10-K
USCB FINANCIAL HOLDINGS, INC. (USCB)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
10-K
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended
December 31 , 2025
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:
001-41196
USCB Financial Holdings, Inc.
(Exact name of registrant as specified in its
charter)
Florida
87-4070846
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
2301 NW 87th Avenue
,
Doral
,
FL
33172
(Address of principal executive offices) (zip
code)
Registrant’s telephone number, including area code:
(
305
)
715-5200
Securities registered pursuant to Section 12(b)
of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Class A Common Stock, $1.00 par value per
share
USCB
The Nasdaq Stock Market LLC
Securities registered pursuant to Section 12(g)
of the Act:
None
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities Act.
☐
Yes
No
☒
Indicate by check mark if the registrant is not required
to file reports pursuant to Section 13 or Section
15(d) of the Act.
Yes
☐
No
☒
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.
Yes
☒
No
☐
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).
Yes
☒
No
☐
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
☐
Accelerated filer
☒
Non-accelerated filer
☐
Smaller reporting company
☒
Emerging growth company
☒
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 has
filed a report on
and attestation to its
management’s assessment of the
effectiveness of its internal
control over
financial reporting
under Section
404(b) of
the Sarbanes-Oxley
Act (15
U.S.C.7262(b)) by
the registered
public accounting
firm that
prepared or issued its audit report.
☐
If securities are registered pursuant to Section 12(b) of the Act, indicate
by check mark whether the financial statements of the registrant included in
the filing reflect the correction of an error to previously
issued financial statements.
☐
Indicate by check mark whether any of those
error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrant’s executive officers during
the relevant recovery period pursuant to §240.10D-1(b).
☐
Indicate by check mark whether the registrant is a
shell company (as defined in Rule 12b-2 of the
Securities Exchange Act of 1934). Yes
☐
No
☒
The aggregate market value of the voting stock
held by non-affiliates of the registrant based on
the closing price of $16.54 per share on
June 30,
2025
, the last business day of the registrant’s second quarter, was approximately $
173.0
million (20,078,385 shares issued and outstanding
at
such date less shares held by affiliates). Although directors
and executive officers and their affiliates of the Registrant were
assumed to be
“affiliates” of the Registrant for purposes of the calculation,
the classification is not to be interpreted as an admission
of such status.
As of February 28, 2026, the registrant had
18,256,986
shares of Class A Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of the registrant’s Proxy Statement for the 2026 Annual Meeting of Shareholders (the “2026
Proxy Statement”) are incorporated by
reference into Part III of this report.
FORM 10-K
DECEMBER 31, 2025
TABLE OF CONTENTS
Cautionary Note Regarding Forward-Looking Statements
PART I
4
Item 1.
Business
4
Item 1A.
Risk Factors
21
Item 1B.
Unresolved Staff Comments
47
Item 1C.
Cybersecurity
47
Item 2.
Properties
49
Item 3.
Legal Proceedings
49
Item 4.
Mine Safety Disclosures
49
PART II
50
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
50
Item 6.
Reserved
51
Item 7.
Management's Discussion and Analysis of Financial Condition and Results of Operations
52
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
75
Item 8.
Financial Statements and Supplementary Data
76
Consolidated Balance Sheets
78
Consolidated Statements of Operations
79
Consolidated Statements of Comprehensive Income
80
Consolidated Statements of Changes in Stockholders’ Equity
81
Consolidated Statements of Cash Flows
82
Notes to the Consolidated Financial Statements
84
Item 9.
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
124
Item 9A.
Controls and Procedures
124
Item 9B.
Other Information
124
Item 9C.
Disclosure Regarding Foreign Jurisdictions That Prevent Inspections
125
PART III
126
Item 10.
Directors, Executive Officers and Corporate Governance
126
Item 11.
Executive Compensation
126
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
126
Item 13.
Certain Relationships and Related Transactions, and Director Independence
126
Item 14.
Principal Accountant Fees and Services
126
PART IV
127
Item 15.
Exhibits and Financial Statement Schedules
127
Item 16.
Form 10-K Summary
129
Exhibit Index
128
Signatures
3
USCB Financial Holdings, Inc.
2025 10-K
CAUTIONARY NOTE REGARDING FORWARD
-LOOKING STATEMENTS
This
Annual
Report
on
Form
10-K
contains
statements
that
are
not
historical
in
nature
are
intended
to
be,
and
are
hereby identified as, forward-looking
statements for purposes of
the safe harbor provided by
Section 21E of the Securities
Exchange
Act
of
1934,
as
amended
(“Exchange
Act”).
The
words
“may,”
“will,”
“anticipate,”
“could,”
“should,”
“would,”
“believe,” “contemplate,” “expect,” “aim,” “plan,” “estimate,” “continue,” and “intend,”
the negative of these terms, as well as
other similar
words and
expressions of
the future,
are intended
to identify
forward-looking statements. These
forward-looking
statements include statements related to
our projected growth, anticipated future
financial performance, and management’s
long-term performance goals, as well as statements relating to the anticipated effects on results of operations and financial
condition from expected
developments or events,
or business
and growth strategies,
including anticipated
internal growth
and potential future additional balance sheet restructuring.
These forward-looking statements involve significant risks and uncertainties that could cause our actual results to differ
materially from those anticipated in such statements.
Potential risks and uncertainties include, but are not
limited to:
•
the strength of the United States economy
in general and the strength of the local
economies in which we conduct
operations;
•
our ability to successfully manage interest rate risk, credit
risk, liquidity risk, and other risks inherent to our industry;
•
the accuracy of our financial statement estimates and assumptions, including the estimates used for our credit loss
reserve and deferred tax asset valuation allowance;
•
the efficiency and effectiveness of our
internal control procedures and processes;
•
our ability
to comply
with the
extensive laws
and regulations
to which
we are
subject, including
the laws
for each
jurisdiction where we operate;
•
adverse
changes
or
conditions
in
the
capital
and
financial
markets,
including
actual
or
potential
stresses
in
the
banking industry;
•
deposit attrition and the level of our uninsured deposits;
•
legislative
or
regulatory
changes,
including
the
enactment
of
the
One
Big
Beautiful
Bill
Act,
and
changes
in
accounting principles, policies, practices
or guidelines, including
the on-going effects of
the Current Expected
Credit
Losses (“CECL”) standard;
•
the lack of a significantly diversified loan portfolio and concentration in the South Florida market, including the risks
of geographic, depositor,
and industry concentrations,
including our concentration
in loans secured by
real estate,
in particular, commercial real estate;
•
the effects of climate change;
•
the concentration of ownership of our common stock;
•
fluctuations in the price of our common stock;
•
our ability to fund or access the capital markets at attractive
rates and terms and manage our growth, both organic
growth as well as growth through other means, such as
future acquisitions;
•
inflation, interest rate, unemployment rate, market, and monetary
fluctuations;
•
the effects of potential new or increased tariffs,
retaliatory tariffs and trade restrictions;
•
impacts of international hostilities and geopolitical events;
•
increased
competition
and
its
effect
on
the
pricing
of
our
products
and
services
as
well
as
our
net
interest
rate
spread and net interest margin;
•
the loss of key employees;
•
the effectiveness of our risk management strategies, including operational risks, including, but not limited to, client,
employee, or third-party fraud and security breaches; and
•
other
risks
described
in
this
Annual
Report
on
Form
10-K
and
other
filings
we
make
with
the
Securities
and
Exchange Commission (“SEC”).
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
Annual Report
on Form
10-K 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 this Annual
Report on Form 10-K and in the reports USCB Financial
Holdings, Inc. has filed or will file with the SEC.
Table of Contents
4
USCB Financial Holdings, Inc.
2025 10-K
PART I
Item 1. Business
Overview
USCB Financial Holdings, Inc.,
a Florida corporation (the “Company”), was formed on December 17, 2021, to serve as
the
holding
company
for
U.S.
Century
Bank,
a
Florida
state-chartered
bank,
and
is
a
bank
holding
company
(a
“BHC”)
registered with
the Board
of Governors
of the
Federal
Reserve System
(the “Federal
Reserve”)
under the
Bank Holding
Company Act
of 1956,
as amended
(the “BHC
Act”). The
Company is
headquartered
in Miami,
Florida, and,
through the
Bank,
its
sole
direct
subsidiary,
operates
10
banking
centers
in
South
Florida
providing
a
wide
range
of
personal
and
business
banking products
and services.
As of
December 31,
2025, the
Company
had total
consolidated
assets
of $2.8
billion.
U.S. Century Bank (the “Bank”)
commenced operations in October
2002 and is a Florida
state-chartered, non-Federal
Reserve
System
member
bank.
Over
the
course
of
2021,
the
Bank
simplified
its
capitalization
structure
by
exchanging
and/or repurchasing
all of its
issued and outstanding
preferred shares,
including Class C,
Class D, and
Class E preferred
stock.
In
December
2021,
the
Bank
reached
agreements
with
holders
of
its
Class
B
common
stock
to
exchange
all
outstanding Class B common stock for Class A common stock
in a 1-for-5 stock exchange.
On July 27,
2021, the Bank
completed an initial
public offering of 4,600,000
shares of its Class
A common stock. Shares
of the Bank’s Class
A common stock were
sold at a price
to the public
of $10.00 per share
and began trading on
the Nasdaq
Stock Market under ticker symbol “USCB”.
On December
30, 2021
(the
“Effective
Date”),
the Company
acquired
all of
the
issued
and
outstanding
stock
of the
Bank in a
share exchange
(the “Reorganization”)
effected under
the Florida
Business Corporation
Act and
in accordance
with the
terms of
an Agreement and
Plan of
Share Exchange dated
December 27, 2021
between the Bank
and the
Company
(the “Share Exchange Agreement”). The Reorganization and
the Share Exchange Agreement were approved
by the Bank’s
stockholders at a special meeting of the Bank’s stockholders held on December 20,
- Pursuant to the Share Exchange
Agreement, on the Effective
Date each issued and outstanding
share of the Bank’s
Class A common stock was
converted
into and exchanged
for one share
of the Company’s Class
A common stock.
As a result,
the Bank became
the wholly owned
subsidiary
of
the
Company,
the
Company
became
the
holding
company
for
the
Bank
and
the
stockholders
of the
Bank
became stockholders of the Company.
Prior to the Effective Date, the Bank’s Class A common stock was registered under Section 12(b) of the Exchange Act,
and the
Bank was subject
to the information
requirements of the
Exchange Act and,
in accordance with
Section 12(i)
thereof,
filed quarterly reports, proxy statements and other information with the Federal Deposit Insurance Corporation (“FDIC”). As
a result
of the
Reorganization, pursuant
to Rule
12g-3(a) under
the Exchange
Act, the
Company became
the successor
registrant
to the
Bank, the
Company’s
Class
A common
stock
was
deemed
to
be
registered
under
Section
12(b) of
the
Exchange Act, and the Company became subject to the information requirements of the Exchange Act and is now required
to file
reports, proxy
statements and
other information with
the SEC.
The trading
symbol for
the Company’s Class
A Common
Stock is “USCB”, which is the same as the Bank’s former
trading symbol.
Prior to
the Reorganization,
the Company
had no
material assets
and had
not conducted
any business
or operations
except for activities related to its incorporation and the
Reorganization.
Our strategy
in becoming
a publicly
traded company
and forming
a BHC
was to
continue pursuing
organic growth
as
well as strategic
acquisitions if the opportunity
arose, which efforts
will be further
facilitated by access
to the public capital
markets and the added flexibility provided by a holding
company structure.
In this Annual Report on Form 10-K, unless the context indicated otherwise, references to “we,” “us,”, and “our” refer to
the Company and the Bank,
as the context dictates. However, if the discussion
relates to a period before
the Effective Date,
the terms refer only to the Bank.
Products and Services
Lending Services
Our mission
is to
provide high
value, relationship
-based banking
products, services
and solutions
to a
diverse
set of
clients in the
markets we serve. We focus
on serving small-to-medium sized businesses (“SMBs”)
and catering to the
needs
of
local
business
owners,
entrepreneurs
and
professionals
in
South
Florida.
We
have
further
leveraged
our
success
in
Table of Contents
5
USCB Financial Holdings, Inc.
2025 10-K
providing comprehensive banking solutions
to SMBs to also secure the personal
retail deposit relationships of the owners,
operators, and employees of our commercial lending clients, which has
been a cornerstone of our deposit growth strategy.
In addition
to our
traditional commercial
banking services,
we are
among a
select number
of banks
of our
size within
our market
area that
can offer
certain specialty
banking products,
services and
solutions designed
for small
businesses,
homeowner associations,
law firms, medical
practices and other
professional services
firms, and global
banking services.
Our major specialty banking offerings include
the following:
•
Small
Business
Administration
(“SBA”)
lending:
Our
SBA
platform
originates
loans
under
Sections
7(a)
and 504
of the
SBA program.
The 7(a)
loan program,
SBA's most
common loan
program, includes
financial
help for small businesses with
special requirements while the
504 loan program provides
long-term, fixed-rate
financing of
up to $5.0
million for
major fixed assets
that promote
business growth
and job creation.
Since its
formation in
2018, the
platform serves
as an
opportunity to
generate commercial
and industrial
loans, or
C&I
loans, and to diversify our revenue stream through originating and
selling SBA 7(a) loans. As of December 31,
2025, the Bank continued to be
a Preferred Lending Partner with the
SBA which allows us to offer
the full range
of SBA loan products and to exercise lending authority at the local bank level, allowing us to
make timely credit
decisions for prospective clients.
•
Yacht lending:
Our yacht lending vertical
provides yacht financing for
larger vessels; transactions range
from
$750 thousand to
$7.5 million. We
target high net-worth
clients in one
of the most
active yacht markets
in the
country.
•
Homeowner Association (“HOA”)
services:
We provide banking services
to HOAs and property
managers,
including deposit collection,
lockbox services, payment
services, and lending
products. Launched in
2016, we
offer our HOA customers a unique combination of market knowledge of
a local bank, and a highly personalized
“white glove” approach to customer service.
•
Private
Client
Group
services:
The
Private
Client
Group
provides
tailored
banking
solutions
for
professionals—particularly those in law firms,
including partners, associates, and
staff—as well as physicians,
dentists, veterinarians, and other high
‑
net
‑
worth individuals. By leveraging our deep relationships with
law firm
clients,
we
also
generate
opportunities
to
expand
personal
deposit
account
relationships
across
their
organizations.
•
Correspondent Banking services:
Our Global Banking
vertical provides correspondent
banking services for
banks headquartered in certain
Latin America and Caribbean
countries. We also
cross-sell our correspondent
banking relationships to
generate international personal
banking clients for
our Bank. Our compliance
team is
experienced in
issues related
to correspondent banking,
and we
have frequent
and regular
open communication
with our correspondent bank clients to ensure proper compliance
controls are maintained at such institutions.
Credit Practices
Our underwriting process is informed by a conservative credit culture
that encourages prudent lending. We believe our
strong asset quality
is due
to our understanding
of and experience
with businesses within
Florida,
in particular South
Florida,
our
long-standing
relationships
with
clients
and
our
disciplined
underwriting
processes.
Our
thorough
underwriting
processes
collaboratively
engage
our
seasoned
business
bankers,
credit
underwriters
and
portfolio
managers
in
the
analysis of each loan request.
We manage our credit risk by analyzing metrics related
to our different lines of business, which allows us to
maintain a
conservative
and
well-diversified
loan portfolio
reflective
of our
assessment
of various
industry
sectors.
Based
upon our
aggregate exposure to any given borrower relationship, we undertake a scaled review
of loan originations that may involve
our senior credit officers, our Chief Credit Officer,
our Credit Committee or, ultimately,
our Board of Directors (“Board”).
Deposit Products
We offer
traditional deposit
products, including
commercial and
consumer checking
accounts, money
market deposit
accounts, savings accounts, and
certificates of deposit
with a
variety of terms
and rates, as
well as a
robust suite of
treasury,
commercial payments, and cash management services. Additionally,
we offer insured cash sweep (“ICS”) and certificate of
deposit account
registry service
(“CDARS”) deposit
products that
are FDIC-insured
for our
clients. Furthermore,
we offer
deposit products
for municipalities
and
other public
entities. Our
deposit products
are mainly
offered
across
our primary
geographic footprint.
Title Services
Florida
Peninsula
Title
LLC
is
a
subsidiary
of
the
Bank
that
offers
our
clients
title
insurance
policies
for
real
estate
transactions
closed
at
the
Bank.
Licensed
in the
State
of Florida
and
approved
by the
Florida
Department
of Insurance
Table of Contents
6
USCB Financial Holdings, Inc.
2025 10-K
Regulation, Florida Peninsula
Title LLC began operations
in 2021. Our
title service business not
only provides diversification
for non-interest income but also provides our clients with access
to tile insurance services.
Seasonality
We do not believe our business to be seasonal
in nature.
Markets
Our
primary
banking
market
is
South
Florida.
South
Florida
has
rapidly
emerged
as
a
top
destination
for
financial
institutions,
driven
by
a
combination
of
factors
that
foster
economic
growth
and
stability.
The
region
offers
a
low-tax
environment, a robust business infrastructure, and access to a
diverse talent pool. With a thriving
real estate market, strong
international
trade
connections,
and
an
increasing
concentration
of
tech
and
finance
sectors,
South
Florida
provides
a
dynamic ecosystem for financial services. Additionally,
the region's strategic location as a gateway to Latin America further
enhances
its appeal
for corporations
looking
to strengthen
global
connectivity
and investment
opportunities.
We
believe
Florida offers
long-term attractive
banking opportunities.
Our largest
concentration is
in the
Miami metropolitan
statistical
area; however, we are
also focused on
growth in
other urban Florida
markets in which
we have a
presence, such as
Broward
and Palm Beach counties.
According to the
United States
Census Bureau’s
estimates, Florida
had
population of
23.8 million at
the end of
2025,
an increase
of 2%
when compared
to the
end of
2024, making
it the
3rd most
populated state
in the
country.
The Miami
Metro Area remains the most populous metro area in Florida with 6.7
million residents reflecting, a growth of 27.62% since
2020.
Competition
Our markets are highly competitive, and we compete with a wide range of lenders and other financial institutions within
our markets,
including local,
regional,
national,
and international
commercial
banks
and credit
unions.
We
also compete
with mortgage companies, brokerage
firms, trust service providers, consumer
finance companies, mutual funds,
securities
firms,
insurance
companies,
third-party
payment
processors,
financial
technology
companies,
or
Fintechs,
and
other
financial intermediaries on various
of our products and
services. Some of our competitors
are not subject to the
regulatory
restrictions
and
the
level
of
regulatory
supervision
applicable
to
us.
Many
of
our
competitors
are
much
larger
financial
institutions that have greater financial
resources than we do
and compete aggressively for market
share. These competitors
attempt to gain market share through their financial product
mix, pricing strategies and larger banking center networks.
Interest rates
on both
loans and
deposits and
prices of
fee-based services
are significant
competitive factors
among
financial
institutions
generally.
Other
important
competitive
factors
include
convenience,
quality
of
customer
service,
availability and quality of digital offerings, community
reputation, and continuity of personnel and services.
Emerging Growth Company
We are an “emerging growth
company,”
or “EGC”, as defined in the Jumpstart
Our Business Startups Act of 2012 (the
“JOBS Act”). As such, we are eligible to take advantage of certain exemptions from various reporting requirements that are
applicable to other public companies
that are not EGCs, including,
but not limited to, not being
required to comply with
the
auditor
attestation
requirements
of
Section
404
of
the
Sarbanes-Oxley
Act,
reduced
disclosure
obligations
regarding
executive compensation in
our periodic reports and
proxy statements, and
exemptions from the requirements
of holding a
non-binding
advisory
vote
on executive
compensation
and shareholder
approval
of any
golden
parachute
payments
not
previously approved.
In addition,
Section
107
of
the
JOBS
Act
also
provides
that
an
EGC can
take
advantage
of
the
extended
transition
period provided
in Section
7(a)(2)(B) of
the Securities
Act of
1933, as
amended (the
“Securities Act”),
for complying
with
new or revised accounting standards. In other
words, an EGC can delay the adoption
of certain accounting standards until
those standards would otherwise apply to private
companies. We intend to take advantage
of the benefits of this extended
transition period, for as long as it is available.
We will
remain an
EGC until
the earliest
to occur
of (i)
the end
of the
fiscal year
following the
fifth anniversary
of the
completion of the Bank’s initial public offering in 2021,
(ii) the last day of the first fiscal year in
which the Company's annual
gross revenues exceed $1.235 billion, (iii) the date that the
Company becomes a “large accelerated filer” as defined in Rule
12b-2 under the Exchange Act which would
occur if the market value of the
Company's common stock that is held
by non-
affiliates exceeds $700 million as of the last business day
of the Company’s most recently completed second
fiscal quarter
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7
USCB Financial Holdings, Inc.
2025 10-K
(June 30th for the
Company), or (iv) the date on
which the Company has issued more
than $1 billion in non-convertible debt
during the preceding three-year period. As a consequence,
we will cease to be an EGC as of December 31, 2026.
Human Capital Resources
We respect
the values and
diversity exhibited
throughout our organization
and the community.
Diversity is
an integral
part of
our organization’s
culture. We
seek the
active engagement
and participation
of people
with diverse
backgrounds.
We continue
taking steps
to create
programs to
ensure that
we are
organized in
a way where
the unique
contributions of
each individual in our
Company is recognized
and supported. Each
team member is
to be treated fairly
with equal access
to opportunities and resources
for success. Additionally, we run homebuyer educational
and financial literacy workshops in
an effort to reach the financing needs of the sectors
of our communities in which these workshops
are most needed.
Our human capital
objectives include attracting,
developing and retaining
the best available
talent from a
diverse pool
of
candidates
for
the
Company.
To
do
so,
we
strive
to
maintain
competitive
pay
and
benefits,
regularly
updating
our
compensation
structure
and
periodically
reviewing
our
compensation
and
benefits
programs.
Additionally,
the
Company
identifies
opportunities
and
paths
for
the
development
of
our
staff,
and
we
seek
to,
whenever
possible,
fill
positions
by
promotion within. The Company recognizes that the skills and knowledge of its employees
are critical to the success of the
organization, and promotes training and continuing education
as an ongoing function for employees.
We recognize
the importance
of our
employee's
financial
health and
well-being,
and offer
benefits such
as a
401(k)
retirement savings plan and make both matching and profit-sharing contributions to that plan. Benefit programs available to
eligible
employees
include,
in
addition
to
the
401(k)
retirement
savings
plan,
health
and
life
insurance,
employee
paid
holidays and other benefits.
We value and promote diversity in
every aspect of our business
and at every level within
the Company. We recruit, hire,
and
promote
employees
based
on
their
individual
ability
and
experience
and
in
accordance
with
Affirmative
Action
and
Equal Employment Opportunity
laws and regulations.
Our policy is that
we do not
discriminate on the
basis of race, color,
religion,
sex,
gender,
sexual
orientation,
ancestry,
pregnancy,
medical
condition,
age,
marital
status,
national
origin,
citizenship status, disability veteran status, gender identity,
genetic information, or any other status protected
by law.
At December 31, 2025,
we had 205
full-time equivalent employees.
None of our
employees are parties
to a collective
bargaining agreement. We believe that our employees are our greatest asset and vital to our success. As such, we seek to
hire and retain the best
candidate for each position, without regard to
age, gender, ethnicity, or other protected class status,
but
with
an
appreciation
for
a
diversity
of
perspectives
and
experiences.
We
have
designed
a
compensation
structure
including an array of benefit plans and programs that
we believe is attractive to our current and prospective
employees.
Regulation and Supervision
Bank holding
companies, banks, and
their affiliates are
extensively regulated under
federal and
state law
and regulation.
These laws and regulations have
a material effect on the operations
of the Company and its
direct and indirect subsidiaries,
including the Bank.
Statutes, regulations and
regulatory policies limit
the activities in
which we may
engage and the
conduct of our
permitted
activities and establish capital requirements with which we must comply. The regulatory framework is intended primarily for
the
protection
of
depositors,
borrowers,
customers
and
clients,
the
FDIC
insurance
funds
and
the
banking
system
as
a
whole, and not for the protection of our shareholders or creditors. In many cases, the applicable regulatory authorities have
broad
enforcement
power
over
bank
holding
companies,
banks
and
their
subsidiaries,
including
the
power
to
impose
substantial fines and other penalties for violations of laws
and regulations.
Further,
the
regulatory
system
imposes
reporting
and
information
collection
obligations.
Banking
statutes
and
regulations are subject
to change,
and additional statutes,
regulations, and corresponding
guidance may
be adopted. We
are unable to predict these future changes or the effects, if any, that these changes could have on the business, prospects,
revenues, and results of operations of the Bank and Company.
The material
statutory and
regulatory requirements
that are
applicable to
us are
summarized below.
The description
below is not intended to summarize all laws
and regulations applicable to us. These summary descriptions are not
intended
to be a complete explanation of
such laws and regulations and their effects on the
Company and the Bank and are
qualified
in their entirety by reference to the actual
laws and regulations. You
should refer to the full text of the statutes,
regulations,
and corresponding guidance for more information.
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8
USCB Financial Holdings, Inc.
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2018 Regulatory Reform
In May 2018
the Economic
Growth, Regulatory
Relief and
Consumer Protection
Act (the “2018
Act”), was
enacted to
modify or remove
certain financial reform
rules and regulations, including
some of those
implemented under the
Dodd-Frank
Wall Street Reform
and Consumer Protection
Act (“Dodd-Frank Act”) enacted
in 2010. While the 2018
Act maintains most
of the
regulatory
structure established
by the
Dodd-Frank Act,
it amends
certain aspects
of the
regulatory framework
for
small depository institutions with assets of less than $10.0 billion and for large banks with assets of more than $50.0
billion.
Many of these changes resulted in meaningful regulatory
relief for community banks such as the Bank.
The 2018 Act, among other matters, expanded
the definition of “qualified mortgages”
which may be held by a financial
institution
and
simplified
the
regulatory
capital
rules
for
financial
institutions
and
their
holding
companies
with
total
consolidated assets of less than
$10.0 billion by instructing
(as described below) the federal
banking regulators to establish
a
single
“Community
Bank
Leverage
Ratio”
discussed
below.
The
2018
Act
also
expanded
the
category
of
holding
companies that may rely on the “Small Bank Holding Company and
Savings and Loan Holding Company Policy Statement”
(the “SBHC Policy”) by raising
the maximum amount of
assets a qualifying holding
company may have from
$1.0 billion to
$3.0 billion.
This expansion
also excluded
such holding
companies
from the
minimum capital
requirements
of the
Dodd-
Frank Act. In addition,
the 2018 Act included
regulatory relief for community banks regarding
regulatory examination cycles,
call reports, the
Volcker
Rule (proprietary trading
prohibitions), mortgage
disclosures and risk
weights for certain
high-risk
commercial real estate loans.
Bank and Bank Holding Company Regulation
As a
Florida-chartered
commercial bank,
the Bank
is subject
to ongoing
and comprehensive
supervision, regulation,
examination, and enforcement by the FDIC and the Florida Office
of Financial Regulation (“FOFR”). The FOFR supervises
and regulates
all areas
of our
operations including,
without limitation,
the making
of loans,
the issuance
of securities,
the
conduct
of
our
corporate
affairs,
the
satisfaction
of
capital
adequacy
requirements,
the
payment
of
dividends,
and
the
establishment or closing
of banking centers.
In addition, our
deposit accounts
are insured
by the Deposit
Insurance Fund
(the “DIF”)
administered by
the FDIC to
the maximum
extent permitted
by law,
and the FDIC
has certain
supervisory and
enforcement powers over us.
Any entity that directly or
indirectly controls a bank
must be approved by the
Federal Reserve under the
Bank Holding
Company
Act
of
1956
(the
“BHC
Act”)
to
become
a
bank
holding
company.
Bank
holding
companies
are
subject
to
regulation, inspection, examination, supervision and enforcement
by the Federal Reserve under the BHC Act. The Federal
Reserve's jurisdiction also extends to any company that is directly
or indirectly controlled by a bank holding company.
The
Company,
which
controls
the
Bank,
is
a
bank
holding
company
and,
as
such,
is
subject
to
ongoing
and
comprehensive supervision, regulation, examination and
enforcement by the Federal Reserve.
Notice and Approval Requirements Related to Control
Banking
laws
impose
notice,
approval,
and
ongoing
regulatory
requirements
on
any
person
or
entity
that
seeks
to
acquire direct or
indirect “control” of
an FDIC-insured depository
institution. These laws
include the
BHC Act and
the Change
in Bank Control Act. Among other things,
these laws require regulatory filings by
individuals or entities that seek to
acquire
direct or indirect
"control" of
an FDIC-insured
depository institution.
The determination
of whether
an investor
"controls" a
depository institution is based
on all of
the facts and
circumstances surrounding the investment. As
a general matter, a party
is deemed to conclusively control a depository institution or
other company if the party owns or
controls 25% or more of any
class of voting stock or owns
one-third or more of the equity of the
depository institution or its holding company.
Subject to
rebuttal, a party may be presumed to control a
depository institution or other company if the investor owns
or controls 10%
or more of any class of
voting stock (and the entity’s securities are registered under the Exchange Act
or, if not, the investor
would
be
the
largest
shareholder).
Except
under
limited
circumstances,
bank
holding
companies
are
prohibited
from
acquiring, without prior approval,
control of any other
bank or bank holding
company or substantially
all the assets thereof
or more
than 5%
of the
voting shares
of a
bank or
bank holding
company which
is not
already a
subsidiary of
such bank
holding company.
Source of Strength
All companies, including bank holding companies, that directly or indirectly control an insured depository institution, are
required to serve as a source
of strength for the institution. Furthermore,
the Federal Reserve policy
is that a bank holding
company should stand ready
to use available resources
to provide adequate capital
to its subsidiary banks
during periods
of financial
stress or
adversity and
should maintain
the financial
flexibility and
capital-raising capacity
to obtain
additional
resources for assisting its subsidiary banks. Under
this requirement, the Company in the future could be
required to provide
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9
USCB Financial Holdings, Inc.
2025 10-K
financial assistance to
the Bank should it
experience financial distress. Such
support may be
required at times when,
absent
this statutory and Federal Reserve policy requirement, a bank holding
company may not be inclined or able to provide
it. A
bank holding company’s failure to meet its obligations to serve as
a source of strength to its subsidiary banks will generally
be considered by
the Federal Reserve to
be an unsafe and
unsound banking practice or
a violation of
the Federal Reserve’s
regulations, or both.
Safety and Soundness Regulation
As an insured depository
institution, we are subject to
prudential regulation and supervision
and must undergo regular
on-site examinations by our state and federal banking agencies. The cost of examinations of insured depository institutions
and any affiliates are assessed
by the appropriate agency against
each institution or affiliate that
is subject to examination
as it deems
necessary or
appropriate. We
file quarterly
consolidated reports
of condition
and income, or
call reports,
with
the FDIC and the FOFR.
The federal banking
agencies have also
adopted guidelines establishing safety
and soundness standards for
all insured
depository institutions including
the Bank. The safety
and soundness guidelines relate
to, among other things,
our internal
controls,
information
systems,
cybersecurity,
internal
audit
systems,
loan
underwriting
and
documentation,
anti-money
laundering policies and procedures, transactions with insiders, risk management, compensation, asset growth, and interest
rate exposure. These
standards assist
the federal banking
agencies with early
identification and resolution
of problems at
insured depository institutions.
If we were
to fail to
meet or otherwise
comply with any
of these standards,
the FDIC could
require us to submit a
plan for achieving and maintaining
compliance. If a financial
institution fails to submit
an acceptable
compliance plan, or fails
in any material respect
to implement a compliance
plan that has been
accepted by the FDIC,
the
FDIC is
required to
issue an
order directing
the institution
to cure
the deficiency.
Until the
deficiency cited
in the
order is
cured, the FDIC
may restrict the
financial institution’s
rate of growth,
require the financial
institution to increase
its capital,
restrict the rates the institution pays on
deposits or require the institution to take
any action the regulator deems appropriate
under the circumstances. Noncompliance with the standards established by the safety and soundness guidelines may also
constitute grounds
for other
enforcement action,
including cease
and desist
orders and civil
money penalty
assessments.
In
addition,
the
FDIC
could
terminate
our
deposit
insurance
if
it
determines
that
our
financial
condition
was
unsafe
or
unsound or that we engaged in unsafe or unsound practices that violated applicable rules, regulations, orders or conditions
enacted or imposed on us by our regulators.
During
the
past
decade,
the
bank
regulatory
agencies
have
increasingly
emphasized
the
importance
of
sound
risk
management processes
and strong
internal controls
when evaluating
the activities
of the
financial institutions they
supervise.
Properly managing risks has been identified as critical to the conduct of safe and sound banking activities and has become
even more
important as
new technologies, product
innovation and
the size
and speed
of financial
transactions have
changed
the nature of
banking markets. The
agencies have identified
a spectrum of
risks facing a
banking institution including,
but
not limited
to, credit,
market, liquidity, interest rate,
cybersecurity, operational, legal and
reputational risk. In
particular, recent
regulatory pronouncements
have focused
on operational
risk, which
arises from
the potential
that inadequate
information
systems,
operational problems,
breaches
in
internal
controls, fraud
or unforeseen
catastrophes
will result
in unexpected
losses. New
products and
services, use
of outside
vendors and
cybersecurity are
critical sources
of operational
risk that
financial institutions
are expected
to address
in the
current environment.
We have
active Board
and senior
management
oversight
policies,
procedures
and
risk
limits;
adequate
risk
measurement
and
monitoring
and
adequate
management
information systems; and comprehensive internal controls
to address these various risks.
Permissible Activities and Investments
Banking laws
generally restrict
the ability
of the
Company to
engage in
activities other
than those
determined by
the
Federal Reserve to
be so closely
related to banking as
to be a
proper incident thereto. The
Federal Reserve has determined
by regulation
that certain
activities are
closely related
to banking
including operating a
mortgage company, finance company,
credit
card
company,
factoring
company,
trust
company
or
savings
association;
performing
certain
data
processing
operations;
providing
limited
securities
brokerage
services;
acting
as
an
investment
or
financial
advisor;
acting
as
an
insurance agent for
certain types of
credit-related insurance; leasing
personal property on
a full-payout, non-operating
basis;
providing tax
planning and
preparation services;
operating a
collection agency;
and providing
certain courier
services. In
addition,
the
Gramm-Leach-Bliley
Act
(the
“GLB
Act”)
expanded
the
scope
of
permissible
activities
for
a
bank
holding
company that qualifies as a financial
holding company. Under the regulations implementing the GLB Act, a financial holding
company may engage in additional activities that
are financial in nature or
incidental or complementary to a financial
activity
such
as
securities
underwriting,
insurance
underwriting
and
merchant
banking.
The
Company
is
not
a
financial
holding
company.
In addition, as a general matter,
the establishment or acquisition by
the Company of a non-bank entity,
or the initiation
of a
non-banking activity, requires prior
regulatory approval. In
approving acquisitions or
the addition
of activities,
the Federal
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10
USCB Financial Holdings, Inc.
2025 10-K
Reserve considers, among
other things, whether
the acquisition or
the additional activities
can reasonably be
expected to
produce benefits
to the
public, such
as greater
convenience,
increased
competition
or gains
in
efficiency,
that outweigh
such possible adverse effects as undue concentration of resources, decreased or unfair competition, conflicts
of interest or
unsound banking practices.
Regulatory Capital Requirements
The federal banking
regulators have adopted
risk-based capital adequacy
guidelines for bank
holding companies and
their subsidiary banks
and banks without bank
holding companies based on
the Basel III
standards. Under these guidelines,
assets and off-balance sheet items are assigned to specific risk categories, each with designated risk weightings. The risk-
based capital guidelines are designed to make regulatory
capital requirements more sensitive to differences
in risk profiles
among banks and bank holding
companies, to account for off-balance sheet
exposure, to minimize disincentives for
holding
liquid assets, and
to achieve greater
consistency in
evaluating the capital
adequacy of
major banks throughout
the world.
The resulting
capital ratio requirements
represent capital as
a percentage of
total risk-weighted assets
and off-balance sheet
items. Final
rules implementing the
capital adequacy guidelines
became effective, with
various phase-in periods,
on January
1, 2015
for
community
banks
such
as us.
All
of
the
rules
were
fully
phased
in
as of
January
1,
2019.
These
final
rules
represent a significant change to the prior general risk-based capital rules and are
designed to substantially conform to the
Basel III international standards.
In computing
total risk-weighted
assets, bank
and bank
holding company
assets are
given risk-weights
of 0%,
20%,
50%, 100%
and 150%.
In addition,
certain
off-balance
sheet items
are given
similar credit
conversion
factors
to convert
them to asset
equivalent
amounts to which
an appropriate risk-weight
will apply.
Most loans will
be assigned to
the 100%
risk
category,
except
for
performing
first
mortgage
loans
fully
secured
by
1-to-4
family
or
certain
multi-family
residential
properties, which carry
a 50% risk
rating, and certain
past due loans
which are assigned
a 150% risk
rating. Most investment
securities (including,
primarily,
general obligation
claims on
states or
other political
subdivisions of
the United
States) will
be assigned to
the 20%
category,
except for
municipal or
state revenue bonds,
which have
a 50%
risk-weight, and
direct
obligations of the U.S. Treasury
or obligations backed by the full faith
and credit of the U.S. government,
which have a 0%
risk-weight. In covering off
-balance sheet items, direct
credit substitutes, including
general guarantees and standby
letters
of credit backing
financial obligations,
are given a
100% conversion
factor.
Transaction-related
contingencies such
as bid
bonds, standby
letters of
credit backing
nonfinancial obligations,
and undrawn
commitments (including
commercial credit
lines with an
initial maturity
of more than
one year) have
a 50% conversion
factor.
Short-term commercial
letters of credit
are converted at 20% and certain short-term unconditionally
cancelable commitments have a 0% factor.
Under
the
final
rules,
minimum
requirements
increased
for
both
the
quality
and
quantity
of
capital
held
by
banking
organizations. In this respect, the final rules
implement strict eligibility criteria for regulatory capital instruments and improve
the methodology for
calculating risk-weighted
assets to enhance
risk sensitivity.
Consistent with the
international Basel III
framework, the rules include a new
minimum ratio of Common Equity
Tier 1 Capital to Risk-Weighted
Assets of 4.5%. The
rules also create a Common Equity Tier 1 Capital conservation
buffer of 2.5% of risk-weighted assets. This buffer
is added
to each of the three risk-based capital
ratios to determine whether an institution
has established the buffer.
The rules raise
the minimum ratio of Tier 1 Capital to Risk-Weighted Assets from 4% to 6% and
include a minimum leverage ratio of 4% for
all banking
organizations. If
a financial
institution’s
capital conservation
buffer
falls below
2.5% —
e.g., if
the institution’s
Common Equity
Tier
1 Capital
to Risk
-Weighted
Assets is
less than
7.0% —
then capital
distributions
and
discretionary
bonus payments will
be limited or
prohibited based on
the size of
the institution’s conservation buffer. The types
of payments
subject to this limitation include
dividends, share buybacks, discretionary payments on
Tier 1 instruments, and discretionary
bonus payments.
Common Equity Tier 1 capital is
generally defined as common stockholders’ equity and
retained earnings. Tier 1 capital
is generally
defined as
Common Equity
Tier 1
and additional
Tier 1
capital. Additional
Tier 1
capital includes
certain non-
cumulative
perpetual
preferred
stock
and
related
surplus
and
minority
interests
in
equity
accounts
of
consolidated
subsidiaries. Total
capital includes
Tier
1 capital
(Common Equity
Tier
1 capital
plus additional
Tier
1 capital)
and Tier
2
capital. Tier
2 capital
is comprised
of
capital
instruments
and
related
surplus,
meeting
specified
requirements,
and
may
include cumulative preferred stock and long-term
perpetual preferred stock, mandatory convertible securities,
intermediate
preferred stock and
subordinated debt. Also
included in Tier
2 capital is the
allowance for loan
and lease losses
limited to
a
maximum
of
1.25%
of
risk-weighted
assets.
Calculation
of
all
types
of
regulatory
capital
is
subject
to
deductions
and
adjustments specified
in the
regulations. In
assessing an
institution’s capital
adequacy,
the FDIC takes
into consideration
not only these numeric factors, but qualitative factors as well, and has the authority to establish higher capital requirements
for individual institutions where deemed necessary.
The
capital
regulations
may
also
impact
the
treatment
of
accumulated
other
comprehensive
income
(“AOCI”)
for
regulatory capital purposes. Under
the rules, AOCI generally
flows through to regulatory
capital;
however, community banks
and their holding companies (if any) were allowed to make a
one-time irrevocable opt-out election to continue to treat AOCI
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11
USCB Financial Holdings, Inc.
2025 10-K
the same
as under
the old
regulations for
regulatory capital
purposes. This
election was
required to
be made
on the
first
call report
filed after
January 1,
- We
made the
opt-out election.
Additionally,
the rules
also permit
community banks
with less than $15.0 billion in total assets to continue to count certain non-qualifying capital instruments issued prior to May
19, 2010 as Tier 1 capital, including trust preferred securities
and cumulative perpetual preferred stock (subject to a limit of
25% of Tier 1 capital). However, non-qualifying
capital instruments issued on or after May 19, 2010 do not qualify for Tier 1
capital treatment. At December 31, 2025, we had no
such investments.
In May 2016,
amendments to the
Federal Reserve’s SBHC Policy
became effective which increased
the asset threshold
to qualify to utilize the
provisions of the SBHC
Policy from $500.0
million to $1.0 billion.
Subsequently,
as part of the
2018
Act, the
threshold
was
increased
to
$3.0
billion.
Bank
holding companies
which
are subject
to the
SBHC
Policy
are not
subject to compliance with
the regulatory capital requirements
described above until they
exceed $3.0 billion in
assets. As
a consequence, as of December 31, 2025, the Company was not required
to comply with the requirements set forth above
and
will
not
be
subject
to
such
requirements
until
such
time
that
its consolidated
total
assets
exceed
$3.0
billion
or the
Federal Reserve determines
that the Company is
no longer deemed to
be a small bank
holding company.
However, if
the
Company had been subject to the requirements, it would have
been in compliance with such requirements.
In
September
2019,
the
federal
banking
agencies
jointly
finalized
a
rule
intended
to
simplify
the
regulatory
capital
requirements described above for qualifying community banking organizations
that opt into the Community Bank Leverage
Ratio, or
CBLR,
framework,
as required
by Section
201 of
the Regulatory
Relief
Act. The
final rule
became
effective
on
January 1,
2020,
and the
CBLR framework
became
available for
banks to
use beginning
with
their
March
31, 2020
call
reports. Under
the final
rule, if
a qualifying
community
banking organization
opts into
the CBLR
framework and
meets all
requirements under the
framework, it will
be considered to
have met
the well-capitalized ratio
requirements under the
prompt
corrective action
regulations
described below
in this
Form 10-K
and will
not be
required to
report or
calculate
risk-based
capital. In order to
qualify for the CBLR
framework, a community
banking organization must
have a tier 1
leverage ratio of
greater than
9%, less
than $10.0
billion in
total consolidated
assets, off
-balance
sheet exposures
of 25%
or less
of total
consolidated assets,
and trading
assets and
liabilities of
5% or
less of
total consolidated
assets. In
November 2025,
the
federal banking
agencies,
including the
FDIC, proposed
a lower
CBLR requirement
of 8%.
Community banks
that fail
to
meet the qualifying
criteria after
opting into the
CBLR framework would
have four reporting
periods to meet
the qualifying
criteria again, provided they maintain a leverage ratio above 7%
and have not used the grace period for more than eight of
the prior 20 quarters. The federal banking agencies
also proposed removing the provisions under the CBLR framework that
provided temporary relief for qualifying community
banks during the COVID-19 outbreak.
Although the Bank is a qualifying
community banking organization, the Bank has elected not to opt in to the CBLR framework at this time and will
continue to
follow the Basel III capital requirements as described above.
As of
December 31,
2025
and 2024,
the U.S.
Century
Bank qualified
as a
“well capitalized”
institution. See
Note 16
“Regulatory Matters”
of the Consolidated
Financial Statements
included in
Item 8
of this
Annual Report
on Form
10-K for
further details.
Prompt Corrective Action
Under the Federal
Deposit Insurance Act
(“FDIA”), the
federal bank regulatory
agencies must take
"prompt corrective
action"
against
undercapitalized
U.S.
depository
institutions.
The
capital-based
regulatory
framework
contains
five
categories
of
compliance
with
regulatory
capital
requirements,
including
"well
capitalized,"
"adequately
capitalized,"
"undercapitalized,"
"significantly
undercapitalized,"
and
"critically
undercapitalized,"
and
are
subjected
to
differential
regulation corresponding to the capital category within
which the institution falls.
An insured depository
institution is deemed
to be "well
capitalized" if
it has a
total risk-based
capital ratio
of 10.0% or
greater, a
tier 1 risk-based
capital ratio of 8.0%
or greater,
a Common Equity
Tier 1
risk-based capital ratio
of 6.5% and a
leverage ratio of 5.0%
or greater, and the institution is
not subject to
an order, written agreement, capital directive, or
prompt
corrective action
directive to
meet and
maintain a
specific level
for any
capital measure.
Under certain
circumstances,
a
well-capitalized, adequately
capitalized or
undercapitalized institution
may be
treated as
if the
institution were
in the
next
lower capital category if it is determined that the institution is in an unsafe or unsound condition or is engaging in an unsafe
or unsound practice.
The degree of
regulatory scrutiny
of a financial
institution will increase,
and the permissible
activities
of
the
institution
will
decrease,
as
it
moves
downward
through
the
capital
categories.
Under
specified
circumstances,
a
federal
banking
agency
may
reclassify
a
“well-capitalized”
institution
as
adequately
capitalized
and
may
require
an
adequately capitalized institution or an
undercapitalized institution to comply with
supervisory actions as if
it were in
the next
lower
category
(except
that
the
FDIC
may
not
reclassify
a
significantly
undercapitalized
institution
as
critically
undercapitalized).
A banking
institution that
is undercapitalized
is required
to submit
a capital
restoration
plan. Failure
to
meet
capital
guidelines
could
subject
the
institution
to
a
variety
of
enforcement
remedies
by
federal
bank
regulatory
agencies,
including:
termination
of
deposit
insurance
by
the
FDIC,
restrictions
on
certain
business
activities,
and
appointment of the FDIC as conservator or receiver.
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12
USCB Financial Holdings, Inc.
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At As
of December
31,
2025,
the
Bank was
deemed
to be
a “well-capitalized”
institution for
purposes
of the
prompt
corrective action regulations and as such is not subject
to the above mentioned restrictions.
Commercial Real Estate Concentration Guidelines
The federal
banking regulators
have implemented
guidelines to
address increased
concentrations in
commercial real
estate
loans.
These
guidelines
describe
the
criteria
regulatory
agencies
will
use
as
indicators
to
identify
institutions
potentially
exposed
to
commercial
real
estate
concentration
risk.
An
institution
that
has
(i)
experienced
rapid
growth
in
commercial real
estate lending,
(ii) notable
exposure to
a specific
type of
commercial real
estate, (iii)
total reported
loans
for construction, land development,
and other land representing
100% or more of
total capital, or (iv) total
commercial real
estate
(including
construction)
loans,
as
defined
in
the
banking
agencies
guidance,
representing
300%
or
more
of
total
capital and the outstanding balance of the
institution’s commercial real estate portfolio has increased by 50% or
more in the
prior 36 months, may be identified for further supervisory
analysis of a potential concentration
risk.
As of As
of December 31,
2025, our ratio
of construction
loans to total
risk-based capital was
31%, and therefore,
we
were under the
100% threshold
set forth in
clause (iii)
in the paragraph
above. However,
with respect to
clause (iv)
in the
paragraph above,
as of December
31, 2025,
our ratio
of total commercial
real estate
loans to total
risk-based capital
was
370%. As
a result,
we are
deemed to
have a concentration
in commercial
real estate
lending under
applicable regulatory
guidelines.
If a
concentration is
present, under
the federal
banking regulator’
guidance, management
should employ
heightened
risk management practices that address key elements,
including board and management oversight and strategic
planning,
portfolio management,
development
of underwriting
standards,
risk assessment
and monitoring
through
market analysis
and stress
testing, and
maintenance of
increased capital
levels as
needed to
support the
level of
commercial real
estate
lending.
To
address the commercial
real estate lending
concentration, the Bank
has previously established
a commercial
real estate lending framework to
monitor specific exposures and
limits by types within the commercial
real estate portfolio,
including, among other things,
annual stress testing of
the commercial real estate
portfolio, and takes
appropriate actions,
as necessary.
Payment of Dividends and Share Repurchases
The ability of
the board of
directors of an
insured depository
institution to declare
a cash dividend
or other distribution
with respect to capital is subject
to federal and state statutory
and regulatory restrictions that
limit the amount available
for
such
distribution
depending
upon
earnings,
financial
condition,
including
whether
the
institution
has
negative
retained
earnings, and cash needs of the institution,
as well as general business conditions.
Insured depository institutions are also
prohibited
from
paying
management
fees
to
any
controlling
persons
or,
with
certain
limited
exceptions,
making
capital
distributions, including dividends, if after such transaction the institution would be
less than adequately capitalized. We may
generally declare a dividend
from retained net profits
which accrued prior to
the preceding two
years, but we must,
before
the
declaration
of
a
dividend
on
our
common
stock,
under
applicable
Florida
law,
carry
20%
of
our
net
profits
for
such
preceding period
as is
covered by
the dividend
to our
surplus fund,
until the
same shall
at least
equal the
amount of
our
common stock and preferred stock,
if any, then issued and outstanding. Under Florida law, we are
prohibited from declaring
a
dividend
at
any
time
at
which
our
net
income
from
the
current
year
combined
with
the
retained
net
income
from
the
preceding two years is a loss or which would cause our capital accounts to
fall below the minimum amount required by law,
regulation, order,
or any written agreement
with a state or
federal regulatory agency.
Furthermore, 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.
A Federal Reserve policy statement on the payment
of cash dividends states that a bank holding
company should pay
cash dividends only to the
extent that the holding company’s net
income for the past year
is sufficient to cover both the
cash
dividends and
a rate
of earnings
retention that
is consistent
with the
holding company’s
capital needs,
asset quality
and
overall
financial
condition.
The
Federal
Reserve’s
policy
statement
also
provides
that
it
would
be
inappropriate
for
a
company experiencing serious financial problems to borrow funds to pay dividends.
Furthermore, under the federal prompt
corrective action
regulations, the
Federal Reserve
may prohibit
a bank
holding company
from paying
any dividends
if the
holding company’s bank subsidiary is classified
as “undercapitalized.” See “- Prompt Corrective Action”
above.
Section 225.4(b)(1) of Regulation
Y promulgated by the Federal
Reserve requires that a bank
holding company that is not
“well-capitalized”
or
“well-managed”,
or
that
is
subject
to
any
unresolved
supervisory
issues,
provide
prior
notice
to
the
Federal Reserve for
any repurchase or
redemption of
its equity securities
for cash or
other value that
would reduce by
10
percent or more the bank
holding company’s consolidated
net worth aggregated over
the preceding 12-month period.
The
Federal
Reserve
may
disapprove
such
a
purchase
or
redemption
if
it
determines
that
the
proposal
would
constitute
an
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13
USCB Financial Holdings, Inc.
2025 10-K
unsafe or
unsound practice
or would
violate any
law,
regulation, Federal
Reserve order
or any
condition imposed
by,
or
written
agreement
with,
the
Federal
Reserve.
As
of
December 31,
2025,
the
Company
was
not
subject
to
any
formal
supervisory restrictions on
its ability
to pay dividends
but will
notify the
Federal Reserve in
advance of any
proposed dividend
to the Company's shareholders in
light of the Bank's
negative retained earnings. In addition,
we will provide prior
notification
to the Federal Reserve prior to effecting proposed share
repurchases.
Incentive Compensation
Guidelines adopted by
the federal
banking agencies pursuant
to the
FDIA prohibit
excessive compensation as
an unsafe
and
unsound
practice
and
describe
compensation
as
excessive
when
the
amounts
paid
are
unreasonable
or
disproportionate to the services performed by an executive
officer, employee, director
or principal shareholder.
In June 2010,
the federal banking
agencies jointly
adopted the
Guidance on Sound
Incentive Compensation
Policies,
or GSICP.
The GSICP was
intended to ensure
that banking organizations
do not undermine
the safety and
soundness of
such organizations
by encouraging
excessive risk-taking.
This guidance,
which covers
all employees
that have
the ability
to expose the organization
to material amounts
of risk, either
individually or as
part of a group,
is based upon a
set of key
principles relating to
a banking organization’s
incentive compensation arrangements.
Specifically,
incentive compensation
arrangements should (i)
provide employee incentives
that appropriately balance risk
in a manner that does
not encourage
employees to expose their
organizations to imprudent risk,
(ii) be compatible with
effective controls and risk
management,
and (iii) be supported by
strong corporate governance,
including active and effective
oversight by the organization’s
board
of directors. Any deficiencies in our compensation
practices could lead to supervisory or enforcement
actions by the FDIC.
The GSICP
provides that
enforcement actions
may be
taken against a
banking organization
if its
incentive compensation
arrangements
or related
risk-management
control
or governance
processes
pose
a risk
to the
organization’s
safety and
soundness and the organization is not taking prompt and
effective measures to correct the deficiencies.
The
Dodd-Frank
Act
requires
the
federal
banking
agencies
and
the
SEC
to
establish
joint
regulations
or
guidelines
prohibiting incentive-based payment arrangements at specified regulated entities, such as us, having at least $1.0 billion in
total
assets
that
encourage
inappropriate
risk-taking
by
providing
an
executive
officer,
employee,
director
or
principal
shareholder
with
excessive
compensation,
fees,
or
benefits
or
that
could
lead
to
material
financial
loss
to
the
entity.
In
addition, these regulators must establish regulations or guidelines requiring enhanced disclosure to regulators of incentive-
based compensation
arrangements. The
federal banking
agencies proposed
such regulations
in April
2011
and issued
a
second proposed
rule in
April 2016.
The second
proposed rule
would apply
to all
banks, among
other institutions,
with at
least $1.0
billion in
average total
consolidated assets.
In addition,
in May
2024, a
re-proposed rule
was published
that is
intended
to
prohibit
certain
financial
institutions
from
establishing
or
maintaining
incentive-based
compensation
arrangements that encourage inappropriate risk taking by providing covered persons with excessive compensation, fees or
benefits that could
lead to material
financial loss at
the financial institution.
Final regulations
have not been
adopted as of
the date of
this Form 10-K.
If adopted, these
or other similar
regulations would impose
limitations on the
manner in which
we may structure
compensation for
our executives
and other employees
that go beyond
the requirements
of GSICP.
The
scope and content
of the federal
banking agencies’
policies on incentive
compensation are continuing
to develop and
are
likely to continue evolving, but the timeframe for finalization,
if finalized, of such policies is not known at this time.
Limits on Transactions with Affiliates and
Insiders
Transactions
between
insured
financial
institutions
and
any
affiliate
are
governed
by
Sections
23A
and
23B
of
the
Federal Reserve Act. An affiliate
of an insured financial institution
is any company or entity which
controls, is controlled by
or
is
under
common
control
with
the
insured
financial
institution.
In
a
bank
holding
company
context,
the
bank
holding
company of an insured financial institution
(such as the Company) and any
companies which are controlled by such holding
company
are
affiliates
of
the
insured
financial
institution.
Generally,
Section
23A
limits
the
extent
to
which
the
insured
financial institution or its
subsidiaries may engage in
“covered transactions” with any one
affiliate to an amount equal
to 10%
of such institution’s
capital stock
and surplus, and
contains an
aggregate limit
on all such
transactions with
all affiliates
to
an amount equal to 20% of such capital stock and surplus. Section 23B applies to “covered transactions” as well as certain
other
transactions
and
requires
that
all
transactions
be
on
terms
substantially
the
same,
or
at
least
as
favorable
to
the
insured financial institution, as
those provided to
a non-affiliate. The term “covered
transaction” includes the making
of loans
to, purchase of
assets from
and issuance of
a guarantee to
an affiliate
and similar
transactions. Section
23B transactions
also include
the provision
of services
and the
sale of
assets by
an insured
financial
institution to
an affiliate.
In addition,
loans or other
extensions of
credit by the
financial institution
to the affiliate
are to be
collateralized in
accordance with the
requirements set forth in Section 23 of the Federal Reserve
Act.
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14
USCB Financial Holdings, Inc.
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Sections 22(g)
and (h)
of the
Federal Reserve
Act place
restrictions on
loans to
executive officers, directors
and principal
shareholders. Under
Section 22(h),
loans to
a director,
an executive
officer
and to
a greater
than 10%
stockholder
of an
insured
financial
institution,
and
certain
affiliated
interests
of
either,
may
not
exceed,
together
with
all
other
outstanding
loans to such
person and
affiliated interests,
the insured financial
institution’s loans
to one borrower
limit (generally
equal
to 15%
of
the
institution’s
unimpaired capital
and
surplus).
Section
22(h) also
requires
that
loans
to directors,
executive
officers and principal stockholders be made on terms substantially the same as offered in comparable transactions to other
persons unless the loans are made pursuant to a benefit or compensation program that (i) is widely available to employees
of the
institution and
(ii) does
not give
preference to
any director, executive
officer or
principal stockholder, or
certain affiliated
interests thereof, over other employees
of the insured financial institution.
Section 22(h) also requires prior board
approval
for the issuance of certain loans. In addition, the aggregate amount of
extensions of credit by an insured financial institution
to all insiders cannot
exceed the institution’s
unimpaired capital and
surplus. Furthermore, Section
22(g) places additional
restrictions on loans to executive officers. At December
31, 2025, the Bank was in compliance with the above restrictions.
FDIC Deposit Insurance
The FDIC is
an independent
federal agency
that insures the
deposits of federally
insured depository
institutions up
to
applicable limits. The FDIC also has certain regulatory,
examination and enforcement powers with respect to FDIC-insured
institutions.
The
deposits
are
insured
by
the
FDIC
up
to
applicable
limits.
As
a
general
matter,
the
maximum
deposit
insurance amount is $250 thousand per depositor.
Additionally,
FDIC-insured depository institutions are required
to pay deposit insurance assessments
to the FDIC. The
amount of
a particular
institution's deposit
insurance assessment
is based
on that
institution's risk
classification under
an
FDIC risk-based assessment system. An institution's
risk classification is assigned based on
its capital levels and the level
of supervisory concern the institution poses to the regulators.
Under the current
system, deposit
insurance assessments
are based
on a bank’s
assessment base,
which is
defined
as average total assets minus
average tangible equity.
For established small institutions,
such as the Bank, the
FDIC sets
deposit
assessment
rates
based
on
the
Financial
Ratios
Method,
which
takes
into
account
several
ratios
that
reflect
leverage, asset quality,
and earnings at
each individual institution
and then applies
a pricing multiplier that
is the same for
all institutions. An
institution’s rate
must be within
a certain minimum
and a certain
maximum, and the
range varies based
on the
institution’s
composite CAMELS
rating. The
deposit insurance
assessment
is calculated
by multiplying
the bank’s
assessment base
by the
total base
assessment rate.
Assessment rates
for most
insured depository
institutions with
less
than $10.0 billion of assets range from 2.5 to 32 basis points
of each institution’s total assets less tangible
capital.
In October 2022, the FDIC finalized a
rule that increased the initial base deposit insurance
assessment rates by 2 basis
points, beginning with the first
quarterly assessment period of 2023
(January 1, 2023 through
March 31, 2023). The FDIC,
as required under the FDIA, established a plan in
September 2020 (the “Restoration Plan”) to restore the DIF
reserve ratio
to meet or exceed
the statutory minimum
of 1.35% within eight
years. The Restoration
Plan did not
include an increase
in
the deposit
insurance assessment
rate. Based
on the
FDIC’s recent
projections,
however,
the FDIC
determined that
the
DIF reserve ratio
is at risk
of not reaching the
statutory minimum by
the statutory deadline
of September 30,
2028 without
increasing the
deposit insurance
assessment rates.
The increased
assessment would
improve the
likelihood that
the DIF
reserve ratio would reach the required minimum by the statutory deadline, consistent with the
FDIC’s amended Restoration
Plan. The
FDIC
is maintain
ing the
Designated
Reserve
Ratio (“DRR”)
for the
DIF at
2% for
2026.
The assessment
rate
schedules will remain in effect unless and until the reserve ratio meets or exceeds 2% in order to support growth in the DIF
in progressing
toward the
FDIC’s long-term
goal of
a 2%
DRR. Progressively
lower assessment
rate schedules
will take
effect
when
the
reserve
ratio
reaches
2%, and
again
when
it reaches
2.5%.
The
revised
assessment
rate
schedule
will
remain in effect unless and until the reserve ratio
meets or exceeds 2%, absent further action by the FDIC.
Under the
FDIA, the
FDIC may
terminate deposit
insurance upon
a finding
that the
institution has
engaged in
unsafe
and unsound
practices,
is in
an unsafe
or unsound
condition
to continue
operations,
or has
violated any
applicable
law,
regulation, rule, order, or condition
imposed by the FDIC.
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15
USCB Financial Holdings, Inc.
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Brokered Deposits
The FDIA
and FDIC
regulations generally
limit the
ability of
an insured
depository institution
to accept,
renew or
roll-
over any brokered deposit
unless the institution's capital
category is "well capitalized"
or, upon
application to and a
waiver
from
the
FDIC,
“adequately
capitalized."
Less-than-well-capitalized
banks
are
also
subject
to
restrictions
on
the
interest
rates that they
may pay on
deposits. The characterization
of deposits as
"brokered" may result
in the imposition
of higher
deposit assessments
on such deposits.
As mandated
by the 2018
Act, the FDIC's
brokered deposit
regulations provide
a
limited exception for reciprocal
deposits for banks that
are well-managed and well
capitalized (or adequately capitalized and
have obtained
a waiver
from the
FDIC as
mentioned above).
Under the
limited exception,
qualified banks
are eligible
for
exemption from
treatment as
"brokered" deposits
up to
$5.0 billion,
or 20%
of the
institution's total
liabilities in
reciprocal
deposits. In
2021, the
FDIC clarified
and modernized
its brokered
deposit regulations
by establishing
clear standards
for
determining whether an
entity qualifies as a
deposit broker,
identifying business relationships
that automatically qualify
for
the
“primary
purpose
exception,”
creating
a
transparent
application
process
for
entities
seeking
that
exception,
and
confirming that third parties with exclusive deposit
-placement arrangements with one institution are
not considered deposit
brokers.
Depositor Preference
The FDIA provides
that, in the
event of the
"liquidation or other
resolution" of an
insured depository institution, the
claims
of depositors
of the institution
(including the
claims of
the FDIC as
subrogee of
insured depositors)
and certain claims
for
administrative
expenses
of
the
FDIC
as
a
receiver
will
have
priority
over
other
general
unsecured
claims
against
the
institution. Insured and
uninsured depositors,
along with the
FDIC, will have
priority in payment
ahead of unsecured,
non-
deposit creditors,
including the
Bank, with
respect to
any extensions
of credit they
have made to
such insured
depository
institution.
Overdraft Fee Regulation
The Electronic Fund Transfer Act prohibits
financial institutions from charging consumers fees
for paying overdrafts on
automated teller machines, or
ATMs,
and one-time debit card transactions,
unless a consumer consents,
or opts in, to the
overdraft service for those types
of transactions. If a consumer
does not opt in,
any ATM transaction or debit that overdraws
the consumer’s account
will be denied.
Overdrafts on
the payment
of checks
and regular
electronic bill
payments are
not
covered
by
this
new
rule.
Before
opting
in,
the
consumer
must
be
provided
with
a
notice
that
explains
the
financial
institution’s
overdraft
services,
including
the
fees
associated
with
the
service,
and
the
consumer’s
choices.
Financial
institutions
must
provide
consumers
who
do
not
opt
in
with
the
same
account
terms,
conditions
and
features
(including
pricing) that they provide to consumers who do opt in.
Federal Reserve System and Federal Home Loan
Bank System
We are a member of the Federal Home Loan Bank (“FHLB”) of Atlanta, which is one of 11 regional FHLBs. Each FHLB
serves as
a quasi-reserve
bank for
its members
within its
assigned region.
It is
funded primarily
from funds
deposited by
member institutions
and proceeds
from the sale
of consolidated
obligations of
the FHLB
system. A
FHLB makes
loans to
members (i.e., advances) in accordance with policies
and procedures established by the Board of Trustees
of the FHLB.
As a member
of the FHLB
of Atlanta, we are
required to own
capital stock in
the FHLB in
an amount at
least equal to
0.07% (or
7 basis
points), which
is subject
to annual
adjustments, of
the Bank’s
total assets
at the
end of
each calendar
year (up
to a
maximum of
$18.0 million),
plus 4.75%
of our
outstanding advances
(borrowings) from
the FHLB
of Atlanta
and
0.10%
of
the
amount
of
outstanding
letters
of
credit
under
the
activity-based
stock
ownership
requirements.
As
of
December 31, 2025, the Bank was in compliance with
such requirements.
Anti-Money Laundering Regulation
As a financial
institution, we
must maintain
anti-money laundering
programs that
include established
internal policies,
procedures
and
controls,
a
designated
compliance
officer,
an
ongoing
employee
training
program,
and
testing
of
the
program by an independent audit function in accordance with the
Bank Secrecy Act of 1970, as amended (“BSA”), and the
regulations issued
by the
Department of
the Treasury
in 31
CFR Chapter
X, Section
326.8 of
the FDIC’s
regulations
and
the
Florida
Control
of
Money
Laundering
and
Terrorist
Financing
in
Financial
Institutions
Act.
Financial
institutions
are
prohibited from entering into specified financial transactions and account relationships and must meet enhanced standards
for due
diligence and
“knowing
your
customer”
in their
dealings
with
foreign financial
institutions,
foreign customers
and
other high-risk customers.
Financial institutions must
also take reasonable
steps to conduct
enhanced scrutiny of
account
relationships to
guard against
money laundering
and to
report transactions
that meet
certain dollar
amount thresholds
as
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USCB Financial Holdings, Inc.
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well as any
suspicious transactions.
Laws, such
as the
USA PATRIOT
Act enacted
in 2001,
as described
below,
provide
law enforcement authorities with increased access to financial
information maintained by banks.
Anti-money laundering
obligations have
been substantially
strengthened
as a
result of
the USA
PATRIOT
Act. Bank
regulators routinely examine institutions for compliance with these obligations, and this area has become a particular focus
of
the
regulators
in
recent
years.
In
addition,
the
regulators
are
required
to
consider
compliance
in
connection
with
the
regulatory
review
of
certain
applications.
In
recent
years,
regulators
have
expressed
concern
over
banking
institutions’
compliance
with
anti-money
laundering
requirements
and,
in
some
cases,
have
delayed
approval
of
their
expansionary
proposals. The regulators and other
governmental authorities have been
active in imposing “cease
and desist” orders and
significant money penalty sanctions against institutions
found to be in violation of the anti-money laundering regulations.
USA PATRIOT
Act
The USA
PATRIOT
Act became
effective
in October
2001 and
amended the
BSA. The
USA PATRIOT
Act requires
banks to establish anti-money laundering programs that
include, at a minimum:
•
a bank
compliance
program
that
contains
internal
policies,
procedures
and
controls
designed
to
implement
and
maintain the
bank’s compliance
with all
of the
requirements of
the USA
PATRIOT
Act, the
BSA and
related laws
and regulations;
bank wide
systems
and procedures
for monitoring
and reporting
of suspicious
transactions
and
activities;
•
a designated compliance officer;
•
employee training for bank employees;
•
an independent audit function to test the efficacy
of the bank’s anti-money laundering program;
•
procedures to verify the identity of each bank customer upon
the opening of accounts;
•
heightened due diligence policies,
procedures and controls applicable to
certain foreign accounts and
relationships;
and
•
required reports to law enforcement and/or financial regulators to assist in the deterrence and prevention of money
laundering activities.
Additionally,
the USA PATRIOT
Act requires each financial
institution to develop a
customer identification program,
or
CIP, as part of its anti-money
laundering program. The
key components of
the CIP are
identification verification, government
list comparison,
notice and
record retention.
The purpose
of the
CIP is
to enable
the financial
institution to
determine the
true identity
and anticipated
account activity
of each
customer.
To
make this
determination, the
financial institution
must,
among other things, collect certain information from customers at the time they enter
into the customer relationship with the
financial institution.
This information must
be verified within
a reasonable time.
Furthermore, all customers
must be
screened
against any CIP-related government
lists of known or suspected
terrorists or other “sanctioned”
persons. In May 2018, the
U.S. Treasury’s
Financial Crimes
Enforcement Network,
or FinCEN,
issued a
final rule
under the
BSA requiring
banks to
identify and verify
the identity of
the natural persons
behind their customers
that are legal
entities—the beneficial
owners.
The
Anti-Money
Laundering
Act
of
2020
(the
“AML
Act”)
and
within
the
AML
Act,
the
Corporate
Transparency
Act
(the
“CTA”),
was enacted in
January 2021. The
AML Act is
intended to be
a comprehensive
reform and modernization
of U.S.
bank
secrecy
and
anti-money
laundering
laws.
Among
other
things,
it
codifies
a
risk-based
approach
to
anti-money
laundering compliance
for financial
institutions; requires the
development of
standards for evaluating
technology and
internal
processes
for BSA
compliance;
expands
enforcement-
and investigation
-related
authority,
including
increasing
available
sanctions
for
certain
BSA
violations
and
instituting
BSA
whistleblower
incentives
and
protections.
The
CTA
establishes
uniform beneficial
ownership reporting
requirements for
corporations, limited
liability companies,
and other similar
entities
formed or registered to do business in the United States. The CTA
authorizes FinCEN to collect that information and share
it with
authorized government authorities
and financial institutions,
subject to
effective safeguards and
controls. In December
2023,
FinCEN
issued
regulations
regarding
access
to
the
beneficial
ownership
information
collected
under
the
CTA.
In
March
2025,
as
a
result
of
various
legal
challenges
to
the
CTA,
the
U.S.
Treasury
announced
that
it
was
suspending
enforcement of the
CTA
against domestic reporting
companies and their
beneficial owners. Later
in March 2025,
the U.S.
Treasury issued
a final interim
rule that formally
excepted domestic
reporting companies
and their beneficial
owners from
the
reporting
requirements.
Under
the
interim
final
rule,
only
foreign
reporting
entities
would
need
to
provide
foreign
beneficial ownership information. We and our affiliates have adopted
policies, procedures and controls designed to comply
with the BSA, the AML Act, the CTA
and the USA PATRIOT
Act.
The Office of Foreign Assets Control
The Office of Foreign Assets Control (the “OFAC”)
is responsible for helping to ensure that U.S. entities do not engage
in transactions with
“enemies” of
the United States,
as defined by
various Executive
Orders and Acts
of Congress.
OFAC
publishes lists of
names of
persons and organizations
suspected of aiding,
harboring or
engaging in terrorist
acts; owned
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17
USCB Financial Holdings, Inc.
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or
controlled
by,
or
acting
on
behalf
of
target
countries;
and
narcotics
traffickers.
Such
persons
are
referred
to
as
“sanctioned” persons.
If a bank finds
a name on
any transaction, account
or wire transfer
that is on
an OFAC
list, it must
freeze the account
and/or block the transaction or wire transfer. We utilize an outside vendor to oversee
the inspection of our accounts and the
filing of any notifications.
We also monitor
high-risk OFAC
areas such as new
accounts, wire transfers
and customer files.
These checks are performed using software that is updated each time
a modification is made to the lists provided by
OFAC
and other agencies of Specially Designated Nationals
and Blocked Persons.
Consumer Laws and Regulations
Our activities
are subject
to a
variety
of federal
and state
statutes and
regulations
designed to
protect consumers
in
transactions with
banks. Interest
and other
charges collected
or contracted
for by
us are
subject to
state usury
laws and
federal laws concerning interest rates. Our loan
operations are also subject to federal laws
applicable to credit transactions,
such as:
•
the
Truth-In-Lending
Act,
and
Regulation
Z,
governing
disclosures
of
credit
and
servicing
terms
to
consumer
borrowers
and
including
substantial
new
requirements
for
mortgage
lending
and
servicing,
as
mandated
by
the
Dodd-Frank Act
•
the Home Mortgage Disclosure Act of 1975 and Regulation C, requiring
financial institutions to provide information
to enable the
public and public
officials to
determine whether
a financial institution
is fulfilling its
obligation to help
meet the housing needs of the communities they serve;
•
the Equal Credit
Opportunity Act
and Regulation
B, prohibiting
discrimination on
the basis
of race,
color,
religion,
or other prohibited factors in extending credit;
•
the Fair
Credit Reporting Act
of 1978,
as amended by
the Fair
and Accurate Credit
Transactions Act, and Regulation
V, as well as the rules and
regulations of the FDIC governing the
use and provision of information
to credit reporting
agencies, certain identity theft protections and certain
credit and other disclosures;
•
the Fair
Debt Collection
Practices Act
and Regulation
F,
governing the
manner in
which consumer
debts may
be
collected by collection agencies; and
•
the Real Estate Settlement Procedures Act, and
Regulation X, which governs aspects of the settlement process for
residential mortgage loans.
Our deposit operations are also subject to federal laws,
such as:
•
the FDIA, which, among other things, limits the amount of
deposit insurance available per account to $250,000 and
imposes other limits on deposit-taking;
•
the Right to
Financial Privacy Act,
which imposes a
duty to maintain
the confidentiality of
consumer financial records
and prescribes procedures for complying with administrative subpoenas
of financial records;
•
Check Clearing for
the 21st Century
Act (also known
as “Check 21”),
which gives “substitute
checks,” such as
digital
check images and copies made from that image, the
same legal standing as the original paper check;
•
the Electronic
Funds Transfer
Act and
Regulation E,
which governs
automatic deposits
to and
withdrawals
from
deposit accounts
and customers’
rights and
liabilities arising
from the
use of
ATMs
and other
electronic banking
services; and
•
the Truth
in Savings
Act and
Regulation DD,
which requires
depository institutions
to provide
disclosures so
that
consumers can make meaningful comparisons about depository
institutions and accounts.
These
laws
and
regulations
mandate
certain
disclosure
requirements
and
regulate
the
manner
in
which
financial
institutions must deal with clients when
taking deposits or making loans to
such clients. We must comply with the applicable
provisions of these consumer protection laws and regulations as part of both
our ongoing client relations and our regulatory
compliance obligations.
Financial Privacy and Cybersecurity
Banking organizations
are
subject to
many federal
and state
laws and
regulations
governing the
collection,
use and
protection of customer information.
Under the privacy protection
provisions of the GLB
Act and related laws
and regulations,
including Florida laws, we are limited in our ability
to disclose non-public information about consumers
to nonaffiliated third
parties. These
limitations
require
disclosure
of
privacy
policies to
consumers
and,
in
some
circumstances,
require
us to
allow
consumers
to
prevent
disclosure
of
certain
personal
information
to
a
non-affiliated
third
party
and
to
not
disclose
account numbers or
access codes to
non-affiliated third parties for
marketing purposes. Federal
banking agencies, including
the
FDIC,
have
adopted
guidelines
for
establishing
information
security
standards
and
cybersecurity
programs
for
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USCB Financial Holdings, Inc.
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implementing safeguards. These guidelines,
along with related
regulatory materials, increasingly focus
on risk management
and processes related to information technology and the use
of third parties in the provision of financial services.
In
addition,
the
federal
banking
agencies
have
adopted
a
rule
to
establish
computer-security
incident
notification
requirements
for
bank
holding
companies,
banks
and
their
service
providers.
Under
the
rule,
banking
organizations
are
required to notify their primary
federal regulators within 36 hours
of any incident that has materially
disrupted or degraded,
or is
reasonably
likely to
materially disrupt
or degrade,
the banking
organization’s
ability to
deliver banking
services to
a
material portion of
its client base,
jeopardize the
viability of key
operations, or
impact the financial
stability of
the financial
sector. The rule also imposes
certain notification requirements on third-party bank
service providers when they experience
a computer-security
incident that
has caused,
or is
likely to
cause a
material service
disruption or
degradation for
four or
more hours. In such case, the service provider is required to notify its bank-designated point of contact as soon as possible
upon discovery of the incident.
In addition to federal laws and regulations, we are subject
to state laws governing customer privacy and cybersecurity.
The Florida Information Protection Act of 2014 (“Florida Act”) requires notification of
the Florida Department of Legal Affairs
of any breach involving
personal information that
affects more than
500 people as
well as requiring notification
of affected
individuals of
a breach.
The Florida
Act also
requires us to
take reasonable
measures to protect
and secure
data in
electronic
form containing personal information and take all reasonable measures to dispose, or arrange for the disposal, of
customer
records containing
personal information
within our
custody or
control when
the records
are no
longer to
be retained.
We
incur
significant
costs
and
expenses
in
order
to
address
compliance
with
the
federal
and
state
customer
privacy
and
cybersecurity laws and regulations, and we expect such
costs and expenses will continue into the future.
Consumer Financial Protection Bureau
The Consumer Financial Protection Bureau (“CFPB”) is
an independent regulatory authority housed within the
Federal
Reserve Board. The CFPB has broad authority to regulate the offering and provision of consumer financial products and to
prevent institutions subject to its authority from engaging in “unfair
and deceptive or abusive acts or practices” with respect
to their
offering of consumer
financial products or
services. The CFPB
has the
authority to
supervise and examine
depository
institutions with more than $10.0 billion
in assets for compliance with federal
consumer laws. The authority to supervise
and
examine depository institutions with $10.0 billion or less in assets, such as the Bank, for compliance with federal consumer
laws remains largely with those institutions’ primary federal
regulators. However, the CFPB may participate in examinations
of these smaller institutions
on a “sampling basis”
and may refer potential
enforcement actions
against such institutions
to
their primary regulators.
As such, the
CFPB may participate
in examinations of
the Bank. In
addition, states are
permitted
to adopt consumer
protection laws and
regulations that are stricter
than the regulations promulgated
by the CFPB,
and state
attorneys general are permitted to enforce consumer protection
rules adopted by the CFPB against certain
institutions.
The Volcker Rule
The Dodd-Frank Act
prohibits (subject to
certain exceptions) us
and our
affiliates from engaging
in short term
proprietary
trading in securities and derivatives and from investing
in and sponsoring certain investment companies defined
in the rule
as “covered
funds” (including
not only
hedge funds,
commodity pools
and private
equity funds,
but also
a range
of asset
securitization structures
that do not
meet exemptive
criteria in the
final rules). This
statutory provision
is commonly
called
the “Volcker Rule.” At December 31, 2025, we are not
subject to the Volcker Rule because of our asset
size, which is below
the $10.0 billion Volcker Rule
threshold.
Community Reinvestment Act and Fair Lending Requirements
As
previously
noted,
we
are
subject
to
certain
fair
lending
requirements
and
reporting
obligations
involving
home
mortgage
lending
operations.
We
are
also
subject
to
certain
requirements
and
reporting
obligations
under
the
federal
Community Reinvestment Act (“CRA”).
The CRA and
its corresponding regulations are
intended to encourage banks
to help
meet the credit needs of
the communities they serve,
including low- and moderate
-income neighborhoods, consistent with
safe and sound banking practices.
Accordingly,
the
CRA
generally
requires
federal
banking
agencies
to
evaluate
the
record
of
a
financial
institution
in
meeting applicable
CRA requirements.
The CRA
further requires
the agencies
to take
into account
our record
of meeting
community
credit
needs
when
evaluating
applications
for,
among
other
things,
new
branches
or
mergers.
We
are
also
subject to analogous state CRA requirements
in Florida and certain other states
in which we may establish branch
offices.
In
connection
with
their
assessments
of
CRA
performance,
the
FDIC
and
FOFR
assign
a
rating
of
“outstanding,”
“satisfactory,”
“needs to
improve,” or
“substantial
noncompliance.”
We received
a “satisfactory”
CRA Assessment
Rating
from
both
regulatory
agencies
in
our
most
recent
CRA
examinations
in
2023.
In
addition
to
substantive
penalties
and
corrective measures that may be required for a violation of certain fair lending laws, the federal banking agencies may take
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19
USCB Financial Holdings, Inc.
2025 10-K
compliance with such laws and CRA
into account when regulating and supervising
other activities of the bank, including
in
acting
on
expansionary
proposals
such
as when
a bank
submits
an
application
to establish
bank
branches,
merge
with
another bank,
or acquire
the assets
and assume
the liabilities
of another bank.
An unsatisfactory
CRA and/or
fair lending
record could
substantially delay or
block any
such transaction.
The regulatory agency's
assessment of
the institution's
record
is made available to
the public at
www.ffiec.gov/craratings.
Following its most
recent CRA performance
evaluation in April
2023, the Bank received an overall rating of "Satisfactory."
In October 2023, the federal
banking agencies jointly issued
a final rule to modernize
CRA, but in light of litigation,
the
agencies issued a joint proposal
in July 2025 to rescind this
rule and reinstate the CRA framework
that existed prior to the
2023 final rule.
Call Reports and Examination Cycle
All institutions, regardless of size, submit
a quarterly call report that includes
data used by federal banking agencies
to
monitor the condition, performance, and
risk profile of individual institutions
and the industry as a whole.
In June 2019, the
federal banking agencies issued a
final rule to permit insured
depository institutions with total assets of
less than $5.0 billion
that
do
not
engage
in
certain
complex
or international
activities
to
file
the
most
streamlined
version
of the
quarterly
call
report, and to reduce data reportable on certain streamlined
call report submissions.
Effect of Governmental Monetary Policies
The commercial banking
business is affected
not only by
general economic conditions,
but also by
the monetary policies
of the Federal Reserve. Changes in the discount rate
on member bank borrowing, availability of borrowing
at the “discount
window,”
open
market
operations,
changes
in
the
Fed
Funds
target
interest
rate,
the
imposition
of
changes
in
reserve
requirements against member banks’ deposits
and assets of foreign banking centers
and the imposition of and changes in
reserve requirements against certain
borrowings by banks and
their affiliates are
some of the
instruments of monetary
policy
available to the Federal Reserve. These
monetary policies are used in
varying combinations to influence overall growth and
distributions of bank loans, investments and deposits, which may affect interest rates charged
on loans or paid on deposits.
The monetary
policies of
the Federal
Reserve have
had a significant
effect on
the operating
results of
commercial banks
and are
expected to
continue
to do
so in
the future.
The
Federal Reserve’s
policies are
primarily
influenced
by the
dual
mandate
of
price
stability
and
full
employment,
and
to
a
lesser
degree
by
short-term
and
long-term
changes
in
the
international trade
balance and
in the
fiscal policies
of the
U.S. government.
Future changes
in monetary
policy and
the
effect of such changes on our business and earnings
in the future cannot be predicted.
Future Legislation and Regulation
Congress may enact legislation from time to time that affects
the regulation of the financial services industry,
and state
legislatures may enact legislation from time to time affecting the regulation of financial institutions chartered by or operating
in those states.
Federal and state
regulatory agencies
also periodically propose
and adopt changes
to their regulations
or
change the manner
in which existing
regulations are
applied or
interpreted. The
substance or
impact of pending
or future
legislation or regulation, or
the application thereof, cannot
be predicted, although enactment
of proposed legislation has
in
the past
and may
in the
future affect
the regulatory
structure under
which we
operate and
may significantly
increase our
costs, impede the efficiency
of our internal business
processes, require us to
increase our regulatory
capital or modify our
business
strategy,
or
limit
our
ability
to
pursue
business
opportunities
in
an
efficient
manner.
Our
business,
financial
condition, results
of operations
or prospects
may be
adversely affected,
perhaps materially,
as a
result of
any such
new
legislation or regulations.
Federal Securities Laws and the Sarbanes-Oxley Act
The
Company
Class
A
common
stock
is
registered
with
the
SEC
under
Section
12(b)
of
the
Exchange
Act.
The
Company is subject to the
proxy and tender offer
rules, insider trading reporting
requirements and restrictions,
and certain
other requirements under the Exchange Act.
As a public
company,
the Company
is also subject
to the Sarbanes-Oxley
Act of 2002
(“SOA”), which
is applicable to
all companies, both U.S. and non-U.S., that file
periodic reports under the Exchange Act. The stated
goals of the SOA were
to increase corporate responsibility,
to provide for enhanced penalties
for accounting and auditing
improprieties at publicly
traded companies and to protect investors by
improving the accuracy and reliability of corporate
disclosures pursuant to the
securities laws. The
SEC is responsible
for establishing rules
to implement various
provisions of the
SOA. The SOA
includes
specific
disclosure
requirements
and
corporate
governance
rules,
requires
the
SEC
and
securities
exchanges
to
adopt
extensive additional disclosure,
corporate governance and
other related rules
and mandates further
studies of certain
issues
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20
USCB Financial Holdings, Inc.
2025 10-K
by the SEC.
The SOA represents
significant regulation
of the accounting
profession and
corporate governance
practices,
such as
the relationship
between a
board of
directors and
management and
between a
board of
directors and
its committees.
As directed by the
SOA, the Company’s
principal executive officer
and principal financial
officer are required
to certify
that the Company’s quarterly and annual
reports do not contain any untrue statement
of a material fact. The rules adopted
by the SEC under the SOA have
several requirements, including having these
officers certify that: they are
responsible for
establishing, maintaining and regularly evaluating
the effectiveness of our internal
control over financial reporting; they
have
made certain disclosures to
the Company’s auditors and the
audit committee of the
Board of Directors about
the Company’s
internal control over financial reporting;
and they have included information
in the Company’s quarterly
and annual reports
about their evaluation
and whether there
have been changes
in the
Company’s internal
control over
financial reporting
or
in other factors that could materially affect the Company’s
internal control over financial reporting.
In March 2020, the SEC issued
a final rule, effective
April 27, 2020, under the
SOA – Amendments to the Accelerated
Filer and
Large Accelerated
Filer Definitions.
As a
result of
the amendments,
certain low
revenue and/or
low public
float
filers, while they remained obligated to provide a
report by management assessing the effectiveness of their internal control
over financial reporting (“ICFR”), were
not required to provide
an attestation report from
their independent auditor assessing
the effectiveness
of their ICFR.
The Company meets
the amended definition
of an accelerated
filer as of
January 1, 2026
and would normally be required to provide an attestation report from its independent auditor assessing
the effectiveness of
its ICFR. However, as long as it is an eligible emerging growth company, such auditor attestation requirement will not apply
to the Company.
The Company will no
longer be an emerging
growth company as of
December 31, 2026 and
is expected
to
be
required
to
comply
with
the
ICFR
independent
auditor
attestation
report.
In
addition,
the
Bank
remains
subject
to
independent auditor attestation required under FDIC regulations
set forth at 12 C.F.R.
§363.3(b).
Available Information
Our website
address is
www.uscentury.com.
Our electronic
filings with
the FDIC
(prior to
the bank
holding company
reorganization) and the SEC (including
all Annual Reports on
Form 10-K, Quarterly Reports on
Form 10-Q, Current Reports
on
Form
8-K,
and
if
applicable,
amendments
to
those
reports)
are
available
free
of
charge
on
the
website
as
soon
as
reasonably practicable after
they are electronically
filed with, or furnished
to, the FDIC
or SEC. The information
posted on
our website is
not incorporated into
this Annual Report
on Form 10-K.
In addition, the
FDIC and the
SEC each maintain
a
website that contains reports and other information that
is filed.
Table of Contents
21
USCB Financial Holdings, Inc.
2025 10-K
Item 1A. Risk Factors
This
section
contains
a
description
of
the
material
risk
and
uncertainties
identified
by
management
that
could,
individually or in combination, harm our business, results of
operations, liquidity and financial condition. The risks described
below are
not all
inclusive. We
may face
other risks
that are
not presently
known, or
that we
presently deem
immaterial,
which may also adversely
affect our business, results
of operations, liquidity and
financial condition. If any
of these known
or unknown risks
or uncertainties actually
occur,
our business, results
of operations, liquidity
and financial condition
could
be materially and adversely affected.
Summary of Risk Factors
Our business is subject to
a number of risks that could
cause actual results to differ
materially from those indicated
by
forward-looking statements
made in this
Form 10-K
or presented
elsewhere from
time to time.
These risks
are discussed
more fully in this Item 1A and include, without limitation,
the following:
Risks Related to our Business and Operations
•
Our
business
operations
and
lending
activities
are concentrated
in
South
Florida,
and
we
are
more
sensitive
to
adverse changes in the local economy than our more geographically
diversified competitors.
•
Our concentration of real estate loans in a limited market
area exposes us to lending risks.
•
The small- to medium-sized businesses
to which we lend may have
fewer resources to weather adverse
business
developments, which may impair a borrower's ability to
repay a loan.
•
Inflationary pressures and rising prices may affect
our results of operations and financial condition.
•
The soundness of other financial institutions could adversely
affect us.
•
Insufficient
liquidity
could
impair
our
ability
to
fund
operations
and
jeopardize
our
financial
condition,
results
of
operations, growth and prospects.
•
Significant
changes
to
the
size,
structure,
powers
and
operations
of
the
federal
government,
changes
to
U.S.
economic policies,
and
uncertainties
regarding
the potential
for these
changes
may cause
economic
disruptions
that could, in turn, adversely impact our business, results
of operations and financial condition.
•
Our lending business is subject to credit risk, which could
lead to unexpected losses.
•
Natural
disasters
and
severe
weather
events
in
Florida
could
have
a
material
adverse
impact
on
our
business,
financial condition and operations.
•
Our business is subject to
interest rate risk and variations
in interest rates may
materially and adversely affect
our
financial performance.
•
Our allowance for credit losses may not be sufficient
to absorb potential losses in our loan portfolio.
•
Our commercial loan portfolio may expose us to increased
credit risk.
•
The imposition of further limits
by the bank regulators
on commercial real estate
lending activities could curtail our
growth and adversely affect our earnings.
•
Our SBA lending program depends on our status as a participant in the SBA's Preferred Lenders Program, and we
face specific risks associated with originating SBA loans
and selling the guaranteed portion thereof.
•
The SBA may not honor its guarantees if we do not originate
loans in compliance with SBA guidelines.
•
Correspondent banking is an important part of our business,
which creates increased BSA/AML risk.
•
We may not recover all amounts that are contractually
owed to us by our borrowers.
Table of Contents
22
USCB Financial Holdings, Inc.
2025 10-K
•
Non-performing assets
take significant time
to resolve and
adversely affect
our results of
operations and financial
condition, and could result in further losses in the future.
•
We engage in
lending secured by
real estate and
may foreclose on
the collateral and
own the underlying
real estate,
subjecting us
to the
costs and potential
risks associated with
the ownership
of real
property and
other risks, including
exposure
to
environmental
liability,
or
consumer
protection
initiatives
or
changes
in
state
or
federal
law
may
substantially raise the cost of foreclosure or prevent us
from foreclosing at all.
•
We are exposed to risk of environmental liability when
we take title to property.
•
We are subject to
certain operational risks, including, but
not limited to, customer, employee or
third-party fraud and
data processing system failures and errors.
•
We face significant
operational risks because
the nature of the
financial services business
involves a high volume
of transactions.
•
We have several large depositor
relationships, the loss of
which could force us to
fund our business through more
expensive and less stable sources.
•
Any change in the Bank's ability to gather brokered deposits
may adversely impact the Bank.
•
Our
securities
portfolio
performance
in
difficult
market
conditions
could
have
adverse
effects
on
our
results
of
operations.
•
We may
not effectively
execute on
our expansion
strategy,
which may
adversely affect
our ability
to maintain
our
historical growth and earnings trends.
•
New lines of business, products, product enhancements
or services may subject us to additional risk.
•
Our business
needs and
future growth
may require us
to raise
additional capital
and that
capital may
not be
available
on terms acceptable to us or may be dilutive to existing shareholders.
•
We may grow through mergers or
acquisitions, a strategy that may
not be successful or, if successful, may produce
risks
in
successfully
integrating
and
managing
the
merged
companies
or
acquisitions
and
may
dilute
our
shareholders.
•
The loss of one or more
of our key personnel, or
our failure to attract and
retain other highly qualified
personnel in
the future, could harm our business.
•
Damage to our reputation could significantly harm our
businesses.
•
We face
strong competition
from financial
services
companies
and other
companies
that offer
banking services,
which could materially and adversely affect our
business.
•
We must respond to rapid technological changes
to remain competitive.
•
We continually
encounter technological change,
and we may
have fewer resources
than many of
our competitors
to invest in technological improvements.
•
Our current and future uses of artificial intelligence and
other emerging technologies may create additional risks.
•
A
failure, interruption, or breach in the
security of our systems, or those
of our contracted vendors, could disrupt
our
business, result in the disclosure of confidential information, damage our reputation, and
create significant financial
and legal exposure.
•
We rely on other companies to provide key components of our business infrastructure and our operations could be
interrupted if
our third-party
service providers
experience difficulty,
terminate their
services
or fail
to comply
with
banking regulations.
•
Litigation
and
regulatory
actions,
including
possible
enforcement
actions,
could
subject
us
to
significant
fines,
penalties, judgments
or other requirements
resulting in
increased expenses or
restrictions on
our business
activities.
Table of Contents
23
USCB Financial Holdings, Inc.
2025 10-K
•
Certain of our
directors may
have conflicts of
interest in determining
whether to present
business opportunities
to
us or another entity with which they are, or may become, affiliated.
Risks Related to Our Tax, Accounting
and Regulatory Compliance
•
Our ability to
recognize the benefits
of our deferred
tax assets is
dependent on future
cash flows and
taxable income
and may be materially impaired upon significant changes
in ownership of our common stock.
•
The accuracy of
our financial statements
and related disclosures
could be affected
if the judgments,
assumptions
or estimates used in our critical accounting policies are inaccurate.
•
As a public company,
we may not efficiently or effectively
create an effective internal control environment,
and any
future failure to maintain effective
internal control over financial reporting
could impair the reliability of
our financial
statements, which
in turn could
harm our
business, impair
investor confidence
in the accuracy
and completeness
of our
financial
reports
and
our access
to the
capital
markets,
cause
the
price
of
our Class
A common
stock
to
decline and subject us to regulatory penalties.
•
We operate in a highly
regulated environment, and the
laws and regulations that
govern our operations, corporate
governance, executive
compensation and
accounting principles, or
changes in them,
or our failure
to comply with
them, could adversely affect us.
•
We
face
a
risk
of
noncompliance
with
the
Bank
Secrecy
Act
and
other
anti-money
laundering
statutes
and
regulations and corresponding enforcement proceedings.
•
Significantly heightened regulatory and
supervisory expectations and scrutiny
in the United States have
increased
our
compliance,
regulatory,
and
other
risks
and
costs
and
subject
us
to
legal
and
regulatory
examinations,
investigations, and enforcement actions.
•
We are subject to capital adequacy requirements
and may become subject to more stringent capital requirements,
which could adversely affect our financial condition
and operations.
•
We are periodically subject to examination and scrutiny by a number of
banking agencies and, depending upon the
findings and determinations of these agencies, we may
be required to make adjustments to our
business that could
adversely affect us.
•
We are
subject to
numerous laws
and regulations
of certain
regulatory agencies
designed to
protect consumers,
including the
Community Reinvestment
Act, or
CRA, and
fair lending
laws, and
failure to
comply with
these laws
could lead to a wide variety of sanctions.
•
Climate change
and related
legislative and
regulatory initiatives
may materially
affect our
business and
results of
operations.
Risks Related to Our Class A Common Stock
•
Our ability to pay dividends is subject to restrictions.
•
If
we
fail
to
pay
interest
on
or
otherwise
default
on
our
subordinated
notes,
we
will
be
prohibited
from
paying
dividends or distributions on our Class A common stock.
•
We may
issue additional
debt securities,
which would
be senior
to our
common stock
and may cause
the market
price of our Class A common stock to decline.
•
The market price and trading volume of our Class A common stock may be volatile, which could result in rapid and
substantial losses for our shareholders.
•
There are
significant restrictions
in our
Articles of
Incorporation
that restrict
the ability
to sell
our capital
stock
to
shareholders that would own 4.95% or more of our stock,
excluding our Significant Investors.
Table of Contents
24
USCB Financial Holdings, Inc.
2025 10-K
•
Because
we
are
an
emerging
growth
company
and
because
we
have
decided
to
take
advantage
of
certain
exemptions from various reporting
and other requirements applicable
to emerging growth companies,
our Class A
common stock could be less attractive to investors.
•
Because
we
have
elected
to
use
the
extended
transition
period
for
complying
with
new
or
revised
accounting
standards for an
“emerging growth company,”
our financial statements
may not be comparable
to companies that
comply with these accounting standards as of the public
company effective dates.
•
We have existing investors that
own a significant amount of
our common stock whose individual
interests may differ
from yours.
•
Provisions in our governing documents and Florida
law may have an anti-takeover effect
and there are substantial
regulatory limitations on changes of control of the Company.
Risks Related to our Business and Operations
Our business
operations and
lending activities
are concentrated
in South
Florida, and
we are
more sensitive
to adverse changes in the local economy than our
more geographically diversified competitors.
Unlike many of
our larger competitors
that maintain significant
operations located
outside of our
market area, most
of
our customers are concentrated in South Florida. In addition, we have
a high concentration of loans secured by real estate
located in
South Florida.
Therefore, our
success depends
upon the
general economic
conditions in
South Florida,
which
may differ from the economic conditions in other areas
of the U.S. or the U.S. generally.
Our real estate
collateral provides
an alternate source
of repayment in
the event
of default by
the borrower;
however,
the value of the collateral may decline during the time the credit is outstanding. The concentration of our loans in the South
Florida area subjects us to
risk that a downturn in the
local economy or recession in
this area could result in
a decrease in
loan originations and increases in delinquencies and foreclosures, which would have a greater negative effect on us than if
our lending were more geographically diversified. Additionally, the COVID-19 pandemic accelerated the adoption of remote
work
options,
potentially
influencing
the
long-term
performance
of
office
properties
within
our
commercial
real
estate
portfolio. If we
are required to
liquidate our real
estate collateral securing
a loan during
a period of
reduced real estate
values
to satisfy the debt,
our earnings and capital could
be adversely affected. Moreover, since a large portion
of our loan portfolio
is secured by properties located in South Florida, the occurrence of a natural disaster, such as a hurricane, or a man-made
disaster could result in
a decline in loan originations,
a decline in the
value or the destruction
of mortgaged properties and
an increase in the risk of delinquencies, foreclosures or loss on loans originated by us. We may suffer further losses due to
the decline in the
value of the properties
underlying our mortgage loans, which
would have an adverse
impact on our results
of operations and financial condition.
A downturn in the local economy generally may lead to loan losses that are not offset by operations in other markets; it
may also reduce the ability
of our customers to grow
or maintain their deposits with
us. For these reasons, any
regional or
local economic
downturn
that
affects
South Florida,
or existing
or prospective
borrowers
or
depositors
in
South Florida,
could have a material adverse effect on our business,
financial condition and results of operations.
In addition, there are continuing concerns related
to, among other things, the increasing
level of U.S. government debt
and fiscal actions that may be taken to address that debt, price fluctuations
of key natural resources, inflation, the potential
resurgence of economic and political tensions with China, the continuing war in Ukraine and the level of oil and natural gas
prices due to, among
other things, Russian supply
disruptions resulting from
the ongoing Ukrainian conflict,
each of which
may have a
destabilizing effect
on financial markets
and economic activity.
Economic pressure on
consumers and overall
economic
uncertainty
may
result
in
changes
in
consumer
and
business
spending,
borrowing
and
saving
habits.
These
economic conditions and/or other negative developments in the domestic or international credit markets or economies may
significantly affect the
markets in which
we do
business, the value
of our
loans and investments,
and our
ongoing operations,
costs and profitability.
Table of Contents
25
USCB Financial Holdings, Inc.
2025 10-K
Our concentration of real estate loans in a limited
market area exposes us to lending risks.
At December 31, 2025, approximately
$1.55 billion, or 71.1%, of our
total loan portfolio, was secured
by real estate, in
particular commercial
real estate,
most of
which is
located in
our primary
lending market
area of
the Miami
metropolitan
statistical
area.
Future
declines
in
the
real
estate
values
in
our
primary
lending
market
and
surrounding
markets
could
significantly impair
the value
of the
particular real
estate collateral
securing our
loans and
our ability
to sell
the collateral
upon
foreclosure
for
an
amount
necessary
to
satisfy
the
borrower’s
obligations
to
us.
This
could
require
increasing
our
allowance for credit
losses to address
the decrease in
the value of
the real estate
securing our loans,
which could have
a
material adverse effect on our business, financial
condition, results of operations, and growth prospects.
The
small-
to
medium-sized
businesses
to
which
we
lend
may
have
fewer
resources
to
weather
adverse
business developments, which may impair a borrower's
ability to repay a loan.
We
target
our
business
development
and
marketing
strategies
primarily
to
serve
the
banking
and
financial
services
needs of SMBs and
the owners and operators of
those businesses. SMBs generally have
fewer financial resources in terms
of capital or
borrowing capacity
than larger entities,
frequently have
smaller market shares
than their competition,
may be
more
vulnerable
to
economic
downturns,
often
need
substantial
additional
capital
to
expand
or
compete,
and
may
experience substantial
volatility in
operating results,
any of
which, individually
or in
the aggregate,
may impair
their ability
as a borrower
to repay a loan.
In addition, the success
of SMBs often
depends on the management
skills, talents and efforts
of a
small group
of key
people, and
the death,
disability or
resignation of
one or
more of
these individuals
could have
an
adverse impact on
the business and
its ability to
repay its loan.
If general economic
conditions negatively impact
the markets
in which we operate
or any of our
borrowers otherwise are affected by adverse
business developments, our SMB borrowers
may be disproportionately affected and their ability to
repay outstanding loans may be adversely affected, which could
have
a material adverse effect on our business, financial
condition and results of operations.
Inflationary pressures and rising prices may affect
our results of operations and financial condition.
The inflationary
outlook in
the United
States remains
uncertain. As
of December
31, 2025,
the consumer
price index
was 2.7% year-over-year. While this is
a significant reduction to the rate of inflation experienced in 2023 and 2024,
it is still
above the FRB’s targeted rate. The risks to
our business from inflation depend on the
durability of the inflationary pressures
in our markets. Although
the FRB has reduced
the federal funds rate
three times in 2024,
and further three times
in 2025,
no assurance can be given that it will continue to do so. At the end of January 2026,
the FRB determined not to reduce the
federal funds rate. The
resurgence of elevated
levels of inflation could
lead the FRB to cease
reducing its benchmark
rate
or potentially
starting to
increase it
again which
could, in
turn, increase
the borrowings
costs of
our customers,
making it
more difficult for
them to repay their
loans or other obligations.
Elevated interest rates
may be needed to
tame inflationary
price pressures, which could also push down asset prices,
including collateral values, and weaken economic activity.
As inflation increases and market interest
rates rise the value of
our investment securities, particularly those with longer
maturities,
decreases,
although
this
effect
can
be
less
pronounced
for
floating-rate
instruments.
In
addition,
inflation
generally increases the cost of goods and services we use in
our business operations, such as electricity and other utilities,
which increases our
noninterest expenses. Also,
a prolonged period
of inflation could
cause wages and
other of our costs
to increase, which could adversely
affect our results of
operations and financial condition.
Furthermore, our customers are
also affected by inflation
and the rising costs of
goods and services used
in their households and businesses,
which could
have a negative impact on their ability to repay their loans with us.
In addition, SMBs may be impacted more during periods
of
high
inflation,
as
they
are
not
able
to
leverage
economics
of
scale
to
mitigate
cost
pressures
compared
to
larger
businesses. Consequently,
the ability of
our business
customers to repay
their loans
may deteriorate,
and in some
cases
this deterioration may occur quickly,
which would adversely impact our results of operations
and financial condition.
The soundness of other financial institutions could
adversely affect us.
Our
ability
to
engage
in
routine
funding
and
other
transactions
could
be
adversely
affected
by
the
actions
and
commercial soundness
of other
financial institutions.
Financial services
companies are
interrelated as
a result
of trading,
clearing,
counterparty
or
other
relationships.
We
have
exposure
to
different
industries
and
counterparties,
and
through
transactions
with
counterparties
in
the
financial
services
industry,
including
brokers
and
dealers,
commercial
banks,
investment
banks,
and
other
institutional
clients.
Defaults
by,
or
even
rumors
or
questions
about,
one
or
more
financial
institutions or market utilities, or
the financial services industry generally, may lead to market-wide liquidity
problems, losses
of depositor,
creditor
and
counterparty
confidence
and
losses
or defaults
by us
or by
other institutions.
These
losses
or
defaults
could
have
a
material
adverse
effect
on
our
business,
financial
condition,
results
of
operations
and
growth
prospects. Additionally,
if our
competitors were
extending credit
on terms
we found
to pose
excessive risks,
or at interest
rates which we believed
did not warrant the
credit exposure, we may not
be able to maintain
our business volume and
could
experience deteriorating financial performance.
Table of Contents
26
USCB Financial Holdings, Inc.
2025 10-K
Insufficient liquidity could
impair our ability to
fund operations and jeopardize
our financial condition,
results
of operations, growth and prospects.
Effective liquidity management is essential for the operation of our business. Although we
have implemented strategies
to maintain
sufficient
and
diverse
sources of
funding
to accommodate
planned,
as well
as unanticipated,
liquidity
needs
(including changes
in assets, liabilities, and
off-balance sheet commitments under various
economic conditions), an inability
to
raise
funds
through
deposits,
borrowings,
the
sale
of
investment
securities
and
other
sources
could
have
a
material
adverse effect
on our
liquidity. Our access
to funding
sources in
amounts adequate to
finance our
activities could
be impaired
by factors that affect us specifically or the financial services
industry in general. Factors that could detrimentally impact
our
access to liquidity sources include a decrease in the level of our business activity due to a market disruption, a decrease in
the borrowing capacity assigned to
our pledged assets by our
secured creditors, competition from other
financial institutions
which could drive up the
costs of deposits or adverse
regulatory action against us. Deterioration in
economic conditions and
the loss of
confidence in financial
institutions may increase
our cost of
funding and limit
our access to
some of our
customary
sources of liquidity,
including, but not
limited to, inter-bank
borrowings and borrowings
from the Federal
Home Loan Bank
of Atlanta, or
the FHLB, and
the Federal Reserve
Bank of Atlanta.
Our ability to
acquire deposits
or borrow
could also be
impaired by
factors that
are not
specific to
us, such
as a
severe disruption
of the
financial markets
or negative
views and
expectations
about the
prospects
for the
financial
services
industry generally
as
a result
of conditions
faced
by banking
organizations
in
the
domestic
and
international
credit
markets.
Any decline
in
available
funding
or cost
of liquidity
could
adversely impact our ability to originate loans, invest in securities, meet our expenses
or fulfill obligations such as repaying
our borrowings or
meeting deposit withdrawal demands,
any of which
could, in turn,
have an adverse
effect on our
business,
financial condition, and results of operations.
Significant changes
to the size,
structure, powers
and operations of
the federal government,
changes to U.S.
economic policies, and
uncertainties regarding
the potential for
these changes may
cause economic
disruptions
that could, in turn, adversely impact our business,
results of operations and financial condition.
The current U.S. administration
has implemented significant changes in
federal priorities and has
taken steps to change
the operations,
structure, and
policy focus
of various
federal agencies,
as well
as regulatory
priorities, policy
approaches
and
interpretations
of
existing
laws
by
those
federal
agencies.
For
example,
recent
executive
actions
and
proposed
legislation has changed agency mandates, modified or reduced federal program funding, altered regulatory frameworks, or
adjusted the size and
composition of the
federal workforce. Moreover,
leadership transitions at
key federal agencies
have
impacted or
may impact
rulemaking, supervision,
enforcement, and
examination
priorities across
the financial
regulatory
landscape. These developments in the federal government may
have varying effects on the banking and financial services
industry that are difficult to predict, which makes it difficult for us to anticipate and mitigate attendant risks. Compliance with
changing federal and regulatory
priorities could, among
other things, increase
the costs of
operating our business,
reduce
the
demand
for
our
products
and
services,
impact
our
ability
to
achieve
our
business
goals,
and
increase
our
legal,
operational and reputational risks, any or all of which could
materially adversely affect our results of operations.
The current U.S. administration also has implemented rapid shifts in macroeconomic policies, such as those relating to
trade restrictions and tariffs, which
have created significant uncertainties regarding
U.S. economic growth, the potential for
recession, and concerns
over an increase in
inflation. Slow economic
growth, economic contraction
or recession, or shifts
in broader consumer and business trends would significantly impact our ability to originate loans, the ability of borrowers to
repay loans, and the value of the collateral securing loans.
Changes in U.S.
immigration policies, particularly those
that could lead
to mass deportations, may
disrupt key industries
in our region such as construction and
hospitality. These disruptions could exacerbate labor shortages, reduce productivity,
and cause financial instability among affected
businesses, impairing the repayment abilities of borrowers
in these sectors.
Other political and economic events within the U.S., including a contentious domestic political environment, changes in
or
disagreements
over
U.S.
monetary
policy
and
actions
of
the
FRB,
disagreements
over
long-term
federal
budget
and
deficit
reduction
plans,
disagreements
over
or
threats
not
to
increase
the
U.S.
government's
borrowing
limit
(or
"debt
ceiling"),
and
risk
of
further
downgrade
of
the
ratings
of
U.S.
government
debt
obligations,
also
may
negatively
impact
financial markets and the U.S. economy.
Further,
the perception
of the
potential for
additional significant
changes in
federal regulatory
or economic
policy has
also increased uncertainty and may exacerbate declines in investor and
consumer confidence, which in turn may adversely
impact financial
markets and the broader economy of the United States.
Regional business
and economic
conditions are
a major
driver of
our results
of operations.
Difficult
conditions in
the
regional’s
business
and
economic
environment,
including
those
caused
by the
lack
of stability
and
predictability
of
U.S.
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27
USCB Financial Holdings, Inc.
2025 10-K
policymaking,
may
materially
adversely
affect
our
operating
expenses,
the
quality
of
our
assets,
credit
losses,
and
the
demand for our products and services.
Regional business
and economic
conditions are
a major
driver of
our results
of operations.
Difficult
conditions in
the
regional
business
and
economic
environment,
including
those
caused
by
the
lack
of
stability
and
predictability
of
U.S.
policymaking,
may
materially
adversely
affect
our
operating
expenses,
the
quality
of
our
assets,
credit
losses,
and
the
demand for our products and services.
Our lending business is subject to credit risk, which
could lead to unexpected losses.
Our
primary
business
involves
making
loans
to
customers.
The
business
of
lending
is
inherently
risky
because
the
principal or
interest on
the loan
may not
be repaid
timely or
at all
or the
value of
any collateral
securing the
loan may
be
insufficient to
cover our
outstanding exposure.
These risks
may be affected
by the
strength or
weakness of
the particular
borrower's business sector
and local, regional and
national market and
economic conditions. Many
of our loans are
made
to SMBs that may be
less able to withstand
competitive, economic and financial
pressures than larger borrowers.
Our risk
management practices,
such as
monitoring the
concentration of
our loans
within specific
industries in
which we
lend and
concentrations with individual borrowers
or related borrowers, and
our credit approval
practices, may not adequately
reduce
credit risk. In addition, there are risks inherent in making any loan, including
risks relating to proper loan underwriting, risks
resulting from
changes in
economic and
industry conditions,
risks inherent
in dealing
with individual
borrowers, including
the risk that a borrower may not provide
information to us about their business
in a timely manner,
may present inaccurate
or incomplete information to us, may lack a U.S. credit history,
or may leave the U.S. without fulfilling their loan obligations,
leaving us with
little recourse
to them personally,
and/or risks
relating to the
value of
collateral. In
order to
manage credit
risk successfully,
we must,
among other
things, maintain
disciplined and
prudent underwriting
standards and
ensure that
our lenders follow those standards. The weakening of
these standards for any reason, such as an
attempt to attract higher
yielding loans,
a lack
of discipline
or diligence
by our
employees in
underwriting and
monitoring loans,
the inability
of our
employees to adequately adapt
policies and procedures to
changes in economic or
any other conditions affecting borrowers
and the quality
of our loan portfolio,
may result in loan
defaults, foreclosures and additional charge-offs and
may necessitate
that we significantly increase our allowance for credit losses, each of which could adversely affect our net income. A failure
to effectively
manage
credit risk
associated
with
our loan
portfolio could
lead to
unexpected
losses and
have a
material
adverse effect on our business, financial condition
and results of operations.
Natural disasters and severe weather events in Florida
could have a material adverse impact on our
business,
financial condition and operations.
Our
operations
and
our
customer
base
are
primarily
located
in
South
Florida.
This
region
is
vulnerable
to
natural
disasters
and
severe
weather
events
or
acts
of
God,
such
as
hurricanes
or
tropical
storms,
which
can
have
a
material
adverse impact
on our
loan portfolio,
our overall
business, financial
condition and
operations, cause
widespread property
damage and have
the potential to
significantly depress
the local economies
in which we
operate. Future adverse
weather
events in
Florida could
potentially result
in extensive
and costly
property damage
to businesses
and residences,
depress
the value of property serving as collateral for our loans, force the relocation of residents, and
significantly disrupt economic
activity in the region.
We cannot
predict the
extent of
damage that
may result
from such
adverse weather
events, which
will depend
on a
variety of factors that are beyond our control,
including, but not limited to, the
severity and duration of the event,
the timing
and level
of government
responsiveness, the
pace of
economic recovery
and availability
of insurance
to cover
losses. In
addition,
the
nature,
frequency
and
severity
of
these
adverse
weather
events
and
other
natural
disasters
may
be
exacerbated by climate change. If a significant adverse weather event or other natural disaster were to occur, it could have
a materially adverse impact
on our financial
condition, results of operations
and our business, as
well as potentially
increase
our exposure to credit and liquidity risks.
Our business is subject to
interest rate risk, and variations in
interest rates may materially and adversely
affect
our financial performance.
Changes in the
interest rate environment
may reduce our
profits. It is
expected that our
primary source of
income will
continue to be from
the differential or
"spread" between the
interest earned on
loans, securities and
other interest-earning
assets, and the interest paid on
deposits, borrowings and other interest-bearing liabilities. Net
interest spreads are affected,
in part, by the
difference between the maturities and repricing characteristics of
interest-earning assets and interest-bearing
liabilities. Changes
in market
interest rates
generally affect
loan volume,
loan yields,
funding sources
and funding
costs.
Our
net interest
spread
depends
on
many
factors
that
are partly
or completely
out
of our
control,
including
competition,
general economic
conditions, and
federal economic
monetary and
fiscal policies,
and in particular,
the Federal
Reserve's
policy determinations with respect to interest rates.
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28
USCB Financial Holdings, Inc.
2025 10-K
During 2022 and 2023, the Federal
Open Market Committee (the “FOMC”)
increased certain benchmark interest
rates
to
reduce
the
rate
of
inflation
to
the
extent
necessary
to
reduce
inflation
to
the
target
rate
that
the
FOMC
believes
is
appropriate.
All of these
increases were expressly made
in response to
inflationary pressures. However, In 2024, the
FOMC
decreased such benchmark
rates three times
followed in 2025
by three additional
decreases
totaling 0.75%. However, there
can be no
assurances as
to any future
FOMC action,
including whether
it continues to
decrease the federal
funds rate or
implements increases. In late January 2026, the
FOMC determined to not change the federal
funds rate at 3.50% to 3.75%.
While an increase in
interest rates may increase
our weighted average
loan yield, it may
adversely affect the
ability of
certain borrowers
with variable rate
loans to pay
the contractual
interest and principal
due to us.
Following an
increase in
interest rates, our
ability to maintain
a positive net
interest spread is
dependent on our ability
to increase our
loan offering
rates, replace
loans that
mature and
repay or
that prepay
before maturity
with new
originations at
higher rates,
minimize
increases on
our deposit
rates, and maintain
an acceptable level
and composition of
funding. We cannot
provide assurances
that we will be
able to increase
our loan offering
rates and continue
to originate loans
due to the competitive
landscape in
which we operate. Additionally, we cannot provide
assurances that we can minimize
the increases in our
deposit rates while
maintaining
an
acceptable
level
of
deposits.
Due
to
competitive
pressures
in
2023,
we
increased
the
rates
paid
on
our
interest-bearing deposits such that
our weighted average cost
of deposits increased from
0.62% for 2022
to 3.04% for
2023.
However,
in
2024
and
2025,
in
light
of
the
FOMC’s
actions
to
decrease
the
federal
funds
rate
a
total
of
six
times,
we
decreased the
rates paid
on our
interest-bearing deposits. As
a result,
while the
overall cost
of funds
increased, as
compared
to 2022 and 2023, it increased at a slower
pace when compared to the increase
in the cost of deposits from 2022 to
2023.
Finally,
we
cannot
provide
any
assurances
that
we
can
maintain
our
current
levels
of
noninterest-bearing
deposits
as
customers continue
seeking higher-yielding
products due
to the increased
interest rates
being paid on
deposits currently,
as compared to rates in early 2024 and 2023 and 2022.
Accordingly,
changes
in
levels
of
interest
rates
could
materially
and
adversely
affect
our
net
interest
margin,
asset
quality, loan origination
volume, average loan portfolio balance, liquidity,
and overall profitability.
Our allowance for credit losses may not be sufficient
to absorb potential losses in our loan portfolio.
We
maintain
an
allowance
for
credit
losses
that
represents
management's
judgment
of
probable
losses
and
risks
inherent in our loan portfolio.
The level of the allowance
reflects management's continuing
evaluation of general economic
conditions,
present
political
and
regulatory
conditions,
diversification
and
seasoning
of
the
loan
portfolio,
historic
loss
experience, identified credit
problems, delinquency levels
and adequacy of
collateral. Determining the
appropriate level of
our
allowance
for
credit
losses
involves
a
degree
of
subjective
judgment
and
requires
management
to
make
significant
estimates of and assumptions regarding current credit risks
and future trends, all of which may undergo material changes.
Inaccurate
management
assumptions,
deterioration
of
economic
conditions
affecting
borrowers,
new
negative
information
regarding
existing
loans,
identification
of
additional
problem
loans
or deterioration
of existing
problem
loans,
and
other
factors
(including
third-party
review
and
analysis),
both
within
and
outside
of
our
control,
may
require
us
to
increase our allowance for
credit losses. In addition,
our regulators, as an
integral part of their
periodic examinations, review
our methodology for calculating, and
the adequacy of, our allowance
for credit losses and may
direct us to make additions
to the allowance
based on their
judgments about
information available to
them at the
time of their
examination. Further,
if
actual charge-offs in future
periods exceed the
amounts allocated to
our allowance for
credit losses, we
may need additional
provisions for credit losses to restore
the adequacy of our allowance for
credit losses. Finally, the measure of our allowance
for credit losses depends on the
adoption and interpretation of accounting
standards. The Financial Accounting
Standards
Board, or FASB, issued a new credit
impairment model, the Current Expected Credit Loss,
or CECL model, which became
applicable
to
us
on
January
1,
2023.
CECL
requires
financial
institutions
to
estimate
and
develop
a
provision
for
credit
losses over the lifetime of the loan at origination, as opposed to reserving for incurred or probable
losses up to the balance
sheet date. Under the CECL
model, expected credit deterioration
will be reflected in the
income statement in the
period of
origination or acquisition of a loan,
with changes in expected credit losses
due to further credit deterioration or
improvement
reflected in the periods in which the expectation
changes. As a result of the initial
implementation of CECL, we incurred as
of January 1, 2023
a $1.1 million cumulative
effect of the
adoption of CECL. Moreover,
the CECL model may
create more
volatility in our level of allowance for credit
losses. If we are required to materially
increase our level of allowance for credit
losses for any reason, such increase could adversely affect our business, prospects, cash flow,
liquidity, financial condition
and results of operations.
Our commercial loan portfolio may expose us to increased
credit risk.
Commercial business
and real
estate loans
generally have
a higher
risk of
loss because
loan balances
are typically
larger
than
residential
real
estate
and
consumer
loans
and
repayment
is
usually
dependent
on
cash
flows
from
the
borrower’s business or the
property securing the loan. Our
commercial business loans are primarily made
to small business
Table of Contents
29
USCB Financial Holdings, Inc.
2025 10-K
and middle market customers. These loans typically
involve repayment that depends upon income
generated, or expected
to be generated, by the property securing the loan
and/or by the cash flow generated by the business borrower and
may be
adversely affected by changes in the economy or
local market conditions. These loans expose a
lender to the risk of having
to liquidate the collateral securing
these loans at times when there
may be significant fluctuation of commercial
real estate
values or to the
risk of inadequate cash flows to
service the commercial loans. Unexpected deterioration in
the credit quality
of our
commercial business
and/or real
estate loan
portfolio could
require us
to increase
our allowance
for credit
losses,
which would
reduce our
profitability and
could have
an adverse
effect on
our business,
financial condition,
and results
of
operations.
Commercial construction loans generally
have a higher risk of
loss due to the assumptions
used to estimate the value
of property
at completion
and the
cost of
the project,
including interest.
It can
be difficult
to accurately
evaluate the
total
funds required
to complete
a project,
and construction
lending often
involves the
disbursement
of substantial
funds with
repayment dependent, in large part, on the success of the ultimate project rather than the ability of a borrower or guarantor
to repay the loan from sources other than the subject project. If the assumptions and estimates are inaccurate, the value of
completed property
may fall
below the
related loan
amount. If we
are forced to
foreclose on
a project
prior to
completion,
we may
be
unable
to
recover
the
entire
unpaid
portion
of the
loan,
which
would
lead
to
losses.
In
addition,
we
may
be
required to fund additional amounts to complete a project,
incur taxes, maintenance and compliance costs for
a foreclosed
property and
may have
to hold
the property
for an
indeterminate
period of
time, any
of which
could adversely
affect
our
business, prospects, cash flow,
liquidity, financial
condition and results of operations.
The imposition of
further limits by the
bank regulators on commercial
real estate lending activities
could curtail
our growth and adversely affect our earnings.
The FDIC, the Federal Reserve
and the Office of
the Comptroller of the
Currency have promulgated joint
guidance on
sound risk management practices for financial institutions with concentrations in commercial real estate lending. Under this
guidance,
a financial
institution
that,
like
us,
is actively
involved
in
commercial
real
estate
lending should
perform
a risk
assessment to identify
concentrations. Regulatory
guidance on concentrations
in commercial real
estate lending provides
that a bank’s commercial real estate lending exposure could
receive increased supervisory scrutiny where total commercial
real estate
loans, including
loans secured
by multi-family
residential
properties, owner-occupied
and nonowner-occupied
investor real estate, and
construction and land loans, represent 300%
or more of an
institution’s total risk-based capital, and
the outstanding balance of the commercial real estate loan portfolio has increased by
50% or more during the preceding 36
months.
At
December
31,
2025,
our
total
commercial
investor
real
estate
loans,
including
loans
secured
by
apartment
buildings, commercial real estate, and construction and land loans represented 370% of the Bank’s total risk-based capital.
However,
the growth
in the
commercial real
estate portfolio
did not
exceed 50%
over the
preceding 36
months but
it has
exceeded the threshold in prior
periods. The particular focus of
the guidance is on exposure
to commercial real estate loans
that are
dependent on
the cash flow
from the
real estate held
as collateral and
that are likely
to be
at greater
risk to
conditions
in the commercial
real estate
market (as opposed
to real estate
collateral held as
a secondary source
of repayment or
as
an abundance
of caution).
The purpose
of the
guidance is
to guide
institutions in
developing risk
management practices
and capital
levels commensurate
with the
level and
nature of
real estate
concentrations. Management
has established
a
commercial
real
estate
lending
framework
to
monitor
specific
exposures
and
limits
by
types
within
the
commercial
real
estate
portfolio
and
takes
appropriate
actions,
as
necessary.
While
we
believe
we
have
implemented
policies
and
procedures with
respect
to our
commercial
real estate
loan portfolio
consistent
with this
guidance,
the FDIC,
the Bank’s
primary federal regulator,
could require us
to implement additional
policies and procedures
pursuant to their
interpretation
of the guidance that may result
in additional costs to us.
In addition, If the FDIC were
to impose restrictions on the
amount
of commercial real estate loans we can hold in our portfolio,
our earnings would be adversely affected.
Our
SBA
lending
program
is dependent
upon
the
federal
government
and
our status
as
a participant
in the
SBA's Preferred
Lenders Program,
and we
face specific
risks associated
with originating
SBA loans
and selling
the guaranteed portion thereof.
We
have
been
approved
by
the
SBA
to
participate
in
the
SBA's
Preferred
Lenders
Program.
As
an
SBA
Preferred
Lender,
we enable
our clients
to obtain
SBA loans
without being
subject to
the potentially
lengthy SBA
approval process
necessary
for
lenders
that
are
not
SBA
Preferred
Lenders.
The
SBA
periodically
reviews
the
lending
operations
of
participating
lenders
to
assess,
among
other
things,
whether
the
lender
exhibits
prudent
risk
management.
When
weaknesses are identified, the SBA may request corrective actions
or impose enforcement actions, including revocation of
the lender's
Preferred Lender
status. If
we lose
our status
as an
SBA Preferred
Lender,
we may
lose some
or all
of our
customers to
lenders who
are SBA
Preferred Lenders,
which could
adversely affect
our business,
financial condition
and
results of operations.
We generally sell the guaranteed
portion of our SBA 7(a) loans
in the secondary market. These sales
have resulted in
both premium income for us
at the time of
sale and created a stream
of future servicing income. There
can be no assurance
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30
USCB Financial Holdings, Inc.
2025 10-K
that we will be able to continue originating these loans, that a secondary market for these loans will continue to exist or that
we will continue to realize
premiums upon the sale of
the guaranteed portion of
these loans. When we sell
the guaranteed
portion of our SBA 7(a) loans, we incur credit risk on the non-guaranteed portion of the loans, and if a customer defaults on
the non-guaranteed portion of a loan, we share any loss
and recovery related to the loan pro-rata with the SBA.
The laws, regulations and
standard operating procedures
that are applicable to
SBA loan products may
change in the
future. We
cannot predict
the effects
of these
changes on
our business
and profitability.
Because government
regulation
greatly
affects
the
business
and
financial
results
of
all
commercial
banks
and
bank
holding
companies,
especially
our
organization, changes in the laws, regulations
and procedures applicable to SBA loans
could adversely affect our ability
to
operate profitably.
In addition, the
aggregate amount of
SBA 7(a) and 504
loan guarantees by the
SBA must be approved
each fiscal year by the federal
government. We cannot predict
the amount of SBA 7(a)
loan guarantees in any given fiscal
year. If the federal government were to reduce the amount of SBA loan guarantees, such reduction
could adversely impact
our SBA lending
program, including making and
selling the guaranteed portion
of fewer SBA
7(a) and 504
loans. In addition,
any default by
the U.S. government
on its obligations
or any prolonged
government shutdown
could, among
other things,
impede our ability to originate
SBA loans or sell such loans
in the secondary market, which
could materially and adversely
affect our business, financial condition and results
of operations.
The SBA may not honor its guarantees if we do not originate
loans in compliance with SBA guidelines
.
SBA lending programs typically guarantee 75% of the
principal on an underlying loan. If the
SBA establishes that a loss
on an
SBA guaranteed loan
is attributable
to significant
technical deficiencies in
the manner
in which
the loan
was originated,
funded or serviced by us, the SBA may seek recovery of the principal loss related to the
deficiency from us notwithstanding
that a
portion of
the loan
was guaranteed
by the
SBA, which
could adversely
affect
our business,
financial condition
and
results of operations. While we follow the SBA's underwriting
guidelines, our ability to do so depends on
the knowledge and
diligence of our employees
and the effectiveness
of controls we have
established. If our employees
do not follow the
SBA
guidelines in
originating loans
and if
our loan
review and
audit programs
fail to
identify and
rectify such
failures, the
SBA
may reduce or, in some cases,
refuse to honor its guarantee obligations and we may incur
losses as a result.
Correspondent banking is an important part of our business,
which creates increased BSA/AML risk.
As our
business
model
includes
correspondent
services
to banks
in Latin
America
and the
Caribbean,
these
cross-
border
correspondent
banking
relationships
pose
unique
risks
because
they
create
situations
in
which
a
U.S.
financial
institution will be
handling funds from
a financial institution
in Latin America
and the Caribbean
whose customers may
not
be transparent to us. Moreover, many foreign financial institutions, including
in Latin America and the Caribbean where our
correspondent banking
services
are located,
are not
subject to
the same
or similar
regulatory
guidelines
as U.S.
banks.
Accordingly,
these
foreign
institutions
may
pose
greater
money
laundering
risk
to
their
respective
U.S.
bank
correspondent(s). Because
of the
large amount
of funds,
multiple transactions,
and our
potential lack
of familiarity
with a
foreign correspondent financial institution's customers, these customers may
be able to more easily
conceal the source and
use
of
illicit
funds.
Consequently,
we
may
have
a
higher
risk
of
non-compliance
with
the
BSA
and
other
anti-money
laundering (“AML”) rules and regulations including the AML Act due
to our correspondent banking relationships with foreign
financial institutions.
Additionally,
international private
banking places additional
pressure on our
policies, procedures
and
systems for complying with the BSA, and
AML statutes and regulations as well as
the recently enacted CTA.
Our failure to
strictly
adhere
to
the
terms
and
requirements
of
our
OFAC
license
or
our
failure
to
adequately
manage
our
BSA/AML
compliance risk in light of our correspondent banking relationship
with foreign financial institutions and international private
banking could result in regulatory or other actions being
taken against us, including the imposition
of civil money penalties,
formal agreements and
cease and desist
orders. Furthermore, failure
to meet regulatory
requirements could require
us to
incur
additional
significant
costs
in
order
to
bring
our
BSA/AML
processes
and
procedures
into
compliance,
negatively
impact our reputation, and have a material adverse effect
on our business, financial condition and results of operations
.
In recent
years, sanctions
that the
regulators have
imposed on
banks that
have not
complied with
all BSA
and AML
requirements have been
especially severe. In
order to comply
with regulations, guidelines
and examination procedures
in
this area, we have
dedicated significant resources to our BSA/AML process
and procedures. If our policies, procedures and
systems
are deemed
deficient,
we could
be
subject
to
liability,
including
fines
and
regulatory
actions
such
as additional
restrictions on our ability to pay
dividends and the necessity to obtain
regulatory approvals to proceed with
certain aspects
of our business plan, such as acquisitions.
We may not recover all amounts that are contractually
owed to us by our borrowers.
We are
dependent on
the collection
of loan
principal, interest,
and fees
to partially
fund our
operations. A
shortfall in
collections and proceeds may impair our ability to fund
our operations or to repay our existing debt.
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31
USCB Financial Holdings, Inc.
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When
we
lend
funds,
commit
to
fund
a
loan
or
enter
into
a
letter
of
credit
or
other
credit-related
contract
with
a
counterparty, we incur credit risk. The
credit quality of our
portfolio can have a
significant impact on our
earnings. We expect
to experience
charge-offs
and delinquencies
on our
loans
in the
future.
Our
customers'
actual
operating
results
may be
worse
than
our
underwriting
contemplated
when
we
originated
the
loans,
and
in
these
circumstances,
we
could
incur
substantial impairment or loss
of the value on these
loans. We may
fail to identify problems
because our customer
did not
report them in a timely manner
or, even if
the customer did report the problem,
we may fail to address it
quickly enough or
at all, or some loans,
due to market circumstances,
may not be able
to be fully rehabilitated.
Even if customers provide
us
with full and accurate disclosure
of all material information concerning
their businesses, we may misinterpret
or incorrectly
analyze this information. Mistakes
may cause us
to make loans that
we otherwise would not
have made or
to fund advances
that we otherwise would not have funded, either
of which could result in losses on
loans, or necessitate that we significantly
increase our allowance for loan and
lease losses. As a result, we could
suffer loan losses and
have non-performing loans,
which could
have
a material
adverse
effect
on our
net
earnings
and
results
of
operations
and financial
condition,
to the
extent the losses exceed our allowance for loan and lease
losses.
Some
of
our
loans
are
secured
by
liens
on
specified
collateral
of
the
borrowers
and
we
may
not
obtain
or
properly
perfect our liens or the value
of the collateral securing any
particular loan may not be sufficient
to protect us from suffering
a partial or complete
loss if the loan
becomes non-performing and
we proceed to foreclose
on or repossess
the collateral.
With
respect
to
loans
that
we
originate
for
condominium
or
homeowners'
associations
(“Associations”),
these
loans
are
primarily secured by and rely
upon the cash flow received
by the Associations from
payments received from their
property
owners, as well
as cash on
hand. These Associations
rely upon payments
received from their
property owners in
order to
perform
on
these
loans
and
for
the
loan
collateral.
Accordingly,
our
ability
to
recover
amounts
on
non-performing
loans
made to Associations
is dependent
upon the Association
having sufficient
cash on hand
for repayment of
the loan and/or
having
the
ability
to
impose
assessments
on
its
property
owners,
some
of
whom
may
not
have
the
ability
to
pay
such
assessments. In such events, we could suffer loan losses,
which could have a material adverse effect on our
net earnings,
allowance for loan and lease losses, financial condition,
and results of operations.
Non-performing
assets
take
significant
time
to
resolve
and
adversely
affect
our
results
of
operations
and
financial condition, and could result in further losses in
the future.
Non-performing assets adversely
affect our net
income in
various ways. We
do not
record interest income
on nonaccrual
loans or other
real estate
owned (“OREO”),
thereby adversely
affecting our
net income
and returns on
assets and
equity,
increasing our loan administration costs and adversely
affecting our efficiency ratio. When
we take collateral in foreclosure
and similar proceedings, we are
required to mark the collateral to
its then-fair market value, which may
result in a loss. Non-
performing loans
and OREO
also increase our
risk profile
and the level
of capital
our regulators
believe is appropriate
for
us to
maintain in
light of
such risks.
The resolution
of non-performing
assets requires
significant time
commitments from
management
and
can
be
detrimental
to
the
performance
of
their
other
responsibilities.
In
addition,
there
are
legal
fees
associated
with
the
resolution
of
problem
assets
as
well
as
carrying
costs
such
as
taxes,
insurance,
and
maintenance
related to OREO.
If we experience
increases in non-performing
loans and non-performing
assets, our net
interest income
may be negatively impacted and
our loan administration costs
could increase, each of which could
have an adverse effect
on our net income and related ratios, such as return
on assets and equity.
We engage in
lending secured by
real estate and
may foreclose on
the collateral and
own the underlying
real
estate,
subjecting
us
to
the
costs
and
potential
risks
associated
with
the
ownership
of
real
property,
including
exposure
to
environmental
liability,
or
consumer
protection
initiatives
or
changes
in
state
or
federal
law
may
substantially raise the cost of foreclosure or prevent
us from foreclosing at all.
Since we
originate
loans secured
by real
estate, we
may have
to foreclose
on the
collateral
property
to recover
our
investment and may thereafter own and operate such property,
in which case we would be exposed to the risks inherent in
the
ownership
of
real
estate.
The
amount
that
we,
as
a
mortgagee,
may
realize
after
a
foreclosure
depends
on
factors
outside of our
control, including,
but not limited
to, general or
local economic conditions,
environmental cleanup
liabilities,
various assessments
relating to
the ownership
of the property,
interest rates, real
estate tax rates,
operating expenses
of
the
mortgaged
properties,
our
ability
to
obtain
and
maintain
adequate
occupancy
of
the
properties,
zoning
laws,
governmental and
regulatory rules,
and natural disasters.
Our inability
to manage
the amount
of costs
or size
of the risks
associated with
the ownership
of real
estate, or
write-downs in
the value
of OREO,
could have
an adverse
effect on
our
business, financial condition, and results of operations.
Additionally,
consumer protection initiatives
or changes in state
or federal law may
substantially increase the time
and
expenses associated
with the
residential foreclosure
process or
prevent us
from foreclosing
at all.
A number
of states
in
recent
years
have
either
considered
or
adopted
foreclosure
reform
laws
that
make
it
substantially
more
difficult
and
expensive for
lenders to
foreclose on
residential properties
in default.
Furthermore, federal
regulators have
prosecuted a
number of
mortgage servicing
companies for
alleged consumer
law violations.
If new
state or
federal laws
or regulations
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32
USCB Financial Holdings, Inc.
2025 10-K
are ultimately enacted
that significantly raise
the cost of residential
foreclosures or raise
outright barriers, they
could have
an adverse effect on our business, financial condition,
and results of operations.
We are exposed to risk of environmental liability
when we take title to property.
A
significant
portion
of
our
loan
portfolio
is
secured
by
real
estate,
and
we
could
become
subject
to
environmental
liabilities with respect
to one or
more of these
properties, or with
respect to properties that
we own in
operating our business.
During the ordinary course of business,
we may foreclose on and take title to
properties securing defaulted loans. In
doing
so, there is
a risk that
hazardous or toxic
substances could
be found on
these properties. If
hazardous conditions
or toxic
substances are found
on these properties,
we may be
liable for remediation
costs, as well
as for personal
injury and property
damage, civil
fines and
criminal penalties
regardless
of when
the hazardous
conditions or
toxic substances
first affected
any particular property.
The costs associated with investigation or
remediation activities could be substantial.
In addition, if
we are the owner or former owner
of a contaminated site, we may be
subject to common law claims by
third parties based
on damages and
costs resulting
from environmental
contamination emanating
from the
property.
If we become
subject to
significant environmental liabilities, our business, financial condition
and results of operations could be adversely affecte
d.
We
are
subject
to
certain
operational
risks,
including,
but
not
limited
to,
customer,
employee
or
third-party
fraud and data processing system failures and errors.
Employee errors and employee or
customer misconduct could subject us
to financial losses or
regulatory sanctions and
seriously harm our reputation. Misconduct by our employees could include hiding unauthorized
activities from us, improper
or unauthorized activities on behalf of our customers or improper use of confidential information. It is not
always possible to
prevent employee
errors and
misconduct, and
the precautions we
take to
prevent and
detect this
activity may
not be
effective
in all cases. Employee errors could also subject us
to financial claims for negligence.
We have
implemented a
system of
internal controls
designed to
mitigate operational
risks, including
data processing
system failures
and errors
and customer
or employee
fraud, as
well as
insurance
coverage
designed to
protect us
from
material
losses
associated
with
these
risks,
including
losses
resulting
from
any
associated
business
interruption.
If
our
internal controls fail
to prevent or
detect an
occurrence, or if
any resulting loss
is not
insured or exceeds
applicable insurance
limits, it could adversely affect our business,
prospects, cash flow, liquidity,
financial condition and results of operations.
We
also
rely
on
the
integrity
and
security
of
a
variety
of
third
party
processors,
payment,
clearing
and
settlement
systems, as well
as the various
participants involved
in these systems,
many of which
have no direct
relationship with us.
Failure
by
these
participants
or
their
systems
to
protect
our
customers'
transaction
data
may
put
us
at
risk
for
possible
losses due
to fraud
or operational
disruption. At
the date
of this
Annual Report
Form 10-K,
there is
no knowledge or
indication
that customer
sensitive information
was compromised
as a
result of
third parties
system vulnerabilities,
but management
continues to monitor developments and vendor communications.
When we originate loans, we rely
heavily upon information supplied by third parties,
including the information contained
in credit
applications, property
appraisals, title
information, equipment
pricing and
valuation and
employment and
income
documentation, in deciding which loans we will originate, as well as the terms of those loans. If any of the information upon
which
we
rely
is
misrepresented,
either
fraudulently
or
inadvertently,
and
the
misrepresentation
is
not
detected
prior
to
funding,
the value
of
the
loan may
be significantly
lower
than expected,
or we
may
fund a
loan that
we
would not
have
funded or
on terms
that do
not comply
with our
general underwriting
standards. Whether
a misrepresentation
is made
by
the applicant, the borrower,
one of our employees or another
third party,
we generally bear the risk of
loss associated with
the misrepresentation. A loan
subject to a material
misrepresentation is typically
unsellable or subject to
repurchase if it
is
sold prior to detection of the
misrepresentation. The sources of
the misrepresentations are often
difficult to locate, and
it is
often difficult
to recover
any
of the
resulting monetary
losses we
may suffer,
which
could
adversely
affect
our business,
financial condition and results of operations.
We
face
significant
operational
risks
because
the
nature
of
the
financial
services
business
involves
a
high
volume of transactions
.
We
operate
in
diverse
markets
and
rely
on
the
ability
of
our
employees
and
systems
to
process
a
high
number
of
transactions. Operational
risk is
the risk of
loss resulting from
our operations,
including but not
limited to, the
risk of fraud
by employees or
persons outside
the Company,
the execution
of unauthorized
transactions by
employees, errors
relating
to transaction
processing and technology, breaches of
our internal
control systems and
compliance requirements. Insurance
coverage may
not be available
for such
losses, or
where available, such
losses may
exceed insurance
limits. This
risk of
loss
also
includes
potential
legal
actions
that
could
arise
as
a
result
of
operational
deficiencies
or
as
a
result
of
non-
compliance with applicable regulatory standards,
adverse business decisions or their
implementation, or customer attrition
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33
USCB Financial Holdings, Inc.
2025 10-K
due to
potential adverse publicity. In the
event of a
breakdown in our
internal control systems,
improper operation of
systems
or improper employee actions, we could suffer financial
loss, face regulatory action, and/or suffer damage to
our reputation.
We have several
large depositor relationships,
the loss of which
could force us to
fund our business
through
more expensive and less stable sources.
Withdrawals of deposits by any
one of our largest depositors
could force us to
rely more heavily on more expensive
and
less
stable
funding
sources.
Consequently,
the
occurrence
of
such
event
could
have
a
material
adverse
effect
on
our
business, financial condition and results of operations. At
December 31, 2025, our top 10 depositors held 15.5% of
our total
deposit portfolio. As of December 31, 2025, 49% of our deposits
are estimated to be FDIC-insured. At such date, our
public
funds are 7%
of total deposits
and are partially
collateralized. The
estimated average account
size of our
deposit portfolio
is
$113
thousand
as
of
December 31,
2025.
In
addition,
the
Bank
was
considered
a
“well
capitalized”
institution
as
of
December 31, 2025 and 2024.
Any change in the Bank's ability to gather brokered
deposits may adversely impact the Bank.
Failure to maintain
the Bank's status as
a "well capitalized" institution
could have an adverse
effect on us, and
our ability
to fund
our operations.
The Bank
uses brokered
deposits to
assist in
funding its
loan and
other financing
products. As
of
December
31,
2025,
11%
of
our
total
deposits
consisted
of
brokered
deposits.
Should
the
Bank
ever
fail
to
be
well
capitalized
in
the
future
as
a
result
of
not
meeting
the
well
capitalized
requirements
or
the
imposition
of
an
individual
minimum capital
requirement
or similar
formal
requirement,
then,
the
Bank would
be
prohibited,
absent
waiver
from the
FDIC, from utilizing brokered deposits
(i.e., no insured depository institution
that is deemed to be
less than "well capitalized"
may accept, renew or
rollover brokered deposits absent a
waiver from the
FDIC). In such event,
such a result
could produce
material adverse
consequences for
the Bank with
respect to
liquidity and could
also have
material adverse
effects on
our
financial condition
and results
of operations.
Further,
depending on
the Bank's
condition in
the future
and its
reliance on
these deposits
as a
source
of funding,
the
FDIC could
increase the
surcharge
on
our brokered
deposits.
If
we are
ever
required
to
pay
higher
surcharge
assessments
with
respect
to
these
deposits,
such
payments
could
be
material
and
therefore could have
a material adverse
effect on our
financial condition and
results of operations.
In addition, changes
to
FDIC regulations regarding brokered deposits
or interpretations of such
regulations by federal banking agencies could
have
an adverse impact on the Bank’s ability to accept
brokered deposits. Additionally,
brokered deposits are highly sensitive to
changes in interest rates and, accordingly,
can be a more volatile source of funding.
Use of brokered deposits involves the
risk that growth supported by such deposits would be halted,
or the Bank’s liquidity adversely impacted, if the
rates offered
by the
Bank were
less than
those offered
by other
institutions seeking
such deposits,
or if
depositors were
to perceive
a
decline in the Bank’s safety and soundness, or both.
Our securities portfolio performance in difficult market conditions could have adverse effects on
our results of
operations
.
Unrealized losses on
investment securities result from
changes in credit
spreads and liquidity
issues in the
marketplace,
along
with
changes
in
the
credit
profile
of
individual
securities
issuers.
Under
GAAP,
we
are
required
to
review
our
investment
portfolio
periodically
for
the
presence
of credit
losses
of
our securities,
taking
into consideration
current
and
future
market
conditions,
the
extent
and
nature
of
changes
in
fair
value,
issuer
rating
changes
and
trends,
volatility
of
earnings, current
analysts’ evaluations,
our ability
and intent
to hold
investments until
a recovery
of fair
value, as
well as
other factors. Adverse developments with respect to one or more of
the foregoing factors may require us to deem particular
securities to be impaired, with the credit-related portion of
the reduction in the value recognized as a
charge to our earnings
through an allowance. Subsequent valuations,
in light of factors prevailing at that
time, may result in significant changes
in
the values of these securities in future periods. Any
of these factors could require us to
recognize further impairments in the
value of our securities portfolio, which may have an adverse
effect on our results of operations in future periods.
We may not
effectively execute
on our expansion
strategy, which
may adversely affect
our ability to
maintain
our historical growth and earnings trends.
Our
primary
expansion
strategy
focuses
on
organic
growth,
supplemented
by
potential
acquisitions
of
financial
institutions and
banking teams;
however,
we may
not be
able to
successfully execute
on these
aspects of
our expansion
strategy,
which
may
cause
our
future
growth
rate
to
decline
below
our
recent
historical
levels,
or
may
prevent
us
from
growing at
all. More
specifically,
we may
not be able
to generate
sufficient new
loans and
deposits within
acceptable risk
and
expense
tolerances
or
obtain
the
personnel
or
funding
necessary
for
additional
growth.
Various
factors,
such
as
economic conditions
and competition with
other financial
institutions, may impede
or restrict the
growth of our
operations.
Further, we may be unable to attract
and retain experienced bankers, which could adversely
affect our growth. The success
of our strategy also depends on our ability to manage our growth effectively,
which in turn depends on a number of factors,
including
our
ability
to
adapt
our
credit,
operational,
technology,
risk
management,
internal
controls
and
governance
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34
USCB Financial Holdings, Inc.
2025 10-K
infrastructure to accommodate expanded operations.
Even if we are successful in continuing our growth,
such growth may
not offer the same
levels of potential profitability,
and we may not
be successful in
controlling costs and maintaining
asset
quality in the
face of that
growth. Accordingly,
our inability
to maintain growth
or to
effectively manage
growth could
have
an adverse effect on our business, financial condition
and results of operations.
New lines of business, products, product enhancements
or services may subject us to additional risk.
From time to time, we
may implement new lines
of business or offer
new products and product
enhancements as well
as new
services within
our existing
lines of
business. There
are substantial
risks and
uncertainties associated
with these
efforts. In
developing, implementing
or marketing new
lines of business,
products, product
enhancements or
services, we
may invest significant time and
resources. We may underestimate the appropriate level
of resources or expertise
necessary
to
make
new
lines
of
business
or
products
successful
or
to
realize
their
expected
benefits.
We
may
not
achieve
the
milestones
set
in
initial
timetables
for
the
development
and
introduction
of
new
lines
of
business,
products,
product
enhancements or services, and price
and profitability targets may not
prove feasible. External factors, such
as compliance
with regulations, competitive
alternatives and shifting
market preferences, may
also impact the
ultimate implementation of
a new line of business or offerings of new products, product
enhancements or services. Any new line of business,
product,
product enhancement or service could have a significant impact on the effectiveness of our system of internal controls. We
may also
decide to
discontinue
businesses
or products,
due to
lack
of customer
acceptance
or unprofitability.
Failure to
successfully develop and implement new lines of business or offerings of new products, product enhancements or services
could have an adverse effect on our business, financial condition and results
of operations and could subject us to new and
unanticipated operational, credit, regulatory and reputational risks,
among other risks.
Our business
needs and
future growth
may require
us to
raise additional
capital and
that capital
may not
be
available on terms acceptable to us or may be dilutive to
existing shareholders.
We believe that we
have sufficient capital
to meet our capital
needs for our current
growth plans. However,
we expect
that we would need to raise additional capital,
in the form of debt or equity securities,
in the future to have sufficient capital
resources
to
meet
our
longer-term
growth
plans,
and/or
if
the
quality
of
our
assets
or
earnings
were
to
deteriorate
significantly.
In addition, we
are required by federal
regulatory authorities to
maintain adequate levels
of capital to support
our operations.
Our ability
to raise
capital will
depend on,
among other
things, conditions
in the
capital markets,
which are
outside of
our control, and our financial performance. Accordingly,
we cannot provide assurance that such capital will
be available on
terms acceptable to us or at all. Any occurrence
that limits our access to capital may adversely
affect our capital costs and
our ability to raise capital. Further, if we need to raise capital in the future, we may have to do so when many other financial
institutions are also
seeking to
raise capital and
would then have
to compete with
those institutions for
investors. Any inability
to raise capital on acceptable terms when needed may cause us to
either issue additional shares of common stock or other
securities on less than
desirable terms or
reduce our rate of
growth until market conditions
become more favorable. If
any
of such
events occur, they could
have a material
adverse effect on
our business, financial
condition and results
of operations
and could be dilutive to both tangible book value and our
share price.
Federal law requires that a holding company act as a source of financial and managerial strength to its subsidiary bank
and to
commit
resources
to support
such subsidiary
bank. Under
the “source
of strength”
doctrine, the
Federal Reserve
may
require
a
holding
company
to
make
capital
injections
into
a
troubled
subsidiary
bank
and
may
charge
the
holding
company with
engaging
in unsafe
and unsound
practices
for failure
to commit
resources
to a
subsidiary
bank. A
capital
injection may be required
at times when the
holding company may
not have the resources
to provide it and
therefore may
be required to attempt to
borrow the funds or raise
capital. Thus, any borrowing that must
be done by the Company
to make
a required
capital injection becomes
more difficult and
expensive and
could have
an adverse
effect on our
business, financial
condition and results of operations.
Moreover, it is possible that we will be
unable to borrow funds or
otherwise raise capital
at a
time when
it is
needed. In
addition, an
inability to
raise capital
when needed
may subject
us to
increased regulatory
supervision and
the
imposition of
restrictions
on our
growth
and business.
These restrictions
could
negatively
affect
our
ability
to
operate
or
further
expand
our
operations
through
loan
growth,
acquisitions
or
the
establishment
of
additional
branches. These restrictions may also
result in increases in operating
expenses and reductions in revenues
that could have
a material adverse effect on our financial condition,
results of operations and our share price.
We may
grow through
mergers or
acquisitions,
a strategy
that may
not be
successful or,
if successful,
may
produce risks in successfully integrating and managing the merged companies or acquisitions and may dilute our
shareholders.
As
part
of
our
growth
strategy,
we
may
pursue
mergers
and
acquisitions
of
banks
and
non-bank
financial
services
companies within or outside our principal market areas that fit within the mission-driven values of our franchise and that we
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35
USCB Financial Holdings, Inc.
2025 10-K
believe support our business and make financial and strategic
sense. We may have difficulty identifying suitable acquisition
candidates or executing on acquisitions that we pursue, and we may
not realize the anticipated benefits of any transactions
we complete. Additionally,
for any opportunistic
acquisition we were
to consider,
we expect to
face significant
competition
from
numerous
other
financial
services
institutions,
many
of
which
will
have
greater
financial
resources
than
we
do.
Accordingly,
attractive
opportunistic
acquisitions
may
not be
available to
us. There
can be
no assurance
that we
will
be
successful in identifying or completing any future acquisitions.
Mergers and acquisitions involve numerous risks, any
of which could harm our business, including:
•
the possibility that expected benefits
may not materialize in the
time frame expected or at
all, or may be more
costly
to achieve, or that the acquired business will not perform
to our expectations;
•
time,
expense
and
difficulties
in
integrating
the
operations,
management,
products
and
services,
technologies,
existing contracts, accounting processes
and personnel of the target
and realizing the anticipated synergies
of the
combined businesses;
•
incurring the
time and
expense associated with
identifying and
evaluating potential acquisitions
and merger
partners
and negotiating potential transactions, resulting in management’s attention being diverted from the operation of our
existing business;
•
difficulties in supporting and transitioning customers
of the target and disruption of our ongoing banking
business;
•
the price we
pay or other
resources that we
devote may exceed
the value we
realize, or the
value we could
have
realized if we had allocated the purchase consideration
or other resources to another opportunity;
•
entering new markets or areas in which we have limited or
no experience;
•
the possibility that our culture is disrupted as a result of
an acquisition;
•
potential loss of key personnel and customers from either
our business or the target’s business;
•
assumption of unanticipated problems, claims or other liabilities
of the acquired business;
•
an inability to realize expected synergies or returns on
investment;
•
the possibility of regulatory approval for the acquisition being delayed,
impeded, restrictively conditioned, including
the requirement to divest
various activities, or denied
due to existing or
new regulatory issues surrounding
us, the
target institution or the proposed combined entity and
the possibility that any such issues associated with
the target
institution, of which
we may or
may not be
aware at the
time of the
acquisition, could adversely impact
the combined
entity after completion of the acquisition;
•
the possibility that the acquisition may not be timely completed,
if at all;
•
the need to raise capital; and
•
inability to generate sufficient revenue to offset
acquisition costs.
Any acquisition activities we engage in could require us to use a substantial amount of cash, other liquid assets, and/or
incur debt. Also, if
we finance acquisitions by issuing equity securities,
our existing shareholders’ ownership may be
diluted,
which
could
negatively
affect
the
market
price
of
our
Class
A
common
stock.
Additionally,
if
the
goodwill
recorded
in
connection with our potential future acquisitions were determined to be impaired, then we would be required to recognize a
charge against our earnings, which
could materially and adversely affect our
results of operations during the
period in which
the impairment was recognized. Acquisitions
may also involve the payment
of a premium over book
and market values and,
therefore, some
dilution of
our tangible
book value
and net
income per
common share
may occur
in connection
with any
future transaction.
As a result, we
may not achieve the
anticipated benefits of
any such merger or
acquisition, and we
may incur costs
in
excess
of
what
we
anticipate.
Our
failure
to
successfully
evaluate
and
execute
mergers,
acquisitions
or
investments
or
otherwise adequately address and manage
the risks associated with
such transactions could have
a material adverse effect
on our business, results of operations and financial condition,
including short-term and long-term liquidity.
The loss of
one or more
of our key
personnel, or our
failure to attract
and retain other
highly qualified personnel
in the future, could harm our business.
Our future success will, to some extent, depend on the continued service of our directors, executive officers and senior
management
team.
The
loss
of
the
services
of
any
of
these
individuals
could
have
a
significant
adverse
effect
on
our
business. In particular,
we believe that retaining
Luis de la Aguilera,
our Chairman, President
and Chief Executive
Officer,
Robert
Anderson,
our
Chief
Financial
Officer,
Nicholas
Bustle,
our
Chief
Lending
Officer,
and
William
Turner,
our
Chief
Credit
Officer,
is
important
to
our
continuing
success.
Although
we
have
entered
into
employment
or
change-in-control
agreements
with
certain
members
of
our
executive
and
senior
management
team,
including
Messrs.
de
la
Aguilera,
Anderson, Bustle
and Turner,
no assurance
can be
given that
these individuals
will continue
to be
employed by
us. The
loss of any of these
individuals could negatively affect
our ability to achieve our
growth strategy and could
have a material
adverse effect on our business and results of operations.
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USCB Financial Holdings, Inc.
2025 10-K
We also need to continue
to attract and retain other senior
management and to recruit qualified
individuals to succeed
existing
key
personnel
to
ensure
the continued
growth
and successful
operation
of our
business.
We
may
be unable
to
attract or
retain qualified
management
and other
key
personnel
in the
future due
to the
intense competition
for qualified
personnel
among
companies
in
the
financial
services
business
and
related
businesses.
The
loss
of
the
services
of any
senior management personnel, or the inability to recruit
and retain qualified personnel in the future, could
have an adverse
effect on our business, results of
operations, financial condition and prospects.
Additionally,
to attract and retain personnel
with appropriate skills and
knowledge to support our
business, we may offer
a variety of benefits, including
equity awards,
which may reduce our earnings or adversely affect our
business, results of operations, financial condition or prospects.
Damage to our reputation could significantly harm
our businesses.
Our ability to attract
and retain customers and
highly-skilled management and employees is impacted
by our reputation.
A negative public
opinion of us
and our business
can result from
any number of
activities, including our
lending practices,
corporate
governance
and
regulatory
compliance,
acquisitions,
customer
complaints
and
actions
taken
by
community
organizations in
response to
these activities.
Furthermore, negative
publicity regarding
us as
an employer
could have
an
adverse
impact on
our reputation,
especially
with respect
to
matters of
diversity,
pay equity
and workplace
harassment.
Significant
harm
to
our
reputation
could
also
arise
as
a
result
of
regulatory
or
governmental
actions,
litigation
and
the
activities of our customers, other
participants in the financial services
industry or our contractual counterparties, such
as our
service providers
and vendors.
The potential
harm
is heightened
given
increased attention
to how
corporations
address
environmental, social
and governance
issues. In
addition, a
cybersecurity event
affecting us
or our customers'
data could
have a negative
impact on our
reputation and
customer confidence
in us and
our cybersecurity
practices. Damage
to our
reputation could also
adversely affect
our credit ratings
and access to
the capital markets.
Additionally,
whereas negative
public opinion once was
primarily driven by adverse
news coverage in traditional
media, the widespread use
of social media
platforms by
virtually every
segment of
society facilitates
the rapid
dissemination
of information
or misinformation,
which
magnifies the potential harm to our reputation.
We
face
strong
competition
from
financial
services
companies
and
other
companies
that
offer
banking
services, which could materially and adversely affect
our business.
The financial
services industry has
become even
more competitive as
a result
of legislative,
regulatory and technological
changes and
continued
banking consolidation,
which
may increase
as a
result of
current economic,
market and
political
conditions. We
face substantial
competition
in all
phases
of our
operations
from
a variety
of competitors,
including local
banks,
regional
banks,
community
banks
and,
more
recently,
financial
technology,
or
"fintech"
companies.
Many
of
our
competitors offer the same banking services that
we offer and our success depends on
our ability to adapt our
products and
services
to
evolving
industry
standards
and
customer
requirements.
Increased
competition
in
our
market
may
result
in
reduced new
loan and
lease production
and/or decreased
deposit balances
or less
favorable terms
on loans
and leases
and/or deposit
accounts. We also
face competition
from many
other types
of financial
institutions, including
without limitation,
non-bank
specialty
lenders,
insurance
companies,
private
investment
funds,
investment
banks,
and
other
financial
intermediaries. Should competition in
the financial services industry
intensify, our ability to market our
products and services
may be adversely affected. If we are unable to attract and retain banking customers, we may be
unable to grow or maintain
the levels
of our
loans and
deposits and
our results
of operations
and financial
condition may
be adversely
affected as
a
result. Ultimately, we
may not be able to compete successfully against current
and future competitors.
We must respond to rapid technological changes
to remain competitive.
We will have to continue to respond
to future technological changes, which are occurring at a
rapid pace in the financial
services industry
in order
to remain
competitive. We
expect that
new technologies
and business
processes applicable
to
the banking industry will
continue to emerge, and
these new technologies and
business processes may be
better than those
we currently
use. Because
the pace
of technological
change is
high and
our industry
is intensely
competitive,
our future
success will depend, in
part, upon our ability
to address the needs
of our customers by
using technology to provide
products
and
services
that
will
satisfy
customer
demands
for
convenience,
as
well
as
to
create
additional
efficiencies
in
our
operations. We may
not be able to
implement new technology-driven
products and services effectively
or be successful in
marketing
these
products
and
services
to
our
customers.
Failure
to
keep
pace
successfully
with
technological
change
affecting the
financial services
industry could
harm our
ability to compete
effectively and
could have
an adverse
effect on
our business, financial condition and results of
operations. As these technologies improve in the future,
we may be required
to make significant capital expenditures in order to remain competitive, which may increase our overall expenses and have
an adverse effect on our business, financial condition
and results of operations.
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37
USCB Financial Holdings, Inc.
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We
continually
encounter
technological
change,
and
we
may
have
fewer
resources
than
many
of
our
competitors to invest in technological improvements.
The financial
services
industry
continues to
undergo
rapid
technological
changes
with
frequent
introductions
of new
technology-driven products
and services,
including recent
and rapid
developments in
artificial intelligence
(“AI”) including
agentic AI. The effective use of technology increases efficiency
and enables financial institutions to better serve customers
and to reduce
costs. Our future
success will depend,
in part, upon
our ability to
address the needs
of our clients
by using
technology to provide products and services that will satisfy client demands for convenience, as well as to create additional
efficiencies
in
our
operations,
including
through
AI
capabilities.
Many
national
vendors
provide
turn-key
services
to
community banks, such
as internet banking
and remote deposit
capture that allow
smaller banks to
compete with institutions
that
have
substantially
greater
resources
to
invest
in
technological
improvements.
We
may
not
be
able,
however,
to
effectively
implement
new
technology-driven
products
and
services
or
be
successful
in
marketing
these
products
and
services to our customers.
Our
current
and
future
uses of
artificial
intelligence
and
other
emerging
technologies
may
create
additional
risks.
The increasing adoption of AI in financial services
presents significant opportunities but also introduces a range of
risks
that
could
impact
our
operations,
regulatory
compliance,
and
customer
trust.
AI
introduces
model
risk,
where
flawed
algorithms or
biased data could
result in inaccurate
credit decisions,
compliance violations,
or discriminatory
outcomes in
lending or customer
service. Cybersecurity
threats, such
as data breaches,
adversarial attacks,
and data poisoning,
pose
significant challenges,
particularly as these
systems handle
large volumes of
sensitive customer
information. Additionally,
the opaque nature of some AI models, often referred to as "black-box" systems, raises regulatory compliance concerns, as
regulators
increasingly
require
transparency
and
explainability
in
AI-driven
decision-making.
The
legal
and
regulatory
environment for AI is uncertain and rapidly evolving, potentially
increasing compliance cost and risk of non-compliance.
Operational risks also arise from potential system failures, over-reliance
on AI, and integration challenges with existing
infrastructure. Disruptions in AI systems could impact critical functions such as fraud detection, transaction monitoring, and
customer support.
Ethical and reputational
risks, including
unintended consequences
or perceived unfairness
in AI-driven
decisions,
may
erode
customer
trust
and
expose
us
to
regulatory
scrutiny.
Mitigating
these
risks
requires
a
robust
governance
framework,
regularly
testing
and
auditing
of
AI
models,
and
strong
human
oversight.
Investments
in
cybersecurity, data
privacy protections, and employee training are critical
to managing these risks.
A
failure,
interruption,
or
breach
in
the
security
of
our
systems,
or
those
of
our
contracted
vendors,
could
disrupt
our
business,
result
in
the
disclosure
of
confidential
information,
damage
our
reputation,
and
create
significant financial and legal exposure.
Although we
devote significant
resources to maintain
and regularly update
our systems and
processes that are
designed
to
protect
the
security
of
our
computer
systems,
software,
networks
and
other
technology
assets,
as
well
as
the
confidentiality,
integrity and availability
of information belonging
to us and
our customers,
there is no
assurance that
all of
our
security
measures
will
provide
absolute
security.
Many
financial
institutions,
including
us,
have
been
subjected
to
attempts to infiltrate the security of their websites or other systems, some involving sophisticated
targeted attacks intended
to obtain
unauthorized access
to confidential
information, destroy
data, disrupt
or degrade
service, sabotage
systems or
cause other damage, including through the introduction of
computer viruses or malware, cyber-attacks and other means. At
this point,
although there
is no
knowledge or
indication that we
have experienced a
material cyber-incident or
security breach
that has been successful in compromising our
data or systems to date, we can
never be certain that all of our
systems are
entirely free from vulnerability to breaches of security or
other technological difficulties or failures.
Despite efforts to
ensure the integrity
and security of
our systems, it
is possible that
we may not
be able to
anticipate,
detect or recognize
threats to our
systems or to
implement effective
preventive measures
against all efforts
to breach our
security inside or outside our business, especially because the techniques used to attack our systems
change frequently or
are
not
recognized
until
launched,
and
because
cyber-attacks
can
originate
from
a
wide
variety
of
sources,
including
individuals or groups who are associated with
external service providers or who are or
may be involved in organized crime
or linked
to terrorist
organizations or
hostile foreign
governments. Those
parties may
also attempt
to fraudulently
induce
employees, customers, third-party service providers or other users of our systems to disclose sensitive information in order
to gain access
to our data or
that of our customers
or clients. Similar
to other companies,
our risks and exposures
related
to cybersecurity attacks have increased as a result of the related increased reliance on remote working and the increase in
digital
operations.
Such
risks
and
exposures
are
expected
to
remain
high
for
the
foreseeable
future
due
to
the
rapidly
evolving nature
and sophistication of
these threats
and the
expanding use
of technology, as our
web-based product offerings
grow and
we expand
internal usage
of web-based
applications.
Cybersecurity
risk and
other security
matters are
also a
major focus of regulatory authorities.
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USCB Financial Holdings, Inc.
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A successful
penetration
or
circumvention
of the
security
of our
systems,
including those
of our
third-party
vendors,
could
cause
serious
negative
consequences,
including
significant
disruption
of
our
operations,
misappropriation
of
confidential information,
or damage
to computers
or systems,
and may
result in violations
of applicable
privacy and
other
laws, financial loss,
loss of confidence
in our security measures,
customer dissatisfaction, increased
insurance premiums,
significant litigation exposure and harm to our reputation, all of which could have a material adverse effect on our business,
financial condition, results of operations, and future prospects.
We
rely
on
other
companies
to
provide
key
components
of
our
business
infrastructure
and
our
operations
could
be
interrupted
if
our
third-party
service
providers
experience
difficulty,
terminate
their
services
or
fail
to
comply with banking regulations.
Third parties
provide key
components of
our business
operations such
as data
processing, recording
and monitoring
transactions,
online
banking
interfaces
and services,
Internet
connections
and
network
access.
While
we
have
selected
these third-party
vendors carefully,
performing upfront
due diligence
and ongoing
monitoring activities,
we do
not control
their actions. Any problems caused by these third parties, including those resulting from disruptions in services provided by
a
vendor
(including
as
a
result
of
a
cyber-attack,
other
information
security
event
or
a
natural
disaster),
financial
or
operational difficulties
for the vendor,
issues at third-party
vendors to our
vendors, failure of
a vendor to
handle current or
higher volumes, failure of a vendor to provide services for
any reason, poor performance of services, failure to comply
with
applicable laws
and regulations,
or fraud
or misconduct
on the
part of
employees of
any of
our vendors,
could adversely
affect our ability
to deliver products
and services to
our customers, our
reputation and our
ability to conduct
our business,
which could
adversely affect
our business,
prospects, cash
flow,
liquidity,
financial condition
and results
of operations.
In
certain
situations,
replacing
these
third-party
vendors
could
also
create
significant
delay,
expense,
and
operational
difficulties, which
could also
adversely affect
our business.
Accordingly,
use of
such third
parties creates
an unavoidable
and inherent
risk to
our business
operations. Such
risk is
generally expected
to remain
elevated as
many of
our vendors
have also
been, and
may
further be,
affected
by increased
reliance
on remote
work
environments,
market
volatility
and
other factors
that increase
their risks
of business
disruption or
that may
otherwise affect
their ability
to perform
under the
terms of any agreements with us or provide essential services.
Our operations could be interrupted or
materially impacted if any of our
third-party service providers fail to comply
with
banking regulations
and other
applicable laws.
The Federal
Reserve, FDIC,
FOFR, and
other regulators
expect financial
institutions
to
be
responsible
for
all
aspects
of
their
performance,
including
aspects
that
they
delegate
to
third
parties.
Accordingly,
we will
be responsible
for deficiencies
in our
oversight and
control of
our third
party relationships
and in
the
performance of the parties with which
we have these relationships. As
a result, if our regulators conclude that
we have not
exercised adequate oversight and control over our third party vendors or
other ongoing third party business relationships or
that
such
third
parties
have
not
performed
appropriately,
we
could
be
subject
to
remedial
and/or
enforcement
actions,
including civil
money penalties
or other
administrative
or judicial
penalties or
fines
as well
as requirements
for customer
remediation, any of which could have a material adverse
effect our business, financial condition or results
of operations.
Litigation and regulatory actions,
including possible enforcement actions, could subject
us to significant fines,
penalties,
judgments
or
other
requirements
resulting
in
increased
expenses
or
restrictions
on
our
business
activities.
In the normal course of
business, from time to time, we
have in the past and
may in the future be
named as a defendant
in various
legal actions
arising in
connection with
our current
and/or prior
business
activities. Legal
actions could
include
claims for substantial compensatory and/or
punitive damages or claims for indeterminate
amounts of damages. Further,
in
the future
our
federal
and/or
state
bank
regulators
may
impose
consent
orders,
civil
money
penalties,
matters
requiring
attention, or similar types of
supervisory penalties or criticism. We may also,
from time to time, be
the subject of subpoenas,
requests
for
information,
reviews,
investigations
and
proceedings
(both
formal
and
informal)
by
governmental
agencies
regarding our
current
and/or prior
business
activities.
Any such
legal or
regulatory
actions may
subject
us to
substantial
compensatory
or
punitive
damages,
significant
fines,
penalties,
obligations
to
change
our
business
practices
or
other
requirements resulting
in increased
expenses, diminished
income and
damage to
our reputation.
Our involvement
in any
such matters,
whether tangential
or otherwise
and
even if
the matters
are ultimately
determined
in our
favor,
could also
cause significant harm to our
reputation and divert management attention away from
the operation of our business.
Further,
any settlement, consent order or adverse judgment in connection with any formal or informal proceeding or investigation by
government
agencies
may
result
in
litigation,
investigations
or
proceedings
as
other
litigants
and
government
agencies
begin independent
reviews of
the same
activities. As
a result,
the outcome
of legal
and regulatory
actions could
have an
adverse effect on our business, results of operations
and results of operations.
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39
USCB Financial Holdings, Inc.
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Certain of
our directors may
have conflicts
of interest in
determining whether to
present business
opportunities
to us or another entity with which they are, or may
become, affiliated.
Certain of our
directors are or may
become subject to fiduciary
obligations in connection with
their service on the
boards
of
directors
of
other
corporations,
including
financial
institutions.
A
director's
association
with
other
financial
institutions,
which give rise to
fiduciary or contractual obligations to such other
institutions, may create conflicts of interest. To the extent
that any of our directors
become aware of acquisition
opportunities that may be
suitable for entities other
than us to which
they have fiduciary or contractual obligations, or they are
presented with such opportunities in their capacities as fiduciaries
to such
entities, they
may honor
such obligations
to such
other entities.
You
should assume
that to
the extent
any of
our
directors become aware
of an opportunity
that may be
suitable both for
us and another
entity to which
such person has
a
fiduciary obligation
or contractual
obligation
to present
such
opportunity as
set forth
above,
he or
she may
first give
the
opportunity to such other entity
or entities and may give
such opportunity to us only
to the extent such other
entity or entities
reject
or
are
unable
to
pursue
such
opportunity.
In
addition,
you
should
assume
that
to
the
extent
any
of
our
directors
become
aware
of
an
acquisition
opportunity
that
does
not
fall
within
the
above
parameters,
but
that
may
otherwise
be
suitable for us, he or she may not present such opportunity to
us.
Pursuant to an agreement between us and each of our Significant Investors
(as defined below), each of the Significant
Investors has the right
to nominate one
director to serve
on our Board, including
Board committees, and
to designate one
non-voting Board
observer.
The directors
and Board
observers
designated by
the Significant
Investors have
the right
to,
and have
no duty
not to,
engage in
the same
or similar
business activities
or lines
of business
as us.
In the
event that
a
director or Board observer designated by a Significant Investor acquires knowledge of a potential transaction or matter that
may be
a corporate opportunity
for us,
such person shall
have no
duty to
communicate or
present such corporate
opportunity
to us
and shall
not be
liable to
us or
our shareholders
for breach
of any
duty by
reason of
the fact
that such
person or
a
related investment fund
thereof, directly or
indirectly, pursues or acquires such opportunity
for itself, directs
such opportunity
to another person, or does not present such opportunity
to us.
Risks Related to Our Tax,
Accounting and Regulatory Compliance
Our ability to recognize
the benefits of
our deferred tax
assets is dependent
on future cash flows
and taxable
income and may be materially impaired upon significant
changes in ownership of our common stock.
We recognize the expected future tax
benefit from deferred tax assets when
it is more likely than
not that the tax benefit
will be
realized. Otherwise,
a valuation
allowance
is applied
against our
deferred
tax assets,
reducing
the value
of such
assets. Assessing
the recoverability
of deferred
tax assets
requires management
to make significant
estimates related
to
expectations
of
future
taxable
income
from
all
sources,
including
reversal
of
taxable
temporary
differences,
forecasted
operating
earnings
and
available
tax
planning
strategies.
Estimates
of
future
taxable
income
are
based
on
forecasted
income from operations and the application of existing tax laws in each jurisdiction. The improved risk profile of the Bank is
a key
component used
in the determination
of our
ability to
realize the
expected future
benefit of
our deferred
tax assets.
To
the extent that future taxable income differs
significantly from estimates as a result
of the interest rate environment and
loan growth capabilities or other factors, our ability to realize
the net deferred tax assets could be negatively
affected.
Subject to certain exceptions, our Class A common stock is subject
to transfer restrictions as set forth in our Articles of
Incorporation that are
designed to preserve
our deferred tax
assets. Notwithstanding these
protective provisions, the
Articles
of Incorporation include
an exception that
allows our Significant
Investors the right
to effect any
transfer that would
otherwise
be prohibited, which transfer could result in the loss of the deferred
tax assets.
Additionally,
significant future
issuances of
common stock
or common
stock equivalents,
or changes
in the
direct or
indirect ownership
of our
common stock
or common
stock equivalents,
could cause
an ownership
change and
could limit
our ability to
utilize our net
operating loss carryforwards
and other tax
attributes pursuant
to Section 382
and Section 383
of the
Internal Revenue
Code of
1986, as
amended.
Future changes
in tax
law or
changes in
ownership structure
could
limit our ability to utilize our recorded net deferred tax assets.
The
accuracy
of
our
financial
statements
and
related
disclosures
could
be
affected
if
the
judgments,
assumptions or estimates used in our critical accounting
policies are inaccurate.
The
preparation
of
our
financial
statements
and
related
disclosures
in
conformity
with
GAAP
requires
us
to
make
judgments,
assumptions
and
estimates
that
affect
the
amounts
reported
in
our
consolidated
financial
statements
and
accompanying notes. In some cases, management
must select the accounting policy or method
to apply from two or more
alternatives,
any of
which
may be
reasonable
under
the circumstances,
yet
which
may result
in
our
reporting
materially
different
results
than
would
have
been
reported
under
a
different
alternative.
Certain
accounting
policies
are
critical
or
significant to presenting our financial
condition and results of
operations. Our critical accounting policies, which
are included
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40
USCB Financial Holdings, Inc.
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in the section captioned "Management's Discussion and Analysis of Financial Condition and Results of Operations"
in Item
7 of this Annual Report
on Form 10-K, describe
those significant accounting
policies and methods used
in the preparation
of
our
consolidated
financial
statements
that
we
consider
critical
because
they
require
judgments,
assumptions
and
estimates that materially affect our consolidated financial statements and related disclosures. As a result, if
future events or
regulatory views concerning such analyses differ significantly from the judgments, assumptions and estimates in
our critical
accounting policies,
those events
or assumptions
could have
a material
impact on
our consolidated
financial statements
and
related
disclosures,
in
each
case
resulting
in
our
need
to
revise
or
restate
prior
period
financial
statements,
cause
damage to our
reputation and
the price
of our Class
A common stock
and adversely affect
our business, prospects,
cash
flow, liquidity,
financial condition and results of operations.
As a public company, we may not efficiently or effectively create an effective internal control environment, and
any future
failure to
maintain
effective
internal control
over financial
reporting
could impair
the reliability
of our
financial
statements,
which
in
turn
could
harm
our
business,
impair
investor
confidence
in
the
accuracy
and
completeness of
our financial
reports and
our access
to the
capital markets,
cause the
price of
our Class
A common
stock to decline and subject us to regulatory penalties.
Our management is responsible for establishing
and maintaining adequate internal control over financial
reporting and
for evaluating
and
reporting
on
that
system
of
internal
control.
Our
internal
control
over
financial
reporting
consists
of
a
process
designed
to
provide
reasonable
assurance
regarding
the
reliability
of
financial
reporting
and
the
preparation
of
financial statements for external purposes in accordance with GAAP.
As a public company,
we are required to comply with
SEC regulations, including
the SOA and
other rules that
govern public companies
that we previously
were not required
to
comply with
as a
private company.
In particular,
we are
required to
certify our
compliance with
Section 404
of the
SOA,
which requires
us to
annually
furnish
a report
by management
on the
effectiveness
of our
internal
control
over
financial
reporting. When evaluating our internal controls over financial reporting, we may identify material weaknesses that we may
not be able to remediate
in time to meet the applicable
deadline imposed upon us for
compliance with the requirements
of
Section 404
of the SOA.
We periodically
review our
formal policies,
processes and practices
related to
financial reporting
and to the
identification of key financial
reporting risks, assess their
potential impact and the
linkage of those
risks to specific
areas and controls within our organization.
If we fail to achieve and maintain the adequacy of
our internal controls, as such standards are modified, supplemented,
or amended from time to
time, we may not
be able to ensure
that we will be able
to conclude on an ongoing
basis that we
have effective
internal controls
over financial
reporting in
accordance with
Section 404
of the
SOA. We
cannot be
certain
as to
the
timing
of completion
of
our
evaluation,
testing,
and
any
remediation
actions
or
the
impact
of
the
same
on
our
operations. If we fail to adequately comply with the requirements of Section 404 of the SOA,
we may be subject to adverse
regulatory consequences and there
could be a
negative reaction in
the financial markets due
to a loss
of investor confidence
in us and the
reliability of our
financial statements. In
addition, we may be
required to incur
costs in improving
our internal
control system
and hiring
additional personnel.
Any such
action could
negatively
affect
our business,
financial condition,
results of operations, and the price of our Class A common
stock may decline.
While we
remain an emerging
growth company, we will
not be
required to include
an attestation report
on internal
control
over financial
reporting issued by
our independent registered
public accounting firm.
We will
cease to be
an emerging
growth
company no later
than December 31,
- To
prepare for compliance
with the auditor
attestation requirement
of Section
404
of
the
SOA
once
we
no
longer
qualify
as
an
emerging
growth
company
or
as
a
non-accelerated
smaller
reporting
company, we are engaged in a process to document and evaluate
our internal control over financial reporting, which
is both
costly and
challenging. In
this regard,
we will
need to
dedicate internal
resources, potentially
engage outside
consultants
and adopt a detailed work
plan to assess and document
the adequacy of internal
control over financial reporting,
continue
steps to improve control
processes as appropriate, validate through
testing that controls are
functioning as documented and
continue to
refine our
reporting and
improvement process
for internal
control over
financial reporting.
Despite our
efforts,
there is a
risk that
we will not
be able
to conclude,
within the prescribed
time frame
or at all,
that our
internal control
over
financial
reporting
is
effective
as
required
by
Section
404
of
Sarbanes-Oxley.
If
we
identify
one
or
more
material
weaknesses, it could result in an adverse reaction in
the financial markets due to a loss of confidence in
the reliability of our
financial statements.
We
operate
in
a
highly
regulated
environment,
and
the
laws
and
regulations
that
govern
our
operations,
corporate governance,
executive compensation
and accounting
principles, or
changes in
them, or
our failure
to
comply with them, could adversely affect us.
We operate in a
highly regulated industry and
we are subject to
examination, supervision and comprehensive
regulation
by various federal and state agencies,
including the Federal Reserve, the
FDIC and the FOFR. As
such, we are subject to
extensive regulation, supervision and
legal requirements that govern almost
all aspects of our operations.
These laws and
regulations
are
not
intended
to
protect
our
shareholders.
Rather,
these
laws
and
regulations
are
intended
to
protect
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41
USCB Financial Holdings, Inc.
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customers, depositors, the Deposit Insurance
Fund, or DIF, and the overall financial health and
stability of the United
States
banking
system.
These
laws
and
regulations,
among
other
matters,
prescribe
minimum
capital
requirements,
impose
limitations on the
business activities
and investments
in which we
can engage, regulate
and restrict our
lending activities,
require us to provide certain banking services broadly within the communities in which we operate,
determine the locations
of our branch
offices and impose certain
specific accounting requirements on us
that may be more
restrictive and may result
in
greater
or
earlier
charges
to
earnings
or
reductions
in
our
capital
than
GAAP
would
require.
We
are
also
subject
to
capitalization
guidelines
established
by
our
regulators,
which
require
us
to
maintain
adequate
capital
to
support
our
business.
Compliance
with
laws
and
regulations
can
be
difficult
and
costly,
and
changes
to
laws
and
regulations
often
impose additional operating costs. Further, we must obtain approval from our regulators
before engaging in many activities,
and
our
regulators
have
the
ability
to
compel
us
to,
or
restrict
us
from,
taking
certain
actions
entirely.
There
can
be
no
assurance that any regulatory approvals we may require
or otherwise seek will be obtained.
Regulations affecting
banks and
other financial
institutions are
undergoing continuous
review and
frequently change,
and the ultimate effect of such changes cannot be predicted. Changes to the legal and regulatory framework governing our
operations, including the Dodd-Frank Act and the 2018 Act, have significantly
revised the laws and regulations under which
we operate. Such regulations
and laws may be modified
or repealed at any time,
and new legislation may be
enacted that
will affect us and our subsidiaries.
Our failure to comply with these laws and regulations, even if the failure follows good faith effort
or reflects a difference
in
interpretation,
could
subject
us
to
restrictions
on
our
business
activities,
enforcement
actions
and
fines
and
other
penalties,
any
of
which
could
adversely
affect
our
results
of
operations,
regulatory
capital
levels
and
the
price
of
our
securities. Further, any new laws, rules
and regulations, such as were imposed under the Dodd-Frank
Act or the 2018 Act,
could make
compliance more difficult
or expensive
or otherwise
adversely affect our
business, prospects,
cash flow, liquidity,
financial condition and results of operations.
We
face
a
risk
of
noncompliance
with
the
Bank
Secrecy
Act
and
other
anti-money
laundering
statutes
and
regulations and corresponding enforcement proceedings.
The BSA, the
USA PATRIOT
Act, and other
laws and regulations
require financial
institutions, among other
duties, to
institute
and
maintain
effective
anti-money
laundering
programs
and
to
file
suspicious
activity
and
currency
transaction
reports,
as
appropriate.
FinCEN,
established
by
the
U.S.
Treasury
Department
to
administer
the
Bank
Secrecy
Act,
is
authorized to impose significant civil money
penalties for violations of those requirements
and has engaged in coordinated
enforcement
efforts
with
the
individual
federal
banking
regulators,
as
well
as
the
U.S.
Department
of
Justice,
Drug
Enforcement
Administration
and
Internal
Revenue
Service.
Additionally,
South
Florida
has
been
designated
as
a
“High
Intensity Financial Crime
Area” (“HIFCA”)
by FinCEN and
a “High Intensity
Drug Trafficking
Area” (“HIDTA”)
by the Office
of National Drug Control
Policy.
The HIFCA program
is intended to concentrate
law enforcement efforts
to combat money
laundering efforts
in higher-risk
areas. There
is also
increased scrutiny
of compliance
with the
rules enforced
by OFAC.
Federal and
state bank
regulators have
for many
years focused
on compliance
with the
BSA and
anti-money laundering
regulations. In
order to
comply with
regulations,
guidelines and
examination
procedures
in this
area, we
have dedicated
significant resources
to our
anti-money laundering
program, especially
due to
the regulatory
focus on
financial and
other
institutions located in South
Florida. Our business includes
supporting our customers, including foreign
financial institutions,
with respect to their international banking needs and our policies, procedures and systems have been designed to address
federal and
state anti-money
laundering compliance.
If our policies,
procedures and
systems are
deemed deficient
or the
policies,
procedures
and
systems
of
the
financial
institutions
that
we
may
acquire
are
deficient,
we
would
be
subject
to
liability,
including
fines,
and
regulatory
actions
that
are
deemed
necessary
in
order
to
remediate
such
deficiencies
and
prevent the recurrence
thereof. In recent
years, sanctions that
the regulators have
imposed on banks
that have not
complied
with
all
anti-money
laundering
requirements
have
been
especially
severe.
Failure
to
maintain
and
implement
adequate
programs to
combat money
laundering and
terrorist financing
could also
have serious
reputational consequences
for us,
which could have a material adverse effect on
our business, financial condition and results of operations.
Significantly
heightened
regulatory
and
supervisory
expectations
and
scrutiny
in
the
United
States
have
increased
our
compliance,
regulatory,
and
other
risks
and
costs
and
subject
us
to
legal
and
regulatory
examinations, investigations, and enforcement actions.
The regulatory and political environment has generally been challenging for
U.S. financial institutions, which have been
subject to
increased regulatory
scrutiny,
including in
the wake
of the failures
of several
regional banks
and other
banking
stresses in recent periods. The
general heightened scrutiny and expectations from
regulators could lead to a more
stringent
regulatory posture by the regulators, investigations and other
inquiries, as well as remediation requirements, regulatory and
operational
restrictions,
more
regulatory
or
other
enforcement
proceedings,
civil
litigation
and
substantial
compliance,
regulatory and other risks and costs.
Our regulators have broad powers
and discretion under their supervisory
authority. A
failure to comply
with regulators’ expectations and
requirements, even if inadvertent,
or to resolve
any identified deficiencies
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42
USCB Financial Holdings, Inc.
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in
a
timely
and
sufficiently
satisfactory
manner
to
regulators,
could
result
in
increased
regulatory
oversight;
material
restrictions,
including,
among
others,
imposition
of
limitations
on
capital
distributions
or
other
business
activities
or
operations; enforcement proceedings; penalties; and fines.
Responding to regulatory inquiries and
proceedings can be time
consuming and
costly and
divert management
attention from
our other
business activities.
As a result
of these
regulatory
efforts and pressures,
like many other
financial institutions, from
time to time,
we may be
subject to public
and non-public
written
agreements,
cease
and
desist
orders,
consent
orders,
memoranda
of
understanding
or
other
enforcement
or
supervisory actions by our regulators.
We
are
subject
to
capital
adequacy
requirements
and
may
become
subject
to
more
stringent
capital
requirements, which could adversely affect our
financial condition and operations.
In
2013,
the
federal
banking
agencies
published
new
regulatory
capital
rules
based
on
the
international
standards,
known as
Basel III,
that were
developed by
the Basel
Committee on
Banking Supervision.
The new
rules raised
the risk-
based capital
requirements
and revised
the
methods for
calculating
risk-weighted
assets, usually
resulting
in higher
risk
weights. The rules apply to us.
The Basel III rules increased
capital requirements and included
two new capital measurements,
a risk-based common
equity Tier 1 ratio
and a capital conservation buffer.
Common Equity Tier
1 (CET1) capital is a subset
of Tier 1 capital
and
is limited to common
equity (plus related surplus), retained earnings,
accumulated other comprehensive income and certain
other
items.
Other
instruments
that
have
historically
qualified
for
Tier
1
treatment,
including
noncumulative
perpetual
preferred stock,
are consigned
to a
category known
as Additional
Tier
1 capital
and must
be phased
out of
CETI over
a
period of
nine years
beginning in
- In
order to
be a
“well-capitalized” depository
institution under
the new
regime, an
institution must maintain a
CET1 capital ratio of 7.0%
or more; a Tier
1 capital ratio of 8.5%
or more; a total capital
ratio of
10.5%
or more;
and
a
Tier
1 leverage
ratio
of
4% or
more. Institutions
must
also
maintain
a capital
conservation
buffer
consisting of
common equity
Tier
1 capital
(which amount
(2.5%) is
reflected above
in the
CET1, Tier
1 and
total capital
ratios). In addition
to the higher
required capital
ratios and
the new
deductions and
adjustments, the
final rules
increased
the risk weights
for certain assets,
meaning that we
will have to
hold more capital
against these assets. We
are also required
to hold capital against short-term commitments that are not
unconditionally cancellable.
While we currently meet the requirements of
the Basel III-based capital requirements, we may fail to
do so in the future.
The failure to
meet applicable regulatory
capital requirements could
result in one
or more of
our regulators placing
limitations
or conditions on our activities, including our growth initiatives, or restricting the commencement of new activities, and could
affect
customer
and
investor confidence,
our costs
of funds
and
level of
required
deposit
insurance
assessments
to
the
FDIC,
our
ability
to
pay
dividends
on
our
capital
stock,
our
ability
to
make
acquisitions,
and
our
business,
results
of
operations and financial condition, generally.
In addition, in the current economic
and regulatory environment bank regulators
may impose capital requirements that
are
more
stringent
than
those
required
by
applicable
existing
regulations.
The
application
of
more
stringent
capital
requirements for us could, among other things, result
in lower returns on equity, require the raising of additional capital, and
result in regulatory actions
if we were to be
unable to comply with
such requirements. Implementation
of changes to asset
risk weightings for risk-based capital
calculations, items included
or deducted in calculating
regulatory capital or additional
capital conservation buffers, could result in management modifying our business strategy
and could limit our ability to make
distributions, including paying
dividends.
We are periodically subject
to examination and
scrutiny by a
number of banking agencies
and, depending upon
the findings and determinations
of these agencies, we may
be required to make adjustments
to our business that
could adversely affect us.
As part of
the bank regulatory process,
the Federal Reserve, the
FDIC and the FOFR
periodically conduct examinations
of our business,
including compliance
with applicable
laws and regulations.
If, as a
result of an
examination, one
of these
banking
agencies
were
to
determine
that
the
financial
condition,
capital
resources,
asset
quality,
asset
concentration,
earnings prospects, management, liquidity sensitivity
to market risk, risk
management and internal controls
or other aspects
of any of our operations has become unsatisfactory, or that we or our management are in violation of any law or regulation,
the banking
agency could
take a
number of
different remedial
or punitive
actions as
it deems
appropriate. These
actions
include the power to prohibit the continuation
of "unsafe or unsound" practices, to require
affirmative actions to correct any
conditions
resulting
from
any
violation
or practice,
to
issue an
administrative
order
or enforcement
that
can
be judicially
enforced, to direct an increase
in our capital, to restrict our
growth, to change the asset composition
of our loan or securities
portfolios
or
balance
sheet,
to
assess
civil
monetary
penalties
against
our
officers
or
directors,
to
remove
officers
and
directors and, if
it is concluded
that such conditions
cannot be corrected
or there is
an imminent risk
of loss to
depositors,
to
terminate
our
deposit
insurance
and
force
us
to
terminate
our
business
operations.
If
we
become
subject
to
such
regulatory actions, our business, financial condition, result
s
of operations and reputation may be negatively impacted.
Table of Contents
43
USCB Financial Holdings, Inc.
2025 10-K
We
are
subject
to
numerous
laws
and
regulations
of
certain
regulatory
agencies
designed
to
protect
consumers, including the Community Reinvestment
Act, or CRA, and fair lending laws, and failure
to comply with
these laws could lead to a wide variety of sanctions.
The CRA directs all insured depository institutions to help meet the credit needs of the local communities
in which they
operate
branches,
including
low-
and
moderate-income
neighborhoods.
Each
institution
is
examined
periodically
by
its
primary federal
regulator,
which assesses
the institution’s
CRA performance.
The Equal
Credit Opportunity
Act, the
Fair
Housing
Act
and
other
fair
lending
laws
and
regulations
impose
nondiscriminatory
lending
requirements
on
financial
institutions. The U.S. Department of Justice, the Federal Reserve, and other federal agencies are responsible for enforcing
these laws and regulations. A successful regulatory challenge to our performance under the CRA, fair lending or consumer
lending
laws
and
regulations
could
result
in
a
wide
variety
of
sanctions,
including
damages
and
civil
money
penalties,
injunctive
relief,
customer
restitution,
restrictions
on
mergers
and
acquisitions
activity,
restrictions
on
expansion,
and
restrictions
on
entering
new
business
lines.
Private
parties
may
also
have
the
ability
to
challenge
an
institution’s
performance
under
fair
lending
laws
in
private
class
action
litigation.
Such
actions
could
have
an
adverse
effect
on
our
business, financial condition and results of operations.
Climate change and related legislative and regulatory initiatives may materially affect our business and results
of operations.
The effects
of climate change
continue to create
a significant level
of concern
for the state
of the global
environment.
The lack of empirical
data surrounding the credit and
other financial risks posed by
climate change render it
difficult, or even
impossible,
to
predict
how
climate
change
may
impact
our
financial
condition
and
results
of
operations;
however,
the
physical
effects
of
climate
change
may
also
directly
impact
us.
Specifically,
unpredictable
and
more
frequent
weather
disasters may adversely impact the real property,
and/or the value of the real property,
securing the loans in our portfolios.
Additionally,
if
insurance
obtained
by
our
borrowers
is
insufficient
to
cover
any
losses
sustained
to
the
collateral,
or
if
insurance coverage is otherwise unavailable to
our borrowers, the collateral securing
our loans may be negatively
impacted
by climate
change, natural disasters
and related events,
which could impact
our financial condition
and results of
operations.
Further,
the effects
of climate
change may
negatively impact
regional and
local economic
activity,
which could
adversely
affect
our
customers
and
the
communities
in
which
we
operate.
Overall,
climate
change,
its
effects
and
the
resulting
unknown impact could have a material adverse effect
on our financial condition and results of operations.
Risks Related to Our Class A Common Stock
Our ability to pay dividends is subject to restrictions.
Holders of our Class A common stock
are only entitled to receive cash dividends when, as
and if declared by our Board
out of funds
legally available
for dividends.
The Company
is a bank
holding company
that conducts
substantially all
of its
operations through the Bank,
which is a legal entity
separate and distinct from
the Company.
As a result, our ability
to pay
dividends
on
our
common
stock
will substantially
depend
upon
the
receipt
of
dividends
and
other
distributions
from
the
Bank,
the
profitability
of
which
is
subject
to
the
fluctuating
cost
and
availability
of
money,
changes
in
interest
rates
and
economic conditions in general. There are
numerous laws and banking regulations and
guidance that limit the Bank's
ability
to pay
dividends to
us and
our ability
to pay
dividends on
our common
stock. Due
to the
fact that
the Bank
has negative
retained earnings,
the Bank
may not
pay dividends
to the
Company without
the prior
approval of
the FDIC.
Similarly,
we
have agreed to notify the Federal Reserve before declaring
and paying any dividends on our Class A common stock.
If we fail to
pay interest on
or otherwise default
on our subordinated
notes, we will
be prohibited from
paying
dividends or distributions on our Class A common
stock.
As
of
December
31,
2025,
we
had
$40.0
million
of
subordinated
notes
outstanding.
The
indenture
under
which
the
subordinated
notes
were
issued
prohibits
us
from
paying
any
dividends
on
our
common
stock
or
making
any
other
distributions
to
our
shareholders
upon
our
failure
to
make
any
required
payment
of
principal
or
interest
or
during
the
continuance
of
an event
of
default
under
the
applicable
agreement.
Events
of
default
generally
consist
of,
among other
things, certain events
of bankruptcy,
insolvency or liquidation
relating to us.
If we were
to fail to
make a required
payment
of principal or interest
on our subordinated
notes, it could have
a material adverse effect on
the market value of
our common
stock.
Table of Contents
44
USCB Financial Holdings, Inc.
2025 10-K
We
may
issue
additional
debt
securities,
which
would
be
senior
to
our
common
stock
and
may
cause
the
market price of our Class A common stock to decline.
We have issued $40.0 million in aggregate principal amount of 7.625% Fixed-to-Floating Rate Subordinated Notes due
- In the future, we may increase our capital resources by making additional offerings of debt or equity securities, which
may include
senior or
additional subordinated
notes, classes
of preferred
shares
and/or common
shares. Holders
of our
common stock are
not entitled to
preemptive rights or
other protections against
dilution. Preferred shares
and debt, if
issued,
have a preference on liquidating distributions or a preference
on dividend or interest payments that could limit our
ability to
make
a
distribution
to
the
holders
of
our
common
stock.
Future
issuances
and
sales
of
parity
preferred
stock,
or
the
perception that
such
issuances
and sales
could occur,
may also
cause
prevailing
market price
for our
Class
A common
stock to decline
and may adversely
affect our
ability to raise
additional capital
in the financial
markets at times
and prices
favorable to us. Further issuances of our Class A common stock could
be dilutive to holders of our Class A common stock.
The market price and trading volume of our Class A
common stock may be volatile, which could result in rapid
and substantial losses for our shareholders.
The market
price
of
our
Class
A common
stock
may
be highly
volatile
and
could
be
subject
to
wide
fluctuations.
In
addition, the trading volume on
our Class A common stock may
fluctuate and cause significant price variations to
occur. We
cannot assure you that the market price of our Class A common stock will not fluctuate or decline significantly in the future.
Some, but
certainly not
all, of
the factors
that could
negatively affect
the price
of our
Class A
common stock,
or result
in
fluctuations in the price or trading volume of our Class
A common stock, include but not limited to:
•
general market conditions;
•
domestic and international economic factors unrelated
to our performance;
•
variations in our quarterly operating results or failure to
meet the market’s earnings expectations;
•
publication of research reports about us or the financial services
industry in general;
•
the determination of securities analysts to not cover our
Class A common stock;
•
the opinion of securities analysts about our stock as an investment;
•
additions to or departures of our key personnel;
•
future sales of our Class A common stock;
•
adverse market reactions to any indebtedness we may
incur or securities we may issue in the future;
•
actions by our shareholders;
•
the operating and securities price performance of companies
that investors consider to be comparable to us;
•
changes or proposed changes in laws or regulations affecting
our business; and
•
actual or potential litigation and governmental investigations.
In
addition,
if
the
market
for
stocks
in
our
industry,
or
the
stock
market
in
general,
experiences
a
loss
of
investor
confidence, the
trading price
of the
Class A
common stock
could decline
for reasons
unrelated to
our business,
financial
condition or results of operations.
If any of the foregoing occurs,
it could cause our Class A common
stock price to fall and
may expose us to lawsuits that, even if unsuccessful, could
be costly to defend and a distraction to management.
There are significant restrictions in our Articles of Incorporation that restrict the
ability to sell our capital stock
to shareholders that would own 4.95% or more of our stock,
excluding our Significant Investors.
Because the
continued availability
of our
"deferred tax
assets" depends,
in part,
on the
value of
our stock
owned by
shareholders owning 5% or
more of our
stock, our amended Articles
of Incorporation, except as
otherwise may be approved
by the Board or
except for transfers by
our Significant Investors, prohibits
any direct or indirect
transfer of stock
or options
to
acquire
stock
to
any
person
who,
as
a
result
of
the
transfer,
would
own
4.95%
or
more
of
our
stock,
as
long
as
the
Company continues to have "deferred tax assets." Such
restrictions may limit the ability to transfer our stock.
Because
we
are
an
emerging
growth
company
and
because
we
have
decided
to
take
advantage
of
certain
exemptions from
various reporting
and other
requirements applicable
to emerging
growth companies,
our Class
A common stock could be less attractive to investors.
We are
an “emerging
growth company,”
as defined
in the
JOBS Act.
For as
long as
we remain
an emerging
growth
company,
we will
have the
option to take
advantage of
certain exemptions
from various
reporting and
other requirements
that are applicable to other public companies that are not
emerging growth companies, including:
•
we
may
present
only
two
years
of
audited
financial
statements
and
only
two
years
of
related
management’s
discussion and analysis of financial condition and results
of operations
Table of Contents
45
USCB Financial Holdings, Inc.
2025 10-K
•
we
are
exempt
from
the
requirements
to
obtain
an
attestation
and
report
from
our
auditors
on
management’s
assessment of our internal control over financial reporting
under the SOA;
•
we are permitted to have less extensive disclosure about our
executive compensation arrangements; and
•
we
are
not
required
to
give
our
shareholders
non-binding
advisory
votes
on
executive
compensation
or
golden
parachute arrangements.
We may
continue to
take advantage
of some
or all
of the
reduced regulatory
and reporting
requirements that
will be
available to
us as
long as
we continue
to
qualify
as an
emerging
growth
company.
We
will remain
an emerging
growth
company until the
earliest to occur
of (i) the
last day of
the first fiscal
year in which
our annual gross
revenues exceed $1.235
billion, (ii) the date that the market
value of our Class A common stock
that is held by non-affiliates
exceeds $700.0 million
as of the
last business day in
June of that
year, (iii) the date on
which we have, during
the previous three-year period, issued
more than $1.0 billion
in non-convertible debt, or
(iv) the end of fiscal
year following the fifth
anniversary of the completion
of our initial public offering (which will be December
31, 2026).
It is possible
that some
investors may
find our Class
A common stock
less attractive
since we chose
to rely
on these
exemptions. If some investors find our Class A common
stock less attractive, there may be a less
active trading market for
our Class A common stock and our stock price may be
more volatile.
Because we have elected
to use the extended
transition period for complying
with new or revised
accounting
standards for an “emerging growth company,” our financial statements may not be comparable to companies that
comply with these accounting standards as of the
public company effective dates.
As an emerging
growth company,
we elected to
use the extended
transition period
for complying
with new
or revised
accounting standards under Section 7(a)(2)(B) of the Securities Act. This election allows us to delay the adoption of new or
revised accounting standards
that have different
effective dates for
public and private
companies until those
standards apply
to private companies. As a
result of this election, our
financial statements may not be
comparable to companies that comply
with these
accounting standards
as of
the public
company effective
dates. Because
our financial
statements
may not
be
comparable
to
companies
that
comply
with
public
company
effective
dates,
investors
may
have
difficulty
evaluating
or
comparing our
business, performance
or prospects
in comparison to
other public
companies, which
may have a
negative
impact on the value and liquidity of our Class A common stock. We cannot predict if investors will find our Class A common
stock
less
attractive
because
we
have
relied
on
this
exemption.
If
some
investors
find
our
Class
A
common
stock
less
attractive as a result, there
may be a less active trading
market for our Class A common
stock and our stock price
may be
more volatile.
We have existing investors that own
a significant amount of our
common stock whose individual interests may
differ from yours.
A significant percentage of our Class A common stock is currently held by a few institutional investors, including Patriot
Financial Partners II,
L.P.
and Patriot Financial
Partners Parallel II, L.P.
(collectively,
"Patriot"), and Priam
Capital Fund II,
LP
("Priam,"
and
together
with
Patriot,
the
"Significant
Investors").
As
of
February
28,
2026
Patriot
and
Priam
own
approximately 10.4% and 21.8%, respectively, of our outstanding shares of Class A common stock. In addition, Patriot and
Priam are
each entitled
to nominate
a director
to our
Board and
have certain
subscription rights
to purchase
new equity
securities that we
issue in the
future, in each
case as long
as certain equity
ownership criteria
are met. Patriot
and Priam
also have
certain registration rights
(which they
have exercised), including
demand registration rights,
and information rights.
Although Patriot
and Priam
are independent
of each
other,
these institutional
investors will
continue to
have a
significant
level of influence over us because of their level
of Class A common stock ownership and their right
to representation on our
Board. For
example, Patriot
and Priam
will have
a greater
ability than
our other
shareholders to
influence the
election of
directors and the
potential outcome of
other matters submitted
to a vote
of our shareholders,
including mergers and
other
acquisition transactions,
amendments to
our amended
Articles of
Incorporation and
Amended and
Restated Bylaws,
and
other
extraordinary
corporate
matters.
The
interests
of
these
investors
could
conflict
with
the
interests
of
our
other
shareholders, and
any future
transfer by
these investors
of their
shares of
Class A
common stock
to other
investors who
have different business objectives
could adversely affect our
business, results of operations,
financial condition, prospects
or the market value of our Class A common stock.
Provisions
in
our
governing
documents
and
Florida
law
may
have
an
anti-takeover
effect
and
there
are
substantial regulatory limitations on changes of control
of the Company.
Our corporate organizational documents and provisions of federal
and state law to which we
are subject contain certain
provisions that could
have an anti-takeover
effect and
may delay,
make more difficult
or prevent an
attempted acquisition
that you may favor or an attempted replacement of our
Board or management.
Table of Contents
46
USCB Financial Holdings, Inc.
2025 10-K
Our governing documents include provisions that:
•
empower our Board, without shareholder approval, to issue shares of preferred stock, the terms of
which, including
voting power, are set by our
Board;
•
provide that directors may be removed from office only for cause and only upon a majority vote
of the shares of our
Company with voting power;
•
prohibit holders of our Class A common stock to take action
by written consent in lieu of a shareholder meeting;
•
require holders of at least 10% of our Class A common
stock to call a special meeting;
•
do not provide for cumulative voting in elections of our
directors;
•
provide that
our Board
has the
authority to amend
our Amended
and Restated Bylaws
without shareholder approval;
•
require shareholders that wish to bring business before annual or special meetings of shareholders, or to nominate
candidates for election as directors at our annual meeting of shareholders, to provide
timely notice of their intent in
writing and satisfy disclosure requirements; and
•
enable our Board to increase, between
annual meetings, the number of
persons serving as directors and
to fill the
vacancies created
as a
result of
the increase until
the next
meeting of
shareholders by a
majority vote
of the
directors
present at a meeting of directors.
In addition,
certain provisions
of Florida
law may
delay,
discourage, or
prevent an
attempted acquisition
or change
in
control. Furthermore,
banking laws
impose notice,
approval, and
ongoing regulatory
requirements on
any shareholder
or
other party that seeks to acquire direct or indirect "control" of a
bank holding company,
which includes the Change in Bank
Control Act
and the
Bank Holding
Company Act.
These laws
could delay
or prevent
an acquisition.
Also, for
preservation
and continued availability
of our "deferred
tax assets," our
amended Articles of
Incorporation prohibit any
direct or indirect
transfer of stock or options to acquire stock to any person who, as a result of the transfer,
would own 4.95% or more of our
stock,
as
long
as
we
continue
to
have
"deferred
tax
assets,"
subject
to
limited
exceptions
as
provided
in
our
amended
Articles of Incorporation. Because of the requirements to overcome this restriction, this
provision of the amended Articles of
Incorporation could
have an
anti-takeover
effect
and
may delay,
make more
difficult
or prevent
an attempted
acquisition
that you may favor.
Table of Contents
47
USCB Financial Holdings, Inc.
2025 10-K
Item 1B. Unresolved Staff Comments
None.
Item 1C. Cybersecurity
Risk Management and Strategy Overview
Customers depend
on the
Company to
safeguard
nonpublic personal
information
gathered and
stored in
connection
with the
services we
provide. The
Company understands
that cyber
incidents can
have financial,
reputational, legal,
and
operational impacts
that can
adversely affect
our customers,
capital, and
earnings. Therefore,
we integrate
cybersecurity
processes throughout the
Company as part of
our enterprise-wide governance
process. Regulatory agencies
are charged
with
ensuring
the
Company’s
cybersecurity
controls
and
procedures
are
compliant
with
the
intent
of
the
cybersecurity
expectations set forth
by the Federal
Financial Institutions
Examination Council
(“FFIEC”). The
FFIEC framework
offers a
set
of
guidelines
and
best
practices
to
help
financial
institutions
manage
and
mitigate
cybersecurity
risks
effectively.
It
focuses on ensuring the confidentiality,
integrity, and availability
of sensitive information and systems.
The Information
Security Officer
(“ISO”) is
an integral
member of
the Risk
Management and
Compliance Department
(“RMCD”) of
the Bank
and provides
expert counsel
on matters
of cybersecurity
and presents
periodic reports
to the
Risk
Committee of our Board of Directors.
As part
of the
program, periodic
risk assessments
are performed
to determine
the Company’s
inherent and
residual
cybersecurity risk, the
maturity level of the program,
the risk of cyber
threats, and the effectiveness
of controls currently
in
practice. The Company utilizes the National Institute of Standards and
Technology
(“NIST”) Framework and the Cyber Risk
Institute Framework (“CRI
Framework”) to help
management identify its
risks and determine
the Company’s
cybersecurity
posture.
Through
the
implementation
of rigorous
procedures
and controls,
augmented
by ongoing
training
initiatives
for
both management and
staff, the institution
cultivates a safe
cybersecurity environment. This
approach encompasses diverse
methodologies
including
defense-in-depth
and
proactive
security
awareness
training
aimed
at
fortifying
the
institutions’
cybersecurity controls and fostering a resilient operational
framework.
Assessment and Response to Cybersecurity Threats
It is the policy of
the Company and its
technology service providers
(“TSPs”) to ensure that
they can identify,
mitigate,
and respond to cyber-attacks involving destructive
malware and invasive attacks such
as phishing, ransomware, malware,
DDoS
attacks,
etc.
This
commitment
aligns
with
the
Company’s
risk
appetite,
Incident
Response
Policy,
and
Business
Continuity Plan,
which incorporates
business continuity
planning and
testing activities
to enhance response
and recovery
capabilities.
The Company recognizes that it faces a variety of risks from cyber-attacks involving destructive malware, including
liquidity, capital, operational, and
reputation risks, due
to events such
as fraud, data
loss, and disruption
of customer
service.
As such,
it is
the policy
of the
Company to
ensure that
its risk
management processes,
and business
continuity planning
address these risks by:
●
Establishing
a
comprehensive
governance
program
encompassing
policies
and
procedures
to
administer
and
oversee
the
information/cybersecurity
programs
to
ensure
adherence
to
regulatory
guidance
and
industry
best
practices.
●
Securely configuring systems and services to mitigate the impact of cyber-threats. This includes measures such as
logical network segmentation, backups, maintaining an inventory
of authorized devices and software, and physical
segmentation
of
critical
systems.
Consistency
in
system
configuration
fosters
a
secure
network
environment
by
removing or disabling unused applications, functions, or components.
●
Implementing and testing
controls around critical
systems on a regular
basis to ensure appropriate
access control
and segregation of duties. Limits on sign-on attempts
for critical systems are enforced, with accounts
being locked
when
the
threshold
are
met.
Alert
systems
notify
of
baseline
control
changes
on
critical
systems,
with
the
effectiveness and
adequacy of
controls periodically
tested and
the results
reported to
senior management
and, if
applicable,
the
Risk
Committee,
along
with
recommended
risk
mitigation
strategies
and
the
progress
of
actions
taken to remediate findings.
●
Performing security
monitoring, prevention,
and risk
mitigation activities
to ensure
the effectiveness
of protection
and detection systems.
This includes maintaining
up-to-date intrusion detection
systems, antivirus protection,
and
properly configured
firewall
rules. Systems
are monitored
to
identify,
prevent,
and contain
cyber-attack
attempts
from all sources.
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48
USCB Financial Holdings, Inc.
2025 10-K
●
Maintaining robust business
continuity planning processes
to swiftly
recover, resume, and maintain
operations post-
cyber-attack incidents
involving destructive
malware. These
processes encompass
data and business
operations
recovery,
network
capability
rebuilding,
and
data
protection
for
offline
backups
in
the
event
of
cyber-attacks
impacting the Company and/or its critical service providers.
●
Conducting ongoing
information security
risk assessments
to address
new and
evolving threats
to online
deposit
and loan accounts. This involves identifying, prioritizing, and assessing risks to
critical systems, including threats to
applications controlling
various system parameters and implementing
necessary security prevention measures.
●
Reviewing, updating, and testing incident response and business
continuity plans annually to ensure effectiveness.
Testing
encompasses
both
in-house
and
third-party
processor
scenarios
to
validate
employee
understanding
of
responsibilities and adherence to Company protocols.
Executive Oversight and Roles
The
responsibility
for
adopting
and
maintaining
an
effective
cybersecurity
program
is
assigned
to
the
RMCD,
who
collaborates
with
functional
area
management,
departmental
level
managers,
and
other
relevant
staff.
Management
committees and
the Audit
and Risk
Committee of
the Board
(“ARC”) review
reports submitted
by the
RMCD detailing
the
Company’s
inherent
and
residual
cybersecurity
risk,
program
sophistication
level,
and
high-risk
threats
identified
in
the
cybersecurity risk assessment.
The
ARC
oversees
the
development
and
maintenance
of
the
information
security
program,
holding
management
accountable.
Management
committees
ensure
program
integration
and
effectiveness,
with
the
RMCD
responsible
for
cybersecurity controls
and procedures.
The ARC
receives regular
reports
on cybersecurity
risk assessment
and program
updates,
providing
expectations
and
requirements
to
management
and
holding
them
accountable
for
oversight
and
coordination, assignment of responsibility,
and the effectiveness of the information and cybersecurity
security program.
Annually,
or
as
required,
the
RMCD
provides
a
comprehensive
report
to
the
Board
regarding
the
status
of
the
cybersecurity
program
.
This
report
encompasses
internal
assessments,
utilization
of
the
Cybersecurity
Assessment,
discussion of
significant program
matters such
as the
annual risk
assessment, risk
management decisions,
monitoring of
service provider compliance, results of key controls testing, security breaches
or violations, management's responses, and
recommendations for program enhancements.
Engagement with Third Party Vendors
The engagement of critical third-party providers introduces a range of
potential risks that can affect the Bank’s strategic
direction, reputation, daily
operations, transaction integrity,
credit exposures, financial
stability,
technological environment,
and compliance posture. Providers whose services include the transmission, storage, or processing
of non-public personal
information
present heightened
compliance risks,
particularly
with respect
to the
requirements
of the
GLB
Act and
other
applicable Privacy Laws and Regulations.
The
Bank
has
established
general
guidelines
to
support
the
identification,
risk
assessment,
monitoring,
and
management of risks related
to the engagement of
third-party providers or vendors.
This framework ensures that risks
are
addressed proactively and in accordance with regulatory
expectations.
Risk assessment for
critical providers may
require the involvement
of specialized personnel,
including the compliance
officer, technology officers, finance officers,
internal auditors, and
legal counsel. Their
participation is essential
for identifying
potential risks arising
from third-party relationships,
defining performance criteria,
establishing internal controls,
specifying
reporting requirements, and ensuring
contractual obligations are in
place for ongoing risk assessment
and mitigation. This
collaborative approach helps maintain the integrity and security of the
Bank’s operations while meeting regulatory and legal
standards.
Compliance with Regulatory Standards
As noted above, annual testing, or more frequently
if deemed necessary,
of cybersecurity controls and procedures
will
be conducted
to ensure
compliance. In
instances of
identified deficiencies
or vulnerabilities,
remedial action
plans will
be
implemented to rectify issues or establish mitigating controls. Any exceptions
deemed significant will be promptly reported,
with remediation efforts prioritized.
Annually,
or
as
required,
the
RMCD
will
provide
a
comprehensive
report
to
the
ARC
or
a
designated
committee
regarding
the
status
of
the
cybersecurity
program.
This
report
will
encompass
internal
assessments,
utilization
of
the
Cybersecurity Assessment, and discussion of other significant
program matters.
Table of Contents
49
USCB Financial Holdings, Inc.
2025 10-K
As of the end of
the reporting period set
forth in this Annual
Report on Form 10-K,
there is no knowledge
or indication
that
customer
sensitive
information
was
compromised
as
a
result
of
third-parties’
system
vulnerabilities.
Management
continues to monitor developments and vendor communications.
Item 2.
Properties
The Company’s corporate
offices
are headquartered at
2301 N.W.
87th Avenue, Doral,
Florida 33172. The
Company,
through the Bank,
operates 10 banking
centers in South
Florida within Miami-Dade and
Broward counties. Of
the 10 banking
centers, nine of these locations are leased
and one is owned. The banking
center that is owned is located at
3999 Sheridan
St, Hollywood,
FL 33021.
Management believes
that each
of these locations
are in good
condition and
adequate to
meet
our present and foreseeable needs, subject to possible future
expansion.
See Note 4 “Leases” and Note 5 “Premises and Equipment” to the Consolidated
Financial Statements included in Item
8 in this Annual Report on Form 10-K for additional information.
Item 3.
Legal Proceedings
We are not currently subject to any material legal proceedings. We are from time to time subject to claims and litigation
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 4.
Mine Safety Disclosures
Not applicable.
Table of Contents
50
USCB Financial Holdings, Inc.
2025 10-K
PART II
Item 5.
Market
for
Registrant’s
Common
Equity,
Related
Stockholder
Matters
and
Issuer
Purchases
of
Equity
Securities
(a)
Market Information
In July
2021, the Bank’s
Class A common
stock began trading
on the
Nasdaq Stock Market
under ticker
symbol “USCB”.
Effective December
30, 2021,
the Company
acquired all
issued and
outstanding shares
of Class
A common
stock of
the
Bank
in
connection
with
the
bank
holding
company
reorganization.
Each
of
the
outstanding
shares
of
the
Bank’s
common
stock
formerly
held
by
its
shareholders
was
converted
into
and
exchanged
for
one
newly
issued
share
of
the
Company’s Class A common stock. The Company’s
Class A common stock is also listed on the Nasdaq Stock
Market and
uses the same ticker symbol.
The listing of our Class
A common stock on the
Nasdaq Stock Market has
resulted in a more active
trading market for
our Class A common
stock. However, we cannot assure investors that
a liquid trading market
for our Class A
common stock
will be sustained.
Prior
to
our
listing
on
the
Nasdaq
Stock
Market
there
was
not
an
established
public
trading
market
for
the
Class
A
common shares.
As of December 31, 2025, our
Class B common stock is
not listed or traded
on any stock exchange and
no shares were
issued and outstanding at such date.
Holders
As of
February
28,
2026,
the
Company’s
Class
A common
shares
were held
by
approximately
550 shareholders
of
record,
not including
the number
of persons
or entities
whose stock
is held
in nominee
or “street”
name through
various
brokerage firms and banks.
Dividends
As a bank holding company, the Company’s ability to declare and pay dividends depends on various federal regulatory
considerations, including
the guidelines
of the Federal
Reserve regarding
capital adequacy
and dividends.
The Company
has agreed to provide notice to the Federal Reserve prior to paying
any cash dividends on its Class A common stock.
Because we are
a bank holding
company and currently do
not engage directly in
business activities of a
material nature,
our ability to pay dividends
to our shareholders depends,
in large part, upon
our receipt of dividends
from the Bank, which
is also subject to
numerous limitations on
the payment of dividends
under federal and state
banking laws, regulations
and
policies. The Bank cannot
declare and pay and
cash dividends to
the Company without receiving
the prior approval of
the
FDIC.
The principal
source of
revenue with
which to
pay dividends
on common
shares are
dividends the
Bank may
declare
and
pay
out
of
funds
legally
available
for
payment
of
dividends.
As
a
Florida
corporation,
we
are
only
permitted
to
pay
dividends to shareholders if, after giving effect to the dividend, (i) the Company is able to pay its debts as they become due
in the ordinary course
of business and
(ii) the Company’s
assets exceeds the
sum of Company’s
(a) liabilities plus
(b) the
amount that
would be
needed for
the Company
to satisfy
the preferential
rights
upon dissolution
of shareholders
whose
preferential rights are superior to those receiving the dividend,
if any.
Securities Authorized for Issuance Under Equity Compensation
Plans
See Note 10 ”Equity Based
and Other Compensation Plans” to
the Consolidated Financial Statements
included in this
Annual Report Form on 10-K for additional information
required.
Table of Contents
51
USCB Financial Holdings, Inc.
2025 10-K
Recent Sales of Unregistered Securities
The Company did not sell any of its equity securities during
2025 that were not registered under the Securities
Act.
Purchases of Equity Securities by Issuer and Other Affiliates
On January 24,
2022, the Board
of Directors approved
the first share
repurchase program
of up to
750,000 shares
of
Class A common stock. On April
22, 2024 the Board of
Directors approved the second share repurchase
program of up to
500,000 shares of
Class A common
stock. Under the
repurchase programs,
the Company may
purchase shares
of Class
A
common
stock
on
a
discretionary
basis
from
time
to
time
through
open
market
repurchases,
privately
negotiated
transactions, or otherwise
in compliance with
Rule 10b-18 under
the Exchange Act.
As of December 31,
2025, the Company
had
repurchased
9,671
shares
of
Class
A
common
stock
under
the
first
program
and
no
shares
under
the
second
repurchase
program.
The
Company
did
not
repurchase
any
of
its
equity
securities
for
the
quarter
ended
December 31,
2025.
As
of
December 31,
2025,
528,309
shares
remained
authorized
for
repurchase
under
the
Company’s
two
stock
repurchase programs.
During the
year ended
December 31,
2025, the
Company
repurchased
2.0 million
shares of
Class
A common
stock
from certain
institutional shareholders
through privately
negotiated transactions,
at a weighted
average price
per share of
$17.19.
The
aggregate
purchase
price
for
these
transactions
was
approximately
$34.4
million.
The
repurchases
were
supplemental and not part of the Company’s two
previously announced stock repurchase programs described
above.
Item 6.
Reserved
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52
USCB Financial Holdings, Inc.
2025 10-K
Item 7.
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Management’s
discussion
and
analysis
of
financial
condition
and
results
of
operations
analyzes
the
consolidated
financial condition and results of operations of the Company and
the Bank, its wholly owned subsidiary, for the years ended
December 31,
2025
and
2024.
This
discussion
and
analysis
is best
read
in
conjunction
with
the
Consolidated
Financial
Statements and related
footnotes of the Company
presented in Item
8 “Financial Statements
and Supplementary Data”
of
this Annual Report on Form
10-K. In addition to
historical information, 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" of this Annual Report.
In this Annual Report on Form 10-K, unless the context indicated otherwise, references to “we,” “us,”, and “our” refer to
the Company and the Bank, as the contest dictates.
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53
USCB Financial Holdings, Inc.
2025 10-K
CAUTIONARY NOTE REGARDING FORWARD
-LOOKING STATEMENTS
This
Annual
Report
on
Form
10-K
contains
statements
that
are
not
historical
in
nature
are
intended
to
be,
and
are
hereby identified as, forward-looking
statements for purposes of
the safe harbor provided by
Section 21E of the Securities
Exchange Act
of 1934,
as amended.
The words
“may,” “will,” “anticipate,” “could,”
“should,” “would,” “believe,”
“contemplate,”
“expect,”
“aim,”
“plan,”
“estimate,”
“seek,”
“continue,”
and
“intend,”
the
negative
of
these
terms,
as
well
as
other
similar
words and expressions of the
future, are intended to identify forward-looking statements.
These forward-looking statements
include statements related to
our projected growth, anticipated
future financial performance, and
management’s long-term
performance goals, as well as statements
relating to the anticipated effects
on results of operations and financial condition
from
expected
developments
or
events,
or
business
and
growth
strategies,
including
anticipated
internal
growth
and
potential future additional balance sheet restructuring.
These forward-looking statements involve significant risks and uncertainties that could cause our actual results to differ
materially from those anticipated in such statements.
Potential risks and uncertainties include, but are not
limited to:
•
the strength of the United States economy
in general and the strength of the local
economies in which we conduct
operations;
•
our ability to successfully manage interest rate risk, credit
risk, liquidity risk, and other risks inherent to our industry;
•
the accuracy of our financial statement estimates and assumptions, including the estimates used for our credit loss
reserve and deferred tax asset valuation allowance;
•
the efficiency and effectiveness of our
internal control procedures and processes;
•
our ability
to comply
with the
extensive laws
and regulations
to which
we are
subject, including
the laws
for each
jurisdiction where we operate;
•
adverse
changes
or
conditions
in
the
capital
and
financial
markets,
including
actual
or
potential
stresses
in
the
banking industry;
•
deposit attrition and the level of our uninsured deposits;
•
legislative or
regulatory changes and
changes including the
enactment of the
One Big Beautiful
Bill Act
and changes
in accounting principles, policies, practices or guidelines,
including the on-going effects of the CECL standard
;
•
the lack of a significantly diversified loan portfolio and concentration in the South Florida market, including the risks
of geographic, depositor,
and industry concentrations,
including our concentration
in loans secured by
real estate,
in particular, commercial real estate;
•
the effects of climate change;
•
the concentration of ownership of our common stock;
•
fluctuations in the price of our common stock;
•
our ability to fund or access the capital markets at attractive
rates and terms and manage our growth, both organic
growth as well as growth through other means, such as
future acquisitions;
•
inflation, interest rate, unemployment rate, market, and monetary
fluctuations;
•
the effects of potential new or increased tariffs,
retaliatory tariffs and trade restrictions;
•
impacts of international hostilities and geopolitical events;
•
increased
competition
and
its
effect
on
the
pricing
of
our
products
and
services
as
well
as
our
net
interest
rate
spread and net interest margin;
•
the loss of key employees;
•
the effectiveness of our risk management strategies, including operational risks, including, but not limited to, client,
employee, or third-party fraud and security breaches; and
•
other risks described in this Annual Report on Form 10-K
and other filings we make with the SEC.
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
Annual Report
on Form
10-K 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 this Annual
Report on Form 10-K and in the reports the
Company filed or will file with the SEC.
Non-GAAP Financial Measures
This Annual Report on Form 10-K includes
financial information determined by methods
other than in accordance with
generally
accepted
accounting
principles
(“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
Table of Contents
54
USCB Financial Holdings, Inc.
2025 10-K
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 ‘Non-GAAP Reconciliation Tables’ included
in this Annual Report on form 10-K.
Overview
For the year ended December 31, 2025, the Company reported net income of
$26.1 million compared with net income
of $24.7 million for the year ended December 31, 2024.
In
evaluating
our
financial
performance,
we
consider
the
level
of
and
trends
in
net
interest
income,
the
net
interest
margin, the
cost of
deposits, growth
and composition
of our
loan portfolio,
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.
The following significant highlights are of note for the year
ended December 31, 2025:
•
Net interest income
before provision
for credit losses
totaled $83.6
million, an
increase of $13.7
million or 19.6%,
compared to $69.9 million for the year ended December
31, 2024.
•
Net interest margin (“NIM”) was 3.20% for the year
ended December 31, 2025, an improvement from 2.94% for the
year ended December 31, 2024.
•
Total assets
grew to
$2.8 billion
at December 31,
2025,
an increase
of $210.3
million or
8.1%, compared
to $2.6
billion at December 31, 2024.
•
Total loans held for investment
grew to $2.2 billion
at December 31, 2025,
an increase of $216.4
million or 11.0%,
compared to $2.0 billion at December 31, 2024.
•
Return on average assets for the year ended December
31, 2025 was 0.96% compared to 0.99%
for 2024.
•
Return on average
stockholders’ equity for
the year ended
December 31, 2025
was 11.79% compared
to 12.11%
for 2024.
•
Nonperforming assets totaled $3.1 million at December
31, 2025 compared to $2.7 million at December 31, 2024.
•
The
Bank
maintained
its
strong
capital
position.
As
of
December 31,
2025,
the
Bank
was
well-capitalized
for
regulatory capital purposes,
with a
total risk-based capital
ratio of 13.67%,
a tier 1
risk-based capital ratio
of 12.47%,
a
common
equity
tier
1
capital
ratio
of
12.47%,
and
a
leverage
ratio
of
9.65%. As
of
December 31,
2025
and
December 31, 2024, all of the Bank’s regulatory capital ratios exceeded the thresholds to be well-capitalized under
the applicable
bank regulatory
requirements. The
Company,
as a
small
bank holding
company,
is not
subject
to
regulatory capital requirements.
•
On August 14,
2025, the
Company entered
into a
Subordinated Note
Purchase Agreement
with certain
qualified
institutional buyers pursuant to which the
Company sold and issued $40.0 million
in aggregate principal amount of
its 7.625%
fixed-to-floating rate
subordinated notes
due August 15,
2035 in
a private
placement transaction.
This
transaction was
conducted under
the provisions
of Regulation
D promulgated
under the
Securities Act 1933. The
subordinated notes were issued by
the Company to the
purchasers at a price equal
to 100% of their face
amount.
The majority of
the net proceeds
were used to
repurchase 2.0 million
shares of Class
A
common stock in
September
2025, from certain institutional shareholders through privately negotiated transactions, at a weighted average price
per share
of $17.19.
The aggregate
purchase
price for
these transactions
was
approximately
$34.4 million.
The
repurchases
were
supplemental
and
not
part
of
the
Company’s
two
previously
announced
stock
repurchase
programs.
•
During the fourth quarter
of 2025 the Company
executed a portfolio restructuring
strategy which resulted in
a sale
of $44.6
million of
its lower-yielding
available-for sale
securities for
a pre-tax
loss of
$7.5 million.
The majority
of
proceeds from the sale were reinvested into loans at quarter-end.
Table of Contents
55
USCB Financial Holdings, Inc.
2025 10-K
Critical Accounting Policies and Estimates
The
consolidated
financial
statements
are
prepared
based
on
the
application
of
U.S.
GAAP,
the
most
significant
of
which are described
in Note 1 “Summary
of Significant Accounting
Policies” to our
Consolidated Financial Statements.
To
prepare financial statements in conformity with 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 in understanding
our
financial statements.
Management
has presented
the application
of these
policies
to the
audit and
risk committee
of our
Board.
Allowance for Credit Losses - Loans
The allowance for credit
losses (“ACL”) is
a valuation allowance that
is established through charges
to earnings in the
form of
a provision for
credit losses. The
amount of the
ACL is
affected by the
following: (i) charge-offs
of loans that
decrease
the allowance;
(ii) subsequent
recoveries on
loans previously
charged off
that increase
the allowance;
and (iii)
provisions
for credit losses charged to income that increase or decrease the allowance. Management considers the policies related to
the ACL as the most critical to the Company’s financ
ial statement presentation.
ACL is calculated using
CECL methodology.
The CECL methodology
measures expected credit
losses and applies to
financial assets measured at amortized cost, including loan receivables and
held-to-maturity debt securities. It also applies
to off
-balance
sheet
credit
exposures
not
accounted
for
as insurance
(e.g.,
loan
commitments,
standby
letters
of credit,
financial guarantees,
and similar
instruments), as
well as
net investments
in leases
recognized by
lessors in
accordance
with
Topic
842
on
leases.The
Company
estimates
the
allowance
for
credit
losses
by
utilizing
pertinent
available
data,
sourced both internally
and externally, relating to
past events, current
conditions, and reasonable
and supportable forecasts.
Historical
credit
losses
provide
the
foundation
for
the
estimation
of
expected
credit
losses.
Qualitative
adjustments
are
applied to the estimated
expected credit losses
for the loan portfolio
to account for
potential constraints of
the quantitative
model. Management
employs
a scorecard
to facilitate
the evaluation
of qualitative
factor adjustments
made to
expected
credit losses.
The estimation's
quantitative aspect
relies on
the statistical
correlation between
the anticipated
value of
an economic
indicator and the
historical loss
experience implied
within a
selected group
of peers.
The Company conducted
regression
analyses using
peer data,
inclusive of
the Company
itself, where
observed credit
losses and chosen
economic indicators
were utilized to identify
appropriate drivers for
modeling the lifetime
probability of default (“PD”)
rates. A loss given
default
rate (“LGD”) is assigned to each pool
of loans for each period based on
these PD outcomes. The model
primarily employs
an expected
discounted cash
flow (“DCF”)
analysis for
segments within
the loan
portfolio. This
DCF analysis
operates at
the
individual
instrument
level
and
incorporates
various
loan-specific
data
points
and
segment-specific
assumptions
to
ascertain the lifetime expected
loss associated with each
instrument. An implicit "hypothetical
loss" is determined for
each
period of the DCF,
aiding in establishing the
present value of future
cash flows for each
period. The reserve allocated
to a
particular loan represents the disparity
between the sum of the
present value of future cash
flows and the book balance
of
the loan at the measurement date.
Management
uses
the
Remaining
Life
(“WARM”)
methodology
for
five
segments
within
the
loan
portfolio.
For
each
segment,
a
long-term
average
loss
rate
is
computed
and
applied
quarterly
throughout
the
remaining
life
of
the
pool.
Qualitative assessments
are conducted
to adjust for
economic expectations.
To
estimate the remaining
life, management
employed a software solution utilizing an attrition-based calculation. This software conducts quarterly cohort-based attrition
measurements based on the loan portfolio.
Portfolio
segments
represent
the
level
at
which
loss
assumptions
are
applied
to
a
pool of
loans,
determined
by
the
similarity of
risk characteristics inherent
in the
included instruments, based
on collateral
codes and
FFIEC Call Report
codes.
Currently,
the Company segments
the portfolio based on
collateral codes to establish
reserves. Each segment
is linked to
regression
models
(Loss
Driver
Analyses)
using
peer
data
for
loans
with
similar
risk
characteristics.
The
Company
has
established connections
between
internal portfolio
segmentation and
FFIEC Call
Report codes
for this
purpose. The
loss
driver
for
each
loan
portfolio
segment
is
derived
from
a
readily
available
and
reasonable
economic
forecast,
including
Federal
Reserve
Bank
projections
of
the
U.S.
civilian
unemployment
rate
and
year-over-year
real
GDP
growth.
For
the
residential
loan
segment,
House
Price
Index
(“HPI”)
projections
published
by
Fannie
Mae’s
Economic
and
Strategic
Research Group are utilized for the forecast. Forecasts are applied for the first
four quarters of the credit loss estimate and
then linearly revert to the historical mean of the economic indicator
over the expected life of the loans.
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56
USCB Financial Holdings, Inc.
2025 10-K
The model integrates qualitative
factor adjustments to
fine-tune risk calibration
for each portfolio
segment, addressing
aspects that quantitative analysis may
not fully capture. Decisions concerning
qualitative adjustments reflect management's
anticipation of loss conditions deviating from those already accounted
for in the quantitative aspect of the model.
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 December 31, 2025, for every
100 basis points increase in the HPI
index, the
forecast reduces
reserves by
approximately $398
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
December 31, 2025,
we stress
tested two
qualitative factors
in our
commercial real
estate loan
pool, as
it’s 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 resulted
in a
$10.3 million
or 39.6%
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.
The Company calculates a reserve for unfunded commitments, distinct from
the allowance for credit losses reported in
accrued interest
and other liabilities.
This reserve
is determined
using both quantitative
and qualitative
factors identical
to
those applied to the collectively evaluated loan portfolio.
Results of Operations
General
The following tables
present selected balance sheet, income statement, and profitability ratios for the dates and for the
periods indicated (in thousands, except ratios):
As of December 31,
2025
2024
Consolidated Balance Sheets:
Total
assets
$
2,791,540
$
2,581,216
Total
loans held for investment
(1)
$
2,189,257
$
1,972,848
Total
deposits
$
2,345,080
$
2,174,004
Total
stockholders' equity
$
217,183
$
215,388
(1)
Loan amounts include deferred fees/costs.
Years Ended December 31,
2025
2024
Consolidated Statements of Operations:
Net interest income before provision for credit losses
$
83,630
$
69,936
Provision for credit losses
$
2,297
$
3,157
Total
non-interest income
$
6,592
$
12,740
Total
non-interest expense
$
52,009
$
47,042
Net income
$
26,100
$
24,674
Net income available to common stockholders
$
26,100
$
24,674
Profitability:
Efficiency ratio
57.65%
56.90%
Net interest margin
3.20%
2.94%
The Company’s results
of operations
depend substantially on
net interest income
and non-interest income.
Other factors
contributing to the
results of operations
include our provision
for credit losses,
non-interest expense, and
the provision for
income taxes.
Net income
for the
year ended
December 31, 2025
was $26.1 million
,
compared with
net income
of $24.7 million
for
the same
period in
- The Company
reported
net income
per diluted
share for
the year
ended December 31,
2025 of
$1.33 compared to net income per diluted share for the
same period in 2024 of $1.24.
Table of Contents
57
USCB Financial Holdings, Inc.
2025 10-K
Net Interest Income
Net
interest
income
is
the
difference
between
interest
earned
on
interest-earning
assets
and
interest
incurred
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
the weighted
average yields
earned on interest
-earning assets
and the weighted
average rates
paid on
interest-bearing liabilities.
Net interest
margin is
equal to
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 benefit of these non-interest-bearing sources.
Changes in
the 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. The
Asset-Liability Committee (“ALCO”) has in place asset-liability management techniques to manage major factors that affect
net interest income and net interest margin.
Table of Contents
58
USCB Financial Holdings, Inc.
2025 10-K
The following table
contains information
related to average
balances, average
yields on assets,
and average
costs of
liabilities for the periods indicated (in thousands).
Years Ended December 31,
2025
2024
Average
Balance
(1)
Interest
Yield/Rate
Average
Balance
(1)
Interest
Yield/Rate
Assets
Interest-earning assets:
Loans
(2)
$
2,069,039
$
128,160
6.19
%
$
1,862,013
$
115,236
6.19
%
Investment securities
(3)
460,089
13,715
2.98
%
427,567
11,480
2.68
%
Other interest-earning assets
86,183
3,612
4.19
%
88,758
4,517
5.09
%
Total
interest-earning assets
2,615,311
145,487
5.56
%
2,378,338
131,233
5.52
%
Non-interest earning assets
105,874
108,215
Total
assets
$
2,721,185
$
2,486,553
Liabilities and stockholders' equity
Interest-bearing liabilities:
Interest-bearing demand deposits
$
51,803
1,283
2.48
%
$
54,667
1,509
2.76
%
Savings and money market deposits
1,255,719
38,027
3.03
%
1,109,853
40,098
3.61
%
Time deposits
470,213
18,104
3.85
%
326,373
13,354
4.09
%
Total
interest-bearing deposits
1,777,735
57,414
3.23
%
1,490,893
54,961
3.69
%
FHLB advances
86,382
3,238
3.75
%
158,484
6,336
4.00
%
Subordinated notes
16,463
1,205
7.32
%
-
-
-
%
Total
interest-bearing liabilities
1,880,580
61,857
3.29
%
1,649,377
61,297
3.72
%
Non-interest-bearing demand deposits
577,232
596,073
Other non-interest-bearing liabilities
41,955
37,399
Total
liabilities
2,499,767
2,282,849
Stockholders' equity
221,418
203,704
Total
liabilities and stockholders' equity
$
2,721,185
$
2,486,553
Net interest income
$
83,630
$
69,936
Net interest spread
(4)
2.27
%
1.80
%
Net interest margin
(5)
3.20
%
2.94
%
(1)
Average balances - Daily average balances are used
to calculate yields/rates.
(2)
Average loan balances include non-accrual loans. Interest income
on loans includes accretion of deferred
loan fees, net of deferred loan costs.
(3)
At fair value except for securities held to maturity. This amount includes
FHLB stock.
(4)
Net interest spread is the weighted average
yield earned on total interest-earning assets
minus the weighted average rate paid on total interest-
bearing liabilities.
(5)
Net interest margin is the ratio of net interest
income to average total interest-earning assets.
Net interest
income before
the provision
for credit
losses was
$83.6 million for
the year
ended December 31,
2025, a
increase of $13.7
million or 19.6%,
from $69.9 million
for the year
ended December 31,
- The increase
was primarily
driven by a decrease in the weighted
‑
average rates paid on interest
‑
bearing liabilities, which lowered overall funding costs,
combined with higher weighted
‑
average yields on interest
‑
earning assets. In addition, growth in the
loan portfolio increased
the volume of interest
‑
earning assets, further contributing to the increase in net
interest income.
The
net
interest
margin
(“NIM”)
was
3.20%
for
the
year
ended
December 31,
2025
and
2.94%
for
the
year
ended
December 31, 2024. The NIM increased
primarily due to a decrease
in the weighted average rate
paid on interest-bearing
Table of Contents
59
USCB Financial Holdings, Inc.
2025 10-K
liabilities, in
particular a
decrease in
weighted average
rate paid
on saving
and money
market deposits.
The decrease
in
our cost of funds was primarily due to the interest rate
market.
Provision for Credit Losses
ACL represents expected
credit losses
in our
portfolio as
the measurement
date. We
maintain an
adequate ACL that
can
mitigate
expected
credit
losses
in
the
loan
portfolio.
The ACL
is
increased
by
the
provision
for
credit
losses
and
is
decreased by charge-offs, net
of recoveries on prior
loan charge-offs. There are
multiple credit quality metrics
that we use
to base
our determination
of the
amount
of the
ACL and
corresponding
provision
for
credit
losses. These
credit metrics
evaluate the
credit quality
and level
of credit
risk inherent
in our
loan portfolio,
assess non-performing
loans and
charge-
offs levels, consider statistical trends and economic conditions
and other applicable factors.
The
provision
for
credit
loss
for
the
year
ended
December 31,
2025,
was
$2.3
million
compared
to
$3.2
million
in
provision expense for the
same period in 2024. The ACL as a
percentage of total
loans was 1.16%
at December 31, 2025
compared to 1.22% at December
31, 2024. The ratio of ACL to total loans decreased due
to several payoffs of individually
reserved
loans during 2025 and the improvement of the expected loss
rate for various categories of pooled loans.
See “Allowance
for Credit
Losses” below
for further
discussion on
how the
ACL was
calculated for
the periods
presented.
Non-Interest Income
Net interest income
and other types of
recurring non-interest
income are generated
from our operations.
Our services
and products generate service charges and
fees, mainly from our depository accounts.
We also generate income from
our
interest
swap
program
and
from
the
gain
on
sale
of
loans
though
our
SBA program.
In
addition,
we
own
life
insurance
policies on several
key employees and
generate income reflecting
the increase in
the cash surrender
value of these
policies.
The following table presents the components of non-interest
income for the periods indicated (in thousands):
Years Ended December 31,
2025
2024
Service fees
$
9,603
$
8,839
(Loss) gain on sale of securities available for sale, net
(7,526)
14
Gain on sale of loans held for sale, net
1,001
747
Other non-interest income
3,514
3,140
Total
non-interest income
$
6,592
$
12,740
Non-interest income
for the
year ended
December 31, 2025
was $6.6
million compared
to $12.7
million for
the same
period in
- This
decrease was
primarily driven
by a
$7.5 million
loss on
sale of
securities available
for sale
resulting
from a portfolio restructuring strategy
approved by the Board of
Directors and implemented in December 2025.
The portfolio
restructuring strategy
resulted in
the sale of
lower-yielding available-for-sale
securities at
a loss in
order to better
position
our securities portfolio.
Proceeds from the sale
transactions were primarily
reinvested in assets
bearing higher yields
than
those on the securities that were
sold. Service fees increased $764
thousand or 8.6%, primarily due
to title insurance fees
and prepayment
penalties.
The gain
on sale
of SBA 7a
loans increased
$254 thousand
or 34.0%,
and other
non-interest
income
increased
$374
thousand
or
11.9%,
primarily
due
to
increases
in
the
cash
surrender
values
of
bank-owned
life
insurance policies.
Non-Interest Expense
The following table presents the components of non-interest
expense for the periods indicated (in thousands):
Years Ended December 31,
2025
2024
Salaries and employee benefits
$
32,167
$
28,793
Occupancy
5,330
5,258
Regulatory assessment and fees
1,637
1,766
Consulting and legal fees
1,941
1,568
Network and information technology services
2,324
1,993
Other operating
8,610
7,664
Total
non-interest expense
$
52,009
$
47,042
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60
USCB Financial Holdings, Inc.
2025 10-K
Non-interest expense
for the
year ended
December 31, 2025
increased $5.0 million
or 10.6%,
compared to
the year
ended December 31, 2024.
The increase is
primarily due to
$3.4 million or
11.7% increase in
salaries and employee
benefits
consisting of a $2.2
million or 11.0% increase
due to merit
promotions and new hires,
a $455 thousand or
13.6% increase
in benefits
(health insurance)
and payroll
taxes,
and a
$876 thousand
increase in
stock-based
compensation due
to the
Company’s favorable financial performance in 2025. Other operating
expense had an increase of $946 thousand or 12.3%
consisting of
an increase
of $204
thousand in
item processing,
$146 thousand
in internet
banking fees,
a $169
thousand
increase
in
promotional
expense,
a
$207
thousand
increase
in
director
fees,
and
a
$220
thousand
in
other
operating
expenses.
Provision for Income Tax
Fluctuations in the effective tax rate reflect the effect of the differences in the inclusion or deductibility of certain income
and expense for income tax purposes.
Therefore, future decisions on the investments we
choose will affect our effective tax
rate. Changes in the
cash surrender value
of bank-owned life
insurance policies for
key employees, purchasing
municipal
bonds, and overall taxable income will be important elements
in determining our effective tax rate.
Income tax
expense for
the year
ended December
31, 2025
was
$9.8 million,
compared
to $7.8 million
for the
year
ended December 31,
- The effective
tax rate
increased to 27.3%
for the year
ended December 31,
2025 from 24.0%
for the
year ended
December 31, 2024.
The increase
in effective
tax rate
in 2025
was due
primarily to
the recognition
of
$1.1 million of state tax liability expense for the year ended December 31, 2024. The state tax liability
expense was related
to taxes due on interest income on loans whose collateral
is located outside the State of Florida.
The Company did not have any tax-exempt securities
at both December 31, 2025 and December 31, 2024.
For a further
discussion on income taxes, see
Note 6 “Income Taxes”
to the Consolidated Financial Statements
set forth
in Item 8 of this Annual Report on Form 10-K.
Rate/Volume Analysis
The
table
below
sets
forth
information
regarding
changes
in
interest
income
and
interest
expense
for
the
periods
indicated (in thousands).
For each category of
interest-earning assets and interest-bearing liabilities,
information is provided
on changes attributable to (i) changes in rate (changes in rate multiplied by old volume); (ii) changes in volume (changes in
volume multiplied by old rate); and (iii) changes in rate-volume (change in
rate multiplied by change in volume). Changes in
rate-volume are proportionately allocated between rate and volume
variance (in thousands).
Years Ended 2025 vs. 2024
Years Ended 2024 vs. 2023
Increase (decrease) due to change in
Increase (decrease) due to change in
Volume
Rate
Net
Change
Volume
Rate
Net
Change
Interest-earning assets:
Loans
(1)
$
12,812
$
112
$
12,924
$
13,949
$
13,403
$
27,352
Investment securities
(2)
873
1,362
2,235
90
1,378
1,468
Other interest-earning assets
(130)
(775)
(905)
1,077
319
1,396
Total increase in interest income
$
13,555
$
699
$
14,254
$
15,116
$
15,100
$
30,216
Interest-bearing liabilities:
Interest-bearing demand deposits
$
(79)
$
(147)
$
(226)
$
23
$
585
$
608
Savings and money market deposits
5,270
(7,341)
(2,071)
4,498
5,942
10,440
Time deposits
5,885
(1,135)
4,750
1,824
3,030
4,854
FHLB advances
(2,882)
(216)
(3,098)
2,269
677
2,946
Subordinated notes
1,205
-
1,205
-
-
-
Total increase (decrease) in interest expense
9,399
(8,839)
560
8,614
10,235
18,848
Increase in net interest income
$
4,156
$
9,538
$
13,694
$
6,502
$
4,865
$
11,368
(1)
Average loan balances include non-accrual loans. Interest income
on loans includes accretion of deferred
loan fees, net of deferred loan costs.
(2)
At fair value except for securities held to maturity. This amount includes
FHLB stock.
Table of Contents
61
USCB Financial Holdings, Inc.
2025 10-K
During
the
year
ended
December 31,
2025
average
rates
paid
on
interest-bearing
liabilities
decreased,
while
yields
earned
on
interest-earning
assets
increased
slightly.
The
Company
was
able
to
reprice
its
interest-bearing
liabilities
downward more rapidly than its interest-earning assets.
Analysis of Financial Condition
Total
assets at December 31,
2025, were $2.8 billion,
an increase of $210.3
million, or 8.1%, over
total assets of $2.6
billion
at
December 31,
2024.
Total
loans
held
for
investment
increased
$216.4
million,
or
11.0%,
to
$2.2
billion
at
December 31, 2025
compared to
$2.0 billion
at December 31,
- Total
deposits increased
by $171.1
million, or
7.9%,
to $2.3
billion at December 31, 2025 compared to $2.2
billion at December 31, 2024.
Investment Securities
The investment portfolio
is used and
managed to provide
liquidity through cash
flows, marketability
and, if necessary,
collateral for
borrowings. The
investment portfolio
is also
used as
a tool
to manage
interest rate
risk and
the Company’s
capital market risk exposure. The
operating 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
Asset
and
Liability
Management
(“ALM”)
policy,
which
includes
investment
guidelines,
approved
by
the
Board.
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
objectives directed by the ALCO. The portfolio of investments can be used to modify the duration of the balance sheet.
The
allocation of cash into securities takes into consideration anticipated
future cash flows (uses and sources) and all available
sources of credit.
Our
investment
portfolio
consists
primarily
of
securities
issued
by
U.S.
government-sponsored
agencies,
agency
mortgage-backed securities,
collateralized mortgage
obligation securities,
municipal securities,
and other
debt securities,
all with varying contractual maturities and coupons. Due to the optionality embedded in these securities, the final maturities
do not
necessarily represent the
expected life of
the portfolio. Some
of these
securities will be
called or paid
down depending
on capital market conditions and expectations. The investment portfolio is regularly reviewed by the Chief Financial Officer,
Treasurer, and/or the ALCO of the Company to ensure an appropriate risk and return profile as
well as for adherence to the
Company’s investment policy.
As of December 31, 2025, the investment portfolio consisted of available-for-sale
(“AFS”) and held-to-maturity (“HTM”)
debt securities. In 2022, the Company transferred investment securities from
AFS to HTM with an amortized cost basis and
fair value
amount of
$74.4 million
and $63.8
million, respectively.
On the
date of
transfer,
these securities
had a
total net
unrealized loss of $10.6 million. The transfer of the debt securities from the AFS to HTM
category was made at fair value at
the date of transfer. The unrealized gain or loss at the date of transfer is retained in accumulated other comprehensive loss
and in the carrying value
of the HTM securities. Such
amounts are amortized over
the remaining life of the security.
There
was no impact
to net income on
the date of transfer. There were
no securities transferred from
AFS to HTM
in 2025 or 2024.
The book value of the AFS securities is adjusted quarterly for
unrealized gain or loss as a valuation allowance, and any
gain or loss is reported on an after-tax basis as a component
of other comprehensive loss in stockholders’ equity.
CECL requires a loss reserve for securities
classified as HTM. The reserve should reflect
historical credit performance
as well as the impact of projected economic forecast.
For U.S. Government bonds and U.S. Agency issued
bonds in HTM,
the explicit guarantee of the U.S.
Government is sufficient to conclude that a
credit loss reserve is not required.
The 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
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 December
31, 2025 and
December 31, 2024,
all HTM securities
held
by the Company were rated investment grade.
Table of Contents
62
USCB Financial Holdings, Inc.
2025 10-K
At December 31, 2025, HTM securities included $144.9
million of U.S. Government and U.S.
Agency 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
$9.0
million
in
investment
grade
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 $2 thousand
ACL as of
December 31, 2025. The
book value for
debt securities classified
as HTM represents
amortized
cost less ACL.
As of December 31, 2025, securities with a fair value of $43.5
million were pledged to secure public deposits.
Table of Contents
63
USCB Financial Holdings, Inc.
2025 10-K
The
following
table
presents
the
amortized
cost
and
fair
value
of
investment
securities
for
the
dates
indicated
(in
thousands):
December 31, 2025
Available-for-sale:
Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Fair Value
U.S. Government Agency
$
15,169
$
18
$
(1,043)
$
14,144
Collateralized mortgage obligations
92,871
-
(17,043)
75,828
Mortgage-backed securities - residential
35,865
135
(6,083)
29,917
Mortgage-backed securities - commercial
174,622
347
(6,861)
168,108
Municipal securities
5,196
-
(933)
4,263
Bank subordinated debt securities
15,284
189
(243)
15,230
$
339,007
$
689
$
(32,206)
$
307,490
December 31, 2025
Held-to-maturity:
Amortized
Cost
Unrecognized
Gains
Unrecognized
Losses
Fair Value
U.S. Government Agency
$
41,158
$
91
$
(3,279)
$
37,970
Collateralized mortgage obligations
51,431
854
(5,499)
46,786
Mortgage-backed securities - residential
37,221
760
(3,263)
34,718
Mortgage-backed securities - commercial
15,088
-
(1,037)
14,051
Corporate bonds
9,045
-
(62)
8,983
$
153,943
$
1,705
$
(13,140)
$
142,508
Allowance for credit losses - securities held-to-maturity
(2)
Securities held-to maturity, net of allowance for credit losses
$
153,941
December 31, 2024
Available-for-sale:
Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Fair Value
U.S. Government Agency
$
14,279
$
14
$
(1,668)
$
12,625
Collateralized mortgage obligations
101,808
15
(22,918)
78,905
Mortgage-backed securities - residential
58,995
1
(12,063)
46,933
Mortgage-backed securities - commercial
86,604
40
(7,905)
78,739
Municipal securities
24,925
-
(5,614)
19,311
Bank subordinated debt securities
24,314
438
(1,044)
23,708
$
310,925
$
508
$
(51,212)
$
260,221
December 31, 2024
Held-to-maturity:
Amortized
Cost
Unrecognized
Gains
Unrecognized
Losses
Fair Value
U.S. Government Agency
$
42,538
$
-
$
(5,094)
$
37,444
Collateralized mortgage obligations
56,987
57
(7,785)
49,259
Mortgage-backed securities - residential
40,681
53
(4,613)
36,121
Mortgage-backed securities - commercial
15,272
-
(1,385)
13,887
Corporate bonds
9,222
-
(393)
8,829
164,700
$
110
$
(19,270)
$
145,540
Allowance for credit losses - securities held-to-maturity
(6)
Securities held-to maturity, net of allowance for credit losses
$
164,694
Table of Contents
64
USCB Financial Holdings, Inc.
2025 10-K
AFS and
HTM investment
securities in
aggregate increased
$36.5 million
or 8.6%
to $461.4
million at
December 31,
2025 from $424.9 million at December 31, 2024.
The following
table shows
the weighted
average yields,
categorized by
contractual maturity,
for investment
securities
as of December 31, 2025 (in thousands, except ratios):
Within 1 year
After 1 year
through 5 years
After 5 years
through 10 years
After 10 years
Total
Amortized
Cost
Yield
Amortized
Cost
Yield
Amortized
Cost
Yield
Amortized
Cost
Yield
Amortized
Cost
Yield
Available-for-sale:
U.S. Government Agency
$
-
-
$
-
-
$
-
-
15,169
4.00%
$
15,169
4.00%
Collateralized mortgage obligations
-
-
-
-
-
-
92,871
1.74%
92,871
1.74%
Mortgage-backed securities - residential
-
-
-
-
-
-
35,865
2.41%
35,865
2.41%
Mortgage-backed securities - commercial
-
-
-
-
-
-
174,622
4.02%
174,622
4.02%
Municipal securities
-
-
-
-
5,196
1.87%
-
-
5,196
1.87%
Bank subordinated debt securities
-
-
4,473
8.14%
10,811
5.65%
-
-
15,284
6.38%
$
-
-
$
4,473
8.14%
$
16,007
4.42%
$
318,527
3.17%
$
339,006
3.30%
Held-to-maturity:
U.S. Government Agency
$
2,999
0.64%
$
19,773
1.25%
$
5,001
1.99%
$
13,385
1.85
$
41,158
1.49%
Collateralized mortgage obligations
-
-
-
-
-
-
51,431
1.67%
51,431
1.67%
Mortgage-backed securities - residential
675
2.96%
3,888
1.66%
5,051
1.62%
27,607
2.18%
37,221
2.06%
Mortgage-backed securities - commercial
-
-
3,042
1.63%
-
-
12,046
2.56%
15,088
2.37%
Corporate bonds
9,045
2.82%
-
-
-
-
-
-
9,045
2.82%
$
12,719
2.31%
$
26,703
1.35%
$
10,052
1.81%
$
104,469
1.92%
$
153,943
1.85%
The Company did not have any tax-exempt securities
at both December 31, 2025 and 2024.
Loans
Loans are
the largest
category of
interest-earning assets
on the
Consolidated
Balance Sheets,
and usually
provides
higher yields than the remainder of the Company’s
interest-earning assets. Higher yields typically carry
inherent credit and
liquidity risks in
comparison to lower
yielding assets. The
Company manages and
mitigates such risks
in accordance with
the credit and ALM policies, risk tolerance and balance
sheet composition.
The following table shows the loan portfolio composition
as of the dates indicated (in thousands):
December 31, 2025
December 31, 2024
Total
Percent of
Total
Total
Percent of
Total
Residential Real Estate
$
307,692
14.1
%
$
289,961
14.8
%
Commercial Real Estate
1,244,835
57.0
%
1,136,417
57.8
%
Commercial and Industrial
295,548
13.5
%
258,311
13.1
%
Correspondent Banks
127,968
5.9
%
82,438
4.2
%
Consumer and Other
207,215
9.5
%
198,091
10.1
%
Total
gross loans
2,183,258
100.0
%
1,965,218
100.0
%
Plus: Deferred costs/fees
5,999
7,630
Total
loans held for investment, net of deferred costs/fees
2,189,257
1,972,848
Less: Allowance for credit losses
25,500
24,070
Total
loans held for investment, net of allowance
$
2,163,757
$
1,948,778
Total
loans held for investment net
of deferred costs/fees increased
by $216.4 million or 11.0%
at December 31, 2025
compared to December 31,
- The most
significant growth was
in the commercial
real estate and
correspondent bank
loan pools.
Commercial real estate continues to
be the main category of
our portfolio, reflective of the
market in which we
operate. We continue
to grow our non-CRE
loan pools to further
diversify the loan portfolio
overall composition, but we
do
not expect any significant changes over the foreseeable
future in the composition of our loan portfolio.
Table of Contents
65
USCB Financial Holdings, Inc.
2025 10-K
The
growth
experienced
over
the
last
couple
of
years
is
primarily
due
to
implementation
of
our
relationship-based
banking
model,
our
diversified
business
verticals,
and
the
success
of
our
relationship
managers
in
competing
for
new
business in a highly competitive metropolitan area.
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
for
the
loan
portfolio
at
December 31, 2025 (in thousands):
Due in 1 year or
less
Due in 1 to 5
years
Due after 5 to 15
years
Due after 15
years
Total
Residential Real Estate
$
8,435
$
61,279
$
66,063
$
171,915
$
307,692
Commercial Real Estate
69,664
527,784
641,905
5,482
1,244,835
Commercial and Industrial
10,369
120,412
120,845
43,922
295,548
Correspondent Banks
127,968
-
-
-
127,968
Consumer and Other
2,493
1,152
24,760
178,810
207,215
Total
gross loans
$
218,929
$
710,627
$
853,573
$
400,129
$
2,183,258
Interest rate sensitivity:
Fixed interest rates
$
176,933
$
188,621
$
164,498
$
310,107
$
840,159
Floating or adjustable rates
41,996
522,006
689,075
90,022
1,343,099
Total
gross loans
$
218,929
$
710,627
$
853,573
$
400,129
$
2,183,258
The information
presented in
the table
above is
based upon
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 and rate
modifications are discussed as well.
As of
December 31,
2025,
approximately
61.5%
of the
loans
have adjustable/variable
rates
and
38.5%
of the
loans
have fixed rates.
The adjustable/variable
loans re-price to
different benchmarks
and tenors in
different periods
of time. By
contractual characteristics, there are no
material concentrations on anniversary repricing. Additionally, it is
important to note
that most
of our
loans have
interest rate
floors. This
embedded option
protects the
Company from
a decrease
in interest
rates and positions us to gain in the scenario of higher interest
rates.
As of
December 31, 2025, the
commercial real estate
portfolio was $1.2
billion or 57.0%
of the
total gross loans
portfolio.
At
such
date,
$193.0
million
of
outstanding
balances
are
characterized
as
owner
occupied
and
$1.05
billion
are
characterized as non-owner occupied.
The retail sector
was the largest
segment comprising $320.1 million
of the non-owner
occupied commercial real estate portfolio.
The
following
table
is
a
summary
of
the
distribution
of
non-owner
occupied
commercial
real
estate
loans
held
for
investment by loan type (dollars in thousands):
December 31, 2025
Balance
of Notes
% of Total
Gross Loans
Average Loan Size
Non-Accruals
Weighted Avg
LTV
(1)
Retail
$
320,132
145
15%
$
2,208
$
-
56%
Multifamily
252,041
197
12%
1,279
-
64%
Warehouse
134,190
68
6%
1,973
-
54%
Office
122,887
59
6%
2,083
-
49%
Hotels/Motels
117,226
52
5%
2,254
-
63%
Construction/Land
73,080
22
3%
3,322
-
46%
Other
32,272
28
1%
1,153
-
59%
$
1,051,828
571
48%
$
1,842
$
-
$
57%
(1) Loan-to-value is calculated based on the real estate value at the time of origination, renewal, or update, whichever is more recent.
Table of Contents
66
USCB Financial Holdings, Inc.
2025 10-K
The following table is a summary of non-owner occupied commercial real estate loans held for investment by collateral
geographical location (dollars in thousands):
December 31, 2025
South Florida
(1)
Rest of Florida
(2)
Outside Florida
(3)
Balance
% of Non-
Owner
Occupied
CRE Loans
Balance
% of Non-
Owner
Occupied
CRE Loans
Balance
% of Non-
Owner
Occupied
CRE Loans
Retail
$
220,390
21%
$
46,268
4%
$
53,475
5%
Multifamily
177,152
17%
74,888
7%
-
0%
Warehouse
70,399
7%
59,465
6%
4,326
0%
Office
90,470
9%
26,788
3%
5,629
1%
Hotels/Motels
89,754
9%
27,472
3%
-
0%
Construction/Land
59,039
6%
14,041
1%
-
0%
Other
17,112
2%
11,659
1%
3,500
0%
$
724,316
71%
$
260,581
25%
$
66,930
6%
(1) Miami-Dade, Broward, and West Palm Beach counties
(2) All other Florida counties
(3) Within the U.S.
As of
December 31, 2025,
71% of
the non-owner
occupied CRE
portfolio were
located within
South Florida.
26 loan
notes with an
outstanding principal
balance of
$66.9 million
are located
outside Florida.
Balances of
non-owner occupied
CRE loans outside
Florida were: $44.2
million in New
York,
$7.3 million in
Georgia,
$7.1 million in
Indiana, $4.3 million
in
Arkansas, and $4.1 million in North Carolina.
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 evaluated
at least annually,
or more frequently
if deemed necessary.
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
– Loans classified as special mention have a potential weakness
that deserves management’s
close attention. If left uncorrected, these potential weaknesses
may result in deterioration of the repayment
prospects for the loan or of the institution’s
credit position at some future date.
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
– Loans classified as doubtful have all the weaknesses inherent
in those classified at substandard, with
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.
Table of Contents
67
USCB Financial Holdings, Inc.
2025 10-K
Loan credit exposures by internally assigned grades are
as follows for the dates indicated (in thousands):
December 31, 2025
Pass
Special Mention
Substandard
Doubtful
Total
Residential Real Estate
$
304,276
$
916
$
2,500
$
-
$
307,692
Commercial Real Estate
1,230,823
11,613
2,399
-
1,244,835
Commercial and Industrial
293,169
907
1,472
-
295,548
Correspondent Banks
127,968
-
-
-
127,968
Consumer and Other
207,215
-
-
-
207,215
$
2,163,451
$
13,436
$
6,371
$
-
$
2,183,258
December 31, 2024
Pass
Special Mention
Substandard
Doubtful
Total
Residential Real Estate
$
289,401
$
-
$
560
$
-
$
289,961
Commercial Real Estate
1,133,965
-
2,452
-
1,136,417
Commercial and Industrial
256,031
-
2,280
-
258,311
Correspondent Banks
82,438
-
-
-
82,438
Consumer and Other
196,101
-
1,990
-
198,091
$
1,957,936
$
-
$
7,282
$
-
$
1,965,218
Non-Performing Assets
The following table presents non-performing assets as
of December 31, 2025 and 2024 (in thousands, except
ratios):
2025
2024
Total
non-performing loans
$
3,138
$
2,707
Other real estate owned
-
-
Total
non-performing assets
3,138
2,707
Asset quality ratios:
Allowance for credit losses to total loans
1.16%
1.22%
Allowance for credit losses to non-performing loans
813%
889%
Non-performing loans to total loans
0.14%
0.14%
Non-performing
assets
include
all
loans
categorized
as non-accrual
or restructured,
impaired
securities,
OREO
and
other repossessed assets. Problem loans for which the collection or liquidation in full is reasonably uncertain are placed on
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 are
surfacing regarding
the client’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 on non-performing loans, see Note
3 “Loans” to the Consolidated Financial Statements
set forth
in Item 8 of this Annual Report on Form 10-K.
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68
USCB Financial Holdings, Inc.
2025 10-K
Allowance for Credit Losses
The ACL
represents
an amount
that,
in
management's
evaluation,
is adequate
to provide
coverage
for
all
expected
future credit losses on outstanding loans as of the measurement date. 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” to the
Consolidated Financial
Statements set forth
in Item 8
of Part 1
of this
Annual Report as Form 10-K for more information on the
allowance for credit losses.
The following table presents ACL and net charge-offs to average loans by
type for the periods indicated (in thousands):
Residential
Real Estate
Commercial
Real Estate
Commercial
and Industrial
Correspondent
Banks
Consumer
and Other
Total
December, 31, 2025
Beginning balance
$
5,121
$
8,788
$
4,633
$
654
$
4,874
$
24,070
Provision for credit losses
(1)
763
688
164
361
143
2,119
Recoveries
24
-
17
-
2
43
Charge-offs
-
-
-
-
(732)
(732)
Ending Balance
$
5,908
$
9,476
$
4,814
$
1,015
$
4,287
$
25,500
Average loans
$
307,199
$
1,186,105
$
266,095
$
99,580
$
210,060
$
2,069,039
Net charge-offs (recoveries) to
average loans
(0.01)%
-
(0.01)%
-
0.35%
0.03%
December, 31, 2024
Beginning balance
$
2,695
$
10,366
$
3,974
$
911
$
3,138
$
21,084
Provision for credit losses
(2)
2,403
(1,578)
640
(257)
1,752
2,960
Recoveries
23
-
19
-
3
45
Charge-offs
-
-
-
-
(19)
(19)
Ending Balance
$
5,121
$
8,788
$
4,633
$
654
$
4,874
$
24,070
Average loans
$
256,112
$
1,068,574
$
238,266
$
103,345
$
195,716
$
1,862,013
Net charge-offs (recoveries) to
average loans
(0.01)%
-
(0.01)%
-
0.01%
(0.00)%
(1) Provision for credit losses excludes $182 thousand provision for unfunded commitments included in accrued interest and other
liabilities and $4 thousand release for investment securities held to maturity.
(2) Provision for credit losses excludes $199 thousand provision for unfunded commitments included in accrued interest and other
liabilities and $2 thousand release for investment securities held to maturity.
The
following
table
presents
ACL
by
type
and
its
individual
percentage
to
total
loans
for
the
periods
indicated
(in
thousands):
December 31,
2025
2024
Loan Category
Allowance
% of Loans in
Each Category to
Total Loans
Allowance
% of Loans in
Each Category to
Total Loans
Residential Real Estate
$
5,908
14.1
%
$
5,121
14.8
%
Commercial Real Estate
9,476
57.0
%
8,788
57.8
%
Commercial and Industrial
4,814
13.5
%
4,633
13.1
%
Correspondent Banks
1,015
5.9
%
654
4.2
%
Consumer and Other
4,287
9.5
%
4,874
10.1
%
Total
$
25,500
100.0
%
$
24,070
100.0
%
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69
USCB Financial Holdings, Inc.
2025 10-K
Bank-Owned Life Insurance
At
December 31,
2025,
the
combined
cash
surrender
value
of
all
bank-owned
life
insurance
(“BOLI”)
policies
was
$59.4 million.
Changes
in
cash
surrender
value
are
recorded
in
non-interest
income
on
the
Consolidated
Statements
of
Operations. In
2025, the Company
maintained BOLI
policies with
five insurance
carriers. The
Company is
the beneficiary
of these policies.
Deposits
Customer deposits are the
primary funding source for
the Bank’s growth.
Through our network of
banking centers, we
offer a competitive array of deposit
accounts and treasury management services designed
to meet our customers’ business
needs. Our primary
deposit customers
are SMBs,
and the personal
business of owners
and operators
of these SMBs,
as
well as the retail/consumer relationships of the employees
of these businesses. Our focus on quality and customer
service
has created a strong brand recognition within
our depositors, which reflects in the composition
of our deposits; most of our
funding sources are customer
deposits. In addition
to our banking centers
network, we have developed
business verticals
to diversify our
portfolio in different specialty industries
and we offer public
fund deposit products to
municipalities and public
agencies in our geographical footprint.
Furthermore, our
personal and
private banking
management
line of
business is
focused on
the needs
of the
owners
and operators of
our business customers,
offering a suite
of checking, savings,
money market and
time deposit accounts,
and utilizing superior
client service
to build and
expand client relationships.
A unique aspect
of our business
model is our
ability to offer correspondent services to banks in
Central America and the Caribbean.
The following
table presents
the daily
average balance
and average
rate paid
on deposits
by category
for the
years
ended December 31, 2025 and 2024 (in thousands, except
ratios):
Years Ended December 31,
2025
2024
Average Balance
Average Rate
Paid
Average Balance
Average Rate
Paid
Non-interest bearing demand deposits
$
577,232
0.00%
$
596,073
0.00%
Interest-bearing demand deposits
51,803
2.48%
54,667
2.76%
Savings and money market deposits
1,255,719
3.03%
1,109,853
3.61%
Time deposits
470,213
3.85%
326,373
4.09%
$
2,354,967
2.44%
$
2,086,966
2.63%
Total average deposits for the year ended December 31, 2025 was $2.4 billion,
an increase of $268.0 million,
or 12.8%
over total
average deposits
of $2.1 billion
for the
same period
in 2024.
The greatest
increase was
in savings
and money
market deposits which
increased by
$145.9 million, or
13.1%. Non-interest-bearing
demand deposits
decreased by
$18.8
million or 3.2%.
The
uninsured
deposits
are
estimated
based
on
the
FDIC
deposit
insurance
limit
of
$250 thousand
for
all
deposit
accounts at the Bank per account holder. Total
estimated uninsured deposits was $1.2 billion at December 31, 2025 and at
December 31, 2024. As of December 31, 2025,
49% of our deposits were estimated to
be FDIC-insured.
At December 31,
2025, our
deposit portfolio
included 7%
of total
deposits were
public funds
(partially collateralized),
11%
of total
deposits
were
brokered
deposits
(FDIC-insured),
and
8%
were
deposits
in
ICS/CDARs
deposit
programs
(FDIC-insured).
The
estimated average
account size
of our deposit
portfolio is
$113
thousand. Time
deposits with
balances of
$250 thousand
or more totaled $111.5
million and $94.0 million at December 31, 2025 and 2024,
respectively. At December
31, 2025, our
top 10 depositors held 15.59% of our
total deposit portfolio. At December 31, 2024, our top 10
depositors held 16.7% of our
total deposit portfolio.
Critical elements of our liquidity
risk management include: effective corporate governance consisting of
oversight by the
Board and ALCO and
involvement by 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; 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
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70
USCB Financial Holdings, Inc.
2025 10-K
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 investment security
cash flows. Other potential funding sources include
federal funds
purchased, brokered certificates of deposit, listing services certificates of deposit, Fed Funds lines and borrowings from the
FHLB
Atlanta.
Accordingly,
our liquidity
resources
were
at sufficient
levels
to fund
loans
and
meet
other
cash
needs as
necessary.
The following table shows scheduled maturities of uninsured
time deposits as of December 31, 2025 (in thousands):
Total
Three months or less
$
59,593
Over three through six months
16,190
Over six through twelve months
9,552
Over twelve months
26,146
$
111,481
Borrowings
FHLB Advances
As
a
member
of
the
FHLB
Atlanta,
we
are
eligible
to
obtain
advances
with
various
terms
and
conditions.
This
accessibility of additional
funding allows us
to efficiently and
timely meet both
expected and unexpected
outgoing cash flows
and collateral needs without adversely affecting
either daily operations or the financial condition
of the Company.
Outstanding fixed-rate
advances from the
FHLB were
at $158.3 million
and $163.0 million,
as of December
31, 2025,
and
December 31,
2024,
respectively.
The
weighted
average
rate
for
outstanding
FHLB
advances
was
3.8%
as
of
December 31, 2025 and 2024.
The following table presents the FHLB fixed-rate advances
as of December 31, 2025 (in thousands):
December, 31, 2025
Interest Rate
Type of Rate
Maturity Date
Amount
3.77%
Fixed
March 16, 2026
$
104,750
3.88%
Variable
May 22, 2026
42,500
3.76%
Fixed
January 24, 2028
11,000
$
158,250
December, 31, 2024
Interest Rate
Type of Rate
Maturity Date
Amount
2.05%
Fixed
March 27, 2025
$
10,000
1.07%
Fixed
July 18, 2025
6,000
3.76%
Fixed
January 24, 2028
11,000
3.77%
Fixed
April 25, 2028
50,000
3.68%
Fixed
September 13, 2027
21,000
3.79%
Fixed
March 23, 2026
20,000
4.65%
Fixed
February 13, 2025
45,000
$
163,000
We
have
also
established
Fed
Funds
lines
of
credit
with
our
upstream
correspondent
banks
to
manage
temporary
fluctuations in our daily
cash balances. As of
December 31, 2025, there were no
outstanding balances under the Fed
Funds
lines of credit.
The Board
of Governors
of the Federal
Reserve System,
on March
12, 2023,
announced the
creation of
a new
Bank
Term
Funding Program (“BTFP”). The BTFP offered loans of up to one year in length to banks, savings associations, credit
unions,
and
other
eligible
depository
institutions
pledging
U.S.
Treasuries,
U.S.
agency
debt
and
mortgage-backed
securities, and other qualifying assets as collateral. The
BTFP program ceased making new loans as of March
2024.
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71
USCB Financial Holdings, Inc.
2025 10-K
The Company paid off $80 million in borrowings under the BTFP
program during the third quarter of 2024. The original
maturity of this borrowing by the Bank under the BTFP program was January 2025, and there are no remaining borrowings
under this program.
Subordinated Notes
On
August
14,
2025,
the
Company
entered
into
a
Subordinated
Note
Purchase
Agreement
with
certain
qualified
institutional
buyers
pursuant
to
which
the
Company
sold
and
issued
$40.0
million
in
aggregate
principal
amount
of
its
7.625% Fixed-to-Floating
Rate Subordinated
Notes due 2035.
The Notes were
issued by the
Company to the
purchasers
at a
price equal
to 100%
of their
face amount.
The Notes
were offered
and sold
by the
Company in
a private
placement
transaction in reliance
on exemptions from
the registration
requirements of the
Securities Act,
pursuant to
Section 4(a)(2)
of the Securities
Act and
Rule 506(b) of
Regulation D thereunder. For additional
information, see the
Form 8-K the
Company
filed on August 14, 2025.The subordinated debt was originally issued at a cost of $760 thousand. The carrying value of the
issuance
cost
has
been
reduced
to
$700
thousand,
reflecting
the
scheduled
expense
recognition
over
the
term
of
the
subordinated
debt.
The
subordinated
notes
are
presented
net
of
these
costs
on
the
consolidated
balance
sheet.
At
December 31, 2025, the outstanding balance of subordinated
notes, net of costs, totaled $39.3 million.
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 as we
do for on-balance sheet
items. We are not
aware of any accounting
loss to be
incurred by funding
these
commitments; however, we maintain an allowance for off-balance sheet
credit risk which is recorded
under accrued interest
and other liabilities on the Consolidated Balance Sheets.
Since commitments associated with letters of
credit and commitments to extend
credit may expire unused, the
amounts
shown do not necessarily
reflect the actual
future cash funding requirements
.
The following table
presents lending related
commitments outstanding as of December 31, 2025 and
2024 (in thousands):
December 31, 2025
December 31, 2024
Commitments to grant loans and unfunded lines of credit
$
161,606
$
122,578
Standby and commercial letters of credit
2,700
5,389
Total
$
164,306
$
127,967
Commitments to extend credit are agreements to lend funds to a client, as long as there is no violation of any condition
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 number 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
The asset and liability management committee of our Company, or ALCO, consists of members of senior management
and our Board. Senior management is responsible for
ensuring in a timely manner that Board
approved strategies, policies,
and procedures
for managing
and mitigating
risks are
appropriately executed
within the
designated lines
of authority
and
responsibility.
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72
USCB Financial Holdings, Inc.
2025 10-K
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”) exposure is inherent
to the banking business, our ALCO
has established
what it believes are sound risk management practices
in place to identify,
measure, monitor and mitigate IRR exposures.
When assessing the scope
of IRR exposure and
impact on the consolidated
balance sheet, cash flows
and statement
of operations,
management considers
both earnings
and economic
impacts. Asset price
variations, deposits
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 steeping) 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 analysis
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.
This assessment
allows
us
to
measure
the
degree
to
which
the
economic
values
will
change
under
different
interest
rate
scenarios.
The
economic value of equity approach focuses on a longer-term time horizon and captures all future cash flows expected from
existing assets and liabilities. The economic value model utilizes a static approach in that the analysis does not incorporate
new business; rather, the
analysis shows a snapshot in time of the risk inherent
in the balance sheet.
Market and Interest Rate Risk Management
As of December 31, 2025, both the
static and dynamic scenarios of the
ALCO model indicate that the Bank’s
balance
sheet is
liability
sensitive
in
year
one.
This means
that
our liabilities
reprice
more
quickly than
our
assets,
resulting in
a
favorable expansion in net interest income
(NII) when market interest rates
decline. For year two, the static
model shifts to
a neutral position, while the dynamic model reflects an asset sensitive
posture, driven primarily by projected balance sheet
growth.
This
divergence
is
expected,
as
the
dynamic
model
incorporates
forward
looking
assumptions
that
include
loan
growth and
mix shifts
over time.
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,
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 the economic value of equity
do not include actions
that management may undertake to
manage the risks in response
to anticipated changes in interest
rates or client deposit
behavior. As part of our ALM strategy and
policy, management has the ability to modify the balance sheet
to either increase
or decrease
asset
duration
and
increase
or decrease
liability
duration
to
modify
the balance
sheet
sensitivity
to interest
rates.
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
of interest
rates will
have a
negative impact
on the
EVE. Results and
analysis are presented
quarterly to the
ALCO, and strategies
are reviewed and
refined. The Bank
remains
within policy limits for long-term interest
rate risk based on EVE
results as of December 31, 2025. The
balance sheet shows
larger EVE swings
when rates go
up than when
rates go down.
This happens because,
in rising rate
scenarios, the value
of our longer
term assets
falls more
quickly,
especially when
loan prepayments
slow while our
liabilities do
not reprice as
fast. In contrast,
when rates
decline, faster
loan prepayments
and quicker
asset repricing
help soften the
impact on
EVE.
Additionally, during 2025, we have been taking actions to reduce
our asset sensitivity by extending asset duration. This has
reduced our NII
volatility for the
first and second
year in the
analysis and has
helped us to
maintain the NII
in accordance
with ALCO expectations.
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.
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73
USCB Financial Holdings, Inc.
2025 10-K
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
adequate funding on
acceptable terms in
a timely matter. 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, interest rate
environment and the cash flow
profiles of our on- and
off-balance
sheet obligations.
In
managing
cash
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), and contingent
liquidity events. Management
presents to
the ALCO,
on a
quarterly basis, liquidity
stress tests following
the scenarios
described in
the Company’s contingency
funding
plan.
Changes
in
macroeconomic
conditions,
exposure
to
credit
deterioration,
market,
operational,
legal
and
reputational
risks, including cybersecurity risk and
social media events could
also affect the Company’s liquidity risk
profile unexpectedly
and are considered in the assessment of liquidity and 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
involvement by senior management;
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;
management
of intraday
liquidity and
collateral;
a 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 investment security
cash flows. Other potential funding sources include
federal funds
purchased, brokered
certificates of
deposit, listing
certificates of
deposit, Fed
Funds lines
and borrowings
from the
FHLB
Atlanta. Accordingly, our liquidity resources were at sufficient levels to
fund loans and meet other
cash needs as necessary.
At December 31, 2025, the
Company had $321.4
million in available liquidity
on balance sheet, including
$286.9 million in
unpledged securities available to
use as collateral and
$34.5 million in
excess cash. The Company
had an additional $349.0
million in off-balance sheet liquidity including excess FHLB Atlanta borrowing
capacity, the Federal Reserve
Bank discount
window and Fed
Fund lines of credit, excluding
access to brokered deposits
and other off-balance sheet sources
of funding.
Table of Contents
74
USCB Financial Holdings, Inc.
2025 10-K
Capital Adequacy
As
of
December 31,
2025,
the
Bank
was
well
capitalized
under
the
FDIC’s
prompt
corrective
action
framework.
Additionally,
we follow the capital conservation
buffer framework, and according to
our actual ratios, the Bank
exceeds the
capital conversation
buffer in
all capital ratios
as of December
31, 2025. The
Company is not
subject to regulatory
capital
requirements because it is deemed by the Federal Reserve
to be a small bank holding company.
The
following
table
presents
the
capital
ratios
for
the
Bank
at
December 31,
2025
and
2024
(in
thousands,
except
ratios):
Actual
Minimum Capital
Requirements
To be Well Capitalized Under
Prompt Corrective Action
Provisions
Amount
Ratio
Amount
Ratio
Amount
Ratio
December 31, 2025
Total
risk-based capital:
$
299,596
13.67%
$
175,387
8.00%
219,234
10.00%
Tier 1 risk-based capital:
$
273,342
12.47%
$
131,541
6.00%
175,387
8.00%
Common equity tier 1 capital:
$
273,342
12.47%
$
98,655
4.50%
142,502
6.50%
Leverage ratio:
$
273,342
9.65%
$
113,296
4.00%
141,620
5.00%
December 31, 2024
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%
Impact of Inflation
Our Consolidated
Financial Statements
and related
notes have been
prepared in
accordance with U.S.
GAAP,
which
requires the
measurement of
financial position
and operating
results in
terms of
historical dollars,
without considering
the
changes
in
the
relative
purchasing
power
of
money
over
time due
to
inflation.
The
impact
of
inflation
is
reflected
in
the
increased cost of operations.
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 do the
effects of general levels
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.
As market interest rates
rise or fall in relation
to the rates earned
on loans and investments,
the value of these assets decreases or increases respectively.
Recently Issued Accounting Pronouncements
Recently issued accounting
pronouncements are discussed
in Note 1 “Summary
of Significant Accounting
Policies” in
the Consolidated Financial Statements of this Annual Report
on Form 10-K.
Table of Contents
75
USCB Financial Holdings, Inc.
2025 10-K
Reconciliation and Management Explanation of Non
-GAAP Financial Measures
Management has included
the non-GAAP measures
set forth below
because it believes
these measures may
provide
useful supplemental information
for evaluating the Company’s
underlying performance trends.
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 Company
believes
these
non-GAAP
measurements
are key
indicators of the
earnings power
of the Company.
The following
table reconciles
the non-GAAP
financial measurement
of
operating net income available to common stockholders
for the periods presented (in thousands,
except per share data):
As of and for the years ended December 31,
2025
2024
Pre-Tax Pre-Provision ("PTPP") income: (1)
Net income (GAAP)
$
26,100
$
24,674
Plus: Provision for income taxes
9,816
7,803
Plus: Provision for credit losses
2,297
3,157
PTPP income
$
38,213
$
35,634
Operating net income: (1)
Net income (GAAP)
$
26,100
$
24,674
Less: Net gain (loss) on sale of securities
(7,526)
14
Less: Tax
effect on sale of securities
1,908
(4)
Plus: Tax
liability expenses from prior periods
764
-
Operating net income
$
32,482
$
24,664
Operating revenue: (1)
Net interest income
$
83,630
$
69,936
Non-interest income
6,592
12,740
Less: Net gain (losses) on sale of securities
(7,526)
14
Operating revenue
$
97,748
$
82,662
Operating efficency ratio: (1)
Total
non-interest expense
$
52,009
47,042
Operating revenue
$
97,748
82,662
Operating efficency ratio
53.21%
56.91%
(1) The Company believes these non-GAAP measurements are key indicators of the ongoing earnings power of the Company.
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
As a smaller reporting company,
we are not required to provide the information required
by this item.
Table of Contents
76
USCB Financial Holdings, Inc.
2025 10-K
Item 8.
Financial Statements and Supplementary Data
INDEX TO CONSOLIDATED
FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm
(
Crowe LLP
, PCAOB ID:
173
)
77
Consolidated Balance Sheets
78
Consolidated Statements of Operations
79
Consolidated Statements of Comprehensive Income
80
Consolidated Statements of Changes in Stockholders’ Equity
81
Consolidated Statements of Cash Flows
82
Notes to the Consolidated Financial Statements
84
Crowe LLP
Independent Member Crowe Global
77
USCB Financial Holdings, Inc.
2025 10-K
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Stockholders and the Board of Directors of
USCB Financial Holdings, Inc.
Doral, Florida
Opinion on the Financial Statements
We have audited the accompanying consolidated
balance sheets of USCB Financial Holdings, Inc. (the
“Company”) as of December 31, 2025 and 2024, the related consolidated
statements of operations,
comprehensive income, changes in stockholders’ equity,
and cash flows for the years then ended,
and the related notes (collectively referred to as the “financial statements”).
In our opinion, the financial
statements present fairly, in all material respects, the
financial position of the Company
as of December 31,
2025 and 2024, and the results of its operations and its
cash flows for the years then ended, in conformity
with accounting principles generally accepted in the United
States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s
management. Our responsibility is to
express an opinion
on the Company’s financial
statements based on our
audits. We are a
public accounting
firm registered with the Public Company Accounting Oversight
Board (United States) (“PCAOB”) and are
required to be
independent with respect to
the Company in accordance
with the U.S.
federal securities laws
and the applicable rules and regulations of the Securities
and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the
standards of the PCAOB. Those standards require that
we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are
free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess
the risks of material misstatement of the financial
statements, whether due to error or fraud, and performing
procedures that respond to those risks. Such
procedures included examining, on a test basis, evidence
regarding the amounts and disclosures in the
financial statements. Our audits also included evaluating the accounting
principles used and significant
estimates made by management, as well as evaluating the
overall presentation of the financial statements.
We believe that our audits provide a reasonable
basis for our opinion.
/s/ Crowe LLP
Crowe LLP
We have served as the Company's auditor since
2017.
Fort Lauderdale, Florida
March 13, 2026
Table of Contents
78
USCB Financial Holdings, Inc.
2025 10-K
USCB FINANCIAL HOLDINGS, INC.
Consolidated Balance Sheets
(Dollars in thousands,
except share and per share data)
December 31,
2025
2024
ASSETS:
Cash and due from banks
$
6,027
$
6,986
Interest-bearing deposits in banks
32,450
70,049
Total cash and cash equivalents
38,477
77,035
Investment securities held to maturity net of allowance
of $
2
and $
6
, respectively (fair value $
142,508
and $
145,540
, respectively)
153,941
164,694
Investment securities available for sale, at fair value
307,490
260,221
Federal Home Loan Bank stock, at cost
9,323
9,379
Loans held for investment, net of allowance of
$
25,500
and $
24,070
, respectively
2,163,757
1,948,778
Accrued interest receivable
11,661
10,945
Premises and equipment, net
4,247
4,563
Bank owned life insurance
59,424
53,472
Deferred tax asset, net
18,046
29,646
Lease right-of-use asset
5,519
8,451
Other assets
19,655
14,032
Total assets
$
2,791,540
$
2,581,216
LIABILITIES:
Deposits:
Non-interest-bearing demand deposits
$
583,860
$
575,159
Savings and money market deposits
1,186,422
1,180,809
Interest-bearing demand deposits
46,989
50,648
Time deposits
527,809
367,388
Total deposits
2,345,080
2,174,004
Federal Home Loan Bank advances
158,250
163,000
Subordinated notes
39,300
-
Lease liability
5,519
8,451
Accrued interest and other liabilities
26,208
20,373
Total liabilities
2,574,357
2,365,828
Commitments and contingencies (See Notes 11 and 20)
(nil)
(nil)
STOCKHOLDERS' EQUITY:
Preferred stock - Class C; $
1.00
par value; $
1,000
per share liquidation preference;
52,748
shares
authorized;
0
issued and
0
outstanding as of December 31, 2025
and 2024
-
-
Preferred stock - Class D; $
1.00
par value; $
5.00
per share liquidation preference;
12,309,480
shares
authorized;
0
issued and
0
outstanding as of December 31, 2025
and 2024
-
-
Preferred stock - Class E; $
1.00
par value; $
1,000
per share liquidation preference;
3,185,024
shares
authorized;
0
issued and
0
outstanding as of December 31, 2025
and 2024
-
-
Common stock - Class A Voting; $
1.00
par value;
45,000,000
shares authorized;
18,137,885
and
19,924,632
issued and outstanding as of December 31,
2025 and 2024
18,138
19,925
Common stock - Class B Non-Voting; $
1.00
par value;
8,000,000
shares authorized;
0
and
0
issued and
outstanding as of December 31, 2025 and 2024
-
-
Additional paid-in capital on common stock
278,852
307,810
Accumulated deficit
(49,542)
(67,813)
Accumulated other comprehensive loss
(30,265)
(44,534)
Total stockholders' equity
217,183
215,388
Total liabilities and stockholders' equity
$
2,791,540
$
2,581,216
The accompanying notes are an integral part of
these consolidated financial statements.
Table of Contents
79
USCB Financial Holdings, Inc.
2025 10-K
USCB FINANCIAL HOLDINGS, INC.
Consolidated Statements of Operations
(Dollars in thousands,
except per share data)
Years Ended December 31,
2025
2024
Interest income:
Loans, including fees
$
128,160
$
115,236
Investment securities
13,715
11,480
Interest-bearing deposits in financial institutions
3,612
4,517
Total interest income
145,487
131,233
Interest expense:
Interest-bearing checking deposits
1,283
1,509
Savings and money markets deposits
38,027
40,098
Time deposits
18,104
13,354
Federal Home Loan Bank advances
3,238
6,336
Subordinated notes
1,205
-
Total interest expense
61,857
61,297
Net interest income before provision for
credit losses
83,630
69,936
Provision for credit losses
2,297
3,157
Net interest income after provision for
credit losses
81,333
66,779
Non-interest income:
Service fees
9,603
8,839
(Loss) gain on sale of securities available for
sale, net
(7,526)
14
Gain on sale of loans held for sale, net
1,001
747
Other non-interest income
3,514
3,140
Total non-interest income
6,592
12,740
Non-interest expense:
Salaries and employee benefits
32,167
28,793
Occupancy
5,330
5,258
Regulatory assessment and fees
1,637
1,766
Consulting and legal fees
1,941
1,568
Network and information technology services
2,324
1,993
Other operating expense
8,610
7,664
Total non-interest expense
52,009
47,042
Net income before income tax expense
35,916
32,477
Income tax expense
9,816
7,803
Net income
26,100
24,674
Net income available to common stockholders
$
26,100
$
24,674
Per share information:
Earnings per share, basic
$
1.34
$
1.25
Earnings per share, diluted
$
1.33
$
1.24
Weighted average shares outstanding:
Common shares, basic
19,425,746
19,675,444
Common shares, diluted
19,650,814
19,831,421
The accompanying notes are an integral part of
these consolidated financial statements.
Table of Contents
80
USCB Financial Holdings, Inc.
2025 10-K
USCB FINANCIAL HOLDINGS, INC.
Consolidated Statements of Comprehensive Income
(Dollars in thousands)
Years Ended December 31,
2025
2024
Net income
$
26,100
$
24,674
Other comprehensive income (loss):
Unrealized gain (loss) on investment securities
11,661
(592)
Amortization of net unrealized losses on securities
transferred from available-for-sale to held-to-maturity
266
267
Reclassification adjustment on sale of available
for sale securities for (income) loss included in net
income
7,526
(14)
Unrealized loss on cash flow hedge
(340)
(13)
Tax (expense) benefit
(4,844)
89
Total other comprehensive income (loss), net of tax
14,269
(263)
Total comprehensive income
$
40,369
$
24,411
The accompanying notes are an integral part of
these consolidated financial statements.
Table of Contents
81
USCB Financial Holdings, Inc.
2025 10-K
USCB FINANCIAL HOLDINGS, INC.
Consolidated Statements of Changes in Stockholders’
Equity
(Dollars in thousands,
except per share data)
Common Stock
Additional Paid-in
Capital on
Common Stock
Accumulated
Deficit
Accumulated
Other
Comprehensive
Loss
Shares
Par Value
Total
Stockholders'
Equity
Balance at January 1, 2025
19,924,632
$
19,925
$
307,810
$
(67,813)
$
(44,534)
$
215,388
Net income
-
-
-
26,100
-
26,100
Other comprehensive income
-
-
-
-
14,269
14,269
Repurchase of Class A common stock
(2,009,671)
(2,010)
(32,544)
-
-
(34,554)
Restricted stock issued
124,424
124
(124)
-
-
-
Exercise of stock options
98,500
99
705
-
-
804
Dividend payment
-
-
-
(7,829)
-
(7,829)
Stock-based compensation
-
-
3,005
-
-
3,005
Balance at December 31, 2025
18,137,885
$
18,138
$
278,852
$
(49,542)
$
(30,265)
$
217,183
Balance at January 1, 2024
19,575,435
$
19,575
$
305,212
$
(88,548)
$
(44,271)
$
191,968
Net income
-
-
-
24,674
-
24,674
Other comprehensive loss
-
-
-
-
(263)
(263)
Repurchase of Class A common stock
(42,100)
(42)
(459)
-
-
(501)
Restricted stock issued
277,922
278
(278)
-
-
-
Restricted stock forfeiture
(8,625)
(8)
8
-
-
-
Exercise of stock options
122,000
122
1,197
-
-
1,319
Dividend payment
-
-
-
(3,939)
-
(3,939)
Stock-based compensation
-
-
2,130
-
-
2,130
Balance at December 31, 2024
19,924,632
$
19,925
$
307,810
$
(67,813)
$
(44,534)
$
215,388
The accompanying notes are an integral part of
these consolidated financial statements.
Table of Contents
82
USCB Financial Holdings, Inc.
2025 10-K
USCB FINANCIAL HOLDINGS, INC.
Consolidated Statements of Cash Flows
(Dollars in thousands)
Years Ended December 31,
2025
2024
Cash flows from operating activities:
Net income
$
26,100
$
24,674
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for credit losses
2,297
3,157
Depreciation and amortization
619
587
Accretion of premiums on securities, net
(1,540)
(521)
Amortization of deferred loan fees, net
1,020
660
Stock-based compensation
3,005
2,130
Loss (gain) on sale of available for sale securities
7,526
(14)
Gain on sale of loans held for sale
(1,001)
(747)
Proceeds from the sale of loans held for
sale
13,810
9,137
Origination of loans held for sale
(12,809)
(8,390)
Increase in cash surrender value of bank owned
life insurance
(1,952)
(1,691)
Decrease in deferred tax asset
6,756
7,725
Net change in operating assets and liabilities:
Accrued interest receivable
(716)
(257)
Other assets
(5,930)
(6,223)
Accrued interest and other liabilities
5,620
4,610
Net cash provided by operating activities
42,805
34,837
Cash flows from investing activities:
Proceeds from maturities and pay-downs of investment
securities held to maturity
10,935
10,461
Purchase of investment securities available for
sale
(139,841)
(85,673)
Proceeds from maturities and pay-downs of investment
securities available for sale
23,364
20,045
Proceeds from sales of investment securities available
for sale
82,497
34,753
Net increase in loans held for investment
(136,726)
(126,049)
Purchase of loans held for investment
(81,392)
(66,605)
Additions to premises and equipment
(303)
(314)
Proceeds from the redemption of Federal Home
Loan Bank stock
16,221
11,733
Purchase of Federal Home Loan Bank stock
(16,165)
(10,959)
Purchase of bank owned life insurance, net
(4,000)
-
Net cash used in investment activities
(245,410)
(212,608)
(Continued)
The accompanying notes are an integral part of
these consolidated financial statements.
Table of Contents
83
USCB Financial Holdings, Inc.
2025 10-K
USCB FINANCIAL HOLDINGS, INC.
Consolidated Statements of Cash Flows (Continued)
(Dollars in thousands)
Years Ended December 31,
2025
2024
Cash flows from financing activities:
Proceeds from exercise of Class A common stock
options, net
804
1,319
Cash dividends paid
(7,829)
(3,939)
Repurchase of Class A common stock
(34,554)
(501)
Net increase in deposits
171,076
236,865
Proceeds from subordinated notes, net
39,300
-
Proceeds from Federal Home Loan Bank advances
and other borrowings
336,750
227,000
Repayments on Federal Home Loan Bank advances
and other borrowings
(341,500)
(247,000)
Net cash provided by financing activities
164,047
213,744
Net increase (decrease) in cash and cash equivalents
(38,558)
35,973
Cash and cash equivalents at beginning of period
77,035
41,062
Cash and cash equivalents at end of period
$
38,477
$
77,035
Supplemental disclosure of cash flow information:
Interest paid
$
59,998
$
60,544
The accompanying notes are an integral part of
these consolidated financial statements.
Table of Contents
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
84
USCB Financial Holdings, Inc.
2025 10-K
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.
In December 2021, USCB Financial
Holdings, Inc. acquired all issued
and outstanding shares of the Class
A common
stock of
the Bank
in connection
with the
reorganization of the
Bank into
a holding
company structure. Each
of the
outstanding
shares of
the Bank’s
class A
common stock,
par value
$
1.00
per share,
formerly held
by its
stockholders were
converted
into and exchanged for
one
newly issued share of the Company’s Class
A common stock, par value $
1.00
per share.
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 tittle LLC began operations in 2021.
Principles of Consolidation
Intercompany transactions
and balances
are eliminated
in consolidation.
The consolidated
financial statements
have
been prepared in accordance with GAAP.
Use of Estimates
The
Company
has
established
policies
and
control
procedures
that
are
intended
to
ensure
valuation
methods
are
controlled and
applied consistently
from period
to period.
These estimates
and assumptions,
which may
materially affect
the reported amounts of
certain assets, liabilities, revenues and
expenses, are based on
information available as of
the date
of the
financial statements,
and changes
in this
information over
time and
the use
of revised
estimates and
assumptions
could materially affect amounts reported in subsequent
financial statements.
Cash and Cash Equivalents
The
Company
considers
investments
with
a
maturity
of
90
days
or
less
from
its
original
purchase
date
to
be
cash
equivalents. For
the Consolidated
Statements of
Cash Flows,
cash and cash
equivalents include
cash on hand,
amounts
due from banks, and interest-bearing deposits in banks.
Restricted Cash
The Company may be required to maintain
funds at other banks to satisfy
the terms of a loan participation agreement.
The Company
reports restricted cash
within cash
and cash equivalents.
At both
December 31, 2025 and
2024, the
Company
had $
0
in restricted cash.
Interest-Bearing Deposits in Banks
Interest-bearing
deposits
in
other
financial
institutions
consist
of
accounts
at
the
Federal
Reserve
Bank
of
Atlanta,
Federal Home Loan Bank of Atlanta and other accounts.
Investment Securities
Debt securities
are recorded
at fair
value except
for those
securities which
the Company
has the
positive intent
and
ability to
hold to
maturity.
Management
generally determines
the appropriate
classification
of its
securities
at the
time of
purchase and accounts for them on a trade date basis.
Debt securities that
management has the
positive intent and
ability to hold
to maturity are
classified as "held-to-maturity"
and recorded at amortized cost. Trading securities are
recorded at fair value with
changes in fair value included
in earnings.
Securities not classified
as held-to-maturity or
trading are classified
as "available-for-sale"
and recorded at
fair value, with
unrealized gains and losses excluded from earnings and
reported in other comprehensive income (loss).
Table of Contents
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
85
USCB Financial Holdings, Inc.
2025 10-K
Purchase premiums and discounts are amortized or accreted over
the estimated life of the related available-for-sale or
held-to-maturity
security
as
an
adjustment
to
yield
using
the
effective
interest
method.
Prepayments
of
principal
are
considered in determining the estimated life of
the security. Such amortization and accretion are included in interest income
in the Consolidated
Statements of Operations.
Dividend and interest
income are recognized
when earned. Gains
and losses
on the sale of securities are recorded on trade date and are determined
on a specific identification basis.
For available-for-sale
debt securities
in an
unrealized loss
position, the
Company first
assesses whether
it intends
to
sell, or it is more likely than
not that it will be required to
sell, the security before recovery
of its amortized cost basis.
If the
Company has
the intent
to sell,
or is
required to
sell, the
difference
between fair
value and
amortized cost
is considered
impaired
and
is
recognized
in
the
provision
for
credit
losses.
For
available-for-sale
debt
securities
that
do
not
meet
the
aforementioned criteria,
the Company
evaluates whether
the decline in
fair value
has resulted from
credit factors
or other
market conditions. The
Company monitors the
credit quality of
debt securities through
the use of
credit ratings. Credit
ratings
are monitored by the Company on at least a quarterly
basis.
CECL requires a loss reserve for securities
classified as HTM. The reserve should reflect
historical credit performance
as well as the impact
of projected economic forecast.
For U.S. Government bonds
and U.S. Agency issued bonds
in HTM
the
explicit
and/or
implicit
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 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.
Federal Home Loan Bank (FHLB) Stock
The Bank is a member of the FHLB system. Members are required to
own a certain amount of stock based on the level
of borrowings and
other factors and
may invest in
additional amounts. FHLB
stock is carried
at cost, classified
as a restricted
asset, and
periodically evaluated
for impairment
based on
ultimate recovery
of par
value. As
of December
31, 2025
and
2024,
FHLB
stock
amounted
to
$
9.3
million
and
$
9.4
million,
respectively,
with
no
impairment
deemed
necessary.
Both
cash and stock dividends are reported as interest income.
Loans Held for Investment and Allowance for Credit
Losses (“ACL”)
Loans held for investment (“loans”) are reported at their outstanding principal
balance net of charge-offs, deferred loan
cost,
unearned income,
and the
ACL. Interest
income
is generally
recognized
when
income is
earned using
the interest
method.
Loan
origination
and
commitment
fees
and
the
costs
associated
with
the
origination
of
loans
are
deferred
and
amortized, using the interest method or the straight-line
method, over the life of the related loan.
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.
All interest accrued but not
collected for loans that are
placed on nonaccrual status is
reversed against interest income. The
interest on
these loans is
accounted for on
the cash-basis or
cost-recovery method, under
which cash collections
are applied
to unpaid principal, which may change as conditions
dictate.
The Company has determined
that the entire
balance of a
loan is contractually delinquent
for all loan
categories if the
minimum
payment
is
not
received
by
the
specified
due
date
on
the
borrower's
statement.
Interest
and
fees
continue
to
accrue on past due loans until the date the loan goes into
nonaccrual status.
The Company
provides for
loan losses
through a provision
for credit losses
charged to
earnings. When
management
believes that a
loan or a portion
of the loan balance
is uncollectible, that
amount is charged
against the ACL.
Subsequent
recoveries, if any,
are credited to the ACL.
Table of Contents
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
86
USCB Financial Holdings, Inc.
2025 10-K
The
ACL
reflects
management's
judgment
of
expected
loan
losses
in
the
portfolio
at
the
balance
sheet
date.
Management uses a disciplined
process and methodology
to establish the ACL
each quarter.
To
determine the total
ACL,
the Company
estimates the
reserves needed
for each
segment of
the portfolio,
including loans
analyzed individually
and
loans analyzed on a pooled basis. The ACL consists
of the amount applicable to the following segments:
•
Residential real estate
•
Commercial real estate
•
Commercial and industrial
•
Correspondent banks
•
Other loans (secured and unsecured consumer loans)
Residential
real
estate
loans
are
underwritten
following
the
policies
of
the
Company
which
include
a
review
of
the
borrower’s credit, capacity
and the collateral
securing the loan.
The borrower’s ability
to repay involves
an analysis of
factors
including: current income,
employment status, monthly
payment of
the loan,
current debt
obligations, monthly debt
to income
ratio and credit history. The Company relies on appraisals in determining the value of the property.
Risk is mitigated by this
analysis and the diversity of the residential portfolio.
Commercial real estate
loans are
secured by liens
on commercial properties,
land, construction and
multifamily housing.
Underwriting of commercial real estate loans will analyze the key market and business factors to arrive at a decision on the
credit worthiness of the borrower. The analysis may include the capacity of the borrower,
income generated by property for
debt service,
other
sources
of repayment,
sensitivity
analysis
to fluctuations
in market
conditions
including vacancy
and
rental rates in geographic
location and loan
to value. Land
and construction loan
analysis will include
the time to
develop,
sell or lease
the property.
Appraisals are used
to determine the
value of the
underlying collateral.
Risk is mitigated
as the
properties securing the commercial real estate loans
are diverse in type, location, and loan structure.
Commercial
and
industrial
loans
are
secured
by
the
business
assets
of
the
borrower
and
may
include
equipment,
inventory, and receivables.
The loans are underwritten based on the
income capacity of the business, the ability
to service
the debt based
on operating cash
flows, the credit
worthiness of the
borrower,
other sources
of repayment
and collateral.
The Company mitigates the risk in the commercial portfolio
through industry diversification.
Correspondent bank loans are
short-term loans with international
correspondent banking institutions primarily domiciled
in Latin America.
Most of these
loans are for
trade capital and
have a life
of less than
one year. The Company’s credit
review
includes a credit analysis, peer comparison and current
country risk overview.
Annual re-evaluation of the risk rating of the
borrower and country where the borrower is
located and a review by the authorized signer
within the Company.
The risk is
mitigated as these loans are short term, have limited exposure,
and are geographically dispersed.
Other loans
are secured
and unsecured
consumer
loans including
yacht loans,
personal loans,
home equity
lines of
credit,
overdrafts,
and
deposit
account
collateralized
loans.
Repayment
of
these
loans
are
primarily
from
the
personal
income of the borrowers. Loans are underwritten based on the credit worthiness of the borrower. The risk on these loans is
mitigated by small loan balances.
Under
CECL,
the
Company
estimates
the
ACL
using
relevant
available
information,
from
both
internal
and
external
sources,
relating
to
past
events,
current
conditions,
and
reasonable
and
supportable
forecasts.
Historical
credit
losses
provide the basis for estimation of expected credit losses. Qualitative adjustments are applied to the expected credit losses
estimated
for
the
loan
portfolio
in
relation
to
potential
limitations
of
the
quantitative
model.
A
scorecard
is
used
to
aid
management in the assessment of qualitative factor adjustments
applied to expected credit losses.
The
quantitative
component
of
the
estimate
relies
on
the
statistical
relationship
between
the
projected
value
of
an
economic
indicator
and
the
implied
historical
loss
experience
among
a
curated
group
of
peers.
The
Company
utilized
regression
analyses
of peer
data,
in
which
the
Company
was
included,
and
where
observed
credit
losses
and selected
economic factors were used
to determine suitable
loss drivers for modeling
the lifetime rates of
probability of default (PD).
A
loss
given
default
rate
(LGD)
is
assigned
to
each
pool
for
each
period
based
on
these
PD
outcomes.
The
model
fundamentally utilizes
an expected
discounted cash
flow (DCF)
analysis for loan
portfolio segments.
The DCF
analysis is
run
at
the
instrument-level
and
incorporates
an
array
of
loan-specific
data
points
and
segment-implied
assumptions
to
determine the lifetime expected
loss attributable to each
instrument. An implicit "hypothetical
loss" is derived
for each period
of the
DCF and
helps establish
the present
value of
future cash
flows for
each period.
The reserve
applied to
a specific
instrument is the difference
between the sum of the present
value of future cash flows
and the book balance of
the loan at
the measurement date.
Table of Contents
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
87
USCB Financial Holdings, Inc.
2025 10-K
Management
elected
the
Remaining
Life
(WARM)
methodology
for
correspondent
bank
loans
and
secured
and
unsecured consumer loan portfolio segments. For each of these segments, a 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
assessments.
For
the
remaining
life
estimated,
management
implemented
a
software
solution
that
uses
an
attrition-based calculation that performs quarterly,
cohort-based attrition measurements based on the loan portfolio.
Portfolio segments are the level at which loss assumptions
are applied to a pool of loans based on the similarity
of risk
characteristics inherent in the
included instruments, relying on
collateral codes and FFIEC
Call Report codes. The
Company
currently segments the
portfolio based on
collateral codes for the
purpose of establishing
reserves. Each of
these segments
is
paired
to
regression
models
(Loss
Driver
Analyses)
based
on
peer
data
for
loans
of
similar
risk
characteristics.
The
Company has established relationships between internal segmentation and FFIEC
Call Report codes for this purpose. The
loss driver for each loan
portfolio segment is derived
from a readily available and
reasonable economic forecast, including
the Federal Reserve Bank
projections of U.S. civilian
unemployment rate and the
year-over-year real GDP
growth; for the
residential
loan
segment,
the
HPI
projections
published
by
Fannie
Mae’s
Economic
and
Strategic
Research
Group
are
utilized for the
forecast. Forecasts
are applied to
the first four
quarters of the
credit loss estimate
and revert on
a straight-
line basis to the lookback period's historical mean for the
economic indicator over the expected life of loans.
The model incorporates qualitative
factor adjustments in order to
calibrate the model for risk
in each portfolio segment
that may
not be captured
through quantitative
analysis. Determinations
regarding qualitative
adjustments are
reflective of
management's
expectation
of loss
conditions
differing
from those
already
captured
in
the
quantitative
component
of
the
model.
Qualitative factors (“Q-Factors”) used in the ACL methodology
include:
• Changes in lending policies, procedures, and strategies
• Changes in international, national, regional, and local conditions
• Changes in nature and volume of portfolio
• Changes in the volume and severity of past due loans
and other similar conditions
• Concentration risk
• Changes in the value of underlying collateral
• The effect of other external factors: e.g., competition,
legal, and regulatory requirements
• Changes in lending management, among others
Management 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
to be required.
The Company
estimates a
reserve for
unfunded commitments, which
is reported
separately from the
ACL within
accrued
interest
and
other
liabilities.
The
reserve
is
based
upon
the
same
quantitative
and
qualitative
factors
applied
to
the
collectively evaluated loan portfolio.
Concentration of Credit Risks
Credit
risk
represents
the
accounting
loss
that
would
be
recognized
at
the
reporting
date
if
counterparties
failed
to
perform as contracted and any collateral or security proved to be insufficient
to cover the loss. Concentrations of credit risk
(whether on or off-balance sheet) arising from financial instruments exist in relation to certain
groups of customers. A group
concentration arises
when a number
of counterparties
have similar economic
characteristics that would
cause their ability
to meet contractual obligations to be similarly affected by changes in economic or other conditions. The Company does not
have a significant exposure to any individual customer
or counterparty.
Most of the Company's business activity is
with customers located within its primary market area, which
is generally the
State of Florida. The Company's loan portfolio is concentrated largely in real estate and commercial loans in South Florida.
Many of the
Company's loan
customers are engaged
in real estate
development. Circumstances
which negatively
impact
the South Florida real estate industry
or the South Florida economy, in general, could adversely impact
the Company's loan
portfolio.
Table of Contents
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
88
USCB Financial Holdings, Inc.
2025 10-K
At December 31,
2025 and
2024, the
Company had
a concentration
of risk
with loans
outstanding to
the Company’s
top ten lending relationships
totaling $
224.9
million and $
236.2
million, respectively.
At December 31, 2025 and
2024, this
concentration
represented
10.3
%
and
12.0
%
of
net
loans
outstanding,
respectively.
At
December 31,
2025
and
December 31,
2024, the
largest
loan relationship
outside Florida
was a
commercial
real
estate loan
with an
outstanding
balance of $
19.0
million and $
19.8
million, at such dates
respectively,
collateralized by a 1
st
lien on a commercial property
located in New York
State.
At
December 31,
2025,
the
Company
had
a
concentration
of
risk
with
loans
outstanding
totaling
$
128.0
million
to
correspondent
banks
located
in
Ecuador,
Guatemala,
Dominican
Republic,
Honduras,
Panama,
and
El
Salvador.
At
December 31,
2024,
the
Company
also
had
a
concentration
of
risk
with
loans
outstanding
totaling
$
82.4
million
to
correspondent
banks
located
in
Ecuador,
Dominican
Republic,
Honduras,
and
El
Salvador.
These
banks
maintained
deposits with right of offset totaling $
57.1
million and $
62.6
million at December 31, 2025 and 2024, respectively.
At various times during
the year,
the Company has maintained
deposits with other
financial institutions. The exposure
to the Company from
these transactions is solely
dependent upon daily balances
and the financial strength
of the respective
institutions.
Premises and Equipment, net
Land is
carried at
cost. Premises
and equipment
are stated
at cost
less accumulated
depreciation
and amortization.
Depreciation is computed
on the straight-line
method over the
estimated useful life
of the asset. Leasehold
improvements
are amortized over the
remaining term of the
applicable leases or their
useful lives, whichever
is shorter.
Estimated useful
lives of these assets were as follows:
Building
s
40
years
Furniture, fixtures and equipment
3
to
25
years
Computer hardware and software
3
to
5
years
Leasehold improvements
Shorter of life or term of lease
Maintenance
and
repairs
are
charged
to
expense
as
incurred
while
improvements
and
betterments
are
capitalized.
When items are retired or are
otherwise disposed of, the related costs
and accumulated depreciation and amortization
are
removed from the accounts and any resulting gains or losses
are credited or charged to income.
Other Real Estate Owned
OREO consists of real estate properties acquired through,
or in lieu of, foreclosure that are
held for sale and are initially
recorded at the fair value of
the property less estimated selling
costs as of the date of
foreclosure, establishing a new
cost
basis. Subsequent to
foreclosure, valuations
are periodically performed
by management and
the assets are
carried at the
lower of carrying
amount or
fair value
less cost
to sell.
Subsequent write-downs
are recognized
as a
valuation allowance
with the offset
recorded in the
Consolidated Statements
of Operations. Carrying
costs are charged
to OREO
expenses in
the
accompanying
Consolidated
Statements
of
Operation.
Gains
or
losses
on
sale
of
OREO
are
recognized
when
consideration has been exchanged, all closing conditions
have been met and permanent financing has been arranged.
Bank Owned Life Insurance
Bank Owned Life
Insurance (“BOLI”)
is carried at
the amount that
could be realized
under the contract
at the balance
sheet
date,
which
is
typically
the
cash
surrender
value.
Changes
in
cash
surrender
value
are
recorded
in
non-interest
income. At December 31,
2025, the Company
maintained BOLI policies
with five insurance
carriers with a
combined cash
surrender value of $
59.4
million. At December 31, 2024, the Company maintained BOLI
policies with five insurance carriers
with a
combined cash
surrender value
of $
53.5
million.
These policies
cover certain
present and
former executives
and
officers; the Company is the beneficiary of these
policies.
Employee 401(k) Plan
The Company
has an 401(k)
plan covering substantially
all eligible
employees. Employee
401(k) plan
expense is
the
amount of matching contributions.
Table of Contents
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
89
USCB Financial Holdings, Inc.
2025 10-K
Income Taxes
Income taxes are accounted for under the
asset and liability method. Deferred tax
assets and liabilities are recognized
for the
future
tax
consequences
attributable
to differences
between the
financial
statement
carrying
amounts
of existing
assets and
liabilities and
their respective
tax bases
and operating
loss and
tax credit
carryforwards. Deferred
tax assets
and
liabilities
are
measured
using
enacted
tax
rates
expected
to
apply
to
taxable
income
in
the
years
in
which
those
temporary differences are expected to be recovered
or settled. The effect on deferred tax assets and
liabilities of a change
in tax rates is recognized in income in the period that includes
the enactment date.
Management is required to
assess whether a valuation
allowance should be established
on the net deferred tax
asset
based on the
consideration of
all available evidence
using a more
likely than not
standard. In its
evaluation, Management
considers taxable loss
carry-back availability, expectation of sufficient
taxable income, trends
in earnings, the
future reversal
of temporary differences, and available tax planning
strategies.
The Company recognizes positions taken
or expected to be
taken in a tax
return in accordance with existing accounting
guidance on
income taxes
which prescribes
a recognition threshold
and measurement
process. Interest
and penalties
on
tax liabilities, if any, would
be recorded in interest expense and other operating non-interest
expense, respectively.
Impairment of Long-Lived Assets
The Company's long-lived
assets, such as premises
and equipment, are reviewed
for impairment whenever
events or
changes in circumstances
indicate that
the carrying
amount of
an asset may
not be recoverable.
Recoverability of
assets
to be held and
used is measured by a
comparison of the carrying amount of
an asset to estimated undiscounted future
cash
flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an
impairment charge
is recognized
by the
amount by
which the
carrying amount
of the
asset exceeds
the fair
value of
the
asset. Assets
to be
disposed of
would be
separately
presented in
the Consolidated
Balance Sheets
and reported
at the
lower of
the carrying
amount or
fair value
less costs
to sell
and are
no longer
depreciated. The
assets and
liabilities of
a
disposal group classified as held for
sale would be presented separately in
the appropriate asset and liability sections of
the
Consolidated Balance Sheets.
Transfer of Financial Assets
Transfers of
financial assets
are accounted for
as sales,
when control over
the assets
has been surrendered.
Control
over
transferred
assets
is
deemed
to
be
surrendered
when
(i)
the
assets
have
been
isolated
from
the
Company
-
put
presumptively
beyond
the
reach
of
the
transferor
and
its
creditors,
even
in
bankruptcy
or
other
receivership,
(ii)
the
transferee obtains
the right
(free of conditions
that constrain
it from taking
advantage of
that right)
to pledge
or exchange
the transferred
assets,
and
(iii) the
Company
does not
maintain effective
control
over
the transferred
assets
through
an
agreement to repurchase them before their maturity or
the ability to unilaterally cause the holder to return specific assets.
Comprehensive Income
Under
GAAP,
certain
changes
in
assets
and
liabilities,
such
as
unrealized
holding
gains
and
losses
on
securities
available-for-sale, are
excluded from
current period
earnings and
reported as
a separate
component of
the stockholders’
equity section of the Consolidated Balance
Sheets. Such items, along with net
income, are components of comprehensive
loss. Additionally,
any unrealized
gains or
losses on
transfers
of investment
securities
from available-for-sale
to held-to-
maturity are
recorded to
accumulated other
comprehensive income
(loss) on
the date
of transfer
and amortized
over the
remaining life
of each
security.
The amortization
of the
unrealized gain
or loss
on transferred
securities
is reported
as a
component of comprehensive income (loss). See Note 2 “Investment
Securities” for further discussion.
The change in
fair value on
the interest rate
swaps is 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. See Note 12.
“Derivatives” for further discussion.
Advertising Costs
Advertising costs are expensed as incurred.
Table of Contents
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
90
USCB Financial Holdings, Inc.
2025 10-K
Earnings per Common Share
Basic earnings
per common
share is
net income
available to
common stockholders
divided by
the weighted
average
number of
common shares outstanding
during the period.
Diluted earnings per
common share include
the effect of
additional
potential common
shares issuable
under vested
stock options
and unvested
shares of
restricted stock.
Basic and
diluted
earnings
per
share
are
updated
to
reflect
the
effect
of
stock
splits
as
occurred.
See
Note
15
“Earnings
Per
Share”
for
additional information on earnings per common share.
Interest Income
Interest income is recognized as earned, based upon the principal
amount outstanding, on an accrual basis.
Operating Segments
While the Company monitors
the revenue streams of
the various products
and services, operations
are managed and
financial performance
is evaluated on
a Company wide
basis. Operating results
of the individual
products are
not used to
make resource allocations or performance decisions by
Company management.
Stock-Based Compensation
Stock-based compensation accounting guidance requires that the compensation
cost relating to share-based payment
transactions be recognized in the accompanying Consolidated
Financial Statements. That cost will be measured
based on
the grant
date fair
value of
the equity
or liability
instruments issued.
The stock-based
compensation accounting
guidance
covers
a
wide
range
of
share-based
compensation
arrangements
including
stock
options,
restricted
share
awards,
performance-based awards, share appreciation rights, and
employee share purchase plans.
The stock-based compensation accounting guidance
requires that compensation cost
for all stock
awards be calculated
and recognized over
the employees' service
period, generally defined
as the vesting
period. For awards
with graded vesting,
compensation cost
is recognized
on
a straight-line
basis over
the
requisite service
period for
the
entire award.
A Black-
Scholes model is used to estimate the fair value of stock
options.
Loss Contingencies
Loss
contingencies,
including
claims
and
legal
actions
arising
in
the
normal
course
of
business,
are
recorded
as
liabilities when the
likelihood of loss is
probable, and an
amount or range of
loss can be
reasonably estimated. 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.
See Note 20 “Loss Contingencies” for further details.
Dividend Restrictions
Banking
regulations
require
maintaining
certain
capital
levels
and
may
limit
the
dividends
paid
by
the
Bank
to
the
Company or by the Company to the stockholders.
Fair Value Measurements
Fair values
of financial
instruments are
estimated using
relevant market
information and
other assumptions,
as more
fully disclosed in Note
13 “Fair Value
Measurements”. Fair value estimates
involve uncertainties and
matters of significant
judgment. Changes in assumptions or in market conditions
could significantly affect the estimates.
Derivative Instruments
Derivative financial instruments are
carried at fair
value and reflect
the estimated amount that
would have been
received
to
terminate
these
contracts
at
the
reporting
date
based
upon
pricing
or
valuation
models
applied
to
current
market
information.
Rate Swaps Designated as Cash Flow Hedges
Table of Contents
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
91
USCB Financial Holdings, Inc.
2025 10-K
The changes in
fair value on
the interest rate
swap is 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. As of December 31, 2025,
the cash flow hedge was effective.
Interest Rate Swaps Designated as Fair Value
Hedges
The
changes
in
fair
value
on
these
interest
rate
swaps
are
recorded
in
other
assets
or
accrued
interest
and
other
liabilities with a corresponding recognition in the assets
being hedged.
Interest Rate Swaps
The Company enters into interest rate swaps
agreements to provide commercial loan clients
the ability to swap from a
variable interest rate to a fixed rate. The Company
enters into a floating-rate loan with a customer with
a separately issued
swap agreement allowing
the customer to convert
floating payments on
the loan into a
fixed interest rate. To
mitigate risk,
the Company enters into a matching agreement with
a third party to offset the exposure on
the customer agreement. These
swaps are
not considered
to be
qualified hedging
transactions and
the unmatched
unrealized gain
or loss
is recorded
in
other non-interest income.
Interest
rate
swap
agreements
are
used
by
the
Company
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.
Revenue from Contracts with Customers
Revenue from
contracts with customers
is recognized in
an amount that
reflects the consideration
the Company expects
to receive for the
services the Company
provides to its
customers. The main
revenue earned by
the Company from
loans
and investment
securities
are excluded
from the
accounting standard
update “Revenue
from Contracts
with Customers”.
Deposit and
service charge
fees, consisting
of primarily
monthly maintenance
fees, wire
fees, ATM
interchange fees
and
other transaction-based fees, are the most
significant types of revenue within
the accounting standard update.
Revenue is
recognized when the service provided by the
Company is complete. The aggregate amount
of revenue within the scope of
this standard that is received from sources other than deposit
service charges and fees is not material.
Cash Flow Statement
The Company reports the net activity rather than gross activity in the Consolidated
Statements of Cash Flows. The net
cash
flows
are
reported
for
loans
held
for
investment,
accrued
interest
receivable,
deferred
tax
assets,
other
assets,
customer deposits, accrued
interest payable, accrued
interest and other
liabilities, exercise of
options, and proceeds
from
the issuance of Class A common shares and subordinated
debt.
Reclassifications
Certain
amounts
in
the
Consolidated
Financial
Statements
have
been
reclassified
to
conform
to
the
current
presentation. Reclassifications had no impact on the net income
or stockholders’ equity of the Company.
Recently Issued Accounting Standards
Issued and Adopted
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,
- 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.
Table of Contents
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
92
USCB Financial Holdings, Inc.
2025 10-K
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):
December 31, 2025
Available-for-sale:
Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Fair Value
U.S. Government Agency
$
15,169
$
18
$
(1,043)
$
14,144
Collateralized mortgage obligations
92,871
-
(17,043)
75,828
Mortgage-backed securities - residential
35,865
135
(6,083)
29,917
Mortgage-backed securities - commercial
174,622
347
(6,861)
168,108
Municipal securities
5,196
-
(933)
4,263
Bank subordinated debt securities
15,284
189
(243)
15,230
$
339,007
$
689
$
(32,206)
$
307,490
December 31, 2025
Held-to-maturity:
Amortized
Cost
Unrecognized
Gains
Unrecognized
Losses
Fair Value
U.S. Government Agency
$
41,158
$
91
$
(3,279)
$
37,970
Collateralized mortgage obligations
51,431
854
(5,499)
46,786
Mortgage-backed securities - residential
37,221
760
(3,263)
34,718
Mortgage-backed securities - commercial
15,088
-
(1,037)
14,051
Corporate bonds
9,045
-
(62)
8,983
$
153,943
$
1,705
$
(13,140)
$
142,508
Allowance for credit losses - securities held-to-maturity
(2)
Securities held-to maturity, net of allowance for credit losses
$
153,941
December 31, 2024
Available-for-sale:
Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Fair Value
U.S. Government Agency
$
14,279
$
14
$
(1,668)
$
12,625
Collateralized mortgage obligations
101,808
15
(22,918)
78,905
Mortgage-backed securities - residential
58,995
1
(12,063)
46,933
Mortgage-backed securities - commercial
86,604
40
(7,905)
78,739
Municipal securities
24,925
-
(5,614)
19,311
Bank subordinated debt securities
24,314
438
(1,044)
23,708
$
310,925
$
508
$
(51,212)
$
260,221
December 31, 2024
Held-to-maturity:
Amortized
Cost
Unrecognized
Gains
Unrecognized
Losses
Fair Value
U.S. Government Agency
$
42,538
$
-
$
(5,094)
$
37,444
Collateralized mortgage obligations
56,987
57
(7,785)
49,259
Mortgage-backed securities - residential
40,681
53
(4,613)
36,121
Mortgage-backed securities - commercial
15,272
-
(1,385)
13,887
Corporate bonds
9,222
-
(393)
8,829
164,700
$
110
$
(19,270)
$
145,540
Allowance for credit losses - securities held-to-maturity
(6)
Securities held-to maturity, net of allowance for credit losses
$
164,694
Table of Contents
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
93
USCB Financial Holdings, Inc.
2025 10-K
Transfers of
debt securities
into the HTM
category from
the available for
sale (“AFS”)
category are made
at fair value
as of the date
of transfer. The unrealized gain or loss
at the date of
transfer is retained in accumulated other
comprehensive
loss
(“AOCL”)
and in
the
carrying
value
of the
HTM securities
and there
is no
impact
to net
income.
Such
amounts
are
amortized over the remaining life of the securities. The
Company made two transfers from AFS to HTM portfolios
in 2022.
There were
no
investment securities that
were transferred from
AFS to HTM for
the years ended December
31, 2025,
and 2024.
For the
years
ended December
31,
2025 and
2024,
total amortization
out of
AOCL
for the
net unrealized
losses
on
securities
transferred
from
AFS
to
HTM
in
2022
was
$
266
thousand
and
$
267
thousand,
respectively.
The
remaining
balance
of
the
net
unrealized
losses
retained
in
AOCL
was
$
9.0
million
at
December 31,
2025
and
$
9.3
million
at
December 31, 2024. The fair value of the transferred securities was $
99.6
million at December 31, 2025 and $
101.2
million
at December 31, 2024.
Gains
and
losses
on
the
sale
of
securities
are
recorded
on
the
trade
date
and
are
determined
on
the
specific
identification basis. The following table presents the proceeds, realized gross gains and realized gross losses on sales and
calls of AFS debt securities for the years ended December
31, 2025 and 2024 (in thousands):
Available-for-sale:
2025
2024
Proceeds from sales and call of securities
$
82,497
$
34,753
Gross gains
$
400
$
195
Gross losses
(7,926)
(181)
Net realized (losses) gains
$
(7,526)
$
14
The
amortized
cost
and
fair
value
of
investment
securities,
by
contractual
maturity,
are
shown
below
for
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
December 31, 2025:
Amortized
Cost
Fair Value
Amortized
Cost
Fair Value
Due within one year
$
-
$
-
$
9,045
$
8,983
Due after one year through five years
4,473
4,504
-
-
Due after five years through ten years
16,007
14,989
-
-
Due after ten years
-
-
-
-
U.S. Government Agency
15,169
14,144
41,158
37,970
Collateralized mortgage obligations
92,871
75,828
51,431
46,786
Mortgage-backed securities - residential
35,865
29,917
37,221
34,718
Mortgage-backed securities - commercial
174,622
168,108
15,088
14,051
$
339,007
$
307,490
$
153,943
$
142,508
At December 31,
2025 and
2024, there
were no
securities to
any one
issuer in
an amount
greater than
10% of
total
stockholders’
equity
other
than
the
U.S.
Government
and
U.S.
Government
Agencies.
All
the
collateralized
mortgage
obligations and mortgage-backed securities
are issued by U.S. government
sponsored entities at December
31, 2025 and
2024.
Table of Contents
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
94
USCB Financial Holdings, Inc.
2025 10-K
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):
December 31, 2025
Less than 12 months
12 months or more
Total
Available-for-sale:
Fair Value
Unrealized
Losses
Fair Value
Unrealized
Losses
Fair Value
Unrealized
Losses
U.S. Government Agency
$
5,937
$
(59)
$
5,649
$
(984)
$
11,586
$
(1,043)
Collateralized mortgage obligations
8,929
(93)
66,899
(16,950)
75,828
(17,043)
Mortgage-backed securities - residential
-
-
22,695
(6,083)
22,695
(6,083)
Mortgage-backed securities -
commercial
59,655
(477)
56,852
(6,384)
116,507
(6,861)
Municipal securities
-
-
4,263
(933)
4,263
(933)
Bank subordinated debt securities
2,020
(4)
7,234
(239)
9,254
(243)
$
76,541
$
(633)
$
163,592
$
(31,573)
$
240,133
$
(32,206)
December 31, 2024
Less than 12 months
12 months or more
Total
Available-for-sale:
Fair Value
Unrealized
Losses
Fair Value
Unrealized
Losses
Fair Value
Unrealized
Losses
U.S. Government Agency
$
4,468
$
(76)
$
7,451
$
(1,592)
$
11,919
$
(1,668)
Collateralized mortgage obligations
3,101
(23)
72,952
(22,895)
76,053
(22,918)
Mortgage-backed securities - residential
972
(11)
44,600
(12,052)
45,572
(12,063)
Mortgage-backed securities - commercial
44,410
(1,266)
27,875
(6,639)
72,285
(7,905)
Municipal securities
-
-
19,311
(5,614)
19,311
(5,614)
Bank subordinated debt securities
-
-
14,352
(1,044)
14,352
(1,044)
$
52,951
$
(1,376)
$
186,541
$
(49,836)
$
239,492
$
(51,212)
At December 31, 2025, the Company had $
32.2
million of unrealized losses in its AFS securities portfolio, which
had a
fair
value
of
$
240.1
million
with
respect
to
the
securities
with
unrealized
losses.
Mortgage-backed
securities
and
collateralized
mortgage
obligations
issued
by
U.S.
government-sponsored
entities
accounted
for
$
31.0
million
of
the
unrealized losses and had
a fair value of $
226.6
million. These unrealized
losses were primarily attributable
to changes in
interest rates
since the
time of
purchase. The
contractual cash
flows for
these securities are
guaranteed by
U.S. Government
Agencies
and
U.S.
government-sponsored
entities.
Municipal
bonds
had
unrealized
losses
of
$
933
thousand
and
a
fair
value of $
4.3
million. These
securities are
of high credit
quality,
and the decline
in fair value
was not
attributable to
credit
deterioration. Bank
subordinated debt
securities had
unrealized losses
of $
243
thousand and
a fair
value of
$
9.3
million,
primarily due
to changes
in interest
rate market
conditions since
purchase. Based
on the
assessment of
these mitigating
factors,
management
believes
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.
The measurement
of expected credit
losses under
the CECL
methodology is
applicable to financial
assets measured
at amortized cost, including loan receivables and HTM
debt securities.
CECL requires a loss reserve for securities
classified as HTM. The reserve should reflect
historical credit performance
as well as the impact of projected economic forecast.
For U.S. Government bonds and U.S. Agency issued
bonds in HTM,
the explicit guarantee of the U.S.
Government is sufficient to conclude that a
credit loss reserve is not required.
The 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
probability of
default/loss
given default
(“PD/LGD”)
approach. PD
represents the
likelihood a
borrower
will
default.
Within
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.
Table of Contents
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
95
USCB Financial Holdings, Inc.
2025 10-K
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 December
31, 2025 and
December 31, 2024,
all HTM securities
held
by the Company were rated investment grade.
At December 31, 2025, HTM securities included $
144.9
million of U.S. Government and U.S.
Agency issued bonds and
mortgage-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
$
9.0
million
in
investment
grade
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 $
2
thousand ACL as
of December 31, 2025.
The book value
for debt securities
classified as HTM
represents amortized
cost less ACL.
The Company determined that an ACL on its debt securities available for sale as was not required as of December
31,
2025 and December 31, 2024.
In 2018, the Company
became a Qualified Public Depository
(“QPD”) with the State
of Florida. As a
QPD, the Company
has the
authority to
legally 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
25
% and
50
% of the average
outstanding amount of
uninsured
deposits
at
December 31,
2025
and
December 31,
2024,
respectively.
The
Company
must
also
maintain
a
minimum amount of pledged securities to be in the program
related to these deposits.
At December 31, 2025, the Company had
fifteen
securities with an aggregate fair value of
$
43.5
million pledged to the
State of Florida
under the public
funds program. The Company
held a total of
$
167.7
million in public
funds at December 31,
2025.
At December 31,
2024, the
Company had
twenty-one
securities with
an aggregate
fair value
of $
66.1
million pledged
to
the
State
of
Florida
under
the
public
funds
program.
The
Company
held
a
total
of
$
110.5
million
in
public
funds
at
December 31, 2024.
3.
LOANS
The following table is a summary of the distribution of loans
held for investment by type (in thousands):
December 31, 2025
December 31, 2024
Total
Percent of
Total
Total
Percent of
Total
Residential Real Estate
$
307,692
14.1
%
$
289,961
14.8
%
Commercial Real Estate
1,244,835
57.0
%
1,136,417
57.8
%
Commercial and Industrial
295,548
13.5
%
258,311
13.1
%
Correspondent Banks
127,968
5.9
%
82,438
4.2
%
Consumer and Other
207,215
9.5
%
198,091
10.1
%
Total
gross loans
2,183,258
100.0
%
1,965,218
100.0
%
Plus: Deferred costs/fees
5,999
7,630
Total
loans held for investment, net of deferred costs/fees
2,189,257
1,972,848
Less: Allowance for credit losses
25,500
24,070
Total
loans held for investment, net of allowance
$
2,163,757
$
1,948,778
At December 31, 2025 and 2024, the Company had $
561.4
million and $
518.8
million, respectively, of commercial real
estate and residential mortgage loans pledged as collateral on lines of credit with the FHLB and the
Federal Reserve Bank
of Atlanta. At December 31, 2025 and 2024, the Company
had
no
real estate loans in the process of foreclosure.
Table of Contents
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
96
USCB Financial Holdings, Inc.
2025 10-K
Allowance for Credit Losses
Changes in the ACL for the years ended December 31, 2025
and 2024 are as follows (in thousands):
Residential
Real Estate
Commercial
Real Estate
Commercial
and Industrial
Correspondent
Banks
Consumer
and Other
Total
December 31, 2025:
Beginning balance
$
5,121
$
8,788
$
4,633
$
654
$
4,874
$
24,070
Provision for credit losses
(1)
763
688
164
361
143
2,119
Recoveries
24
-
17
-
2
43
Charge-offs
-
-
-
-
(732)
(732)
Ending Balance
$
5,908
$
9,476
$
4,814
$
1,015
$
4,287
$
25,500
December 31, 2024:
Beginning balance
$
2,695
$
10,366
$
3,974
$
911
$
3,138
$
21,084
Provision for credit losses
(2)
2,403
(1,578)
640
(257)
1,752
2,960
Recoveries
23
-
19
-
3
45
Charge-offs
-
-
-
-
(19)
(19)
Ending Balance
$
5,121
$
8,788
$
4,633
$
654
$
4,874
$
24,070
(1) Provision for credit losses excludes $
182
thousand provision for unfunded commitments included
in accrued interest and other liabilities and $
4
thousand release for investment securities held to
maturity.
(2) Provision for credit losses excludes $
199
thousand provision for unfunded commitments included
in accrued interest and other liabilities and $
2
thousand release for investment securities held to
maturity.
Table of Contents
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
97
USCB Financial Holdings, Inc.
2025 10-K
At December
31,
2025,
the
ACL
for
loans
was
$
25.5
million
compared
to
$
24.1
million
at
December
31,
2024.
The
increase of $
1.4
million or 5.9% in the ACL was primarily due to loan growth.
Charge offs
related to
loans for
the year
ended December 31,
2025 were
$
23
thousand originated
in 2025
and $
709
thousand originated in 2022. Charge offs for the year
ended December 31, 2024 were $
19
thousand originated in 2024.
Allowance for credit losses and the outstanding balances in
loans as of December 31, 2025 and 2024 are as
follows (in
thousands):
Residential
Real Estate
Commercial
Real Estate
Commercial
and Industrial
Correspondent
Banks
Consumer
and Other
Total
December 31, 2025:
Allowance for credit losses:
Individually evaluated
$
27
$
-
$
84
$
-
$
-
$
111
Collectively evaluated
5,881
9,476
4,730
1,015
4,287
25,389
Balances, end of period
$
5,908
$
9,476
$
4,814
$
1,015
$
4,287
$
25,500
Loans:
Individually evaluated
$
5,583
$
-
$
1,265
$
-
$
-
$
6,848
Collectively evaluated
302,109
1,244,835
294,283
127,968
207,215
2,176,410
Balances, end of period
$
307,692
$
1,244,835
$
295,548
$
127,968
$
207,215
$
2,183,258
December 31, 2024:
Allowance for credit losses:
Individually evaluated
$
40
$
-
$
27
$
-
$
651
$
718
Collectively evaluated
5,081
8,788
4,606
654
4,223
23,352
Balances, end of period
$
5,121
$
8,788
$
4,633
$
654
$
4,874
$
24,070
Loans:
Individually evaluated
$
6,788
$
-
$
690
$
-
$
1,990
$
9,468
Collectively evaluated
283,173
1,136,417
257,621
82,438
196,101
1,955,750
Balances, end of period
$
289,961
$
1,136,417
$
258,311
$
82,438
$
198,091
$
1,965,218
Credit Quality Indicators
The Company grades loans based on the estimated capability of the borrower to repay the contractual obligation of the
loan agreement 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
– Loans classified as special mention have a potential weakness
that deserves management’s
close attention. If left uncorrected, these potential weaknesses
may result in deterioration of the repayment
prospects for the loan or of the institution’s
credit position at some future date.
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
– Loans classified as doubtful have all the weaknesses inherent
in those classified at substandard, with
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.
Table of Contents
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
98
USCB Financial Holdings, Inc.
2025 10-K
Loss
– Loans classified as loss are considered uncollectible.
Loan credit exposures by internally assigned grades are
presented below for the periods indicated (in thousands):
As of December 31, 2025
Term Loans by Origination Year
Revolving
Loans
Total
2025
2024
2023
2022
2021
Prior
Residential real estate
Pass
$
65,582
$
83,426
$
32,139
$
23,685
$
21,056
$
58,220
$
20,168
$
304,276
Special Mention
128
-
-
587
-
201
-
916
Substandard
-
917
1,468
-
-
115
-
2,500
Total
65,710
84,343
33,607
24,272
21,056
58,536
20,168
307,692
Commercial real estate
Pass
241,028
184,323
109,465
281,985
134,663
273,483
5,876
1,230,823
Special Mention
-
-
8,451
-
-
3,162
-
11,613
Substandard
-
-
-
-
1,724
675
-
2,399
Total
241,028
184,323
117,916
281,985
136,387
277,320
5,876
1,244,835
Commercial and
industrial
Pass
75,867
63,178
58,060
32,118
28,090
12,314
23,542
293,169
Special Mention
-
72
-
-
835
-
-
907
Substandard
-
-
389
-
445
638
-
1,472
Total
75,867
63,250
58,449
32,118
29,370
12,952
23,542
295,548
Correspondent banks
Pass
127,968
-
-
-
-
-
-
127,968
Total
127,968
-
-
-
-
-
-
127,968
Consumer and other
loans
Pass
59,276
34,309
36,808
51,091
23,214
747
1,770
207,215
Substandard
-
-
-
-
-
-
-
-
Total
59,276
34,309
36,808
51,091
23,214
747
1,770
207,215
Total
Loans
Pass
569,721
365,236
236,472
388,879
207,023
344,764
51,356
2,163,451
Special Mention
128
72
8,451
587
835
3,363
-
13,436
Substandard
-
917
1,857
-
2,169
1,428
-
6,371
Doubtful
-
-
-
-
-
-
-
-
Total
$
569,849
$
366,225
$
246,780
$
389,466
$
210,027
$
349,555
$
51,356
$
2,183,258
Table of Contents
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
99
USCB Financial Holdings, Inc.
2025 10-K
As of December 31, 2024
Term Loans by Origination Year
Revolving
Loans
Total
2024
2023
2022
2021
2020
Prior
Residential real estate
Pass
$
109,590
$
39,666
$
34,315
$
23,039
$
5,791
$
66,115
$
10,885
$
289,401
Substandard
-
-
-
-
-
560
-
560
Total
109,590
39,666
34,315
23,039
5,791
66,675
10,885
289,961
Commercial real estate
Pass
175,023
130,503
317,971
175,535
98,695
231,558
4,680
1,133,965
Substandard
-
-
-
1,765
687
-
-
2,452
Total
175,023
130,503
317,971
177,300
99,382
231,558
4,680
1,136,417
Commercial and
industrial
Pass
68,405
80,644
33,962
30,495
3,891
11,839
26,795
256,031
Substandard
-
-
-
519
-
1,093
668
2,280
Total
68,405
80,644
33,962
31,014
3,891
12,932
27,463
258,311
Correspondent banks
Pass
82,438
-
-
-
-
-
-
82,438
Total
82,438
-
-
-
-
-
-
82,438
Consumer and other
loans
Pass
40,921
51,392
65,603
35,181
491
815
1,698
196,101
Substandard
-
-
1,990
-
-
-
-
1,990
Total
40,921
51,392
67,593
35,181
491
815
1,698
198,091
Total
Loans
Pass
476,377
302,205
451,851
264,250
108,868
310,327
44,058
1,957,936
Special Mention
-
-
-
-
-
-
-
-
Substandard
-
-
1,990
2,284
687
1,653
668
7,282
Doubtful
-
-
-
-
-
-
-
-
Total
$
476,377
$
302,205
$
453,841
$
266,534
$
109,555
$
311,980
$
44,726
$
1,965,218
Table of Contents
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
100
USCB Financial Holdings, Inc.
2025 10-K
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 loans.
The
following table include an aging analysis of accruing
loans and total non-accruing loans as of December 31, 2025 and 2024
(in thousands):
Accruing
As of December 31, 2025:
Current
Past Due
30-89 Days
Past Due
90 Days or
more and
Still
Accruing
Total
Accruing
Non-Accrual
Total Loans
Residential real estate:
Home equity line of credit and other
$
1,538
$
-
$
-
$
1,538
$
-
$
1,538
1-4 family residential
238,852
1,150
-
240,002
2,385
242,387
Condo residential
62,364
1,288
-
63,652
115
63,767
302,754
2,438
-
305,192
2,500
307,692
Commercial real estate:
Land and construction
83,305
-
-
83,305
-
83,305
Multi-family residential
254,562
-
-
254,562
-
254,562
Condo commercial
61,525
-
-
61,525
-
61,525
Commercial property
845,003
440
-
845,443
-
845,443
Leasehold improvements
-
-
-
-
-
-
1,244,395
440
-
1,244,835
-
1,244,835
Commercial and industrial:
Secured
272,900
71
-
272,971
638
273,609
Unsecured
21,939
-
-
21,939
-
21,939
294,839
71
-
294,910
638
295,548
Correspondent banks
127,968
-
-
127,968
-
127,968
Consumer and other
207,215
-
-
207,215
-
207,215
Total
$
2,177,171
$
2,949
$
-
$
2,180,120
$
3,138
$
2,183,258
Table of Contents
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
101
USCB Financial Holdings, Inc.
2025 10-K
Accruing
As of December 31, 2024:
Current
Past Due
30-89 Days
Past Due
90 Days
or more
and Still
Accruing
Total
Accruing
Non-
Accrual
Total Loans
Residential real estate:
Home equity line of credit and other
$
1,120
$
-
$
-
$
1,120
$
-
$
1,120
1-4 family residential
225,334
2,886
-
228,220
-
228,220
Condo residential
58,956
1,351
-
60,307
314
60,621
285,410
4,237
-
289,647
314
289,961
Commercial real estate:
Land and construction
40,090
-
-
40,090
-
40,090
Multi-family residential
214,912
-
-
214,912
-
214,912
Condo commercial
57,402
-
-
57,402
-
57,402
Commercial property
823,326
687
-
824,013
-
824,013
Leasehold improvements
-
-
-
-
-
-
1,135,730
687
-
1,136,417
-
1,136,417
Commercial and industrial:
Secured
232,779
521
-
233,300
403
233,703
Unsecured
24,608
-
-
24,608
-
24,608
257,387
521
-
257,908
403
258,311
Correspondent banks
82,438
-
-
82,438
-
82,438
Consumer and other
196,101
-
-
196,101
1,990
198,091
Total
$
1,957,066
$
5,445
$
-
$
1,962,511
$
2,707
$
1,965,218
Non-accrual Status
The following
table includes
the amortized
cost
basis of
loans on
non-accrual
status
and loans
past due
90 days
or
more and still accruing as of December 31, 2025 and 2024 (in
thousands):
December 31, 2025
Nonaccrual Loans
With No Related
Allowance
Nonaccrual Loans
With Related
Allowance
Total
Non-accruals
Loans Past Due
90
Days or more and
Still Accruing
Residential real estate
$
2,500
$
-
$
2,500
$
-
Commercial and industrial
563
75
638
-
Total
$
3,063
$
75
$
3,138
$
-
December 31, 2024
Nonaccrual Loans
With No Related
Allowance
Nonaccrual Loans
With Related
Allowance
Total
Non-accruals
Loans Past Due
90
Days or more and
Still Accruing
Residential real estate
$
314
$
-
$
314
$
-
Commercial and industrial
-
403
403
$
-
Consumer and other
-
1,990
1,990
-
Total
$
314
$
2,393
$
2,707
$
-
Accrued interest
receivable is
excluded from
the estimate
of credit
losses. There
was
no
interest income
recognized
attributable
to
non-accrual
loans
outstanding
during
the
years
ended
December 31,
2025
and
2024.
Interest
income
on
Table of Contents
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
102
USCB Financial Holdings, Inc.
2025 10-K
these loans
for the
years ended
December 31, 2025
and 2024,
would have
been approximately
$
114
thousand and
$
84
thousand, respectively,
had these loans performed in accordance with their
original terms.
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. There
were
four
collateral dependent
loans as of December 31, 2025 and
two
collateral dependent loans as of December
31, 2024.
The following
table includes
the amortized cost
basis of
collateral dependent
loans related
to borrowers
experiencing
financial difficulty by type of collateral as of December
31, 2025 and 2024 (in thousands):
December 31, 2025
Collateral Type
Residential Real Estate
Specific Reserves
Residential real estate
$
2,583
$
-
Total
$
2,583
$
-
December 31, 2024
Collateral Type
Boat
Specific Reserves
Consumer and other loans
$
1,990
$
651
Total
$
1,990
$
651
Management 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 following
table present
newly restructured
loans, by
type of
modification, which
occurred during
the years
ended
December 31, 2025 and December 31, 2024 (dollars
in thousands):
December 31, 2025
Amortized Cost Prior to Modification
Amortized Cost After Modification
Number of
Loans
Combination
Modifications
Total
Modifications
Number of
Loans
Combination
Modifications
Total
Modifications
Commercial and industrial
2
$
969
$
969
2
$
883
$
883
2
$
969
$
969
2
$
883
$
883
December 31, 2024
Amortized Cost Prior to Modification
Amortized Cost After Modification
Number of
Loans
Combination
Modifications
Total
Modifications
Number of
Loans
Combination
Modifications
Total
Modifications
Commercial and industrial
1
$
468
$
468
1
$
468
$
468
1
$
468
$
468
1
$
468
$
468
The
two
loan
modifications
for
the
borrowers
experiencing
financial
difficulty
at
December 31,
2025
included
a
combination of
rate, term
and principal
modifications. On
one loan, the
rate was
modified from
a variable rate
to a
7.75
%
fixed rate and the term was
modified from October 2025
to January 2028. On the
second loan, the rate was
modified from
a variable rate to a
7.20
% fixed rate and there was a principal reduction
of $
86
thousand.
Table of Contents
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
103
USCB Financial Holdings, Inc.
2025 10-K
The loan modification
for the
borrower experiencing
financial difficulty
at December 31,
2024, included
a combination
of rate and maturity modifications.
The rate was modified
from a variable rate
to a fixed rate
of
8.0
%. The original maturity
of September 2029 was extended to January 2034.
There were
no
existing loan
modifications
that subsequently
defaulted
during either
year ended
December 31,
2025
and 2024.
4.
LEASES
The
Company
enters
into
leases
in
the
normal
course
of
business
primarily
for
banking
centers
and
back-office
operations. As of
December 31, 2025, the
Company leased nine
of the ten
banking centers and
the headquarter building.
The Company
is obligated
under non-cancelable
operating leases
for these
premises with
expiration dates
ranging from
2026 to 2036. Many of these leases have extension
clauses which the Company could exercise which
would extend these
expiration dates.
The Company
has classified
all leases as
operating leases.
Lease expense
for operating
leases are
recognized on
a
straight-line basis over
the lease term.
Right-of-use (“ROU”)
assets represent the
right to use
the underlying
asset for the
lease
term
and
lease
liabilities
represent
the
obligation
to
make
lease
payments
arising
from
the
lease.
The
Company
elected the short-term
lease recognition exemption
for all leases
that qualify,
meaning those with
terms under 12
months.
ROU assets or lease liabilities are not to be recognized
for short-term leases.
ROU assets and
lease liabilities are
recognized at the lease
commencement date based on
the estimated present value
of lease payments over the lease term.
As
most
of
the
Company’s
leases
do
not
provide
an
implicit
rate,
the
incremental
borrowing
rate
based
on
the
information available
at commencement
date is
used.
The Company’s
incremental borrowing
rate is
based on
the FHLB
advances rate matching or nearing the lease term.
The following table presents the ROU assets and lease liabilities
as of December 31, 2025 and 2024 (in thousands):
December 31,
2025
2024
ROU assets:
Operating leases
$
5,519
$
8,451
Lease liabilities:
Operating leases
$
5,519
$
8,451
The weighted average remaining lease term and weighted average
discount rate as of December 31, 2025 and 2024:
December 31,
2025
2024
Weighted average remaining lease term (in years):
Operating leases
6.04
5.95
Weighted average discount rate:
Operating leases
2.94
%
2.94
%
Table of Contents
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
104
USCB Financial Holdings, Inc.
2025 10-K
Future lease payment obligations and a reconciliation to lease
liability as of December 31, 2025 (in thousands):
Total
2026
$
2,383
2027
951
2028
492
2029
478
Thereafter
2,509
Total
future minimum lease payments
6,813
Less: interest component
(1,294)
Total
lease liability
$
5,519
The lease cost for the years ended December 31, 2025
and 2024 (in thousands):
December 31,
2025
2024
Finance lease cost:
ROU assets amortization
$
2,932
$
2,972
Operating lease cost
823
742
Less: Sublease income
(85)
(82)
Total
lease cost, net
$
3,670
$
3,632
5.
PREMISES AND EQUIPMENT
A summary of premises and equipment are presented below
as of December 31, 2025 and 2024 (in thousands):
December 31,
2025
2024
Land
$
972
$
972
Building
1,952
1,952
Furniture, fixtures and equipment
9,313
9,137
Computer hardware and software
4,747
4,623
Leasehold improvements
10,587
10,584
Premises and equipment, gross
27,571
27,268
Accumulated depreciation and amortization
(23,324)
(22,705)
Premises and equipment, net
$
4,247
$
4,563
Depreciation
and
amortization
expense
was
$
619
thousand
and
$
587
thousand
for
the
years
ended
December 31,
2025 and 2024, respectively.
Table of Contents
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
105
USCB Financial Holdings, Inc.
2025 10-K
6.
INCOME TAXES
The Company’s pre-tax
income and provision
for income taxes
is presented in
the following table
for the years
ended
December 31, 2025 and 2024 (in thousands):
December 31,
2025
2024
Pre-tax income:
Domestic
$
35,916
$
32,477
Total pre-tax income
$
35,916
$
32,477
Current tax expense:
Federal
$
1,213
$
-
State
1,857
-
Total
current
3,070
-
Deferred tax expense:
Federal
4,907
6,122
State
1,839
1,681
Total
deferred
6,746
7,803
Total
income tax expense
$
9,816
$
7,803
The actual income
tax expense for the
years ended December 31, 2025
and 2024 differs from
the statutory tax expense
for the year (computed by applying the U.S. federal
corporate tax rate of
21
% for 2025 and
21
% for 2024 to income before
provision for income taxes) as follows (in thousands):
2025
2024
Amount
% Pre-tax
Income
Amount
% Pre-tax
Income
Computed tax at the statutory federal income tax rate
$
7,542
21.00%
$
6,820
21.00%
State income taxes, net of federal tax benefit
(1)
2,767
7.70%
1,411
4.33%
Nontaxable or Nondeductible Items
Bank owned life insurance income
(495)
(1.38%)
(428)
(1.32%)
Other
2
0.01%
-
-
Other adjustments, net
-
-
-
-
Total
tax expense
$
9,816
27.33%
$
7,803
24.01%
(1) Taxes
in Florida made up the majority (greater than 50%) of the tax effect in this category.
Table of Contents
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
106
USCB Financial Holdings, Inc.
2025 10-K
The following table presents
the deferred tax assets
and deferred tax liabilities
as of December 31, 2025
and 2024 (in
thousands):
2025
2024
Deferred tax assets:
Net operating loss
$
1,039
$
9,276
Allowance for credit losses
6,463
6,100
Lease liability
1,399
2,142
Unrealized loss on available for sale securities
10,270
15,200
Depreciable property
-
38
Equity compensation
973
686
Accruals
721
520
Other, net
268
65
Deferred tax asset
$
21,133
$
34,027
Deferred tax liability:
Deferred loan cost
(1,520)
(1,934)
Lease right of use asset
(1,399)
(2,142)
Deferred expenses
(154)
(224)
Cash flow hedge
(5)
(81)
Depreciable property
(9)
-
Deferred tax liability
$
(3,087)
$
(4,381)
Net deferred tax asset
$
18,046
$
29,646
At December 31, 2025,
the Company had
approximately $
23.9
million of State
net operating loss carryforwards
expiring
in
various
amounts
from
2032
to
2036.
If
unused
after
2036,
their
utilization
is
limited
to
future
taxable
earnings
of
the
Company.
In assessing the
realizability of deferred
tax assets, management considered
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.
Management considers the scheduled reversal
of deferred tax liabilities, projected future taxable
income, and tax planning
strategies in making this assessment.
The U.S.
Federal jurisdiction
and Florida
are the
major tax
jurisdictions where
the Company
files income
tax returns.
The Company is generally no longer subject to U.S. Federal or
State examinations by tax authorities for years before 2022.
For
the
years
ended
December 31,
2025 and
2024,
the
Company
did
no
t have
any unrecognized
tax benefits
as a
result of
tax positions
taken during
a prior
period or
during the
current period.
Additionally,
no
interest or
penalties
were
recorded as a result of tax uncertainties.
Cash payments
for
federal
taxes
was
$
3.9
million
in
the
year
ended
December
31,
2025
and
$
0
in
the
year
ended
December 31, 2024.
Table of Contents
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
107
USCB Financial Holdings, Inc.
2025 10-K
7.
DEPOSITS
The following table presents deposits by type at December 31,
2025 and 2024 (in thousands):
December 31,
2025
2024
Non-interest bearing demand deposits
$
583,860
$
575,159
Interest-bearing demand deposits
46,989
50,648
Savings and money market deposits
1,186,422
1,180,809
Time deposits
527,809
367,388
Total
deposits
$
2,345,080
$
2,174,004
Time
deposits exceeding
the FDIC
deposit insurance
limit of
$250 thousand
per account
at December 31,
2025 and
2024 were $
111.5
million and $
94.0
million, respectively.
As
of
December 31,
2025,
the
Company
had
$
256.8
million
in
brokered
CDs
at
a
weighted
average
rate
of
3.93
%.
Brokered CDs were
11.0
% of total deposits at such date.
As
of
December 31,
2024,
the
Company
had
$
133.0
million
in
brokered
CDs
at
a
weighted
average
rate
of
4.38
%.
Brokered CDs were
6.1
% of total deposits at such date.
At December 31, 2025, the scheduled maturities of time deposits
were (in thousands):
December 31, 2025
Total
2026
$
472,111
2027
54,174
2028
613
2029
418
2030
493
$
527,809
At December 31,
2025 and
2024, the
aggregate amount
of demand
deposits reclassified
to loans
as overdrafts
was
$
372
thousand and $
403
thousand, respectively.
8.
FHLB ADVANCES
At December 31, 2025, FHLB advances were $
158.3
million and at December 31, 2024 were $
163.0
million.
Table of Contents
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
108
USCB Financial Holdings, Inc.
2025 10-K
The following table presents outstanding FHLB advances
at December 31, 2025 and 2024 (in thousands):
December 31, 2025
Interest Rate
Type of Rate
Maturity Date
Amount
3.77
%
Fixed
March 16, 2026
$
104,750
3.88
%
Variable
May 22, 2026
42,500
3.76
%
Fixed
January 24, 2028
11,000
$
158,250
December 31, 2024
Interest Rate
Type of Rate
Maturity Date
Amount
2.05
%
Fixed
March 27, 2025
$
10,000
1.07
%
Fixed
July 18, 2025
6,000
3.76
%
Fixed
January 24, 2028
11,000
3.77
%
Fixed
April 25, 2028
50,000
3.68
%
Fixed
September 13, 2027
21,000
3.79
%
Fixed
March 23, 2026
20,000
4.65
%
Fixed
February 13, 2025
45,000
$
163,000
The
FHLB
holds
a
blanket
lien
on
the
Company's
loan
portfolio
that
may
be
pledged
as
collateral
for
outstanding
advances, subject
to eligibility
under the
borrowing agreement.
The Company
may also
choose to
assign cash
balances
held at the FHLB as additional collateral. See Note 3 “Loans”
for further discussion on pledged loans.
The Board
of Governors
of the Federal
Reserve System,
on March
12, 2023,
announced the
creation of
a new
Bank
Term
Funding Program (“BTFP”). The BTFP offered loans of up to one year in length to banks, savings associations, credit
unions,
and
other
eligible
depository
institutions
pledging
U.S.
Treasuries,
U.S.
Agency
debt
and
mortgage-backed
securities, and other qualifying assets as collateral. The
BTFP program ceased making new loans as of March
2024.
On January 12, 2024, the Company borrowed $
80.0
million at a rate of
4.81
% with a maturity date of
January 10, 2025
,
under the BTFP program.
The Company paid
off the $
80.0
million under the
BTFP program during
the third quarter
2024.
The original maturity of this borrowing under the BTFP program was January 2025, and there are no remaining borrowings
by the Company under this program.
9.
SUBORDINATED
NOTES
On August 14, 2025,
the Company entered into a
Subordinated Note Purchase Agreement (the
“Purchase Agreement”)
with certain qualified
institutional buyers
(the “Purchasers”)
pursuant to which
the Company sold
and issued
$
40.0
million
in aggregate principal amount of its
7.625
% Fixed-to-Floating Rate Subordinated Notes due 2035 (the
“Notes”). The Notes
were issued
by the
Company to
the Purchasers
at a
price equal
to
100
% of
their face
amount. Net
proceeds were
$
39.2
million after an
estimated direct
issuance cost
of approximately $
760
thousand. Unamortized
issuance costs
are deferred
and amortized over
the
10
-year Subordinated note
term. As of
December 31, 2025,
the outstanding balance
of subordinated
notes, net of costs, totaled $
39.3
million and the average interest rate paid on the outstanding average balance net of
costs
was
7.32
%.
The Notes have a stated maturity of August 15, 2035, and
are redeemable, in whole or in part, on any interest payment
date on or after August 15,
2030, and at any time upon
the occurrences of certain events. The Notes
bear interest at a fixed
rate of
7.625
% per year,
from and including August 14, 2025,
to but excluding August 15, 2030
or earlier redemption date.
From and including August 15, 2030, to but excluding the maturity date or early redemption date, the interest rate will reset
quarterly at a variable rate equal to the
then current three-month term secured
overnight financing rate (“SOFR”), plus
422
basis points. If three-month SOFR cannot be determined on a given date, a different index shall be determined and used in
accordance with the terms of the Notes.
The Notes
were offered
and sold
by the
Company in
a private
placement transaction
in reliance
on exemptions
from
the
registration
requirements
of
the
Securities
Act,
pursuant
to
Section
4(a)(2)
of
the
Securities
Act
and
Rule
506(b)
of
Regulation D thereunder. On August 14, 2025, in
connection with the sale and
issuance of the Notes, the
Company entered
into a
Registration Rights
Agreement (the
“Registration
Rights Agreement”)
with the
Purchasers. Under
the terms
of the
Table of Contents
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
109
USCB Financial Holdings, Inc.
2025 10-K
Registration Rights
Agreement, the
Company agreed
to take
certain actions
to provide
for the
exchange of
the Notes
for
subordinated notes
that are
registered under
the Securities
Act and
have substantially
the same
terms as
the Notes
(the
“Exchange Offer”). Under
certain circumstances, if the
Company fails to meet
its obligations under the
Registration Rights
Agreement, it would be required to pay additional interest
to the holders of the Notes.
10.
EQUITY BASED AND OTHER COMPENSATION
PLANS
Employee 401(k) Plan
The Company
has an
401(k) plan
(the “Plan”)
covering substantially all
eligible employees.
The Plan
includes a
provision
that the employer may contribute
to the accounts of
eligible employees for whom
a salary deferral is made.
The Company
contributed
$
423
thousand
and
$
354
thousand
to
the
Plan
during
the
years
ended
December 31,
2025
and
2024,
respectively;
the
contributions
are
included
under
salaries
and
employee
benefits
in
the
Consolidated
Statements
of
Operations.
Stock-Based Compensation
In
2015,
the
Company's
stockholders
approved
the
2015
Equity
Incentive
Plan
(the
“2015
Option
Plan”),
which
authorized grants
of options
to purchase
up to
2,000,000
shares of
common stock.
The
2015
Option
Plan
provided that
vesting
schedules
will
be
determined
upon
issuance
of
options
by
the
Board
of
Directors
or
compensation
committee.
Options granted
under the
2015 Option
Plan have
a
10
-year life
and, in
no event
shall an
option be
exercisable after
the
expiration of
10
years from the
grant date. The
2015 Option Plan
had a
10
-year life and
initially would have
terminated in
- In
July 2020,
the stockholders
of the
Company approved
the amendment
of the
2015 Option
plan to
authorize the
issuance of
an additional
3,000,000
shares of
common stock and
extending the
life of
the plan
5
additional years, terminating
in 2030. The
authorized shares,
after being adjusted
to reflect the
1 for 5
reverse stock
split, totaled
1,000,000
shares. In
December
2021,
the
shareholders
of
the
Company
approved
the
amendment
of
the
2015
Option
Plan
to
authorize
the
issuance of
an additional
1,400,000
shares of
common stock
as well
as the
ability to
issue restricted
stock grants
(up to
600,000
shares) for a total of
2,400,000
shares as well as extending the term until December
2031.
At December 31,
2025, there
were
872,012
shares available
for grant
under the
2015 Option
Plan. At
December 31,
2024, there were
996,436
shares available for grant under the 2015 Option
Plan.
Stock Options
The Company recognizes compensation expense based
on the estimated grant date
fair value method using the
Black-
Scholes
option
pricing
model and
accounts
for this
expense
using
a prorated
straight-line
amortization
method over
the
vesting
period
of
the
option.
Stock-based
compensation
expense
is
based
on
awards
that
the
Company
expects
will
ultimately vest,
reduced by estimated forfeitures.
Estimated forfeitures consider the voluntary
termination trends as well as
actual option forfeitures.
The
compensation
expense
is
reported
under
salaries
and
employee
benefits
in
the
accompanying
Consolidated
Statements of Operations. Compensation expense totaling $
10
thousand was recognized for the year
ended December 31,
2025 and
$
278
thousand
for
the year
ended
December 31,
- There
was
no
related tax
benefit
for
the
years
ended
December 31, 2025 and 2024.
Unrecognized compensation cost
remaining on stock-based
compensation totaled $
0
and $
10
thousand for the
years
ended December 31, 2025 and 2024, respectively.
Cash
flows
resulting
from
excess
tax
benefits
are
required
to
be
classified
as
a
part
of
cash
flows
from
operating
activities. Excess tax benefits
are realized tax benefits
from tax deductions for
exercised options in
excess of the deferred
tax asset attributable to the compensation cost for such
options.
There were
no
options granted in 2025 and 2024.
Table of Contents
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
110
USCB Financial Holdings, Inc.
2025 10-K
The following table presents a summary of stock options
for the years ended December 31, 2025 and 2024:
Stock Options
Weighted Average
Exercise Price
Weighted Average
Remaining
Contractual Years
Aggregate Intrinsic
Value (in
thousands)
Balance at January 1, 2025
725,167
$
10.86
5.3
Granted
—
$
-
Exercised
(98,500)
$
8.15
Forfeitures
—
$
-
Balance at December 31, 2025
626,667
$
11.29
4.8
Exercisable at December 31, 2025
624,500
$
11.28
4.8
$
4,458
Balance at January 1, 2024
947,167
$
10.97
6.5
Granted
—
$
-
Exercised
(122,000)
$
10.81
Forfeitures
(100,000)
$
11.99
Balance at December 31, 2024
725,167
$
10.86
5.3
Exercisable at December 31, 2024
720,499
$
10.85
5.3
$
4,972
The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value of exercisable options at the
dates presented
(the
difference
between
the
valuation
of the
Company’s
stock
and the
exercise
price,
multiplied
by the
number of
options considered
in-the-money) that
would have
been received
by the
option holders
had all
option holders
exercised their options.
Restricted Stock
In 2025 , the Company issued
124,424
shares of Class A common stock to employees and
directors as restricted stock
awards pursuant
to the
Company's 2015
Option Plan.
Awards under
the 2015
Option Plan
may not
be sold
or otherwise
transferred until
certain restrictions have
lapsed. The Company
primarily issues restricted
stock awards with
a
3
-year vesting
period.
In 2024 , the Company issued
277,922
shares of Class A common stock to employees and
directors as restricted stock
awards pursuant
to the
Company's 2015
Option Plan.
Awards under
the 2015
Option Plan
may not
be sold
or otherwise
transferred until
certain restrictions have
lapsed. The Company
primarily issues restricted
stock awards with
a
3
-year vesting
period. However,
out of the
277,922
shares of Class
A common stock
issued pursuant to
restricted stock awards
in 2024,
150,000
shares issued in
October 2024 had
a modified vesting
period. The
150,000
shares vested
33
% of the
award in a
period of two months in 2024, and the
67
% remaining vests one-third in 2025 and in 2026.
The
total
share-based
compensation
expense
for
these
awards
is
determined
based
on
the
market
price
of
the
Company's common
stock as
of the date
of grant
applied to
the total
number of
shares granted
and is
amortized straight
line
over
the
vesting
period
which
is
generally
three
years
unless
the
Board
of
Directors
approves
a
different
vesting
schedule for
the grants.
As of
December 31, 2025,
unearned share
-based compensation
expense associated
with these
awards totaled $
3.6
million. As of
December 31, 2024, unearned
share-based compensation expense associated
with these
awards totaled $
4.3
million.
Compensation expense totaling $
3.0
million was recognized for
the year ended December 31, 2025
and reported under
salaries
and
benefits
in
the
accompanying
Consolidated
Statement
of
Operations.
Compensation
expense
totaling
$
1.9
thousand was recognized for the year ended December
31, 2024.
Table of Contents
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
111
USCB Financial Holdings, Inc.
2025 10-K
The following table presents a summary of restricted stock
awards for the years ended December 31, 2025 and 2024:
Restricted Stock
Weighted Average Grant Date
Fair Value
Balance at January 1, 2025
402,076
$
13.31
Granted
124,424
$
18.78
Forfeited
—
$
-
Vested
(120,237)
$
13.98
Balance at December 31, 2025
406,263
$
14.80
Restricted Stock
Weighted Average Grant Date
Fair Value
Balance at January 1, 2024
218,422
$
12.19
Granted
277,922
$
14.33
Forfeited
(8,625)
$
12.63
Vested
(85,643)
$
13.84
Balance at December 31, 2024
402,076
$
13.31
11.
OFF-BALANCE SHEET ARRANGEMENTS
The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business in order to
meet the 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.
The Company
records
a
liability
for
expected
credit
losses
on
off-balance-sheet
credit
exposure
in
accordance
with
ASC
326.
The
Company
uses
the
loss
rate
and
exposure
of
default
framework
to
estimate
a
reserve
for
unfunded
commitments. Loss rates
for the expected funded
balances are determined
based on the
associated pooled loan
analysis
loss rate and the exposure at default is
based on an estimated utilization given
default. The off-balance sheet commitment
allowance as of December 31, 2025 was $
752
thousand and as of December 31, 2024 was $
571
thousand.
A
summary
of
the
amounts
of
the
Company's
financial
instruments
with
off-balance
sheet
risk
are
shown
below
at
December 31, 2025 and December 31, 2024 (in thousands):
December 31,
2025
2024
Commitments to grant loans and unfunded lines of credit
$
161,606
$
122,578
Standby and commercial letters of credit
2,700
5,389
Total
$
164,306
$
127,967
Commitments 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
is committed.
Table of Contents
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
112
USCB Financial Holdings, Inc.
2025 10-K
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 many of them expire without being drawn upon;
they do not generally present a significant liquidity risk
to the Company.
12.
DERIVATIVES
The Company utilizes interest rate swap agreements
as part of its asset-liability management strategy to help
manage
its interest
rate risk
position. The
notional amount
of the
interest rate
swaps do
not represent
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.
Rate Swaps Designated as Cash Flow Hedges
In July
2025, the
Company entered into
a two-year costless
collar hedge
with a
notional amount of
$
50
million to
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
4.50
% and a
floor rate of
1.875
%, 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
is
being
accounted
for
accordingly.
Changes
in
the
fair
value
of
the
derivative
will
be
recorded
in
other
comprehensive income (loss) to the extent the hedge remains
effective.
In August
2025, the
Company entered
into a
two-year
costless collar
hedge with
a notional
amount of
$
50
million to
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
4.50
%
and
a
floor
rate
of
1.965
%,
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 is
being accounted
for accordingly.
Changes in
the fair
value of
the derivative
will be
recorded in other comprehensive income (loss) to the extent the
hedge remains effective.
As of December 31,
2025, the Company
had
one
interest rate swap
agreements with a
notional aggregate amount
of
$
25
million that were designated as
cash flow hedges of certificates
of deposit. The interest rate
swap agreements have a
maturity of
0.42
years, a weighted average fixed-rate paid of
3.47
%, and with a weighted average 3-month compound USD
SOFR being
received. The
company unwound
one
interest rate
swap designated
as a
cash flow
hedge of
certificates of
deposits with notional
amount of $
25
million during the
quarter ended December 31,
- The decision to
unwind this swap
was driven by changes in interest rate
forecasts and asset-liability management strategies. The early termination income to
unwind the fair value swaps totaled $
5
thousand. The original maturity of the cash flow interest
rate swap was April 2026.
As of December
31, 2024,
the Company had
two
interest rate swap
agreements with
a notional aggregate
amount of
$
50
million that were designated as cash flow hedges of certificates of deposit. The interest rate swap agreements have an
average
maturity
of
1.38
years,
the
weighted
average
fixed-rate
paid
is
3.59
%,
with
the
weighted
average
3-month
compound USD SOFR being received.
The
changes
in
fair
value
on
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
Hedges
During the
third quarter
in 2024,
the Company
unwound
four
fair value
interest rate
swaps with
a notional
aggregate
amount of
$
200
million. The
decision to
unwind these
swaps was
driven by
changes in
interest rate
forecasts and
asset-
liability management
strategies. The
early termination
fee to
unwind the
fair value
swaps totaled
$
3.7
million. The
termination
fees allocated to each loan category are
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 Company’s Consolidated Statement of Operations. The original maturities
of
these
fair
value
interest
swaps
were
between
2025
and
2026.
The
fair
value
interest
rate
swap
agreements
had
an
average maturity of
1.51
years at the date of termination.
Table of Contents
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
113
USCB Financial Holdings, Inc.
2025 10-K
Interest Rate Swaps
The Company also
enters into
interest rate swaps
with its
loan customers. The
Company had
94
and
60
interest rate
swaps with
loan customers
with a
notional aggregate
amount of
$
310.8
million and
$
206.3
million at
December 31, 2025
and 2024, respectively.
These interest rate swaps
have maturity dates of
between 2026 and 2051.
The Company entered
into corresponding
and offsetting
derivatives with
third parties.
The fair
value of
liability on
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 customer
related interest rate swaps at the dates indicated (in
thousands):
Fair Value
Notional
Amount
Collateral
Amount
Balance Sheet Location
Asset
Liability
December 31, 2025:
Derivatives Designated as Cash Flow Hedges:
Interest rate swaps
$
125,000
$
-
Other assets/Accrued interest
and other liabilities
$
14
$
33
Derivatives not designated as hedging instruments:
Interest rate swaps related to customer loans
$
310,761
$
5,769
Other assets/Accrued interest
and other liabilities
$
9,753
$
9,753
December 31, 2024:
Derivatives Designated as Cash Flow Hedges
Interest rate swaps
$
50,000
$
-
Other assets
$
321
$
-
Derivatives not designated as hedging instruments:
Interest rate swaps related to customer loans
$
206,258
$
4,943
Other assets/Accrued interest
and other liabilities
$
6,869
$
6,869
13.
FAIR VALUE
MEASUREMENTS
Determination of Fair Value
The Company
uses
fair value
measurements
to record
fair-value
adjustments
to certain
assets
and liabilities
and to
determine fair value
disclosures. In accordance
with the fair
value measurements
accounting guidance, the
fair value of
a
financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market
participants
at the
measurement
date.
Fair value
is best
determined based
upon quoted
market prices.
However, in
many instances, there
are no quoted
market prices for the
Company's various financial
instruments. In cases
where quoted
market prices
are not
available, fair
values are
based on
estimates using
present value
or other
valuation
techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates
of future cash flows. Accordingly, the fair value estimates may not be realized in
an immediate settlement of the instrument.
The fair
value guidance provides
a consistent definition
of fair
value, which focuses
on exit
price in
an orderly transaction
(that is,
not a
forced
liquidation
or distressed
sale) between
market participants
at the
measurement
date
under current
market conditions.
If there
has been
a significant
decrease
in the
volume
and level
of activity
for the
asset
or liability,
a
change in
valuation technique or
the use
of multiple
valuation techniques may
be appropriate.
In such
instances, determining
the
price
at
which
willing
market
participants
would
transact
at
the
measurement
date
under
current
market
conditions
depends on the facts
and circumstances and
requires the use of
significant judgment. The fair
value is a reasonable
point
within the range that is most representative of fair value under
current market conditions.
Table of Contents
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
114
USCB Financial Holdings, Inc.
2025 10-K
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
- Valuation
is based
on quoted
prices in
active markets
for identical
assets or
liabilities that
the reporting
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
- Valuation
is based on inputs other
than quoted prices included
within Level 1 that are
observable for the
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
- Valuation
is based on
unobservable inputs that
are supported
by little or
no market activity
and that are
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
Investment securities:
When instruments are traded
in secondary markets and
quoted market prices do
not exist 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:
The
fair
value
of
derivatives
are
measured
with
pricing
provided
by
third-party
participants
and
are
classified within Level 2 of the hierarchy.
The
following
table
represents
the
Company's
assets
and
liabilities
measured
at
fair
value
on
a
recurring
basis
at
December 31, 2025 and 2024 for each of the fair value
hierarchy levels (in thousands):
2025
2024
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
Investment securities available for sale:
U.S. Government Agency
$
-
$
14,144
$
-
$
14,144
$
-
$
12,625
$
-
$
12,625
Collateralized mortgage obligations
-
75,828
-
75,828
-
78,905
-
78,905
Mortgage-backed securities - residential
-
29,917
-
29,917
-
46,933
-
46,933
Mortgage-backed securities - commercial
-
168,108
-
168,108
-
78,739
-
78,739
Municipal securities
-
4,263
-
4,263
-
19,311
-
19,311
Bank subordinated debt securities
-
15,230
-
15,230
-
23,708
-
23,708
Total
-
307,490
-
307,490
-
260,221
-
260,221
Derivative assets
-
9,767
-
9,767
-
7,190
-
7,190
Total assets at fair value
$
-
$
317,257
$
-
$
317,257
$
-
$
267,411
$
-
$
267,411
Derivative liabilities
$
-
$
9,786
$
-
$
9,786
$
-
$
6,869
$
-
$
6,869
Total liabilities at fair value
$
-
$
9,786
$
-
$
9,786
$
-
$
6,869
$
-
$
6,869
Table of Contents
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
115
USCB Financial Holdings, Inc.
2025 10-K
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, at December 31, 2025 and 2024 are as follows (in thousands):
Fair Value Hierarchy
Carrying
Amount
Level 1
Level 2
Level 3
Fair Value
Amount
December 31, 2025:
Financial Assets:
Cash and due from banks
$
6,027
$
6,027
$
-
$
-
$
6,027
Interest-bearing deposits in banks
$
32,450
$
32,450
$
-
$
-
$
32,450
Investment securities held to maturity, net
$
153,941
$
-
$
142,508
$
-
$
142,508
Loans held for investment, net
$
2,163,757
$
-
$
-
$
2,210,781
$
2,210,781
Accrued interest receivable
$
11,661
$
-
$
1,443
$
10,218
$
11,661
Financial Liabilities:
Non-interest bearing demand deposits
$
583,860
$
583,860
$
-
$
-
$
583,860
Savings and money market deposits
$
1,186,422
$
1,186,422
$
-
$
-
$
1,186,422
Interest-bearing demand deposits
$
46,989
$
46,989
$
-
$
-
$
46,989
Time deposits
$
527,809
$
-
$
527,575
$
-
$
527,575
FHLB advances
$
158,250
$
-
$
158,342
$
-
$
158,342
Subordinated notes
$
39,300
$
-
$
40,131
$
-
$
40,131
Accrued interest payable
$
3,984
$
-
$
3,984
$
-
$
3,984
December 31, 2024:
Financial Assets:
Cash and due from banks
$
6,986
$
6,986
$
-
$
-
$
6,986
Interest-bearing deposits in banks
$
70,049
$
70,049
$
-
$
-
$
70,049
Investment securities held to maturity, net
$
164,694
$
-
$
145,540
$
-
$
145,540
Loans held for investment, net
$
1,948,778
$
-
$
-
$
1,950,646
$
1,950,646
Accrued interest receivable
$
10,945
$
-
$
1,372
$
9,573
$
10,945
Financial Liabilities:
Demand Deposits
$
575,159
$
575,159
$
-
$
-
$
575,159
Money market and savings accounts
$
1,180,809
$
1,180,809
$
-
$
-
$
1,180,809
Interest-bearing checking accounts
$
50,648
$
50,648
$
-
$
-
$
50,648
Time deposits
$
367,388
$
-
$
366,479
$
-
$
366,479
FHLB advances
$
163,000
$
-
$
161,375
$
-
$
161,375
Accrued interest payable
$
2,125
$
-
$
2,125
$
-
$
2,125
Collateral Dependent Loans Measured for
Expected Credit Losses:
Fair values of collateral-dependent yacht loans
and real estate loans
are based on recent
boat and real estate
appraisals less estimated costs of
sale, repossession, and/or
holding costs.
Appraisals
are made
by a
third
party,
and
its evaluation
may use
either a
comparative
sales, cost
and/or
income approach or a combination of methodologies.
The
fair
value
of
collateral
dependent
loans
considered
Level
3
in
the
fair
value
hierarchy
was
$
2.6
million
with
no
specific reserved as
of December 31, 2025
and $
2.0
million with a
specific reserve of
$
651
thousand at December 31, 2024.
Table of Contents
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
116
USCB Financial Holdings, Inc.
2025 10-K
The following table presents quantitative information about level 3 fair value measurements for assets measured at fair
value on a non-recurring basis at
December 31, 2025 and 2024:
December 31, 2025
Range
Weighted
Financial Instrument
Fair Value
Valuation Technique(s)
Unobservable Input(s)
Minimum
Maximum
average
Collateral dependent loans -
residential loans
$ 2,583
Sales comparison approach
Third party appraisals
0%
0%
0%
December 31, 2024
Range
Weighted
Financial Instrument
Fair Value
Valuation Technique(s)
Unobservable Input(s)
Minimum
Maximum
average
Collateral dependent loans -
consumer boat loans
$ 1,650
Sales comparison approach
Adjustment for differences
between the comparable sales
11%
31%
28%
14.
STOCKHOLDERS’ EQUITY
Common Stock
During the
year ended
December 31,
2025, the
Company
repurchased
2.0
million
shares of
Class
A common
stock
from certain
institutional shareholders
through privately
negotiated transactions,
at a weighted
average price
per share of
$
17.19
.
The
aggregate
purchase
price
for
these
transactions
was
approximately
$
34.4
million.
The
repurchases
were
supplemental and not part of the Company’s two previously announced stock repurchase programs. During the year ended
December 31, 2025 pursuant to the
Company’s publicly announced repurchase programs the
Company repurchased
9,671
shares of Class A common stock at a weighted average price per share of $
17.91
. The aggregate purchase price for these
transactions
was
approximately
$
174
thousand
including
transaction
costs.
As
of
December 31,
2025,
528,309
shares
remained authorized for repurchase under the Company’s
two stock repurchase programs.
During the year
ended December
31, 2024,
the Company
repurchased
42,100
shares of
Class A common
stock at
a
weighted average price per share of $
11.85
. The aggregate purchase price for these transactions was approximately $
501
thousand, including transaction costs.
As of December 31,
2024,
537,980
shares remained authorized for
repurchase under
the Company’s two stock repurchase programs.
In 2025, the Company issued
124,424
shares of Class A common stock to employees and directors as restricted stock
awards pursuant to the Company's 2015 Option Plan.
In 2024, the Company issued
277,922
shares of Class A common stock to employees and directors as restricted stock
awards pursuant to the Company's 2015 Option Plan.
Shares of the Company’s Class A common stock issued and
outstanding as of December 31, 2025 and December 31,
2024 were
18,137,885
and
19,924,632
, 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.
Table of Contents
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
117
USCB Financial Holdings, Inc.
2025 10-K
As
of
December 31,
2025,
the
Company
was
not
subject
to
any
formal
supervisory
restrictions
on
its
ability
to
pay
dividends
but
has
agreed
to
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.
The following table details the dividends declared and paid by
the Company for the periods presented:
2025
Declaration Date
Record Date
Payment Date
Dividend Per Share
Dividend Amount
January 21, 2025
February 14, 2025
March 5, 2025
$
0.10
$
2.0
million
April 21, 2025
May 15, 2025
June 5, 2025
$
0.10
$
2.0
million
July 21, 2025
August 15, 2025
September 5, 2025
$
0.10
$
2.0
million
October 20, 2025
November 14, 2025
December 5, 2025
$
0.10
$
1.8
million
2024
Declaration Date
Record Date
Payment Date
Dividend Per Share
Dividend Amount
January 22, 2024
February 15, 2024
March 5, 2024
$
0.05
$
1.0
million
April 22, 2024
May 15, 2024
June 5, 2024
$
0.05
$
1.0
million
July 22, 2024
August 15, 2024
September 5, 2024
$
0.05
$
1.0
million
October 28, 2024
November 15, 2024
December 5, 2024
$
0.05
$
0.9
million
The
Company
and
the
Bank
exceeded
all
regulatory
capital
requirements
and
remained
above
“well-capitalized”
guidelines as of December 31, 2025 and December
31, 2024. At December 31, 2025, the
total risk-based capital ratios for
the Company and the Bank were
13.91
% and
13.67
%, respectively.
See Note 21, “Subsequent Events”, for information regarding dividends
declared in January 2026.
15.
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
(loss) available to common
stockholders 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 (loss)
available to
common stockholders
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 diluti
ve.
The
following
table
reflects
the
calculation
of
net
income
available
to
common
stockholders
for
the
years
ended
December 31, 2025 and 2024 (in thousands):
For the years ended December 31,
2025
2024
Net Income
$
26,100
$
24,674
Net income available to common stockholders
$
26,100
$
24,674
Table of Contents
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
118
USCB Financial Holdings, Inc.
2025 10-K
The following table
reflects the calculation
of basic and
diluted earnings per
common share
class for the
years ended
December 31, 2025 and 2024 (in thousands, except
per share amounts):
As of and for the years ended December 31,
2025
2024
Class A
Class A
Basic EPS
Numerator:
Net income available to common shares
$
26,100
$
24,674
Denominator:
Weighted average shares outstanding
19,425,746
19,675,444
Earnings per share, basic
$
1.34
$
1.25
Diluted EPS
Numerator:
Net income available to common shares
$
26,100
$
24,674
Denominator:
Weighted average shares outstanding for basic EPS
19,425,746
19,675,444
Add: Dilutive effects of assumed exercises of stock options
225,068
155,977
Weighted avg. shares including dilutive potential common shares
19,650,814
19,831,421
Earnings per share, diluted
$
1.33
$
1.24
Anti-dilutive stock options excluded from diluted EPS
-
15,000
Net income has not been allocated to unvested
restricted stock awards that are participating
securities because the amounts that would be allocated
are
not material to earnings 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.
16.
REGULATORY
MATTERS
Banks and
bank holding
companies
are subject
to regulatory
capital requirements
administered by
federal and
state
banking
agencies.
Failure
to
meet
minimum
capital
requirements
can
initiate
certain
mandatory
and
possibly
additional
discretionary actions
by regulators that,
if undertaken,
could have a
direct material
effect on
the Company's
Consolidated
Financial Statements.
Under
capital adequacy
guidelines and
the regulatory
framework
for prompt
corrective
action, the
Company and the
Bank must meet
specific
capital guidelines that
involve quantitative measures
of their assets,
liabilities,
and certain
off-balance-sheet
items as
calculated under
regulatory accounting
practices. The
Company’s and
the Bank’s
capital
amounts
and
classification
are
also
subject
to
qualitative
judgments
by
the
regulators
about
components,
risk
weightings, and other factors.
Based on changes to the Federal Reserve’s definition of a “Small Bank
Holding Company” that increased the threshold
to $3.0 billion in assets
in August 2018, the Company
is not currently subject to
separate minimum capital measurements.
At such time
when the Company
reaches the $3.0
billion asset level,
it will be
subject to
regulatory capital measurements
independent of the Bank.
The Bank
elected to
permanently opt-out
of the
inclusion of
accumulated other
comprehensive income
in the
capital
calculations, as
permitted by the
regulations. This
opt-out reduces
the impact of
market volatility on
the Bank’s
regulatory
capital levels.
The Bank is
subject to the
rules of the
Basel III regulatory capital
framework and related Dodd-Frank
Wall Street Reform
and Consumer Protection
Act. The rules include
the implementation of
a
2.5
% capital conservation
buffer that is
added to
the minimum requirements
for capital adequacy
purposes. Failure
to maintain the
required capital conservation
buffer will
limit the ability of
the Bank to pay
dividends, repurchase shares
or pay discretionary
bonuses. At December
31, 2025 and
2024, the capital ratios for the Bank were sufficient
to meet the conservation buffer.
Prompt
corrective
action
regulations
provide
five
classifications:
well
capitalized,
adequately
capitalized,
undercapitalized,
significantly
undercapitalized,
and
critically
undercapitalized,
although
these
terms
are
not
used
to
Table of Contents
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
119
USCB Financial Holdings, Inc.
2025 10-K
represent overall financial condition. If
adequately capitalized, regulatory approval
is required to accept brokered
deposits.
If
undercapitalized,
capital
distributions
are
limited,
as
is
asset
growth
and
expansion,
and
capital
restoration
plans
are
required.
At December 31,
2025 and
2024, the
most recent
notification from
the regulatory
authorities categorized
the Bank
as
well capitalized
under the
regulatory framework
for prompt
corrective action.
Failure to
meet statutorily
mandated capital
guidelines
could
subject
the
Bank
to
a
variety
of
enforcement
remedies,
including
issuance
of
a
capital
directive,
the
termination of deposit
insurance by the
FDIC, a prohibition
on accepting or
renewing brokered deposits,
limitations on the
rates of
interest that
the Bank
may pay
on
its deposits
and other
restrictions
on
its business.
To
be categorized
as well
capitalized, an institution
must maintain minimum
total risk-based, Tier
1 risk-based and Tier
1 leverage ratios as
set forth
in the
table below.
There are
no conditions
or events
since the
notification that
management believes
have changed
the
Bank’s category.
Actual and required
capital amounts and
ratios are presented
below for the
Bank at December 31,
2025 and 2024
(in
thousands, except ratios). The required amounts for capital adequacy
shown do not include the capital conservation buffer
previously discussed.
Actual
Minimum Capital
Requirements
To be Well Capitalized
Under Prompt Corrective
Action Provisions
Amount
Ratio
Amount
Ratio
Amount
Ratio
December 31, 2025
Total
risk-based capital:
$
299,596
13.67
%
$
175,387
8.00
%
$
219,234
10.00
%
Tier 1 risk-based capital:
$
273,342
12.47
%
$
131,541
6.00
%
$
175,387
8.00
%
Common equity tier 1 capital:
$
273,342
12.47
%
$
98,655
4.50
%
$
142,502
6.50
%
Leverage ratio:
$
273,342
9.65
%
$
113,296
4.00
%
$
141,620
5.00
%
December 31, 2024
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 limited in
the amount
of cash
dividends that
it may
pay.
Payment of dividends
is generally
limited to
the Company’s net income for 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.
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
from
paying
dividends
including
dividends
to
their
parent
holding company,
if they deem such payment to be an unsafe or unsound
practice.
Table of Contents
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
120
USCB Financial Holdings, Inc.
2025 10-K
17.
RELATED PARTY
TRANSACTIONS
In
the
ordinary
course
of
business,
principal
officers,
directors,
and
affiliates
may
engage
in
transactions
with
the
Company.
The
following
table
presents
loans
to
and
deposits
from
related
parties
included
within
the
accompanying
Consolidated Financial Statements at December 31, 2025
and 2024 (in thousands):
Years Ended December 31,
2025
2024
Consolidated Balance Sheets:
Loans held for investment, net
$
15,000
$
-
Deposits
$
3,238
$
4,551
Consolidated Statements of Operations:
Interest income
$
815
$
-
Interest expense
$
118
$
119
Loan Purchases
During 2025, the Bank purchased $
79.6
million of loans from entities that are
deemed to be related parties.
The Bank
paid those entities fees of $
447
thousand.
During 2024, the Bank purchased $
90.8
million of loans from entities that are
deemed to be related parties.
The Bank
paid those entities fees of $
2.7
million.
Loan Originations
During
the
year
ended
December 31,
2025, the
Bank
acted
as the
lead
arranger
in
a
$
40.0
million
syndicated
loan
extended to
an entity
deemed to
be a
related party.
As of
December 31,
2025, the
Bank held
an outstanding
balance of
$
15.0
million related to this transaction. In connection with the syndication, the Bank received a
50
-basis point commitment
fee and
will earn
a
25
-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.
During the year ended December
31, 2025, the Bank participated
in two loans totaling $
21.3
million with an entity that
is considered
a related
party,
for which
the
Bank was
not the
lead arranger.
The
underlying
borrowers
were
not related
parties. Under the
terms of the
participation agreements,
the Bank pays
the related
‑
party entity a
servicing fee equal
to 8
basis points, calculated on the declining monthly outstanding
balance of the loans.
There were
no
loan originations
or syndications
extended to
entities deemed
to be
related parties
for the
year ended
December 31, 2024.
Table of Contents
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
121
USCB Financial Holdings, Inc.
2025 10-K
18.
PARENT COMPANY
CONDENSED FINANCIAL INFORMATION
In December
2021, USCB
Financial Holdings,
Inc. was
formed as
the parent
bank holding
company of
U.S. Century
Bank.
The
condensed
balance
sheet
is
presented
below
for
USCB
Financial
Holdings,
Inc.
at
the
dates
indicated
(in
thousands):
December 31, 2025
December 31, 2024
ASSETS:
Cash and Cash Equivalents
$
6,773
$
3,735
Investment in bank subsidiary
248,230
210,253
Other assets
2,624
1,400
Total
assets
$
257,627
$
215,388
LIABILITIES AND STOCKHOLDERS' EQUITY:
Subordinated notes
$
39,300
$
-
Accrued interest and other liabilities
1,144
-
Stockholders' equity
217,183
215,388
Total
liabilities and stockholders' equity
$
257,627
$
215,388
The condensed
income statement
is presented
below for
USCB Financial
Holdings, Inc.
for the
periods indicated
(in
thousands):
Years Ended
December 31, 2025
December 31, 2024
INCOME:
Dividends from subsidiaries
$
6,000
$
5,000
Total
6,000
5,000
EXPENSE:
Interest expense
1,205
-
Employee compensation and benefits
3,005
2,129
Other operating
622
570
Total
4,832
2,699
Income before income taxes and undistributed subsidiary income
1,168
2,301
Benefit from income taxes
(1,225)
(684)
Equity in undisbursed subsidiary income
23,707
21,689
Net Income
$
26,100
$
24,674
Table of Contents
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
122
USCB Financial Holdings, Inc.
2025 10-K
The condensed cash
flow is presented below
for USCB Financial Holdings,
Inc. for the periods
indicated (in thousands):
Years Ended
December 31, 2025
December 31, 2024
Cash flows from operating activities:
Net income
$
26,100
$
24,674
Adjustments to reconcile net income to net cash provided by operating
activities:
Equity in undistributed earnings of subsidiaries
(23,707)
(21,689)
Stock-based compensation
3,005
2,129
Increase in deferred tax asset
(1,225)
(684)
Increase in accrued interest and other liabilities
1,144
-
Net cash provided by operating activities
5,317
4,430
Cash flows from investing activities:
Capital contributions to subsidiary
-
-
Other
-
-
Net cash used in investing activities
-
-
Cash flows from financing activities:
Dividends paid
(7,829)
(3,939)
Proceeds from exercise of stock options
804
1,319
Repurchase of common stock
(34,554)
(501)
Proceeds from issuance of subordinated notes, net of issuance cost
39,300
-
Net cash used in financing activities
(2,279)
(3,121)
Net increase in cash and cash equivalents
3,038
1,309
Cash and cash equivalents, beginning of period
3,735
2,426
Cash and cash equivalents, end of period
$
6,773
$
3,735
Table of Contents
USCB FINANCIAL HOLDINGS, INC.
Notes to the Consolidated Financial Statements
123
USCB Financial Holdings, Inc.
2025 10-K
19.
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.
The Company
through the
Bank, its
sole direct
subsidiary,
operates
10
banking centers
in South
Florida providing
a
wide range
of personal
and business
banking products
and services,
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”. 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,
residential real
estate loans,
correspondent
banking 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 receives
regularly are interest expense, provision for
credit losses, salaries and wages, employee
benefits,
and
occupancy.
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
one
reportable segment.
20.
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.
21.
SUBSEQUENT EVENTS
Dividends
On January
20,
2026,
the
Company’s
Board
of Directors
declared
a
quarterly
cash
dividend
of
$
0.125
per
share of
Class A common stock, to be paid on March 5, 2026, to stockholders of record as of the close
of business on February 17,
2026.
Table of Contents
124
USCB Financial Holdings, Inc.
2025 10-K
Item 9.
Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Under the supervision
and with the
participation of our management,
including our 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
of
December 31,
2025.
Based
on
that
evaluation,
management
believes
that
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 as of
the end of
the period covered
by
this Annual Report on Form 10-K.
This
annual
report
does
not
include
an
integrated
audit
report
of
the
Company's
registered
public
accounting
firm
regarding
internal
control
over
financial
reporting.
Management's
report
was
not
subject
to
audit
by
the
Company's
registered public accounting
firm pursuant
to the
rules of
the SEC
that permit
the Company,
as an
emerging growth company
to provide only management's report in this annual report.
Management’s Report on Internal Control
over Financial Reporting
Management is responsible for designing, implementing, documenting, and
maintaining an adequate system of internal
control over financial
reporting, as
such term
is defined
in the Exchange
Act. An
adequate system
of internal control
over
financial reporting encompasses the processes and procedures
that have been established by management to:
•
maintain records that accurately reflect the Company’s
transactions;
•
prepare
financial
statement
and
footnote
disclosures
in
accordance
with
U.S.
GAAP
that
can
be
relied
upon
by
external users; and
•
prevent and detect unauthorized acquisition, use or disposition of the Company's assets that could have a material
effect on the financial statements.
Management conducted
an evaluation
of the
effectiveness
of the
Company's
internal control
over financial
reporting
based on the criteria in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of
the
Treadway
Commission
(COSO).
Based
on
this
evaluation
under
the
criteria
in
Internal
Control-Integrated
Framework,
management concluded that
internal control over financial
reporting was effective
as of December 31,
- Furthermore,
during the conduct of its assessment, management identified no material weakness in
its financial reporting control system.
The Board of the Company,
through its Audit Committee, provides
oversight to management’s
conduct of the financial
reporting process.
The Audit
Committee, which
is composed
entirely of
independent directors,
is also
responsible for
the
appointment of the independent registered public
accounting firm. The Audit Committee also
meets with management, the
internal
audit
staff,
and
the
Company’s
independent
registered
public
accounting
firm
throughout
the
year
to
provide
assurance as to the adequacy of the financial
reporting process and to monitor the overall
scope of the work performed by
the internal audit staff and the independent registered
public accounting firm.
Because of its inherent limitations, the disclosure controls and
procedures may not prevent or detect misstatements.
A
control system, no matter how well conceived and operated, can only provide reasonable, not absolute, assurance that the
objectives of the control system are met. Because
of the inherent limitations in all control systems, no
evaluation of controls
can provide absolute assurance that all control issues and instances of
fraud, if any,
have been detected. Also, projections
of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of
changes in conditions or that the degree of compliance with the
policies or procedures may deteriorate.
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 quarter ended
December 31, 2025 that
has materially affected,
or is reasonably likely
to materially affect, our internal control over financial
reporting.
Item 9B. Other Information
(a)
None
Table of Contents
125
USCB Financial Holdings, Inc.
2025 10-K
(b)
During
the
three
months
ended
December 31,
2025,
none
of
the
Company’s
directors
or
Section
16
reporting
officers
adopted
or
terminated
any Rule 10b5-1
trading arrangement or
non-Rule
10b5-1
trading arrangement (as
such terms are defined in Item 408 of the SEC’s
Regulation S-K).
Item 9C. Disclosure Regarding Foreign Jurisdictions
That Prevent Inspections
Not applicable.
Table of Contents
126
USCB Financial Holdings, Inc.
2025 10-K
PART III
Item 10. Directors, Executive Officers and Corporate Governance
The information required
herein is incorporated
by reference from
the sections captioned
“Information with Respect
to
Nominees for Director
and Information About
Executive Officers”
and “Beneficial Ownership
of Common Stock
by Certain
Beneficial Owners and Management
– Delinquent Section 16(a) Reports”
in the Company’s Definitive
Proxy Statement for
the Annual Meeting
of Shareholders
currently expected
to be held
on May 26,
2026, is expected
to be
filed with the
SEC
within 120 days of December 31, 2025 (“2026 Definitive
Proxy Statement”).
The Company has
adopted a code
of ethics and
business conduct policy,
which applies to
all of its
directors, officers,
including its principal executive officer, principal financial officer, principal accounting officer,
and employees generally. The
Company will
provide a
copy
of its
code
of ethics
to any
person, free
of charge,
upon request.
Any requests
for a
copy
should
be
made
to
the
Corporate
Secretary,
USCB
Financial
Holdings,
Inc.,
2301
N.W.
87th
Avenue,
Doral,
Florida.
In
addition, a
copy
of the
Code of
Ethics is
available at
the Company’s
website
at www.uscentury.com
under
the “Investor
Relations” tab.
There
have
been
no
material
changes
to
the
procedures
by
which
shareholders
may
recommend
nominees
to
the
Company’s Board.
Item 11. Executive Compensation
The information
required herein
is incorporated
by reference
from the
sections captioned
"Executive Compensation"
and “Information with Respect to Nominees for Director and Information About Executive Officers – Corporate Governance
Principles and Board Matters” and “- Director Compensation”
in the Company’s 2026 Definitive Proxy
Statement.
Item 12. Security Ownership of Certain Beneficial Owners
and Management and Related Stockholder
Matters
Equity compensation Plan information
. The following table provide information as of December
31, 2025 with
respect to shares of common stock that may be issued
under our existing equity compensation plans, which
consists of
the 2015 Equity Incentive Plan (the “2015 Option Plan”)
which was approved by our shareholders.
Per Category
Number of
securities issued
or to be upon
exercise of
outstanding
options, warrants
and rights
(a) (1)
Weighted-average
exercise price of
outstanding
options, warrants
and rights
(b) (1)
Number of securities
remaining available for
future issuance under
equity compensation
plans (excluding
securities reflected in
column (a))
(c)
Equity compensation plans approved by security holders
1,032,930
$
12.67
872,012
Equity compensation plans not approved by security holders
-
-
-
Total
1,032,930
$
12.67
872,012
(1)
Includes 406,263 shares subject to restricted stock awards
which were not vested as of December 31, 2025.
The
weighted average exercise price excludes
such restricted stock awards.
Security Ownership of Certain Beneficial Owners and
Management
. Information regarding security ownership
of certain beneficial owners and management is incorporated
by reference to “Beneficial Ownership of Common Stock
by
Certain Beneficial Owners and Management” in the 2026
Definitive Proxy Statement.
Item 13. Certain Relationships and Related Transactions,
and Director Independence
The information
required herein
is incorporated
by reference
from the
sections captioned
“Certain Relationships
and
Related
Party
Transactions”
and
“Information
with
Respect
to
Nominees
for
Director
and
Information
About
Executive
Officers” in the 2026 Definitive Proxy Statement.
Item 14. Principal Accountant Fees and Services
The information required herein is incorporated by reference
from the section captioned “Ratification of
Appointment of Independent Registered Public Accounting
Firm (Proposal Two)
– Audit Fees” in the 2026 Definitive Proxy
Statement.
Table of Contents
127
USCB Financial Holdings, Inc.
2025 10-K
PART IV
Item 15. Exhibits and Financial Statement Schedules
(a)
List of documents filed as part of this Annual Report:
1)
Financial Statements:
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of December 31, 2025 and 2024
Consolidated Statements of Operations for the years ended
December 31, 2025 and 2024
Consolidated Statements of Comprehensive Income for
the years ended December 31, 2025 and 2024
Consolidated Statements of Changes in Stockholders'
Equity for the years ended December 31, 2025 and
2024
Consolidated Statements of Cash Flows for the years
ended December 31, 2025 and 2024
Notes to Consolidated Financial Statements
2)
Financial Statement Schedules:
Financial statement schedules are omitted as not required
or not applicable or because the information is
included in the Consolidated Financial Statements or notes
thereto.
(b)
List of Exhibits:
The exhibit list in the Exhibit Index is incorporated herein
by reference as the list of exhibits required as part of
this Annual Report on Form 10-K.
Table of Contents
128
USCB Financial Holdings, Inc.
2025 10-K
EXHIBIT INDEX
Exhibit
Number
Description of Exhibit
filed with the Securities and Exchange Commission on December 30, 2021).
Exchange Commission on December 30, 2021).
filed with the Securities and Exchange Commission on December 30, 2021).
Commission on March 22, 2024).
Securities and Exchange Commission on August 14, 2025).
incorporated herein by reference to Exhibit 4.5).
*
the Securities and Exchange Commission on December 23, 2025).*
and Exchange Commission on May 9, 2025).*
Table of Contents
129
USCB Financial Holdings, Inc.
2025 10-K
Commission on August 14, 2025).
Subsidiaries of USCB Financial Holdings, Inc.
**
Consent of Crowe LLP, Independent Registered Public Accounting Firm.
**
**
**
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350.
***
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350.
***
101
The following financial statements from
the Company’s Annual Report on
Form 10-K for the year
ended December 31, 2021,
formatted
in
Inline
XBRL:
(i)
Consolidated
Balance
Sheets,
(ii)
Consolidated
Statements
of
Operations,
(iii)
Consolidated
Statements
of
Comprehensive Income,
(iv) Consolidated
Statements of
Changes in
Stockholders’ Equity,
(v)
Consolidated
Statements of Cash Flows, (vi) Notes to Consolidated Financial Statements.
104
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
*
Management contract or compensatory plan or arrangement.
**
Filed herewith.
***
Furnished hereby.
Item 16. Form 10-K Summary
None.
Table of Contents
130
USCB Financial Holdings, Inc.
2025 10-K
SIGNATURES
Pursuant to the requirements of the Exchange
Act, the registrant has duly caused this report
to be signed on its behalf
by the undersigned thereunto duly authorized.
USCB FINANCIAL HOLDINGS, INC.
Date: March 13, 2026
By:
/s/ Luis de la Aguilera
Luis de la Aguilera
President, Chief Executive Officer,
and Chairman
Pursuant to the requirements
of the Exchange Ac,
this report has been
signed by the following
persons in the capacities
and on the dates indicated.
Signature
Title
Date
/s/ Luis de la Aguilera
Chairman, President, and Chief Executive
Officer (Principal Executive Officer)
March 13, 2026
Luis de la Aguilera
/s/ Robert Anderson
Chief Financial Officer (Principal Financial
Officer and Principal Accounting Officer)
March 13, 2026
Robert Anderson
/s/ Aida Levitan
Director
March 13, 2026
Aida Levitan
/s/ Howard Feinglass
Director
March 13, 2026
Howard Feinglass
/s/ Kirk Wycoff
Director
March 13, 2026
Kirk Wycoff
/s/ Ramon A. Abadin
Director
March 13, 2026
Ramon A. Abadin
/s/ Bernardo B. Fernandez
Director
March 13, 2026
Bernardo B. Fernandez
/s/ Ramon A. Rodriguez
Director
March 13, 2026
Ramon A. Rodriguez
/s/ Maria C. Alonso
Director
March 13, 2026
Maria C. Alonso
/s/ Robert E. Kafafian
Director
March 13, 2026
Robert E. Kafafian
exhibit106
Exhibit 10.06
AMENDED
AND
RESTATED
CHANGE
IN
CONTROL AGREEMENT
THIS AMENDED
AND
RESTATED
CHANGE IN
CONTROL AGREEMENT
(the
"Agreement") is
made
as of the 10th day of December, 2025
by and between U.S. Century Bank, with Corporate Offices
located at
2301 NW
87
th
Ave., Doral, FL
33172 (hereinafter
called the
"Bank") and
Mr. William Turner ("Executive").
WHEREAS,
Executive is presently
employed as the Executive
Vice President/Chief Credit Officer of
the Bank;
WHEREAS,
the Bank and
Executive previously
entered into a
Change in Control
Agreement dated as
of May 2, 2024 (the "Prior Agreement");
WHEREAS,
upon
consideration,
the
Bank
and
Executive
wish
to
adopt
certain
mutually
agreed
revisions to the Prior Agreement; and
WHEREAS,
as consideration for
Executive's continued
employment with the
Bank as Executive Vice
President/Chief Credit Officer the parties hereto,
intending to be
legally bound, agree
as follows:
1.
Payment Upon
Change in
Control.
In the event
of a
Change in
Control (as defined
herein) during
the term
of this
Agreement,
the Bank
agrees
to pay
Executive
a cash payment
equal to one
times
the
Base
Annual
Salary of
Executive received
during the
one (1)
year period
prior to
the Change
in Control, to
be paid within
thirty (30) days
of the consummation
of the Change
in Control.
The
Bank's provision
of this
benefit to Executive
is made
without regard
to whether, or
for how
long, Executive
remains employed with
the surviving
company subsequent to
the Change
in
Control.
2.
Change in
Control.
"Change in
Control" shall mean the
occurrence of
an event described
in (i),
(ii), (iii), or (iv) below:
(i)
Any person or
group (within
the meaning
of Sections
13(d) and
14(d) of
the Securities
Exchange Act
of 1934,
as amended
(the "Exchange
Act"),
other
than USCB
Financial
Holdings, Inc. (the
"Company"),
an affiliate
of the Company
or a
trustee or other
fiduciary
holding
securities
under
an
employee
benefit
plan
of
the
Company
or
the
Bank
or
a
corporation
owned
directly
or
indirectly
by
the
stockholders
of
the
Company
in
substantially the same proportions as their ownership of stock
of the Company,
becomes
the
beneficial
owner
(within
the
meaning
of
Rule
13(d)(3)
under
the
Exchange
Act,
directly or indirectly (which shall
include securities issuable
upon conversion, exchange
or
otherwise
) or securities representing 50% or
more of
the combined voting power of the
Company’s or
the Bank’s
then-outstanding
securities
entitled
generally
to vote
for
the
election of directors.
(ii)
Consummation of an agreement to merge or consolidate with another entity (other than a
majority-controlled
subsidiary
of
the
Company)
unless
the
Company's
stockholders
immediately
before
the
merger
or consolidation
own
more
than
50%
of the
combined
voting
power
of the resulting entity's voting securities (giving effect to the
conversion or
exchange of
securities issued
in the
merger or
consolidation to
the other
entity that
are
convertible or exchangeable
for voting
securities) entitled
generally to
vote for
the election
of directors.
(iii)
Consummation
of
an
agreement
(including,
without
limitation,
an
agreement
of
liquidation
) to sell or otherwise dispose of all or substantially all of the business or assets
of the Company or the Bank; or
(iv)
Individuals who, as of the date hereof, constitute the
Board of Directors of the
Company
(the
"
Incumbent
Board")
cease
for
any
reason
during
any
12
month
period
to
2
constitute at least a
majority of the
Board, provided that any
person becoming a director
subsequent
to
the
date
hereof
whose
election
or
nomination
for
election
by
the
stockholders
of the Company
is approved by a vote of at least a majority of directors then
constituting the
Incumbent Board shall be, for purposes of this Agreement, considered
as
though such person were a member of the Incumbent Board.
Notwithstanding
the foregoing, no event shall constitute a Change in Control unless such event
shall also
constitute a
change in
control as defined
in Section
409A of
the Internal
Revenue
Code of 1986, as amended.
3.
Severability.
Should any provision of this
Agreement be declared or determined by any court
of competent
jurisdiction to
be
unenforceable
or
invalid
for any
reason,
the validity
of the
remaining
parts, term or provisions
of this Agreement
shall
not
be affected
thereby and
the
invalid or
unenforceable
part,
term
or
provision
shall
be
deemed
not
to
be
a
part
of
this
Agreement.
4.
Applicable Law/Forum.
This Agreement has been entered into and shall be
governed by and
construed under the internal
laws of the State of
Florida, without regard to conflicts
of laws or
principles. All suits, proceedings and other actions relating to, arising out of
or in connection
with this
Agreement
will be
submitted solely
to
the in
personam jurisdiction
of
the
United States
District Court for the Southern
District of Florida ("Federal Court") or to the Circuit Court in
Broward
County
or
MiamiDade County.
Executive
hereby
waives
any
claims
against
or
objections to such in
personam jurisdiction and venue.
5.
Notice.
All
notices
and
other
communications
hereunder
shall
be in
writing
and
shall
be
deemed
to have been
given only if and
when personally
delivered or three (3) business days
after mailing, postage
prepaid, registered
or certified mail,
or when delivered
(and receipted
for) by an express delivery service, addressed in each case as follows. As to
notices provided
to the Bank, notices shall
be sent to the Human
Resources
Department
at
the address
of the
Bank listed
in the
introductory paragraph of this Agreement.
As
to
notices
to
Executive,
notices
shall be
sent to
the
address provided below
in the signature block hereto. Executive
and the Bank
may
change the address
for the giving of notices.
6.
Complete Agreement. This Agreement represents the complete
agreement between Executive
and the
Bank regarding the
subject matter of
this Agreement.
All prior agreements
between
the Bank and
Executive with
respect to the
specific matters
agreed to herein,
including without
limitation, the Prior Agreement, are hereby superseded and shall have no force or effect.
This
Agreement is in
no way
dependent upon the performance
of any other contract or agreement
that may have
been or may
be entered
into between Executive
and the Bank
and remains
in
effect during the pendency
of this Agreement.
As such, the
breach or
alleged breach
of any
other contract or agreement is no defense to enforcement
of this Agreement.
7.
Amendments
in
Writing.
No
amendment,
modification,
waiver,
or
other
change
to
this
Agreement shall
in any
event
be effective
unless the same
shall
be in
writing, specifically
identifying this Agreement and the provision intended to be
changed and signed by
the
Bank
and Executive, and
each such change
shall be
effective only
in the
specific
instance and
for the
specific
purpose
for which
it
is
given.
No
provision
of
this
Agreement
shall
be
varied,
contradicted or
explained by
any oral
agreement, course
of dealing
or
performance
or
any
other
matter not set
forth in an
agreement in writing and signed by Executive and the
Bank.
8.
Term of the
Agreement.
Subject to
the terms
hereof, the
term of
this Agreement
shall commence
on the date
hereof and terminate
on December 31,
2028 (the
"Initial
Term
").
Prior to December
31, 2026
(the
"
Extension Anniversary Date
"
) and
each annual anniversary
thereafter of the
Extension
Anniversary
Date,
the
Board
of
Directors
of
the
Bank
or
the
Compensation
Committee
thereof
shall
consider
and
review
(with
appropriate
corporate
documentation
thereof, and after taking into account all
relevant factors, including Executive’s performance
3
hereunder) a one-year extension of
the term of this
Agreement. If the Board
of Directors or
the
Compensation
Committee
thereof
approve
such
an
extension,
then
the
term
of
this
Agreement shall be so extended
as of the Extension
Anniversary Date or any
relevant annual
anniversary of
such date
unless Executive
gives written
notice to
the Bank
of Executive’s
election not to extend the term, with such
written notice to be given not less than
thirty (30)
days prior to
the Extension
Anniversary Date
or any relevant
annual anniversary
of such
date.
If the
Board of
Directors elects
not to
extend the
term, it
shall give
written notice
of such
decision to Executive not less than
thirty (30) days prior to
the Extension Anniversary Date
or any annual anniversary
of such date.
If any party gives
timely notice that
the term will not
be extended
as of
the Extension
Anniversary Date
or any
annual anniversary
of such
date,
then
this
Agreement
and
the
rights
and
obligations
provided
herein
shall
terminate
at
the
conclusion of its
remaining term.
References herein to the
term of this Agreement
shall refer
both to
the Initial
Term
and successive
terms as
the term
of this
Agreement is
extended in
accordance with the terms hereof.
9.
Regulatory Actions
.
The following provisions
shall be applicable
to the parties
hereto or any
successor thereto, and shall be controlling in the event of a conflict with any other provision
of this Agreement, including without limitation
Section 1 hereof:
(i)
If Executive is suspended from office and/or temporarily prohibited from participating in
the conduct
of the
Bank’s affairs pursuant
to notice
served under
Section 8(e)(3)
or Section
8(g)(1)
of
the
Federal
Deposit
Insurance
Act
(
"
FDIA
"
)(12
U.S.C.
§§1818(e)(3)
and
1818(g)(1)), the
Bank’s obligations under
this Agreement
shall be
suspended as
of the
date
of
service,
unless
stayed
by
appropriate
proceedings.
If
the
charges
in
the
notice
are
dismissed, the
Bank will:
(i) pay Executive
all or part
of the compensation
withheld while
its obligations
under
this Agreement
were
suspended, and
(ii) reinstate
(in whole
or
in
part) any of its obligations which were suspended.
(ii)
If Executive is
removed from office and/or
permanently prohibited from participating in
the
conduct
of
the
Bank’s
affairs
by
an
order
issued
under
Section
8(e)(4)
or
Section
8(g)(1) of the
FDIA (12
U.S.C. §§1818(e)(4)
and (g)(1)),
all obligations
of the Bank
under
this Agreement
shall terminate
as of
the effective
date of
the order,
but vested
rights of
Executive and the Bank as of the date of termination
shall not be affected.
(iii)
If the
Bank is
in default,
as defined
in Section
3(x)(1) of
the FDIA
(12 U.S.C.
§1813(x)(1)),
all obligations under
this Agreement shall
terminate as of
the date of
default, but vested
rights of Executive and the Bank as of the date
of termination shall not be affected.
(iv)
Notwithstanding
any
other
provision
of
this
Agreement
to
the
contrary,
any
payments
made to
Executive pursuant
to this
Agreement, or
otherwise, are
subject to
and conditioned
upon their
compliance with
Section 18(k)
of the
FDIA (12
U.S.C. §1828(k))
and 12
C.F.R.
Part 359.
10.
Nature
of
Obligations.
Nothing
contained
herein
shall
be
deemed
to
create
other
than
a
terminable at will
employment relationship between
the Bank and
Executive, and the
Bank may
terminate
Executive’s
employment
at
any
time,
subject
to
providing
any
payments
specified
herein in accordance with the terms
hereof.
11.
Acknowledgment. Executive acknowledges that Executive has read this
Agreement in full and
completely understands all of its terms and obligations
and enters into this Agreement freely
and voluntarily, and
after having
the
opportunity to
consult with
representatives
of
Executive's
own choosing and that Executive's
agreement is freely given.
4
IN WITNESS WHEREOF, the parties
hereto have duly
executed this Agreement
as of the date
first
above mentioned.
U.S. Century Bank
Executive
By: /s/Jessica Goldberg
/s/William Turner
Title: Senior Vice President/Director of
Print Name: William Turner
Human Resources
Address: [Redacted]
exhibit1010
Exhibit 10.10
CHANGE
IN
CONTROL AGREEMENT
THIS
CHANGE
IN CONTROL
AGREEMENT
(the “Agreement”)
is made
as of
the
2
nd
day of
January 202
6
by and between U.S.
Century Bank, with Corporate Offices
located at
2301 NW
87
th
Ave.,
Doral, FL 33172
(hereinafter called the
“Bank”) and Mr. Andres Collazo (“Executive”).
WHEREAS,
as consideration for
Executive's continued
employment with the
Bank as Executive Vice
President/Director of
Operations and
Information Technology,
the parties
hereto,
intending to
be legally
bound,
agree as
follows:
1.
Payment Upon
Change in
Control.
In the event
of a
Change in
Control (as defined
herein) during
the term
of this
Agreement,
the Bank
agrees
to pay
Executive
a cash payment
equal to one
times
the
Base
Annual
Salary of
Executive received
during the
one (1)
year period
prior to
the Change
in Control, to
be paid within
thirty (30) days
of the consummation
of the Change
in Control.
The Bank's
provision of this
benefit to Executive
is made
without regard
to whether, or
for how
long, Executive
remains employed with
the surviving
company subsequent to
the Change
in
Control.
2.
Change in
Control.
“Change in
Control” shall mean the
occurrence of
an event described
in (i),
(ii), (iii), or (iv) below:
(i)
Any person
or group
(within the
meaning of
Sections 13(d)
and 14(d)
of the
Securities
Exchange Act
of
1934,
as
amended (the
“Exchange Act”),
other
than USCB
Financial
Holdings, Inc.
(the “Company”),
an affiliate of
the Company
or a trustee
or other fiduciary
holding
securities
under
an
employee
benefit
plan
of
the
Company
or
the
Bank
or
a
corporation
owned
directly
or
indirectly
by
the
stockholders
of
the
Company
in
substantially the same proportions as their ownership of
stock of the Company,
becomes
the
beneficial
owner
(within
the
meaning
of
Rule
13(d)(3)
under
the
Exchange
Act,
directly or indirectly (which
shall include securities
issuable upon conversion,
exchange
or otherwise) or securities
representing 50% or more
of the combined voting
power of the
Company’s
or
the
Bank’s
then-outstanding securities
entitled
generally
to
vote
for
the
election of directors.
(ii)
Consummation of an agreement to merge or consolidate with another entity (other than a
majority-controlled
subsidiary
of
the
Company)
unless
the
Company's
stockholders
immediately
before
the
merger
or consolidation
own
more
than
50%
of the
combined
voting power of the resulting entity's voting securities (giving effect
to the conversion or
exchange of
securities issued
in the
merger or
consolidation to
the other
entity that
are
convertible or exchangeable
for voting
securities) entitled
generally to
vote for
the election
of directors.
(iii)
Consummation
of
an
agreement
(including,
without
limitation,
an
agreement
of
liquidation) to sell or otherwise dispose of
all or substantially all of the business or assets
of the Company or the Bank; or
(iv)
Individuals who, as of the date hereof, constitute the
Board of Directors of the Company
(the “Incumbent Board”) cease
for any reason during
any 12 month period to
constitute at
least a majority of the Board, provided
that any person becoming a director
subsequent to
the
date
hereof
whose
election
or
nomination
for
election
by
the
stockholders
of
the
Company is
approved by
a vote
of at
least a
majority of
directors then
constituting the
Incumbent
Board
shall
be,
for
purposes
of
this
Agreement,
considered
as
though
such
person were a member of the Incumbent Board.
Notwithstanding
the foregoing, no event shall constitute a Change in Control unless such event
shall also
constitute a
change in
control as defined
in Section
409A of
the Internal
Revenue
Code of 1986, as amended.
2
3.
Severability.
Should any provision of this
Agreement be declared or determined by any court
of competent
jurisdiction to
be
unenforceable
or
invalid
for any
reason,
the validity
of the
remaining
parts, term or provisions
of this Agreement
shall
not
be affected
thereby and
the
invalid or
unenforceable
part,
term
or
provision
shall
be
deemed
not
to
be
a
part
of
this
Agreement.
4.
Applicable Law/Forum.
This Agreement has been entered into and shall be
governed by and
construed under the internal
laws of the State of
Florida, without regard to conflicts
of laws or
principles. All suits, proceedings and other actions relating to, arising out of
or in connection
with this
Agreement
will be
submitted solely
to
the in
personam jurisdiction
of
the
United States
District Court for the Southern District of Florida (“Federal Court”) or to the Circuit Court in
Broward
County
or
MiamiDade County.
Executive
hereby
waives
any
claims
against
or
objections to such in
personam jurisdiction and venue.
5.
Notice.
All
notices
and
other
communications
hereunder
shall
be in
writing
and
shall
be
deemed
to have been
given only if and
when personally
delivered or three (3) business days
after mailing, postage
prepaid, registered
or certified mail,
or when delivered
(and receipted
for) by an express delivery service, addressed in each case as follows. As to
notices provided
to the Bank, notices shall
be sent to the Human
Resources
Department
at
the address
of the
Bank listed
in the
introductory paragraph of this Agreement.
As
to
notices
to
Executive,
notices
shall be
sent to
the
address provided below
in the signature block hereto. Executive
and the Bank
may
change the address
for the giving of notices.
6.
Complete Agreement. This Agreement represents the complete
agreement between Executive
and the
Bank regarding the
subject matter of
this Agreement.
All prior agreements
between
the
Bank
and
Executive
with
respect
to
the
specific
matters
agreed
to
herein
are
hereby
superseded and shall have
no force or effect. This
Agreement is in no
way dependent upon
the
performance
of any other contract
or agreement
that may have
been or
may be
entered
into
between Executive and the
Bank and remains in
effect during
the pendency of
this Agreement.
As such,
the
breach
or
alleged
breach
of
any
other
contract
or
agreement
is
no
defense
to
enforcement of this Agreement.
7.
Amendments
in
Writing.
No
amendment,
modification,
waiver,
or
other
change
to
this
Agreement shall
in any
event
be effective
unless the same
shall
be in
writing, specifically
identifying this Agreement and the provision intended to be
changed and signed by
the
Bank
and Executive, and
each such change
shall be
effective only
in the
specific
instance and
for the
specific
purpose
for which
it
is
given.
No
provision
of
this
Agreement
shall
be
varied,
contradicted or
explained by
any oral
agreement, course
of dealing
or
performance
or
any
other
matter not set
forth in an
agreement in writing and signed by Executive and the
Bank.
8.
Term
of
the
Agreement.
Subject
to
the
terms
hereof,
the
term
of
this
Agreement
shall
commence on the
date hereof and
terminate on December
31, 2028 (the
“Initial Term”). Prior
to
December
31,
2026
(the
“Extension
Anniversary
Date”)
and
each
annual
anniversary
thereafter
of
the
Extension
Anniversary
Date,
the
Board
of
Directors
of
the
Bank
or
the
Compensation
Committee
thereof
shall
consider
and
review
(with
appropriate
corporate
documentation
thereof,
and
after
taking
into
account
all
relevant
factors,
including
Executive’s performance
hereunder) a one-year
extension of the
term of this
Agreement. If
the Board of
Directors or the
Compensation Committee thereof approve
such an extension,
then the term
of this Agreement
shall be so
extended as of
the Extension Anniversary Date
or any relevant annual anniversary of
such date unless Executive gives written notice
to the
Bank of Executive’s election not to extend the term, with such written notice to be given
not
less
than
thirty
(30)
days
prior
to
the
Extension
Anniversary Date
or
any
relevant
annual
anniversary of such date. If the Board of Directors elects not to extend the term, it shall give
written
notice
of
such
decision
to
Executive
not
less
than
thirty
(30)
days
prior
to
the
Extension Anniversary
Date or
any annual
anniversary of
such date.
If any
party gives
timely
3
notice that the term will not be extended
as of the Extension Anniversary
Date or any annual
anniversary of such date, then this Agreement
and the rights and obligations provided herein
shall terminate at the conclusion of its remaining term.
References herein to the term of this
Agreement
shall
refer
both
to
the
Initial
Term
and
successive
terms
as
the
term
of
this
Agreement is extended in accordance with the terms
hereof.
9.
Regulatory Actions
.
The following provisions
shall be applicable
to the parties
hereto or any
successor thereto, and shall be controlling in the event of a conflict with any other provision
of this Agreement, including without limitation
Section 1 hereof:
(i)
If Executive is suspended from office and/or temporarily prohibited from participating in
the conduct
of the
Bank’s affairs pursuant
to notice
served under
Section 8(e)(3)
or Section
8(g)(1)
of
the
Federal
Deposit
Insurance
Act
(“FDIA”)(12
U.S.C.
§§1818(e)(3)
and
1818(g)(1)), the
Bank’s obligations under
this Agreement
shall be
suspended as
of the
date
of
service,
unless
stayed
by
appropriate
proceedings.
If
the
charges
in
the
notice
are
dismissed, the
Bank will:
(i) pay Executive
all or part
of the compensation
withheld while
its obligations
under
this Agreement
were
suspended, and
(ii) reinstate
(in whole
or
in
part) any of its obligations which were suspended.
(ii)
If Executive is
removed from office and/or
permanently prohibited from participating in
the
conduct
of
the
Bank’s
affairs
by
an
order
issued
under
Section
8(e)(4)
or
Section
8(g)(1) of the
FDIA (12
U.S.C. §§1818(e)(4)
and (g)(1)),
all obligations
of the Bank
under
this Agreement
shall terminate
as of
the effective
date of
the order,
but vested
rights of
Executive and the Bank as of the date of termination
shall not be affected.
(iii)
If the
Bank is
in default,
as defined
in Section
3(x)(1) of
the FDIA
(12 U.S.C.
§1813(x)(1)),
all obligations under
this Agreement shall
terminate as of
the date of
default, but vested
rights of Executive and the Bank as of the date
of termination shall not be affected.
(iv)
Notwithstanding
any
other
provision
of
this
Agreement
to
the
contrary,
any
payments
made to
Executive pursuant
to this
Agreement, or
otherwise, are
subject to
and conditioned
upon their
compliance with
Section 18(k)
of the
FDIA (12
U.S.C. §1828(k))
and 12
C.F.R.
Part 359.
10.
Nature
of
Obligations.
Nothing
contained
herein
shall
be
deemed
to
create
other
than
a
terminable at will
employment relationship between
the Bank and
Executive, and the
Bank may
terminate
Executive’s
employment
at
any
time,
subject
to
providing
any
payments
specified
herein in accordance with the terms
hereof.
11.
Acknowledgment. Executive acknowledges that Executive has read this
Agreement in full and
completely understands all of its terms and obligations
and enters into this Agreement freely
and voluntarily, and
after having
the
opportunity to
consult with
representatives
of Executive's
own choosing and that Executive's
agreement is freely given.
4
IN WITNESS WHEREOF, the parties
hereto have duly
executed this Agreement
as of the date
first
above mentioned.
U.S. Century Bank
Executive
By:
/s/Jessica Goldberg
/s/Andres Collazo
Title:
Senior Vice President/Director of
Print Name: /s/Andres Collazo
Human Resources
Address:
[Redacted]
exhibit1011
Exhi
bit
10.11
CHANGE
IN
CONTROL AGREEMENT
THIS CHANGE
IN CONTROL
AGREEMENT (the “Agreement”)
is made
as of the
29
th
day of December
202
5
by and
between
U.S. Century
Bank, with
Corporate
Offices located at
2301 NW
87
th
Ave., Doral, FL
33172
(hereinafter called the
“Bank”) and Mr. Oscar Gomez (“Executive”).
WHEREAS,
as consideration for
Executive's continued
employment with the
Bank as Executive Vice
President/Head of Global Banking
Division,
the parties hereto,
intending to be
legally bound, agree
as follows:
1.
Payment Upon
Change in
Control.
In the event
of a
Change in
Control (as defined
herein) during
the term
of this
Agreement,
the Bank
agrees
to pay
Executive
a cash payment
equal to one
times
the
Base
Annual
Salary of
Executive received
during the
one (1)
year period
prior to
the Change
in Control, to
be paid within
thirty (30) days
of the consummation
of the Change
in Control.
The Bank's
provision of this
benefit to Executive
is made
without regard
to whether, or
for how
long, Executive
remains employed with
the surviving
company subsequent to
the Change
in
Control.
2.
Change in
Control.
“Change in
Control” shall mean the
occurrence of
an event described
in (i),
(ii), (iii), or (iv) below:
(i)
Any person
or group
(within the
meaning of
Sections 13(d)
and 14(d)
of the
Securities
Exchange Act
of
1934,
as
amended (the
“Exchange Act”),
other
than USCB
Financial
Holdings, Inc.
(the “Company”),
an affiliate of
the Company
or a trustee
or other fiduciary
holding
securities
under
an
employee
benefit
plan
of
the
Company
or
the
Bank
or
a
corporation
owned
directly
or
indirectly
by
the
stockholders
of
the
Company
in
substantially the same proportions as their ownership of
stock of the Company,
becomes
the
beneficial
owner
(within
the
meaning
of
Rule
13(d)(3)
under
the
Exchange
Act,
directly or indirectly (which
shall include securities
issuable upon conversion,
exchange
or otherwise) or securities
representing 50% or more
of the combined voting
power of the
Company’s
or
the
Bank’s
then-outstanding securities
entitled
generally
to
vote
for
the
election of directors.
(ii)
Consummation of an agreement to merge or consolidate with another entity (other than a
majority-controlled
subsidiary
of
the
Company)
unless
the
Company's
stockholders
immediately
before
the
merger
or consolidation
own
more
than
50%
of the
combined
voting power of the resulting entity's voting securities (giving effect
to the conversion or
exchange of
securities issued
in the
merger or
consolidation to
the other
entity that
are
convertible or exchangeable
for voting
securities) entitled
generally to
vote for
the election
of directors.
(iii)
Consummation
of
an
agreement
(including,
without
limitation,
an
agreement
of
liquidation) to sell or otherwise dispose of
all or substantially all of the business or assets
of the Company or the Bank; or
(iv)
Individuals who, as of the date hereof, constitute the
Board of Directors of the Company
(the “Incumbent Board”) cease
for any reason during
any 12 month period to
constitute at
least a majority of the Board, provided
that any person becoming a director
subsequent to
the
date
hereof
whose
election
or
nomination
for
election
by
the
stockholders
of
the
Company is
approved by
a vote
of at
least a
majority of
directors then
constituting the
Incumbent
Board
shall
be,
for
purposes
of
this
Agreement,
considered
as
though
such
person were a member of the Incumbent Board.
Notwithstanding
the foregoing, no event shall constitute a Change in Control unless such event
shall also
constitute a
change in
control as defined
in Section
409A of
the Internal
Revenue
Code of 1986, as amended.
2
3.
Severability.
Should any provision of this
Agreement be declared or determined by any court
of competent
jurisdiction to
be
unenforceable
or
invalid
for any
reason,
the validity
of the
remaining
parts, term or provisions
of this Agreement
shall
not
be affected
thereby and
the
invalid or
unenforceable
part,
term
or
provision
shall
be
deemed
not
to
be
a
part
of
this
Agreement.
4.
Applicable Law/Forum.
This Agreement has been entered into and shall be
governed by and
construed under the internal
laws of the State of
Florida, without regard to conflicts
of laws or
principles. All suits, proceedings and other actions relating to, arising out of
or in connection
with this
Agreement
will be
submitted solely
to
the in
personam jurisdiction
of
the
United States
District Court for the Southern District of Florida (“Federal Court”) or to the Circuit Court in
Broward
County
or
MiamiDade County.
Executive
hereby
waives
any
claims
against
or
objections to such in
personam jurisdiction and venue.
5.
Notice.
All
notices
and
other
communications
hereunder
shall
be in
writing
and
shall
be
deemed
to have been
given only if and
when personally
delivered or three (3) business days
after mailing, postage
prepaid, registered
or certified mail,
or when delivered
(and receipted
for) by an express delivery service, addressed in each case as follows. As to
notices provided
to the Bank, notices shall
be sent to the Human
Resources
Department
at
the address
of the
Bank listed
in the
introductory paragraph of this Agreement.
As
to
notices
to
Executive,
notices
shall be
sent to
the
address provided below
in the signature block hereto. Executive
and the Bank
may
change the address
for the giving of notices.
6.
Complete Agreement. This Agreement represents the complete
agreement between Executive
and the
Bank regarding the
subject matter of
this Agreement.
All prior agreements
between
the
Bank
and
Executive
with
respect
to
the
specific
matters
agreed
to
herein
are
hereby
superseded and shall have
no force or effect. This
Agreement is in no
way dependent upon
the
performance
of any other contract
or agreement
that may have
been or
may be
entered
into
between Executive and the
Bank and remains in
effect during
the pendency of
this Agreement.
As such,
the
breach
or
alleged
breach
of
any
other
contract
or
agreement
is
no
defense
to
enforcement of this Agreement.
7.
Amendments
in
Writing.
No
amendment,
modification,
waiver,
or
other
change
to
this
Agreement shall
in any
event
be effective
unless the same
shall
be in
writing, specifically
identifying this Agreement and the provision intended to be
changed and signed by
the
Bank
and Executive, and
each such change
shall be
effective only
in the
specific
instance and
for the
specific
purpose
for which
it
is
given.
No
provision
of
this
Agreement
shall
be
varied,
contradicted or
explained by
any oral
agreement, course
of dealing
or
performance
or
any
other
matter not set
forth in an
agreement in writing and signed by Executive and the
Bank.
8.
Term
of
the
Agreement.
Subject
to
the
terms
hereof,
the
term
of
this
Agreement
shall
commence on the
date hereof and
terminate on December
31, 2028 (the
“Initial Term”). Prior
to
December
31,
2026
(the
“Extension
Anniversary
Date”)
and
each
annual
anniversary
thereafter
of
the
Extension
Anniversary
Date,
the
Board
of
Directors
of
the
Bank
or
the
Compensation
Committee
thereof
shall
consider
and
review
(with
appropriate
corporate
documentation
thereof,
and
after
taking
into
account
all
relevant
factors,
including
Executive’s performance
hereunder) a one-year
extension of the
term of this
Agreement. If
the Board of
Directors or the
Compensation Committee thereof approve
such an extension,
then the term
of this Agreement
shall be so
extended as of
the Extension Anniversary Date
or any relevant annual anniversary of
such date unless Executive gives written notice
to the
Bank of Executive’s election not to extend the term, with such written notice to be given
not
less
than
thirty
(30)
days
prior
to
the
Extension
Anniversary Date
or
any
relevant
annual
anniversary of such date. If the Board of Directors elects not to extend the term, it shall give
written
notice
of
such
decision
to
Executive
not
less
than
thirty
(30)
days
prior
to
the
Extension Anniversary
Date or
any annual
anniversary of
such date.
If any
party gives
timely
notice that the term will not be extended
as of the Extension Anniversary
Date or any annual
3
anniversary of such date, then this Agreement
and the rights and obligations provided herein
shall terminate at the conclusion of its remaining term.
References herein to the term of this
Agreement
shall
refer
both
to
the
Initial
Term
and
successive
terms
as
the
term
of
this
Agreement is extended in accordance with the terms
hereof.
9.
Regulatory Actions
.
The following provisions
shall be applicable
to the parties
hereto or any
successor thereto, and shall be controlling in the event of a conflict with any other provision
of this Agreement, including without limitation
Section 1 hereof:
(i)
If Executive is suspended from office and/or temporarily prohibited from participating in
the conduct
of the
Bank’s affairs pursuant
to notice
served under
Section 8(e)(3)
or Section
8(g)(1)
of
the
Federal
Deposit
Insurance
Act
(“FDIA”)(12
U.S.C.
§§1818(e)(3)
and
1818(g)(1)), the
Bank’s obligations under
this Agreement
shall be
suspended as
of the
date
of
service,
unless
stayed
by
appropriate
proceedings.
If
the
charges
in
the
notice
are
dismissed, the
Bank will:
(i) pay Executive
all or part
of the compensation
withheld while
its obligations
under
this Agreement
were
suspended, and
(ii) reinstate
(in whole
or
in
part) any of its obligations which were suspended.
(ii)
If Executive is
removed from office and/or
permanently prohibited from participating in
the
conduct
of
the
Bank’s
affairs
by
an
order
issued
under
Section
8(e)(4)
or
Section
8(g)(1) of the
FDIA (12
U.S.C. §§1818(e)(4)
and (g)(1)),
all obligations
of the Bank
under
this Agreement
shall terminate
as of
the effective
date of
the order,
but vested
rights of
Executive and the Bank as of the date of termination
shall not be affected.
(iii)
If the
Bank is
in default,
as defined
in Section
3(x)(1) of
the FDIA
(12 U.S.C.
§1813(x)(1)),
all obligations under
this Agreement shall
terminate as of
the date of
default, but vested
rights of Executive and the Bank as of the date
of termination shall not be affected.
(iv)
Notwithstanding
any
other
provision
of
this
Agreement
to
the
contrary,
any
payments
made to
Executive pursuant
to this
Agreement, or
otherwise, are
subject to
and conditioned
upon their
compliance with
Section 18(k)
of the
FDIA (12
U.S.C. §1828(k))
and 12
C.F.R.
Part 359.
10.
Nature
of
Obligations.
Nothing
contained
herein
shall
be
deemed
to
create
other
than
a
terminable at will
employment relationship between
the Bank and
Executive, and the
Bank may
terminate
Executive’s
employment
at
any
time,
subject
to
providing
any
payments
specified
herein in accordance with the terms
hereof.
11.
Acknowledgment. Executive acknowledges that Executive has read this
Agreement in full and
completely understands all of its terms and obligations
and enters into this Agreement freely
and voluntarily, and
after having
the
opportunity to
consult with
representatives
of Executive's
own choosing and that Executive's
agreement is freely given.
4
IN WITNESS WHEREOF, the parties
hereto have duly
executed this Agreement
as of the date
first
above mentioned.
U.S. Century Bank
Executive
By:
/s/Jessica Goldberg
/s/Oscar Gomez
Title:
Senior Vice President/Director of
Print Name:
Oscar Gomez
Human Resources
Address: [Redacted]
exhibit1012
Exhibit 10.12
CHANGE
IN
CONTROL AGREEMENT
THIS CHANGE
IN CONTROL
AGREEMENT (the “Agreement”)
is made
as of
the 29th
day of
December
202
5
by and
between
U.S. Century
Bank, with
Corporate
Offices located at
2301 NW
87
th
Ave., Doral, FL
33172
(hereinafter called the
“Bank”) and Ms. Martha
Guerra-Kattou (“Executive”).
WHEREAS,
as consideration for
Executive's continued
employment with the
Bank as Executive Vice
President/Director of Sales and Marketing,
the parties hereto,
intending to be legally
bound, agree
as follows:
1.
Payment Upon
Change in
Control.
In the event
of a
Change in
Control (as defined
herein) during
the term
of this
Agreement,
the Bank
agrees
to pay
Executive
a cash payment
equal to one
times
the
Base
Annual
Salary of
Executive received
during the
one (1)
year period
prior to
the Change
in Control, to
be paid within
thirty (30) days
of the consummation
of the Change
in Control.
The Bank's
provision of this
benefit to Executive
is made
without regard
to whether, or
for how
long, Executive
remains employed with
the surviving
company subsequent to
the Change
in
Control.
2.
Change in
Control.
“Change in
Control” shall mean the
occurrence of
an event described
in (i),
(ii), (iii), or (iv) below:
(i)
Any person
or group
(within the
meaning of
Sections 13(d)
and 14(d)
of the
Securities
Exchange Act
of
1934,
as
amended (the
“Exchange Act”),
other
than USCB
Financial
Holdings, Inc.
(the “Company”),
an affiliate of
the Company
or a trustee
or other fiduciary
holding
securities
under
an
employee
benefit
plan
of
the
Company
or
the
Bank
or
a
corporation
owned
directly
or
indirectly
by
the
stockholders
of
the
Company
in
substantially the same proportions as their ownership of
stock of the Company,
becomes
the
beneficial
owner
(within
the
meaning
of
Rule
13(d)(3)
under
the
Exchange
Act,
directly or indirectly (which
shall include securities
issuable upon conversion,
exchange
or otherwise) or securities
representing 50% or more
of the combined voting
power of the
Company’s
or
the
Bank’s
then-outstanding securities
entitled
generally
to
vote
for
the
election of directors.
(ii)
Consummation of an agreement to merge or consolidate with another entity (other than a
majority-controlled
subsidiary
of
the
Company)
unless
the
Company's
stockholders
immediately
before
the
merger
or consolidation
own
more
than
50%
of the
combined
voting power of the resulting entity's voting securities (giving effect
to the conversion or
exchange of
securities issued
in the
merger or
consolidation to
the other
entity that
are
convertible or exchangeable
for voting
securities) entitled
generally to
vote for
the election
of directors.
(iii)
Consummation
of
an
agreement
(including,
without
limitation,
an
agreement
of
liquidation) to sell or otherwise dispose of
all or substantially all of the business or assets
of the Company or the Bank; or
(iv)
Individuals who, as of the date hereof, constitute the
Board of Directors of the Company
(the “Incumbent Board”) cease
for any reason during
any 12 month period to
constitute at
least a majority of the Board, provided
that any person becoming a director
subsequent to
the
date
hereof
whose
election
or
nomination
for
election
by
the
stockholders
of
the
Company is
approved by
a vote
of at
least a
majority of
directors then
constituting the
Incumbent
Board
shall
be,
for
purposes
of
this
Agreement,
considered
as
though
such
person were a member of the Incumbent Board.
Notwithstanding
the foregoing, no event shall constitute a Change in Control unless such event
shall also
constitute a
change in
control as defined
in Section
409A of
the Internal
Revenue
Code of 1986, as amended.
2
3.
Severability.
Should any provision of this
Agreement be declared or determined by any court
of competent
jurisdiction to
be
unenforceable
or
invalid
for any
reason,
the validity
of the
remaining
parts, term or provisions
of this Agreement
shall
not
be affected
thereby and
the
invalid or
unenforceable
part,
term
or
provision
shall
be
deemed
not
to
be
a
part
of
this
Agreement.
4.
Applicable Law/Forum.
This Agreement has been entered into and shall be
governed by and
construed under the internal
laws of the State of
Florida, without regard to conflicts
of laws or
principles. All suits, proceedings and other actions relating to, arising out of
or in connection
with this
Agreement
will be
submitted solely
to
the in
personam jurisdiction
of
the
United States
District Court for the Southern District of Florida (“Federal Court”) or to the Circuit Court in
Broward
County
or
MiamiDade County.
Executive
hereby
waives
any
claims
against
or
objections to such in
personam jurisdiction and venue.
5.
Notice.
All
notices
and
other
communications
hereunder
shall
be in
writing
and
shall
be
deemed
to have been
given only if and
when personally
delivered or three (3) business days
after mailing, postage
prepaid, registered
or certified mail,
or when delivered
(and receipted
for) by an express delivery service, addressed in each case as follows. As to
notices provided
to the Bank, notices shall
be sent to the Human
Resources
Department
at
the address
of the
Bank listed
in the
introductory paragraph of this Agreement.
As
to
notices
to
Executive,
notices
shall be
sent to
the
address provided below
in the signature block hereto. Executive
and the Bank
may
change the address
for the giving of notices.
6.
Complete Agreement. This Agreement represents the complete
agreement between Executive
and the
Bank regarding the
subject matter of
this Agreement.
All prior agreements
between
the
Bank
and
Executive
with
respect
to
the
specific
matters
agreed
to
herein
are
hereby
superseded and shall have
no force or effect. This
Agreement is in no
way dependent upon
the
performance
of any other contract
or agreement
that may have
been or
may be
entered
into
between Executive and the
Bank and remains in
effect during
the pendency of
this Agreement.
As such,
the
breach
or
alleged
breach
of
any
other
contract
or
agreement
is
no
defense
to
enforcement of this Agreement.
7.
Amendments
in
Writing.
No
amendment,
modification,
waiver,
or
other
change
to
this
Agreement shall
in any
event
be effective
unless the same
shall
be in
writing, specifically
identifying this Agreement and the provision intended to be
changed and signed by
the
Bank
and Executive, and
each such change
shall be
effective only
in the
specific
instance and
for the
specific
purpose
for which
it
is
given.
No
provision
of
this
Agreement
shall
be
varied,
contradicted or
explained by
any oral
agreement, course
of dealing
or
performance
or
any
other
matter not set
forth in an
agreement in writing and signed by Executive and the
Bank.
8.
Term
of
the
Agreement.
Subject
to
the
terms
hereof,
the
term
of
this
Agreement
shall
commence on the
date hereof and
terminate on December
31, 2028 (the
“Initial Term”). Prior
to
December
31,
2026
(the
“Extension
Anniversary
Date”)
and
each
annual
anniversary
thereafter
of
the
Extension
Anniversary
Date,
the
Board
of
Directors
of
the
Bank
or
the
Compensation
Committee
thereof
shall
consider
and
review
(with
appropriate
corporate
documentation
thereof,
and
after
taking
into
account
all
relevant
factors,
including
Executive’s performance
hereunder) a one-year
extension of the
term of this
Agreement. If
the Board of
Directors or the
Compensation Committee thereof approve
such an extension,
then the term
of this Agreement
shall be so
extended as of
the Extension Anniversary Date
or any relevant annual anniversary of
such date unless Executive gives written notice
to the
Bank of Executive’s election not to extend the term, with such written notice to be given
not
less
than
thirty
(30)
days
prior
to
the
Extension
Anniversary Date
or
any
relevant
annual
anniversary of such date. If the Board of Directors elects not to extend the term, it shall give
written
notice
of
such
decision
to
Executive
not
less
than
thirty
(30)
days
prior
to
the
Extension Anniversary
Date or
any annual
anniversary of
such date.
If any
party gives
timely
notice that the term will not be extended
as of the Extension Anniversary
Date or any annual
3
anniversary of such date, then this Agreement
and the rights and obligations provided herein
shall terminate at the conclusion of its remaining term.
References herein to the term of this
Agreement
shall
refer
both
to
the
Initial
Term
and
successive
terms
as
the
term
of
this
Agreement is extended in accordance with the terms
hereof.
9.
Regulatory Actions
.
The following provisions
shall be applicable
to the parties
hereto or any
successor thereto, and shall be controlling in the event of a conflict with any other provision
of this Agreement, including without limitation
Section 1 hereof:
(i)
If Executive is suspended from office and/or temporarily prohibited from participating in
the conduct
of the
Bank’s affairs pursuant
to notice
served under
Section 8(e)(3)
or Section
8(g)(1)
of
the
Federal
Deposit
Insurance
Act
(“FDIA”)(12
U.S.C.
§§1818(e)(3)
and
1818(g)(1)), the
Bank’s obligations under
this Agreement
shall be
suspended as
of the
date
of
service,
unless
stayed
by
appropriate
proceedings.
If
the
charges
in
the
notice
are
dismissed, the
Bank will:
(i) pay Executive
all or part
of the compensation
withheld while
its obligations
under
this Agreement
were
suspended, and
(ii) reinstate
(in whole
or
in
part) any of its obligations which were suspended.
(ii)
If Executive is
removed from office and/or
permanently prohibited from participating in
the
conduct
of
the
Bank’s
affairs
by
an
order
issued
under
Section
8(e)(4)
or
Section
8(g)(1) of the
FDIA (12
U.S.C. §§1818(e)(4)
and (g)(1)),
all obligations
of the Bank
under
this Agreement
shall terminate
as of
the effective
date of
the order,
but vested
rights of
Executive and the Bank as of the date of termination
shall not be affected.
(iii)
If the
Bank is
in default,
as defined
in Section
3(x)(1) of
the FDIA
(12 U.S.C.
§1813(x)(1)),
all obligations under
this Agreement shall
terminate as of
the date of
default, but vested
rights of Executive and the Bank as of the date
of termination shall not be affected.
(iv)
Notwithstanding
any
other
provision
of
this
Agreement
to
the
contrary,
any
payments
made to
Executive pursuant
to this
Agreement, or
otherwise, are
subject to
and conditioned
upon their
compliance with
Section 18(k)
of the
FDIA (12
U.S.C. §1828(k))
and 12
C.F.R.
Part 359.
10.
Nature
of
Obligations.
Nothing
contained
herein
shall
be
deemed
to
create
other
than
a
terminable at will
employment relationship between
the Bank and
Executive, and the
Bank may
terminate
Executive’s
employment
at
any
time,
subject
to
providing
any
payments
specified
herein in accordance with the terms
hereof.
11.
Acknowledgment. Executive acknowledges that Executive has read this
Agreement in full and
completely understands all of its terms and obligations
and enters into this Agreement freely
and voluntarily, and
after having
the
opportunity to
consult with
representatives
of Executive's
own choosing and that Executive's
agreement is freely given.
4
IN WITNESS WHEREOF, the parties
hereto have duly
executed this Agreement
as of the date
first
above mentioned.
U.S. Century Bank
Executive
By:
/s/Jessica Goldber
g
/s/Martha Guerra-Kattou
Title:
Senior Vice President/Director of
Print Name:
Martha Guerra-Kattou
Human Resources
Address:
[Redacted]
exhibit211
Exhibit 21.1
SUBSIDIARY LIST
Subsidiary of USCB Financial Holdings, Inc.:
U.S. Century Bank, a Florida chartered banking corporation.
Subsidiary of U.S. Century Bank:
Florida Peninsula Title LLC
exhibit231
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
We consent to the incorporation by reference
in the registration statement on Form S-8 (333-265498),
Form S-3 (No 333-
286940), and From -4 (No 333-291367) of USCB Financial
Holdings, Inc. of our report dated March 13, 2026,
related to
the consolidated financial statements appearing in this
Annual Report on Form 10-K of USCB Financial Holdings,
Inc. for
the year ended December 31, 2025.
/s/ Crowe LLP
Fort Lauderdale, Florida
March 13, 2026
exhibit311
Exhibit 31.1
Certification of Chief Executive Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002
I, Luis de la Aguilera, certify that:
1.
I have reviewed this Annual Report on Form 10-K
of USCB Financial Holdings, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary
to
make
the
statements
made,
in
light
of
the
circumstances
under
which
such
statements
were
made,
not
misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects
the financial
condition, results
of operations
and cash
flows of
the registrant
as of,
and for,
the periods
presented in this report;
4.
The
registrant’s
other
certifying
officer
and
I
are
responsible
for
establishing
and
maintaining
disclosure
controls
and
procedures (as
defined in
Exchange Act
Rules 13a-15(e) and
15d-15(e))
and internal
control over
financial
reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f))
for the registrant and have:
a)
designed
such
disclosure
controls
and
procedures,
or
caused
such
disclosure
controls
and
procedures
to
be
designed
under
our
supervision,
to
ensure
that
material
information
relating
to
the
registrant,
including
its
consolidated subsidiaries, is
made known
to us by
others within those
entities, particularly during
the period in
which
this report is being prepared;
b)
designed such internal control over financial reporting, or caused such
internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and
the
preparation
of
financial
statements
for
external
purposes
in
accordance
with
generally
accepted
accounting
principles;
c)
evaluated the effectiveness
of the registrant’s
disclosure controls and
procedures and presented
in this report our
conclusions about the effectiveness of the
disclosure controls and procedures, as of the
end of the period covered
by this report based on such evaluation; and
d)
disclosed in this
report any
change in the
registrant’s internal
control over
financial reporting
that occurred
during
the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an Annual Report) that
has
materially
affected,
or
is
reasonably
likely
to
materially
affect,
the
registrant’s
internal
control
over
financial
reporting; and
5.
The registrant’s
other certifying
officer
and I
have disclosed,
based on
our most
recent evaluation
of internal
control over
financial
reporting,
to
the
registrant’s
auditors
and
the
audit
committee
of
the
registrant’s
board
of
directors
(or
persons
performing the equivalent functions):
a)
All
significant
deficiencies
and
material
weaknesses
in
the
design
or
operation
of
internal
control
over
financial
reporting which are
reasonably likely
to adversely affect
the registrant’s ability
to record, process,
summarize and
report financial information; and
b)
Any fraud, whether or not material,
that involves management or other employees who
have a significant role in
the
registrant’s internal control over financial reporting.
/s/ Luis de la Aguilera
Luis de la Aguilera
Chairman, President,
and Chief Executive Officer
Date: 3/13/2026
exhibit312
Exhibit 31.2
Certification of Chief Financial Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002
I, Robert Anderson, certify that:
1.
I have reviewed this Annual Report on Form 10-K
of USCB Financial Holdings, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary
to
make
the
statements
made,
in
light
of
the
circumstances
under
which
such
statements
were
made,
not
misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects
the financial
condition, results
of operations
and cash
flows of
the registrant
as of,
and for,
the periods
presented in this report;
4.
The
registrant’s
other
certifying
officer
and
I
are
responsible
for
establishing
and
maintaining
disclosure
controls
and
procedures (as
defined in
Exchange Act
Rules 13a-15(e) and
15d-15(e))
and internal
control over
financial
reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f))
for the registrant
and have:
a)
designed
such
disclosure
controls
and
procedures,
or
caused
such
disclosure
controls
and
procedures
to
be
designed
under
our
supervision,
to
ensure
that
material
information
relating
to
the
registrant,
including
its
consolidated subsidiaries, is
made known
to us by
others within those
entities, particularly during
the period in
which
this report is being prepared;
b)
designed such internal control over financial reporting, or caused such
internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and
the
preparation
of
financial
statements
for
external
purposes
in
accordance
with
generally
accepted
accounting
principles;
c)
evaluated the effectiveness
of the registrant’s
disclosure controls and
procedures and presented
in this report our
conclusions about the effectiveness of the
disclosure controls and procedures, as of the
end of the period covered
by this report based on such evaluation; and
d)
disclosed in this
report any
change in the
registrant’s internal
control over
financial reporting
that occurred
during
the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an Annual Report) that
has
materially
affected,
or
is
reasonably
likely
to
materially
affect,
the
registrant’s
internal
control
over
financial
reporting; and
5.
The registrant’s
other certifying
officer
and I
have disclosed,
based on
our most
recent evaluation
of internal
control over
financial
reporting,
to
the
registrant’s
auditors
and
the
audit
committee
of
the
registrant’s
board
of
directors
(or
persons
performing the equivalent functions):
a)
All
significant
deficiencies
and
material
weaknesses
in
the
design
or
operation
of
internal
control
over
financial
reporting which are
reasonably likely
to adversely affect
the registrant’s ability
to record, process,
summarize and
report financial information; and
b)
Any fraud, whether or not material, that involves
management or other employees who have a significant role
in the
registrant’s internal control over financial reporting.
/s/ Robert Anderson
Robert Anderson
Chief Financial Officer
Date: 3/13/2026
exhibit321
Exhibit 32.1
Certification of Chief Executive Officer Pursuant to
18 U.S.C. Section 1350
as Adopted Pursuant to Section 906 of the Sarbanes
-Oxley Act of 2002
In
connection
with
the
Annual
Report
of
USCB
Financial
Holdings,
Inc.
(the
“Company”)
on
Form 10-K
for
the
year
ended December 31,
2025 (the
“Report”),
as filed
with the
Securities and
Exchange Commission
on the
date hereof
(the
“Report”), I,
Luis
de
la
Aguilera,
as
President
and
Chief
Executive
Officer
of
the
Company,
certify,
to
the
best
of
my
knowledge, pursuant to 18 U.S.C. §1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
that:
1)
The
Report
fully
complies
with
the
requirements
of
Section 13(a) or
15(d),
as
applicable,
of
the
Securities
Exchange Act of 1934; and
2)
The
information
contained
in
the
Report
fairly
presents,
in
all
material
respects,
the
financial
condition
and
results of operations of the Company.
/s/ Luis de la Aguilera
Luis de la Aguilera
Chairman, President,
and Chief Executive Officer
Date: 3/13/2026
exhibit322
Exhibit 32.2
Certification of Chief Financial Officer Pursuant to
18 U.S.C. Section 1350
as Adopted Pursuant to Section 906 of the Sarbanes
-Oxley Act of 2002
In
connection
with
the
Annual
Report
of
USCB
Financial
Holdings,
Inc.
(the
“Company”)
on
Form 10-K
for
the
year
ended December 31,
2025 (the
“Report”), as
filed with
the Securities
and Exchange
Commission on
the date
hereof (the
“Report”), I, Robert Anderson,
as Chief Financial Officer
of the Company,
certify,
to the best of my knowledge,
pursuant to
18 U.S.C. §1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002, that:
1)
The
Report
fully
complies
with
the
requirements
of
Section 13(a) or
15(d),
as
applicable,
of
the
Securities
Exchange Act of 1934; and
2)
The
information
contained
in
the
Report
fairly
presents,
in
all
material
respects,
the
financial
condition
and
results of operations of the Company.
/s/ Robert Anderson
Robert Anderson
Chief Financial Officer
Date: 3/13/2026