Company Quick10K Filing
OptimumBank
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$0.00 2 $7
10-Q 2019-11-14 Quarter: 2019-09-30
10-Q 2019-08-14 Quarter: 2019-06-30
10-Q 2019-05-14 Quarter: 2019-03-31
10-K 2019-03-27 Annual: 2018-12-31
10-Q 2018-11-14 Quarter: 2018-09-30
10-Q 2018-08-14 Quarter: 2018-06-30
10-Q 2018-05-14 Quarter: 2018-03-31
10-K 2018-03-28 Annual: 2017-12-31
10-Q 2017-11-13 Quarter: 2017-09-30
10-Q 2017-08-14 Quarter: 2017-06-30
10-Q 2017-05-12 Quarter: 2017-03-31
10-K 2017-03-20 Annual: 2016-12-31
10-Q 2016-11-14 Quarter: 2016-09-30
10-Q 2016-08-15 Quarter: 2016-06-30
10-Q 2016-05-13 Quarter: 2016-03-31
10-K 2016-03-25 Annual: 2015-12-31
10-Q 2015-11-13 Quarter: 2015-09-30
10-Q 2015-08-14 Quarter: 2015-06-30
10-Q 2015-05-15 Quarter: 2015-03-31
10-K 2015-04-02 Annual: 2014-12-31
10-Q 2014-11-12 Quarter: 2014-09-30
10-Q 2014-08-14 Quarter: 2014-06-30
10-Q 2014-05-06 Quarter: 2014-03-31
10-K 2014-03-31 Annual: 2013-12-31
10-Q 2013-11-14 Quarter: 2013-09-30
10-Q 2013-08-14 Quarter: 2013-06-30
10-Q 2013-05-14 Quarter: 2013-03-31
10-K 2013-04-04 Annual: 2012-12-31
10-Q 2012-11-14 Quarter: 2012-09-30
10-Q 2012-08-14 Quarter: 2012-06-30
10-Q 2012-05-11 Quarter: 2012-03-31
10-K 2012-03-30 Annual: 2011-12-31
10-Q 2011-11-14 Quarter: 2011-09-30
10-Q 2011-08-15 Quarter: 2011-06-30
10-Q 2011-05-12 Quarter: 2011-03-31
10-K 2011-04-15 Annual: 2010-12-31
10-Q 2010-11-15 Quarter: 2010-09-30
10-Q 2010-08-16 Quarter: 2010-06-30
10-Q 2010-05-14 Quarter: 2010-03-31
10-K 2010-04-15 Annual: 2009-12-31
8-K 2020-01-07 Sale of Shares, Other Events, Exhibits
8-K 2019-11-27 Other Events, Exhibits
8-K 2019-08-27 Shareholder Vote
8-K 2019-03-13 Other Events
8-K 2019-01-08
8-K 2018-11-16
8-K 2018-06-27 Officers
8-K 2018-06-21 Other Events, Exhibits
8-K 2018-03-13 Officers
OPHC 2019-09-30
Part I. Financial Information
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-3.2 ex3-2.htm
EX-31.1 ex31-1.htm
EX-31.2 ex31-2.htm
EX-32.1 ex32-1.htm
EX-32.2 ex32-2.htm

OptimumBank Earnings 2019-09-30

OPHC 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

Comparables ($MM TTM)
Ticker M Cap Assets Liab Rev G Profit Net Inc EBITDA EV G Margin EV/EBITDA ROA
OPHC 7 111 106 0 0 -1 0 -5 -19.4 -1%
GLG 4 8 3 0 0 -4 -4 3 151% -0.6 -54%
FBMS 1 3,473 3,006 0 0 32 63 1 0.0 1%
SBFG 0 1,029 895 2 0 11 23 -42 0% -1.8 1%
CFB
BNS
TFC
CUBB
AMTB
TECTP

10-Q 1 form10-q.htm Submission Proof - Y:\2019 OPERATIONS\2019 EDGAR\10 October\OptimumBank Holding\10-23-2019\Form 10-Q\Draft\Production\OptimumBank Holdings Inc Form 10-Q.gfp

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

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

 

For the quarterly period ended September 30, 2019

 

or

 

[  ] 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.)

 

2477 East Commercial Boulevard, Fort Lauderdale, FL 33308

(Address of principal executive offices)

 

954-900-2800

(Registrant’s telephone number, including area code)

 

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   Optimum Bank Holdings Inc

 

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

 

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted 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 such files). Yes [X] 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 [X]   Smaller reporting company [X]
    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 [X]

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 1,928,776 shares of Common Stock, $0.01 par value, issued and outstanding as of November 14, 2019.

 

 

 

 

 

 

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

 

INDEX

 

  Page
   
PART I. FINANCIAL INFORMATION  
   
Item 1. Financial Statements 1
   
Condensed Consolidated Balance Sheets - September 30, 2019 (unaudited) and December 31, 2018 1
   
Condensed Consolidated Statements of Operations – Three and Nine Months ended September 30, 2019 and 2018 (unaudited) 2
   
Condensed Consolidated Statements of Comprehensive (Loss) Income - Three and Nine Months ended September 30, 2019 and 2018 (unaudited) 3
   
Condensed Consolidated Statements of Stockholders’ Equity - Three and Nine Months ended September 30, 2019 and 2018 (unaudited) 4
   
Condensed Consolidated Statements of Cash Flows - Nine Months ended September 30, 2019 and 2018 (unaudited) 5
   
Notes to Condensed Consolidated Financial Statements (unaudited) 7
   
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 24
   
Item 4. Controls and Procedures 30
   
PART II. OTHER INFORMATION  
   
Item 1. Legal Proceedings 30
   
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 30
   
Item 3. Defaults Upon Senior Securities 30
   
Item 4. Mine Safety Disclosures 30
   
Item 5. Other Information 30
   
Item 6. Exhibits 30
   
SIGNATURES 31

 

i

 

 

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

 

PART I. FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

Condensed Consolidated Balance Sheets
(Dollars in thousands, except per share amounts)

 

   September 30, 2019   December 31, 2018 
    (Unaudited)      
Assets:          
Cash and due from banks  $2,058   $1,934 
Interest-bearing deposits with banks   6,342    6,049 
Total cash and cash equivalents   8,400    7,983 
Securities available for sale   5,861    2,359 
Securities held-to-maturity (fair value of $6,421 and $7,175)   6,195    7,139 
Loans, net of allowance for loan losses of $2,104 and $2,243   92,081    77,200 
Federal Home Loan Bank stock   642    1,132 
Premises and equipment, net   2,753    2,668 
Right-of-use lease assets   1,092     
Accrued interest receivable   354    314 
Other assets   1,927    1,350 
           
Total assets  $119,305   $100,145 
           
Liabilities and Stockholders’ Equity:          
           
Liabilities:          
Noninterest-bearing demand deposits  $11,513   $9,638 
Savings, NOW and money-market deposits   48,063    26,682 
Time deposits   33,689    26,058 
           
Total deposits   93,265    62,378 
           
Federal Home Loan Bank advances   13,000    24,600 
Federal funds purchased   -    560 
Junior subordinated debenture   5,155    5,155 
Official checks   70    274 
Operating lease liabilities   1,095     
Other liabilities   1,928    1,872 
           
Total liabilities   114,513    94,839 
           
Commitments and contingencies (Notes 8, 10, 11 and 12)          
Stockholders’ equity:          
Preferred stock, no par value; 6,000,000 shares authorized: Designated Series A, no par value, $25,000 liquidation value per share, no shares issued and outstanding        
Common stock, $.01 par value; 5,000,000 shares authorized, 1,928,776 shares issued and outstanding in 2019 and 1,858,020 shares issued and outstanding in 2018   19     18 
Additional paid-in capital   36,359   36,128 
Accumulated deficit   (31,366)   (30,510)
Accumulated other comprehensive loss   (220)   (330)
           
Total stockholders’ equity   4,792    5,306 
Total liabilities and stockholders’ equity  $119,305   $100,145 

 

See accompanying notes to condensed consolidated financial statements.

 

1

 

 

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

 

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

 

   Three Months Ended   Nine Months Ended 
   September 30,   September 30, 
   2019   2018   2019   2018 
Interest income:                    
Loans  $1,140   $1,015   $3,328   $2,870 
Securities   63    54    184    187 
Other   58    36    184    103 
                     
Total interest income   1,261    1,105    3,696    3,160 
                     
Interest expense:                    
Deposits   408    107    1,057    312 
Borrowings   130    216    415    554 
                     
Total interest expense   538    323    1,472    866 
                     
Net interest income   723    782    2,224    2,294 
                     
Provision (credit) for loan losses   45        45    (2,100)
                     
Net interest income after provision (credit) for loan losses   678    782    2,179    4,394 
                     
Noninterest income:                    
Service charges and fees   4    2    11    10 
Other   25    19    142    59 
                     
Total noninterest income   29    21    153    69 
                     
Noninterest expenses:                    
Salaries and employee benefits   492    460    1,522    1,358 
Professional fees   114    156    341    379 
Occupancy and equipment   119    116    366    322 
Data processing   141    112    394    288 
Insurance   24    21    66    71 
Regulatory assessment   18    30    40    108 
Other   79    110    511    520 
                     
Total noninterest expenses   987    1,005    3,240    3,046 
                     
Net (loss) earnings before income tax benefit   (280)   (202)   (908)   1,417 
                     
Income tax benefit           (52)    
                     
Net (loss) earnings  $(280)  $(202)  $(856)  $1,417 
                     
Net (loss) earnings per share - Basic and diluted  $(.15)  $(.13)  $(.45)  $1.03 

 

See accompanying notes to condensed consolidated financial statements.

 

2

 

 

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

 

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

 

    Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
    2019     2018     2019     2018  
                         
Net (loss) earnings   $ (280 )    $ (202 )   $ (856 )    $ 1,417  
                                 
Other comprehensive income (loss):                                
Change in unrealized gain (loss) on securities:                                
Unrealized gain (loss) arising during the period     5       (20 )      80       262  
                                 
Amortization of unrealized loss on securities transferred to held-to-maturity     28       27       67        33  
Reclassification adjustment for unrealized loss on securities transferred to held-to-maturity     -       -       -       (432 )
                                 
Other comprehensive income (loss) before income tax (expense) benefit     33       7       147       (137 )
                                 
Deferred income tax (expense) benefit on above change     (8 )      (3 )     (37 )      35  
                                 
Total other comprehensive income (loss)     25       4       110       (102 )
                                 
Comprehensive (loss) income   $ (254 )   $ (198 )   $ (746 )   $ 1,315  

 

See accompanying notes to condensed consolidated financial statements.

 

3

 

 

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

 

Condensed Consolidated Statements of Stockholders’ Equity

Three and Nine Months Ended September 30, 2019 and 2018

(Dollars in thousands)

 

                           Accumulated     
   Preferred Stock   Common Stock   Additional
Paid-In
   Accumulated   Other Comprehensive   Total
Stockholders’
 
   Shares   Amount   Shares   Amount   Capital   Deficit   Loss   Equity 
Balance at December 31, 2017       7   $          -    1,120,947   $    11   $34,090   $(31,306)  $           (250)  $         2,545 
                                         
Proceeds from Sale of Common Stock (unaudited)   -    -    20,814    -    46    -    -    46 
                                         
Common stock issued as compensation to directors (unaudited)   -    -    144,742    1    614    -    -    615 
                                         
Net loss for the three months ended March 31, 2018 (unaudited)   -    -    -    -    -    (285)   -    (285)
                                         
Net change in unrealized loss on securities available for sale, net of income tax benefit (unaudited)   -    -    -    -    -    -    (47)   (47)
                                         
Balance at March 31, 2018 (unaudited)   7   $-    1,286,503   $12   $34,750   $(31,591)  $(297)  $2,874 
                                         
Proceeds from Sale of Common Stock (unaudited)   -    -    143,203    2    356    -    -    358 
                                         
Common stock issued in exchange for Preferred Stock (unaudited)   (7)   -    79,186    1    (1)   -    -    - 
                                         
Net earnings for the three months ended June 30, 2018 (unaudited)   -    -    -    -    -    1,904    -    1,904 
                                         
Net change in unrealized loss on securities available for sale, net of income taxes (unaudited)   -    -    -    -    -    -    259    259 
                                         
Amortization of unrealized loss on securities transferred to held to maturity (unaudited)   -    -    -    -    -    -    6    6 
                                         
Unrealized loss on securities transferred to held to maturity, net of income tax benefit (unaudited)   -    -    -    -    -    -    (324)   (324)
                                         
Balance at June 30, 2018 (unaudited)      $    1,508,892   $15   $35,105   $(29,687)  $(356)  $5,077 
                                         
Proceeds from Sale of Common Stock (unaudited)           3,000        11            11 
                                         
Common stock issued in exchange for Trust Preferred Securities (unaudited)           301,778    3    902            905 
                                         
Net loss for the three months ended September 30, 2018 (unaudited)                       (202)       (202)
                                         
Net change in unrealized loss on securities available for sale, net of income taxes (unaudited)                           4    4 
                                         
Balance at September 30, 2018 (unaudited)      $    1,813,670   $18   $36,018   $(29,889)  $(352)  $5,795 
                                         
Balance at December 31, 2018   -   $-    1,858,020   $18   $36,128   $(30,510)  $(330)  $5,306 
                                         
Net loss for the three months ended March 31, 2019 (unaudited)   -    -    -    -    -    (146)   -    (146)
                                         
Net change in unrealized loss on securities available for sale, net of income taxes (unaudited)   -    -    -    -    -    -    3    3 
                                         
Amortization of unrealized loss on securities transferred to held-to-maturity (unaudited)   -    -    -    -    -    -    14    14 
                                         
Balance at March 31, 2019 (unaudited)   -   $-    1,858,020   $18   $36,128   $(30,656)  $(313)  $5,177 
                                         
Common stock issued and reclassified from other liabilities (unaudited)   -    -    11,250    -    28    -    -    28 
                                         
Common stock issued as compensation to directors (unaudited)   -    -    58,309    1    200    -    -    201 
                                         
Net loss for the three months ended June 30, 2019 (unaudited)   -    -    -    -    -    (430)   -    (430)
                                         
Net change in unrealized loss on securities available for sale, net of income taxes (unaudited)   -    -    -    -    -    -    53    53 
                                         
Amortization of unrealized loss on securities transferred to held-to-maturity (unaudited)   -    -    -    -    -    -    15    15 
                                         
Balance at June 30, 2019 (unaudited)      $    1,927,579   $19   $36,356   $(31,086)  $(245)  $5,044 
                                         
Common stock issued and reclassified from other liabilities (unaudited)           1,197        3            3 
                                         
Net loss for the three months ended September 30, 2019 (unaudited)                       (280)       (280)
                                         
Net change in unrealized loss on securities available for sale, net of income taxes (unaudited)                           4   4
                                         
Amortization of unrealized loss on securities transferred to held to maturity (unaudited)                           21    21 
                                         
Balance at September 30, 2019 (unaudited)      $    1,928,776   $19   $36,359   $(31,366)  $(220)  $4,792 

 

See accompanying notes to condensed consolidated financial statements

 

4

 

 

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

 

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In thousands)

 

    Nine Months Ended
September 30,
 
    2019     2018  
Cash flows from operating activities:                
Net (loss) earnings   $ (856 )    $ 1,417  
Adjustments to reconcile net (loss) earnings to net cash (used in) provided by operating activities:            
Depreciation and amortization     132       115  
Provision (credit) for loan losses     45       (2,100 )
Common stock issued as compensation for services     201        
Net amortization of fees, premiums and discounts     153       168  
Increase in accrued interest receivable     (40 )      (45 )
(Increase) decrease in other assets     (614 )      61  
Decrease in operating lease liabilities     (49 )      
Amortization of right-of-use lease assets     52        
(Decrease) increase in official checks and other liabilities     (117 )      779  
Net cash (used in) provided by operating activities     (1,093 )      395  
                 
Cash flows from investing activities:                
Purchase of securities available for sale     (4,153 )       
Principal repayments of securities available for sale     676       666  
Principal repayments of securities held-to-maturity     977       559  
Net increase in loans     (14,990 )      (6,061 ) 
Purchases of premises and equipment, net     (217 )      (194 )
Redemption (purchase) of FHLB stock     490       (236 )
                 
Net cash used in investing activities     (17,217 )      (5,266 ) 
                 
Cash flows from financing activities:                
Net increase (decrease) in deposits     30,887       (7,212 )
Net decrease in federal funds purchased     (560 )       
Net (decrease) increase in FHLB Advances     (11,600 )      6,050  
                 
Net cash provided by (used in) financing activities     18,727       (747 )
                 
Net increase (decrease) in cash and cash equivalents     417       (5,618 )
                 
Cash and cash equivalents at beginning of the period     7,983       11,665  
                 
Cash and cash equivalents at end of the period   $ 8,400     $ 6,047  

 

See accompanying notes to condensed consolidated financial statements

 

5

 

 

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

 

Condensed Consolidated Statements of Cash Flows (Unaudited), Continued

(In thousands)

 

    Nine Months Ended
September 30,
 
    2019     2018  
Supplemental disclosure of cash flow information:                
Cash paid during the period for:                
Interest   $ 1,249     $ 628  
                 
Income taxes   $     $  
                 
Noncash transactions -                
Change in accumulated other comprehensive loss, net change in unrealized gain (loss) on securities available for sale, net of income taxes   $ 110     $ (102 )
                 
Transfer of securities from available for sale to held-to-maturity           7,945  
                 
Amortization of unrealized loss on securities transferred to held-to-maturity   $ 67     $ 33  
                 
Reclassification of stock compensation issued as compensation to directors from other liabilities to common stock   $     $ 615  
                 
Common stock issued and reclassified from other liabilities     31        
                 
Issuance of common stock in exchange for Trust Preferred Securities           905  
                 
Right-of-use lease assets obtained in exchange for operating lease liabilities     1,144        

 

See accompanying notes to condensed consolidated financial statements

 

6

 

 

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 commercial bank. The Company’s only business is the operation of the Bank (collectively, the “Company”). The Bank’s deposits are insured up to applicable limits by the Federal Deposit Insurance Corporation (“FDIC”). The Bank offers a variety of community banking services to individual and corporate customers through its three banking offices located in Broward County, Florida.
   
  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 September 30, 2019, and the results of operations and cash flows for the three and nine month periods ended September 30, 2019 and 2018. All significant intercompany accounts and transactions have been eliminated in consolidation. The results of operations for the three and nine month periods ended September 30, 2019, are not necessarily indicative of the results to be expected for the full year.
   
 

Junior Subordinated Debenture. The Company is in default with respect to its $5,155,000 Junior Subordinated Debenture (the “Debenture”) due to its failure to make certain required interest payments under the Debenture. The Debenture was issued to OptimumBank Holdings Capital Trust I, a Delaware statutory trust formed by the Company for the purpose of issuing and selling certain securities (the “Trust Preferred Securities”) representing undivided beneficial interests in the Debenture. The trust issued a total of 5,000 Trust Preferred Securities.

 

The Trustee, Wells Fargo Bank, for the Debenture (the “Trustee”) and the beneficial owners of the Debenture are entitled to accelerate the payment of the $5,155,000 principal balance plus accrued and unpaid interest totaling $1,947,000 at September 30, 2019. To date, neither the Trustee nor the holders have accelerated the outstanding balance of the Debenture. No adjustments to the accompanying condensed consolidated financial statements have been made as a result of this uncertainty.

 

In May 2018, a company affiliated with a director of the Company (the “New Holder”) purchased all 5,000 Trust Preferred Securities from a third party. During the third quarter of 2018, the New Holder sold its rights in 694 of the Trust Preferred Securities to several unaffiliated third parties, who subsequently exchanged these Trust Preferred Securities for 301,778 shares of the Company’s common stock. The transaction was recorded as an increase in the Company’s equity interest in the unconsolidated subsidiary trust, presented in “Other Assets” in the accompanying condensed consolidated balance sheets.

 

Although the Company and the New Holder have not executed a formal, definitive bilateral agreement, the New Holder has provided the Company with written representations that the New Holder will not accelerate and demand payment of any of the remaining 4,306 Trust Preferred Securities principal or accrued interest within twelve months from November 14, 2019, the date the Company’s Form 10-Q as of and for the period ended September 30, 2019, was filed with the Securities and Exchange Commission.

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

 

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

 

    September 30,     December 31,  
    2019     2018  
             
Unrealized gain (loss) on securities available for sale   $ 16     $ (64 )
Unamortized portion of unrealized loss related to securities available for sale transferred to securities held-to-maturity     (310 )      (377 )
Income tax benefit     74       111  
                 
    $ (220 )   $ (330 )

 

  Income Taxes. The Company assessed its earnings history and trends and estimates of future earnings, and determined that the deferred tax asset could not be realized as of September 30, 2019. Accordingly, a valuation allowance was recorded against the net deferred tax asset.
   
  (continued)

 

7

 

 

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

 

Notes to Condensed Consolidated Financial Statements (Unaudited)

 

(1) General, Continued.

 

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

 

Recent Pronouncements. In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2016-02, Leases (Topic 842). ASU 2016-02 is intended to improve financial reporting of leasing transactions by requiring organizations that lease assets to recognize assets and liabilities for the rights and obligations created by leases on the condensed consolidated balance sheet. The Company adopted ASU 2016-02 on January 1, 2019. Our only lease at the adoption date was an operating lease for a branch location that has a “5 year term”, commenced in December 2017, does not offer any options to extend, and does contain a rent escalation clause. The effect of this ASU increased total assets by $281,000 and total liabilities by $281,000, at the adoption date. During June 2019, the Company entered into another operating lease agreement which commenced in September 2019, has a “10 year term”, does not offer any options to extend, and does contain a rent escalation clause. This resulted in an additional increase to total assets of $863,000 and total liabilities of $863,000.

 

  In June 2016, the FASB issued ASU No. 2016-13 Financial Instruments-Credit Losses (Topic 326). The ASU improves financial reporting by requiring timelier recording of credit losses on loans and other financial instruments held by the Company. The ASU requires the Company to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses. The Company will continue to use judgment to determine which loss estimation method is appropriate for their circumstances. The ASU requires enhanced disclosures to help investors and other financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an organization’s portfolio. These disclosures include qualitative and quantitative requirements that provide additional information about the amounts recorded in the 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, as the FASB approved delaying the initially anticipated effective date of January 1, 2020. Early adoption is permitted. The Company is in the process of determining the effect of the ASU on its condensed consolidated financial statements.
   
  (continued)

 

8

 

 

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

 

Notes to Condensed Consolidated Financial Statements (Unaudited)

 

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

 

    Amortized
Cost
    Gross
Unrealized
Gains
    Gross
Unrealized
Losses
    Fair
Value
 
                         
At September 30, 2019:                                
Held-to-Maturity:                                
Collateralized mortgage obligations   $ 4,529     $ 171     $   $ 4,700  
Mortgage-backed securities     1,666       55             1,721  
Total     6,195       226           6,421  
Available for Sale:                                
SBA Pool Securities   $ 1,904     $     $ (53 )   $ 1,851  
Collateralized mortgage obligations     1,146       22             1,168  
Mortgage-backed securities     2,795       47             2,842  
Total   $ 5,845     $ 69     $ (53 )   $

5,861 

 

 

    Amortized
Cost
    Gross
Unrealized
Gains
    Gross
Unrealized
Losses
    Fair
Value
 
                         
At December 31, 2018:                                
Held-to-Maturity:                                
Collateralized mortgage obligations   $ 5,183     $ 25     $ (4 )   $ 5,204  
Mortgage-backed securities     1,956       15             1,971  
Total   $ 7,139     $ 40     $ (4 )   $ 7,175  
Available for Sale -                                
SBA Pool Securities   $ 2,423     $     $ (64 )   $ 2,359  

 

In April 2018, the bank transferred $7,945,000 of securities from the available-for-sale category to the held-to-maturity category at their then fair values resulting in unrealized losses of $432,000. The unrealized loss was recorded in stockholders’ equity net of amortization and net of tax and is being amortized over the remaining term of the securities. At September 30, 2019 and December 31, 2018, $122,000 and $55,000, respectively, has been amortized.

 

There were no sales of securities during the three and nine month periods ended September 30, 2019 and 2018.

 

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

 

    At September 30, 2019  
    Over Twelve Months    

Less Than Twelve

Months

 
    Gross
Unrealized
Losses
    Fair
Value
    Gross
Unrealized
Losses
    Fair
Value
 
                         
Available for Sale -                                
SBA Pool Securities   $

    53 

    $ 1,851     $     $        

 

    At December 31, 2018  
    Over Twelve Months    

Less Than Twelve

Months

 
    Gross
Unrealized
Losses
    Fair
Value
    Gross
Unrealized
Losses
    Fair
Value
 
                         
Held-to-Maturity -                                
Collateralized mortgage obligations   $  4     $ 1,361     $  —     $  
Available for Sale -                                
SBA Pool Securities   $ 24     $ 829     $ 40     $ 1,530  

 

(continued)

 

9

 

 

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

 

Notes to Condensed Consolidated Financial Statements (Unaudited)

 

(2)

Securities, Continued.

 

Management evaluates securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic or market concerns 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 September 30, 2019 and December 31, 2018, the unrealized losses on six and seven investment securities, respectively, were caused by market conditions. It is expected that the securities would not be settled at a price less than the book value of the investments. Because the decline in fair value is attributable to market conditions and not credit quality, and because the Company has the ability and intent to hold these investments until a market price recovery or maturity, these investments are not considered other-than-temporarily impaired.

   
  (continued)

 

10

 

 

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

 

Notes to Condensed Consolidated Financial Statements (Unaudited)

 

(3) Loans. The components of loans are as follows (in thousands):

 

   

At
September 30,

2019

   

At
December 31,

2018

 
             
Residential real estate   $ 26,683     $ 27,204  
Multi-family real estate     4,172       8,195  
Commercial real estate     51,997       34,971  
Land and construction     2,077       3,661  
Commercial     4,674       4,997  
Consumer     4,548       260  
                 
Total loans     94,151       79,288  
                 
Add (deduct):                
Net deferred loan fees, costs and premiums     34       155  
Allowance for loan losses     (2,104 )      (2,243 )
                 
Loans, net   $ 92,081     $ 77,200  

 

(continued)

 

11

 

 

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

 

Notes to Condensed Consolidated Financial Statements (Unaudited)

 

(3) Loans, Continued. An analysis of the change in the allowance for loan losses follows (in thousands):

 

    Residential
Real Estate
    Multi-Family
Real Estate
    Commercial
Real Estate
    Land and
Construction
    Commercial     Consumer     Unallocated     Total  
Three Months Ended September 30, 2019:                                                                
                                                                 
Beginning balance   $ 537     $ 41     $ 658     $ 7     $ 558     $ 11     $ 241     $ 2,053  
(Credit) provision for loan losses     (5           87       7       32       165       (241     45  
Charge-offs                                              
Recoveries                     6      —    —         6
                                                                 
Ending balance   $ 532     $ 41     $ 745     $ 20     $ 590     $ 176     $     $ 2,104  
                                                                 
Three Months Ended September 30, 2018:                                                                
Beginning balance   $ 665     $ 53     $ 706     $ 59     $ 266     $ 42     $ 108     $ 1,899  
(Credit) provision for loan losses     (118 )     36       (208 )     (34 )     (4 )     (12 )     340        
Charge-offs                                                
Recoveries                       6