USCB Financial Holdings, Inc. — 2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021; comparisons are with fiscal 2020. This is an annual report, not a standalone fourth-quarter earnings release. USCB is a Florida bank holding company formed in December 2021; its sole subsidiary, U.S. Century Bank, operates 10 banking centers in South Florida and focuses on small and medium-sized businesses and commercial banking.
Financial performance and condition
| Metric | 2021 | 2020 |
|---|---|---|
| Total assets at year-end | $1.854 billion | $1.502 billion |
| Total loans at year-end | $1.190 billion | $1.039 billion |
| Total deposits at year-end | $1.590 billion | $1.273 billion |
| Net interest income | $52.5 million | $43.6 million |
| Net interest margin | 3.26% | 3.26% |
| Non-interest income | $10.7 million | $6.1 million |
| Non-interest expense | $35.7 million | $33.0 million |
| Net income | $21.1 million | $10.8 million |
| Operating cash flow | $22.1 million | $13.1 million |
- Net interest income after the credit-loss provision was $52.7 million, up 30.5%. The 2021 provision was a net recovery of $0.2 million, versus $3.3 million of provision expense in 2020.
- Net interest margin was flat, while earning-asset yield declined to 3.52% from 3.93%; the cost of interest-bearing liabilities fell to 0.45% from 1.07%. The efficiency ratio improved to 56.31% from 71.13%.
- Return on average assets was 1.24% (0.76% in 2020); return on average equity was 11.45% (6.54%).
- Year-end stockholders’ equity was $203.9 million, versus $171.0 million. The Bank’s regulatory capital ratios were 14.92% total risk-based, 13.70% Tier 1 and CET1, and 9.55% leverage; it was categorized as well-capitalized.
- Year-end cash and cash equivalents were $46.2 million. Cash flows were $22.1 million provided by operations, $359.4 million used in investing, and $335.8 million provided by financing. Deposits funded much of the growth; FHLB advances were $36.0 million, unchanged year over year.
Changes, unusual items, and management commentary
- Net income available to common stockholders was a loss of $70.6 million, and diluted GAAP loss per Class A share was $6.72. This primarily reflects a one-time $89.6 million accounting charge from exchanging and redeeming preferred shares; it does not mean the company reported a net loss. Excluding that item, management reported non-GAAP operating net income available to common stockholders of $19.0 million and operating diluted earnings per Class A share of $1.81. These non-GAAP measures are not substitutes for GAAP results.
- Non-interest income rose 75.5%, including a $2.5 million recovery and settlement of interest on a legacy loan and a $1.0 million gain on the sale of a former banking-center property. SBA loan-sale gains and deposit fees also increased.
- Assets grew 23.5%, loans 14.6%, and deposits 24.9%. Loan growth included $129.5 million of purchased loans, including two yacht-loan portfolios; commercial real estate made up 59.2% of gross loans. Management said it intends to focus on commercial lending and does not expect a significant near-term change in portfolio mix.
- Estimated uninsured deposits were $897.8 million, about 56% of year-end deposits. Management identified several large depositor relationships as a potential funding vulnerability.
- Investment securities reached $524.2 million. The company transferred $68.7 million fair value of securities from available-for-sale to held-to-maturity during 2021. AFS unrealized losses contributed to a $7.3 million after-tax decline in comprehensive income and AOCI moved from positive $4.8 million to negative $2.5 million. Management attributed security losses to interest-rate changes rather than credit impairment and reported no securities classified as other-than-temporarily impaired.
- There were no COVID-related loan deferrals at year-end, and PPP loans outstanding were $42.4 million. The allowance for credit losses was $15.1 million, or 1.27% of loans, down from 1.45%.
- Management described the Bank as asset-sensitive; its model indicated a broadly stable net interest margin across static rate scenarios, while higher rates were expected to reduce economic value of equity. These are model estimates, not earnings guidance.
Outlook, risks, and contingencies
- No quantified earnings, revenue, margin, or growth guidance is provided. Management’s stated strategy is organic growth, with strategic acquisitions if opportunities arise, supported by public-market access and the new holding-company structure.
- Key risks include concentration in South Florida and commercial real estate, borrower and collateral credit risk, interest-rate and liquidity risk, reliance on large and uninsured deposits, competition, and operational, cybersecurity, vendor, and BSA/AML compliance risks. Management also highlights COVID-19 uncertainty, inflation, severe weather, and the transition away from LIBOR.
- CECL was expected to be adopted January 1, 2023; management was implementing the standard but had not quantified its financial impact. The filing cautions that adoption may change allowance methods and could increase reserve levels.
- The company reported no material legal proceedings and stated that ordinary-course claims were not expected to materially affect the financial statements. The independent auditor issued an unmodified opinion. Management said disclosure controls were effective; the filing did not include management’s assessment or auditor attestation of internal control over financial reporting, citing the transition relief for newly public companies.
- After year-end, the Board approved a discretionary repurchase program of up to 750,000 Class A shares, with no expiration date. The company said it did not anticipate paying common dividends in the foreseeable future.
Important facts for investors to verify
- Reconcile the $21.1 million GAAP net income with the $70.6 million loss available to common stockholders, including the $89.6 million preferred-share exchange and redemption charge and the non-GAAP adjustments.
- Review loan composition and performance, especially the 59.2% commercial real estate concentration, purchased yacht loans, allowance adequacy, and future credit quality.
- Assess deposit stability and liquidity, including the $897.8 million estimated uninsured-deposit balance and concentration among large depositors.
- Monitor securities marks, AOCI, and sensitivity of net interest income and economic value to changing rates; consider the assumptions behind management’s rate-risk models.
- Confirm future capital needs, CECL adoption effects, and whether the announced share-repurchase program is used; the filing provides no quantified forward guidance.