US Century Bank
NASDAQ:USCB
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Earnings Call Analysis
Summary
Q4-2023
The company closed the quarter with robust loan growth, increasing by 21.6% annualized over the previous quarter and 16.6% compared to the same period last year. Net interest income and net interest margin (NIM) both increased, signaling an improvement poised to continue in 2024 due to various strategic actions. In anticipation of slight asset sensitivity, the company expects to see a margin improvement. Loan repricing strategies could yield an additional $2.2 million in net income, while $40.5 million from the securities portfolio could be reinvested at higher yields. Service fees rose year over year, supporting revenue growth, partly thanks to new foreign correspondent banks. The company also actively repurchased shares, buying back 92,317 shares at $10.45 each during the last quarter. The performance is underpinned by Florida's robust economy, with a projected growth of 3.3% in 2024, and the company's loan book is expected to grow by approximately 12% annually. Prospects for noninterest income look positive, with planned growth in service fees and opportunistic gains on sale, and a 15% increase in this area modeled for the year. Meanwhile, 2 to 3 interest rate cuts in the second half of the year may offer an additional benefit to the margin.
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Good morning, everyone, and welcome to the Q4 2023 USCB Financial Holdings, Inc. Earnings Conference Call.
[Operator Instructions]
Please note, this event is being recorded. And at this time, I'd like to turn the floor over to Luis de la Aguilera, CEO. Please go ahead.
Good morning, and thank you for joining us today for USCB Financial Holdings Fourth Quarter 2023 Earnings Call. With me today reviewing our Q4 highlights as CFO, Rob Anderson, and our new Chief Credit Officer, Bill Turner, who will provide an overview of the bank's performance, the highlights of which you can see on Slide 3.
Bill joined us this past November as Ben Pazos, our previous Chief Credit Officer, formally retired at age 70. Ben was the first member of the executive team that joined me here at U.S. Century after the bank's recapitalization in 2015. He played a transformative role in engineering the bank's conservative credit culture while always maintaining strong and diversified asset quality. I had the distinct pleasure of working with Ben for 38 years. He will be missed, and we wish him well. Like Ben, I have known Bill Turner since 1984 initially when he was a bank examiner with the OCC. Subsequently, we worked together in the late 1980s, a Republic National Bank where he rose to the position of SVP and Credit Policy Officer. From there, Bill went on to serve in key senior and executive positions in both Union Planters and Bank United.
From 2008 to 2015, Bill join me and Ben at TotalBank where for 7 years, he was Credit Policy Officer. Afterwards, he moved up to serve as Chief Credit Officer for both Apollo Bank and into American Bank in Miami. I have full confidence in Bill as having worked with him in the past, I have first-hand experience of his capacity, integrity and leadership. 2023 was a challenging year for the banking industry. The second quarter was tumultous s as certain bank failures triggered a short-lived crisis of confidence, which affected many regional and community banks. Consumer sentiment was shaken, loan demand fall and deposits led to money center banks and a perceived flight to safety. The Fed continued raising rates further, prompting the mix shift in deposits from noninterest-bearing to interest-bearing categories, further compressing NIM.
Still, despite these and other headwinds, the USCB team pushed on through 2023 to deliver solid results with total assets growing $253 million or 12.1% to close the year at $2.3 billion. Loan growth was robust and diversified ending the year at $1.8 billion with total loans growing $273 million or 18% over the previous year. Deposits closed the year at $1.9 billion, an increase of $107.9 million or 6% from December 31, 2022. After the slowdown in Q2, loan production came back on track over the last 2 quarters, as the economy in South Florida continues to perform well with gains across most sectors. In Q4, our loan production was $186 billion, of which $150 million funded mostly in December. This will continue to be accretive to net interest margin going forward. To this end, the weighted average coupon on quarterly loan production over the past 5 quarters has increased from 5.68% to 8%. This will be detailed shortly.
Equally important to loan production and yields is asset quality and diversity. And this past year, 57% of gross loan production was non-CRE consisting of diversified HOA, SBA equipment, consumer and yacht loans. Since loan growth is optimally funded by low-cost deposits, our efforts to further leverage our deposit gathering business lines has taken a priority. New deposit-focused hires sourced in Q3 and Q4 are coming online and new business verticals have been developed and recently introduced. In December 2017, the bank launched or reintroduced 3 deposit aggregating business lines, namely HOA banking, jurist Advantage initiative focused on developing the deposit-rich legal market and Global Banking primarily focused on correspondent banking. Over these 5 years, these verticals have grown over $400 million in deposits, of which 35% are noninterest-bearing. Each business line is headed by a senior banker having expertise in the field. New production personnel has been identified, allocated and hired to further support the deposit gathering activities of these verticals.
Furthermore, on January 18 of this year, we announced a new business vertical branded as MD Advantage, focused on the local medical and health care market. In early 2023, an experienced team with a $200 million book of business was hired and organized to develop this market. The team has set operations at our Dadeland Bank Center which is within 1.5 miles of 3 of the largest hospitals in South Miami. Another veteran senior producer managing $110 million portfolio was also hired this month to further grow our deposit-rich legal banking niche sourcing lower funding costs. Also, during this quarter, the company repurchased 92,317 shares of common stock at a weighted average price per share of $10.45. As of December 31, 2023, 80,080 shares remain authorized for repurchase under the company's stock program. Before we move on, I am pleased to confirm that this past December, a Florida State Court judge dismissed with prejudice a federal class action suit led by 3 U.S. Century Bank shareholders against current and former corporate directors. The judge held that the class action had no Merit.
The next page is self-explanatory, directionally showing 9 select historical trends since recapitalization. Profitable performance based on sound and conservative risk management is what our team is focused on, consistently delivering. So let's now turn our attention to specific financial results and key performance indicators, which will be reviewed by our CFO, Rob Anderson.
Okay. Thank you, Lou, and good morning, everyone. It appears we are coming to the close of the Federal Reserve's most aggressive tightening cycle in decades. As you all know, this has put a squeeze on the industry's profitability and USCB is no exception. As we discussed on our last call, our goal is to aggressively reprice current assets, originate new loans at higher yields and to slow the pace of deposit cost increases to improve the profitability of the bank.
While I'm pleased to say that we have accomplished these goals in Q4, it will take a few more quarters with more pronounced results to materially improve our profitability profile. We also need some help from the Fed, which most believe will come in the second half of 2024. First, I'd point to the loan growth or growth in our loan book, up $104 million from the prior quarter or nearly 25%. While our deposits were up slightly, the pace of increases in our deposit book has slowed, and I'll touch more on this in a bit. Net interest income finally saw an inflection point after the declining all year. And during the fourth quarter, we sold $10 million of lower-yielding securities for an $883,000 loss, which impacted our noninterest income line.
The cash flows from this sale were reinvested in higher earning assets with an earn-back under 1 year. With $104 million of loan growth in the quarter, we booked a rather large provision expense. I'd also note that this growth came on late in the quarter, predominantly in December so we have the provision expense, but not the benefit of the interest income for the quarter, and that impacted our profitability.
Regardless, the interest income generated by these loans will help the bank's profitability going forward. Earnings per share on a GAAP basis was $0.14 for the quarter. And if you back out the securities law sale, we made $0.17 for the quarter. As Lou mentioned, we were able to repurchase some shares this quarter, and that did lower our share count, both on a spot and weighted average basis. So let's move on to our key performance indicators. First, our tangible book value per share increased to $9.81 and includes AOC impact of a negative or negative $2.26. We saw an improvement in our AFS AOCI portfolio of $10.2 million this quarter, which translated into higher tangible book value per share. In terms of profitability, return on average assets was 0.48% for the quarter, and return on average equity was 5.88%. Our NIM was 2.65% and up 5 basis points from the prior quarter, driven by several factors, which I'll cover later.
In terms of soundness, our credit metrics remain strong, and our loan loss reserve coverage was up slightly to 1.18%. Going on to the next page on deposits. A big part of our NIM story centers around our deposit costs in composition. Our deposit book was down slightly on an average basis, but up slightly when compared to the previous quarter on an ending spot basis. Deposit costs continue to increase. However, the pace of change is slowing down, particularly when compared with the first 2 quarters of 2023. As you know, the narrative around interest rates has bounced around some in the quarter. First, we are hired for longer, then the Fed came out in December and announced the expectation for rate cuts in 2024 and the market quickly started pricing in rate cuts. Now in January appears we may be at current rates a bit longer than the market is pricing in and rates have moved back up a bit.
Having said all this, in December, as the rate narrative was moving down, we saw clients asking for 1-year CDs at $5.25 to $5.50 and bringing us advertisements or e-mails with our competitors with those rates. While we did lose some of our clients' excess liquidity at those rates, I can tell you we're not losing clients. Typically, clients that move funds have CDs renewing or would be taking excess liquidity from their money market accounts and trying to lock in rates before they draw. As a note, alternative wholesale funding was nearly 70 to 90 basis points lower than competition for these CDs, so we decided only to match rates for our very best clients. And so far this year, we haven't opened a CD above 5%, and the weighted average coupon for new CDs is close to 4.5%.
Another positive aspect regarding our deposit portfolio is that the beta of total deposit costs remain within the 40% guidance and even when we have seen deposit mix shifting towards interest-bearing accounts, our DDA balances comprised 30.1% of total deposits. At the end of 2023, we have $262 million of deposits that are indexed to rates, both prime and Fed funds. So when rates eventually drop, these deposits will have 100% beta, which will benefit our NIM and overall cost of funds. If you take a closer look at our deposit book on the next slide, our deposit base reflects our business model, a diversified commercial bank. While our uninsured deposits ticked up to 55%, the conversations we are having with clients today are more about the rate being paid and not centered around the safety and insured deposits, which dominated the headlines in Q2.
Page 9 is the new slide to give everyone a better picture of our business verticals and how they contribute to our growth story. As mentioned before, each of these verticals are led by one senior leader with deep expertise strong industry and client contacts and very little support staff, so the operating leverage in these verticals can be impressive, especially without all the brick-and-mortar branch cost. As Lou mentioned, we are adding personnel to all these verticals fully expect this growth trend to continue as we progress through 2024. Let's move on to liquidity. First, you'll notice our loan-to-deposit ratio increased again this quarter to 91.9% as a result of the loan growth in the last few weeks of the quarter. We still have ample sources of liquidity, both on and off balance sheet. And the most noteworthy item on this slide is an action we took in early January. The Fed's bank term funding program has seen increased activity due to the market sentiment of multiple rate cuts over the next 12 months. The rate banks pay to use the BTP is tied to future interest rate expectations.
Now that investors have priced in [indiscernible] rate cuts later this year, USCB and other banks are able to utilize this program at a lower cost than FHLB borrowings. USCB drew down $80 million and paid off a similar amount in overnight FHLB borrowings, saving the company 70 basis points or $560,000 annually. We'll see the impact of this action in 2024. So with that, let me turn it back to Lou to discuss our loan book.
Thank you, Rob. Average loans increased $87.7 million or 21.6% annualized compared to the prior quarter. and $241.8 million or 16.6% compared to the fourth quarter of 2022. Directionally, portfolio loan yields have increased 97 basis points compared to the fourth quarter 2022, a trend that will continue into the new year.
The previously noted Q2 slowdown in loan demand initiated by the sudden bank failures has abated our loan production teams responded and showed their clients. Loan production for 2023 totaled $446 million and well diversified over various asset classes. As we see on the graphic, quarter-to-quarter, the weighted average coupon on new production continued to increase from 568 basis points in Q4 2022 to 800 basis points in both Q3 and Q4 2023 or 221 basis points above the portfolio average. In the fourth quarter, gross closings were $150 million, and the active pipeline is strong as we forecast similar activity, diversification and pricing into the new year. Asset quality and continued portfolio diversification is an ongoing priority. Our Chief Credit Officer, Bill Turner, will be reviewing on Slide 17, our loan portfolio mix as well as the growing production volume contributed by our non-CRE business verticals to our product lines, including association lending, SBA lending, yacht loans and correspondent banking.
Okay. Thank you, Lou. On Page 13, both net interest income and the NIM increased this quarter. while nominal, it does represent an inflection point, and we feel both will continue to improve over 2024 for the following reasons: slower increases in deposit costs, new loans coming on at higher rates, lower cost of borrowings with the FHLB and BTFP transaction, loan-to-deposit ratio is increasing, the mix of our interest-earning assets continues to improve, $40 million of cash flows coming off our security securities portfolio that can be reinvested in rate cuts coming in the second half of the year.
According to our ALM model, we are slightly asset sensitive on a static model run, and this reflects the balance sheet changes and strategies we executed during 2023. While the model is loaded with conservative assumptions that results in low volatility to interest rate movements, we believe that we could beat these assumptions and see a margin improvement during 2024. This, however, is dependent on the yield curve shape normalization from inverter to a more positive slope curve. Furthermore, when we look at our deposit portfolio, we have reasons to believe that during 2024, we will see NIM expansion, as mentioned before, we have $262 million of deposits that are indexed with a beta of 100%. Taking into consideration the index deposits, we have a remaining $750 million in money market accounts, so will reprice with a 44% beta. So if the Fed cuts rates 25 basis points, the annual savings on the money market accounts will be $825,000.
On the loan side, in 2024, we expect to reprice $330 million of variable rate loans and received $118 million in cash flows from loan maturities. The current weighted average [indiscernible] funds for both these buckets is 7.02%. We repriced these buckets at 7.50 or above, this will result in additional net income of $2.2 million. Moving on to the next slide. A key component of our balance sheet and liquidity management is our securities portfolio. For the fourth quarter, the securities portfolio was $404 million, of which $56.7 million is classified as AFS while the remaining 43.3% is classified as HTM.
By classifying 43.3% of our portfolio as HTM, we have saved approximately $28 million of unrealized losses and this has helped preserve our tangible book value per share. Our portfolio has a modified duration of 5.5 and the average life of 6.9. Our duration has increased as a result of extended higher rates, which has resulted in lower prepayments. For the year, we expect to receive $40.5 million from the securities portfolio and depending on our liquidity position and loan demand, we could invest these cash flow as a considerable higher yields as most of the securities portfolio was purchased when rates were at historical lows.
We also saw an improvement in our AFS AOCI portfolio of $10.2 million from quarter-to-quarter, which translated into higher tangible book value per share. So with that, let me turn it over to Bill to discuss asset quality.
Thank you, Rob. I look forward to working with you and the rest of the team here at U.S. Century. As you can see from the first graph, on Page 16, the amount for credit losses increased 2 basis points to 1.18% of the loan portfolio at quarter end. This increase was a result of a $1.6 million provision to the allowance driven mainly by the increase of over $100 million in new loans booked during the fourth quarter. The remaining graphs on Page 16 show the nonperforming loans at the quarter end were unchanged at 0.03% of the portfolio and classified loans increased 5 basis points from the third quarter to 0.32% of the portfolio and 2.49% of capital. No losses are expected from these classified loans. The bank continues to have no other real estate.
On Page 17, the first graph shows the loan portfolio mix at year-end. The portfolio increased over $100 million on a net basis in the fourth quarter to almost $1.8 billion. The composition continues to be well diversified. Commercial real estate represented 59% or a little over $1 billion and is segmented between retail, multifamily, owner-occupied properties and offices. The second graph is a breakout of the commercial real estate portfolios for the non owner-occupied and owner-occupied loans, which demonstrates the diversified makeup of this segment. The table to the right of the graph shows the weighted average loan to values are less than 60% and the debt service coverage ratios are adequate for each segment of the portfolio.
The loan quality and payment performance is good for all segments as the past due loan percentage remains below peer group banks. We're especially vigilant of the upcoming 2024 repricing and insurance schedules for all portfolios and monitor and model the repayment ability in order to respond proactively. Overall, the quality and performance of the portfolio remains good.
Okay. Thank you, Bill. A couple of items to point out on Page 18. First, service fees increased year-over-year due to new foreign correspondent banks being added to the portfolio, doing more business with current clients and modifying our approach to wire fees. Second, which has already been discussed as the securities law sale. While we did 2 of these in 2023, we will be opportunistic about doing further lost sales going forward.
Moving on to Page 19. Our total expense base was $10.7 million and up slightly from the prior quarter. Salaries and benefits were relatively flat as we made a few hires in the quarter and made final adjustments to our incentive accrual. On this front, our incentive program is aligned with shareholders, so when the performance of the company is good, the incentive accrual is larger. And when the company performance is lower, the incentive accrual is lower. In short, we win together, and we lose together. Our associate base is aligned with our shareholders. Looking forward to 2024, we'll be resetting the incentive accrual and anticipate new hires in Q1, so you should expect our expense base to move up from this point.
With that, let's turn to capital. While capital levels retreated somewhat strong loan growth in the quarter, USCB remains comfortably above well-capitalized guidelines. Also worth noting is that the company repurchased 92,317 shares of common stock at a weighted average price of $10.45 during the quarter. And for the full year of 2023, the company repurchased 669,920 shares of the company's common stock at a weighted average price of $11.28 per share. As of year-end, 80,000 shares remain authorized for repurchase under the current program. So with that, let me turn it back to Lou for some closing comments.
Thanks, Rob. Our plans for 2024 are supported of the vibrant strength of Florida's economy, which is forecasted to grow by a solid 3.3% in 2024, more than doubling the national's economy growth of 1.5%. The strong migration in new residents and businesses continued as the state population approach $23 million, adding over 300,000 new residents last year.
We service a strong, diversified and growing market and project annualized loan growth of approximately 12%, 10% deposit growth to support our lending activities with a focus on noninterest-bearing deposits. In the past 4 quarters, we have onboarded 5 new veteran bankers who collectively manage over $350 million in deposits at the prior institutions and expect to hire 2 more in the first quarter 2024. We have launched a new business verticals supporting the medical health care market. This will be our fourth specialized deposit aggregating business line. With that said, I would like to open the floor to Q&A.
Ladies and gentlemen, at this time, we'll begin the question-and-answer session.
[Operator Instructions]
Our first question today comes from Will Jones from KBW.
So Rob, I wanted to start with the margin. I know there's a ton of moving pieces there. And right now on paper, you might screen a little asset sensitive, but it feels like just with deposit betas that you're expecting on the way down and then just the growth you guys are experiencing, directionally you will see expansion again next year. So is there any way to kind of [ring] sense a range? And where do you feel like the NIM could ultimately end the year as we move to 2024?
Yes, it's going to be a little challenging. I mean I think this quarter, we did hit an inflection point on the margin. I think I pointed out a number of reasons why we think it will even -- will increase even without rate cuts. And if we do get rate cuts in the second half of the year, I think our margin will expand even a little further.
Our profile is neutral to slightly asset-sensitive right now. But I would point out that the deposit costs are slowing in a great state where they are today on the deposit side, we shouldn't see too many more increases going forward. And plus, on the way down, we would anticipate 40% of betas on the deposit book. And then also, we have $262 million that's indexed to like prime and Fed funds, and that could have a 100% beta. So I would say on the margin specifically for modeling purposes, I think it's going to grind up slowly until we get rate cuts and then it can move a little faster.
Perfect. That's very helpful there. And then I mean 18% loan growth in a year like this is really pretty impressive. And I look back really since the IPO, you guys have been growing loans at this kind of mid- to upper teens pace. I guess first question is the expectation that you will continue to see that demand. And then we can see that same pace of loan growth moving into next year. And then conversely, the deposits have grown, but not quite at that pace, and we're now sitting at a little over 90% loan-to-deposit ratio. Is that a constraint to you guys moving forward?
Well, I think I answered -- I shared with the group what we're doing strategically. We were setting the bank up next year to really focus -- or last year to really focus on the deposit growth side by continuing to support the deposit aggregating verticals that we have. We've hired 5 new team members throughout the course pf 2023. We were looking for teams that had deposit books and that we've had no issues regarding noncompetes.
The members that we brought in have the $350 million under their management, which now they're going to be targeting of the $350 million from the analysis that we've done, about 35% of that is DDA, which is very much in line with the deposit composition of the verticals that we do have. So we feel comfortable that we are going to be moving up on the deposit side. My projection is 10% deposit growth to support our lending activities with a focus on interest-bearing deposits. And as I stated, I believe the annual loan growth that we are going to be having is about 12% annualized.
Okay. That makes sense. And the MD Advantage program that's an exciting vertical for you guys. You called out the $315 million or so booked that all the lenders currently have. Is the initial expectation that those deposits you will ultimately be able to attain at some point in time?
We're definitely going to be working on it. The good thing is that when you have veteran bankers and in this case, one particular banker has been handling that book of business for 30 years. So the relationship with those clients is very, very deep. I've already met with a few of them of these doctor groups. The first one I met with had a very significant high 7-figure depository balance, and they were just waiting to come on board.
So they're being onboarded as we speak -- and the newest hire that we have, which actually starts in a week, again, has a deposit book of $110 million, which she has handled for the last almost 15 years -- so again, we believe that when you've got that kind of a banker that has a very loyal following, they will follow them.
Our next question comes from Michael Rose from Raymond James.
Just following up on the deposit discussion on Slide 9. These specialty verticals has kind of ranged in the low to mid-20% range in terms of total deposits just with the medical group coming on? I mean, how comfortable are you letting that percentage drift higher? And just are there any other verticals that you guys are exploring that are out there, maybe other licensed professionals or things like that?
Well, we feel -- I feel very strongly that we're going to see faster growth on the Jurist Advantage side and the 1 that's focused on attorneys because we have hired 2 new individuals to work on that. The medical one has just started. Again, we announced the launch January 18 of this year. I think that one is going to get traction quickly the correspondent banking, we onboarded in the fourth quarter for new banks, and we plan to probably do another 4 by the end of the second.
So all of these are going to be accretive into moving these numbers higher. We are, for the first time in the last 5 years, really adding much more personnel focused on these areas. And I think because they're very experienced, they have proven books, there's no restraints on not solicitation or not compete. We should be seeing these areas move forward. We have a total of 6 business verticals for are now focused on deposit. The others are non-CRE lending. We identify the opportunities and create them when -- especially when we find the senior person to lead them. So I don't have any other in mind right now. We just want to focus on expanding and maximizing the growth of the ones we have.
Helpful. And then it was good to see the loan production, the new loan production yield kind of holds steady at percentage you guys are thinking about your modeling and as it relates to the margin, what are you guys assuming for new production loan yields as we move through the year, assuming we do get a couple of cuts this year. Do you guys think you can hold it? do you think as rates come down, there'll be more kind of competition and will put more pressure kind of on those yields?
Until rates are lowered, I think we're going to be able to hold it. Again, our focus on the non-CRE business lines give us the ability to hold their -- they're not as competitive as the CRE market here is in Miami. This is a real estate denominated economy. And every bank in town is competing on CRE. But when you get into all these other business lines, you've got more flexibility on the higher price.
And Michael, the other thing I would say is I think we've proven year after year, we've had very strong loan demand, and I think we can probably be a little bit more selective on the ones that are priced a little higher with good relationship deposits and still have a good growth number on the loan side. And as Lou mentioned, we're putting a lot of resources right now on the deposit aggregating verticals and growing our loan book for our deposit book to support the loan growth.
That's helpful. And Rob, I'm sorry if I missed this, but what is your base case for rates as it relates to the previous margin commentary?
Yes. I mean when we went through our strategic plan this fall, I think anywhere from 2 to 3 rate cuts could happen in the second half of the year. As mentioned on Will's question around the margin, I think we can grind the margin a little higher until rate cuts do materialize, and then I think the margin expands a little further from there.
Great. And then maybe finally for me, you mentioned some new hires, expenses moving a little higher in the first quarter. You guys had a deceleration in expense growth, though, in '23 any other initiatives on the horizon that would cause a reacceleration of expense growth as we move through the year? Or is kind of mid-single-digit range, something we should be contemplating for the year.
Yes. On the expenses, I mentioned it's going to move up some with the new hires and then resetting the incentive accrual a little bit. You want to start off closer to $11 million. We ran $10.7 million this past quarter. We had a onetime item in there, but we could move that up starting off in 2024. But again, we're going to be watching our expenses and the major hires right now are around deposit aggregating people and we got a couple of them in the funnel, but nothing materially above that for the near term.
Our next question comes from Feddie Strickland from Ginnie Macosko.
Just wondering if you could provide a little more detail on the yield of the securities that were sold versus what came on or just generally what the pickup in yield was there on that securities trade.
Yes. I'm looking at my treasurer right now. I think the $10 million was roughly around 2%, and I think we had about a 700 basis point pickup in some of those securities. It was $10 million. I mean, we originated loans at $8 million. We did pick up a couple of pieces of sub debt, I think that we're above 10%, but nothing material, but I would say 700 basis points.
Got it. So with that, the loan growth, the bank term funding program paying off FHLB funding, I mean it seems like maybe we see a little bit more of a pickup maybe in the first quarter in margin that slows down. I know we've already discussed some, but that slows down a bit. And then if we get rate cuts in the back half of the year, it starts to accelerate again. Is that a fair way to look at it?
Yes, Feddie, that's very fair.
Perfect. And then just one more question. Just generally speaking, I know you talked a little bit about noninterest income earlier, but can you talk about how much opportunity you see to grow that line? And then more specifically, SBA longer term?
Okay. I'll start. And one on the service fees, which is predominantly wire fees. This past year, we worked on that a little bit, we have our foreign correspondent business that really has the predominant share of the wire fees. And the leader there, one, we did more business with our current clients, we just asked for more business. We also -- we're working on how we price wire fees with each of those clients and those were somewhat dynamic, but got some pickup there.
And then also, we're adding a couple of banks this year. I think we added at least 3, 4 new banks to the portfolios that picked up as well. I think on the service fee line itself, you could probably estimate or model a double-digit increase on the wire fees alone. And then the gain on sale has been a little bit opportunistic. I think we've closed one in January, but our goal is to have more dollars on that line every quarter. So I don't know, Lou, if you want to make any other comments. But I think it's going to be not materially higher, but we are anticipating that to grow faster than our net interest income. So you can probably model 15% in total for that line item for the year, and I think that would be a good placeholder and we'll see how do against that.
And our next question comes from Ross Haberman from RLH Investments.
I have a quick question. Could you describe your uninsured deposits a little more chunky? Is it 30 names or 200 names that make up the uninsured portion. And are you actively trying to get that percentage down more in '24?
I would say it did -- the uninsured bounce back up a little bit. The conversations lately with the majority of our clients has been around the rate. So they are a little bit more sensitive to rate than the insurance. I think the conversations have quickly changed. Ffrankly, in my career, talking with regulators, this is the first year we've talked about insured deposits versus uninsured deposits.
I think we will follow what our clients are looking for. We have the ability and the products to have them insured if they wish to do that. I wouldn't be surprised if it hovers around this level or the insured improved slightly, but it is somewhat granular. I can't give you a specific amount. But again, about 45 is insured and 55 is uninsured. And we do have big commercial clients and some of those are not insured.
Just one follow-up. Are the regulators pushing you and everybody else to sort of reduce that number or when they come in, they're happy with or satisfied, I should say, with your amount of uninsured?
Well, I'll answer that. We had a safety and soundness exam that wrapped up in August, and we had that discussion, and they acknowledge that this is a topic really never discussed -- in my 42-year career and every examination I've had, it's never been discussed. So we showed them the granularity. We actually have hundreds of accounts. It's not like a big chunky blocks -- they understood that our business model is what it is. We showed them how we had moved it down, how we had quickly educated our clients as to ICS and Cedars how that number had moved up, and they were fine with it. There was no issue.
As an example on our foreign correspondent side, all those banks, it's not even a discussion. They're here with low cost deposits because they want to have a U.S. bank providing them service. And it's not a matter of are they insured? And that was one of the things that we shared with the regulators and they fully understood.
And just one follow-up question about the loans. Could you give us a rough sense or rough breakdown of what percentage of the loans you would describe as B and C office? Or would you describe most of them as A?
Our office portfolio is about $190 million -- it's spread out over 129 loans. 32% of that is owner occupied and 68% is nonowner occupied. We don't -- and 93% of that is located in Florida. I'm not -- I don't have a breakdown of class, but.
If I could, I would say that the great majority, if not all of it is a solid B and C -- these are, I think, rarely would you have an office building here that's over 5 stories. And none of them are really in the major [indiscernible] area. They're out in the commercial section of the suburbs.
And none of the pass-through or nonaccrual or classified there .
Ladies and gentlemen, at this time, and showing no additional questions, I'd like to turn the floor back over to Luis for closing remarks.
Thank you. So on behalf of the USCB team, I would like to thank you all for your attendance and look forward to meet again in our next earnings call. Thank you.
Ladies and gentlemen, that concludes today's conference call and presentation. We thank you for joining. You may now disconnect your lines.