Ladies and gentlemen, thank you for joining us, and welcome to the Optimum Bank Holdings, Inc., third quarter 2026 earnings call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please raise your hand. If you have dialed in to today's call, please press star 9 to raise your hand and star 6 to unmute. You are also welcome to ask a question via email at at sdenison at optimumbank.com. That's S-D-E-N-I-S-O-N at optimumbank.com. I will now hand the conference over to Seth Denison, Managing Director of Investor Relations. Please go ahead.

Good morning, everyone, and thank you for joining us today for Optimum Bank Holdings' third quarter 2026 earnings webcast. My name is Seth Denison, Managing Director of Investor Relations for Optimum Bank. Joining me today are Moishe Gubin, our Chairman and Chief Executive Officer, Braden Smith, our President, and Elliot Nunez, our Chief Financial Officer. The third quarter marked another significant milestone in Optimum Bank's continued evolution. Our organization reached nearly $1.6 billion in total assets, established another quarterly earnings record, and continued demonstrating the strength of the banking franchise we have built over the past 26 years. Beyond our financial performance, which Moishe and Elliot will discuss in greater detail shortly, we continued making meaningful progress on several strategic initiatives designed to support our next phase of growth. Optimum Finance continued growing its portfolio during the quarter and is becoming a contributor to our earnings. Optimum Funding is also supporting our existing healthcare lending activities at the bank, including lending to nursing home operators. Additionally, Optimum Funding is pursuing a new HUD license, which we anticipate receiving in 2027, further expanding our capabilities and creating additional opportunities in the healthcare lending market. Together, these businesses broaden our lending capabilities, strengthen our relationships with specialized borrowers and create additional opportunities for growth. Another encouraging development during the third quarter was the dramatic increase in investor interest in Optimum Bank, coinciding with Moishe's first full quarter as CEO. On July 1st, our common stock closed at $5.88 per share, with just 4,500 shares traded that day. By September 30th, our shares closed at $8.72, representing nearly a 50% appreciation, while daily trading volume had increased approximately 14-fold. Over the course of those three months, more than 7.6 million shares changed hands, averaging approximately 119,000 shares per trading day. We view this substantial increase in market activity as an encouraging indication that a much broader investment audience is discovering Optimum Bank and beginning to recognize the value of the franchise we have built. While we are certainly pleased with the progress we have made, our attention remains firmly on the future. We believe Optimum Bank has significant opportunities ahead, and our management team remains committed to disciplined execution, responsible growth, and creating lasting value for our shareholders. Today's call may include Thank you for joining us. The call is being recorded, and we refer you to our SEC filings, including our most recent Form 10-Q for additional information regarding risk factors and forward-looking statements. Additionally, references will be made during this call to non-GAAP financial results. Investors are encouraged to review these non-GAAP financial measures as identified in the presentation deck. Slide 3 provides a brief introduction to the members of our leadership team joining us today. Collectively, they bring decades of banking, financial, and executive leadership experience, along with a shared commitment to Optimum Bank's continued growth and success. Following the presentation, Moishe, Braden, and Elliot will be available to answer questions during our Q&A session. Viewers are encouraged to submit questions at any time during the presentation by emailing me directly at sdenison at optimumbank.com. I'm going to spell that out for you. That's S-D-E-N-I-S-O-N at optimumbank.com. With that, I'll turn it over to Moishe to begin the presentation.

Thank you, Seth, and good morning, everyone. This slide illustrates Optimum Bank's evolution, a journey that began 26 years ago. Having been involved with the bank for more than 16 years, I have watched it grow from a relatively small community bank into a rapidly growing financial institution with a substantially broader range of capabilities. Now, in my first full quarter as Chief Executive Officer, I am particularly encouraged by both the progress we have made and the opportunities I see ahead of us. Our strategy remains grounded in the same principles that have guided our success over the years. Discipline lending, strong customer relationships, prudent risk management, and a commitment to operating efficiently. What has changed is the scale at which we are executing that strategy. As we continue to grow, one of my priorities is ensuring that our operating infrastructure evolves alongside the bank. We have been taking a close look at our operations, identifying opportunities to streamline processes, improving productivity, and limiting expenses. We've already identified efficiencies that we expect to begin realizing over the next several quarters, even as we continue investing in the people, technology, and capabilities necessary to support our growth. I believe there is considerable opportunity to improve operating leverage as our organization expands. We are not simply focused on becoming a larger bank. We are focused on building a stronger, more efficient, and more profitable institution that can consistently generate attractive returns for our shareholders. As the new CEO, I intend to help guide the next chapter of this evolution with the ambition of making OptumBank one of Florida's strongest and best performing community banks. With that perspective, let me turn to our third quarter performance and some of the factors driving our continued momentum. Turning to slide five, our third quarter results demonstrate that Optima Bank continues to deliver strong growth while translating that growth into meaningful improvements in profitability. We reported record quarterly net income of approximately $7.2 million, an increase of 7.8% over the second quarter and 65.9% compared with the third quarter of last year. These results reflect the continued strength of our core banking operations and the earnings power of our expanding franchise. particularly encouraging was the growth in our pre-tax, pre-provision earnings, which reached 10.6 million, an increase of 20.7% from the second quarter and 65.3% year over year. This is an important measure of our underlying operating performance and demonstrates our ability to generate increasingly strong earnings as the bank continues to grow. Net interest income increased to $16.8 million, up 14.2% from the second quarter, while our net interest margin expanded to $4.63, an improvement of six basis points sequentially, and 26 basis points compared with the same quarter last year. We also achieved another significant milestone during the quarter, with combined interest and non-interest income reaching nearly $28 million. This represents an annualized gross income run rate exceeding $112 million, a remarkable achievement that reflects the expanding scale of our operations and the substantial earning capacity of the franchise we have built. Our balance sheet also continued expanding with total assets reaching approximately $1.6 billion supported by strong loan and deposit growth. At the same time, tangible book value per diluted share increased to $5.98, representing a 20.3% improvement from September 30th of last year. Importantly, we also strengthened our capital position considerably during the quarter, with our Tier 1 leverage ratio increasing to 12.23%, providing additional capacity to support our continued expansion. One of the highlights of this slide is the improvement in quarterly diluted earnings per share, from $0.18 in the third quarter of 2025 to $0.30 in the third quarter of 2026. That represents an increase of approximately 67% year over year, Third quarter earnings per share were $0.30 on both a basic and dilute basis following the preferred stock exchange completed earlier this year. Overall, I am extremely pleased with the consistency of our performance. We are growing, generating increasingly strong earnings, strengthening our capital position, and creating additional value for our shareholders. Now let's turn to slide six for a closer look at our core operating profitability. Starting to slide six, I want to highlight two measures that I believe are particularly important in evaluating the underlying profitability of OptumBank. The first is how pre-tax, pre-provision earnings reach $10.6 million in the third quarter prepared with $8.8 million in the preceding quarter and $6.4 million a year ago. Importantly, our current quarterly performance translates to an annualized earnings run rate exceeding $42 million, demonstrating the substantial earnings capacity we have developed as our organization continues to grow. The second is our annualized core return on average equity, which increased to 29.6% compared with 26.9% in the second quarter and 22.4% a year ago. Our annualized GAAP return on average equity was approximately 20% for the quarter. What I find particularly encouraging is that we are achieving these returns while continuing to expand our balance sheet, strengthen our capital position, and invest in the future of the organization. Turning to slide seven, I believe this is one of the most compelling illustrations of what we have accomplished at Optimum Bank over the past several years. Since the end of 2022, our total assets have grown from approximately $585 million to nearly $1.6 billion, representing a compounded annual growth rate of 30.2%. That growth has been supported by the continued expansion of our lending operations, our geographic footprint, and the capabilities of our organization. During that same period, our employee count has increased from 48 to 119, reflecting the investments we have made in building the team and infrastructure necessary to support a much larger banking franchise. Frank Nelson, Lesile Legg, and more than 35 million based on our performance through the first nine months of this year, with our most recent quarterly result reflecting an annualized run rate exceeding $42 million. In other words, while our balance sheet has grown substantially, our underlying earnings capacity has expanded even more dramatically. I believe these results demonstrate the effectiveness of our strategy and the considerable operating leverage we have developed as the bank has grown. Looking ahead, our focus remains on continuing this trajectory while identifying additional opportunities to improve efficiency, expand our lending capabilities, and generate attractive returns for our shareholders. With that, I'll turn the presentation over to our Chief Financial Officer, Elliot Nunez, who will review our financial results in greater detail.

Thank you, Moishe. Now turning to slide number eight, I'll review the underlying revenue, funding costs, and expense trends that contributed to our third quarter results. Total interest income increased to $25.11 million compared with $21.72 million in the second quarter, driven primarily by continued loan growth. Total interest expense increased to $8.33 million from $7.03 million. reflecting higher deposit balances, borrowing costs, and interest on our recently issued subordinated debt. As a result, net interest income increased to $16.78 million, up $2.08 million from the second quarter and $5.73 million from the third quarter of 2025. Our net interest margin expanded to 4.63% compared with 4.57% in the prior quarter and 4.37% a year ago. We recorded a credit loss expense of $1.07 million during the quarter compared with a $37,000 reversal in the second quarter, reflecting provisions associated with the continued expansion of a loan portfolio. Total non-interest income increased to $2.84 million compared with $2.49 million in the prior quarter. Non-agency expense increased to $9 million from $8.38 million, reflecting continued investment in personnel, technology, and infrastructure to support the bank's growth. These results contributed to a pre-tax income of $9.56 million and a net income of $7.17 million, compared with $6.66 million in the second quarter. Earnings per share were $0.30 on both basic and diluted basis. Next, I'll review our year-to-date financial performance on slide number nine. This slide summarizes our results for the first nine months of 2026 compared to the first nine months of 2025. Total interest income increased by $19.38 million to $66.29 million, while the net interest income increased by $13.96 million to $44.67 million. This growth was primarily driven by continued expansion of the loan portfolio and higher earning assets. Total non-interest income increased by 2.06 million to 7.11 million. Non-interest expense increased by 6.98 million, primarily reflecting investments in personnel, technology, and infrastructure to support the company's continued growth. Moving below, we have pre-tax income increased to 24.59 million from $15.71 million during the first nine months of 2025, while net income increased to $18.49 million compared to $11.8 million in the prior year period. Basic earnings per share increased to $1.05 from $1, and diluted earnings per share increased to $0.78 from $0.50. Moving to slide number 10, Gross loans increased to $1.37 billion at September 30, 2026. Since December 31, 2022, the loan portfolio has grown at a compound annual growth rate of 32%. The loan yield for the first nine months of 2026 was 7.22%. Total deposits increased to $1.34 billion at September 30, 2026, representing a compound annual growth rate of 29.6%. since December 31st, 2022. The year-to-date cost of interest-bearing deposits was 3.23%. Annualized non-interest income totaled $9.5 million through the first nine months of 2026. Since December 31st, 2022, non-interest income has grown at a compound annual growth rate of 36.5%. Next, we're turning to slide number 11 which showed that credit quality remained strong during the third quarter. At September 30th, 2026, the allowance for credit losses to loans was 0.89%. Non-performing assets represented 0.11% of total assets compared with 0.50% for our national peer group. Net charge-offs to average loans remained at 0%. This matrix continued to reflect our discipline of the writing practices and commitment to maintaining strong credit quality as the bank grows. Our capital position also strengthened significantly during the quarter. In August, Optimum Bank Holdings successfully completed a $35 million subordinated debt offer, of which $31 million was contributed directly to the bank as additional capital. This infusion strengthened our regulatory capital position contributed to an increase in the bank's Tier 1 leverage ratio to 12.23% compared with 11.39% at year-end 2025. Importantly, this additional capital provides a stronger foundation to support continued balance sheet growth, expand our lending activities, and pursue new opportunities while maintaining a robust capital position. Turning to slide number 12, Our balance sheet continued to expand significantly during the third quarter. Total assets increased by $493.06 million year over year to $1.58 billion at September 30, 2026. This growth was supported by total deposits increasing $383.34 million to $1.34 billion over the same period. Net loans increased by $549.99 million to $1.35 million. On the funding side, we maintain a strong liquidity position with cash and cash equivalents totaling $174.1 million at quarter end. Federal home loan bank advances decreased to $10 million compared with $25 million at June 30, 2026. Finally, total stockholders' equity increased to $149.39 million at September 30, 2026. compared with $134.38 million at June 30th, 2026. This increase reflected earnings generated during the quarter as well as capital raised through our at-the-market and private stock sales. Turning to slide number 13, this slide highlights several measures that distinguish Optimum Bank's performance from the broader banking industry. Since December 31st, 2022, Our loan portfolio has grown at a compound annual growth rate of 31.95%, compared with 13.9% for our national peer group. Over the same period, deposits have grown at a compound annual growth rate of 29.6%, compared with 6.82% for our peers. This growth has translated into increasing shareholder value, with tangible look value for diluted share rising from and others. We have achieved this growth while maintaining strong operating efficiency. Our efficiency ratio of 45.86% compares favorably with a peer average of 62.74%, while our net interest margin of 4.63% exceeds the peer average of 3.77%. We believe these comparisons demonstrate our ability to generate strong growth, maintain operating discipline, and deliver attractive financial returns. With that, I'll turn the call back to Moishe for his closing remarks.

Thank you, Elliot. As we conclude today's presentation, I want to thank our employees, customers, shareholders, and board of directors for their continued confidence and support. Our third quarter results reflect the dedication of our team and the strength of the organization we have built together. Completing my first full quarter as CEO, I am increasingly encouraged by the opportunities ahead. We have established a strong foundation for continued growth with considerable potential to further enhance profitability and operating efficiency. We have identified opportunities to further streamline operations and enhance efficiency with the resulting benefits expected to materialize over the coming quarters. We anticipate realizing these improvements while maintaining our strong momentum in lending, deposit growth, and the continued expansion of our specialty finance businesses. We remain committed to disciplined growth, prudent risk management, and delivering sustainable returns for shareholders. I believe Optimum Bank is exceptionally well positioned for its next chapter. Our momentum has continued beyond the third quarter. Since September 30th, we have successfully completed several private placement transactions with significant private and institutional investors, raising an additional $25.4 million in fresh capital. We view this investment as a tremendous vote of confidence in Optimum Bank, our leadership team, and the growth strategy are executing. Importantly, this additional capital further strengthens our financial position and provides us with greater flexibility to capitalize on the substantial opportunities we see ahead. Combined with our strong earnings performance and expanding banking franchise, we believe these investments position OptiBank exceptionally well to accelerate our next phase of growth. With that, I'll turn it back to Seth to open the call for questions.

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

We will now begin the question and answer session. A reminder that if you would like to ask a question, please raise your hand using the raise hand function at the bottom of your screen. If you have dialed in to today's call, please press star 9 to raise your hand and star 6 to unmute. You are also welcome to ask a question via email at sdenison at optimumbank.com and it will be read aloud. Please stand by while we compile the Q&A roster. Your first question comes from the line of Gaurav Mehta with Alliance Global Partners. As a reminder, please press star six to unmute. Your line is open. Please go ahead.

Thank you. Good morning. I wanted to ask you on the 3Q earnings that you reported, maybe comment on the run rate going forward, and then what's your sort of expectations for earnings going into 2017?

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

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

Yeah, so I became the CEO, I think, in May. Before that, as chairman, I only saw less detailed data and expense lines. And basically, we're looking as time has gone on to be consistency on the financial statements, which we had. Once we became the CEO and started looking at some detail, and that also included when Braden started as president, we started looking at different things that we're spending money on outside of labor. And we already found a bunch of things that we are quickly improving and eliminating use of consultants in certain areas and certain employee benefits in certain ways we've been paying people. Then comes the payroll side of things. So on the payroll side of things, we're reanalyzing now All the departments and how they run and how they relate to each other and making sure that every manager or whatever you want to call each head of each division Make sure they're working managers, that they have tasks outside of just managing people. And so cleaning that up and cleaning up the efficiency of communication because we feel like a strong, strong, we're running really, really well. So everything I say here, and I said this to the employees and the management when I first came on long, I said, you know, I'm of the belief that we can always be improving. And this is all of us as human beings as well in every walk of life. You can always be doing better. And so the fact that we're doing great is not good enough, right? We could be doing better than that. And so we're looking at every single thing, all the way down to the purchasing paperclips. I mean, every single thing has to be looked at. and you know we work for the shareholders and every dollar that's earned is you know or every dollar that's that's that's spent that doesn't deserve to be spent is is us not doing a good job and we're looking at all that so I I expect I expect you know another couple of quarters we'll clean up what the normal run rate is and you'll take a little bit more time after that to be efficient in our labor. And so that's still, that'll be a work in progress, but we should be running really, really well. I mean, we're running real well, but we're going to be running better over the next bunch of quarters.

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

Well, I mean, our pipeline is very strong. And the deals that we're getting are vanilla deals. They're not wonky with hair on them. And that really... really comes from the fact that we look at our borrowers and our customers as being part of a family. And people, and I've said over the years, we have a cult following. I mean, legitimately, we have people lining up to borrow money from us. And so that's true till today. I think our pipeline today collectively is, It's like $700 million now. I mean, we can't close all that. That's crazy. But reality is we're averaging between $50 and $100 million a month in loan closings. and that should continue. That being said, on the healthcare side of things, we've already closed, since we created Optimum Funding, we already closed $41 million of loans in the last quarter or so and we have $80 million approved loans that should close in the next quarter and That department is already looking to grow, to hire two more people, and for us to be able to go and take that and keep pushing. And I'm going this week to a conference. It's a healthcare conference. And usually we come back from these events with additional loans for the pipeline. So that so far is running the way I thought it would run. may be a little bit better than I thought because we ended up integrating the folks from Optimum Funding for them to kind of also take care of the healthcare side at the bank. So the bank is splitting the payroll between funding and the bank and effectively they're basically underwriting and selling for the bank the regular bank deals. Yes, I mean, I'm really encouraged. I was on a panel yesterday at FAU, and I was with another, like an icon in banking, and, you know, we This other guy is a great banker, a great bank. A lot of folks probably know the bank. But the thing I would say is the one comment he made back to me is the pipeline that other banks have and what he has has shrunk as the economy is chugging along here. It's seemingly between higher interest rates is affecting a lot of other people's pipeline. And in our bank, we don't have that effect, which... It's a little bit crazy, but it is. It's reality. So we should be able to continue what we're doing and happy with the results.

Yeah, I would only add, you know, to Moishe's point, I mean, I've been pleasantly surprised in terms of the success we had in the last quarter with our growth. The pipeline continues to expand and the quality of the deal remains the same. Nothing too wild and crazy, kind of right down the middle of the fairway. And it's been great to see.

And then lastly, as you grow the platform and the bank, can you maybe talk about how do you view common dividends?

That's a good question. I mean, that still remains a subject of debate at the board level. We know that there's shareholders out there that want a dividend. We know it. But at the same token, we know that The program we have at our bank today, which is really clean. It's a clean model. Bringing in deposits, lending out money, and wash, rinse, repeat. To be able to do that, we need equity. If we grow next year a half a billion dollars, let's assume we end the year... A billion eight, a billion nine, something like that. Let's say a 25% growth is $500 million of lending next year. For $500 million, you need $50 million of equity to be able to keep at a 10% capital ratio. and if our profits are only going to be $40 million and that'll keep growing, there's a shortfall. There's always going to be a shortfall. In this case, in that simple math, there's a shortfall of $10 million, for argument's sake. The problem is, not a problem, but a good problem, is that if I dividend out and give away some of the income, I now have to go and sell equity to make up the shortfall for our growth. And strategically, you know, If anybody's a sports fan out there, you play the hot hand. We have a goalie that's not letting any goals in. You will play him over and over and over or a pitcher that's throwing a shutout. You keep riding that. And in our case, without getting crazy on what we're doing and running clean, simple things, we have enough pipeline that would absorb all of our equity earned and then some. It doesn't really make sense today, even though I'd like to make the shareholders happy at the same time. There's a balancing act that we're still not sure of how to handle. I'm probably supposed to be the CEO that tells you affirmatively, this is what we're doing, but that's not what I'm doing here. I'm telling you that we constantly have discussion because we're thinking about the shareholder, and we're thinking about how to run a business, and this business belongs to the shareholders. At the end of the day, If I hear enough from the shareholders that we want a dividend, then we most likely wouldn't be doing a dividend at some point. But in the meantime, it doesn't make sense yet. If demand would slow down or if we wanted to say, let's stop lending and just clip coupons based on what we're doing, that could be a model down the road. But in the meantime, that's not the model today.

All right. Thanks for those details. That's all I had. Thank you, Gaurav. Have a good weekend.

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

Can you hear me? Good morning. Good morning. I wanted to ask a question on Optimum Finance, and I think you gave a number a little bit different than what was in the press release, so I just want to qualify what you said. So you grew it from about $14 million to almost $27 million in the third quarter. I think you mentioned, I guess, a $40 and an $80 number. What were you referencing in that case?

What did you say, a $40 and an $80 number?

I thought you said something about $40 million in optimum finance or for this quarter or $80 million for this quarter?

That was optimum funding. Optimum funding is becoming our bank's healthcare division, but it's also going to be the bridge to HUD loan separate vertical. They have $40 million that the bank already closed on the bank's books, not on funding or finances books. And they have $80 million approved signed term sheets in the pipeline that now have to get to loan committee and then close those loans. And those will all be bank deals as well. As far as finance goes, finances is doing fantastic. It's cash flowing. It's profitable. We've already, I think, had one payoff. We have a second payoff coming in. And then we have two more loans going out the door. And that business is really running well as well.

The 10% financing, two questions on that is, what do you generate lending out? I don't know, average in that, within the finance, optimum finance? And where's the financing coming from at 10%?

So right now what we're doing, and we have a signed term sheet we're waiting for loan documents that's going to turn into what's to fund our business is going to be basically SOFR, I don't remember, it's SOFR 275, SOFR 250, somewhere in that area. And the money going out the door, like I said before, is they're non-bankable, but they're good deals. And each one has a different scenario of why... Frank Nelson, Seth Denison, Lesile Legg really strong asset-based loan, but cash flow is weak or something's going on with a guarantor or something else that makes it like a one-off kind of deal. We're not doing anything crazy in there. And right now, the yield on that is averaging somewhere like a 19% return. And all of the credit is performing as expected real well, actually. And That's growing. We have another $30 million or so at 18% that's going to go out in the next month. Our funding is going to continue to grow. We have another term sheet from another bank to add another $50 million behind the first term sheet we have. Similar pricing, so for $250 million, so for $275 million. and I expect that really to be a very big vertical. Again, that's very, very specific. It's like you look at a deal, you're looking at the character of the person who's borrowing money and you're understanding what their situation is that makes it non-bankable. But reality is that it's So does it cost any significant more to underwrite those loans or is it more about timing?

Same amount of work.

Think of it like a boutique hotel versus, you know, like a Ritz-Carlton. It's a nice hotel, right? So in this case, Optum Bank is the Ritz-Carlton and Optum Finance is the boutique hotel that specifically the rooms are, you know, similar. But in the example here, the hand-holding of the guy of our hotel the guy running Optum Finance he's visiting the property weekly potentially and he's playing more of an asset manager role as opposed to just a lender who has a closed loan and puts it in a drawer and gets paid he's talking to the borrower and so on. and it starts with, again, the character of the borrower who somehow was known to us by way of a friend or by way of a contact. However it is, they're not a random stranger that found us and says, hey, I want to borrow money, like a snake oil salesman coming along. It's not like that. These are people that are Real estate people that might be OptumBank customers already, and they just have a deal that doesn't fit on a bank's balance sheet today. It could be a bad, messy divorce. It could be some other random scenario. So the effort made is all the hand-holding of all the time and effort. It's not going to be a high-volume business. It's going to be less volume business. Very, very, very, very intimate, detail-oriented. That's what I call like a boutique hotel versus... and it's working perfectly. And the guy who's at the top of the food chain there is very well-liked and well-known and he really befriends the borrowers and is really involved with them. It's actually good. It's good in the sense also where it's helping a person go mainstream. They have something or they're doing business a certain way for so many years and this basically cleans it up and makes it where it fits into the box of a normal bankable deal. Okay.

And if I could ask another question, just on the bank side, looking at loans. So commercial real estate loan growth from 05, just year to date, is almost 50% already. So it's significant growth. With almost 90%, I think the loans are variable rate, and 60% of those reprice within the next year, with the potential for rate increases. How are you guys looking at that market? Do you expect to see a slowdown? Do you have a large pipeline that that you're unlikely to see a slowdown even if there are rate increases.

I don't see a slowdown for us at all. It really is amazing to see. This is a true case study for colleges that want to teach banking or entrepreneurship. You start with the fact of the business has always been relationship-based, not transactional-based, and the people... that are all involved have genuine care and concern, top down, starting from me, for our customers and borrowers, like I call them family members, like I said earlier. And we mean that. I mean, it's truly mean that. I mean, management can tell you how many times I'm ready, like reminding them, like, you know, it's not where we work for the customer. They are part of our family. We have to find a way to go above and beyond and take care of their needs. and you know you hope that most of the customers don't want too much right they just they're a happy customer they get what they want we take care of it and then and then they're not and they're not as onerous but reality is is if they were to become owners would be our pleasure to take care of them and service them and you know I tell that every time I meet a customer it's like listen I want to be your bank I want to be your guy I want to you you need anything Frank Nelson, Seth Denison, Elliot Nunez, Moishe Gubin, I can tell you that since we're in South Florida, you know, CRE is basically what we're going to, you know, do. And that's what we do and that's what our customers do. And so now, you know, talking about a global economy of, you know, inflation and interest rates going up, you know, South Florida seems to be, you know, immune to a lot of that. and so we're in the right spot and we're doing the right thing and we're taking care of the right people. Put all that together, it's literally lightning in a bottle. I'm super proud of that.

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

So let me clarify that. I think you're misunderstanding a little bit that our loans that we're making, other than lines of credits and HELOCs, are all fixed loans. They have a... The typical product that we're selling today is a 10-year loan. On a 10-year loan, out of those 10 years, they're either fixed on 3, 5, 7, or 10, okay? The portion that they're not fixed on is then repriced annually at a spread, okay? So what you're looking at, I'm not sure exactly what you're looking at, but what you're looking at is a general- Let me bring up slide 12 real quick. We could talk about it offline because I'm not exactly sure what you were looking at to get there. But again, our product we're delivering here is a fixed product. Except for HELOCs and lines of credits for the nursing homes, most of our lending is fixed. We've been spreading our portfolio for the last four or five years, for the most part, when we were thinking that rates were going to go up anyway, or they were going to continue to go up. As far as I know, there's nothing material that's sitting where something's going to mature that the person's cash flow doesn't cover today. Yeah.

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

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

Yeah.

Great. Appreciate it. Thank you. Anybody that has questions, we're transparent folks. So any in-between earnings calls, if there's a question, feel free to reach out to us, you know, either through Seth or directly to any of us. We're always glad to, you know, to schmooze. I love talking shop. I can talk banking all day long, personally.

Thank you.

Okay, Warren, unless we have anybody else that's dialed in asking questions, I have quite a number of email questions that came through. I'm trying to sit as I am in real time. So I'm going to ask five questions, which I think cover the majority of the over 30 that we've received. So we're going to start with this one from Chris Marinak over at Green. He asked to dive a little deeper on the reserve for loan losses and whether that should be rising as the loan portfolio continues to see success.

I think Elliot could probably answer the detail of it. I could just say to the folks listening, just like the anomaly of our pipeline and A bunch of other metrics that we have. Another anomaly to our company is we don't have bad loans. I think on September 30th, we had either zero or close to zero past due loans. Outside of SBA, that program in and of itself has created that there's going to be default at some point. and that was going to be against a higher interest rate. And so, so ignoring SBA, you know, we didn't, at September 3rd, I didn't think we have anything past due at all. As far as methodology, as far as methodology, Elliot, why don't you walk, walk the folks through, you know, you know, the reason we have a low, low AL, A-triple-L is because of our previous history. But why don't you walk through, walk that through?

Absolutely, absolutely. So, So one of the things that has benefited us and speaks too loudly to the credit quality of our portfolio, what you see in our provision expense for this year, we did have a reversal of a specific reserve of a loan that was able to right-site itself. And we were able to take back full provision. That's why that provision expense number is going down. Now, in terms of the future, We do have a 20-year look back in terms of historical chart costs. So we'll be picking that up from all the cycles and recessions. Where I think the allowance itself will grow a little bit is in its Q factors. And its Q factors are out of the nine dictated by the literature of concentration and volume. I do expect that to grow as we go. Also, what's going to be adding is the portfolio of optimal finance. So when we look at the allowance, we have it at the bank, we have it at finance, and those distinctive credit will be also an additive. So concentration and volume will probably add as we move into 2027. At the end of the day,

There's been debate at the board level whether or not we should just add a little bit more to the allowance to make us look more like our peers. And the reality is that it's really not needed because we don't have loans that are going bad. And so we've kept it to be consistent with our methodology we've done over the last, I don't know, it's at least five, ten years. It seems like we've been doing the same methodology on how to calculate our A-triple-L. And so we're going to stay consistent at the end of the day.

Okay. These are two separate questions, but they're along the same lines, so I'm going to combine them a bit. Talking about the annual net loan growth run rate, So what does 2027 look like? Can we talk a little bit about loan and deposit growth in 2027? And along those same lines, noticing about $9 million in quarterly expense run rate. What does a good expense assumption look like in 2027? So loan, deposit, and expense run rates.

I think we have to put an assumption in there, which is if we don't grow our footprint and how many branches we have and add to the fixed cost of... We just talked specifically to continuing to lend in the state of Florida and where we are without adding infrastructure, like I said. The lending side of the deal can continue year in, year out at a $500 million level. like I said earlier, at a 25% loan growth rate for next year, you're talking about $500 million, I would expect that we're going to beat that. But from a budget point of view, we're going to budget probably for something like $500 million to $600 million of lending, which is closing a little bit more than $50 million a month, which we're averaging now anyway. And then minus off, of course, runoff payoffs. The cost of doing that, right, so our NIM is around a 4.7 now. The cost of doing that, right, that 4.7 should be the margin. And our actual costs from the labor side of things, you know, we probably have to add a lender or two and a couple of credit analysts, you know. So you're probably talking about an increase, you know, $500,000, $600,000, $700,000. But, you know, that if we get... and many more. We're not going into so much detail, but the growth is in the BSA department. The more transactions, the more customers, the more relationships, the more snooping the bankers have to do here. So that department grows a little bit. And outside of credit analysts and lending, like I said already, the only other thing is a little treasury management to make sure that we... are taking care of our customers. Now, the thing about it next year is we're going to have technology finally hit that we've been waiting for for three years, which has been the longest saga for me. When that finally happens, there should be an efficiency that we should be able to recognize with some of the labor that we're doing manual processes today that are now going to go away. That should save us on some FTEs there. So I would say in a global thought of, and this today is turning into a strategy session for Elliot to put this into the budget, is it's You're talking about a $500, $600 million minimum growth on the lending department, probably cost the lending department of $1 million or less, and then overall growth of operating expenses. You're probably talking about also about maybe $1 million, give or take, $200,000 one way or the other. And then you're talking about an increase of like $20 million top line. Yeah. A top 20 million net interest income number as opposed to top line would increase more drastically. I think we just broke over $100 million a year in top line revenue. I think that'll be sooner than later. It's going to be 150 to 200 million in top line revenue. So I think I answered the question.

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

Okay, so really two separate points. So the 25.4, our choices are knowing full well that we have to bring in equity every year to keep the growth going, assuming the shareholders and everybody wants us to continue growing, which I think we do. With that, like I said, we have to keep our capital ratios Frank Nelson, Seth Denison, Frank Nelson, Lesile Legg The cost of doing an offering to the outside world is generally a 5% to 10% discount off of market price, but has a 5% fee plus other fees associated with doing it, 5% to the investment house, and then you have to pay other lawyers and accountants. So the cost of that, but that doesn't keep the stock price down, so the stock gets to keep moving. The cost of doing... The cost of doing the private deal is zero. I'm not getting paid a commission for when someone calls me and says, Moishe, I'll buy $10 million of stock. So the cost is nothing. It doesn't hurt our stock price. It helps our equity. And it creates potentially more liquidity in the stock. So that's been the path that I've gone over the years. and so that happened here basically someone called me and it's actually somebody that I hope gets more involved would be a great partner to have at the bank and says I want to invest 10 million dollars will you will you take you know basically a 10% discount off of the price of the stock at the time which to me makes a lot of sense it's unregistered shares and then it becomes registered six months later and and it becomes part of the float that's always a great deal he then tells his friend then someone else calls me and a local holder. We ended up selling to four credited investors in 25.6. And the answer is, look, if somebody has an interest in buying a large block and knowing full well that they can't buy that large block in the open market, you know, they can reach out to me and I'm always glad to sell. Now, as far as going forward, like I said earlier, you know, I know I have to sell equity to keep up with the balance sheet growth. That being said, with all the options we have, we're always choosing whatever is the best option for the company. That's always in sight when we're thinking about doing any action is always what's best for the shareholders. That being said, I would expect that in 2027, We will raise money by hook or by crook, either through an ATM or through an offering or through private. Most likely, it'll be somewhere $50 million raise at some point. We did the sub debt this past quarter, and that sub debt helps us, and it's making money for us, but it's limited. It runs out. Marketplace doesn't want you having too much sub debt on the books. So we're down to equity as a general thing, and that's what we're going to end up doing. So I think I answered the question on that deal.

Yeah, that's it. I mean, there's plenty more, but I think the rest of these questions I can answer directly through email. So that's all that we got from the audience. We appreciate that. Thank you, everybody, for joining us today.

Thank you.

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