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uscb-10KA-20211231
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uscb-10KA-20211231p1i0
UNITED STATES
 
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
10-K/A
(Amendment No. 1)
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR
 
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended
December 31, 2022
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
 
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____to_____
Commission File Number:
001-41196
USCB Financial Holdings, Inc.
(Exact name of registrant as specified in its
 
charter)
 
Florida
87-4070846
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
2301 NW 87th Avenue
,
Doral
,
FL
33172
(Address of principal executive offices) (zip
 
code)
Registrant’s telephone number, including area code:
 
(
305
)
715-5200
Securities registered pursuant to Section 12(b)
 
of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Class A Common Stock, $1.00 par value per
share
USCB
The Nasdaq Stock Market LLC
Securities registered pursuant to Section 12(g)
 
of the Act:
 
None
Indicate by check mark if the registrant is a well-known
 
seasoned issuer, as defined in Rule 405 of the Securities Act.
☐
 
Yes
 
No
☒
Indicate by check mark if the registrant is not required
 
to file reports pursuant to Section 13 or Section
 
15(d) of the Act.
 
Yes
☐
 
No
☒
Indicate by check mark
 
whether the registrant (1) has
 
filed all reports
 
required to be filed
 
by Section 13 or
 
15(d) of the Securities
 
Exchange Act of
1934 during the
 
preceding 12 months (or
 
for such shorter
 
period that the
 
registrant was required to
 
file such reports),
 
and (2) has
 
been subject to
such filing requirements for the past 90 days.
 
Yes
☒
 
No
☐
Indicate by check mark whether the registrant has
 
submitted electronically every Interactive Data File required
 
to be submitted pursuant to Rule 405
of Regulation S-T
 
(§232.405 of this chapter)
 
during the preceding
 
12 months (or for
 
such shorter period
 
that the registrant
 
was required to submit
such files).
 
Yes
☒
 
No
☐
Indicate by check mark whether
 
the registrant is a large
 
accelerated filer, an accelerated filer, a non-accelerated
 
filer, a smaller reporting company or
an emerging growth company. See the definitions of “large
 
accelerated filer,” “accelerated filer,” “non-accelerated filer,” “smaller reporting company,”
and “emerging growth company” in Rule 12b-2 of
 
the Exchange Act.
Large accelerated filer
☐
 
Accelerated filer
☐
 
Non-accelerated filer
☒
 
Smaller reporting company
☒
 
Emerging growth company
☒
If an emerging growth company, indicate by check mark if the registrant
 
has elected not to use the extended
 
transition period for complying with any
new or revised financial accounting standards provided
 
pursuant to Section 13(a) of the Exchange
 
Act.
☐
Indicate by check mark
 
whether the registrant has
 
filed a report on
 
and attestation to its
 
management’s assessment of the
 
effectiveness of its internal
control over
 
financial reporting
 
under Section
 
404(b) of
 
the Sarbanes-Oxley
 
Act (15
 
U.S.C.7262(b)) by
 
the registered
 
public accounting
 
firm that
prepared or issued its audit report.
 
☐
 
If securities are registered pursuant to Section 12(b) of the Act, indicate
 
by check mark whether the financial statements of the registrant included in
the filing reflect the correction of an error to previously
 
issued financial statements.
 
☐
 
Indicate by check mark whether any of those
 
error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrant’s executive officers during
 
the relevant recovery period pursuant to §240.10D-1(b).
☐
Indicate by check mark whether the registrant is a
 
shell company (as defined in Rule 12b-2 of the
 
Securities Exchange Act of 1934). Yes
☐
 
No
☒
The aggregate market value of the voting stock
 
held by non-affiliates of the registrant based on the
 
closing price of $11.54 per share on June 30,
2022, the last business day of the registrant’s second quarter, was approximately
 
$
125.4
 
million (20,000,753 shares issued and outstanding
 
at
such date less shares held by affiliates). Although directors
 
and executive officers and their affiliates of the Registrant were
 
assumed to be
“affiliates” of the Registrant for purposes of the calculation,
 
the classification is not to be interpreted as an admission
 
of such status.
As of March 15, 2023, the registrant had had
19,622,380
 
shares of Class A Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of the registrant’s Proxy Statement for the 2023 Annual Meeting of Shareholders (the “2023
 
Proxy Statement”) are incorporated by
reference into Part III of this report.
 
EXPLANATORY NOTE
This Amendment No. 1 (“Amendment No. 1”) to the Annual Report on Form 10-K of USCB Financial Holdings, Inc. (the “Company”, “we,” “our” or “us”) for
the fiscal year ended December 31, 2022, as filed with the Securities and Exchange Commission (“SEC”) on March 24, 2023 (the “2022 Annual Report”
or “Original Report”), is being filed (i) to correct an HTML conversion error in the stock performance graph included in Item 5 of Part II and (ii) to delete the
logo of the independent registered public accounting firm that was inadvertently included on more pages than the audit report in the consolidated financial
statements included in Item 8 of Part II (none of the financial data contained in the consolidated financial statements and the notes thereto set forth in Item
8 was revised or modified in any way).
In accordance with Rule 12b-15 under the Securities Exchange Act of 1934, as amended, Item 5 and Item 8 of Part II of the 2022 Annual Report are
hereby amended and restated in their entirety. In addition, pursuant to Rule 12b-15, the Company is including Item 15 of Part IV with this Amendment No.
1, solely to file the certifications required under Sections 302 and 906 of the Sarbanes-Oxley Act of 2002.
This Amendment No. 1 does not affect any other portion of the 2022 Annual Report. Additionally, except as specifically referenced herein, this Amendment
No. 1 does not reflect any event after March 24, 2023, the filing date of the 2022 Annual Report or modify disclosures affected by subsequent events.
Terms used herein but not otherwise defined in Amendment No. 1 have such meaning ascribed to them in the Original Report.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4
 
USCB Financial Holdings, Inc.
 
2022 10-K/A
 
PART II
 
Item 5.
 
Market
 
for
 
Registrant’s
 
Common
 
Equity,
 
Related
 
Stockholder
 
Matters
 
and
 
Issuer
 
Purchases
 
of
 
Equity
Securities
Market Information
In July
 
2021, the Bank’s
 
Class A common
 
stock began trading
 
on the
 
Nasdaq Stock Market
 
under ticker
 
symbol “USCB”.
The listing of our Class
 
A common stock on
 
the Nasdaq Stock Market
 
has resulted in a
 
more active trading market
 
for our
Class
 
A
 
common
 
stock.
 
However,
 
we
 
cannot
 
assure
 
that
 
a
 
liquid
 
trading
 
market
 
for
 
our
 
Class
 
A
 
common
 
stock
 
will
 
be
sustained.
 
Effective December 30, 2021, the bank holding company,
 
or the Company, acquired all issued and
 
outstanding shares
of Class
 
A common
 
stock of
 
the Bank.
 
Each of
 
the outstanding
 
shares of
 
the Bank’s
 
common stock
 
formerly held
 
by its
shareholders was converted
 
into and exchanged
 
for one newly
 
issued share
 
of the Company’s
 
common stock.
 
The ticker
symbol “USCB” remained the same.
Prior
 
to
 
our
 
listing
 
on
 
the
 
Nasdaq
 
Stock
 
Market
 
there
 
was
 
not
 
an
 
established
 
public
 
trading
 
market
 
for
 
the
 
Class
 
A
common shares. The
 
following table shows
 
the quarterly high and
 
low closing prices
 
of our Class A
 
common stock traded
on the Nasdaq Stock Market since going public on July
 
23, 2021:
Stock Price
High
Low
Quarter Ended:
September 30, 2021
$
13.91
$
10.57
December 31, 2021
$
15.89
$
12.30
March 31, 2022
$
15.49
$
13.30
June 30, 2022
$
14.84
$
11.21
September 30, 2022
$
14.74
$
11.08
December 31, 2022
$
14.30
$
12.16
As of
 
December 31, 2022,
 
our Class
 
B common
 
stock is
 
not listed
 
or traded
 
on any
 
stock exchange
 
and no
 
shares were
issued and outstanding at such date.
Holders
As
 
of
 
January
 
31,
 
2023,
 
the
 
Company’s
 
Class
 
A
 
common
 
shares
 
were
 
held
 
by
 
approximately
 
300
 
shareholders
 
of
record, not
 
including the
 
number of
 
persons or
 
entities whose
 
stock is
 
held in
 
nominee or
 
“street” name
 
through
 
various
brokerage firms and banks.
Dividends
As a bank holding company, the Company’s ability to declare and pay dividends depends on various federal regulatory
considerations, including the guidelines of the Federal Reserve
 
regarding capital adequacy and dividends.
Because we are
 
a bank holding
 
company and currently do
 
not engage directly in
 
business activities of a
 
material nature,
our ability to pay dividends
 
to our shareholders depends,
 
in large part, upon
 
our receipt of dividends
 
from the Bank, which
is also subject to
 
numerous limitations on
 
the payment of dividends
 
under federal and state
 
banking laws, regulations
 
and
policies.
The principal
 
source of
 
revenue with
 
which to
 
pay dividends
 
on common
 
shares are
 
dividends the
 
Bank may
 
declare
and
 
pay
 
out
 
of
 
funds
 
legally
 
available
 
for
 
payment
 
of
 
dividends.
 
As
 
a
 
Florida
 
corporation,
 
we
 
are
 
only
 
permitted
 
to
 
pay
dividends to shareholders if, after giving effect to the dividend, (i) the Company is able to pay its debts as they become due
in the ordinary course
 
of business and
 
(ii) the Company’s
 
assets exceeds the
 
sum of Company’s
 
(a) liabilities plus
 
(b) the
amount that
 
would be
 
needed for
 
the Company
 
to satisfy
 
the preferential
 
rights
 
upon dissolution
 
of shareholders
 
whose
preferential rights are superior to those receiving the dividend,
 
if any.
Securities Authorized for Issuance Under Equity Compensation
 
Plans
See Note
 
9 ”Equity
 
Based and
 
Other Compensation
 
Plans” to
 
the Consolidated
 
Financial Statements
 
included in this
Annual Report Form on 10-K for additional information
 
required.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
uscb-10KA-20211231p5i0
 
5
 
USCB Financial Holdings, Inc.
 
2022 10-K/A
 
Stock Price Performance
The graph below compares the
 
cumulative total return
 
to stockholders of our Class
 
A common stock between July
 
23,
2021 (the
 
date the
 
Bank’s
 
Class A
 
common stock
 
commenced
 
trading on
 
the Nasdaq
 
Stock Market)
 
and December
 
31,
2022, with the cumulative total return
 
of (a) the Nasdaq Bank Index
 
(b) the NASDAQ ABA Community Bank
 
Index, and (c)
the Nasdaq
 
Composite Index
 
over the same
 
period. This
 
graph assumes
 
the investment
 
of $100
 
in our Class
 
A common
stock at the closing sale price of $10.82 per share on
 
July
 
23, 2021, and assumes the reinvestment of dividends,
 
if any.
 
The comparisons shown
 
in the graph
 
below are based
 
upon historical data.
 
We caution that
 
the stock price
 
performance
shown in the graph below is not indicative of, nor is it intended to forecast, the potential future performance
 
of our common
stock.
07/23/2021
12/31/2021
12/31/2022
USCB Financial Holdings, Inc. (USCB)
$
100
$
140
$
122
NASDAQ Bank (BANK)
$
100
$
115
$
94
NASDAQ ABA Community Bank (QABA)
$
100
$
114
$
101
NASDAQ Composite (IXIC)
$
100
$
107
$
71
Recent Sales of Unregistered Securities
None.
Purchases of Equity Securities by Issuer and Other
 
Affiliates
 
On January
 
24, 2022,
 
the Board
 
approved a
 
share repurchase
 
program of
 
up to
 
750,000 shares
 
of Class
 
A common
stock. Under
 
the repurchase
 
program, the
 
Company
 
may purchase
 
shares of
 
Class
 
A common
 
stock on
 
a discretionary
basis from time
 
to time through open
 
market repurchases, privately negotiated
 
transactions, or otherwise in
 
compliance with
Rule
 
10b-18
 
under
 
the
 
Exchange
 
Act.
 
As
 
of
 
December 31,
 
2022,
 
neither
 
the
 
Company
 
nor
 
any
 
of
 
its
 
affiliates
 
had
repurchased any Class A common shares of the Company.
 
 
7
 
USCB Financial Holdings, Inc.
 
2022 10-K/A
 
REPORT OF INDEPENDENT REGISTERED
 
PUBLIC ACCOUNTING FIRM
 
Stockholders and the Board of Directors of
USCB Financial Holdings, Inc.
Doral, Florida
Opinion on the Financial Statements
We
 
have
 
audited
 
the
 
accompanying
 
consolidated
 
balance sheets
 
of USCB
 
Financial
 
Holdings,
 
Inc.
 
(the
"Company")
 
as
 
of
 
December
 
31,
 
2022
 
and
 
2021,
 
the
 
related
 
consolidated
 
statements
 
of
 
operations,
comprehensive income
 
(loss),
 
changes in
 
stockholders’ equity,
 
and cash
 
flows for
 
the years
 
then ended,
and the
 
related
 
notes
 
(collectively
 
referred
 
to as
 
the
 
"financial statements").
 
In
 
our opinion,
 
the
 
financial
statements present fairly, in all material respects, the
 
financial position of the Company as
 
of December 31,
2022 and 2021,
 
and the results of its operations
 
and its cash flows for the years
 
then ended, in conformity
with accounting principles generally accepted in the United
 
States of America.
Basis for Opinion
These financial
 
statements are
 
the responsibility
 
of the
 
Company's management.
 
Our responsibility
 
is to
express an opinion
 
on the Company's financial
 
statements based on our
 
audits. We are a
 
public accounting
firm registered
 
with the
 
Public Company
 
Accounting Oversight
 
Board (United
 
States) ("PCAOB")
 
and are
required to be
 
independent with respect to
 
the Company in accordance
 
with the U.S.
 
federal securities laws
and the applicable rules and regulations of the Securities
 
and Exchange Commission and the PCAOB.
 
We conducted
 
our audits
 
in accordance
 
with the
 
standards of
 
the PCAOB.
 
Those standards
 
require that
we plan and perform the
 
audit to obtain reasonable
 
assurance about whether the
 
financial statements are
free of material misstatement, whether due to error or fra
 
ud.
 
Our
 
audits
 
included
 
performing
 
procedures
 
to
 
assess
 
the
 
risks
 
of
 
material
 
misstatement
 
of
 
the
 
financial
statements, whether
 
due to
 
error or
 
fraud, and
 
performing procedures
 
that respond
 
to those
 
risks.
 
Such
procedures
 
included examining,
 
on a
 
test basis,
 
evidence
 
regarding the
 
amounts
 
and disclosures
 
in the
financial
 
statements.
 
Our
 
audits
 
also
 
included
 
evaluating
 
the
 
accounting
 
principles
 
used
 
and
 
significant
estimates made by management, as well as evaluating the
 
overall presentation of the financial statements.
We believe that our audits provide a reasonable
 
basis for our opinion.
 
/s/ Crowe LLP
 
Crowe LLP
We have served as the Company's auditor since
 
2017.
Fort Lauderdale, Florida
March 24, 2023
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
8
 
USCB Financial Holdings, Inc.
 
2022 10-K/A
USCB FINANCIAL HOLDINGS, INC.
Consolidated Balance Sheets
(Dollars in thousands,
 
except share and per share data)
 
December 31,
 
2022
2021
ASSETS:
Cash and due from banks
$
6,605
$
6,477
Interest-bearing deposits in banks
47,563
39,751
Total cash and cash equivalents
54,168
46,228
Investment securities held to maturity (fair value $
169,088
 
and $
120,157
, respectively)
188,699
122,658
Investment securities available for sale, at fair value
230,140
401,542
Federal Home Loan Bank stock, at cost
2,882
2,100
Loans held for investment, net of allowance of
 
$
17,487
 
and $
15,057
, respectively
1,489,851
1,175,024
Accrued interest receivable
7,546
5,975
Premises and equipment, net
5,263
5,278
Bank owned life insurance
42,781
41,720
Deferred tax asset, net
42,360
34,929
Lease right-of-use asset
14,395
14,185
Other assets
7,749
4,300
Total assets
$
2,085,834
$
1,853,939
LIABILITIES:
Deposits:
Demand
$
629,776
$
$605,425
Money market and savings accounts
915,853
703,856
Interest-bearing checking accounts
66,675
55,878
Time deposits
216,977
225,220
Total deposits
1,829,281
1,590,379
Federal Home Loan Bank advances
46,000
36,000
Lease liability
14,395
14,185
Accrued interest and other liabilities
13,730
9,478
Total liabilities
1,903,406
1,650,042
Commitments and contingencies (See Note 10
 
and 18)
(nil)
 
(nil)
 
STOCKHOLDERS' EQUITY:
Preferred stock - Class C; $
1.00
 
par value; $
1,000
 
per share liquidation preference;
52,748
 
shares
authorized;
0
 
issued and outstanding as of December 31,
 
2022 and 2021
-
-
Preferred stock - Class D; $
1.00
 
par value; $
5.00
 
per share liquidation preference;
12,309,480
 
shares
authorized;
0
 
issued and outstanding as of December 31,
 
2022 and 2021
-
-
Preferred stock - Class E; $
1.00
 
par value; $
1,000
 
per share liquidation preference;
3,185,024
 
shares
authorized;
0
 
issued and outstanding as of December 31,
 
2022 and 2021
-
-
Common stock - Class A Voting; $
1.00
 
par value;
45,000,000
 
shares authorized;
 
20,000,753
 
and
19,991,753
 
issued and outstanding as of December 31,
 
2022 and 2021
20,001
19,992
Common stock - Class B Non-voting; $
1.00
 
par value;
8,000,000
 
shares authorized;
 
0
 
issued and
outstanding as of December 31, 2022 and 2021
-
-
Additional paid-in capital on common stock
311,282
310,666
Accumulated deficit
(104,104)
(124,245)
Accumulated other comprehensive income (loss)
(44,751)
(2,516)
Total stockholders' equity
182,428
203,897
Total liabilities and stockholders' equity
$
2,085,834
$
1,853,939
The accompanying notes are an integral part of
 
these consolidated financial statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
9
 
USCB Financial Holdings, Inc.
 
2022 10-K/A
USCB FINANCIAL HOLDINGS, INC.
Consolidated Statements of Operations
(Dollars in thousands,
 
except per share data)
 
Years Ended December 31,
 
2022
2021
Interest income:
 
Loans, including fees
$
60,825
$
48,730
 
Investment securities
9,346
7,886
 
Interest-bearing deposits in financial institutions
929
106
 
Total interest income
71,100
56,722
Interest expense:
 
Interest-bearing deposits
86
59
 
Savings and money markets accounts
5,173
2,082
 
Time deposits
1,509
1,531
 
Federal Home Loan Bank advances
671
554
 
Total interest expense
7,439
4,226
 
Net interest income before provision for
 
credit losses
63,661
52,496
Provision for credit losses
2,495
(160)
 
Net interest income after provision for
 
credit losses
61,166
52,656
Non-interest income:
 
Service fees
4,010
3,609
 
Bank owned life insurance income
1,061
759
 
Gain (loss) on sale of securities available for sale,
 
net
(2,529)
214
 
Gain on sale of loans held for sale, net
891
1,626
 
Gain on sale of premises and equipment,
 
net
-
983
 
Loan settlement
161
2,500
 
Other non-interest income
1,634
1,007
 
Total non-interest income
5,228
10,698
Non-interest expense:
 
Salaries and employee benefits
23,943
21,438
 
Occupancy
5,058
5,257
 
Regulatory assessment and fees
930
783
 
Consulting and legal fees
1,890
1,454
 
Network and information technology services
1,806
1,466
 
Audit and tax services fees
918
975
 
Other operating
4,764
4,304
 
Total non-interest expense
39,309
35,677
 
Net income before income tax expense
27,085
27,677
Income tax expense
6,944
6,600
 
Net income
20,141
21,077
Less: Preferred stock dividend
-
2,077
Less: Exchange and redemption of preferred shares
-
89,585
Net income (loss) available to common stockholders
$
20,141
$
(70,585)
Per share information:
Class A common stock
Net income (loss) per share, basic
$
1.01
$
(6.72)
Net income (loss) per share, diluted
$
1.00
$
(6.72)
(1)
 
See Note 14 "Earnings per Share" for information
 
on the allocation of income available to common
 
stockholders.
The accompanying notes are an integral part of
 
these consolidated financial statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
10
 
USCB Financial Holdings, Inc.
 
2022 10-K/A
USCB FINANCIAL HOLDINGS, INC.
Consolidated Statements of Comprehensive Income
 
(Loss)
(Dollars in thousands)
 
Years Ended December 31,
2022
2021
Net income
$
20,141
$
21,077
Other comprehensive income (loss):
Unrealized loss on investment securities
(59,260)
(9,561)
Amortization of net unrealized gains on securities
 
transferred from available-for-sale to held-to-maturity
120
108
Reclassification adjustment for (gain) loss included
 
in net income
2,529
(214)
Tax effect
14,376
2,370
Total other comprehensive loss, net of tax
(42,235)
(7,297)
Total comprehensive income (loss)
$
(22,094)
$
13,780
The accompanying notes are an integral part of
 
these consolidated financial statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
11
 
USCB Financial Holdings, Inc.
 
2022 10-K/A
USCB FINANCIAL HOLDINGS,
 
INC.
Consolidated Statements of Changes in Stockholders’
 
Equity
(Dollars in thousands,
 
except per share data)
 
Preferred Stock
Common Stock
Additional Paid-
in Capital on
Common Stock
Accumulated
Deficit
Accumulated
Other
Comprehensive
Income (Loss)
Shares
Par Value
Shares
Par Value
Total
Stockholders'
Equity
Balance at January 1, 2022
-
$
-
19,991,753
$
19,992
$
310,666
$
(124,245)
$
(2,516)
$
203,897
Net income
-
-
-
-
-
20,141
-
20,141
Other comprehensive loss
-
-
-
-
-
-
(42,235)
(42,235)
Issuance of common stock - exercised options
-
-
9,000
9
93
-
-
102
Stock based compensation
-
-
-
-
523
-
-
523
Balance at December 31, 2022
-
-
20,000,753
20,001
311,282
(104,104)
(44,751)
182,428
Balance at January 1, 2021
12,350,879
$
32,077
10,010,521
$
10,010
$
177,755
$
(53,622)
$
4,781
$
171,001
Net income
-
-
-
-
-
21,077
-
21,077
Other comprehensive loss
-
-
-
-
-
-
(7,297)
(7,297)
Dividends - preferred stock
-
-
-
-
-
(2,077)
-
(2,077)
Issuance of Class A common stock, net of
offering costs of $
6,048
-
-
4,600,000
4,600
35,226
-
-
39,826
Exchange of preferred stock
(11,109,025)
(22,154)
10,278,072
10,279
92,501
(80,626)
-
-
Redemption of preferred stock
(1,241,854)
(9,923)
-
-
-
(8,997)
-
(18,920)
Exchange of Class B to Class A common stock
-
-
(4,896,840)
(4,897)
4,897
-
-
-
Stock based compensation
-
-
-
-
287
-
-
287
Balance at December 31, 2021
-
$
-
19,991,753
$
19,992
$
310,666
$
(124,245)
$
(2,516)
$
203,897
The accompanying notes are an integral part of
 
these consolidated financial statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
12
 
USCB Financial Holdings, Inc.
 
2022 10-K/A
USCB FINANCIAL HOLDINGS, INC.
Consolidated Statements of Cash Flows
(Dollars in thousands)
Years Ended December 31,
2022
2021
Cash flows from operating activities:
Net income
 
$
20,141
$
21,077
Adjustments to reconcile net income to net
 
cash provided by operating activities:
 
Provision for credit losses
 
2,495
(160)
Depreciation and amortization
688
1,033
Amortization of premiums on securities, net
433
596
Accretion of deferred loan fees, net
(1,497)
(3,754)
Stock based compensation
523
287
Loss (Gain) on sale of available for sale securities,
 
net
2,529
(214)
Gain on sale of loans held for sale
(891)
(1,626)
Gain on sale of premises and equipment, net
-
(983)
Increase in cash surrender value of bank owned life insurance
(1,061)
(759)
Decrease in deferred tax asset
6,945
6,600
Net change in operating assets and liabilities:
 
Accrued interest receivable
(1,571)
(428)
Other assets
(3,449)
(2,270)
Accrued interest and other liabilities
4,252
2,652
Net cash provided by operating activities
29,537
22,051
Cash flows from investing activities:
Purchase of investment securities held to maturity
(14,739)
(57,917)
Proceeds from maturities and pay-downs of investment
 
securities held to maturity
12,237
3,736
Purchase of investment securities available for
 
sale
 
(53,113)
(258,767)
Proceeds from maturities and pay-downs of investment
 
securities available for sale
40,754
61,047
Proceeds from sales of investment securities available
 
for sale
60,649
48,940
Proceeds from call of investment securities available
 
for sale
-
3,034
Net increase in loans held for investment
(257,580)
(33,515)
Purchase of loans held for investment
(70,175)
(129,531)
Additions to premises and equipment
(673)
(633)
Proceeds from the sale of loans held for
 
sale
12,821
16,980
Proceeds from the sale of property
-
1,652
Proceeds from the redemption of Federal Home
 
Loan Bank stock
3,440
611
Purchase of Federal Home Loan Bank stock
(4,222)
-
Purchase of bank owned life insurance
-
(15,000)
Net cash used in investment activities
(270,601)
(359,363)
(Continued)
The accompanying notes are an integral part of
 
these consolidated financial statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
13
 
USCB Financial Holdings, Inc.
 
2022 10-K/A
USCB FINANCIAL HOLDINGS, INC.
Consolidated Statements of Cash Flows (Continued)
(Dollars in thousands)
Years Ended December 31,
2022
2021
Cash flows from financing activities:
Proceeds from issuance of Class A common stock, net
102
39,826
Cash dividends paid
-
(2,077)
Redemption of Preferred stock Class C
-
(5,275)
Redemption of Preferred stock Class D
-
(6,145)
Redemption of Preferred stock Class E
-
(7,500)
Net increase in deposits
238,902
316,977
Proceeds from Federal Home Loan Bank advances
126,000
-
Repayments on Federal Home Loan Bank advances
(116,000)
-
Net cash provided by financing activities
249,004
335,806
Net increase (decrease) in cash and cash equivalents
7,940
(1,506)
Cash and cash equivalents at beginning of year
46,228
47,734
Cash and cash equivalents at end of year
$
54,168
$
46,228
Supplemental disclosure of cash flow information:
Interest paid
$
7,306
$
4,286
Supplemental schedule of non-cash investing and
 
financing activities:
Transfer of loans held for investment to loans held for
 
sale
$
11,930
$
15,354
Transfer of investment securities from available-for-sale to held-to-maturity
$
63,798
$
68,667
Transfer of premises and equipment to assets held for
 
sale
$
-
$
652
Lease liability arising from obtaining right-of-use assets
$
3,203
$
328
Exchange of Preferred C for Class A common
 
stock
$
-
$
47,473
Exchange of Preferred D for Class A common
 
stock
$
-
$
55,308
Exchange of Class B common stock for Class
 
A common stock
$
-
$
4,897
The accompanying notes are an integral part of
 
these consolidated financial statements.
 
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
 
14
 
USCB Financial Holdings, Inc.
 
2022 10-K/A
1.
 
SUMMARY OF SIGNIFICANT ACCOUNTING
 
POLICIES
 
Overview
USCB Financial Holdings, Inc., a
 
Florida corporation incorporated
 
in 2021, is a bank holding
 
company with one wholly
owned subsidiary,
 
U.S. Century Bank (the
 
“Bank”), together referred to
 
as “the Company”. The
 
Bank, established in 2002,
is a Florida
 
state-chartered, non-member financial institution providing financial
 
services through its banking
 
centers located
in South Florida.
In December 2021, USCB Financial
 
Holdings, Inc. acquired all issued
 
and outstanding shares of the Class
 
A common
stock of the Bank. Each of the outstanding shares of
 
the Bank’s common stock, par value $
1.00
 
per share, formerly held by
its shareholders were
 
converted into and exchanged
 
for one newly
 
issued share of
 
the Company’s common stock, par
 
value
$
1.00
 
per share.
The Bank
 
owns a
 
subsidiary,
 
Florida Peninsula
 
Title LLC,
 
that offers
 
our clients
 
title insurance
 
policies for
 
real estate
transactions closed at the Bank. Licensed in the State of Florida and approved by the Department of Insurance Regulation,
Florida Peninsula tittle LLC began operations in 2021.
 
Principles of Consolidation
Intercompany transactions
 
and balances
 
are eliminated
 
in consolidation.
 
The Consolidated
 
financial statements
 
have
been prepared in accordance with U.S. Generally Accepted
 
Accounting Principles ("GAAP").
Initial Public Offering and Exchange and Redemption
 
of Shares
On July 27, 2021,
 
the Company completed
 
an initial public
 
offering (the “IPO”)
 
and its Class
 
A voting common
 
shares
began trading
 
on the
 
Nasdaq Stock
 
Market under
 
ticker symbol
 
“USCB”. Following
 
the IPO,
 
the Company
 
completed an
exchange
 
of
 
then
 
outstanding
 
preferred
 
shares
 
for
 
Class
 
A
 
common
 
shares
 
and
 
thereafter
 
redeemed
 
the
 
remaining
outstanding preferred shares.
 
In December 2021,
 
the Company reached
 
agreements with the
 
Class B common
 
shareholders to receive
 
Class A voting
common
 
stock
 
in
 
exchange
 
for
 
all
 
outstanding
 
Class
 
B
 
non-voting
 
common
 
stock
 
in
 
a
1 for 5
 
stock
 
exchange.
 
As
 
of
December 31,
 
2022,
 
there
 
were
 
no
 
issued
 
and
 
outstanding
 
preferred
 
shares
 
or
 
Class
 
B
 
common
 
shares.
 
See
 
Note
 
13
“Stockholders’ Equity” for further information about the IPO
 
and the exchange and redemption of shares.
 
Risk and Uncertainties
Current Banking Environment
Industry
 
events
 
transpiring
 
prior
 
to
 
the
 
Company’s
 
filing
 
date,
 
including
 
bank
 
failures,
 
have
 
led
 
to
 
uncertainty
 
and
concerns regarding
 
the liquidity
 
positions of
 
the banking
 
sector.
 
These failures
 
underscore the
 
importance of
 
maintaining
access to diverse sources of
 
funding. The Company’s
 
deposit base includes a combination
 
of consumer, commercial,
 
and
public
 
funds
 
deposits.
 
The
 
Company’s
 
largest
 
depositors
 
include
 
a
 
mixture
 
of
 
government-related
 
organizations
 
and
commercial clients without a high level of industry concentration.
In response to
 
these events,
 
the Treasury
 
Department, Federal
 
Reserve, and FDIC
 
jointly announced the
 
Bank Term
Funding
 
Program
 
(BTFP)
 
on
 
March
 
12,
 
2023.
 
This
 
program
 
aims
 
to
 
enhance
 
liquidity
 
by
 
allowing
 
institutions
 
to
 
pledge
certain securities at the
 
par value of the securities,
 
and at a borrowing
 
rate of ten basis
 
points over the one-year
 
overnight
index swap
 
rate. The
 
BTFP is
 
available to
 
eligible
 
U.S. federally
 
insured
 
depository
 
institutions,
 
with
 
advances
 
having a
term of
 
up to
 
one year
 
and no
 
prepayment penalties.
 
As of
 
the date
 
of the
 
release of
 
the Audited
 
Consolidated Financial
Statements, the Company has not accessed the BTFP.
Market conditions and external factors may unpredictably impact the competitive landscape for deposits
 
in the banking
industry.
 
Additionally,
 
the rising interest rate environment
 
has increased competition for
 
liquidity and the premium at
 
which
liquidity is available
 
to meet
 
funding needs.
 
The Company
 
believes its
 
sources of
 
liquidity are sufficient
 
to meet
 
its needs
on the balance sheet date.
An unexpected influx
 
of withdrawals of
 
deposits could adversely
 
impact the Company's
 
ability to
 
rely on organic
 
deposits
to primarily
 
fund its
 
operations, potentially
 
requiring greater
 
reliance on
 
secondary sources
 
of liquidity
 
to meet
 
withdrawal
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
 
15
 
USCB Financial Holdings, Inc.
 
2022 10-K/A
demands or to fund continuing operations. These sources may include proceeds from FHLB advances, sales of
 
investment
securities and loans, federal funds lines of credit from correspondent
 
banks, and out-of-market time deposits.
 
Such reliance on secondary funding sources could increase the Company's
 
overall cost of funding and thereby reduce
net
 
income.
 
While
 
the
 
Company
 
believes
 
its
 
current
 
sources
 
of
 
liquidity
 
are
 
adequate
 
to
 
fund
 
operations,
 
there
 
is
 
no
guarantee they
 
will suffice
 
to meet
 
future
 
liquidity
 
demands.
 
This
 
may necessitate
 
slowing
 
or discontinuing
 
loan growth,
capital expenditures, or other investments, or liquidating assets.
For further discussion of the Company's liquidity practices,
 
see page 59 and 62 of this Annual Report on Form 10-K.
Use of Estimates
In preparing the consolidated financial statements, management is required
 
to make estimates and assumptions based
on available information that affect the amounts reported
 
in the financial statements and the disclosures provided.
The coronavirus (“COVID-19”)
 
pandemic has negatively
 
affected many of
 
the Company’s
 
clients and could
 
still impair
their ability to fulfill
 
their financial obligations.
 
The Company’s business
 
is dependent upon the
 
willingness and ability
 
of its
associates and customers to conduct banking and other financial transactions.
 
While we believe conditions have improved
as of December 31, 2022, if there is a resurgence in the virus, the Company could experience further adverse effects on its
business,
 
financial
 
condition,
 
results
 
of operations
 
and
 
cash
 
flows.
 
While
 
it
 
is not
 
possible
 
to know
 
the
 
full
 
extent
 
of
 
the
impact the
 
COVID-19
 
pandemic will
 
have on
 
the
 
Company's
 
future operations,
 
the Company
 
continues
 
to
 
communicate
with its associates and customers
 
to understand their challenges, which
 
allows us to respond to their
 
needs and issues as
they arise.
While there was
 
not a
 
material impact to
 
the Company’s Consolidated Financial
 
Statements as of
 
and for
 
the year ended
December 31, 2022,
 
future increases
 
in the
 
allowance for
 
credit losses
 
(“ACL”) may
 
be required
 
because of
 
the potential
economic
 
downturn
 
that
 
a
 
resurgence
 
in
 
the virus
 
may
 
cause
 
and those
 
ACL
 
increases
 
can be
 
material.
 
It
 
is difficult
 
to
quantify the
 
impact that
 
COVID-19 will
 
have on
 
the estimates
 
and assumptions
 
used to
 
prepare the
 
financial statements.
Actual results could differ from those estimates.
Cash and Cash Equivalents
The
 
Company
 
considers
 
investments
 
with
 
a
 
maturity
 
of
 
90
 
days
 
or
 
less
 
from
 
its
 
original
 
purchase
 
date
 
to
 
be
 
cash
equivalents. For
 
the Consolidated
 
Statements of
 
Cash Flows,
 
cash and cash
 
equivalents include
 
cash on hand,
 
amounts
due from banks, and interest-bearing deposits in banks.
Restricted Cash
The Company may
 
be required to
 
maintain funds at
 
other banks to
 
satisfy a loan
 
participation agreement. The Company
reports restricted cash within cash and cash equivalents.
 
Interest-Bearing Deposits in Other Financial Institutions
Interest-bearing deposits in other financial institutions consist
 
of Federal Reserve Bank, Federal Home Loan
 
Bank and
other accounts.
Investment Securities
Debt securities
 
are recorded
 
at fair
 
value except
 
for those
 
securities which
 
the Company
 
has the
 
positive intent
 
and
ability to hold to
 
maturity. Management determines the appropriate classification of its securities at
 
the time of purchase
 
and
accounts for them on a trade date basis.
 
Debt securities that
 
management has the
 
positive intent and
 
ability to hold
 
to maturity are
 
classified as "held-to-maturity"
and recorded at amortized cost. Trading securities are
 
recorded at fair value with
 
changes in fair value included
 
in earnings.
Securities not classified
 
as held-to-maturity or
 
trading are classified
 
as "available-for-sale"
 
and recorded at
 
fair value, with
unrealized gains and
 
losses excluded from
 
earnings and reported
 
in other comprehensive
 
income (loss). Equity
 
investments
must be recorded at fair value with changes in fair value
 
included in earnings.
 
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
 
16
 
USCB Financial Holdings, Inc.
 
2022 10-K/A
Purchase premiums and discounts are amortized or accreted over
 
the estimated life of the related available-for-sale or
held-to-maturity
 
security
 
as
 
an
 
adjustment
 
to
 
yield
 
using
 
the
 
effective
 
interest
 
method.
 
Prepayments
 
of
 
principal
 
are
considered in determining the estimated life of
 
the security. Such amortization and accretion are included in interest income
in the Consolidated
 
Statements of Operations.
 
Dividend and interest
 
income are recognized
 
when earned. Gains
 
and losses
on the sale of securities are recorded on trade date and are determined
 
on a specific identification basis.
Declines
 
in
 
the
 
fair
 
value
 
of
 
available-for-sale
 
debt
 
securities
 
below
 
their
 
cost
 
that
 
are
 
deemed
 
to
 
be
 
other-than-
temporary
 
are
 
reflected
 
in
 
earnings
 
as
 
realized
 
losses.
 
In
 
determining
 
whether
 
other-than-temporary
 
impairment
 
exists,
management considers several factors in their analysis including
 
(i) severity and duration of the
 
impairment, (ii) credit rating
of security including any downgrade, (iii) intent to sell the security, or if it is more likely than not that it will be required to sell
the
 
security
 
before
 
recovery,
 
(iv)
 
whether
 
there
 
have
 
been
 
any
 
payment
 
defaults
 
and
 
(v)
 
underlying
 
guarantor
 
of
 
the
securities.
Federal Home Loan Bank (FHLB) Stock
The Bank is a member of the FHLB system. Members are required to
 
own a certain amount of stock based on the level
of borrowings and
 
other factors and
 
may invest in
 
additional amounts. FHLB
 
stock is carried
 
at cost, classified
 
as a restricted
asset, and
 
periodically evaluated
 
for impairment
 
based on
 
ultimate recovery
 
of par
 
value. As
 
of December
 
31, 2022
 
and
2021,
 
FHLB
 
stock
 
amounted
 
to
 
$
2.9
 
million
 
and
 
$
2.1
 
million,
 
respectively,
 
with
 
no
 
impairment
 
deemed
 
necessary.
 
Both
cash and stock dividends are reported as interest income.
Loans Held for Investment and Allowance for Credit
 
Losses
Loans held for investment (“loans”) are reported at their outstanding principal
 
balance net of charge-offs, deferred loan
fees, unearned
 
income
 
and
 
the
 
ACL.
 
Interest
 
income
 
is generally
 
recognized
 
when
 
income
 
is earned
 
using
 
the
 
interest
method.
 
Loan
 
origination
 
and
 
commitment
 
fees
 
and
 
the
 
costs
 
associated
 
with
 
the
 
origination
 
of
 
loans
 
are
 
deferred
 
and
amortized, using the interest method or the straight-line
 
method, over the life of the related loan.
 
If the
 
principal or
 
interest on
 
a commercial
 
loan becomes
 
due and
 
unpaid for
 
90 days
 
or more,
 
the loan
 
is placed
 
on
non-accrual status as of
 
the date it becomes
 
90 days past due
 
and remains in non
 
-accrual status until it
 
meets the criteria
for restoration to accrual status.
 
Residential loans, on
 
the other hand, are placed
 
on non-accrual status when
 
the principal
or interest
 
becomes due
 
and unpaid
 
for 120
 
days or
 
more and remains
 
in non-accrual
 
status until
 
it meets
 
the criteria
 
for
restoration
 
to
 
accrual
 
status.
 
Restoring
 
a
 
loan
 
to
 
accrual
 
status
 
is
 
possible
 
when
 
the
 
borrower
 
resumes
 
payment
 
of
 
all
principal and interest
 
payments for a period
 
of six months
 
and the Company
 
has a documented
 
expectation of repayment
of the remaining contractual principal and interest or the loan becomes secured and in the process of collection. All interest
accrued but not
 
collected for
 
loans that are
 
placed on
 
nonaccrual status
 
is reversed
 
against interest
 
income. The interest
on these
 
loans is
 
accounted for
 
on the
 
cash-basis
 
or cost-recovery
 
method, under
 
which cash
 
collections are
 
applied to
unpaid principal, which may change as conditions dictate.
 
The Company has determined that the entire balance of
 
a loan is contractually delinquent for all
 
classes if the minimum
payment is not received by
 
the specified due date on
 
the borrower's statement. Interest and fees
 
continue to accrue on past
due loans until the date the loan goes into nonaccrual
 
status.
The Company provides for loan losses through a provision for credit losses charged to operations. When management
believes that a
 
loan or a portion
 
of the loan balance
 
is uncollectible, that
 
amount is charged
 
against the ACL.
 
Subsequent
recoveries, if any,
 
are credited to the ACL.
The ACL
 
reflects management's
 
judgment of
 
probable loan
 
losses inherent
 
in the
 
portfolio at
 
the balance
 
sheet date.
Management uses a disciplined
 
process and methodology
 
to establish the ACL
 
each quarter.
 
To
 
determine the total
 
ACL,
the Company
 
estimates the
 
reserves needed
 
for each
 
segment of
 
the portfolio,
 
including loans
 
analyzed individually
 
and
loans analyzed on a pooled basis. The ACL consists
 
of the amount applicable to the following segments:
•
 
Residential real estate
•
 
Commercial real estate
•
 
Commercial and industrial
•
 
Foreign banks
•
 
Other loans (secured and unsecured consumer loans)
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
 
17
 
USCB Financial Holdings, Inc.
 
2022 10-K/A
Residential
 
real
 
estate
 
loans
 
are
 
underwritten
 
following
 
the
 
policies
 
of
 
the
 
Company
 
which
 
includes
 
a
 
review
 
of
 
the
borrower’s credit, capacity
 
and the collateral
 
securing the loan.
 
The borrower’s ability
 
to repay involves
 
an analysis of
 
factors
including: current
 
income, employment
 
status, monthly
 
payment of loan,
 
current debt obligations,
 
monthly debt
 
to income
ratio and credit history. The Company relies on appraisals in determining the value of the property.
 
Risk is mitigated by this
analysis and the diversity of the residential portfolio.
Commercial real estate
 
loans are
 
secured by liens
 
on commercial properties,
 
land, construction and
 
multifamily housing.
Underwriting
 
of
 
commercial
 
loans
 
will
 
analyze
 
the
 
key
 
market
 
and
 
business
 
factors
 
to
 
arrive
 
at
 
a
 
decision
 
on
 
the
 
credit
worthiness of the borrower.
 
The analysis may include
 
the capacity of the borrower,
 
income generated by property
 
for debt
service, other
 
sources of
 
repayment, sensitivity
 
analysis to
 
fluctuations in
 
market conditions
 
including vacancy
 
and rental
rates in geographic location and loan to value. Land and construction analysis will include the time to develop, sell or lease
the property.
 
Appraisals
 
are used
 
to determine
 
the value
 
of the
 
underlying
 
collateral.
 
Risk
 
is mitigated
 
as the
 
properties
securing the commercial real estate loans are diverse in
 
type, location, and loan structure.
 
Commercial
 
and
 
industrial
 
loans
 
are
 
secured
 
by
 
the
 
business
 
assets
 
of
 
the
 
company
 
and
 
may
 
include
 
equipment,
inventory, and receivables.
 
The loans are underwritten based on the
 
income capacity of the business, the ability
 
to service
the debt based
 
on operating cash
 
flows, the credit
 
worthiness of
 
the borrower,
 
other sources
 
of repayment and
 
collateral.
The Company mitigates the risk in the commercial portfolio
 
through industry diversification.
 
Foreign Banks
 
loans are
 
short term
 
loans with
 
international correspondent
 
banking institutions
 
primarily
 
domiciled in
Latin America. Most of these loans are for trade capital and have a
 
life of less than one year. The
 
Company’s credit review
includes a credit analysis, peer comparison and current
 
country risk overview.
 
Annual re-evaluation of the risk rating of the
borrower and country and a review of authorized
 
signer within the Company.
 
The risk is mitigated as these loans are short
term, have limited exposure, and are geographically dispersed.
 
Other
 
loans
 
are
 
secured
 
and
 
unsecured
 
consumer
 
loans
 
including
 
personal
 
loans,
 
overdrafts
 
and
 
deposit
 
account
collateralized
 
loans.
 
Repayment
 
of
 
these
 
loans
 
are
 
primarily
 
from
 
the
 
personal
 
income
 
of
 
the
 
borrowers.
 
Loans
 
are
underwritten based on the credit worthiness of the borrower.
 
The risk on these loans is mitigated by small loan balances.
 
In
 
determining
 
the
 
balance
 
of
 
the
 
ACL,
 
loans
 
are
 
pooled
 
by
 
product
 
segments
 
with
 
similar
 
risk
 
characteristics
 
and
management evaluates
 
the ACL
 
on each
 
segment and
 
as a whole
 
to maintain
 
the allowance
 
at an
 
adequate level
 
based
on factors which, in
 
management's judgment, deserve
 
current recognition in estimating
 
credit losses. Such
 
factors include
changes in prevailing economic conditions, historical loss experience,
 
delinquency trends, changes in the composition and
size of the loan portfolio and the overall credit worthiness
 
of the borrowers.
The ACL
 
consists of
 
general and
 
specific components.
 
The following
 
is how
 
management determines
 
the balance
 
of
the general component for the ACL account for each segment
 
of the loans as described above.
 
The loan segments are
 
primarily grouped by
 
collateral type with similar
 
risk characteristics and
 
a historical loss
 
rate is
determined based on a ten year look back period. The Company applies time
 
weights to consider various stages of a credit
cycle.
 
The
 
ACL
 
calculation
 
is
 
based
 
on
 
the
 
Company’s
 
own
 
net
 
loss
 
experience
 
adjusted
 
for
 
certain
 
qualitative
 
and
environmental factors. To
 
estimate the impact of
 
non-recurrent losses, management
 
has developed a statistical
 
study that
tracks historical non-recurring
 
losses at a
 
loan level. This
 
analysis is
 
used to estimate
 
an adjusted
 
loss rate for
 
each loan
pool. Management believes the
 
effect of these losses
 
results in a loss
 
rate that is more consistent
 
with the behavior of
 
the
loan portfolio in the normal course of business.
 
Qualitative
 
factors
 
are
 
applied
 
to
 
historical
 
loss
 
rates
 
based
 
on
 
management's
 
experience
 
and
 
assessment.
 
The
following are the factors used to adjust the historical loss
 
rates:
 
•
 
Loan quality review
•
 
Lending and credit management /staff expertise
 
and practices
•
 
Economic and business conditions
•
 
Lending and credit underwriting policies and procedures
•
 
Problem loan levels and trends
•
 
Collateral concentrations
•
 
Large obligor concentration
•
 
New loan volumes
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
 
18
 
USCB Financial Holdings, Inc.
 
2022 10-K/A
•
 
Combined loan to value (“CLTV”)
 
qualitative adjustment for substandard accrual loan segment
Changes in these factors could
 
result in material adjustments to the
 
ACL. The losses the Company may
 
ultimately incur
could differ materially from the amounts estimated
 
in arriving at the ACL.
In addition
 
to the
 
ACL, the
 
Company also
 
estimates probable
 
losses related
 
to financial
 
instruments with
 
off-balance
sheet risk, such as letters
 
of credit and unfunded loan
 
commitments, and records these estimates
 
in other liabilities on the
Consolidated
 
Balance
 
Sheets
 
with
 
the
 
offset
 
recorded
 
in
 
non-interest
 
expense
 
on
 
the
 
Consolidated
 
Statements
 
of
Operations.
 
Financial
 
instruments
 
with
 
off-balance
 
sheet
 
risk
 
are
 
subject
 
to
 
review
 
on
 
an
 
aggregate
 
basis.
 
Past
 
loss
experience and
 
any other
 
pertinent information is
 
reviewed, resulting in
 
the estimation of
 
the reserve
 
for financial
 
instruments
with off-balance sheet risk.
A loan is considered
 
impaired when, based
 
on current information
 
and events, it
 
is probable that
 
the Company will
 
be
unable to
 
collect the
 
scheduled payments
 
of principal
 
or interest
 
when due
 
according to
 
the contractual
 
terms of
 
the loan
agreement or when the loan
 
is designated as a Troubled
 
Debt Restructuring (“TDR”). Factors
 
considered by management
in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and
interest payments when due.
 
Loans that experience insignificant
 
payment delays and payment
 
shortfalls generally are not
classified as impaired. Impairment is measured on a loan by loan basis by either the present
 
value of expected future cash
flows discounted at the loan's effective
 
interest rate, the loan's obtainable
 
fair value, or the fair value of
 
the collateral, if the
loan
 
is
 
collateral
 
dependent.
 
If
 
management
 
determines
 
that
 
the
 
value
 
of
 
the
 
impaired
 
loan
 
is
 
less
 
than
 
the
 
recorded
investment in the loan (outstanding principal balance plus accrued interest, net of previous charge-offs, and net of deferred
loan fees or cost), impairment is recognized through an allowance
 
estimate or a charge-off to the ACL.
In
 
situations
 
where,
 
due
 
to
 
a
 
borrower's
 
financial
 
difficulties,
 
management
 
grants
 
a
 
concession
 
for
 
other
 
than
 
an
insignificant period of time to the borrower that would not
 
otherwise be granted, the loan is classified as a TDR.
 
On March 27,
 
2020, the Coronavirus Aid,
 
Relief, and Economic
 
Security Act (“CARES Act”)
 
was signed by
 
the President
of the United
 
States. The
 
CARES Act
 
has certain
 
provisions which
 
encourage financial
 
institutions to
 
prudently work
 
with
borrowers impacted
 
by COVID
 
-19. Under
 
these provisions,
 
modifications
 
deemed to
 
be COVID
 
-19 related
 
would not
 
be
considered a TDR if the loan was not more than 30 days past
 
due as of December 31, 2019. The deferral would need to be
executed March
 
1, 2020
 
and the
 
earlier of
 
60 days
 
after the
 
date of
 
termination
 
of the
 
COVID-19 national
 
emergency
 
or
December 31,
 
2020. Additional
 
legislation was
 
passed in
 
December
 
of 2020
 
that
 
extended
 
the TDR
 
relief to
 
January
 
1,
2022. Banking regulators issued similar guidance clarifying that a COVID-19
 
related modification should not be considered
a TDR if the borrower was current on payments at the time the
 
underlying loan modification program was implemented and
considered short-term. See Note 3 “Loans” for additional disclosures
 
of loans that were modified and not considered TDR.
 
In addition to the
 
allowance for the
 
pooled portfolios, management
 
has developed a
 
separate allowance for
 
loans that
are identified as
 
impaired through a
 
TDR. These loans
 
are excluded from
 
the general component
 
of the ACL,
 
and a separate
reserve is provided under the accounting guidance for loan
 
impairment. Residential loans whose terms have been modified
in a TDR are also individually analyzed for estimated impairment.
The Company's charge-off policy is to review all impaired loans
 
on a quarterly basis in order to monitor the Company's
ability to
 
collect
 
them
 
in
 
full
 
at maturity
 
date
 
and/or
 
in
 
accordance
 
with
 
terms
 
of
 
any restructurings.
 
For
 
loans
 
which are
collateral dependent,
 
or deemed to
 
be uncollectible,
 
any shortfall
 
in the fair
 
value of
 
the collateral
 
relative to
 
the recorded
investment in the loan is charged off.
 
Concentration of Credit Risks
Credit
 
risk
 
represents
 
the
 
accounting
 
loss
 
that
 
would
 
be
 
recognized
 
at
 
the
 
reporting
 
date
 
if
 
counterparties
 
failed
 
to
perform as contracted and any collateral or security proved to be insufficient
 
to cover the loss. Concentrations of credit risk
(whether on or off-balance sheet) arising from financial instruments exist in relation to certain groups
 
of customers. A group
concentration arises when
 
a number of
 
counterparties have
 
similar economic characteristics
 
that would cause
 
their ability
to meet contractual obligations to be similarly affected by changes in economic or other conditions. The Company does not
have a significant exposure to any individual customer
 
or counterparty.
Most of the Company's business activity is
 
with customers located within its primary market area, which
 
is generally the
State of Florida. The Company's loan portfolio is concentrated largely in real estate and commercial loans in South Florida.
Many of the Company's
 
loan customers are engaged
 
in real estate development.
 
Circumstances, which negatively
 
impact
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
 
19
 
USCB Financial Holdings, Inc.
 
2022 10-K/A
the South Florida real estate industry
 
or the South Florida economy, in general, could adversely impact
 
the Company's loan
portfolio.
At December 31,
 
2022 and
 
2021, the
 
Company had
 
a concentration
 
of risk
 
with loans
 
outstanding to
 
the Company’s
top ten lending relationships
 
totaling $
197.9
 
million and $
156.4
 
million, respectively.
 
At December 31, 2022 and
 
2021, this
concentration represented
13.1
%, of
 
the net
 
loans outstanding.
 
For the
 
period ended
 
December 31,
 
2022 there
 
was
one
commercial real estate loan note with an outstanding balance of $
20
 
million collateralized by a 1
st
 
lien commercial property
located in New York
 
State.
 
At December 31,
 
2022, the
 
Company also
 
had a
 
concentration of
 
risk with
 
loans outstanding
 
totaling $
88.8
 
million to
foreign banks located
 
in Ecuador,
 
Dominican Republic, Honduras,
 
and El Salvador.
 
At December 31, 2021,
 
the Company
also had a concentration of risk
 
with loans outstanding totaling $
47.9
 
million to foreign banks located in
 
Ecuador, Honduras,
and
 
El
 
Salvador.
 
These
 
banks
 
maintained
 
deposits
 
with
 
right
 
of
 
offset
 
totaling
 
$
31.4
 
million
 
and
 
$
28.9
 
million
 
at
December 31, 2022 and 2021, respectively.
At various times during
 
the year,
 
the Company has maintained
 
deposits with other
 
financial institutions. The exposure
to the Company from
 
these transactions is solely
 
dependent upon daily balances
 
and the financial strength
 
of the respective
institution.
Premises and Equipment, net
Land is
 
carried at
 
cost. Premises
 
and equipment
 
are stated
 
at cost
 
less accumulated
 
depreciation
 
and amortization.
Depreciation is computed
 
on the straight-line
 
method over the
 
estimated useful life
 
of the asset. Leasehold
 
improvements
are amortized over the
 
remaining term of the
 
applicable leases or their
 
useful lives, whichever
 
is shorter.
 
Estimated useful
lives of these assets were as follows:
Building
 
40
 
years
Furniture, fixtures and equipment
 
3
 
to
25
 
years
Computer hardware and software
 
3
 
to
5
 
years
Leasehold improvements
 
Shorter of life or term of lease
Maintenance
 
and
 
repairs
 
are
 
charged
 
to
 
expense
 
as
 
incurred
 
while
 
improvements
 
and
 
betterments
 
are
 
capitalized.
When items are retired or are
 
otherwise disposed of, the related costs
 
and accumulated depreciation and amortization
 
are
removed from the accounts and any resulting gains or losses
 
are credited or charged to income.
Other Real Estate Owned
Other real estate
 
owned (“OREO”)
 
consists of real
 
estate property
 
acquired through,
 
or in lieu
 
of, foreclosure
 
that are
held for sale and are initially recorded at
 
the fair value of the property less estimated selling
 
costs at the date of foreclosure,
establishing a
 
new cost
 
basis. Subsequent
 
to foreclosure,
 
valuations are
 
periodically performed
 
by management
 
and the
assets are carried at the lower of carrying amount or fair value less cost to sell. Subsequent write-downs are recognized as
a valuation allowance with the offset recorded in the Consolidated Statements of
 
Operations. Carrying costs are charged to
other real estate owned expenses
 
in the accompanying Consolidated
 
Statements of Operation. Gains
 
or losses on sale of
OREO
 
are
 
recognized
 
when
 
consideration
 
has
 
been
 
exchanged,
 
all
 
closing
 
conditions
 
have
 
been
 
met
 
and
 
permanent
financing has been arranged.
 
Bank Owned Life Insurance
Bank owned
 
life insurance
 
(“BOLI”) is
 
carried at
 
the amount
 
that could
 
be realized
 
under the
 
contract at
 
the balance
sheet date, which is typically
 
cash surrender value. Changes
 
in cash surrender value are recorded
 
in non-interest income.
At December 31, 2022, the Company maintained BOLI policies with
 
five insurance carriers with a combined cash surrender
value
 
of
 
$
42.8
 
million.
 
These
 
policies
 
cover
 
certain
 
present
 
and
 
former
 
executives
 
and
 
officers,
 
the
 
Company
 
is
 
the
beneficiary of these policies.
Employee 401(k) Plan
The
 
Company
 
has
 
an
 
employee
 
401(k)
 
plan
 
covering
 
substantially
 
all
 
eligible
 
employees.
 
Employee
 
401(k)
 
plan
expense is the amount of matching contributions.
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
 
20
 
USCB Financial Holdings, Inc.
 
2022 10-K/A
Income Taxes
Income taxes are accounted for under the
 
asset and liability method. Deferred tax
 
assets and liabilities are recognized
for the
 
future
 
tax
 
consequences
 
attributable
 
to differences
 
between the
 
financial
 
statement
 
carrying
 
amounts
 
of existing
assets and
 
liabilities and
 
their respective
 
tax bases
 
and operating
 
loss and
 
tax credit
 
carryforwards.
 
Deferred tax
 
assets
and
 
liabilities
 
are
 
measured
 
using
 
enacted
 
tax
 
rates
 
expected
 
to
 
apply
 
to
 
taxable
 
income
 
in
 
the
 
years
 
in
 
which
 
those
temporary differences are expected to be recovered or
 
settled. The effect on deferred tax assets and liabilities
 
of a change
in tax rates is recognized in income in the period that includes
 
the enactment date.
 
Management is required to
 
assess whether a valuation
 
allowance should be established
 
on the net deferred tax
 
asset
based on the
 
consideration of
 
all available evidence
 
using a more
 
likely than not
 
standard. In its
 
evaluation, Management
considers taxable loss
 
carry-back availability, expectation of sufficient
 
taxable income, trends
 
in earnings, the
 
future reversal
of temporary differences, and available tax planning
 
strategies.
 
The Company recognizes positions taken
 
or expected to be
 
taken in a tax
 
return in accordance with existing accounting
guidance on
 
income taxes
 
which prescribes
 
a recognition threshold
 
and measurement
 
process. Interest
 
and penalties
 
on
tax liabilities, if any, would
 
be recorded in interest expense and other operating noninterest
 
expense, respectively.
Impairment of Long-Lived Assets
The Company's long-lived
 
assets, such as premises
 
and equipment, are reviewed
 
for impairment whenever
 
events or
changes in circumstances
 
indicate that
 
the carrying
 
amount of
 
an asset may
 
not be recoverable.
 
Recoverability of
 
assets
to be held and
 
used is measured by a
 
comparison of the carrying amount of
 
an asset to estimated undiscounted future
 
cash
flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an
impairment charge
 
is recognized
 
by the
 
amount by
 
which the
 
carrying amount
 
of the
 
asset exceeds
 
the fair
 
value of
 
the
asset. Assets
 
to be
 
disposed of
 
would be
 
separately
 
presented in
 
the Consolidated
 
Balance Sheets
 
and reported
 
at the
lower of
 
the carrying
 
amount or
 
fair value
 
less costs
 
to sell
 
and are
 
no longer
 
depreciated. The
 
assets and
 
liabilities of
 
a
disposal group classified as held for
 
sale would be presented separately in
 
the appropriate asset and liability sections of
 
the
Consolidated Balance Sheets.
 
Transfer of Financial Assets
Transfers of
 
financial assets
 
are accounted for
 
as sales,
 
when control over
 
the assets
 
has been surrendered.
 
Control
over
 
transferred
 
assets
 
is
 
deemed
 
to
 
be
 
surrendered
 
when
 
(i)
 
the
 
assets
 
have
 
been
 
isolated
 
from
 
the
 
Company
 
-
 
put
presumptively
 
beyond
 
the
 
reach
 
of
 
the
 
transferor
 
and
 
its
 
creditors,
 
even
 
in
 
bankruptcy
 
or
 
other
 
receivership,
 
(ii)
 
the
transferee obtains
 
the right
 
(free of conditions
 
that constrain
 
it from taking
 
advantage of
 
that right)
 
to pledge
 
or exchange
the transferred
 
assets,
 
and
 
(iii) the
 
Company
 
does not
 
maintain effective
 
control
 
over
 
the transferred
 
assets
 
through
 
an
agreement to repurchase them before their maturity or
 
the ability to unilaterally cause the holder to return specific assets.
Comprehensive Income (Loss)
Under
 
GAAP,
 
certain
 
changes
 
in
 
assets
 
and
 
liabilities,
 
such
 
as
 
unrealized
 
holding
 
gains
 
and
 
losses
 
on
 
securities
available-for-sale, are
 
excluded from
 
current period
 
earnings and
 
reported as
 
a separate
 
component of
 
the stockholders’
equity
 
section
 
of
 
the
 
Consolidated
 
Balance
 
Sheets,
 
such
 
items,
 
along
 
with
 
net
 
income
 
(loss),
 
are
 
components
 
of
comprehensive
 
income
 
(loss).
 
Additionally,
 
any
 
unrealized
 
gains
 
or
 
losses
 
on
 
transfers
 
of
 
investment
 
securities
 
from
available-for-sale to held-to-maturity are recorded to accumulated other comprehensive
 
income on the date of transfer and
amortized over the remaining life of
 
each security.
 
The amortization of the unrealized
 
gain or loss on transferred securities
is reported as a component of comprehensive income
 
(loss). See Note 2 “Investment Securities” for further
 
discussion.
Advertising Costs
Advertising costs are expensed as incurred.
Earnings per Common Share
Basic earnings
 
per common
 
share is
 
net income
 
available to
 
common stockholders
 
divided by
 
the weighted
 
average
number
 
of
 
common
 
shares
 
outstanding
 
during
 
the
 
period.
 
Diluted
 
earnings
 
per
 
common
 
share
 
included
 
the
 
effect
 
of
additional potential common shares issuable under vested stock options. Basic and diluted earnings per share are updated
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
 
21
 
USCB Financial Holdings, Inc.
 
2022 10-K/A
to reflect the effect of stock splits as occurred. See Note 14 “Earnings Per Share” for additional information on earnings per
common share. See Note 13 “Stockholders’ Equity” for further
 
discussion on stock splits.
Interest Income
Interest income is recognized as earned, based upon the principal
 
amount outstanding, on an accrual basis.
Operating Segments
While the Company monitors
 
the revenue streams of
 
the various products
 
and services, operations
 
are managed and
financial performance
 
is evaluated on
 
a Company wide
 
basis. Operating results
 
of the individual
 
products are
 
not used to
make resource allocations or performance decisions by Company
 
management.
Stock-Based Compensation
Stock based compensation accounting guidance requires
 
that the compensation cost relating to share-based payment
transactions be recognized in the accompanying Consolidated
 
Financial Statements. That cost will be measured
 
based on
the grant
 
date fair
 
value of
 
the equity
 
or liability
 
instruments issued.
 
The stock-based
 
compensation accounting
 
guidance
covers
 
a
 
wide
 
range
 
of
 
share-based
 
compensation
 
arrangements
 
including
 
stock
 
options,
 
restricted
 
share
 
plans,
performance-based awards, share appreciation rights, and
 
employee share purchase plans.
The stock-based compensation accounting guidance
 
requires that compensation cost
 
for all stock
 
awards be calculated
and recognized
 
over the
 
employees' service period,
 
generally defined as
 
the vesting
 
period. For
 
awards with graded-vesting,
compensation cost
 
is recognized
 
on
 
a straight-line
 
basis over
 
the
 
requisite
 
service
 
period for
 
the
 
entire award.
 
A Black-
Scholes model is used to estimate the fair value of stock
 
options.
Loss Contingencies
Loss
 
contingencies,
 
including
 
claims
 
and
 
legal
 
actions
 
arising
 
in
 
the
 
normal
 
course
 
of
 
business,
 
are
 
recorded
 
as
liabilities when the
 
likelihood of loss is
 
probable, and an
 
amount or range of
 
loss can be
 
reasonably estimated. In the
 
opinion
of management, none of these actions, either individually or in the aggregate, is expected to have a material adverse effect
on the Company’s Consolidated Financial
 
Statements. See Note 18 “Loss Contingencies” for further
 
details.
Dividend Restrictions
Banking
 
regulations
 
require
 
maintaining
 
certain
 
capital
 
levels
 
and
 
may
 
limit
 
the
 
dividends
 
paid
 
by
 
the
 
Bank
 
to
 
the
Company or by the Company to the shareholders.
Fair Value Measurements
Fair values
 
of financial
 
instruments are
 
estimated using
 
relevant market
 
information and
 
other assumptions,
 
as more
fully disclosed in Note
 
12 “Fair Value
 
Measurements”. Fair value estimates
 
involve uncertainties and
 
matters of significant
judgment. Changes in assumptions or in market conditions
 
could significantly affect the estimates.
Derivative Instruments
Derivative financial instruments are
 
carried at fair
 
value and reflect
 
the estimated amount that
 
would have been
 
received
to
 
terminate
 
these
 
contracts
 
at
 
the
 
reporting
 
date
 
based
 
upon
 
pricing
 
or
 
valuation
 
models
 
applied
 
to
 
current
 
market
information.
The
 
Company
 
enters
 
into
 
interest
 
rate
 
swaps
 
to
 
provide
 
commercial
 
loan
 
clients
 
the
 
ability
 
to
 
swap
 
from
 
a
 
variable
interest rate
 
to a
 
fixed rate.
 
The Company
 
enter
 
into a
 
floating-rate
 
loan with
 
a
 
customer with
 
a separately
 
issued swap
agreement allowing
 
the customer
 
to convert
 
floating
 
payments of
 
the loan
 
into a
 
fixed interest
 
rate. To
 
mitigate risk,
 
the
Company will enter into a matching agreement with a
 
third party to offset the exposure on the
 
customer agreement. These
swaps are
 
not considered
 
to be
 
qualified hedging
 
transactions and
 
the unmatched
 
unrealized gain
 
or loss
 
is recorded
 
in
other non-interest income.
 
 
 
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
 
22
 
USCB Financial Holdings, Inc.
 
2022 10-K/A
Revenue from Contracts with Customers
Revenue from
 
contracts with customers
 
is recognized in
 
an amount that
 
reflects the consideration
 
the Company expects
to receive for the
 
services the Company
 
provides to its
 
customers. The main
 
revenue earned by
 
the Company from
 
loans
and investment
 
securities
 
are excluded
 
from the
 
accounting standard
 
update “Revenue
 
from Contracts
 
with Customers”.
 
Deposit and
 
service charge
 
fees, consisting
 
of primarily
 
monthly maintenance
 
fees, wire
 
fees, ATM
 
interchange fees
 
and
other transaction-based fees, are the
 
most significant types of revenue within
 
the accounting standard update.
 
Revenue is
recognized when the service provided by the
 
Company is complete. The aggregate amount
 
of revenue within the scope of
this standard that is received from sources other than deposit
 
service charges and fees is not material.
 
Cash Flow Statement
The Company reports the net activity rather than gross activity in the Consolidated
 
Statements of Cash Flows. The net
cash flows
 
are reported for
 
loans held
 
for investment, accrued
 
interest receivable, deferred
 
tax asset, other
 
assets, customer
deposits, accrued interest payable, other liabilities, and proceeds
 
from issuance of Class A common shares.
Reclassifications
Certain
 
amounts
 
in
 
the
 
Consolidated
 
Financial
 
Statements
 
have
 
been
 
reclassified
 
to
 
conform
 
to
 
the
 
current
presentation. Reclassifications had no impact on the net income
 
or stockholders’ equity of the Company.
Recently Issued Accounting Standards – Not Yet
 
Adopted
Measurement of Credit Losses on Financial Instruments
In June
 
2016, the FASB issued
 
ASU 2016-13,
 
Financial Instruments -
 
Credit Losses (Topic 326); Measurement
 
of Credit
Losses on Financial Instruments. This accounting standard update (“ASU” or “Update”)
 
on accounting for current expected
credit
 
losses
 
on
 
financial
 
instruments
 
(“CECL”)
 
will
 
replace
 
the
 
current
 
probable
 
incurred
 
loss
 
impairment
 
methodology
under U.S. GAAP
 
with a methodology
 
that reflects the
 
expected credit losses.
 
The Update is
 
intended to provide
 
financial
statement
 
users
 
with
 
more
 
decision-useful
 
information
 
about
 
expected
 
credit
 
losses.
 
This
 
Update
 
is
 
applicable
 
to
 
the
Company
 
on
 
a modified
 
retrospective
 
basis
 
for
 
interim
 
and
 
annual
 
periods
 
in
 
fiscal
 
years
 
beginning
 
after
 
December 15,
2022. The Company adopted this
 
ASU on January 1, 2023. To date, the Company executed a
 
detailed implementation plan
through the adoption date, implemented a
 
software solution to assist with the
 
CECL estimation process, and has completed
parallel run models, and finished a data gap analysis.
The company expects its allowance for credit losses to
 
increase in 2023 approximately $
1.0
 
million to $
2.0
 
million upon
adoption
 
of
 
ASU
 
2016-13
 
compared
 
to
 
its
 
allowance
 
for
 
loan
 
losses
 
at
 
December
 
31,
 
2022.
 
Reserve
 
on
 
unfunded
commitments will
 
also increase
 
approximately $
200
 
thousand to
 
$
600
 
thousand and
 
it will
 
be recognized
 
as a
 
liability on
the
 
Consolidated
 
Balance
 
Sheet.
 
The
 
Company
 
reviewed
 
it’s
 
held-to-maturity
 
debt
 
securities
 
and
 
the
 
allowance
 
was
deemed immaterial. The Company will
 
initially apply the impact
 
of the new guidance through
 
a cumulative-effect adjustment
to retained
 
earnings
 
as
 
of
 
January
 
1,
 
2023. Future
 
adjustments
 
to
 
credit
 
loss
 
expectations
 
will
 
be
 
recorded
 
through
 
the
income statement as charges or credits to earnings.
The disclosed estimates are subject to further refinement upon finalization of the Company’s review of the calculations,
assumptions, methodologies and judgments. Internal controls over financial reporting relating
 
to these new processes have
been designed
 
and
 
implemented
 
and are
 
being evaluated.
 
The
 
Company
 
is in
 
the final
 
stages
 
of completing
 
the formal
governance
 
and
 
approval
 
process.
 
The
 
ongoing
 
impact
 
to
 
the
 
Company’s
 
results
 
of
 
operations
 
in
 
future
 
periods
 
will
 
be
influenced
 
by
 
the
 
loan
 
portfolio
 
composition
 
and
 
by
 
macroeconomic
 
conditions
 
and
 
forecasts
 
at
 
each
 
reporting
 
date.
Adoption of
 
the standard
 
on the
 
first quarter
 
of 2023
 
is expected
 
to result
 
in higher
 
volatility in
 
the quarterly
 
provision for
credit losses when compared to the Company’s
 
historical results under the incurred loss model.
Troubled Debt Restructurings and
 
Vintage Disclosures
In
 
March
 
2022,
 
the
 
FASB
 
issued
 
ASU
 
2022-02,
 
Financial
 
Instruments
 
–
 
Credit
 
Losses
 
(Topic
 
326):
 
Troubled
 
Debt
Restructurings
 
and
 
Vintage
 
Disclosures.
 
This
 
accounting
 
standard
 
eliminates
 
the
 
accounting
 
guidance
 
for
 
troubled
 
debt
restructurings
 
by
 
creditors
 
in
 
ASC
 
310-40,
 
and
 
it
 
enhances
 
disclosure
 
requirements
 
for
 
some
 
loan
 
refinancings
 
and
restructurings
 
involving
 
borrowers
 
experiencing
 
financial
 
difficulty.
 
Specifically,
 
rather
 
than
 
applying
 
the
 
troubled
 
debt
restructuring recognition and measurement guidance,
 
creditors will evaluate all
 
loan modifications to determine if
 
they result
in
 
a
 
new
 
loan
 
or
 
a
 
continuation
 
of
 
the
 
existing
 
loan.
 
Losses
 
associated
 
with
 
troubled
 
debt
 
restructurings
 
should
 
be
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
 
23
 
USCB Financial Holdings, Inc.
 
2022 10-K/A
incorporated in a
 
creditor’s estimate of
 
its allowance for
 
credit losses. Additionally,
 
public business entities
 
are required to
disclose current-period gross write-offs by year
 
of origination for loan financing receivables and net investment
 
in leases.
Reference Rate Reform
In
 
March
 
2020,
 
the
 
FASB
 
issued
 
ASU
 
2020-04,
 
Reference
 
Rate
 
Reform
 
(Topic
 
848),
 
Facilitation
 
of
 
the
 
Effects
 
of
Reference Rate Reform
 
on Financial Reporting.
 
In January 2021,
 
the FASB
 
clarified the scope
 
of this guidance
 
with ASU
2021-01 which provides
 
optional guidance for
 
a limited period of
 
time to ease the
 
burden in accounting for
 
(or recognizing
the effects
 
of) reference
 
rate
 
reform on
 
financial
 
reporting.
 
This
 
ASU is
 
effective
 
March 12,
 
2020 through
 
December 31,
2024. The
 
Company is
 
evaluating the
 
impact of
 
this ASU
 
and has
 
not yet
 
determined whether
 
LIBOR transition
 
and this
ASU will have material effects on our business
 
operations and consolidated financial statements.
2.
 
INVESTMENT SECURITIES
 
The following
 
tables present
 
a summary
 
of the amortized
 
cost, unrealized
 
or unrecognized
 
gains and
 
losses,
 
and fair
value of investment securities at the dates indicated (in
 
thousands):
December 31, 2022
Available-for-sale:
Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Fair Value
U.S. Government Agency
$
10,177
$
-
$
(1,522)
$
8,655
Collateralized mortgage obligations
118,951
-
(23,410)
95,541
Mortgage-backed securities - Residential
73,838
-
(12,959)
60,879
Mortgage-backed securities - Commercial
32,244
15
(4,305)
27,954
Municipal securities
25,084
-
(6,601)
18,483
Bank subordinated debt securities
15,964
5
(1,050)
14,919
Corporate bonds
4,037
-
(328)
3,709
$
280,295
$
20
$
(50,175)
$
230,140
Held-to-maturity:
U.S. Government Agency
$
44,914
$
25
$
(5,877)
$
39,062
U.S. Treasury
9,841
-
(13)
9,828
Collateralized mortgage obligations
68,727
28
(7,830)
60,925
Mortgage-backed securities - Residential
42,685
372
(4,574)
38,483
Mortgage-backed securities - Commercial
11,442
-
(665)
10,777
Corporate bonds
11,090
-
(1,077)
10,013
$
188,699
$
425
$
(20,036)
$
169,088
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
 
24
 
USCB Financial Holdings, Inc.
 
2022 10-K/A
December 31, 2021
Available-for-sale:
Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Fair Value
U.S. Government Agency
$
10,564
$
6
$
(50)
$
10,520
Collateralized mortgage obligations
160,506
22
(3,699)
156,829
Mortgage-backed securities - Residential
120,643
228
(2,029)
118,842
Mortgage-backed securities - Commercial
49,905
820
(608)
50,117
Municipal securities
25,164
6
(894)
24,276
Bank subordinated debt securities
27,003
1,418
(13)
28,408
Corporate bonds
12,068
482
-
12,550
$
405,853
$
2,982
$
(7,293)
$
401,542
Held-to-maturity:
U.S. Government Agency
$
34,505
$
14
$
(615)
$
33,904
Collateralized mortgage obligations
44,820
-
(1,021)
43,799
Mortgage-backed securities - Residential
26,920
-
(568)
26,352
Mortgage-backed securities - Commercial
3,103
-
(90)
3,013
Corporate bonds
13,310
-
(221)
13,089
$
122,658
$
14
$
(2,515)
$
120,157
For the year
 
ended December 31,
 
2022, there were
26
 
investment securities
 
that were transferred
 
from available-for-
sale
 
(“AFS”)
 
to
 
held-to-maturity
 
(“HTM”)
 
with
 
an
 
amortized
 
cost
 
basis
 
and
 
fair
 
value
 
amount
 
of
 
$
74.4
 
million
 
and
$
63.8
 
million, respectively.
 
On the
 
date of
 
transfer,
 
these securities
 
had a
 
total net
 
unrealized loss
 
of $
10.6
 
million which
was included in accumulated other comprehensive income (loss).
 
Transfers of debt securities into the HTM category from the AFS category are made at fair value at the date of transfer.
The unrealized gain or loss at the
 
date of transfer is retained in
 
accumulated other comprehensive income
 
(“AOCI”) and in
the carrying value of the held-to-maturity securities. Such amounts
 
are amortized over the remaining life of the security. For
the year
 
ended December 31,
 
2022, total
 
amortization out
 
of AOCI
 
for the
 
net unrealized
 
losses on
 
securities transferred
from AFS to HTM was $
120
 
thousand and $
108
 
thousand for year ended December 31, 2021.
 
The following
 
table presents
 
the proceeds,
 
realized gross
 
gains and
 
realized gross
 
losses on
 
sales and
 
calls of
 
AFS
debt securities for the years ended December 31, 2022 and
 
2021 (in thousands):
Available-for-sale:
2022
2021
Proceeds from sales and call of securities
$
60,649
$
51,974
Gross Gains
$
217
$
545
Gross Losses
(2,746)
(331)
Net realized gains (losses)
$
(2,529)
$
214
The
 
amortized
 
cost
 
and
 
fair
 
value
 
of
 
investment
 
securities,
 
by
 
contractual
 
maturity,
 
are
 
shown
 
below
 
for
 
the
 
date
indicated (in thousands).
 
Actual maturities may
 
differ from contractual
 
maturities because borrowers
 
may have the right
 
to
call or prepay
 
obligations with or
 
without call or
 
prepayment penalties. Securities not
 
due at a
 
single maturity date are
 
shown
separately.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
 
25
 
USCB Financial Holdings, Inc.
 
2022 10-K/A
Available-for-sale
Held-to-maturity
December 31, 2022:
Amortized
Cost
Fair Value
Amortized
Cost
Fair Value
Due within one year
$
-
$
-
$
1,515
$
1,475
Due after one year through five years
4,037
3,709
9,575
8,539
Due after five years through ten years
16,964
15,722
-
-
Due after ten years
24,084
17,680
-
-
U.S. Government Agency
10,177
8,655
44,914
39,061
U.S. Treasury
-
-
9,841
9,828
Collateralized mortgage obligations
118,951
95,541
68,727
60,925
Mortgage-backed securities - Residential
 
73,838
60,879
42,685
38,483
Mortgage-backed securities - Commercial
 
32,244
27,954
11,442
10,777
$
280,295
$
230,140
$
188,699
$
169,088
At December 31,
 
2022 and
 
2021, there
 
were no
 
securities to
 
any one
 
issuer,
 
in an
 
amount greater
 
than 10%
 
of total
stockholders’ equity
 
other than
 
the United
 
States Government
 
and Government
 
Agencies. All
 
the collateralized
 
mortgage
obligations
 
and
 
mortgage-backed
 
securities
 
are
 
issued
 
by
 
United
 
States
 
sponsored
 
entities
 
at
 
December 31,
 
2022
 
and
2021.
Information pertaining
 
to investment
 
securities with
 
gross unrealized
 
losses, aggregated
 
by investment
 
category
 
and
length of
 
time that
 
those
 
individual securities
 
have been
 
in a
 
continuous
 
loss position,
 
are presented
 
as of
 
the following
dates (in thousands):
December 31, 2022
Less than 12 months
12 months or more
Total
Fair Value
Unrealized
Losses
Fair Value
Unrealized
Losses
Fair Value
Unrealized
Losses
U.S. Government Agency
$
11,407
(1,093)
36,310
(7,616)
$
47,717
$
(8,709)
U.S. Treasury
9,828
(13)
-
-
9,828
$
(13)
Collateralized mortgage obligations
16,500
(963)
139,965
(34,962)
156,465
$
(35,925)
Mortgage-backed securities -
Residential
5,059
(564)
91,742
(19,348)
96,801
$
(19,912)
Mortgage-backed securities -
Commercial
10,052
(1,173)
26,823
(5,300)
36,875
$
(6,473)
Municipal securities
 
-
-
18,483
(6,601)
18,483
$
(6,601)
Bank subordinated debt securities
11,295
(670)
2,619
(381)
13,914
$
(1,051)
Corporate bonds
13,723
(926)
-
-
13,723
$
(926)
$
77,864
$
(5,402)
$
315,942
$
(74,208)
$
393,806
$
(79,610)
December 31, 2021
Less than 12 months
12 months or more
Total
Fair Value
Unrealized
Losses
Fair Value
Unrealized
Losses
Fair Value
Unrealized
Losses
U.S. Government Agency
$
25,951
$
(254)
$
15,477
$
(516)
$
41,428
$
(770)
Collateralized mortgage obligations
155,668
(3,223)
38,459
(1,497)
194,127
$
(4,720)
Mortgage-backed securities -
Residential
88,772
(1,178)
37,373
(1,274)
126,145
$
(2,452)
Mortgage-backed securities -
Commercial
25,289
(318)
7,507
(309)
32,796
$
(627)
Municipal securities
 
11,292
(395)
11,978
(499)
23,270
$
(894)
Bank subordinated debt securities
4,487
(13)
-
-
4,487
$
(13)
$
311,459
$
(5,381)
$
110,794
$
(4,095)
$
422,253
$
(9,476)
The unrealized losses
 
associated with $
134.7
 
million of investment securities
 
transferred from the AFS
 
portfolio to the
HTM portfolio represent unrealized
 
losses since the date of
 
purchase, independent of the
 
impact associated with changes
in the cost basis upon transfer between portfolios.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
 
26
 
USCB Financial Holdings, Inc.
 
2022 10-K/A
The Company performs a review
 
of the investments that have
 
an unrealized loss to determine
 
whether there have been
any changes in the
 
economic circumstance of the security
 
issuer to indicate that
 
the unrealized loss is
 
impaired on an other-
than-temporary (“OTTI”) basis. Management considers several factors in their analysis including (i) severity and duration of
the impairment, (ii) credit
 
rating of the security
 
including any downgrade,
 
(iii) intent to sell
 
the security,
 
or if it is
 
more likely
than not that it will be required to
 
sell the security before recovery,
 
(iv) whether there have been any payment
 
defaults and
(v) underlying guarantor of the securities.
At
 
December
 
31,
 
2022,
 
the
 
Company
 
had
 
$
53.7
 
million
 
of
 
unrealized
 
losses
 
on
 
mortgage
 
backed
 
securities
 
and
collateralized
 
mortgage
 
obligations
 
of
 
government
 
sponsored
 
entities
 
having
 
a
 
fair
 
value
 
of
 
$
294.6
 
million
 
that
 
were
attributable
 
to
 
a
 
combination
 
of
 
factors,
 
including
 
relative
 
changes
 
in
 
interest
 
rates
 
since
 
the
 
time
 
of
 
purchase.
 
The
contractual cash flows
 
for these securities
 
are guaranteed by
 
U.S. government agencies
 
and U.S. government
 
sponsored
entities. The municipal bonds are of high credit
 
quality and the declines in fair value are not
 
due to credit quality.
 
Based on
the assessment of
 
these mitigating factors, management
 
believes that the
 
unrealized losses on these
 
debt security holdings
are a
 
function of
 
changes in
 
investment spreads
 
and interest
 
rate movements and
 
not changes
 
in credit
 
quality. Management
expects to recover the entire amortized cost basis of these securities.
At December 31, 2022, the
 
Company does not intend to
 
sell debt securities that are
 
in an unrealized loss position and
it is not more than likely than not that the Company will be required to sell
 
these securities before recovery of the amortized
cost basis. Therefore,
 
management does
 
not consider any
 
investment to be
 
other than temporarily
 
impaired at December
31, 2022.
As of December 31, 2022, the Company maintains a master repurchase agreement with a public banking institution for
up
 
to
 
$
20.0
 
million
 
fully
 
guaranteed
 
with
 
investment
 
securities
 
upon
 
withdrawal.
 
Any
 
amounts
 
borrowed
 
would
 
be
 
at
 
a
variable interest rate
 
based on prevailing
 
rates at the
 
time funding is
 
requested. At
 
December 31, 2022, the
 
Company did
no
t have any securities pledged under this agreement.
In 2018, the Company became a Qualified Public Depositor (“QPD”) with the State of Florida. As a QPD, the Company
has the
 
authority to
 
legally maintain public
 
deposits from cities,
 
municipalities, and the
 
State of
 
Florida. These public
 
deposits
are secured by
 
securities pledged to
 
the State of
 
Florida at a
 
ratio of
25
% of the
 
average outstanding uninsured
 
deposits.
The Company must also maintain a minimum amount
 
of pledged securities to be in the program.
At December 31, 2022,
 
the Company
 
had
eighteen
 
securities with a
 
fair value of
 
$
49.0
 
million pledged to
 
the State of
Florida under the public funds program. The Company held
 
a total of $
204.2
 
million in public funds at December 31, 2022.
At December
 
31, 2021,
 
the Company
 
had
eleven
 
securities
 
with a
 
fair value
 
of $
20.4
 
million pledged
 
to the
 
State of
Florida under the public funds program. The Company held
 
a total of $
37.3
 
million in public funds at December 31, 2021.
3.
 
LOANS
The following table is a summary of the distribution of
 
loans held for investment by type (in thousands):
 
December 31, 2022
December 31, 2021
Total
Percent of
Total
Total
Percent of
Total
Residential Real Estate
$
185,636
12.3
%
$
201,359
16.9
%
Commercial Real Estate
970,410
64.4
%
704,988
59.2
%
Commercial and Industrial
126,984
8.4
%
146,592
12.3
%
Foreign Banks
93,769
6.2
%
59,491
5.0
%
Consumer and Other
 
130,429
8.7
%
79,229
6.6
%
Total
 
gross loans
1,507,228
100.0
%
1,191,659
100.0
%
Less: Unearned income
(110)
1,578
Total
 
loans net of unearned income
1,507,338
1,190,081
Less: Allowance for credit losses
17,487
15,057
Total
 
net loans
$
1,489,851
 
$
1,175,024
At December 31, 2022 and 2021, the Company had $
338.1
 
million and $
185.1
 
million, respectively,
 
of commercial real
estate and residential mortgage loans pledged as collateral on lines of credit with the FHLB and the
 
Federal Reserve Bank
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
 
27
 
USCB Financial Holdings, Inc.
 
2022 10-K/A
of Atlanta.
 
At December 31,
 
2022 and 2021
 
the Company
 
had
no
 
loans and one
 
loan for $
1.2
 
million, respectively,
 
in the
process of foreclosure.
The Company was a participant
 
of the Small Business Administration’s
 
(“SBA”) Paycheck Protection Program
 
(“PPP”)
loans. These
 
loans were
 
designed to
 
provide a
 
direct incentive
 
for small
 
businesses to
 
keep their
 
workers on
 
payroll and
had to be used towards payroll cost, mortgage interest, rent, utilities and other costs
 
related to COVID-19. These loans are
forgivable under specific criteria
 
as determined by the SBA. The
 
Company had PPP loans of
 
$
1.3
 
million at December 31,
2022 and $
42.4
 
million at December 31, 2021, which are categorized as
 
commercial and industrial loans. These PPP loans
had deferred loan fees of $
13
 
thousand at December 31, 2022 and $
1.5
 
million at December 31, 2021.
The
 
Company
 
recognized
 
$
1.6
 
million
 
and
 
$
4.5
 
million
 
in
 
PPP
 
loan
 
fees
 
and
 
interest
 
income
 
for
 
the
 
years
 
ended
December 31,
 
2022
 
and
 
2021,
 
respectively,
 
which
 
is
 
reported
 
under
 
loans,
 
including
 
fees
 
within
 
the
 
Consolidated
Statements of Operations.
 
The
 
Company
 
segments
 
the
 
portfolio
 
by
 
pools
 
grouping
 
loans
 
that
 
share
 
similar
 
risk
 
characteristics
 
and
 
employing
collateral type
 
and lien
 
position to
 
group loans
 
according to
 
risk. The
 
Company determines
 
historical
 
loss rates
 
for each
loan
 
pool
 
based
 
on
 
its
 
own
 
loss
 
experience.
 
In
 
estimating
 
credit
 
losses,
 
the
 
Company
 
also
 
considers
 
qualitative
 
and
environmental factors that may cause estimated credit losses
 
for the loan portfolio to differ from historical
 
losses.
Changes
 
in
 
the
 
allowance
 
for
 
credit
 
losses
 
for
 
the
 
years
 
ended
 
December 31,
 
2022
 
and
 
2021
 
are
 
as
 
follows
 
(in
thousands):
 
Residential
Real Estate
Commercial
Real Estate
Commercial
and Industrial
Foreign
Banks
Consumer
and Other
Total
December 31, 2022:
Beginning balance
$
2,498
$
8,758
$
2,775
$
457
$
569
$
15,057
Provision for credit losses
(1,179)
1,385
1,474
263
552
2,495
Recoveries
33
-
18
-
4
55
Charge-offs
-
-
(104)
-
(16)
(120)
Ending Balance
 
$
1,352
$
10,143
$
4,163
$
720
$
1,109
$
17,487
December 31, 2021:
Beginning balance
$
3,408
$
9,453
$
1,689
$
348
$
188
$
15,086
Provision for credit losses
(919)
(695)
955
109
390
(160)
Recoveries
238
-
149
-
5
392
Charge-offs
(229)
-
(18)
-
(14)
(261)
Ending Balance
 
$
2,498
$
8,758
$
2,775
$
457
$
569
$
15,057
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
 
28
 
USCB Financial Holdings, Inc.
 
2022 10-K/A
Allowance for credit losses and the outstanding balances in
 
loans as of December 31, 2022 and 2021 are as
 
follows (in
thousands):
Residential
Real Estate
Commercial
Real Estate
Commercial
and Industrial
Foreign
Banks
Consumer
and Other
Total
December 31, 2022:
Allowance for credit losses:
Individually evaluated for impairment
$
155
$
-
$
41
$
-
$
98
$
294
Collectively evaluated for impairment
1,197
10,143
4,122
720
1,011
17,193
Balances, end of period
$
1,352
$
10,143
$
4,163
$
720
$
1,109
$
17,487
Loans:
Individually evaluated for impairment
$
7,206
$
393
$
82
$
-
$
196
$
7,877
Collectively evaluated for impairment
178,430
970,017
126,902
93,769
130,233
1,499,351
Balances, end of period
$
185,636
$
970,410
$
126,984
$
93,769
$
130,429
$
1,507,228
December 31, 2021:
Allowance for credit losses:
Individually evaluated for impairment
$
178
$
-
$
71
$
-
$
111
$
360
Collectively evaluated for impairment
2,320
8,758
2,704
457
458
14,697
Balances, end of period
$
2,498
$
8,758
$
2,775
$
457
$
569
$
15,057
Loans:
Individually evaluated for impairment
$
9,006
$
696
$
141
$
-
$
224
$
10,067
Collectively evaluated for impairment
192,353
704,292
146,451
59,491
79,005
1,181,592
Balances, end of period
$
201,359
$
704,988
$
146,592
$
59,491
$
79,229
$
1,191,659
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
 
29
 
USCB Financial Holdings, Inc.
 
2022 10-K/A
Credit Quality Indicators
The Company grades loans based on the estimated capability of the borrower to repay the contractual obligation of the
loan agreement based
 
on relevant information
 
which may include:
 
current financial information
 
on the borrower,
 
historical
payment
 
experience,
 
credit
 
documentation
 
and
 
other
 
current
 
economic
 
trends.
 
Internal
 
credit
 
risk
 
grades
 
are
 
evaluated
periodically.
 
The Company's internally assigned credit risk grades are as follows:
Pass
– Loans indicate different levels of satisfactory
 
financial condition and performance.
 
Special Mention
 
– Loans classified as special mention have a potential weakness
 
that deserves management’s
close attention. If left uncorrected, these potential weaknesses
 
may result in deterioration of the repayment
prospects for the loan or of the institution’s
 
credit position at some future date.
 
Substandard
– Loans classified as substandard are inadequately protected
 
by the current net worth and paying
capacity of the obligator or of the collateral pledged, if
 
any. Loans so classified
 
have a well-defined weakness or
weaknesses that jeopardize the liquidation of the debt.
 
They are characterized by the distinct possibility that the
institution will sustain some loss if the deficiencies are
 
not corrected.
 
Doubtful
 
– Loans classified as doubtful have all the weaknesses inherent
 
in those classified at substandard, with
the added characteristic that the weaknesses make collection
 
or liquidation in full on the basis of currently existing
facts, conditions, and values, highly questionable and improbable.
 
Loss
– Loans classified as loss are considered uncollectible.
Loan credit exposures by internally assigned grades are
 
presented below for the periods indicated (in thousands):
As of December 31, 2022
Pass
Special
Mention
Substandard
Doubtful
Total Loans
Residential real estate:
Home equity line of credit ("HELOC") and other
$
623
$
-
$
-
$
-
$
623
1-4 family residential
132,178
-
-
-
132,178
Condo residential
52,835
-
-
-
52,835
185,636
-
-
-
185,636
Commercial real estate:
Land and construction
38,687
-
-
-
38,687
Multi family residential
176,820
-
-
-
176,820
Condo commercial
49,601
-
393
-
49,994
Commercial property
702,357
-
2,552
-
704,909
Leasehold improvements
-
-
-
-
-
967,465
-
2,945
-
970,410
Commercial and industrial:
(1)
Secured
120,873
-
807
-
121,680
Unsecured
5,304
-
-
-
5,304
126,177
-
807
-
126,984
Foreign banks
93,769
-
-
-
93,769
Consumer and other loans
130,233
-
196
-
130,429
Total
$
1,503,280
$
-
$
3,948
$
-
$
1,507,228
(1)
 
All outstanding PPP loans were internally graded
 
pass.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
 
30
 
USCB Financial Holdings, Inc.
 
2022 10-K/A
As of December 31, 2021
Pass
Special
Mention
Substandard
Doubtful
Total Loans
Residential real estate:
Home equity line of credit ("HELOC") and other
$
701
$
-
$
-
$
-
$
701
1-4 family residential
130,840
-
4,581
-
135,421
Condo residential
65,237
-
-
-
65,237
196,778
-
4,581
-
201,359
Commercial real estate:
Land and construction
24,581
-
-
-
24,581
Multi family residential
127,489
-
-
-
127,489
Condo commercial
41,983
-
417
-
42,400
Commercial property
509,189
1,222
-
-
510,411
Leasehold improvements
107
-
-
-
107
703,349
1,222
417
-
704,988
Commercial and industrial:
(1)
Secured
97,605
-
536
-
98,141
Unsecured
48,434
-
17
-
48,451
146,039
-
553
-
146,592
Foreign banks
59,491
-
-
-
59,491
Consumer and other loans
79,005
-
224
-
79,229
Total
$
1,184,662
$
1,222
$
5,775
$
-
$
1,191,659
(1)
 
All outstanding PPP loans were internally graded
 
pass.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
 
31
 
USCB Financial Holdings, Inc.
 
2022 10-K/A
Loan Aging
The Company
 
also considers the
 
performance of loans
 
in grading
 
and in
 
evaluating the
 
credit quality
 
of the
 
loan portfolio.
The Company
 
analyzes credit
 
quality and
 
loan grades
 
based on
 
payment performance
 
and the
 
aging status
 
of the
 
loan.
 
The following table include an aging analysis
 
of accruing loans and total non-accruing
 
loans as of December 31, 2022 and
2021 (in thousands):
Accruing
As of December 31, 2022:
Current
Past Due 30-
89 Days
Past Due >
90 Days and
Still
Accruing
Total
Accruing
Non-Accrual
Total Loans
Residential real estate:
Home equity line of credit and other
$
623
$
-
$
-
$
623
$
-
$
623
1-4 family residential
131,120
1,058
-
132,178
-
132,178
Condo residential
50,310
2,525
-
52,835
-
52,835
182,053
3,583
-
185,636
-
185,636
Commercial real estate:
Land and construction
38,687
-
-
38,687
-
38,687
Multi family residential
176,820
-
-
176,820
-
176,820
Condo commercial
49,994
-
-
49,994
-
49,994
Commercial property
704,884
25
-
704,909
-
704,909
Leasehold improvements
-
-
-
-
-
-
970,385
25
-
970,410
-
970,410
Commercial and industrial:
Secured
121,649
31
-
121,680
-
121,680
Unsecured
4,332
972
-
5,304
-
5,304
125,981
1,003
-
126,984
-
126,984
Foreign banks
93,769
-
-
93,769
-
93,769
Consumer and other
130,169
260
-
130,429
-
130,429
Total
$
1,502,357
$
4,871
$
-
$
1,507,228
$
-
$
1,507,228
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
 
32
 
USCB Financial Holdings, Inc.
 
2022 10-K/A
Accruing
As of December 31, 2021:
Current
Past Due
30-89 Days
Past Due >
90 Days and
Still
Accruing
Total
Accruing
Non-Accrual
Total Loans
Residential real estate:
Home equity line of credit and other
$
701
$
-
$
-
$
701
$
-
$
701
1-4 family residential
133,942
289
-
134,231
1,190
135,421
Condo residential
64,243
994
-
65,237
-
65,237
198,886
1,283
-
200,169
1,190
201,359
Commercial real estate:
Land and construction
24,581
-
-
24,581
-
24,581
Multi family residential
127,053
436
-
127,489
-
127,489
Condo commercial
42,400
-
-
42,400
-
42,400
Commercial property
510,411
-
-
510,411
-
510,411
Leasehold improvements
107
-
-
107
-
107
704,552
436
-
704,988
-
704,988
Commercial and industrial:
Secured
98,141
-
-
98,141
-
98,141
Unsecured
48,041
410
-
48,451
-
48,451
146,182
410
-
146,592
-
146,592
Foreign banks
59,491
-
-
59,491
-
59,491
Consumer and other
78,969
260
-
79,229
-
79,229
Total
$
1,188,080
$
2,389
$
-
$
1,190,469
$
1,190
$
1,191,659
There was
no
 
interest income recognized attributable to
 
nonaccrual loans outstanding at
 
December 31, 2022 and 2021.
Interest
 
income
 
on
 
these
 
loans
 
for
 
the
 
years
 
ended
 
December 31,
 
2022
 
and
 
2021,
 
would
 
have
 
been
 
approximately
$
0
 
thousand and $
5
 
thousand, respectively,
 
had these loans performed in accordance with their
 
original terms.
 
There were no loans over 90 days past due and accruing
 
as of December 31, 2022 and 2021.
Impaired Loans
The following table includes
 
the unpaid principal balances
 
for impaired loans with
 
the associated allowance amount,
 
if
applicable, on the basis of impairment methodology for the dates
 
indicated (in thousands):
December 31, 2022
December 31, 2021
Unpaid
Principal
Balance
Net
Investment
Balance
Valuation
Allowance
Unpaid
Principal
Balance
Net
Investment
Balance
Valuation
Allowance
Impaired Loans with No Specific Allowance:
Residential real estate
$
3,551
$
3,544
$
-
$
5,021
$
5,035
$
-
Commercial real estate
393
393
-
696
695
-
3,944
3,937
-
5,717
5,730
-
Impaired Loans with Specific Allowance:
Residential real estate
3,655
3,626
155
3,985
3,950
178
Commercial and industrial
82
82
41
141
141
71
Consumer and other
196
196
98
224
224
111
3,933
3,904
294
4,350
4,315
360
Total
$
7,877
$
7,841
$
294
$
10,067
$
10,045
$
360
Net investment balance is the unpaid principal balance
 
of the loan adjusted for the remaining net deferred loan
 
fees.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
 
33
 
USCB Financial Holdings, Inc.
 
2022 10-K/A
The following table presents the
 
average recorded investment balance on impaired
 
loans as of December 31, 2022
 
and
2021 (in thousands):
2022
2021
Residential real estate
$
7,626
$
8,791
Commercial real estate
575
714
Commercial and industrial
109
178
Consumer and other
210
254
Total
$
8,520
$
9,937
Interest income
 
recognized on
 
impaired loans
 
for the
 
years ended
 
December 31, 2022
 
and 2021
 
was $
351
 
thousand
and $
415
 
thousand, respectively.
Troubled Debt Restructuring
A troubled
 
debt
 
restructuring
 
(“TDR”)
 
occurs
 
when
 
the
 
Company
 
has agreed
 
to
 
a loan
 
modification
 
in
 
the
 
form
 
of
 
a
concession for a borrower who is experiencing financial difficulty.
 
The following table presents performing and non-performing
 
TDRs for the dates indicated (in thousands):
December 31, 2022
December 31, 2021
Accrual Status
Non-Accrual
Status
Total TDRs
Accrual Status
Non-Accrual
Status
Total TDRs
Residential real estate
$
7,206
$
-
$
7,206
$
7,815
$
-
$
7,815
Commercial real estate
393
-
393
696
-
696
Commercial and industrial
82
-
82
141
-
141
Consumer and other
 
196
-
196
224
-
224
Total
$
7,877
$
-
$
7,877
$
8,876
$
-
$
8,876
The Company had
 
allocated $
294
 
thousand and $
360
 
thousand of specific
 
allowance for TDR
 
loans at December 31,
2022 and 2021,
 
respectively. Charge-offs on TDR loans for
 
the years ended
 
December 31, 2022 and
 
2021 was $
0
 
thousand
and $
18
 
thousand, respectively.
 
There was
no
 
commitment to lend additional funds to these TDR customers.
The Company
 
did
no
t have
 
any new
 
TDR loans,
 
loan modifications,
no
r defaults
 
for the
 
years ended
 
December 31,
2022 and December 31, 2021.
During the
 
year ended December 31,
 
2022 and 2021,
 
the Company did
no
t modify
 
any new loans
 
to borrowers impacted
by COVID-19. At December 31, 2022, there was
no
 
loan past due that was modified in 2021.
 
4.
 
LEASES
The
 
Company
 
enters
 
into
 
leases
 
in
 
the
 
normal
 
course
 
of
 
business
 
primarily
 
for
 
banking
 
centers
 
and
 
back-office
operations. As of
 
December 31, 2022, the
 
Company leased nine
 
of the ten
 
banking centers and
 
the headquarter building.
The Company
 
is obligated
 
under non-cancelable
 
operating leases
 
for these
 
premises with
 
expiration dates
 
ranging from
2026 to 2036, many of these leases have extension
 
clauses which the Company could exercise which
 
would extend these
dates.
 
The Company
 
has classified
 
all leases as
 
operating leases.
 
Lease expense
 
for operating
 
leases are
 
recognized on
 
a
straight-line basis over
 
the lease term.
 
Right-of-use (“ROU”)
 
assets represent the
 
right to use
 
the underlying
 
asset for the
lease
 
term
 
and
 
lease
 
liabilities
 
represent
 
the
 
obligation
 
to
 
make
 
lease
 
payments
 
arising
 
from
 
the
 
lease.
 
The
 
Company
elected the short-term
 
lease recognition exemption
 
for all leases
 
that qualify,
 
meaning those with
 
terms under 12
 
months.
ROU assets or lease liabilities are not to be recognized
 
for short-term leases.
ROU assets and
 
lease liabilities are
 
recognized at the lease
 
commencement date based on
 
the estimated present value
of lease payments
 
over the
 
lease term.
 
In the Company’s
 
Consolidated Balance
 
Sheets, ROU
 
assets are
 
reported under
other assets while lease liabilities are classified under
 
accrued interest and other liabilities.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
 
34
 
USCB Financial Holdings, Inc.
 
2022 10-K/A
As
 
most
 
of
 
the
 
Company’s
 
leases
 
do
 
not
 
provide
 
an
 
implicit
 
rate,
 
the
 
incremental
 
borrowing
 
rate
 
based
 
on
 
the
information available
 
at commencement
 
date is
 
used. The
 
Company’s
 
incremental borrowing
 
rate is
 
based on
 
the FHLB
advance rate matching or nearing the lease term.
 
The following table presents the ROU assets and lease liabilities
 
as of December 31, 2022 and 2021 (in thousands):
2022
2021
ROU assets:
Operating leases
 
$
14,395
$
14,185
Lease liabilities:
Operating leases
 
$
14,395
$
14,185
The weighted average remaining lease term and weighted average
 
discount rate as of December 31, 2022 and 2021:
2022
2021
Weighted average remaining lease term (in years):
Operating leases
6.98
8.28
Weighted average discount rate:
Operating leases
 
2.94
%
2.32
%
Future lease payment obligations and a reconciliation to lease
 
liability as of December 31, 2022 (in thousands):
2023
$
3,158
2024
3,236
2025
3,312
2026
2,383
2027
951
Thereafter
3,478
Total
 
future minimum lease payments
16,518
Less: interest component
(2,123)
Total
 
lease liability
$
14,395
5.
 
PREMISES AND EQUIPMENT
 
A summary of premises and equipment are presented
 
below as of December 31, 2022 and 2021 (in thousands):
2022
2021
Land
$
972
$
972
Building
1,952
1,947
Furniture, fixtures and equipment
8,841
8,726
Computer hardware and software
4,575
4,552
Leasehold improvements
10,451
9,921
Premises and equipment, gross
26,791
26,118
Accumulated depreciation and amortization
(21,528)
(20,840)
Premises and equipment, net
$
5,263
$
5,278
Depreciation and
 
amortization expense
 
was $
688
 
thousand and
 
$
1.0
 
million for
 
the years
 
ended December 31,
 
2022
and 2021, respectively.
 
During 2021, the Company
 
eliminated $
0.6
 
million in assets due
 
to the sale of
 
one banking center
and relocation
 
of another
 
banking center.
 
The depreciation
 
on these
 
assets was
 
$
0.6
 
million with
 
the remaining
 
amount
recognized as an immaterial loss.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
 
35
 
USCB Financial Holdings, Inc.
 
2022 10-K/A
6.
 
INCOME TAXES
 
The Company’s provision
 
for income taxes is
 
presented in the following
 
table for the years
 
ended December 31, 2022
and 2021 (in thousands):
2022
2021
Current:
Federal
$
-
$
-
State
-
$
-
Total
 
current
-
$
-
Deferred:
Federal
5,462
$
5,314
State
1,482
$
1,286
Total
 
deferred
6,944
$
6,600
Total
 
tax expense
$
6,944
$
6,600
The actual income
 
tax expense for the
 
years ended December 31, 2022
 
and 2021 differs from
 
the statutory tax expense
for the year (computed by applying the
 
U.S. federal corporate tax rate of
21
% for 2022 and 2021 to income
 
before provision
for income taxes) as follows (in thousands):
2022
2021
Federal taxes at statutory rate
$
5,688
$
5,812
State income taxes, net of federal tax benefit
1,177
$
969
Bank owned life insurance
(269)
$
(186)
Other, net
348
$
5
Total
 
tax expense
$
6,944
$
6,600
The following table presents
 
the deferred tax assets
 
and deferred tax liabilities
 
as of December 31, 2022
 
and 2021 (in
thousands):
2022
2021
Deferred tax assets:
Net operating loss
$
21,720
$
28,819
Allowance for credit losses
4,432
3,816
Lease liability
3,648
3,595
Unrealized loss on available for sale securities
15,193
817
Deferred loan fees
-
400
Depreciable property
158
361
Stock option compensation
373
241
Accruals
723
600
Other, net
-
2
Deferred tax asset
$
46,247
$
38,651
Deferred tax liability:
Deferred loan cost
(28)
-
Lease right of use asset
(3,648)
(3,595)
Deferred expenses
(175)
(127)
Other, net
(36)
-
Deferred tax liability
$
(3,887)
$
(3,722)
Net deferred tax asset
$
42,360
$
34,929
At
 
December
 
31,
 
2022
 
the
 
Company
 
had
 
approximately
 
$
81.8
 
million
 
of
 
Federal
 
and
 
$
104.5
 
million
 
of
 
State
 
net
operating
 
loss
 
carryforwards
 
expiring
 
in
 
various
 
amounts
 
from
 
2031
 
to
 
2036.
 
Their
 
utilization
 
is limited
 
to
 
future
 
taxable
earnings of the Company.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
 
36
 
USCB Financial Holdings, Inc.
 
2022 10-K/A
In assessing the
 
realizability of deferred
 
tax assets, management considered
 
whether it is
 
more likely than
 
not that some
portion or
 
all of
 
the deferred
 
tax assets
 
will not
 
be realized.
 
The ultimate
 
realization
 
of deferred
 
tax assets
 
is dependent
upon the generation of
 
future taxable income
 
during the periods
 
in which those temporary
 
differences become
 
deductible.
Management considers the scheduled reversal
 
of deferred tax liabilities, projected future taxable
 
income, and tax planning
strategies in making this assessment.
The U.S.
 
Federal jurisdiction
 
and Florida
 
are the
 
major tax
 
jurisdictions where
 
the Company
 
files income
 
tax returns.
The Company is generally no longer subject to U.S. Federal or
 
State examinations by tax authorities for years before 2019.
For
 
the
 
years
 
ended
 
December 31,
 
2022 and
 
2021,
 
the
 
Company
 
did
no
t have
 
any unrecognized
 
tax benefits
 
as a
result of
 
tax positions
 
taken during
 
a prior
 
period or
 
during the
 
current period.
 
Additionally,
no
 
interest or
 
penalties
 
were
recorded as a result of tax uncertainties.
7.
 
DEPOSITS
The following table presents deposits by type at December 31,
 
2022 and 2021 (in thousands):
2022
2021
Non-interest bearing deposits
$
629,776
$
605,425
Interest-bearing transaction accounts
66,675
55,878
Saving and money market deposits
915,853
703,856
Time deposits
216,977
225,220
Total
 
deposits
$
1,829,281
$
1,590,379
Time
 
deposits
 
exceeding
 
the
 
FDIC
 
deposit
 
insurance
 
limit
 
of
 
$250
 
thousand
 
at
 
December 31,
 
2022
 
and
 
2021
 
were
$
82.0
 
million and $
119.4
 
million, respectively.
 
At December 31, 2022, the scheduled maturities of time deposits
 
were (in thousands):
2023
$
182,647
2024
11,135
2025
1,998
2026
20,402
2027
549
Thereafter
246
$
216,977
At December 31,
 
2022 and
 
2021, the
 
aggregate amount
 
of demand
 
deposits reclassified
 
to loans
 
as overdrafts
 
was
$
230
 
thousand and $
247
 
thousand, respectively.
8.
 
BORROWINGS
 
Borrowed
 
funds
 
consist
 
of
 
fixed
 
rate
 
advances
 
from
 
the
 
FHLB.
 
At
 
December 31,
 
2022
 
FHLB
 
advances
 
were
 
$
46.0
million and at December 31, 2021 were $
36
 
million.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
 
37
 
USCB Financial Holdings, Inc.
 
2022 10-K/A
The following
 
table presents
 
the fixed
 
interest rates
 
and expected
 
maturities of
 
the FHLB
 
advances at
 
December 31,
2022 and 2021 (in thousands):
At December 31, 2022
Interest Rate
Type of Rate
Maturity Date
Amount
2.05
%
Fixed
March 27, 2025
$
10,000
1.07
%
Fixed
July 18, 2025
6,000
1.04
%
Fixed
July 30, 2024
5,000
0.81
%
Fixed
August 17, 2023
5,000
4.17
%
Fixed
January 13, 2023
20,000
$
46,000
At December 31, 2021
Interest Rate
Type of Rate
Maturity Date
Amount
0.81
%
Fixed
August 17, 2023
$
5,000
1.04
%
Fixed
July 30, 2024
5,000
2.05
%
Fixed
March 27, 2025
10,000
1.91
%
Fixed
March 28, 2025
5,000
1.81
%
Fixed
April 17, 2025
5,000
1.07
%
Fixed
July 18, 2025
6,000
$
36,000
The
 
FHLB
 
holds
 
a
 
blanket
 
lien
 
on
 
the
 
Company's
 
loan
 
portfolio
 
that
 
may
 
be
 
pledged
 
as
 
collateral
 
for
 
outstanding
advances, subject
 
to eligibility
 
under the
 
borrowing agreement.
 
The Company
 
may also
 
choose to
 
assign cash
 
balances
held at the FHLB as additional collateral. See Note 3 “Loans”
 
for further discussion on pledged loans.
9.
 
EQUITY BASED AND OTHER COMPENSATION
 
PLANS
 
Employee 401(k) Plan
The Company has an
 
employee 401(k) plan (the
 
“Plan”) covering substantially all
 
eligible employees. The Plan includes
a provision
 
that
 
the employer
 
may contribute
 
to the
 
accounts
 
of eligible
 
employees
 
for whom
 
a salary
 
deferral
 
is made.
There was $
313
 
thousand and $
296
 
thousand of Company contributions to the Plan during the years ended December 31,
2022 and
 
2021,
 
respectively,
 
and are
 
included
 
under
 
salaries and
 
employee
 
benefits in
 
the Consolidated
 
Statements
 
of
Operations.
Stock-Based Compensation
Stock option
 
balances,
 
weighted average
 
exercise
 
price,
 
and weighted
 
average
 
fair value
 
of options
 
granted
 
for the
year ended
 
December 31,
 
2021 were
 
adjusted to
 
reflect the
1 for 5
 
reverse stock
 
split on
 
Class A
 
common stock.
 
Stock
options are only exercisable
 
to Class A common
 
stock. See Note 13
 
“Stockholders’ Equity” for
 
further discussion on stock
split.
In
 
2015,
 
the
 
Company's
 
shareholders
 
approved
 
the
 
2015
 
Equity
 
Incentive
 
Plan
 
(the
 
“2015
 
Option
 
Plan”),
 
which
authorized grants
 
of options
 
to purchase
 
up to
2,000,000
 
shares of
 
common stock.
 
The
2015
Option
 
Plan
 
provided that
vesting
 
schedules
 
will
 
be
 
determined
 
upon
 
issuance
 
of
 
options
 
by
 
the
 
Board
 
of
 
Directors
 
or
 
compensation
 
committee.
Options
 
granted
 
under
 
the
 
2015
 
Option
 
Plan
 
have
 
a
10
-year
 
life,
 
in
 
no
 
event
 
shall
 
an
 
option
 
be
 
exercisable
 
after
 
the
expiration of
10
 
years from the grant date. The 2015 Option Plan has a
10
-year life and will terminate in 2025. In July 2020,
the
 
shareholders
 
of
 
the
 
Company
 
approved
 
to
 
amend
 
the
 
2015
 
Option
 
plan
 
authorizing
 
the
 
issuance
 
of
 
an
 
additional
3,000,000
 
shares of common stock and extending the life of the plan
5
 
additional years, terminating in 2030. The approved
shares
 
after
 
being
 
adjusted
 
to
 
reflect
 
the
1 for 5
 
reverse
 
stock
 
split
 
totaled
1,000,000
 
shares.
 
In
 
December
 
2021,
 
the
shareholders of the Company approved to amend the
 
2015 Option plan authorizing the issuance of
 
an additional
1,400,000
shares of common stock.
At December 31, 2022, there were
1,386,667
 
shares available for grant under the
 
2015 Option Plan. At December 31,
2021, there were
1,401,667
shares available for grant under the 2015 Option Plan.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
 
38
 
USCB Financial Holdings, Inc.
 
2022 10-K/A
The Company recognizes compensation expense based
 
on the estimated grant date
 
fair value method using the
 
Black-
Scholes
 
option
 
pricing
 
model and
 
accounts
 
for this
 
expense
 
using
 
a prorated
 
straight-line
 
amortization
 
method over
 
the
vesting
 
period
 
of
 
the
 
option.
 
Stock
 
based
 
compensation
 
expense
 
is
 
based
 
on
 
awards
 
that
 
the
 
Company
 
expects
 
will
ultimately vest,
 
reduced by estimated forfeitures.
 
Estimated forfeitures consider the voluntary
 
termination trends as well as
actual option forfeitures.
The
 
compensation
 
expense
 
is
 
reported
 
under
 
salaries
 
and
 
employee
 
benefits
 
in
 
the
 
accompanying
 
Consolidated
Statements
 
of
 
Operations.
 
Compensation
 
expense
 
totaling
 
$
523
 
thousand
 
was
 
recognized
 
for
 
the
 
year
 
ended
December 31, 2022
 
and $
287
 
thousand for
 
the year
 
ended December
 
31, 2021.
 
There was
no
 
related tax
 
benefit for
 
the
years ended December 31, 2022 and 2021.
Unrecognized compensation cost
 
remaining on stock-based
 
compensation totaled $
787
 
thousand and $
1.3
 
million for
the years ended December 31, 2022 and 2021, respectively
 
.
Cash
 
flows
 
resulting
 
from
 
excess
 
tax
 
benefits
 
are
 
required
 
to
 
be
 
classified
 
as
 
a
 
part
 
of
 
cash
 
flows
 
from
 
operating
activities. Excess tax benefits
 
are realized tax benefits
 
from tax deductions for
 
exercised options in
 
excess of the deferred
tax asset attributable to the compensation cost for such
 
options.
The fair value of options
 
granted was determined using
 
the following weighted-average
 
assumptions at December 31,
2022:
Assumption
2022
Risk-free interest rate
2.34
%
Expected term
10
 
years
Expected stock price volatility
10
%
Dividend yield
0
%
The following table presents a summary of stock options
 
for the years ended December 31, 2022 and 2021:
Stock Options
Weighted Average
Exercise Price
Weighted Average
Remaining
Contractual Years
Aggregate Intrinsic
Value (in
thousands)
Balance at January 1, 2022
959,667
$
10.87
8.4
Granted
15,000
$
14.03
Exercised
(9,000)
$
11.35
Balance at December 31, 2022
965,667
$
10.91
7.4
Exercisable at December 31, 2022
560,000
$
10.18
6.4
$
1,131
 
Balance at January 1, 2021
339,667
$
9.37
7.1
Granted
620,000
$
11.69
Balance at December 31, 2021
959,667
$
10.87
8.4
Exercisable at December 31, 2021
319,667
$
9.07
6.0
$
663
The aggregate intrinsic value in
 
the table above represents
 
the total pre-tax intrinsic
 
value (the difference between
 
the
valuation of the Company’s stock and the exercise price, multiplied by
 
the number of options considered in-the-money) that
would have been received by the option holders had all option
 
holders exercised their options.
The weighted average
 
fair value of
 
options granted for
 
the years ended
 
December 31, 2022 and
 
2021 was $
3.45
 
and
$
2.32
, respectively.
There were
no
 
restricted stock awards outstanding as of December
 
31, 2021 or 2022.
There are
no
 
equity compensation plans of the Company that have
 
not been approved by the shareholders.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
 
39
 
USCB Financial Holdings, Inc.
 
2022 10-K/A
10.
 
OFF-BALANCE SHEET ARRANGEMENTS
The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business in order to
meet the financial
 
needs of
 
its customers
 
and to reduce
 
its own
 
exposure to
 
fluctuations in
 
interest rates.
 
These financial
instruments include
 
unfunded commitments
 
under lines
 
of credit,
 
commitments to
 
extend credit,
 
standby and
 
commercial
letters of
 
credit. Those
 
instruments involve,
 
to varying
 
degrees, elements
 
of credit
 
and interest
 
rate risk
 
in excess
 
of the
amount recognized in the Company’s Consolidated Balance Sheets. The Company uses the
 
same credit policies in making
commitments and conditional obligations as it does for on-balance-sheet
 
instruments.
The Company's exposure
 
to credit loss
 
in the event
 
of nonperformance by
 
the other party
 
to the financial
 
instruments
for unused lines of credit, and standby letters of credit
 
is represented by the contractual amount of these commitments.
A
 
summary
 
of
 
the
 
amounts
 
of
 
the
 
Company's
 
financial
 
instruments
 
with
 
off-balance
 
sheet
 
risk
 
are
 
shown
 
below
 
at
December 31, 2022 and 2021 (in thousands):
 
2022
2021
Commitments to grant loans and unfunded lines of credit
$
95,461
$
134,877
Standby and commercial letters of credit
4,320
6,420
Total
$
99,781
$
141,297
Commitments to
 
extend credit
 
are agreements
 
to lend
 
to a
 
customer as
 
long as
 
there is
 
no violation
 
of any
 
condition
established in the contract. Commitments generally have
 
fixed expiration dates or other termination clauses.
Unfunded lines of
 
credit and revolving
 
credit lines are
 
commitments for possible
 
future extensions
 
of credit to
 
existing
customers. These lines of
 
credit are uncollateralized and
 
usually do not contain
 
a specified maturity date
 
and ultimately may
not be drawn upon to the total extent to which the Company
 
is committed.
Standby
 
and
 
commercial
 
letters
 
of
 
credit
 
are
 
conditional
 
commitments
 
issued
 
by
 
the
 
Company
 
to
 
guarantee
 
the
performance of a
 
customer to
 
a third
 
party. Those letters of
 
credit are
 
primarily issued to
 
support public and
 
private borrowing
arrangements. Essentially all letters of credit have fixed maturity dates and many of them expire without being drawn upon,
they do not generally present a significant liquidity risk
 
to the Company.
11.
 
DERIVATIVES
 
The Company utilizes interest rate swap agreements
 
as part of its asset liability management strategy
 
to help manage
its interest
 
rate risk
 
position. The
 
notional amount
 
of the
 
interest rate
 
swaps do
 
not represent
 
amounts exchanged
 
by the
parties. The amounts exchanged are
 
determined by reference to
 
the notional amount and the
 
other terms of the individual
interest rate swap agreements.
 
The Company enters into interest rate swaps with its loan customers. The Company had
15
 
and
18
 
interest rate swaps
with loan customers with
 
a notional amount of
 
$
33.9
 
million and $
39.2
 
million at December 31, 2022
 
and 2021, respectively.
These interest
 
rate swaps
 
have a
 
maturity date
 
between 2025
 
and 2051.
 
The Company
 
entered into
 
corresponding
 
and
offsetting derivatives
 
with third
 
parties. The fair
 
value of liability
 
on these derivatives
 
requires the Company
 
to provide the
counterparty with funds to
 
be held as collateral
 
which the Company reports as
 
other assets under the Consolidated
 
Balance
Sheets. While these derivatives represent economic hedges,
 
it does not qualify as hedges for accounting purposes.
 
The following table reflects the Company’s customer
 
related interest rate swaps for the dates indicated
 
(in thousands):
 
Fair Value
Notional
Amount
Collateral
Amount
Balance Sheet Location
Asset
Liability
December 31, 2022:
Derivatives not designated as hedging instruments:
Interest rate swaps related to customer loans
$
33,893
$
1,278
Other assets/Other liabilities
$
5,011
$
5,011
December 31, 2021:
Derivatives not designated as hedging instruments:
Interest rate swaps related to customer loans
$
39,156
$
1,260
Other assets/Other liabilities
$
1,434
$
1,434
 
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
 
40
 
USCB Financial Holdings, Inc.
 
2022 10-K/A
12.
 
FAIR VALUE
 
MEASUREMENTS
 
Determination of Fair Value
The Company
 
uses
 
fair value
 
measurements
 
to record
 
fair-value
 
adjustments
 
to certain
 
assets
 
and liabilities
 
and to
determine fair value
 
disclosures. In accordance
 
with the fair
 
value measurements
 
accounting guidance, the
 
fair value of
 
a
financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market
 
participants
 
at the
 
measurement
 
date.
 
Fair value
 
is best
 
determined based
 
upon quoted
 
market prices.
However, in
 
many instances, there
 
are no quoted
 
market prices for the
 
Company's various financial
 
instruments. In cases
where quoted
 
market prices
 
are not
 
available, fair
 
values are
 
based on
 
estimates using
 
present value
 
or other
 
valuation
techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates
of future cash flows. Accordingly, the fair value estimates may not be realized in
 
an immediate settlement of the instrument.
The fair
 
value guidance provides
 
a consistent definition
 
of fair
 
value, which focuses
 
on exit
 
price in
 
an orderly transaction
(that is,
 
not a
 
forced
 
liquidation
 
or distressed
 
sale) between
 
market participants
 
at the
 
measurement
 
date
 
under current
market conditions.
 
If there
 
has been
 
a significant
 
decrease
 
in the
 
volume
 
and level
 
of activity
 
for the
 
asset
 
or liability,
 
a
change in
 
valuation technique or
 
the use
 
of multiple
 
valuation techniques may
 
be appropriate.
 
In such
 
instances, determining
the
 
price
 
at
 
which
 
willing
 
market
 
participants
 
would
 
transact
 
at
 
the
 
measurement
 
date
 
under
 
current
 
market
 
conditions
depends on the facts
 
and circumstances and
 
requires the use of
 
significant judgment. The fair
 
value is a reasonable
 
point
within the range that is most representative of fair value under
 
current market conditions.
Fair Value Hierarchy
In accordance with
 
this guidance, the
 
Company groups its
 
financial assets
 
and financial liabilities
 
generally measured
at fair
 
value in
 
three
 
levels, based
 
on the
 
markets
 
in which
 
the assets
 
and liabilities
 
are traded,
 
and the
 
reliability
 
of the
assumptions used to determine fair value.
Level 1
 
- Valuation
 
is based
 
on quoted
 
prices in
 
active markets
 
for identical
 
assets or
 
liabilities that
 
the reporting
entity has
 
the ability
 
to access
 
at the measurement
 
date. Level
 
1 assets
 
and liabilities
 
generally include
 
debt and
equity securities that
 
are traded in
 
an active exchange
 
market. Valuations are obtained from
 
readily available pricing
sources for market transactions involving identical assets
 
or liabilities.
Level 2
 
- Valuation
 
is based on inputs other
 
than quoted prices included
 
within Level 1 that are
 
observable for the
asset
 
or
 
liability,
 
either
 
directly
 
or
 
indirectly.
 
The
 
valuation
 
may
 
be
 
based
 
on
 
quoted
 
prices
 
for
 
similar
 
assets
 
or
liabilities; quoted
 
prices in
 
markets that are
 
not active;
 
or other inputs
 
that are observable
 
or can be
 
corroborated
by observable market data for substantially the full term of the
 
asset or liability.
Level 3
 
- Valuation
 
is based on
 
unobservable inputs that
 
are supported
 
by little or
 
no market activity
 
and that are
significant
 
to
 
the
 
fair
 
value
 
of
 
the
 
assets
 
or
 
liabilities.
 
Level
 
3
 
assets
 
and
 
liabilities
 
include
 
financial
 
instruments
whose value
 
is determined
 
using pricing
 
models, discounted
 
cash
 
flow
 
methodologies,
 
or similar
 
techniques,
 
as
well as instruments for which determination of fair value
 
requires significant management judgment or estimation.
A
 
financial
 
instrument's
 
categorization
 
within
 
the
 
valuation
 
hierarchy
 
is
 
based
 
upon
 
the
 
lowest
 
level
 
of
 
input
 
that
 
is
significant to the fair value measurement.
Items Measured at Fair Value
 
on a Recurring Basis
Investment securities:
 
When instruments are traded
 
in secondary markets and
 
quoted market prices do
 
not exist for
such securities,
 
management generally
 
relies on
 
prices obtained
 
from independent
 
vendors or
 
third-party broker
 
-dealers.
Management reviews pricing methodologies provided by the vendors and third-party broker-dealers in order to determine if
observable market information is being utilized. Securities measured with pricing provided by independent vendors or
 
third-
party broker-dealers
 
are classified within
 
Level 2 of
 
the hierarchy and
 
often involve using
 
quoted market
 
prices for similar
securities, pricing models or discounted cash flow analyses
 
utilizing inputs observable in the market where available.
Derivatives:
 
The
 
fair
 
value
 
of
 
derivatives
 
are
 
measured
 
with
 
pricing
 
provided
 
by
 
third-party
 
participants
 
and
 
are
classified within Level 2 of the hierarchy.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
 
41
 
USCB Financial Holdings, Inc.
 
2022 10-K/A
The following table represents
 
the Company's assets measured at
 
fair value on a
 
recurring basis at December 31, 2022
and 2021 for each of the fair value hierarchy levels (in thousands):
2022
2021
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
Investment securities available for sale:
U.S. Government Agency
$
-
$
8,655
$
-
$
8,655
$
-
$
10,520
$
-
$
10,520
Collateralized mortgage obligations
-
95,541
-
95,541
-
156,829
-
156,829
Mortgage-backed securities - Residential
-
60,879
-
60,879
-
118,842
-
118,842
Mortgage-backed securities - Commercial
-
27,954
-
27,954
-
50,117
-
50,117
Municipal securities
-
18,483
-
18,483
-
24,276
-
24,276
Bank subordinated debt securities
-
14,919
-
14,919
-
28,408
-
28,408
Corporate bonds
-
3,709
-
3,709
-
12,550
-
12,550
Total
-
230,140
-
230,140
-
401,542
-
401,542
Derivative assets
-
5,011
-
5,011
-
1,434
-
1,434
Total assets at fair value
$
-
$
235,151
$
-
$
235,151
$
-
$
402,976
$
-
$
402,976
Derivative liabilities
$
-
$
5,011
$
-
$
5,011
$
-
$
1,434
$
-
$
1,434
Total liabilities at fair value
$
-
$
5,011
$
-
$
5,011
$
-
$
1,434
$
-
$
1,434
Items Measured at Fair Value
 
on a Non-recurring Basis
 
Impaired Loans:
At December
 
31,
 
2022 and
 
2021,
 
in accordance
 
with
 
provisions of
 
the
 
loan impairment
 
guidance,
individual loans
 
with a
 
carrying amount
 
of approximately
 
$
3.9
 
million and
 
$
4.4
 
million, respectively,
 
were written
 
down to
their
 
fair
 
value
 
of
 
approximately
 
$
3.6
 
million
 
and
 
$
4.0
 
million,
 
respectively,
 
resulting
 
in
 
an
 
impairment
 
charge
 
of
$
294
 
thousand
 
and $
360
 
thousand,
 
respectively,
 
which
 
was included
 
in the
 
allowance
 
for credit
 
losses
 
at December 31,
2022 and 2021, respectively.
 
Loans applicable to write-downs, or impaired
 
loans, are estimated using the present
 
value of
expected
 
cash
 
flows
 
or
 
the
 
appraised
 
value
 
of
 
the
 
underlying
 
collateral
 
discounted
 
as
 
necessary
 
due
 
to
 
management's
estimates of changes in economic conditions are considered
 
a Level 3 valuation.
Other Real Estate:
 
Other real
 
estate owned are
 
valued at the
 
lesser of the
 
third-party appraisals
 
less management's
estimate of
 
the costs to
 
sell or the
 
carrying cost of
 
the other
 
real estate
 
owned. Appraisals generally
 
use the market
 
approach
valuation technique
 
and use
 
market observable
 
data to
 
formulate an
 
opinion of
 
the fair
 
value of
 
the properties.
 
However,
the appraiser
 
uses professional
 
judgment in
 
determining the
 
fair value
 
of the
 
property and
 
the Company
 
may also
 
adjust
the value for changes in
 
market conditions subsequent to
 
the valuation date when
 
current appraisals are not
 
available. As
a consequence of the carrying cost or the
 
third-party appraisal and adjustments therein, the fair values of the properties are
considered a Level 3 valuation.
 
The following table represents the Company’s assets measured at fair value on a non-recurring basis at December 31,
2022 and 2021 for each of the fair value hierarchy levels
 
(in thousands):
Level 1
Level 2
Level 3
Total
December 31, 2022:
Impaired loans
$
-
$
-
$
3,639
$
3,639
December 31, 2021:
Impaired loans
$
-
$
-
$
3,990
$
3,990
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
 
42
 
USCB Financial Holdings, Inc.
 
2022 10-K/A
The following table presents
 
quantified information about
 
Level 3 fair value
 
measurements for assets measured
 
at fair
value on a non-recurring basis at December 31, 2022 and 2021
 
(in thousands):
Fair Value
Valuation Technique(s)
Unobservable Input(s)
December 31, 2022:
Residential real estate
$
3,500
Sales comparison approach
Adj. for differences between comparable sales
Commercial and industrial
41
Discounted cash flow
Adj. for differences in net operating income expectations
Other
98
Discounted cash flow
Adj. for differences in net operating income expectations
Total
 
impaired loans
$
3,639
December 31, 2021:
Residential real estate
$
3,807
Sales comparison approach
Adj. for differences between comparable sales
Commercial and industrial
70
Discounted cash flow
Adj. for differences in net operating income expectations
Other
113
Discounted cash flow
Adj. for differences in net operating income expectations
Total
 
impaired loans
$
3,990
There were
no
 
financial liabilities measured at fair value on a non-recurring
 
basis at December 31, 2022 and 2021.
Items Not Measured at Fair Value
The carrying amounts and estimated fair values of financial instruments not carried at fair value, at December 31, 2022
and 2021 are as follows (in thousands):
Fair Value Hierarchy
Carrying
Amount
Level 1
Level 2
Level 3
Fair Value
Amount
December 31, 2022:
Financial Assets:
Cash and due from banks
$
$6,605
$
$6,605
$
-
$
-
$
6,605
Interest-bearing deposits in banks
$
47,563
$
47,563
$
-
$
-
$
47,563
Investment securities held to maturity
$
188,699
$
-
$
169,088
$
-
$
169,088
Loans held for investment, net
$
1,489,851
$
-
$
-
$
1,436,877
$
1,436,877
Accrued interest receivable
$
7,546
$
-
$
1,183
$
6,363
$
7,546
Financial Liabilities:
Demand Deposits
$
$629,776
$
$629,776
$
-
$
-
$
629,776
Money market and savings accounts
$
915,853
$
915,853
$
-
$
-
$
915,853
Interest-bearing checking accounts
$
66,675
$
66,675
$
-
$
-
$
66,675
Time deposits
$
216,977
$
-
$
-
$
211,406
$
211,406
FHLB advances
$
46,000
$
-
$
44,547
$
-
$
44,547
Accrued interest payable
$
229
$
-
$
92
$
137
$
229
December 31, 2021:
Financial Assets:
Cash and due from banks
$
6,477
$
6,477
$
-
$
-
$
6,477
Interest-bearing deposits in banks
$
39,751
$
39,751
$
-
$
-
$
39,751
Investment securities held to maturity
122,658
$
-
$
120,157
$
-
$
120,157
Loans held for investment, net
$
1,175,024
$
-
$
-
$
1,189,191
$
1,189,191
Accrued interest receivable
$
5,975
$
-
$
1,222
$
4,753
$
5,975
Financial Liabilities:
Demand Deposits
$
605,425
$
605,425
$
-
$
-
$
605,425
Money market and savings accounts
$
703,856
$
703,856
$
-
$
-
$
703,856
Interest-bearing checking accounts
$
55,878
$
55,878
$
-
$
-
$
55,878
Time deposits
$
225,220
$
-
$
-
$
224,688
$
224,688
FHLB advances
$
36,000
$
-
$
36,479
$
-
$
36,479
Accrued interest payable
$
96
$
-
$
50
$
46
$
96
 
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
 
43
 
USCB Financial Holdings, Inc.
 
2022 10-K/A
13.
 
STOCKHOLDERS’ EQUITY
Common Stock
On June 16, 2021, the Bank
 
effected a
1 for 5
 
reverse stock split of all
 
the Class A common stock
 
$
1.00
 
par value per
share. As of the effective date of June 16, 2021,
 
each five shares of the Company’s
 
Class A common stock was combined
into
one
 
fully paid share of
 
Class A common
 
stock. Any fractional shares
 
resulting from this reverse
 
stock split were
 
rounded
up to one whole share. The
 
Bank has adjusted the Class
 
A common stock, earnings per
 
share and stock options adjusted
for this
1 for 5
 
reverse stock
 
split for all
 
periods presented
 
here. The
 
Class B non-voting
 
common stock
 
was not adjusted
but if
 
sold or
 
exchanged would
 
be converted
 
at the
1 for 5
 
reverse stock
 
split of
 
5 Class
 
B common
 
stock for
1
 
share of
Class A common stock.
 
On July 27, 2021, the Bank completed the Initial Public Offering (“IPO”) of its Class A common stock, in which it issued
and
 
sold
4,600,000
 
shares
 
of
 
Class
 
A
 
common
 
stock
 
at
 
a
 
price
 
of
 
$
10.00
 
per
 
share.
 
The
 
Company
 
received
 
total
 
net
proceeds of $
40.0
 
million after deducting underwriting discounts and expenses.
On
 
December
 
21,
 
2021,
 
the
 
Company
 
entered
 
into
 
agreements
 
with
 
the
 
Class
 
B
 
shareholders
 
to
 
exchange
 
all
outstanding Class
 
B non-voting
 
common stock
 
for Class
 
A voting
 
common stock
 
at a
 
ratio of
 
5 to
 
1. On
 
the same
 
day,
 
a
total of
6,121,052
 
shares of Class B common stock was exchanged for
1,224,212
 
shares of Class A common stock.
 
In December 2021, the
 
Company acquired all
 
the issued and outstanding
 
shares of the Class
 
A voting common
 
stock
of
 
the
 
Bank,
 
which
 
were
 
the
 
only
 
issued
 
and
 
outstanding
 
shares
 
of
 
the
 
Bank’s
 
capital
 
stock,
 
in
 
a
 
share
 
exchange
 
(the
“Reorganization”)
 
effected
 
under
 
the
 
Florida
 
Business
 
Corporation
 
Act.
 
Each
 
of
 
the
 
outstanding
 
shares
 
of
 
the
 
Bank’s
common stock,
 
par value
 
$
1.00
 
per share,
 
formerly held
 
by its
 
shareholders
 
was
 
converted into
 
and exchanged
 
for one
newly issued
 
share of
 
the
 
Company’s
 
common
 
stock,
 
par value
 
$
1.00
 
per share,
 
and the
 
Bank became
 
the Company’s
wholly-owned subsidiary.
 
Prior to
 
completing the
 
bank holding
 
company formation,
 
the Company
 
had no
 
material assets
and had not conducted any business or operations except
 
for activities related to our organization and the
 
Reorganization.
In the
 
Reorganization,
 
each
 
shareholder
 
of the
 
Bank
 
received securities
 
of
 
the same
 
class,
 
having
 
substantially
 
the
same designations,
 
rights,
 
powers, preferences,
 
qualifications,
 
limitations
 
and restrictions,
 
as those
 
that the
 
shareholder
held
 
in
 
the
 
Bank,
 
and
 
the
 
Company’s
 
current
 
shareholders
 
own
 
the
 
same
 
percentages
 
of
 
its
 
common
 
stock
 
as
 
they
previously owned of the Bank’s common stock.
Preferred Stock
On April 5, 2021,
 
the Board authorized and
 
approved the offer to
 
repurchase all outstanding shares of
 
Class E preferred
stock at
 
the liquidation
 
value of
 
$
7.5
 
million along
 
with declared
 
dividends of
 
$
103
 
thousand.
 
All Class
 
E preferred
 
stock
shareholders approved the repurchase which the Company
 
completed on April 26, 2021.
 
The Company offered the
 
Class C and Class D preferred
 
stockholders the ability to exchange
 
their shares for Class
 
A
common stock. The offer
 
to exchange was voluntary
 
and the preferred stockholders
 
were given the option to
 
convert
90
%
of
 
their
 
preferred
 
shares
 
for
 
Class
 
A
 
common
 
stock
 
with
 
the
 
remaining
10
%
 
to
 
be
 
redeemed
 
in
 
the
 
form
 
of
 
cash.
 
The
exchange ratio for the shares of
 
Class A common stock issued in the
 
exchange transaction was based upon
 
the IPO price
for shares of Class A common stock.
 
During the
 
year ended
 
2021,
47,473
 
shares of
 
Class C
 
preferred stock
 
and
11,061,552
 
shares of
 
Class D
 
preferred
stock converted
 
into
10,278,072
 
shares of
 
Class
 
A common
 
stock. The
 
exchange
 
of the
 
Class C
 
and Class
 
D preferred
shares had
 
a total
 
liquidation value
 
of $
102.8
 
million. The
 
remaining unconverted
 
shares of
 
Class C
 
preferred stock
 
and
Class D preferred stock totaling
1,234,354
 
shares were subsequently redeemed at liquidation
 
value for $
11.4
 
million.
 
The fair value of
 
consideration on the exchange and redemption
 
of the Class C and
 
Class D preferred shares exceeded
the
 
book
 
value
 
causing
 
a
 
one-time
 
reduction
 
in
 
net
 
income
 
available
 
to
 
common
 
stockholders
 
of
 
$
89.6
 
million.
 
As
 
of
December 31, 2022, there were
no
 
preferred shares and
no
 
outstanding dividends to be paid.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
 
44
 
USCB Financial Holdings, Inc.
 
2022 10-K/A
Dividends
The Board approved
 
the following dividend
 
amounts on the
 
preferred shares for
 
the years ended
 
December 31, 2022
and 2021 (in thousands):
 
2022
2021
Preferred stock - Class C: Non-voting, Non-cumulative, Perpetual: $
1.00
 
par value; $
1,000
per share liquidation preference; annual dividend rate of
4
% of liquidation preference paid
quarterly. Quarterly dividend of $
10.00
 
per share.
$
-
$
1,494
Preferred stock - Class D: Non-voting, Non-cumulative, Perpetual: $
1.00
 
par value; $
5.00
per share liquidation preference; annual dividend rate of
4
% of par value paid quarterly.
Quarterly dividend of $
0.01
 
per share.
-
348
Preferred stock - Class E: Non-voting, partially cumulative, Perpetual: $
1.00
 
par value;
$
1,000
 
per share liquidation preference; annual dividend rate of
7
% of liquidation
preferences paid quarterly. Quarterly dividend of $
17.50
 
per share.
-
235
Total
 
dividends paid
$
-
$
2,077
Declaration of dividends by the Board is required before dividend payments are made. The dividend payment dates for
Class C and
 
Class D preferred shares
 
were set by
 
the Board while
 
the Class E preferred
 
shares had a
 
set dividend payment
date on the fifteenth of February,
 
May, August, and November.
No
 
dividends were approved by
 
the Board for the common
 
stock classes for the years
 
ended December 31, 2022 and
2021. Additionally, there
 
were
no
 
dividends declared and unpaid at December 31, 2022
 
and 2021.
14.
 
EARNINGS PER SHARE
Earnings
 
per
 
share
 
(“EPS”)
 
for
 
common
 
stock
 
is
 
calculated
 
using
 
the
 
two-class
 
method
 
required
 
for
 
participating
securities. Basic EPS
 
is calculated by
 
dividing net income
 
(loss) available to
 
common stockholders by the
 
weighted-average
number of common shares outstanding for
 
the period, without consideration for common
 
stock equivalents. Diluted EPS is
computed by
 
dividing net
 
income (loss)
 
available to
 
common stockholders
 
by the
 
weighted-average
 
number
 
of common
shares outstanding for
 
the period and
 
the weighted-average number
 
of dilutive common
 
stock equivalents outstanding
 
for
the period determined using the treasury-stock method. For
 
purposes of this calculation, common stock equivalents include
common stock options and are only included in the calculation
 
of diluted EPS when their effect is dilutive.
 
In calculating EPS for
 
the year ended December 31, 2022
 
and 2021, net income
 
available to common stockholders was
not allocated
 
between Class
 
A and
 
Class B
 
common stock
 
since there
 
was
no
 
issued and
 
outstanding Class
 
B common
stock at year-end.
The following table
 
reflects the calculation
 
of net income
 
(loss) available to
 
common stockholders
 
for the years
 
ended
December 31, 2022 and 2021 (in thousands):
2022
2021
Net Income
$
20,141
$
21,077
Less: Preferred stock dividends
 
-
2,077
Less: Exchange and redemption of preferred shares
-
89,585
Net income (loss) available to common stockholders
$
20,141
$
(70,585)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
 
45
 
USCB Financial Holdings, Inc.
 
2022 10-K/A
The following
 
table reflects
 
the calculation
 
of basic
 
and diluted
 
earnings (loss)
 
per common
 
share class
 
for the
 
years
ended December 31, 2022 and 2021 (in thousands, except
 
per share amounts):
2022
2021
Class A
Class A
Basic EPS
Numerator:
Net income (loss) available to common shares before allocation
$
20,141
$
(70,585)
Multiply: % allocated on weighted avg. shares outstanding
100.0%
100.0%
Net income (loss) available to common shares after allocation
$
20,141
$
(70,585)
Denominator:
Weighted average shares outstanding
19,999,323
10,507,530
Earnings (loss) per share, basic
$
1.01
$
(6.72)
Diluted EPS
Numerator:
Net income (loss) available to common shares before allocation
$
20,141
$
(70,585)
Multiply: % allocated on weighted avg. shares outstanding
100.0%
100.0%
Net income (loss) available to common shares after allocation
$
20,141
$
(70,585)
Denominator:
Weighted average shares outstanding for basic EPS
19,999,323
10,507,530
Add: Dilutive effects of assumed exercises of stock options
177,515
-
Weighted avg. shares including dilutive potential common shares
20,176,838
10,507,530
Earnings (loss) per share, diluted
$
1.00
$
(6.72)
Anti-dilutive stock options excluded from diluted EPS
15,000
183,303
For the year
 
ended 2021, the
 
Company was
 
in a net
 
loss position after
 
adjusting for the
 
exchange and redemption
 
of
the Class C
 
and Class D
 
preferred shares, making
 
basic net loss
 
per share the
 
same as diluted
 
net loss per
 
share as the
inclusion of all potential common shares outstanding would
 
have been antidilutive.
See Note 13 “Stockholders’ Equity” for further discussion
 
on the stock splits.
15.
 
REGULATORY
 
MATTERS
Banks and
 
bank holding
 
companies
 
are subject
 
to regulatory
 
capital requirements
 
administered by
 
federal and
 
state
banking
 
agencies.
 
Failure
 
to
 
meet
 
minimum
 
capital
 
requirements
 
can
 
initiate
 
certain
 
mandatory
 
and
 
possibly
 
additional
discretionary actions
 
by regulators
 
that, if
 
undertaken, could
 
have a
 
direct material
 
effect on
 
the Company's
 
consolidated
financial
 
statements.
 
Under
 
capital
 
adequacy
 
guidelines
 
and
 
the
 
regulatory
 
framework
 
for
 
prompt
 
corrective
 
action,
 
the
Company and the
 
Bank must meet
 
specific capital guidelines
 
that involve quantitative
 
measures of their
 
assets, liabilities,
and
 
certain
 
off-balance-sheet
 
items
 
as
 
calculated
 
under
 
regulatory
 
accounting
 
practices.
 
The
 
Company
 
and
 
the
 
Bank’s
capital
 
amounts
 
and
 
classification
 
are
 
also
 
subject
 
to
 
qualitative
 
judgments
 
by
 
the
 
regulators
 
about
 
components,
 
risk
weightings, and other factors.
Based on changes to the Federal Reserve’s definition of a “Small Bank Holding
 
Company” that increased the threshold
to $3.0 billion in assets
 
in August 2018, the Company
 
is not currently subject to
 
separate minimum capital measurements.
At such time when the Company reaches the
 
$3.0 billion asset level, it will
 
be subject to capital measurements independent
of the Bank.
The Bank has
 
elected to permanently opt-out
 
of the inclusion
 
of accumulated other comprehensive
 
income in the
 
capital
calculations, as permitted by the regulations. This
 
opt-out will reduce the impact of
 
market volatility on the Bank’s regulatory
capital levels.
The Bank is
 
subject to the
 
rules of the
 
Basel III regulatory capital
 
framework and related Dodd-Frank
 
Wall Street Reform
and Consumer Protection
 
Act. The rules include
 
the implementation of
 
a
2.5
% capital conservation
 
buffer that is
 
added to
the minimum requirements
 
for capital adequacy
 
purposes. Failure
 
to maintain the
 
required capital conservation
 
buffer will
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
 
46
 
USCB Financial Holdings, Inc.
 
2022 10-K/A
limit the ability of
 
the Bank to pay
 
dividends, repurchase shares
 
or pay discretionary
 
bonuses. At December
 
31, 2022 and
2021, the capital ratios for the Bank were sufficient
 
to meet the conservation buffer.
Prompt
 
corrective
 
action
 
regulations
 
provide
 
five
 
classifications:
 
well
 
capitalized,
 
adequately
 
capitalized,
undercapitalized,
 
significantly
 
undercapitalized,
 
and
 
critically
 
undercapitalized,
 
although
 
these
 
terms
 
are
 
not
 
used
 
to
represent overall financial condition. If
 
adequately capitalized, regulatory approval
 
is required to accept brokered
 
deposits.
If
 
undercapitalized,
 
capital
 
distributions
 
are
 
limited,
 
as
 
is
 
asset
 
growth
 
and
 
expansion,
 
and
 
capital
 
restoration
 
plans
 
are
required.
 
At December 31,
 
2022 and
 
2021, the
 
most recent
 
notification from
 
the regulatory
 
authorities categorized
 
the Bank
 
as
well capitalized
 
under the
 
regulatory framework
 
for prompt
 
corrective action.
 
Failure to
 
meet statutorily
 
mandated capital
guidelines
 
could
 
subject
 
the
 
Bank
 
to
 
a
 
variety
 
of
 
enforcement
 
remedies,
 
including
 
issuance
 
of
 
a
 
capital
 
directive,
 
the
termination of deposit
 
insurance by the
 
FDIC, a prohibition
 
on accepting or
 
renewing brokered deposits,
 
limitations on the
rates of
 
interest that
 
the Bank
 
may pay
 
on
 
its deposits
 
and other
 
restrictions
 
on
 
its business.
 
To
 
be categorized
 
as well
capitalized, an institution
 
must maintain minimum
 
total risk-based, Tier
 
1 risk-based and Tier
 
1 leverage ratios as
 
set forth
in the
 
table below.
 
There are
 
no conditions
 
or events
 
since the
 
notification that
 
management believes
 
have changed
 
the
Bank’s category.
 
Actual and required
 
capital amounts and
 
ratios are presented
 
below for the
 
Bank at December
 
31, 2022 and
 
2021 (in
thousands, except ratios). The required amounts for capital adequacy
 
shown do not include the capital conservation buffer
previously discussed.
Actual
Minimum Capital
Requirements
 
To be Well Capitalized
Under Prompt Corrective
Action Provisions
Amount
Ratio
Amount
Ratio
Amount
Ratio
December 31, 2022:
Total
 
risk-based capital:
$
216,693
13.58
%
$
127,616
8.00
%
$
159,520
10.00
%
Tier 1 risk-based capital:
$
198,909
12.47
%
$
95,712
6.00
%
$
127,616
8.00
%
Common equity tier 1 capital:
$
198,909
12.47
%
$
71,784
4.50
%
$
103,688
6.50
%
Leverage ratio:
198,909
9.56
%
$
83,210
4.00
%
$
104,012
5.00
%
December 31, 2021:
(1)
Total
 
risk-based capital
$
186,735
14.92
%
$
100,125
8.00
%
$
125,157
10.00
%
Tier 1 risk-based capital
$
171,484
13.70
%
$
75,094
6.00
%
$
100,125
8.00
%
Common equity tier 1 capital
$
171,484
13.70
%
$
56,321
4.50
%
$
81,352
6.50
%
Leverage ratio
$
171,484
9.55
%
$
71,825
4.00
%
$
89,781
5.00
%
Effective December 30, 2021, the Company acquired the Bank in a merger and
 
reorganization through the formation of
a bank holding company.
 
Pursuant to this transaction, all of the
 
outstanding shares of the Bank’s
 
$
1.00
 
par value common
stock formerly
 
held by
 
its shareholders
 
was converted
 
into and
 
exchanged for
 
one newly
 
issued share
 
of the
 
Company’s
par value common
 
stock, and the Bank
 
became a subsidiary of
 
the Company. See Note 13 “Stockholders’ Equity”
 
for further
details.
The Company
 
is limited in
 
the amount
 
of cash
 
dividends that
 
it may
 
pay.
 
Payment of dividends
 
is generally
 
limited to
the Company’s
 
net income
 
of the
 
current year
 
combined with
 
the Bank’s
 
retained income
 
of the
 
preceding two
 
years, as
defined by state banking regulations. However, for any dividend declaration, the Company must consider
 
additional factors
such as the amount
 
of current period net
 
income, liquidity,
 
asset quality,
 
capital adequacy and
 
economic conditions at
 
the
Bank. It is likely that
 
these factors would further limit the
 
amount of dividends which the Company could
 
declare. In addition,
bank regulators have
 
the authority to
 
prohibit banks from
 
paying dividends
 
if they deem
 
such payment to
 
be an unsafe
 
or
unsound practice.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
 
47
 
USCB Financial Holdings, Inc.
 
2022 10-K/A
16.
 
RELATED PARTY
 
TRANSACTIONS
 
In
 
the
 
ordinary
 
course
 
of
 
business,
 
principal
 
officers,
 
directors,
 
and
 
affiliates
 
may
 
engage
 
in
 
transactions
 
with
 
the
Company.
 
The
 
following
 
table
 
presents
 
loans
 
to
 
and
 
deposits
 
from
 
related
 
parties
 
included
 
within
 
the
 
accompanying
Consolidated Financial Statements at December 31, 2022
 
and 2021 (in thousands):
2022
2021
Consolidated Balance Sheets:
Loans held for investment, net
 
$
-
$
-
Deposits
$
6,825
$
1,905
Consolidated Statements of Operations:
Interest income
$
-
$
-
Interest expense
$
54
$
16
Loan Purchases
 
During 2022, the Bank purchased $
42.8
 
million of loans from entities that are deemed
 
to be related parties.
 
The Bank
paid those entities fees of $
881
 
thousand.
 
17.
 
PARENT COMPANY
 
CONDENSED FINANCIAL INFORMATION
 
In December
 
2021, USCB
 
Financial Holdings,
 
Inc. was
 
formed as
 
the parent
 
bank holding
 
company of
 
U.S. Century
Bank.
 
The
 
condensed
 
balance
 
sheet
 
is
 
presented
 
below
 
for
 
USCB
 
Financial
 
Holdings,
 
Inc.
 
at
 
the
 
dates
 
indicated
 
(in
thousands):
December 31, 2022
December 31, 2021
ASSETS:
Cash and Cash Equivalents
$
1,102
$
-
Investment in bank subsidiary
 
181,326
 
203,897
Other assets
-
-
Total
 
assets
$
182,428
$
203,897
LIABILITIES AND STOCKHOLDERS' EQUITY:
Other liabilities
$
-
$
-
Stockholders' equity
182,428
203,897
Total
 
liabilities and stockholders' equity
$
182,428
$
203,897
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
 
48
 
USCB Financial Holdings, Inc.
 
2022 10-K/A
The
 
condensed
 
income
 
statement
 
is
 
presented
 
below
 
for
 
USCB
 
Financial
 
Holdings,
 
Inc.
 
at
 
the
 
dates
 
indicated
 
(in
thousands):
December 31, 2022
December 31, 2021
INCOME:
Dividends from subsidiaries
$
1,000
$
-
Service fees from subsidiaries
-
-
Total
$
1,000
$
-
EXPENSE:
Employee compensation and benefits
 
-
 
-
Total
-
-
Income before income taxes and undistributed subsidiary income
1,000
Provision (benefit) for income taxes
-
-
Equity in undisbursed subsidiary income
19,141
Net Income
 
$
20,141
$
-
The condensed cash flow is presented below for USCB
 
Financial Holdings, Inc. at the dates indicated (in thousands):
December 31, 2022
December 31, 2021
Cash flows from operating activities:
Net income
$
20,141
$
-
Adjustments to reconcile net income to net cash provided
 
by operating
activities:
-
Equity in undistributed earnings of subsidiaries
(19,141)
-
Other
-
Net cash provided by operating activities
$
1,000
$
-
Cash flows from investing activities:
Capital contributions to subsidiary
-
-
Other
-
-
Net cash used in investing activities
 
-
-
Cash flows from financing activities:
Dividends paid
-
-
Proceeds from exercise of stock options
102
-
Repurchase of common stock
-
-
Net cash (used in) provided by financing activities
102
-
Net increase (decrease) in cash and cash equivalents
 
1,102
-
Cash and cash equivalents, beginning of period
 
-
-
Cash and cash equivalents, end of period
 
$
1,102
$
-
18.
 
LOSS CONTINGENCIES
 
Loss contingencies,
 
including claims
 
and legal actions
 
may arise in
 
the ordinary
 
course of
 
business. In
 
the opinion
 
of
management, none
 
of these
 
actions, either
 
individually or
 
in the aggregate,
 
is expected
 
to have
 
a material
 
adverse effect
on the Company’s Consolidated Financial Statements.
19.
 
SUBSEQUENT EVENTS
 
Management has
 
evaluated subsequent
 
events from
 
January 1,
 
2023 through
 
March 24,
 
2023, which
 
is the
 
date this
Annual Report Form 10-K was available to be issued.
Share Repurchase Program
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
 
49
 
USCB Financial Holdings, Inc.
 
2022 10-K/A
In February 2023 the
 
Company repurchased
250,000
 
shares of USCB Financial
 
Holdings Inc. Class
 
A common stock
at
 
a
 
price
 
of
 
$
12.04
.
 
Additionally,
 
the
 
Company
 
repurchased
250,000
 
shares
 
of
 
USCB
 
Financial
 
Holdings
 
Inc
 
Class
 
A
Common stock
 
at a
 
price of
 
$
11.39
 
in March
 
2023. These
 
repurchases were
 
made thru
 
the open
 
market pursuant
 
to the
Company’s publicly announced repurchase program.
 
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
 
50
 
USCB Financial Holdings, Inc.
 
2022 10-K/A
PART IV
 
Item 15. Exhibits and Financial Statement Schedules
(a)
 
List of documents filed as part of this Amendment No.
 
1 to the Annual Report on Form 10-K and are set forth
 
in Item 8
hereto:
1)
Financial Statements:
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of December 31, 2022 and 2021
Consolidated Statements of Operations for the years ended
 
December 31, 2022 and 2021
Consolidated Statements of Comprehensive Income (Loss)
 
for the years ended December 31, 2022 and 2021
Consolidated Statements of Changes in Stockholders'
 
Equity for the years ended December 31, 2022 and 2021
Consolidated Statements of Cash Flows for the years
 
ended December 31, 2022 and 2021
Notes to Consolidated Financial Statements
2)
Financial Statement Schedules:
Financial statement schedules are omitted as not required
 
or not applicable or because the information is
included in the Consolidated Financial Statements or notes
 
thereto.
(b)
 
List of Exhibits:
Item 15(b) of the Original Report is hereby amended solely
 
to provide the exhibits required to be filed in
connection with the Form 10-K/A.
 
 
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
 
51
 
USCB Financial Holdings, Inc.
 
2022 10-K/A
EXHIBIT INDEX
Exhibit
Number
Description of Exhibit
*
*
**
**
101
The following financial statements from
 
the Company’s Annual Report on
 
Form 10-K for the year ended
 
December 31, 2021,
formatted
 
in
 
Inline
 
XBRL:
 
(i)
 
Consolidated
 
Balance
 
Sheets,
 
(ii)
 
Consolidated
 
Statements
 
of
 
Operations,
 
(iii)
 
Consolidated
 
Statements
 
of
 
Comprehensive Income,
 
(iv) Consolidated
 
Statements of
 
Changes in
 
Stockholders’ Equity,
 
(v)
 
Consolidated
 
Statements of Cash Flows, (vi) Notes to Consolidated Financial Statements.
104
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
*
Filed herewith.
**
Furnished hereby.
 
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
 
52
 
USCB Financial Holdings, Inc.
 
2022 10-K/A
SIGNATURES
 
Pursuant to the requirements of the
 
Exchange Act, the registrant has
 
duly caused this Amendment No.
 
1 to this report
to be signed on its behalf by the undersigned thereunto
 
duly authorized.
USCB FINANCIAL HOLDINGS, INC.
Date: March 27, 2023
By:
/s/ Luis de la Aguilera
Luis de la Aguilera
President and Chief Executive Officer
exhibit311
 
 
Table
 
of Contents
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
 
Exhibit 31.1
Certification of Chief Executive Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act
 
of 2002
I, Luis de la Aguilera, certify that:
1.
 
I have reviewed this Annual Report on Form 10-K/A
 
of USCB Financial Holdings, Inc.;
2.
 
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary
 
to
 
make
 
the
 
statements
 
made,
 
in
 
light
 
of
 
the
 
circumstances
 
under
 
which
 
such
 
statements
 
were
 
made,
 
not
misleading with respect to the period covered by this report;
3.
 
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects
 
the financial
 
condition, results
 
of operations
 
and cash
 
flows of
 
the registrant
 
as of,
 
and for,
 
the periods
presented in this report;
4.
 
The
 
registrant’s
 
other
 
certifying
 
officer
 
and
 
I
 
are
 
responsible
 
for
 
establishing
 
and
 
maintaining
 
disclosure
 
controls
 
and
procedures (as defined in Exchange Act Rules 13a-15(e)
 
and 15d-15(e)) and have:
a)
 
designed
 
such
 
disclosure
 
controls
 
and
 
procedures,
 
or
 
caused
 
such
 
disclosure
 
controls
 
and
 
procedures
 
to
 
be
designed
 
under
 
our
 
supervision,
 
to
 
ensure
 
that
 
material
 
information
 
relating
 
to
 
the
 
registrant,
 
including
 
its
consolidated subsidiaries, is
 
made known
 
to us by
 
others within those
 
entities, particularly during
 
the period in
 
which
this report is being prepared;
b)
 
evaluated the effectiveness
 
of the registrant’s
 
disclosure controls and
 
procedures and presented
 
in this report our
conclusions about the effectiveness of the
 
disclosure controls and procedures, as of the
 
end of the period covered
by this report based on such evaluation; and
c)
 
disclosed in this
 
report any
 
change in the
 
registrant’s internal
 
control over
 
financial reporting
 
that occurred
 
during
the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an Annual Report) that
has
 
materially
 
affected,
 
or
 
is
 
reasonably
 
likely
 
to
 
materially
 
affect,
 
the
 
registrant’s
 
internal
 
control
 
over
 
financial
reporting; and
5.
 
The registrant’s
 
other certifying
 
officer
 
and I
 
have disclosed,
 
based on
 
our most
 
recent evaluation
 
of internal
 
control over
financial
 
reporting,
 
to
 
the
 
registrant’s
 
auditors
 
and
 
the
 
audit
 
committee
 
of
 
the
 
registrant’s
 
board
 
of
 
directors
 
(or
 
persons
performing the equivalent functions):
a)
 
All
 
significant
 
deficiencies
 
and
 
material
 
weaknesses
 
in
 
the
 
design
 
or
 
operation
 
of
 
internal
 
control
 
over
 
financial
reporting which are
 
reasonably likely
 
to adversely affect
 
the registrant’s ability
 
to record, process,
 
summarize and
report financial information; and
b)
 
Any fraud, whether or not material,
 
that involves management or other employees who
 
have a significant role in
 
the
registrant’s internal control over financial reporting.
/s/ Luis de la Aguilera
Luis de la Aguilera
President and Chief Executive Officer
Date: 3/27/2023
exhibit312
 
 
Table
 
of Contents
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
 
Exhibit 31.2
Certification of Chief Financial Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act
 
of 2002
I, Robert Anderson, certify that:
1.
 
I have reviewed this Annual Report on Form 10-K/A
 
of USCB Financial Holdings, Inc.;
2.
 
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary
 
to
 
make
 
the
 
statements
 
made,
 
in
 
light
 
of
 
the
 
circumstances
 
under
 
which
 
such
 
statements
 
were
 
made,
 
not
misleading with respect to the period covered by this report;
3.
 
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects
 
the financial
 
condition, results
 
of operations
 
and cash
 
flows of
 
the registrant
 
as of,
 
and for,
 
the periods
presented in this report;
4.
 
The
 
registrant’s
 
other
 
certifying
 
officer
 
and
 
I
 
are
 
responsible
 
for
 
establishing
 
and
 
maintaining
 
disclosure
 
controls
 
and
procedures (as defined in Exchange Act Rules 13a-15(e)
 
and 15d-15(e)) and have:
a)
 
designed
 
such
 
disclosure
 
controls
 
and
 
procedures,
 
or
 
caused
 
such
 
disclosure
 
controls
 
and
 
procedures
 
to
 
be
designed
 
under
 
our
 
supervision,
 
to
 
ensure
 
that
 
material
 
information
 
relating
 
to
 
the
 
registrant,
 
including
 
its
consolidated subsidiaries, is
 
made known
 
to us by
 
others within those
 
entities, particularly during
 
the period in
 
which
this report is being prepared;
b)
 
evaluated the effectiveness
 
of the registrant’s
 
disclosure controls and
 
procedures and presented
 
in this report
 
our
conclusions about the effectiveness of the
 
disclosure controls and procedures, as of the
 
end of the period covered
by this report based on such evaluation; and
c)
 
disclosed in this
 
report any
 
change in the
 
registrant’s internal
 
control over
 
financial reporting
 
that occurred
 
during
the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an Annual Report) that
has
 
materially
 
affected,
 
or
 
is
 
reasonably
 
likely
 
to
 
materially
 
affect,
 
the
 
registrant’s
 
internal
 
control
 
over
 
financial
reporting; and
5.
 
The registrant’s
 
other certifying
 
officer
 
and I
 
have disclosed,
 
based on
 
our most
 
recent evaluation
 
of internal
 
control over
financial
 
reporting,
 
to
 
the
 
registrant’s
 
auditors
 
and
 
the
 
audit
 
committee
 
of
 
the
 
registrant’s
 
board
 
of
 
directors
 
(or
 
persons
performing the equivalent functions):
a)
 
All
 
significant
 
deficiencies
 
and
 
material
 
weaknesses
 
in
 
the
 
design
 
or
 
operation
 
of
 
internal
 
control
 
over
 
financial
reporting which are
 
reasonably likely
 
to adversely affect
 
the registrant’s ability
 
to record, process,
 
summarize and
report financial information; and
b)
 
Any fraud, whether or not material, that involves
 
management or other employees who have a significant role
 
in the
registrant’s internal control over financial reporting.
/s/ Robert Anderson
Robert Anderson
Chief Financial Officer
Date: 3/27/2023
exhibit321
 
 
Table
 
of Contents
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
 
Exhibit 32.1
Certification of Chief Executive Officer Pursuant to
 
18 U.S.C. Section 1350
as Adopted Pursuant to Section 906 of the Sarbanes
 
-Oxley Act of 2002
In connection
 
with the
 
Annual Report
 
of USCB
 
Financial Holdings,
 
Inc. (the
 
“Company”) on
 
Form 10-K/A for
 
the year
ended December 31, 2022, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Luis
de la Aguilera, as President
 
and Chief Executive Officer
 
of the Company,
 
certify, to
 
the best of my knowledge,
 
pursuant to
18 U.S.C. §1350, as adopted pursuant to Section 906
 
of the Sarbanes-Oxley Act of 2002, that:
1)
 
The
 
Report
 
fully
 
complies
 
with
 
the
 
requirements
 
of
 
Section 13(a) or
 
15(d),
 
as
 
applicable,
 
of
 
the
 
Securities
Exchange Act of 1934; and
2)
 
The
 
information
 
contained
 
in
 
the
 
Report
 
fairly
 
presents,
 
in
 
all
 
material
 
respects,
 
the
 
financial
 
condition
 
and
results of operations of the Company.
/s/ Luis de la Aguilera
Luis de la Aguilera
President and Chief Executive Officer
Date: 3/27/2023
exhibit322
 
 
Table
 
of Contents
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
 
Exhibit 32.2
Certification of Chief Financial Officer Pursuant to
 
18 U.S.C. Section 1350
as Adopted Pursuant to Section 906 of the Sarbanes
 
-Oxley Act of 2002
In connection
 
with the
 
Annual Report
 
of USCB
 
Financial Holdings,
 
Inc. (the
 
“Company”) on
 
Form 10-K/A for
 
the year
ended
 
December 31,
 
2022,
 
as
 
filed
 
with
 
the
 
Securities
 
and
 
Exchange
 
Commission
 
on
 
the
 
date
 
hereof
 
(the
 
“Report”), I,
Robert Anderson,
 
as Chief
 
Financial Officer
 
of the
 
Company,
 
certify,
 
to the
 
best of
 
my knowledge,
 
pursuant to
 
18 U.S.C.
§1350, as adopted pursuant to Section 906 of the
 
Sarbanes-Oxley Act of 2002, that:
1)
 
The
 
Report
 
fully
 
complies
 
with
 
the
 
requirements
 
of
 
Section 13(a) or
 
15(d),
 
as
 
applicable,
 
of
 
the
 
Securities
Exchange Act of 1934; and
2)
 
The
 
information
 
contained
 
in
 
the
 
Report
 
fairly
 
presents,
 
in
 
all
 
material
 
respects,
 
the
 
financial
 
condition
 
and
results of operations of the Company.
/s/ Robert Anderson
Robert Anderson
Chief Financial Officer
Date: 3/27/2023