USCB Financial Holdings, Inc.

USCB Financial Holdings, Inc. Earnings Call. My name is Cheryl and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. If you'd like to ask a question, please press 01 on your touchtone phone. I will now turn the call over to Luis de la Aguilera, President and CEO, and Rob Anderson, CFO. Gentlemen, you may begin.

Good morning, and thank you for joining us for our second quarter 2022 earnings call. Today, I will review our Q2 highlights along with our CFO, Rob Anderson, and Chief Credit Officer, Ben Passos, providing an overview of the bank's performance, the highlights of which you can see on slide three. USDB Financial Holdings delivered solid second quarter results with robust double-digit annualized loan and deposit growth and an expanding net interest margin. At the same time, asset quality continued its sound and stable trend, and capital and liquidity remained strong, positioning us well for the future. Average deposits increased by $284.5 million, or 20%, compared to our second quarter 2021, underscoring our focus as a relationship-driven bank. Our staff is trained and incentive to develop fully bank relationships, and our banking centers, business development officers, and lenders consistently hit that mark. Total average loans excluding Triple P loans increased 102.3 million or 35% annualized compared to the prior quarter and 290 million or 29.3% compared to the second quarter of 2021. Over the past two years, we have added six new lenders to the production team while exiting others who were underperforming. The additions have been very accretive to an already talented team of lenders, and together, they have delivered strong results. Furthermore, the continued addition of new business lines, such as our SBA initiative, and most recently, our Yacht Lending product, which launched in January of this year, are providing greater portfolio diversity and growth opportunities. The bank's net income for the second quarter was 5.3 million, or 26 cents per diluted chair. ROAA was 1.08, ROAE was 11.38. Our NIM improved 15 basis points from the second quarter of 2021, increasing to 3.37%. Similarly, we posted an efficiency ratio of 55.34% for the second quarter of 2022. Our management team is committed to continue efforts to improve our efficiency by leveraging technology, and numerous initiatives are ongoing and planned. After much analysis this past month, we contracted to implement a new loan operating system powered by Abrego. When fully deployed early next year, we expect significant enhancements in our underwriting, closing, and funding processes, as well as the benefits by fully integrated LOS. To fully appreciate the dynamic trajectory of U.S. Century Bank, it is best to view performance trends in context. Slide four clearly details the trends of nine performance indicators showing the significant strides made since the bank's recapitalization in March 2015. The bank's progress over six and a half years from regulatory supervision to an IPO is indicative of the commitment of the board, the experience and capacity of the management team, the commitment of our staff, and the demand of the market. With that said, let me turn things back to Rob, who will lead us through the performance in greater detail.

Okay, thank you, Lou, and good morning, everyone. In looking at our financial statements, and by many measures, U.S. Century Bank had another great quarter. Let me highlight a few items on the next couple of pages before getting into specific details. First, total assets eclipsed $2.0 billion for the quarter. Loan balances are $1.373 billion, which is up $114 million from the prior quarter, and deposits are at $1.739 billion. At quarter end, we had 456 million in securities, and 117 million of those securities are classified as held to maturity or HTM to protect tangible book value in a rising rate environment. The 117 million represents 25.6% of the total securities portfolio. While our equity moved down to 180 million, it is being driven by the mark-to-market accounting in our securities portfolios. Had we not made the move last year to classify these securities from AFS to HTM, we would have seen it decrease another $15.6 million. Net interest income increased $1.3 million or 35.2% annualized compared to the prior quarter and $3.2 million or 25.4% compared to the second quarter of 2021. Non-interest income of $1.6 million was down from the first quarter but up from prior year. We booked $705,000 of provision expense with loan growth for the quarter, and operating expenses were basically flat from the prior quarter. Net income was $5.3 million, or 26 cents a share. And I will remind you that EPS comparisons prior year will be difficult and not relevant due to the multitude of items we did to clean up our capital stack throughout 2021. With that, let's take a quick look at our key performance indicators on the next page. In terms of soundness, our credit metrics remain pristine. We had no loan charge-offs, and our loan loss reserve coverage ratio was down to pre-pandemic levels of 1.15%. In terms of profitability, return on average assets was 1.08% for the quarter, and return on average equity was 11.38%. Our NIM expanded 15 basis points from prior quarter to 3.37%, and our efficiency ratio was 55.34%. Last, our tangible book value per share came down to $9 per share, which is reflective of the negative mark in AOCI I mentioned earlier. With that overview, let's look at our loan book and loan yields. We separated out our quarter loans from the Triple P loans so you can see how each component piece is working. While the Triple P loans are going through the forgiveness process, our total average loans, excluding Triple P loans, increased $102.3 million or 34.9% annualized compared to the prior quarter, and $289.9 million, or 29.3% compared to the second quarter of 2021. While this is another quarter with loan growth above our previous guidance, I will provide two comments for modeling purposes. First, our ending spot balance for the second quarter of $1.373 billion is well above the quarterly average, and if you held the $1.373 billion steady all quarter for Q3, we would expect a similar average growth rate in Q3. Second is becoming more likely that loan growth may slow during the latter part of this year or certainly into 2023 as rates continue to rise and fears of an economic downturn continue to develop. This will add a new wrinkle to our guidance, but for the near term, you should expect a similar growth rate as Q1 and Q2 and taper back down to our previous guidance that we provided you in the past. We will still be on the high side of that range, which is the high single digits to low teens, but we'll provide more guidance on 23 as we get into our Q3 call later this year. As it relates to loan yields, we are flat to prior quarter. However, most of the loan fees associated with the Triple P loans have been recognized. The more important data point here is our loan coupon, which is up 15 basis points from prior quarter and up 31 basis points from the prior year. We should continue to see our loan coupon come up with rising rates and the repricing of variable rate loans in our loan portfolio. I will touch more on this in a bit. In terms of new loan origination yields, this quarter we saw the weighted average coupon at 4.45%, and we expect this to increase in coming quarters. With that, I'd like to turn it back to Lou to provide you some more detail on our loan book.