uscb-20240331p1i0
UNITED STATES
 
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
10-Q
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
September 30, 2023March 31, 2024
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 N.W. 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
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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
☐
 
No
☒
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
As of OctoberApril 30, 20232024 the registrant had
19,542,29019,655,632
 
shares of Class
A
common stock outstanding.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3
 
USCB Financial Holdings, Inc.
 
Q3 2023Q1 2024 Form 10-Q
PART
 
I
Item 1.
 
Financial Statements
USCB FINANCIAL HOLDINGS, INC
Consolidated Balance Sheets – Unaudited
(Dollars in thousands, except share data)
September 30, 2023March 31, 2024
December 31, 20222023
ASSETS:
Cash and due from banks
$
5,0749,601
$
6,6058,019
Interest-bearing deposits in banks
28,361116,945
47,56333,043
Total cash and cash equivalents
33,435126,546
54,16841,062
Investment securities held to maturity, net of allowance of $
1612
 
and $
08
, respectively (fair value $
171,294152,156
and $
169,088155,510
, respectively)
197,311173,038
188,699174,974
Investment securities available for sale, at fair value
218,609259,992
230,140229,329
Federal Home Loan Bank stock, at cost
6,3055,532
2,88210,153
Loans held for investment, net of allowance of $
19,49321,454
 
and $
17,48721,084
, respectively
1,657,0271,799,742
1,489,8511,759,743
Accrued interest receivable
8,92011,579
7,54610,688
Premises and equipment, net
4,9514,787
5,2634,836
Bank owned life insurance
51,37752,192
42,78151,781
Deferred tax assets, net
40,43036,249
42,36037,282
Lease right-of-use asset
12,16610,680
14,39511,423
Other assets
14,0718,805
7,7497,822
Total assets
$
2,244,6022,489,142
$
2,085,8342,339,093
LIABILITIES:
 
Deposits:
Demand deposits
$
573,546576,626
$
629,776552,762
Money market and savings accounts
1,016,5641,141,422
915,8531,048,272
Interest-bearing checking
46,53757,839
66,67547,702
Time deposits
284,275326,907
216,977288,403
Total deposits
1,920,9222,102,794
1,829,2811,937,139
Federal Home Loan Bank advances and other
borrowings
102,000162,000
46,000183,000
Lease liability
12,16610,680
14,39511,423
Accrued interest and other liabilities
26,63018,657
13,73015,563
Total liabilities
2,061,7182,294,131
1,903,4062,147,125
Commitments and contingencies (See Notes 5
 
and 10)
.(nil)
.
(nil)
STOCKHOLDERS' EQUITY:
 
Preferred stock - Class C; $
1.00
 
par value; $
1,000
 
per share liquidation preference;
52,748
 
shares
authorized;
0
 
and
0
 
issued and outstanding as of September 30, 2023March 31, 2024
 
and December 31, 20222023
-
-
Preferred stock - Class D; $
1.00
 
par value; $
5.00
 
per share liquidation preference;
12,309,480
 
shares
authorized;
0
 
and
0
 
issued and outstanding as of September 30, 2023March 31, 2024
 
and December 31, 20222023
-
-
Preferred stock - Class E; $
1.00
 
par value; $
1,000
 
per share liquidation preference;
3,185,024
 
shares
authorized;
0
 
and
0
 
issued and outstanding as of September 30, 2023March 31, 2024
 
and December 31, 20222023
-
-
Common stock - Class A Voting; $
1.00
 
par value;
45,000,000
 
shares authorized;
19,542,29019,650,463
 
issued and
outstanding
 
as of September 30, 2023,March 31, 2024,
20,000,75319,575,435
 
issued and outstanding as of December 31,
 
20222023
19,54219,650
20,00119,575
Common stock - Class B Non-voting; $
1.00
 
par value;
8,000,000
 
shares authorized;
0
 
and
0
 
issued and
outstanding as of September 30, 2023March 31, 2024 and December
 
December 31, 20222023
-
-
Additional paid-in capital on common stock
305,837305,740
311,282305,212
Accumulated deficit
(91,269)(84,952)
(104,104)(88,548)
Accumulated other comprehensive loss
(51,226)(45,427)
(44,751)(44,271)
Total stockholders' equity
182,884195,011
182,428191,968
Total liabilities and stockholders' equity
$
2,244,6022,489,142
$
2,085,8342,339,093
The accompanying notes are an integral part of
 
these unaudited consolidated financial statements.
 
4
USCB Financial Holdings, Inc.
Q1 2024 Form 10-Q
USCB FINANCIAL HOLDINGS, INC.
Consolidated Statements of Operations - Unaudited
(Dollars in thousands,
except per share data)
Three Months Ended March 31,
2024
2023
Interest income:
Loans, including fees
$
26,643
$
19,711
Investment securities
2,811
2,286
Interest-bearing deposits in financial institutions
1,433
382
Total interest income
30,887
22,379
Interest expense:
Interest-bearing checking
369
43
Money market and savings accounts
10,394
4,785
Time deposits
3,294
1,057
Federal Home Loan Bank advances and other borrowings
1,672
497
Total interest expense
15,729
6,382
Net interest income before provision for
credit losses
15,158
15,997
Provision for credit losses
410
201
Net interest income after provision for
credit losses
14,748
15,796
Non-interest income:
Service fees
1,651
1,205
(Loss) gain on sale of securities available for
sale, net
-
(21)
Gain on sale of loans held for sale, net
67
347
Other non-interest income
746
539
Total non-interest income
2,464
2,070
Non-interest expense:
Salaries and employee benefits
6,310
6,377
Occupancy
1,314
1,299
Regulatory assessment and fees
433
224
Consulting and legal fees
592
358
Network and information technology services
507
478
Other operating expense
2,018
1,440
Total non-interest expense
11,174
10,176
Income before income tax expense
6,038
7,690
Income tax expense
1,426
1,881
Net income
$
4,612
$
5,809
Per share information:
Net income per share, basic
$
0.23
$
0.29
Net income per share, diluted
$
0.23
$
0.29
Cash dividend declared
$
0.05
$
-
The accompanying notes are an integral part of
these unaudited consolidated financial statements.
5
USCB Financial Holdings, Inc.
Q1 2024 Form 10-Q
USCB FINANCIAL HOLDINGS, INC.
Consolidated Statements of Comprehensive Income
(Loss) - Unaudited
(Dollars in thousands)
Three Months Ended March 31,
2024
2023
Net income
$
4,612
$
5,809
Other comprehensive income (loss):
Unrealized gain (loss) on investment securities
(2,134)
3,637
Amortization of net unrealized gain (loss) on securities
transferred from available-for-sale to held-to-maturity
67
(60)
Reclassification adjustment for (gain) loss included
in net income
-
21
Unrealized gain on cash flow hedge
519
-
Tax effect
392
(912)
Total other comprehensive income (loss), net of tax
(1,156)
2,686
Total comprehensive income
$
3,456
$
8,495
The accompanying notes are an integral part of
these unaudited consolidated financial statements.
6
USCB Financial Holdings, Inc.
Q1 2024 Form 10-Q
USCB FINANCIAL HOLDINGS, INC.
Consolidated Statements of Changes in Stockholders’
Equity - Unaudited
(Dollars in thousands,
except per share data)
Common Stock
Additional Paid-in
Capital on Common
Stock
Accumulated Deficit
Accumulated Other
Comprehensive
Loss
Shares
Par Value
Total
Stockholders'
Equity
Balance at December 31, 2023
19,575,435
$
19,575
$
305,212
$
(88,548)
$
(44,271)
$
191,968
Net income
-
-
-
4,612
-
4,612
Other comprehensive loss
-
-
-
-
(1,156)
(1,156)
Repurchase of Class A common stock
(7,100)
(7)
(72)
-
-
(79)
Restricted stock issued
52,753
53
(53)
-
-
-
Restricted stock forfeiture
(8,625)
(9)
9
-
-
-
Exercise of stock options
38,000
38
284
-
-
322
Dividend payment
-
-
-
(1,016)
-
(1,016)
Stock-based compensation
-
-
360
-
-
360
Balance at March 31, 2024
19,650,463
$
19,650
$
305,740
$
(84,952)
$
(45,427)
$
195,011
Balance at December 31, 2022
20,000,753
$
20,001
$
311,282
$
(104,104)
$
(44,751)
$
182,428
Cumulative effect of adoption of accounting principle
related to ASC 326
-
-
-
(1,325)
-
(1,325)
Adjusted beginning balance after cumulative
effect adjustment
20,000,753
20,001
311,282
(105,429)
(44,751)
181,103
Net income
-
-
-
5,809
-
5,809
Other comprehensive loss
-
-
-
-
2,686
2,686
Repurchase of Class A common stock
(500,000)
(500)
(5,367)
-
-
(5,867)
Restricted stock issued
121,627
121
(121)
-
-
-
Stock-based compensation
-
-
127
-
-
127
Balance at March 31, 2023
19,622,380
$
19,622
$
305,921
$
(99,620)
$
(42,065)
$
183,858
The accompanying notes are an integral
part of these consolidated financial statements.
7
USCB Financial Holdings, Inc.
Q1 2024 Form 10-Q
USCB FINANCIAL HOLDINGS, INC.
Consolidated Statements of Cash Flows - Unaudited
(Dollars in thousands)
Three Months Ended March 31,
2024
2023
Cash flows from operating activities:
Net income
$
4,612
$
5,809
Adjustments to reconcile net income
to net cash provided by operating activities:
Provision for credit losses
410
201
Depreciation and amortization
140
150
(Accretion) amortization of premiums on securities,
net
(135)
(38)
Accretion of deferred loan fees, net
(3)
(93)
Stock-based compensation
360
127
Loss (gain) on sale of available for sale securities
-
21
Gain on sale of loans held for sale
(67)
(347)
Increase in cash surrender value of bank owned
life insurance
(411)
(267)
Decrease in deferred tax assets
1,424
1,881
Net change in operating assets and liabilities:
Accrued interest receivable
(891)
(670)
Other assets
(464)
284
Accrued interest and other liabilities
3,051
1,943
Net cash provided by operating activities
8,026
9,001
Cash flows from investing activities:
Proceeds from maturities and pay-downs of investment
securities held to maturity
1,987
2,406
Purchase of investment securities available
for sale
(36,927)
(7,667)
Proceeds from maturities and pay-downs of investment
securities available for sale
4,278
3,261
Proceeds from sales of investment securities
available for sale
-
8,617
Net increase in loans held for investment
(15,830)
(77,413)
Purchase of loans held for investment
(25,249)
-
Additions to premises and equipment
(91)
(22)
Proceeds from the sale of loans held for sale
787
4,847
Proceeds from the redemption of Federal
Home Loan Bank stock
4,798
3,570
Purchase of Federal Home Loan Bank stock
(177)
(6,831)
Net cash used in investment activities
(66,424)
(69,232)
Cash flows from financing activities:
Proceeds from issuance of Class A common
stock, net
322
-
Cash dividends paid
(1,016)
-
Repurchase of Class A common stock
(79)
(5,867)
Net increase in deposits
165,655
1,181
Proceeds from other borrowings
80,000
158,000
Repayments on Federal Home Loan Bank advances
(101,000)
(84,000)
Net cash provided by financing activities
143,882
69,314
Net increase in cash and cash equivalents
85,484
9,083
Cash and cash equivalents at beginning
of period
41,062
54,168
Cash and cash equivalents at end of period
$
126,546
$
63,251
Supplemental disclosure of cash flow
information:
Interest paid
$
14,624
$
6,044
Supplemental schedule of non-cash investing
and financing activities:
Transfer of loans held for investment to loans held
for sale
$
720
$
4,500
The accompanying notes are an integral
part of these unaudited consolidated financial
statements.
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements - Unaudited
8
USCB Financial Holdings, Inc.
Q1 2024 Form 10-Q
1.
SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Overview
USCB Financial Holdings,
Inc.,
a Florida corporation
incorporated in 2021,
is a bank
holding company with
one direct
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.
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 Title LLC began operations
in 2021.
Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared in accordance with instructions to
Form 10-Q and
do not include all
the information and
footnotes required by U.S.
generally accepted accounting
principles
(“U.S.
GAAP”)
for
complete
financial
statements.
All
adjustments
consisting
of
normally
recurring
accruals
that,
in
the
opinion
of
management,
are
necessary
for
a
fair
presentation
of
the
financial
position
and
results
of
operations
for
the
periods presented
have been
included. These
unaudited consolidated
financial statements
should be
read in
conjunction
with
the
Company’s
consolidated
financial
statements
and
related
notes
appearing
in the
Company’s
Annual
Report
on
Form 10-K for the year ended December 31, 2023.
Principles of Consolidation
The
Company
consolidates
entities
in
which
it
has
a
controlling
financial
interest.
Intercompany
transactions
and
balances are eliminated in consolidation.
Use of Estimates
To prepare
financial statements in conformity with U.S. GAAP,
management makes estimates and assumptions based
on available
information. These
estimates and
assumptions affect
the amounts
reported in
the financial
statements. The
most significant
estimates impacting
the Company’s
consolidated financial
statements are
the allowance
for credit
losses
(“ACL”) and income taxes.
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
Adoption of New Accounting Standards
Reference Rate Reform
In
March
2020,
the
Financial
Accounting
Standards
Board
(“FASB”)
issued
ASU
2020-04,
Reference
Rate
Reform
(Topic
848), aiming to facilitate the impacts
of reference rate reform on financial reporting.
This initiative was subsequently
clarified
in
January
2021
through
ASU
2021-01,
providing
optional
directives
for
a
designated
timeframe
to
alleviate
challenges
associated
with
accounting
for,
or acknowledging
the
effects
of, reference
rate reform
on financial
reporting.
These
amendments
offer
discretionary
guidance
for
a
defined
period
to
alleviate
potential
accounting
complexities
associated with reference rate reform in financial reporting. The
expedients and exceptions provided by these amendments
are not
applicable to
contract modifications
executed and
hedging relationships
initiated or
reviewed after
December 31,
2022, except
for
pre-existing
hedging
relationships
as
of December
31,
2022,
for
which
an
entity
has
opted
for
specific
optional expedients, and which
are retained until the conclusion
of the hedging relationship.
Additionally,
the amendments
permit entities to make a one-time choice to divest, transfer,
or both divest and transfer debt securities categorized as held
to maturity, referencing a rate impacted by reference rate reform,
and classified as held to maturity
prior to January 1, 2020.
In December 2022, the
FASB issued new guidance extending the
expiration date of this
guidance from December 31,
2022,
to December
31, 2024,
after which
entities will
no longer
be authorized
to apply
the relief
provided under
this guidance.
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements - Unaudited
9
USCB Financial Holdings, Inc.
Q1 2024 Form 10-Q
Before this recent guidance, these amendments were effective for all entities
from March 12, 2020, to December 31, 2022.
The
Company
executed
its
transition
strategy
in
preparation
for
the
cessation
of
the
London
Intrabank
Offered
Rate
(“LIBOR”) and the adjustment of
its existing financial instruments affected
by LIBOR, whether directly or
indirectly.
LIBOR-
based originations were ceased as of June 30, 2023, and for existing LIBOR-based transactions,
the Company substituted
Secured Overnight
Financing Rate
(“SOFR”) for
LIBOR. The
Company has
completed its
transition away
from LIBOR
for
its loan and other financial instruments.
Issued and Not Yet Adopted
Improvements to Income Tax
Disclosures
In
December
2023,
the
FASB
issued
Accounting
Standards
Update
(ASU)
2023-09,
Income
Taxes
(Topic
740):
Improvements to Income Tax
Disclosures. This ASU pertains to
disclosures regarding effective
tax rates and cash income
taxes paid with the goal of providing stakeholders with more transparent
and relevant information. This ASU is effective for
public business entities for annual periods beginning after Dec. 15,
2024. The Company is currently assessing the potential
impact of this
ASU on its
financial reporting and
has not yet
concluded whether the
changes will materially
affect its business
operations or consolidated financial statements.
2.
INVESTMENT SECURITIES
The measurement of expected credit losses under the current expected credit loss (“CECL”) methodology is applicable
to
financial
assets
measured
at
amortized
cost,
including
loan
receivables
and
held-to-maturity
debt
securities.
The
accounting
for available-for-sale
debt securities
credit
losses is
presented
as an
allowance rather
than
as a
write-down.
Management does not intend to sell or believes that
it is more likely they will not be required to sell AFS
securities.
CECL requires a loss reserve for
securities classified as held-to-maturity
(“HTM”). The reserve should reflect
historical
credit performance
as well
as the
impact of
projected
economic forecast.
For U.S.
Government bonds
and
U.S. Agency
issued bonds
classified as
HTM, the
explicit guarantee
of the U.S.
Government is
sufficient to
conclude that
a credit
loss
reserve is not required.
The reserve requirement is for three primary assets groups: municipal bonds, corporate bonds, and
non-agency
securitizations.
The Company
calculates
quarterly
the loss
reserve
utilizing Moody’s
ImpairmentStudio.
The
CECL measurement for
investment securities
incorporates historical
data, containing
defaults and recoveries
information,
and Moody’s baseline
economic forecast. The solution
uses probability of default/loss
given default (“PD/LGD”)
approach.
PD represents
the likelihood
a borrower
will default.
Within the
Moody’s model
,
this is
determined using
historical default
data, adjusted for the current economic environment. LGD projects
the expected loss if a borrower were to default.
The Company monitors
the credit
quality of held
to maturity
securities through
the use of
credit ratings.
Credit ratings
are
monitored
by
the
Company
on
at
least
a
quarterly
basis.
As
of
March
31,
2024
and
December
31,
2023,
all
HTM
securities held by the Company were rated investment
grade.
At
quarter
end,
HTM
securities
included
$
163.7
million
of
U.S.
Government
and
U.S.
Agency
issued
bonds
and
mortgage-backed
securities.
Because
of
the
explicit
and/or
implicit
guarantee
on
these
bonds,
the
Company
holds
no
reserves
on these
holdings.
The remaining
portion
of
the HTM
portfolio
is made
up of
$
9.4
million
in
investment
grade
corporate bonds. The required reserve for these holdings is
determined each quarter using the model described above. For
the portion of the HTM exposed to non-government
credit risk, the Company utilized the PD/LGD
methodology to estimate
a $
12
thousand Allowance for
credit losses (“ACL”)
as of March
31, 2024. The book
value for debt securities
classified as
HTM represents amortized cost less ACL.
The Company determined that an ACL on its debt securities available for sale as of March 31, 2024 and December 31,
2023 was not required.
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements - Unaudited
10
USCB Financial Holdings, Inc.
Q1 2024 Form 10-Q
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):
March 31, 2024
Available-for-sale:
Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Fair Value
U.S. Government Agency
$
17,168
$
25
$
(1,644)
$
15,549
Collateralized mortgage obligations
130,533
1
(24,165)
106,369
Mortgage-backed securities - residential
62,734
-
(12,397)
50,337
Mortgage-backed securities - commercial
48,182
70
(6,550)
41,702
Municipal securities
24,985
-
(5,924)
19,061
Bank subordinated debt securities
28,622
471
(2,119)
26,974
$
312,224
$
567
$
(52,799)
$
259,992
Held-to-maturity:
U.S. Government Agency
$
43,439
$
-
$
(5,816)
$
37,623
Collateralized mortgage obligations
61,465
2
(8,336)
53,131
Mortgage-backed securities - residential
43,383
160
(4,930)
38,613
Mortgage-backed securities - commercial
15,409
-
(1,301)
14,108
Corporate bonds
9,354
-
(673)
8,681
$
173,050
$
162
$
(21,056)
$
152,156
Allowance for credit losses - securities held-to-maturity
(12)
Securities held-to maturity, net of allowance for credit losses
$
173,038
December 31, 2023
Available-for-sale:
Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Fair Value
U.S. Government Agency
$
9,664
$
-
$
(1,491)
$
8,173
Collateralized mortgage obligations
103,645
-
(23,039)
80,606
Mortgage-backed securities - residential
63,795
-
(11,608)
52,187
Mortgage-backed securities - commercial
49,212
56
(6,504)
42,764
Municipal securities
25,005
-
(5,667)
19,338
Bank subordinated debt securities
28,106
188
(2,033)
26,261
Corporate bonds
-
-
-
-
$
279,427
$
244
$
(50,342)
$
229,329
Held-to-maturity:
U.S. Government Agency
$
43,626
$
2
$
(5,322)
$
38,306
U.S. Treasury
62,735
-
(7,983)
54,752
Collateralized mortgage obligations
43,784
348
(4,533)
39,599
Mortgage-backed securities - residential
15,439
-
(1,257)
14,182
Mortgage-backed securities - commercial
9,398
-
(727)
8,671
$
174,982
$
350
$
(19,822)
$
155,510
Allowance for credit losses - securities held-to-maturity
(8)
Securities held-to maturity, net of allowance for credit losses
$
174,974
During the quarter ended March 31, 2024 there were
no
investment securities that were transferred from available-for-
sale (“AFS”) to
HTM. For the three
months ended March 31,
2024, total amortization out
of Additional Other Comprehensive
Income
(“AOCI”)
for
net
unrealized
losses
on
securities
transferred
in
2022
from
AFS
to
HTM
was
$
67
thousand.
The
unamortized net unrealized loss as of March 31, 2024,
was $
9.5
million.
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements - Unaudited
11
USCB Financial Holdings, Inc.
Q1 2024 Form 10-Q
Gains
and
losses
on
the
sale
of
securities
are
recorded
on
the
trade
date
and
are
determined
on
the
specific
identification basis. The following table presents the proceeds, realized gross gains and realized gross losses on sales and
calls of AFS debt securities for the three months ended
March 31, 2024 and 2023 (in thousands):
Three Months Ended March 31,
Available-for-sale:
2024
2023
Proceeds from sale and call of securities
$
-
$
8,617
Gross gains
$
-
$
3
Gross losses
-
(24)
Net realized (loss) gain
$
-
$
(21)
The amortized
cost
and
fair
value of
investment
securities,
by contractual
maturity,
are shown
below
as of
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.
Available-for-sale
Held-to-maturity
March 31, 2024:
Amortized
Cost
Fair Value
Amortized
Cost
Fair Value
Due within one year
$
-
$
-
$
-
$
-
Due after one year through five years
2,722
2,863
9,354
8,681
Due after five years through ten years
38,045
33,506
-
-
Due after ten years
12,840
9,666
-
-
U.S. Government Agency
17,168
15,549
43,439
37,623
Collateralized mortgage obligations
130,533
106,369
61,465
53,131
Mortgage-backed securities - residential
62,734
50,337
43,383
38,613
Mortgage-backed securities - commercial
48,182
41,702
15,409
14,108
$
312,224
$
259,992
$
173,050
$
152,156
At March 31, 2024, there were no securities held in the portfolio from any
one issuer in an amount greater than 10% of
total
stockholders’
equity
other
than
the
U.S.
Government
and
Government
Agency
securities.
All
the
collateralized
mortgage
obligations
and
mortgage-backed
securities
at
March 31,
2024
and
December 31,
2023
were
issued
by
U.S.
sponsored entities.
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):
March 31, 2024
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
$
4,601
$
(19)
$
45,668
$
(8,648)
$
50,269
$
(8,667)
Collateralized mortgage obligations
26,015
(85)
131,005
(36,916)
157,020
(37,001)
Mortgage-backed securities - residential
8,043
(129)
80,907
(19,620)
88,950
(19,749)
Mortgage-backed securities - commercial
15,004
(254)
38,777
(9,062)
53,781
(9,316)
Municipal securities
-
-
19,061
(5,924)
19,061
(5,924)
Bank subordinated debt securities
3,198
(159)
13,471
(1,960)
16,669
(2,119)
Corporate bonds
-
-
8,681
(387)
8,681
(387)
$
56,861
$
(646)
$
337,570
$
(82,517)
$
394,431
$
(83,163)
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements - Unaudited
12
USCB Financial Holdings, Inc.
Q1 2024 Form 10-Q
December 31, 2023
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
$
-
-
46,479
(8,043)
46,479
$
(8,043)
Collateralized mortgage obligations
-
-
135,358
(35,566)
135,358
(35,566)
Mortgage-backed securities - residential
5,290
(47)
83,484
(18,365)
88,774
(18,412)
Mortgage-backed securities - commercial
20,292
(611)
33,083
(8,623)
53,375
(9,234)
Municipal securities
-
-
19,338
(5,667)
19,338
(5,667)
Bank subordinated debt securities
8,600
(331)
12,287
(1,703)
20,887
(2,034)
Corporate bonds
-
-
8,671
(406)
8,671
(406)
$
34,182
$
(989)
$
338,700
$
(78,373)
$
372,882
$
(79,362)
The unrealized losses associated
with $
128.5
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 of the securities upon transfer between portfolios.
When evaluating
AFS debt
securities under
ASC Topic
326, the
Company
has evaluated
whether the
decline in
fair
value is
attributed to
credit losses
or other
factors like
interest rate
risk, using
both quantitative
and qualitative
analyses,
including
company
performance
analysis,
review
of
credit
ratings,
remaining
payment
terms,
prepayment
speeds
and
analysis of macro-economic conditions.
Each investment is
expected to recover its
price depreciation over its
holding period
as it
moves to
maturity and
the Company
has the
intent and
ability to
hold these
securities to
maturity if
necessary.
As a
result of this evaluation, the Company concluded that
no allowance was required on AFS securities.
At
March
31,
2024,
the
Company
had
$
57.7
million
of
unrealized
losses
on
mortgage-backed
securities
and
collateralized mortgage
obligations of
U.S. government
sponsored entities
having a
fair value
of $
304.3
million that
were
attributable to a combination of factors, including relative
changes in interest rates since the time of purchase.
At
December
31,
2023,
the
Company
had
$
54.9
million
of
unrealized
losses
on
mortgage
backed
securities
and
collateralized
mortgage
obligations
of
government
sponsored
entities
having
a
fair
value
of
$
284.1
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
believed
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 March 31, 2024, the Company
does not intend to sell
debt securities that are in
an unrealized loss position
and it is
more than likely not required to sell these securities before recovery
of the amortized cost basis.
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. As
of March 31, 2024,
the Company did
no
t have any
securities pledged
under this agreement.
The Bank is a Qualified Public Depository
(“QPD”) with the State of Florida. As a QPD, the Bank has the legal
authority
to
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
50
% of
the outstanding
uninsured deposits
for March
31, 2024
and
25% for
December 31,
2023. The
Bank must
also maintain
a minimum
amount
of pledged
securities
to be
in the
public
funds program.
As of March 31,
2024, the Bank
had a total
of $
249.6
million in deposits
under the public
funds program
and pledged
to the State of Florida for these public funds were
fifty-one
bonds with an aggregate fair value of $
137.0
million.
As of
December 31, 2023, the
Bank had
a total
of $
268.4
million in
deposits under the
public funds program
and pledged
to the State
of Florida for
these public funds were
twenty-eight
corporate bonds with an
aggregate fair value of
$
86.9
million.
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements - Unaudited
13
USCB Financial Holdings, Inc.
Q1 2024 Form 10-Q
The Board
of Governors
of the
Federal Reserve
System, on
March 12,
2023, announced
the creation
of a
new Bank
Term
Funding Program (“BTFP”).
The BTFP offers
loans of up to one year
in length to banks, savings
associations, credit
unions,
and
other
eligible
depository
institutions
pledging
U.S.
Treasuries,
U.S.
agency
debt
and
mortgage-backed
securities, and other qualifying assets as collateral. These
assets will be valued at par.
The Company had $
80
million in borrowings under
the BTFP program as
of March 31, 2024,
and had pledged $
130.3
million in
securities
measured
at par
to the
Federal
Reserve Bank
of Atlanta
for the
BTFP program.
The BTFP
program
ceased making new loans as of March 2024.
3.
LOANS
The following table is a summary of the distribution of
loans held for investment by type (in thousands):
March 31, 2024
December 31, 2023
Total
Percent of
Total
Total
Percent of
Total
Residential Real Estate
$
237,906
13.1
%
$
204,419
11.5
%
Commercial Real Estate
1,057,800
58.2
%
1,047,593
58.8
%
Commercial and Industrial
228,045
12.5
%
219,757
12.4
%
Foreign Banks
100,182
5.5
%
114,945
6.5
%
Consumer and Other
194,325
10.7
%
191,930
10.8
%
Total
gross loans
1,818,258
100.0
%
1,778,644
100.0
%
Plus: Deferred costs
2,938
2,183
Total
loans net of deferred fees (costs)
1,821,196
1,780,827
Less: Allowance for credit losses
21,454
21,084
Total
net loans
$
1,799,742
$
1,759,743
At
March 31,
2024
and
December 31,
2023,
the
Company
had
$
567.7
million
and
$
534.2
million,
respectively,
of
commercial real estate
and residential mortgage loans
pledged as collateral
for lines of
credit with the
FHLB and the
Federal
Reserve Bank of Atlanta.
Allowance for Credit Losses
In
general,
the
Company
utilizes
the
Discounted
Cash
Flow
(“DCF”)
method
or
the
Remaining
Life
(“WARM”)
methodology to estimate the quantitative portion
of the ACL for loan
pools. The DCF uses a
loss driver analysis (“LDA”) and
discounted cash flow
analyses. Management engaged
advisors and consultants
with expertise in
CECL model development
to assist in
development of
a loss driver
analysis based
on regression
models and
supportable forecast.
Peer group data
obtained
from
FFIEC
Call
Report
filings
is
used to
inform
regression
analyses
to
quantify
the
impact
of reasonable
and
supportable
forecasts
in
projective
models.
Economic
forecasts
applied
to
regression
models
to
estimate
probability
of
default for loan receivables use at least
one of the following economic indicators: civilian unemployment rate (national), real
gross domestic
product growth
(national GDP)
or the
HPI. For each
of the
segments in
which the
WARM methodology
is
used,
the
long-term
average
loss
rate
is
calculated
and
applied
on
a
quarterly
basis
for
the
remaining
life
of
the
pool.
Adjustments for economic expectations are made through
qualitative factors.
Qualitative factors (“Q-Factors”) used in the ACL methodology
include:
•
Changes in lending policies, procedures, and strategies
•
Changes in international, national, regional, and local conditions
•
Changes in nature and volume of portfolio
•
Changes in the volume and severity of past due loans and other similar conditions
•
Concentration risk
•
Changes in the value of underlying collateral
•
The effect of other external factors: e.g., competition, legal, and regulatory requirements
•
Changes in lending management, among others
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements - Unaudited
14
USCB Financial Holdings, Inc.
Q1 2024 Form 10-Q
Changes in the ACL for the three months ended March 31,
2024 and 2023 were as follows (in thousands):
Residential
Real Estate
Commercial
Real Estate
Commercial
and
Industrial
Foreign
Banks
Consumer
and Other
Total
Three Months Ended March 31, 2024
Beginning balance
$
2,695
$
10,366
$
3,974
$
911
$
3,138
$
21,084
Provision for credit losses
(1)
235
(64)
288
(117)
21
363
Recoveries
-
-
10
-
2
12
Charge-offs
-
-
-
-
(5)
(5)
Ending Balance
$
2,930
$
10,302
$
4,272
$
794
$
3,156
$
21,454
(1) Provision for credit losses excludes a $
43
thousand charge due to unfunded commitments included in other liabilities and a $
4
thousand charge related to investment securities held to maturity.
Residential
Real Estate
Commercial
Real Estate
Commercial
and Industrial
Foreign
Banks
Consumer
and Other
Total
Three Months Ended March 31, 2023
Beginning balance
$
1,352
$
10,143
$
4,163
$
720
$
1,109
$
17,487
Cumulative effect of adoption of accounting
principle
(1)
1,238
1,105
(2,158)
23
858
1,066
Provision for credit losses
(2)
221
(795)
318
29
512
285
Recoveries
8
-
44
-
2
54
Charge-offs
-
-
-
-
(5)
(5)
Ending Balance
$
2,819
$
10,453
$
2,367
$
772
$
2,476
$
18,887
(1) Impact of CECL adoption on January 1, 2023.
(2) Provision for credit losses excludes a $
84
thousand release due to unfunded commitments included in other liabilities.
At March 31, 2024, the
ACL was $
21.5
million compared to $
21.1
million at December 31,
2023. The increase of
$
0.4
million was composed
of a $
363
thousand increase in
the ACL for loan
receivables due to
loan growth and
to net charge-
offs.
The Company had charge offs totaling $
5
thousand for the quarter ended March 31, 2024 related to loans that were all
originated in 2024.
The Company had charge
offs totaling $
5
thousand for the quarter
ended as of March
31, 2023 on loans
that were all
originated in 2023.
The
Federal
Open
Market
Committee
(“FOMC”)
economic
forecasts
as
of
March
31,
2024,
showed
moderate
improvements in unemployment and a slower real GDP growth.
Fannie Mae HPI forecast reflected important improvement
in national housing prices over the next four quarters.
The Company continued to adjust the HPI index effect on 1-4 Family
loan portfolio with a qualitative
factor because Florida
housing prices are performing
better than national levels.
Q-Factors
were reviewed and updated; maximum loss calculations are based on refreshed stress test and risk statuses
were updated
based on portfolio and external developments during the first
quarter 2024.
Our ACL
included residential
loans. To
assess the
potential impact
of changes
in qualitative
factors related
to these
loans,
management
performed
a sensitivity
analysis.
The Company
evaluated
the
impact
of the
HPI
used
in calculating
expected
losses
on
the
residential
loan segment.
As
of March
31,
2024, for
every
100 basis
points
increase
in
the
HPI
index, the forecast reduces
reserves by approximately $
200
thousand and about
1
basis point to
the reserve coverage ratio,
everything else being
constant. This
sensitivity analysis provides
a hypothetical result
to assess the
sensitivity of the
ACL
and does not represent a change in management’s
judgement.
As of March 31, 2024, we
stress tested two qualitative factors in our commercial real
estate loan pool, as it’s the largest
segment in
our portfolio.
We evaluated
the impact
of a
change in
the qualitative
factors from
no risk
to maximum
loss to
measure the
sensitivity of
the qualitative
factors. The
change from
no risk
to high
risk resulted
in a
$
6.1
million or
36.9
%
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements - Unaudited
15
USCB Financial Holdings, Inc.
Q1 2024 Form 10-Q
increase in the
allowance for
credit losses. This
sensitivity analysis provides
a hypothetical result
to assess
the sensitivity
of the ACL and does not represent a change in management’s
judgement.
The ACL and the outstanding
balances in the specified
loan categories as of March
31, 2024 and December 31,
2023
are as follows (in thousands):
Residential
Real Estate
Commercial
Real Estate
Commercial
and Industrial
Foreign
Banks
Consumer
and Other
Total
March 31, 2024:
Allowance for credit losses:
Individually evaluated
$
47
$
-
$
77
$
-
$
-
$
124
Collectively evaluated
2,883
10,302
4,195
794
3,156
21,330
Balances, end of period
$
2,930
$
10,302
$
4,272
$
794
$
3,156
$
21,454
Loans:
Individually evaluated
$
6,934
$
-
$
805
$
-
$
-
$
7,739
Collectively evaluated
230,972
1,057,800
227,240
100,182
194,325
1,810,519
Balances, end of period
$
237,906
$
1,057,800
$
228,045
$
100,182
$
194,325
$
1,818,258
December 31, 2023:
Allowance for credit losses:
Individually evaluated
$
145
$
-
$
128
$
-
$
-
$
273
Collectively evaluated
2,550
10,366
3,846
911
3,138
20,811
Balances, end of period
$
2,695
$
10,366
$
3,974
$
911
$
3,138
$
21,084
Loans:
Individually evaluated
$
6,994
$
-
$
1,668
$
-
$
-
$
8,662
Collectively evaluated
197,425
1,047,593
218,089
114,945
191,930
1,769,982
Balances, end of period
$
204,419
$
1,047,593
$
219,757
$
114,945
$
191,930
$
1,778,644
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.
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements - Unaudited
16
USCB Financial Holdings, Inc.
Q1 2024 Form 10-Q
Loan credit exposures by internally assigned grades are
presented below for the periods indicated (in thousands):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
As of March 31, 2024
Term Loans by Origination Year
Revolving
Loans
Total
2024
2023
2022
2021
2020
Prior
Residential real estate
Pass
$
36,295
$
43,716
$
36,336
$
26,194
$
5,885
$
80,670
$
8,530
$
237,626
Substandard
-
-
-
-
-
280
-
280
Total
36,295
43,716
36,336
26,194
5,885
80,950
8,530
237,906
Commercial real estate
Pass
28,702
148,575
329,451
181,818
102,597
255,713
4,773
1,051,629
Substandard
-
-
-
5,479
692
-
-
6,171
Total
28,702
148,575
329,451
187,297
103,289
255,713
4,773
1,057,800
Commercial and
industrial
Pass
13,812
96,054
36,806
32,129
5,794
15,762
26,117
226,474
Substandard
-
-
-
319
-
1,252
-
1,571
Total
13,812
96,054
36,806
32,448
5,794
17,014
26,117
228,045
Foreign banks
Pass
34,864
65,318
-
-
-
-
-
100,182
Total
34,864
65,318
-
-
-
-
-
100,182
Consumer and other
loans
Pass
9,557
66,799
72,452
41,499
502
1,845
1,671
194,325
Substandard
-
-
-
-
-
-
-
-
Total
9,557
66,799
72,452
41,499
502
1,845
1,671
194,325
Total
 
Loans
Pass
123,230
420,462
475,045
281,640
114,778
353,990
41,091
1,810,236
Special Mention
-
-
-
-
-
-
-
-
Substandard
-
-
-
5,798
692
1,532
-
8,022
Doubtful
-
-
-
-
-
-
-
-
Total
$
123,230
$
420,462
$
475,045
$
287,438
$
115,470
$
355,522
$
41,091
$
1,818,258
 
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements - Unaudited
 
 
417
 
USCB Financial Holdings, Inc.
 
Q3 2023Q1 2024 Form 10-Q
USCB FINANCIAL HOLDINGS, INC.
Consolidated Statements of Operations - Unaudited
(Dollars in thousands,
except per share data)
Three Months Ended September 30,
Nine Months Ended September 30,
2023
2022
2023
2022
Interest income:
Loans, including fees
$
22,523
$
15,954
$
63,081
$
42,989
Investment securities
2,833
2,201
7,501
7,040
Interest-bearing deposits in financial institutions
1,026
322
2,459
474
Total interest income
26,382
18,477
73,041
50,503
Interest expense:
Interest-bearing checking
331
19
574
52
Money market and savings accounts
8,779
1,141
20,532
2,307
Time deposits
2,565
363
5,767
893
Federal Home Loan Bank advances and other borrowings
685
180
1,976
456
Total interest expense
12,360
1,703
28,849
3,708
Net interest income before provision for
credit losses
14,022
16,774
44,192
46,795
Provision for credit losses
653
910
892
1,615
Net interest income after provision for
credit losses
13,369
15,864
43,300
45,180
Non-interest income:
Service fees
1,329
934
3,707
2,917
(Loss) gain on sale of securities available for
sale, net
(955)
(558)
(976)
(540)
Gain on sale of loans held for sale, net
255
330
696
686
Loan settlement
-
-
-
161
Other non-interest income
1,532
1,083
2,650
2,127
Total non-interest income
2,161
1,789
6,077
5,351
Non-interest expense:
Salaries and employee benefits
6,066
6,075
18,325
17,863
Occupancy
1,350
1,281
3,968
3,802
Regulatory assessment and fees
365
269
1,041
708
Consulting and legal fees
513
604
1,257
1,519
Network and information technology services
481
488
1,464
1,323
Other operating expense
1,686
1,415
5,034
4,080
Total non-interest expense
10,461
10,132
31,089
29,295
Income before income tax expense
5,069
7,521
18,288
21,236
Income tax expense
1,250
1,963
4,464
5,529
Net income
$
3,819
$
5,558
$
13,824
$
15,707
Per share information:
Net income per share, basic
$
0.20
$
0.28
$
0.70
$
0.79
Net income per share, diluted
$
0.19
$
0.28
$
0.70
$
0.78
The accompanying notes are an integral part of
these unaudited consolidated financial statements.
5
USCB Financial Holdings, Inc.
Q3 2023 Form 10-Q
USCB FINANCIAL HOLDINGS, INC.
Consolidated Statements of Comprehensive Income
(Loss) - Unaudited
(Dollars in thousands)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2023
2022
2023
2022
Net income
$
3,819
$
5,558
$
13,824
$
15,707
Other comprehensive income (loss):
Unrealized loss on investment securities
(7,858)
(11,679)
(11,145)
(57,577)
Amortization of net unrealized (loss) gain on
securities transferred from
available-for-sale to held-to-maturity
64
(52)
184
(177)
Reclassification adjustment for loss included in net
income
955
558
976
540
Unrealized gain on cash flow hedge
266
-
1,312
-
Tax effect
1,666
2,832
2,198
14,528
Total other comprehensive loss, net of tax
(4,907)
(8,341)
(6,475)
(42,686)
Total comprehensive income (loss)
$
(1,088)
$
(2,783)
$
7,349
$
(26,979)
The accompanying notes are an integral part of
these unaudited consolidated financial statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
As of December 31, 2023
Term Loans by Origination Year
Revolving
6
USCB Financial Holdings, Inc.
Q3 2023 Form 10-Q
USCB FINANCIAL HOLDINGS, INC.
Consolidated Statements of Changes in Stockholders’
Equity - Unaudited
(Dollars in thousands,
except per share data)
Common Stock
Additional Paid-in
Capital on Common
Stock
Accumulated Deficit
Accumulated Other
Comprehensive
Loss
Shares
Par ValueLoans
Total
Stockholders'
Equity
Balance at July 1, 2023
19,544,7772022
2021
2020
2019
Prior
Residential real estate
Pass
$
19,54544,365
$
305,54736,325
$
(95,088)26,180
$
(46,319)6,080
$
183,6859,325
Net income$
-75,654
-$
-6,198
3,819$
-204,127
3,819
Other comprehensive lossSubstandard
-
-
-
-
(4,907)292
(4,907)-
Restricted stock forfeiture-
(2,487)292
(3)Total
344,365
36,325
26,180
6,080
9,617
75,654
6,198
204,419
Commercial real estate
Pass
148,311
337,938
184,024
104,182
78,153
182,714
4,710
1,040,032
Substandard
-
-
6,867
694
-
-
-
Stock-based compensation7,561
Total
148,311
337,938
190,891
104,876
78,153
182,714
4,710
1,047,593
Commercial and
industrial
Pass
97,753
37,414
34,090
6,499
13,706
3,113
25,554
218,129
Substandard
-
-
287330
-
1,298
-
-
2871,628
Balance at September 30, 2023Total
19,542,29097,753
$37,414
19,54234,420
$6,499
305,83715,004
$3,113
(91,269)25,554
$219,757
(51,226)Foreign banks
$Pass
182,884
Balance at July 1, 2022
20,000,753
$
20,001
$
311,024
$
(114,096)
$
(36,861)
$
180,068
Net income
-
-
-
5,558
-
5,558
Other comprehensive loss114,945
-
-
-
-
(8,341)
(8,341)
Stock-based compensation
-
-
132
-
-
132
Balance at September 30, 2022
20,000,753
$
20,001
$
311,156
$
(108,538)
$
(45,202)
$
177,417
Common Stock
Additional Paid-in
Capital on Common
Stock
Accumulated
Deficit
Accumulated Other
Comprehensive
Loss
Shares
Par Value114,945
Total
Stockholders'
Equity
Balance at January 1, 2023
20,000,753
$
20,001
$
311,282
$
(104,104)
$
(44,751)
$
182,428
After tax cumulative effect of adoption of accounting
principle related to ASC
326
(989)
(989)
Adjusted beginning balance after cumulative
effect adjustment
20,000,753
20,001
311,282
(105,093)
(44,751)
181,439
Net income
-
-
-
13,824
-
13,824
Other comprehensive loss114,945
-
-
-
-
(6,475)
(6,475)
Repurchase of Class A common stock
(577,603)
(577)
(6,036)
-
-
(6,613)114,945
Restricted stock issuedConsumer and other
121,627loans
121Pass
(121)71,593
-74,387
-41,966
-615
Restricted stock forfeiture560
(2,487)1,337
(3)1,472
3191,930
-Total
-71,593
Stock-based compensation74,387
-41,966
-615
709560
-1,337
-1,472
709191,930
Balance at September 30, 2023Total
Loans
19,542,290Pass
$476,967
19,542486,064
$286,260
305,837117,376
$101,744
(91,269)262,818
$37,934
(51,226)1,769,163
$
182,884
Balance at January 1, 2022
19,991,753
19,992
310,666
(124,245)
(2,516)
203,897
Net income
-
-
-
15,707
-
15,707
Other comprehensive lossSpecial Mention
-
-
-
-
(42,686)
(42,686)
Exercise of stock options
9,000
9
93
102
Stock-based compensation-
-
-
397-
Substandard
-
-
3977,197
Balance at September 30, 2022694
20,000,753
$
20,001
$
311,156
$
(108,538)
$
(45,202)
$
177,417
The accompanying notes are an integral
part of these unaudited consolidated financial
statements.
7
USCB Financial Holdings, Inc.
Q3 2023 Form 10-Q
USCB FINANCIAL HOLDINGS, INC.
Consolidated Statements of Cash Flows - Unaudited
(Dollars in thousands)
Nine Months Ended September 30,
2023
2022
Cash flows from operating activities:
Net income
$
13,824
$
15,707
Adjustments to reconcile net income
to net cash provided by operating activities:
Provision for credit losses
892
1,615
Depreciation and amortization
443
530
(Accretion) amortization of premiums on securities,
net
(651)
412
Accretion of deferred loan fees, net
(236)
(1,364)
Stock-based compensation
709
397
Loss (gain) on sale of available for sale securities
976
540
Gain on sale of loans held for sale
(696)
(686)
Increase in cash surrender value of bank owned
life insurance
(775)
(794)
Bank owned life insurance enhancement
(981)1,590
-
Decrease in deferred tax assets
4,465
5,529
Net change in operating assets and liabilities:
Accrued interest receivable
(1,374)
(593)
Other assets
(751)
(4,163)
Accrued interest and other liabilities
12,679
14,432
Net cash provided by operating activities
28,524
31,562
Cash flows from investing activities:
Purchase of investment securities held
to maturity
(86,788)
(2,432)
Proceeds from maturities and pay-downs of investment
securities held to maturity
79,085
9,689
Purchase of investment securities available
for sale
(26,792)
(49,808)
Proceeds from maturities and pay-downs of investment
securities available for sale
11,679
35,502
Proceeds from sales of investment securities
available for sale
15,409
45,647
Net increase in loans held for investment
(165,662)
(177,916)
Purchase of loans held for investment
(13,277)
(70,175)
Additions to premises and equipment
(131)
(175)
Proceeds from the sale of loans held for sale
10,715
8,641
Purchase of Bank owned life insurance
(11,100)
-
Proceeds from the redemption of Federal
Home Loan Bank stock9,481
6,517
2,250
Purchase of Federal Home Loan Bank stock
(9,940)
(2,052)
Net cash used in investment activities
(190,285)
(200,829)
Cash flows from financing activities:
Proceeds from issuance of Class A common
stock, net
-
102
Repurchase of Class A common stock
(6,613)
-
Net increase in deposits
91,641
206,263
Proceeds from Federal Home Loan Bank advances
259,350
60,000
Repayments on Federal Home Loan Bank advances
(203,350)
(70,000)
Net cash provided by financing activities
141,028
196,365
Net increase in cash and cash equivalents
(20,733)
27,098
Cash and cash equivalents at beginning
of period
54,168
46,228
Cash and cash equivalents at end of period
$
33,435
$
73,326
Supplemental disclosure of cash flow
information:
Interest paid
$
27,872
$
3,675
Supplemental schedule of non-cash investing
and financing activities:
Transfer of loans held for investment to loans held
for sale
$
10,019
$
7,955
Transfer of investment securities from available-for-sale
to held-to-maturity
$
-
$
74,444
Lease liability arising from obtaining right-of-use
asset
$
-
$
1,550
The accompanying notes are an integral
part of these unaudited consolidated financial
statements.
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements - Unaudited
8
USCB Financial Holdings, Inc.
Q3 2023 Form 10-Q
1.
SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Overview
USCB Financial Holdings,
Inc.,
a Florida corporation
incorporated in 2021,
is a bank
holding company with
one direct
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.
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 Title LLC began operations
in 2021.
Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared in accordance with instructions to
Form 10-Q and
do not include all
the information and
footnotes required by U.S.
generally accepted accounting
principles
(“U.S.
GAAP”)
for
complete
financial
statements.
All
adjustments
consisting
of
normally
recurring
accruals
that,
in
the
opinion
of
management,
are
necessary
for
a
fair
presentation
of
the
financial
position
and
results
of
operations
for
the
periods presented
have been
included. These
unaudited consolidated
financial statements
should be
read in
conjunction
with
the
Company’s
consolidated
financial
statements
and
related
notes
appearing
in the
Company’s
Annual
Report
on
Form 10-K/A for the year ended December 31, 2022.
Principles of Consolidation
The
Company
consolidates
entities
in
which
it
has
a
controlling
financial
interest.
Intercompany
transactions
and
balances are eliminated in consolidation.
Use of Estimates
To prepare
financial statements in conformity with U.S. GAAP,
management makes estimates and assumptions based
on available
information. These
estimates and
assumptions affect
the amounts
reported in
the financial
statements. The
most significant
estimates impacting
the Company’s
consolidated financial
statements are
the allowance
for credit
losses
(ACL) and income taxes.
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.
Adoption of New Accounting Standards
Measurement of Credit Losses on Financial Instruments
On January
1st, 2023,
the
Company adopted
Accounting Standard
Update (“ASU”)
2016-13 Financial
Instruments
-
Credit
Losses
(Topic
326):
Measurement
of
Credit
Losses
on
Financial
Instruments,
as
amended,
which
replaces
the
incurred loss methodology with an expected loss
methodology that is referred to as the
current expected credit loss (CECL)
methodology.
The measurement
of expected
credit losses
under the
CECL methodology
is applicable
to financial
assets
measured at
amortized cost,
including loan
receivables and
held-to-maturity debt
securities. It
also applies
to off-balance
sheet
credit
exposures
not
accounted
for
as
insurance
(e.g.,
loan
commitments,
standby
letters
of
credit,
financial
guarantees, and other similar
instruments) and net investments
in leases recognized by
a lessor in accordance
with Topic
842 on leases. In addition,
ASC 326 amended the accounting
for available-for-sale debt securities.
One such change is to
require credit losses to be presented as an allowance
rather than as a write-down on available-for-sale debt
securities that
management does not intend to sell or believes that
it is more likely than not they will not be required to sell.
Under CECL,
the Company
estimates the
allowance for
credit losses
using relevant
available information,
from both
internal
and
external
sources,
relating
to
past
events,
current
conditions,
and
reasonable
and
supportable
forecasts.
Historical credit losses provide the basis for estimation of expected credit losses. Qualitative adjustments are applied to the
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements - Unaudited
9
USCB Financial Holdings, Inc.
Q3 2023 Form 10-Q
expected credit
losses estimated
for the
loan portfolio
in relation
to potential
limitations of
the quantitative model.
A scorecard
is used to aid management in the assessment of qualitative
factor adjustments applied to expected credit losses.
The
quantitative
component
of
the
estimate
relies
on
the
statistical
relationship
between
the
projected
value
of
an
economic
indicator
and
the
implied
historical
loss
experience
among
a
curated
group
of
peers.
The
Company
utilized
regression
analyses
of peer
data,
in
which
the
Company
was
included,
and
where
observed
credit
losses
and selected
economic factors were used
to determine suitable
loss drivers for modeling
the lifetime rates of
probability of default (PD).
A
loss
given
default
rate
(LGD)
is
assigned
to
each
pool
for
each
period
based
on
these
PD
outcomes.
The
model
fundamentally utilizes an
expected discounted cash
flow (DCF) analysis
for
loan portfolio segments.
The DCF analysis
is
run
at
the
instrument-level
and
incorporates
an
array
of
loan-specific
data
points
and
segment-implied
assumptions
to
determine the lifetime expected
loss attributable to each
instrument. An implicit "hypothetical
loss" is derived
for each period
of the
DCF and
helps establish
the present
value of
future cash
flows for
each period.
The reserve
applied to
a specific
instrument is the difference
between the sum of the present
value of future cash flows
and the book balance of
the loan at
the measurement date.
Management
elected
the
Remaining
Life
(WARM)
methodology
for
five
loan
portfolio
segments.
For
each
of
these
segments, a
long-term average
loss rate
is calculated
and applied
on a
quarterly basis
for the
remaining life
of the
pool.
Adjustments
for
economic
expectations
are
made
through
qualitative
assessments.
For
the
remaining
life
estimated,
management implemented a software solution
that uses an attrition-based
calculation that performs quarterly, cohort-based
attrition measurements based on the loan portfolio.
At adoption of
CECL,
84
% or $
1.3
billion of loan
receivables were collectively
evaluated under DCF
method and
16
%
or
$
251.0
million
of
loan
receivables
were
collectively
evaluated
under
the
Remaining
Life
method.
The
remaining
$
7.9
million of loan receivables of the total loan portfolio were individually
evaluated.
Portfolio segments are the level at which loss assumptions
are applied to a pool of loans based on the similarity
of risk
characteristics inherent in
the included instruments,
relying on collateral
codes and
FFIEC Call
Report codes. The
Company
currently segments the portfolio based on collateral codes
for purpose of establishing reserves. Each of these
segments is
paired
to
regression
models
(Loss
Driver
Analyses)
based
on
peer
data
for
loans
of
similar
risk
characteristics.
The
Company has established relationships between internal segmentation and FFIEC
Call Report codes for this purpose. The
loss driver for each loan
portfolio segment is derived
from a readily available and
reasonable economic forecast, including
the Federal Reserve Bank
projections of U.S. civilian
unemployment rate and
the year-over-year real
GDP growth;
for the
residential
loan
segment
the
House
Price
index
(“HPI”)
projections
published
by
Fannie
Mae’s
Economic
and
Strategic
Research Group
are utilized
for the
forecast. Forecasts
are applied
the first
four quarters
of the
credit loss
estimate and
revert on a
straight-line basis
to the lookback
period's historical
mean for
the economic
indicator over
the expected
life of
loans.
The model incorporates qualitative
factor adjustments in order to
calibrate the model for risk
in each portfolio segment
that may
not be captured
through quantitative
analysis. Determinations
regarding qualitative
adjustments are
reflective of
management's
expectation
of loss
conditions
differing
from those
already
captured
in
the
quantitative
component
of
the
model.
The
Company
estimates
a
reserve
for
unfunded
commitments,
which
is
reported
separately
from
the
allowance
for
credit losses within
other liabilities. The
reserve is based
upon the same
quantitative and qualitative
factors applied to
the
collectively evaluated loan portfolio.
The
impact
of
adoption
of
the
ASU
2016-13
was
an
increase
to
the
allowance
for
credit
losses
(ACL)
on
loans
receivables of $
1.1
million and an increase
to the reserve for unfunded
commitments of $
259
thousand. This one-time net
of tax cumulative adjustment resulted in a
increase of $
1.0
million in accumulated deficit. See “Allowance for Credit
Losses”
section in Note 3 for more information on the ACL.
Trouble Debt Restructuring
In March 2022, the Financial Accounting Standards Board (“FASB”) issued ASU 2022-02, Financial Instruments-Credit
Losses (Topic 326): Troubled
Debt Restructurings (“TDR”) and Vintage Disclosures. The standard addresses the following:
1) eliminates
the accounting
guidance for
TDRs, require
s
an entity
to determine
whether a
modification results
in a
new
loan or
a continuation
of an
existing
loan, 2)
expands
disclosures
related to
modifications,
and 3)
requires
disclosure of
current
period
gross
write-offs
of
financing
receivables
within
the
vintage
disclosures
table
(see
Note
3).
The
Company
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements - Unaudited
10
USCB Financial Holdings, Inc.
Q3 2023 Form 10-Q
adopted
ASU
2022-02
effective
January
1,
2023
on
a
prospective
basis.
The
adoption
of
ASU
2022-02
did
not
have
a
material impact on the Company’s consolidated financial
statements.
Issued and Not Yet Adopted
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 from 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 a material effect on our business operations
and consolidated financial statements.
2.
INVESTMENT SECURITIES
On
January
1st,
2023,
the
Company
adopted
ASU
2016-13
Financial
Instruments
-
Credit
Losses
(Topic
326):
Measurement of Credit Losses
on Financial Instruments,
as amended, which replaces
the incurred loss methodology
with
an expected
loss methodology
that is
referred to
as the
current expected credit
loss (CECL)
methodology. The measurement
of
expected
credit
losses
under
the
CECL
methodology
is
applicable
to
financial
assets
measured
at
amortized
cost,
including loan receivables and held-to-maturity debt securities. In addition, ASC 326 amended the accounting for available-
for-sale debt securities. One such change is to
require credit losses to be presented as an allowance rather
than as a write-
down on available-for-sale debt securities management does not intend to
sell or believes that it is more likely
than not they
will be required to sell.
CECL requires
a loss reserve
for securities
classified as
Held-to-Maturity (HTM).
The reserve should
reflect historical
credit performance
as well
as the
impact of
projected
economic forecast.
For U.S.
Government bonds
and
U.S. Agency
issued bonds in HTM the explicit guarantee
of the US Government is sufficient
to conclude that a credit loss reserve
is not
required. The reserve
requirement is for
three primary assets
groups: municipal bonds,
corporate bonds,
and non-agency
securitizations.
The
Company
calculates
quarterly
the
loss
reserve
utilizing
Moody’s
ImpairmentStudio.
The
CECL
measurement
for
investment
securities
incorporates
historical
data,
containing
defaults
and
recoveries
information,
and
Moody’s baseline
economic forecast.
The solution
uses probability of
default/loss given
default (“PD/LGD”)
approach. PD
represents the likelihood a borrower will
default. Within the Moody’s model
,
this is determined using historical
default data,
adjusted for the current economic environment. LGD projects
the expected loss if a borrower were to default.
The Company monitors
the credit
quality of held
to maturity
securities through
the use of
credit ratings.
Credit ratings
are monitored by the
Company on at
least a quarterly
basis. As of
September 30, 2023
and December 31,
2022, all held-
to-maturity securities held by the Company were rated investment
grade.
At
quarter
end,
HTM
securities
included
$
187.9
million
of
U.S.
Government
and
U.S.
Agency
issued
bonds
and
mortgage-backed
securities.
Because
of
the
explicit
and/or
implicit
guarantee
on
these
bonds,
the
Company
holds
no
reserves
on these
holdings.
The remaining
portion
of
the HTM
portfolio
is made
up of
$
9.4
million
in
investment
grade
corporate bonds. The required reserve for these holdings is
determined each quarter using the model described above. For
the portion of the HTM exposed to non-government
credit risk, the Company utilized the PD/LGD
methodology to estimate
a $
16
thousand ACL as of September 30, 2023. The book value for debt securities classified as HTM represents amortized
cost less ACL.
The Company determined that
an ACL on its
debt securities available for
sale as of September 30,
2023 and December
31, 2022 was not required.
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements - Unaudited
11
USCB Financial Holdings, Inc.
Q3 2023 Form 10-Q
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):
September 30, 2023
Available-for-sale:
Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Fair Value
U.S. Government Agency
$
9,913
$
-
$
(1,888)
$
8,025
Collateralized mortgage obligations
105,547
-
(26,976)
78,571
Mortgage-backed securities - residential
66,024
-
(14,867)
51,157
Mortgage-backed securities - commercial
48,010
62
(7,508)
40,564
Municipal securities
25,024
-
(6,908)
18,116
Bank subordinated debt securities
24,417
5
(2,246)
22,176
Corporate bondsDoubtful
-
-
-
-
$
278,935
$
67
$
(60,393)
$
218,609
Held-to-maturity:
U.S. Government Agency
$
44,087
$
-
$
(7,038)
$
37,049
U.S. Treasury
19,934
-
(28)
19,906
Collateralized mortgage obligations
64,094
-
(10,308)
53,786
Mortgage-backed securities - residential
44,302
-
(6,088)
38,214
Mortgage-backed securities - commercial
15,467
-
(1,583)
13,884
Corporate bonds
9,443
-
(988)
8,455
$
197,327
$
-
$
(26,033)
$
171,294
Allowance for credit losses - securities held-to-maturity
(16)
Securities held-to maturity, net of allowance for credit losses
$
197,311
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
During the
year ended
December 31,
2022, a
total of
26
investment securities
with an
amortized cost
basis and
fair
value
of
$
74.4
million
and
$
63.8
million,
respectively,
were
transferred
from
AFS
to
HTM.
These
securities
had
a
net
unrealized
loss of
$
10.6
million
on
the
date
of
transfer.
The
net
unrealized
loss
that
was
retained
in
accumulated
other
comprehensive income (“AOCI”) is being amortized over the remaining life of the securities. For
the three and nine months
ended September 30,
2023, total amortization
out of AOCI for
net unrealized losses
on securities transferred
from AFS to
HTM was
$
64
thousand and
$
184
thousand, respectively.
The unamortized
net unrealized
loss on
September 30,
2023,
was $
9.6
million. There were
no
securities transferred from AFS
to HTM during
the nine months
ended September 30,
2023.
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements - Unaudited
12
USCB Financial Holdings, Inc.
Q3 2023 Form 10-Q
Gains
and
losses
on
the
sale
of
securities
are
recorded
on
the
trade
date
and
are
determined
on
the
specific
identification basis. The following table presents the proceeds, realized gross gains and realized gross losses on sales and
calls of AFS debt securities for the three and nine months
ended September 30, 2023 and 2022 (in thousands):
Three Months Ended September 30,
Nine Months Ended September 30,
Available-for-sale:
2023
2022
2023
2022
Proceeds from sale and call of securities
$
6,792
$
13,809
$
15,409
$
45,647
Gross gains
$
-
$
2
$
3
$
218
Gross losses
(955)
(560)
(979)
(758)
Net realized (loss) gain
$
(955)
$
(558)
$
(976)
$
(540)
The amortized
cost
and
fair
value of
investment
securities,
by contractual
maturity,
are shown
below
as of
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.
Available-for-sale
Held-to-maturity
September 30, 2023:
Amortized
Cost
Fair Value
Amortized
Cost
Fair Value
Due within one year
$
-
$
-
$
19,934
$
19,906
Due after one year through five years
6,000
5,977
9,443
8,455
Due after five years through ten years
22,059
18,919
-
-
Due after ten years
21,382
15,396
-
-
U.S. Government Agency
9,913
8,025
44,087
37,049
Collateralized mortgage obligations
105,547
78,571
64,094
53,786
Mortgage-backed securities - residential
66,024
51,157
44,302
38,214
Mortgage-backed securities - commercial
48,010
40,564
15,467
13,884Total
$
278,935476,967
$
218,609486,064
$
197,327293,457
$
171,294
At September 30,
2023, there
were no
securities held
in the
portfolio from
any one
issuer in
an amount
greater than
10%
of
total
stockholders’
equity
other
than
the
United
States
Government
and
Government
Agency
securities.
All
the
collateralized
mortgage
obligations
and
mortgage-backed
securities
are
issued
by
United
States
sponsored
entities
at
September 30, 2023 and December 31, 2022.
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):
September 30, 2023
Less than 12 months
12 months or more
Total
Fair Value
Unrealized
Losses
Fair Value
Unrealized
Losses
Fair Value
Unrealized
Losses
U.S. Government Agency118,070
$
-
-
45,075
(10,184)103,334
$
45,075262,818
$
(10,184)
U.S. Treasury
19,906
(28)
-
-
19,906
(28)
Collateralized mortgage obligations
-
-
132,357
(41,869)
132,357
(41,869)
Mortgage-backed securities - residential
5,362
(237)
84,009
(23,353)
89,371
(23,590)
Mortgage-backed securities - commercial
20,006
(917)
32,923
(9,656)
52,929
(10,573)
Municipal securities
-
-
18,116
(6,908)
18,116
(6,908)
Bank subordinated debt securities
9,611
(304)
11,560
(1,941)
21,171
(2,245)
Corporate bonds
-
-
8,454
(631)
8,454
(631)37,934
$
54,885
$
(1,486)
$
332,494
$
(94,542)
$
387,379
$
(96,028)1,778,644
 
 
 
 
 
 
 
 
 
 
 
 
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements - Unaudited
 
 
1318
 
USCB Financial Holdings, Inc.
 
Q3 2023Q1 2024 Form 10-Q
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)
As of
September 30,
2023,
the unrealized
losses
associated
with
$
128.5
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 of the
securities upon transfer between portfolios.
ASC Topic
326 amended
the
existing
other-than-temporary-impairment
guidance
for AFS
securities,
requiring
credit
losses to be recorded as
an allowance rather than
through a permanent write-down.
When evaluating AFS debt
securities
under ASC
Topic
326, the
Company has
evaluated whether
the decline
in fair
value is
attributed to
credit losses
or other
factors
like
interest
rate
risk,
using
both
quantitative
and
qualitative
analyses,
including
company
performance
analysis,
review of credit
ratings, remaining
payment terms,
prepayment speeds
and analysis
of macro-economic
conditions. Each
investment is
expected to
recover its
price depreciation
over its
holding period
as it
moves to
maturity and
the Company
has
the
intent
and
ability
to
hold
these
securities
to
maturity
if
necessary.
As
a
result
of
this
evaluation,
the
Company
concluded that no allowance was required on AFS securities.
At
September
30,
2023,
the
Company
had
$
67.3
million
of
unrealized
losses
on
mortgage-backed
securities
and
collateralized
mortgage
obligations
of
government
sponsored
entities
having
a
fair
value
of
$
276.2
million
that
were
attributable to a combination of factors, including relative
changes in interest rates since the time of purchase.
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
believed
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 September 30, 2023, 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 September
30, 2023.
Pledged SecuritiesLoan Aging
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. As
of September 30,
2023,also considers the
 
Company did
no
t have
any securities
pledged under this agreement.
The Bank is a Qualified Public Depository
(“QPD”) with the Stateperformance of Florida. As a QPD, the Bank has the legal
authority
to
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
outstanding
uninsured
deposits.
The
Bank
must
also
maintain a minimum amount of pledged securities to be in the
public funds program.
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements - Unaudited
14
USCB Financial Holdings, Inc.
Q3 2023 Form 10-Q
As
of
September 30,
2023,
the
Bank
had
a
total
of
$
212.3
millionloans
 
in
deposits
under
the
public
funds
program
and
pledged to the State
of Florida for these public
funds were
twenty-seven
bonds with an aggregate fair
value of $
82.6
million.
As of
December 31, 2022, the
Bank had
a total
of $
204.2
million in
deposits under the
public funds program grading
 
and pledged
to the State of Florida for these public funds were
eighteen
in
 
corporate bonds with an aggregate fair value of $
49.0
evaluating the
 
million.
The Board
of Governorscredit quality
 
of the
 
Federal Reserveloan portfolio.
The Company
 
System,analyzes credit
quality and
loan grades
based on
 
March 12,payment performance
 
2023, announced
the creation
of a
new Bank
Term
Funding Program
(BTFP). The
BTFP offers
loans of
up to
one year
in length
to banks,
savings associations,
credit
unions,
and
other
eligible
depository
institutions
pledging
U.S.
Treasuries,
U.S.
agency
debt
and
mortgage-backed
securities, and other qualifying assets as collateral. These
assets will be valued at par.
The Company had
no
borrowing under the BTFP
program as of September
30, 2023, and had
pledged $
134.4
million
in securities measured at par to the Federal Reserve
Bank of Atlanta for the BTFP program.
3.
LOANS
On
January
1,
2023,
the
Company
adopted
FASB
ASC
Topic
326
using
the
modified
retrospective
methodology
in
accordance
with
the
amendments
of
FASB
ASU
2016-13.
Through
the
adoption
of
CECL,
the
Company
developed
an
allowance for credit losses (“ACL”) methodology that replaces its previous allowance
for loan losses methodology.
See the
ACL section in this note for further information regarding the Company’s ACL. Prior periods balance for ACL are presented
under legacy GAAP and may not be comparable to current
period presentation.
The following table is a summary of the distribution of
loans held for investment by type (in thousands):
September 30, 2023
December 31, 2022
Total
Percent of
Total
Total
Percent of
Total
Residential Real Estate
$
188,880
11.3
%
$
185,636
12.3
%
Commercial Real Estate
1,005,280
60.0
%
970,410
64.4
%
Commercial and Industrial
212,975
12.7
%
126,984
8.4
%
Foreign Banks
94,640
5.7
%
93,769
6.2
%
Consumer and Other
173,096
10.3
%
130,429
8.7
%
Total
gross loans
1,674,871
100.0
%
1,507,228
100.0
%
Plus: Deferred fees (cost)
1,649
110
Total
loans net of deferred fees (cost)
1,676,520
1,507,338
Less: Allowance for credit losses
19,493
17,487
Total
net loans
$
1,657,027
$
1,489,851
At September 30, 2023
and December 31, 2022,
the Company had
$
556.1
million and $
338.1
million, respectively,
of
commercial real estate
and residential mortgage loans
pledged as collateral
for lines of
credit with the
FHLB and the
 
Federal
Reserve Bank of Atlanta.
The Company was a participant
in 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
the funds 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 totaling $
295
thousand
at September 30, 2023 and $
1.3
million at December 31, 2022, which are categorized
as commercial and industrial loans.
The Company recognized
$
6
thousand and $
1.6
million in PPP
loan fees and
interest income
during the nine
months
ended September 30, 2023
and 2022, respectively,
which is reported
under loans, including
fees, within the
Consolidated
Statements of Operations.
Allowance for Credit Losses
In general, the Company utilizes
the Discounted Cash Flow (DCF)
method or the Remaining Life
(WARM) methodology
to estimate
the quantitative
portion of the
ACL for
loan pools.
The DCF
uses a
loss driver
analysis (LDA)
and discounted
cash flow analyses.
Management engaged
advisors and consultants
with expertise in
CECL model development
to assist
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements - Unaudited
15
USCB Financial Holdings, Inc.
Q3 2023 Form 10-Q
in development of
a loss driver
analysis based on
regression models
and supportable
forecast. Peer group
data obtained
from FFIEC Call Report
filings is used to
inform regression analyses
to quantify the impact
of reasonable and
supportable
forecasts in projective
models. Economic forecasts
applied to regression
models to estimate
probability of default
for loan
receivables use at least one
of the following economic indicators: civilian
unemployment rate (national), real gross domestic
product growth
(national
GDP) and/or
the HPI.
For eachaging status
 
of the
 
segments in
which the
WARM
methodology
is used,
the
long-term average loss rate is calculated and applied on a quarterly basis for the remaining life of the pool. Adjustments for
economic expectations are made through qualitative factors
.
Qualitative factors (“Q-Factors”) used in the ACL methodology
include:
•
Changes in lending policies, procedures, and strategies
•
Changes in international, national, regional, and local conditions
•
Changes in nature and volume of portfolio
•
Changes in the volume and severity of past due loans and other similar conditions
•
Concentration risk
•
Changes in the value of underlying collateral
•
The effect of other external factors: e.g., competition, legal, and regulatory requirements
•
Changes in lending management, among others
ACL for the three
and nine months
ended September 30,
2023, was estimated
under the CECL
methodology,
and for
all periods in 2022, it was estimated under the incurred
loss model.
Changes in the
allowance for credit
losses for the
three and nine
months ended September
30, 2023 and
2022
were
as follows (in thousands):
Residential
Real Estate
Commercial
Real Estate
Commercial
and
Industrial
Foreign
Banks
Consumer
and Other
Total
Three Months Ended September 30, 2023
Beginning balance
$
2,673
$
10,183
$
2,500
$
677
$
2,782
$
18,815
Provision for credit losses
(1)
(162)
(84)
738
73
108
673
Recoveries
-
-
8
-
-
8
Charge-offs
-
-
-
-
(3)
(3)
Ending Balance
$
2,511
$
10,099
$
3,246
$
750
$
2,887
$
19,493
Nine Months Ended September 30, 2023
Beginning balance
$
1,352
$
10,143
$
4,163
$
720
$
1,109
$
17,487
Cumulative effect of adoption of accounting
principle
(2)
1,238
1,105
(2,158)
23
858
1,066
Provision for credit losses
(3)
(89)
(1,149)
1,181
7
965
915
Recoveries
10
-
60
-
3
73
Charge-offs
-
-
-
-
(48)
(48)
Ending Balance
$
2,511
$
10,099
$
3,246
$
750
$
2,887
$
19,493
(1) Provision for credit losses excludes $
17
thousand release due to unfunded commitments included in other liabilities and $
3
thousand release due to investment securities held to maturity.
(2) Impact of CECL adoption on January 1, 2023
(3) Provision for credit losses excludes $
39
thousand release due to unfunded commitments included in other liabilities and $
16
thousand expense due to investment securities held to maturity.
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements - Unaudited
16
USCB Financial Holdings, Inc.
Q3 2023 Form 10-Q
Residential
Real Estate
Commercial
Real Estate
Commercial
and Industrial
Foreign
Banks
Consumer
and Other
Total
Three Months Ended September 30, 2022
Beginning balance
$
2,366
$
9,290
$
2,671
$
651
$
808
$
15,786
Provision for credit losses
(1,009)
695
1,126
74
24
910
Recoveries
1
-
-
-
-
1
Charge-offs
-
-
(88)
-
(5)
(93)
Ending Balance
$
1,358
$
9,985
$
3,709
$
725
$
827
$
16,604
Nine Months Ended September 30, 2022
Beginning balance
$
2,498
$
8,758
$
2,775
$
457
$
569
$
15,057
Provision for credit losses
(1,157)
1,227
1,011
268
266
1,615
Recoveries
33
-
11
-
3
47
Charge-offs
(16)
-
(88)
-
(11)
(115)
Ending Balance
$
1,358
$
9,985
$
3,709
$
725
$
827
$
16,604
At
September
30,
2023
the
ACL,
under
the
CECL
methodology,
was
$
19.5
million
compared
to
$
17.5
million
at
December 31,
2022, under
the incurred
loss
methodology.
The increase
of $
2.0
million was
composed of
a $
1.1
million
impact of adoption of the ASU 2016-13 on loan receivables, a $
915
thousand increase in the ACL for loan receivables due
to loan growth and to net charge-offs.loan.
 
The following
 
Companytables include
 
hadan aging
 
chargeanalysis
 
offs
totaling
$
3
thousand
for
the
quarter
ended
September
30,
2023
related
to
loans
originated in
2023. The
Company had
charge offs
totaling $
48
thousand for
the nine
months ended
September 30,
2023
related to loans. $
27
thousand was related to loans originated
in 2023 and $
21
thousand of charge offs was related to
loans
originated in 2015.
The Company
had
charge
offs
totaling
$
115.0
thousand
for
the
nine
months
ended
September
30,
2022,
on
loans.
$
15.6
thousand
and $
87.7
thousand of
charge offs
related toaccruing
 
loans thatand
 
were originatedtotal non-accruing
 
in 2004
and 2019,
respectively.
$
10.9
thousand of charge offs related to loans that
were originated in 2022.
The
Federal
Open
Market
Committee
(“FOMC”)
economic
forecasts
as
 
of March 31,
 
September
30,
2023,
showed
moderate2024 and
improvements in unemployment and a slower real GDP growth.
Fannie Mae HPI forecast reflected important improvement
in national housing prices over the next four quarters.
The Company continued
to adjust the HPI index effect on 1-4 Family
loan portfolio with a qualitative
factor because Florida
housing prices are performing
better than national levels.
Q-Factors
were reviewed and updated; maximum loss calculations are based on refreshed stress test and risk statuses were
updated
based on portfolio and external developments during the third
quarter.
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements - Unaudited
17
USCB Financial Holdings, Inc.
Q3 2023 Form 10-Q
The ACL and
the outstanding balances
in the specified
loan categories
as of September
30, 2023 and
December 31,
2022 are as follows 2023 (in thousands):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Residential
Real Estate
Commercial
Real Estate
Commercial
and Industrial
Foreign
Banks
Consumer
and Other
Total
September 30, 2023:
Allowance for credit losses:
Individually evaluated for impairment
$
146
$
-
$
135
$
-
$
-
$
281
Collectively evaluated for impairment
2,365
10,099
3,111
750
2,887
19,212
Balances, end of period
$
2,511
$
10,099
$
3,246
$
750
$
2,887
$
19,493
Loans:
Individually evaluated for impairment
$
6,749
$
-
$
869
$
-
$
-
$
7,618
Collectively evaluated for impairment
182,131
1,005,280
212,106
94,640
173,096
1,667,253
Balances, end of period
$
188,880
$
1,005,280
$
212,975
$
94,640
$
173,096
$
1,674,871
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
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.
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements - Unaudited
18
USCB Financial Holdings, Inc.
Q3 2023 Form 10-Q
Loan credit exposures by internally assigned grades are
presented below for the periods indicated (in thousands):
As of September 30, 2023
Term Loans by Origination Year
Revolving
Loans
Total
2023
2022
2021
2020
2019
Prior
Residential real estate
Pass
$
17,760
$
36,828
$
26,315
$
6,527
$
9,749
$
83,244
$
8,457
$
188,880
Total
17,760
36,828
26,315
6,527
9,749
83,244
8,457
188,880
Commercial real estate
Pass
78,285
340,524
210,028
104,816
79,129
186,669
3,314
1,002,765
Substandard
-
-
1,818
697
-
-
-
2,515
Total
78,285
340,524
211,846
105,513
79,129
186,669
3,314
1,005,280
Commercial and
industrial
Pass
92,156
38,012
34,581
7,141
14,001
3,483
21,617
210,991
Substandard
-
-
340
-
1,344
-
300
1,984
Total
92,156
38,012
34,921
7,141
15,345
3,483
21,917
212,975
Foreign banks
Pass
93,515
1,125
-
-
-
-
-
94,640
Total
93,515
1,125
-
-
-
-
-
94,640
Consumer and other
loans
Pass
50,027
74,961
44,249
717
529
1,396
1,217
173,096
Substandard
-
-
-
-
-
-
-
-
Total
50,027
74,961
44,249
717
529
1,396
1,217
173,096
Total
Loans
Pass
331,743
491,450
315,173
119,201
103,408
274,792
34,605
1,670,372
Special Mention
-
-
-
-
-
-
-
-
Substandard
-
-
2,158
697
1,344
-
300
4,499
Doubtful
-
-
-
-
-
-
-
-
Total
$
331,743
$
491,450
$
317,331
$
119,898
$
104,752
$
274,792
$
34,905
$
1,674,871
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements - Unaudited
19
USCB Financial Holdings, Inc.
Q3 2023 Form 10-Q
As of December 31, 2022
Pass
Special
Mention
Substandard
Doubtful
Total Loans
Residential real estate:
Home equity line of credit 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
967,465
-
2,945
-
970,410
Commercial and industrial:
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
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements - Unaudited
20
USCB Financial Holdings, Inc.
Q3 2023 Form 10-Q
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
tables include
an aging
analysis of
accruing loans
and total
non-accruing
loans as
of September 30,
2023
and December 31, 2022 (in thousands):
Accruing
As of September 30, 2023March 31, 2024
Current
Past Due 30-
89 Days
Past Due 90
Days or >
and Still
Accruing
Total
Accruing
Non-Accrual
Total Loans
Residential real estate:
Home equity line of credit and other
$
491548
$
-
$
-
$
491548
$
-
$
491548
1-4 family residential
138,069183,825
6,022
-
-
138,069189,847
-
138,069189,847
Condo residential
49,94943,452
3714,059
-
50,32047,511
-
50,32047,511
188,509227,825
37110,081
-
188,880237,906
-
188,880237,906
Commercial real estate:
Land and construction
30,71721,100
-
-
30,71721,100
-
30,71721,100
Multi-family residential
177,573211,813
-
-
177,573211,813
-
177,573211,813
Condo commercial
58,10056,072
1,918
-
57,990
-
57,990
Commercial property
766,003
873
-
766,876
-
766,876
Leasehold improvements
21
-
-
58,10021
-
58,10021
Commercial property1,055,009
738,8492,791
-
-
738,8491,057,800
-
738,849
Leasehold improvements
41
-
-
41
-
41
1,005,280
-
-
1,005,280
-
1,005,2801,057,800
Commercial and industrial:
Secured
194,119208,590
60
-
208,650
456
209,106
Unsecured
18,495
444
-
18,939
-
18,939
227,085
504
-
227,589
456
228,045
Foreign banks
100,182
-
-
194,119
479
194,598
Unsecured
18,377100,182
-
-
18,377
-
18,377
212,496
-
-
212,496
479
212,975
Foreign banks
94,640
-
-
94,640
-
94,640100,182
Consumer and other
173,096194,325
-
-
173,096194,325
-
173,096194,325
Total
$
1,674,0211,804,426
$
37113,376
$
-
$
1,674,3921,817,802
$
479456
$
1,674,8711,818,258
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements - Unaudited
 
 
2119
 
USCB Financial Holdings, Inc.
 
Q3 2023Q1 2024 Form 10-Q
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Accruing
As of December 31, 2022:2023:
Current
Past Due
30-89 Days
Past Due 90
Days or >
and Still
Accruing
Total
Accruing
Non-Accrual
Total Loans
Residential real estate:
Home equity line of credit and other
$
623559
$
-
$
-
$
623559
$
-
$
623559
1-4 family residential
131,120155,842
1,058711
-
132,178156,553
-
132,178156,553
Condo residential
50,31043,572
2,5253,735
-
52,83547,307
-
52,83547,307
182,053199,973
3,5834,446
-
185,636204,419
-
185,636204,419
Commercial real estate:
Land and construction
38,68733,710
-
-
38,68733,710
-
38,68733,710
Multi-family residential
176,820181,287
-
-
176,820181,287
-
176,820181,287
Condo commercial
49,99458,106
-
-
49,99458,106
-
49,99458,106
Commercial property
704,884772,569
251,890
-
704,909774,459
-
704,909774,459
Leasehold improvements
31
-
-
-31
-
-31
1,045,703
1,890
-
970,385
251,047,593
-
970,410
-
970,4101,047,593
Commercial and industrial:
 
 
 
 
Secured
121,649200,235
3129
-
121,680200,264
468
200,732
Unsecured
19,025
-
121,680-
Unsecured
4,332
97219,025
-
5,30419,025
219,260
29
-
5,304219,289
125,981468
1,003
-
126,984
-
126,984219,757
 
 
 
 
Foreign banks
93,769114,945
-
-
93,769114,945
-
93,769114,945
Consumer and other
130,169
260191,930
-
130,429-
191,930
-
130,429191,930
Total
$
1,502,3571,771,811
$
4,8716,365
$
-
$
1,507,2281,778,176
$
-468
$
1,507,2281,778,644
Non-accrual Status
 
The following table
 
includes the amortized
 
cost basis of
 
loans on non-accrual
 
status and loans
 
past due over
 
90 days
and still accruing as of September 30, 2023 (in thousands):
September 30, 2023
Nonaccrual
Loans With No
Related
Allowance
Nonaccrual
Loans With
Related
Allowance
Total Non-
accruals
Loans Past
Due Over 90
Days and Still
Accruing
Residential real estate
$
-
$
-
$
-
$
-
Commercial real estate
-
-
-
-
Commercial and industrial
-
479
479
-
Consumer and other
-
-
-
-
$
-
$
479
$
479
$
-
The Company did
no
t have loans in nonaccrual status as of December
March 31, 2022.
Accrued interest
receivable is
excluded from
the estimate
of credit
losses. There
was
no
interest income
recognized
attributable to non-accrual
loans outstanding during
the three months
ended September 30, 2023 and
2022. Interest income
on these loans for
the three months
ended September 30,
2023 and 2022,
would have been
approximately $
12
thousand
and $
0
thousand, respectively, had these loans performed in accordance with their original terms. Interest income on these
loans
for the
nine months
ended September
30,
2023 and
2022, would
have been
approximately
$
28
thousand
and
$
0
thousand, respectively,
had these loans performed in accordance with their
original terms.
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements - Unaudited
22
USCB Financial Holdings, Inc.
Q3 2023 Form 10-Q
Collateral-Dependent Loans
A
loan
is
collateral
dependent
when
the
borrower
is
experiencing
financial
difficulty
and
repayment
of
the
loan
is
expected to
be provided
substantially through
the sale
or operation
of the
collateral. There
were
no
collateral dependent
loans as of September 30, 2023, or as of December 31,
2022.
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 as of December
31, 20222024 (in thousands):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
December
March 31, 20222024
UnpaidNonaccrual
PrincipalLoans With
Balance
Net
Investment
Balance
ValuationNo Related
Allowance
Impaired Nonaccrual
Loans with No Specific Allowance:With
Related
Allowance
Total Non-
accruals
Loans Past
Due Over 90
Days and Still
Accruing
Residential real estate
$
3,551-
$
3,544-
$
-
$
-
Commercial real estate
393
393-
-
3,944
3,937-
-
Impaired Commercial and industrial
-
456
456
-
Consumer and other
-
-
-
-
$
-
$
456
$
456
$
-
December 31, 2023
Nonaccrual
Loans with Specific Allowance:With
No Related
Allowance
Nonaccrual
Loans With
Related
Allowance
Total Non-
accruals
Loans Past
Due Over 90
Days and Still
Accruing
Residential real estate
3,655$
3,626-
155$
-
$
-
$
-
Commercial real estate
-
-
-
-
Commercial and industrial
82-
82468
41468
-
Consumer and other
196-
196-
98-
3,933
3,904
294
Total-
$
7,877-
$
7,841468
$
294468
$
-
Net investment balance is the unpaid principal balance
of the loan adjusted for the remaining net deferred loan
fees.
The following table
presents the average
recorded investment
balance on impaired
loans for
the periods indicated
(in
thousands):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended September 30, 2022Tableof Contents
Nine Months Ended September 30, 2022USCB FINANCIAL HOLDINGS, INC.
Residential real estateNotes to the Consolidated Financial Statements - Unaudited
$
7,282
$20
USCB Financial Holdings, Inc.
7,732
Commercial real estate
590
619
Commercial and industrial
95
116
Consumer and other
207
214
Total
$
8,174
$
8,681
Q1 2024 Form 10-Q
Interest income recognized on impaired loans forAccrued interest
receivable is
excluded from
 
the estimate
of credit
losses. There
was
no
interest income
recognized
attributable to non-accrual loans outstanding during the three
months ended September 30, 2022March 31, 2024 and 2023. Interest income on
these loans
 
was for the
three months
ended March 31,
2024 and
2023, would
have been
approximately
$
909
 
thousand and
for the nine months ended September 30, 2022 was $
2712
thousand, respectively,
had these loans performed in accordance with their
original terms.
Collateral-Dependent Loans
A
loan
is
collateral
dependent
when
the
borrower
is
experiencing
financial
difficulty
and
repayment
of
the
loan
is
expected to
be provided
substantially through
the sale
or operation
of the
collateral. There
were
no
 
thousand.collateral dependent
loans as of March 31, 2024, or as of December 31, 202
3.
Loan Modifications to Borrowers Experiencing Financial
 
Difficulties
 
The following table presents newly restructured loans,
 
table present
newly restructured
loans, by
type of
modification, which
occurred during
the ninethree
 
months
ended September 30, 2023March 31, 2024 (in thousands):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Recorded Investment Prior to Modification
Recorded Investment After Modification
Number of
Loans
Combination
Modifications
Total
Modifications
Number of
Loans
Combination
Modifications
Total
Modifications
Residential real estate
-
$
-
$
-
-
$
-
$
-
Commercial real estate
-
-
-
-
-
-
Commercial and industrial
1
350468
350468
1
350468
350468
Consumer and other
-
-
-
-
-
-
1
$
350468
$
350468
1
$
350468
$
350
468
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements - Unaudited
23
USCB Financial Holdings, Inc.
Q3 2023 Form 10-Q
The Company
had
no
 
new modifications
and
one
 
new modifications tomodification
 
to borrowers
experiencing financial
 
difficulties for
the
three
and
nine
months
ended
September
30,
2023,
respectively.
March 31, 2024. There
were
no
 
existing loan modifications that subsequently defaulted
 
loanduring the
three months
ended March
31, 2024.
The Company
did not
have new
 
modifications
 
thatto borrowers
experiencing
financial
difficulties and no loan modifications that subsequently
defaulted during for the three and nine months ended March 31,
 
ended September 30, 2023.
4.
 
INCOME TAXES
 
The Company’s provision for income taxes is presented
 
in the following table for the datesperiods indicated (in thousands):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
NineThree Months Ended September 30,March 31,
2024
2023
2022
Current:
Federal
$
-
$
-
State
-
-
Total
 
current
-
-
Deferred:
Federal
3,5101,114
4,3421,472
State
954312
1,187409
Total
 
deferred
4,4641,426
5,5291,881
Total
 
tax expense
$
4,4641,426
$
5,5291,881
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements - Unaudited
21
USCB Financial Holdings, Inc.
Q1 2024 Form 10-Q
The actual income tax expense for the nine months
 
ended September 30, 2023 and 2022 differsincome
 
from the statutory tax
expense
 
for the
period (computed
by applying
 
the
 
three
months
ended March
31,
2024 and
2023 differs
from
the
statutory
tax
expense for the periods
(computed by applying the U.S.
 
federal
corporate
tax rate
of
21
% for both 2024
 
for
and 2023 and
2022 to
income
before provision for income taxes) as follows (in thousands):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
NineThree Months Ended September 30,March 31,
2024
2023
2022
Federal taxes at statutory rate
$
3,8401,268
$
4,4601,615
State income taxes, net of federal tax benefit
795262
923334
Bank owned life insurance
(171)(104)
(202)(68)
Other, net
-
348-
Total
 
tax expense
$
4,4641,426
$
5,5291,881
The Company’s deferred tax assets and deferred
 
tax liabilities as of the dates indicated were (in thousands):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
September 30, 2023March 31, 2024
December 31, 20222023
Deferred tax assets:
Net operating loss
$
17,58815,369
$
21,72016,430
Allowance for credit losses
4,6705,503
4,4325,410
Lease liability
3,0842,707
3,6482,895
Unrealized losses on available for sale securities
17,72315,638
15,19315,114
Depreciable property
192130
158203
Equity compensation
554716
373630
Accruals
41152
723382
CECL AdoptionOther, net
33611
-10
Deferred tax assets:
44,55840,126
46,24741,074
Deferred tax liability:liabilities:
Deferred loan cost
(418)(745)
(28)(553)
Lease right of use asset
(3,084)(2,707)
(3,648)(2,895)
Deferred expenses
(189)(140)
(175)(180)
Cash flow hedge
(332)(216)
-(85)
Other, net
(105)(69)
(36)(79)
Deferred tax liabilityliabilities
(4,128)(3,877)
(3,887)(3,792)
Net deferred tax assets
$
40,43036,249
$
42,36037,282
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements - Unaudited
24
USCB Financial Holdings, Inc.
Q3 2023 Form 10-Q
The Company
 
has
approximately
 
$
65.556.8
 
million of
 
of federal
 
and
$
88.279.5
 
million of
 
of state
net
 
operating
 
loss
carryforwards
expiring in various amounts between
 
2031 and 2036 and which are
 
limited to offset, to the
 
extent permitted, future taxable
earnings of the Company.
In assessing the realizability of deferred tax assets, management considers
 
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 major tax
 
jurisdictions where the
 
Company files income
 
tax returns are
 
the U.S. federal
 
jurisdiction and
 
the State
of Florida. With few exceptions, the Company is no longer subject to U.S. federal and state income tax examinations by tax
authorities for years before 2019.2020.
For the three and nine months ended September 30,
March 31, 2024 and 2023, and 2022,
the Company
did
no
t have any unrecognized tax
benefits
 
benefits as a
a
result
of
 
tax
positions
 
taken
during
 
a
prior
 
period
or
 
during
the
 
current
period.
 
Additionally,
no
 
interest or
 
orpenalties
were
penalties were recorded as a result of tax uncertainties.
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements - Unaudited
22
USCB Financial Holdings, Inc.
Q1 2024 Form 10-Q
5.
 
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
September 30, 2023March 31, 2024 and December 31, 20222023 (in thousands):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
September 30, 2023March 31, 2024
December 31, 20222023
Commitments to grant loans and unfunded lines of credit
$
100,66199,224
$
95,46185,117
Standby and commercial letters of credit
6,4903,274
4,3203,987
Total
$
107,151102,498
$
99,78189,104
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
 
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 since
 
many of them expire without being drawn
upon, they do not generally present a significant liquidity
 
risk to the Company.
6.
 
DERIVATIVES
 
The Company utilizes interest rate swap agreements
 
as part of its asset-liability management strategy to help
 
manage
its interest rate
 
risk exposure. The notional
 
amount of the interest
 
rate swaps does not
 
represent actual 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.
 
Interest Rate Swaps Designated as a Cash Flow Hedge
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements - Unaudited
25
USCB Financial Holdings, Inc.
Q3 2023 Form 10-Q
As of September 30,March 31,
 
2023,2024, the Company
 
had
two
 
interest rate swap
agreements with a
notional aggregate amount
of $
50
million that
were designated
as cash
flow hedges
of
certificates
of deposit.
The
interest rate
swap
agreements
have an
average maturity
of
2.13
years, the
weighted
average
fixed-rate
paid of
3.59
%, and
 
with the
weighted
average
3-month
compound SOFR being received.
As of December
31, 2023,
the Company had
two
interest rate swap
agreements with
a notional aggregate
 
amount of
$
50
 
million that were designated as cash flow hedges of certificates of deposit. The interest rate swap agreements have an
average
 
maturity
 
of
2.632.38
 
years,
 
the
 
weighted
 
average
 
fixed
ratefixed-rate
 
paid
 
isof
3.59
%,
 
with
 
the
 
weighted
 
average
 
3-month
compound SOFR being received. The Company had
no
cash flow hedges outstanding on December 31,
2022.
The
 
changes
 
in
 
fair
 
value
 
on
 
these
 
interest
 
rate
 
swaps
 
are
 
recorded
 
in
 
other
 
assets
 
or
 
other
 
liabilities
 
with
 
a
corresponding recognition
 
in other comprehensive
 
income (loss)
 
and subsequently reclassified
 
to earnings when
 
gains or
losses are realized.
Interest Rate Swaps Designated as Fair Value
 
Hedge
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements - Unaudited
23
USCB Financial Holdings, Inc.
Q1 2024 Form 10-Q
As of September 30, 2023,
March 31, 2024, the Company had
four
interest rate swap agreements with a notional aggregate amount of $
200
million that were designated as fair value hedges on loans. The interest
 
rate swap agreements have an average maturity of
1.98
years,
the
weighted
average
fixed-rate
paid
is
4.74
%,
with
the
weighted
average
3-month
compound
SOFR
being
received.
As of December
31, 2023, the
Company had
four
interest rate swap
agreements with a
 
notional aggregate amount
of
$
200
 
million
 
that
 
were
 
designated
 
as
 
fair
 
value
 
hedges
 
on
 
loans.
 
The
 
interest
 
rate
 
swap
 
agreements
 
have
 
an
 
average
maturity of
2.482.23
 
years, the weighted average fixed ratefixed-rate paid
 
is
4.74
%, with the weighted average
3-month compound SOFR
being received.
The
changes
in
fair
value
on
these
interest
rate
swaps
are
recorded
in
other
assets
or
other
liabilities
with
a
corresponding recognition in the assets being hedged.
Interest Rate Swaps
The Company enters into interest rate swaps with its loan customers. The Company had
2025
 
and
1520
 
interest rate swaps
with
 
loan
 
customers
 
with
 
an
 
aggregate
 
notional
 
amount
 
of
 
$
46.765.8
 
million
 
and
 
$
33.946.5
 
million
 
at
 
September 30,March 31,
 
20232024
 
and
December 31, 2022,2023,
 
respectively.
 
These interest
 
rate swaps
 
mature 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,
 
they do
 
not qualify
 
as hedges
 
for
accounting purposes.
The following table reflects the Company’s
 
interest rate swaps at the dates indicated (in thousands):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fair Value
Notional
Amount
Collateral
Amount
Balance Sheet Location
Asset
Liability
September 30, 2023:March 31, 2024:
Derivatives designated as cash flow hedges:
Interest rate swaps
$
50,000
$
-
Other assets
$
852
$
-
Derivatives designated as hedging instruments:
Interest rate swaps
$
250,000200,000
$
-
Other assetsliabilities
$
1,450-
$
2941,005
Derivatives not designated as hedging instruments:
Interest rate swaps related to customer loans
$
46,71765,768
$
1,2971,344
Other assets/Other liabilities
$
5,6234,941
$
5,6234,941
December 31, 2022:2023:
Derivatives designated as cash flow hedges:
Interest rate swaps
$
50,000
$
-
Other assets
$
334
$
-
Derivatives designated as fair value hedges:
Interest rate swaps
$
200,000
$
-
Other liabilities
$
-
$
3,430
Derivatives not designated as hedging instruments:
Interest rate swaps related to customer loans
$
33,89346,463
$
1,2781,326
Other assets/Other liabilities
$
5,0114,558
$
5,0114,558
7.
 
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
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements - Unaudited
26
USCB Financial Holdings, Inc.
Q3 2023 Form 10-Q
market conditions.
 
If there
 
has been
 
a significant
 
decrease
 
in the
 
volume
 
and level
 
of activity
 
for the
 
asset
 
or liability,
 
a
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements - Unaudited
24
USCB Financial Holdings, Inc.
Q1 2024 Form 10-Q
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
AFS 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
 
and often involve using
 
involve using quoted market
 
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 - Unaudited
 
 
2725
 
USCB Financial Holdings, Inc.
 
Q3 2023Q1 2024 Form 10-Q
The
 
following
 
table
 
represents
 
the
 
Company's
 
assets
 
and
 
liabilities
 
measured
 
at
 
fair
 
value
 
on
 
a
 
recurring
 
basis
 
at
September 30, 2023March 31, 2024 and December 31, 20222023 for each of the
 
of the fair value hierarchy levels (in thousands):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
September 30, 2023March 31, 2024
December 31, 20222023
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
Investment securities available for sale:
U.S. Government Agency
$
-
$
8,02515,549
$
-
$
8,02515,549
$
-
$
8,6558,173
$
-
$
8,6558,173
Collateralized mortgage obligations
-
78,571106,369
-
78,571106,369
-
95,54180,606
-
95,54180,606
Mortgage-backed securities - residential
-
51,15750,337
-
51,15750,337
-
60,87952,187
-
60,87952,187
Mortgage-backed securities - commercial
-
40,56441,702
-
40,56441,702
-
27,95442,764
-
27,95442,764
Municipal securities
-
18,11619,061
-
18,11619,061
-
18,48319,338
-
18,48319,338
Bank subordinated debt securities
-
22,17626,974
-
22,17626,974
-
14,91926,261
-
14,919
Corporate bonds
-
-
-
-
-
3,709
-
3,70926,261
Total
-
218,609259,992
-
218,609259,992
-
230,140229,329
-
230,140229,329
Derivative assets
-
7,0735,793
-
7,0735,793
-
5,0114,892
-
5,0114,892
Total assets at fair value
$
-
$
225,682265,785
$
-
$
225,682265,785
$
-
$
235,151234,221
$
-
$
235,151234,221
Derivative liabilities
$
-
$
5,9175,946
$
-
$
5,9175,946
$
-
$
5,0117,988
$
-
$
5,0117,988
Total liabilities at fair value
$
-
$
5,9175,946
$
-
$
5,9175,946
$
-
$
5,0117,988
$
-
$
5,0117,988
Items Measured at Fair Value
on a Non-recurring Basis
Individually Evaluated
Loans and
Impaired Loans:
ASC 326
eliminates the
current accounting
model for
impaired
loans
effective
as
of
January
1,
2023.
At
December 31,
2022,
in
accordance
with
provisions
of
the
loan
impairment
guidance,
individual
loans
with
a
carrying
amount
of
approximately
$
3.9
million
were
written
down
to
their
fair
value
of
approximately $
3.6
million, resulting
in an
impairment charge
of $
294
thousand,
which was
included in
the allowance
for
credit losses at December 31,
2022. Loans subject 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 and are
considered a Level 3 valuation.
Other Real
Estate:
Other
real estate
owned
is 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
September 30,
2023 and December 31, 2022 for each of the fair value
hierarchy levels (in thousands):
Level 1
Level 2
Level 3
Total
September 30, 2023:
Individually evaluated loans
$
-
$
-
$
-
$
-
December 31, 2022:
Impaired loans
$
-
$
-
$
3,639
$
3,639
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 (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
Consumer and other loans
98
Discounted cash flow
Adj. for differences in net operating income expectations
Total
impaired loans
$
3,639
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements - Unaudited
28
USCB Financial Holdings, Inc.
Q3 2023 Form 10-Q
There
were
no
financial
liabilities
measured
at
fair
value
on
a
non-recurring
basis
at
September 30,
2023
and
December 31, 2022.
Items Not Measured at Fair Value
The following table
 
presents the carrying
 
amounts and estimated
 
fair values of
 
financial instruments
 
not carried at fair
value as of September 30, 2023March 31, 2024 and December 31, 20222023 (in
 
(in thousands):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fair Value Hierarchy
Carrying
Amount
Level 1
Level 2
Level 3
Fair Value
Amount
September 30,March 31, 2024:
Financial Assets:
Cash and due from banks
$
9,601
$
9,601
$
-
$
-
$
9,601
Interest-bearing deposits in banks
$
116,945
$
116,945
$
-
$
-
$
116,945
Investment securities held to maturity, net
$
173,038
$
-
$
152,156
$
-
$
152,156
Loans held for investment, net
$
1,799,742
$
-
$
-
$
1,763,399
$
1,763,399
Accrued interest receivable
$
11,579
$
-
$
1,732
$
9,847
$
11,579
Financial Liabilities:
Demand deposits
$
576,626
$
576,626
$
-
$
-
$
576,626
Money market and savings accounts
$
1,141,422
$
1,141,422
$
-
$
-
$
1,141,422
Interest-bearing checking accounts
$
57,839
$
57,839
$
-
$
-
$
57,839
Time deposits
$
326,907
$
-
$
-
$
325,215
$
325,215
FHLB advances
$
162,000
$
-
$
159,875
$
-
$
159,875
Accrued interest payable
$
2,477
$
-
$
1,297
$
1,180
$
2,477
December 31, 2023:
Financial Assets:
Cash and due from banks
$
5,0748,019
$
5,0748,019
$
-
$
-
$
5,0748,019
Interest-bearing deposits in banks
$
28,36133,043
$
28,36133,043
$
-
$
-
$
28,36133,043
Investment securities held to maturity net
$
197,311174,974
$
-
$
171,294155,510
$
-
$
171,294155,510
Loans held for investment, net
$
1,657,0271,759,743
$
-
$
-
$
1,606,4401,723,210
$
1,606,4401,723,210
Accrued interest receivable
$
8,92010,688
$
-
$
1,4761,448
$
7,4449,240
$
8,92010,688
Financial Liabilities:
Demand deposits
$
573,546552,762
$
573,546552,762
$
-
$
-
$
573,546552,762
Money market and savings accounts
$
1,016,5641,048,272
$
1,016,5641,048,272
$
-
$
-
$
1,016,5641,048,272
Interest-bearing checking accounts
$
46,53747,702
$
46,53747,702
$
-
$
-
$
46,53747,702
Time deposits
$
284,275288,403
$
-
$
-
$
282,062287,104
$
282,062287,104
FHLB advances
$
102,000183,000
$
-
$
98,718182,282
$
-
$
98,718182,282
Accrued interest payable
$
1,2061,372
$
-
$
469551
$
737821
$
1,206
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
$
2291,372
 
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements - Unaudited
26
USCB Financial Holdings, Inc.
Q1 2024 Form 10-Q
8.
 
STOCKHOLDERS’ EQUITY
Common Stock
In July
 
2021, the
 
Bank completed
 
the initial
 
public offering
 
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 Bank
 
received total net proceeds
 
of $
40.0
million after deducting underwriting discounts and expenses.
In December 2021,
 
the Company acquired
 
all the issued
 
and outstanding shares
 
of the Class
 
A common stock
 
of the
Bank, which at the time 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
 
outstanding
 
share
 
of
 
the
 
Bank’s
 
Class
 
A
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
 
Class
 
A
 
common
 
stock,
 
par
 
value
 
$
1.00
 
per
 
share,
 
and
 
the
 
Bank
 
became
 
the
Company’s wholly owned subsidiary.
 
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements - Unaudited
29
USCB Financial Holdings, Inc.
Q3 2023 Form 10-Q
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
 
then current shareholders
 
owned the same
 
percentages of the
 
Company’s common
stock as they previously owned of the Bank’s common
 
stock.
In March 2023,During the first quarter 2024, the Company issued
52,753
 
shares of Class A common stock to employees as restricted
stock awards
pursuant to
the Company’s
2015 equity
incentive plan
.
During
the first
quarter 2023,
the Company
issued
121,627
 
shares of Class A
 
common stock to
employees and directors as
 
directors as restricted
stock awards pursuant
to the Company’s
2015 equity incentive plan. There were
no
stock awards issued during the quarter
ended September 30, 2023 nor during the three and nine
months ended September 30, 2022.
 
During the three months ended
 
nine months
ended September
30, 2023
March 31, 2024, the Company
 
repurchased
577,6037,100
 
shares
of Class
A common stock at
stock
at
a
weighted
average
price
per
share
of
$
9.7711.15
.
The
aggregate
purchase
price
for
these
transactions
was
approximately
$
6.679
million,thousand,
 
including
 
transaction
 
costs.
 
These
 
repurchases
 
were
 
made
 
throughpursuant
 
opento
 
marketthe
 
purchasesCompany’s
publicly
announced
pursuant to the Company’s publicly announced repurchase program. As of March 31, 2024,
No72,980
 
shares were repurchased during remained authorized for repurchase under this program. During
the three months
ended
 
September
30,
2023. As
of
September
30,ended March 31,
 
2023, the Company
repurchased
172,397500,000
 
shares of Class
 
remainedA
 
authorizedcommon stock at
 
a weighted
average price
per share
of $
11.74
. The
aggregate purchase
price for
 
repurchasethese transactions
 
underwas approximately
 
this$
program.5.9
million,
including transaction costs.
See Note 11, Subsequent Events, for information
regarding the new share repurchase program declared in April 2024.
Shares of the Company’s Class
A common stock issued
and outstanding as of
March 31, 2024 and
of September 30, 2023 and
December 31, 2023
2022 were
19,542,29019,650,463
 
and
20,000,75319,575,435
, respectively.
 
Dividends
Declaration of dividends
by the Board
is required before
dividend payments
are made. 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
Company’s
retained
income
for
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 since the Bank is
the primary source
of funds to fund
dividends by the Company.
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.
On January
29,
2024,
the
Company
announced
that
its
Board
of Directors
approved
a cash
dividend
program.
The
quarterly dividend
for the
first quarter
of 2024
was $
0.05
per share
of Class
A common
stock, paid
on March
5, 2024,
to
stockholders of record as of the close of business
on February 15, 2024. Total amount paid to shareholders in dividends on
February 15,
2024 was
$
1.0
million.
No
 
dividends were approved
declared by
the Board
for the
stockholders for
 
the common stock classesquarter
 
for the threeended
March 31, 2023.
 
months ended September 30, 2023
See Note 11, Subsequent
 
and 2022. Additionally, there wereEvents, for information regarding dividends declared in April 2024.
no
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements - Unaudited
 
27
USCB Financial Holdings, Inc.
Q1 2024 Form 10-Q
The following table details the dividends declared and unpaid as of September 30,paid by
 
2023 and 2022.the Company in the three months ended March
31, 2024:
Declaration Date
Record Date
Payment Date
Dividend Per Share
Dividend Amount
January 19, 2024
February 15, 2024
March 5, 2024
$
0.05
$
1.0
million
The
 
Company
 
and
 
the
 
Bank
 
exceeded
 
all
 
regulatory
 
capital
 
requirements
 
and
 
remained
 
above
 
“well-capitalized”
guidelines
as
of September 30, 2023
March
31,
2024
 
and
December
31, 2022.
2023.
At September 30, 2023,
March 31,
2024,
the
 
total
risk-based
capital
ratios
for
the
the Company and the Bank were
13.1012.98
% and
13.0612.89
%, respectively.
9.
 
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 shareholders 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 share
 
holders 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.
 
The
following
table
reflects
the
calculation
of
net
income
 
available
to
common
shareholders
for
the
three
and
nine
months ended September 30,
March 31, 2024 and 2023 and 2022 (in thousands):
 
 
 
 
 
 
 
 
 
 
Three Months Ended March 31,
September 30,
Nine Months Ended
September 30,2024
2023
2022
2023
2022
Net Income
$
3,8194,612
$
5,558
$
13,824
$
15,7075,809
Net income available to common shareholders
$
3,8194,612
$
5,558
$
13,824
$
15,7075,809
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements - Unaudited
30
USCB Financial Holdings, Inc.
Q3 2023 Form 10-Q
The following table reflects
the calculation of basic and
diluted earnings per common
share class for the
three months
ended March 31, 2024 and nine
months ended September 30, 2023 and 2022 (in thousands, except
 
except per share amounts):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended September 30,March 31,
2024
2023
2022
Class A
Class A
Basic EPS
Numerator:
Net income available to common shares
 
$
3,8194,612
$
5,5585,809
Denominator:
Weighted average shares outstanding
19,542,72319,633,330
20,000,75319,855,409
Earnings per share, basic
$
0.200.23
$
0.280.29
Diluted EPS
Numerator:
Net income available to common shares
$
3,8194,612
$
5,5585,809
Denominator:
Weighted average shares outstanding for basic EPS
19,542,72319,633,330
20,000,75319,855,409
Add: Dilutive effects of assumed exercises of stock options
69,17464,928
147,45585,197
Weighted avg. shares including dilutive potential common shares
19,611,89719,698,258
20,148,20819,940,606
Earnings per share, diluted
$
0.190.23
$
0.280.29
Anti-dilutive stock options excluded from diluted EPS
720,500502,500
15,000572,500
Net income has not been allocated to unvested restricted
 
stock awards that are participating securities
 
because the amounts that would be allocated
are not material to net income per share of
 
common stock. Unvested restricted stock awards
 
that are participating securities represent less than one
percent of all of the outstanding shares of
 
common stock for each of the periods presented.
Nine Months Ended September 30,
2023
2022
Class A
Class A
Basic EPS
Numerator:
Net income available to common shares
$
13,824
$
15,707
Denominator:
Weighted average shares outstanding
19,661,685
19,998,841
Earnings per share, basic
$
0.70
$
0.79
Diluted EPS
Numerator:
Net income available to common shares
$
13,824
$
15,707
Denominator:
Weighted average shares outstanding for basic EPS
19,661,685
19,998,841
Add: Dilutive effects of assumed exercises of stock options
67,496
179,248
Weighted avg. shares including dilutive potential common shares
19,729,181
20,178,089
Earnings per share, diluted
$
0.70
$
0.78
Anti-dilutive stock options excluded from diluted EPS
720,500
15,000
Net income has not been allocated to unvested
restricted stock awards that are participating securities
because the amounts that would be allocated are
not material to net income per share of common
stock. Unvested restricted stock awards that are participating
securities represent less than one percent
of all of the outstanding shares of common stock
for each of the periods presented.
 
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements - Unaudited
 
 
3128
 
USCB Financial Holdings, Inc.
 
Q3 2023Q1 2024 Form 10-Q
10.
 
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.
As previously
 
disclosed, on
11.
 
July 13, 2023,SUBSEQUENT EVENTS
threeDividends
On April 23, 2024,
the Company announced that its
Board of Directors declared its
second quarterly cash dividend. The
quarterly dividend for
the second quarter
of 2024 was
$
0.05
 
individual shareholdersper share of Class
 
(“The Plaintiffs”)A common stock
 
filed a complaintand will be paid
 
againston June
six
board members
serving in
July 2021,
without naming
5, 2024, to stockholders of record as of the Bank
as a
party,
alleging the
named directors
did not
have the
authority to approve the exchangeclose of
 
preferred stock in July 2021 asbusiness on May 15, 2024.
 
part
Share Repurchase Program
On April 22, 2024, the Board of the Bank’s initial publicDirectors approved a new share
 
offering and that further,repurchase program of up to
such action breached500,000
 
their fiduciary duties.shares of Class
A common
 
The Plaintiffsstock
 
claim this exchangeor
 
was not permittedapproximately
2.5
%
 
by the Bank’s
Articles of
Incorporation.
The
Company
believes
that
 
the
 
allegationsCompany’s
 
in
the
lawsuit
are
legallyissued
 
and
 
factuallyoutstanding
 
withoutshares
 
merit,of
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 other means. The repurchase program has no
expiration date and may
be modified, suspended, or
terminated at any time.
The new repurchase program
will commence
upon completion of the Company’s current
repurchase program. Repurchases under this new
program will be funded from
the
Company’s
existing
cash
 
and
 
the
Company intends to vigorously defend against the allegations incash
 
the lawsuit. Despiteequivalents
or
future
cash
flow.
As
of
April
22,
2024,
572,980
shares
remain
authorized for repurchase under the Company’s belief the lawsuit lacks
merit, if the plaintiffs were successful, the Courtshare
 
could award substantial compensatory damages.repurchase programs.
 
 
3229
 
USCB Financial Holdings, Inc.
 
Q3 2023Q1 2024 Form 10-Q
Item 2.
 
Management's Discussion and Analysis of Financial Condition
 
and Results of Operations
 
The
 
following
 
discussion
 
and
 
analysis
 
is
 
designed
 
to
 
provide
 
a
 
better
 
understanding
 
of
 
the
 
consolidated
 
financial
condition
and
results
 
of operations of
 
operationsthe Company and
 
the Bank, its
wholly owned subsidiary,
as of
and for the
 
Companythree months
ended March 31,
 
and the
Bank,
its wholly
owned
subsidiary,
for
the quarter
and nine
months ended
September 30, 2023.2024. This
 
discussion and analysis
 
is best read
 
read in conjunction
 
conjunction with the unaudited
 
the unaudited consolidated financial
financial statements
and related
 
footnotesnotes included in
 
in this Quarterly
 
Report on Form
 
Form 10-Q
(“ (“Form 10-Q”)
 
and the audited
 
auditedconsolidated
consolidated
financial
 
statements
 
and
 
related footnotes
notes
 
included
in
 
the
Annual
 
Report
 
on
Form
 
10-K/A (“202210-K
(“2023
 
Form 10-
10-K”)
filed
with
the
K/A”) filed with the Securities and Exchange Commission (“SEC”)
for the year
ended December 31, 2022.2023.
This discussion contains forward-looking statements that involve risks, uncertainties and assumptions that could cause
actual results to differ materially
 
from management's expectations. Factors that could cause
 
such differences are discussed
in the sections
entitled "Forward-Looking Statements"
 
Statements" and Item
1A “Risk Factors"
below
in Part II
hereof and in
the 2022 2023
Form 10-K/A10-K filed
with the SEC which is available at the
SEC’s website www.sec.gov.
Throughout
 
this
 
document,
 
references
 
to
 
“we,”
 
“us,”
 
“our,”
 
and
 
“the
 
Company”
 
generally
 
refer
 
to
 
USCB
 
Financial
Holdings, Inc.
Forward-Looking Statements
This Form 10-Q10
-Q contains
 
statements that are
 
are not
historical in
 
nature and are
 
intended to
be, and are
 
are hereby identified
as,
as, forward-looking statements for purposes
 
purposes of the safe
 
harbor provided by Section
 
Section 21E of
the Securities Exchange Act
 
Exchange Act of 1934,
1934,
as
amended
(Exchange
Act”).
amended. The
 
words
“may, “may,”
“will, “will,”
“anticipate, “anticipate,” “could,”
 
“should,”
“would, “would,”
“believe, “believe,”
 
“contemplate,”
“expect, “expect,” “aim,” “plan,
“plan,” “estimate,
“estimate,” “continue,”
and “intend,”
as well
as other
similar words
and expressions
of the
future, are
intended
 
intended to
 
identify
forward-looking
 
statements.
 
These
 
forward-looking
 
statements
 
include
 
but
are
not
limited
to,
statements
 
related
 
to
 
our
 
projected
 
growth,
anticipated
future
 
financial
performance,
 
and
management’s
 
long-term performance
performance goals, as
well as
statements relating
to the anticipated
effects on results
 
of operations and
financial condition
from expected
 
expected developments or events,
 
events, or business
and growth
strategies, including anticipated
internal growth and
balance
sheet restructuring.
growth.
These forward-looking statements involve significant risks and uncertainties that could cause our actual results to differ
materially from those anticipated in such statements.
 
Potential risks and uncertainties include, but are not
 
limited to:
•
 
the strength of the United States economy in general and the strength of the local economies in which we conduct operations;
•
 
our ability to successfully manage interest rate risk, credit risk, liquidity risk, and other risks inherent to our industry;
•
 
the accuracy of our financial statement estimates and assumptions, including the estimates
 
used for our credit loss reserve and
deferred tax asset valuation allowance;
•
 
the efficiency and effectiveness of our internal control procedures and processes;
•
 
our ability
 
to comply
 
with the
 
extensive laws
 
and regulations
 
to which
 
we are
 
subject, including
 
the laws
 
for each
 
jurisdiction
where we operate;
•
 
adverse changes or conditions in capital and financial markets, including actual or potential stresses in the banking industry;
•
 
deposit attrition and the level of our uninsured deposits;
•
 
legislative or regulatory changes and changes in
 
accounting principles, policies, practices or guidelines, including
 
the on-going
effects of the implementation of the Current Expected Credit Losses (“CECL”) standard;
•
 
the
 
lack
 
of
 
a
 
significantly
 
diversified
 
loan
 
portfolio
 
and
 
the
 
concentration
 
in
 
the
 
South
 
Florida
 
market,
 
including
 
the
 
risks
 
of
geographic, depositor,
 
and industry
 
concentrations, including
 
our concentration
 
in loans
 
secured by
 
real estate,
 
in particular,
commercial real estate;
•
 
the effects of climate change;
•
 
the concentration of ownership of our common stock;
•
 
fluctuations in the price of our common stock;
•
 
our ability to
 
fund or access
 
the capital markets
 
at attractive rates
 
and terms and
 
manage our growth,
 
both organic growth
 
as
well as growth through other means, such as future acquisitions;
•
 
inflation, interest rate, unemployment rate, market and monetary fluctuations;
•
 
impacts of international hostilities and geopolitical events;
•
 
increased
 
competition
 
and its
 
effect
 
on
 
the pricing
 
of
 
our products
 
and services
 
as
 
well as
 
our interest
 
rate spread
 
and net
interest margin;
•
 
the loss of key employees;
•
 
the effectiveness of
 
our risk management strategies,
 
including operational risks,
 
including, but not limited
 
to, client, employee,
or third-party fraud and security breaches; and
•
 
other risks
described in
this Form
10-Q, the
2022 2023 Form
10-K/A 10-K and
other filings
we make
with the
Securities and
Exchange
Commission (“SEC”). SEC.
 
All
 
forward-looking
 
statements
 
are
 
necessarily
 
only
 
estimates
 
of
 
future
 
results,
 
and
 
there
 
can
 
be
 
no
 
assurance
 
that
actual results will
 
not differ
 
materially from expectations.
 
Therefore, you are
 
cautioned not to
 
place undue reliance
 
on any
forward-looking statements.
Further,
forward-looking statements
included in
this quarterly
report on
Form 10-Q
are made
only
as of
the
date
hereof,
and
we
undertake
no
obligation
to
update
or
revise
any forward
-looking
statement
to reflect
events or circumstances after the date on which the statement is made or to
reflect the occurrence of unanticipated events,
 
 
3330
 
USCB Financial Holdings, Inc.
 
Q3 2023Q1 2024 Form 10-Q
forward-looking statements.
Further,
forward-looking statements
included in
this Form
10-Q are
made only
as of the
date
hereof, and we undertake
no obligation to update
or revise any forward-looking
statement to reflect events
or circumstances
after the date on which the statements are made or to reflect the occurrence of unanticipated
events, unless required to do so
so under the federal securities
laws. You
should also review the
risk factors described
in the Annual
Report on Form 10-K and in the reports the Company has
filed
or will file with the SEC.
Overview
The Company
 
reported net
 
income of
 
$3.84.6 million
 
or $0.19$0.23
 
per diluted
 
share of
 
common stock
 
for the
 
three
 
months
ended March 31,
 
September 30,
2023
2024 compared
 
to $5.8
million or
 
$5.60.29 per
 
milliondiluted share
of common
stock for
the three
months ended
March 31, 2023.
On January 29, 2024, the Company’s Board of
Directors declared a cash dividend of $0.05 per
share of the Company’s
Class A
common
stock.
The
Dividend
was
declared
in
conjunction
with
the
adoption
of
a
cash
dividend
program.
The
dividend was paid
on March 5,
2024 to shareholders
of record at
the close of
business on February
15, 2023. The
aggregate
amount distributed in
connection with this
dividend was $1.0
million. Additionally,
the Company’s Board
of Directors declared
a cash dividend of $0.05 per share of the Company’s Class
A common stock on
April 22, 2024. The dividend will be paid on
June 5, 2024 to shareholders of record at the close of
business on May 15, 2024.
7,100 shares of
Class A common stock were repurchased
at a weighted
average price per
share of $11.15
during the
first quarter 2024. These repurchases were made
pursuant to the Company’s publicly
announced repurchase program. As
of March 31, 2024, 72,980 shares remained authorized
for repurchase under this program.
On April 22, 2024, the Board of Directors approved a new share repurchase
program of up to 500,000 shares of Class
A common
stock
 
or
 
$0.28approximately
 
per2.5%
 
dilutedof
 
sharethe
Company’s
issued
and
outstanding
shares
 
of
 
common
 
stock.
Under
the
repurchase program,
the Company
may purchase
shares of
Class A common stock
 
foron a discretionary
basis from
time to
time through open market repurchases, privately negotiated transactions, or other means. The repurchase program has no
expiration date and may
be modified, suspended,
or terminated at any
time. The new repurchase
program will commence
upon
completion
of
 
the
 
threecurrent
 
months
ended September
30, 2022.
Net income
for the
nine months
ended September
30, 2023
was $13.8
million or
$0.70 per
diluted share of common stock
compared to $15.7 million
or $0.78 per diluted
share of common stock
for the same period
in 2022.
No shares
were repurchased
during the
third
quarter 2023.
Year-to-date, the
Company
has repurchased
577,603 of
Class A
common stock shares at
a weighted average price
per share of
$9.77. These repurchases were
made through open
market purchases pursuant to
the Company’s publicly announced repurchase
 
program.
Repurchases
under
the
new
program
will
be
funded
from
the
Company’s existing cash and cash equivalents or future
cash flow. As of
September 30, 2023, 172,397 April 22, 2024, 572,980 shares remain authorized
shares remained authorized for repurchase under thisthe Company’s share repurchase
 
program.programs.
In evaluating our financial
 
performance, the Company
 
considers the level of
 
and trends in net
 
interest income, the
 
net
interest margin, the cost of deposits, levels
 
and composition of non-interest income and non-interest expense, performance
ratios, asset quality ratios, regulatory capital ratios, and any
 
significant event or transaction.
Unless
otherwise
 
stated,
all
period
 
comparisons
in
the
 
bullet
points
below
 
are
calculated
for
 
the
quarter
ended
September 30, 2023 compared
to the quarter
 
ended September 30, 2022March 31,
2024 compared
 
and to
December 31, 2022,
and annualized where
appropriate:
•
Net interest income
for the three
months ended September
30, 2023 decreased
$2.8 million or
16.4% to $14.0 million
from $16.8
million
for
 
the
 
quarter
 
ended
 
September 30,
2022.
Net
interest
income
for
the
nine
months
ended
in
September
30,March 31,
 
2023
and as
of March
31,
2024
compared
to December
31,
2023,
and
decreased $2.6 million or 5.6% to $44.2 million compared to the same period ended September 30, 2022.annualized where appropriate:
•
 
Net interest marginincome for the three months ended
 
March 31, 2024 decreased $839 thousand or 5.2% to $15.2 million
from $16.0
million for the quarter ended March 31, 2023.
•
Net interest
margin (“NIM”)
was 2.60%2.62%
 
for the three
 
three months ended September
 
30, 2023 comparedended March
 
31, 2024
compared to 3.47%
3.22% for
 
the three months
ended September 30, 2022.
NIM was 2.84% for
the nine months ended
in September 30, 2023
compared to 3.36% for
the same
period in 2022.
March 31, 2023.
•
 
Total assets were $2.2$2.5 billion at September 30,
2023,March 31, 2024, representing an increase of $207.1$325.3 million or 10.2%
15.0% from September 30,March 31, 2023 and
2022 and an increase of $158.8$150.0 million or 10.2%25.7% annualized from December 31, 2022.2023.
 
•
 
Total loans were $1.8
 
$1.7 billion at March 31, 2024,
 
September 30,representing an increase of $240.8
million or 15.2% from March
31, 2023 and
an increase of $40.4 million or 9.1% annualized from December 31, 2023.
•
Total deposits
were $2.1 billion
at March
31, 2024,
 
representing an increase
 
of $245.0 million$272.3
 
million or 17.1% from
 
September 30,14.9% from March
31, 2023
2022 and an increase of $169.2$165.7 million or 15.0%34.4% annualized from December 31, 2022.
•
Total deposits were $1.9 billion at September 30, 2023, representing an increase of $124.3 million or 6.9% from September 30,
2022 and an increase of $91.6 million or 6.7% annualized from December 31, 2022.2023.
 
•
 
Annualized return on average
assets for the quarter
ended September 30, 2023 March 31, 2024
was 0.67%0.76% compared
to 1.09%1.11% for
the quarter ended
ended September 30, 2022.March 31, 2023.
 
•
 
Annualized return on
average stockholders’ equity
for the quarter
 
ended September 30, 2023 was 8.19% comparedMarch
 
31, 2024 was
9.61% compared to 11.90%
12.85% for
for quarter ended September 30, 2022.March 31, 2023.
 
•
 
The ACL to total loans was 1.18% at both March 31, 2024 and December 31, 2023.
 
1.16% at both
September 30, 2023 and December
31, 2022. ACL was calculated under
the CECL
methodology for three and nine months ended September 30, 2023 and the incurred loss methodology for all periods in 2022.
•
 
Non-performing loans to total loans was 0.03% at September 30, 2023 compared to 0.00% atboth March 31, 2024 and December 31, 2022.2023.
 
•
 
At September 30, 2023,
March 31, 2024, the total risk-based
capital ratios for
the Company and
the Bank were
13.10% 12.98% and 13.06%12.89%,
respectively.
•
Tangible book value
per common share
(a non-GAAP financial
measurement) of $9.36
as of September
30, 2023 was
negatively
affected by
$2.62 due
to accumulated
comprehensive loss
of $51.2
million at
September 30,
2023. At
September 30,
2022,
tangible
book
value
of
$8.87
per
common
share
was
negatively
affected
by
$2.26
due
to
$45.2
million
accumulated
other
comprehensive loss.
See “Reconciliation and Management Explanation for Non-GAAP Financial Measures” for a reconciliation
of this non-GAAP financial measure.
 
 
3431
 
USCB Financial Holdings, Inc.
 
Q3Q1 2024 Form 10-Q
•
Tangible book
value per
common share
(a non-GAAP
financial measurement)
of $9.92
as of
March 31,
2024 was
negatively
affected by $2.31 due to accumulated comprehensive loss of
$45.4 million at March 31, 2024.
At March 31, 2023, Form 10-Qtangible book
value of $9.37 per common
share was negatively affected
by $2.14 due to
$42.1 million accumulated other
comprehensive loss.
See
“Reconciliation and
Management
Explanation for
Non-GAAP Financial
Measures” for
a
reconciliation
of
this non-GAAP
financial measure.
Critical Accounting Policies and Estimates
The
 
consolidated
 
financial
 
statements
 
are
 
prepared
 
based
 
on
 
the
 
application
 
of
 
U.S.
 
GAAP,
 
the
 
most
 
significant
 
of
which
are
 
described in
Note 1
“Summary of
Significant Accounting Policies”
 
in the
Company’s 2022 Form
10-K/A. To prepare
financial statements
in conformity
with US
GAAP,
management makes
estimates, assumptions,
and judgments
based on
available information. These estimates,
assumptions, and judgments affect
the amounts reported in
the financial statements
and accompanying notes. These estimates, assumptions,
and judgments are based on information available as of the date
of the financial statements and,
as this information changes, actual results
could differ from the estimates, assumptions and
judgments reflected
in the
financial statements.
In particular,
management
has identified
accounting
policies that,
due to
the estimates, assumptions and judgments inherent in those policies, are critical in understanding our financial statements.
Management has presented the application of these policies
to the Audit and Risk Committee of our Board of
Directors.
Allowance for Credit Losses
On
January
1,
2023,
the
Company
adopted
ASU
2016-13
Financial
Instruments
-
Credit
Losses
(Topic
326):
Measurement of Credit Losses
on Financial Instruments,
as amended, which replaces
the incurred loss methodology
with
an
expected
loss
methodology
that
is
referred
to
as
the
current
expected
credit
loss
(CECL)
methodology.
See
 
Note
 
1
“Summary
of
Significant
Accounting
Policies”
in
the
Company’s
2023
Form
10-K
and
“Summary of Significant Accounting Policies” in Item 1
of Part I of this
Form 10-Q for more information on the
adoption ASC
326 and the allowance for credit losses.
Our ACL
included residential
loans. To
assess the
potential impact
of changes
 
in qualitative
factors related
to thesethis Form 10-Q . To prepare financial statements in conformity with
loans,US GAAP,
 
management makes estimates, assumptions,
 
performedand judgments based on available information.
 
a sensitivityThese estimates,
assumptions,
 
analysis.and
 
The Companyjudgments
 
evaluatedaffect
 
the
 
impactamounts
 
reported
in
the
financial
statements
and
accompanying
notes.
These
estimates, assumptions,
and judgments are
based on information
available as of the
 
HPIdate of the financial
 
usedstatements and,
as
this
information
changes,
actual
results
could
differ
from
the
estimates,
assumptions
and
judgments
reflected
 
in calculating
expected losses on the residential loan segment. As of September 30, 2023, for every 100 basis points increase in the HPI
index, the forecast reduces
 
reservesthe
financial statements. In
 
by approximately $217particular,
 
thousand and about 1management has identified
 
basis point accounting policies that,
due to the
estimates, assumptions
and
judgments
inherent
in
those
policies,
are
critical
to
 
the reserve coverage ratio,
everything else beingan
 
constant. Thisunderstanding
 
sensitivity analysis provides
a hypothetical result
to assess the
sensitivity of the
ACL
and does not represent a change in management’s
judgement.
Income Taxes
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 theirour
 
respective tax bases and operating loss
and tax credit carryforwards. Deferred taxfinancial
 
assets and liabilities are measuredstatements.
 
using enacted tax rates expectedManagement
 
has
presented the application of these policies 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 assets
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 thresholdAudit
 
and measurementRisk Committee of our Board of Directors.
 
process. Interest
and penalties
on
tax liabilities, if any, would
be recorded in interest expense and other operating non-interest
expense, respectively.
Non-GAAP Financial Measures
This Form 10-Q
 
includes financial information determined by
 
methods other than in
 
accordance with generally accepted
accounting principles (“GAAP”). This financial information
 
includes certain operating performance measures.
 
Management
has included these non-GAAP measures because it believes these
 
measures may provide useful supplemental information
for evaluating the Company’s underlying performance trends. Further, management uses these measures in
 
managing and
evaluating
 
the
 
Company’s
 
business
 
and
 
intends
 
to
 
refer
 
to
 
them
 
in
 
discussions
 
about
 
our
 
operations
 
and
 
performance.
Operating performance measures
 
should be viewed in
 
addition to, and not
 
as an alternative to
 
or substitute for,
 
measures
determined in accordance with GAAP,
 
and are not necessarily comparable to non-GAAP measures that may
 
be presented
by other companies. To the extent applicable, reconciliations of these
 
non-GAAP measures to the most
 
directly comparable
GAAP
 
measures
 
can
 
be
 
found
 
in
 
the
 
section
 
“Reconciliation
 
and
 
Management
 
Explanation
 
of
 
Non-GAAP
 
Financial
Measures” included in this Form 10-Q.
35
USCB Financial Holdings, Inc.
Q3 2023 Form 10-Q
Segment Reporting
Management monitors the revenue streams for all its various
 
products and services. The identifiable segments are not
material
 
and
 
operations
 
are
 
managed
 
and
 
financial
 
performance
 
is
 
evaluated
 
on
 
an
 
overall
 
Company-wide
 
basis.
Accordingly, all
 
the financial service
 
operations are
 
considered by management
 
to be
 
aggregated in one
 
reportable operating
segment.
Results of Operations
General
The following
 
tables present
 
selected balance
 
sheet, income
 
statement, and
 
profitability ratios
 
for the
 
dates indicated
(in thousands, except ratios):
September 30, 2023March 31, 2024
December 31, 20222023
Consolidated Balance Sheets:
Total
 
assets
$
2,244,6022,489,142
$
2,085,8342,339,093
Total
 
loans
(1)
$
1,676,5201,821,196
$
1,507,3381,780,827
Total
 
deposits
$
1,920,9222,102,794
$
1,829,2811,937,139
Total
 
stockholders' equity
$
182,884195,011
$
182,428191,968
(1)
 
Loan amounts include deferred fees/costs.
32
USCB Financial Holdings, Inc.
Q1 2024 Form 10-Q
Three Months Ended September 30,March 31,
Nine Months Ended September 30,2024
2023
2022
2023
2022
Consolidated Statements of Operations:
Net interest income before provision for credit losses
$
14,02215,158
$
16,774
$
44,192
$
46,79515,997
Total
 
non-interest income
$
2,1612,464
$
1,789
$
6,077
$
5,3512,070
Total
 
non-interest expense
$
10,46111,174
$
10,132
$
31,089
$
29,29510,176
Net income
 
$
3,8194,612
$
5,558
$
13,824
$
15,7075,809
Profitability:
Efficiency ratio
64.64%63.41%
54.58%
61.85%
56.18%56.32%
Net interest margin
2.60%2.62%
3.47%
2.84%
3.36%3.22%
The Company’s
results
 
of
operations
 
depend
substantially
on
 
the
levels
of
our
net
interest
income
 
and non-interest income.
 
non-interest
income. Other factors
contributing to
 
to the results of
 
of operations
include our
provision for
 
credit losses,
the level
 
of non-interest
expense, and
the
provision for income taxes.
Three months ended September 30, 2023March 31, 2024 compared to the
three months ended September 30, 2022
Net income decreased
to $3.8 million
for the three
 
months ended SeptemberMarch 31, 2023
 
30, 2023 from
During the
three months
ended March
31,
2024, total
interest
income
increased
 
$5.6 million for8.5
 
million compared
to the
same
period in 2022 mainly
2023. However,
this positive
trend was
offset by
a $9.3
million increase
in total
interest expense
due to
higher
weighted average deposit
 
depositcosts
and borrowing costs.
 
Consequently, net income
decreased $1.2 million
to $4.6 million
for
Ninethe three months ended September 30, 2023March 31, 2024 compared to ninethe three
 
months ended September 30, 2022
Net income decreased to $13.8 million for the nine months ended September 30,
2023 from $15.7 million for the same
period in 2022. The main drivers of the variance of net income was a $25.1 million increase in
interest expense mainly due
to increases in the cost of deposits partially offset by a $22.5 million increase in interest income generated from higher loan
yields and a larger loan portfolio.March 31, 2023.
 
Net Interest Income
Net interest income
 
is the difference
 
between interest
 
earned on interest-earning
 
assets and interest
 
paid on interest-
bearing liabilities
 
and is
 
the primary
 
driver of
 
core earnings.
 
Interest income
 
is generated
 
from interest
 
and dividends
 
on
interest-earning
 
assets,
 
including
 
loans,
 
investment
 
securities
 
and
 
other
 
short-term
 
investments.
 
Interest
 
expense
 
is
incurred
 
from
 
interest
 
paid
 
on
 
interest-bearing
 
liabilities,
 
including
 
interest-bearing
 
deposits,
 
FHLB
 
advances
 
and
 
other
borrowings.
To evaluate net
 
interest income, we
 
measure and monitor
 
(i) yields on
 
loans and other
 
interest-earning assets, (ii)
 
the
costs of deposits
 
and other funding
 
sources, (iii) net
 
interest spread, and
 
(iv) net interest margin.
 
Net interest spread is
 
equal
to the difference between yields earned on interest-earning assets and rates paid on interest-bearing liabilities. Net interest
36
USCB Financial Holdings, Inc.
Q3 2023 Form 10-Q
margin is
 
equal to
 
the annualized
 
net interest
 
income
 
divided by
 
average interest
 
-earning assets.
 
Because
 
non-interest-
bearing sources
of funds, such as non-interest-bearing deposits and
 
and stockholders’ equity, also fund
interest-earning assets,
net interest margin includes the indirect benefit of these
 
non-interest-bearing funding sources.
Changes
 
in
 
market
 
interest
 
rates
 
and
 
interest
 
rates
 
we
 
earn
 
on
 
interest-earning
 
assets
 
or
 
pay
 
on
 
interest-bearing
liabilities, as well
 
as the volume
 
and types of
 
interest-earning assets and interest-bearing
 
and non-interest-bearing liabilities,
are usually the
 
largest drivers
 
of periodic changes
 
in net interest
 
spread, net interest
 
margin and net
 
interest income.
 
Our
asset liability committee (ALCO) has in
 
(“ALCO”) has
in place asset-liability
management techniques
to manage major
factors that
 
affect net
net interest income and net interest margin.
37
USCB Financial Holdings, Inc.
Q3 2023 Form 10-Q
The following
table contains
information related
to average
balances, average
yields earned
on assets,
and average
costs of liabilities for the periods indicated (dollars in
thousands):
Three Months Ended September 30,
2023
2022
Average
(1)
Balance
Interest
Yield/Rate
(2)
Average
(1)
Balance
Interest
Yield/Rate
(2)
Assets
Interest-earning assets:
Loans
(3)
$
1,610,864
$
22,523
5.55%
$
1,398,761
$
15,954
4.53%
Investment securities
(4)
445,828
2,833
2.52%
450,514
2,201
1.94%
Other interest-earnings assets
83,479
1,026
4.88%
70,540
322
1.81%
Total interest-earning assets
2,140,171
26,382
4.89%
1,919,815
18,477
3.82%
Non-interest-earning assets
110,087
106,976
Total assets
$
2,250,258
$
2,026,791
Liabilities and stockholders' equity
Interest-bearing liabilities:
Interest-bearing checking
$
52,080
331
2.52%
$
66,585
19
0.11%
Saving and money market deposits
1,011,164
8,779
3.44%
823,521
1,141
0.55%
Time deposits
290,272
2,565
3.51%
217,023
363
0.66%
Total interest-bearing deposits
1,353,516
11,675
3.42%
1,107,129
1,523
0.55%
FHLB advances and other borrowings
85,326
685
3.19%
43,935
180
1.63%
Total interest-bearing liabilities
1,438,842
12,360
3.41%
1,151,064
1,703
0.59%
Non-interest-bearing demand deposits
587,917
655,853
Other non-interest-bearing liabilities
38,598
34,586
Total liabilities
2,065,357
1,841,503
Stockholders' equity
184,901
185,288
Total liabilities and stockholders' equity
$
2,250,258
$
2,026,791
Net interest income
$
14,022
$
16,774
Net interest spread
(5)
1.48%
3.23%
Net interest margin
(6)
2.60%
3.47%
(1)
Average balances - Daily average balances are used
to calculate yields/rates.
(2)
Annualized.
(3)
Average loan balances include non-accrual loans. Interest income
on loans includes accretion of deferred loan
fees, net of deferred loan costs.
(4)
At fair value except for securities held to maturity. This amount includes
FHLB stock.
(5)
Net interest spread is the weighted average
yield on total interest-earning assets minus the weighted
average rate on total interest-bearing liabilities.
(6)
Net interest margin is the ratio of net interest
income to average total interest-earning assets.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3833
 
USCB Financial Holdings, Inc.
 
Q3 2023Q1 2024 Form 10-Q
NineThe following
table contains
information related
to average
balances, average
yields earned
on assets,
and average
costs of liabilities for the periods indicated (dollars in
thousands):
Three Months Ended September 30,March 31,
2024
2023
2022
Average
Balance(1)
(1)Balance
Interest
Yield/Rate
(2)
Average
Balance(1)
(1)Balance
Interest
Yield/Rate
(2)
Assets
Interest-earning assets:
Loans
(3)
$
1,576,0741,781,528
$
63,08126,643
5.35
%6.01%
$
1,302,9091,547,393
$
42,98919,711
4.41
%5.17%
Investment securities
(4)
430,118419,989
7,5012,811
2.332.69%
%421,717
484,4892,286
7,040
1.94
%2.20%
Other interest-earnings assets
71,514125,244
2,4591,433
4.604.60%
%43,084
76,655382
474
0.83
%3.60%
Total interest-earning assets
2,077,7062,326,761
73,04130,887
4.705.34%
%2,012,194
1,864,05322,379
50,5034.51%
3.62
%
Non-interest earningNon-interest-earning assets
107,443109,342
105,914
108,024
Total assets
$
2,185,1492,436,103
$
1,969,9672,120,218
Liabilities and stockholders' equity
Interest-bearing liabilities:
Interest-bearing checking
$
54,55453,344
574369
1.41
%2.78%
$
65,79858,087
5243
0.110.30%
%Saving and money market deposits
Money market and savings accounts1,097,575
949,85810,394
20,5323.81%
2.89897,061
%4,785
780,564
2,307
0.40
%2.16%
Time deposits
264,241322,912
5,7673,294
2.924.10%
%224,730
221,5041,057
893
0.54
%1.91%
Total interest-bearing deposits
1,268,6531,473,831
26,87314,057
2.833.84%
%1,179,878
1,067,8665,885
3,2522.02%
0.30FHLB advances and other borrowings
%164,187
Borrowings and repurchase agreements1,672
80,0874.10%
1,97661,600
3.30497
%
38,788
456
1.57
%3.27%
Total interest-bearing liabilities
1,348,7401,638,018
28,84915,729
2.873.86%
%1,241,478
1,106,6546,382
3,7082.08%
0.45
%
Non-interest bearingNon-interest-bearing demand deposits
617,741574,760
642,396
664,369
Other non-interest-bearing liabilities
34,49230,233
29,60831,000
Total liabilities
2,000,9732,243,011
1,778,658
1,936,847
Stockholders' equity
184,176193,092
191,309183,371
Total liabilities and stockholders' equity
$
2,185,1492,436,103
$
1,969,9672,120,218
Net interest income
$
44,19215,158
$
46,79515,997
Net interest spread
(5)
1.831.48%
%
3.17
%2.43%
Net interest margin
(6)
2.842.62%
%
3.36
%3.22%
(1)
 
Average balances - Daily average balances are used
 
to calculate yields/rates.
(2)
 
Annualized.
(3)
 
Average loan balances include non-accrual loans. Interest income
 
on loans includes accretion of deferred loan fees,
 
fees, net of deferred loan costs.
(4)
 
At fair value except for securities held to maturity. Includes This amount includes
FHLB stock.
(5)
 
Net interest spread is the weighted average
 
yield on total interest-earning assets minus the weighted
 
average rate on total interest-bearing
liabilities.
(6)
 
Net interest margin is the ratio of net interest
 
income to average total interest-earning assets.
Three months ended September 30, 2023March 31, 2024 compared to the three months
 
three months ended September 30, 2022March 31, 2023
 
Net interest income before the provision for
 
for credit losses was $14.0
$15.2 million for the
three months
ended September 30,March 31, 2024,
2023, a
 
decrease
 
of
 
$2.8839
 
millionthousand
 
or
 
16.4%5.2%,
 
from
 
$16.816.0
 
million
 
for
the
 
same
 
period
in
 
2022. 2023.
The
 
decrease
 
was
 
primarily
attributable
 
to
 
the
 
$10.79.3
 
million
 
increase
 
in
 
interest
 
expense,
 
which
 
was
 
a
 
result
 
to
 
the
 
prevailing
 
market
 
interest
 
rate
conditions which offset the increase in interest income.
Net
interest
margin
was 2.60%
2.62%
 
for the quarter ended September 30, 2023 and 3.47% for the same period in 2022. The
increase in loan yields as well as yields on other interest
 
-earning assets was offset by higher deposit and borrowingthe
 
costs.quarter
 
Nine months ended September 30, 2023 compared to nine
 
months ended September 30, 2022
Net interest incomeMarch 31,
 
before the provision2024
 
for credit lossesand
 
was $44.2 million
for the nine
months ended September
30,
2023,
a
decrease
of
$2.6
million
or
5.6%,
from
$46.8
million3.22%
 
for
 
the
 
same
 
period
 
in
 
2022.
2023. The
decrease
was
primarily
attributable
to
the
$25.1
million
increaseincreases
 
in loan yields as well as yields on other interest-earning assets was offset by
 
interest
expense,
which
was
a
result
to
the
prevailing
market
interest
rate
conditions which partially offset by the increase in interest
income.
Net interest margin
decreased to 2.84%
for the nine
months ended September
30, 2023 from
3.36% for the
same period
in 2022. Overall interest-bearing asset yields grew but
were outpaced by the increase in the cost of funds.higher deposit and borrowing costs.
 
Provision for Credit Losses
The provision
 
for credit
 
losses represents
 
a charge
 
to earnings
 
necessary to
 
maintain an
 
allowance for
 
credit losses
that, in
 
management's evaluation,
 
is adequate
 
to provide
 
coverage for
 
all expected
 
credit losses.
 
The provision
 
for credit
losses is impacted
by variations in
the size and
composition of our
loan and debt
securities portfolio, recent
historical and
projected future economic conditions, our internal assessment of the credit quality of the loan and debt
securities portfolios
and net charge-offs.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3934
 
USCB Financial Holdings, Inc.
 
Q3 2023Q1 2024 Form 10-Q
losses is impacted
by variations in
the size and
composition of our
loan and debt
securities portfolio, recent
historical and
projected future economic conditions, our internal assessment of the credit quality of the loan and debt
securities portfolios
and net charge-offs.
Three months ended September 30, 2023March 31, 2024 compared to the three months
 
three months ended September 30, 2022March 31, 2023
 
The provision
 
for credit
 
loss was
 
$653410 thousand
 
for the
 
three months
 
ended September 30,March 31, 2024
 
2023 compared to
 
to $910$201 thousand
thousand for the
 
same period in
 
2022. in 2023.
Growth in
 
the loan portfolio
 
portfolio was
the primary
 
driver of
the increase
in the
 
provision expense during
during the three
months ended
September 30, 2023
period.
The decrease
in provision
for credit
losses in
the 2023
period compared
to the September 30, 2022 quarter was due to greater loan
growth in third quarter 2022.
Nine months ended September 30, 2023 compared to nine
months ended September 30, 2022
The provision
for credit
loss
was
$892 thousand
for the
nine
months
ended
September
30,
2023 compared
to
$1.6
million
for
the
same
period
in
2022.
Decrease
of
$723
thousand
due
to
higher
loan
growth
in
the
nine
months
ended
September 30,
2022. The ACL
as a
percentage
of total
loans was
1.16% at
September
30, 2023
and at
September 30,
2022.
ACL for the three
and nine months
ended September 30,
2023, was estimated
under the CECL methodology,
and for
all periods
in 2022,
it was
estimated under
the incurred
loss model
.
See “Allowance
for Credit
Losses”
below for
further
discussion on how the ACL is calculated.March 31, 2024.
 
Non-Interest Income
Our services and products generate service charges and fees, mainly from our depository
 
accounts. We also generate
income from gain on sale of loans though our swap and SBA
 
programs. In addition, we own and are beneficiaries of the life
insurance policies on some of our
 
employees and generate income from
 
the increase in the cash surrender
 
value of these
policies.
The following table presents the components of non-interest
 
income for the dates indicated (in thousands):
Three Months Ended September 30,March 31,
Nine Months Ended September 30,2024
2023
2022
2023
2022
Service fees
$
1,3291,651
$
934
$
3,707
$
2,9171,205
Gain (loss) on sale of securities available for sale, net
(955)-
(558)
(976)
(540)(21)
Gain on sale of loans held for sale, net
25567
330
696
686
Loan settlement
-
-
-
161347
Other non-interest income
1,532746
1,083
2,650
2,127539
Total
 
non-interest income
$
2,1612,464
$
1,789
$
6,077
$
5,3512,070
Three months ended September 30, 2023March 31, 2024 compared to the three months
 
three months ended September 30, 2022March 31, 2023
 
Non-interest income for the three
months ended September 30, 2023 March 31, 2024
increased $372$394 thousand or 20.8%19.0%, compared to
the same period in 2022.
 
This increase was primarily driven by growth in service fees from a larger deposit portfolio and an
increase in
wire and
treasury
management
fees.
A strategic
restructuring
of
bank
owned
life insurance
increased
other
income
by
$982
thousand.
However,
there
was
a
$955
thousand
securities
loss
experienced
during
the
period.
The
Company sold $7.7 million in lower-yielding securities to reinvest
the funds in higher-return investments.
Nine months ended September 30, 2023 compared to the
same period
 
nine months ended September 30, 2022
Non-interest income for the nine monthsin 2023.
 
ended September 30, 2023 increased $726
thousand or 13.6%, compared to
the same
period in
2022. This increase
 
was primarily
 
driven by
 
an increase
in service
fees from
a larger
deposit portfolio
and an
increasegrowth in
 
wireservice fees
from a
larger deposit
portfolio and
 
an
increase in wire and treasury management fees.
 
fees. A strategic restructuring
of bank
owned life
insurance increased
other income by
$982 thousand
experienced during
the period. However,
there was a
$976 thousand securities
loss. The
Company sold
$16.4 million
in lower-yielding
securities
to reinvest
the funds
in higher-return
investments. For
the period
ended September 30, 2022, the Company recognized $161 thousand interest
recovery from a prior lending customer of the
Bank. This payment reflected the final payment and settlement of
lien judgements against the customer.
40
USCB Financial Holdings, Inc.
Q3 2023 Form 10-Q
Non-Interest Expense
The following table presents the components of non-interest
 
expense for the dates indicated (in thousands):
Three Months Ended September 30,March 31,
Nine Months Ended September 30,2024
2023
2022
2023
2022
Salaries and employee benefits
$
6,0666,310
$
6,075
$
18,325
$
17,8636,377
Occupancy
1,3501,314
1,281
3,968
3,8021,299
Regulatory assessment and fees
365433
269
1,041
708224
Consulting and legal fees
513592
604
1,257
1,519358
Network and information technology services
481507
488
1,464
1,323478
Other operating
1,6862,018
1,415
5,034
4,0801,440
Total
 
non-interest expense
$
10,46111,174
$
10,132
$
31,089
$
29,29510,176
Three months ended September 30, 2023March 31, 2024 compared to the three months
 
three months ended September 30, 2022March 31, 2023
 
Non-interest expense for the three
months ended September 30, 2023 March 31, 2024
increased $329$998 thousand or 3.2%9.8%,
compared to the
the same period in 2023. The increase was
 
period in
2022. The increase
was primarily
driven by
an increase
 
in theother operating expenses of $578
thousand due
to $199 thousand
increase in
internal and
external audit
 
and taxexpense, $70
 
services,thousand increase
in miscellaneous
expense, and
$97
thousand
increase
in
force-placed
insurance
expense
(this
expense
will
eventually
be
reimbursed
by
customers).
Additionally, consulting and legal fees increased
$234 thousand due to legal
 
expenses
and regulatory assessment and fees
increased $209 thousand mostly due to FDIC deposit insurance assessment,
 
and was partially offset by a decrease in the professional
fees.
Nine months ended September 30, 2023 compared to
the nine months ended September 30, 2022
Non-interest expense for the nine months ended September 30,
2023 increased $1.8 million or 6.1%, compared to
the
same period in
2022. The increase
was primarily driven
by higher salaries
and employee benefits
expense due to
new hires,
increased salary compensation and seasonal payroll taxes as well as increases in the FDICour deposit insurance assessment
rate, and audit and tax services expense.portfolio grew.
 
Provision for Income Tax
Fluctuations in the effective tax rate reflect the effect of the differences in the inclusion or deductibility of certain income
and expenses for
 
income tax purposes.
 
Therefore, future
 
decisions on the
 
investments we choose
 
will affect our
 
effective
tax rate.
 
The cash
 
surrender value
 
of bank-owned
 
life insurance
 
policies covering
 
key employees,
 
purchasing municipal
bonds, and overall levels of taxable income will be important
 
elements in determining our effective tax rate.
35
USCB Financial Holdings, Inc.
Q1 2024 Form 10-Q
Three months ended September 30, 2023March 31, 2024 compared to the three months
 
three months ended September 30, 2022March 31, 2023
 
Income tax
expense for
 
the quarter ended March
 
ended September
30, 2023
31, 2024 was $1.3$1.4
 
million as
compared to
 
$2.01.9 million
for the
same period in 2022.
The effective tax rate
for the three months ended
September 30, 2023 was 24.7% compared to
26.1%
for the same period in 2022.
Nine months ended September 30, 2023 compared to the
nine months ended September 30, 2022
Income tax expense for the nine months ended September 30, 2023 decreased to $4.5 million from $5.5 million for
the
same period
in 2022.
The Company’s
effective tax
rate was
24.4% for
the 2023
period compared
to 26.0%
for the
 
same
period in 2022.
2023. The
effective tax
rate for
the three
months ended
March 31, 2024
was 23.6%
compared to
24.5% for
the
same period in 2023.
 
For
 
a
 
further
 
discussion
 
of
 
income
 
taxes,
 
see
 
Note
 
4
 
“Income
 
Taxes”
 
to
 
the
 
unaudited
 
Consolidated
 
Financial
Statements in Item 1 of Part I of this Form 10-Q.
Analysis of Financial Condition
Total
assets at
September 30, 2023
March 31, 2024 were $2.2
$2.49 billion, an
increase of
$158.8 $150.0 million,
or 10.2%
25.8% annualized,
 
over total assets
assets of
$2.1 billion
at December
31, 2022.
Total
loans,
net of
unearned
fees/cost,
increased
$169.2
million,
or 15.0%
annualized, to $1.7 billion at September 30, 2023 compared to $1.5 $2.34 billion at December 31, 2022. 2023. Total
loans, net of unearned fees/cost, increased $40.4 million, or 9.1% annualized,
to $1.82
billion at
March 31,
2024 compared
to $1.78
billion at
December
31, 2023.
Total
 
deposits increased
by $91.6 million,
 
by $165.7
million, or 6.7%34.4% annualized, to $1.9$2.10 billion at September 30, 2023March
 
31, 2024 compared to $1.94 billion December 31, 2022.2023.
Investment Securities
The investment portfolio
 
is used and
 
managed to provide
 
liquidity through cash
 
flows, marketability
 
and, if necessary,
collateral for
 
borrowings. The
 
investment portfolio
 
is also
 
used as
 
a tool
 
to manage
 
interest rate
 
risk and
 
the Company’s
capital
 
market
 
risk
 
exposure.
 
The
 
philosophy
 
of
 
the
 
portfolio
 
is
 
to
 
maximize
 
the
 
Company’s
 
profitability
 
taking
 
into
41
USCB Financial Holdings, Inc.
Q3 2023 Form 10-Q
consideration the Company’s
 
risk appetite and
 
tolerance, manage
 
the asset composition
 
and diversification,
 
and maintain
adequate risk-based capital ratios.
The investment portfolio
 
is managed in accordance
 
with the Board approved
 
Asset and Liability
 
Management (“ALM”)
policy,
 
which
 
includes
 
investment
 
guidelines.
 
Such
 
policy
 
is
 
reviewed
 
at
 
least
 
annually
 
or
 
more
 
frequently
 
if
 
deemed
necessary,
 
depending on
 
market conditions
 
and/or unexpected
 
events. The investment
 
portfolio composition
 
is subject to
change depending on the funding and liquidity needs of the Company, and the interest risk management objective directed
by
the
Asset-Liability
 
Comittee Committee
(“ALCO”).
The
 
portfolio
of
investments
 
also
can
be
 
used
to
modify
 
the
duration
of
 
the balance
balance
sheet.
The
allocation
 
of
cash
into
 
securities
takes
into
 
consideration
anticipated
future
 
cash
flows (uses
(uses
 
and
sources) and
all available sources of credit.
Our investment portfolio consists
 
primarily of securities issued
 
by U.S. government-sponsored agencies,
 
U.S.
 
agency
mortgage-backed securities,
 
collateralized mortgage
 
obligation securities,
 
municipal securities,
 
and other
 
debt securities,
all with varying contractual maturities and coupons. Due to the optionality embedded in these securities, the final maturities
do not necessarily represent
 
the expected life of
 
the portfolio. Some
 
of these securities will
 
be called or paid
 
down prior to
maturity
 
depending on
 
capital market
 
conditions
 
and
 
expectations.
 
The
 
investment
 
portfolio
 
is regularly
 
reviewed by
 
the
Chief Financial
 
Officer,
 
Treasurer,
 
and the
 
ALCO of
 
the Company
 
to ensure
 
an appropriate
 
risk and
 
return profile
 
as well
as for adherence to the investment policy.
ASC Topic
326 amended
the
existing
other-than-temporary-impairment
guidance
forWhen evaluating AFS
 
debt securities under
 
requiring
credit
losses to be recorded as
an allowance rather than
through a permanent write-down.
When evaluating AFS debt
securities
under ASC Topic
 
326, the Company has evaluated
evaluates
 
whether the decline
in fair value
is attributable
 
is attributable to credit losses
 
or other
factors
 
factors like
interest
 
rate
risk,
 
using
both
quantitative
 
and
qualitative
 
analyses, including
including
company
 
performance
 
analysis,
review
review
of
credit
 
ratings,
remaining
 
payment
terms,
 
prepayment
speeds
 
and
analysis
 
of
macro-economic conditions.
 
conditions. Each
investment is expected
 
expected to recover
 
its price depreciationsunrealized loss
 
position over its holding
 
holding period as
it approaches to maturity
 
it moves toand the Company has
 
the intent and ability
to hold these securities
to maturity anduntil
recovery.
As
a result of this evaluation, the
 
Company
has
the
intent
and
ability
to
hold
these
securities
to
maturity
if
necessary.
As
a
result
of
this
evaluation,
the
Company
concluded that no allowance was required on AFS securities.
securities as of March 31, 2024.
AFS and
HTM investment
securities de
creased $2.9
million, or
0.9% annualized,
to $415.9increased $28.7 million,
 
or 28.6% annualized, to $433.0 million at September
30,March 31, 2024
2023 from $418.8$404.3 million at December 31, 2023. Investment
 
2022. Investment securities increased due
to reinvestment of payments
received and
and investment of excess
 
in cash
balances into high
 
high credit quality investments
 
to increase the Company’s
profitability and
modify the
 
Company’s profitability and
modify
the Company
’s
balance
sheet
 
duration
according to
 
the
ALM policy.
As of
March 31, 2024,
investment
securities
with
a
market value
 
of September 30, 2023,
investment securities
with a market value of $107.7$244.4 million
 
were pledged
to secure
public deposits
 
and the
BTFP.
 
The investment
portfolio does
not
not have any tax-exempt securities.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4236
 
USCB Financial Holdings, Inc.
 
Q3 2023Q1 2024 Form 10-Q
The
 
following
 
table
 
presents
 
the
 
amortized
 
cost
 
and
 
fair
 
value
 
of
 
investment
 
securities
 
for
 
the
 
dates
 
indicated
 
(in
thousands):
September 30, 2023March 31, 2024
December 31, 20222023
Available-for-sale:
Amortized
Cost
Fair Value
Amortized
Cost
Fair Value
U.S. Government Agency
$
9,91317,168
$
8,02515,549
$
10,1779,664
$
8,6558,173
Collateralized mortgage obligations
105,547130,533
78,571106,369
118,951103,645
95,54180,606
Mortgage-backed securities - residential
66,02462,734
51,15750,337
73,83863,795
60,87952,187
Mortgage-backed securities - commercial
48,01048,182
40,56441,702
32,24449,212
27,95442,764
Municipal securities
25,02424,985
18,11619,061
25,08425,005
18,48319,338
Bank subordinated debt securities
24,41728,622
22,17626,974
15,96428,106
14,919
Corporate bonds
-
-
4,037
3,70926,261
$
278,935312,224
$
218,609259,992
$
280,295279,427
$
230,140229,329
Held-to-maturity:
U.S. Government Agency
$
44,08743,439
$
37,04937,623
$
44,91443,626
$
39,062
U.S. Treasury
19,934
19,906
9,841
9,82838,306
Collateralized mortgage obligations
64,09461,465
53,78653,131
68,72762,735
60,92554,752
Mortgage-backed securities - residential
44,30243,383
38,21438,613
42,68543,784
38,48339,599
Mortgage-backed securities - commercial
15,46715,409
13,88414,108
11,44215,439
10,77714,182
Corporate bonds
9,4439,354
8,4558,681
11,0909,398
10,0138,671
$
197,327173,050
$
171,294152,156
$
188,699174,982
$
169,088155,510
Allowance for credit losses - securities held-to-maturity
(16)(12)
Securities held-to maturity, net of allowance for credit losses
$
197,311173,038
The following
 
table shows
 
the weighted
 
average yields,
 
categorized by
 
contractual maturity,
 
for investment
 
securities
as of September 30, 2023March 31, 2024 (in thousands,
except ratios):
 
Within 1 year
After 1 year through
5 years
After 5 years through
10 years
After 10 years
Total
Amortized
Cost
Yield
Amortized
Cost
Yield
Amortized
Cost
Yield
Amortized
Cost
Yield
Amortized
Cost
Yield
Available-for-sale:
U.S. Government Agency
$
-
0.00%
$
-
0.00%
$
1,9833,106
3.17%4.03%
$
6,04214,062
1.53%3.66%
$
8,02517,168
1.93%3.73%
Collateralized mortgage obligations
-
0.00%
-
0.00%
-
0.00%
78,571130,533
1.39%2.30%
78,571130,533
1.39%2.30%
MBS - residential
-
0.00%
-
0.00%
-
0.00%
51,15762,734
1.62%1.87%
51,15762,734
1.62%1.87%
MBS - commercial
-
0.00%
-
0.00%
-
0.00%
40,56448,182
2.58%3.35%
40,56448,182
2.58%3.35%
Municipal securities
 
-
0.00%
-
0.00%
2,72020,733
1.69%1.72%
15,3964,252
1.75%1.86%
18,11624,985
1.74%
Bank subordinated debt securities
-
0.00%
5,9775,561
5.75%7.18%
16,19921,272
4.88%5.14%
-
0.00%
22,17626,834
5.12%5.57%
Corporate bonds
-
0.00%
-
0.00%
-1,788
0.00%6.41%
-
0.00%
-1,788
0.00%6.41%
$
-
$
5,9775,561
$
20,90246,899
$
191,730259,763
$
218,609312,224
2.09%2.71%
Held-to-maturity:
U.S. Government Agency
$
-
0.00%
$
7,9217,933
1.02%
$
20,14120,143
1.38%1.45%
$
16,02515,363
2.01%2.03%
$
44,08743,439
1.54%
U.S. Treasury
19,934
5.20%
-
0.00%
-
0.00%
-
0.00%
19,934
5.20%1.58%
Collateralized mortgage obligations
-
0.00%
-
0.00%
-
0.00%
64,09461,465
1.66%
64,09461,465
1.66%
MBS - residential
-
0.00%
4,4684,410
1.85%
5,9255,908
1.75%1.74%
33,90933,066
2.40%2.41%
44,30243,383
2.26%2.27%
MBS - commercial
-
0.00%
3,069
1.62%
-
0.00%
3,07612,340
1.62%2.62%
12,39115,409
2.60%
15,467
2.40%2.42%
Corporate bonds
-
0.00%
9,4439,354
2.80%
-
0.00%
-
0.00%
9,4439,354
2.80%
$
19,934-
$
21,83224,766
$
29,14226,050
$
126,419122,234
$
197,327173,050
2.24%1.92%
Loans
Loans are the
 
largest category of
 
interest-earning assets
 
on the unaudited
 
Consolidated Balance
 
Sheets, and usually
provide
higher
yields
than
the
 
remainder of the interest
 
of
the
interest-earning
-earning assets.
Higher
yields
 
typically
carry greater
 
inherent
credit
and
and liquidity risks in comparison to lower
yield assets. The Company manages
and mitigates such risks in accordance
with the
the credit and ALM policies, risk tolerance and balance sheet
 
sheet composition.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4337
 
USCB Financial Holdings, Inc.
 
Q3 2023Q1 2024 Form 10-Q
The following table shows the loan portfolio composition
 
as of the dates indicated (in thousands):
September 30, 2023March 31, 2024
December 31, 20222023
Total
Percent of
Total
Total
Percent of
Total
Residential Real Estate
$
188,880237,906
11.313.1
%
$
185,636204,419
12.311.5
%
Commercial Real Estate
1,005,2801,057,800
60.058.2
%
970,4101,047,593
64.458.8
%
Commercial and Industrial
212,975228,045
12.712.5
%
126,984219,757
8.412.4
%
Foreign Banks
94,640100,182
5.75.5
%
93,769114,945
6.26.5
%
Consumer and Other
173,096194,325
10.310.7
%
130,429191,930
8.710.8
%
Total
 
gross loans
1,674,8711,818,258
100.0
%
1,507,2281,778,644
100.0
%
Plus: Deferred fees (cost)costs
1,6492,938
 
1102,183
Total
 
loans net of deferred fees (cost)(costs)
1,676,5201,821,196
1,507,3381,780,827
Less: Allowance for credit losses
19,49321,454
17,48721,084
Total
 
net loans
$
1,657,0271,799,742
$
1,489,8511,759,743
Total
 
loans,
net
 
of
unearned
 
fees/cost,
increased
 
by
$169.2 $40.4 million,
 
or
15.0% 9.1%
 
annualized
to
 
$1.7
1.82 billion,
 
at
September 30, 2023
compared to
December March 31,
 
2022.2024
compared to December 31, 2023. The residential real
 
commercial
and industrial,
and to
a lesser
extent, consumer
and other and commercial real estate loan segmentssegment had the
most significant growth.
 
Our
 
loan
 
portfolio
 
continues
 
to
 
grow,
 
with
 
commercial
 
real
 
estate
 
lending
 
as
 
the
 
primary
 
focus
 
which
 
represented
approximately 60.0%
58% of the
 
total gross loan portfolio as
 
loan portfolio
as of
September 30, 2023.
March 31, 2024. Our loan
 
growth strategy since inception has
 
since inceptionbeen
has been reflective of the market in which we operate and of our strategic
 
strategic plan as approved by the Board.
Most of the
 
commercial real estate
 
exposure represents
 
loans to commercial
 
businesses secured
 
by owner-occupied
real estate.
 
The growth
 
experienced in
 
recent years
 
is primarily
 
due to
 
implementation of
 
our relationship-based
 
banking
model and
 
the success
 
of our
 
relationship managers
 
in competing
 
for new
 
business
 
in a
 
highly competitive
 
metropolitan
area. Many
 
of our
 
larger loan
 
clients have
 
long-term relationships
 
with members
 
of our
 
senior management
 
team or
 
our
relationship managers that date back to former institutions.
 
From a
 
liquidity perspective,
 
our loan
 
portfolio provides
 
us with
 
additional
 
liquidity due
 
to repayments
 
or unexpected
prepayments.
The
following
table
shows
 
maturities
and
sensitivity
to
 
interest
rate
changes
for
the
 
loan
portfolio
at March 31,
September 30, 20232024 (in thousands):
Due in 1 year or
less
Due in 1 to 5
years
Due after 5 to 15
years
Due after 15
years
Total
Residential Real Estate
$
9,5135,006
$
23,90242,647
$
81,77774,664
$
73,688115,589
$
188,880237,906
Commercial Real Estate
85,013105,181
164,387200,845
747,779745,043
8,1016,731
1,005,2801,057,800
Commercial and Industrial
5,34813,458
53,23447,095
114,106122,945
40,28744,547
212,975228,045
Foreign Banks
94,640100,182
-
-
-
94,640100,182
Consumer and Other
1,6341,623
3,0803,511
10,22310,711
158,159178,480
173,096194,325
Total
 
gross loans
$
196,148225,450
$
244,603294,098
$
953,885953,363
$
280,235345,347
$
1,674,8711,818,258
Interest rate sensitivity:
Fixed interest rates
$
174,725180,206
$
144,198161,021
$
193,366187,337
$
170,370237,934
$
682,659766,498
Floating or adjustable rates
21,42345,244
100,405133,077
760,519766,026
109,865107,413
992,2121,051,760
Total
 
gross loans
$
196,148225,450
$
244,603294,098
$
953,885953,363
$
280,235345,347
$
1,674,8711,818,258
The information
 
presented
 
in the
 
table above
 
is based
 
upon the
 
contractual
 
maturities of
 
the individual
 
loans, which
may be
 
subject to
 
renewal at
 
their contractual
 
maturity.
 
Renewals will
 
depend on
 
approval by
 
our credit
 
department and
balance sheet
 
composition at the
 
time of
 
the analysis,
 
as well
 
as any
 
modification of terms
 
at the
 
loan’s maturity. Additionally,
maturity
 
concentrations,
 
loan
 
duration,
 
prepayment
 
speeds
 
and
 
other
 
interest
 
rate
 
sensitivity
 
measures
 
are
 
discussed,
reviewed, and analyzed by the ALCO. Decisions on term
 
/rate modifications are discussed as well.
 
As of September 30,March 31, 2024, approximately 58% of
 
2023, approximately 59%the loans have adjustable/variable rates
 
and 42% of the loans have
adjustable/variable rates and
41% of the
loans have fixed
fixed rates.
 
The
adjustable/variable
 
rate
loans
 
re-price
to
 
different
benchmarks
 
and
tenors
 
in
different
 
periods
of
 
time.
By
contractual characteristics, there are no
 
material concentrations on anniversary repricing. Additionally, it is
 
important to note
that most
 
of our
 
loans have
 
interest rate
 
floors. This
 
embedded option
 
protects the
 
Company from
 
a decrease
 
in interest
rates below the floor and positions us to gain in the scenario
 
of higher interest rates.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4438
 
USCB Financial Holdings, Inc.
 
Q3 2023Q1 2024 Form 10-Q
Asset Quality
 
Our asset quality grading
 
analysis estimates the capability of
 
the borrower to repay
 
the contractual obligation of
 
the loan
agreement as scheduled or at all. The Company’s internal credit risk grading system is based on experiences with similarly
graded loans. Internal credit
 
risk grades are reviewed
 
at least once a
 
year, and
 
more frequently as
 
needed. Internal credit
risk ratings
 
may change
 
based on
 
management’s
 
assessment of
 
the results
 
from the
 
annual review,
 
portfolio monitoring,
and other developments observed with borrowers.
 
The internal credit risk grades used by the Company to
 
assess the credit worthiness of a loan are shown below:
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
 
as follows for the dates indicated (in thousands):
 
September 30,March 31, 2024
Pass
Special Mention
Substandard
Doubtful
Total
Residential Real Estate
$
237,626
$
-
$
280
$
-
$
237,906
Commercial Real Estate
1,051,629
-
6,171
-
1,057,800
Commercial and Industrial
226,474
-
1,571
-
228,045
Foreign Banks
100,182
-
-
-
100,182
Consumer and Other
194,325
-
-
-
194,325
$
1,810,236
$
-
$
8,022
$
-
$
1,818,258
December 31, 2023
Pass
Special Mention
Substandard
Doubtful
Total
Residential Real Estate
$
188,880204,127
$
-
$
-292
$
-
$
188,880204,419
Commercial Real Estate
1,002,7651,040,032
-
2,5157,561
-
1,005,2801,047,593
Commercial and Industrial
210,991218,129
-
1,9841,628
-
212,975219,757
Foreign Banks
94,640114,945
-
-
-
94,640114,945
Consumer and Other
173,096191,930
-
-
-
173,096191,930
$
1,670,3721,769,163
$
-
$
4,4999,481
$
-
$
1,674,871
December 31, 2022
Pass
Special Mention
Substandard
Doubtful
Total
Residential Real Estate
$
185,636
$
-
$
-
$
-
$
185,636
Commercial Real Estate
967,465
-
2,945
-
970,410
Commercial and Industrial
126,177
-
807
-
126,984
Foreign Banks
93,769
-
-
-
93,769
Consumer and Other
130,233
-
196
-
130,429
$
1,503,280
$
-
$
3,948
$
-
$
1,507,2281,778,644
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4539
 
USCB Financial Holdings, Inc.
 
Q3 2023Q1 2024 Form 10-Q
Non-Performing Assets
The following table presents non-performing assets as
 
of the dates shown (in thousands,
 
except ratios):
September 30, 2023March 31, 2024
December 31, 20222023
Total
 
non-performing loans
$
479456
$
-468
Other real estate owned
-
-
Total
 
non-performing assets
$
479456
$
-468
Asset quality ratios:
(1)
Allowance for credit losses to total loans
1.16%1.18%
1.16%1.18%
Allowance for credit losses to non-performing loans
4070%4,705%
- %4,505%
Non-performing loans to total loans
0.03%
- %
(1)
ACL was calculated under CECL methodology for 2023, and incurred loss methodology for 20220.03%
Non-performing
assets
include
all
loans
categorized
 
as non-accrual or restructured, other real
 
non-accrual
or
restructured,
impaired
securities,
other
real
estate
owned
(“OREO”)
and
other
repossessed
assets.
 
Problem
loans
for
which
 
the
collection
or
 
liquidation
in
full
 
is
reasonably uncertain are
 
placed
on a non-accrual
 
status. This determination
 
is based on current
 
current existing facts
concerning collateral
collateral values and the
paying
capacity of the borrower.
When the collection of the full contractual balance is unlikely,
 
the
loan is placed on non-accrual to
avoid overstating the
Company’s income for a
loan with increased credit
risk.
 
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 consecutive months
and the Company
 
has a documented
expectation of repayment
repayment of the remaining contractual principal and interest or the
loan becomes secured and in the process of collection.
The
 
Company
 
may
 
grant
 
a
 
loan
 
concession
 
to
 
a
 
borrower
 
experiencing
 
financial
 
difficulties.
 
This
 
determination
 
is
performed
 
during
 
the
 
annual
 
review
 
process
 
or
 
whenever
 
problems
 
surface
 
regarding
 
the
 
client’sborrower’s
 
ability
 
to
 
repay
 
in
accordance with
 
the original
 
terms of
 
the loan
 
or line
 
of credit.
 
The concessions
 
are given
 
to the
 
debtor in
 
various forms,
including interest rate
 
reductions, principal forgiveness, extension
 
of maturity date,
 
waiver, or deferral of
 
payments and other
concessions intended to minimize potential losses.
For further discussion on non-performing loans
 
and borrowers experiencing financial difficulties,
 
see Note 3 “Loans” to
the unaudited Consolidated Financial Statements in Item
 
1 of Part 1 this Form 10-Q.
Allowance for Credit Losses
On January 1,
2023, the Company
adopted FASB
ASU 2016-13,
which introduced the
current expected
credit losses
(CECL)
methodology
and
required
us to
estimate
all expected
credit
losses over
the remaining
life of
our loan
portfolio.
Accordingly,
the
The ACL
 
represents
 
an
amount
 
that,
 
in
 
management's
 
evaluation,
 
is
adequate
 
to
provide
 
coverage
 
for
 
all
expected
expected future
credit
losses
on
outstanding
loans.
Additionally,
 
qualitative adjustments are made to the ACL when, based
on
 
management’s
judgment,
thereadjustments
 
are
 
factorsmade
 
impactingto
 
the
 
allowanceACL
 
when,
based
on
management’s judgment, there
are factors impacting
the allowance estimate
 
not
considered
by
 
the
quantitative calculations.
calculations.
See
Note
3 “Loans”
in Item
1
of
Part 1
of this
Form
10-Q
 
for
more
information
on
the
allowance
for credit
losses. ACL.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4640
 
USCB Financial Holdings, Inc.
 
Q3 2023Q1 2024 Form 10-Q
The following table presents ACL and net charge-offs to average loans by
 
type for the periods indicated (in thousands):
Residential
Real Estate
Commercial
Real Estate
Commercial
and
Industrial
Foreign
 
Banks
Consumer
and Other
Total
Three Months Ended September 30, 2023March 31, 2024
 
 
 
 
 
 
Beginning balance
$
2,6732,695
$
10,18310,366
$
2,5003,974
$
677911
$
2,7823,138
$
18,81521,084
Provision for credit losses
(1)
(162)235
(84)(64)
738288
73(117)
10821
673363
Recoveries
-
-
810
-
-2
812
Charge-offs
-
-
-
-
(3)(5)
(3)(5)
Ending Balance
$
2,5112,930
$
10,09910,302
$
3,2464,272
$
750794
$
2,8873,156
$
19,49321,454
Average loans
$
183,643217,117
$
992,1711,048,870
$
179,127221,804
$
87,847102,150
$
168,076191,587
$
1,610,8641,781,528
Net charge-offs to average loans
-0.00%
-0.00%
-0.02%(0.02)%
-0.00%
0.01%
0.00%
Nine(1) Provision for credit losses excludes a $43 thousand charge due to unfunded commitments included in other liabilities and a $4
thousand charge related to investment securities held to maturity.
Residential
Real Estate
Commercial
Real Estate
Commercial
and
Industrial
Foreign
Banks
Consumer
and Other
Total
Three Months Ended September 30,March 31, 2023
Beginning balance
$
1,352
$
10,143
$
4,163
$
720
$
1,109
$
17,487
Cumulative effect of adoption of accounting
accounting principle
(2)(1)
1,238
1,105
(2,158)
23
858
1,066
Provision for credit losses
(3)(2)
(89)221
(1,149)(795)
1,181318
729
965512
915285
Recoveries
108
-
6044
-
32
7354
Charge-offs
-
-
-
-
(48)(5)
(48)(5)
Ending Balance
$
2,5112,819
$
10,09910,453
$
3,2462,367
$
750772
$
2,8872,476
$
19,49318,887
Average loans
$
186,918194,355
$
980,244964,682
$
164,466158,509
$
90,59789,020
$
153,849140,826
$
1,576,0741,547,392
Net charge-offs to average loans
-0.01%
-
-0.05%
-
0.04%(0.02)%
0.00%
(0.11)%
0.00%
0.01%
(0.01)%
(1) Impact of CECL adoption on January 1, 2023.
(2) Provision for credit losses excludes $17a $84 thousand release due to unfunded commitments included in other liabilities and $3
thousand release due to investment securities held to maturity.
(2) Impact of CECL adoption on January 1, 2023.
(3) Provision for credit losses excludes $39 thousand release due to unfunded commitments included in other liabilities and $16
thousand expense due to investment securities held to maturity.
Residential
Real Estate
Commercial
Real Estate
Commercial
and Industrial
Foreign
Banks
Consumer
and Other
Total
Three Months Ended September 30, 2022
Beginning balance
$
2,366
$
9,290
$
2,671
$
651
$
808
$
15,786
Provision for credit losses
(1,009)
695
1,126
74
24
910
Recoveries
1
-
-
-
-
1
Charge-offs
-
-
(88)
-
(5)
(93)
Ending Balance
$
1,358
$
9,985
$
3,709
$
725
$
827
$
16,604
Average loans
$
190,757
$
887,000
$
119,993
$
94,628
$
106,382
$
1,398,761
Net charge-offs to average loans
-
-
0.29%
-
0.02%
0.03%
Nine Months Ended September 30, 2022
Beginning balance
$
2,498
$
8,758
$
2,775
$
457
$
569
$
15,057
Provision for credit losses
(1,157)
1,227
1,011
268
266
1,615
Recoveries
33
-
11
-
3
47
Charge-offs
(16)
-
(88)
-
(11)
(115)
Ending Balance
$
1,358
$
9,985
$
3,709
$
725
$
827
$
16,604
Average loans
$
195,863
$
809,411
$
128,625
$
77,237
$
91,773
$
1,302,909
Net charge-offs to average loans
-0.02%
0.00%
0.12%
0.00%
0.02%
0.01%
 
Bank-Owned Life Insurance
As of September 30,
2023,March 31, 2024, the combined
cash surrender
value of all
bank-owned life
insurance (“BOLI”) policies was
 
policies was$52.2
$51.4
million.
Changes
in
cash
surrender
value
are
recorded
to
non-interest
income
in
the
unaudited
Consolidated
Statements of
Operations. The Company had BOLI policies with five insurance carriers. The Company is the beneficiary of
these policies.
47
USCB Financial Holdings, Inc.
Q3 2023 Form 10-Q
During the
third quarter
of 2023,
the Company
restructured its
BOLI, cancelling
a $7.1
million policy
by surrendering
$4.2 million of the value and transferring the remaining $2.9 million to a new BOLI
policy. The new BOLI policy
was funded
with an additional
$11.1
million for
a total of
$14.1 million.
This new
BOLI policy
received a cash
surrender enhancement
from the new insurance carrier of $981 thousand.
Deposits
Customer deposits are the
 
primary funding source for
 
the Bank’s growth.
 
Through our network of
 
banking centers, we
offer a competitive array of deposit
 
accounts and treasury management services designed
 
to meet our customers’ business
needs.
 
Our
 
primary
 
deposit
 
customers
 
are
 
small-to-medium
 
sized
 
businesses
 
(“SMBs”),
 
and
 
the
 
personal
 
business
 
of
owners and operators of these SMBs, as well as the retail/consumer
 
relationships of the employees of these businesses.
 
The following table
presents the daily
average balance and
average rate paid
on deposits by
category for
the periods
presented (in thousands, except ratios):
Three Months Ended September 30,
2023
2022
Average Balance
Average Rate
Paid
Average Balance
Average Rate
Paid
Non-interest-bearing checking
$
587,917
0.00%
$
655,853
0.00%
Interest-bearing checking
52,080
2.52%
66,585
0.11%
Money market and savings deposits
1,011,164
3.44%
823,521
0.55%
Time deposits
290,272
3.51%
217,023
0.66%
Total
$
1,941,433
2.39%
$
1,762,982
0.34%
The Company
has a
granular deposit
portfolio with
outstanding balances
comprised of
49% in
commercial
deposits,
37%
personal
deposits,
11%
public
funds
which
are
partially
collateralized
and
3%
brokered
deposits.
During
the
nine
months ended September
30, 2023, the
Company acquired $50
million in brokered
deposits to boost
liquidity. The Company
has
approximately
20
thousand
deposit
accounts
with
the
majority
in
personal
accounts,
approximately
13
thousand
or
63.8%. The
estimated average
account size
of our
deposit portfolio
is approximately
$95
thousand
as of
September 30,
2023. The
Company also offers
Insured Cash
Sweep (“ICS”) and
Certificate of
Deposit Account Registry Service
(“CDARS”)
deposit products to fully insure our clients.
The
uninsured
deposits
are
estimated
based
on
the
FDIC
deposit
insurance
limit
of
$250
thousand
for
all
deposit
accounts at the Company
per account holder.
The total estimated
amount of uninsured deposits
is 53% at
September 30,
2023.
The following table shows scheduled maturities of uninsured
time deposits as of September 30, 2023 (in thousands):
September 30, 2023
Three months or less
$
18,563
Over three through six months
32,457
Over six though twelve months
28,769
Over twelve months
2,566
$
82,355
Other Liabilities
The Company collects from commercial and residential loan
customers funds which are held in escrow for future
payment of real estate taxes and insurance. These escrow
funds are disbursed by the Company directly to the
insurance
companies and taxing authority of the borrower.
Escrow funds are recorded as other liabilities.
As of September 30, 2023 escrow balances totaled $16.7 million
compared to $3.5 million at December 31, 2022.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4841
 
USCB Financial Holdings, Inc.
 
Q3 2023Q1 2024 Form 10-Q
Borrowings
As a memberThe following table
 
ofpresents the FHLB,daily
 
we are eligibleaverage balance and
 
to obtainaverage rate paid
 
advanceson deposits by
category for
the periods
presented (in thousands, except ratios):
Three Months Ended March 31,
2024
2023
Average Balance
Average Rate
Paid
Average Balance
Average Rate
Paid
Non-interest-bearing checking
$
574,760
0.00%
$
664,369
0.00%
Interest-bearing checking
53,344
2.78%
58,087
0.30%
Money market and savings deposits
1,097,575
3.81%
897,061
2.16%
Time deposits
322,912
4.10%
224,730
1.91%
Total
$
2,048,591
2.76%
$
1,844,247
1.29%
The Company
has a
granular deposit
portfolio with
 
various termsoutstanding balances
comprised of
52% in
commercial
deposits,
32% personal deposits, 12% public funds
(which are partially collateralized)
 
and conditions.4% brokered deposits. Brokered
 
This accessibilitydeposits
balance at March 31, 2024 was $90.1 million and there
were no brokered deposits at March 31, 2023.
The Company has approximately
21 thousand deposit accounts
with the majority in
personal accounts, approximately
13 thousand or
62.9%. The estimated
average account
size of our
deposit portfolio is
approximately $103 thousand
as of
March 31, 2024.
The
uninsured
deposits
are
estimated
based
on
the
FDIC
deposit
insurance
limit
of
$250
thousand
for
all
deposit
accounts at
the Company
per account
holder.
The total
estimated
amount of
uninsured
deposits
was 55%
at March
31,
2024 and
56% at
March
31, 2023.
The Company
offers
Insured Cash
Sweep (“ICS”)
and Certificate
 
of
Deposit Account
Registry Service (“CDARS”) deposit products
to fully insure our clients. The
deposit balance in ICS/CDARS at
quarter end
was $144.1 million and $35.7 million at March 31, 2023.
The following table shows scheduled maturities of uninsured
time deposits as of March 31, 2024 (in thousands):
March 31, 2024
Three months or less
$
23,229
Over three through six months
17,772
Over six though twelve months
41,918
Over twelve months
2,393
$
85,312
Other Liabilities
The Company collects from commercial and residential loan
customers funds which are held in escrow for future
payment of real estate taxes and insurance. These escrow
funds are disbursed by the Company directly to the
insurance
companies and taxing authority of the borrower.
Escrow funds are recorded as other liabilities.
As of March 31, 2024 escrow balances totaled $7.8 million compared
to $2.3 million at December 31, 2023.
Borrowings
As
a
member
of
the
FHLB
of
Atlanta,
we
are
eligible
to
obtain
advances
with
various
terms
and
conditions.
This
accessibility of additional
funding allows us
to efficiently and
timely meet both expected
 
expected and unexpected
outgoing cash flows
and collateral
needs without adversely affecting
either daily operations
or the financial condition
of the Company.
As of September 30, 2023,
March 31, 2024, we had $102.0$82.0 million of
 
of fixed and variable rate
fixed-rate advances outstanding from
the FHLB with
a weighted average
rate of 3.66%3.19%.
Maturity dates for the advances range between
 
between 20232024 to 2028 as detailed
in the table below.
 
42
USCB Financial Holdings, Inc.
Q1 2024 Form 10-Q
The following table presents the FHLB advances as of
 
September 30, 2023March 31, 2024 (in thousands):
Interest Rate
Type of Rate
Maturity Date
Amount
5.57%
Variable
December 22, 2023
$
20,000
1.04%
Fixed
July 30, 2024
5,000
2.05%
Fixed
March 27, 2025
10,000
1.07%
Fixed
July 18, 2025
6,000
3.76%
Fixed
January 24, 2028
11,000
3.77%
Fixed
April 25, 2028
50,000
$
102,00082,000
As of
March 31, 2024,
we had
a $80.0
million fixed-rate
loan outstanding
from the
FRB issued
pursuant to
the Bank
Term
Funding Program with an interest rate of 4.81% and
a maturity date of January 10, 2025.
We have
 
also established
 
Federal Funds
 
lines of credit
 
credit with our
 
our upstream
correspondent
 
banks and
 
the BTFP,FRB
 
and theAtlanta
FRB AtlantaDiscount
 
Discount Window
 
to
manage
 
temporary
fluctuations
 
in
our
 
daily
cash
 
balances.
As
 
of September
 
30, 2023,March 31,
2024,
there
were
no
there were no outstanding balances with any of these
liquidity sources.
Off-Balance Sheet Arrangements
We engage
 
in various financial
 
transactions in
 
our operations
 
that, under GAAP,
 
may not be
 
included on
 
the balance
sheet. To
 
meet the financing needs
 
of our customers we may
 
include commitments to extend
 
credit and standby letters
 
of
credit. To
 
a varying
 
degree, such
 
commitments involve
 
elements of
 
credit, market,
 
and interest
 
rate risk
 
in excess
 
of the
amount recognized
 
in the
 
balance sheet.
 
We use
 
more conservative
 
credit and
 
collateral policies
 
in making
 
these credit
commitments than
 
we do
 
for on-balance
 
sheet items.
 
We are
 
not aware
 
of any accounting
 
loss to
 
be incurred
 
by funding
these commitments;
 
however,
 
we
 
maintain
 
an
 
allowance
 
for
 
off-balance
 
sheet
 
credit
 
risk
 
which
 
is recorded
 
under
 
other
liabilities on the unaudited Consolidated Balance Sheets.
Since commitments associated with letters of
 
credit and commitments to extend
 
credit may expire unused, the
 
amounts
shown
 
do
 
not
 
necessarily
 
reflect
 
actual
 
future
 
cash
 
funding
 
requirements.
 
The
 
following
 
table
 
presents
 
lending
 
related
commitments outstanding as of the dates indicated (in thousands
 
):
September 30, 2023March 31, 2024
December 31, 20222023
Commitments to grant loans and unfunded lines of credit
$
100,66199,224
$
95,46185,117
Standby and commercial letters of credit
6,4903,274
4,3203,987
Total
$
107,151102,498
$
99,78189,104
Commitments to extend credit are agreements to lend funds to a client, as long as there is no violation of any condition
established
 
in
 
the
 
contract,
 
for
 
a
 
specific
 
purpose.
 
Commitments
 
generally
 
have
 
variable
 
interest
 
rates,
 
fixed
 
expiration
dates or
 
other
 
termination
 
clauses
 
and
 
may require
 
payment
 
of
 
a fee.
 
Since many
 
of the
 
commitments
 
are
 
expected to
expire without being
 
fully drawn, the
 
total commitment
 
amounts disclosed
 
above do not
 
necessarily represent
 
future cash
requirements.
Unfunded lines of credit represent unused portions of credit facilities to our current borrowers that represent no change
in credit risk in our portfolio. Lines
 
of credit generally have variable interest
 
rates. The maximum potential amount
 
of future
payments we could
 
be required to
 
make is represented
 
by the contractual
 
amount of the
 
commitment, less
 
the amount of
any advances made.
Letters of credit are
 
conditional commitments issued
 
by us to guarantee
 
the performance of a
 
client to a third
 
party.
 
In
the event of nonperformance by
 
the client in accordance with the
 
terms of the agreement with the
 
third party,
 
we would be
required to fund
 
the commitment.
 
If the commitment
 
is funded, we
 
would be entitled
 
to seek recovery
 
from the client
 
from
the underlying collateral,
 
which can include
 
commercial real estate,
 
physical plant and
 
property, inventory, receivables, cash
or marketable securities.
49
USCB Financial Holdings, Inc.
Q3 2023 Form 10-Q
 
Asset and Liability Management Committee
Members
 
of
 
senior
 
management
 
and
 
our
 
Board
 
make
 
up
 
the
 
asset
 
and
 
liability
 
management
 
committee,
 
or
 
ALCO.
Senior management
 
is responsible
 
for ensuring
 
that Board
 
approved strategies
 
and policies
 
for managing
 
and mitigating
risks are appropriately executed within the designated lines of
 
of authority and responsibility in a timely manner.
43
USCB Financial Holdings, Inc.
Q1 2024 Form 10-Q
ALCO
 
oversees
 
the
 
establishment,
 
approval,
 
implementation,
 
and
 
review
 
of
 
interest
 
rate
 
risk,
 
management,
 
and
mitigation strategies, ALM related policies, ALCO procedures
 
and risk tolerances and appetite.
While some degree of
 
IRR (“Interest Rate Risk
 
Risk”(“IRR”) is inherent to
 
the banking business, we
 
believe our ALCO implemented
sound risk management practices to identify,
 
quantify,
 
monitor, and limit IRR exposures.
When assessing
 
the scope
 
of IRR
 
exposure
 
and
 
impact on
 
the consolidated
 
balance sheet,
 
cash
 
flows and
 
income
statement,
 
management
 
considers
 
both
 
earnings
 
and
 
economic
 
impacts.
 
Asset
 
price
 
variations,
 
deposit
 
volatility
 
and
reduced earnings or outright losses could adversely affect
 
the Company’s liquidity,
 
performance, and capital adequacy.
Income simulations
 
are used
 
to assess
 
the impact
 
of changing
 
rates on
 
earnings under
 
different rates
 
scenarios and
time horizons.
 
These simulations
 
utilize both
 
instantaneous and
 
parallel changes
 
in the
 
level of
 
interest rates,
 
as well
 
as
non-parallel changes such as
 
changing slopes (flat and steepening)
 
and twists of the yield curve.
 
Static simulation models
are based on current exposures and assume a constant balance sheet with no new growth. Dynamic simulation analysis is
also utilized to have a more comprehensive assessment on IRR. This
 
simulation relies on detailed assumptions outlined in
our
 
budget
 
and
 
strategic
 
plan,
 
and
 
in
 
assumptions
 
regarding
 
changes
 
in
 
existing
 
lines
 
of
 
business,
 
new
 
business,
management strategies and client expected behavior.
To
 
have
 
a
 
more
 
complete
 
picture
 
of
 
IRR,
 
the
 
Company
 
also
 
evaluates
 
the
 
economic
 
value
 
of
 
equity
 
(“EVE”).
 
This
assessment
 
allows
 
us
 
to
 
measure
 
the
 
degree
 
to
 
which
 
the
 
economic
 
values
 
will
 
change
 
under
 
different
 
interest
 
rate
scenarios (parallel and non-parallel). The economic value approach focuses on a longer-term time horizon and captures all
future cash flows expected
 
from existing assets and
 
liabilities. The economic value
 
model utilizes a static
 
approach in that
the analysis
 
does not
 
incorporate new
 
business; rather,
 
the analysis
 
shows a
 
snapshot in
 
time of
 
the risk
 
inherent in
 
the
balance sheet.
Market and Interest Rate Risk Management
According to our
 
ALCO model, as of
 
September 30, 2023,of March 31,
 
2024, we had
an asset sensitive
 
sensitive balance sheet both
 
both for year one
and
andyear two
 
modeling, using
 
using the static
 
static modeling. Asset
 
Asset sensitivity
indicates
 
that our
 
our assets generally
 
generally reprice
faster
 
than our
liabilities, which results in a favorable impact to net interest income when market interest rates
 
increase. Liability sensitivity
indicates that our
 
liabilities generally reprice faster
 
than our assets,
 
which results in
 
a favorable impact
 
to net interest
 
income
when market interest rates decrease.
 
Many assumptions are used
 
to calculate the impact of interest
 
rate variations on our
net interest income,
 
such as asset
 
prepayment speeds, non-maturity
 
deposit price sensitivity,
 
pricing correlations, deposit
truncations and decay rates, and key interest rate drivers.
Because of the inherent use
 
of these estimates and
 
assumptions in the model,
 
our actual results may,
 
and most likely
will, differ from static measures results.
 
In addition, static measures like EVE
 
do not include actions that management
 
may
undertake to manage the risks in response to anticipated changes in interest rates or clientcustomer deposit behavior. As part of our
our ALM strategy
and
policy,
management
 
has the
ability
to modify
the
balance sheet
to
either increase
asset
duration
and
decrease liability
 
duration to reduce
 
asset sensitivity,
 
or to decrease
 
asset duration and
 
increase liability duration
 
in order
to increase asset sensitivity.
According to our
 
our model,
as of September
 
30, 2023, March
31, 2024,
our balance
 
sheet
is asset
 
sensitive
for both
year
 
one and two
 
underyear
two
under interest
static rate
 
scenarios (an increase
 
increase or
decrease of
 
400 basis
points).
 
This means than
 
than if
rates increase, the
 
the
NIM will
increase and if rates decrease, the NIM will decrease.
Additionally, utilizing
an EVE approach, we analyze the risk
to capital
from
the
 
effects
of
various
interest
rate
scenarios
 
through
a
long-term
discounted
cash
flow
 
model.
This
measures
the
the difference
between
 
the
economic
value
of
 
our
assets
and
the
 
economic
value
of
 
our
liabilities,
which
is
 
a
proxy
for
our
liquidation value.
 
According to
 
our balance
 
sheet composition,
 
and as
 
expected, our
 
model stipulates
 
that an
 
increase in
interest rates will have a
 
negative impact on the EVE and
 
and lower rates, a positive impact.
 
impact. Results and analysis are presented
quarterly to the ALCO, and strategies are reviewed and refined.
50
USCB Financial Holdings, Inc.
Q3 2023 Form 10-Q
Liquidity
Liquidity is defined
 
as a Company’s
 
capacity to meet
 
its cash and
 
collateral obligations at
 
a reasonable cost.
 
Maintaining
an adequate level of liquidity depends on the Company’s ability to
 
efficiently meet both expected and unexpected cash flow
and collateral needs without adversely affecting
 
either daily operations or the financial condition of the
 
Company.
Liquidity risk
 
is the
 
risk that
 
we will
 
be unable
 
to meet
 
our short-term
 
and long-term
 
obligations as
 
they become
 
due
because of an inability
 
to liquidate assets or
 
obtain relatively adequate funding. The
 
Company’s obligations, and the funding
44
USCB Financial Holdings, Inc.
Q1 2024 Form 10-Q
sources
 
used
 
to
 
meet
 
them,
 
depend
 
significantly
 
on
 
our
 
business
 
mix,
 
balance
 
sheet
 
structure
 
and
 
composition,
 
credit
quality of our assets and the cash flow profiles of our on-
 
and off-balance sheet obligations.
In managing
 
inflows and
 
outflows,
 
management
 
regularly
 
monitors situations
 
that can
 
give rise
 
to increased
 
liquidity
risk. These
 
include funding
 
mismatches, market
 
constraints on
 
the ability
 
to convert
 
assets (particularly
 
investments) into
cash or in accessing sources of funds (i.e., market liquidity),
 
and contingent liquidity events.
Changes in macroeconomic conditions, as well as exposure
 
to credit, market, operational, legal and reputational
 
risks,
such as
 
cybersecurity risk,
 
could have
 
an unexpected
 
impact on
 
the Company’s
 
liquidity risk
 
profile and
 
are factored
 
into
the assessment of liquidity and the ALM framework.
Management has established
 
a comprehensive and
 
holistic management process for
 
identifying, measuring, monitoring
and
 
mitigating
 
liquidity
 
risk.
 
Due
 
to
 
its
 
critical
 
importance
 
to
 
the
 
viability
 
of
 
the
 
Company,
 
liquidity
 
risk
 
management
 
is
integrated into our risk management processes, Contingency
 
Funding Plan and ALM policy.
Critical elements of our liquidity
 
risk management include: effective corporate governance consisting of
 
oversight by the
Board and active
 
involvement of senior
 
management; appropriate strategies, policies,
 
procedures, and limits
 
used to identify
and mitigate liquidity risk; comprehensive liquidity risk measurement and
 
monitoring systems (including assessments of the
current and prospective cash flows or sources and uses of funds) that are commensurate with the complexity and
 
business
activities of
 
the Company;
 
active management
 
of intraday
 
liquidity and
 
collateral; an
 
appropriately diverse
 
mix of
 
existing
and
 
potential
 
future
 
funding
 
sources;
 
adequate
 
levels
 
of
 
highly
 
liquid
 
marketable
 
securities
 
free
 
of
 
legal,
 
regulatory,
 
or
operational
 
impediments,
 
that
 
can
 
be
 
used
 
to
 
meet
 
liquidity
 
needs
 
in
 
stressful
 
situations;
 
comprehensive
 
contingency
funding plans
 
that sufficiently address
 
potential adverse liquidity
 
events and emergency
 
cash flow
 
requirements; and internal
controls
 
and
 
internal
 
audit
 
processes
 
sufficient
 
to
 
determine
 
the
 
adequacy
 
of
 
the
 
institution’s
 
liquidity
 
risk
 
management
process.
We
 
expect
 
funds
 
to
 
be
 
available
 
from
 
several
 
basic
 
banking
 
activity
 
sources,
 
including
 
the
 
core
 
deposit
 
base,
 
the
repayment and maturity of loans and investment security
 
cash flows. Other potential funding sources include
 
federal funds
purchased, brokered certificates of deposit, listing services certificates of deposit, and draws
 
certificates of
deposit, listing
services certificates
of deposit,
from the Bank
Term
Funding Program,
FRB
Atlanta discount
window,
 
and borrowings
 
from the
 
FHLB.
Accordingly,
 
we believe
 
our liquidity
 
resources are
 
are adequate
to fund
fund loans and
meet other cash needs as necessary.
 
51
USCB Financial Holdings, Inc.
Q3 2023 Form 10-Q
Capital Adequacy
As of
 
September 30,March 31, 2024,
 
2023, the Bank
 
Bank was well
 
well capitalized
 
under the
 
FDIC’s
 
prompt corrective
 
action framework.
 
We also
also follow the capital conservation buffer framework, and
as of September 30, 2023,March 31, 2024, we exceeded the capital conversation buffer
 
capital conversationin
buffer inall capital
 
all capital ratios,
 
according
to
 
our actual
ratios.
 
The
following
table
 
presents
the
capital
 
ratios
for
 
the Bank at
 
Bank
at the
dates
dates indicated (in thousands,
except ratios).
Actual
Minimum Capital
Requirements
To be Well Capitalized
Under Prompt Corrective
Action Provisions
Amount
Ratio
Amount
Ratio
Amount
Ratio
September 30, 2023March 31, 2024
Total
 
risk-based capital
$
230,801240,055
13.0612.89
%
$
141,327148,997
8.00
%
$
176,659186,247
10.00
%
Tier 1 risk-based capital
$
210,815218,174
11.9311.71
%
$
105,995111,748
6.00
%
$
141,327148,997
8.00
%
Common equity tier 1 capital
$
210,815218,174
11.9311.71
%
$
79,49683,811
4.50
%
$
114,828121,060
6.50
%
Leverage ratio
$
210,815218,174
9.248.84
%
$
91,31098,695
4.00
%
$
114,138123,368
5.00
%
December 31, 2022:2023:
Total
 
risk-based capital
$
216,693233,109
13.5812.65
%
$
127,616147,432
8.00
%
$
159,520184,290
10.00
%
Tier 1 risk-based capital
$
198,909211,645
12.4711.48
%
$
95,712110,574
6.00
%
$
127,616147,432
8.00
%
Common equity tier 1 capital
$
198,909211,645
12.4711.48
%
$
71,78482,931
4.50
%
$
103,688119,789
6.50
%
Leverage ratio
$
198,909211,645
9.569.17
%
$
83,21092,328
4.00
%
$
104,012115,410
5.00
%
The Company is
 
not subject to
 
regulatory capital ratios
 
imposed by Basel
 
III on bank
 
holding companies because
 
the
Company is deemed to be a small bank holding company.
 
45
USCB Financial Holdings, Inc.
Q1 2024 Form 10-Q
Impact of Inflation
Our
 
Consolidated
 
Financial
 
Statements
 
and
 
related
 
notes
 
have
 
been
 
prepared
 
in
 
accordance
 
with
 
U.S.
 
GAAP,
which require the measurement of financial
 
position and operating results in terms
 
of historical dollars, without considering
the changes in the
 
relative purchasing power
 
of money over time
 
due to inflation. The
 
impact of inflation is
 
reflected in the
increased cost of operations.
 
Unlike most industrial companies,
 
nearly all our assets and
 
liabilities are monetary in
 
nature.
As a result,
 
interest rates have a
 
greater impact on our
 
performance than do the
 
effects of general levels
 
of inflation. Periods
of high inflation
 
are often accompanied
 
by relatively higher
 
interest rates, and
 
periods of low
 
inflation are accompanied
 
by
relatively lower interest rates.
 
As market interest rates
 
rise or fall in relation
 
to the rates earned
 
on loans and investments,
the
 
value
 
of
 
these
 
assets
 
decreases
 
or
 
increases
 
respectively.
 
Inflation
 
can
 
also
 
impact
 
core
 
non-interest
 
expenses
associated with delivering the Company’s servi
ces.services.
Recently Issued Accounting Pronouncements
 
Recently issued accounting
 
pronouncements are discussed
 
in Note 1 “Summary
 
of Significant Accounting Policies”
 
to
the unaudited Consolidated Financial Statements in thisPart
 
1 of this Form 10-Q.
 
 
5246
 
USCB Financial Holdings, Inc.
 
Q3 2023Q1 2024 Form 10-Q
Reconciliation and Management Explanation of Non
 
-GAAP Financial Measures
Management
 
has
 
included
 
these
 
non-GAAP
 
measures
 
because
 
it
 
believes
 
these
 
measures
 
may
 
provide
 
useful
supplemental information
 
for evaluating
 
the Company’s
 
underlying performance
 
trends. Further,
 
management uses
 
these
measures
 
in
 
managing
 
and
 
evaluating
 
the
 
Company’s
 
business
 
and
 
intends
 
to
 
refer
 
to
 
them
 
in
 
discussions
 
about
 
our
operations and performance.
 
Operating performance
 
measures should be
 
viewed in addition
 
to, and not
 
as an alternative
to or
 
substitute
 
for,
 
measures
 
determined
 
in
 
accordance
 
with
 
GAAP,
 
and
 
are
 
not
 
necessarily
 
comparable
 
to non-GAAP
measures that may be presented by other
 
companies. The following table reconciles the non-GAAP financial measurement
of operating net income available to common stockholders for the periods presented (in thousands,
 
except per share data):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5347
 
USCB Financial Holdings, Inc.
 
Q3 2023Q1 2024 Form 10-Q
USCB FINANCIAL HOLDINGS, INC.
NON-GAAP FINANCIAL MEASURES (UNAUDITED)
(Dollars in thousands)
As of or For the Three Months Ended
3/31/2024
12/31/2023
9/30/2023
6/30/2023
3/31/2023
12/31/2022
9/30/2022
Pre-tax pre-provision ("PTPP") income:
(1)
Net income
$
4,612
$
2,721
$
3,819
$
4,196
$
5,809
$
4,434
$
5,558
Plus: Provision for income taxes
1,426
787
1,250
1,333
1,881
1,415
1,963
Plus: Provision for credit losses
410
1,475
653
38
201
880
910
PTPP income
$
6,448
$
4,983
$
5,722
$
5,567
$
7,891
$
6,729
$
8,431
PTPP return on average assets:
(1)
 
 
PTPP income
$
6,448
$
4,983
$
5,722
$
5,567
$
7,891
$
6,729Average assets
$
8,4312,436,103
Average assets$
2,268,811
$
2,250,258
$
2,183,542
$
2,120,218
$
2,051,867
$
2,026,791
PTPP return on average assets
(2)
1.06%
0.87%
1.01%
1.02%
1.51%
1.30%
1.65%
 
 
Operating net income:
(1)
Net income
$
4,612
$
2,721
$
3,819
$
4,196
$
5,809
$
4,434
$
5,558
Less: Net gains (losses) on sale of securities
-
(883)
(955)
-
(21)
(1,989)
(558)
Less: Tax effect on sale of securities
-
224
242
-
5
504
141
Operating net income
$
4,612
$
3,380
$
4,532
$
4,196
$
5,825
$
5,919
$
5,975
 
 
Operating PTPP income:
(1)
PTPP income
$
6,448
$
4,983
$
5,722
$
5,567
$
7,891
$
6,729
$
8,431
Less: Net gains (losses) on sale of securities
-
(883)
(955)
-
(21)
(1,989)
(558)
Operating PTPP income
$
6,448
$
5,866
$
6,677
$
5,567
$
7,912
$
8,718
$
8,989
Operating PTPP return on average assets:
(1)
 
 
Operating PTPP income
$
6,448
$
5,866
$
6,677
$
5,567
$
7,912
$
8,718Average assets
$
8,9892,436,103
Average assets$
2,268,811
$
2,250,258
$
2,183,542
$
2,120,218
$
2,051,867
$
2,026,791
Operating PTPP return on average assets
(2)
1.06%
1.03%
1.18%
1.02%
1.51%
1.69%
1.76%
 
 
Operating return on average assets:
(1)
Operating net income
$
4,612
$
3,380
$
4,532
$
4,196
$
5,825
$
5,919Average assets
$
5,9752,436,103
Average assets$
2,268,811
$
2,250,258
$
2,183,542
$
2,120,218
$
2,051,867
$
2,026,791
Operating return on average assets
(2)
0.76%
0.59%
0.80%
0.77%
1.11%
1.14%
1.17%
Operating return on average equity:
(1)
Operating net income
$
4,612
$
3,380
$
4,532
$
4,196
$
5,825
$
5,919Average equity
$
5,975193,092
Average equity$
183,629
$
184,901
$
184,238
$
183,371
$
177,556
$
185,288
Operating return on average equity
(2)
9.61%
7.30%
9.72%
9.13%
12.88%
13.23%
12.79%
Operating Revenue:
(1)
 
Net interest income
$
15,158
$
14,376
$
14,022
$
14,173
$
15,997
$
16,866
$
16,774
 
Plus: Non-interest income
2,464
1,326
2,161
1,846
2,070
(123)
1,789
 
Less: Net gains (losses) on sale of
 
securities
-
(883)
(955)
-
(21)
(1,989)
(558)
 
Operating revenue
$
17,622
$
16,585
$
17,138
$
16,019
$
18,088
$
18,732
$
19,121
 
Operating Efficiency Ratio:
(1)
 
Total non-interest expense
$
11,174
$
10,719
$
10,461
$
10,452
$
10,176
$
10,014
$
10,132
 
Operating revenue
$
17,622
$
16,585
$
17,138
$
16,019
$
18,088
$
18,732
$
19,121
 
Operating efficiency ratio
63.41%
64.63%
61.04%
65.25%
56.26%
53.46%
52.99%
(1)
 
The Company believes these non-GAAP measurements
 
are key indicators of the ongoing earnings
 
power of the Company.
(2)
 
Annualized.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5448
 
USCB Financial Holdings, Inc.
 
Q3 2023Q1 2024 Form 10-Q
USCB FINANCIAL HOLDINGS, INC.
NON-GAAP FINANCIAL MEASURES (UNAUDITED)
(Dollars in thousands, except per share data)
As of or For the Three Months Ended
3/31/2024
12/31/2023
9/30/2023
6/30/2023
3/31/2023
12/31/2022
9/30/2022
Tangible book value per common share (at period-end):
(1)
Total stockholders' equity
$
195,011
$
191,968
$
182,884
$
183,685
$
183,858
$
182,428
$
177,417
Less: Intangible assets
-
-
-
-
-
Tangible stockholders' equity
$
195,011
$
191,968
$
182,884
$
183,685
$
183,858
$
182,428
$
177,417
Total shares issued and outstanding (at period-end):
Total common shares issued and outstanding
19,650,463
19,575,435
19,542,290
19,544,777
19,622,380
19,622,380
20,000,753
20,000,753
Tangible book value per common share
(2)
$
9.92
$
9.81
$
9.36
$
9.40
$
9.37
$
9.12
$
8.87
Operating diluted net income per common share:
(1)
Operating net income
$
4,612
$
3,380
$
4,532
$
4,196
$
5,825
$
5,919
$
5,975
Total weighted average diluted shares of common stock
19,698,258
19,573,350
19,611,897
19,639,682
19,940,606
20,172,438
20,148,208
Operating diluted net income per common share:
$
0.23
$
0.17
$
0.23
$
0.21
$
0.29
$
0.29
$
0.30
Tangible Common Equity/Tangible Assets
(1)
 
Tangible stockholders' equity
$
195,011
$
191,968
$
182,884
$
183,685
$
183,858
$
182,428
$
177,417
 
Tangible assets
$
2,489,142
$
2,339,093
$
2,244,602
$
2,225,914
$
2,163,821
$
2,085,834
$
2,037,453
Tangible Common Equity/Tangible
 
Assets
7.83%
8.21%
8.15%
8.25%
8.50%
8.75%
8.71%
(1)
 
The Company believes these non-GAAP measurements
 
are key indicators of the ongoing earnings
 
power of the Company.
(2)
 
Excludes the dilutive effect, if any, of shares of common stock issuable upon exercise
 
of outstanding stock options.
 
 
5549
 
USCB Financial Holdings, Inc.
 
Q3 2023Q1 2024 Form 10-Q
Item 3.
 
Quantitative and Qualitative Disclosures About Market Risk
As a smaller reporting company,
 
we are not required to provide the information required
 
by this item.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Under the
 
supervision and with
 
the participation of
 
our management, including
 
our President and
 
Chief Executive Officer
and our
 
Chief Financial
 
Officer,
 
we evaluated
 
the effectiveness
 
of the
 
design and
 
operation of
 
the Company’s
 
disclosure
controls
and
procedures (as
(as
defined
in
Rules
13a-15(e)
and
15d-15(e)
under
 
the
Exchange
Act)
as
of September 30, 2023.
March 31,
2024.
Based on that evaluation,
 
evaluation, management believes that, as of
 
that the Company’send of
 
the period covered by
this Form 10-Q, the
Company's
disclosure controls and
procedures were effective
to
collect, process, and disclose the information required to be disclosed
disclosed in the reports filed or submitted under the Exchange Act
Act within the required time periods as of the end of the
period covered by this Form 10-Q.periods.
Changes in Internal Control Over Financial Reporting
There has been
 
no change in
 
our internal control
 
over financial reporting
 
(as defined in
 
Rules 13a-15(f) and
 
15d-15(f)
under the Exchange Act) during the period covered by this Form 10-Q that has
 
materially affected, or is reasonably likely to
materially affect, our internal control over financial
 
reporting.
 
Limitations on Effectiveness of Controls and Procedures
In
 
designing
 
and
 
evaluating
 
the
 
disclosure
 
controls
 
and
 
procedures,
 
management
 
recognizes
 
that
 
any
 
controls
 
and
procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving
the desired control objectives.
 
In addition, the design
 
of disclosure controls and
 
procedures must reflect the
 
fact that there
are resource constraints and that management is required to apply
 
judgment in evaluating the benefits of possible controls
and procedures relative to their costs.
 
 
5650
 
USCB Financial Holdings, Inc.
 
Q3 2023Q1 2024 Form 10-Q
PART II
Item 1.
 
Legal Proceedings
As We are not currently subject to any material legal proceedings. We are from time to time subject to claims and litigation
arising
in
the
ordinary
course
of
business.
These
claims
and
litigation
may
include,
among
other
things,
allegations
of
violation of banking and other applicable regulations, competition
law, labor laws and consumer
protection laws, as well as
claims or
litigation
relating
to intellectual
property,
securities, breach
of contract
and tort.
We
intend to
defend ourselves
vigorously against any pending or future claims and litigation.
The
Company
previously
 
disclosed
that
litigation
(the
“Litigation”)
had
been
commenced
on
July
 
13,
2023
 
by
three
individuals
who
 
were
shareholders
of
the
Bank
prior
to
the
Bank’s
reorganization
into
the
holding
company
form
of
organization in 2021
(the “Plaintiffs”)
against six
persons, all
of whom were
directors of
 
the Bank
prior to
its reorganization
into the holding company form
of organization (the “Plaintiffs”) filed a lawsuit
against six persons, all of
whom were directors
of the
Bank at
 
the relevant
 
time (the
“Defendants”),
in the
Circuit Court,
Eleventh Judicial
Circuit for
Miami-Dade County, Florida (the “Court”) (Benes et al. v. de
(the
“Court”)
(Benes
et
al.
v.
de
la
 
Aguilera
 
et
 
al.)
 
alleging
 
the
 
Defendants
 
(i)
caused
 
the
 
Bank,
 
as
 
directors
 
thereof,
 
to
engage
engage
in ultra vires conduct
 
vires
conduct by
devising
and
approving
 
the
exchange
transaction
 
effected
in
July
2021
 
pursuant
to
which
the
 
Bank’s
 
then
 
outstanding
shares of Class C and Class D preferred stock was exchanged for shares of Class A voting common stock in the
 
ClassBank (the
“Exchange Transaction”),
 
Cwhich action
the Plaintiffs
allege was
not permitted
by the
Bank’s Articles
of Incorporation,
and
(ii) breached
their
fiduciary
duty as
directors
of the
Bank
by approving
 
and
 
Class
D
preferred
stock
was
exchanged
(the
“Exchange
Transaction”),
which
action the Plaintiffs allege was not permitted by the Bank’s Articles of Incorporation, and (ii) breached their
fiduciary duty as
directors of the Bank
by approving and engaging
 
in
the
Exchange
Transaction.
 
The
Plaintiffs seeksought the
 
the Court to certify the
 
the
action
as
a class
 
action
and
to
award
 
damages
in
an
 
amount
to
be
 
proven at trial.
The Plaintiffs sought damages exceeding $750,000
 
atplus attorney’s fees and costs as
 
trial.well as such other relief as the Court
determined to award.
 
Plaintiffs
The Defendants filed a motion to dismiss the Litigation with
 
seekprejudice (the “Motion”). On December 27, 2023, the Court,
after reviewing
 
damagesthe Motion,
 
exceeding
$750,000 plusthe Plaintiff’s response
 
attorney’s feesthereto and
 
and coststhe Defendant’s reply
 
as well
 
as such
other relief
as the
 
Court mayoral arguments presented
by
 
determine. Thethe
 
Company believesparties
on
December
14,
2023,
granted
the
Motion,
dismissing
the
Litigation
with
prejudice
and
rendering
final
judgment in favor
of the Defendants
(the “Order”). The Court
reserved jurisdiction to award
costs or grant
any post-judgment
relief.
On May 1, 2024, the
Plaintiffs filed in the
Thirds District Court of
Appeal for the State of
Florida (the “Appellate Court”)
an appeal, appealing the issuance of the Order and seeking a reversal of the Order.
The Plaintiffs claim the Court erred by
concluding
(i)
the
Exchange
Transaction
was
not
ultra
vires,
and
(ii)
that
 
the
 
allegationsLegacy
Shareholders
(which
includes
the
Plaintiffs) lacked direct standing.
The Company believes
that the positions
 
in
the
lawsuit Appeal
 
are
legally
 
and
factually
without
 
merit,
and
it
 
intends to vigorously
to
vigorously
defend
 
against
 
the
allegations
 
in
the
lawsuit,Appeal,
 
pursue
 
any
 
potential
 
counterclaims
 
against
 
the
 
plaintiffsPlaintiffs
 
as
 
it
 
deems
 
appropriate,
 
and
 
seek
coverage
 
from
 
its
 
insurance
 
carriers.
 
However,
 
there
 
can
 
be
 
no
 
assurance
 
that
 
thisthe
 
litigationAppeal
 
will
 
be
 
resolved
 
favorably.
Furthermore, there
 
is also
 
no assurance
 
that we
 
will be
 
able to
 
secure coverage
 
from our
 
insurance carriers
 
for any
 
expenses
incurred by
us in
 
connection with this litigation. If
defending against
 
the plaintiff shareholders are successful, theAppeal.
The Appellate
 
Court could award substantial
grant the
Plaintiff’s motion
to
compensatory damages.reverse the Order and remand the case to the Court.
At
this
time,
in
the
opinion
of
management,
the
likelihood
is
remote
that
the
impact
of
such
proceedings,
either
individually or
in the
aggregate, would
have a
material adverse
effect
on our
consolidated results
of operations,
financial
condition
or cash
flows. However,
one
or more
unfavorable
outcomes
in any
claim or
litigation
against
us, including
the
aforementioned Appeal
regarding the
Exchange Transaction,
could have
a material
adverse effect
on the period
in which
such claims
or litigation
are resolved.
In addition,
regardless of
their merits
or their
ultimate outcomes,
such matters
are
costly, divert management’s
attention and may materially adversely affect our
reputation, even if resolved in our favor.
In addition
 
to the
 
foregoing, we
 
are from
 
time to
 
time subject
 
to claims
 
and litigation
 
arising in
 
the ordinary
 
course of
business.
 
These
 
claims
 
and
 
litigation
 
may
 
include,
 
among
 
other
 
things,
 
allegations
 
of
 
violation
 
of
 
banking
 
and
 
other
applicable regulations, competition
 
law, labor
 
laws and consumer
 
protection laws, as
 
well as claims or
 
litigation relating to
intellectual property,
 
securities, breach of contract
 
and tort. We intend
 
to defend ourselves vigorously
 
against any pending
or future claims and litigation.
AtThere can be no
 
thisassurance that any
 
time,
in
the
opinion
of
management,
the
likelihood
is
remote
that
the
impact
of
such
future legal proceedings
 
either
individually orto which we are
 
in thea party will not
 
aggregate, wouldbe decided adversely
 
to
our interests and have a
material adverse
effect
 
on our
consolidated results
of operations,
financial
condition
or cash
flows. However,
one
or more
unfavorable
outcomes
in any
claim or
litigation
against
us, including
the
aforementioned litigation regarding the Exchange
Transaction, could have
a material adverse effect on
the period in which
such claims
or litigation
are resolved.
In addition,
regardless of
their merits
or their
ultimate outcomes,
such matters
are
costly, divert management’s
attention and may materially adversely affect our
reputation, even if resolved in our favor.
Item 1A. Risk Factors
For detailed information about certain risk factors that could materially affect our business, financial
condition, or future
results, see “Part I, Item 1A – Risk Factors” of the 2022 Form 10-K/A and see “Part II, Item 1A – Risk Factors” of the March
31, 2023 Form 10-Q.
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
(a) None.
(b) Not applicable.
(c) The Company’s repurchases of equity securities
for the quarter ended September 30, 2023 were as follows:operations.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5751
 
USCB Financial Holdings, Inc.
 
Q3 Q1 2024 Form 10-Q
Item 1A. Risk Factors
For detailed information about certain risk factors that could materially affect our business, financial
condition, or future
results, see “Part I, Item 1A – Risk Factors” of the
2023 Form 10-Q10-K.
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
(a) None.
(b) Not applicable.
(c) The Company’s repurchases of equity securities
for the quarter ended March 31,
2024 were as follows:
Total
Number of
Shares
Purchased
Average
Price Paid
Per Share
Total Number of Shares Purchased
as Part of Publicly Announced Plans
or Programs (1)
Maximum Number
of Shares that May
Yet Be Purchased
Under Plans or
Programs (1)
Period
80,080
July 1-31, 2023January 1 - 31, 2024
-
$
-
-
80,080
February 1 - 29, 2024
 
-
$
-
-
172,397
August 1-30, 2023
-80,080
March 1 - 31, 2024
-
172,397
September 1-30, 2023
-
-
-
172,397
-7,100
$
-11.15
-7,100
72,980
7,100
$
11.15
7,100
(1) On January 24, 2022 the Company announced
 
its initial stock repurchase program to repurchase
 
up to 750,000 shares of Class A common
 
stock,
approximately 3.75% of the Company’s then outstanding
 
shares of common stock.
 
Item 3.
 
Defaults Upon Senior Securities
(a)
 
Not applicable
(b)
 
Not applicable
Item 4.
 
Mine Safety Disclosures
Not applicable.
Item 5. Other Information
(a)
 
Not applicable
(b)
 
Not applicable
(c)
 
Not applicableDuring the
three months
ended March
31, 2024,
none of
the Company’s
directors or Section
16 reporting
officers
adopted
or
terminated
any Rule 10b5-1
trading arrangement or
non-Rule
10b5-1
trading arrangement (as
such terms are
defined in Item
408 of the SEC’s Regulation S-K).
 
 
 
 
5852
 
USCB Financial Holdings, Inc.
 
Q3 2023Q1 2024 Form 10-Q
Item 6. Exhibits
Exhibit No.
Description of Exhibit
*
*
**
**
101
The following financial
 
financial statements from
 
from the
Company’s Quarterly
 
Report on
 
Form 10-Q for
 
for the
quarter ended
 
September 30,March 31,
20232024 formatted
 
in Inline
 
XBRL: (i)
 
Consolidated Balance
 
Sheets (unaudited),
 
(ii) Consolidated
 
Statements of
 
Operations
(unaudited), (iii) Consolidated
 
Statements
 
of Comprehensive
 
Income (unaudited), (iv)
 
Consolidated Statements
 
of Changes
in Stockholders’
 
Equity (unaudited),
 
(v) Consolidated
 
Statements of
 
Cash Flows
 
(unaudited), (vi)
 
Notes to
 
Consolidated
Financial Statements (unaudited).
104
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
*
Filed herewith.
**
Furnished herby.
 
 
 
 
 
 
 
5953
 
USCB Financial Holdings, Inc.
 
Q3 2023Q1 2024 Form 10-Q
SIGNATURES
Pursuant to the
 
requirements of
 
the Securities Exchange
 
Act of 1934,
 
the registrant has
 
duly caused this
 
report to be
signed on its behalf by the undersigned thereunto duly authorized.
USCB FINANCIAL HOLDINGS, INC.
(Registrant)
Signature
Title
Date
/s/ Luis de la Aguilera
Chairman, President and Chief Executive
Officer
 
November 9, 2023May 10, 2024
Luis de la Aguilera
(Principal Executive Officer)
/s/ Robert Anderson
Executive Vice President and Chief Financial
Officer
 
November 9, 2023May 10, 2024
Robert Anderson
(Principal Financial Officer and Principal
Accounting Officer)