OptimumBank Holdings, Inc. - Quarter Report: 2022 March (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to _________

Commission File Number: 000-50755

OPTIMUMBANK HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

Florida		55-0865043
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

2929 East Commercial Boulevard, Fort Lauderdale, FL 33308

(Address of principal executive offices)

954-900-2800

(Registrant’s telephone number, including area code)

N/A

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

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, $.01 Par Value		OPHC		NASDAQ Capital Market

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 ☒ 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, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer ☐		Accelerated filer ☐
Non-accelerated filer ☒		Smaller reporting company ☒
		Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 6,002,612 shares of common stock, $.01 par value, issued and outstanding as of May 11, 2022.

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

INDEX

	Page

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements	1

Condensed Consolidated Balance Sheets - March 31, 2022 (unaudited) and December 31, 2021	1

Condensed Consolidated Statements of Earnings - Three Months ended March 31, 2022 and 2021 (unaudited)	2

Condensed Consolidated Statements of Comprehensive Loss – Three Months ended March 31, 2022 and 2021 (unaudited)	3

Condensed Consolidated Statements of Stockholders’ Equity - Three Months ended March 31, 2022 and 2021 (unaudited)	4

Condensed Consolidated Statements of Cash Flows – Three Months ended March 31, 2022 and 2021 (unaudited)	5

Notes to Condensed Consolidated Financial Statements (unaudited)	6

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	19

Item 4. Controls and Procedures	23

PART II. OTHER INFORMATION

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	23

Item 6. Exhibits	23

SIGNATURES	24

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Condensed Consolidated Balance Sheets

(Dollars in thousands, except per share amounts)

	March 31,			December 31,
	2022			2021
	(Unaudited)
Assets:
Cash and due from banks	$	14,694		$	13,681
Interest-bearing deposits with banks		57,498			45,289
Total cash and cash equivalents		72,192			58,970
Debt securities available for sale		30,946			34,394
Debt securities held-to-maturity (fair value of $804 and $1,071)		808			1,040
Loans, net of allowance for loan losses of $3,408 and $3,075		273,686			247,902
Federal Home Loan Bank stock		850			793
Premises and equipment, net		834			843
Right-of-use lease assets		1,581			1,737
Accrued interest receivable		927			971
Deferred tax asset		3,855			3,442
Other assets		1,495			1,786

Total assets	$	387,174		$	351,878
Liabilities and Stockholders’ Equity:

Liabilities:
Noninterest-bearing demand deposits	$	139,603		$	124,119
Savings, NOW and money-market deposits		166,508			155,102
Time deposits		11,211			13,236

Total deposits		317,322			292,457

Federal Home Loan Bank advances		18,000			18,000
Official checks		263			140
Operating lease liabilities		1,620			1,775
Other liabilities		652			996

Total liabilities		337,857			313,368

Commitments and contingencies (Notes 1, 8 and 11)
Stockholders’ equity:
Preferred stock, no par value; 6,000,000 shares authorized:		—			—
Series A Preferred, no par value, no shares issued and outstanding		—			—
Series B Preferred, no par value, 1,020 shares authorized, 1,020 and 760 shares issued and outstanding		—			—
Preferred stock, value		—			—
Common stock, $.01 par value; 10,000,000 shares authorized, 6,002,612 and 4,775,281 shares issued and outstanding		60			48
Additional paid-in capital		77,204			65,193
Accumulated deficit		(25,241	)		(26,096	)
Accumulated other comprehensive loss		(2,706	)		(635	)

Total stockholders’ equity		49,317			38,510
Total liabilities and stockholders’ equity	$	387,174		$	351,878

See accompanying notes to condensed consolidated financial statements.

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

Condensed Consolidated Statements of Earnings (Unaudited)
(in thousands, except per share amounts)

	2022		2021
	Three Months Ended
	March 31,
	2022		2021
Interest income:
Loans	$	3,263	$	1,847
Debt securities		163		91
Other		37		27

Total interest income		3,463		1,965

Interest expense:
Deposits		175		181
Borrowings		61		98

Total interest expense		236		279

Net interest income		3,227		1,686

Provision (credit) for loan losses		392		(24	)

Net interest income after provision (credit) for loan losses		2,835		1,710

Noninterest income:
Service charges and fees		589		151
Other		61		25

Total noninterest income		650		176

Noninterest expenses:
Salaries and employee benefits		1,335		698
Professional fees		147		112
Occupancy and equipment		167		152
Data processing		277		178
Insurance		24		23
Regulatory assessment		77		61
Other		313		314

Total noninterest expenses		2,340		1,538

Net earnings before income taxes		1,145		348

Income taxes		290		—

Net earnings	$	855	$	348

Net earnings per share - basic and diluted	$	0.17	$	0.11

See accompanying notes to condensed consolidated financial statements.

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

Condensed Consolidated Statements of Comprehensive Loss (Unaudited)
(In thousands)

	2022			2021
	Three Months Ended
	March 31,
	2022			2021

Net earnings	$	855		$	348

Other comprehensive loss:
Change in unrealized loss on debt securities:
Unrealized loss arising during the period		(2,781	)		(922	)

Amortization of unrealized loss on debt securities transferred to held-to-maturity		7			47

Other comprehensive loss before income taxes		(2,774	)		(875	)

Deferred income tax benefit (provision)		703			(25	)

Total other comprehensive loss		(2,071	)		(900	)

Comprehensive loss	$	(1,216	)	$	(552	)

See accompanying notes to condensed consolidated financial statements.

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

Condensed Consolidated Statements of Stockholders’ Equity

Three Months Ended March 31, 2022 and 2021

(Dollars in thousands)

	Shares		Amount		Shares		Amount		Shares		Amount		Capital		Deficit			Loss			Equity
	Preferred Stock												Additional					Accumulated
	Series A				Series B				Common Stock				Paid-In		Accumulated			Comprehensive			Stockholders’
	Shares		Amount		Shares		Amount		Shares		Amount		Capital		Deficit			Loss			Equity

Balance at December 31, 2020		—		—		400		—		3,203,455		32		50,263		(32,392	)		(69	)		17,834

Proceeds from the sale of preferred stock (unaudited)		—		—		160		—		—		—		4,000		—			—			4,000

Common stock issued for junior subordinated debenture interest payable (unaudited)		—		—		—		—		11,042		—		41		—			—			41

Net change in unrealized loss on debt securities available for sale (unaudited)		—		—		—		—		—		—		—		—			(922	)		(922	)

Amortization of unrealized loss on debt securities transferred to held-to-maturity (unaudited)		—		—		—		—		—		—		—		—			22			22

Net earnings (unaudited)		—		—		—		—		—		—		—		348			—			348

Balance at March 31, 2021 (unaudited)		—	$	—		560	$	—		3,214,497	$	32	$	54,304	$	(32,044	)	$	(969	)	$	21,323

Balance at December 31, 2021 (unaudited)		—	$	—		760	$	—		4,775,281	$	48	$	65,193	$	(26,096	)	$	(635	)	$	38,510

Proceeds from the sale of preferred stock (unaudited)		—		—		260		—		—		—		6,500		—			—			6,500

Proceeds from the sale of common stock (unaudited)		—		—		—		—		1,227,331		12		5,511		—			—			5,523

Net change in unrealized loss on debt securities available for sale (unaudited)		—		—		—		—		—		—		—		—			(2,078	)		(2,078	)

Amortization of unrealized loss on debt securities transferred to held-to-maturity (unaudited)		—		—		—		—		—		—		—		—			7			7

Net earnings for three months ended March 31, 2022 (unaudited)		—		—		—		—		—		—		—		855			—			855

Balance at March 31, 2022 (unaudited)		—	$	—		1,020		—		6,002,612	$	60		77,204		(25,241	)		(2,706	)		49,317

See accompanying notes to condensed consolidated financial statements.

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In thousands)

	2022			2021
	Three Months Ended
	March 31,
	2022			2021
Cash flows from operating activities:
Net earnings	$	855		$	348
Adjustments to reconcile net earnings to net cash provided by in operating activities:
Provision (credit) for loan losses		392			(24	)
Depreciation and amortization		56			51
Deferred income taxes		290			-
Net accretion of fees, premiums and discounts		(62	)		(59	)
Stock-based compensation expense		96			-
Decrease in accrued interest receivable		44			223
Amortization of right of use asset		156			37
Net decrease in operating lease liabilities		(155	)		(35	)
Decrease (increase) in other assets		291			(401	)
(Decrease) increase in official checks and other liabilities		(317	)		110
Net cash provided by operating activities		1,646			250

Cash flows from investing activities:
Purchase of debt securities available for sale		—			(5,193	)
Principal repayments of debt securities available for sale		617			740
Principal repayments of debt securities held-to-maturity		236			954
Net increase in loans		(26,061	)		(15,686	)
Purchases of premises and equipment		(47	)		(49	)
(Purchase) redemption of FHLB stock		(57	)		299

Net cash used in investing activities		(25,312	)		(18,935	)

Cash flows from financing activities:
Net increase in deposits		24,865			18,750
Net decrease in FHLB Advances		—			(5,000	)
Proceeds from sale of preferred stock		6,500			4,000
Proceeds from sale of common stock		5,523			-

Net cash provided by financing activities		36,888			17,750

Net increase (decrease) in cash and cash equivalents		13,222			(935	)

Cash and cash equivalents at beginning of the period		58,970			54,629

Cash and cash equivalents at end of the period	$	72,192		$	53,694

Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest	$	237		$	290

Income taxes	$	—		$	—

Noncash transactions:
Change in accumulated other comprehensive loss, net change in unrealized loss on debt securities available for sale, net of income taxes	$	(2,078	)	$	(922	)

Amortization of unrealized loss on debt securities transferred to held-to-maturity	$	7		$	22

Right-of use lease assets obtained in exchange for operating lease liabilities	$	—		$	191
Increase in other liabilities for stock-based compensation	$	96		$	—
Issuance of common stock for Junior Subordinated Debenture interest payable	$	—		$	41

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 “Company”) is a one-bank holding company and owns 100% of OptimumBank (the “Bank”), a Florida-chartered community bank. The Company’s only business is the operation of the Bank. 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 two banking offices located in Broward County, Florida.

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 March 31, 2022, and the results of operations and cash flows for the three month periods ended March 31, 2022 and 2021. All significant intercompany accounts and transactions have been eliminated in consolidation. The results of operations for the three months ended March 31, 2022, are not necessarily indicative of the results to be expected for the full year.

Subsequent Events. The Company has evaluated subsequent events through May 11, 2022, which is the date the condensed consolidated financial statements were issued, determining no additional events required disclosure.

(continued)

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (Unaudited)

(1) General, Continued.

Comprehensive Loss. GAAP generally requires that recognized revenue, expenses, gains and losses be included in net earnings. Although certain changes in assets and liabilities, such as unrealized gains and losses on available-for-sale debt securities, are reported as a separate component of the equity section of the condensed consolidated balance sheets, such items along with net earnings, are components of comprehensive loss.

Accumulated other comprehensive loss consists of the following (in thousands):

	March 31,			December 31,
	2022			2021

Unrealized loss on debt securities available for sale	$	(3,597	)	$	(816	)
Unamortized portion of unrealized loss related to debt securities available for sale transferred to securities held-to-maturity		(27	)		(34	)
Income tax benefit		918			215

Accumulated other comprehensive loss	$	(2,706	)	$	(635	)

Income Taxes.

During the fourth quarter of 2021 the Company assessed its earnings history and trend over the past year and its estimate of future earnings, and the Company determined that it was more likely than not that the deferred tax assets would be realized in the near term. Accordingly, in the fourth quarter of 2021, the valuation allowance in the amount of $4 million that had been previously recorded against the net deferred tax asset for the amount not expected to be realized in the future was fully reversed. Therefore, there was no provision for income taxes for the three months ended March 31, 2021.

Reclassifications. Certain amounts have been reclassified to allow for consistent presentation for the periods presented.

Recent Pronouncements.

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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 condensed consolidated 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, 2022. The Company is in the process of determining the effect of the ASU on its condensed consolidated financial statements.

(continued)

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (Unaudited)

(2) Debt Securities. Debt Securities have been classified according to management’s intent. The carrying amount of debt securities and approximate fair values are as follows (in thousands):

			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value

At March 31, 2022:
Available for sale:
SBA Pool Securities	$	1,063	$	—	$	(25	)	$	1,038
Collateralized mortgage obligations		178		—		(4	)		174
Taxable municipal securities		16,757		—		(2,130	)		14,627
Mortgage-backed securities		16,545		—		(1,438	)		15,107
Total	$	34,543	$	—	$	(3,597	)	$	30,946

Held-to-maturity:
Collateralized mortgage obligations	$	673	$	2		(6	)	$	669
Mortgage-backed securities		135		—		—			135
Total	$	808	$	2		(6	)	$	804

			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value

At December 31, 2021:
Available for sale:
SBA Pool Securities	$	1,097	$	1	$	(26	)	$	1,072
Collateralized mortgage obligations		210		7		—			217
Taxable municipal securities		16,766		19		(359	)		16,426
Mortgage-backed securities		17,137		19		(477	)		16,679
Total	$	35,210	$	46	$	(862	)	$	34,394

Held-to-maturity:
Collateralized mortgage obligations	$	854	$	28		—		$	882
Mortgage-backed securities		186		3		—			189
Total	$	1,040	$	31		—		$	1,071

There were no sales of debt securities during the three months ended March 31, 2022 and 2021.

(continued)

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (Unaudited)

(2) Debt Securities Continued.

Debt Securities available for sale with gross unrealized losses, aggregated by investment category and length of time that individual debt securities have been in a continuous loss position, is as follows (in thousands):

	At March 31, 2022
	Over Twelve Months					Less Than Twelve Months
	Gross					Gross
	Unrealized			Fair		Unrealized			Fair
	Losses			Value		Losses			Value

Available for Sale:
SBA Pool Securities		(25	)		845		—			—
Collateralized mortgage obligation		—			—		(4	)		174
Taxable municipal securities		(904	)		5,650		(1,226	)		8,977
Mortgage-backed securities		(830	)		7,744		(608	)		7,363
Total	$	(1,759	)	$	14,239	$	(1,838	)	$	16,514

	At December 31, 2021
	Over Twelve Months				Less Than Twelve Months
	Gross				Gross
	Unrealized		Fair		Unrealized		Fair
	Losses		Value		Losses		Value

Available for Sale :
SBA Pool Securities		26		895		—		—
Taxable municipal securities		81		1,853		278		12,828
Mortgage-backed securities		242		6,179		235		9,984
Total	$	349	$	8,927	$	513	$	22,812

Management evaluates debt securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic or market concerns warrant 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 March 31, 2022 and December 31, 2021, the unrealized losses on thirty-nine and twenty-nine debt securities, respectively, were caused by market conditions. It is expected that the debt securities will 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):

Schedule of Components of Loans

	March 31,			December 31,
	2022			2021

Residential real estate	$	36,786		$	32,583
Multi-family real estate		49,907			48,592
Commercial real estate		146,181			129,468
Land and construction		7,579			3,772
Commercial		12,589			14,157
Consumer		24,466			22,827

Total loans		277,508			251,399

Deduct:
Net deferred loan fees, costs and premiums		(414	)		(422	)
Allowance for loan losses		(3,408	)		(3,075	)

Loans, net	$	273,686		$	247,902

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			Total
Three Months Ended March 31, 2022:

Beginning balance	$	482		$	535		$	1,535		$	32		$	74		$	417		$	3,075
Provision (credit) for loan losses		93			14			72			47			(6	)		172			392
Charge-offs		—			—			—			—			—			(73	)		(73	)
Recoveries		—			—			—			—			—			14			14

Ending balance	$	575		$	549		$	1,607		$	79		$	68		$	530		$	3,408

Three Months Ended March 31, 2021:
Beginning balance	$	463		$	253		$	884		$	52		$	103		$	151		$	1,906
(Credit) provision for loan losses		(91	)		(15	)		(41	)		(10	)		(4	)		137			(24	)
Charge-offs		—			—			—			—			—			(20	)		(20	)
Recoveries		24			—			—			4			—			—			28

Ending balance	$	396		$	238		$	843		$	46		$	99		$	268		$	1,890

(continued)

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (Unaudited)

(3) Loans, Continued.

	Real Estate		Real Estate		Commercial Real Estate		Land and Construction		Commercial		Consumer		Total
	Residential		Multi-Family
	Real Estate		Real Estate		Commercial Real Estate		Land and Construction		Commercial		Consumer		Total
At March 31, 2022:
Individually evaluated for impairment:
Recorded investment	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Balance in allowance for loan losses	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Collectively evaluated for impairment:
Recorded investment	$	36,786	$	49,907	$	146,181	$	7,579	$	12,589	$	24,466	$	277,508
Balance in allowance for loan losses	$	574	$	549	$	1,607	$	79	$	66	$	533	$	3,408

At December 31, 2021:
Individually evaluated for impairment:
Recorded investment	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Balance in allowance for loan losses	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Collectively evaluated for impairment:
Recorded investment	$	32,583	$	48,592	$	129,468	$	3,772	$	14,157	$	22,827	$	251,399
Collectively evaluated for impairment, Recorded investment	$	32,583	$	48,592	$	129,468	$	3,772	$	14,157	$	22,827	$	251,399
Balance in allowance for loan losses	$	481	$	535	$	1,535	$	32	$	72	$	420	$	3,075
Collectively evaluated for impairment, Balance in allowance for loan losses	$	481	$	535	$	1,535	$	32	$	72	$	420	$	3,075

(continued)

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (Unaudited)

(3) Loans, Continued. The Company has divided the loan portfolio into six portfolio segments, each with different risk characteristics and methodologies for assessing risk. All loans are underwritten based upon standards set forth in the policies approved by the Company’s Board of Directors (the “Board”). The Company identifies the portfolio segments as follows:

Residential Real Estate, Multi-Family Real Estate, Commercial Real Estate, Land and Construction. Residential real estate loans are underwritten based on repayment capacity and source, value of the underlying property, credit history and stability. The Company offers first and second one-to-four family mortgage loans; the collateral for these loans is generally the clients’ owner-occupied residences. Although these types of loans present lower levels of risk than commercial real estate loans, risks do still exist because of possible fluctuations in the value of the real estate collateral securing the loan, as well as changes in the borrowers’ financial condition. 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 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. The Company has supported small business owners by making loans through the Small Business Administration Paycheck Protection Program (“PPP”). Through March 31, 2022, the Bank had originated 502 PPP loans in a total principal amount of $37.4 million. These loans are 100% guaranteed by the Small Business Administration (the “SBA”). At March 31, 2022, the Bank held PPP loans with a total principal balance of $8.4 million.

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):

Schedule of Loans by Credit Quality

	Pass		OLEM (Other Loans Especially Mentioned)		Sub- Standard		Doubtful		Loss		Total

At March 31, 2022:
Residential real estate	$	34,290	$	—	$	2,496	$	—	$	—	$	36,786
Multi-family real estate		49,907		—		—		—		—		49,907
Commercial real estate		142,355		3,826		—		—		—		146,181
Land and construction		7,579		—		—		—		—		7,579
Commercial		12,475		114		—		—		—		12,589
Consumer		24,466		—		—		—		—		24,466

Total	$	271,072	$	3,940	$	2,496	$	—	$	—	$	277,508

At December 31, 2021:
Residential real estate	$	30,080	$	—	$	2,503	$	—	$	—	$	32,583
Multi-family real estate		47,962		630		—		—		—		48,592
Commercial real estate		125,620		3,848		—		—		—		129,468
Land and construction		3,772		—		—		—		—		3,772
Commercial		13,960		197		—		—		—		14,157
Consumer		22,827		—		—		—		—		22,827

Total	$	244,221	$	4,675	$	2,503	$	—	$	—	$	251,399

Internally assigned loan grades are defined as follows:

	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 net 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 effected 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 Past		Total Past Due		Current		Nonaccrual Loans		Total Loans

At March 31, 2022:
Residential real estate	$	—	$	—	$	—	$	—	$	36,786	$	—	$	36,786
Multi-family real estate		—		—		—		—		49,907		—		49,907
Commercial real estate		—		—		—		—		146,181		—		146,181
Land and construction		—		—		—		—		7,579		—		7,579
Commercial		—		—		—		—		12,589		—		12,589
Consumer		121		59		—		180		24,286		—		24,466

Total	$	121	$	59	$	—	$	180	$	277,328	$	—	$	277,508

	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 December 31, 2021:
Residential real estate	$	198	$	—	$	—	$	198	$	32,385	$	—	$	32,583
Multi-family real estate		—		—		—		—		48,592		—		48,592
Commercial real estate		—		—		—		—		129,468		—		129,468
Land and construction		—		—		—		—		3,772		—		3,772
Commercial		—		—		—		—		14,157		—		14,157
Consumer		69		—		—		69		22,758		—		22,827

Total	$	267	$	—	$	—	$	267	$	251,132	$	—	$	251,399

There were no impaired loans at March 31, 2022 or December 31, 2021.

(continued)

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (Unaudited)

(3) Loans, Continued. The average recorded investment in impaired loans and interest income recognized and received on impaired loans are as follows (in thousands):

	Three Months Ended March 31,
	2022						2021
	Average		Interest		Interest		Average		Interest		Interest
	Recorded		Income		Income		Recorded		Income		Income
	Investment		Recognized		Received		Investment		Recognized		Received

Residential real estate	$	—	$	—	$	—	$	—	$	—	$	—
Commercial real estate	$	—	$	—	$	—	$	1,644	$	7	$	7
Commercial	$	—	$	—	$	—	$	—	$	—	$	—
Total	$	—	$	—	$	—	$	1,644	$	7	$	7

No loans have been determined to be troubled debt restructurings (TDR’s) during the three month periods ended March 31, 2022 or 2021. At March 31, 2022 and 2021, there were no loans modified and entered into as TDR’s within the past twelve months, that subsequently defaulted during the three month periods ended March 31, 2022 or 2021.

(4) Earnings Per Share. Basic earnings per share have been computed on the basis of the weighted-average number and 2021 shares of common stock outstanding during the period. During the three month periods ended March 31, 2022, basic and diluted earnings per share is the same as there were no outstanding potentially dilutive securities. Earnings per common share have been computed based on the following:

	2022		2021
	Three Months Ended
	March 31,
	2022		2021
Weighted-average number of common shares outstanding used to calculate basic and diluted earnings per common share		4,892,323		3,203,576

(continued)

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (Unaudited)

(5) Stock-Based Compensation

The Company is authorized to grant stock options, stock grants and other forms of equity-based compensation under its 2018 Equity Incentive Plan (the “2018 Plan”). The plan has been approved by the shareholders. The Company is authorized to issue up to 550,000 shares of common stock under the 2018 Plan, of which 250,096 shares remain available for grant. No stock options are outstanding at March 31, 2022.

(6) Fair Value Measurements. There were no impaired collateral dependent loans measured at fair value on a nonrecurring basis at March 31, 2022 and December 31, 2021.

Debt securities available for sale measured at fair value on a recurring basis are summarized below (in thousands):

	Fair Value		Level 1		Level 2		Level 3
			Fair Value Measurements Using
			Quoted Prices		Significant
			In Active Markets for		Other Observable		Significant Unobservable
	Fair Value		Identical Assets (Level 1)		Inputs (Level 2)		Inputs (Level 3)
At March 31, 2022 :
SBA Pool Securities	$	1,038	$	—	$	1,038		—
Collateralized mortgage obligations		174		—		174		—
Taxable municipal securities		14,627		—		14,627		—
Mortgage-backed securities		15,107		—		15,107		—
Total	$	30,946		—	$	30,946		—

At December 31, 2021 :
SBA Pool Securities	$	1,072	$	—	$	1,072		—
Collateralized mortgage obligations		217		—		217		—
Taxable municipal securities		16,426		—		16,426		—
Mortgage-backed securities		16,679		—		16,679		—
Total	$	34,394		—	$	34,394		—

(7) 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 March 31, 2022						At December 31, 2021
	Carrying Amount		Fair Value		Level		Carrying Amount		Fair Value		Level

Financial assets:
Cash and cash equivalents	$	72,192	$	72,192		1	$	58,970	$	58,970		1
Debt securities available for sale		30,946		30,946		2		34,394		34,394		2
Debt securities held-to-maturity		808		804		2		1,040		1,071		2
Loans		273,686		274,039		3		247,902		247,788		3
Federal Home Loan Bank stock		850		850		3		793		793		3
Accrued interest receivable		927		927		3		971		971		3

Financial liabilities:
Deposit liabilities		317,322		317,368		3		292,457		292,537		3
Federal Home Loan Bank advances		18,000		18,162		3		18,000		18,021		3
Off-balance sheet financial instruments		—		—		3		—		—		3

(continued)

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (Unaudited)

(8) Off- Balance Sheet Financial Instruments. 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, unused lines of credit, and standby letters of 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 sheet. The contract amounts of these instruments reflect the extent of involvement the Company has in these financial instruments.

The Company’s exposure to credit loss in the event of non-performance 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.

Standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party. The credit risk involved in issuing letters of credit to customers is essentially the same as that involved in extending loan facilities to customers. The Bank generally holds collateral supporting those commitments. Standby letters of credit generally have expiration dates within one year.

Commitments to extend credit, unused lines of credit, and standby letters of credit typically result in loans with a market interest rate when funded. A summary of the contractual amounts of the Company’s financial instruments with off-balance-sheet risk at March 31, 2022 follows (in thousands):


Commitments to extend credit	$	28,580

Unused lines of credit	$	15,034

Standby letters of credit	$	3,000

(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.

(continued)

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (Unaudited)

(9) Regulatory Matters, Continued.

Management believes, as of March 31, 2022 and December 31, 2021, that the Bank meets all capital adequacy requirements to which it is subject. The Bank’s actual capital amounts and percentages are presented in the table ($ in thousands):

	Actual					To Be Well Capitalized Under Prompt Corrective Action Regulations (CBLR Framework)
	Amount		%			Amount		%
As of March 31, 2022:
Tier I Capital to Total Assets		48,559		12.53	%		34,884		9.00	%

As of December 31, 2021:
Tier I Capital to Total Assets		35,338		10.64	%		28,235		8.50	%

(10) Preferred Stock

During the first quarter of 2022, the Company issued 260 shares of Series B-2 Participating Preferred Stock to an unrelated party at a cash price of $25,000 per share, or an aggregate of $6,500,000.

OptimumBank Holding Inc. is authorized to issue 1,020 shares of Series B Participating Preferred Stock at a price of $25,000 per share. The Preferred Stock has no par value. Except in the event of liquidation, if the Company declares or pays a dividend or distribution on the common stock, the Company shall simultaneously declare and pay a dividend on the Series B Preferred on a pro rata basis with the common stock determined on an as-converted basis assuming all shares of Series B Preferred Stock had been converted immediately prior to the record date of the applicable dividend.

The Preferred Stock is convertible into shares of common stock, at the option of the Company, subject to the prior fulfilment of the following conditions: (i) such conversion shall have been approved by the holders of a majority of the outstanding common stock of the Company; and (ii) such conversion shall not result in any holder of the Series B Preferred Stock and any persons with whom the holder may be acting in concert, becoming beneficial owners of more than 9.9% of the outstanding shares of the common stock. The number of shares issuable upon conversion is subject to adjustment based on the terms of the applicable Certificate of Designation for the Series B Preferred (the “Certificate of Designation”) The Series B Preferred has preferential liquidation rights over common stockholders and holders of junior securities. The liquidation price is the greater of $25,000 per share of Series B Preferred or such amount per share of Series A Preferred that would have been payable had all shares of the Series B Preferred had been converted into common stock pursuant to the terms of the Certificate of Designation immediately prior to a liquidation. The Series B Preferred generally has no voting rights except as provided in the Certificate of Designation.

The Series B is subdivided into Series B-1 and Series B-2 Preferred Stock. The Company is authorized to issue 760 shares of Series B-1 and 260 shares of Series B-2.

Series B-2 has substantially the same rights, preferences, powers, restrictions and limitations, except that the initial conversion price of the Series B-1 is $2.50 per share and the initial conversion price for Series B-2 is $4.00 per share.

(11) Contingencies. Various claims arise from time to time in the normal course of business. In the opinion of management, none have occurred that will have a material effect on the Company’s condensed consolidated financial statements.

(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 consolidated financial statements and footnotes for the year ended December 31, 2021 in the Annual Report on Form 10-K.

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.

Capital Levels

As of March 31, 2022, the Bank is well capitalized under regulatory guidelines.

Refer to Note 9 for the Bank’s actual and required minimum capital ratios.

(continued)

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Financial Condition at March 31, 2022 and December 31, 2021

Overview

The Company’s total assets increased by approximately $35.3 million to $387.2 million at March 31, 2022, from $351.9 million at December 31, 2021, primarily due to increases in loans, and cash and cash equivalents. The growth in assets was attributable to the success of the Company’s efforts to increase deposits from new customers. Total deposits grew by approximately $24.9 million to $317.3 million at March 31, 2022, from $292.5 million at December 31, 2021. Total stockholders’ equity increased by approximately $10.8 million to $49.3 million at March 31, 2022, from $38.5 million at December 31, 2021, primarily due to proceeds from the sale of preferred stock, common stock and net earnings. The increase in stockholders’ equity was partially offset by the increase in accumulated other comprehensive loss of approximately $2.1 million for the three months ended March 31, 2022.

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

	Three Months Ended March 31, 2022			Year Ended December 31, 2021

Average equity as a percentage of average assets		9.7	%		9.4	%

Equity to total assets at end of period		12.7	%		11	%

Return on average assets (1)		0.9	%		2.2	%

Return on average equity (1)		8.9	%		23.3	%

Noninterest expenses to average assets (1)		2.4	%		2.4	%

(1) Annualized for the three months ended March 31, 2022.

Liquidity and Sources of Funds

The Company’s sources of funds include customer deposits, advances from the Federal Home Loan Bank of Atlanta (“FHLB”), principal repayments and sales of debt securities, loan repayments, 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 Company has priced its deposit rates competitively. The Company will adjust rates on its deposits to attract or retain deposits as needed.

The Company increased deposits by approximately $24.9 million during the three-month period ending March 31, 2022. The proceeds were used to originate new loans.

In addition to obtaining funds from depositors, the Company may borrow funds from other financial institutions. At March 31, 2022, the Company had outstanding borrowings of $18 million, against its $87 million in established borrowing capacity with the FHLB. The Company’s borrowing facility is subject to collateral and stock ownership requirements, as well as prior FHLB consent to each advance. The Company has an available discount window credit line with the Federal Reserve Bank, which is currently $430,000. 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. At March 31, 2022, the Company also had available lines of credit amounting to $19.5 million with five correspondent banks to purchase federal funds. Disbursements on the lines of credit are subject to the approval of the correspondent banks. We measure and monitor our liquidity daily and believe our liquidity sources are adequate to meet our operating needs.

Off-Balance Sheet Arrangements

Refer to Note 8 in the condensed consolidated financial statements for Off-Balance Sheet Arrangements.

(continued)

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) the ratio of average interest-earning assets to average interest-bearing liabilities.

	Three Months Ended March 31,
	2022							2021
			Interest		Average					Interest		Average
	Average		and		Yield/			Average		and		Yield/
(dollars in thousands)	Balance		Dividends		Rate⁽⁵⁾			Balance		Dividends		Rate⁽⁵⁾
Interest-earning assets:
Loans	$	264,442	$	3,263		4.94	%	$	163,086	$	1,847		4.53	%
Securities		34,107		163		1.91	%		25,722		91		1.42	%
Other (1)		71,631		37		0.21	%		27,500		27		0.39	%

Total interest-earning assets/interest income		370,180		3,463		3.74	%		216,308		1,965		3.63	%

Cash and due from banks		17,143							28,067
Premises and equipment		727							1,306
Other		4,821							2,506

Total assets	$	392,871						$	248,187

Interest-bearing liabilities:
Savings, NOW and money-market deposits	$	182,585		160		0.35	%	$	112,908		133		0.47	%
Time deposits		12,237		15		0.49	%		20,810		48		0.92	%
Borrowings (2)		18,000		61		1.36	%		24,625		98		1.59	%

Total interest-bearing liabilities/interest expense		212,822		236		0.44	%		158,343		279		0.70	%

Noninterest-bearing demand deposits		139,128							70,267
Other liabilities		2,677							1,490
Stockholders’ equity		38,244							18,087

Total liabilities and stockholders’ equity	$	392,871						$	248,187

Net interest income			$	3,227						$	1,686

Interest rate spread (3)						3.30	%						2.93	%

Net interest margin (4)						3.49	%						3.12	%

Ratio of average interest-earning assets to average interest-bearing liabilities		1.74							1.37

(1)	Includes interest-earning deposits with banks and Federal Home Loan Bank stock dividends.
(2)	Includes Federal Home Loan Bank advances, other borrowings and the 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.
(5)	Annualized.

(continued)

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 March 31, 2022 and 2021

	Three Months Ended					Increase /
	March 31,					(Decrease)
(dollars in thousands)	2022		2021			Amount			Percentage
Total interest income	$	3,463	$	1,965		$	1,498			76	%
Total interest expense		236		279			(43	)		-15	%
Net interest income		3,227		1,686			1,541			91	%
Provision (credit) for loan losses		392		(24	)		416			1,733	%
Net interest income after provision for loan losses		2,835		1,710			1,125			66	%
Total noninterest income		650		176			474			269	%
Total noninterest expenses		2,340		1,538			802			52	%
Net earnings before income taxes		1,145		348			797			229	%
Income taxes		290		-			290			100	%
Net earnings	$	855	$	348			507			146	%
Net earnings per share - basic and diluted	$	0.17	$	0.11

Net earnings. Net earnings for the three months ended March 31, 2022, were $855,000 or $0.17 per basic and diluted share compared to net earnings of $348,000 or $0.11 per basic and diluted share for the three months ended March 31, 2021. The increase in net earnings during the three months ended March 31, 2022 compared to three months ended March 31, 2021 is primarily attributed to an increase in net interest income and noninterest income, partially offset by the increase in noninterest expense.

Interest Income. Interest income increased $1,498,000 for the three months ended March 31, 2022 compared to the three ended March 31, 2021 due primarily to growth in the loan portfolio.

Interest Expense. Interest expense decreased $43,000 to $236,000 for the three months ended March 31, 2022 compared to the prior period, primarily due to a decrease in interest bearing deposit rates and change in the composition of deposits.

Provision (credit) for Loan Losses. Provision for loan losses was $392,000 for the three months ended March 31, 2022 compared to a $24,000 credit for loan losses for the three months ended March 31, 2021. The provision for loan losses is charged to earnings as losses are estimated to have occurred in order to bring the total loan allowance for loan losses to a level deemed appropriate by management to absorb losses inherent in the portfolio at March 31, 2022. 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 $3.4 million or 1.23% of loans outstanding at March 31, 2022, compared to $3.1 million or 1.22% of loans outstanding at December 31, 2021. The provision for loan losses during the first quarter of 2022 was primarily due to loan volume.

Noninterest Income. Total noninterest income increased to $650,000 for the three months ended March 31, 2022, from $176,000 for the three months ended March 31, 2021 due to increased wire transfer and ACH fees during the three month period ended March 31, 2022.

Noninterest Expenses. Total noninterest expenses increased to $2,340,000 for the three months ended March 31, 2022 compared to $1,538,000 for the three months ended March 31, 2021 primarily due to an increase in salaries and employee benefits and data processing.

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

Item 4. Controls and Procedures

The Company’s management evaluated the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report, and, based on this evaluation, the Principal Executive Officer and Principal Financial Officer concluded that these disclosure controls and procedures are effective.

There have been no changes in the Company’s internal control over financial reporting during the quarter ended March 31, 2022, that have materially affected, or are reasonably likely to materially affect, internal control over financial reporting.

PART II. OTHER INFORMATION

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

During the first quarter of 2022, the Company issued 1,227,331 shares of its common stock in a private placement transaction to 11 accredited investors at a price of $4.50 per share. None of these investors was an officer, director or affiliate of the Company other than Michael Blisko and Moishe Gubin, who are directors of the Company. Mr. Blisko purchased 202,000 shares and Mr. Gubin purchased 190,000 shares. The Company issued these shares in reliance on Section 4(a)(2) of the Securities Act as a transaction by an issuer not involving a public offering.

During the first quarter of 2022, the Company issued a total of 260 shares of Series B-2 preferred stock to a non-related party for a purchase price of $6,500,000. The issuance of the shares was exempt from registration pursuant to Section 4(a)(2) of the Securities Act of 1933 as a transaction by an issuer not involving a public offering. The Company used the proceeds to make capital contributions to the Bank in order to augment the Bank’s regulatory capital ratios.

Item 6. Exhibits

The exhibits listed in the Exhibit Index following the signature page are filed with or incorporated by reference into this report.

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

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.

	OPTIMUMBANK HOLDINGS, INC.
	(Registrant)

Date: May 11, 2022	By:	/s/ Timothy Terry
		Timothy Terry
		Principal Executive Officer

	By:	/s/ Joel Klein
		Joel Klein
		Principal Financial Officer

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

EXHIBIT INDEX

Exhibit No.		Description

31.1		Certification of Principal Executive Officer required by Rule 13a-14(a)/15d-14(a) under the Exchange Act

31.2		Certification of Principal Financial Officer required by Rule 13a-14(a)/15d-14(a) under the Exchange Act

32.1		Certification of Principal Executive Officer

32.2		Certification of Principal Financial Officer

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

EXHIBIT INDEX

Exhibit No.		Description

101.INS		Inline XBRL Instance Document

101.SCH		Inline XBRL Taxonomy Extension Schema Document

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document

104		Cover Page Interactive Data File (embedded within the Inline XBRL document)