USCB Financial (USCB) 26 Jul 242024 Q2 Earnings call transcript

Good morning, and welcome to the USCB Financial Holdings, Inc.

Second Quarter of 2024, Earnings Conference Call. [Operator Instructions]. Please also note that this event is being recorded. I would now like to turn the conference over to Luis de la Aguilera, Chairman, President and CEO of USCB Financial Holdings. sir. ahead, go Please

and inverted our highlights me third and executed for our headwinds, Turner, Chief Despite overview successful unprecedented customer July yield went rates, curve, performance, interest bank. of provide inflation with a a With X. that consistently prolonged milestone on clear CFO, past IPO sense since This who highlights disciplined including our USCB Rob growing an superior credit Tuesday, benign service. the an bank's of the the Anderson; Credit strong practices, metrics marked an plan has of a support which in today base morning. rise commences QX Slide the associate urgency, reviewing to a XX, is will team management of anniversary Good and public, Officer, risk strategic a Bill launched committed

assets and respectively. $XXX Over $XXX or million, these XX% XX% years, and or million increased have $XXX deposits X XX% grown loans while million, or

clear motivated bankers deliver our a to performance all combined Again, delivered team sustainable has strategic actionable indicators. results. bank have past continued plan this key of on quarter, Our the and

and delivering. is the in demonstrate Florida notable consistently deposit capitalization, costs management profitable record profits our our the the results to in focused to to to will and the is Diversified in income review detail surged which focused share, century on Rob following and and growth, select based at economy, resilience what growing with profitability is Noninterest trends XXXX. page improvement directionally has all The significantly sound to rationalize efficiency, continues which earnings average Our on per self-explanatory, in NIM showing high outperforming them the historical has production The of performance strength risk efforts national remarkable has conservative led expansion loan while lower and strong quality of QX. moment. backdrop in coupon in our led X team a continues. quarter is

to now So CFO, be let's financial our reviewed key performance specific which turn our results will by our attention Rob indicators, Anderson. and

Luis, you, everyone. good Thank morning, and

ratio characterize X USCB. quarter on the this fantastic and Net from the value QX, XX% and was up and was The per quarter. in efficiency X, XX.XX%, record prior Return income the X.XX% $X.XX $XX.XX at was prior a points performance since and capital equity quarter. from I from and diluted Driving QX. NIM was XX.XX% the X.XX% down would on to share grew from threefold. Return Pages simplifying assets QX structure. tangible was as in X.XX% was up XX Looking average for going from public in per XX.X%, X.XX%, up book up our basis annualized highest quarter average share prior

notably, or XX.X% million earning to benefit of of increased second annualized our most the the will This income and as Net the XXXX. compared decrease. we net funding half momentum to in the as $X.X improvement overall the margin prior earnings quarter second XX.X% to the costs a with interest million upwards and assets marked $X.X First saw continue reprice interest average or enter and year. compared quarter forward

past last, benign. as Next, the credit pay year metrics continue showed remain strategies over And noninterest income marked uptick a to mentioned our off.

page. let's the deposits overview, next on discuss with that So

average XX.X% second $XX.X deposits million continue saw DDA or deposits for quarter. grow, our average of annualized most growth. First, with the and we deposit comprised second DDA the quarter XX.X% to 'XX increased compared to of the notably and Average balances total

our decrease DDA This pricing was we cost. driven by mentioned the buoyed growth on and was actions our the call. deposit by in the Second, overall previous

by through on deposits that interest-bearing pricing Specifically, relationship. the continue breadth of we're evaluate and the we quarter, basis tenure based points down to able and relationship price our XX all to

we that deposit to With look quarter at to Average will XX prior book. compared out coupons on quarter believe quarter performance the the at increased or the that, $XX.X the Driving compared is basis quarter let's the basis 'XX. really of page. we our prior million DDA points grow forward, $XXX.X million compared points portfolio. to us and XX.X% this the take can and to book the The Loan XX hold Going to of to second be steady continue or key these for million compared annualized second next a $XX rates. loan loans laid 'XX. increased

our rate with remix past the to a these our above embedded we of to the X%. originated have a and of That's X-year weighted balance X sheet average of for total in higher prepayment scenario. This rate are loans fixed $XXX is penalties. look critical floors with to we our XX% X as will yield book. have at loan protection million This yield. of majority the and a margin quarters, over in down with First, provide net component interest improvement terms assets Also, loans

the in In terms credits a solid we pipeline, steady of priced a similar with fashion. have pipeline

up CRE composition, opportunity have the Additionally, achieved the now noteworthy total in XX% and predominant type ago. this the loan X of very XX% just and loan makes which market is down years past years. is our loans, over we that's diversification X from

page optimistic balance costs. interest a and funding level net turn marked result margin. our in interest reasons to lower term, improve several NIM the is improvement at this the have and margin. we about QX will believe maintaining the both over time. look NIM yields asset We direct and showed but net near This a income larger let's sheet, the around Okay, remain of earning improved

already expect rates. environment, So rate our don't jumps let me we that. been adjusted in a interest-bearing have to Deposits so mention material higher deposit

this In fact, quarter, lowered them. we

fully be repriced. that market September the expect the if we over money accounts Fed in Next, billion as have immediately can in $X drop market rates

renewal CD of below million And rate of second the average half at or $XXX CD our all rates X.XX%. are have year in maturing rate. a this of at weighted We currently, this of

funds New above been straight on June, expect grind yield for X% at million loan fully trend executed $XX.X the and a continue. the Also we continues our will sheet rates. on an balance higher. additional we loan expected the side, asset our We into this to bonds also net gain in loan X the average the reinvested transaction, of this XXX X.X and to shown And production were book quarters, of carried an loan of years volume with new bonds lower of as the sale effectively $XX,XXX. extended end at has from an locking of points. life basis protect duration, which The

off be I securities note portfolio can lower, coming yield weighted at earning would flows of drifting in cash opportunities rate-sensitive securities with of million rates $XX.X higher average this to X.XX%, which reinvest on pass deposits. can a also a And into expect may assets. the there year be We liquidity assets. position interest additional QX, sell beginning higher-yielding into with non-relationship we to strong finally, reinvested

sheet to next the the our balance bank's page. model, to slightly sensitive. remains ALM According asset go Let's

management reduction the previous quarter, the has sheet position expected in to efforts balance for of our compared to the The result when asset decreased. better sensitivity lower sensitivity is However, asset rates.

which rate across all these you are of highly aware, parallel run is shops scenarios with tenders, all As unlikely. are

disclosed it regulatory scenarios and filings we requirement. For transparency these purposes, as our show is in a

rates For our example, highly assumptions. all is the contract across modeled which slightly XXX if to drop NIM points centers, again basis will unlikely, according

rates, to reduce the likely Fed these fashion. more for the would more not do being in rates In longer-term short-term and down model be XX-year scenario an scenarios, a X we move However, the and rates [Indiscernible]. equal X,

rates scenario. capitalize poised we are So the we in down on short, believe well to

that, with discuss to it Bill turn let me So quality. asset to over

you, Thank to Please turn Page Rob. XX.

bank mix at the X.XX% end, and The these continues portfolio the XX, second and portfolio a X increase have remaining driven million for than portfolio million. for adequate provision increased increased [Indiscernible] see loans point basis X and loans. increased [Indiscernible]. The net first On can graph, increased on less in non-performing billion. in of X This $XX anticipated point due increased the of the X/XX. the the for on with net portfolio. X classified The The in quarter of other a loans allowance The loss quarter. the the portfolio near loss estate. $XX.X to provision loans quarter. quarter allowance million the also graph the No the by real the classified on point which the basis to you shows to first X.XX% was loan graphs As ratio second credit the XX from of basis credit $XXX,XXX $XX X.XX% $X.X Page losses basis to portfolio as was X% quarter to loan Page second are net to remain shows in no

As you construction. the Commercial can between XX% billion occupied family, retail, owner remains and portfolio represents over composition of or is office, well non-owner occupied, real hotels estate, just and both the segmented owner see, diversified. $X warehouse, and occupied

less good segments [Indiscernible] and The to debt payment and of bank estate loan ratios portfolio. office is for all the service commercial loans, coverage percentage quality adequate The X%. the or the loan table non-owner-occupied at is for the portfolio which of XX, second Page [Indiscernible] to X/X% real portfolio than or owner-occupied On we XX% portfolio weighted and the the commercial shows each right [Indiscernible] than segment. the diversification. is The graph demonstrates performance for discuss less also value or non-owner-occupied average

quarter cover average loans and a loan-to-value an XX% office was of with in classified quality at loan. and portfolio an than Florida. of or located million debt The portfolio amount [Indiscernible] is loan $XXX $X.X service for of loans is X.XX. XXX good with million all properties average Our consists average The total the of no XX% to end XX% [indiscernible] of totaling loans, less BNC all

office graph The with being segment making office occupied the businesses. of owner-occupied medical and of up professionals loans XX% these shows first by the XX%

usage comprised the is medical. of graph XX% office a portfolio second occupied multi-tenant of and non-owner The office XX% with of loans their being

needed. especially low remains of repayment are schedule vigilant the the portfolio the proactively loan performance loan maturing and ability portfolio as We segments annual repricing for and quality Overall, upcoming Rob? monitor model all to good. reviews that respond during of

the were Outside quarter. businesses our other Thank net margin, bright of you Bill. fee the Okay. in spot interest the

notice you'll upward service the First, fees. trend quarterly nice in

differentiating speaking competitors and some to needs. go we are our We have their wire operational been for from clients' bank our that gaining time for traction becoming ourselves

approach gaining the more new board. our wire business with to are clients current We fees modifying and correspondent with banks, clients doing across

of business. have strategies new yielded All these

clients of for the fees at increase one cycle was swaps quarter. Additionally, seen interest prefer this rate in main we and several overall have the in drivers point the this

clients with and had noninterest QX, sales -- QX swaps and have rate can for interest be increases and dependent. to nice we loan restructuring again, in QX for fees. a [Indiscernible] rate Other QX these in for had steady of due lumpy and SBA We quarter pipeline management the solid and quarter-to-quarter nice a of income interest increased did XXXX, but We treasury QX. back in pipeline a

the lines run above expect we quarter-to-quarter, previous be to lumpy While rate. do quarters be the can fee future

So expenses. with let's that, take a at our look

was the and incentives. and and base $XX.X set were aside prior additional quarter. expense benefits total Our to due Salaries for predominantly from up sales dollars up million management

incentive all on company mentioned programs previously, performance. are As based

well, our fairly line in Other items with that company in prior were the shares line does success. quarter. when So team

the accruals can noninterest average we up QX which This So if as this catching trend, meant accrual X.XX% with increase looking company well with in was assets, line year, ratio improved the at the performance. stepping prefer at benchmarks the the the expenses, well to to quarters because again, ratio up back moved peers. you looking was the point and were QX. adding incentive and of XX.X%, and from the low to accrual in compared main the expense Even additional benchmarks efficiency And accruals quarter prior driver with and expense to in performance Last peers. has for in the dollars increase. overall

this expect future dollar would be we quarters to Looking forward, amount around level.

cost and capital. that, go guidelines. repurchased of weighted repurchase USCB with of January have putting the $XX.XX common capital with remain levels an company paid a of We on of in above So per share. weighted to or stock quarter, quarter. back above share shares $X.XX cost shares programs per well capital Since the XX,XXX dividend let's well-capitalized in the comfortably repurchased at share during place we XXX,XXX per the XXXX, average $XX.XX average in

program. repurchase of XXXX, As share remain June the repurchase company's shares authorized XX, XXX,XXX for under

some for comments. back closing So turn let with to that, it me Luis

Thanks, Rob. plan with The past the sustainable strategic as are expectations over course the growth years. X results budget with of and the strong and trajectory contrasted on quarter and second our

boarded reported hires well contributing As efforts. are our generation and loan on last been call, production new on we have our and sourced, fee earnings deposit to

promote Our offerings, These well-priced quality, which supported have rates average of conservative X% production X variety new a weighted [floors], a million NIM Again, of bankers loan past lenders coupon of or quarters have generated expansion over the positively will $XXX non-CRE loan diversification continued a the higher. which in over downward. with have when portfolio. adjust loans loan impact

annualized Organic are value and $XX.X growth compared franchise concentration verticals, professionals. all DDA including second anticipate has portfolio, and June this increased since office of compared $X.X to billion diversification a or of loan group variety X.X% banking, on increased we are aggregating focused our a which and increased on XX.X% deposits Again, loans. XX% deposit key risk deposit of quarter submarkets, XXXX. We deposit-rich quarters goal. further quarter banking total include units is medical private developing by to flowing comprised focused non-CRE. client association of management second balances XX% million which prior and XX.X% production to the led planned Our is deposits legal of XXXX, correspondent as Average has for our to XXXX. and continue local which business to the now Average

deposit as our increased has competitive points a to costs from QX. up efforts we NIM highly market X.XX%, results As have meaningful basis rationalize delivered XX seen to in

XXXX. positive XX, effort Another income, same can the the of an of increase production as of national before, new seen in $X.X is June Florida bright the they overall XXXX, and quarter XXXX, strong million in noninterest Florida private the already be million spot in I double established million over state's businesses GDP growth clearly economic this the XXX,XXX The growth posted is $X for is the bolstered are anchored $X.X in more by economy. results nation that our with months million formed the XX% and and strength a for in job than in resiliency $X.X compared sector which nearly period rate. with X since outlook leads or said to are The ended XXXX.

target enterprises As small like curve is With bank, cultivate, it are grow work market, hard a would that the we commercially which for these with. and to focused that medium to I floor our primary said, to open Q&A.

instructions]. come begin We will our first question-and-answer today session. [Operator Lay question now Wood the from KBW. And will with

bit on of an trends. a is of looks basis like were average end period. levels to Wanted start encouraging. really average On little ahead noninterest-bearing It the

Just comment on you any quarter? during trends saw the the

Yes.

movement second and our lot a our weeks of of pricing feel of of quarter, deposits month So did the action can quarter. on about the we We deposit first end you last of at on see movement the window it's strong first companies the did the doing quarter the the whether some at dressing. growing typically end some the quarter. the into book. see But We X

little So average up bit net and net there's and interest drives but margin. income really down, a the the interest the

So as be fully continue in I the expect to fine, to think we're quarter well. we second to grow going

great really there the to the margin in the more And or throughout second it that second quarter stable to we'll pull-through see mean, quarter? like see. Yes. I in was relatively the margin expansion was quarter, the Is third

March April. we did end second deposit the the quarter the of Like and was quarter, actions pricing stable so second month and relatively quarter. the first a of of I the first It throughout said, lot at

So X we of for a months margin kind basically. all X.XX-ish saw

but to see side were near start to We deposit traction. expect was to and that the was maybe mainly it grinding stable term be forward it that the to gain able certainly, nice we on

that strong forward? segment. you And expectations how then talk full shifting and C&I -- growth you have of going the just last, just sort develop within that maybe saw I pretty you year mean, C&I the to segment developed over Can about how you segment.

number developed of on association the the we main a verticals that residential are X [yacht] on lending, lending, continue years, Certainly. from developed bank the we've concentration verticals had probably number which drivers, SBA on historically lending, diversify to Overall this before CRE a We've of away side. the also, recapitalization.

them. done not strategies, have in. brought So Florida, our lenders. training people one also big as create senior developing helped which product we a job specialist, focus in we South we our and it's a Miami sound, and areas these not marketing good but They they've has verticals over specifically, our C&I time, only but those of on Each focused very a

existing what So to They and leverage going to over team continue proficient believe exactly we've are teams they the you've last X been to doing be very job. hire necessarily have sales do, able able years. that seen the additional do to and the to what not at I they're

great Congrats quarter. on the

our question Raymond And James. from Michael with come will Rose next

What the are I of stuck explain seen. was strong, it of to later in actually just just swap why think you swap to customers kind me banks bit maybe contrary think it kind of out a mentioned, about you we've locking fees, I kind pipeline as solid I we what little activity was And but your in, are slowed. at to mean seems that's Can growth the like other maybe forward. fees that going Luis, think the

explain the that and lending to value explain to the people top trained it, benefits the them. are to when there's in lot Our side a they adept very client they and to move take clients it want And that of and force the the our to sales direction. see on offer time you of to

pipe size, of and term of a this conversation have type special So a that loan -- and when we happens.

the our to take we and it, clients decision. were So a good they time in educate [Indiscernible]

We been clients been in have our orders the have at we size, have have deals future that and our requested growth have the that and the the decisions been swap identified also the favorable, loan only commitment So have in capitalized on. as intent that as look by issued far levers we what it accepted. we not portfolio and of

is track feel and into swap that we QX activity to QX. continue when the that, So very comfortable we going

of mean of already And then to you as opportunity have be seized maybe I actually and for just is kind would you using kind sense grow, I is sheet percentage more on the as that color of love swaps? follow-up the balance do a customer assume some that, what base to just like a then, there'll add there. obviously, your opportunities, you but

that getting I based just we here number the been the the exact has and about significant. production get I maybe folks, active started not key but we X educating growing now. have you the market X% But portfolio percentage, was opportunity can the it's think I It's is swap probably ago, very that huge years with on back of a so it's the given to again, a pipeline -- number. right the information our the think and I on

Yes. that swap a like basis tenor client spread be, gets I million. years, rates a say, let's say, sheet client the now, fixed the a let's why rate, longer to a XXX it, a rate want then XXX, years, plus if balance variable $XXX the can in if a mean and for I say, we'll right got that [Indiscernible] rate. spread think that a reasonable we XX and may that and we call might you XX not mean I plus they want want points was Michael, going may getting fixed doing be may be of seek clients the you're let's to below if The swap. handful about

that. seeing to are So bit them it's a lower, for come bit a activity little little more but clients we asking from

We have be lumpy a from pipeline, but those can quarter-to-quarter.

million, million QX is do we but activity, was and said. we seeing are it for the last QX and was what quarter quarter, $XXX have This pipeline a I've $XXX

strong prior over Obviously, just I outlook growth know of has you and XX%. kind been Maybe have really the of around to a switching balance loan sheet.

maybe It year medicines, that, Any deposits, guys rates. but that. over seems macro-wise, reason that are nearer-term maybe then wouldn't tracking number And the You're good end you economies, you higher have the on but like momentum. reduction just than just in some that? certainly separately there's appreciate really

around of deposits also You've about think talked kind I growing, previously XX%.

to Just loans deposits. an both a and for sense get on wanted update

think, Yes, existing a both -- with think deposit now, as I in loans I loan growth, similar quarter. of cost and Right this fund we'd low-cost you're going quarters future to the to relationship, like deposits, kind saw growth you see growth the deposits. rate,

there portfolio. say So to overall, run as more going look in We'll for off to I I cash flows mentioned, both. double be securities the selling some some maybe opportunistic a the have would to to going some here we're securities it's have low at stuff few but and digits

[Operator Instructions].

will come question from next Our Christopher Janney. Marinac with

see I a you the any little ask going lower you funds cost rollover you quarter. that can continuing? sort and costs bases that little wanted about do funding Do of forward? of see that new fact to the had And bit more this of a

Yes.

little the quarter, end to steady funding costs. rate we Let that cost a me from going stuck the in kind standpoint, rates, of on say little but moved the anticipated be that around When would We even at looking a some sensitive. we're drop at bit, the deposit they did for X our was and months of month of it start. probably bit and the June of I movement. we a did the of quarter, little lose a

level the in our the first the to reprice I and end did current and deposits DDAs there the we kind push we pretty a DDA will sizable keeping through really think that But is our cost in because some hold deposit growth growing looking April the on do expectation of quarter be at of that. key. for us, on

current quarters around movement do or materially any the down we But to not Fed. from without that would expect be every more Now rate the level, the that, we're future doing day. up of right I

deeper follow-up. do on That's just a want for credit? little the then of than just what sort good presentation, there on credit that bit of quick had terms special And see I inflows out for there in is than criticized, in or a you go front helpful. you either anything pending mention What the to

the to very that closely there react monitor and We see very problems out the quickly portfolio now. there nothing of them right is we No. a specifically and as is concern

And now remarks. back this concludes question-and-answer session. like our la turn Luis the de would to conference over I to closing Aguilera for any

Well, Century attendance thank look you I behalf very thank On to next all for much. all like team, the call. would forward again of earnings U.S. in meet you and your to our

now you today's conference for attending has Thank The presentation. concluded.

your lines. You disconnect may now