UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

~~[X]~~☒

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

For the quarterly period ended September 30, ~~2020~~2021

~~[ ]~~☐

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

For the transition period from __________ to _________

Commission File Number: 000-50755

OPTIMUMBANK HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

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

2929 East Commercial Boulevard, Fort Lauderdale, FL33308

(Address of principal executive offices)

~~954-900-2800~~954-900-2800

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

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

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

Large accelerated filer ~~[ ]~~☐		Accelerated filer ~~[ ]~~☐
Non-accelerated filer ~~[X]~~ ☒		Smaller reporting company ~~[X]~~☒
		Emerging growth company ~~[ ]~~☐

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. ~~Yes [ ] No [X]~~☐

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: ~~2,951,353~~4,730,709 shares of common stock, $.01 par value, issued and outstanding as of ~~November 12, 2020.~~October 29, 2021.

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

INDEX

	Page

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements	1

Condensed Consolidated Balance Sheets - September 30, ~~2020~~2021 (unaudited) and December 31, ~~2019~~2020	1

Condensed Consolidated Statements of Operations ~~– Three and Nine Months ended September 30, 2020 and 2019 (unaudited)~~	2

~~Condensed Consolidated Statements of Comprehensive Loss~~ - Three and Nine Months ended September 30, 2021 and 2020 ~~and 2019~~ (unaudited)	32

Condensed Consolidated Statements of Comprehensive Income (Loss) - Three and Nine Months ended September 30, 2021 and 2020 (unaudited)	3

Condensed Consolidated Statements of Stockholders’ Equity - Three and Nine Months ended September 30, 2021 and 2020 ~~and 2019~~ (unaudited)	4

Condensed Consolidated Statements of Cash Flows -– Nine Months ended September 30, 2021 and 2020 ~~and 2019~~ (unaudited)	5

Notes to Condensed Consolidated Financial Statements (unaudited)	6

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	2019

Item 4. Controls and Procedures	2625

PART II. OTHER INFORMATION

Item 1. Legal Proceedings	2625

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	2625

Item 3. Defaults on Senior Securities	2625

Item 4. Mine Safety Disclosures	2625

Item 5. Other Information	2625

Item 6. Exhibits	2625

SIGNATURES	2726

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Condensed Consolidated Balance Sheets

(Dollars in thousands, except per share amounts)

	30-Sep-20			31-Dec-19			September 30, 2021			December 31, 2020
	(Unaudited)						(Unaudited)
Assets:
Cash and due from banks	$	25,868		$	2,111		$	16,563		$	25,523
Interest-bearing deposits with banks		19,403			6,823			67,020			29,106
Total cash and cash equivalents		45,271			8,934			83,583			54,629
Debt securities available for sale		7,460			5,409			35,738			18,893
Debt securities held-to-maturity (fair value of $4,794 and $5,986)		4,571			5,806
Loans, net of allowance for loan losses of $2,145 and $2,009		144,532			102,233
Debt securities held-to-maturity (fair value of $1,375 and $3,549)								1,327			3,399
Loans, net of allowance for loan losses of $2,695 and $1,906								205,865			152,469
Federal Home Loan Bank stock		1,092			642			793			1,092
Premises and equipment, net		1,423			1,389			1,571			1,413
Right-of-use operating lease assets		942			1,055
Right-of-use lease assets								969			904
Accrued interest receivable		1,544			432			863			1,336
Foreclosed real estate		681			—
Other assets		1,088			848			4,364			977

Total assets	$	208,604		$	126,748		$	335,073		$	235,112
Liabilities and Stockholders’ Equity:

Liabilities:
Noninterest-bearing demand deposits	$	49,946		$	10,545		$	114,011		$	58,312
Savings, NOW and money-market deposits		89,501			55,475			153,406			110,704
Time deposits		28,269			35,352			14,329			21,743

Total deposits		167,716			101,372			281,746			190,759

Federal Home Loan Bank advances		23,000			13,000			18,000			23,000
Junior subordinated debenture		2,580			2,580			-			2,068
Official checks		143			208			491			142
Operating lease liabilities		958			1,061			998			923
Other liabilities		523			1,320			666			386

Total liabilities		194,920			119,541			301,901			217,278

Commitments and contingencies (Notes 8 and 11)
Commitments and contingencies (Notes 1, 8 and 11)								-
Stockholders’ equity:
Preferred stock, no par value; 6,000,000 shares authorized:
Designated Series A, no par value, no shares issued and outstanding		—			—
Designated Series B, no par value, 280 shares issued and outstanding in 2020		—			—
Common stock, $.01 par value; 10,000,000 shares authorized, 2,951,353 shares issued and outstanding in 2020 and 2,853,171 shares issued and outstanding in 2019		29			28
Preferred stock, 0 par value; 6,000,000 shares authorized:								—			—
Designated Series B, 0 par value, 760 shares authorized, 760 and 400 shares issued and outstanding								—			—
Common stock, $.01 par value; 10,000,000 shares authorized, 4,524,509 and 3,203,455 shares issued and outstanding								45			32
Additional paid-in capital		46,532			38,994			64,146			50,263
Accumulated deficit		(32,761	)		(31,610	)		(30,683	)		(32,392	)
Accumulated other comprehensive loss		(116	)		(205	)		(336	)		(69	)

Total stockholders’ equity		13,684			7,207			33,172			17,834
Total liabilities and stockholders’ equity	$	208,604		$	126,748		$	335,073		$	235,112

See accompanying notes to condensed consolidated financial statements.

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

Condensed Consolidated Statements of Operations (Unaudited)

(in thousands, except per share amounts)


	Three Months Ended						Nine Months Ended						Three Months Ended					Nine Months Ended
	September 30,						September 30,						September 30,					September 30,
	2020			2019			2020			2019			2021		2020			2021		2020
Interest income:
Loans	$	1,723		$	1,140		$	4,697		$	3,328		$	2,795	$	1,723		$	6,820	$	4,697
Debt securities		41			63			136			184			150		41			327		136
Other		7			58			67			184			28		7			81		67

Total interest income		1,771			1,261			4,900			3,696			2,973		1,771			7,228		4,900

Interest expense:
Deposits		290			408			1,047			1,057			146		290			480		1,047
Borrowings		96			130			322			415			62		96			241		322

Total interest expense		386			538			1,369			1,472			208		386			721		1,369

Net interest income		1,385			723			3,531			2,224			2,765		1,385			6,507		3,531

Provision for loan losses		524			45			1,236			45			582		524			955		1,236

Net interest income after provision for loan losses		861			678			2,295			2,179			2,183		861			5,552		2,295

Noninterest income:
Service charges and fees		1			4			52			11			375		1			816		52
Other		63			25			118			142			48		63			86		118

Total noninterest income		64			29			170			153			423		64			902		170

Noninterest expenses:
Salaries and employee benefits		582			492			1,616			1,522			921		582			2,347		1,616
Professional fees		121			114			368			341			141		121			393		368
Occupancy and equipment		146			119			435			366			156		146			467		435
Data processing		132			141			381			394			195		132			542		381
Insurance		21			24			66			66			23		21			69		66
Regulatory assessment		59			18			129			40			20		59			147		129
Other		360			79			621			511			233		360			780		621

Total noninterest expenses		1,421			987			3,616			3,240			1,689		1,421			4,745		3,616

Net loss before income tax benefit		(496	)		(280	)		(1,151	)		(908	)
Net earnings (loss) before income taxes														917		(496	)		1,709		(1,151	)

Income tax benefit		—			—			—			(52	)
Income taxes														—		—			—		—

Net loss	$	(496	)	$	(280	)	$	(1,151	)	$	(856	)
Net earnings (loss)													$	917	$	(496	)	$	1,709	$	(1,151	)

Net loss per share - Basic and diluted	$	(0.17	)	$	(.15	)	$	(0.39	)	$	(.45	)
Net earnings (loss) per share - basic and diluted													$	0.21	$	(0.17	)	$	0.47	$	(0.39	)

See accompanying notes to condensed consolidated financial statements.

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

Condensed Consolidated Statements of Comprehensive ~~Loss~~Income (Loss) (Unaudited)

(In thousands)

Three Months Ended Nine Months Ended
September 30, September 30,
2020 2019 2020 2019

Net loss $ (496 ) $ (280 ) $ (1,151 ) $ (856 )

Other comprehensive income:
Change in unrealized gain on debt securities-
Unrealized (loss) gain arising during the year (30 ) 5 36 80

Amortization of unrealized loss on debt securities transferred to held-to-maturity 35 28 83 67

Other comprehensive income before income tax expense 5 33 119 147

Deferred income tax expense on above change (2 ) (8 ) (30 ) (37 )

Total other comprehensive income 3 25 89 110

Comprehensive loss $ (493 ) $ (255 ) $ (1,062 ) $ (746 )


	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2021		2020			2021			2020

Net earnings (loss)	$	917	$	(496	)	$	1,709		$	(1,151	)

Other comprehensive income (loss):
Change in unrealized gain on debt securities:
Unrealized gain (loss) arising during the period		233		(30	)		(340	)		36

Amortization of unrealized loss on debt securities transferred to held-to-maturity		18		35			98			83

Other comprehensive income (loss) before income taxes		251		5			(242	)		119

Deferred income taxes		—		(2	)		(25	)		(30	)

Total other comprehensive income (loss)		251		3			(267	)		89

Comprehensive income (loss)	$	1,168	$	(493	)	$	1,442		$	(1,062	)

See accompanying notes to condensed consolidated financial statements.

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

Condensed Consolidated Statements of Stockholders’ Equity

Three and Nine Months Ended September 30, ~~2020~~2021 and ~~2019~~2020

(Dollars in thousands)


	Preferred Stock												Additional					Accumulated Other
	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, 2019		-	$	-		--	$	-		2,853,171	$	28		$  38,994	$	(31,610	)	$	(205	)	$	7,207
Proceeds from the sale of preferred stock (unaudited)
Proceeds from the sale of preferred stock (unaudited), shares

Proceeds from the sale of common stock (unaudited)		-		-		-		-		98,182		1		538		-			-			539
Common stock issued for junior subordinated debenture interest payable (unaudited)
Common stock issued for junior subordinated debenture interest payable (unaudited),shares

Net loss for the three months ended March 31, 2020 (unaudited)		-		-		-		-		-		-		-		(308	)		-			(308	)

Net change in unrealized loss on debt securities available for sale, net of income taxes (unaudited)		-		-		-		-		-		-		-		-			35			35

Amortization of unrealized loss on debt securities transferred to held-to-maturity, net of income taxes (unaudited)		-		-		-		-		-		-		-		-			18			18

Balance at March 31, 2020 (unaudited)		-		-		-		-		2,951,353		29		39,532		(31,918	)		(152	)		7,491

Proceeds from the sale of preferred stock (unaudited)		—		—		100		—		—		—		2,500		—			—			2,500

Net loss for the three months ended June 30, 2020 (unaudited)		—		—		—		—		—		—		—		(347	)		—			(347	)

Net change in unrealized gain on debt securities available for sale, net of income taxes (unaudited)		—		—		—		—		—		—		—		—			15			15

Amortization of unrealized loss on debt securities transferred to held-to-maturity, net of income taxes (unaudited)		—		—		—		—		—		—		—		—			18			18

Balance at June 30, 2020 (unaudited)		—		—		100		—		2,951,353		29		42,032		(32,265	)		(119	)		9,677

Proceeds from the sale of preferred stock (unaudited)		-		-		180		-		-		-		4,500		-			-			4,500

Net loss (unaudited)		-		-		-		-		-		-		-		(496	)		-			(496	)

Net change in unrealized gain on debt securities available for sale, net of income taxes (unaudited)		-		-		-		-		-		-		-		-			(23	)		(23	)

Amortization of unrealized loss on debt securities transferred to held-to-maturity, net of income taxes (unaudited)		-		-		-		-		-		-		-		-			26			26

Balance at September 30, 2020 (unaudited)		-	$	-		280	$	-		2,951,353	$	29	$	46,532	$	(32,761	)	$	(116	)	$	13,684

Balance at December 31, 2020		—		—		400		—		3,203,455		32		50,263		(32,392	)		(69	)		17,834

Proceeds from the sale of preferred stock (unaudited)		—		—		160		—		—		—		4,000		—			—			4,000

Common stock issued for junior subordinated debenture interest payable (unaudited)		—		—		—		—		11,042		—		41		—			—			41

Net change in unrealized gain on loss securities available for sale (unaudited)		—		—		—		—		—		—		—		—			(922	)		(922	)

Amortization of unrealized loss on debt securities transferred to held-to-maturity (unaudited)		—		—		—		—		—		—		—		—			22			22

Net earnings (unaudited)		—		—		—		—		—		—		—		348			—			348

Balance at March 31, 2021 (unaudited)		—	$	—		560	$	—		3,214,497	$	32	$	54,304	$	(32,044	)	$	(969	)	$	21,323

Proceeds from the sale of preferred stock (unaudited)		—		—		200		—		—		—		5,000		—			—			5,000

Proceeds from the sale of common stock (unaudited)		—		—		—		—		262,417		3		1,173		—			—			1,176

Common stock issued for junior subordinated debenture (unaudited)		—		—		—		—		282,377		3		844		—			—			847

Net change in unrealized gain on debt securities available for sale (unaudited)		—		—		—		—		—		—		—		—			349			349

Amortization of unrealized loss on debt securities transferred to held-to-maturity (unaudited)		—		—		—		—		—		—		—		—			33			33

Net earnings for three months ended June 30, 2021 (unaudited)		—		—		—		—		—		—		—		444			—			444

Balance at June 30, 2021 (unaudited)		—		—		760		—		3,759,291		38		61,321		(31,600	)		(587	)		29,172

Proceeds from the sale of common stock (unaudited)		—		—		—		—		358,023		3		1,608		—			—			1,611

Common stock issued for junior subordinated debenture (unaudited)		—		—		—		—		407,195		4		1,217		—			—			1,221

Net change in unrealized gain on debt securities available for sale (unaudited)		—		—		—		—		—		—		—		—			233			233

Amortization of unrealized loss on debt securities transferred to held-to-maturity (unaudited)		—		—		—		—		—		—		—		—			18			18

Net earnings for three months ended September 30, 2021 (unaudited)		—		—		—		—		—		—		—		917			—			917

Net earnings (loss)		—		—		—		—		—		—		—		917			—			917

Balance at September 30, 2021 (unaudited)		—	$	—		760	$	—		4,524,509	$	45	$	64,146	$	(30,683	)	$	(336	)	$	33,172

See accompanying notes to condensed consolidated financial statements.

Preferred Stock Additional Accumulated Other
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, 2018 - $ - - $ - $ 1,858,020 $ 18 $ 36,128 $ (30,510 ) $ (330 ) $ 5,306

Net loss (unaudited) - - - - - - - (146 ) - (146 )

Net change in unrealized loss on securities available for sale, net of income taxes (unaudited) - - - - - - - - 3 3

Amortization of unrealized loss on debt securities transferred to held-to-maturity, net of income taxes (unaudited) - - - - - - - - 14 14

Balance at March 31, 2019 (unaudited) - $ - - $ - $ 1,858,020 $ 18 $ 36,128 $ (30,656 ) $ (313 ) $ 5,177

Common stock issued and reclassified from other liabilities (unaudited) - - - - 11,250 - 28 - - 28

Common stock issued as compensation to directors (unaudited) - - - - 58,309 1 200 - - 201

Net loss (unaudited) - - - - - - - (430 ) - (430 )

Net change in unrealized loss on securities available for sale, net of income taxes (unaudited) - - - - - - - - 53 53

Amortization of unrealized loss on debt securities transferred to held-to-maturity (unaudited) - - - - - - - - 15 15

Balance at June 30, 2019 (unaudited) - $ - - $ - 1,927,579 $ 19 $ 36,356 $ (31,086 ) $ (245 ) $ 5,044

Common stock issued and reclassified from other liabilities (unaudited) - - - - 1,197 - 3 - - 3

Net loss (unaudited) - - - - - - - (280 ) - (280 )

Net change in unrealized loss on securities available for sale, net of income taxes (unaudited) - - - - - - - - 4 4

Amortization of unrealized loss on securities transferred to held to maturity (unaudited) - - - - - - - - 21 21

Balance at September 30, 2019 (unaudited) - - - - 1,928,776 $ 19 $ 36,359 $ (31,366 ) $ (220 ) $ 4,792

Balance at December 31, 2019 - $ - - $ - 2,853,171 $ 28 $ 38,994 $ (31,610 ) $ (205 ) $ 7,207

Proceeds from the sale of common stock (unaudited) - - - - 98,182 1 538 - - 539

Net loss (unaudited) - - - - - - - (308 ) - (308 )

Net change in unrealized gain on debt securities available for sale, net of income taxes (unaudited) - - - - - - - - 35 35

Amortization of unrealized loss on debt securities transferred to held-to-maturity, net of income taxes (unaudited) - - - - - - - - 18 18

Balance at March 31, 2020 (unaudited) - $ - - $ - 2,951,353 $ 29 $ 39,532 $ (31,918 ) $ (152 ) $ 7,491

Proceeds from the sale of preferred stock (unaudited) - - 100 - - - 2,500 - - 2,500

Net loss (unaudited) - - - - - - - (347 ) - (347 )

Net change in unrealized gain on debt securities available for sale, net of income taxes (unaudited) - - - - - - - - 15 15

Amortization of unrealized loss on debt securities transferred to held-to-maturity, net of income taxes (unaudited) - - - - - - - - 18 18

Balance at June 30, 2020 (unaudited) - $ - 100 $ - 2,951,353 $ 29 $ 42,032 $ (32,265 ) $ (119 ) $ 9,677

Proceeds from the sale of preferred stock (unaudited) - - 180 - - - 4,500 - - 4,500

Net loss (unaudited) - - - - - - - (496 ) - (496 )

Net change in unrealized gain on debt securities available for sale, net of income taxes (unaudited) - - - - - - - - (23 ) (23 )

Amortization of unrealized loss on debt securities transferred to held-to-maturity, net of income taxes (unaudited) - - - - - - - - 26 26

Balance at September 30, 2020 (unaudited) - $ - 280 $ - 2,951,353 $ 29 $ 46,532 $ (32,761 ) $ (116 ) $ 13,684

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In thousands)


	Nine Months Ended
	September 30,
	2021			2020
Cash flows from operating activities:
Net earnings (loss)	$	1,709		$	(1,151	)
Adjustments to reconcile net earnings (loss) to net cash used in operating activities:
Provision for loan losses		955			1,236
Depreciation and amortization		156			132
Stock - based compensation		200			200
Net accretion of fees, premiums and discounts		(586	)		(27	)
Decrease (increase) in accrued interest receivable		473			(1,112	)
Amortization of right of use asset		126			113
Net decrease in operating lease liabilities		(116	)		(103	)
Increase in other assets		(3,412	)		(270	)
Increase (decrease) in official checks and other liabilities		470			(1,063	)
Net cash used in operating activities		(25	)		(2,045	)

Cash flows from investing activities:
Purchase of debt securities available for sale		(19,513	)		(3,638	)
Principal repayments of debt securities available for sale		2,184			1,585
Principal repayments of debt securities held-to-maturity		2,113			1,276
Net increase in loans		(53,564	)		(44,109	)
Purchases of premises and equipment		(314	)		(165	)
Redemption (purchase) of FHLB stock		299			(450	)

Net cash used in investing activities		(68,795	)		(45,501	)

Cash flows from financing activities:
Net increase in deposits		90,987			66,344
Net (decrease) increase in FHLB Advances		(5,000	)		10,000
Proceeds from sale of preferred stock		9,000			7,000
Proceeds from sale of common stock		2,787			539

Net cash provided by financing activities		97,774			83,883

Net increase in cash and cash equivalents		28,954			36,337

Cash and cash equivalents at beginning of the period		54,629			8,934

Cash and cash equivalents at end of the period	$	83,583		$	45,271

Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest	$	776		$	2,354

Income taxes	$	—		$	—

Noncash transactions:
Change in accumulated other comprehensive loss, net change in unrealized (loss) gain on debt securities available for sale, net of income taxes	$	(267	)	$	89

Amortization of unrealized loss on debt securities transferred to held-to-maturity	$	98		$	83

Right-of use lease assets obtained in exchange for operating lease liabilities	$	191		$	—

Transfer of loans to foreclosed real estate	$	—		$	681
Increase in other liabilities for Stock-based compensation	$	200		$	200
Issuance of common stock for Junior Subordinated Debenture	$	2,068		$	—
Issuance of common stock for Junior Subordinated Debenture interest payable	$	41		$	—

See accompanying notes to condensed consolidated financial statements

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

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

~~(In thousands)~~

Nine Months Ended
September 30,

2020 2019
Cash flows from operating activities:
Net loss $ (1,151 ) $ (856 )
Adjustments to reconcile net loss to net cash used in operating activities:
Provision for loan losses 1,236 45
Depreciation and amortization 132 132
Stock-based compensation 200 201
Net amortization of fees, premiums and discounts (27 ) 153
Increase in accrued interest receivable (1,112 ) (40 )
Amortization of right-of-use operating lease assets 113 52
Net decrease in operating lease liabilities (103 ) (49 )
Increase in other assets (270 ) (614 )
Decrease in official checks and other liabilities (1,063 ) (117 )
Net cash used in operating activities (2,045 ) (1,093 )

Cash flows from investing activities:
Purchase of debt securities available for sale (3,638 ) (4,153 )
Principal repayments of debt securities available for sale 1,585 676
Principal repayments of debt securities held-to-maturity 1,276 977
Net increase in loans (44,109 ) (14,990 )
Purchases of premises and equipment (165 ) (217 )
(Purchase) redemption of FHLB stock (450 ) 490

Net cash used in investing activities (45,501 ) (17,217 )

Cash flows from financing activities:
Net increase in deposits 66,344 30,887
Net decrease in federal funds purchased — (560 )
Net increase (decrease) in Federal Home Loan Bank advances 10,000 (11,600 )
Proceeds from sale of common stock 539 —
Proceeds from sale of preferred stock 7,000 —

Net cash provided by financing activities 83,883 18,727

Net increase in cash and cash equivalents 36,337 417

Cash and cash equivalents at beginning of the period 8,934 7,983

Cash and cash equivalents at end of the period $ 45,271 $ 8,400

Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 2,354 $ 1,249

Income taxes $ — $ —

Noncash transaction -
Change in accumulated other comprehensive loss, net change in unrealized gain on debt securities available for sale, net of income taxes $ 89 $ 110

Amortization of unrealized loss on debt securities transferred to held-to-maturity $ 83 $ 67

Common stock issued and reclassified from other liabilities $ — $ 31

Right-of use lease assets obtained in exchange for operating lease liabilities $ — $ 1,144

Transfer of loan to foreclosed real estate $ 681 $ —

~~See accompanying notes to condensed consolidated financial statements~~

~~(continued)~~

~~OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY~~

Notes to Condensed Consolidated Financial Statements (Unaudited)

(1) General. OptimumBank Holdings, Inc. (the “Company”) is a one-bank holding company and owns 100% of 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.

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, 2021, and the results of operations and cash flows for the three and nine month periods ended September 30, 2021 and 2020. All significant intercompany accounts and transactions have been eliminated in consolidation. The results of operations for the three and nine months ended September 30, 2021, are not necessarily indicative of the results to be expected for the full year.

Subsequent Events. The Company has evaluated subsequent events through November 9, 2021, which is the date the condensed consolidated financial statements were issued.

Coronavirus Global Pandemic (“COVID-19”). The Company is subject to risks related to the public health crisis associated with COVID-19. COVID-19 has negatively impacted the global economy, disrupted global supply chains and created significant volatility and disruption in financial markets. The extent to which COVID-19 impacts the Company’s business, results of operations, and financial condition, as well as loan quality, regulatory capital and liquidity ratios, will depend on future developments, the duration of the pandemic, and actions taken by governmental authorities to slow the spread of the disease or to mitigate its effects.

Junior Subordinated Debenture. In 2004, the Company formed OptimumBank Capital Trust I (the “Trust’’) for the purpose of raising capital through the sale of trust preferred securities. At that time, the Trust raised $5,155,000 through the sale of 5,000 trust preferred securities (the “Trust Preferred Securities”) to a third-party investor and the issuance of 155 common trust securities to the Company. The Trust utilized the proceeds of $5,155,000 to purchase a junior subordinated debenture from the Company (the “Junior Subordinated Debenture”).

The outstanding principal amount of the Junior Subordinated Debenture at December 31, 2020, was $2,068,000, together with accrued interest of $30,000 at December 31, 2020. The accrued interest is presented on the accompanying condensed consolidated balance sheet under the caption “Other liabilities”.

During the first nine months of 2021, the Company acquired all of the outstanding Trust Preferred Securities and paid all accrued interest in exchange for 700,614 shares of the Company’s common stock. These shares were issued in the following transactions:

During the first quarter of 2021, the Company issued 11,042 shares of common stock to pay approximately $41,000 of accrued interest associated with the Junior Subordinated Debenture.

During the second quarter of 2021, the Company issued 282,377 shares of common stock in exchange for 840 Trust Preferred Securities. For accounting purposes, the Trust Preferred Securities acquired by the Company were deemed to be cancelled. As a result, the Company cancelled $840,000 in principal amount of the Trust Preferred Securities, together with accrued interest of $7,000, and increased its stockholders’ equity by the same amount.

During the third quarter of 2021, the Company issued 407,195 shares of common stock in exchange for the remaining 1,228 Trust Preferred Securities. For accounting purposes, the Trust Preferred Securities acquired by the Company were deemed to be cancelled. As a result, the Company cancelled $1,221,000 in principal amount of the Trust Preferred Securities and increased its stockholders’ equity by the same amount.

As of September 30, 2021, the Company had acquired all of the Trust Preferred Securities. Accordingly, there was no principal or accrued interest owed by the Company with respect to the Junior Subordinated Debenture or the Trust Preferred Securities at September 30, 2021.

(continued)

~~(1)~~	*~~General.~~* OptimumBank Holdings, Inc. (the “Company”) is a one-bank holding company and owns 100% of OptimumBank (the “Bank”), a Florida-chartered commercial 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 three banking offices located in Broward County, Florida.

	~~Basis of Presentation~~. In the opinion of management, the accompanying unaudited 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, 2020, the results of operations for the three and nine month periods ended September 30, 2020 and 2019, and the results of cash flows for the nine month periods ended September 30, 2020 and 2019. All significant intercompany accounts and transactions have been eliminated in consolidation. The results of operations for the three and nine months ended September 30, 2020, are not necessarily indicative of the results to be expected for the full year. The accompanying unaudited condensed consolidated financial statements and notes thereto should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2019 included in the Company’s Annual Report on Form 10-K, which was filed with the SEC on March 25, 2020.

	*~~Subsequent Events.~~* The Company has evaluated subsequent events through November 12, 2020, which is the date the condensed consolidated financial statements were issued, determining no additional events required disclosure.

	*~~Junior Subordinated Debenture.~~* In 2004, the Company formed OptimumBank Capital Trust I (the “Trust’’) for the purpose of raising capital through the sale of trust preferred securities. At that time, the Trust raised $5,155,000 through the sale of 5,000 trust preferred securities (the “Trust Preferred Securities”) to a third party investor and the issuance of 155 common trust securities to the Company. The Trust utilized the proceeds of $5,155,000 to purchase a junior subordinated debenture from the Company (the “Junior Subordinated Debenture”). Under the Junior Subordinated Debenture, the Company is required to make interest payments on a periodic basis and to pay the outstanding principal amount plus accrued interest on October 7, 2034. In May 2018, Preferred Shares, LLC (the “Purchaser”) acquired all 5,000 of the Trust Preferred Securities from a third party. The Purchaser is an affiliate of a director of the Company. The Purchaser has subsequently sold and/or transferred 2,575 of the Trust Preferred Securities to unaffiliated third parties. During 2019 and 2018, the Company issued 1,226,173 shares of the Company’s common stock in exchange for 2,575 Trust Preferred Securities. For accounting purposes, the Trust Preferred Securities acquired by the Company were deemed to be cancelled. As a result, the Company cancelled $2,575,000 in principal amount of the Trust Preferred Securities, together with accrued interest of $974,000, and increased its stockholders’ equity by the same amount. The remaining principal owed by the Company in connection with the Junior Subordinated Debenture was $2,580,000 at September 30, 2020 and December 31, 2019, respectively. The Company has been in default under the Junior Subordinated Debenture due to the failure to pay interest since 2015. In September 2020, the Company paid approximately $1.1 million to the holders of the outstanding Trust Preferred Securities, which represented all accrued interest owed under the Junior Subordinated Debenture attributable to the Trust Preferred Securities that had not been cancelled. The accrued interest owed by the Company associated with the Junior Subordinated Debenture was $0 and $995,000 at September 30, 2020 and December 31, 2019 respectively. The accrued interest at December 31, 2019 is presented on the accompanying condensed consolidated balance sheet under the caption “Other liabilities”.
	*~~Comprehensive Loss.~~* GAAP generally requires that recognized revenue, expenses, gains and losses be included in net loss. Although certain changes in assets and liabilities, such as unrealized gains and losses on available-for-sale debt securities, are reported as a separate component of the equity section of the condensed consolidated balance sheets, such items along with net loss, are components of comprehensive loss.

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (Unaudited)

(1) General, Continued.

Comprehensive Income (Loss). GAAP generally requires that recognized revenue, expenses, gains and losses be included in net earnings (loss). 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 (loss), are components of comprehensive income (loss).

Accumulated other comprehensive loss consists of the following (in thousands):

Schedule of Accumulated Other Comprehensive Loss

	September 30,			December 31,			September 30,			December 31,
	2020			2019			2021			2020

Unrealized gain on debt securities available for sale	$	47		$	11
Unrealized (loss) gain on debt securities available for sale							$	(290	)	$	50
Unamortized portion of unrealized loss related to debt securities available for sale transferred to securities held-to-maturity		(201	)		(284	)		(46	)		(144	)
Income tax benefit		38			68			—			25

	$	(116	)	$	(205	)
Accumulated other comprehensive loss							$	(336	)	$	(69	)

~~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, 2020. Accordingly, a valuation allowance was recorded against the net deferred tax asset.

~~(continued)~~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, 2021. Accordingly, a valuation allowance was recorded against the net deferred tax asset.

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

~~OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY~~Recent Pronouncements.

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

~~(1)~~

~~General, Continued.~~

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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 condensed consolidated 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, 2022. The Company is in the process of determining the effect of the ASU on its condensed consolidated financial statements.

(continued)

~~In August 2018, the FASB issued ASU 2018-13,~~ ~~Fair Value Measurement (Topic 820) - Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement ("ASU 2018-13").~~ ASU 2018-13 removes, modifies, and adds certain disclosure requirements associated with fair value measurements. ASU 2018-13 is effective for fiscal years, and interim periods, within those fiscal years, beginning after December 15, 2019. The removed and modified disclosures will be adopted on a prospective basis. The implementation had no significant impact on the Company's condensed consolidated financial statements.

~~(continued)~~

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (Unaudited)

~~(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):~~

Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value

At September 30, 2020:
Held-to-maturity:
Collateralized mortgage obligations $ 3,208 $ 168 $ — $ 3,376
Mortgage-backed securities 1,363 55 — 1,418
Total $ 4,571 $ 223 $ - $ 4,794
Available for sale:
SBA Pool Securities $ 1,364 $ — $ (43 ) $ 1,321
Collateralized mortgage obligations 582 35 — 617
Mortgage-backed securities 5,467 55 — 5,522
Total $ 7,413 $ 90 $ (43 ) $ 7,460
At December 31, 2019:
Held-to-maturity:
Collateralized mortgage obligations $ 4,218 $ 129 — $ 4,347
Mortgage-backed securities 1,588 51 — 1,639
Total $ 5,806 $ 180 — $ 5,986
Available for sale:
SBA Pool Securities $ 1,734 $ — $ (52 ) $ 1,682
Collateralized mortgage obligations 998 18 — 1,016
Mortgage-backed securities 2,666 45 — 2,711
Total $ 5,398 $ 63 $ (52 ) $ 5,409

(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):

Schedule of Amortized Cost and Approximate Fair Values of Debt Securities

			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value

At September 30, 2021:
Available for sale:
SBA Pool Securities	$	1,139	$	1	$	(27	)	$	1,113
Collateralized mortgage obligations		237		13		—			250
Taxable municipal securities		16,776		58		(165	)		16,669
Mortgage-backed securities		17,876		31		(201	)		17,706
Total	$	36,028	$	103	$	(393	)	$	35,738

Held-to-maturity:
Collateralized mortgage obligations	$	1,061	$	43		—		$	1,104
Mortgage-backed securities		266		5		—			271
Total	$	1,327	$	48		—		$	1,375

			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value

At December 31, 2020:
Available for sale:
SBA Pool Securities	$	1,338	$	—	$	(41	)	$	1,297
Collateralized mortgage obligations		458		27		—			485
Taxable municipal securities		5,063		29		(7	)		5,085
Mortgage-backed securities		11,984		53		(11	)		12,026
Total	$	18,843	$	109	$	(59	)	$	18,893

Held-to-maturity:
Collateralized mortgage obligations	$	2,420	$	116		—		$	2,536
Mortgage-backed securities		979		34		—			1,013
Total	$	3,399	$	150		—		$	3,549

There were no0 sales of debt securities during the three and nine months ended September 30, ~~2020~~2021 and ~~2019.~~2020.

(continued)

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (Unaudited)

(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 with Gross Unrealized Losses, by Investment Category

Over Twelve Less Than Twelve
Months Months
Gross Gross
Unrealized Fair Unrealized Fair
Losses Value Losses Value
At September 30, 2020-
Available for Sale -
SBA Pool securities $ 43 $ 1,321 $ — $ —

At December 31, 2019-
Available for Sale -
SBA Pool Securities $ 52 $ 1,682 $ — $ —

	At September 30, 2021
	Over Twelve Months					Less Than Twelve Months
	Gross					Gross
	Unrealized			Fair		Unrealized			Fair
	Losses			Value		Losses			Value

Available for Sale :
SBA Pool Securities		(27	)		907		—			—
Taxable municipal securities		—			—		(165	)		12,124
Mortgage-backed securities		(39	)		1,613		(162	)		15,205
Total	$	(66	)	$	2,520	$	(327	)	$	27,329

	At December 31, 2020
	Over Twelve Months					Less Than Twelve Months
	Gross					Gross
	Unrealized			Fair		Unrealized			Fair
	Losses			Value		Losses			Value

Available for Sale :
SBA Pool Securities		(41	)		1,297		—			—
Taxable municipal securities		—			—		(7	)		1,413
Mortgage-backed securities		—			—		(11	)		3,583
Total	$	(41	)	$	1,297	$	(18	)	$	4,996

~~(continued)~~

~~OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

~~(2)~~

~~Debt Securities Continued.~~

Management evaluates debt securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. Consideration is given to (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospectus of the issuer, and (3) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.

At September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the unrealized losses on ~~six~~twenty-nine and eleven debt securities respectively, were caused by market conditions. It is expected that the debt securities would not be settled at a price less than the book value of the investments. Because the decline in fair value is attributable to market conditions and not credit quality, and because the Company has the ability and intent to hold these investments until a market price recovery or maturity, these investments are not considered other-than-temporarily impaired.

~~(continued)~~

(continued)

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (Unaudited)

(3) Loans. The components of loans are as follows (in thousands):

Schedule of Components of Loans

	September 30,			December 31,
	2021			2020

Residential real estate	$	30,721		$	28,997
Multi-family real estate		41,159			19,210
Commercial real estate		102,416			74,398
Land and construction		4,694			4,750
Commercial		18,269			21,849
Consumer		12,085			5,715

Total loans		209,344			154,919

Deduct:
Net deferred loan fees, costs and premiums		(784	)		(544	)
Allowance for loan losses		(2,695	)		(1,906	)

Loans, net	$	205,865		$	152,469

~~(3)~~

~~Loans.~~ ~~The components of loans are as follows (in thousands):~~

At At
September 30,
2020 December 31,
2019

Residential real estate $ 32,094 $ 28,266
Multi-family real estate 16,052 8,396
Commercial real estate 67,060 55,652
Land and construction 4,332 2,496
Commercial 22,611 4,476
Consumer 5,080 4,903

Total loans 147,229 104,189

Net deferred (loan fees), costs and premiums (552 ) 53
Allowance for loan losses (2,145 ) (2,009 )

Loans, net $ 144,532 $ 102,233

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

Schedule of Change in Allowance for Loan Losses

	Residential Real			Multi- Family Real			Commercial			Land and															Real Estate			Real Estate		Commercial Real Estate		Land and Construction			Commercial			Consumer			Unallocated			Total
	Estate			Estate			Real Estate			Construction			Commercial			Consumer			Unallocated			Total			Residential			Multi-Family
																									Real Estate			Real Estate		Commercial Real Estate		Land and Construction			Commercial			Consumer			Unallocated			Total
Three Months Ended September 30, 2021:																											��

Beginning balance																									$	472		$	392	$	938	$	57		$	58		$	314		$	—		$	2,231
(Credit) provision for loan losses																										(29	)		102		349		(10	)		39			131			—			582
Charge-offs																										—			—		—		—			(10	)		(111	)		—			(121	)
Recoveries																										3			—		—		—			—			—			—			3

Ending balance																									$	446		$	494	$	1,287	$	47		$	87		$	334		$	—		$	2,695

Three Months Ended September 30, 2020:

Beginning balance	$	717		$	153		$	888		$	50		$	620		$	236		$	—		$	2,664		$	717		$	153	$	888	$	50		$	620		$	236		$	—		$	2,664
Provision (credit) for loan losses		85			75			84			(5	)		292			(7	)		—			524			85			75		84		(5	)		292			(7	)		—			524
Charge-offs		(259	)		—			—			—			(775	)		(17	)		—			(1,051	)		(259			—		—		—			(775	)		(17	)		—			(1,051	)
Recoveries		1			—			—			6			—			1			—			8			1			—		—		6			—			1			—			8

Ending balance	$	544		$	228		$	972		$	51		$	137		$	213		$	—		$	2,145		$	544		$	228	$	972	$	51		$	137		$	213		$	—		$	2,145

Three Months Ended September 30, 2019:
Nine Months Ended September 30, 2021:

Beginning balance	$	537		$	41		$	658		$	7		$	558		$	11		$	241		$	2,053		$	463		$	253	$	884	$	52		$	103		$	151		$	—		$	1,906
Provision (credit) for loan losses		(5	)		—			87			7			32			165			(241	)		45
(Credit) provision for loan losses																										(46	)		241		403		(13	)		4			366			—			955
Charge-offs		—			—			—			—			—			—			—			—			—			—		—		—			(20	)		(191	)		—			(211	)
Recoveries		—			—			—			6			—			—			—			6			29			—		—	$	8			—			8			—			45

Ending balance	$	532		$	41		$	745		$	20		$	590		$	176		$	—		$	2,104		$	446		$	494	$	1,287	$	47		$	87		$	334		$	—		$	2,695

Nine Months Ended September 30, 2020:

Beginning balance	$	531		$	82		$	624		$	21		$	573		$	152		$	26		$	2,009		$	531		$	82	$	624	$	21		$	573		$	152		$	26		$	2,009
Provision (credit) for loan losses		264			146			348			12			339			153			(26	)		1,236			264			146		348		12			339			153			(26	)		1,236
Charge-offs		(259	)		—			—			—			(775	)		(94	)		—			(1,128	)		(259	)		—		—		—			(775	)		(94	)		—			(1,128	)
Recoveries		8			—			—			18			—			2			—			28			8			—		—		18			—			2			—			28

Ending balance	$	544		$	228		$	972		$	51		$	137		$	213		$	-		$	2,145		$	544		$	228	$	972	$	51		$	137		$	213		$	-		$	2,145

Nine Months Ended September 30, 2019:

Beginning balance	$	544		$	88		$	545		$	37		$	850		$	25		$	154		$	2,243
(Credit) provision for loan losses		(12	)		(47	)		395			(35	)		(260	)		158			(154	)		45
Charge-offs		—			—			(195	)		—			—			(7	)		—			(202	)
Recoveries		—			—			—			18			—			—			—			18

Ending balance	$	532		$	41		$	745		$	20		$	590		$	176		$	—		$	2,104

(continued)

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (Unaudited)

(3) Loans, Continued.

			Multi-
	Residential		Family
	Real Estate		Real Estate		Commercial Real Estate		Land and Construction		Commercial		Consumer		Unallocated		Total
At September 30, 2021:
Individually evaluated for impairment:
Recorded investment	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Balance in allowance for loan losses	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Collectively evaluated for impairment:
Recorded investment	$	30,721	$	41,159	$	102,416	$	4,694	$	18,269	$	12,085	$	—	$	209,344
Balance in allowance for loan losses	$	446	$	494	$	1,287	$	47	$	87	$	334	$	—	$	2,695

At December 31, 2020:
Individually evaluated for impairment:
Recorded investment	$	—	$	—	$	2,193	$	—	$	—	$	—	$	—	$	2,193
Balance in allowance for loan losses	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Collectively evaluated for impairment:
Recorded investment	$	28,997	$	19,210	$	72,205	$	4,750	$	21,849	$	5,715	$	—	$	152,726
Balance in allowance for loan losses	$	463	$	253	$	884	$	52	$	103	$	151	$	—	$	1,906

(continued)

Residential
Real
Estate
Multi-
Family
Real
Estate
Commercial Real Estate Land and Construction Commercial Consumer Unallocated Total
At September 30, 2020:
Individually evaluated for impairment:
Recorded investment $ — $ — $ 2,193 $ — $ — $ — $ — $ 2,193
Balance in allowance for loan losses $ — $ — $ — $ — $ — $ — $ — $ —

Collectively evaluated for impairment:
Recorded investment $ 32,094 $ 16,052 $ 64,867 $ 4,332 $ 22,611 $ 5,080 $ — $ 145,036
Balance in allowance for loan losses $ 544 $ 228 $ 972 $ 51 $ 137 $ 213 $ — $ 2,145

At December 31, 2019:
Individually evaluated for impairment:
Recorded investment $ 944 $ — $ 2,206 $ — $ 812 $ — $ — $ 3,962
Balance in allowance for loan losses $ 258 $ — $ — $ — $ 531 $ — $ — $ 789

Collectively evaluated for impairment:
Recorded investment $ 27,322 $ 8,396 $ 53,446 $ 2,496 $ 3,664 $ 4,903 $ — $ 100,227
Balance in allowance for loan losses $ 273 $ 82 $ 624 $ 21 $ 42 $ 152 $ 26 $ 1,220

~~(continued)~~

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (Unaudited)

(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 and are underwritten based upon standards set forth in the policies approved by the 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. The Company has supported small business owners by making loans through the Small Business Administration Paycheck Protection Program (“PPP”). As of September 30, 2021, the Bank had originated 502 PPP loans for a total dollar amount of $37.4 million. These loans are 100% guaranteed by the Small Business Administration (the “SBA”). At September 30, 2021 outstanding PPP loans total approximately $14.3 million.

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.

(continued)

~~(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 borrower’s 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 and are underwritten based upon standards set forth in the policies approved by the 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 borrowing 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. Commercial loans also consist of Paycheck Protection Program (“PPP”) loans which are fully guaranteed by the federal government.

	*~~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.

~~(continued)~~

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (Unaudited)

~~(3)~~

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

Pass OLEM
(Other
Loans
Especially
Mentioned) Sub-
standard Doubtful Loss Total
At September 30, 2020:
Residential real estate $ 32,094 $ — $ — $ — $ — $ 32,094
Multi-family real estate 16,052 — — — — 16,052
Commercial real estate 63,055 1,812 2,193 — — 67,060
Land and construction 2,716 1,616 — — — 4,332
Commercial 22,073 538 — — — 22,611
Consumer 5,053 — 27 — — 5,080

Total $ 141,043 $ 3,966 $ 2,220 $ — $ — $ 147,229
— —
At December 31, 2019: — —
Residential real estate $ 27,322 $ — $ 944 $ — $ — $ 28,266
Multi-family real estate 8,396 — — — — 8,396
Commercial real estate 53,011 435 2,206 — — 55,652
Land and construction 1,261 1,235 — — — 2,496
Commercial 3,027 637 812 — — 4,476
Consumer 4,903 — — — — 4,903

Total $ 97,920 $ 2,307 $ 3,962 $ — $ — $ 104,189

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

Schedule of Loans by Credit Quality

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

At September 30, 2021:
Residential real estate	$	28,212	$	—	$	2,509	$	—	$	—	$	30,721
Multi-family real estate		41,159		—		—		—		—		41,159
Commercial real estate		99,825		2,591		—		—		—		102,416
Land and construction		4,694		—		—		—		—		4,694
Commercial		17,992		277		—		—		—		18,269
Consumer		12,085		—		—		—		—		12,085

Total	$	203,967	$	2,868	$	2,509	$	—	$	—	$	209,344

At December 31, 2020:
Residential real estate	$	28,151	$	—	$	846	$	—	$	—	$	28,997
Multi-family real estate		19,210		—		—		—		—		19,210
Commercial real estate		66,089		4,449		3,860		—		—		74,398
Land and construction		4,750		—		—		—		—		4,750
Commercial		20,735		1,114		—		—		—		21,849
Consumer		5,715		—		—		—		—		5,715

Total	$	144,650	$	5,563	$	4,706	$	—	$	—	$	154,919

Internally assigned loan grades are defined as follows:

	Pass – a 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 – an 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 – a Substandard loan is inadequately protected by the current 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 – a 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 – a 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 effected in the future. The Company fully charges off any loan classified as Loss.

(continued)

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (Unaudited)

~~(3)~~

~~Loans, Continued.~~ ~~Age analysis of past-due loans is as follows (in thousands):~~

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, 2020:
Residential real estate $ — $ — $ — $ — $ 32,094 $ — $ 32,094
Multi-family real estate — — — — 16,052 — 16,052
Commercial real estate — — — — 67,060 — 67,060
Land and construction — — — — 4,332 — 4,332
Commercial — — — — 22,611 — 22,611
Consumer 14 13 — 27 5,053 — 5,080

Total $ 14 $ 13 $ — $ 27 $ 147,202 $ — $ 147,229

At December 31, 2019:
Residential real estate $ 944 $ — $ — $ 944 $ 27,322 $ — $ 28,266
Multi-family real estate — — — — 8,396 — 8,396
Commercial real estate — — — — 55,652 — 55,652
Land and construction 1,235 — — 1,235 1,261 — 2,496
Commercial — — — — 3,664 812 4,476
Consumer — — — — 4,903 — 4,903

Total $ 2,179 $ — $ — $ 2,179 $ 101,198 $ 812 $ 104,189

(3) Loans, Continued. Age analysis of past-due loans is as follows (in thousands):

Schedule of Age Analysis of Past-due Loans

	Accruing Loans
					Greater
	30-59		60-89		Than 90
	Days Past		Days Past		Days Past		Total Past				Nonaccrual		Total
	Due		Due		Past		Due		Current		Loans		Loans

At September 30, 2021:
Residential real estate	$	—	$	—	$	—	$	—	$	30,721	$	—	$	30,721
Multi-family real estate		—		—		—		—		41,159		—		41,159
Commercial real estate		—		—		—		—		102,416		—		102,416
Land and construction		—		—		—		—		4,694		—		4,694
Commercial		—		—		—		—		18,269		—		18,269
Consumer		21		22		—		43		12,042		—		12,085

Total	$	21	$	22	$	—	$	43	$	209,301	$	—	$	209,344

	Accruing Loans
					Greater
	30-59 Days		60-89 Days		Than 90 Days		Total
	Past		Past		Past		Past				Nonaccrual		Total
	Due		Due		Due		Due		Current		Loans		Loans
At December 31, 2020:
Residential real estate	$	977	$	—	$	—	$	977	$	28,020	$	—	$	28,997
Multi-family real estate		—		—		—		—		19,210		—		19,210
Commercial real estate		—		—		—		—		72,205		2,193		74,398
Land and construction		—		—		—		—		4,750		—		4,750
Commercial		—		—		—		—		21,849		—		21,849
Consumer		6		—		—		6		5,709		—		5,715

Total	$	983	$	—	$	—	$	983	$	151,743	$	2,193	$	154,919

There were no impaired loans at September 30, 2021. The following summarizes the amount of impaired loans at December 31, 2020 (in thousands):

Schedule of Impaired Loans

December 31, 2020

Unpaid

Recorded

Principal

Investment

Balance

Allowance

With no related allowance recorded:

Commercial real estate

2,193

—

(continued)

At September 30, 2020 At December 31, 2019
Recorded
Investment Unpaid
Principal
Balance Related
Allowance Recorded
Investment Unpaid
Principal
Balance Related Allowance
With no related allowance recorded-
Commercial real estate $ 2,193 $ 2,193 $ — $ 2,206 $ 2,206 —
With related allowance recorded:
Residential real estate — — — 944 944 258
Commercial — — — 812 812 531
Total:
Residential real estate $ — $ — $ — $ 944 944 258
Commercial real estate $ 2,193 $ 2,193 $ — $ 2,206 2,206 —
Commercial $ — $ — $ — $ 812 $ 812 $ 531
Total $ 2,193 $ 2,193 $ — $ 3,962 $ 3,962 $ 789

~~(continued)~~

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (Unaudited)

(3) Loans, Continued. The average recorded investment in impaired loans and interest income recognized and received on impaired loans are as follows (in thousands):

Schedule of Interest Income Recognized and Received on Impaired Loans

	Three Months Ended September 30,
	2021						2020
	Average		Interest		Interest		Average		Interest		Interest
	Recorded		Income		Income		Recorded		Income		Income
	Investment		Recognized		Received		Investment		Recognized		Received

Residential real estate	$	—	$	—	$	—	$	626	$	—	$	—
Commercial real estate	$	—	$	—	$	—	$	2,193	$	26	$	—
Commercial	$	—	$	—	$	—	$	270	$	—	$	—
Total	$	—	$	—	$	—	$	3,089	$	26	$	—

	Nine Months Ended September 30,
	2021						2020
	Average		Interest		Interest		Average		Interest		Interest
	Recorded		Income		Income		Recorded		Income		Income
	Investment		Recognized		Received		Investment		Recognized		Received

Residential real estate	$	—	$	—	$	—	$	846	$	18	$	11
Commercial real estate	$	658	$	7	$	7	$	2,194	$	78	$	60
Commercial	$	—	$	—	$	—	$	649	$	—	$	18
Total	$	658	$	7	$	7	$	3,689	$	96	$	89

~~(3)~~

~~Loans, Continued.~~ ~~The average net investment in impaired loans and interest income recognized and received on impaired loans are as follows (in thousands):~~

Three Months Ended September 30,
2020 2019
Average Interest Interest Average Interest Interest
Recorded Income Income Recorded Income Income
Investment Recognized Received Investment Recognized Received

Residential real estate $ 626 $ — $ — $ 950 $ 19 $ 19
Commercial real estate $ 2,193 $ 26 $ — $ 2,280 $ 27 $ 27
Commercial $ 270 $ — $ — $ 812 $ — $ —
Total $ 3,089 $ 26 $ — $ 4,042 $ 46 $ 46

Nine Months Ended September 30,
2020 2019
Average Interest Interest Average Interest Interest
Recorded Income Income Recorded Income Income
Investment Recognized Received Investment Recognized Received

Residential real estate $ 846 $ 18 $ 11 $ 950 $ 56 $ 56
Commercial real estate $ 2,194 $ 78 $ 60 $ 2,808 $ 88 $ 86
Commercial $ 649 $ — $ 18 $ 1,327 43 $ 39
Total $ 3,689 $ 96 $ 89 $ 5,085 $ 187 $ 181

No loans have been determined to be troubled debt restructurings (TDR’s) during the three and nine month periods ended September 30, ~~2020~~2021 or ~~2019.~~2020. At September 30, ~~2020~~2021 and ~~2019,~~2020, there were no loans modified and entered into as TDR’s within the past twelve months, that subsequently defaulted during the three and nine month periods ended September 30, ~~2020~~2021 or ~~2019.~~2020.

(4) Earnings (Loss) Per Share. Basic earnings (loss) per share have been computed on the basis of the weighted-average number of shares of common stock outstanding during the period. During the three and nine month periods ended September 30, 2021, basic and diluted earnings per share is the same as there were no outstanding potentially dilutive securities. During the three and nine month periods ended September 30, 2020, basic and diluted loss per share is the same due to the net loss incurred by the Company. Earnings (loss) per common share have been computed based on the following:

Schedule of Basic and Diluted Loss Per Share

	2021		2020		2021		2020
	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
Weighted-average number of common shares outstanding used to calculate basic and diluted loss per common share		4,346,211		2,951,353		3,611,814		2,920,961

(continued)

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (Unaudited)

~~(4)~~

~~Loss Per Share.~~ Basic loss per share has been computed on the basis of the weighted-average number of shares of common stock outstanding during the period. In 2020 and 2019, basic and diluted loss per share are the same due to the net loss incurred by the Company. Loss per common share have been computed based on the following:

Three Months Ended Nine Months Ended
September 30, September 30,
2020 2019 2020 2019
Weighted-average number of common shares outstanding used to calculate basic and diluted loss per common share 2,951,353 1,928,269 2,920,961 1,889,592

~~(continued)~~(5) Stock-Based Compensation

~~OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY~~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 250,096 shares remain available for grant. NaN stock options are outstanding at September 30, 2021.

~~Notes~~During the first quarter of 2021, the Company agreed to ~~Condensed Consolidated Financial Statements (Unaudited)~~issue 62,112 shares to a director for services performed and recorded compensation expense of $200,000. At September 30, 2021 the director had not yet taken delivery of the shares. As such, at September 30, 2021, the $200,000 is presented on the accompanying condensed consolidated balance sheets under the caption of “other liabilities”. During October 2021, the director took delivery of the shares.

~~(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 currently authorized to issue up to 550,000 shares of common stock under the 2018 Plan, due to an amendment to increase the number of authorized shares from 250,000 to 550,000 that was approved by shareholders in August 2020. At September 30, 2020, 318,184 shares remain available for grant.

	~~During the second quarter of 2019, the Company recorded compensation expense of $201,000 with respect to 58,309 shares issued to a director for services performed.~~

	During the third quarter of 2020, the Company agreed to issue 74,626 shares to this director for services performed and recorded compensation expense of $200,000. The director has not yet taken delivery of the shares. As such, at September 30, 2020, the $200,000 is presented on the accompanying condensed consolidated balance sheet under the caption “other liabilities”.

~~(6)~~

~~Fair Value Measurements.~~ Impaired collateral-dependent loans are carried at fair value when the current collateral value is lower than the carrying value of the loan. There were no impaired collateral-dependent loans at September 30, 2020. Those impaired collateral-dependent loans which are measured at fair value on a nonrecurring basis were as follows as December 31, 2019 (in thousands):

Fair Value Level 1 Level 2 Level 3 Total Losses
Losses
Recorded
in
Operations
For the
year ended
ended
December 31, 2019

At December 31, 2019—
Residential real estate $ 686 $ — $ — $ 686 $ 258 $ —

~~Foreclosed real estate is recorded at fair value less selling costs. Foreclosed real estate which is~~(6) Fair Value Measurements. There were 0 impaired collateral dependent loans measured at fair value on a nonrecurring basis ~~is as follows (in thousands):~~at September 30, 2021 and December 31, 2020.

Fair
Value Level 1 Level 2 Level 3 Total
Losses
Losses
Recorded
in
Operations
For the
Nine
months
ended
September 30, 2020

At September 30, 2020—
Foreclosed real estate $ 681 $ — $ — $ 681 $ — $ —

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

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

At September 30, 2020:
SBA Pool Securities $ 1,321 $ — $ 1,321 $ —
Collateralized mortgage obligations 617 — 617 —
Mortgage-backed securities 5,522 — 5,522 —
$ 7,460 — 7,460 —

At December 31, 2019:
SBA Pool Securities $ 1,682 $ — $ 1,682 $ —
Collateralized mortgage obligations 1,016 — 1,016 —
Mortgage-backed securities 2,711 — 2,711 —
Total $ 5,409 — $ 5,409 $ —

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

~~During~~

			Fair Value Measurements Using
			Quoted Prices		Significant
			In Active Markets for		Other Observable		Significant Unobservable
	Fair Value		Identical Assets (Level 1)		Inputs (Level 2)		Inputs (Level 3)
At September 30, 2021 :
SBA Pool Securities	$	1,113	$	—	$	1,113		—
Collateralized mortgage obligations		250		—		250		—
Taxable municipal securities		16,669		—		16,669		—
Mortgage-backed securities		17,706		—		17,706		—
Total	$	35,738		—	$	35,738		—

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

At December 31, 2020 :
SBA Pool Securities	$	1,297	$	—	$	1,297		—
Collateralized mortgage obligations		485		—		485		—
Taxable municipal securities		5,085		—		5,085		—
Mortgage-backed securities		12,026		—		12,026		—
Total	$	18,893		—	$	18,893		—

(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, 2020 and 2019, no debt securities~~Company’s financial instruments were ~~transferred in or out~~as follows (in thousands):

Schedule of ~~Levels 1, 2 or 3.~~

~~(continued)~~

~~OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY~~

~~Notes to Condensed Consolidated~~Estimated Fair Value of Financial ~~Statements (Unaudited)~~Instruments

	Carrying Amount		Fair Value		Level		Carrying Amount		Fair Value			Level
	At September 30, 2021						At December 31, 2020
	Carrying Amount		Fair Value		Level		Carrying Amount		Fair Value			Level

Financial assets:
Cash and cash equivalents	$	83,583	$	83,583		1	$	54,629	$	54,629			1
Debt securities available for sale		35,738		35,738		2		18,893		18,893			2
Debt securities held-to-maturity		1,327		1,375		2		3,399		3,549			2
Loans		205,865		205,807		3		152,469		153,276			3
Federal Home Loan Bank stock		793		793		3		1,092		1,092			3
Accrued interest receivable		863		863		3		1,336		1,336			3

Financial liabilities:
Deposit liabilities		281,746		281,813		3		190,759		191,011			3
Federal Home Loan Bank advances		18,000		18,185		3		23,000		23,254			3
Junior subordinated debenture		—		—		3		2,068		N/A	(1)		3
Off-balance sheet financial instruments		—		—		3		—		—			3

~~(7)~~

~~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, 2020 At December 31, 2019
Carrying
Amount Fair Value Level Carrying
Amount Fair Value Level
Financial assets:
Cash and cash equivalents $ 45,271 $ 45,271 1 $ 8,934 $ 8,934 1
Debt securities available for sale 7,460 7,460 2 5,409 5,409 2
Debt securities held-to-maturity 4,571 4,794 2 5,806 5,986 2
Loans 144,532 144,641 3 102,233 102,060 3
Federal Home Loan Bank stock 1,092 1,092 3 642 642 3
Accrued interest receivable 1,544 1,544 3 432 432 3

Financial liabilities:
Deposit liabilities 167,716 168,003 3 101,372 101,256 3
Federal Home Loan Bank advances 23,000 23,311 3 13,000 13,137 3
Junior subordinated debenture 2,580 N/A ⁽¹⁾ N/A 2,580 N/A ⁽¹⁾ N/A
Off-balance sheet financial instruments — — 3 — — 3

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

~~(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.

(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 ~~nonperformance~~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 September 30, ~~2020~~2021 follows (in thousands):

Schedule of Off-Balance Sheet Risks of Financial Instruments


Commitments to extend credit	$	16,153

Unused lines of credit	$	11,532

Standby letters of credit	$	4,550

(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.

In 2019, the federal banking agencies jointly issued a final rule that provides for an optional, simplified measure of capital adequacy, the community bank leverage ratio framework (CBLR framework), for qualifying community banking organizations. The final rule became effective on January 1, 2020 and was elected by the Bank. In April 2020, the federal banking agencies issued an interim final rule that makes temporary changes to the CBLR framework, pursuant to section 4012 of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, and a second interim final rule that provides a graduated increase in the community bank leverage ratio requirement after the expiration of the temporary changes implemented pursuant to section 4012 of the CARES Act.

The community bank leverage ratio removes the requirement for qualifying banking organizations to calculate and report risk-based capital but rather only requires a Tier 1 to average assets (leverage) ratio. Qualifying community banking organizations that elect to use the community bank leverage ratio framework and that maintain a leverage ratio of greater than required minimums will be considered to have satisfied the generally applicable risk based and leverage capital requirements in the agencies’ capital rules (generally applicable rule) and, if applicable, will be considered to have met the well capitalized ratio requirements for purposes of section 38 of the Federal Deposit Insurance Act. Under the interim final rules, the community bank leverage ratio minimum requirement is 8% as of December 31, 2020, 8.5% for calendar year 2021, and 9% for calendar year 2022 and beyond. The interim rule allows for a two-quarter grace period to correct a ratio that falls below the required amount, provided that the Bank maintains a leverage ratio of 7% as of December 31, 2020, 7.5% for calendar year 2021, and 8% for calendar year 2022 and beyond. Under the final rule, an eligible community banking organization can opt out of the CBLR framework and revert back to the risk-weighting framework without restriction.

(continued)

Commitments to extend credit $ 4,091

Unused lines of credit $ 5,332

Standby letters of credit $ 4,550

~~(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.

	The Bank, is subject to the Basel III capital level threshold requirements under the Prompt Corrective Action regulations with full compliance 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.

	Regulatory banking agencies issued final rules on October 29, 2019 that provide simplified capital measures, including a simplified measure of capital adequacy for qualifying community banking organizations consistent with section 201 of the Economic Growth, Regulatory Relief, and Consumer Protection Act. Qualifying community banking organizations with less than $10 billion of assets that comply with, and elect to use, the community bank leverage ratio (“CBLR”) and that maintain a CBLR greater than 8% in 2020 would be considered to be “well-capitalized” and would no longer be subject to the other generally applicable capital rules. The CBLR would be used and applied for purposes of compliance with the Federal Banking Agencies ‘prompt corrective action rules, and Federal Reserve Regulation O and W compliance, as well as in calculating FDIC deposit insurance assessments. The CBLR, among other proposals, reflects the regulatory banking agencies’ focus on appropriately tailoring capital requirements to an institution’s size, complexity and risk profile. The CBLR was first available for banking organizations to use in their March 31, 2020 Call Report. Non-advanced approaches banking organizations will also be able to take advantage of simpler regulatory capital requirements for mortgage servicing assets, certain deferred tax assets arising from temporary differences and investments in unconsolidated financial institutions. As of September 30, 2020, the Company has determined to opt in to adopting the new CBLR.

~~(continued)~~

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (Unaudited)

(9) Regulatory Matters, Continued.

Management believes, as of September 30, 2021 and December 31, 2020, 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 September 30, 2021:
Tier I Capital to Total Assets		32,980		10.96	%		25,567		8.5	%

	Actual					To Be Well Capitalized Under Prompt Corrective Action Regulations (CBLR Framework)
	Amount		%			Amount		%
As of December 31, 2020:
Tier I Capital to Total Assets		19,261		9	%		17,116		8	%

(10) Preferred Stock

During the first quarter of 2021, the Company issued 160 shares of Series B Participating Preferred Stock (the “Series B Preferred Stock”) to a related party at a cash price of $25,000 per share, or an aggregate of $4,000,000. The related party is a significant common stockholder.

During the second quarter of 2021, the Company issued 200 shares of Series B Participating Preferred Stock (the “Series B Preferred Stock”) to a non-related party at a cash price of $25,000 per share, or an aggregate of $5,000,000.

The Series B Preferred Stock has no par value. Except in the case 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 Stock on a pro rata basis with the common stock determined on an as-converted basis assuming all Shares of Series B Preferred Stock had been converted immediately prior to the record date of the applicable dividend. At September 30, 2021, the Company had 760 shares of Series B Preferred Stock outstanding, which are convertible into 7,600,000 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 amended Certificate of Designation in the Amendment to the Company’s Articles of Incorporation filed on June 25, 2021 (the “Certificate of Designation”) The Preferred Stock has preferential liquidation rights over common stockholders and holders of junior securities. The liquidation price is the greater of $25,000 per share of preferred stock or such amount per share of preferred stock that would have been payable had all shares of the preferred stock been converted into common stock per the terms of the Certificate of Designation immediately prior to a liquidation. The Preferred Stock 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)

~~(9)~~

~~Regulatory Matters, Continued.~~

~~The following table shows the Bank’s capital amounts and ratios and regulatory thresholds at September 30, 2020 and December 31, 2019 (dollars in thousands):~~

Actual
For Capital
Adequacy
Purposes
Minimum To Be
Well Capitalized
Under Prompt
Corrective Action
Provisions

Amount % Amount % Amount %
As of September 30, 2020—
Tier I Capital to Total Assets 16,175 8.70 % $ 7,434 4.00 % $ 9,292 5.00 %

As of December 31, 2019:
Total Capital to Risk-Weighted Assets $ 12,212 12.03 % $ 8,124 8.00 % $ 10,154 10.00 %
Tier I Capital to Risk-Weighted Assets 10,934 10.77 6,093 6.00 % 8,124 8.00 %
Common equity Tier I capital to Risk-Weighted Assets 10,934 10.77 4,569 4.50 % 6,600 6.50 %
Tier I Capital to Total Assets 10,934 8.73 5,010 4.00 % 6,263 5.00 %

~~(10)~~	*~~Preferred Stock~~* ~~During 2020, the Company~~ ~~issued 280 shares of Series B Participating Preferred Stock (the “Series B Preferred Stock”) to a related party at a cash price~~ of ~~$25,000 per~~ ~~share,~~ or an aggregate of $7,000,000. The related party is a significant common stockholder. The Preferred Stock has no par value. Except in the case 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 Stock on a pro rata basis ~~with~~ ~~the common stock determined on~~ an ~~as-converted basis assuming all Shares of Series B Preferred Stock~~ ~~had~~ been converted immediately prior to the record date of the applicable dividend. The Preferred Stock is convertible into 2,800,000 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 by 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 amended Certificate of Designation in the Amendment to the Company’s Articles of Incorporation filed on September 29, 2020 (the “Certificate of Designation”) The Preferred Stock has preferential liquidation rights over common stockholders and holders of junior securities. The liquidation price is the greater of $25,000 per share of preferred stock or such amount per share of preferred stock that would have been payable had all shares of the preferred stock been converted into common stock per the terms of the Certificate of Designation immediately prior to a liquidation. The Preferred Stock ~~generally~~ ~~has no~~ ~~votin~~g ~~rights~~ ~~except as provided in~~ ~~the~~ ~~Certificate of~~ ~~Designation.~~

~~(11)~~	*~~Contingency~~*

	The Coronavirus global pandemic (“COVID-19”) has negatively impacted the global economy, disrupted global supply chains, lowered equity market valuations, created significant volatility and disruption in financial markets and significantly increased unemployment levels. The extent to which the COVID-19 pandemic impacts our business, results of operations, and financial condition, as well as our regulatory capital and liquidity ratios, will depend on future developments, the duration of the pandemic, and actions taken by governmental authorities to slow the spread of the disease or to mitigate its effects. The Company took action to prepare its employees, support its clients, and help its communities. The Company has supported small business owners by making loans through the Small Business Administration Paycheck Protection Program (“PPP”). As of September 30, 2020, the Bank had originated 204 PPP loans for a total dollar amount of $19.2 million. These loans are 100% guaranteed by the Small Business Administration (the “SBA”). The Company has the option to fund PPP loans through the Federal Reserve Bank’s Paycheck Protection Program Liquidity Facility (the “PPPLF”). Loans pledged to secure PPPLF advances will be excluded from the calculations of the Bank’s regulatory capital ratios. At September 30, 2020, there were no outstanding borrowings under the PPPLF.

~~(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, ~~2019~~2020 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 in market conditions, 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.

Capital Levels

As of September 30, ~~2020,~~2021, the Bank is well capitalized under regulatory guidelines. ~~The capital of the Bank was substantially increased in 2020 through capital contributions made by the Company~~

Refer to ~~the Bank with the net proceeds from the sale of $7,000,000 in Series B Preferred Stock. See Note 10 to the financial statements.~~

~~See~~ Note 9 ~~to the financial statements~~ for ~~a discussion of regulatory matters and~~ the Bank’s actual and required minimum capital ratios.

(continued)

~~(continued)~~

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, ~~2020~~2021 and December 31, ~~2019~~2020

Overview

The Company’s total assets increased by approximately ~~$81.8~~$100 million to ~~$208.6~~$335.1 million at September 30, ~~2020,~~2021, from ~~$126.8~~$235.1 million at December 31, ~~2019,~~2020, primarily due to ~~an increase~~increases in loans, ~~and~~ cash and cash equivalents ~~corresponding~~and debt securities. The growth in assets was attributable to anthe success of the Company’s efforts to increase in deposits ~~and FHLB advances.~~from new customers. Total deposits grew by approximately $91 million to $281.7 million at September 30, 2021, from $190.8 million at December 31, 2020. Total stockholders’ equity increased by approximately ~~$6.5~~$15.3 million to ~~$13.7~~$33.2 million at September 30, ~~2020,~~2021, from ~~$7.2~~$17.8 million at December 31, ~~2019,~~2020, primarily due to proceeds from the sale of preferred ~~and~~stock, common stock, ~~which more than~~the issuance of common stock in exchange for Trust Preferred Securities and net earnings. The increase in stockholders’ equity was partially offset by the ~~net~~change in accumulated other comprehensive loss for the ~~nine-month period~~three and nine months ended September 30, ~~2020.~~2021.

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

	Nine Month Period
	Ended			Year Ended
	September 30, 2020			December 31, 2019			Nine Months Ended September 30, 2021			Year Ended December 31, 2020

Average equity as a percentage of average assets		5.2	%		4.6	%		8.7	%		5.8	%

Equity to total assets at end of period		6.6	%		5.7	%		9.9	%		7.6	%

Return on average assets (1)		(1.0	)%		(1.0	)%		0.9	%		(0.5	)%

Return on average equity (1)		(18.4	)%		(21.3	)%		9.5	%		(7.8	)%

Noninterest expenses to average assets (1)		3.02	%		4.0	%		2.3	%		2.9	%

(1) Annualized for the nine ~~month period~~months ended September 30, ~~2020.~~2021.

Liquidity and Sources of Funds

The Company’s sources of funds include customer deposits, advances from the Federal Home Loan Bank of Atlanta (“FHLB”), principal repayments and sales of ~~investment~~debt securities, loan repayments, 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 Company has priced its deposit rates competitively. The Company will adjust rates on its deposits to attract or retain deposits as needed.

The Company increased deposits by ~~$66.3~~approximately $91 million during the ~~nine month~~nine-month period ~~ended~~ending September 30, ~~2020.~~2021. The proceeds were ~~primarily~~ used to originate new ~~loans.~~loans, purchase debt securities and repay Federal Home Loan Bank advances.

In addition to obtaining funds from depositors, the Company may borrow funds from other financial institutions. At September 30, ~~2020,~~2021, the Company had outstanding borrowings of ~~$23~~$18 million, against its ~~$65~~$55 million in established borrowing capacity with the FHLB. The Company’s borrowing facility is subject to collateral and stock ownership requirements, as well as prior FHLB consent to each advance. The Company has an available discount window credit line with the Federal Reserve Bank, currently $430,000. The Federal Reserve Bank line is subject to collateral requirements and must be repaid within 90 days; each advance is subject to prior Federal Reserve Bank consent. At September 30, ~~2020,~~2021, the Company also had available lines of credit amounting to $9.5 million with four correspondent banks ~~and a discount window credit line with the Federal Reserve Bank amounting~~ to ~~$430.000.~~purchase federal funds. Disbursements on the lines of credit are subject to the approval of the correspondent banks. We measure and monitor our liquidity daily and believe our liquidity sources are adequate to meet our operating needs.

Off-Balance Sheet Arrangements

Refer to Note 8 in the condensed consolidated financial statements for Off-Balance Sheet ~~Financial Instruments.~~Arrangements.

Junior Subordinated Debenture

Please refer to Note 1 in the condensed consolidated financial statements for discussion on this matter.

(continued)

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

Item 2. Management’s Discussion and Analysis of Financial Condition and 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 September 30,
	2020								2019								2021							2020
				Interest		Average						Interest		Average					Interest		Average					Interest		Average
	Average			and		Yield/			Average			and		Yield/			Average		and		Yield/			Average		and		Yield/
(dollars in thousands)	Balance			Dividends		Rate⁽⁵⁾			Balance			Dividends		Rate⁽⁵⁾			Balance		Dividends		Rate⁽⁵⁾			Balance		Dividends		Rate⁽⁵⁾
Interest-earning assets:
Loans	$	142,138		$	1,723		4.85	%	$	86,895		$	1,140		5.25	%	$	203,983	$	2,795		5.48	%	$	142,138	$	1,723		4.85	%
Securities		9,092			41		1.80	%		12,508			63		2.01	%		34,044		150		1.76	%		9,092		41		1.80	%
Other (1)		18,928			7		0.15	%		9,768			58		2.38	%		48,596		28		0.23	%		18,928		7		0.15	%

Total interest-earning assets/interest income		170,158			1,771		4.16	%		109,171			1,261		4.62	%		286,623		2,973		4.15	%		170,158		1,771		4.16	%

Cash and due from banks		14,480								2,106								12,080							14,480
Premises and equipment		1,439								2,927								1,402							1,439
Other		1,312								(411	)							1,626							1,312

Total assets	$	187,389							$	113,793							$	301,731						$	187,389

Interest-bearing liabilities:
Savings, NOW and money-market deposits	$	89,383			168		0.75	%	$	46,789			222		1.90	%	$	128,844		124		0.38	%	$	89,383		168		0.75	%
Time deposits		28,583			122		1.71	%		31,055			186		2.40	%		15,429		22		0.57	%		28,583		122		1.71	%
Borrowings (2)		26,758			96		1.44	%		18,155			130		2.86	%		18,387		62		1.35	%		26,758		96		1.44	%

Total interest-bearing liabilities/interest expense		144,724			386		1.07	%		95,999			538		2.24	%		162,660		208		0.51	%		144,724		386		1.07	%

Noninterest-bearing demand deposits		29,970								10,733								105,843							29,970
Other liabilities		2,367								2,149								1,744							2,367
Stockholders’ equity		10,328								4,912								31,484							10,328

Total liabilities and stockholders’ equity	$	187,389							$	113,793							$	301,731						$	187,389

Net interest income				$	1,385							$	723						$	2,765						$	1,385

Interest rate spread (3)							3.09	%							2.38	%						3.64	%						3.09	%

Net interest margin (4)							3.26	%							2.65	%						3.86	%						3.26	%

Ratio of average interest-earning assets to average interest-bearing liabilities		1.18	%							1.14	%							1.76							1.18

(1)	Includes interest-earning deposits with banks and Federal Home Loan Bank stock dividends.
(2)	Includes Federal Home Loan Bank advances, other borrowings and the junior subordinated debenture.
(3)	Interest-rate spread represents the difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities.
(4)	Net interest margin is net interest income divided by average interest-earning assets.
(5)	Annualized.

(continued)

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

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

	Nine Months Ended September 30,																Nine Months Ended September 30,
	2020								2019								2021							2020
				Interest		Average						Interest		Average					Interest		Average					Interest		Average
	Average			and		Yield/			Average			and		Yield/			Average		and		Yield/			Average		and		Yield/
(dollars in thousands)	Balance			Dividends		Rate⁽⁵⁾			Balance			Dividends		Rate⁽⁵⁾			Balance		Dividends		Rate⁽⁵⁾			Balance		Dividends		Rate⁽⁵⁾
Interest-earning assets:
Loans	$	125,090		$	4,697		5.01	%	$	83,271		$	3,328		5.33	%	$	183,068	$	6,820		4.97	%	$	125,090	$	4,697		5.01	%
Securities		10,016			136		1.81	%		11,384			184		2.16	%		28,024		327		1.56	%		10,016		136		1.81	%
Other (1)		14,526			67		0.61	%		9,835			184		2.49	%		38,457		81		0.28	%		14,526		67		0.61	%

Total interest-earning assets/interest income		149,632			4,900		4.37	%		104,490			3,696		4.72	%		249,549		7,228		3.86	%		149,632		4,900		4.37	%

Cash and due from banks		7,748								2,161								21,338							7,748
Premises and equipment		1,423								2,879								1,344							1,423
Other		1,043								(826	)							1,940							1,043

Total assets	$	159,846							$	108,704							$	274,171						$	159,846

Interest-bearing liabilities:
Savings, NOW and money-market deposits	$	72,348			607		1.12	%	$	41,826			567		1.81	%	$	121,077		380		0.42	%	$	72,348		607		1.12	%
Time deposits		30,466			440		1.93	%		29,144			490		2.24	%		18,170		100		0.73	%		30,466		440		1.93	%
Borrowings (2)		24,990			322		1.72	%		19,276			415		2.87	%		21,023		241		1.53	%		24,990		322		1.72	%

Total interest-bearing liabilities/interest expense		127,804			1,369		1.43	%		90,246			1,472		2.17	%		160,270		721		0.60	%		127,804		1,369		1.43	%

Noninterest-bearing demand deposits		21,255								11,155								88,387							21,255
Other liabilities		2,447								2,246								1,642							2,447
Stockholders’ equity		8,340								5,051								23,872							8,340

Total liabilities and stockholders’ equity	$	159,846							$	108,698							$	274,171						$	159,846

Net interest income				$	3,531							$	2,224						$	6,507						$	3,531

Interest rate spread (3)							2.94	%							2.55	%						3.26	%						2.94	%

Net interest margin (4)							3.15	%							2.84	%						3.48	%						3.15	%

Ratio of average interest-earning assets to average interest-bearing liabilities		1.17	%							1.16	%							1.56							1.17

(1)	Includes interest-earning deposits with banks and Federal Home Loan Bank stock dividends.
(2)	Includes Federal Home Loan Bank advances, other borrowings and the junior subordinated debenture.
(3)	Interest-rate spread represents the difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities.
(4)	Net interest margin is net interest income divided by average interest-earning assets.
(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, ~~2020~~2021 and ~~2019:~~2020

	Three Months Ended						Increase /						Three Months Ended					Increase /
	September 30,						(Decrease)						September 30,					(Decrease)
(dollars in thousands)	2020			2019			Amount			Percentage			2021		2020			Amount			Percentage
Total interest income	$	1,771		$	1,261		$	510			40	%	$	2,973	$	1,771		$	1,202			68	%
Total interest expense		386			538			(152	)		(28	)%		208		386			(178	)		(46	)%
Net interest income		1,385			723			662			92	%		2,765		1,385			1,380			100	%
Provision for loan losses		524			45			479			1064	%		582		524			58			11	%
Net interest income after provision for loan losses		861			678			183			27	%		2,183		861			1,322			154	%
Total noninterest income		64			29			35			121	%		423		64			359			561	%
Total noninterest expenses		1,421			987			434			44	%		1,689		1,421			268			19	%
Net loss before income tax benefit		(496	)		(280	)		(216	)		77	%
Income tax benefit		-			-			-			-
Net Loss	$	(496	)	$	(280	)		(216	)		77	%
Net loss per share - Basic and diluted	$	(0.17	)	$	(.15	)
Net earnings (loss) before income taxes														917		(496	)		1,413			(284	)%
Income taxes														-		-			-			-
Net earnings (loss)													$	917	$	(496	)		1,413			(284	)%
Net earnings (loss) per share - basic and diluted													$	0.21	$	(0.17	)

Net ~~Loss.~~ earnings (loss).~~The Company had a net loss of ($496,000)~~ Net earnings for the three ~~month period~~months ended September 30, ~~2020~~2021, were $917,000 or $0.21 per basic and diluted share compared to a net loss of ~~($280,000)~~$(496,000) or $(0.17) per basic and diluted share for the three ~~month period~~months ended September 30, ~~2019.~~2020. The ~~Company recorded provision for loan losses amounting to $524,000~~increase in net earnings during the three ~~month period~~months ended September 30, 2021 compared to three months ended September 30, 2020 ~~which was largely due~~is primarily attributed to an increase in net interest income and noninterest income, partially offset by the economic environment associated with the COVID-19 pandemic. The Company recorded provision for loan losses amounting to $45,000 during the three month period ended September 30, 2019. Excluding the provision for loan losses, the Company would have had net earnings of $28,000 for the three month period ended September 30, 2020 and a net loss of ($235,000) for the three month period ended September 30, 2019. Excluding the provision for loan losses, net loss decreased $263,000 for the three month period ended September 30, 2020 as compared to the three month period ended September 30, 2019.increase in noninterest expense.

Interest Income. Interest income increased ~~$510,000~~$1,202,000 for the three ~~month period~~months ended September 30, 2021 compared to the three ended September 30, 2020 ~~compared to the three month period ended September 30, 2019~~due primarily ~~due~~ to growth in the loan portfolio.

Interest Expense. Interest expense decreased ~~$152,000~~$178,000 to ~~$386,000~~$208,000 for the three ~~month period~~months ended September 30, ~~2020~~2021 compared to the prior ~~period. Decrease in interest expense is~~period, primarily due to a ~~reduction~~decrease in ~~the rates paid on deposits and borrowings offset by volume increases in deposits and borrowings.~~interest bearing deposit rates.

Provision for Loan Losses. Provision for loan losses ~~amounted~~was $582,000 for the three months ended September 30, 2021 compared to $524,000 for the three ~~month period~~months ended September 30, 2020. ~~The Company recorded provision for losses amounting to $45,000 during the three month period ended September 30, 2019.~~ The provision for loan losses is charged to operations as losses are estimated to have occurred in order to bring the total loan allowance for loan losses to a level deemed appropriate by management to absorb losses inherent in the portfolio at September 30, ~~2020 and 2019.~~2021. Management’s periodic evaluation of the adequacy of the allowance is based upon historical experience, the volume and type of lending conducted by us, adverse situations that may affect the borrower’s ability to repay, estimated value of the underlying collateral, loans identified as impaired, general economic conditions, particularly as they relate to our market areas, and other factors related to the estimated collectability of our loan portfolio. The allowance for loan losses totaled ~~$2.1~~$2.7 million or ~~1.46%~~1.29% of loans outstanding at September 30, ~~2020,~~2021, compared to ~~$2.0~~$1.9 million or ~~1.93%~~1.23% of loans outstanding at December 31, ~~2019.~~2020. The provision for loan losses during the ~~third~~second quarter of ~~2020~~2021 was primarily due to ~~the increase in the~~ loan ~~portfolio,~~volume growth and anthe evaluation of the other factors noted above.

Noninterest Income. Total noninterest income increased to $423,000 for the three months ended September 30, 2021, from $64,000 for the three months ended September 30, 2020 due to increased wire transfer and ACH fees related to an increase in business checking accounts of approximately $14.5 million during the three month period ended September 30, ~~2020, from $29,000 for the three month period ended September 30, 2019. The increase is primarily related to services charges and fees.~~2021.

Noninterest Expenses. Total noninterest expenses increased to $1,689,000 for the three months ended September 30, 2021 compared to $1,421,000 for the three ~~month period~~months ended September 30, 2020 ~~compared to $987,000 for the three month period ended September 30, 2019~~ primarily due to an increase in salaries and employee benefits, professional fees and ~~stock-based compensation to a director included in other noninterest expense.~~data processing.

~~OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY~~

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

Comparison of the Nine-Month Periods Ended September 30, ~~2020~~2021 and ~~2019:~~2020

	Nine Months Ended						Increase /						Nine Months Ended					Increase /
	September 30,						(Decrease)						September 30,					(Decrease)
(dollars in thousands)	2020			2019			Amount			Percentage			2021		2020			Amount			Percentage
Total interest income	$	4,900		$	3,696		$	1,204			33	%	$	7,228	$	4,900		$	2,328			48	%
Total interest expense		1,369			1,472			(103	)		(7	)%		721		1,369			(648	)		(47	)%
Net interest income		3,531			2,224			1,307			59	%		6,507		3,531			2,976			84	%
Provision for loan losses		1,236			45			1,191			2647	%		955		1,236			(281	)		(23	)%
Net interest income after provision for loan losses		2,295			2,179			116			5	%		5,552		2,295			3,257			142	%
Total noninterest income		170			153			17			11	%		902		170			732			431	%
Total noninterest expenses		3,616			3,240			376			12	%		4,745		3,616			1,129			31	%
Net loss before income tax benefit		(1,151	)		(908	)		(243	)		27	%
Income tax benefit		-			(52	)		52			(100	)%
Net Loss	$	(1,151	)	$	(856	)		(295	)		34	%
Net loss per share - Basic and diluted	$	(0.39	)	$	(.45	)
Net earnings (loss) before income taxes														1,709		(1,151	)		2,860			(248	)%
Income taxes														-		-			-			-
Net earnings (loss)													$	1,709	$	(1,151	)		2,860			(248	)%
Net earnings (loss) per share - basic and diluted													$	0.47	$	(0.39	)

Net ~~Loss.~~earnings (loss). ~~The Company had a net loss of $1.2 million~~Net earnings for the nine ~~month period~~months ended September 30, ~~2020~~2021, were $1,709,000 or $0.47 per basic and diluted share compared to a net loss of ~~($856,000)~~$(1.2 million) or $(0.39) per basic and diluted share for the nine ~~month period~~months ended September 30, ~~2019.~~2020. The ~~Company recorded provision for loan losses amounting to $1.2 million~~increase in net earnings during the nine ~~month period~~months ended September 30, 2021 compared to nine months ended September 30, 2020 ~~which was largely due~~is primarily attributed to ~~the economic environment associated with the COVID-19 pandemic. The Company recorded provision for loan losses amounting to $45,000 during the nine month period ended September 30, 2019. Excluding~~a decrease in the provision for loan losses, increase in net interest income and noninterest income, partially offset by the ~~Company would have had net earnings of $85,000~~increase in noninterest expense.

Interest Income. Interest income increased $2,328,000 for the nine ~~month period~~months ended September 30, 2021 compared to the nine months ended September 30, 2020 ~~and a net loss of ($811,000) for~~due primarily to growth in the ~~nine month period ended September 30, 2019. Excluding the provision for~~ loan ~~losses, net loss decreased $896,000 for the nine month period ended September 30, 2020 compared to the nine month period ended September 30, 2019.~~portfolio.

~~Interest Income.~~ Interest income increased to $4.9 million for the nine month period ended September 30, 2020 from $3.7 million for the nine month period ended September 30, 2019, primarily due to an increase in loan volume.

Interest Expense. Interest expense ~~on deposits and borrowings~~ decreased ~~$103,000~~$648,000 to ~~$1,369,000~~$721,000 for the nine ~~month period~~months ended September 30, ~~2020~~2021 compared to the prior ~~period. The~~period, primarily due to a decrease in interest ~~expense was caused by a reduction in interest rates paid on deposits and borrowings offset by volume increases in deposits and borrowings.~~bearing deposit rates.

Provision for Loan Losses. ~~The provision~~Provision for loan losses ~~during~~amounted to $955,000 for the nine ~~month period~~months ended September 30, ~~2020 amounted~~2021 compared to $1.2 ~~million.~~million for the nine months ended September 30, 2020. The provision for loan losses is charged to operations as losses are estimated to have occurred in order to bring the total loan allowance for loan losses to a level deemed appropriate by management to absorb losses inherent in the portfolio at September 30, ~~2020 and 2019.~~2021. Management’s periodic evaluation of the adequacy of the allowance is based upon historical experience, the volume and type of lending conducted by us, adverse situations that may affect the borrower’s ability to repay, estimated value of the underlying collateral, loans identified as impaired, general economic conditions, particularly as they relate to our market areas, and other factors related to the estimated collectability of our loan portfolio. The allowance for loan losses totaled ~~$2.1~~$2.7 million or ~~1.46%~~1.29% of loans outstanding at September 30, ~~2020, as~~2021, compared to ~~$2.0~~$1.9 million or ~~1.93%~~1.23% of loans outstanding at December 31, ~~2019.~~2020. The provision for loan losses during nine months ended September 30, 2021 was primarily due to loan volume growth and an evaluation of the other factors noted above.

Noninterest Income. Total noninterest income increased to $902,000 for the nine months ended September 30, 2021, from $170,000 for the nine months ended September 30, 2020 due to increased wire transfer and ACH fees related to an increase in business checking accounts of approximately $23.7 million during the nine month period ended September 30, ~~2020, from $153,000 for the nine month period ended September 30, 2019. The increase is primarily related to services charges and fees.~~2021.

Noninterest Expenses. Total noninterest expenses increased ~~$376,000~~ to ~~$3.6 million~~$4,745,000 for the nine ~~month period~~months ended September 30, ~~2020~~2021 compared to ~~$3.2 million~~$3,616,000 for the nine ~~month period~~months ended September 30, ~~2019~~2020 primarily due to an increase in salaries and employee benefits ~~occupancy~~ and ~~equipment, and other.~~data processing.

~~COVID-19 Related Loan Data~~

~~Loan Forbearance.~~ During the nine month period ended September 30, 2020 we granted 180-day forbearances on 60 loans totaling $43.8 million. At September 30, 2020, we had loans under forbearances amounting to $38.1 million, which represents 25.9% of our gross loan portfolio.

~~Paycheck Protection Program (“PPP”).~~ ~~We closed 204 PPP loans totaling $19.2 million during the nine month period ended September 30, 2020.~~

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 ~~Chairman of the Board~~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, ~~2020,~~2021, that have materially affected, or are reasonably likely to materially affect, internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

None

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

During the ~~first~~third quarter of ~~2020,~~2021, the Company issued ~~98,182~~358,023 shares of its common stock ~~for an aggregate purchase~~in a private placement transaction to 18 accredited investors at a price of ~~$539,000. The issuance~~$4.50 per share. None of these investors was an officer, director or affiliate of the Company other than Martin Schmidt, who is a director of the Company. Mr. Schmidt purchased 10,323 shares. The Company issued these shares in ~~this transaction were exempt from registration pursuant to~~reliance on Section 4(a)(2) of the Securities Act ~~of 1933~~ as a transaction by an issuer not involving a public offering. ~~The Company used the proceeds to pay for operating expenses.~~

During ~~the second and third quarter of 2020,~~October 2021, the Company issued ~~280~~an additional 188,660 shares of ~~preferred~~its common stock in a private placement transaction to ~~a related party for~~ an ~~aggregate purchase~~accredited investor at a price of ~~$7,000,000.~~$4.50 per share. The ~~related party is a significant common stockholder. The issuance~~investor was not an officer, director or affiliate of the Company. The Company issued these shares in ~~these transactions were exempt from registration pursuant to~~reliance on Section 4(a)(2) of the Securities Act ~~of 1933~~ as a transaction by an issuer not involving a public ~~offering. The Company used the proceeds to augment the Bank’s regulatory capital ratios.~~offering.

Item 3. Defaults on Senior Securities

~~Previously disclosed.~~Not applicable.

Item 4. Mine Safety Disclosures

~~None~~

Not applicable.

Item 5. Other Information

~~None~~

Not applicable.

Item 6. Exhibits

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

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	OPTIMUMBANK HOLDINGS, INC.
	(Registrant)

Date: November ~~12, 2020~~9, 2021	By:	/s/ ~~Moishe Gubin~~Timothy Terry
		~~Moishe Gubin,~~Timothy Terry
		~~Chairman of the Board~~Principal Executive Officer

	By:	/s/ Joel Klein
		Joel Klein
		Principal Financial Officer

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

EXHIBIT INDEX

Exhibit No.		Description

31.1		Certification of Principal Executive 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

32.1		Certification of Principal Executive Officer

32.2		Certification of Principal Financial Officer

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

EXHIBIT INDEX

Exhibit No.		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)

2928

	Preferred Stock												Additional					Accumulated Other
	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, 2018		-	$	-		-	$	-	$	1,858,020	$	18	$	36,128	$	(30,510	)	$	(330	)	$	5,306

Net loss (unaudited)		-		-		-		-		-		-		-		(146	)		-			(146	)

Net change in unrealized loss on securities available for sale, net of income taxes (unaudited)		-		-		-		-		-		-		-		-			3			3

Amortization of unrealized loss on debt securities transferred to held-to-maturity, net of income taxes (unaudited)		-		-		-		-		-		-		-		-			14			14

Balance at March 31, 2019 (unaudited)		-	$	-		-	$	-	$	1,858,020	$	18	$	36,128	$	(30,656	)	$	(313	)	$	5,177

Common stock issued and reclassified from other liabilities (unaudited)		-		-		-		-		11,250		-		28		-			-			28

Common stock issued as compensation to directors (unaudited)		-		-		-		-		58,309		1		200		-			-			201

Net loss (unaudited)		-		-		-		-		-		-		-		(430	)		-			(430	)

Net change in unrealized loss on securities available for sale, net of income taxes (unaudited)		-		-		-		-		-		-		-		-			53			53

Amortization of unrealized loss on debt securities transferred to held-to-maturity (unaudited)		-		-		-		-		-		-		-		-			15			15

Balance at June 30, 2019 (unaudited)		-	$	-		-	$	-		1,927,579	$	19	$	36,356	$	(31,086	)	$	(245	)	$	5,044

Common stock issued and reclassified from other liabilities (unaudited)		-		-		-		-		1,197		-		3		-			-			3

Net loss (unaudited)		-		-		-		-		-		-		-		(280	)		-			(280	)

Net change in unrealized loss on securities available for sale, net of income taxes (unaudited)		-		-		-		-		-		-		-		-			4			4

Amortization of unrealized loss on securities transferred to held to maturity (unaudited)		-		-		-		-		-		-		-		-			21			21

Balance at September 30, 2019 (unaudited)		-		-		-		-		1,928,776	$	19	$	36,359	$	(31,366	)	$	(220	)	$	4,792

Balance at December 31, 2019		-	$	-		-	$	-		2,853,171	$	28	$	38,994	$	(31,610	)	$	(205	)	$	7,207

Proceeds from the sale of common stock (unaudited)		-		-		-		-		98,182		1		538		-			-			539

Net loss (unaudited)		-		-		-		-		-		-		-		(308	)		-			(308	)

Net change in unrealized gain on debt securities available for sale, net of income taxes (unaudited)		-		-		-		-		-		-		-		-			35			35

Amortization of unrealized loss on debt securities transferred to held-to-maturity, net of income taxes (unaudited)		-		-		-		-		-		-		-		-			18			18

Balance at March 31, 2020 (unaudited)		-	$	-		-	$	-		2,951,353	$	29	$	39,532	$	(31,918	)	$	(152	)	$	7,491

Proceeds from the sale of preferred stock (unaudited)		-		-		100		-		-		-		2,500		-			-			2,500

Net loss (unaudited)		-		-		-		-		-		-		-		(347	)		-			(347	)

Net change in unrealized gain on debt securities available for sale, net of income taxes (unaudited)		-		-		-		-		-		-		-		-			15			15

Amortization of unrealized loss on debt securities transferred to held-to-maturity, net of income taxes (unaudited)		-		-		-		-		-		-		-		-			18			18

Balance at June 30, 2020 (unaudited)		-	$	-		100	$	-		2,951,353	$	29	$	42,032	$	(32,265	)	$	(119	)	$	9,677

Proceeds from the sale of preferred stock (unaudited)		-		-		180		-		-		-		4,500		-			-			4,500

Net loss (unaudited)		-		-		-		-		-		-		-		(496	)		-			(496	)

Net change in unrealized gain on debt securities available for sale, net of income taxes (unaudited)		-		-		-		-		-		-		-		-			(23	)		(23	)

Amortization of unrealized loss on debt securities transferred to held-to-maturity, net of income taxes (unaudited)		-		-		-		-		-		-		-		-			26			26

Balance at September 30, 2020 (unaudited)		-	$	-		280	$	-		2,951,353	$	29	$	46,532	$	(32,761	)	$	(116	)	$	13,684

	Nine Months Ended September 30,
	2020			2019
Cash flows from operating activities:
Net loss	$	(1,151	)	$	(856	)
Adjustments to reconcile net loss to net cash used in operating activities:
Provision for loan losses		1,236			45
Depreciation and amortization		132			132
Stock-based compensation		200			201
Net amortization of fees, premiums and discounts		(27	)		153
Increase in accrued interest receivable		(1,112	)		(40	)
Amortization of right-of-use operating lease assets		113			52
Net decrease in operating lease liabilities		(103	)		(49	)
Increase in other assets		(270	)		(614	)
Decrease in official checks and other liabilities		(1,063	)		(117	)
Net cash used in operating activities		(2,045	)		(1,093	)

Cash flows from investing activities:
Purchase of debt securities available for sale		(3,638	)		(4,153	)
Principal repayments of debt securities available for sale		1,585			676
Principal repayments of debt securities held-to-maturity		1,276			977
Net increase in loans		(44,109	)		(14,990	)
Purchases of premises and equipment		(165	)		(217	)
(Purchase) redemption of FHLB stock		(450	)		490

Net cash used in investing activities		(45,501	)		(17,217	)

Cash flows from financing activities:
Net increase in deposits		66,344			30,887
Net decrease in federal funds purchased		—			(560	)
Net increase (decrease) in Federal Home Loan Bank advances		10,000			(11,600	)
Proceeds from sale of common stock		539			—
Proceeds from sale of preferred stock		7,000			—

Net cash provided by financing activities		83,883			18,727

Net increase in cash and cash equivalents		36,337			417

Cash and cash equivalents at beginning of the period		8,934			7,983

Cash and cash equivalents at end of the period	$	45,271		$	8,400

Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest	$	2,354		$	1,249

Income taxes	$	—		$	—

Noncash transaction -
Change in accumulated other comprehensive loss, net change in unrealized gain on debt securities available for sale, net of income taxes	$	89		$	110

Amortization of unrealized loss on debt securities transferred to held-to-maturity	$	83		$	67

Common stock issued and reclassified from other liabilities	$	—		$	31

Right-of use lease assets obtained in exchange for operating lease liabilities	$	—		$	1,144

Transfer of loan to foreclosed real estate	$	681		$	—

	Over Twelve				Less Than Twelve
	Months				Months
	Gross				Gross
	Unrealized		Fair		Unrealized		Fair
	Losses		Value		Losses		Value
At September 30, 2020-
Available for Sale -
SBA Pool securities	$	43	$	1,321	$	—	$	—

At December 31, 2019-
Available for Sale -
SBA Pool Securities	$	52	$	1,682	$	—	$	—

	Residential Real Estate		Multi- Family Real Estate		Commercial Real Estate		Land and Construction		Commercial		Consumer		Unallocated		Total
At September 30, 2020:
Individually evaluated for impairment:
Recorded investment	$	—	$	—	$	2,193	$	—	$	—	$	—	$	—	$	2,193
Balance in allowance for loan losses	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Collectively evaluated for impairment:
Recorded investment	$	32,094	$	16,052	$	64,867	$	4,332	$	22,611	$	5,080	$	—	$	145,036
Balance in allowance for loan losses	$	544	$	228	$	972	$	51	$	137	$	213	$	—	$	2,145

At December 31, 2019:
Individually evaluated for impairment:
Recorded investment	$	944	$	—	$	2,206	$	—	$	812	$	—	$	—	$	3,962
Balance in allowance for loan losses	$	258	$	—	$	—	$	—	$	531	$	—	$	—	$	789

Collectively evaluated for impairment:
Recorded investment	$	27,322	$	8,396	$	53,446	$	2,496	$	3,664	$	4,903	$	—	$	100,227
Balance in allowance for loan losses	$	273	$	82	$	624	$	21	$	42	$	152	$	26	$	1,220

	Pass		OLEM (Other Loans Especially Mentioned)		Sub- standard		Doubtful		Loss		Total
At September 30, 2020:
Residential real estate	$	32,094	$	—	$	—	$	—	$	—	$	32,094
Multi-family real estate		16,052		—		—		—		—		16,052
Commercial real estate		63,055		1,812		2,193		—		—		67,060
Land and construction		2,716		1,616		—		—		—		4,332
Commercial		22,073		538		—		—		—		22,611
Consumer		5,053		—		27		—		—		5,080

Total	$	141,043	$	3,966	$	2,220	$	—	$	—	$	147,229
								—		—
At December 31, 2019:								—		—
Residential real estate	$	27,322	$	—	$	944	$	—	$	—	$	28,266
Multi-family real estate		8,396		—		—		—		—		8,396
Commercial real estate		53,011		435		2,206		—		—		55,652
Land and construction		1,261		1,235		—		—		—		2,496
Commercial		3,027		637		812		—		—		4,476
Consumer		4,903		—		—		—		—		4,903

Total	$	97,920	$	2,307	$	3,962	$	—	$	—	$	104,189

	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, 2020:
Residential real estate	$	—	$	—	$	—	$	—	$	32,094	$	—	$	32,094
Multi-family real estate		—		—		—		—		16,052		—		16,052
Commercial real estate		—		—		—		—		67,060		—		67,060
Land and construction		—		—		—		—		4,332		—		4,332
Commercial		—		—		—		—		22,611		—		22,611
Consumer		14		13		—		27		5,053		—		5,080

Total	$	14	$	13	$	—	$	27	$	147,202	$	—	$	147,229

At December 31, 2019:
Residential real estate	$	944	$	—	$	—	$	944	$	27,322	$	—	$	28,266
Multi-family real estate		—		—		—		—		8,396		—		8,396
Commercial real estate		—		—		—		—		55,652		—		55,652
Land and construction		1,235		—		—		1,235		1,261		—		2,496
Commercial		—		—		—		—		3,664		812		4,476
Consumer		—		—		—		—		4,903		—		4,903

Total	$	2,179	$	—	$	—	$	2,179	$	101,198	$	812	$	104,189

	At September 30, 2020						At December 31, 2019
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance		Related Allowance
With no related allowance recorded-
Commercial real estate	$	2,193	$	2,193	$	—	$	2,206	$	2,206		—
With related allowance recorded:
Residential real estate		—		—		—		944		944		258
Commercial		—		—		—		812		812		531
Total:
Residential real estate	$	—	$	—	$	—	$	944		944		258
Commercial real estate	$	2,193	$	2,193	$	—	$	2,206		2,206		—
Commercial	$	—	$	—	$	—	$	812	$	812	$	531
Total	$	2,193	$	2,193	$	—	$	3,962	$	3,962	$	789

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

At September 30, 2020:
SBA Pool Securities	$	1,321	$	—	$	1,321	$	—
Collateralized mortgage obligations		617		—		617		—
Mortgage-backed securities		5,522		—		5,522		—
	$	7,460		—		7,460		—

At December 31, 2019:
SBA Pool Securities	$	1,682	$	—	$	1,682	$	—
Collateralized mortgage obligations		1,016		—		1,016		—
Mortgage-backed securities		2,711		—		2,711		—
Total	$	5,409		—	$	5,409	$	—

	At September 30, 2020							At December 31, 2019
	Carrying Amount		Fair Value			Level		Carrying Amount		Fair Value			Level
Financial assets:
Cash and cash equivalents	$	45,271	$	45,271			1	$	8,934	$	8,934			1
Debt securities available for sale		7,460		7,460			2		5,409		5,409			2
Debt securities held-to-maturity		4,571		4,794			2		5,806		5,986			2
Loans		144,532		144,641			3		102,233		102,060			3
Federal Home Loan Bank stock		1,092		1,092			3		642		642			3
Accrued interest receivable		1,544		1,544			3		432		432			3

Financial liabilities:
Deposit liabilities		167,716		168,003			3		101,372		101,256			3
Federal Home Loan Bank advances		23,000		23,311			3		13,000		13,137			3
Junior subordinated debenture		2,580		N/A	⁽¹⁾		N/A		2,580		N/A	⁽¹⁾		N/A
Off-balance sheet financial instruments		—		—			3		—		—			3

Commitments to extend credit	$	4,091

Unused lines of credit	$	5,332

Standby letters of credit	$	4,550

	Actual					For Capital Adequacy Purposes					Minimum To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		%			Amount		%			Amount		%
As of September 30, 2020—
Tier I Capital to Total Assets		16,175		8.70	%	$	7,434		4.00	%	$	9,292		5.00	%

As of December 31, 2019:
Total Capital to Risk-Weighted Assets	$	12,212		12.03	%	$	8,124		8.00	%	$	10,154		10.00	%
Tier I Capital to Risk-Weighted Assets		10,934		10.77			6,093		6.00	%		8,124		8.00	%
Common equity Tier I capital to Risk-Weighted Assets		10,934		10.77			4,569		4.50	%		6,600		6.50	%
Tier I Capital to Total Assets		10,934		8.73			5,010		4.00	%		6,263		5.00	%