OptimumBank Holdings, Inc. is a Florida corporation formed in 2004 as a bank
holding company for OptimumBank (the “Bank”). The Company’s
only business is the ownership and operation of the Bank and its Bank’s
subsidiaries. The Bank is a Florida state chartered bank established in 2000,
with deposits insured by the Federal Deposit Insurance Corporation (“FDIC”).
The Bank offers a variety of community banking services to individual and corporate
customers through its three banking offices located in Broward County, Florida.
The Bank has 8 wholly-owned subsidiaries primarily engaged in holding and disposing
of foreclosed real estate and one subsidiary primarily engaged in managing foreclosed
real estate.
The Company is subject to the supervision and regulation of the Board of Governors
of the Federal Reserve System (the “Federal Reserve”). OptimumBank
is subject to the supervision and regulation of the State of Florida Office
of Financial Regulation (“OFR”) and the FDIC. OptimumBank is a member
of the Federal Home Loan Bank of Atlanta.
The Bank’s revenues are primarily derived from interest on, and fees
received in connection with, real estate, and other loans, and from interest
from mortgage-backed securities and short-term investments. The principal sources
of funds for the Bank’s lending activities are deposits, borrowings, repayment
of loans, and the repayment, or maturity of investment securities. The Bank’s
principal expenses are the interest paid on deposits, and operating and general
administrative expenses.
As is the case with banking institutions generally, the Bank’s operations
are materially and significantly influenced by general economic conditions and
by related monetary and fiscal policies of financial institution regulatory
agencies, including the Federal Reserve and the FDIC. Deposit flows and costs
of funds are influenced by interest rates on competing investments and general
market rates of interest. Lending activities are affected by the demand for
financing of real estate and other types of loans, which in turn is affected
by the interest rates at which such financing may be offered and other factors
affecting local demand and availability of funds. The Bank faces strong competition
attracting deposits (its primary source of lendable funds) and originating loans.
The Bank provides a range of consumer and commercial banking services to individuals
and businesses. The basic services offered include: demand interest-bearing
and noninterest-bearing accounts, money market deposit accounts, NOW accounts,
time deposits, Visa debit and ATM cards, cash management, direct deposits, notary
services, money orders, night depository, cashier’s checks, domestic collections,
drive-in tellers, and banking by mail. The Bank makes residential and commercial
real estate loans and consumer loans. The Bank offers business lending lines
for working capital needs. Growing businesses can use the loans to expand inventory,
take discounts, offset receivables, or establish new structured financing and
repayment plans that are consistent with the cash flow of the business. The
Bank provides ATM cards and Visa debit cards, as a part of the Star, Presto
and Cirrus networks, thereby permitting customers to utilize the convenience
of ATMs worldwide. The Bank does not have trust powers and provides no trust
services.
The Bank offers real estate, commercial and consumer loans, to individuals
and small businesses and other organizations that are located in or conduct
a substantial portion of their business in its market area. The Bank’s
market area consists of the tri-county area of Broward, Miami-Dade and Palm
Beach counties. The Bank’s net loans at December 31, 2015 were $82.6 million,
or 64.8% of total assets. The interest rates charged on loans varied with the
degree of risk, maturity, and amount of the loan, and are further subject to
competitive pressures, money market rates, availability of funds, and government
regulations. The Bank has no foreign loans.
The Bank’s loan portfolio is concentrated in two major areas: residential
and commercial real estate loans. As of December 31, 2015, 73.4% of the loan
portfolio consisted of loans secured by mortgages on real estate, of which approximately
28.6% of the total loan portfolio was secured by one-to-four family residential
properties. The real estate loans are located primarily in the tri-county market
area.
The Bank’s real estate loans are secured by mortgages and consist primarily
of loans to individuals and businesses for the purchase or improvement of, or
investment in, real estate. These real estate loans were made at fixed or variable
interest rates and are normally adjustable rate mortgages which adjust annually
after the initial three to five year period. The Bank’s fixed rate loans
generally are for terms of five years or less, and are repayable in monthly
installments based on a maximum 30-year amortization schedule.
Loan originations are derived primarily from director and employee referrals,
existing customers, and direct marketing. Certain credit risks are inherent
in making loans. These include prepayment risks, risks resulting from uncertainties
in the future value of collateral, risks resulting from changes in economic
and industry conditions including interest rates, and risks inherent in dealing
with individual borrowers. A significant portion of the Bank’s portfolio
is collateralized by real estate in South Florida, which is susceptible to local
economic downturns. The Bank attempts to minimize credit losses through various
means. On larger credits, it relies on the cash flow and assets of a debtor
as the source of repayment as well as the value of the underlying collateral.
The Bank also generally limits its loans to up to 80% of the value of the underlying
real estate collateral. The Bank generally charges a prepayment penalty if a
loan is repaid within the first two to three years of origination to recover
any costs it paid for the origination of the loan.
