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 December 31, 2025, 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 deposits, treasury management fee income, while operating with an efficient cost structure. Continued emphasis on expansion of our South Florida customer base, along with and exploring additional niche lines of business through OptimumFunding, LLC and OptimumFinance, LLC, are also part of our strategic plan.

 

We believe providing our clients with reasonable solutions that meet their business and personal needs fosters stability in our client base, builds full-service banking relationships, and allows for profitable growth that enhances shareholder returns. We intend to deliver the solutions to clients in a very personalized manner while investing in talent and leveraging modern technology to facilitate efficiency and decrease client pain points while enhancing our competitiveness.

 

We are focused on full-service banking relationships, continuing to identify deposit growth opportunities among our existing customer base and prospects throughout South Florida, Florida, and the United States. Improving our core funding capabilities is foundational to the ability to support our opportunity to capitalize on the strong business and real estate market in South Florida and with our niche skilled nursing facility and merchant cash advance markets. We will accomplish this through the addition of experienced and skilled bankers to our business development and retail banking teams, and we are modernizing and improving our products and digital services to better support our personalized business model. This includes upgrading our core banking system, including our online banking and mobile banking applications. We believe adding this talent and upgrading our core banking system and client facing applications will allow us to better service local area small businesses that will add granularity and diversification to our customer base and balance sheet, while improving the utilization of our local area branches.

 

In early 2026, the Company formed OptimumFinance LLC, a wholly owned non-bank, asset-based lending subsidiary. The subsidiary was created to expand the company’s commercial real estate lending capabilities through flexible bridge and transitional financing solutions. Through OptimumFinance, the Company is able to provide flexible, short-term financing to acquire and reposition assets, and provides a single platform to support clients from bridge origination through permanent financing.

 

In late 2025, the Company formed OptimumHUD Loans, LLC (d/b/a) as OptimumFunding, LLC, a wholly owned non-bank subsidiary. When the subsidiary commences operations, it is expected to support a focused suite of financing solutions, including bridge-to Housing and Urban Development (“HUD”) financing to support acquisitions, refinancing and repositioning to facilitate a transition to long-term HUD or Federal Housing Administration (“FHA”) financing and FHA and HUD loan origination capability for multifamily and healthcare properties. The platform will deliver specialized expertise serving skilled nursing facilities, senior housing, and multifamily assets, building upon the Company’s established lending relationships and sector knowledge.

 

Modernizing our technology and improving our products and services allows us to better support our personalized business model to our niche business owner-operator client base with less friction, a human touch, and we believe better convenience than the large banks. In coordination with our Treasury Cash Management capabilities this has allowed us to enter niche businesses including banking services to Skilled Nursing Facilities in the areas of CRE and Asset-Based Lending (“ABL”) while capturing the business operating accounts. In addition, we have built capabilities in Small Business Administration (SBA) lending, entering the space in late 2023 and being designated as a Preferred Lender under the SBA’s Preferred Lenders Program (“PLP”) in the first quarter of 2025. Under the program the Bank offers SBA-guaranteed 7A loans generally secured by accounts receivable, inventory, equipment, or real estate. Management has implemented initiatives that have enabled us to grow our loan portfolio primarily with South Florida and Florida generated relationships in the commercial real estate, owner-occupied commercial real estate, multifamily, and commercial and industrial sectors.

 

In treasury management services, our primary 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 to further improve efficiency. We are currently investing in the necessary technology and expect efficiencies to occur throughout 2026 and beyond.

 

(continued)

 

 

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

 

Our strategic plan emphasizes and builds upon initiatives focused on strengthening credit oversight and credit administrative processes and procedures. Moreover, management continues to identify loan growth opportunities through our subsidiaries 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.

 

Financial Condition at March 31, 2026 and December 31, 2025

 

Capital Levels

 

As of March 31, 2026 and December 31, 2025, the Bank is well capitalized under regulatory guidelines.

 

Refer to Note 10 in the condensed consolidated financial statements, which presents the Bank’s actual and required minimum capital ratios under Prompt Corrective Action Regulations (“CBLR Framework”).

 

Overview

 

The Company’s total assets increased by approximately $157.1 million to $1.3 billion at March 31, 2026, from $1.1 billion at December 31, 2025, primarily due to increases in loans. Net loans increased by $131.2 million to $1.1 billion at March 31, 2026, from $947.3 million at December 31, 2025. Deposits grew by approximately $161.1 million to $1.1 billion at March 31, 2026, from $931.8 million at December 31, 2025. Total stockholders’ equity increased by approximately $5 million to $126.8 million at March 31, 2026, from $ 121.9 million at December 31, 2025, primarily due to net income and stock-based compensation.

 

The following table shows selected information for the period/year ended or at the dates indicated:

 

	Thress Months Ended			Year Ended
	March 31, 2026			December 31, 2025
Average equity as a percentage of average assets		10.34	%		11.08	%
Equity to total assets at end of period		10.00	%		10.97	%
Return on average assets (1)		1.56	%		1.64	%
Return on average equity (1)		15.12	%		14.83	%
Noninterest expenses to average assets (1)		2.68	%		2.48	%

 

(1) Annualized for the three months ended March 31, 2026.

 

Liquidity and Sources of Funds

 

The Company’s sources of funds include customer deposits, loan repayments, earnings, federal funds market, and access to various borrowing arrangements. These includes borrowing capacity with Federal Home Loan Bank of Atlanta (“FHLB”), the Federal Reserve Bank, and five correspondent banks.

 

Our liquidity is derived primarily from our deposit base, scheduled amortization and prepayments of loans and debt securities, funds provided by operations, and capital. The Company’s liquidity position is also maintained by selling equity and cash flow generation from our subsidiaries. Additionally, as a commercial bank, we are expected to maintain an adequate liquidity position. The Company’s liquidity position may consist of cash on hand, cash on demand deposit with correspondent banks, federal funds sold, and unpledged marketable securities such as United States government securities, collateralized mortgage obligations, and mortgage-backed securities. Some of our securities are pledged to the Federal Reserve Bank to secure borrowing capacity. The market value of securities pledged to the Federal Reserve Bank was $52.1 million at March 31, 2026.

(continued)

 

 

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

 

Deposits increased by approximately $161.1 million during the three-month period ended March 31, 2026. The increase in deposits provided funding for new loan originations and repayment of Federal Home Loan Bank advances.

 

In addition to obtaining funds from depositors, the Company had borrowing capacity of $293.4 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. As of March 31, 2026, first mortgage loans with a carrying value of $579.9 million were pledged to FHLB. At March 31, 2026, the Company also had available lines of credit amounting to $76.5 million with five correspondent banks, disbursements on the lines of credit are subject to the approval of the correspondent banks. As of March 31, 2026, debt securities with a fair value of $52.1 million were pledged as collateral to the Federal Reserve Bank. The Company monitor its liquidity position on daily basis and believes its current funding sources, including deposits, borrowing capacity, unencumbered liquid assets, and access to the federal funds market, are adequate to meet its ongoing operating needs.

 

Off-Balance Sheet Arrangements

 

Refer to Note 9 in the condensed consolidated financial statements for Off-Balance Sheet Arrangements.

 

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 March 31,
	2026												2025
					Interest				Average								Interest				Average
	Average				Income/				Yield/				Average				Income/				Yield/
(dollars in thousands)	Balance				Expense				Rate(1)				Balance				Expense				Rate(1)
Interest-earning assets:
Loans		1,041,583			$	18,114				7.05	%		$	796,846			$	13,601				6.83	%
Securities		26,527				191				2.92	%			22,977				160				2.79	%
Other interest-earning assets (2)		123,845				1,148				3.76	%			109,863				1,246				4.54	%
Total interest-earning assets		1,191,955				19,453				6.62	%			929,686				15,007				6.46	%
Cash and due from banks		10,656												14,177
Premises and equipment		2,684												2,139
Other		4,641												7,862
Total assets		1,209,936											$	953,864
Interest-bearing liabilities:
Savings, NOW and money-market deposits		334,816				1,896				2.30	%		$	277,012				1,751				2.53	%
Time deposits		436,205				4,280				3.98	%			312,116				3,527				4.52	%
Borrowings (3)		9,224				87				3.83	%			32,222				303				3.76	%
Total interest-bearing liabilities		780,245				6,263				3.26	%			621,350				5,581				3.59	%
Noninterest-bearing demand deposits		296,750												219,204
Other liabilities		7,852												7,719
Stockholders’ equity		125,089												105,591
Total liabilities and stockholders’ equity		1,209,936											$	953,864
Net interest income					$	13,190											$	9,426
Interest rate spread (4)										3.36	%											2.87	%
Net interest margin (5)										4.49	%											4.06	%
Ratio of average interest-earning assets to average interest-bearing liabilities		1.53												1.50

 

(1)	Annualized.
(2)	Includes interest-earning deposits with banks, Federal Funds Sold and Federal Home Loan Bank stock dividends.

 

(continued)

 

 

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

 

(3)	Includes Federal Home Loan Bank Advances.
(4)	Interest rate spread represents the difference between average yield on interest-earning assets and the average cost of interest-bearing liabilities.
(5)	Net interest margin is net interest income divided by average interest-earning assets.

 

Comparison of the three-month periods ended March 31, 2026, and 2025

 

	Three Months Ended							Increase /
	March 31,							(Decrease)
(dollars in thousands, except per share amounts)	2026				2025			Amount				Percentage
Total interest income	$	19,453			$	15,007		$	4,446				29.6	%
Total interest expense		6,263				5,581			682				12.2	%
Net interest income		13,190				9,426			3,764				39.9	%
Credit loss expense		770				(165	)		935				(566.7	)%
Net interest income after credit loss expense		12,420				9,591			2,829				29.5	%
Total noninterest income		1,784				1,231			553				44.9	%
Total noninterest expenses		8,006				5,626			2,380				42.3	%
Net income before income taxes		6,198				5,196			1,002				19.3	%
Income taxes		1,535				1,326			209				15.8	%
Net income	$	4,663			$	3,870			793				20.5	%
Earnings per share - Basic	$	0.39			$	0.33
Earnings per share - Diluted(1)	$	0.20			$	0.17

 

(1) On October 1, 2025, the Company amended the terms of the Series B preferred shares, as detailed in Note 11 to the condensed consolidated financial statements. This amendment affected the calculation of diluted earnings per share, and accordingly, all periods diluted EPS figures have been restated to reflect the new dilution structure. This ensures a consistent basis of comparison.

 

Net Income. Net income for the three months ended March 31, 2026, were $4.7 million or $0.39 per basic share and $0.20 per diluted share compared to net income of $3.9 million or $0.33 per basic share and $0.17 per diluted share for the three months ended March 31, 2025. The increase in net income during the three months ended March 31, 2026, compared to three months ended March 31, 2025, is primarily attributed to an increase in net interest income and noninterest income.

 

Interest income. Interest income increased by $4.4 million to $19.5 million for the three months ended March 31, 2026, compared to the three months ended March 31, 2025, the increase was primarily attributed to the increase in average balances of interest earning assets.

 

Interest expense. Interest expense increased by $0.7 million to $6.3 million for the three months ended March 31, 2026, compared to the three months ended March 31, 2025, primarily due to an increase in average interest-bearing liability balances.

 

Credit loss expense. The Company recorded a credit loss expense of $0.8 million for the three months ended March 31, 2026, compared to a credit loss reversal of ($0.2) million for the three months ended March 31, 2025. The expected credit loss expense is charged to earnings as losses are expected to have occurred in order to bring the total allowance for credit losses to a level deemed appropriate by management to absorb losses 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 the Company, adverse situations that may affect the borrower’s ability to repay, estimated value of the underlying collateral, 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 credit losses totaled $11.1 million or 1.01% of loans outstanding at March 31, 2026, compared to $10.3 million or 1.07% of loans outstanding at December 31, 2025. During the three-months ended March 31, 2026, the net charge-off amounting to $3,000 resulted from consumer lending.

 

(continued)

 

 

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

 

Noninterest income. Total noninterest income was $1.8 million for the three months ended March 31, 2026, compared to $1.2 for the three months ended March 31, 2025. The increase reflects an increase in service charges and fees related to banking services.

 

Noninterest expenses. Total noninterest expenses increased to $8.0 million for the three months ended March 31, 2026, compared to $5.6 million for the three months ended March 31, 2025, primarily due prior quarter adjustments to year-end incentive compensation combined with seasonal increases in payroll taxes and other employee benefits and continued investments in personnel.