USCB filing — read by section

Item 7. Management’s Discussion and Analysis

Item 7. 
Management's Discussion and Analysis of Financial Condition 
and Results of Operations 

 Management’s 
discussion 
and 
analysis 
of 
financial 
condition 
and 
results 
of 
operations 
analyzes 
the 
consolidated 
 financial condition and results of operations of the Company and the 
Bank, its wholly owned subsidiary, for the years ended 
 December 31, 2021 
and 
2020. This 
discussion and 
analysis are 
best read 
in conjunction 
with the 
Consolidated Financial 
 Statements and related footnotes 
of our Company presented 
in Item 8 “Financial 
Statements and Supplementary 
Data” of 
 this Annual 
Report. 
In 
addition 
to 
historical 
information, 
this 
discussion 
contains 
forward-looking statements 
that 
involve 
 risks, uncertainties 
and assumptions 
that could 
cause actual 
results to 
differ materially 
from management's 
expectations. 
 Factors that 
could cause 
such differences 
are discussed 
in the 
sections entitled 
"Forward-Looking Statements" 
and Item 
 1A “Risk Factors" of this Annual Report. 
 Throughout this document, references to “we,” “us,” “our,” and “the 
Company” refer to USCB Financial Holdings, Inc. 

 Forward-Looking Statements 
 This 
Annual 
Report 
on 
Form 
10-K 
contains 
statements 
that 
are 
not 
historical 
in 
nature 
are 
intended 
to 
be, 
and 
are 
 hereby identified as, forward-looking 
statements for purposes of 
the safe harbor provided by 
Section 21E of the Securities 
 Exchange 
Act 
of 
1934, 
as 
amended. 
The 
words 
“may,” 
“will,” 
“anticipate,” 
“should,” 
“would,” 
“believe,” 
“contemplate,” 
 “expect,” “aim,” “plan,” “estimate,” “continue,” and “intend,” as well as other similar words and expressions of the future, are 
 intended 
to 
identify 
forward-looking 
statements. 
These 
forward-looking 
statements 
include 
statements 
related 
to 
our 
 projected 
growth, 
anticipated 
future 
financial 
performance, 
and 
management’s 
long-term 
performance 
goals, 
as 
well 
as 
 statements relating to 
the anticipated effects 
on results of 
operations and financial 
condition from expected 
developments 
 or events, or business and growth strategies, including 
anticipated internal growth. 
 These forward-looking statements involve significant risks and uncertainties that could cause our actual results to differ 
 materially from those anticipated in such statements. 
Potential risks and uncertainties include, but are not 
limited to: 
 • 
the strength of the United States economy 
in general and the strength of the local 
economies in which we conduct 
 operations; 
 • 
the COVID-19 pandemic and its impact on 
us, our employees, customers and third-party service providers, and the 
 ultimate extent of the impacts of the pandemic and related government 
stimulus programs; 

 • 
our ability to successfully manage interest rate risk, credit 
risk, liquidity risk, and other risks inherent to our industry; 
 • 
the accuracy of our financial statement estimates and assumptions, including the estimates used for our credit loss 
 reserve and deferred tax asset valuation allowance; 
 • 
the efficiency and effectiveness of our 
internal control environment; 
 • 
our ability 
to comply 
with the 
extensive laws 
and regulations 
to which 
we are 
subject, including 
the laws 
for each 
 jurisdiction where we operate; 
 • 
legislative or regulatory 
changes and changes 
in accounting 
principles, policies, 
practices or guidelines, 
including 
 the effects of the forthcoming implementation 
of the Current Expected Credit Losses (“CECL”) standard; 
 • 
the effects 
of our 
lack of 
a diversified 
loan portfolio 
and concentration 
in the 
South Florida 
market, including 
the 
 risks 
of geographic, 
depositor, 
and 
industry concentrations, 
including our 
concentration 
in 
loans secured 
by real 
 estate; 
 • 
the concentration of ownership of our Class A common 
stock; 
 • 
fluctuations in the price of our Class A common stock; 
 • 
our ability to fund or access the capital markets at attractive 
rates and terms and manage our growth, both organic 
 growth as well as growth through other means, such as 
future acquisitions; 
 • 
inflation, interest rate, unemployment rate, market, and monetary 
fluctuations; 
 • 
increased competition and its effect on pricing 
of our products and services as well as our margins; 

 • 
the effectiveness of our risk management strategies, including operational risks, including, but not limited to, client, 
 employee, or third-party fraud and security breaches; and 

 • 
other 
risks 
described 
this 
Form 
10-K 
and 
other 
filings 
we 
make 
with 
the 
Securities 
and 
Exchange 
Commission 
 (“SEC”). 
 All 
forward-looking 
statements 
are 
necessarily 
only 
estimates 
of 
future 
results, 
and 
there 
can 
be 
no 
assurance 
that 
 actual results will 
not differ 
materially from expectations. 
Therefore, you are 
cautioned not to 
place undue reliance 
on any 
 forward-looking statements. Further, 
forward-looking statements included in this presentation 
are made only as of the date 
 hereof, and we undertake 
no obligation to update 
or revise any forward-looking 
statement to reflect events 
or circumstances 
 after the date on which the statement is made or to reflect the occurrence of unanticipated events, unless required to do so 
 under the federal securities laws. You 
should also review the risk factors 
described in the reports the Company 
filed or will 
 file with the 
SEC and, 
for periods 
prior to 
the completion 
of the bank 
holding company 
reorganization, the 
Bank filed 
with 
 the FDIC. 

 
 
 Table of Contents 
 

 

 44 
USCB Financial Holdings, Inc. 
2021 10-K 
 

 Non-GAAP Financial Measures 
 This Annual Report on Form 10-K includes 
financial information determined by methods 
other than in accordance with 
 generally 
accepted 
accounting 
principles 
(“GAAP”). 
This 
financial 
information 
includes 
certain 
operating 
performance 
 measures. Management has included these non-GAAP 
measures because it believes these measures may 
provide useful 
 supplemental information 
for evaluating 
the Company’s 
underlying performance 
trends. Further, 
management uses 
these 
 measures 
in 
managing 
and 
evaluating 
the 
Company’s 
business 
and 
intends 
to 
refer 
to 
them 
in 
discussions 
about 
our 
 operations and performance. 
Operating performance 
measures should be 
viewed in addition 
to, and not 
as an alternative 
 to or 
substitute 
for, 
measures 
determined 
in 
accordance 
with 
GAAP, 
and 
are 
not 
necessarily 
comparable 
to non-GAAP 
 measures 
that 
may 
be 
presented 
by 
other 
companies. 
To 
the 
extent 
applicable, 
reconciliations 
of 
these 
non-GAAP 
 measures to the most directly 
comparable GAAP measures can be found 
in the ‘Non-GAAP Reconciliation Tables’ included 
 in this annual report.
 Overview 
 For the year ended December 31, 2021, the 
Company reported net income of $21.1 
million compared with net income 
 of 
$10.8 million 
for the 
year ended 
December 31, 2020, 
representing 
a 94.8% 
increase. The 
results from 
2021 included 
 closing our initial public offering of the Class A common stock and the simplification of the Bank’s capital structure. 

 In 
evaluating 
our 
financial 
performance, 
we 
consider 
the 
level 
of 
and 
trends 
in 
net 
interest 
income, 
the 
net 
interest 
 margin, the cost of deposits, 
levels and composition of 
non-interest income and non-interest 
expense, performance ratios, 
 asset quality ratios, regulatory capital ratios, and any significant 
event or transaction. 
 The following significant highlights are of note for the year 
ended December 31, 2021: 
 • 
Net interest 
income 
after 
provision 
for credit 
losses totaled 
$52.7 
million, an 
increase of 
$12.3 
million or 
30.5%, 
 compared to $40.3 million at December 31, 2020. 

 • 
Net interest 
margin (“NIM”) 
remained the 
same at 
3.26% 
for the 
years ended 
December 31, 2021 
and 2020. 
The 
 yield on earning assets decreased to 3.52% in 2021, compared to 3.93% in 2020. The yield on earning assets was 
 negatively impacted by certain floating rate investment securities, 
loans with variable rate pricing features, and 
new 
 loans originated in the lower interest rate environment, 
including PPP loans which carry a rate of 1.0%. 

 • 
NIM, excluding PPP loans, was 3.16% and 3.30% for the years ended December 31, 2021 and 2020, respectively. 

 • 
Total assets grew to $1.9 billion, an increase of $352.2 
million or 23.5%, compared to December 31, 2020. 
 • 
Loans grew to $1.2 billion, an increase of $151.6 million 
or 14.6%, compared to December 31, 2020. 
 • 
The cost of interest-bearing liabilities 
decreased 
to 0.45% 
in 2021 from 1.07% in 
2020 as a result of the continued 
 downward repricing of deposits and continued improvement in 
deposit mix. 
 • 
Return on average assets for the year ended December 
31, 2021 was 1.24% compared to 0.76% in 2020. 
 • 
Return on average stockholders’ equity for the year ended December 31, 2021 was 
11.45% compared to 6.54% in 
 2020. 
 • 
Nonperforming 
assets 
totaled 
$1.2 
million, 
a 
decrease 
of 
$0.4 
million 
or 
24.6%, 
compared 
to 
$1.6 
million 
at 
 December 31, 2020. 

 • 
The Company maintained its strong capital position. As of December 31, 2021, the Bank was well-capitalized, with 
 a total risk-based capital ratio of 14.92%, 
a tier 1 risk-based capital ratio of 
13.70%, a common equity tier 1 capital 
 ratio of 
13.70%, 
and a 
leverage ratio 
of 9.55%. 
As of 
December 31, 2021 
and 2020, 
all of 
our regulatory 
capital 
 ratios exceeded the thresholds to be well-capitalized under 
the applicable bank regulatory requirements. 
 • 
In April 2021, 
the Bank 
repurchased 
all of 
its issued 
and outstanding 
Class E 
preferred 
shares at 
the liquidation 
 value of $7.5 
million along with 
declared dividends approved 
by the Board 
of Directors (the 
“Board”) with the 
goal 
 to simplify its capital structure. 

 
 
 Table of Contents 
 

 

 45 
USCB Financial Holdings, Inc. 
2021 10-K 
 

 • 
In July 
2021, the 
Bank completed 
the initial 
public offering 
of 4,600,000 
shares of 
Class A common 
stock, which 
 included an additional 600,000 shares in connection with the exercise in full of the underwriters’ 
option to purchase 
 additional shares. In a continuation effort to simplify the Company’s capital structure, an exchange and redemption 
 of then outstanding Class C and Class D preferred shares 
was also completed. 
 • 
In December 2021, 
the Bank 
entered into agreements 
with the Class 
B shareholders 
to exchange all 
outstanding 
 Class B non-voting common stock for Class A voting common 
stock. 

 • 
The Company became the parent bank 
holding company of the Bank effective 
December 28, 2021. Each share of 
 the 
Bank 
was 
exchanged 
for 
one 
share 
of 
the 
Company, 
making 
the 
Bank 
a 
wholly 
owned 
subsidiary 
of 
the 
 Company. Shares 
of the Company continue to trade under ticker symbol “USCB” 
on the Nasdaq Stock Market. 
 Critical Accounting Policies and Estimates 
 The 
consolidated 
financial 
statements 
are 
prepared 
based 
on 
the 
application 
of 
U.S. 
GAAP, 
the 
most 
significant 
of 
 which are described 
in Note 1 “Summary 
of Significant Accounting 
Policies” to our 
Consolidated Financial Statements. 
To 
 prepare financial statements in conformity with GAAP, 
management makes estimates, assumptions, 
and judgments based 
 on 
available 
information. 
These 
estimates, 
assumptions, 
and 
judgments 
affect 
the 
amounts 
reported 
in 
the 
financial 
 statements and accompanying notes. These estimates, assumptions, and judgments are based on 
information available as 
 of 
the 
date 
of 
the 
financial 
statements 
and, 
as 
this 
information 
changes, 
actual 
results 
could 
differ 
from 
the 
estimates, 
 assumptions 
and 
judgments 
reflected 
in 
the 
financial 
statements. 
In 
particular, 
management 
has 
identified 
accounting 
 policies that, due to 
the estimates, assumptions 
and judgments inherent 
in those policies, are 
critical in understanding 
our 
 financial statements. 
Management 
has presented 
the application 
of these 
policies 
to the 
audit and 
risk committee 
of our 
 Board. 

 Allowance for Credit Losses 
 The allowance for credit 
losses (“ACL”) is 
a valuation allowance that 
is established through charges 
to earnings in the 
 form of 
a provision for 
credit losses. The 
amount of the 
ACL is 
affected by the 
following: (i) charge-offs of 
loans that decrease 
 the allowance; 
(ii) subsequent 
recoveries on 
loans previously 
charged off 
that increase 
the allowance; 
and (iii) 
provisions 
 for credit losses charged to 
income that increase the allowance. 
Management considers the policies 
related to the ACL as 
 the most critical to 
the financial statement 
presentation. The total 
ACL includes activity 
related to allowances 
calculated in 
 accordance with Accounting Standards Codification (“ASC”) 310, 
Receivables, and ASC 450, Contingencies. 
 Throughout the year, 
management estimates the probable 
incurred losses in the loan portfolio 
to determine if the ACL 
 is adequate to absorb such losses. The ACL 
consists of specific and general components. 
The specific component relates 
 to loans that are 
individually classified as 
impaired. We follow 
a loan review program 
to evaluate the credit 
risk in the loan 
 portfolio. Loans 
that have 
been identified 
as impaired 
are reviewed 
on a 
quarterly basis 
in order 
to determine 
whether a 
 specific reserve is 
required. The general 
component covers 
non-impaired loans 
and is based 
on industry and 
our specific 
 historical loan 
loss experience, 
volume, growth 
and composition 
of the 
loan portfolio, 
the evaluation 
of our 
loan portfolio 
 through our 
internal 
loan review 
process, general 
current 
economic 
conditions 
both 
internal and 
external to 
us that 
may 
 affect the borrower’s ability to pay, 
value of collateral and other qualitative relevant risk factors. Based on a review 
of these 
 estimates, we 
adjust the ACL 
to a 
level determined by 
management to be 
adequate. Estimates of 
credit losses are 
inherently 
 subjective as they involve an exercise of judgment. 
 The 
CARES 
Act, 
as 
amended 
by 
the 
Consolidated 
Appropriations 
Act, 
2021, 
specified 
that 
COVID-19 
related 
loan 
 modifications executed 
between March 1, 
2020 and 
the earlier 
of (i) 
60 days 
after the 
date of 
termination 
of the 
national 
 emergency declared by President Trump and (ii) January 1, 2022, on loans 
that were current as of December 31, 2019, 
are 
 not TDRs. Additionally, 
under guidance from the federal banking agencies, 
other short-term modifications made on a good 
 faith basis 
in response 
to COVID-19 
to borrowers 
that were 
current prior 
to any 
relief are 
not TDRs 
under ASC 
Subtopic 
 310-40, 
“Troubled 
Debt 
Restructurings 
by 
Creditors.” 
These 
modifications 
include 
short-term 
(i.e., 
up 
to 
six 
months) 
 modifications 
such 
as 
payment 
deferrals, 
fee 
waivers, 
extensions 
of 
repayment 
terms, 
or 
delays 
in 
payment 
that 
are 
 insignificant. The Company’s charge-off policy is to continuously 
review all impaired loans to monitor the Company’s ability 
 to collect them in full at the applicable 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. The amount charged 
-off conforms to the amount necessary 
to comply with GAAP. 
 Income Taxes 
 Deferred tax 
assets and 
liabilities are 
recognized for 
the future 
tax consequences 
attributable to 
differences 
between 
 the financial statement carrying amounts of 
existing assets and liabilities and their 
respective tax bases and operating loss 

 
 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Table of Contents 
 

 

 46 
USCB Financial Holdings, Inc. 
2021 10-K 
 

 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 assets 
 based on the 
consideration of 
all available evidence 
using a more 
likely than not 
standard. In its 
evaluation, management 
 considers taxable loss 
carry-back availability, expectation of sufficient 
taxable income, trends 
in earnings, the 
future reversal 
 of temporary differences, and available tax planning 
strategies. 
 The Company recognizes positions taken 
or expected to be 
taken in a tax 
return in accordance with existing accounting 
 guidance on 
income taxes 
which prescribes 
a recognition threshold 
and measurement 
process. Interest 
and penalties 
on 
 tax liabilities, if any, would 
be recorded in interest expense and other operating non-interest 
expense, respectively. 
 Segment Reporting 
 Management monitors the revenue streams for all its various 
products and services. The identifiable segments are not 
 material 
and 
operations 
are 
managed 
and 
financial 
performance 
is 
evaluated 
on 
an 
overall 
Company-wide 
basis. 
 Accordingly, all 
the financial service 
operations are 
considered by management 
to be 
aggregated in one 
reportable operating 
 segment.
 Results of Operations 
 General 
 The following 
tables present 
selected balance 
sheet, income 
statement, and 
profitability ratios 
for the 
dates indicated 
 (in thousands, except ratios): 
 As of December 31, 
 2021 
 2020 
 Consolidated Balance Sheets: 
 Total 
assets 
 $ 
 1,853,939 
 $ 
 1,501,742 
 Total 
loans 
 (1)
 $ 
 1,190,081 
 $ 
 1,038,504 
 Total 
deposits 
 $ 
 1,590,379 
 $ 
 1,273,402 
 Total 
stockholders' equity 
 $ 
 203,897 
 $ 
 171,001 
 (1) 
Loan amounts include deferred fees/costs. 
 Years Ended December 31, 
 2021 
 2020 
 Consolidated Statements of Operations: 
 Net interest income before provision for credit losses 
 $ 
 52,496 
 $ 
 43,597 
 Total 
non-interest income 
 $ 
 10,698 
 $ 
 6,097 
 Total 
non-interest expense 
 $ 
 35,677 
 $ 
 33,036 
 Net income 

 $ 
 21,077 
 $ 
 10,820 
 Net income (loss) available to common stockholders 
 $ 
 (70,585)
 $ 
 7,693 
 Profitability: 
 Efficiency ratio 
 56.31% 
 71.13% 
 Net interest margin 

 3.26% 
 3.26% 
 The Company’s results 
of operations 
depend substantially on 
net interest income 
and non-interest income. 
Other factors 
 contributing 
to 
the 
results 
of 
operations 
include 
our 
provision 
for 
credit 
losses, 
non-interest 
expenses, 
and 
provision 
for 
 income taxes. 
 Net income 
for the 
year ended 
December 31, 2021 
was $21.1 million 
, 
compared with 
net income 
of $10.8 million 
for 
 the same period in 2020. The Company reported net loss per diluted 
share for the year ended December 31, 2021 of $6.72 
 compared to net income per diluted share for the same period in 2020 of $1.50 and $0.30 for 
Class A 
and Class B common 
 stock, respectively, after adjusted to reflect the 1 
for 5 reverse stock split on 
Class A 
common stock. The net loss per diluted 
 share for the year ended December 31, 2021 was attributable to the one-time reduction in net income available to common 
 stockholders for the 
exchange and redemption 
of the Class 
C and Class D 
preferred shares. During 
third quarter of 
2021, 

 
 
 Table of Contents 
 

 

 47 
USCB Financial Holdings, Inc. 
2021 10-K 
 

 the 
Company 
completed 
an 
exchange 
of 
then 
outstanding 
preferred 
shares 
for 
Class A 
common 
shares 
and 
thereafter 
 redeemed the remaining outstanding preferred shares, at a liquidation value that exceeded book value, causing a one-time 
 reduction in 
net income 
available to 
common stockholders 
of $89.6 
million. At December 31, 
2021, there 
were no 
issued 
 and outstanding preferred shares. 

 Operating net 
income per 
diluted share 
(non-GAAP) for 
the year 
ended December 31, 
2021 was 
$1.81 compared 
to 
 operating net income per 
diluted share (non-GAAP) 
for the same period 
in 2020 of $1.50 
and $0.30 for Class A and Class 
 B, respectively. 
Operating net 
income per 
diluted share 
(non-GAAP) for 
the year 
ended December 31, 
2021 excludes 
the 
 $89.6 million one-time accounting 
impact of 
the exchange 
and redemption of 
the preferred 
shares. The 
operating net 
income 
 per diluted share 
for the year 
ended December 31, 
2020 was adjusted 
to reflect the 
1 for 5 
reverse stock 
split on Class A 
 common stock. 
To see 
a reconciliation 
of non-GAAP 
measures to 
GAAP measures 
refer to 
section below 
“Reconciliation 
 and Management Explanation of Non-GAAP Financial 
Measures”. 

 Net Interest Income 
 Net interest 
income is 
the difference 
between interest 
earned on interest 
earning assets 
and interest 
incurred on 
interest-
 bearing liabilities 
and is 
the primary 
driver of 
core earnings. 
Interest income 
is generated 
from interest 
and dividends 
on 
 interest-earning 
assets, 
including 
loans, 
investment 
securities 
and 
other 
short-term 
investments. 
Interest 
expense 
is 
 incurred 
from 
interest 
paid 
on 
interest-bearing 
liabilities, 
including 
interest-bearing 
deposits, 
FHLB 
advances 
and 
other 
 borrowings. 
 To evaluate net 
interest income, we 
measure and monitor 
(i) yields on 
loans and other 
interest-earning assets, (ii) 
the 
 costs of deposits 
and other funding 
sources, (iii) net 
interest spread, and 
(iv) net interest margin. 
Net interest spread is 
equal 
 to the difference between rates 
earned on interest-earning assets 
and rates paid on interest-bearing 
liabilities. Net interest 
 margin is 
equal to 
the annualized 
net interest 
income 
divided by 
average interest 
-earning assets. 
Because 
non-interest-
 bearing sources of funds, such as non-interest-bearing deposits 
and stockholders’ equity, also fund interest-earning assets, 
 net interest margin includes the benefit of these non-interest-bearing 
sources. 
 Changes in 
the market 
interest rates 
and interest 
rates we 
earn on 
interest-earning assets 
or pay on 
interest-bearing 
 liabilities, as well 
as the volume 
and types of 
interest-earning assets and interest-bearing 
and non-interest-bearing liabilities, 
 are usually the 
largest drivers 
of periodic changes 
in net interest 
spread, net interest 
margin and net 
interest income. 
Our 
 asset liability committee 
(“ALCO”) has 
in place asset-liability 
management techniques 
to manage major 
factors that 
affect 
 net interest income and net interest margin. 

 
 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Table of Contents 
 

 

 48 
USCB Financial Holdings, Inc. 
2021 10-K 
 

 The following table contains information related 
to average balance sheet, average yields 
on assets, and average costs 
 of liabilities for the periods indicated (in thousands): 
 Years Ended December 31, 
 2021 
 2020 
 Average 
 Balance 
 Interest 
 Yield/Rate 

 Average 
 Balance 
 Interest 
 Yield/Rate 

 Assets 
 Interest-earning assets: 
 Loans 
 (1)
 $ 
 1,116,142 
 $ 
 48,730 
 4.37 
 % 
 $ 
 1,026,905 
 $ 
 47,078 
 4.58 
 % 
 Investment securities 
 (2)
 403,677 
 7,886 
 1.95 
 % 
 201,073 
 5,248 
 2.61 
 % 
 Other interest earnings assets 
 92,430 
 106 
 0.11 
 % 
 110,898 
 307 
 0.28 
 % 
 Total 
interest-earning assets 
 1,612,249 
 56,722 
 3.52 
 % 
 1,338,876 
 52,633 
 3.93 
 % 
 Non-interest earning assets 
 89,409 
 90,059 
 Total 
assets 
 $ 
 1,701,658 
 $ 
 1,428,935 
 Liabilities and stockholders' equity 
 Interest-bearing liabilities: 
 Interest-bearing demand deposits 
 $ 
 52,379 
 59 
 0.11 
 % 
 $ 
 46,819 
 158 
 0.34 
 % 
 Saving and money market deposits 
 619,810 
 2,082 
 0.34 
 % 
 473,028 
 3,095 
 0.65 
 % 
 Time deposits 
 235,127 
 1,531 
 0.65 
 % 
 276,462 
 4,709 
 1.70 
 % 
 Total 
interest-bearing deposits 
 907,316 
 3,672 
 0.40 
 % 
 796,309 
 7,962 
 1.00 
 % 
 Borrowings and repurchase agreements 
 36,000 
 554 
 1.54 
 % 
 51,362 
 1,074 
 2.09 
 % 
 Total 
interest-bearing liabilities 
 943,316 
 4,226 
 0.45 
 % 
 847,671 
 9,036 
 1.07 
 % 
 Non-interest bearing demand deposits 
 547,116 
 390,467 
 Other non-interest-bearing liabilities 
 27,142 
 25,281 
 Total 
liabilities 
 1,517,574 
 1,263,419 
 Stockholders' equity 
 184,084 
 165,516 
 Total 
liabilities and stockholders' equity 
 $ 
 1,701,658 
 $ 
 1,428,935 
 Net interest income 
 $ 
 52,496 
 $ 
 43,597 
 Net interest spread 
 (3)
 3.07 
 % 
 2.86 
 % 
 Net interest margin 
 (4)
 3.26 
 % 
 3.26 
 % 
 (1) 
Average loan balances include non-accrual loans. Interest income 
on loans includes accretion of deferred 
loan fees, net of deferred loan costs. 
 (2) 
At fair value except for securities held to maturity. 
 (3) 
Net interest spread is the average yield on 
total interest-earning assets minus the average 
rate on total interest-bearing liabilities. 
 (4) 
Net interest margin is the ratio of net interest 
income to total interest-earning assets. 
 Net interest income before the provision 
for credit losses was $52.5 million 
for the year ended December 
31, 2021, an 
 increase of 
$8.9 million or 
20.4%, from 
$43.6 million for 
the year 
ended December 
31, 2020. 
This increase 
was primarily 
 attributable to higher 
income from investment 
securities and loan 
fees as well 
as lower costs 
for interest-bearing liabilities 
 because of lower interest rate benchmarks. 

 Included with loan interest income are PPP fees totaling $3.6 million and $2.3 million for the year ended December 
31, 
 2021 and 2020, respectively. 
PPP loan fees are recognized upon forgiveness. 

 The net 
interest margin 
remained the 
same at 
3.26% for 
the years 
ended December 31, 
2021 and 
2020. The 
overall 
 and individual yields for interest-bearing assets and interest-bearing 
liabilities both decreased in 2021 compared to 2020. 
 Provision for Credit Losses 
 The allowance for credit losses 
(“ACL”) represents probable incurred 
losses in our portfolio. We 
maintain an adequate 
 ACL that can mitigate probable losses incurred in the loan portfolio. The ACL is increased by the provision for credit losses 
 and is decreased 
by charge-offs, 
net of recoveries 
on prior 
loan charge-offs. 
There are multiple 
credit quality 
metrics that 
 we use 
to 
base our 
determination 
of 
the 
amount of 
the ACL and 
corresponding 
provision 
for credit 
losses. These 
credit 
 metrics evaluate 
the credit 
quality and 
level of 
credit risk 
inherent in 
our loan 
portfolio, assess 
non-performing 
loans and 
 charge-offs levels, considers statistical trends and economic 
conditions and other applicable factors. 

 Provision for 
credit loss 
for the 
year ended 
December 31, 
2021, was 
a net 
reduction of 
$160 thousand 
compared to 
 $3.3 million in provision 
expense for the same 
period in 2020. The primary 
driver of the decrease 
was the improvement of 

 
 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Table of Contents 
 

 

 49 
USCB Financial Holdings, Inc. 
2021 10-K 
 

 the credit risk 
associated with the 
COVID-19 pandemic. The 
ACL as 
a percentage of 
total loans was 
1.27% 
at December 31, 
 2021 compared to 1.45% at December 31, 2020. 
 See “Allowance for Credit Losses” below for further discussion 
on how the ACL is calculated. 

 Non-Interest Income 
 Net interest income 
and other types of 
recurring non-interest 
income are generated 
from our operations. 
Our services 
 and products generate service charges and fees, mainly from our depository accounts. We also 
generate income from gain 
 on sale of 
loans though 
our swap and 
SBA programs. In addition, 
we own insurance 
on several employees 
and generate 
 income on the increase in the cash surrender value of 
these policies. 
 The following table presents the components of non-interest 
income for the dates indicated (in thousands): 
 Years Ended December 31, 
 2021 
 2020 
 Service fees 
 $ 
 3,609 
 $ 
 3,266 
 Gain on sale of securities available for sale, net 
 214 
 434 
 Gain on sale of loans held for sale, net 
 1,626 
 839 
 Gain on sale of premises and equipment, net 
 983 
 - 
 Loan settlement 
 2,500 
 - 
 Other non-interest income 
 1,766 
 1,558 
 Total 
non-interest income 
 $ 
 10,698 
 $ 
 6,097 
 Non-interest income 
for the 
year ended 
December 31, 
2021 increased 
$4.6 million or 
75.5%, compared 
to the 
same 
 period in 2020. 
This increase was primarily 
driven by the default 
interest recovery of a 
prior lending customer for $2.5 
million 
 and a gain on the sale of a previously owned building for $983 thousand as well as higher deposit service fees and gain on 
 sales of loans due 
to increased activity 
in our SBA program. Further, 
the default interest recovery 
of $2.5 million was 
for a 
 loan that was originated 
in 2008 and subsequently 
went through many iterations 
of credit collection. This payment 
reflects 
 the final payment and settlement of lien judgments against 
the customer. 
 Non-Interest Expense 
 The following table presents the components of non-interest 
expense for the dates indicated (in thousands):
 Years Ended December 31, 
 2021 
 2020 
 Salaries and employee benefits 
 $ 
 21,438 
 $ 
 19,204 
 Occupancy 
 5,257 
 5,656 
 Regulatory assessment and fees 
 783 
 691 
 Consulting and legal fees 
 1,454 
 1,045 
 Network and information technology services 
 1,466 
 1,536 
 Other operating 
 5,279 
 4,904 
 Total 
non-interest expense 
 $ 
 35,677 
 $ 
 33,036 
 Non-interest expense 
for the 
year ended 
December 31, 2021 
increased $2.6 million 
or 8.0%, 
compared to 
the same 
 period in 
2020. 
The increase 
is primarily 
due to 
an increase 
in salaries 
and employee 
benefit costs 
of $2.2 million 
for the 
 year ended 
December 31, 2021, 
compared to 
the same 
period in 
2020. The 
headcount of 
full-time equivalent 
employees 
 increased 
from 
179 
at 
December 31, 
2020 
to 
187 
at 
December 31, 
2021. 
Further, 
consulting 
and 
legal 
fees 
and 
other 
 operating 
expenses 
increased 
$0.4 
million 
or 
39.1% 
and 
$0.4 million 
or 
7.6%, 
respectively, 
during 
the 
year 
ended 
 December 31, 
2021 compared 
to the 
same 
period 
in 
2020 
due 
to our 
operations 
as a 
publicly traded 
company 
and 
the 
 formation of a bank holding company. 
The increase in salaries and employee benefits, consulting and legal fees, and other 
 operating costs has enabled 
us to support recent growth 
and has provided us with 
the necessary technology and required 
 professionals to execute our growth strategy. 

 Provision for Income Tax 
 Fluctuations in the effective tax rate reflect the effect of the differences in the inclusion or deductibility of certain income 
 and expenses for 
income tax purposes. 
Therefore, future 
decisions on the 
investments we choose 
will affect our 
effective 

 
 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Table of Contents 
 

 

 50 
USCB Financial Holdings, Inc. 
2021 10-K 
 

 tax rate. Surrender value of bank-owned life 
insurance policies for key employees, purchasing municipal bonds, and 
overall 
 taxable income will be important elements in determining our 
effective tax rate. 
 Income tax 
expense for 
the year 
ended 
December 31, 
2021 was 
$6.6 million, 
compared 
to $2. 
6 
million 
for the 
year 
 ended December 31, 2020. The 
effective tax rate for 
the year ended December 31, 2021 
was 23.8% and for the 
year ended 
 December 31, 2020 was 19.3%. 
 For a further discussion 
on income taxes, see 
Note 6 “Income Taxes” to 
the Consolidated Financial 
Statements in this 
 Form 10-K. 
 Rate/Volume Analysis 
 The 
table 
below 
sets 
forth 
information 
regarding 
changes 
in 
interest 
income 
and 
interest 
expense 
for 
the 
periods 
 indicated (in thousands). 
For each category of 
interest-earning assets and interest-bearing liabilities, 
information is provided 
 on changes attributable to (i) changes in rate (changes in rate multiplied by old volume); (ii) changes in volume (changes in 
 volume multiplied by old rate); and (iii) changes in rate-volume (change in 
rate multiplied by change in volume). Changes in 
 rate-volume are proportionately allocated between rate and volume 
variance. 
 Years Ended 2021 vs. 2020 
 Years Ended 2020 vs. 2019 
 Increase (decrease) due to change in 
 Increase (decrease) due to change in 
 Volume 
 Rate 
 Net 
 Change 
 Volume 
 Rate 
 Net 
 Change 
 Interest-earning assets: 
 Loans 
 (1)
 $ 
 4,091 
 $ 
 (2,439)
 $ 
 1,652 
 $ 
 4,573 
 $ 
 (2,229)
 $ 
 2,344 
 Investment securities 
 (2)
 5,288 
 (2,650)
 2,638 
 397 
 (596)
 (199)
 Other interest earnings assets 
 (51)
 (150)
 (201)
 1,412 
 (1,866)
 (454)
 Total increase (decrease) in interest income 
 9,328 
 (5,239)
 4,089 
 6,382 
 (4,691)
 1,691 
 Interest-bearing liabilities: 
 Interest-bearing demand deposits 
 19 
 (118)
 (99)
 $3 
 (6.00)
 (3)
 Saving and money market deposits 
 960 
 (1,973)
 (1,013)
 692 
 (2,738)
 (2,046)
 Time deposits 
 (704)
 (2,474)
 (3,178)
 1,106 
 (1,242)
 (136)
 Borrowings and repurchase agreements 
 (321)
 (199)
 (520)
 (952)
 (81)
 (1,033)
 Total increase (decrease) in interest expense 
 (46)
 (4,764)
 (4,810)
 849 
 (4,067)
 (3,218)
 Increase (decrease) in net interest income 
 $ 
 9,374 
 $ 
 (475)
 $ 
 8,899 
 $ 
 5,533 
 $ 
 (624)
 $ 
 4,909 
 (1) 
Average loan balances include non-accrual loans. Interest income 
on loans includes accretion of deferred 
loan fees, net of deferred loan costs. 
 (2) 
At fair value except for securities held to maturity. 
 Both average yields on 
interest earning assets and 
average rates paid on interest 
bearing liabilities have been declining 
 over the 
periods presented, 
reflecting the 
macro interest 
rate environment 
and ongoing 
initiatives to 
reduce the 
cost and 
 improve the mix of deposits. 
 Analysis of Financial Condition 
 Total 
assets at December 31, 2021, were $1.9 billion, an increase of $352.2 million, or 23.5%, over total assets of $1.5 
 billion at 
December 31, 2020. Total loans increased 
$151.6 million, 
or 14.6%, 
to $1.2 
billion at 
December 31, 2021 compared 
 to 
$1.0 
billion 
at 
December 31, 
2020. 
The 
increase 
in 
loans 
includes 
purchased 
loans 
totaling 
$129.5 
million 
including 
 deferred 
fees. 
Total 
deposits 
increased 
by 
$317.0 
million, 
or 
24.9%, 
to 
$1.6 
billion 
at 
December 31, 
2021 
compared 
to 
 December 31, 2020. 
 Investment Securities 
 The investment portfolio 
is used and 
managed to provide 
liquidity through cash 
flows, marketability 
and, if necessary, 
 collateral for 
borrowings. The 
investment portfolio 
is also 
used as 
a tool 
to manage 
interest rate 
risk and 
the Company’s 
 capital 
market 
risk 
exposure. 
The 
philosophy 
of 
the 
portfolio 
is 
to 
maximize 
the 
Company’s 
profitability 
taking 
into 
 consideration the Company’s risk appetite and tolerance, manage the assets composition 
and diversification, and maintain 
 adequate risk-based capital ratios. 
 The 
investment 
portfolio 
is 
managed 
in 
accordance 
with 
the 
Asset 
and 
Liability 
Management 
(“ALM”) 
policy, 
which 
 includes an 
investment guideline, 
approved by 
the Board. 
Such policy 
is reviewed 
at least 
annually or 
more frequently 
if 
 deemed necessary, 
depending on 
market 
conditions 
and/or 
unexpected 
events. 
The investment 
portfolio 
composition 
is 

 
 
 Table of Contents 
 

 

 51 
USCB Financial Holdings, Inc. 
2021 10-K 
 

 subject to change 
depending on the 
funding and liquidity 
needs of 
the Company, and the interest 
risk management objective 
 directed by the ALCO. The portfolio of investments can be used to modify the duration of the balance 
sheet. The allocation 
 of cash into 
securities takes 
into consideration 
anticipated future cash 
flows (uses 
and sources) and 
all available sources 
 of credit. 
 Our 
investment 
portfolio 
consists 
primarily 
of 
securities 
issued 
by 
U.S. 
government-sponsored 
agencies, 
agency 
 mortgage-backed securities, 
collateralized mortgage 
obligation securities, 
municipal securities, 
and other 
debt securities, 
 all with varying contractual maturities and coupons. Due to the optionality embedded in these securities, the final maturities 
 do not 
necessarily represent the 
expected life of 
the portfolio. Some 
of these 
securities will be 
called or paid 
down depending 
 on capital market conditions and expectations. The investment portfolio is regularly reviewed by the Chief Financial Officer, 
 Treasurer, 
or 
ALCO 
of 
the 
Company 
to 
ensure 
an 
appropriate 
risk 
and 
return 
profile 
as 
well 
as 
for 
adherence 
to 
the 
 investment policy. 
 As of December 31, 2021, the investment portfolio consisted of available-for-sale 
(“AFS”) and held-to-maturity (“HTM”) 
 debt securities. 
During the third quarter 
of 2021, there were 
28 investment securities that 
were transferred from AFS 
to HTM 
 with an amortized cost basis and fair value amount 
of $67.6 million and $68.7 million, respectively. 
On the date of transfer, 
 these securities had a 
total net unrealized gain of 
$1.1 million. The transfer of debt 
securities from the AFS 
to HTM category 
 were 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 
and 
in 
the 
carrying 
value 
of 
the 
HTM 
securities. 
Such 
amounts 
are 
amortized 
over 
the 
 remaining life of the security. 
There was no impact to net income on the date of transfer. 
 The book value of the AFS securities is adjusted monthly 
for unrealized gain or loss as a valuation allowance, 
and any 
 gain 
or 
loss 
is 
reported 
on 
an 
after-tax 
basis 
as 
a 
component 
of 
other 
comprehensive 
income 
in 
stockholders’ 
equity. 
 Periodically, 
we 
may 
need 
to 
assess 
whether 
there 
have 
been 
any 
events 
or 
unexpected 
economic 
circumstances 
to 
 indicate that 
a security 
on which 
there is 
an unrealized 
loss is 
impaired on 
an other-than-temporary 
basis (“OTTI”). 
If the 
 impairment is 
deemed to 
be permanent, 
an analysis 
would be 
made considering 
many factors, 
including the 
severity and 
 duration of the impairment, the severity 
of the event, our intent and 
ability to hold the security for a 
period of time sufficient 
 for a 
recovery in 
value, recent 
events specific 
to the 
issuer or 
industry, 
any related 
credit events, 
and for 
debt securities, 
 external 
credit 
ratings 
and 
recent 
downgrades 
related 
to 
deterioration 
of 
credit 
quality. 
Securities 
on 
which 
there 
is 
an 
 unrealized loss 
that is 
deemed to 
be OTTI 
are written 
down to 
fair value, 
with the 
write-down recorded 
as a 
realized loss 
 under line item 
“Gain (loss) on 
sale of securities 
available-for-sale, 
net” of the Consolidated 
Statements of Operations. 
As 
 of December 
31, 
2021, there 
are no 
securities 
which 
management 
has 
classified 
as 
OTTI. 
For 
further discussion 
of our 
 analysis 
on 
impaired 
investment 
securities 
for 
OTTI, 
see 
Note 2 
“Investment 
Securities” 
to 
the 
Consolidated 
Financial 
 Statements in this Form 10-K. 
 AFS and 
HTM investment 
securities increased 
$189.9 million or 
56.8% to 
$524.2 million at 
December 31, 
2021 from 
 $334.3 million at December 31, 2020. Investment securities increased over the past year due to higher than expected cash 
 balances. 
Management 
reinvested 
idle 
cash 
balances 
into 
high 
credit 
quality 
investments 
to 
increase 
the 
Company’s 
 profitability 
and 
modify 
the 
Company’s 
balance 
sheet 
duration 
according 
to 
the 
ALM 
policy. 
As 
of 
December 31, 
2021, 
 corporate bond securities with a market value of $20.4 million were pledged to secure 
public deposits. As of December 31, 
 2021, the Company did not have any tax-exempt securities 
in the portfolio. 

 
 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Table of Contents 
 

 

 52 
USCB Financial Holdings, Inc. 
2021 10-K 
 

 The 
following 
table 
presents 
the 
amortized 
cost 
and 
fair 
value 
of 
investment 
securities 
for 
the 
dates 
indicated 
(in 
 thousands): 
 December 31, 2021 
 December 31, 2020 
 Available-for-sale: 
 Amortized 
 Cost 
 Fair Value 
 Amortized 
 Cost 
 Fair Value 
 U.S. Government Agency - SBA 
 $ 
 - 
 $ 
 - 
 $ 
 1,488 
 $ 
 1,552 
 U.S. Government Agency 
 10,564 
 10,520 
 20,196 
 20,032 
 Collateralized mortgage obligations 
 160,506 
 156,829 
 104,426 
 104,650 
 Mortgage-backed securities - Residential 
 120,643 
 118,842 
 80,110 
 81,301 
 Mortgage-backed securities - Commercial 
 49,905 
 50,117 
 45,802 
 48,331 
 Municipal securities 
 25,164 
 24,276 
 24,230 
 24,211 
 Bank subordinated debt securities 
 27,003 
 28,408 
 24,004 
 24,630 
 Corporate bonds 
 12,068 
 12,550 
 27,733 
 29,615 
 $ 
 405,853 
 $ 
 401,542 
 $ 
 327,989 
 $ 
 334,322 
 Held-to-maturity: 
 U.S. Government Agency - SBA 
 $ 
 12,004 
 $ 
 11,641 
 $ 
 - 
 $ 
 - 
 U.S. Government Agency 

 22,501 
 22,263 
 - 
 - 
 Collateralized mortgage obligations 
 44,820 
 43,799 
 - 
 - 
 Mortgage-backed securities - Residential 
 26,920 
 26,352 
 - 
 - 
 Mortgage-backed securities - Commercial 
 3,103 
 3,013 
 - 
 - 
 Corporate bonds 
 13,310 
 13,089 
 - 
 - 
 $ 
 122,658 
 $ 
 120,157 
 $ 
 - 
 $ 
 - 
 The following 
table shows 
the weighted 
average yields, 
categorized by 
contractual maturity, 
for investment 
securities 
 as of December 31, 2021 (in thousands, except ratios): 

 Within 1 year 
 After 1 year through 
 5 years 
 After 5 years through 
 10 years 
 After 10 years 
 Total 
 Amortized 
 Cost 
 Yield 
 Amortized 
 Cost 
 Yield 
 Amortized 
 Cost 
 Yield 
 Amortized 
 Cost 
 Yield 
 Amortized 
 Cost 
 Yield 
 Available-for-sale: 
 U.S. Government Agency 

 $ 
 - 
 0.00 % 
 $ 
 - 
 0.00 % 
 $ 
 - 
 0.00 % 
 $ 
 10,564 
 1.74% 
 $ 
 10,564 
 0.00 % 
 Collateralized mortgage obligations 
 - 
 0.00 % 
 - 
 0.00 % 
 - 
 0.00 % 
 160,506 
 1.32% 
 160,506 
 1.32% 
 MBS - Residential 
 - 
 0.00 % 
 - 
 0.00 % 
 1,002 
 0.00 % 
 119,641 
 2.26% 
 120,643 
 1.38% 
 MBS - Commercial 
 - 
 0.00 % 
 - 
 0.00 % 
 - 
 0.00 % 
 49,905 
 2.82% 
 49,905 
 2.82% 
 Municipal securities 

 - 
 0.00 % 
 - 
 0.00 % 
 1,000 
 2.05% 
 24,164 
 1.38% 
 25,164 
 1.73% 
 Bank subordinated debt securities 
 - 
 0.00 % 
 - 
 0.00 % 
 26,003 
 4.98% 
 1,000 
 6.13% 
 27,003 
 5.02% 
 Corporate bonds 
 1,992 
 3.39% 
 5,983 
 4.24% 
 4,093 
 2.54% 
 - 
 0.00 % 
 12,068 
 3.52% 
 $ 
 1,992 
 $ 
 5,983 
 $ 
 32,098 
 $ 
 365,780 
 $ 
 405,853 
 1.87% 
 Held-to-maturity: 
 U.S. Government Agency - SBA 
 $ 
 - 
 0.00 % 
 $ 
 - 
 0.00 % 
 $ 
 3,953 
 1.58% 
 $ 
 8,051 
 1.58% 
 $ 
 12,004 
 1.58% 
 U.S. Government Agency 

 - 
 0.00 % 
 2,982 
 0.64% 
 19,519 
 1.26% 
 - 
 0.00 % 
 22,501 
 1.18% 
 Collateralized mortgage obligations 
 - 
 0.00 % 
 - 
 0.00 % 
 - 
 0.00 % 
 44,820 
 1.46% 
 44,820 
 1.46% 
 MBS - Residential 
 - 
 0.00 % 
 2,836 
 2.98% 
 9,264 
 1.61% 
 14,820 
 1.62% 
 26,920 
 1.76% 
 MBS - Commercial 
 - 
 0.00 % 
 - 
 0.00 % 
 3,103 
 1.61% 
 - 
 0.00 % 
 3,103 
 1.61% 
 Corporate bonds 
 2,017 
 3.07% 
 11,293 
 2.71% 
 - 
 0.00 % 
 - 
 0.00 % 
 13,310 
 2.76% 
 $ 
 2,017 
 $ 
 17,111 
 $ 
 35,839 
 $ 
 67,691 
 $ 
 122,658 
 1.62% 
 Loans 
 Loans are 
the largest 
category of 
interest-earning assets 
on the 
Consolidated 
Balance Sheets, 
and usually 
provides 
 higher yields 
than the 
rest of 
the interest-earning 
assets. Higher 
yields typically 
carry inherent 
credit and 
liquidity risks 
in 
 comparison to lower yield assets. 
The Company manages and mitigates 
such risks in accordance with the 
credit and ALM 
 policies, risk tolerance and balance sheet composition. 

 
 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Table of Contents 
 

 

 53 
USCB Financial Holdings, Inc. 
2021 10-K 
 

 The following table shows the loan portfolio composition 
as of the dates indicated (in thousands): 
 

 December 31, 2021 
 December 31, 2020 
 Total 
 Percent of 
 Total 
 Total 
 Percent of 
 Total 
 Residential Real Estate 
 $ 
 201,359 
 16.9 
 %
 $ 
 232,754 
 22.3 
 % 
 Commercial Real Estate 
 704,988 
 59.2 
 %
 606,425 
 58.2 
 % 
 Commercial and Industrial 
 146,592 
 12.3 
 %
 157,330 
 15.1 
 % 
 Foreign Banks 
 59,491 
 5.0 
 %
 38,999 
 3.7 
 % 
 Consumer and Other 

 79,229 
 6.6 
 %
 5,507 
 0.5 
 % 
 Total 
gross loans 
 1,191,659 
 100.0 
 %
 1,041,015 
 99.8 
 % 
 Less: Unearned income 
 1,578 
 2,511 
 Total 
loans net of unearned income 
 1,190,081 
 1,038,504 
 Less: Allowance for credit losses 
 15,057 
 15,086 
 Total 
net loans 
 $ 
 1,175,024 
 $ 
 1,023,418 
 Total 
gross loans increased 
by $150.6 million 
or 14.5% 
at December 31, 
2021 compared to 
the same period 
in 2020. 
 The most 
significant growth 
was in 
the commercial 
real estate 
and consumer 
and other 
loan pools, 
offset by 
a decline 
in 
 the residential real 
estate and commercial 
and industrial loan 
pools. Consumer and 
other loans increased 
because of two 
 yacht loan portfolios that were purchased for $93.7 million, 
including deferred fees, for the year ended December 31, 2021. 
 Commercial and industrial loans decreased because of 
continuing PPP loan forgiveness 
as expected. 
 The loan portfolio has continued to experience growth in the past two years. Since our inception, the primary focus has 
 been 
on 
commercial 
real 
estate 
lending, 
representing 
approximately 
59.2% 
of 
the 
total 
gross 
loan 
portfolio 
as 
of 
 December 31, 2021. In the past, we supplemented our core commercial growth with the origination of 1-4 family residential 
 loans and 
the acquisition 
of 1-4 
family residential 
loan portfolios 
to further 
diversify our 
loan portfolio. 
However, 
we have 
 determined not to further pursue this line of business and 
are focused on growing our commercial portfolio. 

 Other than the previous 
mentioned shifts, we 
do not expect any 
significant changes 
over the foreseeable future 
in the 
 composition 
of 
our 
loan 
portfolio 
or 
in 
our 
emphasis 
on 
commercial 
real 
estate 
lending. 
Our 
loan 
growth 
strategy 
since 
 inception has been reflective of the market in which we 
operate and of our strategic plan as approved by the 
Board. 
 Most of the 
commercial real estate 
exposure represents 
loans to commercial 
businesses secured 
by owner-occupied 
 real estate. 
The growth 
experienced 
over the 
last couple 
of years 
is primarily 
due to 
implementation 
of our 
relationship-
 based banking model and the success 
of our relationship managers in 
competing for new business in 
a highly competitive 
 metropolitan area. Many of our 
larger loan clients have lengthy 
relationships with members of our senior management 
team 
 or our relationship managers that date back to former institutions. 

 From a 
liquidity perspective, 
our loan 
portfolio provides 
us with 
additional 
liquidity due 
to repayments 
or unexpected 
 prepayments. 
The 
following 
table 
shows 
maturities 
and 
sensitivity 
to 
interest 
rate 
changes 
for 
the 
loan 
portfolio 
at 
 December 31, 2021 (in thousands): 
 Due in 1 year or 
 less 
 Due in 1 to 5 
 years 
 Due after 5 to 15 
 years 
 Due after 15 
 years 
 Total 
 Residential Real Estate 
 $ 
 7,745 
 $ 
 18,350 
 $ 
 83,595 
 $ 
 91,669 
 $ 
 201,359 
 Commercial Real Estate 
 24,279 
 163,931 
 513,333 
 3,445 
 704,988 
 Commercial and Industrial 
 15,263 
 67,833 
 31,336 
 32,160 
 146,592 
 Foreign Banks 
 59,491 
 - 
 - 
 - 
 59,491 
 Consumer and Other 
 2,005 
 3,465 
 2,505 
 71,254 
 79,229 
 Total 
gross loans 
 $ 
 108,783 
 $ 
 253,579 
 $ 
 630,769 
 $ 
 198,528 
 $ 
 1,191,659 
 Interest rate sensitivity: 
 Fixed interest rates 
 $ 
 82,940 
 $ 
 170,406 
 $ 
 136,429 
 $ 
 78,859 
 $ 
 468,634 
 Floating or adjustable rates 
 25,843 
 83,173 
 494,340 
 119,669 
 723,025 
 Total 
gross loans 
 $ 
 108,783 
 $ 
 253,579 
 $ 
 630,769 
 $ 
 198,528 
 $ 
 1,191,659 
 The information 
presented 
in the 
table above 
is based 
upon the 
contractual 
maturities of 
the individual 
loans, which 
 may be 
subject to 
renewal at 
their contractual 
maturity. 
Renewals will 
depend on 
approval by 
our credit 
department and 
 balance sheet 
composition at the 
time of 
the analysis, 
as well 
as any 
modification of terms 
at the 
loan’s maturity. Additionally, 

 
 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Table of Contents 
 

 

 54 
USCB Financial Holdings, Inc. 
2021 10-K 
 

 maturity 
concentrations, 
loan 
duration, 
prepayment 
speeds 
and 
other 
interest 
rate 
sensitivity 
measures 
are 
discussed, 
 reviewed, and analyzed by the ALCO. Decisions on term 
rate modifications are discussed as well. 

 As of 
December 31, 
2021, approximately 
60.7% 
of the 
loans 
have adjustable/variable 
rates 
and 
39.3% 
of the 
loans 
 have fixed rates. 
The adjustable/variable 
loans re-price to 
different benchmarks 
and tenors in 
different periods 
of time. By 
 contractual characteristics, there are no 
material concentrations on anniversary repricing. Additionally, it is 
important to note 
 that most 
of our 
loans have 
interest rate 
floors. This 
embedded option 
protects the 
Company from 
a decrease 
in interest 
 rates and positions us to gain in the scenario of higher interest 
rates.
 Asset Quality 

 Our asset quality grading 
analysis estimates the capability of 
the borrower to repay 
the contractual obligation of 
the loan 
 agreement as scheduled or at all. The Company’s internal credit risk grading system is based on experiences with similarly 
 graded loans. Internal 
credit risk 
grades are evaluated 
at least annually, 
or more frequently 
if deemed necessary. 
Internal 
 credit 
risk 
ratings 
may 
change 
based 
on 
management’s 
assessment 
of 
the 
results 
from 
the 
annual 
review, 
portfolio 
 monitoring and other developments observed with borrowers. 

 The internal credit risk grades used by the Company to 
assess the credit worthiness of a loan are shown below: 
 Pass 
 – Loans indicate different levels of satisfactory 
financial condition and performance. 

 Special Mention
 
– Loans classified as special mention have a potential weakness 
that deserves management’s 
 close attention. If left uncorrected, these potential weaknesses 
may result in deterioration of the repayment 
 prospects for the loan or of the institution’s 
credit position at some future date. 

 Substandard 
 – Loans classified as substandard are inadequately protected 
by the current net worth and paying 
 capacity of the obligator or of the collateral pledged, if 
any. Loans so classified 
have a well-defined weakness or 
 weaknesses that jeopardize the liquidation of the debt. 
They are characterized by the distinct possibility that the 
 institution will sustain some loss if the deficiencies are 
not corrected. 

 Doubtful
 
– Loans classified as doubtful have all the weaknesses inherent 
in those classified at substandard, with 
 the added characteristic that the weaknesses make collection 
or liquidation in full on the basis of currently existing 
 facts, conditions, and values, highly questionable and improbable. 

 Loss 
 – Loans classified as loss are considered uncollectible. 
 Loan credit exposures by internally assigned grades are 
as follows for the dates indicated (in thousands): 

 December 31, 2021 
 Pass 
 Special Mention 
 Substandard 
 Doubtful 
 Total 
 Residential Real Estate 
 $ 
 196,778 
 $ 
 - 
 $ 
 4,581 
 $ 
 - 
 $ 
 201,359 
 Commercial Real Estate 
 703,349 
 1,222 
 417 
 - 
 704,988 
 Commercial and Industrial 
 146,039 
 - 
 553 
 - 
 146,592 
 Foreign Banks 
 59,491 
 - 
 - 
 - 
 59,491 
 Consumer and Other 

 79,005 
 - 
 224 
 - 
 79,229 
 $ 
 1,184,662 
 $ 
 1,222 
 $ 
 5,775 
 $ 
 - 
 $ 
 1,191,659 
 December 31, 2020 
 Pass 
 Special Mention 
 Substandard 
 Doubtful 
 Total 
 Residential Real Estate 
 $ 
 225,861 
 $ 
 - 
 $ 
 6,893 
 $ 
 - 
 $ 
 232,754 
 Commercial Real Estate 
 605,180 
 - 
 1,245 
 - 
 606,425 
 Commercial and Industrial 
 157,097 
 - 
 233 
 - 
 157,330 
 Foreign Banks 
 38,999 
 - 
 - 
 - 
 38,999 
 Consumer and Other 

 5,229 
 - 
 278 
 - 
 5,507 
 $ 
 1,032,366 
 $ 
 - 
 $ 
 8,649 
 $ 
 - 
 $ 
 1,041,015 

 
 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Table of Contents 
 

 

 55 
USCB Financial Holdings, Inc. 
2021 10-K 
 

 Non-Performing Assets 
 The following table presents non-performing assets as 
of December 31, 2021 and 2020 (in thousands, except 
ratios): 
 2021 
 2020 
 Non-accrual loans, less non-accrual TDR loans 
 $ 
 1,190 
 $ 
 303 
 Non-accrual TDRs 
 - 
 1,275 
 Loans past due over 90 days and still accruing 
 - 
 - 
 Total 
non-performing loans 
 1,190 
 1,578 
 Other real estate owned 
 - 
 - 
 Total 
non-performing assets 
 $ 
 1,190 
 $ 
 1,578 
 Asset quality ratios: 
 Allowance for credit losses to total loans 
 1.27% 
 1.45% 
 Allowance for credit losses to non-performing loans 
 1265% 
 956% 
 Non-performing loans to total loans 
 0.10% 
 0.15% 
 Non-performing 
assets include 
all loans 
categorized as 
non-accrual or 
restructured, 
impaired securities, 
non-accrual 
 TDRs, other 
real estate owned 
(“OREO”) and other 
repossessed assets. Problem 
loans for 
which the 
collection or liquidation 
 in 
full 
is 
reasonably 
uncertain 
are 
placed 
on 
a 
non-accrual 
status. 
This 
determination 
is 
based 
on 
current 
existing 
facts 
 concerning collateral values 
and the paying capacity 
of the borrower. 
When the collection of 
the full contractual balance 
is 
 unlikely, the loan is 
placed on non-accrual to avoid overstating the Company’s 
income for a loan with increased credit risk. 

 If the 
principal or 
interest on 
a commercial 
loan becomes 
due and 
unpaid for 
90 days 
or more, 
the loan 
is placed 
on 
 non-accrual status as of 
the date it becomes 
90 days past due 
and remains in non-accrual 
status until it meets 
the criteria 
 for restoration to accrual status. 
Residential loans, on 
the other hand, are placed 
on non-accrual status when 
the principal 
 or interest 
becomes due 
and unpaid 
for 120 
days or 
more and remains 
in non-accrual 
status until 
it meets 
the criteria 
for 
 restoration 
to 
accrual 
status. 
Restoring 
a 
loan 
to 
accrual 
status 
is 
possible 
when 
the 
borrower 
resumes 
payment 
of 
all 
 principal and interest 
payments for a period 
of six 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. 
 A TDR is 
a debtor that 
is experiencing 
financial difficulties 
and the Company 
grants a concession. 
This determination 
 is performed during the annual review process or whenever problems 
are surfacing regarding the client’s ability to repay 
in 
 accordance with 
the original 
terms of 
the loan 
or line 
of credit. 
In general, 
a borrower 
that can 
obtain funds 
from sources 
 other than 
the Company 
at market 
interest rates 
at or 
near those 
for non-troubled 
debt is 
not involved 
in a 
troubled debt 
 restructuring. 
The 
concessions 
are 
given 
to 
the 
debtor 
in 
various 
forms, 
including 
interest 
rate 
reductions, 
principal 
 forgiveness, 
extension 
of 
maturity 
date, 
waiver, 
or 
deferral 
of 
payments 
and 
other 
concessions 
intended 
to 
minimize 
 potential losses. 
 The following tables present performing and non-performing 
TDRs for the dates indicated (in thousands): 
 December 31, 2021 
 Accruing 
 Non-Accruing 
 Total 
 Residential Real Estate 
 $ 
 7,815 
 $ 
 - 
 $ 
 7,815 
 Commercial Real Estate 
 696 
 - 
 696 
 Commercial and Industrial 
 141 
 - 
 141 
 Consumer and Other 

 224 
 - 
 224 
 $ 
 8,876 
 $ 
 - 
 $ 
 8,876 
 December 31, 2020 
 Accruing 
 Non-Accruing 
 Total 
 Residential Real Estate 
 $ 
 8,884 
 $ 
 777 
 $ 
 9,661 
 Commercial Real Estate 
 733 
 - 
 733 
 Commercial and Industrial 
 179 
 23 
 202 
 Consumer and Other 

 278 
 - 
 278 
 $ 
 10,074 
 $ 
 800 
 $ 
 10,874 
 The Company had 
allocated $360 thousand 
and $453 thousand of 
specific allowance for 
TDR loans at 
December 31, 
 2021 and 2020, respectively. 
There was no commitment to lend additional funds to these 
TDR customers. 

 
 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Table of Contents 
 

 

 56 
USCB Financial Holdings, Inc. 
2021 10-K 
 

 Charge-offs on 
TDR loans 
for the years 
ended December 31, 
2021 and 
2020 was $18 
thousand and 
$153 thousand, 
 respectively. 
There 
were 
no 
defaults 
on 
TDR 
loans 
at 
December 31, 
2021 
and 
2020 
within 
the 
prior 
12 
months. 
The 
 Company did not have any new TDR loans for the year 
ended December 31, 2021. 
 The 
Company 
provided 
financial 
relief 
to 
borrowers 
impacted 
by 
COVID-19 
and 
provided 
modifications 
to 
include 
 interest 
only 
deferral 
or 
principal 
and 
interest 
deferral. 
These 
modifications 
are 
excluded 
from 
TDR, 
classification 
under 
 Section 4013 of the CARES Act or under applicable interagency 
guidance of the federal banking regulators. 

 For further 
discussion on 
non-performing loans, 
see Note 
3 “Loans” 
to the 
Consolidated Financial 
Statements of 
this 
 Form 10-K. 
 Allowance for Credit Losses 
 In 
determining 
the 
balance 
of 
the 
allowance 
account, 
loans 
are 
pooled 
by 
product 
segments 
with 
similar 
risk 
 characteristics and management 
evaluates the ACL on 
each segment and on 
a regular basis 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. 
 Additionally, 
qualitative adjustments 
are made to 
the ACL when, 
based on management’s 
judgment, there are 
factors 
 impacting the allowance estimate not considered by the 
quantitative calculations. 

 The following table presents ACL and net charge-offs to average loans by 
type for the periods indicated (in thousands): 
 Residential 
 Real Estate 
 Commercial 
 Real Estate 
 Commercial 
 and Industrial 
 Foreign 

 Banks 
 Consumer 
 and Other 
 Total 
 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 
 Average loans 
 $ 
 212,867 
 $ 
 654,723 
 $ 
 153,763 
 $ 
 52,187 
 $ 
 42,602 
 $ 
 1,116,142 
 Net charge-offs to average loans 
 

 - % 
 

 - % 
 

 (0.08)% 
 

 - % 
 

 0.02%
 

 (0.01)% 
 December 31, 2020: 
 

 

 

 

 

 

 Beginning balance 
 $ 
 3,749 
 $ 
 6,591 
 $ 
 1,214 
 $ 
 332 
 $ 
 112 
 $ 
 11,998 
 Provision for credit losses 
 (36)
 2,861 
 321 
 16 
 88 
 3,250 
 Recoveries 
 168 
 1 
 307 
 - 
 18 
 494 
 Charge-offs 
 (473)
 - 
 (153)
 - 
 (30)
 (656)
 Ending Balance 

 $ 
 3,408 
 $ 
 9,453 
 $ 
 1,689 
 $ 
 348 
 $ 
 188 
 $ 
 15,086 
 Average loans 
 $ 
 258,728 
 $ 
 596,022 
 $ 
 122,177 
 $ 
 43,433 
 $ 
 6,545 
 $ 
 1,026,905 
 Net charge-offs to average loans 
 0.12%
 - % 
 (0.13)% 
 - % 
 0.18%
 0.02%
 Bank-Owned Life Insurance 
 At 
December 31, 
2021, 
the 
combined 
cash 
surrender 
value 
of 
all 
bank-owned 
life 
insurance 
(“BOLI”) 
policies 
was 
 $41.7 million. 
Changes 
in 
cash 
surrender 
value 
are 
recorded 
in 
non-interest 
income 
on 
the 
Consolidated 
Statements 
of 
 Operations. In 
2021, the Company 
maintained BOLI 
policies with 
five insurance 
carriers. The Company 
is the beneficiary 
 of these policies. 
 Deposits 
 Customer deposits are the 
primary funding source for 
the Bank’s growth. 
Through our network of 
banking centers, we 
 offer a competitive array of deposit 
accounts and treasury management services designed 
to meet our customers’ business 
 needs. Our primary 
deposit customers 
are SMBs, 
and the personal 
business of owners 
and operators 
of these 
SMBs, as 
 well as the retail/consumer relationships of the employees 
of these businesses. Our focus on quality and customer 
service 

 
 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Table of Contents 
 

 

 57 
USCB Financial Holdings, Inc. 
2021 10-K 
 

 has created a strong brand recognition within 
our depositors, which reflects in the composition 
of our deposits; most of our 
 funding sources are core deposits. 
 Additionally, our personal and private banking management line of business is focused on the needs of the 
owners and 
 operators of our business 
customers, offering 
a suite of checking, 
savings, money market 
and time deposit 
accounts, and 
 utilizing superior client service to build and expand client relationships. A unique aspect of our business model is our ability 
 to offer correspondent services to banks in Central America 
and the Caribbean. 
 The 
following 
table 
presents 
the 
daily 
average 
balance 
and 
average 
rate 
paid 
on 
deposits 
by 
category 
as 
of 
 December 31, 2021 and 2020 (in thousands, except ratios): 
 2021 
 2020 
 Average 
 Balance 
 Average 
 Rate Paid 
 Average 
 Balance 
 Average 
 Rate Paid 
 Non-interest-bearing deposits 
 $ 
 547,116 
 0.00 
 % 
 $ 
 390,467 
 0.00 
 % 
 Interest-bearing transaction accounts 
 52,379 
 0.11 
 % 
 46,819 
 0.34 
 % 
 Saving and money market deposits 
 619,810 
 0.34 
 % 
 473,028 
 0.65 
 % 
 Time deposits 
 235,127 
 0.65 
 % 
 276,462 
 1.70 
 % 
 
Total 
deposits 
 $ 
 1,454,432 
 0.25 
 % 
 $ 
 1,186,777 
 0.67 
 % 
 To
 tal 
average 
deposits 
at 
December 31, 
2021 
was 
$1.5 billion, 
an 
increase 
of 
$267.7 million, 
or 
22.6% 
over 
total 
 average deposits of $1.2 billion 
for the same period 
in 2020. Our focus on 
demand deposits has resulted 
in an increase in 
 average balances of 
$156.6 million, 
or 40.1%, in non-interest 
bearing demand deposits 
and an increase of 
$146.8 million, 
 or 31.0%, in saving and money market deposits when 
comparing the average balances for the 
years ended December 31, 
 2021 and 2020. 
 The 
uninsured 
deposits 
are 
estimated 
based 
on 
the 
FDIC 
deposit 
insurance 
limit 
of 
$250 thousand 
for 
all 
deposit 
 accounts 
at 
the 
Bank 
per 
account 
holder. 
Total 
estimated 
uninsured 
deposits 
were 
$897.8 million 
and 
$606.1 million 
at 
 December 31, 2021 and 
2020, respectively. 
Time deposits 
with balances of $250 
thousand or more totaled 
$119.4 million 
 and $104.1 million at December 31, 2021 and 2020, 
respectively. 
 The following table shows scheduled maturities of uninsured 
time deposits as of December 31, 2021 (in thousands): 
 Three months or less 
 $ 
 28,707 
 Over three through six months 
 7,948 
 Over six though twelve months 
 42,106 
 Over twelve months 
 24,094 
 $ 
 102,855 
 Borrowings 
 As a 
member of 
the FHLB, we 
are eligible for 
advances with various 
terms and conditions. 
This accessibility of 
additional 
 funding allows 
us to 
efficiently 
and timely 
meet both 
expected and 
unexpected outgoing 
cash flows 
and collateral 
needs 
 without adversely affecting either daily operations 
or the financial condition of the Company. 
 As of December 31, 
2021 and 2020, 
there was $36.0 million 
of fixed rate advances 
from the FHLB outstanding 
with a 
 weighted average rate of 1.52%. Most of the advances 
are due in the first two quarters of 2025. 

 The following table presents the FHLB fixed rate advances 
as of December 31, 2021 (in thousands): 
 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 

 
 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Table of Contents 
 

 

 58 
USCB Financial Holdings, Inc. 
2021 10-K 
 

 We 
have 
also 
established 
Fed 
Funds 
lines 
of 
credit 
with 
our 
upstream 
correspondent 
banks 
to 
manage 
temporary 
 fluctuations in our daily cash balances. As of 
December 31, 2021, there were no 
outstanding balances with the Fed Funds 
 line of credit.
 Off-Balance Sheet Arrangements 
 We engage 
in various financial 
transactions in 
our operations 
that, under GAAP, 
may not be 
included on 
the balance 
 sheet. To 
meet the financing needs 
of our customers we may 
include commitments to extend 
credit and standby letters 
of 
 credit. To 
a varying 
degree, such 
commitments involve 
elements of 
credit, market, 
and interest 
rate risk 
in excess 
of the 
 amount recognized 
in the 
balance sheet. 
We use 
more conservative 
credit and 
collateral policies 
in making 
these credit 
 commitments as we 
do for on-balance sheet 
items. We are not 
aware of any accounting 
loss to be 
incurred by funding 
these 
 commitments; however, 
we maintain an allowance 
for off-balance sheet 
credit risk which is 
recorded under other liabilities 
 on the Consolidated Balance Sheets. 
 Since commitments associated with letters of 
credit and commitments to extend 
credit may expire unused, the 
amounts 
 shown do not necessarily 
reflect the actual 
future cash funding requirements 
. 
The following table 
presents lending related 
 commitments outstanding as of December 31, 2021 and 
2020 (in thousands): 
 2021 
 2020 
 Commitments to grant loans and unfunded lines of credit 
 $ 
 134,877 
 $ 
 107,553 
 Standby and commercial letters of credit 
 6,420 
 1,813 
 Total 
 $ 
 141,297 
 $ 
 109,366 
 Commitments to extend credit are agreements to lend funds to a client, as long as there is no violation of any condition 
 established 
in 
the 
contract, 
for 
a 
specific 
purpose. 
Commitments 
generally 
have 
variable 
interest 
rates, 
fixed 
expiration 
 dates or 
other 
termination 
clauses 
and 
may require 
payment 
of 
a fee. 
Since many 
of the 
commitments 
are 
expected to 
 expire without being 
fully drawn, the 
total commitment 
amounts disclosed 
above do not 
necessarily represent 
future cash 
 requirements. 
 Unfunded lines of credit represent unused portions of credit facilities to our current borrowers that represent no change 
 in credit risk in our portfolio. Lines 
of credit generally have variable interest 
rates. The maximum potential amount 
of future 
 payments we could 
be required to 
make is represented 
by the contractual 
amount of the 
commitment, less 
the amount of 
 any advances made. 
 Letters of credit are 
conditional commitments issued 
by us to guarantee 
the performance of a 
client to a third 
party. 
In 
 the event of nonperformance by 
the client in accordance with the 
terms of the agreement with the 
third party, 
we would be 
 required to fund 
the commitment. 
If the commitment 
is funded, we 
would be entitled 
to seek recovery 
from the client 
from 
 the underlying collateral, 
which can include 
commercial real estate, 
physical plant and 
property, inventory, receivables, cash 
 or marketable securities. 
 Asset and Liability Management Committee 
 The asset and liability management committee of our Company, or ALCO, consists of members of senior management 
 and our Board. Senior management is responsible for 
ensuring in a timely manner that Board 
approved strategies, policies, 
 and procedures 
for managing 
and mitigating 
risks are 
appropriately executed 
within the 
designated lines 
of authority 
and 
 responsibility. 
 ALCO 
oversees 
the 
establishment, 
approval, 
implementation, 
and 
review 
of 
interest 
rate 
risk, 
management, 
and 
 mitigation strategies, ALM related policies, ALCO procedures 
and risk tolerances and appetite. 
 While some 
degree of 
IRR (“Internal 
Rate of 
Return”) is 
inherent to 
the banking 
business, our 
ALCO has 
established 
 sound risk management practices in place to identify, 
measure, monitor and mitigate IRR exposures. 
 When assessing 
the scope 
of IRR 
exposure 
and 
impact on 
the consolidated 
balance sheet, 
cash 
flows and 
income 
 statement, 
management 
considers 
both 
earnings 
and 
economic 
impacts. 
Asset 
price 
variations, 
deposits 
volatility 
and 
 reduced earnings or outright losses could adversely affect 
the Company’s 
liquidity, performance, 
and capital adequacy. 
 Income simulations 
are used 
to assess 
the impact 
of changing 
rates on 
earnings under 
different rates 
scenarios and 
 time horizons. 
These simulations 
utilize both 
instantaneous 
and parallel 
changes in 
the level 
of interest 
rates, as 
well as 
 non-parallel changes such as changing slopes (flat and steeping) and 
twists of the yield curve, Static simulation models are 
 based on current exposures and 
assume a constant balance sheet with 
no new growth. Dynamic simulation analysis 
is also 

 
 
 Table of Contents 
 

 

 59 
USCB Financial Holdings, Inc. 
2021 10-K 
 

 utilized to have a 
more comprehensive assessment 
on IRR. This simulation 
relies on detailed 
assumptions outlined in 
our 
 budget and strategic plan, and in assumptions regarding changes in 
existing lines of business, new business, management 
 strategies and client expected behavior. 
 To 
have 
a 
more 
complete 
picture 
of 
IRR, 
the 
Company 
also 
evaluates 
the 
economic 
value 
of 
equity, 
or 
EVE. 
This 
 assessment 
will 
allow 
us 
to 
measure 
the 
degree 
to 
which 
the 
economic 
values 
will 
change 
under 
different 
interest 
rate 
 scenarios (parallel and non-parallel). The economic-value approach focuses on a longer-term time horizon and 
captures all 
 future cash flows expected 
from existing assets and 
liabilities. The economic 
value model utilizes a 
static approach in that 
 the analysis 
does not 
incorporate new 
business; rather, 
the analysis 
shows a 
snapshot in 
time of 
the risk 
inherent in 
the 
 balance sheet.
 Market and Interest Rate Risk Management 
 
According to our ALCO model, as of December 31, 2021, 
we were an asset sensitive company. This indicates that our 
 assets generally 
reprice faster 
than our 
liabilities, which 
results in 
a favorable 
impact to 
net interest 
income when 
market 
 interest rates 
increase. Many 
assumptions are 
used to 
calculate the 
impact of 
interest rate 
variations 
on our 
net interest 
 income, such as 
asset prepayment speeds, 
non-maturity deposit 
price sensitivity, 
pricing correlations, deposit 
truncations 
 and decay rates, and key rate drivers. 
 Because of the inherent use 
of these estimates and 
assumptions in the model, 
our actual results may, 
and most likely 
 will, differ from static measures results. In addition, static measures like 
EVEs do not include actions that management may 
 undertake to manage the risks in response to anticipated changes in interest rates or client deposit behavior. As part of our 
 ALM strategy 
and 
policy, 
management 
has the 
ability 
to modify 
the 
balance sheet 
to 
either increase 
asset 
duration 
and 
 decrease liability 
duration to reduce 
asset sensitivity, 
or to decrease 
asset duration and 
increase liability duration 
in order 
 to increase asset sensitivity. 
 According to our model, as of December 31, 2021, the NIM will remain fairly stable for static rate scenarios (-400 
basis 
 points: 
+400 
basis 
points). 
For 
the 
static 
forecast 
for 
year 
one, 
the 
estimated 
NIM 
will 
decrease 
from 
3.09% 
base 
case 
 scenario to 3.08% 
under a +400-basis 
points scenario. Additionally, utilizing an economic 
value of equity, or EVE, 
approach, 
 we analyze the 
risk to capital 
from the 
effects of 
various interest 
rate scenarios 
through a long-term 
discounted cash 
flow 
 model. This 
measures the 
difference between 
the economic 
value of 
our assets 
and the 
economic value 
of our 
liabilities, 
 which is 
a proxy for 
our liquidation value. 
According to 
our balance sheet 
composition, and as 
expected, our model 
stipulates 
 that an increase of rates 
will have a negative impact 
on the EVE. Results and 
analysis are presented quarterly to the 
Board, 
 and strategies are defined. 
 Additionally, in the last couple of quarters we 
have been reducing our asset 
sensitivity by extending asset duration. 
This 
 has reduced our NII volatility 
for the first and second 
year and has helped us 
to maintain the NII in 
accordance with ALCO 
 expectations. 

 Liquidity 
 
Liquidity is 
defined as 
a Company’s capacity 
to meet 
its cash 
and collateral 
obligations at 
a reasonable 
cost. Maintaining 
 an adequate level of liquidity depends on the Company’s ability to 
efficiently meet both expected and unexpected cash flow 
 and collateral needs without adversely affecting 
either daily operations or the financial condition of the 
Company. 
 Liquidity risk 
is the 
risk that 
we will 
be unable 
to meet 
our short-term 
and long-term 
obligations as 
they become 
due 
 because of an inability 
to liquidate assets or 
obtain relatively adequate funding. The 
Company’s obligations, and the funding 
 sources 
used 
to 
meet 
them, 
depend 
significantly 
on 
our 
business 
mix, 
balance 
sheet 
structure 
and 
composition, 
credit 
 quality of our assets and the cash flow profiles of our on- 
and off-balance sheet obligations. 
 In managing 
inflows and 
outflows, 
management 
regularly 
monitors situations 
that can 
give rise 
to increased 
liquidity 
 risk. These 
include funding 
mismatches, market 
constraints on 
the ability 
to convert 
assets (particularly 
investments) into 
 cash or in accessing sources of funds (i.e., market liquidity), 
and contingent liquidity events. 
 Changes in macroeconomic conditions or exposure 
to credit, market, operational, legal 
and reputational risks, including 
 cybersecurity risk could also affect the Company’s 
liquidity risk profile unexpectedly and are considered 
in the assessment 
 of liquidity and ALM framework. 
 Management has established 
a comprehensive and 
holistic management process for 
identifying, measuring, monitoring 
 and 
mitigating 
liquidity 
risk. 
Due 
to 
its 
critical 
importance 
to 
the 
viability 
of 
the 
Company, 
liquidity 
risk 
management 
is 
 integrated into our risk management processes and ALM 
policy. 

 
 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Table of Contents 
 

 

 60 
USCB Financial Holdings, Inc. 
2021 10-K 
 

 Critical elements of our liquidity 
risk management include: effective corporate governance consisting of 
oversight by the 
 Board and 
active involvement 
by senior 
management; appropriate strategies, 
policies, procedures, and 
limits used 
to identify 
 and mitigate liquidity risk; comprehensive liquidity risk measurement and 
monitoring systems (including assessments of the 
 current and prospective cash flows or sources and uses of funds) that are commensurate with the complexity and 
business 
 activities of 
the Company; 
active management 
of intraday 
liquidity and 
collateral; an 
appropriately diverse 
mix of 
existing 
 and 
potential 
future 
funding 
sources; 
adequate 
levels 
of 
highly 
liquid 
marketable 
securities 
free 
of 
legal, 
regulatory, 
or 
 operational 
impediments, 
that 
can 
be 
used 
to 
meet 
liquidity 
needs 
in 
stressful 
situations; 
comprehensive 
contingency 
 funding plans 
that sufficiently address 
potential adverse liquidity 
events and emergency 
cash flow 
requirements; and internal 
 controls 
and 
internal 
audit 
processes 
sufficient 
to 
determine 
the 
adequacy 
of 
the 
institution’s 
liquidity 
risk 
management 
 process. 
 We 
expect 
funds 
to 
be 
available 
from 
several 
basic 
banking 
activity 
sources, 
including 
the 
core 
deposit 
base, 
the 
 repayment and maturity of loans and investment security 
cash flows. Other potential funding sources include 
federal funds 
 purchased, brokered 
certificates of 
deposit, listing 
certificates of 
deposit, Fed 
funds lines 
and borrowings 
from the 
FHLB. 
 Accordingly, our liquidity resources 
were at sufficient levels to fund loans and meet other cash needs as necessary. 
We do 
 not expect liquidity resources to be compromised at this 
time.
 Capital Adequacy 
 As 
of 
December 31, 
2021, 
the 
Bank 
was 
well 
capitalized 
under 
the 
FDIC’s 
prompt 
corrective 
action 
framework. 
 Additionally, 
we follow the 
capital conservation buffer 
framework, and according 
to our actual 
ratios the Bank 
exceeds the 
 capital conversation buffer 
in all capital 
ratios as of 
December 31, 2021. 
The following table 
presents the capital 
ratios for 
 both the Bank and the Company at December 31, 2021 
and 2020 (in thousands, 
except ratios): 
 Actual 
 Minimum Capital 
 Requirements 

 To be Well Capitalized 
 Under Prompt Corrective 
 Action Provisions 
 Amount 
 Ratio 
 Amount 
 Ratio 
 Amount 
 Ratio 
 December 31, 2021: 
 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 
 % 
 December 31, 2020: 
 Total 
risk-based capital 
 $ 
 139,326 
 14.24 
 % 
 $ 
 78,260 
 8.00 
 %
 $ 
 97,825 
 10.00 
 % 
 Tier 1 risk-based capital 
 $ 
 127,061 
 12.99 
 % 
 $ 
 58,695 
 6.00 
 %
 $ 
 78,260 
 8.00 
 % 
 Common equity tier 1 capital 
 $ 
 94,984 
 9.71 
 % 
 $ 
 44,021 
 4.50 
 %
 $ 
 63,587 
 6.50 
 % 
 Leverage ratio 
 $ 
 127,061 
 8.61 
 % 
 $ 
 59,053 
 4.00 
 %
 $ 
 73,817 
 5.00 
 % 
 Impact of Inflation 
 Our Consolidated 
Financial Statements 
and related 
notes have been 
prepared in 
accordance with 
U.S. GAAP, 
which 
 require the 
measurement 
of financial 
position and 
operating results 
in terms 
of historical 
dollars, 
without considering 
the 
 changes 
in 
the 
relative 
purchasing 
power 
of 
money 
over 
time due 
to 
inflation. 
The 
impact 
of 
inflation 
is 
reflected 
in 
the 
 increased cost of operations. 
Unlike most industrial companies, 
nearly all our assets and 
liabilities are monetary in 
nature. 
 As a result, 
interest rates have a 
greater impact on our 
performance than do the 
effects of general levels 
of inflation. Periods 
 of high inflation 
are often accompanied 
by relatively higher 
interest rates, and 
periods of low 
inflation are accompanied 
by 
 relatively lower interest rates. 
As market interest rates 
rise or fall in relation 
to the rates earned 
on loans and investments, 
 the 
value 
of 
these 
assets 
decreases 
or 
increases 
respectively. 
Inflation 
can 
also 
impact 
core 
non-interest 
expenses 
 associated with delivering the Company’s services. 
 Recently Issued Accounting Pronouncements
 

 Recently issued accounting 
pronouncements are discussed 
in Note 1 “Summary 
of Significant Accounting Policies” 
to 
 the Consolidated Financial Statements of this Form 10-K.

 
 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Table of Contents 
 

 

 61 
USCB Financial Holdings, Inc. 
2021 10-K 
 

 Reconciliation and Management Explanation of Non 
-GAAP Financial Measures 
 Management 
has 
included 
these 
non-GAAP 
measures 
because 
it 
believes 
these 
measures 
may 
provide 
useful 
 supplemental information 
for evaluating 
the Company’s 
underlying performance 
trends. Further, 
management uses 
these 
 measures 
in 
managing 
and 
evaluating 
the 
Company’s 
business 
and 
intends 
to 
refer 
to 
them 
in 
discussions 
about 
our 
 operations and performance. 
Operating performance 
measures should be 
viewed in addition 
to, and not 
as an alternative 
 to or 
substitute 
for, 
measures 
determined 
in 
accordance 
with 
GAAP, 
and 
are 
not 
necessarily 
comparable 
to non-GAAP 
 measures that may be presented by other 
companies. The following table reconciles the non-GAAP financial measurement 
 of operating net income available to common stockholders for the periods presented (in thousands, 
except per share data):
 As of and for the years ended December 31, 
 2021 
 2020 
 Pre-Tax Pre-Provision ("PTPP") Income: 
 Net income 
 $ 
 21,077 
 $ 
 10,820 
 Plus: Provision for income taxes 
 6,600 
 2,588 
 Plus: Provision for (recovery of) credit losses 
 (160) 
 3,250 
 PTPP income 
 $ 
 27,517 
 $ 
 16,658 
 PTPP Return on Average Assets: 
 PTPP income 
 $ 
 27,517 
 $ 
 16,658 
 Average assets 
 $ 
 1,701,658 
 $ 
 1,428,935 
 PTPP return on average assets 

 1.62% 
 1.17% 
 Operating Net Income: 
 Net income 
 $ 
 21,077 
 $ 
 10,820 
 Less: Net gains on sale of securities 
 214 
 434 
 Less: Tax 
effect on sale of securities 
 (52) 
 (106) 
 Operating net income 
 $ 
 20,915 
 $ 
 10,492 
 Operating PTPP Income: 
 PTPP income 
 $ 
 27,517 
 $ 
 16,658 
 Less: Net gains on sale of securities 
 214 
 434 
 Operating PTPP Income 
 $ 
 27,303 
 $ 
 16,224 
 Operating PTPP Return on Average Assets: 
 Operating PTPP income 
 $ 
 27,303 
 $ 
 16,224 
 Average assets 
 $ 
 1,701,658 
 $ 
 1,428,935 
 Operating PTPP Return on average assets 

 1.60% 
 1.14% 
 Operating Return on Average Asset: 
 Operating net income 
 $ 
 20,915 
 $ 
 10,492 
 Average assets 
 $ 
 1,701,658 
 $ 
 1,428,935 
 Operating return on average assets 

 1.23% 
 0.73% 

 
 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Table of Contents 
 

 

 62 
USCB Financial Holdings, Inc. 
2021 10-K 
 

 Years Ended December 31, 
 2021 
 2020 
 Operating Net Income Available to Common Stockholders: 
 Net income (GAAP) 
 $ 
 21,077 
 $ 
 10,820 
 Less: Preferred dividends 
 2,077 
 3,127 
 Less: Exchange and redemption of preferred shares 
 89,585 
 - 
 Net income (loss) available to common stockholders (GAAP) 
 (70,585) 
 7,693 
 Add back: Exchange and redemption of preferred shares 
 89,585 
 - 
 Operating net income avail. to common stock (non-GAAP)
 (1)
 $ 
 19,000 
 $ 
 7,693 
 Allocation of operating net income per common stock class: 
 Class A common stock 
 $ 
 19,000 
 $ 
 5,851 
 Class B common stock 
 $ 
 - 
 $ 
 1,842 
 Weighted average shares outstanding: 
 Class A common stock 
 
Basic 
 10,507,530 
 3,887,480 
 
Diluted 
 10,507,530 
 3,911,290 
 Class B common stock 
 
Basic 
 - 
 6,121,052 
 
Diluted 
 - 
 6,121,052 
 Diluted EPS:
 (1)(2)
 Class A common stock 
 Net income (loss) per diluted share (GAAP) 
 $ 
 (6.72) 
 $ 
 1.50 
 Add back: Exchange and redemption of preferred shares 
 8.53 
 - 
 
Operating net income per diluted share (non-GAAP) 

 $ 
 1.81 
 $ 
 1.50 
 Class B common stock 
 Net income per diluted share (GAAP) 
 $ 
 - 
 $ 
 0.30 
 Add back: Exchange and redemption of preferred shares 
 - 
 - 
 
Operating net income per diluted share (non-GAAP) 

 $ 
 - 
 $ 
 0.30 
 (1) 
The Company believes these non-GAAP measurements 
are a key indicator of the ongoing earnings 
power of the Company. 
 (2) 
During the year ended December 31, 2021, 
the Company entered into agreements with the Class 
B shareholders to exchange all outstanding 
 Class B non-voting stock for Class A voting common 
stock on a 1 for 5 reverse stock split As such, 
there are no issued and outstanding shares 
of Class 
 B common stock at December 31, 2021. 

 
 
 Table of Contents 
 

 

 63 
USCB Financial Holdings, Inc. 
2021 10-K 
 

 Item 7A. 
Quantitative and Qualitative Disclosures About Market Risk 
 As a smaller reporting company, 
we are not required to provide the information required 
by this item.

 
 
 

 

 Table of Contents 
 

 

 64 
USCB Financial Holdings, Inc. 
2021 10-K
USCB FINANCIAL HOLDINGS, INC. 10-K

Item 7. Management’s Discussion and Analysis
