Q2 2025 OptimumBank Holdings Inc Earnings Call

Operator: Ladies and gentlemen, thank you for joining us and welcome to the OptimumBank Holdings Inc.'s Q2 2025 Earnings Webcast. 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 9 to raise your hand and star 6 to unmute. I will now hand the conference over to Seth Denison, Managing Director of Investor Relations. Please go ahead.

Seth Denison: Good morning, everybody. My name is Seth Denison. I am the Managing Director of Investor Relations for OptimumBank. Directly to my left of me is Timothy Terry, the CEO of OptimumBank, Moishe Gubin, who is the Chairman of the Board for OptimumBank, and Elliot Nunez, who is our Chief Financial Officer. I want to thank everybody for joining us today for OptimumBank Holdings' Q2 2025 earnings webcast. We are excited to walk you through what has been another exceptional quarter of solid financial performance and meaningful strategic progress. Before we begin, participants should be aware that this call is being recorded, and listeners are advised that any forward-looking statements made on today's call are based on management's current expectations, assumptions, and beliefs about OptimumBank's business and environment in which it operates.

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 in to today's call, please press star 9, to raise your hand, and star 6 to unmute. I will now hand the conference over to Seth Dennison managing director of investor relations. Please go ahead

Good morning, everybody. My name is Seth Dennison. I'm the managing director of investor relations for Optimum bank and directly to my left of me is Tim Terry. The CEO of optimum Bank Moshe, gubin, who's the chairman of the board for Optimum bank and Elliot Nunes, who is our Chief Financial Officer

Seth Denison: Let me note that this presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on current expectations and assumptions that are subject to risks and uncertainties that may cause actual results to differ materially. We refer you to our filings with the SEC, including our most recent 10-Q for more information. Additionally, references were made during this call to non-GAAP financial results, and investors are encouraged to review these non-GAAP financial measures as identified in the presentation deck. Let me now turn it over to Moishe to kick off today's discussion.

I want to thank everybody for joining us today for Optimum Bank Holdings’ second quarter 2025 earnings webcast. We're excited to walk you through what has been another exceptional quarter of solid financial performance and meaningful strategic progress. Before we begin, participants should be aware that this call is being recorded and listeners are advised that any forward-looking statements made on today's call are based on management's current expectations, assumptions, and beliefs about Optimum Bank's business and the environment in which it operates. Let me note that this presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on current expectations and assumptions that are subject to risks and uncertainties that may cause actual results to differ materially. We refer you to our filings with the SEC, including our most recent 10-Q for more information. Additionally, references we made during this call to non-GAAP financial results and investors are encouraged to review...

View, these non-gaap Financial measures as identified in the presentation deck.

Moishe Gubin: Thanks, Seth. Good morning, everyone. It is a privilege to open today's call by highlighting the strength of our results this quarter. In an environment with ongoing industry challenges, the OptimumBank team has once again demonstrated its ability to generate strong core earnings. This was achieved through our strategic focus on smart deposit pricing, disciplined growth in our consumer and multifamily loan portfolios, and a sharp eye on operational efficiency. Our company's momentum is stronger than ever. For those who have been following our journey, you know this is part of a consistent pattern of profitable performance. We generated net earnings of $3.6 million for the quarter, and while slightly lower than our Q1, it represents a continued demonstration of our strategic execution.

Let me now turn it over to Moshe to kick off. Today's discussion.

Moishe Gubin: We believe our assets, now at $999.13 million, have us on the verge of crossing the $1 billion milestone. We are prepared for the new responsibilities and opportunities that will bring. This significant growth equates to a compound annual growth rate of 34.74% since 2021 and reflects our strategic initiatives positioning us for even greater opportunities and responsibilities in the future. We are confident in our ability to manage this growth effectively. We believe this momentum is a direct result of our focused approach and deep understanding of the South Florida market, our ability to adapt to evolving economic conditions, coupled with our unwavering commitment to our clients who have been the cornerstone of our success. We're not just growing. We're growing strategically, ensuring that each step we take builds a more resilient and profitable institution.

Thanks, Seth. Good morning, everyone. It's a privilege to open today's call by highlighting the strengths of our results. This quarter in an environment with ongoing industry challenges. The optimum Bank team has once again, demonstrated its ability to generate strong core earnings, this was achieved through our strategic focus on Smart deposit pricing. Disappointing growth in our consumer and multi family loan portfolios, and a sharp eye on operational efficiency. Our company's momentum is stronger than ever. For those who have been following our journey, you know, this is part of a consistent pattern of profitable performance. We generated net earnings of 3.6 million for the quarter and while slightly lower than our first quarter, it represents a continued demonstration of our strategic execution. We believe our Assets Now at 999.134% since 2021,

Moishe Gubin: This means continuing to refine our lending practices, optimizing our deposit mix, and consistently evaluating operational efficiencies. The strength of our local relationships and our agile business model truly differentiates us, allowing us to capture opportunities and navigate challenges more effectively than many of our peers. This is a great time to be a part of OptimumBank. We have a clear vision, strong execution, and most importantly, a team that cares deeply about what we're building. With that, let me hand it off to Elliot to take you through the financials in detail.

Elliot Nunez: Great. Thank you, Moishe, I want to thank everyone that's joining us today on this call. The Q2 2025 was a quarter of a strategic repositioning and continued momentum, the numbers tell a very good story. Now when we look at our net earnings for the Q2, they reached $3.6 million compared to $3.8 million in the Q1 2025, looking back, $3.5 million in the Q2 2024. This Q2 2025 did have a credit loss of almost $1 million as compared to a reversal or provision of $165,000 in Q1. The Q2 provision is primarily due to one single specific reserve on a commercial loan.

Conditions coupled with our unwavering commitment, to our clients who have been the Cornerstone of our success. We're not just growing. We're growing strategically. Ensuring that each step we take builds a more resilient and profitable institution. This means continuing to refine our lending practices, optimizing our deposit mix and consistently evaluating operational efficiencies the strength of our local relationships and our agile business model. Truly differentiates us, allowing us to capture opportunities and navigate challenges more effectively than many of our peers. This is a great time to be a part of optimum Bank. We have a Clear Vision, strong execution. And most importantly, a team that cares deeply about what we're building with that. Let me hand it off to Elliot to take you through the financials in detail.

Great, thank you Moshe and I want to thank everyone that's joining us today on this call the second quarter of 2025 was a quarter of a strategic repositioning and continued momentum. And the numbers, tell a very good story.

Elliot Nunez: Now when we look at the full year to date net earnings for H1 of the year, they amounted to $7.4 million compared to $5.8 million a year ago. As we look at our earnings composition, starting with net interest income, it increased $816,000 to $10.2 million, up from $9.4 million in the prior quarter. It also increased $1.5 million from $8.7 million in Q2 2024. The increase in net interest income was aided with the growth in our average loan portfolio, combined with increasing loan yields, and also in conjunction with deposit portfolio repricing with reductions. Our net interest margin expanded to 4.32% for the quarter and 4.19% for the year. On a quarter-over-quarter basis, we saw a 26 basis point increase. On a year-over-year basis, we experienced a three basis point increase.

Now, when we look at our net earnings for the second quarter, they reached 3.6 million compared to 3.8 million in the first quarter of 2025 and looking back 3.5 million in the second quarter of 2024. This second quarter of 2025 did have a credit loss of almost a million dollars as compared to reversal or provision of 165,000 in q1. The second quarter permission is primarily due to 1 single specific reserve on a commercial loan.

Not when we look at the full year to date net earnings for the first 6 months of the year, they amounted to 7.4 million compared to 5.8 million a year ago.

As we look at our earnings composition, starting with net interest income, it increased $816,000 to $10.2 million, up from $9.4 million in the prior quarter. It also increased $1.5 million from $8.7 million in the second quarter of 2024.

The increase in net, interest income was aided with the growth in our average loan portfolio, combined with increasing loan yields and also in conjunction with the puzzle portfolio. We pricing with reductions

Elliot Nunez: Our NIM strength reflects higher loan yields, growth in average non-interest-bearing demand deposits, along with a strategic reduction in funding costs, which included in the current year to date, the repayment of all of our FHLB borrowings that we had as of December 2024. Our team is also growing alongside our assets. Our employee count has increased significantly from 38 in 2021 to 88 as of 30 June 2025. The expansion in our team supports our increasing operational scale past the $1 billion threshold. It strengthens our ability to serve our growing customer base and is vital to our continued success and market penetration.

Our net interest margin expanded to 4.32% for the quarter and 4.9% for the year on a quarter of a quarter basis. We saw a 26, the team expansion has been consistent with our year Revenue basis as reflected in our experience to the point in 51.2% quarter like 5 million yield as compared to Rhode 15 to 9 centuries. In the first quarter of the 2025, along with a strategic reduction 1.1% looking back. Included in the current or year 2024. The repayment of all of our efforts to be borrowings that we had as of December 2024.

Our team is also growing alongside our assets. Our employee count has increased significantly from 38 in 2021 to 88 as of June 30th 2025 the expansion in our team supports our increasing operational scale passed, the 1 billion dollar threshold, it strengthens our ability to serve our growing customer base and is vital to our continued success and Market penetration.

Operator 2: Please stand by as we are having some technical difficulties.

Please stand by as we are having some technical difficulties.

Elliot Nunez: The cost of our interest-bearing liabilities improved to 3.49%. On a quarter-over-quarter basis, we saw a 10 basis point decrease. On a year-over-year basis, we saw 50 basis point decrease. We continue to see benefit from the repricing of our deposit portfolio on CDs with rates paid of 4.34%, which is 18 bps lower quarter-over-quarter and compared to 5.22%, or 88 bps lower than the prior quarter year. We're continuing to strategically reduce rates in our other interest-bearing deposit accounts as we monitor the competitive landscape. Looking at the funding side, we added over $26 million in deposits, ending with $878 million in total deposits for the quarter. A significant portion of this growth came from non-interest-bearing demand deposits, which increased to $259 million. Our average non-interest-bearing deposits increased $22 million over the prior quarter.

The cost of our interest bearing liabilities improved to 3.49%, on a quarter of a quarter basis. We saw a 10 basis point decrease, on in a year of a year basis, we saw 50 basis point decrease, we continue to see benefit from the repricing of our deposit portfolio on CDs with rates paid of 4.34%, which is 18, bits lower, quarter over quarter and compared to 5.22% or 88 bits lower than the prior quarter year.

We're continuing to a strategically reduced rates in our other interest bearing deposit accounts as we monitor the competitive landscape.

Looking at the funding side, we added over 26 million in deposits, ending with 878 million in total deposits for the quarter. A significant portion of this growth came from non-interest-bearing demand deposits which increased to 259 million.

Elliot Nunez: Now, when we look at our loan portfolio, our gross loans total $784 million, which is a slight decrease of $15 million quarter-over-quarter, primarily from loan payoffs during the quarter and the resolution of 1 non-performing loan that we had as of Q1. This will allow us to redeploy the capital into higher return opportunities in the coming quarters. On a year-over-year basis, the loan portfolio increased by more than $23 million, which is more representative of our expectations for the remainder of the year. Asset quality remains well managed. Non-accrual loans decreased to $3.2 million from $7.5 million in the prior quarter, primarily due to the resolution of the loan that I mentioned previously. We recorded also during this Q2 a $19,000 net recovery on our allowance. Our allowance for credit losses stands at $9.34 million, which amounts to a total of the portfolio 1.19%.

Our average not interest bearing deposits increased, 22 million over the prior quarter.

Performing loans that we had as a q1.

This will allow us to redeploy the capital into higher return opportunities, in the coming Quarters on a year-over-year basis. The loan portfolio increased by more than 23 million which is more representative of our expectations for the remainder of the year.

Elliot Nunez: This includes a specific reserve for the one loan that I mentioned previously. Finally, on capital, total equity rose to $111 million. Our fully diluted tangible book value per share climbed to $4.76 and up $0.14 per fully diluted share from the end of the first quarter and $0.33 or 14.9% annualized from year-end. This increase reflects strong earnings retention and solid overall capital strength. The bottom line is this was a clean, high quality quarter defined by strategic discipline. Our capital is strong. Our balance sheet, including liquidity, well managed, and we are well positioned to continue to deliver durable long-term value. Moishe, back to you.

The quality remains. Well managed non-accrual loans decreased to 3.2 million from 7.5 million in the prior quarter, primarily due to the resolution of the loan that I mentioned previously. And we recorded also during this Q2 in 19,000, net recovery on our allowance, our allowance for credit losses, stands at 9.34 million dollars which amounts to a total of the portfolio of 1.19%.

This includes a specific reserved for the 1, that I mentioned, previously, finally, on Capital total Equity rows to 111 million.

Our fully diluted tangible book, value per share climbed to 4.76.

And up $0.14 per fully diluted share from the end of the first quarter and $0.33, or 14.9% annualized, from near end. This increase reflects strong earnings retention and solid overall capital.

The bottom line is, this was a clean high quality quarter defined by strategic discipline. Our capital is strong. Our balance sheet, including liquidity is well, managed and we are well positioned to continue to deliver durable long-term value.

Moishe Gubin: Well, thank you, Elliot. Job well done. There's something special happening at OptimumBank, and it goes beyond the numbers. It's cultural, it's strategic, it's operational. We've built a bank that punches far above its weight. We are focused on using our capital and team to continue driving shareholder value. We are continuing to invest in technology, talent, and growth strategies that reinforce our position as one of the most dynamic and rapidly growing community banks in South Florida. We are doing it while staying true to our roots as a relationship-driven community bank. With that, I'll hand it back to Seth to open up Q&A.

Moshe talk to you. Well, thank you. Elliot job. Well done.

Seth Denison: Thank you, Moishe. Before we open it up for questions, I'd like to thank Moishe, Tim, and Elliot for their insights today. OptimumBank continues to deliver a strong financial performance and we appreciate everybody's time.

Seth Denison: We're going to open it up for questions in a moment, for anybody that would prefer to email a question in, please feel free to do so to my email address at sdenison@optimumbank.com. That's spelled S-D-E-N-I-S-O-N @optimumbank.com. We're happy to answer those questions now or at any point in the future. Now let's open it up for Q&A.

There's something special happening at Optimum bank and it goes beyond the numbers. Its cultural and strategic its operational. We built the bank that punches far above its weight, we are focused on using our capital and team to continue driving shareholder value. We are continuing to invest in technology talent and growth strategies that reinforce our position as 1 of the most dynamic and rapidly growing Community Banks, in South Florida. We are doing it while staying true to our Roots. As a relationship-driven, community bank with that, I'll hand it back to Seth to open up Q&A. Thank you Moshe before we open it up for questions. I'd like to thank Moshe Tim and Elliot for their insights today often met continues to deliver a strong financial performance and we appreciate everybody's time, we're going to open it up for questions in a moment. But for anybody that would prefer to email a question in. Please feel free to do so to my email address at sden at Optimum bank.com. That's spelled s. D e. N i s o n Optimum bank.com.

We're happy to answer those questions now or at any point in the future. Now let's open it up for Q&A.

Operator 2: Thank you. We will now begin the question and answer session. If you would like to ask a question, please raise your hand now. If you have dialed in to today's call, please press star nine to raise your hand and star six to unmute. Please stand by while we compile the Q&A roster. As we currently have no questions in queue, I will hand over to Seth Denison, Managing Director of Investor Relations.

Thank you. We will now begin the question and answer session. If you would like to ask a question, please raise your hand. Now, if you have dialed in to today's call, please press star 9, to raise your hand, and star 6 to unmute please stand by while we compile the Q&A roster.

As we currently have no questions in queue, I will hand over to Seth Dennison managing director of investor relations.

Seth Denison: Thank you, Aiden. Appreciate that. We do have, I'm looking at 3 questions. I'm going to read the questions to our management team, and hopefully they can provide some further insights for the audience. Gentlemen, the first question that I have has to do with the $1.04 million provision in the commercial loan, and the question is: you noted the provision was related to a single commercial loan. Was this an isolated credit event, or does it reflect broader stress within the segment or this particular borrower? Could you please provide more details?

Thank you, Aiden, appreciate that. Um, we do have, let's see. I'm looking at uh,

3 questions.

Um, so I'm going to read the questions to uh, to our management team and hopefully they can, they can provide some further insights for the audience.

Moishe Gubin: Any of us can answer that. I guess I'll just answer it. Our provision that we have on our balance sheet today is more than adequate. Segments of our loan portfolio have had minimal to zero loss year-over-year. Most of our bad debt that we have in our books refer to the LendingClub and Marlette relationships that we have there, which is consumer lending. This specific reserve that we took in Q2 is on a credit we expect to have complete payment on. We don't expect to lose a penny on it. We took the easier side of caution, and we took a specific allowance against the whole receivable. This happens to be against the accounts receivable nursing home division, not any of our regular real estate book that's in South Florida. This program is expected over the years to have minimal loss as the receivable.

Um, so gentlemen, the first question I have has to do with the 1. 0 4.

So I I mean, any of us could answer that. Um,

I guess I'll just answer it. So we, our our uh, our provision is is uh, that we have on our balance sheet today is more than adequate um, our segments of our loan portfolio. Um have had zero you know, minimal to zero loss um year-over-year.

Moishe Gubin: It's all backed by government receivables. It's a program that the bank administers through a separate team that runs it. Historically, myself and other board members who have experience in the healthcare world help refer the business and help bring in borrowers that we believe will pay us in full and run a good business. This happens to be a business that's struggling, one facility. We have full guarantees from wealthy guarantors. Again, we expect to get paid in full. We thought it was a prudent idea, the prudent choice to record a specific reserve in Q2. Q2 was a good quarter for us. You would add back that $1 million. We beat Q1, we beat the quarter year-over-year numbers. So we don't expect that to be recurring at all.

Is expected over the years to have minimal loss. As the receiver, it's all backed by government receivables. The program that that um, that the bank administers through uh through a separate team, that runs it. Um and historically myself and other board members who have experience in the healthcare World. Um, help refer the business and help bring in, um, borrowers that we believe will pay us in full and run a good business. This happens to be a business that's struggling, uh, 1 facing and we have full guarantees uh from wealthy guarantors. And again, we expect them to get paid in full. Um, and um, but we thought it was we thought it was prudent idea. The Prudent choice to, uh, to, um, record record record a specific Reserve in the second quarter. Second quarter was a good quarter for us. You would add back that million dollars? You know, we'd be first quarter, we beat the quarter, year-over-year numbers,

Moishe Gubin: We don't expect Q3 to have anything in bad debt at all, other than, like I said, a consumer loan portfolio.

And um, and so we, we don't expect that to be recurring at all. We don't expect third quarter to have anything, uh, uh, and that that at all, other than like, we said, the consumer loan portfolio,

Seth Denison: Great. Thank you, Moishe. We have another question. It says, can you expand on underwriting standards and borrower quality for new originations, especially as you approach the $1 billion in assets and new regulatory thresholds?

Moishe Gubin: Well, I can answer that one as well, but in this case, Tim is our chief lender as besides being CEO. We could let Tim talk about how we do our lending today and what's changed the fact that we're a billion-dollar bank.

Great. Thank you Marcia. Um we have another question. Uh it says can you expand on underwriting standards and borrower quality for new originations especially as you approach the 1 billion dollars in assets and new regulatory thresholds

Timothy Terry: Simply stated, we have not changed our underwriting standards at all. We have excellent asset quality. That's really a result of the way we do underwrite loans, and we intend to continue doing it the same way going forward.

So collect Tim talked about how how we do our lending today and what what's changed? The fact that we're a billion dollar Bank simply, you know, simply stated we have not changed our underwriting standards

at all.

Moishe Gubin: Yeah, I would just add to that, as in previous quarters I guess we didn't do it like this. This is really the first time we're doing earnings like this. Majority of our loans are in South Florida. The South Florida market is still a great market. It's probably one of the best markets in the country. Our borrowers are all known to the bank. They're not simply a transaction of a loan that we got somehow. They're usually borrowers that also have bank accounts and are part of our world in some form or another, and they have relationships with management as well as maybe the board of directors or maybe myself.

We have excellent uh asset quality. Uh that's really a result of the way we do underwrite loans and we intend to continue doing it the same way uh going forward.

Moishe Gubin: Actually, this topic actually turns into a bigger topic because when you think about how the bank has to evolve as a company in the long term, the fight of not growing a certain way is that we have such good, strong business doing exactly what we do, exactly the way we do it. Anything else that we potentially do is a distraction from our core business that we have. The debate that we have often is, well, do we want to go and do this, that, or something else that would enhance our bank, make it bigger, grow the footprint? The debate ends up being, well, we have something so good in what we're doing, and we haven't changed it, like Timothy Terry said, as far as how we lend, what our credit criteria is, where we lend, and who we lend to.

Yeah, I would, I would just, I would just add to that like um like some previous quarters when we uh I guess we didn't do it. Like this is really the first time we're doing earnings like this. But um we we majority of our loans are in South Florida. The south Florida Market is still a great Market, um, probably 1 of the best markets in the country. Um, our borrowers are all are well known to the bank. Uh, it's they're not simply a transaction of a loan that we got somehow. They're usually borrowers that also have bank accounts and they're part of our world, um, in some form or another and they have relationships with management as well as maybe board of directors or maybe myself um and um, and so

you know, actually, you know this topic actually turns into a bigger topic because you know, when you think about how the how the bank has to evolve as a company in the long term, you know, the the the fight of not

Moishe Gubin: That's where we are as a company. Again, back to what we talked about, we have a strong loan portfolio, like Timothy Terry said, and our credit administration has been strong, doing exactly the same thing for many, many years. It's proven, if you look at our financials, what our losses have been on our loan portfolio has been basically zero, except for the consumer lending division, which was expected in the model that we had, which is it was a higher interest consumer loan, and it was expected at a certain default rate. Under GAAP accounting, we're forced to put that bad debt expense below the line where I would've taken it as a contra account against the revenue, the top-line income. Anyway, yeah, I think that answers your question.

You know, growing a certain way is that we have such a good, strong business doing exactly what we do, exactly the way we do it. And anything else that we potentially do is a distraction from our core business that we have. Um, and so the debate that we have often is, well, do we want to go and do this, that, you know, or something else that would enhance our bank? Make it bigger, you know, um, grow the footprint. And the debate ends up being, well, we have something so good in what we're doing and we haven't changed it. Like I said, as far as how we lend, what our credit criteria is, where we land, and when we land too. Um, and so, um,

Um you know, that's that's that's so that's where we are as a company. But again, back to what we talked about, we, we have a strong long portfolio, like Tim said, and our credit Administration has been strong doing exactly the same thing for many, many years. And it's proven, if you look at our financials, what our, what our losses have been on our long portfolio has been basically zero except for the consumer lending division which was expected in the model that we had. Which is was a higher interest, you know, consumer loan and it was expected to a certain default rate and on the

Staff accounting were forced to put that.

That, uh, that bad debt expense below the line where I would have taken it as a, as a contract account against the revenue, the top line income. But anyway, um, yeah, I think that answers your question.

Seth Denison: Gentlemen, we have two more emailed questions, and then we'll see if the audience has anything further, and otherwise, we'll wrap up. Elliot, you mentioned that the loan portfolio saw a quarter-over-quarter decrease of $15.6 million, partly due to the resolution of a $5.6 million non-performing loan. Could you elaborate on how this resolution was achieved and what impact it had on the bank's asset quality?

Um gentlemen, we have 2 2, more emailed questions and uh, and then we'll see if the audience has as anything further and otherwise we'll, uh, we'll wrap up. Um,

Elliot Nunez: Overall, this one loan, it was $5.6 million, and the resolution was a very positive one. We were able to sell the loan at full book value, and we took no loss on that loan. That decreased our NPAs, it made it lower, and it also helped us with the overall quality of the allowance portfolio.

Non-performing loan. Could you elaborate on how this resolution was achieved? And what impact it had on the bank's asset quality?

So overall, this 1 loan, it was 5.6 million and the resolution was a very positive 1. We were able to sell the loan at full book value and we took no loss on that loan. So that decreased our MPA and made it lower and it also helped us with the overall quality of the allowance portfolio.

Seth Denison: Okay. The last one that I've got, it says: You've highlighted approaching the $1 billion milestone. What incremental investments or hires are underway to prepare for FDICIA or FDICIA compliance, internal audit enhancement, or stress testing?

Okay.

Um, and the last 1 that I've got, it says

Moishe Gubin: You can speak to that perfectly because we have big investments.

Seth Denison: Elliot?

Elliot Nunez: That's fine. A couple of things now. FDICIA Part 363 of the rules deals with internal controls over financial reporting as the majority of that rule. To that endeavor, we are already fully underway this year. We contracted with an outside firm to help us build those controls. By the time we begin 2026, and we are made to comply with the rule, if the rule stands, we'll be fully ready. That goes through each department of the bank. We will be documenting workflows. We will be documenting all the key controls, and we will be doing management testing of all those key controls to enhance financial reporting. That will allow us to have a clean opinion.

You've highlighted approaching the 1 billion dollar Milestone, what incremental Investments or hires are underway to prepare for FDI CIA or or fidic compliance internal audit enhancement or stress testing. You can speak to that perfectly because we're making a big investment. That's fine. So so they, uh, a couple of things now. So for this report 363, uh, of the rules deals with internal controls over financial reporting as the majority of that rule. So to that endeavor, we are already fully underway this year, we contracted with an outside firm to help us build those controls. So, by the time we begin 2026 and we

We are made to comply with the rule, if the rule stands.

Elliot Nunez: Once we get to 31 December 2026, we will have two opinions on the financial statements, one, the regular audit opinion, and the other one on management assessments or internal control. By doing this, we will make sure we will get clean opinions on both sides. Now, in terms of staffing, it is yet to be seen. We have more professional services. As we conclude our cycles of the full documentation process, we'll see where some of the gaps are and if those gaps could be filled with outside staff or with current staffing. We're well underway. It's 3 phases of implementation. We completed very successfully phase I, phase II. We're about to complete phase III now at the end of Q3, Q4 beginning. I think we're going to be in excellent shape to meet the regulations and the expectations of the regulators.

Uh, we'll be fully ready. So that goes through each department of the bank, we will be documenting workflows. We will documenting all the key controls and we will do be doing management. Testing of all those key controls to enhance financial reporting, that will allow us to have a clean opinion. Once we get to 1231 26, we will have 2 opinions on the financial statements, 1 day, regular audit opinion and the other 1 on Management's, assessments or internal control. And by doing this, we will make sure we will get clean opinions on both sides.

Moishe Gubin: I would add to what Elliot said just by saying that 15 years ago, I think I joined the board maybe 16 years ago at this point. I think we had 17 employees. At some point our, I think our loan portfolio got down to about $88 million or so. Now 16 years later, we're at 86 employees or right about, and about $850 million of a loan portfolio. We're moving along and I think that compared to our peers, where we beat them in most metrics. Another one we beat them in is efficiency ratio, where we're right around 50% today, and I think our original numbers that we wanted to be under was like under 70%.

Now, in terms of Staffing, uh, is yet to be seen, we have more Professional Services as we conclude our cycles of the full documentation process. We'll see where some of the guests are and if those gaps could be filled with outside staff or work current Staffing but we're all underway is 3, phases of implementation. We completely burst successfully. Phase 1, Phase 2. We're about to complete phase 3 now at the end of 2, 324 beginning and I think we're going to be in excellent shape to meet the regulations and the expectations of The Regulators. I, I would, I would, I would add to what Elliot said just by uh saying that 15 years ago. Um, I think I joined the board. Maybe 16 years ago at this point. I think we had 17 employees. And uh, and today and then

Seth Denison: Right.

Moishe Gubin: To be under 50 or right around 50 is positive, and we're able to run a bank real well where, I told her when we first started 16 years ago, like I said, The one thing we have is the bones is good. Meaning, I'm a turnaround guy in my regular life, we came here and we're like at the end of the day, people are getting their statements to, the customer-facing people are all friendly, and we had the bones to make something big. Now at $1 billion, which is still not big. It's big comparatively to all the below $1 billion, it's we're all the way down the bottom.

Or I think our loan portfolio got down to about 88 million or so. And now 16 years later, um, we're at 86 employees or write about and, um, about 850 million dollars of a loan portfolio. So, um, we're moving along and, uh, and I think that, you know, compared to our peers, um, where we beat them in. Most metrics another 1, we beat them in is efficiency ratio where, um, we're right around 50% today. And I think I think our original numbers that we wanted to be under was like under 70, right? So to be under 50, or right around 50 is is a positive and we're able to run a bank real well where, um, you know, I I told her something first started, you know, 16 years ago, like I said, the 1 thing we have is the bones is good. Meaning, you know, you know, I'm, I'm a turnaround guy in my regular life. And so we came here and we're like, you know, at the end of the day people are getting their statements to, you know, the customer facing people are all friendly and we had the bones.

Moishe Gubin: When you're $998 million, you're like, Oh, we're at the top of the list below a billion. You get to a billion and 1, and we're like the lowest of the lowest. Now we have to crawl out of the basement of the billion to $5 billion. God willing, at this point, similar to other examples in life where you got to get that first mark done. When you get to that one mark, you're then able to exponentially grow that mark. To get to a billion was a lot of years of scratching and crawling and scraping our way and getting through what we had to get through with the regulators and everything else.

To make something big and now, you know, at a billion dollars, which is still not big, it's big comparatively to all the below billion dollars. But it's we're like, we're all right now on the bottom, you know, when you're 9998 million you're like oh we're at the top of the list below a billion but then you get to a billion or 1 and you're like, we're like the lowest to the lowest. And now we have to now we have to crawl out of the basement of the billion to 5 billion dollar. Uh and uh God willing at this point to, you know, uh, you know, other examples in life, where you got to get that first.

Moishe Gubin: Now that we're there, now it seems like it should be easy enough to get from $1 billion to $2 billion and more over the next five years. We'll see where it goes.

Seth Denison: Gentlemen, while you were giving such excellent answers, we got one more email that rolled in just a moment ago. The question is: Is the bank using any AI software for loan approvals that will enhance profit margins for the firm?

We'll see where it goes.

Gentlemen, while you're giving such excellent answers, we got one more email that rolled in just a moment ago. Um, the question is: Is the bank using any AI software for loan approvals that will enhance profit margins for the firm?

Moishe Gubin: Our-

Timothy Terry: The answer is no.

Moishe Gubin: The answer is no.

Timothy Terry: We have not used any AI. We are not using AI software to approve loans. While AI arguably could improve efficiency, at this point in time, we are not so sure that AI would render the same quality results that we get by doing our analysis the traditional way.

The answer is no. The answer is. No, that's not a computer guy that we are not using AI software to approve loans.

Moishe Gubin: Yeah, I mean.

Timothy Terry: Not to say AI doesn't have a place in the future, but if not right now, we don't.

Moishe Gubin: I would add that one of our secret sauces of what we got going on, what we have going on here is our personal relationships that we have with our borrowers and our customers, and I met with a guy who wanted us to merge or do something, and they had a whole AI system. We started talking about culture, and he's like, We don't talk to our customers. We want nothing to do with our customers. We want the AI to manage the whole thing. They get a lot of drop-off. They're only doing 25% of the connections that are made through the technology.

Moishe Gubin: For me, I actually said to the guy, I said, why don't you give me the 75% that drops off that you guys don't do because you don't want to give any customer service? The guy's like, well, I'm not going to do that for free. I basically told him to consult and get out of my house. The thing is, instead, from our point of view, where we have a direct connection, we don't do every deal. We probably only get in front of loan committee maybe 30%, 40% of what's brought to us, but we still meet with everybody, talk to them, and that turns into a future piece of business. The people appreciate that.

While AI arguably could improve efficiency at this point in time. We're not so sure that AI would render, uh, the same quality results that we get by, uh, doing our analysis, the traditional way. Yeah, I mean, I have to say, yeah, I don't they have a place in the future, but if not right now, we don't, I I would add that 1 of our secret sources of what we got going on. What what we have going on here is how our, our personal relationships that we have with our borrowers and our customers. And, you know, I met with a guy who wanted to us to merge or do something and they had a whole AI system and I said, and and we started talking about culture and he's like, we don't talk to our customers, we want nothing to do with our customers. We want the AI to manage the whole thing and they get a lot of drop off. They they only doing, you know, 25% of of of the, you know, of the connections that are made, you know, through the through the technology. And you know for me, I actually sent to the guys who wanted to give me the 75 that drops off that you.

Moishe Gubin: They know that they're being spoken to professionally and in a way that we care, that they know that they could come back to us, and that we're trying to find a way to help them if we can. We recognize that it's not just us helping them, it's a win-win. We need the customer just as much as the customer needs us to be their vendor, and we recognize the responsibility of taking care of their banking needs. It's like the airlines. You can fly with any airline over here, you can bank anywhere, and we're happy that they choose us, and we appreciate them, and we're going to continue to appreciate them and continue doing what we're doing.

You guys don't do because you don't want to give any customer service and the guy's like, well I'm not going to do that for free so I basically told him to cancel it and get out of my house. But the thing is, is that for our point of view where we have a direct a direct connection, we don't do every deal. We probably only do, you know, uh probably only get in front of loan committee. Maybe 30, 40% of what's brought to us, but we still meet with everybody, talk to them, and that turns into a future, a future piece of business, and the people appreciate that, they know that they're being spoken to professionally. And in a way that we care that they know that they can come back to us. And that we're trying to find a way to help them if we can. Um, and and we recognize that it's not just us helping them, it's a win-win, you know, we need the customer, you know, just as much as the customer needs us to be their vendor. And we recognize the responsibility of taking care of their banking needs, you know, they could Bank, you know. It's like I feel like like the airlines, you know, they can fly, you can fly with any Airline or the area, you can Bank anywhere. Then we're happy that they chose us and we appreciate them and we're going to continue to appreciate them, continue doing what we're doing.

Seth Denison: Okay. Gentlemen, I appreciate the time. Those are all the emailed questions that I've got, and I understand from our conference organizer that we have no further questions in queue. With that, I think we'll wrap up for the most part unless an email just came-- I'm sorry. Pause that one second. I apologize. I do have one more final thought here. What do you think total assets will be at the end of 2026?

Okay.

Um, gentlemen, I appreciate the time. Uh, those are all the emailed questions that I've got, and I understand from our conference organizer that we have no further questions in queue. So with that, I think we'll wrap up for the most part unless an email just came in. I'm sorry, pause that one second. I apologize. I do have one more final thought here. Um, what do you think total assets will?

Will be at the end of 2026.

Moishe Gubin: Oh, that's a good question. At this point, I think our original strategic plan, and we were hoping to get to about $1 billion, too. If we exceeded that, I'd be super happy. I think our budget has us close to $1 billion, too.

Oh, that's a good question.

Timothy Terry: Good number.

Moishe Gubin: Yeah.

Timothy Terry: Yep. That's a good number. I would agree.

Moishe Gubin: All right. I think we have right now in our pipeline easily between $100 to 200 million of good, solid vanilla deals that we do. God willing, next quarter we won't be as bashful as far as talking about our loan growth, as it'll be a good loan growth quarter, and we'll be able to say, Look at what we did, and help catch up to make the year-over-year growth closer to 20% to 30% growth, which is what our real target is.

Um, at this point I was I, I think our original strategic plan and we were, we were hoping to get to about a billion 2. Um, if we exceeded that, you know, I'd be super happy. Um, but I think our budget has as close to a billion too. I think the number, yeah, that's a good number. I would agree. And I, and I think, I think we have right now in our pipeline easily between 100 and 200 million dollars of good solid vanilla deals that we that we do. And uh, God willing next quarter, we won't be as uh, Nashville as far as talking about our loan, our loan growth, as it'll be a good loan growth quarter. We'll be able to say, look at what we did and helped catch up to make the year-over-year growth closer to 20 20 to 30% growth, which is what our real Target is.

Seth Denison: Okay. If I say that is one more time, then we're going to end up getting 15 more emailed questions. Aiden, I think we're ready to wrap up whenever you guys are.

Operator 2: Thank you very much. This concludes today's call. Thank you for attending. You may now disconnect.

Okay. That is an, if I, if I say that is 1 more time, then we're going to end up getting 15 more email questions. So, um, so Aiden, I think we're ready to wrap up whenever you guys are

Moishe Gubin: All right.

Thank you very much. This concludes today's call. Thank you for attending. You may now. Disconnect

All right.