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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended March 31, 2006
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from __________ to _________
Commission file number 0001288855
OPTIMUMBANK HOLDINGS, INC.
(Exact name of small business issuer as specified in its charter)
FLORIDA 55-0865043
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
2477 EAST COMMERCIAL BOULEVARD, FORT LAUDERDALE, FL 33308
(Address of principal executive offices)
954-776-2332
(Issuer's telephone number)
10197 CLEARY BOULEVARD, PLANTATION, FL 33324
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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 [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the issuer has filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 2,681,775 common shares issued and
outstanding as of May 10, 2006
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
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OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY
INDEX
PART I. FINANCIAL INFORMATION
ITEM 1. INTERIM FINANCIAL STATEMENTS PAGE
----
Condensed Consolidated Balance Sheets -
March 31, 2006 (unaudited) and December 31, 2005........................2
Condensed Consolidated Statements of Earnings -
Three Months ended March 31, 2006 and 2005 (unaudited)..................3
Condensed Consolidated Statements of Stockholders' Equity -
Three Months ended March 31, 2006 and 2005 (unaudited)..................4
Condensed Consolidated Statements of Cash Flows -
Three Months ended March 31, 2006 and 2005 (unaudited)..................5
Notes to Condensed Consolidated Financial Statements (unaudited)........6-9
Review By Independent Registered Public Accounting Firm..................10
Report of Independent Registered Public Accounting Firm..................11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.............................................12-15
ITEM 3. CONTROLS AND PROCEDURES...........................................16
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS..........................................................17
SIGNATURES....................................................................18
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,
--------- ---------
2006 2005
--------- ---------
(UNAUDITED)
ASSETS
Cash and due from banks $ 66 $ 502
Federal funds sold 1,698 652
--------- ---------
Total cash and cash equivalents 1,764 1,154
Securities held to maturity (fair value approximates $24,025
and $25,096) 24,666 25,618
Security available for sale 238 243
Loans, net of allowance for loan losses of $883 and $777 173,644 170,226
Federal Home Loan Bank stock 2,754 2,712
Premises and equipment, net 4,039 4,074
Accrued interest receivable 965 1,030
Other assets 1,062 987
--------- ---------
Total assets $ 209,132 $ 206,044
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Noninterest-bearing demand deposits $ 548 $ 390
Savings, NOW and money-market deposits 8,263 7,050
Time deposits 107,778 106,624
--------- ---------
Total deposits 116,589 114,064
Federal Home Loan Bank advances 51,350 52,950
Other borrowings 12,950 12,950
Junior subordinated debenture 5,155 5,155
Other liabilities 1,728 922
Official checks 2,323 1,593
--------- ---------
Total liabilities 190,095 187,634
--------- ---------
Stockholders' equity:
Common stock, $.01 par value; 6,000,000 shares authorized,
2,678,775 and 2,663,775 shares issued and outstanding 27 27
Additional paid-in capital 14,257 14,141
Retained earnings 4,765 4,249
Accumulated other comprehensive loss (12) (7)
--------- ---------
Total stockholders' equity 19,037 18,410
--------- ---------
Total liabilities and stockholders' equity $ 209,132 $ 206,044
========= =========
See Accompanying Notes to Condensed Consolidated Financial Statements.
2
OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED
MARCH 31,
---------------
2006 2005
------ ------
Interest income:
Loans $3,010 $2,072
Securities 287 299
Other 45 45
------ ------
Total interest income 3,342 2,416
------ ------
Interest expense:
Deposits 1,113 781
Borrowings 707 416
------ ------
Total interest expense 1,820 1,197
------ ------
Net interest income 1,522 1,219
Provision for loan losses 106 33
------ ------
Net interest income after provision for loan losses 1,416 1,186
------ ------
Noninterest income:
Service charges and fees 23 48
Loan prepayment fees 67 187
Gain on early extinguishment of debt 178 --
Other 4 23
------ ------
Total noninterest income 272 258
------ ------
Noninterest expenses:
Salaries and employee benefits 491 473
Occupancy and equipment 159 141
Data processing 41 51
Professional fees 66 42
Insurance 19 16
Stationary and supplies 11 10
Other 98 94
------ ------
Total noninterest expenses 885 827
------ ------
Earnings before income taxes 803 617
Income taxes 287 233
------ ------
Net earnings $ 516 $ 384
====== ======
Net earnings per share:
Basic $ .18 $ .14
====== ======
Diluted $ .18 $ .13
====== ======
Dividends per share $ -- $ --
====== ======
See Accompanying Notes to Condensed Consolidated Financial Statements.
3
OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
THREE MONTHS ENDED MARCH 31, 2006 AND 2005
(DOLLARS IN THOUSANDS)
ACCUMULATED
OTHER
ADDITIONAL COMPRE- TOTAL
COMMON STOCK PAID-IN RETAINED HENSIVE STOCKHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS LOSS EQUITY
---------- ------- ------- ------- ------ -------
Balance at December 31, 2004 2,650,102 $ 27 14,051 2,648 (3) 16,723
Comprehensive income:
Net earnings for the three
months ended March 31,
2005 (unaudited) -- -- -- 384 -- 384
Net change in unrealized loss on
security available for sale
(unaudited) -- -- -- -- (3) (3)
-------
Comprehensive income (unaudited) -- -- -- -- -- 381
-------
Proceeds from exercise of common
stock options (unaudited) 7,400 -- 39 -- -- 39
---------- ------- ------- ------- ------ -------
Balance at March 31, 2005
(unaudited) 2,657,502 $ 27 14,090 3,032 (6) 17,143
========== ======= ======= ======= ====== =======
Balance at December 31, 2005 2,663,775 27 14,141 4,249 (7) 18,410
Comprehensive income:
Net earnings for the three
months ended March 31,
2006 (unaudited) -- -- -- 516 -- 516
Net change in unrealized loss on
security available for sale
(unaudited) -- -- -- -- (5) (5)
-------
Comprehensive income (unaudited) -- -- -- -- -- 511
-------
Proceeds from exercise of common
stock options, including tax
benefit of $32 (unaudited) 15,000 -- 116 -- -- 116
---------- ------- ------- ------- ------ -------
Balance at March 31, 2006
(unaudited) 2,678,775 $ 27 14,257 4,765 (12) 19,037
========== ======= ======= ======= ====== =======
See Accompanying Notes to Condensed Consolidated Financial Statements.
4
OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN THOUSANDS)
THREE MONTHS ENDED
MARCH 31,
------------------
2006 2005
------- -------
Cash flows from operating activities:
Net earnings $ 516 $ 384
Adjustments to reconcile net earnings to net cash provided by
operating activities:
Depreciation and amortization 56 67
Provision for loan losses 106 33
Gain on early extinguishment of debt (178) --
Net amortization of fees, premiums and discounts 85 25
Repayments of loans held for sale -- 2
Decrease (increase) in accrued interest receivable 65 (19)
(Increase) decrease in other assets (75) 115
Increase in official checks and other liabilities 1,568 522
------- -------
Net cash provided by operating activities 2,143 1,129
------- -------
Cash flows from investing activities:
Purchases of securities held to maturity -- (7,843)
Principal repayments of securities held to maturity 954 1,187
Net increase in loans (3,611) (1,571)
Purchase of premises and equipment (21) (81)
Purchase of Federal Home Loan Bank stock (42) (211)
------- -------
Net cash used in investing activities (2,720) (8,519)
------- -------
Cash flows from financing activities:
Net increase in deposits 2,525 1,340
Proceeds from exercise of common stock options 84 39
Net (decrease) increase in Federal Home Loan Bank advances (1,422) 3,400
------- -------
Net cash provided by financing activities 1,187 4,779
------- -------
Net increase (decrease) in cash and cash equivalents 610 (2,611)
Cash and cash equivalents at beginning of the period 1,154 3,223
------- -------
Cash and cash equivalents at end of the period $ 1,764 $ 612
======= =======
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 1,869 $ 1,370
======= =======
Income taxes $ 68 $ 224
======= =======
Noncash transactions:
Change in accumulated other comprehensive loss, net
change in unrealized loss on security available for sale $ (5) $ (3)
======= =======
Tax benefit from stock options exercised $ 32 $ --
======= =======
See Accompanying Notes to Condensed Consolidated Financial Statements.
5
OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(1) GENERAL. OptimumBank Holdings, Inc. (the "Holding Company") is a one-bank
holding company and owns 100% of OptimumBank (the "Bank"), a state
(Florida)-chartered commercial bank (collectively, the "Company"). The
Holding Company's only business is the operation of the Bank. The Bank's
deposits are insured by the Federal Deposit Insurance Corporation. The
Bank offers a variety of community banking services to individual and
corporate customers through its three banking offices located in Broward
County, Florida.
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, 2006, and the results of operations and
cash flows for the three-month periods ended March 31, 2006 and 2005. The
results of operations for the three months ended March 31, 2006, are not
necessarily indicative of the results to be expected for the full year.
(2) LOAN IMPAIRMENT AND CREDIT LOSSES. The activity in the allowance for loan
losses was as follows (in thousands):
THREE MONTHS ENDED
MARCH 31,
--------------------
2006 2005
------- --------
Balance at beginning of period $ 777 $ 628
Provision for loan losses 106 33
------- --------
Balance at end of period $ 883 $ 661
======= ========
There were no impaired loans at March 31, 2006 or December 31, 2005.
The average net investment in impaired loans and interest income recognized and
received on impaired loans is as follows (in thousands):
THREE MONTHS ENDED
MARCH 31,
--------------------
2006 2005
------- --------
Average net investment in impaired loans $ -- $ 3,268
======= ========
Interest income recognized on impaired loans $ -- $ --
======= ========
Interest income received on impaired loans $ -- $ --
======= ========
(continued)
6
OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(3) REGULATORY CAPITAL. The Company and the Bank are required to maintain
certain minimum regulatory capital requirements. The following is a
summary at March 31, 2006 of the regulatory capital requirements of the
Bank's capital on a percentage basis:
REGULATORY
BANK REQUIREMENT
----- -----------
Tier I capital to total average assets 11.37% 4.00%
Tier I capital to risk-weighted assets 15.69% 4.00%
Total capital to risk-weighted assets 16.28% 8.00%
(4) EARNINGS PER SHARE. Basic earnings per share has been computed on the basis
of the weighted-average number of shares of common stock outstanding
during the period. Diluted earnings per share were computed based on the
weighted average number of shares outstanding plus the effect of
outstanding stock options, computed using the treasury stock method. All
amounts reflect the 5% stock dividend declared in April, 2006. Earnings
per common share have been computed based on the following:
THREE MONTHS ENDED
MARCH 31,
------------------------
2006 2005
---------- ----------
Weighted average number of common shares
outstanding used to calculate basic
earnings per common share 2,800,901 2,786,492
Effect of dilutive stock options 119,906 108,791
---------- ----------
Weighted average number of common shares
outstanding used to calculate diluted
earnings per common share 2,920,807 2,895,283
========== ==========
(continued)
7
OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED), CONTINUED
(5) STOCK-BASED COMPENSATION. Prior to January 1, 2006, the Company's stock
option plans were accounted for under the recognition and measurement
provisions of APB Opinion No. 25 (Opinion 25), Accounting for Stock Issued
to Employees, and related Interpretations, as permitted by FASB Statement
No. 123, Accounting for Stock-Based Compensation (as amended by SFAS No.
148, Accounting for Stock-Based Compensation Transition and Disclosure)
(collectively SFAS 123). No stock-based employee compensation cost was
recognized in the Company's consolidated statements of earnings through
December 31, 2005, as all options granted under the plans had an exercise
price equal to the market value of the underlying common stock on the date
of grant. Effective January 1, 2006, the Company adopted the fair value
recognition provisions of FASB Statement No. 123(R), Share-Based Payment
(SFAS 123R), using the modified-prospective-transition method. Under that
transition method, compensation cost recognized in 2006 includes: (a)
compensation cost for all share-based payments granted prior to, but not
yet vested as of January 1, 2006, based on the grant date fair value
calculated in accordance with the original provisions of SFAS 123, and (b)
compensation cost for all share-based payments granted subsequent to
December 31, 2005, based on the grant-date fair value estimated in
accordance with the provisions of SFAS 123(R). As of December 31, 2005,
all stock options were fully vested and no options were granted during the
period ending March 31, 2006; therefore, no stock-based compensation has
been recognized in 2006.
The Company established an Incentive Stock Option Plan (the "Plan") for
officers, directors and employees of the Company and reserved 548,100
(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. However, the Company's board of directors authorized
the immediate vesting of all stock options outstanding as of December 29,
2005 in order to reduce noncash compensation expense that would have been
recorded in its consolidated statements of earnings in future years upon
adoption of SFAS No. 123R in January 2006. The options must be exercised
within ten years from the date of grant. At March 31, 2006, no options
were available for grant.
A summary of the activity in the Company's stock option plan is as
follows. All amounts reflect the 5% stock dividend declared in April of
2006 (dollars in thousands, except per share amounts):
WEIGHTED-
RANGE OF AVERAGE AGGREGATE
NUMBER OF PER SHARE EXERCISE OPTION
SHARES OPTION PRICE PRICE PRICE
-------- ------------ ------- -------
Outstanding at December 31, 2005 498,540 $ 4.76-11.90 $ 7.60 $ 3,792
Exercised (15,750) 4.76-6.43 5.31 (84)
Forfeited (5,250) 9.52 9.52 (50)
-------- ------------ ------- -------
Outstanding at March 31, 2006 477,540 $ 4.76-11.90 $ 7.66 $ 3,658
(continued)
8
OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED), CONTINUED
(5) STOCK-BASED COMPENSATION, CONTINUED. The following table illustrates the
effect on net earnings and earnings per share if the Company had applied
the fair value recognition provisions of SFAS 123 to options granted under
the Company's stock option plan for the three months ended March 31, 2005.
For purposes of this pro forma disclosure, the value of the options is
estimated using the Black-Scholes option-pricing model and is being
amortized to expense over the options' vesting periods. All amounts
reflect the 5% stock dividend declared in April, 2006 (in thousands,
except per share data).
THREE MONTHS ENDED
MARCH 31,
2005
Net earnings, as reported $ 384
Deduct: Total stock-based employee compensation
expense determined under fair value based
method for all awards (44)
-------
Proforma net earnings $ 340
=======
Basic earnings per share:
As reported $ .14
=======
Proforma $ .12
=======
Diluted earnings per share:
As reported $ .13
=======
Proforma $ .12
=======
(6) COMMON STOCK DIVIDEND. On April 27, 2006, the Company's board of directors
declared a 5% stock dividend to shareholders of record on May 11, 2006, to
be paid on June 11, 2006.
9
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, 2006, and for the three-month periods ended March 31, 2006 and 2005,
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.
10
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, 2006,
and the condensed consolidated statements of earnings, stockholders' equity and
cash flows for the three-month periods ended March 31, 2006 and 2005. 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, 2005, 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 10, 2006, 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,
2005, 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 19, 2006
11
OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
COMPARISON OF MARCH 31, 2006 AND DECEMBER 31, 2005
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of cash during the three months ended March
31, 2006 were from net deposit inflows of approximately $2.5 million,
principal repayments of securities held to maturity of approximately $1.0
million and cash provided from operating activities of approximately $2.3
million. Cash was used primarily for net loan originations of
approximately $3.6 million and net repayment of Federal Home Loan Bank
advances of approximately $1.6 million. At March 31, 2006, the Company had
time deposits of approximately $62.8 million that mature in one year or
less. At March 31, 2006, the Company exceeded its regulatory liquidity
requirements. Management believes that, if so desired, it can adjust the
rates on time deposits to retain or attract deposits in a changing
interest-rate environment.
The following table shows selected information for the periods ended or at
the dates indicated:
THREE MONTHS THREE MONTHS
ENDED YEAR ENDED ENDED
MARCH 31, DECEMBER 31, MARCH 31,
2006 2005 2005
------ ------ ------
Average equity as a percentage
of average assets 9.00% 9.48% 10.24%
Equity to total assets at end of period 9.09% 8.93% 10.07%
Return on average assets (1) .99% .86% .92%
Return on average equity (1) 11.01% 9.03% 9.03%
Noninterest expenses to average assets (1) 1.70% 1.82% 1.99%
Nonperforming loans to total assets at end
of period --% --% 1.92%
------------
(1) Annualized for the three months ended March 31, 2006 and 2005.
12
OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS, CONTINUED
OFF-BALANCE SHEET ARRANGEMENTS
The Company is a party to financial instruments with off-balance-sheet
risk in the normal course of business to meet the financing needs of its
customers. These financial instruments include commitments to extend
credit and undisbursed loans in process. These instruments involve, to
varying degrees, elements of credit and interest-rate risk in excess of
the amounts recognized in the condensed consolidated balance sheet. The
contract or notional amounts of those instruments reflect the extent of
the Company's involvement in particular classes of financial instruments.
The Company's exposure to credit loss in the event of nonperformance by
the other party to the financial instrument for commitments to extend
credit and undisbursed loans in process is represented by the contractual
amount of those instruments. The Company uses the same credit policies in
making commitments as it does for on-balance-sheet instruments.
Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination
clauses and may require payment of a fee. Since many of the commitments
are expected to expire without being drawn upon, the total committed
amounts do not necessarily represent future cash requirements. The Company
evaluates each customer's creditworthiness on a case-by-case basis. The
amount of collateral obtained, if it is deemed necessary by the Company
upon extension of credit, is based on management's credit evaluation of
the counter party.
A summary of the amounts of the Company's financial instruments, with
off-balance sheet risk at March 31, 2006, follows (in thousands):
CONTRACT
AMOUNT
--------
Commitments to extend credit $ 14,286
========
Undisbursed loans in process $ 585
========
Management believes that the Company has adequate resources to fund all of
its commitments and that substantially all its existing commitments will be
funded in the next twelve months.
13
OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, information regarding
(i) the total dollar amount of interest and dividend income of the Company from
interest-earning assets and the resultant average yields; (ii) the total dollar
amount of interest expense on interest-bearing liabilities and the resultant
average cost; (iii) net interest income; (iv) interest-rate spread; (v) net
interest margin; and (vi) ratio of average interest-earning assets to average
interest-bearing liabilities.
THREE MONTHS ENDED MARCH 31,
-------------------------------------------------------------------
2006 2005
--------------------------------- -----------------------------
INTEREST AVERAGE INTEREST AVERAGE
AVERAGE AND YIELD/ AVERAG AND YIELD/
BALANCE DIVIDENDS RATE BALANCE DIVIDENDS RATE
--------- ------- ------- --------- ------- ------
Interest-earning assets:
Loans $ 172,186 $ 3,010 6.99% $ 125,942 $ 2,072 6.58%
Securities 25,404 287 4.52 27,158 299 4.40
Other (1) 3,524 45 5.11 6,221 45 2.89
--------- ------- --------- -------
Total interest-earning assets/interest income 201,114 3,342 6.65 159,321 2,416 6.07
------- -------
Cash and due from banks 349 -- -- 99 -- --
Premises and equipment 4,066 4,129 -- --
Other 2,614 -- -- 2,525 -- --
--------- ---------
Total assets $ 208,143 -- -- $ 166,074 -- --
========= =========
Interest-bearing liabilities:
Savings, NOW and money-market deposits 7,316 23 1.26 8,017 19 .95
Time deposits 108,370 1,090 4.02 89,928 762 3.39
Borrowings (2) 70,252 707 4.03 47,954 416 3.47
--------- ------- --------- -------
Total interest-bearing liabilities/interest
expense 185,938 1,820 3.92 145,899 1,197 3.28
-------
Noninterest-bearing demand deposits 889 -- -- 1,088 -- --
Other liabilities 2,575 -- -- 2,074 -- --
Stockholders' equity 18,741 -- -- 17,013 -- --
--------- ---------
Total liabilities and stockholders' equity $ 208,143 -- -- $ 166,074 -- --
========= =========
Net interest income -- $ 1,522 -- -- $ 1,219 --
======= =======
Interest rate spread (3) -- -- 2.73% -- -- 2.79%
====== =====
Net interest margin (4) -- -- 3.03% -- -- 3.06%
====== =====
Ratio of average interest-earning assets to
average interest-bearing liabilities 1.08 -- -- 1.09 -- --
========= =========
------------
(1) Includes interest-earning deposits with banks, Federal funds sold and
Federal Home Loan Bank stock dividends.
(2) Includes Federal Home Loan Bank advances, securities sold under an
agreement to repurchase and junior subordinated debenture.
(3) Interest rate spread represents the difference between 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.
14
OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY
COMPARISON OF THE THREE-MONTH PERIODS ENDED MARCH 31, 2006 AND 2005
GENERAL. Net earnings for the three months ended March 31, 2006, were
$516,000 or $.18 per basic and diluted share compared to net earnings of
$384,000 or $.14 per basic and $.13 per diluted share for the period ended
March 31, 2005. The increase in the Company's net earnings was primarily
due to an increase in net interest income.
INTEREST INCOME. Interest income increased to $3.3 million for the three
months ended March 31, 2006 from $2.4 million for the three months ended
March 31, 2005. Interest income on loans increased to $3.0 million due
primarily to an increase in the average loan portfolio balance for the
three months ended March 31, 2006, and an increase in the average yield
earned from 6.58% for the three months ended March 31, 2005 to 6.99% for
the three months ended March 31, 2006.
INTEREST EXPENSE. Interest expense on deposit accounts increased to $1.1
million for the three months ended March 31, 2006, from $781,000 for the
three months ended March 31, 2005. Interest expense increased primarily
because of an increase in the average rate paid on deposits and an
increase in the average balance of deposits during 2006. Interest expense
on borrowings increased to $707,000 for the three months ended March 31,
2006 from $416,000 for the three months ended March 31, 2005 due to an
increase in the average rate paid on borrowings and an increase in the
average balance of borrowings.
PROVISION FOR LOAN LOSSES. The provision for loan losses is charged to
earnings to bring the total allowance to a level deemed appropriate by
management and is based upon historical experience, the volume and type of
lending conducted by the Company, industry standards, the amount of
nonperforming loans, general economic conditions, particularly as they
relate to the Company's market areas, and other factors related to the
estimated collectibility of the Company's loan portfolio. The provision
for the three months ended March 31, 2006, was $106,000 compared to
$33,000 for the same period in 2005. Management believes the balance in
the allowance for loan losses of $883,000 at March 31, 2006, is adequate.
NONINTEREST INCOME. Total noninterest income increased to $272,000 for the
three months ended March 31, 2006, from $258,000 for the three months
ended March 31, 2005 primarily due to a gain recognized on the payoff of
Federal Home Loan Bank advances of $178,000, partially offset by a
decrease in loan prepayment fees of $120,000.
NONINTEREST EXPENSES. Total noninterest expenses increased to $885,000 for
the three months ended March 31, 2006 from $827,000 for the three months
ended March 31, 2005, primarily due to an increase in salaries and
employee benefits of $18,000, an increase in occupancy and equipment of
$18,000, and an increase in professional fees of $24,000 all due to the
continued growth of the Company.
INCOME TAXES. Income taxes for the three months ended March 31, 2006, were
$287,000 (an effective rate of 35.7%) compared to income taxes of $233,000
(an effective rate of 37.8%) for the three months ended March 31, 2005.
15
OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY
ITEM 3. CONTROLS AND PROCEDURES
a. Evaluation of Disclosure Controls and Procedures. The Company maintains
controls and procedures designed to ensure that information required to
be disclosed in the reports that the Company files or submits under the
Securities Exchange Act of 1934 is recorded, processed, summarized and
reported within the time periods specified in the rules and forms of the
Securities and Exchange Commission. Based upon their evaluation of those
controls and procedures performed within 90 days of the filing date of
this report, the chief executive and principal accounting officers of the
Company concluded that the Company's disclosure controls and procedures
were adequate.
b. Changes in Internal Controls. The Company made no significant changes in
its internal controls or in other factors that could significantly affect
these controls subsequent to the date of the evaluation of those controls
by the chief executive and principal accounting officers.
16
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS
The following exhibits are filed with or incorporated by reference into this
report. The exhibits denominated by (i) an asterisk (*) were previously filed as
a part of a Registration Statement on Form 10-SB under the Exchange Act, filed
with the Federal Deposit Insurance Corporation on March 28, 2003; (ii) a double
asterisk (**) were previously filed as a part of an Annual Report on Form 10-KSB
filed with the Securities and Exchange Commission ("SEC") on March 30, 2004;
(iii) a triple asterisk (***) were previously filed as part of a current report
on Form 8-K filed with the SEC on May 11, 2004; and (iv) a quadruple asterisk
(****)were previously filed as part of a Quarterly Report on Form 10-QSB filed
with the SEC on August 12, 2004; (v) a quintuple asterisk (*****) were
previously filed as part of an Annual Report on Form 10-KSB filed with the SEC
on March 31, 2005; and (vi) a sextuple asterisk (******) were previously filed
as part of an Annual Report on Form 10-KSB filed with the SEC on March 31, 2006.
EXHIBIT NO. DESCRIPTION
----------- -----------
** 2.1 Agreement and Plan of Reorganization between OptimumBank and
OptimumBank Holdings, Inc. dated March 23, 2004
*** 3.1 Articles of Incorporation
*** 3.3 Bylaws
**** 4.1 Form of stock certificate
****** 10.1 Amended and Restated Stock Option Plan
* 10.2 Non-employee Directors' Fee Compensation and Stock Purchase
Plan
* 10.3 Agreement between OptimumBank, Albert J. Finch and
Richard L. Browdy dated June 14, 2002
***** 14.1 Code of Ethics for Chief Executive Officer and Senior
Financial Officers
31.1 Certification of Chief Executive Officer required by Rule
13a-14(a)/15d-14(a) under the Exchange Act
31.2 Certification of Chief Financial Officer required by Rule
13a-14(a)/15d-14(a) under the Exchange Act
32.1 Certification of Chief Executive Officer under ss.906 of the
Sarbanes-Oxley Act of 2002
32.2 Certification of Chief Financial Officer under ss.906 of the
Sarbanes-Oxley Act of 2002
17
OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY
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.
OPTIMUMBANK HOLDINGS, INC.
(Registrant)
Date: May 10, 2006 By: /s/ Albert J. Finch
------------------------------------------
Albert J. Finch, Chief Executive Officer
Date: May 10, 2006 By: /s/ Richard L. Browdy
------------------------------------------
Richard L. Browdy, Chief Financial Officer
18