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, 2019 in the Annual
Report on Form 10-K.




The following discussion and analysis should also be read in conjunction with
the condensed consolidated financial statements and notes thereto appearing
elsewhere in this report. 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 and changes in market conditions, 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.



Capital Levels


Quantitative measures established by regulation to ensure capital adequacy
require us to maintain minimum amounts and ratios of Total and Tier 1 capital to
risk-weighted assets and Tier 1 capital to average assets. As of March 31, 2020,
the Bank is well capitalized under the regulatory framework for prompt
corrective action.



Refer to Note 9 for the Bank's actual and required minimum capital ratios.


                                                                     (continued)



  20






                   OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY


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

Financial Condition at March 31, 2020 and December 31, 2019



Overview



The Company's total assets increased by approximately $14.6 million to $141.4
million at March 31, 2020, from $126.8 million at December 31, 2019, primarily
due to an increase in cash and cash equivalents corresponding to an increase in
Federal Home Loan Bank advances. Total stockholders' equity increased by
approximately $284,000 to $7.5 million at March 31, 2020, from $7.2 million at
December 31, 2019, primarily due to proceeds from the sale of common stock which
more than offset the net loss for the three months ended March 31, 2020.



The following table shows selected information for the periods ended or at the
dates indicated:



                                                     Three Months
                                                        Ended                Year Ended
                                                    March 31, 2020December 31, 2019
Average equity as a percentage of average assets                5.4 %                    4.6 %

Equity to total assets at end of period                         5.3 %                    5.6 %

Return on average assets (1)                                   (0.9 )%                  (1.0 )%

Return on average equity (1)                                  (17.0 )%                 (21.3 )%

Noninterest expenses to average assets (1)                      3.5 %      
             4.0 %



(1) Annualized for the three months ended March 31, 2020.

Liquidity and Sources of Funds

The Company's sources of funds include customer deposits, advances from the
Federal Home Loan Bank of Atlanta ("FHLB"), principal repayments and sales of
investment securities, loan repayments, the use of Federal Funds markets, net
earnings, if any, and loans taken out at the Federal Reserve Bank discount
window.



Deposits are our primary source of funds. In order to increase its core
deposits, the Company has priced its deposit rates competitively. The Company
will adjust rates on its deposits to attract or retain deposits as needed.

The Company increased deposits by $4.4 million during the three month period
ending March 31, 2020. The proceeds were used to originate new loans.




In addition to obtaining funds from depositors, the Company may borrow funds
from other financial institutions. At March 31, 2020, the Company had
outstanding borrowings of $23 million, against its $27 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. In 2010, the Company obtained an available discount window credit
line with the Federal Reserve Bank, currently $430,000. The Federal Reserve Bank
line is subject to collateral requirements and must be repaid within 90 days;
each advance is subject to prior Federal Reserve Bank consent. At March 31,
2020, the Company also had lines of credit amounting to $9.5 million with four
correspondent banks to purchase federal funds. Disbursements on the lines of
credit are subject to the approval of the correspondent banks. We measure and
monitor our liquidity daily and believe our liquidity sources are adequate
to
meet our operating needs.


Off-Balance Sheet Arrangements

Refer to Note 8 for Off-Balance Sheet Arrangements.



Junior Subordinated Debenture


Please refer to Note 1 for discussion on this matter.



  21






                   OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY


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



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,
                                                    2020                                       2019
                                                  Interest       Average                     Interest       Average
                                    Average         and          Yield/        Average         and          Yield/
                                    Balance      Dividends       Rate(5)       Balance      Dividends       Rate(5)
Interest-earning assets:
Loans                              $ 106,875$    1,413          5.29 %   $  82,384$    1,090          5.29 %
Debt securities                       10,903             46          1.69         9,329             50          2.14
Other (1)                             11,447             44          1.54         7,624             62          3.25

Total interest-earning
assets/interest income               129,225          1,503          4.65        99,337          1,202          4.89

Cash and due from banks                2,792                                      2,540
Premises and equipment                 1,467                                      2,836
Other                                    515                                     (1,237 )

Total assets                       $ 133,999$ 103,476

Interest-bearing liabilities:
Savings, NOW and money-market
deposits                              57,258            226          1.58        35,569            146          1.64
Time deposits                         33,292            176          2.11        27,596            143          2.07
Borrowings (2)                        19,143            105          2.20        21,520            164          3.05

Total interest-bearing
liabilities/interest expense         109,693            507          1.85        84,685            453          2.14

Noninterest-bearing demand
deposits                              14,565                                     11,258
Other liabilities                      2,477                                      2,282
Stockholders' equity                   7,264                                      5,251

Total liabilities and
stockholders' equity               $ 133,999$ 103,476

Net interest income                              $      996$      749

Interest rate spread (3)                                             2.80 %                                     2.75 %

Net interest margin (4)                                              3.08 %                                     3.02 %

Ratio of average
interest-earning assets to
average interest-bearing
liabilities                             1.18 %                                     1.17 %



(1)    Includes interest-earning deposits with banks and Federal Home Loan Bank
       stock dividends.
(2)    Includes Federal Home Loan Bank advances, other borrowings and the
       Debenture.
(3)    Interest-rate spread represents the difference between the average yield
       on interest-earning assets and the average cost of interest-bearing
       liabilities.
(4)    Net interest margin is net interest income divided by average
       interest-earning assets.
(5)    Annualized.




  22






                   OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY


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

Comparison of the Three-Month Periods Ended March 31, 2020 and 2019

General. Net loss for the three months ended March 31, 2020, was $(308,000) or
$(0.11) per basic and diluted share compared to a net loss of $(146,000) or
$(0.08) per basic and diluted share for the three months ended March 31, 2019.
The increase in net loss during the three months ended March 31, 2020 compared
to three months ended March 31, 2019 is primarily attributed to an increase in
the provision for loan losses, increase in noninterest expense and no income tax
benefit, partially offset by the increase in net interest income and increase in
noninterest income.



Interest Income. Interest income increased $301,000 for the three months ended
March 31, 2020 compared to the three months ended March 31, 2019 due primarily
to growth in the loan portfolio.



Interest Expense. Interest expense increased $54,000 to $507,000 for the three
months ended March 31, 2020 compared to the prior period, primarily due to an
increase in interest bearing deposits.



Provision for Loan Losses. Provision for loan losses amounted to $189,000 for
the three months ended March 31, 2020. There was no provision for losses during
the 2019 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 March 31, 2020. 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 $2,198 million or
2.01% of loans outstanding at March 31, 2020, compared to $2.0 million or 1.9%
of loans outstanding at December 31, 2019. The provision for loan losses during
the first quarter of 2020 was primarily due to the increase in the loan
portfolio, and an evaluation of the other factors noted above.



Noninterest Income. Total noninterest income increased to $73,000 for the three
months ended March 31, 2020, from $37,000 for the three months ended March 31,
2019 due to increased loan related fees.



Noninterest Expenses. Total noninterest expenses increased to $1,188,000 for the
three months ended March 31, 2020 compared to $984,000 for the three months
ended March 31, 2019 primarily due to an increase in salaries and employee
benefits, professional fees, and occupancy and equipment.



  23






                   OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

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