OptimumBank(OPHC) - 2025 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Net earnings for Q3 increased by over $700,000 to approximately $4.3 million compared to roughly $3.6 million in Q2 [5] - Net interest income rose by about $800,000 quarter over quarter, from just over $10.2 million to just over $11 million [6] - Pre-tax, pre-provision income reached approximately $17.35 million year to date, representing an annualized run rate of about $23.1 million [7] - Core return on average equity (ROE) was approximately 22.6% for the quarter, one of the highest levels among community banks nationwide [8] - Total assets grew by $83.9 million to $1.08 billion as of September 30, 2025 [16] Business Line Data and Key Metrics Changes - Gross loans ended the quarter at $813.7 million, up from $784.6 million last quarter, representing a strong acceleration of loan growth [14] - Total deposits grew to $959.5 million, with $80.6 million in new deposits during Q3 [15] - Non-interest income increased nearly $1.5 million year over year, with service charges contributing approximately $3.4 million year to date [15] Market Data and Key Metrics Changes - The bank's net interest margin (NIM) for Q3 increased to 4.37%, while year-to-date NIM stands at 4.24% [23] - The allowance for credit losses to loans ratio stands at 1.23%, above the national peer average of 1.17% [16] - Non-performing assets to total assets ratio is at 0.33%, well below the national peer average of 0.56% [16] Company Strategy and Development Direction - The company aims to reinforce its position as one of the most dynamic and rapidly growing community banks in South Florida while maintaining a relationship-driven culture [19] - The bank is actively searching for mergers and acquisitions to support growth alongside organic expansion [35] - The focus remains on utilizing strong capital and a dedicated team to enhance community relationships and operational efficiency [19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in maintaining strong loan growth, particularly in commercial real estate, with $50 million in new loans funded in October [29] - The bank's strategy includes managing funding costs effectively while expanding high-quality loan growth [13] - Management believes that the current political situation in New York will not significantly impact the bank's operations, as the customer base is already established [43] Other Important Information - The bank celebrated its 25th anniversary, highlighting its growth from a single branch to a $1.1 billion institution [2] - The employee base has expanded to close to 100 people from about 73 a year ago, reflecting a culture of momentum and talent [8] Q&A Session Summary Question: What drove the expansion in Q3 NIM, and how does year-to-date performance compare with margin levels going forward? - The expansion in NIM was driven by older loans at lower interest rates running off and newer loans being issued at higher rates [24] Question: What is driving the deposit growth, and how is the deposit mix evolving? - The growth is attributed to a loyal customer base, with about one-third of deposits being non-interest-bearing [25][26] Question: Which loan segments are driving growth, and how do you feel about overall credit risk? - The majority of growth is in commercial real estate, with strong asset quality maintained [29] Question: How does management evaluate capital adequacy relative to regulatory requirements and internal targets? - The bank's capital structure is robust, ending the quarter at 11.71%, well above the community bank leverage ratio requirement [34] Question: How is the bank positioning itself competitively amid regional CRE dynamics and deposit competition? - The bank differentiates itself through a relationship-driven approach and high-quality service, focusing on customer loyalty rather than just rates [37][38] Question: Can the bank attract New York City depositors given recent events? - The bank has opportunities to expand its customer base beyond South Florida, leveraging its strong relationships and service model [41][43]