UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

 

(Mark One)

 

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

 

For the quarterly period ended June 30, 2012

or

 

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

 

For the transition period from __________ to _________

 

Commission File Number: 000-50755

 

OPTIMUMBANK HOLDINGS, INC.
(Exact name of registrant as specified in its charter)

 

Florida   000-50755
(State or other jurisdiction of incorporation or organization)   (IRS Employer Identification No.)

 

2477 East Commercial Boulevard, Fort Lauderdale, FL 33308
(Address of principal executive offices)

 

954-776-2332
 
(Registrant’s telephone number, including area code)

 

N/A
(Former name, former address and former fiscal year, if changed since last report)

 

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 S No £

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes S No £

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the 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 £ (Do not check if a smaller reporting company) Smaller reporting company S

 

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

Yes £ No S

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 27,380,994 shares of Common Stock, $.01 par value, issued and outstanding as of August 9, 2012

 

 

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

 

INDEX

 

PART I. FINANCIAL INFORMATION    
     
Item 1. Financial Statements   Page
     
Condensed Consolidated Balance Sheets - June 30, 2012 (unaudited) and December 31, 2011   2
     
Condensed Consolidated Statements of Operations - Three and Six Months ended June 30, 2012 and 2011 (unaudited)   3
     
Condensed Consolidated Statements of Comprehensive Loss - Three and Six Months ended June 30, 2012 and 2011 (unaudited)   4
     
Condensed Consolidated Statements of Stockholders’ Equity (Deficit) - Six Months ended June 30, 2012 and 2011 (unaudited)   5
     
Condensed Consolidated Statements of Cash Flows - Six Months ended June 30, 2012 and 2011 (unaudited)   6-7
     
Notes to Condensed Consolidated Financial Statements (unaudited)   8-27
     
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations   28-35
     
Item 4. Controls and Procedures   36
     
PART II. OTHER INFORMATION    
     
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds   36
     
Item 6. Exhibits   36
     
SIGNATURES   37

 

1
 

 

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

 

PART I. FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

Condensed Consolidated Balance Sheets

(Dollars in thousands, except per share amounts)

 

   June 30,   December 31, 
Assets  2012   2011 
   (Unaudited)     
         
Cash and due from banks  $817   $1,101 
Interest-bearing deposits with banks   5,165    5,123 
Federal funds sold   22,071    16,552 
           
Total cash and cash equivalents   28,053    22,776 
           
Securities available for sale   25,004    28,907 
Loans, net of allowance for loan losses of $2,102 and $2,349   86,641    89,217 
Federal Home Loan Bank stock   1,770    2,159 
Premises and equipment, net   2,738    2,691 
Foreclosed real estate, net   9,088    7,646 
Accrued interest receivable   484    499 
Other assets   370    577 
           
Total assets  $154,148   $154,472 
           
Liabilities and Stockholders’ Equity          
           
Liabilities:          
Noninterest-bearing demand deposits   427    515 
Savings, NOW and money-market deposits   36,268    35,538 
Time deposits   69,969    71,842 
           
Total deposits   106,664    107,895 
           
Federal Home Loan Bank advances   31,700    31,700 
Junior subordinated debenture   5,155    5,155 
Advanced payment by borrowers for taxes and insurance   897    567 
Official checks   1,324    1,113 
Other liabilities   731    1,256 
           
Total liabilities   146,471    147,686 
           
Stockholders’ equity:          
Preferred stock, no par value; 6,000,000 shares authorized, no shares issued or outstanding   0    0 
Common stock, $.01 par value; 50,000,000 shares authorized, 26,880,994 and 22,411,108 shares issued and outstanding in 2012 and 2011   269    224 
Additional paid-in capital   29,251    27,491 
Accumulated deficit   (21,343)   (19,991)
Accumulated other comprehensive loss   (500)   (938)
           
Total stockholders’ equity   7,677    6,786 
           
Total liabilities and stockholders’ equity  $154,148   $154,472 

 

 

See Accompanying Notes to Condensed Consolidated Financial Statements.

2
 

 

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

 

Condensed Consolidated Statements of Operations (Unaudited)

(in thousands, except per share amounts)

 

   Three Months Ended June 30,   Six Months Ended June 30, 
   2012   2011   2012   2011 
                 
Interest income:                    
Loans  $982   $1,197   $1,977   $2,486 
Securities   276    500    574    1,029 
Other   22    14    38    29 
                     
Total interest income   1,280    1,711    2,589    3,544 
                     
Interest expense:                    
Deposits   285    498    576    1,048 
Borrowings   388    384    777    765 
                     
Total interest expense   673    882    1,353    1,813 
                     
Net interest income   607    829    1,236    1,731 
                     
Provision for loan losses   154    860    181    894 
                     
Net interest income (expense) after provision for loan losses   453    (31)   1,055    837 
                     
Noninterest income:                    
Service charges and fees   8    6    11    16 
Loan prepayment fees   0    0    0    6 
Gain on sale of securities   0    153    0    153 
Other   178    46    178    46 
                     
Total noninterest income   186    205    189    221 
                     
Noninterest expenses:                    
Salaries and employee benefits   426    461    836    937 
Occupancy and equipment   125    134    243    267 
Data processing   63    49    114    101 
Professional fees   288    459    527    849 
Insurance   70    113    139    227 
Stationary and supplies   10    8    21    17 
Foreclosed real estate   70    592    138    983 
Regulatory assessment   78    160    123    381 
Other   279    168    455    423 
                     
Total noninterest expenses   1,409    2,144    2,596    4,185 
                     
Net loss  $(770)  $(1,970)  $(1,352)  $(3,127)
                     
Net loss per share-                    
Basic and diluted  $(.03)  $(2.40)  $(.05)  $(3.82)
                     
Dividends per share  $0   $0   $0   $0 

 

See Accompanying Notes to Condensed Consolidated Financial Statements.

3
 

 

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

 

Condensed Consolidated Statements of Comprehensive Loss (Unaudited)

(In thousands)

 

   Three Months Ended June 30,   Six Months Ended June 30, 
   2012   2011   2012   2011 
                 
Net loss  $ (770)  $ (1,970)  $ (1,352)  $ (3,127)
                     
Other comprehensive loss-                    
Unrealized gains (loss) on securities available for sale-                    
Unrealized holding gains (losses) arising during period   111    (875)   438    (875)
                     
Comprehensive loss  $(659)  $(2,845)  $(914)  $(4,002)

 

See Accompanying Notes to Condensed Consolidated Financial Statements.

4
 

 

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

 

Condensed Consolidated Statements of Stockholders’ Equity (Deficit)

 

Six Months Ended June 30, 2012 and 2011

(Dollars in thousands)

 

                  Accumulated      
                  Other    Total 
           Additional       Compre-   Stockholders’ 
   Common Stock   Paid-In   Accumulated   hensive   Equity 
   Shares   Amount   Capital   Deficit   Loss   (Deficit) 
                         
Balance at December 31, 2010   819,358   $8   $19,071   $(16,244)  $0   $2,835 
                               
Net loss for the six months ended June 30, 2011 (unaudited)   0    0    0    (3,127)   0    (3,127)
                               
Unrealized loss on securities available for sale (unaudited)   0    0    0    0    (875)   (875)
                               
Balance at June 30, 2011 (unaudited)   819,358   $8   $19,071   $(19,371)  $(875)  $(1,167)
                               
                               
Balance at December 31, 2011   22,411,108   $224   $27,491   $(19,991)  $(938)  $6,786 
                               
Proceeds from sale of common stock (unaudited)   4,447,500    45    1,735    0    0    1,780 
                               
Common stock issued as compensation to directors   22,386    0    25    0    0    25 
                               
Net loss for the six months ended June 30, 2012 (unaudited)   0    0    0    (1,352)   0    (1,352)
                               
Net change in unrealized loss on securities available for sale (unaudited)   0    0    0    0    438    438 
                               
Balance at June 30, 2012 (unaudited)   26,880,994   $269   $29,251   $(21,343)  $(500)  $7,677 

 

 

See Accompanying Notes to Condensed Consolidated Financial Statements.

5
 

 

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

 

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In thousands)

 

   Six Months Ended June 30, 
   2012   2011 
Cash flows from operating activities:        
Net loss  $(1,352)  $(3,127)
Adjustments to reconcile net loss to net cash used in operating activities:          
Depreciation and amortization   52    65 
Provision for loan losses   181    894 
Gain on sale of securities   0    (153)
Net amortization of fees, premiums and discounts   (10)   78 
Common stock issued as compensation to directors   25    0 
Decrease in other assets   207    470 
Loss on sale of foreclosed real estate   0    166 
Write-down of foreclosed real estate   45    704 
Decrease in accrued interest receivable   15    47 
Other-than-temporary impairment of securities available for sale   103    0 
(Decrease) increase in official checks and other liabilities   (314)   276 
           
Net cash used in operating activities   (1,048)   (580)
           
Cash flows from investing activities:          
Purchases of securities held to maturity   0    (5,048)
Principal repayments of securities available for sale   4,238    5,428 
Net decrease in loans   750    5,443 
Proceeds from sale of securities   0    10,961 
Purchase of premises and equipment   (99)   (5)
Proceeds from sale of foreclosed real estate, net   190    1,643 
Capital improvements on foreclosed real estate   (22)   0 
Redemption of Federal Home Loan Bank stock   389    501 
           
Net cash provided by investing activities   5,446    18,923 
           
Cash flows from financing activities:          
Net decrease in deposits   (1,231)   (10,667)
Net increase in advance payments by borrowers for taxes and insurance   330    245 
Proceeds from sale of common stock   1,780    0 
           
Net cash provided by (used in) financing activities   879    (10,422)
           
Net increase in cash and cash equivalents   5,277    7,921 
           
Cash and cash equivalents at beginning of the period   22,776    14,367 
           
Cash and cash equivalents at end of the period  $28,053   $22,288 

 

(continued)

6
 

 

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

 

Condensed Consolidated Statements of Cash Flows (Unaudited), Continued

(In thousands)

 

   Six Months Ended June 30, 
   2012   2011 
Supplemental disclosure of cash flow information:        
Cash paid during the period for -          
Interest  $1,276   $1,744 
           
Noncash investing and financing activities:          
Change in accumulated other comprehensive loss, net change in unrealized loss on securities available for sale  $438   $(875)
           
Transfer of securities held to maturity to available for sale  $0   $50,534 
           
Loans transferred to foreclosed real estate  $1,655   $5,032 

 

See Accompanying Notes to Condensed Consolidated Financial Statements.

7
 

 

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

 

Notes to Condensed Consolidated Financial Statements (unaudited)

 

(1) General. OptimumBank Holdings, Inc. (the “Holding Company”) is a one-bank holding company and owns 100% of OptimumBank (the “Bank”), a state (Florida)-chartered commercial bank. The Bank’s wholly-owned subsidiaries are OB Real Estate Management, LLC, OB Real Estate Holdings, LLC and OB Real Estate Holdings 1503, LLC, all of which were formed in 2009, OB Real Estate Holdings 1695, LLC, OB Real Estate Holdings 1669, LLC, OB Real Estate Holdings 1645, LLC, OB Real Estate Holdings 1620, LLC, and OB Real Estate Holdings 1565, LLC, all formed in 2010, and OB Real Estate Holdings 1443, LLC, and OB Real Estate Holdings 1596, LLC, OB Real Estate Holdings 1636, LLC, and OB Real Estate Holdings Northwood, LLC, formed in 2011, OB Real Estate Holdings Sillato, LLC, and OB Real Estate Holdings 1655, LLC, formed in 2012. The Holding Company’s only business is the operation of the Bank and its subsidiaries (collectively, the “Company”). The Bank’s deposits are insured up to applicable limits by the Federal Deposit Insurance Corporation (“FDIC”). The Bank offers a variety of community banking services to individual and corporate customers through its three banking offices located in Broward County, Florida. OB Real Estate Management, LLC is primarily engaged in managing foreclosed real estate. This subsidiary had no activity in 2012 and 2011. All other subsidiaries are primarily engaged in holding and disposing of foreclosed real estate.

 

  In the opinion of management, the accompanying condensed consolidated financial statements of the Company contain all adjustments (consisting principally of normal recurring accruals) necessary to present fairly the financial position at June 30, 2012, and the results of operations for the three- and six-month periods ended June 30, 2012 and 2011. The results of operations for the three and six months ended June 30, 2012, are not necessarily indicative of the results to be expected for the full year.
   
  Comprehensive Loss. Generally accepted accounting principles generally requires that recognized revenue, expenses, gains and losses be included in net loss. Although certain changes in assets and liabilities, such as unrealized gains and losses on available for sale securities, are reported as a separate component of the equity section of the consolidated balance sheet, such items along with net loss, are components of comprehensive loss. The only component of other comprehensive loss is the net change in the unrealized loss on the securities available for sale.
   
  Income Taxes. During the year ended December 31, 2009, the Company assessed its earnings history and trend over the past year and its estimate of future earnings, and determined that it is more likely than not that the deferred tax asset will not be realized in the near term. Accordingly, a valuation allowance was recorded against the net deferred tax asset for the amount not expected to be realized in the future. Based on the available evidence at June 30, 2012, the Company determined that it is still more likely than not that the deferred tax asset will not be realized in the near term. Accordingly, the valuation allowance was increased in 2012 to offset the increase in the net deferred tax asset.

 

(continued)

8
 

 

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

 

Notes to Condensed Consolidated Financial Statements (unaudited), Continued

 

 

(1) General, Continued.

 

  Recent Pronouncements. In December 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2011-12 (“ASU 2011-12”), Comprehensive Income (Topic 220), Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05 (“ASU 2011-05”). Stakeholders raised concerns that the new presentation requirements about reclassifications of items out of accumulated other comprehensive income would be difficult for preparers and may add unnecessary complexity to financial statements. In addition, it is difficult for some stakeholders to change systems in time to gather the information for the new presentation requirements by the effective date of Update 2011-05. All other requirements in ASU 2011-05 are not affected by this update, including the requirement to report comprehensive income either in a single continuous financial statement or in two separate but consecutive financial statements. The amendments in ASU 2011-12 are effective on a retrospective basis for public entities for annual periods beginning after December 15, 2011, and interim periods within those years. An entity should provide the disclosures required by ASU 2011-12 retrospectively for all comparative periods presented. The adoption of this guidance did not have a material effect on the Company’s condensed consolidated financial statements.
   
  In December 2011, the FASB issued ASU No. 2011-11 (“ASU 2011-11”), Balance Sheet (Topic 210), Disclosures about Offsetting Assets and Liabilities. The objective of ASU 2011-11 is to enhance disclosures required by U.S. GAAP by requiring improved information about financial instruments and derivative instruments that are either (1) offset in accordance with either Section 210-20-45 or Section 815-10-45 or (2) subject to an enforceable master netting arrangement or similar agreement, irrespective of whether they are offset in accordance with Section 210-20-45 or Section 815-10-45. This information will enable users of an entity’s financial statements to evaluate the effect or potential effect of netting arrangements on an entity’s financial position. The amendments in ASU 2011-11 are effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. An entity should provide the disclosures required by ASU 2011-11 retrospectively for all comparative periods presented. The adoption of this guidance did not have a material effect on the Company’s condensed consolidated financial statements.

 

(continued)

9
 

 

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

 

Notes to Condensed Consolidated Financial Statements (unaudited), Continued

 

 

(1) General, Continued.

 

  Recent Pronouncements, Continued. In June 2011, the FASB issued ASU No. 2011-05 (“ASU 2011-05”), Comprehensive Income (Topic 220), Presentation of Comprehensive Income. The objective of ASU 2011-05 is to improve the comparability, consistency, and transparency of financial reporting and to increase the prominence of items reported in other comprehensive income. To achieve this goal and to facilitate convergence of U.S. generally accepted accounting principles (GAAP) and International Financial Reporting Standards (IFRS), the FASB decided to eliminate the option to present components of other comprehensive income as part of the consolidated statement of changes in stockholders’ equity. The amendments in ASU 2011-05 require that all nonowner changes in stockholders’ equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In the two-statement approach, the first statement should present total net income and its components followed consecutively by a second statement that should present total other comprehensive income, the components of other comprehensive income, and the total of comprehensive income. The amendments in ASU 2011-05 should be applied retrospectively. For public entities, the amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. Early adoption is permitted, because compliance with the amendments is already permitted. The amendments do not require any transition disclosures. The adoption of this guidance did not have a material effect on the Company’s condensed consolidated financial statements.
   
  In May 2011, the FASB issued ASU No. 2011-04 (“ASU 2011-04”), Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. The objective of ASU 2011-04 is to provide clarification of Topic 820 and, also, to ensure that fair value has the same meaning in U.S. generally accepted accounting principles (“GAAP”) and in international financial reporting standards (“IFRSs”) and that their respective fair value measurement and disclosure requirements are generally the same. Thus, this update results in common principles and requirements for measuring fair value and for disclosing information about fair value measurements in accordance with GAAP and IFRSs. The amendment is effective for interim and annual periods beginning after December 15, 2011 and is to be applied prospectively. Early application is not permitted. The adoption of this guidance did not have a material effect on the Company’s condensed consolidated financial statements.

 

(continued)

10
 

 

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

 

Notes to Condensed Consolidated Financial Statements (unaudited), Continued

 

 

(2) Securities. Securities have been classified according to management’s intent. The carrying amount of securities and approximate fair values are as follows (in thousands):

 

      Gross   Gross     
   Amortized   Unrealized   Unrealized   Fair 
   Cost   Gains   Losses   Value 
At June 30, 2012:                
Securities Available for Sale-                    
Mortgage-backed securities  $25,504   $236   $(736)  $25,004 
                     
At December 31, 2011:                    
Securities Available for Sale-                    
Mortgage-backed securities  $29,845   $202   $(1,140)  $28,907 

 

  In June 2011, the Company transferred securities with a book value of approximately $50.5 million from the held to maturity category to the available for sale category. The fair value of the securities was $49.8 million resulting in unrealized losses of approximately $0.7 million. The net unrealized loss was recorded in accumulated other comprehensive loss. Due to this transfer, the Company will be prohibited from classifying securities as held to maturity for a period of two years.
   
  Securities with gross unrealized losses at June 30, 2012, aggregated by investment category and length of time that individual securities have been in a continuous loss position, is as follows (in thousands):

 

   Less Than Twelve Months   Over Twelve Months 
   Gross       Gross     
   Unrealized   Fair   Unrealized   Fair 
  Losses   Value   Losses   Value 
Securities Available for Sale-                
Mortgage-backed securities  $1   $188   $735   $8,059 

 

(continued)

11
 

 

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

 

Notes to Condensed Consolidated Financial Statements (unaudited), Continued

 

(2) Securities, Continued. Management evaluates securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. A security is impaired if the fair value is less than its carrying value at the financial statement date. When a security is impaired, the Company determines whether this impairment is temporary or other-than-temporary. In estimating other-than-temporary impairment (“OTTI”) losses, management assesses whether it intends to sell, or it is more likely than not that it will be required to sell, a security in an unrealized loss position before recovery of its amortized cost basis. If either of these criteria is met, the entire difference between amortized cost and fair value is recognized in operations. For securities that do not meet the aforementioned criteria, the amount of impairment recognized in operations is limited to the amount related to credit losses, while impairment related to other factors is recognized in other comprehensive loss. Management utilizes cash flow models to segregate impairments to distinguish between impairment related to credit losses and impairment related to other factors. To assess for OTTI, management considers, among other things, (i) the severity and duration of the impairment; (ii) the ratings of the security; (iii) the overall transaction structure (the Company’s position within the structure, the aggregate, near-term financial performance of the underlying collateral, delinquencies, defaults, loss severities, recoveries, prepayments, cumulative loss projections, and discounted cash flows); and (iv) the timing and magnitude of a break in modeled cash flows.

 

  In evaluating mortgage-backed securities with unrealized losses greater than twelve months, management utilizes various resources, including input from independent third party firms to perform an analysis of expected future cash flows. The process begins with an assessment of the underlying collateral backing the mortgage pools. Management develops specific assumptions using as much market data as possible and includes internal estimates as well as estimates published by rating agencies and other third-party sources. The data for the individual borrowers in the underlying mortgage pools are generally segregated by state, FICO score at issue, loan to value at issue and income documentation criteria. Mortgage pools are evaluated for current and expected levels of delinquencies and foreclosures, based on where they fall in the proscribed data set of FICO score, geographics, LTV and documentation type and a level of loss severity is assigned to each security based on its experience. The above-described historical data is used to develop current and expected measures of cumulative default rates as well as ultimate loss frequency and severity within the underlying mortgages. This reveals the expected future cash flows within the mortgage pool. The data described above is then input to an industry recognized model to assess the behavior of the particular security tranche owned by the Company. Significant inputs in this process include the structure of any subordination structures, if applicable, and are dictated by the structure of each particular security as laid out in the offering documents. The forecasted cash flows from the mortgage pools are input through the security structuring model to derive expected cash flows for the specific security owned by the Company to determine if the future cash flows are expected to exceed the book value of the security. The values for the significant inputs are updated on a regular basis. During the three and six months ended June 30, 2012, the Company recorded other-than-temporary impairment charges totaling $103,000.

 

(continued)

12
 

 

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

 

Notes to Condensed Consolidated Financial Statements (unaudited), Continued

 

(2) Securities, Continued. The unrealized losses on nine investment securities were caused by market conditions. It is expected that the securities would not be settled at a price less than the book value of the investments. Because the decline in fair value is attributable to market conditions and not credit quality, and because the Company has the ability and intent to hold these investments until a market price recovery or maturity, these investments are not considered other-than-temporarily impaired.
   
(3) Loans. The segments of loans are as follows (in thousands):

 

   At June 30,   At December 31, 
   2012   2011 
         
Residential real estate  $31,821   $30,434 
Multi-family real estate   4,316    4,109 
Commercial real estate   39,805    41,307 
Land and construction   8,935    11,783 
Commercial   3,673    3,713 
Consumer   124    175 
           
Total loans   88,674    91,521 
           
Add (deduct):          
Net deferred loan fees, costs and premiums   69    45 
Allowance for loan losses   (2,102)   (2,349)
           
Loans, net  $86,641   $89,217 

 

  An analysis of the change in the allowance for loan losses follows (in thousands):

 

   Residential   Multi-Family   Commercial   Land             
   Real   Real   Real   and             
   Estate   Estate   Estate   Construction   Commercial   Consumer   Total 
Three-Month Period Ended June 30, 2012:                            
Beginning balance  $661   $214   $814   $146   $117   $23   $1,975 
Provision (credit) for loan losses   189    31    97    (161)   (2)   0    154 
Charge-offs   (147)   0    (141)   0    0    0    (288)
Recoveries   0    0    29    230    0    2    261 
                                    
Ending balance  $703   $245   $799   $215   $115   $25   $2,102 
                                    
Six-Month Period Ended June 30, 2012:                                   
Beginning balance  $549   $247   $1,190   $187   $161   $15   $2,349 
Provision (credit) for loan losses   301   (2)   (210)   133    (46)   5    181 
Charge-offs   (147)   0    (210)   (335)   0    0    (692)
Recoveries   0    0    29    230    0    5    264 
                                    
Ending balance  $703   $245   $799   $215   $115   $25   $2,102 

 

(continued)

13
 

 

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

 

Notes to Condensed Consolidated Financial Statements (unaudited), Continued

 

(3) Loans, Continued.

 

   Residential   Multi-Family   Commercial   Land         
   Real   Real   Real   and         
   Estate   Estate   Estate   Construction   Consumer   Total 
Three-Month Period Ended June 30, 2011:                        
Beginning balance  $1,314   $305   $1,445   $382   $74   $3,520 
Provision (credit) for loan losses   54    2    7    797    0    860 
Charge-offs   (309)   0    (52)   (982)   0    (1,343)
Recoveries   34    1    0    0    3    38 
                               
Ending balance  $1,093   $308   $1,400   $197   $77   $3,075 
                               
Six-Month Period Ended June 30, 2011:                              
Beginning balance  $1,285   $282   $1,542   $514   $80   $3,703 
Provision (credit) for loan losses   82    23    (90)   888   (9)   894 
Charge-offs   (307)   0    (52)   (1,229)   0    (1,588)
Recoveries   33    3    0    24    6    66 
                               
Ending balance  $1,093   $308   $1,400   $197   $77   $3,075 

 

   At June 30, 2012 
   Residential   Multi-Family   Commercial   Land             
   Real   Real   Real   and             
   Estate   Estate   Estate   Construction   Commercial   Consumer   Total 
Individually evaluated for impairment:                            
Recorded investment  $7,814   $0   $14,365   $2,489   $0   $0   $24,668 
Balance in allowance for loan losses  $0   $0   $0   $0   $0   $0   $0 
                                    
Collectively evaluated for impairment:                                   
Recorded investment  $24,007   $4,316   $25,440   $6,446   $3,673   $124   $64,006 
Balance in allowance for loan losses  $703   $245   $799   $215   $115   $25   $2,102 

 

   At December 31, 2011 
   Residential   Multi-Family   Commercial   Land         
   Real   Real   Real   and         
   Estate   Estate   Estate   Construction   Consumer   Total 
Individually evaluated for impairment:                        
Recorded investment  $7,919   $0   $16,716   $7,241   $68   $31,944 
Balance in allowance for loan losses  $0   $0   $11   $0   $0   $11 
                               
Collectively evaluated for impairment:                              
Recorded investment  $23,223   $4,109   $27,596   $4,542   $107   $59,577 
Balance in allowance for loan losses  $566   $247   $1,323   $187   $15   $2,338 

 

 

(continued)

14
 

 

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

 

Notes to Condensed Consolidated Financial Statements (unaudited), Continued

 

 

(3) Loans, Continued. The Company has divided the loan portfolio into six portfolio segments, each with different risk characteristics and methodologies for assessing risk. The portfolio segments identified by the Company are as follows:

 

  Real Estate Mortgage Loans. Real estate mortgage loans are typically segmented into four categories: Residential real estate, Multi-family real estate, Commercial real estate, and Land and Construction. Residential real estate loans are underwritten in accordance with policies set forth and approved by the Board of Directors (the “Board”), including repayment capacity and source, value of the underlying property, credit history and stability. Multi-family real estate and commercial real estate loans are secured by the subject property and are underwritten based upon standards set forth in the policies approved by the Company’s Board. Such standards include, among other factors, loan to value limits, cash flow coverage and general creditworthiness of the obligors. Land and construction loans to borrowers are to finance the construction of owner occupied and leased properties. These loans are categorized as construction loans during the construction period, later converting to commercial or residential real estate loans after the construction is complete and amortization of the loan begins. Real estate development and construction loans are approved based on an analysis of the borrower and guarantor, the viability of the project and on an acceptable percentage of the appraised value of the property securing the loan. Real estate development and construction loan funds are disbursed periodically based on the percentage of construction completed. The Company carefully monitors these loans with on-site inspections and requires the receipt of lien waivers on funds advanced. Development and construction loans are typically secured by the properties under development or construction, and personal guarantees are typically obtained. Further, to assure that reliance is not placed solely on the value of the underlying property, the Company considers the market conditions and feasibility of proposed projects, the financial condition and reputation of the borrower and guarantors, the amount of the borrower’s equity in the project, independent appraisals, costs estimates and pre-construction sale information. The Company also makes loans on occasion for the purchase of land for future development by the borrower. Land loans are extended for the future development for either commercial or residential use by the borrower. The Company carefully analyzes the intended use of the property and the viability thereof.

 

(continued)

15
 

 

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

 

Notes to Condensed Consolidated Financial Statements (unaudited), Continued

 

(3) Loans, Continued.

 

  Commercial Loans. Commercial loans are primarily underwritten on the basis of the borrowers’ ability to service such debt from income. The cash flows of borrowers, however, may not be as expected and the collateral securing these loans may fluctuate in value. As a general practice, the Company takes as collateral a security interest in any available real estate, equipment, or other chattel, although loans may also be made on an unsecured basis. Collateralized working capital loans typically are secured by short-term assets whereas long-term loans are primarily secured by long-term assets. These loans are also affected by adverse economic conditions should they prevail within the Company’s local market.
   
  Consumer Loans. Consumer loans are extended for various purposes, including purchases of automobiles, recreational vehicles, and boats. Also offered are home improvement loans, lines of credit, personal loans, and deposit account collateralized loans. Repayment of these loans is primarily dependent on the personal income of the borrowers, which can be impacted by economic conditions in their market areas such as unemployment levels. Loans to consumers are extended after a credit evaluation, including the creditworthiness of the borrower(s), the purpose of the credit, and the secondary source of repayment. Consumer loans are made at fixed and variable interest rates and may be made on terms of up to ten years. Risk is mitigated by the fact that the loans are of smaller individual amounts and spread over a large number of borrowers.

 

(continued)

16
 

 

 

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

 

Notes to Condensed Consolidated Financial Statements (unaudited), Continued

 

(3) Loans, Continued. The following summarizes the loan credit quality (in thousands):

 

       OLEM                 
       (Other Loans                 
       Especially                 
   Pass   Mentioned)   Substandard   Doubtful   Loss   Total 
At June 30, 2012:                        
Residential real estate:                              
Closed-end first mortgages  $20,871   $2,919   $4,895   $0   $0   $28,685 
Closed-end second mortgages   3,136    0    0    0    0    3,136 
                               
Total residential real estate   24,007    2,919    4,895    0    0    31,821 
                               
Multi-family real estate   4,316    0    0    0    0    4,316 
                               
Commercial real estate:                              
Owner-occupied   10,011    1,992    78    0    0    12,081 
Non-owner-occupied   12,303    1,133    14,288    0    0    27,724 
                               
Total commercial real estate   22,314    3,125    14,366    0    0    39,805 
                               
Land and construction   6,397    49    2,489    0    0    8,935 
                               
Commercial   3,673    0    0    0    0    3,673 
                               
Consumer   57    67    0    0    0    124 
                               
Total  $60,764   $6,160   $21,750   $0   $0   $88,674 
                               
At December 31, 2011:                              
Residential real estate:                              
Closed-end first mortgages  $18,588   $3,686   $5,001   $0   $0   $27,275 
Closed-end second mortgages   3,159    0    0    0    0    3,159 
                               
Total residential real estate   21,747    3,686    5,001    0    0    30,434 
                               
Multi-family real estate   4,109    0    0    0    0    4,109 
                               
Commercial real estate:                              
Owner-occupied   10,132    2,012    369    0    0    12,513 
Non-owner-occupied   10,822    2,764    15,208    0    0    28,794 
                               
Total commercial real estate   20,954    4,776    15,577    0    0    41,307 
                               
Land and construction   4,493    49    7,241    0    0    11,783 
                               
Commercial   3,713    0    0    0    0    3,713 
                               
Consumer   107    68    0    0    0    175 
                               
Total  $55,123   $8,579   $27,819   $0   $0   $91,521 

 

(continued)

17
 

 

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

 

Notes to Condensed Consolidated Financial Statements (unaudited), Continued

 

 

(3) Loans, Continued. Internally assigned loan grades are defined as follows:

 

  Pass – a Pass loan’s primary source of loan repayment is satisfactory, with secondary sources very likely to be realized if necessary. These are loans that conform in all aspects to bank policy and regulatory requirements, and no repayment risk has been identified.
   
  OLEM (Other Loans Especially Mentioned) – an Other Loan Especially Mentioned has potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in the deterioration of the repayment prospects for the asset or the Company’s credit position at some future date.
   
  Substandard – a Substandard loan is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.
   
  Doubtful – a loan classified Doubtful has all the weaknesses inherent in one classified Substandard, with the added characteristics that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. This classification does not mean that the asset has absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing off this basically worthless asset even though partial recovery may be affected in the future. The Company fully charges off any loan classified as Doubtful.
   
  Loss – a loan classified Loss is considered uncollectible and of such little value that continuance as a bankable asset is not warranted. This classification does not mean that the asset has absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing off this basically worthless asset even though partial recovery may be affected in the future. The Company fully charges off any loan classified as Loss.

 

(continued)

18
 

 

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

 

Notes to Condensed Consolidated Financial Statements (unaudited), Continued

 

(3) Loans, Continued. Age analysis of past-due loans is as follows (in thousands):

 

   Accruing Loans         
   30-59 Days Past Due   60-89 Days Past Due   Greater Than 90 Days Past Due   Total Past Due   Current   Nonaccrual Loans   Total Loans 
At June 30, 2012:                            
Residential real estate:                                   
Closed-end first mortgages  $0   $0   $0   $0   $23,789   $4,896   $28,685 
Closed-end second mortgages   0    0    0    0    3,136    0    3,136 
                                    
Subtotal   0    0    0    0    26,925    4,896    31,821 
                                    
Multi-family real estate   0    0    0    0    4,316    0    4,316 
                                    
Commercial real estate:                                   
Owner-occupied   1,241    0    0    1,241    10,763    78    12,082 
Non-owner-occupied   0    0    0    0    13,436    14,287    27,723 
                                    
Subtotal   1,241    0    0    1,241    24,199    14,365    39,805 
                                    
Land and construction   0    0    0    0    6,446    2,489    8,935 
Commercial   0    0    0    0    3,673    0    3,673 
Consumer   0    0    0    0    124    0    124 
                                    
Total  $1,241   $0   $0   $1,241   $65,683   $21,750   $88,674 
                                    
At December 31, 2011:                                   
Residential real estate:                                   
Closed-end first mortgages  $0   $768   $0   $768   $21,506   $5,001   $27,275 
Closed-end second mortgages   0    0    0    0    3,159    0    3,159 
                                    
Subtotal   0    768    0    768    24,665    5,001    30,434 
                                    
Multi-family real estate   0    0    0    0    4,109    0    4,109 
                                    
Commercial real estate:                                   
Owner-occupied   0    0    0    0    12,144    369    12,513 
Non-owner-occupied   0    0    0    0    13,586    15,208    28,794 
                                    
Subtotal   0    0    0    0    25,730    15,577    41,307 
                                    
Land and construction   0    0    0    0    4,542    7,241    11,783 
Commercial   0    0    0    0    3,713    0    3,713 
Consumer   0    0    0    0    175    0    175 
                                    
Total  $0   $768   $0   $768   $62,934   $27,819   $91,521 

 

(continued)

19
 

 

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

 

Notes to Condensed Consolidated Financial Statements (unaudited), Continued

 

(3) Loans, Continued. The following summarizes the amount of impaired loans (in thousands):

 

   At June 30, 2012   At December 31, 2011 
       Unpaid           Unpaid     
   Recorded   Principal   Related   Recorded   Principal   Related 
   Investment   Balance   Allowance   Investment   Balance   Allowance 
With no related allowance recorded:                        
Residential real estate-                        
Closed-end first mortgages  $7,814   $8,506   $0   $7,919   $8,465   $0 
Commercial real estate:                              
Owner-occupied   78    78    0    369    376    0 
Non-owner-occupied   14,287    16,816    0    15,208    17,584    0 
Land and construction   2,489    5,482    0    7,241    11,652    0 
Consumer   0    0    0    68    68    0 
                               
With an allowance recorded:                              
Commercial real estate-                              
Non-owner-occupied   0    0    0    1,139    1,139    11 
                               
Total:                              
Residential real estate-                              
Closed-end first mortgages  $7,814   $8,506   $0   $7,919   $8,465   $0 
Commercial real estate:                              
Owner-occupied  $78   $78   $0   $369   $376   $0 
Non-owner-occupied  $14,287   $16,816   $0   $16,347   $18,723   $11 
Land and construction  $2,489   $5,482   $0   $7,241   $11,652   $0 
Consumer  $0   $0   $0   $68   $68   $0 
                               
Total  $24,668   $30,882   $0   $31,944   $39,284   $11 

 

  The average net investment in impaired loans and interest income recognized and received on impaired loans are as follows (in thousands):

 

   Three Months Ended June 30, 
   2012   2011 
   Average   Interest   Interest   Average   Interest   Interest 
   Recorded   Income   Income   Recorded   Income   Income 
   Investment   Recognized   Received   Investment   Recognized   Received 
Residential real estate-                        
Closed-end first mortgages  $7,870   $52   $84   $11,831   $5   $10 
Multi-family real estate  $0   $0   $0   $0   $0   $0 
Commercial real estate:                              
Owner-occupied  $85   $0   $0   $355   $0   $0 
Non-owner-occupied  $14,681   $0   $59   $19,171   $32   $94 
Land and construction  $4,574   $0   $14   $7,834   $0   $36 
Consumer  $0   $0   $0   $223   $1   $1 
                               
Total  $27,210   $52   $157   $39,414   $38   $141 

 

(continued)

20
 

 

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

 

Notes to Condensed Consolidated Financial Statements (unaudited), Continued

 

 

(3) Loans, Continued.

 

   Six Months Ended June 30, 
   2012   2011 
   Average   Interest   Interest   Average   Interest   Interest 
   Recorded   Income   Income   Recorded   Income   Income 
   Investment   Recognized   Received   Investment   Recognized   Received 
Residential real estate-                        
Closed-end first mortgages  $7,941   $104   $152   $12,005   $56   $88 
Multi-family real estate  $0   $0   $0   $0   $0   $0 
Commercial real estate:                              
Owner-occupied  $227   $0   $0   $552   $0   $1 
Non-owner-occupied  $14,925   $0   $110   $19,317   $85   $211 
Land and construction  $5,848   $0   $4   $8,191   $21   $91 
Consumer  $0   $0   $0   $228   $4   $4 
                               
Total  $28,941   $104   $306   $40,293   $166   $395 

 

  No loans have been determined to be restructured as troubled debt restructurings (“TDR’s”) during the six months ended June 30, 2012 and 2011. In addition there were no defaults of TDR’s during the six months ended June 30, 2011 or 2012.

 

(4) Regulatory Capital. The Bank is required to maintain certain minimum regulatory capital requirements. The following is a summary at June 30, 2012 of the regulatory capital requirements and the Bank’s capital on a percentage basis:

 

      Regulatory
   Bank  Requirement
         
Tier I capital to total average assets   8.63%   8.00%
           
Tier I capital to risk-weighted assets   11.92%   4.00%
           
Total capital to risk-weighted assets   13.18%   12.00%

 

(continued) 

 

21
 

 

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

 

Notes to Condensed Consolidated Financial Statements (unaudited), Continued

 

(5) Loss Per Share. Basic loss per share has been computed on the basis of the weighted-average number of shares of common stock outstanding during the period. Basic and diluted loss per share is the same due to the net loss incurred by the Company. Loss per common share has been computed based on the following:

 

   Three Months Ended June 30,   Six Months Ended June 30, 
   2012   2011   2012   2011 
Weighted-average number of common shares outstanding used to calculate basic and diluted loss per common share   26,735,541    819,358    24,622,418    819,358 

 

(6) Stock-Based Compensation. On December 27, 2011, the Company’s stockholders approved the 2011 Equity Incentive Plan (“2011 Plan”). A total of 2,200,000 shares of common stock are available to be issued under the 2011 Plan. Options, restricted stock, performance share awards and bonus share awards in lieu of obligations may be issued under the 2011 Plan. Both incentive stock options and nonqualified stock options can be granted under the 2011 Plan. The exercise price of the stock options cannot be less than the fair market value of the common stock on the date of grant. Effective January 1, 2012, the Company adopted a Non- Employee Director Compensation Plan under which bonus shares issuable under the 2011 Plan may be issued as compensation to outside directors. During the six months ended June 30, 2012, 22,386 shares of stock valued at approximately $25,000 have been issued under the 2011 Plan and Non-Employee Director Compensation Plan as compensation to outside directors.

 

  The Company’s prior stock option plan terminated on February 27, 2011. At June 30, 2012, no options were available for grant under this plan. Options must be exercised within ten years of the date of grant.
   
  A summary of the activity in the prior plan is as follows:

 

           Weighted-     
       Weighted-   Average     
      Average   Remaining   Aggregate 
   Number of   Exercise   Contractual   Intrinsic 
   Options   Price   Term   Value 
                 
Outstanding at December 31, 2011   50,900   $34.31           
Options forfeited   (11,392)   32.97           
                     
Outstanding and exercisable at June 30, 2012   39,508   $34.70    2.6 years   $0 

 

(continued)

22
 

 

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

 

Notes to Condensed Consolidated Financial Statements (unaudited), Continued

 

(7) Fair Value Measurements. Securities available for sale measured at fair value on a recurring basis are summarized below (in thousands):

       Fair Value Measurements at Reporting Date Using 
    Fair   Quoted Prices In Active Markets for Identical Assets  Significant Other Observable Inputs   Significant Unobservable Inputs 
    Value   (Level 1)  (Level 2)   (Level 3) 
As of June 30, 2012-                
Mortgage-backed securities   $25,004   $ 0  $25,004   $0 
                     
As of December 31, 2011-                   
 Mortgage-backed securities   $28,907  $ 0  $28,907   $0 

 

  There were no transfers of securities between levels of inputs for the six months ended June 30, 2012.
   
  Impaired collateral-dependent loans are carried at fair value when the current collateral value less estimated selling costs is lower than the carrying value of the loan. Those impaired collateral-dependent loans which are measured at fair value on a nonrecurring basis are as follows (in thousands):

 

                       Losses 
                       Recorded in 
                       Operations 
                       For the Six 
   At June 30, 2012   Months Ended 
   Fair               Total   June 30, 
   Value   Level 1   Level 2   Level 3   Losses   2012 
Residential real estate-                        
Closed-end first mortgages  $1,476   $0   $0   $1,476   $692   $147 
Commercial real estate:                              
Non-owner-occupied   9,429    0    0    9,429    2,138    175 
Land and construction   2,489    0    0    2,489    442    335 
                               
   $13,394   $0   $0   $13,394   $3,272   $657 

 

                       Losses 
                       Recorded in 
                       Operations 
                       For the 
   At December 31, 2011   Year Ended 
   Fair               Total   December 31, 
   Value   Level 1   Level 2   Level 3   Losses   2011 
Residential real estate-                        
Closed-end first mortgages  $1,591   $0   $0   $1,591   $545   $308 
Commercial real estate:                              
Owner-occupied   291    0    0    291    8    8 
Non-owner-occupied   6,540    0    0    6,540    2,652    150 
Land and construction   6,793    0    0    6,793    1,511    834 
                               
   $15,215   $0   $0   $15,215   $4,716   $1,300 

 

(continued)

23
 

 

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

 

Notes to Condensed Consolidated Financial Statements (unaudited), Continued

 

(7) Fair Value Measurements, Continued. Foreclosed real estate is recorded at fair value less estimated costs to sell. Foreclosed real estate which is measured at fair value on a nonrecurring basis is as follows (in thousands):

 

                        Losses 
                        Recorded 
    Fair               Total   During the 
    Value   Level 1   Level 2   Level 3   Losses   Period 
                          
At June 30, 2012   $9,088   $0   $0   $9,088   $817   $45 
                                 
At December 31, 2011   $7,646   $0   $0   $7,646   $772   $772 

 

  The estimated fair values and fair value measurement method with respect to the Company’s financial instruments were as follows (in thousands):

 

   At June 30, 2012    At December 31, 2011 
   Carrying   Fair       Carrying   Fair     
   Amount   Value   Level   Amount   Value   Level 
Financial assets:                        
Cash and cash equivalents  $28,053   $28,053    3   $22,776   $22,776    3 
Securities available for sale   25,004    25,004    2    28,907    28,907    2 
Loans   86,641    85,978    89,217    89,069    3      
Federal Home Loan Bank stock   1,770    1,770    3    2,159    2,159    3 
Accrued interest receivable   484    484    3    499    499    3 
                               
Financial liabilities:                              
Deposit liabilities   106,664    106,986    3    107,895    108,461    3 
Federal Home Loan Bank advances   31,700    33,836    3    31,700    33,920    3 
Junior subordinated debenture   5,155    4,836    3    5,155    4,734    3 
Off-balance sheet financial instruments   0    0    3    0    0    3 

 

  Discussion regarding the assumptions used to compute the estimated fair values of financial instruments can be found in Note 1 to the consolidated financial statements included in the Company’s annual report on Form 10-K for the year ended December 31, 2011.

 

(continued)

24
 

 

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

 

Notes to Condensed Consolidated Financial Statements (unaudited), Continued

 

 

(8) Regulatory Matters - Company. The Company is subject to the supervision and regulation of the Board of Governors of the Federal Reserve System (the “Federal Reserve”). On June 22, 2010, the Company entered into a written agreement with the Federal Reserve Bank of Atlanta (“Reserve Bank”) with respect to certain aspects of the operation and management of the Company (the “Written Agreement”).

 

  The Written Agreement contains the following principal requirements:

 

  The Board of the Company must take appropriate steps to fully utilize the Company’s financial and managerial resources to serve as a source of strength to the Bank, including, but not limited to, taking steps to ensure that the Bank complies with the Consent Order entered into with the OFR and the FDIC and any other supervisory action taken by the Bank’s state or federal regulator.
  The Company may not declare or pay any dividends without prior Reserve Bank and Federal Reserve approval.
  The Company may not, directly or indirectly, take dividends or any other form of payment representing a reduction in capital from the Bank without prior Reserve Bank approval.
  The Company and its nonbank subsidiary, OptimumBank Holdings Capital Trust I, may not make any distributions of interest, principal, or other sums on subordinated debentures or trust preferred securities without the prior written approval of the Reserve Bank and the Federal Reserve.
  The Company and its nonbank subsidiary, OptimumBank Holdings Capital Trust I, may not, directly or indirectly, incur, increase, or guarantee any debt or purchase or redeem any shares of its stock without the prior written approval of the Reserve Bank.
  The Company must obtain prior written consent from the Reserve Bank before appointing any new director or senior executive officer, or changing the responsibilities of any senior executive officer so that the officer would assume a different senior executive officer position, and must comply with the regulations applicable to indemnification and severance payments.
  The Company must provide quarterly progress reports to the Reserve Bank, along with parent company only financial statements.

 

  Management believes the Company is in substantial compliance with the requirements of the Written Agreement.

 

(continued)

25
 

 

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

 

Notes to Condensed Consolidated Financial Statements (unaudited), Continued

 

 

(9) Regulatory Matters- Bank. Effective April 16, 2010, the Bank consented to the issuance of a Consent Order by the FDIC and the OFR, also effective as of April 16, 2010.

 

  The Consent Order represents an agreement among the Bank, the FDIC and the OFR as to areas of the Bank’s operations that warrant improvement and presents a plan for making those improvements. The Consent Order imposes no fines or penalties on the Bank. The Consent Order will remain in effect and enforceable until it is modified, terminated, suspended, or set aside by the FDIC and the OFR.
   
  The Consent Order contains the following principal requirements:

 

  The Board of the Bank is required to increase its participation in the affairs of the Bank and assume full responsibility for the approval of sound policies and objectives for the supervision of all of the Bank’s activities.
  The Bank is required to have and retain qualified and appropriately experienced senior management, including a chief executive officer, a chief lending officer and a chief financial officer, who are given the authority to implement the provisions of the Consent Order.
  Any proposed changes in the Bank’s Board of Directors or senior executive officers are subject to the prior consent of the FDIC and the OFR.
  The Bank is required to maintain both a fully funded allowance for loan and lease losses satisfactory to the FDIC and the OFR and a minimum Tier 1 leverage capital ratio of 8% and a total risk-based capital ratio of 12% for as long as the Consent Order remains in effect.
  The Bank must undertake over a two-year period a scheduled reduction of the balance of loans classified “substandard” and “doubtful” in its 2009 FDIC examination by at least 75%.
  The Bank is required to reduce the volume of its adversely classified private label mortgage backed securities under a plan acceptable to the FDIC and OFR.
  The Bank must submit to the FDIC and the OFR for their review and comment a written business/strategic plan covering the overall operation of the Bank.
  The Bank must implement a plan to improve earnings, addressing goals and strategies for improving and sustaining earnings, major areas for improvement in the Bank’s operating performance, realistic and comprehensive budgets and a budget review process.

 

(continued)

26
 

 

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

 

Notes to Condensed Consolidated Financial Statements (unaudited), Continued

 

(9) Regulatory Matters – Bank, Continued.

 

  The Bank is required to revise, implement and incorporate recommendations of the FDIC and OFR with respect to the following policies or plans:

  o Lending and Collection Policies
  o Investment Policy
  o Liquidity, Contingency Funding and Funds Management Plan
  o Interest Rate Risk Management Policy
  o Internal Loan Review and Grading System;
  o Internal Control Policy; and
  o A plan to reduce concentration in commercial real estate loans;

 

  The Bank’s Board of Directors must review the adequacy of the allowance for loan and lease losses and establish a comprehensive policy satisfactory to the FDIC and OFR for determining such adequacy at least quarterly thereafter.
  The Bank may not pay any dividends or bonuses without the prior approval of the FDIC.
  The Bank may not accept, renew or rollover any brokered deposits except with the prior approval of the FDIC.
  The Bank is required to notify the FDIC and OFR prior to undertaking asset growth of 10% or more per annum while the Consent Order remains in effect.
  The Bank is required to file quarterly progress reports with the FDIC and the OFR.

 

  Management believes that the Bank is currently in substantial compliance with all the requirements of the Consent Order except for the following requirements:

 

  Scheduled reductions by October 31, 2011, and April 30, 2012, of 60% and 75%, respectively, of loans classified as substandard and doubtful in the 2009 FDIC Examination;
  Retention of a qualified chief executive officer and chief lending officer; and
  Development of a plan to reduce Bank’s concentration in commercial real estate loans acceptable to the supervisory authorities.

 

  The Bank has implemented comprehensive policies and plans to address all of the requirements of the Consent Order and has incorporated recommendations from the FDIC and OFR into these policies and plans.

 

(10) Junior Subordinated Debenture. The terms of the debenture agreement allow the Company to defer payments of interest on the debenture by extending the interest payment period at any time during the term of the debenture for up to twenty consecution quarterly periods. The Company has elected its right to defer payment of interest on the debenture. Accrued and unpaid interest on the debenture totaled $406,491 at June 30, 2012.

 

27
 

 

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

The following discussion should be read in conjunction with the condensed consolidated financial statements and notes thereto presented elsewhere in this report. For additional information, refer to the financial statements and footnotes for the year ended December 31, 2011 in the Annual Report on Form 10-K.

 

Regulatory Enforcement Actions

 

Bank Consent Order. On April 16, 2010, the Bank consented to the issuance of a Consent Order (“Consent Order”) by the FDIC and OFR. The Consent Order covers areas of the Bank’s operations that warrant improvement and imposes various requirements and restrictions designed to address these areas, including the requirement to maintain certain minimum capital ratios. A detailed discussion of the Consent Order is contained in Footnote 9 to the condensed consolidated financial statements contained in this report. Management believes that the Bank is currently in substantial compliance with all the requirements of the Consent Order except for the following requirements:

 

  Scheduled reductions by October 31, 2011, and April 30, 2012, of 60% and 75%, respectively, of loans classified as substandard and doubtful in the 2009 FDIC Examination;
  Retention of a qualified chief executive officer and chief lending officer; and
  Development of a plan to reduce Bank’s concentration in commercial real estate loans acceptable to the supervisory authorities.

 

The Bank has implemented comprehensive policies and plans to address all of the requirements of the Consent Order and has incorporated recommendations from the FDIC and OFR into these policies and plans.

 

Company Written Agreement with Reserve Bank. On June 22, 2010, the Company and the Reserve Bank entered into a Written Agreement with respect to certain aspects of the operation and management of the Company, including, without the prior approval of the Reserve Bank, paying or declaring dividends, taking dividends or payments from the Bank, making any interest, principal or other distributions on trust preferred securities, incurring, increasing or guaranteeing any debt, purchasing or redeeming any shares of stock, or appointing any new director or senior executive officer. Management believes that the Company is currently in substantial compliance with the requirements of the Written Agreement. A detailed discussion of the Written Agreement is contained in Footnote 8 to the condensed consolidated financial statements contained in this report.

 

28
 

 

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations, Continued

 

Capital Levels

 

  At June 30, 2012, the Bank met or exceeded all of its regulatory capital requirements. The following table summarizes the capital measures of the Bank at June 30, 2012 and December 31, 2011:

 

           FDIC Guideline Requirements         
   June 30, 2012   December 31, 2011   Adequately- Capitalized   Well- Capitalized   Consent Order 
                     
Tier I risk-based capital ratio   11.92%   11.22%   4.00%   6.00%   * 
                          
Total risk-based capital ratio   13.18%   12.48%   8.00%   10.00%   12.00%
                          
Leverage ratio   8.63%   7.76%   4.00%   5.00%   8.00%

 

*No additional requirement is established by the Consent Order

 

Financial Condition at June 30, 2012 and December 31, 2011

 

Overview

 

  Our total assets declined by $.3 million to $154.1 million at June 30, 2012, from $154.5 million at December 31, 2011, due to a $3.9 million reduction in securities primarily as a result of repayments and a $2.6 million reduction in net loans primarily as a result of loan payoffs and transfers to foreclosed real estate, partially offset by a $5.3 million increase in cash and cash equivalents. Deposits decreased by $1.2 million to $106.7 million at June 30, 2012, from $107.9 million at December 31, 2011, primarily due to a reduction in time deposits. Total stockholders' equity increased by $0.9 million to $7.7 million at June 30, 2012 from $6.8 million at December 31, 2011, due to the receipt of $1.8 million in proceeds from the sale of common stock and a $0.4 million decrease in accumulated other comprehensive loss from a reduction of unrealized losses on securities available for sale, partially offset by a $1.4 million net loss for the six month period ended June 30, 2012.

29
 

 

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations, Continued

 

The following table shows selected information for the periods ended or at the dates indicated:

 

   Six Months       Six Months 
   Ended   Year Ended   Ended 
   June 30,   December 31,   June 30, 
   2012   2011   2011 
                
Average equity as a percentage of average assets   4.89%   1.04%   0.64%
                
Equity to total assets at end of period   4.98%   4.39%   (.66)%
                
Return on average assets (1)   (1.77)%   (2.11)%   (3.36)%
                
Return on average equity (1)   (36.23)%   (203.97)%   (526.43)%
                
Noninterest expenses to average assets (1)   3.40%   4.08%   4.49%
                

(1) Annualized for the six months ended June 30, 2012 and 2011.

 

 

  Despite the slowing decline of real estate values in South Florida, we continue to experience the adverse effects of the prolonged real estate devaluation resulting in significant levels of non-performing loans, foreclosed real estate and loan charge-offs. Management, however, is committed to minimizing further losses in the loan portfolio and reducing our nonperforming assets.

 

Liquidity and Sources of Funds

 

  The Bank's sources of funds include customer deposits, advances from the Federal Home Loan Bank of Atlanta ("FHLB"), principal repayments and sales of investment securities, loan repayments, foreclosed real estate sales, the use of Federal Funds markets, net income, if any, and loans taken out at the Reserve Bank discount window.
   
  Deposits are our primary source of funds. Under the Consent Order, the interest rates that we pay on our market area deposits and our ability to accept brokered deposits is restricted. The restriction on brokered deposits is not expected to alter the Bank’s current deposit gathering activities since the Bank has not accepted, renewed or rolled over any brokered deposits since December 2009. With respect to the yield limitations, it is possible that the Bank could experience a decrease in deposit inflows, or the migration of current deposits to competitor institutions, if other institutions offer higher interest rates than those permitted to be offered by the Bank. Despite these yield limitations, we believe that we have the ability to adjust rates on our deposits to attract or retain deposits as needed.

 

30
 

 

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations, Continued

 

  In addition to obtaining funds from depositors, we may borrow funds from other financial institutions. At June 30, 2012, the Bank had outstanding borrowings of $31.7 million, against its $31.7 million in established borrowing capacity with the FHLB. The Bank’s borrowing facility is subject to collateral and stock ownership requirements, as well as prior FHLB consent to each advance. In 2010, the Bank obtained an available discount window credit line with the Reserve Bank, currently $1.1 million. The Reserve Bank line is subject to collateral requirements and must be repaid within 90 days; each advance is subject to prior Reserve Bank consent. We measure and monitor our liquidity daily and believe our liquidity sources are adequate to meet our operating needs.
   
  The Company, on an unconsolidated basis, typically relies on dividends from the Bank to fund its operating expenses, primarily expenses of being publicly held, and to make interest payments on its outstanding trust preferred securities. Under the Consent Order, the Bank is currently unable to pay dividends without prior regulatory approval. In addition, under the Written Agreement, we may not pay interest payments on the trust preferred securities or dividends on our common stock, incur any additional indebtedness at the holding company level, or redeem our common stock without the prior regulatory approval of the Reserve Bank. Since January 2010, we have deferred interest payments on our trust preferred securities.

 

Off-Balance Sheet Arrangements

 

  The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments are commitments to extend credit and may involve, to varying degrees, elements of credit and interest-rate risk in excess of the amounts recognized in the condensed consolidated balance sheet. The contract amounts of these instruments reflect the extent of the Company’s involvement in these financial instruments.
   
  Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total committed amounts do not necessarily represent future cash requirements. The Company evaluates each customer’s creditworthiness on a case-by-case basis.
   
  The amount of collateral obtained, if it is deemed necessary by the Company upon extension of credit, is based on management’s credit evaluation of the counter party. As of June 30, 2012, the Company had no commitments to extend credit.

 

31
 

 

 

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations, Continued

 

Results of Operations

 

The following table sets forth, for the periods indicated, information regarding (i) the total dollar amount of interest and dividend income of the Company from interest-earning assets and the resultant average yields; (ii) the total dollar amount of interest expense on interest-bearing liabilities and the resultant average cost; (iii) net interest income; (iv) interest-rate spread; (v) net interest margin; and (vi) ratio of average interest-earning assets to average interest-bearing liabilities.

 

   Three Months Ended June 30, 
   2012   2011 
   Average Balance   Interest and Dividends   Average Yield/Rate   Average Balance   Interest and Dividends   Average Yield/ Rate 
           ($ in thousands)         
Interest-earning assets:                        
Loans  $89,078   $982    4.41%  $108,219   $1,197    4.42%
Securities   26,563    276    4.16    51,142    500    3.91 
Other (1)   27,181    22    0.32    15,796    14    0.35 
                               
Total interest-earning assets/interest income   142,822    1,280    3.58    175,157    1,711    3.91 
                               
Cash and due from banks   1,962              440           
Premise and equipment   2,688              2,758           
Other   6,702              4,446           
                               
Total assets  $154,174             $182,801           
                               
Interest-bearing liabilities:                              
Savings, NOW and money-market deposits   35,339    57    0.65    36,187    76    0.84 
Time deposits   70,765    228    1.29    105,974    422    1.59 
Borrowings (2)   36,855    388    4.21    36,855    384    4.17 
                               
Total interest-bearing liabilities/ interest expense   142,959    673    1.88    179,016    882    1.97 
                               
Noninterest-bearing demand deposits   571              513           
Other liabilities   2,759              3,074           
Stockholders' equity   7,885              198           
                               
Total liabilities and stockholders' equity  $154,174             $182,801           
                               
Net interest income       $607             $829      
                               
Interest-rate spread (3)             1.70%             1.94%
                               
Net interest margin (4)             1.70%             1.89%
                               
Ratio of average interest-earning assets to average interest-bearing liabilities   1.00              0.98           

 

 

(1) Includes interest-earning deposits with banks, Federal funds sold, and Federal Home Loan Bank stock dividends.
(2) Includes Federal Home Loan Bank advances, other borrowings and junior subordinated debenture.
(3) Interest-rate spread represents the difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities.
(4) Net interest margin is net interest income divided by average interest-earning assets.

32
 

  

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations, Continued

 

Results of Operations

 

The following table sets forth, for the periods indicated, information regarding (i) the total dollar amount of interest and dividend income of the Company from interest-earning assets and the resultant average yields; (ii) the total dollar amount of interest expense on interest-bearing liabilities and the resultant average cost; (iii) net interest income; (iv) interest-rate spread; (v) net interest margin; and (vi) ratio of average interest-earning assets to average interest-bearing liabilities.

 

   Six Months Ended June 30, 
   2012   2011 
       Interest   Average       Interest   Average 
   Average   and   Yield/   Average   and   Yield/ 
   Balance   Dividends   Rate   Balance   Dividends   Rate 
   ($ in thousands) 
                         
Interest-earning assets:                        
Loans  $89,900   $1,977    4.40%  $110,062   $2,486    4.52%
Securities   27,465    574    4.18    51,824    1,029    3.97 
Other (1)   24,709    38    0.31    16,325    29    0.36 
                               
Total interest-earning assets/interest income   142,074    2,589    3.64    178,211    3,544    3.98 
                               
Cash and due from banks   1,192              511           
Premise and equipment   2,687              2,773           
Other   6,531              4,895           
                               
Total assets  $152,484             $186,390           
                               
Interest-bearing liabilities:                              
Savings, NOW and money-market deposits   35,085    112    0.64    36,176    153    0.85 
Time deposits   70,020    464    1.33    108,775    895    1.65 
Borrowings (2)   36,855    777    4.22    36,855    765    4.15 
                               
Total interest-bearing liabilities/ interest expense   141,960    1,353    1.91    181,806    1,813    1.99 
                               
Noninterest-bearing demand deposits   558              497           
Other liabilities   2,503              2,899           
Stockholders’ equity   7,463              1,188           
                               
Total liabilities and stockholders’ equity  $152,484             $186,390           
                               
Net interest income       $1,236             $1,731      
                               
Interest-rate spread (3)             1.73%             1.99%
                               
Net interest margin (4)             1.74%             1.94%
                               
Ratio of average interest-earning assets to average interest-bearing liabilities   1.00              0.98           

 

 

(1) Includes interest-earning deposits with banks, Federal funds sold, and Federal Home Loan Bank stock dividends.
(2) Includes Federal Home Loan Bank advances, other borrowings and junior subordinated debenture.
(3) Interest-rate spread represents the difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities.
(4) Net interest margin is net interest income divided by average interest-earning assets.

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OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations, Continued

 

Comparison of the Three-Month Periods Ended June 30, 2012 and 2011

 

General. Net loss for the three months ended June 30, 2012, was $0.8 million or $(.03) per basic and diluted share compared to a net loss of $2.0 million or $(2.40) per basic and diluted share for the period ended June 30, 2011. This decrease in net loss was partially due to a $0.3 million reduction in provision for loan losses and a $0.7 million decrease in noninterest expenses partially offset by a $0.4 million decrease in interest income.

 

Interest Income. Interest income decreased to $1.3 million for the three months ended June 30, 2012 from $1.7 million for the three months ended June 30, 2011. Interest income on loans decreased $0.2 million due primarily to a decrease in the average loan portfolio balance for the three months ended June 30, 2012 compared to the same period in 2011.

 

Interest Expense. Interest expense decreased to $0.7 million for the three months ended June 30, 2012 from $0.9 million for the three months ended June 30, 2011. Interest expense decreased primarily due to a decrease in the average balance in time deposits and the average yield paid on all deposits during 2012.

 

Provision for Loan Losses. The provision for the three months ended June 30, 2012, was $0.2 million compared to $0.9 million for the same period in 2011. The provision for loan losses is charged to operations as losses are estimated to have occurred in order to bring the total allowance for loan losses to a level deemed appropriate by management to absorb losses inherent in the portfolio at June 30, 2012. Management’s periodic evaluation of the adequacy of the allowance is based upon historical experience, the volume and type of lending conducted by us, adverse situations that may affect the borrower’s ability to repay, estimated value of the underlying collateral, loans identified as impaired, general economic conditions, particularly as they relate to our market areas, and other factors related to the estimated collectability of our loan portfolio. The allowance for loan losses totaled $2.1 million or 2.37% of loans outstanding at June 30, 2012, compared to $2.3 million, or 2.57% of loans outstanding at December 31, 2011. Management believes the balance in the allowance for loan losses at June 30, 2012 is adequate.

 

Noninterest Income. Total noninterest income remained unchanged at $0.2 million for the three months ended June 30, 2012, compared to the three months ended June 30, 2011.

 

Noninterest Expenses. Total noninterest expenses decreased to $1.4 million for the three months ended June 30, 2012 compared to $2.1 million for the three months ended June 30, 2011, primarily due to a decrease in expenses related to foreclosed real estate and professional fees.

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations, Continued

 

Comparison of the Six-Month Periods Ended June 30, 2012 and 2011

 

General. Net loss for the six months ended June 30, 2012, was $1.4 million or $(.05) per basic and diluted share compared to a net loss of $3.1 million or $(3.82) per basic and diluted share for the period ended June 30, 2011. The decrease in the Company’s net loss was primarily due to a $1.6 million decrease in noninterest expense and a $0.7 million decrease in provision for loan losses, partially offset by a $1.0 million decrease in total interest income.

 

Interest Income. Interest income decreased to $2.6 million for the six months ended June 30, 2012 from $3.5 million for the six months ended June 30, 2011. Interest income on loans decreased $0.5 million due primarily to a decrease in the average loan portfolio balance for the six months ended June 30, 2012 compared to the same period in 2011. Interest on securities decreased by $0.5 million to $0.6 million due primarily to a decrease in the average balance of the securities portfolio.

 

Interest Expense. Interest expense on deposits decreased to $0.5 million for the six months ended June 30, 2012 from $1.0 million for the six months ended June 30, 2011. Interest expense decreased primarily due to a decrease in the average balance in time deposits and the average yield paid on all deposits during 2012.

 

Provision for Loan Losses. The provision for the six months ended June 30, 2012, was $0.2 million compared to $0.9 million for the same period in 2011. The provision for loan losses is charged to operations as losses are estimated to have occurred in order to bring the total allowance for loan losses to a level deemed appropriate by management to absorb losses inherent in the portfolio at June 30, 2012. Management’s periodic evaluation of the adequacy of the allowance is based upon historical experience, the volume and type of lending conducted by us, adverse situations that may affect the borrower’s ability to repay, estimated value of the underlying collateral, loans identified as impaired, general economic conditions, particularly as they relate to our market areas, and other factors related to the estimated collectability of our loan portfolio. The allowance for loan losses totaled $2.1 million or 2.42% of loans outstanding at June 30, 2012, compared to $2.3 million, or 2.63% of loans outstanding at December 31, 2011. Management believes the balance in the allowance for loan losses at June 30, 2012 is adequate.

 

Noninterest Income. Total noninterest income remained unchanged at $0.2 million for the six months ended June 30, 2012, compared to the six months ended June 30, 2011.

 

Noninterest Expenses. Total noninterest expenses decreased to $2.6 million for the six months ended June 30, 2012 compared to $4.2 million for the six months ended June 30, 2011, primarily due to a decrease in professional fees and expenses related to foreclosed real estate.

 

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Item 4. Controls and Procedures

 

Under the supervision and with the participation of our President and Chief Financial Officer (our principal executive officer and principal financial officer), we have evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report, and, based on this evaluation, the President and Chief Financial Officer concluded that these disclosure controls and procedures are effective.

 

There have been no changes in our internal control over financial reporting during the quarter ended June 30, 2012, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

PART II. OTHER INFORMATION

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

Private Sale to Accredited Investor

 

On May 22, 2012, the Company closed the sale of 312,500 shares of its common stock at a price of $.40 per share to an individual accredited investor. The shares sold were not registered under the Securities Act of 1933 (the "Securities Act"), in reliance on the exemption provided by Section 4(2) thereof as a transaction by an issuer not involving a public offering.

 

Non-Employee Director Share Issuances

 

On June 30, 2012, the Company issued an aggregate of 18,597 shares of its common stock to the Company's non-employee directors under the Company's 2011 Equity Incentive Plan and the Company's Non-Employee Director Compensation Plan (the "Director Compensation Plan") for attendance fees at Company board meetings during the second quarter of 2012. Under the Director Compensation Plan, which became effective on January 1, 2012, fees for attendance at board and committee meetings are payable 75% in shares of common stock and 25% in cash on a quarterly basis. The shares were issued at the price of $0.64, the fair market value of the shares on the date of issuance. The issuance of the shares was exempt from registration pursuant to Section 4(2) of the Securities Act as a transaction by an issuer not involving a public offering.  

 

Item 6. Exhibits

 

The exhibits contained in the Exhibit Index following the signature page are filed with or incorporated by reference into this report.

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

  

  OPTIMUMBANK HOLDINGS, INC.
  (Registrant)
     
Date: August 14, 2012 By: /s/ Richard L. Browdy
    Richard L. Browdy
    President and Chief Financial Officer
    (Principal Executive Officer and Principal
    Financial Officer)

 

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EXHIBIT INDEX

 

Exhibit No.   Description
       
  3.1   Amended and Restated Articles of Incorporation (incorporated by reference from Annual Report on Form 10-K filed with the SEC on March 30, 2012)
       
  4.1   Bylaws (incorporated by reference from Current Report on Form 8-K filed with the SEC on May 11, 2004)
       
  4.2   Form of stock certificate (incorporated by reference from Quarterly Report on Form 10-QSB filed with the SEC on August 12, 2004)
       
  4.3   Form of Registration Rights Agreement between OptimumBank Holdings, Inc. and Investors (incorporated by reference from Current Report on Form 8-K filed with the SEC on October 31, 2011)
       
  4.4   The Company has outstanding certain long-term debt. None of such debt exceeds ten percent of the Company’s total assets; therefore, copies of the constituent instruments defining the rights of the holders of such debt are not included as exhibits. Copies of instruments with respect to such long-term debt will be furnished to the SEC upon request.
       
  10.1   OptimumBank Holdings, Inc. Non-Employee Director Compensation Plan (incorporated by reference from Annual Report on Form 10-K filed with the SEC on March 30, 2012)
       
  10.2   Amended and Restated Stock Purchase Agreement, dated as of December 5 2011, between OptimumBank Holdings, Inc. and Moishe Gubin (incorporated by reference from Annual Report on Form 10-K filed with the SEC on March 30, 2012)
       
  10.3   First Amendment dated June 29, 2012 to Amended and Restated Stock Purchase Agreement between OptimumBank Holdings, Inc. and Moishe Gubin dated December 5, 2011 (incorporated by reference from Current Report on Form 8-K filed with the SEC on July 6, 2012)
       
  31.1   Certification of Principal Executive and Principal Financial Officer required by Rule 13a-14(a)/15d-14(a) under the Exchange Act
       
  32.1   Certification of Principal Executive and Principal Financial Officer under 18 U.S.C. Section 1350
       
  101.INS   XBRL Instance Document
       
  101.SCH   XBRL Taxonomy Extension Schema Document
       
  101.CAL   XBRL Taxonomy Extension Calculation Linkbase Document
       
  101.LAB   XBRL Taxonomy Extension Label Linkbase Document
       
  101.PRE   XBRL Taxonomy Extension Presentation Linkbase Document
       
  101.DEF   XBRL Taxonomy Extension Definition Linkbase Document

 

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