USCB Financial Q4 2024 Earnings Report

USCB Financial EPS Results

• Actual EPS: $0.34
• Consensus EPS: $0.36
• Beat/Miss: Missed by -$0.02
• One Year Ago EPS: N/A

USCB Financial Revenue Results

• Actual Revenue: $16.59 million
• Expected Revenue: $22.41 million
• Beat/Miss: Missed by -$5.82 million
• YoY Revenue Growth: N/A

USCB Financial Announcement Details

• Quarter: Q4 2024
• Date: 1/23/2025
• Time: After Market Closes
• Conference Call Date: Friday, January 24, 2025
• Conference Call Time: 11:00AM ET

USCB Financial (NASDAQ:USCB) (NASDAQ: USCB) is a bank holding company headquartered in Columbia, South Carolina, serving as the parent company of United Security Bank. Established to support community banking in the Midlands region, the company focuses on relationship-driven financial services tailored to both individuals and businesses. As a regional player, USCB Financial emphasizes personalized service through a network of full-service branch offices.

The company’s core business activities include commercial and consumer lending, deposit products and alternative delivery channels. Commercial banking services encompass term loans, lines of credit and equipment financing for small- to medium-sized enterprises. Consumer services feature residential mortgages, home equity lines of credit and a suite of deposit accounts, including checking, savings and money market options. Through its wealth management and trust division, USCB Financial offers investment advisory, brokerage and fiduciary services designed for individuals, families and non-profit organizations.

Beyond traditional banking, USCB Financial provides ancillary financial solutions such as insurance products and treasury management services. These offerings help clients manage risk, optimize cash flow and streamline receivables and payables. The bank’s mortgage department works with buyers across South Carolina, guiding them through origination to closing, while its insurance advisors deliver property, casualty and life insurance coverage underwritten by national carriers.

Under the leadership of President and CEO Mark A. Mancuso, USCB Financial has maintained a community-focused approach since its inception. The company leverages local market knowledge to support economic development in Columbia and surrounding areas. While rooted in South Carolina, USCB Financial continues to explore strategic growth opportunities that align with its commitment to personalized service and community engagement.

USCB Financial Q4 2024 Earnings Call Transcript

Key Takeaways

• USCB delivered record Q4 earnings with diluted EPS of $0.34, more than double the $0.14 in Q4 2023, as net income rose 153.7% year-over-year driven by expanding net interest margins and loan yields.
• Average deposits increased by $225 million (11.8% YoY) and average loans grew by $260 million (15.3% YoY), with specialized verticals (private clients, attorneys, medical professionals, correspondent banking) now representing 30% of total deposits.
• Net interest margin expanded to 3.16% in Q4 (up 54 bps since Q1 2024 and 13 bps quarter-over-quarter), supporting a 34.7% year-over-year increase in net interest income.
• Asset quality remains strong: nonperforming loans held at 0.14% of the portfolio, allowance for credit losses covered 1.22% of loans, and the bank recorded zero net charge-offs in the quarter.
• The Board approved doubling the quarterly cash dividend to $0.10 per share payable March 5, 2025, reflecting robust capital levels and confidence in continued profitable growth.

Presentation

[Operator]

Good morning, and welcome to the USCB Financial Holdings Fourth Quarter 2024 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad. To withdraw your question, please press star, then two. Please note, this event is being recorded. I would now like to turn the conference over to Lou de la Aguilera, President and CEO. Please go ahead.

[Lou de la Aguilera, Chairman, President, and CEO at USCB Financial Holdings]

Good morning, and thank you for joining us for USCB Financial Holdings Fourth Quarter 2024 Earnings Call. With me today, reviewing our Q4 highlights, is CFO, Rob Anderson and Chief Credit Officer, Bill Turner, who will provide an overview of the bank's performance, the highlights of which commence on slide three. Our results in Q4 2024 highlight a record year for the bank, as Team USCB outperformed our internal budget and delivered impressive results for our shareholders. A year ago, we posted $0.14 per share in diluted EPS in Q4 2023 and more than doubled these earnings this quarter to $0.34 per share. Our continued focus on reducing deposit costs has contributed to net interest margin expansion, helping us maintain solid profitability. Benefiting from Florida's strong, resilient, and growing economy, USCB continues to post strong gains in assets, deposits, diversified quality loan production, and profitability.

[Lou de la Aguilera, Chairman, President, and CEO at USCB Financial Holdings]

Our performance underscores our disciplined execution of a business plan focused on commercial banking initiatives designed to profitably expand existing client relationships and grow new ones. In reviewing our Q4 highlights, I will comment on a select few data points, as CFO Anderson will further detail our growth, profitability, capital, and liquidity positions. Driven by our various deposit-focused business lines, average deposits increased $225 million, or 11.8%, compared to the fourth quarter of 2023. These business verticals, which target deposit-rich private clients, attorneys, medical professionals, as well as correspondent and association banking, have grown to over $625 million, representing 30% of total deposits as of the end of the past quarter. Average loans increased $260 million, or 15.3%, compared to the fourth quarter of 2023.

[Lou de la Aguilera, Chairman, President, and CEO at USCB Financial Holdings]

Our loan pricing has moved in line with the market, as loan coupon rates decreased 7 basis points compared to the prior quarter, while increasing 46 basis points compared to the fourth quarter of 2023. As we look at profitability, net income was $6.9 million, or $0.34 per diluted share, an increase of $4.2 million, or 153.7%, compared to the fourth quarter of 2023. Similarly, net interest income before provision increased $5 million, or 34.7%, for the past quarter in comparison to the fourth quarter of 2023. ROAA was 1.08% for the fourth quarter of 2024, compared to 0.48% for the fourth quarter of 2023, while ROA was 12.73% for the past quarter, again compared to 5.8% for Q4 2023.

[Lou de la Aguilera, Chairman, President, and CEO at USCB Financial Holdings]

Given the earnings power of the company, our outlook for 2025, and the strong capital levels, the board approved on January 21st, 2025, to double the quarterly cash dividend to $0.10 per share of the company's Class A common stock. The dividend will be paid on March 5th, 2025. The cash dividend program is an important driver to shareholder value, and the board of directors is committed to the return of capital to our investors while maintaining a strong balance sheet. The following page is self-explanatory, directionally showing historical trends since recapitalization. The disciplined execution of our business plan focused on developing the best people, products, and processes has consistently delivered efficient, profitable performance guided by conservative risk management practices. So now let's turn our attention to our specific financial results and key performance indicators, which will be reviewed by our CFO, Rob Anderson.

[Rob Anderson, CFO at USCB Financial Holdings]

Okay. Thank you, Lou, and good morning, everyone. Looking at pages five and six, I would characterize Q4 as another fantastic quarter for USCB. Net income was $0.34 per diluted share, and absent the non-recurring expenses, would have been $0.38 per share in another record quarter for USCB. However, as reported, return on average assets was 1.08%, return on average equity was 12.73%, the NIM was 3.16%, and up 13 basis points from the prior quarter. The efficiency ratio was 55.92%, and adjusted for the non-recurring expenses, would have been 51.41%. Tangible book value per share retreated $0.09 to $10.81, driven by a higher AOCI interest rate mark and higher share count. And last, credit metrics remain benign. So with that overview, let's discuss deposits on the next page. Deposits continue to increase both on a linked quarter and year-over-year basis.

[Rob Anderson, CFO at USCB Financial Holdings]

We have used excess liquidity to fund loan volume and walk away from rate-sensitive deposits and single-service product clients. Deposits decreased 18 basis points this quarter, and the reduction in our cost of funds has been a fundamental driver in our net interest margin improvement. So with that, let's look at the loan book. Average loans increased $80.3 million, or 17%, annualized compared to the prior quarter, and $260 million, or 15.3%, compared to the fourth quarter of 2023. Additionally, as we book new loans at yields above the portfolio average, our overall loan yields will remain stable or increased in the next couple of quarters as we continue to book loans with coupons above 7%. As a reminder, we book all loans with floors and prepayment penalties, which should help us in a down-rate scenario.

[Rob Anderson, CFO at USCB Financial Holdings]

As for guidance, we expect loan growth to be in high-single digits to low-double digits going forward, particularly since we have experienced high interest rate volatility in the last couple of weeks. Turning to page nine, you can see for the past five quarters, we have originated $754 million in new loans, and for the fourth quarter, we have originated $161 million, achieving a record quarter in terms of loan production, with a loan coupon of 7.14%. And in the last five quarters, our weighted average coupon was 7.79%, which helped increase our yield on earning assets. And while the loan coupon ticked down this quarter, it is still 89 basis points above the portfolio average. Also worth noting is that we have been able to diversify our loan book over time. As of quarter end, non-real estate loans are 27% of the total loan book.

[Rob Anderson, CFO at USCB Financial Holdings]

Let's look at the margin. One of the most impressive accolades this year is the success story of the NIM. In 2024, our NIM went from 2.62% to 3.16%, an improvement of 54 basis points in a matter of three quarters. Equally impressive has been the improvement on net interest income. Compared to the fourth quarter of 2023, net interest income increased $5 million, or 34.7%. As we enter 2025, this increase will generate significant earnings power going forward. The drivers include a lower deposit cost, larger balance sheet, higher loan yields, and an improvement in our earning asset mix. Going forward, we believe the NIM will hover around current levels near term, but we can expect further expansion in 2025, given a more normalized yield curve. Moving on to page 11.

[Rob Anderson, CFO at USCB Financial Holdings]

According to our ALM model, the bank's balance sheet is neutral for year one as we have made strategic changes in the last couple of quarters to prepare for a lower rate environment. Most notably, we have favored money market retention rates over long-term CD rates. We have focused on three- to six-month CD terms. Moreover, we will adjust the term of our liabilities depending on the current and expected interest rate scenario. For now, we are aiming for a neutral balance sheet. One of the benefits of having a neutral balance sheet is that the bank's financial performance can be more predictable in an uncertain rate environment. As mentioned on earlier calls, we have also pruned the balance sheet from rate-sensitive deposits and single-service product clients. During the last couple of quarters, we have adjusted down our deposit rates without losing meaningful relationships.

[Rob Anderson, CFO at USCB Financial Holdings]

This has translated into a more resilient balance sheet. Additionally, if the Fed Funds rate does drop this year, that will help our deposit costs, and with the rise in the five, seven, and ten-year rates, will help new origination loans at higher rates. In short, this will give us a more normalized yield curve, which is great for the banking industry in general, but will really benefit us as we tend to book loans at five years fixed rate with a spread over the U.S. Treasury rates. With these changes, we believe our NIM performance can hold at the current levels near term and expand into 2025, especially if the yield curve normalizes. With that, let me turn it over to Bill to discuss asset quality.

[Bill Turner, CCO at USCB Financial Holdings]

Thank you, Rob, and good morning, everyone. Please turn to page 12. As you can see from the first graph, the allowance for credit loss has increased to $24 million in the fourth quarter. This was due to a $1 million provision, and the ratio increased three basis points to an adequate 1.22% of the portfolio. $650,000 of the provision is related to a consumer loan relationship consisting of a yacht and a tender vessel, which were repossessed during the fourth quarter. The remaining provision was driven by the $38 million quarterly net loan growth. Net losses were zero for the quarter and the year. The remaining graphs on page 12 show the non-performing loans as of quarter end, which remained unchanged from the third quarter at $2.7 million and represent 0.14% of the portfolio. Classified loans increased slightly to 0.37% and represent less than 3% of capital.

[Bill Turner, CCO at USCB Financial Holdings]

The bank continues to have no other real estate. On page 13, the first graph shows the loan portfolio mix at December 31. The portfolio increased $38 million on a net basis in the fourth quarter to $1.97 billion. The composition continues to be well-diversified. Commercial real estate represents 58% of the portfolio or $1.1 billion, segmented between retail, multifamily, owner-occupied, and office properties. The second graph is a breakout of the commercial real estate portfolios for the non-owner-occupied and owner-occupied loans, which also demonstrate their diversification. The table to the right of the graphs shows the weighted average loan-to-values of the commercial real estate portfolio at less than 60%, and the debt-service coverage ratios are adequate for each portfolio segment. The loan quality and payment performances are good for all segments, and the past due ratio remains at less than 0.5% and below peer banks.

[Bill Turner, CCO at USCB Financial Holdings]

Overall, the quality of the portfolio remains good, with past due ratios below peer banks. Rob?

[Rob Anderson, CFO at USCB Financial Holdings]

Thank you, Bill. Outside of the NIM, fee businesses were the other bright spot in the quarter and for the year. The standout this quarter is the team's record performance in interest rate swaps. Since Q1 of this year, we have seen an uptick in clients managing their debt obligations with interest rate swaps. Additionally, we had $169,000 of prepayment penalties booked in other service fees line items. With other line items straightforward, let's look at expenses. Our total expense base was $12.9 million and contained over $1 million in non-recurring expenses. Salaries and benefits increased $730,000 and contained $620,000 of expenses related to an accelerated restricted stock award. These shares have a three-year ratable vesting period, but for a couple of executives, the first vesting period was recognized or vested in the last two months of the year.

[Rob Anderson, CFO at USCB Financial Holdings]

In 2025, we will have a more normalized vesting period on this stock grant. Additionally, legal expenses increased $173,000 for various items, and other operating expenses increased $174,000 related to force-placed insurance. We expect reimbursement for both items in the coming quarters. As noted on the slide, these non-recurring expenses had a -$0.04 per share impact on our fully diluted earnings per share for the quarter. On an adjusted basis, the efficiency ratio would have been 51.41%, which is more in line with our guidance and run rate improvement this year. Looking forward, we expect Q1 expense base to be around $12 million and move up from there throughout 2025. So with that, let's turn to capital. Three things to note on capital. First, we doubled the dividend to $0.10 per share.

[Rob Anderson, CFO at USCB Financial Holdings]

This increase is a direct result of the current performance and expected future performance of the bank. Next, AOCI increased to -$44.5 million with an increase in interest rates across the five, seven, and ten-year tenor points. And as you know, this negatively impacts our tangible book value per share. And last, the end-of-period share count increased with a restricted share grant in Q4 and individuals exercising options in the quarter. So with that, let me turn it back to Lou for some closing comments.

[Lou de la Aguilera, Chairman, President, and CEO at USCB Financial Holdings]

Thanks, Rob. Our plans for 2025 are rooted on the ongoing strength of Florida's economy, which continues to attract industry, entrepreneurs, and consumers to a state which offers a welcoming tax climate, global accessibility, and a highly skilled workforce. This past year, Florida was again ranked the second in the nation as the best state for business. As we have seen, this economic fuel propels our growth and hones our strategies. Since launching our IPO in 2021, both total assets and deposits have grown by 47%, while loans increased 75%, expanding our balance sheet by $825 million. If Florida was a country, it would be the 15th largest economy in the world, which is forecasted to grow by 2.2% in 2025, slightly ahead of the national economy's growth forecast. Consistent migration of new residents and business continues as the state population approaches 24 million.

[Lou de la Aguilera, Chairman, President, and CEO at USCB Financial Holdings]

U.S. Century services the strong, diversified, and dynamic market. We forecast growth in 2025 to be in the high-single digit to low-double digit range as we continue to optimize operational efficiency, maximize profitability, and maintain pristine credit quality. With that said, I would like to open the floor to Q&A.

[Operator]

We will now begin the question-and-answer session. To ask a question, you may press star, then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then two. At this time, we will pause momentarily to assemble our roster. The first question comes from Woody Lay with KBW. Please go ahead.

[Woody Lay, VP at KBW]

Hey, good morning, guys.

[Lou de la Aguilera, Chairman, President, and CEO at USCB Financial Holdings]

Morning.

[Rob Anderson, CFO at USCB Financial Holdings]

Morning.

[Bill Turner, CCO at USCB Financial Holdings]

Morning.

[Woody Lay, VP at KBW]

Wanted to start on loan production and specifically slide nine, where you sort of outlined the weighted average coupon on new production. The yields were down a little bit in the fourth quarter. I know rates were moving, but is that also a reflection of increased competition impacting pricing? Any thoughts there?

[Lou de la Aguilera, Chairman, President, and CEO at USCB Financial Holdings]

Woody, I think it's a combination of both. Clearly, rates went down, and our portion of the book that is variable went down with it. Competition here in Miami-Dade County is sporty, let's say. But again, we have our focus on where we want to be in pricing, and if it's not a fully banked relationship with deposits and the possibility for growth the way we want it, we'll pass on it.

[Rob Anderson, CFO at USCB Financial Holdings]

Yeah. The other thing, Woody, I would add to that would be we did have a chunk of that new loan production in the fourth quarter in our correspondent banking group, and those are typically 180-day lines of credit, and those are typically a little thinner than our commercial real estate loans or C&I loans as well. So that brought down that quarter's origination yield.

[Woody Lay, VP at KBW]

Got it. That's helpful. And then it does feel like expectations for loan growth across the industry are picking up, and South Florida is a very competitive market. How do you think about deposit growth in the year ahead, and does it pick up in competition? Does that impact the ability at all to lower deposit costs going forward?

[Rob Anderson, CFO at USCB Financial Holdings]

Good question. I mean, we've thought for probably quarters and maybe years that we have a very good loan engine here at USCB. I think the market is very strong, and it really comes down to the funding. And our challenge and how we're gearing the sales team is that we have to have strong bankers that can produce on both sides of the balance sheet, but the deposits will be the challenge. And I think if you ask any bank, that would be the response. But right now, we're growing the deposit book in line with our loans, and we fully expect that to happen in the coming year.

[Woody Lay, VP at KBW]

Yeah, and then lastly, the time deposit portfolio. It's 15% of deposits. It's not overly large, but any color you can provide on the maturity schedule there and repricing dynamics?

[Rob Anderson, CFO at USCB Financial Holdings]

Yeah. I don't have specifics on the repricing, but I think it's about 180 in the next what?

[Rob Anderson, CFO at USCB Financial Holdings]

A year.

[Rob Anderson, CFO at USCB Financial Holdings]

A year, a year.

[Rob Anderson, CFO at USCB Financial Holdings]

In the next year, if my treasurer's giving me the answer there. So we'll have opportunity there. We're pricing that lower. I think that's actually a good opportunity. We are pricing, I would say, along with the Fed Funds line or a Fed Funds curve. So we would expect that book to come down over time, especially if we get one or two rate drops in 2025.

[Woody Lay, VP at KBW]

All right. Thanks for taking my questions. Congrats on the next quarter.

[Rob Anderson, CFO at USCB Financial Holdings]

Thank you, Woody.

[Operator]

The next question is from Michael Rose with Raymond James. Please go ahead.

[Michael Rose, Managing Director at Raymond James]

Hey, good morning, guys. Thanks for taking my questions. Lou, in the opening comments, you mentioned that the specialty verticals are, I think, 30% or so of deposits. Just as we think about South Florida and some of the challenges from the hurricanes and insurance and things like that, and specifically related to the association deposits, any sort of concern there? Is that something you plan to maybe de-emphasize as we move forward, just given the challenges related to some of those associations that we've all read about? And then just broadly, as it relates to deposit competition down there, is it all fairly rational just holistically? Thanks.

[Lou de la Aguilera, Chairman, President, and CEO at USCB Financial Holdings]

Sure. I'm bullish on the association banking. If you look at the data, I think it's over 30% of the population of the state lives in a condominium. So the thing is to choose them wisely. We really look at associations that are professionally managed. When we do our analysis, we really focus on the number that are owners versus renters. We don't go after every single one. We look for ones that have the credit qualifiers that we want, and I think there's plenty of those. So it is in our best interest to be choosy as we've been from the very beginning. I believe that the volume is still going to be significant, and we have a clear focus on this area. So I believe that these verticals that I mentioned at the beginning are going to continue growing.

[Lou de la Aguilera, Chairman, President, and CEO at USCB Financial Holdings]

Our Jurist Advantage, which is focused on the attorney business, which is a deposit-rich market, we service it well. Those clients are responding. So I believe that both these areas and the others, the MD Advantage, which is focused on the medical business, are all scalable, and we have plans to develop them well.

[Michael Rose, Managing Director at Raymond James]

Okay. Helpful. Thanks for that. Rob, maybe just on slide 14, when you look at the service fees, what is in that other category that increased fairly meaningfully, Q-on-Q?

[Rob Anderson, CFO at USCB Financial Holdings]

Yeah. That was the prepayment penalties. So like we said, we booked loans with Florida's prepayment penalties, and we did get paid off on a sum, and then we got paid for it. So that was in the other line item in service fees.

[Michael Rose, Managing Director at Raymond James]

Got it. Thanks. I appreciate that. Sorry if I missed it. And then maybe just finally for me, appreciate the outlook on expenses, obviously some non-recurring items this quarter. Can you just discuss what the hiring plans are for this year and what's baked into your assumptions for expense growth and maybe what the market looks like for competition for those sorts of lending hires? Just want to see if you plan to be a little bit more opportunistic this year, just given the relative strength of the South Florida markets. Thanks.

[Lou de la Aguilera, Chairman, President, and CEO at USCB Financial Holdings]

As we prepare the budget, we closely look at this, and we feel that we are properly staffed for our plans for 2025. Being opportunistic is something that is what we do, and we've been good at it. So when those individuals become available, we will move on them, but it's nothing that we're really budgeting for just in case it happens. We feel very comfortable that our staffing levels are proper and our production teams are primed for action.

[Woody Lay, VP at KBW]

Okay. Great. Appreciate you taking my questions.

[Lou de la Aguilera, Chairman, President, and CEO at USCB Financial Holdings]

Thank you, Michael.

[Operator]

The next question is from Feddie Strickland with the Hovde Group. Please go ahead.

[Feddie Strickland, Director in the Research Department at Hovde Group]

Hey, good morning. Just wanted to start drilling down on fees a little bit here, specifically the swap fee income came in pretty good, as you guys indicated it would last quarter, and Rob, I think you mentioned there's still a decent pipeline there. I mean, what should we expect in the next couple of quarters from that line item?

[Rob Anderson, CFO at USCB Financial Holdings]

Yeah. That one's going to move around a little bit. I mean, this year, I think the market and where interest rates were definitely favored swap activity. I think that could quiet down into 2025, and if that does go down, we'll be looking to offset that decrease with increases in our wire fees, our TM fees, and SBA gain on sales. So that could trend down into 2025. I think for the year, we probably booked over $3 million. I would not anticipate that level of activity in 2025.

[Feddie Strickland, Director in the Research Department at Hovde Group]

That's fair. I was going to ask what the opportunity was on SBA, just kind of what you're seeing in terms of pipelines looking forward and kind of how much we could see that grow over the course of the year, potentially?

[Lou de la Aguilera, Chairman, President, and CEO at USCB Financial Holdings]

We were planning to more than double what we did in this past year. We have a strategy that we actually shared with our board this past meeting. Our focus is going to be on a certain business segment that we're gearing up for. All our lenders are adept on the SBA 7(a) program. This is something that we've been training them on now for three years since we launched the program, where initially it was led by the department head. Every single lender that we have has been participating. They have good marketing support, and they know their goals and their strategy. I think we're in good shape for this year and for that SBA fee volume to increase.

[Feddie Strickland, Director in the Research Department at Hovde Group]

Thank you for that. That's helpful. And just last for me, just thinking about the specialty lending segments between yacht financing and some of the other areas, where do you see the most green shoots for 2025?

[Lou de la Aguilera, Chairman, President, and CEO at USCB Financial Holdings]

I think the yacht financing is going to be steady as it's been the last few years. We're entering all the yacht, actually. It's the yacht season with all the boat shows coming up, the Miami International Boat Show and the Palm Beach, etc., all throughout the state, so that usually spikes volume. I think everything else is going to be steady and growing. On the global side, we have visited all our bank customers that are on the lending side. Every single one of them was visited in the last two quarters. Very good feedback from those visitations. We expect that they're going to continue borrowing and growing the relationships, and it's not necessarily adding new clients there, but expanding on the relationships that we already have, so we feel very comfortable that it's going to be a very productive year with them.

[Lou de la Aguilera, Chairman, President, and CEO at USCB Financial Holdings]

HOA, as I said, also is going to continue moving forward. I forget exactly what the percentage is, but it's almost, I'm going to say, it's near 50% of the HOAs in the state of Florida are over 30 years old, so they have to be going through the 30- and 40-year certifications. They're going to be looking for redos on roofs, on windows, and there's going to be, I think, tremendous opportunities there.

[Feddie Strickland, Director in the Research Department at Hovde Group]

Got it. Thank you so much. That's it for me.

[Lou de la Aguilera, Chairman, President, and CEO at USCB Financial Holdings]

Thanks, Feddie.

[Operator]

The next question is from Stephen Scouten with Piper Sandler. Please go ahead.

[Stephen Scouten, Managing Director at Piper Sandler]

Hi. Good morning, everyone. Sorry, I hopped on a few minutes late, but wondering if you can talk about, and apologies if I missed it, but loan growth obviously was still good this quarter, but maybe a little bit light on what it has been in the recent past. So just if that was just elevated pay downs or any other trends you're seeing and kind of how you think about trend line, what could be best-case scenario growth for you guys in 2025 or maybe a lower end if things don't quite pan out like we all hope?

[Lou de la Aguilera, Chairman, President, and CEO at USCB Financial Holdings]

This past quarter, there was quite a bit of payoff activity, probably more than you normally see on a quarterly basis, especially on our correspondent banking section, which, as we mentioned earlier, these are 180-day terms. Again, we believe that the borrowing is going to continue in that area. We don't really have any issues there. As far as, and we have prepayments on the commercial side. I attend all pipeline meetings, as does Rob and Bill, on a weekly basis. We are constantly in communication with our lenders. We know what the competition is doing. The pipeline going forward, I think, is as strong as any one that we've had in the past four quarters. I think that the loan demand is going to be there. As I said earlier, we believe that it's going to be high-single-digit, low-double-digit growth.

[Lou de la Aguilera, Chairman, President, and CEO at USCB Financial Holdings]

That's what we're planning for.

[Stephen Scouten, Managing Director at Piper Sandler]

Okay. Great. Very helpful. And then I know, Rob, you had kind of said, "Hey, it's the deposit growth that really helps to fuel the potential maximization of the loan opportunities and maximizing the team's potential." Are there any new deposit verticals potentially out on the horizon or any new initiatives from a deposit front that you guys would endeavor towards to drive even higher deposit growth, or is it just the continuation of working what you guys have built and maximizing those platforms?

[Rob Anderson, CFO at USCB Financial Holdings]

Yeah. I think it's optimizing what we have. I think we have a lot of talented people on the team that are sophisticated in their area of expertise. We started MD Advantage this past year. I think there's a lot of opportunity there. Our private client group is seeing a lot of activity and continued growth. And I think it's just growing what we have and giving our team the right tools and the products. And I think they're doing a fantastic job in the market. So I think we'll continue to grow our deposit book in line with our loan book. And part of the key will be making sure we get the operating accounts. And we can tweak maybe incentive plans a tad or two on the deposit side, but I don't think we need new verticals or new teams that add to the expense.

[Rob Anderson, CFO at USCB Financial Holdings]

I think it's working with what we have.

[Lou de la Aguilera, Chairman, President, and CEO at USCB Financial Holdings]

If I can, we chose and developed the association banking, the correspondent banking, the attorney business, and the medical because we believe that they're incredibly scalable in this market, so it's not really about adding new lines. It's about maximizing what we have, and within the strategies, there are opportunities to bring in new teams. We have done that very successfully, and we will continue to look for those opportunities, but I believe that the ones that we've chosen, the ones that we've developed and marketed and trained our people to execute on are very scalable and with a lot of demand.

[Stephen Scouten, Managing Director at Piper Sandler]

Nice. That's great commentary on the scalability. Appreciate that. And then just last thing for me would be loan loss reserve kind of levels. Obviously, you guys have a fantastic credit book, de minimis, non-accruals, but the reserve continues to build as a percentage of loans. As we move forward, if credit holds where it is, could we see those existing dollars of reserve kind of be more flat and just cover the incremental loan growth versus building as a percentage of loans? Or how do you guys think about that loan loss reserve percentage relative to your exemplary credit?

[Bill Turner, CCO at USCB Financial Holdings]

Thank you for the exemplary credit comment. Yeah. It will probably grow in relation to the growth in the portfolio. As the net loans grow, the reserve will take up a basis point or two as we grow. As long as there's no hiccups in credit quality, we should see slow, steady one basis point to two basis point growth or even holding steady each quarter as we go forward.

[Rob Anderson, CFO at USCB Financial Holdings]

I think maybe just adding on to that. I think we were, I don't know, around 119 basis points last quarter. We moved up to 122 basis points. I think part of that is, Bill mentioned the yacht and the vessel that we put a provision on. Other than that, I think the general pool is probably around 119 basis points. That's certainly adequate to benchmark that compared to some of the credit quality. So I don't think it will move materially, maybe in dollars, I think. Bill's mentioning it was certainly with loan growth, but I think we're very adequately reserved.

[Stephen Scouten, Managing Director at Piper Sandler]

Yeah. For sure. Okay. That makes a lot of sense. Thank you, guys, for all the color. Congrats on a great quarter and a great year.

[Rob Anderson, CFO at USCB Financial Holdings]

Thanks, Stephen.

[Operator]

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

[Lou de la Aguilera, Chairman, President, and CEO at USCB Financial Holdings]

Okay. Thank you very much for your attendance. On behalf of the U.S. Century Team, I would like to thank you all for your attendance and look forward to meeting again at our next earnings call.

[Operator]

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

Participants

Executives

• Rob Anderson, CFO
• Lou de la Aguilera, Chairman, President, and CEO
• Bill Turner, CCO
• Treasurer

Analysts

• Feddie Strickland, Director in the Research Department at Hovde Group
• Michael Rose, Managing Director at Raymond James
• Stephen Scouten, Managing Director at Piper Sandler
• Woody Lay, VP at KBW