Item 2. Management’s Discussion and Analysis
of Financial Condition and Results of Operations
The following discussion should be read in conjunction
with the condensed consolidated financial statements and notes thereto presented elsewhere in this report. For additional information,
refer to the financial statements and footnotes for the year ended December 31, 2015 in the Annual Report on Form 10-K.
The following discussion and analysis should also be
read in conjunction with the financial statements and notes thereto appearing elsewhere in this report. This Quarterly Report on
Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. These forward-looking statements involve known and unknown risks and uncertainties,
many of which are beyond the control of the Company, including adverse changes in economic, political and market conditions, losses
from the Company’s lending activities and changes in market conditions, the possible loss of key personnel, the impact of
increasing competition, the impact of changes in government regulation, the possibility of liabilities arising from violations
of federal and state securities laws and the impact of changes in technology in the banking industry. Although the Company believes
that its forward-looking statements are based upon reasonable assumptions regarding its business and future market conditions,
there can be no assurances that the Company’s actual results will not differ materially from any results expressed or implied
by the Company’s forward-looking statements. The Company undertakes no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise. Readers are cautioned that any forward-looking
statements are not guarantees of future performance.
Regulatory Enforcement Actions
Bank Consent Order. On April 16, 2010, the Bank agreed
to the issuance of the Consent Order by the FDIC and the OFR (the “Consent Order”), which was amended on February 28,
2014. Under the Consent Order, the Bank is required to take certain measures to improve its capital position, reduce its level
of problem assets, reduce its loan concentrations in certain portfolios, improve management practices and board supervision and
assure that its reserve for loan losses is maintained at an appropriate level. The Consent Order requires the Bank to maintain
a Tier 1 leverage ratio of at least 8% and a total risk-based capital ratio of 12%. At June 30, 2016, the Bank had a Tier 1
leverage ratio of 7.54%, and a total risk-based capital ratio of 12.14%.
See Footnote 13 to the Consolidated Financial Statements
included in the Company’s 2015 Form 10-K for additional information concerning the requirements of the Consent Order.
During the second quarter of 2016, the Bank was
notified by the FDIC and the OFR that the Bank had not complied with certain of the terms of the Consent Order, and that the
Bank continues to exhibit weaknesses in its level of capital, loan quality, earnings, liquidity and sensitivity to market
risks. The FDIC and OFR also noted issues related to the management of the Bank, including issues with capital adequacy, risk
management, loan concentrations, operating deficits, compliance with the Consent Order, weaknesses in the Bank’s
customer related due diligence, insider conflicts of interest and regulatory compliance. As a result, the FDIC and the OFR
have indicated that they intend to pursue the implementation of a new consent order to address these issues.
Management believes that
the Bank has made substantial progress in improving its financial condition through a significant reduction in non-performing
assets and the receipt of capital increases from investors since the date of the original Consent Order. The Bank is also seeking
to address the other issues raised by the FDIC and the OFR, although the Bank has been hampered by difficulties in raising capital
due to the default under the Debenture and the limits placed on the Company and the Bank under the Consent Order and the Written
Agreement. Management intends to continue its efforts to meet all of the conditions of the Consent Order, the Written Agreement
and any amended Consent Order that may become effective in the future.
Company Written Agreement
with Reserve Bank. On June 22, 2010, the Company and the Reserve Bank entered into a Written Agreement with respect to certain
aspects of the operation and management of the Company The Written Agreement prohibits, without the prior approval of the Reserve
Bank, the payment of dividends, taking dividends or payments from the Bank, making any interest, principal or other distributions
on trust preferred securities (including the Debenture), incurring, increasing or guaranteeing any debt, purchasing or redeeming
any shares of stock, or appointing any new director or senior executive officer. Management believes that the Company is in substantial
compliance with the requirements of the Written Agreement.
Capital Levels
Quantitative measures established
by regulation and by the Consent Order to ensure capital adequacy require us to maintain minimum amounts and ratios (set forth
in the following table) of Total and Tier 1 capital to risk-weighted assets and Tier 1 capital to average assets. As of June 30,
2016, the Bank
met
the minimum applicable capital adequacy requirements
for Total Capital to Risk – Weighted Assets, but did not meet the requirement for Tier I Capital to Total Assets
.
OPTIMUMBANK HOLDINGS, INC.
AND SUBSIDIARY
Item 2. Management’s Discussion
and Analysis of Financial Condition and Results of Operations, (Continued)
The Bank’s
actual and required minimum capital ratios were as follows (in thousands):
Regulatory Capital
Requirements
|
|
|
|
|
|
|
|
Minimum
|
|
|
|
|
|
|
|
|
|
|
|
|
To Be Well
|
|
|
|
|
|
|
|
|
|
|
|
|
Capitalized Under
|
|
|
|
|
|
|
|
|
|
|
|
|
Prompt
|
|
|
|
|
|
|
|
|
|
For Capital
|
|
|
Corrective
|
|
|
Requirements of
|
|
|
|
Actual
|
|
|
Adequacy Purposes
|
|
|
Action Provisions
|
|
|
Consent Order
|
|
|
|
Amount
|
|
|
%
|
|
|
Amount
|
|
|
%
|
|
|
Amount
|
|
|
%
|
|
|
Amount
|
|
|
%
|
|
As of June 30, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Capital to Risk-
Weighted Assets
|
|
$
|
10,438
|
|
|
|
12.14
|
%
|
|
$
|
6,881
|
|
|
|
8.0
|
%
|
|
$
|
8,601
|
|
|
|
10.0
|
%
|
|
$
|
10,321
|
|
|
|
12.0
|
%
|
Tier I Capital to Risk-
Weighted Assets
|
|
|
9,324
|
|
|
|
10.84
|
|
|
|
5,161
|
|
|
|
6.0
|
|
|
|
6,881
|
|
|
|
8.0
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Common equity Tier I capital to Risk-Weighted Assets
|
|
|
9,324
|
|
|
|
10.84
|
|
|
|
3,870
|
|
|
|
4.5
|
|
|
|
5,591
|
|
|
|
6.5
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Tier I Capital to Total Assets
|
|
|
9,324
|
|
|
|
7.54
|
|
|
|
4,949
|
|
|
|
4.0
|
|
|
|
6,186
|
|
|
|
5.0
|
|
|
|
9,898
|
|
|
|
8.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Capital to Risk-
Weighted Assets
|
|
$
|
10,319
|
|
|
|
11.40
|
%
|
|
$
|
7,240
|
|
|
|
8.0
|
%
|
|
$
|
9,050
|
|
|
|
10.0
|
%
|
|
$
|
10,860
|
|
|
|
12.0
|
%
|
Tier I Capital to Risk-
Weighted Assets
|
|
|
9,173
|
|
|
|
10.14
|
|
|
|
5,430
|
|
|
|
6.0
|
|
|
|
7,240
|
|
|
|
8.0
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Common equity Tier I capital to Risk-Weighted Assets
|
|
|
9,173
|
|
|
|
10.14
|
|
|
|
4,073
|
|
|
|
4.5
|
|
|
|
5,883
|
|
|
|
6.5
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Tier I Capital to Total Assets
|
|
|
9,173
|
|
|
|
7.59
|
|
|
|
4,836
|
|
|
|
4.0
|
|
|
|
6,045
|
|
|
|
5.0
|
|
|
|
9,672
|
|
|
|
8.0
|
|
Financial Condition at
June 30, 2016 and December 31, 2015
Overview
The Bank’s
total assets decreased by $3.9 million to $123.6 million at June 30, 2016, from $127.5 million at December 31, 2015, primarily
due to a reduction in total loans and total deposits. Total stockholders’ equity increased approximately $700,000 at June
30, 2016 from $2,956,000 at December 31, 2015 to $3,660,000. The increase was due to an unrealized OCI gain of $224,000, the issuance
of $221,000 of common stock as compensation to directors and the sale of $449,000 in common and preferred stock to investors,
which offset the net loss of $331,000 for the six months ended June 30, 2016.
The following table
shows selected information for the periods ended or at the dates indicated:
|
|
Six Months
|
|
|
Six Months
|
|
|
Year
|
|
|
|
Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
Average equity as a percentage of average assets
|
|
|
2.59
|
%
|
|
|
2.40
|
%
|
|
|
2.45
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity to total assets at end of period
|
|
|
2.96
|
%
|
|
|
2.23
|
%
|
|
|
2.33
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return on average assets (1)
|
|
|
(0.54
|
%)
|
|
|
(.28
|
)%
|
|
|
(.13
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return on average equity (1)
|
|
|
(20.86
|
%)
|
|
|
(11.55
|
)%
|
|
|
(5.33
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest expenses to average assets (1)
|
|
|
3.69
|
%
|
|
|
3.37
|
%
|
|
|
3.64
|
%
|
|
(1) Annualized for the six months ended June 30, 2016
and 2015.
|
OPTIMUMBANK HOLDINGS, INC.
AND SUBSIDIARY
Item 2. Management’s Discussion
and Analysis of Financial Condition and Results of Operations, (Continued)
Liquidity and Sources
of Funds
The Bank’s
sources of funds include customer deposits, advances from the Federal Home Loan Bank of Atlanta (“FHLB”), principal
repayments and sales of investment securities, loan repayments, foreclosed real estate sales, the use of Federal Funds markets,
net earnings, if any, and loans taken out at the Federal Reserve Bank discount window.
Deposits are our
primary source of funds. In order to increase its core deposits, the Bank has priced its deposit rates competitively. The Bank
will adjust rates on its deposits to attract or retain deposits as needed. Under the Consent Order, the interest rate that the
Bank pays on its market area deposits is restricted. It is possible that the Bank could experience a decrease in deposit inflows,
or the migration of current deposits to competitor institutions, if other institutions offer higher interest rates than those
permitted to be offered by the Bank. Despite these yield limitations, we believe that we have the ability to adjust rates on our
deposits to attract or retain deposits as needed.
In addition to obtaining
funds from depositors, we may borrow funds from other financial institutions. At June 30, 2016, the Bank had outstanding borrowings
of $20.5 million, against its $31.7 million in established borrowing capacity with the FHLB. The Bank’s borrowing facility
is subject to collateral and stock ownership requirements, as well as prior FHLB consent to each advance. In 2010, the Bank obtained
an available discount window credit line with the Federal Reserve Bank, currently $765,800. The Federal Reserve Bank line is subject
to collateral requirements and must be repaid within 90 days; each advance is subject to prior Federal Reserve Bank consent. The
Bank also has a $2.5 million line of credit with SunTrust and $600,000 line of credit with Servis First Bank. We measure and monitor
our liquidity daily and believe our liquidity sources are adequate to meet our operating needs.
In the past, the
Company, on an unconsolidated basis, relied on dividends from the Bank to fund its operating expenses, primarily expenses of being
publicly held, and to make interest payments on the Company’s junior subordinated debenture (the “Debenture”).
Under the Consent Order, the Bank is currently unable to pay dividends to the Company without prior regulatory approval. Additionally,
under the Written Agreement, the Company may not pay interest payments on the Debenture or dividends on the Company’s common
stock, incur any additional indebtedness at the Company level, or redeem the Company’s common stock without the prior regulatory
approval of the Federal Reserve Bank. Since January 2010, the Company has deferred interest payments on the Debenture, which has
been in default since 2015. See “Junior Subordinated Debenture” below.
Off-Balance Sheet Arrangements
The Company is a
party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its
customers. These financial instruments are commitments to extend credit and may involve, to varying degrees, elements of credit
and interest-rate risk in excess of the amounts recognized in the condensed consolidated balance sheet. The contract amounts of
these instruments reflect the extent of the Company’s involvement in these financial instruments.
Commitments to extend
credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments
generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments
are expected to expire without being drawn upon, the total committed amounts do not necessarily represent future cash requirements.
The Company evaluates each customer’s creditworthiness on a case-by-case basis.
The amount of collateral
obtained, if it is deemed necessary by the Company upon extension of credit, is based on management’s credit evaluation
of the counter party. As of June 30, 2016, the Company had commitments to extend credit totaling $2.2 million.
OPTIMUMBANK HOLDINGS, INC.
AND SUBSIDIARY
Item 2. Management’s Discussion
and Analysis of Financial Condition and Results of Operations, (Continued)
Junior Subordinated Debenture
On September 30,
2004, the Company issued a $5,155,000 junior subordinated debenture to an unconsolidated subsidiary (the “Debenture”).
The Debenture has a term of thirty years. The interest rate was fixed at 6.4% for the first five years, and thereafter, the coupon
rate floats quarterly at the three-month LIBOR rate plus 2.45% (3.08% at June 30, 2016). The Debenture is redeemable in certain
circumstances. The terms of the Debenture allow the Company to defer payments of interest on the Debenture by extending the interest
payment period at any time during the term of the Debenture for up to twenty consecutive quarterly periods. Beginning in 2010,
the Company exercised its right to defer payment of interest on the Debenture. Interest payments deferred as of June 30, 2016
totaled $1,047,700. The Company has deferred interest payments with respect to the Debenture for the maximum allowable twenty
consecutive quarterly payments. The holder of the Debenture can accelerate the $5,155,000 principal balance as a result of this
default. Under the Written Agreement, the Company is not able to make these interest payments without the prior approval of the
Federal Reserve Bank of Atlanta. Regulatory approval to pay accrued and unpaid interest has been denied.
A Director of the
Company has offered to purchase the Debenture and this offer has been approved by certain equity owners of the Trust that holds
the Debenture. The Director has also agreed to enter into a forbearance agreement with the Company with respect to payments due
under the Debenture upon consummation of the Director’s purchase of the debenture. Although the Director tendered the purchase
price for the Debenture in 2014, the Trustee has received conflicting directions and therefore on December 11, 2014, the Trustee
commenced an Action for Interpleader in the United States District Court for the Southern District of New York. On August 31,
2015, the court held that the Trustee could not sell the Debenture to the Director because certain conditions and requirements
set forth in the indenture for the Trust had not been fulfilled. The Director has continued his efforts to acquire the Debenture.
To date, the Trustee has not accelerated the outstanding balance of the debenture. The Company continues to pursue mechanisms
for paying the accrued interest, such as raising additional capital.
In the event that
the amounts due under the Debenture were accelerated, then the Trustee could undertake legal proceedings to obtain a judgment
against the Company with respect to such amounts due under the Debenture. If this action were successful, then the Trustee could
seek to effect a sale of the Bank in order to pay the amounts due under the Debenture.
OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY
Item 2. Management’s Discussion and Analysis of Financial
Condition and Results of Operations, (Continued)
Results of Operations
The following table sets forth, for the periods
indicated, information regarding (i) the total dollar amount of interest and dividend income of the Company from interest-earning
assets and the resultant average yields; (ii) the total dollar amount of interest expense on interest-bearing liabilities and the
resultant average cost; (iii) net interest income; (iv) interest-rate spread; (v) net interest margin; and (vi) ratio of average
interest-earning assets to average interest-bearing liabilities.
|
|
Three Months Ended June 30,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
Average
Balance
|
|
|
Interest
and
Dividends
|
|
|
Average
Yield/
Rate
|
|
|
Average
Balance
|
|
|
Interest
and
Dividends
|
|
|
Average
Yield/
Rate
|
|
|
|
($ in thousands)
|
|
Interest-earning assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
|
|
$
|
85,141
|
|
|
$
|
1,054
|
|
|
|
4.95
|
%
|
|
$
|
83,361
|
|
|
$
|
967
|
|
|
|
4.64
|
%
|
Securities
|
|
|
23,621
|
|
|
|
124
|
|
|
|
2.10
|
|
|
|
26,751
|
|
|
|
145
|
|
|
|
2.17
|
|
Other (1)
|
|
|
12,330
|
|
|
|
27
|
|
|
|
0.88
|
|
|
|
1,960
|
|
|
|
20
|
|
|
|
4.08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-earning assets/interest income
|
|
|
121,092
|
|
|
|
1,205
|
|
|
|
3.98
|
|
|
|
112,072
|
|
|
|
1,132
|
|
|
|
4.04
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks
|
|
|
846
|
|
|
|
|
|
|
|
|
|
|
|
6,729
|
|
|
|
|
|
|
|
|
|
Premise and equipment
|
|
|
2,689
|
|
|
|
|
|
|
|
|
|
|
|
2,792
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
(905
|
)
|
|
|
|
|
|
|
|
|
|
|
7,063
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
123,722
|
|
|
|
|
|
|
|
|
|
|
$
|
128,656
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings, NOW and money-market deposits
|
|
$
|
23,925
|
|
|
|
30
|
|
|
|
.50
|
|
|
$
|
25,080
|
|
|
|
31
|
|
|
|
0.49
|
|
Time deposits
|
|
|
62,744
|
|
|
|
156
|
|
|
|
.99
|
|
|
|
60,555
|
|
|
|
131
|
|
|
|
0.87
|
|
Borrowings (2)
|
|
|
27,575
|
|
|
|
95
|
|
|
|
1.38
|
|
|
|
28,159
|
|
|
|
59
|
|
|
|
0.84
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing liabilities/ interest expense
|
|
|
114,244
|
|
|
|
281
|
|
|
|
.98
|
|
|
|
113,794
|
|
|
|
221
|
|
|
|
0.78
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-bearing demand deposits
|
|
|
4,208
|
|
|
|
|
|
|
|
|
|
|
|
9,348
|
|
|
|
|
|
|
|
|
|
Other liabilities
|
|
|
2,006
|
|
|
|
|
|
|
|
|
|
|
|
2,450
|
|
|
|
|
|
|
|
|
|
Stockholders’ equity
|
|
|
3,264
|
|
|
|
|
|
|
|
|
|
|
|
3,064
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders’ equity
|
|
$
|
123,722
|
|
|
|
|
|
|
|
|
|
|
$
|
128,656
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
|
|
|
$
|
924
|
|
|
|
|
|
|
|
|
|
|
$
|
911
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-rate spread (3)
|
|
|
|
|
|
|
|
|
|
|
3.00
|
%
|
|
|
|
|
|
|
|
|
|
|
3.26
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest margin (4)
|
|
|
|
|
|
|
|
|
|
|
3.05
|
%
|
|
|
|
|
|
|
|
|
|
|
3.25
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio of average interest-earning assets to average interest-bearing liabilities
|
|
|
1.06
|
|
|
|
|
|
|
|
|
|
|
|
0.98
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Includes interest-earning deposits with banks and Federal Home Loan Bank stock dividends.
|
|
(2)
|
Includes Federal Home Loan Bank advances, other borrowings and junior subordinated debenture.
|
|
(3)
|
Interest-rate spread represents the difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities.
|
|
(4)
|
Net interest margin is net interest income divided by average interest-earning assets.
|
OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARIES
Item 2. Management’s Discussion and
Analysis of Financial Condition and Results of Operations, (Continued)
|
|
Six Months Ended June 30,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
Average
Balance
|
|
|
Interest
and
Dividends
|
|
|
Average
Yield/
Rate
|
|
|
Average
Balance
|
|
|
Interest
and
Dividends
|
|
|
Average
Yield/
Rate
|
|
|
|
|
|
|
|
|
|
($ in thousands)
|
|
|
|
|
|
|
|
Interest-earning assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
|
|
$
|
83,750
|
|
|
$
|
2,074
|
|
|
|
4.95
|
%
|
|
$
|
81,228
|
|
|
$
|
1,854
|
|
|
|
4.56
|
%
|
Securities
|
|
|
23,792
|
|
|
|
251
|
|
|
|
2.11
|
|
|
|
27,357
|
|
|
|
307
|
|
|
|
2.24
|
|
Other (1)
|
|
|
11,537
|
|
|
|
50
|
|
|
|
0.87
|
|
|
|
1,905
|
|
|
|
38
|
|
|
|
3.99
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-earning assets/interest income
|
|
|
119,079
|
|
|
|
2,375
|
|
|
|
3.99
|
|
|
|
110,490
|
|
|
|
2,199
|
|
|
|
3.98
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks
|
|
|
876
|
|
|
|
|
|
|
|
|
|
|
|
8,763
|
|
|
|
|
|
|
|
|
|
Premise and equipment
|
|
|
2,693
|
|
|
|
|
|
|
|
|
|
|
|
2,808
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
(88
|
)
|
|
|
|
|
|
|
|
|
|
|
5,196
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
122,560
|
|
|
|
|
|
|
|
|
|
|
$
|
127,257
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings, NOW and money-market deposits
|
|
$
|
23,873
|
|
|
|
60
|
|
|
|
.50
|
|
|
$
|
25,049
|
|
|
|
62
|
|
|
|
0.50
|
|
Time deposits
|
|
|
63,770
|
|
|
|
308
|
|
|
|
.97
|
|
|
|
59,528
|
|
|
|
254
|
|
|
|
0.86
|
|
Borrowings (2)
|
|
|
25,718
|
|
|
|
170
|
|
|
|
1.31
|
|
|
|
28,049
|
|
|
|
116
|
|
|
|
0.83
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing liabilities/ interest expense
|
|
|
113,361
|
|
|
|
538
|
|
|
|
.95
|
|
|
|
112,626
|
|
|
|
432
|
|
|
|
0.77
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-bearing demand deposits
|
|
|
3,855
|
|
|
|
|
|
|
|
|
|
|
|
9,252
|
|
|
|
|
|
|
|
|
|
Other liabilities
|
|
|
2,170
|
|
|
|
|
|
|
|
|
|
|
|
2,333
|
|
|
|
|
|
|
|
|
|
Stockholders’ equity
|
|
|
3,174
|
|
|
|
|
|
|
|
|
|
|
|
3,048
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders’ equity
|
|
$
|
122,560
|
|
|
|
|
|
|
|
|
|
|
$
|
127,257
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
|
|
|
$
|
1,837
|
|
|
|
|
|
|
|
|
|
|
$
|
1,767
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-rate spread (3)
|
|
|
|
|
|
|
|
|
|
|
3.04
|
%
|
|
|
|
|
|
|
|
|
|
|
3.21
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest margin (4)
|
|
|
|
|
|
|
|
|
|
|
3.09
|
%
|
|
|
|
|
|
|
|
|
|
|
3.20
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio of average interest-earning assets to average interest-bearing liabilities
|
|
|
1.06
|
|
|
|
|
|
|
|
|
|
|
|
0.98
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Includes interest-earning deposits with banks and Federal Home Loan Bank stock dividends.
|
|
(2)
|
Includes Federal Home Loan Bank advances, other borrowings and junior subordinated debenture.
|
|
(3)
|
Interest-rate spread represents the difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities.
|
|
(4)
|
Net interest margin is net interest income divided by average interest-earning assets.
|
OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY
Item 2. Management’s Discussion and Analysis of Financial
Condition and Results of Operations, (Continued)
Comparison of the Three-Month Periods Ended
June 30, 2016 and 2015
General.
Net
loss for the three months ended June 30, 2016, was $(54,000) or $(0.05) per basic and diluted share compared to net earnings of
$6,000 or $0.01 per basic and diluted share for the three months ended June 30, 2015. This decrease in net earnings was due to
a combination a lower level of loan fees included in noninterest income and a higher professional fees and other non-interest expenses,
which offset higher net interest income.
Interest Income.
Interest income increased to $1.2 million for the three months ended June 30, 2016 from $1.1 million for the three months ended
June 30, 2015 due primarily to an increase in interest earnings assets.
Interest Expense.
Interest expense increased to $281,000 for the three months ended June 30, 2016 from $221,000 for the three months ended
June 30, 2015, due to higher interest paid on deposits and borrowing during 2016.
Provision for
Loan Losses.
There was no provision for the three months ended June 30, 2016 or June 30, 2015. The provision for loan losses
is charged to operations in order to bring the total allowance for loan losses to a level deemed appropriate by management to absorb
losses inherent in the portfolio. Management’s periodic evaluation of the adequacy of the allowance is based upon historical
experience, the volume and type of lending conducted by us, adverse situations that may affect the borrower’s ability to
repay, estimated value of the underlying collateral, loans identified as impaired, general economic conditions, particularly as
they relate to our market areas, and other factors related to the estimated collectability of our loan portfolio. The allowance
for loan losses totaled $4.2 million or 5.11% of loans outstanding at June 30, 2016, compared to $2.2 million, or 2.71% of loans
outstanding at June 30, 2015. Management believes the balance in the allowance for loan losses at June 30, 2016 is adequate.
Noninterest
Income.
Total noninterest income decreased to $46,000 from $100,000 for the three months ended June 30, 2016, compared
to the three months ended June 30, 2015. The decrease was due to nonrecurring loan fees recognized in 2015.
Noninterest
Expenses.
Total noninterest expenses remained at approximately $1.0 million for the three months ended June 30, 2016 compared
to the three months ended June 30, 2015.
Comparison of the Six-Month Periods Ended
June 30, 2016 and 2015
General.
Net
loss for the six months ended June 30, 2016, was $(331,000) or $(0.33) loss per basic and diluted share compared to a net loss
of $(176,000) or $(0.19) loss per basic and diluted share for the three months ended June 30, 2015. The increase in net loss was
due to a combination of higher professional fees and other non-interest expenses and a lower level of loan fees included in noninterest
income, which offset higher net interest income.
Interest Income.
Interest income increased to $2,375,000 for the six months ended June 30, 2016 from $2,199,000 for the six months ended June 30,
2015, primarily due to an increase in interest earnings assets.
Interest Expense.
Interest expense on deposits and borrowings increased $538,000 for the six months ended June 30, 2016 from $432,000 for
the six months ended June 30, 2015. Interest expense increased primarily due to higher interest paid on deposits and borrowing
during 2016.
Provision for
Loan Losses.
There was no provision for the six months ended June 30, 2016 or 2015. The provision for loan losses is charged
to operations in order to bring the total allowance for loan losses to a level deemed appropriate by management to absorb losses
inherent in the portfolio. Management’s periodic evaluation of the adequacy of the allowance is based upon historical experience,
the volume and type of lending conducted by us, adverse situations that may affect the borrower’s ability to repay, estimated
value of the underlying collateral, loans identified as impaired, general economic conditions, particularly as they relate to our
market areas, and other factors related to the estimated collectability of our loan portfolio. The allowance for loan losses totaled
$4.2 million or 5.11% of loans outstanding at June 30, 2016, compared to $2.2 million, or 2.71% of loans outstanding at June 30,
2015. Management believes the balance in the allowance for loan losses at June 30, 2016 is adequate.
OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY
Item 2. Management’s Discussion and Analysis of Financial
Condition and Results of Operations, (Continued)
Noninterest
Income.
Total noninterest income decreased to $93,000 from $200,000 for the six months ended June 30, 2016, compared to
the six months ended June 30, 2015 primarily due to nonrecurring loan fees recognized in 2015.
Noninterest
Expenses.
Total noninterest expenses increased to $2,261,000 for the six months ended June 30, 2016 compared to $2,143,000
for the six months ended June 30, 2015, primarily due to increased professional fees.