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                            BROADWAY FINANCIAL CORPORATION
                       STOCK OPTION PLAN FOR OUTSIDE DIRECTORS

I.   PURPOSE

     The purpose of this 1996 Stock Option Plan for Outside Directors (the
"PLAN") is to promote the growth and profitability of Broadway Financial
Corporation (the "HOLDING COMPANY") and Broadway Federal Bank, f.s.b. (the
"BANK") by providing Outside Directors (as defined in Section II(a)) of the
Holding Company and its affiliates, including the Bank, with an incentive to
achieve the long-term objectives of the Holding Company and to attract and
retain non-employee directors of outstanding abilities by providing such outside
directors with an opportunity to acquire an equity interest in the Holding
Company.

II.  GRANT OF OPTIONS

     (a)  INITIAL GRANT.  Each member of the Board of Directors of the Holding
Company or any of its affiliates not also serving as a full-time employee of the
Holding Company or any of its affiliates (an "OUTSIDE DIRECTOR"), who was
serving in such capacity on the date of the Holding Company's initial public
offering of securities and who is continuing in such service at the effective
date of this Plan, is hereby granted a nonqualified stock option ("OPTION") to
purchase shares of the common stock, $0.01 par value of the Holding Company
("COMMON STOCK"), subject to adjustment pursuant to Section IV, based on the
number of his or her years of service with the Holding Company or any of its
affiliates on a non-cumulative basis in accordance with the following schedule:

<TABLE>
<CAPTION>

          YEARS OF SERVICE    SHARES GRANTED
          ----------------    --------------
          <S>                 <C>
          0 - 2                    892
          3 - 14                 1,620
          15 - 18                3,101

</TABLE>

     The purchase price per share of the Common Stock deliverable on exercise of
Options shall be the Fair Market Value (as defined in paragraph (d) below) of
the Common Stock on the date of grant.  The grants provided for in this
paragraph (a) shall be deemed granted on the Effective Date (as defined in
Section V).

     (b)  GRANTS TO SUBSEQUENT OUTSIDE DIRECTORS.  Each Outside Director who is
first elected as a director subsequent to the Effective Date ("SUBSEQUENT
OUTSIDE DIRECTOR") shall be granted an Option in accordance with the following:

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          (i)  To the extent shares are then available under this Plan, as of
               the date on which such Subsequent Outside Director is qualified
               and first begins to serve as an Outside Director, the Subsequent
               Outside Director shall be granted an Option to purchase 892
               shares of Common Stock, subject to adjustment pursuant to Section
               IV.

         (ii)  The purchase price per share of the Common Stock deliverable upon
               exercise of such Option shall equal the Fair Market Value of a
               share of Common Stock on the date the Option is granted.

        (iii)  If sufficient shares are not available under this Plan to fulfill
               the grants of Options provided for in subparagraph (i) above, and
               thereafter shares become available for such purpose, each
               Subsequent Outside Director who has not previously received an
               Option for the full number of shares set forth in subparagraph
               (i) above, shall receive an Option to purchase the number of
               shares of Common Stock determined by dividing pro rata among each
               such Subsequent Outside Directors the number of shares then
               available under this Plan, but in no event shall a Subsequent
               Outside Director receive an Option for a number of shares which
               exceeds the number of shares set forth in subparagraph (i).  The
               date of grant for Options awarded under this subparagraph (iii)
               shall be the date shares become available.  The purchase price
               per share of the Common Stock deliverable upon exercise of each
               such Option shall equal the Fair Market Value of a share of
               Common Stock on the date the Option is granted. 

     (c)  INELIGIBILITY.  An Option under this Plan shall not be granted to any
Outside Director who at any previous time was an employee of either the Holding
Company or the Bank and in such capacity was eligible to receive any Options to
purchase Common Stock.

     (d)  FAIR MARKET VALUE.  For purposes of this Plan, "Fair Market Value"
means the average of the high and low bid prices of the Common Stock as reported
by the Nasdaq Small-Cap Stock Market (as published by the Wall Street Journal,
if then so published) or, if the Common Stock is then listed on or quoted
through a stock exchange or transaction reporting system on or through which
actual sale prices are regularly reported, the closing sale price of the Common
Stock, on the grant date, or if the Common 

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Stock was not traded on such date, on the next preceding day on which the Common
Stock was quoted or traded, as the case may be.

III. TERMS AND CONDITIONS

     (a)  OPTION AGREEMENT.  Each Option shall be evidenced by a written option
agreement between the Holding Company and the recipient specifying the number of
shares of Common Stock that may be acquired through its exercise and containing
such other terms and conditions as are necessary or appropriate and not
inconsistent with the terms of this grant.

     (b)  VESTING.  Subject to paragraph (e) below, each Option granted shall
vest (become exercisable) in five annual cumulative  installments of twenty
percent (20%) per year, commencing on the first anniversary of the grant date
and each subsequent anniversary thereof.

     (c)  MANNER OF EXERCISE.  The Option may be exercised from time to time, in
whole or in part to the extent then vested, by delivering a written notice of
exercise to the Chief Executive Officer of the Holding Company.  Such notice is
irrevocable and must be accompanied by full payment of the exercise price (as
determined in accordance with Section II(a) or (b)) in cash or shares of
previously acquired Common Stock of the Holding Company, or in a combination of
cash and previously acquired shares.  To the extent shares of Common Stock are
tendered in payment of all or part of the exercise price, such shares shall be
valued at the Fair Market Value thereof on the date of exercise. 

     (d)  TRANSFERABILITY.  Each option granted herein may be exercised only by
the Outside Director to whom it is issued or in the event of the Outside
Director's death, his or her personal representative(s) or designee(s), heir(s)
or devisee(s), if applicable under paragraph (e) below.  

     (e)  TERMINATION OF SERVICE; CHANGE OF CONTROL.  Upon the termination of
Outside Director's service on the Board for any reason other than Disability (as
defined herein), death, Removal for Cause (as defined herein) or, to the extent
not prohibited by 12 C.F.R. Section 563b.3(g)(4), following a Change in Control
(as defined herein) of the Bank or the Holding Company, the Outside Director's
Option shall be exercisable within the period described in paragraph (f) below,
but only to the extent the Option was vested at the date of termination.

     In the event of death or termination of service due to Disability of any
Outside Director or, to the extent not 

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prohibited by 12 C.F.R. Section 563b.3(g)(4), following a Change in Control of
the Bank or Holding Company, an Option held by such Outside Director, whether or
not exercisable at such time, shall become immediately exercisable by the
Outside Director or the Outside Director's legal representatives or
beneficiaries.  In the event of a Change in Control as the result of a
Terminating Event (as defined herein), the Outside Director's Option will become
exercisable pursuant to this paragraph only if no provision has been made in
writing in connection with such Terminating Event for the continuance of this
Plan and for the assumption of the Options theretofore granted hereunder, or the
substitution for such Options of new awards issued by the successor corporation
or, if applicable, the publicly traded entity that is the parent entity of the
successor corporation, with such appropriate adjustments as may be determined or
approved by a committee of the Board of Directors or its successor, in which
event this Plan and the Options theretofore granted or substituted therefor
shall continue in the manner and under the terms so provided.

     For purposes of this Plan the following terms are defined as follows:

           (i) As used herein, a "CHANGE IN CONTROL" of the Bank or the Holding
               Company shall mean an event of a nature that (i) would be
               required to be reported in response to Item 1 of a current report
               filed on Form 8-K pursuant to Section 13 or 15(d) of the
               Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT")
               as in effect on the Effective Date of this Plan; or (ii) results
               in any person acquiring control of the Bank or the Holding
               Company within the meaning of the Home Owners' Loan Act of 1933,
               as amended, and the rules and regulations promulgated by the
               Office of Thrift Supervision ("OTS") (or its predecessor agency),
               as in effect on the Effective Date of this Plan by the Board of
               Directors of the Holding Company (provided, that in applying the
               definition of change in control as set forth under the rules and
               regulations of the OTS, the Board shall substitute its judgment
               for that of the OTS), and, without limitation, such a Change in
               Control shall be deemed to have occurred at such time as (A) any
               "person" (as that term is used in Sections 13(d) and 14(d) of the
               Exchange Act and the regulations of the Securities and Exchange
               Commission ("SEC") thereunder, each as in effect on the date of
               the 

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               adoption of this Plan by the Board of Directors of the Holding
               Company, and including any such persons that may be deemed to be
               acting in concert with respect to the Bank or the Holding
               Company, or the acquisition, ownership or voting of Bank or
               Holding Company securities) is or becomes the "beneficial owner"
               (as defined in Rule 13d-3 under the Exchange Act and the
               regulations of the SEC thereunder, each as in effect on the date
               of the adoption of this Plan by the Board of Directors of the
               Holding Company), directly or indirectly, of securities of the
               Bank or the Holding Company representing 20% or more of the
               Bank's or the Holding Company's outstanding securities except for
               any securities of the Bank purchased by the Holding Company in
               connection with the conversion of the Bank to stock form and any
               securities purchased by any tax-qualified employee benefit plan
               of the Bank or the Holding Company; or (B) individuals who
               constitute the Board on the date of the adoption of this Plan by
               the Board of Directors of the Holding Company (the "INCUMBENT
               BOARD") cease for any reason to constitute at least a majority
               thereof, provided that any person becoming a director subsequent
               to the date hereof whose election was approved by a vote of at
               least three-quarters of the directors then comprising the
               Incumbent Board, or whose nomination for election by the Holding
               Company's stockholders was approved by the same nominating
               committee serving under an Incumbent Board, shall be, for
               purposes of this clause (B), considered as though he or she were
               a member of the Incumbent Board; or (C) a plan of liquidation,
               reorganization, merger, consolidation, sale of all or
               substantially all the assets of the Bank or the Holding Company
               or similar transaction is not the resulting entity (a
               "TERMINATING EVENT"), is approved by the Board of Directors and
               stockholders or otherwise occurs; or (D) solicitations of
               stockholders of the Holding Company, by someone other than the
               Incumbent Board of the Holding Company, seeking stockholder
               approval of a plan of reorganization, merger or consolidation of
               the Holding Company or Bank or similar transaction with one or
               more corporations as a result of which the outstanding shares of
               the class of 

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               securities then subject to this Plan are exchanged for or
               converted into cash or property or securities not issued by the
               Bank or the Holding Company shall be distributed; or (E) a tender
               offer is made for 20% or more of the voting securities of the
               Bank or the Holding Company; or (F) any other event, transaction
               or series of transactions occurs as a result of which any person
               may be deemed to "acquire control" of the Bank or the Holding
               Company (as such terms are defined in the regulations of the OTS
               set forth at 12 C.F.R. Part 574 as in effect on the Effective
               Date).

          (ii) "DISABILITY" means the permanent and total inability by reason of
               mental or physical infirmity, or both, of an Outside Director to
               perform his or her duties as such.  If requested by the Board of
               Directors, a medical doctor selected or approved by the Board of
               Directors must advise the Board that it is either not possible to
               determine when such disability will terminate or that it appears
               probable that such disability will be permanent during the
               remainder of such Director's lifetime.

         (iii) "REMOVAL FOR CAUSE" means the removal of the Outside
               Director by shareholder, regulatory or other appropriate
               action because of a material loss to the Holding Company or
               one of its affiliates caused by the Outside Director's
               personal dishonesty, willful misconduct, any breach of
               fiduciary duty involving personal profit, intentional
               failure to perform stated duties, or the willful violation
               of any law, rule or regulation (other than traffic
               violations or similar offenses) or final cease and desist
               order.

     (f)  TERMINATION OF OPTION.  Each Option shall expire upon the earlier of
(i) 120 months following the date of grant, or (ii) one year following the date
on which the recipient ceases to serve in the capacity of Outside Director,
consultant or advisory director for any reason other than Removal for Cause.  If
the Outside Director dies before fully exercising any portion of an Option then
exercisable, such Option may be exercised by such Outside Director's
beneficiary, personal representative(s), heir(s) or devisee(s) at any time
within the one year period following his or her death; provided, however, that
in no event 

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shall the option be exercisable more than 120 months after the date of its
grant.  If the Outside Director's service terminates on account of Removal for
Cause, Option awarded to him or her shall expire upon such removal.

IV.  COMMON STOCK SUBJECT TO THIS PLAN

     The shares which shall be issued and delivered upon exercise of Options
granted under this Plan may be either authorized and unissued shares of Common
Stock or authorized and issued shares of Common Stock purchased by the Holding
Company.  The number of shares of Common Stock reserved for issuance under this
Plan shall not exceed 26,781 shares of the Common Stock, subject to adjustments
pursuant to this Section IV.  Any shares of Common Stock subject to an Option
which for any reason either terminates unexercised or expires, shall again be
available for issuance under this Plan.

     In the event of any change or changes in the outstanding Common Stock of
the Holding Company by reason of any stock dividend or stock split,
recapitalization, reorganization, merger, consolidation, spin-off, combination
or any similar corporate change, or other increase or decrease in such shares
effected without receipt or payment of consideration by the Company, the number
of shares of Common Stock which may be issued under this Plan, the number of
shares of Common Stock subject to Options granted under this Plan and the
exercise price of such Options, shall be automatically adjusted to prevent
dilution or enlargement of the rights granted to recipient under this Plan.

V.   EFFECTIVE DATE OF THIS PLAN

     The "EFFECTIVE DATE" of this Plan is August 1, 1997.

VI.  TERMINATION OF THIS PLAN

     The right to grant Options under this Plan will terminate automatically
upon the earlier of ten years after the Effective Date of this Plan or the
issuance of the maximum number of shares of Common Stock reserved for issuance
pursuant to this Plan.  

VII. AMENDMENT OF THIS PLAN

     This Plan may be amended from time to time by the Board of Directors of the
Company provided that Section II and III hereof shall not be amended more than
once every six months other than to comport with the Internal Revenue Code of
1986, as amended, or the Employee Retirement Income Security Act of 1974, as
amended, or the respective rules thereunder.  Except as provided in 

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Section IV hereof, rights and obligations under any Option granted before an
amendment shall not be altered or impaired by such amendment without the written
consent of the optionee.  If this Plan satisfies the requirements of Rule 16b-3
("RULE 16b-3") of the Exchange Act, and an amendment would require stockholder
approval to retain this Plan's exemption under Rule 16b-3, then subject to the
discretion of the Board of Directors of the Holding Company, such amendment
shall be presented to stockholders for ratification, provided, however, that the
failure to obtain stockholder ratification shall not affect the validity of this
Plan as so amended and the Options granted thereunder.

VIII. APPLICABLE LAW

     This Plan shall be governed by and construed in accordance with the
internal laws of the State of California.

IX.   COMPLIANCE WITH SECTION 16

     Unless otherwise hereafter determined by the Board of Directors of the
Holding Company, to the extent that any provision of this Plan fails to satisfy
the requirements of Rule 16b-3, such provisions shall be deemed null and void,
to the extent permitted by law.

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