Debt Securities

9 Months Ended

Sep. 30, 2024

Investments, Debt and Equity Securities [Abstract]

Debt Securities

(2) Debt Securities. Debt securities have been classified according to management’s intent. The amortized cost of debt securities and fair values are as follows (in thousands):

			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
At September 30, 2024:
Available for sale:
SBA Pool Securities	$	611	$	—	$	(13	)	$	598
Collateralized mortgage obligations		129		—		(12	)		117
Taxable municipal securities		16,663		—		(3,878	)		12,785
Mortgage-backed securities		13,104		—		(2,109	)		10,995
Total	$	30,507	$	—	$	(6,012	)	$	24,495
Held-to-maturity:
Collateralized mortgage obligations	$	300	$	—		(25	)	$	275
Total	$	300	$	—		(25	)	$	275

(continued)

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (Unaudited)

(2) Debt Securities, Continued.

			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
At December 31, 2023:
Available for sale:
SBA Pool Securities	$	706	$	—	$	(16	)	$	690
Collateralized mortgage obligations		138		—		(15	)		123
Taxable municipal securities		16,690		—		(4,480	)		12,210
Mortgage-backed securities		13,927		—		(2,595	)		11,332
Total	$	31,461	$	—	$	(7,106	)	$	24,355
Held-to-maturity:
Collateralized mortgage obligations	$	353	$	—		(35	)	$	318
Mortgage-backed securities		7		1		—			8
Total	$	360	$	1		(35	)	$	326

There were no sales of debt securities during the three and nine months ended September 30, 2024 and 2023.

Debt securities available for sale with gross unrealized losses, aggregated by investment category and length of time that individual debt securities have been in a continuous loss position, is as follows (in thousands):

	Over Twelve Months					Less Than Twelve Months
	Gross					Gross
	Unrealized			Fair		Unrealized			Fair
	Losses			Value		Losses			Value
At September 30, 2024:
Available for Sale:
SBA Pool Securities		(13	)		598		—			—
Collateralized mortgage obligation		(12	)		117		—			—
Taxable municipal securities		(3,878	)		12,785		—			—
Mortgage-backed securities		(2,109	)		10,995		—			—
Total	$	(6,012	)	$	24,495	$	—		$	—
At December 31, 2023:
Available for Sale :
SBA Pool Securities		(16	)		690		—			—
Collateralized mortgage obligation		—			—		(15	)		123
Taxable municipal securities		(4,480	)		12,210		—			—
Mortgage-backed securities		(2,595	)		11,332		—			—
Total	$	(7,091	)	$	24,232	$	(15	)	$	123

(continued)

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (Unaudited)

(2) Debt Securities, Continued.

At September 30, 2024 and December 31, 2023, the unrealized losses on forty investment debt securities in each period were attributable to changes in interest rates.

Management evaluates debt securities for impairment where there has been a decline in fair value below the amortized cost basis of a security to determine whether there is a credit loss associated with the decline in fair value on at least a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. Consideration is given to (1) the financial condition and near-term prospects of the issuer including looking at default and delinquency rates, (2) the outlook for receiving the contractual cash flows of the investments, (3) the length of time and the extent to which the fair value has been less than cost, (4) the intent and ability to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value or for a debt security whether it is more-likely-than-not that the Company will be required to sell the debt security prior to recovering its fair value, (5) the anticipated outlook for changes in the general level of interest rates, (6) credit ratings, (7) third party guarantees, and (8) collateral values. In analyzing an issuer’s financial condition, management considers whether the securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred, the results of reviews of the issuer’s financial condition, and the issuer’s anticipated ability to pay the contractual cash flows of the investments.

The Company performed an analysis that determined that the mortgage-backed securities, collateralized mortgage obligations, and U.S. government securities, and SBA pool securities have a zero expected credit loss as they have the full faith and credit backing of the U.S. government or one of its agencies. Municipal bonds that do not have a zero expected credit loss are evaluated at least quarterly to determine whether there is a credit loss associated with a decline in fair value. At September 30, 2024 and December 31, 2023 all municipal securities were rated as investment grade. All debt securities in an unrealized loss position as of September 30, 2024 continue to perform as scheduled and the Company does not believe that there is a credit loss or that credit loss expense is necessary. Also, as part of our evaluation of our intent and ability to hold investments for a period of time sufficient to allow for any anticipated recovery in the market, the Company considers our investment strategy, cash flow needs, liquidity position, capital adequacy and interest rate risk position. The Company does not currently intend to sell the investments within the portfolio, and it is not more-likely-than-not that a sale will be required.

Management continues to monitor all of our investments with a high degree of scrutiny. There can be no assurance that in a future period, conditions may exist at that time indicating that some or all of the Company’s securities may be sold that would require a charge to earnings as credit loss expense in such period.