XML 94 R20.htm IDEA: XBRL DOCUMENT v2.4.0.6
Regulatory Matters
 12 Months Ended
Dec. 31, 2012
Regulatory Matters  
Regulatory Matters
(13)  Regulatory Matters
 The Bank is subject to various regulatory capital requirements administered by the regulatory banking 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.
 
As of December 31, 2012, the Bank is subject to a Consent Order issued by the Federal Deposit Insurance Corporation and the State of Florida Office of Financial Regulation, and accordingly is deemed to be "adequately capitalized" even if its capital ratios were to exceed those generally required to be a "well capitalized" bank. An institution must maintain minimum total risk-based, Tier I risk-based and Tier I leverage ratios as set forth in the following tables. The Bank's actual capital amounts and percentages are also presented in the table (dollars in thousands):
 
    Actual    
For Capital
Adequacy Purposes
    
Minimum
To Be Well
Capitalized Under
Prompt Corrective
Action Provisions
    
Requirements of
Consent Order
  
    Amount     %     Amount     %     Amount     %     Amount     %  
As of December 31, 2012:
                                                
Total Capital to Risk-
                                                
  Weighted Assets
   $ 13,506       11.48 %   $ 9,412       8.00 %   $ 11,765       10.00 %   $ 14,118       12.00 %
Tier I Capital to Risk-
                                                                
  Weighted Assets
     12,035       10.23       4,706       4.00       7,059       6.00       N/A       N/A  
Tier I Capital
                                                                
  to Total Assets
     12,035       8.12       5,932       4.00       7,415       5.00       11,864       8.00  
                                                                 
As of December 31, 2011:
                                                                
Total Capital to Risk-
                                                                
Weighted Assets
   $ 14,382       12.48 %   $ 9,221       8.00 %   $ 11,526       10.00 %   $ 13,832       12.00 %
Tier I Capital to Risk-
                                                                
Weighted Assets
     12,930       11.22       4,611       4.00       6,916       6.00       N/A       N/A  
Tier I Capital
                                                                
  to Total Assets
     12,930       7.76       6,668       4.00       8,335       5.00       13,335       8.00  
  
 Regulatory Matters - Company.  The Company is subject to the supervision and regulation of the Board of Governors of the Federal Reserve System (the "Federal Reserve").  On June 22, 2010, the Company entered into a written agreement with the Federal Reserve Bank of Atlanta ("Reserve Bank") with respect to certain aspects of the operation and management of the Company (the "Written Agreement").

The Written Agreement contains the following principal requirements:

·  
The Board of the Company must take appropriate steps to fully utilize the Company's financial and managerial resources to serve as a source of strength to the Bank, including, but not limited to, taking steps to ensure that the Bank complies with the Consent Order entered into with the Florida Office of Financial Regulation ("OFR") and the FDIC and any other supervisory action taken by the Bank's state or federal regulator.
·  
The Company may not declare or pay any dividends without prior Reserve Bank and Federal Reserve approval.
·  
The Company may not, directly or indirectly, take dividends or any other form of payment representing a reduction in capital from the Bank without prior Reserve Bank approval.
·  
The Company and its nonconsolidated subsidiary, OptimumBank Holdings Capital Trust I,  may not make any distributions of interest, principal, or other sums on subordinated debentures or trust preferred securities without the prior written approval of the Reserve Bank and the Federal Reserve.
·  
The Company and its nonconsolidated  subsidiary, OptimumBank Holdings Capital Trust I,   may not, directly or indirectly, incur, increase, or guarantee any debt or purchase or redeem any shares of its stock without the prior written approval of the Reserve Bank.
·  
The Company must obtain prior written consent from the Reserve Bank before  appointing any new director or senior executive officer, or changing the responsibilities of any senior executive officer so that the officer would assume a different senior executive officer position, and must comply with the regulations applicable to indemnification and severance payments.
·  
The Company must  provide quarterly progress reports to the Reserve Bank, along with parent company only financial statements.
 
 Regulatory Matters - Bank. Effective April 16, 2010, the Bank consented to the issuance of a Consent Order by the FDIC and the OFR, also effective as of April 16, 2010.

The Consent Order represents an agreement among the Bank, the FDIC and the OFR as to areas of the Bank's operations that warrant improvement and presents a plan for making those improvements. The Consent Order imposes no fines or penalties on the Bank. The Consent Order will remain in effect and enforceable until it is modified, terminated, suspended, or set aside by the FDIC and the OFR.

The Consent Order contains the following principal requirements:

·  
The Board of the Bank is required to increase its participation in the affairs of the Bank and assume full responsibility for the approval of sound policies and objectives for the supervision of all of the Bank's activities.
·  
The Bank is required to have and retain qualified and appropriately experienced senior management, including a chief executive officer, a chief lending officer and a chief financial officer, who are given the authority to implement the provisions of the Consent Order.
·  
Any proposed changes in the Bank's Board of Directors or senior executive officers are subject to the prior consent of the FDIC and the OFR.
·  
The Bank is required to maintain both a fully funded allowance for loan and lease losses satisfactory to the FDIC and the OFR and a minimum Tier 1 leverage capital ratio of 8% and a total risk-based capital ratio of 12% for as long as the Consent Order remains in effect.
·  
The Bank must undertake over a two-year period a scheduled reduction of the balance of loans classified “substandard” and “doubtful” in its 2009 FDIC examination by at least 75%.
·  
The Bank is required to reduce the volume of its adversely classified private label mortgage backed securities under a plan acceptable to the FDIC and OFR.
·  
The Bank must submit to the FDIC and the OFR for their review and comment a written business/strategic plan covering the overall operation of the Bank.
·  
The Bank must implement a plan to improve earnings, addressing goals and strategies for improving and sustaining earnings, major areas for improvement in the Bank's operating performance, realistic and comprehensive budgets and a budget review process.
 
·  
The Bank is required to revise, implement and incorporate recommendations of the FDIC and OFR with respect to the following policies or plans:
o  
Lending and Collection Policies
o  
Investment Policy
o  
Liquidity, Contingency Funding and Funds Management Plan
o  
Interest Rate Risk Management Policy
o  
Internal Loan Review and Grading System;
o  
Internal Control Policy; and
o  
A plan to reduce concentration in commercial real estate loans;
·  
The Bank's Board of Directors must review the adequacy of the allowance for loan and lease losses and establish a comprehensive policy satisfactory to the FDIC and OFR for determining such adequacy at least quarterly thereafter.
·  
The Bank may not pay any dividends or bonuses without the prior approval of the FDIC.
·  
The Bank may not accept, renew or rollover any brokered deposits except with the prior approval of the FDIC.
·  
The Bank is required to notify the FDIC and OFR prior to undertaking asset growth of 10% or more per annum while the Consent Order remains in effect.
·  
The Bank is required to file quarterly progress reports with the FDIC and the OFR.

Management believes that the Bank is currently in substantial compliance with all the requirements of the Consent Order and the Written Agreement except for the following requirements:
·  
Maintain total risk-based capital ratio of 12%;
·  
Scheduled reduction by October 31, 2011 of 60% of loans classified as substandard and doubtful in the 2009 FDIC Examination; and
·  
Development of a plan to reduce Bank’s concentration in commercial real estate loans acceptable to the supervisory authorities.

The Bank has implemented comprehensive policies and plans to address all of the requirements of the Consent Order and has incorporated recommendations from the FDIC and OFR into these policies and plans.  The Company entered into a contract with Moishe Gubin, Chairman of the Board of Directors, to sell approximately $2.2 million of common stock to Mr. Gubin.  The additional $2.2 million in capital from Mr. Gubin is expected to enable the Bank to comply with the total risk-based capital ratio of 12%.  The investment by Mr. Gubin is contingent upon receiving regulatory approval.  At the present time, neither the Company or Mr. Gubin can predict when or if the regulatory approval will be obtained.  Therefore, there can be no assurance that the Company will raise sufficient capital for the Bank to achieve and maintain material compliance with this ratio.