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What changed in USCB FINANCIAL HOLDINGS, INC.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of USCB FINANCIAL HOLDINGS, INC.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+425 added−369 removedSource: 10-K (2025-03-14) vs 10-K (2024-03-22)

Top changes in USCB FINANCIAL HOLDINGS, INC.'s 2024 10-K

425 paragraphs added · 369 removed · 320 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

78 edited+14 added−5 removed190 unchanged
Biggest changeThese guidelines, along with related regulatory materials, increasingly focus on risk management and processes related to information technology and the use of third parties in the provision of financial services. In addition, the federal banking agencies have adopted a rule to establish computer-security incident notification requirements for bank holding companies, banks and their service providers.
Biggest changeFederal banking agencies, including the FDIC, have adopted guidelines for establishing information security standards and cybersecurity programs for implementing safeguards. These guidelines, along with related regulatory materials, increasingly focus on risk management and processes related to information technology and the use of third parties in the provision of financial services.
We also leverage our relationships with our law firm clients to generate personal deposit accounts. • Global Banking services: Our Global Banking vertical provides correspondent banking services for banks headquartered in certain Latin America and the Caribbean countries. We also cross-sell our correspondent banking relationships to generate international personal banking clients for our Bank.
We also leverage our relationships with our law firm clients to generate personal deposit accounts. • Correspondent Banking services: Our Global Banking vertical provides correspondent banking services for banks headquartered in certain Latin America and the Caribbean countries. We also cross-sell our correspondent banking relationships to generate international personal banking clients for our Bank.
The cost of examinations of insured depository institutions and any affiliates are assessed by the appropriate agency against each institution or affiliate that is subject to examination as it deems necessary or appropriate. We file quarterly consolidated reports of condition and income, or call reports, with the FDIC and FOFR.
The cost of examinations of insured depository institutions and any affiliates are assessed by the appropriate agency against each institution or affiliate that is subject to examination as it deems necessary or appropriate. We file quarterly consolidated reports of condition and income, or call reports, with the FDIC and the FOFR.
The CFPB has the authority to supervise and examine depository institutions with more than $10 billion in assets for compliance with federal consumer laws. The authority to supervise and examine depository institutions with $10.0 billion or less in assets, such as U.S. Century Bank, for compliance with federal consumer laws remains largely with those institutions’ primary federal regulators.
The CFPB has the authority to supervise and examine depository institutions with more than $10.0 billion in assets for compliance with federal consumer laws. The authority to supervise and examine depository institutions with $10.0 billion or less in assets, such as U.S. Century Bank, for compliance with federal consumer laws remains largely with those institutions’ primary federal regulators.
The 2018 Act, among other matters, expanded the definition of “qualified mortgages” which may be held by a financial institution and simplified the regulatory capital rules for financial institutions and their holding companies with total consolidated assets of less than $10 billion by instructing (as described below) the federal banking regulators to establish a single “Community Bank Leverage Ratio” of between 8 and 10 percent to replace the leverage and risk-based regulatory capital ratios.
The 2018 Act, among other matters, expanded the definition of “qualified mortgages” which may be held by a financial institution and simplified the regulatory capital rules for financial institutions and their holding companies with total consolidated assets of less than $10.0 billion by instructing (as described below) the federal banking regulators to establish a single “Community Bank Leverage Ratio” of between 8 and 10 percent to replace the leverage and risk-based regulatory capital ratios.
Under the final rule, a new “Retail Lending Test” is established except with banks with total assets of less than $600 million as of December 31 in either of the prior two calendar years have the option to maintain the current CRA evaluation framework, referred to in the final rule as the “Small Bank Lending Test,” or opt into the Retail Lending Test.
Under the final rule, a new “Retail Lending Test” is established except with banks with total assets of less than $600.0 million as of December 31 in either of the prior two calendar years have the option to maintain the current CRA evaluation framework, referred to in the final rule as the “Small Bank Lending Test,” or opt into the Retail Lending Test.
Our business, financial condition, results of operations or prospects may be adversely affected, perhaps materially, as a result of any such new legislation or regulations. Federal Securities Laws and the Sarbanes-Oxley Act USCB Financial Holdings, Inc.’s common stock is registered with the SEC under Section 12(b) of the Securities Exchange Act of 1934.
Our business, financial condition, results of operations or prospects may be adversely affected, perhaps materially, as a result of any such new legislation or regulations. Federal Securities Laws and the Sarbanes-Oxley Act USCB Financial Holdings, Inc.’s Class A common stock is registered with the SEC under Section 12(b) of the Securities Exchange Act of 1934.
While the 2018 Act maintains most of the regulatory structure established by the Dodd-Frank Act, it amends certain aspects of the regulatory framework for small depository institutions with assets of less than $10 billion and for large banks with assets of more than $50 billion. Many of these changes resulted in meaningful regulatory relief for community banks such as U.S.
While the 2018 Act maintains most of the regulatory structure established by the Dodd-Frank Act, it amends certain aspects of the regulatory framework for small depository institutions with assets of less than $10.0 billion and for large banks with assets of more than $50.0 billion. Many of these changes resulted in meaningful regulatory relief for community banks such as U.S.
Additionally, the rules also permit community banks with less than $15 billion in total assets to continue to count certain non-qualifying capital instruments issued prior to May 19, 2010 as Tier 1 capital, including trust preferred securities and cumulative perpetual preferred stock (subject to a limit of 25% of Tier 1 capital).
Additionally, the rules also permit community banks with less than $15.0 billion in total assets to continue to count certain non-qualifying capital instruments issued prior to May 19, 2010 as Tier 1 capital, including trust preferred securities and cumulative perpetual preferred stock (subject to a limit of 25% of Tier 1 capital).
In order to qualify for the CBLR framework, a community banking organization must have a tier 1 leverage ratio of greater than 9%, less than $10 billion in total consolidated assets, off-balance sheet exposures of 25% or less of total consolidated assets, and trading assets and liabilities of 5% or less of total consolidated assets. Although U.S.
In order to qualify for the CBLR framework, a community banking organization must have a tier 1 leverage ratio of greater than 9%, less than $10.0 billion in total consolidated assets, off -balance sheet exposures of 25% or less of total consolidated assets, and trading assets and liabilities of 5% or less of total consolidated assets. Although U.S.
In this Annual Report on Form 10-K, unless the context indicated otherwise, references to “we,” “us,”, and “our” refer to the Company and the Bank, as the contest dictates. However, if the discussion relates to a period before the Effective Date, the terms refer only to the Bank.
In this Annual Report on Form 10-K, unless the context indicated otherwise, references to “we,” “us,”, and “our” refer to the Company and the Bank, as the context dictates. However, if the discussion relates to a period before the Effective Date, the terms refer only to the Bank.
Recent laws, such as the USA PATRIOT Act, enacted in 2001, as described below, provide law enforcement authorities with increased access to financial information maintained by banks. Anti-money laundering obligations have been substantially strengthened as a result of the USA PATRIOT Act.
Laws, such as the USA PATRIOT Act enacted in 2001, as described below, provide law enforcement authorities with increased access to financial information maintained by banks. Anti-money laundering obligations have been substantially strengthened as a result of the USA PATRIOT Act.
We value and promote diversity and inclusion in every aspect of our business and at every level within the Company. We recruit, hire, and promote employees based on their individual ability and experience and in accordance with Affirmative Action and Equal Employment Opportunity laws and regulations.
We value and promote diversity in every aspect of our business and at every level within the Company. We recruit, hire, and promote employees based on their individual ability and experience and in accordance with Affirmative Action and Equal Employment Opportunity laws and regulations.
At December 31, 2023, U.S. Century Bank was deemed to be a “well-capitalized” institution for purposes of the prompt corrective action regulations and as such is not subject to the above mentioned restrictions. Commercial Real Estate Concentration Guidelines The federal banking regulators have implemented guidelines to address increased concentrations in commercial real estate loans.
At December 31, 2024, U.S. Century Bank was deemed to be a “well-capitalized” institution for purposes of the prompt corrective action regulations and as such is not subject to the above mentioned restrictions. Commercial Real Estate Concentration Guidelines The federal banking regulators have implemented guidelines to address increased concentrations in commercial real estate loans.
We have further leveraged our success in Table of Contents 5 USCB Financial Holdings, Inc. 2023 10-K providing comprehensive banking solutions to SMBs to also secure the personal retail deposit relationships of the owners, operators, and employees of our commercial lending clients, which has been a cornerstone of our deposit growth strategy.
We have further leveraged our success in Table of Contents 5 USCB Financial Holdings, Inc. 2024 10-K providing comprehensive banking solutions to SMBs to also secure the personal retail deposit relationships of the owners, operators, and employees of our commercial lending clients, which has been a cornerstone of our deposit growth strategy.
In a bank holding company context, the bank holding company of an insured financial institution (such as the Corporation) and any companies which are controlled by such holding company are affiliates of the insured financial institution.
In a bank holding company context, the bank holding company of an insured financial institution (such as the Company) and any companies which are controlled by such holding company are affiliates of the insured financial institution.
Century Bank is a qualifying community banking organization, U.S. Century Bank has elected not to opt in to the CBLR framework at this time and will continue to follow the Basel III capital requirements as described above. As of December 31, 2023 and 2022, the U.S. Century Bank qualified as a “well capitalized” institution.
Century Bank is a qualifying community banking organization, U.S. Century Bank has elected not to opt in to the CBLR framework at this time and will continue to follow the Basel III capital requirements as described above. As of December 31, 2024 and 2023, the U.S. Century Bank qualified as a “well capitalized” institution.
As a public company, USCB Financial Holdings, Inc. is also subject to the Sarbanes-Oxley Act of 2002 (“SOA”), which is applicable to all companies, both U.S. and non-U.S., that file periodic reports under the Securities Exchange Act of 1934.
As a public company, USCB Financial Holdings, Inc. is also subject to the Sarbanes-Oxley Act of 2002 (“SOA”), which is applicable to all companies, both U.S. and non-U.S., that file periodic reports under the Exchange Act.
As such, we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies,” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.
As such, we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not EGCs, including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.
As directed by the SOA, USCB Financial Holdings, Inc.’s principal executive officer and principal financial officer are required to certify that the Corporation’s quarterly and annual reports do not contain any untrue statement of a material fact.
As directed by the SOA, USCB Financial Holdings, Inc.’s principal executive officer and principal financial officer are required to certify that the Company’s quarterly and annual reports do not contain any untrue statement of a material fact.
This statutory provision is commonly called the “Volcker Rule.” At December 31, 2023, we are not subject to the Volcker Rule because of our asset size, which is below the $10.0 billion Volcker Rule threshold.
This statutory provision is commonly called the “Volcker Rule.” At December 31, 2024, we are not subject to the Volcker Rule because of our asset size, which is below the $10.0 billion Volcker Rule threshold.
See Note 15 “Regulatory Matters” of the Consolidated Financial Statements included in Item 8 of this Form 10-K for further details. Prompt Corrective Action Under the Federal Deposit Insurance Act (“FDIA”), the federal bank regulatory agencies must take "prompt corrective action" against undercapitalized U.S. depository institutions.
See Note 15 “Regulatory Matters” of the Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for further details. Prompt Corrective Action Under the Federal Deposit Insurance Act (“FDIA”), the federal bank regulatory agencies must take "prompt corrective action" against undercapitalized U.S. depository institutions.
Our policy is that we do not discriminate on the basis of race, color, religion, sex, gender, sexual orientation, ancestry, pregnancy, medical condition, age, marital status, national origin, citizenship status, disability veteran status, gender identity, genetic information, or any other status protected by law. At December 31, 2023, we had 196 full-time equivalent employees.
Our policy is that we do not discriminate on the basis of race, color, religion, sex, gender, sexual orientation, ancestry, pregnancy, medical condition, age, marital status, national origin, citizenship status, disability veteran status, gender identity, genetic information, or any other status protected by law. At December 31, 2024, we had 199 full-time equivalent employees.
To address the commercial real estate lending concentration, U.S. Century Bank has previously established a commercial real estate lending framework to monitor specific exposures and limits by types within the commercial real estate portfolio, including, among other things, annual stress testing of the commercial real estate portfolio, and takes appropriate actions, as necessary.
To address the commercial real estate lending concentration, the Bank has previously established a commercial real estate lending framework to monitor specific exposures and limits by types within the commercial real estate portfolio, including, among other things, annual stress testing of the commercial real estate portfolio, and takes appropriate actions, as necessary.
An institution that has (i) experienced rapid growth in commercial real estate lending, (ii) notable exposure to a specific type of commercial real estate, (iii) total reported loans for construction, land development, and other land representing 100% or more of total capital, or (iv) total commercial real estate (including construction) loans representing 300% or more of total capital and the outstanding balance of the institution’s commercial real estate portfolio has increased by 50% or more in the prior 36 months, may be identified for further supervisory analysis of a potential concentration risk.
An institution that has (i) experienced rapid growth in commercial real estate lending, (ii) notable exposure to a specific type of commercial real estate, (iii) total reported loans for construction, land development, and other land representing 100% or more of total capital, or (iv) total commercial real estate (including construction) loans, as defined in the banking agencies guidance, representing 300% or more of total capital and the outstanding balance of the institution’s commercial real estate portfolio has increased by 50% or more in the prior 36 months, may be identified for further supervisory analysis of a potential concentration risk.
Our deposit operations are also subject to federal laws, such as: • the FDIA, which, among other things, limits the amount of deposit insurance available per account to $250,000 and imposes other limits on deposit-taking; • the Right to Financial Privacy Act, which imposes a duty to maintain the confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records; • Check Clearing for the 21st Century Act (also known as “Check 21”), which gives “substitute checks,” such as digital check images and copies made from that image, the same legal standing as the original paper check; • the Electronic Funds Transfer Act and Regulation E, which governs automatic deposits to and withdrawals from deposit accounts and customers’ rights and liabilities arising from the use of ATMs and other electronic banking services; and • the Truth in Savings Act and Regulation DD, which requires depository institutions to provide disclosures so that consumers can make meaningful comparisons about depository institutions and accounts.
Our deposit operations are also subject to federal laws, such as: • the FDIA, which, among other things, limits the amount of deposit insurance available per account to $250,000 and imposes other limits on deposit-taking; • the Right to Financial Privacy Act, which imposes a duty to maintain the confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records; Table of Contents 17 USCB Financial Holdings, Inc. 2024 10-K • Check Clearing for the 21st Century Act (also known as “Check 21”), which gives “substitute checks,” such as digital check images and copies made from that image, the same legal standing as the original paper check; • the Electronic Funds Transfer Act and Regulation E, which governs automatic deposits to and withdrawals from deposit accounts and customers’ rights and liabilities arising from the use of ATMs and other electronic banking services; and • the Truth in Savings Act and Regulation DD, which requires depository institutions to provide disclosures so that consumers can make meaningful comparisons about depository institutions and accounts.
According to the United States Census Bureau’s estimate, Florida was the third most populous state in the country in 2023 and the three largest population centers were in Miami-Dade, Broward, and Palm Beach counties (all located in South Florida) in 2022.
According to the United States Census Bureau’s estimate, Florida was the third most populous state in the country in 2024 and the three largest population centers were in Miami-Dade, Broward, and Palm Beach counties (all located in South Florida).
As of December 31, 2023, the Bank is a Preferred Lending Partner with the SBA which allows us to offer the full range of SBA loan products and to exercise lending authority at the local bank level, allowing us to make timely credit decisions for prospective clients. • Yacht lending: Our yacht lending vertical provides yacht financing for larger vessels; transactions range from $750 thousand to $7.5 million.
As of December 31, 2024, the Bank continued to be a Preferred Lending Partner with the SBA which allows us to offer the full range of SBA loan products and to exercise lending authority at the local bank level, allowing us to make timely credit decisions for prospective clients. • Yacht lending: Our yacht lending vertical provides yacht financing for larger vessels; transactions range from $750 thousand to $7.5 million.
Prior to the Effective Date, the Bank’s Class A common stock was registered under Section 12(b) of the Securities Exchange Act of 1934 (the “Exchange Act”), and the Bank was subject to the information requirements of the Exchange Act and, in accordance with Section 12(i) thereof, filed quarterly reports, proxy statements and other information with the FDIC.
Prior to the Effective Date, the Bank’s Class A common stock was registered under Section 12(b) of the Exchange Act, and the Bank was subject to the information requirements of the Exchange Act and, in accordance with Section 12(i) thereof, filed quarterly reports, proxy statements and other information with the FDIC.
The information posted on our website is not incorporated into this Annual Report on Form 10-K. In addition, the FDIC and the SEC each maintains a website that contains reports and other information that is filed. Table of Contents 20 USCB Financial Holdings, Inc. 2023 10-K
The information posted on our website is not incorporated into this Annual Report on Form 10-K. In addition, the FDIC and the SEC each maintains a website that contains reports and other information that is filed. Table of Contents 21 USCB Financial Holdings, Inc. 2024 10-K
Our electronic filings with the FDIC and the SEC (including all Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and if applicable, amendments to those reports) are available free of charge on the website as soon as reasonably practicable after they are electronically filed with, or furnished to, the FDIC or SEC.
Our electronic filings with the FDIC (prior to the bank holding company reorganization) and the SEC (including all Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and if applicable, amendments to those reports) are available free of charge on the website as soon as reasonably practicable after they are electronically filed with, or furnished to, the FDIC or SEC.
The Bank commenced operations on October 28, 2002 and is a Florida state-chartered, non-Federal Reserve System member bank. Over the course of 2021, the Bank simplified its capitalization structure by exchanging and/or repurchasing all of its issued and outstanding preferred shares, including Class C, Class D, and Class E preferred stock.
Century Bank (the “Bank”) commenced operations in October 2002 and is a Florida state-chartered, non-Federal Reserve System member bank. Over the course of 2021, the Bank simplified its capitalization structure by exchanging and/or repurchasing all of its issued and outstanding preferred shares, including Class C, Class D, and Class E preferred stock.
USCB Financial Holdings, Inc. is subject to the proxy and tender offer rules, insider trading reporting requirements and restrictions, and certain other requirements under the Securities Exchange Act of 1934.
USCB Financial Holdings, Inc. is subject to the proxy and tender offer rules, insider trading reporting requirements and restrictions, and certain other requirements under the Exchange Act.
We will remain an EGC until the earliest to occur of (i) the end of the fiscal year following the fifth anniversary of the completion of the Bank’s initial public offering in 2021, (ii) the last day of the first fiscal year in which the Company's annual gross revenues exceed $1.24 billion, (iii) the date that the Company becomes a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act which would occur if the market value of the Company's common stock that is held by non- affiliates exceeds $700 million as of the last business day of the Company’s most recently completed second fiscal quarter (June 30th for the Company), or (iv) the date on which the Company has issued more than $1 billion in non-convertible debt during the preceding three-year period.
We will remain an EGC until the earliest to occur of (i) the end of the fiscal year following the fifth anniversary of the completion of the Bank’s initial public offering in 2021, (ii) the last day of the first fiscal year in which the Company's annual Table of Contents 7 USCB Financial Holdings, Inc. 2024 10-K gross revenues exceed $1.235 billion, (iii) the date that the Company becomes a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act which would occur if the market value of the Company's common stock that is held by non- affiliates exceeds $700 million as of the last business day of the Company’s most recently completed second fiscal quarter (June 30th for the Company), or (iv) the date on which the Company has issued more than $1 billion in non-convertible debt during the preceding three-year period.
Section 22(h) also requires prior board approval for the issuance of certain loans. In addition, the aggregate amount of extensions of credit by an insured financial institution to all insiders cannot exceed the institution’s unimpaired capital and surplus. Furthermore, Section 22(g) places additional restrictions on loans to executive officers. At December 31, 2023, U.S.
Section 22(h) also requires prior board approval for the issuance of certain loans. In addition, the aggregate amount of extensions of credit by an insured financial institution to all insiders cannot exceed the institution’s unimpaired capital and surplus. Furthermore, Section 22(g) places additional restrictions on loans to executive officers.
Notice and Approval Requirements Related to Control Banking laws impose notice, approval, and ongoing regulatory requirements on any shareholder or other party that seeks to acquire direct or indirect “control” of an FDIC-insured depository institution. These laws include the BHC Act and the Change in Bank Control Act.
Notice and Approval Requirements Related to Control Banking laws impose notice, approval, and ongoing regulatory requirements on any person or entity that seeks to acquire direct or indirect “control” of an FDIC-insured depository institution. These laws include the BHC Act and the Change in Bank Control Act.
As a consequence, as of December 31, 2023, USCB Financial Holdings, Inc. was not required to comply with the requirements set forth above and will not be subject to such requirements until such time that its consolidated total assets exceed $3.0 Table of Contents 11 USCB Financial Holdings, Inc. 2023 10-K billion or the Federal Reserve determines that USCB Financial Holdings, Inc. is no longer deemed to be a small bank holding company.
As a consequence, as of December 31, 2024, USCB Financial Holdings, Inc. was not required to comply with the requirements set forth above and will not be subject to such requirements until such time that its consolidated total assets exceed $3.0 billion or the Federal Reserve determines that USCB Financial Holdings, Inc. is no longer deemed to be a small bank holding company.
The Company is headquartered in Miami, Florida, and, through the Bank, its sole direct subsidiary, operates 10 banking centers in South Florida providing a wide range of personal and business banking products and services . As of December 31, 2023, the Company had total consolidated assets of $2.3 billion.
The Company is headquartered in Miami, Florida, and, through the Bank, its sole direct subsidiary, operates 10 banking centers in South Florida providing a wide range of personal and business banking products and services . As of December 31, 2024, the Company had total consolidated assets of $2.6 billion. U.S.
The Volcker Rule The Dodd-Frank Act prohibits (subject to certain exceptions) us and our affiliates from engaging in short term proprietary trading in securities and derivatives and from investing in and sponsoring certain investment companies defined in the rule as “covered funds” (including not only hedge funds, commodity pools and private equity funds, but also a range of asset securitization structures that do not meet exemptive criteria in the final rules).
Table of Contents 18 USCB Financial Holdings, Inc. 2024 10-K The Volcker Rule The Dodd-Frank Act prohibits (subject to certain exceptions) us and our affiliates from engaging in short term proprietary trading in securities and derivatives and from investing in and sponsoring certain investment companies defined in the rule as “covered funds” (including not only hedge funds, commodity pools and private equity funds, but also a range of asset securitization structures that do not meet exemptive criteria in the final rules).
As a member of the FHLB of Atlanta, we are required to own capital stock in the FHLB in an amount at least equal to 0.07% (or 7 basis points), which is subject to annual adjustments, of the Bank’s total assets at the end of each calendar year (up to a maximum of $15 million), plus 4.75% of our outstanding advances (borrowings) from the FHLB of Atlanta under the activity-based stock ownership requirement.
Table of Contents 15 USCB Financial Holdings, Inc. 2024 10-K As a member of the FHLB of Atlanta, we are required to own capital stock in the FHLB in an amount at least equal to 0.07% (or 7 basis points), which is subject to annual adjustments, of the Bank’s total assets at the end of each calendar year (up to a maximum of $18.0 million), plus 4.75% of our outstanding advances (borrowings) from the FHLB of Atlanta under the activity-based stock ownership requirement.
In approving acquisitions or the addition of activities, the Federal Reserve considers, among other things, whether the acquisition or the additional activities can Table of Contents 10 USCB Financial Holdings, Inc. 2023 10-K reasonably be expected to produce benefits to the public, such as greater convenience, increased competition or gains in efficiency, that outweigh such possible adverse effects as undue concentration of resources, decreased or unfair competition, conflicts of interest or unsound banking practices.
In approving acquisitions or the addition of activities, the Federal Reserve considers, among other things, whether the acquisition or the additional activities can reasonably be expected to produce benefits to the public, such as greater convenience, increased competition or gains in efficiency, that outweigh such possible adverse effects as undue concentration of resources, decreased or unfair competition, conflicts of interest or unsound banking practices.
In addition, as a general matter, the establishment or acquisition by USCB Financial Holdings, Inc. of a non-bank entity, or the initiation of a non-banking activity, requires prior regulatory approval.
Table of Contents 10 USCB Financial Holdings, Inc. 2024 10-K In addition, as a general matter, the establishment or acquisition by USCB Financial Holdings, Inc. of a non-bank entity, or the initiation of a non-banking activity, requires prior regulatory approval.
The substance or impact of pending or future legislation or regulation, or the application thereof, cannot be predicted, although enactment of proposed legislation has in the past and may in the future affect the regulatory structure under which we operate and may significantly increase our costs, impede the efficiency of our internal business processes, require us to increase our regulatory capital or modify our Table of Contents 19 USCB Financial Holdings, Inc. 2023 10-K business strategy, or limit our ability to pursue business opportunities in an efficient manner.
The substance or impact of pending or future legislation or regulation, or the application thereof, cannot be predicted, although enactment of proposed legislation has in the past and may in the future affect the regulatory structure under which we operate and may significantly increase our costs, impede the efficiency of our internal business processes, require us to increase our regulatory capital or modify our business strategy, or limit our ability to pursue business opportunities in an efficient manner.
Table of Contents 15 USCB Financial Holdings, Inc. 2023 10-K Anti-Money Laundering Regulation As a financial institution, we must maintain anti-money laundering programs that include established internal policies, procedures and controls, a designated compliance officer, an ongoing employee training program, and testing of the program by an independent audit function in accordance with the Bank Secrecy Act of 1970, as amended (“BSA”), and the regulations issued by the Department of the Treasury in 31 CFR Chapter X, FDIC Rule 326.8 and the Florida Control of Money Laundering and Terrorist Financing in Financial Institutions Act.
Anti-Money Laundering Regulation As a financial institution, we must maintain anti-money laundering programs that include established internal policies, procedures and controls, a designated compliance officer, an ongoing employee training program, and testing of the program by an independent audit function in accordance with the Bank Secrecy Act of 1970, as amended (“BSA”), and the regulations issued by the Department of the Treasury in 31 CFR Chapter X, FDIC Section 326.8 of the FDIC’s regulations and the Florida Control of Money Laundering and Terrorist Financing in Financial Institutions Act.
As of December 31, 2023, USCB Financial Holdings, Inc. was not subject to any formal supervisory restrictions on its ability to pay dividends but will notify the Federal Reserve in advance of any proposed dividend to the Company's shareholders in light of the Bank's negative retained earnings.
As of December 31, 2024, the Company was not subject to any formal supervisory restrictions on its ability to pay dividends but will notify the Federal Reserve in advance of any proposed dividend to the Company's shareholders in light of the Bank's negative retained earnings.
Specifically, incentive compensation Table of Contents 13 USCB Financial Holdings, Inc. 2023 10-K arrangements should (i) provide employee incentives that appropriately balance risk in a manner that does not encourage employees to expose their organizations to imprudent risk, (ii) be compatible with effective controls and risk management, and (iii) be supported by strong corporate governance, including active and effective oversight by the organization’s board of directors.
Specifically, incentive compensation arrangements should (i) provide employee incentives that appropriately balance risk in a manner that does not encourage employees to expose their organizations to imprudent risk, (ii) be compatible with effective controls and risk management, and (iii) be supported by strong corporate governance, including active and effective oversight by the organization’s board of directors.
Changes in the discount rate on member bank borrowing, availability of borrowing at the “discount window,” open market operations, changes in the Fed Funds target interest rate, the imposition of changes in reserve requirements against member banks’ deposits and assets of foreign banking centers and the imposition of and changes in reserve requirements against certain borrowings by banks and their affiliates are some of the instruments of monetary policy available to the Federal Reserve.
Changes in the discount rate on member bank borrowing, availability of borrowing at the “discount Table of Contents 19 USCB Financial Holdings, Inc. 2024 10-K window,” open market operations, changes in the Fed Funds target interest rate, the imposition of changes in reserve requirements against member banks’ deposits and assets of foreign banking centers and the imposition of and changes in reserve requirements against certain borrowings by banks and their affiliates are some of the instruments of monetary policy available to the Federal Reserve.
Our largest concentration is in the Miami metropolitan statistical area; however, we are also focused on growth in other urban Florida markets in which we have a presence, such as Broward and Palm Beach counties .
We believe Florida offers long-term attractive banking opportunities. Our largest concentration is in the Miami metropolitan statistical area; however, we are also focused on growth in other urban Florida markets in which we have a presence, such as Broward and Palm Beach counties.
Furthermore, the Federal Reserve policy is that a bank holding company should stand ready to use available resources to provide adequate capital to its subsidiary banks during periods of financial stress or adversity and should maintain the financial flexibility and capital-raising capacity to obtain additional resources for assisting its subsidiary banks.
Furthermore, the Federal Reserve policy is that a bank holding company should stand ready to use available resources to provide adequate capital to its subsidiary banks during periods Table of Contents 9 USCB Financial Holdings, Inc. 2024 10-K of financial stress or adversity and should maintain the financial flexibility and capital-raising capacity to obtain additional resources for assisting its subsidiary banks.
The CRA further requires the agencies to take into account our record of meeting community credit needs when evaluating applications for, among other things, new branches or mergers. We are also Table of Contents 18 USCB Financial Holdings, Inc. 2023 10-K subject to analogous state CRA requirements in Florida and certain other states in which we may establish branch offices.
The CRA further requires the agencies to take into account our record of meeting community credit needs when evaluating applications for, among other things, new branches or mergers. We are also subject to analogous state CRA requirements in Florida and certain other states in which we may establish branch offices.
In June 2010, the federal banking agencies jointly adopted the Guidance on Sound Incentive Compensation Policies, or GSICP. The GSICP was intended to ensure that banking organizations do not undermine the safety and soundness of such organizations by encouraging excessive risk-taking.
Table of Contents 13 USCB Financial Holdings, Inc. 2024 10-K In June 2010, the federal banking agencies jointly adopted the Guidance on Sound Incentive Compensation Policies, or GSICP. The GSICP was intended to ensure that banking organizations do not undermine the safety and soundness of such organizations by encouraging excessive risk-taking.
Table of Contents 16 USCB Financial Holdings, Inc. 2023 10-K The Office of Foreign Assets Control The Office of Foreign Assets Control (the “OFAC”) is responsible for helping to ensure that U.S. entities do not engage in transactions with “enemies” of the United States, as defined by various Executive Orders and Acts of Congress.
The Office of Foreign Assets Control The Office of Foreign Assets Control (the “OFAC”) is responsible for helping to ensure that U.S. entities do not engage in transactions with “enemies” of the United States, as defined by various Executive Orders and Acts of Congress.
Deposit Products We offer traditional deposit products, including commercial and consumer checking accounts, money market deposit accounts, savings accounts, and certificates of deposit with a variety of terms and rates, as well as a robust suite of treasury, commercial payments, and cash management services. Additionally, we offer ICS and CDARS deposit products that are FDIC-insured for our clients.
Deposit Products We offer traditional deposit products, including commercial and consumer checking accounts, money market deposit accounts, savings accounts, and certificates of deposit with a variety of terms and rates, as well as a robust suite of treasury, commercial payments, and cash management services.
However, with respect to clause (iv) in the paragraph above, as of December 31, 2023, our ratio of total commercial real estate loans to total risk-based capital was Table of Contents 12 USCB Financial Holdings, Inc. 2023 10-K 384% and the outstanding balance of the institution’s commercial real estate portfolio increased by 50% or more in the prior 36 months.
However, with respect to clause (iv) in the paragraph above, as of December 31, 2024, our ratio of total commercial real estate loans to total risk-based capital was 366% and the outstanding balance of the institution’s commercial real estate portfolio increased by 50% or more in the prior 36 months.
An unsatisfactory CRA and/or fair lending record could substantially delay or block any such transaction. The regulatory agency's assessment of the institution's record is made available to the public at www.ffiec.gov/craratings. Following its most recent CRA performance evaluation in October 2022, U.S.
An unsatisfactory CRA and/or fair lending record could substantially delay or block any such transaction. The regulatory agency's assessment of the institution's record is made available to the public at www.ffiec.gov/craratings.
As of December 31, 2023, our ratio of construction loans to total risk-based capital was 21%, and therefore, we were under the 100% threshold set forth in clause (iii) in the paragraph above.
Table of Contents 12 USCB Financial Holdings, Inc. 2024 10-K As of December 31, 2024, our ratio of construction loans to total risk-based capital was 23%, and therefore, we were under the 100% threshold set forth in clause (iii) in the paragraph above.
In December 2023, FinCEN issued regulations regarding access to the beneficial ownership information collected under the CTA. We and our affiliates have adopted policies, procedures and controls designed to comply with the BSA, the AML Act, the CTA and the USA PATRIOT Act.
Treasury also announced that it would be proposing revised rules applicable to foreign reporting companies only. In December 2023, FinCEN issued regulations regarding access to the beneficial ownership information collected under the CTA. We and our affiliates have adopted policies, procedures and controls designed to comply with the BSA, the AML Act, the CTA and the USA PATRIOT Act.
Century Bank remains subject to independent auditor attestation required under FDIC regulations set forth at 12 C.F.R. §363.3(b). Available Information Our website address is www.uscentury.com.
However, the Bank remains subject to independent auditor attestation required under FDIC regulations set forth at 12 C.F.R. §363.3(b). Table of Contents 20 USCB Financial Holdings, Inc. 2024 10-K Available Information Our website address is www.uscentury.com.
USCB Financial Holdings, Inc. meets the amended definition and is not required to provide an attestation report from its independent auditor assessing the effectiveness of its ICFR. In addition, as long it is an eligible emerging growth company, such auditor attestation requirement will not apply to USCB Financial Holdings, Inc. However, U.S.
The Company meets the amended definition of an accelerated filer as of January 1, 2025 and would normally be required to provide an attestation report from its independent auditor assessing the effectiveness of its ICFR. However, as long it is an eligible emerging growth company, such auditor attestation requirement will not apply to the Company.
Table of Contents 8 USCB Financial Holdings, Inc. 2023 10-K 2018 Regulatory Reform In May 2018 the Economic Growth, Regulatory Relief and Consumer Protection Act (the “2018 Act”), was enacted to modify or remove certain financial reform rules and regulations, including some of those implemented under the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”) enacted in 2010.
You should refer to the full text of the statutes, regulations, and corresponding guidance for more information. 2018 Regulatory Reform In May 2018 the Economic Growth, Regulatory Relief and Consumer Protection Act (the “2018 Act”), was enacted to modify or remove certain financial reform rules and regulations, including some of those implemented under the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”) enacted in 2010.
Century Bank was in compliance with the above restrictions. FDIC Deposit Insurance The FDIC is an independent federal agency that insures the deposits of federally insured depository institutions up to applicable limits. The FDIC also has certain regulatory, examination and enforcement powers with respect to FDIC-insured institutions. The deposits are insured by the FDIC up to applicable limits.
At December 31, 2024, the Bank was in compliance with the above restrictions. FDIC Deposit Insurance The FDIC is an independent federal agency that insures the deposits of federally insured depository institutions up to applicable limits.
Subsequently, as part of the 2018 Act, the threshold was increased to $3.0 billion. Bank holding companies which are subject to the SBHC Policy are not subject to compliance with the regulatory capital requirements described above until they exceed $3.0 billion in assets.
Bank holding companies which are subject to the SBHC Policy are not Table of Contents 11 USCB Financial Holdings, Inc. 2024 10-K subject to compliance with the regulatory capital requirements described above until they exceed $3.0 billion in assets.
As a general matter, the maximum deposit insurance amount is $250 thousand per depositor. Additionally, FDIC-insured depository institutions are required to pay deposit insurance assessments to the FDIC. The amount of a particular institution's deposit insurance assessment is based on that institution's risk classification under an FDIC risk-based assessment system.
Additionally, FDIC-insured depository institutions are required to pay deposit insurance assessments to the FDIC. The amount of a particular institution's deposit insurance assessment is based on that institution's risk classification under an FDIC risk-based assessment system. An institution's risk classification is assigned based on its capital levels and the level of supervisory concern the institution poses to the regulators.
According to estimates from the United States Census Bureau, from 2020 to 2023, Florida’s population increased to 22.6 million residents, an increase of 1.0 million new residents. The percentage change in Florida’s population between April 2020 and July 2023 alone was 5.0% according to the United States Census Bureau.
According to estimates from the United States Census Bureau, Florida’s population increased to 23.4 million residents, an increase of 1.8 million new residents or 8.5% from April 2020 to July 2024.
Table of Contents 7 USCB Financial Holdings, Inc. 2023 10-K Human Capital Resources We respect the values and diversity throughout our organization and the community. Diversity and inclusion are integral parts of our organization’s culture. We seek the active engagement and participation of people with diverse backgrounds and ethnicities.
Human Capital Resources We respect the values and diversity exhibited throughout our organization and the community. Diversity is an integral part of our organization’s culture. We seek the active engagement and participation of people with diverse backgrounds.
Such support may be Table of Contents 9 USCB Financial Holdings, Inc. 2023 10-K required at times when, absent this statutory and Federal Reserve policy requirement, a bank holding company may not be inclined to provide it.
Under this requirement, USCB Financial Holdings, Inc. in the future could be required to provide financial assistance to U.S. Century Bank should it experience financial distress. Such support may be required at times when, absent this statutory and Federal Reserve policy requirement, a bank holding company may not be inclined or able to provide it.
In addition, certain off-balance sheet items are given similar credit conversion factors to convert them to asset equivalent amounts to which an appropriate risk-weight will apply. Most loans will be assigned to the 100% risk category, except for performing first mortgage loans fully secured by 1-to-4 family or certain multi-family residential properties, which carry a 50% risk rating.
Most loans will be assigned to the 100% risk category, except for performing first mortgage loans fully secured by 1-to-4 family or certain multi-family residential properties, which carry a 50% risk rating, and certain past due loans which are assigned a 150% risk rating.
Under the privacy protection provisions of the GLB Act and related regulations, we are Table of Contents 17 USCB Financial Holdings, Inc. 2023 10-K limited in our ability to disclose non-public information about consumers to nonaffiliated third parties.
Financial Privacy and Cybersecurity Banking organizations are subject to many federal and state laws and regulations governing the collection, use and protection of customer information. Under the privacy protection provisions of the GLB Act and related laws and regulations, including Florida laws, we are limited in our ability to disclose non-public information about consumers to nonaffiliated third parties.
Century Bank received an overall rating of "Satisfactory." In October 2023, the federal banking agencies jointly issued a final rule to revise the regulations implementing the CRA. The final rule takes effect on April 1, 2024, with staggered compliance dates; the applicability date for most of the provisions is January 1, 2026.
Following its most recent CRA performance evaluation in April 2023, the Bank received an overall rating of "Satisfactory." In October 2023, the federal banking agencies jointly issued a final rule to revise the regulations implementing the CRA.
However, non-qualifying capital instruments issued on or after May 19, 2010 do not qualify for Tier 1 capital treatment. In May 2016, amendments to the Federal Reserve’s SBHC Policy became effective which increased the asset threshold to qualify to utilize the provisions of the SBHC Policy from $500 million to $1.0 billion.
In May 2016, amendments to the Federal Reserve’s SBHC Policy became effective which increased the asset threshold to qualify to utilize the provisions of the SBHC Policy from $500.0 million to $1.0 billion. Subsequently, as part of the 2018 Act, the threshold was increased to $3.0 billion.
Sections 22(g) and (h) of the Federal Reserve Act place restrictions on loans to executive officers, directors and principal stockholders.
In addition, loans or other extensions of credit by the financial institution to the affiliate are to be collateralized in accordance with the requirements set for in Section 23 of the Federal Reserve Act. Sections 22(g) and (h) of the Federal Reserve Act place restrictions on loans to executive officers, directors and principal stockholders.
Our compliance team is experienced in issues related to foreign banking, and we have frequent and regular open communication with our foreign bank clients to ensure proper compliance controls are maintained at such institutions. Credit Practices Our underwriting process is informed by a conservative credit culture that encourages prudent lending.
Our compliance team is experienced in issues related to correspondent banking, and we have frequent and regular open communication with our correspondent bank clients to ensure proper compliance controls are maintained at such institutions. • Medical Advantage: MD Advantage was launched in 2024; this vertical provides concierge-level banking services to physicians, dentists, and veterinarians.
An institution's risk classification is assigned based on its capital levels and the level of supervisory concern the institution poses to the regulators. Table of Contents 14 USCB Financial Holdings, Inc. 2023 10-K Under the current system, deposit insurance assessments are based on a bank’s assessment base, which is defined as average total assets minus average tangible equity.
Under the current system, deposit insurance assessments are based on a bank’s assessment base, which is defined as average total assets minus average tangible equity.
Licensed in the State of Florida and approved by the Department of Insurance Regulation, Florida Peninsula Title LLC began operations in 2021. Our title service business not only provides diversification for non- interest income but also provides our clients with access to tile insurance services.
Our title service business not only provides diversification for non-interest income but also provides our clients with access to tile insurance services. Seasonality We do not believe our business to be seasonal in nature. Markets Our primary banking market is South Florida.
The CTA establishes uniform beneficial ownership reporting requirements for corporations, limited liability companies, and other similar entities formed or registered to do business in the United States. The CTA authorizes U.S. Treasury’s Financial Crimes Enforcement Network (“FinCEN”) to collect that information and share it with authorized government authorities and financial institutions, subject to effective safeguards and controls.
The CTA establishes Table of Contents 16 USCB Financial Holdings, Inc. 2024 10-K uniform beneficial ownership reporting requirements for corporations, limited liability companies, and other similar entities formed or registered to do business in the United States.
These limitations require disclosure of privacy policies to consumers and, in some circumstances, allow consumers to prevent disclosure of certain personal information to a nonaffiliated third party. Federal banking agencies, including the FDIC, have adopted guidelines for establishing information security standards and cybersecurity programs for implementing safeguards.
These limitations require disclosure of privacy policies to consumers and, in some circumstances, require us to allow consumers to prevent disclosure of certain personal information to a nonaffiliated third party and to not disclose account numbers or access codes to non-affiliated third parties for marketing purposes.
Century Bank and are qualified in their entirety by reference to the actual laws and regulations. You should refer to the full text of the statutes, regulations, and corresponding guidance for more information.
Table of Contents 8 USCB Financial Holdings, Inc. 2024 10-K Century Bank and are qualified in their entirety by reference to the actual laws and regulations.
Furthermore, we offer deposit products for municipalities and other public entities. Our deposit products are mainly offered across our primary geographic footprint. Title Services Florida Peninsula Title LLC is a subsidiary of the Bank that offers our clients title insurance policies for real estate transactions closed at the Bank.
Additionally, we offer insured cash sweep (“ICS”) and certificate of deposit account registry service (“CDARS”) deposit products that are FDIC-insured for our clients. Furthermore, we offer deposit products for municipalities and other public entities. Our deposit products are mainly offered across our primary geographic footprint.
Removed
Table of Contents 6 USCB Financial Holdings, Inc. 2023 10-K Seasonality We do not believe our business to be seasonal in nature. Markets Our primary banking market is South Florida.
Added
MD Advantage products and services were designed to cater to the complex banking requirements of medical professionals. Credit Practices Our underwriting process is informed by a conservative credit culture that encourages prudent lending.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

104 edited+46 added−14 removed278 unchanged
Biggest changeRisks Related to Our Class A Common Stock • Our ability to pay dividends is subject to restrictions. • The market price and trading volume of our Class A common stock may be volatile, which could result in rapid and substantial losses for our shareholders. • There are significant restrictions in our Articles of Incorporation that restrict the ability to sell our capital stock to shareholders that would own 4.95% or more of our stock, excluding our Significant Investors. • Because we are an emerging growth company and because we have decided to take advantage of certain exemptions from various reporting and other requirements applicable to emerging growth companies, our Class A common stock could be less attractive to investors. • Because we have elected to use the extended transition period for complying with new or revised accounting standards for an “emerging growth company,” our financial statements may not be comparable to companies that comply with these accounting standards as of the public company effective dates. • We have existing investors that own a significant amount of our common stock whose individual interests may differ from yours. • Provisions in our governing documents and Florida law may have an anti-takeover effect and there are substantial regulatory limitations on changes of control of the Company.
Biggest changeTable of Contents 24 USCB Financial Holdings, Inc. 2024 10-K • Because we are an emerging growth company and because we have decided to take advantage of certain exemptions from various reporting and other requirements applicable to emerging growth companies, our Class A common stock could be less attractive to investors. • Because we have elected to use the extended transition period for complying with new or revised accounting standards for an “emerging growth company,” our financial statements may not be comparable to companies that comply with these accounting standards as of the public company effective dates. • We have existing investors that own a significant amount of our common stock whose individual interests may differ from yours. • Provisions in our governing documents and Florida law may have an anti-takeover effect and there are substantial regulatory limitations on changes of control of the Company.
Also, for preservation and continued availability of our "deferred tax assets," our Articles of Incorporation prohibits any direct or indirect transfer of stock or options to acquire stock to any person who, as a result of the transfer, would own 4.95% or more of our stock, as long as we continue to have "deferred tax assets," subject to limited exceptions as provided in our amended Articles of Incorporation.
Also, for preservation and continued availability of our "deferred tax assets," our amended Articles of Incorporation prohibits any direct or indirect transfer of stock or options to acquire stock to any person who, as a result of the transfer, would own 4.95% or more of our stock, as long as we continue to have "deferred tax assets," subject to limited exceptions as provided in our amended Articles of Incorporation.
The loss of the services of any of these individuals could have a significant adverse effect on our business. In particular, we believe that retaining Luis de la Aguilera, our President and Chief Executive Officer, Robert Anderson, our Chief Financial Officer, and William Turner, our Chief Credit Officer, is important to our continuing success.
The loss of the services of any of these individuals could have a significant adverse effect on our business. In particular, we believe that retaining Luis de la Aguilera, our Chairman, President, and Chief Executive Officer, Robert Anderson, our Chief Financial Officer, and William Turner, our Chief Credit Officer, is important to our continuing success.
In addition, there are continuing concerns related to, among other things, the increasing level of U.S. government debt and fiscal actions that may be taken to address that debt, price fluctuations of key natural resources, inflation, the potential resurgence of economic and political tensions with China, the continuing war in Ukraine, the conflict in Gaza and continuing higher oil prices due to, among other things, Russian supply disruptions resulting from the ongoing Ukrainian conflict, each of which may have a destabilizing effect on financial markets and economic activity.
In addition, there are continuing concerns related to, among other things, the increasing level of U.S. government debt and fiscal actions that may be taken to address that debt, price fluctuations of key natural resources, inflation, the potential resurgence of economic and political tensions with China, the continuing war in Ukraine, the conflict in Gaza and the level of oil and natural gas prices due to, among other things, Russian supply disruptions resulting from the ongoing Ukrainian conflict, each of which may have a destabilizing effect on financial markets and economic activity.
Moreover, many foreign financial institutions, including in Latin America and the Caribbean where our correspondent banking services are located, are not subject to the same or similar regulatory guidelines as U.S. banks. Accordingly, these foreign institutions may pose higher money laundering risk to their respective U.S. bank correspondent(s).
Moreover, many foreign financial institutions, including in Latin America and the Caribbean where our correspondent banking services are located, are not subject to the same or similar regulatory guidelines as U.S. banks. Accordingly, these foreign institutions may pose greater money laundering risk to their respective U.S. bank correspondent(s).
For as long as we remain an emerging growth company, we will have the option to take advantage of certain exemptions from various reporting and other requirements that are applicable to other public companies that are not emerging growth companies, including: • we may present only two years of audited financial statements and only two years of related management’s discussion and analysis of financial condition and results of operations • we are exempt from the requirements to obtain an attestation and report from our auditors on management’s assessment of our internal control over financial reporting under the Sarbanes-Oxley Act; • we are permitted to have less extensive disclosure about our executive compensation arrangements; and • we are not required to give our shareholders non-binding advisory votes on executive compensation or golden parachute arrangements.
For as long as we remain an emerging growth company, we will have the option to take advantage of certain exemptions from various reporting and other requirements that are applicable to other public companies that are not emerging growth companies, including: • we may present only two years of audited financial statements and only two years of related management’s discussion and analysis of financial condition and results of operations • we are exempt from the requirements to obtain an attestation and report from our auditors on management’s assessment of our internal control over financial reporting under the SOA; • we are permitted to have less extensive disclosure about our executive compensation arrangements; and • we are not required to give our shareholders non-binding advisory votes on executive compensation or golden parachute arrangements.
However, we expect that we will need to raise additional capital, in the form of debt or equity securities, in the future to have sufficient capital resources to meet our longer-term growth plans, and/or if the quality of our assets or earnings were to deteriorate significantly.
However, we expect that we would need to raise additional capital, in the form of debt or equity securities, in the future to have sufficient capital resources to meet our longer-term growth plans, and/or if the quality of our assets or earnings were to deteriorate significantly.
To prepare for eventual compliance with the auditor attestation requirement of Section 404 of Sarbanes- Oxley once we no longer qualify as an emerging growth company or as a non-accelerated smaller reporting company, we are engaged in a process to document and evaluate our internal control over financial reporting, which is both costly and challenging.
To prepare for eventual compliance with the auditor attestation requirement of Section 404 of the SOA once we no longer qualify as an emerging growth company or as a non-accelerated smaller reporting company, we are engaged in a process to document and evaluate our internal control over financial reporting, which is both costly and challenging.
We will remain an emerging growth company until the earliest to occur of (i) the last day of the first fiscal year in which our annual gross revenues exceed $1.235 billion, (ii) the date that the market value of our Class A common stock that is held by non-affiliates exceeds $700 million as of the last business day in June of that year, (iii) the date on which we have, during the previous three-year period, issued more than $1 billion in non-convertible debt, or (iv) the end of fiscal year following the fifth anniversary of the completion of our IPO (which will be December 31, 2026).
We will remain an emerging growth company until the earliest to occur of (i) the last day of the first fiscal year in which our annual gross revenues exceed $1.235 billion, (ii) the date that the market value of our Class A common stock that is held by non-affiliates exceeds $700.0 million as of the last business day in June of that year, (iii) the date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible debt, or (iv) the end of fiscal year following the fifth anniversary of the completion of our initial public offering (which will be December 31, 2026).
As a result of Russia's invasion of Ukraine, the U.S. imposed, and is likely to continue to impose material additional, financial and economic sanctions and export controls against certain Russian organizations and/or individuals, with similar actions either implemented or planned by the European Union ("EU") and the United Kingdom (“UK”) and other jurisdictions.
As a result of Russia's invasion of Ukraine, the U.S. imposed, and may continue to impose material additional, financial and economic sanctions and export controls against certain Russian organizations and/or individuals, with similar actions either implemented or planned by the European Union ("EU") and the United Kingdom (“UK”) and other jurisdictions.
Some of our loans are secured by a lien on specified collateral of the borrower and we may not obtain or properly perfect our liens or the value of the collateral securing any particular loan may not be sufficient to protect us from suffering a partial or complete loss if the loan becomes non-performing and we proceed to foreclose on or repossess the collateral.
Some of our loans are secured by liens on specified collateral of the borrowers and we may not obtain or properly perfect our liens or the value of the collateral securing any particular loan may not be sufficient to protect us from suffering a partial or complete loss if the loan becomes non-performing and we proceed to foreclose on or repossess the collateral.
As a new public company, we may not efficiently or effectively create an effective internal control environment, and any future failure to maintain effective internal control over financial reporting could impair the reliability of our financial statements, which in turn could harm our business, impair investor confidence in the accuracy and completeness of our financial reports and our access to the capital markets, cause the price of our Class A common stock to decline and subject us to regulatory penalti es.
As a public company, we may not efficiently or effectively create an effective internal control environment, and any future failure to maintain effective internal control over financial reporting could impair the reliability of our financial statements, which in turn could harm our business, impair investor confidence in the accuracy and completeness of our financial reports and our access to the capital markets, cause the price of our Class A common stock to decline and subject us to regulatory penalties.
Additionally, significant future issuances of common stock or common stock equivalents, or changes in the direct or indirect ownership of our common stock or common stock equivalents, could cause an ownership change and could limit our ability to utilize our net operating loss carryforwards and other tax attributes pursuant to Section 382 and Section 383 of the Internal Revenue Code.
Additionally, significant future issuances of common stock or common stock equivalents, or changes in the direct or indirect ownership of our common stock or common stock equivalents, could cause an ownership change and could limit our ability to utilize our net operating loss carryforwards and other tax attributes pursuant to Section 382 and Section 383 of the Internal Revenue Code, as 1986, as amended.
LIBOR was used as a reference rate for certain of the Corporation’s adjustable-rate loans and bonds. In 2017, the U.K. Financial Conduct Authority, which regulates LIBOR, announced that the publication of LIBOR would not be guaranteed beyond 2021.
LIBOR (the London InterBank Offered Rate) was used as a reference rate for certain of the Corporation’s adjustable- rate loans and bonds. In 2017, the U.K. Financial Conduct Authority, which regulates LIBOR, announced that the publication of LIBOR would not be guaranteed beyond 2021.
If we fail to achieve and maintain the adequacy of our internal controls, as such standards are modified, supplemented, or amended from time to time, we may not be able to ensure that we will be able to conclude on an ongoing basis that we have effective internal controls over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act.
If we fail to achieve and maintain the adequacy of our internal controls, as such standards are modified, supplemented, or amended from time to time, we may not be able to ensure that we will be able to conclude on an ongoing basis that we have effective internal controls over financial reporting in accordance with Section 404 of the SOA.
Because of the requirements to overcome this restriction, this provision of the amended Articles of Incorporation could have an anti-takeover effect and may delay, make more difficult or prevent an attempted acquisition that you may favor. Table of Contents 44 USCB Financial Holdings, Inc. 2023 10-K Item 1B. Unresolved Staff Comments None.
Because of the requirements to overcome this restriction, this provision of the amended Articles of Incorporation could have an anti-takeover effect and may delay, make more difficult or prevent an attempted acquisition that you may favor. Table of Contents 47 USCB Financial Holdings, Inc. 2024 10-K Item 1B. Unresolved Staff Comments None.
We continually encounter technological change, and we may have fewer resources than many of our competitors to invest in technological improvements. The financial services industry is undergoing rapid technological changes with frequent introductions of new technology- driven products and services. The effective use of technology increases efficiency and enables financial institutions to better serve customers and to reduce costs.
We continually encounter technological change, and we may have fewer resources than many of our competitors to invest in technological improvements. The financial services industry continues to undergo rapid technological changes with frequent introductions of new technology-driven products and services. The effective use of technology increases efficiency and enables financial institutions to better serve customers and to reduce costs.
There is also increased scrutiny of compliance with the rules enforced by OFAC. Federal and state bank regulators have for many years focused on compliance with Bank Secrecy Act and anti-money laundering regulations.
There is also increased scrutiny of compliance with the rules enforced by OFAC. Federal and state bank regulators have for many years focused on compliance with the BSA and anti-money laundering regulations.
When evaluating our internal controls over financial reporting, we may identify material weaknesses that we may not be able to remediate in time to meet the applicable deadline imposed upon us for compliance with the requirements of Section 404 of the Sarbanes-Oxley Act.
When evaluating our internal controls over financial reporting, we may identify material weaknesses that we may not be able to remediate in time to meet the applicable deadline imposed upon us for compliance with the requirements of Section 404 of the SOA.
If we fail to adequately comply with the requirements of Section 404 of the Sarbanes-Oxley Act, we may be subject to adverse regulatory consequences and there could be a negative reaction in the financial markets due to a loss of investor confidence in us and the reliability of our financial statements.
If we fail to adequately comply with the requirements of Section 404 of the SOA, we may be subject to adverse regulatory consequences and there could be a negative reaction in the financial markets due to a loss of investor confidence in us and the reliability of our financial statements.
At December 31, 2023, our total commercial investor real estate loans, including loans secured by apartment buildings, commercial real estate, and construction and land loans represented 384% of the Bank’s total risk-based capital and the growth in the commercial real estate portfolio exceeded 50% over the preceding 36 months.
At December 31, 2024, our total commercial investor real estate loans, including loans secured by apartment buildings, commercial real estate, and construction and land loans represented 366% of the Bank’s total risk-based capital and the growth in the commercial real estate portfolio exceeded 50% over the preceding 36 months.
Finally, we cannot provide any assurances that we can maintain our current levels of noninterest-bearing deposits as customers may seek higher-yielding products due to the increased interest rates being paid on deposits currently.
Finally, we cannot provide any assurances that we can maintain our current levels of noninterest-bearing deposits as customers may seek higher-yielding products due to the increased interest rates being paid on deposits currently, as compared to 2023 and 2022.
In particular, we are required to certify our compliance with Section 404 of the Sarbanes-Oxley Act, which requires us to annually furnish a report by management on the effectiveness of our internal control over financial reporting.
In particular, we are required to certify our compliance with Section 404 of the SOA, which requires us to annually furnish a report by management on the effectiveness of our internal control over financial reporting.
Despite efforts to ensure the integrity and security of our systems, it is possible that we may not be able to anticipate, detect or recognize threats to our systems or to implement effective preventive measures against all efforts to breach our security inside or outside our business, especially because the techniques used to attack our systems change frequently or are not recognized until launched, and because cyber-attacks can originate from a wide variety of sources, including individuals or groups who are associated with external service providers or who are or may be involved in organized crime or linked to terrorist organizations or hostile foreign governments.
Table of Contents 38 USCB Financial Holdings, Inc. 2024 10-K Despite efforts to ensure the integrity and security of our systems, it is possible that we may not be able to anticipate, detect or recognize threats to our systems or to implement effective preventive measures against all efforts to breach our security inside or outside our business, especially because the techniques used to attack our systems change frequently or are not recognized until launched, and because cyber-attacks can originate from a wide variety of sources, including individuals or groups who are associated with external service providers or who are or may be involved in organized crime or linked to terrorist organizations or hostile foreign governments.
Table of Contents 21 USCB Financial Holdings, Inc. 2023 10-K • We may not recover all amounts that are contractually owed to us by our borrowers. • Non-performing assets take significant time to resolve and adversely affect our results of operations and financial condition, and could result in further losses in the future. • We engage in lending secured by real estate and may foreclose on the collateral and own the underlying real estate, subjecting us to the costs and potential risks associated with the ownership of real property and other risks, including exposure to environmental liability, or consumer protection initiatives or changes in state or federal law may substantially raise the cost of foreclosure or prevent us from foreclosing at all. • We are exposed to risk of environmental liability when we take title to property. • We are subject to certain operational risks, including, but not limited to, customer, employee or third-party fraud and data processing system failures and errors. • We face significant operational risks because the nature of the financial services business involves a high volume of transactions. • We have several large depositor relationships, the loss of which could force us to fund our business through more expensive and less stable sources. • Our securities portfolio performance in difficult market conditions could have adverse effects on our results of operations. • We may not effectively execute on our expansion strategy, which may adversely affect our ability to maintain our historical growth and earnings trends. • New lines of business, products, product enhancements or services may subject us to additional risk. • Our business needs and future growth may require us to raise additional capital and that capital may not be available on terms acceptable to us or may be dilutive to existing shareholders. • We may grow through mergers or acquisitions, a strategy that may not be successful or, if successful, may produce risks in successfully integrating and managing the merged companies or acquisitions and may dilute our shareholders. • The loss of one or more of our key personnel, or our failure to attract and retain other highly qualified personnel in the future, could harm our business. • Damage to our reputation could significantly harm our businesses. • We face strong competition from financial services companies and other companies that offer banking services, which could materially and adversely affect our business. • We must respond to rapid technological changes to remain competitive. • We continually encounter technological change, and we may have fewer resources than many of our competitors to invest in technological improvements. • A failure, interruption, or breach in the security of our systems, or those of our contracted vendors, could disrupt our business, result in the disclosure of confidential information, damage our reputation, and create significant financial and legal exposure. • We rely on other companies to provide key components of our business infrastructure and our operations could be interrupted if our third-party service providers experience difficulty, terminate their services or fail to comply with banking regulations. • Litigation and regulatory actions, including possible enforcement actions, could subject us to significant fines, penalties, judgments or other requirements resulting in increased expenses or restrictions on our business activities.
Table of Contents 22 USCB Financial Holdings, Inc. 2024 10-K • Correspondent banking is an important part of our business, which creates increased BSA/AML risk. • We may not recover all amounts that are contractually owed to us by our borrowers. • Non-performing assets take significant time to resolve and adversely affect our results of operations and financial condition, and could result in further losses in the future. • We engage in lending secured by real estate and may foreclose on the collateral and own the underlying real estate, subjecting us to the costs and potential risks associated with the ownership of real property and other risks, including exposure to environmental liability, or consumer protection initiatives or changes in state or federal law may substantially raise the cost of foreclosure or prevent us from foreclosing at all. • We are exposed to risk of environmental liability when we take title to property. • We are subject to certain operational risks, including, but not limited to, customer, employee or third-party fraud and data processing system failures and errors. • We face significant operational risks because the nature of the financial services business involves a high volume of transactions. • We have several large depositor relationships, the loss of which could force us to fund our business through more expensive and less stable sources. • Our securities portfolio performance in difficult market conditions could have adverse effects on our results of operations. • We may not effectively execute on our expansion strategy, which may adversely affect our ability to maintain our historical growth and earnings trends. • New lines of business, products, product enhancements or services may subject us to additional risk. • Our business needs and future growth may require us to raise additional capital and that capital may not be available on terms acceptable to us or may be dilutive to existing shareholders. • We may grow through mergers or acquisitions, a strategy that may not be successful or, if successful, may produce risks in successfully integrating and managing the merged companies or acquisitions and may dilute our shareholders. • The loss of one or more of our key personnel, or our failure to attract and retain other highly qualified personnel in the future, could harm our business. • Damage to our reputation could significantly harm our businesses. • We face strong competition from financial services companies and other companies that offer banking services, which could materially and adversely affect our business. • We must respond to rapid technological changes to remain competitive. • We continually encounter technological change, and we may have fewer resources than many of our competitors to invest in technological improvements. • Our current and future uses of Artificial Intelligence (AI) and other emerging technologies may create additional risks. • A failure, interruption, or breach in the security of our systems, or those of our contracted vendors, could disrupt our business, result in the disclosure of confidential information, damage our reputation, and create significant financial and legal exposure. • We rely on other companies to provide key components of our business infrastructure and our operations could be interrupted if our third-party service providers experience difficulty, terminate their services or fail to comply with banking regulations.
Absent further quantitative easing by the Federal Reserve, these developments could cause interest rates and borrowing costs to rise, which may negatively impact our ability to access the debt markets on favorable terms. In addition, disagreement over the federal budget has caused the U.S. federal government to shut down for periods of time.
These developments could cause interest rates and borrowing costs to rise (unless the Federal Reserve re-initiates quantitative easing), which may negatively impact our ability to access the debt markets on favorable terms. In addition, disagreement over the federal budget has caused the U.S. federal government to shut down for periods of time.
A successful penetration or circumvention of the security of our systems, including those of our third-party vendors, could cause serious negative consequences, including significant disruption of our operations, misappropriation of confidential information, or damage to computers or systems, and may result in violations of applicable privacy and other Table of Contents 36 USCB Financial Holdings, Inc. 2023 10-K laws, financial loss, loss of confidence in our security measures, customer dissatisfaction, increased insurance premiums, significant litigation exposure and harm to our reputation, all of which could have a material adverse effect on our business, financial condition, results of operations, and future prospects.
A successful penetration or circumvention of the security of our systems, including those of our third-party vendors, could cause serious negative consequences, including significant disruption of our operations, misappropriation of confidential information, or damage to computers or systems, and may result in violations of applicable privacy and other laws, financial loss, loss of confidence in our security measures, customer dissatisfaction, increased insurance premiums, significant litigation exposure and harm to our reputation, all of which could have a material adverse effect on our business, financial condition, results of operations, and future prospects.
As a result, if future events or regulatory views concerning such analyses differ significantly from the judgments, assumptions and estimates in our critical accounting policies, those events or assumptions could have a material impact on our consolidated financial statements Table of Contents 38 USCB Financial Holdings, Inc. 2023 10-K and related disclosures, in each case resulting in our need to revise or restate prior period financial statements, cause damage to our reputation and the price of our Class A common stock and adversely affect our business, prospects, cash flow, liquidity, financial condition and results of operations.
As a result, if future events or regulatory views concerning such analyses differ significantly from the judgments, assumptions and estimates in our critical accounting policies, those events or assumptions could have a material impact on our consolidated financial statements and related disclosures, in each case resulting in our need to revise or restate prior period financial statements, cause damage to our reputation and the price of our Class A common stock and adversely affect our business, prospects, cash flow, liquidity, financial condition and results of operations.
Department of Justice, Drug Enforcement Administration and Internal Revenue Service. Additionally, South Florida has been designated as a “High Intensity Financial Crime Area” (“HIFCA”) by FinCEN and a “High Intensity Drug Trafficking Area” (“HIDTA”) by the Office of National Drug Control Policy. The HIFCA program is intended to concentrate law enforcement efforts to combat money laundering efforts in higher-risk areas.
Additionally, South Florida has been designated as a “High Intensity Financial Crime Area” (“HIFCA”) by FinCEN and a “High Intensity Drug Trafficking Area” (“HIDTA”) by the Office of National Drug Control Policy. The HIFCA program is intended to concentrate law enforcement efforts to combat money laundering efforts in higher-risk areas.
If we become subject to such regulatory actions, our business, financial condition, result s of operations and reputation may be negatively impacted.
If we become subject to such regulatory actions, our business, financial condition, results of operations and reputation may be negatively impacted.
These risks are discussed more fully in this Item 1A and include, without limitation, the following: Risks Related to our Business and Operations • Our business operations and lending activities are concentrated in South Florida, and we are more sensitive to adverse changes in the local economy than our more geographically diversified competitors. • The small- to medium-sized businesses to which we lend may have fewer resources to weather adverse business developments, which may impair a borrower's ability to repay a loan. • Inflationary pressures and rising prices may affect our results of operations and financial condition. • Financial challenges at other banking institutions could lead to depositor concerns that spread within the banking industry causing disruptive deposit outflows and other destabilizing results. • Insufficient liquidity could impair our ability to fund operations and jeopardize our financial condition, results of operations, growth and prospects. • Changes in U.S. trade policies and other global political factors beyond our control, including the imposition of tariffs, retaliatory tariffs, or other sanctions, may adversely impact our business, financial condition and results of operations. • Our lending business is subject to credit risk, which could lead to unexpected losses. • The transition from the use of LIBOR may adversely impact the interest rates paid on certain financial instruments. • Natural disasters and severe weather events in Florida could have a material adverse impact on our business, financial condition and operations. • Our business is subject to interest rate risk and variations in interest rates may materially and adversely affect our financial performance. • A failure or the perceived risk of a failure to raise the statutory debt limit of the U.S. in the future could have a material adverse effect on our business, financial condition and results of operations. • Our allowance for credit losses may not be sufficient to absorb potential losses in our loan portfolio. • Our commercial loan portfolio may expose us to increased credit risk. • The imposition of further limits by the bank regulators on commercial real estate lending activities could curtail our growth and adversely affect our earnings. • Our SBA lending program depends on our status as a participant in the SBA's Preferred Lenders Program, and we face specific risks associated with originating SBA loans and selling the guaranteed portion thereof. • The SBA may not honor its guarantees if we do not originate loans in compliance with SBA guidelines. • Global banking is an important part of our business, which creates increased BSA/AML risk.
These risks are discussed more fully in this Item 1A and include, without limitation, the following: Risks Related to our Business and Operations • Our business operations and lending activities are concentrated in South Florida, and we are more sensitive to adverse changes in the local economy than our more geographically diversified competitors. • Our concentration of real estate loans in a limited market area exposes us to lending risks. • The small- to medium-sized businesses to which we lend may have fewer resources to weather adverse business developments, which may impair a borrower's ability to repay a loan. • Inflationary pressures and rising prices may affect our results of operations and financial condition. • The soundness of other financial institutions could adversely affect us. • Insufficient liquidity could impair our ability to fund operations and jeopardize our financial condition, results of operations, growth and prospects. • Changes in U.S. trade policies and other global political factors beyond our control, including the imposition of tariffs, retaliatory tariffs, or other sanctions, may adversely impact our business, financial condition and results of operations. • Our lending business is subject to credit risk, which could lead to unexpected losses. • The transition from the use of LIBOR may adversely impact the interest rates paid on certain financial instruments. • Natural disasters and severe weather events in Florida could have a material adverse impact on our business, financial condition and operations. • Our business is subject to interest rate risk and variations in interest rates may materially and adversely affect our financial performance. • A failure or the perceived risk of a failure to raise the statutory debt limit of the U.S. in the future could have a material adverse effect on our business, financial condition and results of operations. • Our allowance for credit losses may not be sufficient to absorb potential losses in our loan portfolio. • Our commercial loan portfolio may expose us to increased credit risk. • The imposition of further limits by the bank regulators on commercial real estate lending activities could curtail our growth and adversely affect our earnings. • Our SBA lending program depends on our status as a participant in the SBA's Preferred Lenders Program, and we face specific risks associated with originating SBA loans and selling the guaranteed portion thereof. • The SBA may not honor its guarantees if we do not originate loans in compliance with SBA guidelines.
If, as a result of an examination, one of these banking agencies were to determine that the financial condition, capital resources, asset quality, asset concentration, earnings prospects, management, liquidity sensitivity to market risk, risk management and internal controls or other aspects of any of our operations has become unsatisfactory, or that we or our management are in violation of any law or regulation, the banking agency could take a number of different remedial or punitive actions as it deems appropriate.
If, as a result of an examination, one of these Table of Contents 43 USCB Financial Holdings, Inc. 2024 10-K banking agencies were to determine that the financial condition, capital resources, asset quality, asset concentration, earnings prospects, management, liquidity sensitivity to market risk, risk management and internal controls or other aspects of any of our operations has become unsatisfactory, or that we or our management are in violation of any law or regulation, the banking agency could take a number of different remedial or punitive actions as it deems appropriate.
In addition, in the current economic and regulatory environment, including the COVID-19 pandemic, bank regulators may impose capital requirements that are more stringent than those required by applicable existing regulations.
In addition, in the current economic and regulatory environment bank regulators may impose capital requirements that are more stringent than those required by applicable existing regulations.
Risks Related to Our Tax, Accounting and Regulatory Compliance • Our ability to recognize the benefits of our deferred tax assets is dependent on future cash flows and taxable income and may be materially impaired upon significant changes in ownership of our common stock. • The accuracy of our financial statements and related disclosures could be affected if the judgments, assumptions or estimates used in our critical accounting policies are inaccurate. • As a new public company, we may not efficiently or effectively create an effective internal control environment, and any future failure to maintain effective internal control over financial reporting could impair the reliability of our financial statements, which in turn could harm our business, impair investor confidence in the accuracy and completeness of our financial reports and our access to the capital markets, cause the price of our Class A common stock to decline and subject us to regulatory penalties. • We operate in a highly regulated environment, and the laws and regulations that govern our operations, corporate governance, executive compensation and accounting principles, or changes in them, or our failure to comply with them, could adversely affect us. • We face a risk of noncompliance with the Bank Secrecy Act and other anti-money laundering statutes and regulations and corresponding enforcement proceedings. • We are subject to capital adequacy requirements and may become subject to more stringent capital requirements, which could adversely affect our financial condition and operations. • We are periodically subject to examination and scrutiny by a number of banking agencies and, depending upon the findings and determinations of these agencies, we may be required to make adjustments to our business that could adversely affect us. • We are subject to numerous laws and regulations of certain regulatory agencies designed to protect consumers, including the Community Reinvestment Act, or CRA, and fair lending laws, and failure to comply with these laws could lead to a wide variety of sanctions. • Climate change and related legislative and regulatory initiatives may materially affect our business and results of operations.
Risks Related to Our Tax, Accounting and Regulatory Compliance • Our ability to recognize the benefits of our deferred tax assets is dependent on future cash flows and taxable income and may be materially impaired upon significant changes in ownership of our common stock. • The accuracy of our financial statements and related disclosures could be affected if the judgments, assumptions or estimates used in our critical accounting policies are inaccurate. • As a public company, we may not efficiently or effectively create an effective internal control environment, and any future failure to maintain effective internal control over financial reporting could impair the reliability of our financial statements, which in turn could harm our business, impair investor confidence in the accuracy and completeness of our financial reports and our access to the capital markets, cause the price of our Class A common stock to decline and subject us to regulatory penalties. • We operate in a highly regulated environment, and the laws and regulations that govern our operations, corporate governance, executive compensation and accounting principles, or changes in them, or our failure to comply with them, could adversely affect us. • We face a risk of noncompliance with the Bank Secrecy Act and other anti-money laundering statutes and regulations and corresponding enforcement proceedings. • Significantly heightened regulatory and supervisory expectations and scrutiny in the United States have increased our compliance, regulatory, and other risks and costs and subject us to legal and regulatory examinations, investigations, and enforcement actions. • We are subject to capital adequacy requirements and may become subject to more stringent capital requirements, which could adversely affect our financial condition and operations. • We are periodically subject to examination and scrutiny by a number of banking agencies and, depending upon the findings and determinations of these agencies, we may be required to make adjustments to our business that could adversely affect us. • We are subject to numerous laws and regulations of certain regulatory agencies designed to protect consumers, including the Community Reinvestment Act, or CRA, and fair lending laws, and failure to comply with these laws could lead to a wide variety of sanctions. • Climate change and related legislative and regulatory initiatives may materially affect our business and results of operations. • Increasing scrutiny and evolving expectations from customers, regulators, investors, and other stakeholders with respect to our environmental, social and governance practices may impose additional costs on us or expose us to new or additional risks.
As a public company, we are required to comply with SEC regulations, including the Sarbanes-Oxley Act and other rules that govern public companies that we previously were not required to comply with as a private company.
As a public company, we are required to comply with SEC regulations, including the SOA and other rules that govern public companies that we previously were not required to comply with as a private company.
While we remain an emerging growth company or a non-accelerated smaller reporting company, we will not be required to include an attestation report on internal control over financial reporting issued by our independent registered public accounting firm.
While we remain an emerging growth company, we will not be required to include an attestation report on internal control over financial reporting issued by our independent registered public accounting firm.
Regulatory guidance on concentrations in commercial real estate lending provides that a bank’s commercial real estate lending exposure could receive increased supervisory scrutiny where total commercial real estate loans, including loans secured by multi-family residential properties, owner-occupied and nonowner-occupied investor real estate, and construction and land loans, represent 300% or more of an institution’s total risk-based capital, and the outstanding balance of the commercial real estate loan portfolio has increased by 50% or more during the preceding 36 months.
Regulatory guidance on concentrations in commercial real estate lending provides that a bank’s commercial real estate lending exposure could receive increased supervisory scrutiny where total commercial real estate loans, including loans secured by multi-family residential properties, owner-occupied and nonowner-occupied investor real estate, and construction and land loans, represent 300% or more of an institution’s total risk-based capital, and the outstanding balance of the commercial real estate loan portfolio has increased by 50% or more during the preceding 36 Table of Contents 30 USCB Financial Holdings, Inc. 2024 10-K months.
Because the continued availability of our "deferred tax assets" depends, in part, on the value of our stock owned by shareholders owning 5% or more of our stock, our Articles of Incorporation, except as otherwise may be approved by the Board or except for transfers by our Significant Investors, prohibits any direct or indirect transfer of stock or options to acquire stock to any person who, as a result of the transfer, would own 4.95% or more of our stock, as long as the Company continues to have "deferred tax assets." Such restrictions may limit the ability to transfer our stock.
Because the continued availability of our "deferred tax assets" depends, in part, on the value of our stock owned by shareholders owning 5% or more of our stock, our amended Articles of Incorporation, except as otherwise may be approved by the Board or except for transfers by our Significant Investors, prohibits any direct or indirect transfer of stock or options Table of Contents 45 USCB Financial Holdings, Inc. 2024 10-K to acquire stock to any person who, as a result of the transfer, would own 4.95% or more of our stock, as long as the Company continues to have "deferred tax assets." Such restrictions may limit the ability to transfer our stock.
Non-performing assets adversely affect our net income in various ways. We do not record interest income on nonaccrual loans or other real estate owned (“OREO”), thereby adversely affecting our net income and returns on assets and equity, increasing our loan administration costs and adversely affecting our efficiency ratio.
We do not record interest income on nonaccrual loans or other real estate owned (“OREO”), thereby adversely affecting our net income and returns on assets and equity, increasing our loan administration costs and adversely affecting our efficiency ratio.
Under GAAP, we are required to review our investment portfolio periodically for the presence of credit losses of our securities, taking into consideration current and future market conditions, the extent and nature of changes in fair value, issuer rating changes and trends, volatility of Table of Contents 32 USCB Financial Holdings, Inc. 2023 10-K earnings, current analysts’ evaluations, our ability and intent to hold investments until a recovery of fair value, as well as other factors.
Under GAAP, we are required to review our investment portfolio periodically for the presence of credit losses of our securities, taking into consideration current and future market conditions, the extent and nature of changes in fair value, issuer rating changes and trends, volatility of earnings, current analysts’ evaluations, our ability and intent to hold investments until a recovery of fair value, as well as other factors.
Any decline in available funding or cost of liquidity could adversely impact our ability to originate loans, invest in securities, meet our expenses or fulfill obligations such as repaying Table of Contents 25 USCB Financial Holdings, Inc. 2023 10-K our borrowings or meeting deposit withdrawal demands, any of which could, in turn, have an adverse effect on our business, financial condition, and results of operations.
Any decline in available funding or cost of liquidity could adversely impact our ability to originate loans, invest in securities, meet our expenses or fulfill obligations such as repaying our borrowings or meeting deposit withdrawal demands, any of which could, in turn, have an adverse effect on our business, financial condition, and results of operations.
Patriot and Priam also have certain registration rights, including demand registration rights, and information rights. Although Patriot and Priam are independent of each other, these institutional investors will continue to have a significant level of influence over us because of their level of Class A common stock ownership and their right to representation on our Board.
Although Patriot and Priam are independent of each other, these institutional investors will continue to have a significant level of influence over us because of their level of Class A common stock ownership and their right to representation on our Board.
Although U.S. lawmakers have passed legislation in the past to raise the federal debt ceiling on multiple occasions, including the most recent increase in June 2023, ratings agencies have lowered or threatened to lower the long-term sovereign credit rating on the United States.
Although U.S. lawmakers have passed legislation in the past to raise the federal debt ceiling on multiple occasions, including the most recent increase in June 2023, ratings agencies have lowered or threatened to lower the long-term sovereign credit rating on the United States. On January 1, 2025, the extension of the debt ceiling limit effected in June 2023 expired.
Our failure to successfully evaluate and execute mergers, acquisitions or investments or otherwise adequately address and manage the risks associated with such transactions could have a material adverse effect on our business, results of operations and financial condition, including short-term and long-term liquidity.
Our failure to successfully evaluate and execute mergers, acquisitions or investments or Table of Contents 36 USCB Financial Holdings, Inc. 2024 10-K otherwise adequately address and manage the risks associated with such transactions could have a material adverse effect on our business, results of operations and financial condition, including short-term and long-term liquidity.
It can be difficult to accurately evaluate the total Table of Contents 28 USCB Financial Holdings, Inc. 2023 10-K funds required to complete a project, and construction lending often involves the disbursement of substantial funds with repayment dependent, in large part, on the success of the ultimate project rather than the ability of a borrower or guarantor to repay the loan from sources other than the subject project.
It can be difficult to accurately evaluate the total funds required to complete a project, and construction lending often involves the disbursement of substantial funds with repayment dependent, in large part, on the success of the ultimate project rather than the ability of a borrower or guarantor to repay the loan from sources other than the subject project.
Future changes in tax law or changes in ownership structure could limit our ability to utilize our recorded net deferred tax assets. The accuracy of our financial statements and related disclosures could be affected if the judgments, assumptions or estimates used in our critical accounting policies are inaccurate.
Future changes in tax law or changes in ownership structure could limit our ability to utilize our recorded net deferred tax assets. Table of Contents 40 USCB Financial Holdings, Inc. 2024 10-K The accuracy of our financial statements and related disclosures could be affected if the judgments, assumptions or estimates used in our critical accounting policies are inaccurate.
Our commercial business loans are primarily made to small business and middle market customers. These loans typically involve repayment that depends upon income generated, or expected to be generated, by the property securing the loan and/or by the cash flow generated by the business borrower and may be adversely affected by changes in the economy or local market conditions.
These loans typically involve repayment that depends upon income generated, or expected to be generated, by the property securing the loan and/or by the cash flow generated by the business borrower and may be adversely affected by changes in the economy or local market conditions.
The federal Financial Crimes Enforcement Network, or FinCEN, established by the U.S. Treasury Department to administer the Bank Secrecy Act, is authorized to impose significant civil money penalties for violations of those requirements and has engaged in coordinated enforcement efforts with the individual federal banking regulators, as well as the U.S.
FinCEN, established by the U.S. Treasury Department to administer the Bank Secrecy Act, is authorized to impose significant civil money penalties for violations of those requirements and has engaged in coordinated enforcement efforts with the individual federal banking regulators, as well as the U.S. Department of Justice, Drug Enforcement Administration and Internal Revenue Service.
To the extent Table of Contents 37 USCB Financial Holdings, Inc. 2023 10-K that any of our directors become aware of acquisition opportunities that may be suitable for entities other than us to which they have fiduciary or contractual obligations, or they are presented with such opportunities in their capacities as fiduciaries to such entities, they may honor such obligations to such other entities.
To the extent that any of our directors become aware of acquisition opportunities that may be suitable for entities other than us to which they have fiduciary or contractual obligations, or they are presented with such opportunities in their capacities as fiduciaries to such entities, they may honor such obligations to such other entities.
For example, Patriot and Priam will have a greater ability than our other shareholders to influence the election of directors and the potential outcome of other matters submitted to a vote of our shareholders, including mergers and other acquisition transactions, amendments to our amended Articles of Incorporation and Amended and Restated Bylaws, and other extraordinary corporate matters.
For example, Patriot and Priam will have a greater ability than our other shareholders to influence the election of directors and the potential outcome of other matters submitted to a vote of our shareholders, including mergers and other acquisition transactions, Table of Contents 46 USCB Financial Holdings, Inc. 2024 10-K amendments to our amended Articles of Incorporation and Amended and Restated Bylaws, and other extraordinary corporate matters.
In order to be a “well-capitalized” depository institution under the new regime, an institution must maintain a CET1 capital ratio of 7.0% or more; a Tier 1 capital ratio of 8.5% or more; a total capital ratio of Table of Contents 40 USCB Financial Holdings, Inc. 2023 10-K 10.5% or more; and a leverage ratio of 4% or more.
In order to be a “well-capitalized” depository institution under the new regime, an institution must maintain a CET1 capital ratio of 7.0% or more; a Tier 1 capital ratio of 8.5% or more; a total capital ratio of 10.5% or more; and a Tier 1 leverage ratio of 4% or more.
There are ongoing efforts to establish an alternative reference rate. The Federal Reserve Board, in conjunction with the Alternative Reference Rates Committee, a steering committee comprised of large U.S. financial institutions, supports replacing LIBOR with SOFR, a new index calculated by short-term repurchase agreements backed by Treasury securities.
The Federal Reserve Board, in conjunction with the Alternative Reference Rates Committee, a steering committee comprised of large U.S. financial institutions, supports replacing LIBOR with SOFR (Secured Overnight Financing Rate), a new index calculated by short-term repurchase agreements backed by Treasury securities.
Table of Contents 31 USCB Financial Holdings, Inc. 2023 10-K We are subject to certain operational risks, including, but not limited to, customer, employee or third-party fraud and data processing system failures and errors. Employee errors and employee or customer misconduct could subject us to financial losses or regulatory sanctions and seriously harm our reputation.
We are subject to certain operational risks, including, but not limited to, customer, employee or third-party fraud and data processing system failures and errors. Employee errors and employee or customer misconduct could subject us to financial losses or regulatory sanctions and seriously harm our reputation.
Table of Contents 27 USCB Financial Holdings, Inc. 2023 10-K A failure or the perceived risk of a failure to raise the statutory debt limit of the U.S. in the future could have a material adverse effect on our business, financial condition and results of operations .
A failure or the perceived risk of a failure to raise the statutory debt limit of the U.S. in the future could have a material adverse effect on our business, financial condition and results of operations .
Acquisitions may also involve the payment of a premium over book and market values and, Table of Contents 34 USCB Financial Holdings, Inc. 2023 10-K therefore, some dilution of our tangible book value and net income per common share may occur in connection with any future transaction.
Acquisitions may also involve the payment of a premium over book and market values and, therefore, some dilution of our tangible book value and net income per common share may occur in connection with any future transaction.
Our risk management practices, such as monitoring the concentration of our loans within specific industries in which we lend and concentrations with individual borrowers or related borrowers, and our credit approval practices, may not adequately reduce credit risk.
Our risk management practices, such as monitoring the concentration of our loans within specific industries in which we lend and Table of Contents 27 USCB Financial Holdings, Inc. 2024 10-K concentrations with individual borrowers or related borrowers, and our credit approval practices, may not adequately reduce credit risk.
We may also, from time to time, be the subject of subpoenas, requests for information, reviews, investigations and proceedings (both formal and informal) by governmental agencies regarding our current and/or prior business activities.
We may also, from time to time, be the subject of subpoenas, requests for information, reviews, investigations and proceedings (both formal and informal) by governmental agencies Table of Contents 39 USCB Financial Holdings, Inc. 2024 10-K regarding our current and/or prior business activities.
Further, the U.S. Congress, state legislatures and federal and state regulatory agencies continue to Table of Contents 41 USCB Financial Holdings, Inc. 2023 10-K propose numerous initiatives to supplement the global effort to combat climate change, including provisions contained in the Inflation Reduction Act of 2022.
Further, the U.S. Congress, state legislatures and federal and state regulatory agencies continue to propose numerous initiatives to supplement the global effort to combat climate change, including provisions contained in the Inflation Reduction Act of 2022.
We are also subject to capitalization guidelines established by our regulators, which require us to maintain adequate capital to support our Table of Contents 39 USCB Financial Holdings, Inc. 2023 10-K business. Compliance with laws and regulations can be difficult and costly, and changes to laws and regulations often impose additional operating costs.
We are also subject to capitalization guidelines established by our regulators, which require us to maintain adequate capital to support our business. Compliance with laws and regulations can be difficult and costly, and changes to laws and regulations often impose additional operating costs.
Our commercial loan portfolio may expose us to increased credit risk. Commercial business and real estate loans generally have a higher risk of loss because loan balances are typically larger than residential real estate and consumer loans and repayment is usually dependent on cash flows from the borrower’s business or the property securing the loan.
Commercial business and real estate loans generally have a higher risk of loss because loan balances are typically larger than residential real estate and consumer loans and repayment is usually dependent on cash flows from the borrower’s business or the property securing the loan. Our commercial business loans are primarily made to small business and middle market customers.
We operate in a highly regulated environment, and the laws and regulations that govern our operations, corporate governance, executive compensation and accounting principles, or changes in them, or our failure to comply with them, could adversely affect us.
Table of Contents 41 USCB Financial Holdings, Inc. 2024 10-K We operate in a highly regulated environment, and the laws and regulations that govern our operations, corporate governance, executive compensation and accounting principles, or changes in them, or our failure to comply with them, could adversely affect us.
The level of the allowance reflects management's continuing evaluation of general economic conditions, present political and regulatory conditions, diversification and seasoning of the loan portfolio, historic loss experience, identified credit problems, delinquency levels and adequacy of collateral.
The level of the allowance reflects management's continuing evaluation of general economic Table of Contents 29 USCB Financial Holdings, Inc. 2024 10-K conditions, present political and regulatory conditions, diversification and seasoning of the loan portfolio, historic loss experience, identified credit problems, delinquency levels and adequacy of collateral.
(collectively, "Patriot"), and Priam Capital Fund II, LP ("Priam," and together with Patriot, the "Significant Investors"). As of February 29, 2024 Patriot and Priam own approximately 22.82% and 22.83%, respectively, of our outstanding Class A common stock.
(collectively, "Patriot"), and Priam Capital Fund II, LP ("Priam," and together with Patriot, the "Significant Investors"). As of February 28, 2025 Patriot and Priam own approximately 22.4% and 22.5%, respectively, of our outstanding shares of Class A common stock.
With Table of Contents 30 USCB Financial Holdings, Inc. 2023 10-K respect to loans that we originate for condominium or homeowners' associations, these loans are primarily secured by and rely upon the cash flow received by the Associations from payments received from their property owners, as well as cash on hand.
With respect to loans that we originate for condominium or homeowners' associations (“Associations”), these loans are primarily secured by and rely upon the cash flow received by the Associations from payments received from their property owners, as well as cash on hand.
In addition, the aggregate amount of SBA 7(a) and 504 loan guarantees by the SBA must be approved each fiscal year by the federal government. We cannot predict the amount of SBA 7(a) loan guarantees in any given fiscal Table of Contents 29 USCB Financial Holdings, Inc. 2023 10-K year.
In addition, the aggregate amount of SBA 7(a) and 504 loan guarantees by the SBA must be approved each fiscal year by the federal government. We cannot predict the amount of SBA 7(a) loan guarantees in any given fiscal year.
Similar and even more expansive initiatives are expected under the current administration, including potentially increasing supervisory expectations with respect to banks’ risk management practices, accounting for the effects of climate change in stress testing scenarios and systemic risk assessments, revising expectations for credit portfolio concentrations based on climate-related factors and encouraging investment by banks in climate-related initiatives and lending to communities disproportionately impacted by the effects of climate change.
Furthermore, additional initiative may be undertaken in the future, including potentially increasing supervisory expectations with respect to banks’ risk management practices, accounting for the effects of climate change in stress testing scenarios and systemic risk assessments, revising expectations for credit portfolio concentrations based on climate-related factors and encouraging investment by banks in climate-related initiatives and lending to communities disproportionately impacted by the effects of climate change.
Employee errors could also subject us to financial claims for negligence. We have implemented a system of internal controls designed to mitigate operational risks, including data processing system failures and errors and customer or employee fraud, as well as insurance coverage designed to protect us from material losses associated with these risks, including losses resulting from any associated business interruption.
Table of Contents 33 USCB Financial Holdings, Inc. 2024 10-K We have implemented a system of internal controls designed to mitigate operational risks, including data processing system failures and errors and customer or employee fraud, as well as insurance coverage designed to protect us from material losses associated with these risks, including losses resulting from any associated business interruption.
Table of Contents 42 USCB Financial Holdings, Inc. 2023 10-K There are significant restrictions in our Articles of Incorporation that restrict the ability to sell our capital stock to shareholders that would own 4.95% or more of our stock, excluding our Significant Investors.
There are significant restrictions in our Articles of Incorporation that restrict the ability to sell our capital stock to shareholders that would own 4.95% or more of our stock, excluding our Significant Investors.
Table of Contents 33 USCB Financial Holdings, Inc. 2023 10-K Federal law requires that a holding company act as a source of financial and managerial strength to its subsidiary bank and to commit resources to support such subsidiary bank.
Federal law requires that a holding company act as a source of financial and managerial strength to its subsidiary bank and to commit resources to support such subsidiary bank.
Due to competitive pressures in 2023, we increased the rates paid on our interest-bearing deposits such that our weighted average cost of deposits increased from 0.62% for 2022 to 3.04% for 2023.
Due to competitive pressures in 2023, we increased the rates paid on our interest-bearing deposits such that our weighted average cost of deposits increased from 0.62% for 2022 to 3.04% for 2023. However, in 2024, in light of the FOMC’s actions to decrease the federal funds rate three times, we decreased the rates paid on our interest-bearing deposits.
Withdrawals of deposits by any one of our largest depositors could force us to rely more heavily on more expensive and less stable funding sources. Consequently, the occurrence of any of these events could have a material adverse effect on our business, financial condition and results of operations.
Withdrawals of deposits by any one of our largest depositors could force us to rely more heavily on more expensive and less stable funding sources. Consequently, the occurrence of such event could have a material adverse effect on our business, financial condition and results of operations. At December 31, 2024, our top 10 depositors held 16.7% of our total portfolio.
Table of Contents 23 USCB Financial Holdings, Inc. 2023 10-K Risks Related to our Business and Operations Our business operations and lending activities are concentrated in South Florida, and we are more sensitive to adverse changes in the local economy than our more geographically diversified competitors.
Risks Related to our Business and Operations Our business operations and lending activities are concentrated in South Florida, and we are more sensitive to adverse changes in the local economy than our more geographically diversified competitors.
Our business is subject to interest rate risk, and variations in interest rates may materially and adversely affect our financial performance. Changes in the interest rate environment may reduce our profits.
Table of Contents 28 USCB Financial Holdings, Inc. 2024 10-K Our business is subject to interest rate risk, and variations in interest rates may materially and adversely affect our financial performance. Changes in the interest rate environment may reduce our profits.
A capital injection may be required at times when the holding company may not have the resources to provide it and therefore may be required to attempt to borrow the funds or raise capital.
A capital injection may be required at times when the holding company may not have the resources to provide it and therefore may Table of Contents 35 USCB Financial Holdings, Inc. 2024 10-K be required to attempt to borrow the funds or raise capital.
Moreover, the CECL model may create more volatility in our level of allowance for credit losses. If we are required to materially increase our level of allowance for credit losses for any reason, such increase could adversely affect our business, prospects, cash flow, liquidity, financial condition and results of operations.
If we are required to materially increase our level of allowance for credit losses for any reason, such increase could adversely affect our business, prospects, cash flow, liquidity, financial condition and results of operations. Our commercial loan portfolio may expose us to increased credit risk.
In addition, Patriot and Priam are each entitled to nominate a director to our Board and have certain subscription rights to purchase new equity securities Table of Contents 43 USCB Financial Holdings, Inc. 2023 10-K that we issue in the future, in each case as long as certain equity ownership criteria are met.
In addition, Patriot and Priam are each entitled to nominate a director to our Board and have certain subscription rights to purchase new equity securities that we issue in the future, in each case as long as certain equity ownership criteria are met. Patriot and Priam also have certain registration rights, including demand registration rights, and information rights.
Our failure to strictly adhere to the terms and requirements of our OFAC license or our failure to adequately manage our BSA/AML compliance risk in light of our correspondent banking relationship with foreign financial institutions and international private banking could result in regulatory or other actions being taken against us, which could significantly increase our compliance costs and materially and adversely affect our results of operations.
Our failure to strictly adhere to the terms and requirements of our OFAC license or our failure to adequately manage our BSA/AML compliance risk in light of our correspondent banking relationship with foreign financial institutions and international private banking could result in regulatory or other actions being taken against us, including the imposition of civil money penalties, formal agreements and cease and desist orders.
In such events, we could suffer loan losses, which could have a material adverse effect on our net earnings, allowance for loan and lease losses, financial condition, and results of operations. Non-performing assets take significant time to resolve and adversely affect our results of operations and financial condition, and could result in further losses in the future.
In such events, we could suffer loan losses, which could have a material adverse effect on our net earnings, allowance for loan and lease losses, financial condition, and results of operations.
Consequently, we may have a higher risk of non-compliance with the BSA and other AML rules and regulations due to our correspondent banking relationships with foreign financial institutions.
Consequently, we may have a higher risk of non-compliance with the Bank Secrecy Act of 1970, as amended (“BSA”) and other anti-money laundering (“AML”) rules and regulations due to our correspondent banking relationships with foreign financial institutions.
Table of Contents 26 USCB Financial Holdings, Inc. 2023 10-K While the Adjustable Interest Rate (LIBOR) Act and implementing regulations will help to transition legacy LIBOR contracts to a new benchmark rate, the substitution of SOFR for LIBOR may have potentially significant economic impacts on parties to affected contracts.
The Bank adopted SOFR as its preferred benchmark as an alternative to LIBOR for use in new contracts in 2023. While the Adjustable Interest Rate (LIBOR) Act and implementing regulations will help to transition legacy LIBOR contracts to a new benchmark rate, the substitution of SOFR for LIBOR may have potentially significant economic impacts on parties to affected contracts.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

6 edited+5 added−4 removed18 unchanged
Biggest changeIn instances of identified deficiencies or vulnerabilities, remedial action plans will be implemented to rectify issues or establish mitigating controls. Any exceptions deemed significant will be promptly reported, with remediation efforts prioritized. Annually, or as required, the RMCD will provide a comprehensive report to the Board or a designated committee regarding the status of the cybersecurity Program.
Biggest changeCompliance with Regulatory Standards Annual testing or more frequently if deemed necessary of cybersecurity controls and procedures will be conducted to ensure compliance. In instances of identified deficiencies or vulnerabilities, remedial action plans will be implemented to rectify issues or establish mitigating controls. Any exceptions deemed significant will be promptly reported, with remediation efforts prioritized.
Assessment and Response to Cybersecurity Threats It is the policy of the Company and its technology service providers (“TSPs”) to ensure they can identify, mitigate, and respond to cyber-attacks involving destructive malware and invasive attacks such as phishing, ransomware, malware, DDoS attacks, etc.
Assessment and Response to Cybersecurity Threats It is the policy of the Company and its technology service providers (“TSPs”) to ensure that they can identify, mitigate, and respond to cyber-attacks involving destructive malware and invasive attacks such as phishing, ransomware, malware, DDoS attacks, etc.
The Company utilizes the National Institute of Standards and Technology (“NIST”) Framework and the FFIEC’s Cybersecurity Assessment Tool to help management identify its risks and determine the Company’s cybersecurity posture. Through the implementation of rigorous procedures and controls, augmented by ongoing training initiatives for both management and staff, the institution cultivates a safe cybersecurity environment.
The Company utilizes the National Institute of Standards and Technology (“NIST”) Framework and the FFIEC’s Cybersecurity Assessment Tool (“Cybersecurity Assessment”) to help management identify its risks and determine the Company’s cybersecurity posture. Through the implementation of rigorous procedures and controls, augmented by ongoing training initiatives for both management and staff, the institution cultivates a safe cybersecurity environment.
This includes maintaining up-to-date intrusion detection systems, antivirus protection, and properly configured firewall rules. Systems are monitored to identify, prevent, and contain attack attempts from all sources. Table of Contents 45 USCB Financial Holdings, Inc. 2023 10-K ● Maintaining robust business continuity planning processes to swiftly recover, resume, and maintain operations post- cyber-attack incidents involving destructive malware.
This includes maintaining up-to-date intrusion detection systems, antivirus protection, and properly configured firewall rules. Systems are monitored to identify, prevent, and contain attack attempts from all sources. Table of Contents 48 USCB Financial Holdings, Inc. 2024 10-K ● Maintaining robust business continuity planning processes to swiftly recover, resume, and maintain operations post- cyber-attack incidents involving destructive malware.
This report encompasses internal assessments, utilization of the FFIEC Cybersecurity Assessment Tool, discussion of significant program matters such as the annual risk assessment, risk management decisions, monitoring of service provider compliance, results of key controls testing, security breaches or violations, management's responses, and recommendat ions for program enhancements.
This report encompasses internal assessments, utilization of the Cybersecurity Assessment, discussion of significant program matters such as the annual risk assessment, risk management decisions, monitoring of service provider compliance, results of key controls testing, security breaches or violations, management's responses, and recommendations for program enhancements.
This report will encompass internal assessments, utilization of the FFIEC cybersecurity Assessment Tool, and discussion of other significant program matters. As of the reporting period, there is no knowledge or indication that customer sensitive information was compromised as a result of third-parties’ system vulnerabilities. Management continues to monitor developments and vendor communications.
As of the end of the reporting period set forth in this Annual Report on Form 10-K, there is no knowledge or indication that customer sensitive information was compromised as a result of third-parties’ system vulnerabilities. Management continues to monitor developments and vendor communications. Table of Contents 49 USCB Financial Holdings, Inc. 2024 10-K
Removed
Engagement with Third Party Vendors "Private information," which is part of the "Internet Security and Privacy Act" and considered "Highly Sensitive Information" under the Company’s definition, must not be released as storable data to third-party consultants without security procedures that demonstrate compliance with the Company's third-party diligence in protecting the data and ensuring its proper distribution when no longer needed.
Added
Engagement with Third Party Vendors The engagement of third-party providers involves potential risks that may impact strategic, reputational, operational, transaction, credit, financial, technology and compliance considerations.
Removed
"Private or highly sensitive information" refers to personal information (e.g., information concerning an individual which, because of name, number, symbol, mark, or other identifier, can be used to identify an individual) in combination with any one or more of the following data elements: (1) social security number; (2) driver’s license number or non-driver identification card number; (3) account number, credit or debit card number, in combination with any required security code, access code, or password which would permit access to an individual’s financial account(s) at the Company including but not limited to an individual’s deposit and loan accounts.
Added
Third-party providers whose services involve transmittal, storage and processing of non-public personal information represent a greater level of compliance risks, specifically as it relates to compliance requirements of the Gramm Leach Bliley Act (GLBA) regulation and applicable Privacy Laws and Regulations.
Removed
It does not include publicly available information that is lawfully made available to the public from federal, state, or local government records unless attached in any way to the previously mentioned documentation. Compliance with Regulatory Standards Annual testing or more frequently if deemed necessary of cybersecurity controls and procedures will be conducted to ensure compliance.
Added
The Bank has developed general guidelines for the identification, risk assessment, monitoring and management of risks associated to the engagement of third-party providers or vendors.
Removed
Table of Contents 46 USCB Financial Holdings, Inc. 2023 10-K
Added
Certain aspects of the risk assessment process may require the involvement of the compliance officer, technology officers, finance officers, internal auditors, and legal counsel to identify potential risks that may arise from the third-party engagement as well as identify performance criteria, internal controls, reporting needs and any contractual requirements that should be implemented for the ongoing assessment and control of risks that derive from the third-party engagement.
Added
Annually, or as required, the RMCD will provide a comprehensive report to the Board or a designated committee regarding the status of the cybersecurity program. This report will encompass internal assessments, utilization of the Cybersecurity Assessment, and discussion of other significant program matters.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties The Company’s corporate offices are headquartered at 2301 N.W. 87th Avenue, Miami, Florida 33172. The Company, through the Bank, operates 10 banking centers in South Florida within Miami-Dade and Broward counties. From the 10 banking centers, nine of these locations are leased and one is owned.
Biggest changeItem 2. Properties The Company’s corporate offices are headquartered at 2301 N.W. 87th Avenue, Doral, Florida 33172. The Company, through the Bank, operates 10 banking centers in South Florida within Miami-Dade and Broward counties. Of the 10 banking centers, nine of these locations are leased and one is owned.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeThe Plaintiffs sought the Court to certify the action as a class action and to award damages in an amount to be proven at trial. Plaintiffs sought damages exceeding $750,000 plus attorney’s fees and costs as well as such other relief as the Court determined to award. The Defendants filed a motion to dismiss the Litigation with prejudice (the “Motion”).
Biggest changeThe Plaintiffs sought the Court to certify the action as a class action and to award damages in an amount to be proven at trial. The Plaintiffs sought damages exceeding $750,000 plus attorney’s fees and costs as well as such other relief as the Court determined to award.
On December 27, 2023, the Court, after reviewing the Motion, the Plaintiff’s response thereto and the Defendant’s reply as well as the oral arguments presented by the parties on December 14, 2023, granted the Motion, dismissing the Litigation with prejudice and rendering final judgment in favor of the Defendants.
On December 27, 2023, the Court, after reviewing the Motion, the Plaintiff’s response thereto and the Defendant’s reply as well as the oral arguments presented by the parties on December 14, 2023, granted the Motion, dismissing the Litigation with prejudice and rendering final judgment in favor of the Defendants (the “Order”).
The Court reserved jurisdiction to award costs or grant any post-judgment relief. There can be no assurance that any future legal proceedings to which we are a party will not be decided adversely to our interests and have a material adverse effect on our financial condition and operations.
Table of Contents 50 USCB Financial Holdings, Inc. 2024 10-K There can be no assurance that any future legal proceedings to which we are a party will not be decided adversely to our interests and have a material adverse effect on our financial condition and operations.
Added
The Defendants filed a motion to dismiss the Litigation with prejudice (the “Motion”).
Added
The Court reserved jurisdiction to award costs or grant any post-judgment relief. On May 1, 2024, the Plaintiffs filed in the Third District Court of Appeal for the State of Florida (the “Appellate Court”) an appeal (the “Appeal”), appealing the issuance of the Order and seeking a reversal of the Order.
Added
The Plaintiffs claimed the Court erred by concluding (i) the Exchange Transaction was not ultra vires, and (ii) that the Legacy Shareholders (which includes the Plaintiffs) lacked direct standing. The Plaintiffs filed their initial brief and the Defendants filed on July 1, 2024 their answer brief (“Answer Brief”) responding to the allegations contained in the Appeal.
Added
Oral argument was heard before the Court on January 14, 2025. On February 18, 2025, the Appellate Court affirmed the lower court's ruling and dismissed the lawsuit, in favor of the Defendants (the “Dismissal”).
Added
The Plaintiffs have the right to appeal the Dismissal, but they have not done so as of the date of the filing of this Annual Report on Form 10-K.
Added
The Company believes that the positions in the Appeal are legally and factually without merit, and it intends to vigorously defend against any appeal of the Dismissal of the Appeal , pursue any potential counterclaims against the Plaintiffs as it deems appropriate, and seek coverage from its insurance carriers.
Added
Furthermore, there is also no assurance that we will be able to secure coverage from our insurance carriers for any expenses incurred by us in connection with defending against the Appeal.
Added
At this time, in the opinion of management, the likelihood is remote that the impact of such proceedings, either individually or in the aggregate, would have a material adverse effect on our consolidated results of operations, financial condition or cash flows.
Added
However, one or more unfavorable outcomes in any claim or litigation against us, including the aforementioned Appeal regarding the Exchange Transaction, could have a material adverse effect on the period in which such claims or litigation are resolved.
Added
In addition, regardless of their merits or their ultimate outcomes, such matters are costly, divert management’s attention and may materially adversely affect our reputation, even if resolved in our favor.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

15 edited+3 added−1 removed2 unchanged
Biggest changeThe 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 March 31, 2023 $ 12.71 $ 9.89 June 30, 2023 $ 10.94 $ 8.86 September 30, 2023 $ 12.09 $ 10.31 December 31, 2023 $ 12.65 $ 10.11 As of December 31, 2023, our Class B common stock is not listed or traded on any stock exchange and no shares were issued and outstanding at such date.
Biggest changeThe following table shows the quarterly high and low closing prices of our Class A common stock traded on the Nasdaq Stock Market for the last two fiscal years : Stock Price High Low Quarter Ended: March 31, 2023 $ 12.71 $ 9.89 June 30, 2023 $ 10.94 $ 8.86 September 30, 2023 $ 12.09 $ 10.31 December 31, 2023 $ 12.65 $ 10.11 March 31, 2024 $ 12.44 $ 10.85 June 30, 2024 $ 12.83 $ 10.25 September 30, 2024 $ 16.66 $ 11.99 December 31, 2024 $ 20.78 $ 14.16 As of December 31, 2024, our Class B common stock is not listed or traded on any stock exchange and no shares were issued and outstanding at such date.
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 12/31/2023 USCB Financial Holdings, Inc.
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 12/31/2023 12/31/2024 USCB Financial Holdings, Inc.
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, 2023, 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.
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, 2024, 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.
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. The comparisons shown in the graph below are based upon historical data.
Holders As of January 31, 2024, the Company’s Class A common shares were held by approximately 402 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.
Holders As of January 31, 2025, the Company’s Class A common shares were held by approximately 526 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.
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.
Effective December 30, 2021, the Company acquired all issued and outstanding shares of Class A common stock of the Bank in connection with the bank holding company reorganization. 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.
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.
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 Table of Contents 52 USCB Financial Holdings, Inc. 2024 10-K 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.
Table of Contents 48 USCB Financial Holdings, Inc. 2023 10-K 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.
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.
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, 2023, the Company had repurchased 669,920 shares of Class A common stock.
Under the repurchase programs, 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.
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.
The Bank cannot declare and pay and cash dividends to the Company without receiving the prior approval of the FDIC. 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.
(USCB) $ 100 $ 140 $ 122 $ 123 NASDAQ Bank (BANK) $ 100 $ 115 $ 94 $ 88 NASDAQ ABA Community Bank (QABA) $ 100 $ 114 $ 101 $ 96 NASDAQ Composite (IXIC) $ 100 $ 107 $ 71 $ 102 Table of Contents 49 USCB Financial Holdings, Inc. 2023 10-K Recent Sales of Unregistered Securities (a) The Company did not sell any of its equity securities during 2023 that were not registered under the Securities Act.
(USCB) $ 100 $ 140 $ 122 $ 123 $ 166 NASDAQ Bank (BANK) $ 100 $ 115 $ 94 $ 88 $ 102 NASDAQ ABA Community Bank (QABA) $ 100 $ 114 $ 101 $ 96 $ 106 NASDAQ Composite (IXIC) $ 100 $ 107 $ 71 $ 102 $ 130 Recent Sales of Unregistered Securities The Company did not sell any of its equity securities during 2024 that were not registered under the Securities Act.
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.
Purchases of Equity Securities by Issuer and Other Affiliates Table of Contents 53 USCB Financial Holdings, Inc. 2024 10-K On January 24, 2022, the Board of Directors approved the first share repurchase program of up to 750,000 shares of Class A common stock.
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.
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. The Company has agreed to provide notice to the Federal Reserve prior to paying any cash dividends on its Class A 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.
However, we cannot assure investors that a liquid trading market for our Class A common stock will be sustained. Prior to our listing on the Nasdaq Stock Market there was not an established public trading market for the Class A common shares.
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.
The Company’s Class A common stock is also listed on the Nasdaq Stock Market and uses the same ticker symbol. 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.
Removed
(c) The Company’s repurchases of equity securities for the quarter ended December 31, 2023 were as follows: Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) Maximum Number of Shares that May Yet Be Purchased Under Plans or Programs (1) Period October 1 - 31, 2023 - $ - - 172,397 November 1 - 30, 2023 92,317 10.45 92,317 80,080 December 1 - 31, 2023 - - - 80,080 92,317 $ 10.45 92,317 (1) On January 24, 2022 the Company announced its initial stock repurchase program to repurchase up to 750,000 shares of Class A common stock, approximately 3.75% of the Company’s then outstanding shares of common stock.
Added
On April 22, 2024 the Board of Directors approved the second share repurchase program of up to 500,000 shares of Class A common stock.
Added
As of December 31, 2024, the Company had repurchased 712,020 shares of Class A common stock under the first program and no shares under the second repurchase program. The Company did not repurchase any of its equity securities for the quarter ended December 31, 2024.
Added
As of December 31, 2024, 537,980 shares remained authorized for repurchase under the Company’s two stock repurchase programs.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

113 edited+27 added−25 removed78 unchanged
Biggest changeThe 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, 2023: Beginning balance $ 1,352 $ 10,143 $ 4,163 $ 720 $ 1,109 $ 17,487 Cumulative effect of adoption of accounting principle (1) 1,238 1,105 (2,158) 23 858 1,066 Provision for credit losses (2) 95 (882) 1,897 168 1,225 2,503 Recoveries 10 - 72 - 3 85 Charge-offs - - - - (57) (57) Ending Balance $ 2,695 $ 10,366 $ 3,974 $ 911 $ 3,138 $ 21,084 Average loans $ 186,854 $ 986,234 $ 179,574 $ 93,364 $ 160,934 $ 1,606,960 Net charge-offs (recoveries) to average loans (0.01)% - (0.04)% - 0.03% (0.00)% 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 Average loans $ 193,368 $ 842,914 $ 127,473 $ 81,421 $ 96,517 $ 1,341,693 Net charge-offs (recoveries) to average loans (0.02)% - 0.07% - 0.01% 0.00% (1) Impact of CECL adoption on January 1, 2023.
Biggest changeThe 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 Correspondent Banks Consumer and Other Total December, 31, 2024 Beginning balance $ 2,695 $ 10,366 $ 3,974 $ 911 $ 3,138 $ 21,084 Provision for credit losses (1) 2,403 (1,578) 640 (257) 1,752 2,960 Recoveries 23 - 19 - 3 45 Charge-offs - - - - (19) (19) Ending Balance $ 5,121 $ 8,788 $ 4,633 $ 654 $ 4,874 $ 24,070 Average loans $ 256,112 $ 1,068,574 $ 238,266 $ 103,345 $ 195,716 $ 1,862,013 Net charge-offs (recoveries) to average loans (0.01)% - (0.01)% - 0.01% (0.00)% December, 31, 2023 Beginning balance $ 1,352 $ 10,143 $ 4,163 $ 720 $ 1,109 $ 17,487 Cumulative effect of adoption of accounting principle (2) 1,238 1,105 (2,158) 23 858 1,066 Provision for credit losses (3) 95 (882) 1,897 168 1,225 2,503 Recoveries 10 - 72 - 3 85 Charge-offs - - - - (57) (57) Ending Balance $ 2,695 $ 10,366 $ 3,974 $ 911 $ 3,138 $ 21,084 Average loans $ 186,854 $ 986,234 $ 179,574 $ 93,364 $ 160,934 $ 1,606,960 Net charge-offs (recoveries) to average loans (0.01)% - (0.04)% - 0.03% (0.00)% (1) Provision for credit losses excludes $199 thousand release for unfunded commitments included in other liabilities and $2 thousand release for investment securities held to maturity.
Under CECL, the Company estimates the allowance for credit losses by utilizing pertinent available data, sourced both internally and externally, relating to past events, current conditions, and reasonable and supportable forecasts. Historical credit losses provide the foundation for estimation of expected credit losses.
Under CECL, the Company estimates the allowance for credit losses by utilizing pertinent available data, sourced both internally and externally, relating to past events, current conditions, and reasonable and supportable forecasts. Historical credit losses provide the foundation for the estimation of expected credit losses.
Currently, the Company segments the portfolio based on collateral codes to establish reserves. Each segment is linked to regression models (Loss Driver Analyses) using peer data for loans with similar risk characteristics. The Company has established connections between internal segmentation and FFIEC Call Report codes for this purpose.
Currently, the Company segments the portfolio based on collateral codes to establish reserves. Each segment is linked to regression models (Loss Driver Analyses) using peer data for loans with similar risk characteristics. The Company has established connections between internal portfolio segmentation and FFIEC Call Report codes for this purpose.
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 Atlanta.
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 Atlanta.
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.
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.
The reserve should reflect historical credit performance as well as the impact of projected economic forecast. For U.S. Government bonds and U.S. Agency issued bonds in HTM the explicit guarantee of the US Government is sufficient to conclude that a credit loss reserve is not required.
The reserve should reflect historical credit performance as well as the impact of projected economic forecast. For U.S. Government bonds and U.S. Agency issued bonds in HTM the explicit guarantee of the U.S. Government is sufficient to conclude that a credit loss reserve is not required.
The words “may,” “will,” “anticipate,” “could,” “should,” “would,” “believe,” “contemplate,” “expect,” “aim,” “plan,” “estimate,” “continue,” and “intend,” as well as other similar words and expressions of the future, are intended to identify forward-looking statements.
The words “may,” “will,” “anticipate,” “could,” “should,” “would,” “believe,” “contemplate,” “expect,” “aim,” “plan,” “estimate,” “seek,” “continue,” and “intend,” as well as other similar words and expressions of the future, are intended to identify forward-looking statements.
Net interest spread is equal to the difference between the weighted average yields earned on interest -earning assets and the weighted average rates paid on interest-bearing liabilities. Net interest margin is equal to the annualized net interest income divided by average interest-earning assets.
Net interest spread is equal to the difference between the weighted average yields earned on interest -earning assets and the weighted average rates paid on interest-bearing liabilities. Net interest margin is equal to the net interest income divided by average interest-earning assets.
Management opted for the Remaining Life (“WARM”) methodology for five segments within the loan portfolio. For each segment, a long-term average loss rate is computed and applied quarterly throughout the remaining life of the pool. Qualitative assessments are conducted to adjust for economic expectations. To estimate the remaining life, management employed a software solution utilizing an attrition-based calculation.
Management uses the Remaining Life (“WARM”) methodology for five segments within the loan portfolio. For each segment, a long-term average loss rate is computed and applied quarterly throughout the remaining life of the pool. Qualitative assessments are conducted to adjust for economic expectations. To estimate the remaining life, management employed a software solution utilizing an attrition-based calculation.
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.
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, consider statistical trends and economic conditions and other applicable factors.
The investment portfolio is regularly reviewed by the Chief Financial Officer, Treasurer, and/or the ALCO of the Company to ensure an appropriate risk and return profile as well as for adherence to the Company’s investment policy. As of December 31, 2023, the investment portfolio consisted of available-for-sale (“AFS”) and held-to-maturity (“HTM”) debt securities.
The investment portfolio is regularly reviewed by the Chief Financial Officer, Treasurer, and/or the ALCO of the Company to ensure an appropriate risk and return profile as well as for adherence to the Company’s investment policy. As of December 31, 2024, the investment portfolio consisted of available-for-sale (“AFS”) and held-to-maturity (“HTM”) debt securities.
Because of the explicit and/or implicit guarantee on these bonds, the Company holds no reserves on these holdings. The remaining portion of the HTM portfolio is made up of $9.4 million in investment grade corporate bonds. The required reserve for these holdings is determined each quarter using the model described above.
Because of the explicit and/or implicit guarantee on these bonds, the Company holds no reserves on these holdings. The remaining portion of the HTM portfolio is made up of $9.2 million in investment grade corporate bonds. The required reserve for these holdings is determined each quarter using the model described above.
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, 2023. The Company is not subject to regulatory capital requirements because it is deemed by the Federal Reserve to be a small bank holding company.
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, 2024. The Company is not subject to regulatory capital requirements because it is deemed by the Federal Reserve to be a small bank holding company.
Changes in cash surrender value are recorded in non-interest income on the Consolidated Statements of Operations. In 2023, 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.
Changes in cash surrender value are recorded in non-interest income on the Consolidated Statements of Operations. In 2024, 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.
We also generate income from gain on sale of loans though our swap and SBA programs. In addition, we own life insurance policies on several employees and generate income reflecting the increase in the cash surrender value of these policies.
We also generate income from gain on sale of loans though our interest rate swap and SBA programs. In addition, we own life insurance policies on several employees and generate income reflecting the increase in the cash surrender value of these policies.
To have a more complete picture of IRR, the Company also evaluates the economic value of equity, or EVE. This assessment allows us to measure the degree to which the economic values will change under different interest rate scenarios.
To have a more complete picture of IRR, the Company also evaluates the economic value of equity. This assessment allows us to measure the degree to which the economic values will change under different interest rate scenarios.
Renewals will depend on approval by our credit department and balance sheet composition at the time of the analysis, as well as any modification of terms at the loan’s maturity. Additionally, maturity concentrations, loan duration, prepayment speeds and other interest rate sensitivity measures are discussed, reviewed, and analyzed by the ALCO. Decisions on term rate modifications are discussed as well.
Renewals will depend on approval by our credit department and balance sheet composition at the time of the analysis, as well as any modification of terms at the loan’s maturity. Additionally, maturity concentrations, loan duration, prepayment speeds and other interest rate sensitivity measures are discussed, reviewed, and analyzed by the ALCO.
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, 2023 and 2022.
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, 2024 and 2023.
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 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 and balance sheet restructuring.
The book value of the AFS securities is adjusted quarterly 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 (loss) in stockholders’ equity. CECL requires a loss reserve for securities classified as Held-to-Maturity (HTM).
The book value of the AFS securities is adjusted quarterly 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 (loss) in stockholders’ equity. CECL requires a loss reserve for securities classified as HTM.
The concessions are given to the debtor in various forms, including interest rate reductions, principal forgiveness, extension of maturity date, waiver, or deferral of payments and other concessions intended to minimize potential losses. For further discussion on non-performing loans, see Note 3 “Loans” to the Consolidated Financial Statements in this Annual Report on Form 10-K.
The concessions are given to the debtor in various forms, including interest rate reductions, principal forgiveness, extension of maturity date, waiver, or deferral of payments and other concessions intended to minimize potential losses. For further discussion on non-performing loans, see Note 3 “Loans” to the Consolidated Financial Statements set forth in Item 8 of this Annual Report on Form 10-K.
Table of Contents 51 USCB Financial Holdings, Inc. 2023 10-K CAUTIONARY NOTE REGARDING 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.
Table of Contents 55 USCB Financial Holdings, Inc. 2024 10-K CAUTIONARY NOTE REGARDING 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.
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. Outstanding fixed-rate advances from the FHLB were at $183.0 million and $46.0 million, as of December 31, 2023, and December 31, 2022, respectively.
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. Outstanding fixed-rate advances from the FHLB were at $163.0 million and $183.0 million, as of December 31, 2024, and December 31, 2023, respectively.
Operating performance measures should be viewed in addition to, and not as an alternative Table of Contents 52 USCB Financial Holdings, Inc. 2023 10-K 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.
Operating performance measures should be viewed in addition to, and not as an alternative Table of Contents 56 USCB Financial Holdings, Inc. 2024 10-K 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.
There was no impact to net income on the date of transfer. There were no securities transferred from AFS to HTM in 2023.
There was no impact to net income on the date of transfer. There were no securities transferred from AFS to HTM in 2024 or 2023.
See Note 3 “Loans” to the Consolidated Financial Statements set forth in Item 8 of Part 1 of this Form 10-K for more information on the allowance for credit losses.
See Note 3 “Loans” to the Consolidated Financial Statements set forth in Item 8 of Part 1 of this Annual Report as Form 10- K for more information on the allowance for credit losses.
Table of Contents 71 USCB Financial Holdings, Inc. 2023 10-K Reconciliation and Management Explanation of Non -GAAP Financial Measures Management has included non-GAAP measures set forth below because it believes these measures may provide useful supplemental information for evaluating the Company’s underlying performance trends.
Table of Contents 76 USCB Financial Holdings, Inc. 2024 10-K Reconciliation and Management Explanation of Non -GAAP Financial Measures Management has included the non-GAAP measures set forth below because it believes these measures may provide useful supplemental information for evaluating the Company’s underlying performance trends.
Table of Contents 53 USCB Financial Holdings, Inc. 2023 10-K 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.
Table of Contents 57 USCB Financial Holdings, Inc. 2024 10-K 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.
For the portion of the HTM exposed to non-government credit risk, the Company utilized the PD/LGD methodology to estimate a $8 thousand ACL as of December 31, 2023. The book value for debt securities classified as HTM represents amortized cost less ACL.
For the portion of the HTM exposed to non-government credit risk, the Company utilized the PD/LGD methodology to estimate a $6 thousand ACL as of December 31, 2024. The book value for debt securities classified as HTM represents amortized cost less ACL.
Table of Contents 66 USCB Financial Holdings, Inc. 2023 10-K 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 was $1.1 billion at December 31, 2023 and 2022.
Table of Contents 71 USCB Financial Holdings, Inc. 2024 10-K 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 was $1.2 billion at December 31, 2024 and $1.1 billion at December 31, 2023.
The Company had an additional $395.0 million in off balance sheet liquidity, excluding access to brokered deposits and other off balance sheet sources of funding. Table of Contents 70 USCB Financial Holdings, Inc. 2023 10-K Capital Adequacy As of December 31, 2023, the Bank was well capitalized under the FDIC’s prompt corrective action framework.
The Company had an additional $267.0 million in off-balance sheet liquidity, excluding access to brokered deposits and other off-balance sheet sources of funding. Table of Contents 75 USCB Financial Holdings, Inc. 2024 10-K Capital Adequacy As of December 31, 2024, the Bank was well capitalized under the FDIC’s prompt corrective action framework.
Changes in the cash 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, 2023 was $5.3 million, compared to $6.9 million for the year ended December 31, 2022.
Changes in the cash 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, 2024 was $7.8 million, compared to $5.3 million for the year ended December 31, 2023.
The Company reported net income per diluted share for the year ended December 31, 2023 of $0.84 compared to net income per diluted share for the same period in 2022 of $1.00.
The Company reported net income per diluted share for the year ended December 31, 2024 of $1.24 compared to net income per diluted share for the same period in 2023 of $0.84.
During the third quarter of 2022, 26 investment securities were transferred from AFS to 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.
In 2022, the Company transferred investment securities from AFS to 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.
You should also review the risk factors described in this Annual Report on Form 10-K and 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.
You should also review the risk factors described in this Annual Report on Form 10-K and in the reports the Company filed or will file with the SEC and, for periods prior to the Effective Date, the Bank filed with the FDIC.
Provision for credit loss for the year ended December 31, 2023, was $2.4 million compared to $2.5 million in provision expense for the same period in 2022. The ACL as a percentage of total loans was 1.18% at December 31, 2023 compared to 1.16% at December 31, 2022.
The provision for credit loss for the year ended December 31, 2024, was $3.2 million compared to $2.4 million in provision expense for the same period in 2023. The ACL as a percentage of total loans was 1.22% at December 31, 2024 compared to 1.18% at December 31, 2023.
The change resulted in a $6.1 million or 32.6% increase in the allowance for credit losses. This sensitivity analysis provides a hypothetical result to assess the sensitivity of the ACL and does not represent a change in management’s judgement. The Company calculates a reserve for unfunded commitments, distinct from the allowance for credit losses reported in other liabilities.
This sensitivity analysis provides a hypothetical result to assess the sensitivity of the ACL and does not represent a change in management’s judgement . The Company calculates a reserve for unfunded commitments, distinct from the allowance for credit losses reported in other liabilities.
Accordingly, our liquidity resources were at sufficient levels to fund loans and meet other cash needs as necessary. At December 31, 2023, the Company had $224.8 million in available liquidity on balance sheet, including $187.7 million in unpledged securities available to use as collateral and $37.1 million in excess cash.
Accordingly, our liquidity resources were at sufficient levels to fund loans and meet other cash needs as necessary. At December 31, 2024, the Company had $412.8 million in available liquidity on balance sheet, including $339.7 million in unpledged securities available to use as collateral and $73.1 million in excess cash.
Credit ratings are monitored by the Company on at least a quarterly basis. As of December 31, 2023 and December 31, 2022, all HTM securities held by the Company were rated investment grade. At year ended December 31, 2023, HTM securities included $165.6 million of U.S. Government and U.S. Agency issued bonds and mortgage-backed securities.
Credit ratings are monitored by the Company on at least a quarterly basis. As of December 31, 2024 and December 31, 2023, all HTM securities held by the Company were rated investment grade. At December 31, 2024, HTM securities included $155.5 million of U.S. Government and U.S. Agency issued bonds and mortgage-backed securities.
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.
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 Table of Contents 73 USCB Financial Holdings, Inc. 2024 10-K expire without being fully drawn, the total commitment amounts disclosed above do not necessarily represent future cash requirements.
Table of Contents 67 USCB Financial Holdings, Inc. 2023 10-K The following table presents the FHLB fixed rate advances as of December 31, 2023 (in thousands): At December 31, 2023 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 3.76% Fixed January 24, 2028 11,000 3.77% Fixed April 25, 2028 50,000 5.57% Fixed December 26, 2024 101,000 $ 183,000 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 We have also established Fed Funds lines of credit with our upstream correspondent banks to manage temporary fluctuations in our daily cash balances.
Table of Contents 72 USCB Financial Holdings, Inc. 2024 10-K The following table presents the FHLB fixed rate advances as of December 31, 2024 (in thousands): December, 31, 2024 Interest Rate Type of Rate Maturity Date Amount 2.05% Fixed March 27, 2025 $ 10,000 1.07% Fixed July 18, 2025 6,000 3.76% Fixed January 24, 2028 11,000 3.77% Fixed April 25, 2028 50,000 3.68% Fixed September 13, 2027 21,000 3.79% Fixed March 23, 2026 20,000 4.65% Fixed February 13, 2025 45,000 $ 163,000 December, 31, 2023 Interest Rate Type of Rate Maturity Date Amount 1.04% Fixed July 30, 2024 5,000 1.07% Fixed July 18, 2025 6,000 2.05% Fixed March 27, 2025 $ 10,000 3.76% Fixed January 24, 2028 11,000 3.77% Fixed April 25, 2028 50,000 5.57% Fixed December 26, 2024 101,000 $ 183,000 We have also established Fed Funds lines of credit with our upstream correspondent banks to manage temporary fluctuations in our daily cash balances.
Table of Contents 57 USCB Financial Holdings, Inc. 2023 10-K See “Allowance for Credit Losses” below for further discussion on how the ACL was calculated for the periods presented. 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.
See “Allowance for Credit Losses” below for further discussion on how the ACL was calculated for the periods presented. 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.
Table of Contents 60 USCB Financial Holdings, Inc. 2023 10-K The following table presents the amortized cost and fair value of investment securities for the dates indicated (in thousands): December 31, 2023 December 31, 2022 Available-for-sale: Amortized Cost Fair Value Amortized Cost Fair Value U.S.
Table of Contents 64 USCB Financial Holdings, Inc. 2024 10-K The following table presents the amortized cost and fair value of investment securities for the dates indicated (in thousands): December 31, 2024 Available-for-sale: Amortized Cost Unrealized Gains Unrealized Losses Fair Value U.S.
Table of Contents 63 USCB Financial Holdings, Inc. 2023 10-K 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.
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.
The following table presents lending related commitments outstanding as of December 31, 2023 and 2022 (in thousands): 2023 2022 Commitments to grant loans and unfunded lines of credit $ 85,117 $ 95,461 Standby and commercial letters of credit 3,987 4,320 Total $ 89,104 $ 99,781 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.
The following table presents lending related commitments outstanding as of December 31, 2024 and 2023 (in thousands): December 31, 2024 December 31, 2023 Commitments to grant loans and unfunded lines of credit $ 122,578 $ 85,117 Standby and commercial letters of credit 5,389 3,987 Total $ 127,967 $ 89,104 Commitments to extend credit are agreements to lend funds to a client, as long as there is no violation of any condition established in the contract, for a specific purpose.
As of December 31, 2023, 45% of our deposits are estimated to be FDIC-insured. Our public funds are 13.9% of total deposits and are partially collateralized. Brokered deposits are 2.6% of total deposits and are FDIC-insured. The estimated average account size of our deposit portfolio is $97 thousand.
As of December 31, 2024, 45% of our deposits are estimated to be FDIC-insured. Our public funds are 5% of total deposits and are partially collateralized. Brokered deposits are 6% of total deposits and are FDIC-insured. The estimated average account size of our deposit portfolio is $105 thousand.
Restoring a loan to accrual status is possible when the borrower resumes payment of all Table of Contents 64 USCB Financial Holdings, Inc. 2023 10-K 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.
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.
The aggregate purchase price for these transactions was approximately $7.6 million, including transaction costs. These repurchases were made through open market purchases pursuant to the Company’s publicly announced repurchase program.
The aggregate purchase price for these transactions was approximately $501 thousand, including transaction costs. These repurchases were made through open market purchases pursuant to the Company’s publicly announced repurchase programs.
The loss driver for Table of Contents 54 USCB Financial Holdings, Inc. 2023 10-K each loan portfolio segment is derived from a readily available and reasonable economic forecast, including Federal Reserve Bank projections of the U.S. civilian unemployment rate and year-over-year real GDP growth.
The loss driver for each loan portfolio segment is derived from a readily available and reasonable economic forecast, including Federal Reserve Bank projections of the U.S. civilian unemployment rate and year-over-year real GDP growth.
The growth experienced over the last couple of years is primarily due to implementation of our relationship-based banking model, our diversified business verticals, and the success of our relationship managers in competing for new business in a highly competitive metropolitan area.
The growth experienced over the last couple of years is primarily due to implementation of our relationship-based banking model, our diversified business verticals, and the success of our relationship managers in competing for new Table of Contents 66 USCB Financial Holdings, Inc. 2024 10-K business in a highly competitive metropolitan area.
Allowance for Credit Losses On January 1, 2023, the Company adopted FASB ASU 2016-13, which introduced the CECL methodology and required us to estimate all expected credit losses over the remaining life of our loan portfolio.
Table of Contents 69 USCB Financial Holdings, Inc. 2024 10-K Allowance for Credit Losses On January 1, 2023, the Company adopted FASB ASU 2016-13, which introduced the CECL methodology and required us to estimate all expected credit losses over the remaining life of our loan portfolio.
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 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.
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.
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.
Our loan portfolio continues to diversify as commercial and industrial and consumer loans, mostly yacht loans, continue to increase as a percentage to total loans. However, we do not expect any significant changes over the foreseeable future in the composition of our loan portfolio.
The most significant growth was in the residential real estate and commercial real estate loan pools. Our loan portfolio continues to diversify as commercial and industrial loans continue to increase as a percentage to total loans. However, we do not expect any significant changes over the foreseeable future in the composition of our loan portfolio.
The weighted average rate for outstanding FHLB advances at December 31, 2023 was 4.4%.
The weighted average rate for outstanding FHLB advances was 3.8% and 4.4% at December 31, 2024, and December 31, 2023, respectively.
Table of Contents 65 USCB Financial Holdings, Inc. 2023 10-K The following table presents ACL by type and its individual percentage to total loans for the periods indicated (in thousands): December 31, 2023 2022 Loan Category Allowance % of Loans in Each Category to Total Loans Allowance % of Loans in Each Category to Total Loans Residential Real Estate $ 2,695 11.5 % $ 1,352 12.3 % Commercial Real Estate 10,366 58.8 % 10,143 64.4 % Commercial and Industrial 3,974 12.4 % 4,163 8.4 % Foreign Banks 911 6.5 % 720 6.2 % Consumer and Other 3,138 10.8 % 1,109 8.7 % Total $ 21,084 100.0 % $ 17,487 100.0 % Bank-Owned Life Insurance At December 31, 2023, the combined cash surrender value of all bank-owned life insurance (“BOLI”) policies was $51.8 million.
Table of Contents 70 USCB Financial Holdings, Inc. 2024 10-K The following table presents ACL by type and its individual percentage to total loans for the periods indicated (in thousands): December 31, 2024 2023 Loan Category Allowance % of Loans in Each Category to Total Loans Allowance % of Loans in Each Category to Total Loans Residential Real Estate $ 5,121 21.3 % $ 2,695 11.5 % Commercial Real Estate 8,788 36.5 % 10,366 58.8 % Commercial and Industrial 4,633 19.2 % 3,974 12.4 % Correspondent Banks 654 2.7 % 911 6.5 % Consumer and Other 4,874 20.3 % 3,138 10.8 % Total $ 24,070 100.0 % $ 21,084 100.0 % Bank-Owned Life Insurance At December 31, 2024, the combined cash surrender value of all bank-owned life insurance (“BOLI”) policies was $53.5 million.
Asset sensitivity indicates that our assets generally reprice faster than our liabilities, which results in a favorable impact to net interest income when market interest rates increase. Liability sensitivity indicates that our liabilities generally reprice faster than our assets, which results in a favorable impact to net interest income when market interest rates decrease.
Liability sensitivity indicates that our liabilities generally reprice faster than our assets, which results in a favorable impact to net interest income when market interest rates decrease. Neutral indicates minimal changes to the net interest income due to changes on the market interest rate.
The greatest increase was in money market and savings deposits which increased by $160.3 million, or 19.9%. Non-interest-bearing demand deposits decreased by $37.9 million or 5.9% due to customers moving deposits to interest bearing accounts due to increases in rate paid on deposits due to increases in the interest rate market.
The greatest increase was in money market and savings deposits which increased by $146.1 million, or 15.2%. Non-interest-bearing demand deposits decreased by $11.4 million or 1.9% due to customers moving deposits to interest-bearing accounts due to increases in rate paid on deposits due to increases in the interest rate market.
The following table presents the components of non-interest income for the periods indicated (in thousands): Years Ended December 31, 2023 2022 Service fees $ 5,055 $ 4,010 Gain (loss) on sale of securities available for sale, net (1,859) (2,529) Gain on sale of loans held for sale, net 801 891 Loan settlement - 161 Other non-interest income 3,406 2,695 Total non-interest income $ 7,403 $ 5,228 Non-interest income for the year ended December 31, 2023 was $7.4 million compared to $5.2 million for the same period in 2022.
The following table presents the components of non-interest income for the periods indicated (in thousands): Years Ended December 31, 2024 2023 Service fees $ 8,839 $ 5,055 Gain (loss) on sale of securities available for sale, net 14 (1,859) Gain on sale of loans held for sale, net 747 801 Other non-interest income 3,140 3,406 Total non-interest income $ 12,740 $ 7,403 Non-interest income for the year ended December 31, 2024 was $12.7 million compared to $7.4 million for the same period in 2023.
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.
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.
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, 2023 2022 Pre-Tax Pre-Provision ("PTPP") income: (1) Net income (GAAP) $ 16,545 $ 20,141 Plus: Provision for income taxes 5,251 6,944 Plus: Provision for (recovery of) credit losses 2,367 2,495 PTPP income $ 24,163 $ 29,580 Operating net income: (1) Net income (GAAP) $ 16,545 $ 20,141 Less: Net gain (loss) on sale of securities (1,859) (2,529) Less: Tax effect on sale of securities 471 641 Operating net income $ 17,933 $ 22,029 Operating PTPP income: (1) PTPP income $ 24,163 $ 29,580 Less: Net gain (loss) on sale of securities (1,859) (2,529) Operating PTPP Income $ 26,022 $ 32,109 (1) The Company believes these non-GAAP measurements are key indicators of the ongoing earnings power of the Company.
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, 2024 2023 Pre-Tax Pre-Provision ("PTPP") income: (1) Net income (GAAP) $ 24,674 $ 16,545 Plus: Provision for income taxes 7,803 5,251 Plus: Provision for credit losses 3,157 2,367 PTPP income $ 35,634 $ 24,163 Operating net income: (1) Net income (GAAP) $ 24,674 $ 16,545 Less: Net gain (loss) on sale of securities 14 (1,859) Less: Tax effect on sale of securities (4) 471 Operating net income $ 24,664 $ 17,933 Operating PTPP income: (1) PTPP income $ 35,634 $ 24,163 Less: Net gain (loss) on sale of securities 14 (1,859) Operating PTPP Income $ 35,620 $ 26,022 (1) The Company believes these non-GAAP measurements are key indicators of the ongoing earnings power of the Company.
The effective tax rate for the year ended December 31, 2023 was 24.1% and for the year ended December 31, 2022 was 25.6%. Table of Contents 58 USCB Financial Holdings, Inc. 2023 10-K For a further discussion on income taxes, see Note 6 “Income Taxes” to the Consolidated Financial Statements in this Annual Report on Form 10-K.
The effective tax rate for the year ended December 31, 2024 was 24.0% and for the year ended December 31, 2023 was 24.1%. For a further discussion on income taxes, see Note 6 “Income Taxes” to the Consolidated Financial Statements set forth in Item 8 of this Annual Report on Form 10-K.
As part of our ALM strategy and policy, management has the ability to modify the balance sheet to either increase or decrease asset duration and increase or decrease liability duration to modify the balance sheet sensitivity to interest rates.
As part of our ALM strategy and policy, management has the ability to modify the balance sheet to either increase Table of Contents 74 USCB Financial Holdings, Inc. 2024 10-K or decrease asset duration and increase or decrease liability duration to modify the balance sheet sensitivity to interest rates.
Non-Interest Expense The following table presents the components of non-interest expense for the periods indicated (in thousands): Years Ended December 31, 2023 2022 Salaries and employee benefits $ 24,429 $ 23,943 Occupancy 5,230 5,058 Regulatory assessment and fees 1,453 930 Consulting and legal fees 1,899 1,890 Network and information technology services 2,016 1,806 Other operating 6,781 5,682 Total non-interest expense $ 41,808 $ 39,309 Non-interest expense for the year ended December 31, 2023 increased $2.5 million or 6.4%, compared to the same period in 2022.
Non-Interest Expense The following table presents the components of non-interest expense for the periods indicated (in thousands): Years Ended December 31, 2024 2023 Salaries and employee benefits $ 28,793 $ 24,429 Occupancy 5,258 5,230 Regulatory assessment and fees 1,766 1,453 Consulting and legal fees 1,568 1,899 Network and information technology services 1,993 2,016 Other operating 7,664 6,781 Total non-interest expense $ 47,042 $ 41,808 Non-interest expense for the year ended December 31, 2024 increased $5.2 million or 12.5%, compared to the same period in 2023.
(2) Provision for credit losses excludes $144 thousand release for unfunded commitments included in other liabilities and $8 thousand provision for investment securities held to maturity.
(2) Impact of CECL adoption on January 1, 2023. (3) Provision for credit losses excludes $144 thousand release for unfunded commitments included in other liabilities and $8 thousand provision for investment securities held to maturity.
Other factors contributing to the results of operations include our provision for credit losses, non-interest expense, and the provision for income taxes. Net income for the year ended December 31, 2023 was $16.5 million , compared with net income of $20.1 million for the same period in 2022.
Other factors contributing to the results of operations include our provision for credit losses, non-interest expense, and the provision for income taxes. Table of Contents 59 USCB Financial Holdings, Inc. 2024 10-K Net income for the year ended December 31, 2024 was $24.7 million , compared with net income of $16.5 million for the same period in 2023.
The following table presents the capital ratios for the Bank at December 31, 2023 and 2022 (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, 2023 Total risk-based capital: $ 233,109 12.65% $ 147,432 8.00% 184,290 10.00% Tier 1 risk-based capital: $ 211,645 11.48% $ 110,574 6.00% 147,432 8.00% Common equity tier 1 capital: $ 211,645 11.48% $ 82,931 4.50% 119,789 6.50% Leverage ratio: $ 211,645 9.17% $ 92,328 4.00% 115,410 5.00% 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% Impact of Inflation Our Consolidated Financial Statements and related notes have been prepared in accordance with U.S.
The following table presents the capital ratios for the Bank at December 31, 2024 and 2023 (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, 2024 Total risk-based capital: $ 266,387 13.34% $ 159,795 8.00% 199,744 10.00% Tier 1 risk-based capital: $ 241,740 12.10% $ 119,846 6.00% 159,795 8.00% Common equity tier 1 capital: $ 241,740 12.10% $ 89,885 4.50% 129,834 6.50% Leverage ratio: $ 241,740 9.38% $ 103,074 4.00% 128,843 5.00% December 31, 2023 Total risk-based capital: $ 233,109 12.65% $ 147,432 8.00% 184,290 10.00% Tier 1 risk-based capital: $ 211,645 11.48% $ 110,574 6.00% 147,432 8.00% Common equity tier 1 capital: $ 211,645 11.48% $ 83,931 4.50% 119,789 6.50% Leverage ratio: $ 211,645 9.17% $ 92,328 4.00% 115,410 5.00% Impact of Inflation Our Consolidated Financial Statements and related notes have been prepared in accordance with U.S.
(5) Net interest margin is the ratio of net interest income to average total interest-earning assets. Net interest income before the provision for credit losses was $58.6 million for the year ended December 31, 2023, a decrease of $5.1 million or 8.0%, from $63.7 million for the year ended December 31, 2022.
(5) Net interest margin is the ratio of net interest income to average total interest-earning assets. Net interest income before the provision for credit losses was $69.9 million for the year ended December 31, 2024, a increase of $11.4 million or 19.4%, from $58.6 million for the year ended December 31, 2023.
As of December 31, 2023, approximately 57.9% of the loans have adjustable/variable rates and 42.1% 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.
Decisions on term and rate modifications are discussed as well. As of December 31, 2024, approximately 58.5% of the loans have adjustable/variable rates and 41.5% 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.
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. As of December 31, 2024, the commercial real estate portfolio was $1.1 billion or 57.8% of the total gross loans portfolio.
The following table shows scheduled maturities of uninsured time deposits as of December 31, 2023 (in thousands): Three months or less $ 16,641 Over three through six months 16,451 Over six though twelve months 24,002 Over twelve months 1,016 $ 58,110 Borrowings As a member of the FHLB Atlanta, we are eligible to obtain advances with various terms and conditions.
The following table shows scheduled maturities of uninsured time deposits as of December 31, 2024 (in thousands): Three months or less $ 38,848 Over three through six months 31,977 Over six through twelve months 22,239 Over twelve months 942 $ 94,006 Borrowings As a member of the FHLB Atlanta, we are eligible to obtain advances with various terms and conditions.
Table of Contents 55 USCB Financial Holdings, Inc. 2023 10-K Results of Operations General The following tables present selected balance sheet, income statement, and profitability ratios for the dates and for the periods indicated (in thousands, except ratios): As of December 31, 2023 2022 Consolidated Balance Sheets: Total assets $ 2,339,093 $ 2,085,834 Total loans (1) $ 1,780,827 $ 1,507,338 Total deposits $ 1,937,139 $ 1,829,281 Total stockholders' equity $ 191,968 $ 182,428 (1) Loan amounts include deferred fees/costs.
Results of Operations General The following tables present selected balance sheet, income statement, and profitability ratios for the dates and for the periods indicated (in thousands, except ratios): As of December 31, 2024 2023 Consolidated Balance Sheets: Total assets $ 2,581,216 $ 2,339,093 Total loans (1) $ 1,972,848 $ 1,780,827 Total deposits $ 2,174,004 $ 1,937,139 Total stockholders' equity $ 215,388 $ 191,968 (1) Loan amounts include deferred fees/costs.
Time deposits with balances of $250 thousand or more totaled $58.1 million and $122.9 million at December 31, 2023 and 2022, respectively. U.S. Century Bank maintains a well- diversified deposit base. Our top 15 depositors only hold 20% of our total portfolio.
Time deposits with balances of $250 thousand or more totaled $94.0 million and $58.1 million at December 31, 2024 and 2023, respectively. The Bank maintains a well-diversified deposit base. At December 31, 2024, our top 10 depositors only held 16.7% of our total portfolio.
As of December 31, 2023, the Bank was well-capitalized, with a total risk-based capital ratio of 12.65%, a tier 1 risk-based capital ratio of 11.48%, a common equity tier 1 capital ratio of 11.48%, and a leverage ratio of 9.17%.
As of December 31, 2024, the Bank was well-capitalized for regulatory capital purposes, with a total risk-based capital ratio of 13.34%, a tier 1 risk-based capital ratio of 12.10%, a common equity tier 1 capital ratio of 12.10%, and a leverage ratio of 9.38%.
Years Ended December 31, 2023 2022 Consolidated Statements of Operations: Net interest income before provision for credit losses $ 58,568 $ 63,661 Total non-interest income $ 7,403 $ 5,228 Total non-interest expense $ 41,808 $ 39,309 Net income $ 16,545 $ 20,141 Net income available to common stockholders $ 16,545 $ 20,141 Profitability: Efficiency ratio 63.37% 57.06% Net interest margin 2.79% 3.38% The Company’s results of operations depend substantially on net interest income and non-interest income.
Years Ended December 31, 2024 2023 Consolidated Statements of Operations: Net interest income before provision for credit losses $ 69,936 $ 58,568 Provision fro credit losses $ 3,157 $ 2,367 Total non-interest income $ 12,740 $ 7,403 Total non-interest expense $ 47,042 $ 41,808 Net income $ 24,674 $ 16,545 Net income available to common stockholders $ 24,674 $ 16,545 Profitability: Efficiency ratio 56.90% 63.37% Net interest margin 2.94% 2.79% The Company’s results of operations depend substantially on net interest income and non-interest income.
In addition, static measures like the economic value of equity (“EVE“) do not include actions that management may undertake to manage the risks in response to anticipated changes in interest rates or client deposit behavior.
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 the economic value of equity do not include actions that management may undertake to manage the risks in response to anticipated changes in interest rates or client deposit behavior.
This increase was primarily driven by a $1.0 million increase in service fees, consisting mainly of wire transfer fees. Additionally, in both 2023 and 2022, the Company executed a portfolio restructuring strategy which resulted in the sale of lower-yielding available-for-sale securities at a loss in order to better position our securities portfolio.
Additionally, in 2023, the Company executed a portfolio restructuring strategy which resulted in the sale of lower-yielding available-for-sale securities at a loss in order to better position our securities portfolio. The loss on the sale of securities was $1.9 million for 2023.
Higher yields typically carry inherent credit and liquidity risks in comparison to lower yielding assets. The Company manages and mitigates such risks in accordance with the credit and ALM policies, risk tolerance and balance sheet composition.
The Company manages and mitigates such risks in accordance with the credit and ALM policies, risk tolerance and balance sheet composition.
The following table presents the daily average balance and average rate paid on deposits by category as of December 31, 2023 and 2022 (in thousands, except ratios): Twelve Months Ended December 31, 2023 2022 Average Balance Average Rate Paid Average Balance Average Rate Paid Non-interest bearing demand deposits $ 607,506 0.00% $ 645,366 0.00% Interest-bearing demand deposits 53,324 1.69% 64,835 0.13% Saving and money market deposits 963,708 3.08% 803,426 0.64% Time deposits 268,715 3.16% 220,319 0.68% $ 1,893,253 2.06% $ 1,733,946 0.39% Total average deposits for the year ended December 31, 2023 was $1.9 billion, an increase of $159.3 million , or 9.2% over total average deposits of $1.7 billion for the same period in 2022.
The following table presents the daily average balance and average rate paid on deposits by category for the years ended December 31, 2024 and 2023 (in thousands, except ratios): Years Ended December 31, 2024 2023 Average Balance Average Rate Paid Average Balance Average Rate Paid Non-interest bearing demand deposits $ 596,073 0.00% $ 607,506 0.00% Interest-bearing demand deposits 54,667 2.76% 53,324 1.69% Savings and money market deposits 1,109,853 3.61% 963,708 3.08% Time deposits 326,373 4.09% 268,715 3.16% $ 2,086,966 2.63% $ 1,893,253 2.06% Total average deposits for the year ended December 31, 2024 was $2.1 billion, an increase of $193.7 million, or 10.2% over total average deposits of $1.9 billion for the same period in 2023.
As of December 31, 2023, securities with a market value of $86.9 million were pledged to secure public deposits and $132.1 million pledged in securities measured at par to the Federal Reserve Bank of Atlanta for the BTFP program. As of December 31, 2023, the Company did not have any tax-exempt securities in the portfolio.
As of December 31, 2024, securities with a market value of $66.1 million were pledged to secure public deposits. As of December 31, 2024, the Company did not have any tax-exempt securities in the portfolio.

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