UNITED STATESSECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
10-K
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended
December 31
, 2025OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____to_____
Commission File Number:
001-41196
USCB Financial Holdings, Inc.
(Exact name of registrant as specified in itscharter)
Florida
87-4070846
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
2301 NW 87th Avenue
,
Doral
,
FL
33172
(Address of principal executive offices) (zipcode)
Registrant’s telephone number, including area code:
(
305
)
715-5200
Securities registered pursuant to Section 12(b)of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Class A Common Stock, $1.00 par value per
share
USCB
The Nasdaq Stock Market LLC
Securities registered pursuant to Section 12(g)of the Act:
None
Indicate by check mark if the registrant is a well-knownseasoned issuer, as defined in Rule 405 of the Securities Act.
☐
Yes
No
☒
Indicate by check mark if the registrant is not requiredto file reports pursuant to Section 13 or Section15(d) of the Act.Yes
☐
No
☒
Indicate by check markwhether the registrant (1) hasfiled all reportsrequired to be filedby Section 13 or15(d) of the SecuritiesExchange Act of
1934 during thepreceding 12 months (orfor such shorterperiod that theregistrant was required tofile such reports),and (2) hasbeen subject to
such filing requirements for the past 90 days.
Yes
☒
No
☐
Indicate by check mark whether the registrant hassubmitted electronically every Interactive Data File requiredto be submitted pursuant to Rule 405
of Regulation S-T(§232.405 of this chapter)during the preceding12 months (or forsuch shorter periodthat the registrantwas required to submit
such files).
Yes
☒
No
☐
Indicate by check mark whetherthe registrant is a largeaccelerated filer, an accelerated filer, a non-acceleratedfiler, a smaller reporting company or
an emerging growth company. See the definitions of “largeaccelerated filer,” “accelerated filer,” “non-accelerated filer,” “smaller reporting company,”
and “emerging growth company” in Rule 12b-2of the Exchange Act.
Large accelerated filer
☐
Accelerated filer
☒
Non-accelerated filer
☐
Smaller reporting company
☒
Emerging growth company
☒
If an emerging growth company, indicate by check mark if the registranthas elected not to use the extendedtransition period for complying with any
new or revised financial accounting standards providedpursuant to Section 13(a) of the ExchangeAct.
☐
Indicate by check markwhether the registrant hasfiled a report onand attestation to itsmanagement’s assessment of theeffectiveness of its internal
control overfinancial reportingunder Section404(b) ofthe Sarbanes-OxleyAct (15U.S.C.7262(b)) bythe registeredpublic accountingfirm that
prepared or issued its audit report.
☐
If securities are registered pursuant to Section 12(b) of the Act, indicateby check mark whether the financial statements of the registrant included in
the filing reflect the correction of an error to previouslyissued financial statements.
☐
Indicate by check mark whether any of thoseerror corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrant’s executive officers duringthe relevant recovery period pursuant to §240.10D-1(b).
☐
Indicate by check mark whether the registrant is ashell company (as defined in Rule 12b-2 of theSecurities Exchange Act of 1934). Yes
☐
No
☒
The aggregate market value of the voting stockheld by non-affiliates of the registrant based onthe closing price of $16.54 per share onJune 30,
2025
, the last business day of the registrant’s second quarter, was approximately $
173.0
million (20,078,385 shares issued and outstandingat
such date less shares held by affiliates). Although directorsand executive officers and their affiliates of the Registrant wereassumed to be
“affiliates” of the Registrant for purposes of the calculation,the classification is not to be interpreted as an admissionof such status.
As of February 28, 2026, the registrant had
18,256,986
shares of Class A Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of the registrant’s Proxy Statement for the 2026 Annual Meeting of Shareholders (the “2026Proxy Statement”) are incorporated by
reference into Part III of this report.
FORM 10-K
DECEMBER 31, 2025
TABLE OF CONTENTS
3USCB Financial Holdings, Inc.2025 10-K
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
ThisAnnualReportonForm10-Kcontainsstatementsthatarenothistoricalinnatureareintendedtobe,andare
hereby identified as, forward-lookingstatements for purposes ofthe safe harbor provided bySection 21E of the Securities
ExchangeActof1934,asamended(“ExchangeAct”).Thewords“may,”“will,”“anticipate,”“could,”“should,”“would,”
“believe,” “contemplate,” “expect,” “aim,” “plan,” “estimate,” “continue,” and “intend,”the negative of these terms, as well as
other similarwords andexpressions ofthe future,are intendedto identifyforward-looking statements. Theseforward-looking
statements include statements related toour projected growth, anticipated futurefinancial 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 expecteddevelopments or events,or businessand growth strategies,including anticipatedinternal growth
and potential future additional balance sheet restructuring.
These forward-looking statements involve significant risks and uncertainties that could cause our actual results to differ
materially from those anticipated in such statements.Potential risks and uncertainties include, but are notlimited to:
•
the strength of the United States economyin general and the strength of the localeconomies in which we conduct
operations;
•
our ability to successfully manage interest rate risk, creditrisk, liquidity risk, and other risks inherent to our industry;
•
the accuracy of our financial statement estimates and assumptions, including the estimates used for our credit loss
reserve and deferred tax asset valuation allowance;
•
the efficiency and effectiveness of ourinternal control procedures and processes;
•
our abilityto complywith theextensive lawsand regulationsto whichwe aresubject, includingthe lawsfor each
jurisdiction where we operate;
•
adversechangesorconditionsinthecapitalandfinancialmarkets,includingactualorpotentialstressesinthe
banking industry;
•
deposit attrition and the level of our uninsured deposits;
•
legislativeorregulatorychanges,includingtheenactmentoftheOneBigBeautifulBillAct,andchangesin
accounting principles, policies, practicesor guidelines, includingthe on-going effects ofthe Current ExpectedCredit
Losses (“CECL”) standard;
•
the lack of a significantly diversified loan portfolio and concentration in the South Florida market, including the risks
of geographic, depositor,and industry concentrations,including our concentrationin loans secured byreal estate,
in particular, commercial real estate;
•
the effects of climate change;
•
the concentration of ownership of our common stock;
•
fluctuations in the price of our common stock;
•
our ability to fund or access the capital markets at attractiverates and terms and manage our growth, both organic
growth as well as growth through other means, such asfuture acquisitions;
•
inflation, interest rate, unemployment rate, market, and monetaryfluctuations;
•
the effects of potential new or increased tariffs,retaliatory tariffs and trade restrictions;
•
impacts of international hostilities and geopolitical events;
•
increasedcompetitionanditseffectonthepricingofourproductsandservicesaswellasournetinterestrate
spread and net interest margin;
•
the loss of key employees;
•
the effectiveness of our risk management strategies, including operational risks, including, but not limited to, client,
employee, or third-party fraud and security breaches; and
•
otherrisksdescribedinthisAnnualReportonForm10-KandotherfilingswemakewiththeSecuritiesand
Exchange Commission (“SEC”).
Allforward-lookingstatementsarenecessarilyonlyestimatesoffutureresults,andtherecanbenoassurancethat
actual results willnot differmaterially from expectations.Therefore, you arecautioned not toplace undue relianceon any
forward-lookingstatements.Further,forward-lookingstatementsincluded inthisAnnual Reporton Form10-K aremade
onlyas ofthedatehereof,andweundertakenoobligationtoupdateorreviseany forward-lookingstatementto reflect
events or circumstances after the date on which the statement is made or to reflect theoccurrence of unanticipated events,
unless required to do so underthe federal securities laws. Youshould also review the riskfactors described in this Annual
Report on Form 10-K and in the reports USCB FinancialHoldings, Inc. has filed or will file with the SEC.
4USCB Financial Holdings, Inc.2025 10-K
PART I
Item 1. Business
Overview
USCB Financial Holdings, Inc.,a Florida corporation (the “Company”), was formed on December 17, 2021, to serve as
theholdingcompanyforU.S.CenturyBank,aFloridastate-charteredbank,andisabankholdingcompany(a“BHC”)
registered withthe Boardof Governorsof theFederalReserve System(the “FederalReserve”)under theBank Holding
Company Actof 1956,as amended(the “BHCAct”). TheCompany isheadquarteredin Miami,Florida, and,through the
Bank,itssoledirectsubsidiary,operates10bankingcentersinSouthFloridaprovidingawiderangeofpersonaland
businessbanking productsand services.As ofDecember 31,2025, theCompanyhad totalconsolidatedassetsof $2.8
billion.
U.S. Century Bank (the “Bank”)commenced operations in October2002 and is a Floridastate-chartered, non-Federal
ReserveSystemmemberbank.Overthecourseof2021,theBanksimplifieditscapitalizationstructurebyexchanging
and/or repurchasingall of itsissued and outstandingpreferred shares,including Class C,Class D, andClass E preferred
stock.InDecember2021,theBankreachedagreementswithholdersofitsClassBcommonstocktoexchangeall
outstanding Class B common stock for Class A common stockin a 1-for-5 stock exchange.
On July 27,2021, the Bankcompleted an initialpublic offering of 4,600,000shares of its ClassA common stock. Shares
of the Bank’s ClassA common stock weresold at a priceto the publicof $10.00 per shareand began trading onthe Nasdaq
Stock Market under ticker symbol “USCB”.
On December30, 2021(the“EffectiveDate”),the Companyacquiredall oftheissuedandoutstandingstockof the
Bank in ashare exchange(the “Reorganization”)effected underthe FloridaBusiness CorporationAct andin accordance
with theterms ofan Agreement andPlan ofShare Exchange datedDecember 27, 2021between the Bankand theCompany
(the “Share Exchange Agreement”). The Reorganization andthe Share Exchange Agreement were approvedby the Bank’s
stockholders at a special meeting of the Bank’s stockholders held on December 20,2021. Pursuant to the Share Exchange
Agreement, on the EffectiveDate each issued and outstandingshare of the Bank’sClass A common stock wasconverted
into and exchangedfor one shareof the Company’s ClassA common stock.As a result,the Bank becamethe wholly owned
subsidiaryoftheCompany,theCompanybecametheholdingcompanyfortheBankandthestockholdersof theBank
became stockholders of the Company.
Prior to the Effective Date, the Bank’s Class A common stock was registered under Section 12(b) of the Exchange Act,
and theBank was subjectto the informationrequirements of theExchange Act and,in accordance withSection 12(i)thereof,
filed quarterly reports, proxy statements and other information with the Federal Deposit Insurance Corporation (“FDIC”). As
a resultof theReorganization, pursuantto Rule12g-3(a) underthe ExchangeAct, theCompany becamethe successor
registrantto theBank, theCompany’sClassA commonstockwasdeemedtoberegisteredunderSection12(b) ofthe
Exchange Act, and the Company became subject to the information requirements of the Exchange Act and is now required
to filereports, proxystatements andother information withthe SEC.The tradingsymbol forthe Company’s ClassA Common
Stock is “USCB”, which is the same as the Bank’s formertrading symbol.
Prior tothe Reorganization,the Companyhad nomaterial assetsand hadnot conductedany businessor operations
except for activities related to its incorporation and theReorganization.
Our strategyin becominga publiclytraded companyand forminga BHCwas tocontinue pursuingorganic growthas
well as strategicacquisitions if the opportunityarose, which effortswill be furtherfacilitated by accessto the public capital
markets and the added flexibility provided by a holdingcompany structure.
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 discussionrelates to a period beforethe Effective Date,
the terms refer only to the Bank.
Products and Services
Lending Services
Our missionis toprovide highvalue, relationship-based bankingproducts, servicesand solutionsto adiverseset of
clients in themarkets we serve. We focuson serving small-to-medium sized businesses (“SMBs”)and catering to theneeds
oflocalbusinessowners,entrepreneursandprofessionalsinSouthFlorida.Wehavefurtherleveragedoursuccessin
5USCB Financial Holdings, Inc.2025 10-K
providing comprehensive banking solutionsto SMBs to also secure the personalretail deposit relationships of the owners,
operators, and employees of our commercial lending clients, which hasbeen a cornerstone of our deposit growth strategy.
In additionto ourtraditional commercialbanking services,we areamong aselect numberof banksof oursize within
our marketarea thatcan offercertain specialtybanking products,services andsolutions designedfor smallbusinesses,
homeowner associations,law firms, medicalpractices and otherprofessional servicesfirms, and globalbanking services.
Our major specialty banking offerings includethe following:
•
SmallBusinessAdministration(“SBA”)lending:
OurSBAplatformoriginatesloansunderSections7(a)
and 504of theSBA program.The 7(a)loan program,SBA's mostcommon loanprogram, includesfinancial
help for small businesses withspecial requirements while the504 loan program provideslong-term, fixed-rate
financing ofup to $5.0million formajor fixed assetsthat promotebusiness growthand job creation.Since its
formation in2018, theplatform servesas anopportunity togenerate commercialand industrialloans, orC&I
loans, and to diversify our revenue stream through originating andselling SBA 7(a) loans. As of December 31,
2025, the Bank continued to bea Preferred Lending Partner with theSBA which allows us to offerthe full range
of SBA loan products and to exercise lending authority at the local bank level, allowing us tomake timely credit
decisions for prospective clients.
•
Yacht lending:
Our yacht lending verticalprovides yacht financing forlarger vessels; transactions rangefrom
$750 thousand to$7.5 million. Wetarget high net-worthclients in oneof the mostactive yacht marketsin the
country.
•
Homeowner Association (“HOA”)services:
We provide banking servicesto HOAs and propertymanagers,
including deposit collection,lockbox services, paymentservices, and lendingproducts. Launched in2016, we
offer our HOA customers a unique combination of market knowledge ofa local bank, and a highly personalized
“white glove” approach to customer service.
•
PrivateClientGroupservices:
ThePrivateClientGroupprovidestailoredbankingsolutionsfor
professionals—particularly those in law firms,including partners, associates, andstaff—as well as physicians,
dentists, veterinarians, and other high
‑
net
‑
worth individuals. By leveraging our deep relationships withlaw firm
clients,wealsogenerateopportunitiestoexpandpersonaldepositaccountrelationshipsacrosstheir
organizations.
•
Correspondent Banking services:
Our Global Bankingvertical provides correspondentbanking services for
banks headquartered in certainLatin America and Caribbeancountries. We alsocross-sell our correspondent
banking relationships togenerate international personalbanking clients forour Bank. Our complianceteam is
experienced inissues relatedto correspondent banking,and wehave frequentand regularopen communication
with our correspondent bank clients to ensure proper compliancecontrols are maintained at such institutions.
Credit Practices
Our underwriting process is informed by a conservative credit culturethat encourages prudent lending. We believe our
strong asset qualityis dueto our understandingof and experiencewith businesses withinFlorida,in particular SouthFlorida,
ourlong-standingrelationshipswithclientsandourdisciplinedunderwritingprocesses.Ourthoroughunderwriting
processescollaborativelyengageourseasonedbusinessbankers,creditunderwritersandportfoliomanagersinthe
analysis of each loan request.
We manage our credit risk by analyzing metrics relatedto our different lines of business, which allows us tomaintain a
conservativeandwell-diversifiedloan portfolioreflectiveof ourassessmentof variousindustrysectors.Basedupon our
aggregate exposure to any given borrower relationship, we undertake a scaled reviewof loan originations that may involve
our senior credit officers, our Chief Credit Officer,our Credit Committee or, ultimately,our Board of Directors (“Board”).
Deposit Products
We offertraditional depositproducts, includingcommercial andconsumer checkingaccounts, moneymarket deposit
accounts, savings accounts, andcertificates of depositwith avariety of termsand rates, aswell as arobust suite oftreasury,
commercial payments, and cash management services. Additionally,we offer insured cash sweep (“ICS”) and certificate of
deposit accountregistry service(“CDARS”) depositproducts thatare FDIC-insuredfor ourclients. Furthermore,we offer
deposit productsfor municipalitiesandother publicentities. Ourdeposit productsare mainlyofferedacrossour primary
geographic footprint.
Title Services
FloridaPeninsulaTitleLLCisasubsidiaryoftheBankthatoffersourclientstitleinsurancepoliciesforrealestate
transactionsclosedattheBank.Licensedin theStateof Floridaandapprovedby theFloridaDepartmentof Insurance
6USCB Financial Holdings, Inc.2025 10-K
Regulation, Florida PeninsulaTitle LLC began operationsin 2021. Ourtitle service business notonly provides diversification
for non-interest income but also provides our clients with accessto tile insurance services.
Seasonality
We do not believe our business to be seasonalin nature.
Markets
OurprimarybankingmarketisSouthFlorida.SouthFloridahasrapidlyemergedasatopdestinationforfinancial
institutions,drivenbyacombinationoffactorsthatfostereconomicgrowthandstability.Theregionoffersalow-tax
environment, a robust business infrastructure, and access to adiverse talent pool. With a thrivingreal estate market, strong
internationaltradeconnections,andanincreasingconcentrationoftechandfinancesectors,SouthFloridaprovidesa
dynamic ecosystem for financial services. Additionally,the region's strategic location as a gateway to Latin America further
enhancesits appealfor corporationslookingto strengthenglobalconnectivityand investmentopportunities.Webelieve
Florida offerslong-term attractivebanking opportunities.Our largestconcentration isin theMiami metropolitanstatistical
area; however, we arealso focused ongrowth inother urban Floridamarkets in whichwe have apresence, such asBroward
and Palm Beach counties.
According to theUnited StatesCensus Bureau’sestimates, Floridahadpopulation of23.8 million atthe end of2025,
an increaseof 2%when comparedto theend of2024, makingit the3rd mostpopulated statein thecountry.The Miami
Metro Area remains the most populous metro area in Florida with 6.7million residents reflecting, a growth of 27.62% since
2020.
Competition
Our markets are highly competitive, and we compete with a wide range of lenders and other financial institutions within
our markets,including local,regional,national,and internationalcommercialbanksand creditunions.Wealso compete
with mortgage companies, brokeragefirms, trust service providers, consumerfinance companies, mutual funds,securities
firms,insurancecompanies,third-partypaymentprocessors,financialtechnologycompanies,orFintechs,andother
financial intermediaries on variousof our products andservices. Some of our competitorsare not subject to theregulatory
restrictionsandthelevelofregulatorysupervisionapplicabletous.Manyofourcompetitorsaremuchlargerfinancial
institutions that have greater financialresources than we doand compete aggressively for marketshare. These competitors
attempt to gain market share through their financial productmix, pricing strategies and larger banking center networks.
Interest rateson bothloans anddeposits andprices offee-based servicesare significantcompetitive factorsamong
financialinstitutionsgenerally.Otherimportantcompetitivefactorsincludeconvenience,qualityofcustomerservice,
availability and quality of digital offerings, communityreputation, and continuity of personnel and services.
Emerging Growth Company
We are an “emerging growthcompany,”or “EGC”, as defined in the JumpstartOur Business Startups Act of 2012 (the
“JOBS Act”). As such, we are eligible to take advantage of certain exemptions from various reporting requirements that are
applicable to other public companiesthat are not EGCs, including,but not limited to, not beingrequired to comply withthe
auditorattestationrequirementsofSection404oftheSarbanes-OxleyAct,reduceddisclosureobligationsregarding
executive compensation inour periodic reports andproxy statements, andexemptions from the requirementsof holding a
non-bindingadvisoryvoteon executivecompensationand shareholderapprovalof anygoldenparachutepaymentsnot
previously approved.
In addition,Section107oftheJOBSActalsoprovidesthatanEGC cantakeadvantageoftheextendedtransition
period providedin Section7(a)(2)(B) ofthe SecuritiesAct of1933, asamended (the“Securities Act”),for complyingwith
new or revised accounting standards. In otherwords, an EGC can delay the adoptionof certain accounting standards until
those standards would otherwise apply to privatecompanies. We intend to take advantageof the benefits of this extended
transition period, for as long as it is available.
We willremain anEGC untilthe earliestto occurof (i)the endof thefiscal yearfollowing thefifth anniversaryof the
completion of the Bank’s initial public offering in 2021,(ii) the last day of the first fiscal year inwhich the Company's annual
gross revenues exceed $1.235 billion, (iii) the date that theCompany becomes a “large accelerated filer” as defined in Rule
12b-2 under the Exchange Act which wouldoccur if the market value of theCompany's common stock that is heldby non-
affiliates exceeds $700 million as of the last business dayof the Company’s most recently completed secondfiscal quarter
7USCB Financial Holdings, Inc.2025 10-K
(June 30th for theCompany), or (iv) the date onwhich the Company has issued morethan $1 billion in non-convertible debt
during the preceding three-year period. As a consequence,we will cease to be an EGC as of December 31, 2026.
Human Capital Resources
We respectthe values anddiversity exhibitedthroughout our organizationand the community.Diversity isan integral
part ofour organization’sculture. Weseek theactive engagementand participationof peoplewith diversebackgrounds.
We continuetaking stepsto createprograms toensure thatwe areorganized ina way wherethe uniquecontributions of
each individual in ourCompany is recognizedand supported. Eachteam member isto be treated fairlywith equal access
to opportunities and resourcesfor success. Additionally, we run homebuyer educationaland financial literacy workshops in
an effort to reach the financing needs of the sectorsof our communities in which these workshopsare most needed.
Our human capitalobjectives include attracting,developing and retainingthe best availabletalent from adiverse pool
ofcandidatesfortheCompany.Todoso,westrivetomaintaincompetitivepayandbenefits,regularlyupdatingour
compensationstructureandperiodicallyreviewingourcompensationandbenefitsprograms.Additionally,theCompany
identifiesopportunitiesandpathsforthedevelopmentofourstaff,andweseekto,wheneverpossible,fillpositionsby
promotion within. The Company recognizes that the skills and knowledge of its employeesare critical to the success of the
organization, and promotes training and continuing educationas an ongoing function for employees.
We recognizethe importanceof ouremployee'sfinancialhealth andwell-being,and offerbenefits suchas a401(k)
retirement savings plan and make both matching and profit-sharing contributions to that plan. Benefit programs available to
eligibleemployeesinclude,inadditiontothe401(k)retirementsavingsplan,healthandlifeinsurance,employeepaid
holidays and other benefits.
We value and promote diversity inevery aspect of our businessand at every level withinthe Company. We recruit, hire,
andpromoteemployeesbasedontheirindividualabilityandexperienceandinaccordancewithAffirmativeActionand
Equal Employment Opportunitylaws and regulations.Our policy is thatwe do notdiscriminate on thebasis of race, color,
religion,sex,gender,sexualorientation,ancestry,pregnancy,medicalcondition,age,maritalstatus,nationalorigin,
citizenship status, disability veteran status, gender identity,genetic information, or any other status protectedby law.
At December 31, 2025,we had 205full-time equivalent employees.None of ouremployees are partiesto a collective
bargaining agreement. We believe that our employees are our greatest asset and vital to our success. As such, we seek to
hire and retain the bestcandidate for each position, without regard toage, gender, ethnicity, or other protected class status,
butwithanappreciationforadiversityofperspectivesandexperiences.Wehavedesignedacompensationstructure
including an array of benefit plans and programs thatwe believe is attractive to our current and prospectiveemployees.
Regulation and Supervision
Bank holdingcompanies, banks, andtheir affiliates areextensively regulated underfederal andstate lawand regulation.
These laws and regulations havea material effect on the operationsof the Company and itsdirect and indirect subsidiaries,
including the Bank.
Statutes, regulations andregulatory policies limitthe activities inwhich we mayengage and theconduct of ourpermitted
activities and establish capital requirements with which we must comply. The regulatory framework is intended primarily for
theprotectionofdepositors,borrowers,customersandclients,theFDICinsurancefundsandthebankingsystemasa
whole, and not for the protection of our shareholders or creditors. In many cases, the applicable regulatory authorities have
broadenforcementpoweroverbankholdingcompanies,banksandtheirsubsidiaries,includingthepowertoimpose
substantial fines and other penalties for violations of lawsand regulations.
Further,theregulatorysystemimposesreportingandinformationcollectionobligations.Bankingstatutesand
regulations are subjectto change,and additional statutes,regulations, and correspondingguidance maybe adopted. We
are unable to predict these future changes or the effects, if any, that these changes could have on the business, prospects,
revenues, and results of operations of the Bank and Company.
The materialstatutory andregulatory requirementsthat areapplicable tous aresummarized below.The description
below is not intended to summarize all lawsand regulations applicable to us. These summary descriptions are notintended
to be a complete explanation ofsuch laws and regulations and their effects on theCompany and the Bank and arequalified
in their entirety by reference to the actuallaws and regulations. Youshould refer to the full text of the statutes,regulations,
and corresponding guidance for more information.
8USCB Financial Holdings, Inc.2025 10-K
2018 Regulatory Reform
In May 2018the EconomicGrowth, RegulatoryRelief andConsumer ProtectionAct (the “2018Act”), wasenacted to
modify or removecertain financial reformrules and regulations, includingsome of thoseimplemented under theDodd-Frank
Wall Street Reformand Consumer ProtectionAct (“Dodd-Frank Act”) enactedin 2010. While the 2018Act maintains most
of theregulatorystructure establishedby theDodd-Frank Act,it amendscertain aspectsof theregulatory frameworkfor
small depository institutions with assets of less than $10.0 billion and for large banks with assets of more than $50.0billion.
Many of these changes resulted in meaningful regulatoryrelief for community banks such as the Bank.
The 2018 Act, among other matters, expandedthe definition of “qualified mortgages”which may be held by a financial
institutionandsimplifiedtheregulatorycapitalrulesforfinancialinstitutionsandtheirholdingcompanieswithtotal
consolidated assets of less than$10.0 billion by instructing(as described below) the federalbanking regulators to establish
asingle“CommunityBankLeverageRatio”discussedbelow.The2018Actalsoexpandedthecategoryofholding
companies that may rely on the “Small Bank Holding Company andSavings and Loan Holding Company Policy Statement”
(the “SBHC Policy”) by raisingthe maximum amount ofassets a qualifying holdingcompany may have from$1.0 billion to
$3.0 billion.This expansionalso excludedsuch holdingcompaniesfrom theminimum capitalrequirementsof theDodd-
Frank Act. In addition,the 2018 Act includedregulatory relief for community banks regardingregulatory examination cycles,
call reports, theVolckerRule (proprietary tradingprohibitions), mortgagedisclosures and riskweights for certainhigh-risk
commercial real estate loans.
Bank and Bank Holding Company Regulation
As aFlorida-charteredcommercial bank,the Bankis subjectto ongoingand comprehensivesupervision, regulation,
examination, and enforcement by the FDIC and the Florida Officeof Financial Regulation (“FOFR”). The FOFR supervises
and regulatesall areasof ouroperations including,without limitation,the makingof loans,the issuanceof securities,the
conductofourcorporateaffairs,thesatisfactionofcapitaladequacyrequirements,thepaymentofdividends,andthe
establishment or closingof banking centers.In addition, ourdeposit accountsare insuredby the DepositInsurance Fund
(the “DIF”)administered bythe FDIC tothe maximumextent permittedby law,and the FDIChas certainsupervisory and
enforcement powers over us.
Any entity that directly orindirectly controls a bankmust be approved by theFederal Reserve under theBank Holding
CompanyActof1956(the“BHCAct”)tobecomeabankholdingcompany.Bankholdingcompaniesaresubjectto
regulation, inspection, examination, supervision and enforcementby the Federal Reserve under the BHC Act. The Federal
Reserve's jurisdiction also extends to any company that is directlyor indirectly controlled by a bank holding company.
TheCompany,whichcontrolstheBank,isabankholdingcompanyand,assuch,issubjecttoongoingand
comprehensive supervision, regulation, examination andenforcement by the Federal Reserve.
Notice and Approval Requirements Related to Control
Bankinglawsimposenotice,approval,andongoingregulatoryrequirementsonanypersonorentitythatseeksto
acquire direct orindirect “control” ofan FDIC-insured depositoryinstitution. These lawsinclude theBHC Act andthe Change
in Bank Control Act. Among other things,these laws require regulatory filings byindividuals or entities that seek toacquire
direct or indirect"control" ofan FDIC-insureddepository institution.The determinationof whetheran investor"controls" a
depository institution is basedon all ofthe facts andcircumstances surrounding the investment. Asa general matter, a party
is deemed to conclusively control a depository institution orother company if the party owns orcontrols 25% or more of any
class of voting stock or ownsone-third or more of the equity of thedepository institution or its holding company.Subject to
rebuttal, a party may be presumed to control adepository institution or other company if the investor ownsor controls 10%
or more of any class ofvoting stock (and the entity’s securities are registered under the Exchange Actor, if not, the investor
wouldbethelargestshareholder).Exceptunderlimitedcircumstances,bankholdingcompaniesareprohibitedfrom
acquiring, without prior approval,control of any otherbank or bank holdingcompany or substantiallyall the assets thereof
or morethan 5%of thevoting sharesof abank orbank holdingcompany whichis notalready asubsidiary ofsuch bank
holding company.
Source of Strength
All companies, including bank holding companies, that directly or indirectly control an insured depository institution, are
required to serve as a sourceof strength for the institution. Furthermore,the Federal Reserve policyis that a bank holding
company should stand readyto use available resourcesto provide adequate capitalto its subsidiary banksduring periods
of financialstress oradversity andshould maintainthe financialflexibility andcapital-raising capacityto obtainadditional
resources for assisting its subsidiary banks. Underthis requirement, the Company in the future could berequired to provide
9USCB Financial Holdings, Inc.2025 10-K
financial assistance tothe Bank should itexperience financial distress. Suchsupport may berequired at times when,absent
this statutory and Federal Reserve policy requirement, a bank holdingcompany may not be inclined or able to provideit. A
bank holding company’s failure to meet its obligations to serve asa source of strength to its subsidiary banks will generally
be considered bythe Federal Reserve tobe an unsafe andunsound banking practice ora violation ofthe Federal Reserve’s
regulations, or both.
Safety and Soundness Regulation
As an insured depositoryinstitution, we are subject toprudential regulation and supervisionand must undergo regular
on-site examinations by our state and federal banking agencies. The cost of examinations of insured depository institutions
and any affiliates are assessedby the appropriate agency againsteach institution or affiliate thatis subject to examination
as it deemsnecessary orappropriate. Wefile quarterlyconsolidated reportsof conditionand income, orcall reports,with
the FDIC and the FOFR.
The federal bankingagencies have alsoadopted guidelines establishing safetyand soundness standards forall insured
depository institutions includingthe Bank. The safetyand soundness guidelines relateto, among other things,our internal
controls,informationsystems,cybersecurity,internalauditsystems,loanunderwritinganddocumentation,anti-money
laundering policies and procedures, transactions with insiders, risk management, compensation, asset growth, and interest
rate exposure. Thesestandards assistthe federal bankingagencies with earlyidentification and resolutionof problems at
insured depository institutions.If we wereto fail tomeet or otherwisecomply with anyof these standards,the FDIC could
require us to submit aplan for achieving and maintainingcompliance. If a financialinstitution fails to submitan acceptable
compliance plan, or failsin any material respectto implement a complianceplan that has beenaccepted by the FDIC,the
FDIC isrequired toissue anorder directingthe institutionto curethe deficiency.Until thedeficiency citedin theorder is
cured, the FDICmay restrict thefinancial institution’srate of growth,require the financialinstitution to increaseits capital,
restrict the rates the institution pays ondeposits or require the institution to takeany action the regulator deems appropriate
under the circumstances. Noncompliance with the standards established by the safety and soundness guidelines may also
constitute groundsfor otherenforcement action,including ceaseand desistorders and civilmoney penaltyassessments.
Inaddition,theFDICcouldterminateourdepositinsuranceifitdeterminesthatourfinancialconditionwasunsafeor
unsound or that we engaged in unsafe or unsound practices that violated applicable rules, regulations, orders or conditions
enacted or imposed on us by our regulators.
Duringthepastdecade,thebankregulatoryagencieshaveincreasinglyemphasizedtheimportanceofsoundrisk
management processesand stronginternal controlswhen evaluatingthe activitiesof thefinancial institutions theysupervise.
Properly managing risks has been identified as critical to the conduct of safe and sound banking activities and has become
even moreimportant asnew technologies, productinnovation andthe sizeand speedof financialtransactions havechanged
the nature ofbanking markets. Theagencies have identifieda spectrum ofrisks facing abanking institution including,but
not limitedto, credit,market, liquidity, interest rate,cybersecurity, operational, legal andreputational risk. Inparticular, recent
regulatory pronouncementshave focusedon operationalrisk, whicharises fromthe potentialthat inadequateinformation
systems,operational problems,breachesininternalcontrols, fraudor unforeseencatastropheswill resultin unexpected
losses. Newproducts andservices, useof outsidevendors andcybersecurity arecritical sourcesof operationalrisk that
financial institutionsare expectedto addressin thecurrent environment.We haveactive Boardand seniormanagement
oversightpolicies,proceduresandrisklimits;adequateriskmeasurementandmonitoringandadequatemanagement
information systems; and comprehensive internal controlsto address these various risks.
Permissible Activities and Investments
Banking lawsgenerally restrictthe abilityof theCompany toengage inactivities otherthan thosedetermined bythe
Federal Reserve tobe so closelyrelated to banking asto be aproper incident thereto. TheFederal Reserve has determined
by regulationthat certainactivities areclosely relatedto bankingincluding operating amortgage company, finance company,
creditcardcompany,factoringcompany,trustcompanyorsavingsassociation;performingcertaindataprocessing
operations;providinglimitedsecuritiesbrokerageservices;actingasaninvestmentorfinancialadvisor;actingasan
insurance agent forcertain types ofcredit-related insurance; leasingpersonal property ona full-payout, non-operatingbasis;
providing taxplanning andpreparation services;operating acollection agency;and providingcertain courierservices. In
addition,theGramm-Leach-BlileyAct(the“GLBAct”)expandedthescopeofpermissibleactivitiesforabankholding
company that qualifies as a financialholding company. Under the regulations implementing the GLB Act, a financial holding
company may engage in additional activities thatare financial in nature orincidental or complementary to a financialactivity
suchassecuritiesunderwriting,insuranceunderwritingandmerchantbanking.TheCompanyisnotafinancialholding
company.
In addition, as a general matter,the establishment or acquisition bythe Company of a non-bank entity,or the initiation
of anon-banking activity, requires priorregulatory approval. Inapproving acquisitions orthe additionof activities,the Federal
10USCB Financial Holdings, Inc.2025 10-K
Reserve considers, amongother things, whetherthe acquisition orthe additional activitiescan reasonably beexpected to
produce benefitsto thepublic, suchas greaterconvenience,increasedcompetitionor gainsinefficiency,that outweigh
such possible adverse effects as undue concentration of resources, decreased or unfair competition, conflictsof interest or
unsound banking practices.
Regulatory Capital Requirements
The federal bankingregulators have adoptedrisk-based capital adequacyguidelines for bankholding companies and
their subsidiary banksand banks without bankholding companies based onthe Basel IIIstandards. Under these guidelines,
assets and off-balance sheet items are assigned to specific risk categories, each with designated risk weightings. The risk-
based capital guidelines are designed to make regulatorycapital requirements more sensitive to differencesin risk profiles
among banks and bank holdingcompanies, to account for off-balance sheetexposure, to minimize disincentives forholding
liquid assets, andto achieve greaterconsistency inevaluating the capitaladequacy ofmajor banks throughoutthe world.
The resultingcapital ratio requirementsrepresent capital asa percentage oftotal risk-weighted assetsand off-balance sheet
items. Finalrules implementing thecapital adequacy guidelinesbecame effective, withvarious phase-in periods,on January
1, 2015forcommunitybankssuchas us.Alloftheruleswerefullyphasedinas ofJanuary1,2019.Thesefinalrules
represent a significant change to the prior general risk-based capital rules and aredesigned to substantially conform to the
Basel III international standards.
In computingtotal risk-weightedassets, bankand bankholding companyassets aregiven risk-weightsof 0%,20%,
50%, 100%and 150%.In addition,certainoff-balancesheet itemsare givensimilar creditconversionfactorsto convert
them to assetequivalentamounts to whichan appropriate risk-weightwill apply.Most loans willbe assigned tothe 100%
riskcategory,exceptforperformingfirstmortgageloansfullysecuredby1-to-4familyorcertainmulti-familyresidential
properties, which carrya 50% riskrating, and certainpast due loanswhich are assigneda 150% riskrating. Most investment
securities (including,primarily,general obligationclaims onstates orother politicalsubdivisions ofthe UnitedStates) will
be assigned tothe 20%category,except formunicipal orstate revenue bonds,which havea 50%risk-weight, anddirect
obligations of the U.S. Treasuryor obligations backed by the full faithand credit of the U.S. government,which have a 0%
risk-weight. In covering off-balance sheet items, directcredit substitutes, includinggeneral guarantees and standbyletters
of credit backingfinancial obligations,are given a100% conversionfactor.Transaction-relatedcontingencies suchas bid
bonds, standbyletters ofcredit backingnonfinancial obligations,and undrawncommitments (includingcommercial credit
lines with aninitial maturityof more thanone year) havea 50% conversionfactor.Short-term commercialletters of credit
are converted at 20% and certain short-term unconditionallycancelable commitments have a 0% factor.
Underthefinalrules,minimumrequirementsincreasedforboththequalityandquantityofcapitalheldbybanking
organizations. In this respect, the final rulesimplement strict eligibility criteria for regulatory capital instruments and improve
the methodology forcalculating risk-weightedassets to enhancerisk sensitivity.Consistent with theinternational Basel III
framework, the rules include a newminimum ratio of Common EquityTier 1 Capital to Risk-WeightedAssets of 4.5%. The
rules also create a Common Equity Tier 1 Capital conservationbuffer of 2.5% of risk-weighted assets. This bufferis added
to each of the three risk-based capitalratios to determine whether an institutionhas established the buffer.The rules raise
the minimum ratio of Tier 1 Capital to Risk-Weighted Assets from 4% to 6% andinclude a minimum leverage ratio of 4% for
all bankingorganizations. Ifa financialinstitution’scapital conservationbufferfalls below2.5% —e.g., ifthe institution’s
Common EquityTier1 Capitalto Risk-WeightedAssets isless than7.0% —then capitaldistributionsanddiscretionary
bonus payments willbe limited orprohibited based onthe size ofthe institution’s conservation buffer. The typesof payments
subject to this limitation includedividends, share buybacks, discretionary payments onTier 1 instruments, and discretionary
bonus payments.
Common Equity Tier 1 capital isgenerally defined as common stockholders’ equity andretained earnings. Tier 1 capital
is generallydefined asCommon EquityTier 1and additionalTier 1capital. AdditionalTier 1capital includescertain non-
cumulativeperpetualpreferredstockandrelatedsurplusandminorityinterestsinequityaccountsofconsolidated
subsidiaries. Totalcapital includesTier1 capital(Common EquityTier1 capitalplus additionalTier1 capital)and Tier2
capital. Tier2 capitalis comprisedofcapitalinstrumentsandrelatedsurplus,meetingspecifiedrequirements,andmay
include cumulative preferred stock and long-termperpetual preferred stock, mandatory convertible securities,intermediate
preferred stock andsubordinated debt. Alsoincluded in Tier2 capital is theallowance for loanand lease losseslimited to
amaximumof1.25%ofrisk-weightedassets.Calculationofalltypesofregulatorycapitalissubjecttodeductionsand
adjustments specifiedin theregulations. Inassessing aninstitution’s capitaladequacy,the FDIC takesinto consideration
not only these numeric factors, but qualitative factors as well, and has the authority to establish higher capital requirements
for individual institutions where deemed necessary.
Thecapitalregulationsmayalsoimpactthetreatmentofaccumulatedothercomprehensiveincome(“AOCI”)for
regulatory capital purposes. Underthe rules, AOCI generallyflows through to regulatorycapital;however, community banks
and their holding companies (if any) were allowed to make aone-time irrevocable opt-out election to continue to treat AOCI
11USCB Financial Holdings, Inc.2025 10-K
the sameas underthe oldregulations forregulatory capitalpurposes. Thiselection wasrequired tobe madeon thefirst
call reportfiled afterJanuary 1,2015. Wemade theopt-out election.Additionally,the rulesalso permitcommunity 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 securitiesand cumulative perpetual preferred stock (subject to a limit of
25% of Tier 1 capital). However, non-qualifyingcapital instruments issued on or after May 19, 2010 do not qualify for Tier 1
capital treatment. At December 31, 2025, we had nosuch investments.
In May 2016,amendments to theFederal Reserve’s SBHC Policybecame effective which increasedthe asset threshold
to qualify to utilize theprovisions of the SBHCPolicy from $500.0million to $1.0 billion.Subsequently,as part of the2018
Act, thethresholdwasincreasedto$3.0billion.Bankholding companieswhichare subjectto theSBHCPolicyare not
subject to compliance withthe regulatory capital requirementsdescribed above until theyexceed $3.0 billion inassets. As
a consequence, as of December 31, 2025, the Company was not requiredto comply with the requirements set forth above
andwillnotbesubjecttosuchrequirementsuntilsuchtimethatits consolidatedtotalassetsexceed$3.0billionor the
Federal Reserve determinesthat the Company isno longer deemed tobe a small bankholding company.However, ifthe
Company had been subject to the requirements, it would havebeen in compliance with such requirements.
InSeptember2019,thefederalbankingagenciesjointlyfinalizedaruleintendedtosimplifytheregulatorycapital
requirements described above for qualifying community banking organizationsthat opt into the Community Bank Leverage
Ratio, orCBLR,framework,as requiredby Section201 ofthe RegulatoryReliefAct. Thefinal rulebecameeffectiveon
January 1,2020,and theCBLR frameworkbecameavailable forbanks touse beginningwiththeirMarch31, 2020call
reports. Underthe finalrule, ifa qualifyingcommunitybanking organizationopts intothe CBLRframework andmeets all
requirements under theframework, it willbe considered tohave metthe well-capitalized ratiorequirements under theprompt
corrective actionregulationsdescribed belowin thisForm 10-Kand willnot berequired toreport orcalculaterisk-based
capital. In order toqualify for the CBLRframework, a communitybanking organization musthave a tier 1leverage ratio of
greater than9%, lessthan $10.0billion intotal consolidatedassets, off-balancesheet exposuresof 25%or lessof total
consolidated assets,and tradingassets andliabilities of5% orless oftotal consolidatedassets. InNovember 2025,the
federal bankingagencies,including theFDIC, proposeda lowerCBLR requirementof 8%.Community banksthat failto
meet the qualifyingcriteria afteropting into theCBLR framework wouldhave four reportingperiods to meetthe qualifying
criteria again, provided they maintain a leverage ratio above 7%and have not used the grace period for more than eight of
the prior 20 quarters. The federal banking agenciesalso proposed removing the provisions under the CBLR framework that
provided temporary relief for qualifying communitybanks during the COVID-19 outbreak.Although the Bank is a qualifying
community banking organization, the Bank has elected not to opt in to the CBLR framework at this time and willcontinue to
follow the Basel III capital requirements as described above.
As ofDecember 31,2025and 2024,the U.S.CenturyBank qualifiedas a“well capitalized”institution. SeeNote 16
“Regulatory Matters”of the ConsolidatedFinancial Statementsincluded inItem 8of thisAnnual Reporton Form10-K for
further details.
Prompt Corrective Action
Under the FederalDeposit Insurance Act(“FDIA”), thefederal bank regulatoryagencies must take"prompt corrective
action"againstundercapitalizedU.S.depositoryinstitutions.Thecapital-basedregulatoryframeworkcontainsfive
categoriesofcompliancewithregulatorycapitalrequirements,including"wellcapitalized,""adequatelycapitalized,"
"undercapitalized,""significantlyundercapitalized,"and"criticallyundercapitalized,"andaresubjectedtodifferential
regulation corresponding to the capital category withinwhich the institution falls.
An insured depositoryinstitution is deemedto be "wellcapitalized" ifit has atotal risk-basedcapital ratioof 10.0% or
greater, atier 1 risk-basedcapital ratio of 8.0%or greater,a Common EquityTier 1risk-based capital ratioof 6.5% and a
leverage ratio of 5.0%or greater, and the institution isnot subject toan order, written agreement, capital directive, orprompt
corrective actiondirective tomeet andmaintain aspecific levelfor anycapital measure.Under certaincircumstances,a
well-capitalized, adequatelycapitalized orundercapitalized institutionmay betreated asif theinstitution werein thenext
lower capital category if it is determined that the institution is in an unsafe or unsound condition or is engaging in an unsafe
or unsound practice.The degree ofregulatory scrutinyof a financialinstitution will increase,and the permissibleactivities
oftheinstitutionwilldecrease,asitmovesdownwardthroughthecapitalcategories.Underspecifiedcircumstances,a
federalbankingagencymayreclassifya“well-capitalized”institutionasadequatelycapitalizedandmayrequirean
adequately capitalized institution or anundercapitalized institution to comply withsupervisory actions as ifit were inthe next
lowercategory(exceptthattheFDICmaynotreclassifyasignificantlyundercapitalizedinstitutionascritically
undercapitalized).A bankinginstitution thatis undercapitalizedis requiredto submita capitalrestorationplan. Failureto
meetcapitalguidelinescouldsubjecttheinstitutiontoavarietyofenforcementremediesbyfederalbankregulatory
agencies,including:terminationofdepositinsurancebytheFDIC,restrictionsoncertainbusinessactivities,and
appointment of the FDIC as conservator or receiver.
12USCB Financial Holdings, Inc.2025 10-K
At Asof December31,2025,theBank wasdeemedto bea “well-capitalized”institution forpurposesof theprompt
corrective action regulations and as such is not subjectto the above mentioned restrictions.
Commercial Real Estate Concentration Guidelines
The federalbanking regulatorshave implementedguidelines toaddress increasedconcentrations incommercial real
estateloans.Theseguidelinesdescribethecriteriaregulatoryagencieswilluseasindicatorstoidentifyinstitutions
potentiallyexposedtocommercialrealestateconcentrationrisk.Aninstitutionthathas(i)experiencedrapidgrowthin
commercial realestate lending,(ii) notableexposure toa specifictype ofcommercial realestate, (iii)total reportedloans
for construction, land development,and other land representing100% or more oftotal capital, or (iv) totalcommercial real
estate(includingconstruction)loans,asdefinedinthebankingagenciesguidance,representing300%ormoreoftotal
capital and the outstanding balance of theinstitution’s commercial real estate portfolio has increased by 50% ormore in the
prior 36 months, may be identified for further supervisoryanalysis of a potential concentrationrisk.
As of Asof December 31,2025, our ratioof constructionloans to totalrisk-based capital was31%, and therefore,we
were under the100% thresholdset forth inclause (iii)in the paragraphabove. However,with respect toclause (iv)in the
paragraph above,as of December31, 2025,our ratioof total commercialreal estateloans to totalrisk-based capitalwas
370%. Asa result,we aredeemed tohave a concentrationin commercialreal estatelending underapplicable regulatory
guidelines.
If aconcentration ispresent, underthe federalbanking regulator’guidance, managementshould employheightened
risk management practices that address key elements,including board and management oversight and strategicplanning,
portfolio management,developmentof underwritingstandards,risk assessmentand monitoringthroughmarket analysis
and stresstesting, andmaintenance ofincreased capitallevels asneeded tosupport thelevel ofcommercial realestate
lending.Toaddress the commercialreal estate lendingconcentration, the Bankhas previously establisheda commercial
real estate lending framework tomonitor specific exposures andlimits by types within the commercialreal estate portfolio,
including, among other things,annual stress testing ofthe commercial real estateportfolio, and takesappropriate actions,
as necessary.
Payment of Dividends and Share Repurchases
The ability ofthe board ofdirectors of aninsured depositoryinstitution to declarea cash dividendor other distribution
with respect to capital is subjectto federal and state statutoryand regulatory restrictions thatlimit the amount availablefor
suchdistributiondependinguponearnings,financialcondition,includingwhethertheinstitutionhasnegativeretained
earnings, and cash needs of the institution,as well as general business conditions.Insured depository institutions are also
prohibitedfrompayingmanagementfeestoanycontrollingpersonsor,withcertainlimitedexceptions,makingcapital
distributions, including dividends, if after such transaction the institution would beless than adequately capitalized. We may
generally declare a dividendfrom retained net profitswhich accrued prior tothe preceding twoyears, but we must,before
thedeclarationofadividendonourcommonstock,underapplicableFloridalaw,carry20%ofournetprofitsforsuch
preceding periodas iscovered bythe dividendto oursurplus fund,until thesame shallat leastequal theamount ofour
common stock and preferred stock,if any, then issued and outstanding. Under Florida law, we areprohibited from declaring
adividendatanytimeatwhichournetincomefromthecurrentyearcombinedwiththeretainednetincomefromthe
preceding two years is a loss or which would cause our capital accounts tofall below the minimum amount required by law,
regulation, order,or any written agreementwith a state orfederal regulatory agency.
Furthermore, under applicableFDIC
regulationsandpolicy,becausetheBankhasnegativeretainedearnings,itmustobtainthepriorapprovaloftheFDIC
before effecting a cash dividend or other capital distribution.
A Federal Reserve policy statement on the paymentof cash dividends states that a bank holdingcompany should pay
cash dividends only to theextent that the holding company’s netincome for the past yearis sufficient to cover both thecash
dividends anda rateof earningsretention thatis consistentwith theholding company’scapital needs,asset qualityand
overallfinancialcondition.TheFederalReserve’spolicystatementalsoprovidesthatitwouldbeinappropriatefora
company experiencing serious financial problems to borrow funds to pay dividends.Furthermore, under the federal prompt
corrective actionregulations, theFederal Reservemay prohibita bankholding companyfrom payingany dividendsif the
holding company’s bank subsidiary is classifiedas “undercapitalized.” See “- Prompt Corrective Action”above.
Section 225.4(b)(1) of RegulationY promulgated by the FederalReserve requires that a bankholding company that is not
“well-capitalized”or“well-managed”,orthatissubjecttoanyunresolvedsupervisoryissues,providepriornoticetothe
Federal Reserve forany repurchase orredemption ofits equity securitiesfor cash orother value thatwould reduce by10
percent or more the bankholding company’s consolidatednet worth aggregated overthe preceding 12-month period.The
FederalReservemaydisapprovesuchapurchaseorredemptionifitdeterminesthattheproposalwouldconstitutean
13USCB Financial Holdings, Inc.2025 10-K
unsafe orunsound practiceor wouldviolate anylaw,regulation, FederalReserve orderor anycondition imposedby,or
writtenagreement
with,theFederalReserve.AsofDecember 31,2025,theCompanywasnotsubjecttoanyformal
supervisory restrictions onits abilityto pay dividendsbut willnotify theFederal Reserve inadvance of anyproposed dividend
to the Company's shareholders inlight of the Bank'snegative retained earnings. In addition,we will provide priornotification
to the Federal Reserve prior to effecting proposed sharerepurchases.
Incentive Compensation
Guidelines adopted bythe federalbanking agencies pursuantto theFDIA prohibitexcessive compensation asan unsafe
andunsoundpracticeanddescribecompensationasexcessivewhentheamountspaidareunreasonableor
disproportionate to the services performed by an executiveofficer, employee, directoror principal shareholder.
In June 2010,the federal bankingagencies jointlyadopted theGuidance on SoundIncentive CompensationPolicies,
or GSICP.The GSICP wasintended to ensurethat banking organizationsdo not underminethe safety andsoundness of
such organizationsby encouragingexcessive risk-taking.This guidance,which coversall employeesthat havethe ability
to expose the organizationto material amountsof risk, eitherindividually or aspart of a group,is based upon aset of key
principles relating toa banking organization’sincentive compensation arrangements.Specifically,incentive compensation
arrangements should (i)provide employee incentivesthat appropriately balance riskin a manner that doesnot encourage
employees to expose theirorganizations to imprudent risk,(ii) be compatible witheffective controls and riskmanagement,
and (iii) be supported bystrong corporate governance,including active and effectiveoversight by the organization’sboard
of directors. Any deficiencies in our compensationpractices could lead to supervisory or enforcementactions by the FDIC.
The GSICPprovides thatenforcement actionsmay betaken against abanking organizationif itsincentive compensation
arrangementsor relatedrisk-managementcontrolor governanceprocessesposea riskto theorganization’ssafety and
soundness and the organization is not taking prompt andeffective measures to correct the deficiencies.
TheDodd-FrankActrequiresthefederalbankingagenciesandtheSECtoestablishjointregulationsorguidelines
prohibiting incentive-based payment arrangements at specified regulated entities, such as us, having at least $1.0 billion in
totalassetsthatencourageinappropriaterisk-takingbyprovidinganexecutiveofficer,employee,directororprincipal
shareholderwithexcessivecompensation,fees,orbenefitsorthatcouldleadtomaterialfinanciallosstotheentity.In
addition, these regulators must establish regulations or guidelines requiring enhanced disclosure to regulators of incentive-
based compensationarrangements. Thefederal bankingagencies proposedsuch regulationsin April2011and issueda
second proposedrule inApril 2016.The secondproposed rulewould applyto allbanks, amongother institutions,with at
least $1.0billion inaverage totalconsolidated assets.In addition,in May2024, are-proposed rulewas publishedthat is
intendedtoprohibitcertainfinancialinstitutionsfromestablishingormaintainingincentive-basedcompensation
arrangements that encourage inappropriate risk taking by providing covered persons with excessive compensation, fees or
benefits that couldlead to materialfinancial loss atthe financial institution.Final regulationshave not beenadopted as of
the date ofthis Form 10-K.If adopted, theseor other similarregulations would imposelimitations on themanner in which
we may structurecompensation forour executivesand other employeesthat go beyondthe requirementsof GSICP.The
scope and contentof the federalbanking agencies’policies on incentivecompensation are continuingto develop andare
likely to continue evolving, but the timeframe for finalization,if finalized, of such policies is not known at this time.
Limits on Transactions with Affiliates andInsiders
TransactionsbetweeninsuredfinancialinstitutionsandanyaffiliatearegovernedbySections23Aand23Bofthe
Federal Reserve Act. An affiliateof an insured financial institutionis any company or entity whichcontrols, is controlled by
orisundercommoncontrolwiththeinsuredfinancialinstitution.Inabankholdingcompanycontext,thebankholding
company of an insured financial institution(such as the Company) and anycompanies which are controlled by such holding
companyareaffiliatesoftheinsuredfinancialinstitution.Generally,Section23Alimitstheextenttowhichtheinsured
financial institution or itssubsidiaries may engage in“covered transactions” with any oneaffiliate to an amount equalto 10%
of such institution’scapital stockand surplus, andcontains anaggregate limiton all suchtransactions withall affiliatesto
an amount equal to 20% of such capital stock and surplus. Section 23B applies to “covered transactions” as well as certain
othertransactionsandrequiresthatalltransactionsbeontermssubstantiallythesame,oratleastasfavorabletothe
insured financial institution, asthose provided toa non-affiliate. The term “coveredtransaction” includes the makingof loans
to, purchase ofassets fromand issuance ofa guarantee toan affiliateand similartransactions. Section23B transactions
also includethe provisionof servicesand thesale ofassets byan insuredfinancialinstitution toan affiliate.In addition,
loans or otherextensions ofcredit by thefinancial institutionto the affiliateare to becollateralized inaccordance with the
requirements set forth in Section 23 of the Federal ReserveAct.
14USCB Financial Holdings, Inc.2025 10-K
Sections 22(g)and (h)of theFederal ReserveAct placerestrictions onloans toexecutive officers, directorsand principal
shareholders. UnderSection 22(h),loans toa director,an executiveofficerand toa greaterthan 10%stockholderof an
insuredfinancialinstitution,andcertainaffiliatedinterestsofeither,maynotexceed,togetherwithallotheroutstanding
loans to suchperson andaffiliated interests,the insured financialinstitution’s loansto one borrowerlimit (generallyequal
to 15%oftheinstitution’sunimpaired capitalandsurplus).Section22(h) alsorequiresthatloansto directors,executive
officers and principal stockholders be made on terms substantially the same as offered in comparable transactions to other
persons unless the loans are made pursuant to a benefit or compensation program that (i) is widely available to employees
of theinstitution and(ii) doesnot givepreference toany director, executiveofficer orprincipal stockholder, orcertain affiliated
interests thereof, over other employeesof the insured financial institution.Section 22(h) also requires prior boardapproval
for the issuance of certain loans. In addition, the aggregate amount ofextensions of credit by an insured financial institution
to all insiders cannotexceed the institution’sunimpaired capital andsurplus. Furthermore, Section22(g) places additional
restrictions on loans to executive officers. At December31, 2025, the Bank was in compliance with the above restrictions.
FDIC Deposit Insurance
The FDIC isan independentfederal agencythat insures thedeposits of federallyinsured depositoryinstitutions upto
applicable limits. The FDIC also has certain regulatory,examination and enforcement powers with respect to FDIC-insured
institutions.ThedepositsareinsuredbytheFDICuptoapplicablelimits.Asageneralmatter,themaximumdeposit
insurance amount is $250 thousand per depositor.
Additionally,FDIC-insured depository institutions are requiredto pay deposit insurance assessmentsto the FDIC. The
amount ofa particularinstitution's depositinsurance assessmentis basedon thatinstitution's riskclassification underan
FDIC risk-based assessment system. An institution'srisk classification is assigned based onits capital levels and the level
of supervisory concern the institution poses to the regulators.
Under the currentsystem, depositinsurance assessmentsare basedon a bank’sassessment base,which isdefined
as average total assets minusaverage tangible equity.For established small institutions,such as the Bank, theFDIC sets
depositassessmentratesbasedontheFinancialRatiosMethod,whichtakesintoaccountseveralratiosthatreflect
leverage, asset quality,and earnings ateach individual institutionand then appliesa pricing multiplier thatis the same for
all institutions. Aninstitution’s ratemust be withina certain minimumand a certainmaximum, and therange varies based
on theinstitution’scomposite CAMELSrating. Thedeposit insuranceassessmentis calculatedby multiplyingthe bank’s
assessment baseby thetotal baseassessment rate.Assessment ratesfor mostinsured depositoryinstitutions withless
than $10.0 billion of assets range from 2.5 to 32 basis pointsof each institution’s total assets less tangiblecapital.
In October 2022, the FDIC finalized arule that increased the initial base deposit insuranceassessment rates by 2 basis
points, beginning with the firstquarterly assessment period of 2023(January 1, 2023 throughMarch 31, 2023). The FDIC,
as required under the FDIA, established a plan inSeptember 2020 (the “Restoration Plan”) to restore the DIFreserve ratio
to meet or exceedthe statutory minimumof 1.35% within eightyears. The RestorationPlan did notinclude an increasein
the depositinsurance assessmentrate. Basedon theFDIC’s recentprojections,however,the FDICdetermined thatthe
DIF reserve ratiois at riskof not reaching thestatutory minimum bythe statutory deadlineof September 30,2028 without
increasing thedeposit insuranceassessment rates.The increasedassessment wouldimprove thelikelihood thatthe DIF
reserve ratio would reach the required minimum by the statutory deadline, consistent with theFDIC’s amended Restoration
Plan. TheFDICis maintaining theDesignatedReserveRatio (“DRR”)for theDIF at2% for2026.The assessmentrate
schedules will remain in effect unless and until the reserve ratio meets or exceeds 2% in order to support growth in the DIF
in progressingtoward theFDIC’s long-termgoal ofa 2%DRR. Progressivelylower assessmentrate scheduleswill take
effectwhenthereserveratioreaches2%, andagainwhenit reaches2.5%.Therevisedassessmentrateschedulewill
remain in effect unless and until the reserve ratiomeets or exceeds 2%, absent further action by the FDIC.
Under theFDIA, theFDIC mayterminate depositinsurance upona findingthat theinstitution hasengaged inunsafe
and unsoundpractices,is inan unsafeor unsoundconditionto continueoperations,or hasviolated anyapplicablelaw,
regulation, rule, order, or conditionimposed by the FDIC.
15USCB Financial Holdings, Inc.2025 10-K
Brokered Deposits
The FDIAand FDICregulations generallylimit theability ofan insureddepository institutionto accept,renew orroll-
over any brokered depositunless the institution's capitalcategory is "well capitalized"or, uponapplication to and awaiver
fromtheFDIC,“adequatelycapitalized."Less-than-well-capitalizedbanksarealsosubjecttorestrictionsontheinterest
rates that theymay pay ondeposits. The characterizationof deposits as"brokered" may resultin the impositionof higher
deposit assessmentson such deposits.As mandatedby the 2018Act, the FDIC'sbrokered depositregulations providea
limited exception for reciprocaldeposits for banks thatare well-managed and wellcapitalized (or adequately capitalized and
have obtaineda waiverfrom theFDIC asmentioned above).Under thelimited exception,qualified banksare eligiblefor
exemption fromtreatment as"brokered" depositsup to$5.0 billion,or 20%of theinstitution's totalliabilities inreciprocal
deposits. In2021, theFDIC clarifiedand modernizedits brokereddeposit regulationsby establishingclear standardsfor
determining whether anentity qualifies as adeposit broker,identifying business relationshipsthat automatically qualifyfor
the“primarypurposeexception,”creatingatransparentapplicationprocessforentitiesseekingthatexception,and
confirming that third parties with exclusive deposit-placement arrangements with one institution arenot considered deposit
brokers.
Depositor Preference
The FDIA providesthat, in theevent of the"liquidation or otherresolution" of aninsured depository institution, theclaims
of depositorsof the institution(including theclaims ofthe FDIC assubrogee ofinsured depositors)and certain claimsfor
administrativeexpensesoftheFDICasareceiverwillhavepriorityoverothergeneralunsecuredclaimsagainstthe
institution. Insured anduninsured depositors,along with theFDIC, will havepriority in paymentahead of unsecured,non-
deposit creditors,including theBank, withrespect toany extensionsof credit theyhave made tosuch insureddepository
institution.
Overdraft Fee Regulation
The Electronic Fund Transfer Act prohibitsfinancial institutions from charging consumers feesfor paying overdrafts on
automated teller machines, orATMs,and one-time debit card transactions,unless a consumer consents,or opts in, to the
overdraft service for those typesof transactions. If a consumerdoes not opt in,any ATM transaction or debit that overdraws
the consumer’s accountwill be denied.Overdrafts onthe paymentof checksand regularelectronic billpayments arenot
coveredbythisnewrule.Beforeoptingin,theconsumermustbeprovidedwithanoticethatexplainsthefinancial
institution’soverdraftservices,includingthefeesassociatedwiththeservice,andtheconsumer’schoices.Financial
institutionsmustprovideconsumerswhodonotoptinwiththesameaccountterms,conditionsandfeatures(including
pricing) that they provide to consumers who do opt in.
Federal Reserve System and Federal Home LoanBank System
We are a member of the Federal Home Loan Bank (“FHLB”) of Atlanta, which is one of 11 regional FHLBs. Each FHLB
serves asa quasi-reservebank forits memberswithin itsassigned region.It isfunded primarilyfrom fundsdeposited by
member institutionsand proceedsfrom the saleof consolidatedobligations ofthe FHLBsystem. AFHLB makesloans to
members (i.e., advances) in accordance with policiesand procedures established by the Board of Trusteesof the FHLB.
As a memberof the FHLBof Atlanta, we arerequired to owncapital stock inthe FHLB inan amount atleast equal to
0.07% (or7 basispoints), whichis subjectto annualadjustments, ofthe Bank’stotal assetsat theend ofeach calendar
year (upto amaximum of$18.0 million),plus 4.75%of ouroutstanding advances(borrowings) fromthe FHLBof Atlanta
and0.10%oftheamountofoutstandinglettersofcreditundertheactivity-basedstockownershiprequirements.Asof
December 31, 2025, the Bank was in compliance withsuch requirements.
Anti-Money Laundering Regulation
As a financialinstitution, wemust maintainanti-money launderingprograms thatinclude establishedinternal policies,
proceduresandcontrols,adesignatedcomplianceofficer,anongoingemployeetrainingprogram,andtestingofthe
program by an independent audit function in accordance with theBank Secrecy Act of 1970, as amended (“BSA”), and the
regulations issuedby theDepartment ofthe Treasuryin 31CFR ChapterX, Section326.8 ofthe FDIC’sregulationsand
theFloridaControlofMoneyLaunderingandTerroristFinancinginFinancialInstitutionsAct.Financialinstitutionsare
prohibited from entering into specified financial transactions and account relationships and must meet enhanced standards
for duediligence and“knowingyourcustomer”in theirdealingswithforeign financialinstitutions,foreign customersand
other high-risk customers.Financial institutions mustalso take reasonablesteps to conductenhanced scrutiny ofaccount
relationships toguard againstmoney launderingand toreport transactionsthat meetcertain dollaramount thresholdsas
16USCB Financial Holdings, Inc.2025 10-K
well as anysuspicious transactions.Laws, suchas theUSA PATRIOTAct enactedin 2001,as describedbelow,provide
law enforcement authorities with increased access to financialinformation maintained by banks.
Anti-money launderingobligations havebeen substantiallystrengthenedas aresult ofthe USAPATRIOTAct. Bank
regulators routinely examine institutions for compliance with these obligations, and this area has become a particular focus
oftheregulatorsinrecentyears.Inaddition,theregulatorsarerequiredtoconsidercomplianceinconnectionwiththe
regulatoryreviewofcertainapplications.Inrecentyears,regulatorshaveexpressedconcernoverbankinginstitutions’
compliancewithanti-moneylaunderingrequirementsand,insomecases,havedelayedapprovaloftheirexpansionary
proposals. The regulators and othergovernmental authorities have beenactive in imposing “ceaseand desist” orders and
significant money penalty sanctions against institutionsfound to be in violation of the anti-money laundering regulations.
USA PATRIOTAct
The USAPATRIOTAct becameeffectivein October2001 andamended theBSA. TheUSA PATRIOTAct requires
banks to establish anti-money laundering programs thatinclude, at a minimum:
•
a bankcomplianceprogramthatcontainsinternalpolicies,proceduresandcontrolsdesignedtoimplementand
maintain thebank’s compliancewith allof therequirements ofthe USAPATRIOTAct, theBSA andrelated laws
and regulations;bank widesystemsand proceduresfor monitoringand reportingof suspicioustransactionsand
activities;
•
a designated compliance officer;
•
employee training for bank employees;
•
an independent audit function to test the efficacyof the bank’s anti-money laundering program;
•
procedures to verify the identity of each bank customer uponthe opening of accounts;
•
heightened due diligence policies,procedures and controls applicable tocertain foreign accounts andrelationships;
and
•
required reports to law enforcement and/or financial regulators to assist in the deterrence and prevention of money
laundering activities.
Additionally,the USA PATRIOTAct requires each financialinstitution to develop acustomer identification program,or
CIP, as part of its anti-moneylaundering program. Thekey components ofthe CIP areidentification verification, government
list comparison,notice andrecord retention.The purposeof theCIP isto enablethe financialinstitution todetermine the
true identityand anticipatedaccount activityof eachcustomer.Tomake thisdetermination, thefinancial institutionmust,
among other things, collect certain information from customers at the time they enterinto the customer relationship with the
financial institution.This information mustbe verified withina reasonable time.Furthermore, all customersmust bescreened
against any CIP-related governmentlists of known or suspectedterrorists or other “sanctioned”persons. In May 2018, the
U.S. Treasury’sFinancial CrimesEnforcement Network,or FinCEN,issued afinal ruleunder theBSA requiringbanks to
identify and verifythe identity ofthe natural personsbehind their customersthat are legalentities—the beneficialowners.
TheAnti-MoneyLaunderingActof2020(the“AMLAct”)andwithintheAMLAct,theCorporateTransparencyAct(the
“CTA”),was enacted inJanuary 2021. TheAML Act isintended to bea comprehensivereform and modernizationof U.S.
banksecrecyandanti-moneylaunderinglaws.Amongotherthings,itcodifiesarisk-basedapproachtoanti-money
laundering compliancefor financialinstitutions; requires thedevelopment ofstandards for evaluatingtechnology andinternal
processesfor BSAcompliance;expandsenforcement-and investigation-relatedauthority,includingincreasingavailable
sanctionsforcertainBSAviolationsandinstitutingBSAwhistleblowerincentivesandprotections.TheCTAestablishes
uniform beneficialownership reportingrequirements forcorporations, limitedliability companies,and other similarentities
formed or registered to do business in the United States. The CTAauthorizes FinCEN to collect that information and share
it withauthorized government authoritiesand financial institutions,subject toeffective safeguards andcontrols. In December
2023,FinCENissuedregulationsregardingaccesstothebeneficialownershipinformationcollectedundertheCTA.In
March2025,asaresultofvariouslegalchallengestotheCTA,theU.S.Treasuryannouncedthatitwassuspending
enforcement of theCTAagainst domestic reportingcompanies and theirbeneficial owners. Laterin March 2025,the U.S.
Treasury issueda final interimrule that formallyexcepted domesticreporting companiesand their beneficialowners from
thereportingrequirements.Undertheinterimfinalrule,onlyforeignreportingentitieswouldneedtoprovideforeign
beneficial ownership information. We and our affiliates have adoptedpolicies, procedures and controls designed to comply
with the BSA, the AML Act, the CTAand the USA PATRIOTAct.
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” ofthe United States,as defined byvarious ExecutiveOrders and Actsof Congress.OFAC
publishes lists ofnames ofpersons and organizationssuspected of aiding,harboring orengaging in terroristacts; owned
17USCB Financial Holdings, Inc.2025 10-K
orcontrolledby,oractingonbehalfoftargetcountries;andnarcoticstraffickers.Suchpersonsarereferredtoas
“sanctioned” persons.
If a bank findsa name onany transaction, accountor wire transferthat is onan OFAClist, it mustfreeze the account
and/or block the transaction or wire transfer. We utilize an outside vendor to overseethe inspection of our accounts and the
filing of any notifications.We also monitorhigh-risk OFACareas such as newaccounts, wire transfersand customer files.
These checks are performed using software that is updated each timea modification is made to the lists provided byOFAC
and other agencies of Specially Designated Nationalsand Blocked Persons.
Consumer Laws and Regulations
Our activitiesare subjectto avarietyof federaland statestatutes andregulationsdesigned toprotect consumersin
transactions withbanks. Interestand othercharges collectedor contractedfor byus aresubject tostate usurylaws and
federal laws concerning interest rates. Our loanoperations are also subject to federal lawsapplicable to credit transactions,
such as:
•
theTruth-In-LendingAct,andRegulationZ,governingdisclosuresofcreditandservicingtermstoconsumer
borrowersandincludingsubstantialnewrequirementsformortgagelendingandservicing,asmandatedbythe
Dodd-Frank Act
•
the Home Mortgage Disclosure Act of 1975 and Regulation C, requiringfinancial institutions to provide information
to enable thepublic and publicofficials todetermine whethera financial institutionis fulfilling itsobligation to help
meet the housing needs of the communities they serve;
•
the Equal CreditOpportunity Actand RegulationB, prohibitingdiscrimination onthe basisof race,color,religion,
or other prohibited factors in extending credit;
•
the FairCredit Reporting Actof 1978,as amended bythe Fairand Accurate CreditTransactions Act, and Regulation
V, as well as the rules andregulations of the FDIC governing theuse and provision of informationto credit reporting
agencies, certain identity theft protections and certaincredit and other disclosures;
•
the FairDebt CollectionPractices Actand RegulationF,governing themanner inwhich consumerdebts maybe
collected by collection agencies; and
•
the Real Estate Settlement Procedures Act, andRegulation X, which governs aspects of the settlement process for
residential mortgage loans.
Our deposit operations are also subject to federal laws,such as:
•
the FDIA, which, among other things, limits the amount ofdeposit insurance available per account to $250,000 and
imposes other limits on deposit-taking;
•
the Right toFinancial Privacy Act,which imposes aduty to maintainthe confidentiality ofconsumer financial records
and prescribes procedures for complying with administrative subpoenasof financial records;
•
Check Clearing forthe 21st CenturyAct (also knownas “Check 21”),which gives “substitutechecks,” such asdigital
check images and copies made from that image, thesame legal standing as the original paper check;
•
the ElectronicFunds TransferAct andRegulation E,which governsautomatic depositsto andwithdrawalsfrom
deposit accountsand customers’rights andliabilities arisingfrom theuse ofATMsand otherelectronic banking
services; and
•
the Truthin SavingsAct andRegulation DD,which requiresdepository institutionsto providedisclosures sothat
consumers can make meaningful comparisons about depositoryinstitutions and accounts.
Theselawsandregulationsmandatecertaindisclosurerequirementsandregulatethemannerinwhichfinancial
institutions must deal with clients whentaking deposits or making loans tosuch clients. We must comply with the applicable
provisions of these consumer protection laws and regulations as part of bothour ongoing client relations and our regulatory
compliance obligations.
Financial Privacy and Cybersecurity
Banking organizationsaresubject tomany federaland statelaws andregulationsgoverning thecollection,use and
protection of customer information.Under the privacy protectionprovisions of the GLBAct and related lawsand regulations,
including Florida laws, we are limited in our abilityto disclose non-public information about consumersto nonaffiliated third
parties. Theselimitationsrequiredisclosureofprivacypolicies toconsumersand,insomecircumstances,requireus to
allowconsumerstopreventdisclosureofcertainpersonalinformationtoanon-affiliatedthirdpartyandtonotdisclose
account numbers oraccess codes tonon-affiliated third parties formarketing purposes. Federalbanking agencies, including
theFDIC,haveadoptedguidelinesforestablishinginformationsecuritystandardsandcybersecurityprogramsfor
18USCB Financial Holdings, Inc.2025 10-K
implementing safeguards. These guidelines,along with relatedregulatory materials, increasingly focuson risk management
and processes related to information technology and the useof third parties in the provision of financial services.
Inaddition,thefederalbankingagencieshaveadoptedaruletoestablishcomputer-securityincidentnotification
requirementsforbankholdingcompanies,banksandtheirserviceproviders.Undertherule,bankingorganizationsare
required to notify their primaryfederal regulators within 36 hoursof any incident that has materiallydisrupted or degraded,
or isreasonablylikely tomaterially disruptor degrade,the bankingorganization’sability todeliver bankingservices toa
material portion ofits client base,jeopardize theviability of keyoperations, orimpact the financialstability ofthe financial
sector. The rule also imposescertain notification requirements on third-party bankservice providers when they experience
a computer-securityincident thathas caused,or islikely tocause amaterial servicedisruption ordegradation forfour or
more hours. In such case, the service provider is required to notify its bank-designated point of contact as soon as possible
upon discovery of the incident.
In addition to federal laws and regulations, we are subjectto state laws governing customer privacy and cybersecurity.
The Florida Information Protection Act of 2014 (“Florida Act”) requires notification ofthe Florida Department of Legal Affairs
of any breach involvingpersonal information thataffects more than500 people aswell as requiring notificationof affected
individuals ofa breach.The FloridaAct alsorequires us totake reasonablemeasures to protectand securedata inelectronic
form containing personal information and take all reasonable measures to dispose, or arrange for the disposal, ofcustomer
records containingpersonal informationwithin ourcustody orcontrol whenthe recordsare nolonger tobe retained.We
incursignificantcostsandexpensesinordertoaddresscompliancewiththefederalandstatecustomerprivacyand
cybersecurity laws and regulations, and we expect suchcosts and expenses will continue into the future.
Consumer Financial Protection Bureau
The Consumer Financial Protection Bureau (“CFPB”) isan independent regulatory authority housed within theFederal
Reserve Board. The CFPB has broad authority to regulate the offering and provision of consumer financial products and to
prevent institutions subject to its authority from engaging in “unfairand deceptive or abusive acts or practices” with respect
to theiroffering of consumerfinancial products orservices. The CFPBhas theauthority tosupervise and examinedepository
institutions with more than $10.0 billionin assets for compliance with federalconsumer laws. The authority to superviseand
examine depository institutions with $10.0 billion or less in assets, such as the Bank, for compliance with federal consumer
laws remains largely with those institutions’ primary federalregulators. However, the CFPB may participate in examinations
of these smaller institutionson a “sampling basis”and may refer potentialenforcement actionsagainst such institutionsto
their primary regulators.As such, theCFPB may participatein examinations ofthe Bank. Inaddition, states arepermitted
to adopt consumerprotection laws andregulations that are stricterthan the regulations promulgatedby the CFPB,and state
attorneys general are permitted to enforce consumer protectionrules adopted by the CFPB against certaininstitutions.
The Volcker Rule
The Dodd-Frank Actprohibits (subject tocertain exceptions) usand ouraffiliates from engagingin short termproprietary
trading in securities and derivatives and from investingin and sponsoring certain investment companies definedin the rule
as “coveredfunds” (includingnot onlyhedge funds,commodity poolsand privateequity funds,but alsoa rangeof asset
securitization structuresthat do notmeet exemptivecriteria in thefinal rules). Thisstatutory provisionis commonlycalled
the “Volcker Rule.” At December 31, 2025, we are notsubject to the Volcker Rule because of our assetsize, which is below
the $10.0 billion Volcker Rulethreshold.
Community Reinvestment Act and Fair Lending Requirements
Aspreviouslynoted,wearesubjecttocertainfairlendingrequirementsandreportingobligationsinvolvinghome
mortgagelendingoperations.Wearealsosubjecttocertainrequirementsandreportingobligationsunderthefederal
Community Reinvestment Act (“CRA”).The CRA andits corresponding regulations areintended to encourage banksto help
meet the credit needs ofthe communities they serve,including low- and moderate-income neighborhoods, consistent with
safe and sound banking practices.
Accordingly,theCRAgenerallyrequiresfederalbankingagenciestoevaluatetherecordofafinancialinstitutionin
meeting applicableCRA requirements.The CRAfurther requiresthe agenciesto takeinto accountour recordof meeting
communitycreditneedswhenevaluatingapplicationsfor,amongotherthings,newbranchesormergers.Wearealso
subject to analogous state CRA requirementsin Florida and certain other statesin which we may establish branchoffices.
InconnectionwiththeirassessmentsofCRAperformance,theFDICandFOFRassignaratingof“outstanding,”
“satisfactory,”“needs toimprove,” or“substantialnoncompliance.”We receiveda “satisfactory”CRA AssessmentRating
frombothregulatoryagenciesinourmostrecentCRAexaminationsin2023.Inadditiontosubstantivepenaltiesand
corrective measures that may be required for a violation of certain fair lending laws, the federal banking agencies may take
19USCB Financial Holdings, Inc.2025 10-K
compliance with such laws and CRAinto account when regulating and supervisingother activities of the bank, includingin
actingonexpansionaryproposalssuchas whena banksubmitsanapplicationto establishbankbranches,mergewith
another bank,or acquirethe assetsand assumethe liabilitiesof another bank.An unsatisfactoryCRA and/orfair lending
record couldsubstantially delay orblock anysuch transaction.The regulatory agency'sassessment ofthe institution'srecord
is made available tothe public atwww.ffiec.gov/craratings.Following its mostrecent CRA performanceevaluation in April
2023, the Bank received an overall rating of "Satisfactory."
In October 2023, the federalbanking agencies jointly issueda final rule to modernizeCRA, but in light of litigation,the
agencies issued a joint proposalin July 2025 to rescind thisrule and reinstate the CRA frameworkthat existed prior to the
2023 final rule.
Call Reports and Examination Cycle
All institutions, regardless of size, submita quarterly call report that includesdata used by federal banking agenciesto
monitor the condition, performance, andrisk profile of individual institutionsand the industry as a whole.In June 2019, the
federal banking agencies issued afinal rule to permit insureddepository institutions with total assets ofless than $5.0 billion
thatdonotengageincertaincomplexor internationalactivitiestofilethemoststreamlinedversionof thequarterlycall
report, and to reduce data reportable on certain streamlinedcall report submissions.
Effect of Governmental Monetary Policies
The commercial bankingbusiness is affectednot only bygeneral economic conditions,but also bythe monetary policies
of the Federal Reserve. Changes in the discount rateon member bank borrowing, availability of borrowingat the “discount
window,”openmarketoperations,changesintheFedFundstargetinterestrate,theimpositionofchangesinreserve
requirements against member banks’ depositsand assets of foreign banking centersand the imposition of and changes in
reserve requirements against certainborrowings by banks andtheir affiliates aresome of theinstruments of monetarypolicy
available to the Federal Reserve. Thesemonetary policies are used invarying combinations to influence overall growth and
distributions of bank loans, investments and deposits, which may affect interest rates chargedon loans or paid on deposits.
The monetarypolicies ofthe FederalReserve havehad a significanteffect onthe operatingresults ofcommercial banks
and areexpected tocontinueto doso inthe future.TheFederal Reserve’spolicies areprimarilyinfluencedby thedual
mandateofpricestabilityandfullemployment,andtoalesserdegreebyshort-termandlong-termchangesinthe
international tradebalance andin thefiscal policiesof theU.S. government.Future changesin monetarypolicy andthe
effect of such changes on our business and earningsin the future cannot be predicted.
Future Legislation and Regulation
Congress may enact legislation from time to time that affectsthe regulation of the financial services industry,and state
legislatures may enact legislation from time to time affecting the regulation of financial institutions chartered by or operating
in those states.Federal and stateregulatory agenciesalso periodically proposeand adopt changesto their regulationsor
change the mannerin which existingregulations areapplied orinterpreted. Thesubstance orimpact of pendingor future
legislation or regulation, orthe application thereof, cannotbe predicted, although enactmentof proposed legislation hasin
the pastand mayin thefuture affectthe regulatorystructure underwhich weoperate andmay significantlyincrease our
costs, impede the efficiencyof our internal businessprocesses, require us toincrease our regulatorycapital or modify our
businessstrategy,orlimitourabilitytopursuebusinessopportunitiesinanefficientmanner.Ourbusiness,financial
condition, resultsof operationsor prospectsmay beadversely affected,perhaps materially,as aresult ofany suchnew
legislation or regulations.
Federal Securities Laws and the Sarbanes-Oxley Act
TheCompanyClassAcommonstockisregisteredwiththeSECunderSection12(b)oftheExchangeAct.The
Company is subject to theproxy and tender offerrules, insider trading reportingrequirements and restrictions,and certain
other requirements under the Exchange Act.
As a publiccompany,the Companyis also subjectto the Sarbanes-OxleyAct of 2002(“SOA”), whichis applicable to
all companies, both U.S. and non-U.S., that fileperiodic reports under the Exchange Act. The statedgoals of the SOA were
to increase corporate responsibility,to provide for enhanced penaltiesfor accounting and auditingimproprieties at publicly
traded companies and to protect investors byimproving the accuracy and reliability of corporatedisclosures pursuant to the
securities laws. TheSEC is responsiblefor establishing rulesto implement variousprovisions of theSOA. The SOAincludes
specificdisclosurerequirementsandcorporategovernancerules,requirestheSECandsecuritiesexchangestoadopt
extensive additional disclosure,corporate governance andother related rulesand mandates furtherstudies of certainissues
20USCB Financial Holdings, Inc.2025 10-K
by the SEC.The SOA representssignificant regulationof the accountingprofession andcorporate governancepractices,
such asthe relationshipbetween aboard ofdirectors andmanagement andbetween aboard ofdirectors andits committees.
As directed by theSOA, the Company’sprincipal executive officerand principal financialofficer are requiredto certify
that the Company’s quarterly and annualreports do not contain any untrue statementof a material fact. The rules adopted
by the SEC under the SOA haveseveral requirements, including having theseofficers certify that: they areresponsible for
establishing, maintaining and regularly evaluatingthe effectiveness of our internalcontrol over financial reporting; theyhave
made certain disclosures tothe Company’s auditors and theaudit committee of theBoard of Directors aboutthe Company’s
internal control over financial reporting;and they have included informationin the Company’s quarterlyand annual reports
about their evaluationand whether therehave been changesin theCompany’s internalcontrol overfinancial reportingor
in other factors that could materially affect the Company’sinternal control over financial reporting.
In March 2020, the SEC issueda final rule, effectiveApril 27, 2020, under theSOA – Amendments to the Accelerated
Filer andLarge AcceleratedFiler Definitions.As aresult ofthe amendments,certain lowrevenue and/orlow publicfloat
filers, while they remained obligated to provide areport by management assessing the effectiveness of their internal control
over financial reporting (“ICFR”), werenot required to providean attestation report fromtheir independent auditor assessing
the effectivenessof their ICFR.The Company meetsthe amended definitionof an acceleratedfiler as ofJanuary 1, 2026
and would normally be required to provide an attestation report from its independent auditor assessingthe effectiveness of
its ICFR. However, as long as it is an eligible emerging growth company, such auditor attestation requirement will not apply
to the Company.The Company will nolonger be an emerginggrowth company as ofDecember 31, 2026 andis expected
toberequiredtocomplywiththeICFRindependentauditorattestationreport.Inaddition,theBankremainssubjectto
independent auditor attestation required under FDIC regulationsset forth at 12 C.F.R.§363.3(b).
Available Information
Our websiteaddress iswww.uscentury.com.Our electronicfilings withthe FDIC(prior tothe bankholding company
reorganization) and the SEC (includingall Annual Reports onForm 10-K, Quarterly Reports onForm 10-Q, Current Reports
onForm8-K,andifapplicable,amendmentstothosereports)areavailablefreeofchargeonthewebsiteassoonas
reasonably practicable afterthey are electronicallyfiled with, or furnishedto, the FDICor SEC. The informationposted on
our website isnot incorporated intothis Annual Reporton Form 10-K.In addition, theFDIC and theSEC each maintaina
website that contains reports and other information thatis filed.
21USCB Financial Holdings, Inc.2025 10-K
Item 1A. Risk Factors
Thissectioncontainsadescriptionofthematerialriskanduncertaintiesidentifiedbymanagementthatcould,
individually or in combination, harm our business, results ofoperations, liquidity and financial condition. The risks described
below arenot allinclusive. Wemay faceother risksthat arenot presentlyknown, orthat wepresently deemimmaterial,
which may also adverselyaffect our business, resultsof operations, liquidity andfinancial condition. If anyof these known
or unknown risksor uncertainties actuallyoccur,our business, resultsof operations, liquidityand financial conditioncould
be materially and adversely affected.
Summary of Risk Factors
Our business is subject toa number of risks that couldcause actual results to differmaterially from those indicatedby
forward-looking statementsmade in thisForm 10-Kor presentedelsewhere fromtime to time.These risksare discussed
more fully in this Item 1A and include, without limitation,the following:
Risks Related to our Business and Operations
•
Ourbusinessoperationsandlendingactivitiesare concentratedinSouthFlorida,andwearemoresensitiveto
adverse changes in the local economy than our more geographicallydiversified competitors.
•
Our concentration of real estate loans in a limited marketarea exposes us to lending risks.
•
The small- to medium-sized businessesto which we lend may havefewer resources to weather adversebusiness
developments, which may impair a borrower's ability torepay a loan.
•
Inflationary pressures and rising prices may affectour results of operations and financial condition.
•
The soundness of other financial institutions could adverselyaffect us.
•
Insufficientliquiditycouldimpairourabilitytofundoperationsandjeopardizeourfinancialcondition,resultsof
operations, growth and prospects.
•
Significantchangestothesize,structure,powersandoperationsofthefederalgovernment,changestoU.S.
economic policies,anduncertaintiesregardingthe potentialfor thesechangesmay causeeconomicdisruptions
that could, in turn, adversely impact our business, resultsof operations and financial condition.
•
Our lending business is subject to credit risk, which couldlead to unexpected losses.
•
NaturaldisastersandsevereweathereventsinFloridacouldhaveamaterialadverseimpactonourbusiness,
financial condition and operations.
•
Our business is subject tointerest rate risk and variationsin interest rates maymaterially and adversely affectour
financial performance.
•
Our allowance for credit losses may not be sufficientto absorb potential losses in our loan portfolio.
•
Our commercial loan portfolio may expose us to increasedcredit risk.
•
The imposition of further limitsby the bank regulatorson commercial real estatelending 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 loansand selling the guaranteed portion thereof.
•
The SBA may not honor its guarantees if we do not originateloans in compliance with SBA guidelines.
•
Correspondent banking is an important part of our business,which creates increased BSA/AML risk.
•
We may not recover all amounts that are contractuallyowed to us by our borrowers.
22USCB Financial Holdings, Inc.2025 10-K
•
Non-performing assetstake significant timeto resolve andadversely affectour results ofoperations and financial
condition, and could result in further losses in the future.
•
We engage inlending secured byreal estate andmay foreclose onthe collateral andown the underlyingreal estate,
subjecting usto thecosts and potentialrisks associated withthe ownershipof realproperty andother risks, including
exposuretoenvironmentalliability,orconsumerprotectioninitiativesorchangesinstateorfederallawmay
substantially raise the cost of foreclosure or prevent usfrom foreclosing at all.
•
We are exposed to risk of environmental liability whenwe take title to property.
•
We are subject tocertain operational risks, including, butnot limited to, customer, employee orthird-party fraud and
data processing system failures and errors.
•
We face significantoperational risks becausethe nature of thefinancial services businessinvolves a high volume
of transactions.
•
We have several large depositorrelationships, the loss ofwhich could force us tofund our business through more
expensive and less stable sources.
•
Any change in the Bank's ability to gather brokered depositsmay adversely impact the Bank.
•
Oursecuritiesportfolioperformanceindifficultmarketconditionscouldhaveadverseeffectsonourresultsof
operations.
•
We maynot effectivelyexecute onour expansionstrategy,which mayadversely affectour abilityto maintainour
historical growth and earnings trends.
•
New lines of business, products, product enhancementsor services may subject us to additional risk.
•
Our businessneeds andfuture growthmay require usto raiseadditional capitaland thatcapital maynot beavailable
on terms acceptable to us or may be dilutive to existing shareholders.
•
We may grow through mergers oracquisitions, a strategy that maynot be successful or, if successful, may produce
risksinsuccessfullyintegratingandmanagingthemergedcompaniesoracquisitionsandmaydiluteour
shareholders.
•
The loss of one or moreof our key personnel, orour failure to attract andretain other highly qualifiedpersonnel in
the future, could harm our business.
•
Damage to our reputation could significantly harm ourbusinesses.
•
We facestrong competitionfrom financialservicescompaniesand othercompaniesthat offerbanking services,
which could materially and adversely affect ourbusiness.
•
We must respond to rapid technological changesto remain competitive.
•
We continuallyencounter technological change,and we mayhave fewer resourcesthan many ofour competitors
to invest in technological improvements.
•
Our current and future uses of artificial intelligence andother emerging technologies may create additional risks.
•
A
failure, interruption, or breach in thesecurity of our systems, or thoseof our contracted vendors, could disruptour
business, result in the disclosure of confidential information, damage our reputation, andcreate significant financial
and legal exposure.
•
We rely on other companies to provide key components of our business infrastructure and our operations could be
interrupted ifour third-partyservice providersexperience difficulty,terminate theirservicesor failto complywith
banking regulations.
•
Litigationandregulatoryactions,includingpossibleenforcementactions,couldsubjectustosignificantfines,
penalties, judgmentsor other requirementsresulting inincreased expenses orrestrictions onour businessactivities.
23USCB Financial Holdings, Inc.2025 10-K
•
Certain of ourdirectors mayhave conflicts ofinterest in determiningwhether to presentbusiness opportunitiesto
us or another entity with which they are, or may become, affiliated.
Risks Related to Our Tax, Accountingand Regulatory Compliance
•
Our ability torecognize the benefitsof our deferredtax assets isdependent on futurecash flows andtaxable income
and may be materially impaired upon significant changesin ownership of our common stock.
•
The accuracy ofour financial statementsand related disclosurescould be affectedif the judgments,assumptions
or estimates used in our critical accounting policies are inaccurate.
•
As a public company,we may not efficiently or effectivelycreate an effective internal control environment,and any
future failure to maintain effectiveinternal control over financial reportingcould impair the reliability ofour financial
statements, whichin turn couldharm ourbusiness, impairinvestor confidencein the accuracyand completeness
of ourfinancialreportsandour accessto thecapitalmarkets,causethepriceofour ClassA commonstockto
decline and subject us to regulatory penalties.
•
We operate in a highlyregulated environment, and thelaws and regulations thatgovern our operations, corporate
governance, executivecompensation andaccounting principles, orchanges in them,or our failureto comply with
them, could adversely affect us.
•
WefaceariskofnoncompliancewiththeBankSecrecyActandotheranti-moneylaunderingstatutesand
regulations and corresponding enforcement proceedings.
•
Significantly heightened regulatory andsupervisory expectations and scrutinyin the United States haveincreased
ourcompliance,regulatory,andotherrisksandcostsandsubjectustolegalandregulatoryexaminations,
investigations, and enforcement actions.
•
We are subject to capital adequacy requirementsand may become subject to more stringent capital requirements,
which could adversely affect our financial conditionand operations.
•
We are periodically subject to examination and scrutiny by a number ofbanking agencies and, depending upon the
findings and determinations of these agencies, we maybe required to make adjustments to ourbusiness that could
adversely affect us.
•
We aresubject tonumerous lawsand regulationsof certainregulatory agenciesdesigned toprotect consumers,
including theCommunity ReinvestmentAct, orCRA, andfair lendinglaws, andfailure tocomply withthese laws
could lead to a wide variety of sanctions.
•
Climate changeand relatedlegislative andregulatory initiativesmay materiallyaffect ourbusiness andresults of
operations.
Risks Related to Our Class A Common Stock
•
Our ability to pay dividends is subject to restrictions.
•
Ifwefailtopayinterestonorotherwisedefaultonoursubordinatednotes,wewillbeprohibitedfrompaying
dividends or distributions on our Class A common stock.
•
We mayissue additionaldebt securities,which wouldbe seniorto ourcommon stockand may causethe market
price of our Class A common stock to decline.
•
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 aresignificant restrictionsin ourArticles ofIncorporationthat restrictthe abilityto sellour capitalstockto
shareholders that would own 4.95% or more of our stock,excluding our Significant Investors.
24USCB Financial Holdings, Inc.2025 10-K
•
Becauseweareanemerginggrowthcompanyandbecausewehavedecidedtotakeadvantageofcertain
exemptions from various reportingand other requirements applicableto emerging growth companies,our Class A
common stock could be less attractive to investors.
•
Becausewehaveelectedtousetheextendedtransitionperiodforcomplyingwithneworrevisedaccounting
standards for an“emerging growth company,”our financial statementsmay not be comparableto companies that
comply with these accounting standards as of the publiccompany effective dates.
•
We have existing investors thatown a significant amount ofour common stock whose individualinterests may differ
from yours.
•
Provisions in our governing documents and Floridalaw may have an anti-takeover effectand there are substantial
regulatory limitations on changes of control of the Company.
Risks Related to our Business and Operations
Our businessoperations andlending activitiesare concentratedin SouthFlorida, andwe aremore sensitive
to adverse changes in the local economy than ourmore geographically diversified competitors.
Unlike many ofour larger competitorsthat maintain significantoperations locatedoutside of ourmarket area, mostof
our customers are concentrated in South Florida. In addition, we havea high concentration of loans secured by real estate
located inSouth Florida.Therefore, oursuccess dependsupon thegeneral economicconditions inSouth Florida,which
may differ from the economic conditions in other areasof the U.S. or the U.S. generally.
Our real estatecollateral providesan alternate sourceof repayment inthe eventof default bythe borrower;however,
the value of the collateral may decline during the time the credit is outstanding. The concentration of our loans in the South
Florida area subjects us torisk that a downturn in thelocal economy or recession inthis area could result ina decrease in
loan originations and increases in delinquencies and foreclosures, which would have a greater negative effect on us than if
our lending were more geographically diversified. Additionally, the COVID-19 pandemic accelerated the adoption of remote
workoptions,potentiallyinfluencingthelong-termperformanceofofficepropertieswithinourcommercialrealestate
portfolio. If weare required toliquidate our realestate collateral securinga loan duringa period ofreduced real estatevalues
to satisfy the debt,our earnings and capital couldbe adversely affected. Moreover, since a large portionof our loan portfolio
is secured by properties located in South Florida, the occurrence of a natural disaster, such as a hurricane, or a man-made
disaster could result ina decline in loan originations,a decline in thevalue or the destructionof mortgaged properties and
an increase in the risk of delinquencies, foreclosures or loss on loans originated by us. We may suffer further losses due to
the decline in thevalue of the propertiesunderlying our mortgage loans, whichwould have an adverseimpact on our results
of operations and financial condition.
A downturn in the local economy generally may lead to loan losses that are not offset by operations in other markets; it
may also reduce the abilityof our customers to growor maintain their deposits withus. For these reasons, anyregional or
local economicdownturnthataffectsSouth Florida,or existingor prospectiveborrowersordepositorsinSouth Florida,
could have a material adverse effect on our business,financial condition and results of operations.
In addition, there are continuing concerns relatedto, among other things, the increasinglevel of U.S. government debt
and fiscal actions that may be taken to address that debt, price fluctuationsof key natural resources, inflation, the potential
resurgence of economic and political tensions with China, the continuing war in Ukraine and the level of oil and natural gas
prices due to, amongother things, Russian supplydisruptions resulting fromthe ongoing Ukrainian conflict,each of which
may have adestabilizing effecton financial marketsand economic activity.Economic pressure onconsumers and overall
economicuncertaintymayresultinchangesinconsumerandbusinessspending,borrowingandsavinghabits.These
economic conditions and/or other negative developments in the domestic or international credit markets or economies may
significantly affect themarkets in whichwe dobusiness, the valueof ourloans and investments,and ourongoing operations,
costs and profitability.
25USCB Financial Holdings, Inc.2025 10-K
Our concentration of real estate loans in a limitedmarket area exposes us to lending risks.
At December 31, 2025, approximately$1.55 billion, or 71.1%, of ourtotal loan portfolio, was securedby real estate, in
particular commercialreal estate,most ofwhich islocated inour primarylending marketarea ofthe Miamimetropolitan
statisticalarea.Futuredeclinesintherealestatevaluesinourprimarylendingmarketandsurroundingmarketscould
significantly impairthe valueof theparticular realestate collateralsecuring ourloans andour abilityto sellthe collateral
uponforeclosureforanamountnecessarytosatisfytheborrower’sobligationstous.Thiscouldrequireincreasingour
allowance for creditlosses to addressthe decrease inthe value ofthe real estatesecuring our loans,which could havea
material adverse effect on our business, financialcondition, results of operations, and growth prospects.
Thesmall-tomedium-sizedbusinessestowhichwelendmayhavefewerresourcestoweatheradverse
business developments, which may impair a borrower'sability to repay a loan.
Wetargetourbusinessdevelopmentandmarketingstrategiesprimarilytoservethebankingandfinancialservices
needs of SMBs andthe owners and operators ofthose businesses. SMBs generally havefewer financial resources in terms
of capital orborrowing capacitythan larger entities,frequently havesmaller market sharesthan their competition,may be
morevulnerabletoeconomicdownturns,oftenneedsubstantialadditionalcapitaltoexpandorcompete,andmay
experience substantialvolatility inoperating results,any ofwhich, individuallyor inthe aggregate,may impairtheir ability
as a borrowerto repay a loan.In addition, the successof SMBs oftendepends on the managementskills, talents and efforts
of asmall groupof keypeople, andthe death,disability orresignation ofone ormore ofthese individualscould havean
adverse impact onthe business andits ability torepay its loan.If general economicconditions negatively impactthe markets
in which we operateor any of ourborrowers otherwise are affected by adversebusiness developments, our SMB borrowers
may be disproportionately affected and their ability torepay outstanding loans may be adversely affected, which couldhave
a material adverse effect on our business, financialcondition and results of operations.
Inflationary pressures and rising prices may affectour results of operations and financial condition.
The inflationaryoutlook inthe UnitedStates remainsuncertain. Asof December31, 2025,the consumerprice index
was 2.7% year-over-year. While this isa significant reduction to the rate of inflation experienced in 2023 and 2024,it is still
above the FRB’s targeted rate. The risks toour business from inflation depend on thedurability of the inflationary pressures
in our markets. Althoughthe FRB has reducedthe federal funds ratethree times in 2024,and further three timesin 2025,
no assurance can be given that it will continue to do so. At the end of January 2026,the FRB determined not to reduce the
federal funds rate. Theresurgence of elevatedlevels of inflation couldlead the FRB to ceasereducing its benchmarkrate
or potentiallystarting toincrease itagain whichcould, inturn, increasethe borrowingscosts ofour customers,making it
more difficult forthem to repay theirloans or other obligations.Elevated interest ratesmay be needed totame inflationary
price pressures, which could also push down asset prices,including collateral values, and weaken economic activity.
As inflation increases and market interestrates rise the value ofour investment securities, particularly those with longer
maturities,decreases,althoughthiseffectcanbelesspronouncedforfloating-rateinstruments.Inaddition,inflation
generally increases the cost of goods and services we use inour business operations, such as electricity and other utilities,
which increases ournoninterest expenses. Also,a prolonged periodof inflation couldcause wages andother of our costs
to increase, which could adverselyaffect our results ofoperations and financial condition.Furthermore, our customers are
also affected by inflationand the rising costs ofgoods and services usedin their households and businesses,which could
have a negative impact on their ability to repay their loans with us.In addition, SMBs may be impacted more during periods
ofhighinflation,astheyarenotabletoleverageeconomicsofscaletomitigatecostpressurescomparedtolarger
businesses. Consequently,the ability ofour businesscustomers to repaytheir loansmay deteriorate,and in somecases
this deterioration may occur quickly,which would adversely impact our results of operationsand financial condition.
The soundness of other financial institutions couldadversely affect us.
Ourabilitytoengageinroutinefundingandothertransactionscouldbeadverselyaffectedbytheactionsand
commercial soundnessof otherfinancial institutions.Financial servicescompanies areinterrelated asa resultof trading,
clearing,counterpartyorotherrelationships.Wehaveexposuretodifferentindustriesandcounterparties,andthrough
transactionswithcounterpartiesinthefinancialservicesindustry,includingbrokersanddealers,commercialbanks,
investmentbanks,andotherinstitutionalclients.Defaultsby,orevenrumorsorquestionsabout,oneormorefinancial
institutions or market utilities, orthe financial services industry generally, may lead to market-wide liquidityproblems, losses
of depositor,creditorandcounterpartyconfidenceandlossesor defaultsby usor byother institutions.Theselossesor
defaultscouldhaveamaterialadverseeffectonourbusiness,financialcondition,resultsofoperationsandgrowth
prospects. Additionally,if ourcompetitors wereextending crediton termswe foundto poseexcessive risks,or at interest
rates which we believeddid not warrant thecredit exposure, we may notbe able to maintainour business volume andcould
experience deteriorating financial performance.
26USCB Financial Holdings, Inc.2025 10-K
Insufficient liquidity couldimpair our ability tofund operations and jeopardizeour financial condition,results
of operations, growth and prospects.
Effective liquidity management is essential for the operation of our business. Although wehave implemented strategies
to maintainsufficientanddiversesources offundingto accommodateplanned,as wellas unanticipated,liquidityneeds
(including changesin assets, liabilities, andoff-balance sheet commitments under variouseconomic conditions), an inability
toraisefundsthroughdeposits,borrowings,thesaleofinvestmentsecuritiesandothersourcescouldhaveamaterial
adverse effecton ourliquidity. Our accessto fundingsources inamounts adequate tofinance ouractivities couldbe impaired
by factors that affect us specifically or the financial servicesindustry in general. Factors that could detrimentally impactour
access to liquidity sources include a decrease in the level of our business activity due to a market disruption, a decrease in
the borrowing capacity assigned toour pledged assets by oursecured creditors, competition from otherfinancial institutions
which could drive up thecosts of deposits or adverseregulatory action against us. Deterioration ineconomic conditions and
the loss ofconfidence in financialinstitutions may increaseour cost offunding and limitour access tosome of ourcustomary
sources of liquidity,including, but notlimited to, inter-bankborrowings and borrowingsfrom the FederalHome Loan Bank
of Atlanta, orthe FHLB, andthe Federal ReserveBank of Atlanta.Our ability toacquire depositsor borrowcould also be
impaired byfactors thatare notspecific tous, suchas asevere disruptionof thefinancial marketsor negativeviews and
expectationsabout theprospectsfor thefinancialservicesindustry generallyasa resultof conditionsfacedby banking
organizationsinthedomesticandinternationalcreditmarkets.Any declineinavailablefundingor costof liquiditycould
adversely impact our ability to originate loans, invest in securities, meet our expensesor fulfill obligations such as repaying
our borrowings ormeeting deposit withdrawal demands,any of whichcould, in turn,have an adverseeffect on ourbusiness,
financial condition, and results of operations.
Significant changesto the size,structure, powersand operations ofthe federal government,changes to U.S.
economic policies, anduncertainties regardingthe potential forthese changes maycause economicdisruptions
that could, in turn, adversely impact our business,results of operations and financial condition.
The current U.S. administrationhas implemented significant changes infederal priorities and hastaken steps to change
the operations,structure, andpolicy focusof variousfederal agencies,as wellas regulatorypriorities, policyapproaches
andinterpretationsofexistinglawsbythosefederalagencies.Forexample,recentexecutiveactionsandproposed
legislation has changed agency mandates, modified or reduced federal program funding, altered regulatory frameworks, or
adjusted the size andcomposition of thefederal workforce. Moreover,leadership transitions atkey federal agencieshave
impacted ormay impactrulemaking, supervision,enforcement, andexaminationpriorities acrossthe financialregulatory
landscape. These developments in the federal government mayhave varying effects on the banking and financial services
industry that are difficult to predict, which makes it difficult for us to anticipate and mitigate attendant risks. Compliance with
changing federal and regulatorypriorities could, amongother things, increasethe costs ofoperating our business,reduce
thedemandforourproductsandservices,impactourabilitytoachieveourbusinessgoals,andincreaseourlegal,
operational and reputational risks, any or all of which couldmaterially adversely affect our results of operations.
The current U.S. administration also has implemented rapid shifts in macroeconomic policies, such as those relating to
trade restrictions and tariffs, whichhave created significant uncertainties regardingU.S. economic growth, the potential for
recession, and concernsover an increase ininflation. Slow economicgrowth, economic contractionor recession, or shifts
in broader consumer and business trends would significantly impact our ability to originate loans, the ability of borrowers to
repay loans, and the value of the collateral securing loans.
Changes in U.S.immigration policies, particularly thosethat could leadto mass deportations, maydisrupt key industries
in our region such as construction andhospitality. These disruptions could exacerbate labor shortages, reduce productivity,
and cause financial instability among affectedbusinesses, impairing the repayment abilities of borrowersin these sectors.
Other political and economic events within the U.S., including a contentious domestic political environment, changes in
ordisagreementsoverU.S.monetarypolicyandactionsoftheFRB,disagreementsoverlong-termfederalbudgetand
deficitreductionplans,disagreementsoverorthreatsnottoincreasetheU.S.government'sborrowinglimit(or"debt
ceiling"),andriskoffurtherdowngradeoftheratingsofU.S.governmentdebtobligations,alsomaynegativelyimpact
financial markets and the U.S. economy.
Further,the perceptionof thepotential foradditional significantchanges infederal regulatoryor economicpolicy has
also increased uncertainty and may exacerbate declines in investor andconsumer confidence, which in turn may adversely
impact financialmarkets and the broader economy of the United States.
Regional businessand economicconditions area majordriver ofour resultsof operations.Difficultconditions inthe
regional’sbusinessandeconomicenvironment,includingthosecausedby thelackof stabilityandpredictabilityofU.S.
27USCB Financial Holdings, Inc.2025 10-K
policymaking,maymateriallyadverselyaffectouroperatingexpenses,thequalityofourassets,creditlosses,andthe
demand for our products and services.
Regional businessand economicconditions area majordriver ofour resultsof operations.Difficultconditions inthe
regionalbusinessandeconomicenvironment,includingthosecausedbythelackofstabilityandpredictabilityofU.S.
policymaking,maymateriallyadverselyaffectouroperatingexpenses,thequalityofourassets,creditlosses,andthe
demand for our products and services.
Our lending business is subject to credit risk, whichcould lead to unexpected losses.
Ourprimarybusinessinvolvesmakingloanstocustomers.Thebusinessoflendingisinherentlyriskybecausethe
principal orinterest onthe loanmay notbe repaidtimely orat allor thevalue ofany collateralsecuring theloan maybe
insufficient tocover ouroutstanding exposure.These risksmay be affectedby thestrength orweakness ofthe particular
borrower's business sectorand local, regional andnational market andeconomic conditions. Manyof our loans aremade
to SMBs that may beless able to withstandcompetitive, economic and financialpressures than larger borrowers.Our risk
management practices,such asmonitoring theconcentration ofour loanswithin specificindustries inwhich welend and
concentrations with individual borrowersor related borrowers, andour credit approvalpractices, may not adequatelyreduce
credit risk. In addition, there are risks inherent in making any loan, includingrisks relating to proper loan underwriting, risks
resulting fromchanges ineconomic andindustry conditions,risks inherentin dealingwith individualborrowers, including
the risk that a borrower may not provideinformation to us about their businessin a timely manner,may present inaccurate
or incomplete information to us, may lack a U.S. credit history,or may leave the U.S. without fulfilling their loan obligations,
leaving us withlittle recourseto them personally,and/or risksrelating to thevalue ofcollateral. Inorder tomanage credit
risk successfully,we must,among otherthings, maintaindisciplined andprudent underwritingstandards andensure that
our lenders follow those standards. The weakening ofthese standards for any reason, such as anattempt to attract higher
yielding loans,a lackof disciplineor diligenceby ouremployees inunderwriting andmonitoring loans,the inabilityof our
employees to adequately adaptpolicies and procedures tochanges in economic orany other conditions affecting borrowers
and the qualityof our loan portfolio,may result in loandefaults, foreclosures and additional charge-offs andmay necessitate
that we significantly increase our allowance for credit losses, each of which could adversely affect our net income. A failure
to effectivelymanagecredit riskassociatedwithour loanportfolio couldlead tounexpectedlosses andhave amaterial
adverse effect on our business, financial conditionand results of operations.
Natural disasters and severe weather events in Floridacould have a material adverse impact on ourbusiness,
financial condition and operations.
OuroperationsandourcustomerbaseareprimarilylocatedinSouthFlorida.Thisregionisvulnerabletonatural
disastersandsevereweathereventsoractsofGod,suchashurricanesortropicalstorms,whichcanhaveamaterial
adverse impacton ourloan portfolio,our overallbusiness, financialcondition andoperations, causewidespread property
damage and havethe potential tosignificantly depressthe local economiesin which weoperate. Future adverseweather
events inFlorida couldpotentially resultin extensiveand costlyproperty damageto businessesand residences,depress
the value of property serving as collateral for our loans, force the relocation of residents, andsignificantly disrupt economic
activity in the region.
We cannotpredict theextent ofdamage thatmay resultfrom suchadverse weatherevents, whichwill dependon a
variety of factors that are beyond our control,including, but not limited to, theseverity and duration of the event,the timing
and levelof governmentresponsiveness, thepace ofeconomic recoveryand availabilityof insuranceto coverlosses. In
addition,thenature,frequencyandseverityoftheseadverseweathereventsandothernaturaldisastersmaybe
exacerbated by climate change. If a significant adverse weather event or other natural disaster were to occur, it could have
a materially adverse impacton our financialcondition, results of operationsand our business, aswell as potentiallyincrease
our exposure to credit and liquidity risks.
Our business is subject tointerest rate risk, and variations ininterest rates may materially and adverselyaffect
our financial performance.
Changes in theinterest rate environmentmay reduce ourprofits. It isexpected that ourprimary source ofincome will
continue to be fromthe differential or"spread" between theinterest earned onloans, securities andother interest-earning
assets, and the interest paid ondeposits, borrowings and other interest-bearing liabilities. Netinterest spreads are affected,
in part, by thedifference between the maturities and repricing characteristics ofinterest-earning assets and interest-bearing
liabilities. Changesin marketinterest ratesgenerally affectloan volume,loan yields,funding sourcesand fundingcosts.
Ournet interestspreaddependsonmanyfactorsthatare partlyor completelyoutof ourcontrol,includingcompetition,
general economicconditions, andfederal economicmonetary andfiscal policies,and in particular,the FederalReserve's
policy determinations with respect to interest rates.
28USCB Financial Holdings, Inc.2025 10-K
During 2022 and 2023, the FederalOpen Market Committee (the “FOMC”)increased certain benchmark interestrates
toreducetherateofinflationtotheextentnecessarytoreduceinflationtothetargetratethattheFOMCbelievesis
appropriate.All of theseincreases were expressly madein response toinflationary pressures. However, In 2024, theFOMC
decreased such benchmarkrates three timesfollowed in 2025by three additionaldecreasestotaling 0.75%. However, there
can be noassurances asto any futureFOMC action,including whetherit continues todecrease the federalfunds rate or
implements increases. In late January 2026, theFOMC determined to not change the federalfunds rate at 3.50% to 3.75%.
While an increase ininterest rates may increaseour weighted averageloan yield, it mayadversely affect theability of
certain borrowerswith variable rateloans to paythe contractualinterest and principaldue to us.Following anincrease in
interest rates, ourability to maintaina positive netinterest spread isdependent on our abilityto increase ourloan offering
rates, replaceloans thatmature andrepay orthat prepaybefore maturitywith neworiginations athigher rates,minimize
increases onour depositrates, and maintainan acceptable leveland composition offunding. We cannotprovide assurances
that we will beable to increaseour loan offeringrates and continueto originate loansdue to the competitivelandscape in
which we operate. Additionally, we cannot provideassurances that we can minimizethe increases in ourdeposit rates while
maintaininganacceptablelevelofdeposits.Duetocompetitivepressuresin2023,weincreasedtheratespaidonour
interest-bearing deposits such thatour weighted average costof deposits increased from0.62% for 2022to 3.04% for2023.
However,in2024and2025,inlightoftheFOMC’sactionstodecreasethefederalfundsrateatotalofsixtimes,we
decreased therates paidon ourinterest-bearing deposits. Asa result,while theoverall costof fundsincreased, ascompared
to 2022 and 2023, it increased at a slowerpace when compared to the increasein the cost of deposits from 2022 to2023.
Finally,wecannotprovideanyassurancesthatwecanmaintainourcurrentlevelsofnoninterest-bearingdepositsas
customers continueseeking higher-yieldingproducts dueto the increasedinterest ratesbeing paid ondeposits currently,
as compared to rates in early 2024 and 2023 and 2022.
Accordingly,changesinlevelsofinterestratescouldmateriallyandadverselyaffectournetinterestmargin,asset
quality, loan originationvolume, average loan portfolio balance, liquidity,and overall profitability.
Our allowance for credit losses may not be sufficientto absorb potential losses in our loan portfolio.
Wemaintainanallowanceforcreditlossesthatrepresentsmanagement'sjudgmentofprobablelossesandrisks
inherent in our loan portfolio.The level of the allowancereflects management's continuingevaluation of general economic
conditions,presentpoliticalandregulatoryconditions,diversificationandseasoningoftheloanportfolio,historicloss
experience, identified creditproblems, delinquency levelsand adequacy ofcollateral. Determining theappropriate level of
ourallowanceforcreditlossesinvolvesadegreeofsubjectivejudgmentandrequiresmanagementtomakesignificant
estimates of and assumptions regarding current credit risksand future trends, all of which may undergo material changes.
Inaccuratemanagementassumptions,deteriorationofeconomicconditionsaffectingborrowers,newnegative
informationregardingexistingloans,identificationofadditionalproblemloansor deteriorationof existingproblemloans,
andotherfactors(includingthird-partyreviewandanalysis),bothwithinandoutsideofourcontrol,mayrequireusto
increase our allowance forcredit losses. In addition,our regulators, as anintegral part of theirperiodic examinations, review
our methodology for calculating, andthe adequacy of, our allowancefor credit losses and maydirect us to make additions
to the allowancebased on theirjudgments aboutinformation available tothem at thetime of theirexamination. Further,if
actual charge-offs in futureperiods exceed theamounts allocated toour allowance forcredit losses, wemay need additional
provisions for credit losses to restorethe adequacy of our allowance forcredit losses. Finally, the measure of our allowance
for credit losses depends on theadoption and interpretation of accountingstandards. The Financial AccountingStandards
Board, or FASB, issued a new creditimpairment model, the Current Expected Credit Loss,or CECL model, which became
applicabletousonJanuary1,2023.CECLrequiresfinancialinstitutionstoestimateanddevelopaprovisionforcredit
losses over the lifetime of the loan at origination, as opposed to reserving for incurred or probablelosses up to the balance
sheet date. Under the CECLmodel, expected credit deteriorationwill be reflected in theincome statement in theperiod of
origination or acquisition of a loan,with changes in expected credit lossesdue to further credit deterioration orimprovement
reflected in the periods in which the expectationchanges. As a result of the initialimplementation of CECL, we incurred as
of January 1, 2023a $1.1 million cumulativeeffect of theadoption of CECL. Moreover,the CECL model maycreate more
volatility in our level of allowance for creditlosses. If we are required to materiallyincrease 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 increasedcredit risk.
Commercial businessand realestate loansgenerally havea higherrisk ofloss becauseloan balancesare typically
largerthanresidentialrealestateandconsumerloansandrepaymentisusuallydependentoncashflowsfromthe
borrower’s business or theproperty securing the loan. Ourcommercial business loans are primarily madeto small business
29USCB Financial Holdings, Inc.2025 10-K
and middle market customers. These loans typicallyinvolve repayment that depends upon incomegenerated, or expected
to be generated, by the property securing the loanand/or by the cash flow generated by the business borrower andmay be
adversely affected by changes in the economy orlocal market conditions. These loans expose alender to the risk of having
to liquidate the collateral securingthese loans at times when theremay be significant fluctuation of commercialreal estate
values or to therisk of inadequate cash flows toservice the commercial loans. Unexpected deterioration inthe credit quality
of ourcommercial businessand/or realestate loanportfolio couldrequire usto increaseour allowancefor creditlosses,
which wouldreduce ourprofitability andcould havean adverseeffect onour business,financial condition,and resultsof
operations.
Commercial construction loans generallyhave a higher risk ofloss due to the assumptionsused to estimate the value
of propertyat completionand thecost ofthe project,including interest.It canbe difficultto accuratelyevaluate thetotal
funds requiredto completea project,and constructionlending ofteninvolves thedisbursementof substantialfunds 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. If the assumptions and estimates are inaccurate, the value of
completed propertymay fallbelow therelated loanamount. If weare forced toforeclose ona projectprior tocompletion,
we maybeunabletorecovertheentireunpaidportionof theloan,whichwouldleadtolosses.Inaddition,wemaybe
required to fund additional amounts to complete a project,incur taxes, maintenance and compliance costs fora foreclosed
property andmay haveto holdthe propertyfor anindeterminateperiod oftime, anyof whichcould adverselyaffectour
business, prospects, cash flow,liquidity, financialcondition and results of operations.
The imposition offurther limits by thebank regulators on commercialreal estate lending activitiescould curtail
our growth and adversely affect our earnings.
The FDIC, the Federal Reserveand the Office ofthe Comptroller of theCurrency have promulgated jointguidance on
sound risk management practices for financial institutions with concentrations in commercial real estate lending. Under this
guidance,a financialinstitutionthat,likeus,is activelyinvolvedincommercialrealestatelending shouldperforma risk
assessment to identifyconcentrations. Regulatoryguidance on concentrationsin commercial realestate lending provides
that a bank’s commercial real estate lending exposure couldreceive increased supervisory scrutiny where total commercial
real estateloans, includingloans securedby multi-familyresidentialproperties, owner-occupiedand nonowner-occupied
investor real estate, andconstruction and land loans, represent 300%or more of aninstitution’s total risk-based capital, and
the outstanding balance of the commercial real estate loan portfolio has increased by50% or more during the preceding 36
months.AtDecember31,2025,ourtotalcommercialinvestorrealestateloans,includingloanssecuredbyapartment
buildings, commercial real estate, and construction and land loans represented 370% of the Bank’s total risk-based capital.
However,the growthin thecommercial realestate portfoliodid notexceed 50%over thepreceding 36months butit has
exceeded the threshold in priorperiods. The particular focus ofthe guidance is on exposureto commercial real estate loans
that aredependent onthe cash flowfrom thereal estate heldas collateral andthat are likelyto beat greaterrisk toconditions
in the commercialreal estatemarket (as opposedto real estatecollateral held asa secondary sourceof repayment oras
an abundanceof caution).The purposeof theguidance isto guideinstitutions indeveloping riskmanagement practices
and capitallevels commensuratewith thelevel andnature ofreal estateconcentrations. Managementhas establisheda
commercialrealestatelendingframeworktomonitorspecificexposuresandlimitsbytypeswithinthecommercialreal
estateportfolioandtakesappropriateactions,asnecessary.Whilewebelievewehaveimplementedpoliciesand
procedures withrespectto ourcommercialreal estateloan portfolioconsistentwith thisguidance,the FDIC,the Bank’s
primary federal regulator,could require usto implement additionalpolicies and procedurespursuant to theirinterpretation
of the guidance that may resultin additional costs to us.In addition, If the FDIC wereto impose restrictions on theamount
of commercial real estate loans we can hold in our portfolio,our earnings would be adversely affected.
OurSBAlendingprogramis dependentuponthefederalgovernmentandour statusasa participantin the
SBA's PreferredLenders Program,and weface specificrisks associatedwith originatingSBA loansand selling
the guaranteed portion thereof.
WehavebeenapprovedbytheSBAtoparticipateintheSBA'sPreferredLendersProgram.AsanSBAPreferred
Lender,we enableour clientsto obtainSBA loanswithout beingsubject tothe potentiallylengthy SBAapproval process
necessaryforlendersthatarenotSBAPreferredLenders.TheSBAperiodicallyreviewsthelendingoperationsof
participatinglenderstoassess,amongotherthings,whetherthelenderexhibitsprudentriskmanagement.When
weaknesses are identified, the SBA may request corrective actionsor impose enforcement actions, including revocation of
the lender'sPreferred Lenderstatus. Ifwe loseour statusas anSBA PreferredLender,we maylose someor allof our
customers tolenders whoare SBAPreferred Lenders,which couldadversely affectour business,financial conditionand
results of operations.
We generally sell the guaranteedportion of our SBA 7(a) loansin the secondary market. These saleshave resulted in
both premium income for usat the time ofsale and created a streamof future servicing income. Therecan be no assurance
30USCB Financial Holdings, Inc.2025 10-K
that we will be able to continue originating these loans, that a secondary market for these loans will continue to exist or that
we will continue to realizepremiums upon the sale ofthe guaranteed portion ofthese loans. When we sellthe guaranteed
portion of our SBA 7(a) loans, we incur credit risk on the non-guaranteed portion of the loans, and if a customer defaults on
the non-guaranteed portion of a loan, we share any lossand recovery related to the loan pro-rata with the SBA.
The laws, regulations andstandard operating proceduresthat are applicable toSBA loan products maychange in the
future. Wecannot predictthe effectsof thesechanges onour businessand profitability.Because governmentregulation
greatlyaffectsthebusinessandfinancialresultsofallcommercialbanksandbankholdingcompanies,especiallyour
organization, changes in the laws, regulationsand procedures applicable to SBA loanscould adversely affect our abilityto
operate profitably.In addition, theaggregate amount ofSBA 7(a) and 504loan guarantees by theSBA must be approved
each fiscal year by the federalgovernment. We cannot predictthe amount of SBA 7(a)loan guarantees in any given fiscal
year. If the federal government were to reduce the amount of SBA loan guarantees, such reductioncould adversely impact
our SBA lendingprogram, including making andselling the guaranteed portionof fewer SBA7(a) and 504loans. In addition,
any default bythe U.S. governmenton its obligationsor any prolongedgovernment shutdowncould, amongother things,
impede our ability to originateSBA loans or sell such loansin the secondary market, whichcould materially and adversely
affect our business, financial condition and resultsof operations.
The SBA may not honor its guarantees if we do not originateloans in compliance with SBA guidelines
.
SBA lending programs typically guarantee 75% of theprincipal on an underlying loan. If theSBA establishes that a loss
on anSBA guaranteed loanis attributableto significanttechnical deficiencies inthe mannerin whichthe loanwas originated,
funded or serviced by us, the SBA may seek recovery of the principal loss related to thedeficiency from us notwithstanding
that aportion ofthe loanwas guaranteedby theSBA, whichcould adverselyaffectour business,financial conditionand
results of operations. While we follow the SBA's underwritingguidelines, our ability to do so depends onthe knowledge and
diligence of our employeesand the effectivenessof controls we haveestablished. If our employeesdo not follow theSBA
guidelines inoriginating loansand ifour loanreview andaudit programsfail toidentify andrectify suchfailures, theSBA
may reduce or, in some cases,refuse to honor its guarantee obligations and we may incurlosses as a result.
Correspondent banking is an important part of our business,which creates increased BSA/AML risk.
As ourbusinessmodelincludescorrespondentservicesto banksin LatinAmericaand theCaribbean,thesecross-
bordercorrespondentbankingrelationshipsposeuniquerisksbecausetheycreatesituationsinwhichaU.S.financial
institution will behandling funds froma financial institutionin Latin Americaand the Caribbeanwhose customers maynot
be transparent to us. Moreover, many foreign financial institutions, includingin Latin America and the Caribbean where our
correspondent bankingservicesare located,are notsubject tothe sameor similarregulatoryguidelinesas U.S.banks.
Accordingly,theseforeigninstitutionsmayposegreatermoneylaunderingrisktotheirrespectiveU.S.bank
correspondent(s). Becauseof thelarge amountof funds,multiple transactions,and ourpotential lackof familiaritywith a
foreign correspondent financial institution's customers, these customers maybe able to more easilyconceal the source and
useofillicitfunds.Consequently,wemayhaveahigherriskofnon-compliancewiththeBSAandotheranti-money
laundering (“AML”) rules and regulations including the AML Act dueto our correspondent banking relationships with foreign
financial institutions.Additionally,international privatebanking places additionalpressure on ourpolicies, proceduresand
systems for complying with the BSA, andAML statutes and regulations as well asthe recently enacted CTA.Our failure to
strictlyadheretothetermsandrequirementsofourOFAClicenseorourfailuretoadequatelymanageourBSA/AML
compliance risk in light of our correspondent banking relationshipwith foreign financial institutions and international private
banking could result in regulatory or other actions beingtaken against us, including the impositionof civil money penalties,
formal agreements andcease and desistorders. Furthermore, failureto meet regulatoryrequirements could requireus to
incuradditionalsignificantcostsinordertobringourBSA/AMLprocessesandproceduresintocompliance,negatively
impact our reputation, and have a material adverse effecton our business, financial condition and results of operations.
In recentyears, sanctionsthat theregulators haveimposed onbanks thathave notcomplied withall BSAand AML
requirements have beenespecially severe. Inorder to complywith regulations, guidelinesand examination proceduresin
this area, we havededicated significant resources to our BSA/AML processand procedures. If our policies, procedures and
systemsare deemeddeficient,we couldbesubjecttoliability,includingfinesandregulatoryactionssuchas additional
restrictions on our ability to paydividends and the necessity to obtainregulatory approvals to proceed withcertain aspects
of our business plan, such as acquisitions.
We may not recover all amounts that are contractuallyowed to us by our borrowers.
We aredependent onthe collectionof loanprincipal, interest,and feesto partiallyfund ouroperations. Ashortfall in
collections and proceeds may impair our ability to fundour operations or to repay our existing debt.
31USCB Financial Holdings, Inc.2025 10-K
Whenwelendfunds,committofundaloanorenterintoaletterofcreditorothercredit-relatedcontractwitha
counterparty, we incur credit risk. Thecredit quality of ourportfolio can have asignificant impact on ourearnings. We expect
to experiencecharge-offsand delinquencieson ourloansin thefuture.Ourcustomers'actualoperatingresultsmay be
worsethanourunderwritingcontemplatedwhenweoriginatedtheloans,andinthesecircumstances,wecouldincur
substantial impairment or lossof the value on theseloans. We mayfail to identify problemsbecause our customerdid not
report them in a timely manneror, even ifthe customer did report the problem,we may fail to address itquickly enough or
at all, or some loans,due to market circumstances,may not be ableto be fully rehabilitated.Even if customers provideus
with full and accurate disclosureof all material information concerningtheir businesses, we may misinterpretor incorrectly
analyze this information. Mistakesmay cause usto make loans thatwe otherwise would nothave made orto fund advances
that we otherwise would not have funded, eitherof which could result in losses onloans, or necessitate that we significantly
increase our allowance for loan andlease losses. As a result, we couldsuffer loan losses andhave non-performing loans,
which couldhavea materialadverseeffecton ournetearningsandresultsofoperationsand financialcondition,to the
extent the losses exceed our allowance for loan and leaselosses.
Someofourloansaresecuredbyliensonspecifiedcollateraloftheborrowersandwemaynotobtainorproperly
perfect our liens or the valueof the collateral securing anyparticular loan may not be sufficientto protect us from suffering
a partial or completeloss if the loanbecomes non-performing andwe proceed to forecloseon or repossessthe collateral.
Withrespecttoloansthatweoriginateforcondominiumorhomeowners'associations(“Associations”),theseloansare
primarily secured by and relyupon the cash flow receivedby the Associations frompayments received from theirproperty
owners, as wellas cash onhand. These Associationsrely upon paymentsreceived from theirproperty owners inorder to
performontheseloansandfortheloancollateral.Accordingly,ourabilitytorecoveramountsonnon-performingloans
made to Associationsis dependentupon the Associationhaving sufficientcash on handfor repayment ofthe loan and/or
havingtheabilitytoimposeassessmentsonitspropertyowners,someofwhommaynothavetheabilitytopaysuch
assessments. In such events, we could suffer loan losses,which could have a material adverse effect on ournet earnings,
allowance for loan and lease losses, financial condition,and results of operations.
Non-performingassetstakesignificanttimetoresolveandadverselyaffectourresultsofoperationsand
financial condition, and could result in further losses inthe future.
Non-performing assets adverselyaffect our netincome invarious ways. Wedo notrecord interest incomeon nonaccrual
loans or otherreal estateowned (“OREO”),thereby adverselyaffecting ournet incomeand returns onassets andequity,
increasing our loan administration costs and adverselyaffecting our efficiency ratio. Whenwe take collateral in foreclosure
and similar proceedings, we arerequired to mark the collateral toits then-fair market value, which mayresult in a loss. Non-
performing loansand OREOalso increase ourrisk profileand the levelof capitalour regulatorsbelieve is appropriatefor
us tomaintain inlight ofsuch risks.The resolutionof non-performingassets requiressignificant timecommitments from
managementandcanbedetrimentaltotheperformanceoftheirotherresponsibilities.Inaddition,therearelegalfees
associatedwiththeresolutionofproblemassetsaswellascarryingcostssuchastaxes,insurance,andmaintenance
related to OREO.If we experienceincreases in non-performingloans and non-performingassets, our netinterest income
may be negatively impacted andour loan administration costscould increase, each of which couldhave an adverse effect
on our net income and related ratios, such as returnon assets and equity.
We engage inlending secured byreal estate andmay foreclose onthe collateral andown the underlyingreal
estate,subjectingustothecostsandpotentialrisksassociatedwiththeownershipofrealproperty,including
exposuretoenvironmentalliability,orconsumerprotectioninitiativesorchangesinstateorfederallawmay
substantially raise the cost of foreclosure or preventus from foreclosing at all.
Since weoriginateloans securedby realestate, wemay haveto forecloseon thecollateralpropertyto recoverour
investment and may thereafter own and operate such property,in which case we would be exposed to the risks inherent in
theownershipofrealestate.Theamountthatwe,asamortgagee,mayrealizeafteraforeclosuredependsonfactors
outside of ourcontrol, including,but not limitedto, general orlocal economic conditions,environmental cleanupliabilities,
various assessmentsrelating tothe ownershipof the property,interest rates, realestate tax rates,operating expensesof
themortgagedproperties,ourabilitytoobtainandmaintainadequateoccupancyoftheproperties,zoninglaws,
governmental andregulatory rules,and natural disasters.Our inabilityto managethe amountof costsor sizeof the risks
associated withthe ownershipof realestate, orwrite-downs inthe valueof OREO,could havean adverseeffect onour
business, financial condition, and results of operations.
Additionally,consumer protection initiativesor changes in stateor federal law maysubstantially increase the timeand
expenses associatedwith theresidential foreclosureprocess orprevent usfrom foreclosingat all.A numberof statesin
recentyearshaveeitherconsideredoradoptedforeclosurereformlawsthatmakeitsubstantiallymoredifficultand
expensive forlenders toforeclose onresidential propertiesin default.Furthermore, federalregulators haveprosecuted a
number ofmortgage servicingcompanies foralleged consumerlaw violations.If newstate orfederal lawsor regulations
32USCB Financial Holdings, Inc.2025 10-K
are ultimately enactedthat significantly raisethe cost of residentialforeclosures or raiseoutright barriers, theycould have
an adverse effect on our business, financial condition,and results of operations.
We are exposed to risk of environmental liabilitywhen we take title to property.
Asignificantportionofourloanportfolioissecuredbyrealestate,andwecouldbecomesubjecttoenvironmental
liabilities with respectto one ormore of theseproperties, or withrespect to properties thatwe own inoperating our business.
During the ordinary course of business,we may foreclose on and take title toproperties securing defaulted loans. Indoing
so, there isa risk thathazardous or toxicsubstances couldbe found onthese properties. Ifhazardous conditionsor toxic
substances are foundon these properties,we may beliable for remediationcosts, as wellas for personalinjury and property
damage, civilfines andcriminal penaltiesregardlessof whenthe hazardousconditions ortoxic substancesfirst affected
any particular property.The costs associated with investigation orremediation activities could be substantial.In addition, if
we are the owner or former ownerof a contaminated site, we may besubject to common law claims bythird parties based
on damages andcosts resultingfrom environmentalcontamination emanatingfrom theproperty.If we becomesubject to
significant environmental liabilities, our business, financial conditionand results of operations could be adversely affected.
Wearesubjecttocertainoperationalrisks,including,butnotlimitedto,customer,employeeorthird-party
fraud and data processing system failures and errors.
Employee errors and employee orcustomer misconduct could subject usto financial losses orregulatory sanctions and
seriously harm our reputation. Misconduct by our employees could include hiding unauthorizedactivities from us, improper
or unauthorized activities on behalf of our customers or improper use of confidential information. It is notalways possible to
prevent employeeerrors andmisconduct, andthe precautions wetake toprevent anddetect thisactivity maynot beeffective
in all cases. Employee errors could also subject usto financial claims for negligence.
We haveimplemented asystem ofinternal controlsdesigned tomitigate operationalrisks, includingdata processing
system failuresand errorsand customeror employeefraud, aswell asinsurancecoveragedesigned toprotect usfrom
materiallossesassociatedwiththeserisks,includinglossesresultingfromanyassociatedbusinessinterruption.Ifour
internal controls failto prevent ordetect anoccurrence, or ifany resulting lossis notinsured or exceedsapplicable insurance
limits, it could adversely affect our business,prospects, cash flow, liquidity,financial condition and results of operations.
Wealsorelyontheintegrityandsecurityofavarietyofthirdpartyprocessors,payment,clearingandsettlement
systems, as wellas the variousparticipants involvedin these systems,many of whichhave no directrelationship with us.
Failurebytheseparticipantsortheirsystemstoprotectourcustomers'transactiondatamayputusatriskforpossible
losses dueto fraudor operationaldisruption. Atthe dateof thisAnnual ReportForm 10-K,there isno knowledge orindication
that customersensitive informationwas compromisedas aresult ofthird partiessystem vulnerabilities,but management
continues to monitor developments and vendor communications.
When we originate loans, we relyheavily upon information supplied by third parties,including the information contained
in creditapplications, propertyappraisals, titleinformation, equipmentpricing andvaluation andemployment andincome
documentation, in deciding which loans we will originate, as well as the terms of those loans. If any of the information upon
whichwerelyismisrepresented,eitherfraudulentlyorinadvertently,andthemisrepresentationisnotdetectedpriorto
funding,the valueoftheloan maybe significantlylowerthan expected,or wemayfund aloan thatwewould nothave
funded oron termsthat donot complywith ourgeneral underwritingstandards. Whethera misrepresentationis madeby
the applicant, the borrower,one of our employees or anotherthird party,we generally bear the risk ofloss associated with
the misrepresentation. A loansubject to a materialmisrepresentation is typicallyunsellable or subject torepurchase if itis
sold prior to detection of themisrepresentation. The sources ofthe misrepresentations are oftendifficult to locate, andit is
often difficultto recoveranyof theresulting monetarylosses wemay suffer,whichcouldadverselyaffectour business,
financial condition and results of operations.
Wefacesignificantoperationalrisksbecausethenatureofthefinancialservicesbusinessinvolvesahigh
volume of transactions
.
Weoperateindiversemarketsandrelyontheabilityofouremployeesandsystemstoprocessahighnumberof
transactions. Operationalrisk isthe risk ofloss resulting fromour operations,including but notlimited to, therisk of fraud
by employees orpersons outsidethe Company,the executionof unauthorizedtransactions byemployees, errorsrelating
to transactionprocessing and technology, breaches ofour internalcontrol systems andcompliance requirements. Insurance
coverage maynot be availablefor suchlosses, orwhere available, suchlosses mayexceed insurancelimits. Thisrisk of
lossalsoincludespotentiallegalactionsthatcouldariseasaresultofoperationaldeficienciesorasaresultofnon-
compliance with applicable regulatory standards,adverse business decisions or theirimplementation, or customer attrition
33USCB Financial Holdings, Inc.2025 10-K
due topotential adverse publicity. In theevent of abreakdown in ourinternal control systems,improper operation ofsystems
or improper employee actions, we could suffer financialloss, face regulatory action, and/or suffer damage toour reputation.
We have severallarge depositor relationships,the loss of whichcould force us tofund our businessthrough
more expensive and less stable sources.
Withdrawals of deposits by anyone of our largest depositorscould force us torely more heavily on more expensiveand
lessstablefundingsources.Consequently,theoccurrenceofsucheventcouldhaveamaterialadverseeffectonour
business, financial condition and results of operations. AtDecember 31, 2025, our top 10 depositors held 15.5% ofour total
deposit portfolio. As of December 31, 2025, 49% of our depositsare estimated to be FDIC-insured. At such date, ourpublic
funds are 7%of total depositsand are partiallycollateralized. Theestimated average accountsize of ourdeposit portfolio
is$113thousandasofDecember 31,2025.Inaddition,theBankwasconsidereda“wellcapitalized”institutionasof
December 31, 2025 and 2024.
Any change in the Bank's ability to gather brokereddeposits may adversely impact the Bank.
Failure to maintainthe Bank's status asa "well capitalized" institutioncould have an adverseeffect on us, andour ability
to fundour operations.The Bankuses brokereddeposits toassist infunding itsloan andother financingproducts. Asof
December31,2025,11%ofourtotaldepositsconsistedofbrokereddeposits.ShouldtheBankeverfailtobewell
capitalizedinthefutureasaresultofnotmeetingthewellcapitalizedrequirementsortheimpositionofanindividual
minimum capitalrequirementor similarformalrequirement,then,theBank wouldbeprohibited,absentwaiverfrom the
FDIC, from utilizing brokered deposits(i.e., no insured depository institutionthat is deemed to beless than "well capitalized"
may accept, renew orrollover brokered deposits absent awaiver from theFDIC). In such event,such a resultcould produce
material adverseconsequences forthe Bank withrespect toliquidity and couldalso havematerial adverseeffects onour
financial conditionand resultsof operations.Further,depending onthe Bank'scondition inthe futureand itsreliance on
these depositsas asourceof funding,theFDIC couldincrease thesurchargeonour brokereddeposits.Ifwe areever
requiredtopayhighersurchargeassessmentswithrespecttothesedeposits,suchpaymentscouldbematerialand
therefore could havea material adverseeffect on ourfinancial condition andresults of operations.In addition, changesto
FDIC regulations regarding brokered depositsor interpretations of suchregulations by federal banking agencies couldhave
an adverse impact on the Bank’s ability to acceptbrokered deposits. Additionally,brokered deposits are highly sensitive to
changes in interest rates and, accordingly,can be a more volatile source of funding.Use of brokered deposits involves the
risk that growth supported by such deposits would be halted,or the Bank’s liquidity adversely impacted, if therates offered
by theBank wereless thanthose offeredby otherinstitutions seekingsuch deposits,or ifdepositors wereto perceivea
decline in the Bank’s safety and soundness, or both.
Our securities portfolio performance in difficult market conditions could have adverse effects onour results of
operations
.
Unrealized losses oninvestment securities result fromchanges in creditspreads and liquidityissues in themarketplace,
alongwithchangesinthecreditprofileofindividualsecuritiesissuers.UnderGAAP,wearerequiredtoreviewour
investmentportfolioperiodicallyforthepresenceof creditlossesofour securities,takinginto considerationcurrentand
futuremarketconditions,theextentandnatureofchangesinfairvalue,issuerratingchangesandtrends,volatilityof
earnings, currentanalysts’ evaluations,our abilityand intentto holdinvestments untila recoveryof fairvalue, aswell as
other factors. Adverse developments with respect to one or more ofthe foregoing factors may require us to deem particular
securities to be impaired, with the credit-related portion ofthe reduction in the value recognized as acharge to our earnings
through an allowance. Subsequent valuations,in light of factors prevailing at thattime, may result in significant changesin
the values of these securities in future periods. Anyof these factors could require us torecognize further impairments in the
value of our securities portfolio, which may have an adverseeffect on our results of operations in future periods.
We may noteffectively executeon our expansionstrategy, whichmay adversely affectour ability tomaintain
our historical growth and earnings trends.
Ourprimaryexpansionstrategyfocusesonorganicgrowth,supplementedbypotentialacquisitionsoffinancial
institutions andbanking teams;however,we maynot beable tosuccessfully executeon theseaspects ofour expansion
strategy,whichmaycauseourfuturegrowthratetodeclinebelowourrecenthistoricallevels,ormaypreventusfrom
growing atall. Morespecifically,we maynot be ableto generatesufficient newloans anddeposits withinacceptable risk
andexpensetolerancesorobtainthepersonnelorfundingnecessaryforadditionalgrowth.Variousfactors,suchas
economic conditionsand competition withother financialinstitutions, may impedeor restrict thegrowth of ouroperations.
Further, we may be unable to attractand retain experienced bankers, which could adverselyaffect our growth. The success
of our strategy also depends on our ability to manage our growth effectively,which in turn depends on a number of factors,
includingourabilitytoadaptourcredit,operational,technology,riskmanagement,internalcontrolsandgovernance
34USCB Financial Holdings, Inc.2025 10-K
infrastructure to accommodate expanded operations.Even if we are successful in continuing our growth,such growth may
not offer the samelevels of potential profitability,and we may notbe successful incontrolling costs and maintainingasset
quality in theface of thatgrowth. Accordingly,our inabilityto maintain growthor toeffectively managegrowth couldhave
an adverse effect on our business, financial conditionand results of operations.
New lines of business, products, product enhancementsor services may subject us to additional risk.
From time to time, wemay implement new linesof business or offernew products and productenhancements as well
as newservices withinour existinglines ofbusiness. Thereare substantialrisks anduncertainties associatedwith these
efforts. Indeveloping, implementingor marketing newlines of business,products, productenhancements orservices, we
may invest significant time andresources. We may underestimate the appropriate levelof resources or expertisenecessary
tomakenewlinesofbusinessorproductssuccessfulortorealizetheirexpectedbenefits.Wemaynotachievethe
milestonessetininitialtimetablesforthedevelopmentandintroductionofnewlinesofbusiness,products,product
enhancements or services, and priceand profitability targets may notprove feasible. External factors, suchas compliance
with regulations, competitivealternatives and shiftingmarket preferences, mayalso impact theultimate implementation of
a new line of business or offerings of new products, productenhancements or services. Any new line of business,product,
product enhancement or service could have a significant impact on the effectiveness of our system of internal controls. We
may alsodecide todiscontinuebusinessesor products,due tolackof customeracceptanceor unprofitability.Failure to
successfully develop and implement new lines of business or offerings of new products, product enhancements or services
could have an adverse effect on our business, financial condition and resultsof operations and could subject us to new and
unanticipated operational, credit, regulatory and reputational risks,among other risks.
Our businessneeds andfuture growthmay requireus toraise additionalcapital andthat capitalmay notbe
available on terms acceptable to us or may be dilutive toexisting shareholders.
We believe that wehave sufficient capitalto meet our capitalneeds for our currentgrowth plans. 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
resourcestomeetourlonger-termgrowthplans,and/orifthequalityofourassetsorearningsweretodeteriorate
significantly.In addition, weare required by federalregulatory authorities tomaintain adequate levelsof capital to support
our operations.
Our abilityto raisecapital willdepend on,among otherthings, conditionsin thecapital markets,which areoutside of
our control, and our financial performance. Accordingly,we cannot provide assurance that such capital willbe available on
terms acceptable to us or at all. Any occurrencethat limits our access to capital may adverselyaffect our capital costs and
our ability to raise capital. Further, if we need to raise capital in the future, we may have to do so when many other financial
institutions are alsoseeking toraise capital andwould then haveto compete withthose institutions forinvestors. Any inability
to raise capital on acceptable terms when needed may cause us toeither issue additional shares of common stock or other
securities on less thandesirable terms orreduce our rate ofgrowth until market conditionsbecome more favorable. Ifany
of suchevents occur, they couldhave a materialadverse effect onour business, financialcondition and resultsof operations
and could be dilutive to both tangible book value and ourshare price.
Federal law requires that a holding company act as a source of financial and managerial strength to its subsidiary bank
and tocommitresourcesto supportsuch subsidiarybank. Underthe “sourceof strength”doctrine, theFederal Reserve
mayrequireaholdingcompanytomakecapitalinjectionsintoatroubledsubsidiarybankandmaychargetheholding
company withengagingin unsafeand unsoundpracticesfor failureto commitresourcesto asubsidiarybank. Acapital
injection may be requiredat times when theholding company maynot have the resourcesto provide it andtherefore may
be required to attempt toborrow the funds or raisecapital. Thus, any borrowing that mustbe done by the Companyto make
a requiredcapital injection becomesmore difficult andexpensive andcould havean adverseeffect on ourbusiness, financial
condition and results of operations.Moreover, it is possible that we will beunable to borrow funds orotherwise raise capital
at atime whenit isneeded. Inaddition, aninability toraise capitalwhen neededmay subjectus toincreased regulatory
supervision andtheimposition ofrestrictionson ourgrowthand business.These restrictionscouldnegativelyaffectour
abilitytooperateorfurtherexpandouroperationsthroughloangrowth,acquisitionsortheestablishmentofadditional
branches. These restrictions may alsoresult in increases in operatingexpenses and reductions in revenuesthat could have
a material adverse effect on our financial condition,results of operations and our share price.
We maygrow throughmergers oracquisitions,a strategythat maynot besuccessful or,if successful,may
produce risks in successfully integrating and managing the merged companies or acquisitions and may dilute our
shareholders.
Aspartofourgrowthstrategy,wemaypursuemergersandacquisitionsofbanksandnon-bankfinancialservices
companies within or outside our principal market areas that fit within the mission-driven values of our franchise and that we
35USCB Financial Holdings, Inc.2025 10-K
believe support our business and make financial and strategicsense. We may have difficulty identifying suitable acquisition
candidates or executing on acquisitions that we pursue, and we maynot realize the anticipated benefits of any transactions
we complete. Additionally,for any opportunisticacquisition we wereto consider,we expect toface significantcompetition
fromnumerousotherfinancialservicesinstitutions,manyofwhichwillhavegreaterfinancialresourcesthanwedo.
Accordingly,attractiveopportunisticacquisitionsmaynot beavailable tous. Therecan beno assurancethat wewillbe
successful in identifying or completing any future acquisitions.
Mergers and acquisitions involve numerous risks, anyof which could harm our business, including:
•
the possibility that expected benefitsmay not materialize in thetime frame expected or atall, or may be morecostly
to achieve, or that the acquired business will not performto our expectations;
•
time,expenseanddifficultiesinintegratingtheoperations,management,productsandservices,technologies,
existing contracts, accounting processesand personnel of the targetand realizing the anticipated synergiesof the
combined businesses;
•
incurring thetime andexpense associated withidentifying andevaluating potential acquisitionsand mergerpartners
and negotiating potential transactions, resulting in management’s attention being diverted from the operation of our
existing business;
•
difficulties in supporting and transitioning customersof the target and disruption of our ongoing bankingbusiness;
•
the price wepay or otherresources that wedevote may exceedthe value werealize, or thevalue we couldhave
realized if we had allocated the purchase considerationor other resources to another opportunity;
•
entering new markets or areas in which we have limited orno experience;
•
the possibility that our culture is disrupted as a result ofan acquisition;
•
potential loss of key personnel and customers from eitherour business or the target’s business;
•
assumption of unanticipated problems, claims or other liabilitiesof the acquired business;
•
an inability to realize expected synergies or returns oninvestment;
•
the possibility of regulatory approval for the acquisition being delayed,impeded, restrictively conditioned, including
the requirement to divestvarious activities, or denieddue to existing ornew regulatory issues surroundingus, the
target institution or the proposed combined entity andthe possibility that any such issues associated withthe target
institution, of whichwe may ormay not beaware at thetime of theacquisition, could adversely impactthe combined
entity after completion of the acquisition;
•
the possibility that the acquisition may not be timely completed,if at all;
•
the need to raise capital; and
•
inability to generate sufficient revenue to offsetacquisition costs.
Any acquisition activities we engage in could require us to use a substantial amount of cash, other liquid assets, and/or
incur debt. Also, ifwe finance acquisitions by issuing equity securities,our existing shareholders’ ownership may bediluted,
whichcouldnegativelyaffectthemarketpriceofourClassAcommonstock.Additionally,ifthegoodwillrecordedin
connection with our potential future acquisitions were determined to be impaired, then we would be required to recognize a
charge against our earnings, whichcould materially and adversely affect ourresults of operations during theperiod in which
the impairment was recognized. Acquisitionsmay also involve the paymentof a premium over bookand market values and,
therefore, somedilution ofour tangiblebook valueand netincome percommon sharemay occurin connectionwith any
future transaction.
As a result, wemay not achieve theanticipated benefits ofany such merger oracquisition, and wemay incur costsin
excessofwhatweanticipate.Ourfailuretosuccessfullyevaluateandexecutemergers,acquisitionsorinvestmentsor
otherwise adequately address and managethe risks associated withsuch transactions could havea material adverse effect
on our business, results of operations and financial condition,including short-term and long-term liquidity.
The loss ofone or moreof our keypersonnel, or ourfailure to attractand retain otherhighly qualified personnel
in the future, could harm our business.
Our future success will, to some extent, depend on the continued service of our directors, executive officers and senior
managementteam.Thelossoftheservicesofanyoftheseindividualscouldhaveasignificantadverseeffectonour
business. In particular,we believe that retainingLuis de la Aguilera,our Chairman, Presidentand Chief ExecutiveOfficer,
RobertAnderson,ourChiefFinancialOfficer,NicholasBustle,ourChiefLendingOfficer,andWilliamTurner,ourChief
CreditOfficer,isimportanttoourcontinuingsuccess.Althoughwehaveenteredintoemploymentorchange-in-control
agreementswithcertainmembersofourexecutiveandseniormanagementteam,includingMessrs.delaAguilera,
Anderson, Bustleand Turner,no assurancecan begiven thatthese individualswill continueto beemployed byus. The
loss of any of theseindividuals could negatively affectour ability to achieve ourgrowth strategy and couldhave a material
adverse effect on our business and results of operations.
36USCB Financial Holdings, Inc.2025 10-K
We also need to continueto attract and retain other seniormanagement and to recruit qualifiedindividuals to succeed
existingkeypersonneltoensurethe continuedgrowthand successfuloperationof ourbusiness.Wemaybe unableto
attract orretain qualifiedmanagementand otherkeypersonnelin thefuture dueto theintense competitionfor qualified
personnelamongcompaniesinthefinancialservicesbusinessandrelatedbusinesses.Thelossoftheservicesof any
senior management personnel, or the inability to recruitand retain qualified personnel in the future, couldhave an adverse
effect on our business, results ofoperations, financial condition and prospects.Additionally,to attract and retain personnel
with appropriate skills andknowledge to support ourbusiness, we may offera variety of benefits, includingequity awards,
which may reduce our earnings or adversely affect ourbusiness, results of operations, financial condition or prospects.
Damage to our reputation could significantly harmour businesses.
Our ability to attractand retain customers andhighly-skilled management and employees is impactedby our reputation.
A negative publicopinion of usand our businesscan result fromany number ofactivities, including ourlending practices,
corporategovernanceandregulatorycompliance,acquisitions,customercomplaintsandactionstakenbycommunity
organizations inresponse tothese activities.Furthermore, negativepublicity regardingus asan employercould havean
adverseimpact onour reputation,especiallywith respecttomatters ofdiversity,pay equityand workplaceharassment.
Significantharmtoourreputationcouldalsoariseasaresultofregulatoryorgovernmentalactions,litigationandthe
activities of our customers, otherparticipants in the financial servicesindustry or our contractual counterparties, suchas our
service providersand vendors.The potentialharmis heightenedgivenincreased attentionto howcorporationsaddress
environmental, socialand governanceissues. Inaddition, acybersecurity eventaffecting usor our customers'data could
have a negativeimpact on ourreputation andcustomer confidencein us andour cybersecuritypractices. Damageto our
reputation could alsoadversely affectour credit ratingsand access tothe capital markets.Additionally,whereas negative
public opinion once wasprimarily driven by adversenews coverage in traditionalmedia, the widespread useof social media
platforms byvirtually everysegment ofsociety facilitatesthe rapiddisseminationof informationor misinformation,which
magnifies the potential harm to our reputation.
Wefacestrongcompetitionfromfinancialservicescompaniesandothercompaniesthatofferbanking
services, which could materially and adversely affectour business.
The financialservices industry hasbecome evenmore competitive asa resultof legislative,regulatory and technological
changes andcontinuedbanking consolidation,whichmay increaseas aresult ofcurrent economic,market andpolitical
conditions. Weface substantialcompetitionin allphasesof ouroperationsfroma varietyof competitors,including local
banks,regionalbanks,communitybanksand,morerecently,financialtechnology,or"fintech"companies.Manyofour
competitors offer the same banking services thatwe offer and our success depends onour ability to adapt ourproducts and
servicestoevolvingindustrystandardsandcustomerrequirements.Increasedcompetitioninourmarketmayresultin
reduced newloan andlease productionand/or decreaseddeposit balancesor lessfavorable termson loansand leases
and/or depositaccounts. We alsoface competitionfrom manyother typesof financialinstitutions, includingwithout limitation,
non-bankspecialtylenders,insurancecompanies,privateinvestmentfunds,investmentbanks,andotherfinancial
intermediaries. Should competition inthe financial services industryintensify, our ability to market ourproducts and services
may be adversely affected. If we are unable to attract and retain banking customers, we may beunable to grow or maintain
the levelsof ourloans anddeposits andour resultsof operationsand financialcondition maybe adverselyaffected asa
result. Ultimately, wemay not be able to compete successfully against currentand future competitors.
We must respond to rapid technological changesto remain competitive.
We will have to continue to respondto future technological changes, which are occurring at arapid pace in the financial
services industryin orderto remaincompetitive. Weexpect thatnew technologiesand businessprocesses applicableto
the banking industry willcontinue to emerge, andthese new technologies andbusiness processes may bebetter than those
we currentlyuse. Becausethe paceof technologicalchange ishigh andour industryis intenselycompetitive,our future
success will depend, inpart, upon our abilityto address the needsof our customers byusing technology to provideproducts
andservicesthatwillsatisfycustomerdemandsforconvenience,aswellastocreateadditionalefficienciesinour
operations. We maynot be able toimplement new technology-drivenproducts and services effectivelyor be successful in
marketingtheseproductsandservicestoourcustomers.Failuretokeeppacesuccessfullywithtechnologicalchange
affecting thefinancial servicesindustry couldharm ourability to competeeffectively andcould havean adverseeffect on
our business, financial condition and results ofoperations. As these technologies improve in the future,we may be required
to make significant capital expenditures in order to remain competitive, which may increase our overall expenses and have
an adverse effect on our business, financial conditionand results of operations.
37USCB Financial Holdings, Inc.2025 10-K
Wecontinuallyencountertechnologicalchange,andwemayhavefewerresourcesthanmanyofour
competitors to invest in technological improvements.
The financialservicesindustrycontinues toundergorapidtechnologicalchangeswithfrequentintroductionsof new
technology-driven productsand services,including recentand rapiddevelopments inartificial intelligence(“AI”) including
agentic AI. The effective use of technology increases efficiencyand enables financial institutions to better serve customers
and to reducecosts. Our futuresuccess will depend,in part, uponour ability toaddress the needsof our clientsby using
technology to provide products and services that will satisfy client demands for convenience, as well as to create additional
efficienciesinouroperations,includingthroughAIcapabilities.Manynationalvendorsprovideturn-keyservicesto
community banks, suchas internet bankingand remote depositcapture that allowsmaller banks tocompete with institutions
thathavesubstantiallygreaterresourcestoinvestintechnologicalimprovements.Wemaynotbeable,however,to
effectivelyimplementnewtechnology-drivenproductsandservicesorbesuccessfulinmarketingtheseproductsand
services to our customers.
Ourcurrentandfutureuses ofartificialintelligenceandotheremergingtechnologiesmaycreateadditional
risks.
The increasing adoption of AI in financial servicespresents significant opportunities but also introduces a range ofrisks
thatcouldimpactouroperations,regulatorycompliance,andcustomertrust.AIintroducesmodelrisk,whereflawed
algorithms orbiased data couldresult in inaccuratecredit decisions,compliance violations,or discriminatoryoutcomes in
lending or customerservice. Cybersecuritythreats, suchas data breaches,adversarial attacks,and data poisoning,pose
significant challenges,particularly as thesesystems handlelarge volumes ofsensitive customerinformation. Additionally,
the opaque nature of some AI models, often referred to as "black-box" systems, raises regulatory compliance concerns, as
regulatorsincreasinglyrequiretransparencyandexplainabilityinAI-drivendecision-making.Thelegalandregulatory
environment for AI is uncertain and rapidly evolving, potentiallyincreasing compliance cost and risk of non-compliance.
Operational risks also arise from potential system failures, over-relianceon AI, and integration challenges with existing
infrastructure. Disruptions in AI systems could impact critical functions such as fraud detection, transaction monitoring, and
customer support.Ethical and reputationalrisks, includingunintended consequencesor perceived unfairnessin AI-driven
decisions,mayerodecustomertrustandexposeustoregulatoryscrutiny.Mitigatingtheserisksrequiresarobust
governanceframework,regularlytestingandauditingofAImodels,andstronghumanoversight.Investmentsin
cybersecurity, dataprivacy protections, and employee training are criticalto managing these risks.
Afailure,interruption,orbreachinthesecurityofoursystems,orthoseofourcontractedvendors,could
disruptourbusiness,resultinthedisclosureofconfidentialinformation,damageourreputation,andcreate
significant financial and legal exposure.
Although wedevote significantresources to maintainand regularly updateour systems andprocesses that aredesigned
toprotectthesecurityofourcomputersystems,software,networksandothertechnologyassets,aswellasthe
confidentiality,integrity and availabilityof information belongingto us andour customers,there is noassurance thatall of
oursecuritymeasureswillprovideabsolutesecurity.Manyfinancialinstitutions,includingus,havebeensubjectedto
attempts to infiltrate the security of their websites or other systems, some involving sophisticatedtargeted attacks intended
to obtainunauthorized accessto confidentialinformation, destroydata, disruptor degradeservice, sabotagesystems or
cause other damage, including through the introduction ofcomputer viruses or malware, cyber-attacks and other means. At
this point,although thereis noknowledge orindication that wehave experienced amaterial cyber-incident orsecurity breach
that has been successful in compromising ourdata or systems to date, we cannever be certain that all of oursystems are
entirely free from vulnerability to breaches of security orother technological difficulties or failures.
Despite efforts toensure the integrityand security ofour systems, itis possible thatwe may notbe able toanticipate,
detect or recognizethreats to oursystems or toimplement effectivepreventive measuresagainst all effortsto breach our
security inside or outside our business, especially because the techniques used to attack our systemschange frequently or
arenotrecognizeduntillaunched,andbecausecyber-attackscanoriginatefromawidevarietyofsources,including
individuals or groups who are associated withexternal service providers or who are ormay be involved in organized crime
or linkedto terroristorganizations orhostile foreigngovernments. Thoseparties mayalso attemptto fraudulentlyinduce
employees, customers, third-party service providers or other users of our systems to disclose sensitive information in order
to gain accessto our data orthat of our customersor clients. Similarto other companies,our risks and exposuresrelated
to cybersecurity attacks have increased as a result of the related increased reliance on remote working and the increase in
digitaloperations.Suchrisksandexposuresareexpectedtoremainhighfortheforeseeablefutureduetotherapidly
evolving natureand sophistication ofthese threatsand theexpanding useof technology, as ourweb-based product offerings
grow andwe expandinternal usageof web-basedapplications.Cybersecurityrisk andother securitymatters arealso a
major focus of regulatory authorities.
38USCB Financial Holdings, Inc.2025 10-K
A successfulpenetrationorcircumventionof thesecurityof oursystems,including thoseof ourthird-partyvendors,
couldcauseseriousnegativeconsequences,includingsignificantdisruptionofouroperations,misappropriationof
confidential information,or damageto computersor systems,and mayresult in violationsof applicableprivacy andother
laws, financial loss,loss of confidencein our security measures,customer dissatisfaction, increasedinsurance 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.
Werelyonothercompaniestoprovidekeycomponentsofourbusinessinfrastructureandouroperations
couldbeinterruptedifourthird-partyserviceprovidersexperiencedifficulty,terminatetheirservicesorfailto
comply with banking regulations.
Third partiesprovide keycomponents ofour businessoperations suchas dataprocessing, recordingand monitoring
transactions,onlinebankinginterfacesand services,Internetconnectionsandnetworkaccess.Whilewehaveselected
these third-partyvendors carefully,performing upfrontdue diligenceand ongoingmonitoring activities,we donot control
their actions. Any problems caused by these third parties, including those resulting from disruptions in services provided by
avendor(includingasaresultofacyber-attack,otherinformationsecurityeventoranaturaldisaster),financialor
operational difficultiesfor the vendor,issues at third-partyvendors to ourvendors, failure ofa vendor tohandle current or
higher volumes, failure of a vendor to provide services forany reason, poor performance of services, failure to complywith
applicable lawsand regulations,or fraudor misconducton thepart ofemployees ofany ofour vendors,could adversely
affect our abilityto deliver productsand services toour customers, ourreputation and ourability to conductour business,
which couldadversely affectour business,prospects, cashflow,liquidity,financial conditionand resultsof operations.In
certainsituations,replacingthesethird-partyvendorscouldalsocreatesignificantdelay,expense,andoperational
difficulties, whichcould alsoadversely affectour business.Accordingly,use ofsuch thirdparties createsan unavoidable
and inherentrisk toour businessoperations. Suchrisk isgenerally expectedto remainelevated asmany ofour vendors
have alsobeen, andmayfurther be,affectedby increasedrelianceon remoteworkenvironments,marketvolatilityand
other factorsthat increasetheir risksof businessdisruption orthat mayotherwise affecttheir abilityto performunder the
terms of any agreements with us or provide essential services.
Our operations could be interrupted ormaterially impacted if any of ourthird-party service providers fail to complywith
banking regulationsand otherapplicable laws.The FederalReserve, FDIC,FOFR, andother regulatorsexpect financial
institutionstoberesponsibleforallaspectsoftheirperformance,includingaspectsthattheydelegatetothirdparties.
Accordingly,we willbe responsiblefor deficienciesin ouroversight andcontrol ofour thirdparty relationshipsand inthe
performance of the parties with whichwe have these relationships. Asa result, if our regulators conclude thatwe have not
exercised adequate oversight and control over our third party vendors orother ongoing third party business relationships or
thatsuchthirdpartieshavenotperformedappropriately,wecouldbesubjecttoremedialand/orenforcementactions,
including civilmoney penaltiesor otheradministrativeor judicialpenalties orfinesas wellas requirementsfor customer
remediation, any of which could have a material adverseeffect our business, financial condition or resultsof operations.
Litigation and regulatory actions,including possible enforcement actions, could subjectus to significant fines,
penalties,judgmentsorotherrequirementsresultinginincreasedexpensesorrestrictionsonourbusiness
activities.
In the normal course ofbusiness, from time to time, wehave in the past andmay in the future benamed as a defendant
in variouslegal actionsarising inconnection withour currentand/or priorbusinessactivities. Legalactions couldinclude
claims for substantial compensatory and/orpunitive damages or claims for indeterminateamounts of damages. Further,in
the futureourfederaland/orstatebankregulatorsmayimposeconsentorders,civilmoneypenalties,mattersrequiring
attention, or similar types ofsupervisory penalties or criticism. We may also,from time to time, bethe subject of subpoenas,
requestsforinformation,reviews,investigationsandproceedings(bothformalandinformal)bygovernmentalagencies
regarding ourcurrentand/or priorbusinessactivities.Any suchlegal orregulatoryactions maysubjectus tosubstantial
compensatoryorpunitivedamages,significantfines,penalties,obligationstochangeourbusinesspracticesorother
requirements resultingin increasedexpenses, diminishedincome anddamage toour reputation.Our involvementin any
such matters,whether tangentialor otherwiseandeven ifthe mattersare ultimatelydeterminedin ourfavor,could also
cause significant harm to ourreputation and divert management attention away fromthe operation of our business.Further,
any settlement, consent order or adverse judgment in connection with any formal or informal proceeding or investigation by
governmentagenciesmayresultinlitigation,investigationsorproceedingsasotherlitigantsandgovernmentagencies
begin independentreviews ofthe sameactivities. Asa result,the outcomeof legaland regulatoryactions couldhave an
adverse effect on our business, results of operationsand results of operations.
39USCB Financial Holdings, Inc.2025 10-K
Certain ofour directors mayhave conflictsof interest indetermining whether topresent businessopportunities
to us or another entity with which they are, or maybecome, affiliated.
Certain of ourdirectors are or maybecome subject to fiduciaryobligations in connection withtheir service on theboards
ofdirectorsofothercorporations,includingfinancialinstitutions.Adirector'sassociationwithotherfinancialinstitutions,
which give rise tofiduciary or contractual obligations to such otherinstitutions, may create conflicts of interest. To the extent
that any of our directorsbecome aware of acquisitionopportunities that may besuitable for entities otherthan us to which
they have fiduciary or contractual obligations, or they arepresented with such opportunities in their capacities as fiduciaries
to suchentities, theymay honorsuch obligationsto suchother entities.Youshould assumethat tothe extentany ofour
directors become awareof an opportunitythat may besuitable both forus and anotherentity to whichsuch person hasa
fiduciary obligationor contractualobligationto presentsuchopportunity asset forthabove,he orshe mayfirst givethe
opportunity to such other entityor entities and may givesuch opportunity to us onlyto the extent such otherentity or entities
rejectorareunabletopursuesuchopportunity.Inaddition,youshouldassumethattotheextentanyofourdirectors
becomeawareofanacquisitionopportunitythatdoesnotfallwithintheaboveparameters,butthatmayotherwisebe
suitable for us, he or she may not present such opportunity tous.
Pursuant to an agreement between us and each of our Significant Investors(as defined below), each of the Significant
Investors has the rightto nominate onedirector to serveon our Board, includingBoard committees, andto designate one
non-voting Boardobserver.The directorsand Boardobserversdesignated bythe SignificantInvestors havethe rightto,
and haveno dutynot to,engage inthe sameor similarbusiness activitiesor linesof businessas us.In theevent thata
director or Board observer designated by a Significant Investor acquires knowledge of a potential transaction or matter that
may bea corporate opportunityfor us,such person shallhave noduty tocommunicate orpresent such corporateopportunity
to usand shallnot beliable tous orour shareholdersfor breachof anyduty byreason ofthe factthat suchperson ora
related investment fundthereof, directly orindirectly, pursues or acquires such opportunityfor itself, directssuch opportunity
to another person, or does not present such opportunityto us.
Risks Related to Our Tax,Accounting and Regulatory Compliance
Our ability to recognizethe benefits ofour deferred taxassets is dependenton future cash flowsand taxable
income and may be materially impaired upon significantchanges in ownership of our common stock.
We recognize the expected future taxbenefit from deferred tax assets whenit is more likely thannot that the tax benefit
will berealized. Otherwise,a valuationallowanceis appliedagainst ourdeferredtax assets,reducingthe valueof such
assets. Assessingthe recoverabilityof deferredtax assetsrequires managementto make significantestimates relatedto
expectationsoffuturetaxableincomefromallsources,includingreversaloftaxabletemporarydifferences,forecasted
operatingearningsandavailabletaxplanningstrategies.Estimatesoffuturetaxableincomearebasedonforecasted
income from operations and the application of existing tax laws in each jurisdiction. The improved risk profile of the Bank is
a keycomponent usedin the determinationof ourability torealize theexpected futurebenefit ofour deferredtax assets.
Tothe extent that future taxable income differssignificantly from estimates as a resultof the interest rate environment and
loan growth capabilities or other factors, our ability to realizethe net deferred tax assets could be negativelyaffected.
Subject to certain exceptions, our Class A common stock is subjectto transfer restrictions as set forth in our Articles of
Incorporation that aredesigned to preserveour deferred taxassets. Notwithstanding theseprotective provisions, theArticles
of Incorporation includean exception thatallows our SignificantInvestors the rightto effect anytransfer that wouldotherwise
be prohibited, which transfer could result in the loss of the deferredtax assets.
Additionally,significant futureissuances ofcommon stockor commonstock equivalents,or changesin thedirect or
indirect ownershipof ourcommon stockor commonstock equivalents,could causean ownershipchange andcould limit
our ability toutilize our netoperating loss carryforwardsand other taxattributes pursuantto Section 382and Section 383
of theInternal RevenueCode of1986, asamended.Future changesin taxlaw orchanges inownership structurecould
limit our ability to utilize our recorded net deferred tax assets.
Theaccuracyofourfinancialstatementsandrelateddisclosurescouldbeaffectedifthejudgments,
assumptions or estimates used in our critical accountingpolicies are inaccurate.
ThepreparationofourfinancialstatementsandrelateddisclosuresinconformitywithGAAPrequiresustomake
judgments,assumptionsandestimatesthataffecttheamountsreportedinourconsolidatedfinancialstatementsand
accompanying notes. In some cases, managementmust select the accounting policy or methodto apply from two or more
alternatives,any ofwhichmay bereasonableunderthe circumstances,yetwhichmay resultinourreportingmaterially
differentresultsthanwouldhavebeenreportedunderadifferentalternative.Certainaccountingpoliciesarecriticalor
significant to presenting our financialcondition and results ofoperations. Our critical accounting policies, whichare included
40USCB Financial Holdings, Inc.2025 10-K
in the section captioned "Management's Discussion and Analysis of Financial Condition and Results of Operations"in Item
7 of this Annual Reporton Form 10-K, describethose significant accountingpolicies and methods usedin the preparation
ofourconsolidatedfinancialstatementsthatweconsidercriticalbecausetheyrequirejudgments,assumptionsand
estimates that materially affect our consolidated financial statements and related disclosures. As a result, iffuture events or
regulatory views concerning such analyses differ significantly from the judgments, assumptions and estimates inour critical
accounting policies,those eventsor assumptionscould havea materialimpact onour consolidatedfinancial statements
andrelateddisclosures,ineachcaseresultinginourneedtoreviseorrestatepriorperiodfinancialstatements,cause
damage to ourreputation andthe priceof our ClassA common stockand adversely affectour business, prospects,cash
flow, liquidity,financial condition and results of operations.
As a public company, we may not efficiently or effectively create an effective internal control environment, and
any futurefailure tomaintaineffectiveinternal controlover financialreportingcould impairthe reliabilityof our
financialstatements,whichinturncouldharmourbusiness,impairinvestorconfidenceintheaccuracyand
completeness ofour financialreports andour accessto thecapital markets,cause theprice ofour ClassA common
stock to decline and subject us to regulatory penalties.
Our management is responsible for establishingand maintaining adequate internal control over financialreporting and
for evaluatingandreportingonthatsystemofinternalcontrol.Ourinternalcontroloverfinancialreportingconsistsofa
processdesignedtoprovidereasonableassuranceregardingthereliabilityoffinancialreportingandthepreparationof
financial statements for external purposes in accordance with GAAP.As a public company,we are required to comply with
SEC regulations, includingthe SOA andother rules thatgovern public companiesthat we previouslywere not requiredto
comply withas aprivate company.In particular,we arerequired tocertify ourcompliance withSection 404of theSOA,
which requiresus toannuallyfurnisha reportby managementon theeffectivenessof ourinternalcontroloverfinancial
reporting. When evaluating our internal controls over financial reporting, we may identify material weaknesses that we may
not be able to remediatein time to meet the applicabledeadline imposed upon us forcompliance with the requirementsof
Section 404of the SOA.We periodicallyreview ourformal policies,processes and practicesrelated tofinancial reporting
and to theidentification of key financialreporting risks, assess theirpotential impact and thelinkage of thoserisks to specific
areas and controls within our organization.
If we fail to achieve and maintain the adequacy ofour internal controls, as such standards are modified, supplemented,
or amended from time totime, we may notbe able to ensurethat we will be ableto conclude on an ongoingbasis that we
have effectiveinternal controlsover financialreporting inaccordance withSection 404of theSOA. Wecannot becertain
as tothetimingof completionofourevaluation,testing,andanyremediationactionsortheimpactofthesameonour
operations. If we fail to adequately comply with the requirements of Section 404 of the SOA,we may be subject to adverse
regulatory consequences and therecould be anegative reaction inthe financial markets dueto a lossof investor confidence
in us and thereliability of ourfinancial statements. Inaddition, we may berequired to incurcosts in improvingour internal
control systemand hiringadditional personnel.Any suchaction couldnegativelyaffectour business,financial condition,
results of operations, and the price of our Class A commonstock may decline.
While weremain an emerginggrowth company, we willnot berequired to includean attestation reporton internalcontrol
over financialreporting issued byour independent registeredpublic accounting firm.We willcease to bean emerginggrowth
company no laterthan December 31,2026. Toprepare for compliancewith the auditorattestation requirementof Section
404oftheSOAoncewenolongerqualifyasanemerginggrowthcompanyorasanon-acceleratedsmallerreporting
company, we are engaged in a process to document and evaluateour internal control over financial reporting, whichis both
costly andchallenging. Inthis regard,we willneed todedicate internalresources, potentiallyengage outsideconsultants
and adopt a detailed workplan to assess and documentthe adequacy of internalcontrol over financial reporting,continue
steps to improve controlprocesses as appropriate, validate throughtesting that controls arefunctioning as documented and
continue torefine ourreporting andimprovement processfor internalcontrol overfinancial reporting.Despite ourefforts,
there is arisk thatwe will notbe ableto conclude,within the prescribedtime frameor at all,that ourinternal controlover
financialreportingiseffectiveasrequiredbySection404ofSarbanes-Oxley.Ifweidentifyoneormorematerial
weaknesses, it could result in an adverse reaction inthe financial markets due to a loss of confidence inthe reliability of our
financial statements.
Weoperateinahighlyregulatedenvironment,andthelawsandregulationsthatgovernouroperations,
corporate governance,executive compensationand accountingprinciples, orchanges inthem, orour failureto
comply with them, could adversely affect us.
We operate in ahighly regulated industry andwe are subject toexamination, supervision and comprehensiveregulation
by various federal and state agencies,including the Federal Reserve, theFDIC and the FOFR. Assuch, we are subject to
extensive regulation, supervision andlegal requirements that govern almostall aspects of our operations.These laws and
regulationsarenotintendedtoprotectourshareholders.Rather,theselawsandregulationsareintendedtoprotect
41USCB Financial Holdings, Inc.2025 10-K
customers, depositors, the Deposit InsuranceFund, or DIF, and the overall financial health andstability of the UnitedStates
bankingsystem.Theselawsandregulations,amongothermatters,prescribeminimumcapitalrequirements,impose
limitations on thebusiness activitiesand investmentsin which wecan engage, regulateand restrict ourlending activities,
require us to provide certain banking services broadly within the communities in which we operate,determine the locations
of our branchoffices and impose certainspecific accounting requirements on usthat may be morerestrictive and may result
ingreaterorearlierchargestoearningsorreductionsinourcapitalthanGAAPwouldrequire.Wearealsosubjectto
capitalizationguidelinesestablishedbyourregulators,whichrequireustomaintainadequatecapitaltosupportour
business.Compliancewithlawsandregulationscanbedifficultandcostly,andchangestolawsandregulationsoften
impose additional operating costs. Further, we must obtain approval from our regulatorsbefore engaging in many activities,
andourregulatorshavetheabilitytocompelusto,orrestrictusfrom,takingcertainactionsentirely.Therecanbeno
assurance that any regulatory approvals we may requireor otherwise seek will be obtained.
Regulations affectingbanks andother financialinstitutions areundergoing continuousreview andfrequently change,
and the ultimate effect of such changes cannot be predicted. Changes to the legal and regulatory framework governing our
operations, including the Dodd-Frank Act and the 2018 Act, have significantlyrevised the laws and regulations under which
we operate. Such regulationsand laws may be modifiedor repealed at any time,and new legislation may beenacted that
will affect us and our subsidiaries.
Our failure to comply with these laws and regulations, even if the failure follows good faith effortor reflects a difference
ininterpretation,couldsubjectustorestrictionsonourbusinessactivities,enforcementactionsandfinesandother
penalties,anyofwhichcouldadverselyaffectourresultsofoperations,regulatorycapitallevelsandthepriceofour
securities. Further, any new laws, rulesand regulations, such as were imposed under the Dodd-FrankAct or the 2018 Act,
could makecompliance more difficultor expensiveor otherwiseadversely affect ourbusiness, prospects,cash flow, liquidity,
financial condition and results of operations.
WefaceariskofnoncompliancewiththeBankSecrecyActandotheranti-moneylaunderingstatutesand
regulations and corresponding enforcement proceedings.
The BSA, theUSA PATRIOTAct, and otherlaws and regulationsrequire financialinstitutions, among otherduties, to
instituteandmaintaineffectiveanti-moneylaunderingprogramsandtofilesuspiciousactivityandcurrencytransaction
reports,asappropriate.FinCEN,establishedbytheU.S.TreasuryDepartmenttoadministertheBankSecrecyAct,is
authorized to impose significant civil moneypenalties for violations of those requirementsand has engaged in coordinated
enforcementeffortswiththeindividualfederalbankingregulators,aswellastheU.S.DepartmentofJustice,Drug
EnforcementAdministrationandInternalRevenueService.Additionally,SouthFloridahasbeendesignatedasa“High
Intensity Financial CrimeArea” (“HIFCA”)by FinCEN anda “High IntensityDrug TraffickingArea” (“HIDTA”)by the Office
of National Drug ControlPolicy.The HIFCA programis intended to concentratelaw enforcement effortsto combat money
laundering effortsin higher-riskareas. Thereis alsoincreased scrutinyof compliancewith therules enforcedby OFAC.
Federal andstate bankregulators havefor manyyears focusedon compliancewith theBSA andanti-money laundering
regulations. Inorder tocomply withregulations,guidelines andexaminationproceduresin thisarea, wehave dedicated
significant resourcesto ouranti-money launderingprogram, especiallydue tothe regulatoryfocus onfinancial andother
institutions located in SouthFlorida. Our business includessupporting our customers, including foreignfinancial institutions,
with respect to their international banking needs and our policies, procedures and systems have been designed to address
federal andstate anti-moneylaundering compliance.If our policies,procedures andsystems aredeemed deficientor the
policies,proceduresandsystemsofthefinancialinstitutionsthatwemayacquirearedeficient,wewouldbesubjectto
liability,includingfines,andregulatoryactionsthataredeemednecessaryinordertoremediatesuchdeficienciesand
prevent the recurrencethereof. In recentyears, sanctions thatthe regulators haveimposed on banksthat have notcomplied
withallanti-moneylaunderingrequirementshavebeenespeciallysevere.Failuretomaintainandimplementadequate
programs tocombat moneylaundering andterrorist financingcould alsohave seriousreputational consequencesfor us,
which could have a material adverse effect onour business, financial condition and results of operations.
SignificantlyheightenedregulatoryandsupervisoryexpectationsandscrutinyintheUnitedStateshave
increasedourcompliance,regulatory,andotherrisksandcostsandsubjectustolegalandregulatory
examinations, investigations, and enforcement actions.
The regulatory and political environment has generally been challenging forU.S. financial institutions, which have been
subject toincreased regulatoryscrutiny,including inthe wakeof the failuresof severalregional banksand otherbanking
stresses in recent periods. Thegeneral heightened scrutiny and expectations fromregulators could lead to a morestringent
regulatory posture by the regulators, investigations and otherinquiries, as well as remediation requirements, regulatory and
operationalrestrictions,moreregulatoryorotherenforcementproceedings,civillitigationandsubstantialcompliance,
regulatory and other risks and costs.Our regulators have broad powersand discretion under their supervisoryauthority. A
failure to complywith regulators’ expectations andrequirements, even if inadvertent,or to resolveany identified deficiencies
42USCB Financial Holdings, Inc.2025 10-K
inatimelyandsufficientlysatisfactorymannertoregulators,couldresultinincreasedregulatoryoversight;material
restrictions,including,amongothers,impositionoflimitationsoncapitaldistributionsorotherbusinessactivitiesor
operations; enforcement proceedings; penalties; and fines.Responding to regulatory inquiries andproceedings can be time
consuming andcostly anddivert managementattention fromour otherbusiness activities.As a resultof theseregulatory
efforts and pressures,like many otherfinancial institutions, fromtime to time,we may besubject to publicand non-public
writtenagreements,ceaseanddesistorders,consentorders,memorandaofunderstandingorotherenforcementor
supervisory actions by our regulators.
Wearesubjecttocapitaladequacyrequirementsandmaybecomesubjecttomorestringentcapital
requirements, which could adversely affect ourfinancial condition and operations.
In2013,thefederalbankingagenciespublishednewregulatorycapitalrulesbasedontheinternationalstandards,
known asBasel III,that weredeveloped bythe BaselCommittee onBanking Supervision.The newrules raisedthe risk-
based capitalrequirementsand revisedthemethods forcalculatingrisk-weightedassets, usuallyresultingin higherrisk
weights. The rules apply to us.
The Basel III rules increasedcapital requirements and includedtwo new capital measurements,a risk-based common
equity Tier 1 ratioand a capital conservation buffer.Common Equity Tier1 (CET1) capital is a subsetof Tier 1 capitaland
is limited to commonequity (plus related surplus), retained earnings,accumulated other comprehensive income and certain
otheritems.OtherinstrumentsthathavehistoricallyqualifiedforTier1treatment,includingnoncumulativeperpetual
preferred stock,are consignedto acategory knownas AdditionalTier1 capitaland mustbe phasedout ofCETI overa
period ofnine yearsbeginning in2014. Inorder tobe a“well-capitalized” depositoryinstitution underthe newregime, an
institution must maintain aCET1 capital ratio of 7.0%or more; a Tier1 capital ratio of 8.5%or more; a total capitalratio of
10.5%or more;andaTier1 leverageratioof4% ormore. Institutionsmustalsomaintaina capitalconservationbuffer
consisting ofcommon equityTier1 capital(which amount(2.5%) isreflected abovein theCET1, Tier1 andtotal capital
ratios). In additionto the higherrequired capitalratios andthe newdeductions andadjustments, thefinal rulesincreased
the risk weightsfor certain assets,meaning that wewill have tohold more capitalagainst these assets. Weare also required
to hold capital against short-term commitments that are notunconditionally cancellable.
While we currently meet the requirements ofthe Basel III-based capital requirements, we may fail todo so in the future.
The failure tomeet applicable regulatorycapital requirements couldresult in oneor more ofour regulators placinglimitations
or conditions on our activities, including our growth initiatives, or restricting the commencement of new activities, and could
affectcustomerandinvestor confidence,our costsof fundsandlevel ofrequireddepositinsuranceassessmentstothe
FDIC,ourabilitytopaydividendsonourcapitalstock,ourabilitytomakeacquisitions,andourbusiness,resultsof
operations and financial condition, generally.
In addition, in the current economicand regulatory environment bank regulatorsmay impose capital requirements that
aremorestringentthanthoserequiredbyapplicableexistingregulations.Theapplicationofmorestringentcapital
requirements for us could, among other things, resultin lower returns on equity, require the raising of additional capital, and
result in regulatory actionsif we were to beunable to comply withsuch requirements. Implementationof changes to asset
risk weightings for risk-based capitalcalculations, items includedor deducted in calculatingregulatory capital or additional
capital conservation buffers, could result in management modifying our business strategyand could limit our ability to make
distributions, including payingdividends.
We are periodically subjectto examination andscrutiny by anumber of banking agenciesand, depending upon
the findings and determinationsof these agencies, we maybe required to make adjustmentsto our business that
could adversely affect us.
As part ofthe bank regulatory process,the Federal Reserve, theFDIC and the FOFRperiodically conduct examinations
of our business,including compliancewith applicablelaws and regulations.If, as aresult of anexamination, oneof these
bankingagenciesweretodeterminethatthefinancialcondition,capitalresources,assetquality,assetconcentration,
earnings prospects, management, liquidity sensitivityto market risk, riskmanagement and internal controlsor 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 bankingagency couldtake anumber ofdifferent remedialor punitiveactions asit deemsappropriate. Theseactions
include the power to prohibit the continuationof "unsafe or unsound" practices, to requireaffirmative actions to correct any
conditionsresultingfromanyviolationor practice,toissue anadministrativeorderor enforcementthatcanbe judicially
enforced, to direct an increasein our capital, to restrict ourgrowth, to change the asset compositionof our loan or securities
portfoliosorbalancesheet,toassesscivilmonetarypenaltiesagainstourofficersordirectors,toremoveofficersand
directors and, ifit is concludedthat such conditionscannot be correctedor there isan imminent riskof loss todepositors,
toterminateourdepositinsuranceandforceustoterminateourbusinessoperations.Ifwebecomesubjecttosuch
regulatory actions, our business, financial condition, resultsof operations and reputation may be negatively impacted.
43USCB Financial Holdings, Inc.2025 10-K
Wearesubjecttonumerouslawsandregulationsofcertainregulatoryagenciesdesignedtoprotect
consumers, including the Community ReinvestmentAct, or CRA, and fair lending laws, and failureto comply with
these laws could lead to a wide variety of sanctions.
The CRA directs all insured depository institutions to help meet the credit needs of the local communitiesin which they
operatebranches,includinglow-andmoderate-incomeneighborhoods.Eachinstitutionisexaminedperiodicallybyits
primary federalregulator,which assessesthe institution’sCRA performance.The EqualCredit OpportunityAct, theFair
HousingActandotherfairlendinglawsandregulationsimposenondiscriminatorylendingrequirementsonfinancial
institutions. The U.S. Department of Justice, the Federal Reserve, and other federal agencies are responsible for enforcing
these laws and regulations. A successful regulatory challenge to our performance under the CRA, fair lending or consumer
lendinglawsandregulationscouldresultinawidevarietyofsanctions,includingdamagesandcivilmoneypenalties,
injunctiverelief,customerrestitution,restrictionsonmergersandacquisitionsactivity,restrictionsonexpansion,and
restrictionsonenteringnewbusinesslines.Privatepartiesmayalsohavetheabilitytochallengeaninstitution’s
performanceunderfairlendinglawsinprivateclassactionlitigation.Suchactionscouldhaveanadverseeffectonour
business, financial condition and results of operations.
Climate change and related legislative and regulatory initiatives may materially affect our business and results
of operations.
The effectsof climate changecontinue to createa significant levelof concernfor the stateof the globalenvironment.
The lack of empiricaldata surrounding the credit andother financial risks posed byclimate change render itdifficult, or even
impossible,topredicthowclimatechangemayimpactourfinancialconditionandresultsofoperations;however,the
physicaleffectsofclimatechangemayalsodirectlyimpactus.Specifically,unpredictableandmorefrequentweather
disasters may adversely impact the real property,and/or the value of the real property,securing the loans in our portfolios.
Additionally,ifinsuranceobtainedbyourborrowersisinsufficienttocoveranylossessustainedtothecollateral,orif
insurance coverage is otherwise unavailable toour borrowers, the collateral securingour loans may be negativelyimpacted
by climatechange, natural disastersand related events,which could impactour financial conditionand results ofoperations.
Further,the effectsof climatechange maynegatively impactregional andlocal economicactivity,which couldadversely
affectourcustomersandthecommunitiesinwhichweoperate.Overall,climatechange,itseffectsandtheresulting
unknown impact could have a material adverse effecton our financial condition and results of operations.
Risks Related to Our Class A Common Stock
Our ability to pay dividends is subject to restrictions.
Holders of our Class A common stockare only entitled to receive cash dividends when, asand if declared by our Board
out of fundslegally availablefor dividends.The Companyis a bankholding companythat conductssubstantially allof its
operations through the Bank,which is a legal entityseparate and distinct fromthe Company.As a result, our abilityto pay
dividendsonourcommonstockwill substantiallydependuponthereceiptofdividendsandotherdistributionsfromthe
Bank,theprofitabilityofwhichissubjecttothefluctuatingcostandavailabilityofmoney,changesininterestratesand
economic conditions in general. There arenumerous laws and banking regulations andguidance that limit the Bank'sability
to paydividends tous andour abilityto paydividends onour commonstock. Dueto thefact thatthe Bankhas negative
retained earnings,the Bankmay notpay dividendsto theCompany withoutthe priorapproval ofthe FDIC.Similarly,we
have agreed to notify the Federal Reserve before declaringand paying any dividends on our Class A common stock.
If we fail topay interest onor otherwise defaulton our subordinatednotes, we willbe prohibited frompaying
dividends or distributions on our Class A commonstock.
AsofDecember31,2025,wehad$40.0millionofsubordinatednotesoutstanding.Theindentureunderwhichthe
subordinatednoteswereissuedprohibitsusfrompayinganydividendsonourcommonstockormakinganyother
distributionstoourshareholdersuponourfailuretomakeanyrequiredpaymentofprincipalorinterestorduringthe
continuanceofan eventofdefaultundertheapplicableagreement.Eventsofdefaultgenerallyconsistof,among other
things, certain eventsof bankruptcy,insolvency or liquidationrelating to us.If we wereto fail tomake a requiredpayment
of principal or intereston our subordinatednotes, it could havea material adverse effect onthe market value ofour common
stock.
44USCB Financial Holdings, Inc.2025 10-K
Wemayissueadditionaldebtsecurities,whichwouldbeseniortoourcommonstockandmaycausethe
market price of our Class A common stock to decline.
We have issued $40.0 million in aggregate principal amount of 7.625% Fixed-to-Floating Rate Subordinated Notes due
2035. In the future, we may increase our capital resources by making additional offerings of debt or equity securities, which
may includesenior oradditional subordinatednotes, classesof preferredsharesand/or commonshares. Holdersof our
common stock arenot entitled topreemptive rights orother protections againstdilution. Preferred sharesand debt, ifissued,
have a preference on liquidating distributions or a preferenceon dividend or interest payments that could limit ourability to
makeadistributiontotheholdersofourcommonstock.Futureissuancesandsalesofparitypreferredstock,orthe
perception thatsuchissuancesand salescould occur,may alsocauseprevailingmarket pricefor ourClassA common
stock to declineand may adverselyaffect ourability to raiseadditional capitalin the financialmarkets at timesand prices
favorable to us. Further issuances of our Class A common stock couldbe dilutive to holders of our Class A common stock.
The market price and trading volume of our Class Acommon stock may be volatile, which could result in rapid
and substantial losses for our shareholders.
The marketpriceofourClassA commonstockmaybe highlyvolatileandcouldbesubjecttowidefluctuations.In
addition, the trading volume onour Class A common stock mayfluctuate and cause significant price variations tooccur. We
cannot assure you that the market price of our Class A common stock will not fluctuate or decline significantly in the future.
Some, butcertainly notall, ofthe factorsthat couldnegatively affectthe priceof ourClass Acommon stock,or resultin
fluctuations in the price or trading volume of our ClassA common stock, include but not limited to:
•general market conditions;
•domestic and international economic factors unrelatedto our performance;
•variations in our quarterly operating results or failure tomeet the market’s earnings expectations;
•publication of research reports about us or the financial servicesindustry in general;
•the determination of securities analysts to not cover ourClass A common stock;
•the opinion of securities analysts about our stock as an investment;
•additions to or departures of our key personnel;
•future sales of our Class A common stock;
•adverse market reactions to any indebtedness we mayincur or securities we may issue in the future;
•actions by our shareholders;
•the operating and securities price performance of companiesthat investors consider to be comparable to us;
•changes or proposed changes in laws or regulations affectingour business; and
•actual or potential litigation and governmental investigations.
Inaddition,ifthemarketforstocksinourindustry,orthestockmarketingeneral,experiencesalossofinvestor
confidence, thetrading priceof theClass Acommon stockcould declinefor reasonsunrelated toour business,financial
condition or results of operations.If any of the foregoing occurs,it could cause our Class A commonstock price to fall and
may expose us to lawsuits that, even if unsuccessful, couldbe costly to defend and a distraction to management.
There are significant restrictions in our Articles of Incorporation that restrict theability to sell our capital stock
to shareholders that would own 4.95% or more of our stock,excluding our Significant Investors.
Because thecontinued availabilityof our"deferred taxassets" depends,in part,on thevalue ofour stockowned by
shareholders owning 5% ormore of ourstock, our amended Articlesof Incorporation, except asotherwise may be approved
by the Board orexcept for transfers byour Significant Investors, prohibitsany direct or indirecttransfer of stockor options
toacquirestocktoanypersonwho,asaresultofthetransfer,wouldown4.95%ormoreofourstock,aslongasthe
Company continues to have "deferred tax assets." Suchrestrictions may limit the ability to transfer our stock.
Becauseweareanemerginggrowthcompanyandbecausewehavedecidedtotakeadvantageofcertain
exemptions fromvarious reportingand otherrequirements applicableto emerginggrowth companies,our Class
A common stock could be less attractive to investors.
We arean “emerginggrowth company,”as definedin theJOBS Act.For aslong aswe remainan emerginggrowth
company,we willhave theoption to takeadvantage ofcertain exemptionsfrom variousreporting andother requirements
that are applicable to other public companies that are notemerging growth companies, including:
•
wemaypresentonlytwoyearsofauditedfinancialstatementsandonlytwoyearsofrelatedmanagement’s
discussion and analysis of financial condition and resultsof operations
45USCB Financial Holdings, Inc.2025 10-K
•
weareexemptfromtherequirementstoobtainanattestationandreportfromourauditorsonmanagement’s
assessment of our internal control over financial reportingunder the SOA;
•
we are permitted to have less extensive disclosure about ourexecutive compensation arrangements; and
•
wearenotrequiredtogiveourshareholdersnon-bindingadvisoryvotesonexecutivecompensationorgolden
parachute arrangements.
We maycontinue totake advantageof someor allof thereduced regulatoryand reportingrequirements thatwill be
available tous aslong aswe continuetoqualifyas anemerginggrowthcompany.Wewill remainan emerginggrowth
company until theearliest to occurof (i) thelast day ofthe first fiscalyear in whichour annual grossrevenues exceed $1.235
billion, (ii) the date that the marketvalue of our Class A common stockthat is held by non-affiliatesexceeds $700.0 million
as of thelast business day inJune of thatyear, (iii) the date onwhich we have, duringthe previous three-year period, issued
more than $1.0 billionin non-convertible debt, or(iv) the end of fiscalyear following the fifthanniversary of the completion
of our initial public offering (which will be December31, 2026).
It is possiblethat someinvestors mayfind our ClassA common stockless attractivesince we choseto relyon these
exemptions. If some investors find our Class A commonstock less attractive, there may be a lessactive trading market for
our Class A common stock and our stock price may bemore volatile.
Because we have electedto use the extendedtransition period for complyingwith new or revisedaccounting
standards for an “emerging growth company,” our financial statements may not be comparable to companies that
comply with these accounting standards as of thepublic company effective dates.
As an emerginggrowth company,we elected touse the extendedtransition periodfor complyingwith newor revised
accounting standards under Section 7(a)(2)(B) of the Securities Act. This election allows us to delay the adoption of new or
revised accounting standardsthat have differenteffective dates forpublic and privatecompanies until thosestandards apply
to private companies. As aresult of this election, ourfinancial statements may not becomparable to companies that comply
with theseaccounting standardsas ofthe publiccompany effectivedates. Becauseour financialstatementsmay notbe
comparabletocompaniesthatcomplywithpubliccompanyeffectivedates,investorsmayhavedifficultyevaluatingor
comparing ourbusiness, performanceor prospectsin comparison toother publiccompanies, whichmay have anegative
impact on the value and liquidity of our Class A common stock. We cannot predict if investors will find our Class A common
stocklessattractivebecausewehavereliedonthisexemption.IfsomeinvestorsfindourClassAcommonstockless
attractive as a result, theremay be a less active tradingmarket for our Class A commonstock and our stock pricemay be
more volatile.
We have existing investors that owna significant amount of ourcommon stock whose individual interests may
differ from yours.
A significant percentage of our Class A common stock is currently held by a few institutional investors, including Patriot
Financial Partners II,L.P.and Patriot FinancialPartners Parallel II, L.P.(collectively,"Patriot"), and PriamCapital Fund II,
LP("Priam,"andtogetherwithPatriot,the"SignificantInvestors").AsofFebruary28,2026PatriotandPriamown
approximately 10.4% and 21.8%, respectively, of our outstanding shares of Class A common stock. In addition, Patriot and
Priam areeach entitledto nominatea directorto ourBoard andhave certainsubscription rightsto purchasenew equity
securities that weissue in thefuture, in eachcase as longas certain equityownership criteriaare met. Patriotand Priam
also havecertain registration rights(which theyhave exercised), includingdemand registration rights,and information rights.
Although Patriotand Priamare independentof eachother,these institutionalinvestors willcontinue tohave asignificant
level of influence over us because of their levelof Class A common stock ownership and their rightto representation on our
Board. Forexample, Patriotand Priamwill havea greaterability thanour othershareholders toinfluence theelection of
directors and thepotential outcome ofother matters submittedto a voteof our shareholders,including mergers andother
acquisition transactions,amendments toour amendedArticles ofIncorporation andAmended andRestated Bylaws,and
otherextraordinarycorporatematters.Theinterestsoftheseinvestorscouldconflictwiththeinterestsofourother
shareholders, andany futuretransfer bythese investorsof theirshares ofClass Acommon stockto otherinvestors who
have different business objectivescould adversely affect ourbusiness, results of operations,financial condition, prospects
or the market value of our Class A common stock.
ProvisionsinourgoverningdocumentsandFloridalawmayhaveananti-takeovereffectandthereare
substantial regulatory limitations on changes of controlof the Company.
Our corporate organizational documents and provisions of federaland state law to which weare subject contain certain
provisions that couldhave an anti-takeovereffect andmay delay,make more difficultor prevent anattempted acquisition
that you may favor or an attempted replacement of ourBoard or management.
46USCB Financial Holdings, Inc.2025 10-K
Our governing documents include provisions that:
•
empower our Board, without shareholder approval, to issue shares of preferred stock, the terms ofwhich, including
voting power, are set by ourBoard;
•
provide that directors may be removed from office only for cause and only upon a majority voteof the shares of our
Company with voting power;
•
prohibit holders of our Class A common stock to take actionby written consent in lieu of a shareholder meeting;
•
require holders of at least 10% of our Class A commonstock to call a special meeting;
•
do not provide for cumulative voting in elections of ourdirectors;
•
provide thatour Boardhas theauthority to amendour Amendedand Restated Bylawswithout shareholder approval;
•
require shareholders that wish to bring business before annual or special meetings of shareholders, or to nominate
candidates for election as directors at our annual meeting of shareholders, to providetimely notice of their intent in
writing and satisfy disclosure requirements; and
•
enable our Board to increase, betweenannual meetings, the number ofpersons serving as directors andto fill the
vacancies createdas aresult ofthe increase untilthe nextmeeting ofshareholders by amajority voteof thedirectors
present at a meeting of directors.
In addition,certain provisionsof Floridalaw maydelay,discourage, orprevent anattempted acquisitionor changein
control. Furthermore,banking lawsimpose notice,approval, andongoing regulatoryrequirements onany shareholderor
other party that seeks to acquire direct or indirect "control" of abank holding company,which includes the Change in Bank
Control Actand theBank HoldingCompany Act.These lawscould delayor preventan acquisition.Also, forpreservation
and continued availabilityof our "deferredtax assets," ouramended Articles ofIncorporation prohibit anydirect 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,aslongaswecontinuetohave"deferredtaxassets,"subjecttolimitedexceptionsasprovidedinouramended
Articles of Incorporation. Because of the requirements to overcome this restriction, thisprovision of the amended Articles of
Incorporation couldhave ananti-takeovereffectandmay delay,make moredifficultor preventan attemptedacquisition
that you may favor.
47USCB Financial Holdings, Inc.2025 10-K
Item 1B. Unresolved Staff Comments
None.
Item 1C. Cybersecurity
Risk Management and Strategy Overview
Customers dependon theCompany tosafeguardnonpublic personalinformationgathered andstored inconnection
with theservices weprovide. TheCompany understandsthat cyberincidents canhave financial,reputational, legal,and
operational impactsthat canadversely affectour customers,capital, andearnings. Therefore,we integratecybersecurity
processes throughout theCompany as part ofour enterprise-wide governanceprocess. Regulatory agenciesare charged
withensuringtheCompany’scybersecuritycontrolsandproceduresarecompliantwiththeintentofthecybersecurity
expectations set forthby the FederalFinancial InstitutionsExamination Council(“FFIEC”). TheFFIEC frameworkoffers a
setofguidelinesandbestpracticestohelpfinancialinstitutionsmanageandmitigatecybersecurityriskseffectively.It
focuses on ensuring the confidentiality,integrity, and availabilityof sensitive information and systems.
The InformationSecurity Officer(“ISO”) isan integralmember ofthe RiskManagement andCompliance Department
(“RMCD”) ofthe Bankand providesexpert counselon mattersof cybersecurityand presentsperiodic reportsto theRisk
Committee of our Board of Directors.
As partof theprogram, periodicrisk assessmentsare performedto determinethe Company’sinherent andresidual
cybersecurity risk, thematurity level of the program,the risk of cyberthreats, and the effectivenessof controls currentlyin
practice. The Company utilizes the National Institute of Standards andTechnology(“NIST”) Framework and the Cyber Risk
Institute Framework (“CRIFramework”) to helpmanagement identify itsrisks and determinethe Company’scybersecurity
posture.Throughthe
implementation
of rigorousproceduresand controls,augmentedby ongoingtraininginitiativesfor
both management andstaff, the institutioncultivates a safecybersecurity environment. Thisapproach encompasses diverse
methodologiesincludingdefense-in-depthandproactivesecurityawarenesstrainingaimedatfortifyingtheinstitutions’
cybersecurity controls and fostering a resilient operationalframework.
Assessment and Response to Cybersecurity Threats
It is the policy ofthe Company and itstechnology service providers(“TSPs”) to ensure thatthey can identify,mitigate,
and respond to cyber-attacks involving destructivemalware and invasive attacks suchas phishing, ransomware, malware,
DDoSattacks,etc.ThiscommitmentalignswiththeCompany’sriskappetite,IncidentResponsePolicy,andBusiness
Continuity Plan,which incorporatesbusiness continuityplanning andtesting activitiesto enhance responseand recovery
capabilities.
The Company recognizes that it faces a variety of risks from cyber-attacks involving destructive malware, including
liquidity, capital, operational, andreputation risks, dueto events suchas fraud, dataloss, and disruptionof customerservice.
As such,it isthe policyof theCompany toensure thatits riskmanagement processes,and businesscontinuity planning
address these risks by:
●
Establishingacomprehensivegovernanceprogramencompassingpoliciesandprocedurestoadministerand
overseetheinformation/cybersecurityprogramstoensureadherencetoregulatoryguidanceandindustrybest
practices.
●
Securely configuring systems and services to mitigate the impact of cyber-threats. This includes measures such as
logical network segmentation, backups, maintaining an inventoryof authorized devices and software, and physical
segmentationofcriticalsystems.Consistencyinsystemconfigurationfostersasecurenetworkenvironmentby
removing or disabling unused applications, functions, or components.
●
Implementing and testingcontrols around criticalsystems on a regularbasis to ensure appropriateaccess control
and segregation of duties. Limits on sign-on attemptsfor critical systems are enforced, with accountsbeing locked
whenthethresholdaremet.Alertsystemsnotifyofbaselinecontrolchangesoncriticalsystems,withthe
effectiveness andadequacy ofcontrols periodicallytested andthe resultsreported tosenior managementand, if
applicable,theRiskCommittee,alongwithrecommendedriskmitigationstrategiesandtheprogressofactions
taken to remediate findings.
●
Performing securitymonitoring, prevention,and riskmitigation activitiesto ensurethe effectivenessof protection
and detection systems.This includes maintainingup-to-date intrusion detectionsystems, antivirus protection,and
properly configuredfirewallrules. Systemsare monitoredtoidentify,prevent,and containcyber-attackattempts
from all sources.
48USCB Financial Holdings, Inc.2025 10-K
●
Maintaining robust businesscontinuity planning processesto swiftlyrecover, resume, and maintainoperations post-
cyber-attack incidentsinvolving destructivemalware. Theseprocesses encompassdata and businessoperations
recovery,networkcapabilityrebuilding,anddataprotectionforofflinebackupsintheeventofcyber-attacks
impacting the Company and/or its critical service providers.
●
Conducting ongoinginformation securityrisk assessmentsto addressnew andevolving threatsto onlinedeposit
and loan accounts. This involves identifying, prioritizing, and assessing risks tocritical systems, including threats to
applications controllingvarious system parameters and implementingnecessary security prevention measures.
●
Reviewing, updating, and testing incident response and businesscontinuity plans annually to ensure effectiveness.
Testingencompassesbothin-houseandthird-partyprocessorscenariostovalidateemployeeunderstandingof
responsibilities and adherence to Company protocols.
Executive Oversight and Roles
The
responsibility
foradoptingandmaintaininganeffectivecybersecurityprogramisassignedtotheRMCD,who
collaborateswithfunctionalareamanagement,departmentallevelmanagers,andotherrelevantstaff.
Management
committees andthe Auditand RiskCommittee ofthe Board(“ARC”) reviewreports submittedby theRMCD detailingthe
Company’sinherentandresidualcybersecurityrisk,programsophisticationlevel,andhigh-riskthreatsidentifiedinthe
cybersecurity risk assessment.
TheARCoverseesthedevelopmentandmaintenanceoftheinformationsecurityprogram,holdingmanagement
accountable.Managementcommitteesensureprogramintegrationandeffectiveness,withtheRMCDresponsiblefor
cybersecurity controlsand procedures.The ARCreceives regular
reports
on cybersecurityrisk assessmentand program
updates,providingexpectationsandrequirementstomanagementandholdingthemaccountableforoversightand
coordination, assignment of responsibility,and the effectiveness of the information and cybersecuritysecurity program.
Annually,orasrequired,theRMCDprovidesacomprehensivereporttotheBoardregardingthestatusofthe
cybersecurityprogram
.Thisreportencompassesinternalassessments,utilizationoftheCybersecurityAssessment,
discussion ofsignificant programmatters suchas theannual riskassessment, riskmanagement decisions,monitoring of
service provider compliance, results of key controls testing, security breachesor violations, management's responses, and
recommendations for program enhancements.
Engagement with Third Party Vendors
The engagement of critical third-party providers introduces a range ofpotential risks that can affect the Bank’s strategic
direction, reputation, dailyoperations, transaction integrity,credit exposures, financialstability,technological environment,
and compliance posture. Providers whose services include the transmission, storage, or processingof non-public personal
informationpresent heightenedcompliance risks,particularlywith respectto therequirementsof theGLBAct andother
applicable Privacy Laws and Regulations.
TheBankhasestablishedgeneralguidelinestosupporttheidentification,riskassessment,monitoring,and
management of risks relatedto the engagement ofthird-party providers or vendors.This framework ensures that risksare
addressed proactively and in accordance with regulatoryexpectations.
Risk assessment forcritical providers mayrequire the involvementof specialized personnel,including the compliance
officer, technology officers, finance officers,internal auditors, andlegal counsel. Theirparticipation is essentialfor identifying
potential risks arisingfrom third-party relationships,defining performance criteria,establishing internal controls,specifying
reporting requirements, and ensuringcontractual obligations are inplace for ongoing risk assessmentand mitigation. This
collaborative approach helps maintain the integrity and security of theBank’s operations while meeting regulatory and legal
standards.
Compliance with Regulatory Standards
As noted above, annual testing, or more frequentlyif deemed necessary,of cybersecurity controls and procedureswill
be conductedto ensurecompliance. Ininstances ofidentified deficienciesor vulnerabilities,remedial actionplans willbe
implemented to rectify issues or establish mitigating controls. Any exceptionsdeemed significant will be promptly reported,
with remediation efforts prioritized.
Annually,orasrequired,theRMCDwillprovideacomprehensivereporttotheARCoradesignatedcommittee
regardingthestatusofthecybersecurityprogram.Thisreportwillencompassinternalassessments,utilizationofthe
Cybersecurity Assessment, and discussion of other significantprogram matters.
49USCB Financial Holdings, Inc.2025 10-K
As of the end ofthe reporting period setforth in this AnnualReport on Form 10-K,there is no knowledgeor indication
thatcustomersensitiveinformationwascompromisedasaresultofthird-parties’systemvulnerabilities.Management
continues to monitor developments and vendor communications.
Item 2.Properties
The Company’s corporateofficesare headquartered at2301 N.W.87th Avenue, Doral,Florida 33172. TheCompany,
through the Bank,operates 10 bankingcenters in SouthFlorida within Miami-Dade andBroward counties. Ofthe 10 banking
centers, nine of these locations are leasedand one is owned. The bankingcenter that is owned is located at3999 Sheridan
St, Hollywood,FL 33021.Management believesthat eachof these locationsare in goodcondition andadequate tomeet
our present and foreseeable needs, subject to possible futureexpansion.
See Note 4 “Leases” and Note 5 “Premises and Equipment” to the ConsolidatedFinancial Statements included in Item
8 in this Annual Report on Form 10-K for additional information.
Item 3.Legal Proceedings
We are not currently subject to any material legal proceedings. We are from time to time subject to claims and litigation
arisingintheordinarycourseofbusiness.Theseclaimsandlitigationmayinclude,amongotherthings,allegationsof
violation of banking and other applicable regulations, competitionlaw, labor laws and consumerprotection laws, as well as
claims orlitigationrelatingto intellectualproperty,securities, breachof contractand tort.Weintend todefend ourselves
vigorously against any pending or future claims and litigation.
There can be noassurance that anyfuture legal proceedingsto which we area party will notbe decided adverselyto
our interests and have a material adverse effecton our financial condition and operations.
Item 4.Mine Safety Disclosures
Not applicable.
50USCB Financial Holdings, Inc.2025 10-K
PART II
Item 5.MarketforRegistrant’sCommonEquity,RelatedStockholderMattersandIssuerPurchasesofEquity
Securities
(a)
Market Information
In July2021, the Bank’sClass A commonstock began tradingon theNasdaq Stock Marketunder tickersymbol “USCB”.
Effective December30, 2021,the Companyacquired allissued andoutstanding sharesof ClassA commonstock of
theBankinconnectionwiththebankholdingcompanyreorganization.EachoftheoutstandingsharesoftheBank’s
commonstockformerlyheldbyitsshareholderswasconvertedintoandexchangedforonenewlyissuedshareofthe
Company’s Class A common stock. The Company’sClass A common stock is also listed on the Nasdaq StockMarket and
uses the same ticker symbol.
The listing of our ClassA common stock on theNasdaq Stock Market hasresulted in a more activetrading market for
our Class A commonstock. However, we cannot assure investors thata liquid trading marketfor our Class Acommon stock
will be sustained.
PriortoourlistingontheNasdaqStockMarkettherewasnotanestablishedpublictradingmarketfortheClassA
common shares.
As of December 31, 2025, ourClass B common stock isnot listed or tradedon any stock exchange andno shares were
issued and outstanding at such date.
Holders
As ofFebruary28,2026,theCompany’sClassA commonshareswere heldbyapproximately550 shareholdersof
record,not includingthe numberof personsor entitieswhose stockis heldin nomineeor “street”name throughvarious
brokerage firms and banks.
Dividends
As a bank holding company, the Company’s ability to declare and pay dividends depends on various federal regulatory
considerations, includingthe guidelinesof the FederalReserve regardingcapital adequacyand dividends.The Company
has agreed to provide notice to the Federal Reserve prior to payingany cash dividends on its Class A common stock.
Because we area bank holdingcompany and currently donot engage directly inbusiness activities of amaterial nature,
our ability to pay dividendsto our shareholders depends,in large part, uponour receipt of dividendsfrom the Bank, which
is also subject tonumerous limitations onthe payment of dividendsunder federal and statebanking laws, regulationsand
policies. The Bank cannotdeclare and pay andcash dividends tothe Company without receivingthe prior approval ofthe
FDIC.
The principalsource ofrevenue withwhich topay dividendson commonshares aredividends theBank maydeclare
andpayoutoffundslegallyavailableforpaymentofdividends.AsaFloridacorporation,weareonlypermittedtopay
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 courseof business and(ii) the Company’sassets exceeds thesum of Company’s(a) liabilities plus(b) the
amount thatwould beneeded forthe Companyto satisfythe preferentialrightsupon dissolutionof shareholderswhose
preferential rights are superior to those receiving the dividend,if any.
Securities Authorized for Issuance Under Equity CompensationPlans
See Note 10 ”Equity Basedand Other Compensation Plans” tothe Consolidated Financial Statementsincluded in this
Annual Report Form on 10-K for additional informationrequired.
51USCB Financial Holdings, Inc.2025 10-K
Recent Sales of Unregistered Securities
The Company did not sell any of its equity securities during2025 that were not registered under the SecuritiesAct.
Purchases of Equity Securities by Issuer and Other Affiliates
On January 24,2022, the Boardof Directors approvedthe first sharerepurchase programof up to750,000 sharesof
Class A common stock. On April22, 2024 the Board ofDirectors approved the second share repurchaseprogram of up to
500,000 shares ofClass A commonstock. Under therepurchase programs,the Company maypurchase sharesof Class
Acommonstockonadiscretionarybasisfromtimetotimethroughopenmarketrepurchases,privatelynegotiated
transactions, or otherwisein compliance withRule 10b-18 underthe Exchange Act.As of December 31,2025, the Company
hadrepurchased9,671sharesofClassAcommonstockunderthefirstprogramandnosharesunderthesecond
repurchaseprogram.TheCompanydidnotrepurchaseanyofitsequitysecuritiesforthequarterendedDecember 31,
2025.AsofDecember 31,2025,528,309sharesremainedauthorizedforrepurchaseundertheCompany’stwostock
repurchase programs.
During theyear endedDecember 31,2025, theCompanyrepurchased2.0 millionshares ofClassA commonstock
from certaininstitutional shareholdersthrough privatelynegotiated transactions,at a weightedaverage priceper share of
$17.19.Theaggregatepurchasepriceforthesetransactionswasapproximately$34.4million.Therepurchaseswere
supplemental and not part of the Company’s twopreviously announced stock repurchase programs describedabove.
Item 6.Reserved
52USCB Financial Holdings, Inc.2025 10-K
Item 7.Management's Discussion and Analysis of Financial Conditionand Results of Operations
Management’sdiscussionandanalysisoffinancialconditionandresultsofoperationsanalyzestheconsolidated
financial condition and results of operations of the Company andthe Bank, its wholly owned subsidiary, for the years ended
December 31,2025and2024.Thisdiscussionandanalysisis bestreadinconjunctionwiththeConsolidatedFinancial
Statements and relatedfootnotes of the Companypresented in Item8 “Financial Statementsand Supplementary Data”of
this Annual Report on Form10-K. In addition tohistorical information, thisdiscussion contains forward-lookingstatements
thatinvolverisks,uncertaintiesandassumptionsthatcouldcauseactualresultstodiffermateriallyfrommanagement's
expectations.Factorsthatcouldcausesuchdifferencesarediscussedinthesectionsentitled"Forward-Looking
Statements" and Item 1A “Risk Factors" of this Annual Report.
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.
53USCB Financial Holdings, Inc.2025 10-K
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
ThisAnnualReportonForm10-Kcontainsstatementsthatarenothistoricalinnatureareintendedtobe,andare
hereby identified as, forward-lookingstatements for purposes ofthe safe harbor provided bySection 21E of the Securities
Exchange Actof 1934,as amended.The words“may,” “will,” “anticipate,” “could,”“should,” “would,” “believe,”“contemplate,”
“expect,”“aim,”“plan,”“estimate,”“seek,”“continue,”and“intend,”thenegativeoftheseterms,aswellasothersimilar
words and expressions of thefuture, are intended to identify forward-looking statements.These forward-looking statements
include statements related toour projected growth, anticipatedfuture financial performance, andmanagement’s long-term
performance goals, as well as statementsrelating to the anticipated effectson results of operations and financial condition
fromexpecteddevelopmentsorevents,orbusinessandgrowthstrategies,includinganticipatedinternalgrowthand
potential future additional balance sheet restructuring.
These forward-looking statements involve significant risks and uncertainties that could cause our actual results to differ
materially from those anticipated in such statements.Potential risks and uncertainties include, but are notlimited to:
•
the strength of the United States economyin general and the strength of the localeconomies in which we conduct
operations;
•
our ability to successfully manage interest rate risk, creditrisk, liquidity risk, and other risks inherent to our industry;
•
the accuracy of our financial statement estimates and assumptions, including the estimates used for our credit loss
reserve and deferred tax asset valuation allowance;
•
the efficiency and effectiveness of ourinternal control procedures and processes;
•
our abilityto complywith theextensive lawsand regulationsto whichwe aresubject, includingthe lawsfor each
jurisdiction where we operate;
•
adversechangesorconditionsinthecapitalandfinancialmarkets,includingactualorpotentialstressesinthe
banking industry;
•
deposit attrition and the level of our uninsured deposits;
•
legislative orregulatory changes andchanges including theenactment of theOne Big BeautifulBill Actand changes
in accounting principles, policies, practices or guidelines,including the on-going effects of the CECL standard;
•
the lack of a significantly diversified loan portfolio and concentration in the South Florida market, including the risks
of geographic, depositor,and industry concentrations,including our concentrationin loans secured byreal estate,
in particular, commercial real estate;
•
the effects of climate change;
•
the concentration of ownership of our common stock;
•
fluctuations in the price of our common stock;
•
our ability to fund or access the capital markets at attractiverates and terms and manage our growth, both organic
growth as well as growth through other means, such asfuture acquisitions;
•
inflation, interest rate, unemployment rate, market, and monetaryfluctuations;
•
the effects of potential new or increased tariffs,retaliatory tariffs and trade restrictions;
•
impacts of international hostilities and geopolitical events;
•
increasedcompetitionanditseffectonthepricingofourproductsandservicesaswellasournetinterestrate
spread and net interest margin;
•
the loss of key employees;
•
the effectiveness of our risk management strategies, including operational risks, including, but not limited to, client,
employee, or third-party fraud and security breaches; and
•
other risks described in this Annual Report on Form 10-Kand other filings we make with the SEC.
Allforward-lookingstatementsarenecessarilyonlyestimatesoffutureresults,andtherecanbenoassurancethat
actual results willnot differmaterially from expectations.Therefore, you arecautioned not toplace undue relianceon any
forward-lookingstatements.Further,forward-lookingstatementsincluded inthisAnnual Reporton Form10-K aremade
onlyas ofthedatehereof,andweundertakenoobligationtoupdateorreviseany forward-lookingstatementto reflect
events or circumstances after the date on which the statement is made or to reflect theoccurrence of unanticipated events,
unless required to do so underthe federal securities laws. Youshould also review the riskfactors described in this Annual
Report on Form 10-K and in the reports theCompany filed or will file with the SEC.
Non-GAAP Financial Measures
This Annual Report on Form 10-K includesfinancial information determined by methodsother than in accordance with
generallyacceptedaccountingprinciples(“GAAP”).Thisfinancialinformationincludescertainoperatingperformance
measures. Management has included these non-GAAPmeasures because it believes these measures mayprovide useful
supplemental informationfor evaluatingthe Company’sunderlying performancetrends. Further,management usesthese
measuresinmanagingandevaluatingtheCompany’sbusinessandintendstorefertothemindiscussionsaboutour
54USCB Financial Holdings, Inc.2025 10-K
operations and performance.Operating performancemeasures should beviewed in additionto, and notas an alternative
to orsubstitutefor,measuresdeterminedinaccordancewithGAAP,andarenotnecessarilycomparableto non-GAAP
measuresthatmaybepresentedbyothercompanies.Totheextentapplicable,reconciliationsofthesenon-GAAP
measures to the most directlycomparable GAAP measures can be foundin the ‘Non-GAAP Reconciliation Tables’ included
in this Annual Report on form 10-K.
Overview
For the year ended December 31, 2025, the Company reported net income of$26.1 million compared with net income
of $24.7 million for the year ended December 31, 2024.
Inevaluatingourfinancialperformance,weconsiderthelevelofandtrendsinnetinterestincome,thenetinterest
margin, thecost ofdeposits, growthand compositionof ourloan portfolio,levels andcomposition ofnon-interest income
and non-interestexpense,performanceratios,assetquality ratios,regulatorycapitalratios,and anysignificantevent or
transaction.
The following significant highlights are of note for the yearended December 31, 2025:
•
Net interest incomebefore provisionfor credit lossestotaled $83.6million, anincrease of $13.7million or 19.6%,
compared to $69.9 million for the year ended December31, 2024.
•
Net interest margin (“NIM”) was 3.20% for the yearended December 31, 2025, an improvement from 2.94% for the
year ended December 31, 2024.
•
Total assetsgrew to$2.8 billionat December 31,2025,an increaseof $210.3million or8.1%, comparedto $2.6
billion at December 31, 2024.
•
Total loans held for investmentgrew to $2.2 billionat December 31, 2025,an increase of $216.4million or 11.0%,
compared to $2.0 billion at December 31, 2024.
•
Return on average assets for the year ended December31, 2025 was 0.96% compared to 0.99%for 2024.
•
Return on averagestockholders’ equity forthe year endedDecember 31, 2025was 11.79% comparedto 12.11%
for 2024.
•
Nonperforming assets totaled $3.1 million at December31, 2025 compared to $2.7 million at December 31, 2024.
•
TheBankmaintaineditsstrongcapitalposition.AsofDecember 31,2025,theBankwaswell-capitalizedfor
regulatory capital purposes,with atotal risk-based capitalratio of 13.67%,a tier 1risk-based capital ratioof 12.47%,
acommonequitytier1capitalratioof12.47%,andaleverageratioof9.65%. AsofDecember 31,2025and
December 31, 2024, all of the Bank’s regulatory capital ratios exceeded the thresholds to be well-capitalized under
the applicablebank regulatoryrequirements. TheCompany,as asmallbank holdingcompany,is notsubjectto
regulatory capital requirements.
•
On August 14,2025, theCompany enteredinto aSubordinated NotePurchase Agreementwith certainqualified
institutional buyers pursuant to which theCompany sold and issued $40.0 millionin aggregate principal amount of
its 7.625%fixed-to-floating ratesubordinated notesdue August 15,2035 ina privateplacement transaction.This
transaction wasconducted underthe provisionsof RegulationD promulgatedunder theSecurities Act 1933. The
subordinated notes were issued bythe Company to thepurchasers at a price equalto 100% of their faceamount.
The majority ofthe net proceedswere used torepurchase 2.0 millionshares of ClassAcommon stock inSeptember
2025, from certain institutional shareholders through privately negotiated transactions, at a weighted average price
per shareof $17.19.The aggregatepurchaseprice forthese transactionswasapproximately$34.4 million.The
repurchasesweresupplementalandnotpartoftheCompany’stwopreviouslyannouncedstockrepurchase
programs.
•
During the fourth quarterof 2025 the Companyexecuted a portfolio restructuringstrategy which resulted ina sale
of $44.6million ofits lower-yieldingavailable-for salesecurities fora pre-taxloss of$7.5 million.The majorityof
proceeds from the sale were reinvested into loans at quarter-end.
55USCB Financial Holdings, Inc.2025 10-K
Critical Accounting Policies and Estimates
TheconsolidatedfinancialstatementsarepreparedbasedontheapplicationofU.S.GAAP,themostsignificantof
which are describedin Note 1 “Summaryof Significant AccountingPolicies” to ourConsolidated Financial Statements.To
prepare financial statements in conformity with GAAP,management makes estimates, assumptions,and judgments based
onavailableinformation.Theseestimates,assumptions,andjudgmentsaffecttheamountsreportedinthefinancial
statements and accompanying notes. These estimates, assumptions, and judgments are based oninformation available as
ofthedateofthefinancialstatementsand,asthisinformationchanges,actualresultscoulddifferfromtheestimates,
assumptionsandjudgmentsreflectedinthefinancialstatements.Inparticular,managementhasidentifiedaccounting
policies that, due tothe estimates, assumptionsand judgments inherentin those policies, arecritical in understandingour
financial statements.Managementhas presentedthe applicationof thesepoliciesto theaudit andrisk committeeof our
Board.
Allowance for Credit Losses - Loans
The allowance for creditlosses (“ACL”) isa valuation allowance thatis established through chargesto earnings in the
form ofa provision forcredit losses. Theamount of theACL isaffected by thefollowing: (i) charge-offsof loans thatdecrease
the allowance;(ii) subsequentrecoveries onloans previouslycharged offthat increasethe allowance;and (iii)provisions
for credit losses charged to income that increase or decrease the allowance. Management considers the policies related to
the ACL as the most critical to the Company’s financial statement presentation.
ACL is calculated usingCECL methodology.The CECL methodologymeasures expected creditlosses and applies to
financial assets measured at amortized cost, including loan receivables andheld-to-maturity debt securities. It also applies
to off-balancesheetcreditexposuresnotaccountedforas insurance(e.g.,loancommitments,standbylettersof credit,
financial guarantees,and similarinstruments), aswell asnet investmentsin leasesrecognized bylessors inaccordance
withTopic842onleases.TheCompanyestimatestheallowanceforcreditlossesbyutilizingpertinentavailabledata,
sourced both internallyand externally, relating topast events, currentconditions, and reasonableand supportable forecasts.
Historicalcreditlossesprovidethefoundationfortheestimationofexpectedcreditlosses.Qualitativeadjustmentsare
applied to the estimatedexpected credit lossesfor the loan portfolioto account forpotential constraints ofthe quantitative
model. Managementemploysa scorecardto facilitatethe evaluationof qualitativefactor adjustmentsmade toexpected
credit losses.
The estimation'squantitative aspectrelies onthe statisticalcorrelation betweenthe anticipatedvalue ofan economic
indicator and thehistorical lossexperience impliedwithin aselected groupof peers.The Company conductedregression
analyses usingpeer data,inclusive ofthe Companyitself, whereobserved creditlosses and choseneconomic indicators
were utilized to identifyappropriate drivers formodeling the lifetimeprobability of default (“PD”)rates. A loss givendefault
rate (“LGD”) is assigned to each poolof loans for each period based onthese PD outcomes. The modelprimarily employs
an expecteddiscounted cashflow (“DCF”)analysis forsegments withinthe loanportfolio. ThisDCF analysisoperates at
theindividualinstrumentlevelandincorporatesvariousloan-specificdatapointsandsegment-specificassumptionsto
ascertain the lifetime expectedloss associated with eachinstrument. An implicit "hypotheticalloss" is determined foreach
period of the DCF,aiding in establishing thepresent value of futurecash flows for eachperiod. The reserve allocatedto a
particular loan represents the disparitybetween the sum of thepresent value of future cashflows and the book balanceof
the loan at the measurement date.
ManagementusestheRemainingLife(“WARM”)methodologyforfivesegmentswithintheloanportfolio.Foreach
segment,along-termaveragelossrateiscomputedandappliedquarterlythroughouttheremaininglifeofthepool.
Qualitative assessmentsare conductedto adjust foreconomic expectations.Toestimate the remaininglife, management
employed a software solution utilizing an attrition-based calculation. This software conducts quarterly cohort-based attrition
measurements based on the loan portfolio.
Portfoliosegmentsrepresentthelevelatwhichlossassumptionsareappliedtoapool ofloans,determinedbythe
similarity ofrisk characteristics inherentin theincluded instruments, basedon collateralcodes andFFIEC Call Reportcodes.
Currently,the Company segmentsthe portfolio based oncollateral codes to establishreserves. Each segmentis linked to
regressionmodels(LossDriverAnalyses)usingpeerdataforloanswithsimilarriskcharacteristics.TheCompanyhas
established connectionsbetweeninternal portfoliosegmentation andFFIEC CallReport codesfor thispurpose. Theloss
driverforeachloanportfoliosegmentisderivedfromareadilyavailableandreasonableeconomicforecast,including
FederalReserveBankprojectionsoftheU.S.civilianunemploymentrateandyear-over-yearrealGDPgrowth.Forthe
residentialloansegment,HousePriceIndex(“HPI”)projectionspublishedbyFannieMae’sEconomicandStrategic
Research Group are utilized for the forecast. Forecasts are applied for the firstfour quarters of the credit loss estimate and
then linearly revert to the historical mean of the economic indicatorover the expected life of the loans.
56USCB Financial Holdings, Inc.2025 10-K
The model integrates qualitativefactor adjustments tofine-tune risk calibrationfor each portfoliosegment, addressing
aspects that quantitative analysis maynot fully capture. Decisions concerningqualitative adjustments reflect management's
anticipation of loss conditions deviating from those already accountedfor in the quantitative aspect of the model.
Our ACLincluded residentialloans. Toassess thepotential impactof changesin qualitativefactors relatedto these
loans,managementperformeda sensitivityanalysis.The Companyevaluatedtheimpactof theHPIusedin calculating
expected losses on the residential loan segment.As of December 31, 2025, for every100 basis points increase in the HPI
index, theforecast reducesreserves byapproximately $398thousand andabout 2basis pointsto thereserve coverage
ratio, everything else beingconstant. This sensitivity analysisprovides a hypothetical resultto assess the sensitivityof the
ACL and does not represent a change in management’sjudgement.
As ofDecember 31, 2025,we stresstested twoqualitative factorsin ourcommercial realestate loanpool, asit’s the
largest segmentin ourportfolio. Weevaluated theimpact ofa changein thequalitative factorsfrom norisk tomaximum
loss tomeasure thesensitivity ofthe qualitativefactors. Thechange resultedin a$10.3 millionor 39.6%increase inthe
ACL. This sensitivityanalysis provides ahypothetical result toassess the sensitivityof the ACLand doesnot represent a
change in management’s judgement.
The Company calculates a reserve for unfunded commitments, distinct fromthe allowance for credit losses reported in
accrued interestand other liabilities.This reserveis determinedusing both quantitativeand qualitativefactors identicalto
those applied to the collectively evaluated loan portfolio.
Results of Operations
General
The following tablespresent selected balance sheet, income statement, and profitability ratios for the dates and for the
periods indicated (in thousands, except ratios):
As of December 31,
2025
2024
Consolidated Balance Sheets:
Totalassets
$
2,791,540
$
2,581,216
Totalloans held for investment
(1)
$
2,189,257
$
1,972,848
Totaldeposits
$
2,345,080
$
2,174,004
Totalstockholders' equity
$
217,183
$
215,388
(1)Loan amounts include deferred fees/costs.
Years Ended December 31,
2025
2024
Consolidated Statements of Operations:
Net interest income before provision for credit losses
$
83,630
$
69,936
Provision for credit losses
$
2,297
$
3,157
Totalnon-interest income
$
6,592
$
12,740
Totalnon-interest expense
$
52,009
$
47,042
Net income
$
26,100
$
24,674
Net income available to common stockholders
$
26,100
$
24,674
Profitability:
Efficiency ratio
57.65%
56.90%
Net interest margin
3.20%
2.94%
The Company’s resultsof operationsdepend substantially onnet interest incomeand non-interest income.Other factors
contributing to theresults of operationsinclude our provisionfor credit losses,non-interest expense, andthe provision for
income taxes.
Net incomefor theyear endedDecember 31, 2025was $26.1 million,compared withnet incomeof $24.7 millionfor
the sameperiod in2024. The Companyreportednet incomeper dilutedshare forthe yearended December 31,2025 of
$1.33 compared to net income per diluted share for thesame period in 2024 of $1.24.
57USCB Financial Holdings, Inc.2025 10-K
Net Interest Income
Netinterestincomeisthedifferencebetweeninterestearnedoninterest-earningassetsandinterestincurredon
interest-bearing liabilities andis theprimary driver ofcore earnings. Interestincome is generatedfrom interest anddividends
oninterest-earningassets,includingloans,investmentsecuritiesandothershort-terminvestments.Interestexpenseis
incurredfrominterestpaidoninterest-bearingliabilities,includinginterest-bearingdeposits,FHLBadvancesandother
borrowings.
To evaluate netinterest income, wemeasure and monitor(i) yields onloans and otherinterest-earning assets, (ii)the
costs of depositsand other fundingsources, (iii) netinterest spread, and(iv) net interest margin.Net interest spread isequal
to thedifference betweenthe weightedaverage yieldsearned on interest-earning assetsand the weightedaverage rates
paid oninterest-bearing liabilities.Net interestmargin isequal tonet interestincome dividedby averageinterest-earning
assets. Because non-interest-bearingsources of funds,such as non-interest-bearingdeposits and stockholders’equity, also
fund interest-earning assets, net interest margin includesthe benefit of these non-interest-bearing sources.
Changes inthe marketinterest ratesand interestrates weearn oninterest-earning assetsor pay oninterest-bearing
liabilities, as wellas the volumeand types ofinterest-earning assets and interest-bearingand non-interest-bearing liabilities,
are usually thelargest drivers ofperiodic changes innet interest spread,net interest marginand net interestincome. The
Asset-Liability Committee (“ALCO”) has in place asset-liability management techniques to manage major factors that affect
net interest income and net interest margin.
58USCB Financial Holdings, Inc.2025 10-K
The following tablecontains informationrelated to averagebalances, averageyields on assets,and averagecosts of
liabilities for the periods indicated (in thousands).
Years Ended December 31,
2025
2024
Average
Balance
(1)
Interest
Yield/Rate
Average
Balance
(1)
Interest
Yield/Rate
Assets
Interest-earning assets:
Loans
(2)
$
2,069,039
$
128,160
6.19
%
$
1,862,013
$
115,236
6.19
%
Investment securities
(3)
460,089
13,715
2.98
%
427,567
11,480
2.68
%
Other interest-earning assets
86,183
3,612
4.19
%
88,758
4,517
5.09
%
Totalinterest-earning assets
2,615,311
145,487
5.56
%
2,378,338
131,233
5.52
%
Non-interest earning assets
105,874
108,215
Totalassets
$
2,721,185
$
2,486,553
Liabilities and stockholders' equity
Interest-bearing liabilities:
Interest-bearing demand deposits
$
51,803
1,283
2.48
%
$
54,667
1,509
2.76
%
Savings and money market deposits
1,255,719
38,027
3.03
%
1,109,853
40,098
3.61
%
Time deposits
470,213
18,104
3.85
%
326,373
13,354
4.09
%
Totalinterest-bearing deposits
1,777,735
57,414
3.23
%
1,490,893
54,961
3.69
%
FHLB advances
86,382
3,238
3.75
%
158,484
6,336
4.00
%
Subordinated notes
16,463
1,205
7.32
%
-
-
-
%
Totalinterest-bearing liabilities
1,880,580
61,857
3.29
%
1,649,377
61,297
3.72
%
Non-interest-bearing demand deposits
577,232
596,073
Other non-interest-bearing liabilities
41,955
37,399
Totalliabilities
2,499,767
2,282,849
Stockholders' equity
221,418
203,704
Totalliabilities and stockholders' equity
$
2,721,185
$
2,486,553
Net interest income
$
83,630
$
69,936
Net interest spread
(4)
2.27
%
1.80
%
Net interest margin
(5)
3.20
%
2.94
%
(1)Average balances - Daily average balances are usedto calculate yields/rates.
(2)Average loan balances include non-accrual loans. Interest incomeon loans includes accretion of deferredloan fees, net of deferred loan costs.
(3)At fair value except for securities held to maturity. This amount includesFHLB stock.
(4)Net interest spread is the weighted averageyield earned on total interest-earning assetsminus the weighted average rate paid on total interest-
bearing liabilities.
(5)Net interest margin is the ratio of net interestincome to average total interest-earning assets.
Net interestincome beforethe provisionfor creditlosses was$83.6 million forthe yearended December 31,2025, a
increase of $13.7million or 19.6%,from $69.9 millionfor the yearended December 31,2024. The increasewas primarily
driven by a decrease in the weighted
‑
average rates paid on interest
‑
bearing liabilities, which lowered overall funding costs,
combined with higher weighted
‑
average yields on interest
‑
earning assets. In addition, growth in theloan portfolio increased
the volume of interest
‑
earning assets, further contributing to the increase in netinterest income.
Thenetinterestmargin(“NIM”)was3.20%fortheyearendedDecember 31,2025and2.94%fortheyearended
December 31, 2024. The NIM increasedprimarily due to a decreasein the weighted average ratepaid on interest-bearing
59USCB Financial Holdings, Inc.2025 10-K
liabilities, inparticular adecrease inweighted averagerate paidon savingand moneymarket deposits.The decreasein
our cost of funds was primarily due to the interest ratemarket.
Provision for Credit Losses
ACL represents expectedcredit lossesin ourportfolio asthe measurementdate. Wemaintain anadequate ACL that
canmitigateexpectedcreditlossesintheloanportfolio.The ACLisincreasedbytheprovisionforcreditlossesandis
decreased by charge-offs, netof recoveries on priorloan charge-offs. There aremultiple credit quality metricsthat we use
to baseour determinationof theamountof theACL andcorrespondingprovisionforcreditlosses. Thesecredit metrics
evaluate thecredit qualityand levelof creditrisk inherentin ourloan portfolio,assess non-performingloans andcharge-
offs levels, consider statistical trends and economic conditionsand other applicable factors.
TheprovisionforcreditlossfortheyearendedDecember 31,2025,was$2.3millioncomparedto$3.2millionin
provision expense for thesame period in 2024. The ACL as apercentage of totalloans was 1.16%at December 31, 2025
compared to 1.22% at December31, 2024. The ratio of ACL to total loans decreased dueto several payoffs of individually
reservedloans during 2025 and the improvement of the expected lossrate for various categories of pooled loans.
See “Allowancefor CreditLosses” belowfor furtherdiscussion onhow theACL wascalculated forthe periodspresented.
Non-Interest Income
Net interest incomeand other types ofrecurring non-interestincome are generatedfrom our operations.Our services
and products generate service charges andfees, mainly from our depository accounts.We also generate income fromour
interestswapprogramandfromthegainonsaleofloansthoughourSBA program.Inaddition,weownlifeinsurance
policies on severalkey employees andgenerate income reflectingthe increase inthe cash surrendervalue of thesepolicies.
The following table presents the components of non-interestincome for the periods indicated (in thousands):
Years Ended December 31,
2025
2024
Service fees
$
9,603
$
8,839
(Loss) gain on sale of securities available for sale, net
(7,526)
14
Gain on sale of loans held for sale, net
1,001
747
Other non-interest income
3,514
3,140
Totalnon-interest income
$
6,592
$
12,740
Non-interest incomefor theyear endedDecember 31, 2025was $6.6million comparedto $12.7million forthe same
period in2024. Thisdecrease wasprimarily drivenby a$7.5 millionloss onsale ofsecurities availablefor saleresulting
from a portfolio restructuring strategyapproved by the Board ofDirectors and implemented in December 2025.The portfolio
restructuring strategyresulted inthe sale oflower-yielding available-for-salesecurities ata loss inorder to betterposition
our securities portfolio.Proceeds from the saletransactions were primarilyreinvested in assetsbearing higher yieldsthan
those on the securities that weresold. Service fees increased $764thousand or 8.6%, primarily dueto title insurance fees
and prepaymentpenalties.The gainon saleof SBA 7aloans increased$254 thousandor 34.0%,and othernon-interest
incomeincreased$374thousandor11.9%,primarilyduetoincreasesinthecashsurrendervaluesofbank-ownedlife
insurance policies.
Non-Interest Expense
The following table presents the components of non-interestexpense for the periods indicated (in thousands):
Years Ended December 31,
2025
2024
Salaries and employee benefits
$
32,167
$
28,793
Occupancy
5,330
5,258
Regulatory assessment and fees
1,637
1,766
Consulting and legal fees
1,941
1,568
Network and information technology services
2,324
1,993
Other operating
8,610
7,664
Totalnon-interest expense
$
52,009
$
47,042
60USCB Financial Holdings, Inc.2025 10-K
Non-interest expensefor theyear endedDecember 31, 2025increased $5.0 millionor 10.6%,compared tothe year
ended December 31, 2024.The increase isprimarily due to$3.4 million or11.7% increase insalaries and employeebenefits
consisting of a $2.2million or 11.0% increasedue to meritpromotions and new hires,a $455 thousand or13.6% increase
in benefits(health insurance)and payrolltaxes,and a$876 thousandincrease instock-basedcompensation dueto the
Company’s favorable financial performance in 2025. Other operatingexpense had an increase of $946 thousand or 12.3%
consisting ofan increaseof $204thousand initem processing,$146 thousandin internetbanking fees,a $169thousand
increaseinpromotionalexpense,a$207thousandincreaseindirectorfees,anda$220thousandinotheroperating
expenses.
Provision for Income Tax
Fluctuations in the effective tax rate reflect the effect of the differences in the inclusion or deductibility of certain income
and expense for income tax purposes.Therefore, future decisions on the investments wechoose will affect our effective tax
rate. Changes in thecash surrender valueof bank-owned lifeinsurance policies forkey employees, purchasingmunicipal
bonds, and overall taxable income will be important elementsin determining our effective tax rate.
Income taxexpense forthe yearended December31, 2025was$9.8 million,comparedto $7.8 millionfor theyear
ended December 31,2024. The effectivetax rateincreased to 27.3%for the yearended December 31,2025 from 24.0%
for theyear endedDecember 31, 2024.The increasein effectivetax ratein 2025was dueprimarily tothe recognitionof
$1.1 million of state tax liability expense for the year ended December 31, 2024. The state tax liabilityexpense was related
to taxes due on interest income on loans whose collateralis located outside the State of Florida.
The Company did not have any tax-exempt securitiesat both December 31, 2025 and December 31, 2024.
For a furtherdiscussion on income taxes, seeNote 6 “Income Taxes”to the Consolidated Financial Statementsset forth
in Item 8 of this Annual Report on Form 10-K.
Rate/Volume Analysis
Thetablebelowsetsforthinformationregardingchangesininterestincomeandinterestexpensefortheperiods
indicated (in thousands).For each category ofinterest-earning assets and interest-bearing liabilities,information is provided
on changes attributable to (i) changes in rate (changes in rate multiplied by old volume); (ii) changes in volume (changes in
volume multiplied by old rate); and (iii) changes in rate-volume (change inrate multiplied by change in volume). Changes in
rate-volume are proportionately allocated between rate and volumevariance (in thousands).
Years Ended 2025 vs. 2024
Years Ended 2024 vs. 2023
Increase (decrease) due to change in
Increase (decrease) due to change in
Volume
Rate
Net
Change
Volume
Rate
Net
Change
Interest-earning assets:
Loans
(1)
$
12,812
$
112
$
12,924
$
13,949
$
13,403
$
27,352
Investment securities
(2)
873
1,362
2,235
90
1,378
1,468
Other interest-earning assets
(130)
(775)
(905)
1,077
319
1,396
Total increase in interest income
$
13,555
$
699
$
14,254
$
15,116
$
15,100
$
30,216
Interest-bearing liabilities:
Interest-bearing demand deposits
$
(79)
$
(147)
$
(226)
$
23
$
585
$
608
Savings and money market deposits
5,270
(7,341)
(2,071)
4,498
5,942
10,440
Time deposits
5,885
(1,135)
4,750
1,824
3,030
4,854
FHLB advances
(2,882)
(216)
(3,098)
2,269
677
2,946
Subordinated notes
1,205
-
1,205
-
-
-
Total increase (decrease) in interest expense
9,399
(8,839)
560
8,614
10,235
18,848
Increase in net interest income
$
4,156
$
9,538
$
13,694
$
6,502
$
4,865
$
11,368
(1)Average loan balances include non-accrual loans. Interest incomeon loans includes accretion of deferredloan fees, net of deferred loan costs.
(2)At fair value except for securities held to maturity. This amount includesFHLB stock.
61USCB Financial Holdings, Inc.2025 10-K
DuringtheyearendedDecember 31,2025averageratespaidoninterest-bearingliabilitiesdecreased,whileyields
earnedoninterest-earningassetsincreasedslightly.TheCompanywasabletorepriceitsinterest-bearingliabilities
downward more rapidly than its interest-earning assets.
Analysis of Financial Condition
Totalassets at December 31,2025, were $2.8 billion,an increase of $210.3million, or 8.1%, overtotal assets of $2.6
billionatDecember 31,2024.Totalloansheldforinvestmentincreased$216.4million,or11.0%,to$2.2billionat
December 31, 2025compared to$2.0 billionat December 31,2024. Totaldeposits increasedby $171.1million, or7.9%,
to $2.3billion at December 31, 2025 compared to $2.2billion at December 31, 2024.
Investment Securities
The investment portfoliois used andmanaged to provideliquidity through cashflows, marketabilityand, if necessary,
collateral forborrowings. Theinvestment portfoliois alsoused asa toolto manageinterest raterisk andthe Company’s
capital market risk exposure. Theoperating philosophy of the portfolio isto maximize the Company’s profitability,taking into
consideration theCompany’s riskappetite andtolerance, manageit’s assetcomposition anddiversification, andmaintain
adequate risk-based capital ratios.
TheinvestmentportfolioismanagedinaccordancewiththeAssetandLiabilityManagement(“ALM”)policy,which
includesinvestmentguidelines,approvedbytheBoard.Suchpolicyisreviewedatleastannuallyormorefrequentlyif
deemed necessary,depending onmarketconditionsand/orunexpectedevents.The investmentportfoliocompositionis
subjecttochangedependingonthefundingandliquidityneedsoftheCompany,andtheinterestriskmanagement
objectives directed by the ALCO. The portfolio of investments can be used to modify the duration of the balance sheet.The
allocation of cash into securities takes into consideration anticipatedfuture cash flows (uses and sources) and all available
sources of credit.
OurinvestmentportfolioconsistsprimarilyofsecuritiesissuedbyU.S.government-sponsoredagencies,agency
mortgage-backed securities,collateralized mortgageobligation securities,municipal securities,and otherdebt securities,
all with varying contractual maturities and coupons. Due to the optionality embedded in these securities, the final maturities
do notnecessarily represent theexpected life ofthe portfolio. Someof thesesecurities will becalled or paiddown depending
on capital market conditions and expectations. 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 aswell as for adherence to the
Company’s investment policy.
As of December 31, 2025, the investment portfolio consisted of available-for-sale(“AFS”) and held-to-maturity (“HTM”)
debt securities. In 2022, the Company transferred investment securities fromAFS to HTM with an amortized cost basis and
fair valueamount of$74.4 millionand $63.8million, respectively.On thedate oftransfer,these securitieshad atotal net
unrealized loss of $10.6 million. The transfer of the debt securities from the AFS to HTMcategory was made at fair value at
the date of transfer. The unrealized gain or loss at the date of transfer is retained in accumulated other comprehensive loss
and in the carrying valueof the HTM securities. Suchamounts are amortized overthe remaining life of the security.There
was no impactto net income onthe date of transfer. There wereno securities transferred fromAFS to HTMin 2025 or 2024.
The book value of the AFS securities is adjusted quarterly forunrealized gain or loss as a valuation allowance, and any
gain or loss is reported on an after-tax basis as a componentof other comprehensive loss in stockholders’ equity.
CECL requires a loss reserve for securitiesclassified as HTM. The reserve should reflecthistorical credit performance
as well as the impact of projected economic forecast.For U.S. Government bonds and U.S. Agency issuedbonds in HTM,
the explicit guarantee of the U.S.Government is sufficient to conclude that acredit loss reserve is not required.The reserve
requirementisfor threeprimaryassetsgroups:municipalbonds,corporatebonds,andnon-agencysecuritizations.The
Company calculates quarterly the loss reserveutilizing Moody’s ImpairmentStudio. The CECL measurement for investment
securitiesincorporateshistoricaldata,containingdefaultsandrecoveriesinformation,andMoody’sbaselineeconomic
forecast. Thesolution usesprobability ofdefault/lossgiven default(“PD/LGD”)approach. PDrepresents thelikelihood a
borrower willdefault.Within theMoody’smodel, thisis determinedusing historicaldefault data,adjusted forthe current
economic environment. LGD projects the expected lossif a borrower were to default.
The Companymonitors the creditquality of HTMsecurities through theuse ofcredit ratings. Creditratings are monitored
by the Companyon at leasta quarterly basis.As of December31, 2025 andDecember 31, 2024,all HTM securitiesheld
by the Company were rated investment grade.
62USCB Financial Holdings, Inc.2025 10-K
At December 31, 2025, HTM securities included $144.9million of U.S. Government and U.S.Agency issued bonds and
mortgage-backedsecurities.Becauseoftheexplicitand/orimplicitguaranteeonthesebonds,theCompanyholdsno
reservesontheseholdings.TheremainingportionoftheHTMportfolioismadeupof$9.0millionininvestmentgrade
corporate bonds. The required reserve for theseholdings is determined each quarter using the model described above.For
the portion of the HTM exposed to non-government credit risk,the Company utilized the PD/LGD methodologyto estimate
a $2 thousandACL as ofDecember 31, 2025. Thebook value fordebt securities classifiedas HTM representsamortized
cost less ACL.
As of December 31, 2025, securities with a fair value of $43.5million were pledged to secure public deposits.
63USCB Financial Holdings, Inc.2025 10-K
Thefollowingtablepresentstheamortizedcostandfairvalueofinvestmentsecuritiesforthedatesindicated(in
thousands):
December 31, 2025
Available-for-sale:
Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Fair Value
U.S. Government Agency
$
15,169
$
18
$
(1,043)
$
14,144
Collateralized mortgage obligations
92,871
-
(17,043)
75,828
Mortgage-backed securities - residential
35,865
135
(6,083)
29,917
Mortgage-backed securities - commercial
174,622
347
(6,861)
168,108
Municipal securities
5,196
-
(933)
4,263
Bank subordinated debt securities
15,284
189
(243)
15,230
$
339,007
$
689
$
(32,206)
$
307,490
December 31, 2025
Held-to-maturity:
Amortized
Cost
Unrecognized
Gains
Unrecognized
Losses
Fair Value
U.S. Government Agency
$
41,158
$
91
$
(3,279)
$
37,970
Collateralized mortgage obligations
51,431
854
(5,499)
46,786
Mortgage-backed securities - residential
37,221
760
(3,263)
34,718
Mortgage-backed securities - commercial
15,088
-
(1,037)
14,051
Corporate bonds
9,045
-
(62)
8,983
$
153,943
$
1,705
$
(13,140)
$
142,508
Allowance for credit losses - securities held-to-maturity
(2)
Securities held-to maturity, net of allowance for credit losses
$
153,941
December 31, 2024
Available-for-sale:
Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Fair Value
U.S. Government Agency
$
14,279
$
14
$
(1,668)
$
12,625
Collateralized mortgage obligations
101,808
15
(22,918)
78,905
Mortgage-backed securities - residential
58,995
1
(12,063)
46,933
Mortgage-backed securities - commercial
86,604
40
(7,905)
78,739
Municipal securities
24,925
-
(5,614)
19,311
Bank subordinated debt securities
24,314
438
(1,044)
23,708
$
310,925
$
508
$
(51,212)
$
260,221
December 31, 2024
Held-to-maturity:
Amortized
Cost
Unrecognized
Gains
Unrecognized
Losses
Fair Value
U.S. Government Agency
$
42,538
$
-
$
(5,094)
$
37,444
Collateralized mortgage obligations
56,987
57
(7,785)
49,259
Mortgage-backed securities - residential
40,681
53
(4,613)
36,121
Mortgage-backed securities - commercial
15,272
-
(1,385)
13,887
Corporate bonds
9,222
-
(393)
8,829
164,700
$
110
$
(19,270)
$
145,540
Allowance for credit losses - securities held-to-maturity
(6)
Securities held-to maturity, net of allowance for credit losses
$
164,694
64USCB Financial Holdings, Inc.2025 10-K
AFS andHTM investmentsecurities inaggregate increased$36.5 millionor 8.6%to $461.4million atDecember 31,
2025 from $424.9 million at December 31, 2024.
The followingtable showsthe weightedaverage yields,categorized bycontractual maturity,for investmentsecurities
as of December 31, 2025 (in thousands, except ratios):
Within 1 year
After 1 year
through 5 years
After 5 years
through 10 years
After 10 years
Total
Amortized
Cost
Yield
Amortized
Cost
Yield
Amortized
Cost
Yield
Amortized
Cost
Yield
Amortized
Cost
Yield
Available-for-sale:
U.S. Government Agency
$
-
-
$
-
-
$
-
-
15,169
4.00%
$
15,169
4.00%
Collateralized mortgage obligations
-
-
-
-
-
-
92,871
1.74%
92,871
1.74%
Mortgage-backed securities - residential
-
-
-
-
-
-
35,865
2.41%
35,865
2.41%
Mortgage-backed securities - commercial
-
-
-
-
-
-
174,622
4.02%
174,622
4.02%
Municipal securities
-
-
-
-
5,196
1.87%
-
-
5,196
1.87%
Bank subordinated debt securities
-
-
4,473
8.14%
10,811
5.65%
-
-
15,284
6.38%
$
-
-
$
4,473
8.14%
$
16,007
4.42%
$
318,527
3.17%
$
339,006
3.30%
Held-to-maturity:
U.S. Government Agency
$
2,999
0.64%
$
19,773
1.25%
$
5,001
1.99%
$
13,385
1.85
$
41,158
1.49%
Collateralized mortgage obligations
-
-
-
-
-
-
51,431
1.67%
51,431
1.67%
Mortgage-backed securities - residential
675
2.96%
3,888
1.66%
5,051
1.62%
27,607
2.18%
37,221
2.06%
Mortgage-backed securities - commercial
-
-
3,042
1.63%
-
-
12,046
2.56%
15,088
2.37%
Corporate bonds
9,045
2.82%
-
-
-
-
-
-
9,045
2.82%
$
12,719
2.31%
$
26,703
1.35%
$
10,052
1.81%
$
104,469
1.92%
$
153,943
1.85%
The Company did not have any tax-exempt securitiesat both December 31, 2025 and 2024.
Loans
Loans arethe largestcategory ofinterest-earning assetson theConsolidatedBalance Sheets,and usuallyprovides
higher yields than the remainder of the Company’sinterest-earning assets. Higher yields typically carryinherent credit and
liquidity risks incomparison to loweryielding assets. TheCompany manages andmitigates such risksin accordance with
the credit and ALM policies, risk tolerance and balancesheet composition.
The following table shows the loan portfolio compositionas of the dates indicated (in thousands):
December 31, 2025
December 31, 2024
Total
Percent of
Total
Total
Percent of
Total
Residential Real Estate
$
307,692
14.1
%
$
289,961
14.8
%
Commercial Real Estate
1,244,835
57.0
%
1,136,417
57.8
%
Commercial and Industrial
295,548
13.5
%
258,311
13.1
%
Correspondent Banks
127,968
5.9
%
82,438
4.2
%
Consumer and Other
207,215
9.5
%
198,091
10.1
%
Totalgross loans
2,183,258
100.0
%
1,965,218
100.0
%
Plus: Deferred costs/fees
5,999
7,630
Totalloans held for investment, net of deferred costs/fees
2,189,257
1,972,848
Less: Allowance for credit losses
25,500
24,070
Totalloans held for investment, net of allowance
$
2,163,757
$
1,948,778
Totalloans held for investment netof deferred costs/fees increasedby $216.4 million or 11.0%at December 31, 2025
compared to December 31,2024. The mostsignificant growth wasin the commercialreal estate andcorrespondent bank
loan pools.Commercial real estate continues tobe the main category ofour portfolio, reflective of themarket in which we
operate. We continueto grow our non-CREloan pools to furtherdiversify the loan portfoliooverall composition, but wedo
not expect any significant changes over the foreseeablefuture in the composition of our loan portfolio.
65USCB Financial Holdings, Inc.2025 10-K
Thegrowthexperiencedoverthelastcoupleofyearsisprimarilyduetoimplementationofourrelationship-based
bankingmodel,ourdiversifiedbusinessverticals,andthesuccessofourrelationshipmanagersincompetingfornew
business in a highly competitive metropolitan area.
From aliquidity perspective,our loanportfolio providesus withadditionalliquidity dueto repaymentsor unexpected
prepayments.Thefollowingtableshowsmaturitiesandsensitivitytointerestratechangesfortheloanportfolioat
December 31, 2025 (in thousands):
Due in 1 year or
less
Due in 1 to 5
years
Due after 5 to 15
years
Due after 15
years
Total
Residential Real Estate
$
8,435
$
61,279
$
66,063
$
171,915
$
307,692
Commercial Real Estate
69,664
527,784
641,905
5,482
1,244,835
Commercial and Industrial
10,369
120,412
120,845
43,922
295,548
Correspondent Banks
127,968
-
-
-
127,968
Consumer and Other
2,493
1,152
24,760
178,810
207,215
Totalgross loans
$
218,929
$
710,627
$
853,573
$
400,129
$
2,183,258
Interest rate sensitivity:
Fixed interest rates
$
176,933
$
188,621
$
164,498
$
310,107
$
840,159
Floating or adjustable rates
41,996
522,006
689,075
90,022
1,343,099
Totalgross loans
$
218,929
$
710,627
$
853,573
$
400,129
$
2,183,258
The informationpresented inthe tableabove isbased uponcontractual maturitiesof theindividual loans,which may
be subject to renewal at their contractual maturity. Renewals will depend on approval by our credit department and balance
sheet compositionat thetime ofthe analysis,as wellas anymodification ofterms atthe loan’s maturity. Additionally, maturity
concentrations,loan duration,prepaymentspeedsandother interestratesensitivitymeasuresare discussed,reviewed,
and analyzed by the ALCO. Decisions on term and ratemodifications are discussed as well.
As ofDecember 31,2025,approximately61.5%of theloanshave adjustable/variableratesand38.5%of theloans
have fixed rates.The adjustable/variableloans re-price todifferent benchmarksand tenors indifferent periodsof time. By
contractual characteristics, there are nomaterial concentrations on anniversary repricing. Additionally, it isimportant to note
that mostof ourloans haveinterest ratefloors. Thisembedded optionprotects theCompany froma decreasein interest
rates and positions us to gain in the scenario of higher interestrates.
As ofDecember 31, 2025, thecommercial real estateportfolio was $1.2billion or 57.0%of thetotal gross loansportfolio.
Atsuchdate,$193.0millionofoutstandingbalancesarecharacterizedasowneroccupiedand$1.05billionare
characterized as non-owner occupied.The retail sectorwas the largestsegment comprising $320.1 millionof the non-owner
occupied commercial real estate portfolio.
Thefollowingtableisasummaryofthedistributionofnon-owneroccupiedcommercialrealestateloansheldfor
investment by loan type (dollars in thousands):
December 31, 2025
Balance
# of Notes
% of Total
Gross Loans
Average Loan Size
Non-Accruals
Weighted Avg
LTV
(1)
Retail
$
320,132
145
15%
$
2,208
$
-
56%
Multifamily
252,041
197
12%
1,279
-
64%
Warehouse
134,190
68
6%
1,973
-
54%
Office
122,887
59
6%
2,083
-
49%
Hotels/Motels
117,226
52
5%
2,254
-
63%
Construction/Land
73,080
22
3%
3,322
-
46%
Other
32,272
28
1%
1,153
-
59%
$
1,051,828
571
48%
$
1,842
$
-
$
57%
(1) Loan-to-value is calculated based on the real estate value at the time of origination, renewal, or update, whichever is more recent.
66USCB Financial Holdings, Inc.2025 10-K
The following table is a summary of non-owner occupied commercial real estate loans held for investment by collateral
geographical location (dollars in thousands):
December 31, 2025
South Florida
(1)
Rest of Florida
(2)
Outside Florida
(3)
Balance
% of Non-
Owner
Occupied
CRE Loans
Balance
% of Non-
Owner
Occupied
CRE Loans
Balance
% of Non-
Owner
Occupied
CRE Loans
Retail
$
220,390
21%
$
46,268
4%
$
53,475
5%
Multifamily
177,152
17%
74,888
7%
-
0%
Warehouse
70,399
7%
59,465
6%
4,326
0%
Office
90,470
9%
26,788
3%
5,629
1%
Hotels/Motels
89,754
9%
27,472
3%
-
0%
Construction/Land
59,039
6%
14,041
1%
-
0%
Other
17,112
2%
11,659
1%
3,500
0%
$
724,316
71%
$
260,581
25%
$
66,930
6%
(1) Miami-Dade, Broward, and West Palm Beach counties
(2) All other Florida counties
(3) Within the U.S.
As ofDecember 31, 2025,71% ofthe non-owneroccupied CREportfolio werelocated withinSouth Florida.26 loan
notes with anoutstanding principalbalance of$66.9 millionare locatedoutside Florida.Balances ofnon-owner occupied
CRE loans outsideFlorida were: $44.2million in NewYork,$7.3 million inGeorgia,$7.1 million inIndiana, $4.3 millionin
Arkansas, and $4.1 million in North Carolina.
Asset Quality
Our asset quality gradinganalysis estimates the capability ofthe borrower to repaythe contractual obligation ofthe loan
agreement as scheduled or at all. The Company’s internal credit risk grading system is based on experiences with similarly
graded loans. Internalcredit riskgrades are evaluatedat least annually,or more frequentlyif deemed necessary.Internal
creditriskratingsmaychangebasedonmanagement’sassessmentoftheresultsfromtheannualreview,portfolio
monitoring and other developments observed with borrowers.
The internal credit risk grades used by the Company toassess the credit worthiness of a loan are shown below:
Pass
– Loans indicate different levels of satisfactoryfinancial condition and performance.
Special Mention
– Loans classified as special mention have a potential weaknessthat deserves management’s
close attention. If left uncorrected, these potential weaknessesmay result in deterioration of the repayment
prospects for the loan or of the institution’scredit position at some future date.
Substandard
– Loans classified as substandard are inadequately protectedby the current net worth and paying
capacity of the obligator or of the collateral pledged, ifany. Loans so classifiedhave a well-defined weakness or
weaknesses that jeopardize the liquidation of the debt.They are characterized by the distinct possibility that the
institution will sustain some loss if the deficiencies arenot corrected.
Doubtful
– Loans classified as doubtful have all the weaknesses inherentin those classified at substandard, with
the added characteristic that the weaknesses make collectionor liquidation in full on the basis of currently existing
facts, conditions, and values, highly questionable and improbable.
Loss
– Loans classified as loss are considered uncollectible.
67USCB Financial Holdings, Inc.2025 10-K
Loan credit exposures by internally assigned grades areas follows for the dates indicated (in thousands):
December 31, 2025
Pass
Special Mention
Substandard
Doubtful
Total
Residential Real Estate
$
304,276
$
916
$
2,500
$
-
$
307,692
Commercial Real Estate
1,230,823
11,613
2,399
-
1,244,835
Commercial and Industrial
293,169
907
1,472
-
295,548
Correspondent Banks
127,968
-
-
-
127,968
Consumer and Other
207,215
-
-
-
207,215
$
2,163,451
$
13,436
$
6,371
$
-
$
2,183,258
December 31, 2024
Pass
Special Mention
Substandard
Doubtful
Total
Residential Real Estate
$
289,401
$
-
$
560
$
-
$
289,961
Commercial Real Estate
1,133,965
-
2,452
-
1,136,417
Commercial and Industrial
256,031
-
2,280
-
258,311
Correspondent Banks
82,438
-
-
-
82,438
Consumer and Other
196,101
-
1,990
-
198,091
$
1,957,936
$
-
$
7,282
$
-
$
1,965,218
Non-Performing Assets
The following table presents non-performing assets asof December 31, 2025 and 2024 (in thousands, exceptratios):
2025
2024
Totalnon-performing loans
$
3,138
$
2,707
Other real estate owned
-
-
Totalnon-performing assets
3,138
2,707
Asset quality ratios:
Allowance for credit losses to total loans
1.16%
1.22%
Allowance for credit losses to non-performing loans
813%
889%
Non-performing loans to total loans
0.14%
0.14%
Non-performingassetsincludeallloanscategorizedas non-accrualor restructured,impairedsecurities,OREOand
other repossessed assets. Problem loans for which the collection or liquidation in full is reasonably uncertain are placed on
non-accrualstatus.Thisdeterminationisbasedoncurrentexistingfactsconcerningcollateralvaluesandthepaying
capacity of the borrower. When the collection of the full contractual balance is unlikely,the loan is placed on non-accrual to
avoid overstating the Company’s income for a loan withincreased credit risk.
If theprincipal orinterest ona commercialloan becomesdue andunpaid for90 daysor more,the loanis placedon
non-accrual status as ofthe date it becomes90 days past dueand remains in non-accrualstatus until it meetsthe criteria
for restoration to accrual status.Residential loans, onthe other hand, are placedon non-accrual status whenthe principal
or interestbecomes dueand unpaidfor 120days ormore and remainsin non-accrualstatus untilit meetsthe criteriafor
restorationtoaccrualstatus.Restoringaloantoaccrualstatusispossiblewhentheborrowerresumespaymentofall
principal and interest payments for a period of six consecutive months and the Companyhas a documented expectation of
repayment of the remaining contractual principal and interest or the loan becomes secured and in the process of collection.
TheCompanymaygrantaloanconcessiontoaborrowerexperiencingfinancialdifficulties.Thisdeterminationis
performed duringthe annualreview processor wheneverproblems aresurfacing regardingthe client’sability torepay in
accordance withthe originalterms ofthe loanor lineof credit.The concessionsare givento thedebtor invarious forms,
including interest ratereductions, principal forgiveness, extensionof maturity date,waiver, or deferral ofpayments and other
concessions intended to minimize potential losses.
For further discussion on non-performing loans, see Note3 “Loans” to the Consolidated Financial Statementsset forth
in Item 8 of this Annual Report on Form 10-K.
68USCB Financial Holdings, Inc.2025 10-K
Allowance for Credit Losses
The ACLrepresentsan amountthat,inmanagement'sevaluation,is adequateto providecoverageforallexpected
future credit losses on outstanding loans as of the measurement date. Additionally, qualitative adjustments are made to the
ACL when,based onmanagement’s judgment,there arefactors impactingthe allowanceestimate notconsidered bythe
quantitative calculations.See Note 3“Loans” to theConsolidated FinancialStatements set forthin Item 8of Part 1of this
Annual Report as Form 10-K for more information on theallowance for credit losses.
The following table presents ACL and net charge-offs to average loans bytype for the periods indicated (in thousands):
Residential
Real Estate
Commercial
Real Estate
Commercial
and Industrial
Correspondent
Banks
Consumer
and Other
Total
December, 31, 2025
Beginning balance
$
5,121
$
8,788
$
4,633
$
654
$
4,874
$
24,070
Provision for credit losses
(1)
763
688
164
361
143
2,119
Recoveries
24
-
17
-
2
43
Charge-offs
-
-
-
-
(732)
(732)
Ending Balance
$
5,908
$
9,476
$
4,814
$
1,015
$
4,287
$
25,500
Average loans
$
307,199
$
1,186,105
$
266,095
$
99,580
$
210,060
$
2,069,039
Net charge-offs (recoveries) to
average loans
(0.01)%
-
(0.01)%
-
0.35%
0.03%
December, 31, 2024
Beginning balance
$
2,695
$
10,366
$
3,974
$
911
$
3,138
$
21,084
Provision for credit losses
(2)
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)%
(1) Provision for credit losses excludes $182 thousand provision for unfunded commitments included in accrued interest and other
liabilities and $4 thousand release for investment securities held to maturity.
(2) Provision for credit losses excludes $199 thousand provision for unfunded commitments included in accrued interest and other
liabilities and $2 thousand release for investment securities held to maturity.
ThefollowingtablepresentsACLbytypeanditsindividualpercentagetototalloansfortheperiodsindicated(in
thousands):
December 31,
2025
2024
Loan Category
Allowance
% of Loans in
Each Category to
Total Loans
Allowance
% of Loans in
Each Category to
Total Loans
Residential Real Estate
$
5,908
14.1
%
$
5,121
14.8
%
Commercial Real Estate
9,476
57.0
%
8,788
57.8
%
Commercial and Industrial
4,814
13.5
%
4,633
13.1
%
Correspondent Banks
1,015
5.9
%
654
4.2
%
Consumer and Other
4,287
9.5
%
4,874
10.1
%
Total
$
25,500
100.0
%
$
24,070
100.0
%
69USCB Financial Holdings, Inc.2025 10-K
Bank-Owned Life Insurance
AtDecember 31,2025,thecombinedcashsurrendervalueofallbank-ownedlifeinsurance(“BOLI”)policieswas
$59.4 million.Changesincashsurrendervaluearerecordedinnon-interestincomeontheConsolidatedStatementsof
Operations. In2025, the Companymaintained BOLIpolicies withfive insurancecarriers. TheCompany isthe beneficiary
of these policies.
Deposits
Customer deposits are theprimary funding source forthe Bank’s growth.Through our network ofbanking centers, we
offer a competitive array of depositaccounts and treasury management services designedto meet our customers’ business
needs. Our primarydeposit customersare SMBs,and the personalbusiness of ownersand operatorsof these SMBs,as
well as the retail/consumer relationships of the employeesof these businesses. Our focus on quality and customerservice
has created a strong brand recognition withinour depositors, which reflects in the compositionof our deposits; most of our
funding sources are customerdeposits. In additionto our banking centersnetwork, we have developedbusiness verticals
to diversify ourportfolio in different specialty industriesand we offer publicfund deposit products tomunicipalities and public
agencies in our geographical footprint.
Furthermore, ourpersonal andprivate bankingmanagementline ofbusiness isfocused onthe needsof theowners
and operators ofour business customers,offering a suiteof checking, savings,money market andtime deposit accounts,
and utilizing superiorclient serviceto build andexpand client relationships.A unique aspectof our businessmodel is our
ability to offer correspondent services to banks inCentral America and the Caribbean.
The followingtable presentsthe dailyaverage balanceand averagerate paidon depositsby categoryfor theyears
ended December 31, 2025 and 2024 (in thousands, exceptratios):
Years Ended December 31,
2025
2024
Average Balance
Average Rate
Paid
Average Balance
Average Rate
Paid
Non-interest bearing demand deposits
$
577,232
0.00%
$
596,073
0.00%
Interest-bearing demand deposits
51,803
2.48%
54,667
2.76%
Savings and money market deposits
1,255,719
3.03%
1,109,853
3.61%
Time deposits
470,213
3.85%
326,373
4.09%
$
2,354,967
2.44%
$
2,086,966
2.63%
Total average deposits for the year ended December 31, 2025 was $2.4 billion,an increase of $268.0 million,or 12.8%
over totalaverage depositsof $2.1 billionfor thesame periodin 2024.The greatestincrease wasin savingsand money
market deposits whichincreased by$145.9 million, or13.1%. Non-interest-bearingdemand depositsdecreased by$18.8
million or 3.2%.
TheuninsureddepositsareestimatedbasedontheFDICdepositinsurancelimitof$250 thousandforalldeposit
accounts at the Bank per account holder. Totalestimated uninsured deposits was $1.2 billion at December 31, 2025 and at
December 31, 2024. As of December 31, 2025,49% of our deposits were estimated tobe FDIC-insured.At December 31,
2025, ourdeposit portfolioincluded 7%of totaldeposits werepublic funds(partially collateralized),11%of totaldeposits
werebrokereddeposits(FDIC-insured),and8%weredepositsinICS/CDARsdepositprograms(FDIC-insured).The
estimated averageaccount sizeof our depositportfolio is$113thousand. Timedeposits withbalances of$250 thousand
or more totaled $111.5million and $94.0 million at December 31, 2025 and 2024,respectively. At December31, 2025, our
top 10 depositors held 15.59% of ourtotal deposit portfolio. At December 31, 2024, our top 10depositors held 16.7% of our
total deposit portfolio.
Critical elements of our liquidityrisk management include: effective corporate governance consisting ofoversight by the
Board and ALCO andinvolvement by senior management;appropriate strategies, policies,procedures, and limitsused to
identifyandmitigateliquidityrisk;comprehensiveliquidityriskmeasurementandmonitoringsystems(including
assessmentsofthecurrentandprospectivecashflowsorsourcesandusesoffunds)thatarecommensuratewiththe
complexity and businessactivities of theCompany; management of intradayliquidity and collateral;an appropriately diverse
mixofexistingandpotentialfuturefundingsources;adequatelevelsofhighlyliquidmarketablesecuritiesfreeoflegal,
regulatory,oroperationalimpediments,thatcanbeusedtomeetliquidityneedsinstressfulsituations;comprehensive
contingencyfundingplansthatsufficientlyaddresspotentialadverseliquidityeventsandemergencycashflow
70USCB Financial Holdings, Inc.2025 10-K
requirements;andinternalcontrols andinternalauditprocessessufficienttodeterminetheadequacyoftheinstitution’s
liquidity risk management process.
Weexpectfundstobeavailablefromseveralbasicbankingactivitysources,includingthecoredepositbase,the
repayment and maturity of loans and investment securitycash flows. Other potential funding sources includefederal funds
purchased, brokered certificates of deposit, listing services certificates of deposit, Fed Funds lines and borrowings from the
FHLBAtlanta.Accordingly,our liquidityresourceswereat sufficientlevelsto fundloansandmeetothercashneeds as
necessary.
The following table shows scheduled maturities of uninsuredtime deposits as of December 31, 2025 (in thousands):
Total
Three months or less
$
59,593
Over three through six months
16,190
Over six through twelve months
9,552
Over twelve months
26,146
$
111,481
Borrowings
FHLB Advances
AsamemberoftheFHLBAtlanta,weareeligibletoobtainadvanceswithvarioustermsandconditions.This
accessibility of additionalfunding allows usto efficiently andtimely meet bothexpected and unexpectedoutgoing cash flows
and collateral needs without adversely affectingeither daily operations or the financial conditionof the Company.
Outstanding fixed-rateadvances from theFHLB wereat $158.3 millionand $163.0 million,as of December31, 2025,
andDecember 31,2024,respectively.TheweightedaveragerateforoutstandingFHLBadvanceswas3.8%asof
December 31, 2025 and 2024.
The following table presents the FHLB fixed-rate advancesas of December 31, 2025 (in thousands):
December, 31, 2025
Interest Rate
Type of Rate
Maturity Date
Amount
3.77%
Fixed
March 16, 2026
$
104,750
3.88%
Variable
May 22, 2026
42,500
3.76%
Fixed
January 24, 2028
11,000
$
158,250
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
WehavealsoestablishedFedFundslinesofcreditwithourupstreamcorrespondentbankstomanagetemporary
fluctuations in our dailycash balances. As ofDecember 31, 2025, there were nooutstanding balances under the FedFunds
lines of credit.
The Boardof Governorsof the FederalReserve System,on March12, 2023,announced thecreation ofa newBank
TermFunding Program (“BTFP”). The BTFP offered loans of up to one year in length to banks, savings associations, credit
unions,andothereligibledepositoryinstitutionspledgingU.S.Treasuries,U.S.agencydebtandmortgage-backed
securities, and other qualifying assets as collateral. TheBTFP program ceased making new loans as of March2024.
71USCB Financial Holdings, Inc.2025 10-K
The Company paid off $80 million in borrowings under the BTFPprogram during the third quarter of 2024. The original
maturity of this borrowing by the Bank under the BTFP program was January 2025, and there are no remaining borrowings
under this program.
Subordinated Notes
OnAugust14,2025,theCompanyenteredintoaSubordinatedNotePurchaseAgreementwithcertainqualified
institutionalbuyerspursuanttowhichtheCompanysoldandissued$40.0millioninaggregateprincipalamountofits
7.625% Fixed-to-FloatingRate SubordinatedNotes due 2035.The Notes wereissued by theCompany to thepurchasers
at aprice equalto 100%of theirface amount.The Noteswere offeredand soldby theCompany ina privateplacement
transaction in relianceon exemptions fromthe registrationrequirements of theSecurities Act,pursuant toSection 4(a)(2)
of the SecuritiesAct andRule 506(b) ofRegulation D thereunder. For additionalinformation, see theForm 8-K theCompany
filed on August 14, 2025.The subordinated debt was originally issued at a cost of $760 thousand. The carrying value of the
issuancecosthasbeenreducedto$700thousand,reflectingthescheduledexpenserecognitionoverthetermofthe
subordinateddebt.Thesubordinatednotesarepresentednetofthesecostsontheconsolidatedbalancesheet.At
December 31, 2025, the outstanding balance of subordinatednotes, net of costs, totaled $39.3 million.
Off-Balance Sheet Arrangements
We engagein various financialtransactions inour operationsthat, under GAAP,may not beincluded onthe balance
sheet. Tomeet the financing needsof our customers we mayinclude commitments to extendcredit and standby lettersof
credit. Toa varyingdegree, suchcommitments involveelements ofcredit, market,and interestrate riskin excessof the
amount recognizedin thebalance sheet.We usemore conservativecredit andcollateral policiesin makingthese credit
commitments as wedo for on-balance sheetitems. We are notaware of any accountingloss to beincurred by fundingthese
commitments; however, we maintain an allowance for off-balance sheetcredit risk which is recordedunder accrued interest
and other liabilities on the Consolidated Balance Sheets.
Since commitments associated with letters ofcredit and commitments to extendcredit may expire unused, theamounts
shown do not necessarilyreflect the actualfuture cash funding requirements.The following tablepresents lending related
commitments outstanding as of December 31, 2025 and2024 (in thousands):
December 31, 2025
December 31, 2024
Commitments to grant loans and unfunded lines of credit
$
161,606
$
122,578
Standby and commercial letters of credit
2,700
5,389
Total
$
164,306
$
127,967
Commitments to extend credit are agreements to lend funds to a client, as long as there is no violation of any condition
establishedinthecontract,foraspecificpurpose.Commitmentsgenerallyhavevariableinterestrates,fixedexpiration
dates orotherterminationclausesandmay requirepaymentofa fee.Since manyof thecommitmentsareexpected to
expire without beingfully drawn, thetotal commitmentamounts disclosedabove do notnecessarily representfuture cash
requirements.
Unfunded lines of credit represent unused portions of credit facilities to our current borrowers that represent no change
in credit risk in our portfolio. Lines of creditgenerally have variable interest rates. Themaximum potential number of future
payments we couldbe required tomake is representedby the contractualamount of thecommitment, lessthe amount of
any advances made.
Letters of credit areconditional commitments issuedby us to guaranteethe performance of aclient to a thirdparty.In
the event of nonperformance bythe client in accordance with theterms of the agreement with thethird party,we would be
required to fundthe commitment.If the commitmentis funded, wewould be entitledto seek recoveryfrom the clientfrom
the underlying collateral,which can includecommercial real estate,physical plant andproperty, inventory, receivables, cash
or marketable securities.
Asset and Liability Management Committee
The asset and liability management committee of our Company, or ALCO, consists of members of senior management
and our Board. Senior management is responsible forensuring in a timely manner that Boardapproved strategies, policies,
and proceduresfor managingand mitigatingrisks areappropriately executedwithin thedesignated linesof authorityand
responsibility.
72USCB Financial Holdings, Inc.2025 10-K
ALCOoverseestheestablishment,approval,implementation,andreviewofinterestraterisk,management,and
mitigation strategies, ALM related policies, ALCO proceduresand risk tolerances and appetite.
While some degree of interestrate risk (“IRR”) exposure is inherentto the banking business, our ALCOhas established
what it believes are sound risk management practicesin place to identify,measure, monitor and mitigate IRR exposures.
When assessing the scopeof IRR exposure andimpact on the consolidatedbalance sheet, cash flowsand statement
of operations,management considersboth earningsand economicimpacts. Asset pricevariations, depositsvolatility and
reduced earnings or outright losses could adversely affectthe Company’s liquidity,performance, and capital adequacy.
Income simulationsare usedto assessthe impactof changingrates onearnings underdifferent ratesscenarios and
time horizons.These simulationsutilize bothinstantaneous andparallel changesin thelevel ofinterest rates,as wellas
non-parallel changes such as changing slopes (flat and steeping) andtwists of the yield curve, Static simulation models are
based on current exposures andassume a constant balance sheet withno new growth. Dynamic simulation analysisis also
utilized to have amore comprehensive assessmenton IRR. This simulationrelies on detailedassumptions outlined inour
budget and strategic plan, and in assumptions regarding changes inexisting lines of business, new business, management
strategies and client expected behavior.
Tohave a more completepicture of IRR, the Companyalso evaluates the economicvalue of equity.This assessment
allowsustomeasurethedegreetowhichtheeconomicvalueswillchangeunderdifferentinterestratescenarios.The
economic value of equity approach focuses on a longer-term time horizon and captures all future cash flows expected from
existing assets and liabilities. The economic value model utilizes a static approach in that the analysis does not incorporate
new business; rather, theanalysis shows a snapshot in time of the risk inherentin the balance sheet.
Market and Interest Rate Risk Management
As of December 31, 2025, both thestatic and dynamic scenarios of theALCO model indicate that the Bank’sbalance
sheet isliabilitysensitiveinyearone.This meansthatour liabilitiesrepricemorequickly thanourassets,resulting ina
favorable expansion in net interest income(NII) when market interest ratesdecline. For year two, the staticmodel shifts to
a neutral position, while the dynamic model reflects an asset sensitiveposture, driven primarily by projected balance sheet
growth.Thisdivergenceisexpected,asthedynamicmodelincorporatesforwardlookingassumptionsthatincludeloan
growth andmix shiftsover time.Many assumptionsare used tocalculate theimpact ofinterest ratevariations onour net
interestincome,suchasassetprepaymentspeeds,non-maturitydepositpricesensitivity,pricingcorrelations,deposit
truncations and decay rates, and key interest rate drivers.
Because of the inherent useof these estimates andassumptions 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 equitydo not include actions
that management may undertake tomanage the risks in responseto anticipated changes in interestrates or client deposit
behavior. As part of our ALM strategy andpolicy, management has the ability to modify the balance sheetto either increase
or decreaseassetdurationandincreaseor decreaseliabilitydurationtomodifythe balancesheetsensitivityto interest
rates.
Additionally, utilizing an EVE approach, we analyze the risk to capital from the effectsof various interest rate scenarios
through a long-term discountedcash flow model. Thismeasures the differencebetween the economic valueof our assets
andtheeconomicvalueofourliabilities,whichisaproxyforourliquidationvalue.Accordingtoourbalancesheet
composition, andas expected,our modelstipulates thatan increaseof interestrates willhave anegative impacton the
EVE. Results andanalysis are presentedquarterly to theALCO, and strategiesare reviewed andrefined. The Bankremains
within policy limits for long-term interestrate risk based on EVEresults as of December 31, 2025. Thebalance sheet shows
larger EVE swingswhen rates goup than whenrates go down.This happens because,in rising ratescenarios, the value
of our longerterm assetsfalls morequickly,especially whenloan prepaymentsslow while ourliabilities donot reprice as
fast. In contrast,when ratesdecline, fasterloan prepaymentsand quickerasset repricinghelp soften theimpact onEVE.
Additionally, during 2025, we have been taking actions to reduceour asset sensitivity by extending asset duration. This has
reduced our NIIvolatility for thefirst and secondyear in theanalysis and hashelped us tomaintain the NIIin accordance
with ALCO expectations.
Liquidity
Liquidity isdefined asa Company’s capacityto meetits cashand collateralobligations ata reasonablecost. Maintaining
an adequate level of liquidity depends on the Company’s ability toefficiently meet both expected and unexpected cash flow
and collateral needs without adversely affectingeither daily operations or the financial condition of theCompany.
73USCB Financial Holdings, Inc.2025 10-K
Liquidity riskis therisk thatwe willbe unableto meetour short-termand long-termobligations asthey becomedue
because of aninability to liquidateassets or obtainadequate funding onacceptable terms ina timely matter. TheCompany’s
obligations, and the funding sources used to meet them, depend significantlyon our business mix, balance sheet structure
and composition, credit quality ofour assets, interest rateenvironment and the cash flowprofiles of our on- andoff-balance
sheet obligations.
Inmanagingcashinflowsandoutflows,managementregularlymonitorssituationsthatcangiverisetoincreased
liquidity risk.These includefunding mismatches, marketconstraints onthe abilityto convertassets (particularly investments)
into cash or inaccessing sources offunds (i.e., marketliquidity), and contingentliquidity events. Managementpresents to
the ALCO,on aquarterly basis, liquiditystress tests followingthe scenariosdescribed inthe Company’s contingencyfunding
plan.
Changesinmacroeconomicconditions,exposuretocreditdeterioration,market,operational,legalandreputational
risks, including cybersecurity risk andsocial media events couldalso affect the Company’s liquidity riskprofile unexpectedly
and are considered in the assessment of liquidity and ALMframework.
Management has establisheda comprehensive andholistic management process foridentifying, measuring, monitoring
andmitigatingliquidityrisk.DuetoitscriticalimportancetotheviabilityoftheCompany,liquidityriskmanagementis
integrated into our risk management processes, ContingencyFunding Plan and ALM policy.
Critical elements of our liquidityrisk management include: effective corporate governance consisting ofoversight by the
Board and ALCO andinvolvement by senior management;strategies, policies, procedures,and limits used toidentify and
mitigateliquidityrisk;comprehensiveliquidityriskmeasurementandmonitoringsystems(includingassessmentsofthe
current and prospective cash flows or sources and uses of funds) that are commensurate with the complexity andbusiness
activitiesof theCompany;managementof intradayliquidity andcollateral;a diversemix ofexistingandpotentialfuture
funding sources; adequate levels of highly liquid marketable securities freeof legal, regulatory, or operational impediments,
that canbe usedto meetliquidity needsin stressful situations;comprehensive contingencyfunding plansthat sufficiently
address potential adverseliquidity events andemergency cashflow requirements; andinternal controls andinternal audit
processes sufficient to determine the adequacyof the institution’s liquidity risk managementprocess.
Weexpectfundstobeavailablefromseveralbasicbankingactivitysources,includingthecoredepositbase,the
repayment and maturity of loans and investment securitycash flows. Other potential funding sources includefederal funds
purchased, brokeredcertificates ofdeposit, listingcertificates ofdeposit, FedFunds linesand borrowingsfrom theFHLB
Atlanta. Accordingly, our liquidity resources were at sufficient levels tofund loans and meet othercash needs as necessary.
At December 31, 2025, theCompany had $321.4million in available liquidityon balance sheet, including$286.9 million in
unpledged securities available touse as collateral and$34.5 million inexcess cash. The Companyhad an additional $349.0
million in off-balance sheet liquidity including excess FHLB Atlanta borrowingcapacity, the Federal ReserveBank discount
window and FedFund lines of credit, excludingaccess to brokered depositsand other off-balance sheet sourcesof funding.
74USCB Financial Holdings, Inc.2025 10-K
Capital Adequacy
AsofDecember 31,2025,theBankwaswellcapitalizedundertheFDIC’spromptcorrectiveactionframework.
Additionally,we follow the capital conservationbuffer framework, and according toour actual ratios, the Bankexceeds the
capital conversationbuffer inall capital ratiosas of December31, 2025. TheCompany is notsubject to regulatorycapital
requirements because it is deemed by the Federal Reserveto be a small bank holding company.
ThefollowingtablepresentsthecapitalratiosfortheBankatDecember 31,2025and2024(inthousands,except
ratios):
Actual
Minimum Capital
Requirements
To be Well Capitalized Under
Prompt Corrective Action
Provisions
Amount
Ratio
Amount
Ratio
Amount
Ratio
December 31, 2025
Totalrisk-based capital:
$
299,596
13.67%
$
175,387
8.00%
219,234
10.00%
Tier 1 risk-based capital:
$
273,342
12.47%
$
131,541
6.00%
175,387
8.00%
Common equity tier 1 capital:
$
273,342
12.47%
$
98,655
4.50%
142,502
6.50%
Leverage ratio:
$
273,342
9.65%
$
113,296
4.00%
141,620
5.00%
December 31, 2024
Totalrisk-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%
Impact of Inflation
Our ConsolidatedFinancial Statementsand relatednotes have beenprepared inaccordance with U.S.GAAP,which
requires themeasurement offinancial positionand operatingresults interms ofhistorical dollars,without consideringthe
changesintherelativepurchasingpowerofmoneyovertime duetoinflation.Theimpactofinflationisreflectedinthe
increased cost of operations.Unlike most industrial companies,nearly all our assets andliabilities are monetary innature.
As a result,interest rates have agreater impact on ourperformance than do theeffects of general levelsof inflation. Periods
of high inflationare often accompaniedby relatively higherinterest rates, andperiods of lowinflation are accompaniedby
relatively lower interest rates.As market interest ratesrise or fall in relationto the rates earnedon loans and investments,
the value of these assets decreases or increases respectively.
Recently Issued Accounting Pronouncements
Recently issued accountingpronouncements are discussedin Note 1 “Summaryof Significant AccountingPolicies” in
the Consolidated Financial Statements of this Annual Reporton Form 10-K.
75USCB Financial Holdings, Inc.2025 10-K
Reconciliation and Management Explanation of Non-GAAP Financial Measures
Management has includedthe non-GAAP measuresset forth belowbecause it believesthese measures mayprovide
useful supplemental informationfor evaluating the Company’sunderlying performance trends.Further, managementuses
these measures in managing and evaluating the Company’s business and intends to refer to them in discussions about our
operations and performance.Operating performancemeasures should beviewed in additionto, and notas an alternative
to orsubstitutefor,measuresdeterminedinaccordancewithGAAP,andarenotnecessarilycomparableto non-GAAP
measuresthatmay bepresentedby othercompanies.The Companybelievesthesenon-GAAPmeasurementsare key
indicators of theearnings powerof the Company.The followingtable reconcilesthe non-GAAPfinancial measurementof
operating net income available to common stockholdersfor the periods presented (in thousands,except per share data):
As of and for the years ended December 31,
2025
2024
Pre-Tax Pre-Provision ("PTPP") income: (1)
Net income (GAAP)
$
26,100
$
24,674
Plus: Provision for income taxes
9,816
7,803
Plus: Provision for credit losses
2,297
3,157
PTPP income
$
38,213
$
35,634
Operating net income: (1)
Net income (GAAP)
$
26,100
$
24,674
Less: Net gain (loss) on sale of securities
(7,526)
14
Less: Taxeffect on sale of securities
1,908
(4)
Plus: Taxliability expenses from prior periods
764
-
Operating net income
$
32,482
$
24,664
Operating revenue: (1)
Net interest income
$
83,630
$
69,936
Non-interest income
6,592
12,740
Less: Net gain (losses) on sale of securities
(7,526)
14
Operating revenue
$
97,748
$
82,662
Operating efficency ratio: (1)
Totalnon-interest expense
$
52,009
47,042
Operating revenue
$
97,748
82,662
Operating efficency ratio
53.21%
56.91%
(1) The Company believes these non-GAAP measurements are key indicators of the ongoing earnings power of the Company.
Item 7A.Quantitative and Qualitative Disclosures About Market Risk
As a smaller reporting company,we are not required to provide the information requiredby this item.
76USCB Financial Holdings, Inc.2025 10-K
Item 8.Financial Statements and Supplementary Data
INDEX TO CONSOLIDATEDFINANCIAL STATEMENTS
(
Crowe LLP
, PCAOB ID:
173
)
Crowe LLP
Independent Member Crowe Global
77USCB Financial Holdings, Inc.2025 10-K
REPORT OF INDEPENDENT REGISTEREDPUBLIC ACCOUNTING FIRM
Stockholders and the Board of Directors of
USCB Financial Holdings, Inc.
Doral, Florida
Opinion on the Financial Statements
We have audited the accompanying consolidatedbalance sheets of USCB Financial Holdings, Inc. (the
“Company”) as of December 31, 2025 and 2024, the related consolidatedstatements of operations,
comprehensive income, changes in stockholders’ equity,and cash flows for the years then ended,
and the related notes (collectively referred to as the “financial statements”).In our opinion, the financial
statements present fairly, in all material respects, thefinancial position of the Companyas of December 31,
2025 and 2024, and the results of its operations and itscash flows for the years then ended, in conformity
with accounting principles generally accepted in the UnitedStates of America.
Basis for Opinion
These financial statements are the responsibility of the Company’smanagement. Our responsibility is to
express an opinionon the Company’s financialstatements based on ouraudits. We are apublic accounting
firm registered with the Public Company Accounting OversightBoard (United States) (“PCAOB”) and are
required to beindependent with respect tothe Company in accordancewith the U.S.federal securities laws
and the applicable rules and regulations of the Securitiesand Exchange Commission and the PCAOB.
We conducted our audits in accordance with thestandards of the PCAOB. Those standards require that
we plan and perform the audit to obtain reasonable assuranceabout whether the financial statements are
free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assessthe risks of material misstatement of the financial
statements, whether due to error or fraud, and performingprocedures that respond to those risks. Such
procedures included examining, on a test basis, evidenceregarding the amounts and disclosures in the
financial statements. Our audits also included evaluating the accountingprinciples used and significant
estimates made by management, as well as evaluating theoverall presentation of the financial statements.
We believe that our audits provide a reasonablebasis for our opinion.
/s/ Crowe LLP
Crowe LLP
We have served as the Company's auditor since2017.
Fort Lauderdale, Florida
March 13, 2026
78USCB Financial Holdings, Inc.2025 10-K
USCB FINANCIAL HOLDINGS, INC.
Consolidated Balance Sheets
(Dollars in thousands,except share and per share data)
December 31,
2025
2024
ASSETS:
Cash and due from banks
$
6,027
$
6,986
Interest-bearing deposits in banks
32,450
70,049
Total cash and cash equivalents
38,477
77,035
Investment securities held to maturity net of allowanceof $
2
and $
6
, respectively (fair value $
142,508
and $
145,540
, respectively)
153,941
164,694
Investment securities available for sale, at fair value
307,490
260,221
Federal Home Loan Bank stock, at cost
9,323
9,379
Loans held for investment, net of allowance of$
25,500
and $
24,070
, respectively
2,163,757
1,948,778
Accrued interest receivable
11,661
10,945
Premises and equipment, net
4,247
4,563
Bank owned life insurance
59,424
53,472
Deferred tax asset, net
18,046
29,646
Lease right-of-use asset
5,519
8,451
Other assets
19,655
14,032
Total assets
$
2,791,540
$
2,581,216
LIABILITIES:
Deposits:
Non-interest-bearing demand deposits
$
583,860
$
575,159
Savings and money market deposits
1,186,422
1,180,809
Interest-bearing demand deposits
46,989
50,648
Time deposits
527,809
367,388
Total deposits
2,345,080
2,174,004
Federal Home Loan Bank advances
158,250
163,000
Subordinated notes
39,300
-
Lease liability
5,519
8,451
Accrued interest and other liabilities
26,208
20,373
Total liabilities
2,574,357
2,365,828
Commitments and contingencies (See Notes 11 and 20)
(nil)
(nil)
STOCKHOLDERS' EQUITY:
Preferred stock - Class C; $
1.00
par value; $
1,000
per share liquidation preference;
52,748
shares
authorized;
0
issued and
0
outstanding as of December 31, 2025and 2024
-
-
Preferred stock - Class D; $
1.00
par value; $
5.00
per share liquidation preference;
12,309,480
shares
authorized;
0
issued and
0
outstanding as of December 31, 2025and 2024
-
-
Preferred stock - Class E; $
1.00
par value; $
1,000
per share liquidation preference;
3,185,024
shares
authorized;
0
issued and
0
outstanding as of December 31, 2025and 2024
-
-
Common stock - Class A Voting; $
1.00
par value;
45,000,000
shares authorized;
18,137,885
and
19,924,632
issued and outstanding as of December 31,2025 and 2024
18,138
19,925
Common stock - Class B Non-Voting; $
1.00
par value;
8,000,000
shares authorized;
0
and
0
issued and
outstanding as of December 31, 2025 and 2024
-
-
Additional paid-in capital on common stock
278,852
307,810
Accumulated deficit
(49,542)
(67,813)
Accumulated other comprehensive loss
(30,265)
(44,534)
Total stockholders' equity
217,183
215,388
Total liabilities and stockholders' equity
$
2,791,540
$
2,581,216
The accompanying notes are an integral part ofthese consolidated financial statements.
79USCB Financial Holdings, Inc.2025 10-K
USCB FINANCIAL HOLDINGS, INC.
Consolidated Statements of Operations
(Dollars in thousands,except per share data)
Years Ended December 31,
2025
2024
Interest income:
Loans, including fees
$
128,160
$
115,236
Investment securities
13,715
11,480
Interest-bearing deposits in financial institutions
3,612
4,517
Total interest income
145,487
131,233
Interest expense:
Interest-bearing checking deposits
1,283
1,509
Savings and money markets deposits
38,027
40,098
Time deposits
18,104
13,354
Federal Home Loan Bank advances
3,238
6,336
Subordinated notes
1,205
-
Total interest expense
61,857
61,297
Net interest income before provision forcredit losses
83,630
69,936
Provision for credit losses
2,297
3,157
Net interest income after provision forcredit losses
81,333
66,779
Non-interest income:
Service fees
9,603
8,839
(Loss) gain on sale of securities available forsale, net
(7,526)
14
Gain on sale of loans held for sale, net
1,001
747
Other non-interest income
3,514
3,140
Total non-interest income
6,592
12,740
Non-interest expense:
Salaries and employee benefits
32,167
28,793
Occupancy
5,330
5,258
Regulatory assessment and fees
1,637
1,766
Consulting and legal fees
1,941
1,568
Network and information technology services
2,324
1,993
Other operating expense
8,610
7,664
Total non-interest expense
52,009
47,042
Net income before income tax expense
35,916
32,477
Income tax expense
9,816
7,803
Net income
26,100
24,674
Net income available to common stockholders
$
26,100
$
24,674
Per share information:
Earnings per share, basic
$
1.34
$
1.25
Earnings per share, diluted
$
1.33
$
1.24
Weighted average shares outstanding:
Common shares, basic
19,425,746
19,675,444
Common shares, diluted
19,650,814
19,831,421
The accompanying notes are an integral part ofthese consolidated financial statements.
80USCB Financial Holdings, Inc.2025 10-K
USCB FINANCIAL HOLDINGS, INC.
Consolidated Statements of Comprehensive Income
(Dollars in thousands)
Years Ended December 31,
2025
2024
Net income
$
26,100
$
24,674
Other comprehensive income (loss):
Unrealized gain (loss) on investment securities
11,661
(592)
Amortization of net unrealized losses on securitiestransferred from available-for-sale to held-to-maturity
266
267
Reclassification adjustment on sale of availablefor sale securities for (income) loss included in netincome
7,526
(14)
Unrealized loss on cash flow hedge
(340)
(13)
Tax (expense) benefit
(4,844)
89
Total other comprehensive income (loss), net of tax
14,269
(263)
Total comprehensive income
$
40,369
$
24,411
The accompanying notes are an integral part ofthese consolidated financial statements.
81USCB Financial Holdings, Inc.2025 10-K
USCB FINANCIAL HOLDINGS, INC.
Consolidated Statements of Changes in Stockholders’Equity
(Dollars in thousands,except per share data)
Common Stock
Additional Paid-in
Capital on
Common Stock
Accumulated
Deficit
Accumulated
Other
Comprehensive
Loss
Shares
Par Value
Total
Stockholders'
Equity
Balance at January 1, 2025
19,924,632
$
19,925
$
307,810
$
(67,813)
$
(44,534)
$
215,388
Net income
-
-
-
26,100
-
26,100
Other comprehensive income
-
-
-
-
14,269
14,269
Repurchase of Class A common stock
(2,009,671)
(2,010)
(32,544)
-
-
(34,554)
Restricted stock issued
124,424
124
(124)
-
-
-
Exercise of stock options
98,500
99
705
-
-
804
Dividend payment
-
-
-
(7,829)
-
(7,829)
Stock-based compensation
-
-
3,005
-
-
3,005
Balance at December 31, 2025
18,137,885
$
18,138
$
278,852
$
(49,542)
$
(30,265)
$
217,183
Balance at January 1, 2024
19,575,435
$
19,575
$
305,212
$
(88,548)
$
(44,271)
$
191,968
Net income
-
-
-
24,674
-
24,674
Other comprehensive loss
-
-
-
-
(263)
(263)
Repurchase of Class A common stock
(42,100)
(42)
(459)
-
-
(501)
Restricted stock issued
277,922
278
(278)
-
-
-
Restricted stock forfeiture
(8,625)
(8)
8
-
-
-
Exercise of stock options
122,000
122
1,197
-
-
1,319
Dividend payment
-
-
-
(3,939)
-
(3,939)
Stock-based compensation
-
-
2,130
-
-
2,130
Balance at December 31, 2024
19,924,632
$
19,925
$
307,810
$
(67,813)
$
(44,534)
$
215,388
The accompanying notes are an integral part ofthese consolidated financial statements.
82USCB Financial Holdings, Inc.2025 10-K
USCB FINANCIAL HOLDINGS, INC.
Consolidated Statements of Cash Flows
(Dollars in thousands)
Years Ended December 31,
2025
2024
Cash flows from operating activities:
Net income
$
26,100
$
24,674
Adjustments to reconcile net income to netcash provided by operating activities:
Provision for credit losses
2,297
3,157
Depreciation and amortization
619
587
Accretion of premiums on securities, net
(1,540)
(521)
Amortization of deferred loan fees, net
1,020
660
Stock-based compensation
3,005
2,130
Loss (gain) on sale of available for sale securities
7,526
(14)
Gain on sale of loans held for sale
(1,001)
(747)
Proceeds from the sale of loans held forsale
13,810
9,137
Origination of loans held for sale
(12,809)
(8,390)
Increase in cash surrender value of bank ownedlife insurance
(1,952)
(1,691)
Decrease in deferred tax asset
6,756
7,725
Net change in operating assets and liabilities:
Accrued interest receivable
(716)
(257)
Other assets
(5,930)
(6,223)
Accrued interest and other liabilities
5,620
4,610
Net cash provided by operating activities
42,805
34,837
Cash flows from investing activities:
Proceeds from maturities and pay-downs of investmentsecurities held to maturity
10,935
10,461
Purchase of investment securities available forsale
(139,841)
(85,673)
Proceeds from maturities and pay-downs of investmentsecurities available for sale
23,364
20,045
Proceeds from sales of investment securities availablefor sale
82,497
34,753
Net increase in loans held for investment
(136,726)
(126,049)
Purchase of loans held for investment
(81,392)
(66,605)
Additions to premises and equipment
(303)
(314)
Proceeds from the redemption of Federal HomeLoan Bank stock
16,221
11,733
Purchase of Federal Home Loan Bank stock
(16,165)
(10,959)
Purchase of bank owned life insurance, net
(4,000)
-
Net cash used in investment activities
(245,410)
(212,608)
(Continued)
The accompanying notes are an integral part ofthese consolidated financial statements.
83USCB Financial Holdings, Inc.2025 10-K
USCB FINANCIAL HOLDINGS, INC.
Consolidated Statements of Cash Flows (Continued)
(Dollars in thousands)
Years Ended December 31,
2025
2024
Cash flows from financing activities:
Proceeds from exercise of Class A common stockoptions, net
804
1,319
Cash dividends paid
(7,829)
(3,939)
Repurchase of Class A common stock
(34,554)
(501)
Net increase in deposits
171,076
236,865
Proceeds from subordinated notes, net
39,300
-
Proceeds from Federal Home Loan Bank advancesand other borrowings
336,750
227,000
Repayments on Federal Home Loan Bank advancesand other borrowings
(341,500)
(247,000)
Net cash provided by financing activities
164,047
213,744
Net increase (decrease) in cash and cash equivalents
(38,558)
35,973
Cash and cash equivalents at beginning of period
77,035
41,062
Cash and cash equivalents at end of period
$
38,477
$
77,035
Supplemental disclosure of cash flow information:
Interest paid
$
59,998
$
60,544
The accompanying notes are an integral part ofthese consolidated financial statements.
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
84USCB Financial Holdings, Inc.2025 10-K
1.SUMMARY OF SIGNIFICANT ACCOUNTINGPOLICIES
Overview
USCB Financial Holdings,Inc., a Floridacorporation incorporatedin 2021, isa bank holdingcompany with
one
direct
wholly owned subsidiary,U.S. Century Bank (the “Bank”), together referred to as “the Company”.The Bank, established in
2002, is a Florida state-chartered,non-member financial institution providingfinancial services through itsbanking centers
located in South Florida.
In December 2021, USCB FinancialHoldings, Inc. acquired all issuedand outstanding shares of the ClassA common
stock ofthe Bankin connectionwith thereorganization of theBank intoa holdingcompany structure. Eachof theoutstanding
shares ofthe Bank’sclass Acommon stock,par value$
1.00
per share,formerly heldby itsstockholders wereconverted
into and exchanged for
one
newly issued share of the Company’s ClassA common stock, par value $
1.00
per share.
The Bankowns asubsidiary,Florida PeninsulaTitle LLC,that offersour clientstitle insurancepolicies forreal estate
transactions closed at the Bank. Licensed in the State of Florida and approved by the Department of Insurance Regulation,
Florida Peninsula tittle LLC began operations in 2021.
Principles of Consolidation
Intercompany transactionsand balancesare eliminatedin consolidation.The consolidatedfinancial statementshave
been prepared in accordance with GAAP.
Use of Estimates
TheCompanyhasestablishedpoliciesandcontrolproceduresthatareintendedtoensurevaluationmethodsare
controlled andapplied consistentlyfrom periodto period.These estimatesand assumptions,which maymaterially affect
the reported amounts ofcertain assets, liabilities, revenues andexpenses, are based oninformation available as ofthe date
of thefinancial statements,and changesin thisinformation overtime andthe useof revisedestimates andassumptions
could materially affect amounts reported in subsequentfinancial statements.
Cash and Cash Equivalents
TheCompanyconsidersinvestmentswithamaturityof90daysorlessfromitsoriginalpurchasedatetobecash
equivalents. Forthe ConsolidatedStatements ofCash Flows,cash and cashequivalents includecash on hand,amounts
due from banks, and interest-bearing deposits in banks.
Restricted Cash
The Company may be required to maintainfunds at other banks to satisfythe terms of a loan participation agreement.
The Companyreports restricted cashwithin cashand cash equivalents.At bothDecember 31, 2025 and2024, theCompany
had $
0
in restricted cash.
Interest-Bearing Deposits in Banks
Interest-bearingdepositsinotherfinancialinstitutionsconsistofaccountsattheFederalReserveBankofAtlanta,
Federal Home Loan Bank of Atlanta and other accounts.
Investment Securities
Debt securitiesare recordedat fairvalue exceptfor thosesecurities whichthe Companyhas thepositive intentand
ability tohold tomaturity.Managementgenerally determinesthe appropriateclassificationof itssecuritiesat thetime of
purchase and accounts for them on a trade date basis.
Debt securities thatmanagement has thepositive intent andability to holdto maturity areclassified as "held-to-maturity"
and recorded at amortized cost. Trading securities arerecorded at fair value withchanges in fair value includedin earnings.
Securities not classifiedas held-to-maturity ortrading are classifiedas "available-for-sale"and recorded atfair value, with
unrealized gains and losses excluded from earnings andreported in other comprehensive income (loss).
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
85USCB Financial Holdings, Inc.2025 10-K
Purchase premiums and discounts are amortized or accreted overthe estimated life of the related available-for-sale or
held-to-maturitysecurityasanadjustmenttoyieldusingtheeffectiveinterestmethod.Prepaymentsofprincipalare
considered in determining the estimated life ofthe security. Such amortization and accretion are included in interest income
in the ConsolidatedStatements of Operations.Dividend and interestincome are recognizedwhen earned. Gainsand losses
on the sale of securities are recorded on trade date and are determinedon a specific identification basis.
For available-for-saledebt securitiesin anunrealized lossposition, theCompany firstassesses whetherit intendsto
sell, or it is more likely thannot that it will be required tosell, the security before recoveryof its amortized cost basis.If the
Company hasthe intentto sell,or isrequired tosell, thedifferencebetween fairvalue andamortized costis considered
impairedandisrecognizedintheprovisionforcreditlosses.Foravailable-for-saledebtsecuritiesthatdonotmeetthe
aforementioned criteria,the Companyevaluates whetherthe decline infair valuehas resulted fromcredit factorsor other
market conditions. TheCompany monitors thecredit quality ofdebt securities throughthe use ofcredit ratings. Creditratings
are monitored by the Company on at least a quarterlybasis.
CECL requires a loss reserve for securitiesclassified as HTM. The reserve should reflecthistorical credit performance
as well as the impactof projected economic forecast.For U.S. Government bondsand U.S. Agency issued bondsin HTM
theexplicitand/orimplicitguaranteeoftheU.S.Governmentissufficienttoconcludethatacreditlossreserveisnot
required. The reserverequirement is forthree primary assetsgroups: municipal bonds,corporate bonds, andnon-agency
securitizations.TheCompanycalculatesquarterlythelossreserveutilizingMoody’sImpairmentStudio.TheCECL
measurementforinvestmentsecuritiesincorporateshistoricaldata,containingdefaultsandrecoveriesinformation,and
Moody’s baselineeconomic forecast.The solutionuses probabilityof default/lossgiven default (“PD/LGD”)approach. PD
represents the likelihood a borrower willdefault. Within the Moody’s model,this is determined using historicaldefault data,
adjusted for the current economic environment. LGD projectsthe expected loss if a borrower were to default.
Federal Home Loan Bank (FHLB) Stock
The Bank is a member of the FHLB system. Members are required toown a certain amount of stock based on the level
of borrowings andother factors andmay invest inadditional amounts. FHLBstock is carriedat cost, classifiedas a restricted
asset, andperiodically evaluatedfor impairmentbased onultimate recoveryof parvalue. Asof December31, 2025and
2024,FHLBstockamountedto$
9.3
millionand$
9.4
million,respectively,withnoimpairmentdeemednecessary.Both
cash and stock dividends are reported as interest income.
Loans Held for Investment and Allowance for CreditLosses (“ACL”)
Loans held for investment (“loans”) are reported at their outstanding principalbalance net of charge-offs, deferred loan
cost,unearned income,and theACL. Interestincomeis generallyrecognizedwhenincome isearned usingthe interest
method.Loanoriginationandcommitmentfeesandthecostsassociatedwiththeoriginationofloansaredeferredand
amortized, using the interest method or the straight-linemethod, over the life of the related loan.
If theprincipal orinterest ona commercialloan becomesdue andunpaid for90 daysor more,the loanis placedon
non-accrual status as ofthe date it becomes90 days past dueand remains in non-accrualstatus until it meetsthe criteria
for restoration to accrual status.Residential loans, onthe other hand, are placedon non-accrual status whenthe principal
or interestbecomes dueand unpaidfor 120days ormore and remainsin non-accrualstatus untilit meetsthe criteriafor
restorationtoaccrualstatus.Restoringaloantoaccrualstatusispossiblewhentheborrowerresumespaymentofall
principal and interest payments for a period of six consecutive months and the Companyhas a documented expectation of
repayment of the remaining contractual principal and interest or the loan becomes secured and in the process of collection.
All interest accrued but notcollected for loans that areplaced on nonaccrual status isreversed against interest income. The
interest onthese loans isaccounted for onthe cash-basis orcost-recovery method, underwhich cash collectionsare applied
to unpaid principal, which may change as conditionsdictate.
The Company has determinedthat the entirebalance of aloan is contractually delinquentfor all loancategories if the
minimumpaymentisnotreceivedbythespecifiedduedateontheborrower'sstatement.Interestandfeescontinueto
accrue on past due loans until the date the loan goes intononaccrual status.
The Companyprovides forloan lossesthrough a provisionfor credit lossescharged toearnings. Whenmanagement
believes that aloan or a portionof the loan balanceis uncollectible, thatamount is chargedagainst the ACL.Subsequent
recoveries, if any,are credited to the ACL.
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
86USCB Financial Holdings, Inc.2025 10-K
TheACLreflectsmanagement'sjudgmentofexpectedloanlossesintheportfolioatthebalancesheetdate.
Management uses a disciplinedprocess and methodologyto establish the ACLeach quarter.Todetermine the totalACL,
the Companyestimates thereserves neededfor eachsegment ofthe portfolio,including loansanalyzed individuallyand
loans analyzed on a pooled basis. The ACL consistsof the amount applicable to the following segments:
•Residential real estate
•Commercial real estate
•Commercial and industrial
•Correspondent banks
•Other loans (secured and unsecured consumer loans)
ResidentialrealestateloansareunderwrittenfollowingthepoliciesoftheCompanywhichincludeareviewofthe
borrower’s credit, capacityand the collateralsecuring the loan.The borrower’s abilityto repay involvesan analysis offactors
including: current income,employment status, monthlypayment ofthe loan,current debtobligations, monthly debtto income
ratio and credit history. The Company relies on appraisals in determining the value of the property.Risk is mitigated by this
analysis and the diversity of the residential portfolio.
Commercial real estateloans aresecured by lienson commercial properties,land, construction andmultifamily housing.
Underwriting of commercial real estate loans will analyze the key market and business factors to arrive at a decision on the
credit worthiness of the borrower. The analysis may include the capacity of the borrower,income generated by property for
debt service,othersourcesof repayment,sensitivityanalysisto fluctuationsin marketconditionsincluding vacancyand
rental rates in geographiclocation and loanto value. Landand construction loananalysis will includethe time todevelop,
sell or leasethe property.Appraisals are usedto determine thevalue of theunderlying collateral.Risk is mitigatedas the
properties securing the commercial real estate loansare diverse in type, location, and loan structure.
Commercialandindustrialloansaresecuredbythebusinessassetsoftheborrowerandmayincludeequipment,
inventory, and receivables.The loans are underwritten based on theincome capacity of the business, the abilityto service
the debt basedon operating cashflows, the creditworthiness of theborrower,other sourcesof repaymentand collateral.
The Company mitigates the risk in the commercial portfoliothrough industry diversification.
Correspondent bank loans areshort-term loans with internationalcorrespondent banking institutions primarily domiciled
in Latin America.Most of theseloans are fortrade capital andhave a lifeof less thanone year. The Company’s creditreview
includes a credit analysis, peer comparison and currentcountry risk overview.Annual re-evaluation of the risk rating of the
borrower and country where the borrower islocated and a review by the authorized signerwithin the Company.The risk is
mitigated as these loans are short term, have limited exposure,and are geographically dispersed.
Other loansare securedand unsecuredconsumerloans includingyacht loans,personal loans,home equitylines of
credit,overdrafts,anddepositaccountcollateralizedloans.Repaymentoftheseloansareprimarilyfromthepersonal
income of the borrowers. Loans are underwritten based on the credit worthiness of the borrower. The risk on these loans is
mitigated by small loan balances.
UnderCECL,theCompanyestimatestheACLusingrelevantavailableinformation,frombothinternalandexternal
sources,relatingtopastevents,currentconditions,andreasonableandsupportableforecasts.Historicalcreditlosses
provide the basis for estimation of expected credit losses. Qualitative adjustments are applied to the expected credit losses
estimatedfortheloanportfolioinrelationtopotentiallimitationsofthequantitativemodel.Ascorecardisusedtoaid
management in the assessment of qualitative factor adjustmentsapplied to expected credit losses.
Thequantitativecomponentoftheestimatereliesonthestatisticalrelationshipbetweentheprojectedvalueofan
economicindicatorandtheimpliedhistoricallossexperienceamongacuratedgroupofpeers.TheCompanyutilized
regressionanalysesof peerdata,inwhichtheCompanywasincluded,andwhereobservedcreditlossesand selected
economic factors were usedto determine suitableloss drivers for modelingthe lifetime rates ofprobability of default (PD).
Alossgivendefaultrate(LGD)isassignedtoeachpoolforeachperiodbasedonthesePDoutcomes.Themodel
fundamentally utilizesan expecteddiscounted cashflow (DCF)analysis for loanportfolio segments.The DCFanalysis is
runattheinstrument-levelandincorporatesanarrayofloan-specificdatapointsandsegment-impliedassumptionsto
determine the lifetime expectedloss attributable to eachinstrument. An implicit "hypotheticalloss" is derivedfor each period
of theDCF andhelps establishthe presentvalue offuture cashflows foreach period.The reserveapplied toa specific
instrument is the differencebetween the sum of the presentvalue of future cash flowsand the book balance ofthe loan at
the measurement date.
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
87USCB Financial Holdings, Inc.2025 10-K
ManagementelectedtheRemainingLife(WARM)methodologyforcorrespondentbankloansandsecuredand
unsecured consumer loan portfolio segments. For each of these segments, a long-term average loss rate is calculated and
applied ona quarterlybasis forthe remaininglife ofthe pool.Adjustments foreconomic expectationsare madethrough
qualitativeassessments.Fortheremaininglifeestimated,managementimplementedasoftwaresolutionthatusesan
attrition-based calculation that performs quarterly,cohort-based attrition measurements based on the loan portfolio.
Portfolio segments are the level at which loss assumptionsare applied to a pool of loans based on the similarityof risk
characteristics inherent in theincluded instruments, relying oncollateral codes and FFIECCall Report codes. TheCompany
currently segments theportfolio based oncollateral codes for thepurpose of establishingreserves. Each ofthese segments
ispairedtoregressionmodels(LossDriverAnalyses)basedonpeerdataforloansofsimilarriskcharacteristics.The
Company has established relationships between internal segmentation and FFIECCall Report codes for this purpose. The
loss driver for each loanportfolio segment is derivedfrom a readily available andreasonable economic forecast, including
the Federal Reserve Bankprojections of U.S. civilianunemployment rate and theyear-over-year real GDPgrowth; for the
residentialloansegment,theHPIprojectionspublishedbyFannieMae’sEconomicandStrategicResearchGroupare
utilized for theforecast. Forecastsare applied tothe first fourquarters of thecredit loss estimateand revert ona straight-
line basis to the lookback period's historical mean for theeconomic indicator over the expected life of loans.
The model incorporates qualitativefactor adjustments in order tocalibrate the model for riskin each portfolio segment
that maynot be capturedthrough quantitativeanalysis. Determinationsregarding qualitativeadjustments arereflective of
management'sexpectationof lossconditionsdifferingfrom thosealreadycapturedinthequantitativecomponentofthe
model.
Qualitative factors (“Q-Factors”) used in the ACL methodologyinclude:
• Changes in lending policies, procedures, and strategies
• Changes in international, national, regional, and local conditions
• Changes in nature and volume of portfolio
• Changes in the volume and severity of past due loansand other similar conditions
• Concentration risk
• Changes in the value of underlying collateral
• The effect of other external factors: e.g., competition,legal, and regulatory requirements
• Changes in lending management, among others
Management evaluateson an individualbasis collateraldependent loansusing the fairvalue of thecollateral method
to determineif acredit lossreserve isnecessary.The ACLis measuredbased onthe differenceof thefairvalue ofthe
collateral andthe recordedinvestment(amortizedcost basisof theloan). Ifthe finalcollateralvaluationis lessthan the
recorded investmentof theloan, areserve amountis calculated.If thecollateral valuationis equalto orgreater thanthe
recorded investment of the loan, no reserve is determinedto be required.
The Companyestimates areserve forunfunded commitments, whichis reportedseparately from theACL withinaccrued
interestandotherliabilities.Thereserveisbaseduponthesamequantitativeandqualitativefactorsappliedtothe
collectively evaluated loan portfolio.
Concentration of Credit Risks
Creditriskrepresentstheaccountinglossthatwouldberecognizedatthereportingdateifcounterpartiesfailedto
perform as contracted and any collateral or security proved to be insufficientto cover the loss. Concentrations of credit risk
(whether on or off-balance sheet) arising from financial instruments exist in relation to certaingroups of customers. A group
concentration ariseswhen a numberof counterpartieshave similar economiccharacteristics that wouldcause their ability
to meet contractual obligations to be similarly affected by changes in economic or other conditions. The Company does not
have a significant exposure to any individual customeror counterparty.
Most of the Company's business activity iswith customers located within its primary market area, whichis generally the
State of Florida. The Company's loan portfolio is concentrated largely in real estate and commercial loans in South Florida.
Many of theCompany's loancustomers are engagedin real estatedevelopment. Circumstanceswhich negativelyimpact
the South Florida real estate industryor the South Florida economy, in general, could adversely impactthe Company's loan
portfolio.
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
88USCB Financial Holdings, Inc.2025 10-K
At December 31,2025 and2024, theCompany hada concentrationof riskwith loansoutstanding tothe Company’s
top ten lending relationshipstotaling $
224.9
million and $
236.2
million, respectively.At December 31, 2025 and2024, this
concentrationrepresented
10.3
%and
12.0
%ofnetloansoutstanding,respectively.AtDecember 31,2025and
December 31,2024, thelargestloan relationshipoutside Floridawas acommercialrealestate loanwith anoutstanding
balance of $
19.0
million and $
19.8
million, at such datesrespectively,collateralized by a 1
st
lien on a commercial property
located in New YorkState.
AtDecember 31,2025,theCompanyhadaconcentrationofriskwithloansoutstandingtotaling$
128.0
millionto
correspondentbankslocatedinEcuador,Guatemala,DominicanRepublic,Honduras,Panama,andElSalvador.At
December 31,2024,theCompanyalsohadaconcentrationofriskwithloansoutstandingtotaling$
82.4
millionto
correspondentbankslocatedinEcuador,DominicanRepublic,Honduras,andElSalvador.Thesebanksmaintained
deposits with right of offset totaling $
57.1
million and $
62.6
million at December 31, 2025 and 2024, respectively.
At various times duringthe year,the Company has maintaineddeposits with otherfinancial institutions. The exposure
to the Company fromthese transactions is solelydependent upon daily balancesand the financial strengthof the respective
institutions.
Premises and Equipment, net
Land iscarried atcost. Premisesand equipmentare statedat costless accumulateddepreciationand amortization.
Depreciation is computedon the straight-linemethod over theestimated useful lifeof the asset. Leaseholdimprovements
are amortized over theremaining term of theapplicable leases or theiruseful lives, whicheveris shorter.Estimated useful
lives of these assets were as follows:
Buildings
40
years
Furniture, fixtures and equipment
3
to
25
years
Computer hardware and software
3
to
5
years
Leasehold improvementsShorter of life or term of lease
Maintenanceandrepairsarechargedtoexpenseasincurredwhileimprovementsandbettermentsarecapitalized.
When items are retired or areotherwise disposed of, the related costsand accumulated depreciation and amortizationare
removed from the accounts and any resulting gains or lossesare credited or charged to income.
Other Real Estate Owned
OREO consists of real estate properties acquired through,or in lieu of, foreclosure that areheld for sale and are initially
recorded at the fair value ofthe property less estimated sellingcosts as of the date offoreclosure, establishing a newcost
basis. Subsequent toforeclosure, valuationsare periodically performedby management andthe assets arecarried at the
lower of carryingamount orfair valueless costto sell.Subsequent write-downsare recognizedas avaluation allowance
with the offsetrecorded in theConsolidated Statementsof Operations. Carryingcosts are chargedto OREOexpenses in
theaccompanyingConsolidatedStatementsofOperation.GainsorlossesonsaleofOREOarerecognizedwhen
consideration has been exchanged, all closing conditionshave been met and permanent financing has been arranged.
Bank Owned Life Insurance
Bank Owned LifeInsurance (“BOLI”)is carried atthe amount thatcould be realizedunder the contractat the balance
sheetdate,whichistypicallythecashsurrendervalue.Changesincashsurrendervaluearerecordedinnon-interest
income. At December 31,2025, the Companymaintained BOLI policieswith five insurancecarriers with acombined cash
surrender value of $
59.4
million. At December 31, 2024, the Company maintained BOLIpolicies with five insurance carriers
with acombined cashsurrender valueof $
53.5
million.These policiescover certainpresent andformer executivesand
officers; the Company is the beneficiary of thesepolicies.
Employee 401(k) Plan
The Companyhas an 401(k)plan covering substantiallyall eligibleemployees. Employee401(k) planexpense isthe
amount of matching contributions.
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
89USCB Financial Holdings, Inc.2025 10-K
Income Taxes
Income taxes are accounted for under theasset and liability method. Deferred taxassets and liabilities are recognized
for thefuturetaxconsequencesattributableto differencesbetween thefinancialstatementcarryingamountsof existing
assets andliabilities andtheir respectivetax basesand operatingloss andtax creditcarryforwards. Deferredtax assets
andliabilitiesaremeasuredusingenactedtaxratesexpectedtoapplytotaxableincomeintheyearsinwhichthose
temporary differences are expected to be recoveredor settled. The effect on deferred tax assets andliabilities of a change
in tax rates is recognized in income in the period that includesthe enactment date.
Management is required toassess whether a valuationallowance should be establishedon the net deferred taxasset
based on theconsideration ofall available evidenceusing a morelikely than notstandard. In itsevaluation, Management
considers taxable losscarry-back availability, expectation of sufficienttaxable income, trendsin earnings, thefuture reversal
of temporary differences, and available tax planningstrategies.
The Company recognizes positions takenor expected to betaken in a taxreturn in accordance with existing accounting
guidance onincome taxeswhich prescribesa recognition thresholdand measurementprocess. Interestand penaltieson
tax liabilities, if any, wouldbe recorded in interest expense and other operating non-interestexpense, respectively.
Impairment of Long-Lived Assets
The Company's long-livedassets, such as premisesand equipment, are reviewedfor impairment wheneverevents or
changes in circumstancesindicate thatthe carryingamount ofan asset maynot be recoverable.Recoverability ofassets
to be held andused is measured by acomparison of the carrying amount ofan asset to estimated undiscounted futurecash
flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an
impairment chargeis recognizedby theamount bywhich thecarrying amountof theasset exceedsthe fairvalue ofthe
asset. Assetsto bedisposed ofwould beseparatelypresented inthe ConsolidatedBalance Sheetsand reportedat the
lower ofthe carryingamount orfair valueless coststo selland areno longerdepreciated. Theassets andliabilities ofa
disposal group classified as held forsale would be presented separately inthe appropriate asset and liability sections ofthe
Consolidated Balance Sheets.
Transfer of Financial Assets
Transfers offinancial assetsare accounted foras sales,when control overthe assetshas been surrendered.Control
overtransferredassetsisdeemedtobesurrenderedwhen(i)theassetshavebeenisolatedfromtheCompany-put
presumptivelybeyondthereachofthetransferoranditscreditors,eveninbankruptcyorotherreceivership,(ii)the
transferee obtainsthe right(free of conditionsthat constrainit from takingadvantage ofthat right)to pledgeor exchange
the transferredassets,and(iii) theCompanydoes notmaintain effectivecontroloverthe transferredassetsthroughan
agreement to repurchase them before their maturity orthe ability to unilaterally cause the holder to return specific assets.
Comprehensive Income
UnderGAAP,certainchangesinassetsandliabilities,suchasunrealizedholdinggainsandlossesonsecurities
available-for-sale, areexcluded fromcurrent periodearnings andreported asa separatecomponent ofthe stockholders’
equity section of the Consolidated BalanceSheets. Such items, along with netincome, are components of comprehensive
loss. Additionally,any unrealizedgains orlosses ontransfersof investmentsecuritiesfrom available-for-saleto held-to-
maturity arerecorded toaccumulated othercomprehensive income(loss) onthe dateof transferand amortizedover the
remaining lifeof eachsecurity.The amortizationof theunrealized gainor losson transferredsecuritiesis reportedas a
component of comprehensive income (loss). See Note 2 “InvestmentSecurities” for further discussion.
The change infair value onthe interest rateswaps is recordedin other assetsor accrued interestand other liabilities
withacorrespondingrecognitioninothercomprehensiveincome(loss)andsubsequentlyreclassifiedtoearningswhen
gains or losses are realized. See Note 12.
“Derivatives” for further discussion.
Advertising Costs
Advertising costs are expensed as incurred.
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
90USCB Financial Holdings, Inc.2025 10-K
Earnings per Common Share
Basic earningsper commonshare isnet incomeavailable tocommon stockholdersdivided bythe weightedaverage
number ofcommon shares outstandingduring the period.Diluted earnings percommon share includethe effect ofadditional
potential commonshares issuableunder vestedstock optionsand unvestedshares ofrestricted stock.Basic anddiluted
earningspershareareupdatedtoreflecttheeffectofstocksplitsasoccurred.SeeNote15“EarningsPerShare”for
additional information on earnings per common share.
Interest Income
Interest income is recognized as earned, based upon the principalamount outstanding, on an accrual basis.
Operating Segments
While the Company monitorsthe revenue streams ofthe various productsand services, operationsare managed and
financial performanceis evaluated ona Company widebasis. Operating resultsof the individualproducts arenot used to
make resource allocations or performance decisions byCompany management.
Stock-Based Compensation
Stock-based compensation accounting guidance requires that the compensationcost relating to share-based payment
transactions be recognized in the accompanying ConsolidatedFinancial Statements. That cost will be measuredbased on
the grantdate fairvalue ofthe equityor liabilityinstruments issued.The stock-basedcompensation accountingguidance
coversawiderangeofshare-basedcompensationarrangementsincludingstockoptions,restrictedshareawards,
performance-based awards, share appreciation rights, andemployee share purchase plans.
The stock-based compensation accounting guidancerequires that compensation costfor all stockawards be calculated
and recognized overthe employees' serviceperiod, generally definedas the vestingperiod. For awardswith graded vesting,
compensation costis recognizedona straight-linebasis overtherequisite serviceperiod fortheentire award.A Black-
Scholes model is used to estimate the fair value of stockoptions.
Loss Contingencies
Losscontingencies,includingclaimsandlegalactionsarisinginthenormalcourseofbusiness,arerecordedas
liabilities when thelikelihood of loss isprobable, and anamount or range ofloss can bereasonably estimated. In theopinion
of management, none of these actions, either individually or in the aggregate, is expected to have a material adverse effect
on the Company’s Consolidated Financial Statements.See Note 20 “Loss Contingencies” for further details.
Dividend Restrictions
BankingregulationsrequiremaintainingcertaincapitallevelsandmaylimitthedividendspaidbytheBanktothe
Company or by the Company to the stockholders.
Fair Value Measurements
Fair valuesof financialinstruments areestimated usingrelevant marketinformation andother assumptions,as more
fully disclosed in Note13 “Fair ValueMeasurements”. Fair value estimatesinvolve uncertainties andmatters of significant
judgment. Changes in assumptions or in market conditionscould significantly affect the estimates.
Derivative Instruments
Derivative financial instruments arecarried at fairvalue and reflectthe estimated amount thatwould have beenreceived
toterminatethesecontractsatthereportingdatebaseduponpricingorvaluationmodelsappliedtocurrentmarket
information.
Rate Swaps Designated as Cash Flow Hedges
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
91USCB Financial Holdings, Inc.2025 10-K
The changes infair value onthe interest rateswap is recordedin other assetsor accrued interestand other liabilities
withacorrespondingrecognitioninothercomprehensiveincome(loss)andsubsequentlyreclassifiedtoearningswhen
gains or losses are realized. As of December 31, 2025,the cash flow hedge was effective.
Interest Rate Swaps Designated as Fair ValueHedges
Thechangesinfairvalueontheseinterestrateswapsarerecordedinotherassetsoraccruedinterestandother
liabilities with a corresponding recognition in the assetsbeing hedged.
Interest Rate Swaps
The Company enters into interest rate swapsagreements to provide commercial loan clientsthe ability to swap from a
variable interest rate to a fixed rate. The Companyenters into a floating-rate loan with a customer witha separately issued
swap agreement allowingthe customer to convertfloating payments onthe loan into afixed interest rate. Tomitigate risk,
the Company enters into a matching agreement witha third party to offset the exposure onthe customer agreement. These
swaps arenot consideredto bequalified hedgingtransactions andthe unmatchedunrealized gainor lossis recordedin
other non-interest income.
InterestrateswapagreementsareusedbytheCompanyaspartofitsasset-liabilitymanagementstrategytohelp
manage its interestrate risk exposure.The notional amountof the interestrate swaps doesnot represent actualamounts
exchanged by the parties.The amounts exchanged are determinedby reference to thenotional amount and theother terms
of the individual interest rate swap agreements.
Revenue from Contracts with Customers
Revenue fromcontracts with customersis recognized inan amount thatreflects the considerationthe Company expects
to receive for theservices the Companyprovides to itscustomers. The mainrevenue earned bythe Company fromloans
and investmentsecuritiesare excludedfrom theaccounting standardupdate “Revenuefrom Contractswith Customers”.
Deposit andservice chargefees, consistingof primarilymonthly maintenancefees, wirefees, ATMinterchange feesand
other transaction-based fees, are the mostsignificant types of revenue withinthe accounting standard update.Revenue is
recognized when the service provided by theCompany is complete. The aggregate amountof revenue within the scope of
this standard that is received from sources other than depositservice charges and fees is not material.
Cash Flow Statement
The Company reports the net activity rather than gross activity in the ConsolidatedStatements of Cash Flows. The net
cashflowsarereportedforloansheldforinvestment,accruedinterestreceivable,deferredtaxassets,otherassets,
customer deposits, accruedinterest payable, accruedinterest and otherliabilities, exercise ofoptions, and proceedsfrom
the issuance of Class A common shares and subordinateddebt.
Reclassifications
CertainamountsintheConsolidatedFinancialStatementshavebeenreclassifiedtoconformtothecurrent
presentation. Reclassifications had no impact on the net incomeor stockholders’ equity of the Company.
Recently Issued Accounting Standards
Issued and Adopted
Improvements to Income TaxDisclosures
InDecember2023,theFASBissuedAccountingStandardsUpdate(ASU)2023-09,IncomeTaxes(Topic740):
Improvements to Income TaxDisclosures. This ASU pertains todisclosures regarding effectivetax rates and cash income
taxes paid with the goal of providing stakeholders with more transparentand relevant information. This ASU is effective for
public businessentities forannual periodsbeginning afterDecember 15,2024. The Companyadopted thisASU 2023-09
effective January 1, 2025; the adoption of this ASU did not have a material impact on theCompany’s consolidated financial
statements.
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
92USCB Financial Holdings, Inc.2025 10-K
2.INVESTMENT SECURITIES
The followingtables presenta summaryof the amortizedcost, unrealizedor unrecognizedgains andlosses,and fair
value of investment securities at the dates indicated (inthousands):
December 31, 2025
Available-for-sale:
Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Fair Value
U.S. Government Agency
$
15,169
$
18
$
(1,043)
$
14,144
Collateralized mortgage obligations
92,871
-
(17,043)
75,828
Mortgage-backed securities - residential
35,865
135
(6,083)
29,917
Mortgage-backed securities - commercial
174,622
347
(6,861)
168,108
Municipal securities
5,196
-
(933)
4,263
Bank subordinated debt securities
15,284
189
(243)
15,230
$
339,007
$
689
$
(32,206)
$
307,490
December 31, 2025
Held-to-maturity:
Amortized
Cost
Unrecognized
Gains
Unrecognized
Losses
Fair Value
U.S. Government Agency
$
41,158
$
91
$
(3,279)
$
37,970
Collateralized mortgage obligations
51,431
854
(5,499)
46,786
Mortgage-backed securities - residential
37,221
760
(3,263)
34,718
Mortgage-backed securities - commercial
15,088
-
(1,037)
14,051
Corporate bonds
9,045
-
(62)
8,983
$
153,943
$
1,705
$
(13,140)
$
142,508
Allowance for credit losses - securities held-to-maturity
(2)
Securities held-to maturity, net of allowance for credit losses
$
153,941
December 31, 2024
Available-for-sale:
Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Fair Value
U.S. Government Agency
$
14,279
$
14
$
(1,668)
$
12,625
Collateralized mortgage obligations
101,808
15
(22,918)
78,905
Mortgage-backed securities - residential
58,995
1
(12,063)
46,933
Mortgage-backed securities - commercial
86,604
40
(7,905)
78,739
Municipal securities
24,925
-
(5,614)
19,311
Bank subordinated debt securities
24,314
438
(1,044)
23,708
$
310,925
$
508
$
(51,212)
$
260,221
December 31, 2024
Held-to-maturity:
Amortized
Cost
Unrecognized
Gains
Unrecognized
Losses
Fair Value
U.S. Government Agency
$
42,538
$
-
$
(5,094)
$
37,444
Collateralized mortgage obligations
56,987
57
(7,785)
49,259
Mortgage-backed securities - residential
40,681
53
(4,613)
36,121
Mortgage-backed securities - commercial
15,272
-
(1,385)
13,887
Corporate bonds
9,222
-
(393)
8,829
164,700
$
110
$
(19,270)
$
145,540
Allowance for credit losses - securities held-to-maturity
(6)
Securities held-to maturity, net of allowance for credit losses
$
164,694
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
93USCB Financial Holdings, Inc.2025 10-K
Transfers ofdebt securitiesinto the HTMcategory fromthe available forsale (“AFS”)category are madeat fair value
as of the dateof transfer. The unrealized gain or lossat the date oftransfer is retained in accumulated othercomprehensive
loss(“AOCL”)and inthecarryingvalueof theHTM securitiesand thereis noimpactto netincome.Suchamountsare
amortized over the remaining life of the securities. TheCompany made two transfers from AFS to HTM portfoliosin 2022.
There were
no
investment securities thatwere transferred fromAFS to HTM forthe years ended December31, 2025,
and 2024.
For theyearsended December31,2025 and2024,total amortizationout ofAOCLfor thenet unrealizedlosseson
securitiestransferredfromAFStoHTMin2022was$
266
thousandand$
267
thousand,respectively.Theremaining
balanceofthenetunrealizedlossesretainedinAOCLwas$
9.0
millionatDecember 31,2025and$
9.3
millionat
December 31, 2024. The fair value of the transferred securities was $
99.6
million at December 31, 2025 and $
101.2
million
at December 31, 2024.
Gainsandlossesonthesaleofsecuritiesarerecordedonthetradedateandaredeterminedonthespecific
identification basis. The following table presents the proceeds, realized gross gains and realized gross losses on sales and
calls of AFS debt securities for the years ended December31, 2025 and 2024 (in thousands):
Available-for-sale:
2025
2024
Proceeds from sales and call of securities
$
82,497
$
34,753
Gross gains
$
400
$
195
Gross losses
(7,926)
(181)
Net realized (losses) gains
$
(7,526)
$
14
Theamortizedcostandfairvalueofinvestmentsecurities,bycontractualmaturity,areshownbelowforthedate
indicated (in thousands).Actual maturities maydiffer from contractualmaturities because borrowersmay have the rightto
call or prepayobligations with orwithout call orprepayment penalties. Securities notdue at asingle maturity date areshown
separately.
Available-for-sale
Held-to-maturity
December 31, 2025:
Amortized
Cost
Fair Value
Amortized
Cost
Fair Value
Due within one year
$
-
$
-
$
9,045
$
8,983
Due after one year through five years
4,473
4,504
-
-
Due after five years through ten years
16,007
14,989
-
-
Due after ten years
-
-
-
-
U.S. Government Agency
15,169
14,144
41,158
37,970
Collateralized mortgage obligations
92,871
75,828
51,431
46,786
Mortgage-backed securities - residential
35,865
29,917
37,221
34,718
Mortgage-backed securities - commercial
174,622
168,108
15,088
14,051
$
339,007
$
307,490
$
153,943
$
142,508
At December 31,2025 and2024, therewere nosecurities toany oneissuer inan amountgreater than10% oftotal
stockholders’equityotherthantheU.S.GovernmentandU.S.GovernmentAgencies.Allthecollateralizedmortgage
obligations and mortgage-backed securitiesare issued by U.S. governmentsponsored entities at December31, 2025 and
2024.
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
94USCB Financial Holdings, Inc.2025 10-K
Information pertainingto investmentsecurities withgross unrealizedlosses, aggregatedby investmentcategoryand
length oftime thatthoseindividual securitieshave beenin acontinuousloss position,are presentedas ofthe following
dates (in thousands):
December 31, 2025
Less than 12 months
12 months or more
Total
Available-for-sale:
Fair Value
Unrealized
Losses
Fair Value
Unrealized
Losses
Fair Value
Unrealized
Losses
U.S. Government Agency
$
5,937
$
(59)
$
5,649
$
(984)
$
11,586
$
(1,043)
Collateralized mortgage obligations
8,929
(93)
66,899
(16,950)
75,828
(17,043)
Mortgage-backed securities - residential
-
-
22,695
(6,083)
22,695
(6,083)
Mortgage-backed securities -
commercial
59,655
(477)
56,852
(6,384)
116,507
(6,861)
Municipal securities
-
-
4,263
(933)
4,263
(933)
Bank subordinated debt securities
2,020
(4)
7,234
(239)
9,254
(243)
$
76,541
$
(633)
$
163,592
$
(31,573)
$
240,133
$
(32,206)
December 31, 2024
Less than 12 months
12 months or more
Total
Available-for-sale:
Fair Value
Unrealized
Losses
Fair Value
Unrealized
Losses
Fair Value
Unrealized
Losses
U.S. Government Agency
$
4,468
$
(76)
$
7,451
$
(1,592)
$
11,919
$
(1,668)
Collateralized mortgage obligations
3,101
(23)
72,952
(22,895)
76,053
(22,918)
Mortgage-backed securities - residential
972
(11)
44,600
(12,052)
45,572
(12,063)
Mortgage-backed securities - commercial
44,410
(1,266)
27,875
(6,639)
72,285
(7,905)
Municipal securities
-
-
19,311
(5,614)
19,311
(5,614)
Bank subordinated debt securities
-
-
14,352
(1,044)
14,352
(1,044)
$
52,951
$
(1,376)
$
186,541
$
(49,836)
$
239,492
$
(51,212)
At December 31, 2025, the Company had $
32.2
million of unrealized losses in its AFS securities portfolio, whichhad a
fairvalueof$
240.1
millionwithrespecttothesecuritieswithunrealizedlosses.Mortgage-backedsecuritiesand
collateralizedmortgageobligationsissuedbyU.S.government-sponsoredentitiesaccountedfor$
31.0
millionofthe
unrealized losses and hada fair value of $
226.6
million. These unrealizedlosses were primarily attributableto changes in
interest ratessince thetime ofpurchase. Thecontractual cashflows forthese securities areguaranteed byU.S. Government
AgenciesandU.S.government-sponsoredentities.Municipalbondshadunrealizedlossesof$
933
thousandandafair
value of $
4.3
million. Thesesecurities areof high creditquality,and the declinein fair valuewas notattributable tocredit
deterioration. Banksubordinated debtsecurities hadunrealized lossesof $
243
thousand anda fairvalue of$
9.3
million,
primarily dueto changesin interestrate marketconditions sincepurchase. Basedon theassessment ofthese mitigating
factors,managementbelievesthattheunrealizedlossesonthesedebtsecurityholdingsareafunctionofchangesin
investment spreads and interest rate movements and not changesin credit quality.
The measurementof expected creditlosses underthe CECLmethodology isapplicable to financialassets measured
at amortized cost, including loan receivables and HTMdebt securities.
CECL requires a loss reserve for securitiesclassified as HTM. The reserve should reflecthistorical credit performance
as well as the impact of projected economic forecast.For U.S. Government bonds and U.S. Agency issuedbonds in HTM,
the explicit guarantee of the U.S.Government is sufficient to conclude that acredit loss reserve is not required.The reserve
requirementisfor threeprimaryassetsgroups:municipalbonds,corporatebonds,andnon-agencysecuritizations.The
Company calculates quarterly the loss reserveutilizing Moody’s ImpairmentStudio. The CECL measurement for investment
securitiesincorporateshistoricaldata,containingdefaultsandrecoveriesinformation,andMoody’sbaselineeconomic
forecast. Thesolution usesprobability ofdefault/lossgiven default(“PD/LGD”)approach. PDrepresents thelikelihood a
borrowerwilldefault.WithinMoody’smodel,thisisdeterminedusinghistoricaldefaultdata,adjustedforthecurrent
economic environment. LGD projects the expected lossif a borrower were to default.
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
95USCB Financial Holdings, Inc.2025 10-K
The Company monitorsthe creditquality of HTMsecurities throughthe use ofcredit ratings.Credit ratingsare monitored
by the Companyon at leasta quarterly basis.As of December31, 2025 andDecember 31, 2024,all HTM securitiesheld
by the Company were rated investment grade.
At December 31, 2025, HTM securities included $
144.9
million of U.S. Government and U.S.Agency issued bonds and
mortgage-backedsecurities.Becauseoftheexplicitand/orimplicitguaranteeonthesebonds,theCompanyholds
no
reservesontheseholdings.TheremainingportionoftheHTMportfolioismadeupof$
9.0
millionininvestmentgrade
corporate bonds. The required reserve for theseholdings is determined each quarter using the model described above.For
the portion of the HTM exposed to non-governmentcredit risk, the Company utilized the PD/LGDmethodology to estimate
a $
2
thousand ACL asof December 31, 2025.The book valuefor debt securitiesclassified as HTMrepresents amortized
cost less ACL.
The Company determined that an ACL on its debt securities available for sale as was not required as of December31,
2025 and December 31, 2024.
In 2018, the Companybecame a Qualified Public Depository(“QPD”) with the Stateof Florida. As aQPD, the Company
has theauthority tolegally maintain publicdeposits from cities,municipalities, and theState ofFlorida. These publicdeposits
are secured by securitiespledged to theState of Florida ata ratio of
25
% and
50
% of the averageoutstanding amount of
uninsureddepositsatDecember 31,2025andDecember 31,2024,respectively.TheCompanymustalsomaintaina
minimum amount of pledged securities to be in the programrelated to these deposits.
At December 31, 2025, the Company had
fifteen
securities with an aggregate fair value of$
43.5
million pledged to the
State of Floridaunder the publicfunds program. The Companyheld a total of$
167.7
million in publicfunds at December 31,
2025.
At December 31,2024, theCompany had
twenty-one
securities withan aggregatefair valueof $
66.1
million pledged
totheStateofFloridaunderthepublicfundsprogram.TheCompanyheldatotalof$
110.5
millioninpublicfundsat
December 31, 2024.
3.LOANS
The following table is a summary of the distribution of loansheld for investment by type (in thousands):
December 31, 2025
December 31, 2024
Total
Percent of
Total
Total
Percent of
Total
Residential Real Estate
$
307,692
14.1
%
$
289,961
14.8
%
Commercial Real Estate
1,244,835
57.0
%
1,136,417
57.8
%
Commercial and Industrial
295,548
13.5
%
258,311
13.1
%
Correspondent Banks
127,968
5.9
%
82,438
4.2
%
Consumer and Other
207,215
9.5
%
198,091
10.1
%
Totalgross loans
2,183,258
100.0
%
1,965,218
100.0
%
Plus: Deferred costs/fees
5,999
7,630
Totalloans held for investment, net of deferred costs/fees
2,189,257
1,972,848
Less: Allowance for credit losses
25,500
24,070
Totalloans held for investment, net of allowance
$
2,163,757
$
1,948,778
At December 31, 2025 and 2024, the Company had $
561.4
million and $
518.8
million, respectively, of commercial real
estate and residential mortgage loans pledged as collateral on lines of credit with the FHLB and theFederal Reserve Bank
of Atlanta. At December 31, 2025 and 2024, the Companyhad
no
real estate loans in the process of foreclosure.
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
96USCB Financial Holdings, Inc.2025 10-K
Allowance for Credit Losses
Changes in the ACL for the years ended December 31, 2025and 2024 are as follows (in thousands):
Residential
Real Estate
Commercial
Real Estate
Commercial
and Industrial
Correspondent
Banks
Consumer
and Other
Total
December 31, 2025:
Beginning balance
$
5,121
$
8,788
$
4,633
$
654
$
4,874
$
24,070
Provision for credit losses
(1)
763
688
164
361
143
2,119
Recoveries
24
-
17
-
2
43
Charge-offs
-
-
-
-
(732)
(732)
Ending Balance
$
5,908
$
9,476
$
4,814
$
1,015
$
4,287
$
25,500
December 31, 2024:
Beginning balance
$
2,695
$
10,366
$
3,974
$
911
$
3,138
$
21,084
Provision for credit losses
(2)
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
(1) Provision for credit losses excludes $
182
thousand provision for unfunded commitments includedin accrued interest and other liabilities and $
4
thousand release for investment securities held tomaturity.
(2) Provision for credit losses excludes $
199
thousand provision for unfunded commitments includedin accrued interest and other liabilities and $
2
thousand release for investment securities held tomaturity.
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
97USCB Financial Holdings, Inc.2025 10-K
At December31,2025,theACLforloanswas$
25.5
millioncomparedto$
24.1
millionatDecember31,2024.The
increase of $
1.4
million or 5.9% in the ACL was primarily due to loan growth.
Charge offsrelated toloans forthe yearended December 31,2025 were$
23
thousand originatedin 2025and $
709
thousand originated in 2022. Charge offs for the yearended December 31, 2024 were $
19
thousand originated in 2024.
Allowance for credit losses and the outstanding balances inloans as of December 31, 2025 and 2024 are asfollows (in
thousands):
Residential
Real Estate
Commercial
Real Estate
Commercial
and Industrial
Correspondent
Banks
Consumer
and Other
Total
December 31, 2025:
Allowance for credit losses:
Individually evaluated
$
27
$
-
$
84
$
-
$
-
$
111
Collectively evaluated
5,881
9,476
4,730
1,015
4,287
25,389
Balances, end of period
$
5,908
$
9,476
$
4,814
$
1,015
$
4,287
$
25,500
Loans:
Individually evaluated
$
5,583
$
-
$
1,265
$
-
$
-
$
6,848
Collectively evaluated
302,109
1,244,835
294,283
127,968
207,215
2,176,410
Balances, end of period
$
307,692
$
1,244,835
$
295,548
$
127,968
$
207,215
$
2,183,258
December 31, 2024:
Allowance for credit losses:
Individually evaluated
$
40
$
-
$
27
$
-
$
651
$
718
Collectively evaluated
5,081
8,788
4,606
654
4,223
23,352
Balances, end of period
$
5,121
$
8,788
$
4,633
$
654
$
4,874
$
24,070
Loans:
Individually evaluated
$
6,788
$
-
$
690
$
-
$
1,990
$
9,468
Collectively evaluated
283,173
1,136,417
257,621
82,438
196,101
1,955,750
Balances, end of period
$
289,961
$
1,136,417
$
258,311
$
82,438
$
198,091
$
1,965,218
Credit Quality Indicators
The Company grades loans based on the estimated capability of the borrower to repay the contractual obligation of the
loan agreement basedon relevant informationwhich mayinclude: current financialinformation on theborrower,historical
paymentexperience,creditdocumentationandothercurrenteconomictrends.Internalcreditriskgradesareevaluated
periodically.
The Company's internally assigned credit risk grades are as follows:
Pass
– Loans indicate different levels of satisfactoryfinancial condition and performance.
Special Mention
– Loans classified as special mention have a potential weaknessthat deserves management’s
close attention. If left uncorrected, these potential weaknessesmay result in deterioration of the repayment
prospects for the loan or of the institution’scredit position at some future date.
Substandard
– Loans classified as substandard are inadequately protectedby the current net worth and paying
capacity of the obligator or of the collateral pledged, ifany. Loans so classifiedhave a well-defined weakness or
weaknesses that jeopardize the liquidation of the debt.They are characterized by the distinct possibility that the
institution will sustain some loss if the deficiencies arenot corrected.
Doubtful
– Loans classified as doubtful have all the weaknesses inherentin those classified at substandard, with
the added characteristic that the weaknesses make collectionor liquidation in full on the basis of currently existing
facts, conditions, and values, highly questionable and improbable.
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
98USCB Financial Holdings, Inc.2025 10-K
Loss
– Loans classified as loss are considered uncollectible.
Loan credit exposures by internally assigned grades arepresented below for the periods indicated (in thousands):
As of December 31, 2025
Term Loans by Origination Year
Revolving
Loans
Total
2025
2024
2023
2022
2021
Prior
Residential real estate
Pass
$
65,582
$
83,426
$
32,139
$
23,685
$
21,056
$
58,220
$
20,168
$
304,276
Special Mention
128
-
-
587
-
201
-
916
Substandard
-
917
1,468
-
-
115
-
2,500
Total
65,710
84,343
33,607
24,272
21,056
58,536
20,168
307,692
Commercial real estate
Pass
241,028
184,323
109,465
281,985
134,663
273,483
5,876
1,230,823
Special Mention
-
-
8,451
-
-
3,162
-
11,613
Substandard
-
-
-
-
1,724
675
-
2,399
Total
241,028
184,323
117,916
281,985
136,387
277,320
5,876
1,244,835
Commercial and
industrial
Pass
75,867
63,178
58,060
32,118
28,090
12,314
23,542
293,169
Special Mention
-
72
-
-
835
-
-
907
Substandard
-
-
389
-
445
638
-
1,472
Total
75,867
63,250
58,449
32,118
29,370
12,952
23,542
295,548
Correspondent banks
Pass
127,968
-
-
-
-
-
-
127,968
Total
127,968
-
-
-
-
-
-
127,968
Consumer and other
loans
Pass
59,276
34,309
36,808
51,091
23,214
747
1,770
207,215
Substandard
-
-
-
-
-
-
-
-
Total
59,276
34,309
36,808
51,091
23,214
747
1,770
207,215
TotalLoans
Pass
569,721
365,236
236,472
388,879
207,023
344,764
51,356
2,163,451
Special Mention
128
72
8,451
587
835
3,363
-
13,436
Substandard
-
917
1,857
-
2,169
1,428
-
6,371
Doubtful
-
-
-
-
-
-
-
-
Total
$
569,849
$
366,225
$
246,780
$
389,466
$
210,027
$
349,555
$
51,356
$
2,183,258
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
99USCB Financial Holdings, Inc.2025 10-K
As of December 31, 2024
Term Loans by Origination Year
Revolving
Loans
Total
2024
2023
2022
2021
2020
Prior
Residential real estate
Pass
$
109,590
$
39,666
$
34,315
$
23,039
$
5,791
$
66,115
$
10,885
$
289,401
Substandard
-
-
-
-
-
560
-
560
Total
109,590
39,666
34,315
23,039
5,791
66,675
10,885
289,961
Commercial real estate
Pass
175,023
130,503
317,971
175,535
98,695
231,558
4,680
1,133,965
Substandard
-
-
-
1,765
687
-
-
2,452
Total
175,023
130,503
317,971
177,300
99,382
231,558
4,680
1,136,417
Commercial and
industrial
Pass
68,405
80,644
33,962
30,495
3,891
11,839
26,795
256,031
Substandard
-
-
-
519
-
1,093
668
2,280
Total
68,405
80,644
33,962
31,014
3,891
12,932
27,463
258,311
Correspondent banks
Pass
82,438
-
-
-
-
-
-
82,438
Total
82,438
-
-
-
-
-
-
82,438
Consumer and other
loans
Pass
40,921
51,392
65,603
35,181
491
815
1,698
196,101
Substandard
-
-
1,990
-
-
-
-
1,990
Total
40,921
51,392
67,593
35,181
491
815
1,698
198,091
TotalLoans
Pass
476,377
302,205
451,851
264,250
108,868
310,327
44,058
1,957,936
Special Mention
-
-
-
-
-
-
-
-
Substandard
-
-
1,990
2,284
687
1,653
668
7,282
Doubtful
-
-
-
-
-
-
-
-
Total
$
476,377
$
302,205
$
453,841
$
266,534
$
109,555
$
311,980
$
44,726
$
1,965,218
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
100USCB Financial Holdings, Inc.2025 10-K
Loan Aging
The Companyalso considers theperformance of loansin gradingand inevaluating thecredit qualityof theloan portfolio.
The Company analyzes credit quality andloan grades based on payment performanceand the aging status of loans.The
following table include an aging analysis of accruingloans and total non-accruing loans as of December 31, 2025 and 2024
(in thousands):
Accruing
As of December 31, 2025:
Current
Past Due
30-89 Days
Past Due
90 Days or
more and
Still
Accruing
Total
Accruing
Non-Accrual
Total Loans
Residential real estate:
Home equity line of credit and other
$
1,538
$
-
$
-
$
1,538
$
-
$
1,538
1-4 family residential
238,852
1,150
-
240,002
2,385
242,387
Condo residential
62,364
1,288
-
63,652
115
63,767
302,754
2,438
-
305,192
2,500
307,692
Commercial real estate:
Land and construction
83,305
-
-
83,305
-
83,305
Multi-family residential
254,562
-
-
254,562
-
254,562
Condo commercial
61,525
-
-
61,525
-
61,525
Commercial property
845,003
440
-
845,443
-
845,443
Leasehold improvements
-
-
-
-
-
-
1,244,395
440
-
1,244,835
-
1,244,835
Commercial and industrial:
Secured
272,900
71
-
272,971
638
273,609
Unsecured
21,939
-
-
21,939
-
21,939
294,839
71
-
294,910
638
295,548
Correspondent banks
127,968
-
-
127,968
-
127,968
Consumer and other
207,215
-
-
207,215
-
207,215
Total
$
2,177,171
$
2,949
$
-
$
2,180,120
$
3,138
$
2,183,258
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
101USCB Financial Holdings, Inc.2025 10-K
Accruing
As of December 31, 2024:
Current
Past Due
30-89 Days
Past Due
90 Days
or more
and Still
Accruing
Total
Accruing
Non-
Accrual
Total Loans
Residential real estate:
Home equity line of credit and other
$
1,120
$
-
$
-
$
1,120
$
-
$
1,120
1-4 family residential
225,334
2,886
-
228,220
-
228,220
Condo residential
58,956
1,351
-
60,307
314
60,621
285,410
4,237
-
289,647
314
289,961
Commercial real estate:
Land and construction
40,090
-
-
40,090
-
40,090
Multi-family residential
214,912
-
-
214,912
-
214,912
Condo commercial
57,402
-
-
57,402
-
57,402
Commercial property
823,326
687
-
824,013
-
824,013
Leasehold improvements
-
-
-
-
-
-
1,135,730
687
-
1,136,417
-
1,136,417
Commercial and industrial:
Secured
232,779
521
-
233,300
403
233,703
Unsecured
24,608
-
-
24,608
-
24,608
257,387
521
-
257,908
403
258,311
Correspondent banks
82,438
-
-
82,438
-
82,438
Consumer and other
196,101
-
-
196,101
1,990
198,091
Total
$
1,957,066
$
5,445
$
-
$
1,962,511
$
2,707
$
1,965,218
Non-accrual Status
The followingtable includesthe amortizedcostbasis ofloans onnon-accrualstatusand loanspast due90 daysor
more and still accruing as of December 31, 2025 and 2024 (inthousands):
December 31, 2025
Nonaccrual Loans
With No Related
Allowance
Nonaccrual Loans
With Related
Allowance
Total
Non-accruals
Loans Past Due90
Days or more and
Still Accruing
Residential real estate
$
2,500
$
-
$
2,500
$
-
Commercial and industrial
563
75
638
-
Total
$
3,063
$
75
$
3,138
$
-
December 31, 2024
Nonaccrual Loans
With No Related
Allowance
Nonaccrual Loans
With Related
Allowance
Total
Non-accruals
Loans Past Due90
Days or more and
Still Accruing
Residential real estate
$
314
$
-
$
314
$
-
Commercial and industrial
-
403
403
$
-
Consumer and other
-
1,990
1,990
-
Total
$
314
$
2,393
$
2,707
$
-
Accrued interestreceivable isexcluded fromthe estimateof creditlosses. Therewas
no
interest incomerecognized
attributabletonon-accrualloansoutstandingduringtheyearsendedDecember 31,2025and2024.Interestincomeon
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
102USCB Financial Holdings, Inc.2025 10-K
these loansfor theyears endedDecember 31, 2025and 2024,would havebeen approximately$
114
thousand and$
84
thousand, respectively,had these loans performed in accordance with theiroriginal terms.
Collateral-Dependent Loans
Aloaniscollateraldependentwhentheborrowerisexperiencingfinancialdifficultyandrepaymentoftheloanis
expected to beprovided substantiallythrough the saleor operation ofthe collateral. Therewere
four
collateral dependent
loans as of December 31, 2025 and
two
collateral dependent loans as of December31, 2024.
The followingtable includesthe amortized costbasis ofcollateral dependentloans relatedto borrowersexperiencing
financial difficulty by type of collateral as of December31, 2025 and 2024 (in thousands):
December 31, 2025
Collateral Type
Residential Real Estate
Specific Reserves
Residential real estate
$
2,583
$
-
Total
$
2,583
$
-
December 31, 2024
Collateral Type
Boat
Specific Reserves
Consumer and other loans
$
1,990
$
651
Total
$
1,990
$
651
Management evaluateson an individualbasis collateraldependent loansusing the fairvalue of thecollateral method
to determineif acredit lossreserve isnecessary.The ACLis measuredbased onthe differenceof thefairvalue ofthe
collateral andthe recordedinvestment(amortizedcostbasis oftheloan), ifthe finalcollateralvaluationis lessthan the
recorded investmentof theloan areserve amountis calculated.If thecollateralvaluation isequal toor greaterthan the
recorded investment of the loan, no reserve is determined.
Loan Modifications to Borrowers Experiencing FinancialDifficulties
The followingtable presentnewly restructuredloans, bytype ofmodification, whichoccurred duringthe yearsended
December 31, 2025 and December 31, 2024 (dollarsin thousands):
December 31, 2025
Amortized Cost Prior to Modification
Amortized Cost After Modification
Number of
Loans
Combination
Modifications
Total
Modifications
Number of
Loans
Combination
Modifications
Total
Modifications
Commercial and industrial
2
$
969
$
969
2
$
883
$
883
2
$
969
$
969
2
$
883
$
883
December 31, 2024
Amortized Cost Prior to Modification
Amortized Cost After Modification
Number of
Loans
Combination
Modifications
Total
Modifications
Number of
Loans
Combination
Modifications
Total
Modifications
Commercial and industrial
1
$
468
$
468
1
$
468
$
468
1
$
468
$
468
1
$
468
$
468
ThetwoloanmodificationsfortheborrowersexperiencingfinancialdifficultyatDecember 31,2025includeda
combination ofrate, termand principalmodifications. Onone loan, therate wasmodified froma variable rateto a
7.75
%
fixed rate and the term wasmodified from October 2025to January 2028. On thesecond loan, the rate wasmodified from
a variable rate to a
7.20
% fixed rate and there was a principal reductionof $
86
thousand.
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
103USCB Financial Holdings, Inc.2025 10-K
The loan modificationfor theborrower experiencingfinancial difficultyat December 31,2024, includeda combination
of rate and maturity modifications.The rate was modifiedfrom a variable rateto a fixed rateof
8.0
%. The original maturity
of September 2029 was extended to January 2034.
There were
no
existing loanmodificationsthat subsequentlydefaultedduring eitheryear endedDecember 31,2025
and 2024.
4.LEASES
TheCompanyentersintoleasesinthenormalcourseofbusinessprimarilyforbankingcentersandback-office
operations. As ofDecember 31, 2025, theCompany leased nineof the tenbanking centers andthe headquarter building.
The Companyis obligatedunder non-cancelableoperating leasesfor thesepremises withexpiration datesranging from
2026 to 2036. Many of these leases have extensionclauses which the Company could exercise whichwould extend these
expiration dates.
The Companyhas classifiedall leases asoperating leases.Lease expensefor operatingleases arerecognized ona
straight-line basis overthe lease term.Right-of-use (“ROU”)assets represent theright to usethe underlyingasset for the
leasetermandleaseliabilitiesrepresenttheobligationtomakeleasepaymentsarisingfromthelease.TheCompany
elected the short-termlease recognition exemptionfor all leasesthat qualify,meaning those withterms under 12months.
ROU assets or lease liabilities are not to be recognizedfor short-term leases.
ROU assets andlease liabilities arerecognized at the leasecommencement date based onthe estimated present value
of lease payments over the lease term.
AsmostoftheCompany’sleasesdonotprovideanimplicitrate,theincrementalborrowingratebasedonthe
information availableat commencementdate isused.The Company’sincremental borrowingrate isbased onthe FHLB
advances rate matching or nearing the lease term.
The following table presents the ROU assets and lease liabilitiesas of December 31, 2025 and 2024 (in thousands):
December 31,
2025
2024
ROU assets:
Operating leases
$
5,519
$
8,451
Lease liabilities:
Operating leases
$
5,519
$
8,451
The weighted average remaining lease term and weighted averagediscount rate as of December 31, 2025 and 2024:
December 31,
2025
2024
Weighted average remaining lease term (in years):
Operating leases
6.04
5.95
Weighted average discount rate:
Operating leases
2.94
%
2.94
%
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
104USCB Financial Holdings, Inc.2025 10-K
Future lease payment obligations and a reconciliation to leaseliability as of December 31, 2025 (in thousands):
Total
2026
$
2,383
2027
951
2028
492
2029
478
Thereafter
2,509
Totalfuture minimum lease payments
6,813
Less: interest component
(1,294)
Totallease liability
$
5,519
The lease cost for the years ended December 31, 2025and 2024 (in thousands):
December 31,
2025
2024
Finance lease cost:
ROU assets amortization
$
2,932
$
2,972
Operating lease cost
823
742
Less: Sublease income
(85)
(82)
Totallease cost, net
$
3,670
$
3,632
5.PREMISES AND EQUIPMENT
A summary of premises and equipment are presented belowas of December 31, 2025 and 2024 (in thousands):
December 31,
2025
2024
Land
$
972
$
972
Building
1,952
1,952
Furniture, fixtures and equipment
9,313
9,137
Computer hardware and software
4,747
4,623
Leasehold improvements
10,587
10,584
Premises and equipment, gross
27,571
27,268
Accumulated depreciation and amortization
(23,324)
(22,705)
Premises and equipment, net
$
4,247
$
4,563
Depreciationandamortizationexpensewas$
619
thousandand$
587
thousandfortheyearsendedDecember 31,
2025 and 2024, respectively.
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
105USCB Financial Holdings, Inc.2025 10-K
6.INCOME TAXES
The Company’s pre-taxincome and provisionfor income taxesis presented inthe following tablefor the yearsended
December 31, 2025 and 2024 (in thousands):
December 31,
2025
2024
Pre-tax income:
Domestic
$
35,916
$
32,477
Total pre-tax income
$
35,916
$
32,477
Current tax expense:
Federal
$
1,213
$
-
State
1,857
-
Totalcurrent
3,070
-
Deferred tax expense:
Federal
4,907
6,122
State
1,839
1,681
Totaldeferred
6,746
7,803
Totalincome tax expense
$
9,816
$
7,803
The actual incometax expense for theyears ended December 31, 2025and 2024 differs fromthe statutory tax expense
for the year (computed by applying the U.S. federalcorporate tax rate of
21
% for 2025 and
21
% for 2024 to income before
provision for income taxes) as follows (in thousands):
2025
2024
Amount
% Pre-tax
Income
Amount
% Pre-tax
Income
Computed tax at the statutory federal income tax rate
$
7,542
21.00%
$
6,820
21.00%
State income taxes, net of federal tax benefit
(1)
2,767
7.70%
1,411
4.33%
Nontaxable or Nondeductible Items
Bank owned life insurance income
(495)
(1.38%)
(428)
(1.32%)
Other
2
0.01%
-
-
Other adjustments, net
-
-
-
-
Totaltax expense
$
9,816
27.33%
$
7,803
24.01%
(1) Taxesin Florida made up the majority (greater than 50%) of the tax effect in this category.
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
106USCB Financial Holdings, Inc.2025 10-K
The following table presentsthe deferred tax assetsand deferred tax liabilitiesas of December 31, 2025and 2024 (in
thousands):
2025
2024
Deferred tax assets:
Net operating loss
$
1,039
$
9,276
Allowance for credit losses
6,463
6,100
Lease liability
1,399
2,142
Unrealized loss on available for sale securities
10,270
15,200
Depreciable property
-
38
Equity compensation
973
686
Accruals
721
520
Other, net
268
65
Deferred tax asset
$
21,133
$
34,027
Deferred tax liability:
Deferred loan cost
(1,520)
(1,934)
Lease right of use asset
(1,399)
(2,142)
Deferred expenses
(154)
(224)
Cash flow hedge
(5)
(81)
Depreciable property
(9)
-
Deferred tax liability
$
(3,087)
$
(4,381)
Net deferred tax asset
$
18,046
$
29,646
At December 31, 2025,the Company hadapproximately $
23.9
million of Statenet operating loss carryforwardsexpiring
invariousamountsfrom2032to2036.Ifunusedafter2036,theirutilizationislimitedtofuturetaxableearningsofthe
Company.
In assessing therealizability of deferredtax assets, management consideredwhether it ismore likely thannot that some
portion orall ofthe deferredtax assetswill notbe realized.The ultimaterealizationof deferredtax assetsis dependent
upon the generation offuture taxable incomeduring the periodsin which those temporarydifferences become deductible.
Management considers the scheduled reversalof deferred tax liabilities, projected future taxableincome, and tax planning
strategies in making this assessment.
The U.S.Federal jurisdictionand Floridaare themajor taxjurisdictions wherethe Companyfiles incometax returns.
The Company is generally no longer subject to U.S. Federal orState examinations by tax authorities for years before 2022.
FortheyearsendedDecember 31,2025 and2024,theCompanydid
no
t haveany unrecognizedtax benefitsas a
result oftax positionstaken duringa priorperiod orduring thecurrent period.Additionally,
no
interest orpenaltieswere
recorded as a result of tax uncertainties.
Cash paymentsforfederaltaxeswas$
3.9
millionintheyearendedDecember31,2025and$
0
intheyearended
December 31, 2024.
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
107USCB Financial Holdings, Inc.2025 10-K
7.DEPOSITS
The following table presents deposits by type at December 31,2025 and 2024 (in thousands):
December 31,
2025
2024
Non-interest bearing demand deposits
$
583,860
$
575,159
Interest-bearing demand deposits
46,989
50,648
Savings and money market deposits
1,186,422
1,180,809
Time deposits
527,809
367,388
Totaldeposits
$
2,345,080
$
2,174,004
Timedeposits exceedingthe FDICdeposit insurancelimit of$250 thousandper accountat December 31,2025 and
2024 were $
111.5
million and $
94.0
million, respectively.
AsofDecember 31,2025,theCompanyhad$
256.8
millioninbrokeredCDsataweightedaveragerateof
3.93
%.
Brokered CDs were
11.0
% of total deposits at such date.
AsofDecember 31,2024,theCompanyhad$
133.0
millioninbrokeredCDsataweightedaveragerateof
4.38
%.
Brokered CDs were
6.1
% of total deposits at such date.
At December 31, 2025, the scheduled maturities of time depositswere (in thousands):
December 31, 2025
Total
2026
$
472,111
2027
54,174
2028
613
2029
418
2030
493
$
527,809
At December 31,2025 and2024, theaggregate amountof demanddeposits reclassifiedto loansas overdraftswas
$
372
thousand and $
403
thousand, respectively.
8.FHLB ADVANCES
At December 31, 2025, FHLB advances were $
158.3
million and at December 31, 2024 were $
163.0
million.
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
108USCB Financial Holdings, Inc.2025 10-K
The following table presents outstanding FHLB advancesat December 31, 2025 and 2024 (in thousands):
December 31, 2025
Interest Rate
Type of Rate
Maturity Date
Amount
3.77
%
Fixed
March 16, 2026
$
104,750
3.88
%
Variable
May 22, 2026
42,500
3.76
%
Fixed
January 24, 2028
11,000
$
158,250
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
TheFHLBholdsablanketlienontheCompany'sloanportfoliothatmaybepledgedascollateralforoutstanding
advances, subjectto eligibilityunder theborrowing agreement.The Companymay alsochoose toassign cashbalances
held at the FHLB as additional collateral. See Note 3 “Loans”for further discussion on pledged loans.
The Boardof Governorsof the FederalReserve System,on March12, 2023,announced thecreation ofa newBank
TermFunding Program (“BTFP”). The BTFP offered loans of up to one year in length to banks, savings associations, credit
unions,andothereligibledepositoryinstitutionspledgingU.S.Treasuries,U.S.Agencydebtandmortgage-backed
securities, and other qualifying assets as collateral. TheBTFP program ceased making new loans as of March2024.
On January 12, 2024, the Company borrowed $
80.0
million at a rate of
4.81
% with a maturity date of
January 10, 2025
,
under the BTFP program.The Company paidoff the $
80.0
million under theBTFP program duringthe third quarter2024.
The original maturity of this borrowing under the BTFP program was January 2025, and there are no remaining borrowings
by the Company under this program.
9.SUBORDINATEDNOTES
On August 14, 2025,the Company entered into aSubordinated Note Purchase Agreement (the“Purchase Agreement”)
with certain qualifiedinstitutional buyers(the “Purchasers”)pursuant to whichthe Company soldand issued$
40.0
million
in aggregate principal amount of its
7.625
% Fixed-to-Floating Rate Subordinated Notes due 2035 (the“Notes”). The Notes
were issuedby theCompany tothe Purchasersat aprice equalto
100
% oftheir faceamount. Netproceeds were$
39.2
million after anestimated directissuance costof approximately $
760
thousand. Unamortizedissuance costsare deferred
and amortized overthe
10
-year Subordinated noteterm. As ofDecember 31, 2025,the outstanding balanceof subordinated
notes, net of costs, totaled $
39.3
million and the average interest rate paid on the outstanding average balance net ofcosts
was
7.32
%.
The Notes have a stated maturity of August 15, 2035, andare redeemable, in whole or in part, on any interest payment
date on or after August 15,2030, and at any time uponthe occurrences of certain events. The Notesbear interest at a fixed
rate of
7.625
% per year,from and including August 14, 2025,to but excluding August 15, 2030or earlier redemption date.
From and including August 15, 2030, to but excluding the maturity date or early redemption date, the interest rate will reset
quarterly at a variable rate equal to thethen current three-month term securedovernight financing rate (“SOFR”), plus422
basis points. If three-month SOFR cannot be determined on a given date, a different index shall be determined and used in
accordance with the terms of the Notes.
The Noteswere offeredand soldby theCompany ina privateplacement transactionin relianceon exemptionsfrom
theregistrationrequirementsoftheSecuritiesAct,pursuanttoSection4(a)(2)oftheSecuritiesActandRule506(b)of
Regulation D thereunder. On August 14, 2025, inconnection with the sale andissuance of the Notes, theCompany entered
into aRegistration RightsAgreement (the“RegistrationRights Agreement”)with thePurchasers. Underthe termsof the
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
109USCB Financial Holdings, Inc.2025 10-K
Registration RightsAgreement, theCompany agreedto takecertain actionsto providefor theexchange ofthe Notesfor
subordinated notesthat areregistered underthe SecuritiesAct andhave substantiallythe sameterms asthe Notes(the
“Exchange Offer”). Undercertain circumstances, if theCompany fails to meetits obligations under theRegistration Rights
Agreement, it would be required to pay additional interestto the holders of the Notes.
10.EQUITY BASED AND OTHER COMPENSATIONPLANS
Employee 401(k) Plan
The Companyhas an401(k) plan(the “Plan”)covering substantially alleligible employees.The Planincludes aprovision
that the employer may contributeto the accounts ofeligible employees for whoma salary deferral is made.The Company
contributed$
423
thousandand$
354
thousandtothePlanduringtheyearsendedDecember 31,2025and2024,
respectively;thecontributionsareincludedundersalariesandemployeebenefitsintheConsolidatedStatementsof
Operations.
Stock-Based Compensation
In2015,theCompany'sstockholdersapprovedthe2015EquityIncentivePlan(the“2015OptionPlan”),which
authorized grantsof optionsto purchaseup to
2,000,000
shares ofcommon stock.The
2015
OptionPlanprovided that
vestingscheduleswillbedetermineduponissuanceofoptionsbytheBoardofDirectorsorcompensationcommittee.
Options grantedunder the2015 OptionPlan havea
10
-year lifeand, inno eventshall anoption beexercisable afterthe
expiration of
10
years from thegrant date. The2015 Option Planhad a
10
-year life andinitially would haveterminated in
2025. InJuly 2020,the stockholdersof theCompany approvedthe amendmentof the2015 Optionplan toauthorize the
issuance ofan additional
3,000,000
shares ofcommon stock andextending thelife ofthe plan
5
additional years, terminating
in 2030. Theauthorized shares,after being adjustedto reflect the1 for 5reverse stocksplit, totaled
1,000,000
shares. In
December2021,theshareholdersoftheCompanyapprovedtheamendmentofthe2015OptionPlantoauthorizethe
issuance ofan additional
1,400,000
shares ofcommon stockas wellas theability toissue restrictedstock grants(up to
600,000
shares) for a total of
2,400,000
shares as well as extending the term until December2031.
At December 31,2025, therewere
872,012
shares availablefor grantunder the2015 OptionPlan. AtDecember 31,
2024, there were
996,436
shares available for grant under the 2015 OptionPlan.
Stock Options
The Company recognizes compensation expense basedon the estimated grant datefair value method using theBlack-
Scholesoptionpricingmodel andaccountsfor thisexpenseusinga proratedstraight-lineamortizationmethod overthe
vestingperiodoftheoption.Stock-basedcompensationexpenseisbasedonawardsthattheCompanyexpectswill
ultimately vest,reduced by estimated forfeitures.Estimated forfeitures consider the voluntarytermination trends as well as
actual option forfeitures.
ThecompensationexpenseisreportedundersalariesandemployeebenefitsintheaccompanyingConsolidated
Statements of Operations. Compensation expense totaling $
10
thousand was recognized for the yearended December 31,
2025 and$
278
thousandforthe yearendedDecember 31,2024. Therewas
no
related taxbenefitfortheyearsended
December 31, 2025 and 2024.
Unrecognized compensation costremaining on stock-basedcompensation totaled $
0
and $
10
thousand for theyears
ended December 31, 2025 and 2024, respectively.
Cashflowsresultingfromexcesstaxbenefitsarerequiredtobeclassifiedasapartofcashflowsfromoperating
activities. Excess tax benefitsare realized tax benefitsfrom tax deductions forexercised options inexcess of the deferred
tax asset attributable to the compensation cost for suchoptions.
There were
no
options granted in 2025 and 2024.
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
110USCB Financial Holdings, Inc.2025 10-K
The following table presents a summary of stock optionsfor the years ended December 31, 2025 and 2024:
Stock Options
Weighted Average
Exercise Price
Weighted Average
Remaining
Contractual Years
Aggregate Intrinsic
Value (in
thousands)
Balance at January 1, 2025
725,167
$
10.86
5.3
Granted
—
$
-
Exercised
(98,500)
$
8.15
Forfeitures
—
$
-
Balance at December 31, 2025
626,667
$
11.29
4.8
Exercisable at December 31, 2025
624,500
$
11.28
4.8
$
4,458
Balance at January 1, 2024
947,167
$
10.97
6.5
Granted
—
$
-
Exercised
(122,000)
$
10.81
Forfeitures
(100,000)
$
11.99
Balance at December 31, 2024
725,167
$
10.86
5.3
Exercisable at December 31, 2024
720,499
$
10.85
5.3
$
4,972
The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value of exercisable options at the
dates presented(thedifferencebetweenthevaluationof theCompany’sstockand theexerciseprice,multipliedby the
number ofoptions consideredin-the-money) thatwould havebeen receivedby theoption holdershad alloption holders
exercised their options.
Restricted Stock
In 2025 , the Company issued
124,424
shares of Class A common stock to employees anddirectors as restricted stock
awards pursuantto theCompany's 2015Option Plan.Awards underthe 2015Option Planmay notbe soldor otherwise
transferred untilcertain restrictions havelapsed. The Companyprimarily issues restrictedstock awards witha
3
-year vesting
period.
In 2024 , the Company issued
277,922
shares of Class A common stock to employees anddirectors as restricted stock
awards pursuantto theCompany's 2015Option Plan.Awards underthe 2015Option Planmay notbe soldor otherwise
transferred untilcertain restrictions havelapsed. The Companyprimarily issues restrictedstock awards witha
3
-year vesting
period. However,out of the
277,922
shares of ClassA common stockissued pursuant torestricted stock awardsin 2024,
150,000
shares issued inOctober 2024 hada modified vestingperiod. The
150,000
shares vested
33
% of theaward in a
period of two months in 2024, and the
67
% remaining vests one-third in 2025 and in 2026.
Thetotalshare-basedcompensationexpensefortheseawardsisdeterminedbasedonthemarketpriceofthe
Company's commonstock asof the dateof grantapplied tothe totalnumber ofshares grantedand isamortized straight
lineoverthevestingperiodwhichisgenerallythreeyearsunlesstheBoardofDirectorsapprovesadifferentvesting
schedule forthe grants.As ofDecember 31, 2025,unearned share-based compensationexpense associatedwith these
awards totaled $
3.6
million. As ofDecember 31, 2024, unearnedshare-based compensation expense associatedwith these
awards totaled $
4.3
million.
Compensation expense totaling $
3.0
million was recognized forthe year ended December 31, 2025and reported under
salariesandbenefitsintheaccompanyingConsolidatedStatementofOperations.Compensationexpensetotaling$
1.9
thousand was recognized for the year ended December31, 2024.
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
111
USCB Financial Holdings, Inc.2025 10-K
The following table presents a summary of restricted stockawards for the years ended December 31, 2025 and 2024:
Restricted Stock
Weighted Average Grant Date
Fair Value
Balance at January 1, 2025
402,076
$
13.31
Granted
124,424
$
18.78
Forfeited
—
$
-
Vested
(120,237)
$
13.98
Balance at December 31, 2025
406,263
$
14.80
Restricted Stock
Weighted Average Grant Date
Fair Value
Balance at January 1, 2024
218,422
$
12.19
Granted
277,922
$
14.33
Forfeited
(8,625)
$
12.63
Vested
(85,643)
$
13.84
Balance at December 31, 2024
402,076
$
13.31
11.OFF-BALANCE SHEET ARRANGEMENTS
The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business in order to
meet the financialneeds ofits customersand to reduceits ownexposure tofluctuations ininterest rates.These financial
instruments includeunfunded commitmentsunder linesof credit,commitments toextend credit,standby andcommercial
letters ofcredit. Thoseinstruments involve,to varyingdegrees, elementsof creditand interestrate riskin excessof the
amount recognized in the Company’s Consolidated Balance Sheets. The Company uses thesame credit policies in making
commitments and conditional obligations as it does for on-balance-sheetinstruments.
The Company's exposureto credit lossin the eventof nonperformance bythe other partyto the financialinstruments
for unused lines of credit, and standby letters of creditis represented by the contractual amount of these commitments.
The Companyrecordsaliabilityforexpectedcreditlossesonoff-balance-sheetcreditexposureinaccordancewith
ASC326.TheCompanyusesthelossrateandexposureofdefaultframeworktoestimateareserveforunfunded
commitments. Loss ratesfor the expected fundedbalances are determinedbased on theassociated pooled loananalysis
loss rate and the exposure at default isbased on an estimated utilization givendefault. The off-balance sheet commitment
allowance as of December 31, 2025 was $
752
thousand and as of December 31, 2024 was $
571
thousand.
AsummaryoftheamountsoftheCompany'sfinancialinstrumentswithoff-balancesheetriskareshownbelowat
December 31, 2025 and December 31, 2024 (in thousands):
December 31,
2025
2024
Commitments to grant loans and unfunded lines of credit
$
161,606
$
122,578
Standby and commercial letters of credit
2,700
5,389
Total
$
164,306
$
127,967
Commitments toextend creditare agreementsto lendto acustomer aslong asthere isno violationof anycondition
established in the contract. Commitments generally havefixed expiration dates or other termination clauses.
Unfunded lines ofcredit and revolvingcredit lines arecommitments for possiblefuture extensionsof credit toexisting
customers. These lines ofcredit are uncollateralized andusually do not containa specified maturity dateand ultimately may
not be drawn upon to the total extent to which the Companyis committed.
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
112USCB Financial Holdings, Inc.2025 10-K
StandbyandcommerciallettersofcreditareconditionalcommitmentsissuedbytheCompanytoguaranteethe
performance of acustomer toa thirdparty. Those letters ofcredit areprimarily issued tosupport public andprivate borrowing
arrangements. Essentially all letters of credit have fixed maturity dates and many of them expire without being drawn upon;
they do not generally present a significant liquidity riskto the Company.
12.DERIVATIVES
The Company utilizes interest rate swap agreementsas part of its asset-liability management strategy to helpmanage
its interestrate riskposition. Thenotional amountof theinterest rateswaps donot representamounts exchangedby the
parties. The amounts exchangedare determined by referenceto the notional amountand the other terms ofthe individual
interest rate swap agreements.
Rate Swaps Designated as Cash Flow Hedges
In July2025, theCompany entered intoa two-year costlesscollar hedgewith anotional amount of$
50
million tomanage
exposure to interestrate volatility ona three-month brokered CD.The derivative isbased on theUSD SOFR overnight index
and establishes acap rate of
4.50
% and afloor rate of
1.875
%, effectively creating adefined range ofinterest rate outcomes
without requiringan upfrontpremium. Thehedge wasdesignated asa cashflow hedgeunder ASC815, Derivativesand
Hedging,andisbeingaccountedforaccordingly.Changesinthefairvalueofthederivativewillberecordedinother
comprehensive income (loss) to the extent the hedge remainseffective.
In August2025, theCompany enteredinto atwo-yearcostless collarhedge witha notionalamount of$
50
million to
manageexposuretointerestratevolatilityonathree-monthbrokeredCD.ThederivativeisbasedontheUSDSOFR
overnightindexandestablishesacaprateof
4.50
%andafloorrateof
1.965
%,effectivelycreatingadefinedrangeof
interest rate outcomes without requiringan upfront premium. The hedge wasdesignated as a cash flow hedgeunder ASC
815, Derivativesand Hedging,and isbeing accountedfor accordingly.Changes inthe fairvalue ofthe derivativewill be
recorded in other comprehensive income (loss) to the extent thehedge remains effective.
As of December 31,2025, the Companyhad
one
interest rate swapagreements with anotional aggregate amountof
$
25
million that were designated ascash flow hedges of certificatesof deposit. The interest rateswap agreements have a
maturity of
0.42
years, a weighted average fixed-rate paid of
3.47
%, and with a weighted average 3-month compound USD
SOFR beingreceived. Thecompany unwound
one
interest rateswap designatedas acash flowhedge ofcertificates of
deposits with notionalamount of $
25
million during thequarter ended December 31,2025. The decision tounwind this swap
was driven by changes in interest rateforecasts and asset-liability management strategies. The early termination income to
unwind the fair value swaps totaled $
5
thousand. The original maturity of the cash flow interestrate swap was April 2026.
As of December31, 2024,the Company had
two
interest rate swapagreements witha notional aggregateamount of
$
50
million that were designated as cash flow hedges of certificates of deposit. The interest rate swap agreements have an
averagematurityof
1.38
years,theweightedaveragefixed-ratepaidis
3.59
%,withtheweightedaverage3-month
compound USD SOFR being received.
Thechangesinfairvalueontheseinterestrateswapsarerecordedinotherassetsoraccruedinterestandother
liabilities with a corresponding recognition in other comprehensiveincome (loss) and subsequently reclassified to earnings
when gains or losses are realized.
Interest Rate Swaps Designated as Fair ValueHedges
During thethird quarterin 2024,the Companyunwound
four
fair valueinterest rateswaps witha notionalaggregate
amount of$
200
million. Thedecision tounwind theseswaps wasdriven bychanges ininterest rateforecasts andasset-
liability managementstrategies. Theearly terminationfee tounwind thefair valueswaps totaled$
3.7
million. Thetermination
fees allocated to each loan category areamortized over the remining life of thehedge loans on a monthly straight-line basis
with full recognition of the unamortized cost uponthe early payoff of the hedge loan. The amortizationof the termination fee
is reflected in the loan interest income line in the Company’s Consolidated Statement of Operations. The original maturities
ofthesefairvalueinterestswapswerebetween2025and2026.Thefairvalueinterestrateswapagreementshadan
average maturity of
1.51
years at the date of termination.
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
113USCB Financial Holdings, Inc.2025 10-K
Interest Rate Swaps
The Company alsoenters intointerest rate swapswith itsloan customers. TheCompany had
94
and
60
interest rate
swaps withloan customerswith anotional aggregateamount of$
310.8
million and$
206.3
million atDecember 31, 2025
and 2024, respectively.These interest rate swapshave maturity dates ofbetween 2026 and 2051.The Company entered
into correspondingand offsettingderivatives withthird parties.The fairvalue ofliability onthese derivativesrequires the
Company to provide the counterpartywith funds to be held as collateralwhich the Company reports as otherassets under
the ConsolidatedBalance Sheets.While thesederivatives representeconomic hedges,they donot qualifyas hedgesfor
accounting purposes.
The following table reflects the Company’s customerrelated interest rate swaps at the dates indicated (inthousands):
Fair Value
Notional
Amount
Collateral
Amount
Balance Sheet Location
Asset
Liability
December 31, 2025:
Derivatives Designated as Cash Flow Hedges:
Interest rate swaps
$
125,000
$
-
Other assets/Accrued interest
and other liabilities
$
14
$
33
Derivatives not designated as hedging instruments:
Interest rate swaps related to customer loans
$
310,761
$
5,769
Other assets/Accrued interest
and other liabilities
$
9,753
$
9,753
December 31, 2024:
Derivatives Designated as Cash Flow Hedges
Interest rate swaps
$
50,000
$
-
Other assets
$
321
$
-
Derivatives not designated as hedging instruments:
Interest rate swaps related to customer loans
$
206,258
$
4,943
Other assets/Accrued interest
and other liabilities
$
6,869
$
6,869
13.FAIR VALUEMEASUREMENTS
Determination of Fair Value
The Companyusesfair valuemeasurementsto recordfair-valueadjustmentsto certainassetsand liabilitiesand to
determine fair valuedisclosures. In accordancewith the fairvalue measurementsaccounting guidance, thefair value ofa
financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between marketparticipantsat themeasurementdate.Fair valueis bestdetermined basedupon quotedmarket prices.
However, inmany instances, thereare no quotedmarket prices for theCompany's various financialinstruments. In cases
where quotedmarket pricesare notavailable, fairvalues arebased onestimates usingpresent valueor othervaluation
techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates
of future cash flows. Accordingly, the fair value estimates may not be realized inan immediate settlement of the instrument.
The fairvalue guidance providesa consistent definitionof fairvalue, which focuseson exitprice inan orderly transaction
(that is,not aforcedliquidationor distressedsale) betweenmarket participantsat themeasurementdateunder current
market conditions.If therehas beena significantdecreasein thevolumeand levelof activityfor theassetor liability,a
change invaluation technique orthe useof multiplevaluation techniques maybe appropriate.In suchinstances, determining
thepriceatwhichwillingmarketparticipantswouldtransactatthemeasurementdateundercurrentmarketconditions
depends on the factsand circumstances andrequires the use ofsignificant judgment. The fairvalue is a reasonablepoint
within the range that is most representative of fair value undercurrent market conditions.
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
114USCB Financial Holdings, Inc.2025 10-K
Fair Value Hierarchy
In accordance withthis guidance, theCompany groups itsfinancial assetsand financial liabilitiesgenerally measured
at fairvalue inthreelevels, basedon themarketsin whichthe assetsand liabilitiesare traded,and thereliabilityof the
assumptions used to determine fair value.
Level 1
- Valuationis basedon quotedprices inactive marketsfor identicalassets orliabilities thatthe reporting
entity hasthe abilityto accessat the measurementdate. Level1 assetsand liabilitiesgenerally includedebt and
equity securities thatare traded inan active exchangemarket. Valuations are obtained fromreadily available pricing
sources for market transactions involving identical assetsor liabilities.
Level 2
- Valuationis based on inputs otherthan quoted prices includedwithin Level 1 that areobservable for the
assetorliability,eitherdirectlyorindirectly.Thevaluationmaybebasedonquotedpricesforsimilarassetsor
liabilities; quotedprices inmarkets that arenot active;or other inputsthat are observableor can becorroborated
by observable market data for substantially the full term of theasset or liability.
Level 3
- Valuationis based onunobservable inputs thatare supportedby little orno market activityand that are
significanttothefairvalueoftheassetsorliabilities.Level3assetsandliabilitiesincludefinancialinstruments
whose valueis determinedusing pricingmodels, discountedcashflowmethodologies,or similartechniques,as
well as instruments for which determination of fair valuerequires significant management judgment or estimation.
Afinancialinstrument'scategorizationwithinthevaluationhierarchyisbaseduponthelowestlevelofinputthatis
significant to the fair value measurement.
Items Measured at Fair Valueon a Recurring Basis
Investment securities:
When instruments are tradedin secondary markets andquoted market prices donot exist for
such securities,management generallyrelies onprices obtainedfrom independentvendors orthird-party broker-dealers.
Management reviews pricing methodologies provided by the vendors and third-party broker-dealers in order to determine if
observable market information is being utilized. Securities measured with pricing provided by independent vendors orthird-
party broker-dealersare classified withinLevel 2 ofthe hierarchyand ofteninvolve using quotedmarket pricesfor similar
securities, pricing models or discounted cash flow analysesutilizing inputs observable in the market where available.
Derivatives:
Thefairvalueofderivativesaremeasuredwithpricingprovidedbythird-partyparticipantsandare
classified within Level 2 of the hierarchy.
ThefollowingtablerepresentstheCompany'sassetsandliabilitiesmeasuredatfairvalueonarecurringbasisat
December 31, 2025 and 2024 for each of the fair valuehierarchy levels (in thousands):
2025
2024
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
Investment securities available for sale:
U.S. Government Agency
$
-
$
14,144
$
-
$
14,144
$
-
$
12,625
$
-
$
12,625
Collateralized mortgage obligations
-
75,828
-
75,828
-
78,905
-
78,905
Mortgage-backed securities - residential
-
29,917
-
29,917
-
46,933
-
46,933
Mortgage-backed securities - commercial
-
168,108
-
168,108
-
78,739
-
78,739
Municipal securities
-
4,263
-
4,263
-
19,311
-
19,311
Bank subordinated debt securities
-
15,230
-
15,230
-
23,708
-
23,708
Total
-
307,490
-
307,490
-
260,221
-
260,221
Derivative assets
-
9,767
-
9,767
-
7,190
-
7,190
Total assets at fair value
$
-
$
317,257
$
-
$
317,257
$
-
$
267,411
$
-
$
267,411
Derivative liabilities
$
-
$
9,786
$
-
$
9,786
$
-
$
6,869
$
-
$
6,869
Total liabilities at fair value
$
-
$
9,786
$
-
$
9,786
$
-
$
6,869
$
-
$
6,869
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
115USCB Financial Holdings, Inc.2025 10-K
Items Not Measured at Fair Value
The following tablepresents the carryingamounts and estimatedfair values offinancial instrumentsnot carried at fair
value, at December 31, 2025 and 2024 are as follows (in thousands):
Fair Value Hierarchy
Carrying
Amount
Level 1
Level 2
Level 3
Fair Value
Amount
December 31, 2025:
Financial Assets:
Cash and due from banks
$
6,027
$
6,027
$
-
$
-
$
6,027
Interest-bearing deposits in banks
$
32,450
$
32,450
$
-
$
-
$
32,450
Investment securities held to maturity, net
$
153,941
$
-
$
142,508
$
-
$
142,508
Loans held for investment, net
$
2,163,757
$
-
$
-
$
2,210,781
$
2,210,781
Accrued interest receivable
$
11,661
$
-
$
1,443
$
10,218
$
11,661
Financial Liabilities:
Non-interest bearing demand deposits
$
583,860
$
583,860
$
-
$
-
$
583,860
Savings and money market deposits
$
1,186,422
$
1,186,422
$
-
$
-
$
1,186,422
Interest-bearing demand deposits
$
46,989
$
46,989
$
-
$
-
$
46,989
Time deposits
$
527,809
$
-
$
527,575
$
-
$
527,575
FHLB advances
$
158,250
$
-
$
158,342
$
-
$
158,342
Subordinated notes
$
39,300
$
-
$
40,131
$
-
$
40,131
Accrued interest payable
$
3,984
$
-
$
3,984
$
-
$
3,984
December 31, 2024:
Financial Assets:
Cash and due from banks
$
6,986
$
6,986
$
-
$
-
$
6,986
Interest-bearing deposits in banks
$
70,049
$
70,049
$
-
$
-
$
70,049
Investment securities held to maturity, net
$
164,694
$
-
$
145,540
$
-
$
145,540
Loans held for investment, net
$
1,948,778
$
-
$
-
$
1,950,646
$
1,950,646
Accrued interest receivable
$
10,945
$
-
$
1,372
$
9,573
$
10,945
Financial Liabilities:
Demand Deposits
$
575,159
$
575,159
$
-
$
-
$
575,159
Money market and savings accounts
$
1,180,809
$
1,180,809
$
-
$
-
$
1,180,809
Interest-bearing checking accounts
$
50,648
$
50,648
$
-
$
-
$
50,648
Time deposits
$
367,388
$
-
$
366,479
$
-
$
366,479
FHLB advances
$
163,000
$
-
$
161,375
$
-
$
161,375
Accrued interest payable
$
2,125
$
-
$
2,125
$
-
$
2,125
Collateral Dependent Loans Measured forExpected Credit Losses:
Fair values of collateral-dependent yacht loans
and real estate loansare based on recentboat and real estateappraisals less estimated costs ofsale, repossession, and/or
holding costs.Appraisalsare madeby athirdparty,andits evaluationmay useeither acomparativesales, costand/or
income approach or a combination of methodologies.
ThefairvalueofcollateraldependentloansconsideredLevel3inthefairvaluehierarchywas$
2.6
millionwith
no
specific reserved asof December 31, 2025and $
2.0
million with aspecific reserve of$
651
thousand at December 31, 2024.
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
116USCB Financial Holdings, Inc.2025 10-K
The following table presents quantitative information about level 3 fair value measurements for assets measured at fair
value on a non-recurring basis atDecember 31, 2025 and 2024:
December 31, 2025
Range
Weighted
Financial Instrument
Fair Value
Valuation Technique(s)
Unobservable Input(s)
Minimum
Maximum
average
Collateral dependent loans -
residential loans
$ 2,583
Sales comparison approach
Third party appraisals
0%
0%
0%
December 31, 2024
Range
Weighted
Financial Instrument
Fair Value
Valuation Technique(s)
Unobservable Input(s)
Minimum
Maximum
average
Collateral dependent loans -
consumer boat loans
$ 1,650
Sales comparison approach
Adjustment for differences
between the comparable sales
11%
31%
28%
14.STOCKHOLDERS’ EQUITY
Common Stock
During theyear endedDecember 31,2025, theCompanyrepurchased
2.0
millionshares ofClassA commonstock
from certaininstitutional shareholdersthrough privatelynegotiated transactions,at a weightedaverage priceper share of
$
17.19
.Theaggregatepurchasepriceforthesetransactionswasapproximately$
34.4
million.Therepurchaseswere
supplemental and not part of the Company’s two previously announced stock repurchase programs. During the year ended
December 31, 2025 pursuant to theCompany’s publicly announced repurchase programs theCompany repurchased
9,671
shares of Class A common stock at a weighted average price per share of $
17.91
. The aggregate purchase price for these
transactionswasapproximately$
174
thousandincludingtransactioncosts.AsofDecember 31,2025,
528,309
shares
remained authorized for repurchase under the Company’stwo stock repurchase programs.
During the yearended December31, 2024,the Companyrepurchased
42,100
shares ofClass A commonstock ata
weighted average price per share of $
11.85
. The aggregate purchase price for these transactions was approximately $
501
thousand, including transaction costs.As of December 31,2024,
537,980
shares remained authorized forrepurchase under
the Company’s two stock repurchase programs.
In 2025, the Company issued
124,424
shares of Class A common stock to employees and directors as restricted stock
awards pursuant to the Company's 2015 Option Plan.
In 2024, the Company issued
277,922
shares of Class A common stock to employees and directors as restricted stock
awards pursuant to the Company's 2015 Option Plan.
Shares of the Company’s Class A common stock issued andoutstanding as of December 31, 2025 and December 31,
2024 were
18,137,885
and
19,924,632
, respectively.
Dividends
Declaration of dividendsby the Boardis required beforedividend paymentsare made. TheCompany islimited in the
amount ofcash dividendsthat itmay pay.Payment ofdividends isgenerally limitedto theCompany’snet incomeof the
currentyearcombinedwiththeCompany’sretainedincomefortheprecedingtwoyears,asdefinedbystatebanking
regulations. However,for anydividend declaration,the Companymust consideradditional factorssuch asthe amountof
current period net income, liquidity,asset quality,capital adequacy and economic conditionsat the Bank since the Bank is
the primary sourceof funds to funddividends by the Company.It is likely thatthese factors wouldfurther limit theamount
of dividends whichthe Company coulddeclare. In addition,bank regulators havethe authority toprohibit banks andbank
holding companies from paying dividends if they deemsuch payment to be an unsafe or unsound practice.
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
117USCB Financial Holdings, Inc.2025 10-K
AsofDecember 31,2025,theCompanywasnotsubjecttoanyformalsupervisoryrestrictionsonitsabilitytopay
dividendsbuthasagreedtonotifytheFederalReserveBankofAtlantainadvanceofanyproposeddividendtothe
Company's shareholdersin lightof theBank's negativeretained earnings.In addition,under applicableFDIC regulations
and policy, because the Bank has negative retainedearnings, it must obtain the prior approval of the FDIC before effecting
a cash dividend or other capital distribution.
The following table details the dividends declared and paid bythe Company for the periods presented:
2025
Declaration Date
Record Date
Payment Date
Dividend Per Share
Dividend Amount
January 21, 2025
February 14, 2025
March 5, 2025
$
0.10
$
2.0
million
April 21, 2025
May 15, 2025
June 5, 2025
$
0.10
$
2.0
million
July 21, 2025
August 15, 2025
September 5, 2025
$
0.10
$
2.0
million
October 20, 2025
November 14, 2025
December 5, 2025
$
0.10
$
1.8
million
2024
Declaration Date
Record Date
Payment Date
Dividend Per Share
Dividend Amount
January 22, 2024
February 15, 2024
March 5, 2024
$
0.05
$
1.0
million
April 22, 2024
May 15, 2024
June 5, 2024
$
0.05
$
1.0
million
July 22, 2024
August 15, 2024
September 5, 2024
$
0.05
$
1.0
million
October 28, 2024
November 15, 2024
December 5, 2024
$
0.05
$
0.9
million
TheCompanyandtheBankexceededallregulatorycapitalrequirementsandremainedabove“well-capitalized”
guidelines as of December 31, 2025 and December31, 2024. At December 31, 2025, thetotal risk-based capital ratios for
the Company and the Bank were
13.91
% and
13.67
%, respectively.
See Note 21, “Subsequent Events”, for information regarding dividendsdeclared in January 2026.
15.EARNINGS PER SHARE
Earningspershare(“EPS”)forcommonstockiscalculatedusingthetwo-classmethodrequiredforparticipating
securities. Basic EPSis calculated bydividing net income(loss) available to commonstockholders by the weighted-average
number of common shares outstanding forthe period, without consideration for commonstock equivalents. Diluted EPS is
computed bydividing netincome (loss)available tocommon stockholdersby theweighted-averagenumberof common
shares outstanding forthe period andthe weighted-average numberof dilutive commonstock equivalents outstandingfor
the period determined using the treasury-stock method. Forpurposes of this calculation, common stock equivalentsinclude
common stock options and are only included in the calculationof diluted EPS when their effect is dilutive.
Thefollowingtablereflectsthecalculationofnetincomeavailabletocommonstockholdersfortheyearsended
December 31, 2025 and 2024 (in thousands):
For the years ended December 31,
2025
2024
Net Income
$
26,100
$
24,674
Net income available to common stockholders
$
26,100
$
24,674
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
118USCB Financial Holdings, Inc.2025 10-K
The following tablereflects the calculationof basic anddiluted earnings percommon shareclass for theyears ended
December 31, 2025 and 2024 (in thousands, exceptper share amounts):
As of and for the years ended December 31,
2025
2024
Class A
Class A
Basic EPS
Numerator:
Net income available to common shares
$
26,100
$
24,674
Denominator:
Weighted average shares outstanding
19,425,746
19,675,444
Earnings per share, basic
$
1.34
$
1.25
Diluted EPS
Numerator:
Net income available to common shares
$
26,100
$
24,674
Denominator:
Weighted average shares outstanding for basic EPS
19,425,746
19,675,444
Add: Dilutive effects of assumed exercises of stock options
225,068
155,977
Weighted avg. shares including dilutive potential common shares
19,650,814
19,831,421
Earnings per share, diluted
$
1.33
$
1.24
Anti-dilutive stock options excluded from diluted EPS
-
15,000
Net income has not been allocated to unvestedrestricted stock awards that are participatingsecurities because the amounts that would be allocatedare
not material to earnings per share of common stock.Unvested restricted stock awards that are participatingsecurities represent less than one percent of
all of the outstanding shares of common stock foreach of the periods presented.
16.REGULATORYMATTERS
Banks andbank holdingcompaniesare subjectto regulatorycapital requirementsadministered byfederal andstate
bankingagencies.Failuretomeetminimumcapitalrequirementscaninitiatecertainmandatoryandpossiblyadditional
discretionary actionsby regulators that,if undertaken,could have adirect materialeffect onthe Company'sConsolidated
Financial Statements.Undercapital adequacyguidelines andthe regulatoryframeworkfor promptcorrectiveaction, the
Company and theBank must meetspecificcapital guidelines thatinvolve quantitative measuresof their assets,liabilities,
and certainoff-balance-sheetitems ascalculated underregulatory accountingpractices. TheCompany’s andthe Bank’s
capitalamountsandclassificationarealsosubjecttoqualitativejudgmentsbytheregulatorsaboutcomponents,risk
weightings, and other factors.
Based on changes to the Federal Reserve’s definition of a “Small BankHolding Company” that increased the threshold
to $3.0 billion in assetsin August 2018, the Companyis not currently subject toseparate minimum capital measurements.
At such timewhen the Companyreaches the $3.0billion asset level,it will besubject toregulatory capital measurements
independent of the Bank.
The Bankelected topermanently opt-outof theinclusion ofaccumulated othercomprehensive incomein thecapital
calculations, aspermitted by theregulations. Thisopt-out reducesthe impact ofmarket volatility onthe Bank’sregulatory
capital levels.
The Bank issubject to therules of theBasel III regulatory capitalframework and related Dodd-FrankWall Street Reform
and Consumer ProtectionAct. The rules includethe implementation ofa
2.5
% capital conservationbuffer that isadded to
the minimum requirementsfor capital adequacypurposes. Failureto maintain therequired capital conservationbuffer will
limit the ability ofthe Bank to paydividends, repurchase sharesor pay discretionarybonuses. At December31, 2025 and
2024, the capital ratios for the Bank were sufficientto meet the conservation buffer.
Promptcorrectiveactionregulationsprovidefiveclassifications:wellcapitalized,adequatelycapitalized,
undercapitalized,significantlyundercapitalized,andcriticallyundercapitalized,althoughthesetermsarenotusedto
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
119USCB Financial Holdings, Inc.2025 10-K
represent overall financial condition. Ifadequately capitalized, regulatory approvalis required to accept brokereddeposits.
Ifundercapitalized,capitaldistributionsarelimited,asisassetgrowthandexpansion,andcapitalrestorationplansare
required.
At December 31,2025 and2024, themost recentnotification fromthe regulatoryauthorities categorizedthe Bankas
well capitalizedunder theregulatory frameworkfor promptcorrective action.Failure tomeet statutorilymandated capital
guidelinescouldsubjecttheBanktoavarietyofenforcementremedies,includingissuanceofacapitaldirective,the
termination of depositinsurance by theFDIC, a prohibitionon accepting orrenewing brokered deposits,limitations on the
rates ofinterest thatthe Bankmay payonits depositsand otherrestrictionsonits business.Tobe categorizedas well
capitalized, an institutionmust maintain minimumtotal risk-based, Tier1 risk-based and Tier1 leverage ratios asset forth
in thetable below.There areno conditionsor eventssince thenotification thatmanagement believeshave changedthe
Bank’s category.
Actual and requiredcapital amounts andratios are presentedbelow for theBank at December 31,2025 and 2024(in
thousands, except ratios). The required amounts for capital adequacyshown do not include the capital conservation buffer
previously discussed.
Actual
Minimum Capital
Requirements
To be Well Capitalized
Under Prompt Corrective
Action Provisions
Amount
Ratio
Amount
Ratio
Amount
Ratio
December 31, 2025
Totalrisk-based capital:
$
299,596
13.67
%
$
175,387
8.00
%
$
219,234
10.00
%
Tier 1 risk-based capital:
$
273,342
12.47
%
$
131,541
6.00
%
$
175,387
8.00
%
Common equity tier 1 capital:
$
273,342
12.47
%
$
98,655
4.50
%
$
142,502
6.50
%
Leverage ratio:
$
273,342
9.65
%
$
113,296
4.00
%
$
141,620
5.00
%
December 31, 2024
Totalrisk-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
%
The Companyis limited inthe amountof cashdividends thatit maypay.Payment of dividendsis generallylimited to
the Company’s net income for the current year combined with the Company’sretained income for the preceding two years,
asdefinedbystatebankingregulations.However,foranydividenddeclaration,theCompanymustconsideradditional
factors such as the amount of current period net income, liquidity,asset quality, capital adequacyand economic conditions
at the Bank.It is likelythat these factorswould further limitthe amount ofdividends which theCompany could declare.In
addition,bankregulatorshavetheauthoritytoprohibitbanksfrompayingdividendsincludingdividendstotheirparent
holding company,if they deem such payment to be an unsafe or unsoundpractice.
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
120USCB Financial Holdings, Inc.2025 10-K
17.RELATED PARTYTRANSACTIONS
Intheordinarycourseofbusiness,principalofficers,directors,andaffiliatesmayengageintransactionswiththe
Company.Thefollowingtablepresentsloanstoanddepositsfromrelatedpartiesincludedwithintheaccompanying
Consolidated Financial Statements at December 31, 2025and 2024 (in thousands):
Years Ended December 31,
2025
2024
Consolidated Balance Sheets:
Loans held for investment, net
$
15,000
$
-
Deposits
$
3,238
$
4,551
Consolidated Statements of Operations:
Interest income
$
815
$
-
Interest expense
$
118
$
119
Loan Purchases
During 2025, the Bank purchased $
79.6
million of loans from entities that aredeemed to be related parties.The Bank
paid those entities fees of $
447
thousand.
During 2024, the Bank purchased $
90.8
million of loans from entities that aredeemed to be related parties.The Bank
paid those entities fees of $
2.7
million.
Loan Originations
DuringtheyearendedDecember 31,2025, theBankactedas theleadarrangerina$
40.0
millionsyndicatedloan
extended toan entitydeemed tobe arelated party.As ofDecember 31,2025, theBank heldan outstandingbalance of
$
15.0
million related to this transaction. In connection with the syndication, the Bank received a
50
-basis point commitment
fee andwill earna
25
-basis pointannual servicingfee. Theother twofinancial institutionsparticipating inthe syndication
were also deemed to be related parties. Althoughoriginating loans to related parties is not part ofthe Company’s standard
policy,this transactionwas reviewedby theappropriate departmentsin accordancewith Companyprocedures.Detailed
analyses werepresented tothe Boardof Directorsand theAudit andRisk Committee,and allnecessary approvalswere
obtained.Additionalanalysiswasconductedtodeterminethatthetransactionwasexecutedintheordinarycourseof
business and on arm’s-length terms, consistent with therequirements of Regulation O.
During the year ended December31, 2025, the Bank participatedin two loans totaling $
21.3
million with an entity that
is considereda relatedparty,for whichtheBank wasnot thelead arranger.Theunderlyingborrowerswerenot related
parties. Under theterms of theparticipation agreements,the Bank paysthe related
‑
party entity aservicing fee equalto 8
basis points, calculated on the declining monthly outstandingbalance of the loans.
There were
no
loan originationsor syndicationsextended toentities deemedto berelated partiesfor theyear ended
December 31, 2024.
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
121USCB Financial Holdings, Inc.2025 10-K
18.PARENT COMPANYCONDENSED FINANCIAL INFORMATION
In December2021, USCBFinancial Holdings,Inc. wasformed asthe parentbank holdingcompany ofU.S. Century
Bank.ThecondensedbalancesheetispresentedbelowforUSCBFinancialHoldings,Inc.atthedatesindicated(in
thousands):
December 31, 2025
December 31, 2024
ASSETS:
Cash and Cash Equivalents
$
6,773
$
3,735
Investment in bank subsidiary
248,230
210,253
Other assets
2,624
1,400
Totalassets
$
257,627
$
215,388
LIABILITIES AND STOCKHOLDERS' EQUITY:
Subordinated notes
$
39,300
$
-
Accrued interest and other liabilities
1,144
-
Stockholders' equity
217,183
215,388
Totalliabilities and stockholders' equity
$
257,627
$
215,388
The condensedincome statementis presentedbelow forUSCB FinancialHoldings, Inc.for theperiods indicated(in
thousands):
Years Ended
December 31, 2025
December 31, 2024
INCOME:
Dividends from subsidiaries
$
6,000
$
5,000
Total
6,000
5,000
EXPENSE:
Interest expense
1,205
-
Employee compensation and benefits
3,005
2,129
Other operating
622
570
Total
4,832
2,699
Income before income taxes and undistributed subsidiary income
1,168
2,301
Benefit from income taxes
(1,225)
(684)
Equity in undisbursed subsidiary income
23,707
21,689
Net Income
$
26,100
$
24,674
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
122USCB Financial Holdings, Inc.2025 10-K
The condensed cashflow is presented belowfor USCB Financial Holdings,Inc. for the periodsindicated (in thousands):
Years Ended
December 31, 2025
December 31, 2024
Cash flows from operating activities:
Net income
$
26,100
$
24,674
Adjustments to reconcile net income to net cash provided by operating
activities:
Equity in undistributed earnings of subsidiaries
(23,707)
(21,689)
Stock-based compensation
3,005
2,129
Increase in deferred tax asset
(1,225)
(684)
Increase in accrued interest and other liabilities
1,144
-
Net cash provided by operating activities
5,317
4,430
Cash flows from investing activities:
Capital contributions to subsidiary
-
-
Other
-
-
Net cash used in investing activities
-
-
Cash flows from financing activities:
Dividends paid
(7,829)
(3,939)
Proceeds from exercise of stock options
804
1,319
Repurchase of common stock
(34,554)
(501)
Proceeds from issuance of subordinated notes, net of issuance cost
39,300
-
Net cash used in financing activities
(2,279)
(3,121)
Net increase in cash and cash equivalents
3,038
1,309
Cash and cash equivalents, beginning of period
3,735
2,426
Cash and cash equivalents, end of period
$
6,773
$
3,735
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
123USCB Financial Holdings, Inc.2025 10-K
19.SEGMENT REPORTING
Operatingsegmentsare componentsof anenterpriseabout whichseparatefinancialinformationis availablethatis
evaluatedregularlybythechiefoperatingdecisionmaker(“CODM”)inassessingperformanceandindecidinghowto
allocate resources. The Company’s CODM is thePresident, Chief Executive Officer,and Chairman.
The Companythrough theBank, itssole directsubsidiary,operates
10
banking centersin SouthFlorida providinga
wide rangeof personaland businessbanking productsand services,and througha subsidiaryof theBank, offersclients
title insurance policies for real estate transactions closed atthe Bank. The Company’s business activities are similar in their
nature,operationsandeconomiccharacteristics,largelyservingcommercialandspecialtybanking clientswith products
and servicesthat areoffered throughsimilar processesand platforms.Accounting policiesfor theproductsand services
referenced here are the same as those described in Note 1, “Summary of Significant Accounting Policies”. The Company’s
segment revenueis drivenprimarily byinterest incomeon loansas wellas feeincome fromthe originationof loansand
from fees charged on loans and depositaccounts. Lending activities include loansto individuals, which primarily consist of
home equity lines of credit, residential real estate loans, yacht loans, and consumer loans, and loans tocommercial clients,
which includecommercial andindustrial loans,commercial realestate loans,residential realestate loans,correspondent
banking loans, and letters of credit.
TheCODMregularlyreviewsconsolidatedincomeandexpenses,aspresentedontheConsolidatedStatementsof
Operations,inadditiontoconsolidatedassetspresentedontheConsolidatedBalanceSheets.Thesignificantsegment
expenses that the CODM receivesregularly are interest expense, provision forcredit losses, salaries and wages, employee
benefits,andoccupancy.TheCODMevaluatestheperformanceofthesegmentandallocatesresourcesbasedonnet
incomethatisalsoreportedontheConsolidatedStatementsofOperationsasconsolidatednetincometomaximize
shareholder value.Additionally,consolidatedinternal financialinformation isused bythe CODMto monitorcredit quality
and credit loss expense. Furthermore, net income, as the measure of profit or loss, is used to monitor budget versus actual
results andto performcompetitive analysesthat benchmarkthe Companyto competitors.As aresult, theCompany has
determined that it has only
one
reportable segment.
20.LOSS CONTINGENCIES
Loss contingencies,including claimsand legal actionsmay arise inthe ordinarycourse ofbusiness. Inthe opinionof
management, noneof theseactions, eitherindividually orin the aggregate,is expectedto havea materialadverse effect
on the Company’s Consolidated Financial Statements.
21.SUBSEQUENT EVENTS
Dividends
On January20,2026,theCompany’sBoardof Directorsdeclaredaquarterlycashdividendof$
0.125
pershare of
Class A common stock, to be paid on March 5, 2026, to stockholders of record as of the closeof business on February 17,
2026.
124USCB Financial Holdings, Inc.2025 10-K
Item 9.Changes in and Disagreements with Accountants onAccounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Under the supervisionand with theparticipation of our management,including our Chief ExecutiveOfficer and our Chief
FinancialOfficer,weevaluatedtheeffectivenessofthedesignandoperationoftheCompany’sdisclosurecontrolsand
proceduresasofDecember 31,2025.Basedonthatevaluation,managementbelievesthattheCompany’sdisclosure
controlsandprocedureswereeffectivetocollect,process,anddisclosetheinformationrequiredtobedisclosedinthe
reports filed orsubmitted underthe ExchangeAct withinthe required timeperiods as ofthe end ofthe period coveredby
this Annual Report on Form 10-K.
ThisannualreportdoesnotincludeanintegratedauditreportoftheCompany'sregisteredpublicaccountingfirm
regardinginternalcontroloverfinancialreporting.Management'sreportwasnotsubjecttoauditbytheCompany's
registered public accountingfirm pursuantto therules ofthe SECthat permitthe Company,as anemerging growth company
to provide only management's report in this annual report.
Management’s Report on Internal Controlover Financial Reporting
Management is responsible for designing, implementing, documenting, andmaintaining an adequate system of internal
control over financialreporting, assuch termis definedin the ExchangeAct. Anadequate systemof internal controlover
financial reporting encompasses the processes and proceduresthat have been established by management to:
•maintain records that accurately reflect the Company’stransactions;
•preparefinancialstatementandfootnotedisclosuresinaccordancewithU.S.GAAPthatcanberelieduponby
external users; and
•prevent and detect unauthorized acquisition, use or disposition of the Company's assets that could have a material
effect on the financial statements.
Management conductedan evaluationof theeffectivenessof theCompany'sinternal controlover financialreporting
based on the criteria in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations ofthe
TreadwayCommission(COSO).BasedonthisevaluationunderthecriteriainInternalControl-IntegratedFramework,
management concluded thatinternal control over financialreporting was effectiveas of December 31,2025. Furthermore,
during the conduct of its assessment, management identified no material weakness inits financial reporting control system.
The Board of the Company,through its Audit Committee, providesoversight to management’sconduct of the financial
reporting process.The AuditCommittee, whichis composedentirely ofindependent directors,is alsoresponsible forthe
appointment of the independent registered publicaccounting firm. The Audit Committee alsomeets with management, the
internalauditstaff,andtheCompany’sindependentregisteredpublicaccountingfirmthroughouttheyeartoprovide
assurance as to the adequacy of the financialreporting process and to monitor the overallscope of the work performed by
the internal audit staff and the independent registeredpublic accounting firm.
Because of its inherent limitations, the disclosure controls andprocedures may not prevent or detect misstatements.A
control system, no matter how well conceived and operated, can only provide reasonable, not absolute, assurance that the
objectives of the control system are met. Becauseof the inherent limitations in all control systems, noevaluation of controls
can provide absolute assurance that all control issues and instances offraud, if any,have been detected. Also, projections
of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of
changes in conditions or that the degree of compliance with thepolicies or procedures may deteriorate.
Changes in Internal Control Over Financial Reporting
There has beenno change inour internal controlover financial reporting(as defined inRules 13a-15(f) and15d-15(f)
under the Exchange Act)during the quarter endedDecember 31, 2025 thathas materially affected,or is reasonably likely
to materially affect, our internal control over financialreporting.
Item 9B. Other Information
(a)
None
125USCB Financial Holdings, Inc.2025 10-K
(b)
DuringthethreemonthsendedDecember 31,2025,noneoftheCompany’sdirectorsorSection16reporting
officers
adopted
or
terminated
any Rule 10b5-1trading arrangement or
non-Rule
10b5-1
trading arrangement (as
such terms are defined in Item 408 of the SEC’sRegulation S-K).
Item 9C. Disclosure Regarding Foreign JurisdictionsThat Prevent Inspections
Not applicable.
126USCB Financial Holdings, Inc.2025 10-K
PART III
Item 10. Directors, Executive Officers and Corporate Governance
The information requiredherein is incorporatedby reference fromthe sections captioned“Information with Respectto
Nominees for Directorand Information AboutExecutive Officers”and “Beneficial Ownershipof Common Stockby Certain
Beneficial Owners and Management– Delinquent Section 16(a) Reports”in the Company’s DefinitiveProxy Statement for
the Annual Meetingof Shareholderscurrently expectedto be heldon May 26,2026, is expectedto befiled with theSEC
within 120 days of December 31, 2025 (“2026 DefinitiveProxy Statement”).
The Company hasadopted a codeof ethics andbusiness conduct policy,which applies toall of itsdirectors, officers,
including its principal executive officer, principal financial officer, principal accounting officer,and employees generally. The
Company willprovide acopyof itscodeof ethicsto anyperson, freeof charge,upon request.Any requestsfor acopy
shouldbemadetotheCorporateSecretary,USCBFinancialHoldings,Inc.,2301N.W.87thAvenue,Doral,Florida.In
addition, acopyof theCode ofEthics isavailable atthe Company’swebsiteat www.uscentury.comunderthe “Investor
Relations” tab.
Therehavebeennomaterialchangestotheproceduresbywhichshareholdersmayrecommendnomineestothe
Company’s Board.
Item 11. Executive Compensation
The informationrequired hereinis incorporatedby referencefrom thesections captioned"Executive Compensation"
and “Information with Respect to Nominees for Director and Information About Executive Officers – Corporate Governance
Principles and Board Matters” and “- Director Compensation”in the Company’s 2026 Definitive ProxyStatement.
Item 12. Security Ownership of Certain Beneficial Ownersand Management and Related StockholderMatters
Equity compensation Plan information
. The following table provide information as of December31, 2025 with
respect to shares of common stock that may be issuedunder our existing equity compensation plans, whichconsists of
the 2015 Equity Incentive Plan (the “2015 Option Plan”)which was approved by our shareholders.
Per Category
Number of
securities issued
or to be upon
exercise of
outstanding
options, warrants
and rights
(a) (1)
Weighted-average
exercise price of
outstanding
options, warrants
and rights
(b) (1)
Number of securities
remaining available for
future issuance under
equity compensation
plans (excluding
securities reflected in
column (a))
(c)
Equity compensation plans approved by security holders
1,032,930
$
12.67
872,012
Equity compensation plans not approved by security holders
-
-
-
Total
1,032,930
$
12.67
872,012
(1)
Includes 406,263 shares subject to restricted stock awardswhich were not vested as of December 31, 2025.The
weighted average exercise price excludessuch restricted stock awards.
Security Ownership of Certain Beneficial Owners andManagement
. Information regarding security ownership
of certain beneficial owners and management is incorporatedby reference to “Beneficial Ownership of Common Stockby
Certain Beneficial Owners and Management” in the 2026Definitive Proxy Statement.
Item 13. Certain Relationships and Related Transactions,and Director Independence
The informationrequired hereinis incorporatedby referencefrom thesections captioned“Certain Relationshipsand
RelatedPartyTransactions”and“InformationwithRespecttoNomineesforDirectorandInformationAboutExecutive
Officers” in the 2026 Definitive Proxy Statement.
Item 14. Principal Accountant Fees and Services
The information required herein is incorporated by referencefrom the section captioned “Ratification of
Appointment of Independent Registered Public AccountingFirm (Proposal Two)– Audit Fees” in the 2026 Definitive Proxy
Statement.
127USCB Financial Holdings, Inc.2025 10-K
PART IV
Item 15. Exhibits and Financial Statement Schedules
(a)
List of documents filed as part of this Annual Report:
1)
Financial Statements:
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of December 31, 2025 and 2024
Consolidated Statements of Operations for the years endedDecember 31, 2025 and 2024
Consolidated Statements of Comprehensive Income forthe years ended December 31, 2025 and 2024
Consolidated Statements of Changes in Stockholders'Equity for the years ended December 31, 2025 and2024
Consolidated Statements of Cash Flows for the yearsended December 31, 2025 and 2024
Notes to Consolidated Financial Statements
2)
Financial Statement Schedules:
Financial statement schedules are omitted as not requiredor not applicable or because the information is
included in the Consolidated Financial Statements or notesthereto.
(b)
List of Exhibits:
The exhibit list in the Exhibit Index is incorporated hereinby reference as the list of exhibits required as part of
this Annual Report on Form 10-K.
128USCB Financial Holdings, Inc.2025 10-K
EXHIBIT INDEX
Exhibit
Number
Description of Exhibit
*
129USCB Financial Holdings, Inc.2025 10-K
**
**
**
**
***
***
101
The following financial statements fromthe Company’s Annual Report onForm 10-K for the yearended December 31, 2021,
formattedinInlineXBRL:(i)ConsolidatedBalanceSheets,(ii)ConsolidatedStatementsofOperations,(iii)Consolidated
StatementsofComprehensive Income,(iv) ConsolidatedStatements ofChanges inStockholders’ Equity,(v)Consolidated
Statements of Cash Flows, (vi) Notes to Consolidated Financial Statements.
104
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
*
Management contract or compensatory plan or arrangement.
**
Filed herewith.
***
Furnished hereby.
Item 16. Form 10-K Summary
None.
130USCB Financial Holdings, Inc.2025 10-K
SIGNATURES
Pursuant to the requirements of the ExchangeAct, the registrant has duly caused this reportto be signed on its behalf
by the undersigned thereunto duly authorized.
USCB FINANCIAL HOLDINGS, INC.
Date: March 13, 2026
By:
/s/ Luis de la Aguilera
Luis de la Aguilera
President, Chief Executive Officer,and Chairman
Pursuant to the requirementsof the Exchange Ac,this report has beensigned by the followingpersons in the capacities
and on the dates indicated.
Signature
Title
Date
/s/ Luis de la Aguilera
Chairman, President, and Chief Executive
Officer (Principal Executive Officer)
March 13, 2026
Luis de la Aguilera
/s/ Robert Anderson
Chief Financial Officer (Principal Financial
Officer and Principal Accounting Officer)
March 13, 2026
Robert Anderson
/s/ Aida Levitan
Director
March 13, 2026
Aida Levitan
/s/ Howard Feinglass
Director
March 13, 2026
Howard Feinglass
/s/ Kirk Wycoff
Director
March 13, 2026
Kirk Wycoff
/s/ Ramon A. Abadin
Director
March 13, 2026
Ramon A. Abadin
/s/ Bernardo B. Fernandez
Director
March 13, 2026
Bernardo B. Fernandez
/s/ Ramon A. Rodriguez
Director
March 13, 2026
Ramon A. Rodriguez
/s/ Maria C. Alonso
Director
March 13, 2026
Maria C. Alonso
/s/ Robert E. Kafafian
Director
March 13, 2026
Robert E. Kafafian