Item
1. Financial Statements
Condensed
Consolidated Balance Sheets
(Dollars in thousands, except per share amounts)
|
|
June
30, 2017
|
|
|
December
31, 2016
|
|
|
|
(Unaudited)
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
Cash
and due from banks
|
|
|
19,552
|
|
|
$
|
17,563
|
|
Interest-bearing
deposits with banks
|
|
|
184
|
|
|
|
77
|
|
Total
cash and cash equivalents
|
|
|
19,736
|
|
|
|
17,640
|
|
Securities
available for sale
|
|
|
19,161
|
|
|
|
20,222
|
|
Loans,
net of allowance for loan losses of $3,895 and $3,915
|
|
|
69,256
|
|
|
|
76,999
|
|
Federal
Home Loan Bank stock
|
|
|
979
|
|
|
|
1,113
|
|
Premises
and equipment, net
|
|
|
2,608
|
|
|
|
2,648
|
|
Accrued
interest receivable
|
|
|
343
|
|
|
|
380
|
|
Other
assets
|
|
|
672
|
|
|
|
701
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
|
112,755
|
|
|
$
|
119,703
|
|
Liabilities
and Stockholders’ Equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
Noninterest-bearing
demand deposits
|
|
|
7,597
|
|
|
|
7,131
|
|
Savings,
NOW and money-market deposits
|
|
|
22,258
|
|
|
|
22,153
|
|
Time
deposits
|
|
|
51,795
|
|
|
|
56,725
|
|
|
|
|
|
|
|
|
|
|
Total
deposits
|
|
|
81,650
|
|
|
|
86,009
|
|
|
|
|
|
|
|
|
|
|
Federal
Home Loan Bank advances
|
|
|
20,500
|
|
|
|
23,500
|
|
Junior
subordinated debenture
|
|
|
5,155
|
|
|
|
5,155
|
|
Advanced
payment by borrowers for taxes and insurance
|
|
|
494
|
|
|
|
221
|
|
Official
checks
|
|
|
194
|
|
|
|
114
|
|
Other
liabilities
|
|
|
2,089
|
|
|
|
1,623
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities
|
|
|
110,082
|
|
|
|
116,622
|
|
|
|
|
|
|
|
|
|
|
Commitments
and contingencies (Notes 1, 8 and 9)
|
|
|
|
|
|
|
|
|
Stockholders’ equity:
|
|
|
|
|
|
|
|
|
Preferred
stock, no par value; 6,000,000 shares authorized, 7 shares issued and outstanding in 2017 and 2016
|
|
|
—
|
|
|
|
—
|
|
Common
stock, $.01 par value; 5,000,000 shares authorized, 1,103,447 shares issued and outstanding in 2017 and 2016
|
|
|
11
|
|
|
|
11
|
|
Additional
paid-in capital
|
|
|
34,039
|
|
|
|
34,039
|
|
Accumulated
deficit
|
|
|
(31,169
|
)
|
|
|
(30,717
|
)
|
Accumulated
other comprehensive loss
|
|
|
(208
|
)
|
|
|
(252
|
)
|
|
|
|
|
|
|
|
|
|
Total
stockholders’ equity
|
|
|
2,673
|
|
|
|
3,081
|
|
Total
liabilities and stockholders’ equity
|
|
|
112,755
|
|
|
$
|
119,703
|
|
See
accompanying notes to condensed consolidated financial statements.
OPTIMUMBANK
HOLDINGS, INC. AND SUBSIDIARY
Condensed
Consolidated Statements of Operations (Unaudited)
(in thousands, except per share amounts)
|
|
Three
Months Ended
|
|
|
Six
Months Ended
|
|
|
|
June
30,
|
|
|
June
30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
|
|
$
|
955
|
|
|
$
|
1,054
|
|
|
$
|
1,999
|
|
|
$
|
2,074
|
|
Securities
|
|
|
101
|
|
|
|
124
|
|
|
|
210
|
|
|
|
251
|
|
Other
|
|
|
58
|
|
|
|
27
|
|
|
|
97
|
|
|
|
50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
interest income
|
|
|
1,114
|
|
|
|
1,205
|
|
|
|
2,306
|
|
|
|
2,375
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
176
|
|
|
|
186
|
|
|
|
356
|
|
|
|
368
|
|
Borrowings
|
|
|
137
|
|
|
|
95
|
|
|
|
237
|
|
|
|
170
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
interest expense
|
|
|
313
|
|
|
|
281
|
|
|
|
593
|
|
|
|
538
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
interest income
|
|
|
801
|
|
|
|
924
|
|
|
|
1,713
|
|
|
|
1,837
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision
for loan losses
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
interest income after provision for loan losses
|
|
|
801
|
|
|
|
924
|
|
|
|
1,713
|
|
|
|
1,837
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service
charges and fees
|
|
|
5
|
|
|
|
22
|
|
|
|
11
|
|
|
|
41
|
|
Gain
on sale of securities available for sale
|
|
|
—
|
|
|
|
17
|
|
|
|
—
|
|
|
|
45
|
|
Other
|
|
|
3
|
|
|
|
7
|
|
|
|
5
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
noninterest income
|
|
|
8
|
|
|
|
46
|
|
|
|
16
|
|
|
|
93
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries
and employee benefits
|
|
|
436
|
|
|
|
487
|
|
|
|
878
|
|
|
|
955
|
|
Occupancy
and equipment
|
|
|
102
|
|
|
|
108
|
|
|
|
202
|
|
|
|
235
|
|
Data
processing
|
|
|
86
|
|
|
|
86
|
|
|
|
166
|
|
|
|
173
|
|
Professional
fees
|
|
|
177
|
|
|
|
170
|
|
|
|
392
|
|
|
|
329
|
|
Insurance
|
|
|
24
|
|
|
|
25
|
|
|
|
47
|
|
|
|
52
|
|
Foreclosed
real estate, net
|
|
|
—
|
|
|
|
8
|
|
|
|
—
|
|
|
|
36
|
|
Regulatory
assessment
|
|
|
51
|
|
|
|
74
|
|
|
|
102
|
|
|
|
147
|
|
Other
|
|
|
101
|
|
|
|
66
|
|
|
|
394
|
|
|
|
334
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
noninterest expenses
|
|
|
977
|
|
|
|
1,024
|
|
|
|
2,181
|
|
|
|
2,261
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss
|
|
$
|
(168
|
)
|
|
$
|
(54
|
)
|
|
$
|
(452
|
)
|
|
$
|
(331
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss per share-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted
|
|
$
|
(0.16
|
)
|
|
$
|
(0.06
|
)
|
|
$
|
(0.41
|
)
|
|
$
|
(0.33
|
)
|
See
accompanying notes to condensed consolidated financial statements.
OPTIMUMBANK
HOLDINGS, INC. AND SUBSIDIARY
Condensed
Consolidated Statements of Comprehensive (Loss) Income (Unaudited)
(In thousands)
|
|
Three
Months Ended
|
|
|
Six
Months Ended
|
|
|
|
June
30,
|
|
|
June
30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(168
|
)
|
|
$
|
(54
|
)
|
|
$
|
(452
|
)
|
|
$
|
(331
|
)
|
Other
comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized
gains on securities available for sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized
gain arising during the period
|
|
|
45
|
|
|
|
126
|
|
|
|
71
|
|
|
|
407
|
|
Reclassification
adjustment for realized gains on securities available for sale
|
|
|
—
|
|
|
|
(17
|
)
|
|
|
—
|
|
|
|
(45
|
)
|
Net
change in unrealized holding loss
|
|
|
45
|
|
|
|
109
|
|
|
|
71
|
|
|
|
362
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
income taxes on above change
|
|
|
17
|
|
|
|
43
|
|
|
|
27
|
|
|
|
138
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
other comprehensive income
|
|
|
28
|
|
|
|
66
|
|
|
|
44
|
|
|
|
224
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
(loss) income
|
|
$
|
(140
|
)
|
|
$
|
12
|
|
|
$
|
(408
|
)
|
|
$
|
(107
|
)
|
See
accompanying notes to condensed consolidated financial statements.
OPTIMUMBANK
HOLDINGS, INC. AND SUBSIDIARY
Condensed
Consolidated Statements of Stockholders’ Equity (Unaudited)
Six
Months Ended June 30, 2017 and 2016
(Dollars
in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
Comprehensive
|
|
|
Total
|
|
|
|
Preferred
Stock
|
|
|
Common
Stock
|
|
|
Paid-In
|
|
|
Accumulated
|
|
|
Income
|
|
|
Stockholders’
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
(Loss)
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at December 31, 2015
|
|
|
4
|
|
|
$
|
—
|
|
|
|
9,628,863
|
|
|
$
|
96
|
|
|
$
|
33,330
|
|
|
$
|
(30,321
|
)
|
|
$
|
(138
|
)
|
|
$
|
2,967
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reverse
common stock split (1-for-10) (unaudited)
|
|
|
—
|
|
|
|
—
|
|
|
|
(8,665,694
|
)
|
|
|
(87
|
)
|
|
|
87
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds
from sale of Preferred stock (unaudited)
|
|
|
3
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
75
|
|
|
|
—
|
|
|
|
—
|
|
|
|
75
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds
from sale of common stock (unaudited)
|
|
|
—
|
|
|
|
—
|
|
|
|
92,980
|
|
|
|
1
|
|
|
|
374
|
|
|
|
—
|
|
|
|
—
|
|
|
|
375
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock issued as compensation to directors (unaudited)
|
|
|
—
|
|
|
|
—
|
|
|
|
51,649
|
|
|
|
1
|
|
|
|
221
|
|
|
|
—
|
|
|
|
—
|
|
|
|
222
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock issued for services (unaudited)
|
|
|
—
|
|
|
|
—
|
|
|
|
36,118
|
|
|
|
—
|
|
|
|
128
|
|
|
|
—
|
|
|
|
—
|
|
|
|
128
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss for the six months ended June 30, 2016 (unaudited)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(331
|
)
|
|
|
—
|
|
|
|
(331
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
change in unrealized loss on securities available for sale, net of taxes (unaudited)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
224
|
|
|
|
224
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at June 30, 2016 (unaudited)
|
|
|
7
|
|
|
$
|
—
|
|
|
|
1,143,916
|
|
|
$
|
11
|
|
|
$
|
34,215
|
|
|
$
|
(30,652
|
)
|
|
$
|
86
|
|
|
$
|
3,660
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at December 31, 2016
|
|
|
7
|
|
|
$
|
—
|
|
|
|
1,103,447
|
|
|
$
|
11
|
|
|
$
|
34,039
|
|
|
$
|
(30,717
|
)
|
|
$
|
(252
|
)
|
|
$
|
3,081
|
|
Net
loss for the six months ended June 30, 2017 (unaudited)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(452
|
)
|
|
|
—
|
|
|
|
(452
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
change in unrealized loss on securities available for sale, net of taxes (unaudited)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
44
|
|
|
|
44
|
|
Balance
at June 30, 2017 (unaudited)
|
|
|
7
|
|
|
$
|
—
|
|
|
|
1,103,447
|
|
|
$
|
11
|
|
|
$
|
34,039
|
|
|
$
|
(31,169
|
)
|
|
$
|
(208
|
)
|
|
$
|
2,673
|
|
See
accompanying notes to condensed consolidated financial statements
OPTIMUMBANK
HOLDINGS, INC. AND SUBSIDIARY
Condensed
Consolidated Statements of Cash Flows (Unaudited)
(In
thousands)
|
|
Six
Months Ended
|
|
|
|
June
30,
|
|
|
|
2017
|
|
|
2016
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(452
|
)
|
|
$
|
(331
|
)
|
Adjustments
to reconcile net loss to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
72
|
|
|
|
78
|
|
Gain
on sale of securities available for sale
|
|
|
—
|
|
|
|
(45
|
)
|
Net
amortization of fees, premiums and discounts
|
|
|
235
|
|
|
|
115
|
|
Common
stock issued as compensation to directors
|
|
|
—
|
|
|
|
222
|
|
Common
stock issued as compensation for services
|
|
|
—
|
|
|
|
128
|
|
Decrease/(increase)
in other assets
|
|
|
2
|
|
|
|
(136
|
)
|
Decrease in accrued interest receivable
|
|
|
37
|
|
|
|
112
|
|
Increase/(decrease)
in official checks and other liabilities
|
|
|
546
|
|
|
|
(38
|
)
|
|
|
|
|
|
|
|
|
|
Net
cash provided by operating activities
|
|
|
440
|
|
|
|
105
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
Purchase
of securities available for sale
|
|
|
—
|
|
|
|
(8,985
|
)
|
Principal
repayments of securities available for sale
|
|
|
1,011
|
|
|
|
1,891
|
|
Net
decrease in loans
|
|
|
7,629
|
|
|
|
3,128
|
|
Proceeds
from sale of securities available for sale
|
|
|
—
|
|
|
|
9,848
|
|
Purchase
of premises and equipment, net
|
|
|
(32)
|
|
|
|
(81
|
)
|
Proceeds
from sale of foreclosed real estate, net
|
|
|
—
|
|
|
|
1,617
|
|
Redemption/(purchase)
of Federal Home Loan Bank stock
|
|
|
134
|
|
|
|
(51
|
)
|
|
|
|
|
|
|
|
|
|
Net
cash provided by investing activities
|
|
|
8,742
|
|
|
|
7,367
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
Net
decrease in deposits
|
|
|
(4,359
|
)
|
|
|
(5,430
|
)
|
Net
increase in advance payments by borrowers for taxes and insurance
|
|
|
273
|
|
|
|
307
|
|
Proceeds
from sale of common stock
|
|
|
—
|
|
|
|
375
|
|
Proceeds
from sale of preferred stock
|
|
|
—
|
|
|
|
75
|
|
Net
(decrease) increase in FHLB Advances
|
|
|
(3,000
|
)
|
|
|
500
|
|
|
|
|
|
|
|
|
|
|
Net
cash used in financing activities
|
|
|
(7,086
|
)
|
|
|
(4,173
|
)
|
|
|
|
|
|
|
|
|
|
Net
increase in cash and cash equivalents
|
|
|
2,096
|
|
|
|
3,299
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents at beginning of the period
|
|
|
17,640
|
|
|
|
10,365
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents at end of the period
|
|
$
|
19,736
|
|
|
$
|
13,664
|
|
See
accompanying notes to condensed consolidated financial statements
OPTIMUMBANK
HOLDINGS, INC. AND SUBSIDIARY
Condensed
Consolidated Statements of Cash Flows (Unaudited), Continued
(In
thousands)
|
|
Six
Months Ended
June 30,
|
|
|
|
2017
|
|
|
2016
|
|
Supplemental
disclosure of cash flow information:
|
|
|
|
|
|
|
Cash
paid during the period for:
|
|
|
|
|
|
|
Interest
|
|
$
|
497
|
|
|
$
|
446
|
|
|
|
|
|
|
|
|
|
|
Income
taxes
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
Noncash
transaction -
|
|
|
|
|
|
|
|
|
Change
in accumulated other comprehensive loss, net change in unrealized loss on securities available for sale
|
|
$
|
44
|
|
|
$
|
224
|
|
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 Florida-chartered commercial bank. The Bank’s wholly-owned subsidiaries are OB Real Estate
Management, LLC and OB Real Estate Holdings, LLC, both of which were formed in 2009; OB Real Estate Holdings 1692 and OB Real
Estate Holdings 1704 formed in 2012, collectively, (the “Real Estate Holding Subsidiaries”). The Holding Company’s
only business is the operation of the Bank and its subsidiaries (collectively, the “Company”). The Bank’s
deposits are insured up to applicable limits by the Federal Deposit Insurance Corporation (“FDIC”). The Bank offers
a variety of community banking services to individual and corporate customers through its three banking offices located in
Broward County, Florida. OB Real Estate Management, LLC is primarily engaged in managing foreclosed real estate. This subsidiary
had no activity in 2017 and 2016. All other subsidiaries are primarily engaged in holding and disposing of foreclosed real
estate.
|
|
|
|
Basis
of Presentation
.
In the opinion of management, the accompanying condensed consolidated financial statements of the
Company contain all adjustments (consisting principally of normal recurring accruals) necessary to present fairly the financial
position at June 30, 2017, and the results of operations and comprehensive (loss) income for the three and six month periods
ended June 30, 2017 and 2016, and cash flows for the six month periods ending June 30, 2017 and 2016. The results of operations
for the three and six months ended June 30, 2017 are not necessarily indicative of the results to be expected for the full
year.
|
|
|
|
Going
Concern Status
.
The Company is in default with respect to its $5,155,000 Junior
Subordinated Debenture (“Debenture”) due to its failure to make certain required
interest payments under the Debenture. The Trustee of the Debenture (the “Trustee”)
or the holders of the Debenture are entitled to accelerate the payment of the $5,155,000
principal balance plus accrued and unpaid interest totaling $1,255,587 at June
30, 2017. To date the Trustee has not accelerated the outstanding balance of the Debenture.
No adjustments to the accompanying condensed consolidated financial statements have been
made as a result of this uncertainty.
Management’s
plans with regard to this matter are as follows: A Director of the Company has offered to purchase the Debenture and this
offer has been approved by certain equity owners of the Trust that holds the Debenture. The Director has also agreed to
enter into a forbearance agreement with the Company with respect to payments due under the Debenture upon consummation
of the Director’s purchase of the Debenture.
In
March 2016, the Trustee received a direction from certain equity owners of the Trust that holds the Debenture to sell
the Debenture to a Director of the Company. Based upon the receipt of conflicting directions from other debt holders of
the Trust, in August 2016, the Trustee commenced an action in a Minnesota State Court seeking directions from the Court.
The case was subsequently transferred to United States District Court for the Southern District of New York, where the
case is currently pending. The Company continues to pursue mechanisms for paying the accrued interest, such as raising
additional capital.
|
|
|
|
Comprehensive
(Loss) Income
GAAP generally requires that recognized revenue, expenses, gains and losses be included in net
loss. Although certain changes in assets and liabilities, such as unrealized gains and losses on available for sale securities,
are reported as a separate component of the equity section of the condensed consolidated balance sheets, such items along
with net loss, are components of comprehensive (loss) income. The only component of comprehensive (loss) income
is the net change in the unrealized loss on the securities available for sale.
|
|
|
|
Income
Taxes.
The Company assessed its earnings history and trends and estimates of future earnings, and determined that
the deferred tax asset could not be realized as of June 30, 2017. Accordingly, a valuation allowance was recorded against
the net deferred tax asset.
|
|
(continued)
|
OPTIMUMBANK
HOLDINGS, INC. AND SUBSIDIARY
Notes
to Condensed Consolidated Financial Statements (Unaudited)
(1)
|
General,
Continued.
|
|
Recent
Pronouncements.
In January 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting
Standards Update (“ASU”) 2016-01,
Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement
of Financial Assets and Financial Liabilities
, which is intended to enhance the reporting model for financial
instruments to provide users of financial statements with more decision-useful information. The ASU requires equity investments
to be measured at fair value with changes in fair values recognized in net earnings, simplifies the impairment assessment
of equity investments without readily determinable fair values by requiring a qualitative assessment to identity impairment
and eliminates the requirement to disclose fair values, the methods and significant assumptions used to estimate the fair
value of financial instruments measured at amortized cost. The ASU also clarifies that the Company should evaluate the
need for a valuation allowance on a deferred tax asset related to available for-sale debt securities in combination with
the Company’s other deferred tax assets. The ASU is effective for the Company beginning January 1, 2018. Early adoption
is permitted. The adoption of this guidance is not expected to have a material impact on the Company’s condensed
consolidated financial statements.
In
February 2016, the FASB issued ASU 2016-2,
Leases (Topic 842)
which will require lessees to recognize on
the balance sheet the assets and liabilities for the rights and obligations created by those leases with term of more
than twelve months. Consistent with current GAAP, the recognition, measurement, and presentation of expenses and cash
flows arising from a lease by a lessee primarily will depend on its classification as a finance or operating lease. The
new ASU will require both types of leases to be recognized on the balance sheet. The ASU also will require disclosures
to help investors and other financial statement users better understand the amount, timing, and uncertainty of cash flows
arising from leases. These disclosures include qualitative and quantitative requirements, providing additional information
about the amounts recorded in the financial statements. The ASU is effective for fiscal years and interim periods within
those fiscal years beginning after December 15, 2018. The Company is in the process of determining the effect of the ASU
on its condensed consolidated financial statements. Early application will be permitted.
In
March 2016, the FASB issued ASU No. 2016-09,
Compensation-Stock Compensation (Topic 718)
intended to improve the
accounting for employee share-based payments. The ASU affects all organizations that issue share-based payment awards
to their employees. The ASU simplifies several aspects of the accounting for share-based payment award transactions, including
the income tax consequences, classification of awards as either equity or liabilities, and classification on the consolidated
statement of cash flows. The ASU will take effect for annual periods beginning after December 15, 2016, and interim periods
within those annual periods. The Company has evaluated the effect of ASU and determined it has no material effect on its
condensed consolidated financial statements.
In
June 2016, the FASB issued ASU No. 2016-13
Financial Instruments-Credit Losses (Topic 326).
The ASU improves
financial reporting by requiring timelier recording of credit losses on loans and other financial instruments held by
the Company. The ASU requires the Company to measure all expected credit losses for financial assets held at the reporting
date based on historical experience, current conditions, and reasonable and supportable forecasts. Many of the loss estimation
techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full
amount of expected credit losses. The Company will continue to use judgment to determine which loss estimation method
is appropriate for their circumstances. The ASU requires enhanced disclosures to help investors and other financial statement
users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality
and underwriting standards of an organization’s portfolio. These disclosures include qualitative and quantitative
requirements that provide additional information about the amounts recorded in the financial statements. Additionally,
the ASU amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with
credit deterioration. The ASU will take effect for fiscal years, and interim periods within those fiscal years, beginning
after December 15, 2019. Early adoption is permitted. The Company is in the process of determining the effect of the ASU
on its condensed consolidated financial statements.
|
|
|
|
In March 2017, FASB issued ASU 2017-08,
Receivables-Nonrefundable
Fees and Other Costs (Subtopic 310-20)
which amends the accounting for the amortization of premiums for certain purchased
callable debt securities by shortening the amortization period to the earliest call date. ASU 2017-08 is effective for interim
and annual periods beginning after December 15, 2019. The Company is currently evaluating the impact of ASU 2017-08 may have,
if any, on its condensed consolidated financial statements.
|
|
|
|
In
May 2017, the FASB issued new guidance related to Stock Compensation, Scope of Modification
Accounting. The new guidance provides clarity and reduces both diversity in practice
and cost and complexity when applying the guidance in Accounting Standards Codification
Topic 718, Compensation—Stock Compensation. An entity will not apply modification
accounting to a share-based payment award if all of the following are the same immediately
before and after the change: (i) the award’s fair value, (ii) the award’s
vesting conditions and (iii) the award’s classification as an equity or liability
instrument. The amendments are effective for fiscal years and interim periods within
those years beginning after December 15, 2017. Early adoption is permitted. The Company
is in the process of determining the effect of the amendments on its condensed consolidated
financial statements.
|
|
|
|
Reclassification.
Certain amounts have been reclassified to conform to the 2017 condensed consolidated financial statement presentation.
|
|
|
(continued)
OPTIMUMBANK
HOLDINGS, INC. AND SUBSIDIARY
Notes
to Condensed Consolidated Financial Statements (Unaudited)
(2)
|
Securities.
Securities have been classified according to management’s intent. The carrying amount of securities and approximate
fair values are as follows (in thousands):
|
|
|
Amortized
Cost
|
|
|
Gross
Unrealized
Gains
|
|
|
Gross
Unrealized
Losses
|
|
|
Fair
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
June 30, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities
Available for Sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
Collateralized
mortgage obligations
|
|
$
|
9,576
|
|
|
$
|
—
|
|
|
$
|
(311
|
)
|
|
$
|
9,265
|
|
SBA
Pool Securities
|
|
|
9,919
|
|
|
|
8
|
|
|
|
(31
|
)
|
|
|
9,896
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
19,495
|
|
|
$
|
8
|
|
|
$
|
(342
|
)
|
|
$
|
19,161
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
December 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities
Available for Sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
Collateralized
mortgage obligations
|
|
$
|
10,157
|
|
|
$
|
—
|
|
|
$
|
(405
|
)
|
|
$
|
9,752
|
|
SBA
Pool Securities
|
|
|
10,470
|
|
|
|
—
|
|
|
|
—
|
|
|
|
10,470
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
20,627
|
|
|
$
|
—
|
|
|
$
|
(405
|
)
|
|
$
|
20,222
|
|
The
following summarizes the sales of securities (in thousands):
|
|
Three
Months Ended June 30,
|
|
|
Six
Months Ended June 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds
from sales of securities
|
|
$
|
—
|
|
|
$
|
2,857
|
|
|
$
|
—
|
|
|
$
|
9,848
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
gains from sale of securities
|
|
|
—
|
|
|
|
17
|
|
|
|
—
|
|
|
|
45
|
|
Gross
losses from sale of securities
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
gain from sales of securities
|
|
$
|
—
|
|
|
$
|
17
|
|
|
$
|
—
|
|
|
$
|
45
|
|
Securities
with gross unrealized losses, aggregated by investment category and length of time that individual securities have been in a continuous
loss position, is as follows (in thousands):
|
|
At
June 30, 2017
|
|
|
|
Over
Twelve Months
|
|
|
Less
Than Twelve Months
|
|
|
|
Gross
Unrealized
Losses
|
|
|
Fair
Value
|
|
|
Gross
Unrealized
Losses
|
|
|
Fair
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities
Available for Sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
Collateralized
mortgage obligations
|
|
$
|
(93
|
)
|
|
$
|
1,988
|
|
|
$
|
(218
|
)
|
|
$
|
7,277
|
|
SBA
Pool Securities
|
|
|
—
|
|
|
|
—
|
|
|
|
(31
|
)
|
|
|
7,592
|
|
|
|
$
|
(93
|
)
|
|
$
|
1,988
|
|
|
$
|
(249
|
)
|
|
$
|
14,869
|
|
|
|
At
December 31, 2016
|
|
|
|
Over
Twelve Months
|
|
|
Less
Than Twelve Months
|
|
|
|
Gross
Unrealized
Losses
|
|
|
Fair
Value
|
|
|
Gross
Unrealized
Losses
|
|
|
Fair
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities
Available for Sale-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collateralized
mortgage obligations
|
|
$
|
(46
|
)
|
|
$
|
864
|
|
|
$
|
(359
|
)
|
|
$
|
8,888
|
|
(continued)
OPTIMUMBANK
HOLDINGS, INC. AND SUBSIDIARY
Notes
to Condensed Consolidated Financial Statements (Unaudited)
(2)
|
Securities,
Continued.
Management
evaluates securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic
or market concerns warrants such evaluation. Consideration is given to (1) the length of time and the extent to which
the fair value has been less than cost, (2) the financial condition and near-term prospectus of the issuer, and (3) the
intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for
any anticipated recovery in fair value.
At
June 30, 2017 and December 31, 2016, the unrealized losses on twenty investment securities and six investment securities,
respectively were caused by market conditions. It is expected that the securities would not be settled at a price less
than the book value of the investments. Because the decline in fair value is attributable to market conditions and not
credit quality, and because the Company has the ability and intent to hold these investments until a market price recovery
or maturity, these investments are not considered other-than-temporarily impaired.
|
|
|
|
(continued)
|
OPTIMUMBANK
HOLDINGS, INC. AND SUBSIDIARY
Notes
to Condensed Consolidated Financial Statements (Unaudited)
(3)
|
Loans.
The components of loans are as follows (in thousands):
|
|
|
At
June 30, 2017
|
|
|
At
December 31, 2016
|
|
|
|
|
|
|
|
|
Residential
real estate
|
|
$
|
26,801
|
|
|
$
|
27,334
|
|
Multi-family
real estate
|
|
|
6,173
|
|
|
|
5,829
|
|
Commercial
real estate
|
|
|
30,304
|
|
|
|
29,264
|
|
Land
and construction
|
|
|
2,825
|
|
|
|
5,681
|
|
Commercial
|
|
|
5,510
|
|
|
|
10,514
|
|
Consumer
|
|
|
1,216
|
|
|
|
1,829
|
|
|
|
|
|
|
|
|
|
|
Total
loans
|
|
|
72,829
|
|
|
|
80,451
|
|
|
|
|
|
|
|
|
|
|
Add
(deduct):
|
|
|
|
|
|
|
|
|
Net
deferred loan fees, costs and premiums
|
|
|
322
|
|
|
|
463
|
|
Allowance
for loan losses
|
|
|
(3,895
|
)
|
|
|
(3,915
|
)
|
|
|
|
|
|
|
|
|
|
Loans,
net
|
|
$
|
69,256
|
|
|
$
|
76,999
|
|
(continued)
OPTIMUMBANK
HOLDINGS, INC. AND SUBSIDIARY
Notes
to Condensed Consolidated Financial Statements (Unaudited)
(3)
|
Loans,
Continued.
An analysis of the change in the allowance for loan losses follows (in thousands):
|
|
|
Residential
Real Estate
|
|
|
Multi-Family
Real Estate
|
|
|
Commercial
Real Estate
|
|
|
Land
and
Construction
|
|
|
Commercial
|
|
|
Consumer
|
|
|
Unallocated
|
|
|
Total
|
|
Three
Months Ended June 30, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning
balance
|
|
$
|
302
|
|
|
$
|
73
|
|
|
$
|
818
|
|
|
$
|
65
|
|
|
$
|
126
|
|
|
$
|
152
|
|
|
$
|
2,379
|
|
|
$
|
3,915
|
|
(Credit)
provision for loan losses
|
|
|
—
|
|
|
|
(11
|
)
|
|
|
(49
|
)
|
|
|
(10
|
)
|
|
|
(59
|
)
|
|
|
22
|
|
|
|
107
|
|
|
|
—
|
|
Charge-offs
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(31
|
)
|
|
|
—
|
|
|
|
(31
|
)
|
Recoveries
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
6
|
|
|
|
—
|
|
|
|
5
|
|
|
|
—
|
|
|
|
11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending
balance
|
|
$
|
302
|
|
|
$
|
62
|
|
|
$
|
769
|
|
|
$
|
61
|
|
|
$
|
67
|
|
|
$
|
148
|
|
|
$
|
2,486
|
|
|
$
|
3,895
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended June 30, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning
balance
|
|
$
|
266
|
|
|
$
|
40
|
|
|
$
|
1,175
|
|
|
$
|
81
|
|
|
$
|
210
|
|
|
$
|
151
|
|
|
$
|
2,157
|
|
|
$
|
4,080
|
|
(Credit)
provision for loan losses
|
|
|
(4
|
)
|
|
|
(1
|
)
|
|
|
(404
|
)
|
|
|
(23
|
)
|
|
|
(10
|
)
|
|
|
92
|
|
|
|
350
|
|
|
|
—
|
|
Charge-offs
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(90
|
)
|
|
|
—
|
|
|
|
(90
|
)
|
Recoveries
|
|
|
—
|
|
|
|
—
|
|
|
|
241
|
|
|
|
6
|
|
|
|
—
|
|
|
|
3
|
|
|
|
—
|
|
|
|
250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending
balance
|
|
$
|
262
|
|
|
$
|
39
|
|
|
$
|
1,012
|
|
|
$
|
64
|
|
|
$
|
200
|
|
|
$
|
156
|
|
|
$
|
2,507
|
|
|
$
|
4,240
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six
Months Ended June 30, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning
balance
|
|
$
|
310
|
|
|
$
|
58
|
|
|
$
|
787
|
|
|
$
|
120
|
|
|
$
|
188
|
|
|
$
|
165
|
|
|
$
|
2,287
|
|
|
$
|
3,915
|
|
(Credit)
provision for loan losses
|
|
|
(8
|
)
|
|
|
4
|
|
|
|
(18
|
)
|
|
|
(71
|
)
|
|
|
(121
|
)
|
|
|
15
|
|
|
|
199
|
|
|
|
—
|
|
Charge-offs
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(40
|
)
|
|
|
—
|
|
|
|
(40
|
)
|
Recoveries
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
12
|
|
|
|
—
|
|
|
|
8
|
|
|
|
—
|
|
|
|
20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending
balance
|
|
$
|
302
|
|
|
$
|
62
|
|
|
$
|
769
|
|
|
$
|
61
|
|
|
$
|
67
|
|
|
$
|
148
|
|
|
$
|
2,486
|
|
|
$
|
3,895
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six
Months Ended June 30, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning
balance
|
|
$
|
116
|
|
|
$
|
26
|
|
|
$
|
1,085
|
|
|
$
|
77
|
|
|
$
|
120
|
|
|
$
|
151
|
|
|
$
|
720
|
|
|
$
|
2,295
|
|
Provision
(credit) for loan losses
|
|
|
146
|
|
|
|
13
|
|
|
|
(2,122
|
)
|
|
|
(25
|
)
|
|
|
80
|
|
|
|
121
|
|
|
|
1,787
|
|
|
|
—
|
|
Charge-offs
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(122
|
)
|
|
|
—
|
|
|
|
(122
|
)
|
Recoveries
|
|
|
—
|
|
|
|
—
|
|
|
|
2,049
|
|
|
|
12
|
|
|
|
—
|
|
|
|
6
|
|
|
|
—
|
|
|
|
2,067
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending
balance
|
|
$
|
262
|
|
|
$
|
39
|
|
|
$
|
1,012
|
|
|
$
|
64
|
|
|
$
|
200
|
|
|
$
|
156
|
|
|
$
|
2,507
|
|
|
$
|
4,240
|
|
(continued)
OPTIMUMBANK
HOLDINGS, INC. AND SUBSIDIARY
Notes
to Condensed Consolidated Financial Statements (Unaudited)
|
|
Residential
Real Estate
|
|
|
Multi-
Family Real Estate
|
|
|
Commercial
Real Estate
|
|
|
Land
and Construction
|
|
|
Commercial
|
|
|
Consumer
|
|
|
Unallocated
|
|
|
Total
|
|
At
June 30, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually
evaluated for impairment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recorded
investment
|
|
$
|
371
|
|
|
$
|
—
|
|
|
$
|
991
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,362
|
|
Balance
in allowance for loan losses
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
77
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
77
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collectively
evaluated for impairment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recorded
investment
|
|
$
|
26,430
|
|
|
$
|
6,173
|
|
|
$
|
29,313
|
|
|
$
|
2,825
|
|
|
$
|
5,510
|
|
|
$
|
1,216
|
|
|
$
|
—
|
|
|
$
|
71,467
|
|
Balance
in allowance for loan losses
|
|
$
|
302
|
|
|
$
|
62
|
|
|
$
|
692
|
|
|
$
|
61
|
|
|
$
|
67
|
|
|
$
|
148
|
|
|
$
|
2,486
|
|
|
$
|
3,818
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
December 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually
evaluated for impairment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recorded
investment
|
|
$
|
375
|
|
|
$
|
—
|
|
|
$
|
1,004
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,379
|
|
Balance
in allowance for loan losses
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
104
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
104
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collectively
evaluated for impairment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recorded
investment
|
|
$
|
26,959
|
|
|
$
|
5,829
|
|
|
$
|
28,260
|
|
|
$
|
5,681
|
|
|
$
|
10,514
|
|
|
$
|
1,829
|
|
|
$
|
—
|
|
|
$
|
79,072
|
|
Balance
in allowance for loan losses
|
|
$
|
310
|
|
|
$
|
58
|
|
|
$
|
683
|
|
|
$
|
120
|
|
|
$
|
188
|
|
|
$
|
165
|
|
|
$
|
2,287
|
|
|
$
|
3,811
|
|
(continued)
OPTIMUMBANK
HOLDINGS, INC. AND SUBSIDIARY
Notes
to Condensed Consolidated Financial Statements (Unaudited)
(3)
|
Loans,
Continued.
Residential
Real Estate, Multi-Family Real Estate, Commercial Real Estate, Land and Construction.
All loans are underwritten
in accordance with policies set forth and approved by the Board of Directors (the “Board”), including repayment
capacity and source, value of the underlying property, credit history and stability. Multi-family and commercial real
estate loans are secured by the subject property and are underwritten based upon standards set forth in the policies approved
by the Company’s Board. Such standards include, among other factors, loan to value limits, cash flow coverage and
general creditworthiness of the obligors. Construction loans to borrowers finance the construction of owner occupied and
leased properties. These loans are categorized as construction loans during the construction period, later converting
to commercial or residential real estate loans after the construction is complete and amortization of the loan begins.
Real estate development and construction loans are approved based on an analysis of the borrower and guarantor, the viability
of the project and on an acceptable percentage of the appraised value of the property securing the loan. Real estate development
and construction loan funds are disbursed periodically based on the percentage of construction completed. The Company
carefully monitors these loans with on-site inspections and requires the receipt of lien waivers on funds advanced. Development
and construction loans are typically secured by the properties under development or construction, and personal guarantees
are typically obtained. Further, to assure that reliance is not placed solely on the value of the underlying property,
the Company considers the market conditions and feasibility of proposed projects, the financial condition and reputation
of the borrower and guarantors, the amount of the borrower’s equity in the project, independent appraisals, cost
estimates and pre-construction sales information. The Company also makes loans on occasion for the purchase of land for
future development by the borrower. Land loans are extended for future development for either commercial or residential
use by the borrower. The Company carefully analyzes the intended use of the property and the viability thereof.
|
|
|
|
Commercial.
Commercial business loans and lines of credit consist of loans to small- and medium-sized companies in the Company’s
market area. Commercial loans are generally used for working capital purposes or for acquiring equipment, inventory or furniture.
Primarily all of the Company’s commercial loans are secured loans, along with a small amount of unsecured loans. The
Company’s underwriting analysis consists of a review of the financial statements of the borrower, the lending history
of the borrower, the debt service capabilities of the borrower, the projected cash flows of the business, the value of the
collateral, if any, and whether the loan is guaranteed by the principals of the borrower. These loans are generally secured
by accounts receivable, inventory and equipment. Commercial loans are typically made on the basis of the borrower’s
ability to make repayment from the cash flow of the borrower’s business, which makes them of higher risk than residential
loans and the collateral securing loans may be difficult to appraise and may fluctuate in value based on the success of the
business. The Company seeks to minimize these risks through its underwriting standards.
|
|
|
|
Consumer.
Consumer loans are extended for various purposes, including purchases of automobiles, recreational vehicles, and boats.
Also offered are home improvement loans, lines of credit, personal loans, and deposit account collateralized loans. Repayment
of these loans is primarily dependent on the personal income of the borrowers, which can be impacted by economic conditions
in their market areas such as unemployment levels. Loans to consumers are extended after a credit evaluation, including the
creditworthiness of the borrower(s), the purpose of the credit, and the secondary source of repayment. Consumer loans are
made at fixed and variable interest rates. Risk is mitigated by the fact that the loans are of smaller individual amounts.
|
(continued)
OPTIMUMBANK
HOLDINGS, INC. AND SUBSIDIARY
Notes
to Condensed Consolidated Financial Statements (Unaudited)
(3)
|
Loans,
Continued.
The following summarizes the loan credit quality (in thousands):
|
|
|
Pass
|
|
|
OLEM
(Other
Loans
Especially Mentioned)
|
|
|
Sub-
standard
|
|
|
Doubtful
|
|
|
Loss
|
|
|
Total
|
|
At
June 30, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
real estate
|
|
$
|
23,038
|
|
|
$
|
3,392
|
|
|
$
|
371
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
26,801
|
|
Multi-family
real estate
|
|
|
6,173
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
6,173
|
|
Commercial
real estate
|
|
|
26,417
|
|
|
|
2,899
|
|
|
|
988
|
|
|
|
—
|
|
|
|
—
|
|
|
|
30,304
|
|
Land
and construction
|
|
|
430
|
|
|
|
2,395
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,825
|
|
Commercial
|
|
|
5,510
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5,510
|
|
Consumer
|
|
|
1,216
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,216
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
62,784
|
|
|
$
|
8,686
|
|
|
$
|
1,359
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
72,829
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
December 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
real estate
|
|
$
|
25,326
|
|
|
$
|
1,633
|
|
|
$
|
375
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
27,334
|
|
Multi-family
real estate
|
|
|
5,829
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5,829
|
|
Commercial
real estate
|
|
|
25,979
|
|
|
|
1,174
|
|
|
|
2,111
|
|
|
|
—
|
|
|
|
—
|
|
|
|
29,264
|
|
Land
and construction
|
|
|
5,636
|
|
|
|
45
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5,681
|
|
Commercial
|
|
|
8,768
|
|
|
|
—
|
|
|
|
1,746
|
|
|
|
—
|
|
|
|
—
|
|
|
|
10,514
|
|
Consumer
|
|
|
1,823
|
|
|
|
—
|
|
|
|
6
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,829
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
73,361
|
|
|
$
|
2,852
|
|
|
$
|
4,238
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
80,451
|
|
|
Pass
– A Pass loan’s primary source of loan repayment is satisfactory, with secondary sources very likely to
be realized if necessary. These are loans that conform in all aspects to bank policy and regulatory requirements, and no repayment
risk has been identified.
|
|
|
|
OLEM
– An Other Loan Especially Mentioned has potential weaknesses that deserve management’s close attention.
If left uncorrected, these potential weaknesses may result in the deterioration of the repayment prospects for the asset or
the Company’s credit position at some future date.
|
|
|
|
Substandard
– A Substandard loan is inadequately protected by the current sound worth and paying capacity of the obligor
or of the collateral pledged, if any. Loans so classified must have a well-defined weakness or weaknesses that jeopardize
the liquidation of the debt. Included in this category are loans that are current on their payments, but the Bank is unable
to document the source of repayment. They are characterized by the distinct possibility that the Company will sustain some
loss if the deficiencies are not corrected.
|
|
|
|
Doubtful
– A loan classified as Doubtful has all the weaknesses inherent in one classified as Substandard, with the added
characteristics that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions,
and values, highly questionable and improbable. This classification does not mean that the asset has absolutely no recovery
or salvage value, but rather it is not practical or desirable to defer writing off this basically worthless asset even though
partial recovery may be affected in the future. The Company charges off any loan classified as Doubtful.
|
|
|
|
Loss
– A loan classified Loss is considered uncollectible and of such little value that continuance as a bankable
asset is not warranted. This classification does not mean that the asset has absolutely no recovery or salvage value, but
rather it is not practical or desirable to defer writing off this basically worthless asset even though partial recovery may
be affected in the future. The Company fully charges off any loan classified as Loss.
|
(continued)
OPTIMUMBANK
HOLDINGS, INC. AND SUBSIDIARY
Notes
to Condensed Consolidated Financial Statements (Unaudited)
(3)
|
Loans,
Continued.
Age analysis of past-due loans is as follows (in thousands):
|
|
|
Accruing
Loans
|
|
|
|
|
|
|
|
|
|
|
|
|
30-59
Days
Past Due
|
|
|
60-89
Days
Past Due
|
|
|
Greater
Than 90
Days
Past
Due
|
|
|
Total
Past
Due
|
|
|
Current
|
|
|
Nonaccrual
Loans
|
|
|
Total
Loans
|
|
At
June 30, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
real estate
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
26,801
|
|
|
$
|
—
|
|
|
$
|
26,801
|
|
Multi-family
real estate
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
6,173
|
|
|
|
—
|
|
|
|
6,173
|
|
Commercial
real estate
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
30,304
|
|
|
|
—
|
|
|
|
30,304
|
|
Land
and construction
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,825
|
|
|
|
—
|
|
|
|
2,825
|
|
Commercial
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5,510
|
|
|
|
—
|
|
|
|
5,510
|
|
Consumer
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,216
|
|
|
|
—
|
|
|
|
1,216
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
72,829
|
|
|
$
|
—
|
|
|
$
|
72,829
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
December 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
real estate
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
26,959
|
|
|
$
|
375
|
|
|
$
|
27,334
|
|
Multi-family
real estate
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5,829
|
|
|
|
—
|
|
|
|
5,829
|
|
Commercial
real estate
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
29,264
|
|
|
|
—
|
|
|
|
29,264
|
|
Land
and construction
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5,681
|
|
|
|
—
|
|
|
|
5,681
|
|
Commercial
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
10,514
|
|
|
|
—
|
|
|
|
10,514
|
|
Consumer
|
|
|
—
|
|
|
|
6
|
|
|
|
—
|
|
|
|
6
|
|
|
|
1,823
|
|
|
|
—
|
|
|
|
1,829
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
—
|
|
|
$
|
6
|
|
|
$
|
—
|
|
|
$
|
6
|
|
|
$
|
80,070
|
|
|
$
|
375
|
|
|
$
|
80,451
|
|
The
following summarizes the amount of impaired loans (in thousands):
|
|
At
June 30, 2017
|
|
|
At
December 31, 2016
|
|
|
|
Recorded
Investment
|
|
|
Unpaid
Principal
Balance
|
|
|
Related
Allowance
|
|
|
Recorded
Investment
|
|
|
Unpaid
Principal
Balance
|
|
|
Related
Allowance
|
|
With
no related allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
real estate
|
|
$
|
371
|
|
|
$
|
497
|
|
|
$
|
—
|
|
|
$
|
375
|
|
|
$
|
501
|
|
|
$
|
—
|
|
C
ommercial
real estate
|
|
|
234
|
|
|
|
234
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With
related allowance recorded -
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
$
|
757
|
|
|
|
757
|
|
|
|
77
|
|
|
|
1,004
|
|
|
|
1,004
|
|
|
|
104
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
real estate
|
|
$
|
371
|
|
|
$
|
497
|
|
|
$
|
—
|
|
|
$
|
375
|
|
|
$
|
501
|
|
|
$
|
—
|
|
Commercial
real estate
|
|
$
|
991
|
|
|
$
|
991
|
|
|
$
|
77
|
|
|
$
|
1,004
|
|
|
$
|
1,004
|
|
|
$
|
104
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,362
|
|
|
$
|
1,488
|
|
|
$
|
77
|
|
|
$
|
1,379
|
|
|
$
|
1,505
|
|
|
$
|
104
|
|
(continued)
OPTIMUMBANK
HOLDINGS, INC. AND SUBSIDIARY
Notes
to Condensed Consolidated Financial Statements (Unaudited)
(3)
|
Loans,
Continued.
The average net investment in impaired loans and interest income recognized and received on impaired loans
are as follows (in thousands):
|
|
|
Three
Months Ended June 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
Average
|
|
|
Interest
|
|
|
Interest
|
|
|
Average
|
|
|
Interest
|
|
|
Interest
|
|
|
|
Recorded
|
|
|
Income
|
|
|
Income
|
|
|
Recorded
|
|
|
Income
|
|
|
Income
|
|
|
|
Investment
|
|
|
Recognized
|
|
|
Received
|
|
|
Investment
|
|
|
Recognized
|
|
|
Received
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
real estate
|
|
$
|
371
|
|
|
$
|
12
|
|
|
$
|
12
|
|
|
$
|
1,278
|
|
|
$
|
23
|
|
|
$
|
24
|
|
Commercial
real estate
|
|
$
|
896
|
|
|
$
|
13
|
|
|
$
|
13
|
|
|
$
|
2,528
|
|
|
$
|
35
|
|
|
$
|
32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,267
|
|
|
$
|
25
|
|
|
$
|
25
|
|
|
$
|
3,806
|
|
|
$
|
58
|
|
|
$
|
56
|
|
|
|
Six
Months Ended June 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
Average
|
|
|
Interest
|
|
|
Interest
|
|
|
Average
|
|
|
Interest
|
|
|
Interest
|
|
|
|
Recorded
|
|
|
Income
|
|
|
Income
|
|
|
Recorded
|
|
|
Income
|
|
|
Income
|
|
|
|
Investment
|
|
|
Recognized
|
|
|
Received
|
|
|
Investment
|
|
|
Recognized
|
|
|
Received
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
real estate
|
|
$
|
371
|
|
|
$
|
25
|
|
|
$
|
25
|
|
|
$
|
1,289
|
|
|
$
|
32
|
|
|
$
|
48
|
|
Commercial
real estate
|
|
$
|
891
|
|
|
$
|
25
|
|
|
$
|
25
|
|
|
$
|
2,814
|
|
|
$
|
48
|
|
|
$
|
66
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,262
|
|
|
$
|
50
|
|
|
$
|
50
|
|
|
$
|
4,103
|
|
|
$
|
80
|
|
|
$
|
114
|
|
|
No
loans have been determined to be troubled debt restructurings during the three and six month periods ended June
30, 2017 or 2016.
|
(4)
|
Regulatory
Capital.
The Bank is required to maintain certain minimum regulatory capital requirements. The following is a summary
at June 30, 2017 of the regulatory capital requirements and the Bank’s capital on a percentage basis:
|
|
|
Bank
|
|
|
Consent
Order
Regulatory
Requirement
|
|
|
|
|
|
|
|
|
Tier
I capital to total average assets
|
|
|
8.27
|
%
|
|
|
8.00
|
%
|
|
|
|
|
|
|
|
|
|
Tier
I capital to risk-weighted assets
|
|
|
13.14
|
%
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
Common
equity Tier I capital to risk-weighted assets
|
|
|
13.14
|
%
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
Total
capital to risk-weighted assets
|
|
|
14.44
|
%
|
|
|
12.00
|
%
|
|
At
June 30, 2017, the Bank is well-capitalized. As a result of the Consent Order discussed in Note 9, the Bank cannot be categorized
higher than “adequately capitalized” until the Consent Order is lifted, even if its ratios were to exceed those
required to be a “well capitalized” bank.
|
(continued)
OPTIMUMBANK
HOLDINGS, INC. AND SUBSIDIARY
Notes
to Condensed Consolidated Financial Statements (Unaudited)
(5)
|
Loss
Per Share.
Basic loss per share has
been computed on the basis of the weighted-average number of shares of common stock outstanding during the periods.
Loss per common share have been computed based on the following (weighted-average number of common shares outstanding have
been adjusted for the reverse stock split discussed in note 11):
|
|
|
Three
Months Ended
June 30,
|
|
|
Six
Months Ended
June 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Weighted-average
number of common shares outstanding used to calculate basic and diluted loss per common share
|
|
|
1,103,447
|
|
|
|
1,046,268
|
|
|
|
1,103,447
|
|
|
|
1,004,719
|
|
(continued)
OPTIMUMBANK
HOLDINGS, INC. AND SUBSIDIARY
Notes
to Condensed Consolidated Financial Statements (Unaudited)
(6)
|
Stock-Based
Compensation.
On December 27, 2011, the Company’s stockholders approved the 2011 Equity Incentive Plan (“2011
Plan”). In May 2016, the Company increased the total number of shares available to be awarded from 105,000 shares (adjusted
for the one-for-ten reverse stock split) to 210,000 shares. Options, restricted stock, performance share awards and bonus
share awards in lieu of obligations may be issued under the 2011 Plan. Both incentive stock options and nonqualified stock
options can be granted under the 2011 Plan. The exercise price of the stock options cannot be less than the fair market value
of the common stock on the date of grant. Options must be exercised within ten years of the date of grant.
|
|
|
|
As
of June 30, 2017, only common stock has been issued as compensation to directors for services rendered under this plan. There
were no shares of common stock issued during the period ended June 30, 2017. A total of 51,649 shares of common stock
(adjusted for one-for-ten reverse stock split) were issued during the period ended June 30, 2016. A total of $222,000
of compensation was recorded during the period ended June 30, 2016. Subsequently, $200,000 (46,296 shares) was reclassified
to other liabilities (see Note 13). At June 30, 2017, a total of 145,861 (adjusted for one-for-ten reverse stock split) shares
remain available for grant.
|
(7)
|
Fair
Value Measurements.
Assets measured at fair value on a nonrecurring basis are as follows (in thousands):
|
Impaired
Collateral Dependent Loans:
|
|
Fair
Value
|
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
|
Total
Losses
|
|
|
Losses
Recorded in
Operations
|
|
At
June 30, 2017-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
real estate
|
|
$
|
371
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
371
|
|
|
$
|
126
|
|
|
$
|
—
|
|
|
|
Fair
Value
|
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
|
Total
Losses
|
|
|
Losses
Recorded in
Operations
|
|
At
December 31, 2016-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
real estate
|
|
$
|
375
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
375
|
|
|
$
|
126
|
|
|
$
|
—
|
|
Available-for-sale
securities measured at fair value on a recurring basis are summarized below (in thousands):
|
|
Fair
Value Measurements Using
|
|
|
|
Fair
Value
|
|
|
Quoted
Prices
In Active Markets
for Identical Assets (Level 1)
|
|
|
Significant
Other Observable Inputs (Level 2)
|
|
|
Significant
Unobservable
Inputs (Level 3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
June 30, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
Collateralized
mortgage obligations
|
|
$
|
9,265
|
|
|
|
—
|
|
|
$
|
9,265
|
|
|
|
—
|
|
SBA
Pool Securities
|
|
|
9,896
|
|
|
|
—
|
|
|
|
9,896
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
19,161
|
|
|
|
—
|
|
|
$
|
19,161
|
|
|
|
—
|
|
At
December 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collateralized
mortgage obligations
|
|
$
|
9,752
|
|
|
$
|
—
|
|
|
$
|
9,752
|
|
|
$
|
—
|
|
SBA
Pool Securities
|
|
|
10,470
|
|
|
|
—
|
|
|
|
10,470
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
20,222
|
|
|
$
|
—
|
|
|
$
|
20,222
|
|
|
$
|
—
|
|
During
the three and six month periods ended June 30, 2017 and 2016, no securities wear transferred in or out of Level
1, Level 2 or Level 3.
(continued)
OPTIMUMBANK
HOLDINGS, INC. AND SUBSIDIARY
Notes
to Condensed Consolidated Financial Statements (Unaudited)
(8)
|
Fair
Value
of Financial Instruments.
The estimated fair values
and fair value measurement method with respect to the Company’s financial instruments were as follows (in thousands):
|
|
|
At
June 30, 2017
|
|
|
At
December 31, 2016
|
|
|
|
Carrying
Amount
|
|
|
Fair
Value
|
|
|
Level
|
|
|
Carrying
Amount
|
|
|
Fair
Value
|
|
|
Level
|
|
Financial
assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
19,736
|
|
|
$
|
19,736
|
|
|
|
1
|
|
|
$
|
17,640
|
|
|
$
|
17,640
|
|
|
|
1
|
|
Securities
available for sale
|
|
|
19,161
|
|
|
|
19,161
|
|
|
|
2
|
|
|
|
20,222
|
|
|
|
20,222
|
|
|
|
2
|
|
Loans
|
|
|
69,256
|
|
|
|
69,155
|
|
|
|
3
|
|
|
|
76,999
|
|
|
|
76,829
|
|
|
|
3
|
|
Federal
Home Loan Bank stock
|
|
|
979
|
|
|
|
979
|
|
|
|
3
|
|
|
|
1,113
|
|
|
|
1,113
|
|
|
|
3
|
|
Accrued
interest receivable
|
|
|
343
|
|
|
|
343
|
|
|
|
3
|
|
|
|
380
|
|
|
|
380
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial
liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposit
liabilities
|
|
|
81,650
|
|
|
|
81,987
|
|
|
|
3
|
|
|
|
86,009
|
|
|
|
86,364
|
|
|
|
3
|
|
Federal
Home Loan Bank advances
|
|
|
20,500
|
|
|
|
20,475
|
|
|
|
3
|
|
|
|
23,500
|
|
|
|
23,500
|
|
|
|
3
|
|
Junior
subordinated debenture
|
|
|
5,155
|
|
|
|
N/A
|
(1)
|
|
|
3
|
|
|
|
5,155
|
|
|
|
N/A
|
(1)
|
|
|
3
|
|
Off-balance
sheet financial instruments
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
(1)
|
The
Company is unable to determine the fair value based on significant unobservable inputs required in the calculation
refer to Note 10 for further information.
|
|
|
|
The
Company is party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing
needs of its customers. These financial instruments are commitments to extend credit and may involve, to varying degrees,
elements of credit and interest-rate risk in excess of the amount recognized in the condensed consolidated balance
sheets. 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 June 30, 2017, commitments to extend credit totaled $3.3 million.
|
(9)
|
Regulatory
Matters.
The Bank is subject to various regulatory capital requirements administered by the bank regulatory agencies.
Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions
by regulators that, if undertaken, could have a direct material effect on the Company and Bank’s financial statements.
Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital
guidelines that involve quantitative measures of its assets, liabilities, and certain off-balance-sheet items as calculated
under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by
the regulators about components, risk weightings, and other factors.
|
|
|
|
Effective
January 1, 2015, the Bank, became subject to the new Basel III capital level threshold requirements under the Prompt Corrective
Action regulations with full compliance with all of the final rule’s requirements phased in over a multi-year schedule.
These new regulations were designed to ensure that banks maintain strong capital positions even in the event of severe economic
downturns or unforeseen losses.
|
|
|
|
Changes
that could affect the Bank going forward include additional constraints on the inclusion of deferred tax assets in capital
and increased risk weightings for nonperforming loans and acquisition/development loans in regulatory capital. Beginning on
January 1, 2016, the Bank became subject to the capital conservation buffer rules which places limitations on distributions,
including dividend payments, and certain discretionary bonus payments to executive officers. In order to avoid these limitations,
an institution must hold a capital conservation buffer above its minimum risk-based capital requirements. As of June 30, 2017
and December 31, 2016, the Bank’s capital conversation buffer exceeds the minimum requirements of 0.625%. The required
buffer is to be phased in over three years. Under the new regulations in the first quarter of 2015, the Bank elected an irreversible
one-time opt-out to exclude accumulated other comprehensive loss from regulatory capital.
|
(continued)
OPTIMUMBANK
HOLDINGS, INC. AND SUBSIDIARY
Notes
to Condensed Consolidated Financial Statements (Unaudited)
(9)
|
Regulatory
Matters, Continued.
As of June 30, 2017 and December 31, 2016, the Bank is subject
to a Consent Order issued by the Federal Deposit Insurance Corporation and the State
of Florida Office of Financial Regulation (“OFR”), and accordingly is deemed
to be “adequately capitalized” even if its capital ratios were to exceed
those generally required to be a “well capitalized” bank. An institution
must maintain minimum total risk-based, Tier I risk-based and Tier I leverage ratios
as set forth in the following tables. The Bank’s actual capital amounts and percentages
are also presented in the table (dollars in thousands):
The
following table shows the Bank’s capital amounts and ratios and regulatory thresholds at June 30, 2017 and December
31, 2016 (dollars in thousands):
|
|
|
Actual
|
|
|
For
Capital
Adequacy Purposes
|
|
|
Minimum
To Be Well
Capitalized Under
Prompt
Corrective
Action Provisions
|
|
|
Requirements
of
Consent Order
|
|
|
|
Amount
|
|
|
%
|
|
|
Amount
|
|
|
%
|
|
|
Amount
|
|
|
%
|
|
|
Amount
|
|
|
%
|
|
As
of June 30, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Capital to Risk-Weighted Assets
|
|
$
|
10,428
|
|
|
|
14.44
|
%
|
|
$
|
5,778
|
|
|
|
8.0
|
%
|
|
$
|
7,233
|
|
|
|
10.0
|
%
|
|
$
|
8,667
|
|
|
|
12.0
|
%
|
Tier
I Capital to Risk-Weighted Assets
|
|
|
9,488
|
|
|
|
13.14
|
|
|
|
4,334
|
|
|
|
6.0
|
|
|
|
5,778
|
|
|
|
8.0
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Common
equity Tier I capital to Risk-Weighted Assets
|
|
|
9,488
|
|
|
|
13.14
|
|
|
|
3,250
|
|
|
|
4.5
|
|
|
|
4,695
|
|
|
|
6.5
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Tier
I Capital to Total Assets
|
|
|
9,488
|
|
|
|
8.27
|
|
|
|
4,587
|
|
|
|
4.0
|
|
|
|
5,733
|
|
|
|
5.0
|
|
|
|
9,173
|
|
|
|
8.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
of December 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Capital to Risk-Weighted Assets
|
|
$
|
10,662
|
|
|
|
12.79
|
%
|
|
$
|
6,609
|
|
|
|
8.0
|
%
|
|
$
|
8,261
|
|
|
|
10.0
|
%
|
|
$
|
9,913
|
|
|
|
12.0
|
%
|
Tier
I Capital to Risk-Weighted Assets
|
|
|
9,498
|
|
|
|
11.50
|
|
|
|
4,957
|
|
|
|
6.0
|
|
|
|
6,609
|
|
|
|
8.0
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Common
equity Tier I capital to Risk-Weighted Assets
|
|
|
9,498
|
|
|
|
11.50
|
|
|
|
3,718
|
|
|
|
4.5
|
|
|
|
5,370
|
|
|
|
6.5
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Tier
I Capital to Total Assets
|
|
|
9,498
|
|
|
|
8.06
|
|
|
|
4,714
|
|
|
|
4.0
|
|
|
|
5,893
|
|
|
|
5.0
|
|
|
|
9,428
|
|
|
|
8.0
|
|
|
Regulatory
Enforcement Actions
|
|
|
|
Bank
Consent Order
. On November 7, 2016, the Bank agreed to the issuance of a Consent Order by the FDIC and the OFR (the “Consent
Order”), which requires the Bank to take certain measures to improve its safety and soundness. The Consent Order supersedes
the prior consent order that became effective in 2010. Pursuant to the Consent Order, the Bank is required to take certain
measures to improve its management, condition and operations, including actions to improve management practices and board
supervision and independence, assure that its allowance for loan losses is maintained at an appropriate level and improve
liquidity. The Consent Order requires the Bank to adopt and implement a compliance plan to address the Bank
’
s
obligations under the Bank Secrecy Act and related obligations related to anti-money laundering. The Consent Order prohibits
the payment of dividends by the Bank. The Consent Order continues the requirement for the Bank to maintain a Tier 1 leverage
ratio of at least 8% and a total risk-based capital ratio of 12% beginning 90 days from the issuance of the Consent Order.
At June 30, 2017, the Bank had a Tier 1 leverage ratio of 8.27%, and a total risk-based capital ratio of 14.44%.
|
|
|
|
See
Footnote 13 to the Consolidated Financial Statements included in the Company’s 2016 Form 10-K for additional information
concerning the requirements of the Consent Order.
|
(continued)
OPTIMUMBANK
HOLDINGS, INC. AND SUBSIDIARY
Notes
to Condensed Consolidated Financial Statements (Unaudited)
|
Regulatory
Matters, Continued.
Management believes that the Bank has made substantial progress in improving its financial condition
through a significant reduction in non-performing assets and the receipt of capital increases from investors since the 2010
Consent Order. The Bank is also seeking to address the other issues raised by the FDIC and the OFR, although the Bank has
been hampered by difficulties in raising capital due to the default under the Junior Subordinated Debenture and the
limits placed on the Company and the Bank under the prior Consent Order and the Written Agreement. Management intends to continue
its efforts to meet the conditions of the New Consent Order and the Written Agreement.
|
|
|
|
Company
Written Agreement with Reserve Bank
. On June 22, 2010, the Company and the Reserve Bank entered into a Written Agreement
with respect to certain aspects of the operation and management of the Company. The Written Agreement prohibits, without the
prior approval of the Reserve Bank, the payment of dividends, taking dividends or payments from the Bank, making any interest,
principal or other distributions on trust preferred securities (including the Debenture), incurring, increasing or guaranteeing
any debt, purchasing or redeeming any shares of stock, or appointing any new director or senior executive officer. Management
believes that the Company is in substantial compliance with the requirements of the Written Agreement.
|
(10)
|
Junior
Subordinated Debenture.
On September 30, 2004, the Company issued a $5,155,000 junior subordinated debenture to an
unconsolidated subsidiary (the “Debenture”). The Debenture has a term of thirty years. The interest rate was fixed
at 6.4% for the first five years, and thereafter, the coupon rate floats quarterly at the three-month LIBOR rate plus 2.45%
(3.60% at June 30, 2017). The Debenture is redeemable in certain circumstances. The terms of the Debenture allow the Company
to defer payments of interest on the Debenture by extending the interest payment period at any time during the term of the
Debenture for up to twenty consecutive quarterly periods. Beginning in 2010, the Company exercised its right to defer payment
of interest on the Debenture. Interest payments deferred as of June 30, 2017 totaled $1,255,587. The Company has deferred
interest payments with respect to the Debenture for the maximum allowable twenty consecutive quarterly payments. The holder
of the Debenture can accelerate the $5,155,000 principal balance as a result of this default. Under the Written Agreement,
the Company is not able to make these interest payments without the prior approval of the Federal Reserve Bank of Atlanta.
Regulatory approval to pay accrued and unpaid interest has been denied.
|
|
|
|
A
Director of the Company has offered to purchase the Debenture and this offer has been approved by certain equity owners of
the Trust that holds the Debenture. The Director has also agreed to enter into a forbearance agreement with the Company with
respect to payments due under the Debenture upon consummation of the Director’s purchase of the debenture.
|
|
|
|
In
March of 2016, the Trustee received a direction from certain equity owners of the Trust that hold the Debenture to Sell the
Debenture to a Director of the Company. Based upon the receipt of other conflicting directions, in August 26, 2016, the Trustee
commenced an action in a Minnesota State Court seeking directions from the Court. The case was subsequently transferred to
the United States District Court for the Southern District of New York, were the case is currently pending. The Company continues
to pursue mechanisms for paying the accrued interest, such as raising additional capital.
|
|
|
(11)
|
Reverse
Common Stock Split.
Effective January 11, 2016 each ten shares of the Company’s common stock were converted
into one share of common stock. Loss per share for 2017 and 2016 has been adjusted to reflect the 1-for-10 reverse common
stock split.
|
|
|
(12)
|
Loan
Loss Recovery.
On January 6, 2016, the Bank completed a sale of judgement on a defaulted credit that resulted in a
$1.8 million recovery of previously charged-off amounts to the Allowance for Loan and Lease Losses (“ALLL”). This
increases the balance of the ALLL to approximately $4.2 million. On February 12, 2016, and amended May 6, 2016, pursuant to
the terms and requirements of the Consent Order, Management submitted a written request to the FDIC for a partial reversal
of the ALLL. The FDIC has requested additional information to assess the Bank’s request for a reversal. As
of this date, the FDIC has not reached a final decision in regards to the Bank’s request.
|
|
|
(13)
|
Reclassification.
During the quarter ended March 31, 2016, the Company agreed to issue 46,296 shares to the Bank’s Chairman
as compensation. The Company recorded compensation expense of $200,000 based on the fair market value of the shares at that
time, and reflected the issuance of the shares as an increase in stockholders’ equity. The Bank’s Chairman has
not yet taken delivery of the shares. As a result, during the quarter ended September 30, 2016, the Company determined to
reclassify the transaction as a liability of the Company (rather than an increase in stockholders’ equity) until the
issuance of the shares. As of December 31, 2016, an accrued liability totaling $200,000 was recorded in connection with these
shares.
|
|
|
(14)
|
Brokered
Deposits.
Under the terms of the Consent Order, the Bank is not permitted to solicit brokered deposits. In March 2017,
the FDIC notified the Bank that it considers a significant portion of the Bank’s certificates of deposit to be brokered
deposits due to the rates paid on such deposits, even though such deposits were not obtained through any deposit brokers.
The Bank has requested a waiver of the prohibition on brokered deposits from the FDIC which has been subsequently withdraw.
Consequently, the Bank can not renew or rollover the existing certificates of deposit that are viewed as brokered deposits,
which have an adverse effect on the Bank’s liquidity. Management has identified several strategies to adverse this issue
and believes that the Bank’s liquidity will be sufficient. As of June 30, 2017, the Bank had $27.9 million in brokered
deposits that mature over the next two years. Management is exploring all alternatives to resolve this issue including, but
not limited to, raising local deposits.
|
|
|
(15)
|
Bank
Secrecy Act (“BSA”) Lookback Review.
Under the terms of the Consent Order, the Bank is required to perform
a BSA lookback review. The Bank estimates that the cost of the BSA lookback review will range from $250,000 to $300,000 based
on an independent firm’s proposal for services. The proposal and ultimate agreement is subject to FDIC review and approval.
Until the approval is received, these BSA services cannot be rendered. Once the BSA lookback review begins, the independent
firm has 120 days to complete the work. As of June 30, 2017, the Bank has accrued $180,000 for the proposed services.
|
(continued)
OPTIMUMBANK
HOLDINGS, INC. AND SUBSIDIARY
Item
2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The
following discussion should be read in conjunction with the condensed consolidated financial statements and notes thereto presented
elsewhere in this report. For additional information, refer to the financial statements and footnotes for the year ended December
31, 2016 in the Annual Report on Form 10-K.
The
following discussion and analysis should also be read in conjunction with the condensed consolidated financial statements
and notes thereto appearing elsewhere in this report. This Quarterly Report on Form 10-Q contains “forward-looking statements”
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These
forward-looking statements involve known and unknown risks and uncertainties, many of which are beyond the control of the Company,
including adverse changes in economic, political and market conditions, losses from the Company’s lending activities and
changes in market conditions, the possible loss of key personnel, the impact of increasing competition, the impact of changes
in government regulation, the possibility of liabilities arising from violations of federal and state securities laws and the
impact of changes in technology in the banking industry. Although the Company believes that its forward-looking statements are
based upon reasonable assumptions regarding its business and future market conditions, there can be no assurances that the Company’s
actual results will not differ materially from any results expressed or implied by the Company’s forward-looking statements.
The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information,
future events or otherwise. Readers are cautioned that any forward-looking statements are not guarantees of future performance.
Regulatory
Enforcement Actions
|
Bank
Consent Order
. On November 7, 2016, the Bank agreed to the issuance of a Consent Order by the FDIC and the OFR (the “Consent
Order”), which requires the Bank to take certain measures to improve its safety and soundness. The Consent Order supersedes
the prior consent order that became effective in 2010. Pursuant to the Consent Order, the Bank is required to take certain
measures to improve its management, condition and operations, including actions to improve management practices and board
supervision and independence, assure that its allowance for loan losses is maintained at an appropriate level and improve
liquidity. The Consent Order requires the Bank to adopt and implement a compliance plan to address the Bank
’
s
obligations under the Bank Secrecy Act and related obligations related to anti-money laundering. The Consent Order prohibits
the payment of dividends by the Bank. The Consent Order continues the requirement for the Bank to maintain a Tier 1 leverage
ratio of at least 8% and a total risk-based capital ratio of 12% beginning 90 days from the issuance of the Consent Order.
At June 30, 2017, the Bank had a Tier 1 leverage ratio of 8.27%, and a total risk-based capital ratio of 14.44%.
|
|
See
Footnote 13 to the Consolidated Financial Statements included in the Company’s 2016 Form 10-K for additional information
concerning the requirements of the Consent Order.
|
(continued)
OPTIMUMBANK
HOLDINGS, INC. AND SUBSIDIARY
Notes
to Condensed Consolidated Financial Statements (Unaudited)
Management
believes that the Bank has made substantial progress in improving its financial condition through a significant reduction
in non-performing assets and the receipt of capital increases from investors since the 2010 Consent Order. The Bank is also
seeking to address the other issues raised by the FDIC and the OFR, although the Bank has been hampered by difficulties in
raising capital due to the default under the Debenture and the limits placed on the Company and the Bank under the prior Consent
Order and the Written Agreement. Management intends to continue its efforts to meet the conditions of the New Consent Order
and the Written Agreement.
|
|
Company
Written Agreement with Reserve Bank
. On June 22, 2010, the Company and the Reserve Bank entered into a Written Agreement
with respect to certain aspects of the operation and management of the Company. The Written Agreement prohibits, without the
prior approval of the Reserve Bank, the payment of dividends, taking dividends or payments from the Bank, making any interest,
principal or other distributions on trust preferred securities (including the Debenture), incurring, increasing or guaranteeing
any debt, purchasing or redeeming any shares of stock, or appointing any new director or senior executive officer. Management
believes that the Company is in substantial compliance with the requirements of the Written Agreement.
|
Capital
Levels
Quantitative
measures established by regulation and by the Consent Order to ensure capital adequacy require us to maintain minimum amounts
and ratios (set forth in the following table) of Total and Tier 1 capital to risk-weighted assets and Tier 1 capital to average
assets. As of June 30, 2017, the Bank met the minimum applicable capital adequacy requirements for Total Capital to Risk –
Weighted Assets, and for Tier I Capital to Total Assets.
OPTIMUMBANK
HOLDINGS, INC. AND SUBSIDIARY
Item
2. Management’s Discussion and Analysis of Financial Condition and Results of Operations, (Continued)
The
Bank’s actual and required minimum capital ratios were as follows (in thousands):
Regulatory
Capital Requirements
|
|
|
|
|
|
|
|
Minimum
|
|
|
|
|
|
|
|
|
|
|
|
|
To
Be Well
|
|
|
|
|
|
|
|
|
|
|
|
|
Capitalized
Under
|
|
|
|
|
|
|
|
|
|
|
|
|
Prompt
|
|
|
|
|
|
|
|
|
|
For
Capital
|
|
|
Corrective
|
|
|
Requirements
of
|
|
|
|
Actual
|
|
|
Adequacy
Purposes
|
|
|
Action
Provisions
|
|
|
Consent
Order
|
|
|
|
Amount
|
|
|
%
|
|
|
Amount
|
|
|
%
|
|
|
Amount
|
|
|
%
|
|
|
Amount
|
|
|
%
|
|
As
of June 30, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Capital to Risk-Weighted Assets
|
|
$
|
10,428
|
|
|
|
14.44
|
%
|
|
$
|
5,778
|
|
|
|
8.0
|
%
|
|
$
|
7,223
|
|
|
|
10.0
|
%
|
|
$
|
8,667
|
|
|
|
12.0
|
%
|
Tier
I Capital to Risk-Weighted Assets
|
|
|
9,488
|
|
|
|
13.14
|
|
|
|
4,334
|
|
|
|
6.0
|
|
|
|
5,778
|
|
|
|
8.0
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Common
equity Tier I capital to Risk-Weighted Assets
|
|
|
9,488
|
|
|
|
13.14
|
|
|
|
3,250
|
|
|
|
4.5
|
|
|
|
4,695
|
|
|
|
6.5
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Tier
I Capital to Total Assets
|
|
|
9,488
|
|
|
|
8.27
|
|
|
|
4,587
|
|
|
|
4.0
|
|
|
|
5,733
|
|
|
|
5.0
|
|
|
|
9,173
|
|
|
|
8.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
of December 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Capital to Risk-Weighted Assets
|
|
$
|
10,662
|
|
|
|
12.79
|
%
|
|
$
|
6,609
|
|
|
|
8.0
|
%
|
|
$
|
8,261
|
|
|
|
10.0
|
%
|
|
$
|
9,913
|
|
|
|
12.00
|
%
|
Tier
I Capital to Risk-Weighted Assets
|
|
|
9,498
|
|
|
|
11.50
|
|
|
|
4,957
|
|
|
|
6.0
|
|
|
|
6,609
|
|
|
|
8.0
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Common
Equity Tier 1 Capital to Risk-Weighted Assets
|
|
|
9,498
|
|
|
|
11.50
|
|
|
|
3,718
|
|
|
|
4.5
|
|
|
|
5,370
|
|
|
|
6.5
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Tier
I Capital to Total Assets
|
|
|
9,498
|
|
|
|
8.06
|
|
|
|
4,714
|
|
|
|
4.0
|
|
|
|
5,893
|
|
|
|
5.0
|
|
|
|
9,428
|
|
|
|
8.0
|
|
Financial
Condition at June 30, 2017 and December 31, 2016
Overview
The
Bank’s total assets decreased by $6.9 million to $112.8 million at June 30, 2017, from $119.7 million at December 31, 2016,
primarily due to a reduction in total loans. Total stockholders’ equity decreased approximately $0.4 million at June 30,
2017 from $3.1 million at December 31, 2016 to $2.7 million, due to the net loss of $452,000 for the six months ended June 30,
2017.
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, 2017
|
|
|
June
30, 2016
|
|
|
December
31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
Average
equity as a percentage of average assets
|
|
|
2.50
|
%
|
|
|
2.59
|
%
|
|
|
2.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
to total assets at end of period
|
|
|
2.37
|
%
|
|
|
2.96
|
%
|
|
|
2.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return
on average assets (1)
|
|
|
(0.79
|
)%
|
|
|
(0.54
|
)%
|
|
|
(0.3
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return
on average equity (1)
|
|
|
(31.31
|
)%
|
|
|
(20.86
|
)%
|
|
|
(12.5
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest
expenses to average assets (1)
|
|
|
3.77
|
%
|
|
|
3.69
|
%
|
|
|
3.3
|
%
|
(1)
Annualized for the six months ended June 30, 2017 and 2016.
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, 2017, the Bank
had outstanding borrowings of $20,500,000, against its $35,298,000 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 $643,700. The Federal
Reserve Bank line is subject to collateral requirements and must be repaid within 90 days; each advance is subject to prior Federal
Reserve Bank consent. The Bank also has a $2.5 million line of credit with SunTrust, $750,000 line of credit with Servis First
Bank and a $2.5 million line of credit with AloStar Bank. We measure and monitor our liquidity daily and believe our liquidity
sources are adequate to meet our operating needs.
In
the past, the Company, on an unconsolidated basis, relied on dividends from the Bank to fund its operating expenses, primarily
expenses of being publicly held, and to make interest payments on the Company’s junior subordinated debenture (the “Debenture”).
Under the Consent Order, the Bank is currently unable to pay dividends to the Company without prior regulatory approval. Additionally,
under the Written Agreement, the Company may not pay interest payments on the Debenture or dividends on the Company’s common
stock, incur any additional indebtedness at the Company level, or redeem the Company’s common stock without the prior regulatory
approval of the Federal Reserve Bank. Since January 2010, the Company has deferred interest payments on the Debenture, which has
been in default since 2015. See “Junior Subordinated Debenture” below.
Off-Balance
Sheet Arrangements
The
Company is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing
needs of its customers. These financial instruments are commitments to extend credit and may involve, to varying degrees, elements
of credit and interest-rate risk in excess of the amounts recognized in the condensed consolidated balance sheet. The contract
amounts of these instruments reflect the extent of the Company’s involvement in these financial instruments.
Commitments
to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of
the commitments are expected to expire without being drawn upon, the total committed amounts do not necessarily represent future
cash requirements. The Company evaluates each customer’s creditworthiness on a case-by-case basis.
The
amount of collateral obtained, if it is deemed necessary by the Company upon extension of credit, is based on management’s
credit evaluation of the counter party. As of June 30, 2017, the Company had commitments to extend credit totaling $3.3 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% (3.60% at June 30, 2017). The Debenture is redeemable in certain
circumstances. The terms of the Debenture allow the Company to defer payments of interest on the Debenture by extending the interest
payment period at any time during the term of the Debenture for up to twenty consecutive quarterly periods. Beginning in 2010,
the Company exercised its right to defer payment of interest on the Debenture. Interest payments deferred as of June 30, 2017
totaled $1,255,587. The Company has deferred interest payments with respect to the Debenture for the maximum allowable twenty
consecutive quarterly payments. The holder of the Debenture can accelerate the $5,155,000 principal balance as a result of this
default. Under the Written Agreement, the Company is not able to make these interest payments without the prior approval of the
Federal Reserve Bank of Atlanta. Regulatory approval to pay accrued and unpaid interest has been denied.
A
Director of the Company has offered to purchase the Debenture and this offer has been approved by certain equity owners of the
Trust that holds the Debenture. The Director has also agreed to enter into a forbearance agreement with the Company with respect
to payments due under the Debenture upon consummation of the Director’s purchase of the debenture.
In
March of 2016, the Trustee received a direction from certain equity owners of the Trust that hold the Debenture to Sell the Debenture
to a Director of the Company. Based upon the receipt of other conflicting directions, in August 26, 2016, the Trustee commenced
an action in a Minnesota State Court seeking directions from the Court. The case was subsequently transferred to the United States
District Court for the Southern District of New York, were the case is currently pending. The Company continues to pursue mechanisms
for paying the accrued interest, such as raising additional capital.
In
the event the amounts due under the Debenture were accelerated, then the Trustee could undertake legal proceedings to obtain a
judgment against the Company with respect to such amounts due under the Debenture. If this action were successful, then the Trustee
could seek to affect a sale of the Bank to pay the amounts due under the Debenture.
OPTIMUMBANK
HOLDINGS, INC. AND SUBSIDIARY
Item
2. Management’s Discussion and Analysis of Financial Condition and Results of Operations, (Continued)
Results
of Operations
The
following table sets forth, for the periods indicated, information regarding (i) the total dollar amount of interest and dividend
income of the Company from interest-earning assets and the resultant average yields; (ii) the total dollar amount of interest
expense on interest-bearing liabilities and the resultant average cost; (iii) net interest income; (iv) interest-rate spread;
(v) net interest margin; and (vi) ratio of average interest-earning assets to average interest-bearing liabilities.
|
|
Three
Months Ended June 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
Average
Balance
|
|
|
Interest
and
Dividends
|
|
|
Average
Yield/
Rate
|
|
|
Average
Balance
|
|
|
Interest
and
Dividends
|
|
|
Average
Yield/
Rate
|
|
|
|
($
in thousands)
|
|
Interest-earning
assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
|
|
$
|
75,928
|
|
|
$
|
955
|
|
|
|
5.03
|
%
|
|
$
|
85,141
|
|
|
$
|
1,054
|
|
|
|
4.95
|
%
|
Securities
|
|
|
19,586
|
|
|
|
101
|
|
|
|
2.06
|
|
|
|
23,621
|
|
|
|
124
|
|
|
|
2.10
|
|
Other
(1)
|
|
|
18,470
|
|
|
|
58
|
|
|
|
1.26
|
|
|
|
12,330
|
|
|
|
27
|
|
|
|
0.88
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
interest-earning assets/interest income
|
|
|
113,984
|
|
|
|
1,114
|
|
|
|
3.91
|
|
|
|
121,092
|
|
|
|
1,205
|
|
|
|
3.98
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and due from banks
|
|
|
1,149
|
|
|
|
|
|
|
|
|
|
|
|
846
|
|
|
|
|
|
|
|
|
|
Premise
and equipment
|
|
|
2,620
|
|
|
|
|
|
|
|
|
|
|
|
2,689
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
(3,086
|
)
|
|
|
|
|
|
|
|
|
|
|
(905
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$
|
114,667
|
|
|
|
|
|
|
|
|
|
|
$
|
123,722
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing
liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings,
NOW and money-market deposits
|
|
$
|
22,269
|
|
|
|
28
|
|
|
|
.50
|
|
|
$
|
23,925
|
|
|
|
30
|
|
|
|
.50
|
|
Time
deposits
|
|
|
54,020
|
|
|
|
148
|
|
|
|
1.06
|
|
|
|
62,744
|
|
|
|
156
|
|
|
|
.99
|
|
Borrowings
(2)
|
|
|
25,655
|
|
|
|
137
|
|
|
|
2.14
|
|
|
|
27,575
|
|
|
|
95
|
|
|
|
1.38
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
interest-bearing liabilities/ interest expense
|
|
|
101,944
|
|
|
|
313
|
|
|
|
1.20
|
|
|
|
114,244
|
|
|
|
281
|
|
|
|
.98
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-bearing
demand deposits
|
|
|
7,463
|
|
|
|
|
|
|
|
|
|
|
|
4,208
|
|
|
|
|
|
|
|
|
|
Other
liabilities
|
|
|
2,
498
|
|
|
|
|
|
|
|
|
|
|
|
2,006
|
|
|
|
|
|
|
|
|
|
Stockholders’
equity
|
|
|
2,762
|
|
|
|
|
|
|
|
|
|
|
|
3,264
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities and stockholders’ equity
|
|
$
|
114,667
|
|
|
|
|
|
|
|
|
|
|
$
|
123,722
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
interest income
|
|
|
|
|
|
$
|
801
|
|
|
|
|
|
|
|
|
|
|
$
|
924
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-rate
spread (3)
|
|
|
|
|
|
|
|
|
|
|
2.71
|
%
|
|
|
|
|
|
|
|
|
|
|
3.00
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
interest margin (4)
|
|
|
|
|
|
|
|
|
|
|
2.81
|
%
|
|
|
|
|
|
|
|
|
|
|
3.05
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio
of average interest-earning assets to average interest-bearing liabilities
|
|
|
1.10
|
|
|
|
|
|
|
|
|
|
|
|
1.06
|
|
|
|
|
|
|
|
|
|
|
|
Six
Months Ended June 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
Average
Balance
|
|
|
Interest
and
Dividends
|
|
|
Average
Yield/
Rate
|
|
|
Average
Balance
|
|
|
Interest
and
Dividends
|
|
|
Average
Yield/
Rate
|
|
|
|
|
|
|
|
|
|
($
in thousands)
|
|
|
|
|
|
|
|
Interest-earning
assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
|
|
$
|
78,487
|
|
|
$
|
1,999
|
|
|
|
5.10
|
%
|
|
$
|
83,750
|
|
|
$
|
2,074
|
|
|
|
4.95
|
%
|
Securities
|
|
|
19,829
|
|
|
|
210
|
|
|
|
2.12
|
|
|
|
23,792
|
|
|
|
251
|
|
|
|
2.11
|
|
Other
(1)
|
|
|
16,524
|
|
|
|
97
|
|
|
|
1.17
|
|
|
|
11,537
|
|
|
|
50
|
|
|
|
0.87
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
interest-earning assets/interest income
|
|
|
114,840
|
|
|
|
2,306
|
|
|
|
4.02
|
|
|
|
119,079
|
|
|
|
2,375
|
|
|
|
3.99
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and due from banks
|
|
|
1,165
|
|
|
|
|
|
|
|
|
|
|
|
876
|
|
|
|
|
|
|
|
|
|
Premise
and equipment
|
|
|
2,630
|
|
|
|
|
|
|
|
|
|
|
|
2,693
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
(3,074
|
)
|
|
|
|
|
|
|
|
|
|
|
(88
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$
|
115,561
|
|
|
|
|
|
|
|
|
|
|
$
|
122,560
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing
liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings,
NOW and money-market deposits
|
|
$
|
22,250
|
|
|
|
55
|
|
|
|
.49
|
|
|
$
|
23,873
|
|
|
|
60
|
|
|
|
.50
|
|
Time
deposits
|
|
|
56,442
|
|
|
|
301
|
|
|
|
1.06
|
|
|
|
63,770
|
|
|
|
308
|
|
|
|
.97
|
|
Borrowings
(2)
|
|
|
25,689
|
|
|
|
237
|
|
|
|
1.84
|
|
|
|
25,718
|
|
|
|
170
|
|
|
|
1.31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
interest-bearing liabilities/ interest expense
|
|
|
104
,381
|
|
|
|
593
|
|
|
|
1.28
|
|
|
|
113,361
|
|
|
|
538
|
|
|
|
.95
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-bearing
demand deposits
|
|
|
7,018
|
|
|
|
|
|
|
|
|
|
|
|
3,855
|
|
|
|
|
|
|
|
|
|
Other
liabilities
|
|
|
1,275
|
|
|
|
|
|
|
|
|
|
|
|
2,170
|
|
|
|
|
|
|
|
|
|
Stockholders’
equity
|
|
|
2,887
|
|
|
|
|
|
|
|
|
|
|
|
3,174
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities and stockholders’ equity
|
|
$
|
115,560
|
|
|
|
|
|
|
|
|
|
|
$
|
122,560
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
interest income
|
|
|
|
|
|
$
|
1,713
|
|
|
|
|
|
|
|
|
|
|
$
|
1,837
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-rate
spread (3)
|
|
|
|
|
|
|
|
|
|
|
2.74
|
%
|
|
|
|
|
|
|
|
|
|
|
3.04
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
interest margin (4)
|
|
|
|
|
|
|
|
|
|
|
2.99
|
%
|
|
|
|
|
|
|
|
|
|
|
3.09
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio
of average interest-earning assets to average interest-bearing liabilities
|
|
|
1.24
|
|
|
|
|
|
|
|
|
|
|
|
1.06
|
|
|
|
|
|
|
|
|
|
(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, 2017 and 2016
General.
Net loss for the three months ended June 30, 2017, was $(168,000) or $(0.16) per basic and diluted share compared
to a net loss of $(54,000) or $(0.06) per basic and diluted share for the period ended June 30, 2016.
Interest
Income.
Interest income decreased $91,000 for the three months ended June 30, 2017 compared to the three months ended
June 30, 2016.
Interest
Expense.
Interest expense on deposits and borrowings
increased
to
$313,000 for the three months ended June 30, 2017 from $281,000 for the three months ended June 30, 2016. Interest expense increased
primarily due to higher interest paid on borrowings during the second quarter of 2017. In late March 2017, the Bank extended the
maturities of $15.5 million in Federal Home loan Advances into longer fixed rate terms with higher interest rates. The weighted
average rate of these advances increased from 0.49% to 1.19%.
Provision
for Loan Losses.
There was no provision for losses during the 2017 or 2016 period. The provision for loan losses is charged
to operations as losses are estimated to have occurred in order to bring the total allowance for loan losses to a level deemed
appropriate by management to absorb losses inherent in the portfolio at June 30, 2017. Management’s periodic evaluation
of the adequacy of the allowance is based upon historical experience, the volume and type of lending conducted by us, adverse
situations that may affect the borrower’s ability to repay, estimated value of the underlying collateral, loans identified
as impaired, general economic conditions, particularly as they relate to our market areas, and other factors related to the estimated
collectability of our loan portfolio. The allowance for loan losses totaled $3.9 million or 5.35% of loans outstanding at June
30, 2017, as compared to $4.2 million or 5.11% of loans outstanding at June 30, 2016. Management believes
the balance in the allowance for loan losses at June 30, 2017 is adequate.
Noninterest
Income.
Total noninterest income decreased to $8,000 for the three months ended June 30, 2017, from $46,000 for the three
months ended June 30, 2016 due to gains on securities sales of $17,000 in 2016 and reduced service charges and other fees.
Noninterest
Expenses.
Total noninterest expenses decreased $48,000 to $977,000 for the three months ended June 30, 2017 compared
to $1.0 million for the three months ended June 30, 2016.
Comparison
of the Six-Month Periods Ended June 30, 2017 and 2016
General.
Net loss for the six months ended June 30, 2017, was $(452,000) or $(0.41) loss per basic and diluted share compared
to a net loss of $(331,000) or $(0.33) loss per basic and diluted share for the six months ended June 30, 2016. 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.
Interest
Income.
Interest income decreased to $2,306,000 for the six months ended June 30, 2017 from
$2,375,000 for the six months ended June 30, 2016, primarily due to a decrease in interest earnings assets.
Interest
Expense.
Interest expense on deposits and borrowings increased to $593,000 for the six months ended June 30, 2017 from
$538,000 for the six months ended June 30, 2016. Interest expense increased primarily due to higher interest paid on borrowings
during 2017. In late March 2017, the Bank extended the maturities of $15.5 million in Federal Home Loan Advances into longer fixed
rate terms with higher interest rates. The weighted average rate of these advances increased from 0.49% to 1.19%.
Provision
for Loan Losses.
There was no provision for the six months ended June 30, 2017 or 2016. 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 $3.9 million or 5.35% of loans outstanding at June 30, 2017, compared to $4.2 million, or 5.11% of loans
outstanding at June 30, 2016. Management believes the balance in the allowance for loan losses at June 30, 2017 is adequate.
Noninterest
Income.
Total noninterest income decreased to $16,000 from $93,000 for the six months
ended June 30, 2017, compared to the six months ended June 30, 2016 due to gains on securities sales of $45,000 in 2016 and
reduced service charges and other fees.
Noninterest
Expenses.
Total noninterest expenses decreased to $2,181,000 for the six months ended June 30, 2017 compared to $2,261,000
for the six months ended June 30, 2016, primarily due to decreased salaries and benefits, occupancy, data processing,
and regulation assessments.