OptimumBank Holdings, Inc. - Quarter Report: 2009 March (Form 10-Q)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

For the quarterly period ended March 31, 2009

For the transition period from              to             

Commission file number 000-50755

OPTIMUMBANK HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

2477 East Commercial Boulevard, Fort Lauderdale, FL 33308

(Address of principal executive offices)

954-776-2332

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ¨    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date: 3,120,992 shares of Common Stock, $.01 par value, issued and outstanding as of May 14, 2009

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OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

INDEX

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OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Condensed Consolidated Balance Sheets

(Dollars in thousands, except per share amounts)

See Accompanying Notes to Condensed Consolidated Financial Statements.

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OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

Condensed Consolidated Statements of Earnings (Unaudited)

(Dollars in thousands, except per share amounts)

See Accompanying Notes to Condensed Consolidated Financial Statements.

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Condensed Consolidated Statements of Stockholders’ Equity

Three Months Ended March 31, 2009 and 2008

(Dollars in thousands)

See Accompanying Notes to Condensed Consolidated Financial Statements.

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Condensed Consolidated Statements of Cash Flows (Unaudited)

(In thousands)

(continued)

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Condensed Consolidated Statements of Cash Flows, Continued (Unaudited)

(In thousands)

See Accompanying Notes to Condensed Consolidated Financial Statements.

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Notes to Condensed Consolidated Financial Statements (unaudited)

In the opinion of the management, the accompanying condensed consolidated financial statements of the Company contain all adjustments (consisting principally of normal recurring accruals) necessary to present fairly the financial position at March 31, 2009, and the results of operations and cash flows for the three-month periods ended March 31, 2009 and 2008. The results of operations for the three months ended March 31, 2009, are not necessarily indicative of the results to be expected for the full year.

The following summarizes the impaired loans at March 31, 2009 and 2008, which were collateral dependent (in thousands):

(continued)

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Notes to Condensed Consolidated Financial Statements (unaudited), Continued

At March 31, 2009 and 2008, the Company had no loans over ninety days past due still accruing interest. Nonaccrual loans were as follows (in thousands):

(continued)

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Notes to Condensed Consolidated Financial Statements (unaudited), Continued

The following options were excluded from the calculation of earnings per share due to the exercise price being above the average market price:

The Company established an Incentive Stock Option Plan (the “Plan”) for officers, directors and employees of the Company and reserved 600,686 (amended) shares of common stock for the plan. Both incentive stock options and nonqualified stock options may be granted under the plan. The exercise price of the stock options is determined by the board of directors at the time of grant, but cannot be less than the fair market value of the common stock on the date of grant. The options vest over three and five years. The options must be exercised within ten years from the date of grant. At March 31, 2009, 14,239 options were available for grant.

(continued)

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Notes to Condensed Consolidated Financial Statements (unaudited), Continued

Impaired collateral-dependent loans and foreclosed assets are carried at fair value when the current collateral value is lower than the carrying value of the loan or foreclosed asset. Those impaired collateral-dependent loans and foreclosed assets which are measured at fair value on a nonrecurring basis are as follows (in thousands):

Loans with a carrying value of $5,264,000 were measured for impairment using Level 3 inputs and had a fair value in excess of carrying value.

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OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

Review by Independent Registered Public Accounting Firm

Hacker, Johnson & Smith PA, the Company’s independent registered public accounting firm, have made a limited review of the interim financial data as of March 31, 2009, and for the three-month periods ended March 31, 2009 and 2008, presented in this document, in accordance with standards established by the Public Company Accounting Oversight Board.

Their report furnished pursuant to Article 10 of Regulation S-X is included herein.

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Report of Independent Registered Public Accounting Firm

OptimumBank Holdings, Inc.

Fort Lauderdale, Florida:

We have reviewed the accompanying condensed consolidated balance sheet of OptimumBank Holdings, Inc. and Subsidiary (the “Company”) as of March 31, 2009, and the related condensed consolidated statements of earnings, stockholders’ equity and cash flows for the three-month periods ended March 31, 2009 and 2008. These interim financial statements are the responsibility of the Company’s management.

We conducted our reviews in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim condensed consolidated financial statements for them to be in conformity with U.S. generally accepted accounting principles.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board, the consolidated balance sheet as of December 31, 2008, and the related consolidated statements of earnings, stockholders’ equity and cash flows for the year then ended (not presented herein); and in our report dated March 13, 2009, we expressed an unqualified opinion on those financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2008, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

/s/ Hacker, Johnson & Smith PA

HACKER, JOHNSON & SMITH PA

Fort Lauderdale, Florida

April 28, 2009

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Item 2. Management’s Discussion and Analysis

of Financial Condition and Results of Operations

Comparison of March 31, 2009 and December 31, 2008

Liquidity and Capital Resources

The Company’s primary sources of cash during the three months ended March 31, 2009 were principal repayments of securities held to maturity of approximately $4.7 million, net deposit inflows of approximately $9.8 million and cash provided from operating activities of approximately $.7 million. Cash was used primarily for purchases of securities of approximately $9.0 million and net loan originations of approximately $1.8 million. At March 31, 2009, the Company had time deposits of approximately $77.4 million that mature in one year or less. At March 31, 2009, the Company exceeded its regulatory liquidity requirements. Management believes that, if so desired, it can adjust the rates on time deposits to retain or attract deposits in a changing interest-rate environment.

The following table shows selected information for the periods ended or at the dates indicated:

Off-Balance Sheet Arrangements

At March 31, 2009, the Company has no financial instruments with off-balance-sheet risk.

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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.

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Comparison of the Three-Month Periods Ended March 31, 2009 and 2008

General. Net earnings for the three months ended March 31, 2009, were $58,000 or $.02 per basic and diluted share compared to net earnings of $429,000 or $.14 per basic and $.13 per diluted share for the period ended March 31, 2008. The decrease in the Company’s net earnings was primarily due to a decrease in net interest income and an increase in the provision for loan losses.

Interest Income. Interest income decreased to $3.7 million for the three months ended March 31, 2009 from $4.0 million for the three months ended March 31, 2008. Interest income on loans decreased to $2.4 million due primarily to a decrease in the average loan portfolio balance for the three months ended March 31, 2009, and a decrease in the average yield earned from 7.44% for the three months ended March 31, 2008, to 6.03% for the three months ended March 31, 2009. Interest income on securities increased to $1.2 million due primarily to an increase in the average security balance for the three months ended March 31, 2009.

Interest Expense. Interest expense on deposit accounts decreased to $976,000 due primarily to a decrease in the average yield from 4.46% for the three months ended March 31, 2008, to 3.29% for the three months ended March 31, 2009. Interest expense on borrowings increased to $1.2 million for the three months ended March 31, 2009, from $1.0 million for the three months ended March 31, 2008, due primarily to an increase in the average balance of borrowings.

Provision for Loan Losses. The provision for the three months ended March 31, 2009, was $405,000 compared to $121,000 for the same period in 2008. The provision for loan losses is charged to earnings as losses are estimated to have occurred in order to bring the total allowance for loan losses to a level deemed appropriate by management. Management’s periodic evaluation of the adequacy of the allowance is based upon historical experience, the volume and type of lending conducted by us, adverse situations that may affect the borrower’s ability to repay, estimated value of the underlying collateral, loans identified as impaired, general economic conditions, particularly as they relate to our market areas, and other factors related to the estimated collectibility of our loan portfolio. The allowance for loan losses totaled $1,827,000 or 1.12% of loans outstanding at March 31, 2009, compared to $794,000, or .47% of loans outstanding at March 31, 2008. Management believes the balance in the allowance for loan losses at March 31, 2009 is adequate.

Noninterest Income. Total noninterest income decreased to $31,000 for the three months ended March 31, 2009, from $42,000 for the three months ended March 31, 2008.

Noninterest Expenses. Total noninterest expenses increased to $1.0 million for the three months ended March 31, 2009, from $909,000 for the three months ended March 31, 2008 primarily due to an increase in the FDIC insurance assessment of $35,000.

Income Taxes. Income taxes for the three months ended March 31, 2009, were $35,000 (an effective rate of 37.6%) compared to income taxes of $259,000 (an effective rate of 37.6%) for the three months ended March 31, 2008.

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PART II. OTHER INFORMATION

The following exhibits are filed with or incorporated by reference into this report. The exhibits denominated by (i) an asterisk (*) were previously filed as a part of a Registration Statement on Form 10-SB under the Exchange Act, filed with the Federal Deposit Insurance Corporation on March 28, 2003; (ii) a double asterisk (**)were previously filed as part of a current report on Form 8-K filed with the Securities and Exchange Commission (“SEC”) on May 11, 2004; and (iii) a triple asterisk (***)were previously filed as part of a Quarterly Report on Form 10-QSB filed with the SEC on August 12, 2004; (iv) a quadruple asterisk (****) were previously filed as part of an Annual Report on Form 10-KSB filed with the SEC on March 31, 2006; (v) a quintuple asterisk (*****) were previously filed as part of an Annual Report on Form 10-KSB filed with the SEC on March 31, 2008; and (vi) a sextuple asterisk (******) were previously filed as part of an Annual Report on Form 10-K filed with the SEC on March 31, 2009.

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PART II. OTHER INFORMATION

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

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