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 July 31, 2025 the registrant had
A
common stock outstanding.
FORM 10-Q
June 30, 2025
TABLE OF CONTENTS
3
USCB Financial Holdings, Inc.
Q2 2025 Form 10-Q
PART
I
Item 1.
Financial Statements
USCB FINANCIAL HOLDINGS, INC
Consolidated Balance Sheets – Unaudited
(Dollars in thousands, except share data)
June 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
Lease liability
Accrued interest and other liabilities
Total liabilities
Commitments and contingencies (See Notes 5
and 11)
(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 June 30, 2025,
Common stock - Class B Non-voting; $
outstanding as of June 30, 2025 and December
31, 2024
-
-
Additional paid-in capital on common stock
Accumulated deficit
(
56,025
)
(
67,813
)
Accumulated other comprehensive loss
(
41,752
)
(
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.
Q2 2025 Form 10-Q
USCB FINANCIAL HOLDINGS, INC.
Consolidated Statements of Operations - Unaudited
(Dollars in thousands,
except per share data)
Three Months Ended June 30,
Six Months Ended June 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:
-
-
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.
Q2 2025 Form 10-Q
USCB FINANCIAL HOLDINGS, INC.
Consolidated Statements of Comprehensive Income
- Unaudited
(Dollars in thousands)
Three Months Ended
June 30,
Six Months Ended
June 30,
2025
2024
2025
2024
Net income
$
$
$
$
Other comprehensive income (loss):
Unrealized gain (loss) on investment securities
(
895
)
(
1,224
)
Reclassification adjustment for amortization of net
unrealized losses on
securities transferred from available-for-sale to held-to-maturity
Reclassification adjustment for gain included in net
income
-
(
14
)
-
(
14
)
Unrealized gain (loss) on cash flow hedge
(
28
)
(
186
)
Tax benefit (expense)
(
251
)
(
944
)
Total other comprehensive income (loss), net of tax
(
639
)
(
415
)
Total comprehensive income
$
$
$
$
The accompanying notes are an integral part of
these unaudited consolidated financial statements.
6
USCB Financial Holdings, Inc.
Q2 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 March 31, 2025
$
$
$
(
62,160
)
$
(
41,113
)
$
Net income
-
-
-
-
Other comprehensive loss
-
-
-
-
(
639
)
(
639
)
Exercise of stock options
-
-
Dividend payment
-
-
-
(
2,005
)
-
(
2,005
)
Stock-based compensation
-
-
-
-
Balance at June 30, 2025
$
$
$
(
56,025
)
$
(
41,752
)
$
Balance at March 31, 2024
$
$
$
(
84,952
)
$
(
45,427
)
$
Net income
-
-
-
-
Other comprehensive income
-
-
-
-
Repurchase of Class A common stock
(
25,000
)
(
25
)
(
275
)
-
-
(
300
)
Restricted stock issued
(
6
)
-
-
-
Dividend payment
-
-
-
(
1,017
)
-
(
1,017
)
Stock-based compensation
-
-
-
-
Balance at June 30, 2024
$
$
$
(
79,760
)
$
(
44,686
)
$
7
USCB Financial Holdings, Inc.
Q2 2025 Form 10-Q
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
(
9,671
)
(
10
)
(
164
)
-
-
(
174
)
Restricted stock issued
(
124
)
-
-
-
Restricted stock forfeiture
-
-
-
-
-
-
Exercise of stock options
-
-
Dividend payment
-
-
-
(
4,010
)
-
(
4,010
)
Stock-based compensation
-
-
-
-
Balance at June 30, 2025
$
$
$
(
56,025
)
$
(
41,752
)
$
Balance at December 31, 2023
(
88,548
)
(
44,271
)
Net income
-
-
-
-
Other comprehensive loss
-
-
-
-
(
415
)
(
415
)
Repurchase of Class A common stock
(
32,100
)
(
32
)
(
348
)
-
-
(
380
)
Restricted stock issued
(
58
)
-
-
-
Restricted stock forfeiture
(
8,625
)
(
8
)
-
-
-
Exercise of stock options
-
-
Dividend payment
-
-
-
(
2,033
)
-
(
2,033
)
Stock-based compensation
-
-
-
-
Balance at June 30, 2024
$
$
$
(
79,760
)
$
(
44,686
)
$
The accompanying notes are an integral
part of these unaudited consolidated financial
statements.
The accompanying notes are an integral
part of these consolidated financial statements.
8
USCB Financial Holdings, Inc.
Q2 2025 Form 10-Q
USCB FINANCIAL HOLDINGS, INC.
Consolidated Statements of Cash Flows - Unaudited
(Dollars in thousands)
Six Months Ended June 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
(
728
)
(
228
)
Amortization of deferred loan fees, net
Stock-based compensation
Gain on sale of available for sale securities,
net
-
(
14
)
Gain on sale of loans held for sale, net
(
676
)
(
484
)
Proceeds from the sale of loans held for sale
Origination of loans held for sale
(
9,069
)
(
5,565
)
Increase in cash surrender value of bank owned
life insurance
(
955
)
(
826
)
Decrease in deferred tax assets
Net change in operating assets and liabilities:
Accrued interest receivable
(
340
)
(
850
)
Other assets
(
6,586
)
(
1,198
)
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
(
31,676
)
(
52,449
)
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
(
71,439
)
(
43,821
)
Purchase of loans held for investment
(
70,015
)
(
44,691
)
Additions to premises and equipment
(
94
)
(
178
)
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
)
(
177
)
Net cash used in investment activities
(
157,674
)
(
86,680
)
Cash flows from financing activities:
Proceeds from issuance of Class A common
stock, net
Cash dividends paid
(
4,010
)
(
2,033
)
Repurchase of Class A common stock
(
174
)
(
380
)
Net increase in deposits
Proceeds from FHLB advances
-
Proceeds from other borrowings
-
Repayments on Federal Home Loan Bank advances
(
172,000
)
(
101,000
)
Net cash provided by financing activities
Net increase (decrease) in cash and
cash equivalents
(
22,216
)
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
9
USCB Financial Holdings, Inc.
Q2 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
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
10
USCB Financial Holdings, Inc.
Q2 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):
June 30, 2025
Available-for-sale:
Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Fair Value
U.S. Government Agency
$
$
$
(
1,476
)
$
Collateralized mortgage obligations
(
20,748
)
Mortgage-backed securities - residential
(
11,024
)
Mortgage-backed securities - commercial
(
8,261
)
Municipal securities
-
(
5,054
)
Bank subordinated debt securities
(
657
)
$
$
$
(
47,220
)
$
Held-to-maturity:
Amortized
Cost
Unrecognized
Gains
Unrecognized
Losses
Fair Value
U.S. Government Agency
$
$
$
(
4,154
)
$
Collateralized mortgage obligations
(
6,641
)
Mortgage-backed securities - residential
(
4,168
)
Mortgage-backed securities - commercial
-
(
1,293
)
Corporate bonds
-
(
221
)
$
$
$
(
16,477
)
$
Allowance for credit losses - securities held-to-maturity
(
7
)
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
HTM
category
from
the
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
AOCI 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
During the quarter
ended June 30,
2025 there were
For the three
months ended June 30, 2025, total
amortization out of AOCI
for net unrealized losses
on securities transferred
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements - Unaudited
11
USCB Financial Holdings, Inc.
Q2 2025 Form 10-Q
in 2022 from AFS to HTM was $
the fair value of the securities was $
For
the
quarter
ended
June
30,
2024,
total
amortization
out
of
AOCI
for
the
net
unrealized
losses
on
securities
transferred from
AFS to HTM
was $
2024, the fair value of the securities
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 held-to-maturity debt securities.
CECL requires a loss reserve for
securities classified as held-to-maturity
(“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 June 30, 2025 and December 31,
2024, all HTM securities held by the
Company were rated investment grade.
At
June
30,
2025
HTM
securities
included
$
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 $
less the ACL related to these securities.
The Company’s investment
portfolio includes Available-for-Sale
(“AFS”) debt securities,
which are carried at
fair value
with unrealized gains and losses recognized in accumulated other comprehensive income (loss) (“AOCI”), 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 allowance
for credit losses (“ACL”) is recorded. As a result of this evaluation, the Company concluded that no allowance was required
on AFS securities as of June 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):
June 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
$
$
(
48
)
$
$
(
1,428
)
$
$
(
1,476
)
Collateralized mortgage obligations
-
-
(
20,748
)
(
20,748
)
Mortgage-backed securities - residential
(
29
)
(
10,995
)
(
11,024
)
Mortgage-backed securities - commercial
(
1,637
)
(
6,624
)
(
8,261
)
Municipal securities
-
-
(
5,054
)
(
5,054
)
Bank subordinated debt securities
(
18
)
(
639
)
(
657
)
$
$
(
1,732
)
$
$
(
45,488
)
$
$
(
47,220
)
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements - Unaudited
12
USCB Financial Holdings, Inc.
Q2 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 for these securities
are guaranteed by U.S.
government sponsored entities.
The municipal
bonds are of high
credit quality and the declines
in fair value are
not due to credit
quality. Based on the assessment of these
mitigating factors,
management believed that
the unrealized
losses on
these debt
security holdings
are a
function of
changes
in investment spreads and interest rate movements and
not changes in credit quality.
Gains
and
losses
on
the
sale
of
securities
are
recorded
on
the
trade
date
and
are
determined
on
the
specific
identification basis. There were
six months ended June 30, 2025.
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 six months ended June 30, 2024 (in thousands):
Three Months Ended June 30,
Six Months Ended June 30,
Available-for-sale:
2025
2024
2025
2024
Proceeds from sale and call of securities
$
$
$
$
Gross gains
$
-
$
$
-
$
Gross losses
-
(
181
)
-
(
181
)
Net realized gain
$
-
$
$
-
$
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
June 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 June 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
securities. All
the collateralized
mortgage
obligations
and
mortgage-backed
securities
at
June 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
securities pledged to the
State of Florida at a
ratio of
% of the quarter daily
average balance at June 30,
2025 and
%
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements - Unaudited
13
USCB Financial Holdings, Inc.
Q2 2025 Form 10-Q
at December
31, 2024.
The Bank
must also
maintain a
minimum amount
of pledged
securities
to be
in the
public funds
program.
As of June 30, 2025, the
Bank had a total of $
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):
June 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
June 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 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 discounted cash
flow 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
14
USCB Financial Holdings, Inc.
Q2 2025 Form 10-Q
Changes in the ACL for the three and six months ended June
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 June 30, 2025
Beginning balance
$
$
$
$
$
$
Provision for credit losses
(1)
Recoveries
-
-
Charge-offs
-
-
-
-
(
710
)
(
710
)
Ending Balance
$
$
$
$
$
$
Six Months Ended June 30, 2025
Beginning balance
$
$
$
$
$
$
Provision for credit losses
(2)
(
131
)
Recoveries
-
-
Charge-offs
-
-
-
-
(
723
)
(
723
)
Ending Balance
$
$
$
$
$
$
(1) Provision for credit losses excludes a $
other 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 June 30, 2024
Beginning balance
$
$
$
$
$
$
Provision for credit losses
(1)
(
30
)
(
25
)
Recoveries
-
-
-
Charge-offs
-
-
-
-
(
5
)
(
5
)
Ending Balance
$
$
$
$
$
$
Six Months Ended June 30, 2024
Beginning balance
$
$
$
$
$
$
Provision for credit losses
(2)
(
94
)
(
19
)
(
4
)
Recoveries
-
-
Charge-offs
-
-
-
-
(
10
)
(
10
)
Ending Balance
$
$
$
$
$
$
(1) Provision for credit losses excludes a $
liabilities and a $
(2) Provision for credit losses excludes a $
liabilities and $
At June 30, 2025, the ACL
for loans was $
of $
Charge offs related to loans for the
three months ended June 30, 2025 were
$
originated in
2025. Charge
offs for
the six
months ended
June 30,
2025 were
$
thousand originated in 2025.
Charge offs related
to loans for the
three months ended
June 30, 2024
totaled $
2024. Charge offs for the six months ended June 30,
2024 totaled $
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements - Unaudited
15
USCB Financial Holdings, Inc.
Q2 2025 Form 10-Q
The ACL
and the
outstanding balances
in the
specified loan
categories as
of June 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
June 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
16
USCB Financial Holdings, Inc.
Q2 2025 Form 10-Q
Loan credit exposures by internally assigned grades are
presented below for the periods indicated (in thousands):
As of June 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
17
USCB Financial Holdings, Inc.
Q2 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
18
USCB Financial Holdings, Inc.
Q2 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
loan.
The
following
tables
include
an
aging
analysis
of
accruing
loans
and
total
non-accruing
loans
as
of
June 30,
2025
and
December 31, 2024 (in thousands):
Accruing
As of June 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
19
USCB Financial Holdings, Inc.
Q2 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
June 30,
2025 and
as of
December 31, 2024 (in thousands):
June 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 months
ended June 30,
2025 and 2024.
Interest income
on
these loans
for the
three months
ended June
30, 2025
and 2024,
would have
been approximately
$
thousand, respectively,
had these loans performed
in accordance with their
original terms. Interest
income on these loans
for
the
six
months
ended
June 30,
2025
and
2024,
would
have
been
approximately
$
respectively, had
these loans performed in accordance with their original
terms.
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements - Unaudited
20
USCB Financial Holdings, Inc.
Q2 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 June
30, 2025 and December 31, 2024 (in thousands):
June 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
the recorded
investment
(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 six
months
ended
June 30,
2025
and
three
months
ended
June
30,
2024.
The
Company
had
one
new
modification
to
borrowers
experiencing financial difficulties
for the six
months ended June
30, 2024. The following
table presents newly
restructured
loans, by type of modification, which occurred during the
six months ended June 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 June 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
June 30, 2025 and June 30, 2024.
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements - Unaudited
21
USCB Financial Holdings, Inc.
Q2 2025 Form 10-Q
4.
INCOME TAXES
The Company’s provision for income taxes is presented
in the following table for the periods indicated (in thousands):
Six Months Ended June 30,
2025
2024
Current:
Federal
$
-
$
-
State
-
-
Total
current
-
-
Deferred:
Federal
State
Total
deferred
Total
tax expense
$
$
The actual income tax
expense for the six months
ended June 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 provision for income taxes) as follows (in thousands):
Six Months Ended June 30,
2025
2024
Federal taxes at statutory rate
$
$
State income taxes, net of federal tax benefit
Bank owned life insurance
(
242
)
(
210
)
Total
tax expense
$
$
The Company’s deferred tax assets and deferred
tax liabilities as of the dates indicated were (in thousands):
June 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
(
1,807
)
(
1,934
)
Lease right of use asset
(
1,786
)
(
2,142
)
Deferred expenses
(
323
)
(
224
)
Cash flow hedge
(
34
)
(
81
)
Deferred tax liabilities
(
3,950
)
(
4,381
)
Net deferred tax assets
$
$
The Company
has approximately
$
expiring in various amounts 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
22
USCB Financial Holdings, Inc.
Q2 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 six months
ended June 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,
as a result of tax uncertainties.
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,
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
June 30, 2025 and December 31, 2024 (in thousands):
June 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.
Interest Rate Swaps Designated as a Cash Flow Hedge
As of
June 30, 2025,
the Company
had
million that
were designated
as cash
flow hedges
of
certificates
of deposit.
The
interest rate
swap
agreements
have an
average
maturity
of
%,
and
with
a
weighted
average
3-month
compound SOFR being received.
As of December
31, 2024,
the Company had
$
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements - Unaudited
23
USCB Financial Holdings, Inc.
Q2 2025 Form 10-Q
average
maturity
of
%,
and
with
a
weighted
average
3-month
compound 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
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
loan.
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 June 30, 2025 was $
were between 2025
and 2026. The
fair value interest
rate swap agreements
had an average
maturity of
date of their termination.
At June
30,
2024,
the
Company
had
million that were designated as fair value hedges on loans. The interest
rate swap agreements have an average maturity of
%,
with
the
weighted
average
3-month
compound
SOFR
being
received.
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
June
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.
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
June 30, 2025:
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/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/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
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements - Unaudited
24
USCB Financial Holdings, Inc.
Q2 2025 Form 10-Q
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
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.
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements - Unaudited
25
USCB Financial Holdings, Inc.
Q2 2025 Form 10-Q
The
following
table
represents
the
Company's
assets
and
liabilities
measured
at
fair
value
on
a
recurring
basis
at
June 30, 2025 and December 31, 2024 for each of the
fair value hierarchy levels (in thousands):
June 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
$
-
$
$
-
$
$
-
$
$
-
$
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 June 30, 2025 and December 31, 2024 (in
thousands):
Fair Value Hierarchy
Carrying
Amount
Level 1
Level 2
Level 3
Fair Value
Amount
June 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 and other borrowings
$
$
-
$
$
-
$
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
$
$
-
$
$
-
$
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements - Unaudited
26
USCB Financial Holdings, Inc.
Q2 2025 Form 10-Q
8.
STOCKHOLDERS’ EQUITY
Common Stock
There were
June 30,
2025, the
Company issued
pursuant to the Company’s 2015 equity incentive
plan.
During the
second quarter 2024,
the Company issued
stock awards pursuant to the Company’s 2015 equity incentive
plan. For the six month ended June 30, 2024 the Company
issued
equity incentive plan.
During the first quarter 2025, the Company repurchased
cost per share of $
. The aggregate purchase price for
these transactions was approximately $
transaction costs.
These repurchases
were made
pursuant to
the Company’s
publicly announced
repurchase
programs.
There
were
authorized for repurchase under the Company’s two stock
repurchase programs.
Shares of the Company’s Class A common stock issued and outstanding as of June 30, 2025 and December
31, 2024
were
, respectively.
Dividends
Declaration of dividends
by the Board
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
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 June 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
shareholders 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.
On January
21,
2025,
the
Board of
Directors
declared
a quarterly
cash
dividend.
The
quarterly
dividend
for the
first
quarter of 2025 was $
close of business
on February 14,
2025. The aggregate
distribution in connection
with the first quarter
2025 dividend was
$
June 5, 2025, to stockholders
of record as of close of
business on May 15, 2025.
The aggregate distribution in connection
with the second quarter dividend was $
The quarterly dividend for
the first quarter of
2024 was $
to stockholders
of record as
of the close
of business
on February 15,
2024. The aggregate
distribution in connection
with
the first
quarter dividend
was $
common stock, paid on June
5, 2024, to stockholders of
record as of the
close of business on May 15,
2024. The aggregate
distribution in connection with the second quarter dividend was
$
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements - Unaudited
27
USCB Financial Holdings, Inc.
Q2 2025 Form 10-Q
The following table details the dividends declared and paid by
the Company for the periods presented:
Six Months Ended June 30, 2025
Declaration Date
Record Date
Payment Date
Dividend Per Share
Dividend Amount
$
-
$
$
$
Six Months Ended June 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 June 30,
2025 and December
31, 2024.
At June 30, 2025,
the total risk
-based capital ratios
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 13, Subsequent Events, for information regarding
dividends declared in July 2025.
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 six months
ended June 30, 2025 and 2024 (in thousands):
Three Months Ended June 30,
Six Months Ended
June 30,
2025
2024
2025
2024
Net Income
$
$
$
$
Net income available to common shareholders
$
$
$
$
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements - Unaudited
28
USCB Financial Holdings, Inc.
Q2 2025 Form 10-Q
The following table reflects
the calculation of basic
and diluted earnings per
common share class
for the three
and six
months ended June 30, 2025 and 2024 (in thousands,
except share amounts):
Three Months Ended June 30,
Six Months Ended June 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.
SEGMENT REPORTING
Operating segments are components of an enterprise about which
separate financial information is available that is
evaluated regularly by the chief operating decision maker
(“CODM”) in assessing performance and in deciding how to
allocate resources. The Company’s CODM is the
President, Chief Executive Officer,
and Chairman of the Board.
The Company through the Bank, its sole direct subsidiary,
operates
wide range of personal and business banking products and services,
and through a subsidiary of the Bank, offers clients
title insurance policies for real estate transactions closed
at the Bank. The Company’s business activities
are similar in
their nature, operations and economic characteristics, largely serving
commercial and specialty banking clients with
products and services that are offered through similar
processes and platforms. Accounting policies for the products
and
services referenced here are the same as those described
in Note 1, “Summary of Significant Accounting Policies”
in this
From 10-Q. The Company’s segment revenue is
driven primarily by interest income on loans as well as fee
income from
the origination of loans and from fees charged on loans
and deposit accounts. Lending activities include loans
to
individuals, which primarily consist of home equity lines
of credit, residential real estate loans, yacht loans, and
consumer
loans, and loans to commercial clients, which include
commercial and industrial loans, commercial real estate
loans,
investor residential real estate loans, correspondent bank
loans, and letters of credit.
The CODM regularly reviews consolidated income and
expenses, as presented on the Consolidated Statements
of
Operations, in addition to consolidated assets presented on the
Consolidated Balance Sheets. The significant segment
expenses that the CODM reviews regularly are interest
expense, provision for credit losses, salaries and wages,
employee benefits, and occupancy expense. The CODM
evaluates the performance of the segment and allocates
resources based on net income that is also reported on
the Consolidated Statements of Operations as consolidated
net
income to maximize shareholder value. Additionally,
consolidated internal financial information is used by the
CODM to
monitor credit quality and credit loss expense. Furthermore,
net income, as the measure of profit or loss, is used
to
monitor budget versus actual results and to perform competitive
analyses that benchmark the Company to competitors.
As a result, the Company has determined that it has only
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements - Unaudited
29
USCB Financial Holdings, Inc.
Q2 2025 Form 10-Q
11.
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.
12.
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 six months ended June 30, 2025 the Bank purchased
$
parties. The Bank paid those entities net fees of $
During the year 2024, the Bank purchased $
The Bank paid those entities fees of $
Loan Originations
During the three months ended June 30, 2025, the Bank
acted as the lead arranger in a $
extended to an entity deemed to be a related party.
As of June 30, 2025, the Bank held an outstanding balance
of $
million related to this transaction. In connection with the syndication,
the Bank received a
-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
months ended March 31, 2025 and for the year ended December
31, 2024.
13.
SUBSEQUENT EVENTS
Dividends
On July
21, 2025, the
Company announced that
its Board
of Directors
declared its quarterly
cash dividend. The
quarterly
dividend for the third quarter of
2025 was $
to stockholders of record as of the close of business on August
15, 2025.
Derivatives
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
to the
extent the
hedge remains
effective. Management
believes this
instrument
strengthens the
Company’s interest rate risk management strategy by
mitigating the impact of rate movements on future cash flows.
In Augus
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
to the extent
the hedge remains
effective. Management believes
this instrument
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements - Unaudited
30
USCB Financial Holdings, Inc.
Q2 2025 Form 10-Q
strengthens the
Company’s interest
rate risk
management strategy
by mitigating
the impact
of rate
movements on
future
cash flows.
Debt Rating
Kroll Bond Rating Agency assigned both the Company and the Bank investment grade
debt ratings in July 2025.
31
USCB Financial Holdings, Inc.
Q2 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
six
months
ended
June 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.
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;
•
•
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;
•
•
•
•
and net interest margin;
•
•
employee, or third-party fraud and security breaches; and
•
32
USCB Financial Holdings, Inc.
Q2 2025 Form 10-Q
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 filed or will file with the SEC.
Overview
The Company
reported net
income of
$8.1 million
or $0.40
per diluted
share of
common stock
for the
three
months
ended June 30, 2025
compared to $6.2 million
or $0.31 per diluted
share of common stock for
the three months ended
June
30, 2024.
On January 21, 2025, the Company’s Board of Directors
declared the first quarter cash dividend of $0.10
per share on
the Company’s Class A common stock. The
dividend was paid
on March 5,
2025 to shareholders
of record at the
close of
business on February 15, 2025. The aggregate amount distributed in
connection with the quarterly cash dividend paid was
$2.0 million. The
second quarter cash
dividend of $0.10
per share on
the Company’s
Class A common stock was
paid on
June 5,
2025 to
shareholders
of record
at the
close
of business
on May
15, 2025.
The aggregate
amount distributed
in
connection with this dividend
was $2.0 million. Additionally, the
Company’s Board of
Directors declared a cash
dividend of
$0.10 per share of the
Company’s Class A
common stock on July 21,
2025. The dividend will
be paid on September 5,
2025
to shareholders of record at the close of business on August 15, 2025.
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
June 30, 2025 compared to at or for the quarter ended June 30, 2024 and as of December 31, 2024 and annualized where
appropriate:
•
$17.3 million for the quarter ended June 30, 2024.
•
months ended June 30, 2024.
•
2024 and an increase of $138.3 million or 10.8% annualized
from December 31, 2024.
•
increase of $244.1 million
or 13.1% from June
30,
2024 and an increase
of $140.5 million or
14.4% annualized from
December 31, 2024.
•
30, 2024 and an increase of $161.7 million or 15.0% annualized
from December 31, 2024.
•
quarter ended June 30, 2024.
•
12.63% for quarter ended June 30, 2024.
•
•
•
respectively.
•
increase of $0.72 or 13.5%
annualized from $10.81
at December 31, 2024. At June 30,
2025, tangible book value
33
USCB Financial Holdings, Inc.
Q2 2025 Form 10-Q
per common share
was negatively affected
by $2.08 due
to an accumulated
comprehensive loss
of $41.8 million.
At
December
31,
2024,
tangible
book
value
per
common
share
was
negatively
affected
by
$2.24
due
to
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.
•
offer various securities over
a period of
time, as needed, without
the requirement to file
a new registration statement
for each offering.
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.
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):
June 30, 2025
December 31, 2024
Consolidated Balance Sheets:
Total
assets
$
2,719,474
$
2,581,216
Total
loans
(1)
$
2,113,318
$
1,972,848
Total
deposits
$
2,335,661
$
2,174,004
Total
stockholders' equity
$
231,583
$
215,388
(1)
Loan amounts include deferred fees/costs.
34
USCB Financial Holdings, Inc.
Q2 2025 Form 10-Q
Three Months Ended June 30,
Six Months Ended
June 30,
2025
2024
2025
2024
Consolidated Statements of Operations:
Net interest income before provision for credit losses
$
21,034
$
17,311
$
40,149
$
32,469
Total
non-interest income
$
3,370
$
3,211
$
7,086
$
5,675
Total
non-interest expense
$
12,634
$
11,560
$
24,686
$
22,734
Net income
$
8,140
$
6,209
$
15,798
$
10,821
Profitability:
Efficiency ratio
51.77%
56.33%
52.26%
59.60%
Net interest margin
3.28%
2.94%
3.18%
2.78%
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 June 30, 2025 compared to the three
months ended June 30, 2024.
Net income
increased $1.9
million to
$8.1 million
for the
three months
ended June 30,
2025 from
$6.2 million
for the
same
period
in
2024. The
$1.9
million
or
31.1%
increase
in
net
income
was
primarily
driven
by
an
improvement
in
net
interest margin, resulting from a larger loan portfolio earning
higher yields, along with a reduction in interest expense.
Six months ended June 30, 2025 compared to the six
months ended June 30, 2024
Net income increased
to $15.8 million
for the six
months ended June
30, 2025
from $10.8 million
for the same
period
in 2024. The
$5.0 million or
46.0%
increase in net
income was
driven by an
improvement in
net interest margin,
resulting
from a larger loan portfolio earning higher yields, along with a reduction
in interest expense. 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-
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.
35
USCB Financial Holdings, Inc.
Q2 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 June 30,
2025
2024
Average
(1)
Balance
Interest
Yield/Rate
(2)
Average
(1)
Balance
Interest
Yield/Rate
(2)
Assets
Interest-earning assets:
Loans
(3)
$
2,057,445
$
31,946
6.23%
$
1,828,487
$
28,017
6.16%
Investment securities
(4)
449,624
3,432
3.06%
440,559
3,069
2.80%
Other interest-earnings assets
63,974
776
4.87%
100,371
1,531
6.13%
Total interest-earning assets
2,571,043
36,154
5.64%
2,369,417
32,617
5.54%
Non-interest-earning assets
106,155
109,805
Total assets
$
2,677,198
$
2,479,222
Liabilities and stockholders' equity
Interest-bearing liabilities:
Interest-bearing demand deposits
$
46,694
285
2.45%
$
56,369
391
2.79%
Saving and money market deposits
1,211,513
9,410
3.12%
1,101,272
10,071
3.68%
Time deposits
452,361
4,343
3.85%
315,872
3,222
4.10%
Total interest-bearing deposits
1,710,568
14,038
3.29%
1,473,513
13,684
3.74%
FHLB advances and other borrowings
116,527
1,082
3.72%
162,000
1,622
4.03%
Total interest-bearing liabilities
1,827,095
15,120
3.32%
1,635,513
15,306
3.76%
Non-interest-bearing demand deposits
580,121
610,370
Other non-interest-bearing liabilities
41,490
35,584
Total liabilities
2,448,706
2,281,467
Stockholders' equity
228,492
197,755
Total liabilities and stockholders' equity
$
2,677,198
$
2,479,222
Net interest income
$
21,034
$
17,311
Net interest spread
(5)
2.32%
1.78%
Net interest margin
(6)
3.28%
2.94%
(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.
36
USCB Financial Holdings, Inc.
Q2 2025 Form 10-Q
Six Months Ended June 30,
2025
2024
Average
Balance
(1)
Interest
Yield/Rate
(2)
Average
Balance
(1)
Interest
Yield/Rate
(2)
Assets
Interest-earning assets:
Loans
(3)
$
2,022,345
$
62,191
6.18
%
$
1,805,008
$
54,660
6.09
%
Investment securities
(4)
443,314
6,456
2.93
%
430,274
5,880
2.75
%
Other interest-earnings assets
69,547
1,485
4.29
%
112,808
2,964
5.28
%
Total interest-earning assets
2,535,206
70,132
5.56
%
2,348,090
63,504
5.44
%
Non-interest earning assets
106,885
109,572
Total assets
$
2,642,091
$
2,457,662
$
Liabilities and stockholders' equity
Interest-bearing liabilities:
Interest-bearing demand deposits
$
50,133
623
2.50
%
$
54,857
$
760
2.79
%
Saving and money market deposits
1,205,305
18,745
3.13
%
1,099,423
20,465
3.74
%
Time deposits
426,081
8,261
3.90
%
319,392
6,516
4.10
%
Total interest-bearing deposits
1,681,519
27,629
3.30
%
1,473,672
27,741
3.79
%
FHLB advances and other borrowings
127,674
2,354
3.71
%
163,093
3,294
4.06
%
Total interest-bearing liabilities
1,809,193
29,983
3.33
%
1,636,765
31,035
3.81
%
Non-interest bearing demand deposits
571,627
592,565
Other non-interest-bearing liabilities
37,247
32,908
Total liabilities
2,418,067
2,262,238
Stockholders' equity
224,024
195,424
Total liabilities and stockholders' equity
$
2,642,091
$
2,457,662
Net interest income
$
40,149
$
32,469
Net interest spread
(5)
2.23
%
1.63
%
Net interest margin
(6)
3.18
%
2.78
%
(1)
Average balances - Daily average balances are used
to calculate yields/rates.
(2)
Annualized.
(3)
Average loan balances include 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 June 30, 2025 compared to the three
months ended June 30, 2024.
Net interest income before the provision
for credit losses was $21.0 million
for the three months ended June
30, 2025.
The increase of $3.7
million or 21.5% was
primarily driven by
higher income from
an expanded loan portfolio,
an increase
in the weighted average loan yield, and a reduction in rates
paid on interest-bearing liabilities between periods.
Net interest
margin (“NIM”)
was 3.28%
for the
three months
ended June 30,
2025 and
2.94% for
the same
period in
2024. The
NIM expansion of
34 basis
points reflects both
higher loan
yields and growth
in the loan
portfolio average balance,
along with a decrease in interest rates paid on interest-bearing
liabilities.
Six months ended June 30, 2025 compared to the six months ended
June 30, 2024
Net interest income before the provision for credit losses was $40.1 million for the six months ended June 30, 2025, an
increase of $7.7 million or
23.7%, from $32.5 million for the
same period in 2024. This
growth was primarily driven by higher
income from an
expanded loan
portfolio, an increase
in the weighted
average loan yield,
and a reduction
in rates paid
on
interest-bearing liabilities between periods.
The NIM
was 3.18%
for the
six months
ended June 30, 2025
and 2.78%
for the
same period
in 2024.
The NIM
expansion
of 40 basis points reflects both higher loan yields and growth in the loan average balance, along with a decrease in interest
rates paid on interest-bearing liabilities.
37
USCB Financial Holdings, Inc.
Q2 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
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 June 30, 2025 compared to the three
months ended June 30, 2024.
The provision for credit loss was
$1.0 million for the three months
ended June 30, 2025 compared to $786 thousand for
the same period in 2024.
Growth in the loan portfolio
was the primary driver
of the increase in the
provision expense. This
impact was partially offset by the release of
reserves related to individually evaluated loans, following a charge-off recorded
during the second quarter of 2025.
Six months ended June 30, 2025 compared to the six months ended
June 30, 2024
The provision for credit
loss was $1.7
million for the six
months ended June 30,
2025 compared to
$1.2 million for the
same
period
in
2024.
Growth
in the
loan
portfolio
was
the
primary
driver
of
the
increase
in
the
provision
expense.
This
impact was partially offset by the release of
reserves related to individually evaluated loans, following a charge-off recorded
during the second quarter of 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 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 June 30,
Six Months Ended June 30,
2025
2024
2025
2024
Service fees
$
2,402
$
1,977
$
4,733
$
3,628
Gain on sale of securities available for sale, net
-
14
-
14
Gain on sale of loans held for sale, net
151
417
676
484
Other non-interest income
817
803
1,677
1,549
Total
non-interest income
$
3,370
$
3,211
$
7,086
$
5,675
Three months ended June 30, 2025 compared to the three
months ended June 30, 2024.
Non-interest
income for
the
three months
ended June
30, 2025
increased
$159 thousand
or 5.0%,
compared
to the
same
period
in
2024. This
increase
was
primarily
driven
by
growth
in
prepayment
penalties
and
title
insurance
income
reported under service fees category.
Six months ended June 30, 2025 compared to the six months ended
June 30, 2024
Non-interest income
for the six
months ended
June 30, 2025
increased $1.4
million or 24.9%,
compared to
the same
period in 2024.
This increase
was primarily
driven by growth
in prepayment
penalties and title
insurance income
reported
under service fees category combined with an increase in
the gain on sale of loans.
38
USCB Financial Holdings, Inc.
Q2 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 June 30,
Six Months Ended June 30,
2025
2024
2025
2024
Salaries and employee benefits
$
7,954
$
7,353
$
15,590
$
13,663
Occupancy
1,337
1,266
2,621
2,580
Regulatory assessment and fees
396
476
817
909
Consulting and legal fees
263
263
456
855
Network and information technology services
564
479
1,069
986
Other operating
2,120
1,723
4,133
3,741
Total
non-interest expense
$
12,634
$
11,560
$
24,686
$
22,734
Three months ended June 30, 2025 compared to the three
months ended June 30, 2024.
Non-interest expense for the
three months ended the
June 30, 2025 increased
$1.1 million, or 9.3%,
compared to the
same period
in 2024.
The increase was
primarily driven by
a $601
thousand rise
in salaries
and employee
benefits, reflecting
merit increases
and higher
stock-based compensation
expense. Additionally, other
operating expense
increased by
$397
thousand, largely due to a reimbursement
of force-placed insurance expense
received in the second quarter
of 2024. This
reimbursement reduced expenses in that period, making the
second quarter of 2025 appear higher by comparison.
Six months ended June 30, 2025 compared to the six months ended
June 30, 2024
Non-interest expense
for the six
months ended June
30, 2025 increased
$2.0 million or
8.6%, compared
to the same
period in 2024.
The increase
was primarily
driven by an
increase of
$1.9 million
in salaries and
employee benefits
due to
increase of $882
thousand in merit
increases and new
full-time employee salaries,
$318 thousand in
payroll taxes and
group
insurance expense, and $727 thousand in stock-based
compensation expense.
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 June 30, 2025 compared to the three
months ended June 30, 2024.
Income tax
expense for
the three
months ended
June 30,
2025 was
$2.6 million
as compared
to $2.0
million for
the
same period in 2024 and reflected the substantially increased level of net income
experienced during the 2025 period. The
effective tax rate for the three months ended June 30,
2025 was 24.2% compared to 24.1% for the same period
in 2024.
Six months ended June 30, 2025 compared to the six months ended
June 30, 2024
Income tax expense for the six months ended June 30, 2025 was $5.0 million as compared to $3.4 million for
the same
period
in
2024
and
reflected
the
substantially
increased
level
of
net
income
experienced
during
the
2025
period.
The
effective tax rate for the six months ended June 30,
2025 was 24.2% compared to 23.9% 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.
Analysis of Financial Condition
Total
assets at June 30, 2025 were
$2.72 billion, an increase
of $138.3 million, or 10.8%
annualized, over total assets
of
$2.58
billion
at
December 31,
2024.
Total
loans,
net
of
deferred
fees/costs,
increased
$140.5
million,
or
14.4%
annualized, to $2.11
billion at June 30, 2025 compared to
$1.97 billion at December 31, 2024. Total
deposits increased by
$161.7 million,
or 15.0% annualized, to $2.34 billion at June 30, 2025 compared
to $2.17 billion December 31, 2024.
39
USCB Financial Holdings, Inc.
Q2 2025 Form 10-Q
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 June 30, 2025.
At
quarter
end,
HTM
securities
included
$149.6
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
$7 thousand
ACL as
of June 30,
2025. The
book value
for debt
securities
classified as
HTM
represents amortized cost less ACL.
Aggregate
AFS
and
HTM
investment
securities
increased
$19.2 million,
or
9.1%
annualized,
to
$444.1 million
at
June 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 June 30, 2025,
investment securities with a market value of $49.6 million were pledged to secure public deposits.
The investment portfolio does not have any tax-exempt
securities.
40
USCB Financial Holdings, Inc.
Q2 2025 Form 10-Q
The following table
presents the amortized
cost and fair
value of investment
securities for
the dates indicated
(dollars
in thousands):
June 30, 2025
December 31, 2024
Available-for-sale:
Amortized
Cost
Fair Value
Amortized
Cost
Fair Value
U.S. Government Agency
$
16,308
$
14,850
$
14,279
$
12,625
Collateralized mortgage obligations
97,459
76,724
101,808
78,905
Mortgage-backed securities - residential
62,002
50,987
58,995
46,933
Mortgage-backed securities - commercial
104,782
96,524
86,604
78,739
Municipal securities
24,885
19,831
24,925
19,311
Bank subordinated debt securities
26,873
26,466
24,314
23,708
$
332,309
$
285,382
$
310,925
$
260,221
Held-to-maturity:
U.S. Government Agency
$
41,716
$
37,584
$
42,538
$
37,444
Collateralized mortgage obligations
54,312
47,937
56,987
49,259
Mortgage-backed securities - residential
38,404
34,555
40,681
36,121
Mortgage-backed securities - commercial
15,182
13,889
15,272
13,887
Corporate bonds
9,133
8,912
9,222
8,829
$
158,747
$
142,877
$
164,700
$
145,540
Allowance for credit losses - securities held-to-maturity
(7)
(6)
Securities held-to maturity, net of allowance for credit losses
$
158,740
$
164,694
The following
table shows
the weighted
average yields,
categorized by
contractual maturity,
for investment
securities
as of June 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
$
-
-
$
-
-
$
5,374
4.20%
$
10,933
4.18%
$
16,308
4.19%
Collateralized mortgage obligations
-
-
-
-
-
-
97,459
1.61%
97,459
1.61%
MBS - residential
-
-
-
-
-
-
62,002
2.11%
62,002
2.11%
MBS - commercial
-
-
1,594
4.41%
4,092
4.71%
99,097
3.97%
104,782
4.01%
Municipal securities
-
-
-
-
20,645
1.73%
4,240
1.86%
24,885
1.75%
Bank subordinated debt securities
-
-
7,925
9.13%
18,948
4.96%
-
-
26,873
6.19%
$
-
-
$
9,519
8.34%
$
49,058
3.50%
$
273,732
2.68%
$
332,309
2.97%
Held-to-maturity:
U.S. Government Agency
$
2,997
1%
$
4,967
1.25%
$
19,866
1.44%
$
13,886
1.85%
$
41,716
1.50%
Collateralized mortgage obligations
-
-
-
-
-
-
54,312
1.65%
54,312
1.65%
MBS - residential
-
-
3,818
1.71%
5,865
1.75%
28,721
2.32%
38,404
2.17%
MBS - commercial
-
-
3,050
1.62%
-
-
12,132
2.57%
15,182
2.38%
Corporate bonds
9,133
2.81%
-
-
-
-
-
-
9,133
2.81%
$
12,130
2.27%
$
11,835
1.49%
$
25,731
1.51%
$
109,051
1.95%
$
158,747
1.87%
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.
41
USCB Financial Holdings, Inc.
Q2 2025 Form 10-Q
The following table shows the loan portfolio composition
as of the dates indicated (in thousands):
June 30, 2025
December 31, 2024
Total
Percent of
Total
Total
Percent of
Total
Residential Real Estate
$
307,020
14.6
%
$
289,961
14.8
%
Commercial Real Estate
1,206,621
57.3
%
1,136,417
57.8
%
Commercial and Industrial
263,966
12.5
%
258,311
13.1
%
Correspondent Banks
110,155
5.2
%
82,438
4.2
%
Consumer and Other
218,426
10.4
%
198,091
10.1
%
Total
gross loans
2,106,188
100.0
%
1,965,218
100.0
%
Plus: Deferred fees/costs
7,130
7,630
Total
loans net of deferred fees/costs
2,113,318
1,972,848
Less: Allowance for credit losses
24,933
24,070
Total
net loans
$
2,088,385
$
1,948,778
Total
loans, net
of deferred
fees/costs, increased
by $140.5 million,
or 14.4%
annualized to
$2.11
billion, at
June 30,
2025 compared to
December 31, 2024. The
commercial real estate
loan segment had
the most significant
growth compared
to December 31, 2024.
Our
loan
portfolio
continues
to
grow,
with
commercial
real
estate
lending
as
the
primary
focus
which
represented
approximately
57.3%
of the
total gross
loan portfolio
as of
June 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.
Most of the
commercial real estate
exposure represents
loans to commercial
businesses secured
by owner-occupied
real estate.
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 June 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
$
17,952
$
44,877
$
64,545
$
179,646
$
307,020
Commercial Real Estate
88,561
441,689
670,767
5,604
1,206,621
Commercial and Industrial
10,922
86,096
122,542
44,406
263,966
Correspondent Banks
110,155
-
-
-
110,155
Consumer and Other
2,218
1,534
20,038
194,636
218,426
Total
gross loans
$
229,808
$
574,196
$
877,892
$
424,292
$
2,106,188
Interest rate sensitivity:
Fixed interest rates
$
187,629
$
189,334
$
151,576
$
333,915
$
862,454
Floating or adjustable rates
42,179
384,862
726,316
90,377
1,243,734
Total
gross loans
$
229,808
$
574,196
$
877,892
$
424,292
$
2,106,188
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
June 30,
2025,
approximately
59.1%
of the
loan
portfolio
has
adjustable/variable
rates
and
40.9%
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.
42
USCB Financial Holdings, Inc.
Q2 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):
June 30, 2025
Pass
Special Mention
Substandard
Doubtful
Total
Residential Real Estate
$
303,536
$
2,925
$
559
$
-
$
307,020
Commercial Real Estate
1,198,870
5,327
2,424
-
1,206,621
Commercial and Industrial
260,342
965
2,659
-
263,966
Correspondent Banks
110,155
-
-
-
110,155
Consumer and Other
218,426
-
-
-
218,426
$
2,091,329
$
9,217
$
5,642
$
-
$
2,106,188
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
43
USCB Financial Holdings, Inc.
Q2 2025 Form 10-Q
Non-Performing Assets
The following table presents non-performing assets as
of the dates shown (in thousands,
except ratios):
June 30, 2025
December 31, 2024
Non-accrual loans
$
1,366
$
2,707
Loans past due over 90 days and still accruing
-
-
Total
non-performing loans
$
1,366
$
2,707
Other real estate owned
-
-
Total
non-performing assets
$
1,366
$
2,707
Asset quality ratios:
Allowance for credit losses to total loans
1.18%
1.22%
Allowance for credit losses to non-performing loans
1,825%
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 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.
44
USCB Financial Holdings, Inc.
Q2 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 June 30, 2025
Beginning balance
$
5,115
$
9,197
$
4,434
$
817
$
5,177
$
24,740
Provision for credit losses
(1)
356
294
73
57
115
895
Recoveries
6
-
1
-
1
8
Charge-offs
-
-
-
-
(710)
(710)
Ending Balance
$
5,477
$
9,491
$
4,508
$
874
$
4,583
$
24,933
Average loans
$
299,857
$
1,167,698
$
265,465
$
101,776
$
222,649
$
2,057,445
Net charge-offs (recoveries) to average
loans
(2)
(0.01)%
-
(0.00)%
-
1.28%
0.14%
Six Months Ended June 30, 2025
Beginning balance
$
5,121
$
8,788
$
4,633
$
654
$
4,874
$
24,070
Provision for credit losses
(3)
344
703
(131)
220
431
1,567
Recoveries
12
-
6
-
1
19
Charge-offs
-
-
-
-
(723)
(723)
Ending Balance
$
5,477
$
9,491
$
4,508
$
874
$
4,583
$
24,933
Average loans
$
300,560
$
1,155,436
$
261,377
$
94,516
$
210,456
$
2,022,345
Net charge-offs (recoveries) to average
loans
(2)
(0.01)%
-
(0.00)%
-
0.69%
0.07%
(1) Provision for credit losses excludes a $134 thousand provision due to unfunded commitments included in accrued interest and
other liabilities and a $2 thousand provision related to investment securities held to maturity.
(2) Annualized.
(3) Provision for credit losses excludes a $144 thousand provision due to unfunded commitments included in accrued interest and
other liabilities and a $1 thousand provision related to investment securities held to maturity.
45
USCB Financial Holdings, Inc.
Q2 2025 Form 10-Q
Residential
Real Estate
Commercial
Real Estate
Commercial
and
Industrial
Correspondent
Banks
Consumer
and Other
Total
Three Months Ended June 30, 2024
Beginning balance
$
2,930
$
10,302
$
4,272
$
794
$
3,156
$
21,454
Provision for credit losses
(1)
257
(30)
474
98
(25)
774
Recoveries
6
-
1
-
-
7
Charge-offs
-
-
-
-
(5)
(5)
Ending Balance
$
3,193
$
10,272
$
4,747
$
892
$
3,126
$
22,230
Average loans
$
231,807
$
1,064,636
$
232,019
$
102,597
$
197,428
$
1,828,487
Net charge-offs (recoveries) to average
loans
(0.01)%
-
(0.00)%
-
0.01%
0.00%
Six Months Ended June 30, 2024
Beginning balance
$
2,695
$
10,366
$
3,974
$
911
$
3,138
$
21,084
Provision for credit losses
(3)
492
(94)
762
(19)
(4)
1,137
Recoveries
6
-
11
-
2
19
Charge-offs
-
-
-
-
(10)
(10)
Ending Balance
$
3,193
$
10,272
$
4,747
$
892
$
3,126
$
22,230
Average loans
$
228,830
$
1,050,965
$
229,040
$
101,280
$
194,893
$
1,805,008
Net charge-offs (recoveries) to average
loans
(0.01)%
-
(0.01)%
-
0.01%
0.00%
(1) Provision for credit losses excludes a $15 thousand provision due to unfunded commitments included in accrued interest and other
liabilities and a $3 thousand release related to investment securities held to maturity.
(2) Annualized.
(3) Provision for credit losses excludes $58 thousand provision due to unfunded commitments included in accrued interest and other
liabilities and $1 thousand provision due to investment securities held to maturity.
The
Federal
Open
Market
Committee
(“FOMC”)
economic
forecasts
as
of
June
30,
2025,
showed
moderate
deterioration
in
unemployment
and
forecast
for
real
GDP.
Fannie
Mae
House
Price
Index
(“HPI”)
forecast
reflected
a
deterioration in
national housing
prices as
well. 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 portfo
lio 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
June 30, 2025,
for every 100
basis points increase
in the HPI,
the
forecast
reduces
reserves
by
approximately
$353
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 June 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
$9.4 million
or 36.4%
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 June 30,
2025, the combined
cash surrender value
of all bank-owned
life insurance (“BOLI”)
policies was $58.4
million. Changes in cash surrender value are recorded to 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.
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
46
USCB Financial Holdings, Inc.
Q2 2025 Form 10-Q
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 June 30,
2025
2024
Average Balance
Average Rate
Paid
Average Balance
Average Rate
Paid
Non-interest bearing demand deposits
$
580,121
0.00%
$
610,370
0.00%
Interest-bearing demand deposits
46,694
2.45%
56,369
2.79%
Saving and money market deposits
1,211,513
3.12%
1,101,272
3.68%
Time deposits
452,361
3.85%
315,872
4.10%
Total
$
2,290,689
2.46%
$
2,083,883
2.64%
The Company
has a
granular deposit
portfolio with
outstanding balances
comprised of
57% in
commercial
deposits,
28% in personal deposits, 8% in public funds (which are
partially collateralized) and 8% in brokered deposits. The brokered
deposits balance at June 30, 2025 was $188.0 million
and was $133.0 million at December 31, 2024.
As
of
June
30,
2025,
the
Company
has
approximately
21
thousand
deposit
accounts
with
the
majority
in
personal
accounts,
approximately
13
thousand
or
61.4%.
The
estimated
average
account
size
of
our
deposit
portfolio
was
approximately $113
thousand as of June 30, 2025.
The 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
52% at June 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 $143.4
million at June 30, 2025 and was $125.5 million at December
31, 2024.
The following table shows scheduled maturities of uninsured
time deposits as of June 30, 2025 (in thousands):
June 30, 2025
Three months or less
$
53,680
Over three through six months
25,041
Over six though twelve months
11,888
Over twelve months
40,376
$
130,985
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.
As of June 30, 2025, escrow balances totaled $20.9 million
compared to $6.1 million at December 31, 2024
.
Borrowings
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 June 30, 2025, we had $108.0 million of fixed-rate advances outstanding from
the FHLB with a weighted average
rate of 3.60%. Maturity dates for the advances range
between 2025 to 2028 as detailed in the table below.
47
USCB Financial Holdings, Inc.
Q2 2025 Form 10-Q
The following table presents the FHLB advances as of
June 30, 2025 (in thousands):
Interest Rate
Type of Rate
Maturity Date
Amount
1.07%
Fixed
July 18, 2025
$
6,000
3.76%
Fixed
January 24, 2028
11,000
3.77%
Fixed
April 25, 2028
50,000
3.68%
Fixed
September 13, 2027
21,000
3.79%
Fixed
March 23, 2026
20,000
$
108,000
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
June 30, 2025, there were no outstanding balances with any
of these liquidity sources.
Off-Balance Sheet Arrangements
We engage
in various financial
transactions in
our operations
that, under GAAP,
may not be
included on
the balance
sheet. To
meet the financing needs of our customers,
we may include commitments to extend credit and standby
letters of
credit. To
a varying
degree, such
commitments involve
elements of
credit, market,
and interest
rate risk
in excess
of the
amount recognized
in the
balance sheet.
We use
more conservative
credit and
collateral policies
in making
these credit
commitments than
we do
for on-balance
sheet items.
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 June 30, 2025 was
$716 thousand and at December 31, 2024
was $571 thousand. The increase
was primarily driven by an increase
in unfunded commitments and to
a lesser degree by the deterioration
of the estimated
loss rate.
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
):
June 30, 2025
December 31, 2024
Commitments to grant loans and unfunded lines of credit
$
124,051
$
122,578
Standby and commercial letters of credit
2,616
5,389
Total
$
126,667
$
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
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.
48
USCB Financial Holdings, Inc.
Q2 2025 Form 10-Q
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 rates
scenarios and
time horizons.
These simulations
utilize both
instantaneous and
parallel changes
in the
level of
interest rates,
as well
as
non-parallel changes such as
changing slopes (flat and 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 detailed
assumptions outlined in
our
budget and strategic plan, and in assumptions regarding changes in
existing lines of business, new business, management
strategies and client expected behavior.
To
have
a
more
complete
picture
of
IRR,
the
Company
also
evaluates
the
economic
value
of
equity
(“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 June 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. Asset
sensitivity indicates
that our
assets generally
reprice
faster than
our liabilities,
which results
in a
favorable
impact to
net interest
income when
market interest
rates
increase.
Liability sensitivity
indicates that
our liabilities generally
reprice faster
than our
assets, which
results in a
favorable impact
to net interest income when market interest rates
decrease. 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.
According to our
model, as of
June 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.
49
USCB Financial Holdings, Inc.
Q2 2025 Form 10-Q
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
fed funds
lines 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.
Capital Adequacy
As
of
June 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 June
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
June 30, 2025
Total
risk-based capital
$
287,836
13.67
%
$
168,507
8.00
%
$
210,634
10.00
%
Tier 1 risk-based capital
$
262,180
12.45
%
$
126,380
6.00
%
$
168,507
8.00
%
Common equity tier 1 capital
$
262,180
12.45
%
$
94,785
4.50
%
$
136,912
6.50
%
Leverage ratio
$
262,180
9.65
%
$
108,629
4.00
%
$
135,786
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
50
USCB Financial Holdings, Inc.
Q2 2025 Form 10-Q
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.
51
USCB Financial Holdings, Inc.
Q2 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
6/30/2025
3/31/2025
12/31/2024
9/30/2024
6/30/2024
Pre-tax pre-provision ("PTPP") income:
(1)
Net income
$
8,140
$
7,658
$
6,904
$
6,949
$
6,209
Plus: Provision for income taxes
2,599
2,440
2,197
2,213
1,967
Plus: Provision for credit losses
1,031
681
1,030
931
786
PTPP income
$
11,770
$
10,779
$
10,131
$
10,093
$
8,962
PTPP return on average assets:
(1)
PTPP income
$
11,770
$
10,779
$
10,131
$
10,093
$
8,962
Average assets
$
2,677,198
$
2,606,593
$
2,544,592
$
2,485,434
$
2,479,222
PTPP return on average assets
(2)
1.76%
1.68%
1.58%
1.62%
1.45%
Operating net income:
(1)
Net income
$
8,140
$
7,658
$
6,904
$
6,949
$
6,209
Less: Net gains (losses) on sale of securities
-
-
-
-
14
Less: Tax effect on sale of securities
-
-
-
-
(4)
Operating net income
$
8,140
$
7,658
$
6,904
$
6,949
$
6,199
Operating PTPP income:
(1)
PTPP income
$
11,770
$
10,779
$
10,131
$
10,093
$
8,962
Less: Net gains (losses) on sale of securities
-
-
-
-
14
Operating PTPP income
$
11,770
$
10,779
$
10,131
$
10,093
$
8,948
Operating PTPP return on average assets:
(1)
Operating PTPP income
$
11,770
$
10,779
$
10,131
$
10,093
$
8,948
Average assets
$
2,677,198
$
2,606,593
$
2,544,592
$
2,485,434
$
2,479,222
Operating PTPP return on average assets
(2)
1.76%
1.68%
1.58%
1.62%
1.45%
Operating return on average assets:
(1)
Operating net income
$
8,140
$
7,658
$
6,904
$
6,949
$
6,199
Average assets
$
2,677,198
$
2,606,593
$
2,544,592
$
2,485,434
$
2,479,222
Operating return on average assets
(2)
1.22%
1.19%
1.08%
1.11%
1.01%
Operating return on average equity:
(1)
Operating net income
$
8,140
$
7,658
$
6,904
$
6,949
$
6,199
Average equity
$
228,492
$
219,505
$
215,715
$
206,641
$
197,755
Operating return on average equity
(2)
14.29%
14.15%
12.73%
13.38%
12.61%
Operating Revenue:
(1)
$
21,034
$
19,115
$
19,358
$
18,109
$
17,311
3,370
3,716
3,627
3,438
3,211
-
-
-
-
14
$
24,404
$
22,831
$
22,985
$
21,547
$
20,508
Operating Efficiency Ratio:
(1)
$
12,634
$
12,052
$
12,854
$
11,454
$
11,560
$
24,404
$
22,831
$
22,985
$
21,547
$
20,508
51.77%
52.79%
55.92%
53.16%
56.37%
(1)
The Company believes these non-GAAP measurements
are key indicators of the ongoing earnings
power of the Company.
(2)
Annualized.
52
USCB Financial Holdings, Inc.
Q2 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
6/30/2025
3/31/2025
12/31/2024
9/30/2024
6/30/2024
Tangible book value per common share (at period-end):
(1)
Total stockholders' equity
$
231,583
$
225,088
$
215,388
$
213,916
$
201,020
Less: Intangible assets
-
-
-
-
-
Tangible stockholders' equity
$
231,583
$
225,088
$
215,388
$
213,916
$
201,020
Total shares issued and outstanding (at period-end):
Total common shares issued and outstanding
20,078,385
20,048,385
19,924,632
19,620,632
19,630,632
Tangible book value per common share
(2)
$
11.53
$
11.23
$
10.81
$
10.90
$
10.24
Operating diluted net income per common share:
(1)
Operating net income
$
8,140
$
7,658
$
6,904
$
6,949
$
6,199
Total weighted average diluted shares of common stock
20,295,794
20,319,535
20,183,731
19,825,211
19,717,167
Operating diluted net income per common share:
$
0.40
$
0.38
$
0.34
$
0.35
$
0.31
Tangible Common Equity/Tangible Assets
(1)
$
231,583
$
225,088
$
215,388
$
213,916
$
201,020
(3)
$
2,719,474
$
2,677,382
$
2,581,216
$
2,503,954
$
2,458,270
Tangible Common Equity/Tangible
Assets
8.52%
8.41%
8.34%
8.54%
8.18%
(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 total assets is the same amount
as total assets calculated under GAA
P.
53
USCB Financial Holdings, Inc.
Q2 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
June 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.
54
USCB Financial Holdings, Inc.
Q2 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) There were
no repurchases of
equity securities during
any month in
the three months
ended June 30,
2025. As of
June 30,
2025 the
maximum number
of shares
that may
yet be
purchased
under the
Company’s
Board approved
stock
repurchase programs was 528,309 shares.
Item 3.
Defaults Upon Senior Securities
(a)
(b)
Item 4.
Mine Safety Disclosures
Not applicable.
Item 5. Other Information
(a)
(b)
(c)
terms are defined in Item 408 of the SEC’s Regulation
S-K).
55
USCB Financial Holdings, Inc.
Q2 2025 Form 10-Q
Item 6. Exhibits
Exhibit No.
Description of Exhibit
**
**
***
***
101
The following financial statements
from the Company’s Quarterly
Report on Form
10-Q for the
quarter ended June 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.
Q2 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
August 8, 2025
Luis de la Aguilera
(Principal Executive Officer)
/s/ Robert Anderson
Executive Vice President and Chief Financial
Officer
August 8, 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