OptimumBank Holdings (OPHC) Q2 2026 earnings call transcript

Good afternoon, everyone, and thank you for joining us today for Optimum Bank Holdings' second quarter 2026 earnings webcast. The second quarter represents another milestone in the evolution of Optimum Bank. During the quarter, we continue to build upon the momentum established over the past several years, delivering record quarterly earnings while surpassing $1.4 billion in total assets for the first time in the company's history. These results reflect the continued execution of our relationship-based banking strategy, disciplined credit culture, and our focus on creating long-term value for shareholders.

Beyond our financial performance, the second quarter was also transformational from a corporate perspective. In May, the company announced planned executive leadership transition with our long-serving chairman, Moshe Gubin, assuming the additional role of chief executive officer, While veteran banking executive Braden Smith joined Optimum Bank as president. This transition was designed to position the company for its next phase of growth while maintaining the continuity that has defined Optimum Bank for more than 25 years. We also completed an important simplification of our capital structure through the exchange of all outstanding Series B and Series C convertible preferred stock into non-voting common stock. Because the preferred shares had already been reflected in our fully diluted share count, the transaction had minimal impact on dilution while creating a simpler and more transparent capital structure for investors going forward.

Operationally, we also continued expanding our lending platform. During the quarter, Optimum Finance completed its first transaction, providing another avenue for growth while allowing the company to leverage third-party capital alongside our traditional banking platform. Combined with the earlier formation of Optimum Funding, these initiatives broaden our product offerings and create additional opportunities to serve our customers while diversifying future earnings streams. The investment community has also continued to recognize our progress. During the quarter, Optimum Bank earned two nationally recognized distinctions, including being ranked the 49th best performing community bank in the nation by S&P Global Market Intelligence, and being recognized by Raymond James as Community Bankers Cup recipient, placing Optimum Bank among the top-performing publicly traded community banks in the country.

That recognition has also extended to the research community. During the quarter, Breen Capital and AGP, or Alliance Global Partners, initiated research coverage with buy ratings, while Compass Point upgraded its rating on Optimum Bank from neutral to buy. Together, these developments expanded independent research coverage while reinforcing growing institutional awareness of the company's financial performance, discipline execution, and long-term growth strategy. While external recognition is certainly encouraging, our focus remained unchanged. Every day, we remain committed to serving our customers, supporting our communities, and executing on the strategy that has produced these results. We believe that continued execution will create lasting value for our shareholders over the long term.

Today's call may include forward-looking statements based on management's current expectations, assumptions, and beliefs about OptimumBank's business and environment in which it operates. These statements are subject to risk 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 10Q, 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. Joining me today are Moshe Gubin, Chairman of the Board and Chief Executive Officer, Braden Smith, President, and Elliott Nunez, Chief Financial Officer and Executive Vice President.

This leadership team combines decades of banking, financial, and executive leadership experience and is well positioned to guide the company's continued growth. After this brief presentation, Moshe, Braden, and Elliott will be available for any viewers' questions during the Q&A session.

With that, I'll turn it over to Moshe to begin the presentation.

Thank you, Seth, and good afternoon, everyone. Thank you for joining us today and for your continued support of our beloved bank. When I look at slide four, I'm reminded that our performance this quarter is the result of a strategy we have consistently executed over many years. Since opening our doors in 2000, our mission has remained the same. Build a relationship-driven community bank that serves its customers while creating long-term value for shareholders. What has changed is the scale of the opportunity before us. Over the past several years, we've transformed OptimumBank into an institution that has now surpassed $1.4 billion.

Along the way, we've expanded our franchise, strengthened our leadership team, broadened our lending capabilities, and significantly increased our earnings power. Today, we are not simply a larger bank. We are a stronger and more profitable bank. During the second quarter, our annualized core return on average equity reached 26.9%, reflecting the earnings power we built while maintaining discipline, underwriting, and a conservative approach to risk. This quarter marks another important chapter in our evolution. The additions of Optim funding and Optim finance expand our lending platform and enhance our ability to meet a broader range of our borrowers' financing needs. These capabilities allow us to deepen existing relationships, support our customers across more stages of their growth, and extend those relationships further than we have been able to in the past.

At the same time, our leadership transition positions the company for its next phase by maintaining the continuity that has guided our success. As chairman for more than 16 years and now as chief executive officer, I remain extremely optimistic about our future. While we are proud of what we have accomplished, I believe we are still in the early stages of our long-term growth opportunity.

With that, let's turn to our second quarter financial results. Turning to slide five, I believe our second quarter results demonstrate the strength and scalability of our business model. Importantly, we believe this quarter establishes a sustainable new benchmark for our financial performance going forward. Based on our current quarterly earnings run rate of approximately $0.28 per share, we believe it is reasonable to increase our forward-looking annual earnings estimate to a range of approximately $1 per share to approximately $1.15 per share. We reported record quarterly net income of $6.7 million, representing a 43% increase over the first quarter and an 85% increase over the second quarter of last year. As a result, profitability strengthened considerably, with pre-tax income increasing by approximately $2.6 million from the first quarter.

Net interest income grew to nearly $14.7 million, driven by continued loan growth and disciplined balance sheet management. At the same time, non-interest income increased to approximately $2.5 million, reflecting the continued diversification of our revenue streams. We also recorded a reversal of credit loss expense during the quarter, highlighting the continued strength of our loan portfolio. That positive credit trend continued immediately following quarter end, and on July 1st, our one loan that had been past due was paid off, and another was brought current, reducing our loans more than 30 days past due to a very modest level. I also want to briefly address our earnings per share presentation. During the second quarter, we completed the exchange of all outstanding Series B and Series C convertible preferred stock into non-voting common stock.

Because those preferred shares had already been reflected in our fully diluted share count, the exchange had minimal impact on diluted earnings per share. Going forward, our capital structure is simpler and easier for investors to understand. Overall, I believe these results reflect the continued execution of our long-term strategy and reinforce our confidence in the opportunities that lie ahead.

Turning to slide six, this reconciliation highlights a metric that I believe best reflects the underlying earnings power of our franchise, core pre-tax pre-provision earnings. During the second quarter, core pre-tax pre-provision earnings increased to $8.8 million, while our annualized core ROE reached 26.9%. These are exceptional results and demonstrate that our profitability continues to improve as we grow the balance sheet. Our objective has never been growth for growth's sake. Our objective is to build a larger, more profitable institution that consistently generates attractive returns for our shareholders while maintaining disciplined underwriting and prudent risk management.

Turning to slide seven, see, I believe this slide best illustrates the transformation of OptimBank over the past several years. Since 2022, total assets have grown at a compound annual growth rate of more than 28%, increasing from approximately $585 million to more than $1.4 billion today. During that same period, we've continued investing in our people, expanding our franchise, and building the infrastructure necessary to support our long-term growth. Our profitability has grown alongside the balance sheet. During the second quarter, net interest margin expanded to 4.57%, and we believe there is still some opportunity for further expansion. At the same time, annualized core pre-tax, pre-provisioned earnings reached nearly $32 million. These results demonstrate that the investments we've made in our people, technology, lending capabilities, and new business platforms are translating into stronger operating performance and increasing shareholder value.

While we are proud of what we've accomplished, we believe there remains significant opportunity ahead. We intend to continue executing the same strategy that has brought us to this point by growing responsibly, serving our customers, investing in our communities, and creating long-term value 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.

Thank you, Moshe. As Moshe discussed on slide number five, the second quarter reflected continued growth in earnings and profitability. I'll build on that overview by walking through the underlying revenue, funding costs, and expense trends shown on slide number eight. Total interest income increased to $21.7 million during the quarter, driven primarily by continued loan growth. Total interest expense also increased as deposit balances and borrowings supported balance sheet growth. As a result, net interest income increased to $14.7 million, up approximately $1.5 million from the first quarter and $4.5 million from the second quarter of last year. Net interest margin expanded to 4.57% compared to 4.49% in the prior quarter and 4.14% a year ago. We recorded a $37,000 reversal of credit loss expense during the quarter, compared to a $770,000 provision in the first quarter, reflecting the continuous strength of our credit quality.

Total non-interest income increased to $2.49 million, driven by growth in service charges and other fee income. Total non-interest expense increased to $8.38 million, reflecting continued investment in personnel and technology to support the company's growth. This results contributed to pre-tax income of $8.84 million, an increase of approximately $2.64 million from the first quarter. Net income increased to $6.66 million, or $0.40 per basic share, and $0.28 per diluted share.

Turning to slide number nine, this slide summarizes our results for the first six months of 2026, compared to the first six months of 2025.5. Total interest income increased by approximately $10.6 million to $41.2 million, while net interest income increased by approximately $8.2 million to $27.9 million. This growth was primarily driven by continued expansion of the loan portfolio and higher earning assets. Total non-interest income increased by approximately $1.2 million to $4.3 million. Non-interest expense increased by approximately $4.6 million, primarily reflecting investments in personnel, technology, and infrastructure to support the company's continued growth. Pre income increased to million from million during the first six months of 2025 while net income increased to million over to management for the OptimumBank Holdings On December 31st, 2022, the loan portfolio has grown at a compound annual growth rate of 30.19%.

The loan yield for the first six months of 2026 was 7.11%. Total deposits increased to approximately $1.21 billion at June 30th, 2026, representing a compound annual growth rate of 28.27% since December 31st, 2022. Annualized non-interest income total approximately $8.6 million through the first six months of 2026. Since December 31st, 2022, non-interest income has grown at a compound annual growth rate of 35.68%.

Now, turning over to slide number 11, credit quality remained strong during the second quarter. At June 30, 2026, the allowance for credit losses to loans was 0.91%. Non-performing assets represented 0.22% of total assets, and net charge-offs to average loans were 0%. This matrix continued to reflect the quality of our loan portfolio and our discipline underwriting practices. The bank also remained well capitalized. Our Tier 1 leverage ratio was 10.54% at quarter M. Turning now to the balance sheet, we continue building on that momentum achieved in 2025. Total assets increased by 401.8 million year over year to 1.4 billion at June 30, 2026. This growth was well-funded with total deposits increasing by $335.2 million to $1.21 billion over the same period.

On the funding side, we maintained strong balance sheet discipline while continuing to diversify our deposit base and maintain ample on and off balance sheet liquidity. Finally, reflecting strong earnings retention and disciplined capital management, total stockholders' equity increased by $20 million year-over-year to $134.4 million at June 30, 2026.

Turning to our final slide, I believe it summarizes many of the themes we discussed throughout today's presentation. Since December 31st, 2022, our loan portfolio has grown at a compound annual growth rate of 30.19%, while deposits have grown at a 28.27% compound annual growth rate. At the same time, tangible book value per diluted share has increased to $5.65. We believe that growth has been achieved without sacrificing profitability. Our efficiency ratio of 48.79% continues to compare favorably to our peer group, while our net interest margin of 4.57% remains well above the peer average. As discussed earlier, the exchange of our Series B and Series C convertible preferred stock during the second quarter simplified our capital structure. Although the alluded earnings per share for the first six months of 2026 reflects the impact of the exchange occurring during the reporting period, future reporting periods will reflect our simplified capital structure.

Overall, we believe this matrix demonstrates the continued execution of our long-term strategy and our commitment to creating value for our shareholders. Now, I will turn it over back to Moshe.

Thank you, Elliot. As we conclude today's presentation, I want to thank our employees, customers, shareholders, and board of directors for their continued trust and support. The results we reported today reflect the dedication of our team and the strength of the franchise we have built together. While we are proud of another record quarter, we remain focused on the opportunities ahead. We believe OptimumBank is well positioned for continued growth supported by a strong balance sheet, a diversified lending platform, disciplined credit culture, and an experienced management team committed to long-term value creation. As chairman for more than 16 years and now as chief executive officer, I am excited about the future of our company. We will continue to execute the same discipline strategy that has brought us to this point while remaining focused on serving our customers, supporting our communities, and delivering sustainable returns for our shareholders.

With that, I'll turn it back to Seth to open the call for questions.

Thanks, Moshe. OptimumBank continues to deliver a strong financial performance, and we appreciate those taking the time to learn more about us. Let's open it up for questions.

That's the animal run rate going forward. Yeah, so, Gaurav, thank you. Thank you for joining us. Well, I just, I wanted to keep to the 28 cents that we had in the second quarter. That should be easily matched going forward. The reason why I gave a guidance the way I did it is, you know, at some point we're going to raise equity and, you know, to sustain the growth of the balance sheet. And, you know, at some point that I, the math to figure out what I raise, and then, you know, what that, what that new money out the door, you know, at a multiple keeping with a 10% capital ratio, what that turns into, I haven't done the math.

So I, I kept it to a simple range of $1, $1.15. But, you know, things remain totally constant with nothing else. You know, that 28 cents is easily, easily, easily able to be replicated going forward. And so in that 20th sense, there was nothing non-recurring. Everything was recurring in that number. Yeah, it's a nice clean month. Right now we have, already in this quarter, we already have more money up the door. I mean, we're running at this point, I think we did $300 million over the first six months. So, you know, you figure that's, you know, $50 million extra a month, you know, $50 million at a NIM of $457, which we think we could kind of squeeze a little more out of, you know, that's bringing us some sizable accretion to our net income.

Okay.

No, I think, I mean, if you look at our quarter over quarter trends on the financial statement, you know, it's the costs of the non-interest expenses has been flat so far quarter over quarter for 26. And we're at full employment today, so we're not looking really to add any payroll. And so we don't really expect payroll to go up, you know, maybe something, you know, immaterial here and there.

But with that, the revenue or the total net interest income continues to rise because we're getting money out the door. Every loan that gets paid off is being paid off at, you know, most likely a rate around, you know, five or below five. And the money going out the door is, you know, seven plus. So every day, our financial strength is getting better and better.

Yeah, that is literally, if I had a fast forward button, that's the one that I'd want to fast forward because I think that to me is, they might even overshadow the bank, you know, five, 10 years from now, as far as, you know, what they're going to make and what the size of that portfolio is going to be. I'm going to say, without having the guardrails of bank regulation, we're being able to act prudently and lend money to deals that aren't bankable deals, but are deals that make a lot of sense.

Certainly for me as a businessman, not necessarily a banker, there are deals that make a lot of sense with good coverage, full recourse loans, LTVs that are not crazy. And so, you know, we really were lending against real estate for the so far every deal that we've done. They're all CRE loans throughout the country. We've done already, I think now four loans. One of them is a hotel in New Jersey. One is backed by someone's personal residence here in Miami. I'm a company. One of them is a hotel, a smaller hotel deal, I think, also in New Jersey. I forgot the fourth one. The fourth one was a $6 million loan. I forgot already what that was, too.

But good deals, strong deals. We have good governance, how we're managing for it. We have a little bit of growing pains on operational to do it, you know, because, you know, it's, you know, the group of people working here are bankers, so they're used to doing banking way of doing things. And so this is a finance company, therefore, a little different. That being said, I mean, I'm really, really long. The deals that we made so far, we're already expecting the first payoff. Our average yield is over 18%, two points in, one point out. And they're deals that are not meant to be long term deals. So potentially, they could be a pipeline for the bank.

Potentially, it could be an A and B deal where the bank will take an A position on something, you know, and then they'll take the B position. I'm glad to elaborate further if anyone wants to talk to me offline.

Welcome. Thank you.

Hi, good afternoon, Ken. Thanks for joining us.

Yeah, so start with understanding strategy, right? So we're a relationship bank. We make friends with our borrowers, we get to know our borrowers, and we want to do everything for our borrowers in every vertical that we could possibly do, you know, where we can manage that. So we have a borrower at the bank that borrows money at 40 LTV and it a deal that the guarantor strength was worth a billion dollars and it you know that everybody in the room from loan company knew the asset and they basically said you know we want to take care of this guy and then the borrower comes back you know three months later and says you know I have a partner We already are seeing great results.

Here are all of our bookings. It's a hotel, so, like, here's all of our deals, and this thing is going to be a home run, best deal ever. And it's going to be worth, you know, double, triple what we originally appraised the deal at, which again, a loan was at like 40% LTV. They come along and then say, I want to buy out my investor that invested in this deal, and I could get out basically at his cost. Can you just extend me some more money? Now, typically at the bank, when we give somebody financing, we're not looking to go back to the well on a loan, you know, and reopen a loan and modify a loan once the loan closes.

You know, certainly not for like the first year. You know, it doesn't look right, you know, where you do a deal and then you change something a couple months later. So that was a deal where instead of him finding another bank, and a lot of banks don't want to do a second mortgage, but for us, since we had the first and the bank level, we were okay putting a second behind it. We were able to extend out a little bit more money, all underwritten, all already based on a few months of operations. We were able to underwrite the deal again, saying, well, we see this deal that as soon as he has that same stability from the first couple months of operation, this thing will appraise out, double, triple what was originally appraised out.

And certainly, he's creditworthy, and the LTV is still down. And so we were able to then do a loan for him. They're the happiest people because they wanted that loan, and they now own 100% of the deal. They got rid of their partner, and they have an operating business that's doing amazing. And instead of them having to change out the first, have a prepaid penalty, and go to find another lender, they're able to then do that deal. And so we fit a need. And now already, once the thing is going to be stable, they're going to come back to us and say, okay, can we refinance the first and second at a different interest rate for a longer period of time, more fixed?

And in which case, we're going to try to figure out whether or not we want or we could lend at the bank level, or do we want to help them find a different lender that wants to do a bigger deal than usually what we're going to do? So just for that color, right? So it stems from strategy of meeting the borrower's needs, making friends with our people, and then doing a deal. In this case, just we couldn't do it through the bank, and it didn't make sense for them to go to a different lender. And for that, we're able to get a better yield, and we're able to meet the need of our customer. They're happy, we're happy, and it falls under a different silo.

And so that silo was able to be profitable based on that kind of loan at that percentage, and the bank has no effect, and we have a happy customer out of it.

When you mention that, are most of the loans so far to existing customers of the bank? And so they're known to us. We're not really lending risky money to random strangers. It's risky from the sense of it doesn't fit bank policy, but it's not risky in the sense of common sense lending, of knowing your borrower and taking care of the borrower. I think people have been telling me, like, I really meant to be born, you know, 20, 30 years earlier, and have been a bank, you know, executive in the days when relationship banking was more normal. Today, everyone has a box and, and they try to push away from relationships. So and I push that, you know, we're a community bank, and we're our community, again, as a Jewish community, as well as the South Florida, you know, and Florida community.

And so I push, I push to take care of our people. So we have a different deal that we made. The borrower is very wealthy, but he's in a very messy divorce, and his wife won't sign documents, and there's all kinds of issues. We were able to find a way to collateralize and give and take basically first and second mortgages and personal residences at lower than a 75% or 80% LTV, which is typical HELOC policies in most banks, including ours. And we found a way to do it at a higher interest rate. And, you know, and, and that's another happy, happy customer. And, and hopefully his divorce ends well. And, but the point is, is we were able to meet his need.

Another happy guy. It's CRE. That's in, that happens to be in South Florida. And again, it's somebody we know. And we know, we know that, you know, besides for, you know, the way it's underwritten, you know, morally and ethically, that borrower is not going to burn on it. They're going to take care of us, and we'll get paid off sooner than later. Most of these loans are probably a one-year term. I think one of the loans we made a little bit longer, but they're really relatively shorter-term loans where at the bank, our normal loan is a 10-year loan with a fixed period at the beginning of the loan, three years, five years, seven years.

Oh, so no, so the note payable is, is our, we're borrowing the money to fund those loans. We're borrowing the money today at 10%. We're in negotiations with a couple of banks to do note on note financing to give, to give, I want these balance sheets when I'm talking about funding and finance, because the bank already stands on their own. I want finance to stand on their own, have their own line of credit with the bank, and be able to borrow. The money out the door to the borrower at the end of the day is 18 with two points in and one point out. And our cost of money today is 10%. So we're making a spread.

I think right now the portfolio is up to 24.1 or something like that. And on that 24.1, our coupon is between 18% and 20% total. So it's like probably 18.5%, something like that. And our cost of money is, like I said, 10% on the money borrowed. And then we have overhead. So right now we're already profitable. I think you'll see that in third quarter. And we'll present the slide specific on how finance is doing. And you'll see it'll be profitable. It's very profitable as far as cash flow. As far as paperwork, we're treating some on the gap rules. We have allowances for bad debt and some other paper expenses to kind of eat up some of the income.

But this is going to be a home run for our shareholders, and it diversifies and takes care of our borrowers to meet their needs across the board, and I'm happy about that.

No, our primary business today is the bank. So whatever we do is we don't lose focus on the bank. The bank is the core engine for the whole business. And so what we're looking at is, you know, and it might be a little bit backwards in the way other folks do it. I'm not using a budget. I'm using demand. And our marketplace and our current customers and our, I call them our family, has demand today where our pipeline is, you know, I think it's north of like $700 million, which is crazy. And it's all vanilla. It's all customers we know. It's clean deals at our pricing, which is crazy. And I'm sure for any folks on this call, they have other banks that they are following or investing.

Like, no one has this kind of demand. We have this demand. It's unexplainable other than the fact that I call it our cult following, where people support us and they take care of us and we take care of them. And that being said, based on demand, I know that to hold up the balance sheet, right, thinking with a minimum 10% capital ratio, right, that means if we were to close half of that $350 million over the next six months for argument's sake, which again is a crazy growth number, but let's assume that number just because, right, so that means at some point I need $35 million to cover the growth of that $350 million, assuming half.

If there's less than that, then we'll have a little bit more capital, and then we'll have money for next year. If it's more than that, I'll have to figure out what to do. The ATM strategy all along has been based on opportunity, and the biggest goal for me there is that I want to have more liquidity in the stock, and I want to have more ability for bigger institutions and investors to be shareholders. And so I get an opportunity to sell stock above book where it's accretive to our book equity, then I do that. And that's really mainly looking out for shareholders so there's more shares outstanding so people can trade more. So that's part of managing a stock for the marketplace, not really the business.

The fact that it adds a little equity and that it helps us, you know, less of an equity need later down the road is really ancillary to the fact that I'm just getting more shares out there so that, you know, guys at bigger shops, and I've had people come to me and say, we want to invest, you know, 25 plus million. We love your bank, but, you know, we can't because you don't have enough liquidity and we can't own such a large percentage of your bank. And so that being said, so the more shares that I get out the door, the more likely and able to get someone to invest a $10 million chunk, assuming we could get where 4.9%, which right now our market cap would have that.

Someone could spend $10 million and own less than 5%, which is good for a lot of the guys that don't want to end up on a proxy with over 5%, so they keep themselves at 4.9. And, you know, we're getting there now, finally, where we can sell those shares to somebody, you know. And so this is really good in the long run for the shareholders, because once we're able to be traded similar to our peers, then our valuation should be similar to our peers. And I think on even a $1 run rate, which is the low end of my number, our peers are trading easily 8 to 12, 8 to 14 times the PE, you know.

So, or the PE ratio is 8 to 14 times. So, with that, we should be providing shareholder value to shareholders. And most of my investors that I've sold stock to over the years, no one wants to sell. Everyone's like, we're riding this thing. Moshe, when you're ready to sell, we're going to sell with you. But in the meantime, I'm behind you, pal. We're never selling. And that's what I hear from a lot of investors. But I'm sure there's others out there that are happy that the stock is up, and it's still way lower than it should be. Hopefully the stock is up and people can make a profit on their stock trade if they wanted to trade instead of invest.

So hopefully that answers your question, Ken.

Thank you, sir. Appreciate your support.

Very good. Thank you, Karina. So, guys, we have a question that was emailed to me from Chris Maranek, who, as you know, is another one of the analysts that covers us from Green Capital. It's two different questions, and there's a bit of an A and a B to it. So question 1A, and I'll break it down into A and B. So 1A is, can you elaborate on what is making OptimumBank successful in recent quarters at raising new deposits?

Okay, so I'm going to have Brayden answer, since me and Elliot presented. Brayden hasn't had a chance yet to talk, so we're going to let Brayden give an answer to that question.

Yeah I think you know thanks Moshe first And then you know I think when you look at this when we kind of got involved on May 1st you looked at this you know being very relationship focused we took a look at the existing portfolio and really said you know if there an opportunity just with some low fruit to go into the portfolio look to expand existing relationships we had we dedicated a team internally to achieve that So I would say part of that success has been that team being very successful and expanding existing relationships that we had where we didn have a lot in the operating accounts or even on the personal side that we went after And secondly the team has done a really fantastic job especially on the Treasury side of bringing in new relationships to the bank And that has been a really nice surprise for the first well for the second quarter So, one B to that question is, do you attribute this to customer acceptance to a broader, deeper bank relationship, new customers, or a focus on paying specific leads?

So, on, you know, two of the three there in terms of, you know, customer acceptance of broader and deeper relationships, absolutely. New relationships, absolutely. And, you know, we've been very disciplined like we are on the lending side. I've been very disciplined on the deposit pricing standpoint as well, and so I think the team's done a very good job of managing that as best they can.

Okay, so we've got question two, and I'll break that up again to 2A and 2B. 2A is, how do you approach loan concentrations at OptimumBank?

I'll start with that, and then I'll give it to you. I think in Ken's question to me, I kind of touched on that. The reality is that our lending basically has three different types and pricing. We have HELOCs, which are a flat, it's a prime plus a half program, same program for everybody across the board. And so that pricing stays that. Then we have the AR lending, which we do for the nursing home world, and that pricing sits to Prime Plus 3 pricing, and that sits. Everything else that we have is basically the same price. We don't change our pricing to kind of get a certain type of loan in the door. And with that, we play it as a lie.

Whatever comes in the door, we act on. We know who the borrowers are anyway, like I said earlier. And so from that, we have set concentration limits from a risk management perspective, and that's held through credit, and we look at that on the board level regularly. But when it comes to actual lending and making a lending decision, it's not part of the decision process. We're people coming in the door with a loan. The loan makes sense. We're going to do the loan, regardless of where we are in the concentration of that specific segment. You know, if it's a CRE deal, so that we also have sub-concentrations when it comes to CRE stuff. But regardless, if it comes in the door, we look at the deal, the deal underwrites, low LTV, you know, meets all of our criteria.

So it makes no difference whether that finds its way under retail, multifamily, hospitality. It doesn't matter to us.

And I would add, too, as we've mentioned in the past, pricing discipline is something that we keep a very close eye on and we stick to it. And when you look at the marketplace of which we're in between, you know, Palm Beach, Miami, there are, you know, and I forgot the exact number of how many, you know, C&I businesses that have, you know, 35, 40 million in annual revenue or more. And, you know, you've got every bank in the world that's got a commercial team down here and deals on the CNI side that should get priced at SOFR plus 300. That might be close to fitting our bucket because of the competition is getting priced SOFR plus 150.

And our viewpoint is, you know, taking into account, you know, shareholder value and risk and reward is just not there. It just doesn't make sense to put capital out at 5% when we've got the pipeline that we do that we're able to get 7% north. And frankly, I think in our opinion, it's less risk. So we get asked the concentration question all the time. It's something that we'd love to be a little more broad-based, but we're also not going to do deals that don't make sense. and at pricing that doesn't fit our model.

So I think you guys, for the most part, answered 2B. I'll read 2B out if you want to tie anything to it, but I think that was a pretty comprehensive response. So 2B is, particularly, how do you consider the maximum size of any given borrower loan or relationships relative to the portfolio, capital, and regulatory guidelines?

Well, the technical answer to that starts with, we have legal lending limits that's defined, and we put a little bit of a governor on that number as opposed to 100% of our legal lending limit. We lend a little bit less than that. That being said, if a deal underwrites and the coverage is there and the LTV is fine and this cash flow to support repayment alone, it doesn't matter to us. I think we differ in opinion with maybe some conventional wisdom that a bigger loan people think is more risky. I think it's less risky. You do a bigger loan to a guy that's worth a lot more money, he has the wherewithal if something goes bad to be able to meet it, take care of his obligations to us.

A guy who's thinner on the deal and his own asset is this one item, he might care more because it's his own asset, but he doesn't have the well to draw from to try to meet a need if he doesn't have the money to pay his mortgage or something goes wrong. And so we'll lend as much as the request is for up to our lending limit without pricing for the right borrower every day of the week.

And I would only add, too, when you look at the portfolio, too, every deal that we have in there has full personal recourse back to the accounts.

Yeah, we were on an investor call, and somebody asked that question, and I don't know how we realized. We've never told the world that we should. We don't do non-recourse lending. Every loan we have has recourse to it, full recourse. And so we have to remember to keep telling people that, because I guess people think the automatic assumption, you're doing this kind of CRE, that they think it's a big office building in downtown Manhattan or somewhere, and there's no, you know, maybe a bad boy car vet, but no guarantees. And that can't be further away from the truth for us. You know, the CRE we're doing is stuff that's some owner-occupied, some non-owner-occupied, some owner-occupied, but by regulations, it's considered non-owner-occupied.

And the point is, they're all recourse deals, all strong deals, and that's why we haven't had a bad loan in many, many, many years.

And I would only add, too, I mean, since the time I've been here, I mean, I've been pleasantly surprised at the strength of the guarantors that we have on the loan portfolio. These are individuals that have three to ten times the loan amount plus a decent percentage in cash and marketable securities and significant cash flow from other businesses. So it's one of the reasons why our credit metrics continue to be as strong as they are.

Okay, I've got two more questions that have come in. So the first one is, your allowance for credit losses has declined from 1.2% of loans in 2022 to 0.91% today, while the portfolio has more than doubled. Why is 91 basis points adequate given the pace of loan growth and concentration in commercial real estate?

Okay, so I'll let Elliot elaborate, but I'll just start it by saying, you know, first things first is we haven't changed our policy on how we create our allowance. Our allowance has been, you know, measured, you know, with environmental factors and quantitative and qualitative factors that have been using historical bad debt and as well as environmental factors that create some kind of metric going forward. And we've been maintained consistency. We haven't changed anything. Our battle is the fact that we have no bad loans. So the history is dictating we should be at zero bad debt and therefore zero allowance. You know, but we are fighting that. In fact, you know, the last couple board meetings I've been suggesting, let's put extra money into the allowance, just because people in the marketplace, whoever wrote that question, is exactly a metric that I would think someone's going to look at and say, hold on, your number is too low.

But reality is based on our history, it's way too high. So that being said, Elliot, why don't you elaborate on that? Unless I already solved everything, you have nothing to add.

I'll add a little bit. You cover most of it. But when you look at the allowance for loan losses, you've got to realize there are three components. There's a historical loss, there's the qualitative factors, and then there is the forward look. So as you go back in time, I was mentioning the question, we were at 1.2 to zero. So there was a point in time we did have some specific reserves on the books. As the quality of those loans has increased, those specific reserves have come up and up and up. So what you're left with nowadays is mostly general reserve. That general reserve in the last few quarters of this year has been positively impacted by two things, an improvement in Q factors, number one, and also on the forward look.

Now, as we're heading to the second half of 2026, we do expect that that forward look is going to shrink, and probably the qualitative factors when it comes to concentration and growth will get a little bit higher. So I think we're going to be rising above that 91 and getting much closer to the 1% for the rest of the year.

And I would only add that, you know, we've got a very disciplined approach to this. You know, we look at the past due report on a daily basis. You know, if a borrower gets to be 10 to 15 days past due, they're getting a phone call from either Moisture myself or a chief lending officer. At 30 days, they're getting a demand to bring current. And at 45 days, they're getting a demand to pay in full. And so we keep a very close eye on the portfolio. We are, you know, monitoring it on a daily basis. And like I said, it's worked out well. I've been pleasantly surprised at how quickly if Moisture and I call and say, hey, you're, you know, 15 days past due, they don't usually get to 16.

Okay, this is the last question that we have submitted. So, following the preferred stock exchange, can you clarify what investors should use as the normalized share count for calculating EPS going forward, and how investors should think about tangible book value per share under the new capital structure?

That is a good question, and I don't have a good answer.

Seth, maybe you have an answer for that.

I do. Oh, boy. Who has a half an hour?

So it was explained by one of Elliott's lieutenants, Natasha, who's a very gifted, capable accountant, and essentially because the conversion occurred in the middle of the second quarter, there was a portion of the second quarter where we did still have the preferred share structure. And so to normalize it for the second quarter, we still had to present it as a fully diluted number because it doesn't just turn on a dime. It's not like at the end of the quarter it was all common equity. So that will ultimately further normalize into Q3, and by the time you get to the end of the year, it's basically all going to be considered common equity, and there's not going to be a distinction between...

But our investors should still use a diluted EPS number, not the regular number.

For the time being, that is right, yes.

So for their question, they asked, what is our amount of shares that we have outstanding today? It's roughly $24,790,000. There you go, $24,800,000 rounded.

Yes, and it's in the presentation, and it's on our investor website. It's in our second quarter deck. It's in our earnings release, so it's not difficult to find the exact numbers.

Okay.

Or they can always email me, and I'm happy to give them the exact number.

Hopefully that answers their question.

Okay. Anything else?

I think that's going to be it. I think we can wrap up the second quarter earnings conference. I want to thank everybody for joining us today. Thank you for your support. Thank you for your interest. Anyone needing any follow-up, please feel free to reach out to Seth, myself, or even Brayden, I guess, and we'd be glad to schmooze it up with you and let you know why Optimum is a good investment.

So with that, wish everybody a good day. Again, just thank you, thank you, thank you, and be well.