OPHC OptimumBank Holdings Inc

OptimumBank Holdings, Inc. (NASDAQ: OPHC) Similar to my comments at last year’s Annual Shareholder meeting, I want to focus today on our past year’s results and discuss our expectations for the remainder of 2023. 2022 was a great year for us, as we had a full year of normalized results. There was barely any income from any one-time events, and we saw our net income pre-tax and pre-allowance jump over 74%. We will discuss earnings later, but our story today is still all about growth. The growth in 2023 is a slower growth as we have managed to hold our loan pricing to a spread over SOFR which brings us to over a 3.5% NIM on current deposit pricing. I, for one, am in favor of slowing growth during this strange time in the world with interest rates being as high as they are. For years, the Company was constrained as to what we were allowed to do because of circumstances that preceded any of our current management or board members. Today I feel we are doing great and now we begin the next phase in the evolution of our bank. I am fortunate to have an excellent team with me on the board of directors and I take seriously the responsibility of being their chairman.

Our singular goal is to provide shareholder returns and we are poised to continue in 2023 the way we ended 2022. As we have evolved over the last few years, we have seen our near-term goals come into focus. We expect that by the end of 2024, meaning over the next 18 months, we will open two new branches in the Miami area. Those two branches will solidify our foothold with smaller businesses, and we anticipate many of our current borrowers will transfer the rest of their banking relationships to us. In the past six months, we have seen the market lose faith in a few banking institutions, but our customers have shown their support and helped grow our deposits 74% from year end 2021 to year end 2022. So far in 2023 we have grown deposits by an additional 3.8%. Fortunately for our customers, at the of 2022, the Bank added ICS, which provides unlimited insurance for our deposits over $250K at our cost. I would also note that our securities portfolio is completely marked to market, and we have no securities with built in losses sitting inside a held to maturity figure.

We continue to improve our online banking, as we believe the future lies in the online platform and to a lesser extent in the bricks and mortar locations. We continue to work towards online account opening and hope to finally get that accomplished soon. We also expect our website users to be able to select various language options to better attract foreigners doing business in America. Lastly, we imminently expect to offer our customers peer-to-peer money transfer services which will allow individuals to send and receive money with each other through connected bank accounts through Zelle®.

In the last few years, we grew our SNF Accounts Receivable lending program to now include a dedicated lender and underwriter to be able to continue the growth in that segment of our loan portfolio. We felt as a board, with Michael and I being on the board and being heavily involved in the healthcare space, that we should start a lending platform for healthcare providers needing financing for government receivables. We expect the size of that segment of the loan portfolio to increase to $40MM by the end of 2023.

Previously, I said that I appreciated the confidence you have in me to lead our Board and help OptimumBank Holdings, Inc. in reaching our singular goal of bringing shareholder returns, while safeguarding the Company’s equity. 2022 was our best year and we reached a core profitability of almost $5.4MM without adding back provision. The consolidated net income after provision and income tax expense was $4,023,000. The provision for loan loss in 2022 was $3,466,000 as compared to $1,173,000 in 2021. The reason for the extraordinary high provision is from our extraordinary loan growth. I would note that other than bad debt from our consumer lending, we have not had a single dollar of loan loss in the prior few years. If you add back the provision and tax, we made in 2022 over $8.8MM and we expect that number to grow slightly to break $9MM. So far in 2023, our first quarter pre-tax income is over $1,546,000 after a loan loss provision of $726,000. In addition, we are fully allowanced. In fact, we have a higher percentage in our allowance than many of our peers, yet we have a lower bad debt as previously mentioned.

Our total loans have grown from $247MM at the end of 2021 to $477MM at the end of 2022. That is a 93% growth rate, and I am sure that we are doing better than our fellow banks in Florida. As of March 31, 2023, our loan portfolio was at $496MM, which is a growth rate of more than 81% year over year. Our secret sauce lies in the fact that our customers all have long term relationships with people at the bank, the bank itself or board members. We are currently closing loans for borrowers that were referred by borrowers who were referred by borrowers before them. We currently spend little in annual marketing fees as it is not needed. Nevertheless, we have added an employee for investor relations and also to help with moving our bank into the social media space to attract outside customers that typically would not have banked with us. We expect that as our lending limits increase, we will be able to keep lending to our base and future referrals.

In 2022, net interest income increased by $6,432,000 or 68% over 2021. In totality, net interest income in 2022 was $15,836,000, and we are anticipating that number to be over $20MM in 2023. At December 31, 2022, total assets amounted to approximately $585MM, as compared to $351MM for the prior year, which represents a growth of $233MM or 66%. At March 31, 2023, we reached $622MM and expect to surpass $750MM before the end of the year. The increase in total assets during 2022 was mainly driven by a growth of $229MM in loans and $13MM in cash, cash equivalents and investments. For the period ended March 31, 2023, we continued growing our loan portfolio by $19MM. In order to fund the growth, the Bank undertook a significant program of increasing non-maturity deposits such as checking accounts and money market accounts. From the end of the year 2021 until the end of the year 2022, we grew by 74% or $292MM, which put us at $508MM. At March 31, 2022, deposits have grown to over $527MM. I am personally excited by how our depositor base has stood behind our bank. We do not have a single customer that has more than 5% of our deposits, but rather we have many smaller loyal customers banking with us. I, in fact, know many of our customers, and I am able to call them friends.

In 2022, our equity rose to $62.5MM from $38.5MM at year end 2021 after accumulated other comprehensive losses. We did this by selling a $20MM mixture of common and preferred stock, while the rest came from net income. We expect that by the end of 2024, we will do an equity offering to the public, which we will change our balance sheet as well as our public profile. We expect that the next infusion of capital will bolster our market cap and improve our float and stock price to the public. We want to get to a billion dollars in assets and to do that we need over $100MM of equity. At this point, capital is not an obstacle to the Company’s growth. As has been noted in the past, the Company and the Bank are fortunate to enjoy a broad-based Boards of Directors with access to capital.

Based on 7,058,897 shares outstanding at December 31, 2022, we had an Earnings Per Share (EPS) of 68 cents. As of March 31, 2023, with the same common shares outstanding, we have an EPS of 16 cents. I would note that the equity came in at the end of the year and these results do not reflect the money being put out to use as of yet. We expect ending the year with an EPS of approximately 68 cents.

As many of you shareholders know, I am CEO and Chairman of a different company named Strawberry Fields REIT. The reason I bring this up is because Strawberry has taught me many things. One of the things I have learned and have begun to integrate is the managing of the stock price. I learned that I have not succeeded the way I should have succeeded for the shareholders of OPHC. I am by nature programmed to work on fundamentals, and when I became involved in our bank, we focused on fundamentals. In 2010. when I joined the bank board, we were bleeding money. We fixed that and in the last five years we have gone from losing $589k in 2017 to making over $4MM in 2022. We have gone from $62MM of deposits in 2017 to $507MM in 2022. Our loans went from $68MM in 2017 to $477MM in 2022. Lastly, our assets grew from $68MM in 2017 to $585MM in 2022. I realize of course because of the experience with STRW that now we need to finally attract the institutions. We also need to get analyst coverage of our stock. Lastly, we need to create that relationship with the investor public so that we could raise equity from outside the current board of directors.

In conclusion, my comments are similar to previous years comments. It’s been a few years since we created a Strategic Plan which provided the roadmap for growing our bank. Since that time as stated earlier, we have grown our assets, deposits, loan portfolio as well as our net interest income, fee service income and lastly, net income growth. We believe we are doing great so as we go forward, we will continue doing what we are doing. As we succeed, we will keep pushing the goals further out so that we can improve on our results and truly succeed in bringing returns to all of our shareholders.

We will continue working hard and expect great things to happen in the future.

Thank you,

Moishe Gubin, Chairman

About OptimumBank Holdings, Inc.

OptimumBank Holdings, Inc. operates as the bank holding company for OptimumBank that provides a range of consumer and commercial banking services to individuals and businesses. The company accepts demand interest-bearing and noninterest-bearing, savings, money market, NOW, and time deposit accounts, as well as certificates of deposit; and offers residential and commercial real estate, commercial, and consumer loans, as well as lending lines for working capital needs. It also provides debit and ATM cards; investment, cash management, and notary and night depository services; and direct deposits, money orders, cashier's checks, domestic collections, drive-in tellers, and banking by mail, as well as Internet banking services. In addition, the company engages in holding, managing, and disposing foreclosed real estate. It operates through banking offices located in Broward County, Florida. OptimumBank Holdings, Inc. was founded in 2000 and is based in Fort Lauderdale, Florida.

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