USCB Q3 2026 Earnings Call: Record Profit and 3.40% Q4 NIM Outlook

Key Takeaways

• USCB Financial Holdings reported record quarterly net income of $9.5 million, or $0.51 per diluted share, up 13.3% year over year. Net income for the first nine months of 2026 reached approximately $28 million.
• Net interest income was $24.3 million, up 14.2% year over year. Net interest margin was 3.37%, down from 3.49% in Q2, but improved to 3.41% in September.
• Average loans increased 10% year over year and 8.8% annualized from the prior quarter. Period-end loans totaled $2.3 billion, up 9% year over year.
• Credit losses remained limited, with net charge-offs of $23,000. However, non-performing loans rose to $7.7 million, or 0.33% of total loans, primarily because of one credit.
• Management expects Q4 net interest margin to be around 3.40% and non-interest expense to reach approximately $15 million or slightly higher.
• The company is investing in deposit growth, adding four deposit-focused bankers who previously managed more than $700 million in deposits, while continuing to expand its Doral commercial banking team.

Key Financial Data

Business and Operating Performance

Loan production reached $156 million despite the typically slower summer period. Year-to-date originations totaled $616 million. The average coupon on new loans increased 12 basis points to 6.02%; excluding correspondent banking, new production carried an average coupon of 6.29%, approximately 18 basis points above the portfolio yield.

Payoffs and amortization totaled $155 million, almost fully offsetting new fundings. Management described the payoff level as elevated but consistent with activity seen throughout 2026. Prepayment penalties contributed more than $600,000 year to date.

Average deposits rose to $2.5 billion, while average non-interest-bearing demand deposits increased $40.7 million, or 7.2%, year over year. Total deposit cost declined 34 basis points year over year to 2.19%, and the cost of interest-bearing deposits remained at 2.90%.

Period-end deposits were up $101 million, or 4.3%, from year-end despite approximately $54 million of seasonal public-fund outflows. Excluding public funds, deposits grew by approximately $48 million during the quarter.

USCB added four deposit-focused bankers in October to expand relationship funding in Broward County and surrounding South Florida markets. It is also building a commercial banking team in the Doral-Medley-Hialeah corridor, with a focus on commercial lending, treasury management, owner-occupied real estate, business deposits and SBA lending.

Non-interest income of $2.7 million was below management’s preferred level. Swap demand weakened amid elevated rates, while SBA loan-sale activity was lighter than planned. Recurring wire fees increased to $645,000, supported by correspondent banking relationships.

Management Guidance

• Net interest margin: Management expects Q4 NIM around 3.40%, broadly consistent with the September exit rate of 3.41%. The outlook assumes benefits from loan repricing, new relationship deposits and potential repayment of higher-cost wholesale funding.
• Loan growth: The company maintained its high-single-digit to low-double-digit growth framework, although near-term growth may be toward the lower end of that range.
• Expenses: Q4 non-interest expense is expected to be approximately $15 million or slightly higher, reflecting a full quarter of recent hires and performance-based compensation.
• 2027 expense growth: Management said mid- to high-single-digit growth would be a reasonable assumption, while continuing to target an efficiency ratio in the low-50% range and expenses below 2% of average assets.
• Fee income: Management expects non-interest income to move back toward $3.5 million per quarter over time, but said the timing depends on SBA loan sales, swap activity, client demand and the rate environment.

Risks and Watchpoints

Non-performing loans increased from $2.1 million, or 0.09% of loans, to $7.7 million, or 0.33%, primarily due to one loan. Classified loans also rose to 0.44% of total loans from 0.20%. Management said the deterioration was concentrated and that the company continues to monitor the affected credit closely.

The balance sheet is modestly liability-sensitive in the near term. Additional increases in short-term rates could initially pressure funding costs, although approximately 64% of the loan portfolio is variable or hybrid rate. USCB has $610 million of loans scheduled to reprice in Q4 at a weighted average yield of 6.37%, plus $106 million of maturing loans that could renew at higher rates.

Transactional fee revenue remains sensitive to interest rates and client activity. Management also identified SBA execution as an area requiring improvement.

Analyst Q&A Highlights

Management attributed the sequential decline in NIM mainly to lower loan-fee income associated with payoff activity rather than weaker underlying pricing. New loan coupons remained above the existing portfolio yield, while variable-rate and short-duration correspondent loans provide additional repricing capacity.

The Q4 loan pipeline was described as one of the strongest of 2026 and broadly diversified. Management nevertheless expects payoffs to remain near Q3 levels, with correspondent banking, yacht and residential loans contributing to repayment activity.

For future rate increases, management expects some initial funding pressure before asset repricing takes effect. New relationship deposits could also allow USCB to repay more than $120 million of higher-cost wholesale funding recorded at quarter-end.

Asked about the softer sequential performance, management pointed to seasonal loan growth, elevated payoffs, weak swap and SBA fee activity, and higher expenses related to strategic hiring. It emphasized that year-over-year earnings and profitability trends remained positive.

Full Earnings Call Transcript

Complete Earnings Call Transcript

Management Remarks

Operator

Good day and welcome to the USCB Financial Holdings Third Quarter 2026 Earnings Conference Call. [Operator Instructions] Please note, today's event is being recorded. I would now like to turn the conference over to Luis de la Aguilera, President and.

Luis de la Aguilera

CEO. 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 Robert Anderson and Chief Credit Officer Sergio Garrido, who will provide additional detail on the company's performance, beginning with the highlights summarized on slide 3. 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, an 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 4 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 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 2 experienced commercial lenders and a portfolio manager, with additional positions expected to be filled during the fourth quarter. The Doral-Medley-Hialeah Corridor represents 1 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. 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 9 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. The 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, by 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 strong 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. That consistency is 1 of the defining characteristics of the USCB franchise and 1 of the primary reasons we remain well positioned for continued growth and success. With that perspective, I'll turn the call over to Robert Anderson, who will walk us through our third quarter results and discuss the drivers behind another record earnings quarter for USCB. Rob?

Robert Anderson

Thank you, Luis, and good morning, everyone. Third quarter produced record earnings for Team USCB. We delivered the highest quarterly net income since our IPO, held on to 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 51 cents per diluted share, up from 49 cents last quarter and up 13.3% over the prior year. 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 were 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'll 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. Intangible 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, and 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 3 basis point uptick in total deposit costs was simply mixed, 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 #1 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. And 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. So with that, let's 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 over year, 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. That change was driven by lower loan fee income, largely the accelerated amortization of premiums and fees on loans that paid off, a timing item, not a pricing issue. The underlying book continues to reprice higher, older fixed rate vintages are resetting at today's rates. As you'll see on the next page, the coupon on new production is moving up. According to the production slide, new loan production was $156 million, up 18% from the third quarter of last year, a solid result for what has historically been our slowest season. Year to date, we have originated $616 million in new loans, which speaks to the depth of demand in our South Florida markets. Just as important is the quality of that production. The average coupon on new loans rose 12 basis points to 6.02% and excluding correspondent banking, new loans came on at 6.29%, about 18 basis points above our portfolio yield. As a reminder, our correspondent banking loans are typically 180-day notes tied to SOFR, so they reprice quickly and make natural benefit with short-term rates moving higher, while also bringing full relationship, low-cost deposits, and wire activity. Payoffs and amortization were $155 million, consistent with the elevated prepayment activity we have seen throughout 2026. And payoffs are a normal feature of a healthy, well-performing book, and our embedded prepayment penalties protect yield and earnings, contributing to over $600,000 year-to-date. Let's move on to the margin. Turning to the margin, net interest income was $24.3 million, holding near the record level we reached in Q2, and up $3 million, or 14.2%, year over year. NIM was 3.37% compared to 3.49% last quarter. And using the waterfall on the page, more than half of that change, 7 basis points, came from lower loan fee income tied to payoff activity. In funding mix toward interest-bearing deposits and borrowings accounted for 3 basis points and lower income on other earning assets for the 2 basis points. On a year-over-year basis, the margin is still 23 basis points higher from 314, and September came in at 341, so we are entering the fourth quarter with good momentum. Now a word on the rate environment, because it has shifted. Market rates moved higher in September, and the forward curve suggests that we may stay elevated for some time. As we have discussed on prior calls, our balance sheet is modestly liability-sensitive in the near term. So higher short-term rates put some pressure on funding costs, but we have several levers working in our favor. First, about 64% of our loan book is variable or hybrid rate, and new and renewing loans are coming on at higher coupons. Specifically in Q4, we have $610 million of loans that are repricing tied to SOFR prime at a weighted average yield of 6.37%. These loans would reprice with any rate increase. Additionally, we have $106 million maturing, predominantly short-term correspondent loans, which typically renew and currently have a weighted average yield of 5.8%, and given the current rate environment, these would also reprice higher. We put excess cash to work during the quarter, buying approximately $33 million of investment grade corporate bonds at 5.23%, about 190 basis points above the existing portfolio yield. Additionally, our interest rate caps, which we put on last year, are designed to protect the balance sheet if rates continue to rise at a fast pace. The $100 million will be in the money if SOFR hits 450. And most importantly, the return of public funds and new relationship deposits generated by our new deposit team should allow us to pay down higher cost wholesale borrowings in the fourth quarter. Putting that together, we believe we can hold or improve the NIM for the fourth quarter and we guide to the 3.40% level, broadly consistent with our September exit rate. So with that, let me pass it over to Sergio to discuss asset quality.

Sergio Garrido

Thank you, Rob. Turning to Asset Quality. Non-performing loans increased to $7.7 million, or 33 basis points of total loans, compared with $2.1 million, or 9 basis points, at the end of the prior quarter. The increase was primarily driven by 1 loan, which we continue to monitor and manage closely. Classified loans increased to 44 basis points of total loans from 20 basis points on June 30th. Despite the increasing metrics, loss experiences remained limited, with net charge-offs only of $23,000 for the quarter. The allowance for credit losses increased by $317,000 to approximately $27 million, representing 1.16% of total loans, compared with 1.15% in prior quarter, and generally consistent with historical levels. Overall, increasing non-performing and classified loans was concentrated. While charge-off activity remained minimal and allowance coverage remained stable, we continue to maintain disciplined underwriting, active portfolio monitoring, and a conservative approach to credit risk management. Now,

Robert Anderson

Let me turn it back over to Rob. Thank you, Sergio. Non-interest income was $2.7 million for the quarter, and candidly, that is below where we want it to be. The softness was in our more transactional fee lines. With yields elevated, client appetite for swaps slowed considerably. And SBA gain on sale activity was lighter than planned. The core of our fee businesses, however, remained solid, wire fees are our largest recurring category increase to $645,000 supported by our correspondent banking relationships and our other recurring service fees continue to provide a stable base. Year to date non-interest income represents 12.8% of total revenue. Rebuilding the fee income is a priority and over time we would expect non-interest income to move back towards $3.5 million per quarter. That said, the pace of that recovery will depend largely on SBA and swap activity, which is driven by client demand and rate environment, so we're being measured in that outlook. Let's take a look at expenses. Total non-interest expense was $14.7 million. The increase from last quarter was primarily in salaries, benefits, and that is by design, full-time headcount grew to 222 from 216, including additional sales staff along with merit increases, performance-based incentives that are aligned with our record earnings. We also continue to invest in our technology infrastructure to support a safe and sound franchise. The efficiency ratio was 54.62%, and a big portion of that increase is revenue-driven, not necessarily the increase in expenses. And importantly, relative to the size of our balance sheet, expenses remain well controlled. Non-interest expense to average assets was 1.97%, consistent with the 1.93% to 1.97% range of the last 3 quarters. For the fourth quarter, I would model expenses at approximately $15 million or slightly higher, reflecting a full quarter of our recent hires, the deposit team we just lifted in October, and performance-based incentives. Expense management has always been a cornerstone of Team USCB. We remain focused on making opportunistic investments in talented people as they become available, and these investments may periodically increase expenses. But our track record demonstrates that over time, USCB operates efficiently while supporting its long-term growth objectives. So with that, let me touch on capital. Regulatory capital strengthened across the board this quarter as earnings retention outpaced balance sheet growth. Total risk-based capital at the company increased to 14.07% from 13.88%, comfortably above well-capitalized thresholds. On October 19th, our board declared a quarterly cash dividend of 12.5 cents per share, payable December 4th to shareholders of record as of November 16th, 2026. The AOCI was negative $43.3 million compared to negative $31.4 million on June 30th. That move is entirely a function of higher market rates in our AOCI portfolio, so it accretes back over time as the securities pay down and mature. The silver lining is that the same higher rates let us invest portfolio cash flows at better yields which supports earnings going forward. With tangible book value per share up 7.5% year over year to $12.42 and a 16% return on equity, we continue to generate capital at a strong pace while preserving flexibility to support balance sheet growth. So with that, let me turn it back to Luis for some closing comments.

Luis de la Aguilera

Thank you, Rob. As you've heard today, the quarter was highlighted by record earnings, continued profitability, strong capital generation, sound asset quality, and strategic investments that we believe position USCB for continued growth. While we remain mindful of the evolving interest rate and economic environment, we're encouraged by the momentum we are seeing across our franchise and remain confident in our long-term strategy. At this point, we'd be pleased to answer any questions. Operator, please open the line for questions.

Operator

Sure. We will now begin the question and answer session. [Operator Instructions] Today's first question comes from Hannah Wynn at KBW. Please go ahead.

Unknown Speaker

Hi, good morning, guys.

Luis de la Aguilera

Good morning, Hannah.

Robert Anderson

Good morning, Hannah.

Unknown Speaker

I wanted to start on the margin. Really appreciated all of the color that you gave on the details in your prepared remarks. And you noted that your lower NIM was driven a lot by those lower net loan fees. And just was wondering if you could talk about the underlying trends in the loan yields and excluding those fees and where you'd expect those low yields to go from here.

Robert Anderson

Yes, thank you, Hannah. As I mentioned, typically the production in the third quarter has been seasonal for us. And, um, but even so, the new loan production came on, absent the correspondent banking loans, I'll touch on that in a second, came on at 6.29%. So that's above the portfolio yield. We do have a little over $100 million in correspondent banking loans. These are very short-term notes, typically 180-day, and they're tied to SOFR. So if we get rate increases, which we did in September, we'll get the full impact in the fourth quarter of those and any future rate increases, that would impact that book fairly quickly. Additionally, as mentioned in the commentary, we have about $610 million of loans that are repricing. Those are tied to SOFR prime, and those are at a weighted average yield of 6.37%. And all those loans will reprice if we have any future rate increase, and we'll see the full quarter's impact with the past increase that we just saw. So while the NIM in September came out at 3.41%, which gives us a good start into the quarter, you know, our game plan is to cautiously look at our deposit costs for full relationships, slow walk those increases, and get the impact of the loans near term. So we're going to guide to the 3.40% level on the margin, but we'd like to see some upside since we came in at the lower end of our range this past quarter.

Unknown Speaker

Great, that's all really helpful. And then another question on loan growth. I know you saw elevated payoffs this quarter. Just curious how you're seeing the pipeline going into the fourth quarter and where you're expecting loan growth to come in for the full year and into 2027.

Luis de la Aguilera

The pipeline, Hannah, and this is Luis, Rob and I and Sergio sit on the ongoing pipeline calls on a weekly basis, actually 2 times a week. So we're very involved with what's happening and have a good feel for it. But the pipeline going into the fourth quarter is about as strong as it's been for the year. Historically, the third quarter, the summer months, tend to be a little slow, and it pretty much was in line with what we did in the third quarter of last year. I believe our loan production is going to be steady and stronger than in the third quarter. And going into Q4, it's building and it's pretty diversified, so we're very happy. The new additions that have joined the bank both on the loan production side and on the depository side are also going to be added.

Robert Anderson

To those efforts. Yeah, maybe just to pick up on that, Hannah, on the loan growth. We'd still guide to the high single to low double-digit growth, you know, maybe near-term, maybe on the lower end of that guidance. But certainly, as you get into 2027, you know, we're being cautious, you know, outside, you stick to our high single to low double digit growth, which we've executed on fairly consistently over the past few years.

Unknown Speaker

That's great to hear. I really appreciate the color there, guys. Thanks for taking my questions. I'll step back.

Luis de la Aguilera

Thank you, Hannah.

Operator

Thank you. And our next question today comes from Freddie Strickland at Hovde Group.

Question-and-Answer Session

Feddie Strickland

Hey, good morning. Um, just wanted to follow up on that last point on the payoffs in particular. I mean, I know they've stepped down some this quarter, I don't know whether that was planned amortization or just early payoffs, but does a lower amount of payoffs factor into your future assumptions here, given high rates tend to produce payoffs?

Robert Anderson

You know, on the payoffs, if you looked at, you know, page 10, you can see both the, uh, you know, new production, the amortization, you know, in the second quarter was around $189 million and this quarter was $155 million. We typically do have in the second quarter a little bit more payoff activity in the correspondent book with notes. We did see some of that activity this quarter as well. But right now we have over $100 million mature during in the fourth quarter. And again, a good chunk of that is on correspondent. So outside of that, we could have some payoffs in the yacht activity. We've mentioned that that book moves pretty fast. We have seen some of that activity. And then also in the Resi book as well. That probably was the elevated payoffs that we anticipated. But we would anticipate, you know, payoffs being at this level probably in the fourth quarter as well. And, you know, last year was $137 million in the fourth quarter. But, you know, we're anticipating a similar amount in the fourth quarter as we did this quarter.

Feddie Strickland

Got it. Thanks, Rob. And just wanted to move over to the margin just as we think through hikes in 2027, could we see a scenario where let's say we get some hikes, you know, like 26 or 27 and the margin maybe faces a little bit of pressure initially on the funding side, but then in the asset side reprices, assuming we don't get hikes in the back half of the year, the margin maybe comes back up. Is that the right way to think about how we can see the margins play out next year?

Robert Anderson

Yeah, I think, uh, I think that's right, Freddie. I think near term we could see a little pressurization, but we profile, you know, slightly liability sensitive to neutral. And again, I gave some color on on, uh, you know, the variable loan book we over have over $600 million that's going to reprice this quarter. Our game plan is to, 1, put the new deposit team to work. As they bring on relationship deposits, we're going to pay down some of the expensive wholesale funding that we have on our books this quarter. I think we have over $120 million at quarter end, we could pay that off. That should be helpful as well. But certainly with any rate increases, I think we're well balanced from a balance sheet perspective as neutral, but we'll also slow walk any type of non-relationship funding and really work on our deposit book to fuel the NIM. But I would still guide to the 3.40% level and we'll see how that shakes out in the fourth quarter. But I think any rate increases were positioned well for rate movement either way.

Feddie Strickland

Got it. And just 1 last 1 real quick, if I could, on expenses. Appreciate the guide for the fourth quarter. Understand the puts and takes there on salary and comp, and you guys are making new hires. But with that in mind, how should we think about the growth rate for 2027 and is it, is it step down from kind of the low double digits we saw in 2026? It's kind of implied by that, or is it high single digits? I mean, what should we think about in terms of expense growth for next year?

Robert Anderson

Yeah, I would say mid to high single digits would be reasonable in terms of an expense growth. You know, the way we look at expenses is that we will look at opportunistic hires, which we just filled in the fourth quarter. And that may elevate the expenses from quarter to quarter, but over a long period of time, we're still managing to the low 50s. You know, last quarter we dipped down below 50% on the efficiency ratio. If you look at it from, you know, on an expense to average assets on a balance sheet on the assets we're putting on, you know, we're below the 2% benchmark. And typically, I think that performs well when you compare that to the peers anything below 2% is typically a very efficient bank and that that's, you know, part of our cornerstone of our profitability profile. So from time to time it may spike with some hires but overall I would still guide to, you know, the low 50s and an expense ratio below 2% on assets. Perfect.

Feddie Strickland

That's all I have. Thanks for the call, Rob. I'll step back.

Operator

Thanks, Beth. Thank you and as a reminder to ask a question, please press star then 1. Our next question today comes from Steven Skelton at Piper Sandler. Please go ahead.

Unknown Speaker

Hey, good morning, everyone. Appreciate it. Um. I really just have 1 question and I can step back. Obviously, on this side of our world, we get a little myopic in the quarter over quarter versus the year over year. And I think, Luis, you pointed out the year over year still looks really encouraging. It's a nice trend line. But what do you think we misinterpreted maybe in terms of expectations from last quarter or what might have worsened, but led to slightly worse quarter per quarter performance. I mean, obviously the stocks responding as it is. Um, so just kind of wanted to understand that a little bit more about um where the disconnect was potentially.

Robert Anderson

Yes, maybe I'll take that 1, Steven. I think a couple things stood out for us this quarter. Certainly the elevated payoffs. We came off second quarter with a very, very strong loan growth. It was well above the higher end of that range in this quarter, obviously a little disappointing, but we tried to telegraph that Q3 is typically seasonal. So that would be 1 point. On the non-interest income, you know, certainly I mentioned that we're a little bit disappointed in that activity, but it's really some transactional pieces. You know, in a higher rate environment or where there is rising rates, the swap activity will be more challenging. In fact, you know, in Q1 of this year when we had, you know, rates going down, we booked $1.4 million in swap activity. The second and third quarter, we booked nearly negligible dollar amounts. So with a rising rate environment, I think we're going to be challenged on swaps. We need better execution on the SBA. That was disappointing, but that's episodic. We do have a number in the pipeline, so we expect the fourth quarter fee income to be a little stronger. Expenses ticked up a little bit, but again, we're going to invest when we have opportunistic hires. We did that in the third quarter, that was probably a miss as well. And certainly on the provision that was flat because we basically had no loan growth quarter over quarter. So certainly you guys modeled probably strong quarter on the backs of, you know, our record second quarter, but, you know, the third quarter was a little sluggish on balance sheet growth, but we still produced good returns in terms of profitability. So I'd say over the longer term if you march it out, we're still within the range that we provide, it's just not always going to be quarter over quarter. So, um, we'll have to moderate our comments to you when we have a record 1 so you don't get too hot on the next quarter out but I'd probably characterize that as, you know, part of the disconnect, Steven.

Unknown Speaker

Thank you. Appreciate that, Culler. Thank you.

Operator

Thank you. And that does conclude our question and answer session for today. I'd like to turn the conference back to the management team for any closing remarks.

Luis de la Aguilera

Thank you, Operator, and thanks to everyone who joined us today. As we conclude the call, I want to reiterate how pleased we are with the continued progress of the organization. The third quarter reflects more than simply another strong financial performance. It demonstrates the strength of the strategy, the dedication of the employees, and the value of the relationships we've built with our clients throughout South Florida. We enter the fourth quarter with healthy business pipelines, strong capital levels, excellent credit quality, and a clear focus on continued execution. We are especially encouraged by the opportunities ahead. As our newly added deposit production team begins to contribute to growth across Broward County and surrounding markets, these bankers bring proven relationship building capabilities and meaningful deposit gathering experience that we believe will support our growth objectives for years to come. We're equally enthusiastic about the continued build out of our Doral-based commercial banking team. The Doral, Medley, and Hialeah Corridor remains 1 of the most economically vibrant businesses marked in South Florida, and we believe our investments in experienced lenders, SBA capabilities, treasury management services, and business development resources positions us exceptionally well to capitalize on these opportunities. Beyond growth, we remain focused on further diversifying our balance sheet, expanding non-interest income sources, deepening client relationships, and continuing to deliver consistent value to our shareholders. On the fifth anniversary of our IPO, we are proud of what the team has accomplished. Since becoming a public company in 2021, USCB has grown significantly in assets, loans, deposits, earnings, and shareholder value, while maintaining the disciplined credit culture, and conservative risk management principles that have defined the organization. Looking ahead, we remain optimistic about both South Florida economy and the opportunities available to USCB. Our markets continue to benefit from business investments, population growth, entrepreneurial activity, and long-term economic expansion. Combined with the strength of our franchise, talent of our team, we believe these factors position us well for continuing profitable growth. On behalf of our board of directors, the management team, I would like to thank our employees, customers, and shareholders for their continued support and confidence in USCB. Thank you for joining us today, and we look forward to updating you on our continued progress next quarter. With that, we wish you all a great day.

Operator

Thank you, sir. That concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.

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