OptimumBank (OPHC) Q3 2026 Earnings Call Transcript

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DATE

Friday, Nov. 13, 2026

CALL PARTICIPANTS

• Chairman and Chief Executive Officer - Moishe Gubin
• President - Braden Smith
• Chief Financial Officer - Elliot Nunez
• Managing Director of Investor Relations - Seth Denison

TAKEAWAYS

• Net Income -- $7.2 million, an increase of 65.9% compared with the third quarter of last year, driven by strong core banking operations and expanding franchise earnings power.
• Diluted EPS -- $0.30, up 67% from $0.18 in the prior year period, reflecting the completion of a preferred stock exchange earlier in the year.
• Pre-tax Pre-provision Earnings -- $10.6 million, representing 65.3% growth versus last year and establishing an annualized run rate exceeding $42 million.
• Net Interest Margin -- 4.63%, an expansion of 26 basis points versus last year, resulting from disciplined loan and deposit pricing strategies.
• Total Assets -- $1.58 billion, up $493.1 million compared to the previous year, supported by significant loan and deposit growth.
• Gross Loans -- $1.37 billion, reflecting 12.3% growth from June 30, 2026, due to increased demand across all portfolio segments.
• Total Deposits -- $1.34 billion, an increase of 40.0% since Sept. 30, 2025, with noninterest-bearing demand deposits growing 21.6% over that period.
• Tangible Book Value Per Diluted Share -- $5.98, a 20.3% improvement from the previous year, driven by record quarterly earnings retention.
• Efficiency Ratio -- 45.86%, improving from 48.78% in the second quarter, as revenue growth outpaced the expansion of noninterest expenses.
• Tier 1 Leverage Ratio -- 12.23%, a 169 basis point increase from the previous quarter, following a $31 million capital contribution to the bank from subordinated debt proceeds.
• Non-interest Income -- $2.8 million, up from $2.5 million in the prior quarter, primarily due to higher banking service fees and the collection of $900,000 in late fees from a nonaccrual loan payoff.
• Non-interest Expense -- $9 million, up from $8.4 million in the second quarter, reflecting investments in personnel, technology, and infrastructure to support scaling.
• Non-performing Assets -- 0.11% of total assets, compared with a 0.50% national peer group average, indicating disciplined underwriting and strong asset quality.
• Subordinated Debt Issuance -- $35 million, completed in Aug. 2026 at a 7.50% fixed-to-floating rate, to provide a foundation for future balance sheet growth.
• OptimumFinance Loan Portfolio -- $26.7 million, nearly doubling from $14.2 million in the second quarter, as the specialty finance subsidiary expanded its non-bank lending activities.
• Commercial Real Estate Loans -- $996.5 million, representing growth of $91.4 million during the quarter and establishing the segment as the largest portion of the portfolio.
• Residential Real Estate Loans -- $107.1 million, an increase of $28.8 million in the third quarter, driven by higher demand in the Florida market.
• 2027 PTPP Earnings Guidance -- $48 million to $50 million, supported by anticipated expense reductions of $600,000 to $1 million annually.
• Loan Pipeline -- Approximately $700 million, which management noted contains a high volume of standard real estate transactions that exceed the bank's current closing capacity.
• Private Equity Placement -- $25.4 million, raised from four accredited investors after Sept. 30, 2026, at a 10% discount to the market price without commission costs.
• Headcount -- 119 employees, an increase from 48 at the end of 2022, reflecting the scaling of the team to manage a nearly threefold increase in total assets.
• Credit Loss Expense -- $1.1 million, compared to a $37,000 reversal in the second quarter, reflecting provisions tied to the expansion of the loan portfolio.

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RISKS

• Gubin stated, "The marketplace does not want you having too much sub debt on the books," noting that the company must rely on equity raises rather than further debt to support capital ratios.

SUMMARY

OptimumBank Holdings, Inc. (NYSEMKT:OPHC) achieved record quarterly earnings driven by substantial balance sheet expansion and net interest margin improvement. Management focused on optimizing internal operational infrastructure through process streamlining and the development of specialty finance subsidiaries, including OptimumFinance and OptimumFunding. The company strengthened its capital foundation through subordinated debt and subsequent private placements to support a robust loan pipeline while maintaining strong asset quality metrics compared to its national peer group.

• CEO Gubin reported that the company has identified "efficiencies that we expect to begin realizing over the next several quarters" by streamlining processes and limiting non-labor expenses.
• The company plans to pursue a HUD license in 2027 to expand lending to nursing home operators through its OptimumFunding subsidiary.
• Seth Denison noted that daily trading volume increased 14-fold during the quarter, with more than 7.6 million shares changing hands between July and Sept. 30.
• Gubin stated that the bank maintains a "cult following" among its borrowers, which has contributed to a current loan pipeline of approximately $700 million.
• Management expects to raise approximately $50 million in new equity in 2027 to maintain a 10% capital ratio while supporting projected lending growth of $500 million to $600 million.

INDUSTRY GLOSSARY

• ACH: Automated Clearing House, a network used for electronic financial transactions.
• ATM: At-the-market, a type of follow-on offering of stock to the public.
• BSA: Bank Secrecy Act, requiring financial institutions to assist U.S. government agencies in detecting and preventing money laundering.
• HUD: U.S. Department of Housing and Urban Development.
• NIM: Net interest margin, the difference between the interest income earned by a bank and the amount of interest paid out to lenders.
• PTPP: Pre-tax, pre-provision earnings, representing operating income before taxes and credit loss provisions.
• SOFR: Secured Overnight Financing Rate, a benchmark interest rate for dollar-denominated derivatives and loans.
• Tier 1 Leverage Ratio: A regulatory measurement of a bank's core capital to its total assets.

Full Conference Call Transcript

Operator: Thank you for joining us, and welcome to the OptimumBank Holdings Inc. third quarter 2026 earnings call. After today's prepared remarks, we will host a question-and-answer session. If you would like to ask a question, please raise your hand. If you have dialed into today's call, please press star nine to raise your hand and star six to unmute. You are also welcome to ask a question via email at sdenison@optimumbank.com. That's-D-E-N-I-S-O-N @optimumbank.com. I will now hand the conference over to Seth Denison, Managing Director of Investor Relations. Please go ahead.

Seth Denison: Good morning, everyone, and thank you for joining us today for OptimumBank Holdings third quarter 2026 earnings webcast. My name is Seth Denison, Managing Director of Investor Relations for OptimumBank. Joining me today are Moishe Gubin, our Chairman and Chief Executive Officer, Braden Smith, our President, and Elliot Nunez, our Chief Financial Officer. The third quarter marked another significant milestone in OptimumBank's continued evolution. Our organization reached nearly $1.6 billion in total assets, established another quarterly earnings record, and continued demonstrating the strength of the banking franchise we have built over the past 26 years.

Beyond our financial performance, which Moishe and Elliot will discuss in greater detail shortly, we continued making meaningful progress on several strategic initiatives designed to support our next phase of growth. OptimumFinance continued growing its portfolio during the quarter and is becoming a contributor to our earnings. OptimumFunding is also supporting our existing healthcare lending activities at the bank, including lending to nursing home operators. Additionally, OptimumFunding is pursuing a new HUD license, which we anticipate receiving in 2027, further expanding our capabilities and creating additional opportunities in the healthcare lending market. Together, these businesses broaden our lending capabilities, strengthen our relationships with specialized borrowers, and create additional opportunities for growth.

Another encouraging development during the third quarter was the dramatic increase in investor interest in OptimumBank, coinciding with Moishe's first full quarter as CEO. On July 1st, our common stock closed at $5.88 per share, with just 4,500 shares traded that day. By September 30th, our shares closed at $8.72, representing nearly a 50% appreciation, while daily trading volume had increased approximately 14-fold. Over the course of those three months, more than 7.6 million shares changed hands, averaging approximately 119,000 shares per trading day. We view this substantial increase in market activity as an encouraging indication that a much broader investment audience is discovering OptimumBank and beginning to recognize the value of the franchise we have built.

While we are certainly pleased with the progress we have made, our attention remains firmly on the future. We believe OptimumBank has significant opportunities ahead, and our management team remains committed to disciplined execution, responsible growth, and creating lasting value for our shareholders. Today's call may include forward-looking statements based on management's current expectations, assumptions, and beliefs about OptimumBank's business and the environment in which it operates. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those anticipated. The call is being recorded, and we refer you to our SEC filings, including our most recent Form 10-Q, for additional information regarding risk factors and forward-looking statements.

Additionally, references will be made during this call to non-GAAP financial results. Investors are encouraged to review these non-GAAP financial measures as identified in the presentation deck. Slide three provides a brief introduction to the members of our leadership team joining us today. Collectively, they bring decades of banking, financial, and executive leadership experience, along with a shared commitment to OptimumBank's continued growth and success. Following the presentation, Moishe, Braden, and Elliot will be available to answer questions during our Q&A session. Viewers are encouraged to submit questions at any time during the presentation by emailing me directly at sdenison@optimumbank.com. I am going to spell that out for you. That is S-D-E-N-I-S-O-N @optimum, O-P-T-I-M-U-M, bank, B-A-N-K.com.

With that, I will turn it over to Moishe to begin the presentation.

Moishe Gubin: Thank you, Seth, and good morning, everyone. This slide illustrates OptimumBank's evolution, a journey that began 26 years ago. Having been involved with the bank for more than 16 years, I have watched it grow from a relatively small community bank into a rapidly growing financial institution with a substantially broader range of capabilities. Now, in my first full quarter as Chief Executive Officer, I am particularly encouraged by both the progress we have made and the opportunities I see ahead of us. Our strategy remains grounded in the same principles that have guided our success over the years: disciplined lending, strong customer relationships, prudent risk management, and a commitment to operating efficiently.

What has changed is the scale at which we are executing that strategy. As we continue to grow, one of my priorities is ensuring that our operating infrastructure evolves alongside the bank. We have been taking a close look at our operations, identifying opportunities to streamline processes, improving productivity, and limiting expenses. We have already identified efficiencies that we expect to begin realizing over the next several quarters, even as we continue investing in the people, technology, and capabilities necessary to support our growth. I believe there is considerable opportunity to improve operating leverage as our organization expands. We are not simply focused on becoming a larger bank.

We are focused on building a stronger, more efficient, and more profitable institution that can consistently generate attractive returns for our shareholders. As the new CEO, I intend to help guide the next chapter of this evolution with the ambition of making OptimumBank one of Florida's strongest and best-performing community banks. With that perspective, let me turn to our third quarter performance and some of the factors driving our continued momentum. Turning to slide five, our third quarter results demonstrate that OptimumBank continues to deliver strong growth while translating that growth into meaningful improvements in profitability.

We reported record quarterly net income of approximately $7.2 million, an increase of 7.8% over the second quarter and 65.9% compared with the third quarter of last year. These results reflect the continued strength of our core banking operations and the earnings power of our expanding franchise. Particularly encouraging was the growth in our pre-tax, pre-provision earnings, which reached $10.6 million, an increase of 20.7% from the second quarter and 65.3% year-over-year. This is an important measure of our underlying operating performance and demonstrates our ability to generate increasingly strong earnings as the bank continues to grow.

Net interest income increased to $16.8 million, up 14.2% from the second quarter, while our net interest margin expanded to 4.63%, an improvement of 6 basis points sequentially and 26 basis points compared with the same quarter last year. We also achieved another significant milestone during the quarter, with combined interest and non-interest income reaching nearly $28 million. This represents an annualized gross income run rate exceeding $112 million, a remarkable achievement that reflects the expanding scale of our operations and the substantial earning capacity of the franchise we have built. Our balance sheet also continued expanding, with total assets reaching approximately $1.6 billion, supported by strong loan and deposit growth.

At the same time, tangible book value per diluted share increased to $5.98, representing a 20.3% improvement from September 30th of last year. Importantly, we also strengthened our capital position considerably during the quarter, with our Tier 1 leverage ratio increasing to 12.23%, providing additional capacity to support our continued expansion. One of the highlights of this slide is the improvement in quarterly diluted earnings per share, from $0.18 in the third quarter of 2025 to $0.30 in the third quarter of 2026. That represents an increase of approximately 67% year-over-year. Third quarter earnings per share were $0.30 on both a basic and diluted basis, following the preferred stock exchange completed earlier this year.

Overall, I am extremely pleased with the consistency of our performance. We are growing, generating increasingly strong earnings, strengthening our capital position, and creating additional value for our shareholders. Now let's turn to slide six for a closer look at our core operating profitability. Turning to slide six, I want to highlight two measures that I believe are particularly important in evaluating the underlying profitability of OptimumBank. The first is our pre-tax, pre-provision earnings reached $10.6 million in the third quarter, compared with $8.8 million in the preceding quarter and $6.4 million a year ago.

Importantly, our current quarterly performance translates to an annualized earnings run rate exceeding $42 million, demonstrating the substantial earnings capacity we have developed as our organization continues to grow. The second is our annualized core return on average equity, which increased to 29.6% compared with 26.9% in the second quarter and 22.4% a year ago. Our annualized GAAP return on average equity was approximately 20% for the quarter. What I find particularly encouraging is that we are achieving these returns while continuing to expand our balance sheet, strengthen our capital position, and invest in the future of the organization.

Turning to slide seven, I believe this is one of the most compelling illustrations of what we have accomplished at OptimumBank over the past several years. Since the end of 2022, our total assets have grown from approximately $585 million to nearly $1.6 billion, representing a compounded annual growth rate of 30.2%. That growth has been supported by the continued expansion of our lending operations, our geographic footprint, and the capabilities of our organization. During that same period, our employee count has increased from 48 to 119, reflecting the investments we have made in building the team and infrastructure necessary to support a much larger banking franchise. What I find most impressive is how that growth has translated into profitability.

Our net interest margin has expanded from 3.53% in 2022 to 4.63% in the third quarter of 2026. At the same time, our annualized pre-tax, pre-provision earnings have increased from approximately, like I said earlier, $8.9 million in 2022 to more than $35 million based on our performance through the first nine months of this year, with our most recent quarterly result reflecting an annualized run rate exceeding $42 million. In other words, while our balance sheet has grown substantially, our underlying earnings capacity has expanded even more dramatically. I believe these results demonstrate the effectiveness of our strategy and the considerable operating leverage we have developed as the bank has grown.

Looking ahead, our focus remains on continuing this trajectory while identifying additional opportunities to improve efficiency, expand our lending capabilities, and generate attractive returns for our shareholders. With that, I'll turn the presentation over to our Chief Financial Officer, Elliot Nunez, who will review our financial results in greater detail.

Elliot Nunez: Thank you, Moishe. Now turning to slide number eight, I'll review the underlying revenue, funding costs, and expense trends that contributed to our third quarter results. Total interest income increased to $25.11 million compared with $21.72 million in the second quarter, driven primarily by continued loan growth. Total interest expense increased to $8.33 million from $7.03 million, reflecting higher deposit balances, borrowing costs, and interest on our recently issued subordinated debt. As a result, net interest income increased to $16.78 million, up $2.08 million from the second quarter and $5.73 million from the third quarter of 2025. Our net interest margin expanded to 4.63% compared with 4.57% in the prior quarter and 4.37% a year ago.

We recorded a credit loss expense of $1.07 million during the quarter, compared with a $37,000 reversal in the second quarter, reflecting provisions associated with the continued expansion of the loan portfolio. Total non-interest income increased to $2.84 million compared with $2.49 million in the prior quarter. Non-interest expense increased to $9 million from $8.38 million, reflecting continued investment in personnel, technology, and infrastructure to support the bank's growth. These results contributed to pre-tax income of $9.56 million and a net income of $7.17 million, compared with $6.66 million in the second quarter. Earnings per share were $0.30 on both basic and diluted basis. Next, I'll review our year-to-date financial performance on slide number nine.

This slide summarizes our results for the first nine months of 2026 compared to the first nine months of 2025. Total interest income increased by $19.38 million to $66.29 million, while the net interest income increased by $13.96 million to $44.67 million. This growth was primarily driven by continued expansion of the loan portfolio and higher earning assets. Total non-interest income increased by $2.06 million to $7.11 million. Non-interest expense increased by $6.98 million, primarily reflecting investments in personnel, technology, and infrastructure to support the company's continued growth.

Moving below, we have pre-tax income increased to $24.59 million from $15.71 million during the first nine months of 2025, while net income increased to $18.49 million compared to $11.8 million in the prior year period. Basic earnings per share increased to $1.05 from $1, and diluted earnings per share increased to $0.78 from $0.50. Moving to slide number 10, gross loans increased to $1.37 billion at September 30th, 2026. Since December 31st, 2022, the loan portfolio has grown at a compound annual growth rate of 32%. The loan yield for the first nine months of 2026 was 7.22%.

Total deposits increased to $1.34 billion at September 30th, 2026, representing a compound annual growth rate of 29.6% since December 31st, 2022. The year-to-date cost of interest-bearing deposits was 3.23%. Annualized non-interest income totaled $9.5 million through the first nine months of 2026. Since December 31st, 2022, non-interest income has grown at a compound annual growth rate of 36.5%. Next, we're turning to slide number 11, which shows that credit quality remained strong during the third quarter. At September 30th, 2026, the allowance for credit losses to loans was 0.89%. Non-performing assets represented 0.11% of total assets, compared with 0.50% for our national peer group. Net charge-offs to average loans remain at 0%.

This metrics continued to reflect our disciplined underwriting practices and commitment to maintaining strong credit quality as the bank grows. Our capital position also strengthened significantly during the quarter. In August, OptimumBank Holdings successfully completed a $35 million subordinated debt offer, of which $31 million was contributed directly to the bank as additional capital. This infusion strengthened our regulatory capital position, contributing to an increase in the bank's Tier 1 leverage ratio to 12.23%, compared with 11.39% at year-end 2025. Importantly, this additional capital provides a stronger foundation to support continued balance sheet growth, expand our lending activities, and pursue new opportunities while maintaining a robust capital position.

Turning to slide number 12, our balance sheet continued to expand significantly during the third quarter. Total assets increased by $493.06 million year-over-year to $1.58 billion at September 30th, 2026. This growth was supported by total deposits increasing $383.34 million to $1.34 billion over the same period. Net loans increased by $549.99 million to $1.35 billion. On the funding side, we maintain a strong liquidity position. With cash and cash equivalents totaling $174.1 million at quarter-end. Federal Home Loan Bank advances decreased to $10 million compared with $25 million at June 30th, 2026. Finally, total stockholders' equity increased to $149.39 million at September 30th, 2026, compared with $134.38 million at June 30th, 2026.

This increase reflected earnings generated during the quarter, as well as capital raised through our at-the-market and private stock sales. Turning to slide number 13, this slide highlights several measures that distinguish OptimumBank's performance from the broader banking industry. Since December 31st, 2022, our loan portfolio has grown at a compound annual growth rate of 31.95%, compared with 13.09% for our national peer group. Over the same period, deposits have grown at a compound annual growth rate of 29.6%, compared with 6.82% for our peers. This growth has translated into increasing shareholder value, with tangible book value per diluted share rising from $3.44 at year-end 2022 to $5.98 at September 30th, 2026.

Diluted earnings per share for the first nine months of 2026 totaled $0.78, compared with $0.71 for the full year 2025. Importantly, we have achieved this growth while maintaining strong operating efficiency. Our efficiency ratio of 45.86% compares favorably with the peer average of 62.74%, while our net interest margin of 4.63% exceeds the peer average of 3.77%. We believe these comparisons demonstrate our ability to generate strong growth, maintain operating discipline, and deliver attractive financial returns. With that, I'll turn the call back to Moishe for his closing remarks.

Moishe Gubin: Thank you, Elliot. As we conclude today's presentation, I want to thank our employees, customers, shareholders, and Board of Directors for their continued confidence and support. Our third quarter results reflect the dedication of our team and the strength of the organization we have built together. Completing my first full quarter as CEO, I'm increasingly encouraged by the opportunities ahead. We have established a strong foundation for continued growth, with considerable potential to further enhance profitability and operating efficiency. We have identified opportunities to further streamline operations and enhance efficiency, with the resulting benefits expected to materialize over the coming quarters.

We anticipate realizing these improvements while maintaining our strong momentum in lending, deposit growth, and the continued expansion of our specialty finance businesses. We remain committed to disciplined growth, prudent risk management, and delivering sustainable returns for shareholders. I believe OptimumBank is exceptionally well-positioned for its next chapter. Our momentum has continued beyond the third quarter. Since September 30th, we have successfully completed several private placement transactions with significant private and institutional investors, raising an additional $25.4 million in fresh capital. We view this investment as a tremendous vote of confidence in OptimumBank, our leadership team, and the growth strategy we are executing.

Importantly, this additional capital further strengthens our financial position and provides us with greater flexibility to capitalize on the substantial opportunities we see ahead. Combined with our strong earnings performance and expanding banking franchise, we believe these investments position OptimumBank exceptionally well to accelerate our next phase of growth. With that, I'll turn it back to Seth to open the call for questions.

Seth Denison: Thanks, Moishe. We believe OptimumBank is entering an exciting new phase of growth, and we welcome the opportunity to share our progress, strategy, and long-term vision with the investment community. We're going to open it up for questions, and remember, if you have any, please feel free to email me at sdenison@optimumbank.com.

Operator: We will now begin the question-and-answer session. A reminder that if you would like to ask a question, please raise your hand using the raise hand function at the bottom of your screen. If you have dialed into today's call, please press star nine to raise your hand and star six to unmute. You are also welcome to ask a question via email at sdenison@optimumbank.com, and it will be read aloud. Please stand by while we compile the Q&A roster. Your first question comes from the line of Gaurav Mehta with Alliance Global Partners. As a reminder, please press star six to unmute. Your line is open. Please go ahead.

Gaurav Mehta: Thank you. Good morning. I wanted to ask you on the 3Q earnings that you reported, maybe comment on the run rate going forward, and then what's your sort of expectations for earnings going into 2027?

Moishe Gubin: Okay. So I'm using pre-tax, pre-provision. Our run rate should be easily probably $10 million a quarter, and that should actually probably grow maybe $12 million a quarter. So we should be looking at pre-tax, pre-provision $48 million on the year, $50 million on the year. That should be easily sustainable, especially we found some expenses that we were able to curb, which should probably add between $600,000 to $1 million a year right to the bottom line. So yeah, I think we should be able to pump out closer to $50 million a year in pre-tax, pre-provision.

Gaurav Mehta: All right, thanks for those details. I also wanted to ask you your comments on the expenses. I think you mentioned something about operating efficiency and focusing on expense control going forward. Can you provide some color on where you're looking to reduce expenses?

Moishe Gubin: Yeah. I became the CEO, I think, in May. Before that, as Chairman, I only saw less detailed data and expense lines, and basically were looking, as time has gone on, to be consistency on the financial statements, which we had. Once we became the CEO and started looking at some detail, and that also included when Braden Smith started as President, we started looking at different things that we're spending money on outside of labor, and we already found a bunch of things that we are quickly improving and eliminating, use of consultants in certain areas and certain employee benefits and certain ways we've been paying people. Then comes the payroll side of things.

On the payroll side of things, we're reanalyzing now all the departments and how they run and how they relate to each other, and making sure that every manager or whatever you want to call each head of each division, make sure they're working managers, that they have tasks outside of just managing people. So cleaning that up and cleaning up the efficiency of communication, because we feel like a strong— Now, we're running really, really well. Everything I say here, and I said this to the employees and the management when I first came along, I said, I'm of the belief that we can always be improving.

This is all of us as human beings as well, in every walk of life. You can always be doing better. So the fact that we're doing great is not good enough, right? We could be doing better than that. So we're looking at every single thing, all the way down to purchasing paperclips. Every single thing has to be looked at. We work for the shareholders, and every dollar that's earned is Or every dollar that's spent that doesn't deserve to be spent is us not doing a good job. We're looking at all that.

So I expect another couple of quarters, we'll clean up what the normal run rate is, and it'll take a little bit more time after that to be efficient in our labor. So that's still, that'll be a work in progress, but we should be running really, really well. I mean, we're running real well, but we're going to be running better over the next bunch of quarters.

Gaurav Mehta: Thanks for those details. Can you maybe comment on the demand that you are seeing for lending in the healthcare sector? I think in the prepared remarks, you talked about doing some lending in skilled nursing. Maybe provide some color on what you guys are seeing there.

Moishe Gubin: Well, I mean, our pipeline is very strong, and the deals that we are getting are vanilla deals. They are not wonky with hair on them. That really comes from the fact that we look at our borrowers and our customers as being part of a family. People, and I have said over the years, we have a cult following. I mean, legitimately, we have people lining up to borrow money from us. That is true till today. I think our pipeline today collectively is like $700 million now. I mean, we cannot close all that. That is crazy. But reality is, we are averaging between $50 million and $100 million a month in loan closings, and that should continue.

That being said, on the healthcare side of things, we have already closed, since we created OptimumFunding, we already closed $41 million of loans in the last quarter or so. We have $80 million approved loans that should close in the next quarter. That department is already looking to grow, to hire two more people, and for us to be able to go and take that and we will keep pushing. I am going this week to a conference, it is a healthcare conference, and usually we come back from these events with additional loans for the pipeline. That, so far, is running the way I thought it would run.

Maybe a little bit better than I thought, because we ended up integrating the folks from OptimumFunding for them to kind of also take care of the healthcare side at the bank. The bank is splitting the payroll between funding and the bank, and effectively, they are basically underwriting and selling for the bank, the regular bank deals. Yeah, I mean, I am really encouraged. I was on a panel yesterday at FAU, and I was with another, like an icon in banking. This other guy is a great banker, a great bank. A lot of folks probably know the bank.

But the thing I would say is, the one comment he made back to me is, like the pipeline that other banks have and what he has shrunk as the economy is chugging along here. It is seemingly, between higher interest rates, is affecting a lot of other people's pipeline. Our bank, we do not have that effect, which- It is a little bit crazy, but it is. It is reality. We should be able to continue what we are doing, and happy with the results.

Braden Smith: I would only add, to Moishe's point, I have been pleasantly surprised in terms of the success we had in the last quarter with our growth. The pipeline continues to expand, and the quality of the deals remains the same. Nothing too wild and crazy, kind of right down the middle of the fairway, and it has been great to see.

Gaurav Mehta: Then lastly, as you grow the platform and the bank, can you maybe talk about how you view common dividends?

Moishe Gubin: That is a good question. That still remains a subject of debate at the board level. We know that there are shareholders out there that want a dividend. We know it. But at the same token, we know that the program we have at our bank today, which is really clean, it is a clean model, bringing in deposits, lending out money, and wash, rinse, repeat. To be able to do that, we need equity. If we grow next year $500 million, okay, let us assume we end the year $1.8 billion-$1.9 billion, something like that, right? So, let us say a 25% growth is $500 million of lending next year.

For $500 million, you need $50 million of equity to be able to keep at a 10% capital ratio. And if our profits are only going to be $40 million, that will keep growing, there is a shortfall. There is always going to be a shortfall. In this case, that simple math is a shortfall of $10 million, for argument's sake. The problem is, not a problem, but a good problem, maybe, whatever, is that if I dividend out and give away some of the income, I now have to go and sell equity to make up the shortfall for our growth. Strategically, you are running. Anybody who is a sports fan out there, you play the hot hand.

We have a goalie that is not letting any goals in, you will play him over and over and over, or a pitcher that is throwing a shutout, you keep riding that. In our case, without getting crazy on what we are doing and running clean, simple things, we have enough pipeline that would absorb all of our equity earned and then some, that it does not really make sense today, even though I would like to make the shareholders happy at the same time. So, there is a balancing act that we are still not sure of how to handle.

I am probably supposed to be the CEO that tells you affirmatively, This is what we are doing, da, da, but that is not what I am doing here. I am telling you that we constantly have discussion because we are thinking about the shareholder, and we are thinking about how to run a business, and this business belongs to the shareholders. So, at the end of the day, if I hear enough from the shareholders that we want a dividend, then we most likely will end up doing a dividend at some point. But in the meantime, it does not make sense yet.

If demand would slow down, or if we wanted to say, Let us stop lending and just clip coupons for based on what we are doing, that could be a model down the road. But in the meantime, that is not the model today.

Gaurav Mehta: Thanks for those details. That is all I had.

Moishe Gubin: Thank you, Gaurav. Have a good weekend.

Operator: Your next question comes from the line of Ken Billingsley with Compass Point. Your line is open. Please go ahead. As a reminder, if you are muted locally, please remember to unmute your device.

Ken Billingsley: Can you hear me? Good morning. All right.

Moishe Gubin: Morning.

Ken Billingsley: I wanted to ask a question on OptimumFinance, and I think you gave a number a little bit different than what was in the press release, so I just want to qualify what you said. You grew it from about $14 million to almost $27 million in the third quarter. I think you mentioned, I got a $40 million and an $80 million number. What were you referencing in that case?

Moishe Gubin: What did you say, a $40 million and an $80 million?

Ken Billingsley: I thought you said something about $40 million in OptimumFinance, or for this quarter, or $80 million for this quarter. Maybe I misheard.

Moishe Gubin: No, that was OptimumFunding. OptimumFunding is the division for It's becoming our bank's healthcare division, but it's also going to be the bridge to HUD loan, the separate vertical. They have $40 million that the bank already closed on the bank's books, not on funding or finance's books, and they have $80 million approved, signed term sheets in the pipeline, that now have to get to loan committee and then close those loans, and those will all be bank deals as well. As far as Finance goes, Finance is doing fantastic. It's cash flowing, it's profitable. We've already, I think, had one payoff.

We have a second payoff coming in, and then we have two more loans going out the door, and that business is really running well as well.

Ken Billingsley: Yeah. The 10% financing, two questions on that is, what are you generally lending out on average in that, within the Finance, OptimumFinance? And where's the financing coming from at 10%?

Moishe Gubin: Right now, what we're doing, and we have a signed term sheet, we're waiting for loan documents, that's going to turn into what's to fund our business is going to be basically SOFR, I don't remember, it's SOFR 275, SOFR 250, somewhere in that area. The money going out the door, like I said before, is they're non-bankable, but they're good deals. Each one has a different scenario of why a bank couldn't do the deal or why a bank wouldn't do the deal. Most of it is going to turn into OptimumBank lending.

It's basically a stabilization period for properties that are really strong asset-based loan, but cash flow is weak, or something's going on with a guarantor, or something else that makes it like a one-off kind of deal. We're not doing anything crazy in there. Right now, the yield on that is averaging somewhere like a 19% return. All of the credit is performing as expected, real well actually. That's growing. We have another $30 million or so at 18% that's going to go out in the next month. Our funding is going to continue to grow. We have another term sheet from another bank to add another $50 million behind the first term sheet we have.

Similar pricing, SOFR 250, SOFR 275. I expect that really to be a very big vertical. Again, that's very, very specific. It's like you look at a deal, you're looking at the character of the person who's borrowing money, and you're understanding what their situation is that makes it non-bankable. Reality is that it's metric. On a metric basis, it's a deal that a normal lender would want to lend. It's just got to find the right shop for it. In our case, it's something where the borrower wants to be an OptimumBank customer, but they need to get through a cleanse before they get to be on our balance sheet.

Ken Billingsley: Does it cost any significant more to underwrite those loans, or is it more about timing? Same amount of work, just timing?

Moishe Gubin: Think of it like a boutique hotel versus a Ritz-Carlton. It's a nice hotel, right? In this case, OptimumBank is the Ritz-Carlton, and OptimumFinance is the boutique hotel that specifically the rooms are similar, but in the example here, the handholding of the guy running our OptimumFinance, he's visiting the property weekly potentially, and he's playing more of an asset manager role as opposed to just a lender who has a closed loan and puts the file and puts it in a drawer and gets paid. He's talking to the borrower weekly, daily. He's there often. A lot of times the collateral is a mixture of a bunch of different things.

With a regular bank, they don't want that because it's too complicated. But over here, you're watching each piece of that collateral. There's a little bit more handholding, a lot more coddling, a lot more effort being made. It starts with, again, the character of the borrower who somehow is known to us by way of a friend or by way of a contact. However it is, they're not a random stranger that found us and says, hey, I want to borrow money, like a snake oil salesman coming along. It's not like that.

These are people that are real estate people that might be OptimumBank customers already, and they just have a deal that doesn't fit on a bank's balance sheet today. It could be a bad, messy divorce. It could be some other random scenario. So the effort made is all the handholding of all the time and effort. It's not going to be a high-volume business. It's going to be less volume, very intimate, detail-oriented. That's why I call it a boutique hotel versus a nice Ritz. It's working perfectly. The guy who's at the top of the food chain there is very well-liked and well-known, and he really befriends the borrowers and is really involved with them. It's actually good.

It's good in the sense also where it's helping a person go mainstream. They have something that they did, or they're doing business a certain way for so many years, and this basically cleans it up and makes it where it fits into the box of a normal bank and bankable deal.

Ken Billingsley: Great. If I could ask another question just on the bank side, looking at loans. Commercial real estate loan growth from 2025, just year-to-date, is almost 50% already. So it's significant growth. With, what, almost 90%, I think, of the loans are variable rate, and 60% of those reprice within the next year. With the potential for rate increases, how are you guys looking at that market? Do you expect to see a slowdown? Do you have a large pipeline that your mix, you're unlikely to see a slowdown even if there are rate increases?

Moishe Gubin: Yeah. I do not see a slowdown for us at all. It really is amazing to see. This is a true case study for colleges that want to teach banking or entrepreneurship. You start with the fact of the business has always been relationship-based, not transactional-based. The people that are all involved have genuine care and concern, top-down, starting from me, for our customers and borrowers. I call them family members, like I said earlier. We mean that. It is truly mean that. Management could tell you how many times I am ready, reminding them, we work for the customer. They are part of our family.

We have to find a way to go above and beyond and take care of their needs. You hope that most of the customers do not want too much, right? They are a happy customer. They get what they want. We take care of it, then they are not as onerous. Reality is, if they were to become onerous, it would be our pleasure to take care of them and service them. I tell that every time I meet a customer. It is like, listen, I want to be your bank. I want to be your guy.

You need anything, if I cannot take care of it, I want to be able to refer you somewhere else that can take care of it. I do not want a fee for it. I want to just take care of you. I want to be your bank. When you think banking, you are going to call me, and I want to take care of everything you need. That is how we treat it. From that point of view, I do not think the pipeline is diminishing anytime soon.

I could tell you that since we are in South Florida, CRE is basically what we are going to do, and that is what we do, and that is what our customers do. Now, talking about a global economy of inflation and interest rates going up, South Florida seems to be immune to a lot of that. We are in the right spot, and we are doing the right thing, and we are taking care of the right people. Put all that together, it is literally lightning in a bottle. Super proud of that.

Ken Billingsley: Could you see yourself shifting to more fixed loans, though, or trying to push fixed versus variable? I know it is customer business and you want to give them what they need, but will your interest be to move them more to fixed in the next year or so?

Moishe Gubin: Let me clarify that. I think you're misunderstanding a little bit that our loans that we're making, other than lines of credits and HELOCs, are all fixed loans. The typical product that we're selling today is a 10-year loan. On a 10-year loan, out of those 10 years, they're either fixed in a three, five, seven, or 10. The portion that they're not fixed on is then repriced annually at a spread. So what you're looking at, I'm not sure exactly what you're looking at, but what you're looking at is a general—

Ken Billingsley: Slide 12.

Moishe Gubin: —Huh? Slide 12?

Ken Billingsley: I'm looking at slide 12 from the presentation.

Moishe Gubin: Well, let me bring up slide 12 real quick. We could talk about it offline, because I'm not exactly sure what you were looking at to get there. But again, our product we're delivering here is a fixed product, except for HELOCs and lines of credits for the nursing homes. Most of our lending is fixed. We've been spreading our portfolio for the last four or five years, for the most part, when we were thinking that rates were going to go up anyway, or they were going to continue to go up. As far as I know, there's nothing material that's sitting where something's going to mature that the person's cash flow doesn't cover today.

Braden Smith: Yeah.

Elliot Nunez: Yeah.

Braden Smith: Ken, I'd just add, I think the stuff that you're referencing in there is stuff that was put on the books three to five years ago, which is stuff that we're excited is coming off fixed and going to floating, because obviously it's going to adjust up significantly. If you look at the growth over the last, this year in particular, and last year, majority of that is, we've got some runway to go on that for the next couple years. Being fixed, I mean.

Ken Billingsley: Great.

Elliot Nunez: Yeah, Ken, I just wanted to add to that question, is as those loans come up for next year, we have a robust process in place where our credit department has already backed up Moishe's comment and reviewed all those credits, and they will have sufficient cash flows to go to variable at that point.

Braden Smith: Yeah.

Ken Billingsley: Great. Appreciate it. Thank you.

Moishe Gubin: Yeah, Ken, anybody that has questions, we are transparent folks. So in between earnings calls, if there is a question, feel free to reach out to us, either through Seth or directly to any of us. We are always glad to schmooze. I love talking shop. I could talk banking all day long, personally.

Speaker 7: [inaudible]

Seth Denison: Okay. Warren, unless we have anybody else that is dialed in asking questions, I have quite a number of emailed questions that came through. I am trying to sift as I am in real time. So I am going to ask five questions, which I think cover the majority of the over 30 that we have received. So we are going to start with this one from Chris Marinac over at Brean. He asked to dive a little deeper on the reserve for loan losses and whether that should be rising as the loan portfolio continues to see success.

Moishe Gubin: Okay. So, I think Elliot could probably answer the detail of it. I could just say to the folks listening, just like the anomaly of our pipeline and bunch of other metrics that we have, another anomaly to our pipeline or to our company is we do not have bad loans. I think at September 30th, we had either zero or close to zero past due loans, outside of SBA being That program in and of itself was created that there is going to be default at some point, and that was going to be against a higher interest rate. So ignoring SBA, at September 30th, I did not think we had anything past due at all.

As far as methodology, Elliot, why do not you walk the folks through the reason we have a low ALLL is because of our previous history. But why do not you walk that through?

Elliot Nunez: Yeah, absolutely. So, one of the things that has benefited us and speaks too loudly to the credit quality of our portfolio, what you see in our provision expense for this year, we did have a reversal of a specific reserve of a loan that was able to right-size itself, and we were able to take back full provision. That is why that provision expense number is going down. Now, in terms of the future, we do have a 20-year look back in terms of historical charge-offs, so we will be picking that up from all the cycles and recessions. Where I think the allowance itself will grow a little bit is in its Q factors.

In its Q factors, out of the nine dictated by the literature of concentration and volume, I do expect that to grow as we go. Also, what's going to be adding is the portfolio of OptimumFinance. When we look at the allowance, we have it at the bank, we have it at finance, and those distinctive credit will be also an additive. Concentration and volume will probably add as we move into 2027.

Moishe Gubin: At the end of the day, there's been debate at the board level whether or not we should just add a little bit more to the allowance to make us look more like our peers. The reality is that it's really not needed because we don't have loans that are going bad. We've kept it to be consistent with our methodology we've done over the last, I don't know, it's at least five, 10 years, it seems like we've been doing the same methodology on how to calculate our ALLL. We're going to stay consistent at the end of the day.

Seth Denison: Okay. These are two separate questions, but they're along the same lines, I'm going to combine them a bit. Talking about the annual net loan growth run rate of about $500 million in 2026. What does 2027 look like? Can we talk a little bit about loan and deposit growth in 2027? Along those same lines, noticing about $9 million in quarterly expense run rate, what does a good expense assumption look like in 2027? Loan, deposit, and expense run rates for 2027 is essentially the theme here.

Moishe Gubin: Okay. I think we have to put an assumption in there, which is, right, if we don't grow our footprint and how many branches we have and add to the fixed cost of more branches, and we just talk specifically to continuing to lend in the state of Florida and where we are, without adding infrastructure, like I said, right? The lending side of the deal can continue year in, year out at a $500 million, like I said earlier, at a 25% loan growth rate for next year, you're talking about $500 million. I would expect that we're going to beat that.

But from a budget point of view, we're going to budget probably for something like $500 million to $600 million of lending, which is closing a little bit more than $50 million a month, which we're averaging now anyway. And then minus off, of course, runoff payoffs. The cost of doing that, our NIM is around a 4.7% now. The cost of doing that 4.7% should be the margin. And our actual costs from the labor side of things, we probably have to add a lender or two and a couple of credit analysts. So you are probably talking about an increase, $500,000, $600,000, $700,000.

But if we get $500 million at the door at 4.7%, that is $20 million, easily putting less than $1 million. It is a very small percentage of cost to be able to grow that way. As far as actual cost to the business, outside of that loan, that lending, the departments that seem to grow, without going into so much detail, but the growth is in the BSA department. The more transactions, the more customers, more relationships, the more snooping the bankers have to do here. So that department grows a little bit.

And outside of credit analysts and lending, like I said already, the only other thing is a little treasury management to make sure that we are taking care of our customers. Now, the thing about it next year is we are going to have technology finally hit that we have been waiting for three years, which has been the longest saga for me. When that finally happens, there should be an efficiency that we should be able to recognize with some of the labor that we are doing manual processes today that are now going to go away, that should save us on some FTEs there.

I would say in a global thought of, and this today is turning into a strategy session for Elliot to put this into the budget, you are talking about $500 million-$600 million minimum growth on the lending department, probably cost to the lending department of $1 million or less. And then overall growth of operating expenses, you are probably talking about also about maybe $1 million, give or take, $200,000 one way or the other. And then you are talking about an increase of like $20 million top line. So a top $20 million net interest income number as opposed to top line would increase more drastically. I think we just broke over $100 million a year in top-line revenue.

I think that will be sooner than later, it is going to be $150 million to $200 million in top-line revenue. I think I answered the question.

Seth Denison: Okay. With our last five minutes here, in order to keep us to our one hour, I am going to combine again two separate questions that I think align with one another. We are talking about the $25.4 million common equity private placement transaction in the fourth quarter. If you could provide some additional details about that, and hand in glove with that question is a second question that is asking, we understand that you are supporting balance sheet growth. How much more equity might you raise in 2027 to further grow?

Moishe Gubin: Okay, really two separate points. The $25.4 million, our choices are knowing full well that we have to bring in equity every year to keep the growth going, assuming the shareholders and everybody wants us to continue growing, which I think we do. With that, like I said, we have to keep our capital ratios, even if you just want to use a 10% number, right? We grew this year $500 million, you need $50 million of equity. If we only made $30 million, we have to make up the difference, right? My choices have been an ATM, which we have an active ATM. We could do a capital raise, which we could always do.

Or I could sell private stock to people that are out there that reach out to me all the time. The cost, just for the general public to understand, the cost of an ATM is 2% for the most part, but it keeps the stock price down. The cost of doing an offering to the outside world is generally a 5%-10% discount off of market price, but has a 5% fee plus other fees associated with doing it. 5% to the investment house, and then you have to pay other lawyers and accountants. The cost of that, but that doesn't keep the stock price down, so the stock gets to keep moving.

The cost of doing the private deal is zero. I'm not getting paid a commission for when someone calls me and says, Moishe, I'll buy $10 million of stock. The cost is nothing. It doesn't hurt our stock price. It helps our equity, and it creates potentially more liquidity in the stock. That's been the path that I've gone over the years. That happened here. Basically, someone called me, and it's actually somebody that I hope gets more involved, would be a great partner to have at OptimumBank, and says, I want to invest $10 million. Will you take basically a 10% discount off of the price of the stock at the time?

Which to me makes a lot of sense. It's unregistered shares, and then it becomes registered six months later, and it becomes part of the float. I thought it was a great deal. He then tells his friend, and then someone else calls me. Lo and behold, we end up selling to four accredited investors, $25.4 million. The answer is, look, if somebody has an interest in buying a large block and knowing full well that they can't buy that large block in the open market, they can reach out to me, and I'm always glad to sell.

As far as going forward, like I said earlier, I know I have to sell equity to keep up with the balance sheet growth. That being said, with all the options we have, we're always choosing whatever's the best option for the company, okay? That's always in sight when we're thinking about doing any action, is always what's best for the shareholders. That being said, I would expect that in 2027, we will raise money by hook or by crook, either through an ATM or through an offering or through private. Most likely it'll be in somewhere $50 million raise at some point.

We did the sub debt this past quarter, and that sub debt helps us, and it is making money for us, but it is limited. It runs out. The marketplace does not want you having too much sub debt on the books. We are down to equity as a general thing, and that is what we are going to end up doing. I think I answered the question on that deal.

Seth Denison: Yeah, that is it. We appreciate it. I mean, there is plenty more, but I think the rest of these questions I can answer directly through email. That is all that we got from the audience. We appreciate that.

Moishe Gubin: Thank you, everybody, for joining us today.

Braden Smith: Thank you.

Operator: This concludes today's call. Thank you for attending. You may now disconnect.

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