March 21, 2006
OptimumBank Holdings, Inc. (the Company) was formed in March 2004 as a Florida corporation to serve as a one-bank holding company for OptimumBank (the Bank), a Florida state chartered bank. The Companys only business is the operation of the Bank which opened for business in November 2000. The Bank provides community banking services and products to individuals and businesses in Broward, Miami-Dade and Palm Beach counties. The Company currently operates out of its main office and three branch banking offices in Broward County, Florida. As a registered bank holding company, the Company is regulated by the Federal Reserve Board. The Bank is a member of the Federal Home Loan Bank of Atlanta and is regulated by the State of Florida Department of Financial Services and the Federal Deposit Insurance Corporation, the insurer of its deposits. As a public company on the NASDAQ Capital Market Exchange, the Company is also governed by the rules of the exchange which require significant corporate governance requirements on their listed companies. As of December 31, 2005, the Company has grown to $206.0 million in assets, $170.2 million in net loans, $114.1 million in deposits and $18.4 million in Capital.
In addition to being regulated and audited by three different governmental bodies we are also audited yearly by the independent accounting firm of Hacker, Johnson and Smith, located in Florida. The Company already feels the burden of accounting, regulatory and corporate governance compliance of four independent entities. With the advent of Section 404 of Sarbanes Oxley (SOX), the compliance burden has grown out of proportion to the benefit, especially since small public banking companies like OptimumBank Holdings are so highly regulated in the first place. This significant current regulatory oversight of the Company could be reason enough for not requiring any more oversight under SOX.
We have studied our own regulatory burden related to SOX 404 requirements which when implemented will approximate over $200,000 annually, approximately 7.5% of our net income in 2005, which is significant. We have talked to our peers in Florida Banking and they describe similar costs or greater. It should also be noted certain research by NASDAQ has indicated that the burden on small companies on a percentage of revenues basis, is 11 times the burden on large companies. We dont see the benefit of that cost, especially in light of the already huge accounting, regulatory and market oversight.
We would urge that you adopt the recommendations of the SECs Advisory Committee on Smaller Public Companies, which has proposed exemption from SOX for companies with less than $128 million in market cap. In literature that we have seen, this exemption would account for only 6% of the US market cap which is immaterial to the vast majority of companies SOX would cover.
Richard L. Browdy