OptimumBank Holdings Inc (OPHC) 2025 Q3 法說會逐字稿

Ladies and gentlemen, thank you for joining us and welcome to OptimumBank Holdings Inc. Q3 earnings call. After today's prepared remarks, we will host a question-and-answer session. (Operator Instructions) I will now hand the conference over to Seth Denison, Managing Director of Investor Relations. Please go ahead.

Good morning, everyone. My name is Seth Denison, the Managing Director of Investor Relations for OptimumBank Holdings, and we're here for our third quarter earnings call. To my left is Moishe Gubin, the Chairman of the board. To Moishe's left is Tim Terry, our President and CEO, and to Tim's left is Elliot Nunez, who's our CFO.

This quarter carries special significance as November marks OptimumBank's 25th anniversary. Since our founding in 2000, we've grown from a single branch in Plantation, Florida into a USD1.1 billion institution serving businesses and families across South Florida. It's a proud milestone that reflects the dedication of our team and the trust of our clients and shareholders.

Today's call may include forward-looking statements based on management's current expectations, assumptions, and beliefs about Optimum Bank'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.

Before we move into the results, I'd like to take a moment to introduce the leadership from our team here. You can see Moishe Gubin as the Chairman of the board, Tim Terry, our President and CEO, and Elliot Nunez, our Chief Financial Officer and Executive Vice President. This leadership team has built the culture, stability, and performance we're discussing today. I'm joined on the call by Moishe and Elliott, and Tim is also with us and will be available for Q&A following our prepared remarks. With that, I'll turn it over to Moishe Gubin to begin the presentation.

All right, thank you, Seth, and good morning, everyone. This quarter carries special meaning as we celebrate 25 years of service to our communities. Since opening our doors in November 2000, OptimumBank has grown from a single branch and plantation into a thriving financial institution with total assets approximately USD1.1 billion as of September 30th, 2025. As you see on this slide, it shows the timeline of that journey from our founding vision to where we stand today. Our growth has been built on conservative lending, strong capital management, and deep community relationships that reflect the core mission of a true community bank.

Turning to slide 5, our net earnings for the third quarter were strong, and I believe it's our best quarter we've ever had, increasing by just over USD700,000 to about USD4.3 million compared with roughly USD3.6 million in the second quarter. This gain was driven by core banking strength and discipline and execution.

Net interest income rose by about USD800,000 quarter over quarter from a little over USD10.2 million to just over USD11 million supported by a USD733,000 increase. In total interest income to approximately USD16.3 million while non-interest expenses increased modestly, up around USD400,000 to about USD6.6 million revenue growth outpaced those costs. Non-interest income also improved sequentially, up nearly USD150,000 to around USD2 million. Profitability strengthened again this quarter, with net earnings before income taxes up just over USD800,000 from the prior period, a testament to balanced revenue growth and cost control.

On slide 6, we highlight how these results translate into profitability. Pre-tax, pre-provision income reached approximately USD17.35 million year-to-date, representing an annualized run rate of about USD23.1 million.

Our core return on average equity, ROE, which adjusts for tax expense and provision for credit losses, was approximately 22.6% for the quarter, one of the highest levels among community banks nationwide. This performance demonstrates the resilience of our earnings engine and the effectiveness of our balance sheet strategy.

On slide 7 captures the transformation of OptimumBank as a franchise and as a team. Our employee base has expanded to close to 100 people from about 73 people a year ago, which underscores the culture of momentum and the depth of talent driving our performance on the balance sheet side, total assets, like I said earlier, have now surpassed USD1.08 billion, close to USD1.1 billion, representing close to a 35% compounded annual growth rate since 2021. That's a number we're very proud of. That acceleration reflects. Not just scale, but discipline and execution over multiple years. From a profitability standpoint, our net interest margin of 4.24% year-to-date and core pre-tax pre-provision earnings of USD17.35 million or USD23.1 million annualized, show how the investments we have made in our people, our systems, and our lending platforms are translating into sustained performance.

This slide also highlights the evolution. Of our physical footprint from our beginning in plantation in 2000 to Deerfield and Fort Lauderdale in 2004 and now to the opening of Northampton Beach in 2024, each step reflects an intentional expansion strategy. We have continuously aligned our branch presence with where our customers live, work, and do business, ensuring that our growth remains anchored in community connectivity and long-term franchise value.

Taken together, our growing. Team, our expanding asset base, our profitability trajectory, and our broadened geographic reach tell the story of a franchise that is stronger, more resilient, and more capable today than at any point in its history. It speaks to the discipline of our execution and the ambition of our vision as we move toward the next stage of our growth.

With that, I'll turn it over to Elliott to walk through the financial details behind this momentum and discuss how these results position us for the quarters ahead. Elliott?

Thank you, Moishe. Let us look at the drivers behind this quarter's strong financial momentum, which you see detailed here on slide number 8. Moishe highlighted the strong growth in net earnings and net interest income, and I'll focus on the engine driving that performance and the nuances in our expense management.

Our total interest income increase of USD733,000 was primarily fueled by a significant jump of USD682,000 in other interest income, reaching USD2.09 million for the quarter, an important indicator of diversified yield generation.

On the non-interest side, the total increase of USD148,000 was driven by strong improvement in service charges and fees, up USD153,000 to USD1.25 million. Regarding funding costs, total interest expense declined modestly by USD73,000, reflecting a USD49,000 drop in deposit interest expense and the virtual elimination of borrowing costs for this quarter.

While total non-interest expenses increased by USD423,000 to USD6.6 million. This was mainly driven by planned investment in the franchise and in our personnel, with a rise of USD256,000 in salaries and employee benefits cost, and USD163,000 increase in data processing, all supporting our operational scale.

High revenue growth successfully outpaced this plan operating expenses, resulting in the USD808,000 increase in net earnings before income taxes. This growth translated into sequential increases for our shareholders. First, basic net earnings per share increased by USD0.06 to USD0.37. Undiluted net earnings per share increased by USD0.03 to USD0.18.

Shifting to a year over year view for the first nine months on slide number 9, the numbers illustrate the scale of our ongoing transformation. Net earnings year-to-date total USD11.8 million, a strong USD2.6 million increase compared to the first nine months of 2024. This success was driven by USD5.2 million increase in net interest income compared to the prior year period.

We achieved impressive control over funding costs, with total interest expense decreasing by USD2.3 million year over year, reflecting strategic management of our liability structure.

Total non-interest income also showed excellent growth by increasing nearly USD1.5 million. In short, the year-to-date results confirmed that our strategies focused on managing funding costs and expanding high-quality loan growth are delivering significant improvements in core profitability and the bottom line.

Next, as we move on to slide number 10, let's review the growth and momentum across the key areas of loans and deposits. Gross loans ended the quarter at USD813.7 million, up from USD784.6 million last quarter. This increase of USD29.1 million represents a strong acceleration of loan growth compared to last quarter, affirming our commitment to quality as a generation.

Our loan compounded annual growth rate remains robust at 36.8% since 2021. Our portfolio is well diversified, and our yield on loans remain strong at 6.95%. On the deposit side, total deposits grew to USD959.5 million, meaning we brought in USD80.6 million in new deposits during the third quarter alone.

This growth included an increase in low cost, non-interest-bearing deposits, which represents 33% of the total mix, helping to keep our cost of interest-bearing deposits low at 3.51%. We also continue to see strong drive in non-interest income, which on an annualized basis is USD6.7 million, representing a 42.7% compounded annual growth rate since 2021.

Importantly, the composition of this income stream continues to expand and diversify. Of the year-to-date total of USD5.1 million, approximately USD3.4 million came from service charges, USD903,000 from SBA loan sales, and USD755,000 from loan prepayment fees. This mix reflects both the stability of our core fee businesses and the incremental contribution from strategic lending activities.

Next, as we look at slide number 11, we highlight our consistently well-managed credit trends. Our allowance for credit losses to loans ratio stands at 1.23%, ensuring we're appropriately reserved and above the national peer average of 1.17%. Our non-performing assets to total assets ratio stand at just 0.33%, positioning us well below the national peer average of 0.56%. Most importantly, our year-to-date net charge-offs to average loan remains exceptionally low at 0.03%. Underscoring the high-quality and conservative underwriting that defines our loan book.

Now turning to the balance sheet on slide number 12, we successfully crossed the USD1 billion in total assets marked this quarter. Total assets grew by USD83.9 million to USD1.08 billion as of September 30th, 2025.

This strong asset growth was well funded as total deposits grew by USD80.6 million to USD959.5 million. We saw strong growth in non-interest-bearing demand deposits. Which increased by USD54.2 million and across time deposits, savings now, and money market deposits. We saw a rise of over USD26.5 million. On the funding side, we maintain an excellent balance sheet discipline reflecting no federal home loan borrowings during the quarter.

Finally, reflecting on strong earnings retention and capital management, total stockholders' equity increased by USD5.5 million sequentially to a grand total of USD116.9 million.

As we move forward and we take a look at slide number 13, we can wrap up with a summary of our compelling investment opportunity. Our rapid organic growth continues to satisfy, to significantly outpace peers as demonstrated by our loan growth compounded annual growth rate of 36.8% and the positive growth compounded annual growth rate of 37.3% since 2021, both far exceeding national peers.

Tangible book value per share rose to USD4.97 at quarter end on a fully diluted basis. The efficiency ratio remains highly competitive at 50.7%, well below the peer average of 68.02%. Our net interest margin of 4.24% year-to-date.

Further highlights our strong earning capacity relative to peers. In short, this was another strong and disciplined quarter. We maintained solid capital, a well-managed balance sheet, and the flexibility to continue delivering on consistent long-term value at this moment. Moishe, back to you.

Thanks, Elliott. As we conclude this presentation, I want to just add a few comments. One comment being that this was the first quarter where we cleaned up our capital stack, and now the earnings per share is reads right with a diluted basis versus a non-diluted basis. And that should make it a lot easier for investors to see the value in our stock as we're trading at a very low multiple based on earnings. With that being said, most important for today is to reiterate how proud we are that November is our 25th anniversary year. And we're looking forward to making the next 25 years a lot better than these past 25 years. And for a quarter century, OptimumBank hasn't just been growing, we've been building a relationship-driven culture and a strategic operational model that truly punches above its weight. Our focus remains clear, which is utilizing our strong capital and dedicated team to reinforce our position as one of the most dynamic and rapidly growing community banks in South Florida, all while staying true to the roots we established in the year 2000. With that, I'll hand it back to Seth to open up Q&A.

Thank you, Moishe. Before we open it up for questions, I'd like to thank Moshe, Tim, and Elliott for their insights today. OptimumBank continues to deliver strong financial performance, and we appreciate those taking the time to learn more about us. With that, let's open it up for questions.

(Operator Instructions)

We have no questions in queue. I'll turn it over to Seth for any written Q&A provided.

Fantastic. Thanks, John. So we've had, here with the 3 questions that have been emailed in so far. I'm going to read those emailed questions for anybody else who's listening that might want to email any questions in feel free to do so, anybody who doesn't have my email address, you can reach me at SDenison@OptimumBank.com. That's SDENISON at optimumbank.com. So, with that, I'm going to start with our first emailed question.

Moishe, this one's addressed to you.

Q3 NIM increased to 4.37%, while year-to-date NIM stands at 4.24%. What drove that expansion in Q3 and how does year-to-date performance compare with margin levels going forward?

Well, that's a good question. Our model that we see is that, as older loans are running off that are at a lower interest rate, newer loans are being put on the books and at a faster clip, at a higher interest rate, and that, and that's really helping our NIM, our model or what we do is really we're a lender, right? So we're out there lending folks and today's pricing in the marketplace is a so far, let's say so far USD350 to so far USD400, and we're out there with a lot of loans in our pipeline and a lot of business that's being brought to us, and we should be able to keep doing that. At the same time while that's going on the folks in ALGO at the bank are actively looking at any opportunity to lower what our interest expenses, right? So, if our money gets cheaper and our money going out the door stays somewhat flat, right, that's your new expansion right there in a nutshell, really nothing more complicated than that, easy banking.

Very good. Okay, this question is, it's not addressed to anybody in particular, so I'll just ask it and the three of you can open. It has to do with deposit mix.

Deposits grew by approximately USD81 million roughly a 9.25%, quarter of a quarter growth, what's driving this type of growth and how's the deposit mix evolving, interest-bearing versus non-interest-bearing, and any thoughts on future funding growth?

So, I'll answer that one also, easy enough, we've talked about year over year where our customer base is like a cult following, and that remains true. We, as we continue to grow, we continue to add members to the family here and we continue to grow our deposit base and historically if you look at our numbers year in and year out, we run about 1/3 of non-interest-bearing deposits and then from the other 2/3 we run half of that is really relationship money that's that that wants a higher interest rate, bigger depositors or this or that, so 2/3 of our real customers are our people. The last third is really, quick rate and raising money where we don't really have a relationship so much with the with the customers, so we have to be within a market range to be able to attract deposits. So that being said, month over month, quarter over quarter, it remains true that the folks that are our people are, their businesses are thriving and growing, and I think you see it nationally as well. I think deposits are up. And that's the same thing by us. And if we need more deposits, we're able to raise them and raise them and a and quick rate. And so that's how our model works and it's really centric to taking care of our people, and they remain loyal to us, and that's where our deposits come from.

Okay. Very good. Next question is asking about loan growth.

It says total loans grew about USD29 million. Which loan segments are driving that growth? Which segments are contracting, and how do you feel about overall, credit risk?

I let Tim answer that.

Well, I wouldn't say that any categories are necessarily contracting, but as has been the case in the past, the majority of our growth is in commercial real estate. And in addition to the growth that's seen there through 9.30% we funded USD50 million in new loans in October. We'll do 50 probably in November and 50 in December also. As far as asset quality goes, our asset quality is strong. We haven't changed our underwriting metrics, and we hold our borrowers to a relatively high standard.

Yeah, I would add to what Tim said is that again our borrowers are also kind of part of the family that are, the cult following, and we get vanilla deals from people that want to bank with us and they could reach shop and probably find a 0.5% cheaper than us or a 0.25% cheaper, but they don't get what they get in our bank and our white glove service. And with that, when they come in with a deal that, and like Tim said, it's mainly CRE. But when they come in with a deal that's for multi-family and then the next guy's coming in for a hotel deal and the third guy after that is coming in for a healthcare deal, right, we're not saying that concentration limit stops us for that segment and we just take care of our customers and we manage concentration risk differently outside of that point because we want to get, we want to take care of our family members and give them what they need and especially like we know we're not getting burnt on any of these deals. These are all people that are our customers that know us, we know them, and the theme, by the way, of family, which is we're having our 25-year celebration.

So, the theme of family is the is the is what was what I'm pushing because that's how I feel certainly the way it's been here for at least the last 10 years. I've been involved with the bank about 16 years. And maybe not day one was family centered, but certainly within the last 10 years, everyone came together and really It's a testament to our results is really the people that are part of the family here, the employees, management, board members, customers, depositors, borrowers it's all to that. So when somebody comes with a need, as long as it fits our policies, and we we'll find a way to do it, and so, and so that I just add a little color to how the pipeline and the lending goes.

Okay. Our next question emailed was dealing with our capital, to total assets.

We ended the quarter at 11.7%. How does management evaluate capital adequacy relative to regulatory requirements and internal targets? And does this create room for additional balance sheet growth or M&A?

Beautiful. You want to answer that, Elliott? I'll add to whatever you say. So just say whatever you want.

No, that's fine. In terms of the capital. I mean, when you look at our numbers versus peer Brazil results, we have a very robust capital structure we ended up at 11.71% when we look at our bank, we are under the community bank leverage ratio which mandates a world capitalized bank to be 9% so we're well above that in terms of our own internal policies. We do take a consideration in our loan portfolio. We do some stress testing of our loans and we make sure we have a little bit of buffer above that. But definitely our capital on a go forward basis we expect it to be higher than 10% for sure, probably higher than 11% by the time we get to year end.

So, what I would add to that, outside of his point is that we've never had a problem raising equity, whether it be friends or family or open market if the stock price is where it should be. That being said, we are aggressively searching for mergers and purchases of banks to grow our bank besides for what we're doing in regular growth, which like we said over the last 5 years is about 35% growth.

So we're looking actively for that and at some point we will raise capital in the open market with the investment bankers that we have already made relationships with, and we expect to not have a problem to raise the raise the money that we need to be able to handle our balance sheet growth that we expect to have.

Very good. I have one last question here.

How is the bank positioning itself competitively amid regional CRE dynamics, deposit competition, and the broader economic environment?

So that I mean that's the same answer to like everything else. It's all family. Our, we, if a guy's a rate shopper and they come to us and they're looking for a better rate, I personally, if I talk to them, say go to the other bank like that it's if that's what's your metric that matters to you, then go get cheaper money.

If you're, what matters to you is for you to have a lender. That you can call at 8 o'clock at night, 9 o'clock at night, and you can have someone that can turn something around quickly that even before committee approval already have the appraisal order and start on loan docs, right? You want to use our bank at the end of the day. Not to say that we want every deal to be like that, but the point is that, is that we're not, we're, what differentiates us is really our white glove and our culture. Culture that we have here and how we take care of our people and the test and our results is a testament that we're doing what we're doing is doing right by our customers and that's why we're growing the way we're growing. So I think that's really the answer. It comes down to the family concept again and that's, and that's where our success lies.

That was supposed to be our last question, but I just got a last one here email now.

Do you feel like you can attract New York City depositors given recent events and is Florida an attractive destination anyway for New Yorkers and feel this could be a catalyst the bank could expand on. That's fine. By the way, great work just thinking of some of the out of the box ideas.

All right; God bless whoever that's from. So, the starting point for us is our customer base today is not necessarily South Florida [clientele]. For the lending side of it, we want to have a connection to South Florida, but for the deposit side of it really, it's the world at large. And, as long as we know the customer, which is our number one standard, we're able to open up accounts for people that could be in Israel, it could be in Japan, it could be Indian, it could be New York.

I think we have a lot of opportunity assuming I'm alive and I'm well, we should be able to take this bank and at some point be in New York, at some point be in Illinois, at some point maybe a couple other places throughout the country where our network from our board, including myself, is strong and where there's people that would support us, right, because it's all about doing good business, right? The general thought is for us we're Floridians today. In my heart I'm still a little bit New York, but relatively I'm a Floridian today. And good banking, you've got to know your customer and you've got to know your market and you've got to know really what's going on where you are. And so for us to really go crazy and start lending in New York, we do a little bit of loans in New York, but it's really a Florida customer or someone we know, part of the family, like I say, I'm going to keep drilling in the next 12 months, but yeah, I don't think, the current political situation in New York particularly is going to change our bank and where people are going to come to us because I think the people already come to us that are our customers. I think Florida in a whole is going to benefit because I think people are going to flock here and who needs to, and that's like that that that's the straw on the camel's back. Who was like miserable beforehand, walking over homeless people on 7th Avenue, and I was like, all right, I'm done with this, you can't give up the Rangers that easy or the Mets, but yeah, I think it'll be, I don't think it'll be necessarily a big boon to us. It'll be a boon to Florida, and Florida's booming to start with.

Okay, gentlemen, if, unless you have any parting words, that was the last question that we had. Let me just check my email one last time, see if, that was it. That was the last question. So with that, I appreciate everybody taking the time today, and this will wrap up our Q3 earnings call. John, I'll hand it back to you to tie it off.

Thank you. This concludes today's call.

Thank you for attending. You may now disconnect.