_________ (State or other jurisdiction of incorporation or organization) (IRS Employer Identification No.) SUBSIDIARIES Assets Cash and due from banks Interest-bearing deposits with banks Federal funds sold Total cash and cash equivalents Securities held to maturity (fair value of $100) Securities available for sale Loans, net of allowance for loan losses of $1,975 and $2,349 Federal Home Loan Bank stock Premises and equipment, net Foreclosed real estate, net Accrued interest receivable Other assets Total assets Liabilities and Stockholders’ Equity Liabilities: Noninterest-bearing demand deposits Savings, NOW and money-market deposits Time deposits Total deposits Federal Home Loan Bank advances Junior subordinated debenture Advanced payment by borrowers for taxes and insurance Official checks Other liabilities Total liabilities Stockholders’ equity: Preferred stock, no par value; 6,000,000 shares authorized, no shares issued or outstanding Common stock, $.01 par value; 50,000,000 shares authorized, 26,487,397 and 22,411,108 shares issued and outstanding in 2012 and 2011 Additional paid-in capital Accumulated deficit Accumulated other comprehensive loss Total stockholders’ equity Total liabilities and stockholders’ equity SUBSIDIARIES Interest income: Loans Securities Other Total interest income Interest expense: Deposits Borrowings Total interest expense Net interest income Provision for loan losses Net interest income after provision for loan losses Noninterest income: Service charges and fees Other Total noninterest income Noninterest expenses: Salaries and employee benefits Professional fees Occupancy and equipment Data processing Insurance Foreclosed real estate expenses Regulatory assessment Other Total noninterest expenses Net loss Net loss per share: Basic Diluted Dividends per share SUBSIDIARIES Net loss Other comprehensive loss- Unrealized gains on securities available for sale- Unrealized holding gains arising during period Comprehensive loss SUBSIDIARIES Balance at December 31, 2010 Net loss for the three months ended March 31, 2011 (unaudited) Balance at March 31, 2011 (unaudited) Balance at December 31, 2011 Net loss for the three months ended March 31, 2012 (unaudited) Net change in unrealized loss on securities available for sale (unaudited) Proceeds from sale of common stock (unaudited) Balance at March 31, 2012 (unaudited) SUBSIDIARIES Cash flows from operating activities: Net loss Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization Provision for loan losses Net amortization of fees, premiums and discounts Decrease in accrued interest receivable (Increase) decrease in other assets Loss on sale of foreclosed real estate Write-down of foreclosed real estate (Decrease) increase in official checks and other liabilities Net cash used in operating activities Cash flows from investing activities: Purchases of securities Principal repayments and calls of securities Net decrease in loans Purchases of premises and equipment Proceeds from sale of foreclosed real estate, net Capital improvements on foreclosed real estate Net cash provided by investing activities Cash flows from financing activities: Net decrease in deposits Net (decrease) increase in advanced payments by borrowers for taxes and insurance Proceeds from sale of common stock Net cash used in financing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of the period Cash and cash equivalents at end of the period SUBSIDIARIES Supplemental disclosure of cash flow information: Cash paid during the period for: Interest Income taxes Noncash transactions: Change in accumulated other comprehensive loss, net change in unrealized loss on securities available for sale Loans transferred to foreclosed real estate SUBSIDIARIES SUBSIDIARIES SUBSIDIARIES At March 31, 2012: Securities Available for Sale- Mortgage-backed securities Security Held to Maturity- State of Israel Bond At December 31, 2011: Securities Available for Sale- Mortgage-backed securities Security Held to Maturity- State of Israel Bond Securities Available for Sale- Mortgage-backed securities SUBSIDIARIES SUBSIDIARIES Residential real estate Multi-family real estate Commercial real estate Land and construction Commercial Consumer Total loans Add (deduct): Net deferred loan fees, costs and premiums Allowance for loan losses Loans, net SUBSIDIARIES Beginning balance Provision (credit) for loan losses Charge-offs Recoveries Ending balance Individually evaluated for impairment: Recorded investment Balance in allowance for loan losses Collectively evaluated for impairment: Recorded investment Balance in allowance for loan losses Beginning balance Provision (credit) for loan losses Charge-offs Recoveries Ending balance Individually evaluated for impairment: Recorded investment Balance in allowance for loan losses Collectively evaluated for impairment: Recorded investment Balance in allowance for loan losses SUBSIDIARIES SUBSIDIARIES At March 31, 2012: Residential real estate: Closed-end first mortgages Closed-end second mortgages Total residential real estate Multi-family real estate Commercial real estate: Owner-occupied Non-owner-occupied Total commercial real estate Land and construction Commercial Consumer: Non-real estate secured Real estate secured Total consumer Total At December 31, 2011: Residential real estate: Closed-end first mortgages Closed-end second mortgages Total residential real estate Multi-family real estate Commercial real estate: Owner-occupied Non-owner-occupied Total commercial real estate Land and construction Commercial Consumer: Non-real estate secured Real estate secured Total consumer Total SUBSIDIARIES SUBSIDIARIES At March 31, 2012: Residential real estate: Closed-end first mortgages Closed-end second mortgages Subtotal Multi-family real estate Commercial real estate: Owner-occupied Non-owner-occupied Subtotal Land and construction Commercial Consumer: Non-real estate secured Real estate secured Subtotal Total At December 31, 2011: Residential real estate: Closed-end first mortgages Closed-end second mortgages Subtotal Multi-family real estate Commercial real estate: Owner-occupied Non-owner-occupied Subtotal Land and construction Commercial Consumer: Non-real estate secured Real estate secured Subtotal Total SUBSIDIARIES With no related allowance recorded: Residential real estate- Closed-end first mortgages Commercial real estate: Owner-occupied Non-owner-occupied Land and construction Consumer- Non-real estate secured With an allowance recorded: Commercial real estate- Non-owner-occupied Total: Residential real estate- Closed-end first mortgages Commercial real estate: Owner-occupied Non-owner-occupied Land and construction Consumer- Non-real estate secured Total Residential real estate- Closed-end first mortgages Commercial real estate: Owner-occupied Non-owner-occupied Land and construction Consumer- Non-real estate secured Total Tier I capital to total average assets Tier I capital to risk-weighted assets Total capital to risk-weighted assets Weighted-average number of common shares outstanding used to calculate basic and diluted loss per common share Outstanding at December 31, 2011 Options forfeited Outstanding and exercisable at March 31, 2012 As of March 31, 2012- Mortgage-backed securities As of December 31, 2011- Mortgage-backed securities SUBSIDIARIES Residential real estate- Closed-end first mortgages Commercial real estate: Owner-occupied Non-owner-occupied Land and construction Residential real estate- Closed-end first mortgages Commercial real estate: Owner-occupied Non-owner-occupied Land and construction SUBSIDIARIES At March 31, 2012 At December 31, 2011 Financial assets: Cash and cash equivalents Securities held to maturity Securities available for sale Loans Federal Home Loan Bank stock Accrued interest receivable Financial liabilities: Deposit liabilities Federal Home Loan Bank advances Junior subordinated debenture Off-balance sheet financial instruments SUBSIDIARIES Regulatory Matters - Company. The Company is subject to the supervision and regulation of the Board of Governors of the Federal Reserve System (the “Federal Reserve”). On June 22, 2010, the Company entered into a written agreement with the Federal Reserve Bank of Atlanta (“Reserve Bank”) with respect to certain aspects of the operation and management of the Company (the “Written Agreement”). SUBSIDIARIES Regulatory Matters- Bank. Effective April 16, 2010, the Bank consented to the issuance of a Consent Order by the FDIC and the OFR, also effective as of April 16, 2010. SUBSIDIARIES Tier I risk-based capital ratio Total risk-based capital ratio Leverage ratio nine month period ended September 30, 2012. SUBSIDIARIES Average equity as a percentage of average assets Equity to total assets at end of period Return on average assets (1) Return on average equity (1) Noninterest expenses to average assets (1) Despite the slowing of the decline Deposits are our primary source of funds. Under the Consent Order, the interest rates that we pay on our market area deposits and our ability to accept brokered deposits SUBSIDIARIES credit totaling $6.9 million.0- SUBSIDIARIES Interest-earning assets: Loans Securities Other (1) Total interest-earning assets/interest income Cash and due from banks Premises and equipment Other Total assets Interest-bearing liabilities: Savings, NOW and money-market deposits Time deposits Borrowings (2) Total interest-bearing liabilities/interest expense Noninterest-bearing demand deposits Other liabilities Stockholders’ equity Total liabilities and stockholders’ equity Net interest income Interest rate spread (3) Net interest margin (4) Ratio of average interest-earning assets to average interest-bearing liabilities SUBSIDIARIES undersigned thereunto duly authorized. xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934March 31,September 30, 2012or TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934OPTIMUMBANK HOLDINGS, INC.(Exact name of registrant as specified in its charter)(Exact name of registrant as specified in its charter) Florida 000-50755 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)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 ¨o¨o“accelerated“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (check one):Large accelerated filer¨Accelerated filer¨Non-accelerated filer¨ (Do not check if a smaller reporting company)Smaller reporting companyx¨o No x26,549,89730,900,833 shares of Common Stock, $.01 par value, issued and outstanding as of May 10,November 13, 2012 Page 2 2 3 3 4 4 5 5 6-7 6-78-28 8-27 29-37 28-3338 34 38 39 34 3540 SUBSIDIARYItem 1. Financial Statements March 31,
2012 December 31,
2011 (Unaudited) $ 2,270 $ 1,101 6,189 5,123 15,632 16,552 24,091 22,776 100 100 26,946 28,907 88,254 89,217 2,159 2,159 2,673 2,691 7,643 7,646 495 499 577 477 $ 152,938 $ 154,472 488 515 34,688 35,538 70,357 71,842 105,533 107,895 31,700 31,700 5,155 5,155 509 567 457 1,113 1,410 1,256 144,764 147,686 0 0 265 224 29,093 27,491 (20,573 ) (19,991 ) (611 ) (938 ) 8,174 6,786 $ 152,938 $ 154,472 September 30, December 31, Assets 2012 2011 (Unaudited) Cash and due from banks $ 1,959 $ 1,101 Interest-bearing deposits with banks 3,688 5,123 Federal funds sold 21,720 16,552 Total cash and cash equivalents 27,367 22,776 Securities available for sale 21,588 28,907 Loans, net of allowance for loan losses of $1,936 and $2,349 85,451 89,217 Federal Home Loan Bank stock 1,478 2,159 Premises and equipment, net 2,859 2,691 Foreclosed real estate, net 10,444 7,646 Accrued interest receivable 477 499 Other assets 330 577 Total assets $ 149,994 $ 154,472 Liabilities and Stockholders’ Equity Liabilities: Noninterest-bearing demand deposits 1,309 515 Savings, NOW and money-market deposits 34,573 35,538 Time deposits 69,644 71,842 Total deposits 105,526 107,895 Federal Home Loan Bank advances 27,700 31,700 Junior subordinated debenture 5,155 5,155 Advanced payment by borrowers for taxes and insurance 1,029 567 Official checks 320 1,113 Other liabilities 1,397 1,256 Total liabilities 141,127 147,686 Stockholders’ equity: Preferred stock, no par value; 6,000,000 shares authorized, no shares issued or outstanding 0 0 Common stock, $.01 par value; 50,000,000 shares authorized, 30,900,833 and 22,411,108 shares issued and outstanding in 2012 and 2011 309 224 Additional paid-in capital 30,823 27,491 Accumulated deficit (22,368 ) (19,991 ) Accumulated other comprehensive income (loss) 103 (938 ) Total stockholders’ equity 8,867 6,786 Total liabilities and stockholders’ equity $ 149,994 $ 154,472 SUBSIDIARY Three Months Ended
March 31, 2012 2011 $ 995 $ 1,289 298 529 16 15 1,309 1,833 291 550 389 380 680 930 629 903 27 34 602 869 3 10 1 6 4 16 410 476 239 390 119 133 50 52 70 114 68 391 44 221 188 265 1,188 2,042 $ (582 ) $ (1,157 ) $ (.03 ) $ (1.41 ) $ (.03 ) $ (1.41 ) $ 0 $ 0 2012 2011 2012 2011 Interest income: Loans $ 1,025 $ 1,121 $ 3,002 $ 3,607 Securities 245 378 819 1,407 Other 22 17 60 46 Total interest income 1,292 1,516 3,881 5,060 Interest expense: Deposits 272 441 848 1,489 Borrowings 359 389 1,136 1,153 Total interest expense 631 830 1,984 2,642 Net interest income 661 686 1,897 2,418 Provision (credit) for loan losses 197 (243 ) 378 652 Net interest income after provision (credit) for loan losses 464 929 1,519 1,766 Noninterest income: Service charges and fees 9 9 19 26 Gain on sale of securities 0 0 0 153 Other 1 1 179 53 Total noninterest income 10 10 198 232 Noninterest expenses: Salaries and employee benefits 465 444 1,301 1,380 Occupancy and equipment 133 132 376 399 Data processing 47 45 161 147 Professional fees 283 417 810 1,267 Insurance 68 99 208 326 Foreclosed real estate 192 81 329 1,063 Regulatory assessment 92 163 215 545 Other 118 121 490 561 Total noninterest expenses 1,398 1,502 3,890 5,688 Other-than-temporary impairment on securities: Total other-than-temporary impairment losses 101 0 204 0 Portion of losses recognized in other comprehensive income 0 0 0 0 Net impairment loss 101 0 204 0 Net loss $ (1,025 ) $ (563 ) $ (2,377 ) $ (3,690 ) Net loss per share: Basic $ (.04 ) $ (.69 ) $ (.09 ) $ (4.50 ) Diluted $ (.04 ) $ (.69 ) $ (.09 ) $ (4.50 ) Dividends per share $ 0 $ 0 $ 0 $ 0 SUBSIDIARY
Condensed Consolidated Statements of Comprehensive Loss (Unaudited) Three Months Ended
March 31, 2012 2011 $ (582 ) $ (1,157 ) 327 0 $ (255 ) $ (1,157 ) Three Months Ended September 30, Nine Months Ended September 30, 2012 2011 2012 2011 Net loss $ (1,025 ) $ (563 ) $ (2,377 ) $ (3,690 ) Other comprehensive loss- Unrealized gains (loss) on securities available for sale- Unrealized holding gains (losses) arising during period 603 21 1,041 (854 ) Comprehensive loss $ (422 ) $ (542 ) $ (1,336 ) $ (4,544 ) SUBSIDIARYMarch 31,September 30, 2012 and 2011 Common Stock Additional
Paid-In
Capital Accumulated
Deficit Accumulated
Other
Comprehensive
Loss Total
Stockholders’
Equity Shares Amount 819,358 $ 8 $ 19,071 $ (16,244 ) $ 0 $ 2,835 0 0 0 (1,157 ) 0 (1,157 ) 819,358 $ 8 $ 19,071 $ (17,401 ) $ 0 $ 1,678 22,411,108 $ 224 $ 27,491 $ (19,991 ) $ (938 ) $ 6,786 0 0 0 (582 ) 0 (582 ) 0 0 0 0 327 327 4,076,289 41 1,602 0 0 1,643 26,487,397 $ 265 $ 29,093 $ (20,573 ) $ (611 ) $ 8,174 Accumulated Other Total Additional Compre- Stockholders’ Common Stock Paid-In Accumulated hensive Equity Shares Amount Capital Deficit Loss (Deficit) Balance at December 31, 2010 819,358 $ 8 19,071 (16,244 ) 0 2,835 Net loss for the nine months ended September 30, 2011 (unaudited) 0 0 0 (3,690 ) 0 (3,690 ) Net change in unrealized loss on securities available for sale (unaudited) 0 0 0 0 (854 ) (854 ) Balance at September 30, 2011 (unaudited) 819,358 $ 8 19,071 (19,934 ) (854 ) (1,709 ) Balance at December 31, 2011 22,411,108 $ 224 27,491 (19,991 ) (938 ) 6,786 Proceeds from sale of common stock (unaudited) 8,447,500 85 3,290 0 0 3,375 Common stock issued as compensation to directors (unaudited) 42,225 0 42 0 0 42 Net loss for the nine months ended September 30, 2012 (unaudited) 0 0 0 (2,377 ) 0 (2,377 ) Net change in unrealized loss on securities available for sale (unaudited) 0 0 0 0 1,041 1,041 Balance at September 30, 2012 (unaudited) 30,900,833 $ 309 30,823 (22,368 ) 103 8,867 SUBSIDIARY Three Months Ended
March 31, 2012 2011 $ (582 ) $ (1,157 ) 26 33 27 34 9 (69 ) 4 85 (100 ) 207 0 166 25 180 (502 ) 508 (1,093 ) (13 ) 0 (5,048 ) 2,286 3,405 929 2,463 (8 ) (4 ) 0 1,643 (22 ) 0 3,185 2,459 (2,362 ) (5,940 ) (58 ) 85 1,643 0 (777 ) (5,855 ) 1,315 (3,409 ) 22,776 14,367 $ 24,091 $ 10,958 Nine Months Ended September 30, 2012 2011 Cash flows from operating activities: Net loss $ (2,377 ) $ (3,690 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 87 94 Provision for loan losses 378 652 Gain on sale of securities 0 (153 ) Common stock issued as compensation to directors 42 0 Net amortization of fees, premiums and discounts 0 93 Decrease in other assets 247 373 Loss on sale of foreclosed real estate 28 186 Write-down of foreclosed real estate 70 704 Decrease in accrued interest receivable 22 101 Decrease in official checks and other liabilities (652 ) (79 ) Other-than-temporary impairment of securities available for sale 204 0 Net cash used in operating activities (1,951 ) (1,719 ) Cash flows from investing activities: Purchases of securities held to maturity 0 (5,048 ) Principal repayments and maturity of securities available for sale 8,156 7,688 Proceeds from sale of security available for sale 0 11,028 Net decrease in loans 232 8,492 Purchase of premises and equipment (255 ) (5 ) Proceeds from sale of foreclosed real estate 317 3,703 Capital improvements on foreclosed real estate (57 ) 0 Redemption of Federal Home Loan Bank stock 681 747 Net cash provided by investing activities 9,074 26,605 Cash flows from financing activities: Net decrease in deposits (2,369 ) (19,014 ) Increase in advance payments by borrowers for taxes and insurance 462 459 Repayment of Federal Home Loan Bank advances (4,000 ) 0 Proceeds from sale of common stock 3,375 0 Net cash used in financing activities (2,532 ) (18,555 ) Net increase in cash and cash equivalents 4,591 6,331 Cash and cash equivalents at beginning of the period 22,776 14,367 Cash and cash equivalents at end of the period $ 27,367 $ 20,698 SUBSIDIARY Three Months Ended
March 31, 2012 2011 $ 640 $ 902 $ 0 $ 0 $ 327 $ 0 $ 0 $ 4,957 Nine Months Ended September 30, 2012 2011 Supplemental disclosure of cash flow information: Cash paid during the period for: Interest $ 1,898 $ 2,535 Income taxes $ 0 $ 0 Noncash investing and financing activities: Change in accumulated other comprehensive loss, net change in unrealized loss on security available for sale $ 1,041 $ 21 Transfer of securities held to maturity to available for sale $ 0 $ 50,534 Loans transferred to foreclosed real estate $ 3,156 $ 8,596 SUBSIDIARY(1) HoldingHoldings 1503, LLC, all of which were formed in 2009, OB Real Estate Holdings 1695, LLC, OB Real Estate Holdings 1669, LLC, OB Real Estate Holdings 1645, LLC, OB Real Estate Holdings 1620, LLC, and OB Real Estate Holdings 1565, LLC, all formed in 2010, and OB Real Estate Holdings 1443, LLC, and OB Real Estate Holdings 1616, OB Real Estate Holdings 1617, OB Real Estate Holdings 1710, OB Real Estate Holdings 1596, LLC, OB Real Estate Holdings 1636, LLC, and OB Real Estate Holdings Northwood, LLC, formed in 2011.2011, OB Real Estate Holdings Sillato, LLC, OB Real Estate Holdings 1655, LLC, OB Real Estate Holdings 1704, LLC and OB Real Estate Holdings Rosemary, LLC, formed in 2012. The Holding Company’s only business is the operation of the Bank and its subsidiaries (collectively, the “Company”). The Bank’s deposits are insured up to applicable limits by the Federal Deposit Insurance Corporation (“FDIC”). The Bank offers a variety of community banking services to individual and corporate customers through its three banking offices located in Broward County, Florida. OB Real Estate Management, LLC is primarily engaged in managing foreclosed real estate. This subsidiary had no activity in 2012 and 2011. All other subsidiaries are primarily engaged in holding and disposing of foreclosed real estate.In the opinion of the management, the accompanying condensed consolidated financial statements of the Company contain all adjustments (consisting principally of normal recurring accruals) necessary to present fairly the financial position at March 31, 2012, and the results of operations and cash flows for the three-month periods ended March 31, 2012 and 2011. The results of operations for the three months ended March 31, 2012, are not necessarily indicative of the results to be expected for the full year.Comprehensive Loss.Generally accepted accounting principles generally requires that recognized revenue, expenses, gains and losses be included in net loss. Although certain changes in assets and liabilities, such as unrealized gains and losses on available for sale securities, are reported as a separate component of the equity section of the consolidated balance sheet, such items along with net loss, are components of comprehensive loss. The only component of other comprehensive loss is the net change in the unrealized loss on the securities available for sale.Income Taxes. During the year ended December 31, 2009, the Company assessed its earnings history and trend over the past year and its estimate of future earnings, and determined that it is more likely than not that the deferred tax asset will not be realized in the near term. Accordingly, a valuation allowance was recorded against the net deferred tax asset for the amount not expected to be realized in the future. Based on the available evidence at March 31, 2012, the Company determined that it is still more likely than not that the deferred tax asset will not be realized in the near term. Accordingly, the valuation allowance was increased in 2012 to offset the increase in the net deferred tax asset.SUBSIDIARY(1) General, Continued. (continued) (1) General, Continued. Recent Pronouncements. In December 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2011-12 (“ASU 2011-12”),Comprehensive Income (Topic 220), Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05 (“ASU 2011-05”).Stakeholders raised concerns that the new presentation requirements about reclassifications of items out of accumulated other comprehensive income would be difficult for preparers and may add unnecessary complexity to financial statements. In addition, it is difficult for some stakeholders to change systems in time to gather the information for the new presentation requirements by the effective date of Update 2011-05. All other requirements in ASU 2011-05 are not affected by this update, including the requirement to report comprehensive income either in a single continuous financial statement or in two separate but consecutive financial statements. The amendments in ASU 2011-12 are effective on a retrospective basis for public entities for annual periods beginning after December 15, 2011, and interim periods within those years. An entity should provide the disclosures required by ASU 2011-12 retrospectively for all comparative periods presented. The adoption of this guidance did not have a material effect on the Company’s consolidated financial statements.In December 2011, the FASB issued ASU No. 2011-11 (“ASU 2011-11”),Balance Sheet (Topic 210), Disclosures about Offsetting Assets and Liabilities.The objective of ASU 2011-11 is to enhance disclosures required by U.S. GAAP by requiring improved information about financial instruments and derivative instruments that are either (1) offset in accordance with either Section 210-20-45 or Section 815-10-45 or (2) subject to an enforceable master netting arrangement or similar agreement, irrespective of whether they are offset in accordance with Section 210-20-45 or Section 815-10-45. This information will enable users of an entity’s financial statements to evaluate the effect or potential effect of netting arrangements on an entity’s financial position. The amendments in ASU 2011-11 are effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. An entity should provide the disclosures required by ASU 2011-11 retrospectively for all comparative periods presented. The adoption of this guidance did not have a material effect on the Company’s consolidated financial statements.(continued)(continued) SUBSIDIARY(1)(2)General, Continued.Securities.Recent Pronouncements, Continued.In June 2011, the FASB issued ASU No. 2011-05 (“ASU 2011-05”),Comprehensive Income (Topic 220), Presentation of Comprehensive Income.The objective of ASU 2011-05 is to improve the comparability, consistency, and transparency of financial reporting and to increase the prominence of items reported in other comprehensive income. To achieve this goal and to facilitate convergence of U.S. generally accepted accounting principles (GAAP) and International Financial Reporting Standards (IFRS), the FASB decided to eliminate the option to present components of other comprehensive income as part of the consolidated statement of changes in stockholders’ equity. The amendments in ASU 2011-05 require that all nonowner changes in stockholders’ equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In the two-statement approach, the first statement should present total net income and its components followed consecutively by a second statement that should present total other comprehensive income, the components of other comprehensive income, and the total of comprehensive income. The amendments in ASU 2011-05 should be applied retrospectively. For public entities, the amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. Early adoption is permitted, because compliance with the amendments is already permitted. The amendments do not require any transition disclosures. The adoption of this guidance did not have a material effect on the Company’s consolidated financial statements.In May 2011, the FASB issued ASU No. 2011-04 (“ASU 2011-04”),Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs.The objective of ASU 2011-04 is to provide clarification of Topic 820 and, also, to ensure that fair value has the same meaning in U.S. generally accepted accounting principles (“GAAP”) and in international financial reporting standards (“IFRSs”) and that their respective fair value measurement and disclosure requirements are generally the same. Thus, this update results in common principles and requirements for measuring fair value and for disclosing information about fair value measurements in accordance with GAAP and IFRSs. The amendment is effective for interim and annual periods beginning after December 15, 2011 and is to be applied prospectively. Early application is not permitted. The adoption of this guidance did not have a material effect on the Company’s consolidated financial statements.(continued)OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARYNotes to Condensed Consolidated Financial Statements (unaudited), Continued(2)Securities. Securities have been classified according to management’s intent. The carrying amount of securities and approximate fair values are as follows (in thousands): Amortized
Cost Gross
Unrealized
Gains Gross
Unrealized
Losses Fair
Value $ 27,557 $ 216 $ (827 ) $ 26,946 $ 100 $ 0 $ 0 $ 100 $ 29,845 $ 202 $ (1,140 ) $ 28,907 $ 100 $ 0 $ 0 $ 100 Gross Gross Amortized Unrealized Unrealized Fair Cost Gains Losses Value At September 30, 2012: Securities Available for Sale- Mortgage-backed securities $ 21,485 $ 375 $ (272 ) $ 21,588 At December 31, 2011: Securities Available for Sale- Mortgage-backed securities $ 29,845 $ 202 $ (1,140 ) $ 28,907 Securities with gross unrealized losses at March 31, 2012, aggregated by investment category and length of time that individual securities have been in a continuous loss position, is as follows (in thousands): Less Than Twelve Months Over Twelve Months Gross
Unrealized
Losses Fair
Value Gross
Unrealized
Losses Fair
Value $ (14 ) $ 535 $ (813 ) $ 10,019 Securities with gross unrealized losses at September 30, 2012, aggregated by investment category and length of time that individual securities have been in a continuous loss position, is as follows (in thousands): Over Twelve Months Securities Available for Sale- Mortgage-backed securities $ 272 $ 5,132 SUBSIDIARY(2) In evaluating mortgage-backed securities with unrealized losses greater than twelve months, management utilizes various resources, including input from independent third party firms to perform an analysis of expected future cash flows. The process begins with an assessment of the underlying collateral backing the mortgage pools. Management develops specific assumptions using as much market data as possible and includes internal estimates as well as estimates published by rating agencies and other third-party sources. The data for the individual borrowers in the underlying mortgage pools are generally segregated by state, FICO score at issue, loan to value at issue and income documentation criteria. Mortgage pools are evaluated for current and expected levels of delinquencies and foreclosures, based on where they fall in the proscribed data set of FICO score, geographics, LTV and documentation type and a level of loss severity is assigned to each security based on its experience. The above-described historical data is used to develop current and expected measures of cumulative default rates as well as ultimate loss frequency and severity within the underlying mortgages. This reveals the expected future cash flows within the mortgage pool. The data described above is then input to an industry recognized model to assess the behavior of the particular security tranche owned by the Company. Significant inputs in this process include the structure of any subordination structures, if applicable, and are dictated by the structure of each particular security as laid out in the offering documents. The forecasted cash flows from the mortgage pools are input through the security structuring model to derive expected cash flows for the specific security owned by the Company to determine if the future cash flows are expected to exceed the book value of the security. The values for the significant inputs are updated on a regular basis.SUBSIDIARY(2) ninefour investment securities were caused by market conditions. It is expected that the securities would not be settled at a price less than the book value of the investments. Because the decline in fair value is attributable to market conditions and not credit quality, and because the Company has the ability and intent to hold these investments until a market price recovery or maturity, these investments are not considered other-than-temporarily impaired.(3) At March 31,
2012 At December 31,
2011 $ 29,891 $ 30,434 4,059 4,109 41,025 41,307 11,397 11,783 3,693 3,713 125 175 90,190 91,521 39 45 (1,975 ) (2,349 ) $ 88,254 $ 89,217 At September 30, At December 31, 2012 2011 Residential real estate $ 32,430 $ 30,434 Multi-family real estate 4,182 4,109 Commercial real estate 39,221 41,307 Land and construction 7,323 11,783 Commercial 3,959 3,713 Consumer 123 175 Total loans 87,238 91,521 Add (deduct): Net deferred loan fees, costs and premiums 149 45 Allowance for loan losses (1,936 ) (2,349 ) Loans, net $ 85,451 $ 89,217 Residential Multi-Family Commercial Land Real Real Real and Estate Estate Estate Construction Commercial Consumer Total Three Months Ended September 30, 2012: Beginning balance $ 703 $ 245 $ 799 $ 215 $ 115 $ 25 $ 2,102 (231 ) 15 364 36 12 0 196 Charge-offs 0 (1 ) (346 ) (53 ) 0 0 (400 ) Recoveries 17 0 0 17 0 4 38 Ending balance $ 489 $ 259 $ 817 $ 215 $ 127 $ 29 $ 1,936 Nine Months Ended September 30, 2012: Beginning balance $ 549 $ 247 $ 1,190 $ 187 $ 161 $ 15 $ 2,349 70 12 154 170 (33 ) 5 378 Charge-offs (146 ) 0 (557 ) (388 ) (1 ) 0 (1,092 ) Recoveries 16 0 30 246 0 9 301 Ending balance $ 489 $ 259 $ 817 $ 215 $ 127 $ 29 $ 1,936 SUBSIDIARY(3) Loans, Continued. An analysis of the change in the allowance for loan losses for the three-month periods ended March 31, 2012 and 2011 follows (in thousands): March 31, 2012 Residential
Real
Estate Multi-Family
Real
Estate Commercial
Real
Estate Land
and
Construction Commercial Consumer Total $ 549 $ 247 $ 1,190 $ 187 $ 161 $ 15 $ 2,349 112 (33 ) (307 ) 294 (44 ) 5 27 0 0 (69 ) (335 ) 0 0 (404 ) 0 0 0 0 0 3 3 $ 661 $ 214 $ 814 $ 146 $ 117 $ 23 $ 1,975 $ 8,006 $ 0 $ 15,438 $ 6,877 $ 0 $ 0 $ 30,321 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 21,885 $ 4,059 $ 25,587 $ 4,520 $ 3,693 $ 125 $ 59,869 $ 661 $ 214 $ 814 $ 146 $ 117 $ 23 $ 1,975 March 31, 2011 Residential
Real
Estate Multi-Family
Real
Estate Commercial
Real
Estate Land
and
Construction Consumer Total $ 1,285 $ 282 $ 1,542 $ 514 $ 80 $ 3,703 27 23 (97 ) 90 (9 ) 34 0 0 0 (245 ) 0 (245 ) 2 0 0 23 3 28 $ 1,314 $ 305 $ 1,445 $ 382 $ 74 $ 3,520 $ 12,047 $ 0 $ 19,488 $ 9,052 $ 229 $ 40,816 $ 0 $ 0 $ 11 $ 199 $ 0 $ 210 $ 25,650 $ 4,186 $ 33,678 $ 5,006 $ 108 $ 68,628 $ 1,314 $ 305 $ 1,434 $ 183 $ 74 $ 3,310 Consumer Total Three Months Ended September 30, 2011: Beginning balance $ 1,093 $ 308 $ 1,400 $ 197 $ 77 $ 3,075 Provision for loan losses (644 ) 135 374 (117 ) 9 (243 ) Charge-offs 0 0 (150 ) 0 0 (150 ) Recoveries 328 2 0 121 4 455 Ending balance $ 777 $ 445 $ 1,624 $ 201 $ 90 $ 3,137 Nine Months Ended September 30, 2011: Beginning balance $ 1,285 $ 282 $ 1,542 $ 514 $ 80 $ 3,703 Provision (credit) for loan losses (562 ) 158 284 772 0 652 Charge-offs (308 ) 0 (202 ) (1,230 ) 0 (1,740 ) Recoveries 362 5 0 145 10 522 Ending balance $ 777 $ 445 $ 1,624 $ 201 $ 90 $ 3,137 At September 30, 2012 Commercial Consumer Total
impairment: Recorded investment $ 7,628 $ 0 $ 13,933 $ 905 $ 0 $ 0 $ 22,466
for loan losses $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
impairment: Recorded investment $ 24,802 $ 4,182 $ 25,288 $ 6,418 $ 3,959 $ 123 $ 64,772
for loan losses $ 489 $ 259 $ 817 $ 215 $ 127 $ 29 $ 1,936 At December 31, 2011
Real
Real
Real Land
and Construction Consumer Total
impairment: Recorded investment $ 7,919 $ 0 $ 16,716 $ 7,241 $ 68 $ 31,944
for loan losses $ 0 $ 0 $ 11 $ 0 $ 0 $ 11
impairment: Recorded investment $ 23,223 $ 4,109 $ 27,596 $ 4,542 $ 107 $ 59,577
for loan losses $ 566 $ 247 $ 1,323 $ 187 $ 15 $ 2,338 SUBSIDIARY(3) Real Estate Mortgage Loans.Real estate mortgage loans are typically segmented into four categories: Residential real estate, Multi-family real estate, Commercial real estate, and Land and Construction. Residential real estate loans are underwritten in accordance with policies set forth and approved by the Board of Directors (the “Board”), including repayment capacity and source, value of the underlying property, credit history and stability. Multi-family and commercial real estate loans are secured by the subject property and are underwritten based upon standards set forth in the policies approved by the Company’s Board. Such standards include, among other factors, loan to value limits, cash flow coverage and general creditworthiness of the obligors. Construction loans to borrowers are to finance the construction of owner occupied and leased properties. These loans are categorized as construction loans during the construction period, later converting to commercial or residential real estate loans after the construction is complete and amortization of the loan begins. Real estate development and construction loans are approved based on an analysis of the borrower and guarantor, the viability of the project and on an acceptable percentage of the appraised value of the property securing the loan. Real estate development and construction loan funds are disbursed periodically based on the percentage of construction completed. The Company carefully monitors these loans with on-site inspections and requires the receipt of lien waivers on funds advanced. Development and construction loans are typically secured by the properties under development or construction, and personal guarantees are typically obtained. Further, to assure that reliance is not placed solely on the value of the underlying property, the Company considers the market conditions and feasibility of proposed projects, the financial condition and reputation of the borrower and guarantors, the amount of the borrower’s equity in the project, independent appraisals, costs estimates and pre-construction sale information. The Company also makes loans on occasion for the purchase of land for future development by the borrower. Land loans are extended for the future development for either commercial or residential use by the borrower. The Company carefully analyzes the intended use of the property and the viability thereof.Consumer Loans.Consumer loans are extended for various purposes, including purchases of automobiles, recreational vehicles, and boats. Also offered are home improvement loans, lines of credit, personal loans, and deposit account collateralized loans. Repayment of these loans is primarily dependent on the personal income of the borrowers, which can be impacted by economic conditions in their market areas such as unemployment levels. Loans to consumers are extended after a credit evaluation, including the creditworthiness of the borrower(s), the purpose of the credit, and the secondary source of repayment. Consumer loans are made at fixed and variable interest rates and may be made on terms of up to ten years. Risk is mitigated by the fact that the loans are of smaller individual amounts and spread over a large number of borrowers.(continued)(continued)
OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARYSUBSIDIARIES(3) Commercial Loans.Commercial loans consist of loans to small- and medium-sized companies in the Company’s market area. Commercial loans are generally used for working capital purposes or for acquiring equipment, inventory or furniture. Primarily all of the Company’s commercial loans are secured loans, along with a small amount of unsecured loans. The Company’s underwriting analysis consists of a review of the financial statements of the borrower, the lending history of the borrower, the debt service capabilities of the borrower, the projected cash flows of the business, the value of the collateral, if any, and whether the loan is guaranteed by the principals of the borrower. These loans are generally secured by accounts receivable, inventory and equipment. Commercial loans are typically made on the basis of the borrower’s ability to make repayment from the cash flow of the borrower’s business, which makes them of higher risk than residential loans. Further, the collateral securing these loans may be difficult to appraise and may fluctuate in value based on the success of the business. The Company seeks to minimize these risks through our underwriting standards.(continued)(continued) SUBSIDIARY(3) Pass OLEM
(Other Loans
Especially
Mentioned) Substandard Doubtful Loss Total $ 18,737 $ 2,919 $ 5,087 $ 0 $ 0 $ 26,743 3,148 0 0 0 0 3,148 21,885 2,919 5,087 0 0 29,891 4,059 0 0 0 0 4,059 10,073 2,001 369 0 0 12,443 12,371 1,141 15,070 0 0 28,582 22,444 3,142 15,439 0 0 41,025 4,471 49 6,877 0 0 11,397 3,693 0 0 0 0 3,693 0 68 0 0 0 68 57 0 0 0 0 57 57 68 0 0 0 125 $ 56,609 $ 6,178 $ 27,403 $ 0 $ 0 $ 90,190 $ 18,588 $ 3,686 $ 5,001 $ 0 $ 0 $ 27,275 3,159 0 0 0 0 3,159 21,747 3,686 5,001 0 0 30,434 4,109 0 0 0 0 4,109 10,132 2,012 369 0 0 12,513 10,822 2,764 15,208 0 0 28,794 20,954 4,776 15,577 0 0 41,307 4,493 49 7,241 0 0 11,783 3,713 0 0 0 0 3,713 0 68 0 0 0 68 107 0 0 0 0 107 107 68 0 0 0 175 $ 55,123 $ 8,579 $ 27,819 $ 0 $ 0 $ 91,521 OLEM (Other Loans Especially Pass Mentioned) Substandard Doubtful Loss Total At September 30, 2012: Residential real estate: Closed-end first mortgages $ 21,678 $ 2,919 $ 4,709 $ 0 $ 0 $ 29,306 Closed-end second mortgages 3,124 0 0 0 0 3,124 Total residential real estate 24,802 2,919 4,709 0 0 32,430 Multi-family real estate 4,182 0 0 0 0 4,182 Commercial real estate: Owner-occupied 9,949 1,979 78 0 0 12,006 Non-owner-occupied 12,235 1,125 13,855 0 0 27,215 Total commercial real estate 22,184 3,104 13,933 0 0 39,221 Land and construction 6,369 49 905 0 0 7,323 Commercial 3,959 0 0 0 0 3,959 Consumer 123 0 0 0 0 123 Total $ 61,619 $ 6,072 $ 19,547 $ 0 $ 0 $ 87,238 At December 31, 2011: Residential real estate: Closed-end first mortgages $ 18,588 $ 3,686 $ 5,001 $ 0 $ 0 $ 27,275 Closed-end second mortgages 3,159 0 0 0 0 3,159 Total residential real estate 21,747 3,686 5,001 0 0 30,434 Multi-family real estate 4,109 0 0 0 0 4,109 Commercial real estate: Owner-occupied 10,132 2,012 369 0 0 12,513 Non-owner-occupied 10,822 2,764 15,208 0 0 28,794 Total commercial real estate 20,954 4,776 15,577 0 0 41,307 Land and construction 4,493 49 7,241 0 0 11,783 Commercial 3,713 0 0 0 0 3,713 Consumer 107 68 0 0 0 175 Total $ 55,123 $ 8,579 $ 27,819 $ 0 $ 0 $ 91,521 SUBSIDIARY(3) loan’sloan's primary source of loan repayment is satisfactory, with secondary sources very likely to be realized if necessary. These are loans that conform in all aspects to bank policy and regulatory requirements, and no repayment risk has been identified.management’smanagement's close attention. If left uncorrected, these potential weaknesses may result in the deterioration of the repayment prospects for the asset or the Company’sCompany's credit position at some future date.SUBSIDIARY(3) Accruing Loans 30-59
Days
Past Due 60-89
Days
Past Due Greater
Than 90
Days
Past Due Total
Past
Due Current Nonaccrual
Loans Total
Loans $ 0 $ 41 $ 0 $ 41 $ 21,615 $ 5,087 $ 26,743 0 0 0 0 3,148 0 3,148 0 41 0 41 24,763 5,087 29,891 0 0 0 0 4,059 0 4,059 0 0 0 0 12,074 369 12,443 3,300 0 0 3,300 10,212 15,070 28,582 3,300 0 0 3,300 22,286 15,439 41,025 0 0 0 0 4,520 6,877 11,397 0 0 0 0 3,693 0 3,693 0 0 0 0 68 0 68 0 0 0 0 57 0 57 0 0 0 0 125 0 125 $ 3,300 $ 41 $ 0 $ 3,341 $ 59,446 $ 27,403 $ 90,190 $ 0 $ 768 $ 0 $ 768 $ 21,506 $ 5,001 $ 27,275 0 0 0 0 3,159 0 3,159 0 768 0 768 24,665 5,001 30,434 0 0 0 0 4,109 0 4,109 0 0 0 0 12,144 369 12,513 0 0 0 0 13,586 15,208 28,794 0 0 0 0 25,730 15,577 41,307 0 0 0 0 4,542 7,241 11,783 0 0 0 0 3,713 0 3,713 0 0 0 0 68 0 68 0 0 0 0 107 0 107 0 0 0 0 175 0 175 $ 0 $ 768 $ 0 $ 768 $ 62,934 $ 27,819 $ 91,521 Accruing Loans Greater 30-59 60-89 Than 90 Total Days Days Days Past Nonaccrual Total Past Due Past Due Past Due Due Current Loans Loans At September 30, 2012: Residential real estate: Closed-end first mortgages $ 0 $ 0 $ 0 $ 0 $ 24,597 $ 4,709 $ 29,306 Closed-end second mortgages 0 0 0 0 3,124 0 3,124 Subtotal 0 0 0 0 27,721 4,709 32,430 Multi-family real estate 0 0 0 0 4,182 0 4,182 Commercial real estate: Owner-occupied 0 0 0 0 �� 11,928 78 12,006 Non-owner-occupied 0 0 0 0 13,360 13,855 27,215 Subtotal 0 0 0 0 25,288 13,933 39,221 Land and construction 0 0 0 0 6,418 905 7,323 Commercial 701 0 0 701 3,258 0 3,959 Consumer 0 0 0 0 123 0 123 Total $ 701 $ 0 $ 0 $ 701 $ 66,990 $ 19,547 $ 87,238 At December 31, 2011: Residential real estate: Closed-end first mortgages $ 0 $ 768 $ 0 $ 768 $ 21,506 $ 5,001 $ 27,275 Closed-end second mortgages 0 0 0 0 3,159 0 3,159 Subtotal 0 768 0 768 24,665 5,001 30,434 Multi-family real estate 0 0 0 0 4,109 0 4,109 Commercial real estate: Owner-occupied 0 0 0 0 12,144 369 12,513 Non-owner-occupied 0 0 0 0 13,586 15,208 28,794 Subtotal 0 0 0 0 25,730 15,577 41,307 Land and construction 0 0 0 0 4,542 7,241 11,783 Commercial 0 0 0 0 3,713 0 3,713 Consumer 0 0 0 0 175 0 175 Total $ 0 $ 768 $ 0 $ 768 $ 62,934 $ 27,819 $ 91,521 SUBSIDIARY(3)(3) At March 31, 2012 At December 31, 2011 Recorded
Investment Unpaid
Principal
Balance Related
Allowance Recorded
Investment Unpaid
Principal
Balance Related
Allowance $ 8,006 $ 8,551 $ 0 $ 7,919 $ 8,465 $ 0 368 376 0 369 376 0 15,070 17,516 0 15,208 17,584 0 6,877 11,623 0 7,241 11,652 0 0 0 0 68 68 0 0 0 0 1,139 1,139 11 $ 8,006 $ 8,551 $ 0 $ 7,919 $ 8,465 $ 0 $ 368 $ 376 $ 0 $ 369 $ 376 $ 0 $ 15,070 $ 17,516 $ 0 $ 16,347 $ 18,723 $ 11 $ 6,877 $ 11,623 $ 0 $ 7,241 $ 11,652 $ 0 $ 0 $ 0 $ 0 $ 68 $ 68 $ 0 $ 30,321 $ 38,066 $ 0 $ 31,944 $ 39,284 $ 11 The average net investment in impaired loans and interest income recognized and received on impaired loans are as follows (in thousands): For the Period Ended March 31, For the Period Ended March 31, 2012 2011 Average
Recorded
Investment Interest
Income
Recognized Interest
Income
Received Average
Recorded
Investment Interest
Income
Recognized Interest
Income
Received $ 8,011 $ 52 $ 68 $ 11,752 $ 52 $ 78 $ 369 $ 0 $ 0 $ 751 $ 0 $ 1 $ 15,199 $ 0 $ 51 $ 19,465 $ 53 $ 117 $ 7,123 $ 0 $ 29 $ 8,080 $ 21 $ 56 $ 0 $ 0 $ 0 $ 234 $ 2 $ 2 $ 30,702 $ 52 $ 148 $ 40,282 $ 128 $ 254 At September 30, 2012 At December 31, 2011 Unpaid Unpaid Recorded Principal Related Recorded Principal Related Investment Balance Allowance Investment Balance Allowance With no related allowance recorded: Residential real estate- Closed-end first mortgages $ 7,628 $ 8,079 $ 0 $ 7,919 $ 8,465 $ 0 Commercial real estate: Owner-occupied 78 78 0 369 376 0 Non-owner-occupied 13,855 16,730 0 15,208 17,584 0 Land and construction 905 2,429 0 7,241 11,652 0 Consumer 0 0 0 68 68 0 With an allowance recorded: Commercial real estate- Non-owner-occupied 0 0 0 1,139 1,139 11 Total: Residential real estate- Closed-end first mortgages $ 7,628 $ 8,079 $ 0 $ 7,919 $ 8,465 $ 0 Commercial real estate: Owner-occupied $ 78 $ 78 $ 0 $ 369 $ 376 $ 0 Non-owner-occupied $ 13,855 $ 16,730 $ 0 $ 16,347 $ 18,723 $ 11 Land and construction $ 905 $ 2,429 $ 0 $ 7,241 $ 11,652 $ 0 Consumer $ 0 $ 0 $ 0 $ 68 $ 68 $ 0 Total $ 22,466 $ 27,316 $ 0 $ 31,944 $ 39,284 $ 11 The average net investment in impaired loans and interest income recognized and received on impaired loans are as follows (in thousands): Three Months Ended September 30, 2012 2011 Average Interest Interest Average Interest Interest Recorded Income Income Recorded Income Income Investment Recognized Received Investment Recognized Received Residential real estate- Closed-end first mortgages $ 7,688 $ 52 $ 102 $ 11,080 $ 66 $ 71 Multi-family real estate $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 Commercial real estate: Owner-occupied $ 78 $ 0 $ 0 $ 296 $ 0 $ 0 Non-owner-occupied $ 14,199 $ 0 $ 63 $ 18,404 $ 10 $ 92 Land and construction $ 2,372 $ 0 $ 25 $ 6,746 $ 0 $ 28 Consumer- Non-real estate secured $ 0 $ 0 $ 0 $ 216 $ 1 $ 1 Total $ 24,337 $ 52 $ 190 $ 36,742 $ 77 $ 192 (3)(3) Loans, Continued. Nine Months Ended September 30, 2012 2011 Average Interest Interest Average Interest Interest Recorded Income Income Recorded Income Income Investment Recognized Received Investment Recognized Received Residential real estate- Closed-end first mortgages $ 7,863 $ 156 $ 254 $ 11,686 $ 174 $ 211 Multi-family real estate $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 Commercial real estate: Owner-occupied $ 177 $ 0 $ 0 $ 466 $ 0 $ 1 Non-owner-occupied $ 14,682 $ 0 $ 172 $ 19,009 $ 95 $ 303 Land and construction $ 4,681 $ 0 $ 69 $ 7,704 $ 21 $ 119 Consumer- Non-real estate secured $ 0 $ 0 $ 0 $ 224 $ 5 $ 5 Total $ 27,403 $ 156 $ 495 $ 39,089 $ 295 $ 639 No loans have been determined to be restructured as troubled debt restructurings (“ TDR’s”TDRs”) during the nine months ended September 30, 2012. The following schedule summarizes TDRs during nine months ended September 30, 2011. There were no loans determined to be restructured as TDR during three months ended March 31, 2012. In addition thereSeptember 30, 2011. Nine Months Ended September 30, 2011 Outstanding Recorded Investment Number of Pre- Post- Contracts Modification Modification Troubled Debt Restructurings: Real estate mortgage loans: Residential real estate: Modified interest rate and amortization 1 $ 1,289 $ 1,289 Commercial real estate: Modified interest rate and amortization 4 6,321 6,321 Land and construction: Modified interest rate and amortization 1 2,080 2,080 Total 6 $ 9,690 $ 9,690 (3) threenine months ended March 31, 2011 orSeptember 30, 2012. The following schedule summarizes troubled debt restructurings that subsequently defaulted during three and nine months ended September 30, 2011.The allowance for loan losses on commercial and consumer loans that have been restructured and are considered TDR’s is included in the Company’s specific reserve. The specific reserve is determined on a loan by loan basis by either the present value of expected future cash flows discounted at the loan’s effective interest rate, or the fair value of the collateral if the loan is collateral-dependent. TDR’s that have subsequently defaulted are considered collateral-dependent. 1 $ 2,806 1 $ 2,806 (4) March 31,September 30, 2012 of the regulatory capital requirements and the Bank’s capital on a percentage basis: Bank Regulatory
Requirement 9.16 % 8.00 % 11.94 % 4.00 % 13.20 % 12.00 % Bank
Requirement Tier I capital to total average assets 9.21 % 8.00 % Tier I capital to risk-weighted assets 12.64 % 4.00 % Total capital to risk-weighted assets 13.90 % 12.00 % (5)As a result of the Consent Order discussed in Note 8, the Bank is categorized as “adequately capitalized” until the Consent Order is lifted, even though the ratios would otherwise place it in the “well capitalized” category. (5) Three Months Ended
March 31, 2012 2011 22,509,296 819,358 Three Months Ended September 30, Nine Months Ended September 30, 2012 2011 2012 2011 29,114,906 819,358 26,130,843 819,358 (6) aremay be issued as compensation to outside directors. As of March 31,During the nine months ended September 30, 2012, 3,78942,225 shares of stock valued at approximately $42,000 have been issued under the 2011 Plan and Non-Employee Director Compensation Plan as compensation to outside directors.(continued)OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARYNotes to Condensed Consolidated Financial Statements (unaudited), Continued(6)Stock-Based Compensation, Continued.The Company’s prior stock option plan terminated on February 27, 2011. At MarchSeptember 30, 2012, no options were available for grant under this plan. Options must be exercised within ten years of the date of grant.A summary of the activity in the prior plan is as follows: Number of
Options Weighted-
Average
Exercise
Price Weighted-
Average
Remaining
Contractual
Term Aggregate
Intrinsic
Value 50,900 $ 34.31 (11,392 ) 32.97 39,508 $ 34.70 2.8 years $ 0 (7)A summary of the activity in the prior plan is as follows: Outstanding at December 31, 2011 50,900 $ 34.31 Options forfeited (11,392 ) 32.97 39,508 $ 34.70 2.3 years $ 0 (7) Fair Value Measurements at Reporting Date Using Fair
Value Quoted Prices
In Active
Markets for
Identical
Assets
(Level 1) Significant
Other
Observable
Inputs
(Level 2) Significant
Unobservable
Inputs
(Level 3) $ 26,946 $ 0 $ 26,946 $ 0 $ 28,907 $ 0 $ 28,907 $ 0 Fair Value Measurements at Reporting Date Using As of September 30, 2012- Mortgage-backed securities $ 21,588 $ 0 $ 21,588 $ 0 As of December 31, 2011- Mortgage-backed securities $ 28,907 $ 0 $ 28,907 $ 0 SUBSIDIARY(7) threenine months ended March 31, 2012.September 30, 2012 and 2011.Impaired collateral-dependent loans are carried at fair value when the current collateral value less estimated selling costs is lower than the carrying value of the loan. Those impaired collateral-dependent loans which are measured at fair value on a nonrecurring basis are as follows (in thousands): Losses
Recorded in
Operations
For the Three At March 31, 2012 Months Ended Fair
Value Level 1 Level 2 Level 3 Total
Losses March 31,
2012 $ 854 $ 0 $ 0 $ 854 $ 545 $ 0 291 0 0 291 8 0 10,061 0 0 10,061 2,781 69 6,699 0 0 6,699 1,525 335 $ 17,905 $ 0 $ 0 $ 17,905 $ 4,859 $ 404 Losses
Recorded in
Operations
For the At December 31, 2011 Year Ended Fair
Value Level 1 Level 2 Level 3 Total
Losses December 31,
2011 $ 1,591 $ 0 $ 0 $ 1,591 $ 545 $ 308 291 0 0 291 8 8 6,540 0 0 6,540 2,652 150 6,793 0 0 6,793 1,511 834 $ 15,215 $ 0 $ 0 $ 15,215 $ 4,716 $ 1,300 Impaired collateral-dependent loans are carried at fair value when the current collateral value less estimated selling costs is lower than the carrying value of the loan. Those impaired collateral-dependent loans which are measured at fair value on a nonrecurring basis are as follows (in thousands): Residential real estate- $ 1,294 $ 0 $ 0 $ 1,294 $ 451 $ 0 Commercial real estate: Non-owner-occupied 8,997 0 0 8,997 2,484 0 Land and construction 905 0 0 905 449 0 $ 11,196 $ 0 $ 0 $ 11,196 $ 3,384 $ 0
2011 At December 31, 2011 Level 1 Level 2 Level 3 Residential real estate- $ 1,591 $ 0 $ 0 $ 1,591 $ 545 $ 308 Commercial real estate: Owner-occupied 291 0 0 291 8 8 Non-owner-occupied 6,540 0 0 6,540 2,652 150 Land and construction 6,793 0 0 6,793 1,511 834 $ 15,215 $ 0 $ 0 $ 15,215 $ 4,716 $ 1,300 SUBSIDIARY(7) Fair
Value Level 1 Level 2 Level 3 Total
Losses Losses
Recorded
During the
Period $ 7,643 $ 0 $ 0 $ 7,643 $ 797 $ 25 $ 7,646 $ 0 $ 0 $ 7,646 $ 772 $ 772 The estimated fair values of the Company’s financial instruments were as follows (in thousands): At March 31, 2012 At December 31, 2011 Carrying
Amount Fair Value Carrying
Amount Fair Value $ 24,091 $ 24,091 $ 22,776 $ 22,776 100 100 100 100 26,946 26,946 28,907 28,907 88,254 88,110 89,217 89,069 2,159 2,159 2,159 2,159 495 495 499 499 105,533 105,949 107,895 108,461 31,700 33,842 31,700 33,920 5,155 4,790 5,155 4,734 0 0 0 0 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, 2011. Losses Recorded Fair Total During the Value Level 1 Level 2 Level 3 Losses Period At September 30, 2012 $ 10,444 $ 0 $ 0 $ 10,444 $ 842 $ 70 At December 31, 2011 $ 7,646 $ 0 $ 0 $ 7,646 $ 772 $ 772 The estimated fair values and fair value measurement method with respect to the Company’s financial instruments were as follows (in thousands): At September 30, 2012 At December 31, 2011 Carrying Fair Carrying Fair Amount Value Level Amount Value Level Financial assets: Cash and cash equivalents $ 27,367 $ 27,367 1 $ 22,776 $ 22,776 1 Securities available for sale 21,588 21,588 2 28,907 28,907 2 Loans 85,451 85,298 3 89,217 89,069 3 Federal Home Loan Bank stock 1,478 1,478 3 2,159 2,159 3 Accrued interest receivable 477 477 3 499 499 3 Financial liabilities: Deposit liabilities 105,526 106,065 1,3 107,895 108,461 1,3 27,700 29,884 3 31,700 33,920 3 Junior subordinated debenture 5,155 4,836 3 5,155 4,734 3 0 0 3 0 0 3 Discussion regarding the assumptions used to compute the estimated 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, 2011. SUBSIDIARY(8)Regulatory Matters - Company.The Company is subject to the supervision and regulation of the Board of Governors of the Federal Reserve System (the “Federal Reserve”). On June 22, 2010, the Company entered into a written agreement with the Federal Reserve Bank of Atlanta (“Reserve Bank”) with respect to certain aspects of the operation and management of the Company (the “Written Agreement”).The Board of the Company must take appropriate steps to fully utilize the Company’s financial and managerial resources to serve as a source of strength to the Bank, including, but not limited to, taking steps to ensure that the Bank complies with the Consent Order entered into with the OFR and the FDIC and any other supervisory action taken by the Bank’s state or federal regulator.The Company may not declare or pay any dividends without prior Reserve Bank and Federal Reserve approval.The Board of the Company must take appropriate steps to fully utilize the Company’s financial and managerial resources to serve as a source of strength to the Bank, including, but not limited to, taking steps to ensure that the Bank complies with the Consent Order entered into with the OFR and the FDIC and any other supervisory action taken by the Bank’s state or federal regulator. The Company may not, directly or indirectly, take dividends or any other form of payment representing a reduction in capital from the Bank without prior Reserve Bank approval.The Company and its nonbank subsidiary, OptimumBank Holdings Capital Trust I, may not make any distributions of interest, principal, or other sums on subordinated debentures or trust preferred securities without the prior written approval of the Reserve Bank and the Federal Reserve.The Company and its nonbank subsidiary, OptimumBank Holdings Capital Trust I, may not, directly or indirectly, incur, increase, or guarantee any debt or purchase or redeem any shares of its stock without the prior written approval of the Reserve Bank.The Company must obtain prior written consent from the Reserve Bank before appointing any new director or senior executive officer, or changing the responsibilities of any senior executive officer so that the officer would assume a different senior executive officer position, and must comply with the regulations applicable to indemnification and severance payments.The Company must provide quarterly progress reports to the Reserve Bank, along with parent company only financial statements.SUBSIDIARY(9)Regulatory Matters - Bank.Effective April 16, 2010, the Bank consented to the issuance of a Consent Order by the FDIC and the OFR, also effective as of April 16, 2010.The Board of the Bank is required to increase its participation in the affairs of the Bank and assume full responsibility for the approval of sound policies and objectives for the supervision of all of the Bank’s activities.The Bank is required to have and retain qualified and appropriately experienced senior management, including a chief executive officer, a chief lending officer and a chief financial officer, who are given the authority to implement the provisions of the Consent Order.Any proposed changes in the Bank’s Board of Directors or senior executive officers are subject to the prior consent of the FDIC and the OFR.The Bank is required to maintain both a fully funded allowance for loan and lease losses satisfactory to the FDIC and the OFR and a minimum Tier 1 leverage capital ratio of 8% and a total risk-based capital ratio of 12% for as long as the Consent Order remains in effect.The Bank must undertake over a two-year period a scheduled reduction of the balance of loans classified “substandard” and “doubtful” in its 2009 FDIC examination by at least 75%.The Bank is required to reduce the volume of its adversely classified private label mortgage backed securities under a plan acceptable to the FDIC and OFR.The Bank must submit to the FDIC and the OFR for their review and comment a written business/strategic plan covering the overall operation of the Bank.The Bank must implement a plan to improve earnings, addressing goals and strategies for improving and sustaining earnings, major areas for improvement in the Bank’s operating performance, realistic and comprehensive budgets and a budget review process.SUBSIDIARY(9)-– Bank, Continued.The Bank is required to revise, implement and incorporate recommendations of the FDIC and OFR with respect to the following policies or plans:Lending and Collection PoliciesInvestment PolicyLiquidity, Contingency Funding and Funds Management PlanInterest Rate Risk Management PolicyInternal Loan Review and Grading System;Internal Control Policy; andA plan to reduce concentration in commercial real estate loans;The Bank’s Board of Directors must review the adequacy of the allowance for loan and lease losses and establish a comprehensive policy satisfactory to the FDIC and OFR for determining such adequacy at least quarterly thereafter.The Bank may not pay any dividends or bonuses without the prior approval of the FDIC.The Bank may not accept, renew or rollover any brokered deposits except with the prior approval of the FDIC.The Bank is required to notify the FDIC and OFR prior to undertaking asset growth of 10% or more per annum while the Consent Order remains in effect.The Bank is required to file quarterly progress reports with the FDIC and the OFR.Management believes that the Bank is currently in substantial compliance with all the requirements of the Consent Order except for the following requirements:Scheduled reductions by October 31, 2011, and April 30, 2012, of 60% and 75%, respectively, of loans classified as substandard and doubtful in the 2009 FDIC Examination;Retention of a qualified chief executive officer and chief lending officer; andDevelopment of a plan to reduce Bank’s concentration in commercial real estate loans acceptable to the supervisory authorities.The Bank has implemented comprehensive policies and plans to address all of the requirements of the Consent Order and has incorporated recommendations from the FDIC and OFR into these policies and plans.(10)The Bank is required to revise, implement and incorporate recommendations of the FDIC and OFR with respect to the following policies or plans: o Lending and Collection Policies o Investment Policy o Liquidity, Contingency Funding and Funds Management Plan o Interest Rate Risk Management Policy o Internal Loan Review and Grading System; o Internal Control Policy; and o A plan to reduce concentration in commercial real estate loans; The Bank’s Board of Directors must review the adequacy of the allowance for loan and lease losses and establish a comprehensive policy satisfactory to the FDIC and OFR for determining such adequacy at least quarterly thereafter. The Bank may not pay any dividends or bonuses without the prior approval of the FDIC. The Bank may not accept, renew or rollover any brokered deposits except with the prior approval of the FDIC. The Bank is required to notify the FDIC and OFR prior to undertaking asset growth of 10% or more per annum while the Consent Order remains in effect. The Bank is required to file quarterly progress reports with the FDIC and the OFR. Management believes that the Bank is currently in substantial compliance with all the requirements of the Consent Order except for the following requirements: Scheduled reductions by October 31, 2011, and April 30, 2012, of 60% and 75%, respectively, of loans classified as substandard and doubtful in the 2009 FDIC Examination; Retention of a qualified chief executive officer; and Development of a plan to reduce Bank’s concentration in commercial real estate loans acceptable to the supervisory authorities. The Bank has implemented comprehensive policies and plans to address all of the requirements of the Consent Order and has incorporated recommendations from the FDIC and OFR into these policies and plans. $367,000$446,629 at March 31,September 30, 2012.SUBSIDIARYSUBSIDIARIESScheduled reductions by October 31, 2011, and April 30, 2012, of 60% and 75%, respectively, of loans classified as substandard and doubtful in the 2009 FDIC Examination;Retention of a qualified chief executive officer and chief lending officer; andDevelopment of a plan to reduce Bank’s concentration in commercial real estate loans acceptable to the supervisory authorities.Retention of a qualified chief executive officer and a chief lending officer; and Development of a plan to reduce Bank’s concentration in commercial real estate loans acceptable to the supervisory authorities. SUBSIDIARYSUBSIDIARIESItem 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations, ContinuedMarch 31,September 30, 2012 and December 31, 2011: FDIC Guideline Requirements March 31,
2012 December 31,
2011 Adequately-
Capitalized Well-
Capitalized Consent
Order 9.16 7.76 4.00 6.00 * 13.20 12.48 8.00 10.00 12.00 11.94 11.22 4.00 5.00 8.00 *No additional requirement is established by the Consent Order FDIC Guideline Requirements
2012
2011 Tier I risk-based capital ratio 12.64 11.22 4.00 6.00 * Total risk-based capital ratio 13.90 12.48 8.00 10.00 12.00 Leverage ratio 9.21 7.76 4.00 5.00 8.00 March 31,September 30, 2012 and December 31, 2011$1.5$4.5 million to $152.9$150.0 million at March 31,September 30, 2012, from $154.5 million at December 31, 2011, due to a $2.0$7.3 million reduction in securities primarily as a result of repayments and a $1.0$3.8 million reduction in net loans primarily as a result of loan payments,payoffs and transfers to foreclosed real estate, partially offset by a $1.3$4.6 million increase in cash and cash equivalents. Deposits decreased by $2.4 million to $105.5 million at March 31,September 30, 2012, from $107.9 million at December 31, 2011.2011, primarily due to a reduction in time deposits. Total stockholders’ equity increased by $1.4$2.1 million to $8.2$8.9 million at March 31,September 30, 2012 from $6.8 million at December 31, 2011, due to the receipt of $1.6$3.4 million in proceeds from the sale of common stock and a $.3$1.0 million decrease in accumulated other comprehensive loss from a reduction of unrealized losses on securities available for sale, partially offset by a $.6$2.4 million net loss for the quarter.SUBSIDIARY Three Months
Ended
March 31,
2012 Year Ended
December 31,
2011 Three Months
Ended
March 31,
2011 4.67 % 1.04 % 1.15 % 5.34 % 4.39 % 0.91 % (1.54 )% (2.11 )% (2.44 )% (33.07 )% (203.97 )% (212.49 )% 3.15 % 4.08 % 4.30 % Nine Months Nine Months Ended Year Ended Ended September 30, December 31, September 30, 2012 2011 2011 Average equity as a percentage of average assets 5.11 % �� 1.04 % 0.13 % Equity to total assets at end of period 5.91 % 4.39 % (1.02 )% Return on average assets (1) (2.08 )% (2.11 )% (2.72 )% Return on average equity (1) (40.75 )% (203.97 )% (129.87 )% Noninterest expenses to average assets (1) 3.41 % 4.08 % 4.19 % (1) Annualized for the threenine months ended March 31,September 30, 2012 and 2011.ofin real estate values in South Florida, we continue to experience the adverse effects of the prolonged real estate devaluation resulting in significant levels of non-performing loans, foreclosed real estate and loan charge-offs. Management, however, is committed to minimizing further losses in the loan portfolio and reducing our nonperforming assets.FHLB,Federal Home Loan Bank of Atlanta (“FHLB”), principal repayments and sales of investment securities, loan repayments, foreclosed real estate sales, the use of Federal Funds markets, net income, if any, and loans taken out at the Federal Reserve Bank discount window.isare restricted. The restriction on brokered deposits is not expected to alter the Bank’sBank's current deposit gathering activities since the Bank has not accepted, renewed or rolled over any brokered deposits since December 2009. With respect to the yield limitations, it is possible that the Bank could experience a decrease in deposit inflows, or the migration of current deposits to competitor institutions, if other institutions offer higher interest rates than those permitted to be offered by the Bank. Despite these yield limitations, we believe that we have to the ability to adjust rates on our deposits to attract or retain deposits as needed.31 SUBSIDIARYMarch 31,September 30, 2012, the Bank had outstanding borrowings of $31.7$27.7 million, against its $31.7$27.7 million in established borrowing capacity with the FHLB. The Bank’s borrowing facility is subject to collateral and stock ownership requirements, as well as prior FHLB consent to each advance. The use of the Federal Fund line is subject to certain conditions. In 2010, the Bank obtained an available discount window credit line with the Reserve Bank, currently $1.1$1.9 million. The Reserve Bank line is subject to collateral requirements and must be repaid within 90 days, anddays; each advance is subject to prior Reserve Bank consent. We measure and monitor our liquidity daily and believe our liquidity sources are adequate to meet our operating needs.March 31,September 30, 2012, the Company has nohad commitments to extend credit.SUBSIDIARY Three Months Ended March 31, 2012 2011 Average
Balance Interest
and
Dividends Average
Yield/
Rate Average
and
Balance Interest
and
Dividends Average
Yield/
Rate $ 90,721 995 4.39 % $ 111,905 1,289 4.61 % 28,367 298 4.20 52,505 529 4.03 22,236 16 0.29 16,854 15 0.36 141,324 1,309 3.70 181,264 1,833 4.04 421 581 2,685 2,787 6,363 5,347 $ 150,793 $ 189,979 34,831 55 0.63 36,166 77 0.85 69,275 236 1.36 111,576 473 1.70 36,855 389 4.22 36,855 380 4.12 140,961 680 1.93 184,597 930 2.02 545 481 2,247 2,723 7,040 2,178 $ 150,793 $ 189,979 $ 629 $ 903 1.77 % 2.02 % 1.78 % 1.99 % 1.00 0.98 Three Months Ended September 30, 2012 2011 Interest Average Interest Average Average and Yield/ Average and Yield/ Balance Dividends Rate Balance Dividends Rate ($ in thousands) Interest-earning assets: Loans $ 89,022 $ 1,025 4.61 % $ 102,825 $ 1,121 4.36 % Securities 24,661 245 3.97 38,281 378 3.95 Other (1) 25,838 22 0.34 20,881 17 0.33 Total interest-earning assets/interest income 139,521 1,292 3.70 161,987 1,516 3.74 Cash and due from banks 2,399 27 Premises and equipment 2,804 2,726 Other 7,232 5,363 Total assets $ 151,956 $ 170,103 Interest-bearing liabilities: Savings, NOW and money-market deposits 35,837 57 0.64 34,491 62 0.72 Time deposits 70,228 215 1.22 97,033 379 1.56 Borrowings (2) 34,116 359 4.21 36,855 389 4.22 Total interest-bearing liabilities/interest expense 140,181 631 1.80 168,379 830 1.97 Noninterest-bearing demand deposits 1,069 570 Other liabilities 2,299 2,836 Stockholders’ equity 8,407 (1,682 ) Total liabilities and stockholders’ equity $ 151,956 $ 170,103 Net interest income $ 661 $ 686 Interest-rate spread (3) 1.90 % 1.77 % Net interest margin (4) 1.81 % 1.69 % Ratio of average interest-earning assets to average interest-bearing liabilities 1.00 0.96 (1) Includes interest-earning deposits with banks, Federalfederal 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. Nine Months Ended September 30, 2012 2011 Interest Average Interest Average Average and Yield/ Average and Yield/ Balance Dividends Rate Balance Dividends Rate ($ in thousands) Interest-earning assets: Loans $ 89,607 $ 3,002 4.47 % $ 107,650 $ 3,607 4.47 % Securities 26,530 819 4.12 47,309 1,407 3.97 Other (1) 25,085 60 0.32 17,844 46 0.34 Total interest-earning assets/interest income 141,222 3,881 3.66 172,803 5,060 3.90 Cash and due from banks 1,594 349 Premises and equipment 2,726 2,757 Other 6,760 5,052 Total assets $ 152,308 $ 180,961 Interest-bearing liabilities: Savings, NOW and money-market deposits 35,336 169 0.64 35,615 215 0.80 Time deposits 70,089 679 1.29 104,861 1,274 1.62 Borrowings (2) 35,942 1,136 4.21 36,855 1,153 4.17 Total interest-bearing liabilities/interest expense 141,367 1,984 1.87 177,331 2,642 1.99 Noninterest-bearing demand deposits 728 521 Other liabilities 2,435 2,878 Stockholders’ equity 7,777 231 Total liabilities and stockholders’ equity $ 152,308 $ 180,961 Net interest income $ 1,897 $ 2,418 Interest-rate spread (3) 1.79 % 1.91 % Net interest margin (4) 1.79 % 1.87 % Ratio of average interest-earning assets to average interest-bearing liabilities 1.00 0.97 (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 rateInterest-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. SUBSIDIARYMarch 31,September 30, 2012 and 2011General. Net loss for the three months ended March 31, 2012, was $.6 million or $(.03) per basic and diluted share compared to a net loss of $1.2 million or $(1.41) per basic and diluted share for the period ended March 31, 2011. This decrease in the Company’s net loss was primarily due to a $.9 million decrease in noninterest expenses, including foreclosure expenses, regulatory assessments, and professional fees associated with loan foreclosures and workouts.Interest Income. Interest income decreased to $1.3 million for the three months ended March 31, 2012 from $1.8 million for the three months ended March 31, 2011. Interest income on loans decreased $.3 million due primarily to a decrease in the average loan portfolio balance for the three months ended March 31, 2012 compared to the same period in 2011. Interest on securities decreased by $.2 million to $.3 million due primarily to a decrease in the average balance of the securities portfolio.Interest Expense.Interest expense on deposits decreased to $.3 million for the three months ended March 31, 2012 from $.6 million for the three months ended March 31, 2011. Interest expense decreased primarily because of a decrease in average deposits as well as a decrease in the average yield paid during 2012.Provision for Loan Losses. The provision for the three months ended March 31, 2012, was $27,000 compared to $34,000 for the same period in 2011. 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 March 31, 2012. 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 collectability of our loan portfolio. The allowance for loan losses totaled $2.0 million or 2.19% of loans outstanding at March 31, 2012, compared to $2.3 million, or 2.57% of loans outstanding at December 31, 2011. The decrease in the allowance was due to the use of specific reserves for charge-offs of loans deemed uncollectible. Management believes the balance in the allowance for loan losses at March 31, 2012 is adequate.Noninterest Income. Total noninterest income decreased to $4,000 for the three months ended March 31, 2012, from $16,000 for the three months ended March 31, 2011 primarily due to a decrease inservice charges and fees.Noninterest Expenses. Total noninterest expenses decreased to $1.2 million for the three months ended March 31, 2012 compared to $2.0 million for the three months ended March 31, 2011, primarily due to a decrease in foreclosure expenses, regulatory assessments, and professional fees.SUBSIDIARYSUBSIDIARIESItem 4.Controls and ProceduresUndersupervision andExhibit Index following the signature page are filed with this report.participation of our President and Chief Financial Officer (our principal executive officer and principal financial officer), we have evaluated the effectiveness of our disclosure controls and procedures asrequirements of the endSecurities Exchange Act of 1934, the period covered byRegistrant has duly caused this report and, basedto be signed on this evaluation,its behalf by the President and Chief Financial Officer concluded that these disclosure controls and procedures are effective.There have been no changes in our internal control over financial reporting during the quarter ended March 31, 2012, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.OPTIMUMBANK HOLDINGS, INC.
(Registrant)Date: November 14 , 2012 By: /s/ Richard L. Browdy Richard L. Browdy President and Chief Financial Officer Exhibit No. Description 3.1 Amended and Restated Articles of Incorporation (incorporated by reference from Annual Report on Form 10-K filed with the SEC on March 30, 2012) 4.1 Bylaws (incorporated by reference from Current Report on Form 8-K filed with the SEC on May 11, 2004) 4.2 Form of stock certificate (incorporated by reference from Quarterly Report on Form 10-QSB filed with the SEC on August 12, 2004) 4.3 Form of Registration Rights Agreement between OptimumBank Holdings, Inc. and Investors (incorporated by reference from Current Report on Form 8-K filed with the SEC on October 31, 2011) 4.4 The Company has outstanding certain long-term debt. None of such debt exceeds ten percent of the Company’s total assets; therefore, copies of the constituent instruments defining the rights of the holders of such debt are not included as exhibits. Copies of instruments with respect to such long-term debt will be furnished to the SEC upon request. 10.1 OptimumBank Holdings, Inc. Non-Employee Director Compensation Plan (incorporated by reference from Annual Report on Form 10-K filed with the SEC on March 30, 2012) 10.2 Amended and Restated Stock Purchase Agreement, dated as of December 5 2011, between OptimumBank Holdings, Inc. and Moishe Gubin (incorporated by reference from Annual Report on Form 10-K filed with the SEC on March 30, 2012) 10.3 First Amendment dated June 29, 2012 to Amended and Restated Stock Purchase Agreement between OptimumBank Holdings, Inc. and Moishe Gubin dated December 5, 2011 (incorporated by reference from Current Report on Form 8-K filed with the SEC on July 6, 2012) 10.4 Second First Amendment dated October 25, 2012 to Amended and Restated Stock Purchase Agreement between OptimumBank Holdings, Inc. and Moishe Gubin dated December 5, 2011 31.1 32.1 101.INS XBRL Instance Document 101.SCH XBRL Taxonomy Extension Schema Document 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document 101.LAB XBRL Taxonomy Extension Label Linkbase Document 101.PRE XBRL Taxonomy Extension Presentation Linkbase Document 101.DEF XBRL Taxonomy Extension Definition Linkbase Document 39 Item 6.ExhibitsThe exhibits contained in the Exhibit Index following the signature page are filed with or incorporated by reference into this report.OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARYPursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.OPTIMUMBANK HOLDINGS, INC. (Registrant)Date:May 11, 2012By:/s/ Richard L. BrowdyRichard L. BrowdyPresident and Chief Financial Officer(Principal Executive Officer and Principal Financial Officer)OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARYEXHIBIT INDEXExhibitNo.Description 3.1Amended and Restated Articles of Incorporation (incorporated by reference from Annual Report on Form 10-K filed with the SEC on March 30, 2012) 4.1Bylaws (incorporated by reference from Current Report on Form 8-K filed with the SEC on May 11, 2004) 4.2Form of stock certificate (incorporated by reference from Quarterly Report on Form 10-QSB filed with the SEC on August 12, 2004) 4.3Form of Registration Rights Agreement between OptimumBank Holdings, Inc. and Investors (incorporated by reference from Current Report on Form 8-K filed with the SEC on October 31, 2011) 4.4The Company has outstanding certain long-term debt. None of such debt exceeds ten percent of the Company’s total assets; therefore, copies of the constituent instruments defining the rights of the holders of such debt are not included as exhibits. Copies of instruments with respect to such long-term debt will be furnished to the SEC upon request. 10.1OptimumBank Holdings, Inc. Non-Employee Director Compensation Plan (incorporated by reference from Annual Report on Form 10-K filed with the SEC on March 30, 2012) 10.2Amended and Restated Stock Purchase Agreement, dated as of December 5 2011, between OptimumBank Holdings, Inc. and Moishe Gubin (incorporated by reference from Annual Report on Form 10-K filed with the SEC on March 30, 2012) 31.1Certification of Principal Executive and Principal Financial Officer required by Rule 13a-14(a)/15d-14(a) under the Exchange Act 32.1Certification of Principal Executive and Principal Financial Officer under 18 U.S.C. Section 1350101.INSXBRL Instance Document101.SCHXBRL Taxonomy Extension Schema Document101.CALXBRL Taxonomy Extension Calculation Linkbase Document101.DEFXBRL Taxonomy Extension Definition Linkbase Document101.LABXBRL Taxonomy Extension Label Linkbase Document101.PREXBRL Taxonomy Extension Presentation Linkbase Document