2012 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) Title of each class Name of each exchange on which registered . Additional information on the Bank’s capital adequacy is contained in “Item 7- Management’s Discussion and Analysis of Results of Operations and Financial Condition.” increase the number of shares to be purchased from 6,750,000 shares to 7,333,333 shares. The Company has agreed to these changes because of the continuing losses incurred by the Company in 2012 and the decrease of the Company’s book value per share from $0.30 at December 31, 2011 to $0.22 at December 31, 2012. The Company agreed to increase the number of shares to be purchased in order to partially offset the decrease in the net proceeds of the sale to Mr. Gubin. not intended to be an exhaustive description of the statutes or regulations applicable to the business of our company and our bank. Supervision, regulation, and examination of banks by regulatory agencies are intended primarily for the protection of depositors, rather than shareholders. On December 31, 2011, the Bank had a Tier 1 Leverage ratio of 7.76% and a Total Risk Based Capital Ratio of 12.48%.xANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 19342011OR¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from to Florida 55-0865043 Securities registered pursuant to Section 12(b) of the Act: Common Stock, Par Valuepar value $0.01 per share NASDAQ Capital Market ¨o No x¨o No x¨o¨o¨o ¨ Accelerated ¨Non-accelerated filer¨ (Do(Do not check if a smaller reporting company) Smaller reporting companyx.: Yes ¨o No x( 742,418(21,795,217 shares) on June 30, 2011,2012, was approximately $ 705,297,$13,949,000, computed by reference to the closing market price at $ .95$0.64 per share as of June 30, 2011.2012. For purposes of this information, the outstanding shares of common stock owned by directors and executive officers of the registrant were deemed to be shares of common stock held by affiliates.Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest most practicable date: 28, 201227, 2013 was 22,411,10831,511,201 shares.24, 2012,30, 2013, to be filed with the Securities and Exchange Commission pursuant to Regulation 14A within 120 days of the issuer’s fiscal year end are incorporated by reference into Part III, Items 10 through 14, of this Annual Report on Form 10-K. Page PART I 1 Item 1. 1 Item 2. 119 Item 3. 119 Item 4. 219 233444444412Item 2.12Item 3.12Item 4.Mine Safety DisclosuresPART II 13 Item 5. 1320 Item 6. 1421 Item 7. 1522 Item 8. 3141 Item 9. 3183 Item 9A.9A(T). 3183 Item 9B. 3284 PART III 32 Item 10. 3285 Item 11. 3285 Item 12. 3285 Item 13. 3386 Item 14. 3386 PART IV 33 Item 15. 3387 SIGNATURES 3489 “believes,” “estimates,” “plans,” “expects,” “should,” “may,” “might,” “outlook,”"believes," "estimates," "plans," "expects," "should," "may," "might," "outlook," and “anticipates,”"anticipates," as well as similar expressions, as they relate to OptimumBank Holdings, Inc., or its management, are intended to identify forward-looking statements. (the “Company”), is a Florida corporation (the "Company") formed in 2004 as a bank holding company for OptimumBank (the “Bank”"Bank"). The Company’sCompany's only business is the ownership and operation of OptimumBankthe Bank and theits Bank’s subsidiaries. The Bank is a Florida state chartered bank established in 2000, with deposits insured by the Federal Deposit Insurance Corporation (“FDIC”("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. The Bank has 1317 wholly-owned subsidiaries primarily engaged in holding and disposing of foreclosed real estate under substantially similar names of OB Real Estate Holdings, LLC, with a separate identifying loan number or name for the real estate owned by eachand one subsidiary e.g., OB Real Estate Holdings 1645, LLC. OptimumBank Real Estate Management, LLC, a wholly owned subsidiary of the Bank, is primarily engaged in managing foreclosed real estate.OptimumBank HoldingsReserve.Reserve System (the “Federal Reserve”). OptimumBank is subject to the supervision and regulation of the State of Florida Office of Financial Regulation (“OFR”("OFR") and the FDIC. OptimumBank is a member of the Federal Home Loan Bank of Atlanta.2011,2012, the Company had total assets of $154.5$143.7 million, net loans of $89.2$85.2 million, total deposits of $107.9$101.6 million and stockholders’stockholders' equity of $6.8$6.9 million. During 2011,2012, the Company incurred a net loss of $3.7$4.7 million.wasis maintained at an appropriate level. Among the corrective actions required were for the Bank to have and 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.Agreement with the Federal Reserve.Agreement.”the fourth quarter of 2011 and 2012, the Company sold approximately 21.630.6 million shares of its common stock in a private placement offering. The Company received net proceeds of approximately $8.6$12.3 million allthrough the sale of which was downstreamed intoapproximately 30,639,250 shares at a price of $0.40 per share. The Company contributed approximately $12.0 million of the net proceeds to the Bank.2011,2012, after giving effect to $8.6$12.3 million in the new capital, the Bank remained out of compliance with the 8%had a Tier 1 leverage ratio of 8.12%, which exceeded the 8% requirement set forth inof the Consent Order and a total risk-based capital ratio of 11.48%, which was below the 12% requirement of the Consent Order. At December 31, 2011,2012, the Bank would have needed approximately $.4 million$600,000 in additional capital in order to comply with the Tier 1 leveragetotal risk-based capital ratio requirement of the Consent Order.boardBoard of directors,Directors, to sell 6,750,000 shares to Mr. Gubin at a price of $.40$0.40 per share, foror a total of $2.7 million. In March 2013, the Company and Mr. Gubin amended this agreement to increase the number of shares to be purchased to 7,333,333, to decrease the price to $0.30 per share and to extend the outside closing date to September 30, 2013. The Company is seeking to complete the transaction with Mr. Gubin in order to assist the Bank in meeting the capital requirements of the Consent Order and to increase its lending and investment portfolio.scheduled to closecompleted will depend on or before June 30, 2012. Thisthe closing date of the Gubin Transaction; the level of the Bank’s assets and liabilities at that time, the amount of the Bank’s losses between December 31, 2012 and the date of the closing, and the amount of any additional capital received from other sources.be sufficient to allowprovide the Company and the Bank with additional working capital to meetimplement the capital requirementsBank’s business plan, including addressing non-performing loans and funding expanded lending and investment activities.Consent Order at the time of the closing of the transaction. We also expect that we will need to raise additional capital in the futuretransaction with Mr. Gubin in order to grow our banking operationsreduce the price per share from $0.40 per share to $0.30 per share, and to implement our business plan.Board of Governors of the Federal Reserve System and the FDIC. Deposit flows and costs of funds are influenced by interest rates on competing investments and general market rates of interest. Lending activities are affected by the demand for financing of real estate and other types of loans, which in turn is affected by the interest rates at which such financing may be offered and other factors affecting local demand and availability of funds. We face strong competition in attracting deposits (our primary source of lendable funds) and originating loans.travelers’travelers' checks, cashier’scashier's checks, domestic collections, savings bonds, bank drafts, automated teller services, drive-in tellers, and banking by mail. In addition, we make residential and commercial real estate loans and consumer loans. We provide ATM cards, as a part of the Star, Presto and Cirrus networks, thereby permitting customers to utilize the convenience of ATMs worldwide. We do not have trust powers and provide no trust services. primarily adjustable rate residential and commercial mortgage loans, commercial loans, and consumer loans for our customers; and our knowledge of the real estate values and borrowers in our market area;•Stabilize the Loan Portfolio - Management is devoting significant resources to the identification and workout of problem loans.•Increase and Diversify Loan Originations - Management is focused on increasing its loan production to add more interest bearing assets and interest income to its asset based. In addition, Management is diversifying its loan originations and portfolio to include commercial and consumer loans, in addition to residential and commercial real estate loans.•Lower the Cost of Deposits - Management is focused on changing the Bank’s deposit mix by replacing higher cost interest bearing time deposits with non-interest bearing demand deposits.•Increase Capital Ratios - Management continues to seek additional sources of capital in order to increase the Bank’s capital ratios, which in turn allows the Bank to grow, implement its business plan and return to profitability.20112012 were $89.2$85.2 million, or 57.8%59.2% of total assets. The interest rates we charge on loans varyvaried with the degree of risk, maturity, and amount of the loan, and are further subject to competitive pressures, money market rates, availability of funds, and government regulations. We have no foreign loans or loans for highly leveraged transactions.2011, 99.8%2012, 91.8% of our loan portfolio consisted of loans secured by mortgages on real estate, of which approximately 34.0%34.3% of the total loan portfolio was secured by one-to-four family residential properties. Our real estate loans are located primarily in our tri-county market area.marketing and an independent mortgage broker that processes our loans. We pay fees to this broker in connection with their services; however, we perform the underwriting and approval of each of the loans we fund.marketing. Loan originations have also been derived from existing customers, and referrals from existing customers, and Company directors and employees.On brokered loans, weWe generally charge a prepayment penalty if a loan is repaid within the first two to three years of origination to recover any fees we paid for the origination of the loan.fromof October 2009 through September 2011, due to the need for the Bank to reduce its exposure to credit risk and preserve regulatory capital, we have limited our lending activities to restructuring, modifying, or extending existing loans and lending to purchasers of real estate properties owned by the Bank. Since completion of the capital raise in the last quarter of 2011,2012, we have resumed all of our lending activities.CD’sCD's under $100,000 to be core deposits. These accounts comprised approximately 72.0%72.9% of our total deposits at December 31, 2011.2012. Approximately 66.6%61.9% of our deposits at December 31, 20112012 were certificates of deposit. Generally, we attempt to maintain the rates paid on our deposits at a competitive level. Time deposits of $100,000 and over made up approximately 27.9%27.1% of our total deposits at December 31, 2011.Although2012. Although these large deposits are not traditionally considered core deposits, the majority of these deposits have served as a stable source of funds in our targeted market. The majority of our deposits are generated from Broward County.OptimumBank’sOptimumBank's competitive market area. Since December 2009, we have no longer solicited or renewed existing brokered deposits due to regulatory restrictions. Brokered deposits amounted to 0.4%0.3% and 1.2%0.4% of our total deposits at December 31, 2012 and 2011, and 2010, respectively.$29.0$18.6 million and $51.1$29.0 million at December 31, 20112012 and 2010,2011, respectively, representing 18.8%12.9% and 26.8%18.8% of our total assets. At December 31, 2011,2012, approximately 41.7%34.7% of this portfolio was invested in U.S. government agency mortgage-backed securities and 58.3%65.3% of this portfolio was invested in private label mortgage-backed securities. Mortgage backed securities generally have a shorter life than the stated maturity. Our investments are managed in relation to loan demand and deposit growth, and are generally used to provide for the investment of excess funds at minimal risk levels while providing liquidity to fund increases in loan demand or to offset fluctuations in deposits.2011,2012, we had seventeen19 full-time employees, including executive officers. The employees are not represented by a collective bargaining unit. We consider relations with employees to be good.OnIn 2008, the Company and the Bank began to experience a substantial increase in impaired and non-performing loans and associated credit losses due to the nationwide economic recession and the related drop in real estate values in south Florida. As a result, the Company’s net income for 2008 was only $520,000. These trends continued in 2009 and 2010, with the result that the Company and the Bank sustained net losses of $11.5 million in 2009 and $8.5 million in 2010, primarily from significant increases in the provision for loan losses. These operating losses have eroded OptimumBank's regulatory capital and weakened its financial condition. As a result of these losses and other related operating issues, on April 16, 2010, OptimumBank was required to enter into a Consent Order with the FDIC and the Florida Office of Financial Regulation. UnderRegulation, and, on June 22, 2010, the Company was required to enter into a Written Agreement with the Federal Reserve Bank of Atlanta, or Federal Reserve.the Bank is required to implementimposes a number of corrective measuresrequirements on the Bank intended to improve the Bank’sBank's condition, including a requirement tothat the Bank maintain a ratio of Tier 1 capital to adjusted total assets (the “Tier 1 Leverage Ratio”) of 8.0%, and a ratio of total risk based capital to risk-weighted assets of 12.0% (the “Total Risk Based Capital Ratio”). The Consent Order also contains significant operating restrictions. andPlanloans;loans.1 Leverage Ratio2 capital ratio of 8%12%;On June 22, 2010, the Company was required to enter into a Written Agreement with the Federal Reserve Bank of Atlanta. The Written Agreement between the Company and the Federal Reserve requires the Company to serve as a source of strength to certain aspects of the capitalization, operation and management of the Bank. The Company also agreed that while the Written Agreement remains in effect, without prior approval of the Federal Reserve, it will not:dividends,dividends.securities,securities.stock, orstock.•Increased Capital Standards and Enhanced Supervision. The federal banking agencies are required to establish minimum leverage and risk-based capital requirements for banks and bank holding companies. These new standards will be no lower than existing regulatory capital and leverage standards applicable to insured depository institutions and may, in fact, be higher when established by the agencies. Compliance with heightened capital standards may reduce our ability to generate or originate revenue-producing assets and thereby restrict revenue generation from banking and non-banking operations. The Dodd-Frank Act also increases regulatory oversight, supervision and examination of banks, bank holding companies and their respective subsidiaries by the appropriate regulatory agency. Compliance with new regulatory requirements and expanded examination processes could increase the Company’s cost of operations.•The Consumer Financial Protection Bureau. The Dodd-Frank Act creates a new, independent Consumer Financial Protection Bureau, or the Bureau, within the Federal Reserve. The Bureau is tasked with establishing and implementing rules and regulations under certain federal consumer protection laws with respect to the conduct of providers of certain consumer financial products and services. The Bureau has rulemaking authority over many of the statutes governing products and services offered to bank consumers. Generally, we will not be directly subject to the rules and regulations of the Bureau. However, the Dodd-Frank Act permits states to adopt consumer protection laws and regulations that are stricter than those regulations promulgated by the Bureau and state attorneys general are permitted to enforce consumer protection rules adopted by the Bureau against certain state-chartered institutions. Any such new regulations could increase our cost of operations and, as a result, could limit our ability to expand into these products and services.•Deposit Insurance. The Dodd-Frank Act makes permanent the $250,000 deposit insurance limit for insured deposits. Amendments to the Federal Deposit Insurance Act also revise the assessment base against which an insured depository institution’s deposit insurance premiums paid to the FDIC’s Deposit Insurance Fund, or the DIF, will be calculated. Under the amendments, the assessment base will no longer be the institution’s deposit base, but rather its average consolidated total assets less its average tangible equity. Additionally, the Dodd-Frank Act makes changes to the minimum designated reserve ratio of the DIF, increasing the minimum from 1.15 percent to 1.35 percent of the estimated amount of total insured deposits, and eliminating the requirement that the FDIC pay dividends to depository institutions when the reserve ratio exceeds certain thresholds. Several of these provisions could increase the FDIC deposit insurance premiums paid by us. The Dodd-Frank Act also provides that, effective one year after the date of enactment, depository institutions may pay interest on demand deposits.•Transactions with Affiliates. The Dodd-Frank Act enhances the requirements for certain transactions with affiliates under Section 23A and 23B of the Federal Reserve Act, including an expansion of the definition of “covered transactions” and increasing the amount of time for which collateral requirements regarding covered transactions must be maintained.•Transactions with Insiders. Insider transaction limitations are expanded through the strengthening on loan restrictions to insiders and the expansion of the types of transactions subject to the various limits.•Enhanced Lending Limits. The Dodd-Frank Act strengthens the existing limits on a depository institution’s credit exposure to one borrower. Current banking law limits a depository institution’s ability to extend credit to one person (or group of related persons) in an amount exceeding certain thresholds. The Dodd-Frank Act expands the scope of these restrictions to include credit exposure arising from derivative transactions, repurchase agreements, and securities lending and borrowing transactions.General. As a bank holding company registered under the Bank Holding Company Act of 1956 (the “BHCA”), OptimumBank Holdings is subject to the regulation and supervision of, and inspection by, the Federal Reserve.Reserve Board (“Federal Reserve”). OptimumBank Holdings also is required to file with the Federal Reserve annual reports and other information regarding its business operations, and those of its subsidiaries. In the past, the BHCA limited the activities of bank holding companies and their subsidiaries to activities which were limited to banking, managing or controlling banks, furnishing services to or performing services for their subsidiaries or engaging in any other activity which the Federal Reserve determined to be so closely related to banking or managing or controlling banks as to be properly incident thereto. Under the Gramm-Leach-Bliley Financial Modernization Act of 1999 which is discussed below, bank holding companies now have the opportunity to seek broadened authority, subject to limitations on investment, to engage in activities that are “financial in nature” if all of their subsidiary depository institutions are well capitalized, well managed, and have at least a satisfactory rating under the Community Reinvestment Act, which is also discussed below.Holding Company Control. The BHCA also requires that every bank holding company obtain the prior approval of the Federal Reserve before it may acquire all or substantially all of the assets of any bank, or ownership or control of any voting shares of any bank, if after such acquisition it would own or control, directly or indirectly, more than 5% of the voting shares of such bank. In approving bank acquisitions by bank holding companies, the Federal Reserve is required to consider the financial and managerial resources and future prospects of the bank holding company and the banks concerned, the convenience and needs of the communities to be served, including the parties’ performance under the Community Reinvestment Act (discussed below) and various competitive factors. As described in greater detail below, pursuant to the Riegle-Neal Interstate Banking and Branch Efficiency Act of 1994 (the “Interstate Banking and Branching Act”), a bank holding company is permitted to acquire banks in states other than its home state. OptimumBank Holdings’ The Company’s common stock is registered with the Securities and Exchange Commission (the “SEC”) under Section 12(g) of the Securities Exchange Act of 1934, and we are subject to restrictions, reporting requirements and review procedures under federal securities laws and regulations.regulations. We are also subject to the rules and reporting requirements of the NASDAQ Global Market, on which our common stock is traded. Like other issuers of publicly traded securities, we must also comply with the corporate governance reforms enacted under the Sarbanes-Oxley Act of 2002 (“The Sarbanes-Oxley Act”) and the rules of the SEC and NASDAQ Stock Market adopted pursuant to the Sarbanes Oxley Act. Among other things, these reforms, effective as of various dates, require certification of financial statements by the chief executive officer and chief financial officer, prohibit the provision of specified services by independent auditors, require pre-approval of independent auditor services, define director independence and require certain committees, and a majority of a subject company’s board of directors, to consist of independent directors, establish additional disclosure requirements in reports filed with the SEC, require expedited filing of reports, require management evaluation and auditor attestation of internal controls, prohibit loans by the issuer (but not by certain depository institutions) to directors and officers, set record-keeping requirements, mandate complaint procedures for the reporting of accounting and audit concerns by employees, and establish penalties for non-compliance.General. OptimumBank is chartered under the laws of the State of Florida, and its deposits are insured by the FDIC to the extent provided by law. OptimumBank is subject to comprehensive regulation, examination and supervision by the FDIC and the Florida Office of Financial Regulation, or Florida OFR, and to other laws and regulations applicable to banks. Such regulations include limitations on loans to a single borrower and to its directors, officers and employees; limitations on the types of activities a state bank can conduct, restrictions on the opening and closing of branch offices; the maintenance of required capital ratios; the granting of credit under equal and fair conditions; and the disclosure of the costs and terms of such credit. OptimumBank is examined periodically by the FDIC and the Florida OFR, to whom it submits periodic reports regarding its financial condition and other matters. The FDIC and the Florida OFR have a broad range of powers to enforce regulations under their jurisdiction, and to take discretionary actions determined to be for the protection and safety and soundness of banks, including the institution of cease and desist orders and the removal of directors and officers. The FDIC and the Florida OFR also have the authority to approve or disapprove mergers, consolidations, and similar corporate actions.2011,2012, our Tier 1 and total risk-based capital ratios were 11.22%10.23% and 12.48%11.48%, respectively.2011,2012, our leverage ratio was 7.76%8.12%.7.76%8.12% and a Total Risk Based Capital Ratio of 12.48%11.48% at December 31, 2011,2012, the Bank did not meet the Tier 1 Leveragetotal risk-based capital ratio as required by the Consent Order.
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OptimumBank’s
Location Executive Office 2477 East Commercial Boulevard Fort Lauderdale, Florida 33308 Branch Offices 10197 Cleary Boulevard Plantation, Florida 33324 3524 North Ocean Boulevard Fort Lauderdale, Florida 33308 2215 West Hillsboro Boulevard Deerfield Beach, Florida 22442 Year 2010 2011 2012. NASDAQ. At Year End: Cash and cash equivalents Securities held to maturity Security available for sale Loans, net All other assets Total assets Deposit accounts Federal Home Loan Bank advances Other borrowings Junior subordinated debenture All other liabilities Stockholders’ equity Total liabilities and stockholders’ equity For the Year: Total interest income Total interest expense Net interest income (Credit) provision for loan losses Net interest income (expense) after (credit) provision for loan losses Noninterest income (expense) Noninterest expenses (Loss) earnings before income taxes (benefit) Income taxes (benefit) Net (loss) earnings Net (loss) earnings per share, basic (1) Net (loss) earnings per share, diluted (1) Weighted-average number of shares outstanding, basic (1) Weighted-average number of shares outstanding, diluted (1) Ratios and Other Data: Return on average assets Return on average equity Average equity to average assets Net interest margin during the year Interest-rate differential during the year Net yield on average interest-earning assets Noninterest expenses to average assets Ratio of average interest-earning assets to average interest-bearing liabilities Nonperforming loans and foreclosed assets as a percentage of total assets at end of year Allowance for loan losses as a percentage of total loans at end of year Total number of banking offices Total shares outstanding at end of year (1) Book value per share at end of year (1) Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. Residential real estate Multi-family real estate Commercial real estate Land and construction Consumer Total loans Add (deduct): Allowance for loan losses Net deferred loan costs and discounts Loans, net Residential real estate Multi-family real estate Commercial real estate Land and construction Consumer Total loans Add (deduct): Allowance for loan losses Net deferred loan costs and discounts Loans, net Beginning balance (Credit) provision for loan losses Loans charged off Recoveries Ending balance Residential real estate Multi-family real estate Commercial real estate Land and construction Consumer Total allowance for loan losses Allowance for loan losses as a percentage of total loans outstanding Residential real estate Multi-family real estate Commercial real estate Land and construction Consumer Total allowance for loan losses Allowance for loan losses as a percentage of total loans outstanding Collateral-dependent loans identified as impaired: Gross loans with no related allowance for losses Gross loans with related allowance for losses recorded Less allowances on these loans Net loans with related allowance Net investment in collateral-dependent impaired loans Noncollateral-dependent loans identified as impaired: Gross loans with no related allowance for losses Gross loans with related allowance for losses recorded Less allowance on these loans Net loans with related allowance Net investment in noncollateral-dependent impaired loans Net investment in impaired loans Average investment in impaired loans Interest income recognized on impaired loans Interest income received on a cash basis on impaired loans Nonaccrual loans Past ninety days or more, but still accruing interest At December 31, 2011: Securities held to maturity- Foreign bond Securities available for sale- Mortgage-backed securities At December 31, 2010: Securities held to maturity: Mortgage-backed securities Foreign bond At December 31, 2009: Securities held to maturity: Mortgage-backed securities Foreign bond At December 31, 2011: Mortgage-backed securities Foreign bond At December 31, 2010: Mortgage-backed securities Foreign bond At December 31, 2009: Mortgage-backed securities Foreign bond As of December 31, 2011: Total Capital to Risk-Weighted Assets Tier I Capital to Risk-Weighted Assets Tier I Capital to Total Assets As of December 31, 2010: Total Capital to Risk-Weighted Assets Tier I Capital to Risk-Weighted Assets Tier I Capital to Total Assets As of December 31, 2009: Total Capital to Risk-Weighted Assets Tier I Capital to Risk-Weighted Assets Tier I Capital to Total Assets Loans (1): Residential real estate loans Multi-family real estate loans Commercial real estate loans Land and construction Consumer loans Total loans Federal funds sold Securities (2) Federal Home Loan Bank stock Total rate-sensitive assets Deposit accounts (3): Money-market deposits Interest-bearing checking deposits Savings deposits Time deposits Total deposits Federal Home Loan Bank advances Junior subordinated debenture Total rate-sensitive liabilities GAP (repricing differences) Cumulative GAP Cumulative GAP/total assets Residential real estate Multi-family real estate Commercial real estate Land and construction Consumer Total Fixed interest rate Variable interest rate Total Federal Home Loan Bank advances Junior subordinated debenture Operating leases Total 2011. Noninterest-bearing demand deposits Interest-bearing demand deposits Money-market deposits Savings Subtotal Time deposits: 0.00% – 0.99% 1.00% – 1.99% 2.00% – 2.99% 3.00% – 3.99% 4.00% – 4.99% 5.00% – 5.99% 6.00% – 6.99% Total time deposits (1) Total deposits Due three months or less Due more than three months to six months More than six months to one year One to five years Total Interest-earning assets: Loans Securities Other interest-earning assets (1) Total interest-earning assets/interest income Cash and due from banks Premises and equipment Other assets Total assets Interest-bearing liabilities: Savings, NOW and money- market deposits Time deposits Borrowings (4) Total interest-bearing liabilities/interest expense Noninterest-bearing demand deposits Other liabilities Stockholders’ equity Total liabilities and stockholders’ equity Net interest income Interest rate spread (2) Net interest margin (3) Ratio of average interest-earning assets to average interest-bearing liabilities Interest-earning assets: Loans Securities Other interest-earning assets Total interest-earning assets Interest-bearing liabilities: Savings, NOW and money-market Time deposits Other Total interest-bearing liabilities Net interest income Interest-earning assets: Loans Securities Other interest-earning assets Total interest-earning assets Interest-bearing liabilities: Savings, NOW and money-market Time deposits Other Total interest-bearing liabilities Net interest income In 2012, the Company issued an additional 9.0 million shares of common stock resulting in additional capital of $3.7 million. 2011 Cash Flows The Company Plan Category Stock Option Plan 2011 Equity Incentive Plan Equity compensation plans approved by security holders this plan. OPTIMUMBANK HOLDINGS, INC. /s/ Moishe Gubin /s/ Sam Borek(“CRA”("CRA") and the regulations promulgated thereunder by the appropriate bank regulatory agency. Under the terms of the CRA, the appropriate federal bank regulatory agency is required, in connection with its examination of a bank, to assess such bank’s record in meeting the credit needs of the community served by that bank, including low-and moderate-income neighborhoods. The regulatory agency’sagency's assessment of the Bank’sBank's record is made available to the public. Further, such assessment is required of any bank which has applied to charter a bank, obtain deposit insurance coverage for a newly chartered institution, establish a new branch office that will accept deposits, relocate an office, or merge or consolidate with, or acquire the assets or assume the liabilities of, a federally regulated financial institution. In the case of a bank holding company applying for approval to acquire a bank or other bank holding company, the Federal Reserve will assess the record of each subsidiary bank of the applicant bank holding company, and such records may be the basis for denying the application.Policies.Policies“Management’s"Management's Discussion and Analysis of Financial Condition and Results of Operations,”" for statistical and financial data providing a review of our business activities.Item 2.Properties2011. Year Facility
Opened Facility Status 2004 Owned 2000 Owned 2003 Leased (1) 2004 Leased (2) (1)LocationOn February 1, 2007, OptimumBank entered into a sale/leaseback transaction for this facility. No gain or loss was recognized on this transaction. The lease is for a seven-year term. The monthly lease payment at December 31, 2011 was $4,444. The tenant is responsible for maintenanceYear Facility Opened Facility Status real estate taxes.Ft. Lauderdale Branch:2004 Owned 2000 Owned 2004 Leased (1) (2)Lease is for a ten-year term, with two five-year options to renew, for 2,500 square feet. The monthly lease payment at December 31, 2011 was $6,642.Item 3.Legal ProceedingsRegistrant’sRegistrant's Common Equity and Related Stockholder Matters and Issuer Purchase of Equity Securities“OPHC.”"OPHC." The table below presents the high and low sales prices for the periods indicated. Sales prices have been adjusted to reflect the 4-for-1 reverse stock split effective November 5, 2010. Quarter High Low First $ 11.00 $ 3.36 Second $ 7.28 $ 1.40 Third $ 3.92 $ 1.32 Fourth $ 6.49 $ 1.75 First $ 5.10 $ 2.03 Second $ 4.64 $ .52 Third $ 1.63 $ .63 Fourth $ .80 $ .41 Year Quarter High Low 2011 First $ 5.10 $ 2.03 Second $ 4.64 $ 0.52 Third $ 1.63 $ 0.63 Fourth $ 0.80 $ 0.41 2012 First $ 5.43 $ 0.38 Second $ 3.75 $ 0.56 Third $ 0.74 $ 0.40 Fourth $ 0.68 $ 0.41 472872 holders registered or in street name as of December 31, 2011.January 13,June 20, 2012, The Nasdaqthe NASDAQ Stock Market has notified usthe Company that weit has failed to comply with the NASDAQ Listing Rule requiring the boardCompany to maintain a minimum bid price of directors to have a majority of members who are independent because only three of the directors on our six-member board were independent.$1.00 per share. We have been provided until (a)June 17, 2013 to regain compliance with this requirement. The Company currently plans to implement a 4 for 1 reverse stock split to achieve this goal. In the earlier ofevent that the reverse stock split does not result in compliance, the Company’s next annual shareholders’ meeting or January 1, 2013 or (b) if the next annual shareholders’ meeting is held before June 29, 2012, no later than June 29, 2012, to comply with the independent director requirement. If we are unable to comply with the independent director requirement by the deadline, our common stock willcould be delisted from The NASDAQ Capital Market.2011,2012, the Bank and Company could not pay cash dividends and the Company does not anticipate that it will pay dividends on its common stock in the foreseeable future. Banking regulations place certain restrictions on dividends and loans or advances made by the Bank to the Company. The amount of cash dividends that may be paid by the Bank to the Company is based on the Bank’sBank's net earnings of the current year combined with the Bank’sBank's retained earnings of the preceding two years, as defined by state banking regulations. However, for any dividend declaration, the Company must consider additional factors such as the amount of current period net earnings, liquidity, asset quality, capital adequacy and economic conditions. It is likely that these factors would further limit the amount of dividends which the Company could declare. Furthermore, the Bank’s ability to pay dividends is restricted under the Consent Order issued by the FDIC and Florida Office of Financial Regulation and banking laws. The Company’s ability to pay dividends is also restricted under its Written Agreement with the Federal Reserve.Recent Sales of Unregistered SecuritiesItem 6.During the summer of 2011, the Company undertook an offering of 37,500,000 shares of its common stock, $.01 par value, at a price of $.40 per share (the “Private Offering”). The shares were offered on behalf of the Company by its officers and directors, none of whom received any compensation in connection with the offering of the shares.As a result of these efforts, during the fourth quarter of 2011, the Company sold a total of 21,591,750 shares in the Private Offering. The Company received net proceeds of $8,597,000, after the deduction of $40,000 in offering expenses. The Private Offering involved two closings. At the first closing, which occurred on October 27, 2011, the Company sold 21,002,250 shares to 36 accredited investors and four employees of the Company who were not accredited investors. Directors and executive officers of the Company purchased 4,965,000 of the shares sold. At the second closing, which occurred on December 29, 2011, the Company sold 589,500 shares to 10 accredited investors. The shares sold in the Private Placement were not registered under the Securities Act of 1933, in reliance on the exemption provided by Rule 506 of Regulation D promulgated thereunder.Item 6.Selected Financial DataSELECTED FINANCIAL DATA Selected Financial Data 2012 2011 2010 2009 2008 At Year End: Cash and cash equivalents $ 23,611 22,776 14,367 36,784 3,220 Securities held to maturity 0 100 51,057 81,141 82,208 Security available for sale 18,648 28,907 0 0 244 Loans, net 85,209 89,217 113,542 134,126 160,699 All other assets 16,275 13,572 11,339 17,906 9,369 Total Assets $ 143,743 154,472 190,305 269,957 255,740 Deposit accounts 101,611 107,895 148,238 151,682 114,925 Federal Home Loan Bank advances 27,700 31,700 31,700 57,700 68,700 Other borrowings 0 0 0 41,800 41,800 Junior subordinated debenture 5,155 5,155 5,155 5,155 5,155 All other liabilities 2,367 2,936 2,377 2,332 2,395 Stockholders' equity 6,910 6,786 2,835 11,288 22,765 Total Liabilities and Stockholders' Equity $ 143,743 154,472 190,305 269,957 255,740 For the Year: Total interest income 5,162 6,422 8,787 14,006 15,570 Total interest expense 2,581 3,427 4,867 8,351 9,211 Net interest income 2,581 2,995 3,920 5,655 6,359 Provision (credit) for loan losses 1,653 (149 ) 3,645 15,794 1,374 Net interest income (expense) after (credit) provision for loan losses 928 3,144 275 (10,139 ) 4,985 Noninterest income (expense) 258 379 1,394 (145 ) 393 Noninterest expenses 5,883 7,229 9,773 4,698 4,545 (Loss) earnings before income taxes (benefit) (4,697 ) (3,706 ) (8,104 ) (14,982 ) 833 Income taxes (benefit) 0 41 349 (3,501 ) 313 Net (loss) earnings $ (4,697 ) (3,747 ) (8,453 ) (11,481 ) 520 Net (loss) earnings per share, basic (1) $ (.17 ) (.82 ) (10.32 ) (14.01 ) .63 Net (loss) earnings per share, diluted (1) $ (.17 ) (.82 ) (10.32 ) (14.01 ) .63 Weighted-average number of shares outstanding, basic (1) 27,362,672 4,576,304 819,358 819,358 819,261 Weighted-average number of shares outstanding, diluted (1) 27,362,672 4,576,304 819,358 819,358 830,608 Ratios and Other Data: 2012 2011 2010 2009 2008 Return on average assets (3.1 )% (2.1 )% (3.8 )% (4.2 )% 0.2 % Return on average equity (60.3 )% (204.0 )% (127.6 )% (55.6 )% 2.3 % Average equity to average assets 5.2 % 1.0 % 3.0 % 7.6 % 9.2 % Net interest margin during the year 1.9 % 1.8 % 1.9 % 2.1 % 2.6 % Interest-rate differential during the year 2.5 % 1.8 % 1.9 % 1.9 % 2.3 % Net yield on average interest-earning assets 3.9 % 3.8 % 4.2 % 5.3 % 6.4 % Noninterest expenses to average assets 3.6 % 4.1 % 4.4 % 1.7 % 1.8 % Ratio of average interest-earning assets to average interest-bearing liabilities 1.1 1.0 1.0 1.1 1.1 Nonperforming loans and foreclosed assets as a percentage of total assets at end of year 19.5 % 23.0 % 19.8 % 10.9 % 2.0 % Allowance for loan losses as a percentage of total loans at end of year 2.8 % 2.6 % 3.2 % 6.5 % 1.2 % Total number of banking offices 3 3 3 3 3 Total shares outstanding at end of year (1) 31,511,201 22,411,108 819,358 819,358 780,248 Book value per share at end of year (1) $ .22 .30 3.46 13.78 29.17
(1) All share and per share amounts have been adjusted to reflect the 1-for-4 reverse stock split declared in October 2010 and 5% stock dividends declared in May 2009 and 2008. 2011 2010 2009 2008 2007 $ 22,776 14,367 36,784 3,220 701 100 51,057 81,141 82,208 58,471 28,907 0 0 244 244 89,217 113,542 134,126 160,699 173,323 13,472 11,339 17,906 9,369 8,808 $ 154,472 190,305 269,957 255,740 241,547 107,895 148,238 151,682 114,925 125,034 31,700 31,700 57,700 68,700 56,850 0 0 41,800 41,800 28,900 5,155 5,155 5,155 5,155 5,155 2,936 2,377 2,332 2,395 3,361 6,786 2,835 11,288 22,765 22,247 $ 154,472 190,305 269,957 255,740 241,547 6,422 8,787 14,006 15,570 16,137 3,427 4,867 8,351 9,211 9,700 2,995 3,920 5,655 6,359 6,437 (149 ) 3,645 15,794 1,374 476 3,144 275 (10,139 ) 4,985 5,961 379 1,394 (145 ) 393 533 7,229 9,773 4,698 4,545 3,749 (3,706 ) (8,104 ) (14,982 ) 833 2,745 41 349 (3,501 ) 313 1,003 $ (3,747 ) (8,453 ) (11,481 ) 520 1,742 $ (.82 ) (10.32 ) (14.01 ) .63 2.13 $ (.82 ) (10.32 ) (14.01 ) .63 2.08 4,576,304 819,358 819,358 819,261 816,960 4,576,304 819,358 819,358 830,608 835,995 (2.11 )% (3.84 )% (4.23 )% .21 % .73 % (203.97 )% (127.59 )% (55.55 )% 2.26 % 8.16 % 1.04 % 3.01 % 7.62 % 9.15 % 8.96 % 1.77 % 1.88 % 2.14 % 2.61 % 2.78 % 1.82 % 1.87 % 1.91 % 2.26 % 2.34 % 3.80 % 4.21 % 5.30 % 6.38 % 6.96 % 4.08 % 4.44 % 1.73 % 1.81 % 1.57 % 0.98 1.00 1.07 1.09 1.10 22.96 % 19.82 % 10.87 % 2.03 % 0.13 % 2.57 % 3.16 % 6.54 % 1.18 % .40 % 3 3 3 3 3 22,411,108 819,358 819,358 780,248 780,283 $ .30 3.46 13.78 29.17 28.52 (1)All share and per share amounts have been adjusted to reflect the 1-for-4 reverse stock split declared in October 2010 and5% stock dividends declared in May 2009, 2008 and 2007.Management’s Discussion and Analysis of Financial Condition and Results of Operations.2011,2012, the Company had total assets of $154.5$143.7 million, net loans of $89.2$85.2 million, and total deposits of $107.9$101.6 million and stockholders’stockholders' equity of $6.8$6.9 million. During 2011,2012, the Company had a net loss of $3.7$4.7 million. In the fourth quarter of 2011, the Company received net proceeds of $8.6 million from the sale of its common stock.borrower’sborrower's ability to pay, legislation impacting the banking industry and economic conditions specific to the tri-county region we serve in Southeast Florida. Because the calculation of the allowance for loan losses relies on our estimates and judgments relating to inherently uncertain events, results may differ from management’s estimates.“Loan"Loan Portfolio, Asset Quality and Allowance for Loan Losses”Losses" and in Note 3 of Notes to the Consolidated Financial Statements. Our significant accounting policies are discussed in Note 1 of Notes to the Consolidated Financial Statements.2011,2012, our impaired loans were approximately $31.9$20.0 million, or 35.76%23.5% of the net loan portfolio. Impaired loans and real estate owned were approximately $39.6$31.0 million as of this same date, or 25.6%21.5% of total assets. If market conditions continue to deteriorate, they may lead to additional valuation adjustments on our loan portfolio and real estate owned as we continue to reassess the market value of our loan portfolio, the losses associated with impaired loans, and the net realizable value of real estate owned. At December 31, 2011 2010 2009 Amount % of
Total Amount % of
Total Amount % of
Total (dollars in thousands) $ 31,142 34.03 % $ 40,130 34.27 % $ 55,915 39.06 % 4,109 4.49 4,213 3.60 5,162 3.61 44,312 48.42 55,119 47.07 58,901 41.14 11,783 12.87 17,292 14.77 22,355 15.61 175 .19 358 .29 836 .58 91,521 100.00 % 117,112 100.00 % 143,169 100.00 % (2,349 ) (3,703 ) (9,363 ) 45 133 320 $ 89,217 $ 113,542 $ 134,126 At December 31, 2008 2007 Amount % of
Total Amount % of
Total (dollars in thousands) $ 58,693 36.25 % $ 65,908 38.08 % 9,588 5.92 10,275 5.94 73,541 45.42 75,777 43.78 19,223 11.87 21,093 12.19 878 .54 15 .01 161,923 100.00 % 173,068 100.00 % (1,906 ) (692 ) 682 947 $ 160,699 $ 173,323 At December 31, 2012 2011 % of % of % of Amount Total Amount Total Amount Total (dollars in thousands) Residential real estate $ 30,064 34.32 % $ 31,142 34.03 % $ 40,130 34.27 % Multi-family real estate 3,916 4.47 4,109 4.49 4,213 3.60 Commercial real estate 39,126 44.66 44,312 48.42 55,119 47.07 Land and construction 7,276 8.30 11,783 12.87 17,292 14.77 Commercial 7,158 8.17 0 .00 0 .00 Consumer 70 .08 175 .19 358 .29 Total loans 87,610 100.00 91,521 100.00 117,112 100.00 Add (deduct): Allowance for loan losses (2,459 ) (2,349 ) (3,703 ) 58 45 133 Loans, net $ 85,209 $ 89,217 $ 113,542 At December 31, 2009 2008 Amount Amount (dollars in thousands) Residential real estate $ 55,915 39.06 % $ 58,693 36.25 % Multi-family real estate 5,162 3.61 9,588 5.92 Commercial real estate 58,901 41.14 73,541 45.42 Land and construction 22,355 15.61 19,223 11.87 Consumer 836 .58 878 .54 Total loans 143,169 100.00 % 161,923 100.00 % Add (deduct): Allowance for loan losses (9,363 ) (1,906 ) Net deferred loan costs and discounts 320 682 Loans, net $ 134,126 $ 160,699 Year Ended December 31, 2011 2010 2009 2008 2007 $ 3,703 $ 9,363 $ 1,906 $ 692 $ 974 (149 ) 3,645 15,794 1,374 476 (1,739 ) (9,424 ) (8,337 ) (160 ) (758 ) 534 119 0 0 0 $ 2,349 $ 3,703 $ 9,363 $ 1,906 $ 692 Year Ended December 31, 2012 2011 2010 2009 2008 Beginning balance $ 2,349 $ 3,703 $ 9,363 $ 1,906 $ 692 Provision (credit) for loan losses 1,653 (149 ) 3,645 15,794 1,374 Loans charged off (1,848 ) (1,739 ) (9,424 ) (8,337 ) (160 ) Recoveries 305 534 119 0 0 Ending balance $ 2,459 $ 2,349 $ 3,703 $ 9,363 $ 1,906 recoveries.recoveries. The allowance for loan losses represented 2.57%2.81% and 3.16%2.57% of the total loans outstanding at December 31, 2012 and 2011, and 2010, respectively.experience,experiences, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’sborrower's ability to repay, estimated value of any underlying collateral and current economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.loan’sloan's effective interest rate, the loan’sloan's obtainable market price, or the fair value of the collateral if the loan is collateral dependent. collateral-dependent. A loan may be impaired (i.e. not expected to repay as agreed), but may be sufficiently collateralized such that we expect to recover all principal and interest eventually, and therefore no specific reserve is warranted.management’smanagement's estimate of probable loss. The aggregate of these two components results in our total allowance for loan losses. At December 31, 2011 2010 2009 Amount % of
Total
Loans Amount % of
Total
Loans Amount % of
Total
Loans $ 566 34.03 % $ 1,285 34.27 % $ 2,049 39.06 % 247 4.49 282 3.60 489 3.61 1,334 48.42 1,542 47.07 1,466 41.14 187 12.87 514 14.77 5,227 15.61 15 .19 80 .29 132 .58 $ 2,349 100.00 % $ 3,703 100.00 % $ 9,363 100.00 % 2.57 % 3.16 % 6.54 % At December 31, 2008 2007 Amount % of
Total
Loans Amount % of
Total
Loans $ 928 36.25 % $ 187 38.08 % 62 5.92 59 5.94 463 45.42 379 43.78 444 11.87 67 12.19 9 .54 — .01 $ 1,906 100.00 % $ 692 100.00 % 1.18 % 0.40 % At December 31, 2012 2011 2010 % of % of % of Total Total Total Amount Loans Amount Loans Amount Loans Residential real estate $ 434 34.32 % $ 566 34.03 % $ 1,285 34.27 % Multi-family real estate 267 4.47 247 4.49 282 3.60 Commercial real estate 1,372 44.66 1,334 48.42 1,542 47.07 Land and construction 166 8.30 187 12.87 514 14.77 Commercial 216 8.17 0 .00 0 .00 Consumer 4 .08 15 .19 80 .29 Total allowance for loan losses $ 2,459 100.00 % $ 2,349 100.00 % $ 3,703 100.00 % Allowance for loan losses as a percentage of total loans outstanding 2.81 % 2.57 % 3.16 % At December 31, 2009 2008 % of % of Total Total Amount Loans Amount Loans Residential real estate $ 2,049 39.06 % $ 928 36.25 % Multi-family real estate 489 3.61 62 5.92 Commercial real estate 1,466 41.14 463 45.42 Land and construction 5,227 15.61 444 11.87 Consumer 132 .58 9 .54 Total allowance for loan losses $ 9,363 100.00 % $ 1,906 100.00 % Allowance for loan losses as a percentage of total loans outstanding 6.54 % 1.18 % At December 31, 2011 2010 $ 23,653 $ 35,531 0 669 0 (75 ) 0 594 23,653 36,125 7,152 7,347 1,139 1,174 (11 ) (11 ) 1,128 1,163 8,280 8,510 $ 31,933 $ 44,635 December 31, 2012 At December 31, 2011 With no related allowance recorded: Residential real estate $ 7,573 $ 8,024 $ 0 $ 7,919 $ 8,465 $ 0 Commercial real estate 8,661 11,412 0 15,577 17,960 0 Land and construction 886 2,410 0 7,241 11,652 0 Consumer 0 0 0 68 68 0 With an allowance recorded: Commercial real estate 2,874 2,874 366 1,139 1,139 11 Total: Residential real estate $ 7,573 $ 8,024 $ 0 $ 7,919 $ 8,465 $ 0 Commercial real estate $ 11,535 $ 14,286 $ 366 $ 16,716 $ 19,099 $ 11 Land and construction $ 886 $ 2,410 $ 0 $ 7,241 $ 11,652 $ 0 Consumer $ 0 $ 0 $ 0 $ 68 $ 68 $ 0 Total $ 19,994 $ 24,720 $ 366 $ 31,944 $ 39,284 $ 11 2010 and 2009,2010, the average net investment in impaired loans and interest income recognized and received on impaired loans is as follows (in thousands): Year Ended December 31, 2011 2010 2009 $ 37,549 $ 33,987 $ 25,017 $ 367 $ 313 $ 280 $ 834 $ 658 $ 584 Year Ended December 31, 2012 2011 2010 Average investment in impaired loans $ 25,743 $ 37,549 $ 33,987 $ 175 $ 367 $ 313 Interest income received on a cash basis on impaired loans $ 616 $ 834 $ 658 and 2008 (in thousands): At December 31, 2011 2010 2009 2008 $ 27,819 $ 34,530 $ 23,848 $ 5,086 $ 0 $ 0 $ 0 $ 0 At December 31, 2012 2011 2010 2009 Nonaccrual loans $ 17,079 $ 27,819 $ 34,530 $ 23,848 Past ninety days or more, but still accruing interest $ 0 $ 0 $ 0 $ 0 institution’sinstitution's ability to meet current and future obligations through liquidation or maturity of existing assets or the acquisition of additional liabilities. Our ability to respond to the needs of depositors and borrowers and to benefit from investment opportunities is facilitated through liquidity management.20112012 were from principal repayments of securities available for sale of $15.3 million, proceeds from the sale of securities of $11.0 million, net repayments of loans of $15.3 million and proceeds from sale of common stock of $8.6$3.7 million. Cash was used primarily to purchase securities totaling $5 million and repay $40.3$6.3 million of deposits.deposits, repay $4 million of Federal Home Loan Bank advances and fund $2.3 million of loans. In order to increase our core deposits, we have priced our deposit rates competitively. We will adjust rates on our deposits to attract or retain deposits as needed. We obtain funds primarily from depositors in our market area.2011,2012, we had $31.7$27.7 million in borrowings outstanding from the Federal Home Loan Bank of Atlanta to facilitate loan fundings and manage our asset and liability structure.“held"held to maturity”maturity" or “available"available for sale.”" Securities held to maturity represent those securities which we have the positive intent and ability to hold to maturity. These securities are carried at amortized cost. Securities available for sale represent those investments which may be sold for various reasons including changes in interest rates and liquidity considerations. These securities are reported at fair market value and unrealized gains and losses are excluded from earnings and reported in other comprehensive income. Amortized
Cost Fair
Value $ 100 $ 100 $ 29,845 $ 28,907 $ 50,957 $ 48,739 100 100 $ 51,057 $ 48,839 $ 81,041 $ 76,884 100 100 $ 81,141 $ 76,984 At December 31, 2012: Securities available for sale: Mortgage-backed securities $ 16,325 $ 15,629 U.S. Government and agency securities 2,097 3,019 $ 18,422 $ 18,648 At December 31, 2011: Securities available for sale: Mortgage-backed securities $ 23,853 $ 22,864 U.S. Government and agency securities 5,992 6,043 $ 29,845 $ 28,907 At December 31, 2010: Securities held to maturity: Mortgage-backed securities $ 50,957 $ 48,739 Within
One Year After One
But Within
Five
Years After Five
Years
Through
Ten Years After Ten
Years Total Yield $ 2,999 $ 2,994 $ 4,372 $ 19,480 $ 29,845 4.03 % $ 0 $ 0 $ 100 $ 0 $ 100 5.95 % $ 4,001 $ 5,988 $ 1,887 $ 39,081 $ 50,957 4.25 % $ 0 $ 0 $ 100 $ 0 $ 100 5.95 % $ 0 $ 0 $ 11,576 $ 69,465 $ 81,041 5.39 % $ 0 $ 0 $ 100 $ 0 $ 100 5.95 % Total Yield At December 31, 2012: Mortgage-backed securities $ 0 $ 0 $ 2,915 $ 12,510 $ 15,425 4.57 % U.S. Government and agency securities 2,997 0 0 0 2,997 0.96 % $ 2,997 $ 0 $ 2,915 $ 12,510 $ 18,422 At December 31, 2011: Mortgage-backed securities $ 0 $ 0 $ 4,373 $ 19,480 $ 22,853 4.03 % U.S. Government and agency securities 2,998 2,994 0 0 5,992 0.86 % $ 2,998 $ 2,994 $ 4,373 $ 19,480 $ 29,845 At December 31, 2010: Mortgage-backed securities $ 4,001 $ 5,988 $ 1,887 $ 39,081 $ 50,957 4.25% During the year ended December 31, 2011, the Company sold securities available for sale for gross proceeds of $11.0 million and recognized a gross gain of $0.2 million from the sale of these securities. in held to maturity securities in order to downsize and deleverage its balance sheet, recognizing net gains of $1.3 million. This action was taken in an effort to comply with a significant increase in the regulatory capital requirements imposed on the Bank under the Consent Order issued by the FDIC and Florida Office of Financial Regulation.2011, $11.72012, $6.6million of the $28.9$18.6 million in mortgage-backed securities (“MBS”("MBS") were U.S. agency MBS and $17.2$12.0million were private label MBS. Approximately $16.4$11.3 million of the private label MBS at December 31, 2011 were rated sub-investment grade securities by the securities rating agencies. In general, non-investment grade securities cannot be used to collateralize borrowings and are considered to be substandard assets by the Federal regulatory agencies.2011,2012, we did not meet the minimum Tier 1applicable capital to total assets ratio requirement.adequacy requirements. See “Supervision"Supervision and Regulation - Consent Order” for a discussion of– Bank Regulation- Capital Adequacy Requirements" with respect to the required Tier 1 capital to total assets ratioratios of 8%.REGULATORY CAPITAL REQUIREMENTS Actual For Capital
Adequacy Purposes Minimum
To Be Well
Capitalized Under
Prompt Corrective
Action Provisions Requirements of
Consent Order Amount % Amount % Amount % Amount % $ 14,382 12.48 % $ 9,221 8.00 % $ 11,526 10.00 % $ 13,832 12.00 % 12,930 11.22 4,611 4.00 6,916 6.00 N/A N/A 12,930 7.76 6,668 4.00 8,335 5.00 13,335 8.00 9,639 6.70 11,513 8.00 14,392 10.00 17,270 12.00 7,817 5.43 5,757 4.00 8,635 6.00 N/A N/A 7,817 4.02 7,786 4.00 9,733 5.00 15,572 8.00 18,342 10.23 14,349 8.00 17,937 10.00 N/A N/A 16,012 8.93 7,175 4.00 10,762 6.00 N/A N/A 16,012 5.85 10,952 4.00 13,690 5.00 N/A N/A Actual For Capital Adequacy Purposes Requirements of
Consent Order Amount % Amount % Amount % Amount % As of December 31, 2012: Total Capital to Risk- Weighted Assets $ 13,506 11.48 $ 9,412 8.00 $ 11,765 10.00 $ 14,118 12.00 Tier I Capital to Risk- Weighted Assets 12,035 10.23 4,706 4.00 7,059 6.00 N/A N/A Tier I Capital to Total Assets 12,035 8.12 5,932 4.00 7,415 5.00 11,864 8.00 As of December 31, 2011: Total Capital to Risk- Weighted Assets 14,382 12.48 9,221 8.00 11,526 10.00 13,832 12.00 Tier I Capital to Risk- Weighted Assets 12,930 11.22 4,611 4.00 6,916 6.00 N/A N/A Tier I Capital to Total Assets 12,930 7.76 6,668 4.00 8,335 5.00 13,335 8.00 As of December 31, 2010: Total Capital to Risk- Weighted Assets 9,639 6.70 11,513 8.00 14,392 10.00 17,270 12.00 Tier I Capital to Risk- Weighted Assets 7,817 5.43 5,757 4.00 8,635 6.00 N/A N/A Tier I Capital to Total Assets 7,817 4.02 7,786 4.00 9,733 5.00 15,572 8.00 98 of Notes to Consolidated Financial Statements.“interest"interest rate sensitive”sensitive" and by monitoring an institution’s interest rate sensitivity “gap.”"gap." An asset or liability is said to be interest rate sensitive within a specific time period if it will mature or reprice within that time period. The interest-rate sensitivity gap is defined as the difference between interest-earning assets and interest-bearing liabilities maturing or repricing within a given time period. The gap ratio is computed as the amount of rate sensitive assets less the amount of rate sensitive liabilities divided by total assets. A gap is considered positive when the amount of interest-rate sensitive assets exceeds interest-rate sensitive liabilities. A gap is considered negative when the amount of interest-rate sensitive liabilities exceeds interest-rate sensitive assets. During a period of rising interest rates, a negative gap would adversely affect net interest income, while a positive gap would result in an increase in net interest income. During a period of falling interest rates, a negative gap would result in an increase in net interest income, while a positive gap would adversely affect net interest income.2011,2012, that are estimated to mature or are scheduled to reprice within the period shown (dollars in thousands):GAP MATURITYREPRICING SCHEDULE One
Year or
Less More
than One
Year and
Less than
Five Years More
than Five
Years and
Less than
Fifteen Years Over
Fifteen
Years Total $ 21,969 $ 7,228 $ 1,945 $ 0 $ 31,142 4,009 22 25 53 4,109 31,744 12,433 135 0 44,312 7,496 3,999 288 0 11,783 68 107 0 0 175 65,286 23,789 2,393 53 91,521 16,552 0 0 0 16,552 2,999 2,993 10,366 13,487 29,845 2,159 0 0 0 2,159 86,996 26,782 12,759 13,540 140,077 33,265 0 0 0 33,265 1,213 0 0 0 1,213 1,060 0 0 0 1,060 58,025 13,817 0 0 71,842 93,563 13,817 0 0 107,380 4,000 26,100 1,600 0 31,700 0 0 0 5,155 5,155 97,563 39,917 1,600 5,155 144,235 $ (10,567 ) $ (13,135 ) $ 11,159 $ 8,385 $ (4,158 ) $ (10,567 ) $ (23,702 ) $ (12,543 ) $ (4,158 ) $ (4,158 ) (6.84 )% (15.34 )% (8.12 )% (2.69 )% More More than One than Five One Year and Years and Over Year or Less than Less than Fifteen Less Five Years Fifteen Years Years Total Loans (1): Residential real estate loans $ 21,162 $ 5,229 $ 1,920 $ 1,753 $ 30,064 Multi-family real estate loans 3,093 746 25 52 3,916 Commercial real estate loans 29,138 9,988 0 0 39,126 Land and construction 2,047 4,945 284 0 7,276 Consumer loans 5,789 369 1,000 0 7,158 Consumer 13 57 0 0 70 Total loans 61,242 21,334 3,229 1,805 87,610 Securities (2) 2,997 0 5,769 9,656 18,422 Federal Home Loan Bank stock 1,478 0 0 0 1,478 Total rate-sensitive assets 65,717 21,334 8,998 11,461 107,510 Deposit accounts (3): Money-market deposits 31,738 0 0 0 31,738 Interest-bearing checking deposits 1,714 0 0 0 1,714 Savings deposits 701 0 0 0 701 Time deposits 37,814 25,018 0 0 62,832 Total deposits 71,967 25,018 0 0 96,985 Federal Home Loan Bank advances 7,500 20,200 0 27,700 Junior subordinated debenture 0 0 0 5,155 5,155 Total rate-sensitive liabilities 79,467 45,218 0 5,155 129,840 GAP (repricing differences) $ (13,750 ) $ (23,884 ) $ 8,998 $ 6,306 $ (22,330 ) Cumulative GAP $ (13,750 ) $ (37,634 ) $ (28,636 ) $ (22,330 ) $ (22,330 ) Cumulative GAP/total assets (9.57 )% (26.18 )% (19.92 )% (15.53 )% (1) In preparing the table above, adjustable-rate loans are included in the period in which the interest rates are next scheduled to adjust rather than in the period in which the loans mature. Fixed-rate loans are scheduled, including repayment, according to their maturities. (2) Securities are scheduled through the repricing date. (3) Money-market, interest-bearing checking and savings deposits are regarded as readily accessible withdrawable accounts. All other time deposits are scheduled through the maturity dates. 20112012 (in thousands): One Year
or Less After One
But Within
Five Years After
Five Years Total $ 0 $ 2,919 $ 28,223 $ 31,142 0 0 4,109 4,109 4,919 8,379 31,014 44,312 2,002 485 9,296 11,783 0 175 0 175 $ 6,921 $ 11,958 $ 72,642 $ 91,521 After One One Year But Within After or Less Five Years Five Years Total Residential real estate $ 0 $ 2,069 $ 27,995 $ 30,064 Multi-family real estate 0 555 3,361 3,916 Commercial real estate 1,800 14,816 22,510 39,126 Land and construction 0 2,070 5,206 7,276 Commercial 1,927 597 4,634 7,158 Consumer 0 70 0 70 Total $ 3,727 $ 20,177 $ 63,706 $ 87,610 20112012 (in thousands): One
Year or
Less After One
But Within
Five Years After
Five Years Total $ 7,487 $ 2,639 $ 2,158 $ 12,284 57,855 21,094 288 79,237 $ 65,342 $ 23,733 $ 2,446 $ 91,521 After One One Year But Within After or Less Five Years Five Years Total Fixed interest rate $ 1,633 $ 8,110 $ 3,750 $ 13,493 Variable interest rate 59,382 13,451 1,284 74,117 Total $ 61,015 $ 21,561 $ 5,034 $ 87,610 2011,2012, we had no outstanding commitments to originate real estate loans. These instruments involve, to varying degrees, elements of credit and interest-rate risk in excess of the amounts recognized in the consolidated balance sheet. The contractual amounts of those instruments reflect the extent of the Company’sCompany's involvement in particular classes of financial instruments.customer’scustomer's credit worthiness on a case-by-case basis. The amount of collateral obtained, if we deem it necessary in order to extend credit, is based on management’smanagement's credit evaluation of the counterparty.Bank’sBank's contractual obligations, including certain on-balance sheet obligations, at December 31, 20112012 (in thousands): Payments Due by Period Contractual Obligations Total Less
Than 1
Year 1-3
Years 3-5
Years More
Than 5
Years $ 31,700 $ 4,000 $ 7,500 $ 18,600 $ 1,600 5,155 0 0 0 5,155 598 84 168 176 170 $ 37,453 $ 4,084 $ 7,668 $ 18,776 $ 6,925 Payments Due by Period Less More Than 1 1-3 3-5 Than 5 Contractual Obligations Total Year Years Years Years Federal Home Loan Bank advances $ 27,700 $ 7,500 $ 18,600 $ 1,600 $ 0 Junior subordinated debenture 5,155 0 0 0 5,155 Operating leases 520 80 176 176 88 Total $ 33,375 $ 7,580 $ 18,776 $ 1,776 $ 5,243 2011 and decreased $3.4 million in 2010.$0.4$0.3 million and $1.7$0.4 million as of December 31, 20112012 and December 31, 2010,2011, respectively. We have reduced our reliance on brokered deposits which are considered a more volatile source of funding by no longer accepting or rolling over existing brokered deposits.Bank’sBank's deposits at December 31, 2012, 2011 2010 and 20092010 (dollars in thousands): At December 31, 2011 2010 2009 Amount % of
Deposits Amount % of
Deposits Amount % of
Deposits $ 515 .48 % $ 309 .21 % $ 199 .13 % 1,213 1.12 986 .67 1,157 .76 33,265 30.83 33,854 22.83 41,204 27.16 1,060 .98 1,814 1.22 1,861 1.24 36,053 33.41 36,963 24.93 44,421 29.29 $ 22,567 20.92 % $ 9,046 6.10 % $ 8,056 5.31 % 38,290 35.49 83,601 56.40 35,524 23.42 9,052 8.39 15,455 10.43 52,719 34.76 592 .55 987 .67 2,568 1.69 1,341 1.24 1,460 .98 7,562 4.99 0 0 726 .49 810 .53 0 0 0 0 22 .01 71,842 66.59 111,275 75.07 107,261 70.71 $ 107,895 100.00 % $ 148,238 100.00 % $ 151,682 100.00 % (1)Included are Individual Retirement Accounts (IRA’s) totaling $7,074,000 and $8,745,000 at December 31, 2011 and 2010, respectively, all of which are in the form of time deposits. At December 31, 2012 2011 2010 Amount Amount Amount Noninterest-bearing demand deposits $ 4,626 4.45 % $ 515 .48 % $ 309 .21 % Interest-bearing demand deposits 1,714 1.69 1,213 1.12 986 .67 Money-market deposits 31,738 31.27 33,265 30.83 33,854 22.83 Savings 701 .69 1,060 .98 1,814 1.22 Subtotal 38,779 38.10 36,053 33.41 36,963 24.93 Time deposits: 0.00% – 0.99% $ 32,686 32.20 % $ 22,567 20.92 % $ 9,046 6.10 % 1.00% – 1.99% 23,398 23.05 38,290 35.49 83,601 56.40 2.00% – 2.99% 5,102 5.03 9,052 8.39 15,455 10.43 3.00% – 3.99% 454 .45 592 .55 987 .67 4.00% – 4.99% 1,192 1.17 1,341 1.24 1,460 .98 5.00% – 5.99% 0 0 0 0 726 .49 6.00% – 6.99% 0 0 0 0 0 0 Total time deposits (1) 62,832 61.90 71,842 66.6 111,275 75.07 Total deposits $ 101,611 100.00 % $ 107,895 100.00 % $ 148,238 100.00 % 20112012 and 20102011 (in thousands): At December 31, 2011 2010 $ 10,486 $ 14,829 7,754 7,036 6,654 19,495 5,261 9,949 $ 30,155 $ 51,309 ANALYSIS OF RESULTS OF OPERATIONS At December 31, 2012 2011 Due three months or less $ 4,819 $ 10,486 Due more than three months to six months 4,816 7,754 More than six months to one year 6,104 6,654 One to five years 11,717 5,261 Total $ 27,456 $ 30,155 (“("interest-rate spread”spread") and the relative amounts of interest-earning assets and interest-bearing liabilities. Our interest-rate spread is affected by regulatory, economic, and competitive factors that influence interest rates, loan demand, and deposit flows. Our results of operations are also affected by the provision for loan losses, operating expenses such as salaries and employee benefits, occupancy and other operating expenses including income taxes, and noninterest income such as loan prepayment fees. Years Ended December 31, 2011 2010 2009 Average
Balance Interest
and
Dividends Average
Yield/
Rate Average
Balance Interest
and
Dividends Average
Yield/
Rate Average
Balance Interest
and
Dividends Average
Yield/
Rate $ 104,227 4,625 4.44 % $ 129,947 $ 6,301 4.85 % $ 158,157 $ 8,986 5.68 % 43,575 1,729 3.97 45,027 2,409 5.35 89,129 4,985 5.59 21,266 68 0.32 33,555 77 0.23 16,953 35 0.21 169,068 6,422 3.80 208,529 8,787 4.21 264,239 14,006 5.30 290 1,164 2,176 2,744 2,872 3,017 5,291 7,341 1,933 $ 177,393 $ 219,906 $ 271,365 35,261 271 0.77 41,555 486 1.17 38,616 713 1.85 100,583 1,611 1.60 114,817 2,297 2.00 94,838 2,913 3.07 36,855 1,545 4.19 51,194 2,084 4.07 113,175 4,725 4.17 172,699 3,427 1.98 207,566 4,867 2.34 246,629 8,351 3.39 527 507 449 2,331 5,208 3,620 1,836 6,625 20,667 $ 177,393 $ 219,906 $ 271,365 $ 2,995 $ 3,920 $ 5,655 1.82 % 1.87 % 1.91 % 1.77 % 1.88 % 2.14 % 0.98 1.00 1.07 (1)Includes interest-earning deposits with banks, Federal funds sold and Federal Home Loan Bank stock dividends.(2)Interest rate spread represents the difference between average yield on interest-earning assets and the average cost of interest-bearing liabilities.(3)Net interest margin is net interest income divided by average interest-earning assets.(4)Includes Federal Home Loan Bank advances, junior subordinated debenture and securities sold under an agreement to repurchase.RATE/VOLUME ANALYSIS 2012 2011 2010 Average Interest-earning assets: Loans $ 88,968 4,040 4.54 % $ 104,227 4,625 4.44 % $ 129,947 $ 6,301 4.85 % Securities 25,247 1,038 4.11 43,575 1,729 3.97 45,027 2,409 5.35 Other interest-earning assets (1) 24,751 84 0.34 21,266 68 0.32 33,555 77 0.23 Total interest-earning assets/interest income 138,966 5,162 3.71 169,068 6,422 3.80 208,529 8,787 4.21 Cash and due from banks 1,945 290 1,164 Premises and equipment 2,766 2,744 2,872 Other assets 7,630 5,291 7,341 Total assets $ 151,307 $ 177,393 $ 219,906 Interest-bearing liabilities: 35,164 220 0.63 35,261 271 0.77 41,555 486 1.17 Time deposits 69,340 883 1.27 100,583 1,611 1.60 114,817 2,297 2.00 Borrowings (4) 35,170 1,478 4.20 36,855 1,545 4.19 51,194 2,084 4.07 Total interest-bearing liabilities/interest expense 139,674 2,581 1.85 172,699 3,427 1.98 207,566 4,867 2.34 Noninterest-bearing demand deposits 1,194 527 507 Other liabilities 2,647 2,331 5,208 Stockholders' equity 7,792 1,836 6,625 Total liabilities and stockholders' equity $ 151,307 $ 177,393 $ 219,906 Net interest income $ 2,581 $ 2,995 $ 3,920 Interest rate spread (2) % % % Net interest margin (3) 1.86 % 1.77 % 1.88 % Ratio of average interest-earning assets to average interest- 0.99 0.98 1.00 Year Ended December 31,
2011 versus 2010
Increases (Decreases) Due to Change In: Rate Volume Rate/
Volume Total $ (532 ) $ (1,249 ) $ 105 $ (1,676 ) (622 ) (78 ) 20 (680 ) 30 (28 ) (11 ) (9 ) (1,124 ) (1,355 ) 114 (2,365 ) (167 ) (74 ) 25 (216 ) (459 ) (285 ) 57 (687 ) 62 (583 ) (16 ) (537 ) (564 ) (942 ) 66 (1,440 ) $ (560 ) $ (413 ) $ 48 $ (925 ) Year Ended December 31,
2010 versus 2009
Increases (Decreases) Due to Change In: Rate Volume Rate/
Volume Total $ (1,317 ) $ (1,603 ) $ 235 $ (2,685 ) (216 ) (2,467 ) 107 (2,576 ) 3 35 4 42 (1,530 ) (4,035 ) 346 (5,219 ) (261 ) 54 (20 ) (227 ) (1,016 ) 614 (214 ) (616 ) (119 ) (2,588 ) 66 (2,641 ) (1,396 ) (1,920 ) (168 ) (3,484 ) $ (134 ) $ (2,115 ) $ 514 $ (1,735 ) Year Ended December 31, 2012 versus 2011 Rate Volume Total Interest-earning assets: Loans $ 108 $ (677 ) $ (16 ) $ (585 ) Securities 63 (727 ) (27 ) (691 ) Other interest-earning assets 3 12 1 16 Total interest-earning assets 174 (1,392 ) (42 ) (1,260 ) Interest-bearing liabilities: Savings, NOW and money-market (50 ) (1 ) 0 (51 ) Time deposits (331 ) (501 ) 103 (729 ) Other 13,944 (1,397 ) (12,613 ) (66 ) Total interest-bearing liabilities 13,563 (1,899 ) (12,510 ) (846 ) Net interest income $ (13,389 ) $ 507 $ 12,468 $ (414 ) Rate Volume Total Interest-earning assets: Loans $ (532 ) $ (1,249 ) $ 105 $ (1,676 ) Securities (622 ) (78 ) 20 (680 ) Other interest-earning assets 30 (28 ) (11 ) (9 ) Total interest-earning assets (1,124 ) (1,355 ) 114 (2,365 ) Interest-bearing liabilities: Savings, NOW and money-market (167 ) (74 ) 25 (216 ) Time deposits (459 ) (285 ) 57 (687 ) Other 62 (583 ) (16 ) (537 ) Total interest-bearing liabilities (564 ) (942 ) 66 (1,440 ) Net interest income $ (560 ) $ (413 ) $ 48 $ (925 )
Financial Condition as of December 31, 20112012 Compared to December 31, 20102011$35.8$10.8 million, to $155.5$143.7 million at December 31, 2012, from $154.5 million at December 31, 2011, from $190.3 million at December 31, 2010, due to the Company’sCompany's strategy of downsizing in order to preserve its capital ratios. The Company reduced its loans and securities as well as its interest bearing time deposits. an additional 21.6 million shares of its common stock in a private placement offering, resulting in additional capital of $8.6 million.General. Net loss for the year ended December 31, 2011, was $3.8 million or $(.82) per basic and diluted share compared to a net loss of $8.5 million or $(10.32) per basic and diluted share for the year ended December 31, 2010. This $4.7 million decrease in the Company’sCompany's net loss was primarily due to a $3.8 million decrease in the provision for loan losses. provision for the year ended December 31, 2011, was $(149,000) compared to $3.6 million for the same period in 2010. The provision (credit) 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 loan portfolio at December 31, 2011. Management’sManagement'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’sborrower'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 qualitative factors related to the estimated collectability of our loan portfolio. The allowance for loan losses totaled $2.3 million or 2.57% of loans outstanding at December 31, 2011, compared to $3.7 million or 3.16% of loans outstanding at December 31, 2010. The decrease in the allowance was due to the use of specific reserves for charge-offs of loans deemed uncollectible. Management believes the balance in the allowance for loan losses at December 31, 2011 is adequate.Company’sCompany's downsizing in 2010, offset in part by a $.9 million increase in foreclosed real estate expenses and a $.2 million increase in insurance expense in 2011.Year Ended December 31, 2010 Compared to Year Ended December 31, 2009General. Net loss for the year ended December 31, 2010, was $8.5 million or $(10.32) per basic and diluted share compared to a net loss of $11.5 million or $(14.01) per basic and diluted share for the year ended December 31, 2009. This $3.0 million decrease in the Company’s net loss was primarily due to a $12.2 million decrease in the provision for loan losses, partially offset by a net $2.3 million expense associated with downsizing the Company, a $3.9 million reduction in income tax benefit and a $1.1 million increase in professional fees associated with loan foreclosures, workouts, and regulatory matters.Interest Income. Interest income decreased to $8.8 million for the year ended December 31, 2010 compared to $14.0 million for the year ended December 31, 2009. Interest income on loans decreased to $6.3 million due primarily to a decrease in the average loan portfolio balance and a decrease in the average yield earned in 2010 due to an increase in the average balance of non-performing loans in 2010. Interest on securities decreased by $2.6 million due primarily to a decrease in the average balance of the securities portfolio in 2010.Interest Expense.Interest expense on deposit accounts decreased to $2.8 million for the year ended December 31, 2010, from $3.6 million for the year ended December 31, 2009. Interest expense on deposits decreased primarily because of a decrease in the average yield paid in 2010 partially offset by an increase in the average balance of deposits. Interest expense on borrowings decreased to $2.1 million for the year ended December 31, 2010 from $4.7 million for the year ended December 31, 2009 due primarily to a decrease in the average balance of borrowings.Provision for Loan Losses. The provision for the year ended December 31, 2010, was $3.6 million compared to $15.8 million for the same period in 2009. 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 loan portfolio at December 31, 2010. 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 qualitative factors related to the estimated collectability of our loan portfolio. The allowance for loan losses totaled $3.7 million or 3.16% of loans outstanding at December 31, 2010, compared to $9.4 million, or 6.54% of loans outstanding at December 31, 2009. The decrease in the allowance was due to the use of specific reserves for charge-offs of loans deemed uncollectible. Management believes the balance in the allowance for loan losses at December 31, 2010 is adequate.Noninterest Income. Total noninterest income increased to $1.4 million for the year ended December 31, 2010, from $(145,000) for the year ended December 31, 2009 primarily due to gains recognized on the sale of securities as part of the downsizing of the Company in the first quarter of 2010 and an other-than-temporary impairment on securities recorded for $179,000 in 2009.Noninterest Expenses. Total noninterest expenses increased to $9.8 million for the year ended December 31, 2010 from $4.7 million for the year ended December 31, 2009, primarily due to a loss on the early extinguishment of debt associated with the Company’s downsizing, and an increase in professional fees due to legal and consulting expenses associated with loan foreclosure, loan workouts, and regulatory matters, and write-downs on foreclosed real estate, all occurring in the 2010 period.Income Taxes (Benefit). The income tax expense for the year ended December 31, 2010 was $349,000. The income tax benefit for the year ended December 31, 2009 was $3,501,000.Item 8.Financial StatementsThe financial statements of OptimumBank Holding, Inc. as of and for the years ended December 31, 2011 and 2010 are set forth in this Form 10-K as Exhibit 13.1 and contain the following information: December 31, 2011 and 2010 2012 2011 Assets Cash and due from banks $ 4,541 $ 1,101 Interest-bearing deposits with banks 19,070 5,123 Federal funds sold 0 16,552 Total cash and cash equivalents 23,611 22,776 Securities available for sale 18,648 28,907 Loans, net of allowance for loan losses of $2,459 and $2,349 85,209 89,217 Federal Home Loan Bank stock 1,478 2,159 Premises and equipment, net 2,906 2,691 Foreclosed real estate, net 10,938 7,646 Accrued interest receivable 499 499 Other assets 454 577 Total assets $ 143,743 $ 154,472 Liabilities and Stockholders' Equity Liabilities: Noninterest-bearing demand deposits 4,626 515 Savings, NOW and money-market deposits 34,153 35,538 Time deposits 62,832 71,842 Total deposits 101,611 107,895 Federal Home Loan Bank advances 27,700 31,700 Junior subordinated debenture 5,155 5,155 Advanced payment by borrowers for taxes and insurance 461 567 Official checks 581 1,113 Other liabilities 1,325 1,256 Total liabilities 136,833 147,686 Commitments and contingencies (Notes 4, 13, 15 and 18) 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 in 2012 and 2011, 31,511,201 and 22,411,108 shares issued and outstanding in 2012 and 2011 315 224 Additional paid-in capital 31,057 27,491 Accumulated deficit (24,688 ) (19,991 ) Accumulated other comprehensive income (loss) 226 (938 ) Total stockholders' equity 6,910 6,786 Total liabilities and stockholders' equity $ 143,743 $ 154,472 for the Year Ended December 31, 2012 2011 Interest income: Loans $ 4,040 $ 4,625 Securities 1,038 1,729 Other 84 68 Total interest income 5,162 6,422 Interest expense: Deposits 1,103 1,882 Borrowings 1,478 1,545 Total interest expense 2,581 3,427 Net interest income 2,581 2,995 Provision (credit) for loan losses 1,653 (149 ) Net interest income after provision (credit) for loan losses 928 3,144 Noninterest income: Service charges and fees 72 30 Gain on sale of securities 0 153 Other 186 196 Total noninterest income 258 379 Noninterest expenses: Salaries and employee benefits 1,746 1,791 Occupancy and equipment 512 536 Data processing 229 192 Professional fees 1,114 1,573 Insurance 285 397 Foreclosed real estate expenses 550 1,319 Regulatory assessments 305 694 Other 733 727 Total noninterest expenses 5,474 7,229 Other-than-temporary impairment on securities: Total other-than-temporary impairment losses 409 0 Portion of losses recognized in other comprehensive income 0 0 Net impairment loss 409 0 Loss before income taxes (4,697 ) (3,706 ) Income taxes 0 41 Net loss $ (4,697 ) $ (3,747 ) Net loss per share: Basic $ (.17 ) $ (.82 ) Diluted $ (.17 ) $ (.82 ) Year Ended December 31, 2012 2011 Net loss $ (4,697 ) $ (3,747 ) Other comprehensive income (loss)- Unrealized gains (loss) on securities available for sale: Unrealized holding gains (losses) arising during the year 755 (938 ) Reclassification adjustment for other-than-temporary impairment losses recognized 409 - Net change in unrealized gain (loss) 1,164 (938 ) Comprehensive loss $ (3,533 ) $ (4,685 ) 20112012 and 2010 Common Stock Accumulated
hensive Shares Amount Capital Deficit (Loss) Equity Balance at December 31, 2010 819,358 $ 8 $ 19,071 $ (16,244 ) $ 0 $ 2,835 Proceeds from sale of common stock 21,591,750 216 8,420 0 0 8,636 0 0 0 0 (938 ) (938 ) Net loss 0 0 0 (3,747 ) 0 (3,747 ) Balance at December 31, 2011 22,411,108 $ 224 $ 27,491 $ (19,991 ) $ (938 ) $ 6,786 Proceeds from sale of common stock 9,047,500 90 3,539 0 0 3,629 Stock compensation 52,593 1 27 0 0 28 0 0 0 0 1,164 1,164 Net loss 0 0 0 (4,697 ) 0 (4,697 ) Balance at December 31, 2012 31,511,201 $ 315 $ 31,057 $ (24,688 ) $ 226 $ 6,910 Stockholders’ Equity for the Years Ended December 31, 2011 and 2010 Year Ended December 31, 2012 2011 Cash flows from operating activities: Net loss $ (4,697 ) $ (3,747 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 128 105 Provision (credit) for loan losses 1,653 (149 ) Decrease in income taxes receivable 0 772 Gain on sale of securities 0 (153 ) Stock compensation 28 0 Net amortization of fees, premiums and discounts 22 124 Decrease in accrued interest receivable 0 145 Decrease in other assets 123 262 Loss on sale of foreclosed real estate 32 186 Write-down of foreclosed real estate 102 772 (Decrease) increase in official checks and other liabilities (463 ) 798 Other-than-temporary impairment of securities available for sale 409 0 Net cash used in operating activities (2,663 ) (885 ) Cash flows from investing activities: Purchases of securities 0 (5,048 ) Principal repayments and calls of securities 11,007 15,299 Proceeds from sale of securities 0 10,961 Net (increase) decrease in loans (2,320 ) 15,310 Purchase of premises and equipment, net (343 ) 0 Proceeds from sale of foreclosed real estate, net 1,291 3,704 Capital improvements on foreclosed real estate (57 ) 0 Redemption of Federal Home Loan Bank stock 681 1,014 Net cash provided by investing activities 10,259 41,240 Cash flows from financing activities: Net decrease in deposits (6,284 ) (40,343 ) Proceeds from sale of common stock 3,629 8,636 Repayments of Federal Home Loan Bank advances (4,000 ) 0 Net decrease in advanced payment by borrowers for taxes and insurance (106 ) (239 ) Net cash used in financing activities (6,761 ) (31,946 ) Net increase in cash and cash equivalents 835 8,409 Cash and cash equivalents at beginning of the year 22,776 14,367 Cash and cash equivalents at end of the year $ 23,611 $ 22,776 forContinued Year Ended December 31, Supplemental disclosure of cash flow information: 2012 2011 Cash paid during the year for: Interest $ 2,458 $ 3,283 Income taxes $ 0 $ 0 Noncash transactions: $ 1,164 $ 938 Transfer of securities held to maturity to available for sale $ 0 $ 50,534 Loans transferred to foreclosed real estate $ 4,660 $ 9,093 December 31, 2011 and 2010(1) Summary of Significant Accounting Policies (1) Summary of Significant Accounting Policies, Continued (1) Summary of Significant Accounting Policies, Continued (1) Summary of Significant Accounting Policies, Continued (1) Summary of Significant Accounting Policies, Continued (1) Summary of Significant Accounting Policies, Continued 2012 27,362,672 4,576,304 (1) Summary of Significant Accounting Policies, Continued Level 3: Unobservable inputs to measure fair value of assets and liabilities for which there is little, if any market activity at the measurement date, using reasonable inputs and assumptions based upon the best information at the time, to the extent that inputs are available without undue cost and effort. (1) Summary of Significant Accounting Policies, Continued 2010assumptions were used by the Company in estimating fair values of financial instruments disclosed herein:(1) Summary of Significant Accounting Policies, 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 At December 31, 2012: Cost Gains Losses Value Securities Available for Sale- Mortgage-backed securities $ 15,425 $ 283 $ (79 ) $ 15,629 2,997 22 - 3,019 Total $ 18,422 $ 305 $ (79 ) $ 18,648 At December 31, 2011: Securities Available for Sale- Mortgage-backed securities $ 23,853 $ 151 $ (1,140 ) $ 22,864 5,992 51 - 6,043 Total $ 29,845 $ 202 $ (1,140 ) $ 28,907 All U.S. Government and agency securities outstanding at December 31, 2012 are due in 2013. The following summarizes sales of securities (in thousands): 2012 2011 Proceeds from sales of securities $ 0 $ 10,961 Gross gains from sale of securities 0 153 Gross losses from sale of securities 0 0 Net gains from sale of securities $ 0 $ 153 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 income (loss). Due to this transfer, the Company will be prohibited from classifying securities as held to maturity for a period of two years. (2) Securities, Continued Securities with gross unrealized losses at December 31, 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 Mortgage-backed securities $ (9 ) $ 2,668 $ (70 ) $ 1,999 The unrealized losses on ten 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. (2) Securities, Continued In evaluating mortgage-backed securities with unrealized losses greater than 12 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 prescribed 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. The key base assumptions for mortgage-backed securities used are in the table below: At December 31, 2012 2011 Prepayment rate 0.5-74.4 % 9-58 % Loss severity 26.17-75.55 % 2-140 % Cumulative default rate 0-35.07 % 0.51-9.16 % Principal write-down 0-2.68 % 0-.81 % Loss severity rates are estimated based on collateral characteristics for single family first mortgages. The Company recorded OTTI of $409,000 during the year ended December 31, 2012 which resulted in cumulative OTTI of $504,000 as of December 31, 2012. (2) Securities, Continued Available-for-sale securities measured at fair value on a recurring basis are summarized below (in thousands): Fair Value Measurements Using At December 31, 2012- $ 18,648 $ 0 $ 18,648 $ 0 At December 31, 2011- $ 28,907 $ 0 $ 28,907 $ 0 During the years ended December 31, 2012 and 2011, no securities were transferred in or out of Level 1, Level 2 and Level 3. (3) Loans The components of loans are as follows (in thousands): At December 31, 2012 2011 Residential real estate $ 30,064 $ 31,142 Multi-family real estate 3,916 4,109 Commercial real estate 39,126 44,312 Land and construction 7,276 11,783 Commercial 7,158 0 Consumer 70 175 Total loans 87,610 91,521 Add (deduct): Net deferred loan fees, costs and premiums 58 45 Allowance for loan losses (2,459 ) (2,349 ) Loans, net $ 85,209 $ 89,217 (3) Loans, Continued An analysis of the change in the allowance for loan losses for the years ended December 31, 2012 and 2011 follows (in thousands): Year Ended December 31, 2012: Commercial Consumer Total Beginning balance $ 566 $ 247 $ 1,334 $ 187 $ 0 $ 15 $ 2,349 (Credit) provision for loan losses (1 ) 19 912 531 216 (24 ) 1,653 Charge-offs (147 ) 0 (903 ) (798 ) 0 0 (1,848 ) Recoveries 16 1 29 246 0 13 305 Ending balance $ 434 $ 267 $ 1,372 $ 166 $ 216 $ 4 $ 2,459 Year Ended December 31, 2011: Beginning balance $ 1,285 $ 282 $ 1,542 $ 514 $ 0 $ 80 $ 3,703 (Credit) provision for loan losses (779 ) (42 ) (6 ) 755 0 (77 ) (149 ) Charge-offs (308 ) 0 (202 ) (1,229 ) 0 0 (1,739 ) Recoveries 368 7 0 147 0 12 534 Ending balance $ 566 $ 247 $ 1,334 $ 187 $ 0 $ 15 $ 2,349 (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: (3) Loans, Continued The balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of December 31, 2012 and 2011 follows (in thousands): At December 31, 2012: Commercial Consumer Total Individually evaluated for impairment: Recorded investment $ 7,573 $ 0 $ 11,535 $ 886 $ 0 $ 0 $ 19,994 Balance in allowance for loan losses $ 0 $ 0 $ 366 $ 0 $ 0 $ 0 $ 366 Collectively evaluated for impairment: Recorded investment $ 22,491 $ 3,916 $ 27,591 $ 6,390 $ 7,158 $ 70 $ 67,616 Balance in allowance for loan losses $ 434 $ 267 $ 1,006 $ 166 $ 216 $ 4 $ 2,093 (3) Loans, Continued ResidentialMulti-Family Commercial Land At December 31, 2011: Commercial Consumer Total Individually evaluated for impairment: Recorded investment $ 7,919 $ 0 $ 16,716 $ 7,241 $ 0 $ 68 $ 31,944 Balance in allowance for loan losses $ 0 $ 0 $ 11 $ 0 $ 0 $ 0 $ 11 Collectively evaluated for impairment: Recorded investment $ 23,223 $ 4,109 $ 27,596 $ 4,542 $ 0 $ 107 $ 59,577 Balance in allowance for loan losses $ 566 $ 247 $ 1,323 $ 187 $ 0 $ 15 $ 2,338 The following summarizes the loan credit quality (in thousands): OLEM (Other Loans Especially Pass Mentioned) Substandard Doubtful Loss Total At December 31, 2012: Residential real estate $ 22,491 $ 0 $ 7,573 $ 0 $ 0 $ 30,064 Multi-family real estate 3,916 0 0 0 0 3,916 Commercial real estate 24,967 2,624 11,535 0 0 39,126 Land and construction 4,402 1,987 887 0 0 7,276 Commercial 7,092 66 0 0 0 7,158 Consumer 70 0 0 0 0 70 Total $ 62,938 $ 4,677 $ 19,995 $ 0 $ 0 $ 87,610 At December 31, 2011: Residential real estate $ 22,455 $ 3,686 $ 5,001 $ 0 $ 0 $ 31,142 Multi-family real estate 4,109 0 0 0 0 4,109 Commercial real estate 23,959 4,776 15,577 0 0 44,312 Land and construction 4,493 49 7,241 0 0 11,783 Consumer 107 68 0 0 0 175 Total $ 55,123 $ 8,579 $ 27,819 $ 0 $ 0 $ 91,521 Internally assigned loan grades are defined as follows: (3) Loans, Continued Age analysis of past-due loans is as follows is as follows (in thousands): Accruing Loans Greater 30-59 60-89 Than 90 Total Days Days Days Past Nonaccrual Total At December 31, 2012: Past Due Past Due Past Due Due Current Loans Loans Residential real estate $ 0 $ 2,915 $ 0 $ 2,915 $ 22,492 $ 4,657 $ 30,064 Multi-family real estate 0 0 0 0 3,916 0 3,916 Commercial real estate 0 0 0 0 27,591 11,535 39,126 Land and construction 0 0 0 0 6,389 887 7,276 Commercial 699 0 0 699 6,459 0 7,158 Consumer 0 0 0 0 70 0 70 Total $ 699 $ 2,915 $ 0 $ 3,614 $ 66,917 $ 17,079 $ 87,610 At December 31, 2011: Residential real estate $ 0 $ 768 $ 0 $ 768 $ 25,373 $ 5,001 $ 31,142 Multi-family real estate 0 0 0 0 4,109 0 4,109 Commercial real estate 0 0 0 0 28,735 15,577 44,312 Land and construction 0 0 0 0 4,542 7,241 11,783 Consumer 0 0 0 0 175 0 175 Total $ 0 $ 768 $ 0 $ 768 $ 62,934 $ 27,819 $ 91,521 (3) Loans, Continued The following summarizes the amount of impaired loans (in thousands): At December 31, 2012 At December 31, 2011 With no related allowance recorded: Residential real estate $ 7,573 $ 8,024 $ 0 $ 7,919 $ 8,465 $ 0 Commercial real estate 8,661 11,412 0 15,577 17,960 0 Land and construction 886 2,410 0 7,241 11,652 0 Consumer 0 0 0 68 68 0 With an allowance recorded- Commercial real estate $ 2,874 $ 2,874 $ 366 $ 1,139 $ 1,139 $ 11 Total: Residential real estate $ 7,573 $ 8,024 $ 0 $ 7,919 $ 8,465 $ 0 Commercial real estate $ 11,535 $ 14,286 $ 366 $ 16,716 $ 19,099 $ 11 Land and construction $ 886 $ 2,410 $ 0 $ 7,241 $ 11,652 $ 0 Consumer $ 0 $ 0 $ 0 $ 68 $ 68 $ 0 Total $ 19,994 $ 24,720 $ 366 $ 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): For the Year Ended December 31, 2012 2011 Average Interest Interest Average Interest Interest Residential real estate $ 7,795 $ 175 $ 307 $ 11,077 $ 226 $ 306 Multi-family real estate $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 Commercial real estate $ 14,219 $ 0 $ 222 $ 18,862 $ 115 $ 376 Land and construction $ 3,729 $ 0 $ 87 $ 7,412 $ 21 $ 147 Consumer $ 0 $ 0 $ 0 $ 198 $ 5 $ 5 Total $ 25,743 $ 175 $ 616 $ 37,549 $ 367 $ 834 (3) Loans, Continued The following is a summary of loans determined to be troubled debt restructurings (dollars in thousands): Number Troubled Debt Restructurings: Year Ended December 31, 2012: Residential real estate- Modified interest rate and amortization 1 $ 941 $ 941 Year Ended December 31, 2011: Residential real estate- Modified interest rate and amortization 1 $ 1,540 $ 1,540 Commercial real estate- Modified interest rate and amortization 4 5,915 5,915 Land and construction- Modified interest rate and amortization 1 1,030 1,030 6 $ 8,485 $ 8,485 The allowance for loan losses on residential real estate, commercial real estate, and land and construction loans that have been restructured and are considered trouble debt restructurings ("TDR") is included in the Company's specific reserve. The specific reserve is determined on a loan by loan basis by either the present value of expected future cash flows discounted at the loan's effective interest rate, or the fair value of the collateral if the loan is collateral-dependent. TDR's that have subsequently defaulted are considered collateral-dependent. There were no TDR's that have subsequently defaulted in the year they were restructured which were restructured during 2012 and 2011. (4) Premises and Equipment A summary of premises and equipment follows (in thousands): At December 31, 2012 2011 Land $ 1,171 $ 1,171 Buildings and improvements 2,046 1,959 Furniture, fixtures and equipment 1,170 1,026 Leasehold improvements 119 119 Total, at cost 4,506 4,275 Less accumulated depreciation and amortization (1,600 ) (1,584 ) Premises and equipment, net $ 2,906 $ 2,691 The Company currently leases one branch facility under operating lease. The lease contains renewal options and requires the Company to pay an allowable share of common area maintenance and real estate taxes. Rent expense under the operating lease during the years ended December 31, 2012 and 2011 was $84,000 and $133,000, respectively. At December 31, 2012, the future minimum lease payments are approximately as follows (in thousands): Year Ending December 31, Amount 2013 $ 80 2014 88 2015 88 2016 88 2017 88 Thereafter 88 $ 520 (5) Foreclosed Real Estate Expenses applicable to foreclosed real estate are as follows (in thousands): Year Ended December 31, 2012 2011 Provision for losses on foreclosed real estate $ 102 $ 772 Loss on sale of foreclosed real estate 32 186 Operating expenses 416 361 $ 550 $ 1,319 (6) Deposits The aggregate amount of time deposits with a minimum denomination of $100,000, was approximately $27.5 million and $30.2 million at December 31, 2012 and 2011, respectively. A schedule of maturities of time deposits at December 31, 2012 follows (in thousands): December 31, Amount 2013 $ 37,814 2014 20,154 2015 3,623 2016 239 2017 1,002 $ 62,832 (7) Federal Home Loan Bank Advances and Junior Subordinated Debenture The maturities and interest rates on the Federal Home Loan Bank ("FHLB") advances were as follows (dollars in thousands): Maturity Year Ending Call Interest At December 31, December 31, Date Rate 2012 2011 2012 - 4.75 % $ 0 $ 4,000 2013 2013 3.64 7,500 7,500 2016 - 4.51 5,000 5,000 2016 - 4.65 8,000 8,000 2016 - 4.44 5,600 5,600 2017 2013 4.38 1,600 1,600 $ 27,700 $ 31,700 Certain of the above advances are callable by the FHLB starting in the year indicated. At December 31, 2012 and 2011, the FHLB advances were collateralized by $6.5 million and $10.2 million, respectively, of securities and by a lien on qualifying residential one-to-four family mortgage loans, commercial and multi-family real estate loans and second mortgage loans. On September 30, 2004, the Company issued a $5,155,000 junior subordinated debenture to an unconsolidated subsidiary. 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% (2.97% at December 31, 2011). The junior subordinated debenture, due in 2034, is redeemable in certain circumstances after October 2009. 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 consecutive quarterly periods. During 2012 and 2011, the Company exercised its right to defer payment of interest on the debenture. Interest payments deferred as of December 31, 2012 and 2011 totaled $485,000 and $326,000, respectively. (8) Financial Instruments At December 31, 2012 At December 31, 2011 Financial assets: Cash and cash equivalents $ 23,611 $ 23,611 $ 22,776 $ 22,776 Securities available for sale 18,648 18,648 28,907 28,907 Loans 85,209 85,046 89,217 89,069 Federal Home Loan Bank stock 1,478 1,478 2,159 2,159 Accrued interest receivable 499 499 499 499 Financial liabilities: Deposit liabilities 101,611 101,985 107,895 108,461 Federal Home Loan Bank advances 27,700 29,633 31,700 33,920 Junior subordinated debenture 5,155 4,836 5,155 4,734 Off-balance sheet financial instruments 0 0 0 0 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 December 31, 2012, commitments to extend credit totaled $5,195,000. (9) Credit Risk forportions of Palm Beach and Miami-Dade Counties, Florida. Although the Years Then EndedCompany has a diversified loan portfolio, a significant portion of its borrowers' ability to repay their loans and meet their contractual obligations to the Company is dependent upon the economy in Broward, Palm Beach and Miami-Dade Counties, Florida.Item 9.(10) Changes in and Disagreements with Accountants on Accounting and Financial DisclosureIncome TaxesNot applicable. Year Ended December 31, 2012 2011 Current: Federal $ 0 $ 41 State 0 0 Total current 0 41 Deferred: Federal (1,508 ) (1,232 ) State (259 ) (203 ) Change in valuation allowance 1,767 1,435 Total deferred 0 0 Total $ 0 $ 41 The reasons for the differences between the statutory Federal income tax rate and the effective tax rate are summarized as follows (dollars in thousands): Year Ended December 31, 2012 2011 % of % of Pretax Pretax Amount Loss Amount Loss Income tax benefit at statutory rate $ (1,597 ) (34.0 )% $ (1,260 ) (34.0 )% Increase (decrease) resulting from: State taxes, net of Federal tax benefit (170 ) (3.6 ) (134 ) (3.6 ) Change in valuation allowance 1,767 37.6 1,435 38.7 $ 0 0.0 % $ 41 1.1 % (10) Income Taxes, Continued The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are presented below (in thousands). At December 31, 2012 2011 Deferred tax assets: Allowance for loan losses $ 421 $ 71 Net operating loss carryforwards 6,887 5,919 Premises and equipment 132 109 Impaired securities 190 67 Foreclosed property expenses 650 442 Nonaccrual loan interest 399 298 Other 72 69 Gross deferred tax assets 8,751 6,975 Less: Valuation allowance 8,737 6,970 Net deferred tax assets 14 5 Deferred tax liabilities: Loan costs (14 ) (4 ) Prepaid expenses 0 (1 ) Deferred tax liabilities (14 ) (5 ) Net deferred tax asset $ 0 $ 0 During the years ended December 31, 2012 and 2011, the Company assessed its earnings history and trend over the past year and its estimate of future earnings, and determined that it was more likely than not that the deferred tax assets would not be realized in the near term. Accordingly, a valuation allowance was recorded and maintained against the net deferred tax asset for the amount not expected to be realized in the future. At December 31, 2012, the Company had net operating loss carryforwards of approximately $17.2 million for Federal tax purposes and $28.2 million for Florida tax purposes available to offset future taxable income. These carryforwards will begin to expire in 2029. These carryforwards are subject to an annual limitation going forward under Internal Revenue Code Section 382 which became applicable with the sale of common stock that occurred during 2011. The Company files U.S. and Florida income tax returns. With few exceptions, the Company is no longer subject to U.S. Federal or state and local income tax examinations by taxing authorities for years before 2009. The Company's 2009 Federal income tax return is currently under examination. (11) Related Party Transactions The Company has entered into transactions with its executive officers, directors and their affiliates in the ordinary course of business. There were loans to related parties at December 31, 2012 and 2011 of approximately $2,243,000 and $239,000, respectively. At December 31, 2012 and 2011, related parties had approximately $2,867,000 and $509,000, respectively, on deposit with the Company. (12) Stock-Based Compensation On December 27, 2011, the Company's stockholders approved the 2011 Equity Incentive Plan ("2011 Plan"). A total of 2,147,407 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 can not 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. The Company's prior plan was terminated on February 27, 2011. As of December 31, 2012, 52,593 shares have been granted under the 2011 Plan as compensation to directors for services rendered. Fair value of the shares as of the dates of the grants totaled approximately $28,000 and has been reflected as expense in the accompanying consolidated statements of operations. A summary of the activity in the prior plan is as follows (dollars in thousands, except share amounts): Weighted- Weighted- Average Average Remaining Aggregate Number of Exercise Contractual Intrinsic Options Price Term Value Outstanding at December 31, 2010 69,132 $ 30.05 Expired (18,232 ) 18.16 Outstanding at December 31, 2011 50,900 34.31 Expired (7,595 ) 35.64 Forfeited (15,949 ) 24.48 Outstanding and exercisable at December 31, 2012 27,356 $ 36.27 2.6 years $ 0 (13) Regulatory Matters The Bank is subject to various regulatory capital requirements administered by the regulatory banking 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. As of December 31, 2012, the Bank is subject to a Consent Order issued by the Federal Deposit Insurance Corporation and the State of Florida Office of Financial Regulation, 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): Actual Amount % Amount % Amount % Amount % As of December 31, 2012: Total Capital to Risk- Weighted Assets $ 13,506 11.48 % $ 9,412 8.00 % $ 11,765 10.00 % $ 14,118 12.00 % Tier I Capital to Risk- Weighted Assets 12,035 10.23 4,706 4.00 7,059 6.00 N/A N/A Tier I Capital to Total Assets 12,035 8.12 5,932 4.00 7,415 5.00 11,864 8.00 As of December 31, 2011: Total Capital to Risk- Weighted Assets $ 14,382 12.48 % $ 9,221 8.00 % $ 11,526 10.00 % $ 13,832 12.00 % Tier I Capital to Risk- Weighted Assets 12,930 11.22 4,611 4.00 6,916 6.00 N/A N/A Tier I Capital to Total Assets 12,930 7.76 6,668 4.00 8,335 5.00 13,335 8.00 (13) Regulatory Matters, Continued 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 Florida Office of Financial Regulation ("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 nonconsolidated 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 nonconsolidated 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. (13) Regulatory Matters, Continued 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. (13) Regulatory Matters, 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 and the Written Agreement except for the following requirements: · Maintain total risk-based capital ratio of 12%; · Scheduled reduction by October 31, 2011 of 60% of loans classified as substandard and doubtful in the 2009 FDIC Examination; 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. The Company entered into a contract with Moishe Gubin, Chairman of the Board of Directors, to sell approximately $2.2 million of common stock to Mr. Gubin. The additional $2.2 million in capital from Mr. Gubin is expected to enable the Bank to comply with the total risk-based capital ratio of 12%. The investment by Mr. Gubin is contingent upon receiving regulatory approval. At the present time, neither the Company or Mr. Gubin can predict when or if the regulatory approval will be obtained. Therefore, there can be no assurance that the Company will raise sufficient capital for the Bank to achieve and maintain material compliance with this ratio. (14) Dividends The Company is limited in the amount of cash dividends that may be paid. Banking regulations place certain restrictions on dividends and loans or advances made by the Bank to the Holding Company. The amount of cash dividends that may be paid by the Bank to the Holding Company is based on the Bank's net earnings of the current year combined with the Bank's retained earnings of the preceding two years, as defined by state banking regulations. However, for any dividend declaration, the Company must consider additional factors such as the amount of current period net earnings, liquidity, asset quality, capital adequacy and economic conditions. It is likely that these factors would further limit the amount of dividends which the Company could declare. In addition, bank regulators have the authority to prohibit banks from paying dividends if they deem such payment to be an unsafe or unsound practice. At December 31, 2012, the Bank and Holding Company could not pay cash dividends (See Note 13). (15) Contingencies Various claims also arise from time to time in the normal course of business. In the opinion of management, none have occurred that will have a material effect on the Company's consolidated financial statements. (16) Retirement Plans The Company has a Simple IRA Plan whereby substantially all employees participate in the Plan. Employees may contribute up to 15 percent of their compensation subject to certain limits based on federal tax laws. The Company makes matching contributions equal to the first 3% of an employee's compensation contributed to the Plan. Matching contributions vest to the employee immediately. For the year ended December 31, 2011, expense attributable to the Plan amounted to $38,000. The Company's Simple IRA Plan was terminated effective January 1, 2012. Effective January 1, 2012, the Company established a 401(k) Profit Sharing plan covering all eligible employees who are over the age of twenty one and have completed one year of service. The Company may make a matching contribution each year. The Company did not make any matching contributions in connection with this plan during the year ended December 31, 2012. (17) Fair Value Measurement Impaired collateral-dependent loans are carried at fair value when the current collateral value is lower than the carrying value of the loan. Those impaired collateral-dependent loans which are measured at fair value or a nonrecurring basis are as follows (in thousands): At December 31, 2012 Level 1 Level 2 Level 3 Losses 2012 Residential real estate $ 1,247 $ 0 $ 0 $ 1,247 $ 451 $ 0 Commercial real estate 6,232 0 0 6,232 2,780 366 Land and construction 887 0 0 887 449 0 $ 8,366 $ 0 $ 0 $ 8,366 $ 3,680 $ 366 At December 31, 2011 Losses Level 1 Level 2 Level 3 Losses 2011 Residential real estate $ 1,591 $ 0 $ 0 $ 1,591 $ 545 $ 308 Commercial real estate 6,831 0 0 6,831 2,660 158 Land and construction 6,793 0 0 6,793 1,511 834 $ 15,215 $ 0 $ 0 $ 15,215 $ 4,716 $ 1,300 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 At Year End Recorded Fair Total During the Value Level 1 Level 2 Level 3 Losses Year At December 31, 2012 $ 10,938 $ 0 $ 0 $ 10,938 $ 102 $ 102 At December 31, 2011 $ 7,646 $ 0 $ 0 $ 7,646 $ 772 $ 772 (18) Stockholders' Equity On September 29, 2011, the Company amended its Articles of Incorporation to increase the number of common shares authorized from 1,500,000 shares to 50,000,000 shares. (19) Holding Company Financial Information The Holding Company's unconsolidated financial information as of December 31, 2012 and 2011 and for the years then ended follows (in thousands): At December 31, Assets 2012 2011 Cash $ 109 $ 46 Investment in subsidiary 12,261 11,992 Other assets 180 230 Total assets $ 12,550 $ 12,268 Liabilities and Stockholders' Equity Other liabilities $ 485 $ 327 Junior subordinated debenture 5,155 5,155 Stockholders' equity 6,910 6,786 Total liabilities and stockholders' equity $ 12,550 $ 12,268 (19) Holding Company Financial Information, Continued Condensed Statements of Operations Year Ended December 31, 2012 2011 Loss of subsidiary $ (4,302 ) $ (3,473 ) Interest expense (158 ) (148 ) Other expense (237 ) (126 ) Net loss $ (4,697 ) $ (3,747 ) Condensed Statements of Cash Flows Year Ended December 31, 2012 2011 Cash flows from operating activities: Net loss $ (4,697 ) $ (3,747 ) Equity in undistributed loss of subsidiary 4,302 3,473 Decrease (increase) in other assets 50 (50 ) Increase in accrued other liabilities 158 148 Net cash used in operating activities (187 ) (176 ) Cash flow from investing activity- Investment in subsidiary (3,407 ) (8,586 ) Cash flows from financing activity- Proceeds from sale of common stock, net 3,657 8,636 Net increase (decrease) in cash 63 (126 ) Cash at beginning of the year 46 172 Cash at end of year $ 109 $ 46 Noncash transactions- Change in accumulated other comprehensive income (loss) of subsidiary, net change in unrealized loss on securities available for sale $ 1,164 $ (938 ) management’smanagement's evaluation of those controls and procedures performed within the 90 days preceding the filing of this Report, our Principal Executive Officer and Chief Financial Officer concluded that, subject to the limitations noted below, the Company’sCompany's disclosure controls and procedures (as defined in Rules 13a-15(e) under the Securities Exchange Act of 1934) are effective to ensure that the information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the U.S. Securities and Exchange Commission’sCommission's rules and forms.Management’sManagement's Report on Internal Control Over Financial ReportingCompany’sCompany's management assessed the effectiveness of the Company’sCompany's internal control over financial reporting as of December 31, 2011.2012. In making this assessment, the Company used the criteria set forth inInternal Control-Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”("COSO"). Based upon our evaluation under the framework in Internal Control-Integrated Framework, our management concluded that our internal control over financial reporting was effective as of December 31, 2011.2012.Company’sCompany's registered public accounting firm regarding internal control over financial reporting. Management’sManagement's report was not subject to attestation by the Company’sCompany's registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit the Company to provide only management’smanagement's report in this annual report.20112012 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.Other Information did not fail to file any Form 8-K or to disclose any information required to be disclosed therein during the fourth quarter of 2011.Item 10.Directors, Executive Officers, and Corporate GovernanceOptimumBank has a Code of Ethics that applies to its chief executive officer, chief operating officer, chief financial officer (who is also its chief accounting officer) and controller, a copy of which is incorporated by reference into this Form 10-K as Exhibit 14.1.controller. This Code of Ethics is also posted on our website atwww.optimumbank.com/corpgovernance.html.Thecontained under the sections captioned “Nominees”about them and “Executive Officers Who Are Not Directors” under “Proposal 1: Election of Directors and Management Information” and “The Board of Directors Meetings and Committees” under “Corporate Governance,” and “Section 16(a) Beneficial Ownership Reporting Compliance,”our directors will be included in the registrant’s definitive Proxy Statement for theour 2013 Annual Meeting of ShareholdersStockholders to be held on April 24, 2012, to30, 2013, which will be filed with the SEC pursuant to Regulation 14A within 120 days of the registrant'send of our fiscal year endended December 31, 2012 (the “Proxy“2013 Proxy Statement”), and is incorporated herein by reference.Item 11.Executive CompensationThe information contained under the sections captioned “Director Compensation,” “Executive Officer Compensation,” and “Certain Relationships and Related Transactions,” Information about our Audit Committee may be found in the Proxy Statement,Statement. That information is incorporated herein by reference.Item 12.Security Ownership of Certain Beneficial Owners ManagementThe information contained under the section captioned “Securitycompensation committee of our board of directors will be included in the 2013 Proxy Statement and is incorporated herein by reference.twoone compensation plansplan under which shares of our common stock were issuable at December 31, 2011-2012. This plan is our Stock Option Plan which terminated in February 2011 - and our 20112012 Equity Compensation Plan, each previously approved by our stockholders. The following table sets forth information as of December 31, 20112012 with respect to the number of shares of our common stock issuable pursuant to these plans.EQUITY COMPENSATION PLAN INFORMATION (a) (b) (c) Number of Securities
to be Issued Upon Exercise
of Outstanding Options
Warrants and Rights Weighted-Average
Exercise Price of
Outstanding
Options, Warrants
and
Rights Number of Securities
Remaining Available for
Future Issuance under
Equity Compensation
Plans (excluding
Securities Reflected
in Column (a) 50,900 $ 34.31 0 — — 2,200,000 50,900 $ 34.31 2,200,000 Item 13.Certain Relationships and Related Transactions, and Director Independencecontainedgenerally as of December 31, 2012, regarding securities to be issued on exercise of stock options, and securities remaining available for issuance under the section captioned “CertainCompany’s equity compensation plans that were in effect during fiscal 2012.Plan Category Number of securities to be issued upon exercise of outstanding options, warrants and rights Weighted average exercise price of outstanding options, warrants and rights Number of securities remaining available for future issuance under equity compensation plans Equity compensation plans approved by stockholders 27,356 $ 36.27 2,147,407 Equity compensation plans not approved by stockholders - - - Total 27,356 $ 36.27 2,147,407 “The Board of Directors Meetingsrelated transactions and Committees” under “Corporate Governance”director independence will be included in the 2013 Proxy Statement and is incorporated herein by reference.Item 14.Principal Accounting Fees and ServicesThe information contained under the section captioned “Independent Accountants”The financial statements of OptimumBank Holding, Inc. as of and for the years ended December 31, 2011 and 2010 are set forth in this Form 10-K as Exhibit 13.1 and contain the following information:Report of Independent Registered Public Accounting FirmConsolidated Balance Sheets, December 31, 2011 and 2010Consolidated Statements of Operations for the Years Ended December 31, 2011 and 2010Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2011 and 2010Consolidated Statements of Cash Flows for the Years Ended December 31, 2011 and 2010Notes to Consolidated Financial Statements, December 31, 2011 and 2010 and for the Years Then Ended(2)See3.2Articles of Amendment to the Articles of Incorporation, effective as of January 7, 2009 (incorporated by reference to Exhibit Index.3.2 to Annual Report on Form 10-K for the year ended December 31, 2008, filed with the SEC on March 31, 2009)3.3 Articles of Amendment to the Articles of Incorporation, effective as of November 5, 2010 (incorporated by reference to Exhibit 3.3 to the Current Report on Form 8-K, filed with the SEC on November 5, 2010) 3.4 Articles of Amendment to the Articles of Incorporation, effective as of September 29, 2011 (incorporated by reference from Current Report on Form 8-K, filed with the SEC on October 4, 2011) 4.3 Bylaws (incorporated by reference from Current Report on Form 8-K filed with the SEC on May 11, 2004) 4.1 Form of stock certificate (incorporated by reference from Quarterly Report on Form 10-QSB filed with the SEC on August 12, 2004) 10.1 Amended and Restated Stock Option Plan (incorporated by reference from Annual Report on Form 10-KSB filed with the SEC on March 31, 2006) 10.2 OptimumBank Holdings, Inc. 2011 Equity Incentive Plan (incorporated by reference from Current Report on Form 8-K filed with the SEC on January 3, 2012) 10.3 OptimumBank Holdings, Inc. Director Compensation Plan (incorporated by reference from Current Report on Form 10-K filed with the SEC on March 30, 2012) 10.4 Consent Order between OptimumBank, Federal Deposit Insurance Corporation and State of Florida Office of Financial Regulation dated April 16, 2010 (incorporated by reference from current report on Form 8-K filed with the SEC on April 26, 2010) 10.5 Written Agreement by and between OptimumBank Holdings, Inc. and Federal Reserve Bank of Atlanta dated June 22, 2010 (incorporated by reference from Quarterly Report on Form 10-Q filed with the SEC on November 15, 2010) 10.6 Amended and Restated Stock Purchase Agreement, dated as of December 5 2011, between OptimumBank Holdings, Inc. and Moishe Gubin (incorporated by reference from Current Report on Form 8-K filed with the SEC on December 9, 2011) 10.7 Amended and Restated Stock Purchase Agreement, dated as of March 22, 2013, between OptimumBank Holdings, Inc. and Moishe Gubin (incorporated by reference from Current Report on Form 8-K filed with the SEC on March 28, 2013) 10.8 Form of Registration Rights Agreement between OptimumBank Holdings, Inc. and Moishe Gubin (incorporated by reference from Current Report on Form 8-K filed with the SEC on October 31, 2011) 10.9 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) 14.1 Code of Ethics for Chief Executive Officer and Senior Financial Officers (incorporated by reference from Annual Report on Form 10-K filed with the SEC on March 31, 2010) 32.1 101.INS XBRL Instance Document 101.SCH XBRL Taxonomy Extension Schema Document 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF XBRL Taxonomy Extension Definition Linkbase Document 101.LAB XBRL Taxonomy Extension Label Linkbase Document 101.PRE XBRL Taxonomy Extension Presentation Linkbase Document SIGNATURES30th 4th day of March 2012.April, 2013./s/ Richard L. Browdy /s/ Thomas Procelli Richard L. BrowdyThomas Procelli, President and Chief Financial Officer(Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer)OfficerMarch 30, 2012.April 4, 2013.Signature Title Signature Title/s/ Richard L. BrowdyDirectorRichard L. Browdy Director and Chairman of the Board Moishe Gubin Director and Vice Chairman of the Board Sam Borek /s/ Wendy Mitchler /s/ Seth Gillman Director Wendy Mitchler /s/ Seth GillmanDirectorSeth Gillman /s/ Robert Acri /s/ Joel Klein Director Robert AcriJoel Klein ExhibitNo.Description of Exhibit 3.1Amended and Restated Articles of Incorporation 4.1Bylaws (incorporated by reference from Current Report on Form 8-K filed with the SEC on May 11, 2004) 4.2Form of stock certificate (incorporated by reference from Quarterly Report on Form 10- QSB filed with the SEC on August 12, 2004)10.1(a)OptimumBank Holdings, inc. Amended and Restated Stock Option Plan (incorporated by reference from Annual Report on Form 10-KSB filed with the SEC on March 31, 2006)10.2(a)OptimumBank Holdings, Inc. 2011 Equity Incentive Plan (incorporated by reference from Current Report on Form 8-K filed with the SEC on January 3, 2012)10.3(a)OptimumBank Holdings, Inc. Non-Employee Director Compensation Plan10.4Stipulation to Entry of Consent Order and Consent Order between OptimumBank, Federal Deposit Insurance Corporation and State of Florida Office of Financial Regulation dated April 16, 2010 (incorporated by reference from current report on Form 8-K filed with the SEC on April 26, 2010)10.5Written Agreement by and between OptimumBank Holdings, Inc. and Federal Reserve Bank of Atlanta dated June 22, 2010 (incorporated by reference from Quarterly Report on Form 10-Q filed with the SEC on November 15, 2010)10.6Amended and Restated Stock Purchase Agreement, dated as of December 5 2011, between OptimumBank Holdings, Inc. and Moishe Gubin10.7Form 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)10.8Form of Subscription Agreement between OptimumBank Holdings, Inc. and Related Parties (incorporated by reference from Current Report on Form 8-K/A filed with the SEC on November 2, 2011)13.1Consolidated Financial Statements of OptimumBank Holdings, Inc. and Report of Independent Registered Public Accounting Firm(a)Represents a management contract or compensatory plan or arrangement required to be filed as an exhibit.EXHIBIT INDEXExhibitNo.Description 14.1Code of Ethics for Chief Executive Officer and Senior Financial Officers (incorporated by reference from Annual Report on Form 10-K filed with the SEC on March 31, 2010) 21.1Subsidiaries of the Registrant31.1 32.1 101.INSXBRL Instance Document101.SCHXBRL Taxonomy Extension Schema Document101.CALXBRL Taxonomy Extension Calculation Linkbase Document101.LABXBRL Taxonomy Extension Label Linkbase Document101.PREXBRL Taxonomy Extension Presentation Linkbase Document101.DEFXBRL Taxonomy Extension Definition Linkbase Document36