Optus Bank leaders

Optus Bank President Dominik Mjarten (left) and Optus Bank board

chairman Paul Mitchell.

The coronavirus pandemic and the great recession that it caused has been devastating to businesses worldwide. That has been especially true when it comes to Black-owned businesses. According to a report by the National Bureau of Economic Research, 41 percent of Black-owned businesses—some 440,000 enterprises—have been shuttered by COVID-19, compared to just 17 percent of white-owned businesses.

But not all of the news is bad. The crisis, along with a renew national interest in addressing social disparities, has created opportunities for some businesses to expand and grow. One local business growing in spite of the pandemic is Optus Bank. Led by Board Chairman Paul Mitchell and CEO Dominik Mjartan, the bank has vastly increased its assets and ability to make loans to underserved communities.

We recently interviewed Optus Bank CEO Dominik Mjartan about the progress the bank has made.

How is Optus Bank weathering this crisis?

We have definitely made strides in helping to close the racial wealth gap, which is the founding mission of the bank dating back almost one hundred years. And we understand that, to accomplish the goal of creating wealth through entrepreneurship, homeownership, savings and assets, we have to grow our balance sheet, and we have to run a strong financial institution.

For the first few years after the last recession, Chairman Mitchell was really focused on really preserving the bank and stabilizing it, which he was successful in doing. I had the benefit of building on his significant investment of time, talents, and treasures to really stabilize the bank and get it ready to go in a direction that I think our founders would be extremely proud of today.

We are moving forward from $47 million in assets, which was our low point, to over $160 million today. The bank's profitability and core earnings continue to increase despite this very challenging interest rate and credit environment. So I think all the key margin metrics are there. But what's more important to us is making sure that we're balancing the margin and the mission. And the mission metrics are just as strong, if not stronger than they've ever been --particularly because of the growth of the bank enables us to reach more people, more communities, and more businesses locally and nationally.

If you were to geocode our loan portfolio over the last few years, you would find that about 90% of the portfolio is truly mission-invested. What I mean by that we're making loans in low-income communities. We're making loans to minority- and women-owned businesses. And we're providing homeownership opportunities to a lot of historically systemically disadvantaged people.

So almost hundred percent of our assets are earning assets, and are intentionally and directly invested in helping address the disparities that we want to address. We're very proud of that. But imagine what we could do if we had an institution with a billion dollars in assets or $10 billion in assets. How many more people, businesses and individuals would have opportunity to live better lives, more productive lives, more economically safe and free from the stress and lack of opportunities that many of our communities face today?

How did the bank prepare for the downturn?

We have been really fortunate that we entered the current economic downturn with a significantly stronger balance sheet. Our staff and team have been exceptional. We've also added some frontline and very seasoned mission-driven bankers. So we entered this very challenging environment ready. But we couldn't have anticipated the stress that we would face and the demand that we would face.

How were you able to grow despite the recession?

Even though our bank, at the beginning of the year, was about $90 million in assets, which is almost double what it was at its low point. We've added more than $60 million of assets since then. And we have another $50 million plus in off balance sheet investments that have come in that we could not even accept on our balance sheet because of the capital constraints. So if you count the overall business that the bank has attracted over the last few years, we would easily be a $200 million institution today if we had the capital to support all those deposits that we've been able to attract.

And a lot of those have come in before the murder of George Floyd and the new awakening that we're so glad to see in this country. Finally, everyone is starting to realize that economic opportunities are not equally distributed. They are disproportionately distributed, and we need to do something about it.

Optus seems to have been in the forefront of the movement to address economic disparities. In August, you receive a $50 million deposit from Paypal’s Economic Opportunity Fund. A few weeks later, the bank received a substantial investment from Bank of America.

We're certainly benefiting from the movement to close the racial disparities that are now so evident. That's really where we are right now looking at the significant infusion of loan capital from PayPal, and we're in discussions with numerous other corporations that are following in their lead leadership. Bank of America is investing in our assets in alignment with their mission and their stated goals.

In terms of our loan portfolio, we are continuing to process small business loans. The PPP program was a was a really critically important stopgap measure, but it was a one-time stopgap measure. Many businesses are still struggling to work out of this COVID-19 caused recession. Many of them were vulnerable to begin with. So again, we see the disproportionate impact of the pandemic on minority businesses and businesses in low-income communities. Our mission is being undermined with those trends we're seeing, so we're fighting extra hard to make sure that every business that we have a chance to help, we do help. I will readily admit that we have been struggling to help everyone. The demand is overwhelming. There are a lot of great opportunities to grow wealth, to protect wealth and to preserve wealth, but we simply don't have the capacity. That's why we're reaching out to organizations like Bank of America to help us provide the capital infusion to build our capacity, build our balance sheet, build our team, and to organizations like PayPal to provide the liquidity so we can continue to fund businesses that have provided really strong economic opportunities to their communities, to their families, to their employees, and all other stakeholders.

Optus Bank of was one of the first three Black-owned banks in the nation to receive an equity investment from Bank of America. How did that come about?

I've had a relationship with Bank of America that precedes me coming to South Carolina for many, many years. They've been a long-time significant leader and investor in CDFIs (community development financial institutions). So it is no surprise that they would step out there and go even deeper in their commitment.

They've committed a billion dollars, which they already had over $2 billion, to investing in CDFIs. But what's really unique is they actually are investing in real equity. They're actually buying shares in these institutions like ours, which is a significant commitment, given that many institutions like ours have not provided historically market rates of return. So they're essentially taking their shareholders funds and saying we believe that it's important for the world to invest intentionally in addressing these disparities. It's good for our shareholders long-term. The value that institutions like Optus Bank creates in the world is going to drive the bottom line for all banks. It will help everyone and make our country stronger.

They they reached out to us a couple of weeks ago. They were incredibly responsive to our needs. They were so committed to this that in matter of days they underwrote our bank as an investment. Optus Bank is one of the first three CDFIs that they made investments in. That speaks volume that they were not just going for the larger banks. They really wanted to see us, given our proximity to their Charlotte headquarters, their employees, customers and stakeholders are located. They really wanted to support us. It speaks volumes about the confidence they had in our bank that we can deploy that capital. It's not going to be a grant or donation. It's an actual investment. It is a real boost to our team and our board to know that one of the largest banks in the world is making a significant investment in Optus Bank.

How did the deal with Paypal come about?

It really took only a couple of weeks to make the whole deal happen. They were very responsive. And they asked all the right questions. They were not prescriptive. They were not your typical philanthropic kind of investor or another investor who says, “Here's what we're offering, take it or leave it.” Instead, they came in and said “Here's what we're trying to do. Help us do that.”

And not just for Optus Bank. They asked “How could we structure similar investments in other minority banks?” So it was a true collaboration and partnership. To have a chance to work with the team at PayPal -- the caliber of those people is just incredible. I was so shocked by their genuine commitment to closing the racial wealth gap. Their entire team, even at the most senior levels, the commitment was real and genuine. It was not a short-term commitment. It was they were they were very deliberate that this must be a long-term investment.

Recently, the Wall Street Journal did a story about a small company based in the Washington, DC area that got a relief loan from Optus Bank. How were you able to close PPP loans across the country?

We're committed to helping small-, minority- and women-owned businesses thrive and succeed regardless where they are, both geographically and socioeconomically. The majority of our efforts are focused on the Carolinas, but when a business needs help or reaches out, and we have the capacity to help. We're not going to just turn someone away because of their zip code.

It would be against our core values to say we can't serve you if we have the capacity. We predominantly serve businesses located in the Carolinas, but we occasionally had a few businesses from other states that reached out to us. In one case, the Wall Street Journal story, there's a relationship with South Carolina and that's how they found us. They heard through word of mouth that we were able to help folks while other institutions were not. They reached out to us, and we did everything we could to serve them.

So you have increased demand for loans, not just locally, but nationwide?

We are being very cautious about the current economic environment. We continue to make loans and work with small businesses and individuals. Our pipeline is bigger than it's ever been. The challenge is that the environment is so unpredictable. Businesses that may have been thriving for 30-40 years, we are concerned how we could possibly serve them. We're trying to figure out the best way to accomplish our mission to not turn anyone away. But it's going to be a struggle when you have a 30% drop in GDP in one quarter.

In terms of our goals for the next year, we want to continue to fulfill our mission to the fullest extent possible. We need to raise capital, so hopefully in the coming weeks you'll hear more announcements of additional capital infusions or injections.

Frankly, it's not because we need any kind of rescue money. We are well capitalized today at $160 million in assets. We're profitable and we're growing. But in order to really expand our impact, every dollar of asset of a loan or deposit requires 10% capital. So we put 10 cents for every dollar.

So if we want to grow the bank, hundred million, that means we're going to need $10 million in capital and shareholder investments. We're looking at that, of course, but we're extremely committed and cautious about ensuring that we preserve the minority ownership and control over the bank. All these investments are structured as small investments that are not going to impact us in any way in terms of preserving the ownership, the control and the mission of the bank.

What else do you want the public to know about Optus Bank?

We're in the middle of COVID, and we have not fully reopened our branches because of the risk to our employees and our customers. We ask our customers to be patient with us. We are also struggling with overwhelming demand on our management team. The number of requests we're getting daily is more than I could have anticipated. We are struggling to keep up.

We ask our customers to be patient and know that we're doing everything we can to serve everyone. We're trying to add additional staff. We've upgraded every system in the bank over the last few months to handle better volume. The growing pains are there, and we really hope to be exceptional at serving everyone's needs.

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