UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____to_____
Commission File Number:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
,
,
(Address of principal executive offices) (zip code)
Registrant’s telephone number, including area code:
)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Indicate by check
mark whether the
registrant (1) has
filed all reports
required to be
filed by Section
13 or 15(d)
of the Securities
Exchange
Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was
required to file such reports), and (2)
has
been subject to such filing requirements for the past 90 days.
☒
☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data
File required to be submitted pursuant
to Rule 405
of Regulation S-T
(§232.405 of this
chapter) during the
preceding 12 months
(or for such
shorter period that
the registrant
was required to submit such files).
☒
☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company
or
an
emerging
growth
company.
See
the
definitions
of
“large
accelerated
filer,”
“accelerated
filer,”
“non-accelerated
filer,”
“smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
☐
☒
☐
If an
emerging growth
company, indicate by
check mark
if the
registrant has elected
not to
use the
extended transition
period for
complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
☐
☒
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
As of October 31, 2025, the registrant had
A
common stock outstanding.
FORM 10-Q
September 30, 2025
TABLE OF CONTENTS
3
USCB Financial Holdings, Inc.
Q3 2025 Form 10-Q
PART
I
Item 1.
Financial Statements
USCB FINANCIAL HOLDINGS, INC
Consolidated Balance Sheets – Unaudited
(Dollars in thousands, except share data)
September 30, 2025
December 31, 2024
ASSETS:
Cash and due from banks
$
$
Interest-bearing deposits in banks
Total cash and cash equivalents
Investment securities held to maturity, net of allowance of $
, respectively (fair value of
$
, respectively)
Investment securities available for sale, at fair value
Federal Home Loan Bank stock, at cost
Loans held for investment, net of allowance of
$
, respectively
Accrued interest receivable
Premises and equipment, net
Bank owned life insurance
Deferred tax assets, net
Lease right-of-use asset
Other assets
Total assets
$
$
LIABILITIES:
Deposits:
Non-interest bearing demand deposits
$
$
Savings and money market deposits
Interest-bearing demand deposits
Time deposits
Total deposits
Federal Home Loan Bank advances
Subordinated notes
-
Lease liability
Accrued interest and other liabilities
Total liabilities
Commitments and contingencies (See Notes 5
and 10)
(nil)
(nil)
STOCKHOLDERS' EQUITY:
Preferred stock - Class C; $
authorized;
-
-
Preferred stock - Class D; $
authorized;
-
-
Preferred stock - Class E; $
authorized;
-
-
Common stock - Class A Voting; $
outstanding as of September 30, 2025,
Common stock - Class B Non-voting; $
outstanding as of September 30, 2025 and
December 31, 2024
-
-
Additional paid-in capital on common stock
Accumulated deficit
(
49,094
)
(
67,813
)
Accumulated other comprehensive loss
(
37,806
)
(
44,534
)
Total stockholders' equity
Total liabilities and stockholders' equity
$
$
The accompanying notes are an integral part of
these unaudited consolidated financial statements.
4
USCB Financial Holdings, Inc.
Q3 2025 Form 10-Q
USCB FINANCIAL HOLDINGS, INC.
Consolidated Statements of Operations - Unaudited
(Dollars in thousands,
except per share data)
Three Months Ended September 30,
Nine Months Ended September 30,
2025
2024
2025
2024
Interest income:
$
$
$
$
Interest expense:
Interest-bearing demand deposits
Savings and money market deposits
-
-
Provision for credit losses
Non-interest income:
(
28
)
-
(
28
)
Non-interest expense:
Income tax expense
$
$
$
$
Per share information:
Net income per share, basic
$
$
$
$
Net income per share, diluted
$
$
$
$
Cash dividends declared
$
$
$
$
The accompanying notes are an integral part of
these unaudited consolidated financial statements.
5
USCB Financial Holdings, Inc.
Q3 2025 Form 10-Q
USCB FINANCIAL HOLDINGS, INC.
Consolidated Statements of Comprehensive Income
- Unaudited
(Dollars in thousands)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2025
2024
2025
2024
Net income
$
$
$
$
Other comprehensive income:
Unrealized gain on investment securities
Reclassification adjustment for amortization of net
unrealized losses on
securities transferred from available-for-sale to held-to-maturity
Reclassification adjustment for realized losses (gains)
included in net
income
-
(
14
)
Unrealized loss on cash flow hedge
(
123
)
(
930
)
(
309
)
(
381
)
Tax expense
(
1,340
)
(
2,277
)
(
2,284
)
(
2,136
)
Total other comprehensive income, net of tax
Total comprehensive income
$
$
$
$
The accompanying notes are an integral part of
these unaudited consolidated financial statements.
6
USCB Financial Holdings, Inc.
Q3 2025 Form 10-Q
USCB FINANCIAL HOLDINGS, INC.
Consolidated Statements of Changes in Stockholders’
Equity - Unaudited
(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 June 30, 2025
$
$
$
(
56,025
)
$
(
41,752
)
$
Net income
-
-
-
-
Other comprehensive income
-
-
-
-
Repurchase of Class A common stock
(
2,000,000
)
(
2,000
)
(
32,380
)
-
-
(
34,380
)
Exercise of stock options
-
-
Dividend payment
-
-
-
(
2,008
)
-
(
2,008
)
Stock-based compensation
-
-
-
-
Balance at September 30, 2025
$
$
$
(
49,094
)
$
(
37,806
)
$
Balance at June 30, 2024
$
$
$
(
79,760
)
$
(
44,686
)
$
Net income
-
-
-
-
Other comprehensive income
-
-
-
-
Repurchase of Class A common stock
(
10,000
)
(
10
)
(
111
)
-
-
(
121
)
Dividend payment
-
-
-
(
1,016
)
-
(
1,016
)
Stock-based compensation
-
-
-
-
Balance at September 30, 2024
$
$
$
(
73,827
)
$
(
37,978
)
$
Common Stock
Additional Paid-in
Capital on Common
Stock
Accumulated
Deficit
Accumulated Other
Comprehensive
Loss
Shares
Par Value
Total
Stockholders'
Equity
Balance at December 31, 2024
$
$
$
(
67,813
)
$
(
44,534
)
$
Net income
-
-
-
-
Other comprehensive income
-
-
-
-
Repurchase of Class A common stock
(
2,009,671
)
(
2,010
)
(
32,544
)
-
-
(
34,554
)
Restricted stock issued
(
124
)
-
-
-
Exercise of stock options
-
-
Dividend payment
-
-
-
(
6,018
)
-
(
6,018
)
Stock-based compensation
-
-
-
-
Balance at September 30, 2025
$
$
$
(
49,094
)
$
(
37,806
)
$
Balance at December 31, 2023
(
88,548
)
(
44,271
)
Net income
-
-
-
-
Other comprehensive income
-
-
-
-
Repurchase of Class A common stock
(
42,100
)
(
42
)
(
459
)
-
-
(
501
)
Restricted stock issued
(
58
)
-
-
-
Restricted stock forfeiture
(
8,625
)
(
8
)
-
-
-
Exercise of stock options
-
-
Dividend payment
-
-
-
(
3,049
)
-
(
3,049
)
Stock-based compensation
-
-
-
-
Balance at September 30, 2024
$
$
$
(
73,827
)
$
(
37,978
)
$
The accompanying notes are an integral
part of these consolidated financial statements.
7
USCB Financial Holdings, Inc.
Q3 2025 Form 10-Q
USCB FINANCIAL HOLDINGS, INC.
Consolidated Statements of Cash Flows - Unaudited
(Dollars in thousands)
Nine Months Ended September 30,
2025
2024
Cash flows from operating activities:
Net income
$
$
Adjustments to reconcile net income
to net cash provided by operating activities:
Provision for credit losses
Depreciation and amortization
Accretion of premiums on securities, net
(
1,136
)
(
365
)
Amortization of deferred loan fees, net
Stock-based compensation
(Loss) gain on sale of available for sale securities,
net
(
14
)
Gain on sale of loans held for sale, net
(
804
)
(
593
)
Proceeds from the sale of loans held for sale
Origination of loans held for sale
(
10,569
)
(
6,815
)
Increase in cash surrender value of bank owned
life insurance
(
1,451
)
(
1,257
)
Decrease in deferred tax assets
Net change in operating assets and liabilities:
Accrued interest receivable
(
1,181
)
(
77
)
Other assets
(
7,389
)
(
8,292
)
Accrued interest and other liabilities
Net cash provided by operating activities
Cash flows from investing activities:
Proceeds from maturities and pay-downs of investment
securities held to maturity
Purchase of investment securities available
for sale
(
101,486
)
(
70,996
)
Proceeds from maturities and pay-downs of investment
securities available for sale
Proceeds from sales of investment securities
available for sale
Net increase in loans held for investment
(
78,149
)
(
92,812
)
Purchase of loans held for investment
(
81,392
)
(
58,368
)
Additions to premises and equipment
(
208
)
(
256
)
Purchase of bank owned life insurance
(
4,000
)
-
Proceeds from the redemption of Federal
Home Loan Bank stock
Purchase of Federal Home Loan Bank stock
(
5,727
)
(
5,734
)
Net cash used in investment activities
(
201,898
)
(
161,561
)
Cash flows from financing activities:
Proceeds from issuance of Class A common
stock, net
Cash dividends paid
(
6,018
)
(
3,049
)
Repurchase of Class A common stock
(
34,554
)
(
501
)
Net increase in deposits
Proceeds from subordinated notes
-
Proceeds from FHLB advances
Repayments on Federal Home Loan Bank advances
(
269,000
)
(
262,000
)
Net cash provided by financing activities
Net decrease in cash and cash equivalents
(
20,224
)
(
2,576
)
Cash and cash equivalents at beginning
of period
Cash and cash equivalents at end of period
$
$
Supplemental disclosure of cash flow
information:
Interest paid
$
$
The accompanying notes are an integral
part of these unaudited consolidated financial
statements.
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements - Unaudited
8
USCB Financial Holdings, Inc.
Q3 2025 Form 10-Q
1.
SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Overview
USCB Financial Holdings,
Inc.,
a Florida corporation
incorporated in 2021,
is a bank
holding company 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 providing
financial services through its
banking centers
located in South Florida.
The Bank
owns a
subsidiary,
Florida Peninsula
Title LLC,
that offers
our clients
title insurance
policies for
real estate
transactions closed at the Bank. Licensed in the State of Florida and approved by the Department of Insurance Regulation,
Florida Peninsula Title LLC began operations
in 2021.
Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared in accordance with instructions to
Form 10-Q and
do not include all
the information and
footnotes required by U.S.
generally accepted accounting
principles
(“U.S.
GAAP”)
for
complete
financial
statements.
All
adjustments
consisting
of
normally
recurring
accruals
that,
in
the
opinion
of
management,
are
necessary
for
a
fair
presentation
of
the
financial
position
and
results
of
operations
for
the
periods presented
have been
included. These
unaudited consolidated
financial statements
should be
read in
conjunction
with the Company’s audited
consolidated financial statements and
related notes appearing in
the Company’s Annual Report
on Form 10-K for the year ended December 31, 2024.
Principles of Consolidation
The
Company
consolidates
entities
in
which
it
has
a
controlling
financial
interest.
Intercompany
transactions
and
balances are eliminated in consolidation.
Use of Estimates
To prepare
financial statements in conformity with U.S. GAAP,
management makes estimates and assumptions based
on available
information. These
estimates and
assumptions affect
the amounts
reported in
the financial
statements. The
most
significant
estimate
impacting
the
Company’s
consolidated
financial
statements
is
the
allowance
for
credit
losses
(“ACL”).
Reclassifications
Certain
amounts
in
prior
period
consolidated
financial
statements
have
been
reclassified
to
conform
to
the
current
presentation. Reclassifications had no impact on prior period
net income or stockholders’ equity.
Recently Issued Accounting Standards
Adoption of New Accounting Standards
Improvements to Income Tax
Disclosures
In December
2023,
the
Financial
Accounting
Standard
Board
(“FASB”)
issued
Accounting
Standards
Update
(ASU)
2023-09, Income Taxes (Topic
740): Improvements to Income Tax Disclosures. This ASU pertains to disclosures regarding
effective tax rates
and cash income
taxes paid with
the goal of providing
stakeholders with more
transparent and relevant
information. This
ASU is effective
for public
business entities
for annual
periods beginning
after December
15, 2024. The
Company adopted this ASU 2023-09 effective January 1, 2025. The adoption of
this ASU did not have a material impact on
the Company’s consolidated financial statements.
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements - Unaudited
9
USCB Financial Holdings, Inc.
Q3 2025 Form 10-Q
2.
INVESTMENT SECURITIES
The following
tables present
a summary
of the amortized
cost, unrealized
or unrecognized
gains and
losses,
and fair
value of investment securities at the dates indicated (in
thousands):
September 30, 2025
Available-for-sale:
Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Fair Value
U.S. Government Agency
$
$
$
(
1,214
)
$
Collateralized mortgage obligations
-
(
19,135
)
Mortgage-backed securities - residential
(
9,715
)
Mortgage-backed securities - commercial
(
7,491
)
Municipal securities
-
(
3,923
)
Bank subordinated debt securities
(
439
)
$
$
$
(
41,917
)
$
Held-to-maturity:
Amortized
Cost
Unrecognized
Gains
Unrecognized
Losses
Fair Value
U.S. Government Agency
$
$
$
(
3,529
)
$
Collateralized mortgage obligations
(
5,956
)
Mortgage-backed securities - residential
(
3,523
)
Mortgage-backed securities - commercial
-
(
1,133
)
Corporate bonds
-
(
129
)
$
$
$
(
14,270
)
$
Allowance for credit losses - securities held-to-maturity
(
5
)
Securities held-to maturity, net of allowance for credit losses
$
December 31, 2024
Available-for-sale:
Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Fair Value
U.S. Government Agency
$
$
$
(
1,668
)
$
Collateralized mortgage obligations
(
22,918
)
Mortgage-backed securities - residential
(
12,063
)
Mortgage-backed securities - commercial
(
7,905
)
Municipal securities
-
(
5,614
)
Bank subordinated debt securities
(
1,044
)
$
$
$
(
51,212
)
$
Held-to-maturity:
Amortized
Cost
Unrecognized
Gains
Unrecognized
Losses
Fair Value
U.S. Government Agency
$
$
-
$
(
5,094
)
$
Collateralized mortgage obligations
(
7,785
)
Mortgage-backed securities - residential
(
4,613
)
Mortgage-backed securities - commercial
-
(
1,385
)
Corporate bonds
-
(
393
)
$
$
$
(
19,270
)
$
Allowance for credit losses - securities held-to-maturity
(
6
)
Securities held-to maturity, net of allowance for credit losses
$
Transfers of debt
securities into the held
-to-maturity (“HTM”) category
from the available for
sale (“AFS”) category
are
made at fair
value as of
the date of
transfer. The
unrealized gain or
loss at the
date of transfer
is retained in
accumulated
other comprehensive
loss (“AOCL”) and
in the carrying
value of the
HTM securities
and there is
no impact to
net income.
Such amounts
are amortized
over the
remaining life
of the security.
The Company
made
portfolios in 2022.
During the quarter ended
September 30, 2025, there
were
HTM.
For
the
three
months
ended
September 30,
2025,
total
amortization
out
of
AOCL
for
net
unrealized
losses
on
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements - Unaudited
10
USCB Financial Holdings, Inc.
Q3 2025 Form 10-Q
securities transferred in
2022 from
AFS to
HTM was
$
30, 2025. At September 30,
2025, the fair value of the
transferred securities was $
unrealized loss was $
For the quarter
ended September 30,
2024, total amortization
out of AOCL
for the net
unrealized losses
on securities
transferred from
AFS to
HTM was
$
September 30,
2024, the
fair value
of the
transferred securities
was $
losses was $
The measurement of expected credit losses under the current expected credit loss (“CECL”) methodology is applicable
to financial assets measured at amortized cost, including
loan receivables and HTM debt securities.
CECL requires a loss reserve for securities
classified as HTM. The reserve should reflect
historical credit performance
as well
as the impact
of projected
economic forecasts. For
U.S. Government bonds
and U.S.
Agency issued bonds
classified
as HTM,
the explicit
guarantee of
the U.S.
Government is
sufficient to
conclude that
a credit
loss reserve
is not
required.
The
reserve
requirement
is
for
three
primary
assets
groups:
municipal
bonds,
corporate
bonds,
and
non-agency
securitizations.
The
Company
calculates
quarterly
the
loss
reserve
utilizing
Moody’s
ImpairmentStudio.
The
CECL
measurement
for
investment
securities
incorporates
historical
data,
containing
defaults
and
recoveries
information,
and
Moody’s baseline
economic forecast.
The solution
uses the probability
of default/loss
given default (“PD/LGD”)
approach.
PD represents
the likelihood
a borrower
will default.
Within the
Moody’s model,
this is
determined using
historical default
data, adjusted for the current economic environment. LGD projects
the expected loss if a borrower were to default.
The Company
monitors the credit
quality of HTM
securities through the
use of
credit ratings. Credit
ratings are monitored
by the Company on
at least a quarterly basis.
As of September 30, 2025
and December 31, 2024,
all HTM securities held
by the Company were rated investment grade.
At September
30, 2025,
HTM securities
included $
and mortgage-backed securities.
Because of the explicit
and/or implicit guarantee
on these bonds, the
Company holds
reserves
on these
holdings.
The remaining
portion of
the HTM
portfolio
is made
up of
$
corporate bonds. The required reserve for these
holdings 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
methodology to estimate
a $
cost less the ACL related to these securities.
The Company’s investment portfolio
includes AFS debt securities, which
are carried at fair value with unrealized
gains
and losses
recognized
in
AOCL, net
of applicable
taxes.
The Company
evaluates
whether the
declines
in fair
value
are
attributable to credit losses or other factors like interest rate risk, using both quantitative and qualitative
analyses, including
company performance analysis, review
of credit ratings, bond
vintage, remaining payment terms,
prepayment speeds and
analysis
of
macro-economic
conditions.
When
the
fair
value
of
an
AFS
security
is
less
than
its
amortized
cost
and
the
decline is attributable
to credit-related
factors, an ACL
is recorded. As
a result of
this evaluation, the
Company concluded
that no allowance was required on AFS securities as of
September 30, 2025.
Information pertaining
to investment
securities with
gross unrealized
losses, aggregated
by investment
category
and
length of
time that
those
individual securities
have been
in a
continuous
loss position,
are presented
as of
the following
dates (in thousands):
September 30, 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
$
$
(
11
)
$
$
(
1,203
)
$
$
(
1,214
)
Collateralized mortgage obligations
(
34
)
(
19,101
)
(
19,135
)
Mortgage-backed securities - residential
-
-
(
9,715
)
(
9,715
)
Mortgage-backed securities - commercial
(
412
)
(
7,079
)
(
7,491
)
Municipal securities
-
-
(
3,923
)
(
3,923
)
Bank subordinated debt securities
(
1
)
(
438
)
(
439
)
$
$
(
458
)
$
$
(
41,459
)
$
$
(
41,917
)
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements - Unaudited
11
USCB Financial Holdings, Inc.
Q3 2025 Form 10-Q
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
$
$
(
76
)
$
$
(
1,592
)
$
$
(
1,668
)
Collateralized mortgage obligations
(
23
)
(
22,895
)
(
22,918
)
Mortgage-backed securities - residential
(
11
)
(
12,052
)
(
12,063
)
Mortgage-backed securities - commercial
(
1,265
)
(
6,640
)
(
7,905
)
Municipal securities
-
-
(
5,614
)
(
5,614
)
Bank subordinated debt securities
-
-
(
1,044
)
(
1,044
)
$
$
(
1,375
)
$
$
(
49,837
)
$
$
(
51,212
)
The contractual
cash flows
associated with
U.S. Government
Agency securities,
collateralized
mortgage obligations,
and residential
and commercial
mortgage-backed
securities
are guaranteed
by U.S.
government-sponsored
enterprises,
thereby minimizing
credit risk.
Municipal bonds
are of
high credit
quality,
and the
observed declines
in fair
value are
not
attributable to deterioration in the
creditworthiness. Similarly, the decrease in fair value of bank
subordinated debt securities
is primarily driven
by changes
in market interest
rates rather
than credit
concerns. Based
on management’s
evaluation of
these factors,
management believes
that the
unrealized losses
on these
debt securities
are attributable
to fluctuations
in
market spreads and interest rate movements, rather than adverse
changes in the underlying credit quality of the issuers.
Gains
and
losses
on
the
sale
of
securities
are
recorded
on
the
trade
date
and
are
determined
on
the
specific
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 three and nine months
ended September 30, 2025 and 2024 (in thousands):
Three Months Ended September 30,
Nine Months Ended September 30,
Available-for-sale:
2025
2024
2025
2024
Proceeds from sale and call of securities
$
$
-
$
$
Gross gains
$
$
-
$
$
Gross losses
(
363
)
-
(
363
)
(
181
)
Net realized gain (loss)
$
(
28
)
$
-
$
(
28
)
$
The amortized
cost
and
fair
value of
investment
securities,
by contractual
maturity,
are shown
below
as of
the date
indicated (in thousands).
Actual maturities may
differ from contractual
maturities because borrowers
may have the right
to
call or prepay
obligations with or
without call or
prepayment penalties. Securities not
due at a
single maturity date are
shown
separately.
Available-for-sale
Held-to-maturity
September 30, 2025:
Amortized
Cost
Fair Value
Amortized
Cost
Fair Value
Due within one year
$
-
$
-
$
$
Due after one year through five years
-
-
Due after five years through ten years
-
-
Due after ten years
-
-
-
-
U.S. Government Agency
Collateralized mortgage obligations
Mortgage-backed securities - residential
Mortgage-backed securities - commercial
$
$
$
$
At September 30,
2025, there
were no
securities held
in the
portfolio from
any one
issuer in
an amount
greater than
10% of total
stockholders’
equity other than
the U.S. Government
and U.S. Government
Agency issued securities.
All the
collateralized mortgage obligations
and mortgage-backed securities
at September 30, 2025 and
December 31, 2024 were
issued by U.S. Government entities.
The Bank is a Qualified Public Depository (“QPD”) with the State of Florida. As a QPD, the Bank
has the legal authority
to
maintain
public
deposits
from
cities,
municipalities,
and
the
State
of
Florida.
These
public
deposits
are
secured
by
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements - Unaudited
12
USCB Financial Holdings, Inc.
Q3 2025 Form 10-Q
securities
pledged
to
the
State
of
Florida
at
a
ratio
of
%
of
the
quarter
daily
average
balance
for
quarter
ended
September 30, 2025, and
% for the quarter daily average balance
for quarter ended December 31, 2024. The Bank must
also maintain a minimum amount of pledged securities
to be in the public funds program.
As
of
September 30,
2025,
the
Bank
had
a
total
of
$
pledged to the State of Florida for these public funds were
As of
December 31, 2024, the
Bank had
a total
of $
to the State of Florida for these public funds were
3.
LOANS
The following table is a summary of the distribution of loans
held for investment by type (dollars in thousands):
September 30, 2025
December 31, 2024
Total
Percent of
Total
Total
Percent of
Total
Residential real estate
$
%
$
%
Commercial real estate
%
%
Commercial and industrial
%
%
Correspondent banks
%
%
Consumer and other
%
%
Total
gross loans
%
%
Plus: Deferred fees/costs
Total
loans net of deferred fees/costs
Less: Allowance for credit losses
Total
net loans
$
$
At September 30, 2025
and December 31, 2024,
the Company had
$
commercial real estate and residential mortgage
loans pledged as collateral for lines of
credit with the Federal Home Loan
Bank (“FHLB”) of Atlanta and the Federal Reserve Bank
of Atlanta.
Allowance for Credit Losses
In
general,
the
Company
utilizes
the
Discounted
Cash
Flow
(“DCF”)
method
or
the
Weighted-Average
Remaining
Maturity (“WARM”) methodology to estimate the
quantitative portion of the ACL
for loan pools. The
DCF method uses a loss
driver analysis (“LDA”)
and DCF analyses.
Management engaged advisors
and consultants with expertise
in CECL model
development to
assist in
development of
a LDA
based on
regression models
and supportable
forecast. Peer
group data
obtained
from
FFIEC
Call
Report
filings
is
used to
inform
regression
analyses
to
quantify
the
impact
of reasonable
and
supportable
forecasts
in
projective
models.
Economic
forecasts
applied
to
regression
models
to
estimate
probability
of
default for loan receivables use at least
one of the following economic indicators: civilian unemployment rate (national), real
gross domestic
product growth
(national GDP)
or the
House Price
Index (“HPI”).
For each
of the
segments
in which
the
WARM methodology is used,
the long-term average
loss rate is
calculated and applied
on a quarterly
basis for the
remaining
life of the pool. Adjustments for economic expectations are
made through qualitative factors.
Qualitative factors (“Q-Factors”) used in the ACL methodology
include:
•
•
•
•
•
•
•
•
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements - Unaudited
13
USCB Financial Holdings, Inc.
Q3 2025 Form 10-Q
Changes in the
ACL for the
three and nine
months ended September 30,
2025 and 2024
were as follows
(in thousands):
Residential
Real Estate
Commercial
Real Estate
Commercial
and
Industrial
Correspondent
Banks
Consumer
and Other
Total
Three Months Ended September 30,
2025
Beginning balance
$
$
$
$
$
$
Provision for credit losses
(1)
(
102
)
(
118
)
(
45
)
(
252
)
Recoveries
-
-
-
Charge-offs
-
-
-
-
(
7
)
(
7
)
Ending Balance
$
$
$
$
$
$
Nine Months Ended September 30, 2025
Beginning balance
$
$
$
$
$
$
Provision for credit losses
(2)
(
249
)
Recoveries
-
-
Charge-offs
-
-
-
-
(
730
)
(
730
)
Ending Balance
$
$
$
$
$
$
(1) Provision for credit losses excludes a $
liabilities and a $
(2) Provision for credit losses excludes a $
other liabilities and a $
Residential
Real Estate
Commercial
Real Estate
Commercial
and
Industrial
Correspondent
Banks
Consumer
and Other
Total
Three Months Ended September 30,
2024
Beginning balance
$
$
$
$
$
$
Provision for credit losses
(1)
(
86
)
(
96
)
(
69
)
Recoveries
-
-
Charge-offs
-
-
-
-
(
7
)
(
7
)
Ending Balance
$
$
$
$
$
$
Nine Months Ended September 30, 2024
Beginning balance
$
$
$
$
$
$
Provision for credit losses
(2)
(
180
)
(
88
)
Recoveries
-
-
Charge-offs
-
-
-
-
(
17
)
(
17
)
Ending Balance
$
$
$
$
$
$
(1) Provision for credit losses excludes a $
other liabilities and a $
(2) Provision for credit losses excludes a $
other liabilities.
At September
30,
2025, the
ACL
for loans
was
$
increase of $
Charge offs
related
to loans
for the
three
months ended
September 30,
2025 were
$
Charge
offs
for
the
nine
months
ended
September
30,
2025
were
$
originated in 2025.
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements - Unaudited
14
USCB Financial Holdings, Inc.
Q3 2025 Form 10-Q
Charge-offs
for
the
three
months
ended
September
30,
2024
totaled
$
Charge-offs for the nine months ended September
30, 2024 totaled $
The ACL and
the outstanding balances
in the specified
loan categories
as of September
30, 2025 and
December 31,
2024 are as follows (in thousands):
Residential
Real Estate
Commercial
Real Estate
Commercial
and Industrial
Correspondent
Banks
Consumer
and Other
Total
September 30, 2025:
Allowance for credit losses:
Individually evaluated
$
$
-
$
$
-
$
-
$
Collectively evaluated
Balances, end of period
$
$
$
$
$
$
Loans:
Individually evaluated
$
$
-
$
$
-
$
-
$
Collectively evaluated
Balances, end of period
$
$
$
$
$
$
December 31, 2024:
Allowance for credit losses:
Individually evaluated
$
$
-
$
$
-
$
$
Collectively evaluated
Balances, end of period
$
$
$
$
$
$
Loans:
Individually evaluated
$
$
-
$
$
-
$
$
Collectively evaluated
Balances, end of period
$
$
$
$
$
$
Credit Quality Indicators
The Company grades loans based on the estimated capability of the borrower to repay the contractual obligation of the
loan agreement based
on relevant information
which may
include: current financial
information on the
borrower,
historical
payment
experience,
credit
documentation
and
other
current
economic
trends.
Internal
credit
risk
grades
are
evaluated
periodically.
The Company's internally assigned credit risk grades are as follows:
Pass
– Loans indicate different levels of satisfactory
financial condition and performance.
Special Mention
close attention. If left uncorrected, these potential weaknesses
may result in deterioration of the repayment
prospects for the loan or of the institution’s
credit position at some future date.
Substandard
– Loans classified as substandard are inadequately protected
by the current net worth and paying
capacity of the obligator or of the collateral pledged, if
any. Loans so classified
have a well-defined weakness or
weaknesses that jeopardize the liquidation of the debt.
They are characterized by the distinct possibility that the
institution will sustain some loss if the deficiencies are
not corrected.
Doubtful
the added characteristic that the weaknesses make collection
or liquidation in full on the basis of currently existing
facts, conditions, and values, highly questionable and improbable.
Loss
– Loans classified as loss are considered uncollectible.
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements - Unaudited
15
USCB Financial Holdings, Inc.
Q3 2025 Form 10-Q
Loan credit exposures by internally assigned grades are
presented below for the periods indicated (in thousands):
As of September 30, 2025
Term Loans by Origination Year
Revolving
Loans
Total
2025
2024
2023
2022
2021
Prior
Residential real estate
Pass
$
$
$
$
$
$
$
$
Special Mention
-
-
-
-
-
Substandard
-
-
-
-
-
Total
Commercial real estate
Pass
Special Mention
-
-
-
-
-
Substandard
-
-
-
-
-
Total
Commercial and
industrial
Pass
Special Mention
-
-
-
-
-
Substandard
-
-
-
-
Total
Correspondent banks
Pass
-
-
-
-
-
Total
-
-
-
-
-
Consumer and other
loans
Pass
Total
Total
Loans
Pass
Special Mention
-
-
-
Substandard
-
-
-
Doubtful
-
-
-
-
-
-
-
-
Total
$
$
$
$
$
$
$
$
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements - Unaudited
16
USCB Financial Holdings, Inc.
Q3 2025 Form 10-Q
As of December 31, 2024
Term Loans by Origination Year
Revolving
Loans
Total
2024
2023
2022
2021
2020
Prior
Residential real estate
Pass
$
$
$
$
$
$
$
$
Substandard
-
-
-
-
-
-
Total
Commercial real estate
Pass
Substandard
-
-
-
-
-
Total
Commercial and
industrial
Pass
Substandard
-
-
-
-
Total
Correspondent banks
Pass
-
-
-
-
-
-
Total
-
-
-
-
-
-
Consumer and other
loans
Pass
Substandard
-
-
-
-
-
-
Total
Total
Loans
Pass
Special Mention
-
-
-
-
-
-
-
-
Substandard
-
-
Doubtful
-
-
-
-
-
-
-
-
Total
$
$
$
$
$
$
$
$
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements - Unaudited
17
USCB Financial Holdings, Inc.
Q3 2025 Form 10-Q
Loan Aging
The Company
also considers the
performance of loans
in grading
and in
evaluating the
credit quality
of the
loan portfolio.
The Company
analyzes credit
quality and
loan grades based
on payment
performance and
the aging status
of the loans.
The following
tables include
an aging
analysis of
accruing loans
and total
non-accruing
loans as
of September 30,
2025
and December 31, 2024 (in thousands):
Accruing
As of September 30, 2025
Current
Past Due 30-
89 Days
Past Due 90
Days or >
and Still
Accruing
Total
Accruing
Non-Accrual
Total Loans
Residential real estate:
Home equity lines of credit and other
$
$
-
$
-
$
$
-
$
1-4 family residential
-
Condo residential
-
-
Commercial real estate:
Land and construction
-
-
Multi-family residential
-
-
Condo commercial
-
-
-
Commercial property
-
-
-
-
Commercial and industrial:
Secured
-
-
Unsecured
-
-
-
-
-
Correspondent banks
-
-
-
Consumer and other
-
-
-
Total
$
$
$
-
$
$
$
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements - Unaudited
18
USCB Financial Holdings, Inc.
Q3 2025 Form 10-Q
Accruing
As of December 31, 2024:
Current
Past Due
30-89 Days
Past Due 90
Days or >
and Still
Accruing
Total
Accruing
Non-Accrual
Total Loans
Residential real estate:
Home equity lines of credit and other
$
$
-
$
-
$
$
-
$
1-4 family residential
-
-
Condo residential
-
-
Commercial real estate:
Land and construction
-
-
-
Multi-family residential
-
-
-
Condo commercial
-
-
-
Commercial property
-
-
-
-
Commercial and industrial:
Secured
-
Unsecured
-
-
-
-
Correspondent banks
-
-
-
Consumer and other
-
-
Total
$
$
$
-
$
$
$
Non-accrual Status
The following table includes
the amortized cost basis of loans
on non-accrual status as of
September 30, 2025 and as
of December 31, 2024 (in thousands):
September 30, 2025
Non-accrual
Loans With No
Related Allowance
Non-accrual
Loans With
Related Allowance
Total Non-
accruals
Residential real estate
$
$
-
$
Commercial and industrial
Total
$
$
$
December 31, 2024
Non-accrual
Loans With No
Related Allowance
Non-accrual
Loans With
Related Allowance
Total Non-
accruals
Residential real estate
$
$
-
$
Commercial and industrial
-
Consumer and other
-
Total
$
$
$
Accrued interest
receivable is
excluded from
the estimate
of credit
losses. There
was
attributable
to
non-accrual
loans
outstanding
during
the
three
and
nine
months
ended
September 30,
2025
and
2024.
Interest income on these loans for the three months ended September 30, 2025 and 2024, would have been
approximately
$
income on
these loans
for the
nine months
ended September
30, 2025
and 2024,
would have
been approximately
$
thousand and $
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements - Unaudited
19
USCB Financial Holdings, Inc.
Q3 2025 Form 10-Q
Collateral-Dependent Loans
A
loan
is
collateral
dependent
when
the
borrower
is
experiencing
financial
difficulty
and
repayment
of
the
loan
is
expected to be provided substantially through the sale
or operation of the collateral.
The following
table includes
the amortized cost
basis of
collateral dependent
loans related
to borrowers
experiencing
financial difficulty by type of collateral as of September
30, 2025 and December 31, 2024 (in thousands):
September 30, 2025
Collateral Type
Residential Real Estate
Specific Reserve
Residential real estate
$
$
-
Total
$
$
-
December 31, 2024
Collateral Type
Boat
Specific Reserve
Consumer and other
$
$
Total
$
$
Management evaluates
on an individual
basis collateral
dependent loans
using the fair
value of the
collateral method
to determine
if a
credit loss
reserve is
necessary.
The ACL
is measured
based on
the difference
of the
fair
value of
the
collateral and
amortized cost
basis of
the loan.
If the
final collateral
valuation is
less than
the recorded
investment of
the
loan, a
reserve amount
is calculated.
If the
collateral valuation
is equal
to or
greater than
the recorded
investment of
the
loan, no reserve is determined.
Loan Modifications to Borrowers Experiencing Financial
Difficulties
The Company had
no new modifications
to borrowers
experiencing financial
difficulties for
the three and
nine months
ended
September 30,
2025
and
three
months
ended
September
30,
2024.
The
Company
had
one
new
modification
to
borrowers experiencing
financial difficulties
for the
nine months
ended September
30, 2024.
The following
table presents
newly restructured
loans, by
type of
modification, which
occurred during
the nine
months ended
September 30,
2024 (in
thousands):
Recorded Investment Prior to Modification
Recorded Investment After Modification
Number of
Loans
Combination
Modifications
Total
Modifications
Number of
Loans
Combination
Modifications
Total
Modifications
Commercial and industrial
$
$
$
$
Total
$
$
$
$
The loan modification
for the borrower
experiencing financial
difficulty at
September 30,
2024 included
a combination
of rate and maturity modifications.
The rate was modified
from a variable rate
to a fixed rate
of
%. The original maturity
of September 2029 was extended to January
2034.
There were
September 30, 2025 and 2024.
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements - Unaudited
20
USCB Financial Holdings, Inc.
Q3 2025 Form 10-Q
4.
INCOME TAXES
The Company’s income tax expense is presented
in the following table for the periods indicated (in thousands):
Nine Months Ended September 30,
2025
2024
Current:
Federal
$
$
-
State
-
-
Total
current
-
Deferred:
Federal
State
Total
deferred
Total
tax expense
$
$
The actual income tax expense for the nine months ended
September 30, 2025 and 2024 differs from
the statutory tax
expense for the periods (computed by applying the U.S.
federal corporate tax rate of
% for both 2025 and 2024
periods
to income before income tax expense) as follows (in thousands):
Nine Months Ended September 30,
2025
2024
Federal taxes at statutory rate
$
$
State income taxes, net of federal tax benefit
Bank owned life insurance
(
368
)
(
319
)
Total
tax expense
$
$
The Company’s deferred tax assets and deferred
tax liabilities as of the dates indicated were (in thousands):
September 30, 2025
December 31, 2024
Deferred tax assets:
Net operating loss
$
$
Allowance for credit losses
Lease liability
Unrealized losses on available for sale securities
Depreciable property
Equity compensation
Accruals
Other, net
-
Deferred tax assets:
Deferred tax liabilities:
Deferred loan cost
(
1,602
)
(
1,934
)
Lease right of use asset
(
1,592
)
(
2,142
)
Deferred expenses
(
245
)
(
224
)
Cash flow hedge
(
3
)
(
81
)
Other, net
(
286
)
-
Deferred tax liabilities
(
3,728
)
(
4,381
)
Net deferred tax assets
$
$
The Company
has approximately
$
between 2031 and 2036 and which are limited to offset,
to the extent permitted, future taxable earnings of the
Company.
In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some
portion or
all of
the deferred
tax assets
will not
be realized.
The ultimate
realization
of deferred
tax assets
is dependent
upon the generation of
future taxable income
during the periods
in which those temporary
differences become deductible.
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements - Unaudited
21
USCB Financial Holdings, Inc.
Q3 2025 Form 10-Q
Management considers the scheduled reversal
of deferred tax liabilities, projected future taxable
income, and tax planning
strategies in making this assessment.
The major tax
jurisdictions where the
Company files income
tax returns are
the U.S. federal
jurisdiction and
the State
of Florida. With few exceptions, the Company is no longer subject to U.S. federal and state income tax return examinations
by tax authorities for years before 2022.
For the nine
months ended
September 30, 2025
and 2024, the
Company did
t have any
unrecognized tax
benefits
as a result of
tax positions taken during a prior
period or during the current period. Additionally,
recorded as a result of tax uncertainties.
On
July
4,
2025,
the
One
Big
Beautiful
Bill
Act
(“OBBBA”)
was
enacted
in
the
United
States.
The
OBBBA
includes
significant provisions, such as the permanent extension of certain expiring provisions of
the Tax Cuts and Jobs Act enacted
in 2017, modifications to the international
tax framework and the restoration of
favorable tax treatment for certain business
provisions, in particular the depreciation
of capital asset additions. The
legislation has multiple effective
dates, with certain
provisions effective
in 2025
and others
implemented through
2027. The
Company is
currently assessing
its impact
on its
consolidated
financial
statements
but
preliminarily
does
not
believe
the
OBBBA
provisions
will
significantly
modify
its
effective income tax rate.
5.
OFF-BALANCE SHEET ARRANGEMENTS
The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business in order to
meet the financial
needs of
its customers
and to reduce
its own
exposure to
fluctuations in
interest rates.
These financial
instruments
include
unfunded
commitments
under
lines
of
credit,
commitments
to
extend
credit,
and
standby
and
commercial letters
of credit.
Those instruments involve,
to varying
degrees, elements of
credit and
interest rate
risk in
excess
of the amount recognized
in the Company’s
Consolidated Balance Sheets.
The Company uses the
same credit policies in
making commitments and conditional obligations as it
does for on-balance sheet instruments.
The Company's exposure
to credit loss
in the event
of nonperformance by
the other party
to the financial
instruments
for unused lines of credit and standby letters of credit is
represented by the contractual amount of these commitments.
A
summary
of
the
amounts
of
the
Company's
financial
instruments
with
off-balance
sheet
risk
are
shown
below
at
September 30, 2025 and December 31, 2024 (in thousands):
September 30, 2025
December 31, 2024
Commitments to grant loans and unfunded lines of credit
$
$
Standby and commercial letters of credit
Total
$
$
Commitments to
extend credit
are agreements
to lend
to a
customer as
long as
there is
no violation
of any
condition
established in the contract. Commitments generally have
fixed expiration dates or other termination clauses.
Unfunded lines of
credit and revolving
credit lines are
commitments for possible
future extensions
of credit to
existing
customers. These lines of
credit are uncollateralized and
usually do not contain
a specified maturity date
and ultimately may
not be drawn upon to the total extent to which the Company
committed.
Standby
and
commercial
letters
of
credit
are
conditional
commitments
issued
by
the
Company
to
guarantee
the
performance of a
customer to
a third
party. Those letters of
credit are
primarily issued to
support public and
private borrowing
arrangements. Essentially all letters of credit have fixed maturity dates and since
many of them expire without being drawn
upon, they do not generally present a significant liquidity
risk to the Company.
6.
DERIVATIVES
The Company utilizes interest rate swap agreements
as part of its asset-liability management strategy to help
manage
its interest rate
risk exposure. The notional
amount of the interest
rate swaps does not
represent actual amounts exchanged
by the
parties.
The amounts
exchanged
are determined
by reference
to the
notional amount
and the
other
terms
of the
individual interest rate swap agreements.
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements - Unaudited
22
USCB Financial Holdings, Inc.
Q3 2025 Form 10-Q
Interest Rate Swaps Designated as a Cash Flow Hedge
In July
2025, the
Company entered into
a two-year costless
collar hedge
with a
notional amount of
$
exposure to interest
rate volatility on
a three-month brokered CD.
The derivative is
based on the
USD SOFR overnight index
and establishes a
cap rate of
% and a
floor rate of
%, effectively creating a
defined range of
interest rate outcomes
without requiring
an upfront
premium. The
hedge was
designated as
a cash
flow hedge
under ASC
815, Derivatives
and
Hedging,
and
will
be
accounted
for
accordingly.
Changes
in
the
fair
value
of
the
derivative
will
be
recorded
in
other
comprehensive income (loss) to the extent the hedge remains
effective.
In August
2025, the
Company entered
into a
two-year
costless collar
hedge with
a notional
amount of
$
manage
exposure
to
interest
rate
volatility
on
a
three-month
brokered
CD.
The
derivative
is
based
on
the
USD
SOFR
overnight
index
and
establishes
a
cap
rate
of
%
and
a
floor
rate
of
%,
effectively
creating
a
defined
range
of
interest rate outcomes without requiring
an upfront premium. The hedge was
designated as a cash flow hedge
under ASC
815,
Derivatives
and
Hedging,
and
will
be
accounted
for
accordingly.
Changes
in
the
fair
value
of
the
derivative
will
be
recorded in other comprehensive income (loss) to the extent the
hedge remains effective.
As of September 30, 2025,
the Company had
$
average
maturity
of
%,
and
with
a
weighted
average
3-month
compound USD SOFR being received.
As of December
31, 2024,
the Company had
$
average
maturity
of
%,
and
with
a
weighted
average
3-month
compound USD SOFR being received.
The changes
in fair
value of
these interest
rate swaps
are recorded
in other
assets or
accrued interest
and other
liabilities
with
a
corresponding
recognition
in
other
comprehensive
income
(loss)
and
subsequently
reclassified
to
earnings
when
gains or losses are realized.
Interest Rate Swaps Designated as Fair Value
Hedge
The Company had
the quarter ended September 30, 2024,
the Company unwound
amount of
$
liability management
strategies. The
early termination
fee to
unwind the
fair value
swaps totaled
$
fee allocated to
each loan category
is being amortized
over the remining
life of the
hedge loans on
a monthly straight-line
basis
with
full
recognition
of
the
unamortized
cost
upon
the
early
payoff
of
the
hedge
loans.
The
amortization
of
the
termination
fee
is reflected
in the
loan interest
income
line in
the
Consolidated
Statement
of Operations
.
The remaining
unamortized termination fee as
of September 30, 2025
was $
swaps were between 2025 and
2026. The fair value interest
rate swap agreements had
an average maturity of
at the date of their termination.
Interest Rate Swaps
The Company enters into interest rate swaps with its loan customers. The Company had
with loan
customers with
an aggregate
notional amount
of $
December 31, 2024, respectively.
At September 30, 2025,
these interest rate swaps mature
between 2025 and 2051. The
Company entered
into corresponding
and offsetting
derivatives with
third parties.
The fair
value of
the liability
created by
these derivatives requires the Company to
provide the counterparty with funds to be
held as collateral which the Company
reports as other assets under the Consolidated Balance
Sheets. While these derivatives represent economic
hedges, they
do not qualify as hedges for accounting purposes.
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements - Unaudited
23
USCB Financial Holdings, Inc.
Q3 2025 Form 10-Q
The following table reflects the Company’s
interest rate swaps at the dates indicated (in thousands):
Fair Value
Notional
Amount
Collateral
Amount
Balance Sheet Location
Asset
Liability
September 30, 2025:
Derivatives designated as cash flow hedges:
Interest rate swaps
$
$
-
Other assets/Accrued interest and
other liabilities
$
$
Derivatives not designated as hedging instruments:
Interest rate swaps related to customer loans
$
$
Other assets/Accrued interest and
other liabilities
$
$
December 31, 2024:
Derivatives designated as cash flow hedges:
Interest rate swaps
$
$
-
Other assets
$
$
-
Derivatives not designated as hedging instruments:
Interest rate swaps related to customer loans
$
$
Other assets/Accrued interest and
other liabilities
$
$
7.
FAIR VALUE
MEASUREMENTS
Determination of Fair Value
The Company
uses
fair value
measurements
to record
fair-value
adjustments
to certain
assets
and liabilities
and to
determine fair value
disclosures. In accordance
with the fair
value measurements
accounting guidance, the
fair value of
a
financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market
participants
at the
measurement
date.
Fair value
is best
determined based
upon quoted
market prices.
However, in
many instances, there
are no quoted
market prices for the
Company's various financial
instruments. In cases
where quoted
market prices
are not
available, fair
values are
based on
estimates using
present value
or other
valuation
techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates
of future cash flows. Accordingly, the fair value estimates may not be realized in
an immediate settlement of the instrument.
The fair
value guidance provides
a consistent definition
of fair
value, which focuses
on exit
price in
an orderly transaction
(that is,
not a
forced
liquidation
or distressed
sale) between
market participants
at the
measurement
date
under current
market conditions.
If there
has been
a significant
decrease
in the
volume
and level
of activity
for the
asset
or liability,
a
change in
valuation technique or
the use
of multiple
valuation techniques may
be appropriate.
In such
instances, determining
the
price
at
which
willing
market
participants
would
transact
at
the
measurement
date
under
current
market
conditions
depends on the facts
and circumstances and
requires the use of
significant judgment. The fair
value is a reasonable
point
within the range that is most representative of fair value under
current market conditions.
Fair Value Hierarchy
In accordance with
this guidance, the
Company groups its
financial assets
and financial liabilities
generally measured
at fair
value in
three
levels, based
on the
markets
in which
the assets
and liabilities
are traded,
and the
reliability
of the
assumptions used to determine fair value.
Level 1
entity has
the ability
to access
at the measurement
date. Level
1 assets
and liabilities
generally include
debt and
equity securities that
are traded in
an active exchange
market. Valuations are obtained from
readily available pricing
sources for market transactions involving identical assets
or liabilities.
Level 2
asset
or
liability,
either
directly
or
indirectly.
The
valuation
may
be
based
on
quoted
prices
for
similar
assets
or
liabilities; quoted
prices in
markets that are
not active;
or other inputs
that are observable
or can be
corroborated
by observable market data for substantially the full term of the
asset or liability.
Level 3
significant
to
the
fair
value
of
the
assets
or
liabilities.
Level
3
assets
and
liabilities
include
financial
instruments
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements - Unaudited
24
USCB Financial Holdings, Inc.
Q3 2025 Form 10-Q
whose value
is determined
using pricing
models, discounted
cash
flow
methodologies,
or similar
techniques,
as
well as instruments for which determination of fair value
requires significant management judgment or estimation.
A
financial
instrument's
categorization
within
the
valuation
hierarchy
is
based
upon
the
lowest
level
of
input
that
is
significant to the fair value measurement.
Items Measured at Fair Value
on a Recurring Basis
AFS investment securities:
for such securities,
management generally relies
on prices obtained
from independent vendors
or third-party broker-dealers.
Management reviews pricing methodologies provided by the vendors and third-party broker-dealers in order to determine if
observable market information is being utilized. Securities measured with pricing provided by independent vendors or
third-
party broker-dealers
are classified within
Level 2 of
the hierarchy and
often involve using
quoted market
prices for similar
securities, pricing models or discounted cash flow analyses
utilizing inputs observable in the market where available.
Derivatives:
classified within Level 2 of the hierarchy.
The
following
table
represents
the
Company's
assets
and
liabilities
measured
at
fair
value
on
a
recurring
basis
at
September 30, 2025 and December 31, 2024 for each
of the fair value hierarchy levels (in thousands):
September 30, 2025
December 31, 2024
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
Investment securities available for sale:
U.S. Government Agency
$
-
$
$
-
$
$
-
$
$
-
$
Collateralized mortgage obligations
-
-
-
-
Mortgage-backed securities - residential
-
-
-
-
Mortgage-backed securities - commercial
-
-
-
-
Municipal securities
-
-
-
-
Bank subordinated debt securities
-
-
-
-
Total
-
-
-
-
Derivative assets
-
-
-
-
Total assets at fair value
$
-
$
$
-
$
$
-
$
$
-
$
Derivative liabilities
$
-
$
$
-
$
$
-
$
$
-
$
Total liabilities at fair value
$
-
$
$
-
$
$
-
$
$
-
$
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements - Unaudited
25
USCB Financial Holdings, Inc.
Q3 2025 Form 10-Q
Fair Value Measurements
on a Nonrecurring Basis
During
the
three
and
nine
months
ended
September
30,
2025
and
2024,
the
Company
did
not
have
any
assets
or
liabilities measured at fair value on a nonrecurring basis.
Items Not Measured at Fair Value
The following table
presents the carrying
amounts and estimated
fair values of
financial instruments
not carried at fair
value as of September 30, 2025 and December 31, 2024
(in thousands):
Fair Value Hierarchy
Carrying
Amount
Level 1
Level 2
Level 3
Fair Value
Amount
September 30, 2025:
Financial Assets:
Cash and due from banks
$
$
$
-
$
-
$
Interest-bearing deposits in banks
$
$
$
-
$
-
$
Investment securities held to maturity, net
$
$
-
$
$
-
$
Loans held for investment, net
$
$
-
$
-
$
$
Accrued interest receivable
$
$
-
$
$
$
Financial Liabilities:
Non-interest bearing demand deposits
$
$
$
-
$
-
$
Savings and money market deposits
$
$
$
-
$
-
$
Interest-bearing demand deposits
$
$
$
-
$
-
$
Time deposits
$
$
-
$
$
-
$
FHLB advances
$
$
-
$
$
-
$
Subordinated notes
$
$
$
-
$
$
Accrued interest payable
$
$
-
$
$
-
$
December 31, 2024:
Financial Assets:
Cash and due from banks
$
$
$
-
$
-
$
Interest-bearing deposits in banks
$
$
$
-
$
-
$
Investment securities held to maturity
$
$
-
$
$
-
$
Loans held for investment, net
$
$
-
$
-
$
$
Accrued interest receivable
$
$
-
$
$
$
Financial Liabilities:
Non-interest bearing demand deposits
$
$
$
-
$
-
$
Savings and money market deposits
$
$
$
-
$
-
$
Interest-bearing demand deposits
$
$
$
-
$
-
$
Time deposits
$
$
-
$
$
-
$
FHLB advances
$
$
-
$
$
-
$
Accrued interest payable
$
$
-
$
$
-
$
8.
STOCKHOLDERS’ EQUITY
Common Stock
During the three months ended September 30 2025, the
Company repurchased
stock from
certain institutional shareholders
through privately negotiated
transactions, at a
weighted average price
per share
of $
. The
aggregate purchase
price for
these transactions
was approximately
$
supplemental and not
part of the
Company’s two previously announced
stock repurchase programs. During
the nine months
ended
September
30,
2025
pursuant
to
the
Company’s
publicly
announced
repurchase
programs
the
Company
repurchased
.
The
aggregate
purchase price for
these transactions
was approximately $
2025,
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements - Unaudited
26
USCB Financial Holdings, Inc.
Q3 2025 Form 10-Q
During the
three months
ended September
30, 2024,
the Company
repurchased
stock
at
a
weighted
average
price
per
share
of
$
.
The
aggregate
purchase
price
for
these
transactions
was
approximately $
repurchased
. The
aggregate
purchase price for these transactions was approximately $
There were
ended September
30,
2025, the
Company
issued
stock awards pursuant to the Company’s 2015 equity
incentive plan.
There
were
ended September 30, 2024 the Company issued
awards pursuant to the Company’s 2015 equity incentive
plan.
The number of shares of the Company’s Class A common
stock issued and outstanding as of September 30, 2025 and
December 31, 2024 were
, respectively.
Dividends
Declaration of
dividends by
the Board
of Directors
is required
before dividend
payments are
made. The
Company is
limited in
the amount
of cash
dividends that
it may
pay.
Payment of
dividends is
generally limited
to the
Company’s
net
income of the current year combined with
the Company’s
retained income for the preceding two years,
as defined by state
banking
regulations.
However,
for
any
dividend
declaration,
the
Company
must
consider
additional
factors
such
as
the
amount of current
period net income,
liquidity,
asset quality,
capital adequacy
and economic
conditions at the
Bank since
the Bank is the
primary source of
funds to fund
dividends by the
Company.
It is likely that
these factors would
further limit
the amount of dividends which the
Company could legally declare. In addition, bank regulators
have the authority to prohibit
banks and bank holding companies from paying dividends if they
deem such payment to be an unsafe or
unsound practice.
As of
September
30,
2025,
the
Company
was
not
subject
to any
formal
supervisory
restrictions
on
its
ability
to pay
dividends
but
will
notify
the
Federal
Reserve
Bank
of
Atlanta
in
advance
of
any
proposed
dividend
to
the
Company's
stockholders in
light of
the
Bank's negative
retained earnings.
In addition,
under applicable
FDIC regulations
and policy,
because the
Bank has
negative
retained
earnings,
it
must obtain
the
prior approval
of the
FDIC before
effecting
a cash
dividend or other capital distribution from the Bank to the
Company.
The following table details the dividends declared and paid by
the Company for the periods presented:
Nine Months Ended September 30, 2025
Declaration Date
Record Date
Payment Date
Dividend Per Share
Dividend Amount
$
$
$
$
$
$
Nine Months Ended September 30, 2024
Declaration Date
Record Date
Payment Date
Dividend Per Share
Dividend Amount
$
$
$
$
$
$
The
Company
and
the
Bank
exceeded
all
regulatory
capital
requirements
and
remained
above
“well-capitalized”
guidelines as of September 30, 2025 and December 31,
2024. At September 30, 2025, the total risk-based
capital ratio for
the
Bank
was
%.
The
Company
is
not
subject
to
regulatory
capital
ratios
imposed
by
Basel
III
on
bank
holding
companies because the Company is deemed to be a small
bank holding company.
See Note 12, Subsequent Events, for information regarding
dividends declared in October 2025.
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements - Unaudited
27
USCB Financial Holdings, Inc.
Q3 2025 Form 10-Q
9.
EARNINGS PER SHARE
Earnings
per
share
(“EPS”)
for
common
stock
is
calculated
using
the
two-class
method
required
for
participating
securities.
Basic
EPS
is
calculated
by
dividing
net
income
available
to
common
shareholders
by
the
weighted-average
number of common shares outstanding for
the period, without consideration for common
stock equivalents. Diluted EPS is
computed by dividing
net income
available to common
shareholders by the
weighted-average number
of common shares
outstanding for
the period
and the
weighted-average number of
dilutive common stock
equivalents outstanding
for the
period
determined using the treasury-stock
method. For purposes of this
calculation, common stock equivalents
include common
stock options and are only included in the calculation of diluted
EPS when their effect is dilutive.
The
following
table
reflects
the
calculation
of
net
income
available
to
common
shareholders
for
the
three
and
nine
months ended September 30, 2025 and 2024 (in thousands):
Three Months Ended
September 30,
Nine Months Ended
September 30,
2025
2024
2025
2024
Net Income
$
$
$
$
Net income available to common shareholders
$
$
$
$
The following table reflects the calculation of basic and diluted earnings per common share class for the three and nine
months ended September 30, 2025 and 2024 (in thousands,
except share amounts):
Three Months Ended September 30,
Nine Months Ended September 30,
2025
2024
2025
2024
Class A
Class A
Basic EPS
Numerator:
Net income available to common shares
$
$
$
$
Denominator:
Weighted average shares outstanding
Earnings per share, basic
$
$
$
$
Diluted EPS
Numerator:
Net income available to common shares
$
$
$
$
Denominator:
Weighted average shares outstanding for basic EPS
Add: Dilutive effects of assumed exercises of stock
options
Weighted avg. shares including dilutive potential common
shares
Earnings per share, diluted
$
$
$
$
Anti-dilutive stock options excluded from diluted
EPS
Net income has not been allocated to unvested
restricted stock awards that are participating
securities because the amounts that
would be allocated are not material to net income
per share of common stock. Unvested restricted
stock awards that are
participating securities represent less than one percent
of all of the outstanding shares of common
stock for each of the periods
presented.
10.
LOSS CONTINGENCIES
Loss contingencies,
including claims
and legal actions
may arise in
the ordinary
course of
business. In
the opinion
of
management, none
of these
actions, either
individually or
in the aggregate,
is expected to
have a
material adverse
effect
on the Company’s Consolidated Financial Statements.
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements - Unaudited
28
USCB Financial Holdings, Inc.
Q3 2025 Form 10-Q
11.
RELATED PARTY
TRANSACTIONS
In the ordinary course of business, principal officers,
directors, and affiliates may engage in transactions
with the
Company.
Loan Purchases
During the nine months ended September 30, 2025,
the Bank purchased $
related parties. The Bank paid those entities net fees of
$
During the nine months ended September 30, 2024,
the Bank purchased $
deemed to be related parties. The Bank paid those entities
fees of $
Loan Originations
During the nine months ended September 30, 2025, the
Bank acted as the lead arranger in a $
loan extended to an entity deemed to be a related party.
As of September 30, 2025, the Bank held an outstanding
balance
of $
-basis point
commitment fee and will earn a
-basis point annual servicing fee. The other two financial
institutions participating in the
syndication were also deemed to be related parties. Although
originating loans to related parties is not part of the
Company’s standard policy,
this transaction was reviewed by the appropriate departments
in accordance with Company
procedures. Detailed analyses were presented to the Board of Directors
and the Audit and Risk Committee, and all
necessary approvals were obtained. Additional analysis
was conducted to determine that the transaction was executed
in
the ordinary course of business and on arm’s-length terms,
consistent with the requirements of Regulation O.
There were
December 31, 2024.
12.
SUBSEQUENT EVENTS
Dividends
On October
21, 2025,
the Company
announced that
its Board
of Directors
declared its
quarterly cash
dividend. The
quarterly dividend for
the fourth quarter
of 2025
was $
5, 2025, to stockholders of record as of the close of business
on November 14, 2025.
29
USCB Financial Holdings, Inc.
Q3 2025 Form 10-Q
Item 2.
Management's Discussion and Analysis of Financial Condition
and Results of Operations
The
following
discussion
and
analysis
is
designed
to
provide
a
better
understanding
of
the
consolidated
financial
condition and results of
operations of the
Company and the Bank,
its wholly owned subsidiary,
as of and for
the three and
the nine
months ended
September 30, 2025.
This discussion
and analysis
is best
read in
conjunction with
the unaudited
consolidated financial statements and related
notes included in this Quarterly
Report on Form 10-Q (“Form
10-Q”) and the
audited consolidated financial
statements and related
notes included in the
Annual Report on
Form 10-K (“2024
Form 10-
K”) filed with the Securities and Exchange Commission
(“SEC”) for the year ended December 31, 2024.
This discussion contains forward-looking statements that involve risks, uncertainties and assumptions that could cause
actual results to differ materially
from management's expectations. Factors that could cause
such differences are discussed
in the sections
entitled "Forward-Looking
Statements" and Item
1A “Risk Factors"
below
in Part II
hereof and in
the 2024
Form 10-K filed with the SEC which is available at the
SEC’s website www.sec.gov.
Throughout
this
document,
references
to
“we,”
“us,”
“our,”
and
“the
Company”
generally
refer
to
USCB
Financial
Holdings, Inc.
Forward-Looking Statements
This Form 10-Q
contains statements
that are not
historical in
nature are
intended to
be, and are
hereby identified
as,
forward-looking statements for purposes
of the safe
harbor provided by
Section 21E of
the Securities Exchange Act
of 1934,
as amended. The
words “may,” “will,” “anticipate,” “could,”
“should,” “would,” “believe,”
“contemplate,” “expect,” “aim,”
“plan,”
“estimate,” “continue,”
and “intend,”
as well
as other
similar words
and expressions
of the
future, are
intended to
identify
forward-looking
statements.
These
forward-looking
statements
include
statements
related
to
our
projected
growth,
anticipated future
financial performance,
and management’s
long-term performance
goals, as
well as
statements relating
to the anticipated
effects on results
of operations and
financial condition from
expected developments or
events, or business
and growth strategies, including anticipated internal
growth and potential 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 not
limited to:
•
operations;
•
•
for credit losses and deferred tax asset valuation allowance;
•
•
jurisdiction where we operate;
•
industry;
•
•
principles, policies,
practices or
guidelines, including
the on-going
effects of
the Current
Expected Credit
Losses
(“CECL”) standard;
•
risks
of geographic,
depositor,
and
industry concentrations,
including our
concentration
in
loans secured
by real
estate, in particular, commercial real
estate;
•
•
•
•
growth as well as growth through other means, such as
future acquisitions;
•
•
•
Administration loans;
•
•
and net interest margin;
•
30
USCB Financial Holdings, Inc.
Q3 2025 Form 10-Q
•
employee, or third-party fraud and security breaches; and
•
All
forward-looking
statements
are
necessarily
only
estimates
of
future
results,
and
there
can
be
no
assurance
that
actual results will
not differ
materially from expectations.
Therefore, you are
cautioned not to
place undue reliance
on any
forward-looking statements.
Further,
forward-looking statements
included in
this Form
10-Q are
made only
as of the
date
hereof, and we undertake
no obligation to update
or revise any forward-looking
statement to reflect events
or circumstances
after the date on which the statement is made or to reflect the occurrence of unanticipated events, unless required to do so
under the federal
securities laws. You should also review the
risk factors described in
the 2024 Form 10-K
and in the
reports
the Company has filed or will file with the SEC.
Overview
The Company
reported net
income of
$8.9 million
or $0.45
per diluted
share of
common stock
for the
three
months
ended
September
30,
2025
compared
to
$6.9
million
or
$0.35 per
diluted
share
of
common
stock
for
the
three
months
ended September 30,
2024.
For nine months
ended September 30,
2025, the Company
reported net income
of $24.7 million
or $1.23 per diluted
share of common stock
compared to $17.8 million
or $0.90 per diluted
share of common stock
for the
nine months ended September 30, 2024.
In evaluating our financial
performance, the Company
considers the level of
and trends in net
interest income, the
net
interest
margin,
the
cost
of
deposits
and
borrowings,
levels
and
composition
of
non-interest
income
and
non-interest
expense, performance ratios,
asset quality ratios, regulatory capital ratios, and any
significant event or transaction.
Unless otherwise
stated, all
period comparisons
in the
bullet points
below are
calculated
at or
for the
quarter ended
September 30,
2025
compared
to
at
or
for
the
quarter
ended
September 30,
2024
and
as
of
December
31,
2024
and
annualized where appropriate:
•
from $18.1 million for the quarter ended September
30, 2024.
•
for the three months ended September 30, 2024.
•
September 30,
2024 and an increase of $186.7 million or 9.7%
annualized from December 31, 2024.
•
an
increase
of
$199.6
million
or
10.3%
from
September
30,
2024
and
an
increase
of
$158.1
million
or
10.7%
annualized from December 31, 2024.
•
September 30,
2024 and an increase of $281.6 million or 17.3%
annualized from December 31, 2024.
•
the quarter ended September 30, 2024.
•
compared to 13.38% for quarter ended September 30, 2024.
•
•
•
respectively.
•
an increase of $0.74 or
9.1% annualized from $10.81 at December
31, 2024.
At September 30, 2025, tangible
book
value per common
share was
negatively affected by
($2.09) due to
an accumulated
comprehensive loss
of $37.8
million. At December
31, 2024, tangible
book value
per common
share was
negatively affected
by ($2.24)
due to
31
USCB Financial Holdings, Inc.
Q3 2025 Form 10-Q
an accumulated
comprehensive loss
of $44.5
million. See
“Reconciliation and
Management Explanation
for Non-
GAAP Financial Measures” included in this Form 10-Q for a reconciliation
of this non-GAAP financial measure.
•
institutional buyers pursuant to which the
Company sold and issued $40.0 million
in aggregate principal amount of
its 7.625%
fixed-to-floating rate
subordinated notes
due August 15,
2035 in
a private
placement transaction.
This
transaction was
conducted under
the provisions
of Regulation
D promulgated
under the
Securities Act 1933. The
subordinated notes were issued by
the Company to the
purchasers at a price equal
to 100% of their face
amount.
The majority of
the net proceeds
were used to
repurchase 2.0 million
shares of Class
A
common stock in
September
2025, from certain institutional shareholders through privately negotiated transactions, at a weighted average price
per share
of $17.19.
The aggregate
purchase
price for
these transactions
was
approximately
$34.4 million.
The
repurchases
were
supplemental
and
not
part
of
the
Company’s
two
previously
announced
stock
repurchase
programs.
Critical Accounting Policies and Estimates
The consolidated
financial statements
are prepared
based on
the application
of U.S.
Generally Accepted
Accounting
Practices (“GAAP”),
the most significant
of which are
described in Note
1 “Summary
of Significant Accounting
Policies” in
the Company’s 2024 Form
10-K and “Summary of Significant
Accounting Policies” in Part I
in this Form 10-Q . To
prepare
financial statements
in conformity
with US
GAAP,
management makes
estimates, assumptions,
and judgments
based on
available information. These estimates,
assumptions, and judgments affect
the amounts reported in
the financial statements
and accompanying notes. These estimates, assumptions,
and judgments are based on information available as of the date
of the financial statements and,
as this information changes, actual results
could differ from the estimates, assumptions and
judgments reflected
in the
financial statements.
In particular,
management
has identified
accounting
policies that,
due to
the
estimates,
assumptions
and
judgments
inherent
in
those
policies,
are
critical
to
an
understanding
of
our
financial
statements. Management has
presented the application
of these policies to
the Audit and
Risk Committee of
our Board of
Directors.
Non-GAAP Financial Measures
This
Form
10-Q
includes
financial
information
determined
by
methods
other
than
in
accordance
with
GAAP.
This
financial
information
includes
certain
operating
performance
measures.
Management
has
included
these
non-GAAP
measures because it believes these measures
may provide useful supplemental information
for evaluating the Company’s
underlying performance
trends. Further,
management
uses these
measures in
managing and
evaluating
the Company’s
business
and
intends
to
refer
to
them
in
discussions
about
our
operations
and
performance.
Operating
performance
measures should be
viewed in addition to,
and not as
an alternative to
or substitute for, measures determined in
accordance
with GAAP,
and are
not necessarily
comparable to
non-GAAP measures
that may
be presented
by other
companies. To
the extent applicable,
reconciliations of
these non-GAAP
measures to the
most directly comparable
GAAP measures
can
be found
in the
section “Reconciliation
and Management
Explanation of
Non-GAAP Financial
Measures” included
in this
Form 10-Q.
Segment Reporting
Management monitors the revenue streams for all its various
products and services. The identifiable segments are not
material
and
operations
are
managed
and
financial
performance
is
evaluated
on
an
overall
Company-wide
basis.
Accordingly, all
the financial service
operations are
considered by management
to be
aggregated in one
reportable operating
segment.
32
USCB Financial Holdings, Inc.
Q3 2025 Form 10-Q
Results of Operations
General
The following tables present selected
balance sheet, income statement, and
profitability ratios for the dates
and periods
indicated (in thousands, except ratios):
September 30, 2025
December 31, 2024
Consolidated Balance Sheets:
Total
assets
$
2,767,945
$
2,581,216
Total
loans
(1)
$
2,130,966
$
1,972,848
Total
deposits
$
2,455,614
$
2,174,004
Total
stockholders' equity
$
209,095
$
215,388
(1)
Loan amounts include deferred fees/costs.
Three Months Ended
September 30,
Nine Months Ended
September 30,
2025
2024
2025
2024
Consolidated Statements of Operations:
Net interest income before provision for credit losses
$
21,274
$
18,109
$
61,423
$
50,578
Total
non-interest income
$
3,684
$
3,438
$
10,770
$
9,113
Total
non-interest expense
$
13,048
$
11,454
$
37,734
$
34,188
Net income
$
8,939
$
6,949
$
24,737
$
17,770
Profitability:
Efficiency ratio
52.28%
53.16%
52.27%
57.27%
Net interest margin
3.14%
3.03%
3.17%
2.87%
The Company’s
results
of
operations
depend
substantially
on
the
levels
of
our
net
interest
income
and
non-interest
income. Other factors contributing
to the results of
operations include our provision for
credit losses, the level
of non-interest
expense, and the provision for income taxes.
Three months ended September 30, 2025 compared to the
three months ended September 30, 2024.
Net income increased $2.0 million to $8.9
million for the three months ended September
30, 2025 from $6.9 million for
the same period in
2024. The $2.0 million
or 28.6% increase
in net income was
primarily driven by
an improvement in
net
interest margin due to reduction in rates paid on interest-bearing liabilitie
s
between periods and a decrease in provision for
credit losses for the third quarter ended September 30, 2025.
Nine months ended September 30, 2025 compared to
the nine months ended September 30, 2024
Net income
increased $7.0
million to
$24.7 million
for the
nine months
ended September 30,
2025
from $17.8
million
for the same period in 2024. The $7.0
million or 39.2% increase in the net income
was primarily driven by an improvement
in net interest margin due to reduction in rates paid on interest-bearing liabilities between periods. However, the increase in
net interest
income
was
partially
offset
by
an
increase
in non-interest
expense
between
periods.
Additionally,
increased
activity
in
fee
generating
transactions
(gain
on
sale
of
SBA
7a
loans,
prepayment
penalties,
title
insurance
income)
contributed to the increase between periods.
Net Interest Income
Net interest income
is the difference
between interest
earned on interest-earning
assets and interest
paid on interest-
bearing liabilities
and is
the primary
driver of
core earnings.
Interest income
is generated
from interest
and dividends
on
interest-earning
assets,
including
loans,
investment
securities
and
other
short-term
investments.
Interest
expense
is
incurred
from
interest
paid
on
interest-bearing
liabilities,
including
interest-bearing
deposits,
FHLB
advances
and
other
borrowings.
To evaluate net
interest income, we
measure and monitor
(i) yields on
loans and other
interest-earning assets, (ii)
the
costs of deposits
and other funding
sources, (iii) net
interest spread, and
(iv) net interest margin.
Net interest spread is
equal
to the difference between yields earned on interest-earning assets and rates paid on interest-bearing liabilities. Net interest
margin is
equal to
the annualized
net interest
income
divided by
average interest
-earning assets.
Because
non-interest-
33
USCB Financial Holdings, Inc.
Q3 2025 Form 10-Q
bearing sources of funds, such as non-interest-bearing deposits
and stockholders’ equity, also fund
interest-earning assets,
net interest margin includes the indirect benefit of these
non-interest-bearing funding sources.
Changes
in
market
interest
rates
and
interest
rates
we
earn
on
interest-earning
assets
or
pay
on
interest-bearing
liabilities, as well
as the volume
and types of
interest-earning assets and interest-bearing
and non-interest-bearing liabilities,
are usually the
largest drivers
of periodic changes
in net interest
spread, net interest
margin and net
interest income.
Our
asset liability committee
(“ALCO”) has
in place asset-liability
management techniques
to manage major
factors that
affect
net interest income and net interest margin.
34
USCB Financial Holdings, Inc.
Q3 2025 Form 10-Q
The following
table contains
information related
to average
balances, average
yields earned
on assets,
and average
costs of liabilities for the periods indicated (dollars in
thousands):
Three Months Ended September 30,
2025
2024
Average
(1)
Balance
Interest
Yield/Rate
(2)
Average
(1)
Balance
Interest
Yield/Rate
(2)
Assets
Interest-earning assets:
Loans
(3)
$
2,099,043
$
32,866
6.21%
$
1,878,230
$
29,819
6.32%
Investment securities
(4)
461,303
3,522
3.03%
419,315
2,754
2.61%
Other interest-earnings assets
130,740
1,332
4.04%
80,378
989
4.89%
Total interest-earning assets
2,691,086
37,720
5.56%
2,377,923
33,562
5.61%
Non-interest-earning assets
107,029
107,511
Total assets
$
2,798,115
$
2,485,434
Liabilities and stockholders' equity
Interest-bearing liabilities:
Interest-bearing demand deposits
$
47,338
286
2.40%
$
57,925
411
2.82%
Saving and money market deposits
1,319,862
10,343
3.11%
1,084,562
10,064
3.69%
Time deposits
520,345
5,036
3.84%
325,580
3,391
4.14%
Total interest-bearing deposits
1,887,545
15,665
3.29%
1,468,067
13,866
3.76%
FHLB advances and other borrowings
40,065
377
3.73%
156,043
1,587
4.05%
Subordinated notes
26,029
404
6.16%
-
-
- %
Total interest-bearing liabilities
1,953,639
16,446
3.34%
1,624,110
15,453
3.79%
Non-interest-bearing demand deposits
569,522
609,456
Other non-interest-bearing liabilities
49,638
45,227
Total liabilities
2,572,799
2,278,793
Stockholders' equity
225,316
206,641
Total liabilities and stockholders' equity
$
2,798,115
$
2,485,434
Net interest income
$
21,274
$
18,109
Net interest spread
(5)
2.22%
1.82%
Net interest margin
(6)
3.14%
3.03%
(1)
Average balances - Daily average balances are used
to calculate yields/rates.
(2)
Annualized.
(3)
Average loan balances include
deferred fees/costs and non-accrual loans.
Interest income on loans includes accretion
of deferred loan fees, net of
deferred loan costs.
(4)
At fair value except for securities held to maturity. This amount includes
FHLB stock.
(5)
Net interest spread is the weighted average
yield on total interest-earning assets minus the weighted
average rate on total interest-bearing liabilities.
(6)
Net interest margin is the ratio of net interest
income to average total interest-earning assets.
35
USCB Financial Holdings, Inc.
Q3 2025 Form 10-Q
Nine Months Ended September 30,
2025
2024
Average
Balance
(1)
Interest
Yield/Rate
(2)
Average
Balance
(1)
Interest
Yield/Rate
(2)
Assets
Interest-earning assets:
Loans
(3)
$
2,048,192
$
95,057
6.21
%
$
1,829,593
$
84,479
6.17
%
Investment securities
(4)
449,376
9,978
2.97
%
426,594
8,634
2.70
%
Other interest-earnings assets
90,169
2,817
4.18
%
101,919
3,953
5.18
%
Total interest-earning assets
2,587,737
107,852
5.57
%
2,358,106
97,066
5.50
%
Non-interest earning assets
106,933
108,902
Total assets
$
2,694,670
$
2,467,008
$
Liabilities and stockholders' equity
Interest-bearing liabilities:
Interest-bearing demand deposits
$
49,191
909
2.47
%
$
55,887
$
1,171
2.80
%
Saving and money market deposits
1,243,911
29,088
3.13
%
1,094,433
30,529
3.73
%
Time deposits
457,847
13,297
3.88
%
321,470
9,907
4.12
%
Total interest-bearing deposits
1,750,949
43,294
3.31
%
1,471,790
41,607
3.78
%
FHLB advances
98,151
2,731
3.72
%
160,726
4,881
4.06
%
Subordinated notes
8,771
404
6.16
%
-
-
-
Total interest-bearing liabilities
1,857,871
46,429
3.34
%
1,632,516
46,488
3.80
%
Non-interest bearing demand deposits
570,918
598,294
Other non-interest-bearing liabilities
41,422
37,045
Total liabilities
2,470,211
2,267,855
Stockholders' equity
224,459
199,153
Total liabilities and stockholders' equity
$
2,694,670
$
2,467,008
Net interest income
$
61,423
$
50,578
Net interest spread
(5)
2.23
%
1.70
%
Net interest margin
(6)
3.17
%
2.87
%
(1)
Average balances - Daily average balances are used
to calculate yields/rates.
(2)
Annualized.
(3)
Average loan balances include
deferred fees/costs and non-accrual loans.
Interest income on loans includes accretion
of deferred loan fees, net of
deferred loan costs.
(4)
At fair value except for securities held to maturity. This amount includes
FHLB stock.
(5)
Net interest spread is the weighted average
yield on total interest-earning assets minus the weighted
average rate on total interest-bearing
liabilities.
(6)
Net interest margin is the ratio of net interest
income to average total interest-earning assets.
Three months ended September 30, 2025 compared to the
three months ended September 30, 2024.
Net interest income before the provision
for credit losses was $21.3
million for the three months
ended September 30,
2025 as compared to $18.1 million for the same period 2024. The increase of $3.2 million or 17.5% was primarily driven by
higher
income
from
an
expanded
loan
portfolio,
and
a
reduction
in
rates
paid
on
interest-bearing
liabilities
between
the
periods.
Net interest margin (“NIM”) was 3.14%
for the three months ended September 30, 2025 and 3.03%
for the same period
in 2024.
The
11-basis-point
increase primarily
reflects
a reduction
in the
weighted
average rate
paid on
interest-bearing
liabilities
that outweighed
the
decline in
the yield
on
interest-bearing
assets. Additionally,
the
balance of
interest-bearing
assets grew more rapidly than the balance of interest-bearing
liabilities.
Nine months ended September 30, 2025 compared to the nine months
ended September 30, 2024
Net interest income
before the provision
for credit losses
was $61.4 million
for the nine
months ended September
30,
2025, an increase
of $10.8 million
or 21.4%, from
$50.6 million for
the same period
in 2024. This
growth was primarily
driven
by higher income
from an expanded
loan portfolio
and a reduction
in the weighted
average rates
paid on interest
-bearing
liabilities between periods.
The NIM was 3.17% for the nine months
ended September 30, 2025 and 2.87% for
the same period in 2024. The NIM
expansion of 30 basis points reflects both
higher loan yields and growth in the loan average
balance, along with a decrease
in interest rate paid on interest-bearing liabilities.
36
USCB Financial Holdings, Inc.
Q3 2025 Form 10-Q
Provision for Credit Losses
The provision for credit losses represents a charge to
earnings necessary to maintain an allowance for
credit losses at
a level that,
in management's evaluation,
is adequate to
provide coverage for
all expected credit
losses. The provision for
credit losses is impacted by variations in the size and composition of our loan and debt securities portfolio, recent historical
and
projected
future
economic
conditions,
our
internal
assessment
of
the
credit
quality
of
the
loan
and
debt
securities
portfolios and net charge-offs.
Three months ended September 30, 2025 compared to the
three months ended September 30, 2024.
The provision
for credit
loss was
$105 thousand
for the
three months
ended September
30, 2025
compared to
$931
thousand for
the same
period in
2024. The
significant decrease
in provision
expense was
primarily attributable
to slower
loan portfolio growth during the third quarter of 2025.
Nine months ended September 30, 2025 compared to the nine months
ended September 30, 2024
The provision for credit loss was
$1.8 million for the nine months
ended September 30, 2025 compared
to $2.1 million
for
the
same
period
in
2024.
The
decrease
in
the
provision
for
credit
losses
was
due
to
release
of
reserves
related
to
individually evaluated loans, following two charge-offs
recorded during the nine months ended September
30, 2025.
Non-Interest Income
Our services and products generate service charges and fees, mainly from our depository
accounts. We also generate
income from
gain on
sale of
loans though
the SBA
7a loan
program and
the monetization
fees earned
through our
loan
swap program.
In addition,
we own
and are
beneficiaries of
the life
insurance policies
on some
of our
employees,
which
policies generate income from the increase in the cash
surrender values.
The following table presents the components of non-interest
income for the dates indicated (in thousands):
Three Months Ended September 30,
Nine Months Ended September 30,
2025
2024
2025
2024
Service fees
$
2,661
$
2,544
$
7,394
$
6,172
(Loss) gain on sale of securities available for sale, net
(28)
-
(28)
14
Gain on sale of loans held for sale, net
128
109
804
593
Other non-interest income
923
785
2,600
2,334
Total
non-interest income
$
3,684
$
3,438
$
10,770
$
9,113
Three months ended September 30, 2025 compared to the
three months ended September 30, 2024.
Non-interest income for the
three months ended September
30, 2025 increased $246
thousand or 7.2%, compared
to
the
same
period
in
2024.
This
increase
was
primarily
driven
by
growth
in
prepayment
penalties
and
wire
transfer
fees
reported
under
the
service
fees category
and
income
from bank
owned
life
insurance
reported
under
other
non-interest
income.
Nine months ended September 30, 2025 compared to the nine months
ended September 30, 2024
Non-interest income for the nine months ended September
30, 2025 increased $1.7 million or 18.2%, compared to
the
same
period
in
2024. This
increase
was
primarily
driven
by
growth
in
prepayment
penalties
and
title
insurance
income
reported under
the service
fees category
combined with
an increase
in the
gain on
sale of
loans as
well as
income from
bank owned life insurance reported under other non-interest
income.
37
USCB Financial Holdings, Inc.
Q3 2025 Form 10-Q
Non-Interest Expense
The following table presents the components of non-interest
expense for the dates indicated (in thousands):
Three Months Ended September 30,
Nine Months Ended September 30,
2025
2024
2025
2024
Salaries and employee benefits
$
7,909
$
7,200
$
23,499
$
20,863
Occupancy
1,382
1,341
4,003
3,921
Regulatory assessment and fees
377
452
1,194
1,361
Consulting and legal fees
585
161
1,041
1,016
Network and information technology services
656
513
1,725
1,499
Other operating
2,139
1,787
6,272
5,528
Total
non-interest expense
$
13,048
$
11,454
$
37,734
$
34,188
Three months ended September 30, 2025 compared to the
three months ended September 30, 2024.
Non-interest expense for the three
months ended September 30, 2025,
increased $1.6 million, or 13.9%,
compared to
the same
period in
2024. The
increase was
primarily
driven by
a $709
thousand
rise in
salaries and
employee
benefits,
reflecting merit increases,
new hires and
higher stock-based compensation
expense. Consulting
and legal fees
increased
$424 thousand due to
the administration expense
related to the interest
rate collars and the
third quarter of 2024
included
a legal
expense
reimbursement,
which
reduced
expenses
in that
period
and contributed
to
the year-over-year
increase.
Additionally,
other operating
expense increased
by $352
thousand,
primarily due
to the
absence of
a reimbursement
for
force-placed insurance that was
received in the third quarter
of 2024. These prior-period reimbursements
had the effect of
lowering reported expenses, making the current period’s
expenses appear higher by comparison.
Nine months ended September 30, 2025 compared to the nine months
ended September 30, 2024
Non-interest expense for the nine
months ended September 30, 2025 increased $3.5 million
or 10.4%, compared to the
same period
in 2024.
The increase
was primarily
driven by
an increase
of $2.6
million in
salaries and
employee benefits
due to an
increase of $1.0
million in merit
increases and new
full-time employee
salaries, and
$1.5 million in
stock-based
compensation expenses.
Additionally, other operating
expenses increased $744
thousand due to
increase of $276
thousand
due
to
item
processing
and
internet
banking
fees,
$160
thousand
in
board
of
directors’
expenses,
$147
thousand
in
shareholders expense and $103 thousand in forced placed insurance.
Provision for Income Tax
Fluctuations in the effective tax rate reflect the effect of the differences in the inclusion or deductibility of certain income
and expenses for
income tax purposes.
Therefore, future
decisions on the
investments we choose
will affect our
effective
tax rate.
The cash
surrender value
of bank-owned
life insurance
policies covering
key employees,
purchasing municipal
bonds, and overall levels of taxable income will be important
elements in determining our effective tax rate.
Three months ended September 30, 2025 compared to the
three months ended September 30, 2024.
Income tax expense for the
three months ended September
30, 2025 was $2.9
million as compared to
$2.2 million for
the same period
in 2024 and
reflected the increased
level of pre-tax
net income experienced
during the 2025
period. The
effective tax rate for the three months ended September 30, 2025 was 24.28% compared to 24.15% for the same period
in
2024.
Nine months ended September 30, 2025 compared to the nine months
ended September 30, 2024
Income tax expense
for the
nine months ended
September 30, 2025
was $7.9 million
as compared to
$5.6 million for
the same period in 2024 and
reflected the substantially increased
level of pre-tax net income
experienced during the 2025
period. The effective
tax rate for
the nine months
ended September 30, 2025
was 24.22% compared to
23.98% for the
same
period in 2024.
For
a
further
discussion
of
income
taxes,
see
Note
4
“Income
Taxes”
to
the
unaudited
Consolidated
Financial
Statements in Item 1 of Part I of this Form 10-Q.
38
USCB Financial Holdings, Inc.
Q3 2025 Form 10-Q
Analysis of Financial Condition
Total
assets at
September 30, 2025
were $2.77
billion, an
increase of
$186.7 million,
or 9.7%
annualized, over
total
assets of
$2.58 billion
at December 31,
2024. Total
loans, net
of deferred
fees/costs, increased
$158.1 million,
or 10.7%
annualized,
to
$2.13
billion
at
September 30,
2025
compared
to
$1.97
billion
at
December 31,
2024.
Total
deposits
increased
by
$281.6
million,
or
17.3%
annualized,
to
$2.46
billion
at
September 30,
2025
compared
to
$2.17
billion
December 31, 2024.
Investment Securities
The investment portfolio
is used and
managed to provide
liquidity through cash
flows, marketability
and, if necessary,
collateral for
borrowings. The
investment portfolio
is also
used as
a tool
to manage
interest rate
risk and
the Company’s
capital
market
risk
exposure.
The
philosophy
of
the
portfolio
is
to
maximize
the
Company’s
profitability
taking
into
consideration the
Company’s risk
appetite and
tolerance, manage
it’s asset
composition and
diversification, and
maintain
adequate risk-based capital ratios.
The investment portfolio
is managed in accordance
with the Board approved
Asset and Liability
Management (“ALM”)
policy,
which
includes
investment
guidelines.
Such
policy
is
reviewed
at
least
annually
or
more
frequently
if
deemed
necessary,
depending on
market conditions
and/or unexpected
events. The investment
portfolio composition
is subject to
change depending on the funding and liquidity needs of the Company, and the interest risk management objective directed
by
the
Asset-Liability
Committee
(“ALCO”).
The
portfolio
of
investments
also
can
be
used
to
modify
the
duration
of
the
balance
sheet.
The
allocation
of
cash
into
securities
takes
into
consideration
anticipated
future
cash
flows
(uses
and
sources) and all available sources of credit.
Our investment portfolio consists primarily of
securities issued by the U.S.
Government and U.S. Government Agencies
and
mortgage-backed
securities,
collateralized
mortgage
obligations,
corporate
bonds,
municipal
securities,
other
debt
securities
all
with
varying
contractual
maturities
and
coupons.
Due
to
the
optionality
embedded
in
these
securities,
the
contractual maturities do not necessarily represent the
expected life of the portfolio. Some of these securities
will be called
or paid down
prior to maturity
depending on capital market
conditions and expectations. The
investment portfolio is
regularly
reviewed by the Chief Financial Officer,
Treasurer,
and the ALCO of the Company to ensure an appropriate risk and return
profile as well as for adherence to the Company’s
investment policy.
When evaluating AFS
debt securities under
ASC Topic
326, the Company
evaluates
whether the decline
in fair value
is attributable
to credit losses
or other
factors like interest
rate risk,
using both quantitative
and qualitative
analyses, including
company performance analysis, review of credit ratings, vintage bonds, remaining payment terms, prepayment speeds and
analysis
of
macro-economic
conditions.
As
a
result
of
this
evaluation,
the
Company
concluded
that
no
allowance
was
required on AFS securities as of September 30, 2025.
At
quarter
end,
HTM
securities
included
$147.3
million
of
U.S.
Government
and
U.S.
Government
Agencies
issued
bonds and
mortgage-backed
securities.
Because
of the
explicit and/or
implicit
guarantee
on these
bonds,
the
Company
holds no reserves
on these holdings.
The remaining portion
of the HTM
portfolio is made
up of $9.1
million in investment
grade corporate
bonds. For
the portion
of the
HTM exposed
to non-government credit
risk, the
Company utilized
the PD/LGD
methodology to
estimate a
$5 thousand
ACL as
of September 30,
2025. The
book value
for debt
securities
classified as
HTM represents amortized cost less ACL.
Aggregate
AFS
and
HTM
investment
securities
increased
$55.6 million,
or
17.5%
annualized,
to
$480.5 million
at
September 30,
2025 from
$424.9 million
at
December 31,
2024.
Investment
securities
increased
due
to
reinvestment
of
payments received and investment of excess in cash balances into high credit quality
investment securities to increase the
Company’s profitability and modify the Company
’s balance sheet duration according to the ALM
policy.
As of
September 30,
2025,
investment securities
with a
market value
of $49.7 million
were pledged
to secure
public
deposits. The investment portfolio does not contain any
tax-exempt securities.
39
USCB Financial Holdings, Inc.
Q3 2025 Form 10-Q
The following table
presents the amortized
cost and fair
value of investment
securities for
the dates indicated
(dollars
in thousands):
September 30, 2025
December 31, 2024
Available-for-sale:
Amortized
Cost
Fair Value
Amortized
Cost
Fair Value
U.S. Government Agency
$
13,143
$
11,965
$
14,279
$
12,625
Collateralized mortgage obligations
100,830
81,695
101,808
78,905
Mortgage-backed securities - residential
60,915
51,318
58,995
46,933
Mortgage-backed securities - commercial
145,991
138,517
86,604
78,739
Municipal securities
22,838
18,915
24,925
19,311
Bank subordinated debt securities
22,046
21,769
24,314
23,708
$
365,763
$
324,179
$
310,925
$
260,221
Held-to-maturity:
U.S. Government Agency
$
41,500
$
38,046
$
42,538
$
37,444
Collateralized mortgage obligations
52,766
47,376
56,987
49,259
Mortgage-backed securities - residential
37,880
34,915
40,681
36,121
Mortgage-backed securities - commercial
15,135
14,002
15,272
13,887
Corporate bonds
9,089
8,960
9,222
8,829
$
156,370
$
143,299
$
164,700
$
145,540
Allowance for credit losses - securities held-to-maturity
(5)
(6)
Securities held-to maturity, net of allowance for credit losses
$
156,365
$
164,694
The following
table shows
the weighted
average yields,
categorized by
contractual maturity,
for investment
securities
as of September 30, 2025 (in thousands,
except yields):
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
$
-
-
$
-
-
$
2,390
2.90%
$
10,753
2.62%
$
13,143
2.68%
Collateralized mortgage obligations
-
-
-
-
-
-
100,830
1.46%
100,830
1.46%
MBS - residential
-
-
-
-
-
-
60,915
1.86%
60,915
1.86%
MBS - commercial
-
-
-
-
-
-
145,991
3.67%
145,991
3.67%
Municipal securities
-
-
-
-
22,838
1.45%
-
-
22,838
1.45%
Bank subordinated debt securities
-
-
1,983
7.97%
20,063
5.26%
-
-
22,046
5.52%
$
-
-
$
1,983
7.97%
$
45,291
3.21%
$
318,489
2.59%
$
365,763
2.70%
Held-to-maturity:
U.S. Government Agency
$
2,998
0.64%
$
13,873
1.22%
$
10,885
1.59%
$
13,744
2.07%
$
41,500
1.56%
Collateralized mortgage obligations
-
-
-
-
-
-
52,766
1.64%
52,766
1.64%
MBS - residential
-
-
4,597
1.85%
5,052
1.62%
28,231
2.33%
37,880
2.18%
MBS - commercial
-
-
3,046
1.63%
-
-
12,089
2.57%
15,135
2.38%
Corporate bonds
9,089
2.82%
-
-
-
-
-
-
9,089
2.82%
$
12,087
2.28%
$
21,516
1.42%
$
15,937
1.60%
$
106,830
1.98%
$
156,370
1.89%
Loans
Loans are the
largest category of
interest-earning assets
on the unaudited
Consolidated Balance
Sheets, and usually
provide higher yields than the
remainder of the interest
-earning assets. Higher yields
typically carry greater
inherent credit
and liquidity risks in comparison to lower yield assets. The Company manages and mitigates such risks in accordance with
the credit and ALM policies, risk tolerance and balance
sheet composition.
40
USCB Financial Holdings, Inc.
Q3 2025 Form 10-Q
The following table shows the loan portfolio composition
as of the dates indicated (in thousands):
September 30, 2025
December 31, 2024
Total
Percent of
Total
Total
Percent of
Total
Residential real estate
$
316,557
14.9
%
$
289,961
14.8
%
Commercial real estate
1,226,121
57.7
%
1,136,417
57.8
%
Commercial and industrial
269,430
12.7
%
258,311
13.1
%
Correspondent banks
104,598
4.9
%
82,438
4.2
%
Consumer and other
207,939
9.8
%
198,091
10.1
%
Total
gross loans
2,124,645
100.0
%
1,965,218
100.0
%
Plus: Deferred fees/costs
6,321
7,630
Total
loans net of deferred fees/costs
2,130,966
1,972,848
Less: Allowance for credit losses
24,964
24,070
Total
net loans
$
2,106,002
$
1,948,778
Total
loans,
net
of
deferred
fees/costs,
increased
by
$158.1 million,
or
10.7%
annualized
to
$2.13
billion,
at
September 30, 2025 compared
to December 31, 2024.
The commercial real
estate loan segment
had the most
significant
balance increase compared to December 31, 2024.
Our
loan
portfolio
continues
to
grow,
with
commercial
real
estate
lending
as
the
primary
focus
which
represented
approximately 57.7%
of the
total gross
loan portfolio
as of
September 30, 2025.
Our loan
growth strategy
since inception
has been reflective of the market in which we operate and
of our strategic plan as approved by the Board.
The growth experienced in recent
years is primarily due to
implementation of our relationship-based banking model
and
the success of our relationship managers in competing for new business in a highly competitive metropolitan area. Many of
our
larger
loan
clients
have
long-term
relationships
with
members
of
our
senior
management
team
or
our
relationship
managers that date back to former institutions.
From a
liquidity perspective,
our loan
portfolio provides
us with
additional
liquidity due
to repayments
or unexpected
prepayments.
The
following
table
shows
maturities
and
sensitivity
to
interest
rate
changes
of
the
loan
portfolio
at
September 30, 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
$
15,515
$
51,018
$
68,095
$
181,929
$
316,557
Commercial real estate
83,082
463,653
673,810
5,576
1,226,121
Commercial and industrial
10,968
109,875
104,382
44,205
269,430
Correspondent banks
104,598
-
-
-
104,598
Consumer and other
2,519
1,307
22,547
181,566
207,939
Total
gross loans
$
216,682
$
625,853
$
868,834
$
413,276
$
2,124,645
Interest rate sensitivity:
Fixed interest rates
$
170,510
$
180,720
$
146,407
$
315,912
$
813,549
Floating or adjustable rates
46,172
445,133
722,427
97,364
1,311,096
Total
gross loans
$
216,682
$
625,853
$
868,834
$
413,276
$
2,124,645
The information
presented
in the
table above
is based
upon the
contractual
maturities of
the individual
loans, which
may be
subject to
renewal at
their contractual
maturity.
Renewals will
depend on
approval by
our credit
department and
balance sheet
composition at the
time of
the analysis,
as well
as any
modification of terms
at the
loan’s maturity. Additionally,
maturity
concentrations,
loan
duration,
prepayment
speeds
and
other
interest
rate
sensitivity
measures
are
discussed,
reviewed, and analyzed by the ALCO. Decisions on term
/rate modifications are discussed as well.
As of
September 30, 2025,
approximately 61.7%
of the
loan portfolio
has adjustable/variable
rates and
38.3% of
the
loan portfolio has fixed rates. The adjustable/variable rate loans re-price to different benchmarks and tenors and
in different
periods of time.
By contractual characteristics,
there are no
material concentrations
on anniversary repricing.
Additionally,
it is important to
note that most
of our loans have
interest rate floors.
This embedded option
protects the Company from
a
decrease in interest rates below the floor and positions
us to gain in the scenario of higher interest rates.
41
USCB Financial Holdings, Inc.
Q3 2025 Form 10-Q
Asset Quality
Our asset quality grading
analysis estimates the capability of
the borrower to repay
the contractual obligation of
the loan
agreement as scheduled or at all. The Company’s internal credit risk grading system is based on experiences with similarly
graded loans. Internal credit
risk grades are reviewed
at least once a
year, and
more frequently as
needed. Internal credit
risk ratings
may change
based on
management’s
assessment of
the results
from the
annual review,
portfolio monitoring,
and other developments observed with borrowers.
The internal credit risk grades used by the Company to
assess the credit worthiness of a loan are shown below:
Pass
– Loans indicate different levels of satisfactory
financial condition and performance.
Special Mention
close attention. If left uncorrected, these potential weaknesses
may result in deterioration of the repayment
prospects for the loan or of the institution’s
credit position at some future date.
Substandard
– Loans classified as substandard are inadequately protected
by the current net worth and paying
capacity of the obligator or of the collateral pledged, if
any. Loans so classified
have a well-defined weakness or
weaknesses that jeopardize the liquidation of the debt.
They are characterized by the distinct possibility that the
institution will sustain some loss if the deficiencies are
not corrected.
Doubtful
the added characteristic that the weaknesses make collection
or liquidation in full on the basis of currently existing
facts, conditions, and values, highly questionable and improbable.
Loss
– Loans classified as loss are considered uncollectible.
Loan credit exposures by internally assigned grades are
as follows for the dates indicated (in thousands):
September 30, 2025
Pass
Special Mention
Substandard
Doubtful
Total
Residential real estate
$
313,945
$
2,060
$
552
$
-
$
316,557
Commercial real estate
1,212,052
11,656
2,413
-
1,226,121
Commercial and industrial
266,801
936
1,693
-
269,430
Correspondent banks
104,598
-
-
-
104,598
Consumer and other
207,939
-
-
-
207,939
$
2,105,335
$
14,652
$
4,658
$
-
$
2,124,645
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
42
USCB Financial Holdings, Inc.
Q3 2025 Form 10-Q
Non-Performing Assets
The following table presents non-performing assets as
of the dates shown (in thousands,
except ratios):
September 30, 2025
December 31, 2024
Non-accrual loans
$
1,310
$
2,707
Loans past due over 90 days and still accruing
-
-
Total
non-performing loans
$
1,310
$
2,707
Other real estate owned
-
-
Total
non-performing assets
$
1,310
$
2,707
Asset quality ratios:
Allowance for credit losses to total loans
1.17%
1.22%
Allowance for credit losses to non-performing loans
1,906%
889%
Non-performing loans to total loans
0.06%
0.14%
Non-performing
assets
include
all
loans
categorized
as
non-accrual,
other
real
estate
owned
(“OREO”)
and
other
repossessed assets. Problem loans for
which the collection or
liquidation in full is
reasonably uncertain are placed on
a non-
accrual status. This determination is based on current existing facts concerning collateral values and the paying
capacity of
the
borrower.
When
the
collection
of
the
full
contractual
balance
is
unlikely,
the
loan
is
placed
on
non-accrual
to
avoid
overstating the Company’s income for a loan
with increased credit risk.
If the
principal or
interest on
a commercial
loan becomes
due and
unpaid for
90 days
or more,
the loan
is placed
on
non-accrual status as of
the date it becomes
90 days past due
and remains in non-accrual
status until it meets
the criteria
for restoration to accrual status.
Residential loans, on
the other hand, are placed
on non-accrual status when
the principal
or interest
becomes due
and unpaid
for 120
days or
more and remains
in non-accrual
status until
it meets
the criteria
for
restoration
to
accrual
status.
Restoring
a
loan
to
accrual
status
is
possible
when
the
borrower
resumes
payment
of
all
principal and interest payments for a period of six consecutive months and the Company
has a documented expectation of
repayment of the remaining contractual principal and interest or the loan becomes secured and in the process of collection.
The
Company
may
grant
a
loan
concession
to
a
borrower
experiencing
financial
difficulties.
This
determination
is
performed
during
the
annual
review
process
or
whenever
problems
surface
regarding
the
borrower’s
ability
to
repay
in
accordance with
the original
terms of
the loan
or line
of credit.
The concessions
are given
to the
debtor in
various forms,
including interest rate reductions, principal
forgiveness, extension of maturity date,
waiver or deferral of
payments and other
concessions intended to minimize potential losses.
For further discussion of
non-performing loans and
borrowers experiencing financial
difficulties, see
Note 3 “Loans” to
the unaudited Consolidated Financial Statements in Item
1 of Part 1 of this Form 10-Q.
Allowance for Credit Losses
The
ACL
on
loans
represents
an
amount
that,
in
management's
evaluation,
is
adequate
to
provide
coverage
for
all
expected future credit losses on outstanding loans. Additionally,
qualitative adjustments are made to the ACL when, based
on
management’s
judgment,
there
are
factors
impacting
the
allowance
estimate
not
considered
by
the
quantitative
calculations. See Note 3 “Loans” in Item 1 of Part 1 of
this Form 10-Q for more information on the ACL.
43
USCB Financial Holdings, Inc.
Q3 2025 Form 10-Q
The following
table presents
ACL on
loans and
net charge-offs
to average
loans by
type for
the periods
indicated (in
thousands):
Residential
Real
Estate
Commercial
Real Estate
Commercial
and
Industrial
Correspondent
Banks
Consumer
and Other
Total
Three Months Ended September 30,
2025
Beginning balance
$
5,477
$
9,491
$
4,508
$
874
$
4,583
$
24,933
Provision for credit losses
(1)
544
(102)
(118)
(45)
(252)
27
Recoveries
5
-
6
-
-
11
Charge-offs
-
-
-
-
(7)
(7)
Ending Balance
$
6,026
$
9,389
$
4,396
$
829
$
4,324
$
24,964
Average loans
$
316,701
$
1,184,145
$
269,204
$
103,210
$
225,783
$
2,099,043
Net charge-offs (recoveries) to average
loans
(2)
(0.01)%
-
(0.01)%
-
0.01%
(0.00)%
Nine Months Ended September 30,
2025
Beginning balance
$
5,121
$
8,788
$
4,633
$
654
$
4,874
$
24,070
Provision for credit losses
(3)
888
601
(249)
175
179
1,594
Recoveries
17
-
12
-
1
30
Charge-offs
-
-
-
-
(730)
(730)
Ending Balance
$
6,026
$
9,389
$
4,396
$
829
$
4,324
$
24,964
Average loans
$
304,401
$
1,170,204
$
264,718
$
95,724
$
213,145
$
2,048,192
Net charge-offs (recoveries) to average
loans
(2)
(0.01)%
-
(0.00)%
-
0.69%
0.07%
(1) Provision for credit losses excludes a $80 thousand provision due to unfunded commitments included in accrued interest and other
liabilities and a $2 thousand release related to investment securities held to maturity.
(2) Annualized.
(3) Provision for credit losses excludes a $224 thousand provision due to unfunded commitments included in accrued interest and
other liabilities and a $1 thousand release related to investment securities held to maturity.
44
USCB Financial Holdings, Inc.
Q3 2025 Form 10-Q
Residential
Real Estate
Commercial
Real Estate
Commercial
and
Industrial
Correspondent
Banks
Consumer
and Other
Total
Three Months Ended September 30,
2024
Beginning balance
$
3,193
$
10,272
$
4,747
$
892
$
3,126
$
22,230
Provision for credit losses
(1)
760
(86)
(96)
(69)
322
831
Recoveries
2
-
10
-
1
13
Charge-offs
-
-
-
-
(7)
(7)
Ending Balance
$
3,955
$
10,186
$
4,661
$
823
$
3,442
$
23,067
Average loans
$
238,113
$
1,093,599
$
238,331
$
105,388
$
202,799
$
1,878,230
Net charge-offs (recoveries) to average
loans
(0.01)%
-
(0.02)%
-
0.01%
0.00%
Nine Months Ended September 30,
2024
Beginning balance
$
2,695
$
10,366
$
3,974
$
911
$
3,138
$
21,084
Provision for credit losses
(3)
1,252
(180)
666
(88)
318
1,968
Recoveries
8
-
21
-
3
32
Charge-offs
-
-
-
-
(17)
(17)
Ending Balance
$
3,955
$
10,186
$
4,661
$
823
$
3,442
$
23,067
Average loans
$
231,947
$
1,065,280
$
232,160
$
102,659
$
197,547
$
1,829,593
Net charge-offs (recoveries) to average
loans
(0.01)%
-
(0.02)%
-
0.01%
0.00%
(1) Provision for credit losses excludes a $101 thousand provision due to unfunded commitments included in accrued interest and other
liabilities and a $1 thousand release related to investment securities held to maturity.
(2) Annualized.
(3) Provision for credit losses excludes $159 thousand provision due to unfunded commitments included in accrued interest.
The
Federal
Open
Market
Committee
(“FOMC”)
economic
forecasts
as
of
September
30,
2025,
showed
moderate
improvement
in
the forecast
for real
GDP
an slight
improvement
in unemployment
rate.
Fannie
Mae House
Price Index
(“HPI”) forecast reflected a
deterioration in national housing
prices. The Company continued
to adjust the HPI index
effect
on the 1-4 Family loan portfolio with a
qualitative factor because Florida housing
prices are performing better than national
levels.
The
Q-factor
scorecard
was
updated
based
on
the
latest
portfolio
stress
test
and
the
resulting
maximum
loss
calculation.
Our ACL
included residential
loans. To
assess the
potential impact
of changes
in qualitative
factors related
to these
loans,
management
performed
a sensitivity
analysis.
The Company
evaluated
the
impact
of the
HPI
used
in calculating
expected losses on the residential loan segment. As
of September 30, 2025, for every 100 basis
points increase in the HPI,
the forecast
reduces
reserves
by approximately
$380
thousand
and
about
2 basis
points
to
the
reserve
coverage
ratio,
everything else being
constant. This sensitivity
analysis provides a
hypothetical result to
assess the sensitivity
of the ACL
and does not represent a change in management’s
judgement.
As of September 30,
2025, we stress tested
two qualitative factors in
our commercial real estate
loan pool, as it
is the
largest segment
in our
portfolio. We
evaluated the
impact of
a change
in the
qualitative factors
from no
risk to
maximum
loss to
measure the
sensitivity of
the qualitative
factors. The
change from
no risk
to high
risk resulted
in a
$9.1 million
or
35.5% increase in the ACL.
This sensitivity analysis provides
a hypothetical result to assess
the sensitivity of the ACL
and
does not represent a change in management’s judgement.
Bank-Owned Life Insurance
As of September 30,
2025, the combined
cash surrender
value of all
bank-owned life
insurance (“BOLI”)
policies was
$58.9 million.
Changes in
cash surrender
value are
recorded to
other non-interest
income in
the unaudited
Consolidated
Statements of Operations. The Company has
BOLI policies with five insurance carriers. The Company is the beneficiary of
these policies.
45
USCB Financial Holdings, Inc.
Q3 2025 Form 10-Q
Deposits
Customer deposits are the
primary funding source for
the Bank’s growth.
Through our network of
banking centers, we
offer a competitive array of deposit
accounts and treasury management services designed
to meet our customers’ business
needs. Our primary
deposit customers
are small-to-medium
sized businesses (“SMBs”),
and the personal
business of the
owners and operators of these SMBs, as well as the retail/consumer
relationships of the employees of these businesses.
The following table
presents the daily
average balance and
average rate paid
on deposits by
category for
the periods
presented (in thousands, except ratios):
Three Months Ended September 30,
2025
2024
Average Balance
Average Rate
Paid
Average Balance
Average Rate
Paid
Non-interest bearing demand deposits
$
569,522
0.00%
$
609,456
0.00%
Interest-bearing demand deposits
47,338
2.40%
57,925
2.82%
Saving and money market deposits
1,319,862
3.11%
1,084,562
3.69%
Time deposits
520,345
3.84%
325,580
4.14%
Total
$
2,457,067
2.53%
$
2,077,523
2.66%
The Company
has a
granular deposit
portfolio with
outstanding balances
comprised of
57% in
commercial
deposits,
27% in personal
deposits, 6% in
public funds (which
are partially collateralized)
and 10% in
brokered deposits. The
brokered
deposits balance at
September 30, 2025 was
$235.5 million and
$133.0 million at
December 31, 2024.
This increase was
primarily driven
by a
$100 million
aggregate notional
amount associated
with two
costless collar
hedges executed
during
the
third
quarter
of
2025.These
costless
hedges
enhance
the
Company’s
interest
rate
risk
management
strategy
by
mitigating the impact of rate movements on future cash flows.
As of September 30,
2025, the Company
has approximately 21
thousand deposit accounts
with the majority
of
which
were personal accounts, approximately 13 thousand or 61.7%. The estimated average account size in our deposit portfolio
was approximately $119
thousand as of September 30, 2025.
The
amount
of
uninsured
deposits
are
estimated
based
on
the
FDIC
deposit
insurance
limit
of
$250
thousand
per
account holder for all deposit accounts at the Company.
The total estimated percentage of uninsured deposits
was 53% at
September 30,
2025 and
55%
at December
31,
2024.
The Company
offers
Insured
Cash Sweep
(“ICS”)
and
Certificate
of
Deposit Account
Registry
Service
(“CDARS”)
deposit
products
to
fully
insure
our
clients.
The
deposit
balance
in
ICS/CDARS was $183.9 million at September 30, 2025 and
was $129.5 million at December 31, 2024.
The following table shows scheduled maturities of uninsured
time deposits as of September 30, 2025 (in thousands):
September 30, 2025
Three months or less
$
68,923
Over three through six months
24,033
Over six though twelve months
9,923
Over twelve months
38,097
$
140,976
Other Liabilities
The Company collects from commercial and residential loan customers
funds which are held in escrow for future
payment of real estate taxes and insurance. These escrow
funds are disbursed by the Company directly to the
insurance
companies and taxing authority of the borrower.
Escrow funds are recorded as accrued interest and other
liabilities in the
consolidated balance sheet.
As of September 30, 2025, escrow balances totaled
$29.2 million compared to $6.1 million at December
31, 2024.
The increase reflects the normal growth in escrow accounts
pending tax and insurance payments.
46
USCB Financial Holdings, Inc.
Q3 2025 Form 10-Q
Borrowings
FHLB Advances
As
a
member
of
the
FHLB
of
Atlanta,
we
are
eligible
to
obtain
advances
with
various
terms
and
conditions.
This
accessibility to additional
funding allows us
to efficiently and
timely meet both
expected and unexpected
outgoing cash flows
and collateral needs without adversely affecting
either daily operations or the financial condition of the
Company.
As of
September 30,
2025, we
had $11.0
million
of fixed-rate
advances
outstanding
from the
FHLB with
a weighted
average rate of 3.76% maturing in 2028 as detailed in the table
below.
The following table presents the FHLB advances as of
September 30, 2025 (in thousands):
Interest Rate
Type of Rate
Maturity Date
Amount
3.76%
Fixed
January 24, 2028
11,000
$
11,000
During the third
quarter 2024, the
Company paid off
the $80.0 million
fixed-rate loan outstanding
from the Bank
Term
Funding Program with an original maturity date of January
10, 2025.
The
Company
has
also
established
Federal
Funds
lines
of
credit
with
our
upstream
correspondent
banks
and
the
Federal
Reserve
Bank
of
Atlanta
Discount
Window
to
manage
temporary
fluctuations
in
our
daily
cash
balances.
As
of
September 30, 2025, there were no outstanding balances
with any of these liquidity sources.
Subordinated Notes
On
August
14,
2025,
the
Company
entered
into
a
Subordinated
Note
Purchase
Agreement
with
certain
qualified
institutional
buyers
pursuant
to
which
the
Company
sold
and
issued
$40.0
million
in
aggregate
principal
amount
of
its
7.625% Fixed-to-Floating Rate
Subordinated Notes due 2035.
The Notes were issued by
the Company to the purchasers
at a price equal to
100% of their face amount. The
subordinated debt was originally issued at a
cost of $760 thousand. After
two
months
of
amortization,
the
carrying
value
has
been
reduced
to
$738
thousand,
reflecting
the
scheduled
expense
recognition over the
term of the
instrument. The subordinated
notes are presented
net of these
costs on the
consolidated
balance
sheet.
The
Notes
were
offered
and
sold
by
the
Company
in
a
private
placement
transaction
in
reliance
on
exemptions from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), pursuant to
Section
4(a)(2)
of
the
Securities
Act
and
Rule
506(b)
of
Regulation
D
thereunder.
For
additional
information,
see
the
Company Form 8-K filed on August 14, 2025.
Off-Balance Sheet Arrangements
We engage
in various financial
transactions in
our operations
that, under GAAP,
may not be
included on
the balance
sheet. To
meet the financing needs of our customers,
we may include commitments to extend credit and standby
letters of
credit. To
a varying
degree, such
commitments involve
elements of
credit, market,
and interest
rate risk
in excess
of the
amount recognized in
the balance sheet. We
maintain an allowance
for off-balance sheet credit
risk which is
recorded under
accrued
interest
and
other
liabilities
on
the
unaudited
Consolidated
Balance
Sheets.
The
ACL
related
to
unfunded
commitments at
September 30,
2025 was
$795 thousand
and at
December 31,
2024 was
$571 thousand.
The increase
was primarily driven by an increase in unfunded commitments.
Since commitments associated with letters of
credit and commitments to extend
credit may expire unused, the
amounts
shown
do
not
necessarily
reflect
actual
future
cash
funding
requirements.
The
following
table
presents
lending
related
commitments outstanding as of the dates indicated (in thousands
):
September 30, 2025
December 31, 2024
Commitments to grant loans and unfunded lines of credit
$
140,146
$
122,578
Standby and commercial letters of credit
3,855
5,389
Total
$
144,001
$
127,967
Commitments to extend credit are agreements to lend funds to a client, as long as there is no violation of any condition
established
in
the
contract,
for
a
specific
purpose.
Commitments
generally
have
variable
interest
rates,
fixed
expiration
dates or
other
termination
clauses
and
may require
payment
of
a fee.
Since many
of the
commitments
are
expected to
47
USCB Financial Holdings, Inc.
Q3 2025 Form 10-Q
expire without being
fully drawn, the
total commitment
amounts disclosed
above do not
necessarily represent
future cash
requirements.
Unfunded lines of credit represent unused portions of credit facilities to our current borrowers that represent no change
in credit risk in our portfolio. Lines
of credit generally have variable interest
rates. The maximum potential amount
of future
payments we could
be required to
make is represented
by the contractual
amount of the
commitment, less
the amount of
any advances made.
Letters of credit are
conditional commitments issued
by us to guarantee
the performance of a
client to a third
party.
In
the event of nonperformance by
the client in accordance with the
terms of the agreement with the
third party,
we would be
required to fund
the commitment.
If the commitment
is funded, we
would be entitled
to seek recovery
from the client
from
the underlying collateral,
which can include
commercial real estate,
physical plant and
property, inventory, receivables, cash
or marketable securities.
Asset and Liability Management Committee
Members
of
senior
management
and
our
Board
make
up
the
asset
and
liability
management
committee,
or
ALCO.
Senior management
is responsible
for ensuring
that Board
approved strategies
and policies
for managing
and mitigating
risks are appropriately executed within the designated
lines of authority and responsibility in a timely manner.
ALCO
oversees
the
establishment,
approval,
implementation,
and
review
of
interest
rate
risk,
management,
and
mitigation strategies, ALM related policies, ALCO procedures
and risk tolerances and appetite.
While some degree of Interest Rate Risk (“IRR”) is inherent to the banking business, we believe our ALCO implements
sound risk management practices to identify,
quantify,
monitor, and limit IRR exposures.
When assessing
the scope
of IRR
exposure
and
impact on
the consolidated
balance sheet,
cash
flows and
income
statement,
management
considers
both
earnings
and
economic
impacts.
Asset
price
variations,
deposit
volatility
and
reduced earnings or outright losses could adversely affect
the Company’s liquidity,
performance, and capital adequacy.
Income simulations are
used to assess
the impact
of changing rates
on earnings under
different interest rates
scenarios,
yield curve
shapes
and
time
horizons.
These
simulations
utilize
both
instantaneous
and
parallel
changes
in
the
level of
interest rates, as well as
non-parallel changes such as
changing slopes (flat and steepening)
and twists of the yield
curve.
Static
simulation
models
are
based
on
current
exposures
and
assume
a
constant
balance
sheet
with
no
new
growth.
Dynamic simulation
is also
utilized to
have a
more comprehensive
assessment
on IRR.
This simulation
relies on,
and in
assumptions regarding
changes in
existing lines
of business,
new business,
management strategies
and client
expected
behavior.
To
have
a
more
complete
picture
of
IRR,
the
Company
also
evaluates
the
economic
value
of
equity
(“EVE”).
This
assessment
allows
us
to
measure
the
degree
to
which
the
economic
values
will
change
under
different
interest
rate
scenarios (parallel and non-parallel). The economic value approach focuses on a longer-term time horizon and captures all
future cash flows expected
from existing assets and
liabilities. The economic value
model utilizes a static
approach in that
the analysis
does not
incorporate new
business; rather,
the analysis
shows a
snapshot in
time of
the risk
inherent in
the
balance sheet.
Market and Interest Rate Risk Management
According to
our ALCO
model, as
of September
30, 2025,
we had
a slightly
liability sensitive
balance sheet
for year
one, and
a neutral balance
sheet for
year two, using
the static model.
Liability sensitivity indicates
that our liabilities
generally
reprice
faster
than
our
assets,
which
results
in
a
favorable
impact
to
net
interest
income
when
market
interest
rates
decrease. Asset sensitivity indicates that our assets
generally reprice faster than our liabilities,
which results in a favorable
impact
to
net
interest
income
when
market
interest
rates
increase.
Neutral
denotes
minimal
or
no
effect
on
net
interest
income as a
result of changes in
interest rates. Many
assumptions are used to
calculate the impact
of interest rate
variations
on
our
net
interest
income,
such
as
asset
prepayment
speeds,
non-maturity
deposit
price
sensitivity
(betas),
pricing
correlations, deposit truncations and decay rates, and
key interest rate drivers.
Because of the inherent use
of these estimates and
assumptions in the model,
our actual results may,
and most likely
will, differ from static measures results.
In addition, static measures like EVE
do not include actions that management
may
undertake to manage the risks in response to anticipated changes in interest rates or customer deposit behavior. As part of
our ALM strategy and policy, management
has the ability to modify the balance sheet to either increase asset duration and
decrease liability
duration to reduce
asset sensitivity,
or to decrease
asset duration and
increase liability duration
in order
to increase asset sensitivity.
48
USCB Financial Holdings, Inc.
Q3 2025 Form 10-Q
According to our model, as of
September 30, 2025, our balance sheet is
liability sensitive for year one and
more neutral
in year two under static interest rate scenarios
(an increase or decrease of 400 basis
points). Additionally,
utilizing an EVE
approach, we analyze
the risk to capital
from the effects
of various interest
rate scenarios through
a long-term discounted
cash flow model.
This measures
the difference
between the
economic value
of our assets
and the economic
value of our
liabilities, which is
a proxy for
our liquidation value.
According to our
balance sheet composition, and
as expected, our
model
stipulates
that
an
increase
in
interest
rates
will
have
a
negative
impact
on
the
EVE
and
lower
rates,
a
positive
impact.
Results and analysis are presented quarterly to the ALCO,
and strategies are reviewed and defined.
Liquidity
Liquidity is defined
as a Company’s
capacity to meet
its cash and
collateral obligations at
a reasonable cost.
Maintaining
an adequate level of liquidity depends on the Company’s ability to
efficiently meet both expected and unexpected cash flow
and collateral needs without adversely affecting
either daily operations or the financial condition of the
Company.
Liquidity risk
is the
risk that
we will
be unable
to meet
our short-term
and long-term
obligations as
they become
due
because of an inability
to liquidate assets or
obtain relatively adequate funding. The
Company’s obligations, and the funding
sources
used
to
meet
them,
depend
significantly
on
our
business
mix,
balance
sheet
structure
and
composition,
credit
quality of our assets and the cash flow profiles of our on-
and off-balance sheet obligations.
In managing
inflows and
outflows,
management
regularly
monitors situations
that can
give rise
to increased
liquidity
risk. These
include funding
mismatches, market
constraints on
the ability
to convert
assets (particularly
investments) into
cash or in accessing sources of funds (i.e., market liquidity),
pledging assets and contingent liquidity events.
Changes in macroeconomic conditions, as well as exposure to credit, market, operational, legal,
cybersecurity risk and
reputational
risks,
could
have
an
unexpected
impact
on
the
Company’s
liquidity
risk
profile
and
are
factored
into
the
assessment of liquidity and the ALM framework.
Management has established
a comprehensive and
holistic management process for
identifying, measuring, monitoring
and
mitigating
liquidity
risk.
Due
to
its
critical
importance
to
the
viability
of
the
Company,
liquidity
risk
management
is
integrated into our risk management processes, Contingency
Funding Plan and ALM policy.
Critical elements of our liquidity
risk management include: effective corporate governance consisting of
oversight by the
Board and
ALCO, and
active involvement
of senior
management; appropriate
strategies, policies,
procedures,
and limits
used
to
identify
and
mitigate
liquidity
risk;
comprehensive
liquidity
risk
measurement
and
monitoring
systems
(including
assessments
of
the
current
and
prospective
cash
flows
or
sources
and
uses
of
funds)
that
are
commensurate
with
the
complexity and business activities of the Company; active management of intraday liquidity and collateral; an appropriately
diverse mix
of existing
and potential
future funding
sources; adequate
levels of
highly liquid
marketable securities
free of
legal, regulatory, or operational impediments,
that can be
used to meet
liquidity needs in
stressful situations; comprehensive
contingency
funding
plans
that
sufficiently
address
potential
adverse
liquidity
events
and
emergency
cash
flow
requirements;
and
internal
controls and
internal
audit
processes
sufficient
to
determine
the
adequacy
of
the
institution’s
liquidity risk management process.
We
expect
funds
to
be
available
from
several
basic
banking
activity
sources,
including
the
core
deposit
base,
the
repayment and maturity
of loans and
the investment
portfolio cash
flows. Other
potential funding
sources include
Federal
Funds purchased, brokered certificates of deposit, listing services
certificates of deposit, unsecured Federal Funds lines of
credit with other
banking institutions and
draws from the
Federal Reserve Bank
of Atlanta Discount Window, and
borrowings
from the
FHLB
Atlanta.
Accordingly,
we believe
our liquidity
resources
are adequate
to fund
loans and
meet other
cash
needs as necessary.
49
USCB Financial Holdings, Inc.
Q3 2025 Form 10-Q
Capital Adequacy
As of
September 30,
2025, the
Bank was
well capitalized
under the
FDIC’s
prompt corrective
action framework.
We
also follow the capital conservation buffer framework, and
as of September 30, 2025, we exceeded the
capital conversation
buffer in
all capital ratios,
according to
our actual ratios.
The following table
presents the capital
ratios for the
Bank at the
dates indicated (in thousands,
except ratios).
Actual
Minimum Capital
Requirements
To be Well Capitalized
Under Prompt Corrective
Action Provisions
Amount
Ratio
Amount
Ratio
Amount
Ratio
September 30, 2025
Total
risk-based capital
$
299,147
13.93
%
$
171,861
8.00
%
$
214,826
10.00
%
Tier 1 risk-based capital
$
273,382
12.73
%
$
128,896
6.00
%
$
171,861
8.00
%
Common equity tier 1 capital
$
273,382
12.73
%
$
96,672
4.50
%
$
139,637
6.50
%
Leverage ratio
$
273,382
9.63
%
$
113,507
4.00
%
$
141,883
5.00
%
December 31, 2024
Total
risk-based capital
$
266,387
13.34
%
$
159,795
8.00
%
$
199,744
10.00
%
Tier 1 risk-based capital
$
241,740
12.10
%
$
119,846
6.00
%
$
159,795
8.00
%
Common equity tier 1 capital
$
241,740
12.10
%
$
89,885
4.50
%
$
129,834
6.50
%
Leverage ratio
$
241,740
9.38
%
$
103,074
4.00
%
$
128,843
5.00
%
The Company is
not subject to
regulatory capital ratios
imposed by Basel
III on bank
holding companies because
the
Company is deemed to be a small bank holding company.
Impact of Inflation
Our
Consolidated
Financial
Statements
and
related
notes
have
been
prepared
in
accordance
with
U.S.
GAAP,
which require the measurement of financial
position and operating results in terms
of historical dollars, without considering
the changes in the relative purchasing power of money over time
due to inflation. The impact of inflation is mostly reflected
in the increased cost of operations, inflation can negatively impact overhead expenses and other variable expenses. Unlike
most industrial
companies,
nearly all
our
assets
and liabilities
are monetary
in nature.
As a
result,
interest
rates
have a
greater impact on our performance than the effects of inflation. Periods of high inflation are often accompanied by relatively
higher interest rates, and periods of low inflation are accompanied
by relatively lower interest rates.
Recently Issued Accounting Pronouncements
Recently issued accounting
pronouncements are discussed
in Note 1 “Summary
of Significant Accounting Policies”
to
the unaudited Consolidated Financial Statements in Part
1 of this Form 10-Q.
50
USCB Financial Holdings, Inc.
Q3 2025 Form 10-Q
Reconciliation and Management Explanation of Non
-GAAP Financial Measures
Management
has
included
these
non-GAAP
measures
because
it
believes
these
measures
may
provide
useful
supplemental information
for evaluating
the Company’s
underlying performance
trends. Further,
management uses
these
measures
in
managing
and
evaluating
the
Company’s
business
and
intends
to
refer
to
them
in
discussions
about
our
operations and performance.
Operating performance
measures should be
viewed in addition
to, and not
as an alternative
to or
substitute
for,
measures
determined
in
accordance
with
GAAP,
and
are
not
necessarily
comparable
to non-GAAP
measures that may be presented by other
companies. The following table reconciles the non-GAAP financial measurement
of operating net income available to
common shareholders for the periods presented (in thousands,
except per share data):
USCB FINANCIAL HOLDINGS, INC.
NON-GAAP FINANCIAL MEASURES (UNAUDITED)
(Dollars in thousands)
As of or For the Three Months Ended
9/30/2025
6/30/2025
3/31/2025
12/31/2024
9/30/2024
Pre-tax pre-provision ("PTPP") income:
(1)
Net income
$
8,939
$
8,140
$
7,658
$
6,904
$
6,949
Plus: Income tax expense
2,866
2,599
2,440
2,197
2,213
Plus: Provision for credit losses
105
1,031
681
1,030
931
PTPP income
$
11,910
$
11,770
$
10,779
$
10,131
$
10,093
PTPP return on average assets:
(1)
PTPP income
$
11,910
$
11,770
$
10,779
$
10,131
$
10,093
Average assets
$
2,798,115
$
2,677,198
$
2,606,593
$
2,544,592
$
2,485,434
PTPP return on average assets
(2)
1.69%
1.76%
1.68%
1.58%
1.62%
Operating net income:
(1)
Net income
$
8,939
$
8,140
$
7,658
$
6,904
$
6,949
Less: Net losses on sale of securities
(28)
-
-
-
-
Less: Tax effect on sale of securities
7
-
-
-
-
Operating net income
$
8,960
$
8,140
$
7,658
$
6,904
$
6,949
Operating PTPP income:
(1)
PTPP income
$
11,910
$
11,770
$
10,779
$
10,131
$
10,093
Less: Net losses on sale of securities
(28)
-
-
-
-
Operating PTPP income
$
11,938
$
11,770
$
10,779
$
10,131
$
10,093
Operating PTPP return on average assets:
(1)
Operating PTPP income
$
11,938
$
11,770
$
10,779
$
10,131
$
10,093
Average assets
$
2,798,115
$
2,677,198
$
2,606,593
$
2,544,592
$
2,485,434
Operating PTPP return on average assets
(2)
1.69%
1.76%
1.68%
1.58%
1.62%
Operating return on average assets:
(1)
Operating net income
$
8,960
$
8,140
$
7,658
$
6,904
$
6,949
Average assets
$
2,798,115
$
2,677,198
$
2,606,593
$
2,544,592
$
2,485,434
Operating return on average assets
(2)
1.27%
1.22%
1.19%
1.08%
1.11%
Operating return on average equity:
(1)
Operating net income
$
8,960
$
8,140
$
7,658
$
6,904
$
6,949
Average equity
$
225,316
$
228,492
$
219,505
$
215,715
$
206,641
Operating return on average equity
(2)
15.78%
14.29%
14.15%
12.73%
13.38%
Operating Revenue:
(1)
$
21,274
$
21,034
$
19,115
$
19,358
$
18,109
3,684
3,370
3,716
3,627
3,438
(28)
-
-
-
-
$
24,986
$
24,404
$
22,831
$
22,985
$
21,547
Operating Efficiency Ratio:
(1)
$
13,048
$
12,634
$
12,052
$
12,854
$
11,454
$
24,986
$
24,404
$
22,831
$
22,985
$
21,547
52.22%
51.77%
52.79%
55.92%
53.16%
(1)
The Company believes these non-GAAP measurements are
key indicators of the ongoing earnings power
of the Company.
(2)
Annualized.
51
USCB Financial Holdings, Inc.
Q3 2025 Form 10-Q
USCB FINANCIAL HOLDINGS, INC.
NON-GAAP FINANCIAL MEASURES (UNAUDITED)
(Dollars in thousands, except per share data)
As of or For the Three Months Ended
9/30/2025
6/30/2025
3/31/2025
12/31/2024
9/30/2024
Tangible book value per common share (at period-end):
(1)
Total stockholders' equity
$
209,095
$
231,583
$
225,088
$
215,388
$
213,916
Less: Intangible assets
-
-
-
-
-
Tangible stockholders' equity
(3)
$
209,095
$
231,583
$
225,088
$
215,388
$
213,916
Total shares issued and outstanding (at period-end):
Total common shares issued and outstanding
18,107,385
20,078,385
20,048,385
19,924,632
19,620,632
Tangible book value per common share
(2)
$
11.55
$
11.53
$
11.23
$
10.81
$
10.90
Operating diluted net income per common share:
(1)
Operating net income
$
8,960
$
8,140
$
7,658
$
6,904
$
6,949
Total weighted average diluted shares of common stock
19,755,820
20,295,794
20,319,535
20,183,731
19,825,211
Operating diluted net income per common share:
$
0.45
$
0.40
$
0.38
$
0.34
$
0.35
Tangible Common Equity/Tangible Assets
(1)
$
209,095
$
231,583
$
225,088
$
215,388
$
213,916
(3)
$
2,767,945
$
2,719,474
$
2,677,382
$
2,581,216
$
2,503,954
Tangible Common Equity/Tangible
Assets
7.55%
8.52%
8.41%
8.34%
8.54%
(1)
The Company believes these non-GAAP measurements are
key indicators of the ongoing earnings power
of the Company.
(2)
Excludes the dilutive effect, if any, of shares of common stock issuable upon exercise
of outstanding stock options.
(3) Since the Company has no intangible
assets, tangible stockholders’ equity and tangible
total assets are the same amounts as stockholders’
equity
and total assets, respectively, as calculated under GAAP.
52
USCB Financial Holdings, Inc.
Q3 2025 Form 10-Q
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
As a smaller reporting company,
we are not required to provide the information required
by this item.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Under the
supervision and with
the participation of
our management, including
our President and
Chief Executive Officer
and our
Chief Financial
Officer,
we evaluated
the effectiveness
of the
design and
operation of
the Company’s
disclosure
controls
and
procedures
(as
defined
in
Rules
13a-15(e)
and
15d-15(e)
under
the
Securities
Exchange
Act
of
1934
(“Exchange Act”))
as of
September 30,
2025. Based
on that
evaluation,
management
believes that,
as of
the end
of the
period covered
by this
Form 10-Q,
the Company's
disclosure controls
and procedures
were effective
to collect,
process,
and disclose
the information
required to
be disclosed
in the
reports filed
or submitted
under the
Exchange Act
within the
required time periods.
Changes in Internal Control Over Financial Reporting
There has been
no change in
our internal control
over financial reporting
(as defined in
Rules 13a-15(f) and
15d-15(f)
under the Exchange Act) during the period covered by this Form 10-Q that has
materially affected, or is reasonably likely to
materially affect, our internal control over financial
reporting.
Limitations on Effectiveness of Controls and Procedures
In
designing
and
evaluating
the
disclosure
controls
and
procedures,
management
recognizes
that
any
controls
and
procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving
the desired control objectives.
In addition, the design
of disclosure controls and
procedures must reflect the
fact that there
are resource constraints and that management is required to apply
judgment in evaluating the benefits of possible controls
and procedures relative to their costs.
53
USCB Financial Holdings, Inc.
Q3 2025 Form 10-Q
PART II
Item 1.
Legal Proceedings
We are not currently subject to any material legal proceedings. We are from time to time subject to claims and litigation
arising
in
the
ordinary
course
of
business.
These
claims
and
litigation
may
include,
among
other
things,
allegations
of
violation of banking and other applicable regulations, competition
law, labor laws and consumer
protection laws, as well as
claims or
litigation
relating
to intellectual
property,
securities, breach
of contract
and tort.
We
intend to
defend ourselves
vigorously against any pending or future claims and litigation.
There can be no
assurance that any
future legal proceedings
to which we are
a party will not
be decided adversely
to
our interests and have a material adverse effect
on our financial condition and operations.
Item 1A. Risk Factors
For detailed information about certain risk factors that could materially affect our business, financial
condition, or future
results, see “Part I, Item 1A – Risk Factors” of the
2024 Form 10-K.
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
(a) None.
(b) Not applicable.
(c) The Company’s repurchases of equity securities
for the three months ended September 30, 2025 were
as follows:
Total
Number of
Shares
Purchased
Average
Price Paid
Per Share
Total Number of Shares Purchased
as Part of Publicly Announced
Plans or Programs (1)
Maximum Number
of Shares that
May
Yet Be Purchased
Under Plans or
Programs (1)
Period
July 1 - 31, 2025
-
$
-
-
528,309
August 1 - 31, 2025
-
$
-
-
528,309
September 1 - 30, 2025
2,000,000
$
17.19
-
528,309
Total
2,000,000
(2)
$
17.19
-
(1) As of September 30, 2025 there were
528,309 number of shares available for repurchase under
the two outstanding share repurchase programs:
- On January 24, 2022, the Company announced
its initial stock repurchase program to repurchase
up to 750,000 shares of Class A common
stock.
- On April 22, 2024, the Company announced the
adoption of a second repurchase program to repurchase
up to 500,000 share of Class A common
stock to commence upon completion of its first
repurchase program.
(2) Reflects the repurchase of shares pursuant
to stock repurchase agreements entered into
with certain institutional investors on September 2, 2025.
For additional information regarding such repurchases,
please see the Current Report on Form 8-K filed
with the SEC on September 5, 2025.
Item 3.
Defaults Upon Senior Securities
(a)
(b)
Item 4.
Mine Safety Disclosures
Not applicable.
Item 5. Other Information
(a)
(b)
54
USCB Financial Holdings, Inc.
Q3 2025 Form 10-Q
(c)
persons
such terms are defined in Item 408 of the SEC’s
Regulation S-K).
55
USCB Financial Holdings, Inc.
Q3 2025 Form 10-Q
Item 6. Exhibits
Exhibit No.
Description of Exhibit
Form 8-K (File No. 001-41196) filed with the Securities and Exchange Commission on August 14, 2025).
Form 8-K (File No. 001-41196) filed with the Securities and Exchange Commission on August 14, 2025).
**
**
***
***
101
The following financial
statements from
the Company’s Quarterly
Report on
Form 10-Q for
the quarter ended
September 30,
2025 formatted
in Inline
XBRL: (i)
Consolidated Balance
Sheets (unaudited),
(ii) Consolidated
Statements of
Operations
(unaudited), (iii) Consolidated
Statements
of Comprehensive
Income (unaudited), (iv)
Consolidated Statements
of Changes
in Stockholders’
Equity (unaudited),
(v) Consolidated
Statements of
Cash Flows
(unaudited), (vi)
Notes to
Consolidated
Financial Statements (unaudited).
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.
56
USCB Financial Holdings, Inc.
Q3 2025 Form 10-Q
SIGNATURES
Pursuant to the
requirements of
the Securities Exchange
Act of 1934,
the registrant has
duly caused this
report to be
signed on its behalf by the undersigned thereunto duly authorized.
USCB FINANCIAL HOLDINGS, INC.
(Registrant)
Signature
Title
Date
/s/ Luis de la Aguilera
Chairman, President and Chief Executive
Officer
November 7, 2025
Luis de la Aguilera
(Principal Executive Officer)
/s/ Robert Anderson
Executive Vice President and Chief Financial
Officer
November 7, 2025
Robert Anderson
(Principal Financial Officer and Principal
Accounting Officer)
TABLE OF CONTENTS
Part IItem 1. Financial StatementsItem 2. Management's Discussion and Analysis Of Financial Condition and Results Of OperationsItem 3. Quantitative and Qualitative Disclosures About Market RiskItem 4. Controls and ProceduresPart IIItem 1. Legal ProceedingsItem 1A. Risk FactorsItem 2. Unregistered Sales Of Equity Securities and Use Of ProceedsItem 3. Defaults Upon Senior SecuritiesItem 4. Mine Safety DisclosuresItem 5. Other InformationItem 6. Exhibits