USCB Financial (USCB) 1 Nov 242024 Q3 Earnings call transcript

Good day, and welcome to the Third Quarter 2024 USCB Financial Holdings, Inc. Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Luis de la Aguilera, Chairman and CEO. Please go ahead.

Good morning, and thank you for joining us for USCB Financial Holdings Third Quarter 2024 Earnings Call. the our Officer, is provide Bill of bank's reviewing and Rob an today commence the Credit which Chief Turner, performance, me QX X. CFO, highlights Anderson; overview on With Slide of highlights who will

diversified few by loan XX.X% of million business XXXX. to the of execution USCB of generating in We designed client reaffirming business $XXX the quality the of the will third record Anderson, continued that quarter per These various correspondent aggregating non-CRE the of steady well and market verticals the increased growth, which on XX.X% profitability, focus as strength capital, our the our $X.X quarter million loans, total quarter. data our the our relationship-focused performance. Supported or to continued by organic detail loans or also both attorney existing developing our growth strategic represent association have deposit production quality I of deposit-rich another include of deposits further are on lines, grown and as report the select deposits, third supported These consecutive to deepen of diversified XXXX. economy, business a of develop diluted XX% increased points posting diversification profitability. compared initiatives third plan billion These banking to banking as to $XXX business positions. Supported as fully and loans. Average strong liquidity deposits verticals, highlights, results end of focuses compared reviewing contribute ones. In comment quarter assets, to QX very earnings operational commercial Florida's pleased CFO on soundness growth, new relationships share, and initiatives and by will to a reflect

of be hurricane. compared to has had policies increased and clients pleased in to quarter Orlando, To report that the by the of path profitability. initiated, loan storm, Repairs early projected points loan made loan damage exposure loan in XX compared we our basis rates XXXX. all all detailed X exposure. department this contacted quarter points million the bank's storm of loan which from markets the yields end, line improvement preparation Florida for to identified are with current. This credit and and immediately quarter-over-quarter to and $XXX and average experienced multifamily XX identified visits and the as in consecutive Prior contributing of had portfolio, Tampa, basis All were West Our growth the the one along shortly. And site exposure the bank the storm, Ocala reported In after where building third of insurance our the having caused along moved Coast only current will is underway coupon to prior landfall speaking the loan Xth October million the storm, that damage. on a active. $X.X were bank effects minimal confirmed Hurricane a the I Category Milton, am the

share while Company's A disciplined as of Board ROAA at of is look compared plan compared XXXX, third self-explanatory, As quarter, committed XXXX The to value, diluted company's $X.X past of $X.X third dividend on XX% delivered an compared or of shareholder X.XX% important while quarter and $X.XX ROAE cash sheet. The since XX.XX% the million profitability, per trends is The of best for we net of an to share, capital year. return efficient $X.XX conservative or increase our recapitalization. program dividend dividend Xth The a declared was XXXX. QX of December was select quarter driver per for management million following to again, be Directors XXXX. paid the guided X.XX% directionally to business this third strong XXXX. Also, page to the XX, X.XX% income Class cash October the has and for of to maintaining stock by quarter is on risk for common the was the will X profitable the investors focused of a of Directors our showing performance people, on practices. consistently products, historical execution processes balance developing the Board

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

quarter good Lu, in second everyone. a morning, was earnings. we Thank the where record Okay. row and posted QX you,

trends look see as you'll As into sustainable crisp well-oiled that machine reflect from X, you that at we positive USCB we and and are QX XXXX. Pages results enter X believe execution a and

income $X.XX up from last was share diluted net fully and $X.XX million That's First, per share quarter per was per $X.X earnings and $X.XX share share. per year. last

double of book metrics prior balance assets up Tangible prior share would $XX.XX. from the with return exclude at exceeded to was per tangible all value and on value average $XX.XX. and share total deposits, loans, As year. quarters XX.XX%. assets sheet, X.XX% be if on you were return AOCI, digits per the book average it the And equity relates Profitability

improved. Credit and net clean ratio all capital We efficiency remains the interest improvements the ratios also saw quarter. this in both margin and

for deposits we efforts the confident of September. took team points the that XX page. in liquidity excess the volume discuss on Probably, starting any to was fund deposit with cuts. cost September we the noteworthy flat next the X.XX%, we was deposits while quarter-to-quarter, steady deposit money in deposit in overview, specifics, with And So costs used the quarter. rate ready cost were We to book. rates our repricing was item quarter this action the can loan throughout the the book Fed's feel representing reduce with let's most by as the market basis The Accordingly, stayed move. cut that

quarter Reducing average beta for specifically taking deposit the book We actions deposit a of million we XX% we and to of to CDs average in weighted Fed weighted we between year rate be out you we a discuss we repricing Furthermore, our X.XX%. X XXX basis offering are CDs the continue. With at or double let's QX, loan book The a any market we in the In to repricing $XXX look perspective If have whether between a short keep is are this year-over-year. are specific these beta. months, anticipating rate loan million rates it CDs money are points have following: from board. that Currently, rates XX liabilities tenor. repricing to Some anticipate X include would at continues the linked anywhere XX% grow digits, across not based the that, $XXX at as to currently book. lower X.XX%. beyond on at as looking market CDs went we

average, loans we at and the portfolio our higher. above grind will yields overall as yields book portfolio Additionally, new continue loan

which us to As a rates reminder, we drop. book begin prepayment all could loans and protect with if penalties, floors

guidance, we double the digits single in expect for continue growth to loan going As high forward. to low

ensure past have points average, are loan quarters, the Page time new is noting the average X, coupons coupon the $XXX weighted diversified. past above over below X with yield continues loan loan help higher. X-quarter the grind the seen still million we Also worth loans time that lowers loan basis which loans you This first XXX quarter, is originated has more we transitioned originating will X.XX%. Turning portfolio average. we have loan quarter while can a portfolio X%. This that at in see coupon our for to this the book ticked and And down is to

quarter of loan estate of the non-real end, are at loans As XX% portfolio. total

Let's page go to look at and the margin. next the

balance improvement income $XXX,XXX the the the prior yields include or XX.X% mix basis X.XX%, the while as holding points couple NIM for sheet, While ALM lower model, buoyed our environment. money over NIM in asset deposit is going as will higher CD stable. earning retention to loan the quarters The have rates This stabilization us made a rates. bank's the interest prepare loan improved larger the costs. According improve quarter. increased that Most to We of can forward. in deposit from our a favored go allow we higher close September's to rate to annualized net market margin in continue and we and sheet costs to X liabilities by notably, last changes to was our yields, believe faster have balance neutral drivers here in reprice quarter, compared an

prefer CDs X beyond previously are we liability as the stay year not side. As short to on booking we any mentioned,

not as basis a we Fed an a million unwound rate beneficial fixed with During $XXX policy change inverted at the of of while These of the notional the cuts. curve, swaps. XX they period interest swaps, point points where were rate quarter, and were in rates and rising pay yield in appealing we

in reduced quarters, coming While these swaps we profitability. with sensitivity will have a negative drag the our have impact minimal on asset small

We X.XX%, flows $XX.X the at between from QX cash to to -- expect offering million drop XXXX. rates higher will we us flows support opportunity portfolio debt points, rates. $XX.X receive to rates at repayment. expect in growth much $XX.X in XXX these X.XX% the attached an loan These current reinvest receive million are If securities to rates cash rates to million in and XXXX. basis or These

clients. from rate-sensitive the public calls, we earlier As product funds balance and mentioned on pruned service have single sheet also

we our performance NIM especially this if curve improve changes, believe level, steepens. will these the With from yield

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

Thank Page Rob. you, to XX. Please turn

X/XX. million first increase due the to increased remained collection, the for The process end million represent quarterly were you portfolio. This an driven X Page consisting consumer see loan quarter. the between As remaining quarter relationship billion properties. than retail, losses increased portfolio a Classified was third XX% The multifamily, currently to basis real the bank in graphs with second portfolio. ratio $X loan of the XX, X no X% have million first from large other X to in $XX of no increase the less the quarter. The losses on by shows at quarter loss $X.X off substandard $XX unchanged or provision which credit the portfolio of be diversified. than the quarter estate expected. real million The paid composition graph, portfolio the from net XX third portfolio continues driven by increased well basis an Commercial the of X.XX% capital. in adequate no points as The loan loss the Net the provision more graph loan bank. X.XX%. nonperforming Page office for on improved segmented allowance of was and rate the can X and to little $XXX,XXX real the are loans, estate. On to the billion. was a at mix of commercial continues at $XX represent owner-occupied, estate X.XX% loans net is This the loans in represents loans to a show Classified $X.X and to the

coverage debt all adequate X% remains The ratios their at we XX% diversification. segments second demonstrates the is banks. On performance values X.X% for and less or ratio loan breakout than payment the the discuss loans, owner-occupied the segment. shows and loan service The the the for right The average past are XX, table non-owner-occupied office or below peer and the of each of at for portfolio commercial also of loan real graph less graph real portfolio portfolio. a with bank's Page estate than due weighted good the to portfolio which commercial portfolios to estate and

good an XX% Our quality consists loans South $X.X of of service The C. coverage. million the all XX% Florida paying $XXX totaling end classified as with of is with XX% over being adequate the loan-to-value all with and portfolio loans in B Class at coverage debt are and at with no The average properties average office Xx. XXX properties Florida with is of loan portfolio almost are and amount average service debt in million loans. quarter agreed almost

and loans being The owner-occupied offices the segment XX% by that professional of with medical XX% occupied chart businesses. those up first making of shows

comprising office the XX% of The non-owner-occupied is those being second office with medical. and loans of multi-tenant XX% chart the portfolio

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

Thank you, Bill.

will or interest fee our anticipate quarter line clients interest Since an rate the at businesses, pipeline at expenses. is with we as in performance have year, We let's the a As swaps. we look line standout items robust. With their of this with QX swaps. look managing straightforward, rate have obligations the this uptick other QX team's debt performance seen in remains similar

been this and share Also at per Salaries and a the to to straightforward, Also asset XXXX. base capital. efficiency well-capitalized noting in remain was during count let's expense the is earnings head due $XXX,XXX Our higher with peers. With improved evident overall quarter. which to worth compared quarter total average average capital some down expense a guidelines. noting repurchased cost leverage $XX out shares larger is to our benefits $XX.X turn of to of stock paid stable quarter. All of the the ratio prior decreased noninterest worth slightly fixed and us million price XX,XXX incentives of the USCB is quarter ratios and for second ratio, from base, the to and has well time, both that earning negative allowing over to $XX.XX common the other strong in the items assets comfortably weighted AOCI line levels benchmark company above improved million. to prior

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

approximately delivering billion performance is the in budget XXX is unemployment in economy strength expectations, runs U.S. of the management's the residents state which or on throughout with every income strong point the than the #X and this a the beyond. With daily. $XX team strong a of profitability has would continued the Without with consecutive is adding factors operating few start due doubt, Rob. passed which Bank's U.S. strong leads net Century our keenly low companies. are the consistently you, nation to statewide financial states migration, creating best continued than X.X% year new the and consumers to job met Thank and in provides historically tax to state us top wealth for continued that growth, grow. The achieve midyear is said, net targets of as offer ahead. will year jobs bank's business XX small resiliency XX Florida corporate among the of XXXX and quarter fuel lower the the metrics, average our X state engine The Florida floor as rest migration. Florida the and exceeded continue focused the X.X% greater for national confidence combined. Florida's unemployment The has been months. and XXXX we XX also and that to gives ranked is low a These to rate sheet ability a open economic on efficiency in balance I like that growth, and in the Q&A. the migration

Woody question comes Instructions] first [Operator from The with Lay KBW.

aspects is impressive with noninterest-bearing Does to seasonal increase quarter. the start there was see. that like that impacted feel it to deposit wanted in really that growth the in segment I the Or It segment? were sticky?

kind towards was average, the first, of we DDA an see the quarter, uptick did flat Yes. the that Maybe month. On end shot at take of the a but I'll Woody. in

growth But deposits was end time the of building at on fairly some businesses accounts do have to would sales we and operating focusing relationships. tell from quarter some I So efforts team strong. lot you, point-to-point a see a time. with We add

anticipate we DDA forward. to going So build our

So that continue. trend should

some you on that mean, more was drove there Or I the the then, verticals? deposit in really were verticals certain that overall the it specific among also give strong. was pretty Could deposit quarter? just growth broad-based And color growth

a X verticals Hello, great aggregating done broad-based. really this is our it's of doubt, a But Lu. fairly are have that say there job. I without Woody, would deposit

strong. has business on the Jurist the on Our focuses been which Advantage, attorney focus client

HOA I has been seeing in Our very think strong. going And banking strong. And that. we're our general, association continue very also very, also to been business has

put side. have have just X the verticals million I If last grown almost perspective, it been to $XXX deposits really XX% said our -- deposit really, We that, nicely quarters. by HOA total in of in aggregating the on like have contributed we earlier, grown those

focused So deposits, said, deposits, and kind like team Rob the on is they're the are deposits, overall. the entire in those of leaders But delivering.

I then, shifting the over mean, to And loan side. just

sustainable do past the going fourth is sustainable of levels quarter? over range forward? couple quarters. printed you And is the You've double-digit the this think How entering double-digit pipeline

with every QX week right with line pipeline the with on attend leaders. interact We very I Bill. does does competition. budget. Yes. much what's our and pipeline head, single as of meetings informed the our team keep And us the Rob happening is division They

very same So that feel we comfortable momentum continue. the will

The Michael Rose James. with next question Raymond comes from

to deposits. some comment the remind wanted just are your on that where us core have of I'm in about trends go be specialized of there. the the of I the those you now business you to us call Lu, verticals the the at on kind just of seasonality just then could better -- growth beginning incentive just that sense back to Can is of you remind was year And there some of sort ago? just verticals? relationship or the what of place would limiter that is growth? put to Because in I those to to potential that get that X structures And would maybe maybe some or lumpiness you place a can expect trying in side, some a any more look depending of drive XX% there again traditional verticals.

XXXX, verticals, third were quarter Right. the And there The I million. X this $XXX XXXX, totaled if million. main $XXX year, In were million. at go there the first back million. quarter, we're In $XXX deposit to aggregating $XXX of in

that this it business you with It lenders with So again, a the really to work the in over share to is have expert is nonseasonal. knowledge product, the leverage job is we team. the way, and area see the a then continuous. And officers and put trend their development time can product let's each

not it's these loans one and/or go in that just with person So deposits bringing specialized them.

great that. time, we same the that. job I think per we're at se. do very We're doing And done additional staff it when they've a tactical on by adding not

and for as how asset quality. I on have incentive focus programs, much, we that rewards semiannually. it an loans deposits. far can And both say, incentive very also As paid program is It's

to of your all your top on your quality, it's your It's growth, loan play. asset maintenance. things And be deposit growth. X it's have portfolio it's So that, in

that. management there's to So a risk big component

at I I some the Rob, you mentioned deposit said the the statistics and then, as well. of And was X.XX%, repricing repricing kind you around you think the I know end -- and think, margin, the both quarter, around great of gave loan

based portion As we grind do -- -- that that up over think a down competition of at should of ramps the we I come kind has obviously, about higher you side dynamics? a of X.XX% the of quarters little here. could on the the Or the sensitivity next margin quarters? bit the to couple on with next of couple the off and rate think mean, offset that loan on least expect

question. good Yes,

data So of the points. a couple

the the improving side, of in. loan the portfolio. the was if didn't of basis we're at deposits and the get X.XX%. points going NIM on yields cuts X.XX% slide full On on quarter month the was was on -- XX about loan the look September of the slide, our cost we every deposit you September total of The And end month the

a to margin, that our impact the on grind to positive anticipate that we all continue of and higher. have So of impact will

hold there, somewhere if how XX% be see to to market And you cuts, money rate think, the X.XX% in if tell the fourth quarter. be I additional that betas you'll coming going $X will book look X.XX%, beneficial. around can billion XX%, the the be is could cuts, we with to between we're we're we quarters that get performing, And place that then that in first have. we'll and we able and So

again, average. we're the loans XXX still portfolio So points originating basis above

So I to portfolio higher anticipate as grind the total loan well.

probably like down? what Could just when equal, seems the there's else are, likelihood, that debt look be about those talked probably remind us you opportunities. some pretty maturities and you'd pay you then And good to a are, some that it of all repayment

Yes.

have we interest had are rates staged There only end. at some borrowings quarter We some So low. in there. FHLB out when some were terms really

we think a in 'XX. have couple I

And out to balances amount borrowings in the on months a X get or looking the end. odd can. certainly at some we that you when queue. it the loaning significant have be but -- have paying to are We cash at I not keeping FHLB specifics there or either There's we off will small maturity. quarter can specifics, get the the

And if squeeze last in. just one I could

a kind in that forward? keep have larger moving running Or expenses of for average as now. momentum sub-X% we You of sort we to the target XXXs Any to of guys, range? of high XXXs, growth while to is noninterest expenditures kind been your move should balance to think point, kind a think continue that low sheet that about should we assets forward

move will that hold as forward, think I Michael. we

terms below X have the We think And a continue looked at X. X We is new year, or low probably not to past probably and and maybe XXs and it and the year. to made targeting some on significant over the the And at XXX expense certainly to we've performance sales the those to side. manage the good able just I a -- X, last in we're assets predominantly individuals are I leverage average range. salespeople of typically hired modeling others. people ratio, hires we XXX efficiency we're to But get the month

with Strickland next Group. Hovde comes Feddie The from question

XXXX start to remain you base million product? customer or a guess, the through said taken fourth as expect that's, this to on But of mean, here. so wanted they'd to fees that I stable step I work I level should know at bit in relatively you start that sort we Just quarter. down on in early the swap likely $X.X

very in the on now, at at say, quarter just right we And strong. was be should and would October's fourth we're closing is, would I right say now mean, I October looking numbers robust. I could. that mean level. It I

could as feel think a term I clients, rates say months, the So X next certainly, good maybe the I'd But number. the is moderate But fees. on it to go level bit. a near near continue modeling that swap for about down, term, comfortable I

And the now. then you have dividend

You've deployment on in forward? going about you and priorities talk of in mind, how can buyback. With the rank terms you opportunities been active that just capital different

Yes.

mean, growth, to First as growing is we we then if support the I capital assets, build our our but there than tools foremost, the and at the probably -- dividend, also And going we're capital. faster other we're buyback. to have the and we'll look earnings such in place

and So where think when as be into going I feel the But stock at, is look lower of we should dividend at trading we certainly, will kind to we're it compared the to repurchase. budgeting But enter the and we growth. cycle level year detail. would But those I to in that first and foremost support like areas planning X for is to point that would more the be capital. next for fall stuff our

last one me. for just And one

base, I there's really speaking, I or any kind pretty your sound sentiment change the right? like slowdown of customer Just negative it strong. seem been mean doesn't among mean generally pipeline loan

So imply that at to that would pace a down along quick things proceeding still pretty are me there?

be different over team non-CRE, really think years, to a their and that are at management we commercial that over used suite real And our estate. would selective pass time pace. products the and delivery. they've on. is keeps contributed and quality concentrated lines deals, business bank done has a choices. lot really Feddie, fact and asset on the a the This I good steadily. I very There's say very job it's of make We're we diversified very And in relationship how the we are pretty overall have steady all very that growing pick in the introducing steady from, to of business a

So I low foresee that double-digit target. our continuity in

agree, Yes, Feddie. would I

The next question Piper with comes from Sandler. Stephen Scouten

the into most general into hearing the such we're phenomenal you it up low that 'XX? So probably been industry from I seeing obviously a we're the this hey, growth as whole when this mean think look growth. 'XX. the loan in slower. seeing growth of is, the the of not a do already reported strength are industry banks and or But could How about after We from has time quarter. other message you in guys kind pick growth trends double-digit think election from

Or the an could me uptick? could. So we level of that if environment? do you about see manage kind help of of that, to Or think want you just growth additional of to irrespective kind

that double years, business we've we I'd Well, adds it us. that surprise delivery. it's to ended my go all and at right? moments X we if modeling been X gets, as as over kind know, it that I growth the we my lines And consistency. we'll where and And these back dip, But Florida and is Texas strong there let market, last we're diversified here that may low has developed about be but you Florida. see digit. for fact or a seen you, have it very steady We that as that of the really talk all -- say year-over-year the And again, decade,

going I strong deliver, to we're state. would a going be on economy based projecting it's still XXXX, So that into is and to the what we're really in say what

on in that, growth to this Or you like along can period you have teams? of time? this I And have good with the pace feel the the do pace at of do some you drive future, to mean, grow like here of to team feel field grow for to kind you continue your continue

talent. We for are always looking

individuals. shortly. been joining a person us that the to again, being fact, of morning, to okay, interviewed somebody talking going matter this they're a of is But just for to As while. we're ready selective go, very The I we've be and believe I

talking years, doing at What XXX count. bank over staff is over good our Rob think still person quality comes $X of I the upgrading made we've X been how we've a it person very we're and that the in the last the in. of head about grown the billion point assets production under in or

do trimmed And in that. focused continue been have we've so on on to and nonperformers, bringing talent. we we very And the will

continue the and not an that to people in ones numbers. be It's it's to needs the So hiring right bringing exponential we have. supporting done craze our

just maybe And me. then last thing for

industry on on direction 'XX. loan not let's to third bucked of but guys the have only You also growth, the say, quarter seemingly trends positive second, NIM your since,

So directionally, sensitive, improvement. but screen great seeing you asset you're is

So they're just Is you'll as as seen is actually of Or deposit once you've of NIM in we volatility few asset the that? think we've expansion the cutting and it it they about maybe in side? I to sensitivity? how improvement about made the the do see that quarters rates. is I not see the that see level And able reality really versus How then, moving, on kind think the some the again, be and stability same last modeling more pause. Fed but we progress can

have Yes, is perform book, to XX% those all would going great screen historical have this money my deposit outperform I we've model, probably what a assumptions, Stephen, the sensitive Well, are able to to time pieces. question, I that model Like book. some we're at they're market But beta. treasurer margin talk on our models neutral. a say the the and But because on know, and slightly if that do to expansion. as XX% outperform going then especially with on based asset to it's about we're you that we we to been XX% repricing and model loaded could

example. one be would that So

side. deposit focused We are on very the

working proven double-digit loan growing a we've that good a the pace. of over here, at think period is engine time I

how do us to challenge as the loan at move continue So fund low-cost we we that deposits. growth real forward for is

deposit all into made that interviewed relationships. good morning bring have have gathering year, the bankers that this around and and one books So is can we solid recently over deposit hires year the that that this Lu last

our outperform into anticipate to further look we'll we margin as So expansion model, we and XXXX. more go the

Congrats on a quarter, continued progress. and all great guys, the

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

thank everybody. Well, you,

to day. team would -- a So thank the U.S. on again attendance for look to next of I forward Have great U.S. your at all behalf earnings like call. Century and you meet in our Bank, Century

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

disconnect. You now may