株探米国株
英語
エドガーで原本を確認する
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SECURITIES AND EXCHANGE COMMISSION
 
 
 
 
 
 
 
 
uscb-20240331p1i0
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
March 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 April 30, 2024 the registrant had
19,655,632
 
of Class A common stock outstanding.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3
 
USCB Financial Holdings, Inc.
 
Q1 2024 Form 10-Q
PART
 
I
Item 1.
 
Financial Statements
USCB FINANCIAL HOLDINGS, INC
Consolidated Balance Sheets – Unaudited
(Dollars in thousands, except share data)
March 31, 2024
December 31, 2023
ASSETS:
Cash and due from banks
$
9,601
$
8,019
Interest-bearing deposits in banks
116,945
33,043
Total cash and cash equivalents
126,546
41,062
Investment securities held to maturity, net of allowance of $
12
 
and $
8
, respectively (fair value $
152,156
and $
155,510
, respectively)
173,038
174,974
Investment securities available for sale, at fair value
259,992
229,329
Federal Home Loan Bank stock, at cost
5,532
10,153
Loans held for investment, net of allowance of $
21,454
 
and $
21,084
, respectively
1,799,742
1,759,743
Accrued interest receivable
11,579
10,688
Premises and equipment, net
4,787
4,836
Bank owned life insurance
52,192
51,781
Deferred tax assets, net
36,249
37,282
Lease right-of-use asset
10,680
11,423
Other assets
8,805
7,822
Total assets
$
2,489,142
$
2,339,093
LIABILITIES:
 
Deposits:
Demand deposits
$
576,626
$
552,762
Money market and savings accounts
1,141,422
1,048,272
Interest-bearing checking
57,839
47,702
Time deposits
326,907
288,403
Total deposits
2,102,794
1,937,139
Federal Home Loan Bank advances and other
 
borrowings
162,000
183,000
Lease liability
10,680
11,423
Accrued interest and other liabilities
18,657
15,563
Total liabilities
2,294,131
2,147,125
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 March 31, 2024
 
and December 31, 2023
-
-
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 March 31, 2024
 
and December 31, 2023
-
-
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 March 31, 2024
 
and December 31, 2023
-
-
Common stock - Class A Voting; $
1.00
 
par value;
45,000,000
 
shares authorized;
19,650,463
 
issued and
outstanding
 
as of March 31, 2024,
19,575,435
 
issued and outstanding as of December 31,
 
2023
19,650
19,575
Common stock - Class B Non-voting; $
1.00
 
par value;
8,000,000
 
shares authorized;
0
 
and
0
 
issued and
outstanding as of March 31, 2024 and December
 
31, 2023
-
-
Additional paid-in capital on common stock
305,740
305,212
Accumulated deficit
(84,952)
(88,548)
Accumulated other comprehensive loss
(45,427)
(44,271)
Total stockholders' equity
195,011
191,968
Total liabilities and stockholders' equity
$
2,489,142
$
2,339,093
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, 10 USCB Financial Holdings, Inc. Q1 2024 Form 10-Q
2023 was not required.
 
 
 
 
 
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements - Unaudited
 
 
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 $ 11 USCB Financial Holdings, Inc. Q1 2024 Form 10-Q
9.5
 
million.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements - Unaudited
 
 
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 $ 13 USCB Financial Holdings, Inc. Q1 2024 Form 10-Q
86.9
 
million.
 
 
 
 
 
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements - Unaudited
 
 
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 14 USCB Financial Holdings, Inc. Q1 2024 Form 10-Q
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements - Unaudited
 
 
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 $ 15 USCB Financial Holdings, Inc. Q1 2024 Form 10-Q
6.1
 
million or
36.9
%
 
 
 
 
 
 
 
 
 
 
 
 
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements - Unaudited
 
 
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 16 USCB Financial Holdings, Inc. Q1 2024 Form 10-Q
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
 
 
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
 
 
17
 
USCB Financial Holdings, Inc.
 
Q1 2024 Form 10-Q
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
As of December 31, 2023
Term Loans by Origination Year
Revolving
Loans
Total
2023
2022
2021
2020
2019
Prior
Residential real estate
Pass
$
44,365
$
36,325
$
26,180
$
6,080
$
9,325
$
75,654
$
6,198
$
204,127
Substandard
-
-
-
-
292
-
-
292
Total
44,365
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
-
-
-
7,561
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
-
-
330
-
1,298
-
-
1,628
Total
97,753
37,414
34,420
6,499
15,004
3,113
25,554
219,757
Foreign banks
Pass
114,945
-
-
-
-
-
-
114,945
Total
114,945
-
-
-
-
-
-
114,945
Consumer and other
loans
Pass
71,593
74,387
41,966
615
560
1,337
1,472
191,930
Total
71,593
74,387
41,966
615
560
1,337
1,472
191,930
Total
 
Loans
Pass
476,967
486,064
286,260
117,376
101,744
262,818
37,934
1,769,163
Special Mention
-
-
-
-
-
-
-
-
Substandard
-
-
7,197
694
1,590
-
-
9,481
Doubtful
-
-
-
-
-
-
-
-
Total
$
476,967
$
486,064
$
293,457
$
118,070
$
103,334
$
262,818
$
37,934
$
1,778,644
 
 
 
 
 
 
 
 
 
 
 
 
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements - Unaudited
 
 
18
 
USCB Financial Holdings, Inc.
 
Q1 2024 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 March 31,
 
2024 and
December 31, 2023 (in thousands):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Accruing
As of March 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
$
548
$
-
$
-
$
548
$
-
$
548
1-4 family residential
183,825
6,022
-
189,847
-
189,847
Condo residential
43,452
4,059
-
47,511
-
47,511
227,825
10,081
-
237,906
-
237,906
Commercial real estate:
Land and construction
21,100
-
-
21,100
-
21,100
Multi-family residential
211,813
-
-
211,813
-
211,813
Condo commercial
56,072
1,918
-
57,990
-
57,990
Commercial property
766,003
873
-
766,876
-
766,876
Leasehold improvements
21
-
-
21
-
21
1,055,009
2,791
-
1,057,800
-
1,057,800
Commercial and industrial:
Secured
208,590
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
-
-
100,182
-
100,182
Consumer and other
194,325
-
-
194,325
-
194,325
Total
$
1,804,426
$
13,376
$
-
$
1,817,802
$
456
$
1,818,258
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements - Unaudited
 
 
19
 
USCB Financial Holdings, Inc.
 
Q1 2024 Form 10-Q
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Accruing
As of December 31, 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
$
559
$
-
$
-
$
559
$
-
$
559
1-4 family residential
155,842
711
-
156,553
-
156,553
Condo residential
43,572
3,735
-
47,307
-
47,307
199,973
4,446
-
204,419
-
204,419
Commercial real estate:
Land and construction
33,710
-
-
33,710
-
33,710
Multi-family residential
181,287
-
-
181,287
-
181,287
Condo commercial
58,106
-
-
58,106
-
58,106
Commercial property
772,569
1,890
-
774,459
-
774,459
Leasehold improvements
31
-
-
31
-
31
1,045,703
1,890
-
1,047,593
-
1,047,593
Commercial and industrial:
 
 
 
 
Secured
200,235
29
-
200,264
468
200,732
Unsecured
19,025
-
-
19,025
-
19,025
219,260
29
-
219,289
468
219,757
 
 
 
 
Foreign banks
114,945
-
-
114,945
-
114,945
Consumer and other
191,930
-
-
191,930
-
191,930
Total
$
1,771,811
$
6,365
$
-
$
1,778,176
$
468
$
1,778,644
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 March 31, 2024 (in thousands):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
March 31, 2024
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
-
456
456
-
Consumer and other
-
-
-
-
$
-
$
456
$
456
$
-
December 31, 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
-
468
468
-
Consumer and other
-
-
-
-
$
-
$
468
$
468
$
-
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements - Unaudited
 
 
20
 
USCB Financial Holdings, Inc.
 
Q1 2024 Form 10-Q
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 March 31, 2024 and 2023. Interest income on
these loans
 
for the
 
three months
 
ended March 31,
 
2024 and
 
2023, would
 
have been
 
approximately
 
$
9
 
thousand and
 
$
2
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
 
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,
 
by type of modification, which occurred during the three
 
months
ended March 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
468
468
1
468
468
Consumer and other
-
-
-
-
-
-
1
$
468
$
468
1
$
468
$
468
The Company
 
had no
 
new modifications
 
and one
 
new modification
 
to borrowers
 
experiencing financial
 
difficulties for
the three months ended March 31, 2024. There were
no
 
existing loan modifications that subsequently defaulted
 
during the
three months
 
ended March
 
31, 2024.
 
The Company
 
did not
 
have new
 
modifications
 
to borrowers
 
experiencing
 
financial
difficulties and no loan modifications that subsequently
 
defaulted during for the three months ended March 31,
 
2023.
4.
 
INCOME TAXES
 
The Company’s provision for income taxes is presented
 
in the following table for the periods indicated (in thousands):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended March 31,
2024
2023
Current:
Federal
$
-
$
-
State
-
-
Total
 
current
-
-
Deferred:
Federal
1,114
1,472
State
312
409
Total
 
deferred
1,426
1,881
Total
 
tax expense
$
1,426
$
1,881
 
 
 
 
 
 
 
 
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
 
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
 
and 2023 to income
before provision for income taxes) as follows (in thousands):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended March 31,
2024
2023
Federal taxes at statutory rate
$
1,268
$
1,615
State income taxes, net of federal tax benefit
262
334
Bank owned life insurance
(104)
(68)
Other, net
-
-
Total
 
tax expense
$
1,426
$
1,881
The Company’s deferred tax assets and deferred
 
tax liabilities as of the dates indicated were (in thousands):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
March 31, 2024
December 31, 2023
Deferred tax assets:
Net operating loss
$
15,369
$
16,430
Allowance for credit losses
5,503
5,410
Lease liability
2,707
2,895
Unrealized losses on available for sale securities
15,638
15,114
Depreciable property
130
203
Equity compensation
716
630
Accruals
52
382
Other, net
11
10
Deferred tax assets:
40,126
41,074
Deferred tax liabilities:
Deferred loan cost
(745)
(553)
Lease right of use asset
(2,707)
(2,895)
Deferred expenses
(140)
(180)
Cash flow hedge
(216)
(85)
Other, net
(69)
(79)
Deferred tax liabilities
(3,877)
(3,792)
Net deferred tax assets
$
36,249
$
37,282
The Company
 
has approximately
 
$
56.8
 
million of
 
federal
 
and $
79.5
 
million 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 2020.
For the three months ended
 
March 31, 2024 and 2023,
 
the Company did
no
t have any unrecognized tax
 
benefits as a
result of
 
tax positions
 
taken during
 
a prior
 
period or
 
during the
 
current period.
 
Additionally,
no
 
interest or
 
penalties
 
were
recorded as a result of tax uncertainties.
 
 
 
 
 
 
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
March 31, 2024 and December 31, 2023 (in thousands):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
March 31, 2024
December 31, 2023
Commitments to grant loans and unfunded lines of credit
$
99,224
$
85,117
Standby and commercial letters of credit
3,274
3,987
Total
$
102,498
$
89,104
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
As of March 31,
 
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
2.38
 
years,
 
the
 
weighted
 
average
 
fixed-rate
 
paid
 
of
3.59
%,
 
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 other comprehensive
 
income (loss)
 
and subsequently reclassified
 
to earnings when
 
gains or
losses are realized.
Interest Rate Swaps Designated as Fair Value Hedge 23 USCB Financial Holdings, Inc. Q1 2024 Form 10-Q
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements - Unaudited
 
 
As of 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
2.23
 
years, the weighted average fixed-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
25
 
and
20
 
interest rate swaps
with
 
loan
 
customers
 
with
 
an
 
aggregate
 
notional
 
amount
 
of
 
$
65.8
 
million
 
and
 
$
46.5
 
million
 
at
 
March 31,
 
2024
 
and
December 31, 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
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
$
200,000
$
-
Other liabilities
$
-
$
1,005
Derivatives not designated as hedging instruments:
Interest rate swaps related to customer loans
$
65,768
$
1,344
Other assets/Other liabilities
$
4,941
$
4,941
December 31, 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
$
46,463
$
1,326
Other assets/Other liabilities
$
4,558
$
4,558
 
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
market conditions. If there has been a significant decrease in the volume and level of activity for the asset or liability, a 24 USCB Financial Holdings, Inc. Q1 2024 Form 10-Q
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements - Unaudited
 
 
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
 
often involve using
 
quoted market
 
prices for similar
securities, pricing models or discounted cash flow analyses
 
utilizing inputs observable in the market where available.
Derivatives:
 
The
 
fair
 
value
 
of
 
derivatives
 
are
 
measured
 
with
 
pricing
 
provided
 
by
 
third-party
 
participants
 
and
 
are
classified within Level 2 of the hierarchy.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements - Unaudited
 
 
25
 
USCB Financial Holdings, Inc.
 
Q1 2024 Form 10-Q
The
 
following
 
table
 
represents
 
the
 
Company's
 
assets
 
and
 
liabilities
 
measured
 
at
 
fair
 
value
 
on
 
a
 
recurring
 
basis
 
at
March 31, 2024 and December 31, 2023 for each of the
 
fair value hierarchy levels (in thousands):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
March 31, 2024
December 31, 2023
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
Investment securities available for sale:
U.S. Government Agency
$
-
$
15,549
$
-
$
15,549
$
-
$
8,173
$
-
$
8,173
Collateralized mortgage obligations
-
106,369
-
106,369
-
80,606
-
80,606
Mortgage-backed securities - residential
-
50,337
-
50,337
-
52,187
-
52,187
Mortgage-backed securities - commercial
-
41,702
-
41,702
-
42,764
-
42,764
Municipal securities
-
19,061
-
19,061
-
19,338
-
19,338
Bank subordinated debt securities
-
26,974
-
26,974
-
26,261
-
26,261
Total
-
259,992
-
259,992
-
229,329
-
229,329
Derivative assets
-
5,793
-
5,793
-
4,892
-
4,892
Total assets at fair value
$
-
$
265,785
$
-
$
265,785
$
-
$
234,221
$
-
$
234,221
Derivative liabilities
$
-
$
5,946
$
-
$
5,946
$
-
$
7,988
$
-
$
7,988
Total liabilities at fair value
$
-
$
5,946
$
-
$
5,946
$
-
$
7,988
$
-
$
7,988
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 March 31, 2024 and December 31, 2023 (in
 
thousands):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fair Value Hierarchy
Carrying
Amount
Level 1
Level 2
Level 3
Fair Value
Amount
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
$
8,019
$
8,019
$
-
$
-
$
8,019
Interest-bearing deposits in banks
$
33,043
$
33,043
$
-
$
-
$
33,043
Investment securities held to maturity
$
174,974
$
-
$
155,510
$
-
$
155,510
Loans held for investment, net
$
1,759,743
$
-
$
-
$
1,723,210
$
1,723,210
Accrued interest receivable
$
10,688
$
-
$
1,448
$
9,240
$
10,688
Financial Liabilities:
Demand deposits
$
552,762
$
552,762
$
-
$
-
$
552,762
Money market and savings accounts
$
1,048,272
$
1,048,272
$
-
$
-
$
1,048,272
Interest-bearing checking accounts
$
47,702
$
47,702
$
-
$
-
$
47,702
Time deposits
$
288,403
$
-
$
-
$
287,104
$
287,104
FHLB advances
$
183,000
$
-
$
182,282
$
-
$
182,282
Accrued interest payable
$
1,372
$
-
$
551
$
821
$
1,372
 
 
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.
 
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.
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
 
restricted stock awards pursuant
 
to the Company’s
2015 equity incentive plan.
 
During the three months ended
 
March 31, 2024, the Company
 
repurchased
7,100
 
shares of Class A common stock at
a weighted average price per share of $
11.15
. The aggregate purchase price for these transactions was approximately $
79
thousand,
 
including
 
transaction
 
costs.
 
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. During
the three months
 
ended March 31,
 
2023, the Company
 
repurchased
500,000
 
shares of Class
 
A
 
common stock at
 
a weighted
average price
 
per share
 
of $
11.74
. The
 
aggregate purchase
 
price for
 
these transactions
 
was approximately
 
$
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
 
December 31, 2023
were
19,650,463
 
and
19,575,435
, 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
 
declared by
 
the Board
 
for the
 
stockholders for
 
the quarter
 
ended
March 31, 2023.
 
See Note 11, Subsequent
 
Events, for information regarding dividends declared in April 2024.
 
 
 
 
 
 
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 paid by
 
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
 
March
 
31,
 
2024
 
and
 
December
 
31,
 
2023.
 
At
 
March 31,
 
2024,
 
the
 
total
 
risk-based
 
capital
 
ratios
 
for
 
the
Company and the Bank were
12.98
% and
12.89
%, 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 months ended
March 31, 2024 and 2023 (in thousands):
 
 
 
 
 
 
 
 
 
 
Three Months Ended March 31,
2024
2023
Net Income
$
4,612
$
5,809
Net income available to common shareholders
$
4,612
$
5,809
The following table reflects
 
the calculation of basic and
 
diluted earnings per common
 
share class for the
 
three months
ended March 31, 2024 and 2023 (in thousands, except
 
per share amounts):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended March 31,
2024
2023
Class A
Class A
Basic EPS
Numerator:
Net income available to common shares
 
$
4,612
$
5,809
Denominator:
Weighted average shares outstanding
19,633,330
19,855,409
Earnings per share, basic
$
0.23
$
0.29
Diluted EPS
Numerator:
Net income available to common shares
$
4,612
$
5,809
Denominator:
Weighted average shares outstanding for basic EPS
19,633,330
19,855,409
Add: Dilutive effects of assumed exercises of stock options
64,928
85,197
Weighted avg. shares including dilutive potential common shares
19,698,258
19,940,606
Earnings per share, diluted
$
0.23
$
0.29
Anti-dilutive stock options excluded from diluted EPS
502,500
572,500
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.
 
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements - Unaudited
 
 
28
 
USCB Financial Holdings, Inc.
 
Q1 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.
 
11.
 
SUBSEQUENT EVENTS
 
Dividends
 
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
 
per share of Class
 
A common stock
 
and will be paid
 
on June
5, 2024, to stockholders of record as of the close of
 
business on May 15, 2024.
 
Share Repurchase 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
 
approximately
2.5
%
 
of
 
the
 
Company’s
 
issued
 
and
 
outstanding
 
shares
 
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
 
cash
 
equivalents
 
or
 
future
 
cash
 
flow.
 
As
 
of
 
April
 
22,
 
2024,
572,980
 
shares
 
remain
authorized for repurchase under the Company’s share
 
repurchase programs.
 
 
29
 
USCB Financial Holdings, Inc.
 
Q1 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
 
the Company and
 
the Bank, its
 
wholly owned subsidiary,
 
as of
 
and for the
 
three months
ended March 31,
 
2024. This
 
discussion and analysis
 
is best read
 
in conjunction
 
with the unaudited
 
consolidated financial
statements and related
 
notes included in
 
this Quarterly
 
Report on Form
 
10-Q (“Form 10-Q”)
 
and the audited
 
consolidated
financial
 
statements
 
and
 
related
 
notes
 
included
 
in
 
the
 
Annual
 
Report
 
on
 
Form
 
10-K
 
(“2023
 
Form
 
10-K”)
 
filed
 
with
 
the
Securities and Exchange Commission (“SEC”) for the year
 
ended December 31, 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" and Item
 
1A “Risk Factors"
 
below
 
in Part II
 
hereof and in
 
the 2023
Form 10-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
 
-Q contains
 
statements that
 
are not
 
historical in
 
nature are
 
intended to
 
be, and are
 
hereby identified
 
as,
forward-looking statements for purposes
 
of the safe
 
harbor provided by
 
Section 21E of
 
the Securities Exchange Act
 
of 1934,
as amended. The
 
words “may,” “will,” “anticipate,” “could,”
 
“should,” “would,” “believe,”
 
“contemplate,” “expect,” “aim,”
 
“plan,”
“estimate,” “continue,”
 
and “intend,”
 
as well
 
as other
 
similar words
 
and expressions
 
of the
 
future, are
 
intended to
 
identify
forward-looking
 
statements.
 
These
 
forward-looking
 
statements
 
include
 
statements
 
related
 
to
 
our
 
projected
 
growth,
anticipated future
 
financial performance,
 
and management’s
 
long-term performance
 
goals, as
 
well as
 
statements relating
to the anticipated
 
effects on results
 
of operations and
 
financial condition from
 
expected developments or
 
events, or business
and growth strategies, including anticipated internal 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 2023 Form 10-K and other filings we make with the 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, 30 USCB Financial Holdings, Inc. Q1 2024 Form 10-Q
 
 
unless required to do 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
 
filed or will file with the SEC.
Overview
The Company
 
reported net
 
income of
 
$4.6 million
 
or $0.23
 
per diluted
 
share of
 
common stock
 
for the
 
three
 
months
ended March 31,
 
2024 compared
 
to $5.8
 
million or
 
$0.29 per
 
diluted 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
 
approximately
 
2.5%
 
of
 
the
 
Company’s
 
issued
 
and
 
outstanding
 
shares
 
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
 
current
 
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 April 22, 2024, 572,980 shares remain authorized
for repurchase under the Company’s share repurchase
 
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 March 31,
2024 compared
 
to
 
the
 
quarter
 
ended
 
March 31,
 
2023
 
and as
 
of March
 
31,
 
2024
 
compared
 
to December
 
31,
 
2023,
 
and
annualized where appropriate:
•
 
Net interest income 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 2.62%
 
for the
 
three months
 
ended March
 
31, 2024
 
compared to
 
3.22% for
 
the three months
ended March 31, 2023.
•
 
Total assets were $2.5 billion at March 31, 2024, representing an increase of $325.3 million or 15.0% from March 31, 2023 and
an increase of $150.0 million or 25.7% annualized from December 31, 2023.
 
•
 
Total loans were $1.8
 
billion at March 31, 2024,
 
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 $272.3
 
million or
 
14.9% from March
 
31, 2023
and an increase of $165.7 million or 34.4% annualized from December 31, 2023.
 
•
 
Annualized return on average
 
assets for the quarter
 
ended March 31, 2024
 
was 0.76% compared
 
to 1.11% for
 
the quarter ended
March 31, 2023.
 
•
 
Annualized return on
 
average stockholders’ equity
 
for the quarter
 
ended March
 
31, 2024 was
 
9.61% compared to
 
12.85% for
quarter ended March 31, 2023.
 
•
 
The ACL to total loans was 1.18% at both March 31, 2024 and December 31, 2023.
 
•
 
Non-performing loans to total loans was 0.03% at both March 31, 2024 and December 31, 2023.
 
•
 
At March 31, 2024, the total risk-based capital ratios for the Company and the Bank were 12.98% and 12.89%, respectively.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
31
 
USCB Financial Holdings, Inc.
 
Q1 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, tangible 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
 
2023
 
Form
 
10-K
 
and
“Summary of Significant Accounting Policies” in Part I
 
in this Form 10-Q . 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
 
to
 
an
 
understanding
 
of
 
our
 
financial
 
statements.
 
Management
 
has
presented the application of these policies to the Audit
 
and Risk Committee of our Board of Directors.
 
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.
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):
March 31, 2024
December 31, 2023
Consolidated Balance Sheets:
Total
 
assets
$
2,489,142
$
2,339,093
Total
 
loans
(1)
$
1,821,196
$
1,780,827
Total
 
deposits
$
2,102,794
$
1,937,139
Total
 
stockholders' equity
$
195,011
$
191,968
(1)
 
Loan amounts include deferred costs.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
32
 
USCB Financial Holdings, Inc.
 
Q1 2024 Form 10-Q
Three Months Ended March 31,
2024
2023
Consolidated Statements of Operations:
Net interest income before provision for credit losses
$
15,158
$
15,997
Total
 
non-interest income
$
2,464
$
2,070
Total
 
non-interest expense
$
11,174
$
10,176
Net income
 
$
4,612
$
5,809
Profitability:
Efficiency ratio
63.41%
56.32%
Net interest margin
2.62%
3.22%
The Company’s
 
results
 
of
 
operations
 
depend
 
substantially
 
on
 
the
 
levels
 
of
 
our
 
net
 
interest
 
income
 
and
 
non-interest
income. Other factors contributing
 
to the results of
 
operations include our provision for
 
credit losses, the level
 
of non-interest
expense, and the provision for income taxes.
Three months ended March 31, 2024 compared to the three
 
months ended March 31, 2023
 
During the
 
three months
 
ended March
 
31,
 
2024, total
 
interest
 
income
 
increased
 
$8.5
 
million compared
 
to the
 
same
period in
 
2023. However,
 
this positive
 
trend was
 
offset by
 
a $9.3
 
million increase
 
in total
 
interest expense
 
due to
 
higher
weighted average deposit
 
costs
 
and borrowing costs.
 
Consequently, net income
 
decreased $1.2 million
 
to $4.6 million
 
for
the three months ended March 31, 2024 compared to the three
 
months ended 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
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
 
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 place asset-liability
 
management techniques
 
to manage major
 
factors that
 
affect
net interest income and net interest margin.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
33
 
USCB Financial Holdings, Inc.
 
Q1 2024 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 March 31,
2024
2023
Average
(1)
Balance
Interest
Yield/Rate
(2)
Average
(1)
Balance
Interest
Yield/Rate
(2)
Assets
Interest-earning assets:
Loans
(3)
$
1,781,528
$
26,643
6.01%
$
1,547,393
$
19,711
5.17%
Investment securities
(4)
419,989
2,811
2.69%
421,717
2,286
2.20%
Other interest-earnings assets
125,244
1,433
4.60%
43,084
382
3.60%
Total interest-earning assets
2,326,761
30,887
5.34%
2,012,194
22,379
4.51%
Non-interest-earning assets
109,342
 
 
108,024
 
 
Total assets
$
2,436,103
$
2,120,218
Liabilities and stockholders' equity
 
 
 
 
 
 
Interest-bearing liabilities:
Interest-bearing checking
$
53,344
369
2.78%
$
58,087
43
0.30%
Saving and money market deposits
1,097,575
10,394
3.81%
897,061
4,785
2.16%
Time deposits
322,912
3,294
4.10%
224,730
1,057
1.91%
Total interest-bearing deposits
1,473,831
14,057
3.84%
1,179,878
5,885
2.02%
FHLB advances and other borrowings
164,187
1,672
4.10%
61,600
497
3.27%
Total interest-bearing liabilities
1,638,018
15,729
3.86%
1,241,478
6,382
2.08%
Non-interest-bearing demand deposits
574,760
 
 
664,369
 
 
Other non-interest-bearing liabilities
30,233
31,000
Total liabilities
2,243,011
 
 
1,936,847
 
 
Stockholders' equity
193,092
183,371
Total liabilities and stockholders' equity
$
2,436,103
 
 
$
2,120,218
 
 
Net interest income
$
15,158
$
15,997
Net interest spread
(5)
1.48%
2.43%
Net interest margin
(6)
2.62%
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, 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.
Three months ended March 31, 2024 compared to the three months
 
ended March 31, 2023
 
Net interest income before the provision for
 
credit losses was $15.2 million for the
 
three months ended March 31, 2024,
a
 
decrease
 
of
 
$839
 
thousand
 
or
 
5.2%,
 
from
 
$16.0
 
million
 
for
 
the
 
same
 
period
 
in
 
2023.
 
The
 
decrease
 
was
 
primarily
attributable
 
to
 
the
 
$9.3
 
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
 
2.62%
 
for
 
the
 
quarter
 
ended
 
March 31,
 
2024
 
and
 
3.22%
 
for
 
the
 
same
 
period
 
in
 
2023. The
increases
 
in loan yields as well as yields on other interest-earning assets was offset by
 
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 34 USCB Financial Holdings, Inc. Q1 2024 Form 10-Q
and net charge-offs.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three months ended March 31, 2024 compared to the three months
 
ended March 31, 2023
 
The provision
 
for credit
 
loss was
 
$410 thousand
 
for the
 
three months
 
ended March 31, 2024
 
compared to
 
$201 thousand
for the
 
same period
 
in 2023.
 
Growth in
 
the loan
 
portfolio was
 
the primary
 
driver of
 
the increase
 
in the
 
provision expense
during the three months ended 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 March 31,
2024
2023
Service fees
$
1,651
$
1,205
Gain (loss) 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
Three months ended March 31, 2024 compared to the three months
 
ended March 31, 2023
 
Non-interest income for the three
 
months ended March 31, 2024
 
increased $394 thousand or 19.0%,
 
compared to the
same period
 
in 2023.
 
This increase
 
was primarily
 
driven by
 
growth in
 
service fees
 
from a
 
larger deposit
 
portfolio and
 
an
increase in wire and treasury management fees.
 
Non-Interest Expense
The following table presents the components of non-interest
 
expense for the dates indicated (in thousands):
Three Months Ended March 31,
2024
2023
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
2,018
1,440
Total
 
non-interest expense
$
11,174
$
10,176
Three months ended March 31, 2024 compared to the three months
 
ended March 31, 2023
 
Non-interest expense for the three
 
months ended March 31, 2024
 
increased $998 thousand or 9.8%,
 
compared to the
same period in 2023. The increase was
 
primarily driven by an increase
 
in other operating expenses of $578
 
thousand due
to $199 thousand
 
increase in
 
internal and
 
external audit
 
expense, $70
 
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
 
as our deposit 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 March 31, 2024 compared to the three months
 
ended March 31, 2023
 
Income tax expense for
 
the quarter ended March
 
31, 2024 was $1.4
 
million as compared to
 
$1.9 million for the
 
same
period in
 
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 March 31, 2024 were $2.49 billion, an increase of $150.0 million, or 25.8% annualized,
 
over total assets
of $2.34 billion at December 31, 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 $165.7
million, or 34.4% annualized, to $2.10 billion at March
 
31, 2024 compared to $1.94 billion December 31, 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
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
 
Committee
 
(“ALCO”).
 
The
 
portfolio
 
of
 
investments
 
also
 
can
 
be
 
used
 
to
 
modify
 
the
 
duration
 
of
 
the
balance
 
sheet.
 
The
 
allocation
 
of
 
cash
 
into
 
securities
 
takes
 
into
 
consideration
 
anticipated
 
future
 
cash
 
flows
 
(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.
When evaluating AFS
 
debt securities under
 
ASC Topic
 
326, the Company
 
evaluates
 
whether the decline
 
in fair value
is attributable
 
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 unrealized loss
 
position over its
 
holding period as
it approaches to maturity
 
and the Company has
 
the intent and ability
 
to hold these securities
 
to maturity until
 
recovery.
 
As
a result of this evaluation, the
 
Company concluded that no allowance was required on AFS
 
securities as of March 31, 2024.
AFS and HTM investment securities increased $28.7 million,
 
or 28.6% annualized, to $433.0 million at March 31, 2024
from $404.3 million at December 31, 2023. Investment
 
securities increased due to reinvestment of payments
 
received and
investment of excess
 
in cash
 
balances into high
 
credit quality investments
 
to increase 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 $244.4 million were pledged to secure public deposits and the BTFP. The investment portfolio does not 36 USCB Financial Holdings, Inc. Q1 2024 Form 10-Q
have any tax-exempt securities.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The
 
following
 
table
 
presents
 
the
 
amortized
 
cost
 
and
 
fair
 
value
 
of
 
investment
 
securities
 
for
 
the
 
dates
 
indicated
 
(in
thousands):
March 31, 2024
December 31, 2023
Available-for-sale:
Amortized
Cost
Fair Value
Amortized
Cost
Fair Value
U.S. Government Agency
$
17,168
$
15,549
$
9,664
$
8,173
Collateralized mortgage obligations
130,533
106,369
103,645
80,606
Mortgage-backed securities - residential
62,734
50,337
63,795
52,187
Mortgage-backed securities - commercial
48,182
41,702
49,212
42,764
Municipal securities
24,985
19,061
25,005
19,338
Bank subordinated debt securities
28,622
26,974
28,106
26,261
$
312,224
$
259,992
$
279,427
$
229,329
Held-to-maturity:
U.S. Government Agency
$
43,439
$
37,623
$
43,626
$
38,306
Collateralized mortgage obligations
61,465
53,131
62,735
54,752
Mortgage-backed securities - residential
43,383
38,613
43,784
39,599
Mortgage-backed securities - commercial
15,409
14,108
15,439
14,182
Corporate bonds
9,354
8,681
9,398
8,671
$
173,050
$
152,156
$
174,982
$
155,510
Allowance for credit losses - securities held-to-maturity
(12)
Securities held-to maturity, net of allowance for credit losses
$
173,038
The following
 
table shows
 
the weighted
 
average yields,
 
categorized by
 
contractual maturity,
 
for investment
 
securities
as of March 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%
$
3,106
4.03%
$
14,062
3.66%
$
17,168
3.73%
Collateralized mortgage obligations
-
0.00%
-
0.00%
-
0.00%
130,533
2.30%
130,533
2.30%
MBS - residential
-
0.00%
-
0.00%
-
0.00%
62,734
1.87%
62,734
1.87%
MBS - commercial
-
0.00%
-
0.00%
-
0.00%
48,182
3.35%
48,182
3.35%
Municipal securities
 
-
0.00%
-
0.00%
20,733
1.72%
4,252
1.86%
24,985
1.74%
Bank subordinated debt securities
-
0.00%
5,561
7.18%
21,272
5.14%
-
0.00%
26,834
5.57%
Corporate bonds
-
0.00%
-
0.00%
1,788
6.41%
-
0.00%
1,788
6.41%
$
-
$
5,561
$
46,899
$
259,763
$
312,224
2.71%
Held-to-maturity:
U.S. Government Agency
$
-
0.00%
$
7,933
1.02%
$
20,143
1.45%
$
15,363
2.03%
$
43,439
1.58%
Collateralized mortgage obligations
-
0.00%
-
0.00%
-
0.00%
61,465
1.66%
61,465
1.66%
MBS - residential
-
0.00%
4,410
1.85%
5,908
1.74%
33,066
2.41%
43,383
2.27%
MBS - commercial
-
0.00%
3,069
1.62%
-
0.00%
12,340
2.62%
15,409
2.42%
Corporate bonds
-
0.00%
9,354
2.80%
-
0.00%
-
0.00%
9,354
2.80%
$
-
$
24,766
$
26,050
$
122,234
$
173,050
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
 
-earning assets. Higher yields
 
typically carry greater
 
inherent credit
and liquidity risks in comparison to lower yield assets. The Company manages and mitigates such risks in accordance with
the credit and ALM policies, risk tolerance and balance
 
sheet composition.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
37
 
USCB Financial Holdings, Inc.
 
Q1 2024 Form 10-Q
The following table shows the loan portfolio composition
 
as of the dates indicated (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
Total
 
loans, net
 
of unearned
 
cost, increased
 
by $40.4 million,
 
or 9.1%
 
annualized to
 
$1.82 billion,
 
at March 31,
 
2024
compared to December 31, 2023. The residential real
 
estate loan segment had the most significant growth.
 
Our
 
loan
 
portfolio
 
continues
 
to
 
grow,
 
with
 
commercial
 
real
 
estate
 
lending
 
as
 
the
 
primary
 
focus
 
which
 
represented
approximately 58% of the
 
total gross loan portfolio as
 
of March 31, 2024. Our loan
 
growth strategy since inception has
 
been
reflective of the market in which we operate and of our 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,
2024 (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
$
5,006
$
42,647
$
74,664
$
115,589
$
237,906
Commercial Real Estate
105,181
200,845
745,043
6,731
1,057,800
Commercial and Industrial
13,458
47,095
122,945
44,547
228,045
Foreign Banks
100,182
-
-
-
100,182
Consumer and Other
1,623
3,511
10,711
178,480
194,325
Total
 
gross loans
$
225,450
$
294,098
$
953,363
$
345,347
$
1,818,258
Interest rate sensitivity:
Fixed interest rates
$
180,206
$
161,021
$
187,337
$
237,934
$
766,498
Floating or adjustable rates
45,244
133,077
766,026
107,413
1,051,760
Total
 
gross loans
$
225,450
$
294,098
$
953,363
$
345,347
$
1,818,258
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 March 31, 2024, approximately 58% of
 
the loans have adjustable/variable rates
 
and 42% of the loans have 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.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
38
 
USCB Financial Holdings, Inc.
 
Q1 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):
 
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
$
204,127
$
-
$
292
$
-
$
204,419
Commercial Real Estate
1,040,032
-
7,561
-
1,047,593
Commercial and Industrial
218,129
-
1,628
-
219,757
Foreign Banks
114,945
-
-
-
114,945
Consumer and Other
191,930
-
-
-
191,930
$
1,769,163
$
-
$
9,481
$
-
$
1,778,644
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
39
 
USCB Financial Holdings, Inc.
 
Q1 2024 Form 10-Q
Non-Performing Assets
The following table presents non-performing assets as
 
of the dates shown (in thousands,
 
except ratios):
March 31, 2024
December 31, 2023
Total
 
non-performing loans
$
456
$
468
Other real estate owned
-
-
Total
 
non-performing assets
$
456
$
468
Asset quality ratios:
Allowance for credit losses to total loans
1.18%
1.18%
Allowance for credit losses to non-performing loans
4,705%
4,505%
Non-performing loans to total loans
0.03%
0.03%
Non-performing assets include all loans categorized
 
as non-accrual or restructured, 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 existing facts
 
concerning 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 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
 
borrower’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
The ACL
 
represents
 
an amount
 
that,
 
in
 
management's
 
evaluation,
 
is adequate
 
to provide
 
coverage
 
for
 
all
 
expected
future
 
credit
 
losses
 
on
 
outstanding
 
loans.
 
Additionally,
 
qualitative
 
adjustments
 
are
 
made
 
to
 
the
 
ACL
 
when,
 
based
 
on
management’s judgment, there
 
are factors impacting
 
the allowance estimate
 
not considered by
 
the quantitative calculations.
See Note 3 “Loans” in Item 1 of Part 1 of this Form 10-Q
 
for more information on the ACL.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
40
 
USCB Financial Holdings, Inc.
 
Q1 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 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
Average loans
$
217,117
$
1,048,870
$
221,804
$
102,150
$
191,587
$
1,781,528
Net charge-offs to average loans
0.00%
0.00%
(0.02)%
0.00%
0.01%
0.00%
(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
Average loans
$
194,355
$
964,682
$
158,509
$
89,020
$
140,826
$
1,547,392
Net charge-offs to average loans
(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 a $84 thousand release due to unfunded commitments included in other liabilities
 
Bank-Owned Life Insurance
As of March 31, 2024, the combined cash surrender value of all bank-owned life insurance (“BOLI”) policies was
 
$52.2
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.
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.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
41
 
USCB Financial Holdings, Inc.
 
Q1 2024 Form 10-Q
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 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
 
outstanding balances
 
comprised of
 
52% in
 
commercial
 
deposits,
32% personal deposits, 12% public funds
 
(which are partially collateralized)
 
and 4% brokered deposits. Brokered
 
deposits
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 and unexpected
 
outgoing cash flows
and collateral needs without adversely affecting
 
either daily operations or the financial condition
 
of the Company.
As of March 31, 2024, we had $82.0 million of
 
fixed-rate advances outstanding from the FHLB with a weighted average
rate of 3.19%. Maturity dates for the advances range between
 
2024 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
 
March 31, 2024 (in thousands):
Interest Rate
Type of Rate
Maturity Date
Amount
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
$
82,000
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
 
with our
 
upstream correspondent
 
banks and
 
the FRB
 
Atlanta
Discount
 
Window
 
to
 
manage
 
temporary
 
fluctuations
 
in
 
our
 
daily
 
cash
 
balances.
 
As
 
of
 
March 31,
 
2024,
 
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
 
):
March 31, 2024
December 31, 2023
Commitments to grant loans and unfunded lines of credit
$
99,224
$
85,117
Standby and commercial letters of credit
3,274
3,987
Total
$
102,498
$
89,104
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.
 
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 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
 
Interest Rate 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 March 31,
 
2024, we had
 
an asset sensitive
 
balance sheet both
 
for year one
 
and
year two
 
modeling, using
 
the static
 
modeling. Asset
 
sensitivity indicates
 
that our
 
assets 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 customer deposit behavior. As part of
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 model,
 
as of
 
March
 
31, 2024,
 
our balance
 
sheet
 
is asset
 
sensitive
 
for both
 
year
 
one and
 
year
 
two
under interest
 
static rate
 
scenarios (an
 
increase or
 
decrease of
 
400 basis
 
points).
 
This means
 
than if
 
rates increase,
 
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 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 lower rates, a positive
 
impact. Results and analysis are presented
quarterly to the ALCO, and strategies are reviewed and refined.
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
 
from the FRB Atlanta discount
window,
 
and borrowings
 
from the
 
FHLB.
 
Accordingly,
 
we believe
 
our liquidity
 
resources
 
are adequate
 
to fund
 
loans and
meet other cash needs as necessary.
 
Capital Adequacy
As of
 
March 31, 2024,
 
the Bank
 
was well
 
capitalized
 
under the
 
FDIC’s
 
prompt corrective
 
action framework.
 
We also
follow the capital conservation buffer framework, and as of March 31, 2024, we exceeded the capital conversation buffer
 
in
all capital
 
ratios,
 
according
 
to
 
our actual
 
ratios.
 
The
 
following
 
table
 
presents
 
the
 
capital
 
ratios
 
for
 
the
 
Bank
 
at the
 
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
March 31, 2024
Total
 
risk-based capital
$
240,055
12.89
%
$
148,997
8.00
%
$
186,247
10.00
%
Tier 1 risk-based capital
$
218,174
11.71
%
$
111,748
6.00
%
$
148,997
8.00
%
Common equity tier 1 capital
$
218,174
11.71
%
$
83,811
4.50
%
$
121,060
6.50
%
Leverage ratio
$
218,174
8.84
%
$
98,695
4.00
%
$
123,368
5.00
%
December 31, 2023:
Total
 
risk-based capital
$
233,109
12.65
%
$
147,432
8.00
%
$
184,290
10.00
%
Tier 1 risk-based capital
$
211,645
11.48
%
$
110,574
6.00
%
$
147,432
8.00
%
Common equity tier 1 capital
$
211,645
11.48
%
$
82,931
4.50
%
$
119,789
6.50
%
Leverage ratio
$
211,645
9.17
%
$
92,328
4.00
%
$
115,410
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 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 Part
 
1 of this Form 10-Q.
 
 
46
 
USCB Financial Holdings, Inc.
 
Q1 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):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
47
 
USCB Financial Holdings, Inc.
 
Q1 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
Pre-tax pre-provision ("PTPP") income:
(1)
Net income
$
4,612
$
2,721
$
3,819
$
4,196
$
5,809
Plus: Provision for income taxes
1,426
787
1,250
1,333
1,881
Plus: Provision for credit losses
410
1,475
653
38
201
PTPP income
$
6,448
$
4,983
$
5,722
$
5,567
$
7,891
PTPP return on average assets:
(1)
 
 
PTPP income
$
6,448
$
4,983
$
5,722
$
5,567
$
7,891
Average assets
$
2,436,103
$
2,268,811
$
2,250,258
$
2,183,542
$
2,120,218
PTPP return on average assets
(2)
1.06%
0.87%
1.01%
1.02%
1.51%
 
 
Operating net income:
(1)
Net income
$
4,612
$
2,721
$
3,819
$
4,196
$
5,809
Less: Net gains (losses) on sale of securities
-
(883)
(955)
-
(21)
Less: Tax effect on sale of securities
-
224
242
-
5
Operating net income
$
4,612
$
3,380
$
4,532
$
4,196
$
5,825
 
 
Operating PTPP income:
(1)
PTPP income
$
6,448
$
4,983
$
5,722
$
5,567
$
7,891
Less: Net gains (losses) on sale of securities
-
(883)
(955)
-
(21)
Operating PTPP income
$
6,448
$
5,866
$
6,677
$
5,567
$
7,912
Operating PTPP return on average assets:
(1)
 
 
Operating PTPP income
$
6,448
$
5,866
$
6,677
$
5,567
$
7,912
Average assets
$
2,436,103
$
2,268,811
$
2,250,258
$
2,183,542
$
2,120,218
Operating PTPP return on average assets
(2)
1.06%
1.03%
1.18%
1.02%
1.51%
 
 
Operating return on average assets:
(1)
Operating net income
$
4,612
$
3,380
$
4,532
$
4,196
$
5,825
Average assets
$
2,436,103
$
2,268,811
$
2,250,258
$
2,183,542
$
2,120,218
Operating return on average assets
(2)
0.76%
0.59%
0.80%
0.77%
1.11%
Operating return on average equity:
(1)
Operating net income
$
4,612
$
3,380
$
4,532
$
4,196
$
5,825
Average equity
$
193,092
$
183,629
$
184,901
$
184,238
$
183,371
Operating return on average equity
(2)
9.61%
7.30%
9.72%
9.13%
12.88%
Operating Revenue:
(1)
 
Net interest income
$
15,158
$
14,376
$
14,022
$
14,173
$
15,997
 
Plus: Non-interest income
2,464
1,326
2,161
1,846
2,070
 
Less: Net gains (losses) on sale of
 
securities
-
(883)
(955)
-
(21)
 
Operating revenue
$
17,622
$
16,585
$
17,138
$
16,019
$
18,088
 
Operating Efficiency Ratio:
(1)
 
Total non-interest expense
$
11,174
$
10,719
$
10,461
$
10,452
$
10,176
 
Operating revenue
$
17,622
$
16,585
$
17,138
$
16,019
$
18,088
 
Operating efficiency ratio
63.41%
64.63%
61.04%
65.25%
56.26%
(1)
 
The Company believes these non-GAAP measurements
 
are key indicators of the ongoing earnings
 
power of the Company.
(2)
 
Annualized.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
48
 
USCB Financial Holdings, Inc.
 
Q1 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
Tangible book value per common share (at period-end):
(1)
Total stockholders' equity
$
195,011
$
191,968
$
182,884
$
183,685
$
183,858
Less: Intangible assets
-
-
-
-
-
Tangible stockholders' equity
$
195,011
$
191,968
$
182,884
$
183,685
$
183,858
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
Tangible book value per common share
(2)
$
9.92
$
9.81
$
9.36
$
9.40
$
9.37
Operating diluted net income per common share:
(1)
Operating net income
$
4,612
$
3,380
$
4,532
$
4,196
$
5,825
Total weighted average diluted shares of common stock
19,698,258
19,573,350
19,611,897
19,639,682
19,940,606
Operating diluted net income per common share:
$
0.23
$
0.17
$
0.23
$
0.21
$
0.29
Tangible Common Equity/Tangible Assets
(1)
 
Tangible stockholders' equity
$
195,011
$
191,968
$
182,884
$
183,685
$
183,858
 
Tangible assets
$
2,489,142
$
2,339,093
 
$
2,244,602
$
2,225,914
$
2,163,821
Tangible Common Equity/Tangible
 
Assets
7.83%
8.21%
8.15%
8.25%
8.50%
(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.
 
 
49
 
USCB Financial Holdings, Inc.
 
Q1 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
 
defined
 
in
 
Rules
 
13a-15(e)
 
and
 
15d-15(e)
 
under
 
the
 
Exchange
 
Act)
 
as
 
of
 
March 31,
 
2024.
Based on that evaluation,
 
management believes that, as of
 
the end 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
in the reports filed or submitted under the Exchange Act
 
within the required time 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.
 
 
50
 
USCB Financial Holdings, Inc.
 
Q1 2024 Form 10-Q
PART II
Item 1.
 
Legal Proceedings
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 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
la
 
Aguilera
 
et
 
al.)
 
alleging
 
the
 
Defendants
 
(i) caused
 
the
 
Bank,
 
as
 
directors
 
thereof,
 
to
 
engage
 
in ultra
 
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
 
Bank (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 sought the
 
Court to certify 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
 
plus attorney’s fees and costs as
 
well as such other relief as the Court
determined to award.
 
The Defendants filed a motion to dismiss the Litigation with
 
prejudice (the “Motion”). On December 27, 2023, the Court,
after reviewing
 
the Motion,
 
the Plaintiff’s response
 
thereto and
 
the Defendant’s reply
 
as well
 
as the
 
oral arguments presented
by
 
the
 
parties
 
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
 
Legacy
 
Shareholders
 
(which
 
includes
 
the
Plaintiffs) lacked direct standing.
The Company believes
 
that the positions
 
in the Appeal
 
are legally
 
and factually without
 
merit, and it
 
intends to vigorously
defend
 
against
 
the
 
Appeal,
 
pursue
 
any
 
potential
 
counterclaims
 
against
 
the
 
Plaintiffs
 
as
 
it
 
deems
 
appropriate,
 
and
 
seek
coverage
 
from
 
its
 
insurance
 
carriers.
 
However,
 
there
 
can
 
be
 
no
 
assurance
 
that
 
the
 
Appeal
 
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
 
defending against
 
the Appeal.
 
The Appellate
 
Court could
 
grant the
 
Plaintiff’s motion
 
to
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.
There can be no
 
assurance that any
 
future legal proceedings
 
to which we are
 
a party will not
 
be decided adversely
 
to
our interests and have a material adverse effect
 
on our financial condition and operations.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
51
 
USCB Financial Holdings, Inc.
 
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-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
January 1 - 31, 2024
-
$
-
-
80,080
February 1 - 29, 2024
 
-
$
-
-
 
 
80,080
March 1 - 31, 2024
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)
 
During 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).
 
 
 
 
52
 
USCB Financial Holdings, Inc.
 
Q1 2024 Form 10-Q
Item 6. Exhibits
Exhibit No.
Description of Exhibit
*
*
**
**
101
The following
 
financial statements
 
from the
 
Company’s Quarterly
 
Report on
 
Form 10-Q
 
for the
 
quarter ended
 
March 31,
2024 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.
 
 
 
 
 
 
 
53
 
USCB Financial Holdings, Inc.
 
Q1 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
 
May 10, 2024
Luis de la Aguilera
(Principal Executive Officer)
/s/ Robert Anderson
Executive Vice President and Chief Financial
Officer
 
May 10, 2024
Robert Anderson
(Principal Financial Officer and Principal Certification of Chief Executive Officer
Accounting Officer)
EX-31.1 8 exhibit311.htm EX-31.1 exhibit311
 
 
 
Exhibit 31.1
Pursuant to Section 302 of the Sarbanes-Oxley Act
 
of 2002
I, Luis de la Aguilera, certify that:
1.
 
I have reviewed this Quarterly Report on Form
 
10-Q of USCB Financial Holdings, Inc.;
2.
 
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary
 
to
 
make
 
the
 
statements
 
made,
 
in
 
light
 
of
 
the
 
circumstances
 
under
 
which
 
such
 
statements
 
were
 
made,
 
not
misleading with respect to the period covered by this report;
3.
 
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects
 
the financial
 
condition, results
 
of operations
 
and cash
 
flows of
 
the registrant
 
as of,
 
and for,
 
the periods
presented in this report;
4.
 
The
 
registrant’s
 
other
 
certifying
 
officer
 
and
 
I
 
are
 
responsible
 
for
 
establishing
 
and
 
maintaining
 
disclosure
 
controls
 
and
procedures (as
 
defined in
 
Exchange Act
 
Rules 13a-15(e)
 
and 15d-15(e))
 
and internal
 
control over
 
financial reporting
 
(as
defined in Exchange
 
Act Rules 13a-15(f) and 15d-15(f)) for the registrant and
 
have:
a)
 
designed
 
such
 
disclosure
 
controls
 
and
 
procedures,
 
or
 
caused
 
such
 
disclosure
 
controls
 
and
 
procedures
 
to
 
be
designed
 
under
 
our
 
supervision,
 
to
 
ensure
 
that
 
material
 
information
 
relating
 
to
 
the
 
registrant,
 
including
 
its
consolidated subsidiaries, is
 
made known
 
to us by
 
others within those
 
entities, particularly during
 
the period in
 
which
this report is being prepared;
b)
 
designed such internal control over financial reporting, or caused such
 
internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and
the
 
preparation
 
of
 
financial
 
statements
 
for
 
external
 
purposes
 
in
 
accordance
 
with
 
generally
 
accepted
 
accounting
principles;
c)
 
evaluated the effectiveness
 
of the registrant’s
 
disclosure controls and
 
procedures and presented
 
in this report our
conclusions about the effectiveness of the
 
disclosure controls and procedures, as of the
 
end of the period covered
by this report based on such evaluation; and
d)
 
disclosed in this
 
report any
 
change in the
 
registrant’s internal
 
control over
 
financial reporting
 
that occurred
 
during
the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an Annual Report) that
has
 
materially
 
affected,
 
or
 
is
 
reasonably
 
likely
 
to
 
materially
 
affect,
 
the
 
registrant’s
 
internal
 
control
 
over
 
financial
reporting; and
5.
 
The registrant’s
 
other certifying
 
officer
 
and I
 
have disclosed,
 
based on
 
our most
 
recent evaluation
 
of internal
 
control over
financial
 
reporting,
 
to
 
the
 
registrant’s
 
auditors
 
and
 
the
 
audit
 
committee
 
of
 
the
 
registrant’s
 
board
 
of
 
directors
 
(or
 
persons
performing the equivalent functions):
a)
 
All
 
significant
 
deficiencies
 
and
 
material
 
weaknesses
 
in
 
the
 
design
 
or
 
operation
 
of
 
internal
 
control
 
over
 
financial
reporting which are
 
reasonably likely
 
to adversely affect
 
the registrant’s ability
 
to record, process,
 
summarize and
report financial information; and
b)
 
Any fraud, whether or not material,
 
that involves management or other employees who
 
have a significant role in
 
the
registrant’s internal control over financial reporting.
/s/ Luis de la Aguilera
Luis de la Aguilera
Chairman, President and Chief Executive Officer
Date: May 10, 2024
EX-31.2 9 exhibit312.htm EX-31.2 exhibit312
 
 
 
Exhibit 31.2
Certification of Chief Financial Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act
 
of 2002
I, Robert Anderson, certify that:
1.
 
I have reviewed this Quarterly Report on Form 10-Q of
 
USCB Financial Holdings, Inc.;
2.
 
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary
 
to
 
make
 
the
 
statements
 
made,
 
in
 
light
 
of
 
the
 
circumstances
 
under
 
which
 
such
 
statements
 
were
 
made,
 
not
misleading with respect to the period covered by this report;
3.
 
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects
 
the financial
 
condition, results
 
of operations
 
and cash
 
flows of
 
the registrant
 
as of,
 
and for,
 
the periods
presented in this report;
4.
 
The
 
registrant’s
 
other
 
certifying
 
officer
 
and
 
I
 
are
 
responsible
 
for
 
establishing
 
and
 
maintaining
 
disclosure
 
controls
 
and
procedures (as
 
defined in
 
Exchange Act
 
Rules 13a-15(e)
 
and 15d-15(e))
 
and internal
 
control over
 
financial reporting
 
(as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f))
 
for the registrant and have:
a)
 
designed
 
such
 
disclosure
 
controls
 
and
 
procedures,
 
or
 
caused
 
such
 
disclosure
 
controls
 
and
 
procedures
 
to
 
be
designed
 
under
 
our
 
supervision,
 
to
 
ensure
 
that
 
material
 
information
 
relating
 
to
 
the
 
registrant,
 
including
 
its
consolidated subsidiaries, is
 
made known
 
to us by
 
others within those
 
entities, particularly during
 
the period in
 
which
this report is being prepared;
b)
 
designed such internal control over financial reporting, or caused such
 
internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and
the
 
preparation
 
of
 
financial
 
statements
 
for
 
external
 
purposes
 
in
 
accordance
 
with
 
generally
 
accepted
 
accounting
principles;
c)
 
evaluated the effectiveness
 
of the registrant’s
 
disclosure controls and
 
procedures and presented
 
in this report our
conclusions about the effectiveness of the
 
disclosure controls and procedures, as of the
 
end of the period covered
by this report based on such evaluation; and
d)
 
disclosed in this
 
report any
 
change in the
 
registrant’s internal
 
control over
 
financial reporting
 
that occurred
 
during
the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an Annual Report) that
has
 
materially
 
affected,
 
or
 
is
 
reasonably
 
likely
 
to
 
materially
 
affect,
 
the
 
registrant’s
 
internal
 
control
 
over
 
financial
reporting; and
5.
 
The registrant’s
 
other certifying
 
officer
 
and I
 
have disclosed,
 
based on
 
our most
 
recent evaluation
 
of internal
 
control over
financial
 
reporting,
 
to
 
the
 
registrant’s
 
auditors
 
and
 
the
 
audit
 
committee
 
of
 
the
 
registrant’s
 
board
 
of
 
directors
 
(or
 
persons
performing the equivalent functions):
a)
 
All
 
significant
 
deficiencies
 
and
 
material
 
weaknesses
 
in
 
the
 
design
 
or
 
operation
 
of
 
internal
 
control
 
over
 
financial
reporting which are
 
reasonably likely
 
to adversely affect
 
the registrant’s ability
 
to record, process,
 
summarize and
report financial information; and
b)
 
Any fraud, whether or not material, that involves
 
management or other employees who have a significant role
 
in the
registrant’s internal control over financial reporting.
/s/ Robert Anderson
Robert Anderson
Chief Financial Officer
Date: May 10, 2024
EX-32.1 10 exhibit321.htm EX-32.1 exhibit321
 
 
 
Exhibit 32.1
Certification of Chief Executive Officer Pursuant to
 
18 U.S.C. Section 1350
as Adopted Pursuant to Section 906 of the Sarbanes
 
-Oxley Act of 2002
In connection with the Quarterly
 
Report of USCB Financial Holdings, Inc. (the
 
“Company”) on Form 10-Q for the
 
quarter
ended March 31, 2024, as filed with
 
the Securities and Exchange Commission
 
on the date hereof (the “Report”),
 
I, Luis de
la Aguilera, as President and
 
Chief Executive Officer of
 
the Company,
 
certify,
 
to the best of my knowledge,
 
pursuant to 18
U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes
 
-Oxley Act of 2002, that:
1)
 
The
 
Report
 
fully
 
complies
 
with
 
the
 
requirements
 
of
 
Section 13(a) or
 
15(d),
 
as
 
applicable,
 
of
 
the
 
Securities
Exchange Act of 1934; and
2)
 
The
 
information
 
contained
 
in
 
the
 
Report
 
fairly
 
presents,
 
in
 
all
 
material
 
respects,
 
the
 
financial
 
condition
 
and
results of operations of the Company.
/s/ Luis de la Aguilera
Luis de la Aguilera
Chairman, President and Chief Executive Officer
Date: May 10, 2024
EX-32.2 11 exhibit322.htm EX-32.2 exhibit322
 
 
 
Exhibit 32.2
Certification of Chief Financial Officer Pursuant to
 
18 U.S.C. Section 1350
as Adopted Pursuant to Section 906 of the Sarbanes
 
-Oxley Act of 2002
In connection with the Quarterly
 
Report of USCB Financial Holdings, Inc. (the
 
“Company”) on Form 10-Q for the
 
quarter
ended March 31, 2024,
 
as filed with the
 
Securities and Exchange
 
Commission on the
 
date hereof (the “Report”),
 
I, Robert
Anderson,
 
as Chief Financial Officer of the Company, certify, to the best of my knowledge, pursuant to 18 U.S.C. §1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley
 
Act of 2002, that:
1)
 
The
 
Report
 
fully
 
complies
 
with
 
the
 
requirements
 
of
 
Section 13(a) or
 
15(d),
 
as
 
applicable,
 
of
 
the
 
Securities
Exchange Act of 1934; and
2)
 
The
 
information
 
contained
 
in
 
the
 
Report
 
fairly
 
presents,
 
in
 
all
 
material
 
respects,
 
the
 
financial
 
condition
 
and
results of operations of the Company.
/s/ Robert Anderson
Robert Anderson
Chief Financial Officer
Date: May 10, 2024