OptimumBank Holdings Inc

Previous wording

During the second quarter, we intend to limit our growth in loans and other illiquid assets. Therefore, we do not expect a material increase in our loan balances during the coming quarter. However we expect to continue our focus on originating multi-family, non-owner occupied, commercial real estate, and skilled nursing facility loans. As to deposits, we are focused on increasing our on-balance sheet liquidity by identifying deposit growth opportunities among our existing customer base and prospects throughout Florida and the United States. With respect to treasury management, our focus will remain on merchant cash advance providers and the related electronic funds transfer line of business. For this revenue source to increase further in a meaningful way, automation will be necessary in order to further improve efficiency. We are currently investing in the necessary technology to achieve this end.

Current wording

During the third quarter, we intend to continue to limit our growth in loans and other illiquid assets. Therefore, we do not expect a material increase in our loan balances during the coming quarter. However, we expect to continue our focus on originating multi-family, non-owner occupied, commercial real estate, and skilled nursing receivable facility loans. As to deposits, we are focused on increasing our on-balance sheet liquidity by identifying deposit growth opportunities among our existing customer base and prospects throughout Florida and the United States. With respect to treasury management, our focus will remain on merchant cash advance providers and the related electronic funds transfer line of business. For this revenue source to increase further in a meaningful way, automation will be necessary in order to further improve efficiency. We are currently investing in the necessary technology to achieve this end.

Previous wording

During the first quarter of 2024, the Bank commenced offering U.S. Small Business Administration (“SBA”) SBA 7A loans. SBA 7A loans are generally used to establish a new business or assist in the acquisition, operation, or expansion of an existing business. With SBA loan programs, there are set eligibility requirements and underwriting standards outlined by SBA that can change as the government alters its fiscal policy. These loans are generally secured by accounts receivable, inventory, equipment, and real estate. The Bank hired two full-time SBA staff. At March 31, 2024, SBA 7A loans amounted to $1.4 million. The Bank intends to sell the guaranteed portion of the SBA loans.

Current wording

During the six-month period ended June 30, 2024, the Bank commenced offering U.S. Small Business Administration (“SBA”) SBA 7A loans. SBA 7A loans are generally used to establish a new business or assist in the acquisition, operation, or expansion of an existing business. With SBA loan programs, there are set eligibility requirements and underwriting standards outlined by SBA that can change as the government alters its fiscal policy. These loans are generally secured by accounts receivable, inventory, equipment, and real estate. The Bank hired two full-time SBA staff. At June 30, 2024, SBA 7A loans amounted to $2.7 million. The Bank sells the guaranteed portion of the SBA loans.

Previous wording

The Company’s total assets increased by approximately $149 million to $941 million at March 31, 2024, from $791 million at December 31, 2023, primarily due to increases in loans, and cash and cash equivalents. The growth in assets was attributable to the success of the Company’s efforts to increase loans and deposits from new customers. Net loans grew by $75 million to $746 million at March 31, 2024, from $671 million at December 2023. Deposits grew by approximately $159 million to $798 million at March 31, 2024, from $640 million at December 31, 2023. Total stockholders’ equity increased by approximately $13.3 million to $83.3 million at March 31, 2024, from $70.0 million at December 31, 2023, primarily due to net earnings and proceeds from common stock sales, partially offset by changes in unrealized loss on debt securities available for sale.

Current wording

The Company’s total assets increased by approximately $109 million to $900 million at June 30, 2024, from $791 million at December 31, 2023, primarily due to increases in loans, and cash and cash equivalents. The growth in assets was attributable to the success of the Company’s efforts to increase loans and deposits from new customers, predominantly in the first quarter. Net loans grew by $81 million to $752 million at June 30, 2024, from $671 million at December 31, 2023. Deposits grew by approximately $123 million to $763 million at June 30, 2024, from $640 million at December 31, 2023. Total stockholders’ equity increased by approximately $17 million to $87 million at June 30, 2024, from $70 million at December 31, 2023, primarily due to net earnings and proceeds from common and preferred stock sales, partially offset by changes in unrealized losses on debt securities available for sale.

Previous wording

(1) Annualized for the three months ended March 31, 2024.

Current wording

(1) Annualized for the six months ended June 30, 2024.

Previous wording

The Company’s sources of funds include customer deposits, advances from the Federal Home Loan Bank of Atlanta (“FHLB”), principal repayments and sales of debt securities, loan repayments, the use of Federal Funds markets, net earnings, and loans taken out at the Federal Reserve Bank discount window.

Current wording

The Company’s sources of funds include customer deposits, advances from the Federal Home Loan Bank of Atlanta (“FHLB”), principal repayments and sales of debt securities, loan repayments.

Previous wording

Our liquidity is derived primarily from our deposit base, scheduled amortization and prepayments of loans and investment securities, funds provided by operations, and capital. Additionally, as a commercial bank, we are expected to maintain an adequate liquidity position. The liquidity position may consist of cash on hand, cash on demand deposit with correspondent banks, federal funds sold, and unpledged marketable securities such as United States government treasury and agency securities, municipal securities, U.S. agency mortgage-backed securities, and asset-backed securities. Some of our securities are pledged to the Federal Reserve Bank. The market value of securities pledged to the Federal Reserve Bank, Term Funding Program was $11.3 million at March 31, 2024.

Current wording

Our liquidity is derived primarily from our deposit base, scheduled amortization and prepayments of loans and investment securities, funds provided by operations, and capital. Additionally, as a commercial bank, we are expected to maintain an adequate liquidity position. The liquidity position may consist of cash on hand, cash on demand deposit with correspondent banks, federal funds sold, and unpledged marketable securities such as United States government treasury and agency securities, municipal securities, U.S. agency mortgage-backed securities, and asset-backed securities.

Previous wording

The Company increased deposits by approximately $159 million during the three-month period ended March 31, 2024. The proceeds were used to originate new loans.

Current wording

The Company increased deposits by approximately $123 million during the six-month period ended June 30, 2024. The proceeds were primarily used to originate new loans. This growth was predominantly in the first quarter, similar to the growth in assets and loans.

Previous wording

In addition to obtaining funds from depositors, the Company may borrow funds from other financial institutions. At March 31, 2024, the Company had outstanding borrowings of $40 million, against its $198 million in established borrowing capacity with the FHLB. The Company’s borrowing facility is subject to collateral and stock ownership requirements, as well as prior FHLB consent to each advance. The Company also has a $13.3 million advance with the Federal Reserve that matures in January 2025. At March 31, 2024, the Company also had available lines of credit amounting to $29.5 million with six correspondent banks to purchase federal funds. Disbursements on the lines of credit are subject to the approval of the correspondent banks. We measure and monitor our liquidity daily and believe our liquidity sources are adequate to meet our operating needs.

Current wording

In addition to obtaining funds from depositors, the Company may borrow funds from other financial institutions. At June 30, 2024, the Company had outstanding borrowings of $45 million, against its $235 million in established borrowing capacity with the FHLB. The Company’s borrowing facility is subject to collateral and stock ownership requirements, as well as prior FHLB consent to each advance. At June 30, 2024, the Company also had available lines of credit amounting to $29.5 million with six correspondent banks to purchase federal funds. Disbursements on the lines of credit are subject to the approval of the correspondent banks. We measure and monitor our liquidity daily and believe our liquidity sources are adequate to meet our operating needs.

Previous wording

Net earnings. Net earnings for the three months ended March 31, 2024, were $2.4 million or $.31 per basic and diluted share compared to net earnings of $1.2 million or $.16 per basic and diluted share for the three months ended March 31, 2023. The increase in net earnings during the three months ended March 31, 2024 compared to three months ended March 31, 2023 is primarily attributed to an increase in net interest income and non-interest income, partially offset by the increase in non-interest expense.

Current wording

Net earnings. Net earnings for the three months ended June 30, 2024, were $3.5 million or $.36 per basic share and $.34 per diluted share compared to net earnings of $1.3 million or $.18 per basic and diluted share for the three months ended June 30, 2023. The increase in net earnings during the three months ended June 30, 2024 compared to three months ended June 30, 2023 is primarily attributed to an increase in net interest income and non-interest income, partially offset by the increase in interest expense and non-interest expense.

Previous wording

Interest income. Interest income increased $5.9 million to $13.5 million for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 due primarily to growth in the loan portfolio and increases in yields on interest earning assets.

Current wording

Interest income. Interest income increased $7 million to $15 million for the three months ended June 30, 2024 compared to the three months ended June 30, 2023 due primarily to growth in the loan portfolio and increases in yields on interest earning assets.

Previous wording

Noninterest income. Total noninterest income increased to $1.2 million for the three months ended March 31, 2024, from $729,000 for the three months ended March 31, 2023, due to increased wire transfer and ACH fees during first quarter of 2024.

Current wording

Noninterest income. Total noninterest income increased $429,000 to $1.2 million for the three months ended June 30, 2024, from $772,000 for the three months ended June 30, 2023, due to increased wire transfer and ACH fees during second quarter of 2024.

Previous wording

***Interest expense.***Interest expense increased $3.3 million to $5.7 million for the three months ended March 31, 2024, compared to the three months ended March 31, 2023, primarily due to an increase in deposit rates and changes in the composition of deposits and increase in the average balances.

Current wording

***Interest expense.***Interest expense increased $7 million to $12 million for the six months ended June 30, 2024, compared to the six months ended June 30, 2023, primarily due to an increase in deposit rates and changes in the composition of deposits and increase in the average balances.

Previous wording

Credit loss expense. Expected credit loss expense increased $237,000 to $1 million for the three months ended March 31, 2024, compared to the three months ended March 31, 2023, respectively. The expected credit loss expense is charged to earnings as losses are expected to have occurred in order to bring the total allowance for credit losses to a level deemed appropriate by management to absorb losses expected. Management’s periodic evaluation of the adequacy of the allowance for credit losses is based upon historical experience, the volume and type of lending conducted by the Company, adverse situations that may affect the borrower’s ability to repay, estimated value of the underlying collateral, general economic conditions, particularly as they relate to our market areas, and other factors related to the estimated collectability of our loan portfolio. The allowance for credit losses totaled $8.3 million or 1.10% of loans outstanding at March 31, 2024, compared to $7.6 million or 1.13% of loans outstanding at December 31, 2023. The increase in the credit loss expense during the first quarter of 2024 was primarily due to loan volume growth and the evaluation of the other factors noted above. During the three-months ended March 31, 2024, the net charge off amounting to $534,000 resulted from consumer lending.

Current wording

Credit loss expense. Expected credit loss expense decreased $271,000 to $1.3 million for the six months ended June 30, 2024, compared to the six months ended June 30, 2023, respectively. The expected credit loss expense is charged to earnings as losses are expected to have occurred in order to bring the total allowance for credit losses to a level deemed appropriate by management to absorb losses expected. Management’s periodic evaluation of the adequacy of the allowance for credit losses is based upon historical experience, the volume and type of lending conducted by the Company, adverse situations that may affect the borrower’s ability to repay, estimated value of the underlying collateral, general economic conditions, particularly as they relate to our market areas, and other factors related to the estimated collectability of our loan portfolio. The allowance for credit losses totaled $8.2 million or 1.08% of loans outstanding at June 30, 2024, compared to $7.7 million or 1.13% of loans outstanding at December 31, 2023. The increase in the credit loss expense during the second quarter of 2024 was primarily due to loan volume growth and the evaluation of the other factors noted above. During the six-months ended June 30, 2024, the net charge off amounting to $869,000 resulted from consumer lending.

Previous wording

Noninterest expenses. Total noninterest expenses increased to $4.7 million for the three months ended March 31, 2024, compared to $3.4 million for the three months ended March 31, 2023, primarily due to employee compensation and benefits, and data processing.

Current wording

Noninterest expenses. Total noninterest expenses increased to $9.8 million for the six months ended June 30, 2024, compared to $7.3 million for the six months ended June 30, 2023, primarily due to employee compensation and benefits, and data processing.