USCB FINANCIAL HOLDINGS, INC. Q4 FY2024 earnings call

• Dividend Increase: Board approved doubling the quarterly cash dividend to $0.10 per share, payable March 5, 2025. - Deposits and Loans: Average deposits up 11.8% YoY, average loans up 15.3% YoY, with focus on deposit-rich verticals like private clients, attorneys, etc. - Profitability: Strong net income growth, improved NIM, ROAA, and ROA. Nonrecurring expenses affected EPS but adjusted efficiency ratio was 51.41%. - Asset Quality: Allowance for credit losses rose to $24 million, nonperforming loans unchanged at $2.7 million, classified loans at 0.37%, past due ratio below 0.5%. - Fees: Interest rate swaps and prepayment penalties contributed to fee income growth.

Deposits: Average deposits increased $225 million or 11.8% compared to Q4 2023, reaching over $625 million, which accounts for 30% of total deposits. Loans: Average loans rose $260 million or 15.3% YoY. Loan coupon rates decreased 7 basis points QoQ but increased 46 basis points YoY. Profitability: Net income was $6.9 million or $0.34 per diluted share, a 153.7% increase YoY. Net interest income before provision grew $5 million or 34.7% YoY. ROAA was 1.08% in Q4 2024 vs. 0.48% in Q4 2023; ROA was 12.73% in Q4 2024 vs. 5.8% in Q4 2023.

• Loan Growth: Expect loan growth in high single-digits to low double-digits going forward. - NIM: NIM expected to hover near current levels near term with potential expansion in 2025 if yield curve normalizes. - Dividend: Quarterly cash dividend doubled to $0.10 per share, effective March 5, 2025.

• Interest Rate Volatility: Impact on loan pricing and deposit costs. - Competition: Potential impact on deposit growth and loan pricing in competitive South Florida. - Association Banking Challenges: Need to selectively choose associations due to potential challenges like hurricanes, insurance issues.

Q: Woody Lay asked about loan production yield down in Q4. What's the thought?

A: Luis de la Aguilera said it's a combination of rate decrease and correspondent banking group's 180-day lines of credit; focus on pricing and selective lending. Rob Anderson added correspondent banking loans are thinner, bringing down origination yield.

Q: Woody Lay asked about deposit growth and competition. How to think about it?

A: Rob Anderson said focus on strong bankers producing on both sides; growing deposit book in line with loans, expecting continuation.

Q: Michael Rose asked about association deposits concern. Any thoughts?

A: Luis de la Aguilera was bullish on association banking, stating to choose wisely, focus on professionally managed associations.

Q: Michael Rose asked about service fees increase. What's the reason?

A: Rob Anderson said it was prepayment penalties from floor prepayment penalties.

Q: Feddie Strickland asked about swap fee income outlook. What's expected?

A: Rob Anderson said activity may quiet in 2025, offset with other fee lines like wire fees, TM fees, and SBA gain on sale.

Q: Stephen Scouten asked about loan growth trend in 2025. What's the expectation?

A: Luis de la Aguilera said high single-digit to low double-digit growth expected, considering pipeline and relationships.

Q: Stephen Scouten asked about loan loss reserve. What's the view?

A: Bill Turner said reserve may tick up with loan growth but remains adequately reserved; Rob Anderson added reserve is adequately reserved compared to credit quality.