA”) capital regulations of the OTS and FDIC pursuant to which banks and savings institutions are to be classified into one of five categories based primarily upon capital adequacy, ranging from “well capitalized” to “critically undercapitalized” and which require, subject to certain exceptions, the appropriate federal banking agency to take prompt corrective action with respect to an institution which becomes “undercapitalized” and to take additional actions if the institution becomes “significantly undercapitalized” or “critically undercapitalized.”

Under the OTS’s PCA regulations, an institution is “well capitalized” if it has a Total Risk-based capital ratio of 10.00% or greater, has a Tier 1 Risk-based capital ratio (Tier 1 capital to total risk-weighted assets) of 6.00% or greater, has a Core capital ratio of 5.00% or greater and is not subject to any written capital order or directive to meet and maintain a specific capital level or any capital measure. An institution is “adequately capitalized” if it has a Total Risk-based capital ratio of 8.00% or greater, has a Tier 1 Risk-based capital ratio of 4.00% or greater and has a Core capital ratio of 4.00% or greater (3.00% for certain highly rated institutions).

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The OTS also has authority, after an opportunity for a hearing, to downgrade an institution from “well capitalized” to “adequately capitalized,” or to subject an “adequately capitalized” or “undercapitalized” institution to the supervisory actions applicable to the next lower category, for supervisory concerns.

In addition to the generally applicable capital requirements summarized above, the C&D requires the Bank to attain, and thereafter maintain, a Tier 1 Capital ratio of at least 8% and a Total Risk-Based capital ratio of at least 12%, both of which ratios are greater than the respective 6% and 10% levels for such ratios that are generally required under OTS regulations. We have met the minimums required to be well capitalized at December 31, 2010 and 2009 based on the prompt corrective action regulations, however we cannot be considered well capitalized due to our current regulatory agreement.

Actual and normally required capital amounts and ratios at December 31, 2010 and 2009, together with the higher capital requirements that the OTS required the Bank to meet, are presented below.

	Actual					Required for Capital Adequacy Purposes					To Be Well Capitalized Under Prompt Corrective Action Regulations					Capital Requirements under Cease and Desist Order
	Amount		Ratio			Amount		Ratio			Amount		Ratios			Amount		Ratios
	(Dollars in thousands)
December 31, 2010:
Tangible Capital to adjusted total assets	$	42,630		8.82	%	$	7,252		1.50	%		N/A		N/A			N/A		N/A
Tier 1(Core) Capital to adjusted total assets	$	42,630		8.82	%	$	19,338		4.00	%	$	24,172		5.00	%	$	38,676		8.00	%
Tier 1(Core) Capital to risk weighted assets	$	42,630		11.76	%		N/A		N/A		$	21,754		6.00	%		N/A		N/A
Total Capital to risk weighted assets	$	47,299		13.05	%	$	29,006		8.00	%	$	36,257		10.00	%	$	43,508		12.00	%
December 31, 2009:
Tangible Capital to adjusted total assets	$	34,797		6.69	%	$	7,803		1.50	%		N/A		N/A			N/A		N/A
Tier 1(Core) Capital to adjusted total assets	$	34,797		6.69	%	$	20,809		4.00	%	$	26,011		5.00	%		N/A		N/A
Tier 1(Core) Capital to risk weighted assets	$	34,797		8.91	%		N/A		N/A		$	23,443		6.00	%		N/A		N/A
Total Capital to risk weighted assets	$	39,806		10.19	%	$	31,257		8.00	%	$	39,072		10.00	%		N/A		N/A

Deposit Insurance

The FDIC is an independent federal agency that insures deposits of federally insured banks and savings institutions, up to prescribed statutory limits for each depositor, through its DIF. The FDIC charges an annual assessment for the insurance of deposits based on the risk a particular institution poses to the FDIC’s Deposit Insurance Fund. The amount of the assessment paid by an institution is based on its relative risk of default as measured by regulatory capital ratios and other supervisory factors. The FDIC’s overall premium rate structure is subject to change from time to time to reflect its actual and anticipated loss experience. Since the beginning of the financial crisis in 2008, there have been higher levels of bank failures. These failures have dramatically increased the resolution costs of the FDIC and have depleted the DIF. In order to maintain a strong funding position and restore reserve ratios of the deposit insurance fund, the FDIC has increased the assessment rates of insured institutions and may continue to do so in the future. Due to its current designation as being “in troubled condition,” the Bank has been required to pay a higher FDIC insurance premium assessment rate beginning in 2010. For the fourth quarter of 2010, the Bank’s annualized assessment rate was 0.32% of insured deposits, compared to 0.16% of insured deposits for the fourth quarter of 2009.

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In 2008, the level of FDIC deposit insurance was temporarily increased from $100,000 to $250,000 per depositor and the increased level of insurance coverage will remain in effect through December 31, 2013. The Dodd-Frank Act permanently raised the standard maximum deposit insurance amount to $250,000.

The FDIC has redefined its deposit insurance premium assessment base to be an institution’s average consolidated total assets minus average tangible equity as required by the Dodd-Frank Act and revised its deposit insurance assessment rate schedules in light of the changes to the assessment base. The proposed rate schedule and other revisions to the assessment rules, which were adopted by the FDIC Board of Directors in February 2011, become effective April 1, 2011 and will be used to calculate the June 30, 2011.

The Bank also pays assessments toward the retirement of the Financing Corporation bonds (known as FICO Bonds) issued in the 1980s by its former federal deposit insurer, the Federal Savings and Loan Insurance Corporation, to assist in the recovery of the savings and loan industry. These assessments will continue until the FICO Bonds mature in 2017. For the fourth quarter of 2010, the Bank’s annualized FICO assessment rate was 0.01% of insured deposits.

Broadway Federal elected in 2008 to participate in the Transaction Account Guarantee Program (“TAGP”) which is part of the FDIC’s Temporary Liquidity Guarantee Program (“TLGP”). Broadway Federal declined to participate in the Debt Guarantee Program (“DGP”), another facility available under TLGP. Through the TAGP, the FDIC provides unlimited deposit insurance coverage for all noninterest-bearing transaction accounts, including traditional non-interest bearing checking accounts and NOW accounts as long as the interest rate does not exceed 0.50 percent. To participate in the TAGP, Broadway Federal paid an additional ten basis point deposit insurance assessment on any deposit amount in excess of $250,000 that was covered by the TAGP. Beginning in 2010, this fee increased to fifteen, twenty or twenty-five basis points, depending on a participating institution’s risk category rating.

In place of the TAGP which expired on December 31, 2010, and in accordance with certain provisions of the Dodd-Frank Act, the FDIC adopted further rules in November 2010 which provide for temporary unlimited insurance coverage of certain non-interest bearing transaction accounts. Such coverage begins on December 31, 2010 and terminates on December 31, 2012.

Guidance on Commercial Real Estate Lending

On October 30, 2009, the federal banking agencies adopted a policy statement supporting commercial real estate (“CRE”) loan workouts, which is referred to as the CRE Policy Statement. The CRE Policy Statement provides guidance for examiners, and for financial institutions that are working with CRE borrowers who are experiencing diminished operating cash flows, depreciated collateral values, or prolonged delays in selling or renting commercial properties. The CRE Policy Statement details risk-management practices for loan workouts that support prudent and pragmatic credit and business decision-making within the framework of financial accuracy, transparency, and timely loss recognition. The CRE Policy Statement states that financial institutions that implement prudent loan workout arrangements after performing comprehensive reviews of borrowers’ financial conditions will not be subject to criticism for engaging in these efforts, even if the restructured loans have weaknesses that result in adverse credit classifications. In addition, performing loans, including those renewed or restructured on reasonable modified terms, made to creditworthy borrowers, will not be subject to adverse classification solely because the value of the underlying collateral declined. The CRE Policy Statement reiterates existing guidance that examiners are expected to take a balanced approach in assessing institutions’ risk-management practices for loan workout activities.

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Loans to One Borrower

Savings institutions generally are subject to the lending limits that are applicable to national banks. With certain limited exceptions, the maximum amount that a savings institution may lend to any borrower (including certain related persons or entities of such borrower) is an amount equal to 15% of the savings institution’s unimpaired capital and unimpaired surplus, or $8.9 million for Broadway Federal at December 31, 2010, plus an additional 10% for loans fully secured by readily marketable collateral. Real estate is not included within the definition of “readily marketable collateral” for this purpose. We are in compliance with the applicable loans to one borrower limitations. At December 31, 2010, our largest aggregate amount of loans to one borrower totaled $4.5 million. Both of the loans for the largest borrower were performing in accordance with their terms and the borrower had no affiliation with Broadway Federal.

Community Reinvestment Act

The Community Reinvestment Act (“CRA”) requires each savings institution, as well as other lenders, to identify the communities served by the institution’s offices and to identify the types of credit the institution is prepared to extend within those communities. The CRA also requires the OTS to assess the performance of the institution in meeting the credit needs of its communities as part of its examination of a savings institution, and to take such assessments into consideration in reviewing applications for mergers, acquisitions and other transactions. An unsatisfactory CRA rating may be the basis for denying an application. Community groups have successfully protested applications on CRA grounds. In connection with the assessment of a savings institution’s CRA performance, the OTS assigns ratings of “outstanding,” “satisfactory,” “needs to improve” or “substantial noncompliance.” The Bank was rated “outstanding” in its most recent CRA examination.

Qualified Thrift Lender Test

Savings institutions regulated by the OTS are subject to a qualified thrift lender (“QTL”) test, which in general requires such an institution to maintain on an average basis at least 65% of its portfolio assets (as defined) in “qualified thrift investments.” Qualified thrift investments include, in general, loans, securities and other investments that are related to housing, shares of stock issued by any Federal Home Loan Bank, loans for educational purposes, loans to small businesses, loans made through credit cards or credit card accounts and certain other permitted thrift investments. A savings institution’s failure to remain a QTL may result in conversion of the institution to a bank charter or operation under certain restrictions including limitations on new investments and activities, and the imposition of the restrictions on branching and the payment of dividends that apply to national banks. At December 31, 2010, the Bank was in compliance with the QTL test requirements.

The USA Patriot Act, Bank Secrecy Act (“BSA”), and Anti-Money Laundering (“AML”) Requirements

The USA PATRIOT Act was enacted after September 11, 2001 to provide the federal government with powers to prevent, detect, and prosecute terrorism and international money laundering, and has resulted in promulgation of several regulations that have a direct impact on savings associations. Financial institutions must have a number of programs in place to comply with this law, including: (i) a program to manage BSA/AML risk; (ii) a customer identification program designed to determine the true identity of customers, document and verify the information, and determine whether the customer appears on any federal government list of known or suspected terrorist or terrorist organizations; and (iii) a program for monitoring for the timely detection and reporting of suspicious activity and reportable transactions.

Privacy Protection

Broadway Federal is subject to OTS regulations implementing the privacy protection provisions of the Gramm-Leach Bliley Act, or Gramm-Leach. These regulations require Broadway Federal to disclose its privacy policy, including identifying with whom it shares “nonpublic personal information,” to customers at the time of

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establishing the customer relationship and annually thereafter. The regulations also require Broadway Federal to provide its customers with initial and annual notices that accurately reflect its privacy policies and practices. In addition, to the extent its sharing of such information is not covered by an exception, Broadway Federal is required to provide its customers with the ability to “opt-out” of having Broadway Federal share their nonpublic personal information with unaffiliated third parties.

Broadway Federal is also subject to regulatory guidelines establishing standards for safeguarding customer information. These regulations implement certain provisions of Gramm-Leach. The guidelines describe the agencies’ expectations for the creation, implementation and maintenance of an information security program, which would include administrative, technical and physical safeguards appropriate to the size and complexity of the institution and the nature and scope of its activities. The standards set forth in the guidelines are intended to ensure the security and confidentiality of customer records and information, protect against any anticipated threats or hazards to the security or integrity of such records and protect against unauthorized access to or use of such records or information that could result in substantial harm or inconvenience to any customer.

Savings and Loan Holding Company Regulation

As a savings and loan holding company, we are subject to certain restrictions with respect to our activities and investments. Among other things, we are generally prohibited, either directly or indirectly, from acquiring more than 5% of the voting shares of any savings association or savings and loan holding company that is not a subsidiary of the Company.

OTS approval must be obtained prior to any person acquiring control of the Company or Broadway Federal. Control is conclusively presumed to exist if, among other things, a person acquires more than 25% of any class of voting stock of the institution or holding company or controls in any manner the election of a majority of the directors of the insured institution or the holding company and may be presumed to exist at lower levels of ownership under certain circumstances.

Restrictions on Dividends and Other Capital Distributions

In general, the prompt corrective action regulations prohibit an OTS-regulated institution from declaring any dividends, making any other capital distribution, or paying a management fee to a controlling person, such as its parent holding company, if, following the distribution or payment, the institution would be within any of the three undercapitalized categories. In addition to the prompt corrective action restriction on paying dividends, OTS regulations limit certain “capital distributions” by savings associations. Capital distributions are defined to include, among other things, dividends and payments for stock repurchases and payments of cash to stockholders in mergers.

Under the OTS capital distribution regulations, a savings association that is a subsidiary of a savings and loan holding company must notify the OTS at least 30 days prior to the declaration of any capital distribution by its savings association subsidiary. The 30-day period provides the OTS an opportunity to object to the proposed dividend if it believes that the dividend would not be advisable.

An application to the OTS for approval to pay a dividend is required if: (a) the total of all capital distributions made during that calendar year (including the proposed distribution) exceeds the sum of the institution’s year-to-date net income and its retained income for the preceding two years; (b) the institution is not entitled under OTS regulations to “expedited treatment” (which is generally available to institutions the OTS regards as well run and adequately capitalized); (c) the institution would not be at least “adequately capitalized” following the proposed capital distribution; or (d) the distribution would violate an applicable statute, regulation, agreement, or condition imposed on the institution by the OTS.

As previously noted, the C&D issued by the OTS prohibits the Company and Bank from declaring or paying any dividends or making any other capital distributions without the prior written approval of the OTS Regional Director.

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The Bank’s ability to pay dividends to the Company is also subject to the restriction that the Bank is not permitted to pay dividends to the Company if its regulatory capital would be reduced below the amount required for the liquidation account established in connection with the conversion of the Bank from the mutual to the stock form of organization.

See Item 5, “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities” and Note 15 “Regulatory Capital Matters and Capital Purchase Program” of the Notes to Consolidated Financial Statements for a further description of dividend and other capital distribution limitations to which the Company and the Bank are subject.

Tax Matters

Federal Income Taxes

We report our income on a calendar year basis using the accrual method of accounting and are subject to federal income taxation in the same manner as other corporations with certain exceptions, including particularly the Bank’s tax reserve for bad debts. The Bank has qualified under provisions of the Internal Revenue Code (the “Code”) that in the past allowed qualifying savings institutions to establish reserves for bad debts, and to make additions to such reserves, using certain preferential methodologies. Under the relevant provisions of the Code as currently in effect, a small bank (a bank with $500 million or less of assets) may continue to utilize a reserve method of accounting for bad debts, under which additions to reserves are based on the institution’s six-year average loss experience. Broadway Federal qualifies as a small bank and has utilized the reserve method of accounting for bad debts based on its actual loss experience.

California Taxes

As a savings and loan holding company filing California franchise tax returns on a combined basis with its subsidiaries, the Company is subject to California franchise tax at the rate applicable to “financial corporations.” The applicable tax rate is the rate for general corporations plus 2%. Under California regulations, bad debt deductions are available in computing California franchise taxes using a three or six year average loss experience method.

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ITEM 2. PROPERTIES

We conduct our business through five branch offices and two loan production offices. Our loan service operation is also conducted from one of our branch offices. Our administrative and corporate operations are conducted from our corporate facility located at 4800 Wilshire Boulevard, Los Angeles, which also houses one of our branch offices. There are no mortgages, material liens or encumbrances against any of our owned properties. We believe that all of the properties are adequately covered by insurance, and that our facilities are adequate to meet our present needs.

Location	Leased or Owned		Original Date Leased  or Acquired		Date of Lease Expiration		Net Book Value of  Property or Leasehold Improvements at December 31, 2010
								(In thousands)
Administrative/Branch Office/Loan Origination Center:
4800 Wilshire Blvd		Owned		1997		-	$	1,780
Los Angeles, CA
Branch Offices:
4835 West Venice Blvd.		Building Owned		1965		2013	$	83
Los Angeles, CA		on Leased Land
170 N. Market Street		Owned		1996		-	$	741
Inglewood, CA
(Branch Office/Loan Service Center)
4001 South Figueroa Street		Owned		1996		-	$	1,870
Los Angeles, CA
4371 Crenshaw Blvd., Suite C		Leased		2007		2012	$	182
Los Angeles, CA
Loan Production Offices:
19800 MacArthur Blvd, Suite 300		Leased		2005		2011		-
Irvine, CA
2400 West Carson Street, Suite 215		Leased		2007		2012		-
Torrance, CA

ITEM 3. LEGAL PROCEEDINGS

Litigation

The Bank is the defendant in Daniel D. Holliday III, Attorney at Law, LLC (“Holliday”) v. Broadway Federal Bank (Case No. BC 398403), a lawsuit filed in the Superior Court of the State of California for Los Angeles County on September 18, 2008 and amended on March 4, 2009, November 20, 2009 and May 24, 2010. This legal action arises from a dispute over the priority of the Bank’s lien against a $2.6 million deposit account balance in the Bank securing a land development loan. The lawsuit seeks damages of $2.6 million, plus interest, costs and attorneys fees according to proof. The plaintiff also seeks injunctive relief to prevent the Bank from asserting a senior security interest in the deposit account and to prevent the Bank from applying the funds in the deposit account to satisfy the amount owing on the loan.

On April 17, 2009, the Bank filed a cross-complaint against Holliday (as an individual), Bachmann Springs Holdings, LLC (the developer), Thomas T. Bachmann (the principal of the developer), Robert Estareja (an agent

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of Bachmann Springs Holdings), Alan Roberson (the loan broker), Canyon Acquisitions, LLC (“Canyon”) (the broker who located the investors for the real estate project at issue and the entity funding Holliday’s fees and costs), and Brent Borland (Canyon’s principal), alleging causes of action for: declaratory relief, money due on default on promissory note, judicial foreclosure on personal property, money lent, fraud, negligent misrepresentation, conspiracy, implied equitable indemnity, rescission based on fraud, and equitable subordination. The allegations of the cross-complaint include that, among other things, the cross-defendants conspired with each other to fraudulently induce the Bank to make the loan at issue.

On or about October 27, 2009, Holliday filed and served a motion for leave to file a third amended complaint, which motion was granted on November 20, 2009. In addition to the causes of action pleaded against the Bank in the second amended complaint, the proposed third amended complaint includes a cause of action against the Bank for equitable subordination as well as causes of action against Wayne Standback, a vice-president of the Bank (Mr. Standback passed away on October 13, 2009) and Paul Hudson, the Chairman and CEO of the Bank, for negligence and conspiracy. Broadway filed a demurrer to and motion to strike the third amended complaint, the hearing on which took place on May 14, 2010. The demurrer was sustained. The fourth amended complaint, which was served on May 24, 2010, contains the same causes of action as the third amended complaint. Mr. Standback, however, is no longer a defendant. Hudson demurred to the fourth amended complaint and the Bank filed an answer.

Holliday and the Bank participated in mediation before a retired Superior Court judge on December 10, 2009 during which the parties attempted to resolve all of the disputes set forth in the pleadings and in counsel’s letter dated October 9, 2009. However, the parties were not successful in reaching a settlement.

On January 21, 2010, the court set a trial date in the Holliday matter for October 5, 2010, which as detailed below has been continued.

On February 1, 2010, Canyon filed a complaint in Los Angeles County Superior Court against the Bank and several of its officers and directors including Paul Hudson, Kellogg Chan, Javier Leon, Odell Maddox, Rick McGill, Daniel Medina, and Virgil Roberts, and certain non-Bank related defendants, for declaratory relief, breach of contract, interference with economic relations, negligence, intentional concealment, conspiracy, breach of fiduciary duty, and equitable subordination (Canyon Acquisitions, LLC v. Broadway Federal Bank, Case No. BC 431035). The complaint arises out of the same transaction that is the subject of the Holliday lawsuit discussed above. The Bank notified the court of this fact, which deemed the cases related. In the complaint, Canyon seeks general damages of not less than $10,000,000 and punitive damages in an unspecified amount. Service of the Canyon Complaint was effective as of March 16, 2010. The Bank has filed a demurrer to and motion to strike the complaint, the hearings on which were set for June 18, 2010. However, on June 18, 2010, Canyon filed a first amended complaint alleging similar causes of action and the scheduled hearing was not held. Then, on June 23, 2010, Canyon filed a motion to (1) consolidate the Canyon and Holliday lawsuits and (2) treat the Canyon lawsuit as a cross-complaint in the Holliday lawsuit. The hearing on Canyon’s motion was set for July 16, 2010.

However, on July 16, 2010, pursuant to the Stipulation between the parties, which was approved by the Court, the two cases (Holliday and Canyon) were consolidated, the Canyon Complaint is treated as a cross-complaint in the Holliday lawsuit, the trial was postponed from October 5, 2010 to May 10, 2011, and the following individuals were dismissed from the litigation with prejudice: all of the Broadway officers and directors who had been named as individual defendants in the Holliday and Canyon matters, Brent Borland, Daniel Holliday, III (as an individual only), and the Estate of Wayne Standback.

On August 31, 2010, the Bank filed a demurrer to Canyon’s cross-complaint, the hearing on which took place on December 8, 2010. At the hearing, the Court overruled the Bank’s demurrer to Canyon’s Second Cause of Action for Breach of Contract and sustained the Bank’s demurrer to Canyon’s Seventh Cause of Action for Breach of Fiduciary Duty without leave to amend. The Bank subsequently filed an answer to Canyon’s cross-complaint and asserted various affirmative defenses.

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With respect to the foregoing matters, management has established a $1.5 million specific allocation of the allowance for loan losses for the related $2.2 million loan as of December 31, 2010.

OTS Investigation

The OTS is conducting a formal investigation of the activities of a former loan officer of the Bank whose employment was terminated in March 2010. In connection with the investigation the OTS has issued subpoenas to the chief lending officer and chief executive officer requesting documents relating to our loan officer and loans he originated while employed by the Bank. The subpoenas also contemplate taking oral testimony from the officers. While the OTS has not informed us of the scope of its investigation, we believe the OTS investigation includes, but may not be limited to, inquiry into whether documentation submitted in connection with loan applications for loans originated by the loan officer contained inaccurate or deliberately falsified information and whether the loan officer received unauthorized direct or indirect benefits from payments made by the borrowers on such loans to loan brokers or other persons associated with the lending process. All of the loans originated by the former loan officer have been reviewed by us and by the independent loan review firm we engaged to perform a general review of our loan portfolio pursuant to the C&D issued to us by the OTS. See “Item 1. Business—Regulation—Cease and Desist Orders.” We have taken the results of these loan reviews into account, along with all other relevant information known to us, in determining the amounts of our loan loss provisions and the level of our loan loss reserves that we believe to be appropriate as of December 31, 2010.

ITEM 4. REMOVED AND RESERVED

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PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock is traded on the Nasdaq Capital Market under the symbol “BYFC.” The table below shows the high and low sale prices for our common stock during the periods indicated.

2010	1st Quarter	2nd Quarter	3rd Quarter	4th Quarter
High	$7.00	$6.09	$3.71	$3.77
Low	$5.63	$1.82	$1.78	$1.68
2009	1st Quarter	2nd Quarter	3rd Quarter	4th Quarter
High	$5.24	$8.00	$7.60	$7.70
Low	$3.84	$4.15	$4.75	$4.08

The closing sale price for our common stock on the Nasdaq Capital Market on March 15, 2011 was $2.20 per share. As of March 15, 2011, we had 399 shareholders of record and 1,743,965 shares of common stock outstanding.

We paid quarterly dividends on our Common Stock at the rate of $0.05 per share during 2009 and reduced the quarterly dividends to $0.01 per share during the first quarter of 2010. Effective June 2010, as discussed below, we stopped paying dividends in order to retain capital for reinvestment in the Company’s business. In general, we may pay dividends out of funds legally available for that purpose at such times as our Board of Directors determines that dividend payments are appropriate, after considering our net income, capital requirements, financial condition, alternate investment options, prevailing economic conditions, industry practices and other factors deemed to be relevant at the time. However, pursuant to the C&D order issued to the Company and the Bank by the OTS in September 2010, neither the Company nor the Bank may declare or pay dividends or make other capital distributions, which term includes repurchases of stock, without receipt of prior written notice of non-objection to such capital distribution from the OTS Regional Director. In addition, we agreed in connection with our issuance of Series D and Series E Senior Preferred Stock to the U.S. Treasury that we would not pay cash dividends on our common stock at a quarterly rate greater than $0.05 per share, or redeem, purchase or acquire any of our common stock or other equity securities, without the prior approval of the U.S. Treasury while the Series D or Series E Senior Preferred Stock remain outstanding.

Our ability to pay permitted dividends is primarily dependent upon receipt of dividends from Broadway Federal. Broadway Federal is subject to certain requirements, in addition to the OTS directive referred to above, which may limit its ability to pay dividends or make other capital distributions. See Item 1, “Business – Regulation” and Note 15 “Regulatory Capital Matters and Capital Purchase Program” of the Notes to Consolidated Financial Statements in Item 8, “Financial Statements and Supplementary Data” for an explanation of the impact of regulatory capital requirements on Broadway Federal’s ability to pay dividends.

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Equity Compensation Plan Information

The following table provides information about the Company’s common stock that may be issued under equity compensation plans as of December 31, 2010.

Plan category	Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)		Weighted average exercise price of outstanding options, warrants and rights (b)		Number of  securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c)
Equity compensation plans approved by security holders:
Performance equity plan		600	$	-		-
1996 Long term incentive plan		70,918	$	9.27		-
Stock option plan for outside directors		4,282	$	9.91		-
2008 Long term incentive plan		151,875	$	5.31		199,843
Equity compensation plans not approved by security holders:
None		-		-		-
Total		227,675	$	6.61		199,843

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ITEM 7. 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 Item 8, “Financial Statements and Supplementary Data,” of this Annual Report on Form 10-K.

Overview

During the year ended December 31, 2010, the national economy stabilized from the volatility experienced in 2008 and 2009 and showed signs of improvement as evidenced by, among other things, a decrease in the unemployment rate and moderate job growth. However, softness in the housing and real estate markets persist and unemployment levels remain elevated with a national unemployment rate of 9.4% for December 2010. The recent financial crisis and continued concern for the stability of the banking and financial systems resulted in the passage of the Dodd-Frank Act in July 2010. Certain aspects of the Dodd-Frank Act will have an impact on us including the combination of our primary regulator, the OTS, with the OCC, the imposition of consolidated holding company capital requirements, and the changes to deposit insurance assessments.

In March 2010, the Company and the Bank were determined to be “in troubled condition” by the OTS, which has imposed limitations on various aspects of our operations, including among others, limitations on our growth and ability to pay dividends and on our ability to use brokered deposits to fund our operations. The Company and the Bank agreed to the issuance of cease and desist orders to them by the OTS effective September 09, 2010, which we refer to collectively herein as the “C&D.” The C&D requires, among other things, that the Company and the Bank take remedial actions to improve the Bank’s loan underwriting and internal asset review procedures, to reduce the amount of its non-performing assets and to improve other aspects of the Bank’s business, as well as the Company’s management of its business and the oversight of the Company’s business by the Board. The C&D requires the Bank to attain, and thereafter maintain, a Tier 1 (Core) Capital to Adjusted Total Assets ratio of at least 8% and a Total Risk-Based Capital to Risk-Weighted Assets ratio of at least 12%, both of which ratios are greater than the respective 6% and 10% levels for such ratios that are generally required under OTS regulations.

In response to the C&D, we substantially reduced our loan origination efforts, suspended our church lending and ran off maturing brokered deposits, including deposits obtained through the CDARS reciprocal referral system, beginning in the second quarter of 2010. As a result, total assets, primarily our loan portfolio, and total deposits decreased during the year ended December 31, 2010. We are also pursing a Recapitalization Program that is intended to increase our common equity capital base and greatly reduce our reliance on senior capital securities and borrowings at our holding company level, but which will result in very substantial dilution to our existing senior and common equity holders. See “—Capital Resources” below.

Net earnings increased for the year ended December 31, 2010, compared to the year ended December 31, 2009. This increase was due to a substantial decrease in provision for loan losses, an increase in net interest income and an increase in non-interest income, partially offset by increases in income tax expense and non-interest expense.

Analysis of Net Interest Income

Net interest income is the difference between income on interest-earning assets and the expense on interest-bearing liabilities. Net interest income depends upon the relative amounts of interest-earning assets and interest-bearing liabilities and the interest rates earned or paid on them. The following table sets forth average balance sheets, average yields and costs, and certain other information for the periods indicated. All average balances are

31

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 nonaccrual status, however, the balance of these loans is included in the total average balance, which has the effect of reducing average loan yields.

	For the Year Ended December 31,
	2010							2009							2008
(Dollars in Thousands)	Average Balance		Interest		Average Yield/Cost			Average Balance		Interest		Average Yield/Cost			Average Balance		Interest		Average Yield/Cost
Assets
Interest-earning assets:
Interest-earning deposits	$	4,224	$	10		0.24	%	$	8,051	$	83		1.03	%	$	3,718	$	73		1.96	%
Federal Funds sold and other short-term investments		20,968		23		0.11	%		1,281		2		0.16	%		3,032		37		1.22	%
Investment securities		1,000		50		5.00	%		1,000		50		5.00	%		1,079		55		5.10	%
Residential mortgage-backed securities		25,761		914		3.55	%		26,795		1,158		4.32	%		29,109		1,371		4.71	%
Loans receivable (1)(2)		462,800		28,821		6.23	%		429,040		27,366		6.38	%		339,166		23,744		7.00	%
FHLB stock		4,336		19		0.44	%		4,140		9		0.22	%		5,086		204		4.01	%
Total interest-earning assets		519,089	$	29,837		5.75	%		470,307	$	28,668		6.10	%		381,190	$	25,484		6.69	%
Non-interest-earning assets		4,424							9,325							9,278
Total assets	$	523,513						$	479,632						$	390,468
Liabilities and Stockholders’ Equity
Interest-bearing liabilities:
Money market deposits	$	27,701	$	182		0.66	%	$	33,719	$	530		1.57	%	$	29,035	$	705		2.43	%
Passbook deposits		37,574		163		0.43	%		37,763		311		0.82	%		39,378		547		1.39	%
NOW and other demand deposits		47,077		104		0.22	%		64,967		763		1.17	%		39,853		303		0.76	%
Certificate accounts		274,641		5,461		1.99	%		221,863		5,318		2.40	%		156,228		5,624		3.60	%
Total deposits		386,993		5,910		1.53	%		358,312		6,922		1.93	%		264,494		7,179		2.71	%
FHLB advances		87,897		2,930		3.33	%		76,433		2,830		3.70	%		89,404		3,566		3.99	%
Junior subordinated debentures and other borrowings		10,231		433		4.23	%		6,385		236		3.70	%		7,192		421		5.85	%
Total interest-bearing liabilities		485,121	$	9,273		1.91	%		441,130	$	9,988		2.26	%		361,090	$	11,166		3.09	%
Non-interest-bearing liabilities		5,631							5,328							4,954
Stockholders’ Equity		32,761							33,174							24,424
Total liabilities and stockholders’ equity	$	523,513						$	479,632						$	390,468
Net interest rate spread (3)			$	20,564		3.84	%			$	18,680		3.84	%			$	14,318		3.60	%
Net interest rate margin (4)						3.96	%						3.97	%						3.76	%
Ratio of interest-earning assets to interest-bearing liabilities						107.00	%						106.61	%						105.57	%
Return on average assets						0.37	%						(1.35	%)						0.59	%
Return on average equity						5.85	%						(19.47	%)						9.42	%
Average equity to average assets ratio						6.26	%						6.92	%						6.26	%
Dividend payout ratio (5)						N/A							N/A							16.90	%

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

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

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

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

(5) Percentage is calculated based on dividends on common stocks divided by net earnings (loss) less dividends and accretion on preferred stocks.

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Changes in our net interest income are a function of changes in both rates and volumes of interest-earning assets and interest-bearing liabilities. The following table sets forth information regarding changes in our interest income and expense for the years indicated. Information is provided in each category with respect to (i) changes attributable to changes in volume (changes in volume multiplied by prior rate), (ii) changes attributable to changes in rate (changes in rate multiplied by prior volume), and (iii) the total change. The changes attributable to the combined impact of volume and rate have been allocated proportionately to the changes due to volume and the changes due to rate.

	Year ended December 31, 2010 Compared to Year ended December 31, 2009									Year ended December 31, 2009 Compared to Year ended December 31, 2008
	Increase (Decrease) in Net Interest Income									Increase (Decrease) in Net Interest Income
	Due to Volume			Due to Rate			Total			Due to Volume			Due to Rate			Total
	(In thousands)
Interest-earning assets:
Interest-earning deposits	$	(28	)	$	(45	)	$	(73	)	$	56		$	(46	)	$	10
Federal funds sold and other short term investments		22			(1	)		21			(14	)		(21	)		(35	)
Investment securities, net		-			-			-			(4	)		(1	)		(5	)
Mortgage backed securities, net		(43	)		(201	)		(244	)		(105	)		(108	)		(213	)
Loans receivable, net		2,501			(1,046	)		1,455			5,873			(2,251	)		3,622
FHLB stock		-			10			10			(32	)		(163	)		(195	)
Total interest-earning assets		2,452			(1,283	)		1,169			5,774			(2,590	)		3,184
Interest-bearing liabilities:
Money market deposits		(82	)		(266	)		(348	)		159			(334	)		(175	)
Passbook deposits		(2	)		(146	)		(148	)		(22	)		(214	)		(236	)
NOW and other demand deposits		(167	)		(492	)		(659	)		247			213			460
Certificate accounts		1,139			(996	)		143			1,839			(2,145	)		(306	)
FHLB advances		399			(299	)		100			(493	)		(243	)		(736	)
Junior subordinated debentures		-			(38	)		(38	)		-			(138	)		(138	)
Other borrowings		235			-			235			(48	)		1			(47	)
Total interest-bearing liabilities		1,522			(2,237	)		(715	)		1,682			(2,860	)		(1,178	)
Change in net interest income	$	930		$	954		$	1,884		$	4,092		$	270		$	4,362

Comparison of Operating Results for the Years Ended December 31, 2010 and 2009

General

Our most significant source of income is net interest income, which is the difference between our interest income and our interest expense. Generally, interest income is generated from our loans and investments (interest-earning assets) and interest expense is generated from deposits and borrowings (interest-bearing liabilities). Our results of operations are also affected by our provision for loan losses, non-interest income generated from service charges and fees on loan and deposit accounts, gain or loss on the sale of loans and securities, non-interest expenses and income taxes.

Net Earnings (Loss)

We recorded net earnings of $1.9 million, or $0.44 per diluted common share, for the year ended December 31, 2010, compared to a net loss of ($6.5) million, or ($4.14) per diluted common share, for the year ended December 31, 2009. The improvement in net earnings reflected higher net interest income before loan loss provisions, substantially reduced provisions for losses, and higher non-interest income.

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Net Interest Income

Net interest income before provision for loan losses for the year ended December 31, 2010 was $20.6 million, which represented an increase of $1.9 million, or 10.09%, from the year ended December 31, 2009. The increase was primarily attributable to an increase of $48.8 million in average interest-earning assets, combined with one basis point decrease in net interest margin from 3.97% in 2009 to 3.96% in 2010.

Interest Income

Interest income for 2010 increased $1.2 million, or 4.08%, from a year ago. The increase was due primarily to higher levels of interest-earning assets which resulted in a $2.5 million increase in interest income. The increase in average interest-earning assets was offset by a 35 basis point decrease in the yield on average interest-earning assets, which reduced interest income by $1.3 million.

Our net loan portfolio accounted for a substantial portion of the increase in our average interest-earning assets. In 2010, average loans outstanding increased by $33.8 million, or 7.87%. At the same time, the yield earned on loans decreased by 15 basis points to 6.23%, which was primarily due to higher level of nonaccrual loans.

Interest Expense

Interest expense for 2010 decreased $715 thousand, or 7.16%, from a year ago. The decrease was primarily due to a 35 basis point decline in the cost of average interest-bearing liabilities from 2.26% for 2009 to 1.91% for 2010, which resulted in a decrease in interest expense of $2.2 million. The cost of average interest-bearing liabilities declined in 2010 as we lowered the interest rates paid on deposit accounts and as maturing certificates of deposits were renewed or replaced by new certificates of deposit at lower rates. Partially offsetting the impact of the decline in the cost of average interest-bearing liabilities was an increase in the average balance of interest-bearing liabilities of $44.0 million. Interest-bearing liabilities averaged $485.1 million in 2010 compared to $441.1 million in 2009. The increase in these average balances resulted in a $1.5 million increase in interest expense.

Provision for Loan Losses

The provision for loan losses represents the charge against current earnings that we determine as the amount needed to maintain an allowance for loan losses that should be sufficient to absorb loan losses inherent in the Bank’s loan portfolio. We determine the size of the provision for each year based upon many factors, including loan growth, net charge-offs, changes in the composition of the loan portfolio, delinquencies, non-performing loans, our assessment of loan portfolio quality, value of collateral, general economic factors and feedback from regulatory examinations.

For the year 2010, the provision for loan losses totaled $4.5 million, down $15.1 million, from a year ago. The amount of the provision recorded in 2010 primarily reflected increases in classified and nonperforming loans and a reduction in our gross loan portfolio. The provision for loan losses of $19.6 million for 2009 was reflective of deteriorating asset quality and the results of a regulatory examination in the early part of 2010.

We performed an impairment analysis for all non-performing and restructured loans, and established specific loss allocations for impaired loans of $6.0 million at December 31, 2010. The specific loss allocations at December 31, 2010 were mainly related to eleven commercial real estate loans, three one to four-family residential loans and two multi-family residential loans totaling $10.1 million. The loans are non-performing and the recent valuation of the underlying collateral reflected a decrease in values, and the Bank accordingly allocated $2.0 million of specific loss allocations. The Bank also recorded a $2.4 million specific loss allocation

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on two commercial loans, an unsecured consumer loan, and one loan secured by a deposit account, totaling $6.0 million. Additionally, the Bank recorded $1.6 million specific loss allocation for impairment related to $15.8 million of loans that were modified in troubled debt restructurings.

Net loan charge-offs during 2010 were $4.5 million, or 0.97% of average loans, compared to $2.7 million, or 0.64% of average loans, during 2009. Charge-offs during 2010 included $2.0 million of charge-offs on twelve one to four-family loans, $209 thousand of charge-offs on nine commercial real estate loans, $21 thousand of charge-off on two multi-family loans, $1.7 million of charge-off on a commercial loan and $504 thousand of charge-offs on four unsecured consumer loans. Of the $4.5 million of loan charge-offs during 2010, $2.9 million were specifically reserved for at year-end 2009 and $1.6 million were specifically reserved for in 2010.

Non-Interest Income

For the year 2010, non-interest income totaled $2.7 million, up $699 thousand, or 35.68%, from a year ago. The increase was primarily due to $1.5 million in grants received from the U.S. Department of the Treasury’s Community Development Financial Institutions (CDFI) Fund in 2010, compared to $591 thousand in grants received in 2009, which were included with other non-interest income on the income statement. This increase was partially offset by $116 thousand higher net losses on sale of loans and REO and $47 thousand lower service charges for loan related fees and retail banking fees.

Non-Interest Expense

For the year 2010, non-interest expense totaled $15.5 million, up $3.4 million, or 27.95%, from a year ago. The increase was mostly due to higher provision for losses on loans held for sale and REO. Also contributing to higher non-interest expense in 2010 were higher professional services expense, primarily legal, audit, tax and consulting fees, and higher FDIC insurance premium expense. These expenses increased primarily as a result of the C&D issued to us by the OTS. Compensation and benefits expense also increased primarily due to the lower amount of salaries that were deferred on loan originations as a result of decreased loan origination volume in 2010. Other expense also increased primarily reflecting higher appraisal expenses related to delinquent loans and REO.

Income Taxes

Income tax expense totaled $1.3 million for 2010 compared to income tax benefit of ($4.6) million for 2009. The effective tax rates for the periods ended December 31, 2010 and 2009 were 41.19% and (41.84%), respectively. Income taxes are computed by applying the statutory federal income tax rate of 34% and the California income tax rate of 10.84% to earnings before income taxes. See Note 1 “Summary of Significant Accounting Principles” and Note 12 “Income Taxes” of the Notes to Consolidated Financial Statements for a further discussion of income taxes and a reconciliation of income tax at the federal statutory tax rate to actual tax expense (benefit).

The Company’s net deferred tax assets totaled $5.4 million at December 31, 2010 compared to $5.0 million at December 31, 2009. The Company has recorded a valuation allowance of $507 thousand and $206 thousand at year-end 2010 and 2009 related to deferred state taxes as it does not anticipate having future state taxable income sufficient to fully utilize the net deferred state tax asset. No valuation allowance has been recorded against the net deferred federal tax asset as the Company expects to have sufficient future income to utilize the net deferred federal tax assets.

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Comparison of Financial Condition at December 31, 2010 and 2009

Total Assets

Total assets were $483.9 million at December 31, 2010, which represented a decrease of $37.1 million, or 7.12%, from December 31, 2009. During 2010, net loans (including loans held for sale) decreased by $41.6 million, or 9.16%, and securities decreased by $8.0 million, or 25.56%. Other assets decreased $2.9 million, or 39.89%, primarily reflecting a $998 thousand decrease in prepaid FDIC insurance, a $430 thousand write-off of two overdraft deposit DDA accounts and a $288 thousand decrease in accounts receivable. These decreases in assets were partially offset by a $14.5 million increase in cash and cash equivalents, a $964 thousand increase in REO and a $383 thousand increase in net deferred income tax assets.

The C&D issued to us by the OTS effective September 9, 2010, among other restrictions, limits the increase in the Bank’s total assets during any quarter to an amount equal to the net interest credited on deposit liabilities during the prior quarter without the prior written notice to and receipt of notice of non-objection from the OTS Regional Director.

Loans Receivable

During 2010, we restrained loan growth to comply with the C&D restriction on asset growth and suspension of church lending. Our gross loan portfolio decreased to $402.6 million at December 31, 2010 from $453.1 million at December 31, 2009. The $50.5 million decrease in our loan portfolio primarily consisted of a $17.8 million decrease in our multi-family residential real estate loan portfolio, a $12.9 million decrease in our commercial real estate loan portfolio, an $11.0 million decrease in commercial loans and an $8.0 million decrease in our one-to-four family residential real estate loan portfolio.

Loan originations, including purchases, for the year ended December 31, 2010 totaled $17.5 million compared to $154.7 million for the year ended December 31, 2009. Loan repayments, including loan sales, totaled $39.3 million for the year ended December 31, 2010, compared to $37.8 million for the comparable period in 2009. Loans transferred to REO during 2010 totaled $5.0 million, compared to $2.1 million during 2009. In addition, during 2010 we transferred $24.0 million of loans to loans receivable held for sale, compared to $-0- during 2009.

Deposits

Deposits totaled $348.4 million at December 31, 2010, down $37.0 million, or 9.61%, from year-end 2009. During 2010, core deposits (NOW, demand, money market and passbook accounts) decreased by $6.8 million and certificates of deposit (“CDs”) decreased by $30.2 million. Included in the $30.2 million decrease in CDs was an $82.8 million reduction in our brokered deposits, which was partially offset by a $52.6 million increase in our regular CDs. Brokered deposits represented 5% of total deposits at December 31, 2010 compared to 26.19% at December 31, 2009.

The C&D issued to us by the OTS effective September 9, 2010, among other restrictions, prohibits the Bank from increasing the amount of its brokered deposits beyond the amount of interest credited without prior notice to and receipt of notice of non-objection from the OTS Regional Director. To comply with the C&D restriction on brokered deposits and asset growth, we lowered our deposit rates and ran off maturing brokered deposits, including CDARS, beginning in the second quarter of 2010.

Borrowings

At December 31, 2010, borrowings consisted of advances from the FHLB of $87.0 million, junior subordinated debentures of $6.0 million and other borrowings of $5.0 million. Since the end of 2009, FHLB borrowings have decreased by $4.6 million, or 5.02%, as our assets decreased in 2010. At December 31, 2010

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and 2009, FHLB advances were 17.98% and 17.58%, respectively, of total assets, and the weighted average cost of advances at those dates was 3.24% and 3.23%, respectively. In February 2010, the Company borrowed an aggregate of $5.0 million under its $5.0 million line of credit with another financial institution and invested all of the proceeds in the equity capital of the Bank. The C&D issued to us by the OTS effective September 9, 2010, among other restrictions, prohibits the Bank to incur, issue, renew, repurchase, make payments on or increase any debt or redeem any capital stock without prior notice to and receipt of written notice of non-objection from the OTS Regional Director.

Stockholders’ Equity

Stockholders’ equity was $32.9 million, or 6.79% of the Company’s total assets, at December 31, 2010. At December 31, 2010, the Bank’s Total Risk-Based Capital ratio was 13.05%, its Tier 1 Risk-Based Capital ratio was 11.76%, and its Core Capital and Tangible Capital ratios were 8.82%. The Company is currently pursuing a Recapitalization Plan to increase capital and reduce debt and senior securities, including a sale of additional common stock and exchanges of preferred stock for common stock at a discount to the liquidation amount, to further strengthen the Company’s capital ratios, and position the Bank for future growth.

Stockholders’ equity increased by $1.4 million, or 4.27%, to $32.9 million at December 31, 2010 from $31.5 million at December 31, 2009. This increase in stockholders’ equity was primarily due to net earnings of $1.9 million for the year which was partially offset by $787 thousand of dividends.

Capital Resources

Our principal subsidiary, Broadway Federal, must comply with capital standards established by the OTS in the conduct of its business and failure to comply with such capital requirements may result in significant limitations on its business or other sanctions. We are not currently subject to separate holding company capital requirements, but Dodd-Frank Act recently enacted by Congress will, among other things, impose specific capital requirements on us as a savings and loan holding company as well. The current regulatory capital requirements and possible consequences of failure to maintain compliance are described in Part I, Item 1 “Business-Regulation” and in Note 15 “Regulatory Capital Matters and Capital Purchase Program” of the Notes to Consolidated Financial Statements.

On November 14, 2008, the Company issued 9,000 shares of the Company’s Fixed Rate Cumulative Perpetual Preferred Stock, Series D, having a liquidation preference of $1,000 per share, together with a ten-year warrant to purchase 183,175 shares of Company common stock at $7.37 per share, to the U.S. Treasury for gross proceeds of $9.0 million. The sale of the Senior Preferred Stock was made pursuant to the U.S. Treasury’s TARP Capital Purchase Program.

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

We are pursuing our comprehensive Recapitalization Plan. To date, we have obtained, subject to documentation and certain terms and conditions:

• The consent of the U.S. Treasury to exchange our Series D and E Fixed Rate Cumulative Perpetual Preferred Stock for common stock at a discount of 50% of the liquidation amount, plus an undiscounted exchange of the accumulated but unpaid dividends on such preferred stock for common stock;

• An agreement in principle with the holders of both the Series A and Series B Perpetual Preferred Stock to exchange their holdings for common stock at a discount of 50% of the liquidation amount;

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• An agreement in principle with our senior bank lender to exchange a portion of our senior line of credit, which is currently in default, for common stock at 100% of the face amount to be exchanged and to forgive the accrued interest on the line of credit to the date of the exchange.

The conditions to each of the above exchanges include requirements that the holder of our outstanding Series C Noncumulative Perpetual Convertible Preferred Stock concurrently exchange such preferred stock for our common stock on similar terms and that we concurrently complete private placements or other sales of our common stock aggregating $5 million or more in gross proceeds. Based on the agreements in principle that we have reached, we anticipate that these transactions will result in the issuance of approximately 7.0 million new shares of our common stock, which would constitute approximately 80% of the pro forma outstanding shares of our common stock.

Liquidity

The objective of liquidity management is to ensure that we have the continuing ability to fund operations and meet other obligations on a timely and cost-effective basis. Our sources of funds include deposits, advances from the FHLB and other borrowings, proceeds from the sale of loans, mortgage-backed and investment securities, and principal and interest payments from loans and mortgage-backed and other investment securities. Primary uses of funds include withdrawal of and interest payments on deposits, originations of loans, purchases of mortgage-backed and other investment securities, and payment of operating expenses.

Net cash inflows from operating activities totaled $23.6 million and $7.5 million during 2010 and 2009, respectively. Net cash inflows from operating activities for 2010 were primarily attributable to payments of interest on loans and proceeds from sales of loans held for sale during 2010.

Net cash inflows (outflows) from investing activities totaled $28.2 million and ($125.6) million during 2010 and 2009, respectively. Net cash inflows from investing activities for 2010 were attributable primarily to principal repayments on loans and residential mortgage-backed securities.

Net cash inflows (outflows) from financing activities totaled ($37.3) million and $118.1 million during 2010 and 2009, respectively. Net cash outflows from financing activities for 2010 were attributable primarily to the net decreases in deposits and FHLB advances.

When we have more funds than required for our reserve requirements or short-term liquidity needs, we sell federal funds to other financial institutions. Conversely, when we have fewer funds than required, we may borrow funds from the FHLB. We currently are approved by the FHLB to borrow up to $100.0 million to the extent we provide qualifying collateral and hold sufficient FHLB stock. That approved limit and collateral requirement would have permitted the Bank, as of year-end 2010, to borrow an additional $13.0 million.

At times we maintain a portion of our liquid assets in interest-bearing cash deposits with other banks, in overnight federal funds sold to other banks, and in investment securities available-for-sale that are not pledged. Our liquid assets, consisting of cash and cash equivalents and investment securities available-for-sale that are not pledged, were $32.5 million at December 31, 2010 compared to $22.4 million at December 31, 2009. Cash and cash equivalents were $22.0 million at December 31, 2010, compared to $7.4 million at December 31, 2009.

On February 28, 2010, we borrowed an aggregate of $5.0 million under our $5.0 million line of credit with another financial institution and most of the proceeds have been invested in the equity capital of the Bank. Borrowings under the line of credit are secured by the Company’s assets. The full amount of this borrowing became due and payable on July 31, 2010. This senior line of credit has not been repaid and we are now in default under the line of credit agreement. We do not have sufficient cash available to repay the borrowing at this time and would require approval of the OTS to make any payment on this senior line of credit or to obtain a dividend from the Bank for such purpose. On April 7, 2011, the Lender agreed to forbear from exercising its

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rights (other than increasing the interest rate by the default rate margin) until January 1, 2012 subject to certain conditions described in Note 10 of the Notes to Consolidated Financial Statements. Further information regarding this borrowing is included in Note 10 “Other Borrowings and Management’s Capital Plan” of the Notes to Consolidated Financial Statements.

Off-Balance-Sheet Arrangements and Contractual Obligations

We are a party to financial instruments with off-balance-sheet risk in the normal course of our business primarily in order to meet the financing needs of our customers. These instruments involve, to varying degrees, elements of credit, interest rate and liquidity risk. In accordance with GAAP, these instruments are either not recorded in the consolidated financial statements or are recorded in amounts that differ from the notional amounts. Such instruments primarily include lending commitments and lease commitments as described below.

Lending commitments include commitments to originate loans and to fund lines of credit. Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since some of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. We evaluate creditworthiness on a case-by-case basis. Our maximum exposure to credit risk is represented by the contractual amount of the instruments.

In addition to our lending commitments, we have contractual obligations related to operating lease commitments. Operating lease commitments are obligations under various non-cancelable operating leases on buildings and land used for office space and banking purposes.

The following table details our contractual obligations at December 31, 2010.

	Less than one year		More than one year to three years		More than three years to five tears		More than five tears		Total
	(Dollars in thousands)
Certificates of deposit	$	130,539	$	93,805	$	9,730	$	4,109	$	238,183
FHLB advances		9,000		16,500		38,500		23,000		87,000
Junior subordinated debentures		-		-		6,000		-		6,000
Other borrowings		5,000		-		-		-		5,000
Commitments to originate loans		382		-		-		-		382
Commitments to fund unused lines of credit		5,420		2,685		298		407		8,810
Operating lease obligations		209		238		-		-		447
Total contractual obligations	$	150,550	$	113,228	$	54,528	$	27,516	$	345,822

Impact of Inflation and Changing Prices

Our consolidated financial statements including notes have been prepared in accordance with GAAP which require the measurement of financial position and operating results primarily in terms of historical dollars without considering the changes in the relative purchasing power of money over time due to inflation. The impact of inflation is reflected in increased costs of our operations. Unlike industrial companies, nearly all of our assets and liabilities are monetary in nature. As a result, interest rates have a greater impact on our performance than do the effects of general levels of inflation. Interest rates do not necessarily move in the same direction or to the same extent as the price of goods and services.

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Critical Accounting Policies

Critical accounting policies are those that involve significant judgments and assessments by management, and which could potentially result in materially different results under different assumptions and conditions. We consider the following to be critical accounting policies:

Allowance for Loan Losses

The determination of the allowance for loan losses is considered critical due to the high degree of judgment involved, the subjectivity of the underlying assumptions used, and the potential for changes in the economic environment that could result in material changes in the amount of the allowance for loan losses considered necessary. The allowance is evaluated on a regular basis by management and the Board of Directors and is based on a periodic review of the collectability of the loans in light of historical experience, the nature and size of the loan portfolio, adverse situations that may affect borrowers’ ability to repay, the estimated value of any underlying collateral, prevailing economic conditions and feedback from regulatory examinations. See Item 1, “Business – Asset Quality – Allowance for Loan Losses” for a full discussion of the allowance for loan losses.

Real Estate Owned (“REO”)

REO includes property acquired through foreclosure or deed in lieu of foreclosure and is recorded at the lower of cost or fair value, less estimated costs to sell, at the time of acquisition. The excess, if any, of the loan balance over the fair value of the property at the time of transfer from loans to REO is charged to the allowance for loan losses. Subsequent to the transfer to REO, if the fair value of the property less estimated selling costs is less than the carrying value of the property, the deficiency is charged to income and a valuation allowance is established. Operating costs after acquisition are expensed. Due to changing market conditions, there are inherent uncertainties in the assumptions with respect to the estimated fair value of REO. Therefore, the amount ultimately realized may differ from the amounts reflected in the accompanying consolidated financial statements.

Income Taxes

Deferred income tax assets and liabilities are determined using the liability (or balance sheet) method. Under this method, the net deferred tax asset or liability is determined based on the tax effects of the temporary differences between the book and tax bases of the various balance sheet assets and liabilities and gives current recognition to changes in tax rates and laws. A valuation allowance is established against deferred tax assets when, based upon the available evidence including historical and projected taxable income, it is more likely than not that some or all of the deferred tax asset will not be realized. See Note 12 “Income Taxes” of the Notes to Consolidated Financial Statements in Item 8, “Financial Statements and Supplementary Data.”

This discussion has highlighted those accounting policies that management considers critical; however, all accounting policies are important, and therefore you are encouraged to review each of the policies included in Note 1 “Summary of Significant Accounting Principles” of the Notes to Consolidated Financial Statements beginning at page F-6 to gain a better understanding of how our financial performance is measured and reported.

Impact of Recent Accounting Standards

In July 2010, the FASB amended existing disclosure guidance to require an entity to provide a greater level of disaggregated information about the credit quality of its financing receivables and its allowance for credit losses. The new and amended disclosure requirements focus on such areas as nonaccrual and past due financing receivables, allowance for credit losses related to financing receivables, impaired loans, credit quality information and modifications. The guidance requires an entity to disaggregate new and existing disclosures based on how it develops its allowance for credit losses and how it manages credit exposures. For public entities, the disclosures as of the end of a reporting period are effective for interim and annual reporting periods ending on or after December 15, 2010. The disclosures about activity that occurs during a reporting period are effective for interim and annual reporting periods beginning on or after December 15, 2010. See Note 4 “Loans” of the Notes to Consolidated Financial Statements for the required disclosures at December 31, 2010.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See Index to Consolidated Financial Statements of Broadway Financial Corporation and Subsidiaries.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures

As of December 31, 2010, an evaluation was performed under the supervision of the Company’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based on that evaluation, the Company’s CEO and CFO concluded that the Company’s disclosure controls and procedures were effective as of December 31, 2010.

Management’s annual report on internal control over financial reporting

The management of Broadway Financial Corporation is responsible for establishing and maintaining adequate internal control over financial reporting for the Company as defined in Rule 13a-15(f) under the Exchange Act. This system, which management has chosen to base on the framework set forth in Internal Control-Integrated Framework, published by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and which is effected by the Company’s board of directors, management and other personnel, is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.

The Company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and the directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, a system of internal control over financial reporting can provide only reasonable assurance and may not prevent or detect misstatements. Further, because of changes in conditions, effectiveness of internal controls over financial reporting may vary over time.

With the participation of the Company’s Chief Executive Officer and Chief Financial Officer, management has conducted an evaluation of the effectiveness of the Company’s system of internal control over financial reporting. Based on this evaluation, management determined that the Company’s system of internal control over financial reporting was effective as of December 31, 2010.

This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.

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Changes in internal control over financial reporting

There were no significant changes in the Company’s internal control over financial reporting identified in connection with the evaluation of internal control over financial reporting that occurred during the fourth quarter of 2010 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

/s/ Paul C. Hudson	/s/ Samuel Sarpong
Paul C. Hudson	Samuel Sarpong
Chief Executive Officer	Chief Financial Officer
Los Angeles, CA	Los Angeles, CA
April 14, 2011	April 14, 2011

ITEM 9B. OTHER INFORMATION

None

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PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Directors

The Board of Directors (the “Board”) of the Company is divided into three classes, with each class containing approximately one-third of the Board and with only one class being elected each year. The directors are elected by the shareholders of the Company for staggered terms of three years each, or until their respective successors are elected and qualified. One class of directors, consisting of Messrs. A. Odell Maddox, Daniel A. Medina, and Virgil Roberts, has a term of office expiring at the 2011 Annual Meeting of Stockholders. Messrs. Maddox, Medina, and Roberts are expected to be nominated for election to serve for additional terms as directors at the Company’s 2011 Annual Meeting of Stockholders.

The following table sets forth the names and information regarding the persons who are currently members of the Board:

Name	Age at December 31, 2010		Director Since		Term Expires		Positions Currently Held with the Company and the Bank
NOMINEES:
A. Odell Maddox		64		1986		2011	Director
Daniel A. Medina		53		1997		2011	Director
Virgil Roberts		63		2002		2011	Director
CONTINUING DIRECTORS:
Paul C. Hudson		62		1985		2012	Chairman of the Board and Chief Executive Officer
Kellogg Chan		71		1993		2012	Director
Robert C. Davidson, Jr.		65		2003		2013	Director
Javier León		45		2007		2013	Director
Elrick Williams		63		2007		2013	Director

The following is a brief description of the business experience of the nominees and continuing directors for at least the past five years and their respective directorships, if any, with other public companies that are subject to the reporting requirements of the Exchange Act.

Nominees

A. Odell Maddox is Manager of Maddox Co., a real estate property management and sales company, and has served in that capacity since 1986. Mr. Maddox has worked in property management, real estate brokerage and investment businesses for over 35 years. Mr. Maddox has extensive experience in real estate in Los Angeles, as well as significant experience in real estate lending and loan workouts. He has extensive entrepreneurial experience developing and managing small and medium-sized businesses. Mr. Maddox has a long history with and knowledge of the Company and the communities and markets in which the Company operates.

Daniel A. Medina is Managing Director of Capital Knowledge, LLC, a consulting firm that provides financial advisory services. He has been with Capital Knowledge, LLC and its predecessor since April 1, 2000. Mr. Medina has extensive experience in analyzing and valuing financial institutions and assessing their strengths and weaknesses. He has extensive knowledge of the capital markets and mergers and acquisitions, specifically within the financial services industry.

Virgil Roberts has been Managing Partner of Bobbitt & Roberts, a law firm representing clients in the entertainment industry, since 1996. He currently serves on the Board of Directors of Community Build, Inc.,

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Claremont Graduate School, Families in Schools, the Alliance for College Ready Public Schools, Southern California Public Radio, the Alliance of Artists and Record Companies, and the Bridgespan Group, a management and consulting firm for large philanthropy companies with offices in Boston, San Francisco and New York. Mr. Roberts’ qualifications to serve on the Board include his extensive legal and business experience and community leadership. Mr. Roberts serves on a number of local community boards and provides leadership to local community groups. Mr. Roberts serves as the Lead Director and chair of the Board’s Nominating Committee. Mr. Roberts brings leadership, management and regulatory experience to the Board.

Continuing Directors

Paul C. Hudson is the Chief Executive Officer and Chairman of the Company and the Bank. Mr. Hudson joined the Bank in 1981, was elected to the Board in 1985, and served in various positions prior to becoming Chairman and Chief Executive Officer in 2007. Mr. Hudson is an inactive member of California and Washington D.C. Bar Associations. He currently serves on several nonprofit boards, including the board of the California Housing Finance Agency and Abode Communities. Mr. Hudson brings to his position almost thirty years of executive management experience with the Company and over 25 years as its leader. He is responsible for developing the Company from a relatively small mutual thrift institution into one of the largest African American thrift institutions in the United States. He has an extensive knowledge of the history of the Company and the markets in which it operates. He is well versed in the regulatory and other issues facing the Company and the banking industry.

Kellogg Chan has served as President of Asia Capital Group, Ltd., a biotechnology holding company since 2001. He has been a member of the Board since 1993. He served as the Chairman and Chief Executive Officer of Universal Bank, f.s.b from 1994 to 1995 and President and Chief Executive Officer of East-West Bank from 1976 to 1992. Mr. Chan has extensive experience in the thrift industry covering a wide variety of economic and interest rate cycles. He has served in executive management positions in thrift institutions and has experienced a diversity of corporate cultures. His extensive executive management experience includes, but is not limited to, strategic planning and its implementation and the development, implementation and evaluation of internal control structures, particularly in the thrift industry.

Robert C. Davidson, Jr. retired in 2007 from his position as Chairman/Chief Executive Officer of Surface Protection Industries, a company he formed in 1978 and one of the largest African American owned manufacturing companies in California. He is a member of the Boards of Directors of Jacobs Engineering Group, Inc. (a publicly traded engineering and design firm), Morehouse College, Cedars Sinai Medical Center, Art Center College of Design located in Pasadena, California, the South Coast Air Quality Management District Brain Tumor and Air Pollution Foundation, and the University of Chicago Graduate School of Business Advisory Council. Mr. Davidson has extensive entrepreneurial experience in developing and managing small and medium size businesses. He has hands-on experience in marketing and sales, human resources and strategic planning and implementation. He has a long history with an extensive knowledge of the Company and of the markets and communities in which the Company operates.

Javier León is the Managing Director of Andell Sports Group, which oversees the sports and related assets of Andell Holdings and has served in that capacity since 2008. Mr. Leon oversees the business and operations of the Chicago Fire, a professional soccer team, on behalf of its owner. He is involved in strategic planning and marketing, as well as the development of Hispanic community and public relations strategies and programs. Prior to joining Andell, Mr. Leon served as the Chief Executive Officer for Chivas USA Enterprises in Los Angeles from 2004 to 2007. Mr. León was a managing director in investment banking for Merrill Lynch, Deutsche Bank, and ING-Barings from 1992 to 2004. He received a bachelors degree from Claremont McKenna College and a Masters of International Management from the University of California at San Diego. Mr. Leon has extensive experience in managing, planning and operating businesses. He has expertise in developing, reviewing and maintaining systems of internal controls and in financial reporting and analysis. He has prior experience in the capital markets. We believe Mr. Leon’s experience in the areas of strategic planning and marketing, including marketing to Hispanic communities, makes him an excellent candidate for the Board.

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Elrick Williams has been Chairman of Williams Group Holdings LLC, a privately held investment firm with offices in Chicago and Los Angeles, since the firm was established in 2006. Prior to his current position, Mr. Williams founded Allston Trading LLC in 2003 and retired as its Chief Executive Officer and Chairman in late 2008. Allston Trading LLC is a firm that specializes in algorithmic electronic trading of stocks, Treasury bonds, currencies, futures and options. Mr. Williams was employed as a trader from 1981 to 2003 by various securities trading companies. Mr. Williams has extensive experience in planning for, managing and operating a financial services business. He also has significant experience in and knowledge of the equity markets. We believe Mr. Williams’ many years of hands-on business experience combined with his proven leadership skills make him an excellent candidate for the Board.

Executive Officers

The following table sets forth information with respect to executive officers of the Company and the Bank who are not directors. Officers of the Company and the Bank serve at the discretion of, and are elected annually by the respective Boards of Directors.

Name	Age(1)		Principal Occupation during the Past Five Years
Wayne-Kent A. Bradshaw		63	President / Chief Operating Officer of the Company and the Bank since February 2009. Regional President and National Manager for Community and External Affairs at Washington Mutual Bank from 2004 to 2009.
Samuel Sarpong		50	Senior Vice President / Chief Financial Officer of the Company and the Bank since 2005. First Vice President / Chief Compliance Officer and Internal Audit Director of the Bank from 2004 to 2005.
Wilbur A. McKesson Jr.		57	Senior Vice President / Chief Loan Officer of the Company since 2007. Vice President for Affordable Housing of Option One Mortgage Corporation from 2002 to 2007.

(1) As of December 31, 2010.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires the Company’s executive officers and directors, and persons who own more than ten percent (10%) of the Company’s common stock, to report to the SEC their initial ownership of the Company’s common stock and any subsequent changes in that ownership. Specific due dates for these reports have been established by the SEC and any late filings or failures to file are to be disclosed. Officers, directors and greater than ten percent (10%) stockholders are required by SEC rules to furnish the Company with copies of all forms that they file pursuant to Section 16(a) of the Exchange Act.

Based solely on our review of copies of such forms received, the Company believes that, during the last fiscal year, all filing requirements under Section 16(a) of the Exchange Act applicable to its officers, directors and 10% stockholders were timely met.

Code of Ethics

The Board has adopted a Code of Ethics (the ”Code”) for the Company’s directors and executive officers. Our directors and executive officers are expected to adhere at all times to the Code. Stockholders may obtain a copy of the Code, free of charge, upon written request to: Broadway Financial Corporation, 4800 Wilshire Boulevard, Los Angeles, California 90010, Attention: Daniele Johnson.

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Audit Committee

The Company has a separately-designated standing Audit Committee. The Audit Committee consists of Messrs Maddox (Chairman), Medina, and Williams. The Audit Committee is responsible for oversight of the internal audit function for the Company, assessment of accounting and internal control policies and monitoring of regulatory compliance. This committee is also responsible for oversight of the Company’s independent auditors. The members of the Audit Committee are independent directors as defined under the Nasdaq Stock Market listing standards. In addition, Messrs Medina and Williams meet the definition of “audit committee financial expert,” as defined by the SEC.

ITEM 11. EXECUTIVE COMPENSATION

Compensation Tables

The following table sets forth a summary of certain information concerning the compensation awarded to, earned by or paid to our Chief Executive Officer and our three most highly compensated executive officers for services rendered in all capacities during 2010, 2009 and 2008.

Summary Compensation Table

Name and Principal Position	Year		Salary(1)		Bonus(2)		Option Awards(3)		Nonqualified Deferred Compensation Earnings(4)		All  Other Compen- sation(5)		Total ($)
Paul C. Hudson Chief Executive Officer		2010	$	300,000		—		—	$	141,761	$	37,633	$	479,394
		2009	$	286,667		—		—	$	133,526	$	34,549	$	454,742
		2008	$	210,000	$	81,418		—	$	126,007	$	29,864	$	447,289
Wayne-Kent A. Bradshaw(6) Chief Operating Officer		2010	$	210,000		—		—		—	$	33,725	$	243,725
		2009	$	178,750		—	$	224,250		—	$	26,232	$	429,232
		2008		—		—		—		—		—		—
Samuel Sarpong Chief Financial Officer		2010	$	172,601		—		—		—	$	21,457	$	194,058
		2009	$	161,551		—		—		—	$	19,332	$	180,883
		2008	$	150,000	$	50,067	$	49,350		—	$	19,205	$	268,622
Wilbur McKesson Chief Lending Officer		2010	$	165,191		—		—		—	$	25,866	$	191,057
		2009	$	159,811		—		—		—	$	28,545	$	188,356
		2008	$	155,625	$	51,944	$	131,600		—	$	22,692	$	361,861

(1) Includes amounts deferred and contributed to the 401(k) Plan by the named executive officer.

(2) The amounts shown represent performance-based bonuses earned in 2008 but paid in 2009. No performance-based bonuses were earned in 2009 and 2010.

(3) Represents the grant date fair value of option awards granted under the Company’s Long-Term Incentive Plans. Option awards vest 20% per year from the date of the grant and are fully vested in year five. The maximum term of each option is ten years. For the assumptions used in calculating the grant date fair value under ASC 718, see Note 14 of the Notes to Consolidated Financial Statements.

(4) The Bank has a Salary Continuation Agreement with Mr. Hudson. The amount listed reflects the change in the actuarial present value of the accumulated benefits under this agreement. The income from a bank owned life insurance policy reduces the expense related to the Salary Continuation Agreement. The other Named Executive Officers did not participate in the Bank’s Non-Qualified Deferred Compensation Plan during 2010, 2009 and 2008.

(5) Includes amounts paid by the Company to the 401(k) account of the executive officer, and estimated allocations under the ESOP. Also includes perquisites and other benefits consisting of automobile and phone allowances, and premiums paid for medical, dental and group term life insurance policies.

(6) Wayne-Kent A. Bradshaw commenced his employment as the Bank’s President and Chief Operating Officer in February 2009.

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The following table sets forth information concerning outstanding equity awards held by each named executive officer as of December 31, 2010.

Outstanding Equity Awards at December 31, 2010

	Option Awards								Stock Awards
Name	Number of Securities Underlying Unexercised Options (Exercisable)(1)		Number of Securities Underlying Unexercised Options (Unexercisable)(2)		Option Exercise Price(3)		Option Expiration Date(4)		Number of Shares or Units of Stock That Have Not Vested(5)		Market Value of Shares or Units of Stock That Have Not Vested(6)
Paul C. Hudson		29,718		—	$	6.68		07/25/12		—		—
Wayne K. Bradshaw		15,000		60,000	$	4.98		03/18/19		—		—
Samuel Sarpong		10,000		—	$	13.11		04/21/14		—		—
		12,000		3,000	$	10.25		05/24/16		600	$	1,458
		6,000		9,000	$	5.95		10/22/18		—		—
Wilbur McKesson		16,000		24,000	$	5.95		10/22/18		—		—

(1) The stock options shown are immediately exercisable.

(2) Options vest in equal annual installments on each anniversary date over a period of five years commencing on the date of the grant.

(3) Based upon the fair market value of a share of Company common stock on the date of grant.

(4) Terms of outstanding stock options are for a period of ten years from the date the option is granted.

(5) Shares vest in equal annual installments on each anniversary date over a period of five years commencing on the date of the grant.

(6) Based upon a fair market value of $2.43 per share for the Company common stock as of December 31, 2010.

Salary Continuation Agreement

Under the 2006 Salary Continuation Agreement, upon termination of employment after Mr. Paul Hudson reaches age 65, he will receive an annual benefit of $100,000, divided into 12 equal monthly payments, for 15 years. The normal retirement age is defined as age 65. The agreement includes provisions for early termination, disability, termination for cause, death and change in control. The present value of the accumulated benefit is the accrual balance as of December 31, 2010. The accrual balance is determined using a discount rate of 6%.

Director Compensation

The following table summarizes the compensation paid to non-employee directors for the year ended December 31, 2010.

Name	Fees Earned or Paid in Cash(1)		Option Awards(2)		All Other Compensation(3)		Total
Kellogg Chan	$	22,000	$	4,825		—	$	26,825
Robert C. Davidson	$	22,000	$	4,825	$	5,485	$	32,310
Javier León	$	14,000	$	4,825		—	$	18,825
A. Odell Maddox	$	20,500	$	4,825	$	4,616	$	29,941
Daniel Medina	$	22,000	$	4,825		—	$	26,825
Virgil Roberts	$	21,500	$	4,825		—	$	26,325
Elrick Williams	$	20,500	$	4,825		—	$	25,325

(1) Includes payments of annual retainer fees, fees paid to chairmen of Board committees, and meeting attendance fees.

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(2) Represents the grant date fair value of option awards granted under the Company’s Long-Term Incentive Plan. Option awards vest immediately and the maximum term of each option is ten years. For the assumptions used in calculating the grant date fair value under ASC 718, see Note 14 of the Notes to the Consolidated Financial Statements.

(3) Includes premiums paid for medical, dental and group term life insurance.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table sets forth information, as of March 31, 2011, concerning the shares of the Company’s Common Stock owned by each person known to the Company to be a beneficial owner of more than 5% of the Company’s Common Stock, each director, each executive officer named in the Summary Compensation Table, and all directors and executive officers as a group.

Name and Address of Beneficial Owner	Amount and Nature of Beneficial Ownership			Percent of Class
Beneficial Owners:
Cathay General Bancorp 777 North Broadway Los Angeles, CA 90012		215,000	(1)		12.33	%
First Opportunity Fund, Inc. 2344 Spruce Street, Suite A Boulder, CO 80302		96,980	(2)		5.56	%
Directors and Executive Officers:
Paul C. Hudson		90,317	(3)		5.18	%
Kellogg Chan		43,139	(4)		2.47	%
Robert C. Davidson, Jr.		10,713	(5)(6)		0.61	%
Javier León		3,125	(4)		0.18	%
A. Odell Maddox		19,019	(4)		1.09	%
Daniel A. Medina		10,041	(4)(7)		0.58	%
Virgil Roberts		14,632	(8)(9)		0.84	%
Elrick Williams		192,642	(4)(10)		11.05	%
Wayne-Kent A. Bradshaw		30,000	(11)		1.72	%
Samuel Sarpong		31,085	(12)		1.78	%
Wilbur McKesson		16,159	(13)		0.93	%
All directors and executive officers as a group (11 persons)		460,872			26.43	%

(1) Information based upon Schedule 13G, filed on May 26, 2006 with the SEC by Cathay General Bancorp.

(2) Information based upon Schedule 13G/A, filed on February 17, 2011 with the SEC by First Opportunity Fund, Inc. (formerly First Financial Fund, Inc.)

(3) Includes 16,763 allocated shares under the Employee Stock Ownership Plan (“ESOP”), and 29,718 shares subject to options granted under the Company’s Long Term Incentive Plan (the “LTIP”), which options are all currently exercisable.

(4) Includes 3,125 shares subject to options granted under the Company’s 2008 Long Term Incentive Plan (the “2008 LTIP”), which options are all currently exercisable.

(5) Includes 5,356 shares held jointly with spouse with whom voting and investment power are shared.

(6) Includes 1,428 shares subject to options granted under the Stock Option Plan for Outside Directors (the “SOPOD”), and 3,125 shares subject to options granted under the 2008 LTIP, which options are all currently exercisable.

(7) Includes 6,110 shares held jointly with spouse with whom voting and investment power are shared.

(8) Includes 5,806 shares held jointly with spouse with whom voting and investment power are shared.

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(9) Includes 1,784 shares subject to options granted under the SOPOD, and 3,125 shares subject to options granted under the 2008 LTIP, which options are all currently exercisable.

(10) Information based upon Schedule 13G/A, filed on February 11, 2010 with the SEC by Elrick Williams. Mr. Williams is a majority owner of Williams Group Holdings LLC which owns 189,517 shares of the Company’s Common Stock.

(11) Includes 30,000 shares subject to options granted under the 2008 LTIP, which options are all currently exercisable.

(12) Includes 685 allocated shares under the ESOP, and 28,000 shares subject to options granted under the LTIP, which options are all currently exercisable.

(13) Includes 159 allocated shares under the ESOP, and 16,000 shares subject to options granted under the LTIP, which options are all currently exercisable.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Certain Relationships and Related Transactions

The Company’s current loan policy provides that all loans made by the Company or its subsidiaries to its directors and executive officers must be made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons and must not involve more than the normal risk of collectibility or present other unfavorable features.

On September 30, 1999, the Bank made a loan of $550,000 to Maddox & Stabler LLC. Mr. A. Odell Maddox is a director of the Company and the Bank. The loan is secured by a 24-unit multi-family property located in Los Angeles, California. The terms of the 30-year loan include an initial interest rate of 8% fixed for the first five years and a variable rate thereafter equal to 2.50% over the one-year Treasury Bill rate. Since inception, payments on the loan have been made as agreed. As of March 31, 2011, the outstanding balance of the loan was $449,648.

Mr. Elrick Williams is a director of both the Company and the Bank and holds a non-controlling interest in Williams Group Holdings (“WGH”). On September 26, 2006, the Bank made a loan of $3,250,000 to Gemini Basketball (“Gemini”). In October 2007, WGH made a minority investment in Gemini. In October of 2008, the Bank made an additional $750,000 loan to Gemini. The outstanding balance on the loan is $4,000,000. In January 2009, WGH acquired a majority interest in Gemini. The loan had an initial rate of 6.50% for one year and a variable rate thereafter equal to 2.50% over the Wall Street Journal Prime Rate. Since inception, payments on the loan have been made as agreed.

Director Independence

We have adopted standards for director independence pursuant to Nasdaq Stock Market listing standards. The Board considered relationships, transactions and/or arrangements with each of its directors and determined that all seven of the Company’s non-employee directors are “independent” under applicable Nasdaq Stock Market listing standards and SEC rules.

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ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Before the Company’s independent accountants are engaged to render non-audit services for the Company or the Bank, the Audit Committee approves each engagement. The Audit Committee also preapproved all of the audit and audit-related services provided by Crowe Horwath LLP for the year ended December 31, 2010 and 2009. The following table sets forth the aggregate fees billed to us by Crowe Horwath LLP for the years indicated.

	2010		2009
	(In thousands)
Audit fees(1)	$	160	$	228
Audit-related fees(2)		12		24
All other fees		—		1	(3)
Total fees	$	172	$	253

(1) Aggregate fees billed for professional services rendered for the audit of the Company’s consolidated annual financial statements included in the Company’s Annual Report on Form 10-K and for the reviews of the Company’s consolidated financial statements included in the Company’s Quarterly Reports on Form 10-Q.

(2) Consultation fees billed for professional services rendered for the 2010 and 2009 Independent Accountant’s Report on Management’s Assertion About Compliance with Minimum Servicing Standards (USAP) and for professional services rendered for consultation regarding management’s assessment of the adequacy of internal control over financial reporting for 2009 and for providing a consent for a Form S-8 filing for 2009.

(3) Fees billed for professional services rendered for consultation regarding CEO bonus limitations for TARP recipients.

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) 1. See Index to Consolidated Financial Statements.

2. Financial Statement Schedules have been omitted because they are not applicable or the required information is shown in the Consolidated Financial Statements or Notes included under Item 8, “Financial Statements and Supplementary Data.”

(b) List of Exhibits

Exhibit Number*
2.1	Plan of Conversion, including Certificate of Incorporation and Bylaws of the Registrant and Federal Stock Charter and Bylaws of Broadway Federal (Exhibit 2.1 to Amendment No. 2 to Registration Statement on Form S-1, No. 33-96814, filed by Registrant on November 13, 1995)
3.1	Certificate of Incorporation of Registrant (contained in Exhibit 2.1)
3.2	Bylaws of Registrant (contained in Exhibit 2.1)
4.1	Form of Common Stock Certificate (Exhibit 4.1 to Registration Statement on Form S-1, No. 33-96814, filed by the Registrant on September 12, 1995)
4.2	Form of Series A Preferred Stock Certificate (Exhibit 4.2 to Amendment No. 1 to Registration Statement on Form S-1, No. 33-96814, filed by the Registrant on November 6, 1995)

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Exhibit Number*
4.3	Form of Certificate of Designation for Series A Preferred Stock (contained in Exhibit 2.1)
4.4	Form of Series B Preferred Stock Certificate (Exhibit 4.4 to Form 10-KSB filed by the Registrant for the fiscal year ended December 31, 2003)
4.5	Form of Certificate of Designation for Series B Preferred Stock (Exhibit 4.5 to Form 10-KSB filed by the Registrant for the fiscal year ended December 31, 2003)
4.6	Form of Series C Preferred Stock Certificate (Exhibit 4.6 to Form 10-KSB filed by the Registrant for the fiscal year ended December 31, 2006)
4.7	Form of Certificate of Designation for Series C Preferred Stock (Exhibit 4.7 to Form 10-KSB filed by the Registrant for the fiscal year ended December 31, 2006)
4.8	Form of Series D Preferred Stock Certificate (Exhibit 4.8 to Form 8-K filed by the Registrant on November 19, 2008)
4.9	Form of Certificate of Designation for Fixed Rate Cumulative Perpetual Preferred Stock Series D (Exhibit 3.3 to Form 8-K filed by the Registrant on November 19, 2008)
4.10	Warrant to Purchase Common Stock of Broadway Financial Corporation (Exhibit 4.9 to Form 8-K filed by the Registrant on November 19, 2008)
4.11	Form of Series E Preferred Stock Certificate (Exhibit 4.2 to Form 8-K filed by the Registrant on December 9, 2009)
4.12	Form of Certificate of Designation for Fixed Rate Cumulative Perpetual Preferred Stock Series E (Exhibit 4.1 to Form 8-K filed by the Registrant on December 9, 2009)
10.1	Broadway Federal Bank Employee Stock Ownership Plan (Exhibit 4.1 to Registration Statement on Form S-1, No. 33-96814, filed by the Registrant on September 12, 1995)
10.2	ESOP Loan Commitment Letter and ESOP Loan and Security Agreement (Exhibit 4.1 to Registration Statement on Form S-1, No. 33-96814, filed by the Registrant on September 12, 1995)
10.3	Form of Severance Agreement among Broadway Financial Corporation, Broadway Federal and certain executive officers (Exhibit 10.7 to Amendment No. 2 to Registration Statement on Form S-1, No. 33-96814, filed by the Registrant on November 13, 1995)
10.4	Broadway Financial Corporation Recognition and Retention Plan for Outside Directors dated August 1, 1997, (Exhibit 10.4 to Form 10-KSB filed by the Registrant for the fiscal year ended December 31, 1997)
10.5	Broadway Financial Corporation Performance Equity Program for Officers and Directors, dated August 1, 1997, (Exhibit 10.5 to Form 10-KSB filed by the Registrant for the fiscal year ended December 31, 1997)
10.6	Broadway Financial Corporation Stock Option Plan for Outside Directors (filed by the Registrant as part of Form S-8, No. 333-17331, on December 5, 1996)
10.7	Broadway Financial Corporation Long Term Incentive Plan (filed by Registrant as part of Form S-8, No. 333-17331, on December 5, 1996)
10.8	Broadway Financial Corporation 2008 Long Term Incentive Plan (filed by Registrant as part of Form S-8, No. 333-163150, on November 17, 2009)
10.9	Stock Purchase Agreement Among Cathay General Bancorp, Broadway Financial Corporation and Broadway Federal Bank (Exhibit 10.9 to Form 10-KSB filed by the Registrant for the fiscal year ended December 31, 2004)
10.10	First Amendment to Stock Purchase Agreement Among Cathay General Bancorp, Broadway Financial Corporation and Broadway Federal Bank (Exhibit 10.10 to Form 10-KSB filed by the Registrant for the fiscal year ended December 31, 2004)

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Exhibit Number*
10.11	Second Amendment to Stock Purchase Agreement Among Cathay General Bancorp, Broadway Financial Corporation and Broadway Federal Bank (Exhibit 10.11 to Form 10-KSB filed by the Registrant for the fiscal year ended December 31, 2005)
10.12	Third Amendment to Stock Purchase Agreement Among Cathay General Bancorp, Broadway Financial Corporation and Broadway Federal Bank (Exhibit 10.12 to Form 10-KSB filed by the Registrant for the fiscal year ended December 31, 2005)
10.13	Preferred Stock Purchase Agreement Between Broadway Financial Corporation and National Community Investment Fund (Exhibit 10.1 to Form 8-K filed by the Registrant on April 6, 2006)
10.14	Deferred Compensation Plan (Exhibit 10.14 to Form 10-KSB filed by the Registrant for the fiscal year ended December 31, 2006)
10.15	Salary Continuation Agreement Between Broadway Federal Bank and Chief Executive Officer Paul C. Hudson (Exhibit 10.15 to Form 10-KSB filed by the Registrant for the fiscal year ended December 31, 2006)
10.16	Securities Purchase Agreement Between Broadway Financial Corporation and United States Department of the Treasury (Exhibit 10.16 to Form 8-K filed by the Registrant on November 19, 2008)
10.17	Letter Agreement, dated December 4, 2009, which includes the Securities Purchase Agreement Between Broadway Financial Corporation and United States Department of the Treasury (Exhibit 10.1 to Form 8-K filed by the Registrant on December 9, 2009)
10.18