USCB FINANCIAL HOLDINGS, INC. Q3 FY2024 earnings call

• Strong growth in assets, deposits, diversified quality loans, and profitability supported by Florida's economy. - Minimal effects from Hurricane Milton; only one multifamily building with $1.6 million loan had damage, repairs underway. - Dividend of five cents per share declared, paid December 5, 2024. - Disciplined execution of business plan focusing on organic growth and diversified commercial banking. - Efforts to manage deposit costs, including reducing money market rates, repricing CDs, and favoring money market retention. - Loan book growth, diversified portfolio with non-RE loans at 28% of total loan portfolio. - Asset quality: Allowance for credit loss increased, nonperforming loans up $2 million but low, classified loans improved.

Deposits increased $206 million to $2.1 billion (10.7% compared to Q3 2023), with deposit aggregating verticals (association, correspondent banking, attorney client market) representing 31% of total deposits. Average loans increased $267 million (16.6% compared to Q3 2023). Net income was $6.9 million ($0.35 per diluted share), up $3.1 million (82%) compared to Q3 2023. ROA was 1.11% for Q3 2024 vs 0.67% for Q3 2023, and ROE was 13.38% vs 8.19% for Q3 2023.

• Loan growth expected in high single to low double digits. - NIM expected to improve as loan yields rise and deposit costs stabilize. - Anticipate $13.5 million from securities portfolio in Q4 and $49.2 million in 2025, with potential to reinvest at higher rates if rates drop.

• Impact of interest rate changes on swaps, which may have a small negative drag in coming quarters. - Potential seasonality or lumpiness in deposit aggregating verticals, but trends are continuous.

Q: Non-interest-bearing deposit growth stickiness?

A: Rob Anderson said DDA flat in quarter but uptick at end, sales team focusing on operating accounts.

Q: Deposit growth drivers?

A: Luis De La Aguilera said broad-based, with Jurisadvantage, HOA, association banking strong, contributing 31% of deposits.

Q: Loan pipeline and sustainability?

A: Luis De La Aguilera said Q4 pipeline on budget, momentum to continue.

Q: Deposit verticals growth potential?

A: Luis De La Aguilera said verticals grew from $312 million in 2020 to $644 million in Q3 2024, trend continuous, with product experts leveraging teams.

Q: Margin outlook?

A: Rob Anderson said NIM expected to grind higher as loan yields rise and deposit costs stabilize.

Q: Debt repayment opportunities?

A: Rob Anderson said looking at loaning out, keeping cash, or paying off FHLB borrowings, specifics to be provided.

Q: Non-interest expense outlook?

A: Rob Anderson said efficiency ratio targeting low fifties, expense to average assets below 2%, around 1.80-1.90 range.

Q: Swap fees outlook?

A: Rob Anderson said swap fees likely stable in Q4, near term modeling at current level.

Q: Loan growth into 2025?

A: Luis De La Aguilera said modeling low double-digit growth, based on strong Florida economy and diversified business lines.

Q: Talent for growth?

A: Luis De La Aguilera said always looking for talent, being selective, upgrading quality of staff, not exponential hiring.