Edgar Filing: OptimumBank Holdings, Inc.

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Form 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2009

¨	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)

954-776-2332

(Registrant’s telephone number, including area code)

N/A

(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 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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No ¨ *The registrant has not yet been phased into the interactive data requirements.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (check one):

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 registrant’s classes of common stock, as of the latest practicable date: 3,276,842 shares of Common Stock, $.01 par value, issued and outstanding as of November 23, 2009

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

INDEX


		Page
PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Condensed Consolidated Balance Sheets - September 30, 2009 (unaudited) and December 31, 2008		2

Condensed Consolidated Statements of Operations - Three and Nine Months ended September 30, 2009 and 2008 (unaudited)		3

Condensed Consolidated Statements of Stockholders’ Equity - Nine Months ended September 30, 2009 and 2008 (unaudited)		4

Condensed Consolidated Statements of Cash Flows - Nine Months ended September 30, 2009 and 2008 (unaudited)		5

Notes to Condensed Consolidated Financial Statements (unaudited)		6-10

Review by Independent Registered Public Accounting Firm		11

Report of Independent Registered Public Accounting Firm		12

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		13-18

Item 4T. Controls and Procedures		19

PART II. OTHER INFORMATION

Item 6. Exhibits		20

SIGNATURES		21

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, 2009		December 31, 2008
	September 30, 2009		December 31, 2008
	(unaudited)
Assets

Cash and due from banks	$	1,852	$	980
Interest-bearing deposits with banks		5,202		97
Federal funds sold		11,894		2,143


Total cash and cash equivalents		18,948		3,220

Securities held to maturity (fair value of $83,099 and $78,756)		86,748		82,208
Security available for sale		-		244
Loans, net of allowance for loan losses of $2,878 and $1,906		153,417		160,699
Federal Home Loan Bank stock		3,551		3,526
Premises and equipment, net		2,966		3,094
Foreclosed assets		88		95
Accrued interest receivable		1,157		1,277
Other assets		3,062		1,377


Total assets	$	269,937	$	255,740


Liabilities and Stockholders’ Equity

Liabilities:
Noninterest-bearing demand deposits	$	130	$	90
Savings, NOW and money-market deposits		41,319		30,668
Time deposits		93,781		84,167


Total deposits		135,230		114,925

Federal Home Loan Bank advances		63,700		68,700
Other borrowings		41,800		41,800
Junior subordinated debenture		5,155		5,155
Advanced payments by borrowers for taxes and insurance		2,029		935
Official checks		728		553
Other liabilities		951		907


Total liabilities		249,593		232,975


Stockholders’ equity:
Common stock, $.01 par value; 6,000,000 shares authorized, 3,276,842 and 3,120,992 shares issued and outstanding		33		31
Additional paid-in capital		19,046		18,494
Retained earnings		1,265		4,244
Accumulated other comprehensive loss		-		(4	)


Total stockholders’ equity		20,344		22,765


Total liabilities and stockholders’ equity	$	269,937	$	255,740

See Accompanying Notes to Condensed Consolidated Financial Statements.

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

Condensed Consolidated Statements of Operations (Unaudited)

(Dollars in thousands, except per share amounts)


	Three Months Ended September 30,					Nine Months Ended September 30,
	2009			2008		2009			2008
Interest income:
Loans	$	2,266		$	2,749	$	7,338		$	8,731
Securities		1,268			1,116		3,845			3,030
Other		14			35		17			144


Total interest income		3,548			3,900		11,200			11,905


Interest expense:
Deposits		873			1,046		2,841			3,501
Borrowings		1,203			1,237		3,642			3,450


Total interest expense		2,076			2,283		6,483			6,951


Net interest income		1,472			1,617		4,717			4,954

Provision for loan losses		733			47		5,240			161


Net interest income (expense) after provision for loan losses		739			1,570		(523	)		4,793


Noninterest income:
Service charges and fees		12			46		18			119
Loan prepayment fees		1			30		1			35
Other		1			2		3			4


Total noninterest income		14			78		22			158


Noninterest expenses:
Salaries and employee benefits		520			540		1,609			1,631
Occupancy and equipment		138			168		455			537
Data processing		42			42		129			125
Professional fees		94			54		313			195
Insurance		141			36		377			64
Stationary and supplies		10			11		29			24
Loss on sale of foreclosed assets		-			293		-			293
Provision for losses on foreclosed assets		-			11		7			74
Other-than-temporary impairment of securities		179			-		179			-
Other		132			170		289			374


Total noninterest expenses		1,256			1,325		3,387			3,317


(Loss) earnings before income taxes (benefit)		(503	)		323		(3,888	)		1,634

Income taxes (benefit)		(190	)		122		(1,463	)		615


Net (loss) earnings	$	(313	)	$	201	$	(2,425	)	$	1,019


Net (loss) earnings per share:
Basic	$	(.10	)	$	.06	$	(.74	)	$	.31


Diluted	$	(.10	)	$	.06	$	(.74	)	$	.31


Dividends per share	$	-		$	-	$	-		$	-

See Accompanying Notes to Condensed Consolidated Financial Statements.

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

Condensed Consolidated Statements of Stockholders’ Equity

Nine Months Ended September 30, 2009 and 2008

(Dollars in thousands)


	Common Stock			Additional Paid-In Capital		Retained Earnings			Accumulated Other Comprehensive Loss			Total Stockholders’ Equity
	Shares	Amount		Additional Paid-In Capital		Retained Earnings			Accumulated Other Comprehensive Loss			Total Stockholders’ Equity

Balance at December 31, 2007	2,972,507	$	30	$	17,308	$	4,913		$	(4	)	$	22,247


Comprehensive income:
Net earnings for the nine months ended September 30, 2008 (unaudited)	-		-		-		1,019			-			1,019

Net change in unrealized loss on security available for sale (unaudited)	-		-		-		-			(1	)		(1	)


Comprehensive income (unaudited)													1,018


5% stock dividend (fractional shares paid in cash) (unaudited)	148,485		1		1,186		(1,189	)		-			(2	)


Balance at September 30, 2008 (unaudited)	3,120,992	$	31	$	18,494	$	4,743		$	(5	)	$	23,263


Balance at December 31, 2008	3,120,992	$	31	$	18,494	$	4,244		$	(4	)	$	22,765


Comprehensive loss:
Net loss for the nine months ended September 30, 2009 (unaudited)	-		-		-		(2,425	)		-			(2,425	)

Net change in unrealized loss on security available for sale (unaudited)	-		-		-		-			4			4


Comprehensive loss (unaudited)													(2,421	)


5% stock dividend (fractional shares paid in cash) (unaudited)	155,850		2		552		(554	)		-			-


Balance at September 30, 2009 (unaudited)	3,276,842	$	33	$	19,046	$	1,265		$	-		$	20,344

See Accompanying Notes to Condensed Consolidated Financial Statements.

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In thousands)


	Nine Months Ended September 30,
	2009			2008
Cash flows from operating activities:
Net (loss) earnings	$	(2,425	)	$	1,019
Adjustments to reconcile net (loss) earnings to net cash provided by operating activities:
Depreciation and amortization		141			153
Provision for loan losses		5,240			161
Net amortization of fees, premiums and discounts		(464	)		804
Decrease in accrued interest receivable		120			105
(Increase) decrease in other assets		(1,685	)		118
Loss on sale of foreclosed assets		-			293
Provision for losses on foreclosed assets		7			74
Other-than-temporary impairment of securities		179			-
Increase (decrease) in official checks and other liabilities		219			(157	)


Net cash provided by operating activities		1,332			2,570


Cash flows from investing activities:
Purchases of securities held to maturity		(24,032	)		(35,603	)
Principal repayments of securities held to maturity		19,677			8,323
Proceeds from sale of security available for sale		248			-
Net decrease in loans		2,142			9,281
Purchase of premises and equipment		(13	)		(41	)
Proceeds from sale of foreclosed assets		-			257
Purchase of Federal Home Loan Bank stock		(25	)		(741	)


Net cash used in investing activities		(2,003	)		(18,524	)


Cash flows from financing activities:
Net increase (decrease) in deposits		20,305			(12,468	)
Net increase in other borrowings		-			12,900
Proceeds from Federal Home Loan Bank advances		-			45,600
Repayment of Federal Home Loan Bank advances		(5,000	)		(29,750	)
Increase in advance payments by borrowers for taxes and insurance		1,094			878
Fractional shares of stock dividend paid-in cash		-			(2	)


Net cash provided by financing activities		16,399			17,158


Net increase in cash and cash equivalents		15,728			1,204

Cash and cash equivalents at beginning of the period		3,220			701


Cash and cash equivalents at end of the period	$	18,948		$	1,905


Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest	$	6,418		$	6,907


Income taxes	$	300		$	889


Noncash investing and financing activities:
Change in accumulated other comprehensive loss, net change in unrealized loss on security available for sale, net of tax	$	4		$	(1	)


Common stock dividend	$	554		$	1,187


Loans transferred to foreclosed assets	$	-		$	2,390


Loan made in connection with sale of foreclosed asset	$	-		$	1,600


Foreclosed assets reclassified to other assets	$	-		$	150

See Accompanying Notes to Condensed Consolidated Financial Statements.

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (unaudited)

(1)

General. OptimumBank Holdings, Inc. (the “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 September 30, 2009, and the results of operations for the three- and nine-month periods ended September 30, 2009 and 2008, and cash flows for the nine-months periods ended September 30, 2009 and 2008. The results of operations for the three and nine months ended September 30, 2009, are not necessarily indicative of the results to be expected for the full year.

Management has evaluated events occurring subsequent to the balance sheet date through November 23, 2009 (the financial statement issuance date), determining no events require additional disclosure in these consolidated condensed financial statements.

(2)

Loan Impairment and Credit Losses. The activity in the allowance for loan losses was as follows (in thousands):


	Three Months Ended September 30,						Nine Months Ended September 30,
	2009			2008			2009			2008

Balance at beginning of period	$	3,297		$	694		$	1,906		$	692
Charge-offs, net of recoveries		(1,152	)		(9	)		(4,268	)		(121	)
Provision for loan losses		733			47			5,240			161


Balance at end of period	$	2,878		$	732		$	2,878		$	732

The following summarizes the impaired loans at September 30, 2009 and 2008 (in thousands):


	At September 30,
	2009			2008

Loans identified as impaired:
Gross loans with no related allowance for loan losses	$	32,312		$	5,070

Gross loans with related allowance for losses recorded		10,493			-
Less: Allowance on these loans		(1,020	)		-


Net investment in impaired loans	$	41,785		$	5,070

(continued)

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (unaudited), Continued

(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 September 30,				Nine Months Ended September 30,
	2009		2008		2009		2008

Average net investment in impaired loans	$	41,785	$	4,729	$	20,694	$	2,675


Interest income recognized on impaired loans	$	306	$	-	$	392	$	-


Interest income received on impaired loans	$	306	$	-	$	392	$	-

At September 30, 2009 and 2008, the Company had no loans over ninety days past due still accruing interest. Nonaccrual loans were as follows (in thousands):

(3)

Regulatory Capital. The Bank is required to maintain certain minimum regulatory capital requirements. The following is a summary at September 30, 2009 of the regulatory capital requirements and the Bank’s capital on a percentage basis:


	Bank		Regulatory Requirement

Tier I capital to total average assets	9.05	%	4.00	%

Tier I capital to risk-weighted assets	13.21	%	4.00	%

Total capital to risk-weighted assets	14.46	%	8.00	%

(continued)

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (unaudited), Continued

(4)

(Loss) Earnings Per Share. Basic (loss) earnings per share has been computed on the basis of the weighted-average number of shares of common stock outstanding during the period. In 2008, 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. In 2009, basic and diluted loss per share are the same due to the net loss incurred by the Company. All amounts reflect the 5% stock dividends declared in May, 2009 and 2008. (Loss) earnings per common share have been computed based on the following:


	Three Months Ended September 30,		Nine Months Ended September 30,
	2009	2008	2009	2008
Weighted-average number of common shares outstanding used to calculate basic (loss) earnings per common share	3,276,842	3,276,842	3,276,842	3,276,842
Effect of dilutive stock options	-	43,547	-	57,381


Weighted-average number of common shares outstanding used to calculate diluted (loss) earnings per common share	3,276,842	3,320,389	3,276,842	3,334,223

The following options were excluded from the calculation of the 2008 earnings per share due to the exercise price being above the average market price:


	Number Outstanding	Exercise Price		Expire
*For the three and nine months ended September 30, 2008-*
Options	292,936	$	7.43-11.33	2014-2015

(5)

Stock-Based Compensation. As of December 31, 2005, all stock options were fully vested and no options have been granted since 2005; therefore, no stock-based compensation has been recognized.

The Company established an Incentive Stock Option Plan (the “Plan”) for officers, directors and employees of the Company and reserved 630,720 (amended) shares of common stock for the plan. Both incentive stock options and nonqualified stock options may be granted under the plan. The exercise price of the stock options is determined by the board of directors at the time of grant, but cannot be less than the fair market value of the common stock on the date of grant. The options vest over three and five years. The options must be exercised within ten years from the date of grant. At September 30, 2009, 14,951 options were available for grant.

(continued)

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (unaudited), Continued

(5)

Stock-Based Compensation, Continued. A summary of the activity in the Company’s stock option plan is as follows. All amounts reflect the 5% stock dividend declared in May 2009:


	Number of Options	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding and exercisable at December 31, 2008 and September 30, 2009	528,744	$	7.31	4.1 years	$	-

(6)

Fair Value Measurements. Impaired collateral-dependent loans and foreclosed assets are carried at fair value when the current collateral value is lower than the carrying value of the loan or foreclosed asset. Those impaired collateral-dependent loans and foreclosed assets which are measured at fair value on a nonrecurring basis are as follows (in thousands):


	Fair Value		Level 1	Level 2	Level 3	Total Losses	Losses Recorded in Operations For the Nine Months Ended September 30, 2009
*As of September 30, 2009:*
Impaired loans ⁽¹⁾	$	9,473	-	-	9,473	3,200	2,080


Foreclosed assets	$	88	-	-	88	22	7

⁽¹⁾	Loans with a carrying value of $32,312,000 were measured for impairment using Level 3 inputs and had a fair value in excess of carrying value.

(continued)

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (unaudited), Continued

(6)

Fair Value Measurements, Continued. The estimated fair values of the Company’s financial instruments were as follows (in thousands):


	At September 30, 2009				At December 31, 2008
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Financial assets:
Cash and cash equivalents	$	18,948	$	18,948	$	3,220	$	3,220
Securities held to maturity		86,748		83,099		82,208		78,756
Security available for sale		-		-		244		244
Loans		153,417		153,425		160,699		160,684
Federal Home Loan Bank stock		3,551		3,551		3,526		3,526
Accrued interest receivable		1,157		1,157		1,277		1,277

Financial liabilities:
Deposit liabilities		135,230		136,029		114,925		115,807
Federal Home Loan Bank advances		63,700		65,439		68,700		71,058
Other borrowings		41,800		43,240		41,800		43,714
Junior subordinated debenture		5,155		4,991		5,155		4,871
Off-balance sheet financial instruments		-		-		-		-

Discussion regarding the assumptions used to compute the fair values of financial instruments can be found in Note 1 to the consolidated financial statements included in the Company’s annual report on Form 10-K for the year ended December 31, 2008.

(7)

Common Stock Dividend. On May 28, 2009, the Company’s board of directors declared a 5% stock dividend to shareholders of record on June 11, 2009 which was paid on July 11, 2009.

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 September 30, 2009, and for the three- and nine-month periods ended September 30, 2009 and 2008, 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.

Report of Independent Registered Public Accounting Firm

OptimumBank Holdings, Inc.

Fort Lauderdale, Florida:

We have reviewed the accompanying condensed consolidated balance sheet of OptimumBank Holdings, Inc. and Subsidiary (the “Company”) as of September 30, 2009, and the condensed consolidated statements of operations for the three- and nine-month periods ended September 30, 2009 and 2008 and the related condensed consolidated statements of stockholders’ equity and cash flows for the nine-month periods ended September 30, 2009 and 2008. 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, 2008, and the related consolidated statements of earnings, stockholders’ equity and cash flows for the year then ended (not presented herein); and in our report dated March 13, 2009, 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, 2008, 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

November 23, 2009

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

Item 2. Management’s Discussion and Analysis

of Financial Condition and Results of Operations

Comparison of September 30, 2009 and December 31, 2008

Liquidity and Capital Resources

The Company’s primary sources of cash during the nine months ended September 30, 2009 were principal repayments of securities held to maturity of approximately $19.7 million, net deposit inflows of approximately $20.3 million and cash provided from operating activities of approximately $1.3 million. Cash was used primarily for purchases of securities of approximately $24.0 million and the repayment of Federal Home Loan Bank advances of $5.0 million. At September 30, 2009, the Company had time deposits of approximately $85.8 million that mature in one year or less. 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.

We have agreed with the bank regulatory agencies that OptimumBank, our subsidiary bank, will limit its asset growth to no more than 5%, will make no significant change in its funding sources, and will not increase its brokered deposits.

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


	Nine Months Ended September 30, 2009		Year Ended December 31, 2008		Nine Months Ended September 30, 2008
Average equity as a percentage of average assets	8.04	%	9.15	%	9.19	%

Equity to total assets at end of period	7.54	%	8.92	%	8.96	%

Return on average assets (1)	(1.20	)%	.21	%	0.55	%

Return on average equity (1)	(14.86	)%	2.26	%	5.94	%

Noninterest expenses to average assets (1)	1.67	%	1.81	%	1.78	%

(1)	Annualized for the nine months ended September 30, 2009 and 2008.

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. These instruments involve, to varying degrees, elements of credit and interest-rate risk in excess of the amounts recognized in the condensed consolidated balance sheet. The contract or notional amounts of those instruments reflect the extent of the Company’s involvement in particular classes of financial instruments.

The Company’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit 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 September 30, 2009, follows (in thousands):


	Contract Amount

Commitments to extend credit	$	2,250

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.

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 September 30,
	2009						2008
	Average Balance		Interest and Dividends		Average Yield/ Rate		Average Balance		Interest and Dividends		Average Yield/ Rate
	($ in thousands)
Interest-earning assets:
Loans	$	158,192		2,266	5.73	%	$	159,844		2,749	6.88	%
Securities		91,340		1,268	5.55			82,681		1,116	5.40
Other (1)		20,201		14	0.28			5,267		35	2.66


Total interest-earning assets/interest income		269,733		3,548	5.26			247,792		3,900	6.30


Cash and due from banks		2,032						486
Premises and equipment		2,995						3,164
Other		1,452						3,696


Total assets	$	276,212					$	255,138

Interest-bearing liabilities:
Savings, NOW and money-market deposits		40,891		169	1.65			34,449		264	3.07
Time deposits		96,818		704	2.91			76,924		782	4.07
Borrowings (2)		113,046		1,203	4.26			116,525		1,237	4.25


Total interest-bearing liabilities/interest expense		250,755		2,076	3.31			227,898		2,283	4.01


Noninterest-bearing demand deposits		469						487
Other liabilities		4,395						3,591
Stockholders’ equity		20,593						23,162


Total liabilities and stockholders’ equity	$	276,212					$	255,138


Net interest income			$	1,472					$	1,617


Interest-rate spread (3)					1.95	%					2.29	%


Net interest margin (4)					2.18	%					2.61	%


Ratio of average interest-earning assets to average interest-bearing liabilities		1.08						1.09

(1)	Includes interest-earning deposits with banks, federal funds sold and Federal Home Loan Bank stock dividends.

(2)	Includes Federal Home Loan Bank advances, other borrowings 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.

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.


	Nine Months Ended September 30,
	2009						2008
	Average Balance		Interest and Dividends		Average Yield/ Rate		Average Balance		Interest and Dividends		Average Yield/ Rate
	($ in thousands)
Interest-earning assets:
Loans	$	160,053		7,338	6.11	%	$	162,846		8,731	7.15	%
Securities		90,502		3,845	5.66			74,315		3,030	5.44
Other (1)		13,187		17	0.17			4,549		144	4.22


Total interest-earning assets/interest income		263,742		11,200	5.66			241,710		11,905	6.57


Cash and due from banks		2,247						478
Premises and equipment		3,036						3,200
Other		1,525						3,653


Total assets	$	270,550					$	249,041

Interest-bearing liabilities:
Savings, NOW and money-market deposits		37,155		536	1.92			32,361		804	3.31
Time deposits		92,725		2,305	3.31			81,843		2,697	4.39
Borrowings (2)		115,211		3,642	4.21			107,649		3,450	4.27


Total interest-bearing liabilities/interest expense		245,091		6,483	3.53			221,853		6,951	4.18


Noninterest-bearing demand deposits		439						827
Other liabilities		3,258						3,477
Stockholders’ equity		21,762						22,884


Total liabilities and stockholders’ equity	$	270,550					$	249,041


Net interest income			$	4,717					$	4,954


Interest-rate spread (3)					2.13	%					2.39	%


Net interest margin (4)					2.38	%					2.73	%


Ratio of average interest-earning assets to average interest-bearing liabilities		1.08						1.09

(1)	Includes interest-bearing deposits in banks, federal funds sold and Federal Home Loan Bank stock dividends.

(2)	Includes Federal Home Loan Bank advances, other borrowings 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.

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

Comparison of the Three-Month Periods Ended September 30, 2009 and 2008

General. Net loss for the three months ended September 30, 2009, were $(313,000) or $(.10) per basic and diluted share compared to net earnings of $201,000 or $.06 per basic and diluted share for the period ended September 30, 2008. This decrease in the Company’s net earnings was primarily due to an increase in the provision for loan losses.

Interest Income. Interest income decreased to $3.5 million for the three months ended September 30, 2009 from $3.9 million for the three months ended September 30, 2008. Interest income on loans decreased due primarily to a decrease in the average loan portfolio balance and a decrease in the average yield earned for the three months ended September 30, 2009. Interest on securities increased to $1.3 million due primarily to an increase in the average balance of the securities portfolio and an increase in the average yield earned from 5.40% for the three months ended September 30, 2008, to 5.55% for the three months ended September 30, 2009.

Interest Expense. Interest expense on deposits decreased to $0.9 million for the three months ended September 30, 2009 from $1.0 million for the three months ended September 30, 2008. Interest expense decreased primarily because of a decrease in the average yield paid during 2009.

Provision for Loan Losses. The provision for the three months ended September 30, 2009, was $733,000 compared to $47,000 for the same period in 2008. The provision for loan losses is charged to operations as losses are estimated to have occurred in order to bring the total allowance for loan losses to a level deemed appropriate by management to absorb losses inherent in the portfolio at September 30, 2009. Management’s periodic evaluation of the adequacy of the allowance is based upon historical experience, the volume and type of lending conducted by us, adverse situations that may affect the borrower’s ability to repay, estimated value of the underlying collateral, loans identified as impaired, general economic conditions, particularly as they relate to our market areas, and other factors related to the estimated collectibility of our loan portfolio. The increase in the provision for loan losses for third quarter of 2009 was due to potential increased credit risk on existing loans which resulted in a $600,000 increase in the specific reserve allocation for impaired loans and a $133,000 increase in the general reserve allocation. The allowance for loan losses totaled $2,878,000 or 1.84% of loans outstanding at September 30, 2009, compared to $1,906,000, or 1.17% of loans outstanding at December 31, 2008. Management believes the balance in the allowance for loan losses at September 30, 2009 is adequate.

Noninterest Income. Total noninterest income decreased to $14,000 for the three months ended September 30, 2009, from $78,000 for the three months ended September 30, 2008, primarily due to a decrease in loan prepayment fees and late charge fees.

Noninterest Expenses. Total noninterest expenses remained $1.3 million for the three months ended September 30, 2009 compared to the three months ended September 30, 2008. Increases in 2009 due to a special assessment by the Federal Deposit Insurance Corporation of $119,000 and an other-than-termporary impairment on securities of $179,000 were offset by a $293,000 reduction in losses on sale of foreclosed assets.

Income Taxes (Benefit). Income tax benefit for the three months ended September 30, 2009, was $(190,000) (an effective rate of 37.8%) compared to income taxes of $122,000 (an effective rate of 37.8%) for the three months ended September 30, 2008.

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

Comparison of the Nine-Month Periods Ended September 30, 2009 and 2008

General. Net loss for the nine months ended September 30, 2009, were $(2,425,000) or $(.74) per basic and diluted share compared to net earnings of $1,019,000 or $.31 per basic and diluted share for the period ended September 30, 2008. This decrease in the Company’s net earnings was primarily due to an increase in the provision for loan losses.

Interest Income. Interest income decreased to $11.2 million for the nine months ended September 30, 2009 compared to $11.9 million for the nine months ended September 30, 2008. Interest income on loans decreased to $7.3 million due primarily to a decrease in the average loan portfolio balance and a decrease in the average yield earned in 2009. Interest on securities increased to $3.8 million due primarily to an increase in the average balance of the securities portfolio in 2009 and an increase in the average yield earned.

Interest Expense. Interest expense on deposit accounts decreased to $2.8 million for the nine months ended September 30, 2009, from $3.5 million for the nine months ended September 30, 2008. Interest expense on deposits decreased primarily because of a decrease in the average yield paid in 2009. Interest expense on borrowings increased to $3.6 million for the nine months ended September 30, 2009 from $3.5 million for the nine months ended September 30, 2008 due primarily to an increase in the average balance of borrowings.

Provision for Loan Losses. The provision for the nine months ended September 30, 2009, was $5,240,000 compared to $161,000 for the same period in 2008. The provision for loan losses is charged to operations as losses are estimated to have occurred in order to bring the total allowance for loan losses to a level deemed appropriate by management to absorb losses inherent in the loan portfolio at September 30, 2009. Management’s periodic evaluation of the adequacy of the allowance is based upon historical experience, the volume and type of lending conducted by us, adverse situations that may affect the borrower’s ability to repay, estimated value of the underlying collateral, loans identified as impaired, general economic conditions, particularly as they relate to our market areas, and other factors related to the estimated collectibility of our loan portfolio. The increase in the provision for loan losses for 2009 was due to potential increased credit risk on existing loans which resulted in a $4,619,000 increase in the specific reserve allocation for impaired loans and a $621,000 increase in the general reserve allocation. The allowance for loan losses totaled $2,878,000 or 1.84% of loans outstanding at September 30, 2009, compared to $1,906,000, or 1.17% of loans outstanding at December 31, 2008. Management believes the balance in the allowance for loan losses at September 30, 2009 is adequate.

Noninterest Income. Total noninterest income decreased to $22,000 for the nine months ended September 30, 2009, from $158,000 for the nine months ended September 30, 2008 primarily due to a decrease in loan prepayment fees and late charge fees.

Noninterest Expenses. Total noninterest expenses increased to $3.4 million for the nine months ended September 30, 2009 from $3.3 million for the nine months ended September 30, 2008, primarily due to a special assessment by the Federal Deposit Insurance Corporation of $119,000 and an other-than-temporary impairment on securities of $179,000 in 2009.

Income Taxes (Benefit). Income tax benefit for the nine months ended September 30, 2009, was $(1,463,000) (an effective rate of 37.6%) compared to income taxes of $615,000 (an effective rate of 37.6%) for the nine months ended September 30, 2008.

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

Item 4T. Controls and Procedures

Evaluation of Disclosure Controls and Procedures. On November 23, 2009, the Company restated its interim financial statements for the three and six months ended June 30, 2009. In the restatement, management increased the level of impaired loans and reported substantial additional provisions for loan losses and charge offs of impaired real estate loans for the three months ended June 30, 2009. Management made the adjustments to the Company’s financial statements as a result of adjustments to the Bank’s call report for June 30, 2009. Among other things, the adjustments were based on management’s review of additional information regarding the Company’s real estate loan portfolio, reevaluation of the underlying collateral and identification of continued deterioration in the ability of some of the borrowers to make loan payments.

As a result of the restatement, management is in the process of evaluating the effectiveness of the Company’s disclosure controls and procedures and internal control over financial reporting as of September 30, 2009, including the identification of any material weaknesses in the Company’s internal controls. Management has not yet reached a conclusion as to whether the Company’s disclosure controls and procedures were effective as of September 30, 2009. Management intends to retain outside advisors to assist with this process and expects to complete its evaluation as promptly as possible, but in no event later than December 31, 2009.

Changes in Internal Controls. During the period covered by this report, there have been no changes in the Company’s internal control over financial reporting that have materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting. However, as described above, management is in the process of evaluating the effectiveness of the Company’s disclosure controls and procedures and internal control over financial reporting as of September 30, 2009, including the identification of any material weaknesses in the Company’s internal controls. If material weaknesses are identified, the Company has directed management to promptly develop such modifications to its internal control processes and procedures as may be necessary to address the identified material weaknesses.

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

PART II. OTHER INFORMATION

Item 6.

Exhibits

The following exhibits are filed with or incorporated by reference into this report. The exhibits denominated by (i) an asterisk (*) were previously filed as a part of a Registration Statement on Form 10-SB under the Exchange Act, filed with the Federal Deposit Insurance Corporation on March 28, 2003; (ii) a double asterisk (**)were previously filed as part of a current report on Form 8-K filed with the Securities and Exchange Commission (“SEC”) on May 11, 2004; and (iii) a triple asterisk (***)were previously filed as part of a Quarterly Report on Form 10-QSB filed with the SEC on August 12, 2004; (iv) a quadruple asterisk (****) were previously filed as part of an Annual Report on Form 10-KSB filed with the SEC on March 31, 2006; (v) a quintuple asterisk (*****) were previously filed as part of an Annual Report on Form 10-KSB filed with the SEC on March 31, 2008; and (vi) a sextuple asterisk (******) were previously filed as part of an Annual Report on Form 10-K filed with the SEC on March 31, 2009.


Exhibit No.		Description

**	3.1	Articles of Incorporation
******	3.2	Articles of Amendment to Articles of Incorporation
**	3.3	Bylaws
***	4.1	Form of stock certificate
****	10.1	Amended and Restated Stock Option Plan
*	10.3	Agreement between OptimumBank, Albert J. Finch and Richard L. Browdy dated June 14, 2002
*****	14.1	Code of Ethics for Chief Executive Officer and Senior Financial Officers
	31.1	Certification of Chief Executive Officer required by Rule 13a-14(a)/15d-14(a) under the Exchange Act
	31.2	Certification of Chief Financial Officer required by Rule 13a-14(a)/15d-14(a) under the Exchange Act
	32.1	Certification of Chief Executive Officer under §906 of the Sarbanes-Oxley Act of 2002
	32.2	Certification of Chief Financial Officer under §906 of the Sarbanes-Oxley Act of 2002

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:	November 23, 2009	By:	/S/ ALBERT J. FINCH
			Albert J. Finch, Chief Executive Officer

Date:	November 23 , 2009	By:	/S/ RICHARD L. BROWDY
			Richard L. Browdy, Chief Financial Officer

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