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Loans
 12 Months Ended
Dec. 31, 2023
Receivables [Abstract]  
Loans

(3) Loans. The components of loans are as follows (in thousands):

 

    2023     2022  
    At December 31,  
    2023     2022  
             
Residential real estate   $ 71,400     $ 50,354  
Multi-family real estate     67,498       69,555  
Commercial real estate     422,680       310,695  
Land and construction     32,600       17,286  
Commercial     41,870       5,165  
Consumer     44,023       30,323  
                 
Total loans     680,071       483,378  
                 
Deduct:                
Net deferred loan fees     (1,294 )     (367 )
Allowance for credit losses     (7,683 )     (5,793 )
                 
Loans, net   $ 671,094     $ 477,218  

 

The Company makes the majority of its loans to borrowers in Broward County, Florida and portions of Palm Beach and Miami-Dade Counties, Florida. Although the Company has a diversified loan portfolio, a significant portion of its borrowers’ ability to repay their loans and meet their contractual obligations to the Company is dependent upon the economy in Broward, Palm Beach and Miami-Dade Counties, Florida.

 

(continued)

 

 

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

 

Notes to Consolidated Financial Statements

 

(3) Loans, Continued. An analysis of the change in the allowance for credit losses for the years ended December 31, 2023, and 2022, follows (in thousands):

 

   Residential Real Estate   Multi-Family Real Estate   Commercial Real Estate   Land and Construction   Commercial   Consumer   Total 
Year Ended December 31, 2023:                                   
Beginning balance   768    748    3,262    173    277    565    5,793 
Additional allowance recognized due to adoption of Topic 326   33    327    (367)   278    (262)   209    218 
Balance January 1, 2023   801    1,075    2,895    451    15    774    6,011 
Credit loss expense   219    (34)   898    568    250    1,858    3,759 
Charge-offs   —    —    —    —    (71)   (2,371)   (2,442)
Recoveries   —    —    —    —    87    268    355 
                                    
Ending balance   1,020    1,041    3,793    1,019    281    529    7,683 
                                    
Year Ended December 31, 2022:                                   
                                    
Beginning balance   482    535    1,535    32    74    417    3,075 
Provision for loan losses   286    213    1,727    141    244    855    3,466 
Charge-offs   —    —    —    —    (97)   (804)   (901)
Recoveries   —    —    —    —    56    97    153 
                                    
Ending balance   768   $748   $3,262   $173   $277   $565   $5,793 

 

The balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of December 31, 2022 follows (in thousands):

 

At December 31, 2022:  Residential Real Estate   Multi-Family Real Estate   Commercial Real Estate   Land and Construction   Commercial   Consumer   Total 
Collectively evaluated for impairment:                                   
Recorded investment  $50,354   $69,555   $310,695   $17,286   $5,165   $30,323   $483,378 
Balance in allowance for loan losses  $768   $748   $3,262   $173   $277   $565   $5,793 

 

(continued)

 

 

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

 

Notes to Consolidated Financial Statements

 

(3) Loans, Continued.

 

Residential Real Estate, Multi-Family Real Estate, Commercial Real Estate, Land and Construction. All loans are underwritten in accordance with policies set forth and approved by the Board of Directors (the “Board”), including repayment capacity and source, value of the underlying property, credit history and stability. Residential real estate loans are underwritten based on repayment capacity and source, value of the underlying property, credit history and stability. Multi-family and commercial real estate loans are secured by the subject property and are underwritten based upon standards set forth in the policies approved by the Company’s Board. Such standards include, among other factors, loan to value limits, cash flow coverage and general creditworthiness of the obligors. Construction loans to borrowers finance the construction of owner occupied and leased properties. These loans are categorized as construction loans during the construction period, later converting to commercial or residential real estate loans after the construction is complete and amortization of the loan begins. Real estate development and construction loans are approved based on an analysis of the borrower and guarantor, the viability of the project and on an acceptable percentage of the appraised value of the property securing the loan. Real estate development and construction loan funds are disbursed periodically based on the percentage of construction completed. The Company carefully monitors these loans with on-site inspections and requires the receipt of lien waivers on funds advanced. Development and construction loans are typically secured by the properties under development or construction, and personal guarantees are typically obtained. Further, to assure that reliance is not placed solely on the value of the underlying property, the Company considers the market conditions and feasibility of proposed projects, the financial condition and reputation of the borrower and guarantors, the amount of the borrower’s equity in the project, independent appraisals, cost estimates and pre-construction sales information. The Company also makes loans on occasion for the purchase of land for future development by the borrower. Land loans are extended for future development for either commercial or residential use by the borrower. The Company carefully analyzes the intended use of the property and the viability thereof.

 

Commercial. Commercial business loans and lines of credit consist of loans to small- and medium-sized companies in the Company’s market area. Commercial loans are generally used for working capital purposes or for acquiring equipment, inventory or furniture. Primarily all of the Company’s commercial loans are secured loans, along with a small amount of unsecured loans. The Company’s underwriting analysis consists of a review of the financial statements of the borrower, the lending history of the borrower, the debt service capabilities of the borrower, the projected cash flows of the business, the value of the collateral, if any, and whether the loan is guaranteed by the principals of the borrower. These loans are generally secured by accounts receivable, inventory and equipment. Commercial loans are typically made on the basis of the borrower’s ability to make repayment from the cash flow of the borrower’s business, which makes them of higher risk than residential loans and the collateral securing loans may be difficult to appraise and may fluctuate in value based on the success of the business. The Company seeks to minimize these risks through its underwriting standards.

 

Consumer. Consumer loans are extended for various purposes, including purchases of automobiles, recreational vehicles, and boats. Also offered are home improvement loans, lines of credit, personal loans, and deposit account collateralized loans. Repayment of these loans is primarily dependent on the personal income of the borrowers, which can be impacted by economic conditions in their market areas such as unemployment levels. Loans to consumers are extended after a credit evaluation, including the creditworthiness of the borrower(s), the purpose of the credit, and the secondary source of repayment. Consumer loans are made at fixed and variable interest rates. Risk is mitigated by the fact that the loans are of smaller individual amounts.

 

(continued)

 

 

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

 

Notes to Consolidated Financial Statements

 

(3) Loans, Continued. The following summarizes the loan credit quality (in thousands):

 

   Pass   OLEM (Other Loans Especially Mentioned)  

Sub-

standard

   Doubtful   Loss   Total 
                         
At December 31, 2023:                              
Residential real estate  $71,400   $—   $—   $—   $—   $71,400 
Multi-family real estate   67,498    —    —    —    —    67,498 
Commercial real estate   421,471    —    1,209    —    —    422,680 
Land and construction   32,600    —    —    —    —    32,600 
Commercial   41,870    —    —    —    —    41,870 
Consumer   42,998    —    1,025    —    —    44,023 
                               
Total  $677,837   $—   $2,234   $—   $—   $680,071 
At December 31, 2022:                              
Residential real estate  $50,354   $—   $—   $—   $—   $50,354 
Multi-family real estate   69,555    —    —    —    —    69,555 
Commercial real estate   309,458    —    1,237    —    —    310,695 
Land and construction   17,286    —    —    —    —    17,286 
Commercial   5,165    —    —    —    —    5,165 
Consumer   30,323    —    —    —    —    30,323 
                               
Total  $482,141   $—   $1,237   $—   $—   $483,378 

 

Internally assigned loan grades are defined as follows:

 

  Pass – a Pass loan’s primary source of loan repayment is satisfactory, with secondary sources very likely to be realized if necessary. These are loans that conform in all aspects to bank policy and regulatory requirements, and no repayment risk has been identified.
     
  OLEM – an Other Loan Especially Mentioned has potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in the deterioration of the repayment prospects for the asset or the Company’s credit position at some future date.
     
  Substandard – a Substandard loan is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. Included in this category are loans that are current on their payments, but the Bank is unable to document the source of repayment. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.
     
  Doubtful – a loan classified as Doubtful has all the weaknesses inherent in one classified as Substandard, with the added characteristics that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. This classification does not mean that the asset has absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing off this basically worthless asset even though partial recovery may be affected in the future. The Company charges off any loan classified as Doubtful.
     
  Loss – a loan classified as Loss is considered uncollectible and of such little value that continuance as a bankable asset is not warranted. This classification does not mean that the asset has absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing off this basically worthless asset even though partial recovery may be affected in the future. The Company fully charges off any loan classified as Loss.

  

(continued)


OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

 

Notes to Consolidated Financial Statements

 

(3) Loans, Continued. Age analysis of past due loans at December 31, 2023 and 2022 is as follows (in thousands):

 

   Accruing Loans         
   30-59 Days Past Due   60-89 Days Past Due   Greater Than 90 Days Past Due   Total Past Due   Current   Nonaccrual Loans   Total Loans 
At December 31, 2023:                                   
Residential real estate  $—   $—   $—   $—   $71,400   $—   $71,400 
Multi-family real estate   —    —    —    —    67,498    —    67,498 
Commercial real estate   —    —    —    —    422,680    —    422,680 
Land and construction   —    —    —    —    32,600    —    32,600 
Commercial   —    —    —    —    41,870    —    41,870 
Consumer   230    208    —    438    42,560    1,025    44,023 
                                    
Total  $230   $208   $—   $438   $678,608   $1,025   $680,071 
                                    
At December 31, 2022:                                   
Residential real estate  $—   $—   $—   $—   $50,354   $—   $50,354 
Multi-family real estate   —    —    —    —    69,555    —    69,555 
Commercial real estate   —    —    —    —    310,695    —    310,695 
Land and construction   —    —    —    —    17,286    —    17,286 
Commercial   —    —    —    —    5,165    —    5,165 
Consumer   150    27    —    177    30,146    —    30,323 
                                    
Total  $150   $27   $—   $177   $483,201   $—   $483,378 

 

(continued)

 

 

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

 

Notes to Consolidated Financial Statements

 

(3) Loans, Continued.

 

   Term Loans       Revolving Loans     
   Amortized Cost Basis by Origination Year   Revolving   Converted to Term     
Land and construction  2023   2022   2021   2020   2019   Prior  

Loans

(Amortized Cost Basis)

   Loans (Amortized Cost Basis)   Total 
Pass  $11,869   $14,933   $2,689   $1,488   $1,621   $—   $—   $—   $32,600 
OLEM (Other Loans Especially Mentioned)   —    —    —    —    —    —    —    —    — 
Substandard   —    —    —    —    —    —    —    —    — 
Doubtful   —    —    —    —    —    —    —    —    — 
Loss   —    —    —    —    —    —    —    —    — 
Subtotal loans  $11,869   $14,933   $2,689   $1,488   $1,621   $—   $—   $—   $32,600 
Current period Gross write-offs  $—   $—   $—   $—   $—   $—   $—   $—   $— 
Residential real estate                                             
Pass  $21,343   $25,898   $9,747   $4,777   $4,044   $4,844   $747   $—   $71,400 
OLEM (Other Loans Especially Mentioned)   —    —    —    —    —    —    —    —    — 
Substandard   —    —    —    —    —    —    —    —    — 
Doubtful   —    —    —    —    —    —    —    —    — 
Loss   —    —    —    —    —    —    —    —    — 
Subtotal loans  $21,343   $25,898   $9,747   $4,777   $4,044   $4,844   $747   $—   $71,400 
Current period Gross write-offs  $—   $—   $—   $—   $—   $—   $—   $—   $— 
Multi-family real estate                                             
Pass  $1,369   $29,561   $27,224   $6,086   $2,064   $1,194   $—   $—   $67,498 
OLEM (Other Loans Especially Mentioned)   —    —    —    —    —    —    —    —    — 
Substandard   —    —    —    —    —    —    —    —    — 
Doubtful   —    —    —    —    —    —    —    —    — 
Loss   —    —    —    —    —    —    —    —    — 
Subtotal loans  $1,369   $29,561   $27,224   $6,086   $2,064   $1,194   $—   $—   $67,498 
Current period Gross write-offs  $—   $—   $—   $—   $—   $—   $—   $—   $— 
Commercial real estate                                              
Pass  $123,081   $204,425   $52,536   $15,297   $12,593   $13,539   $—   $—   $421,471 
OLEM (Other Loans Especially Mentioned)   —    —    —    —    —    —    —    —    — 
Substandard   —    —    —    —    1,209    —    —    —    1,209 
Doubtful   —    —    —    —    —    —    —    —    — 
Loss   —    —    —    —    —    —    —    —    — 
Subtotal loans  $123,081   $204,425   $52,536   $15,297   $13,802   $13,539   $—   $—   $422,680 
Current period Gross write-offs  $—   $—   $—   $—   $—   $—   $—   $—   $— 
Commercial business loans                                             
Pass  $37,854   $1,935   $1,403   $634   $44   $—   $—   $—   $41,870 
OLEM (Other Loans Especially Mentioned)   —    —    —    —    —              —    — 
Substandard   —    —    —    —    —              —    — 
Doubtful   —    —    —    —    —              —    — 
Loss   —    —    —    —    —              —    — 
Subtotal loans  $37,854   $1,935   $1,403   $634   $44   $—   $—   $—   $41,870 
Current period Gross write-offs  $(45)  $—   $—   $—   $—   $(26)  $—   $—   $(71)
Consumer                                             
Pass  $8,657   $7,033   $3,627   $147   $111   $—   $23,423   $—   $42,998 
OLEM (Other Loans Especially Mentioned)   —    —    —    —    —    —    —    —    — 
Substandard   —    —    —    —    —    —    1,025    —    1,025 
Doubtful   —    —    —    —    —    —    —    —    — 
Loss   —    —    —    —    —    —    —    —    — 
Subtotal loans  $8,657   $7,033   $3,627   $147   $111   $—   $24,448   $—   $44,023 
Current period Gross write-offs  $(423)  $(1,065)  $(880)  $(3)  $—   $—   $—   $—   $(2,371)

 

(continued)

 

 

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

 

Notes to Consolidated Financial Statements

 

(3) Loans, Continued

 

The Company has not made any modifications of loans to borrowers experiencing financial difficulties during the year ended December 31, 2023.

 

The Company recognized $85,000 of interest income on nonaccrual loans in 2023. There was no allowance for credit losses on nonaccrual loans at December 31, 2023.

 

No loans have been determined to be troubled debt restructurings (TDR’s) during the year ended December 31, 2022. At December 31, 2022, there were no loans modified and entered into TDR’s within the past twelve months, that subsequently defaulted during the year ended December 31, 2022. There were no impaired loans at December 31, 2022.