USCB Financial Q3 2025 Earnings Call Transcript

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Date

Friday, October 24, 2025 at 11:00 a.m. ET

Call participants

President and Chief Executive Officer — Luis de la Aguilera

Chief Financial Officer — Robert B. Anderson

Chief Credit Officer — William Turner

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Takeaways

Net Income -- $8.9 million for Q3 2025, up from $6.9 million in Q3 2024, a 29% increase driven by operating leverage and balance sheet growth.

Earnings Per Share (EPS) -- $0.45 per diluted share for Q3 2025, up from $0.35 in Q3 2024, marking the third consecutive quarterly record.

Return on Average Assets -- 1.27% for Q3 2025, increased from 1.11% in Q3 2024.

Return on Average Equity -- 15.74% for Q3 2025, compared to 13.38% in Q3 2024.

Efficiency Ratio -- 52.28%, reflecting disciplined expense management, with total noninterest expense of $13 million—including $188,000 in one-time charges—for Q3 2025.

Net Interest Margin (NIM) -- 3.14% in Q3 2025, up from 3.03% in Q3 2024. September NIM reached 3.27% following higher loan production late in the quarter.

Total Assets -- $2.8 billion as of Sept. 30, 2025, up 10.5% year over year.

Total Deposits -- $2.5 billion as of Sept. 30, 2025, up 15.5% year over year, with broad-based growth across segments.

Deposit-Focused Verticals -- $672 million, or 27% of total deposits, concentrated in association banking, private client group, and correspondent banking as of Q3 2025.

Loans Held for Investment -- $2.1 billion as of Sept. 30, 2025, an increase of $199 million or 10.3% from $1.9 billion on Sept. 30, 2024.

Diversification of Loan Portfolio -- As of Q3 2025, 42% of loans are non-commercial real estate, indicating expanded segment exposure.

Non-Performing Loans -- 0.06% of the loan portfolio ($1.3 million) as of Q3 2025, down from 0.14% in Q3 2024.

Allowance for Credit Losses -- $25 million, equating to 1.17% of total loans; a provision of $31,000 was added for Q3 2025.

Subordinated Debt Issuance -- $40 million raised in Q3 2025, providing capital for balance sheet leverage and share repurchase.

Share Repurchase -- Approximately 2 million shares, representing 10% of the company, were repurchased at a weighted average price of $17.19 per share during Q3 2025.

Tangible Book Value Per Share -- $11.55 as of Sept. 30, 2025, up 6% from the prior year.

Risk-Based Capital Ratios -- 14.2% at the holding company and 13.93% at the bank, both well above regulatory minimums as of Q3 2025.

Average Deposits Growth -- Up $166 million, or nearly 29% from the prior quarter, and $380 million, or 18% year over year.

Brokered CDs Issued -- $100 million, with hedging via a two-year interest rate collar (cap: 4.5%; floor: 1.88%) in Q3 2025.

Deposit Mix and Costs -- DDA balances declined $10.6 million from the prior quarter and now comprise 23% of total deposits. Interest-bearing deposit costs remained stable at 3.29%, while total deposit costs rose 7 basis points due to mix shifts in Q3 2025.

Loan Growth -- Average loans rose $41.6 million, or 8% annualized from the prior quarter; loan yield for new production was 6.43%, 22 bps above the portfolio average.

Loan Portfolio Characteristics -- Commercial real estate represents 57% of the loan portfolio in Q3 2025, with all segments showing loan-to-value below 60% and stable debt service coverage ratios.

Securities Portfolio -- $480 million total, with 67% available-for-sale and 33% held-to-maturity, producing a blended yield of 3.03%, up 42 bps. $76 million of higher-yield (6%) bonds were added as of Q3 2025.

Liquidity and ALM Position -- As of Q3 2025, 62% of loans are variable or hybrid in nature, and 47% of these will reprice within the next year.

Non-Interest Income -- Represents 14.8% of total revenue and 0.52% of average assets in Q3 2025, with growth attributed to increased wire and swap fees, as well as prepayment fees.

Expense Outlook -- Expenses are expected to gradually rise from $13 million per quarter due to additional hires and increased incentive accruals with performance, as discussed on the Q3 2025 earnings call.

Summary

Management completed a $40 million subordinated debt raise and executed a major share repurchase, using most of the proceeds to buy back 10% of common shares at $17.19 per share in Q3 2025. Deposit and loan growth met or exceeded stated guidance in Q3 2025, with deposit-focused verticals and business pipeline investments supporting ongoing expansion across customer segments and capital deployment. The securities portfolio strategy has shifted to higher yields and longer duration, while active asset-liability management—including rate-hedging and aggressive liability repricing—positions the balance sheet to benefit from a declining rate environment.

Anderson stated, "If that securities portfolio moved up 100 bps, I mean, that would give us tremendous earnings power and expansion in our margin," underscoring management's focus on improving portfolio yield.

Prepayment of over $10 million in yacht loans occurred in August 2025, temporarily reducing loan yields and net interest margin that month, but this was offset by record loan production in September 2025.

New loan production in September 2025 achieved a weighted average coupon of 6.43%, exceeding prior portfolio averages. Management expects Q4 2025 loan momentum to remain in line with prior quarters.

Deposit costs saw marginal upward pressure from a mix shift, but multiple proactive rate reductions on money market and CD products are expected to lower funding costs in Q4 2025.

The association banking vertical, supported by recent hiring, is viewed as a key driver for potential doubling of business in the next 18 months due to Florida condominium recertification cycles.

Industry glossary

ALM (Asset-Liability Management): A banking risk-management process that seeks to match assets (such as loans and securities) with liabilities (like deposits) to optimize profitability while controlling interest rate risk.

DDA (Demand Deposit Account): Non-interest-bearing checking account funds accessible on demand.

Interest Rate Collar: A derivative structure combining a cap and a floor to limit the range within which an interest rate can fluctuate, used for hedging interest rate risk.

CD (Certificate of Deposit): A fixed-term, interest-bearing deposit product.

Swap Fee: Income earned by the bank from arranging an interest rate swap contract for a borrower, usually involving exchange of fixed and variable rate exposure.

Subordinated Debt: A lower-priority debt instrument that ranks after other debts in the event of liquidation.

Full Conference Call Transcript

Luis de la Aguilera: Good morning, and thank you for joining us for USCB Financial Holdings Q3 2025 Earnings Call. With me today reviewing our Q3 highlights is CFO, Robert B. Anderson and Chief Credit Officer, William Turner who will provide an overview of the bank's performance, the highlights of which commence on Slide three. The 2025 continued to reflect disciplined financial performance across all key metrics, marking our third consecutive quarter of record fully diluted earnings per share. For the quarter ended 09/30/2025, the bank posted net income of $8.9 million or $0.45 per diluted share. Up from $6.9 million or $0.35 per share in 2024. During the third quarter, our profitability metrics remain among the best in our peer group.

Return on average assets increased to 1.27%, compared to 1.11% a year ago. Return on average equity improved from 15.74% up from 13.38% last year. Our efficiency ratio strengthened to 52.28%, reflecting disciplined expense management and operating leverage. Net interest margin expanded to 3.14% compared to 3.03% in the same quarter last year. Net interest income before provision for credit losses was $21.3 million up $3.2 million or 17.5% from the prior year supported by solid balance sheet growth and prudent pricing discipline. Total assets reached $2.8 billion as of 09/30/2025, representing a 10.5% year over year growth. Total deposits ended the quarter at $2.5 billion marking a robust 15.5% year over year increase.

Growth was broad based across business and consumer segments. Our diversified deposit focused business verticals, namely association banking, private client group and correspondent banking, now account for $672 million or 27% of total deposits. These deposit focused verticals are highly scalable and in the past year, we have added new production personnel to further support our growth plans. Liquidity remains strong and well above policy limits providing ample flexibility to support loan growth and capital initiatives. Loans held for investment grew to $2.1 billion an increase of more than $199 million or 10.3% from $1.9 billion on 09/30/2024. Reflecting steady customer demand and solid credit quality. Again, we consistently focus on credit quality and diversity.

And our loan book has significantly diversified in composition as 42% of our loans are now non-CRE. Credit performance continues to be exceptionally strong, Non-performing loans declined to just 0.06% of total loans, down from 0.14% last year. The allowance for credit losses totaled $25 million at year end representing 1.17% of total loans. During the quarter, we completed a successful $40 million subordinated debt issuance providing efficient capital at attractive terms. Most of the proceeds were used to repurchase approximately 2 million shares at a weighted average price of $17.19 per share. Underscoring our confidence in the intrinsic value of our stock and our commitment to returning capital to shareholders.

Following these transactions, tangible book value per share grew to $11.55, six percent higher than the prior year. Our capital position remains a key strength. As of September 30, total risk based capital ratios were 14.2%, for the company and 13.93% for the bank. Well above regulatory minimums. Overall, the third quarter's record performance reflects the strength of our business model, our focus on relationship based growth and our commitment to deliver long term value to our shareholders, customers and employees. On the following page, is self explanatory. Directionally showing nine select historical trends since recapitalization. Profitable performance based on sound conservative risk management is what our team is focused on consistently delivering.

So let's now draw our attention to our specific financial results and key performance indicators which will be reviewed by our CFO, Robert B. Anderson.

Robert B. Anderson: Thank you, Lou, and good morning, everyone. Looking at pages five and six, I would describe the 2025 as a highly successful quarter for USCB. In fact, it was another record for us. Net income was $8.9 million or $0.45 per diluted share and that's up 29% over the prior year. Return on average assets was 1.27%, Return on average equity was 15.74%. And these metrics benchmark incredibly well when compared to peers. The most notable activity in the quarter was the $40 million sub debt raise and repurchase of 2 million shares or 10% of the company. The weighted average price per share of the buyback was $17.19.

While the 2 million share repurchase happened on September 4, the weighted average diluted share count for the quarter was marginally impacted to 19,755,000 shares versus the ending share count of 18.1 million. On a pro forma basis, assuming the repurchase happened on day one of the quarter, with the same $8.9 million of earnings would have equated to an EPS amount of $0.49. This number should help you when updating your estimates for 2026. While the summer months cooled off our loan growth for the quarter, we put excess cash to work in our securities portfolio. As a reminder, our securities portfolio is still reflective of the COVID era. Yielding 3.03%.

As discussed in previous calls, this represents a tremendous opportunity for us to improve go forward earnings. I will elaborate more on this in a bit. With the sub debt raise and the excess cash on the balance sheet and in anticipation of loan demand, the NIM retreated slightly to 3.14%. The efficiency ratio was steady at 52.28%, Tangible book value per share was $11.55 and reflects the impact of the share repurchase. And last credit metrics remain benign. So with that overview, let's discuss deposits on the next page. Average deposits increased $166 million or nearly 29% compared to the prior quarter and are up $380 million or 18% year over year.

During the quarter, we issued $100 million of brokered CDs which were used as hedging instruments as we put on an interest rate collar to mitigate interest rate risk. These are three month CDs which will be renewed every quarter at market rates over the next two years. The cap rate on the collar is 4.5% with a floor rate of 1.88%. The swaps have a duration of two years at inception. While average DDA balances declined $10.6 million from the prior quarter, DDA still comprised 23% of total deposits. Interest bearing deposit costs remained stable at 3.29% down 47 basis points from the same period last year.

Total deposit costs increased slightly by seven basis points primarily due to the decrease in DDA balances and the higher proportion of interest bearing deposits. While this mix shift puts some pressure on the cost of funds, we anticipate improvement in our funding base in the fourth quarter as more liabilities reprice with rate cuts. Despite the temporary shift, we remain optimistic about deposit growth and continue to execute our business plan in niche verticals to support sustainable growth in core operating accounts and low cost deposits. So with that, let's move on to the loan book. On a linked quarter basis, average loans grew by $41.6 million or 8% annualized, Compared to 2024, we grew $220.8 million or 11.8%.

Both growth metrics are within our stated guidance. Alongside this growth, loan yield decreased two basis points to 6.21% and was negatively impacted by the payoff of consumer yacht loans during the quarter. Excluding the effect of the consumer yacht loan payoffs, the yield would have been 6.25%. On a point to point basis, the loan book increased $19 million. As you can see from Page nine, our new loan production was lower than our last four quarters, but with a strong pipeline and the summer sluggishness behind us, we look to get on our normal run rate in Q4. New loan production had a weighted average coupon of 6.43%, 22 basis points higher than the portfolio's average yield.

On page 10 is a snapshot of our business verticals. Two are loan oriented and three are deposit oriented. Namely association banking, private client group, and correspondent banking. All business verticals are led by very seasoned experienced bankers and are pivotal to our branch light model. As Lou mentioned, they are highly scalable and in the past year, we have added new production personnel to further support growth. Moving on to Page 11, net interest income increased by $240,000 or 4.5% annualized compared to prior quarter and was up $3.2 million or 17.5% year over year.

Our net interest margin for the quarter was 3.14% and was affected by the higher cash balances, the issuance of $40 million of sub debt at 7.625%, delayed loan production and increased funding costs driven by lower DDA balances. Additionally, we received prepayments on yacht loans, which negatively impacted loan yields and the NIM for the quarter. However, looking ahead, we expect improvement in the NIM as we put excess cash to work in loan volume late in the quarter added to our securities portfolio and cut deposit rates in September. In fact, the NIM for the month of September was 3.27%. All these items are good tailwinds heading into Q4.

With that, let's move on to the ALM model on the next page. In the past several quarters, strategy has been to prepare for a lower rate environment. And according to our ALM model, the balance sheet is liability sensitive and well positioned for the current rate environment. With rate cuts expected in the short term, we anticipate this will benefit our funding costs and overall margin. And the effect of these rate cuts will be seen more predominantly in the fourth quarter. For instance, the ALM model contains a deposit beta assumption of 60%. But we have outperformed this beta over time.

With the September rate cut, we achieved a 70% beta on our $1.2 billion money market book which translates into an $840 million repricing fully at 100% or 25 basis points. On the flip side, we have $2.131 billion in our loan book, and 62% or $1.3 billion is variable rate or hybrid in nature. 47% of that book $620 million will reprice in the next year. In short, our liability sensitivity will be dependent on our ability to reprice our money market book faster than our loan book reprices. With that, let's take a look at our securities portfolio.

Total holdings stood at $480 million at quarter end with 67% classified as available for sale and 33% as held to maturity. This portfolio yield has improved compared to the previous year, reaching 3.03%. This represents an increase of 42 basis points compared to the same period last year. A significant portion of this yield enhancement is due to our net purchase of $76 million bonds during the first nine months of the year which carry a yield of 6% and an average duration of four years. The modified duration is 5.1 the average life is 6.4 years, reflecting our strategy to purchase longer duration bonds in anticipation of lower interest rates.

79% of the portfolio is invested in agency, mortgage backed securities boosting liquidity. Looking ahead, we expect to receive $14.4 million in cash flows from the portfolio the remainder of 2025 at current rates, approximately $76.4 million in 2026 with a runoff rate of about 3%. These cash flows provide us with significant optionality. They can be reinvested at higher yields, whether in loans or other investments, or used to let go of more expensive funding sources. In this way, our investment portfolio should be viewed as a strategic tool for the upcoming quarters. Supporting both margin improvement and balance sheet flexibility as we navigate the evolving rate environment.

With that, let me turn it over to William Turner to discuss asset quality.

William Turner: Thank you, Rob, and good morning, everyone. As you can see from page 14, the first graph shows the allowance for credit losses is at $25 million at the third quarter end and at an adequate 1.17% of the portfolio. We made a $31,000 provision to the ACL that was driven mostly by the $18 million in net loan growth with no new classified loans and no loan losses in the third quarter. No significant losses are expected in the fourth quarter.

Luis de la Aguilera: The remaining graphs on Page 14 show the nonperforming loans as of quarter end steady at $1.3 million and remained at 0.06% of portfolio and are well covered by the allowance. No losses are expected from these non-performing loans. Classified loans also decreased during the quarter to $4.7 million or 0.22% of the portfolio and represent less than 2% of capital. No losses are expected from these classified loans. The bank continues to have no other real estate. On Page 15, the first graph shows the diversified loan portfolio mix at third quarter end. The loan portfolio increased $18 million on a net basis in the second quarter to $2.1 billion.

Commercial real estate represents 57% of the portfolio, or $1.2 billion segmented between retail, multifamily and owner occupied. The second graph is a breakout of the commercial real estate portfolios for non-owner occupied and owner occupied loans which also demonstrates their collateral diversification. The table to the right of the graph shows the weighted average loan to values for the commercial real estate portfolio at less than 60% and debt service coverage ratios are adequate for each portfolio segment. The quality and payment performances are good for all segments of the loan portfolio with the past due ratio at 0.38% and nonperforming loans at 0.06% remain below peer banks. Overall, the quality of the loan portfolio is good.

Now let me turn it back over to Rob.

Robert B. Anderson: Thank you, Bill. Non-interest income continues to improve with a variety of different revenue streams. Both wire and swap fees increased over the prior quarter, and as mentioned in previous calls, all loans are booked with prepayment penalties, so in the event of an early payoff, we receive compensation. These fees are booked under the other line item and service fees. Non-interest income was 14.8% of total revenue and 0.52% to average assets. Let's take a look at expenses. Our total expense base was $13 million and while up from the prior quarter, contained $188,000 in one-time expenses. This includes legal fees for the S-three filing and the administration expense related to the interest rate collar.

Since the end of the first quarter, we have added five new sales associates with three of the five in deposit aggregating business verticals. The efficiency ratio was 52.28% and noninterest expense to average assets was stable at 1.85% and consistent with recent quarters. Looking forward, we expect the quarterly expense base to be at this level and gradually increasing due to additional new hires, and potentially adding to the incentive accrual with improved company performance.

Luis de la Aguilera: Let's go to capital.

Robert B. Anderson: In August, the company issued the $40 million in subordinated notes and used most of the proceeds to buy back 2 million shares or approximately 10% of the company. The impact of these two transactions can be seen on all capital levels. In fact, all capital levels remain comfortably above well-capitalized regulatory guidelines. And last, I'll note the ending share count for the quarter was 18.1 million. So with that, let me turn it back to Lou for some closing comments.

Luis de la Aguilera: Thanks, Rob. Before we open the call for questions, I want to take a moment to put our results in the context of the broader environment here in Florida. Because the strength of the state's economy continues to be a key driver of our success. Florida remains one of the most vibrant and resilient economies in the nation. In 2025, real GDP growth is tracking around 2.4%, outpacing national averages and underscoring the state's enduring fundamentals. Population growth remains strong with over 23 million residents and continued positive net migration that fuels housing, business formation and consumer spending. Business confidence across Florida also remains high.

From Miami to Tampa to Orlando, the economic landscape is driven by the diversification in financial services, trade, healthcare and technology. Which continues to create opportunities across our client base. The moderate normalization we have seen in interest rates and inflation trends has also contributed to a more stable, predictable operating environment. For USCB, this economic background aligns perfectly with our strategy. South Florida's growth in middle market business, real estate development and professional services continues to generate high quality loan and deposit opportunities. Our ability to serve these sectors with a personal relationship driven approach positions us exceptionally well within this expanding marketplace. In short, Florida's strength is USCB strength.

The combination of a resilient economy, disciplined execution, and a focus on long term relationships allow us to continue growing at a steady, sustainable pace delivering strong results to our shareholders. Thank you again for your time and your confidence in USCB Financial Holdings. So operator, we are now ready to open the line for questions.

Operator: We will now begin the question and answer session. If you're using a speakerphone, please pick up your handset before pressing the keys. The first question comes from Woody Lay with KBW. Please go ahead.

Woody Lay: Hey, good morning guys. Good morning. Just a question on the yacht payoffs you saw in the quarter. Could you just and sorry if I missed it in the opening comments, but could you just quantify the amount of payoffs you saw in that division? When in the quarter they and when in the quarter they occurred?

Robert B. Anderson: Yeah. I'll take that one, Woody, and good morning. It was a little over $10 million and that happened in August. And that impacted our loan yields in August and our margin in August.

Woody Lay: Got it.

William Turner: Okay. And then it looks like

Woody Lay: a majority of the loan production came in September, you know, that'll obviously be a strength for the NIM next quarter. But just looking into that production, is it a sign of you know, sustained loan momentum entering the fourth quarter? Or was it September just a strong month?

Luis de la Aguilera: No. I believe it is. Historically we always see a seasonal dip in Q3. That's vacation time. School stops, school starts. We had the same situation last year and the previous year. And you're right, September was a record setting month for the year. As we look forward, the go forward pipeline is absolutely in line with what we've seen over the last five quarters. And I just attended with Rob and Bill a pipeline meeting a couple of days ago. We have dry powder, I think, to have a very good fourth quarter.

Woody Lay: Yeah. And what are you seeing on the loan competition side, especially on pricing? It looks like the yields on new production came down a little bit, but that was you know, to be expected with the rate cut. And, you know, that can be driven by mix shift. So any thoughts on how competition's impacting pricing?

Luis de la Aguilera: Well, without a doubt, this is a very competitive market. There's no question about it. We price to relationship. We price deposits and an overall relationship. We are not a transactional lender. So every deal is priced based on opportunity and based on existing loan balances and deposit balances and overall relationship. We've been very active on the swaps side as rates have gone down. There's been a lot of opportunity for that. And we continue seeing the same for the coming quarter.

Robert B. Anderson: Yes. And even while it was down from the previous quarter at 6.43%, that's still 22 basis points above the portfolio average. I would say, I think our yacht loans are priced right around 6.25% right now. We're probably seeing the majority of our new loan production at six to six fifty.

Woody Lay: Got it. That's helpful. Alright. That's all for me. Thanks for taking my question.

Robert B. Anderson: Thank you, Woody.

Operator: The next question comes from Feddie Strickland with Hovde. Please go ahead.

Feddie Strickland: Hey, good morning. Just wanted to start on the margin, digging in a little deeper here. Appreciate the detail on that 3.27% and the discussion on yields and where yields are going. But, you know, given that we have a little bit of additional costs, I guess, coming in from the sub debt in the fourth quarter, Does the court still, I guess, end at that $3.27? Just trying to figure out if maybe more of that is coming from the cost side. For you to kind of land a recovery in the margin there. Yes. On the margin, I mean, it came back to $3.14.

August, was a month where we had a lot of cash sitting on the balance sheet because we were anticipating a strong pipeline, but all the loan demand came in, in September. So and then we had payoffs on the yacht portfolio that exasperated that issue in August. But $327,000,000 I think is a good go forward number for the fourth quarter. We had a rate cut in September. There's like a 97% probability in October. We've already done a round of rate cuts on our money book. We've lowered CD rates. So I think 3.27% or slightly better for the fourth quarter. Is still a realistic number. Thanks, Rob. Appreciate that.

And just wanted to dig a little bit on the swap fees as well. Obviously, great to see those come up. Is that still a good new run rate going forward? I'm just trying to get a sense for of where we could have noninterest income. And within that same vein, what are you seeing on the FCA side, keeping in mind the government shutdown these Yeah. In fact, I'll start with the SBA. We probably had $200,000 that got slow walked at the end of the quarter that will fall into the first quarter. But that's definitely impacting on the SBA side.

But we're seeing a lot of activity on the wire fees predominantly in correspondent banking group, in our private client group. The swap fees, specifically with rates being lower, there's a lot of activity on swaps, and I would anticipate a somewhat similar number, you know, maybe between Q2 and Q3 could repeat again in the fourth quarter. So a lot of the loan volume right now, as Lou mentioned, we saw the pipeline. We see what's in there at either fixed rate, variable rate, what's on swaps, etcetera. So there's a fair amount of swap volume in there too. Perfect. Thanks, Rob.

If I could just squeeze one more in, just wanted to ask about the opportunity set on the condo association banking business line. Just how much do you think you can grow that segment in terms of loans and deposits over the next couple of quarters?

Luis de la Aguilera: We're very bullish about the association banking vertical. I think it's one of our greatest opportunities for scale. Just to put things in perspective, there's a 27,500 condominium associations in the state of Florida. 48% of that is in between Miami Dade and Broward County. And of the overall condominium inventory, 60% of that falls between thirty to forty years and they're all subject to thirty and forty year recertifications. So we, right now, in the current pipeline, have more HOA business than we probably have seen in any one quarter. So we are very bullish on this area. It gives us great opportunities for low cost deposits.

Shorter term C and I lending, We hired about two quarters ago a new production officer, which joined us from one of the largest management companies here, She's doing quite well, and we believe that this is an area that we could probably double up the book of business in the next eighteen months.

Feddie Strickland: Alright. Great.

Robert B. Anderson: Mhmm.

Feddie Strickland: Sure.

William Turner: Thank you.

Robert B. Anderson: Thanks, Feddie.

Operator: The next question comes from Michael Rose with Raymond James. Please go ahead.

Michael Rose: Hey, good morning, guys. Thanks for taking my questions. Rob, maybe I just want to go back to the margin. I think you said that the September margin was 3.27 I know you guys are liability sensitive, and looks like loan growth is gonna reaccelerate. So is three twenty seven kind of a good starting point to think about the fourth quarter? And then I would expect as we move through what appears to be, if I use the forward curve, a few more cuts from here you know, further expansion as we as we go ahead or at some point through the forces of deposit competition? Competition and lower rate loan rates went over at some point? Thanks. Yes.

No, the September was on the margin, it was 3.27% and that we had a full month of the sub debt costs embedded in that month. As Lou mentioned, we really had a record month in terms of loan volume. So we put on some securities. We put on loan volume in the month of September. And I would say that's a good starting point. We profile as liability sensitive. We have been aggressive on the rate cuts on our money market book. We've already cut some rates in anticipation of the October rate cut on what is it, the twenty ninth and next week we'll get another update from the Fed, I believe.

So I think we're well positioned for this rate environment and any further cuts. We would expect expansion on the NIM. The other thing that we mentioned too is our securities portfolio. I mean, that's still reflective of a COVID era yield. And I think there's a lot of opportunity on the securities portfolio to either rebalance that. There could be a securities trades in there as well. But we have $480 million yielding 3% and we're earning just under 16% on our equity. If that securities portfolio moved up 100 bps, I mean, that would give us tremendous earnings power and expansion in our margin.

So I think we have a lot of opportunity as we go into 2026 with the rate environment going down, steeper yield curve, and our ability to fix our securities portfolio over time.

William Turner: That's very helpful, Rob. Thank you.

Michael Rose: And then maybe just going back to expenses, I think you mentioned relative stability near term, but obviously balancing that with some investments as we move through next year. I know it may be a little bit early, but is, you know, rate of inflation, you know, let's call it two, 3% plus you know, GDP, you know, plus or something like that, a good way to think about expenses for you guys? Or is there gonna be some more concentrated, efforts to hire folks and maybe we could be thinking or contemplating something a little bit higher for next year. Thanks.

Robert B. Anderson: Yeah. I mean, now, efficiency ratio is 52% in our expense to average assets. I always kind of use a benchmark around peers as if we're under two, I think we're performing well. Think both metrics benchmark well. In terms of the pure number, we've added some sales facing FTE. I think we've added five. Since the end of the first quarter, all in sales type roles. Lou mentioned the one in HOA, we've got one on the private client group, we have other business development and some business banking personnel as well. Sometimes those get a little costly with some upfront money to get that personnel.

But I would anticipate the run rate of $13 million a quarter to be at that level to increase slightly throughout next year. But I would say low 50s, in terms of efficiency ratio. And it could, you know, dip into the below 50, but I would say right now, I'd say low 50s in the near term. But the pure $13 million could inch up in the fourth quarter. And then into next year as well.

Michael Rose: Very helpful. And maybe if I could just sneak one last one in. Just going back to the comments you made on the securities portfolio and where capital is at this point, have you guys given any updated thoughts on any sort of potential restructuring? Would that make sense for you guys at this point? You know, maybe not right now just given, the use of, of capital and cash for the repurchases. But would just be curious as to any thoughts you have. Thanks.

Robert B. Anderson: I mean, that strategy is always on the table. We're looking at it every month in terms of the viability, terms of, you know, payback and what that would be. You know, Certainly with rates coming down a bit, we'd like to see if we could get out of this without doing a restructure. But certainly, I think $480 million at 3%, if we could move that up significantly to even 100 basis points that would give us tremendous earning power going forward. So I think that strategy is always on the table and should be. I think well run companies look at it. And connect on it from time to time.

Right now, we use a lot of our excess capital or dry powder on the repurchase was which I thought was a unique opportunity repurchase 10% of the company. You know, we bought that back probably at 1.5 tangible book value, but on a forward earnings basis on 2026, it was relatively cheap compared to peers in terms of where we trade and how we perform a performance basis. So I'd say it's clearly on the table and whether or not we act upon it will depend upon interest rates, earn back, a lot of different factors.

William Turner: Appreciate all the color. Thanks, guys.

Operator: This concludes our question and answer session. I would like to turn the conference back over to Mr. Aguilera for any closing remarks.

Luis de la Aguilera: Thank you again to everyone joining us today. As we conclude the third quarter, I want to emphasize how proud we are of the consistency and strength demonstrated across all aspects of our business. Our record earnings, loan and deposit growth, strong credit quality, are direct results of disciplined execution and a commitment to long term strategic priorities. Looking ahead, we remain confident of our ability to sustain this momentum into 2026. The fundamentals of our business are solid. Our markets are vibrant. Our balance sheet is strong. And our team remains focused on building lasting relationships with our customers and communities.

We continue to invest in capabilities that will enhance our growth and efficiency while maintaining prudent risk management and delivering value for our shareholders. As always, thanks to our employees for their hard work, to our customers for their trust, and to our shareholders for their continued support. Thank you, and we will be talking at our next earnings call.

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

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