(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 ~~[X]~~ ☒ No ~~[ ]~~☐

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ~~[ ]~~☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ~~[ ]~~ ☐ No ~~[X]~~ ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: ~~1,103,447~~7,250,218 shares of ~~Common Stock,~~common stock, $.01 par value, issued and outstanding as of ~~November 13, 2017.~~May 10, 2023.

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

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

Condensed Consolidated Statements of ~~Operations (Unaudited)~~
Stockholders’ Equity

Condensed Consolidated Statements of ~~Comprehensive Loss~~Cash Flows (Unaudited)

(1) General. OptimumBank Holdings, Inc. (the “Company”) is a one-bank holding company and owns 100% of ~~Stockholders’ Equity (Unaudited)~~OptimumBank (the “Bank”), a Florida-chartered community bank. The Company’s only business is the operation of the Bank. 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 two banking offices located in Broward County, Florida.

~~See~~Basis of Presentation. In the opinion of management, the accompanying ~~notes to~~ 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, 2023, and the results of operations and cash flows for the three month periods ended March 31, 2023 and 2022. All significant intercompany accounts and transactions have been eliminated in consolidation. The results of operations for the three months ended March 31, 2023, are not necessarily indicative of the results to be expected for the full year.

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

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

Adoption of New Accounting Standards. The Company adopted Accounting Standards Update 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, and the related amendments (collectively, Accounting Standards Codification 326), effective January 1, 2023. The guidance replaces the incurred loss methodology with an expected loss methodology that is referred to as the current expected credit loss (“CECL”) methodology. The measurement of expected credit losses under the CECL methodology is applicable to financial assets measured at amortized cost, including loan receivables and held-to-maturity debt securities. It also applies to certain off-balance sheet credit exposures not accounted for as insurance, including loan commitments, standby letters of credits, financial guarantees, and other similar instruments. In addition, Accounting Standards Codification 326 (“ASC 326”) made changes to the accounting for debt securities available for sale. One such change is to require credit losses to be presented as an allowance rather than as a write-down on debt securities available for sale that management does not intend to sell or believes that it is more likely than not they will not be required to sell. ASC 326 also changed the accounting for purchased financial assets with credit deterioration.

The Company adopted ASC 326 using the modified retrospective method for all financial assets measured at amortized cost and off-balance-sheet credit exposures. Results for reporting periods beginning after January 1, 2023 are presented under ASC 326 while prior period amounts continue to be reported in accordance with previously applicable GAAP. The adoption of CECL resulted in the recognition of $219,000 allowance for credit losses, $23,000 of liability for unfunded commitments, a deferred income tax asset of $61,000 and a reduction in retained earnings of $181,000. With this transition method, the Company did not have to restate comparative prior periods presented in the consolidated financial statements related to ASC 326 but will present comparative prior periods disclosures using the previous accounting guidance for the allowance for loan losses. The Company adopted ASC 326 using the prospective transition approach for debt securities available for sale. As of January 1, 2023, the Company did not have any allowance for credit losses on debt securities.

Allowance for Credit Losses (“ACL”). The following is a summary of ~~Cash Flows (Unaudited)~~the Company’s significant accounting policies with respect to ASC 326:

ACL - Debt Securities Available for Sale. Management uses a systematic methodology to determine its ACL for debt securities available for sale. Each quarter management evaluates impairment where there has been a decline in fair value below the amortized cost basis to determine whether there is a credit loss associated with the decline in fair value. The Company first assesses whether it intends to sell, or it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis. If either one of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through income. For debt securities that do not meet the aforementioned criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. In ~~thousands)~~making this assessment, management considers the extent to which the fair value is less than the amortized cost basis, among various other factors, including the nature of the collateral, potential future changes in collateral values, default rates, delinquency rates, third-party guarantees, credit ratings, interest rate changes since purchase, volatility of the security’s fair value and historical loss information for financial assets secured with similar collateral among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis. If the present value of cash flows expected to be collected is less than the amortized cost basis, an ACL is recorded, which is limited by the amount that the fair value is less than the amortized cost basis. Credit losses are calculated individually, rather than collectively. Any impairment that has not been recorded through an ACL is recognized in other comprehensive loss.

~~See accompanying notes~~Changes in the ACL are recorded as credit loss expense (reversal). Losses are charged against the ACL when management believes the collectability of the debt security is confirmed or when either of the criteria regarding intent or requirement to ~~condensed consolidated financial statements~~sell is met.

Management excludes the accrued interest receivable balance from the amortized cost basis in measuring expected credit losses on the debt securities available for sale and does not record an ACL on accrued interest receivable. As of March 31, 2023, the accrued interest receivable for debt securities available for sale recognized in accrued interest receivable was $140,000.

ACL – Debt Securities Held to Maturity. The Company measures expected credit losses on debt securities held to maturity on a collective basis by major security type. U.S. Government agency securities, Mortgage-backed securities and collateralized mortgage obligations are either explicitly or implicitly guaranteed by the U.S. government, are highly rated by major rating agencies and have a long history of no credit losses. Taxable municipal securities are highly rated by major credit agencies.

ACL - Loans. The ACL reflects management’s estimate of losses that will result from the inability of our borrowers to make required loan payments. The Company records loans charged-off against the ACL when management believes the uncollectability of a loan balance is confirmed and subsequent recoveries, if any, increase the ACL when they are recognized.

Management uses systematic methodologies to determine its ACL for loans and certain off- balance sheet credit exposures. The ACL is a valuation account that is deducted from the amortized cost basis to present the net amount expected to be collected on the loan portfolio. Management estimates the ACL using relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. Historical credit loss experience provides the basis for the estimation of the expected credit losses. Adjustments to historical loss information are made for the differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, delinquency level, or term as well as changes in environmental conditions, such as changes in unemployment rates, property values, or other relevant factors.

The Company’s estimate of its ACL involves a high degree of judgment; therefore, management’s process for determining expected credit losses may result in a range of expected credit losses.

The Company’s ACL recorded in the balance sheet reflects management’s best estimate of expected credit losses. The Company recognizes in earnings the amount needed to adjust the ACL for management’s current estimate of expected credit losses. The Company’s ACL is calculated using collectively evaluated and individually evaluated loans.

The ACL is measured on a collective pool basis when similar risk characteristics exist. Loans with similar risk characteristics are grouped into homogenous segments for analysis. The Company’s ACL is measured based on FDIC call report codes as these types of ~~Cash Flows (Unaudited)~~loans exhibit similar risk characteristics. The loan portfolio is further segmented by loan product type, collateral codes, occupancy codes, property code or lien position and are representative of the manner in which the Company lends.

The ACL for each segment is measured through the use of the average charge-off method. In accordance with the average charge-off method, an annual loss rate is applied to the amortized cost of an asset or pool of assets over the remaining expected life. The annual loss rate consists of historical and forecasted loss components. The forecasted component is applied using loss rates from historical periods that management believes are representative of economic conditions over a full economic cycle. For certain loan segments with limited credit loss histories, management determined the loss experience of peer banks provides the best basis for its assessment of expected credit losses. Other loan segments with more established loss histories utilize historical loss experience of the Company. Management determined that the appropriate historical loss period will begin in the first quarter of 2001 and continue through the most recent quarter, which represents a full peak to peak economic cycle. Additionally, management has determined that the Company’s reasonable and supportable forecast period is one year.

Included in its systematic methodology to determine its ACL, management considers the need to qualitatively adjust model results for risk factors that are not considered within the Company’s loss estimation process but are nonetheless relevant in assessing the expected credit losses within our loan pools.

These qualitative factors (“Q-Factors”) may increase or decrease management’s estimate of expected credit losses by a calculated percentage based upon the estimated level of risk. The various risks that may be considered in making Q-Factor adjustments include, among other things, the impact of 1) changes in lending policies and procedures, including changes in underwriting standards; 2) changes in international, national, regional and local economic conditions; 3) changes in the volume and severity of past due and nonaccrual status; 4) the effect of any concentrations of credit and changes in the levels of such concentrations; 5) changes in the experience, depth, and ability of lending management; 6) changes in nature and volume of the portfolio; 7) trends in underlying collateral values; 8) changes in the quality of the loan review system and 9) the effect of other external factors (i.e., ~~Continued~~competition, legal and regulatory requirements) on the level of estimated credit losses.

The annual loss rates, as defined above, adjusted for Q-Factors, are applied to the amortized loan balances over each subsequent period and aggregated to arrive at the General ACL. The amortized loan balances are adjusted based on management’s estimate of loan repayments in future periods.

When a loan no longer shares similar risk characteristics with its segment, the asset is assessed to ~~condensed consolidated~~determine whether it should be included in another segment or should be individually evaluated. Under ASC 326, the Company has adopted the collateral maintenance practical expedient to measure the ACL based on the fair value of collateral. Collateral dependent loans are loans for which the repayment is expected to be provided substantially through the operation or sale of the collateral and the borrower is experiencing financial ~~statements~~difficulty. These loans do not share common risk characteristics and are not included within the collectively evaluated loans for determining ACL. A Specific ACL is calculated on an individual loan basis based on the shortfall between the fair value of the loan’s collateral, which is adjusted for selling costs, and amortized cost. If the fair value of the collateral exceeds the amortized cost, no allowance is required. Financial assets that have been individually evaluated can be returned to a pool for purposes of estimating the expected credit loss to the extent their credit profile improves and that the repayment terms were not considered to be unique to the asset.

Management measures expected credit losses over the contractual term of a loan. The contractual term excludes expected extensions, renewals, and modifications unless either of the following applies:

The Company follows its nonaccrual policy by reversing contractual interest income in the consolidated statements of income when the Company places a loan on nonaccrual status. Therefore, management excludes the accrued interest receivable balance from the amortized cost basis in measuring expected credit losses on the portfolio and does not record an ACL on accrued interest receivable. As of March 31, 2023, the accrued interest receivable for loans recorded in accrued interest receivable was $1,277,000.

Also, various regulatory agencies, as an integral part of their examination process, periodically review the Company’s allowance for credit losses. Such agencies may require the Company to recognize additions to the allowance for credit losses based on their judgments of information available to them at the time of their examination.

Prior to the adoption of ASC 326, the allowance for loan losses represented management’s best estimate of inherent losses that had been incurred within the existing portfolio of loans. The allowance for loan losses included allowance allocations calculated in accordance with ASC 310, “Receivables” and allowance allocations calculated in accordance with ASC 450, “Contingencies.”

ACL - Off -Balance Sheet Credit Exposures. The Company has a variety of assets that have a component that qualifies as an off-balance sheet exposure. These primarily include commitments to extend credit, standby letters of credit, and unfunded commitments under revolving lines of credit. The Company estimates expected credit losses over the contractual period in which the Company is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company. Management has determined that a majority of the Company’s off-balance-sheet credit exposures are not unconditionally cancellable.

The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over their expected lives. Management used its judgement to determinate funding rates. Management applied the funding rates, along with the loss factor rate determined for each pooled loan segment, to unfunded loan commitments, excluding unconditionally cancellable exposures and letters of credit, to arrive at the reserve for unfunded loan commitments.

As of March 31, 2023, the liability recorded for expected credit losses on unfunded commitments was $77,000 and is included in “other liabilities” on the accompanying condensed consolidated balance sheets. The current adjustment to the ACL for unfunded commitments is recognized through credit loss expense in the condensed consolidated statements of earnings.

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

There were no sales of debt securities during the three months ended March 31, 2023, and 2022.

~~The following summarizes the sales of securities (in thousands):~~(2) Debt Securities, Continued.

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

Schedule of Debt Securities Available for Sale with Gross Unrealized Losses, by Investment Category

~~(continued)~~(3) Loans. The segments of loans are as follows (in thousands):

An analysis of the change in the allowance for credit losses follows (in thousands):

(3) Loans, Continued. The Company has divided the loan portfolio into six portfolio segments, each with different risk characteristics and methodologies for assessing risk. All loans are underwritten based upon standards set forth in the policies approved by the Company’s Board of Directors (the “Board”). The Company identifies the portfolio segments as follows:

Residential Real Estate, Multi-Family Real Estate, Commercial Real Estate, Land and Construction. Residential real estate loans are underwritten based on repayment capacity and source, value of the underlying property, credit history and stability. The Company offers first and second one-to-four family mortgage loans; the collateral for these loans is generally the clients’ owner-occupied residences. Although these types of loans present lower levels of risk than commercial real estate loans, risks do still exist because of possible fluctuations in the value of the real estate collateral securing the loan, as well as changes in the borrowers’ financial condition. Multi-family and commercial real estate loans are secured by the subject property. Underwriting standards include, among other factors, loan to value limits, cash flow coverage and general creditworthiness of the obligors. Construction loans to borrowers 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 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, cost estimates and pre-construction sales information. The Company also makes loans on occasion for the purchase of land for future development by the borrower. Land loans are extended for 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.

Commercial. Commercial business loans and lines of credit 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 and the collateral securing 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 its underwriting standards.

Consumer. 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. Risk is mitigated by the fact that the loans are of smaller individual amounts.

(3) Loans, Continued. The following summarizes the loan credit quality (in thousands):

The Company’s loans to customers as of March 31, 2023, based on year of origination within each credit quality indicator are as follows (in thousands):

At September 30, 2017, the Bank is well-capitalized. As a result of the Consent Order discussed in Note 9, the Bank cannot be categorized higher than “adequately capitalized” until the Consent Order is lifted, even if its ratios were to exceed those required to be a “well capitalized” bank.18

~~(continued)~~

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (Unaudited)

~~(5)~~

(~~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 periods. (Loss) earnings per common share have been computed based on the following (weighted-average number of common shares outstanding have been adjusted for the reverse stock split discussed in note 11):

Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016
Weighted-average number of common shares outstanding used to calculate basic and diluted (loss) earnings per common share 1,103,447 1,097,644 1,103,447 1,024,704

~~(continued)~~(3) Loans, Continued.

Term Loans

Amortized Cost Basis by Origination Year

Multi-family real estate	2023		2022			2021			2020			2019		Prior			Revolving Loans (Amortized Cost Basis)		Revolving Loans Converted to Term Loans (Amortized Cost Basis)		Total
Pass	$	1,000	$	27,736		$	29,762		$	6,233		$	2,103	$	1,292		$	-	$	-	$	68,126
OLEM (Other Loans Especially Mentioned)		-		-			-			-			-		-			-		-		-
Substandard		-		-			-			-			-		-			-		-		-
Doubtful		-		-			-			-			-		-			-		-		-
Loss		-		-			-			-			-		-			-		-		-
Subtotal loans	$	1,000	$	27,736		$	29,762		$	6,233		$	2,103	$	1,292		$	-	$	-		68,126
Current period Gross write-offs	$	-	$	-		$	-		$	-		$	-	$	-		$	-	$	-	$	-
Commercial real estate (CRE)
Pass	$	12,084	$	201,594		$	55,395		$	16,990		$	15,805	$	16,348		$	-	$	-	$	318,216
OLEM (Other Loans Especially Mentioned)		-		-			-			-			-		-			-		-		-
Substandard		-		-			-			-			1,230		-			-		-		1,230
Doubtful		-		-			-			-			-		-			-		-		-
Loss		-		-			-			-			-		-			-		-		-
Subtotal loans	$	12,084	$	201,594		$	55,395		$	16,990		$	17,035	$	16,348		$	-	$	-	$	319,446
Current period Gross write-offs	$	-	$	-		$	-		$	-		$	-	$	-		$	-	$	-	$	-
Commercial business loans
Pass	$	123	$	1,055		$	1,426		$	295		$	821	$	-		$	-	$	-	$	3,720
OLEM (Other Loans Especially Mentioned)		-		-			-			-			-		-			-		-		-
Substandard		-		-			-			-			-		-			-		-		-
Doubtful		-		-			-			-			-		-			-		-		-
Loss		-		-			-			-			-		-			-		-		-
Subtotal loans	$	123	$	1,055		$	1,426		$	295		$	821	$	-		$	-	$	-	$	3,720
Current period Gross write-offs	$	-	$	-		$	-		$	-		$	-	$	(26	)	$	-	$	-	$	(26	)
Consumer
Pass	$	5,508	$	-		$	4,006		$	-		$	22,499	$	-		$	12,813	$	-	$	39,527
OLEM (Other Loans Especially Mentioned)		-		-			-			-			-		-			-		-		-
Substandard		-		-			-			-			-		-			-		-		-
Doubtful		-		-			-			-			-		-			-		-		-
Loss		-		-			-			-			-		-			-		-		-
Subtotal loans	$	5,508	$	-		$	4,006		$	-		$	22,499	$	-		$	12,813	$	-	$	39,527
Current period Gross write-offs	$	-	$	(243	)	$	(191	)	$	(3	)	$	-	$	-		$	-	$	-	$	(437	)

(continued)

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (Unaudited)

(3) Loans, Continued.

(4) Earnings Per Share. Basic earnings per share have been computed on the basis of the weighted-average number of shares of common stock outstanding during the periods. During the three-month periods ended March 31, 2023 and 2022, basic and diluted earnings per share is the same as there were no outstanding potentially dilutive securities. Earnings per common share have been computed based on the following:

Schedule of Basic and Diluted Loss Per Share

	2023		2022
	Three Months Ended
	March 31,
	2023		2022
Weighted-average number of common shares outstanding used to calculate basic and diluted earnings per common share		7,204,168		4,892,323

(5) Stock-Based Compensation

The Company is authorized to grant stock options, stock grants and other forms of equity-based compensation under its 2018 Equity Incentive Plan (the “2018 Plan”). The plan has been approved by the shareholders. The Company is authorized to issue up to 550,000 shares of common stock under the 2018 Plan, of which 39,320 shares remain available for grant. No stock options are outstanding at March 31, 2023.

During the first quarter ended March 31, 2023, the Company issued 66,479 shares to a director for services performed and recorded compensation expense of $274,000.

During the first quarter ended March 31, 2023, the Company issued 52,622 shares to employees for services performed and recorded compensation expense of $216,000.

(continued)

~~(6)~~	*~~Stock-Based Compensation.~~* On December 27, 2011, the Company’s stockholders approved the 2011 Equity Incentive Plan (“2011 Plan”). In May 2016, the Company increased the total number of shares available to be awarded from 105,000 shares (adjusted for the one-for-ten reverse stock split) to 210,000 shares. Options, restricted stock, performance share awards and bonus share awards in lieu of obligations may be issued under the 2011 Plan. Both incentive stock options and nonqualified stock options can be granted under the 2011 Plan. The exercise price of the stock options cannot be less than the fair market value of the common stock on the date of grant. Options must be exercised within ten years of the date of grant.
	20
	As of September 30, 2017, only common stock has been issued as compensation to directors for services rendered under this plan. There were no shares of common stock issued during the period ended September 30, 2017. A total of 7,559 shares of common stock (adjusted for one-for-ten reverse stock split) were issued during the period ended September 30, 2016. A total of $32,000 of compensation was recorded during the period ended September 30, 2016. Subsequently, $200,000 (46,296 shares) was reclassified to other liabilities (see Note 13). At September 30, 2017, a total of 145,861 (adjusted for one-for-ten reverse stock split) shares remain available for grant.

~~(7)~~

~~Fair Value Measurements.~~~~Assets measured at fair value on a nonrecurring basis are as follows (in thousands):~~

~~Impaired Collateral Dependent Loans:~~OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

Fair
Value Level 1 Level 2 Level 3 Total
Losses Losses
Recorded in
Operations
At September 30, 2017-
Residential real estate $ 1,018 $ — $ — $ 1,018 $ 461 $ —

Fair
Value Level 1 Level 2 Level 3 Total Losses Losses
Recorded in
Operations
At December 31, 2016-
Residential real estate $ 375 $ — $ — $ 375 $ 126 $ —

~~Available-for-sale~~Notes to Condensed Consolidated Financial Statements (Unaudited)

(6) Fair Value Measurements.

Debt securities available for sale measured at fair value on a recurring basis are summarized below (in thousands):

Fair Value Measurements Using
Fair
Value Quoted Prices
In Active Markets for Identical Assets
(Level 1) Significant Other Observable Inputs
(Level 2) Significant
Unobservable
Inputs
(Level 3)

At September 30, 2017:
Collateralized mortgage obligations $ 8,882 — $ 8,882 —
SBA Pool Securities 7,317 — 7,317 —

$ 16,199 — $ 16,199 —
At December 31, 2016:
Collateralized mortgage obligations $ 9,752 $ — $ 9,752 $ —
SBA Pool Securities 10,470 — 10,470 —

$ 20,222 $ — $ 20,222 $ —

Schedule of Debt Securities Available-for-sale Measured at Fair Value on Recurring Basis

~~During~~


			Fair Value Measurements Using
	Fair Value		Quoted Prices In Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
At March 31, 2023:
SBA Pool Securities	$	785	$	—	$	785	$	—
Collateralized mortgage obligations		130		—		130		—
Taxable municipal securities		12,169		—		12,169		—
Mortgage-backed securities		12,470		—		12,470		—
Total	$	25,554	$	—	$	25,554	$	—

At December 31, 2022:
SBA Pool Securities	$	817	$	—	$	817	$	—
Collateralized mortgage obligations		130		—		130		—
Taxable municipal securities		11,620		—		11,620		—
Mortgage-backed securities		12,535		—		12,535		—
Total	$	25,102	$	—	$	25,102	$	—

(7) Fair Value of Financial Instruments. The estimated fair values and fair value measurement method with respect to the ~~three and nine month periods ended September 30, 2017 and 2016, no securities~~Company’s financial instruments were ~~transferred in or out~~as follows (in thousands):

Schedule of ~~Level 1, Level 2 or Level 3.~~Estimated Fair Value of Financial Instruments

	At March 31, 2023						At December 31, 2022
	Carrying Amount		Fair Value		Level		Carrying Amount		Fair Value		Level

Financial assets:
Cash and cash equivalents	$	86,658	$	86,658		1	$	71,836	$	71,836		1
Debt securities available for sale		25,554		25,554		2		25,102		25,102		2
Debt securities held-to-maturity		498		468		2		540		504		2
Loans		495,556		488,175		3		477,218		476,566		3
Federal Home Loan Bank stock		1,354		1,354		3		600		600		3
Accrued interest receivable		1,427		1,427		3		1,444		1,444		3

Financial liabilities:
Deposit liabilities		527,387		531,928		3		507,899		512,357		3
Federal Home Loan Bank advances		25,000		24,526		3		10,000		9,450		3
Off-balance sheet financial instruments		—		—		3		—		—		3

(continued)

~~(continued)~~

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (Unaudited)

(8) Off- Balance Sheet Financial Instruments. The Company is 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 are commitments to extend credit, unused lines of credit, and standby letters of credit and may involve, to varying degrees, elements of credit and interest-rate risk in excess of the amount recognized in the condensed consolidated balance sheet. The contract amounts of these instruments reflect the extent of involvement the Company has in these financial instruments.

The Company’s exposure to credit loss in the event of non-performance 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. Because some of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company evaluates each customer’s credit worthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Company, upon extension of credit, is based on management’s credit evaluation of the counterparty.

Standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party. The credit risk involved in issuing letters of credit to customers is essentially the same as that involved in extending loan facilities to customers. The Bank generally holds collateral supporting those commitments. Standby letters of credit generally have expiration dates within one year.

Commitments to extend credit, unused lines of credit, and standby letters of credit typically result in loans with a market interest rate when funded. A summary of the contractual amounts of the Company’s financial instruments with off-balance-sheet risk at March 31, 2023 follows (in thousands):

Schedule of Off-Balance Sheet Risks of Financial Instruments


Commitments to extend credit	$	25,600

Unused lines of credit	$	33,628

Standby letters of credit	$	4,313

(9) Regulatory Matters. The Bank is subject to various regulatory capital requirements administered by the bank regulatory agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company and Bank’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of its assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

(continued)

~~(8)~~

~~Fair Value of Financial Instruments.~~~~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, 2017 At December 31, 2016
Carrying
Amount Fair
Value Level Carrying
Amount Fair
Value Level
Financial assets:
Cash and cash equivalents $ 18,514 $ 18,514 1 $ 17,640 $ 17,640 1
Securities available for sale 16,199 16,199 2 20,222 20,222 2
Loans 69,194 69,095 3 76,999 76,829 3
Federal Home Loan Bank stock 979 979 3 1,113 1,113 3
Accrued interest receivable 366 366 3 380 380 3

Financial liabilities:
Deposit liabilities 77,374 77,935 3 86,009 86,364 3
Federal Home Loan Bank advances 20,500 20,458 3 23,500 23,500 3
Junior subordinated debenture 5,155 NA ⁽¹⁾ 3 5,155 N/A ⁽¹⁾ 3
Off-balance sheet financial instruments — — — — — —

~~(1)~~	~~The Company is unable to determine the fair value based on significant unobservable inputs required in the calculation refer to Note 10 for further information.~~

	The Company is 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 are commitments to extend credit and may involve, to varying degrees, elements of credit and interest-rate risk in excess of the amount recognized in the condensed consolidated balance sheets. The contract amounts of these instruments reflect the extent of involvement the Company has in these financial instruments.
22
	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. Because some of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company evaluates each customer’s credit worthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Company, upon extension of credit, is based on management’s credit evaluation of the counterparty.

	~~As of September 30, 2017, commitments to extend credit totaled $4.3 million.~~

~~(9)~~	*~~Regulatory Matters.~~* The Bank is subject to various regulatory capital requirements administered by the bank regulatory agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company and Bank’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of its assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

	Effective January 1, 2015, the Bank, became subject to the new Basel III capital level threshold requirements under the Prompt Corrective Action regulations with full compliance with all of the final rule’s requirements phased in over a multi-year schedule. These new regulations were designed to ensure that banks maintain strong capital positions even in the event of severe economic downturns or unforeseen losses.

	Changes that could affect the Bank going forward include additional constraints on the inclusion of deferred tax assets in capital and increased risk weightings for nonperforming loans and acquisition/development loans in regulatory capital. Beginning on January 1, 2016, the Bank became subject to the capital conservation buffer rules which places limitations on distributions, including dividend payments, and certain discretionary bonus payments to executive officers. In order to avoid these limitations, an institution must hold a capital conservation buffer above its minimum risk-based capital requirements. As of September 30, 2017 and December 31, 2016, the Bank’s capital conversation buffer exceeds the minimum requirements of 0.625%. The required buffer is to be phased in over three years. Under the new regulations in the first quarter of 2015, the Bank elected an irreversible one-time opt-out to exclude accumulated other comprehensive loss from regulatory capital.

~~(continued)~~

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (Unaudited)

~~(9)~~

~~Regulatory Matters, Continued.~~As of September 30, 2017 and December 31, 2016, the Bank is subject to a Consent Order issued by the Federal Deposit Insurance Corporation and the State of Florida Office of Financial Regulation (“OFR”), and accordingly is deemed to be “adequately capitalized” even if its capital ratios were to exceed those generally required to be a “well capitalized” bank. An institution must maintain minimum total risk-based, Tier I risk-based and Tier I leverage ratios as set forth in the following tables. The Bank’s actual capital amounts and percentages are also presented in the table (dollars in thousands):

~~The following table shows the Bank’s capital amounts and ratios and regulatory thresholds at September 30, 2017 and December 31, 2016 (dollars in thousands):~~

(9) Regulatory Matters, Continued.

Actual For Capital
Adequacy Purposes Minimum
To Be Well
Capitalized Under
Prompt Corrective
Action Provisions Requirements of
Consent Order
Amount % Amount % Amount % Amount %
As of September 30, 2017:
Total Capital to Risk-Weighted Assets $ 10,472 14.42 % $ 5,809 8.0 % $ 7,262 10.0 % $ 8,714 12.00 %
Tier I Capital to Risk-Weighted Assets 9,527 13.12 % 4,357 6.0 % 5,809 8.0 % NA NA
Common equity Tier I capital to Risk-Weighted Assets 9,527 13.12 % 3,268 4.5 % 4,720 6.5 % NA NA
Tier I Capital to Total Assets 9,527 8.54 % 4,463 4.0 % 5,579 5.0 % 8,926 8.00 %

As of December 31, 2016:
Total Capital to Risk-Weighted Assets $ 10,662 12.79 % $ 6,609 8.0 % $ 8,261 10.0 % $ 9,913 12.0 %
Tier I Capital to Risk-Weighted Assets 9,498 11.50 % 4,957 6.0 % 6,609 8.0 % N/A N/A
Common equity Tier I capital to Risk-Weighted Assets 9,498 11.50 % 3,718 4.5 % 5,370 6.5 % N/A N/A
Tier I Capital to Total Assets 9,498 8.06 % 4,714 4.0 % 5,893 5.0 % 9,428 8.0 %

Management believes, as of March 31, 2023 and December 31, 2022, that the Bank meets all capital adequacy requirements to which it is subject. The Bank’s actual capital amounts and percentages are presented in the table ($ in thousands):

Schedule of Capital Amounts, Ratios and Regulatory Thresholds

	Actual					To Be Well Capitalized Under Prompt Corrective Action Regulations (CBLR Framework)
	Amount		%			Amount		%
As of March 31, 2023:
Tier I Capital to Total Assets	$	67,652		11.24	%	$	54,158		9.00	%

As of December 31, 2022:
Tier I Capital to Total Assets	$	66,291		11.29	%	$	52,865		9.00	%

(10) Preferred Stock

During the first quarter of 2022, the Company issued 260 shares of Series B Preferred Stock to an unrelated party at a cash price of $25,000 per share, or an aggregate of $6,500,000.

(continued)

	~~Regulatory Enforcement Actions~~
23
	~~Bank Consent Order~~. On November 7, 2016, the Bank agreed to the issuance of a Consent Order by the FDIC and the OFR (the “Consent Order”), which requires the Bank to take certain measures to improve its safety and soundness. The Consent Order supersedes the prior consent order that became effective in 2010. Pursuant to the Consent Order, the Bank is required to take certain measures to improve its management, condition and operations, including actions to improve management practices and board supervision and independence, assure that its allowance for loan losses is maintained at an appropriate level and improve liquidity. The Consent Order requires the Bank to adopt and implement a compliance plan to address the Bank’s obligations under the Bank Secrecy Act and related obligations related to anti-money laundering. The Consent Order prohibits the payment of dividends by the Bank. The Consent Order continues the requirement for the Bank to maintain a Tier 1 leverage ratio of at least 8% and a total risk-based capital ratio of 12% beginning 90 days from the issuance of the Consent Order. At September 30, 2017, the Bank had a Tier 1 leverage ratio of 8.54%, and a total risk-based capital ratio of 14.42%.

	~~See Footnote 13 to the Consolidated Financial Statements included in the Company’s 2016 Form 10-K for additional information concerning the requirements of the Consent Order.~~

~~(continued)~~

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (Unaudited)

(10) Preferred Stock, Continued.

The Preferred Stock has no par value. Except in the event of liquidation, if the Company declares or pays a dividend or distribution on the common stock, the Company shall simultaneously declare and pay a dividend on the Series B Preferred on a pro rata basis with the common stock determined on an as-conve1ted basis assuming all shares of Series B Preferred Stock had been converted immediately prior to the record date of the applicable dividend. As of March 31, 2023 the Series B Preferred Stock is convertible into 11,114,000 shares of common stock, at the option of the Company, subject to the prior fulfilment of the following conditions: (i) such conversion shall have been approved by the holders of a majority of the outstanding common stock of the Company; and (ii) such conversion shall not result in any holder of the Series B Preferred Stock and any persons with whom the holder may be acting in concert, becoming beneficial owners of more than 9.9% of the outstanding shares of the common stock. The number of shares issuable upon conversion is subject to adjustment based on the terms of the applicable Certificate of Designation for the Series B Preferred (the “Certificate of Designation”). The Series B Preferred has preferential liquidation rights over common stockholders. The liquidation price is the greater of $25,000 per share of Series B Preferred or such amount per share of Series B Preferred that would have been payable had all shares of the Series B Preferred had been converted into common stock pursuant to the terms of the Certificate of Designation immediately prior to a liquidation. The Series B Preferred generally has no voting rights except as provided in the Certificate of Designation.

(11) Contingencies. Various claims arise from time to time in the normal course of business. In the opinion of management, none have occurred that will have a material effect on the Company’s condensed consolidated financial statements.

(continued)

	*~~Regulatory Matters, Continued.~~*Management believes that the Bank has made substantial progress in improving its financial condition through a significant reduction in non-performing assets and the receipt of capital increases from investors since the 2010 Consent Order. The Bank is also making significant progress in resolving the other issues raised by the FDIC and the OFR including strengthening the senior management team with the addition of David Edgar as Chief Financial Officer in October 2017. Although the Bank has been hampered by difficulties in raising capital due to the default under the Junior Subordinated Debenture and the limits placed on the Company and the Bank under the prior Consent Order and the Written Agreement. Management intends to continue its efforts to meet the conditions of the New Consent Order and the Written Agreement.
24
	~~Company Written Agreement with Reserve Bank~~. On June 22, 2010, the Company and the Reserve Bank entered into a Written Agreement with respect to certain aspects of the operation and management of the Company. The Written Agreement prohibits, without the prior approval of the Reserve Bank, the payment of dividends, taking dividends or payments from the Bank, making any interest, principal or other distributions on trust preferred securities (including the Debenture), incurring, increasing or guaranteeing any debt, purchasing or redeeming any shares of stock, or appointing any new director or senior executive officer. Management believes that the Company is in substantial compliance with the requirements of the Written Agreement.

~~(10)~~	*~~Junior Subordinated Debenture.~~* On September 30, 2004, the Company issued a $5,155,000 junior subordinated debenture to an unconsolidated subsidiary (the “Debenture”). The Debenture has a term of thirty years. The interest rate was fixed at 6.4% for the first five years, and thereafter, the coupon rate floats quarterly at the three-month LIBOR rate plus 2.45% (3.78% at September 30, 2017). The Debenture is redeemable in certain circumstances. The terms of the Debenture allow the Company to defer payments of interest on the Debenture by extending the interest payment period at any time during the term of the Debenture for up to twenty consecutive quarterly periods. Beginning in 2010, the Company exercised its right to defer payment of interest on the Debenture. Interest payments deferred as of September 30, 2017 totaled $1,314,000. The Company has deferred interest payments with respect to the Debenture for the maximum allowable twenty consecutive quarterly payments. The holder of the Debenture can accelerate the $5,155,000 principal balance as a result of this default. Under the Written Agreement, the Company is not able to make these interest payments without the prior approval of the Federal Reserve Bank of Atlanta. Regulatory approval to pay accrued and unpaid interest has been denied.

	A Director of the Company has offered to purchase the Debenture and this offer has been approved by certain equity owners of the Trust that holds the Debenture. The Director has also agreed to enter into a forbearance agreement with the Company with respect to payments due under the Debenture upon consummation of the Director’s purchase of the debenture.

	In March of 2016, the Trustee received a direction from certain equity owners of the Trust that hold the Debenture to Sell the Debenture to a Director of the Company. Based upon the receipt of other conflicting directions, in August 26, 2016, the Trustee commenced an action in a Minnesota State Court seeking directions from the Court. The case was subsequently transferred to the United States District Court for the Southern District of New York, were the case is currently pending. The Company continues to pursue mechanisms for paying the accrued interest, such as raising additional capital.

~~(11)~~	*~~Reverse Common Stock Split.~~* Effective January 11, 2016 each ten shares of the Company’s common stock were converted into one share of common stock. Loss (earnings) per share for 2017 and 2016 has been adjusted to reflect the 1-for-10 reverse common stock split.

~~(12)~~	*~~Loan Loss Recovery.~~*On January 6, 2016, the Bank completed a sale of judgement on a defaulted credit that resulted in a $1.8 million recovery of previously charged-off amounts to the Allowance for Loan and Lease Losses (“ALLL”). This increased the balance of the ALLL to approximately $4.2 million. On February 12, 2016, and amended May 6, 2016, pursuant to the terms and requirements of the Consent Order, Management submitted a written request to the FDIC for a partial reversal of the ALLL. The FDIC has requested additional information to assess the Bank’s request for a reversal. As of this date, the FDIC has not reached a final decision in regards to the Bank’s request.

~~(13)~~	*~~Reclassification.~~*During the quarter ended March 31, 2016, the Company agreed to issue 46,296 shares to the Bank’s Chairman as compensation. The Company recorded compensation expense of $200,000 based on the fair market value of the shares at that time, and reflected the issuance of the shares as an increase in stockholders’ equity. The Bank’s Chairman has not yet taken delivery of the shares. As a result, during the quarter ended September 30, 2016, the Company determined to reclassify the transaction as a liability of the Company (rather than an increase in stockholders’ equity) until the issuance of the shares. As of December 31, 2016, an accrued liability totaling $200,000 was recorded in connection with these shares.

~~(14)~~	*~~Brokered Deposits.~~*Under the terms of the Consent Order, the Bank is not permitted to solicit brokered deposits. In March 2017, the FDIC notified the Bank that it considers a significant portion of the Bank’s certificates of deposit to be brokered deposits due to the rates paid on such deposits, even though such deposits were not obtained through any deposit brokers. The Bank has requested a waiver of the prohibition on brokered deposits from the FDIC which has been subsequently withdrawn. Consequently, the Bank can not renew or rollover the existing certificates of deposit that are viewed as brokered deposits, which have an adverse effect on the Bank’s liquidity. Management has identified several strategies to mitigate this issue and believes that the Bank’s liquidity will be sufficient. As of September 30, 2017, the Bank had $25.1 million in brokered deposits that will mature over the next two years. Management is exploring all alternatives to resolve this issue including, but not limited to, raising local deposits.

~~(15)~~	*~~Bank Secrecy Act (“BSA”) Lookback Review.~~*Under the terms of the Consent Order, the Bank is required to perform a BSA lookback review. The Bank estimates that the cost of the BSA lookback review will range from $250,000 to $300,000 based on an independent firm’s proposal for services. The proposal and ultimate agreement is subject to FDIC review and approval. Until the approval is received, these BSA services cannot be rendered. Once the BSA lookback review begins, the independent firm has 120 days to complete the work. As of September 30, 2017, the Bank has accrued $210,000 for the proposed services.

~~(continued)~~

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

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

The following discussion should be read in conjunction with the condensed consolidated financial statements and notes thereto presented elsewhere in this report. For additional information, refer to the consolidated financial statements and footnotes for the year ended December 31, ~~2016~~2022, in the Annual Report on Form 10-K.

~~The following discussion and analysis should also be read in conjunction with the condensed consolidated financial statements and notes thereto appearing elsewhere in this report.~~ This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements involve known and unknown risks and uncertainties, many of which are beyond the control of the Company, including adverse changes in economic, political and market conditions, losses from the Company’s lending activities, ~~and changes~~increases in ~~market conditions,~~interest rates, the possible loss of key personnel, the impact of increasing competition, the impact of changes in government regulation, the possibility of liabilities arising from violations of federal and state securities laws and the impact of changes in technology in the banking industry. Although the Company believes that its forward-looking statements are based upon reasonable assumptions regarding its business and future market conditions, there can be no assurances that the Company’s actual results will not differ materially from any results expressed or implied by the Company’s forward-looking statements. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Readers are cautioned that any forward-looking statements are not guarantees of future performance.

~~Regulatory Enforcement Actions~~Capital Levels

~~Bank Consent Order. On November 7, 2016, the Bank agreed to the issuance~~As of a Consent Order by the FDIC and the OFR (the “Consent Order”), which requires the Bank to take certain measures to improve its safety and soundness. The Consent Order supersedes the prior consent order that became effective in 2010. Pursuant to the Consent Order,March 31, 2023, the Bank is ~~required~~well capitalized under regulatory guidelines.

Refer to ~~take certain measures to improve its management, condition and operations, including actions to improve management practices and board supervision and independence, assure that its allowance~~Note 9 for ~~loan losses is maintained at an appropriate level and improve liquidity. The Consent Order requires~~ the ~~Bank to adopt and implement a compliance plan to address the Bank~~’s obligations under the Bank Secrecy Act and related obligations related to anti-money laundering. The Consent Order prohibits the payment of dividends by the Bank. The Consent Order continues the requirement for the Bank to maintain a Tier 1 leverage ratio of at least 8% and a total risk-based capital ratio of 12% beginning 90 days from the issuance of the Consent Order. At September 30, 2017, the Bank had a Tier 1 leverage ratio of 8.54%, and a total risk-based capital ratio of 14.42%.

~~See Footnote 13 to the Consolidated Financial Statements included in the Company’s 2016 Form 10-K for additional information concerning the requirements of the Consent Order.~~

~~(continued)~~

~~OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY~~

Management believes that the Bank has made substantial progress in improving its financial condition through a significant reduction in non-performing assets and the receipt of capital increases from investors since the 2010 Consent Order. The Bank is also making significant progress in resolving the other issues raised by the FDIC and the OFR including strengthening the senior management team with the addition of David Edgar as Chief Financial Officer in October 2017. Although the Bank has been hampered by difficulties in raising capital due to the default under the Debenture and the limits placed on the Company and the Bank under the prior Consent Order and the Written Agreement. Management intends to continue its efforts to meet the conditions of the New Consent Order and the Written Agreement.

~~Company Written Agreement with Reserve Bank~~. On June 22, 2010, the Company and the Reserve Bank entered into a Written Agreement with respect to certain aspects of the operation and management of the Company. The Written Agreement prohibits, without the prior approval of the Reserve Bank, the payment of dividends, taking dividends or payments from the Bank, making any interest, principal or other distributions on trust preferred securities (including the Debenture), incurring, increasing or guaranteeing any debt, purchasing or redeeming any shares of stock, or appointing any new director or senior executive officer. Management believes that the Company is in substantial compliance with the requirements of the Written Agreement.

~~Capital Levels~~

Quantitative measures established by regulation and by the Consent Order to ensure capital adequacy require us to maintain minimum amounts and ratios (set forth in the following table) of Total and Tier 1 capital to risk-weighted assets and Tier 1 capital to average assets. As of September 30, 2017, the Bank met the minimum applicable capital adequacy requirements for Total Capital to Risk – Weighted Assets, and for Tier I Capital to Total Assets.

~~OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY~~

~~The~~ Bank’s actual and required minimum capital ~~ratios were as follows (in thousands):~~ratios.

~~Regulatory Capital Requirements~~(continued)

Actual For Capital
Adequacy Purposes Minimum
To Be Well
Capitalized Under
Prompt Corrective
Action Provisions Requirements of
Consent Order
Amount % Amount % Amount % Amount %
As of September 30, 2017:
Total Capital to Risk-Weighted Assets $ 10,472 14.42 % $ 5,809 8.0 % $ 7,262 10.02 % $ 8,714 12.00 %
Tier I Capital to Risk-Weighted Assets 9,527 13.12 % 4,357 6.0 % 5,809 8.0 % NA NA
Common equity Tier I capital to Risk-Weighted Assets 9,527 13.12 % 3,268 4.5 % 4,720 6.5 % NA NA
Tier I Capital to Total Assets 9,527 8.54 % 4,463 4.0 % 5,579 5.0 % 8,926 8.00 %

As of December 31, 2016:
Total Capital to Risk-Weighted Assets $ 10,662 12.79 % $ 6,609 8.0 % $ 8,261 10.0 % $ 9,913 12.0 %
Tier I Capital to Risk-Weighted Assets 9,498 11.50 % 4,957 6.0 % 6,609 8.0 % N/A N/A
Common equity Tier I capital to Risk-Weighted Assets 9,498 11.50 % 3,718 4.5 % 5,370 6.5 % N/A N/A
Tier I Capital to Total Assets 9,498 8.06 % 4,714 4.0 % 5,893 5.0 % 9,428 8.0 %

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Financial Condition at ~~September 30, 2017~~March 31, 2023 and December 31, ~~2016~~2022

Overview

The Company’s total assets ~~decreased~~increased by ~~$11.2~~approximately $37 million to ~~$108.5~~$622 million at ~~September 30, 2017,~~March 31, 2023, from ~~$119.7~~$585 million at December 31, ~~2016,~~2022, primarily due to ~~a reduction~~increases in ~~total deposits. Total stockholders’ equity decreased~~loans, and cash and cash equivalents. The growth in assets was attributable to the success of the Company’s efforts to increase loans and deposits from new customers. Net loans grew by $18 million. Deposits grew by approximately ~~$0.5~~$19 million to $527 million at ~~September 30, 2017~~March 31, 2023, from ~~$3.1~~$508 million at December 31, ~~2016~~2022. The Company increased the Federal Home Loan Bank advances by $15 million to ~~$2.6~~$25 million at March 31, 2023. Total stockholders’ equity increased by approximately $2 million to $65 million at March 31, 2023, from $63 million at December 31, 2022, primarily due to ~~the~~proceeds from common stock sales and changes in unrealized loss on debt securities available for sale and net ~~loss of $510,000 for the nine months ended September 30, 2017. As of September 30,2017, the Bank has provided for a reserve for BSA Compliancelookback of $210.000.~~earnings.

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

	Nine Months			Nine Months			Year
	Ended			Ended			Ended
	September 30, 2017			September 30, 2016			December 31, 2016			Three Months Ended March 31, 2023			Year Ended December 31, 2022

Average equity as a percentage of average assets		2.22	%		2.59	%		2.6	%		10.6	%		9.9	%

Equity to total assets at end of period		2.42	%		2.73	%		2.6	%		10.4	%		10.7	%

Return on average assets (1)		(.45	)%		(0.34	)%		(0.3	)%		0.8	%		0.9	%

Return on average equity (1)		(18.15	)%		(12.96	)%		(12.5	)%		7.7	%		8.6	%

Noninterest expenses to average assets (1)		2.74	%		3.51	%		3.3	%		2.3	%		2.1	%

(1) Annualized for the ~~nine~~three months ended ~~September 30, 2017 and 2016.~~March 31, 2023.

~~OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY~~

Liquidity and Sources of Funds

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

Deposits are our primary source of funds. In order to increase its core deposits, the ~~Bank~~Company has priced its deposit rates competitively. The ~~Bank~~Company will adjust rates on its deposits to attract or retain deposits as needed. ~~Under~~

The Company increased deposits by approximately $19 million during the Consent Order, the interest rate that the Bank pays on its market area deposits is restricted. It is possible that the Bank could experience a decrease in deposit inflows, or the migration of current depositsthree-month period ended March 31, 2023. The proceeds were used 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 the ability to adjust rates on our deposits to attract or retain deposits as needed.originate new loans.

In addition to obtaining funds from depositors, wethe Company may borrow funds from other financial institutions. At ~~September 30, 2017,~~March 31, 2023, the ~~Bank~~Company had outstanding borrowings of ~~$20,500,000,~~$25 million, against its ~~$31,300,000~~$146 million in established borrowing capacity with the FHLB. The ~~Bank’s~~Company’s borrowing facility is subject to collateral and stock ownership requirements, as well as prior FHLB consent to each advance. ~~In 2010,~~At March 31, 2023, the ~~Bank obtained an~~Company also had available ~~discount window~~lines of credit ~~line~~amounting to $25 million with six correspondent banks to purchase federal funds. Disbursements on the ~~Federal Reserve Bank, currently $643,700. The Federal Reserve Bank line is~~lines of credit are subject to ~~collateral requirements and must be repaid within 90 days; each advance is subject to prior Federal Reserve Bank consent. The Bank also has a $2.5 million line~~the approval of ~~credit with SunTrust, $750,000 line of credit with Servis First Bank and a $2.5 million line of credit with AloStar Bank.~~the correspondent banks. We measure and monitor our liquidity daily and believe our liquidity sources are adequate to meet our operating needs.

In the past, the Company, on an unconsolidated basis, relied on dividends from the Bank to fund its operating expenses, primarily expenses of being publicly held, and to make interest payments on the Company’s junior subordinated debenture (the “Debenture”). Under the Consent Order, the Bank is currently unable to pay dividends to the Company without prior regulatory approval. Additionally, under the Written Agreement, the Company may not pay interest payments on the Debenture or dividends on the Company’s common stock, incur any additional indebtedness at the Company level, or redeem the Company’s common stock without the prior regulatory approval of the Federal Reserve Bank. Since January 2010, the Company has deferred interest payments on the Debenture, which has been in default since 2015. See “Junior Subordinated Debenture” below.

Off-Balance Sheet Arrangements

~~The Company is a party~~Refer 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 are commitments to extend credit and may involve, to varying degrees, elements of credit and interest-rate risk in excess of the amounts recognizedNote 8 in the condensed consolidated ~~balance sheet. The contract amounts of these instruments reflect the extent of the Company’s involvement in these~~ financial ~~instruments.~~statements for Off-Balance Sheet Arrangements.

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.(continued)

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. As of September 30, 2017, the Company had commitments to extend credit totaling $4.3 million.

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

~~Junior Subordinated Debenture~~

~~On September 30, 2004, the Company issued a $5,155,000 junior subordinated debenture to an unconsolidated subsidiary (the “Debenture”). The Debenture has a term~~Item 2. Management’s Discussion and Analysis of ~~thirty years. The interest rate was fixed at 6.4% for the first five years,~~Financial Condition and thereafter, the coupon rate floats quarterly at the three-month LIBOR rate plus 2.45% (3.78% at September 30, 2017). The Debenture is redeemable in certain circumstances. The terms of the Debenture allow the Company to defer payments of interest on the Debenture by extending the interest payment period at any time during the term of the Debenture for up to twenty consecutive quarterly periods. Beginning in 2010, the Company exercised its right to defer payment of interest on the Debenture. Interest payments deferred as of September 30, 2017 totaled $1,314,000. The Company has deferred interest payments with respect to the Debenture for the maximum allowable twenty consecutive quarterly payments. The holder of the Debenture can accelerate the $5,155,000 principal balance as a result of this default. Under the Written Agreement, the Company is not able to make these interest payments without the prior approval of the Federal Reserve Bank of Atlanta. Regulatory approval to pay accrued and unpaid interest has been denied.

A Director of the Company has offered to purchase the Debenture and this offer has been approved by certain equity owners of the Trust that holds the Debenture. The Director has also agreed to enter into a forbearance agreement with the Company with respect to payments due under the Debenture upon consummation of the Director’s purchase of the debenture.

In March of 2016, the Trustee received a direction from certain equity owners of the Trust that hold the Debenture to Sell the Debenture to a Director of the Company. Based upon the receipt of other conflicting directions, in August 26, 2016, the Trustee commenced an action in a Minnesota State Court seeking directions from the Court. The case was subsequently transferred to the United States District Court for the Southern District of New York, were the case is currently pending. The Company continues to pursue mechanisms for paying the accrued interest, such as raising additional capital.

In the event the amounts due under the Debenture were accelerated, then the Trustee could undertake legal proceedings to obtain a judgment against the Company with respect to such amounts due under the Debenture. If this action were successful, then the Trustee could seek to affect a sale of the Bank to pay the amounts due under the Debenture.

~~OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY~~

Results of Operations (Continued)

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) the ratio of average interest-earning assets to average interest-bearing liabilities.

	Three Months Ended September 30,																Three Months Ended March 31,
	2017								2016								2023							2022
	Average Balance			Interest and Dividends		Average Yield/ Rate			Average Balance			Interest and Dividends		Average Yield/ Rate					Interest		Average					Interest		Average
	($ in thousands)																Average		and		Yield/			Average		and		Yield/
(dollars in thousands)																	Balance		Dividends		Rate⁽⁵⁾			Balance		Dividends		Rate⁽⁵⁾
Interest-earning assets:
Loans	$	72,777		$	972		5.34	%	$	85,020		$	1,082		5.09	%	$	492,658	$	6,589		5.35	%	$	264,442	$	3,263		4.94	%
Securities		19,207			96		2.00			22,779			117		2.05			25,876		178		2.75	%		34,107		163		1.91	%
Other (1)		17,908			65		1.45			11,225			24		0.86			61,050		749		4.90	%		71,631		37		0.21	%

Total interest-earning assets/interest income		109,892			1,133		4.12			119,024			1,223		4.11			579,584		7,516		5.19	%		370,180		3,463		3.74	%

Cash and due from banks		1,156								910								16,949							17,143
Premise and equipment		2,612								2,696
Premises and equipment																		989							727
Other		(3,345	)							(1,005	)							4,974							4,821

Total assets	$	110,315							$	121,625							$	602,496						$	392,871

Interest-bearing liabilities:
Savings, NOW and money-market deposits	$	21,657			27		.50		$	22,960			29		0.51		$	121,779		271		0.89	%	$	182,585		160		0.35	%
Time deposits		49,945			140		1.12			59,069			152		1.03			238,537		2,161		3.62	%		12,237		15		0.49	%
Borrowings (2)		25,655			141		2.20			25,663			91		1.42			10,167		25		0.98	%		18,000		61		1.36	%

Total interest-bearing liabilities/ interest expense		97,257			308		1.27			107,692			272		1.01
Total interest-bearing liabilities/interest expense																		370,483		2,457		2.65	%		212,822		236		0.44	%

Noninterest-bearing demand deposits		8,376								8,039								165,081							139,128
Other liabilities		2,026								2,534								3,307							2,677
Stockholders’ equity		2,656								3,360								63,625							38,244

Total liabilities and stockholders’ equity	$	110,315							$	121,625							$	602,496						$	392,871

Net interest income				$	825							$	951						$	5,059						$	3,227

Interest-rate spread (3)							2.85	%							3.10	%

Net interest-earnings assets	$	12,635							$	11,332
Interest rate spread (3)																						2.54	%						3.30	%

Net interest margin (4)							3.00	%							3.20	%						3.49	%						3.49	%

Ratio of average interest-earning assets to average interest-bearing liabilities		1.13								1.11								1.56							1.74

Nine Months Ended September 30,
2017 2016
Average
Balance Interest
and
Dividends Average
Yield/
Rate Average
Balance Interest
and
Dividends Average
Yield/
Rate
($ in thousands)
Interest-earning assets:
Loans $ 76,583 $ 2,971 5.17 % $ 84,173 $ 3,156 5.00 %
Securities 19,622 306 2.08 23,454 367 2.09
Other (1) 16,985 162 1.27 11,433 75 0.87

Total interest-earning assets/interest income 113,190 3,439 4.05 119,060 3,598 4.03

Cash and due from banks 1,162 887
Premise and equipment 2,624 2,694
Other (3,164 ) (393 )

Total assets $ 113,812 $ 122,248

Interest-bearing liabilities:
Savings, NOW and money-market deposits $ 22,052 82 0.50 $ 23,719 89 0.50
Time deposits 53,609 442 1.10 62,203 461 0.99
Borrowings (2) 25,677 378 1.96 25,700 260 1.35

Total interest-bearing liabilities/ interest expense 101,338 902 1.29 111,622 810 0.97

Noninterest-bearing demand deposits 7,471 5,249
Other liabilities 2,193 2,208
Stockholders’ equity 2,810 3,169

Total liabilities and stockholders’ equity $ 113,812 $ 122,248

Net interest income $ 2,537 $ 2,788

Interest-rate spread (3) 2.76 % 3.06 %

Net interest-earning assets $ 11,852 $ 7,438

Net interest margin (4) 2.99 % 3.12 %

Ratio of average interest-earning assets to average interest-bearing liabilities 1.21 1.07

(1)	Includes interest-earning deposits with banks and Federal Home Loan Bank stock dividends.
(2)	Includes Federal Home Loan Bank advances and other ~~borrowings and junior subordinated debenture.~~borrowings.
(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.
(5)	Annualized.

(continued)

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Comparison of the Three-Month Periods Ended ~~September 30, 2017~~March 31, 2023, and ~~2016~~2022

	Three Months Ended				Increase /
	March 31,				(Decrease)
(dollars in thousands except per share amounts)	2023		2022		Amount		Percentage
Total interest income	$	7,516	$	3,463	$	4,053		117	%
Total interest expense		2,457		236		2,221		941	%
Net interest income		5,059		3,227		1,832		57	%
Credit loss expense		820		392		428		109	%
Net interest income after credit loss expense		4,239		2,835		1,404		50	%
Total noninterest income		729		650		79		12	%
Total noninterest expenses		3,422		2,340		1,082		46	%
Net earnings before income taxes		1,546		1,145		401		35	%
Income taxes		393		290		103		36	%
Net earnings	$	1,153	$	855		298		35	%
Net earnings per share - Basic and diluted	$	.16	$	.17

~~General.~~Net ~~loss~~earnings. Net earnings for the three months ended ~~September 30, 2017, was $(56,000)~~March 31, 2023, were $1,153,000 or ~~$(.05) loss~~$.16 per basic and diluted share compared to a net earnings of ~~$22,000~~$855,000 or ~~$0.02 earnings~~$.17 per basic and diluted share for the ~~period~~three months ended ~~September 30, 2016.~~March 31, 2022. The increase in net earnings during the three months ended March 31, 2023 compared to three months ended March 31, 2022 is primarily attributed to an increase in net interest income and non interest income, partially offset by the increase in credit loss expense and non interest expense.

Interest ~~Income.~~income. Interest income ~~decreased $90,000~~increased $4,053,000 for the three months ended ~~September 30, 2017~~March 31, 2023 compared to the three months ~~Ended September 30, 2016.~~ended March 31, 2022 due primarily to growth in the loan portfolio and increases in loan and fed funds yields.

Interest ~~Expense.~~expense. Interest expense ~~on deposits and borrowings~~ increased ~~by $36,000~~$2,221,000 to $2,457,000 for the three months ended ~~September 30, 2017 from $272,000~~March 31, 2023, compared to the prior period, primarily due to increases in Federal Home Loan Bank advances and, interest bearing deposit rates and changes in the composition of deposits.

Credit loss expense. Credit loss expense was $820,000 for the three months ~~Ended September 30, 2016. Interest~~ended March 31, 2023, compared to a $392,000 for the three months ended March 31, 2022. The credit loss expense increased primarily due to higher interest paid on borrowings during the second and third quarter of 2017. In late March 2017, the Bank extended the maturities of $15.5 million in Federal Home loan Advances into longer fixed rate terms with higher interest rates. The weighted average rate of these advances increased from 0.49% to 1.19%.

~~Provision for Loan Losses.~~ ~~There was no provision for losses during the 2017 or 2016 period. The provision for loan losses~~ is charged to ~~operations~~earnings as losses are ~~estimated~~expected to have occurred in order to bring the total loan allowance for ~~loan~~credit losses to a level deemed appropriate by management to absorb losses ~~inherent~~expected in the ~~portfolio at September 30, 2017.~~portfolio. Management’s periodic evaluation of the adequacy of the allowance for credit losses is based upon historical experience, the volume and type of lending conducted by 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~~credit losses totaled ~~$3.9~~$6.4 million or ~~5.37%~~1.26% of loans outstanding at ~~September 30, 2017, as~~March 31, 2023, compared to ~~$4.2~~$5.8 million or ~~4.91%~~1.20% of loans outstanding at ~~September 30, 2016. Management believes the balance~~December 31, 2022. The increase in the ~~allowance for~~credit loss expense during the first quarter of 2023 was primarily due to loan ~~losses at September 30, 2017 is significantly overfunded.~~volume growth and the evaluation of the other factors noted above.

Noninterest ~~Income.~~income.Total noninterest income increased ~~by $23,000~~to $729,000 for the three months ended ~~September 30, 2017,~~March 31, 2023, from ~~$31,000 for the three months Ended September 30, 2016 due to significant fees collected on previously impaired loans.~~

~~Noninterest Expenses.~~ ~~Total noninterest expenses decreased $25,000 to $935,000~~$650,000 for the three months ended ~~September 30, 2017 compared~~March 31, 2022, due to ~~$960,000 million~~increased wire transfer and ACH fees during the three-month period ended March 31, 2023.

Noninterest expenses. Total noninterest expenses increased to $3,422,000 for the three months ~~Ended September 30, 2016.~~

~~Comparison of the Nine-Month Periods Ended September 30, 2017 and 2016~~

~~General.~~~~Net loss~~ended March 31, 2023, compared to $2,340,000 for the ~~nine~~three months ended September 30, 2017, was $(510,000) or $(.46) loss per basic and diluted share compared to a net loss of $(308,000) or $(0.30) loss per basic and diluted share for the nine nonths Ended September 30, 2016. The increase in net loss was due to a decrease in net interest income and a combination of higher professional fees and other non-interest expenses and a lower level of loan fees included in noninterest income.

~~Interest Income.~~ ~~Interest income decreased by $159,000 for the nine months ended September 30, 2017 from $3,598,000 for the nine months Ended September 30, 2016,~~March 31, 2022, primarily due to ~~a decrease~~an increase in ~~interest earnings assets.~~

~~Interest Expense.~~ Interest expense on deposits and borrowings increased to $902,000 for the nine months ended September 30, 2017 from $810,000 for the nine months Ended September 30, 2016. Interest expense increased primarily due to higher interest paid on borrowings during 2017. In late March 2017, the Bank extended the maturities of $15.5 million in Federal Home Loan Advances into longer fixed rate terms with higher interest rates. The weighted average rate of these advances increased from 0.49% to 1.19%.

~~Provision for Loan Losses.~~There was no provision for the nine months ended September 30, 2017 or 2016. The provision for loan losses is charged to operations in order to bring the total allowance for loan losses to a level deemed appropriate by management to absorb losses inherent in the portfolio. 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 $3.9 million or 5.37% of loans outstanding at September 30, 2017, compared to $4.2 million, or 4.91% of loans outstanding at September 30, 2016. Management believes the balance in the allowance for loan losses at September 30, 2017 is significantly overfunded.

~~Noninterest Income.~~ Total noninterest income decreased to $71,000 from $125,000 for the nine months ended September 30, 2017, compared to the nine months Ended September 30, 2016 due to gains on securities sales of $48,000 in 2016 compared to $7,000 in 2017 and reduced service charges and other fees.

~~Noninterest Expenses.~~~~Total noninterest expenses decreased to $3,118,000 for the nine months ended September 30, 2017 compared to $3,221,000 for the nine months Ended September 30, 2016, primarily due to decreased~~ salaries and employee benefits ~~occupancy,~~and data processing and ~~regulatory assessments.~~other operating costs.

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

Item 4. Controls and Procedures

The Company’s management evaluated the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report, and, based on this evaluation, the Principal Executive Officer and Principal Financial Officer concluded that these disclosure controls and procedures are effective.

There have been no changes in the Company’s internal control over financial reporting during the quarter ended ~~September 30, 2017,~~March 31, 2023, that have materially affected, or are reasonably likely to materially affect, internal control over financial reporting.

~~OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY~~

PART II. OTHER INFORMATION

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

~~Non-Employee Director Share Issuances~~

~~On March 31, 2017,~~During the first quarter of 2023, the Company ~~agreed to issue 4,550~~issued 72,221 shares of its common stock in a private placement transaction to the Company’s non-employee directors under the Company’s 2011 Equity Incentive Plan and the Company’s Non-Employee Director Compensation Plan (the “Director Compensation Plan”) for attendance fees2 accredited investors at ~~board meetings~~a price of $4.50 per share. None of these investors was an officer, director or affiliate of the Company. Under the Director Compensation Plan, which became effective on January 1, 2012, fees for attendance at board and committee meetings are payable 75% in shares of common stock and 25% in cash on a quarterly basis. The ~~shares were~~Company issued at the price of $3.15, the fair market value of the shares on the date of issuance. Pursuant to the Director Compensation Plan, a director must remain on the board as of the end of the year to earn the shares. Therefore, these shares ~~with an aggregate value of $14,333 are recorded as a liability as of September 30, 2017. The issuance of the shares was exempt from registration pursuant to~~in reliance on Section ~~4(2)~~4(a)(2) of the Securities Act as a transaction by an issuer not involving a public offering.

~~Other Significant Share Issuance~~

On March 27, 2017, the Company allocated 59,523 shares to the Bank’s Chairman under the 2011 Equity Incentive Plan as compensation for services as a director at the price of $3.36 per share, the fair market value of the shares on the date of issuance. The aggregate value of $200,000 was also recorded as a liability because the Bank’s Chairman has yet to take delivery of the shares. In addition, in March 2016 the Company allocated 46,296 shares to the Bank’ s Chairman under the 2011 Equity Incentive Plan as compensation for services as a director at the price of $4.32 per share, the fair market value of the shares on the date of issuance. The aggregate value of $200,000 was also recorded as a liability because the Bank’s Chairman has yet to take delivery of the shares. The total liability recorded for these allocated shares is $400,000 as of September 30, 2017. The issuance of the shares was exempt from registration pursuant to Section 4(2) of the Securities Act as a transaction by an issuer not involving a public offering.

~~Item 3. Defaults on Senior Securities~~

~~Junior Subordinated Debenture~~

On September 30, 2004, the Company issued a $5,155,000 junior subordinated debenture to an unconsolidated subsidiary (the “Debenture”). The Debenture has a term of thirty years. The interest rate was fixed at 6.4% for the first five years, and thereafter, the coupon rate floats quarterly at the three-month LIBOR rate plus 2.45% (3.78% at September 30, 2017). The Debenture is redeemable in certain circumstances. The terms of the Debenture allow the Company to defer payments of interest on the Debenture by extending the interest payment period at any time during the term of the Debenture for up to twenty consecutive quarterly periods. Beginning in 2010, the Company exercised its right to defer payment of interest on the Debenture. Interest payments deferred as of September 30, 2017 totaled $1,314,000. The Company has deferred interest payments with respect to the Debenture for the maximum allowable twenty consecutive quarterly payments. The holder of the Debenture can accelerate the $5,155,000 principal balance as a result of this default. Under the Written Agreement, the Company is not able to make these interest payments without the prior approval of the Federal Reserve Bank of Atlanta. Regulatory approval to pay accrued and unpaid interest has been denied.

Item 6. Exhibits

The exhibits ~~contained~~listed in the Exhibit Index following the signature page are filed or furnished with or incorporated by reference into this report.

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

~~SIGNATURES~~

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:May 10, 2023	~~November 13, 2017~~By:	~~By:~~	/s/ Timothy Terry
			Timothy Terry
			Principal Executive Officer

	By:	~~By:~~	/s/ ~~David L.Edgar~~Joel Klein
			~~David L.Edgar~~Joel Klein
			Principal Financial Officer

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

EXHIBIT INDEX

Exhibit No.		Description

31.1		Certification of Principal Executive ~~and~~Officer required by Rule 13a-14(a)/15d-14(a) under the Exchange Act

31.2		Certification of Principal Financial Officer required by Rule 13a-14(a)/15d-14(a) under the Exchange Act

~~31.2~~32.1		~~Certification of Principal Executive and Principal Financial Officer under 18 U.S.C. Section 1350~~

~~32.1~~		Certification of Principal Executive Officer

32.2		Certification of Principal Financial Officer

~~OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY~~

~~EXHIBIT INDEX~~

~~Exhibit~~ ~~No.~~101.INS		~~Description~~

~~101.INS~~		Inline XBRL Instance Document

101.SCH		Inline XBRL Taxonomy Extension Schema Document

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document

104		Cover Page Interactive Data File (embedded within the Inline XBRL document)

Florida		55-0865043
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, $.01 Par Value		OPHC		NASDAQ Capital Market

Large accelerated filer ~~[ ]~~☐		Accelerated filer ~~[ ]~~☐

Non-accelerated filer ~~[ ]~~ ☒	~~(Do not check if a smaller reporting company)~~	Smaller reporting company ~~[X]~~☒

Emerging ~~Growth Company [ ]~~		growth company ☐

	Page

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements	31

Condensed Consolidated Balance Sheets - ~~September 30, 2017~~March 31, 2023 (unaudited) and December 31, ~~2016~~2022	31

Condensed Consolidated Statements of ~~Operations~~Earnings - Three ~~and Nine~~ Months ended ~~September 30, 2017~~March 31, 2023 and ~~2016~~2022 (unaudited)	42

Condensed Consolidated Statements of Comprehensive ~~Loss~~Income (Loss) - Three ~~and Nine~~ Months ended ~~September 30, 2017~~March 31, 2023 and ~~2016~~2022 (unaudited)	53

Condensed Consolidated Statements of Stockholders’ Equity - ~~Nine~~Three Months ended ~~September 30, 2017~~March 31, 2023 and ~~2016~~2022 (unaudited)	64

Condensed Consolidated Statements of Cash Flows - ~~Nine~~Three Months ended ~~September 30, 2017~~March 31, 2023 and ~~2016~~2022 (unaudited)	7-85

Notes to Condensed Consolidated Financial Statements (unaudited)	9-246

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	~~25-~~3325

Item 4. Controls and Procedures	3329

PART II. OTHER INFORMATION

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	3429

~~Item 3. Defaults on Senior Securities~~	34

Item 6. Exhibits	3429

SIGNATURES	3530

							March 31,			December 31,
	September 30, 2017			December 31, 2016			2023			2022
	(Unaudited)						(Unaudited)
Assets:
Cash and due from banks	$	18,330		$	17,563		$	20,692		$	19,788
Interest-bearing deposits with banks		184			77			65,966			52,048
Total cash and cash equivalents		18,514			17,640			86,658			71,836
Securities available for sale		16,199			20,222
Loans, net of allowance for loan losses of $3,903 and $3,915		69,194			76,999
Debt securities available for sale								25,554			25,102
Debt securities held-to-maturity (fair value of $468 and $504)								498			540
Loans, net of allowance for credit losses of $6,353 and $5,793								495,556			477,218
Federal Home Loan Bank stock		979			1,113			1,354			600
Premises and equipment, net		2,601			2,648			1,117			934
Right-of-use lease assets								2,369			2,119
Accrued interest receivable		366			380			1,427			1,444
Deferred tax asset								3,323			3,836
Other assets		619			701			4,180			1,590

Total assets	$	108,472		$	119,703		$	622,036		$	585,219
Liabilities and Stockholders’ Equity:

Liabilities:
Noninterest-bearing demand deposits		8,813			7,131		$	159,784		$	159,193
Savings, NOW and money-market deposits		21,705			22,153			134,020			108,726
Time deposits		46,856			56,725			233,583			239,980

Total deposits		77,374			86,009			527,387			507,899

Federal Home Loan Bank advances		20,500			23,500			25,000			10,000
Junior subordinated debenture		5,155			5,155
Advanced payment by borrowers for taxes and insurance		518			221

Official checks		44			114			981			110
Operating lease liabilities								2,431			2,172
Other liabilities		2,252			1,623			1,332			2,458

Total liabilities		105,843			116,622			557,131			522,639

Commitments and contingencies (Notes 1, 8 and 9)
Commitments and contingencies (Notes 8 and 11)								-			-
Stockholders’ equity:
Preferred stock, no par value; 6,000,000 shares authorized, 7 shares issued and outstanding in 2017 and 2016		—			—
Common stock, $.01 par value; 5,000,000 shares authorized, 1,103,447 shares issued and outstanding in 2017 and 2016		11			11
Preferred stock, no par value; 6,000,000 shares authorized:
Series A Preferred, no par value, no shares issued and outstanding								—			—
Series B Convertible Preferred, no par value, 1,520 shares authorized, 1,360 shares issued and outstanding								—			—
Preferred stock value								—			—
Common stock, $.01 par value; 10,000,000 shares authorized, 7,250,218 and 7,058,897 shares issued and outstanding								72			71
Additional paid-in capital		34,039			34,039			91,221			90,408
Accumulated deficit		(31,227	)		(30,717	)		(21,101	)		(22,073	)
Accumulated other comprehensive loss		(194	)		(252	)		(5,287	)		(5,826	)

Total stockholders’ equity		2,629			3,081			64,905			62,580
Total liabilities and stockholders’ equity	$	108,472		$	119,703		$	622,036		$	585,219

	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2017			2016		2017			2016

Interest income:
Loans	$	972		$	1,082	$	2,971		$	3,156
Securities		96			117		306			367
Other		65			24		162			75

Total interest income		1,133			1,223		3,439			3,598

Interest expense:
Deposits		167			181		524			550
Borrowings		141			91		378			260

Total interest expense		308			272		902			810

Net interest income		825			951		2,537			2,788

Provision for loan losses		—			—		—			—

Net interest income after provision for loan losses		825			951		2,537			2,788

Noninterest income:
Service charges and fees		44			22		55			63
Gain on sale of securities available for sale		7			2		7			48
Other		3			7		9			14

Total noninterest income		54			31		71			125

Noninterest expenses:
Salaries and employee benefits		423			430		1,301			1,385
Occupancy and equipment		91			112		293			346
Data processing		96			77		262			250
Professional fees		134			151		526			480
Insurance		24			27		72			78
Regulatory assessment		50			74		152			221
Other		117			89		512			461

Total noninterest expenses		935			965		3,118			3,263

Net (loss) earnings	$	(56	)	$	22	$	(510	)	$	(308	)

Net (loss) earnings per share-
Basic and diluted	$	(.05	)	$	.02	$	(.46	)	$	(0.30	)

	Shares		Amount		Shares		Amount		Shares		Amount		Capital		Deficit			Loss			Equity
	Preferred Stock												Additional					Accumulated
	Series A				Series B				Common Stock				Paid-In		Accumulated			Comprehensive			Stockholders’
	Shares		Amount		Shares		Amount		Shares		Amount		Capital		Deficit			Loss			Equity

Balance at December 31, 2021		—	$	—		760	$	—		4,775,281	$	48	$	65,193	$	(26,096	)	$	(635	)	$	38,510

Proceeds from the sale of preferred stock (unaudited)		—		—		260		—		—		—		6,500		—			—			6,500

Proceeds from the sale of common stock (unaudited)		—		—		—		—		1,227,331		12		5,511		—			—			5,523

Net change in unrealized loss on debt securities available for sale (unaudited)		—		—		—		—		—		—		—		—			(2,078	)		(2,078	)

Amortization of unrealized loss on debt securities transferred to held-to-maturity (unaudited)		—		—		—		—		—		—		—		—			7			7

Net earnings for three months ended March 31, 2022 (unaudited)		—		—		—		—		—		—		—		855			—			855

Balance at March 31, 2022 (unaudited)		—	$	—		1,020	$	—		6,002,612	$	60	$	77,204	$	(25,241	)	$	(2,706	)	$	49,317

Balance at December 31, 2022		—	$	—		1,360	$	—		7,058,897	$	71	$	90,408	$	(22,073	)	$	(5,826	)	$	62,580

Additional allowance recognized due to adoption of Topic 326		—		—		—		—		—		—		—		(181	)		—			(181	)

Proceeds from the sale of common stock (unaudited)		—		—		—		—		72,221		—		324		—			—			324

Stock-based Compensation (unaudited)		—		—		—		—		119,101		1		489		—			—			490

Net change in unrealized loss on debt securities available for sale (unaudited)		—		—		—		—		—		—		—		—			538			538

Amortization of unrealized loss on debt securities transferred to held-to-maturity (unaudited)		—		—		—		—		—		—		—		—			1			1

Net earnings for three months ended March 31, 2023 (unaudited)		—		—		—		—		—		—		—		1,153			—			1,153

Balance at March 31, 2023 (unaudited)		—	$	—		1,360	$	—		7,250,219	$	72	$	91,221	$	(21,101	)	$	(5,287	)	$	64,905

	●	Management has a reasonable expectation at the reporting date that a loan modification will be executed with an individual borrower.

	●	The extension or renewal options are included in the original or modified contract at the reporting date and are not unconditionally cancellable by the Company.

~~(1)~~	*~~General.~~*OptimumBank Holdings, Inc. (the “Holding Company”) is a one-bank holding company and owns 100% of OptimumBank (the “Bank”), a Florida-chartered commercial bank. The Bank’s wholly-owned subsidiaries are OB Real Estate Management, LLC and OB Real Estate Holdings, LLC, both of which were formed in 2009; OB Real Estate Holdings 1692 and OB Real Estate Holdings 1704 formed in 2012, collectively, (the “Real Estate Holding Subsidiaries”). 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 2017 and 2016. All other subsidiaries are primarily engaged in holding and disposing of foreclosed real estate.

	~~Basis of Presentation~~.In the opinion of management, the accompanying condensed consolidated financial statements of the Company contain all adjustments (consisting principally of normal recurring accruals) necessary to present fairly the financial position at September 30, 2017, and the results of operations and comprehensive loss for the three and nine month periods ended September 30, 2017 and 2016, and cash flows for the nine month periods ending September 30, 2017 and 2016. The results of operations for the three and nine months ended September 30, 2017 are not necessarily indicative of the results to be expected for the full year.

	~~Going Concern Status~~.The Company is in default with respect to its $5,155,000 Junior Subordinated Debenture (“Debenture”) due to its failure to make certain required interest payments under the Debenture. The Trustee of the Debenture (the “Trustee”) or the holders of the Debenture are entitled to accelerate the payment of the $5,155,000 principal balance plus accrued and unpaid interest totaling $1,314,000 at September 30, 2017. To date the Trustee has not accelerated the outstanding balance of the Debenture. No adjustments to the accompanying condensed consolidated financial statements have been made as a result of this uncertainty. Management’s plans with regard to this matter are as follows: A Director of the Company has offered to purchase the Debenture and this offer has been approved by certain equity owners of the Trust that holds the Debenture. The Director has also agreed to enter into a forbearance agreement with the Company with respect to payments due under the Debenture upon consummation of the Director’s purchase of the Debenture. In March 2016, the Trustee received a direction from certain equity owners of the Trust that holds the Debenture to sell the Debenture to a Director of the Company. Based upon the receipt of conflicting directions from other debt holders of the Trust, in August 2016, the Trustee commenced an action in a Minnesota State Court seeking directions from the Court. The case was subsequently transferred to United States District Court for the Southern District of New York, where the case is currently pending. The Company continues to pursue mechanisms for paying the accrued interest, such as raising additional capital.

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

	*~~Income Taxes.~~* The Company assessed its earnings history and trends and estimates of future earnings, and determined that the deferred tax asset could not be realized as of September 30, 2017. Accordingly, a valuation allowance was recorded against the net deferred tax asset.

	~~(continued)~~

~~(1)~~	*~~General, Continued.~~*
	*~~Recent Pronouncements.~~~~In January 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-01,~~~~Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities~~, which is intended to enhance the reporting model for financial instruments to provide users of financial statements with more decision-useful information. The ASU requires equity investments to be measured at fair value with changes in fair values recognized in net earnings, simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identity impairment and eliminates the requirement to disclose fair values, the methods and significant assumptions used to estimate the fair value of financial instruments measured at amortized cost. The ASU also clarifies that the Company should evaluate the need for a valuation allowance on a deferred tax asset related to available for-sale debt securities in combination with the Company’s other deferred tax assets. The ASU is effective for the Company beginning January 1, 2018. Early adoption is permitted. The adoption of this guidance is not expected to have a material impact on the Company’s condensed consolidated financial statements. ~~In February 2016, the FASB issued ASU 2016-2,~~~~Leases (Topic 842)~~* which will require lessees to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases with term of more than twelve months. Consistent with current GAAP, the recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification as a finance or operating lease. The new ASU will require both types of leases to be recognized on the balance sheet. The ASU also will require disclosures to help investors and other financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. These disclosures include qualitative and quantitative requirements, providing additional information about the amounts recorded in the financial statements. The ASU is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2018. The Company is in the process of determining the effect of the ASU on its condensed consolidated financial statements. Early application will be permitted. ~~In March 2016, the FASB issued ASU No. 2016-09,~~~~Compensation-Stock Compensation (Topic 718)~~ intended to improve the accounting for employee share-based payments. The ASU affects all organizations that issue share-based payment awards to their employees. The ASU simplifies several aspects of the accounting for share-based payment award transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the consolidated statement of cash flows. The ASU was effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The Company has evaluated the effect of ASU and determined it has no material effect on its condensed consolidated financial statements. ~~In June 2016, the FASB issued ASU No. 2016-13~~~~Financial Instruments-Credit Losses (Topic 326).~~ The ASU improves financial reporting by requiring timelier recording of credit losses on loans and other financial instruments held by the Company. The ASU requires the Company to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses. The Company will continue to use judgment to determine which loss estimation method is appropriate for their circumstances. The ASU requires enhanced disclosures to help investors and other financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an organization’s portfolio. These disclosures include qualitative and quantitative requirements that provide additional information about the amounts recorded in the financial statements. Additionally, the ASU amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. The ASU will take effect for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted. The Company is in the process of determining the effect of the ASU on its condensed consolidated financial statements.

	~~In March 2017, FASB issued ASU 2017-08,~~~~Receivables-Nonrefundable Fees and Other Costs (Subtopic 310-20)~~ which amends the accounting for the amortization of premiums for certain purchased callable debt securities by shortening the amortization period to the earliest call date. ASU 2017-08 is effective for interim and annual periods beginning after December 15, 2019. The Company is currently evaluating the impact of ASU 2017-08 may have, if any, on its condensed consolidated financial statements.

	In May 2017, the FASB issued new guidance related to Stock Compensation, Scope of Modification Accounting. The new guidance provides clarity and reduces both diversity in practice and cost and complexity when applying the guidance in Accounting Standards Codification Topic 718, Compensation—Stock Compensation. An entity will not apply modification accounting to a share-based payment award if all of the following are the same immediately before and after the change: (i) the award’s fair value, (ii) the award’s vesting conditions and (iii) the award’s classification as an equity or liability instrument. The amendments are effective for fiscal years and interim periods within those years beginning after December 15, 2017. Early adoption is permitted. The Company is in the process of determining the effect of the amendments on its condensed consolidated financial statements.

	In July 2017, the FASB issued ASU 2017-11, The ASU amends ASC 815 which makes limited changes to the Board’s guidance on classifying certain financial instruments as either liabilities or equity. The ASU’s objective is to improve (1) the accounting for instruments with “down-round” provisions and (2) the readability of the guidance in ASC 480 on distinguishing liabilities from equity by replacing the indefinite deferral of certain pending content with scope exceptions. In addition, the ASU amends the guidance on the recognition and measurement of freestanding equity-classified instruments (e.g., warrants) by adding requirements to ASC 260 for entities that disclose earnings per share (EPS). The ASU is effective for annual reporting periods beginning after December 15, 2018, early adoption is permitted upon its issuance. The Company currently has no financials instruments related to this ASU. As a result, the adoption of this guidance is not expected to be material to the condensed consolidated financial statements. In August 2017, the Financial Accounting Standards Board (“FASB”) issued ASU 2017-12, which amends the hedge accounting recognition and presentation requirements in ASC 815. The Board’s objectives in issuing the ASU are to improve the transparency and understandability of information conveyed to financial statement users about an entity’s risk management activities by better aligning the entity’s financial reporting for hedging relationships with those risk management activities and to reduce the complexity of and simplify the application of hedge accounting by preparers. The ASU is effective for fiscal years beginning after December 15, 2018, early adoption is permitted upon its issuance. The Company currently has no hedging relationships. As a result, the adoption of this guidance is not expected to be material to the condensed consolidated financial statements.

	*~~Reclassification.~~*~~Certain amounts have been reclassified to conform to the 2017 condensed consolidated financial statement presentation.~~

			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value

At March 31, 2023:
Available for sale:
SBA Pool Securities	$	802	$	1	$	(18	)	$	785
Collateralized mortgage obligations		142		—		(12	)		130
Taxable municipal securities		16,719		—		(4,550	)		12,169
Mortgage-backed securities		14,962		—		(2,492	)		12,470
Total	$	32,625	$	1	$	(7,072	)	$	25,554

Held-to-maturity:
Collateralized mortgage obligations	$	449	$	—	$	(29	)	$	420
Mortgage-backed securities		49		—		(1	)		48
Total	$	498	$	—	$	(30	)	$	468

At December 31, 2022:
Available for sale:
SBA Pool Securities	$	834	$	1	$	(18	)	$	817
Collateralized mortgage obligations		145		—		(15	)		130
Taxable municipal securities		16,729		—		(5,109	)		11,620
Mortgage-backed securities		15,180		—		(2,645	)		12,535
Total	$	32,888	$	1	$	(7,787	)	$	25,102

Held-to-maturity:
Collateralized mortgage obligations	$	475	$	—	$	(35	)	$	440
Mortgage-backed securities		65		—		(1	)		64
Total	$	540	$	—	$	(36	)	$	504

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value

At September 30, 2017:
Securities Available for Sale:
Collateralized mortgage obligations	$	9,181	$	—	$	(299	)	$	8,882
SBA Pool Securities		7,330		8		(21	)		7,317

Total	$	16,511	$	8	$	(320	)	$	16,199

At December 31, 2016:
Securities Available for Sale:
Collateralized mortgage obligations	$	10,157	$	—	$	(405	)	$	9,752
SBA Pool Securities		10,470		—		—			10,470

Total	$	20,627	$	—	$	(405	)	$	20,222

	Three Months Ended September 30,					Nine Months Ended September 30,
	2017		2016			2017		2016

Proceeds from sales of securities	$	2,278	$	8,180		$	2,278	$	18,028

Gross gains from sale of securities		7		20			7		66
Gross losses from sale of securities		—		(18	)		—		(18	)

Net gain from sales of securities	$	7	$	2		$	7	$	48

	At September 30, 2017
	Over Twelve Months				Less Than Twelve Months
	Gross Unrealized Losses		Fair Value		Gross Unrealized Losses			Fair Value

Securities Available for Sale:
Collateralized mortgage obligations	$	(299)	$	8,882	$	—		$	—
SBA Pool Securities		—		—		(21	)		4,091
	$	(299)	$	8,882	$	(21	)	$	4,091

	At December 31, 2016
	Over Twelve Months					Less Than Twelve Months
	Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value

Securities Available for Sale-
Collateralized mortgage obligations	$	(46	)	$	864	$	(359	)	$	8,888

	At September 30, 2017			At December 31, 2016

Residential real estate	$	26,564		$	27,334
Multi-family real estate		6,142			5,829
Commercial real estate		30,637			29,264
Land and construction		3,037			5,681
Commercial		5,390			10,514
Consumer		1,025			1,829

Total loans		72,795			80,451

Add (deduct):
Net deferred loan fees, costs and premiums		302			463
Allowance for loan losses		(3,903	)		(3,915	)

Loans, net	$	69,194		$	76,999

	Residential Real Estate		Multi-Family Real Estate		Commercial Real Estate			Land and Construction			Commercial			Consumer			Unallocated			Total
Three Months Ended September 30, 2017:

Beginning balance	$	302	$	62	$	769		$	61		$	67		$	148		$	2,486		$	3,895
Provision (credit) for loan losses		322	$	—	$	6		$	(2	)	$	(2	)	$	(3	)	$	(321	)	$	—
Charge-offs		—	$	—	$	—		$	—		$	—		$	(3	)	$	—		$	(3	)
Recoveries		—	$	—	$	—		$	6		$	—		$	5		$	—		$	11

Ending balance	$	624	$	62	$	775		$	65		$	65		$	147		$	2,165		$	3,903

Three Months Ended September 30, 2016:
Beginning balance	$	262	$	39	$	1,012		$	64		$	200		$	156		$	2,507		$	4,240
Provision (credit) for loan losses		58		19		89			(4	)		48			75			(285	)		—
Charge-offs		—		—		(14	)		—			—			(72	)		—			(86	)
Recoveries		—		—		—			6			—			9			—			15

Ending balance	$	320	$	58	$	1,087		$	66		$	248		$	168		$	2,222		$	4,169

Nine Months ended September 30, 2017:
Beginning balance	$	310	$	58	$	787		$	120		$	188		$	165		$	2,287		$	3,915
Provision (credit) for loan losses		314	$	4	$	(12	)	$	(73	)	$	(123	)	$	12		$	(122	)	$	—
Charge-offs		—	$	—	$	—		$	—		$	—		$	(43	)	$	—		$	(43	)
Recoveries		—	$	—	$	—		$	18		$	—		$	13		$	—		$	31

Ending balance	$	624	$	62	$	775		$	65		$	65		$	147		$	2,165		$	3,903

Nine Months Ended September 30, 2016:
Beginning balance	$	116	$	26	$	1,085		$	77		$	120		$	151		$	720		$	2,295
Provision (credit) for loan losses		204		32		(2,033	)		(29	)		128			196			1,502			—
Charge-offs		—		—		(14	)		—			—			(195	)		—			(209	)
Recoveries		—		—		2,049			18			—			16			—			2,083

Ending balance	$	320		58		1,087			66			248			168			2,222			4,169


	Residential Real Estate		Multi-Family Real Estate		Commercial Real Estate		Land and Construction		Commercial		Consumer		Total
*At December 31, 2022:*
Individually evaluated for impairment:
Recorded investment	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Balance in allowance for loan losses	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Collectively evaluated for impairment:
Recorded investment	$	50,354	$	69,555	$	310,695	$	17,286	$	5,165	$	30,323	$	483,378
Balance in allowance for loan losses	$	768	$	748	$	3,262	$	173	$	277	$	565	$	5,793

	Residential Real Estate		Multi- Family Real Estate		Commercial Real Estate		Land and Construction		Commercial		Consumer		Unallocated		Total
At September 30, 2017:
Individually evaluated for impairment:
Recorded investment	$	1,354	$	—	$	981	$	—	$	—	$	—	$	—	$	2,335
Balance in allowance for loan losses	$	336	$	—	$	76	$	—	$	—	$	—	$	—	$	412

Collectively evaluated for impairment:
Recorded investment	$	25,210	$	6,142	$	29,656	$	3,037	$	5,390	$	1,025	$	—	$	70,460
Balance in allowance for loan losses	$	288	$	62	$	699	$	65	$	65	$	147	$	2,165	$	3,491

At December 31, 2016:
Individually evaluated for impairment:
Recorded investment	$	375	$	—	$	1,004	$	—	$	—	$	—	$	—	$	1,379
Balance in allowance for loan losses	$	—	$	—	$	104	$	—	$	—	$	—	$	—	$	104

Collectively evaluated for impairment:
Recorded investment	$	26,959	$	5,829	$	28,260	$	5,681	$	10,514	$	1,829	$	—	$	79,072
Balance in allowance for loan losses	$	310	$	58	$	683	$	120	$	188	$	165	$	2,287	$	3,811


			OLEM
			(Other Loans Especially		Sub-
	Pass		Mentioned)		Standard		Doubtful		Loss		Total

At March 31, 2023:
Residential real estate	$	52,087	$	—	$	—	$	—	$	—	$	52,087
Multi-family real estate		68,126		—		—		—		—		68,126
Commercial real estate		318,216		—		1,230		—		—		319,446
Land and construction		19,629		—		—		—		—		19,629
Commercial		3,720		—		—		—		—		3,720
Consumer		39,527		—		—		—		—		39,527

Total	$	501,305	$	—	$	1,230	$	—	$	—	$	502,535

At December 31, 2022:
Residential real estate	$	50,354	$	—	$	—	$	—	$	—	$	50,354
Multi-family real estate		69,555		—		—		—		—		69,555
Commercial real estate		309,458		—		1,237		—		—		310,695
Land and construction		17,286		—		—		—		—		17,286
Commercial		5,165		—		—		—		—		5,165
Consumer		30,323		—		—		—		—		30,323

Total	$	482,141	$	—	$	1,237	$	—	$	—	$	483,378

~~(3)~~	*~~Loans, Continued.~~* *~~Residential Real Estate, Multi-Family Real Estate, Commercial Real Estate, Land and Construction.~~* All 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 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, cost estimates and pre-construction sales information. The Company also makes loans on occasion for the purchase of land for future development by the borrower. Land loans are extended for 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.

	*~~Commercial.~~*Commercial business loans and lines of credit 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 and the collateral securing 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 its underwriting standards.

	*~~Consumer.~~*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. Risk is mitigated by the fact that the loans are of smaller individual amounts.

	Pass		OLEM (Other Loans Especially Mentioned)		Sub- standard		Doubtful		Loss		Total
At September 30, 2017:
Residential real estate	$	22,820	$	3,375	$	369	$	—	$	—	$	26,564
Multi-family real estate		6,142	$	—	$	—	$	—	$	—	$	6,142
Commercial real estate		26,773	$	2,883	$	981	$	—	$	—	$	30,637
Land and construction		651	$	2,386	$	—	$	—	$	—	$	3,037
Commercial		3,133	$	2,257	$	—	$	—	$	—	$	5,390
Consumer		1,025	$	—	$	—	$	—	$	—	$	1,025

Total	$	60,544	$	10,901	$	1,350	$	—	$	—	$	72,795

At December 31, 2016:
Residential real estate	$	25,326	$	1,633	$	375	$	—	$	—	$	27,334
Multi-family real estate		5,829		—		—		—		—		5,829
Commercial real estate		25,979		1,174		2,111		—		—		29,264
Land and construction		5,636		45		—		—		—		5,681
Commercial		8,768		—		1,746		—		—		10,514
Consumer		1,823		—		6		—		—		1,829

Total	$	73,361	$	2,852	$	4,238	$	—	$	—	$	80,451

	Pass – Aa Pass loan’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.

	OLEM – Anan Other Loan Especially Mentioned has potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in the deterioration of the repayment prospects for the asset or the Company’s credit position at some future date.

	Substandard – Aa Substandard loan is inadequately protected by the current ~~sound~~net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. Included in this category are loans that are current on their payments, but the Bank is unable to document the source of repayment. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.

	Doubtful – Aa loan classified as Doubtful has all the weaknesses inherent in one classified as Substandard, with the added characteristics that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. This classification does not mean that the asset has absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing off this basically worthless asset even though partial recovery may be affected in the future. The Company charges off any loan classified as Doubtful.

	Loss – Aa loan classified Loss is considered uncollectible and of such little value that continuance as a bankable asset is not warranted. This classification does not mean that the asset has absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing off this basically worthless asset even though partial recovery may be ~~affected~~effected in the future. The Company fully charges off any loan classified as Loss.

	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
At September 30, 2017:
Residential real estate	$		—	$		—	$		—	$		—		$		26,564	$		—	$		26,564
Multi-family real estate			—			—			—			—				6,142			—			6,142
Commercial real estate			—			—			—			—				30,637			—			30,637
Land and construction			—			—			—			—				3,037			—			3,037
Commercial			—			—			—			—				5,390			—			5,390
Consumer			—			—			—			—				1,025			—			1,025

Total	$		—	$		—	$			$		—		$		72,795	$		—	$		72,795

At December 31, 2016:
Residential real estate		$	—		$	—		$	—		$	—			$	26,959		$	375		$	27,334
Multi-family real estate			—			—			—			—				5,829			—			5,829
Commercial real estate			—			—			—			—				29,264			—			29,264
Land and construction			—			—			—			—				5,681			—			5,681
Commercial			—			—			—			—				10,514			—			10,514
Consumer			—			6			—			6				1,823			—			1,829

Total		$	—		$	6		$	—		$	6			$	80,070		$	375		$	80,451

	Bank			Consent Order Regulatory Requirement

Tier I capital to total average assets		8.54	%		8.00	%

Tier I capital to risk-weighted assets		13.12	%		NA	%

Common equity Tier I capital to risk-weighted assets		13.12	%		NA	%

Total capital to risk-weighted assets		14.42	%		12.00	%

Construction and land real estate	2023		2022		2021		2020		2019		Prior		Revolving Loans (Amortized Cost Basis)		Revolving Loans Converted to Term Loans (Amortized Cost Basis)		Total
Pass	$	808	$	15,223	$	2,079	$	1,519	$	-	$	-	$	-	$	-	$	19,629
OLEM (Other Loans Especially Mentioned)		-		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-		-
Doubtful		-		-		-		-		-		-		-		-		-
Loss		-		-		-		-		-		-		-		-		-
Subtotal loans	$	808	$	15,223	$	2,079	$	1,519	$	-	$	-	$	-	$	-	$	19,629
Current period Gross write-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Residential real estate
Pass	$	-	$	26,695	$	9,908	$	6,841	$	4,122	$	3,634	$	887	$	-	$	52,087
OLEM (Other Loans Especially Mentioned)		-		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-		-
Doubtful		-		-		-		-		-		-		-		-		-
Loss		-		-		-		-		-		-		-		-		-
Subtotal loans	$	-	$	26,695	$	9,908	$	6,841	$	4,122	$	3,634	$	887	$	-	$	52,087
Current period Gross write-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
Weighted-average number of common shares outstanding used to calculate basic and diluted (loss) earnings per common share		1,103,447		1,097,644		1,103,447		1,024,704

	Fair Value		Level 1		Level 2		Level 3		Total Losses		Losses Recorded in Operations
*At September 30, 2017-*
Residential real estate	$	1,018	$	—	$	—	$	1,018	$	461	$	—

	Fair Value Measurements Using
	Fair Value		Quoted Prices In Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)

At September 30, 2017:
Collateralized mortgage obligations	$	8,882		—	$	8,882		—
SBA Pool Securities		7,317		—		7,317		—

	$	16,199		—	$	16,199		—
At December 31, 2016:
Collateralized mortgage obligations	$	9,752	$	—	$	9,752	$	—
SBA Pool Securities		10,470		—		10,470		—

	$	20,222	$	—	$	20,222	$	—

	At September 30, 2017							At December 31, 2016
	Carrying Amount		Fair Value			Level		Carrying Amount		Fair Value			Level
Financial assets:
Cash and cash equivalents	$	18,514	$	18,514			1	$	17,640	$	17,640			1
Securities available for sale		16,199		16,199			2		20,222		20,222			2
Loans		69,194		69,095			3		76,999		76,829			3
Federal Home Loan Bank stock		979		979			3		1,113		1,113			3
Accrued interest receivable		366		366			3		380		380			3

Financial liabilities:
Deposit liabilities		77,374		77,935			3		86,009		86,364			3
Federal Home Loan Bank advances		20,500		20,458			3		23,500		23,500			3
Junior subordinated debenture		5,155		NA	⁽¹⁾		3		5,155		N/A	⁽¹⁾		3
Off-balance sheet financial instruments		—		—			—		—		—			—

	Actual					For Capital Adequacy Purposes					Minimum To Be Well Capitalized Under Prompt Corrective Action Provisions					Requirements of Consent Order
	Amount		%			Amount		%			Amount		%			Amount		%
As of September 30, 2017:
Total Capital to Risk-Weighted Assets	$	10,472		14.42	%	$	5,809		8.0	%	$	7,262		10.0	%	$	8,714		12.00	%
Tier I Capital to Risk-Weighted Assets		9,527		13.12	%		4,357		6.0	%		5,809		8.0	%		NA		NA
Common equity Tier I capital to Risk-Weighted Assets		9,527		13.12	%		3,268		4.5	%		4,720		6.5	%		NA		NA
Tier I Capital to Total Assets		9,527		8.54	%		4,463		4.0	%		5,579		5.0	%		8,926		8.00	%

As of December 31, 2016:
Total Capital to Risk-Weighted Assets	$	10,662		12.79	%	$	6,609		8.0	%	$	8,261		10.0	%	$	9,913		12.0	%
Tier I Capital to Risk-Weighted Assets		9,498		11.50	%		4,957		6.0	%		6,609		8.0	%		N/A		N/A
Common equity Tier I capital to Risk-Weighted Assets		9,498		11.50	%		3,718		4.5	%		5,370		6.5	%		N/A		N/A
Tier I Capital to Total Assets		9,498		8.06	%		4,714		4.0	%		5,893		5.0	%		9,428		8.0	%