USCB Financial Holdings, Inc. Class A Common Stock 2026 Q3 Earnings Call

Please go ahead. Good morning, everyone, and thank you for joining us today to review USCB Financial Holdings' third quarter 2026 results.

Joining me on the call today are Chief Financial Officer Rob Anderson and Chief Credit Officer Sergio Garrido, who will provide additional detail on the company's performance, beginning with the highlights summarized on slide three. I am pleased to report another strong quarter for USCB Financial Holdings. We delivered record quarterly earnings and continue to build on the momentum we have established over the past several years. Even more importantly, through the first nine months of 2026, we have generated approximately $28 million in net income, already surpassing the full-year earnings reported in any year since our IPO.

We also delivered a 16.03% return on average equity and a 1.27% return on average assets, reflecting the strength of our franchise, the resilience of our markets, and the disciplined execution of our team. Just as importantly, these results were achieved while maintaining a strong risk profile. Credit quality remained sound with negligible charge-offs during the quarter and allowance for credit losses of 1.16% of loans and non-performing assets representing only 0.26% of total assets. Conservative risk management and disciplined underwriting continue to be the hallmarks of the USCB franchise. We also continue to benefit from a diversified, relationship-driven business model. Our specialized banking verticals, including association banking, private client group, and correspondent banking, now generate approximately 30% of our deposits and provide a valuable source of stable, relationship-based funding.

On the lending side, our portfolio remains well-diversified across commercial real estate, residential real estate, commercial and industrial lending, correspondent banking, and specialty lending businesses, helping us manage risk while supporting consistent growth. While the summer months are typically a slower period for USCB, we remain focused on executing our strategy, strengthening client relationships, and investing in future growth. This month, we expanded our deposit-gathering capabilities with the addition of a seasoned team of four deposit-focused bankers from a national competitor who collectively managed more than $700 million in deposits. Strategic talent acquisitions such as these remain an important component for our long-term growth strategy, and we continue to be successful in attracting high-performing banking professionals. This team will be based in our Hollywood and Aventura banking centers, further strengthening our presence in Broward County and supporting future growth opportunities throughout South Florida.

Earlier this year, we also launched a fourth commercial banking production team headquartered in our Doral banking center. To support this expansion, we have already added two experienced commercial lenders and a portfolio manager, with additional positions expected to be filled during the fourth quarter. The Doral Medley Hialeah corridor represents one of South Florida's most vibrant concentrations of small businesses, industrial enterprises, and commercial activity. We believe this market represents significant opportunities for commercial lending, treasury management services, owner-occupied real estate financing, and business deposit growth. This team will also serve as a catalyst for expanding our SBA lending activities. Additional business development personnel are being added to support these efforts. While SBA training initiatives are being implemented throughout our production platform to further enhance our ability to serve small business customers.

Growing deposits, further diversifying our loan portfolio, and expanding non-interest income opportunities, including SBA loan sales and treasury management revenues, remain key strategic priorities for USCB. I'd like now to spend a moment on slide 4, which is largely self-explanatory. These nine historical trends tell an important story about USCB's transformation and performance since recapitalization. They reflect the steady and reliable progress we have made in growing the franchise, increasing profitability, strengthening capital, and improving operational efficiency, and maintaining disciplined credit performance. What I find most meaningful about these trends is that they demonstrate consistency. Our results are not the product of a single quarter or a favorable market cycle. Rather, they reflect years of disciplined execution, prudent balance sheet management, sound underwriting, and a long-term commitment in building shareholder value.

As you look across these charts, you'll see a business that has consistently grown deposits, loans, earnings, and capital while maintaining strong credit quality and a conservative risk profile. Since our recapitalization, we have successfully navigated multiple economic cycles, periods of rising and falling interest rates, the pandemic, inflationary pressures, and significant changes across the banking industry. Through each of these environments, our focus has remained unchanged, building a stronger franchise, serving our clients exceptionally well, managing risk conservatively, and creating long-term value for our shareholders. The discipline is reflected throughout these historical trends. Sustainable, profitable performance anchored by sound and conservative risk management is what our management team is focused on delivering year after year. We believe that consistency is one of the defining characteristics of the USCB franchise and one of the primary reasons we remain well-positioned for continued growth and success.

With that perspective, I'll turn the call over to Rob Anderson, who will walk us through our third quarter results and discuss the drivers behind another record earnings quarter for USCB.

Rob? Thank you, Lou, and good morning, everyone.

Third quarter produced record earnings for Team USCB. We delivered the highest quarterly net income since our IPO, held onto the step-up in net interest income we achieved in Q2, and did it while investing in people and technology, which will strengthen our franchise going forward. Highlights include net income was $9.5 million, or $0.51 per diluted share, up from $0.49 last quarter, and up 13.3% over the prior year. Net interest income was $24.3 million, essentially in line with our strong second quarter and up $3 million or 14.2% year over year. A clear reflection of the earnings power of a larger balance sheet. Average loans grew 8.8% annualized over the prior year and 10% year over year, consistent with our guidance despite the typical summer slowdown.

Return on average equity improved to 16.03%, and return on average assets was 1.27%. The NIM was 3.37%, still 23 basis points higher than a year ago, and importantly, the margin exited the quarter at 3.41% in September. I will walk through the drivers on page 11. Credit remains sound with a very small charge-off of $23,000 and provision of $53,000. As we indicated last quarter, the tax line moderated with some changes in our deferred tax asset. The efficiency ratio was 54.62%, reflecting deliberate investment in talent, including front office sales professionals. Tangible book value per share was $12.42, up 7.5% year over year. The quarterly change reflects the rate-driven mark on our securities portfolio. Average deposits for the quarter totaled $2.5 billion, up $22.3 million or 3.6% annualized over the second quarter, and average DDA balances are up $40.7 million or 7.2% year over year.

On pricing, I am pleased with the discipline of our team. The total deposit cost was 2.19%, 34 basis points lower than a year ago, and the cost of interest-bearing deposits held flat at 2.90%. Even as market rates move higher in September, the modest three basis point uptick in total deposit cost was simply mix. As some DDA balances moved into interest-bearing accounts, not a change in our pricing. On an end-of-period basis, deposits are up $101 million or 4.3% since year end. Quarter-end balances absorb seasonal outflow of approximately $54 million in public funds, which we expect to return later this year. Excluding public funds, deposits grew approximately $48 million in the quarter. Core deposit growth remains our number one priority, and we are investing behind it. We have added dedicated deposit-focused relationship bankers who are already building strong pipelines.

We have also given our officers greater pricing flexibility to win new operating relationships. Any new loan pricing exception now carries a higher deposit commitment. Together, these steps position us to grow stable, relationship-based funding, the most valuable part of our franchise in a higher rate environment. Let us move on to the loan book. On an average basis, loans increased $50 million or 8.8% annualized over the prior quarter and $210 million or 10% year over year, right within the high single digit to low double-digit range we have communicated to you. At quarter end, loans stood at $2.3 billion, up $191 million or 9% from a year ago, as new fundings of $156 million fully replaced payoffs and amortization during the quarter. Loan yield was 6.11% compared to 6.2% last quarter.