UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31,June 30, 2008
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number 000-50755
OPTIMUMBANK HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
| Florida | 55-0865043 | |
(State or other jurisdiction of incorporation or organization) | (IRS Employer Identification No.) |
2477 East Commercial Boulevard, Fort Lauderdale, FL 33308
(Address of principal executive offices)
954-776-2332
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (check one):
| Large accelerated filer | ¨ | Accelerated filer | ¨ | |||
| Non-accelerated filer | ||||||
| Smaller reporting company | x | |||||
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date: 2,972,5073,120,992 shares of Common Stock, $.01 par value, issued and outstanding as of April 28,August 13, 2008
OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY
INDEX
OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY
Condensed Consolidated Balance Sheets
(Dollars in thousands, except per share amounts)
| June 30, 2008 | December 31, 2007 | |||||||||||||||
| March 31, 2008 | December 31, 2007 | |||||||||||||||
| (unaudited) | (unaudited) | |||||||||||||||
Assets | ||||||||||||||||
Cash and due from banks | $ | 509 | $ | 475 | $ | 409 | $ | 475 | ||||||||
Federal funds sold | 616 | 226 | — | 226 | ||||||||||||
Total cash and cash equivalents | 1,125 | 701 | 409 | 701 | ||||||||||||
Securities held to maturity (fair value of $75,748 and $58,117) | 77,118 | 58,471 | ||||||||||||||
Securities held to maturity (fair value of $75,368 and $58,117) | 78,143 | 58,471 | ||||||||||||||
Security available for sale | 245 | 244 | 240 | 244 | ||||||||||||
Loans, net of allowance for loan losses of $794 and $692 | 166,844 | 173,323 | ||||||||||||||
Loans, net of allowance for loan losses of $694 and $692 | 161,507 | 173,323 | ||||||||||||||
Federal Home Loan Bank stock | 3,389 | 2,965 | 3,551 | 2,965 | ||||||||||||
Premises and equipment, net | 3,216 | 3,249 | 3,175 | 3,249 | ||||||||||||
Foreclosed assets | 106 | 79 | 2,406 | 79 | ||||||||||||
Accrued interest receivable | 1,480 | 1,448 | 1,514 | 1,448 | ||||||||||||
Other assets | 947 | 1,067 | 953 | 1,067 | ||||||||||||
Total assets | $ | 254,470 | $ | 241,547 | $ | 251,898 | $ | 241,547 | ||||||||
Liabilities and Stockholders’ Equity | ||||||||||||||||
Liabilities: | ||||||||||||||||
Noninterest-bearing demand deposits | $ | 815 | $ | 1,304 | $ | 561 | $ | 1,304 | ||||||||
Savings, NOW and money-market deposits | 30,781 | 28,202 | 34,745 | 28,202 | ||||||||||||
Time deposits | 84,769 | 95,528 | 73,749 | 95,528 | ||||||||||||
Total deposits | 116,365 | 125,034 | 109,055 | 125,034 | ||||||||||||
Federal Home Loan Bank advances | 64,850 | 56,850 | 69,250 | 56,850 | ||||||||||||
Other borrowings | 41,800 | 28,900 | 41,948 | 28,900 | ||||||||||||
Junior subordinated debenture | 5,155 | 5,155 | 5,155 | 5,155 | ||||||||||||
Official checks | 2,695 | 2,251 | 2,723 | 2,251 | ||||||||||||
Other liabilities | 928 | 1,110 | 708 | 1,110 | ||||||||||||
Total liabilities | 231,793 | 219,300 | 228,839 | 219,300 | ||||||||||||
Stockholders’ equity: | ||||||||||||||||
Common stock, $.01 par value; 6,000,000 shares authorized, 2,972,507 shares issued and outstanding | 30 | 30 | ||||||||||||||
Common stock, $.01 par value; 6,000,000 shares authorized, 3,120,992 and 2,972,507 shares issued and outstanding | 31 | 30 | ||||||||||||||
Additional paid-in capital | 17,308 | 17,308 | 18,494 | 17,308 | ||||||||||||
Retained earnings | 5,342 | 4,913 | 4,542 | 4,913 | ||||||||||||
Accumulated other comprehensive loss | (3 | ) | (4 | ) | (8 | ) | (4 | ) | ||||||||
Total stockholders’ equity | 22,677 | 22,247 | 23,059 | 22,247 | ||||||||||||
Total liabilities and stockholders’ equity | $ | 254,470 | $ | 241,547 | $ | 251,898 | $ | 241,547 | ||||||||
See Accompanying Notes to Condensed Consolidated Financial Statements.
OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Earnings (Unaudited)
(Dollars in thousands, except per share amounts)
| Three Months Ended March 31, | Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||
| 2008 | 2007 | 2008 | 2007 | 2008 | 2007 | ||||||||||||||
Interest income: | |||||||||||||||||||
Loans | $ | 3,116 | $ | 3,323 | $ | 2,867 | $ | 3,238 | $ | 5,982 | $ | 6,561 | |||||||
Securities | 853 | 449 | 1,061 | 705 | 1,914 | 1,154 | |||||||||||||
Other | 56 | 55 | 52 | 62 | 109 | 117 | |||||||||||||
Total interest income | 4,025 | 3,827 | 3,980 | 4,005 | 8,005 | 7,832 | |||||||||||||
Interest expense: | |||||||||||||||||||
Deposits | 1,314 | 1,474 | 1,141 | 1,444 | 2,455 | 2,918 | |||||||||||||
Borrowings | 1,035 | 766 | 1,178 | 986 | 2,213 | 1,752 | |||||||||||||
Total interest expense | 2,349 | 2,240 | 2,319 | 2,430 | 4,668 | 4,670 | |||||||||||||
Net interest income | 1,676 | 1,587 | 1,661 | 1,575 | 3,337 | 3,162 | |||||||||||||
Provision for loan losses | 121 | 311 | |||||||||||||||||
(Credit) provision for loan losses | (7 | ) | 209 | 114 | 520 | ||||||||||||||
Net interest income after provision for loan losses | 1,555 | 1,276 | |||||||||||||||||
Net interest income after (credit) provision for loan losses | 1,668 | 1,366 | 3,223 | 2,642 | |||||||||||||||
Noninterest income: | |||||||||||||||||||
Service charges and fees | 42 | 15 | 32 | 11 | 73 | 26 | |||||||||||||
Loan prepayment fees | — | 68 | 5 | 142 | 5 | 210 | |||||||||||||
Litigation settlement | — | 150 | — | 5 | — | 155 | |||||||||||||
Other | — | 1 | 1 | 1 | 2 | 2 | |||||||||||||
Total noninterest income | 42 | 234 | 38 | 159 | 80 | 393 | |||||||||||||
Noninterest expenses: | |||||||||||||||||||
Salaries and employee benefits | 535 | 497 | 556 | 480 | 1,091 | 977 | |||||||||||||
Occupancy and equipment | 164 | 167 | 205 | 161 | 369 | 328 | |||||||||||||
Data processing | 43 | 48 | 40 | 36 | 83 | 84 | |||||||||||||
Professional fees | 70 | 57 | 71 | 69 | 141 | 126 | |||||||||||||
Insurance | 13 | 15 | 15 | 15 | 28 | 30 | |||||||||||||
Stationary and supplies | 8 | 12 | 5 | 10 | 13 | 22 | |||||||||||||
Other | 76 | 96 | 191 | 134 | 267 | 231 | |||||||||||||
Total noninterest expenses | 909 | 892 | 1,083 | 905 | 1,992 | 1,798 | |||||||||||||
Earnings before income taxes | 688 | 618 | 623 | 620 | 1,311 | 1,237 | |||||||||||||
Income taxes | 259 | 202 | 235 | 233 | 493 | 435 | |||||||||||||
Net earnings | $ | 429 | $ | 416 | $ | 388 | $ | 387 | $ | 818 | $ | 802 | |||||||
Net earnings per share: | |||||||||||||||||||
Basic | $ | .14 | $ | .14 | $ | .12 | $ | .12 | $ | .26 | $ | .26 | |||||||
Diluted | $ | .14 | $ | .14 | $ | .12 | $ | .12 | $ | .26 | $ | .25 | |||||||
Dividends per share | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||
See Accompanying Notes to Condensed Consolidated Financial Statements.
OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Stockholders’ Equity
ThreeSix Months Ended March 31,June 30, 2008 and 2007
(Dollars in thousands)
| Common Stock | Additional Paid-In Capital | Retained Earnings | Accumulated Other Comprehensive Loss | Total Stockholders’ Equity | Common Stock | �� | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Additional Paid-In Capital | Retained Earnings | Accumulated Other Comprehensive Loss | Total Stockholders’ Equity | |||||||||||||||||||||||
Balance at December 31, 2006 | 2,820,280 | $ | 28 | 15,930 | 4,474 | (9 | ) | 20,423 | 2,820,280 | $ | 28 | 15,930 | 4,474 | (9 | ) | 20,423 | ||||||||||||||
Comprehensive income- | ||||||||||||||||||||||||||||||
Net earnings for the three months ended March 31, 2007 (unaudited) | — | — | — | 416 | — | 416 | ||||||||||||||||||||||||
Comprehensive income: | ||||||||||||||||||||||||||||||
Net earnings for the six months ended June 30, 2007 (unaudited) | — | — | — | 802 | — | 802 | ||||||||||||||||||||||||
Net change in unrealized loss on security available for sale (unaudited) | — | — | — | — | (3 | ) | (3 | ) | ||||||||||||||||||||||
Balance at March 31, 2007 (unaudited) | 2,820,280 | $ | 28 | 15,930 | 4,890 | (9 | ) | 20,839 | ||||||||||||||||||||||
Comprehensive income (unaudited) | 799 | |||||||||||||||||||||||||||||
5% stock dividend (fractional shares paid in cash) (unaudited) | 140,889 | 2 | 1,300 | (1,303 | ) | — | (1 | ) | ||||||||||||||||||||||
Balance at June 30, 2007 (unaudited) | 2,961,169 | $ | 30 | 17,230 | 3,973 | (12 | ) | 21,221 | ||||||||||||||||||||||
Balance at December 31, 2007 | 2,972,507 | $ | 30 | 17,308 | 4,913 | (4 | ) | 22,247 | 2,972,507 | $ | 30 | 17,308 | 4,913 | (4 | ) | 22,247 | ||||||||||||||
Comprehensive income: | ||||||||||||||||||||||||||||||
Net earnings for the three months ended March 31, 2008 (unaudited) | — | — | — | 429 | — | 429 | ||||||||||||||||||||||||
Net earnings for the six months ended June 30, 2008 (unaudited) | — | — | — | 818 | — | 818 | ||||||||||||||||||||||||
Net change in unrealized loss on security available for sale (unaudited) | — | — | — | — | 1 | 1 | — | — | — | — | (4 | ) | (4 | ) | ||||||||||||||||
Comprehensive income (unaudited) | 430 | 814 | ||||||||||||||||||||||||||||
Balance at March 31, 2008 (unaudited) | 2,972,507 | $ | 30 | 17,308 | 5,342 | (3 | ) | 22,677 | ||||||||||||||||||||||
5% stock dividend (fractional shares paid in cash) (unaudited) | 148,485 | 1 | 1,186 | (1,189 | ) | — | (2 | ) | ||||||||||||||||||||||
Balance at June 30, 2008 (unaudited) | 3,120,992 | $ | 31 | 18,494 | 4,542 | (8 | ) | 23,059 | ||||||||||||||||||||||
See Accompanying Notes to Condensed Consolidated Financial Statements.
OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Cash Flows (Unaudited)
(In thousands)
| Three Months Ended March 31, | Six Months Ended June 30, | ||||||||||||||
| 2008 | 2007 | 2008 | 2007 | ||||||||||||
Cash flows from operating activities: | |||||||||||||||
Net earnings | $ | 429 | $ | 416 | $ | 818 | 802 | ||||||||
Adjustments to reconcile net earnings to net cash provided by operating activities: | |||||||||||||||
Depreciation and amortization | 52 | 58 | 103 | 114 | |||||||||||
Provision for loan losses | 121 | 311 | 114 | 520 | |||||||||||
Net amortization of fees, premiums and discounts | 180 | 13 | 374 | 105 | |||||||||||
Increase in accrued interest receivable | (32 | ) | (42 | ) | (66 | ) | (115 | ) | |||||||
Decrease (increase) in other assets | 120 | (775 | ) | 114 | (734 | ) | |||||||||
Increase in security purchased, not yet settled | — | 8,898 | |||||||||||||
Increase in official checks and other liabilities | 262 | 1,836 | 70 | 1,001 | |||||||||||
Net cash provided by operating activities | 1,132 | 10,715 | 1,527 | 1,693 | |||||||||||
Cash flows from investing activities: | |||||||||||||||
Purchases of securities held to maturity | (20,743 | ) | (19,862 | ) | (25,484 | ) | (24,680 | ) | |||||||
Principal repayments of securities held to maturity | 2,021 | 1,437 | 5,649 | 5,017 | |||||||||||
Net decrease (increase) in loans | 6,226 | (4,056 | ) | ||||||||||||
Purchases of premises and equipment | (19 | ) | (19 | ) | |||||||||||
Sale of premises and equipment | — | 565 | |||||||||||||
Decrease in loans | 9,164 | 8,764 | |||||||||||||
(Purchase) sale of premises and equipment | (29 | ) | 542 | ||||||||||||
(Purchase) redemption of Federal Home Loan Bank stock | (424 | ) | 65 | (586 | ) | 126 | |||||||||
Net cash used in investing activities | (12,939 | ) | (21,870 | ) | (11,286 | ) | (10,231 | ) | |||||||
Cash flows from financing activities: | |||||||||||||||
Net (decrease) increase in deposits | (8,669 | ) | 2,327 | ||||||||||||
Decrease in deposits | (15,979 | ) | (7,595 | ) | |||||||||||
Increase (decrease) in Federal Home Loan Bank advances | 12,400 | (3,400 | ) | ||||||||||||
Net increase in other borrowings | 12,900 | 10,500 | 13,048 | 20,950 | |||||||||||
Net increase (decrease) in Federal Home Loan Bank advances | 8,000 | (1,350 | ) | ||||||||||||
Fractional shares of stock dividend paid in cash | (2 | ) | (1 | ) | |||||||||||
Net cash provided by financing activities | 12,231 | 11,477 | 9,467 | 9,954 | |||||||||||
Net increase in cash and cash equivalents | 424 | 322 | |||||||||||||
Net (decrease) increase in cash and cash equivalents | (292 | ) | 1,416 | ||||||||||||
Cash and cash equivalents at beginning of the period | 701 | 1,604 | 701 | 1,604 | |||||||||||
Cash and cash equivalents at end of the period | $ | 1,125 | $ | 1,926 | $ | 409 | 3,020 | ||||||||
Supplemental disclosure of cash flow information: | |||||||||||||||
Cash paid during the period for: | |||||||||||||||
Interest | $ | 2,373 | $ | 2,288 | $ | 4,616 | 4,671 | ||||||||
Income taxes | $ | 80 | $ | 12 | $ | 700 | 802 | ||||||||
Noncash transactions: | |||||||||||||||
Noncash investing and financing activities: | |||||||||||||||
Change in accumulated other comprehensive loss, net change in unrealized loss on security available for sale | $ | 1 | $ | — | $ | (4 | ) | (3 | ) | ||||||
Common stock dividend | $ | 1,187 | 1,302 | ||||||||||||
Loans transferred to foreclosed assets | $ | 27 | $ | — | $ | 2,327 | — | ||||||||
See Accompanying Notes to Condensed Consolidated Financial Statements.
OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY
Notes to Condensed Consolidated Financial Statements (unaudited)
(1) General. OptimumBank Holdings, Inc. (the “Holding Company”) is a one-bank holding company and owns 100% of OptimumBank (the “Bank”), a state (Florida)-chartered commercial bank (collectively, the “Company”). The Holding Company’s only business is the operation of the Bank. The Bank’s deposits are insured by the Federal Deposit Insurance Corporation. The Bank offers a variety of community banking services to individual and corporate customers through its three banking offices located in Broward County, Florida.
| (1) | General. OptimumBank Holdings, Inc. (the “Holding Company”) is a one-bank holding company and owns 100% of OptimumBank (the “Bank”), a state (Florida)-chartered commercial bank (collectively, the “Company”). The Holding Company’s only business is the operation of the Bank. The Bank’s deposits are insured by the Federal Deposit Insurance Corporation. The Bank offers a variety of community banking services to individual and corporate customers through its three banking offices located in Broward County, Florida. |
In the opinion of the management, the accompanying condensed consolidated financial statements of the Company contain all adjustments (consisting principally of normal recurring accruals) necessary to present fairly the financial position at March 31,June 30, 2008, and the results of operations for the three- and six-month periods ended June 30, 2008 and 2007, and cash flows for the three-monthsix-months periods ended March 31,June 30, 2008 and 2007. The results of operations for the three and six months ended March 31,June 30, 2008, are not necessarily indicative of the results to be expected for the full year.
(2) Loan Impairment and Credit Losses.The activity in the allowance for loan losses was as follows (in thousands):
| (2) | Loan Impairment and Credit Losses.The activity in the allowance for loan losses was as follows (in thousands): |
| Three Months Ended March 31, | Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2008 | 2007 | 2008 | 2007 | 2008 | 2007 | |||||||||||||||||||
Balance at beginning of period | $ | 692 | $ | 974 | $ | 794 | $ | 1,113 | $ | 692 | $ | 974 | ||||||||||||
Charge-offs | (19 | ) | (172 | ) | (93 | ) | (586 | ) | (112 | ) | (758 | ) | ||||||||||||
Provision for loan losses | 121 | 311 | ||||||||||||||||||||||
(Credit) provision for loan losses | (7 | ) | 209 | 114 | 520 | |||||||||||||||||||
Balance at end of period | $ | 794 | $ | 1,113 | $ | 694 | $ | 736 | $ | 694 | $ | 736 | ||||||||||||
There were no impaired loans at December 31, 2007. The following summarizes the impaired loans at March 31,June 30, 2008, and 2007, which were collateral dependent (in thousands):
| At March 31, | ||||||||
| 2008 | 2007 | |||||||
Loans identified as impaired: | ||||||||
Gross loans with related allowance for losses recorded | $ | 2,520 | $ | 3,900 | ||||
Less: Allowance on these loans | (93 | ) | (350 | ) | ||||
| $ | 2,427 | $ | 3,550 | |||||
| At June 30, 2008 | |||
Loans identified as impaired- | |||
Gross loans with no related allowance for losses recorded | $ | 4,277 | |
(continued)
OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY
Notes to Condensed Consolidated Financial Statements (unaudited), Continued
(2) Loan Impairment and Credit Losses, Continued.The average net investment in the impaired loans and interest income recognized and received on the impaired loans during the three months ended March 31, 2008 and 2007 were as follows (in thousands):
| (2) | Loan Impairment and Credit Losses, Continued.The average net investment in impaired loans and interest income recognized and received on impaired loans is as follows (in thousands): |
| Three Months Ended March 31, | Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||
| 2008 | 2007 | 2008 | 2007 | 2008 | 2007 | |||||||||||||
Average net investment in impaired loans | $ | 1,618 | $ | 2,925 | $ | 1,578 | $ | 3,771 | $ | 1,588 | $ | 3,189 | ||||||
Interest income recognized on impaired loans | $ | — | $ | 39 | $ | — | $ | — | $ | — | $ | 39 | ||||||
Interest income received on impaired loans | $ | — | $ | 39 | $ | — | $ | — | $ | — | $ | 39 | ||||||
At March 31,June 30, 2008 and 2007, the Company had no loans over ninety days past due still accruing interest. Nonaccrual loans were as follows (in thousands):
| At March 31, | ||||||
| 2008 | 2007 | |||||
Nonaccrual loans | $ | 250 | $ | 108 | ||
(3) Regulatory Capital.The Bank is required to maintain certain minimum regulatory capital requirements. The following is a summary at March 31, 2008 of the regulatory capital requirements and the Bank’s capital on a percentage basis:
| At June 30, | ||||||
| 2008 | 2007 | |||||
Nonaccrual loans | $ | 276 | $ | 115 | ||
| Bank | Regulatory Requirement | |||||
Tier I capital to total average assets | 11.56 | % | 4.00 | % | ||
Tier I capital to risk-weighted assets | 17.88 | % | 4.00 | % | ||
Total capital to risk-weighted assets | 18.40 | % | 8.00 | % |
| (3) | Regulatory Capital.The Bank is required to maintain certain minimum regulatory capital requirements. The following is a summary at June 30, 2008 of the regulatory capital requirements and the Bank’s capital on a percentage basis: |
| Bank | Regulatory Requirement | |||||
Tier I capital to total average assets | 11.04 | % | 4.00 | % | ||
Tier I capital to risk-weighted assets | 18.14 | % | 4.00 | % | ||
Total capital to risk-weighted assets | 18.59 | % | 8.00 | % |
(continued)
OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY
Notes to Condensed Consolidated Financial Statements (unaudited), Continued
(4) Earnings Per Share.Basic earnings per share has been computed on the basis of the weighted-average number of shares of common stock outstanding during the period. Diluted earnings per share were computed based on the weighted average number of shares outstanding plus the effect of outstanding stock options, computed using the treasury stock method. All amounts reflect the 5% stock dividend declared in May 2007. Earnings per common share have been computed based on the following:
| (4) | Earnings Per Share. Basic earnings per share has been computed on the basis of the weighted-average number of shares of common stock outstanding during the period. Diluted earnings per share were computed based on the weighted-average number of shares outstanding plus the effect of outstanding stock options, computed using the treasury stock method. All amounts reflect the 5% stock dividends declared in May, 2008 and 2007. Earnings per common share have been computed based on the following: |
| Three Months Ended March 31, | ||||
| 2008 | 2007 | |||
Weighted average number of common shares outstanding used to calculate basic earnings per common share | 2,972,507 | 2,961,294 | ||
Effect of dilutive stock options | 62,853 | 97,893 | ||
Weighted average number of common shares outstanding used to calculate diluted earnings per common share | 3,035,360 | 3,059,187 | ||
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||
| 2008 | 2007 | 2008 | 2007 | |||||
Weighted-average number of common shares outstanding used to calculate basic earnings per common share | 3,120,992 | 3,109,227 | 3,120,992 | 3,109,227 | ||||
Effect of dilutive stock options | 61,649 | 77,351 | 62,534 | 81,838 | ||||
Weighted-average number of common shares outstanding used to calculate diluted earnings per common share | 3,182,641 | 3,186,578 | 3,183,526 | 3,191,065 | ||||
The following options were excluded from the calculation of earnings per share due to the exercise price being above the average market price:
| Number Outstanding | Exercise Price | Expire | |||||
For the three months ended March 31, 2008- | 254,678 | $ | 10.00-12.49 | 2014-2015 | |||
For the three months ended March 31, 2007- | 10,500 | $ | 12.49 | 2015 | |||
| Number Outstanding | Exercise Price | Expire | |||||
For the three and six months ended June 30, 2008- | |||||||
Options | 267,411 | $ | 9.52-11.90 | 2014-2015 | |||
For the three and six months ended June 30, 2007- | |||||||
Options | 271,464 | $ | 9.52-11.90 | 2014-2015 | |||
| (5) |
(continued)
OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY
Notes to Condensed Consolidated Financial Statements (unaudited), Continued
| (5) | Stock-Based Compensation, Continued.The Company established an Incentive Stock Option Plan (the “Plan”) for officers, directors and employees of the Company and reserved 600,686 (amended) shares of common stock for the plan. Both incentive stock options and nonqualified stock options may be granted under the plan. The exercise price of the stock options is determined by the board of directors at the time of grant, but cannot be less than the fair market value of the common stock on the date of grant. The options vest over three and five years. The options must be exercised within ten years from the date of grant. At June 30, 2008, 14,239 options were available for grant. |
A summary of the activity in the Company’s stock option plan is as follows. All amounts reflect the 5% stock dividend declared on May 29, 2008 (dollars in thousands, except per share amounts):
| Number of Options | Weighted- Average Exercise Price | Weighted- Average Remaining Contractual Term | Aggregate Intrinsic Value | |||||||
Outstanding and exercisable at December 31, 2007 and June 30, 2008 | 503,587 | $ | 7.68 | 5.1 years | $ | 601 | ||||
| (6) | Common Stock Dividend. On May 29, 2008, the Company’s board of directors declared a 5% stock dividend to shareholders of record on June 12, 2008 and paid on July 14, 2008. |
| (7) | Fair Value Measurements. On January 1, 2008, the Company adopted SFAS 157, “Fair Value Measurements.” SFAS 157, among other things, defines fair value, establishes a framework for measuring fair value and enhances disclosures about fair value measurements required under other accounting pronouncements, but does not change existing guidance as to whether or not an instrument is carried at fair value. The adoption of this statement had no effect on the Company’s financial statements. |
The following disclosures, which include certain disclosures that are generally not required in interim period financial statements, are included herein as a result of the adoption of SFAS 157.
The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. Currently, the Company has securities available for sale that are recorded at fair value on a recurring basis. Also from time to time the Company may be required to record at fair value other assets or liabilities on a non-recurring basis, such as impaired loans and foreclosed assets. These non-recurring fair value adjustments involve the application of lower-of-cost-or-market, accounting or write-downs of individual assets.
(continued)
OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY
Notes to Condensed Consolidated Financial Statements (unaudited), Continued
Level 1 – Valuation is based upon quoted prices for identical instruments in active markets. Level 2 – Valuation is based upon quoted prices for similar instruments traded in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which all significant assumptions are observable in the market. Level 3 – Valuation is generated from model-based techniques that use significant assumptions not observable in the market. These unobservable assumptions reflect the Company’s estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include the use of option pricing models, discounted cash flow models and similar techniques. The Outstanding and exercisable at December 31, 2007 and March 31, 2008 The Company The following describes valuation methodologies used for assets measured at fair value on a recurring and non-recurring basis. Securities Available for Sale.These (continued)(5) Stock-Based Compensation,(7) Fair Value Measurements, Continued. In accordance with SFAS 157, the Company groups its assets and liabilities at fair value in three levels, based on the markets in which the assets are traded and the reliability of the assumptions used to determine fair value. These levels are: Company establishedresults cannot be determined with precision and may not be realized in an Incentive Stock Option Plan (the “Plan”) for officers, directors and employeesactual sale or immediate settlement of the Company and reserved 572,082 (amended) shares of common stock for the plan. Both incentive stock options and nonqualified stock options may be granted under the plan. The exercise price of the stock options is determined by the board of directors at the time of grant, but cannot be less than the fair market value of the common stock on the date of grant. The options vest over three and five years. The options must be exercised within ten years from the date of grant. At March 31, 2008, 13,561 options were available for grant.A summary of the activity in the Company’s stock option plan is as follows. All amounts reflect the 5% stock dividend declared in May 2007. The Board of Directors did not adjust the exercise price of the stock options outstanding to reflect the 5% stock dividend (dollars in thousands, except per share amounts): Number
of
Options Weighted-
Average
Exercise
Price Weighted-
Average
Remaining
Contractual
Term Aggregate
Intrinsic
Value 479,607 $ 8.06 5.3 years $ 733 (6) Common Stock Dividend. On May 31, 2007, the Company’s board of directors declared a 5% stock dividend to shareholders of record on June 12, 2007 and paid on July 12, 2007.(7) Fair Value Measurements. Effective January 1, 2008, the Company adopted SFAS No. 157,Fair Value Measurements (“SFAS 157”). SFAS 157 clarifies the definition of fair value and describes methods available to appropriately measure fair value in accordance with generally accepted accounting principles. This statement applies whenever other accounting pronouncements requireasset or permit fair value measurements.liability.performs fair-market valuationsbases its fair value on certain assets as the resultprice that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. SFAS 157 requires the Company to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. In instances where the determination of the applicationfair value measurement is based on inputs from different levels of accounting guidelinesthe fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that were in effect prioris significant to the adoptionfair value measurement in its entirety. The Company’s assessment of SFAS 157. the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.assets include securities that are available for sale and are valued based upon open-market quotes obtained from reputable third-party brokers which is considered a Level I fair value measurement. Level I fair value measurements are quoted prices in active markets formarkets. For identical assets. Marketassets market pricing is based upon specific CUSIP identification for each individual security. Changes in fair value are recorded in other comprehensive income.
OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY
Notes to Condensed Consolidated Financial Statements (unaudited), Continued
| (7) | Fair Value Measurements, Continued. |
(7) Fair Value Measurements, Continued.Impaired Loans. Also effective January 1, 2008,A loan is considered impaired when, based upon current information and events, it is probable that we will be unable to collect all amounts due, including principal and interest, according to the contractual terms of the loan agreement. The Company’s impaired loans are normally collateral dependent and, as such, are carried at the lower of the Company’s net recorded investment in the loan or the estimated fair value of the collateral less estimated selling costs. Adjustments to the recorded investment are made through specific valuation allowances that are recorded as part of the overall allowances for loan losses. Estimates of fair value is determined based on a variety of information, including the use of available appraisals, estimates of market value by licensed appraisers or local real estate brokers and the knowledge and experience of the Company’s officers related to values of properties in the Company’s market areas. These officers take into consideration the type, location and occupancy of the property as well as current economic conditions in the area the property is located in assessing estimates of fair value. Accordingly, fair value estimates for impaired loans is classified as Level 3.
Foreclosed Assets.Foreclosed assets represents real estate acquired by the Company adopted SFAS 159,as a result of foreclosure or by deed in lieu of foreclosure and is carried, net of any allowance for losses if any, at the lower of cost or estimated fair value less estimated selling costs. Fair value is estimated in the same manner as impaired loans and, as such, is also classified as Level 3. As these properties are actively marketed, estimated fair value may be periodically adjusted through an allowance for losses to reflect decreases resulting from changing market conditions.
The Fair Value Option for Financial Assets and Financial Liabilities-Including an amendmentfollowing table provides the level of FASB Statement No. 115(“SFAS 159”). SFAS 159 provides companies with an optionvaluation assumptions used to report selected financialdetermine the carrying value of our assets and liabilitiesmeasured at fair value. Most of the provisions of this statement apply onlyvalue on a recurring and non-recurring basis at June 30, 2008 (in thousands).
| Net carrying value at June 30, 2008 | Total Losses(1) | ||||||||||||
| Total | Level 1 | Level 2 | Level 3 | Three-Months Ended June 30, 2008 | Six-Months Ended June 30, 2008 | ||||||||
Securities available for sale | $ | 240 | 240 | — | — | 5 | 4 | ||||||
Impaired loans | 4,277 | — | — | 4,277 | — | — | |||||||
Foreclosed assets(2) | 2,406 | — | — | 2,406 | — | 93 | |||||||
(1) | For securities available for sale, unrealized losses are recorded in accumulated other comprehensive loss. |
(2) | In August 2008, the Bank sold a foreclosed asset with a net carrying value of $2,300,000, realizing an additional loss of $293,000. |
(continued)
OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY
Notes to entities that elect the fair value option. However, the amendment to SFAS No. 115,Accounting for Certain Investments in Debt and Equity Securities, applies to all entities with available-for-sale and trading securities. SFAS 159 also establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar types of assets and liabilities. Management determined that this Statement had no material effect on the Company’s consolidated financial statements.Condensed Consolidated Financial Statements (unaudited), Continued
| (7) | Fair Value Measurements, Continued. Also effective January 1, 2008, the Company adopted SFAS 159,The Fair Value Option for Financial Assets and Financial Liabilities-Including an amendment of FASB Statement No. 115(“SFAS 159”). SFAS 159 provides companies with an option to report selected financial assets and liabilities at fair value. Most of the provisions of this statement apply only to entities that elect the fair value option. However, the amendment to SFAS No. 115,Accounting for Certain Investments in Debt and Equity Securities, applies to all entities with available-for-sale and trading securities. SFAS 159 also establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar types of assets and liabilities. Management determined that this Statement had no material effect on the Company’s consolidated financial statements. |
OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY
Review by Independent Registered Public Accounting Firm
Hacker, Johnson & Smith PA, the Company’s independent registered public accounting firm, have made a limited review of the interim financial data as of March 31,June 30, 2008, and for the three-monththree- and six-month periods ended March 31,June 30, 2008 and 2007, presented in this document, in accordance with standards established by the Public Company Accounting Oversight Board.
Their report furnished pursuant to Article 10 of Regulation S-X is included herein.
Report of Independent Registered Public Accounting Firm
OptimumBank Holdings, Inc.
Fort Lauderdale, Florida:
We have reviewed the accompanying condensed consolidated balance sheet of OptimumBank Holdings, Inc. and Subsidiary (the “Company”) as of March 31,June 30, 2008, and the condensed consolidated statements of earnings for the three- and six-month periods ended June 30, 2008 and 2007 and the related condensed consolidated statements of stockholders’ equity and cash flows for the three-monthsix-month periods ended March 31,June 30, 2008 and 2007. These interim financial statements are the responsibility of the Company’s management.
We conducted our reviews in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim condensed consolidated financial statements for them to be in conformity with U.S. generally accepted accounting principles.
We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board, the consolidated balance sheet as of December 31, 2007, and the related consolidated statements of earnings, stockholders’ equity and cash flows for the year then ended (not presented herein); and in our report dated March 21, 2008, we expressed an unqualified opinion on those financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2007, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.
/s/ Hacker, Johnson & Smith PA
HACKER, JOHNSON & SMITH PA
Fort Lauderdale, Florida
July 22, 2008
OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY
Item 2. Management’s Discussion and Analysis
of Financial Condition and Results of Operations
Comparison of March 31,June 30, 2008 and December 31, 2007
Liquidity and Capital Resources
The Company’s primary sources of cash during the threesix months ended March 31,June 30, 2008 were from an increase in other borrowings of approximately $12.9$13.0 million, an increase in Federal Home Loan Bank advances of approximately $8.0$12.4 million, principal repayments of securities held to maturity of approximately $2.0$5.6 million, net loan repayments of approximately $6.2$9.2 million and cash provided from operating activities of approximately $1.1$1.5 million. Cash was used primarily for purchases of securities of approximately $20.7$25.5 million and to fund deposit withdrawals of approximately $8.7$16.0 million. At March 31,June 30, 2008, the Company had time deposits of approximately $71.0$57.2 million that mature in one year or less. At March 31,June 30, 2008, the Company exceeded its regulatory liquidity requirements. Management believes that, if so desired, it can adjust the rates on time deposits to retain or attract deposits in a changing interest-rate environment.
The following table shows selected information for the periods ended or at the dates indicated:
| Three Months Ended March 31, 2008 | Year Ended December 31, 2007 | Three Months Ended March 31, 2007 | Six Months Ended June 30, 2008 | Year Ended December 31, 2007 | Six Months Ended June 30, 2007 | |||||||||||||
Average equity as a percentage of average assets | 9.44 | % | 8.96 | % | 9.18 | % | 9.25 | % | 8.96 | % | 8.97 | % | ||||||
Equity to total assets at end of period | 8.91 | % | 9.21 | % | 8.39 | % | 9.15 | % | 9.21 | % | 8.94 | % | ||||||
Return on average assets (1) | 0.72 | % | 0.73 | % | 0.74 | % | 0.67 | % | 0.73 | % | 0.69 | % | ||||||
Return on average equity (1) | 7.61 | % | 8.91 | % | 8.03 | % | 7.19 | % | 8.91 | % | 7.68 | % | ||||||
Noninterest expenses to average assets (1) | 1.52 | % | 1.57 | % | 1.58 | % | 1.62 | % | 1.57 | % | 1.63 | % | ||||||
| (1) | Annualized for the |
OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY
Item 2. Management’s Discussion and Analysis
of Financial Condition and Results of Operations, Continued
Off-Balance Sheet Arrangements
The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and undisbursed loans in process. These instruments involve, to varying degrees, elements of credit and interest-rate risk in excess of the amounts recognized in the condensed consolidated balance sheet. The contract or notional amounts of those instruments reflect the extent of the Company’s involvement in particular classes of 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 and undisbursed loans in process 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. Since many of the commitments are expected to expire without being drawn upon, the total committed amounts do not necessarily represent future cash requirements. The Company evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if it is deemed necessary by the Company upon extension of credit, is based on management’s credit evaluation of the counter party.
A summary of the amounts of the Company’s financial instruments, with off-balance sheet risk at March 31,June 30, 2008, follows (in thousands):
| Contract Amount | Contract Amount | |||||
Commitments to extend credit | $ | 2,450 | $ | 10,950 | ||
Undisbursed loans in process | $ | 9 | $ | 9 | ||
Management believes that the Company has adequate resources to fund all of its commitments and that substantially all its existing commitments will be funded in the next twelve months.
OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY
Results of Operations
The following table sets forth, for the periods indicated, information regarding (i) the total dollar amount of interest and dividend income of the Company from interest-earning assets and the resultant average yields; (ii) the total dollar amount of interest expense on interest-bearing liabilities and the resultant average cost; (iii) net interest income; (iv) interest-rate spread; (v) net interest margin; and (vi) ratio of average interest-earning assets to average interest-bearing liabilities.
| Three Months Ended June 30, | ||||||||||||||||||||||||||||||||||||
| Three Months Ended March 31, | 2008 | 2007 | ||||||||||||||||||||||||||||||||||
| 2008 | 2007 | Average Balance | Interest and Dividends | Average Yield/ Rate | Average Balance | Interest and Dividends | Average Yield/ Rate | |||||||||||||||||||||||||||||
| Average Balance | Interest and Dividends | Average Yield/ Rate | Average Balance | Interest and Dividends | Average Yield/ Rate | ($ in thousands) | ||||||||||||||||||||||||||||||
Interest-earning assets: | ||||||||||||||||||||||||||||||||||||
Loans | $ | 167,503 | 3,116 | 7.44 | % | $ | 179,695 | 3,323 | 7.40 | % | $ | 161,191 | $ | 2,867 | 7.11 | % | $ | 178,718 | $ | 3,238 | 7.25 | % | ||||||||||||||
Securities | 60,821 | 853 | 5.61 | 35,218 | 449 | 5.10 | 79,442 | 1,061 | 5.34 | 51,756 | 705 | 5.45 | ||||||||||||||||||||||||
Other (1) | 4,272 | 56 | 5.24 | 3,685 | 55 | 5.97 | 4,108 | 52 | 5.06 | 4,379 | 62 | 5.66 | ||||||||||||||||||||||||
Total interest-earning assets/interest income | 232,596 | 4,025 | 6.92 | 218,598 | 3,827 | 7.00 | 244,741 | 3,980 | 6.50 | 234,853 | 4,005 | 6.82 | ||||||||||||||||||||||||
Cash and due from banks | 393 | 386 | 556 | 239 | ||||||||||||||||||||||||||||||||
Premises and equipment | 3,233 | 3,772 | ||||||||||||||||||||||||||||||||||
Premise and equipment | 3,204 | 3,369 | ||||||||||||||||||||||||||||||||||
Other | 2,543 | 2,614 | 4,718 | 2,196 | ||||||||||||||||||||||||||||||||
Total assets | $ | 238,765 | $ | 225,370 | $ | 253,219 | $ | 240,657 | ||||||||||||||||||||||||||||
Interest-bearing liabilities: | ||||||||||||||||||||||||||||||||||||
Savings, NOW and money-market deposits | 28,783 | 271 | 3.77 | 26,783 | 286 | 4.27 | 33,851 | 269 | 3.18 | 26,487 | 296 | 4.47 | ||||||||||||||||||||||||
Time deposits | 89,191 | 1,043 | 4.68 | 101,876 | 1,188 | 4.66 | 79,413 | 872 | 4.39 | 96,768 | 1,148 | 4.75 | ||||||||||||||||||||||||
Borrowings (2) | 93,525 | 1,035 | 4.43 | 71,832 | 766 | 4.27 | 112,898 | 1,178 | 4.17 | 90,205 | 986 | 4.37 | ||||||||||||||||||||||||
Total interest-bearing liabilities/interest expense | 211,499 | 2,349 | 4.44 | 200,491 | 2,240 | 4.47 | 226,162 | 2,319 | 4.10 | 213,460 | 2,430 | 4.55 | ||||||||||||||||||||||||
Noninterest-bearing demand deposits | 1,264 | 1,206 | 729 | 2,150 | ||||||||||||||||||||||||||||||||
Other liabilities | 3,453 | 2,989 | 3,388 | 3,948 | ||||||||||||||||||||||||||||||||
Stockholders’ equity | 22,549 | 20,684 | 22,940 | 21,099 | ||||||||||||||||||||||||||||||||
Total liabilities and stockholders’ equity | $ | 238,765 | $ | 225,370 | $ | 253,219 | $ | 240,657 | ||||||||||||||||||||||||||||
Net interest income | $ | 1,676 | $ | 1,587 | $ | 1,661 | $ | 1,575 | ||||||||||||||||||||||||||||
Interest rate spread (3) | 2.48 | % | 2.53 | % | ||||||||||||||||||||||||||||||||
Interest-rate spread (3) | 2.40 | % | 2.27 | % | ||||||||||||||||||||||||||||||||
Net interest margin (4) | 2.88 | % | 2.90 | % | 2.71 | % | 2.68 | % | ||||||||||||||||||||||||||||
Ratio of average interest-earning assets to average interest-bearing liabilities | 1.10 | 1.09 | 1.08 | 1.10 | ||||||||||||||||||||||||||||||||
| (1) | Includes interest-earning deposits with banks, Federal funds sold, and Federal Home Loan Bank stock dividends. |
| (2) | Includes Federal Home Loan Bank advances, other borrowings and junior subordinated debenture. |
| (3) |
| (4) | Net interest margin is net interest income divided by average interest-earning assets. |
OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY
The following table sets forth, for the periods indicated, information regarding (i) the total dollar amount of interest and dividend income of the Company from interest-earning assets and the resultant average yields; (ii) the total dollar amount of interest expense on interest-bearing liabilities and the resultant average cost; (iii) net interest income; (iv) interest rate spread; (v) net interest margin; and (vi) ratio of average interest-earning assets to average interest-bearing liabilities.
| Six Months Ended June 30, | ||||||||||||||||||
| 2008 | 2007 | |||||||||||||||||
| Average Balance | Interest and Dividends | Average Yield/ Rate | Average Balance | Interest and Dividends | Average Yield/ Rate | |||||||||||||
| ($ in thousands) | ||||||||||||||||||
Interest-earning assets: | ||||||||||||||||||
Loans | $ | 164,347 | $ | 5,982 | 7.28 | % | $ | 179,207 | $ | 6,561 | 7.32 | % | ||||||
Securities | 70,132 | 1,914 | 5.46 | 43,487 | 1,154 | 5.31 | ||||||||||||
Other (1) | 4,190 | 109 | 5.20 | 4,032 | 117 | 5.80 | ||||||||||||
Total interest-earning assets/interest income | 238,669 | 8,005 | 6.71 | 226,726 | 7,832 | 6.91 | ||||||||||||
Cash and due from banks | 475 | 313 | ||||||||||||||||
Premises and equipment | 3,219 | 3,571 | ||||||||||||||||
Other | 3,629 | 2,404 | ||||||||||||||||
Total assets | $ | 245,992 | $ | 233,014 | ||||||||||||||
Interest-bearing liabilities: | ||||||||||||||||||
Savings, NOW and money-market deposits | 31,317 | 540 | 3.45 | 26,635 | 582 | 4.37 | ||||||||||||
Time deposits | 84,302 | 1,915 | 4.54 | 99,322 | 2,336 | 4.70 | ||||||||||||
Borrowings (2) | 103,212 | 2,213 | 4.29 | 81,019 | 1,752 | 4.32 | ||||||||||||
Total interest-bearing liabilities/interest expense | 218,831 | 4,668 | 4.27 | 206,976 | 4,670 | 4.51 | ||||||||||||
Noninterest-bearing demand deposits | 997 | 1,678 | ||||||||||||||||
Other liabilities | 3,419 | 3,468 | ||||||||||||||||
Stockholders’ equity | 22,745 | 20,892 | ||||||||||||||||
Total liabilities and stockholders’ equity | $ | 245,992 | $ | 233,014 | ||||||||||||||
Net interest income | $ | 3,337 | $ | 3,162 | ||||||||||||||
Interest-rate spread (3) | 2.44 | % | 2.40 | % | ||||||||||||||
Net interest margin (4) | 2.80 | % | 2.79 | % | ||||||||||||||
Ratio of average interest-earning assets to average interest-bearing liabilities | 1.09 | 1.10 | ||||||||||||||||
| (1) | Includes interest-earning deposits with banks, Federal funds sold, and Federal Home Loan Bank stock dividends. |
| (2) | Includes Federal Home Loan Bank advances, other borrowings and junior subordinated debenture. |
| (3) | Interest-rate spread represents the difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities. |
| (4) | Net interest margin is net interest income divided by average interest-earning assets. |
OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY
Comparison of the Three-Month Periods Ended March 31,June 30, 2008 and 2007
General. Net earnings for the three months ended March 31,June 30, 2008, were $429,000$388,000 or $.14$.12 per basic and diluted share compared to net earnings of $416,000$387,000 or $.14$.12 per basic and diluted share for the period ended March 31,June 30, 2007. The increase in the Company’s net earnings was primarily due to an increase in net interest income and a decrease in the provision for loan losses, partially offset by a decrease in noninterest income.
Interest Income. Interest income increased to $4.0 million for the three months ended March 31, 2008 from $3.8 million for the three months ended March 31, 2007. Interest income on loans decreased to $3.1$2.9 million due primarily to a decrease in the average loan portfolio balance for the three months ended March 31, 2008, partially offset by an increaseand a decrease in the average yield earned from 7.40%7.25% for the three months ended March 31,June 30, 2007 to 7.44%7.11% for the three months ended March 31,June 30, 2008. Interest income on securities increased to $853,000$1.1 due primarily to an increase in the average security balance forof the three months ended March 31,securities portfolio in 2008, and an increasepartially offset by a decrease in the average yield earned from 5.10%5.45% for the three months ended March 31,June 30, 2007, to 5.61%5.34% for the three months ended March 31,June 30, 2008.
Interest Expense.Interest expense on deposit accountsdeposits decreased to $1.3$1.1 million for the three months ended March 31,June 30, 2008, from $1.5$1.4 million for the three months ended March 31,June 30, 2007. Interest expense decreased primarily because of a decrease in the average balance of deposits and rates paid on deposits during 2008. Interest expense on borrowings increased to $1.0$1.2 million for the three months ended March 31,June 30, 2008 from $766,000$986,000 for the three months ended March 31,June 30, 2007 due to an increase in the average balance of borrowings.
(Credit) Provision for Loan Losses. Management’s periodic evaluation of the adequacy of the allowance is based upon historical experience, the volume and type of lending conducted by us, adverse situations that may affect the borrower’s ability to repay, estimated value of the underlying collateral, loans identified as impaired, general economic conditions, particularly as they relate to our market areas, and other factors related to the estimated collectibility of our loan portfolio. The allowance for loan losses totaled $694,000 or .43% of loans outstanding at June 30, 2008, compared to $736,000, or .43% of loans outstanding at June 30, 2007. Management believes the balance in the allowance for loan losses at June 30, 2008 is adequate. The (credit) provision for the three months ended June 30, 2008, was $(7,000) compared to $209,000 for the same period in 2007. In 2008 the credit is due to the decrease in the loan portfolio balance. In 2007, the provision was primarily to reflect the impairment in value of a collateral dependent single-family residential construction loan, which was paid off in June 2007, through the sale of the underlying property. The provision for loan losses is charged to earnings as losses are estimated to have occurred in order to bring the total allowance to a level deemed appropriate by management.
Noninterest Income. Total noninterest income decreased to $38,000 for the three months ended June 30, 2008, from $159,000 for the three months ended June 30, 2007, primarily due to a decrease in loan prepayment fees in 2008.
Noninterest Expenses. Total noninterest expenses increased to $1.1 million for the three months ended June 30, 2008 from $905,000 for the three months ended June 30, 2007, primarily due to the continued growth of the Company.
Income Taxes. Income taxes for the three months ended June 30, 2008, were $235,000 (an effective rate of 37.7%) compared to income taxes of $233,000 (an effective rate of 37.6%) for the three months ended June 30, 2007.
OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY
Comparison of the Six-Month Periods Ended June 30, 2008 and 2007
General. Net earnings for the six months ended June 30, 2008, were $818,000 or $.26 per basic and diluted share compared to net earnings of $802,000 or $.26 per basic and $.25 per diluted share for the period ended June 30, 2007.
Interest Income. Interest income increased to $8.0 million for the six months ended June 30, 2008 from $7.8 million for the six months ended June 30, 2007. Interest income on loans decreased to $6.0 million due primarily to a decrease in the average loan portfolio balance and a decrease in the average yield earned from 7.32% for the six months ended June 30, 2007 to 7.28% for the six months ended June 30, 2008. Interest on securities increased to $1.9 million due primarily to an increase in the average balance of the securities portfolio in 2008 and an increase in the average yield earned.
Interest Expense.Interest expense on deposits decreased to $2.5 million for the six months ended June 30, 2008, from $2.9 million for the six months ended June 30, 2007. Interest expense decreased primarily due to a decrease in the average balance of deposits and rates paid on deposits during 2008. Interest expense on borrowings increased to $2.2 million for the six months ended June 30, 2008 from $1.8 million for the six months ended June 30, 2007 due to an increase in the average balance of borrowings during 2007.
Provision for Loan Losses. The provision for the threesix months ended March 31,June 30, 2008, was $121,000$114,000 compared to $311,000$520,000 for the same period in 2007. In 2007, the provision was primarily to reflect the impairment in value of a collateral dependent single-family residential construction loan, which was paid off in June 2007, through the sale of the underlying property. The provision for loan losses is charged to earnings as losses are estimated to have occurred in order to bring the total allowance for loan losses to a level deemed appropriate by management. Management’s periodic evaluation of the adequacy of the allowance is based upon historical experience, the volume and type of lending conducted by us, adverse situations that may affect the borrower’s ability to repay, estimated value of the underlying collateral, loans identified as impaired, general economic conditions, particularly as they relate to our market areas, and other factors related to the estimated collectibility of our loan portfolio. The allowance for loan losses totaled $794,000$694,000 or .47%.43% of loans outstanding at March 31,June 30, 2008, compared to $1,113,000,$736,000, or .60%.43% of loans outstanding at March 31,June 30, 2007. Management believes the balance in the allowance for loan losses at March 31,June 30, 2008 is adequate.
Noninterest Income. Total noninterest income decreased to $42,000$80,000 for the threesix months ended March 31,June 30, 2008, from $234,000$393,000 for the threesix months ended March 31,June 30, 2007, primarily due to a litigation settlement of $150,000 in March 2007 and a decrease in loan prepayment fees of $68,000.in 2008 and a litigation settlement in 2007.
Noninterest Expenses. Total noninterest expenses increased to $909,000was $2.0 million for the threesix months ended March 31,June 30, 2008 from $892,000and $1.8 million for the threesix months ended March 31, 2007, primarilyJune 30, 2007. The increase was due to an increase in salaries and employee benefitsthe overall growth of $38,000.the Company.
Income Taxes. Income taxes for the threesix months ended March 31,June 30, 2008, were $259,000$493,000 (an effective rate of 37.6%) compared to income taxes of $202,000$435,000 (an effective rate of 32.7%35.2%) for the threesix months ended March 31,June 30, 2007.
OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY
| Item 3. | Controls and Procedures |
| a. | Evaluation of Disclosure Controls and Procedures. We maintain controls and procedures designed to ensure that information required to be disclosed in the reports that the Company files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. Based upon management’s evaluation of those controls and procedures performed within the 90 days preceding the filing of this Report, our Chief Executive Officer and Chief Financial Officer concluded that, as of |
| b. | Changes in Internal Controls. We have made no significant changes in our internal controls over financial reporting during the quarter ended |
| Item 4. | Submission of Matters to a Vote of Security Holders |
The Annual Meeting of the Shareholders (the “Annual Meeting”) of OptimumBank was held on April 24, 2008, to consider the election of directors each for a term of one year.
At the Annual Meeting, 2,475,338 shares were present in person or by proxy. The following is a summary and tabulation of the matters that were voted upon at the Annual Meeting:
Proposal I
The election of directors each for a term of one year is as follows:
| For | Withheld | |||
Albert J. Finch | 2,386,044 | 89,294 | ||
Richard L. Browdy | 2,353,934 | 121,404 | ||
Michael Bedzow | 2,467,862 | 7,476 | ||
Sam Borek | 2,474,236 | 1,102 | ||
Irving P. Cohen | 2,442,126 | 33,212 | ||
Gordon Deckelbaum | 2,474,236 | 1,102 | ||
H. David Krinsky | 2,474,236 | 1,102 | ||
Wendy Mitchler | 2,392,418 | 82,920 | ||
Larry R. Willis | 2,474,236 | 1,102 | ||
OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY
PART II. OTHER INFORMATION
| Item 6. | Exhibits |
The following exhibits are filed with or incorporated by reference into this report. The exhibits denominated by (i) an asterisk (*) were previously filed as a part of a Registration Statement on Form 10-SB under the Exchange Act, filed with the Federal Deposit Insurance Corporation on March 28, 2003; (ii) a double asterisk (**)were previously filed as part of a current report on Form 8-K filed with the Securities and Exchange Commission (“SEC”) on May 11, 2004; and (iv) a triple asterisk (***)were previously filed as part of a Quarterly Report on Form 10-QSB filed with the SEC on August 12, 2004; (v) a quadruple asterisk (****) were previously filed as part of an Annual Report on Form 10-KSB filed with the SEC on March 31, 2006; and (vi) a quintuple asterisk (*****) were previously filed as part of an Annual Report on Form 10-KSB filed with the SEC on March 31, 2008.
Exhibit No. | Description | |||
** | 3.1 | Articles of Incorporation | ||
** | 3.3 | Bylaws | ||
*** | 4.1 | Form of stock certificate | ||
**** | 10.1 | Amended and Restated Stock Option Plan | ||
* | 10.2 | Non-employee Directors’ Fee Compensation and Stock Purchase Plan | ||
* | 10.3 | Agreement between OptimumBank, Albert J. Finch and Richard L. Browdy dated June 14, 2002 | ||
***** | 14.1 | Code of Ethics for Chief Executive Officer and Senior Financial Officers | ||
| 31.1 | Certification of Chief Executive Officer required by Rule 13a-14(a)/15d-14(a) under the Exchange Act | |||
| 31.2 | Certification of Chief Financial Officer required by Rule 13a-14(a)/15d-14(a) under the Exchange Act | |||
| 32.1 | Certification of Chief Executive Officer under §906 of the Sarbanes-Oxley Act of 2002 | |||
| 32.2 | Certification of Chief Financial Officer under §906 of the Sarbanes-Oxley Act of 2002 | |||
OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY
PART II. OTHER INFORMATION
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| OPTIMUMBANK HOLDINGS, INC. | ||||||||
| (Registrant) | ||||||||
| Date: | August 13, 2008 | By: | /s/ Albert J. Finch | |||||
| Albert J. Finch, Chief Executive Officer | ||||||||
| Date: | August 13, 2008 | By: | /s/ Richard L. Browdy | |||||
| Richard L. Browdy, Chief Financial Officer | ||||||||
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