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