Table of Contents

|                                   
|-----------------------------------
|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, 2008    
|                                                
|OR                                              
|o                                                | TRANSITION REPORT PURSUANT TO
 SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|                                                 |                                                                                          
|Commission
 File Number 000-1288855             
|                                                
|                                                
|OPTIMUMBANK
 HOLDINGS, INC.                     
|(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)                        |  | (Zip
Code)                           
|                                                               
|Issuers telephone number, including area code:                
|(954) 776-2332                                                 
|                                                               
|Securities registered pursuant to Section 12(b) of the
 Act:   
|Common Stock, par value $0.01 per share                        
|                                                               
|Securities registered pursuant to Section 12(g) of the
 Act:   
|None                                                           
|                                                               
|                                                               

The
registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. YES o     NO x

The
registrant is not required to file reports pursuant to Section 13 or
Section 15(d) of the Act. YESoNO x

Check
whether the issuer has (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past
12 months (or for such shorter period that the issuer was required to file such
reports), and (2) has been subject to such filing requirements for the
past 90 days. YES x  NO o

Check
if there is no disclosure of delinquent filers in response to Item 405 of
Regulation SK contained in this form, and no disclosure will be contained, to
the best of issuer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 if the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See the
definitions of large accelerated filer, accelerated filer and smaller
reporting company in Rule 12b-2 of the Exchange Act. (Check one):

|                           |                             
|-------------------------- | ----------------------------
|Large
 accelerated filer o | Accelerated
 filer o        
|Non-accelerated
 filer o   | Smaller
 reporting company x

The
registrant is a shell company, as defined in Rule 12b-2 of the Exchange Act.   YES o   NO x

The
aggregate market value of the Common Stock of the issuer held by non-affiliates
of the issuer (2,057,603 shares) on March 23, 2009, was approximately
$8,724,237. The aggregate market value was computed by reference to the last
sale of the Common Stock of the issuer at $4.24 per share on March 23, 2009.
For the purposes of this response, directors and executive officers are
considered the affiliates of the issuer at that date.

As
of March 23, 2009, there were outstanding 3,120,992 shares of the issuers
Common Stock.

DOCUMENTS INCORPORATED BY REFERENCE

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Table of Contents

Portions
of the Proxy Statement for the Annual Meeting of Shareholders to be held on
April 30, 2009 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 9 through 12, and 14, of this
Annual Report on Form 10-K.

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TABLE OF CONTENTS

|            |                                                                                                                    |     
|----------- | ------------------------------------------------------------------------------------------------------------------ | ----
|            |                                                                                                                    | Page
|            |                                                                                                                    |     
|PART I      |                                                                                                                    | 1   
|            |                                                                                                                    |     
|Item 1.     | Business                                                                                                           |     
|            | Forward-Looking Statements                                                                                         | 1   
|            | General                                                                                                            | 1   
|            | Recent Events                                                                                                      | 1   
|            | Banking Products                                                                                                   | 1   
|            | Strategy                                                                                                           | 2   
|            | Lending Activities                                                                                                 | 2   
|            | Deposit Activities                                                                                                 | 3   
|            | Investments                                                                                                        | 3   
|            | Correspondent Banking                                                                                              | 3   
|            | Data Processing                                                                                                    | 3   
|            | Internet Banking                                                                                                   | 3   
|            | Competition                                                                                                        | 4   
|            | Employees                                                                                                          | 4   
|            | Supervision and Regulation                                                                                         | 4   
|            | Statistical Profile and Other
 Financial Data                                                                      | 8   
|            |                                                                                                                    |     
|Item 2.     | Properties                                                                                                         | 8   
|            |                                                                                                                    |     
|Item 3.     | Legal Proceedings                                                                                                  | 9   
|            |                                                                                                                    |     
|Item 4.     | Submission of Matters to a Vote of
 Security Holders                                                               | 9   
|            |                                                                                                                    |     
|PART II     |                                                                                                                    | 9   
|            |                                                                                                                    |     
|Item 5.     | Market for the Registrants Common
 Equity and Related Stockholder Matters                                         | 9   
|            |                                                                                                                    |     
|Item 6.     | Managements Discussion and Analysis
 of Financial Condition and Results of Operations                             | 10  
|            |                                                                                                                    |     
|Item 7.     | Financial Statements                                                                                               | 27  
|            |                                                                                                                    |     
|Item 8.     | Changes in and Disagreements with
 Accountants on Accounting and Financial Disclosure                              | 27  
|            |                                                                                                                    |     
|Item 8A(T). | Controls and Procedures                                                                                            | 27  
|            |                                                                                                                    |     
|Item 8B.    | Other Information                                                                                                  | 28  
|            |                                                                                                                    |     
|PART III    |                                                                                                                    | 28  
|            |                                                                                                                    |     
|Item 9.     | Directors, Executive Officers,
 Promoters and Control Persons; 
 Compliance with Section 16(a) of the Exchange Act | 28  
|            |                                                                                                                    |     
|Item 10.    | Executive Compensation                                                                                             | 28  
|            |                                                                                                                    |     
|Item 11.    | Security Ownership of Certain
 Beneficial Owners and Management                                                    | 28  
|            |                                                                                                                    |     
|Item 12.    | Certain Relationships and Related
 Transactions and Director Independence                                          | 29  
|            |                                                                                                                    |     
|Item 13.    | Exhibits                                                                                                           | 29  
|            |                                                                                                                    |     
|Item 14.    | Principal Accountant Fees and
 Services                                                                            | 30  
|            |                                                                                                                    |     
|SIGNATURES  | 31                                                                                                                

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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. Our only business is the ownership and operation of
OptimumBank. 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.

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 and the Federal Deposit Insurance Corporation.
OptimumBank is a member of the Federal Home Loan Bank of Atlanta.

At
December 31, 2008, our company had total assets of $255.7 million, net loans of
$160.7 million, total deposits of $114.9 million and stockholders equity of
$22.8 million. During 2008, our company had net earnings of $520,000.

Recent
Events

In
December 2008, we received preliminary approval from the U. S. Department of
Treasury to sell up to $4.578 million in preferred stock to Treasury under its
Troubled Asset Relief Program (TARP) Capital Purchase Program. Prior to
closing the transaction, we declined to accept the TARP funds after
consideration of all the factors associated with the receipt of TARP funds. We
based our decision in part on the fact that we had capital well in excess of
that required to be considered well-capitalized under banking regulations
without the TARP funds.

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.

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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.

Strategy

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

Our
operating and business strategy emphasizes:

| |    |                                                                                                                                                                                                                                                              
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1. | Local
 management and local decision making resulting in rapid, personalized
 customer service, rapid credit decisions and expedited closings;                                                                                                               
| | 2. | Maintaining
 our presence in Broward County through a branch network- we currently have
 three branch banking offices in Broward County;                                                                                                                     
| | 3. | Real estate
 lending activities by continuing to originate adjustable rate residential and
 commercial mortgage loans for our customers;                                                                                                                     
| | 4. | Maintaining
 high credit quality through strict underwriting criteria and our knowledge of
 the real estate values in our market area;                                                                                                                       
| | 5. | 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.

Lending Activities

We
offer primarily real estate and to a lesser extent, consumer loans, to
individuals and small businesses and other organizations that are 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, 2008 were $160.7 million, or 62.84% of
total assets. The interest rates we charge on loans vary with the degree of
risk, maturity, and amount of the loan, and are 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, 2008, 99.46% of our loan portfolio consisted
of loans secured by mortgages on real estate, of which approximately 36.25% 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 may be 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. Our consumer loans range from a term
of one to five years and may be made at fixed or variable interest rates. We
originate unsecured consumer loans as well as consumer loans secured by
mortgages on residential and commercial real estate.

Loan
originations are derived primarily from existing customers, direct marketing
and independent mortgage brokers that process our loans. We pay fees to these
brokers in connection with their services; however, we perform the underwriting
and approval of each of the loans we fund.

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. 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 real estate
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.

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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 67.9% of our total deposits at December 31, 2008.
Approximately 73.2% of our deposits at December 31, 2008 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
32.1% of our total deposits at December 31, 2008. 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
may use 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. Brokered
deposits amounted to 11.9% and 6.0% of our total deposits at December 31, 2008
and 2007, respectively.

Investments

We
invest a portion of our assets in mortgage-backed securities and federal funds
sold. Our investments are managed in relation to loan demand and deposit
growth, and are generally used to provide for the investment of excess funds
with minimal risk and for liquidity to fund increases in loan demand or to
offset fluctuations in deposits.

Our
total investment portfolio may be invested in U.S. Treasury and general
obligations of its agencies because such securities generally represent a
minimal investment risk. Mortgage-backed securities generally have a shorter
life than the stated maturity. 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.

We
monitor changes in financial markets. In addition to investments for our
portfolio, we monitor our daily cash position to ensure that all available
funds earn interest at the earliest possible date. A portion of the investment
account is designated as secondary reserves and invested in liquid securities
that can be readily converted to cash with minimum risk of market loss. These
investments usually consist of U.S. Treasury obligations, U.S. government
agencies and federal funds. The remainder of the investment account may be placed
in investment securities of different type and longer maturity. Daily surplus
funds are sold in the federal funds market for one business day. We attempt to
stagger the maturities of our securities so as to produce a steady cash flow in
the event we need cash.

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.

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.

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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, 2008, we had 19 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.

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

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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.

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(b) 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 Department of Financial Services (the Florida Department) 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 Department, to
whom it submits periodic reports regarding its financial condition and other
matters. The FDIC and the Florida Department 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

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of banks,
including the institution of cease and desist orders and the removal of
directors and officers. The FDIC and the Florida Department also have the
authority to approve or disapprove mergers, consolidations, and similar
corporate actions.

Dividends.OptimumBank
Holdings ability to pay
dividends is substantially dependent on the ability of OptimumBank to pay
dividends to OptimumBank Holdings. The FDIC and the Florida Department have the
general authority to limit the dividend payment by banks if such payment may be
deemed to constitute an unsafe and unsound practice. For information on the
restrictions on the right of OptimumBank to pay dividends to OptimumBank
Holdings, see Part II  Item 5 Market for the Registrants Common
Equity and Related Stockholder Matters.

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 $6.9 million,
provided the unsecured portion does not exceed approximately $4.1 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 Department 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
Department 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 Department for its review and approval. Subsections
658.27(2)(c) 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 Department for prior approval.

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.State 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                    

6

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Table of Contents

| |   |                                                                                                                                                                                                                                                                                                                                               
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | ▪ | 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.                                                                                                                                               

Capital
Adequacy Requirements

The
Federal Reserve Board and bank regulatory agencies require bank holding
companies and banks 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 and qualifying preferred
shareholders equity, excluding the unrealized gain (loss) on
available-for-sale securities, 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. 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 3%, but all but the highest rated
institutions are required to maintain ratios 100 to 200 basis points above the
minimum. At December 31, 2008, the Bank met all capital requirements to
which they were subject.

The
FDIC Improvement Act of 1991 (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. Under regulations implementing the prompt
corrective action provisions of FDICIA, the FDIC possesses broad powers to
take prompt corrective action as deemed appropriate for a bank, based on the
banks capital levels. The extent of these powers depends upon whether the bank
in question is considered well-capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized, or critically
undercapitalized. Generally, as a bank is deemed to be less well-capitalized,
the scope and severity of the FDICs powers increase, ultimately permitting the
FDIC to appoint a receiver for the bank. Business activities may also be
influenced by a banks capital classification. For instance, only a
well-capitalized bank may accept brokered deposits without prior regulatory
approval, and can engage in various expansion activities with prior notice,
rather than prior regulatory approval. Failure to meet these capital
requirements could subject the bank to the prompt corrective action provisions
of the FDIC, which may include filing with the FDIC a plan describing the means
and a schedule for achieving the minimum capital requirements. In addition, a
bank would not be able to receive regulatory approval of any application that
required consideration of capital adequacy, such as a branch or merger
application, unless it could demonstrate a reasonable plan to meet the capital
requirement within an acceptable period of time. As of December 31, 2008,
OptimumBank met the capital requirements of a well capitalized institution.

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

7

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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 section
captioned 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, 2008.

|                                                                |  |      |                       |  |                 | 
|--------------------------------------------------------------- |  | ---- | --------------------- |  | --------------- | 
|Location                                                        |  |      | Year Facility
 Opened |  | Facility Status
|                                                               
|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, 2008 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, 2008 was $6,449.                                                                                                                                                               

8

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Table of Contents

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.

Item 4. Submission of
Matters to a Vote of Security Holders

No
matters were submitted to a vote of our security holders during the fourth
quarter of the year ended December 31, 2008.

PART II

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

Our
common stock currently trades on the NASDAQ Global Market, under the symbol
OPHC. The table below presents the high and low sales prices for the periods
indicated.

|     |  |         |  |      |       |     |   |      | 
|---- |  | ------- |  | ---- | ----- | --- | - | ---- | 
|Year |  | Quarter |  | High |       | Low |  
|     |  |         |  |      |       |     |   |      | 
|2007 |  | First   |  | $    | 13.00 |     | $ | 8.12 | 
|     |  | Second  |  | $    | 10.50 |     | $ | 8.50 | 
|     |  | Third   |  | $    | 10.16 |     | $ | 6.39 | 
|     |  | Fourth  |  | $    | 9.00  |     | $ | 6.51 | 
|     |  |         |  |      |       |     |   |      | 
|2008 |  | First   |  | $    | 9.71  |     | $ | 5.16 | 
|     |  | Second  |  | $    | 9.45  |     | $ | 6.75 | 
|     |  | Third   |  | $    | 8.01  |     | $ | 3.84 | 
|     |  | Fourth  |  | $    | 6.00  |     | $ | 3.08 | 

We
had approximately 208 holders registered or in street name as of December 31,
2008.

We have not
paid any cash dividends in the past. We intend that, for the foreseeable
future, we will retain earnings to finance continued growth rather than pay
cash dividends on our common stock.

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 Department, 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. In addition, a state-chartered bank in Florida is
required to transfer at least 20% of its net income to surplus until its
surplus equals the amount of paid-in capital. 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.

9

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Table of Contents

Item 6. Managements
Discussion and Analysis of Financial Condition and Results of Operations.

SELECTED FINANCIAL DATA

At December 31, or for the Year Then Ended 
(Dollars in thousands, except per share figures)

|                                                                                          |  |      |           |      |  |           |   |      |           |      |  |           |   |  |           |  
|----------------------------------------------------------------------------------------- |  | ---- | --------- | ---- |  | --------- | - | ---- | --------- | ---- |  | --------- | - |  | --------- | -
|                                                                                          |  | 2008 |           | 2007 |  | 2006      |   | 2005 |           | 2004 | 
|At Year End:                                                                              |  |      |           |      |  |           |   |      |           |      |  |           |   |  |           |  
|                                                                                          |  |      |           |      |  |           |   |      |           |      |  |           |   |  |           |  
|Cash and cash equivalents                                                                 |  | $    | 3,220     |      |  | 701       |   |      | 1,604     |      |  | 1,154     |   |  | 3,223     |  
|Securities held to maturity                                                               |  |      | 82,208    |      |  | 58,471    |   |      | 33,399    |      |  | 25,618    |   |  | 24,134    |  
|Security available for sale                                                               |  |      | 244       |      |  | 244       |   |      | 241       |      |  | 243       |   |  | 247       |  
|Loans, net                                                                                |  |      | 160,699   |      |  | 173,323   |   |      | 181,878   |      |  | 170,226   |   |  | 128,810   |  
|Loans held for sale                                                                       |  |      | -         |      |  | -         |   |      | -         |      |  | -         |   |  | 509       |  
|All other assets                                                                          |  |      | 9,369     |      |  | 8,808     |   |      | 8,581     |      |  | 8,803     |   |  | 7,635     |  
|                                                                                          |  |      |           |      |  |           |   |      |           |      |  |           |   |  |           |  
|Total assets                                                                              |  | $    | 255,740   |      |  | 241,547   |   |      | 225,703   |      |  | 206,044   |   |  | 164,558   |  
|                                                                                          |  |      |           |      |  |           |   |      |           |      |  |           |   |  |           |  
|Deposit accounts                                                                          |  |      | 114,925   |      |  | 125,034   |   |      | 129,502   |      |  | 114,064   |   |  | 97,994    |  
|Federal Home Loan Bank advances                                                           |  |      | 68,700    |      |  | 56,850    |   |      | 56,550    |      |  | 52,950    |   |  | 37,650    |  
|Other borrowings                                                                          |  |      | 41,800    |      |  | 28,900    |   |      | 10,950    |      |  | 12,950    |   |  | 5,000     |  
|Junior subordinated debenture                                                             |  |      | 5,155     |      |  | 5,155     |   |      | 5,155     |      |  | 5,155     |   |  | 5,155     |  
|All other liabilities                                                                     |  |      | 2,395     |      |  | 3,361     |   |      | 3,123     |      |  | 2,515     |   |  | 2,036     |  
|Stockholders equity                                                                      |  |      | 22,765    |      |  | 22,247    |   |      | 20,423    |      |  | 18,410    |   |  | 16,723    |  
|                                                                                          |  |      |           |      |  |           |   |      |           |      |  |           |   |  |           |  
|Total liabilities and stockholders
equity                                                |  | $    | 255,740   |      |  | 241,547   |   |      | 225,703   |      |  | 206,044   |   |  | 164,558   |  
|                                                                                          |  |      |           |      |  |           |   |      |           |      |  |           |   |  |           |  
|For the Year:                                                                             |  |      |           |      |  |           |   |      |           |      |  |           |   |  |           |  
|                                                                                          |  |      |           |      |  |           |   |      |           |      |  |           |   |  |           |  
|Total interest income                                                                     |  |      | 15,570    |      |  | 16,137    |   |      | 14,191    |      |  | 11,334    |   |  | 8,815     |  
|Total interest expense                                                                    |  |      | 9,211     |      |  | 9,700     |   |      | 8,063     |      |  | 5,841     |   |  | 4,032     |  
|                                                                                          |  |      |           |      |  |           |   |      |           |      |  |           |   |  |           |  
|Net interest income                                                                       |  |      | 6,359     |      |  | 6,437     |   |      | 6,128     |      |  | 5,493     |   |  | 4,783     |  
|Provision for loan losses                                                                 |  |      | 1,374     |      |  | 476       |   |      | 265       |      |  | 149       |   |  | 136       |  
|                                                                                          |  |      |           |      |  |           |   |      |           |      |  |           |   |  |           |  
|Net interest income after provision for
 loan losses                                      |  |      | 4,985     |      |  | 5,961     |   |      | 5,863     |      |  | 5,344     |   |  | 4,647     |  
|                                                                                          |  |      |           |      |  |           |   |      |           |      |  |           |   |  |           |  
|Noninterest income                                                                        |  |      | 393       |      |  | 533       |   |      | 628       |      |  | 635       |   |  | 690       |  
|Noninterest expenses                                                                      |  |      | 4,545     |      |  | 3,749     |   |      | 3,574     |      |  | 3,396     |   |  | 2,801     |  
|                                                                                          |  |      |           |      |  |           |   |      |           |      |  |           |   |  |           |  
|Earnings before income taxes                                                              |  |      | 833       |      |  | 2,745     |   |      | 2,917     |      |  | 2,583     |   |  | 2,536     |  
|Income taxes                                                                              |  |      | 313       |      |  | 1,003     |   |      | 1,083     |      |  | 982       |   |  | 966       |  
|                                                                                          |  |      |           |      |  |           |   |      |           |      |  |           |   |  |           |  
|Net earnings                                                                              |  | $    | 520       |      |  | 1,742     |   |      | 1,834     |      |  | 1,601     |   |  | 1,570     |  
|                                                                                          |  |      |           |      |  |           |   |      |           |      |  |           |   |  |           |  
|Net earnings per share, basic (1)                                                         |  | $    | .17       |      |  | .56       |   |      | .59       |      |  | .52       |   |  | .51       |  
|                                                                                          |  |      |           |      |  |           |   |      |           |      |  |           |   |  |           |  
|Net earnings per share, diluted (1)                                                       |  | $    | .16       |      |  | .55       |   |      | .57       |      |  | .50       |   |  | .50       |  
|                                                                                          |  |      |           |      |  |           |   |      |           |      |  |           |   |  |           |  
|Weighted-average number of shares
 outstanding, basic (1)                                 |  |      | 3,120,992 |      |  | 3,112,227 |   |      | 3,101,357 |      |  | 3,077,949 |   |  | 3,051,874 |  
|                                                                                          |  |      |           |      |  |           |   |      |           |      |  |           |   |  |           |  
|Weighted-average number of shares
 outstanding, diluted (1)                               |  |      | 3,164,219 |      |  | 3,184,744 |   |      | 3,233,617 |      |  | 3,197,124 |   |  | 3,147,249 |  
|                                                                                          |  |      |           |      |  |           |   |      |           |      |  |           |   |  |           |  
|Ratios and Other Data:                                                                    |  |      |           |      |  |           |   |      |           |      |  |           |   |  |           |  
|                                                                                          |  |      |           |      |  |           |   |      |           |      |  |           |   |  |           |  
|Return on average assets                                                                  |  |      | .21       | %    |  | .73       | % |      | .85       | %    |  | .86       | % |  | 1.06      | %
|Return on average equity                                                                  |  |      | 2.26      | %    |  | 8.16      | % |      | 9.37      | %    |  | 9.09      | % |  | 10.05     | %
|Average equity to average assets                                                          |  |      | 9.15      | %    |  | 8.96      | % |      | 9.12      | %    |  | 9.42      | % |  | 10.53     | %
|Net interest margin during the year                                                       |  |      | 2.61      | %    |  | 2.78      | % |      | 2.96      | %    |  | 3.08      | % |  | 3.35      | %
|Interest-rate differential during the year                                                |  |      | 2.26      | %    |  | 2.34      | % |      | 2.63      | %    |  | 2.84      | % |  | 3.05      | %
|Net yield on average interest-earning
 assets                                             |  |      | 6.38      | %    |  | 6.96      | % |      | 6.85      | %    |  | 6.36      | % |  | 6.18      | %
|Noninterest expenses to average assets                                                    |  |      | 1.81      | %    |  | 1.57      | % |      | 1.67      | %    |  | 1.82      | % |  | 1.89      | %
|Ratio of average interest-earning assets to
 average interest-bearing liabilities         |  |      | 1.09      |      |  | 1.10      |   |      | 1.08      |      |  | 1.08      |   |  | 1.11      |  
|Nonperforming loans and foreclosed assets
 as a percentage of total assets at end of year |  |      | 2.03      | %    |  | 0.13      | % |      | -         |      |  | -         |   |  | 2.54      | %
|Allowance for loan losses as a percentage
 of total loans at end of year                  |  |      | 1.18      | %    |  | .40       | % |      | .54       | %    |  | .46       | % |  | .49       | %
|Total number of banking offices                                                           |  |      | 3         |      |  | 3         |   |      | 3         |      |  | 3         |   |  | 3         |  
|Total shares outstanding at end of year (1)                                               |  |      | 3,120,992 |      |  | 3,121,132 |   |      | 3,109,359 |      |  | 3,083,653 |   |  | 3,067,824 |  
|Book value per share at end of year (1)                                                   |  | $    | 7.29      |      |  | 7.13      |   |      | 6.57      |      |  | 5.97      |   |  | 5.45      |  

|    |                                                                                                                            
|--- | ---------------------------------------------------------------------------------------------------------------------------
|(1) | All share
 and per share amounts have been adjusted to reflect the 5% stock dividends
 declared in May 2008, 2007 and 2006.

10

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Table of Contents

General

OptimumBank
Holdings, Inc. is a one-bank holding company formed in 2004. Our only business
is the ownership and operation of OptimumBank. OptimumBank is a Florida
chartered bank which opened in November 2000, and its deposits are insured by
the 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.

At December
31, 2008, our company had total assets of $255.7 million, net loans of $160.7
million, total deposits of $114.9 million and stockholders equity of $22.8
million. During 2008, our company had net earnings of $520,000.

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
allowance for loan losses is one of our most difficult and subjective
judgments. 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 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 Results of Operations
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 Department of Financial Services and the FDIC. We file reports with
the Florida Department 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 Department 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.

Loan Portfolio, Allowance for Loan Losses,
Asset Quality and Credit Risk

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. We have instituted detailed
loan policies and procedures which include underwriting guidelines to minimize
loss exposure. We also have credit review procedures to protect us from
avoidable credit losses. We believe our procedures are adequate to insure asset
quality and protect against credit risk, but some losses beyond our control
will inevitably occur.

We grant
the majority of our loans to borrowers throughout Broward and portions of Palm
Beach and Miami-Dade Counties, Florida. Although we have a diversified loan
portfolio, a significant portion of our borrowers ability to honor their
contracts is dependent on the economy in Broward, Palm Beach and Miami-Dade
County, Florida, and to a lesser extent, other regions in Florida.

11

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Table of Contents

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

|                                  |  |                        |         |             |        |        |   |             |   |        |   |             |         |   |        |  
|--------------------------------- |  | ---------------------- | ------- | ----------- | ------ | ------ | - | ----------- | - | ------ | - | ----------- | ------- | - | ------ | -
|                                  |  | At December 31,        |        
|                                  |  | 2008                   |         | 2007        |        | 2006   |  
|                                  |  | Amount                 |         | % of
 Total |        | Amount |   | % of
 Total |   | Amount |   | % of
 Total |        
|                                  |  | (dollars in thousands) |        
|                                 
|Residential real estate           |  | $                      | 58,693  |             | 36.25  | %      | $ | 65,908      |   | 38.08  | % | $           | 70,868  |   | 38.99  | %
|Multi-family real estate          |  |                        | 9,588   |             | 5.92   |        |   | 10,275      |   | 5.94   |   |             | 10,769  |   | 5.93   |  
|Commercial real estate            |  |                        | 73,541  |             | 45.42  |        |   | 75,777      |   | 43.78  |   |             | 68,852  |   | 37.89  |  
|Land and construction             |  |                        | 19,223  |             | 11.87  |        |   | 21,093      |   | 12.19  |   |             | 31,022  |   | 17.07  |  
|Commercial                        |  |                        | -       |             | -      |        |   | -           |   | -      |   |             | -       |   | -      |  
|Consumer                          |  |                        | 878     |             | .54    |        |   | 15          |   | .01    |   |             | 227     |   | .12    |  
|                                  |  |                        |         |             |        |        |   |             |   |        |   |             |         |   |        |  
|Total loans                       |  |                        | 161,923 |             | 100.00 | %      |   | 173,068     |   | 100.00 | % |             | 181,738 |   | 100.00 | %
|                                  |  |                        |         |             |        |        |   |             |   |        |   |             |         |   |        |  
|Add (deduct):                     |  |                        |         |             |        |        |   |             |   |        |   |             |         |   |        |  
|Allowance for loan losses         |  |                        | (1,906  | )           |        |        |   | (692        | ) |        |   |             | (974    | ) |        |  
|Net deferred loan costs discounts |  |                        | 682     |             |        |        |   | 947         |   |        |   |             | 1,114   |   |        |  
|                                  |  |                        |         |             |        |        |   |             |   |        |   |             |         |   |        |  
|Loans, net                        |  | $                      | 160,699 |             |        |        | $ | 173,323     |   |        |   | $           | 181,878 |   |        |  

|                                  |  |                        |         |             |        |        |   |             |   |        |  
|--------------------------------- |  | ---------------------- | ------- | ----------- | ------ | ------ | - | ----------- | - | ------ | -
|                                  |  | At December 31,        |        
|                                  |  | 2005                   |         | 2004        |       
|                                  |  | Amount                 |         | % of
 Total |        | Amount |   | % of
 Total |  
|                                  |  | (dollars in thousands) |        
|                                 
|Residential
 real estate          |  | $                      | 65,016  |             | 38.29  | %      | $ | 61,070      |   | 47.38  | %
|Multi-family
 real estate         |  |                        | 15,135  |             | 8.91   |        |   | 10,853      |   | 8.42   |  
|Commercial
 real estate           |  |                        | 54,286  |             | 31.97  |        |   | 38,064      |   | 29.53  |  
|Land and
 construction            |  |                        | 34,760  |             | 20.47  |        |   | 18,169      |   | 14.09  |  
|Commercial                        |  |                        | 570     |             | .33    |        |   | 581         |   | .45    |  
|Consumer                          |  |                        | 43      |             | .03    |        |   | 162         |   | .13    |  
|                                  |  |                        |         |             |        |        |   |             |   |        |  
|Total loans                       |  |                        | 169,810 |             | 100.00 | %      |   | 128,899     |   | 100.00 | %
|                                  |  |                        |         |             |        |        |   |             |   |        |  
|Add
 (deduct):                    |  |                        |         |             |        |        |   |             |   |        |  
|Allowance for loan losses         |  |                        | (777    | )           |        |        |   | (628        | ) |        |  
|Net deferred loan costs discounts |  |                        | 1,193   |             |        |        |   | 539         |   |        |  
|                                  |  |                        |         |             |        |        |   |             |   |        |  
|Loans, net                        |  | $                      | 170,226 |             |        |        | $ | 128,810     |   |        |  

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

|                           |  |                         |       |      |   |      |   |      |     |      |   |     |  |   |     | 
|-------------------------- |  | ----------------------- | ----- | ---- | - | ---- | - | ---- | --- | ---- | - | --- |  | - | --- | 
|                           |  | Year Ended December 31, |      
|                           |  | 2008                    |       | 2007 |   | 2006 |   | 2005 |     | 2004 |  
|                           |  |                         |       |      |   |      |   |      |     |      |   |     |  |   |     | 
|Beginning
 balance         |  | $                       | 692   |      | $ | 974  |   | $    | 777 |      | $ | 628 |  | $ | 492 | 
|Provision
 for loan losses |  |                         | 1,374 |      |   | 476  |   |      | 265 |      |   | 149 |  |   | 136 | 
|Loans
 charged off:        |  |                         |       |      |   |      |   |      |     |      |   |     |  |   |     | 
|Residential
 real estate   |  |                         | (112  | )    |   | (758 | ) |      | (68 | )    |   | -   |  |   | -   | 
|Commercial
 real estate    |  |                         | (48   | )    |   | -    |   |      | -   |      |   | -   |  |   | -   | 
|Total Loans
 Charged Off   |  |                         | (160  | )    |   | (758 | ) |      | (68 | )    |   | -   |  |   | -   | 
|                           |  |                         |       |      |   |      |   |      |     |      |   |     |  |   |     | 
|Ending
 balance            |  | $                       | 1,906 |      | $ | 692  |   | $    | 974 |      | $ | 777 |  | $ | 628 | 

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The
allowance for loan losses is established as losses are estimated to have
occurred through a provision for loan losses charged to earnings. Loan losses
are charged against the allowance when we believe the uncollectibility of a
loan balance is confirmed. Subsequent recoveries, if any, are credited to the
allowance. In 2008, the charge-offs related to single-family residential loans
and a commercial real estate loan. In 2007, the charge-offs related to a
single-family residential loan. The allowance for loan losses represented 1.18%
and .40% of the total loans outstanding at December 31, 2008 and 2007,
respectively.

We evaluate
the allowance for loan losses on a regular basis. It is based on our periodic
review of the collectibility of the existing loan portfolio in light of
historical loss experience, the nature and volume of the loan portfolio,
adverse situations, including economic conditions, that may affect the
borrowers ability to repay, estimated value of any underlying collateral and
prevailing 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 specific and general components. The specific component
relates to loans that are classified as impaired. For such loans, we establish
an allowance when the discounted cash flows (or collateral value or observable
market price) of the impaired loan is lower than the carrying value of that
loan. The general component covers all other loans and is based on historical
loss experience adjusted for qualitative factors.

We consider
a loan impaired when, based on current information and events, it is probable
that we will be unable to collect the scheduled payments of principal or
interest when due according to the contractual terms of the loan agreement.
Factors we consider in determining impairment include payment status,
collateral value, and the probability of collecting scheduled principal and
interest payments when due. Loans that experience insignificant payment delays
and payment shortfalls generally are not classified as impaired. We determine
the significance of payment delays and payment shortfalls on a case-by-case
basis, taking into consideration all of the circumstances surrounding the loan
and the borrower, including the length of the delay, the reasons for the delay,
the borrowers prior payment record, and the amount of the shortfall in
relation to the principal and interest owed.

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. For loans that are collateral dependent,
our estimates of the fair value of collateral are based on a variety of
information, including the use of available appraisals, estimates of market
value by licensed appraisers or local real estate brokers, and the knowledge
and experience of our management related to property values in our market
areas. Our management takes into consideration the type, location and occupancy
of the property as well as current economic conditions in the area the property
is located in assessing estimates of fair value.

In the
table below, we have shown the two components, as discussed above, of our
allowance for loan losses at December 31, 2008 and 2007 (dollars in thousands):

|                                                        |  |                 |         |      |   |         |  
|------------------------------------------------------- |  | --------------- | ------- | ---- | - | ------- | -
|                                                        |  | At December 31, |        
|                                                        |  | 2008            |         | 2007 |  
|Impaired loans                                          |  | $               | 10,938  |      | $ | -       |  
|                                                        |  |                 |         |      |   |         |  
|Specific Allowance on Impaired Loans                    |  |                 | 1,120   |      |   | -       |  
|                                                        |  |                 |         |      |   |         |  
|Specific allowance as percentage of
 impaired loans     |  |                 | 10.24   | %    |   | -       | %
|                                                        |  |                 |         |      |   |         |  
|Total loans other than impaired loans                   |  |                 | 150,985 |      |   | 173,068 |  
|                                                        |  |                 |         |      |   |         |  
|General Allowance                                       |  |                 | 786     |      |   | 692     |  
|                                                        |  |                 |         |      |   |         |  
|General allowance as percentage of non
 impaired loans  |  |                 | .52     | %    |   | .40     | %
|                                                        |  |                 |         |      |   |         |  
|Total loans                                             |  |                 | 161,923 |      |   | 173,068 |  
|                                                        |  |                 |         |      |   |         |  
|Total allowance for loan losses                         |  |                 | 1,906   |      |   | 692     |  
|                                                        |  |                 |         |      |   |         |  
|Allowance for loan losses as percentage of
 total loans |  |                 | 1.18    | %    |   | .40     | %

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

|                                                                      |  |                 |       |                    |  |        |   |                    |      |        |  |                    |   |   |      |   |  |        |  
|--------------------------------------------------------------------- |  | --------------- | ----- | ------------------ |  | ------ | - | ------------------ | ---- | ------ |  | ------------------ | - | - | ---- | - |  | ------ | -
|                                                                      |  | At December 31, |      
|                                                                      |  | 2008            |       | 2007               |  | 2006   |  
|                                                                      |  | Amount          |       | % of
 Total
 Loans |  | Amount |   | % of
 Total
 Loans |      | Amount |  | % of
 Total
 Loans |  
|                                                                     
|Residential real estate                                               |  | $               | 928   |                    |  | 36.25  | % | $                  | 187  |        |  | 38.08              | % | $ | 400  |   |  | 38.99  | %
|Multi-family real estate                                              |  |                 | 62    |                    |  | 5.92   |   |                    | 59   |        |  | 5.94               |   |   | 54   |   |  | 5.93   |  
|Commercial real estate                                                |  |                 | 463   |                    |  | 45.42  |   |                    | 379  |        |  | 43.78              |   |   | 406  |   |  | 37.89  |  
|Land and construction                                                 |  |                 | 444   |                    |  | 11.87  |   |                    | 67   |        |  | 12.19              |   |   | 114  |   |  | 17.07  |  
|Commercial                                                            |  |                 | -     |                    |  | -      |   |                    | -    |        |  | -                  |   |   | -    |   |  | -      |  
|Consumer                                                              |  |                 | 9     |                    |  | .54    |   |                    | -    |        |  | .01                |   |   | -    |   |  | .12    |  
|                                                                      |  |                 |       |                    |  |        |   |                    |      |        |  |                    |   |   |      |   |  |        |  
|Total allowance for loan losses                                       |  | $               | 1,906 |                    |  | 100.00 | % | $                  | 692  |        |  | 100.00             | % | $ | 974  |   |  | 100.00 | %
|                                                                      |  |                 |       |                    |  |        |   |                    |      |        |  |                    |   |   |      |   |  |        |  
|Allowance for loan losses as a percentage
 of total loans outstanding |  |                 | 1.18  | %                  |  |        |   |                    | 0.40 | %      |  |                    |   |   | 0.54 | % |  |        |  

|                                                                      |  |                 |      |                    |  |        |   |                    |      |   |  |        |  
|--------------------------------------------------------------------- |  | --------------- | ---- | ------------------ |  | ------ | - | ------------------ | ---- | - |  | ------ | -
|                                                                      |  | At December 31, |     
|                                                                      |  | 2005            |      | 2004               | 
|                                                                      |  | Amount          |      | % of
 Total
 Loans |  | Amount |   | % of
 Total
 Loans |     
|                                                                     
|Residential real estate                                               |  | $               | 206  |                    |  | 38.29  | % | $                  | 218  |   |  | 47.38  | %
|Multi-family real estate                                              |  |                 | 81   |                    |  | 8.91   |   |                    | 52   |   |  | 8.42   |  
|Commercial real estate                                                |  |                 | 347  |                    |  | 31.97  |   |                    | 240  |   |  | 29.53  |  
|Land and construction                                                 |  |                 | 140  |                    |  | 20.47  |   |                    | 115  |   |  | 14.09  |  
|Commercial                                                            |  |                 | 3    |                    |  | .33    |   |                    | 3    |   |  | .45    |  
|Consumer                                                              |  |                 | -    |                    |  | .03    |   |                    | -    |   |  | .13    |  
|                                                                      |  |                 |      |                    |  |        |   |                    |      |   |  |        |  
|Total allowance for loan losses                                       |  | $               | 777  |                    |  | 100.00 | % | $                  | 628  |   |  | 100.00 | %
|                                                                      |  |                 |      |                    |  |        |   |                    |      |   |  |        |  
|Allowance for loan losses as a percentage
 of total loans outstanding |  |                 | 0.46 | %                  |  |        |   |                    | 0.49 | % |  |        |  

Information
about impaired loans, all of which are collateral dependent, is as follows (in
thousands):

|                                                             |  |                 |        |      |   |   | 
|------------------------------------------------------------ |  | --------------- | ------ | ---- | - | - | 
|                                                             |  | At December 31, |       
|                                                             |  | 2008            |        | 2007 |  
|Loans
 identified as impaired:                               |  |                 |        |      |   |   | 
|Gross loans with no related allowance for
 losses            |  | $               | 4,001  |      | $ | - | 
|Gross loans with related allowance for loan
 losses recorded |  |                 | 6,937  |      |   | - | 
|Less: Allowance on these loans                               |  |                 | (1,120 | )    |   | - | 
|                                                             |  |                 |        |      |   |   | 
|Net investment in impaired loans                             |  | $               | 9,818  |      | $ | - | 

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There were
no impaired loans during 2006. During 2008 and 2007, 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, |      
|                                                            |  | 2008                    |       | 2007 |  
|                                                           
|Average
 investment in impaired loans                       |  | $                       | 3,240 |      | $ | 1,581 | 
|                                                            |  |                         |       |      |   |       | 
|Interest
 income recognized on impaired loans               |  | $                       | -     |      | $ | 39    | 
|                                                            |  |                         |       |      |   |       | 
|Interest
 income received on a cash basis on impaired loans |  | $                       | -     |      | $ | 39    | 

The
increase in impaired loans in 2008 is reflective of the current real estate
market in Florida and the economy in general. The net investment in impaired
loans at December 31, 2008 consists of 10 land loans with a carrying value of
$7.41 million, net of related allowance for loan losses of $420,000, and one
residential loan in the amount of $2.408 million, net of related allowance for
loan losses of $700,000, secured by a single-family residence in Naples,
Florida. The largest impaired land loans consist of two loans in the aggregate
amount of $4.299 million, net of related allowance for loan losses of $5,033,
secured by undeveloped waterfront land in North Fort Myers, Florida, and a
$1.869 million loan, net of related allowance for loan losses of $200,000,
secured by waterfront lots in Bonita Springs, Florida.

At December
31, 2006 and 2005, 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, 2008, 2007 and 2004 (in thousands):

|                                                       |  |                 |       |      |   |      |  |   |       | 
|------------------------------------------------------ |  | --------------- | ----- | ---- | - | ---- |  | - | ----- | 
|                                                       |  | At December 31, |      
|                                                       |  | 2008            |       | 2007 |   | 2004 | 
|                                                      
|Nonaccrual
 loans                                      |  | $               | 5,086 |      | $ | 245  |  | $ | 3,268 | 
|                                                       |  |                 |       |      |   |      |  |   |       | 
|Past ninety
 days or more, but still accruing interest |  | $               | -     |      | $ | -    |  | $ | -     | 

All
non-accrual loans at December 31, 2008 have been identified by management as
impaired loans at that date.

At December
31, 2008 and 2007, the Company had $95,000 and $79,000, respectively, of
foreclosed real estate assets.

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.

Our primary
sources of cash during the year ended December 31, 2008 were from other
borrowings of $12.9 million, principal repayments of securities held to
maturity of $11.4 million, net repayments of loans of $10.0 million and
proceeds from Federal Home Loan Bank advances of $22.5 million. Cash was used
primarily to purchase securities held to maturity totaling $35.6 million,
repayment of Federal Home Loan Bank advances of $10.7 million and to fund
deposit withdrawals of $10.1 million. We 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 utilize 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 40% of
the Banks total assets. As of December 31, 2008, we had $68.7 million in
borrowings outstanding from the Federal Home Loan Bank of Atlanta to facilitate
loan fundings and manage our asset and liability structure. In addition, we
have an unsecured federal funds line of credit with Independent Bankers Bank
of Florida totaling $6 million, none of which was outstanding at December 31,
2008. This credit line is normally used to meet short-term funding demands. At
December 31, 2008, we sold securities under an agreement to repurchase totaling
$41.8 million. These borrowings are collateralized by securities held to
maturity with a carrying value of $55.6 million at December 31, 2008. We
believe our liquidity sources are adequate to meet our operating needs.

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Table of Contents

Securities

Our
securities portfolio is comprised primarily of mortgage-backed securities and a
mutual fund. 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):

|                                         |  |                 |        |             |   |        | 
|---------------------------------------- |  | --------------- | ------ | ----------- | - | ------ | 
|                                         |  | Amortized
 Cost |        | Fair
 Value |  
|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    | 
|                                         |  |                 |        |             |   |        | 
|At December 31, 2007:                    |  |                 |        |             |   |        | 
|Securities
 held to maturity:            |  |                 |        |             |   |        | 
|Mortgage-backed securities               |  | $               | 58,371 |             | $ | 58,017 | 
|Foreign bond                             |  |                 | 100    |             |   | 100    | 
|                                         |  |                 |        |             |   |        | 
|                                         |  | $               | 58,471 |             | $ | 58,117 | 
|                                         |  |                 |        |             |   |        | 
|Security
 available for sale-Mutual fund |  | $               | 250    |             | $ | 244    | 
|                                         |  |                 |        |             |   |        | 
|At December 31, 2006:                    |  |                 |        |             |   |        | 
|Securities
 held to maturity:            |  |                 |        |             |   |        | 
|Mortgage-backed securities               |  | $               | 33,299 |             | $ | 33,050 | 
|Foreign bond                             |  |                 | 100    |             |   | 100    | 
|                                         |  |                 |        |             |   |        | 
|                                         |  | $               | 33,399 |             | $ | 33,150 | 
|                                         |  |                 |        |             |   |        | 
|Security
 available for sale-Mutual fund |  | $               | 250    |             | $ | 241    | 

A decline
in the market value of any security below cost that is deemed to be
other-then-temporary results in a reduction of carrying value to fair value.
The impairment is charged to earnings and a new cost basis for the security is
established. To determine whether an impairment is other-than-temporary, we
consider (1) the length of time and the extent to which fair value has been
less than cost; (2) the financial condition and near-term prospects of the
issuer; and (3) whether we have the intent and ability to retain the investment
for a period of time sufficient to allow for any anticipated recovery in fair
value. Because the decline in fair value and the unrealized losses on the
investment securities at December 31, 2008, are attributable to market
conditions and not credit quality, and because we have the ability and intent
to hold these investments until a market price recovery or maturity, we do not
consider these investments other-than-temporarily impaired.

16

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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):

|                           |  |                  |   |                                    |   |                                       |  |                  |       |       |   |        |  |   |        |  |  |      |  
|-------------------------- |  | ---------------- | - | ---------------------------------- | - | ------------------------------------- |  | ---------------- | ----- | ----- | - | ------ |  | - | ------ |  |  | ---- | -
|                           |  | Within
 One Year |   | After One
 But Within
 Five
 Years |   | After Five
 Years
 Through
 Ten Years |  | After Ten
 Years |       | Total |   | Yield  | 
|                           |  |                  |   |                                    |   |                                       |  |                  |       |       |   |        | 
|At December 31,
 2008:     |  |                  |   |                                    |   |                                       |  |                  |       |       |   |        |  |   |        |  |  |      |  
|Mortgage-backed securities |  | $                | - |                                    | $ | -                                     |  | $                | 1,604 |       | $ | 80,504 |  | $ | 82,108 |  |  | 5.41 | %
|                           |  |                  |   |                                    |   |                                       |  |                  |       |       |   |        |  |   |        |  |  |      |  
|Foreign bond               |  | $                | - |                                    | $ | -                                     |  | $                | 100   |       | $ | -      |  | $ | 100    |  |  | 5.95 | %
|                           |  |                  |   |                                    |   |                                       |  |                  |       |       |   |        |  |   |        |  |  |      |  
|At December 31,
 2007:     |  |                  |   |                                    |   |                                       |  |                  |       |       |   |        |  |   |        |  |  |      |  
|Mortgage-backed securities |  | $                | - |                                    | $ | -                                     |  | $                | -     |       | $ | 58,371 |  | $ | 58,371 |  |  | 5.59 | %
|                           |  |                  |   |                                    |   |                                       |  |                  |       |       |   |        |  |   |        |  |  |      |  
|Foreign bond               |  | $                | - |                                    | $ | -                                     |  | $                | 100   |       | $ | -      |  | $ | 100    |  |  | 5.95 | %
|                           |  |                  |   |                                    |   |                                       |  |                  |       |       |   |        |  |   |        |  |  |      |  
|At December 31,
 2006:     |  |                  |   |                                    |   |                                       |  |                  |       |       |   |        |  |   |        |  |  |      |  
|Mortgage-backed securities |  | $                | - |                                    | $ | -                                     |  | $                | -     |       | $ | 33,299 |  | $ | 33,299 |  |  | 5.01 | %
|                           |  |                  |   |                                    |   |                                       |  |                  |       |       |   |        |  |   |        |  |  |      |  
|Foreign bond               |  | $                | - |                                    | $ | -                                     |  | $                | 100   |       | $ | -      |  | $ | 100    |  |  | 5.95 | %

Regulatory Capital Adequacy

The Bank is
subject to various regulatory capital requirements administered by the Federal
and state banking agencies. As of December 31, 2008, the most recent
notification from the regulatory authorities categorized our Bank as well
capitalized under the regulatory framework for prompt corrective action. To be
categorized as well capitalized, an institution must maintain minimum total
risk-based, Tier I risk-based, and Tier I leverage percentages as set forth in
the following tables. There are no conditions or events since that notification
that management believes have changed our category.

The
following table sets forth for the Bank the amount and the percentage of our
actual regulatory capital, regulatory capital for capital adequacy purposes,
and the minimum regulatory capital to be well capitalized under the prompt
corrective action provisions of the Federal regulations (dollars in thousands).

REGULATORY CAPITAL REQUIREMENTS

|                                       |  |        |        |                                |  |                                                                          |   |   |        |        |  |      |   |   |        |  |  |       |  
|-------------------------------------- |  | ------ | ------ | ------------------------------ |  | ------------------------------------------------------------------------ | - | - | ------ | ------ |  | ---- | - | - | ------ |  |  | ----- | -
|                                       |  | Actual |        | For Capital Adequacy
 Purposes |  | Minimum
 To Be Well
 Capitalized 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  |  
|                                       |  |        |        |                                |  |                                                                          |   |   |        |        |  |      |   |   |        |  |  |       |  
|As of December 31,
 2007:              |  |        |        |                                |  |                                                                          |   |   |        |        |  |      |   |   |        |  |  |       |  
|Total Capital to Risk-Weighted Assets  |  |        | 27,966 |                                |  | 17.95                                                                    |   |   | 12,465 |        |  | 8.00 |   |   | 15,581 |  |  | 10.00 |  
|Tier I Capital to Risk-Weighted Assets |  |        | 27,274 |                                |  | 17.50                                                                    |   |   | 6,232  |        |  | 4.00 |   |   | 9,349  |  |  | 6.00  |  
|Tier I Capital to Total Assets         |  |        | 27,274 |                                |  | 11.15                                                                    |   |   | 9,787  |        |  | 4.00 |   |   | 12,234 |  |  | 5.00  |  

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|                                       |  |        |        |                                |  |                                                                          |   |   |        |        |  |      |   |   |        |  |  |       |  
|-------------------------------------- |  | ------ | ------ | ------------------------------ |  | ------------------------------------------------------------------------ | - | - | ------ | ------ |  | ---- | - | - | ------ |  |  | ----- | -
|                                       |  | Actual |        | For Capital Adequacy
 Purposes |  | Minimum
 To Be Well
 Capitalized UnderPrompt CorrectiveAction Provisions |  
|                                       |  | Amount |        | %                              |  | Amount                                                                   |   | % |        | Amount |  | %    |  
|As of December 31,
 2006:              |  |        |        |                                |  |                                                                          |   |   |        |        |  |      |   |   |        |  |  |       |  
|Total Capital to Risk-Weighted Assets  |  | $      | 26,334 |                                |  | 16.72                                                                    | % | $ | 12,599 |        |  | 8.00 | % | $ | 15,749 |  |  | 10.00 | %
|Tier I Capital to Risk-Weighted Assets |  |        | 25,360 |                                |  | 16.10                                                                    |   |   | 6,299  |        |  | 4.00 |   |   | 9,449  |  |  | 6.00  |  
|Tier I Capital to Total Assets         |  |        | 25,360 |                                |  | 11.24                                                                    |   |   | 9,026  |        |  | 4.00 |   |   | 11,282 |  |  | 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 8 of Notes to Consolidated Financial Statements.

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.

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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.

The
following table sets forth certain information relating to our interest-earning
assets and interest-bearing liabilities at December 31, 2008, that are
estimated to mature or are scheduled to reprice within the period shown
(dollars in thousands):

GAP MATURITY / REPRICING SCHEDULE

|                                   |  |                    |         |                                                 |   |                                                      |    |                      |         |       |   |        |   |   |         | 
|---------------------------------- |  | ------------------ | ------- | ----------------------------------------------- | - | ---------------------------------------------------- | -- | -------------------- | ------- | ----- | - | ------ | - | - | ------- | 
|                                   |  | One
 Year or
 Less |         | More
 than One
 Year and
 Less than
 Five Years |   | More
 than Five
 Years and
 Less than
 Fifteen Years |    | Over
 Fifteen
 Years |         | Total |  
|Loans (1):                         |  |                    |         |                                                 |   |                                                      |    |                      |         |       |   |        |   |   |         | 
|Residential real estate loans      |  | $                  | 37,274  |                                                 | $ | 20,179                                               |    | $                    | 1,240   |       | $ | -      |   | $ | 58,693  | 
|Multi-family real estate loans     |  |                    | 5,946   |                                                 |   | 3,642                                                |    |                      | -       |       |   | -      |   |   | 9,588   | 
|Commercial real estate loans       |  |                    | 45,238  |                                                 |   | 27,091                                               |    |                      | 1,212   |       |   | -      |   |   | 73,541  | 
|Land and construction              |  |                    | 13,937  |                                                 |   | 5,286                                                |    |                      | -       |       |   | -      |   |   | 19,223  | 
|Consumer loans                     |  |                    | 518     |                                                 |   | 257                                                  |    |                      | -       |       |   | 97     |   |   | 872     | 
|                                   |  |                    |         |                                                 |   |                                                      |    |                      |         |       |   |        |   |   |         | 
|Total loans                        |  |                    | 102,913 |                                                 |   | 56,455                                               |    |                      | 2,452   |       |   | 97     |   |   | 161,917 | 
|                                   |  |                    |         |                                                 |   |                                                      |    |                      |         |       |   |        |   |   |         | 
|Federal funds sold                 |  |                    | 2,143   |                                                 |   | -                                                    |    |                      | -       |       |   | -      |   |   | 2,143   | 
|Securities (2)                     |  |                    | 3,903   |                                                 |   | -                                                    |    |                      | 32,812  |       |   | 45,737 |   |   | 82,452  | 
|Federal Home Loan Bank stock       |  |                    | 3,526   |                                                 |   | -                                                    |    |                      | -       |       |   | -      |   |   | 3,526   | 
|                                   |  |                    |         |                                                 |   |                                                      |    |                      |         |       |   |        |   |   |         | 
|Total rate-sensitive assets        |  |                    | 112,485 |                                                 |   | 56,455                                               |    |                      | 35,264  |       |   | 45,834 |   |   | 250,038 | 
|                                   |  |                    |         |                                                 |   |                                                      |    |                      |         |       |   |        |   |   |         | 
|Deposit accounts (3):              |  |                    |         |                                                 |   |                                                      |    |                      |         |       |   |        |   |   |         | 
|Money-market deposits              |  |                    | 28,009  |                                                 |   | -                                                    |    |                      | -       |       |   | -      |   |   | 28,009  | 
|Interest-bearing checking deposits |  |                    | 1,464   |                                                 |   | -                                                    |    |                      | -       |       |   | -      |   |   | 1,464   | 
|Savings deposits                   |  |                    | 1,195   |                                                 |   | -                                                    |    |                      | -       |       |   | -      |   |   | 1,195   | 
|Time deposits                      |  |                    | 72,989  |                                                 |   | 11,178                                               |    |                      | -       |       |   | -      |   |   | 84,167  | 
|                                   |  |                    |         |                                                 |   |                                                      |    |                      |         |       |   |        |   |   |         | 
|Total deposits                     |  |                    | 103,657 |                                                 |   | 11,178                                               |    |                      | -       |       |   | -      |   |   | 114,835 | 
|                                   |  |                    |         |                                                 |   |                                                      |    |                      |         |       |   |        |   |   |         | 
|Federal Home Loan Bank advances    |  |                    | 43,200  |                                                 |   | 25,500                                               |    |                      | -       |       |   | -      |   |   | 68,700  | 
|Other borrowings                   |  |                    | 20,900  |                                                 |   | 20,900                                               |    |                      | -       |       |   | -      |   |   | 41,800  | 
|Junior subordinated debenture      |  |                    | 5,155   |                                                 |   | -                                                    |    |                      | -       |       |   | -      |   |   | 5,155   | 
|                                   |  |                    |         |                                                 |   |                                                      |    |                      |         |       |   |        |   |   |         | 
|Total rate-sensitive liabilities   |  |                    | 172,912 |                                                 |   | 57,578                                               |    |                      | -       |       |   | -      |   |   | 230,490 | 
|                                   |  |                    |         |                                                 |   |                                                      |    |                      |         |       |   |        |   |   |         | 
|GAP (repricing differences)        |  | $                  | (60,427 | )                                               | $ | (1,123                                               | )  | $                    | 35,264  |       | $ | 45,834 |   | $ | 19,548  | 
|                                   |  |                    |         |                                                 |   |                                                      |    |                      |         |       |   |        |   |   |         | 
|Cumulative GAP                     |  | $                  | (60,427 | )                                               | $ | (61,550                                              | )  | $                    | (26,286 | )     | $ | 19,548 |   |   |         | 
|                                   |  |                    |         |                                                 |   |                                                      |    |                      |         |       |   |        |   |   |         | 
|Cumulative GAP/total assets        |  |                    | (23.63  | )%                                              |   | (24.07                                               | )% |                      | (10.28  | )%    |   | 7.64   | % |   |         | 

|    |                                                                                                                                                                                                                                                                                    
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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, 2008
(in thousands):

|                          |  |                   |        |                                   |   |                   |  |       |         |  |   |         | 
|------------------------- |  | ----------------- | ------ | --------------------------------- | - | ----------------- |  | ----- | ------- |  | - | ------- | 
|                          |  | One Year
 or Less |        | After One
 But Within
 Five Years |   | After
 Five Years |  | Total |        
|                          |  |                   |        |                                   |   |                   |  |       |         |  |   |         | 
|Residential
 real estate  |  | $                 | 3,040  |                                   | $ | 3,200             |  | $     | 52,453  |  | $ | 58,693  | 
|Multi-family
 real estate |  |                   | -      |                                   |   | -                 |  |       | 9,588   |  |   | 9,588   | 
|Commercial
 real estate   |  |                   | 7,188  |                                   |   | 5,345             |  |       | 61,008  |  |   | 73,541  | 
|Land and
 construction    |  |                   | 7,136  |                                   |   | 303               |  |       | 11,784  |  |   | 19,223  | 
|Consumer                  |  |                   | 518    |                                   |   | 257               |  |       | 97      |  |   | 872     | 
|                          |  |                   |        |                                   |   |                   |  |       |         |  |   |         | 
|Total                     |  | $                 | 17,882 |                                   | $ | 9,105             |  | $     | 134,930 |  | $ | 161,917 | 

The
following table sets forth the maturity or repricing of loans by interest type
at December 31, 2008 (in thousands):

|                        |  |                   |         |                                   |   |                   |  |       |       |  |   |         | 
|----------------------- |  | ----------------- | ------- | --------------------------------- | - | ----------------- |  | ----- | ----- |  | - | ------- | 
|                        |  | One Year
 or Less |         | After One
 But Within
 Five Years |   | After
 Five Years |  | Total |      
|                        |  |                   |         |                                   |   |                   |  |       |       |  |   |         | 
|Fixed
 interest rate    |  | $                 | 15,269  |                                   | $ | 2,524             |  | $     | 7,877 |  | $ | 25,670  | 
|Variable
 interest rate |  |                   | 87,643  |                                   |   | 47,327            |  |       | 1,277 |  |   | 136,247 | 
|                        |  |                   |         |                                   |   |                   |  |       |       |  |   |         | 
|Total                   |  | $                 | 102,912 |                                   | $ | 49,851            |  | $     | 9,154 |  | $ | 161,917 | 

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, 2008, we had
outstanding commitments to originate real estate loans totaling $2.0 million.
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, 2008 (in thousands):

|                                 |  |                        |         |                    |   |          |  |          |        |                     |   |        |  |   |        | 
|-------------------------------- |  | ---------------------- | ------- | ------------------ | - | -------- |  | -------- | ------ | ------------------- | - | ------ |  | - | ------ | 
|                                 |  | Payments Due by Period |        
|Contractual Obligations          |  | Total                  |         | Less
 Than 1
 Year |   | 1-3Years |  | 3-5Years |        | More
 Than 5
 Years |  
|                                 |  |                        |         |                    |   |          |  |          |        |                     |   |        |  |   |        | 
|Federal Home
 Loan Bank advances |  | $                      | 68,700  |                    | $ | 11,000   |  | $        | 10,000 |                     | $ | 19,500 |  | $ | 28,200 | 
|Junior
 subordinated debenture   |  |                        | 5,155   |                    |   | 5,155    |  |          | -      |                     |   | -      |  |   | -      | 
|Other
 borrowings                |  |                        | 41,800  |                    |   | -        |  |          | -      |                     |   | 41,800 |  |   | -      | 
|Operating
 leases                |  |                        | 558     |                    |   | 133      |  |          | 266    |                     |   | 159    |  |   | -      | 
|Loan
 commitments                |  |                        | 2,000   |                    |   | 2,000    |  |          | -      |                     |   | -      |  |   | -      | 
|                                
|Total                            |  | $                      | 118,213 |                    | $ | 18,288   |  | $        | 10,266 |                     | $ | 61,459 |  | $ | 28,200 | 

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 $10.1 million in 2008 and $4.5 million in 2007.

In years
prior to 2008, we used brokered deposits to facilitate mortgage loan fundings
in circumstances when larger than anticipated loan volumes occur and there was
limited time to fund the additional loan demand through traditional deposit
solicitation. In general, brokered deposits can be obtained in one to three
days. Historically, 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. In
2008, local deposit rates were driven higher by troubled institutions in our
market area, and we increased our use of brokered deposits because the rates we
paid on brokered deposits were significantly lower than the local rates we
would have been otherwise required to pay. Brokered deposits amounted to $13.7
million and $7.5 million as of December 31, 2008 and December 31, 2007,
respectively.

The
following table displays the distribution of the Banks deposits at December
31, 2008, 2007 and 2006 (dollars in thousands):

|                                    |  |                 |         |                |  |        |   |                |         |        |  |                |   |   |         |  |  |        |  
|----------------------------------- |  | --------------- | ------- | -------------- |  | ------ | - | -------------- | ------- | ------ |  | -------------- | - | - | ------- |  |  | ------ | -
|                                    |  | At December 31, |        
|                                    |  | 2008            |         | 2007           |  | 2006   |  
|                                    |  | Amount          |         | % of
 Deposits |  | Amount |   | % of
 Deposits |         | Amount |  | % of
 Deposits |  
|                                    |  |                 |         |                |  |        |   |                |         |        |  |                |   |   |         |  |  |        |  
|Noninterest-bearing demand deposits |  | $               | 90      |                |  | .08    | % | $              | 1,304   |        |  | 1.04           | % | $ | 545     |  |  | .42    | %
|Interest-bearing demand deposits    |  |                 | 1,464   |                |  | 1.27   |   |                | 967     |        |  | .77            |   |   | 1,780   |  |  | 1.37   |  
|Money-market deposits               |  |                 | 28,009  |                |  | 24.37  |   |                | 26,760  |        |  | 21.40          |   |   | 23,239  |  |  | 17.95  |  
|Savings                             |  |                 | 1,195   |                |  | 1.04   |   |                | 475     |        |  | .39            |   |   | 856     |  |  | .66    |  
|                                    |  |                 |         |                |  |        |   |                |         |        |  |                |   |   |         |  |  |        |  
|Subtotal                            |  |                 | 30,758  |                |  | 26.76  |   |                | 29,506  |        |  | 23.60          |   |   | 26,420  |  |  | 20.40  |  
|                                    |  |                 |         |                |  |        |   |                |         |        |  |                |   |   |         |  |  |        |  
|Time deposits:                      |  |                 |         |                |  |        |   |                |         |        |  |                |   |   |         |  |  |        |  
|2.00%  2.99%                       |  | $               | 7,696   |                |  | 6.70   | % | $              | -       |        |  | -              | % | $ | 501     |  |  | .39    | %
|3.00%  3.99%                       |  |                 | 39,678  |                |  | 34.53  |   |                | 11,721  |        |  | 9.37           |   |   | 16,578  |  |  | 12.80  |  
|4.00%  4.99%                       |  |                 | 35,627  |                |  | 31.00  |   |                | 44,680  |        |  | 35.73          |   |   | 47,282  |  |  | 36.51  |  
|5.00%  5.99%                       |  |                 | 1,146   |                |  | 1.00   |   |                | 37,801  |        |  | 30.23          |   |   | 38,721  |  |  | 29.90  |  
|6.00%  6.99%                       |  |                 | 20      |                |  | .01    |   |                | 1,326   |        |  | 1.07           |   |   | -       |  |  | -      |  
|                                    |  |                 |         |                |  |        |   |                |         |        |  |                |   |   |         |  |  |        |  
|Total time deposits (1)             |  |                 | 84,167  |                |  | 73.24  |   |                | 95,528  |        |  | 76.40          |   |   | 103,082 |  |  | 79.60  |  
|                                    |  |                 |         |                |  |        |   |                |         |        |  |                |   |   |         |  |  |        |  
|Total deposits                      |  | $               | 114,925 |                |  | 100.00 | % | $              | 125,034 |        |  | 100.00         | % | $ | 129,502 |  |  | 100.00 | %

(1)          Included
are Individual Retirement Accounts (IRAs) totaling $6,618,000 and $7,522,000
at December 31, 2008 and 2007, 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, 2008 and 2007 (in
thousands):

|                                          |  |                 |        |      |   |        | 
|----------------------------------------- |  | --------------- | ------ | ---- | - | ------ | 
|                                          |  | At December 31, |       
|                                          |  | 2008            |        | 2007 |  
|                                          |  |                 |        |      |   |        | 
|Due three
 months or less                 |  | $               | 5,980  |      | $ | 8,033  | 
|Due more
 than three months to six months |  |                 | 6,225  |      |   | 16,616 | 
|More than
 six months to one year         |  |                 | 21,551 |      |   | 8,680  | 
|One to five
 years                        |  |                 | 3,103  |      |   | 5,543  | 
|                                          |  |                 |        |      |   |        | 
|Total                                     |  | $               | 36,859 |      | $ | 38,872 | 

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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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, |        
|                                                                                  |  | 2008                     |         | 2007                     |   | 2006                  | 
|                                                                                  |  | Average
 Balance         |         | Interest
 and
 Dividends |   | Average
 Yield/
 Rate |  | Average
 Balance |      | Interest
 and
 Dividends |   | Average
 Yield/
 Rate |  | Average
 Balance |        | Interest
 and
 Dividends |  | Average
 Yield/
 Rate |  
|Interest-earning assets:                                                          |  |                          |         |                          |   |                       |  |                  |      |                          |   |                       |  |                  |        |                          |  |                       |   |   |         |  |   |        |  |  |      |  
|Loans                                                                             |  | $                        | 162,157 |                          | $ | 11,236                |  |                  | 6.93 | %                        | $ | 176,679               |  | $                | 13,086 |                          |  | 7.41                  | % | $ | 175,225 |  | $ | 12,662 |  |  | 7.23 | %
|Securities                                                                        |  |                          | 76,975  |                          |   | 4,183                 |  |                  | 5.43 |                          |   | 50,891                |  |                  | 2,803  |                          |  | 5.51                  |   |   | 28,129  |  |   | 1,323  |  |  | 4.70 |  
|Other interest-earning assets (1)                                                 |  |                          | 4,786   |                          |   | 151                   |  |                  | 3.16 |                          |   | 4,364                 |  |                  | 248    |                          |  | 5.68                  |   |   | 3,851   |  |   | 206    |  |  | 5.35 |  
|                                                                                  |  |                          |         |                          |   |                       |  |                  |      |                          |   |                       |  |                  |        |                          |  |                       |   |   |         |  |   |        |  |  |      |  
|Total interest-earning assets/interest
income                                     |  |                          | 243,918 |                          |   | 15,570                |  |                  | 6.38 |                          |   | 231,934               |  |                  | 16,137 |                          |  | 6.96                  |   |   | 207,205 |  |   | 14,191 |  |  | 6.85 |  
|                                                                                  |  |                          |         |                          |   |                       |  |                  |      |                          |   |                       |  |                  |        |                          |  |                       |   |   |         |  |   |        |  |  |      |  
|Cash and due from banks                                                           |  |                          | 538     |                          |   |                       |  |                  |      |                          |   | 346                   |  |                  |        |                          |  |                       |   |   | 311     |  |   |        |  |  |      |  
|Premises and equipment                                                            |  |                          | 3,181   |                          |   |                       |  |                  |      |                          |   | 3,433                 |  |                  |        |                          |  |                       |   |   | 4,034   |  |   |        |  |  |      |  
|Other assets                                                                      |  |                          | 3,234   |                          |   |                       |  |                  |      |                          |   | 2,609                 |  |                  |        |                          |  |                       |   |   | 3,019   |  |   |        |  |  |      |  
|                                                                                  |  |                          |         |                          |   |                       |  |                  |      |                          |   |                       |  |                  |        |                          |  |                       |   |   |         |  |   |        |  |  |      |  
|Total assets                                                                      |  | $                        | 250,871 |                          |   |                       |  |                  |      |                          | $ | 238,322               |  |                  |        |                          |  |                       |   | $ | 214,569 |  |   |        |  |  |      |  
|                                                                                  |  |                          |         |                          |   |                       |  |                  |      |                          |   |                       |  |                  |        |                          |  |                       |   |   |         |  |   |        |  |  |      |  
|Interest-bearing liabilities:                                                     |  |                          |         |                          |   |                       |  |                  |      |                          |   |                       |  |                  |        |                          |  |                       |   |   |         |  |   |        |  |  |      |  
|Savings, NOW and money-market deposits                                            |  |                          | 32,291  |                          |   | 1,024                 |  |                  | 3.17 |                          |   | 26,648                |  |                  | 1,196  |                          |  | 4.49                  |   |   | 11,974  |  |   | 390    |  |  | 3.26 |  
|Time deposits                                                                     |  |                          | 81,461  |                          |   | 3,497                 |  |                  | 4.29 |                          |   | 97,269                |  |                  | 4,640  |                          |  | 4.77                  |   |   | 108,448 |  |   | 4,758  |  |  | 4.39 |  
|Borrowings (4)                                                                    |  |                          | 109,961 |                          |   | 4,690                 |  |                  | 4.27 |                          |   | 86,089                |  |                  | 3,864  |                          |  | 4.49                  |   |   | 70,614  |  |   | 2,915  |  |  | 4.13 |  
|                                                                                  |  |                          |         |                          |   |                       |  |                  |      |                          |   |                       |  |                  |        |                          |  |                       |   |   |         |  |   |        |  |  |      |  
|Total interest-bearing liabilities/interest
expense                               |  |                          | 223,713 |                          |   | 9,211                 |  |                  | 4.12 |                          |   | 210,006               |  |                  | 9,700  |                          |  | 4.62                  |   |   | 191,036 |  |   | 8,063  |  |  | 4.22 |  
|                                                                                  |  |                          |         |                          |   |                       |  |                  |      |                          |   |                       |  |                  |        |                          |  |                       |   |   |         |  |   |        |  |  |      |  
|Noninterest-bearing demand deposits                                               |  |                          | 715     |                          |   |                       |  |                  |      |                          |   | 1,684                 |  |                  |        |                          |  |                       |   |   | 747     |  |   |        |  |  |      |  
|Other liabilities                                                                 |  |                          | 3,478   |                          |   |                       |  |                  |      |                          |   | 5,289                 |  |                  |        |                          |  |                       |   |   | 3,214   |  |   |        |  |  |      |  
|Stockholders equity                                                              |  |                          | 22,965  |                          |   |                       |  |                  |      |                          |   | 21,343                |  |                  |        |                          |  |                       |   |   | 19,572  |  |   |        |  |  |      |  
|                                                                                  |  |                          |         |                          |   |                       |  |                  |      |                          |   |                       |  |                  |        |                          |  |                       |   |   |         |  |   |        |  |  |      |  
|Total liabilities and stockholders
equity                                        |  | $                        | 250,871 |                          |   |                       |  |                  |      |                          | $ | 238,322               |  |                  |        |                          |  |                       |   | $ | 214,569 |  |   |        |  |  |      |  
|                                                                                  |  |                          |         |                          |   |                       |  |                  |      |                          |   |                       |  |                  |        |                          |  |                       |   |   |         |  |   |        |  |  |      |  
|Net interest income                                                               |  |                          |         |                          | $ | 6,359                 |  |                  |      |                          |   |                       |  | $                | 6,437  |                          |  |                       |   |   |         |  | $ | 6,128  |  |  |      |  
|                                                                                  |  |                          |         |                          |   |                       |  |                  |      |                          |   |                       |  |                  |        |                          |  |                       |   |   |         |  |   |        |  |  |      |  
|Interest rate spread (2)                                                          |  |                          |         |                          |   |                       |  |                  | 2.26 | %                        |   |                       |  |                  |        |                          |  | 2.34                  | % |   |         |  |   |        |  |  | 2.63 | %
|                                                                                  |  |                          |         |                          |   |                       |  |                  |      |                          |   |                       |  |                  |        |                          |  |                       |   |   |         |  |   |        |  |  |      |  
|Net interest margin (3)                                                           |  |                          |         |                          |   |                       |  |                  | 2.61 | %                        |   |                       |  |                  |        |                          |  | 2.78                  | % |   |         |  |   |        |  |  | 2.96 | %
|                                                                                  |  |                          |         |                          |   |                       |  |                  |      |                          |   |                       |  |                  |        |                          |  |                       |   |   |         |  |   |        |  |  |      |  
|Ratio of average interest-earning assets to average interest-bearing
 liabilities |  |                          |         |                          |   |                       |  |                  | 1.09 |                          |   |                       |  |                  |        |                          |  | 1.10                  |   |   |         |  |   |        |  |  | 1.08 |  

|    |                                                                                                                                                        
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------
|(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,
 2008 versus 2007
 Increases (Decreases) Due to Change In: |       
|                                   |  | Rate                                                                               |        | Volume |   | Rate/
 Volume |   | Total |    
|Interest-earning
 assets:          |  |                                                                                    |        |        |   |               |   |       |     |   |   |        |  
|Loans                              |  | $                                                                                  | (844   | )      | $ | (1,076        | ) | $     | 70  |   | $ | (1,850 | )
|Securities                         |  |                                                                                    | (37    | )      |   | 1,437         |   |       | (20 | ) |   | 1,380  |  
|Other interest-earning assets      |  |                                                                                    | (111   | )      |   | 23            |   |       | (9  | ) |   | (97    | )
|                                   |  |                                                                                    |        |        |   |               |   |       |     |   |   |        |  
|Total interest-earning assets      |  |                                                                                    | (992   | )      |   | 384           |   |       | 41  |   |   | (567   | )
|                                   |  |                                                                                    |        |        |   |               |   |       |     |   |   |        |  
|Interest-bearing
 liabilities:     |  |                                                                                    |        |        |   |               |   |       |     |   |   |        |  
|Savings, NOW and money-market      |  |                                                                                    | (351   | )      |   | 253           |   |       | (74 | ) |   | (172   | )
|Time deposits                      |  |                                                                                    | (464   | )      |   | (754          | ) |       | 75  |   |   | (1,143 | )
|Other                              |  |                                                                                    | (192   | )      |   | 1,070         |   |       | (52 | ) |   | 826    |  
|                                   |  |                                                                                    |        |        |   |               |   |       |     |   |   |        |  
|Total interest-bearing liabilities |  |                                                                                    | (1,007 | )      |   | 569           |   |       | (51 | ) |   | (489   | )
|                                   |  |                                                                                    |        |        |   |               |   |       |     |   |   |        |  
|Net interest income                |  | $                                                                                  | 15     |        | $ | (185          | ) | $     | 92  |   | $ | (78    | )

|                              |  |                                                                                    |      |        |   |               |   |       |     |   |   |       |  
|----------------------------- |  | ---------------------------------------------------------------------------------- | ---- | ------ | - | ------------- | - | ----- | --- | - | - | ----- | -
|                              |  | Year Ended December 31,
 2007 versus 2006
 Increases (Decreases) Due to Change In: |     
|                              |  | Rate                                                                               |      | Volume |   | Rate/
 Volume |   | Total |    
|Interest
 income:             |  |                                                                                    |      |        |   |               |   |       |     |   |   |       |  
|Loans                         |  | $                                                                                  | 316  |        | $ | 105           |   | $     | 3   |   | $ | 424   |  
|Securities                    |  |                                                                                    | 227  |        |   | 1,071         |   |       | 182 |   |   | 1,480 |  
|Other interest-earning assets |  |                                                                                    | 14   |        |   | 26            |   |       | 2   |   |   | 42    |  
|                              |  |                                                                                    |      |        |   |               |   |       |     |   |   |       |  
|Total interest income         |  |                                                                                    | 557  |        |   | 1,202         |   |       | 187 |   |   | 1,946 |  
|                              |  |                                                                                    |      |        |   |               |   |       |     |   |   |       |  
|Interest
 expense:            |  |                                                                                    |      |        |   |               |   |       |     |   |   |       |  
|Savings, NOW and money-market |  |                                                                                    | 148  |        |   | 478           |   |       | 180 |   |   | 806   |  
|Time deposits                 |  |                                                                                    | 414  |        |   | (491          | ) |       | (41 | ) |   | (118  | )
|Borrowings                    |  |                                                                                    | 254  |        |   | 638           |   |       | 57  |   |   | 949   |  
|                              |  |                                                                                    |      |        |   |               |   |       |     |   |   |       |  
|Total interest expense        |  |                                                                                    | 816  |        |   | 625           |   |       | 196 |   |   | 1,637 |  
|                              |  |                                                                                    |      |        |   |               |   |       |     |   |   |       |  
|Net interest income           |  | $                                                                                  | (259 | )      | $ | 577           |   | $     | (9  | ) | $ | 309   |  

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Year
Ended December 31, 2008 Compared to Year Ended December 31, 2007

General.
Net earnings for 2008 were $520,000, or $.17 per basic and $.16 per diluted
share, $1.2 million less than in 2007. The primary factors explaining the
decline were a $796,000 increase in noninterest expenses coupled with a
$898,000 increase in the provision for loan losses, and a $78,000 decrease in
net interest income, partially offset by a $690,000 decrease in income tax
expense.

Interest
Income. Interest income decreased to $15.6 million
for 2008 compared to $16.1 million for 2007. Interest income on loans decreased
to $11.2 million due primarily to a decrease in the average loan portfolio
balance and a decrease in the average yield earned in 2008. Interest on
securities increased by $1.4 million due primarily to an increase in the
average balance of the securities portfolio in 2008.

Interest Expense. Interest expense on deposit accounts
decreased to $4.5 million for 2008, from $5.8 million for 2007. Interest
expense on deposits decreased primarily because of a decrease in the average
balance of deposits and rates paid in 2008. Interest expense on borrowings
increased to $4.7 million for 2008 from $3.9 million for 2007 due primarily to
an increase in the average balance of borrowings.

Provision
for Loan Losses. The provision for 2008 was
$1,374,000 compared to $476,000 for 2007. In 2008, the provision was increased
primarily to reflect the impairment in value of ten loans in the amount of $1.1
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 loan loss
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 collectibility of our loan portfolio. The allowance
for loan losses totaled $1,906,000 or 1.18% of loans outstanding at December
31, 2008, compared to $692,000, or .40% of loans outstanding at December 31,
2007. Management believes the balance in the allowance for loan losses at
December 31, 2008 is adequate.

Noninterest
Income. Total noninterest income decreased to
$393,000 for 2008, from $533,000 for 2007 primarily as a result of a litigation
settlement of $155,000 in 2007 and a decrease in loan prepayment fees in 2008.

Noninterest
Expenses. Total noninterest expenses increased to
$4.5 million for 2008 from $3.7 million for 2007, primarily due to losses
relating to foreclosed assets recorded in 2008 of $517,000 related to one
residential property, compared to no such losses in 2007.

Income
Taxes. Income taxes for 2008, were $313,000 (an
effective rate of 37.6%) compared to income taxes of $1,003,000 (an effective
rate of 36.5%) for 2007.

Year Ended December 31, 2007 Compared to Year
Ended December 31, 2006

General.
Net earnings for 2007 were $1.7 million, or $.56 per basic and $.55 per diluted
share, $92,000 less than in 2006. The primary factors explaining the decline
were a $175,000 increase in noninterest expenses coupled with a $211,000 increase
in the provision for loan losses, partially offset by a $309,000 increase in
net interest income.

Interest
Income. Interest income totaled $16.1 million in
2007, an increase of $1.9 million, or 13.7%. This increase was primarily due to
a $22.8 million, or 80.9%, increase in the average securities portfolio balance
coupled with an increase in the average yield earned on securities, from 4.70%
to 5.51%, resulting in a $1.5 million increase in interest on securities.
Interest income on loans increased by 3.4%, or $424,000, primarily due to an
increase in the average yield earned on loans, from 7.23% to 7.41%.

Interest
Expense. Interest expense totaled $9.7 million in
2007, an increase of $1.6 million, or 20.3%, primarily as a result of an
increase in the overall cost of interest-bearing liabilities to 4.62% compared
to 4.22% a year ago, coupled with a $15.5 million or 21.9% increase in the
average balance of borrowings used to fund the Companys growth. Average
balances in deposit accounts increased only marginally by $3.5 million, or
2.9%, and interest expense on deposit accounts increased by $688,000, or 13.4%,
to $5.8 million for 2007.

Provision for Loan
Losses. The provision for loan losses in 2007 was
$476,000 compared to $265,000 in 2006. 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

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economic conditions, particularly as they relate to our market areas,
and other factors related to the estimated collectibility of our loan
portfolio. The allowance for loan losses totaled $692,000 or .40% of loans
outstanding at December 31, 2007, compared to $974,000, or .54% of loans
outstanding at December 31, 2006. Management believes the balance in the
allowance for loan losses at December 31, 2007 is adequate.

Noninterest Income.
Total noninterest income decreased $95,000, to $533,000 in 2007, from $628,000
in 2006, primarily due to a reduction of $202,000 due to no gains recognized on
the payoff of Federal Home Loan Bank advances in 2007, partially offset by a
$62,000 increase in litigation settlements and a $44,000 increase in loan
prepayment fees.

Noninterest Expenses.
Noninterest expenses totaled $3.7 million in 2007, a $175,000 increase from
2006, due primarily to a $59,000 increase in salaries and employee benefits, a
$49,000 increase in the FDIC insurance premium, and a $26,000 increase in professional
fees, all due to general increases in the cost of services.

Income Taxes.
Income taxes for 2007 were $1,003,000 (an effective rate of 36.5%) compared to
income taxes of $1,083,000 (an effective rate of 37.1%) for 2006.

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.

Selected Quarterly Results

Selected
quarterly results of operations for the four quarters ended December 31, 2008
and 2007 are as follows (in thousands, except share amounts):

|                                                     |  |               |       |                |   |                 |  |              |       |                 |   |                |  |                 |       |              |   |       |  |   |       |  |   |       | 
|---------------------------------------------------- |  | ------------- | ----- | -------------- | - | --------------- |  | ------------ | ----- | --------------- | - | -------------- |  | --------------- | ----- | ------------ | - | ----- |  | - | ----- |  | - | ----- | 
|                                                     |  | 2008          |       | 2007           |  
|                                                     |  | FourthQuarter |       | Third
 Quarter |   | Second
 Quarter |  | FirstQuarter |       | Fourth
 Quarter |   | Third
 Quarter |  | Second
 Quarter |       | FirstQuarter |  
|                                                     |  |               |       |                |   |                 |  |              |       |                 |   |                |  |                 |       |              |   |       |  |   |       |  |   |       | 
|Interest income                                      |  | $             | 3,665 |                | $ | 3,900           |  | $            | 3,980 |                 | $ | 4,025          |  | $               | 4,175 |              | $ | 4,130 |  | $ | 4,005 |  | $ | 3,827 | 
|Interest expense                                     |  |               | 2,260 |                |   | 2,283           |  |              | 2,319 |                 |   | 2,349          |  |                 | 2,531 |              |   | 2,499 |  |   | 2,430 |  |   | 2,240 | 
|Net interest income                                  |  |               | 1,405 |                |   | 1,617           |  |              | 1,661 |                 |   | 1,676          |  |                 | 1,644 |              |   | 1,631 |  |   | 1,575 |  |   | 1,587 | 
|Provision (credit) for loan losses                   |  |               | 1,213 |                |   | 47              |  |              | (7    | )               |   | 121            |  |                 | (60   | )            |   | 16    |  |   | 209   |  |   | 311   | 
|Net interest income after provision for
 loan losses |  |               | 192   |                |   | 1,570           |  |              | 1,668 |                 |   | 1,555          |  |                 | 1,704 |              |   | 1,615 |  |   | 1,366 |  |   | 1,276 | 
|Noninterest income                                   |  |               | 235   |                |   | 78              |  |              | 38    |                 |   | 42             |  |                 | 93    |              |   | 47    |  |   | 159   |  |   | 234   | 
|Noninterest expense                                  |  |               | 1,228 |                |   | 1,325           |  |              | 1,083 |                 |   | 909            |  |                 | 993   |              |   | 959   |  |   | 905   |  |   | 892   | 
|(Loss) earnings before income taxes                  |  |               | (801  | )              |   | 323             |  |              | 623   |                 |   | 688            |  |                 | 804   |              |   | 703   |  |   | 620   |  |   | 618   | 
|Net (loss) earnings                                  |  |               | (498  | )              |   | 201             |  |              | 388   |                 |   | 429            |  |                 | 501   |              |   | 438   |  |   | 387   |  |   | 416   | 
|Basic (loss) earnings per common share               |  |               | (.16  | )              |   | .06             |  |              | .12   |                 |   | .13            |  |                 | .16   |              |   | .14   |  |   | .12   |  |   | .14   | 
|Diluted (loss) earnings per common share             |  |               | (.16  | )              |   | .06             |  |              | .12   |                 |   | .13            |  |                 | .16   |              |   | .13   |  |   | .13   |  |   | .13   | 

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Item 7. Financial Statements

The
financial statements of OptimumBank Holdings, Inc. as of and for the years
ended December 31, 2008 and 2007 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, 2008 and 2007                                             
| | Consolidated Statements of Earnings for the Years Ended December 31,
 2008 and 2007                 
| | Consolidated Statements of Stockholders Equity for the Years Ended
 December 31, 2008 and 2007     
| | Consolidated Statements of Cash Flows for the Years Ended December
 31, 2008 and 2007               
| | Notes to Consolidated Financial Statements, December 31, 2008 and
 2007 and for the Years Then Ended

Item 8. Changes in and Disagreements with
Accountants on Accounting and Financial Disclosure

Not
applicable.

Item 8A(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 Chief
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, 2008. 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, 2008.

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 temporary 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, 2008 that have materially affected or are
reasonably likely to materially affect our internal control over financial
reporting.

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(d) Limitations on
the Effectiveness of Controls

Our
management, including our Chief 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.

Item 8B. 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 2008.

PART III

Item 9. Directors, Executive Officers,
Promoters and Control Persons; Compliance with Section 16(a) of the Exchange
Act

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-K 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 on April 30, 2009, at 10:00 a.m. 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 10. 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 11. 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, 2008. This plan is our Stock Option Plan, previously approved by
our stockholders. The following table sets forth information as of December 31,
2008 with respect to the number of shares of our common stock issuable pursuant
to the Stock Option Plan.

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Table of Contents

|                                                        |  |                                                                                                    |  |                                                                                       |  |                                                                                                                                                       |  |   |      |  |  |  |  |        |  | 
|------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------- |  | - | ---- |  |  |  |  | ------ |  | 
|EQUITY COMPENSATION PLAN INFORMATION                   
|                                                       
|Plan Category                                           |  | (a)
 Number of Securities
 to be Issued Upon Exercise
 of Outstanding Options
 Warrants and Rights |  | (b)
 Weighted-Average
 Exercise Price of
 Outstanding
 Options, Warrants
 and
 Rights |  | (c)
 Number of Securities
 Remaining Available for
 Future Issuance under
 Equity Compensation
 Plans (excluding
 Securities Reflected
 in Column (a) | 
|                                                        |  |                                                                                                    |  |                                                                                       |  |                                                                                                                                                       |  |   |      |  |  |  |  |        |  | 
|Equity compensation plans approved by
 security holders |  |                                                                                                    |  | 503,587                                                                               |  |                                                                                                                                                       |  | $ | 7.68 |  |  |  |  | 14,239 |  | 
|                                                        |  |                                                                                                    |  |                                                                                       |  |                                                                                                                                                       |  |   |      |  |  |  |  |        |  | 
|Total                                                   |  |                                                                                                    |  | 503,587                                                                               |  |                                                                                                                                                       |  | $ | 7.68 |  |  |  |  | 14,239 |  | 

| | 
| | 
|

Item 12. 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 13. Exhibits

(a)
The following documents are filed as part of this report

The
following exhibits are filed with or incorporated by reference into this
report. The exhibits denominated by (i) an asterisk (*) were previously filed
as a part of a Registration Statement on Form 10-SB under the Exchange Act,
filed with the Federal Deposit Insurance Corporation on March 28, 2003; (ii) a
double asterisk (**) were previously filed as a part of an Annual Report on
Form 10-KSB filed with the Securities and Exchange Commission (SEC) on March
30, 2004; (iii) a triple asterisk (***) were previously filed as part of a
current report on Form 8-K filed with the SEC on May 11, 2004; (iv) a quadruple
asterisk (****) were previously filed as part of a Quarterly Report on Form
10-QSB filed with the SEC on August 12, 2004; and (v) a quintuple asterisk
(*****) were previously filed as part of an Annual Report on Form 10-KSB filed
with the SEC on March 31, 2006; (v) a sextuple asterisk (******) were
previously filed as part of an Annual Report on Form 10-K filed with the SEC on
March 31, 2008.

| |             |         |                                                                                                                              
| | ----------- | ------- | -----------------------------------------------------------------------------------------------------------------------------
| | 3. Exhibits |         |                                                                                                                              
| |             |         |                                                                                                                              
| | **          | 2.1     | Agreement
 and Plan of Reorganization between OptimumBank and OptimumBank Holdings, Inc.
 dated March 23, 2004               
| | ***         | 3.1     | Articles of
 Incorporation                                                                                                   
| |             | 3.2     | Articles of
 Amendment to Articles of Incorporation                                                                          
| | ***         | 3.3     | Bylaws                                                                                                                       
| | ****        | 4.1     | Form of
 stock certificate                                                                                                   
| | *****       | 10.1(a) | Amended and
 Restated Stock Option Plan                                                                                      
| | *           | 10.3(a) | Agreement
 between OptimumBank, Albert J. Finch and Richard L. Browdy dated June 14,
 2002                                   
| |             | 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                                                    
| |             | 21.1    | Subsidiaries
 of the Registrant                                                                                              
| |             | 31.1    | Certification
 of Chief Executive Officer required by Rule 13a-14(a)/15d-14(a) under the
 Exchange Act                       
| |             | 31.2    | Certification
 of Chief Financial Officer required by Rule 13a-14(a)/15d-14(a) under the
 Exchange Act                       

29

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Table of Contents

| |  |      |                                                                                                                                                
| |  | ---- | -----------------------------------------------------------------------------------------------------------------------------------------------
| |  | 32.1 | Certification
 of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted
 pursuant to Section 906 of Sarbanes-Oxley Act of 2002
| |  | 32.2 | Certification
 of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
 pursuant to Section 906 of Sarbanes-Oxley Act of 2002

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

Item 14. Principal Accountant Fees and
Services

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

30

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Table of Contents

SIGNATURES

In accordance
with Section 13 or 15(d) of the Exchange Act, the Registrant has caused this
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 31st day
of March 2009.

| |                                                    
| | ---------------------------------------------------
| | OPTIMUMBANK HOLDINGS, INC.                         
| |                                                    
| | /s/ Albert
 J. Finch                               
| | Albert J.
 Finch                                   
| | Chief
 Executive Officer                           
| |                                                    
| | /s/ Richard
 L. Browdy                             
| | Richard L.
 Browdy                                 
| | Chief
 Financial Officer (Chief 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 March
31, 2009.

|                       |  |         
|---------------------- |  | --------
|Signature              |  | Title   
|                       |  |         
|/s/ Albert J.
 Finch   |  | Director
|Albert J.
 Finch       |  |         
|                       |  |         
|/s/ Richard
 L. Browdy |  | Director
|Richard L.
 Browdy     |  |         
|                       |  |         
|/s/ Michael
 Bedzow    |  | Director
|Michael
 Bedzow        |  |         
|                       |  |         
|                       |  | Director
|Sam Borek              |  |         
|                       |  |         
|/s/ Irving
 P. Cohen   |  | Director
|Irving P.
 Cohen       |  |         
|                       |  |         
|/s/ Gordon
 Deckelbaum |  | Director
|Gordon
 Deckelbaum     |  |         
|                       |  |         
|                       |  | Director
|H. David
 Krinsky      |  |         
|                       |  |         
|/s/ Wendy
 Mitchler    |  | Director
|Wendy
 Mitchler        |  |         
|                       |  |         
|/s/ Larry
 Willis      |  | Director
|Larry Willis           |  |         

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Exhibit Index

|            |  |                        |                                                                                                                                                 | 
|----------- |  | ---------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------- | 
|Exhibit No. |  | Description
of Exhibit |                                                                                                                                                
|            |  |                        |                                                                                                                                                
|3.2         |  |                        | Articles of
 Amendment to Articles of Incorporation                                                                                            
|            |  |                        |                                                                                                                                                
|13.1        |  |                        | OptimumBank
 Holdings, Inc. and Report of Independent Registered Public Accounting Firm                                                        
|            |  |                        |                                                                                                                                                
|21.1        |  |                        | Subsidiaries
 of the Registrant                                                                                                                
|            |  |                        |                                                                                                                                                
|31.1        |  |                        | Certification
 of Chief Executive Officer required by Rule 13a-14(a)/15d-14(a) under the
 Exchange Act                                         
|            |  |                        |                                                                                                                                                
|31.2        |  |                        | Certification
 of Chief Financial Officer required by Rule 13a-14(a)/15d-14(a) under the
 Exchange Act                                         
|            |  |                        |                                                                                                                                                
|32.1        |  |                        | Certification
 of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted
 pursuant to Section 906 of Sarbanes-Oxley Act of 2002
|            |  |                        |                                                                                                                                                
|32.2        |  |                        | Certification
 of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
 pursuant to Section 906 of Sarbanes-Oxley Act of 2002

---