OptimumBank Holdings, Inc. (OPHC) stock intrinsic value fair value estimate & owner earnings analysis

What the business is. OptimumBank Holdings owns OptimumBank, a community bank that operates a main office and two branches in Broward County and one branch in Miami-Dade County, Florida. It takes deposits and lends them out, mostly against commercial property. Its primary market is Broward, Miami-Dade, Palm Beach, Martin and St. Lucie counties, and most of its loans are to borrowers in Broward and parts of Palm Beach and Miami-Dade. At December 31, 2025 it had $1.11 billion of assets, $959 million of loans and $932 million of deposits; by June 30, 2026 assets had reached $1.40 billion and deposits $1.21 billion. This is a very different bank from the one of a decade ago: in 2019 it had about $102 million of loans and it lost money in most years from 2016 through 2020. New capital, partly through convertible preferred stock and partly through common stock sales, let it grow roughly tenfold, and earnings followed: net income was $6.3 million in 2023, $13.1 million in 2024 and $16.6 million in 2025, and $11.3 million in the first half of 2026, 51% more than a year earlier. Its 2025 tax rate was about 25%, so these profits are fully taxed. How we count the shares. There are 1,360 shares of Series B preferred stock, each convertible at the holder's option into 8,172 common shares (about 11.1 million in total), and they share in any dividend as if already converted. There are also 875,641 Series C convertible preferred shares. Together these represent about half of the company's economics, so every per-share figure here uses the fully converted count of about 23.7 million shares, the same basis the company now uses for its diluted earnings per share. Book value was $134.4 million, or about $5.67 per converted share, on June 30, 2026. What the business earns. We measure the cash the bank generates for owners: operating cash flow, adjusted to remove swings in working capital, minus stock compensation, minus the spending needed to keep branches and equipment current, and minus the loans the bank actually wrote off, net of recoveries. We do not subtract the full loan-loss provision, because much of it is reserve set aside simply because the loan book grew; the risk that future write-offs will be much larger is carried in the cases below instead. On that basis the bank earned about $0.49 per share in 2023, $0.66 in 2024 and $0.76 in 2025, after net write-offs of $2.1 million, $1.4 million and $0.3 million. We take $0.66, the middle of those three years, as the starting level; earlier years describe a much smaller bank. That level equals about 15.9% on average equity in both 2024 and 2025 (13.6% in 2023). Our earlier estimate subtracted the whole loan-loss provision each year. Switching to losses actually realized raises the bank's measured earnings, and therefore our values, modestly. How a growing bank is valued. A bank cannot pay out everything it earns while it grows, because it must keep capital in proportion to its balance sheet. Equity was 9.6% of assets at June 30, 2026 (down from 11.0% six months earlier, because assets grew faster than capital), and the bank's Tier 1 leverage ratio was 11.4% at the end of 2025. In every case we therefore hold back enough of each year's earnings to keep equity growing in step with the loans that case assumes, and value only what is left over. In all three cases the bank keeps operating, so its deposits and borrowings are treated as part of the ongoing business and nothing is subtracted for them. Base case, about $15.73 per share. The bank earns about 15.9% on equity in the coming year, which is roughly $0.90 per share. That is 18% more than 2025's $0.76, a little faster than the 16% growth achieved in 2025. The reason is already visible in the June 2026 figures: assets grew 26% and deposits 30% in six months, and second-quarter interest income was 39% higher than a year earlier. The return then drifts down to 12% by year ten as growth slows from 14% next year to 5%. The supports are cheap funding and falling funding costs. Non-interest-bearing accounts were 29% of deposits at the end of 2025 (26% in June 2026), and interest paid fell from $26.4 million in 2024 to $21.7 million in 2025 even though deposits grew from $772 million to $932 million. The case includes one ordinary credit downturn around year four, with write-offs about 1% of loans higher than normal. Because loans are roughly eight times equity, that costs about six points of return and cuts that year to about 8.6%. After year ten we assume only that the South Florida deposit franchise keeps earning about 10% on equity, with no further growth and everything paid out. That long-run earning power supplies more than four-fifths of the value. Bear case, about $6.99 per share. The main risk is concentration. Commercial real estate loans are $667 million, 70% of the loan book, several times the bank's capital, and most of it is lent in three South Florida counties. The bank also relies partly on less loyal money: at the end of 2025, deposits from listing services were 15% of the total and brokered deposits 9% (down from 19% a year earlier). In this case a South Florida property downturn in years two and three produces write-offs of about 3% of loans each year. That means two loss-making years, no growth for three years, and owners putting back the capital lost. The bank then earns 7% to 9% on equity, growing 3% a year, and 7.5% over the long run. The bank has been through hard times before: its filings show loan charge-offs of $1.8 million in 2012 and $3.0 million in 2013, a 2010 written agreement with the Federal Reserve Bank of Atlanta and a consent order that were both still in force in early 2017, and losses in most years from 2016 through 2020. We did not assume the bank fails or must issue shares cheaply to rebuild capital. Nothing in today's filings points to that. Nonaccrual loans were $2.9 million (0.3% of loans) at the end of 2025, down from $7.6 million a year earlier, and the loss allowance was $10.3 million, about 1.1% of loans. Bull case, about $22.84 per share. The bank earns about 18% on equity for three years, roughly its first-half 2026 pace on this cash measure, and grows 15% to 16% a year funded entirely by retained earnings. Returns ease to 14% by year ten as growth slows to 6%, credit costs stay normal, and the long-run return settles at 12%. What could make this wrong. The value depends heavily on the bank earning well above 6% on equity for a very long time, and on commercial real estate losses staying moderate. Net write-offs in our starting years were small, at most about $2.1 million a year, far below what the bear case assumes, which is why that case matters. The large deposit inflow in the first half of 2026 could not be traced to its sources. Non-interest-bearing deposits grew about 20% while total deposits grew 30%, so most of the new money pays interest. If it came from a few large or rate-sensitive accounts, growth and margins will be weaker than assumed. If the bank chooses or is required to rebuild its capital ratio from 9.6% toward the 11% it held at the end of 2025, less can be paid out for several years. The preferred holders have about half of the economic interest, so their decisions carry great weight. Margin-of-safety price. This is a small, highly leveraged lender concentrated in one property market, so the margin-of-safety price carries a wide discount. It is $8.50, a little over half the base case and about 20% above the bear case.