Item 1. Financial Statements
Condensed Consolidated Balance Sheets
(Dollars in thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
Assets:
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks
|
|
$
|
17,681
|
|
|
$
|
17,563
|
|
Interest-bearing deposits with banks
|
|
|
100
|
|
|
|
77
|
|
Total cash and cash equivalents
|
|
|
17,781
|
|
|
|
17,640
|
|
Securities available for sale
|
|
|
19,759
|
|
|
|
20,222
|
|
Loans, net of allowance for loan losses of $3,915
|
|
|
75,532
|
|
|
|
76,999
|
|
Federal Home Loan Bank stock
|
|
|
979
|
|
|
|
1,113
|
|
Premises and equipment, net
|
|
|
2,630
|
|
|
|
2,648
|
|
Accrued interest receivable
|
|
|
382
|
|
|
|
380
|
|
Other assets
|
|
|
802
|
|
|
|
701
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
117,865
|
|
|
$
|
119,703
|
|
Liabilities and Stockholders’ Equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
Noninterest-bearing demand deposits
|
|
|
6,865
|
|
|
|
7,131
|
|
Savings, NOW and money-market deposits
|
|
|
22,109
|
|
|
|
22,153
|
|
Time deposits
|
|
|
58,019
|
|
|
|
56,725
|
|
|
|
|
|
|
|
|
|
|
Total deposits
|
|
|
86,993
|
|
|
|
86,009
|
|
|
|
|
|
|
|
|
|
|
Federal Home Loan Bank advances
|
|
|
20,500
|
|
|
|
23,500
|
|
Junior subordinated debenture
|
|
|
5,155
|
|
|
|
5,155
|
|
Advanced payment by borrowers for taxes and insurance
|
|
|
331
|
|
|
|
221
|
|
Official checks
|
|
|
84
|
|
|
|
114
|
|
Other liabilities
|
|
|
1,988
|
|
|
|
1,623
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
115,051
|
|
|
|
116,622
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies (Notes 1, 8 and 9)
|
|
|
|
|
|
|
|
|
Stockholders’ equity:
|
|
|
|
|
|
|
|
|
Preferred stock, no par value; 6,000,000 shares authorized, 7 shares issued and outstanding in 2017 and 2016
|
|
|
—
|
|
|
|
—
|
|
Common stock, $.01 par value; 5,000,000 shares authorized, 1,103,447 shares issued and outstanding in 2017 and 2016
|
|
|
11
|
|
|
|
11
|
|
Additional paid-in capital
|
|
|
34,039
|
|
|
|
34,039
|
|
Accumulated deficit
|
|
|
(31,000
|
)
|
|
|
(30,717
|
)
|
Accumulated other comprehensive loss
|
|
|
(236
|
)
|
|
|
(252
|
)
|
|
|
|
|
|
|
|
|
|
Total stockholders’ equity
|
|
|
2,814
|
|
|
|
3,081
|
|
Total liabilities and stockholders’ equity
|
|
$
|
117,865
|
|
|
$
|
119,703
|
|
See accompanying notes to condensed consolidated
financial statements.
OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY
Condensed Consolidated Statements of
Operations (Unaudited)
(in thousands, except per share amounts)
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
|
|
2017
|
|
|
2016
|
|
Interest income:
|
|
|
|
|
|
|
|
|
Loans
|
|
$
|
1,045
|
|
|
$
|
1,020
|
|
Securities
|
|
|
109
|
|
|
|
126
|
|
Other
|
|
|
39
|
|
|
|
23
|
|
|
|
|
|
|
|
|
|
|
Total interest income
|
|
|
1,193
|
|
|
|
1,169
|
|
|
|
|
|
|
|
|
|
|
Interest expense:
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
180
|
|
|
|
182
|
|
Borrowings
|
|
|
100
|
|
|
|
74
|
|
|
|
|
|
|
|
|
|
|
Total interest expense
|
|
|
280
|
|
|
|
256
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
913
|
|
|
|
913
|
|
|
|
|
|
|
|
|
|
|
Provision for loan losses
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Net interest income after provision for loan losses
|
|
|
913
|
|
|
|
913
|
|
|
|
|
|
|
|
|
|
|
Noninterest income:
|
|
|
|
|
|
|
|
|
Service charges and fees
|
|
|
6
|
|
|
|
19
|
|
Gain on sale of securities available for sale
|
|
|
—
|
|
|
|
28
|
|
Other
|
|
|
3
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Total noninterest income
|
|
|
9
|
|
|
|
47
|
|
|
|
|
|
|
|
|
|
|
Noninterest expenses:
|
|
|
|
|
|
|
|
|
Salaries and employee benefits
|
|
|
442
|
|
|
|
468
|
|
Professional fees
|
|
|
217
|
|
|
|
160
|
|
Occupancy and equipment
|
|
|
100
|
|
|
|
126
|
|
Data processing
|
|
|
80
|
|
|
|
87
|
|
Insurance
|
|
|
23
|
|
|
|
27
|
|
Foreclosed real estate, net
|
|
|
—
|
|
|
|
29
|
|
Regulatory assessment
|
|
|
51
|
|
|
|
73
|
|
Other
|
|
|
292
|
|
|
|
266
|
|
|
|
|
|
|
|
|
|
|
Total noninterest expenses
|
|
|
1,205
|
|
|
|
1,236
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(283
|
)
|
|
$
|
(276
|
)
|
|
|
|
|
|
|
|
|
|
Net loss per share:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.26
|
)
|
|
$
|
(0.29
|
)
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
(0.26
|
)
|
|
$
|
(0.29
|
)
|
See accompanying notes to condensed consolidated
financial statements.
OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY
Condensed Consolidated Statements of
Comprehensive Loss (Unaudited)
(In thousands)
|
|
Three Months Ended
March 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(283
|
)
|
|
$
|
(276
|
)
|
|
|
|
|
|
|
|
|
|
Other comprehensive income -
|
|
|
|
|
|
|
|
|
Unrealized gains on securities available for sale:
|
|
|
|
|
|
|
|
|
Unrealized gain arising during the period
|
|
|
26
|
|
|
|
281
|
|
Reclassification adjustment for realized gain on sale of securities available for sale
|
|
|
—
|
|
|
|
(28
|
)
|
Net change in unrealized holding loss
|
|
|
26
|
|
|
|
253
|
|
|
|
|
|
|
|
|
|
|
Deferred income taxes on above change
|
|
|
(10
|
)
|
|
|
(95
|
)
|
|
|
|
|
|
|
|
|
|
Total other comprehensive income
|
|
|
16
|
|
|
|
158
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss
|
|
$
|
(267
|
)
|
|
$
|
(118
|
)
|
See accompanying notes to condensed consolidated
financial statements.
OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY
Condensed Consolidated Statements of
Stockholders’ Equity (Unaudited)
Three Months Ended March 31, 2017 and
2016
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
Comprehensive
|
|
|
Total
|
|
|
|
Preferred Stock
|
|
|
Common Stock
|
|
|
Paid-In
|
|
|
Accumulated
|
|
|
(Loss)
|
|
|
Stockholders’
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Income
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2015
|
|
|
4
|
|
|
$
|
—
|
|
|
|
9,628,863
|
|
|
$
|
96
|
|
|
$
|
33,330
|
|
|
$
|
(30,321
|
)
|
|
$
|
(138
|
)
|
|
$
|
2,967
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reverse common stock split (1-for-10) (unaudited)
|
|
|
—
|
|
|
|
—
|
|
|
|
(8,665,694
|
)
|
|
|
(87
|
)
|
|
|
87
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued as compensation to directors (unaudited)
|
|
|
—
|
|
|
|
—
|
|
|
|
48,681
|
|
|
|
1
|
|
|
|
210
|
|
|
|
—
|
|
|
|
—
|
|
|
|
211
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the three months ended March 31, 2016 (unaudited)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(276
|
)
|
|
|
—
|
|
|
|
(276
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in unrealized loss on securities available for sale, net of taxes (unaudited)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
158
|
|
|
|
158
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2016 (unaudited)
|
|
|
4
|
|
|
$
|
—
|
|
|
|
1,011,850
|
|
|
$
|
10
|
|
|
$
|
33,627
|
|
|
$
|
(30,597
|
)
|
|
$
|
20
|
|
|
$
|
3,060
|
|
Balance at December 31, 2016
|
|
|
7
|
|
|
|
—
|
|
|
|
1,103,447
|
|
|
|
11
|
|
|
$
|
34,039
|
|
|
$
|
(30,717
|
)
|
|
$
|
(252
|
)
|
|
$
|
3,081
|
|
Net loss for the three months ended March 31, 2017 (unaudited)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(283
|
)
|
|
|
—
|
|
|
|
(283
|
)
|
Net change in unrealized loss on
securities available for sale, net of taxes (unaudited)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
16
|
|
|
|
16
|
|
Balance at March 31, 2017 (unaudited)
|
|
|
7
|
|
|
$
|
—
|
|
|
$
|
1,103,447
|
|
|
$
|
11
|
|
|
$
|
34,039
|
|
|
$
|
(31,000
|
)
|
|
$
|
(236
|
)
|
|
$
|
2,814
|
|
See accompanying notes to condensed consolidated
financial statements
OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY
Condensed Consolidated Statements of
Cash Flows (Unaudited)
(In thousands)
|
|
Three Months Ended
March 31,
|
|
|
|
2017
|
|
|
2016
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(283
|
)
|
|
$
|
(276
|
)
|
Adjustments to reconcile net loss to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
40
|
|
|
|
40
|
|
Gain on sale of securities
|
|
|
—
|
|
|
|
(28
|
)
|
Net amortization of fees, premiums and discounts
|
|
|
101
|
|
|
|
72
|
|
Common stock issued as compensation
|
|
|
—
|
|
|
|
211
|
|
(Increase)/decrease in accrued interest receivable
|
|
|
(2
|
)
|
|
|
20
|
|
Increase in other assets
|
|
|
(111
|
)
|
|
|
(99
|
)
|
Increase in official checks and other liabilities
|
|
|
335
|
|
|
|
159
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
80
|
|
|
|
99
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
Purchases of securities
|
|
|
—
|
|
|
|
(5,915
|
)
|
Principal repayments, sales and calls of securities
|
|
|
433
|
|
|
|
7,841
|
|
Net decrease (increase) in loans
|
|
|
1,422
|
|
|
|
(771
|
)
|
Purchases of premises and equipment
|
|
|
(22
|
)
|
|
|
(31
|
)
|
Redemption (purchase) of FHLB stock
|
|
|
134
|
|
|
|
(169
|
)
|
Proceeds from sale of foreclosed real estate
|
|
|
—
|
|
|
|
1,617
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by investing activities
|
|
|
1,967
|
|
|
|
2,572
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
Net increase (decrease) in deposits
|
|
|
984
|
|
|
|
(5,029
|
)
|
Net increase in advanced payments by borrowers for taxes
and insurance
|
|
|
110
|
|
|
|
135
|
|
Net (decrease) increase from FHLB Advances
|
|
|
(3,000
|
)
|
|
|
3,750
|
|
|
|
|
|
|
|
|
|
|
Net cash used in financing activities
|
|
|
(1,906
|
)
|
|
|
(1,144
|
)
|
|
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents
|
|
|
141
|
|
|
|
1,527
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of the period
|
|
|
17,640
|
|
|
|
10,365
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of the period
|
|
$
|
17,781
|
|
|
$
|
11,892
|
|
See accompanying notes to condensed consolidated
financial statements
OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY
Condensed Consolidated Statements of
Cash Flows (Unaudited), Continued
(In thousands)
|
|
Three Months Ended
March 31,
|
|
|
|
2017
|
|
|
2016
|
|
Supplemental disclosure of cash flow information:
|
|
|
|
|
|
|
Cash paid during the period for:
|
|
|
|
|
|
|
Interest
|
|
$
|
239
|
|
|
$
|
210
|
|
|
|
|
|
|
|
|
|
|
Income taxes
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
Noncash transaction -
|
|
|
|
|
|
|
|
|
Change in accumulated other comprehensive loss, net change in unrealized loss on securities available for sale
|
|
$
|
16
|
|
|
$
|
158
|
|
See accompanying notes to condensed consolidated
financial statements
(continued)
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 Florida-chartered commercial bank. The Bank’s wholly-owned subsidiaries are OB Real Estate
Management, LLC and OB Real Estate Holdings, LLC, both of which were formed in 2009; OB Real Estate Holdings 1692 and OB Real
Estate Holdings 1704 formed in 2012, collectively, (the “Real Estate Holding Subsidiaries”). 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 2017 and 2016. All other subsidiaries are primarily engaged in holding and disposing of foreclosed real
estate.
|
|
|
|
Basis
of Presentation
.
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 March 31, 2017, and the results of operations and cash flows for the three-month periods ended March 31, 2017
and 2016. The results of operations for the three months ended March 31, 2017, are not necessarily indicative of the results
to be expected for the full year.
|
|
|
|
Going
Concern Status
.
The Company is in default with respect to its $5,155,000 Junior Subordinated Debenture (“Debenture”)
due to its failure to make certain required interest payments under the Debenture. The Trustee of the Debenture (the “Trustee”)
or the holders of the Debenture are entitled to accelerate the payment of the $5,155,000 principal balance plus accrued
and unpaid interest totaling $1,200,318 at March 31, 2017. To date the Trustee has not accelerated the outstanding balance
of the Debenture. No adjustments to the accompanying condensed consolidated financial statements have been made as a result
of this uncertainty.
Management’s
plans with regard to this matter are as follows: A Director of the Company has offered to purchase the Debenture and this
offer has been approved by certain equity owners of the Trust that holds the Debenture. The Director has also agreed to
enter into a forbearance agreement with the Company with respect to payments due under the Debenture upon consummation
of the Director’s purchase of the Debenture.
In
March 2016, the Trustee received a direction from certain equity owners of the Trust that holds the Debenture to sell
the Debenture to a Director of the Company. Based upon the receipt of conflicting directions from other debt holders of
the Trust, in August 2016, the Trustee commenced an action in a Minnesota State Court seeking directions from the Court.
The case was subsequently transferred to United States District Court for the Southern District of New York, where the
case is currently pending. The Company continues to pursue mechanisms for paying the accrued interest, such as raising
additional capital.
|
|
|
|
Comprehensive
Loss.
GAAP 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 condensed consolidated balance sheets, such items along with net loss,
are components of comprehensive loss. The only component of comprehensive loss is the net change in the unrealized loss on
the securities available for sale.
|
|
|
|
Income
Taxes.
The Company assessed its earnings history and trends and estimates of future earnings, and determined that
the deferred tax asset could not be realized as of March 31, 2017. Accordingly, a valuation allowance was recorded against
the net deferred tax asset.
|
|
(continued)
|
OPTIMUMBANK
HOLDINGS, INC. AND SUBSIDIARY
Notes
to Condensed Consolidated Financial Statements (Unaudited)
(1)
|
General,
Continued.
|
|
Recent
Pronouncements.
In January 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting
Standards Update (“ASU”) 2016-01, Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement
of Financial Assets and Financial Liabilities, which is intended to enhance the reporting model for financial instruments
to provide users of financial statements with more decision-useful information. The ASU requires equity investments to
be measured at fair value with changes in fair values recognized in net earnings, simplifies the impairment assessment
of equity investments without readily determinable fair values by requiring a qualitative assessment to identity impairment
and eliminates the requirement to disclose fair values, the methods and significant assumptions used to estimate the fair
value of financial instruments measured at amortized cost. The ASU also clarifies that the Company should evaluate the
need for a valuation allowance on a deferred tax asset related to available for-sale debt securities in combination with
the Company’s other deferred tax assets. The ASU is effective for the Company beginning January 1, 2018. Early adoption
is permitted. The adoption of this guidance is not expected to have a material impact on the Company’s condensed
consolidated financial statements.
In
February 2016, the FASB issued ASU 2016-2, Leases (Topic 842) which will require lessees to recognize on the balance sheet
the assets and liabilities for the rights and obligations created by those leases with term of more than twelve months.
Consistent with current GAAP, the recognition, measurement, and presentation of expenses and cash flows arising from a
lease by a lessee primarily will depend on its classification as a finance or operating lease. The new ASU will require
both types of leases to be recognized on the balance sheet. The ASU also will require disclosures to help investors and
other financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases.
These disclosures include qualitative and quantitative requirements, providing additional information about the amounts
recorded in the financial statements. The ASU is effective for fiscal years and interim periods within those fiscal years
beginning after December 15, 2018. The Company is in the process of determining the effect of the ASU on its condensed
consolidated financial statements. Early application will be permitted.
In
March 2016, the FASB issued ASU No. 2016-09,
Compensation-Stock Compensation (Topic 718)
intended to improve the
accounting for employee share-based payments. The ASU affects all organizations that issue share-based payment awards
to their employees. The ASU simplifies several aspects of the accounting for share-based payment award transactions, including
the income tax consequences, classification of awards as either equity or liabilities, and classification on the consolidated
statement of cash flows. The ASU will take effect for annual periods beginning after December 15, 2016, and interim periods
within those annual periods. The Company has evaluated the effect of ASU and determined it has no material effect on its
condensed consolidated financial statements.
In
June 2016, the FASB issued ASU No. 2016-13 Financial Instruments-Credit Losses (Topic 326). The ASU improves financial
reporting by requiring timelier recording of credit losses on loans and other financial instruments held by the Company.
The ASU requires the Company to measure all expected credit losses for financial assets held at the reporting date based
on historical experience, current conditions, and reasonable and supportable forecasts. Many of the loss estimation techniques
applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount
of expected credit losses. The Company will continue to use judgment to determine which loss estimation method is appropriate
for their circumstances. The ASU requires enhanced disclosures to help investors and other financial statement users better
understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting
standards of an organization’s portfolio. These disclosures include qualitative and quantitative requirements that
provide additional information about the amounts recorded in the financial statements. Additionally, the ASU amends the
accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration.
The ASU will take effect for fiscal years, and interim periods within those fiscal years, beginning after December 15,
2019. Early adoption is permitted. The Company is in the process of determining the effect of the ASU on its condensed
consolidated financial statements.
|
|
|
|
Reclassification.
Certain amounts have been reclassified to conform to the 2017 condensed consolidated financial statement presentation.
|
|
|
(continued)
OPTIMUMBANK
HOLDINGS, INC. AND SUBSIDIARY
Notes
to Condensed Consolidated Financial Statements (Unaudited)
(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):
|
|
|
Amortized
Cost
|
|
|
Gross
Unrealized
Gains
|
|
|
Gross
Unrealized
Losses
|
|
|
Fair
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At March 31, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities Available for Sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collateralized mortgage obligations
|
|
$
|
9,900
|
|
|
$
|
—
|
|
|
$
|
(355
|
)
|
|
$
|
9,545
|
|
SBA Pool Securities
|
|
|
10,238
|
|
|
|
12
|
|
|
|
(36
|
)
|
|
|
10,214
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
20,138
|
|
|
$
|
12
|
|
|
$
|
(391
|
)
|
|
$
|
19,759
|
|
|
|
Amortized
Cost
|
|
|
Gross
Unrealized
Gains
|
|
|
Gross
Unrealized
Losses
|
|
|
Fair
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities Available for Sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collateralized mortgage obligations
|
|
$
|
10,157
|
|
|
$
|
—
|
|
|
$
|
(405
|
)
|
|
$
|
9,752
|
|
SBA Pool Securities
|
|
|
10,470
|
|
|
|
—
|
|
|
|
—
|
|
|
|
10,470
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
20,627
|
|
|
$
|
—
|
|
|
$
|
(405
|
)
|
|
$
|
20,222
|
|
The
following summarizes the sales of securities (in thousands):
|
|
Three Months Ended March 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
Proceeds from sales of securities
|
|
$
|
—
|
|
|
$
|
6,991
|
|
|
|
|
|
|
|
|
|
|
Gross gains from sale of securities
|
|
|
—
|
|
|
|
28
|
|
Gross losses from sale of securities
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Net gain from sales of securities
|
|
$
|
—
|
|
|
$
|
28
|
|
Securities
with gross unrealized losses, aggregated by investment category and length of time that individual securities have been in a continuous
loss position, is as follows (in thousands):
|
|
At March 31, 2017
|
|
|
|
Over Twelve Months
|
|
|
Less Than Twelve Months
|
|
|
|
Gross
Unrealized
Losses
|
|
|
Fair
Value
|
|
|
Gross
Unrealized
Losses
|
|
|
Fair
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities Available for Sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collateralized mortgage obligations
|
|
$
|
(108
|
)
|
|
$
|
2,085
|
|
|
$
|
(247
|
)
|
|
$
|
7,460
|
|
SBA Pool Securities
|
|
|
—
|
|
|
|
—
|
|
|
|
(36
|
)
|
|
|
7,274
|
|
|
|
$
|
(108
|
)
|
|
$
|
2,085
|
|
|
$
|
(283
|
)
|
|
$
|
14,734
|
|
|
|
At
December 31, 2016
|
|
|
|
Over
Twelve Months
|
|
|
Less
Than Twelve Months
|
|
|
|
Gross
Unrealized
Losses
|
|
|
Fair
Value
|
|
|
Gross
Unrealized
Losses
|
|
|
Fair
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities
Available for Sale-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collateralized
mortgage obligations
|
|
$
|
(46
|
)
|
|
$
|
864
|
|
|
$
|
(359
|
)
|
|
$
|
8,888
|
|
(continued)
OPTIMUMBANK
HOLDINGS, INC. AND SUBSIDIARY
Notes
to Condensed Consolidated Financial Statements (Unaudited)
(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 warrants such evaluation. Consideration is given to (1) the length of time and the extent to which
the fair value has been less than cost, (2) the financial condition and near-term prospectus of the issuer, and (3) the
intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for
any anticipated recovery in fair value.
At
March 31, 2017 and December 31, 2016, the unrealized losses on nineteen investment securities and six investment securities,
respectively 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.
|
|
|
|
(continued)
|
OPTIMUMBANK
HOLDINGS, INC. AND SUBSIDIARY
Notes
to Condensed Consolidated Financial Statements (Unaudited)
(3)
|
Loans.
The components of loans are as follows (in thousands):
|
|
|
At March 31,
2017
|
|
|
At December 31,
2016
|
|
|
|
|
|
|
|
|
Residential real estate
|
|
$
|
26,841
|
|
|
$
|
27,334
|
|
Multi-family real estate
|
|
|
7,254
|
|
|
|
5,829
|
|
Commercial real estate
|
|
|
31,424
|
|
|
|
29,264
|
|
Land and construction
|
|
|
3,011
|
|
|
|
5,681
|
|
Commercial
|
|
|
8,997
|
|
|
|
10,514
|
|
Consumer
|
|
|
1,513
|
|
|
|
1,829
|
|
|
|
|
|
|
|
|
|
|
Total loans
|
|
|
79,040
|
|
|
|
80,451
|
|
|
|
|
|
|
|
|
|
|
Add (deduct):
|
|
|
|
|
|
|
|
|
Net deferred loan fees, costs and premiums
|
|
|
407
|
|
|
|
463
|
|
Allowance for loan losses
|
|
|
(3,915
|
)
|
|
|
(3,915
|
)
|
|
|
|
|
|
|
|
|
|
Loans, net
|
|
$
|
75,532
|
|
|
$
|
76,999
|
|
(continued)
OPTIMUMBANK
HOLDINGS, INC. AND SUBSIDIARY
Notes
to Condensed Consolidated Financial Statements (Unaudited)
(3)
|
Loans,
Continued.
An analysis of the change in the allowance for loan losses follows (in thousands):
|
|
|
Residential
Real Estate
|
|
|
Multi-Family
Real Estate
|
|
|
Commercial
Real Estate
|
|
|
Land
and
Construction
|
|
|
Commercial
|
|
|
Consumer
|
|
|
Unallocated
|
|
|
Total
|
|
Three
Months Ended March 31, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning
balance
|
|
$
|
310
|
|
|
$
|
58
|
|
|
$
|
787
|
|
|
$
|
120
|
|
|
$
|
188
|
|
|
$
|
165
|
|
|
$
|
2,287
|
|
|
$
|
3,915
|
|
(Credit)
provision for loan losses
|
|
|
(8
|
)
|
|
|
15
|
|
|
|
31
|
|
|
|
(61
|
)
|
|
|
(62
|
)
|
|
|
(7
|
)
|
|
|
92
|
|
|
|
—
|
|
Charge-offs
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(9
|
)
|
|
|
—
|
|
|
|
(9
|
)
|
Recoveries
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
6
|
|
|
|
—
|
|
|
|
3
|
|
|
|
—
|
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending
balance
|
|
$
|
302
|
|
|
$
|
73
|
|
|
$
|
818
|
|
|
$
|
65
|
|
|
$
|
126
|
|
|
$
|
152
|
|
|
$
|
2,379
|
|
|
$
|
3,915
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended March 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning
balance
|
|
$
|
116
|
|
|
$
|
26
|
|
|
$
|
1,085
|
|
|
$
|
77
|
|
|
$
|
120
|
|
|
$
|
151
|
|
|
$
|
720
|
|
|
$
|
2,295
|
|
Provision
(credit) for loan losses
|
|
|
152
|
|
|
|
14
|
|
|
|
(1,722
|
)
|
|
|
(2
|
)
|
|
|
92
|
|
|
|
29
|
|
|
|
1,437
|
|
|
|
—
|
|
Charge-offs
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(32
|
)
|
|
|
—
|
|
|
|
(32
|
)
|
Recoveries
|
|
|
—
|
|
|
|
—
|
|
|
|
1,808
|
|
|
|
6
|
|
|
|
—
|
|
|
|
3
|
|
|
|
—
|
|
|
|
1,817
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending
balance
|
|
$
|
268
|
|
|
$
|
40
|
|
|
$
|
1,171
|
|
|
$
|
81
|
|
|
$
|
212
|
|
|
$
|
151
|
|
|
$
|
2,157
|
|
|
$
|
4,080
|
|
(continued)
OPTIMUMBANK
HOLDINGS, INC. AND SUBSIDIARY
Notes
to Condensed Consolidated Financial Statements (Unaudited)
|
|
Residential
Real Estate
|
|
|
Multi-
Family Real Estate
|
|
|
Commercial
Real Estate
|
|
|
Land
and Construction
|
|
|
Commercial
|
|
|
Consumer
|
|
|
Unallocated
|
|
|
Total
|
|
At March 31, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated
for impairment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recorded
investment
|
|
$
|
372
|
|
|
$
|
—
|
|
|
$
|
996
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,368
|
|
Balance
in allowance for loan losses
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
103
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
103
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collectively evaluated
for impairment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recorded
investment
|
|
$
|
26,469
|
|
|
$
|
7,254
|
|
|
$
|
30,428
|
|
|
$
|
3,011
|
|
|
$
|
8,997
|
|
|
$
|
1,513
|
|
|
$
|
—
|
|
|
$
|
77,672
|
|
Balance
in allowance for loan losses
|
|
$
|
302
|
|
|
$
|
73
|
|
|
$
|
715
|
|
|
$
|
65
|
|
|
$
|
126
|
|
|
$
|
152
|
|
|
$
|
2,379
|
|
|
$
|
3,812
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31,
2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated
for impairment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recorded
investment
|
|
$
|
375
|
|
|
$
|
—
|
|
|
$
|
1,004
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,379
|
|
Balance
in allowance for loan losses
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
104
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
104
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collectively evaluated
for impairment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recorded investment
|
|
$
|
26,959
|
|
|
$
|
5,829
|
|
|
$
|
28,260
|
|
|
$
|
5,681
|
|
|
$
|
10,514
|
|
|
$
|
1,829
|
|
|
$
|
—
|
|
|
$
|
79,072
|
|
Balance
in allowance for loan losses
|
|
$
|
310
|
|
|
$
|
58
|
|
|
$
|
683
|
|
|
$
|
120
|
|
|
$
|
188
|
|
|
$
|
165
|
|
|
$
|
2,287
|
|
|
$
|
3,811
|
|
(continued)
OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY
Notes to Condensed Consolidated Financial
Statements (Unaudited)
(3)
|
Loans, Continued.
Residential Real Estate,
Multi-Family Real Estate, Commercial Real Estate, Land and Construction.
All 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 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.
Construction loans to borrowers 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, cost estimates and pre-construction sales information. The Company also makes loans on occasion for the purchase of
land for future development by the borrower. Land loans are extended for 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.
|
|
|
|
Commercial.
Commercial business loans and lines of credit consist of loans to small- and medium-sized companies in the Company’s market area. Commercial loans are generally used for working capital purposes or for acquiring equipment, inventory or furniture. Primarily all of the Company’s commercial loans are secured loans, along with a small amount of unsecured loans. The Company’s underwriting analysis consists of a review of the financial statements of the borrower, the lending history of the borrower, the debt service capabilities of the borrower, the projected cash flows of the business, the value of the collateral, if any, and whether the loan is guaranteed by the principals of the borrower. These loans are generally secured by accounts receivable, inventory and equipment. Commercial loans are typically made on the basis of the borrower’s ability to make repayment from the cash flow of the borrower’s business, which makes them of higher risk than residential loans and the collateral securing loans may be difficult to appraise and may fluctuate in value based on the success of the business. The Company seeks to minimize these risks through its underwriting standards.
|
|
|
|
Consumer.
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. Risk is mitigated by the fact that the loans are of smaller individual amounts.
|
(continued)
OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY
Notes to Condensed Consolidated Financial
Statements (Unaudited)
(3)
|
Loans, Continued.
The following summarizes the loan credit quality (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass
|
|
|
OLEM
(Other
Loans
Especially Mentioned)
|
|
|
Sub-
standard
|
|
|
Doubtful
|
|
|
Loss
|
|
|
Total
|
|
At March 31, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate
|
|
$
|
23,060
|
|
|
$
|
3,409
|
|
|
$
|
372
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
26,841
|
|
Multi-family real estate
|
|
|
7,254
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
7,254
|
|
Commercial real estate
|
|
|
26,977
|
|
|
|
3,451
|
|
|
|
996
|
|
|
|
—
|
|
|
|
—
|
|
|
|
31,424
|
|
Land and construction
|
|
|
1,246
|
|
|
|
1,765
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3,011
|
|
Commercial
|
|
|
8,997
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
8,997
|
|
Consumer
|
|
|
1,488
|
|
|
|
—
|
|
|
|
25
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,513
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
69,022
|
|
|
$
|
8,625
|
|
|
$
|
1,393
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
79,040
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate
|
|
$
|
25,326
|
|
|
$
|
1,633
|
|
|
$
|
375
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
27,334
|
|
Multi-family real estate
|
|
|
5,829
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5,829
|
|
Commercial real estate
|
|
|
25,979
|
|
|
|
1,174
|
|
|
|
2,111
|
|
|
|
—
|
|
|
|
—
|
|
|
|
29,264
|
|
Land and construction
|
|
|
5,636
|
|
|
|
45
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5,681
|
|
Commercial
|
|
|
8,768
|
|
|
|
—
|
|
|
|
1,746
|
|
|
|
—
|
|
|
|
—
|
|
|
|
10,514
|
|
Consumer
|
|
|
1,823
|
|
|
|
—
|
|
|
|
6
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,829
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
73,361
|
|
|
$
|
2,852
|
|
|
$
|
4,238
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
80,451
|
|
|
|
|
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 – 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. Included in this category are loans that are current on their payments, but the Bank is unable to document the source of repayment. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.
|
|
|
|
Doubtful – a loan classified as Doubtful has all the weaknesses inherent in one classified as 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 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)
OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY
Notes to Condensed Consolidated Financial
Statements (Unaudited)
(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 March 31, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate
|
|
$
|
407
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
407
|
|
|
$
|
26,434
|
|
|
$
|
—
|
|
|
$
|
26,841
|
|
Multi-family real estate
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
7,254
|
|
|
|
—
|
|
|
|
7,254
|
|
Commercial real estate
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
31,424
|
|
|
|
—
|
|
|
|
31,424
|
|
Land and construction
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3,011
|
|
|
|
—
|
|
|
|
3,011
|
|
Commercial
|
|
|
1,746
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,746
|
|
|
|
7,251
|
|
|
|
—
|
|
|
|
8,997
|
|
Consumer
|
|
|
25
|
|
|
|
—
|
|
|
|
—
|
|
|
|
25
|
|
|
|
1,488
|
|
|
|
—
|
|
|
|
1,513
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
2,178
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,178
|
|
|
$
|
76,862
|
|
|
$
|
—
|
|
|
$
|
79,040
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
26,959
|
|
|
$
|
375
|
|
|
$
|
27,334
|
|
Multi-family real estate
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5,829
|
|
|
|
—
|
|
|
|
5,829
|
|
Commercial real estate
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
29,264
|
|
|
|
—
|
|
|
|
29,264
|
|
Land and construction
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5,681
|
|
|
|
—
|
|
|
|
5,681
|
|
Commercial
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
10,514
|
|
|
|
—
|
|
|
|
10,514
|
|
Consumer
|
|
|
—
|
|
|
|
6
|
|
|
|
—
|
|
|
|
6
|
|
|
|
1,823
|
|
|
|
—
|
|
|
|
1,829
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
—
|
|
|
$
|
6
|
|
|
$
|
—
|
|
|
$
|
6
|
|
|
$
|
80,070
|
|
|
$
|
375
|
|
|
$
|
80,451
|
|
The following summarizes the amount of impaired loans (in thousands):
|
|
At March 31, 2017
|
|
|
At December 31, 2016
|
|
|
|
Recorded
Investment
|
|
|
Unpaid
Principal
Balance
|
|
|
Related
Allowance
|
|
|
Recorded
Investment
|
|
|
Unpaid
Principal
Balance
|
|
|
Related
Allowance
|
|
With no related allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate
|
|
$
|
372
|
|
|
$
|
498
|
|
|
$
|
—
|
|
|
$
|
375
|
|
|
$
|
501
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With related allowance recorded - Commercial real estate
|
|
$
|
996
|
|
|
|
996
|
|
|
|
103
|
|
|
|
1,004
|
|
|
|
1,004
|
|
|
|
104
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate
|
|
$
|
372
|
|
|
$
|
498
|
|
|
$
|
—
|
|
|
$
|
375
|
|
|
$
|
501
|
|
|
$
|
—
|
|
Commercial real estate
|
|
$
|
996
|
|
|
$
|
996
|
|
|
$
|
103
|
|
|
$
|
1,004
|
|
|
$
|
1,004
|
|
|
$
|
104
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,368
|
|
|
$
|
1,494
|
|
|
$
|
103
|
|
|
$
|
1,379
|
|
|
$
|
1,505
|
|
|
$
|
104
|
|
(continued)
OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY
Notes to Condensed Consolidated Financial
Statements (Unaudited)
(3)
|
Loans, Continued.
The average net investment in impaired loans and interest income recognized and received on impaired loans are as follows (in thousands):
|
|
|
|
|
For the Period Ended March 31,
|
|
|
For the Period Ended March 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
Average
Recorded
Investment
|
|
|
Interest
Income
Recognized
|
|
|
Interest
Income
Received
|
|
|
Average
Recorded
Investment
|
|
|
Interest
Income
Recognized
|
|
|
Interest
Income
Received
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate
|
|
$
|
372
|
|
|
$
|
12
|
|
|
$
|
12
|
|
|
$
|
1,048
|
|
|
$
|
12
|
|
|
$
|
18
|
|
Commercial real estate
|
|
$
|
895
|
|
|
$
|
13
|
|
|
$
|
13
|
|
|
$
|
3,100
|
|
|
$
|
13
|
|
|
$
|
36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,267
|
|
|
$
|
25
|
|
|
$
|
25
|
|
|
$
|
4,148
|
|
|
$
|
25
|
|
|
$
|
54
|
|
|
|
|
No loans have been determined to be troubled debt restructurings during the three months ended March 31, 2017 or 2016.
|
|
|
(4)
|
Regulatory Capital.
The Bank is required to maintain certain minimum regulatory capital requirements. The following is a summary at March 31, 2017 of the regulatory capital requirements and the Bank’s capital on a percentage basis:
|
|
|
|
|
Bank
|
|
|
Consent Order
Regulatory
Requirement
|
|
|
|
|
|
|
|
|
Tier I capital to total average assets
|
|
|
8.18
|
%
|
|
|
8.00
|
%
|
|
|
|
|
|
|
|
|
|
Tier I capital to risk-weighted assets
|
|
|
12.28
|
%
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
Common equity Tier I capital to risk-weighted assets
|
|
|
12.28
|
%
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
Total capital to risk-weighted assets
|
|
|
13.58
|
%
|
|
|
12.00
|
%
|
|
|
|
|
|
|
|
|
|
|
At March 31, 2017, the Bank is well-capitalized. As a result of the Consent Order discussed in Note 9, the Bank cannot be categorized higher than “adequately capitalized” until the Consent Order is lifted, even if its ratios were to exceed those required to be a “well capitalized” bank.
|
(continued)
OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY
Notes to Condensed Consolidated Financial
Statements (Unaudited)
(5)
|
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. Loss per common share have been computed based on the following (weighted-average number of common shares outstanding have been adjusted for the reverse stock split discussed in note 11):
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
|
2017
|
|
|
2016
|
|
Weighted-average number of common shares outstanding used to calculate basic and diluted loss per common share
|
|
|
1,103,447
|
|
|
|
963,673
|
|
|
|
|
|
|
|
|
|
|
(continued)
OPTIMUMBANK
HOLDINGS, INC. AND SUBSIDIARY
Notes
to Condensed Consolidated Financial Statements (Unaudited)
(6)
|
Stock-Based
Compensation.
On December 27, 2011, the Company’s stockholders approved the 2011 Equity Incentive Plan (“2011
Plan”). In May 2016, the Company increased the total number of shares available to be awarded from 105,000 shares (adjusted
for the one-for-ten reverse stock split) to 210,000 shares. 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. Options must be exercised within ten years of the date of grant.
|
|
|
|
As
of March 31, 2017, only common stock has been issued as compensation to directors for services rendered under this plan. There
were no shares of common stock issued during the period ended March 31, 2017. A total of 48,681 shares of common stock (adjusted
for one-for-ten reverse stock split) were issued during the period ended March 31, 2016. A total of $211,000 of compensation
was recorded during the period ended March 31, 2016. Subsequently, $200,000 (46,296 shares) was reclassified to other liabilities
(see Note 13). At March 31, 2017, a total of 145,861 (adjusted for one-for-ten reverse stock split) shares remain available
for grant.
|
(7)
|
Fair
Value Measurements.
Assets measured at fair value on a nonrecurring basis are as follows (in thousands):
|
Impaired
Collateral Dependent Loans:
|
|
Fair
Value
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
Losses
|
|
|
Losses
Recorded in
Operations
|
|
At March 31, 2017-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate
|
|
$
|
372
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
372
|
|
|
$
|
126
|
|
|
$
|
—
|
|
|
|
Fair
Value
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total Losses
|
|
|
Losses
Recorded in
Operations
|
|
At December 31, 2016-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate
|
|
$
|
375
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
375
|
|
|
$
|
126
|
|
|
$
|
—
|
|
Available-for-sale
securities measured at fair value on a recurring basis are summarized below (in thousands):
|
|
Fair Value Measurements Using
|
|
|
|
Fair
Value
|
|
|
Quoted Prices
In Active Markets for Identical Assets (Level 1)
|
|
|
Significant Other Observable Inputs (Level 2)
|
|
|
Significant
Unobservable
Inputs (Level 3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At March 31, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collateralized mortgage obligations
|
|
$
|
9,545
|
|
|
|
—
|
|
|
$
|
9,545
|
|
|
|
—
|
|
SBA Pool Securities
|
|
|
10,214
|
|
|
|
—
|
|
|
|
10,214
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
19,759
|
|
|
|
—
|
|
|
$
|
19,759
|
|
|
|
—
|
|
At December 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collateralized mortgage obligations
|
|
$
|
9,752
|
|
|
$
|
—
|
|
|
$
|
9,752
|
|
|
$
|
—
|
|
SBA Pool Securities
|
|
|
10,470
|
|
|
|
—
|
|
|
|
10,470
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
20,222
|
|
|
$
|
—
|
|
|
$
|
20,222
|
|
|
$
|
—
|
|
During
the three months ended March 31, 2017 and 2016, no securities wear transferred in or out of Level 1, Level 2 or Level 3.
(continued)
OPTIMUMBANK
HOLDINGS, INC. AND SUBSIDIARY
Notes
to Condensed Consolidated Financial Statements (Unaudited)
(8)
|
Value of Financial Instruments.
The estimated fair values and fair value measurement method with respect to the Company’s
financial instruments were as follows (in thousands):
|
|
|
At
March 31, 2017
|
|
|
At
December 31, 2016
|
|
|
|
Carrying
Amount
|
|
|
Fair
Value
|
|
|
Level
|
|
|
Carrying
Amount
|
|
|
Fair
Value
|
|
|
Level
|
|
Financial
assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
17,781
|
|
|
$
|
17,781
|
|
|
1
|
|
|
$
|
17,640
|
|
|
$
|
17,640
|
|
|
|
1
|
|
Securities
available for sale
|
|
|
19,759
|
|
|
|
19,759
|
|
|
2
|
|
|
|
20,222
|
|
|
|
20,222
|
|
|
|
2
|
|
Loans
|
|
|
75,532
|
|
|
|
75,424
|
|
|
3
|
|
|
|
76,999
|
|
|
|
76,829
|
|
|
|
3
|
|
Federal
Home Loan Bank stock
|
|
|
979
|
|
|
|
979
|
|
|
3
|
|
|
|
1,113
|
|
|
|
1,113
|
|
|
|
3
|
|
Accrued
interest receivable
|
|
|
382
|
|
|
|
382
|
|
|
3
|
|
|
|
380
|
|
|
|
380
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial
liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposit
liabilities
|
|
|
86,993
|
|
|
|
87,356
|
|
|
3
|
|
|
|
86,009
|
|
|
|
86,364
|
|
|
|
3
|
|
Federal
Home Loan Bank advances
|
|
|
20,500
|
|
|
|
20,454
|
|
|
3
|
|
|
|
23,500
|
|
|
|
23,500
|
|
|
|
3
|
|
Junior
subordinated debenture
|
|
|
5,155
|
|
|
|
N/A
|
(1)
|
|
3
|
|
|
|
5,155
|
|
|
|
N/A
|
(1)
|
|
|
3
|
|
Off-balance
sheet financial instruments
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
(1)
|
The
Company is unable to determine value based on significant unobservable inputs required in the calculation refer to Note 10
for further information.
|
|
|
|
The
Company is 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 amount recognized in the consolidated balance sheet. The contract
amounts of these instruments reflect the extent of involvement the Company has in these financial instruments.
|
|
|
|
The
Company’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for
commitments to extend credit is represented by the contractual amount of those instruments. The Company uses the same credit
policies in making commitments as it does for on-balance-sheet 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.
Because some of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. The Company evaluates each customer’s credit worthiness on a case-by-case basis.
The amount of collateral obtained, if deemed necessary by the Company, upon extension of credit, is based on management’s
credit evaluation of the counterparty.
|
|
|
|
As
of March 31, 2017, commitments to extend credit totaled $1.9 million.
|
(9)
|
Regulatory
Matters.
The Bank is subject to various regulatory capital requirements administered by the bank regulatory agencies.
Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions
by regulators that, if undertaken, could have a direct material effect on the Company and Bank’s financial statements.
Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital
guidelines that involve quantitative measures of its assets, liabilities, and certain off-balance-sheet items as calculated
under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by
the regulators about components, risk weightings, and other factors.
|
|
|
|
Effective
January 1, 2015, the Bank, became subject to the new Basel III capital level threshold requirements under the Prompt Corrective
Action regulations with full compliance with all of the final rule’s requirements phased in over a multi-year schedule.
These new regulations were designed to ensure that banks maintain strong capital positions even in the event of severe economic
downturns or unforeseen losses.
|
|
|
|
Changes
that could affect the Bank going forward include additional constraints on the inclusion of deferred tax assets in capital
and increased risk weightings for nonperforming loans and acquisition/development loans in regulatory capital. Beginning on
January 1, 2016, the Bank become subject to the capital conservation buffer rules which places limitations on distributions,
including dividend payments, and certain discretionary bonus payments to executive officers. In order to avoid these limitations,
an institution must hold a capital conservation buffer above its minimum risk-based capital requirements. As of March 31,
2017 and December 31, 2016, the Bank’s capital conversation buffer exceeds the minimum requirements of 0.625%. The required
buffer is to be phased in over three years. Under the new regulations in the first quarter of 2015, the Bank elected an irreversible
one-time opt-out to exclude accumulated other comprehensive income(loss) from regulatory capital.
|
(continued)
OPTIMUMBANK
HOLDINGS, INC. AND SUBSIDIARY
Notes
to Condensed Consolidated Financial Statements (Unaudited)
(9)
|
Regulatory
Matters, Continued.
As of March 31, 2017 and December 31, 2016, the Bank is subject to a Consent
Order issued by the Federal Deposit Insurance Corporation and the State of Florida Office of Financial
Regulation (“OFR”), and accordingly is deemed to be “adequately capitalized”
even if its capital ratios were to exceed those generally required to be a “well capitalized”
bank. An institution must maintain minimum total risk-based, Tier I risk-based and Tier I leverage
ratios as set forth in the following tables. The Bank’s actual capital amounts and percentages
are also presented in the table (dollars in thousands):
The
following table shows the Bank’s capital amounts and ratios and regulatory thresholds at March 31, 2017 and December
31, 2016 (dollars in thousands):
|
|
|
Actual
|
|
|
For
Capital
Adequacy Purposes
|
|
|
Minimum
To Be Well
Capitalized Under
Prompt Corrective
Action Provisions
|
|
|
Requirements
of
Consent Order
|
|
|
|
Amount
|
|
|
%
|
|
|
Amount
|
|
|
%
|
|
|
Amount
|
|
|
%
|
|
|
Amount
|
|
|
%
|
|
As
of March 31, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Capital to Risk-Weighted Assets
|
|
$
|
10,529
|
|
|
|
13.58
|
%
|
|
$
|
6,203
|
|
|
|
8.0
|
%
|
|
$
|
7,753
|
|
|
|
10.0
|
%
|
|
$
|
9,304
|
|
|
|
12.0
|
%
|
Tier
I Capital to Risk-Weighted Assets
|
|
|
9,523
|
|
|
|
12.28
|
|
|
|
4,652
|
|
|
|
6.0
|
|
|
|
6,203
|
|
|
|
8.0
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Common
equity Tier I capital to Risk-Weighted Assets
|
|
|
9,523
|
|
|
|
12.28
|
|
|
|
3,489
|
|
|
|
4.5
|
|
|
|
5,090
|
|
|
|
6.5
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Tier
I Capital to Total Assets
|
|
|
9,523
|
|
|
|
8.18
|
|
|
|
4,658
|
|
|
|
4.0
|
|
|
|
5,823
|
|
|
|
5.0
|
|
|
|
9,316
|
|
|
|
8.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
of December 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Capital to Risk-Weighted Assets
|
|
$
|
10,662
|
|
|
|
12.79
|
%
|
|
$
|
6,609
|
|
|
|
8.0
|
%
|
|
$
|
8,261
|
|
|
|
10.0
|
%
|
|
$
|
9,913
|
|
|
|
12.0
|
%
|
Tier
I Capital to Risk-Weighted Assets
|
|
|
9,498
|
|
|
|
11.50
|
|
|
|
4,957
|
|
|
|
6.0
|
|
|
|
6,609
|
|
|
|
8.0
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Common
equity Tier I capital to Risk-Weighted Assets
|
|
|
9,498
|
|
|
|
11.50
|
|
|
|
3,718
|
|
|
|
4.5
|
|
|
|
5,370
|
|
|
|
6.5
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Tier
I Capital to Total Assets
|
|
|
9,498
|
|
|
|
8.06
|
|
|
|
4,714
|
|
|
|
4.0
|
|
|
|
5,893
|
|
|
|
5.0
|
|
|
|
9,428
|
|
|
|
8.0
|
|
|
Regulatory
Enforcement Actions
|
|
|
|
Bank
Consent Order
. On November 7, 2016, the Bank agreed to the issuance of a Consent Order by the FDIC and the OFR (the “Consent
Order”), which requires the Bank to take certain measures to improve its safety and soundness. The Consent Order supersedes
the prior consent order that became effective in 2010. Pursuant to the Consent Order, the Bank is required to take certain
measures to improve its management, condition and operations, including actions to improve management practices and board
supervision and independence, assure that its allowance for loan losses is maintained at an appropriate level and improve
liquidity. The Consent Order requires the Bank to adopt and implement a compliance plan to address the Bank
’
s
obligations under the Bank Secrecy Act and related obligations related to anti-money laundering. The Consent Order prohibits
the payment of dividends by the Bank. The Consent Order continues the requirement for the Bank to maintain a Tier 1 leverage
ratio of at least 8% and a total risk-based capital ratio of 12% beginning 90 days from the issuance of the Consent Order.
At March 31, 2017, the Bank had a Tier 1 leverage ratio of 8.18%, and a total risk-based capital ratio of 13.58%.
|
|
|
|
See
Footnote 13 to the Consolidated Financial Statements included in the Company’s 2016 Form 10-K for additional information
concerning the requirements of the Consent Order.
|
(continued)
OPTIMUMBANK
HOLDINGS, INC. AND SUBSIDIARY
Notes
to Condensed Consolidated Financial Statements (Unaudited)
|
Regulatory
Matters, Continued.
Management believes that the Bank has made substantial progress in improving its financial condition
through a significant reduction in non-performing assets and the receipt of capital increases from investors since the 2010
Consent Order. The Bank is also seeking to address the other issues raised by the FDIC and the OFR, although the Bank has
been hampered by difficulties in raising capital due to the default under the Debenture and the limits placed on the Company
and the Bank under the prior Consent Order and the Written Agreement. Management intends to continue its efforts to meet the
conditions of the New Consent Order and the Written Agreement.
|
|
|
|
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. The Written Agreement prohibits, without the
prior approval of the Reserve Bank, the payment of dividends, taking dividends or payments from the Bank, making any interest,
principal or other distributions on trust preferred securities (including the Debenture), 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 in substantial compliance with the requirements of the Written Agreement.
|
(10)
|
Junior
Subordinated Debenture.
On September 30, 2004, the Company issued a $5,155,000 junior subordinated debenture to an
unconsolidated subsidiary (the “Debenture”). The Debenture has a term of thirty years. The interest rate was fixed
at 6.4% for the first five years, and thereafter, the coupon rate floats quarterly at the three-month LIBOR rate plus 2.45%
(3.45% at March 31, 2017). The Debenture is redeemable in certain circumstances. The terms of the Debenture 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 consecutive quarterly periods. Beginning in 2010, the Company exercised its right to defer payment
of interest on the Debenture. Interest payments deferred as of March 31, 2017 totaled $1,200,318. The Company has deferred
interest payments with respect to the Debenture for the maximum allowable twenty consecutive quarterly payments. The holder
of the Debenture can accelerate the $5,155,000 principal balance as a result of this default. Under the Written Agreement,
the Company is not able to make these interest payments without the prior approval of the Federal Reserve Bank of Atlanta.
Regulatory approval to pay accrued and unpaid interest has been denied.
|
|
|
|
A
Director of the Company has offered to purchase the Debenture and this offer has been approved by certain equity owners of
the Trust that holds the Debenture. The Director has also agreed to enter into a forbearance agreement with the Company with
respect to payments due under the Debenture upon consummation of the Director’s purchase of the debenture.
|
|
|
|
In
March of 2016, the Trustee received a direction from certain equity owners of the Trust that hold the Debenture to Sell the
Debenture to a Director of the Company. Based upon the receipt of other conflicting directions, in August 26, 2016, the Trustee
commenced an action in a Minnesota State Court seeking directions from the Court. The case was subsequently transferred to
the United States District Court for the Southern District of New York, were the case is currently pending. The Company continues
to pursue mechanisms for paying the accrued interest, such as raising additional capital.
|
|
|
(11)
|
Reverse
Common Stock Split.
Effective January 11, 2016 each ten shares of the Company’s common stock were converted
into one share of common stock. Loss per share for 2017 and 2016 has been adjusted to reflect the 1-for-10 reverse common
stock split.
|
|
|
(12)
|
Loan
Loss Recovery.
On January 6, 2016, the Bank completed a sale of judgement on a defaulted credit that resulted in a
$1.8 million recovery of previously charged-off amounts to the Allowance for Loan and Lease Losses (“ALLL”). This
increases the balance of the ALLL to approximately $4.2 million. On February 12, 2016, and amended May 6, 2016, pursuant to
the terms and requirements of the Consent Order, Management submitted a written request to the FDIC for a partial reversal
of the ALLL. As of this date, no response from the FDIC has been received and management does not expect a response until
the completion of the report from the safety and soundness examination performed in the first and second quarters of 2017.
|
|
|
(13)
|
Reclassification.
During the quarter ended March 31, 2016, the Company agreed to issue 46,296 shares to the Bank’s Chairman as
compensation. The Company recorded compensation expense of $200,000 based on the fair market value of the shares at that time,
and reflected the issuance of the shares as an increase in stockholders’ equity. The Bank’s Chairman has not yet
taken delivery of the shares. As a result, during the quarter ended September 30, 2016, the Company determined to reclassify
the transaction as a liability of the Company (rather than an increase in stockholders’ equity) until the issuance of
the shares. As of December 31, 2016, an accrued liability totaling $200,000 was recorded in connection with these shares.
|
|
|
(14)
|
Brokered
Deposits.
Under the terms of the Consent Order, the Bank is not permitted to solicit brokered deposits. In March 2017,
the FDIC notified the Bank that it considers a significant portion of the Bank’s certificates of deposit to be brokered
deposits due to the rates paid on such deposits, even though such deposits were not obtained through any deposit brokers.
The Bank has requested a waiver of the prohibition on brokered deposits from the FDIC. If this waiver is not granted, then
the Bank would not be able to accept, renew or rollover the existing certificates of deposit that are viewed as brokered deposits,
which would likely have an adverse effect on the Bank’s liquidity. As of March 31, 2017, the Bank had $30.8 million
in brokered deposits that mature over the next two years. Management is exploring all alternatives to resolve this issue including,
but not limited to, raising local deposits.
|
|
|
(15)
|
Bank
Secrecy Act (“BSA”) Lookback Review.
Under the terms of the Consent Order, the Bank is required to perform
a BSA lookback review. The Bank estimates that the cost of the BSA lookback review will range from $250,000 to $300,000 based
on an independent firm’s proposal for services. The proposal and ultimate agreement is subject to FDIC review and approval.
Until the approval is received, these BSA services cannot be rendered. Once the BSA lookback review begins, the independent
firm has 120 days to complete the work. As of March 31, 2017, the Bank has accrued $160,000 for the proposed services.
|
(continued)
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, 2016 in the Annual Report on Form 10-K.
The
following discussion and analysis should also be read in conjunction with the condensed financial statements and notes thereto
appearing elsewhere in this report. This Quarterly Report on Form 10-Q contains “forward-looking statements” within
the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking
statements involve known and unknown risks and uncertainties, many of which are beyond the control of the Company, including adverse
changes in economic, political and market conditions, losses from the Company’s lending activities and changes in market
conditions, the possible loss of key personnel, the impact of increasing competition, the impact of changes in government regulation,
the possibility of liabilities arising from violations of federal and state securities laws and the impact of changes in technology
in the banking industry. Although the Company believes that its forward-looking statements are based upon reasonable assumptions
regarding its business and future market conditions, there can be no assurances that the Company’s actual results will not
differ materially from any results expressed or implied by the Company’s forward-looking statements. The Company undertakes
no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events
or otherwise. Readers are cautioned that any forward-looking statements are not guarantees of future performance.
Regulatory
Enforcement Actions
|
Bank
Consent Order
. On November 7, 2016, the Bank agreed to the issuance of a Consent Order by the FDIC and the OFR (the “Consent
Order”), which requires the Bank to take certain measures to improve its safety and soundness. The Consent Order supersedes
the prior consent order that became effective in 2010. Pursuant to the Consent Order, the Bank is required to take certain
measures to improve its management, condition and operations, including actions to improve management practices and board
supervision and independence, assure that its allowance for loan losses is maintained at an appropriate level and improve
liquidity. The Consent Order requires the Bank to adopt and implement a compliance plan to address the Bank
’
s
obligations under the Bank Secrecy Act and related obligations related to anti-money laundering. The Consent Order prohibits
the payment of dividends by the Bank. The Consent Order continues the requirement for the Bank to maintain a Tier 1 leverage
ratio of at least 8% and a total risk-based capital ratio of 12% beginning 90 days from the issuance of the Consent Order.
At March 31, 2017, the Bank had a Tier 1 leverage ratio of 8.18%, and a total risk-based capital ratio of 13.58%.
|
|
See
Footnote 13 to the Consolidated Financial Statements included in the Company’s 2016 Form 10-K for additional information
concerning the requirements of the Consent Order.
|
(continued)
OPTIMUMBANK
HOLDINGS, INC. AND SUBSIDIARY
Notes
to Condensed Consolidated Financial Statements (Unaudited)
Management
believes that the Bank has made substantial progress in improving its financial condition through a significant reduction
in non-performing assets and the receipt of capital increases from investors since the 2010 Consent Order. The Bank is also
seeking to address the other issues raised by the FDIC and the OFR, although the Bank has been hampered by difficulties in
raising capital due to the default under the Debenture and the limits placed on the Company and the Bank under the prior Consent
Order and the Written Agreement. Management intends to continue its efforts to meet the conditions of the New Consent Order
and the Written Agreement.
|
|
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. The Written Agreement prohibits, without the
prior approval of the Reserve Bank, the payment of dividends, taking dividends or payments from the Bank, making any interest,
principal or other distributions on trust preferred securities (including the Debenture), 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 in substantial compliance with the requirements of the Written Agreement.
|
Capital
Levels
Quantitative
measures established by regulation and by the Consent Order to ensure capital adequacy require us to maintain minimum amounts
and ratios (set forth in the following table) of Total and Tier 1 capital to risk-weighted assets and Tier 1 capital to average
assets. As of March 31, 2017, the Bank met the minimum applicable capital adequacy requirements for Total Capital to Risk –
Weighted Assets, and for Tier I Capital to Total Assets.
OPTIMUMBANK
HOLDINGS, INC. AND SUBSIDIARY
Item
2. Management’s Discussion and Analysis of Financial Condition and Results of Operations, (Continued)
The
Bank’s actual and required minimum capital ratios were as follows (in thousands):
Regulatory
Capital Requirements
|
|
|
|
|
|
|
|
Minimum
|
|
|
|
|
|
|
|
|
|
|
|
|
To
Be Well
|
|
|
|
|
|
|
|
|
|
|
|
|
Capitalized
Under
|
|
|
|
|
|
|
|
|
|
|
|
|
Prompt
|
|
|
|
|
|
|
|
|
|
For
Capital
|
|
|
Corrective
|
|
|
Requirements
of
|
|
|
|
Actual
|
|
|
Adequacy
Purposes
|
|
|
Action
Provisions
|
|
|
Consent
Order
|
|
|
|
Amount
|
|
|
%
|
|
|
Amount
|
|
|
%
|
|
|
Amount
|
|
|
%
|
|
|
Amount
|
|
|
%
|
|
As
of March 31, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Capital to Risk-Weighted Assets
|
|
$
|
10,529
|
|
|
|
13.58
|
%
|
|
$
|
6,203
|
|
|
|
8.0
|
%
|
|
$
|
7,753
|
|
|
|
10.0
|
%
|
|
$
|
9,304
|
|
|
|
12.0
|
%
|
Tier
I Capital to Risk-Weighted Assets
|
|
|
9,523
|
|
|
|
12.28
|
|
|
|
4,652
|
|
|
|
6.0
|
|
|
|
6,203
|
|
|
|
8.0
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Common
equity Tier I capital to Risk-Weighted Assets
|
|
|
9,523
|
|
|
|
12.28
|
|
|
|
3,489
|
|
|
|
4.5
|
|
|
|
5,090
|
|
|
|
6.5
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Tier
I Capital to Total Assets
|
|
|
9,523
|
|
|
|
8.18
|
|
|
|
4,658
|
|
|
|
4.0
|
|
|
|
5,823
|
|
|
|
5.0
|
|
|
|
9,316
|
|
|
|
8.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
of December 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Capital to Risk-Weighted Assets
|
|
$
|
10,662
|
|
|
|
12.79
|
%
|
|
$
|
6,609
|
|
|
|
8.0
|
%
|
|
$
|
8,261
|
|
|
|
10.0
|
%
|
|
$
|
9,913
|
|
|
|
12.00
|
%
|
Tier
I Capital to Risk-Weighted Assets
|
|
|
9,498
|
|
|
|
11.50
|
|
|
|
4,957
|
|
|
|
6.0
|
|
|
|
6,609
|
|
|
|
8.0
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Common
Equity Tier 1 Capital to Risk-Weighted Assets
|
|
|
9,498
|
|
|
|
11.50
|
|
|
|
3,718
|
|
|
|
4.5
|
|
|
|
5,370
|
|
|
|
6.5
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Tier
I Capital to Total Assets
|
|
|
9,498
|
|
|
|
8.06
|
|
|
|
4,714
|
|
|
|
4.0
|
|
|
|
5,893
|
|
|
|
5.0
|
|
|
|
9,428
|
|
|
|
8.0
|
|
Financial
Condition at March 31, 2017 and December 31, 2016
Overview
The
Bank’s total assets decreased by $1.8 million to $117.9 million at March 31, 2017, from $119.7 million at December 31, 2016,
primarily due to a reduction in total loans. Total stockholders’ equity decreased approximately $0.3 million at March 31, 2017 from $3.1 million at December 31, 2016 to $2.8 million, due to the net loss of $283,000 for the three months ended
March 31, 2017.
The
following table shows selected information for the periods ended or at the dates indicated:
|
|
Three
Months
Ended
March 31,
2017
|
|
|
Year
Ended
December 31,
2016
|
|
|
|
|
|
|
|
|
Average equity as a percentage of average assets
|
|
|
2.6
|
%
|
|
|
2.6
|
%
|
|
|
|
|
|
|
|
|
|
Equity to total assets at end of period
|
|
|
2.4
|
%
|
|
|
2.6
|
%
|
|
|
|
|
|
|
|
|
|
Return on average assets (1)
|
|
|
(1.0
|
)%
|
|
|
(0.3
|
)%
|
|
|
|
|
|
|
|
|
|
Return on average equity (1)
|
|
|
(37.7
|
)%
|
|
|
(12.5
|
)%
|
|
|
|
|
|
|
|
|
|
Noninterest expenses to average assets (1)
|
|
|
4.14
|
%
|
|
|
3.3
|
%
|
(1)
Annualized for the three months ended March 31, 2017.
OPTIMUMBANK
HOLDINGS, INC. AND SUBSIDIARY
Item
2. Management’s Discussion and Analysis of Financial Condition and Results of Operations, (Continued)
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 earnings, if any, and loans taken out at the Federal Reserve Bank discount window.
Deposits
are our primary source of funds. In order to increase its core deposits, the Bank has priced its deposit rates competitively.
The Bank will adjust rates on its deposits to attract or retain deposits as needed. Under the Consent Order, the interest rate
that the Bank pays on its market area deposits is restricted. 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.
In
addition to obtaining funds from depositors, we may borrow funds from other financial institutions. At March 31, 2017, the Bank
had outstanding borrowings of $20,500,000, against its $29,880,750 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 Federal Reserve Bank, currently $694,600. The Federal
Reserve Bank line is subject to collateral requirements and must be repaid within 90 days; each advance is subject to prior Federal
Reserve Bank consent. The Bank also has a $2.5 million line of credit with SunTrust, $750,000 line of credit with Servis First
Bank and a $2.5 million line of credit with AloStar Bank. We measure and monitor our liquidity daily and believe our liquidity
sources are adequate to meet our operating needs.
In
the past, the Company, on an unconsolidated basis, relied on dividends from the Bank to fund its operating expenses, primarily
expenses of being publicly held, and to make interest payments on the Company’s junior subordinated debenture (the “Debenture”).
Under the Consent Order, the Bank is currently unable to pay dividends to the Company without prior regulatory approval. Additionally,
under the Written Agreement, the Company may not pay interest payments on the Debenture or dividends on the Company’s common
stock, incur any additional indebtedness at the Company level, or redeem the Company’s common stock without the prior regulatory
approval of the Federal Reserve Bank. Since January 2010, the Company has deferred interest payments on the Debenture, which has
been in default since 2015. See “Junior Subordinated Debenture” below.
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 March 31, 2017, the Company had commitments to extend credit totaling $1.9 million.
OPTIMUMBANK
HOLDINGS, INC. AND SUBSIDIARY
Item
2. Management’s Discussion and Analysis of Financial Condition and Results of Operations, (Continued)
Junior
Subordinated Debenture
|
|
On
September 30, 2004, the Company issued a $5,155,000 junior subordinated debenture to an unconsolidated subsidiary (the “Debenture”).
The Debenture has a term of thirty years. The interest rate was fixed at 6.4% for the first five years, and thereafter, the
coupon rate floats quarterly at the three-month LIBOR rate plus 2.45% (3.45% at March 31, 2017). The Debenture is redeemable
in certain circumstances. The terms of the Debenture 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 consecutive quarterly periods. Beginning
in 2010, the Company exercised its right to defer payment of interest on the Debenture. Interest payments deferred as of March
31, 2017 totaled $1,200,318. The Company has deferred interest payments with respect to the Debenture for the maximum allowable
twenty consecutive quarterly payments. The holder of the Debenture can accelerate the $5,155,000 principal balance as a result
of this default. Under the Written Agreement, the Company is not able to make these interest payments without the prior approval
of the Federal Reserve Bank of Atlanta. Regulatory approval to pay accrued and unpaid interest has been denied.
|
|
A
Director of the Company has offered to purchase the Debenture and this offer has been approved by certain equity owners of
the Trust that holds the Debenture. The Director has also agreed to enter into a forbearance agreement with the Company with
respect to payments due under the Debenture upon consummation of the Director’s purchase of the debenture.
|
|
In
March of 2016, the Trustee received a direction from certain equity owners of the Trust that hold the Debenture to Sell the
Debenture to a Director of the Company. Based upon the receipt of other conflicting directions, in August 26, 2016, the Trustee
commenced an action in a Minnesota State Court seeking directions from the Court. The case was subsequently transferred to
the United States District Court for the Southern District of New York, were the case is currently pending. The Company continues
to pursue mechanisms for paying the accrued interest, such as raising additional capital.
|
|
In
the event the amounts due under the Debenture were accelerated, then the Trustee could undertake legal proceedings to obtain
a judgment against the Company with respect to such amounts due under the Debenture. If this action were successful, then
the Trustee could seek to affect a sale of the Bank to pay the amounts due under the Debenture.
|
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 March 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
Interest
|
|
|
Average
|
|
|
|
|
|
Interest
|
|
|
Average
|
|
|
|
Average
|
|
|
and
|
|
|
Yield/
|
|
|
Average
|
|
|
and
|
|
|
Yield/
|
|
|
|
Balance
|
|
|
Dividends
|
|
|
Rate
|
|
|
Balance
|
|
|
Dividends
|
|
|
Rate
|
|
Interest-earning assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
|
|
$
|
81,045
|
|
|
$
|
1,045
|
|
|
|
5.16
|
%
|
|
$
|
82,358
|
|
|
$
|
1,020
|
|
|
|
4.95
|
%
|
Securities
|
|
|
20,072
|
|
|
|
109
|
|
|
|
2.17
|
|
|
|
23,963
|
|
|
|
126
|
|
|
|
2.10
|
|
Other (1)
|
|
|
14,577
|
|
|
|
39
|
|
|
|
1.07
|
|
|
|
10,743
|
|
|
|
23
|
|
|
|
0.86
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-earning assets/interest income
|
|
|
115,694
|
|
|
|
1,193
|
|
|
|
4.12
|
|
|
|
117,064
|
|
|
|
1,169
|
|
|
|
3.99
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks
|
|
|
1,181
|
|
|
|
|
|
|
|
|
|
|
|
828
|
|
|
|
|
|
|
|
|
|
Premises and equipment
|
|
|
2,640
|
|
|
|
|
|
|
|
|
|
|
|
2,697
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
(3,062
|
)
|
|
|
|
|
|
|
|
|
|
|
808
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
116,453
|
|
|
|
|
|
|
|
|
|
|
$
|
121,397
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings, NOW and money-market deposits
|
|
|
22,231
|
|
|
|
27
|
|
|
|
0.49
|
|
|
|
24,271
|
|
|
|
30
|
|
|
|
0.49
|
|
Time deposits
|
|
|
56,863
|
|
|
|
153
|
|
|
|
1.08
|
|
|
|
64,795
|
|
|
|
152
|
|
|
|
0.94
|
|
Borrowings (2)
|
|
|
25,722
|
|
|
|
100
|
|
|
|
1.56
|
|
|
|
18,706
|
|
|
|
74
|
|
|
|
1.58
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing liabilities/interest expense
|
|
|
104,816
|
|
|
|
280
|
|
|
|
1.07
|
|
|
|
107,772
|
|
|
|
256
|
|
|
|
.95
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-bearing demand deposits
|
|
|
6,575
|
|
|
|
|
|
|
|
|
|
|
|
3,501
|
|
|
|
|
|
|
|
|
|
Other liabilities
|
|
|
2,062
|
|
|
|
|
|
|
|
|
|
|
|
7,041
|
|
|
|
|
|
|
|
|
|
Stockholders’ equity
|
|
|
3,000
|
|
|
|
|
|
|
|
|
|
|
|
3,083
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders’ equity
|
|
$
|
116,453
|
|
|
|
|
|
|
|
|
|
|
$
|
121,397
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
|
|
|
$
|
913
|
|
|
|
|
|
|
|
|
|
|
$
|
913
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate spread (3)
|
|
|
|
|
|
|
|
|
|
|
3.05
|
%
|
|
|
|
|
|
|
|
|
|
|
3.04
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest margin (4)
|
|
|
|
|
|
|
|
|
|
|
3.16
|
%
|
|
|
|
|
|
|
|
|
|
|
3.12
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio of average interest-earning assets to average interest-bearing liabilities
|
|
|
1.10
|
%
|
|
|
|
|
|
|
|
|
|
|
1.09
|
%
|
|
|
|
|
|
|
|
|
(1)
|
Includes
interest-earning deposits with banks 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.
|
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 March 31, 2017 and 2016
General
.
Net loss for the three months ended March 31, 2017, was $(283,000) or $(0.26) per basic and diluted share compared to a net
loss of$(276,000) or $(0.29) per basic and diluted share for the period ended March 31, 2016.
Interest
Income
.
Interest income increased $24,000 for the three months ended March 31, 2017 compared to the three months ended
March 31, 2016.
Interest
Expense.
Interest expense on deposits decreased $2,000 to $180,000 for the three months ended March 31, 2017 compared
to the prior period.
Provision
for Loan Losses.
There was no provision for losses during the 2017 or 2016 period. 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 March 31, 2017. 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 $3.9 million or 4.95% of loans outstanding at March
31, 2017, as compared to $3.9 million or 4.87% of loans outstanding at December 31, 2016.
Noninterest
Income.
Total noninterest income decreased to $9,000 for the three months ended March 31, 2017, from $47,000 for the three
months ended March 31, 2016 due to gains on securities sales of $28,000 in 2016 and reduced service charges and other fees.
Noninterest
Expenses
.
Total noninterest expenses remained flat at $1.2 million for the three months ended March 31, 2017 compared
to $1.2 million for the three months ended March 31, 2016.