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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-QSB
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(Mark One)
[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange Act
of 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2005
[ ] Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from ___________ to ___________
Commission File Number 0001288855
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OPTIMUMBANK HOLDINGS, INC.
-----------------------------------------------------------------
(Exact Name of Small Business Issuer as Specified in Its Charter)
Florida 55-0865043
--------------------------------- ------------------
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
2477 East Commercial Boulevard
Fort Lauderdale, Florida 33308
----------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(954) 776-2332
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(ISSUER'S TELEPHONE NUMBER, INCLUDING AREA CODE)
---------------------------------------------------------------
(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR, IF CHANGED
SINCE LAST REPORT)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or 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
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date:
Common stock, par value $.01 per share 2,661,835 shares
-------------------------------------- ----------------------------
(CLASS) OUTSTANDING AT JULY 18, 2005
Transitional Small Business 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 -
June 30, 2005 (unaudited) and December 31, 2004................ 2
Condensed Consolidated Statements of Earnings -
Three and Six Months ended June 30, 2005 and 2004 (unaudited).. 3
Condensed Consolidated Statements of Stockholders' Equity -
Six Months ended June 30, 2005 and 2004 (unaudited)............ 4
Condensed Consolidated Statements of Cash Flows -
Six Months ended June 30, 2005 and 2004 (unaudited)............ 5
Notes to Condensed Consolidated Financial Statements
(unaudited) ................................................... 6-8
Review By Independent Registered Public Accounting Firm.......... 9
Report of Independent Registered Public Accounting Firm.......... 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS........................................ 11-16
ITEM 3. CONTROLS AND PROCEDURES.......................................... 17
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.............. 17
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K................................. 18
SIGNATURES................................................................ 19
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
JUNE 30, DECEMBER 31,
2005 2004
--------- ---------
(UNAUDITED)
ASSETS
Cash and due from banks $ 242 $ 383
Federal funds sold 339 2,840
--------- ---------
Total cash and cash equivalents 581 3,223
Securities held to maturity (fair value approximates $28,937 and
$24,065) 29,072 24,134
Security available for sale 249 247
Loans, net of allowance for loan losses of $773 and $628 150,529 128,810
Loans held for sale 504 509
Federal Home Loan Bank stock 2,212 1,965
Premises and equipment, net 4,103 4,114
Foreclosed real estate 3,315 --
Accrued interest receivable 868 878
Other assets 873 678
--------- ---------
Total assets $ 192,306 $ 164,558
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Noninterest-bearing demand deposits $ 564 $ 558
Savings, NOW and money-market deposits 7,521 8,091
Time deposits 103,978 89,345
--------- ---------
Total deposits 112,063 97,994
Federal Home Loan Bank advances 41,300 37,650
Other borrowings 12,950 5,000
Junior subordinated debenture 5,155 5,155
Other liabilities 364 522
Official checks 2,610 1,209
Deferred income tax liability 305 305
--------- ---------
Total liabilities 174,747 147,835
--------- ---------
Stockholders' equity:
Common stock, $.01 par value; 6,000,000 shares authorized,
2,661,835 and 2,650,102 shares issued and outstanding 27 27
Additional paid-in capital 14,113 14,051
Retained earnings 3,420 2,648
Accumulated other comprehensive income (loss) (1) (3)
--------- ---------
Total stockholders' equity 17,559 16,723
--------- ---------
Total liabilities and stockholders' equity $ 192,306 $ 164,558
========= =========
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 SIX MONTHS ENDED
JUNE 30, JUNE 30,
----------------- -----------------
2005 2004 2005 2004
------ ------ ------ ------
Interest income:
Loans $2,427 $1,880 $4,499 $3,812
Securities 338 185 637 379
Other 31 29 76 50
------ ------ ------ ------
Total interest income 2,796 2,094 5,212 4,241
------ ------ ------ ------
Interest expense:
Deposits 892 679 1,673 1,362
Borrowings 531 264 947 532
------ ------ ------ ------
Total interest expense 1,423 943 2,620 1,894
------ ------ ------ ------
Net interest income 1,373 1,151 2,592 2,347
Provision for loan losses 112 25 145 55
------ ------ ------ ------
Net interest income after provision for loan losses 1,261 1,126 2,447 2,292
------ ------ ------ ------
Noninterest income:
Service charges and fees 52 39 100 77
Prepayment fees collected 154 148 341 329
Other 15 9 38 11
------ ------ ------ ------
Total noninterest income 221 196 479 417
------ ------ ------ ------
Noninterest expenses:
Salaries and employee benefits 463 402 936 816
Occupancy and equipment 150 101 291 209
Data processing 50 38 101 76
Professional fees 60 38 102 71
Insurance 18 13 34 25
Stationary and supplies 12 17 22 33
Other 102 81 196 162
------ ------ ------ ------
Total noninterest expenses 855 690 1,682 1,392
------ ------ ------ ------
Earnings before income taxes 627 632 1,244 1,317
Income taxes 239 241 472 502
------ ------ ------ ------
Net earnings $ 388 $ 391 $ 772 $ 815
====== ====== ====== ======
Net earnings per share:
Basic $ .15 $ .15 $ .29 $ .31
====== ====== ====== ======
Diluted $ .14 $ .14 $ .28 $ .30
====== ====== ====== ======
Dividends per share $ -- $ -- $ -- $ --
====== ====== ====== ======
See Accompanying Notes to Condensed Consolidated Financial Statements.
3
OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
SIX MONTHS ENDED JUNE 30, 2005 AND 2004
(DOLLARS IN THOUSANDS)
ACCUMULATED
OTHER
COMPRE-
ADDITIONAL HENSIVE TOTAL
COMMON STOCK PAID-IN RETAINED INCOME STOCKHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS (LOSS) EQUITY
--------- --------- --------- --------- --------- ---------
Balance at December 31, 2003 2,613,501 $ 26 13,800 1,078 (4) 14,900
------
Comprehensive income:
Net earnings for the six months ended
June 30, 2004 (unaudited) -- -- -- 815 -- 815
Net change in unrealized loss on
security available for sale
(unaudited) -- -- -- -- (3) (3)
------
Comprehensive income (unaudited) -- -- -- -- -- 812
------
Proceeds from sale of common stock
(unaudited) 915 -- 9 -- -- 9
Proceeds from exercise of common
stock options (unaudited) 19,734 -- 103 -- -- 103
--------- --------- --------- --------- --------- ---------
Balance at June 30, 2004 (unaudited) 2,634,150 $ 26 13,912 1,893 (7) 15,824
========= ========= ========= ========= ========= =========
Balance at December 31, 2004 2,650,102 $ 27 14,051 2,648 (3) 16,723
---------
Comprehensive income:
Net earnings for the six months ended
June 30, 2005 (unaudited) -- -- -- 772 -- 772
Net change in unrealized loss on
security available for sale
(unaudited) -- -- -- -- 2 2
------
Comprehensive income (unaudited) -- -- -- -- -- 774
------
Proceeds from exercise of common
stock options (unaudited) 11,733 -- 62 -- -- 62
--------- --------- --------- --------- --------- ---------
Balance at June 30, 2005 (unaudited) 2,661,835 $ 27 14,113 3,420 (1) 17,559
========= ========= ========= ========= ========= =========
See Accompanying Notes to Condensed Consolidated Financial Statements.
4
OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN THOUSANDS)
SIX MONTHS ENDED
JUNE 30,
----------------------
2005 2004
-------- --------
Cash flows from operating activities:
Net earnings $ 772 $ 815
Adjustments to reconcile net earnings to net cash provided by
operating activities:
Depreciation and amortization 131 81
Provision for loan losses 145 55
Net amortization of fees, premiums and discounts 106 97
Repayments of loans held for sale 5 16
Decrease (increase) in accrued interest receivable 10 (45)
Increase in other assets (195) (606)
Increase in official checks and other liabilities 1,243 533
-------- --------
Net cash provided by operating activities 2,217 946
-------- --------
Cash flows from investing activities:
Purchases of securities held to maturity (7,843) (4,982)
Principal repayments of securities held to maturity 2,926 1,655
Net increase in loans (25,306) (5,082)
Purchase of premises and equipment (120) (200)
Net increase in Federal Home Loan Bank stock (247) (433)
-------- --------
Net cash used in investing activities (30,590) (9,042)
-------- --------
Cash flows from financing activities:
Net increase in deposits 14,069 8,599
Proceeds from sale of common stock, net -- 9
Proceeds from exercise of common stock options 62 103
Net increase in Federal Home Loan Bank advances 3,650 9,650
Net increase (decrease) in other borrowings 7,950 (1,250)
-------- --------
Net cash provided by financing activities 25,731 17,111
-------- --------
Net (decrease) increase in cash and cash equivalents (2,642) 9,015
Cash and cash equivalents at beginning of the period 3,223 539
-------- --------
Cash and cash equivalents at end of the period $ 581 $ 9,554
======== ========
Supplemental disclosure of cash flow information: Cash paid during the period
for:
Interest $ 2,533 $ 1,824
======== ========
Income taxes $ 1,004 $ 649
======== ========
Noncash investing activities:
Change in accumulated other comprehensive income (loss)
net change in unrealized loss on security available for sale $ 2 $ (3)
======== ========
Loans reclassified to foreclosed real estate $ 3,315 $ --
======== ========
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 June 30, 2005,
and the results of operations for the three- and six-month periods
ended June 30, 2005 and 2004, and cash flows for the six-months
periods ended June 30, 2005 and 2004. The results of operations for
the three and six months ended June 30, 2005, 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 SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------- --------------
2005 2004 2005 2004
----- ----- ----- -----
Balance at beginning of period $ 661 $ 522 $ 628 $ 492
Provision for loan losses 112 25 145 55
----- ----- ----- -----
Balance at end of period $ 773 $ 547 $ 773 $ 547
===== ===== ===== =====
The following summarizes the amount of impaired loans, all of which are
collateral dependent (in thousands):
AT
---------------------
JUNE 30, DECEMBER 31,
2005 2004
------ -------
Loans identified as impaired:
Gross loans with related allowance
for losses recorded $ -- $ 3,268
Less allowance for losses on these loans -- --
------ -------
Net investment in impaired loans $ -- $ 3,268
====== =======
Nonaccrual loans $ -- $ 3,268
====== =======
Loans past due 90 days still accruing interest $ -- $ --
====== =======
(continued)
6
OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(2) LOAN IMPAIRMENT AND CREDIT LOSSES, CONTINUED. The average net investment
in impaired loans and interest income recognized and received on
impaired loans is as follows (in thousands):
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------ ------ ------ ------
2005 2004 2005 2004
------ ------ ------ ------
Average net investment in impaired loans $ 467 $ -- $1,870 $ --
====== ====== ====== ======
Interest income recognized on impaired loans $ -- $ -- $ -- $ --
====== ====== ====== ======
Interest income received on impaired loans $ -- $ -- $ -- $ --
====== ====== ====== ======
(3) REGULATORY CAPITAL. The Company and the Bank are required to maintain
certain minimum regulatory capital requirements. The following is a
summary at June 30, 2005 of the regulatory capital requirements and
the Company's and the Bank's capital on a percentage basis:
REGULATORY
COMPANY BANK REQUIREMENT
------- ----- -----------
Tier I capital to total average assets 11.98% 11.87% 4.00%
Tier I capital to risk-weighted assets 16.77% 16.62% 4.00%
Total capital to risk-weighted assets 17.34% 17.20% 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. Earnings per common share have been computed
based on the following:
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
----------------------- -----------------------
2005 2004 2005 2004
--------- --------- --------- ---------
Weighted-average number of common shares
outstanding used to calculate basic
earnings per common share 2,658,585 2,633,020 2,656,007 2,626,988
Effect of dilutive stock options 90,264 75,207 104,909 65,072
--------- --------- --------- ---------
Weighted-average number of common shares
outstanding used to calculate diluted earnings
per common share 2,748,849 2,708,227 2,760,916 2,692,060
========= ========= ========= =========
(5) STOCK OPTIONS. The Company established a Stock Option Plan (the "Plan")
for officers, directors and employees of the Company and reserved
522,000 shares of common stock for the Plan. Both incentive stock
options and nonqualified stock options may be granted under the Plan.
The exercise price of the stock options is determined by the board of
directors at the time of grant, but cannot be less than the fair
market value of the common stock on the date of grant. The options
vest over three and five years. The options must be exercised within
ten years from the date of grant.
(continued)
7
OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED), CONTINUED
(5) STOCK OPTIONS, CONTINUED. A summary of the activity in the Company's
stock option plan is as follows (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, 2004 370,433 $ 5.00-10.00 $ 7.19 $ 2,662
Granted 10,000 12.49 12.49 125
Exercised (11,733) 5.00-6.75 5.36 (61)
Forfeited (3,000) 6.75-10.00 8.37 (25)
------- ------------ -------- -------
Outstanding at June 30, 2005 365,700 $ 5.00-12.49 $ 7.39 $ 2,701
======= ============ ======== =======
The Company accounts for their stock option plan under the recognition
and measurement principles of Accounting Principles Board Opinion No.
25, Accounting for Stock Issued to Employees. No stock-based employee
compensation cost is reflected in net earnings, as all options granted
under this plan had an exercise price which approximated the market
value of the underlying common stock on the date of grant. The
following table illustrates the effect on net earnings if the Company
had applied the fair value recognition provisions of Statement of
Financial Accounting Standards No. 123 Accounting for Stock-Based
Compensation, as amended by SFAS No. 148, Accounting for Stock-Based
Compensation Transition and Disclosure to stock-based employee
compensation (in thousands, except per share amounts).
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------- --------------------
2005 2004 2005 2004
----- ----- ----- -----
Net earnings, as reported $ 388 $ 391 $ 772 $ 815
Deduct: Total stock-based employee
compensation determined under the
fair value based method for all
awards, net of related tax effect 44 69 88 83
----- ----- ----- -----
Proforma net earnings $ 344 $ 322 $ 684 $ 732
===== ===== ===== =====
Basic earnings per share:
As reported $ .15 $ .15 $ .29 $ .31
===== ===== ===== =====
Proforma $ .13 $ .12 $ .26 $ .28
===== ===== ===== =====
Diluted earnings per share:
As reported $ .14 $ .14 $ .28 $ .30
===== ===== ===== =====
Proforma $ .13 $ .12 $ .25 $ .27
===== ===== ===== =====
8
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
June 30, 2005, and for the three- and six-month periods ended June 30, 2005 and
2004, 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.
9
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
OptimumBank Holdings, Inc.
Plantation, Florida:
We have reviewed the accompanying condensed consolidated balance sheet of
OptimumBank Holdings, Inc. and Subsidiary (the "Company") as of June 30, 2005,
and the condensed consolidated statements of earnings for the three- and
six-month periods ended June 30, 2005 and 2004 and the related condensed
consolidated statements of stockholders' equity and cash flows for the six-month
periods ended June 30, 2005 and 2004. 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, 2004, 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 February 22, 2005, 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,
2004, 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
July 22, 2005
OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
COMPARISON OF JUNE 30, 2005 AND DECEMBER 31, 2004
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of cash during the six months ended June 30,
2005 were from net deposit inflows of approximately $14.1 million, principal
repayments of securities held to maturity of approximately $2.9 million and
Federal Home Loan Bank advances and other borrowings of $11.6 million. Cash
was used primarily for net loan originations of approximately $25.3 million
and purchases of securities held to maturity of approximately $7.8 million.
At June 30, 2005, the Company had time deposits of approximately $53.0
million that mature in one year or less. At June 30, 2005, 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:
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED
JUNE 30, DECEMBER 31, JUNE 30,
2005 2004 2004
------ ------ ------
Average equity as a percentage
of average assets 9.70% 10.53% 10.58%
Equity to total assets at end of period 9.13% 10.16% 10.29%
Return on average assets (1) .87% 1.06% 1.15%
Return on average equity (1) 8.98% 10.05% 10.89%
Noninterest expenses to average assets (1) 1.90% 1.89% 1.97%
Nonperforming assets to total assets at end
of period 1.72% 2.54% --%
-----------
(1) Annualized for the six months ended June 30, 2005 and 2004.
11
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 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 June 30, 2005, follows (in thousands):
CONTRACT
AMOUNT
-------
Commitments to extend credit $ 9,861
-------
Undisbursed loans in process $ 4,115
-------
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.
12
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 JUNE 30,
2005 2004
------------------------------- ---------------------------
INTEREST AVERAGE INTEREST AVERAGE
AVERAGE AND YIELD/ AVERAGE AND YIELD/
BALANCE DIVIDENDS RATE BALANCE DIVIDENDS RATE
--------- ------- ------ --------- ------- ------
Interest-earning assets:
Loans $ 145,080 $ 2,427 6.69% $ 113,449 $ 1,880 6.63%
Securities 30,405 338 4.45 16,191 185 4.57
Other interest-earning assets (1) 2,840 31 4.37 8,616 29 1.35
--------- ------- ------ --------- ------- ------
Total interest-earning assets/interest income 178,325 2,796 6.27 138,256 2,094 6.07
------- -------
Cash and due from banks 258 -- -- 451 -- --
Premise and equipment 4,125 -- -- 1,967 -- --
Other assets 5,420 -- -- 2,059 -- --
--------- ---------
Total assets $ 188,128 -- -- $ 142,733 -- --
========= =========
Interest-bearing liabilities:
Savings, NOW and money-market deposits 7,640 26 1.36 8,880 27 1.22
Time deposits 98,525 866 3.52 79,840 652 3.27
Borrowings (2) 61,132 531 3.47 35,728 264 2.96
--------- ------- --------- ------
Total interest-bearing liabilities/
interest expense 167,297 1,423 3.40 124,448 943 3.03
------- ------
Noninterest-bearing demand deposits 1,070 -- -- 1,214 -- --
Other liabilities 2,399 -- -- 2,072 -- --
Stockholders' equity 17,362 -- -- 14,999 -- --
--------- ---------
Total liabilities and stockholders' equity $ 188,128 -- -- $ 142,733 -- --
========= =========
Net interest income -- $ 1,373 -- -- $ 1,151 --
======= =======
Interest-rate spread (3) -- -- 2.87% -- -- 3.04%
==== ====
Net interest margin (4) -- -- 3.08% -- -- 3.33%
==== ====
Ratio of average interest-earning assets to
average interest-bearing liabilities 1.07 -- -- 1.11 -- --
--------- ---------
-----------
(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 agreements
to repurchase and junior subordinated debenture.
(3) Interest-rate spread represents the difference between the average yield on
interest-earning assets and the average cost of interest-bearing
liabilities.
(4) Net interest margin is net interest income divided by average
interest-earning assets.
13
OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY
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.
SIX MONTHS ENDED JUNE 30,
-------------------------------------------------------------------
2005 2004
------------------------------- -----------------------------
INTEREST AVERAGE INTEREST AVERAGE
AVERAGE AND YIELD/ AVERAGE AND YIELD/
BALANCE DIVIDENDS RATE BALANCE DIVIDENDS RATE
--------- ------- ------- --------- ------- -------
Interest-earning assets:
Loans $ 135,511 $ 4,499 6.64% $ 114,047 $ 3,812 6.68%
Securities 28,782 637 4.43 16,380 379 4.63
Other interest-earning assets (1) 4,530 76 3.35 6,157 50 1.62
--------- ------- --------- -------
Total interest-earning assets/interest income 168,823 5,212 6.17 136,584 4,241 6.21
------- -------
Cash and due from banks 417 -- -- 513 -- --
Premise and equipment 2,857 -- -- 1,959 -- --
Other assets 5,004 -- -- 2,392 -- --
--------- ---------
Total assets $ 177,101 -- -- $ 141,448 -- --
========= =========
Interest-bearing liabilities:
Savings, NOW and money-market deposits 7,829 45 1.15 8,293 55 1.33
Time deposits 94,227 1,628 3.46 78,907 1,307 3.31
Borrowings (2) 54,542 947 3.47 36,411 532 2.92
--------- ------- --------- -------
Total interest-bearing liabilities/
interest expense 156,598 2,620 3.35 123,611 1,894 3.06
------- -------
Noninterest-bearing demand deposits 1,079 -- -- 983 -- --
Other liabilities 2,237 -- -- 1,880 -- --
Stockholders' equity 17,187 -- -- 14,974 -- --
--------- ---------
Total liabilities and stockholders' equity $ 177,101 -- -- $ 141,448 -- --
========= =========
Net interest income -- $ 2,592 -- -- $ 2,347 --
======= =======
Interest-rate spread (3) -- -- 2.82% -- -- 3.15%
==== ====
Net interest margin (4) -- -- 3.07% -- -- 3.44%
==== ====
Ratio of average interest-earning assets to
average interest-bearing liabilities 1.08 -- -- 1.10 -- --
==== ====
--------------
(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 agreements to repurchase and junior subordinated
debenture. (3) Interest-rate spread represents the difference between the
average yield on interest-earning assets and the average cost of
interest-bearing liabilities.
(4) Net interest margin is net interest income divided by average
interest-earning assets.
14
OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY
COMPARISON OF THE THREE-MONTH PERIODS ENDED JUNE 30, 2005 AND 2004
GENERAL. Net earnings for the three months ended June 30, 2005, were
$388,000 or $.15 per basic and $.14 per diluted share compared to net
earnings of $391,000 or $.15 per basic and $.14 per diluted share for
the period ended June 30, 2004. This decrease in the Company's net
earnings was primarily due to an increase in noninterest expenses and
the provision for loan losses which was partially offset by an
increase in net interest income and noninterest income, all of which
were due to the overall growth of the Company.
INTEREST INCOME. Interest income increased to $2.8 million for the three
months ended June 30, 2005 from $2.1 million for the three months
ended June 30, 2004. Interest income on loans increased to $2.4
million due primarily to an increase in the average loan portfolio
balance and an increase in the average yield earned for the three
months ended June 30, 2005. Interest on securities increased to
$338,000 due primarily to an increase in the average balance of the
securities portfolio in 2005.
INTEREST EXPENSE. Interest expense on deposits increased to $892,000 for
the three months ended June 30, 2005, from $679,000 for the three
months ended June 30, 2004. Interest expense increased primarily
because of an increase in the average balance and the average rate
paid on deposits during 2005. Interest expense on borrowings increased
to $531,000 for the three months ended June 30, 2005 from $264,000 for
the three months ended June 30, 2004 due to an increase in the average
balance of borrowings and an increase in the average rate paid on
borrowings during 2005.
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 June 30, 2005, was
$112,000 compared to $25,000 for the same period in 2004. Management
believes the balance in the allowance for loan losses of $773,000 at
June 30, 2005, is adequate.
NONINTEREST INCOME. Total noninterest income increased to $221,000 for
the three months ended June 30, 2005, from $196,000 for the three
months ended June 30, 2004.
NONINTEREST EXPENSES. Total noninterest expenses increased to $855,000
for the three months ended June 30, 2005 from $690,000 for the three
months ended June 30, 2004, primarily due to an increase in salaries
and employee benefits of $61,000, an increase in occupancy and
equipment of $49,000, and an increase in professional fees of $22,000
all due to the continued growth of the Company.
INCOME TAXES. Income taxes for the three months ended June 30, 2005, were
$239,000 (an effective rate of 38.1%) compared to income taxes of
$241,000 (an effective rate of 38.1%) for the three months ended June
30, 2004.
15
OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY
COMPARISON OF THE SIX-MONTH PERIODS ENDED JUNE 30, 2005 AND 2004
GENERAL. Net earnings for the six months ended June 30, 2005, were
$772,000 or $.29 per basic and $.28 per diluted share compared to net
earnings of $815,000 or $.31 per basic and $.30 per diluted share for
the period ended June 30, 2004. This decrease in the Company's net
earnings was primarily due to an increase in noninterest expenses and
the provision for loan losses which was partially offset by an
increase in the net interest income and noninterest expenses.
INTEREST INCOME. Interest income increased to $5.2 million for the six
months ended June 30, 2005 from $4.2 million for the six months ended
June 30, 2004. Interest income on loans increased to $4.5 million due
primarily to an increase in the average loan portfolio balance for the
six months ended June 30, 2005. Interest on securities increased to
$637,000 due primarily to an increase in the average balance which was
partially offset by a decrease in the average yield earned on the
securities portfolio in 2005.
INTEREST EXPENSE. Interest expense on deposits increased to $1.7 million
for the six months ended June 30, 2005, from $1.4 million for the six
months ended June 30, 2004. Interest expense increased primarily
because of an increase in the average balance of deposits during 2005.
Interest expense on borrowings increased to $947,000 for the six
months ended June 30, 2005 from $532,000 for the six months ended June
30, 2004 due to an increase in the average balance of borrowings and
an increase in the average rate paid on borrowings during 2005.
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 six months ended June 30, 2005, was
$145,000 compared to $55,000 for the same period in 2004. Management
believes the balance in the allowance for loan losses of $773,000 at
June 30, 2005, is adequate.
NONINTEREST INCOME. Total noninterest income increased to $479,000 for
the six months ended June 30, 2005, from $417,000 for the six months
ended June 30, 2004.
NONINTEREST EXPENSES. Total noninterest expenses increased to $1.7
million for the six months ended June 30, 2005 from $1.4 million for
the six months ended June 30, 2004, primarily due to an increase in
salaries and employee benefits of $120,000, an increase in occupancy
and equipment of $82,000, an increase in professional fees of $31,000,
and an increase in other expenses of $34,000 all due to the continued
growth of the Company.
INCOME TAXES. Income taxes for the six months ended June 30, 2005, were
$472,000 (an effective rate of 37.9%) compared to income taxes of
$502,000 (an effective rate of 38.1%) for the six months ended June
30, 2004.
16
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.
17
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of the Shareholders (the "Annual Meeting") of Optimum Bank
was held on April 28, 2005, to consider the election of directors each for a
term of one year.
At the Annual Meeting, 2,110,017 shares were present in person or by proxy. The
following is a summary and tabulation of the matters that were voted upon at the
Annual Meeting:
Proposal I
The election of directors each for a term of one year is as follows:
FOR WITHHELD AGAINST
--------- -------- -------
Albert J. Finch 2,063,777 46,240 --
========= ========= ========
Richard L. Browdy 2,063,777 46,240 --
Michael Bedzow 2,109,977 40 --
Sam Borek 2,110,017 -- --
Irving P. Cohen 2,110,017 -- --
Gordon Deckelbaum 2,109,977 40 --
Paul B. Fay, Jr. 2,063,777 46,240 --
H. David Krinsky 2,063,777 46,240 --
Larry R. Willis 2,109,977 40 --
Wendy Mitcher 2,109,977 40 --
18
OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
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 on March 30, 2004; (iii) a
triple asterisk (***) were previously filed as part of a current report on Form
8-K filed with the Securities and Exchange Commission on May 11, 2004; and (iv)
a quadruple asterisk (****)were previously filed as part of an Annual Report on
Form 10-KSB filed with the Securities and Exchange Commission on March 31, 2005.
EXHIBIT NO. DESCRIPTION OF EXHIBIT
---------- ----------------------
** 2 Agreement and Plan of Reorganization 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 Nonemployee Directors Stock Purchase Plan
* 10.3 Agreement between OptimumBank, Albert J. Finch and
Richard L. Browdy dated June 14, 2002
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 pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906
of Sarbanes-Oxley Act of 2002
32.2 Certification of Chief Financial Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906
of Sarbanes-Oxley Act of 2002
19
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: August 12, 2005 By: /s/ Albert J. Finch
-----------------------------------------
Albert J. Finch, Chief Executive Officer
Date: August 12, 2005 By: /s/ Richard L. Browdy
------------------------------------------
Richard L. Browdy, Chief Financial Officer
20