• Deposits: Increased by $206 million to $2.1 billion, a 10.7% increase compared to Q3 2023.
• Average Loans: Increased by $267 million or 16.6% compared to Q3 2023.
• Net Income: $6.9 million, an increase of $3.1 million or 82% compared to Q3 2023.
• Earnings Per Share (EPS): $0.35 per diluted share, up from $0.19 per share in Q3 2023.
• Return on Average Assets (ROAA): 1.11% for Q3 2024, compared to 0.67% in Q3 2023.
• Return on Average Equity (ROAE): 13.38% for Q3 2024, compared to 8.19% in Q3 2023.
• Loan Yields: Increased 16 basis points from the prior quarter and 79 basis points compared to Q3 2023.
• Net Interest Margin (NIM): Improved by 9 basis points in the quarter.
• Allowance for Credit Losses: Increased by $23 million, with a provision of $837,000.
• Non-Performing Loans: Increased by $2 million, representing 0.14% of the portfolio.
• Total Expenses: $11.5 million, slightly down from the prior quarter.
• Cash Dividend: Declared $0.05 per share of Class A common stock.

• Warning! GuruFocus has detected 6 Warning Signs with USCB.

Release Date: November 01, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• USCB Financial Holdings Inc (NASDAQ:USCB) reported another consecutive record quarter of fully diluted earnings per share, demonstrating strong strategic initiatives and operational performance.
• Deposits increased by $206 million to $2.1 billion, a 10.7% increase compared to the third quarter of 2023, supported by various deposit aggregating business verticals.
• Average loans increased by $267 million or 16.6% compared to the third quarter of 2023, with loan yields improving by 16 basis points from the prior quarter.
• Net income rose to $6.9 million or $0.35 per diluted share, marking an 82% increase compared to the third quarter of 2023.
• The company's board declared a cash dividend of $0.05 per share, reflecting a commitment to returning capital to investors while maintaining a strong balance sheet.

Negative Points

• Non-performing loans increased by $2 million, representing 0.14% of the portfolio, driven by one consumer loan relationship.
• The allowance for credit losses increased by $23 million in the third quarter, with a provision driven by a $62 million net quarterly increase in the loan portfolio.
• The bank unwound $200 million notional pay fix interest rate swaps, which will have a small negative drag in the coming quarters.
• The cost of deposits remained flat quarter-to-quarter, with September's cost of deposit at 2.57%, indicating challenges in reducing deposit costs.
• The bank is not offering CDs beyond one year, indicating a cautious approach to liability management amid anticipated Fed rate changes.

Q & A Highlights

Q: The non-interest bearing deposit growth in the quarter was impressive. Is this increase expected to be sustainable, or were there seasonal factors at play? A: Robert Anderson, CFO, explained that while average DDA was flat, there was an uptick at the end of the month. The growth is attributed to efforts by the sales team focusing on operating accounts and building relationships, suggesting the trend should continue.

Q: Can you provide more details on the strong overall deposit growth? Were specific verticals responsible for this growth? A: Luis De La Aguilera, CEO, noted that the growth was broad-based but highlighted strong contributions from the Jurist Advantage, HOA, and association banking verticals. These verticals have significantly contributed to the deposit growth, with 31% of total deposits coming from these areas.

Q: How is the loan pipeline looking as you enter the fourth quarter, and is the double-digit growth sustainable? A: Luis De La Aguilera, CEO, stated that the Q4 pipeline is in line with budget expectations, and the momentum is expected to continue, indicating confidence in sustaining the double-digit growth.

Q: With specialized verticals now comprising 31% of deposits, is there a limit to their growth, and what incentives are in place for traditional relationship growth? A: Luis De La Aguilera, CEO, shared that the growth in specialized verticals has been consistent and non-seasonal. The bank has product experts to leverage team efforts. Incentive programs reward loan and deposit growth, asset quality, and portfolio maintenance.

Q: Given the current margin trends, should we expect the margin to continue to improve, or could competition offset this? A: Robert Anderson, CFO, indicated that the margin is expected to improve, with a focus on repricing the money market book and maintaining a positive impact on the margin. The bank is originating loans above the portfolio average, supporting margin expansion.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.