##### Table of Contents





UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-K

|x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ------------------------------------------------------------------------------------

For the fiscal year ended December 31, 2010

OR



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

For the transition period from              to

Commission File Number: 000-1288855





OPTIMUMBANK HOLDINGS, INC.

(Exact name of registrant as specified in its charter)



|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Florida                                                        |  | 55-0865043                          
|(State or other jurisdiction of
incorporation or organization) |  | (I.R.S. Employer Identification No.)

2477 East Commercial Blvd., Fort
Lauderdale, FL 33308

(Address of principal executive offices)

Registrants telephone number, including area code: (954) 776-2332

Securities registered pursuant to Section 12(b) of the Act:



|                                        |  |                                          
|--------------------------------------- |  | -----------------------------------------
|Title of each class                     |  | Name of each exchange on which registered
|Common Stock, Par Value $0.01 per share |  | NASDAQ Global Market                     

Securities registered pursuant to Section 12(g) of the Act:

None





Indicate by
check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act of 1993.    Yes   ̈    No  x

Indicate by check mark if the registrant is not required to file reports pursuant
to Section 13 or Section 15(d) of the Securities Exchange Act of
1934.    Yes   ̈    No  x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days.    Yes  x    No   ̈

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files).    Yes   ̈    No   ̈

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is
not contained herein, and will not be contained, to the best of the registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.  x

Indicate by check mark whether the registrant is
a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of large accelerated filer, accelerated filer and smaller reporting company in
Rule 12b-2 of the Exchange Act.



|                        |  |                                                  |  |                           |  |  
|----------------------- |  | ------------------------------------------------ |  | ------------------------- |  | -
|Large accelerated filer |  |  ̈                                                |  | Accelerated filer         |  |  ̈
|                        |  |                                                  | 
|Non-accelerated filer   |  |  ̈  (Do not check if a smaller reporting company) |  | Smaller reporting company |  | x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Act).    Yes   ̈    No  x

The aggregate market value of the registrants common stock held by non-affiliates of the registrant (616,690 shares) on
April 12, 2010, was approximately $2,287,920, computed by reference to the closing market price at $3.71 per share as of April 12, 2010. For purposes of this information, the outstanding shares of common stock owned by directors and
executive officers of the registrant were deemed to be shares of common stock held by affiliates.

Indicate the number of
shares outstanding of each of the registrants classes of common stock, as of the latest most practicable date: The number of shares of common stock, par value $0.01 per share, of the registrant outstanding as of April 12, 2010 was
819,358 shares.





DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy Statement for the Annual Meeting of Shareholders to be held in June 2011 to be filed with the Securities and Exchange Commission pursuant to Regulation 14A within 120 days of the
issuers fiscal year end are incorporated by reference into Part III, Items 10 through 14, of this Annual Report on Form 10-K.









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##### Table of Contents

TABLE OF CONTENTS



|                                                                                                                            |  |      |    | 
|--------------------------------------------------------------------------------------------------------------------------- |  | ---- | -- | 
|                                                                                                                            |  | Page |   
|PART I                                                                                                                      |  |      | 3  | 
|                                                                                                                            | 
|Item 1.   Business                                                                                                          |  |      |    | 
|Forward-Looking Statements                                                                                                  |  |      | 3  | 
|General                                                                                                                     |  |      | 3  | 
|Recent Developments                                                                                                         |  |      | 3  | 
|Banking Products                                                                                                            |  |      | 5  | 
|Strategy                                                                                                                    |  |      | 6  | 
|Lending Activities                                                                                                          |  |      | 6  | 
|Deposit Activities                                                                                                          |  |      | 7  | 
|Investments                                                                                                                 |  |      | 7  | 
|Correspondent Banking                                                                                                       |  |      | 7  | 
|Data Processing                                                                                                             |  |      | 8  | 
|Internet Banking                                                                                                            |  |      | 8  | 
|Competition                                                                                                                 |  |      | 8  | 
|Employees                                                                                                                   |  |      | 8  | 
|Supervision and Regulation                                                                                                  |  |      | 8  | 
|Statistical Profile and Other Financial Data                                                                                |  |      | 15 | 
|                                                                                                                            | 
|Item 2.   Properties                                                                                                        |  |      | 15 | 
|                                                                                                                            | 
|Item 3.   Legal Proceedings                                                                                                 |  |      | 16 | 
|                                                                                                                            | 
|Item 4.   (Reserved)                                                                                                        |  |      |    | 
|                                                                                                                            | 
|PART II                                                                                                                     |  |      |    | 
|                                                                                                                            | 
|Item 5.   
Market for the Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |  |      | 16 | 
|                                                                                                                            | 
|Item 6.   Selected Financial Data                                                                                           |  |      | 17 | 
|                                                                                                                            | 
|Item 7.   
Managements Discussion and Analysis of Financial Condition and Results of Operations                            |  |      | 18 | 
|                                                                                                                            | 
|Item 8.   Financial Statements                                                                                              |  |      | 34 | 
|                                                                                                                            | 
|Item 9.   
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure                             |  |      | 35 | 
|                                                                                                                            | 
|Item 9A(T). Controls and Procedures                                                                                         |  |      | 35 | 
|                                                                                                                            | 
|Item 9B. Other Information                                                                                                  |  |      | 36 | 
|                                                                                                                            | 
|PART III                                                                                                                    |  |      | 36 | 
|                                                                                                                            | 
|Item 10. Directors, Executive Officers, and Corporate Governance                                                            |  |      | 36 | 
|                                                                                                                            | 
|Item 11. Executive Compensation                                                                                             |  |      | 36 | 
|                                                                                                                            | 
|Item 12. Security Ownership of Certain Beneficial Owners and Management                                                     |  |      | 36 | 
|                                                                                                                            | 
|Item 13. Certain Relationships and Related Transactions, and Director
Independence                                          |  |      | 37 | 
|                                                                                                                            | 
|Item 14. Principal Accounting Fees and Services                                                                             |  |      | 37 | 
|                                                                                                                            | 
|PART IV                                                                                                                     |  |      | 37 | 
|                                                                                                                            | 
|Item 15. Exhibits and Financial Statement Schedules                                                                         |  |      | 37 | 
|                                                                                                                            | 
|SIGNATURES                                                                                                                  |  |      | 38 | 



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##### Table of Contents

PART I

Item 1. Business

Forward-Looking Statements

We have made
forward-looking statements in this Annual Report about the financial condition, results of operations, and business of our company. These statements are not historical facts and include expressions concerning the future that are subject to risks and
uncertainties. Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements include, among other things, the following possibilities:



| |  |  | general economic conditions, either nationally or regionally, that are less favorable than expected resulting in, among other things, a deterioration
in credit quality and an increase in credit risk-related losses and expenses;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | changes in the interest rate environment that reduce margins;
| | - |  | -------------------------------------------------------------



| |  |  | competitive pressure in the banking industry that increases significantly;
| | - |  | --------------------------------------------------------------------------



| |  |  | changes that occur in the regulatory environment; and
| | - |  | -----------------------------------------------------



| |  |  | changes that occur in business conditions and the rate of inflation.
| | - |  | --------------------------------------------------------------------

When used in this Annual Report, the words believes, estimates, plans, expects,
should, may, might, outlook, and anticipates, as well as similar expressions, as they relate to OptimumBank Holdings, Inc., or its management, are intended to identify forward-looking
statements.

General

OptimumBank Holdings, Inc. was formed in 2004 as a Florida corporation to serve as a one-bank holding company for OptimumBank and acquired all of the shares of OptimumBank in May 2004. The holding
companys only business is the ownership and operation of OptimumBank and subsidiaries of the bank. OptimumBank is a Florida chartered bank which opened in November 2000, and its deposits are insured by the Federal Deposit Insurance
Corporation, or FDIC. OptimumBank provides community banking services to individuals and businesses in Broward, Miami-Dade and Palm Beach counties. OptimumBank conducts operations from its Fort Lauderdale headquarters and three branch offices in
Fort Lauderdale, Plantation and Deerfield Beach. The Banks wholly-owned subsidiaries are OB Real Estate Management, LLC, OB Real Estate Holdings, LLC, OB Real Estate Holding 1503, LLC, all of which were formed in 2009 and OB Real Estate
Holdings 1695, OB Real Estate Holdings 1669, OB Real Estate Holdings 1645 and OB Real Estate Holdings 1565, all formed in 2010. OB Real Estate Management, LLC is primarily engaged in managing foreclosed real estate but had no activity in 2010. All
other bank subsidiaries are primarily engaged in holding and disposing of foreclosed real estate.

OptimumBank Holdings is
subject to the supervision and regulation of the Federal Reserve. OptimumBank is subject to the supervision and regulation of the Florida Office of Financial Regulation, or OFR, and the FDIC. OptimumBank is a member of the Federal Home Loan Bank of
Atlanta.

At December 31, 2010, our company had total assets of $190.3 million, net loans of $113.5 million, total
deposits of $148.2 million and stockholders equity of $2.8 million. During 2010, our company had a net loss of $8.5 million.

Recent Developments

In 2008, the Company and the Bank began to experience a substantial increase in impaired and
non-performing loans and associated credit losses due to the nationwide economic recession and the related plunge in real estate values in south Florida. As a result, the Companys net income for 2008 was only $520,000. These trends continued
in 2009 and 2010, with the result that the Company and the Bank sustained net losses of $11.5 million in 2009 and $8.5 million in 2010, primarily from significant increases in the provision for loan losses. These operating losses have eroded
OptimumBanks regulatory capital and weakened its financial condition. As a result of these losses and other related operating issues, on April 16, 2010, OptimumBank was required to enter into a Consent Order with the FDIC and Florida
Office of Financial Regulation, and, on June 22, 2010, the Company was required to enter into a Written Agreement with the Federal Reserve Bank of Atlanta, or Federal Reserve.



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Consent Order.The Consent Order imposes a number of requirements on
the Bank intended to improve the Banks condition, including a requirement that the Bank maintain a ratio of Tier 1 capital to adjusted total assets (the Tier 1 Leverage Ratio) of 8.0%, and a ratio of total risk based capital to
risk-weighted assets of 12.0% (the Total Risk Based Capital Ratio). On December 31, 2010, the Bank had a Tier 1 Leverage ratio of 4.02% and a Total Risk Based Capital Ratio of 6.7%. The Bank would have needed approximately $7.8
million in additional capital as of December 31, 2010 in order to comply with the capital requirements of the Consent Order.

The Consent Order contains the following principal requirements:



| |  |  | 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 must revise and implement its written lending and collection policy to provide effective guidance and control of the lending function. The
Bank is required to revise, implement and incorporate recommendations of the FDIC and OFR with respect to the following policies or plans:
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Lending and Collection Policies
| | - |  | -------------------------------



| |  |  | Investment Policy
| | - |  | -----------------



| |  |  | Liquidity, Contingency Funding and Funds Management Plan
| | - |  | --------------------------------------------------------



| |  |  | Interest Rate Risk Management Policy
| | - |  | ------------------------------------



| |  |  | Internal Loan Review and Grading System and
| | - |  | -------------------------------------------



| |  |  | Internal Control Policy
| | - |  | -----------------------



| |  |  | The Bank must develop and implement a satisfactory interest rate risk management policy that is appropriate to the size of the Bank and the complexity
of its assets.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 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 prior to undertaking asset growth of 10% or more per annum while the Consent Order remains in effect.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The Bank is required to file periodic 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 except for the
Banks failure to attain the regulatory capital ratio requirements. The Company is currently conducting a private placement offering of its common stock intended to result in the Bank attaining such capital ratios. There can be no assurance,
however, that the Company will raise sufficient capital, if any, in the private placement offering for the Bank to meet the capital requirements of the Consent Order.



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Written Agreement with the Federal Reserve.The Written Agreement
between the Company and the Federal Reserve requires the Company to serve as a source of strength to certain aspects of the capitalization, operation and management of the Bank. The Company also agreed that while the Written Agreement remains in
effect, without prior approval of the Federal Reserve, it will not:



| |  |  | declare or pay dividends,
| | - |  | -------------------------



| |  |  | directly or indirectly take dividends or any other form of payment representing a reduction in capital from OptimumBank.
| | - |  | ------------------------------------------------------------------------------------------------------------------------



| |  |  | make any distributions of interest, principal, or other sums on subordinated debentures or trust preferred securities,
| | - |  | ----------------------------------------------------------------------------------------------------------------------



| |  |  | incur, increase, or guarantee any debt or purchase or redeem any shares of its stock, or
| | - |  | ----------------------------------------------------------------------------------------



| |  |  | appoint any new director or senior executive officer, or change the responsibilities of any senior executive officer so that the officer would assume a
different senior executive officer position.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Management believes that the Company is in substantial
compliance with all the provisions of the Written Agreement with the Federal Reserve.

Companys Ability to
Continue as a Going Concern.The Companys recent and continuing increases in nonperforming assets, declining net interest margin, continuing high levels of noninterest expenses related to the credit problems, and eroding
regulatory capital raise substantial doubt about the Companys ability to return to profitability and continue as a going concern. The Bank is not in compliance with its regulatory capital requirements set forth in the Consent Order, as well as
the FDIC regulatory framework for prompt corrective action. For additional information on the Banks regulatory capital requirements, see Managements Discussion and Analysis of Financial Condition and Results of Operation-
Regulatory Capital Adequacy.

We have determined that additional capital will be required for us to return to
profitability and continue operations. Since January 2011, we have engaged in a private placement offering of our common stock to increase our regulatory capital. It remains to be seen whether the offering will be successful. If we are unable to
raise capital and the Banks regulatory capital levels continue to decline, the regulators may take additional enforcement action against us, including placing the Bank into conservatorship or receivership, to protect the interests of
depositors insured by the FDIC.

The accompanying consolidated financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and the discharge of liabilities in the normal course of business for the foreseeable future, and do not include any adjustments to reflect the possible future effects on the recoverability or
classification of assets, and the amounts or classification of liabilities that may result from the outcome of any regulatory action which would affect our ability to continue as a going concern.

Banking Products

Our revenues are primarily derived from interest on, and fees received in connection with, real estate, and other loans, and from interest from mortgage-backed securities and short-term investments. The
principal sources of funds for our lending activities are deposits, borrowings, repayment of loans, and the repayment, or maturity of investment securities. Our principal expenses are the interest paid on deposits, and operating and general
administrative expenses.

As is the case with banking institutions generally, our operations are materially and significantly
influenced by general economic conditions and by related monetary and fiscal policies of financial institution regulatory agencies, including the Board of Governors of the Federal Reserve System and the FDIC. Deposit flows and costs of funds are
influenced by interest rates on competing investments and general market rates of interest. Lending activities are affected by the demand for financing of real estate and other types of loans, which in turn is affected by the interest rates at which
such financing may be offered and other factors affecting local demand and availability of funds. We face strong competition in attracting deposits (our primary source of lendable funds) and originating loans.

We provide a range of consumer and commercial banking services to individuals and businesses. The basic services we offer include: demand
interest-bearing and noninterest-bearing accounts, money market deposit accounts, NOW accounts, time deposits, credit cards, cash management, direct deposits, notary services, money orders, night depository, travelers checks, cashiers
checks, domestic collections, savings bonds, bank drafts, automated teller services, drive-in tellers, and banking by mail. In addition, we make residential and commercial real estate loans and consumer loans. We provide ATM cards, as a part of the
Star, Presto and Cirrus networks, thereby permitting customers to utilize the convenience of ATMs worldwide. We do not have trust powers and provide no trust services.



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Strategy

Our continuing goal is to become one of the leading community banking organizations in Broward County through steady, reasonable and
controlled growth and a prudent operating strategy.

Prior to 2010, our operating and business strategy emphasized:



| |  |  | Local management and local decision making resulting in rapid, personalized customer service, rapid credit decisions and expedited closings;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Maintaining our presence in Broward County through a branch network- we currently have three branch banking offices in Broward County;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Real estate lending activities by continuing to originate adjustable rate residential and commercial mortgage loans for our customers;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Maintaining high credit quality through strict underwriting criteria and our knowledge of the real estate values in our market area;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Personalized products and service - we strive to provide innovative financial products, high service levels and to maintain strong customer
relationships. We seek customers who prefer to conduct business with a locally owned and managed institution.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Our ability to execute this strategy is currently limited by the Consent Order and our current capital levels. As a result, our
management has focused its efforts on a short-term strategy that has the following objectives:



| |  |  | Stabilize the Companys Loan Portfolio- Management discontinued new loan originations and devoted significant resources to the
identification and workout of problem loans.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Stabilize the Companys Funding Sources- Management acted to reduce the Banks dependence on brokered deposits and wholesale
borrowings.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Increase the Banks Capital Ratios- Management reduced the size of the Bank and is attempting to raise capital in a private placement
offering of the Companys common stock.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Lending Activities

Prior to 2010, we offered primarily real estate and to a lesser extent, consumer loans, to individuals and small businesses and other
organizations that were located in or conduct a substantial portion of their business in our market area. Our market area consists of the tri-county area of Broward, Miami-Dade and Palm Beach counties. Our net loans at December 31, 2010 were
$113.5 million, or 59.8% of total assets. The interest rates we charged on loans varied with the degree of risk, maturity, and amount of the loan, and were further subject to competitive pressures, money market rates, availability of funds, and
government regulations. We have no foreign loans or loans for highly leveraged transactions.

Our loans are concentrated in
two major areas: residential and commercial real estate loans. As of December 31, 2010, 99.7% of our loan portfolio consisted of loans secured by mortgages on real estate, of which approximately 34.2% of the total loan portfolio was secured by
one-to-four family residential properties. Our real estate loans are located primarily in our tri-county market area.

Our
real estate loans are secured by mortgages and consist primarily of loans to individuals and businesses for the purchase or improvement of, or investment in, real estate. These real estate loans were made at fixed or variable interest rates and are
normally adjustable rate mortgages which adjust annually after the initial three to five year period. Our fixed rate loans generally are for terms of five years or less, and are repayable in monthly installments based on a maximum 30-year
amortization schedule.

Prior to 2010, loan originations were derived primarily from existing customers, direct marketing and
independent mortgage brokers that processed our loans. We paid fees to these brokers in connection with their services; however, we performed the underwriting and approval of each of the loans we fund. Loan originations have also been derived from
existing customers, and referrals from existing customers and Bank employees.



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Certain credit risks are inherent in making loans. These include prepayment risks, risks
resulting from uncertainties in the future value of collateral, risks resulting from changes in economic and industry conditions including interest rates, and risks inherent in dealing with individual borrowers. A significant portion of our
portfolio is collateralized by real estate in south Florida, and we are susceptible to local economic downturns. We attempt to minimize credit losses through various means. On larger credits, we rely on the cash flow and assets of a debtor as the
source of repayment as well as the value of the underlying collateral. We also generally limit our loans to 80% of the value of the underlying real estate collateral. We generally charge a prepayment penalty if a loan is repaid within the first two
to three years of origination to recover any fees we paid for the origination of the loan.

Due to the effects of the current
recession, our earnings have been materially affected by required provisions for loan losses, and to a lesser degree, reduced interest income and increased loan administration expenses, stemming primarily from deterioration in our commercial real
estate and land loan portfolios. Since the last quarter of 2009, due to the need for the Bank to reduce its exposure to credit risk and preserve regulatory capital, we have limited our lending activities to restructuring, modifying, or extending
existing loans and lending to purchasers of real estate properties owned by the Bank.

Deposit Activities

Deposits are the major source of our funds for lending and other investment activities. We consider the majority of our
regular savings, demand, NOW, money market deposit accounts and CDs under $100,000 to be core deposits. These accounts comprised approximately 65.4% of our total deposits at December 31, 2010. Approximately 75.1% of our deposits at
December 31, 2010 were certificates of deposit. Generally, we attempt to maintain the rates paid on our deposits at a competitive level. Time deposits of $100,000 and over made up approximately 34.6% of our total deposits at December 31,
2010.Although these large deposits are not traditionally considered core deposits, the majority of these deposits have served as a stable source of funds in our targeted market. The majority of our deposits are generated from Broward County.

We have used brokered deposits to facilitate the funding of our mortgage lending activities in circumstances when larger than
anticipated loan volumes occur and there is not enough time to fund the additional loan demand through traditional deposit solicitation. The time frame from the initial order to the final funding of brokered deposits is generally one to three days.
The rates paid on these brokered deposits are typically equal to or slightly less than the high end of the interest rates in OptimumBanks competitive market area. Since December 2009, we have no longer solicited or renewed existing brokered
deposits due to regulatory restrictions. Brokered deposits amounted to 1.2% and 9.2% of our total deposits at December 31, 2010 and 2009, respectively.

Investments

Our investment securities portfolio
was approximately $ 51.1 million and $81.1 million at December 31, 2010 and 2009, respectively, representing 26.8% and 30.1% of our total assets. At December 31, 2010, approximately 47.0% of this portfolio was
invested in U.S. government agency mortgage-backed securities and 52.8% of this portfolio was invested in private label mortgage-backed securities. Mortgage backed securities generally have a shorter life than the stated maturity. Our
investments are managed in relation to loan demand and deposit growth, and are generally used to provide for the investment of excess funds at minimal risk levels while providing liquidity to fund increases in loan demand or to offset fluctuations
in deposits.

Federal funds sold is the excess cash we have available over and above daily cash needs. This money is invested
on an overnight basis with approved correspondent banks.

Correspondent Banking

Correspondent banking involves one bank providing services to another bank which cannot provide that service for itself from an economic
or practical standpoint. We are required to purchase correspondent services offered by larger banks, including check collections, purchase of federal funds, security safekeeping, investment services, coin and currency supplies, overline and
liquidity loan participations, and sales of loans to or participations with correspondent banks.

We have established a
correspondent relationship with Independent Bankers Bank of Florida. We pay for such services in cash as opposed to keeping compensating balances. We also sell loan participations to other banks with respect to loans which exceed our lending limit.



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Data Processing

We outsource most of our data processing services, including an automated general ledger and deposit accounting; however, we service all
our loans in-house.

Internet Banking

We maintain a website at www.optimumbank.com where customers can access account balances, view current account activity and
their previous statement, view images of paid checks and transfer funds between accounts. Our website provides information regarding our Visa credit card offering.

Competition

We encounter strong competition both
in making loans and in attracting deposits. The deregulation of the banking industry and the widespread enactment of state laws which permit multi-bank holding companies as well as an increasing level of interstate banking have created a highly
competitive environment for commercial banking. In one or more aspects of our business, we compete with other commercial banks, savings and loan associations, credit unions, finance companies, mutual funds, insurance companies, brokerage and
investment banking companies, and other financial intermediaries. Most of these competitors, some of which are affiliated with bank holding companies, have substantially greater resources and lending limits, and may offer certain services that we do
not currently provide. In addition, many of our non-bank competitors are not subject to the same extensive federal regulations that govern federally insured banks. Recent federal and state legislation has heightened the competitive environment in
which financial institutions must conduct their business, and the potential for competition among financial institutions of all types has increased significantly.

To compete, we rely upon specialized services, responsive handling of customer needs, and personal contacts by our officers, directors, and staff. Large multi-branch banking competitors tend to compete
primarily by rate and the number and location of branches while smaller, independent financial institutions tend to compete primarily by rate and personal service.

Employees

As of December 31, 2010, we had
nineteen full-time employees, including executive officers. The employees are not represented by a collective bargaining unit. We consider relations with employees to be good.

Supervision and Regulation

Banks and their
holding companies are extensively regulated under both federal and state law. The following is a brief summary of certain statutes, rules, and regulations affecting OptimumBank Holdings and OptimumBank. This summary is qualified in its entirety by
reference to the particular statutory and regulatory provisions referred to below and is not intended to be an exhaustive description of the statutes or regulations applicable to the business of our company and our bank. Supervision, regulation, and
examination of banks by regulatory agencies are intended primarily for the protection of depositors, rather than shareholders.

Dodd-Frank Act.On July 21, 2010, President Obama signed the Dodd-Frank Wall Street Reform and Consumer
Protection Act, or the Dodd-Frank Act, into law. The Dodd-Frank Act will have a broad impact on the financial services industry, including potentially significant regulatory and compliance changes including, among other things, (1) enhanced
resolution authority of troubled and failing banks and their holding companies; (2) potential changes to capital and liquidity requirements; (3) changes to regulatory examination fees; (4) changes to assessments to be paid to the FDIC
for federal deposit insurance; and (5) numerous other provisions designed to improve supervision and oversight of, and strengthening safety and soundness for, the financial services sector. Additionally, the Dodd-Frank Act establishes a new
framework for systemic risk oversight within the financial system to be distributed among new and existing federal regulatory agencies, including the Financial Stability Oversight Council, the Board of Governors of the Federal Reserve System, or the
Federal Reserve, the Office of the Comptroller of the Currency, or the OCC, and the Federal Deposit Insurance Corporation, or the FDIC. Many of the requirements called for in the Dodd-Frank Act will be implemented over time and most will be subject
to implementing regulations over the course of several years. Given the uncertainty associated with the manner in which the provisions of the Dodd-Frank Act will be implemented by the various regulatory agencies and through regulations, the full
extent of the impact such requirements will have on our



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operations is unclear. The changes resulting from the Dodd-Frank Act may impact the profitability of our business activities, require changes to certain of our business practices, impose upon us
more stringent capital, liquidity and leverage ratio requirements or otherwise adversely affect our business. These changes may also require us to invest significant management attention and resources to evaluate and make necessary changes in order
to comply with new statutory and regulatory requirements. Failure to comply with any such laws, regulations, or principles or changes thereto, may negatively impact our results of operations and financial condition. While we cannot predict what
effect any presently contemplated or future changes in the laws or regulations or their interpretations would have on us, these changes could be materially adverse to our investors and shareholders.

The following items provide a brief description of the impact of the Dodd-Frank Act on our operations and activities, both currently and
prospectively.



| |  |  | Increased Capital Standards and Enhanced Supervision. The federal banking agencies are required to establish minimum leverage and risk-based
capital requirements for banks and bank holding companies. These new standards will be no lower than existing regulatory capital and leverage standards applicable to insured depository institutions and may, in fact, be higher when established by the
agencies. Compliance with heightened capital standards may reduce our ability to generate or originate revenue-producing assets and thereby restrict revenue generation from banking and non-banking operations. The Dodd-Frank Act also increases
regulatory oversight, supervision and examination of banks, bank holding companies and their respective subsidiaries by the appropriate regulatory agency. Compliance with new regulatory requirements and expanded examination processes could increase
the Companys cost of operations.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The Consumer Financial Protection Bureau. The Dodd-Frank Act creates a new, independent Consumer Financial Protection Bureau, or the Bureau,
within the Federal Reserve. The Bureau is tasked with establishing and implementing rules and regulations under certain federal consumer protection laws with respect to the conduct of providers of certain consumer financial products and services.
The Bureau has rulemaking authority over many of the statutes governing products and services offered to bank consumers. Generally, we will not be directly subject to the rules and regulations of the Bureau. However, the Dodd-Frank Act permits
states to adopt consumer protection laws and regulations that are stricter than those regulations promulgated by the Bureau and state attorneys general are permitted to enforce consumer protection rules adopted by the Bureau against certain
state-chartered institutions. Any such new regulations could increase our cost of operations and, as a result, could limit our ability to expand into these products and services.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Deposit Insurance. The Dodd-Frank Act makes permanent the $250,000 deposit insurance limit for insured deposits. Amendments to the Federal
Deposit Insurance Act also revise the assessment base against which an insured depository institutions deposit insurance premiums paid to the FDICs Deposit Insurance Fund, or the DIF, will be calculated. Under the amendments, the
assessment base will no longer be the institutions deposit base, but rather its average consolidated total assets less its average tangible equity. Additionally, the Dodd-Frank Act makes changes to the minimum designated reserve ratio of the
DIF, increasing the minimum from 1.15 percent to 1.35 percent of the estimated amount of total insured deposits, and eliminating the requirement that the FDIC pay dividends to depository institutions when the reserve ratio exceeds certain
thresholds. Several of these provisions could increase the FDIC deposit insurance premiums paid by us. The Dodd-Frank Act also provides that, effective one year after the date of enactment, depository institutions may pay interest on demand
deposits.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Transactions with Affiliates. The Dodd-Frank Act enhances the requirements for certain transactions with affiliates under Section 23A and
23B of the Federal Reserve Act, including an expansion of the definition of covered transactions and increasing the amount of time for which collateral requirements regarding covered transactions must be maintained.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Transactions with Insiders. Insider transaction limitations are expanded through the strengthening on loan restrictions to insiders and the
expansion of the types of transactions subject to the various limits.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Enhanced Lending Limits. The Dodd-Frank Act strengthens the existing limits on a depository institutions credit exposure to one borrower.
Current banking law limits a depository institutions ability to extend credit to one person (or group of related persons) in an amount exceeding certain thresholds. The Dodd-Frank Act expands the scope of these restrictions to include credit
exposure arising from derivative transactions, repurchase agreements, and securities lending and borrowing transactions.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Company Regulation

General. As a bank holding company registered under the Bank Holding Company Act of 1956 (the BHCA),
OptimumBank Holdings is subject to the regulation and supervision of, and inspection by, the Federal Reserve Board (Federal Reserve). OptimumBank Holdings also is required to file with the Federal Reserve annual reports and other
information regarding its business operations, and those of its subsidiaries. In the past, the BHCA limited the activities of bank holding companies and their subsidiaries to activities which were limited to banking, managing or controlling banks,
furnishing services to or performing services for their subsidiaries or engaging in any other activity which the Federal Reserve determined to be so closely related to banking or managing or controlling banks as to be properly incident thereto.
Under the Gramm-Leach-Bliley Financial Modernization Act of 1999 which is discussed below, bank holding companies now have the opportunity to seek broadened authority, subject to limitations on investment, to engage in activities that are
financial in nature if all of their subsidiary depository institutions are well capitalized, well managed, and have at least a satisfactory rating under the Community Reinvestment Act, which is also discussed below.

In this regard, the BHCA prohibits a bank holding company, with certain limited exceptions, from (i) acquiring or retaining direct
or indirect ownership or control of more than 5% of the outstanding voting stock of any company which is not a bank or bank holding company, or (ii) engaging directly or indirectly in activities other than those of banking, managing or
controlling banks, or performing services for its subsidiaries, unless such non-banking business is determined by the FRB to be so closely related to banking or managing or controlling banks as to be properly incident thereto. In making such
determinations, the FRB is required to weigh the expected benefit to the public, such as greater convenience, increased competition or gains in efficiency, against the possible adverse effects, such as undue concentration of resources, decreased or
unfair competition, conflicts of interest, or unsound banking practices. Generally, bank holding companies, such as OptimumBank Holdings, are required to obtain prior approval of the Federal Reserve to engage in any new activity not previously
approved by the Federal Reserve.

Change of Holding Company Control. The BHCA also requires that every bank
holding company obtain the prior approval of the Federal Reserve before it may acquire all or substantially all of the assets of any bank, or ownership or control of any voting shares of any bank, if after such acquisition it would own or control,
directly or indirectly, more than 5% of the voting shares of such bank. In approving bank acquisitions by bank holding companies, the Federal Reserve is required to consider the financial and managerial resources and future prospects of the bank
holding company and the banks concerned, the convenience and needs of the communities to be served, including the parties performance under the Community Reinvestment Act (discussed below) and various competitive factors. As described in
greater detail below, pursuant to the Riegle-Neal Interstate Banking and Branch Efficiency Act of 1994 (the Interstate Banking and Branching Act), a bank holding company is permitted to acquire banks in states other than its home state.

The BHCA further prohibits a person or group of persons from acquiring control of a bank holding company unless
the Federal Reserve Bank has been notified and has not objected to the transaction. Under a rebuttable presumption established by the Federal Reserve, the acquisition of 10% or more of a class of voting stock of a bank holding company with a class
of securities registered under Section 12 of the Exchange Act would, under the circumstances set forth in the presumption, constitute acquisition of control of the bank holding company. In addition, any person or group of persons must obtain
the approval of the Federal Reserve under the BHCA before acquiring 25% (5% in the case of an acquirer that is already a bank holding company) or more of the outstanding common stock of a bank holding company, or otherwise obtaining control or a
controlling influence over the bank holding company.

Interstate Banking and Branching. The
Interstate Banking and Branching Act provides for nationwide interstate banking and branching. Under the law, interstate acquisitions of banks or bank holding companies in any state by bank holding companies in any other state are permissible
subject to certain limitations. Florida also has a law that allows out-of-state bank holding companies (located in states that allow Florida bank holding companies to acquire banks and bank holding companies in that state) to acquire Florida banks
and Florida bank holding companies. The law essentially provides for out-of-state entry by acquisition only (and not by interstate branching) and requires the acquired Florida bank to have been in existence for at least three years. Interstate
branching and consolidation of existing bank subsidiaries in different states is permissible. A Florida bank also may establish, maintain, and operate one or more branches in a state other than Florida pursuant to an interstate merger transaction in
which the Florida bank is the resulting bank.



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Financial Modernization.The Gramm-Leach-Bliley Act of 1999 (the
GLB Act) sought to achieve significant modernization of the federal bank regulatory framework by allowing the consolidation of banking institutions with other types of financial services firms, subject to various restrictions and
requirements. In general, the GLB Act repealed most of the federal statutory barriers which separated commercial banking firms from insurance and securities firms and authorized the consolidation of such firms in a financial services holding
company. We have no current plans to utilize the structural options created by the GLB Act.

Securities Regulation
and Corporate Governance. OptimumBank Holdings common stock is registered with the Securities and Exchange Commission (the SEC) under Section 12(g) of the Securities Exchange Act of 1934, and we are subject to
restrictions, reporting requirements and review procedures under federal securities laws and regulations. We are also subject to the rules and reporting requirements of the NASDAQ Global Market, on which our common stock is traded. Like other
issuers of publicly traded securities, we must also comply with the corporate governance reforms enacted under the Sarbanes-Oxley Act of 2002 (The Sarbanes-Oxley Act) and the rules of the SEC and NASDAQ Stock Market adopted pursuant to
the Sarbanes Oxley Act. Among other things, these reforms, effective as of various dates, require certification of financial statements by the chief executive officer and chief financial officer, prohibit the provision of specified services by
independent auditors, require pre-approval of independent auditor services, define director independence and require certain committees, and a majority of a subject companys board of directors, to consist of independent directors, establish
additional disclosure requirements in reports filed with the SEC, require expedited filing of reports, require management evaluation and auditor attestation of internal controls, prohibit loans by the issuer (but not by certain depository
institutions) to directors and officers, set record-keeping requirements, mandate complaint procedures for the reporting of accounting and audit concerns by employees, and establish penalties for non-compliance.

Bank Regulation

General. OptimumBank is chartered under the laws of the State of Florida, and its deposits are insured by the FDIC to the extent provided by law. OptimumBank is subject to comprehensive
regulation, examination and supervision by the FDIC and the Florida Office of Financial Regulation, or Florida OFR, and to other laws and regulations applicable to banks. Such regulations include limitations on loans to a single borrower and to its
directors, officers and employees; limitations on the types of activities a state bank can conduct, restrictions on the opening and closing of branch offices; the maintenance of required capital ratios; the granting of credit under equal and fair
conditions; and the disclosure of the costs and terms of such credit. OptimumBank is examined periodically by the FDIC and the Florida OFR, to whom it submits periodic reports regarding its financial condition and other matters. The FDIC and the
Florida OFR have a broad range of powers to enforce regulations under their jurisdiction, and to take discretionary actions determined to be for the protection and safety and soundness of banks, including the institution of cease and desist orders
and the removal of directors and officers. The FDIC and the Florida OFR also have the authority to approve or disapprove mergers, consolidations, and similar corporate actions.

Consent Order. On April 16, 2010, OptimumBank was required to enter into a Consent Order with the FDIC and the Florida
Office of Financial Regulation. Under the Consent Order, the Bank is required to implement a number of corrective measures intended to improve the Banks condition, including a requirement to maintain certain minimum capital ratios. The Consent
Order also contains significant operating restrictions. A description of the principal requirements of the Consent Order are contained in Business- - Recent Developments- Consent Order.

Capital Adequacy Requirements. Banks are required to maintain capital at adequate levels based on a percentage of assets
and off-balance sheet exposures, adjusted for risk weights ranging from 0% to 100%. Under the risk-based standard, capital is classified into two tiers. Tier 1 capital consists of common shareholders equity (excluding the unrealized gain
(loss) on available-for-sale securities), trust preferred securities subject to certain limitations, and minus certain intangible assets. Tier 2 capital consists of the general allowance for credit losses except for certain limitations. An
institutions qualifying capital base for purposes of its risk-based capital ratio consists of the sum of its Tier 1 and Tier 2 capital. The regulatory minimum requirements are 4% for Tier 1 and 8% for total risk-based capital. At
December 31, 2010, our Tier 1 and total risk-based capital ratios were 5.43% and 6.7%, respectively.

Banks are also
required to maintain capital at a minimum level based on total assets, which is known as the leverage ratio. The minimum requirement for the leverage ratio is 4%, but all but the highest rated institutions are required to maintain ratios 100 to 200
basis points above the minimum. At December 31, 2010, our leverage ratio was 4.02%.



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The Consent Order imposes higher capital requirements on OptimumBank. Under the Consent
Order, OptimumBank must maintain a Tier 1 Leverage Ratio of 8.0%, and a total risk based capital ratio of 12.0%. With a Tier 1 Leverage ratio of 4.02% and a Total Risk Based Capital Ratio of 6.7% at December 31, 2010, the Bank did not meet the
capital adequacy ratios as required by the Consent Order.

The FDIC Improvement Act of 1993 (FDICIA) contains
prompt corrective action provisions pursuant to which banks are to be classified into one of five categories based upon capital adequacy, ranging from well capitalized to critically undercapitalized and which
require (subject to certain exceptions) the appropriate federal banking agency to take prompt corrective action with respect to an institution which becomes significantly undercapitalized or critically undercapitalized.

The FDIC has issued regulations to implement the prompt corrective action provisions of FDICIA. In general, the
regulations define the five capital categories as follows:



| |  |  | an institution is well capitalized if it has a total risk-based capital ratio of 10% or greater, has a Tier 1 risk-based capital ratio of
6% or greater, has a leverage ratio of 5% or greater and is not subject to any written capital order or directive to meet and maintain a specific capital level for any capital measures;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | an institution is adequately capitalized if it has a total risk-based capital ratio of 8% or greater, has a Tier 1 risk-based capital ratio
of 4% or greater, and has a leverage ratio of 4% or greater;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | an institution is undercapitalized if it has a total risk-based capital ratio of less than 8%, has a Tier 1 risk-based capital ratio that
is less than 4% or has a leverage ratio that is less than 4%;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | an institution is significantly undercapitalized if it has a total risk-based capital ratio that is less than 6%, a Tier 1 risk-based
capital ratio that is less than 3% or a leverage ratio that is less than 3%; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | an institution is critically undercapitalized if its tangible equity is equal to or less than 2% of its total assets.
| | - |  | -------------------------------------------------------------------------------------------------------------------------

The FDIC, after an opportunity for a hearing, has authority to downgrade an institution from well capitalized
to adequately capitalized or to subject an adequately capitalized or undercapitalized institution to the supervisory actions applicable to the next lower category, for supervisory concerns.

Generally, FDICIA requires that an undercapitalized institution must submit an acceptable capital restoration plan to the
appropriate federal banking agency within 45 days after the institution becomes undercapitalized and the agency must take action on the plan within 60 days. The appropriate federal banking agency may not accept a capital restoration plan
unless, among other requirements, each company having control of the institution has guaranteed that the institution will comply with the plan until the institution has been adequately capitalized on average during each of the three consecutive
calendar quarters and has provided adequate assurances of performance. The aggregate liability under this provision of all companies having control of an institution is limited to the lesser of:



| |  |  | 5% of the institutions total assets at the time the institution becomes undercapitalized or
| | - |  | ----------------------------------------------------------------------------------------------



| |  |  | the amount which is necessary, or would have been necessary, to bring the institution into compliance with all capital standards applicable to the
institution as of the time the institution fails to comply with the plan filed pursuant to FDICIA
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

An
undercapitalized institution may not acquire an interest in any company or any other insured depository institution, establish or acquire additional branch offices or engage in any new business unless the appropriate federal banking
agency has accepted its capital restoration plan, the institution is implementing the plan, and the agency determines that the proposed action is consistent with and will further the achievement of the plan, or the appropriate Federal banking agency
determines the proposed action will further the purpose of the prompt corrective action sections of FDICIA.

If an
institution is critically undercapitalized, it must comply with the restrictions described above. In addition, the appropriate Federal banking agency is authorized to restrict the activities of any critically undercapitalized
institution and to prohibit such an institution, without the appropriate Federal banking agencys prior written approval, from:



| |  |  | entering into any material transaction other than in the usual course of business;
| | - |  | ----------------------------------------------------------------------------------



| |  |  | engaging in any covered transaction with affiliates (as defined in Section 23A(b) of the Federal Reserve Act);
| | - |  | --------------------------------------------------------------------------------------------------------------



| |  |  | paying excessive compensation or bonuses; and
| | - |  | ---------------------------------------------



| |  |  | paying interest on new or renewed liabilities at a rate that would increase the institutions weighted average costs of funds to a level
significantly exceeding the prevailing rates of interest on insured deposits in the institutions normal market areas.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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The prompt corrective action provisions of FDICIA also provide that in general
no institution may make a capital distribution if it would cause the institution to become undercapitalized. Capital distributions include cash (but not stock) dividends, stock purchases, redemptions, and other distributions of capital
to the owners of an institution.

Additionally, FDICIA requires, among other things, that:



| |  |  | only a well capitalized depository institution may accept brokered deposits without prior regulatory approval and
| | - |  | -------------------------------------------------------------------------------------------------------------------



| |  |  | the appropriate federal banking agency annually examine all insured depository institutions, with some exceptions for small, well
capitalized institutions and state-chartered institutions examined by state regulators.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

As of
December 31, 2010, OptimumBank did not meet the capital requirements of an adequately capitalized institution, but rather met the FDIC definition of an undercapitalized institution.

For additional information regarding OptimumBanks capital ratios and requirements, see Managements Discussion and
Analysis of Financial Condition and Results of Operations  Regulatory Capital Adequacy.

Dividends.OptimumBank Holdings ability to pay dividends is substantially dependent on the ability of
OptimumBank to pay dividends to OptimumBank Holdings. As a state chartered bank, OptimumBank is subject to dividend restrictions set by Florida law and the FDIC. Except with the prior approval of the Florida OFR, all dividends of any Florida bank
must be paid out of retained net profits from the current period and the previous two years, after deducting expenses, including losses and bad debts. Under the Federal Deposit Insurance Act, an FDIC-insured institution may not pay any dividend if
payment would cause it to become undercapitalized or while it is undercapitalized. The FDIC and the Florida OFR also have the general authority to limit the dividend payment by banks if such payment may be deemed to constitute an unsafe and unsound
practice. The Banks ability to pay dividends is further restricted under the Consent Order and the Companys ability to pay dividends is also restricted under its Written Agreement with the Federal Reserve. At December 31, 2010, the
Bank and Company could not pay cash dividends.

Loans to One Borrower. Florida law generally allows a state bank
such as OptimumBank to extend credit to any one borrower (and certain related entities of such borrower) in an amount up to 25% of its capital accounts, provided that the unsecured portion may not exceed 15% of the capital accounts of the bank.
Based upon OptimumBanks capital, the maximum loan OptimumBank is currently permitted to make is approximately $1.9 million, provided the unsecured portion does not exceed approximately $1.2 million.

Transactions with Affiliates. Under federal law, federally insured banks are subject, with certain exceptions, to certain
restrictions on any extension of credit to their parent holding companies or other affiliates, on investment in the stock or other securities of affiliates, and on the taking of such stock or securities as collateral from any borrower. In addition,
banks are prohibited from engaging in certain tie-in arrangements in connection with any extension of credit or the providing of any property or service.

Change of Bank Control. Florida law restricts the amount of voting stock of a bank that a person may acquire without the prior approval of banking regulators. The overall effect of such laws
is to make it more difficult to acquire a bank by tender offer or similar means than it might be to acquire control of another type of corporation. Consequently, shareholders of financial institutions are less likely to benefit from the rapid
increases in stock prices that often result from tender offers or similar efforts to acquire control of other companies.

Under Florida law, no person or group of persons may, directly or indirectly or acting by or through one or more persons, purchase or
acquire a controlling interest in any bank which would result in the change in control of that bank unless the Florida OFR first shall have approved such proposed acquisition. A person or group will be deemed to have acquired control of
a bank (i) if the person or group, directly or indirectly or acting by or through one, or more other persons, owns, controls, or has power to vote 25% or more of any class of voting securities of the bank, or controls in any manner the election
of a majority of the directors of the bank, or (ii) if the Florida OFR determines that such person exercises a controlling influence over the management or policies of the bank. In any case where a proposed purchase of voting securities would
give rise to a presumption of control, the person or group who proposes to purchase the securities must first file written notice of the proposal to the Florida OFR for its review and approval. Subsections 658.27(2)I and 658.28(3), Florida Statutes,
refer to a potential change of control of a financial institution at a 10% or more threshold and rebuttable presumption of control. Accordingly, the name of any subscriber acquiring more than 10% of the voting securities of OptimumBank must be
submitted to the Florida OFR for prior approval.



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USA Patriot Act.The USA Patriot Act was enacted after
September 11, 2001 to provide the federal government with powers to prevent, detect, and prosecute terrorism and international money laundering, and has resulted in promulgation of several regulations that have a direct impact on banks. There
are a number of programs that financial institutions must have in place such as: (i) Bank Secrecy Act/Anti-Money Laundering programs to manage risk; (ii) Customer Identification Programs to determine the true identity of customers,
document and verify the information, and determine whether the customer appears on any federal government list of known or suspected terrorist or terrorist organizations; and (iii) monitoring for the timely detection and reporting of suspicious
activity and reportable transactions. Over the past few years, enforcement, and compliance monitoring, of these anti-money laundering laws has dramatically increased. As a result, we have increased the attention and resources we dedicate to
compliance with these laws.

Other Consumer Laws. Florida usury laws and federal laws concerning interest rates
limit the amount of interest and various other charges collected or contracted by a bank. OptimumBanks loans are also subject to federal laws applicable to consumer credit transactions, such as the:



| |  |  | Federal Truth-In-Lending Act governing disclosures of credit terms to consumer borrowers;
| | - |  | -----------------------------------------------------------------------------------------



| |  |  | Community Reinvestment Act requiring financial institutions to meet their obligations to provide for the total credit needs of the communities they
serve, including investing their assets in loans to low and moderate-income borrowers;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Home Mortgage Disclosure Act requiring financial institutions to provide information to enable public officials to determine whether a financial
institution is fulfilling its obligations to meet the housing needs of the community it serves;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Equal Credit Opportunity Act prohibiting discrimination on the basis of race, creed or other prohibitive factors in extending credit;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Real Estate Settlement Procedures Act which requires lenders to disclose certain information regarding the nature and cost of real estate settlements,
and prohibits certain lending practices, as well as limits escrow account amounts in real estate transactions;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Fair Debt Collection Act governing the manner in which consumer debts may be collected by collection agencies;
| | - |  | --------------------------------------------------------------------------------------------------------------



| |  |  | Fair and Accurate Credit Transactions Act which establishes additional rights for consumers to obtain and correct credit reports, addresses identity
theft, and establishes additional requirements for consumer reporting agencies and financial institutions that provide adverse credit information to a consumer reporting agency; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The rules and regulations of various federal agencies charged with the responsibility of implementing such federal laws.
| | - |  | ------------------------------------------------------------------------------------------------------------------------

OptimumBanks deposit and loan operations are also subject to the:



| |  |  | The Gramm-Leach-Bliley Act of 1999 privacy provisions, which require us to maintain privacy policies intended to safeguard consumer financial
information, to disclose these policies to our customers, and allow customers to opt-out of having their financial service providers disclose their confidential financial information to non-affiliated third parties, subject to certain
exceptions;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Right to Financial Privacy Act, which imposes a duty to maintain confidentiality of consumer financial records and prescribes procedures for complying
with administrative subpoenas of financial records; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Electronic Funds Transfer Act and Regulation E, which govern automatic deposits to, and withdrawals from, deposit accounts and customers rights
and liabilities arising from the use of automated teller machines and other electronic banking services.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Other Regulation

Enforcement Powers. Congress has provided the federal bank regulatory agencies with an array of powers to enforce laws, rules, regulations and orders. Among other things, the agencies may
require that institutions cease and desist from certain activities, may preclude persons from participating in the affairs of insured depository institutions, may suspend or remove deposit insurance, and may impose civil money penalties against
institution-affiliated parties for certain violations.



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##### Table of Contents

Community Redevelopment Act.Bank holding companies and their subsidiary banks
are subject to the provisions of the Community Reinvestment Act of 1977 (CRA) and the regulations promulgated thereunder by the appropriate bank regulatory agency. Under the terms of the CRA, the appropriate federal bank regulatory
agency is required, in connection with its examination of a bank, to assess such banks record in meeting the credit needs of the community served by that bank, including low-and moderate-income neighborhoods. The regulatory agencys
assessment of the Banks record is made available to the public. Further, such assessment is required of any bank which has applied to charter a bank, obtain deposit insurance coverage for a newly chartered institution, establish a new branch
office that will accept deposits, relocate an office, or merge or consolidate with, or acquire the assets or assume the liabilities of, a federally regulated financial institution. In the case of a bank holding company applying for approval to
acquire a bank or other bank holding company, the Federal Reserve will assess the record of each subsidiary bank of the applicant bank holding company, and such records may be the basis for denying the application.

Effect of Governmental Monetary Policies.Our earnings are affected by domestic economic conditions and the monetary and
fiscal policies of the United States government and its agencies. The Federal Reserve monetary policies have had, and will likely continue to have, an important impact on the operating results of financial institutions through its power to implement
national monetary policy in order, among other things, to curb inflation or combat a recession. The monetary policies of the Federal Reserve have major effects upon the levels of loans, investments and deposits through its open market operations in
United States Government securities and through its regulation of the discount rate on borrowings of member banks and the reserve requirement against member bank deposits. It is not possible to predict the nature or impact of future changes in
monetary and fiscal policies.

Statistical Profile and Other Financial Data

Reference is hereby made to the statistical and financial data contained in the sections captioned Selected Financial Data and
Managements Discussion and Analysis of Financial Condition and Results of Operations, for statistical and financial data providing a review of our business activities.

Item 2. Properties

The following table sets
forth information with respect to our main office and branch offices as of December 31, 2010.



|                                                              |  |                     |      |  |                |  |        |    
|------------------------------------------------------------- |  | ------------------- | ---- |  | -------------- |  | ------ | ---
|Location                                                      |  | Year FacilityOpened |      |  | FacilityStatus | 
|                                                              |  |                    
|Executive Office                                              |  |                     |      |  |                |  |        |    
|                                                              |  |                    
|2477 East Commercial Boulevard
Fort Lauderdale, Florida 33308 |  |                     | 2004 |  |                |  | Owned  |    
|                                                              |  |                    
|Branch Offices                                                |  |                     |      |  |                |  |        |    
|                                                              |  |                    
|10197 Cleary Boulevard
Plantation, Florida 33324              |  |                     | 2000 |  |                |  | Owned  |    
|                                                              |  |                    
|3524 North Ocean Boulevard
Fort Lauderdale, Florida 33308     |  |                     | 2003 |  |                |  | Leased | (1)
|                                                              |  |                    
|2215 West Hillsboro Boulevard
Deerfield Beach, Florida 22442  |  |                     | 2004 |  |                |  | Leased | (2)



|(1) | On February 1, 2007, OptimumBank entered into a sale/leaseback transaction for this facility. No gain or loss was recognized on this transaction. The lease is for
a seven-year term. The monthly lease payment at December 31, 2010 was $4,444. The tenant is responsible for maintenance and real estate taxes.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Lease is for a ten-year term, with two five-year options to renew, for 2,500 square feet. The monthly lease payment at December 31, 2010 was $6,642.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------



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Item 3. Legal Proceedings

From time-to-time, we are involved in litigation arising in the ordinary course of our business. As of the date of the filing of this Form
10-K, we are of the opinion that the ultimate aggregate liability represented thereby, if any, will not have a material adverse effect on our consolidated financial condition or results of operations.

PART II

Item 5. Market for the Registrants Common Equity and Related Stockholder Matters

Our common stock currently trades on the NASDAQ Capital Market, under the symbol OPHC. The table below presents the high and low sales prices for the periods indicated. Sales prices have been
adjusted to reflect the 4-for-1 reverse stock split effective November 5, 2010.



|     |  |         |  |      |       |  |     |   |       | 
|---- |  | ------- |  | ---- | ----- |  | --- | - | ----- | 
|Year |  | Quarter |  | High |       |  | Low |  
|     |  |         | 
|2009 |  | First   |  | $    | 22.40 |  |     | $ | 12.72 | 
|     |  | Second  |  | $    | 23.96 |  |     | $ | 11.88 | 
|     |  | Third   |  | $    | 20.00 |  |     | $ | 10.80 | 
|     |  | Fourth  |  | $    | 12.60 |  |     | $ | 5.00  | 
|     |  |         | 
|2010 |  | First   |  | $    | 11.00 |  |     | $ | 3.36  | 
|     |  | Second  |  | $    | 7.28  |  |     | $ | 1.40  | 
|     |  | Third   |  | $    | 3.92  |  |     | $ | 1.32  | 
|     |  | Fourth  |  | $    | 6.49  |  |     | $ | 1.75  | 

We had approximately
471 holders registered or in street name as of December 31,

On January 10, 2011, the Nasdaq Stock Market notified
us that we failed to comply with the NASDAQ Listing Rule requiring the board of directors to have a majority of members who are independent because only three of the directors on our six-member board were independent. We have been provided until
(a) the earlier of the Companys next annual shareholders meeting or January 6, 2012; or (b) if the next annual shareholders meeting is held before July 5, 2011, no later than July 5, 2011 to comply with the
independent director requirement. If we are unable to comply with the independent director requirement by the deadline, our common stock will be delisted from the NASDAQ Capital Market.

At December 31, 2010, the Bank and Company could not pay cash dividends and the Company does not anticipate that it will pay
dividends on its common stock in the foreseeable future. Banking regulations place certain restrictions on dividends and loans or advances made by the Bank to the Company. The amount of cash dividends that may be paid by the Bank to the Company is
based on the Banks net earnings of the current year combined with the Banks retained earnings of the preceding two years, as defined by state banking regulations. However, for any dividend declaration, the Company must consider
additional factors such as the amount of current period net earnings, liquidity, asset quality, capital adequacy and economic conditions. It is likely that these factors would further limit the amount of dividends which the Company could declare.
Furthermore, the Banks ability to pay dividends is restricted under the Consent Order issued by the FDIC and Florida Office of Financial Regulation and banking laws. The Companys ability to pay dividends is also restricted under its
Written Agreement with the Federal Reserve.



16



---

##### Table of Contents

Item 6. Selected Financial Data

SELECTED FINANCIAL DATA

At December 31, or for the Year Then Ended

(Dollars in thousands,
except per share figures)



|                                                                                         |  |      |         |    |      |  |         |      |  |  |         |   |  |      |         |   |  |  |         |  
|---------------------------------------------------------------------------------------- |  | ---- | ------- | -- | ---- |  | ------- | ---- |  |  | ------- | - |  | ---- | ------- | - |  |  | ------- | -
|                                                                                         |  | 2010 |         |    | 2009 |  |         | 2008 |  |  | 2007    |   |  | 2006 |        
|At Year End:                                                                             |  |      |         |    |      |  |         |      |  |  |         |   |  |      |         |   |  |  |         |  
|                                                                                         |  |      |         |    |     
|Cash and cash equivalents                                                                |  | $    | 14,367  |    |      |  | 36,784  |      |  |  | 3,220   |   |  |      | 701     |   |  |  | 1,604   |  
|Securities held to maturity                                                              |  |      | 51,057  |    |      |  | 81,141  |      |  |  | 82,208  |   |  |      | 58,471  |   |  |  | 33,399  |  
|Security available for sale                                                              |  |      |        |    |      |  |        |      |  |  | 244     |   |  |      | 244     |   |  |  | 241     |  
|Loans, net                                                                               |  |      | 113,542 |    |      |  | 134,126 |      |  |  | 160,699 |   |  |      | 173,323 |   |  |  | 181,878 |  
|All other assets                                                                         |  |      | 11,339  |    |      |  | 17,906  |      |  |  | 9,369   |   |  |      | 8,808   |   |  |  | 8,581   |  
|                                                                                         |  |      |         |    |      |  |         |      |  |  |         |   |  |      |         |   |  |  |         |  
|                                                                                         |  |      |         |    |     
|Total assets                                                                             |  | $    | 190,305 |    |      |  | 269,957 |      |  |  | 255,740 |   |  |      | 241,547 |   |  |  | 225,703 |  
|                                                                                         |  |      |         |    |      |  |         |      |  |  |         |   |  |      |         |   |  |  |         |  
|                                                                                         |  |      |         |    |     
|Deposit accounts                                                                         |  |      | 148,238 |    |      |  | 151,682 |      |  |  | 114,925 |   |  |      | 125,034 |   |  |  | 129,502 |  
|Federal Home Loan Bank advances                                                          |  |      | 31,700  |    |      |  | 57,700  |      |  |  | 68,700  |   |  |      | 56,850  |   |  |  | 56,550  |  
|Other borrowings                                                                         |  |      |        |    |      |  | 41,800  |      |  |  | 41,800  |   |  |      | 28,900  |   |  |  | 10,950  |  
|Junior subordinated debenture                                                            |  |      | 5,155   |    |      |  | 5,155   |      |  |  | 5,155   |   |  |      | 5,155   |   |  |  | 5,155   |  
|All other liabilities                                                                    |  |      | 2,377   |    |      |  | 2,332   |      |  |  | 2,395   |   |  |      | 3,361   |   |  |  | 3,123   |  
|Stockholders equity                                                                     |  |      | 2,835   |    |      |  | 11,288  |      |  |  | 22,765  |   |  |      | 22,247  |   |  |  | 20,423  |  
|                                                                                         |  |      |         |    |      |  |         |      |  |  |         |   |  |      |         |   |  |  |         |  
|                                                                                         |  |      |         |    |     
|Total liabilities and stockholders equity                                               |  | $    | 190,305 |    |      |  | 269,957 |      |  |  | 255,740 |   |  |      | 241,547 |   |  |  | 225,703 |  
|                                                                                         |  |      |         |    |      |  |         |      |  |  |         |   |  |      |         |   |  |  |         |  
|                                                                                         |  |      |         |    |     
|For the Year:                                                                            |  |      |         |    |      |  |         |      |  |  |         |   |  |      |         |   |  |  |         |  
|                                                                                         |  |      |         |    |     
|Total interest income                                                                    |  |      | 8,787   |    |      |  | 14,006  |      |  |  | 15,570  |   |  |      | 16,137  |   |  |  | 14,191  |  
|Total interest expense                                                                   |  |      | 4,867   |    |      |  | 8,351   |      |  |  | 9,211   |   |  |      | 9,700   |   |  |  | 8,063   |  
|                                                                                         |  |      |         |    |      |  |         |      |  |  |         |   |  |      |         |   |  |  |         |  
|                                                                                         |  |      |         |    |     
|Net interest income                                                                      |  |      | 3,920   |    |      |  | 5,655   |      |  |  | 6,359   |   |  |      | 6,437   |   |  |  | 6,128   |  
|Provision for loan losses                                                                |  |      | 3,645   |    |      |  | 15,794  |      |  |  | 1,374   |   |  |      | 476     |   |  |  | 265     |  
|                                                                                         |  |      |         |    |      |  |         |      |  |  |         |   |  |      |         |   |  |  |         |  
|                                                                                         |  |      |         |    |     
|Net interest income (expense) after provision for loan losses                            |  |      | 275     |    |      |  | (10,139 | )    |  |  | 4,985   |   |  |      | 5,961   |   |  |  | 5,863   |  
|                                                                                         |  |      |         |    |     
|Noninterest income (expense)                                                             |  |      | 1,394   |    |      |  | (145    | )    |  |  | 393     |   |  |      | 533     |   |  |  | 628     |  
|Noninterest expenses                                                                     |  |      | 9,773   |    |      |  | 4,698   |      |  |  | 4,545   |   |  |      | 3,749   |   |  |  | 3,574   |  
|                                                                                         |  |      |         |    |      |  |         |      |  |  |         |   |  |      |         |   |  |  |         |  
|                                                                                         |  |      |         |    |     
|(Loss) earnings before income taxes (benefit)                                            |  |      | (8,104  | )  |      |  | (14,982 | )    |  |  | 833     |   |  |      | 2,745   |   |  |  | 2,917   |  
|Income taxes expense (benefit)                                                           |  |      | 349     |    |      |  | (3,501  | )    |  |  | 313     |   |  |      | 1,003   |   |  |  | 1,083   |  
|                                                                                         |  |      |         |    |      |  |         |      |  |  |         |   |  |      |         |   |  |  |         |  
|                                                                                         |  |      |         |    |     
|Net (loss) earnings                                                                      |  | $    | (8,453  | )  |      |  | (11,481 | )    |  |  | 520     |   |  |      | 1,742   |   |  |  | 1,834   |  
|                                                                                         |  |      |         |    |      |  |         |      |  |  |         |   |  |      |         |   |  |  |         |  
|                                                                                         |  |      |         |    |     
|Net (loss) earnings per share, basic (1)                                                 |  | $    | (10.32  | )  |      |  | (14.01  | )    |  |  | .63     |   |  |      | 2.13    |   |  |  | 2.25    |  
|                                                                                         |  |      |         |    |      |  |         |      |  |  |         |   |  |      |         |   |  |  |         |  
|                                                                                         |  |      |         |    |     
|Net (loss) earnings per share, diluted (1)                                               |  | $    | (10.32  | )  |      |  | (14.01  | )    |  |  | .63     |   |  |      | 2.08    |   |  |  | 2.16    |  
|                                                                                         |  |      |         |    |      |  |         |      |  |  |         |   |  |      |         |   |  |  |         |  
|                                                                                         |  |      |         |    |     
|Weighted-average number of shares outstanding, basic (1)                                 |  |      | 819,358 |    |      |  | 819,358 |      |  |  | 819,261 |   |  |      | 816,960 |   |  |  | 814,106 |  
|                                                                                         |  |      |         |    |      |  |         |      |  |  |         |   |  |      |         |   |  |  |         |  
|                                                                                         |  |      |         |    |     
|Weighted-average number of shares outstanding, diluted (1)                               |  |      | 819,358 |    |      |  | 819,358 |      |  |  | 830,608 |   |  |      | 835,995 |   |  |  | 848,825 |  
|                                                                                         |  |      |         |    |      |  |         |      |  |  |         |   |  |      |         |   |  |  |         |  
|                                                                                         |  |      |         |    |     
|Ratios and Other Data:                                                                   |  |      |         |    |      |  |         |      |  |  |         |   |  |      |         |   |  |  |         |  
|                                                                                         |  |      |         |    |     
|Return on average assets                                                                 |  |      | (3.84   | )% |      |  | (4.23   | )%   |  |  | .21     | % |  |      | .73     | % |  |  | .85     | %
|Return on average equity                                                                 |  |      | (127.59 | )% |      |  | (55.55  | )%   |  |  | 2.26    | % |  |      | 8.16    | % |  |  | 9.37    | %
|Average equity to average assets                                                         |  |      | 3.01    | %  |      |  | 7.62    | %    |  |  | 9.15    | % |  |      | 8.96    | % |  |  | 9.12    | %
|Net interest margin during the year                                                      |  |      | 1.88    | %  |      |  | 2.14    | %    |  |  | 2.61    | % |  |      | 2.78    | % |  |  | 2.96    | %
|Interest-rate differential during the year                                               |  |      | 1.87    | %  |      |  | 1.91    | %    |  |  | 2.26    | % |  |      | 2.34    | % |  |  | 2.63    | %
|Net yield on average interest-earning assets                                             |  |      | 4.21    | %  |      |  | 5.30    | %    |  |  | 6.38    | % |  |      | 6.96    | % |  |  | 6.85    | %
|Noninterest expenses to average assets                                                   |  |      | 4.44    | %  |      |  | 1.73    | %    |  |  | 1.81    | % |  |      | 1.57    | % |  |  | 1.67    | %
|Ratio of average interest-earning assets to average interest-bearing liabilities         |  |      | 1.00    |    |      |  | 1.07    |      |  |  | 1.09    |   |  |      | 1.10    |   |  |  | 1.08    |  
|Nonperforming loans and foreclosed assets as a percentage of total assets at end of year |  |      | 19.82   | %  |      |  | 10.87   | %    |  |  | 2.03    | % |  |      | 0.13    | % |  |  |        |  
|Allowance for loan losses as a percentage of total loans at end of year                  |  |      | 3.16    | %  |      |  | 6.54    | %    |  |  | 1.18    | % |  |      | .40     | % |  |  | .54     | %
|Total number of banking offices                                                          |  |      | 3       |    |      |  | 3       |      |  |  | 3       |   |  |      | 3       |   |  |  | 3       |  
|Total shares outstanding at end of year (1)                                              |  |      | 819,358 |    |      |  | 819,358 |      |  |  | 780,248 |   |  |      | 780,283 |   |  |  | 777,340 |  
|Book value per share at end of year (1)                                                  |  | $    | 3.46    |    |      |  | 13.78   |      |  |  | 29.17   |   |  |      | 28.52   |   |  |  | 26.27   |  



|(1) | All share and per share amounts have been adjusted to reflect the 1-for-4 reverse stock split declared in October 2010 and 5% stock dividends declared in May 2009, 2008
and 2007.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



17



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##### Table of Contents

Item 7. Managements Discussion and Analysis of Financial Condition
and Results of Operations.

General

OptimumBank Holdings, Inc. was formed in 2004 as a Florida corporation to serve as a one-bank holding company for OptimumBank and acquired all of the shares of OptimumBank in May 2004. Our only business
is the ownership and operation of OptimumBank and its subsidiaries. OptimumBank is a Florida chartered bank which opened in November 2000, and its deposits are insured by the FDIC. The Bank provides community banking services to individuals and
businesses in Broward, Miami-Dade and Palm Beach counties. OptimumBank conducts operations from its Fort Lauderdale headquarters and three branch offices in Fort Lauderdale, Plantation and Deerfield Beach. The Banks wholly-owned subsidiaries
are OB Real Estate Management, LLC, OB Real Estate Holdings, LLC and OB Real Estate Holding 1503, LLC, all of which were formed in 2009, and OB Real Estate Holdings 1695, OB Real Estate Holdings 1669, OB Real Estate Holdings 1645, and OB Real Estate
Holdings 1565, all formed in 2010. OB Real Estate Management, LLC is primarily engaged in managing foreclosed real estate, but had no activity in 2010. All other bank subsidiaries are primarily engaged in holding and disposing of foreclosed real
estate.

At December 31, 2010, our company had total assets of $190.3 million, net loans of $113.5 million, total
deposits of $148.2 million and stockholders equity of $2.8 million. During 2010, our company had a net loss of $8.5 million.

Critical Accounting Policies

Our financial condition and results of operations are sensitive to accounting measurements and estimates of matters that are inherently uncertain. When applying accounting policies in areas that are
subjective in nature, we must use our best judgment to arrive at the carrying value of certain assets. One of the most critical accounting policies applied by us is related to the valuation of our loan portfolio.

A variety of estimates impact the carrying value of our loan portfolio including the calculation of the allowance for loan losses,
valuation of underlying collateral, the timing of loan charge-offs and the amount and amortization of loan fees and deferred origination costs.

The calculation of the allowance for loan losses is a complex process containing estimates which are inherently subjective and susceptible to significant revision as current information becomes available.
The allowance is established and maintained at a level we believe is adequate to cover losses resulting from the inability of borrowers to make required payments on loans. Estimates for loan losses are determined by analyzing risks associated with
specific loans and the loan portfolio, current trends in delinquencies and charge-offs, the views of our regulators, changes in the size and composition of the loan portfolio and peer comparisons. The analysis also requires consideration of the
economic climate and direction, changes in the economic and interest rate environment which may impact a borrowers ability to pay, legislation impacting the banking industry and economic conditions specific to the tri-county region we serve in
Southeast Florida. Because the calculation of the allowance for loan losses relies on our estimates and judgments relating to inherently uncertain events, results may differ from managements estimates.

The allowance for loan losses is also discussed as part of Loan Portfolio, Asset Quality and Allowance for Loan Losses and in
Note 3 of Notes to the Consolidated Financial Statements. Our significant accounting policies are discussed in Note 1 of Notes to the Consolidated Financial Statements.

Regulation and Legislation

As a state-chartered commercial bank, the Bank
is subject to extensive regulation by the Florida Office of Financial Regulation, or Florida OFR, and the FDIC. We file reports with the Florida OFR and the FDIC concerning our activities and financial condition, in addition to obtaining regulatory
approvals prior to entering into certain transactions such as mergers with or acquisitions of other financial institutions. Periodic examinations are performed by the Florida OFR and the FDIC to monitor our compliance with the various regulatory
requirements. The Company is also subject to regulation and examination by the Federal Reserve Board of Governors.



18



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##### Table of Contents

Loan Portfolio, Asset Quality and Allowance for Loan Losses

Our primary business is making real estate loans. This activity may subject us to potential loan losses, the magnitude of which depends on
a variety of economic factors affecting borrowers which are beyond our control. For the past several years, there has been a dramatic decrease in housing and real estate values in south Florida, coupled with a significant increase in the rate of
unemployment. With most of our loans concentrated in south Florida, the decline in local economic conditions has adversely affected the values of our real estate collateral. These trends have contributed to an increase in our impaired loans and
reduced asset quality. As of December 31, 2010, our impaired loans were approximately $44.6 million, or 39.3% of the net loan portfolio. Impaired loans and real estate owned were approximately $47.9 million as of this same date, or 25.1%
of total assets. If market conditions continue to deteriorate, they may lead to additional valuation adjustments on our loan portfolio and real estate owned as we continue to reassess the market value of our loan portfolio, the losses associated
with impaired loans, and the net realizable value of real estate owned.

The following table sets forth the composition of our
loan portfolio:



|                                      |  |                        |         |   |           |  |        |        |  |   |           |   |  |        |        |   |           |   |         |   |  |  |        |  
|------------------------------------- |  | ---------------------- | ------- | - | --------- |  | ------ | ------ |  | - | --------- | - |  | ------ | ------ | - | --------- | - | ------- | - |  |  | ------ | -
|                                      |  | At December 31,        |        
|                                      |  | 2010                   |         |   | 2009      |  |        | 2008   | 
|                                      |  | Amount                 |         |   | % ofTotal |  |        | Amount |  |   | % ofTotal |   |  | Amount |        |   | % ofTotal |  
|                                      |  | (dollars in thousands) |        
|                                      |  |                        |         |   |           | 
|Residential real estate               |  | $                      | 40,130  |   |           |  | 34.27  | %      |  | $ | 55,915    |   |  |        | 39.06  | % |           | $ | 58,693  |   |  |  | 36.25  | %
|Multi-family real estate              |  |                        | 4,213   |   |           |  | 3.60   |        |  |   | 5,162     |   |  |        | 3.61   |   |           |   | 9,588   |   |  |  | 5.92   |  
|Commercial real estate                |  |                        | 55,119  |   |           |  | 47.07  |        |  |   | 58,901    |   |  |        | 41.14  |   |           |   | 73,541  |   |  |  | 45.42  |  
|Land and construction                 |  |                        | 17,292  |   |           |  | 14.77  |        |  |   | 22,355    |   |  |        | 15.61  |   |           |   | 19,223  |   |  |  | 11.87  |  
|Consumer                              |  |                        | 358     |   |           |  | .29    |        |  |   | 836       |   |  |        | .58    |   |           |   | 878     |   |  |  | .54    |  
|                                      |  |                        |         |   |           |  |        |        |  |   |           |   |  |        |        |   |           |   |         |   |  |  |        |  
|                                      |  |                        |         |   |           | 
|Total loans                           |  |                        | 117,112 |   |           |  | 100.00 | %      |  |   | 143,169   |   |  |        | 100.00 | % |           |   | 161,923 |   |  |  | 100.00 | %
|                                      |  |                        |         |   |           |  |        |        |  |   |           |   |  |        |        |   |           |   |         |   |  |  |        |  
|                                      |  |                        |         |   |           | 
|Add (deduct):                         |  |                        |         |   |           |  |        |        |  |   |           |   |  |        |        |   |           |   |         |   |  |  |        |  
|Allowance for loan losses             |  |                        | (3,703  | ) |           |  |        |        |  |   | (9,363    | ) |  |        |        |   |           |   | (1,906  | ) |  |  |        |  
|Net deferred loan costs and discounts |  |                        | 133     |   |           |  |        |        |  |   | 320       |   |  |        |        |   |           |   | 682     |   |  |  |        |  
|                                      |  |                        |         |   |           |  |        |        |  |   |           |   |  |        |        |   |           |   |         |   |  |  |        |  
|                                      |  |                        |         |   |           | 
|Loans, net                            |  | $                      | 113,542 |   |           |  |        |        |  | $ | 134,126   |   |  |        |        |   |           | $ | 160,699 |   |  |  |        |  
|                                      |  |                        |         |   |           |  |        |        |  |   |           |   |  |        |        |   |           |   |         |   |  |  |        |  



|                                      |  |                        |         |   |           |  |        |        |  |   |           |   |  |  |        |  
|------------------------------------- |  | ---------------------- | ------- | - | --------- |  | ------ | ------ |  | - | --------- | - |  |  | ------ | -
|                                      | 
|                                      |  | At December 31,        |        
|                                      |  | 2007                   |         |   | 2006      | 
|                                      |  | Amount                 |         |   | % ofTotal |  |        | Amount |  |   | % ofTotal |  
|                                      |  | (dollars in thousands) |        
|                                      |  |                        |         |  
|Residential real estate               |  | $                      | 65,908  |   |           |  | 38.08  | %      |  | $ | 70,868    |   |  |  | 38.99  | %
|Multi-family real estate              |  |                        | 10,275  |   |           |  | 5.94   |        |  |   | 10,769    |   |  |  | 5.93   |  
|Commercial real estate                |  |                        | 75,777  |   |           |  | 43.78  |        |  |   | 68,852    |   |  |  | 37.89  |  
|Land and construction                 |  |                        | 21,093  |   |           |  | 12.19  |        |  |   | 31,022    |   |  |  | 17.07  |  
|Consumer                              |  |                        | 15      |   |           |  | .01    |        |  |   | 227       |   |  |  | .12    |  
|                                      |  |                        |         |   |           |  |        |        |  |   |           |   |  |  |        |  
|                                      |  |                        |         |  
|Total loans                           |  |                        | 173,068 |   |           |  | 100.00 | %      |  |   | 181,738   |   |  |  | 100.00 | %
|                                      |  |                        |         |   |           |  |        |        |  |   |           |   |  |  |        |  
|                                      |  |                        |         |  
|Add (deduct):                         |  |                        |         |   |           |  |        |        |  |   |           |   |  |  |        |  
|Allowance for loan losses             |  |                        | (692    | ) |           |  |        |        |  |   | (974      | ) |  |  |        |  
|Net deferred loan costs and discounts |  |                        | 947     |   |           |  |        |        |  |   | 1,114     |   |  |  |        |  
|                                      |  |                        |         |   |           |  |        |        |  |   |           |   |  |  |        |  
|                                      |  |                        |         |  
|Loans, net                            |  | $                      | 173,323 |   |           |  |        |        |  | $ | 181,878   |   |  |  |        |  
|                                      |  |                        |         |   |           |  |        |        |  |   |           |   |  |  |        |  



19



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##### Table of Contents

The following table sets forth the activity in the allowance for loan losses (in thousands):



|                          |  |                         |        |   |      |   |        |      |  |   |       |   |  |      |      |   |  |   |     |  
|------------------------- |  | ----------------------- | ------ | - | ---- | - | ------ | ---- |  | - | ----- | - |  | ---- | ---- | - |  | - | --- | -
|                          |  | Year Ended December 31, |       
|                          |  | 2010                    |        |   | 2009 |   |        | 2008 |  |   | 2007  |   |  | 2006 |     
|                          |  |                         |        |   |     
|Beginning balance         |  | $                       | 9,363  |   |      | $ | 1,906  |      |  | $ | 692   |   |  | $    | 974  |   |  | $ | 777 |  
|Provision for loan losses |  |                         | 3,645  |   |      |   | 15,794 |      |  |   | 1,374 |   |  |      | 476  |   |  |   | 265 |  
|Loans charged off         |  |                         | (9,424 | ) |      |   | (8,337 | )    |  |   | (160  | ) |  |      | (758 | ) |  |   | (68 | )
|Recoveries                |  |                         | 119    |   |      |   |       |      |  |   |      |   |  |      |     |   |  |   |    |  
|                          |  |                         |        |   |      |   |        |      |  |   |       |   |  |      |      |   |  |   |     |  
|                          |  |                         |        |   |     
|Ending balance            |  | $                       | 3,703  |   |      | $ | 9,363  |      |  | $ | 1,906 |   |  | $    | 692  |   |  | $ | 974 |  
|                          |  |                         |        |   |      |   |        |      |  |   |       |   |  |      |      |   |  |   |     |  

The allowance for loan losses represents our estimate of probable incurred losses inherent in the
existing loan portfolio. The allowance for loan losses is increased by the provision for loan losses charged to expense and reduced by loans charged off, net of recoveries. The allowance for loan losses represented 3.16% and 6.54% of the total loans
outstanding at December 31, 2010 and 2009, respectively.

We evaluate the allowance for loan losses on a regular basis.
The allowance for loan losses is determined based on our periodic review of several factors: reviews and evaluation of individual loans, historical loan loss experiences, the nature and volume of the loan portfolio, adverse situations that may
affect the borrowers ability to repay, estimated value of any underlying collateral and current economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more
information becomes available.

The allowance consists of two components. The first component consists of amounts specifically
reserved (specific allowance) for specific loans identified as impaired, as defined by FASB Accounting Standards Codification No. 310 (ASC 310). Impaired loans are those loans that management has estimated will not repay
as agreed upon. We measure impairment on a loan by loan basis for all our loans by either the present value of expected future cash flows discounted at the loans effective interest rate, the loans obtainable market price, or the fair
value of the collateral if the loan is collateral dependent. A loan may be impaired (i.e. not expected to repay as agreed), but may be sufficiently collateralized such that we expect to recover all principal and interest eventually, and therefore no
specific reserve is warranted.



20



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##### Table of Contents

The second component is a general reserve (general allowance) on all of our
loans other than those identified as impaired. We group these loans into categories with similar characteristics and then apply a loss factor to each group which is derived from our historical loss experience for that category adjusted for
qualitative factors such as economic conditions and other trends or uncertainties that could affect managements estimate of probable loss. The aggregate of these two components results in our total allowance for loan losses.

The following table sets forth our allowance for loan losses by loan type (dollars in thousands):



|                                                                     |  |                 |       |   |                |  |        |        |  |   |                |   |  |        |        |   |                |   |       |   |  |  |        |  
|-------------------------------------------------------------------- |  | --------------- | ----- | - | -------------- |  | ------ | ------ |  | - | -------------- | - |  | ------ | ------ | - | -------------- | - | ----- | - |  |  | ------ | -
|                                                                     |  | At December 31, |      
|                                                                     |  | 2010            |       |   | 2009           |  |        | 2008   | 
|                                                                     |  | Amount          |       |   | % ofTotalLoans |  |        | Amount |  |   | % ofTotalLoans |   |  | Amount |        |   | % ofTotalLoans |  
|                                                                     |  |                 |       |   |                | 
|Residential real estate                                              |  | $               | 1,285 |   |                |  | 34.27  | %      |  | $ | 2,049          |   |  |        | 39.06  | % |                | $ | 928   |   |  |  | 36.25  | %
|Multi-family real estate                                             |  |                 | 282   |   |                |  | 3.60   |        |  |   | 489            |   |  |        | 3.61   |   |                |   | 62    |   |  |  | 5.92   |  
|Commercial real estate                                               |  |                 | 1,542 |   |                |  | 47.07  |        |  |   | 1,466          |   |  |        | 41.14  |   |                |   | 463   |   |  |  | 45.42  |  
|Land and construction                                                |  |                 | 514   |   |                |  | 14.77  |        |  |   | 5,227          |   |  |        | 15.61  |   |                |   | 444   |   |  |  | 11.87  |  
|Consumer                                                             |  |                 | 80    |   |                |  | .29    |        |  |   | 132            |   |  |        | .58    |   |                |   | 9     |   |  |  | .54    |  
|                                                                     |  |                 |       |   |                |  |        |        |  |   |                |   |  |        |        |   |                |   |       |   |  |  |        |  
|                                                                     |  |                 |       |   |                | 
|Total allowance for loan losses                                      |  | $               | 3,703 |   |                |  | 100.00 | %      |  | $ | 9,363          |   |  |        | 100.00 | % |                | $ | 1,906 |   |  |  | 100.00 | %
|                                                                     |  |                 |       |   |                |  |        |        |  |   |                |   |  |        |        |   |                |   |       |   |  |  |        |  
|                                                                     |  |                 |       |   |                | 
|Allowance for loan losses as a percentage of total loans outstanding |  |                 | 3.16  | % |                |  |        |        |  |   | 6.54           | % |  |        |        |   |                |   | 1.18  | % |  |  |        |  
|                                                                     |  |                 |       |   |                |  |        |        |  |   |                |   |  |        |        |   |                |   |       |   |  |  |        |  



|                                                                     |  |                 |      |   |                |  |        |        |  |   |                |   |  |  |        |  
|-------------------------------------------------------------------- |  | --------------- | ---- | - | -------------- |  | ------ | ------ |  | - | -------------- | - |  |  | ------ | -
|                                                                     |  | At December 31, |     
|                                                                     |  | 2007            |      |   | 2006           | 
|                                                                     |  | Amount          |      |   | % ofTotalLoans |  |        | Amount |  |   | % ofTotalLoans |  
|                                                                     |  |                 |      |  
|Residential real estate                                              |  | $               | 187  |   |                |  | 38.08  | %      |  | $ | 400            |   |  |  | 38.99  | %
|Multi-family real estate                                             |  |                 | 59   |   |                |  | 5.94   |        |  |   | 54             |   |  |  | 5.93   |  
|Commercial real estate                                               |  |                 | 379  |   |                |  | 43.78  |        |  |   | 406            |   |  |  | 37.89  |  
|Land and construction                                                |  |                 | 67   |   |                |  | 12.19  |        |  |   | 114            |   |  |  | 17.07  |  
|Consumer                                                             |  |                 |     |   |                |  | .01    |        |  |   |               |   |  |  | .12    |  
|                                                                     |  |                 |      |   |                |  |        |        |  |   |                |   |  |  |        |  
|                                                                     |  |                 |      |  
|Total allowance for loan losses                                      |  | $               | 692  |   |                |  | 100.00 | %      |  | $ | 974            |   |  |  | 100.00 | %
|                                                                     |  |                 |      |   |                |  |        |        |  |   |                |   |  |  |        |  
|                                                                     |  |                 |      |  
|Allowance for loan losses as a percentage of total loans outstanding |  |                 | 0.40 | % |                |  |        |        |  |   | 0.54           | % |  |  |        |  
|                                                                     |  |                 |      |   |                |  |        |        |  |   |                |   |  |  |        |  



21



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The following summarizes impaired loans (in thousands):



|                                                         |  |                 |        |   |      |   |        |  
|-------------------------------------------------------- |  | --------------- | ------ | - | ---- | - | ------ | -
|                                                         |  | At December 31, |       
|                                                         |  | 2010            |        |   | 2009 |  
|Collateral-dependent loans identified as impaired:       |  |                 |        |   |      |   |        |  
|Gross loans with no related allowance for losses         |  | $               | 35,531 |   |      | $ | 21,846 |  
|                                                         |  |                 |        |   |      |   |        |  
|                                                         |  |                
|Gross loans with related allowance for losses recorded   |  |                 | 669    |   |      |   | 18,032 |  
|Less allowances on these loans                           |  |                 | (75    | ) |      |   | (5,542 | )
|                                                         |  |                 |        |   |      |   |        |  
|                                                         |  |                
|Net loans with related allowance                         |  |                 | 594    |   |      |   | 12,490 |  
|                                                         |  |                 |        |   |      |   |        |  
|                                                         |  |                
|Net investment in collateral-dependent impaired loans    |  |                 | 36,125 |   |      |   | 34,336 |  
|                                                         |  |                 |        |   |      |   |        |  
|                                                         |  |                
|Noncollateral-dependent loans identified as impaired:    |  |                 |        |   |      |   |        |  
|Gross loans with no related allowance for losses         |  |                 | 7,347  |   |      |   |       |  
|                                                         |  |                 |        |   |      |   |        |  
|                                                         |  |                
|Gross loans with related allowance for losses recorded   |  |                 | 1,174  |   |      |   | 3,623  |  
|Less allowance on these loans                            |  |                 | (11    | ) |      |   | (65    | )
|                                                         |  |                 |        |   |      |   |        |  
|                                                         |  |                
|Net loans with related allowance                         |  |                 | 1,163  |   |      |   | 3,558  |  
|                                                         |  |                 |        |   |      |   |        |  
|                                                         |  |                
|Net investment in noncollateral-dependent impaired loans |  |                 | 8,510  |   |      |   | 3,558  |  
|                                                         |  |                 |        |   |      |   |        |  
|                                                         |  |                
|Net investment in impaired loans                         |  | $               | 44,635 |   |      | $ | 37,894 |  
|                                                         |  |                 |        |   |      |   |        |  

During 2010, 2009 and 2008, the average net investment in impaired loans and interest income recognized and
received on impaired loans is as follows (in thousands):



|                                                           |  |                         |        |  |      |   |        |      |  |   |       | 
|---------------------------------------------------------- |  | ----------------------- | ------ |  | ---- | - | ------ | ---- |  | - | ----- | 
|                                                           |  | Year Ended December 31, |       
|                                                           |  | 2010                    |        |  | 2009 |   |        | 2008 | 
|                                                           |  |                         |       
|Average investment in impaired loans                       |  | $                       | 33,987 |  |      | $ | 25,017 |      |  | $ | 3,240 | 
|                                                           |  |                         |        |  |      |   |        |      |  |   |       | 
|                                                           |  |                         |       
|Interest income recognized on impaired loans               |  | $                       | 313    |  |      | $ | 280    |      |  | $ |      | 
|                                                           |  |                         |        |  |      |   |        |      |  |   |       | 
|                                                           |  |                         |       
|Interest income received on a cash basis on impaired loans |  | $                       | 658    |  |      | $ | 584    |      |  | $ |      | 
|                                                           |  |                         |        |  |      |   |        |      |  |   |       | 

At December 31, 2006, the Company had no nonaccrual loans or loans over 90 days past due still accruing
interest. Nonaccrual and past due loans were as follows as of December 31, 2010, 2009, 2008 and 2007 (in thousands):



|                                                      |  |                 |        |  |      |   |        |      |  |   |       |  |  |   |     | 
|----------------------------------------------------- |  | --------------- | ------ |  | ---- | - | ------ | ---- |  | - | ----- |  |  | - | --- | 
|                                                      |  | At December 31, |       
|                                                      |  | 2010            |        |  | 2009 |   |        | 2008 |  |   | 2007  | 
|                                                      |  |                 |        | 
|Nonaccrual loans                                      |  | $               | 34,530 |  |      | $ | 23,848 |      |  | $ | 5,086 |  |  | $ | 245 | 
|                                                      |  |                 |        |  |      |   |        |      |  |   |       |  |  |   |     | 
|                                                      |  |                 |        | 
|Past ninety days or more, but still accruing interest |  | $               |       |  |      | $ |       |      |  | $ |      |  |  | $ |    | 
|                                                      |  |                 |        |  |      |   |        |      |  |   |       |  |  |   |     | 

Liquidity and Capital Resources

Liquidity represents an institutions ability to meet current and future obligations through liquidation or maturity of existing assets or the acquisition of additional liabilities. Our ability to
respond to the needs of depositors and borrowers and to benefit from investment opportunities is facilitated through liquidity management.



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Our primary sources of cash during the year ended December 31, 2010 were from principal
repayments of securities held to maturity of $11.4 million, proceeds from the sale of securities held to maturity of $44.9 million and net repayments of loans of $16.7 million. Cash was used primarily to purchase securities held to maturity totaling
$24.3 million and repayment of Federal Home Loan Bank advances and repurchase agreements of $71.5 million. In order to increase our core deposits, we have priced our deposit rates competitively. We will adjust rates on our deposits to attract or
retain deposits as needed. In addition to obtaining funds from depositors in our market area, from time to time we have utilized brokers to obtain deposits outside our market area.

In addition to obtaining funds from depositors, we may borrow funds from other financial institutions. We are a member of the Federal
Home Loan Bank of Atlanta, which allows us to borrow funds under a pre-arranged line of credit equal to $31.7 million. As of December 31, 2010, we had $31.7 million in borrowings outstanding from the Federal Home Loan Bank of Atlanta to
facilitate loan fundings and manage our asset and liability structure.

Securities

Our securities portfolio is comprised primarily of mortgage-backed securities. The securities portfolio is categorized as either
held to maturity or available for sale. Securities held to maturity represent those securities which we have the positive intent and ability to hold to maturity. These securities are carried at amortized cost. Securities
available for sale represent those investments which may be sold for various reasons including changes in interest rates and liquidity considerations. These securities are reported at fair market value and unrealized gains and losses are excluded
from earnings and reported in other comprehensive income.

The following table sets forth the amortized cost and fair value of
our securities portfolio (in thousands):



|                             |  |               |        |  |           |   |        | 
|---------------------------- |  | ------------- | ------ |  | --------- | - | ------ | 
|                             |  | AmortizedCost |        |  | FairValue |  
|                             |  |              
|At December 31, 2010:        |  |               |        |  |           |   |        | 
|Securities held to maturity: |  |               |        |  |           |   |        | 
|Mortgage-backed securities   |  | $             | 50,957 |  |           | $ | 48,739 | 
|Foreign bond                 |  |               | 100    |  |           |   | 100    | 
|                             |  |               |        |  |           |   |        | 
|                             |  |              
|                             |  | $             | 51,057 |  |           | $ | 48,839 | 
|                             |  |               |        |  |           |   |        | 
|                             |  |              
|At December 31, 2009:        |  |               |        |  |           |   |        | 
|Securities held to maturity: |  |               |        |  |           |   |        | 
|Mortgage-backed securities   |  | $             | 81,041 |  |           | $ | 76,884 | 
|Foreign bond                 |  |               | 100    |  |           |   | 100    | 
|                             |  |               |        |  |           |   |        | 
|                             |  |              
|                             |  | $             | 81,141 |  |           | $ | 76,984 | 
|                             |  |               |        |  |           |   |        | 
|                             |  |              
|At December 31, 2008:        |  |               |        |  |           |   |        | 
|Securities held to maturity: |  |               |        |  |           |   |        | 
|Mortgage-backed securities   |  | $             | 82,108 |  |           | $ | 78,656 | 
|Foreign bond                 |  |               | 100    |  |           |   | 100    | 
|                             |  |               |        |  |           |   |        | 
|                             |  |              
|                             |  | $             | 82,208 |  |           | $ | 78,756 | 
|                             |  |               |        |  |           |   |        | 
|                             |  |              
|Security available for sale- |  |               |        |  |           |   |        | 
|Mutual fund                  |  | $             | 250    |  |           | $ | 244    | 
|                             |  |               |        |  |           |   |        | 



23



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##### Table of Contents

The following table sets forth, by maturity distribution, certain information pertaining to
the securities portfolio (dollars in thousands):



|                           |  |                |       |  |                               |   |       |                                 |  |   |                |  |  |       |        |  |       |   |        |  |  |  |      |  
|-------------------------- |  | -------------- | ----- |  | ----------------------------- | - | ----- | ------------------------------- |  | - | -------------- |  |  | ----- | ------ |  | ----- | - | ------ |  |  |  | ---- | -
|                           |  | WithinOne Year |       |  | After OneBut 
WithinFiveYears |   |       | After FiveYearsThroughTen Years |  |   | After TenYears |  |  | Total |        |  | Yield |  
|At December 31, 2010:      |  |                |       |  |                               |   |       |                                 |  |   |                |  |  |       |        |  |       |   |        |  |  |  |      |  
|Mortgage-backed securities |  | $              | 4,001 |  |                               | $ | 5,988 |                                 |  | $ | 1,887          |  |  | $     | 39,081 |  |       | $ | 50,957 |  |  |  | 4.25 | %
|                           |  |                |       |  |                               |   |       |                                 |  |   |                |  |  |       |        |  |       |   |        |  |  |  |      |  
|                           |  |                |       |  |                               |  
|Foreign bond               |  | $              |      |  |                               | $ |      |                                 |  | $ | 100            |  |  | $     |       |  |       | $ | 100    |  |  |  | 5.95 | %
|                           |  |                |       |  |                               |   |       |                                 |  |   |                |  |  |       |        |  |       |   |        |  |  |  |      |  
|                           |  |                |       |  |                               |  
|At December 31, 2009:      |  |                |       |  |                               |   |       |                                 |  |   |                |  |  |       |        |  |       |   |        |  |  |  |      |  
|Mortgage-backed securities |  | $              |      |  |                               | $ |      |                                 |  | $ | 11,576         |  |  | $     | 69,465 |  |       | $ | 81,041 |  |  |  | 5.39 | %
|                           |  |                |       |  |                               |   |       |                                 |  |   |                |  |  |       |        |  |       |   |        |  |  |  |      |  
|                           |  |                |       |  |                               |  
|Foreign bond               |  | $              |      |  |                               | $ |      |                                 |  | $ | 100            |  |  | $     |       |  |       | $ | 100    |  |  |  | 5.95 | %
|                           |  |                |       |  |                               |   |       |                                 |  |   |                |  |  |       |        |  |       |   |        |  |  |  |      |  
|                           |  |                |       |  |                               |  
|At December 31, 2008:      |  |                |       |  |                               |   |       |                                 |  |   |                |  |  |       |        |  |       |   |        |  |  |  |      |  
|Mortgage-backed securities |  | $              |      |  |                               | $ |      |                                 |  | $ | 1,604          |  |  | $     | 80,504 |  |       | $ | 82,108 |  |  |  | 5.41 | %
|                           |  |                |       |  |                               |   |       |                                 |  |   |                |  |  |       |        |  |       |   |        |  |  |  |      |  
|                           |  |                |       |  |                               |  
|Foreign bond               |  | $              |      |  |                               | $ |      |                                 |  | $ | 100            |  |  | $     |       |  |       | $ | 100    |  |  |  | 5.95 | %
|                           |  |                |       |  |                               |   |       |                                 |  |   |                |  |  |       |        |  |       |   |        |  |  |  |      |  

During the first quarter of 2010, the Company sold 22 held to maturity securities in order to downsize and
deleverage its balance sheet, recognizing net gains of $1.35 million. This action was taken in an effort to comply with a significant increase in the regulatory capital requirements imposed on the Bank under the Consent Order issued by the FDIC and
Florida Office of Financial Regulation

At December 31, 2010, $24.0million of the $51.0 million in
mortgage-backed securities (MBS) were U.S. agency MBS and $27.0million were private label MBS. Approximately $24.2 million of the private label MBS at December 31, 2010 were rated sub-investment grade
securities by the securities rating agencies. In general, non-investment grade securities cannot be used to collateralize borrowings and are considered to be substandard assets by the Federal regulatory agencies.

Regulatory Capital Adequacy

Failure to meet minimum capital requirements can result in certain mandatory and, possibly, additional discretionary actions by federal and state regulators that, if undertaken, could have a direct
material effect on our financial condition and results of operations. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, we must meet specific capital guidelines that involve quantitative measures of our
assets, liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices. In addition, the Consent Order imposes increased minimum capital requirements on the Bank.

Quantitative measures established by regulation and by the Consent Order to ensure capital adequacy require us to maintain minimum
amounts and ratios (set forth in the following table) of Total and Tier 1 capital to risk-weighted assets and Tier 1 capital to average assets. As of December 31, 2010, we did not meet the minimum applicable capital adequacy requirements. See
Supervision and Regulation  Bank Regulation- Capital Adequacy Requirements.



24



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As of December 31, 2010, our actual and required minimum capital ratios were as follows
(in thousands):

REGULATORY CAPITAL REQUIREMENTS



|                                       |  |        |        |  |                              |  |       |                                                                      |  |   |                              |  |  |        |      |   |   |   |        |        |  |  |       |   |  |   |        |  |  |  |       |  
|-------------------------------------- |  | ------ | ------ |  | ---------------------------- |  | ----- | -------------------------------------------------------------------- |  | - | ---------------------------- |  |  | ------ | ---- | - | - | - | ------ | ------ |  |  | ----- | - |  | - | ------ |  |  |  | ----- | -
|                                       |  | Actual |        |  | For CapitalAdequacy Purposes |  |       | MinimumTo Be WellCapitalized
UnderPrompt CorrectiveAction Provisions |  |   | Requirements ofConsent Order | 
|                                       |  | Amount |        |  | %                            |  |       | Amount                                                               |  |   | %                            |  |  | Amount |      |   | % |   |        | Amount |  |  | %     |  
|As of December 31, 2010:               |  |        |        |  |                              |  |       |                                                                      |  |   |                              |  |  |        |      |   |   |   |        |        |  |  |       |   |  |   |        |  |  |  |       |  
|Total Capital to Risk-Weighted Assets  |  | $      | 9,639  |  |                              |  | 6.70  | %                                                                    |  | $ | 11,513                       |  |  |        | 8.00 | % |   | $ | 14,392 |        |  |  | 10.00 | % |  | $ | 17,270 |  |  |  | 12.00 | %
|Tier I Capital to Risk-Weighted Assets |  |        | 7,817  |  |                              |  | 5.43  |                                                                      |  |   | 5,757                        |  |  |        | 4.00 |   |   |   | 8,635  |        |  |  | 6.00  |   |  |   | N/A    |  |  |  | N/A   |  
|Tier I Capital to Total Assets         |  |        | 7,817  |  |                              |  | 4.02  |                                                                      |  |   | 7,786                        |  |  |        | 4.00 |   |   |   | 9,733  |        |  |  | 5.00  |   |  |   | 15,572 |  |  |  | 8.00  |  
|                                       |  |        |        |  |                              |  |       |                                                                     
|As of December 31, 2009:               |  |        |        |  |                              |  |       |                                                                      |  |   |                              |  |  |        |      |   |   |   |        |        |  |  |       |   |  |   |        |  |  |  |       |  
|Total Capital to Risk-Weighted Assets  |  |        | 18,342 |  |                              |  | 10.23 |                                                                      |  |   | 14,349                       |  |  |        | 8.00 |   |   |   | 17,937 |        |  |  | 10.00 |   |  |   | N/A    |  |  |  | N/A   |  
|Tier I Capital to Risk-Weighted Assets |  |        | 16,012 |  |                              |  | 8.93  |                                                                      |  |   | 7,175                        |  |  |        | 4.00 |   |   |   | 10,762 |        |  |  | 6.00  |   |  |   | N/A    |  |  |  | N/A   |  
|Tier I Capital to Total Assets         |  |        | 16,012 |  |                              |  | 5.85  |                                                                      |  |   | 10,952                       |  |  |        | 4.00 |   |   |   | 13,690 |        |  |  | 5.00  |   |  |   | N/A    |  |  |  | N/A   |  



|                                       |  |        |        |  |                              |  |       |                                                                      |  |   |        |  |  |        |      |   |   |   |        |  |  |  |       |  
|-------------------------------------- |  | ------ | ------ |  | ---------------------------- |  | ----- | -------------------------------------------------------------------- |  | - | ------ |  |  | ------ | ---- | - | - | - | ------ |  |  |  | ----- | -
|                                       |  | Actual |        |  | For Capital AdequacyPurposes |  |       | MinimumTo Be WellCapitalized
UnderPrompt CorrectiveAction Provisions | 
|                                       |  | Amount |        |  | %                            |  |       | Amount                                                               |  |   | %      |  |  | Amount |      |   | % |  
|As of December 31, 2008:               |  |        |        |  |                              |  |       |                                                                      |  |   |        |  |  |        |      |   |   |   |        |  |  |  |       |  
|Total Capital to Risk-Weighted Assets  |  | $      | 29,357 |  |                              |  | 18.91 | %                                                                    |  | $ | 12,419 |  |  |        | 8.00 | % |   | $ | 15,524 |  |  |  | 10.00 | %
|Tier I Capital to Risk-Weighted Assets |  |        | 27,451 |  |                              |  | 17.68 |                                                                      |  |   | 6,210  |  |  |        | 4.00 |   |   |   | 9,314  |  |  |  | 6.00  |  
|Tier I Capital to Total Assets         |  |        | 27,451 |  |                              |  | 10.71 |                                                                      |  |   | 10,254 |  |  |        | 4.00 |   |   |   | 12,818 |  |  |  | 5.00  |  

Market Risk

Market risk is the risk of loss from adverse changes in market prices and rates. Our market risk arises primarily from interest-rate risk
inherent in our lending and deposit-taking activities. We do not engage in securities trading or hedging activities and do not invest in interest-rate derivatives or enter into interest rate swaps.

We may utilize financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of our
customers. The measurement of market risk associated with financial instruments is meaningful only when all related and offsetting on- and off-balance-sheet transactions are aggregated, and the resulting net positions are identified. Disclosures
about the fair value of financial instruments, which reflect changes in market prices and rates, can be found in Note 9 of Notes to Consolidated Financial Statements.



25



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##### Table of Contents

Our primary objective in managing interest-rate risk is to minimize the potential adverse
impact of changes in interest rates on our net interest income and capital, while adjusting our asset-liability structure to obtain the maximum yield-cost spread on that structure. We actively monitor and manage our interest-rate risk exposure by
managing our asset and liability structure. However, a sudden and substantial increase in interest rates may adversely impact our earnings, to the extent that the interest-earning assets and interest-bearing liabilities do not change or reprice at
the same speed, to the same extent, or on the same basis.

We use modeling techniques to simulate changes in net interest
income under various rate scenarios. Important elements of these techniques include the mix of floating versus fixed-rate assets and liabilities, and the scheduled, as well as expected, repricing and maturing volumes and rates of the existing
balance sheet.

Asset Liability Management

As part of our asset and liability management, we have emphasized establishing and implementing internal asset-liability decision processes, as well as control procedures to aid in managing our earnings.
Management believes that these processes and procedures provide us with better capital planning, asset mix and volume controls, loan-pricing guidelines, and deposit interest-rate guidelines, which should result in tighter controls and less exposure
to interest-rate risk.

The matching of assets and liabilities may be analyzed by examining the extent to which such assets
and liabilities are interest rate sensitive and by monitoring an institutions interest rate sensitivity gap. An asset or liability is said to be interest rate sensitive within a specific time period if it will mature or
reprice within that time period. The interest-rate sensitivity gap is defined as the difference between interest-earning assets and interest-bearing liabilities maturing or repricing within a given time period. The gap ratio is computed as the
amount of rate sensitive assets less the amount of rate sensitive liabilities divided by total assets. A gap is considered positive when the amount of interest-rate sensitive assets exceeds interest-rate sensitive liabilities. A gap is considered
negative when the amount of interest-rate sensitive liabilities exceeds interest-rate sensitive assets. During a period of rising interest rates, a negative gap would adversely affect net interest income, while a positive gap would result in an
increase in net interest income. During a period of falling interest rates, a negative gap would result in an increase in net interest income, while a positive gap would adversely affect net interest income.

In order to minimize the potential for adverse effects of material and prolonged increases in interest rates on the results of
operations, our management continues to monitor our assets and liabilities to better match the maturities and repricing terms of our interest-earning assets and interest-bearing liabilities. Our policies emphasize the origination of adjustable-rate
loans, building a stable core deposit base and, to the extent possible, matching deposit maturities with loan repricing timeframes or maturities.



26



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The following table sets forth certain information relating to our interest-earning assets
and interest-bearing liabilities at December 31, 2010, that are estimated to mature or are scheduled to reprice within the period shown (dollars in thousands):

GAP MATURITY / REPRICING SCHEDULE



|                                   |  |                |         |    |                                         |   |         |                                              |  |   |                  |    |  |       |        |    |  |   |         |  
|---------------------------------- |  | -------------- | ------- | -- | --------------------------------------- | - | ------- | -------------------------------------------- |  | - | ---------------- | -- |  | ----- | ------ | -- |  | - | ------- | -
|                                   |  | OneYear orLess |         |    | Morethan OneYear andLess
thanFive Years |   |         | Morethan FiveYears andLess
thanFifteen Years |  |   | OverFifteenYears |    |  | Total |       
|                                   |  |                |         |    |                                        
|Loans (1):                         |  |                |         |    |                                         |   |         |                                              |  |   |                  |    |  |       |        |    |  |   |         |  
|Residential real estate loans      |  | $              | 29,194  |    |                                         | $ | 10,936  |                                              |  | $ |                 |    |  | $     |       |    |  | $ | 40,130  |  
|Multi-family real estate loans     |  |                | 3,480   |    |                                         |   | 653     |                                              |  |   |                 |    |  |       | 80     |    |  |   | 4,213   |  
|Commercial real estate loans       |  |                | 40,905  |    |                                         |   | 13,254  |                                              |  |   | 960              |    |  |       |       |    |  |   | 55,119  |  
|Land and construction              |  |                | 12,674  |    |                                         |   | 4,325   |                                              |  |   | 293              |    |  |       |       |    |  |   | 17,292  |  
|Consumer loans                     |  |                | 150     |    |                                         |   | 208     |                                              |  |   |                 |    |  |       |       |    |  |   | 358     |  
|                                   |  |                |         |    |                                         |   |         |                                              |  |   |                  |    |  |       |        |    |  |   |         |  
|                                   |  |                |         |    |                                        
|Total loans                        |  |                | 86,403  |    |                                         |   | 29,376  |                                              |  |   | 1,253            |    |  |       | 80     |    |  |   | 117,112 |  
|                                   |  |                |         |    |                                        
|Federal funds sold                 |  |                | 13,154  |    |                                         |   |        |                                              |  |   |                 |    |  |       |       |    |  |   | 13,154  |  
|Securities (2)                     |  |                | 4,001   |    |                                         |   | 5,988   |                                              |  |   | 21,207           |    |  |       | 19,861 |    |  |   | 51,057  |  
|Federal Home Loan Bank stock       |  |                | 3,173   |    |                                         |   |        |                                              |  |   |                 |    |  |       |       |    |  |   | 3,173   |  
|                                   |  |                |         |    |                                         |   |         |                                              |  |   |                  |    |  |       |        |    |  |   |         |  
|                                   |  |                |         |    |                                        
|Total rate-sensitive assets        |  |                | 106,731 |    |                                         |   | 35,364  |                                              |  |   | 22,460           |    |  |       | 19,941 |    |  |   | 184,496 |  
|                                   |  |                |         |    |                                         |   |         |                                              |  |   |                  |    |  |       |        |    |  |   |         |  
|                                   |  |                |         |    |                                        
|Deposit accounts (3):              |  |                |         |    |                                         |   |         |                                              |  |   |                  |    |  |       |        |    |  |   |         |  
|Money-market deposits              |  |                | 33,854  |    |                                         |   |        |                                              |  |   |                 |    |  |       |       |    |  |   | 33,854  |  
|Interest-bearing checking deposits |  |                | 986     |    |                                         |   |        |                                              |  |   |                 |    |  |       |       |    |  |   | 986     |  
|Savings deposits                   |  |                | 1,814   |    |                                         |   |        |                                              |  |   |                 |    |  |       |       |    |  |   | 1,814   |  
|Time deposits                      |  |                | 87,919  |    |                                         |   | 23,356  |                                              |  |   |                 |    |  |       |       |    |  |   | 111,275 |  
|                                   |  |                |         |    |                                         |   |         |                                              |  |   |                  |    |  |       |        |    |  |   |         |  
|                                   |  |                |         |    |                                        
|Total deposits                     |  |                | 124,573 |    |                                         |   | 23,356  |                                              |  |   |                 |    |  |       |       |    |  |   | 147,929 |  
|                                   |  |                |         |    |                                        
|Federal Home Loan Bank advances    |  |                |        |    |                                         |   | 11,500  |                                              |  |   | 20,200           |    |  |       |       |    |  |   | 31,700  |  
|Junior subordinated debenture      |  |                |        |    |                                         |   |        |                                              |  |   |                 |    |  |       | 5,155  |    |  |   | 5,155   |  
|                                   |  |                |         |    |                                         |   |         |                                              |  |   |                  |    |  |       |        |    |  |   |         |  
|                                   |  |                |         |    |                                        
|Total rate-sensitive liabilities   |  |                | 124,573 |    |                                         |   | 34,856  |                                              |  |   | 20,200           |    |  |       | 5,155  |    |  |   | 184,784 |  
|                                   |  |                |         |    |                                         |   |         |                                              |  |   |                  |    |  |       |        |    |  |   |         |  
|                                   |  |                |         |    |                                        
|GAP (repricing differences)        |  | $              | (17,842 | )  |                                         | $ | 508     |                                              |  | $ | 2,260            |    |  | $     | 14,786 |    |  | $ | (288    | )
|                                   |  |                |         |    |                                         |   |         |                                              |  |   |                  |    |  |       |        |    |  |   |         |  
|                                   |  |                |         |    |                                        
|Cumulative GAP                     |  | $              | (17,842 | )  |                                         | $ | (17,334 | )                                            |  | $ | (15,074          | )  |  | $     | (288   | )  |  |   |         |  
|                                   |  |                |         |    |                                         |   |         |                                              |  |   |                  |    |  |       |        |    |  |   |         |  
|                                   |  |                |         |    |                                        
|Cumulative GAP/total assets        |  |                | (9.38   | )% |                                         |   | (9.11   | )%                                           |  |   | (7.92            | )% |  |       | (.15   | )% |  |   |         |  
|                                   |  |                |         |    |                                         |   |         |                                              |  |   |                  |    |  |       |        |    |  |   |         |  



|(1) | In preparing the table above, adjustable-rate loans are included in the period in which the interest rates are next scheduled to adjust rather than in the period in
which the loans mature. Fixed-rate loans are scheduled, including repayment, according to their maturities.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Securities are scheduled through the repricing date.
|--- | ----------------------------------------------------

|(3) | Money-market, interest-bearing checking and savings deposits are regarded as readily accessible withdrawable accounts. All other time deposits are scheduled through the
maturity dates.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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The following table sets forth loan maturities by type of loan at December 31, 2010 (in
thousands):



|                         |  |                 |        |  |                               |   |        |                 |  |   |        |  |  |   |         | 
|------------------------ |  | --------------- | ------ |  | ----------------------------- | - | ------ | --------------- |  | - | ------ |  |  | - | ------- | 
|                         |  | One Yearor Less |        |  | After OneBut WithinFive Years |   |        | AfterFive Years |  |   | Total  | 
|                         |  |                 |        | 
|Residential real estate  |  | $               | 2,865  |  |                               | $ | 2,360  |                 |  | $ | 34,905 |  |  | $ | 40,130  | 
|Multi-family real estate |  |                 |       |  |                               |   |       |                 |  |   | 4,213  |  |  |   | 4,213   | 
|Commercial real estate   |  |                 | 9,162  |  |                               |   | 7,461  |                 |  |   | 38,496 |  |  |   | 55,119  | 
|Land and construction    |  |                 | 2,531  |  |                               |   | 668    |                 |  |   | 14,093 |  |  |   | 17,292  | 
|Consumer                 |  |                 | 150    |  |                               |   | 208    |                 |  |   |       |  |  |   | 358     | 
|                         |  |                 |        |  |                               |   |        |                 |  |   |        |  |  |   |         | 
|                         |  |                 |        | 
|Total                    |  | $               | 14,708 |  |                               | $ | 10,697 |                 |  | $ | 91,707 |  |  | $ | 117,112 | 
|                         |  |                 |        |  |                               |   |        |                 |  |   |        |  |  |   |         | 

The following table sets forth the maturity or repricing of loans by interest type at December 31, 2010
(in thousands):



|                       |  |                 |        |  |                               |   |       |                 |  |   |        |  |  |   |         | 
|---------------------- |  | --------------- | ------ |  | ----------------------------- | - | ----- | --------------- |  | - | ------ |  |  | - | ------- | 
|                       |  | One Yearor Less |        |  | After OneBut WithinFive Years |   |       | AfterFive Years |  |   | Total  | 
|                       |  |                 |        | 
|Fixed interest rate    |  | $               | 14,557 |  |                               | $ | 5,405 |                 |  | $ | 254    |  |  | $ | 20,216  | 
|Variable interest rate |  |                 | 5,442  |  |                               |   |      |                 |  |   | 91,454 |  |  |   | 96,896  | 
|                       |  |                 |        |  |                               |   |       |                 |  |   |        |  |  |   |         | 
|                       |  |                 |        | 
|Total                  |  | $               | 19,999 |  |                               | $ | 5,405 |                 |  | $ | 91,708 |  |  | $ | 117,112 | 
|                       |  |                 |        |  |                               |   |       |                 |  |   |        |  |  |   |         | 

Scheduled contractual principal repayments of loans do not reflect the actual life of such assets. The
average life of loans is substantially less than their average contractual terms due to prepayments. In addition, due-on-sale clauses on loans generally give us the right to declare a conventional loan immediately due and payable in the event, among
other things, that the borrower sells real property subject to a mortgage and the loan is not repaid. The average life of mortgage loans tends to increase, however, when current mortgage loan rates are substantially higher than rates on existing
mortgage loans and, conversely, decrease when rates on existing mortgages are substantially higher than current mortgage rates.

Off-Balance Sheet Arrangements and Aggregate Contractual Obligations

We are party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of our customers. These financial instruments include commitments to extend
credit. At December 31, 2010, we had no outstanding commitments to originate real estate loans. These instruments involve, to varying degrees, elements of credit and interest-rate risk in excess of the amounts recognized in the consolidated
balance sheet. The contractual amounts of those instruments reflect the extent of the Companys involvement in particular classes of financial instruments.

Our exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit is represented by the contractual amount of those instruments. We
use the same credit policies in making commitments as we do for on-balance-sheet instruments.

Commitments to extend credit
are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed-expiration dates or other termination clauses and may require payment of a fee. Since certain
commitments expire without being drawn upon, the total committed amounts do not necessarily represent future cash requirements. We evaluate each customers credit worthiness on a case-by-case basis. The amount of collateral obtained, if we deem
it necessary in order to extend credit, is based on managements credit evaluation of the counterparty.



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The following is a summary of the Banks contractual obligations, including certain
on-balance sheet obligations, at December 31, 2010 (in thousands):



|                                |  |                        |        |  |                |   |     |          |  |   |          |  |  |                 |   |  |  |   |        | 
|------------------------------- |  | ---------------------- | ------ |  | -------------- | - | --- | -------- |  | - | -------- |  |  | --------------- | - |  |  | - | ------ | 
|                                |  | Payments Due by Period |       
|Contractual Obligations         |  | Total                  |        |  | LessThan 1Year |   |     | 1-3Years |  |   | 3-5Years |  |  | MoreThan 5Years |  
|                                |  |                        |        |  |               
|Federal Home Loan Bank advances |  | $                      | 31,700 |  |                | $ |    |          |  | $ | 11,500   |  |  | $               |  |  |  | $ | 20,200 | 
|Junior subordinated debenture   |  |                        | 5,155  |  |                |   |    |          |  |   |         |  |  |                 |  |  |  |   | 5,155  | 
|Operating leases                |  |                        | 297    |  |                |   | 133 |          |  |   | 164      |  |  |                 |  |  |  |   |       | 
|                                |  |                        |        |  |                |   |     |          |  |   |          |  |  |                 |   |  |  |   |        | 
|                                |  |                        |        |  |               
|Total                           |  | $                      | 37,152 |  |                | $ | 133 |          |  | $ | 11,664   |  |  | $               |  |  |  | $ | 25,355 | 
|                                |  |                        |        |  |                |   |     |          |  |   |          |  |  |                 |   |  |  |   |        | 

Deposits

Deposits traditionally are the primary source of funds for our use in lending, making investments and meeting liquidity demands. We have focused on raising time deposits primarily within our market area,
which is the tri-county area of Broward, Miami-Dade and Palm Beach counties. However, we offer a variety of deposit products, which we promote within our market area. Net deposits decreased $3.4 million in 2010 and increased $36.8 million in 2009.

We have used brokered deposits to facilitate mortgage loan fundings in circumstances when larger than anticipated loan
volumes occur and there is limited time to fund the additional loan demand through traditional deposit solicitation. In general, brokered deposits can be obtained in one to three days. The rates paid on these deposits are typically equal to or
slightly less than the high end of the interest rates in our market area. Brokered deposits amounted to $1.7 million and $13.9 million as of December 31, 2010 and December 31, 2009, respectively. We have reduced our reliance on brokered
deposits which are considered a more volatile source of funding by no longer accepting or rolling over existing brokered deposits.

The following table displays the distribution of the Banks deposits at December 31, 2010, 2009 and 2008 (dollars in thousands):



|                                    |  |                 |         |  |              |  |        |        |  |   |              |  |  |        |        |   |              |   |         |  |  |  |        |  
|----------------------------------- |  | --------------- | ------- |  | ------------ |  | ------ | ------ |  | - | ------------ |  |  | ------ | ------ | - | ------------ | - | ------- |  |  |  | ------ | -
|                                    |  | At December 31, |        
|                                    |  | 2010            |         |  | 2009         |  |        | 2008   | 
|                                    |  | Amount          |         |  | % ofDeposits |  |        | Amount |  |   | % ofDeposits |  |  | Amount |        |   | % ofDeposits |  
|                                    |  |                 |         |  |              | 
|Noninterest-bearing demand deposits |  | $               | 309     |  |              |  | .21    | %      |  | $ | 199          |  |  |        | .13    | % |              | $ | 90      |  |  |  | .08    | %
|Interest-bearing demand deposits    |  |                 | 986     |  |              |  | .67    |        |  |   | 1,157        |  |  |        | .76    |   |              |   | 1,464   |  |  |  | 1.27   |  
|Money-market deposits               |  |                 | 33,854  |  |              |  | 22.83  |        |  |   | 41,204       |  |  |        | 27.16  |   |              |   | 28,009  |  |  |  | 24.37  |  
|Savings                             |  |                 | 1,814   |  |              |  | 1.22   |        |  |   | 1,861        |  |  |        | 1.24   |   |              |   | 1,195   |  |  |  | 1.04   |  
|                                    |  |                 |         |  |              |  |        |        |  |   |              |  |  |        |        |   |              |   |         |  |  |  |        |  
|                                    |  |                 |         |  |              | 
|Subtotal                            |  |                 | 36,963  |  |              |  | 24.93  |        |  |   | 44,421       |  |  |        | 29.29  |   |              |   | 30,758  |  |  |  | 26.76  |  
|                                    |  |                 |         |  |              |  |        |        |  |   |              |  |  |        |        |   |              |   |         |  |  |  |        |  
|                                    |  |                 |         |  |              | 
|Time deposits:                      |  |                 |         |  |              |  |        |        |  |   |              |  |  |        |        |   |              |   |         |  |  |  |        |  
|0.00%  0.99%                       |  |                 | 9,046   |  |              |  | 6.10   |        |  | $ | 8,056        |  |  |        | 5.31   | % |              | $ |        |  |  |  |       | %
|1.00%  1.99%                       |  |                 | 83,601  |  |              |  | 56.40  |        |  |   | 35,524       |  |  |        | 23.42  |   |              |   |        |  |  |  |       |  
|2.00%  2.99%                       |  |                 | 15,455  |  |              |  | 10.43  |        |  |   | 52,719       |  |  |        | 34.76  |   |              |   | 7,696   |  |  |  | 6.70   |  
|3.00%  3.99%                       |  |                 | 987     |  |              |  | .67    |        |  |   | 2,568        |  |  |        | 1.69   |   |              |   | 39,678  |  |  |  | 34.53  |  
|4.00%  4.99%                       |  |                 | 1,460   |  |              |  | .98    |        |  |   | 7,562        |  |  |        | 4.99   |   |              |   | 35,627  |  |  |  | 31.00  |  
|5.00%  5.99%                       |  |                 | 726     |  |              |  | .49    |        |  |   | 810          |  |  |        | .53    |   |              |   | 1,146   |  |  |  | 1.00   |  
|6.00%  6.99%                       |  |                 |        |  |              |  |       |        |  |   | 22           |  |  |        | .01    |   |              |   | 20      |  |  |  | .01    |  
|                                    |  |                 |         |  |              |  |        |        |  |   |              |  |  |        |        |   |              |   |         |  |  |  |        |  
|                                    |  |                 |         |  |              | 
|Total time deposits (1)             |  |                 | 111,275 |  |              |  | 75.07  |        |  |   | 107,261      |  |  |        | 70.71  |   |              |   | 84,167  |  |  |  | 73.24  |  
|                                    |  |                 |         |  |              |  |        |        |  |   |              |  |  |        |        |   |              |   |         |  |  |  |        |  
|                                    |  |                 |         |  |              | 
|Total deposits                      |  | $               | 148,238 |  |              |  | 100.00 | %      |  | $ | 151,682      |  |  |        | 100.00 | % |              | $ | 114,925 |  |  |  | 100.00 | %
|                                    |  |                 |         |  |              |  |        |        |  |   |              |  |  |        |        |   |              |   |         |  |  |  |        |  



|(1) | Included are Individual Retirement Accounts (IRAs) totaling $8,745,000 and $8,790,000 at December 31, 2010 and 2009, respectively, all of which are in the
form of time deposits.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|
|

|
|



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##### Table of Contents

Deposits of $100,000 or more, or Jumbo Time Deposits, are generally considered a more
unpredictable source of funds. The following table sets forth our maturity distribution of deposits of $100,000 or more at December 31, 2010 and 2009 (in thousands):



|                                         |  |                 |        |  |      |   |        | 
|---------------------------------------- |  | --------------- | ------ |  | ---- | - | ------ | 
|                                         |  | At December 31, |       
|                                         |  | 2010            |        |  | 2009 |  
|                                         |  |                
|Due three months or less                 |  | $               | 14,829 |  |      | $ | 9,060  | 
|Due more than three months to six months |  |                 | 7,036  |  |      |   | 14,083 | 
|More than six months to one year         |  |                 | 19,495 |  |      |   | 25,608 | 
|One to five years                        |  |                 | 9,949  |  |      |   | 3,887  | 
|                                         |  |                 |        |  |      |   |        | 
|                                         |  |                
|Total                                    |  | $               | 51,309 |  |      | $ | 52,638 | 
|                                         |  |                 |        |  |      |   |        | 

ANALYSIS OF RESULTS OF OPERATIONS

Our profitability depends to a large extent on net interest income, which is the difference between the interest received on earning assets, such as loans and securities, and the interest paid on
interest-bearing liabilities, principally deposits and borrowings. Net interest income is determined by the difference between yields earned on interest-earning assets and rates paid on interest-bearing liabilities (interest-rate spread)
and the relative amounts of interest-earning assets and interest-bearing liabilities. Our interest-rate spread is affected by regulatory, economic, and competitive factors that influence interest rates, loan demand, and deposit flows. Our results of
operations are also affected by the provision for loan losses, operating expenses such as salaries and employee benefits, occupancy and other operating expenses including income taxes, and noninterest income such as loan prepayment fees.



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##### Table of Contents

The following table sets forth,for the periods indicated, information regarding
(i) the total dollar amount of interest income from interest-earning assets and the resultant average yield; (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; and (v) net interest margin. Average balances are based on average daily balances (dollars in thousands):



|                                                                                 |  |                          |         |  |                      |   |       |                   |  |  |                |   |  |                      |         |  |                   |   |        |                |  |  |                      |   |  |                   |         |  |  |   |        |  |  |  |      |  
|-------------------------------------------------------------------------------- |  | ------------------------ | ------- |  | -------------------- | - | ----- | ----------------- |  |  | -------------- | - |  | -------------------- | ------- |  | ----------------- | - | ------ | -------------- |  |  | -------------------- | - |  | ----------------- | ------- |  |  | - | ------ |  |  |  | ---- | -
|                                                                                 |  | Years Ended December 31, |        
|                                                                                 |  | 2010                     |         |  | 2009                 |   |       | 2008              | 
|                                                                                 |  | AverageBalance           |         |  | InterestandDividends |   |       | AverageYield/Rate |  |  | AverageBalance |   |  | InterestandDividends |         |  | AverageYield/Rate |   |        | AverageBalance |  |  | InterestandDividends |   |  | AverageYield/Rate |        
|Interest-earning assets:                                                         |  |                          |         |  |                      |   |       |                   |  |  |                |   |  |                      |         |  |                   |   |        |                |  |  |                      |   |  |                   |         |  |  |   |        |  |  |  |      |  
|Loans                                                                            |  | $                        | 129,947 |  |                      | $ | 6,301 |                   |  |  | 4.85           | % |  | $                    | 158,157 |  |                   | $ | 8,986  |                |  |  | 5.68                 | % |  | $                 | 162,157 |  |  | $ | 11,236 |  |  |  | 6.93 | %
|Securities                                                                       |  |                          | 45,027  |  |                      |   | 2,409 |                   |  |  | 5.35           |   |  |                      | 89,129  |  |                   |   | 4,985  |                |  |  | 5.59                 |   |  |                   | 76,975  |  |  |   | 4,183  |  |  |  | 5.43 |  
|Other interest-earning assets (1)                                                |  |                          | 33,555  |  |                      |   | 77    |                   |  |  | 0.23           |   |  |                      | 16,953  |  |                   |   | 35     |                |  |  | 0.21                 |   |  |                   | 4,786   |  |  |   | 151    |  |  |  | 3.16 |  
|                                                                                 |  |                          |         |  |                      |   |       |                   |  |  |                |   |  |                      |         |  |                   |   |        |                |  |  |                      |   |  |                   |         |  |  |   |        |  |  |  |      |  
|                                                                                 |  |                          |         |  |                      |   |       |                   | 
|Total interest-earning assets/interest income                                    |  |                          | 208,529 |  |                      |   | 8,787 |                   |  |  | 4.21           |   |  |                      | 264,239 |  |                   |   | 14,006 |                |  |  | 5.30                 |   |  |                   | 243,918 |  |  |   | 15,570 |  |  |  | 6.38 |  
|                                                                                 |  |                          |         |  |                      |   |       |                   |  |  |                |   |  |                      |         |  |                   |   |        |                |  |  |                      |   |  |                   |         |  |  |   |        |  |  |  |      |  
|                                                                                 |  |                          |         |  |                      |   |       |                   | 
|Cash and due from banks                                                          |  |                          | 1,164   |  |                      |   |       |                   |  |  |                |   |  |                      | 2,176   |  |                   |   |        |                |  |  |                      |   |  |                   | 538     |  |  |   |        |  |  |  |      |  
|Premises and equipment                                                           |  |                          | 2,872   |  |                      |   |       |                   |  |  |                |   |  |                      | 3,017   |  |                   |   |        |                |  |  |                      |   |  |                   | 3,181   |  |  |   |        |  |  |  |      |  
|Other assets                                                                     |  |                          | 7,341   |  |                      |   |       |                   |  |  |                |   |  |                      | 1,933   |  |                   |   |        |                |  |  |                      |   |  |                   | 3,234   |  |  |   |        |  |  |  |      |  
|                                                                                 |  |                          |         |  |                      |   |       |                   |  |  |                |   |  |                      |         |  |                   |   |        |                |  |  |                      |   |  |                   |         |  |  |   |        |  |  |  |      |  
|                                                                                 |  |                          |         |  |                      |   |       |                   | 
|Total assets                                                                     |  | $                        | 219,906 |  |                      |   |       |                   |  |  |                |   |  | $                    | 271,365 |  |                   |   |        |                |  |  |                      |   |  | $                 | 250,871 |  |  |   |        |  |  |  |      |  
|                                                                                 |  |                          |         |  |                      |   |       |                   |  |  |                |   |  |                      |         |  |                   |   |        |                |  |  |                      |   |  |                   |         |  |  |   |        |  |  |  |      |  
|                                                                                 |  |                          |         |  |                      |   |       |                   | 
|Interest-bearing liabilities:                                                    |  |                          |         |  |                      |   |       |                   |  |  |                |   |  |                      |         |  |                   |   |        |                |  |  |                      |   |  |                   |         |  |  |   |        |  |  |  |      |  
|Savings, NOW and money-market deposits                                           |  |                          | 41,555  |  |                      |   | 486   |                   |  |  | 1.17           |   |  |                      | 38,616  |  |                   |   | 713    |                |  |  | 1.85                 |   |  |                   | 32,291  |  |  |   | 1,024  |  |  |  | 3.17 |  
|Time deposits                                                                    |  |                          | 114,817 |  |                      |   | 2,297 |                   |  |  | 2.00           |   |  |                      | 94,838  |  |                   |   | 2,913  |                |  |  | 3.07                 |   |  |                   | 81,461  |  |  |   | 3,497  |  |  |  | 4.29 |  
|Borrowings (4)                                                                   |  |                          | 51,194  |  |                      |   | 2,084 |                   |  |  | 4.07           |   |  |                      | 113,175 |  |                   |   | 4,725  |                |  |  | 4.17                 |   |  |                   | 109,961 |  |  |   | 4,690  |  |  |  | 4.27 |  
|                                                                                 |  |                          |         |  |                      |   |       |                   |  |  |                |   |  |                      |         |  |                   |   |        |                |  |  |                      |   |  |                   |         |  |  |   |        |  |  |  |      |  
|                                                                                 |  |                          |         |  |                      |   |       |                   | 
|Total interest-bearing liabilities/interest expense                              |  |                          | 207,566 |  |                      |   | 4,867 |                   |  |  | 2.34           |   |  |                      | 246,629 |  |                   |   | 8,351  |                |  |  | 3.39                 |   |  |                   | 223,713 |  |  |   | 9,211  |  |  |  | 4.12 |  
|                                                                                 |  |                          |         |  |                      |   |       |                   |  |  |                |   |  |                      |         |  |                   |   |        |                |  |  |                      |   |  |                   |         |  |  |   |        |  |  |  |      |  
|                                                                                 |  |                          |         |  |                      |   |       |                   | 
|Noninterest-bearing demand deposits                                              |  |                          | 507     |  |                      |   |       |                   |  |  |                |   |  |                      | 449     |  |                   |   |        |                |  |  |                      |   |  |                   | 715     |  |  |   |        |  |  |  |      |  
|Other liabilities                                                                |  |                          | 5,208   |  |                      |   |       |                   |  |  |                |   |  |                      | 3,620   |  |                   |   |        |                |  |  |                      |   |  |                   | 3,478   |  |  |   |        |  |  |  |      |  
|Stockholders equity                                                             |  |                          | 6,625   |  |                      |   |       |                   |  |  |                |   |  |                      | 20,667  |  |                   |   |        |                |  |  |                      |   |  |                   | 22,965  |  |  |   |        |  |  |  |      |  
|                                                                                 |  |                          |         |  |                      |   |       |                   |  |  |                |   |  |                      |         |  |                   |   |        |                |  |  |                      |   |  |                   |         |  |  |   |        |  |  |  |      |  
|                                                                                 |  |                          |         |  |                      |   |       |                   | 
|Total liabilities and stockholders equity                                       |  | $                        | 219,906 |  |                      |   |       |                   |  |  |                |   |  | $                    | 271,365 |  |                   |   |        |                |  |  |                      |   |  | $                 | 250,871 |  |  |   |        |  |  |  |      |  
|                                                                                 |  |                          |         |  |                      |   |       |                   |  |  |                |   |  |                      |         |  |                   |   |        |                |  |  |                      |   |  |                   |         |  |  |   |        |  |  |  |      |  
|                                                                                 |  |                          |         |  |                      |   |       |                   | 
|Net interest income                                                              |  |                          |         |  |                      | $ | 3,920 |                   |  |  |                |   |  |                      |         |  |                   | $ | 5,655  |                |  |  |                      |   |  |                   |         |  |  | $ | 6,359  |  |  |  |      |  
|                                                                                 |  |                          |         |  |                      |   |       |                   |  |  |                |   |  |                      |         |  |                   |   |        |                |  |  |                      |   |  |                   |         |  |  |   |        |  |  |  |      |  
|                                                                                 |  |                          |         |  |                      |   |       |                   | 
|Interest rate spread (2)                                                         |  |                          |         |  |                      |   |       |                   |  |  | 1.87           | % |  |                      |         |  |                   |   |        |                |  |  | 1.91                 | % |  |                   |         |  |  |   |        |  |  |  | 2.26 | %
|                                                                                 |  |                          |         |  |                      |   |       |                   |  |  |                |   |  |                      |         |  |                   |   |        |                |  |  |                      |   |  |                   |         |  |  |   |        |  |  |  |      |  
|                                                                                 |  |                          |         |  |                      |   |       |                   | 
|Net interest margin (3)                                                          |  |                          |         |  |                      |   |       |                   |  |  | 1.88           | % |  |                      |         |  |                   |   |        |                |  |  | 2.14                 | % |  |                   |         |  |  |   |        |  |  |  | 2.61 | %
|                                                                                 |  |                          |         |  |                      |   |       |                   |  |  |                |   |  |                      |         |  |                   |   |        |                |  |  |                      |   |  |                   |         |  |  |   |        |  |  |  |      |  
|                                                                                 |  |                          |         |  |                      |   |       |                   | 
|Ratio of average interest-earning assets to average interest-bearing liabilities |  |                          |         |  |                      |   |       |                   |  |  | 1.00           |   |  |                      |         |  |                   |   |        |                |  |  | 1.07                 |   |  |                   |         |  |  |   |        |  |  |  | 1.09 |  
|                                                                                 |  |                          |         |  |                      |   |       |                   |  |  |                |   |  |                      |         |  |                   |   |        |                |  |  |                      |   |  |                   |         |  |  |   |        |  |  |  |      |  



|(1) | Includes interest-earning deposits with banks, Federal funds sold and Federal Home Loan Bank stock dividends.
|--- | -------------------------------------------------------------------------------------------------------------

|(2) | Interest rate spread represents the difference between average yield on interest-earning assets and the average cost of interest-bearing liabilities.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Net interest margin is net interest income divided by average interest-earning assets.
|--- | --------------------------------------------------------------------------------------

|(4) | Includes Federal Home Loan Bank advances, junior subordinated debenture and securities sold under an agreement to repurchase.
|--- | -----------------------------------------------------------------------------------------------------------------------------



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RATE/VOLUME ANALYSIS

The following tables set forth certain information regarding changes in interest income and interest expense for the periods indicated.
For each category of interest-earning assets and interest-bearing liabilities, information is provided on changes attributable to (1) changes in rate (change in rate multiplied by prior volume), (2) changes in volume (change in volume
multiplied by prior rate) and (3) changes in rate-volume (change in rate multiplied by change in volume) (in thousands):



|                                   |  |                                         |        |   |                  |   |        |             |  |   |       |   |  |   |        |  
|---------------------------------- |  | --------------------------------------- | ------ | - | ---------------- | - | ------ | ----------- |  | - | ----- | - |  | - | ------ | -
|                                   |  | Year Ended December 31,                 |       
|                                   |  |                                         |        |   | 2010 versus 2009 |   |        |             | 
|                                   |  | Increases (Decreases) Due to Change In: |       
|                                   |  | Rate                                    |        |   | Volume           |   |        | Rate/Volume |  |   | Total |  
|Interest-earning assets:           |  |                                         |        |   |                  |   |        |             |  |   |       |   |  |   |        |  
|Loans                              |  | $                                       | (1,317 | ) |                  | $ | (1,603 | )           |  | $ | 235   |   |  | $ | (2,685 | )
|Securities                         |  |                                         | (216   | ) |                  |   | (2,467 | )           |  |   | 107   |   |  |   | (2,576 | )
|Other interest-earning assets      |  |                                         | 3      |   |                  |   | 35     |             |  |   | 4     |   |  |   | 42     |  
|                                   |  |                                         |        |   |                  |   |        |             |  |   |       |   |  |   |        |  
|                                   |  |                                         |        |  
|Total interest-earning assets      |  |                                         | (1,530 | ) |                  |   | (4,035 | )           |  |   | 346   |   |  |   | (5,219 | )
|                                   |  |                                         |        |   |                  |   |        |             |  |   |       |   |  |   |        |  
|                                   |  |                                         |        |  
|Interest-bearing liabilities:      |  |                                         |        |   |                  |   |        |             |  |   |       |   |  |   |        |  
|Savings, NOW and money-market      |  |                                         | (261   | ) |                  |   | 54     |             |  |   | (20   | ) |  |   | (227   | )
|Time deposits                      |  |                                         | (1,016 | ) |                  |   | 614    |             |  |   | (214  | ) |  |   | (616   | )
|Other                              |  |                                         | (119   | ) |                  |   | (2,588 | )           |  |   | 66    |   |  |   | (2,641 | )
|                                   |  |                                         |        |   |                  |   |        |             |  |   |       |   |  |   |        |  
|                                   |  |                                         |        |  
|Total interest-bearing liabilities |  |                                         | (1,396 | ) |                  |   | (1,920 | )           |  |   | (168  | ) |  |   | (3,484 | )
|                                   |  |                                         |        |   |                  |   |        |             |  |   |       |   |  |   |        |  
|                                   |  |                                         |        |  
|Net interest income                |  | $                                       | (134   | ) |                  | $ | (2,115 | )           |  | $ | 514   |   |  | $ | (1,735 | )
|                                   |  |                                         |        |   |                  |   |        |             |  |   |       |   |  |   |        |  
|                                   | 
|                                   |  | Year Ended December 31,                 |       
|                                   |  |                                         |        |   | 2009 versus 2008 |   |        |             | 
|                                   |  | Increases (Decreases) Due to Change In: |       
|                                   |  | Rate                                    |        |   | Volume           |   |        | Rate/Volume |  |   | Total |  
|Interest-earning assets:           |  |                                         |        |   |                  |   |        |             |  |   |       |   |  |   |        |  
|Loans                              |  | $                                       | (2,023 | ) |                  | $ | (277   | )           |  | $ | 50    |   |  | $ | (2,250 | )
|Securities                         |  |                                         | 123    |   |                  |   | 660    |             |  |   | 19    |   |  |   | 802    |  
|Other interest-earning assets      |  |                                         | (140   | ) |                  |   | 383    |             |  |   | (359  | ) |  |   | (116   | )
|                                   |  |                                         |        |   |                  |   |        |             |  |   |       |   |  |   |        |  
|                                   |  |                                         |        |  
|Total interest-earning assets      |  |                                         | (2,040 | ) |                  |   | 766    |             |  |   | (290  | ) |  |   | (1,564 | )
|                                   |  |                                         |        |   |                  |   |        |             |  |   |       |   |  |   |        |  
|                                   |  |                                         |        |  
|Interest-bearing liabilities:      |  |                                         |        |   |                  |   |        |             |  |   |       |   |  |   |        |  
|Savings, NOW and money-market      |  |                                         | (428   | ) |                  |   | 201    |             |  |   | (84   | ) |  |   | (311   | )
|Time deposits                      |  |                                         | (995   | ) |                  |   | 574    |             |  |   | (163  | ) |  |   | (584   | )
|Other                              |  |                                         | (99    | ) |                  |   | 136    |             |  |   | (2    | ) |  |   | 35     |  
|                                   |  |                                         |        |   |                  |   |        |             |  |   |       |   |  |   |        |  
|                                   |  |                                         |        |  
|Total interest-bearing liabilities |  |                                         | (1,522 | ) |                  |   | 911    |             |  |   | (249  | ) |  |   | (860   | )
|                                   |  |                                         |        |   |                  |   |        |             |  |   |       |   |  |   |        |  
|                                   |  |                                         |        |  
|Net interest income                |  | $                                       | (518   | ) |                  | $ | (145   | )           |  | $ | (41   | ) |  | $ | (704   | )
|                                   |  |                                         |        |   |                  |   |        |             |  |   |       |   |  |   |        |  



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Year Ended December 31, 2010 Compared to Year Ended December 31, 2009

General. Net loss for the year ended December 31, 2010, was $8,453,000 or $(10.32) per basic and diluted share compared to a net loss
of $11,481,000 or $(14.01) per basic and diluted share for the year ended December 31, 2009. This $3.0 million decrease in the Companys net loss was primarily due to a $12,149,000 decrease in the provision for loan losses partially offset
by a net $2.3 million expense associated with downsizing the Company, a $3.9 million reduction in income tax benefit and a $1.1 million increase in professional fees associated with loan foreclosures, workouts, and regulatory matters.

Interest Income. Interest income decreased to $8.8 million for the year ended December 31, 2010 compared to $14.0 million for the year
ended December 31, 2009. Interest income on loans decreased to $6.3 million due primarily to a decrease in the average loan portfolio balance and a decrease in the average yield earned in 2010 due to an increase in the average balance of
non-performing loans in 2010. Interest on securities decreased by $2.6 million due primarily to a decrease in the average balance of the securities portfolio in 2010.

Interest Expense.Interest expense on deposit accounts decreased to $2.8 million for the year ended December 31, 2010, from $3.6 million for the year ended December 31, 2009.
Interest expense on deposits decreased primarily because of a decrease in the average yield paid in 2010 partially offset by an increase in the average balance of deposits. Interest expense on borrowings decreased to $2.1 million for the year ended
December 31, 2010 from $4.7 million for the year ended December 31, 2009 due primarily to a decrease in the average balance of borrowings.

Provision for Loan Losses. The provision for the year ended December 31, 2010, was $3.6 million compared to $15.8 million for the same period in 2009. 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 loan portfolio at December 31, 2010.
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 $3.7 million or 3.16% of loans outstanding at December 31, 2010, compared to $9.4 million, or 6.54% of loans outstanding at December 31, 2009. The decrease in the allowance was due to the use of specific reserves for charge-offs of
loans deemed uncollectible. Management believes the balance in the allowance for loan losses at December 31, 2010 is adequate.

Noninterest Income. Total noninterest income increased to $1.4 million for the year ended December 31, 2010, from $(145,000) for the
year ended December 31, 2009 primarily due to gains recognized on the sale of securities as part of the downsizing of the Company in the first quarter of 2010 and an other-than-temporary impairment on securities recorded for $179,000 in 2009.

Noninterest Expenses. Total noninterest expenses increased to $9.8 million for the year ended December 31, 2010 from $4.7
million for the year ended December 31, 2009, primarily due to a loss on the early extinguishment of debt associated with the Companys downsizing, and an increase in professional fees due to legal and consulting expenses associated with
loan foreclosure, loan workouts, and regulatory matters, and write-downs on foreclosed real estate, all occurring in the 2010 period.

Income Taxes (Benefit). The income tax expense for the year ended December 31, 2010 was $349,000. The income tax benefit for the year
ended December 31, 2009 was $3,501,000.

Year Ended December 31, 2009 Compared to Year Ended December 31, 2008

General. Net loss for 2009 were $11,481,000, or $14.01 per basic and diluted share, $12 million more than in 2008. The
primary factors explaining the decline were a $.5 decrease in noninterest income (expense) coupled with a $14.4 million increase in the provision for loan losses, and a $.7 decrease in net interest income, partially offset by a $4.3 million decrease
in income tax expense.



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##### Table of Contents

Interest Income. Interest income decreased to $14.0 million for 2009 compared to
$15.6 million for 2008. Interest income on loans decreased to $9.0 million due primarily to a decrease in the average loan portfolio balance and a decrease in the average yield earned in 2009. Interest on securities increased by $.8 million due
primarily to an increase in the average balance of the securities portfolio in 2009.

Interest Expense. Interest expense on
deposit accounts decreased to $3.6 million for 2009, from $4.5 million for 2008. Interest expense on deposits decreased primarily because of a decrease in rates paid in 2009. Interest expense on borrowings remained $4.7 million for 2009 and 2008.

Provision for Loan Losses. The provision for 2009 was $15.8 million compared to $1.4 million for 2008. In 2009, the provision
was primarily to reflect the impairment in value of loans in the amount of $5.5 million and charge-offs of $8.3 million. The provision for loan losses is charged to earnings as losses are estimated to have occurred in order to bring the total
allowance for loan losses to a level deemed appropriate by management. 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 $9.4 million or 6.54% of loans outstanding at December 31, 2009, compared to $1.9 million, or 1.18% of loans outstanding at December 31, 2008. Management
believes the balance in the allowance for loan losses at December 31, 2009 is adequate.

Noninterest Income (Expense).
Total noninterest income (expense) decreased to $(145,000) for 2009, from $393,000 for 2008 primarily as a result of a decrease in loan prepayment fees, late charge fees and an other-than-temporary impairment on securities of $179,000 in 2009.

Noninterest Expenses. Total noninterest expenses increased to $4.7 million for 2009 from $4.5 million for 2008, primarily due
to a special assessment by the Federal Deposit Insurance Corporation of $119,000 in 2009.

Income Taxes (Benefit). Income tax
benefit for 2009, was $(3,501,000) (an effective rate of 23.4%) compared to income taxes of $313,000 (an effective rate of 37.6%) for 2008.

Impact of Inflation and Changing Prices

The financial statements and related data presented herein have been prepared in accordance with accounting principles generally accepted in the United States of America, which requires the measurement of
financial position and operating results in terms of historical dollars, without considering changes in the relative purchasing power of money over time due to inflation. Unlike most industrial companies, substantially all of our assets and
liabilities are monetary in nature. As a result, interest rates have a more significant impact on our performance than the effects of general levels of inflation. Interest rates do not necessarily move in the same direction or in the same magnitude
as the prices of goods and services, since such prices are affected by inflation to a larger extent than interest rates.

Item 8. Financial Statements

The financial statements of OptimumBank Holding, Inc. as of and for the years ended
December 31, 2010 and 2009 are set forth in this Form 10-K as Exhibit 13.1 and contain the following information:

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets, December 31, 2010 and 2009

Consolidated
Statements of Operations for the Years Ended December 31, 2010 and 2009

Consolidated Statements of Stockholders
Equity for the Years Ended December 31, 2010 and 2009

Consolidated Statements of Cash Flows for the Years Ended
December 31, 2010 and 2009

Notes to Consolidated Financial Statements, December 31, 2010 and 2009 and for the Years
Then Ended



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Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure

Not applicable.

Item 9A(T). Controls and Procedures

(a) Evaluation
of Disclosure Controls and Procedures

We maintain controls and procedures designed to ensure that information required
to be disclosed in the reports that the Company files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange
Commission. Based upon managements evaluation of those controls and procedures performed within the 90 days preceding the filing of this Report, our Principal Executive Officer and Chief Financial Officer concluded that, subject to the
limitations noted below, the Companys disclosure controls and procedures (as defined in Rules 13a-15(e) under the Securities Exchange Act of 1934) are effective to ensure that the information required to be disclosed by the Company in the
reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the U.S. Securities and Exchange Commissions rules and forms.

(b) Managements Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined
in Exchange Act Rule 13a-15(f). Such internal controls over financial reporting were designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles.

The Companys management assessed the effectiveness of the
Companys internal control over financial reporting as of December 31, 2010. In making this assessment, the Company used the criteria set forth in Internal Control-Integrated Frameworkissued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). Based upon our evaluation under the framework in Internal Control-Integrated Framework, our management concluded that our internal control over financial reporting was effective as of
December 31, 2010.

This annual report does not include an attestation report of the Companys registered public
accounting firm regarding internal control over financial reporting. Managements report was not subject to attestation by the Companys registered public accounting firm pursuant to rules of the Securities and Exchange Commission that
permit the Company to provide only managements report in this annual report.

(c) Changes in Internal Controls

We have made no significant changes in our internal controls over financial reporting during the quarter ended December 31, 2010 that
have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

(d) Limitations
on the Effectiveness of Controls

Our management, including our Principal Executive Officer and Chief Financial
Officer, does not expect that our disclosure controls and internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives
of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all
control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in
decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the
control.

The design of any system of controls also is based in part upon certain assumptions about the likelihood of future
events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the
policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.



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Item 9B. Other Information

The Company did not fail to file any Form 8-K or to disclose any information required to be disclosed therein during the fourth quarter of
2010.

PART III

Item 10. Directors, Executive Officers, and Corporate Governance

OptimumBank has a Code of Ethics that applies to its chief executive officer, chief operating officer, chief financial officer (who is also its chief accounting officer) and controller, a copy of which is
incorporated by reference into this Form 10-KSB as Exhibit 14.1. This Code of Ethics is also posted on our website at www.optimumbank.com/corpgovernance.html.

The information contained under the sections captioned Nominees and Executive Officers Who Are Not Directors under Proposal 1: Election of Directors and Management
Information and The Board of Directors Meetings and Committees under Corporate Governance, and Section 16(a) Beneficial Ownership Reporting Compliance, in the registrants definitive Proxy Statement for
the Annual Meeting of Shareholders to be held in June 2011, to be filed with the SEC pursuant to Regulation 14A within 120 days of the registrants fiscal year end (the Proxy Statement), is incorporated herein by reference.

Item 11. Executive Compensation

The information contained under the sections captioned Directors Compensation, Information Regarding Executive
Officer Compensation, and Certain Relationship and Related Transactions, in the Proxy Statement, is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management

The information contained under the section captioned Information Regarding Beneficial Ownership of Principal Shareholders, Directors and Management in the Proxy Statement is incorporated
herein by reference.

We had one compensation plan under which shares of our common stock were issuable at December 31,
2010. This plan is our Stock Option Plan, previously approved by our stockholders. The following table sets forth information as of December 31, 2010 with respect to the number of shares of our common stock issuable pursuant to this plan.

EQUITY COMPENSATION PLAN INFORMATION



|                                                       |  |                                                                                          |        |  |                                                                        |   |       |                                                                                                                                      |  |  |        | 
|------------------------------------------------------ |  | ---------------------------------------------------------------------------------------- | ------ |  | ---------------------------------------------------------------------- | - | ----- | ------------------------------------------------------------------------------------------------------------------------------------ |  |  | ------ | 
|                                                       |  | (a)                                                                                      |        |  | (b)                                                                    |   |       | (c)                                                                                                                                  | 
|Plan Category                                          |  | Number of 
Securitiesto be Issued Upon Exerciseof Outstanding OptionsWarrants and Rights |        |  | Weighted-AverageExercise Price ofOutstandingOptions, WarrantsandRights |   |       | Number of SecuritiesRemaining Available forFuture Issuance
underEquity CompensationPlans (excludingSecurities Reflected inColumn (a) | 
|                                                       |  |                                                                                          |       
|Equity compensation plans approved by security holders |  |                                                                                          | 69,132 |  |                                                                        | $ | 30.05 |                                                                                                                                      |  |  | 66,794 | 
|                                                       |  |                                                                                          |        |  |                                                                        |   |       |                                                                                                                                      |  |  |        | 



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##### Table of Contents

Item 13. Certain Relationships and Related Transactions, and Director
Independence

The information contained under the section captioned Certain Relationships and Related
Transactions, and sections captioned Director Independence and The Board of Directors Meetings and Committees under Corporate Governance in the Proxy Statement is incorporated herein by reference.

Item 14. Principal Accounting Fees and Services

The information contained under the section captioned Independent Accountants in the Proxy Statement is incorporated herein by
reference.

PART IV

Item 15. Exhibits and Financial Statement Schedules

The financial statements of OptimumBank Holding, Inc. as of and for the years ended December 31, 2010 and 2009 are set forth in this Form 10-K as Exhibit 13.1 and contain the following
information:

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets, December 31, 2010 and 2009

Consolidated Statements of Operations for the Years Ended December 31, 2010 and 2009

Consolidated Statements of Stockholders Equity for the Years Ended December 31, 2010 and 2009

Consolidated Statements of Cash Flows for the Years Ended December 31, 2010 and 2009

Notes to Consolidated Financial Statements, December 31, 2010 and 2009 and for the Years Then Ended

(2) See Exhibit Index.



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SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant has caused this 10-K report to be duly signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Fort Lauderdale, State of Florida, on the 15th day of April 2011.



OPTIMUMBANK HOLDINGS, INC./s/ Richard L. BrowdyRichard L. BrowdyPresident and Chief Financial Officer(Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer)


In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated on April 15, 2011.



|                                        |  |  |  |                                    |  | 
|--------------------------------------- |  |  |  | ---------------------------------- |  | 
|Signature                               |  |  |  | Title                              |  | 
|                                        |  |  | 
|/s/ Richard L. Browdy Richard L. Browdy |  |  |  | Director                           |  | 
|                                        |  |  | 
|/s/ Sam Borek Sam Borek                 |  |  |  | Director and Chairman of the Board |  | 
|                                        |  |  | 
|/s/ Jerry Grace Jerry Grace             |  |  |  | Director                           |  | 
|                                        |  |  | 
|/s/ Wendy Mitchler Wendy Mitchler       |  |  |  | Director                           |  | 
|                                        |  |  | 
|/s/ Larry Willis Larry Willis           |  |  |  | Director                           |  | 
|                                        |  |  | 
|/s/ Robert Acri Robert Acri             |  |  |  | Director                           |  | 



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EXHIBIT INDEX



|           |  |                                                                                                                                                                                                                                                                                             
|---------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNo. |  | Description of Exhibit                                                                                                                                                                                                                                                                      
|           | 
|3.1        |  | Articles of Incorporation (incorporated by reference from Current Report on Form 8- K filed with the Securities and Exchange Commission (SEC) on May 11,
2004                                                                                                                             
|           | 
|3.2        |  | Articles of Amendment to the Articles of Incorporation, effective as of January 7, 2009 (Incorporated by reference to Exhibit 3.2 to Annual Report on Form 10-K for the year ended
December 31, 2008, filed with the SEC on March 31, 2009)                                                 
|           | 
|3.3        |  | Articles of Amendment to the Articles of Incorporation, effective as of November 5, 2010 (Incorporated by reference to Exhibit 3.3 to the Current Report on Form 8-K, filed with the
SEC on November 5, 2010)                                                                               
|           | 
|4.3        |  | Bylaws (incorporated by reference from Current Report on Form 8-K filed with the SEC on May 11, 2004                                                                                                                                                                                        
|           | 
|4.1        |  | Form of stock certificate (incorporated by reference from Quarterly Report on Form 10- QSB filed with the SEC on August 12, 2004)                                                                                                                                                           
|           | 
|10.1       |  | Amended and Restated Stock Option Plan (incorporated by reference from Annual Report on Form 10-KSB filed with the SEC on March 31, 2006)                                                                                                                                                   
|           | 
|10.2       |  | Stipulation to Entry of Consent Order and Consent Order between OptimumBank, Federal Deposit Insurance Corporation and State of Florida Office of Financial Regulation dated April
16, 2010 (incorporated by reference from current report on Form 8-K filed with the SEC on April 26, 2010)
|           | 
|10.3       |  | Agreement between OptimumBank, Albert J. Finch and Richard L. Browdy dated June 14, 2002 (incorporated by reference from Registration Statement on Form 10-SB under the Exchange Act,
filed with the Federal Deposit Insurance Corporation on March 28, 2003) (a)                           
|           | 
|10.4       |  | Written Agreement by and between OptimumBank Holdings, Inc. and Federal Reserve Bank of Atlanta dated June 22, 2010 (incorporated by reference from Quarterly Report on Form
10-Q filed with the SEC on November 15, 2010)                                                                  
|           | 
|13.1       |  | Consolidated Financial Statements of OptimumBank Holdings, Inc. and Report of Independent Registered Public Accounting Firm                                                                                                                                                                 
|           | 
|14.1       |  | Code of Ethics for Chief Executive Officer and Senior Financial Officers (incorporated by reference from Annual Report on Form 10-K filed with the SEC on March 31,
2010)                                                                                                                   
|           | 
|21.1       |  | Subsidiaries of the Registrant                                                                                                                                                                                                                                                              
|           | 
|31.1       |  | Certification of Principal Executive and Principal Financial Officer required by Rule 13a-14(a)/15d-14(a) under the Exchange Act                                                                                                                                                            
|           | 
|32.1       |  | Certification of Principal Executive and Principal Financial Officer under §906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                           



|(a) | Represents a management contract or compensatory plan or arrangement required to be filed as an exhibit.
|--- | --------------------------------------------------------------------------------------------------------



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