##### Table of Contents





UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

FORM 10-Q

(Mark One)

|x | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------

For the quarterly period ended June 30, 2010



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

For transition period from
 to

Commission file number  000-27464

BROADWAY FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)



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



|                                                 |  |           
|------------------------------------------------ |  | ----------
|4800 Wilshire Boulevard, Los Angeles, California |  | 90010     
|(Address of principal executive offices)         |  | (Zip Code)

(323) 634-1700

(Registrants telephone number, including area code)

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Date 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 whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated, or a smaller reporting company. See
the definition of large accelerated filer, accelerated filer, and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer   ̈    Accelerated
Filer   ̈    Non-Accelerated Filer   ̈    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

Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest practicable date: 1,743,965 shares of the
Companys Common Stock, par value $0.01 per share, were outstanding as of August 6, 2010.









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##### Table of Contents

TABLE OF CONTENTS



|         |  |                       |  |                                                                                                                                        |  |   
|-------- |  | --------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------- |  | --
|         |  |                       |  | Page                                                                                                                                  
|         |  |                      
|PART I.  |  | FINANCIAL INFORMATION |  |                                                                                                                                       
|         |  |                       | 
|         |  | Item 1.               |  | Financial Statements                                                                                                                   |  |   
|         |  |                       | 
|         |  |                       |  | Consolidated Balance Sheets as of June 30, 2010 (unaudited) and December 31, 2009                                                      |  | 1 
|         |  |                       | 
|         |  |                       |  | Consolidated Statements of Operations and Comprehensive Earnings (unaudited) for the three and six months ended June 30, 2010 and 2009 |  | 2 
|         |  |                       | 
|         |  |                       |  | Consolidated Statements of Cash Flows (unaudited) for the three and six months ended June 30, 2010 and 2009                            |  | 3 
|         |  |                       | 
|         |  |                       |  | Notes to Unaudited Consolidated Financial Statements                                                                                   |  | 4 
|         |  |                       | 
|         |  | Item 2.               |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                                  |  | 13
|         |  |                       | 
|         |  | Item 4.               |  | Controls and Procedures                                                                                                                |  | 18
|         |  |                      
|PART II. |  | OTHER INFORMATION     |  |                                                                                                                                       
|         |  |                       | 
|         |  | Item 1.               |  | Legal Proceedings                                                                                                                      |  | 19
|         |  |                       | 
|         |  | Item 1A.              |  | Risk Factors                                                                                                                           |  | 20
|         |  |                       | 
|         |  | Item 2.               |  | Unregistered Sales of Equity Securities and Use of Proceeds                                                                            |  | 20
|         |  |                       | 
|         |  | Item 3.               |  | Defaults Upon Senior Securities                                                                                                        |  | 20
|         |  |                       | 
|         |  | Item 4.               |  | Reserved                                                                                                                               |  | 20
|         |  |                       | 
|         |  | Item 5.               |  | Other Information                                                                                                                      |  | 20
|         |  |                       | 
|         |  | Item 6.               |  | Exhibits                                                                                                                               |  | 20
|         |  |                      
|         |  | Signatures            |  | 21                                                                                                                                    
|         |  |                       | 
|         |  | Ex 31.1               |  | Section 302 Certification of CEO                                                                                                       |  |   
|         |  |                       | 
|         |  | Ex 31.2               |  | Section 302 Certification of CFO                                                                                                       |  |   
|         |  |                       | 
|         |  | Ex 32                 |  | Section 906 Certifications of CEO and CFO                                                                                              |  |   



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##### Table of Contents

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARIES

Consolidated Balance Sheets



|                                                                                                                                                                                                                                                                                                                                                                                |  |                                                 |         |   |                  |   |         |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------- | ------- | - | ---------------- | - | ------- | -
|                                                                                                                                                                                                                                                                                                                                                                                |  | June 30,2010(Unaudited)                         |         |   | December 31,2009 |  
|                                                                                                                                                                                                                                                                                                                                                                                |  | (Dollars in thousands, exceptper share amounts) |        
|Assets                                                                                                                                                                                                                                                                                                                                                                          |  |                                                 |         |  
|Cash                                                                                                                                                                                                                                                                                                                                                                            |  | $                                               | 4,100   |   |                  | $ | 7,440   |  
|Federal funds sold                                                                                                                                                                                                                                                                                                                                                              |  |                                                 | 49,660  |   |                  |   |        |  
|                                                                                                                                                                                                                                                                                                                                                                                |  |                                                 |         |   |                  |   |         |  
|Cash and cash equivalents                                                                                                                                                                                                                                                                                                                                                       |  |                                                 | 53,760  |   |                  |   | 7,440   |  
|Securities available for sale, at fair value                                                                                                                                                                                                                                                                                                                                    |  |                                                 | 12,404  |   |                  |   | 14,961  |  
|Securities held to maturity (fair value of $14,874 at June 30, 2010 and $16,838 at December 31, 2009)                                                                                                                                                                                                                                                                           |  |                                                 | 14,281  |   |                  |   | 16,285  |  
|Loans receivable held-for-sale, net                                                                                                                                                                                                                                                                                                                                             |  |                                                 | 18,815  |   |                  |   | 20,940  |  
|Loans receivable, net of allowance of $18,462 and $20,460                                                                                                                                                                                                                                                                                                                       |  |                                                 | 423,347 |   |                  |   | 432,640 |  
|Accrued interest receivable                                                                                                                                                                                                                                                                                                                                                     |  |                                                 | 2,517   |   |                  |   | 2,419   |  
|Federal Home Loan Bank (FHLB) stock, at cost                                                                                                                                                                                                                                                                                                                                    |  |                                                 | 4,367   |   |                  |   | 4,305   |  
|Office properties and equipment, net                                                                                                                                                                                                                                                                                                                                            |  |                                                 | 5,251   |   |                  |   | 5,363   |  
|Real estate owned (REO)                                                                                                                                                                                                                                                                                                                                                         |  |                                                 | 4,487   |   |                  |   | 2,072   |  
|Bank owned life insurance                                                                                                                                                                                                                                                                                                                                                       |  |                                                 | 2,466   |   |                  |   | 2,418   |  
|Deferred tax assets                                                                                                                                                                                                                                                                                                                                                             |  |                                                 | 5,010   |   |                  |   | 4,986   |  
|Other assets                                                                                                                                                                                                                                                                                                                                                                    |  |                                                 | 4,864   |   |                  |   | 7,217   |  
|                                                                                                                                                                                                                                                                                                                                                                                |  |                                                 |         |   |                  |   |         |  
|Total assets                                                                                                                                                                                                                                                                                                                                                                    |  | $                                               | 551,569 |   |                  | $ | 521,046 |  
|                                                                                                                                                                                                                                                                                                                                                                                |  |                                                 |         |   |                  |   |         |  
|Liabilities and stockholders equity                                                                                                                                                                                                                                                                                                                                            |  |                                                 |         |   |                  |   |         |  
|Deposits                                                                                                                                                                                                                                                                                                                                                                        |  | $                                               | 414,149 |   |                  | $ | 385,488 |  
|Federal Home Loan Bank advances                                                                                                                                                                                                                                                                                                                                                 |  |                                                 | 88,000  |   |                  |   | 91,600  |  
|Junior subordinated debentures                                                                                                                                                                                                                                                                                                                                                  |  |                                                 | 6,000   |   |                  |   | 6,000   |  
|Other borrowings                                                                                                                                                                                                                                                                                                                                                                |  |                                                 | 5,000   |   |                  |   |        |  
|Advance payments by borrowers for taxes and insurance                                                                                                                                                                                                                                                                                                                           |  |                                                 | 194     |   |                  |   | 372     |  
|Other liabilities                                                                                                                                                                                                                                                                                                                                                               |  |                                                 | 5,048   |   |                  |   | 6,071   |  
|                                                                                                                                                                                                                                                                                                                                                                                |  |                                                 |         |   |                  |   |         |  
|Total liabilities                                                                                                                                                                                                                                                                                                                                                               |  |                                                 | 518,391 |   |                  |   | 489,531 |  
|                                                                                                                                                                                                                                                                                                                                                                                |  |                                                 |         |   |                  |   |         |  
|                                                                                                                                                                                                                                                                                                                                                                                |  |                                                
|Stockholders Equity:                                                                                                                                                                                                                                                                                                                                                           |  |                                                 |         |   |                  |   |         |  
|Senior preferred, cumulative and non-voting stock, $1,000 par value, authorized, issued and outstanding 9,000 shares of Series D
at June 30, 2010 and December 31, 2009; liquidation preference of $9,056 at June 30, 2010 and December 31, 2009                                                                                                                                |  |                                                 | 8,963   |   |                  |   | 8,963   |  
|Senior preferred, cumulative and non-voting stock, $1,000 par value, authorized, issued and outstanding 6,000 shares of Series E
at June 30, 2010 and December 31, 2009; liquidation preference of $6,038 at June 30, 2010 and December 31, 2009                                                                                                                                |  |                                                 | 5,974   |   |                  |   | 5,974   |  
|Preferred, non-cumulative and non-voting stock, $.01 par value, authorized 1,000,000 shares; issued and outstanding 55,199 shares
of Series A, 100,000 shares of Series B and 76,950 shares of Series C at June 30, 2010 and December 31, 2009; liquidation preference of $552 for Series A, $1,000 for Series B and $1,000 for Series C at June 30, 2010 and
December 31, 2009 |  |                                                 | 2       |   |                  |   | 2       |  
|Preferred stock discount                                                                                                                                                                                                                                                                                                                                                        |  |                                                 | (1,569  | ) |                  |   | (1,756  | )
|Common stock, $.01 par value, authorized 3,000,000 shares; issued 2,013,942 shares at June 30, 2010 and December 31,
2009; outstanding 1,743,965 shares at June 30, 2010 and 1,743,365 shares at December 31, 2009                                                                                                                                                              |  |                                                 | 20      |   |                  |   | 20      |  
|Additional paid-in capital                                                                                                                                                                                                                                                                                                                                                      |  |                                                 | 14,351  |   |                  |   | 14,273  |  
|Retained earnings-substantially restricted                                                                                                                                                                                                                                                                                                                                      |  |                                                 | 8,558   |   |                  |   | 7,322   |  
|Accumulated other comprehensive income, net of taxes of $221 and $118 at June 30, 2010 and December 31,
2009                                                                                                                                                                                                                                                                    |  |                                                 | 330     |   |                  |   | 176     |  
|Treasury stock-at cost, 269,977 shares at June 30, 2010 and 270,577 shares at December 31, 2009                                                                                                                                                                                                                                                                                 |  |                                                 | (3,451  | ) |                  |   | (3,459  | )
|                                                                                                                                                                                                                                                                                                                                                                                |  |                                                 |         |   |                  |   |         |  
|Total stockholders equity                                                                                                                                                                                                                                                                                                                                                      |  |                                                 | 33,178  |   |                  |   | 31,515  |  
|                                                                                                                                                                                                                                                                                                                                                                                |  |                                                 |         |   |                  |   |         |  
|Total liabilities and stockholders equity                                                                                                                                                                                                                                                                                                                                      |  | $                                               | 551,569 |   |                  | $ | 521,046 |  
|                                                                                                                                                                                                                                                                                                                                                                                |  |                                                 |         |   |                  |   |         |  

See accompanying notes to unaudited consolidated financial statements.



1



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##### Table of Contents

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARIES

Consolidated Statements of Operations and Comprehensive Earnings

(Unaudited)



|                                                        |  |                                                |       |   |                          |   |       |      |  |   |        |   |  |   |        |  
|------------------------------------------------------- |  | ---------------------------------------------- | ----- | - | ------------------------ | - | ----- | ---- |  | - | ------ | - |  | - | ------ | -
|                                                        |  | Three Months EndedJune 30,                     |       |   | Six Months EndedJune 30, |  
|                                                        |  | 2010                                           |       |   | 2009                     |   |       | 2010 |  |   | 2009   |  
|                                                        |  | (Dollars in thousands,except per shareamounts) |      
|Interest and fees on loans receivable                   |  | $                                              | 7,415 |   |                          | $ | 6,683 |      |  | $ | 14,842 |   |  | $ | 12,937 |  
|Interest on mortgage-backed securities                  |  |                                                | 244   |   |                          |   | 266   |      |  |   | 514    |   |  |   | 560    |  
|Interest on investment securities                       |  |                                                | 13    |   |                          |   | 12    |      |  |   | 25     |   |  |   | 25     |  
|Other interest income                                   |  |                                                | 15    |   |                          |   | 32    |      |  |   | 25     |   |  |   | 66     |  
|                                                        |  |                                                |       |   |                          |   |       |      |  |   |        |   |  |   |        |  
|Total interest income                                   |  |                                                | 7,687 |   |                          |   | 6,993 |      |  |   | 15,406 |   |  |   | 13,588 |  
|                                                        |  |                                                |       |   |                          |   |       |      |  |   |        |   |  |   |        |  
|Interest on deposits                                    |  |                                                | 1,568 |   |                          |   | 1,813 |      |  |   | 3,071  |   |  |   | 3,538  |  
|Interest on borrowings                                  |  |                                                | 851   |   |                          |   | 745   |      |  |   | 1,646  |   |  |   | 1,497  |  
|                                                        |  |                                                |       |   |                          |   |       |      |  |   |        |   |  |   |        |  
|Total interest expense                                  |  |                                                | 2,419 |   |                          |   | 2,558 |      |  |   | 4,717  |   |  |   | 5,035  |  
|                                                        |  |                                                |       |   |                          |   |       |      |  |   |        |   |  |   |        |  
|Net interest income before provision for loan losses    |  |                                                | 5,268 |   |                          |   | 4,435 |      |  |   | 10,689 |   |  |   | 8,553  |  
|Provision for loan losses                               |  |                                                | 309   |   |                          |   | 1,589 |      |  |   | 883    |   |  |   | 2,105  |  
|                                                        |  |                                                |       |   |                          |   |       |      |  |   |        |   |  |   |        |  
|Net interest income after provision for loan losses     |  |                                                | 4,959 |   |                          |   | 2,846 |      |  |   | 9,806  |   |  |   | 6,448  |  
|                                                        |  |                                                |       |   |                          |   |       |      |  |   |        |   |  |   |        |  
|Non-interest income:                                    |  |                                                |       |   |                          |   |       |      |  |   |        |   |  |   |        |  
|Service charges                                         |  |                                                | 303   |   |                          |   | 328   |      |  |   | 566    |   |  |   | 675    |  
|Net gains on mortgage banking activities                |  |                                                |      |   |                          |   |      |      |  |   |       |   |  |   | 17     |  
|Net gains (loss) on sale of loans                       |  |                                                | (136  | ) |                          |   |      |      |  |   | (136   | ) |  |   |       |  
|Net gains (loss) on sale of REO                         |  |                                                | (61   | ) |                          |   |      |      |  |   | (35    | ) |  |   |       |  
|Provision for losses on loans held-for-sale             |  |                                                | (472  | ) |                          |   | (245  | )    |  |   | (547   | ) |  |   | (350   | )
|Other                                                   |  |                                                | 111   |   |                          |   | 34    |      |  |   | 63     |   |  |   | 71     |  
|                                                        |  |                                                |       |   |                          |   |       |      |  |   |        |   |  |   |        |  
|Total non-interest income                               |  |                                                | (255  | ) |                          |   | 117   |      |  |   | (89    | ) |  |   | 413    |  
|                                                        |  |                                                |       |   |                          |   |       |      |  |   |        |   |  |   |        |  
|Non-interest expense:                                   |  |                                                |       |   |                          |   |       |      |  |   |        |   |  |   |        |  
|Compensation and benefits                               |  |                                                | 1,796 |   |                          |   | 1,368 |      |  |   | 3,727  |   |  |   | 2,994  |  
|Occupancy expense, net                                  |  |                                                | 348   |   |                          |   | 383   |      |  |   | 710    |   |  |   | 728    |  
|Information services                                    |  |                                                | 186   |   |                          |   | 211   |      |  |   | 404    |   |  |   | 409    |  
|Professional services                                   |  |                                                | 386   |   |                          |   | 177   |      |  |   | 596    |   |  |   | 350    |  
|Office services and supplies                            |  |                                                | 133   |   |                          |   | 149   |      |  |   | 277    |   |  |   | 293    |  
|FDIC insurance                                          |  |                                                | 215   |   |                          |   | 387   |      |  |   | 462    |   |  |   | 492    |  
|Other                                                   |  |                                                | 280   |   |                          |   | 284   |      |  |   | 543    |   |  |   | 519    |  
|                                                        |  |                                                |       |   |                          |   |       |      |  |   |        |   |  |   |        |  
|Total non-interest expense                              |  |                                                | 3,344 |   |                          |   | 2,959 |      |  |   | 6,719  |   |  |   | 5,785  |  
|                                                        |  |                                                |       |   |                          |   |       |      |  |   |        |   |  |   |        |  
|Earnings before income taxes                            |  |                                                | 1,360 |   |                          |   | 4     |      |  |   | 2,998  |   |  |   | 1,076  |  
|Income taxes                                            |  |                                                | 514   |   |                          |   | (30   | )    |  |   | 1,164  |   |  |   | 380    |  
|                                                        |  |                                                |       |   |                          |   |       |      |  |   |        |   |  |   |        |  
|Net earnings                                            |  | $                                              | 846   |   |                          | $ | 34    |      |  | $ | 1,834  |   |  | $ | 696    |  
|                                                        |  |                                                |       |   |                          |   |       |      |  |   |        |   |  |   |        |  
|Other comprehensive income (loss), net of tax:          |  |                                                |       |   |                          |   |       |      |  |   |        |   |  |   |        |  
|Unrealized gain (loss) on securities available for sale |  | $                                              | 168   |   |                          | $ | (6    | )    |  | $ | 257    |   |  | $ | 98     |  
|Income tax effect                                       |  |                                                | (67   | ) |                          |   | 2     |      |  |   | (103   | ) |  |   | (39    | )
|                                                        |  |                                                |       |   |                          |   |       |      |  |   |        |   |  |   |        |  
|Other comprehensive income (loss), net of tax           |  |                                                | 101   |   |                          |   | (4    | )    |  |   | 154    |   |  |   | 59     |  
|                                                        |  |                                                |       |   |                          |   |       |      |  |   |        |   |  |   |        |  
|Comprehensive earnings                                  |  | $                                              | 947   |   |                          | $ | 30    |      |  | $ | 1,988  |   |  | $ | 755    |  
|                                                        |  |                                                |       |   |                          |   |       |      |  |   |        |   |  |   |        |  
|Net earnings                                            |  | $                                              | 846   |   |                          | $ | 34    |      |  | $ | 1,834  |   |  | $ | 696    |  
|Dividends and discount accretion on preferred stock     |  |                                                | (281  | ) |                          |   | (188  | )    |  |   | (581   | ) |  |   | (351   | )
|                                                        |  |                                                |       |   |                          |   |       |      |  |   |        |   |  |   |        |  
|Earnings (loss) available to common shareholders        |  | $                                              | 565   |   |                          | $ | (154  | )    |  | $ | 1,253  |   |  | $ | 345    |  
|                                                        |  |                                                |       |   |                          |   |       |      |  |   |        |   |  |   |        |  
|Earnings (loss) per common share-basic                  |  | $                                              | 0.32  |   |                          | $ | (0.09 | )    |  | $ | 0.72   |   |  | $ | 0.20   |  
|                                                        |  |                                                |       |   |                          |   |       |      |  |   |        |   |  |   |        |  
|Earnings (loss) per common share-diluted                |  | $                                              | 0.32  |   |                          | $ | (0.09 | )    |  | $ | 0.72   |   |  | $ | 0.20   |  
|                                                        |  |                                                |       |   |                          |   |       |      |  |   |        |   |  |   |        |  
|Dividends declared per share-common stock               |  | $                                              |      |   |                          | $ | 0.05  |      |  | $ | 0.01   |   |  | $ | 0.10   |  
|                                                        |  |                                                |       |   |                          |   |       |      |  |   |        |   |  |   |        |  

See accompanying notes to unaudited consolidated financial statements.



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##### Table of Contents

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(Unaudited)



|                                                                                           |  |                          |        |   |      |   |         |  
|------------------------------------------------------------------------------------------ |  | ------------------------ | ------ | - | ---- | - | ------- | -
|                                                                                           |  | Six Months EndedJune 30, |       
|                                                                                           |  | 2010                     |        |   | 2009 |  
|                                                                                           |  | (Dollars in thousands)   |       
|Cash flows from operating activities:                                                      |  |                          |        |   |      |   |         |  
|Net earnings                                                                               |  | $                        | 1,834  |   |      | $ | 696     |  
|Adjustments to reconcile net earnings to net cash provided by operating activities:        |  |                          |        |   |      |   |         |  
|Provision for loan losses                                                                  |  |                          | 883    |   |      |   | 2,105   |  
|Provision for losses on loans receivable held-for-sale                                     |  |                          | 547    |   |      |   | 350     |  
|Valuation adjustment on REO                                                                |  |                          | 111    |   |      |   |        |  
|Depreciation                                                                               |  |                          | 214    |   |      |   | 217     |  
|Net amortization of premiums and discounts on loans purchased                              |  |                          | (1     | ) |      |   | (7      | )
|Net amortization of deferred loan origination (fees) costs                                 |  |                          | (5     | ) |      |   | 10      |  
|Net amortization of premiums on mortgage-backed securities                                 |  |                          | 102    |   |      |   | 11      |  
|Stock-based compensation expense                                                           |  |                          | 80     |   |      |   | 41      |  
|Net gains on mortgage banking activities                                                   |  |                          |       |   |      |   | (17     | )
|Earnings on bank owned life insurance                                                      |  |                          | (48    | ) |      |   | (47     | )
|Net losses on sale of REO                                                                  |  |                          | 35     |   |      |   |        |  
|Net change in:                                                                             |  |                          |        |   |      |   |         |  
|Loans receivable held-for-sale, net                                                        |  |                          | 3,000  |   |      |   | 1,188   |  
|Accrued interest receivable                                                                |  |                          | (98    | ) |      |   | (174    | )
|Deferred tax assets                                                                        |  |                          | (127   | ) |      |   |        |  
|Other assets                                                                               |  |                          | 2,353  |   |      |   | (292    | )
|Other liabilities                                                                          |  |                          | (663   | ) |      |   | (1,408  | )
|                                                                                           |  |                          |        |   |      |   |         |  
|Net cash provided by operating activities                                                  |  |                          | 8,217  |   |      |   | 2,673   |  
|                                                                                           |  |                          |        |   |      |   |         |  
|Cash flows from investing activities:                                                      |  |                          |        |   |      |   |         |  
|Available-for-sale securities:                                                             |  |                          |        |   |      |   |         |  
|Maturities, prepayments and calls                                                          |  |                          | 2,718  |   |      |   | 299     |  
|Held-to-maturity securities:                                                               |  |                          |        |   |      |   |         |  
|Maturities, prepayments and calls                                                          |  |                          | 1,998  |   |      |   | 3,710   |  
|Net change in loans receivable                                                             |  |                          | 3,037  |   |      |   | (78,433 | )
|Proceeds from sale of REO                                                                  |  |                          | 1,396  |   |      |   |        |  
|Investment in affordable housing limited partnership                                       |  |                          | (359   | ) |      |   |        |  
|Purchase of Federal Home Loan Bank stock                                                   |  |                          | (231   | ) |      |   | (38     | )
|Proceeds from redemption of Federal Home Loan Bank stock                                   |  |                          | 169    |   |      |   |        |  
|Additions to office properties and equipment                                               |  |                          | (102   | ) |      |   | (139    | )
|                                                                                           |  |                          |        |   |      |   |         |  
|Net cash provided by (used in) investing activities                                        |  |                          | 8,626  |   |      |   | (74,601 | )
|                                                                                           |  |                          |        |   |      |   |         |  
|Cash flows from financing activities:                                                      |  |                          |        |   |      |   |         |  
|Net change in deposits                                                                     |  |                          | 28,661 |   |      |   | 78,025  |  
|Repayments on Federal Home Loan Bank advances                                              |  |                          | (3,600 | ) |      |   | (2,500  | )
|Net increase in other borrowings                                                           |  |                          | 5,000  |   |      |   |        |  
|Cash dividends paid                                                                        |  |                          | (412   | ) |      |   | (463    | )
|Reissuance of treasury stock                                                               |  |                          | 6      |   |      |   | 6       |  
|Net change in advance payments by borrowers for taxes and insurance                        |  |                          | (178   | ) |      |   | (126    | )
|                                                                                           |  |                          |        |   |      |   |         |  
|Net cash provided by financing activities                                                  |  |                          | 29,477 |   |      |   | 74,942  |  
|                                                                                           |  |                          |        |   |      |   |         |  
|Net change in cash and cash equivalents                                                    |  |                          | 46,320 |   |      |   | 3,014   |  
|Cash and cash equivalents at beginning of period                                           |  |                          | 7,440  |   |      |   | 7,476   |  
|                                                                                           |  |                          |        |   |      |   |         |  
|Cash and cash equivalents at end of period                                                 |  | $                        | 53,760 |   |      | $ | 10,490  |  
|                                                                                           |  |                          |        |   |      |   |         |  
|                                                                                           |  |                         
|Supplemental disclosures of cash flow information:                                         |  |                          |        |   |      |   |         |  
|Cash paid for interest                                                                     |  | $                        | 4,796  |   |      | $ | 4,973   |  
|                                                                                           |  |                          |        |   |      |   |         |  
|Cash paid for income taxes                                                                 |  | $                        |       |   |      | $ | 1,525   |  
|                                                                                           |  |                          |        |   |      |   |         |  
|                                                                                           |  |                         
|Supplemental disclosures of non-cash investing and financing activities:                   |  |                          |        |   |      |   |         |  
|Transfers of loans receivable to REO                                                       |  | $                        | 3,957  |   |      | $ |        |  
|                                                                                           |  |                          |        |   |      |   |         |  
|Transfers of loans receivable from loans receivable, net to loans receivable held-for-sale |  | $                        | 1,422  |   |      | $ |        |  
|                                                                                           |  |                          |        |   |      |   |         |  

See accompanying notes to unaudited consolidated financial statements.



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BROADWAY FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

June 30, 2010

NOTE (1)  Basis of Financial Statement Presentation

The accompanying unaudited consolidated financial statements include Broadway Financial Corporation (the Company) and its
wholly owned subsidiary, Broadway Federal Bank, f.s.b. (the Bank). Also included in the unaudited consolidated financial statements is Broadway Service Corporation, a wholly owned subsidiary of the Bank. All significant intercompany
balances and transactions have been eliminated in consolidation.

The unaudited consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions for quarterly reports on Form 10-Q. These unaudited consolidated financial statements do
not include all disclosures associated with the Companys consolidated annual financial statements included in its annual report on Form 10-K for the year ended December 31, 2009 and, accordingly, should be read in conjunction with such
audited consolidated financial statements. In the opinion of management, all adjustments (all of which are normal and recurring in nature) considered necessary for a fair presentation have been included. Operating results for the three and six
months ended June 30, 2010 are not necessarily indicative of the results that may be expected for the year ending December 31, 2010.

Some items in the consolidated financial statements for the prior period were reclassified to conform to the current presentation.

NOTE (2)  Recent Accounting Pronouncements

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 amendments require an entity to disclose credit quality indicators, past due information and modifications of its financing receivables. The objective of
these expanded disclosures is to provide financial statement users with greater transparency about an entitys allowance for credit losses and the credit quality of its financing receivables. The guidance is effective for interim and annual
reporting periods beginning on or after December 15, 2010. Since this guidance is disclosure related, adoption of this guidance will not have a material effect on the Companys consolidated financial statements.

NOTE (3)  Earnings Per Common Share

Basic earnings per common share is computed by dividing earnings available to common shareholders by the weighted average number of shares
of common stock outstanding for the period. Diluted earnings per common share is computed by dividing earnings available to common shareholders by the weighted average number of shares of common stock outstanding for the period, increased for the
dilutive effect of common stock equivalents.

The following table shows how we computed basic and diluted earnings per common
share for the three and six months ended June 30, 2010 and 2009.



|                                                            |  |                                          |           |   |                                  |   |           |      |  |   |           |   |  |   |           |  
|----------------------------------------------------------- |  | ---------------------------------------- | --------- | - | -------------------------------- | - | --------- | ---- |  | - | --------- | - |  | - | --------- | -
|                                                            |  | For the three months
endedJune 30,       |           |   | For the six months
endedJune 30, |  
|                                                            |  | 2010                                     |           |   | 2009                             |   |           | 2010 |  |   | 2009      |  
|                                                            |  | (Dollars in thousands, except per share) |          
|Basic                                                       |  |                                          |           |   |                                  |   |           |      |  |   |           |   |  |   |           |  
|Net earnings                                                |  | $                                        | 846       |   |                                  | $ | 34        |      |  | $ | 1,834     |   |  | $ | 696       |  
|Less: Preferred stock dividends and accretion               |  |                                          | (281      | ) |                                  |   | (188      | )    |  |   | (581      | ) |  |   | (351      | )
|                                                            |  |                                          |           |   |                                  |   |           |      |  |   |           |   |  |   |           |  
|Earnings (loss) available to common shareholders            |  | $                                        | 565       |   |                                  | $ | (154      | )    |  | $ | 1,253     |   |  | $ | 345       |  
|                                                            |  |                                          |           |   |                                  |   |           |      |  |   |           |   |  |   |           |  
|Weighted average common shares outstanding                  |  |                                          | 1,743,609 |   |                                  |   | 1,743,002 |      |  |   | 1,743,488 |   |  |   | 1,742,884 |  
|                                                            |  |                                          |           |   |                                  |   |           |      |  |   |           |   |  |   |           |  
|Basic earnings per common share                             |  | $                                        | 0.32      |   |                                  | $ | (0.09     | )    |  | $ | 0.72      |   |  | $ | 0.20      |  
|                                                            |  |                                          |           |   |                                  |   |           |      |  |   |           |   |  |   |           |  
|                                                            |  |                                          |           |  
|Diluted                                                     |  |                                          |           |   |                                  |   |           |      |  |   |           |   |  |   |           |  
|Net earnings                                                |  | $                                        | 846       |   |                                  | $ | 34        |      |  | $ | 1,834     |   |  | $ | 696       |  
|Less: Preferred stock dividends and accretion               |  |                                          | (281      | ) |                                  |   | (188      | )    |  |   | (581      | ) |  |   | (351      | )
|                                                            |  |                                          |           |   |                                  |   |           |      |  |   |           |   |  |   |           |  
|Earnings (loss) available to common shareholders            |  | $                                        | 565       |   |                                  | $ | (154      | )    |  | $ | 1,253     |   |  | $ | 345       |  
|                                                            |  |                                          |           |   |                                  |   |           |      |  |   |           |   |  |   |           |  
|Weighted average common shares outstanding                  |  |                                          | 1,743,609 |   |                                  |   | 1,743,002 |      |  |   | 1,743,488 |   |  |   | 1,742,884 |  
|Add: dilutive effects of assumed exercises of stock options |  |                                          | 900       |   |                                  |   | 3,281     |      |  |   | 3,485     |   |  |   | 2,746     |  
|                                                            |  |                                          |           |   |                                  |   |           |      |  |   |           |   |  |   |           |  
|Average shares and dilutive potential common shares         |  |                                          | 1,744,509 |   |                                  |   | 1,746,283 |      |  |   | 1,746,973 |   |  |   | 1,745,630 |  
|                                                            |  |                                          |           |   |                                  |   |           |      |  |   |           |   |  |   |           |  
|Diluted earnings per common share                           |  | $                                        | 0.32      |   |                                  | $ | (0.09     | )    |  | $ | 0.72      |   |  | $ | 0.20      |  
|                                                            |  |                                          |           |   |                                  |   |           |      |  |   |           |   |  |   |           |  



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BROADWAY FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (continued)

June 30, 2010



Stock options for 237,547 and 212,700 shares of common stock were not considered in
computing diluted earnings per common share for the three and six months ended June 30, 2010 and stock options and warrants for 401,500 and 367,482 shares of common stock were not considered in computing diluted earnings per common share for
the three and six months ended June 30, 2009 because they were anti-dilutive.

NOTE (4)  Securities

The following table summarizes the amortized cost and fair value of the available-for-sale and held-to-maturity investment securities
portfolios at June 30, 2010 and December 31, 2009 and the corresponding amounts of unrealized gains and losses which are recognized in accumulated other comprehensive income (loss), for available-for-sale investment securities, were as
follows:



|                                   |  |                |        |                      |   |                       |  |           |   |  |   |       
|---------------------------------- |  | -------------- | ------ | -------------------- | - | --------------------- |  | --------- | - |  | - | ------
|                                   |  | AmortizedCost  |        | GrossUnrealizedGains |   | GrossUnrealizedLosses |  | FairValue
|                                   |  | (In thousands)
|June 30, 2010:                     |  |                |       
|Available-for-sale                 |  |                |        |                      |   |                       |  |           |   |  |   |       
|Residential mortgage-backed        |  | $              | 11,853 |                      | $ | 551                   |  | $         |  |  | $ | 12,404
|                                   |  |                |        |                      |   |                       |  |           |   |  |   |       
|Total available-for-sale           |  | $              | 11,853 |                      | $ | 551                   |  | $         |  |  | $ | 12,404
|                                   |  |                |        |                      |   |                       |  |           |   |  |   |       
|                                   |  |                |        |                     
|Held-to-maturity                   |  |                |        |                      |   |                       |  |           |   |  |   |       
|Residential mortgage-backed        |  | $              | 13,281 |                      | $ | 484                   |  | $         |  |  | $ | 13,765
|U.S. Government and federal agency |  |                | 1,000  |                      |   | 109                   |  |           |  |  |   | 1,109 
|                                   |  |                |        |                      |   |                       |  |           |   |  |   |       
|Total held-to-maturity             |  | $              | 14,281 |                      | $ | 593                   |  | $         |  |  | $ | 14,874
|                                   |  |                |        |                      |   |                       |  |           |   |  |   |       
|                                   |  |                |        |                     
|                                   |  | AmortizedCost  |        | GrossUnrealizedGains |   | GrossUnrealizedLosses |  | FairValue
|                                   |  | (In thousands)
|December 31, 2009:                 |  |                |       
|Available-for-sale                 |  |                |        |                      |   |                       |  |           |   |  |   |       
|Residential mortgage-backed        |  | $              | 14,667 |                      | $ | 294                   |  | $         |  |  | $ | 14,961
|                                   |  |                |        |                      |   |                       |  |           |   |  |   |       
|Total available-for-sale           |  | $              | 14,667 |                      | $ | 294                   |  | $         |  |  | $ | 14,961
|                                   |  |                |        |                      |   |                       |  |           |   |  |   |       
|                                   |  |                |        |                     
|Held-to-maturity                   |  |                |        |                      |   |                       |  |           |   |  |   |       
|Residential mortgage-backed        |  | $              | 15,285 |                      | $ | 460                   |  | $         |  |  | $ | 15,745
|U.S. Government and federal agency |  |                | 1,000  |                      |   | 93                    |  |           |  |  |   | 1,093 
|                                   |  |                |        |                      |   |                       |  |           |   |  |   |       
|Total held-to-maturity             |  | $              | 16,285 |                      | $ | 553                   |  | $         |  |  | $ | 16,838
|                                   |  |                |        |                      |   |                       |  |           |   |  |   |       



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BROADWAY FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (continued)

June 30, 2010



The amortized cost and fair value of the investment securities portfolios are shown by
contractual maturity at June 30, 2010. Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties. Securities not due at a single maturity
date, primarily residential mortgage-backed securities, are shown separately.



|                            |  |                    |        |                  |   |               |  |           |        |  |   |       
|--------------------------- |  | ------------------ | ------ | ---------------- | - | ------------- |  | --------- | ------ |  | - | ------
|                            |  | Available-for-Sale |        | Held-to-Maturity
|Maturity                    |  | AmortizedCost      |        | FairValue        |   | AmortizedCost |  | FairValue
|                            |  | (In thousands)    
|Within one year             |  | $                  |       |                  | $ |              |  | $         |       |  | $ |      
|One to five years           |  |                    |       |                  |   |              |  |           | 1,000  |  |   | 1,109 
|Five to ten years           |  |                    |       |                  |   |              |  |           |       |  |   |      
|Beyond ten years            |  |                    |       |                  |   |              |  |           |       |  |   |      
|Residential mortgage-backed |  |                    | 11,853 |                  |   | 12,404        |  |           | 13,281 |  |   | 13,765
|                            |  |                    |        |                  |   |               |  |           |        |  |   |       
|Total                       |  | $                  | 11,853 |                  | $ | 12,404        |  | $         | 14,281 |  | $ | 14,874
|                            |  |                    |        |                  |   |               |  |           |        |  |   |       

At June 30, 2010 and December 31, 2009,
securities pledged to secure public deposits and Federal Home Loan Bank (FHLB) advances had a carrying amount of $14.3 million and $16.3 million, respectively. At June 30, 2010 and December 31, 2009, there were no holdings of
securities of any one issuer, other than the U.S. Government and its agencies, in an amount greater than 10% of stockholders equity. There were no sales of securities during the three and six months ended June 30, 2010 and 2009.

There were no securities with unrealized losses at June 30, 2010 and December 31, 2009. We evaluate securities for
other-than-temporary impairment at least quarterly, and more frequently when economic or market concerns warrant such evaluation. Consideration is given to the financial condition and near-term prospects of the issuer, the length of time and the
extent to which the fair value has been less than the cost, and our intent and ability to retain our investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. In analyzing an issuers
financial condition, we consider whether the securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred, and the results of reviews of the issuers financial condition.

NOTE (5)  Loans Receivable Held-for-Sale, net

Loans receivable held-for-sale, net, consisted of multi-family and commercial real estate loans originated for sale. Non-performing loans
receivable held-for-sale, included in loans receivable held-for-sale, net, totaled $7.2 million, net of charge-offs of $639 thousand and a $444 thousand valuation allowance, as of June 30, 2010 and totaled $5.7 million, net of a $994 thousand
valuation allowance, at December 31, 2009.

We recorded lower of cost or market write-downs on non-performing loans
receivable held-for-sale totaling $547 thousand for the six months ended June 30, 2010, compared to $350 thousand for the same period in 2009.

NOTE (6)  Allowance for Loan Losses and Impaired Loans

Activity in the allowance for loan losses was as follows:



|                          |  |                                  |        |   |      |   |      
|------------------------- |  | -------------------------------- | ------ | - | ---- | - | -----
|                          |  | For the six months endedJune 30,
|                          |  | 2010                             |        |   | 2009
|                          |  | (In thousands)                  
|Beginning balance         |  | $                                | 20,460 |   |      | $ | 3,559
|Provision for loan losses |  |                                  | 883    |   |      |   | 2,105
|Loans charged off         |  |                                  | (2,881 | ) |      |   |     
|                          |  |                                  |        |   |      |   |      
|Ending balance            |  | $                                | 18,462 |   |      | $ | 5,664
|                          |  |                                  |        |   |      |   |      



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BROADWAY FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (continued)

June 30, 2010



Individually impaired loans were as follows:



|                                                                                                                                    |  |                |        |                  |   |       
|----------------------------------------------------------------------------------------------------------------------------------- |  | -------------- | ------ | ---------------- | - | ------
|                                                                                                                                    |  | June 30,2010   |        | December 31,2009
|                                                                                                                                    |  | (In thousands)
|Impaired loans with no allocated allowance for loan losses                                                                          |  | $              | 18,582 |                  | $ | 17,500
|Impaired loans with allocated allowance for loan losses based on fair value of collateral                                           |  |                | 15,096 |                  |   | 16,956
|Impaired loans with allocated allowance for loan losses based on present value of cash flows as a troubled debt restructure
(TDR) |  |                | 16,495 |                  |   | 15,186
|                                                                                                                                    |  |                |        |                  |   |       
|Total                                                                                                                               |  | $              | 50,173 |                  | $ | 49,642
|                                                                                                                                    |  |                |        |                  |   |       
|Allowance for loan losses allocated to impaired loans based on fair value of collateral                                             |  | $              | 3,669  |                  | $ | 4,831 
|Allowance for loan losses allocated to impaired loans based on present value of cash flows as a TDR                                 |  |                | 488    |                  |   | 543   
|                                                                                                                                    |  |                |        |                  |   |       
|Allowance for loan losses allocated to impaired loans                                                                               |  | $              | 4,157  |                  | $ | 5,374 
|                                                                                                                                    |  |                |        |                  |   |       

Non-accrual loans were as follows:



|                               |  |                |        |                  |   |       
|------------------------------ |  | -------------- | ------ | ---------------- | - | ------
|                               |  | June 30,2010   |        | December 31,2009
|                               |  | (In thousands)
|Loans receivable held-for-sale |  | $              | 3,518  |                  | $ | 4,013 
|Loans receivable, net          |  |                | 29,334 |                  |   | 30,908
|                               |  |                |        |                  |   |       
|Total non-accrual loans        |  | $              | 32,852 |                  | $ | 34,921
|                               |  |                |        |                  |   |       

Non-accrual loans consist of delinquent loans that are
90 days or more past due and TDRs that do not qualify for accrual status. There were no loans 90 days or more past due and still accruing at June 30, 2010.

At June 30, 2010, loans classified as a TDR totaled $35.0 million, of which $10.0 million were included in nonaccrual loans and
$25.0 million were on accrual status as the loans have complied with the terms of their restructured agreements for a satisfactory period of time. At December 31, 2009, loans classified as a TDR totaled $32.5 million, of which $11.0 million
were included in nonaccrual loans and $21.5 million were on accrual status as the loans have complied with the terms of their restructured agreements for a satisfactory period of time. The Company has allocated $488 thousand and $543 thousand of
specific allowance allocations to TDRs as of June 30, 2010 and December 31, 2009, respectively. The net carrying value of TDRs is evaluated on at least a quarterly basis and valuation allowances are adjusted for changes in the estimated
present value of the expected future cash flows discounted at the loans effective interest rate. As of June 30, 2010 and December 31, 2009, we did not have any outstanding commitments to extend additional funds to these borrowers.

NOTE (7)  Fair Value

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

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

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



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BROADWAY FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (continued)

June 30, 2010



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

The Company used the following
methods and significant assumptions to estimate the fair value of each type of financial instrument:

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

The fair values of non-performing loans receivable held-for-sale is generally based upon the fair value of the collateral which is
obtained from recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the
appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are typically significant and result in a Level 3 classification of the inputs for determining fair value.

Our impaired loans are generally collateral dependent and, as such, are carried at the estimated fair value of the collateral less
estimated selling costs. Fair values are estimated through current appraisals, broker opinions or automated valuation models and adjusted as necessary, by management, to reflect current market conditions and, as such, are classified as Level 3.

Nonrecurring adjustments to certain commercial and residential real estate properties classified as real estate owned
(REO) are measured at the lower of carrying amount or fair value, less costs to sell. Fair values are generally based on third party appraisals of the property, resulting in a Level 3 classification. In cases where the carrying amount
exceeds the fair value, less costs to sell, an impairment loss is recognized.

Mortgage servicing rights assets are recognized
on residential and non-residential mortgage loans we service for others. The fair value of mortgage servicing rights is based on a valuation model that calculates the present value of estimated future net servicing income (Level 3 inputs).

Assets Measured on a Recurring Basis

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



|                                                            |  |                |        |                                                            |   |                                           |  |                                         |        |  |   |  
|----------------------------------------------------------- |  | -------------- | ------ | ---------------------------------------------------------- | - | ----------------------------------------- |  | --------------------------------------- | ------ |  | - | -
|                                                            |  |                |        | Fair Value Measurements at June 30, 2010 Using            
|                                                            |  | CarryingValue  |        | Quoted Prices inActive Marketsfor
IdenticalAssets(Level 1) |   | SignificantOtherObservableInputs(Level 2) |  | SignificantUnobservableInputs(Level
 3)
|                                                            |  | (In thousands)
|Assets:                                                     |  |                |       
|Securities available-for-sale - residential mortgage-backed |  | $              | 12,404 |                                                            | $ |                                          |  | $                                       | 12,404 |  | $ | 
|                                                            |  |               
|                                                            |  |                |        | Fair Value Measurements at December 31, 2009 Using        
|                                                            |  | CarryingValue  |        | Quoted Prices inActive Marketsfor
IdenticalAssets(Level 1) |   | SignificantOtherObservableInputs(Level 2) |  | SignificantUnobservableInputs(Level
 3)
|                                                            |  | (In thousands)
|Assets:                                                     |  |                |       
|Securities available-for-sale - residential mortgage-backed |  | $              | 14,961 |                                                            | $ |                                          |  | $                                       | 14,961 |  | $ | 



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BROADWAY FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (continued)

June 30, 2010



Assets Measured on a Non-Recurring Basis

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



|                                                   |  |                |        |                                                            |   |                                           |  |                                         |   |  |   |       
|-------------------------------------------------- |  | -------------- | ------ | ---------------------------------------------------------- | - | ----------------------------------------- |  | --------------------------------------- | - |  | - | ------
|                                                   |  |                |        | Fair Value Measurements at June 30, 2010 Using            
|                                                   |  | CarryingValue  |        | Quoted Prices inActive Marketsfor
IdenticalAssets(Level 1) |   | SignificantOtherObservableInputs(Level 2) |  | SignificantUnobservableInputs(Level
 3)
|                                                   |  | (In thousands)
|Assets:                                            |  |                |        |                                                            |   |                                           |  |                                         |   |  |   |       
|Non-performing loans receivable held-for-sale, net |  | $              | 7,180  |                                                            | $ |                                          |  | $                                       |  |  | $ | 7,180 
|Impaired loans carried at fair value of collateral |  |                | 17,410 |                                                            |   |                                          |  |                                         |  |  |   | 17,410
|Real estate owned                                  |  |                | 4,487  |                                                            |   |                                          |  |                                         |  |  |   | 4,487 
|Mortgage servicing rights                          |  |                | 447    |                                                            |   |                                          |  |                                         |  |  |   | 447   
|                                                   |  |               
|                                                   |  |                |        | Fair Value Measurements at December 31, 2009 Using        
|                                                   |  | CarryingValue  |        | Quoted Prices inActive
Marketsfor IdenticalAssets(Level 1) |   | SignificantOtherObservableInputs(Level 2) |  | SignificantUnobservableInputs(Level
 3)
|                                                   |  | (In thousands)
|Assets:                                            |  |                |       
|Non-performing loans receivable held-for-sale, net |  | $              | 5,700  |                                                            | $ |                                          |  | $                                       |  |  | $ | 5,700 
|Impaired loans carried at fair value of collateral |  |                | 17,071 |                                                            |   |                                          |  |                                         |  |  |   | 17,071
|Mortgage servicing rights                          |  |                | 450    |                                                            |   |                                          |  |                                         |  |  |   | 450   

The following table
provides information regarding our assets measured at fair value on a non-recurring basis at June 30, 2010 and December 31, 2009, and the losses recognized on these assets for the three and six months ended June 30, 2010 and for the
year ended June 30, 2009.



|                                                       |  |                                |        |                                   |   |                                           |  |                                         |       |  |   |      
|------------------------------------------------------ |  | ------------------------------ | ------ | --------------------------------- | - | ----------------------------------------- |  | --------------------------------------- | ----- |  | - | -----
|                                                       |  | PrincipalAmount atJune 30,2010 |        | ValuationAllowanceat June 30,2010 |   | Lossesfor thethreemonthsendedJune 30,2010 |  | Lossesfor thesixmonthsendedJune 30,2010
|                                                       |  | (In thousands)                
|Non-performing loans receivable held-for-sale, net (1) |  | $                              | 7,624  |                                   | $ | 444                                       |  | $                                       | 33    |  | $ | 89   
|Impaired loans carried at fair value of collateral (2) |  |                                | 21,079 |                                   |   | 3,669                                     |  |                                         | 1,015 |  |   | 1,106
|Real estate owned (3)                                  |  |                                | 4,523  |                                   |   | 36                                        |  |                                         | 36    |  |   | 111  
|Mortgage servicing rights (4)                          |  |                                | 447    |                                   |   |                                          |  |                                         | 1     |  |   | 3    
|                                                       |  |                                |        |                                   |   |                                           |  |                                         |       |  |   |      
|Total                                                  |  | $                              | 33,673 |                                   | $ | 4,149                                     |  | $                                       | 1,085 |  | $ | 1,309
|                                                       |  |                                |        |                                   |   |                                           |  |                                         |       |  |   |      



| | (1) | Losses are charged to provision for losses on loans receivable held-for-sale.
| | --- | -----------------------------------------------------------------------------

| | (2) | Losses are charged against the allowance for loan losses. Includes $6.0 million of loans that were carried at cost as the fair value of the collateral on these loans
exceeded the book value as a result of charge-offs.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (3) | Losses are charged against the allowance for loan losses in the case of a write-down upon the transfer of a loan to REO. Losses subsequent to the transfer of a loan to
REO are charged to provision for losses on REO which is a component of other non-interest income.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (4) | Losses are charged to other non-interest income.
| | --- | ------------------------------------------------



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##### Table of Contents

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (continued)

June 30, 2010



|                                                       |  |                                    |        |                                       |   |                                          |  |   |      
|------------------------------------------------------ |  | ---------------------------------- | ------ | ------------------------------------- | - | ---------------------------------------- |  | - | -----
|                                                       |  | PrincipalAmount atDecember 31,2009 |        | ValuationAllowance atDecember 31,2009 |   | Losses for theyear
endedDecember 31,2009
|Non-performing loans receivable held-for-sale, net (1) |  | $                                  | 6,694  |                                       | $ | 994                                      |  | $ | 734  
|Impaired loans carried at fair value of collateral (2) |  |                                    | 21,902 |                                       |   | 4,831                                    |  |   | 5,924
|Mortgage servicing rights (3)                          |  |                                    | 450    |                                       |   |                                         |  |   | 13   
|                                                       |  |                                    |        |                                       |   |                                          |  |   |      
|Total                                                  |  | $                                  | 29,046 |                                       | $ | 5,825                                    |  | $ | 6,671
|                                                       |  |                                    |        |                                       |   |                                          |  |   |      



| | (1) | Losses are charged to provision for losses on loans receivable held-for-sale.
| | --- | -----------------------------------------------------------------------------

| | (2) | Losses are charged against the allowance for loan losses. Includes $4.9 million of loans that were carried at cost as the fair value of the collateral on these loans
exceeded the book value as a result of charge-offs.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (3) | Losses are charged to other non-interest income.
| | --- | ------------------------------------------------

Fair Values of Financial Instruments

The carrying amounts and estimated fair values of financial instruments, at June 30, 2010 and December 31, 2009 were as follows:



|                                                      |  |                |          |   |                     |   |          |                |  |   |                     |   |  |   |          |  
|----------------------------------------------------- |  | -------------- | -------- | - | ------------------- | - | -------- | -------------- |  | - | ------------------- | - |  | - | -------- | -
|                                                      |  | June 30, 2010  |          |   | December 31, 2009   |  
|                                                      |  | CarryingAmount |          |   | EstimatedFair Value |   |          | CarryingAmount |  |   | EstimatedFair Value |  
|                                                      |  | (In thousands) |         
|Financial Assets:                                     |  |                |          |   |                     |   |          |                |  |   |                     |   |  |   |          |  
|Cash and cash equivalents                             |  | $              | 53,760   |   |                     | $ | 53,760   |                |  | $ | 7,440               |   |  | $ | 7,440    |  
|Securities available-for-sale                         |  |                | 12,404   |   |                     |   | 12,404   |                |  |   | 14,961              |   |  |   | 14,961   |  
|Securities held-to-maturity                           |  |                | 14,281   |   |                     |   | 14,874   |                |  |   | 16,285              |   |  |   | 16,838   |  
|Loans receivable held-for-sale, net                   |  |                | 18,815   |   |                     |   | 18,815   |                |  |   | 20,940              |   |  |   | 20,940   |  
|Loans receivable, net                                 |  |                | 423,347  |   |                     |   | 425,662  |                |  |   | 432,640             |   |  |   | 434,770  |  
|Federal Home Loan Bank stock                          |  |                | 4,367    |   |                     |   | N/A      |                |  |   | 4,305               |   |  |   | N/A      |  
|Accrued interest receivable                           |  |                | 2,517    |   |                     |   | 2,517    |                |  |   | 2,419               |   |  |   | 2,419    |  
|                                                      |  |                |          |  
|Financial Liabilities:                                |  |                |          |   |                     |   |          |                |  |   |                     |   |  |   |          |  
|Deposits                                              |  | $              | (414,149 | ) |                     | $ | (414,081 | )              |  | $ | (385,488            | ) |  | $ | (382,435 | )
|Federal Home Loan Bank advances                       |  |                | (88,000  | ) |                     |   | (93,150  | )              |  |   | (91,600             | ) |  |   | (94,491  | )
|Junior subordinated debentures                        |  |                | (6,000   | ) |                     |   | (4,466   | )              |  |   | (6,000              | ) |  |   | (5,237   | )
|Other borrowings                                      |  |                | (5,000   | ) |                     |   | (4,877   | )              |  |   |                    |   |  |   |         |  
|Advance payments by borrowers for taxes and insurance |  |                | (194     | ) |                     |   | (194     | )              |  |   | (372                | ) |  |   | (372     | )
|Accrued interest payable                              |  |                | (415     | ) |                     |   | (415     | )              |  |   | (494                | ) |  |   | (494     | )

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

Carrying amount is the estimated
fair value for cash and cash equivalents, accrued interest receivable and payable, demand deposits, short term debt, advance payments by borrowers for taxes and insurance, and variable rate loans, deposits and borrowings that reprice frequently and
fully. The methods for determining the fair values for securities were described previously. For fixed rate loans and deposits and for variable rate loans and deposits with infrequent repricing or repricing limits, fair value is based on discounted
cash flows using current market rates applied to the estimated life and credit risk without consideration of widening credit spreads due to market illiquidity. Fair value of debt is based on current rates for similar financing. It was not
practicable to determine the fair value of FHLB stock due to restrictions placed on its transferability. The fair values of off-balance-sheet items are not considered material (or are based on the current fees or cost that would be charged to enter
into or terminate such arrangements) and, as such, they are not presented herein.



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##### Table of Contents

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (continued)

June 30, 2010



NOTE (8)  Stock-based Compensation

In 2008, we adopted the 2008 Long-Term Incentive Plan (2008 LTIP), which authorizes up to a maximum of 351,718 shares plus
certain shares covered under the Companys 1996 Long-Term Incentive Plan and 1996 Stock Option Plan, which have expired. At June 30, 2010, 199,843 shares remain available for issuance pursuant to future grants. The granting of awards to
key employees and directors is typically in the form of options to purchase capital stock.

During the first six months of
2010, the Company granted 8,750 stock options, with an exercise price of $6.00 per share. These options vest immediately and expire in ten years. Using the Black-Scholes option pricing model, the Company estimated the fair value of these stock
options to be $34 thousand or $3.86 per share. The Company expensed this amount during the period granted. The assumptions used in the option pricing model and the determination of stock option expense were an expected volatility of 102.91%, a risk
free interest rate of 3.68%, an expected option term of ten years, and a 3.33% dividend yield.

The Company recorded $48
thousand of stock-based compensation expense, net of tax, during the first six months of 2010 compared to $24 thousand for the first six months of 2009.

NOTE (9)  Loss Contingencies

Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the
likelihood of loss is probable and an amount or range of loss can be reasonably estimated. Management does not believe there now are any such matters that will have a material effect on the consolidated financial statements.

On September 18, 2008, a lawsuit was filed in the Superior Court of the State of California for Los Angeles County against the Bank
by Daniel D. Holliday III, Attorney at Law, LLC (Holliday). 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 on 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 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 basis of the cross-complaint is that, among other things the cross-defendants conspired with each other to fraudulently induce the Bank to make the loan at issue. See Part II, Item 1, Legal Proceedings for further
description.

With respect to the foregoing matters, the Banks attorneys have not concluded that the likelihood of an
unfavorable outcome is neither probable or remote, and express no opinion as to the likely outcome of such matters. Management has vigorously defended against the lawsuit and prosecuted the cross-complaint.

As of June 30, 2010, a $600 thousand specific allocation of the allowance for loan losses has been established for the related $2.2
million loan and the loan is on nonaccrual status. If the Bank is unsuccessful in defending against the lawsuit, the loan and the non-accrued interest receivable balances may not be fully collectible and a loss may be incurred that could be material
to the Companys consolidated financial statements.



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##### Table of Contents

BROADWAY FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (continued)

June 30, 2010



NOTE (10)  Regulatory Matters

As reported in the Companys most recent Form 10-K Annual Report, the Company and the Bank are currently considered by the Office of
Thrift Supervision (the OTS) to be in troubled condition and the OTS has imposed certain limitations on the Bank and the Company. These limitations include the following, among others:



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



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



| |  |  | Neither the Bank nor the Company 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 Bank and the Company will be subject to limitations on entering into or amending employment agreements and compensation arrangements, and on the
payment of bonuses to Bank officers and employees.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



| |  |  | The Bank will not be 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.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The OTS has further requested that the
Company and the Bank consent to the issuance of a cease and desist order requiring, 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 cease and desist order
would require that the Bank 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.

Actual and normally
required capital amounts and ratios at June 30, 2010 and December 31, 2009, together with the higher capital requirements that the OTS will require the Bank to meet, are presented below.



|                                              |  |                        |        |       |                                       |   |        |                                                                |        |  |                                                |        |  |        |        |  |        |   |        |   |        |  |       |  
|--------------------------------------------- |  | ---------------------- | ------ | ----- | ------------------------------------- | - | ------ | -------------------------------------------------------------- | ------ |  | ---------------------------------------------- | ------ |  | ------ | ------ |  | ------ | - | ------ | - | ------ |  | ----- | -
|                                              |  | Actual                 |        |       | Requiredfor 
CapitalAdequacy Purposes |   |        | To Be WellCapitalized UnderPrompt CorrectiveAction Regulations |        |  | CapitalRequirementsunder Cease andDesist Order |       
|                                              |  | Amount                 |        | Ratio |                                       |   | Amount |                                                                | Ratio  |  |                                                | Amount |  | Ratios |        |  | Amount |   | Ratios |  
|                                              |  | (Dollars in thousands) |       
|June 30, 2010:                                |  |                        |        |      
|Tangible Capital to adjusted total assets     |  | $                      | 42,330 |       | 7.68                                  | % |        | $                                                              | 8,267  |  | 1.50                                           | %      |  |        | N/A    |  | N/A    |   |        |   | N/A    |  | N/A   |  
|Tier 1(Core) Capital to adjusted total assets |  | $                      | 42,330 |       | 7.68                                  | % |        | $                                                              | 22,045 |  | 4.00                                           | %      |  | $      | 27,557 |  | 5.00   | % |        | $ | 44,091 |  | 8.00  | %
|Tier 1(Core) Capital to risk weighted assets  |  | $                      | 42,330 |       | 10.72                                 | % |        |                                                                | N/A    |  | N/A                                            |        |  | $      | 23,700 |  | 6.00   | % |        |   | N/A    |  | N/A   |  
|Total Capital to risk weighted assets         |  | $                      | 47,388 |       | 12.00                                 | % |        | $                                                              | 31,600 |  | 8.00                                           | %      |  | $      | 39,500 |  | 10.00  | % |        | $ | 47,400 |  | 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   |  



12



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##### Table of Contents

|ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|------- | -------------------------------------------------------------------------------------

Managements Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is intended to provide a
reader of our financial statements with a narrative from the perspective of our management on our financial condition, results of operations, liquidity and certain other factors that may affect our future results. Our MD&A should be read in
conjunction with the Consolidated Financial Statements and related Notes included in Part I Item 1, Financial Statements, of this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2010.

Overview

During the six months ended June 30, 2010, total assets increased by $30.5 million, or 6%, primarily due to an increase in cash and
cash equivalents, which increased by $46.3 million as we improved our liquidity in anticipation of deposit run-offs expected to result from growth restrictions imposed by our primary regulator, the OTS. Our deposits increased $28.7 million, or 7%,
while FHLB advances decreased $3.6 million, or 4%.

Our net earnings for the quarter ended June 30, 2010 were $846
thousand, or $0.32 per diluted share, compared to net earnings of $34 thousand, or a loss of ($0.09) per diluted share, for the same period a year ago, representing an increase in net earnings of $812 thousand. The annualized return on average
assets was 0.62% for the second quarter of 2010, compared to 0.03% for the second quarter of 2009. The annualized return on average equity was 10.28% for the second quarter of 2010, compared to 0.41% for the same period in 2009. The efficiency ratio
was 66.71% for the second quarter of 2010, compared to 65.00% for the same period in 2009.

In the course of a regularly
scheduled comprehensive examination of the Bank by the OTS and the Federal Deposit Insurance Corporation (FDIC), which commenced in January 2010, the OTS informed us that it considers the Company and the Bank to be in troubled
condition and 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 OTS has
requested that the Company and the Bank consent to the issuance of cease and desist orders requiring, 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 management of its business and the oversight of the Companys and the Banks business by their boards of
directors. The cease and desist orders would require that the Bank 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. Further discussion of these subjects and other important aspects of our operations and financial condition are
contained in Note (10) to the Unaudited Consolidated Financial Statements included in Item 1 of this report and in Part II, Item 7 Managements Discussion and Analysis of Financial Condition and Results of Operations
in our Annual Report on Form 10-K for the year ended December 31, 2010.

Results of Operations

Net Earnings

Net
earnings for the second quarter of 2010 were $846 thousand, or $0.32 per diluted common share, up $812 thousand when compared with net earnings of $34 thousand, or a loss of $(0.09) per diluted common share, for the second quarter of 2009. Higher
net interest income and lower provision for loan losses resulted in higher net earnings for the second quarter of 2010.

For
the six months ended June 30, 2010, net earnings totaled $1.8 million, or $0.72 per diluted common share, up $1.1 million when compared with net earnings of $696 thousand, or $0.20 per diluted common share, for the same period in 2009.



13



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##### Table of Contents

Net Interest Income

For the quarter ended June 30, 2010, net interest income before provision for loan losses was $5.3 million, which represented an
increase of $833 thousand, or 19%, from the second quarter of 2009. The increase was primarily attributable to the substantial growth in our loan portfolio during 2009. Average interest-earning assets increased $88.1 million, or 20%, from the second
quarter of 2009. Our net interest margin for the quarter ended June 30, 2010 decreased to 3.92%, down 2 basis points from the net interest margin for the second quarter 2009, as the yield on our interest-earning assets declined more rapidly
than the cost of our interest-bearing liabilities.

The annualized yield on our average interest-earning assets decreased 50
basis points to 5.71% for the second quarter of 2010 from the annualized yield of 6.21% for the same period a year ago. The decline in asset yields is directly related to the downward repricing of assets in this lower interest rate environment and a
higher average balance invested in lower yielding federal funds sold. Higher levels of non-accrual loans also resulted in lower loan yields.

The annualized cost of our average interest-bearing liabilities decreased 47 basis points to 1.92% for the second quarter of 2010 from
the annualized cost of 2.39% for the same period a year ago. The decrease primarily reflected the 52 basis points decrease in the annualized cost of deposits and a 40 basis point decrease in the annualized cost of borrowings. The decline in deposit
and borrowing costs is due to the continued low level of market interest rates during the period.

For the six months ended
June 30, 2010, net interest income before provision for loan losses totaled $10.7 million, up $2.1 million, or 25%, from the net interest income before provision for loan losses for the same period a year ago, as a result of increased average
interest-earning assets and a higher net interest margin, which increased from 4.00% for the six months ended June 30, 2009 to 4.04% for the six months ended June 30, 2010.

Provision for Loan Losses

The Company records a provision for loan losses as a charge to its earnings when necessary in order to maintain the allowance for loan
losses at a level sufficient, in managements judgment, to absorb losses inherent in the loan portfolio and is reflective of portfolio fluctuations, changes to the loan portfolio composition, managements evaluation of the quality of the
loan portfolio and net charge-offs.

During the quarter ended June 30, 2010, the provision for loan losses totaled $309
thousand compared to $1.6 million for the same period a year ago. The amount of the provision recorded in the second quarter of 2010 reflects the increase in specific valuation allowance that we recorded for loans that became impaired during the
quarter, which was partially offset by a decrease in the general valuation allowance that we recorded due to the reduction in our gross loan portfolio.

Net loan charge-offs for the quarter ended June 30, 2010 totaled $2.0 million (of which $144 thousand represented three one-to-four
family loans, $1.7 million represented a commercial loan and $74 thousand represented two unsecured consumer loans) compared to $924 thousand for the first quarter of 2010 (of which $429 thousand represented two overdrafted NOW accounts, $366
thousand represented three one-to-four family loans and $129 thousand represented four commercial real estate loans) and $0 for the 2009 second quarter. Of the $2.0 million loan charge-offs during the second quarter of 2010, $1.3 million were
specifically reserved for at year-end 2009 and $689 thousand were specifically reserved for in 2010. Net loan charge-offs as a percent of average loans was approximately 42 basis points for the quarter ended June 30, 2010.

For the six months ended June 30, 2010, the provision for loan losses totaled $883 thousand compared to $2.1 million of provisions
for the same period a year-ago. The decrease in loan loss provision was primarily due to lower impairment charges resulting from fewer additions to our impaired loans and a reduction in our gross loan portfolio this year.



14



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##### Table of Contents

Non-interest Income

Non-interest income (loss) for the quarter ended June 30, 2010 totaled ($255) thousand compared to $117 thousand for the second
quarter of 2009. The decrease from the second quarter of 2009 was primarily due to a $136 thousand net loss on sale of loans and $227 thousand higher provision for losses on loans held-for-sale in the second quarter of 2010.

For the six months ended June 30, 2010, non-interest income (loss) totaled ($89) thousand compared to $413 thousand for the same
period a year ago. The decrease primarily reflects a $136 thousand net loss on sale of loans, a $197 thousand higher provision for losses on loans held-for-sale and a $109 thousand lower service charges for the first six months of 2010.

Non-interest Expense

Non-interest expense for the quarter ended June 30, 2010 totaled $3.3 million compared to $3.0 million for the second quarter of
2009. The increase was mostly due to higher compensation and benefits expense, primarily reflecting a lower amount of salaries that were deferred in the second quarter of 2010 as a result of decreased loan origination volume, and higher expenses for
professional services, primarily audit and legal expenses. These increases were partially offset by lower premiums for FDIC insurance, as the second quarter of 2009 included a $222 thousand accrual for a special assessment imposed by the FDIC.

For the six months ended June 30, 2010, non-interest expense totaled $6.7 million compared to $5.8 million for the same
period a year ago. The increase primarily reflects higher compensation and benefits expense and higher expense for professional services, as discussed above.

Income Taxes

The
Companys effective income tax rates were 37.79% and 38.83% for the three and six months ended June 30, 2010 compared to (750.00%) and 35.32% for the three and six months ended June 30, 2009. 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. The effective income tax rate for each period was reduced by the amount of non-taxable income from earnings on bank owned life
insurance and the impact of state income tax deductions for loans made in designated enterprise zones.

Financial Condition

Total Assets

Total
assets were $551.6 million at June 30, 2010, which represented an increase of $30.5 million from December 31, 2009. During the first six months of 2010, cash and cash equivalents increased by $46.3 million, net loans (including loans
held-for-sale) decreased by $11.4 million and securities decreased by $4.6 million.

Loan Portfolio

Our gross loan portfolio decreased to $441.8 million at June 30, 2010 from $453.1 million at December 31, 2009. The $11.3
million decrease in our loan portfolio primarily consisted of a $10.5 million decrease in our commercial real estate loan portfolio, a $5.8 million decrease in commercial loans and a $2.8 million decrease in our one-to-four family residential real
estate loan portfolio, which decreases were partially offset by an $8.7 million increase in our multi-family residential real estate loan portfolio.

Loan originations, including purchases, for the six months ended June 30, 2010 totaled $15.3 million compared to $97.8 million for
the comparable period in 2009. Loan repayments, including loan sales, totaled $22.3 million for the six months ended June 30, 2010 and 2009. Loans transferred to REO during 2010 totaled $4.0 million.



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##### Table of Contents

Deposits

The Company experienced strong deposit growth during the first six months of 2010. Deposit balances increased by $28.7 million, or 7.4%,
to $414.1 million at June 30, 2010 from $385.5 million at December 31, 2009. This growth is attributable to the online banking campaign we conducted during the second quarter of 2010 to strengthen liquidity. Core deposits (NOW, demand,
money market and passbook accounts) represented 27% of total deposits at June 30, 2010 compared to 30% at December 31, 2009 and CDs represented 73% of total deposits at June 30, 2010 compared to 70% at December 31, 2009. Included
in CDs are brokered deposits, which decreased by $31.7 million, or 31%, in the first six months of 2010 and represented 17% of total deposits at June 30, 2010, compared to 26% at December 31, 2009.

Borrowings

Since the
end of 2009, FHLB borrowings decreased by $3.6 million, or 4%, to $88.0 million at June 30, 2010 from $91.6 million at December 31, 2009, as management replaced these borrowings with the aforementioned deposit inflows. 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.

Allowance for Loan Losses

At June 30, 2010, the allowance for loan losses was $18.5 million, or 4.18% of total gross loans receivable, excluding loans
receivable held-for-sale, compared to $20.5 million, or 4.52% of total gross loans receivable, excluding loans receivable held-for-sale, at December 31, 2009. The $2.0 million decrease in the allowance for loan losses from December 31,
2009 to June 30, 2010 was due to net loan charge-offs of $2.9 million partially offset by $883 thousand of provisions for loan losses for the first six months of 2010. Of the $2.9 million loan charge-offs during the first six months of 2010,
$1.7 million were specifically reserved for at year-end 2009 and $1.2 million were specifically reserved for in 2010.

Management believes that the allowance for loan losses is adequate to cover probable incurred losses in the loan portfolio as of
June 30, 2010, but there can be no assurance that actual losses will not exceed the estimated amounts. In addition, the OTS and the FDIC periodically review the allowance for loan losses as an integral part of their examination process. These
agencies may require an increase in the allowance for loan losses based on their judgments of the information available to them at the time of their examinations.

Non-Performing Assets

At June 30, 2010, non-performing assets were $37.3 million, or 6.77% of total assets, compared to $37.0 million, or 7.10% of total
assets, at December 31, 2009. Total non-performing assets at June 30, 2010 were comprised of $32.9 million in non-accrual loans and $4.5 million in REO. During the latest quarter, non-accrual loans declined by $1.2 million from the balance
at the end of the first quarter of 2010 and by $2.1 million from the balance at the end of 2009. These loans consist of delinquent loans that are 90 days or more past due and troubled debt restructurings that do not qualify for accrual status. The
non-accrual loans included $19.1 million of commercial real estate loans, $5.1 million of one-to-four family residential real estate loans, $2.3 million of multi-family residential real estate loans, $4.0 million of commercial loans and $2.3 million
of secured consumer loans. During the second quarter, REO increased by $2.3 million from the end of the first quarter and by $2.4 million from the end of 2009. At June 30, 2010 the Banks REO consisted of three one-to-four family
residential properties and five commercial real estate properties, three of which are church buildings. We are continuing to monitor our portfolio closely and working with borrowers to maximize the value of our assets. In addition, we are pursuing
selective sales of classified assets and REO.

Performance Ratios

The annualized return on average equity for the second quarter of 2010 was 10.28%, compared to 0.41% for the second quarter of 2009. The
annualized return on average assets for the second quarter of 2010 was 0.62%, compared to 0.03% for the second quarter of 2009. The increase in our annualized returns on average equity and average assets between the second quarters was primarily due
to higher net earnings in the second quarter of 2010 as a result of higher net interest income and lower provision for loan losses which were partially offset by higher non-interest expense and lower non-interest income.



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##### Table of Contents

The efficiency ratio for the second quarter of 2010 was 66.71%, compared to 65.00% for the
second quarter of 2009. The slight deterioration in our efficiency ratio primarily reflects higher non-interest expenses compared to revenues for the second quarter of 2010 as compared to the same period in 2009.

Liquidity and Capital Resources

The Banks primary 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. While maturities and scheduled amortization of loans and securities are predictable sources of funds,
deposit flows and loan and security prepayments are greatly influenced by the general level of interest rates, economic conditions and competition. 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.

Sources of liquidity and
capital for the Company on a stand-alone basis include distributions from the Bank and the issuance of equity and debt securities, such as the senior preferred stock issued in 2008 and 2009 to the United States Department of the Treasury, preferred
stock issued to others in 2002 and in 2006, the junior subordinated debentures issued in 2004, the sale to Cathay General Bancorp of 70,000 shares of common stock in 2004 and 145,000 shares of common stock in 2006 and other borrowings. Dividends and
other capital distributions from the Bank are subject to general regulatory restrictions. In addition, as discussed in our Annual Report on Form 10-K, the OTS has placed limitations on the Company and accordingly, 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.

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. 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. 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 loan or to obtain a dividend from the Bank for such purpose. We have entered into discussions with the lender on our
line of credit and are also exploring alternative borrowing resources.

Regulatory Capital

The OTS capital regulations include three separate minimum capital requirements for savings institutions that are subject to OTS
supervision. First, the tangible capital requirement mandates that the Banks stockholders equity, less intangible assets, be at least 1.50% of adjusted total assets as defined in the capital regulations. Second, the core capital
requirement currently mandates that core capital (tangible capital plus certain qualifying intangible assets) be at least 4.00% of adjusted total assets as defined in the capital regulations. Third, the risk-based capital requirement presently
mandates that core capital plus supplemental capital (as defined by the OTS) be at least 8.00% of risk-weighted assets as prescribed in the capital regulations. The capital regulations assign specific risk weightings to all assets and off-balance-
sheet items for this purpose.

The Bank was in compliance with all capital requirements in effect at June 30, 2010, and
met the generally applicable capital ratio standards necessary to be considered well-capitalized under the prompt corrective action regulations adopted by the OTS pursuant to the Federal Deposit Insurance Corporation Improvement Act of
1991. However, in March 2010, the Company and the Bank were determined to be in troubled condition by the OTS. The OTS has requested that the Company and the Bank consent to the issuance of cease and desist orders requiring, 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 management of its business and the oversight of the Companys and the Banks business by their boards of directors. The cease and desist orders would require that the Bank 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. Under the applicable regulations, the Bank will therefore be precluded from being considered to be more than adequately capitalized until such special capital requirements are terminated and the Company
and the Bank are no longer considered to be in troubled condition.



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##### Table of Contents

Actual and normally required capital amounts and ratios at June 30, 2010 and
December 31, 2009, together with the higher capital requirements that the OTS will require the Bank to meet, are presented below.



|                                              |  |                        |        |       |                                       |   |        |                                                                |        |  |                                                |        |  |        |        |  |        |   |        |   |        |  |       |  
|--------------------------------------------- |  | ---------------------- | ------ | ----- | ------------------------------------- | - | ------ | -------------------------------------------------------------- | ------ |  | ---------------------------------------------- | ------ |  | ------ | ------ |  | ------ | - | ------ | - | ------ |  | ----- | -
|                                              |  | Actual                 |        |       | Requiredfor 
CapitalAdequacy Purposes |   |        | To Be WellCapitalized UnderPrompt CorrectiveAction Regulations |        |  | CapitalRequirementsunder Cease andDesist Order |       
|                                              |  | Amount                 |        | Ratio |                                       |   | Amount |                                                                | Ratio  |  |                                                | Amount |  | Ratios |        |  | Amount |   | Ratios |  
|                                              |  | (Dollars in thousands) |       
|June 30, 2010:                                |  |                        |        |       |                                       |   |        |                                                                |        |  |                                                |        |  |        |        |  |        |   |        |   |        |  |       |  
|Tangible Capital to adjusted total assets     |  | $                      | 42,330 |       | 7.68                                  | % |        | $                                                              | 8,267  |  | 1.50                                           | %      |  |        | N/A    |  | N/A    |   |        |   | N/A    |  | N/A   |  
|Tier 1(Core) Capital to adjusted total assets |  | $                      | 42,330 |       | 7.68                                  | % |        | $                                                              | 22,045 |  | 4.00                                           | %      |  | $      | 27,557 |  | 5.00   | % |        | $ | 44,091 |  | 8.00  | %
|Tier 1(Core) Capital to risk weighted assets  |  | $                      | 42,330 |       | 10.72                                 | % |        |                                                                | N/A    |  | N/A                                            |        |  | $      | 23,700 |  | 6.00   | % |        |   | N/A    |  | N/A   |  
|Total Capital to risk weighted assets         |  | $                      | 47,388 |       | 12.00                                 | % |        | $                                                              | 31,600 |  | 8.00                                           | %      |  | $      | 39,500 |  | 10.00  | % |        | $ | 47,400 |  | 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   |  



|ITEM 4. | CONTROLS AND PROCEDURES
|------- | -----------------------

Evaluation of
Disclosure Controls and Procedures

As of June 30, 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 June 30, 2010. Management has implemented changes, as described below, in the Companys internal controls over financial
reporting subsequent to March 31, 2010 to address the material weaknesses in the Companys internal controls over financial reporting that were identified at December 31, 2009, such as the adequacy of the allowance for loan losses and
weaknesses in the design and implementation of internal controls for monitoring loan originations, approval and disbursements and the documentation of loan underwriting, including documentation of borrower repayment ability.

The calculation of the allowance for loan losses has been improved with the use of a migration to loss analysis and more frequent update
of the Banks historical loss rates. The loan review process has also been enhanced to ensure all problem and impaired loans will be identified and properly classified. Also, loan concentrations are regularly monitored for the purpose of
identifying added risk. The classification system has been revised to provide that all troubled debt restructures (TDRs) will be classified as substandard pending receipt of satisfactory financial documentation and a sufficient period of
payment and other performance to establish the borrowers future ability to comply with the modified loan terms. An Internal Asset Review Committee of the Board of Directors has also been established to ensure the loan review process is
independent of loan origination and servicing. The loan policy has been revised to include requirements to verify borrower financial performance and income and strengthened loan approval procedures. The enhancements also include the requirement to
obtain audited financial statements on certain loans.



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##### Table of Contents

PART II. OTHER INFORMATION



|Item 1. | LEGAL PROCEEDINGS
|------- | -----------------

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 on 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 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 basis of the cross-complaint is 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 with ten days leave to amend. 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, the hearing on which is set for August 27, 2010, 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.

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 $10.0 million 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. 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 is 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



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##### Table of Contents

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.

Broadways response to the Cross-Complaint must be filed and served no later than August 23, 2010.

With respect to the foregoing matters, the Banks attorneys have not concluded that the likelihood of an unfavorable outcome is
either probable or remote, and express no opinion as to the likely outcome of such matters. Management has vigorously defended against the lawsuit and prosecuted the cross-complaint.

As of June 30, 2010, a $600 thousand specific allocation of the allowance for loan losses has been established for the related $2.2
million loan and the loan is on nonaccrual status. If the Bank is unsuccessful in defending against the lawsuit, the loan and the non-accrued interest receivable balances may not be fully collectible and a loss may be incurred that could be material
to the Companys consolidated financial statements.



|Item 1A. | RISK FACTORS
|-------- | ------------

None



|Item 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|------- | -----------------------------------------------------------

None



|Item 3. | DEFAULTS UPON SENIOR SECURITIES
|------- | -------------------------------

None



|Item 4. | RESERVED
|------- | --------



|Item 5. | OTHER INFORMATION
|------- | -----------------

None



|Item 6. | EXHIBITS
|------- | --------



|               |  |                                                                                                                                
|-------------- |  | -------------------------------------------------------------------------------------------------------------------------------
|Exhibit 31.1 - |  | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                             
|               | 
|Exhibit 31.2 - |  | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                             
|               | 
|Exhibit 32 -   |  | Certifications of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002



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##### Table of Contents

SIGNATURES

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



|                         |  |                         |  |                   
|------------------------ |  | ----------------------- |  | ------------------
|Date:    August 16, 2010 |  | By:                     |  | /s/ Paul C. Hudson
|                         |  | Paul C. Hudson         
|                         |  | Chief Executive Officer
|                         |  |                        
|Date:    August 16, 2010 |  | By:                     |  | /s/ Samuel Sarpong
|                         |  | Samuel Sarpong         
|                         |  | Chief Financial Officer



21