OptimumBank Holdings stock is taking off today, following a nice rally yesterday. All of this seems to be occurring on no real news items. However, earlier in the week earnings were quietly reported. In this column we briefly want to highlight the performance of OptimumBank Holdings in the 3rd quarter, relative to last year:

Third Quarter 2017 versus Third Quarter 2016

General. Net loss for the three months ended September 30, 2017, was $(56,000) or $(.05) loss per basic and diluted share compared to a net earnings of $22,000 or $0.02 earnings per basic and diluted share for the period ended September 30, 2016.

Interest Income. Interest income decreased $90,000 for the three months ended September 30, 2017 compared to the three months Ended September 30, 2016.

Interest Expense. Interest expense on deposits and borrowings increased by $36,000 for the three months ended September 30, 2017 from $272,000 for the three months Ended September 30, 2016. Interest expense increased primarily due to higher interest paid on borrowings during the second and third quarter of 2017. In late March 2017, the Bank extended the maturities of $15.5 million in Federal Home loan Advances into longer fixed rate terms with higher interest rates. The weighted average rate of these advances increased from 0.49% to 1.19%.

Provision for Loan Losses. There was no provision for losses during the 2017 or 2016 period. The provision for loan losses is charged to operations as losses are estimated to have occurred in order to bring the total allowance for loan losses to a level deemed appropriate by management to absorb losses inherent in the portfolio at September 30, 2017. Management’s periodic evaluation of the adequacy of the allowance is based upon historical experience, the volume and type of lending conducted by us, adverse situations that may affect the borrower’s ability to repay, estimated value of the underlying collateral, loans identified as impaired, general economic conditions, particularly as they relate to our market areas, and other factors related to the estimated collectability of our loan portfolio. The allowance for loan losses totaled $3.9 million or 5.37% of loans outstanding at September 30, 2017, as compared to $4.2 million or 4.91% of loans outstanding at September 30, 2016. Management believes the balance in the allowance for loan losses at September 30, 2017 is significantly overfunded.

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

Noninterest Expenses. Total noninterest expenses decreased $25,000 to $935,000 for the three months ended September 30, 2017 compared to $960,000 million for the three months Ended September 30, 2016.

 

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

 

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

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

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

Provision for Loan Losses. There was no provision for the nine months ended September 30, 2017 or 2016. The provision for loan losses is charged to operations in order to bring the total allowance for loan losses to a level deemed appropriate by management to absorb losses inherent in the portfolio. Management’s periodic evaluation of the adequacy of the allowance is based upon historical experience, the volume and type of lending conducted by us, adverse situations that may affect the borrower’s ability to repay, estimated value of the underlying collateral, loans identified as impaired, general economic conditions, particularly as they relate to our market areas, and other factors related to the estimated collectability of our loan portfolio. The allowance for loan losses totaled $3.9 million or 5.37% of loans outstanding at September 30, 2017, compared to $4.2 million, or 4.91% of loans outstanding at September 30, 2016. Management believes the balance in the allowance for loan losses at September 30, 2017 is significantly overfunded.

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

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

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