UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended ~~September~~June 30, ~~2022~~2023

☐	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, FL 33308

(Address of principal executive offices)

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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

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:

Large accelerated filer ☐		Accelerated filer ☐
Non-accelerated filer ☒		Smaller reporting company ☒
		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. ☐

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: ~~6,768,509~~7,250,219 shares of common stock, $.01 par value, issued and outstanding as of ~~November 10, 2022.~~August 9, 2023.

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

INDEX

	Page

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements	1

Condensed Consolidated Balance Sheets - ~~September~~June 30, ~~2022~~2023 (unaudited) and December 31, ~~2021~~2022	1

Condensed Consolidated Statements of Earnings -– Three and ~~Nine~~Six Months ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022 (unaudited)	2

Condensed Consolidated Statements of Comprehensive ~~(loss) income~~Income (Loss) – Three and ~~Nine~~Six Months ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022 (unaudited)	3

Condensed Consolidated Statements of Stockholders’ Equity -– Three and ~~Nine~~Six Months ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022 (unaudited)	4

Condensed Consolidated Statements of Cash Flows ~~– Nine~~- Six Months ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022 (unaudited)	5

Notes to Condensed Consolidated Financial Statements (unaudited)	6

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	1925

Item 4. Controls and Procedures	2531

PART II. OTHER INFORMATION

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	2531

Item 6. Exhibits	2531

SIGNATURES	2632

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Condensed Consolidated Balance Sheets

(Dollars in thousands, except ~~per~~ share amounts)

	September 30,			December 31,			June 30,			December 31,
	2022			2021			2023			2022
	(Unaudited)							(Unaudited)
Assets:
Cash and due from banks	$	23,791		$	13,681		$	11,852		$	19,788
Interest-bearing deposits with banks		50,002			45,289			66,521			52,048
Total cash and cash equivalents		73,793			58,970			78,373			71,836

Debt securities available for sale		25,434			34,394			24,762			25,102
Debt securities held-to-maturity (fair value of $547 and $1,071)		578			1,040
Loans, net of allowance for loan losses of $5,212 and $3,075		432,470			247,902
Debt securities held-to-maturity (fair value of $406 and $504)								445			540
Loans, net of allowance for credit losses of $6,645 and $5,793								518,829			477,218
Federal Home Loan Bank stock		2,725			793			717			600
Premises and equipment, net		872			843			1,162			934
Right-of-use lease assets		1,459			1,737			2,300			2,119
Accrued interest receivable		1,202			971			1,559			1,444
Deferred tax asset		4,368			3,442			3,091			3,836
Other assets		1,924			1,786			1,275			1,590

Total assets	$	544,825		$	351,878		$	632,513		$	585,219

Liabilities and Stockholders’ Equity:

Liabilities:
Noninterest-bearing demand deposits	$	158,887		$	124,119		$	215,326		$	159,193
Savings, NOW and money-market deposits		138,985			155,102			128,732			108,726
Time deposits		124,330			13,236			207,573			239,980

Total deposits		422,202			292,457			551,631			507,899

Federal Home Loan Bank advances		68,000			18,000			10,000			10,000
Official checks		220			140			67			110
Operating lease liabilities		1,507			1,775			2,370			2,172
Other liabilities		1,691			996			2,516			2,458

Total liabilities		493,620			313,368			566,584			522,639

Commitments and contingencies (Notes 8 and 11)		-			-			-			-
Stockholders’ equity:
Preferred stock, no par value; 6,000,000 shares authorized:		—			—			—			—
Series A Preferred, no par value, no shares issued and outstanding		—			—			—			—
Series B Convertible Preferred, no par value, 1,020 shares authorized, 1,020 and 760 shares issued and outstanding		—			—
Preferred stock value		-			-
Common stock, $.01 par value; 10,000,000 shares authorized, 6,768,509 and 4,775,281 shares issued and outstanding		68			48
Series B Convertible Preferred, no par value, 1,520 shares authorized, 1,360 shares issued and outstanding								—			—
Preferred stock, value								—			—
Common stock, $.01 par value; 10,000,000 shares authorized, 7,250,219 and 7,058,897 shares issued and outstanding								72			71
Additional paid-in capital		80,601			65,193			91,221			90,408
Accumulated deficit		(23,623	)		(26,096	)		(19,789	)		(22,073	)
Accumulated other comprehensive loss		(5,841	)		(635	)		(5,575	)		(5,826	)

Total stockholders’ equity		51,205			38,510			65,929			62,580
Total liabilities and stockholders’ equity	$	544,825		$	351,878		$	632,513		$	585,219

See accompanying notes to condensed consolidated financial statements.

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

Condensed Consolidated Statements of Earnings (Unaudited)

(in thousands, except per share amounts)

	2022		2021		2022		2021		2023		2022		2023		2022
	Three Months Ended				Nine Months Ended				Three Months Ended				Six Months Ended
	September 30,				September 30,				June 30,				June 30,
	2022		2021		2022		2021		2023		2022		2023		2022
Interest income:
Loans	$	5,000	$	2,795	$	12,027	$	6,820	$	7,252	$	3,764	$	13,841	$	7,027
Debt securities		153		150		475		327		172		159		350		322
Other		341		28		480		81		755		102		1,504		139

Total interest income		5,494		2,973		12,982		7,228		8,179		4,025		15,695		7,488

Interest expense:
Deposits		803		146		1,148		480		2,556		170		4,988		345
Borrowings		386		62		549		241		31		102		56		163

Total interest expense		1,189		208		1,697		721		2,587		272		5,044		508

Net interest income		4,305		2,765		11,285		6,507		5,592		3,753		10,651		6,980

Provision for loan losses		1,374		582		2,757		955
Credit loss expense										704		991		1,524		1,383

Net interest income after provision for loan losses		2,931		2,183		8,528		5,552
Net interest income after credit loss expense										4,888		2,762		9,127		5,597

Noninterest income:
Service charges and fees		637		375		1,906		816		759		680		1,478		1,269
Other		55		48		200		86		13		84		23		145

Total noninterest income		692		423		2,106		902		772		764		1,501		1,414

Noninterest expenses:
Salaries and employee benefits		1,421		921		4,063		2,347		2,041		1,307		4,007		2,642
Professional fees		129		141		418		393		171		142		368		289
Occupancy and equipment		185		156		527		467		188		175		377		342
Data processing		324		195		886		542		385		285		751		562
Insurance		24		23		72		69
Regulatory assessment		46		20		146		147		224		23		433		100
Litigation Settlement										375		—		375		—
Other		591		233		1,208		780		518		328		1,013		665

Total noninterest expenses		2,720		1,689		7,320		4,745		3,902		2,260		7,324		4,600

Net earnings before income taxes		903		917		3,314		1,709		1,758		1,266		3,304		2,411

Income taxes		230		—		841		—		446		321		839		611

Net earnings	$	673	$	917	$	2,473	$	1,709	$	1,312	$	945	$	2,465	$	1,800

Net earnings per share - Basic and diluted	$	0.11	$	0.21	$	0.44	$	0.47	$	0.18	$	0.16	$	0.34	$	0.33
Net earnings per share - Basic									$	0.18	$	0.16	$	0.34	$	0.33

See accompanying notes to condensed consolidated financial statements.

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

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

(In thousands)

	2022			2021		2022			2021			2023			2022			2023			2022
	Three Months Ended					Nine Months Ended						Three Months Ended						Six Months Ended
	September 30,					September 30,						June 30,						June 30,
	2022			2021		2022			2021			2023			2022			2023			2022

Net earnings	$	673		$	917	$	2,473		$	1,709		$	1,312		$	945		$	2,465		$	1,800

Other comprehensive (loss) income:
Change in unrealized loss on debt securities:
Unrealized (loss) gain arising during the period		(1,084	)		233		(6,989	)		(340	)		(380	)		(3,124	)		335			(5,905	)

Amortization of unrealized loss on debt securities transferred to held-to-maturity		1			18		12			98			1			4			2			11

Other comprehensive (loss) income before income taxes		(1,083	)		251		(6,977	)		(242	)		(379	)		(3,120	)		337			(5,894	)

Deferred income taxes		276			—		1,771			(25	)
Deferred income taxes benefit (provision)													91			792			(85	)		1,495

Total other comprehensive (loss) income		(807	)		251		(5,206	)		(267	)		(288	)		(2,328	)		252			(4,399	)

Comprehensive (loss) income	$	(134	)	$	1,168	$	(2,733	)	$	1,442
Comprehensive income (loss)												$	1,024		$	(1,383	)	$	2,717		$	(2,599	)

See accompanying notes to condensed consolidated financial statements.

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

Condensed Consolidated Statements of Stockholders’ Equity

Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022

(Dollars in thousands)

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

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 loss on debt securities available for sale (unaudited)		—		—		—		—		—		—		—		—			(922	)		(922	)

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

Net earnings for the three months ended March 31, 2021 (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

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

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

Proceeds from the sale of preferred stock (unaudited)		—		—		260		—		—		—		6,500		—			—			6,500			—		—		260		—		—		—		6500		—			—			6,500

Proceeds from the sale of common stock (unaudited)		—		—		—		—		1,227,331		12		5,511		—			—			5,523			—		—		—		—		1,227,331		12		5511		—			—			5,523

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

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

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

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

Stock-based Compensation (unaudited)		—		—		—		—		24,493		—		96		—			—			96			—		—		—		—		24,493		—		96		—			—			96

Net change in unrealized loss on debt securities available for sale (unaudited)		—		—		—		—		—		—		—		—			(2,332	)		(2,332	)		—		—		—		—		—		—		—		—			(2,332	)		(2,332	)

Amortization of unrealized loss on debt securities transferred to held-to-maturity (unaudited)		—		—		—		—		—		—		—		—			4			4			—		—		—		—		—		—		—		—			4			4

Net earnings for the three months ended June 30, 2022 (unaudited)		—		—		—		—		—		—		—		945			—			945
Net earnings (unaudited)																									—		—		—		—		—		—		—		945			—			945

Balance at June 30, 2022 (unaudited)		—	$	—		1,020	$	—		6,027,105	$	60	$	77,300	$	(24,296	)	$	(5,034	)	$	48,030			—	$	—		1,020	$	—		6,027,105	$	60	$	77,300	$	(24,296	)	$	(5,034	)	$	48,030

Stock-based Compensation (unaudited)		—		—		—		—		67,182		1		274		—			—			275
Balance at December 31, 2022																									—	$	—		1,360	$	—		7,058,897	$	71	$	90,408	$	(22,073	)	$	(5,826	)	$	62,580

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

Proceeds from the sale of common stock (unaudited)		—		—		—		—		674,222		7		3,027		—			—			3,034			—		—		—		—		72,221		—		324		—			—			324

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

Net change in unrealized loss on debt securities available for sale (unaudited)		—		—		—		—		—		—		—		—			(808	)		(808	)		—		—		—		—		—		—		—		—			538			538

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

Net earnings for the three months ended September 30, 2022 (unaudited)		—		—		—		—		—		—		—		673			—			673
Net earnings for three months ended March 31, 2023 (unaudited)																									—		—		—		—		—		—		—		1,153			—			1,153

Balance at September 30, 2022 (unaudited)		—	$	—		1,020	$	—		6,768,509	$	68	$	80,601	$	(23,623	)	$	(5,841	)	$	51,205
Balance at March 31, 2023 (unaudited)																									—	$	—		1,360	$	—		7,250,219	$	72	$	91,221	$	(21,101	)	$	(5,287	)	$	64,905
Balance																									—	$	—		1,360	$	—		7,250,219	$	72	$	91,221	$	(21,101	)	$	(5,287	)	$	64,905

Net change in unrealized loss on debt securities available for sale (unaudited)																									—		—		—		—		—		—		—		—			(289	)		(289	)

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

Net earnings (unaudited)																									—		—		—		—		—		—		—		1,312			—			1,312

Balance at June 30, 2023 (unaudited)																									—	$	—		1,360	$	—		7,250,219	$	72	$	91,221	$	(19,789	)	$	(5,575	)	$	65,929
Balance																									—	$	—		1,360	$	—		7,250,219	$	72	$	91,221	$	(19,789	)	$	(5,575	)	$	65,929

See accompanying notes to condensed consolidated financial statements.

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In thousands)

	2022			2021			2023			2022
	Nine Months Ended						Six Months Ended
	September 30,						June 30,
	2022			2021			2023			2022
Cash flows from operating activities:
Net earnings	$	2,473		$	1,709		$	2,465		$	1,800
Adjustments to reconcile net earnings to net cash provided by (used in) operating activities:
Provision for loan losses		2,757			955
Adjustments to reconcile net earnings to net cash provided by operating activities:
Credit loss expense								1,524			1,383
Depreciation and amortization		172			156			115			115
Deferred income taxes		845			—			734			613
Net accretion of fees, premiums and discounts		(283	)		(586	)		11			(252	)
Stock-based compensation expense		371			200			490			96
(Increase) decrease in accrued interest receivable		(231	)		473
Increase in accrued interest receivable								(115	)		(26	)
Amortization of right of use asset		278			126			134			217
Net decrease in operating lease liabilities		(268	)		(116	)		(117	)		(211	)
Increase in other assets		(138	)		(3,412	)
Increase in official checks and other liabilities		775			470
Net cash provided by (used in) operating activities		6,751			(25	)
Decrease (increase) in other assets								315			(332	)
(Decrease) increase in official checks and other liabilities								(221	)		1,050
Net cash provided by operating activities								5,335			4,453

Cash flows from investing activities:
Purchase of debt securities available for sale		—			(19,513	)
Principal repayments of debt securities available for sale		1,814			2,184			606			1,177
Principal repayments of debt securities held-to-maturity		469			2,113			98			398
Net increase in loans		(186,880	)		(53,564	)		(43,098	)		(102,070	)
Purchases of premises and equipment		(201	)		(314	)		(343	)		(112	)
(Purchase) redemption of FHLB stock		(1,932	)		299
Purchase of FHLB stock								(117	)		(1,932	)

Net cash used in investing activities		(186,730	)		(68,795	)		(42,854	)		(102,539	)

Cash flows from financing activities:
Net increase in deposits		129,745			90,987			43,732			49,362
Net increase (decrease) in FHLB Advances		50,000			(5,000	)
Net increase in FHLB Advances								—			50,000
Net change in repurchase agreements								—			5,000
Proceeds from sale of preferred stock		6,500			9,000			—			6,500
Proceeds from sale of common stock		8,557			2,787			324			5,523

Net cash provided by financing activities		194,802			97,774			44,056			116,385

Net increase in cash and cash equivalents		14,823			28,954			6,537			18,299

Cash and cash equivalents at beginning of the period		58,970			54,629			71,836			58,970

Cash and cash equivalents at end of the period	$	73,793		$	83,583		$	78,373		$	77,269

Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest	$	1,640		$	776		$	4,792		$	473

Income taxes	$	—		$	—		$	395		$	—

Noncash transactions:
Change in accumulated other comprehensive loss, net change in unrealized loss on debt securities available for sale, net of income taxes	$	(5,206	)	$	(267	)	$	252		$	(4,399	)

Amortization of unrealized loss on debt securities transferred to held-to-maturity	$	12		$	98		$	2		$	11

Reduction stockholders’ equity due to adoption of Topic 326, net								(181	)		—
Right-of use lease assets obtained in exchange for operating lease liabilities	$	—		$	191		$	315		$	—
Increase in other liabilities for stock-based compensation	$	—		$	200		$	—		$	96
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~~statements.

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. The Bank also markets its deposit and electronic funds transfer services on a national basis to merchant cash advance providers.

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~~June 30, ~~2022,~~2023, and the results of operations and cash flows for the three and ~~nine~~ six month periods ended ~~September~~June 30, ~~2022~~2023 and ~~2021.~~2022. All significant intercompany accounts and transactions have been eliminated in consolidation. The results of operations for the three and ~~nine~~ six months ended ~~September~~June 30, ~~2022,~~2023, are not necessarily indicative of the results to be expected for the full year.

~~(continued)~~

~~OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY~~

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

~~(1)~~ ~~General, Continued.~~

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

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

Schedule of Accumulated Other Comprehensive Loss

September 30, December 31,
2022 2021

Unrealized loss on debt securities available for sale $ (7,805 ) $ (816 )
Unamortized portion of unrealized loss related to debt securities available for sale transferred to securities held-to-maturity (22 ) (34 )
Income tax benefit 1,986 215

Accumulated other comprehensive loss $ (5,841 ) $ (635 )
~~Income Taxes~~.
During the fourth quarter of 2021 the Company assessed its earnings history and trend over the past year and its estimate of future earnings, and the Company determined that it was more likely than not that the deferred tax assets would be realized in the near term. Accordingly, in the fourth quarter of 2021, the valuation allowance in the amount of $4 million that had been previously recorded against the net deferred tax asset for the amount not expected to be realized in the future was fully reversed. Therefore, there was no provision for income taxes for the three and nine months ended September 30, 2021.
June 30, December 31,
2023 2022

Unrealized loss on debt securities available for sale $ (7,452 ) $ (7,786 )
Unamortized portion of unrealized loss related to debt securities available for sale transferred to securities held-to-maturity (16 ) (18 )
Income tax benefit 1,893 1,978

Accumulated other comprehensive loss $ (5,575 ) $ (5,826 )

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

~~Recent Pronouncements~~Adoption of New Accounting Standards. The Company adopted Accounting Standards Update 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, and the related amendments (collectively, Accounting Standards Codification 326), effective January 1, 2023. The guidance replaces the incurred loss methodology with an expected loss methodology that is referred to as the current expected credit loss (“CECL”) methodology. The measurement of expected credit losses under the CECL methodology is applicable to financial assets measured at amortized cost, including loan receivables and held-to-maturity debt securities. It also applies to certain off-balance sheet credit exposures not accounted for as insurance, including loan commitments, standby letters of credits, financial guarantees, and other similar instruments. In addition, Accounting Standards Codification 326 (“ASC 326”) made changes to the accounting for debt securities available for sale. One such change is to require credit losses to be presented as an allowance rather than as a write-down on debt securities available for sale that management does not intend to sell or believes that it is more likely than not, they will not be required to sell. ASC 326 also changed the accounting for purchased financial assets with credit deterioration.
The Company adopted ASC 326 using the modified retrospective method for all financial assets measured at amortized cost and off-balance-sheet credit exposures. Results for reporting periods beginning after January 1, 2023 are presented under ASC 326 while prior period amounts continue to be reported in accordance with previously applicable GAAP. The adoption of CECL resulted in the recognition of $219,000 allowance for credit losses, $23,000 of liability for unfunded commitments, a deferred income tax asset of $61,000 and a reduction in retained earnings of $181,000. With this transition method, the Company did not have to restate comparative prior periods presented in the consolidated financial statements related to ASC 326 but will present comparative prior periods disclosures using the previous accounting guidance for the allowance for loan losses. The Company adopted ASC 326 using the prospective transition approach for debt securities available for sale. As of January 1, 2023, the Company did not have any allowance for credit losses on debt securities.
(continued)
6
OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (Unaudited)
(1) General, Continued.
Allowance for Credit Losses (“ACL”). The following is a summary of the Company’s significant accounting policies with respect to ASC 326:
ACL - Debt Securities Available for Sale. Management uses a systematic methodology to determine its ACL for debt securities available for sale. Each quarter management evaluates impairment where there has been a decline in fair value below the amortized cost basis to determine whether there is a credit loss associated with the decline in fair value. The Company first assesses whether it intends to sell, or it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis. If either one of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through income. For debt securities that do not meet the aforementioned criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. In ~~June 2016,~~making this assessment, management considers the ~~Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13~~ ~~Financial Instruments-Credit~~extent to which the fair value is less than the amortized cost basis, among various other factors, including the nature of the collateral, potential future changes in collateral values, default rates, delinquency rates, third-party guarantees, credit ratings, interest rate changes since purchase, volatility of the security’s fair value and historical loss information for financial assets secured with similar collateral among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis. If the present value of cash flows expected to be collected is less than the amortized cost basis, an ACL is recorded, which is limited by the amount that the fair value is less than the amortized cost basis. Credit losses are calculated individually, rather than collectively. Any impairment that has not been recorded through an ACL is recognized in other comprehensive loss.
Changes in the ACL are recorded as credit loss expense (reversal). Losses ~~(Topic 326)~~~~. The ASU improves financial reporting by requiring timelier recording~~are charged against the ACL when management believes the collectability of the debt security is confirmed or when either of the criteria regarding intent or requirement to sell is met.
Management excludes the accrued interest receivable balance from the amortized cost basis in measuring expected credit losses on ~~loans~~the debt securities available for sale and ~~other financial instruments held by~~does not record an ACL on accrued interest receivable. As of June 30, 2023, the ~~Company.~~ accrued interest receivable for debt securities available for sale recognized in accrued interest receivable was $169,000.
ACL – Debt Securities Held to Maturity. The ~~ASU requires the~~ Company ~~to measure all~~measures expected credit losses on debt securities held to maturity on a collective basis by major security type. U.S. Government agency securities, Mortgage-backed securities and collateralized mortgage obligations are either explicitly or implicitly guaranteed by the U.S. government, are highly rated by major rating agencies and have a long history of no credit losses. Taxable municipal securities are highly rated by major credit agencies.
ACL - Loans. The ACL reflects management’s estimate of losses that will result from the inability of our borrowers to make required loan payments. The Company records loans charged-off against the ACL when management believes the uncollectability of a loan balance is confirmed and subsequent recoveries, if any, increase the ACL when they are recognized.
Management uses systematic methodologies to determine its ACL for ~~financial assets held at~~loans and certain off- balance sheet credit exposures. The ACL is a valuation account that is deducted from the ~~reporting date based~~amortized cost basis to present the net amount expected to be collected on ~~historical experience,~~the loan portfolio. Management estimates the ACL using relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. ~~Many~~Historical credit loss experience provides the basis for the estimation of the expected credit losses. Adjustments to historical loss ~~estimation techniques applied today will still be permitted, although~~information are made for the ~~inputs to those techniques will change to reflect~~differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, delinquency level, or term as well as changes in environmental conditions, such as changes in unemployment rates, property values, or other relevant factors.
The Company’s estimate of its ACL involves a high degree of judgment; therefore, management’s process for determining expected credit losses may result in a range of expected credit losses.
The Company’s ACL recorded in the ~~full amount~~balance sheet reflects management’s best estimate of expected credit losses. The Company ~~will continue~~recognizes in earnings the amount needed to ~~use judgment to determine which loss estimation method~~adjust the ACL for management’s current estimate of expected credit losses. The Company’s ACL is ~~appropriate for their circumstances. The ASU requires enhanced disclosures to help investors~~calculated using collectively evaluated 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 has executed an implementation plan through adoption date, implemented a software solution to assist with the estimation process, and has completed a data analysis. The Company expects that the impact of this ASU will not have a material effect to the Company’s Condensed Consolidated Financial Statements.individually evaluated loans.

(continued)

7
OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (Unaudited)
(1) General, Continued.
The ACL is measured on a collective pool basis when similar risk characteristics exist. Loans with similar risk characteristics are grouped into homogenous segments for analysis. The Company’s ACL is measured based on FDIC call report codes as these types of loans exhibit similar risk characteristics. The loan portfolio is further segmented by loan product type, collateral codes, occupancy codes, property code or lien position and are representative of the manner in which the Company lends.
The ACL for each segment is measured through the use of the average charge-off method. In accordance with the average charge-off method, an annual loss rate is applied to the amortized cost of an asset or pool of assets over the remaining expected life. The annual loss rate consists of historical and forecasted loss components. The forecasted component is applied using loss rates from historical periods that management believes are representative of economic conditions over a full economic cycle. For certain loan segments with limited credit loss histories, management determined the loss experience of peer banks provides the best basis for its assessment of expected credit losses. Other loan segments with more established loss histories utilize historical loss experience of the Company. Management determined that the appropriate historical loss period will begin in the first quarter of 2001 and continue through the most recent quarter, which represents a full peak to peak economic cycle. Additionally, management has determined that the Company’s reasonable and supportable forecast period is one year.
Included in its systematic methodology to determine its ACL, management considers the need to qualitatively adjust model results for risk factors that are not considered within the Company’s loss estimation process but are nonetheless relevant in assessing the expected credit losses within our loan pools.
These qualitative factors (“Q-Factors”) may increase or decrease management’s estimate of expected credit losses by a calculated percentage based upon the estimated level of risk. The various risks that may be considered in making Q-Factor adjustments include, among other things, the impact of 1) changes in lending policies and procedures, including changes in underwriting standards; 2) changes in international, national, regional and local economic conditions; 3) changes in the volume and severity of past due and nonaccrual status; 4) the effect of any concentrations of credit and changes in the levels of such concentrations; 5) changes in the experience, depth, and ability of lending management; 6) changes in nature and volume of the portfolio; 7) trends in underlying collateral values; 8) changes in the quality of the loan review system and 9) the effect of other external factors (i.e., competition, legal and regulatory requirements) on the level of estimated credit losses.
The annual loss rates, as defined above, adjusted for Q-Factors, are applied to the amortized loan balances over each subsequent period and aggregated to arrive at the General ACL. The amortized loan balances are adjusted based on management’s estimate of loan repayments in future periods.
When a loan no longer shares similar risk characteristics with its segment, the asset is assessed to determine whether it should be included in another segment or should be individually evaluated. Under ASC 326, the Company has adopted the collateral maintenance practical expedient to measure the ACL based on the fair value of collateral. Collateral dependent loans are loans for which the repayment is expected to be provided substantially through the operation or sale of the collateral and the borrower is experiencing financial difficulty. These loans do not share common risk characteristics and are not included within the collectively evaluated loans for determining ACL. A Specific ACL is calculated on an individual loan basis based on the shortfall between the fair value of the loan’s collateral, which is adjusted for selling costs, and amortized cost. If the fair value of the collateral exceeds the amortized cost, no allowance is required. Financial assets that have been individually evaluated can be returned to a pool for purposes of estimating the expected credit loss to the extent their credit profile improves and that the repayment terms were not considered to be unique to the asset.
Management measures expected credit losses over the contractual term of a loan. The contractual term excludes expected extensions, renewals, and modifications unless either of the following applies:
● Management has a reasonable expectation at the reporting date that a loan modification will be executed with an individual borrower.
● The extension or renewal options are included in the original or modified contract at the reporting date and are not unconditionally cancellable by the Company.
(continued)
8
OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY
Notes to Condensed Consolidated Financial Statements (Unaudited)
(1) General, Continued.
The Company follows its nonaccrual policy by reversing contractual interest income in the consolidated statements of income when the Company places a loan on nonaccrual status. Therefore, management excludes the accrued interest receivable balance from the amortized cost basis in measuring expected credit losses on the portfolio and does not record an ACL on accrued interest receivable. As of June 30, 2023, the accrued interest receivable for loans was $1,377,000.
Also, various regulatory agencies, as an integral part of their examination process, periodically review the Company’s allowance for credit losses. Such agencies may require the Company to recognize additions to the allowance for credit losses based on their judgments of information available to them at the time of their examination.
Prior to the adoption of ASC 326, the allowance for loan losses represented management’s best estimate of inherent losses that had been incurred within the existing portfolio of loans. The allowance for loan losses included allowance allocations calculated in accordance with ASC 310, “Receivables” and allowance allocations calculated in accordance with ASC 450, “Contingencies.”
ACL - Off -Balance Sheet Credit Exposures. The Company has a variety of assets that have a component that qualifies as an off-balance sheet exposure. These primarily include commitments to extend credit, standby letters of credit, and unfunded commitments under revolving lines of credit. The Company estimates expected credit losses over the contractual period in which the Company is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company. Management has determined that a majority of the Company’s off-balance-sheet credit exposures are not unconditionally cancellable.
The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over their expected lives. Management used its judgement to determinate funding rates. Management applied the funding rates, along with the loss factor rate determined for each pooled loan segment, to unfunded loan commitments, excluding unconditionally cancellable exposures and letters of credit, to arrive at the reserve for unfunded loan commitments.
As of June 30, 2023, the liability recorded for expected credit losses on unfunded commitments was $236,000 and is included in “other liabilities” on the accompanying condensed consolidated balance sheets. The current adjustment to the ACL for unfunded commitments is recognized through credit loss expense in the condensed consolidated statements of earnings.
(continued)
9
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):
Schedule of Amortized Cost and Approximate Fair Values of Debt Securities
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value

At September 30, 2022:
Available for sale:
SBA Pool Securities $ 858 $ 1 $ (18 ) $ 841
Collateralized mortgage obligations 153 — (15 ) 138
Taxable municipal securities 16,740 — (4,919 ) 11,821
Mortgage-backed securities 15,488 — (2,854 ) 12,634
Total $ 33,239 $ 1 $ (7,806 ) $ 25,434

Held-to-maturity:
Collateralized mortgage obligations $ 500 $ — (31 ) $ 469
Mortgage-backed securities 78 — — 78
Total $ 578 $ — (31 ) $ 547

Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value

At December 31, 2021:
Available for sale:
SBA Pool Securities $ 1,097 $ 1 $ (26 ) $ 1,072
Collateralized mortgage obligations 210 7 — 217
Taxable municipal securities 16,766 19 (359 ) 16,426
Mortgage-backed securities 17,137 19 (477 ) 16,679
Total $ 35,210 $ 46 $ (862 ) $ 34,394

Held-to-maturity:
Collateralized mortgage obligations $ 854 $ 28 — $ 882
Mortgage-backed securities 186 3 — 189
Total $ 1,040 $ 31 — $ 1,071
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value

At June 30, 2023:
Available for sale:
SBA Pool Securities $ 775 $       1 $ (17 ) $ 759
Collateralized mortgage obligations 139 — (15 ) 124
Taxable municipal securities 16,710 — (4,699 ) 12,011
Mortgage-backed securities 14,589 — (2,721 ) 11,868
Total $ 32,213 $ 1 $ (7,452 ) $ 24,762

Held-to-maturity:
Collateralized mortgage obligations $ 415 $ — $ (39 ) $ 376
Mortgage-backed securities 30 — — 30
Total $ 445 $ — $ (39 ) $ 406
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value

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

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

There were no sales of debt securities during the ~~three and nine~~six months ended ~~September~~June 30, ~~2022~~2023, and ~~2021.~~2022.

(continued)
810
OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (Unaudited)

~~(2)~~ ~~Debt Securities Continued.~~
(2) Debt Securities, Continued.

Debt Securities available for sale with gross unrealized losses, aggregated by investment category and length of time that individual debt securities have been in a continuous loss position, is as follows (in thousands):
Schedule of Debt Securities Available for Sale with Gross Unrealized Losses, by Investment Category
Over Twelve Months Less Than Twelve Months
Gross Gross
Unrealized Fair Unrealized Fair
Losses Value Losses Value
At June 30, 2023:
Available for Sale:
SBA Pool Securities $ 17 $ 607 $       — $ —
Collateralized mortgage obligation 15 124 — —
Taxable municipal securities 4,699 12,012 — —
Mortgage-backed securities 2,721 11,868 — —
Total $ 7,452 $ 24,611 $ — $ —
At September 30, 2022
Over Twelve Months Less Than Twelve Months
Gross Gross
Unrealized Fair Unrealized Fair
Losses Value Losses Value

Available for Sale:
SBA Pool Securities (18 ) 673 — —
Collateralized mortgage obligation — — (15 ) 138
Taxable municipal securities (4,333 ) 10,150 (586 ) 1,670
Mortgage-backed securities (2,780 ) 12,076 (74 ) 558
Total $ (7,131 ) $ 22,899 $ (675 ) $ 2,366
At December 31, 2021
Over Twelve Months Less Than Twelve Months
Gross Gross
Unrealized Fair Unrealized Fair
Losses Value Losses Value

Available for Sale:
SBA Pool Securities (26 ) 895 — —
Taxable municipal securities (81 ) 1,853 (278 ) 12,828
Mortgage-backed securities (242 ) 6,179 (235 ) 9,984
Total $ (349 ) $ 8,927 $ (513 ) $ 22,812
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, 2022 and December 31, 2021, the unrealized losses on forty-two and twenty-nine debt securities, respectively, were caused by market conditions. It is expected that the debt securities will 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.
Over Twelve Months Less Than Twelve Months
Gross Gross
Unrealized Fair Unrealized Fair
Losses Value Losses Value
At December 31, 2022:
Available for Sale :
SBA Pool Securities $ 18 $ 657 $        — $ —
Collateralized mortgage obligation — — 15 130
Taxable municipal securities 5,109 11,620 — —
Mortgage-backed securities 2,621 12,292 24 243
Total $ 7,748 $ 24,569 $ 39 $ 373

(continued)

911

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY
Notes to Condensed Consolidated Financial Statements (Unaudited)
(2) Debt Securities, Continued.
At June 30, 2023 and December 31, 2022, the unrealized losses on forty-two and forty investment debt securities, respectively, were caused by interest-rate changes.
Management evaluates debt securities for impairment where there has been a decline in fair value below the amortized cost basis of a security to determine whether there is a credit loss associated with the decline in fair value on at least a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. Consideration is given to (1) the financial condition and near-term prospects of the issuer including looking at default and delinquency rates, (2) the outlook for receiving the contractual cash flows of the investments, (3) the length of time and the extent to which the fair value has been less than cost, (4) the intent and ability to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value or for a debt security whether it is more-likely-than-not that the Company will be required to sell the debt security prior to recovering its fair value, (5) the anticipated outlook for changes in the general level of interest rates, (6) credit ratings, (7) third party guarantees, and (8) collateral values. In analyzing an issuer’s financial condition, management considers whether the securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred, the results of reviews of the issuer’s financial condition, and the issuer’s anticipated ability to pay the contractual cash flows of the investments.
The Company performed an analysis that determined that the mortgage-backed securities, collateralized mortgage obligations, and U.S. government securities, have a zero expected credit loss as they have the full faith and credit backing of the U.S. government or one of its agencies. Municipal bonds that do not have a zero expected credit loss are evaluated at least quarterly to determine whether there is a credit loss associated with a decline in fair value. At June 30, 2023 and December 31, 2022 all municipal securities were rated as investment grade. All debt securities in an unrealized loss position as of June 30, 2023 continue to perform as scheduled and the Company does not believe that there is a credit loss or that credit loss expense is necessary. Also, as part of our evaluation of our intent and ability to hold investments for a period of time sufficient to allow for any anticipated recovery in the market, the Company considers our investment strategy, cash flow needs, liquidity position, capital adequacy and interest rate risk position. The Company does not currently intend to sell the investments within the portfolio, and it is not more-likely-than-not that a sale will be required.
Management continues to monitor all of our investments with a high degree of scrutiny. There can be no assurance that in a future period, conditions may exist at that time indicating that some or all of the Company’s securities may be sold that would require a charge to earnings as credit loss expense in such period.
(continued)
12
OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (Unaudited)

(3) Loans. The ~~components~~segments of loans are as follows (in thousands):
Schedule of Components of Loans
September 30, December 31, June 30, December 31,
2022 2021 2023 2022

Residential real estate $ 34,558 $ 32,583 $ 60,273 $ 50,354
Multi-family real estate 67,966 48,592 69,518 69,555
Commercial real estate 294,696 129,468 321,814 310,695
Land and construction 6,998 3,772 27,019 17,286
Commercial 5,785 14,157 6,950 5,165
Consumer 28,099 22,827 40,686 30,323

Total loans 438,102 251,399 526,260 483,378

Deduct:
Net deferred loan fees and costs (420 ) (422 )
Allowance for loan losses (5,212 ) (3,075 )
Net deferred loan fees, and costs (786 ) (367 )
Allowance for credit losses (6,645 ) (5,793 )

Loans, net $ 432,470 $ 247,902 $ 518,829 $ 477,218

~~An analysis of the change in the allowance for loan losses follows (in thousands):~~
An analysis of the change in the allowance for credit losses follows (in thousands):
Schedule of ~~Change~~Changes in Allowance for Loan Losses
Residential Real Estate Multi-Family Real Estate
Commercial Real Estate
Land and Construction Commercial Consumer Total Real Estate Real Estate Real Estate Construction Commercial Consumer Total
Three Months Ended September 30, 2022:
Residential Multi-Family Commercial Land and
Beginning balance $ 514 $ 619 $ 2,340 $ 71 $ 67 $ 632 $ 4,243
Provision (Credit) for loan losses 34 129 754 (1 ) (2 ) 460 1,374
Real Estate Real Estate Real Estate Construction Commercial Consumer Total
Three Months Ended June 30, 2023:

Balance March 31, 2023 $ 742 $ 1,077 $ 3,030 $ 533 $ 26 $ 945 $ 6,353
Credit loss expense (income) 141 (40 ) (228 ) 147 38 487 545
Charge-offs — — — — - (446 ) (446 ) — — — — (16 ) (367 ) (383 )
Recoveries — — — — - 41 41 — — — — 87 43 130

Ending balance $ 548 $ 748 $ 3,094 $ 70 $ 65 $ 687 $ 5,212
Ending balance (June 30, 2023) $ 883 $ 1,037 $ 2,802 $ 680 $ 135 $ 1,108 $ 6,645

Three Months Ended September 30, 2021:
Three Months Ended June 30, 2022:
Beginning balance $ 472 $ 392 $ 938 $ 57 $ 58 $ 314 $ 2,231 $ 575 $ 549 $ 1,607 $ 79 $ 68 $ 530 $ 3,408
(Credit) provision for loan losses (29 ) 102 349 (10 ) 39 131 582 (61 ) 70 733 (8 ) 33 224 991
Charge-offs — — — — (10 ) (111 ) (121 ) — — — — (90 ) (136 ) (226 )
Recoveries 3 — — — — — 3 — — — — 56 14 70

Ending balance $ 446 $ 494 $ 1,287 $ 47 $ 87 $ 334 $ 2,695
Ending balance (June 30, 2022) $ 514 $ 619 $ 2,340 $ 71 $ 67 $ 632 $ 4,243

Nine Months Ended September 30, 2022:
Six Months Ended June 30, 2023:

Beginning balance Dec 31, 2022 $ 768 $ 748 $ 3,262 $ 173 $ 277 $ 565 $ 5,793
Additional allowance recognized due to adoption of Topic 326 33 327 (367 ) 278 (262 ) 209 218
Balance January 31, 2023 $ 801 $ 1,075 $ 2,895 $ 451 $ 15 $ 774 $ 6,011
Credit loss expense (income) 82 (38 ) (93 ) 229 75 1,056 1,311
Charge-offs — — — — (42 ) (804 ) (846 )
Recoveries — — — — 87 82 169

Ending balance (June 30, 2023) $ 883 $ 1,037 $ 2,802 $ 680 $ 135 $ 1,108 $ 6,645

Six Months Ended June 30, 2022:

Beginning balance $ 482 $ 535 $ 1,535 $ 32 $ 74 $ 417 $ 3,075 $ 482 $ 535 $ 1,535 $ 32 $ 74 $ 417 $ 3,075
Provision for loan losses 66 213 1,559 38 25 856 2,757 32 84 805 39 27 396 1,383
Charge-offs — — — — (90 ) (655 ) (745 ) — — — — (90 ) (209 ) (299 )
Recoveries — — — — 56 69 125 — — — — 56 28 84

Ending balance $ 548 $ 748 $ 3,094 $ 70 $ 65 $ 687 $ 5,212 $ 514 $ 619 $ 2,340 $ 71 $ 67 $ 632 $ 4,243

Nine Months Ended September 30, 2021:

Beginning balance $ 463 $ 253 $ 884 $ 52 $ 103 $ 151 $ 1,906
(Credit) provision for loan losses
(46 ) 241 403 (13 ) 4 366 955
Charge-offs — — — — (20 ) (191 ) (211 )
Recoveries 29 — — 8 — 8 45

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

~~(continued)~~
1013

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (Unaudited)

(3) Loans, Continued.

Residential
Real Estate Multi-Family
Real Estate Commercial Real Estate Land and Construction Commercial Consumer Total Residential Multi-Family Commercial
At September 30, 2022:
Real
Estate Real
Estate
Real
Estate
Land and Construction Commercial Consumer Total

At December 31, 2022:
Individually evaluated for impairment:
Recorded investment $ — $ — $ — $ — $ — $ — $ — $ — $ — $ — $ — $ — $ — $ —
Balance in allowance for loan losses $ — $ — $ — $ — $ — $ — $ — $ — $ — $ — $ — $ — $ — $ —

Collectively evaluated for impairment:
Recorded investment $ 34,558 $ 67,966 $ 294,696 $ 6,998 $ 5,785 $ 28,099 $ 438,102 $ 50,354 $ 69,555 $ 310,695 $ 17,286 $ 5,165 $ 30,323 $ 483,378
Balance in allowance for loan losses $ 548 $ 748 $ 3,094 $ 70 $ 65 $ 687 $ 5,212 $ 768 $ 748 $ 3,262 $ 173 $ 277 $ 565 $ 5,793

At December 31, 2021:
Individually evaluated for impairment:
Recorded investment $ — $ — $ — $ — $ — $ — $ —
Balance in allowance for loan losses $ — $ — $ — $ — $ — $ — $ —

Collectively evaluated for impairment:
Recorded investment $ 32,583 $ 48,592 $ 129,468 $ 3,772 $ 14,157 $ 22,827 $ 251,399
Collectively evaluated for impairment, Recorded investment $ 32,583 $ 48,592 $ 129,468 $ 3,772 $ 14,157 $ 22,827 $ 251,399
Balance in allowance for loan losses $ 481 $ 535 $ 1,535 $ 32 $ 72 $ 420 $ 3,075
Collectively evaluated for impairment, Balance in allowance for loan losses $ 481 $ 535 $ 1,535 $ 32 $ 72 $ 420 $ 3,075
(continued)

1114

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~~Bank’s Board of ~~Directors (the “Board”).~~Directors. The Company identifies the portfolio segments as follows:

Residential Real Estate, Multi-Family Real Estate, Commercial Real Estate, Land and Construction. Residential real estate loans are underwritten based on repayment capacity and source, value of the underlying property, credit history and stability. The Company offers first and second one-to-four family mortgage loans; the collateral for these loans is generally the clients’ owner-occupied residences. Although these types of loans present lower levels of risk than commercial real estate loans, risks do still exist because of possible fluctuations in the value of the real estate collateral securing the loan, as well as changes in the borrowers’ financial condition. Multi-family and commercial real estate loans are secured by the subject property. Underwriting standards include, among other factors, loan to value limits, cash flow coverage and general creditworthiness of the obligors. Construction loans to borrowers finance the construction of owner occupied and leased properties. These loans are categorized as construction loans during the construction period, later converting to commercial or residential real estate loans after the construction is complete and amortization of the loan begins. Real estate development and construction loans are approved based on an analysis of the borrower and guarantor, the viability of the project and 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.~~companies. 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~~mitigates these risks through its underwriting standards.

Consumer. Consumer loans are extended for various purposes, including purchases of automobiles, recreational vehicles, and boats. Also offered are home improvement loans, lines of credit, personal loans, and deposit account collateralized loans. Repayment of these loans is primarily dependent on the personal income of the borrowers, which can be impacted by economic conditions in their market areas such as unemployment levels. Loans to consumers are extended after a credit evaluation, including the creditworthiness of the borrower(s), the purpose of the credit, and the secondary source of repayment. Consumer loans are made at fixed and variable interest rates. Risk is mitigated by the fact that the loans are of smaller individual amounts.

(continued)

1215
OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (Unaudited)

(3) Loans, Continued. The following summarizes the loan credit quality (in thousands):
Schedule of Loans by Credit Quality
Pass OLEM
(Other Loans Especially Mentioned) Sub- Standard Doubtful Loss Total
Pass OLEM
(Other Loans Especially
Mentioned)

Sub-
Standard
Doubtful Loss Total
At September 30, 2022:
At December 31, 2022:
Residential real estate $ 34,558 $ — $ — $ — $ — $ 34,558 $ 50,354 $ — $ — $ — $ — $ 50,354
Multi-family real estate 67,966 — — — — 67,966 69,555 — — — — 69,555
Commercial real estate 291,968 1,483 1,245 — — 294,696 309,458 — 1,237 — — 310,695
Land and construction 6,998 — — — — 6,998 17,286 — — — — 17,286
Commercial 5,785 — — — — 5,785 5,165 — — — — 5,165
Consumer 28,099 — — — — 28,099 30,323 — — — — 30,323

Total $ 435,374 $ 1,483 $ 1,245 $ — $ — $ 438,102 $ 482,141 $ — $ 1,237 $ — $ — $ 483,378

At December 31, 2021:
Residential real estate $ 30,080 $ — $ 2,503 $ — $ — $ 32,583
Multi-family real estate 47,962 630 — — — 48,592
Commercial real estate 125,620 3,848 — — — 129,468
Land and construction 3,772 — — — — 3,772
Commercial 13,960 197 — — — 14,157
Consumer 22,827 — — — — 22,827

Total $ 244,221 $ 4,675 $ 2,503 $ — $ — $ 251,399

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.~~loss.
(continued)
1316

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):
Schedule of Age Analysis of Past-due Loans
Accruing Loans
Accruing Loans

30-59
Days
Past
Due

60-89
Days
Past
Due

Greater
Than 90
Days Past
Past

Total
Past
Due

Current

Nonaccrual
Loans

Total
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, 2022:
At June 30, 2023:
Residential real estate $ — $ — $ — $ — $ 34,558 $ — $ 34,558 $ — $ — $ — $ — $ 60,273 $       — $ 60,273
Multi-family real estate — — — — 67,966 — 67,966 1,259 — — 1,259 68,259 — 69,518
Commercial real estate — — — — 294,696 — 294,696 — — — — 321,814 — 321,814
Land and construction — — — — 6,998 — 6,998 — — — — 27,019 — 27,019
Commercial — — — — 5,785 — 5,785 — — — — 6,950 — 6,950
Consumer 58 73 — 131 27,968 — 28,099 347 158 — 505 40,181 — 40,686

Total $ 58 $ 73 $ — $ 131 $ 437,971 $ — $ 438,102 $ 1,606 $ 158 $ — $ 1,764 $ 524,496 $ — $    526,260

Accruing Loans 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
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 December 31, 2021:
At December 31, 2022:
Residential real estate $ 198 $ — $ — $ 198 $ 32,385 $ — $ 32,583 $ — $ — $ — $ — $ 50,354 $      — $ 50,354
Multi-family real estate — — — — 48,592 — 48,592 — — — — 69,555 — 69,555
Commercial real estate — — — — 129,468 — 129,468 — — — — 310,695 — 310,695
Land and construction — — — — 3,772 — 3,772 — — — — 17,286 — 17,286
Commercial — — — — 14,157 — 14,157 — — — — 5,165 — 5,165
Consumer 69 — — 69 22,758 — 22,827 150 27 — 177 30,146 — 30,323

Total $ 267 $ — $ — $ 267 $ 251,132 $ — $ 251,399 $ 150 $ 27 $ — $ 177 $ 483,201 $ — $   483,378

~~There were no impaired loans at September 30, 2022 or December 31, 2021.~~
The Company has not made any modifications of loans to borrowers experiencing financial difficulties during the six months ended June 30, 2023.
No loans have been determined to be troubled debt restructurings (TDR’s) during the six-month period ended June 30, 2022. At June 30, 2023 and 2022, there were no loans modified and entered into as TDR’s within the past twelve months, that subsequently defaulted during the six-month periods ended June 30, 2022.
(continued)

1417

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):~~
Term Loans
Amortized Cost Basis by Origination Year
Schedule of Amortized Cost Basis
Term Loans
Amortized Cost Basis by Origination Year
Revolving Loans
(Amortized
Revolving Loans Converted to Term Loans (Amortized
land and construction
June 30, 2023

2022

2021

2020

2019

Prior

Cost Basis)

Cost
Basis)

Total

Pass $        6,406 $ 15,136 $ 2,324 $ 1,509 $ 1,644 $ - $       - $          - $ 27,019
OLEM (Other Loans Especially Mentioned) - - - - - - - - -
Substandard - - - - - - - - -
Doubtful - - - - - - - - -
Loss - - - - - - - - -
Subtotal loans $ 6,406 $ 15,136 $ 2,324 $ 1,509 $ 1,644 $ - $ - $ - $ 27,019
Current period Gross charge-offs $ - $ - $ - $ - $ - $ - $ - $ - $ -
Residential real estate
Pass $ 7,350 $ 26,567 $ 9,853 $ 6,686 $ 4,097 $ 3,286 $ 2,434 $ - $ 60,273
OLEM (Other Loans Especially Mentioned) - - - - - - - - -
Substandard - - - - - - - - -
Doubtful - - - - - - - - -
Loss - - - - - - - - -
Subtotal loans $ 7,350 $ 26,567 $ 9,853 $ 6,686 $ 4,097 $ 3,286 $ 2,434 $ - $ 60,273
Current period Gross charge-offs $ - $ - $ - $ - $ - $ - $ - $ - $ -
(continued)
18
OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY
~~Schedule of Interest Income Recognized and Received on Impaired Loans~~
Three Months Ended September 30,
2022 2021
Average Interest Interest Average Interest Interest
Recorded Income Income Recorded Income Income
Investment Recognized Received Investment Recognized Received

Residential real estate $ — $ — $ — $ — $ — $ —
Commercial real estate $ — $ — $ — $ — $ — $ —
Commercial $ — $ — $ — $ — $ — $ —
Total $ — $ — $ — $ — $ — $ —
Notes to Condensed Consolidated Financial Statements (Unaudited)

Nine Months Ended September 30,
2022 2021
Average Interest Interest Average Interest Interest
Recorded Income Income Recorded Income Income
Investment Recognized Received Investment Recognized Received

Residential real estate $ — $ — $ — $ — $ — $ —
Commercial real estate $ — $ — $ — $ 658 $ 7 $ 7
Commercial $ — $ — $ — $ — $ — $ —
Total $ — $ — $ — $ 658 $ 7 $ 7
(3) Loans, Continued.

Term Loans
Amortized Cost Basis by Origination Year
Term Loans
Amortized Cost Basis by Origination Year
Revolving Loans
(Amortized
Revolving Loans Converted to Term Loans (Amortized
Multi-family real estate
June 30, 2023

2022

2021

2020

2019

Prior

Cost Basis)

Cost
Basis)

Total

Pass $ 998 $ 29,396 $ 29,570 $ 6,185 $ 2,090 $ 1,279 $ - $               - $ 69,518
OLEM (Other Loans Especially Mentioned) - - - - - - - - -
Substandard - - - - - - - - -
Doubtful - - - - - - - - -
Loss - - - - - - - - -
Subtotal loans $ 998 $ 29,396 $ 29,570 $ 6,185 $ 2,090 $ 1,279 $ - $ - $ 69,518
Current period Gross charge-offs $ - $ - $ - $ - $ - $ - $ - $ - $ -
Commercial real estate (CRE)
Pass $ 20,590 $ 199,769 $ 55,017 $ 16,183 $ 12,815 $ 16,218 $ - $ - $ 320,592
OLEM (Other Loans Especially Mentioned) - - - - - - - - -
Substandard - - - - 1,222 - - - 1,222
Doubtful - - - - - - - - -
Loss - - - - - - - - -
Subtotal loans $ 20,590 $ 199,769 $ 55,017 $ 16,183 $ 14,037 $ 16,218 $ - $ - $ 321,814
Current period Gross charge-offs $ - $ - $ - $ - $ - $ - $ - $ - $ -
Commercial
Pass $ 4,044 $ 1,401 $ 1,363 $ 85 $ 57 $ - $ - $ - $ 6,950
OLEM (Other Loans Especially Mentioned) - - - - - - - - -
Substandard - - - - - - - - -
Doubtful - - - - - - - - -
Loss - - - - - - - - -
Subtotal loans $ 4,044 $ 1,401 $ 1,363 $ 85 $ 57 $ - $ - $ - $ 6,950
Current period Gross charge-offs $ (16 ) $ - $ - $ - $ - $ (26 ) $ - $ - $ (42 )
Consumer
Pass $ 8,798 $ 9,359 $ 5,612 $ 250 $ 198 $ - $ 16,469 $ - $ 40,686
OLEM (Other Loans Especially Mentioned) - - - - - - - - -
Substandard - - - - - - - - -
Doubtful - - - - - - - - -
Loss - - - - - - - - -
Subtotal loans $ 8,798 $ 9,359 $ 5,612 $ 250 $ 198 $ - $ 16,469 $ - $ 40,686
Current period Gross charge-offs $ (30 ) $ (505 ) $ (266 ) $ (3 ) $ - $ - $ - $ - $ (804 )
(continued)
No loans have been determined to be troubled debt restructurings (TDR’s) during the three and nine month periods ended September 30, 2022 or 2021. At September 30, 2022 and 2021, 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, 2022 or 2021.19
OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY
Notes to Condensed Consolidated Financial Statements (Unaudited)

(4) Earnings Per Share. Basic earnings per share have been computed on the basis of the weighted-average number of shares of common stock outstanding during the periods. During the ~~three~~three- and ~~nine month~~six-months periods ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, basic and diluted earnings per share is the same as there were no outstanding potentially dilutive securities. Earnings per common share have been computed based on the following:
Schedule of Basic and Diluted Loss Per Share
2022 2021 2022 2021
Three Months Ended Nine Months Ended
September 30, September 30,
2022 2021 2022 2021
Weighted-average number of common shares outstanding used to calculate basic and diluted earnings per common share 6,065,648 4,346,211 5,661,056 3,611,814
2023 2022 2023 2022
Three Months Ended Six Months Ended
June 30, June 30,
2023 2022 2023 2022
Weighted-average number of common shares outstanding used to calculate basic and diluted earnings per common share $ 7,250,219 $ 6,007,484 $ 7,226,953 $ 5,455,406
~~(continued)~~
15
~~OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY~~
~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~
(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~~1,050,000 shares of common stock under the 2018 Plan, due to an amendment to increase the number of ~~which~~authorized shares from ~~158,421~~500,000 to 1,050,000 that was approved by shareholders in June 2023. At June 30, 2023, 539,320 shares remain available for grant.No ~~stock options are outstanding at September 30, 2022.~~
During the ~~third quarter of 2022,~~six-month period ended June 30, 2023, the Company issued ~~67,182~~66,479 shares to a director for services performed and recorded compensation expense of $~~275,000~~274,000.
During the six-month period ended June 30, 2023, the Company issued 52,622 shares to employees for services performed and recorded compensation expense of $216,000.
(continued)
20
OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY
Notes to Condensed Consolidated Financial Statements (Unaudited)

(6) Fair Value Measurements.

Debt securities available for sale measured at fair value on a recurring basis are summarized below (in thousands):
Schedule of Debt Securities Available-for-sale Measured at Fair Value on Recurring Basis
Fair Value (Level 1) (Level 2) (Level 3)
Fair Value Measurements Using
Quoted Prices
In Active
Markets for Significant Other Significant
Identical Observable Unobservable
Fair Value Assets
(Level 1) Inputs
(Level 2) Inputs
(Level 3)
At September 30, 2022:
SBA Pool Securities $ 841 $ — $ 841 $ —
Collateralized mortgage obligations 138 — 138 —
Taxable municipal securities 11,821 — 11,821 —
Mortgage-backed securities 12,634 — 12,634 —
Total $ 25,434 $ — $ 25,434 $ —

At December 31, 2021:
SBA Pool Securities $ 1,072 $ — $ 1,072 $ —
Collateralized mortgage obligations 217 — 217 —
Taxable municipal securities 16,426 — 16,426 —
Mortgage-backed securities 16,679 — 16,679 —
Total $ 34,394 $ — $ 34,394 $ —

Fair Value Measurements Using
Fair Value
Quoted Prices
In Active Markets for
Identical Assets
(Level 1)

Significant
Other Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

At June 30, 2023:
SBA Pool Securities $ 759 $   — $ 759 —
Collateralized mortgage obligations 124 — 124 —
Taxable municipal securities 12,011 — 12,011 —
Mortgage-backed securities 11,868 — 11,868 —
Total $ 24,762 — $ 24,762 —

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

(7) Fair Value of Financial Instruments. The estimated fair values and fair value measurement method with respect to the Company’s financial instruments were as follows (in thousands):
Schedule of Estimated Fair Value of Financial Instruments
At September 30, 2022 At December 31, 2021 At June 30, 2023 At December 31, 2022
Carrying Amount Fair Value Level Carrying Amount Fair Value Level Carrying Amount Fair Value Level Carrying Amount Fair Value Level

Financial assets:
Cash and cash equivalents $ 73,793 $ 73,793 1 $ 58,970 $ 58,970 1 $ 78,373 $ 78,373 1 $ 71,836 $ 71,836 1
Debt securities available for sale 25,434 25,434 2 34,394 34,394 2 24,762 24,762 2 25,102 25,102 2
Debt securities held-to-maturity 578 547 2 1,040 1,071 2 445 406 2 540 504 2
Loans 432,470 432,309 3 247,902 247,788 3 518,829 512,031 3 477,218 476,566 3
Federal Home Loan Bank stock 2,725 2,725 3 793 793 3 717 717 3 600 600 3
Accrued interest receivable 1,202 1,202 3 971 971 3 1,559 1,559 3 1,444 1,444 3

Financial liabilities:
Deposit liabilities 422,202 423,250 3 292,457 292,537 3 551,631 556,017 3 507,899 512,357 3
Federal Home Loan Bank advances 68,000 67,758 3 18,000 18,021 3 10,000 9,456 3 10,000 9,450 3
Off-balance sheet financial instruments — — 3 — — 3 — — 3 — — 3
(continued)
1621
OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (Unaudited)

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

The Company’s exposure to credit loss in the event of non-performance by the other party to the financial instrument for commitments to extend credit is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments as it does for on-balance-sheet instruments.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Because some of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company evaluates each customer’s credit worthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Company, upon extension of credit, is based on management’s credit evaluation of the counterparty.

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

Commitments to extend credit, unused lines of credit, and standby letters of credit typically result in loans with a market interest rate when funded. A summary of the contractual amounts of the Company’s financial instruments with off-balance-sheet risk at ~~September~~June 30, ~~2022~~2023 follows (in thousands):
Schedule of Off-Balance Sheet Risks of Financial Instruments

Commitments to extend credit $ 20,335 $ 32,184

Unused lines of credit $ 19,962 $ 56,272

Standby letters of credit $ 4,313 $ 4,313
(9) Regulatory Matters. The Bank is subject to various regulatory capital requirements administered by the bank regulatory agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company and Bank’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of its assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

(continued)

1722

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (Unaudited)

(9) Regulatory Matters, Continued.

~~Management believes, as~~As of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021, that~~2022, 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, 2022:
Tier I Capital to Total Assets $ 54,520 10.77 % $ 45,554 9.00 %

As of December 31, 2021:
Tier I Capital to Total Assets $ 35,338 10.64 % $ 28,235 8.50 %
Actual To Be Well Capitalized Under Prompt Corrective Action Regulations (CBLR Framework)
Amount % Amount %
As of June 30, 2023:
Tier 1 Capital to Total Assets 69,234 11.20 % 55,616 9.00 %

As of December 31, 2022:
Tier 1 Capital to Total Assets 66,291 11.29 % 52,865 9.00 %
(continued)
23
OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY
Notes to Condensed Consolidated Financial Statements (Unaudited)

(10) Series B Preferred Stock

~~During the first quarter of 2022, the Company issued~~ ~~260~~ ~~shares of Series B-2 Participating Preferred Stock to an unrelated party at a cash price of $25,000~~ ~~per share, or an aggregate of $6,500,000~~.
~~OptimumBank Holding Inc. is authorized to issue~~ ~~1,020~~ ~~shares of Series B Participating Preferred Stock at a price of $25,000~~ ~~per share. The Preferred Stock has no par value.~~ Except in the event of liquidation, if the Company declares or pays a dividend or distribution on the common stock, the Company shall simultaneously declare and pay a dividend on the Series B Preferred 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~~ As of June 30, 2023 the Series B Preferred Stock is convertible into 11,113,889 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~~must not result in any holder of the Series B Preferred Stock and any persons with whom the holder may be acting in concert, becoming the beneficial owners of more than ~~9.9~~%9.9% of the outstanding shares of the Company’s common ~~stock.~~stock, unless the issuance, shall have been approved by all banking regulatory authorities whose approval is required for the acquisition of such shares. The number of shares issuable upon conversion is subject to adjustment based on the terms of the ~~applicable Certificate of Designation for the~~ Series B Preferred ~~(the “Certificate of Designation”).~~Stock. The Series B Preferred has preferential liquidation rights over common ~~stockholders and holders of junior securities.~~stockholders. The liquidation price is the greater of $25,000per share of Series B Preferred or such amount per share of Series B Preferred that would have been payable had all shares of the Series B Preferred had been converted into common stock pursuant to the terms of the Series B Preferred Stock’s Certificate of Designation immediately prior to a liquidation. The Series B Preferred generally has no voting rights except as provided in the Certificate of Designation.

The Series B isPreferred Stock are subdivided into ~~Series B-1 and Series B-2 Preferred Stock.~~three categories. The Company is authorized to issue 760~~shares of Series B-1 and~~ ~~260~~ shares of Series ~~B-2.~~B-1; 260 shares of Series B-2; and 500 shares of Series B-3.

~~Series B-2~~Each series has substantially the same rights, preferences, powers, restrictions and limitations, except that the initial conversion price of the Series B-1 is $2.50 per ~~share and~~share; the initial conversion price for Series B-2 is $4.00 per share, and the initial conversion price for Series B-3 is $4.50 per share.
During the Annual Meeting of Shareholders held on June 27, 2023, the Company’s shareholders approved the issuance of up to 11,113,889 shares of common stock upon conversion of the Series B preferred stock previously issued by the Company.

(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.

During the three-months ended June 30, 2023 the Company incurred a one-time expense relate to the settlement of a foreclosure litigation in the amount of $375,000.
(continued)
1824
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, ~~2021~~2022, in the Annual Report on Form 10-K.

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, increases in interest rates, the possible loss of key personnel, the impact of increasing competition, the impact of changes in government regulation, the possibility of liabilities arising from violations of federal and state securities laws and the impact of changes in technology in the banking industry. Although the Company believes that its forward-looking statements are based upon reasonable assumptions regarding its business and future market conditions, there can be no assurances that the Company’s actual results will not differ materially from any results expressed or implied by the Company’s forward-looking statements. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Readers are cautioned that any forward-looking statements are not guarantees of future performance.

Strategic Plan
Our key strategic initiatives are designed to generate continued growth in earning assets, core transaction and savings deposits, treasury management fee income, and lower costs. Continued emphasis on expansion of our footprint and exploring additional lines of business are also part of our plans.
On the loan side, we intend to continue our focus on increasing our multi-family, non-owner occupied, commercial real estate, and skilled nursing facility loan portfolios. As to deposits, we are focused on identifying deposit growth opportunities among our existing customer base and prospects throughout Florida and the United States. With respect to treasury management, our focus will remain on merchant cash advance providers and the related electronic funds transfer line of business. For this revenue source to increase further in a meaningful way, automation will be necessary in order to further improve efficiency. We are currently investing in the necessary technology to achieve this end.
Going forward, our strategic plan will continue to emphasize and build upon initiatives focused on strengthening credit oversight and credit administrative processes and procedures. Moreover, management continues to identify loan growth opportunities that are designed to improve overall profitability without sacrificing credit quality and underwriting standards. This growth oriented strategic direction is expected to be facilitated by maintaining credit administration objectives including a risk-based and comprehensive credit culture and a credit administrative infrastructure that reinforces appropriate risk management practices.
During the third quarter of 2023, the Bank plans to offer U.S. Small Business Administration (“SBA”) SBA 7A loans. SBA 7A loans are generally used to establish a new business or assist in the acquisition, operation, or expansion of an existing business. With SBA loan programs, there are set eligibility requirements and underwriting standards outlined by SBA that can change as the government alters its fiscal policy. These loans are generally secured by accounts receivable, inventory, equipment, and real estate. The Bank hired two full-time SBA staff. So, loans and revenue they may produce will be without any increased expense, other than servicing fees.
Additionally, management has implemented initiatives that have enabled us to grow our loan portfolio primarily with locally generated relationships in the non-owner occupied, multi-family and commercial real estate sectors. However, out-of-area loans and loan pool purchases will be considered as deemed appropriate and subject to proper due diligence to further increase interest income and for portfolio diversification purposes.
Capital Levels

As of ~~September~~June 30, ~~2022,~~2023, the Bank is well capitalized under regulatory guidelines.

Refer to Note 9 for the Bank’s actual and required minimum capital ratios.

(continued)
1925
OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

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

Financial Condition at ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021~~2022

Overview

The Company’s total assets increased by approximately ~~$192.9~~$47 million to ~~$544.8~~$633 million at ~~September~~June 30, ~~2022,~~2023, from ~~$351.9~~$585 million at December 31, ~~2021,~~2022, primarily due to increases in ~~commercial real estate~~ loans, and cash and cash equivalents. The growth in assets was attributable to the success of the Company’s efforts to increase loans and deposits from new customers. Net loans grew by ~~$184.5 million. Deposits~~$42 million to $519 million and deposits grew by approximately ~~$129.7~~$44 million to ~~$422.2~~$552 million at ~~September~~June 30, ~~2022,~~2023, from ~~$292.5~~$477 million and $508 million at December 31, ~~2021. The Company increased the Federal Home Loan Bank advances by $50 million to $68 million at September 30,~~ 2022. Total stockholders’ equity increased by approximately ~~$12.7~~$3 million to ~~$51.2~~$66 million at ~~September~~June 30, ~~2022,~~2023, from ~~$38.5~~$63 million at December 31, ~~2021,~~2022, primarily due to net earnings, proceeds from ~~the sale of preferred stock,~~ common stock sales and ~~net earnings. The increase~~changes in ~~stockholders’ equity was partially offset by the increase in accumulated other comprehensive~~unrealized loss ~~of approximately $5.2 million~~on debt securities available for ~~the nine months ended September 30, 2022.~~sale.

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

Six Months Ended Year Ended
Nine Months Ended
September 30, 2022 Year Ended
December 31, 2021 June 30, 2023 December 31, 2022

Average equity as a percentage of average assets 10.5 % 9.4 % 10.6 % 9.9 %

Equity to total assets at end of period 9.4 % 11.0 % 10.4 % 10.7 %

Return on average assets (1) 0.8 % 2.2 % 0.8 % 0.9 %

Return on average equity (1) 7.3 % 23.3 % 7.6 % 8.6 %

Noninterest expenses to average assets (1) 2.3 % 2.4 % 2.4 % 2.1 %

(1) Annualized for the ~~nine~~six months ended ~~September~~June 30, ~~2022.~~2023.

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 debt securities, loan repayments, the use of Federal Funds markets, net earnings, 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 approximately ~~$129.7~~$44 million during the ~~nine-month~~six-month period ~~ending September~~ended June 30, ~~2022.~~2023. The proceeds were used to originate new loans.

In addition to obtaining funds from depositors, the Company may borrow funds from other financial institutions. At ~~September~~June 30, ~~2022,~~2023, the Company had outstanding borrowings of ~~$68~~$10 million, against its ~~$116.1~~$155 million in established borrowing ~~capacity~~capacity. with the FHLB. The Company’s borrowing facility is subject to collateral and stock ownership requirements, as well as prior FHLB consent to each advance. At ~~September~~June 30, ~~2022,~~2023, the Company also had available lines of credit amounting to ~~$24.5~~$25 million with six correspondent banks to purchase federal funds. Disbursements on the lines of credit are subject to the approval of the correspondent banks. The Company has an available discount window credit line with the Federal Reserve Bank, currently $12 million. The Federal Reserve Bank line is subject to collateral requirements. 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 Arrangements.

(continued)

2026
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,
2022 2021
Interest Average Interest Average
Average and Yield/ Average and Yield/
(dollars in thousands) Balance Dividends Rate⁽⁵⁾ Balance Dividends Rate⁽⁵⁾
Interest-earning assets:
Loans $ 398,914 $ 5,000 5.01 % $ 203,983 $ 2,795 5.48 %
Securities 27,862 153 2.20 % 34,044 150 1.76 %
Other (1) 60,600 341 2.25 % 48,596 28 0.23 %

Total interest-earning assets/interest income 487,376 5,494 4.51 % 286,623 2,973 4.15 %

Cash and due from banks 15,944 12,080
Premises and equipment 860 1,402
Other 4,434 1,626

Total assets $ 508,614 $ 301,731

Interest-bearing liabilities:
Savings, NOW and money-market deposits $ 147,259 138 0.37 % $ 128,844 124 0.38 %
Time deposits 97,638 665 2.72 % 15,429 22 0.57 %
Borrowings (2) 71,804 386 2.15 % 18,387 62 1.35 %

Total interest-bearing liabilities/interest expense 316,701 1,189 1.50 % 162,660 208 0.51 %

Noninterest-bearing demand deposits 140,282 105,843
Other liabilities 2,989 1,744
Stockholders’ equity 48,642 31,484

Total liabilities and stockholders’ equity $ 508,614 $ 301,731

Net interest income $ 4,305 $ 2,765

Interest rate spread (3) 3.01 % 3.64 %

Net interest margin (4) 3.53 % 3.86 %

Ratio of average interest-earning assets to average interest-bearing liabilities 1.54 1.76

Three Months Ended June 30,
2023 2022
Interest Average Interest Average
Average and Yield/ Average and Yield/
(dollars in thousands) Balance Dividends Rate⁽⁵⁾ Balance Dividends Rate⁽⁵⁾
Interest-earning assets:
Loans $ 515,342 $ 7,252 5.63 % $ 297,472 $ 3,764 5.06 %
Securities 25,656 172 2.68 % 29,944 159 2.12 %
Other (1) 58,552 755 5.16 % 44,235 102 0.92 %

Total interest-earning assets/interest income 599,550 8,179 5.46 % 371,651 4,025 4.33 %

Cash and due from banks 12,929 15,264
Premises and equipment 1,154 863
Other 5,330 5,010

Total assets $ 618,963 $ 392,788

Interest-bearing liabilities:
Savings, NOW and money-market deposits $ 129,890 395 1.22 % $ 154,365 125 0.32 %
Time deposits 229,376 2,161 3.77 % 15,958 45 1.13 %
Borrowings (2) 10,330 31 1.20 % 24,649 102 1.66 %

Total interest-bearing liabilities/interest expense 369,596 2,587 2.80 % 194,972 272 0.56 %

Noninterest-bearing demand deposits 179,050 146,579
Other liabilities 5,105 2,521
Stockholders’ equity 65,212 48,716

Total liabilities and stockholders’ equity $ 618,963 $ 392,788

Net interest income $ 5,592 $ 3,753

Interest rate spread (3) 2.66 % 3.77 %

Net interest margin (4) 3.73 % 4.04 %

Ratio of average interest-earning assets to average interest-bearing liabilities 1.62 1.91
(1) Includes interest-earning deposits with banks and Federal Home Loan Bank stock dividends.
(2) Includes Federal Home Loan Bank advances and other borrowings.
(3) Interest-rate spread represents the difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities.
(4) Net interest margin is net interest income divided by average interest-earning assets.
(5) Annualized.
27
Six Months Ended June 30,
2023 2022
Interest Average Interest Average
Average and Yield/ Average and Yield/
(dollars in thousands) Balance Dividends Rate⁽⁵⁾ Balance Dividends Rate⁽⁵⁾
Interest-earning assets:
Loans $ 504,000 $ 13,841 5.49 % $ 280,957 $ 7,027 5.00 %
Securities 25,766 350 2.72 % 32,026 322 2.01 %
Other (1) 59,801 1,504 5.03 % 57,933 139 0.48 %

Total interest-earning assets/interest income 589,567 15,695 5.32 % 370,916 7,488 4.04 %

Cash and due from banks 14,939 15,277
Premises and equipment 1,072 861
Other 5,753 4,850

Total assets $ 611,331 $ 391,904

Interest-bearing liabilities:
Savings, NOW and money-market deposits $ 125,834 666 1.06 % $ 168,478 286 0.34 %
Time deposits 233,957 4,322 3.69 % 14,097 59 0.84 %
Borrowings (2) 10,248 56 1.09 % 21,324 163 1.53 %

Total interest-bearing liabilities/interest expense 370,039 5,044 2.73 % 203,899 508 0.50 %

Noninterest-bearing demand deposits 172,065 141,927
Other liabilities 4,808 2,598
Stockholders’ equity 64,419 43,480

Total liabilities and stockholders’ equity $ 611,331 $ 391,904

Net interest income $ 10,651 $ 6,980

Interest rate spread (3) 2.59 % 3.54 %

Net interest margin (4) 3.61 % 3.76 %

Ratio of average interest-earning assets to average interest-bearing liabilities 1.59 1.82
(1) Includes interest-earning deposits with banks and Federal Home Loan Bank stock dividends.
(2) Includes Federal Home Loan Bank advances and other borrowings.
(3) Interest-rate spread represents the difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities.
(4) Net interest margin is net interest income divided by average interest-earning assets.
(5) Annualized.

(continued)

2128
~~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,
2022 2021
Interest Average Interest Average
Average and Yield/ Average and Yield/
(dollars in thousands) Balance Dividends Rate⁽⁵⁾ Balance Dividends Rate⁽⁵⁾
Interest-earning assets:
Loans $ 320,276 $ 12,027 5.01 % $ 183,068 6,820 4.97 %
Securities 30,638 475 2.07 % 28,024 327 1.56 %
Other (1) 58,822 480 1.09 % 38,457 81 0.28 %

Total interest-earning assets/interest income 409,736 12,982 4.22 % 249,549 7,228 3.86 %

Cash and due from banks 15,499 21,338
Premises and equipment 861 1,344
Other 4,711 1,940

Total assets $ 430,807 $ 274,171

Interest-bearing liabilities:
Savings, NOW and money-market deposits $ 161,405 424 0.35 % $ 121,077 380 0.42 %
Time deposits 41,944 724 2.30 % 18,170 100 0.73 %
Borrowings (2) 38,151 549 1.92 % 21,023 241 1.53 %

Total interest-bearing liabilities/interest expense 241,500 1,697 0.94 % 160,270 721 0.60 %

Noninterest-bearing demand deposits 141,379 88,387
Other liabilities 2,727 1,642
Stockholders’ equity 45,201 23,872

Total liabilities and stockholders’ equity $ 430,807 $ 274,171

Net interest income $ 11,285 6,507

Interest rate spread (3) 3.29 % 3.26 %

Net interest margin (4) 3.67 % 3.48 %

Ratio of average interest-earning assets to average interest-bearing liabilities 1.70 1.56
~~(1)~~ ~~Includes interest-earning deposits with banks and Federal Home Loan Bank stock dividends.~~
~~(2)~~ ~~Includes Federal Home Loan Bank advances and other borrowings.~~
~~(3)~~ ~~Interest-rate spread represents the difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities.~~
~~(4)~~ ~~Net interest margin is net interest income divided by average interest-earning assets.~~
~~(5)~~ ~~Annualized.~~
22
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~~June 30, ~~2022~~2023, and ~~2021~~2022

Three Months Ended Increase / Three Months Ended Increase /
September 30, (Decrease) June 30, (Decrease)
(dollars in thousands) 2022 2021 Amount Percentage 2023 2022 Amount Percentage
Total interest income $ 5,494 $ 2,973 $ 2,521 85 % $ 8,179 $ 4,025 $ 4,154 103 %
Total interest expense 1,189 208 981 472 % 2,587 272 2,315 851 %
Net interest income 4,305 2,765 1,540 56 % 5,592 3,753 1,839 49 %
Provision for loan losses 1,374 582 792 136 %
Credit loss expense 704 991 (287 ) -29 %
Net interest income after provision for loan losses 2,931 2,183 748 34 % 4,888 2,762 2,126 77 %
Total noninterest income 692 423 269 64 % 772 764 8 1 %
Total noninterest expenses 2,720 1,689 1,031 61 % 3,902 2,260 1,642 73 %
Net earnings before income taxes 903 917 (14 ) -2 % 1,758 1,266 492 39 %
Income taxes 230 - 230 — 446 321 125 39 %
Net earnings $ 673 $ 917 (244 ) -27 % $ 1,312 $ 945 367 39 %
Net earnings per share - Basic and diluted $ 0.11 $ 0.21 $ 0.18 $ 0.16

Net earnings. Net earnings for the three months ended ~~September~~June 30, ~~2022,~~2023, were ~~$673,000~~$1,312,000 or ~~$0.11~~$.18 per basic and diluted share compared to net earnings of ~~$917,000~~$945,000 or ~~$0.21~~$.16 per basic and diluted share for the three months ended ~~September~~June 30, ~~2021.~~2022. The ~~decrease~~increase in net earnings during the three months ended ~~September~~June 30, ~~2022,~~2023 compared to three months ended ~~September~~June 30, ~~2021~~2022 is primarily attributed to ~~increases in the, provision for loan losses, income taxes, and noninterest expenses, which were partially offset by~~ an increase in net interest ~~income.~~income and non-interest income, partially offset by the increase in non-interest expense.

Interest ~~Income~~income. Interest income increased ~~$2.5~~$4.2 million for the three months ended ~~September~~June 30, ~~2022~~2023 compared to the ~~nine~~three months ended ~~September~~June 30, ~~2021~~2022 due primarily to growth in the loan ~~portfolio.~~portfolio and increases in yields on interest earning assets.

Interest ~~Expense.~~expense. Interest expense increased ~~$981,000~~$2.3 million to ~~$1,189,000~~$2.6 million for the three months ended ~~September~~June 30, ~~2022~~2023, compared to the ~~prior period,~~three months ended June 30, 2022, primarily due to ~~increases in Federal Home Loan Bank advances and,~~ interest bearing deposit rates and changes in the composition of deposits.

~~Provision for Loan Losses.~~Credit loss expense. ~~Provision for loan losses~~Expected credit loss expense was ~~$1,374,000~~$704,000 for the three months ended ~~September~~June 30, ~~2022~~2023, compared to ~~a $582,000 credit for loan losses~~$991,000 for the three months ended ~~September~~June 30, ~~2021.~~2022. The ~~provision for loan losses~~expected credit loss expense is charged to earnings as losses are ~~estimated~~expected to have occurred in order to bring the total ~~loan~~ allowance for ~~loan~~credit losses to a level deemed appropriate by management to absorb losses ~~inherent in the portfolio at September 30, 2022.~~expected. Management’s periodic evaluation of the adequacy of the allowance for credit losses is based upon historical experience, the volume and type of lending conducted by us, adverse situations that may affect the borrower’s ability to repay, estimated value of the underlying collateral, ~~loans identified as impaired,~~ general economic conditions, particularly as they relate to our market areas, and other factors related to the estimated collectability of our loan portfolio. The allowance for ~~loan~~credit losses totaled ~~$5.2~~$6.6 million or ~~1.19%~~1.26% of loans outstanding at ~~September~~June 30, ~~2022,~~2023, compared to ~~$3.1~~$5.8 million or ~~1.22%~~1.20% of loans outstanding at December 31, ~~2021.~~2022. The increase in the ~~provision for loan losses~~credit loss expense during the ~~third~~second quarter of ~~2022~~2023 was primarily due to loan volume growth and the evaluation of the other factors noted above. During the three-months ended June 30, 2023, the net charge off amounting to $253,000 arose mostly due to consumer lending for the three-month ended June 30, 2023.

Noninterest ~~Income.~~income. Total noninterest income increased to ~~$692,000~~$772,000 for the three months ended ~~September~~June 30, ~~2022,~~2023, from ~~$423,000~~$764,000 for the three months ended ~~September~~June 30, ~~2021,~~2022, due to increased wire transfer and ACH fees during ~~the three month period ended September 30, 2022.~~second quarter of 2023.

Noninterest ~~Expenses~~expenses. Total noninterest expenses increased to ~~$2,720,000~~$3.9 million for the three months ended ~~September~~June 30, ~~2022~~2023, compared to ~~$1,689,000~~$2.3 million for the three months ended ~~September~~June 30, ~~2021~~2022, primarily due to anone-time litigation settlement, increase in salaries and employee benefits, ~~and~~ data processing, and other operating ~~cost.~~costs.

2329

~~OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY~~
Comparison of the ~~Nine-Month~~Six-Month Periods Ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022

Nine Months Ended Increase / Six Months Ended Increase /
September 30, (Decrease) June 30, (Decrease)
(dollars in thousands) 2022 2021 Amount Percentage 2023 2022 Amount Percentage
Total interest income $ 12,982 $ 7,228 $ 5,754 80 % $ 15,695 $ 7,488 $ 8,207 110 %
Total interest expense 1,697 721 976 135 % 5,044 508 4,536 893 %
Net interest income 11,285 �� 6,507 4,778 73 % 10,651 6,980 3,671 53 %
Provision for loan losses 2,757 955 1,802 189 %
Credit loss expense 1,524 1,383 141 10 %
Net interest income after provision for loan losses 8,528 5,552 2,976 54 % 9,127 5,597 3,530 63 %
Total noninterest income 2,106 902 1,204 133 % 1,501 1,414 87 6 %
Total noninterest expenses 7,320 �� 4,745 2,575 54 % 7,324 4,600 2,724 59 %
Net earnings before income taxes 3,314 1,709 1,605 94 % 3,304 2,411 893 37 %
Income taxes 841 - 841 — 839 611 228 37 %
Net earnings $ 2,473 $ 1,709 764 45 % $ 2,465 $ 1,800 665 37 %
Net earnings per share - Basic and diluted $ 0.44 $ 0.47 $ 0.34 $ 0.33

Net earnings. Net earnings for the ~~nine~~six months ended ~~September~~June 30, ~~2022, were $2,473,000~~2023, was $2,465,000 or ~~$0.44~~$.34 per basic and diluted share compared to a net earnings of ~~$1,709,000~~$1,800,000 or ~~$0.47~~$.33 per basic and diluted share for the ~~nine~~six months ended ~~September~~June 30, ~~2021.~~2022. The increase in net earnings during the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023 compared to ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 is primarily attributed to ~~increases~~an increase in ~~noninterest income and~~ net interest income, ~~which were~~ partially offset by the increase in noninterest expense.

Interest Income. Interest income increased ~~$5,754,000~~$8.2 million for the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023 compared to the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 due primarily to growth in the loan portfolio and ~~increases~~increase in ~~interest rates on the Company’s loans.~~loan and fed funds yields.

Interest Expense. Interest expense increased ~~$976,000~~$4.5 million to ~~$1,697,000~~$5.0 million for the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023 compared to the ~~prior period primarily due to~~six-months ended June 30, 2022 as a result of an increase in ~~Federal Home loan Bank advances~~deposits and ~~interest bearing deposit~~ rates.

~~Provision for Loan Losses.~~Credit loss expense. ~~Provision for loan losses amounted to $2,757,000~~Expected credit loss expense was $1.5 million for the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, compared to ~~$955,000~~$1.4 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021. The provision for loan losses is charged to~~ ~~earnings~~ 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, 2022. 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~~credit losses totaled ~~$5.2~~$6.6 million or ~~1.19%~~1.26% of loans outstanding at ~~September~~June 30, ~~2022,~~2023, compared to ~~$3.1~~$5.8 million or ~~1.22%~~1.20% of loans outstanding at December 31, ~~2021.~~2022. The increase in the ~~provision for loan losses~~credit loss expense during ~~nine~~the six months ended ~~September~~June 30, ~~2022~~2023 was primarily due to loan volume growth and the evaluation of the other factors noted above. During the six-months ended June 30, 2023, the net charge off amounting to $677,000 arose mostly due to consumer lending for the six month ended June 30, 2023.

Noninterest Income. Total noninterest income increased to ~~$2,106,000~~$1.5 million for the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, from ~~$902,000~~$1.4 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 due to increased wire transfer and ACH ~~fees.~~fees related to an increase in business checking accounts during the six-month period ended June 30, 2023.

Noninterest Expenses. Total noninterest expenses increased to ~~$7,320,000~~$7.3 million for the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023 compared to ~~$4,745,000~~$4.6 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 primarily due to ~~increases~~one-time litigation settlement, increase in salaries and employee benefits, data processing, and other operating ~~cost.~~costs.

2430
OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

Item 4. Controls and Procedures

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

There have been no significant changes in the Company’s internal control over financial reporting during the quarter ended ~~September~~June 30, ~~2022,~~2023, that have materially affected, or are reasonably likely to materially affect, internal control over financial reporting.

PART II. OTHER INFORMATION

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

During the ~~third quarter~~first six months of ~~2022,~~2023, the Company issued ~~674,222~~72,221 shares of its common stock in a private placement transaction to 4two accredited investors at a price of $4.50 per share. None of these investors was an officer, director or affiliate of the ~~Company other than Steven Newman, who is a director of the~~ Company. ~~Mr. Newman purchased 17,000 shares.~~ The Company issued these shares in reliance on Section 4(a)(2) of the Securities Act as a transaction by an issuer not involving a public offering.

Item 6. Exhibits

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

2531
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 10, 2022~~August 9, 2023 By: /s/ Timothy Terry
Timothy Terry
Principal Executive Officer

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

2632

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

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)

2733

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

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

			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value

At September 30, 2022:
Available for sale:
SBA Pool Securities	$	858	$	1	$	(18	)	$	841
Collateralized mortgage obligations		153		—		(15	)		138
Taxable municipal securities		16,740		—		(4,919	)		11,821
Mortgage-backed securities		15,488		—		(2,854	)		12,634
Total	$	33,239	$	1	$	(7,806	)	$	25,434

Held-to-maturity:
Collateralized mortgage obligations	$	500	$	—		(31	)	$	469
Mortgage-backed securities		78		—		—			78
Total	$	578	$	—		(31	)	$	547

	Over Twelve Months				Less Than Twelve Months
	Gross				Gross
	Unrealized		Fair		Unrealized		Fair
	Losses		Value		Losses		Value
At June 30, 2023:
Available for Sale:
SBA Pool Securities	$	17	$	607	$	—	$	—
Collateralized mortgage obligation		15		124		—		—
Taxable municipal securities		4,699		12,012		—		—
Mortgage-backed securities		2,721		11,868		—		—
Total	$	7,452	$	24,611	$	—	$	—

	At September 30, 2022
	Over Twelve Months					Less Than Twelve Months
	Gross					Gross
	Unrealized			Fair		Unrealized			Fair
	Losses			Value		Losses			Value

Available for Sale:
SBA Pool Securities		(18	)		673		—			—
Collateralized mortgage obligation		—			—		(15	)		138
Taxable municipal securities		(4,333	)		10,150		(586	)		1,670
Mortgage-backed securities		(2,780	)		12,076		(74	)		558
Total	$	(7,131	)	$	22,899	$	(675	)	$	2,366

	At December 31, 2021
	Over Twelve Months					Less Than Twelve Months
	Gross					Gross
	Unrealized			Fair		Unrealized			Fair
	Losses			Value		Losses			Value

Available for Sale:
SBA Pool Securities		(26	)		895		—			—
Taxable municipal securities		(81	)		1,853		(278	)		12,828
Mortgage-backed securities		(242	)		6,179		(235	)		9,984
Total	$	(349	)	$	8,927	$	(513	)	$	22,812

	Residential Real Estate			Multi-Family Real Estate		Commercial Real Estate		Land and Construction			Commercial			Consumer			Total			Real Estate			Real Estate			Real Estate			Construction			Commercial			Consumer			Total
Three Months Ended September 30, 2022:
																				Residential			Multi-Family			Commercial			Land and
Beginning balance	$	514		$	619	$	2,340	$	71		$	67		$	632		$	4,243
Provision (Credit) for loan losses		34			129		754		(1	)		(2	)		460			1,374
																				Real Estate			Real Estate			Real Estate			Construction			Commercial			Consumer			Total
Three Months Ended June 30, 2023:

Balance March 31, 2023																				$	742		$	1,077		$	3,030		$	533		$	26		$	945		$	6,353
Credit loss expense (income)																					141			(40	)		(228	)		147			38			487			545
Charge-offs		—			—		—		—			-			(446	)		(446	)		—			—			—			—			(16	)		(367	)		(383	)
Recoveries		—			—		—		—			-			41			41			—			—			—			—			87			43			130

Ending balance	$	548		$	748	$	3,094	$	70		$	65		$	687		$	5,212
Ending balance (June 30, 2023)																				$	883		$	1,037		$	2,802		$	680		$	135		$	1,108		$	6,645

Three Months Ended September 30, 2021:
Three Months Ended June 30, 2022:
Beginning balance	$	472		$	392	$	938	$	57		$	58		$	314		$	2,231		$	575		$	549		$	1,607		$	79		$	68		$	530		$	3,408
(Credit) provision for loan losses		(29	)		102		349		(10	)		39			131			582			(61	)		70			733			(8	)		33			224			991
Charge-offs		—			—		—		—			(10	)		(111	)		(121	)		—			—			—			—			(90	)		(136	)		(226	)
Recoveries		3			—		—		—			—			—			3			—			—			—			—			56			14			70

Ending balance	$	446		$	494	$	1,287	$	47		$	87		$	334		$	2,695
Ending balance (June 30, 2022)																				$	514		$	619		$	2,340		$	71		$	67		$	632		$	4,243

Nine Months Ended September 30, 2022:
Six Months Ended June 30, 2023:

Beginning balance Dec 31, 2022																				$	768		$	748		$	3,262		$	173		$	277		$	565		$	5,793
Additional allowance recognized due to adoption of Topic 326																					33			327			(367	)		278			(262	)		209			218
Balance January 31, 2023																				$	801		$	1,075		$	2,895		$	451		$	15		$	774		$	6,011
Credit loss expense (income)																					82			(38	)		(93	)		229			75			1,056			1,311
Charge-offs																					—			—			—			—			(42	)		(804	)		(846	)
Recoveries																					—			—			—			—			87			82			169

Ending balance (June 30, 2023)																				$	883		$	1,037		$	2,802		$	680		$	135		$	1,108		$	6,645

Six Months Ended June 30, 2022:

Beginning balance	$	482		$	535	$	1,535	$	32		$	74		$	417		$	3,075		$	482		$	535		$	1,535		$	32		$	74		$	417		$	3,075
Provision for loan losses		66			213		1,559		38			25			856			2,757			32			84			805			39			27			396			1,383
Charge-offs		—			—		—		—			(90	)		(655	)		(745	)		—			—			—			—			(90	)		(209	)		(299	)
Recoveries		—			—		—		—			56			69			125			—			—			—			—			56			28			84

Ending balance	$	548		$	748	$	3,094	$	70		$	65		$	687		$	5,212		$	514		$	619		$	2,340		$	71		$	67		$	632		$	4,243

Nine Months Ended September 30, 2021:

Beginning balance	$	463		$	253	$	884	$	52		$	103		$	151		$	1,906
(Credit) provision for loan losses		(46	)		241		403		(13	)		4			366			955
Charge-offs		—			—		—		—			(20	)		(191	)		(211	)
Recoveries		29			—		—		8			—			8			45

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


	Residential Real Estate		Multi-Family Real Estate		Commercial Real Estate		Land and Construction		Commercial		Consumer		Total		Residential		Multi-Family		Commercial
At September 30, 2022:
															Real Estate		Real Estate		Real Estate		Land and Construction		Commercial		Consumer		Total

At December 31, 2022:
Individually evaluated for impairment:
Recorded investment	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Balance in allowance for loan losses	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Collectively evaluated for impairment:
Recorded investment	$	34,558	$	67,966	$	294,696	$	6,998	$	5,785	$	28,099	$	438,102	$	50,354	$	69,555	$	310,695	$	17,286	$	5,165	$	30,323	$	483,378
Balance in allowance for loan losses	$	548	$	748	$	3,094	$	70	$	65	$	687	$	5,212	$	768	$	748	$	3,262	$	173	$	277	$	565	$	5,793

At December 31, 2021:
Individually evaluated for impairment:
Recorded investment	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Balance in allowance for loan losses	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Collectively evaluated for impairment:
Recorded investment	$	32,583	$	48,592	$	129,468	$	3,772	$	14,157	$	22,827	$	251,399
Collectively evaluated for impairment, Recorded investment	$	32,583	$	48,592	$	129,468	$	3,772	$	14,157	$	22,827	$	251,399
Balance in allowance for loan losses	$	481	$	535	$	1,535	$	32	$	72	$	420	$	3,075
Collectively evaluated for impairment, Balance in allowance for loan losses	$	481	$	535	$	1,535	$	32	$	72	$	420	$	3,075

	Pass		OLEM (Other Loans Especially Mentioned)		Sub- Standard		Doubtful		Loss		Total
													Pass		OLEM (Other Loans Especially Mentioned)		Sub- Standard		Doubtful		Loss		Total
At September 30, 2022:
At December 31, 2022:
Residential real estate	$	34,558	$	—	$	—	$	—	$	—	$	34,558	$	50,354	$	—	$	—	$	—	$	—	$	50,354
Multi-family real estate		67,966		—		—		—		—		67,966		69,555		—		—		—		—		69,555
Commercial real estate		291,968		1,483		1,245		—		—		294,696		309,458		—		1,237		—		—		310,695
Land and construction		6,998		—		—		—		—		6,998		17,286		—		—		—		—		17,286
Commercial		5,785		—		—		—		—		5,785		5,165		—		—		—		—		5,165
Consumer		28,099		—		—		—		—		28,099		30,323		—		—		—		—		30,323

Total	$	435,374	$	1,483	$	1,245	$	—	$	—	$	438,102	$	482,141	$	—	$	1,237	$	—	$	—	$	483,378

At December 31, 2021:
Residential real estate	$	30,080	$	—	$	2,503	$	—	$	—	$	32,583
Multi-family real estate		47,962		630		—		—		—		48,592
Commercial real estate		125,620		3,848		—		—		—		129,468
Land and construction		3,772		—		—		—		—		3,772
Commercial		13,960		197		—		—		—		14,157
Consumer		22,827		—		—		—		—		22,827

Total	$	244,221	$	4,675	$	2,503	$	—	$	—	$	251,399

	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.~~loss.

															Accruing Loans
	Accruing Loans														30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days Past Past		Total Past Due		Current		Nonaccrual Loans		Total 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, 2022:
At June 30, 2023:
Residential real estate	$	—	$	—	$	—	$	—	$	34,558	$	—	$	34,558	$	—	$	—	$	—	$	—	$	60,273	$	—	$	60,273
Multi-family real estate		—		—		—		—		67,966		—		67,966		1,259		—		—		1,259		68,259		—		69,518
Commercial real estate		—		—		—		—		294,696		—		294,696		—		—		—		—		321,814		—		321,814
Land and construction		—		—		—		—		6,998		—		6,998		—		—		—		—		27,019		—		27,019
Commercial		—		—		—		—		5,785		—		5,785		—		—		—		—		6,950		—		6,950
Consumer		58		73		—		131		27,968		—		28,099		347		158		—		505		40,181		—		40,686

Total	$	58	$	73	$	—	$	131	$	437,971	$	—	$	438,102	$	1,606	$	158	$	—	$	1,764	$	524,496	$	—	$	526,260

	Accruing Loans														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		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 December 31, 2021:
At December 31, 2022:
Residential real estate	$	198	$	—	$	—	$	198	$	32,385	$	—	$	32,583	$	—	$	—	$	—	$	—	$	50,354	$	—	$	50,354
Multi-family real estate		—		—		—		—		48,592		—		48,592		—		—		—		—		69,555		—		69,555
Commercial real estate		—		—		—		—		129,468		—		129,468		—		—		—		—		310,695		—		310,695
Land and construction		—		—		—		—		3,772		—		3,772		—		—		—		—		17,286		—		17,286
Commercial		—		—		—		—		14,157		—		14,157		—		—		—		—		5,165		—		5,165
Consumer		69		—		—		69		22,758		—		22,827		150		27		—		177		30,146		—		30,323

Total	$	267	$	—	$	—	$	267	$	251,132	$	—	$	251,399	$	150	$	27	$	—	$	177	$	483,201	$	—	$	483,378

	The Company has not made any modifications of loans to borrowers experiencing financial difficulties during the six months ended June 30, 2023.

	No loans have been determined to be troubled debt restructurings (TDR’s) during the six-month period ended June 30, 2022. At June 30, 2023 and 2022, there were no loans modified and entered into as TDR’s within the past twelve months, that subsequently defaulted during the six-month periods ended June 30, 2022.

	Term Loans Amortized Cost Basis by Origination Year												Revolving Loans (Amortized		Revolving Loans Converted to Term Loans (Amortized
land and construction	June 30, 2023		2022		2021		2020		2019		Prior		Cost Basis)		Cost Basis)		Total
Pass	$	6,406	$	15,136	$	2,324	$	1,509	$	1,644	$	-	$	-	$	-	$	27,019
OLEM (Other Loans Especially Mentioned)		-		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-		-
Doubtful		-		-		-		-		-		-		-		-		-
Loss		-		-		-		-		-		-		-		-		-
Subtotal loans	$	6,406	$	15,136	$	2,324	$	1,509	$	1,644	$	-	$	-	$	-	$	27,019
Current period Gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Residential real estate
Pass	$	7,350	$	26,567	$	9,853	$	6,686	$	4,097	$	3,286	$	2,434	$	-	$	60,273
OLEM (Other Loans Especially Mentioned)		-		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-		-
Doubtful		-		-		-		-		-		-		-		-		-
Loss		-		-		-		-		-		-		-		-		-
Subtotal loans	$	7,350	$	26,567	$	9,853	$	6,686	$	4,097	$	3,286	$	2,434	$	-	$	60,273
Current period Gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

		Three Months Ended September 30,
		2022						2021
		Average		Interest		Interest		Average		Interest		Interest
		Recorded		Income		Income		Recorded		Income		Income
		Investment		Recognized		Received		Investment		Recognized		Received

Residential real estate	$	—	$	—	$	—	$	—	$	—	$	—
Commercial real estate	$	—	$	—	$	—	$	—	$	—	$	—
Commercial	$	—	$	—	$	—	$	—	$	—	$	—
Total	$	—	$	—	$	—	$	—	$	—	$	—

	Nine Months Ended September 30,
	2022						2021
	Average		Interest		Interest		Average		Interest		Interest
	Recorded		Income		Income		Recorded		Income		Income
	Investment		Recognized		Received		Investment		Recognized		Received

Residential real estate	$	—	$	—	$	—	$	—	$	—	$	—
Commercial real estate	$	—	$	—	$	—	$	658	$	7	$	7
Commercial	$	—	$	—	$	—	$	—	$	—	$	—
Total	$	—	$	—	$	—	$	658	$	7	$	7

	Term Loans Amortized Cost Basis by Origination Year																	Revolving Loans (Amortized		Revolving Loans Converted to Term Loans (Amortized
Multi-family real estate	June 30, 2023			2022			2021			2020			2019		Prior			Cost Basis)		Cost Basis)		Total
Pass	$	998		$	29,396		$	29,570		$	6,185		$	2,090	$	1,279		$	-	$	-	$	69,518
OLEM (Other Loans Especially Mentioned)		-			-			-			-			-		-			-		-		-
Substandard		-			-			-			-			-		-			-		-		-
Doubtful		-			-			-			-			-		-			-		-		-
Loss		-			-			-			-			-		-			-		-		-
Subtotal loans	$	998		$	29,396		$	29,570		$	6,185		$	2,090	$	1,279		$	-	$	-	$	69,518
Current period Gross charge-offs	$	-		$	-		$	-		$	-		$	-	$	-		$	-	$	-	$	-
*Commercial real estate (CRE)*
Pass	$	20,590		$	199,769		$	55,017		$	16,183		$	12,815	$	16,218		$	-	$	-	$	320,592
OLEM (Other Loans Especially Mentioned)		-			-			-			-			-		-			-		-		-
Substandard		-			-			-			-			1,222		-			-		-		1,222
Doubtful		-			-			-			-			-		-			-		-		-
Loss		-			-			-			-			-		-			-		-		-
Subtotal loans	$	20,590		$	199,769		$	55,017		$	16,183		$	14,037	$	16,218		$	-	$	-	$	321,814
Current period Gross charge-offs	$	-		$	-		$	-		$	-		$	-	$	-		$	-	$	-	$	-
*Commercial*
Pass	$	4,044		$	1,401		$	1,363		$	85		$	57	$	-		$	-	$	-	$	6,950
OLEM (Other Loans Especially Mentioned)		-			-			-			-			-		-			-		-		-
Substandard		-			-			-			-			-		-			-		-		-
Doubtful		-			-			-			-			-		-			-		-		-
Loss		-			-			-			-			-		-			-		-		-
Subtotal loans	$	4,044		$	1,401		$	1,363		$	85		$	57	$	-		$	-	$	-	$	6,950
Current period Gross charge-offs	$	(16	)	$	-		$	-		$	-		$	-	$	(26	)	$	-	$	-	$	(42	)
*Consumer*
Pass	$	8,798		$	9,359		$	5,612		$	250		$	198	$	-		$	16,469	$	-	$	40,686
OLEM (Other Loans Especially Mentioned)		-			-			-			-			-		-			-		-		-
Substandard		-			-			-			-			-		-			-		-		-
Doubtful		-			-			-			-			-		-			-		-		-
Loss		-			-			-			-			-		-			-		-		-
Subtotal loans	$	8,798		$	9,359		$	5,612		$	250		$	198	$	-		$	16,469	$	-	$	40,686
Current period Gross charge-offs	$	(30	)	$	(505	)	$	(266	)	$	(3	)	$	-	$	-		$	-	$	-	$	(804	)

	Fair Value		(Level 1)		(Level 2)		(Level 3)
			Fair Value Measurements Using
			Quoted Prices
			In Active Markets for		Significant Other		Significant
			Identical		Observable		Unobservable
	Fair Value		Assets (Level 1)		Inputs (Level 2)		Inputs (Level 3)
At September 30, 2022:
SBA Pool Securities	$	841	$	—	$	841	$	—
Collateralized mortgage obligations		138		—		138		—
Taxable municipal securities		11,821		—		11,821		—
Mortgage-backed securities		12,634		—		12,634		—
Total	$	25,434	$	—	$	25,434	$	—

At December 31, 2021:
SBA Pool Securities	$	1,072	$	—	$	1,072	$	—
Collateralized mortgage obligations		217		—		217		—
Taxable municipal securities		16,426		—		16,426		—
Mortgage-backed securities		16,679		—		16,679		—
Total	$	34,394	$	—	$	34,394	$	—


			Fair Value Measurements Using
	Fair Value		Quoted Prices In Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
At June 30, 2023:
SBA Pool Securities	$	759	$	—	$	759		—
Collateralized mortgage obligations		124		—		124		—
Taxable municipal securities		12,011		—		12,011		—
Mortgage-backed securities		11,868		—		11,868		—
Total	$	24,762		—	$	24,762		—

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

	At September 30, 2022						At December 31, 2021						At June 30, 2023						At December 31, 2022
	Carrying Amount		Fair Value		Level		Carrying Amount		Fair Value		Level		Carrying Amount		Fair Value		Level		Carrying Amount		Fair Value		Level

Financial assets:
Cash and cash equivalents	$	73,793	$	73,793		1	$	58,970	$	58,970		1	$	78,373	$	78,373		1	$	71,836	$	71,836		1
Debt securities available for sale		25,434		25,434		2		34,394		34,394		2		24,762		24,762		2		25,102		25,102		2
Debt securities held-to-maturity		578		547		2		1,040		1,071		2		445		406		2		540		504		2
Loans		432,470		432,309		3		247,902		247,788		3		518,829		512,031		3		477,218		476,566		3
Federal Home Loan Bank stock		2,725		2,725		3		793		793		3		717		717		3		600		600		3
Accrued interest receivable		1,202		1,202		3		971		971		3		1,559		1,559		3		1,444		1,444		3

Financial liabilities:
Deposit liabilities		422,202		423,250		3		292,457		292,537		3		551,631		556,017		3		507,899		512,357		3
Federal Home Loan Bank advances		68,000		67,758		3		18,000		18,021		3		10,000		9,456		3		10,000		9,450		3
Off-balance sheet financial instruments		—		—		3		—		—		3		—		—		3		—		—		3


Commitments to extend credit	$	20,335	$	32,184

Unused lines of credit	$	19,962	$	56,272

Standby letters of credit	$	4,313	$	4,313

	Actual					To Be Well Capitalized Under Prompt Corrective Action Regulations (CBLR Framework)
	Amount		%			Amount		%
As of September 30, 2022:
Tier I Capital to Total Assets	$	54,520		10.77	%	$	45,554		9.00	%

As of December 31, 2021:
Tier I Capital to Total Assets	$	35,338		10.64	%	$	28,235		8.50	%

	Actual					To Be Well Capitalized Under Prompt Corrective Action Regulations (CBLR Framework)
	Amount		%			Amount		%
As of June 30, 2023:
Tier 1 Capital to Total Assets		69,234		11.20	%		55,616		9.00	%

As of December 31, 2022:
Tier 1 Capital to Total Assets		66,291		11.29	%		52,865		9.00	%

							Six Months Ended			Year Ended
	Nine Months Ended September 30, 2022			Year Ended December 31, 2021			June 30, 2023			December 31, 2022

Average equity as a percentage of average assets		10.5	%		9.4	%		10.6	%		9.9	%

Equity to total assets at end of period		9.4	%		11.0	%		10.4	%		10.7	%

Return on average assets (1)		0.8	%		2.2	%		0.8	%		0.9	%

Return on average equity (1)		7.3	%		23.3	%		7.6	%		8.6	%

Noninterest expenses to average assets (1)		2.3	%		2.4	%		2.4	%		2.1	%

	Three Months Ended September 30,
	2022							2021
			Interest		Average					Interest		Average
	Average		and		Yield/			Average		and		Yield/
(dollars in thousands)	Balance		Dividends		Rate⁽⁵⁾			Balance		Dividends		Rate⁽⁵⁾
Interest-earning assets:
Loans	$	398,914	$	5,000		5.01	%	$	203,983	$	2,795		5.48	%
Securities		27,862		153		2.20	%		34,044		150		1.76	%
Other (1)		60,600		341		2.25	%		48,596		28		0.23	%

Total interest-earning assets/interest income		487,376		5,494		4.51	%		286,623		2,973		4.15	%

Cash and due from banks		15,944							12,080
Premises and equipment		860							1,402
Other		4,434							1,626

Total assets	$	508,614						$	301,731

Interest-bearing liabilities:
Savings, NOW and money-market deposits	$	147,259		138		0.37	%	$	128,844		124		0.38	%
Time deposits		97,638		665		2.72	%		15,429		22		0.57	%
Borrowings (2)		71,804		386		2.15	%		18,387		62		1.35	%

Total interest-bearing liabilities/interest expense		316,701		1,189		1.50	%		162,660		208		0.51	%

Noninterest-bearing demand deposits		140,282							105,843
Other liabilities		2,989							1,744
Stockholders’ equity		48,642							31,484

Total liabilities and stockholders’ equity	$	508,614						$	301,731

Net interest income			$	4,305						$	2,765

Interest rate spread (3)						3.01	%						3.64	%

Net interest margin (4)						3.53	%						3.86	%

Ratio of average interest-earning assets to average interest-bearing liabilities		1.54							1.76

	Three Months Ended June 30,
	2023							2022
			Interest		Average					Interest		Average
	Average		and		Yield/			Average		and		Yield/
(dollars in thousands)	Balance		Dividends		Rate⁽⁵⁾			Balance		Dividends		Rate⁽⁵⁾
Interest-earning assets:
Loans	$	515,342	$	7,252		5.63	%	$	297,472	$	3,764		5.06	%
Securities		25,656		172		2.68	%		29,944		159		2.12	%
Other (1)		58,552		755		5.16	%		44,235		102		0.92	%

Total interest-earning assets/interest income		599,550		8,179		5.46	%		371,651		4,025		4.33	%

Cash and due from banks		12,929							15,264
Premises and equipment		1,154							863
Other		5,330							5,010

Total assets	$	618,963						$	392,788

Interest-bearing liabilities:
Savings, NOW and money-market deposits	$	129,890		395		1.22	%	$	154,365		125		0.32	%
Time deposits		229,376		2,161		3.77	%		15,958		45		1.13	%
Borrowings (2)		10,330		31		1.20	%		24,649		102		1.66	%

Total interest-bearing liabilities/interest expense		369,596		2,587		2.80	%		194,972		272		0.56	%

Noninterest-bearing demand deposits		179,050							146,579
Other liabilities		5,105							2,521
Stockholders’ equity		65,212							48,716

Total liabilities and stockholders’ equity	$	618,963						$	392,788

Net interest income			$	5,592						$	3,753

Interest rate spread (3)						2.66	%						3.77	%

Net interest margin (4)						3.73	%						4.04	%

Ratio of average interest-earning assets to average interest-bearing liabilities		1.62							1.91

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

	Six Months Ended June 30,
	2023							2022
			Interest		Average					Interest		Average
	Average		and		Yield/			Average		and		Yield/
(dollars in thousands)	Balance		Dividends		Rate⁽⁵⁾			Balance		Dividends		Rate⁽⁵⁾
Interest-earning assets:
Loans	$	504,000	$	13,841		5.49	%	$	280,957	$	7,027		5.00	%
Securities		25,766		350		2.72	%		32,026		322		2.01	%
Other (1)		59,801		1,504		5.03	%		57,933		139		0.48	%

Total interest-earning assets/interest income		589,567		15,695		5.32	%		370,916		7,488		4.04	%

Cash and due from banks		14,939							15,277
Premises and equipment		1,072							861
Other		5,753							4,850

Total assets	$	611,331						$	391,904

Interest-bearing liabilities:
Savings, NOW and money-market deposits	$	125,834		666		1.06	%	$	168,478		286		0.34	%
Time deposits		233,957		4,322		3.69	%		14,097		59		0.84	%
Borrowings (2)		10,248		56		1.09	%		21,324		163		1.53	%

Total interest-bearing liabilities/interest expense		370,039		5,044		2.73	%		203,899		508		0.50	%

Noninterest-bearing demand deposits		172,065							141,927
Other liabilities		4,808							2,598
Stockholders’ equity		64,419							43,480

Total liabilities and stockholders’ equity	$	611,331						$	391,904

Net interest income			$	10,651						$	6,980

Interest rate spread (3)						2.59	%						3.54	%

Net interest margin (4)						3.61	%						3.76	%

Ratio of average interest-earning assets to average interest-bearing liabilities		1.59							1.82

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

	Three Months Ended				Increase /						Three Months Ended				Increase /
	September 30,				(Decrease)						June 30,				(Decrease)
(dollars in thousands)	2022		2021		Amount			Percentage			2023		2022		Amount			Percentage
Total interest income	$	5,494	$	2,973	$	2,521			85	%	$	8,179	$	4,025	$	4,154			103	%
Total interest expense		1,189		208		981			472	%		2,587		272		2,315			851	%
Net interest income		4,305		2,765		1,540			56	%		5,592		3,753		1,839			49	%
Provision for loan losses		1,374		582		792			136	%
Credit loss expense												704		991		(287	)		-29	%
Net interest income after provision for loan losses		2,931		2,183		748			34	%		4,888		2,762		2,126			77	%
Total noninterest income		692		423		269			64	%		772		764		8			1	%
Total noninterest expenses		2,720		1,689		1,031			61	%		3,902		2,260		1,642			73	%
Net earnings before income taxes		903		917		(14	)		-2	%		1,758		1,266		492			39	%
Income taxes		230		-		230			—			446		321		125			39	%
Net earnings	$	673	$	917		(244	)		-27	%	$	1,312	$	945		367			39	%
Net earnings per share - Basic and diluted	$	0.11	$	0.21							$	0.18	$	0.16

	OPTIMUMBANK HOLDINGS, INC.
	(Registrant)

Date: ~~November 10, 2022~~August 9, 2023	By:	/s/ Timothy Terry
		Timothy Terry
		Principal Executive Officer

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