OPTIMUMBANK HOLDINGS, INC. 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
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.
Capital Levels
As of
Refer to Note 9 for the Bank's actual and required minimum capital ratios.
(continued)
19
OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued)
Financial Condition at
Overview
The Company's total assets increased by approximately$192.9 million to$544.8 million atSeptember 30, 2022 , from$351.9 million atDecember 31, 2021 , 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 grew by approximately$129.7 million to$422.2 million atSeptember 30, 2022 , from$292.5 million atDecember 31, 2021 . The Company increased theFederal Home Loan Bank advances by$50 million to$68 million atSeptember 30, 2022 . Total stockholders' equity increased by approximately$12.7 million to$51.2 million atSeptember 30, 2022 , from$38.5 million atDecember 31, 2021 , primarily due to proceeds from the sale of preferred stock, common stock and net earnings. The increase in stockholders' equity was partially offset by the increase in accumulated other comprehensive loss of approximately$5.2 million for the nine months endedSeptember 30, 2022 . The following table shows selected information for the periods ended or at the dates indicated: Nine Months Ended Year EndedSeptember 30, 2022 December 31, 2021
Average equity as a percentage of average assets 10.5 % 9.4 % Equity to total assets at end of period 9.4 % 11.0 % Return on average assets (1) 0.8 % 2.2 % Return on average equity (1) 7.3 % 23.3 % Noninterest expenses to average assets (1) 2.3 % 2.4 %
(1) Annualized for the nine months ended
Liquidity and Sources of Funds
The Company's sources of funds include customer deposits, advances from the
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
In addition to obtaining funds from depositors, the Company may borrow funds from other financial institutions. AtSeptember 30, 2022 , the Company had outstanding borrowings of$68 million , against its$116.1 million in established borrowing capacity with the FHLB. The Company's borrowing facility is subject to collateral and stock ownership requirements, as well as prior FHLB consent to each advance. AtSeptember 30, 2022 , the Company also had available lines of credit amounting to$24.5 million with six correspondent banks to purchase federal funds. Disbursements on the lines of credit are subject to the approval of the correspondent banks. We measure and monitor our liquidity daily and believe our liquidity sources are adequate to meet our operating needs.
Off-Balance Sheet Arrangements
Refer to Note 8 in the condensed consolidated financial statements for Off-Balance Sheet Arrangements.
(continued)
20
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-bearingliabilities/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
(1) Includes interest-earning deposits with banks and
stock dividends.
(2)
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)
21
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-bearingliabilities/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
stock dividends.
(2)
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
Three Months Ended Increase /
September 30, (Decrease)
(dollars in thousands) 2022 2021 Amount Percentage
Total interest income $ 5,494 $ 2,973 $ 2,521 85 %
Total interest expense 1,189 208 981 472 %
Net interest income 4,305 2,765 1,540 56 %
Provision for loan losses 1,374 582 792 136 %
Net interest income after
provision for loan losses 2,931 2,183 748 34 %
Total noninterest income 692 423 269 64 %
Total noninterest expenses 2,720 1,689 1,031 61 %
Net earnings before income taxes 903 917 (14 ) -2 %
Income taxes 230 - 230 -
Net earnings $ 673 $ 917 (244 ) -27 %
Net earnings per share - Basic
and diluted $ 0.11 $ 0.21
Net earnings. Net earnings for the three months ended September 30, 2022 , were
$673,000 or $0.11 per basic and diluted share compared to net earnings of
$917,000 or $0.21 per basic and diluted share for the three months ended
September 30, 2021 . The decrease in net earnings during the three months ended
September 30, 2022 , compared to three months ended September 30, 2021 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.
Interest Income. Interest income increased $2.5 million for the three months
ended September 30, 2022 compared to the nine months ended September 30, 2021
due primarily to growth in the loan portfolio.
Interest Expense. Interest expense increased
Provision for Loan Losses. Provision for loan losses was$1,374,000 for the three months endedSeptember 30, 2022 compared to a$582,000 credit for loan losses for the three months endedSeptember 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 atSeptember 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 losses totaled$5.2 million or 1.19% of loans outstanding atSeptember 30, 2022 , compared to$3.1 million or 1.22% of loans outstanding atDecember 31, 2021 . The increase in the provision for loan losses during the third quarter of 2022 was primarily due to loan volume growth and the evaluation of the other factors noted above. Noninterest Income. Total noninterest income increased to$692,000 for the three months endedSeptember 30, 2022 , from$423,000 for the three months endedSeptember 30, 2021 , due to increased wire transfer and ACH fees during the three month period endedSeptember 30, 2022 . Noninterest Expenses. Total noninterest expenses increased to$2,720,000 for the three months endedSeptember 30, 2022 compared to$1,689,000 for the three months endedSeptember 30, 2021 primarily due to an increase in salaries and employee benefits and data processing and other operating cost. 23OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY
Comparison of the Nine-Month Periods Ended
Nine Months Ended Increase /
September 30, (Decrease)
(dollars in thousands) 2022 2021 Amount Percentage
Total interest income $ 12,982 $ 7,228 $ 5,754 80 %
Total interest expense 1,697 721 976 135 %
Net interest income 11,285 6,507 4,778 73 %
Provision for loan losses 2,757 955 1,802 189 %
Net interest income after
provision for loan losses 8,528 5,552 2,976 54 %
Total noninterest income 2,106 902 1,204 133 %
Total noninterest expenses 7,320 4,745 2,575 54 %
Net earnings before income taxes 3,314 1,709 1,605 94 %
Income taxes 841 - 841 -
Net earnings $ 2,473 $ 1,709 764 45 %
Net earnings per share - Basic
and diluted $ 0.44 $ 0.47
Net earnings. Net earnings for the nine months ended September 30, 2022 , were
$2,473,000 or $0.44 per basic and diluted share compared to a net earnings of
$1,709,000 or $0.47 per basic and diluted share for the nine months ended
September 30, 2021 . The increase in net earnings during the nine months ended
September 30, 2022 , compared to nine months ended September 30, 2021 is
primarily attributed to increases 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 for the nine months ended
September 30, 2022 , compared to the nine months ended September 30, 2021 due
primarily to growth in the loan portfolio and increases in interest rates on the
Company's loans.
Interest Expense. Interest expense increased $976,000 to $1,697,000 for the nine
months ended September 30, 2022 , compared to the prior period primarily due to
an increase in Federal Home loan Bank advances and interest bearing deposit
rates.
Provision for Loan Losses. Provision for loan losses amounted to $2,757,000 for
the nine months ended September 30, 2022 , compared to $955,000 for the nine
months ended September 30, 2021 . The provision for loan losses is charged to
earningsas 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 losses totaled $5.2 million or 1.19% of loans outstanding at September 30,
2022 , compared to $3.1 million or 1.22% of loans outstanding at December 31,
2021 . The increase in the provision for loan losses during nine months ended
September 30, 2022 was primarily due to loan volume growth and the evaluation of
the other factors noted above.
Noninterest Income. Total noninterest income increased to $2,106,000 for the
nine months ended September 30, 2022 , from $902,000 for the nine months ended
September 30, 2021 due to increased wire transfer and ACH fees.
Noninterest Expenses. Total noninterest expenses increased to $7,320,000 for the
nine months ended September 30, 2022 , compared to $4,745,000 for the nine months
ended September 30, 2021 primarily due to increases in salaries and employee
benefits, data processing, and other operating cost.
24
OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY© Edgar Online, source
