What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-03-14 compared with 2024-03-22 · 526 added, 510 removed, 1353 unchanged (43% of the section changed)

32 unchanged sentences

“contemplate,”

“expect,” “aim,” “plan,” “estimate,” “continue,” and “intend,” as well as other similar words and expressions of the future, are

forward-looking

“expect,” “aim,”

“plan,” “estimate,”

“seek,” “continue,”

and “intend,”

similar words

and expressions

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

4 unchanged sentences

or events, or business and growth strategies, including

anticipated internal growth.

anticipated internal growth and balance sheet restructuring.

These forward-looking statements involve significant risks and uncertainties that could cause our actual results to differ

59 unchanged sentences

factors described in this Annual

Report on Form 10-K

and in the reports the

Company filed or will file

with the SEC and, for

periods prior to the completion

of the bank holding company reorganization, the Bank

filed with the FDIC.

the Effective

Date, the Bank filed with the FDIC.

Non-GAAP Financial Measures

20 unchanged sentences

in the ‘Non-GAAP Reconciliation Tables’ included

in this annual report.

in this Annual Report on form 10-K.

For the year ended December 31, 2024, the Company reported net income of

10 unchanged sentences

ended December 31, 2024:

On January 29,

2024, the Company

announced that its

Board of Directors

had adopted a

quarterly cash dividend

The quarterly dividend for all quarters in 2024 was $0.05 per share

of Class A common stock.

income before

provision for

credit losses

totaled $69.9

$11.4 million

compared to $58.6 million for the year ended December

December 31, 2022.

margin (“NIM”)

December 31, 2024

The weighted average cost of interest-bearing liabilities increased to 3.07% for the year ended December 31, 2023

from 0.66% in December 31, 2022 as a result of the increase

in market interest rates.

improvement from

the year ended December 31, 2023.

Total assets grew to

$2.6 billion at December

31, 2024, an increase

of $242.1 million

or 10.4%, compared

billion at December 31, 2023.

Total loans held for investment

grew to $2.0 billion at

December 31, 2024, an

increase of $192.0 million or

compared to $1.8 billion at December 31, 2023.

Return on average assets for the year ended December

31, 2023 was 0.75% compared to 1.01% in 2022.

Return on average stockholders’ equity for the year ended December 31, 2023 was 8.99% compared to 10.73% in

Nonperforming assets was $468 thousand at December

31, 2023 compared to $0 at December 31, 2022.

The Company maintained its strong capital position.

As of December 31, 2023, the Bank was well-capitalized, with

a total risk-based capital ratio of

12.65%, a tier 1 risk-based

capital ratio of 11.48%, a common

equity tier 1 capital

capital ratios exceeded the thresholds to be well-capitalized

under the applicable bank regulatory requirements.

During the year

ended December 31,

2023, the Company

repurchased 669,920 shares

of Class A common stock

31, 2024 was 0.99% compared to 0.75% for 2023.

Return on average stockholders’ equity

for the year ended December 31, 2024 was 12.11% compared

Nonperforming

maintained its

strong capital

December 31, 2024,

was well-capitalized

regulatory capital purposes,

total risk-based capital

ratio of 13.34%,

risk-based capital ratio

a common equity tier 1 capital ratio of 12.10%, and a leverage ratio of 9.38%.

As of December 31, 2024 and 2023,

all of the Bank’s regulatory

capital ratios exceeded the

thresholds to be well-capitalized

under the applicable bank

regulatory requirements.

In April 2024, the Board of

Directors approved a

new share repurchase

program of up to

500,000 shares of

A common stock or approximately 2.5% of the Company’s then issued and outstanding shares

of common stock.

During the year ended December 31, 2024, the Company repurchased 42,100

shares of Class A common stock at

approximately

purchases pursuant to the Company’s publicly announced

repurchase program.

As of December 31, 2023, 80,080

shares remained authorized for repurchase under this

Instruments - Credit Losses (Topic 326) to calculate the ACL.

The Company brought in $50 million of brokered CDs at a weighted average rate of 4.98%

to boost liquidity during

the second quarter of 2023.

The CDs renewed in Q1 2024 at weighted

interest swap

with a notional

fix interest rate funding.

The Company executed four fair

value interest swaps with a

notional value of $200 million

to manage exposure to

interest rate risk by reducing the loan portfolio duration.

These repurchases

537,980 shares remained authorized for repurchase under

the current two programs.

During the third

quarter in 2024,

the Company unwound four

fair value interest rate

notional aggregate

amount of $200 million.

USCB Financial Holdings, Inc.

58 unchanged sentences

and supportable

credit losses provide the foundation for the

estimation of expected credit losses.

adjustments are applied to the

The estimation's

16 unchanged sentences

modeling the lifetime

probability of default (“PD”)

probability of default

(“PD”) rates.

loss given default

rate (“LGD”) is assigned to each pool

18 unchanged sentences

present value of future cash

flows and the book balance

flows and the book

the loan at the measurement date.

Management opted for the Remaining Life (“WARM”) methodology for five segments within the loan portfolio.

Qualitative assessments

16 unchanged sentences

characteristics.

established connections between

internal segmentation and

FFIEC Call Report

codes for this purpose.

The loss driver

established connections

internal portfolio

segmentation and

year-over-year

USCB Financial Holdings, Inc.

Reserve Bank projections

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

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.

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.

The model integrates qualitative

18 unchanged sentences

100 basis points increase in the HPI

index, the forecast reduces

reserves by approximately $150

thousand and about 1

basis point to

the reserve coverage ratio,

everything else being

sensitivity analysis provides

a hypothetical result

to assess the

sensitivity of the

and does not represent a change in management’s

forecast reduces

approximately $582

reserve coverage

ratio, everything else being

This sensitivity analysis

provides a hypothetical result

to assess the sensitivity

ACL and does not represent a change in management’s

As of December

18 unchanged sentences

collectively evaluated loan portfolio.

liabilities are

recognized for

tax consequences

attributable to

the financial statement carrying amounts of

existing assets and liabilities and their

respective tax bases and operating loss

and tax credit carryforwards.

assets and liabilities are measured

using enacted tax rates expected

taxable income

temporary differences

deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment

Management is required to assess whether a valuation allowance should be established on the net deferred tax assets

consideration of

all available evidence

likely than not

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

The Company recognizes positions taken

or expected to be

taken in a tax

return in accordance with existing accounting

which prescribes

a recognition threshold

and measurement

and penalties

tax liabilities, if any, would

be recorded in interest expense and other operating non-interest

expense, respectively.

Segment Reporting

Management monitors the revenue streams for all its various

products and services.

The identifiable segments are not

Accordingly, all

the financial service

operations are

considered by management

aggregated in one

reportable operating

USCB Financial Holdings, Inc.

Results of Operations

9 unchanged sentences

Net interest income before provision for credit losses

Provision fro credit losses

non-interest income

17 unchanged sentences

income taxes.

USCB Financial Holdings, Inc.

December 31, 2024

2 unchanged sentences

of $16.5 million

diluted share

December 31, 2023

ended December 31,

$1.24 compared to net income per diluted share for the

29 unchanged sentences

average rates

interest-bearing

interest margin

interest-earning

non-interest-bearing

stockholders’ equity, also fund

interest-earning assets, net interest margin includes

the benefit of these

non-interest-bearing

paid on interest-bearing liabilities.

Net interest margin is

net interest income divided

by average interest-earning

Because non-interest-bearing

sources of funds,

such as non-interest-bearing

deposits and stockholders’

fund interest-earning assets, net interest margin includes

the benefit of these non-interest-bearing sources.

interest rates

14 unchanged sentences

USCB Financial Holdings, Inc.

The following table contains information related

to average balance sheet, average yields

on assets, and average costs

of liabilities for the periods indicated (in thousands):

The following table

contains information

related to average

balances, average

yields on assets,

liabilities for the periods indicated (in thousands).

Years Ended December 31,

7 unchanged sentences

Interest-bearing demand deposits

Saving and money market deposits

Savings and money market deposits

Time deposits

26 unchanged sentences

ended December 31,

$5.1 million or

increase of $11.4 million

or 19.4%, from

$58.6 million for

ended December 31,

attributable to higher

cost of funds

due to the interest

The increase in

weighted average rates

paid on cost of

funds was greater than the increase in weighted average yields

earned on interest-earning assets.

the year ended

December 31, 2023.

attributable to increase in weighted average yields on interest-earning assets growing at a higher pace than the increase in

weighted average rates paid on

interest-earning liabilities.

Additionally, the increase

in the volume of

interest-earning assets

was higher than interest-earning liabilities.

interest margin was

2 unchanged sentences

year ended 2023.

and individual

the overall and

individual yields for

interest-earning assets

and interest-bearing

liabilities both

greater increase

when compared

funds was primarily

and interest-bearing liabilities

both increased in

2024, the yield

on interest-earning assets, especially on loans, had a greater

increase when compared to 2023.

The increase in our yields

and cost of funds was primarily due to the interest rate

The Company did not have any tax-exempt securities

at both December 31, 2024 and 2023.

USCB Financial Holdings, Inc.

Provision for Credit Losses

13 unchanged sentences

loan portfolio,

non-performing loans

offs levels, considers statistical trends and economic conditions

assess non-performing

offs levels, consider statistical trends and economic conditions

and other applicable factors.

Provision for credit loss for

the year ended December 31, 2023,

was $2.4 million compared to

$2.5 million in provision

expense for the same period in 2022.

The ACL as a percentage of total loans was 1.18% at December 31, 2023 compared

to 1.16% at December 31, 2022.

USCB Financial Holdings, Inc.

provision expense for the

same period in 2023.

percentage of total

loans was 1.22%

at December 31, 2024

compared to 1.18% at December 31, 2023.

See “Allowance

10 unchanged sentences

generate income from gain

on sale of loans though our swap and SBA programs.

In addition, we own life insurance policies on several employees and

generate income reflecting the increase in the cash surrender value

of these policies.

interest rate

SBA programs.

insurance policies

employees and generate income reflecting the increase in

the cash surrender value of these policies.

The following table presents the components of non-interest

3 unchanged sentences

Gain on sale of loans held for sale, net

Loan settlement

Other non-interest income

1 unchanged sentence

Non-interest income

December 31, 2024

million compared

primarily driven by

million increase in

service fees, consisting

mainly of wire

period in 2023.

increase was primarily

$2.9 million increase

in interest rate

swap income, $415

Additionally, in

both 2023 and 2022, the

Company executed a portfolio restructuring strategy

which resulted in the sale

of lower-yielding available-for-sale securities at a loss in

order to better position our securities portfolio.

Company executed

restructuring strategy

which resulted

lower-yielding

available-for-sale securities at a loss

in order to better

position our securities portfolio.

The loss on the sale

reinvested in securities and loans yielding higher than the

securities that were sold.

of securities was

$1.9 million for

Proceeds from

the sale transactions

were primarily reinvested

in securities and

loans bearing yields

higher than those on the securities that were sold.

Non-Interest Expense

8 unchanged sentences

non-interest expense

Non-interest expense

Non-interest expense for

the year ended

December 31, 2024

increased $5.2 million

or 12.5%, compared

period in 2023.

The increase is

primarily due to other operating expense specially in

the categories of internet banking fees,

promotional expense, audit

service fees, and

insurance expense due

activity and fees,

which increased

$1.1 million or 19.7%.

Regulatory assessment and fees increased by $523 thousand

or 56.2% compared to the year ended

Salaries and benefits increased by $486 thousand or 2.0%

due to increase in full time employees to 196 from 191

in salaries and

employee benefits

and other operating

enabled us to

support recent

and has provided us with the necessary technology and

required professionals to execute our growth strategy.

The increase is primarily due to $4.4 million or

17.9% increase in salaries and employee benefits consisting

incentives, and a $1.1 million

increase in stock-based compensation

due to the Company’s financial

performance in 2024.

Other operating

13.0% consisting

$157 thousand

USCB Financial Holdings, Inc.

banking fees,

insurance expense,

director’s fees,

thousand in other expenses.

Provision for Income Tax

16 unchanged sentences

December 31, 2023 was 24.1%.

USCB Financial Holdings, Inc.

For a further discussion

on income taxes, see

Note 6 “Income Taxes” to

the Consolidated Financial

Statements in this

Annual Report on Form 10-K.

For a further

discussion on income taxes, see

Note 6 “Income Taxes”

to the Consolidated Financial Statements

in Item 8 of this Annual Report on Form 10-K.

Rate/Volume Analysis

16 unchanged sentences

Investment securities

Other interest earnings assets

Total increase (decrease) in interest income

Other interest-earning assets

Total increase in interest income

Interest-bearing liabilities:

Interest-bearing demand deposits

Saving and money market deposits

Savings and money market deposits

Time deposits

Borrowings and repurchase agreements

Total increase (decrease) in interest expense

Total increase in interest expense

Increase (decrease) in net interest income

5 unchanged sentences

This amount includes

Both average yields on

interest-earning assets and

average rates paid on

interest-bearing liabilities increased

as a compared to 2022, reflecting the changes in the macro

interest rate environment.

However, the average rates paid on

interest-bearing liabilities increased to a greater degree than

yields on interest-earning assets.

Both average yields

earned on interest-earning

assets and average

rates paid on

interest-bearing liabilities

in 2024 as a compared to 2023, reflecting the

changes in the macro interest rate environment.

However, the average yields

earned on interest-earning

assets increased to a

greater degree than

rates paid on interest

-bearing liabilities.

Additionally,

interest-earning assets volume growth was greater than

the volume growth of interest-bearing liabilities.

The Company did not have any tax-exempt securities

at both December 31, 2024 and December 31, 2023.

Analysis of Financial Condition

2 unchanged sentences

Total loans increased

at December 31,

2023 compared

to $1.5 billion

at December 31,

deposits increased

by $107.9 million,

$1.9 billion at

$192.0 million,

December 31, 2024 compared

to $1.8 billion at December 31, 2023.

deposits increased by $236.9 million,

or 12.2%, to $2.2 billion at December

2024 compared to $1.9 billion at December 31, 2023.

USCB Financial Holdings, Inc.

Investment Securities

17 unchanged sentences

adequate risk-based capital ratios.

investment guideline,

more frequently

deemed necessary,

1 unchanged sentence

objectives directed by the ALCO.

The portfolio of investments can be used to modify the duration of the balance sheet.

The portfolio of investments can be used to modify the duration of the

balance sheet.

allocation of cash into securities takes into consideration anticipated

7 unchanged sentences

debt securities,

USCB Financial Holdings, Inc.

all with varying contractual maturities and coupons.

13 unchanged sentences

(“AFS”) and held-to-maturity (“HTM”)

amortized cost basis

and fair value

amount of $74.4

million and $63.8

debt securities.

In 2022, the Company transferred investment securities from AFS to

HTM with an amortized cost basis and

$74.4 million

million, respectively.

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 income (loss)

and in the carrying value

of the HTM securities.

Such amounts are amortized

remaining life

net income on

There were no

securities transferred

from AFS to HTM in 2023.

these securities

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 unrealized

comprehensive

income (loss)

carrying value

amortized over

the remaining

There was no impact to net income on the date of transfer.

There were no securities transferred from AFS to HTM

in 2024 or 2023.

The book value of the AFS securities is adjusted quarterly for

1 unchanged sentence

gain or loss is reported on an after-tax basis as a component of other comprehensive income (loss) in stockholders’ equity.

CECL requires

a loss reserve

for securities

classified as

Held-to-Maturity (HTM).

The reserve should

reflect historical

credit performance

economic forecast.

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.

Government bonds

issued bonds in HTM the explicit guarantee

of the US Government is sufficient

to conclude that a credit loss reserve

requirement is for

three primary assets

municipal bonds,

corporate bonds, and

Agency issued bonds

the explicit guarantee of the U.S.

Government is sufficient to conclude that a

credit loss reserve is not required.

securitizations.

ImpairmentStudio.

Moody’s baseline

economic forecast.

uses probability

of default/loss

given default (“PD/LGD”)

represents the likelihood a borrower will

Within the Moody’s model,

this is determined using historical

Company calculates quarterly the loss reserve

utilizing Moody’s ImpairmentStudio.

The CECL measurement for investment

solution uses

probability of

given default

represents the

borrower will

is determined

using historical

default data,

adjusted for the current economic environment.

the expected loss if a borrower were to default.

economic environment.

LGD projects the expected loss

if a borrower were to default.

monitors the credit

9 unchanged sentences

by the Company were rated investment grade.

At year ended

December 31, 2023,

HTM securities included $165.6

million of U.S.

Government and U.S.

Agency issued

At December 31, 2024, HTM securities

included $155.5 million of U.S.

Government and

Agency issued bonds and

mortgage-backed

explicit and/or

holds no reserves

remaining portion

in investment

For the portion of the HTM

exposed to non-government credit risk,

the Company utilized the PD/LGD

to estimate a $8 thousand ACL as of December 31,

The book value for debt securities classified

as HTM represents

amortized cost less ACL.

investment securities

decreased $14.5 million

to $404.3 million

at December 31,

2023 from $418.8

corporate bonds.

The required reserve for these

holdings is determined each quarter using the model described above.

the portion of the HTM exposed to non-government credit risk,

the Company utilized the PD/LGD methodology

a $6 thousand

December 31, 2024.

Investment securities

decreased over the

repayments from

securities were

Management reinvested

the repayments

of securities

sale of securities into higher

yielding loans.

As of December

31, 2023, securities with

a market value of $86.9

pledged to secure public deposits and $132.1 million pledged in securities measured at par to the Federal Reserve Bank of

The book value

for debt securities

classified as HTM

represents amortized

cost less ACL.

As of December 31, 2024, securities with a market value of $66.1 million were pledged to secure public deposits.

December 31, 2024, the Company did not have any tax-exempt

securities in the portfolio.

USCB Financial Holdings, Inc.

December 31, 2024

December 31, 2022

Available-for-sale:

5 unchanged sentences

Bank subordinated debt securities

Held-to-maturity:

Government Agency

Collateralized mortgage obligations

Mortgage-backed securities - residential

Mortgage-backed securities - commercial

Corporate bonds

Allowance for credit losses - securities held-to-maturity

Securities held-to maturity, net of allowance for credit losses

December 31, 2023

Available-for-sale:

Government Agency

Collateralized mortgage obligations

Mortgage-backed securities - residential

Mortgage-backed securities - commercial

Municipal securities

Bank subordinated debt securities

Held-to-maturity:

6 unchanged sentences

Securities held-to maturity, net of allowance for credit losses

USCB Financial Holdings, Inc.

HTM investment

securities in

aggregate increased

$20.6 million

2024 from $404.3 million at December 31, 2023.

The following

4 unchanged sentences

as of December 31, 2024 (in thousands, except ratios):

After 1 year through 5

After 5 years through

Within 1 year

through 5 years

After 5 years

through 10 years

After 10 years

Available-for-sale:

1 unchanged sentence

Collateralized mortgage obligations

MBS - residential

MBS - commercial

Mortgage-backed securities - residential

Mortgage-backed securities - commercial

Municipal securities

3 unchanged sentences

Collateralized mortgage obligations

MBS - residential

MBS - commercial

Mortgage-backed securities - residential

Mortgage-backed securities - commercial

Corporate bonds

The Company did not have any tax-exempt securities

at both December 31, 2024 and 2023.

interest-earning assets

12 unchanged sentences

sheet composition.

USCB Financial Holdings, Inc.

The following table shows the loan portfolio composition

5 unchanged sentences

Commercial and Industrial

Foreign Banks

Correspondent Banks

Consumer and Other

Deferred cost

loans net of deferred cost

Deferred costs

loans net of deferred costs

Allowance for credit losses

gross loans increased

by $271.4 million

December 31, 2023

$192.0 million

compared to December 31, 2023.

most significant growth

commercial and

industrial and

commercial real

estate loan pools.

loans increased primarily as result of organic growth from our yacht lending business vertical created in January 2022.

increase as a percentage to

we do not expect any

significant changes over the

foreseeable future in

the composition of our loan portfolio.

Commercial real estate continues to be the main category of our portfolio, reflective of

the market in which we operate.

The most significant growth was in the residential real estate and commercial real estate

portfolio continues to diversify

as commercial and industrial loans

continue to increase as

to total loans.

However, we do not expect any significant

changes over the foreseeable future in

the composition of our loan

estate continues

implementation

relationship-based

USCB Financial Holdings, Inc.

business in a highly competitive metropolitan area.

14 unchanged sentences

Commercial and Industrial

Foreign Banks

Correspondent Banks

Consumer and Other

3 unchanged sentences

The information

maturities of

the individual

their contractual

Renewals will

department and

balance sheet

composition at the

contractual maturities

individual loans,

be subject to renewal at their contractual maturity.

Renewals will depend on approval by our credit department and balance

sheet composition

the analysis,

modification of terms

loan’s maturity.

Additionally,

modification of

the loan’s maturity.

Additionally, maturity

concentrations,

reviewed, and analyzed by the ALCO.

Decisions on term

rate modifications are discussed as well.

loan duration,

other interest

are discussed,

and analyzed by the ALCO.

Decisions on term and rate

modifications are discussed as well.

2024, approximately

13 unchanged sentences

rates and positions us to gain in the scenario of higher interest

USCB Financial Holdings, Inc.

December 31, 2024, the

3 unchanged sentences

total gross loans

17% of outstanding balances are

characterized as owner occupied and

83% are characterized as non-owner

retail sector was $285.7 million or 33% of the $868.1 million

non-owner occupied CRE portfolio.

investment by loan type (in thousands):

characterized

characterized as non-owner occupied.

The retail sector

was the largest

segment comprising $305.0 million

of the non-owner

occupied commercial real estate portfolio.

investment by loan type (dollars in thousands):

December 31, 2024

3 unchanged sentences

(1) Loan-to-value is calculated based on the real estate value at the time of origination, renewal, or update, whichever is more recent.

USCB Financial Holdings, Inc.

The following table is a summary of non-owner occupied commercial real estate loans held for investment by collateral

geographical location (in thousands):

geographical location (dollars in thousands):

December 31, 2024

14 unchanged sentences

outside Florida.

CRE loans outside Florida were:

$69.7 million in New York,

$7.1 million in Georgia,

and $2.6 million in New Jersey.

occupied CRE loans outside Florida were:

$67.2 million in New York, $6.9 million in Georgia,

$4.4 million in Arkansas, $4.2

million in North Carolina, $2.8 million in Indiana, and $2.5 million

in New Jersey.

Asset Quality

15 unchanged sentences

financial condition and performance.

USCB Financial Holdings, Inc.

Special Mention

21 unchanged sentences

– Loans classified as loss are considered uncollectible.

USCB Financial Holdings, Inc.

Loan credit exposures by internally assigned grades are

5 unchanged sentences

Commercial and Industrial

Foreign Banks

Correspondent Banks

Consumer and Other

4 unchanged sentences

Commercial and Industrial

Foreign Banks

Correspondent Banks

Consumer and Other

9 unchanged sentences

Non-performing loans to total loans

(1) ACL was calculated under CECL methodology for 2023, and incurred loss methodology for 2022

Non-performing

21 unchanged sentences

in non-accrual

USCB Financial Holdings, Inc.

principal and interest

20 unchanged sentences

concessions intended to minimize potential losses.

discussion on

non-performing loans,

Consolidated Financial

Statements in

Annual Report on Form 10-K.

For further discussion on non-performing loans, see Note

3 “Loans” to the Consolidated Financial Statements

in Item 8 of this Annual Report on Form 10-K.

USCB Financial Holdings, Inc.

Allowance for Credit Losses

16 unchanged sentences

the quantitative calculations.

information on the allowance for credit losses.

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

1 unchanged sentence

and Industrial

Correspondent

December, 31, 2024

Beginning balance

Cumulative effect of adoption of

accounting principle

Provision for credit losses

5 unchanged sentences

Beginning balance

Cumulative effect of adoption of

accounting principle

Provision for credit losses

3 unchanged sentences

average loans

(1) Provision for credit losses excludes $199 thousand release for unfunded commitments included in other liabilities and $2 thousand

release for investment securities held to maturity.

(2) Impact of CECL adoption on January 1, 2023.

10 unchanged sentences

Commercial and Industrial

Foreign Banks

Correspondent Banks

Consumer and Other

49 unchanged sentences

Central America and the Caribbean.

December 31, 2023 and 2022 (in thousands, except ratios):

Twelve Months Ended December 31,

The following

table presents

average balance

ended December 31, 2024 and 2023 (in thousands, except

Years Ended December 31,

Average Balance

Non-interest bearing demand deposits

Interest-bearing demand deposits

Saving and money market deposits

Savings and money market deposits

Time deposits

average deposits for the

year ended December 31, 2023

was $1.9 billion,

Total average deposits for the year ended December 31, 2024 was $2.1 billion,

an increase of $193.7 million,

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moving deposits

bearing accounts

to interest-bearing

due to increases in the interest rate market.

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at December 31,

As of December 31, 2023, 45%

of our deposits are estimated to be

$1.1 billion at December

December 31, 2024,

of our deposits

are estimated to be

FDIC-insured.

Our public funds are 13.9% of total

deposits and are partially collateralized.

Brokered deposits are 2.6% of total deposits and are FDIC-insured.

The estimated

average account size

of our deposit

portfolio is $97

Time deposits with

balances of $250

thousand or more

respectively.

diversified deposit base.

Our top 15 depositors only hold 20%

of our total portfolio.

are partially

collateralized.

Brokered deposits

FDIC-insured.

The estimated average

account size of our deposit

portfolio is $105 thousand.

Time deposits

with balances

of $250 thousand or more

totaled $94.0 million and

$58.1 million at December 31,

2024 and 2023, respectively.

maintains a well-diversified deposit

At December 31,

2024, our top

10 depositors only

held 16.7% of

our total portfolio.

Critical elements of our liquidity

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purchased, brokered

listing certificates

borrowings from

certificates of

deposit, listing

certificates of

and borrowings

Accordingly, our liquidity resources were at sufficient levels to

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Over three through six months

Over six though twelve months

Over six through twelve months

Over twelve months

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Outstanding fixed-rate

advances from

advances from the

$163.0 million and

$183.0 million,

as of December

and December 31,

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rate for outstanding

FHLB advances at

FHLB advances was

3.8% and 4.4%

December 31, 2024, and December 31, 2023, respectively.

USCB Financial Holdings, Inc.

1 unchanged sentence

as of December 31, 2024 (in thousands):

At December 31, 2023

December, 31, 2024

Interest Rate

2 unchanged sentences

July 18, 2025

July 30, 2024

January 24, 2028

April 25, 2028

September 13, 2027

March 23, 2026

February 13, 2025

December, 31, 2023

At December 31, 2022

Interest Rate

Maturity Date

March 27, 2025

July 30, 2024

July 18, 2025

August 17, 2023

March 27, 2025

January 24, 2028

April 25, 2028

December 26, 2024

correspondent

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outstanding balances under the Fed

line of credit and the BTFP.

line of credit.

of the Federal

Reserve System,

announced the

Funding Program (“BTFP”).

The BTFP offered loans of up to one year in length to banks, savings associations, credit

mortgage-backed

securities, and other qualifying assets as collateral.

BTFP program ceased making new loans as of March

The Company paid off $80 million in borrowings under the BTFP

program during the third quarter of 2024.

maturity of this borrowing by the Bank under the BTFP program was January 2025, and there are no remaining borrowings

under this program.

Off-Balance Sheet Arrangements

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2023 (in thousands):

December 31, 2024

December 31, 2023

Commitments to grant loans and unfunded lines of credit

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Commitments to extend credit are agreements to lend funds to a client, as long as there is no violation of any condition

USCB Financial Holdings, Inc.

expire without being

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or marketable securities.

USCB Financial Holdings, Inc.

Asset and Liability Management Committee

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has established

sound risk management practices in place to identify,

what it believes are sound risk management practices

in place to identify,

measure, monitor and mitigate IRR exposures.

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strategies and client expected behavior.

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;

the analysis shows a snapshot in time of the risk

inherent in the balance sheet.

have a more complete

picture of IRR, the Company

also evaluates the economic

value of equity.

This assessment

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;

analysis shows a snapshot in time of the risk inherent

in the balance sheet.

Market and Interest Rate Risk Management

According to our ALCO model, as

of December 31, 2023, we were

a slightly asset sensitive/neutral bank

modeling and asset sensitive for year two modeling.

of December 31, 2024, the Bank’s balance sheet was neutral for

year one and asset

sensitive for year two.

Asset sensitivity indicates that

our assets generally reprice faster than

sensitivity indicates

liabilities generally

reprice faster

which results

our assets generally reprice faster than our

liabilities, which results in

a favorable impact to

net interest income when market

interest rates increase.

Liability sensitivity

indicates that our liabilities

generally reprice

assets, which

rates decrease.

Neutral indicates

minimal changes

interest income

interest rates

assumptions are

calculate the

due to changes

on the market

interest rate.

correlations, deposit truncations and decay rates, and

Many assumptions

rate variations

prepayment speeds,

deposit price

pricing correlations,

deposit truncations

key interest rate drivers.

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will, differ from static measures results.

addition, static measures like the economic value

of equity (“EVE“) do not include

actions that management may undertake

to manage the risks in

response to anticipated changes

in interest rates or client

deposit behavior.

our ALM strategy and policy,

management has the ability to modify the balance sheet to either

decrease asset

decrease liability

balance sheet

sensitivity to

interest rates.

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

As part of our ALM strategy and

policy, management has the ability to modify the balance sheet

to either increase

USCB Financial Holdings, Inc.

According to our model, as of

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+400 basis points).

static forecast for year one,

the estimated NIM will increase

from 2.81% base case scenario

2.86% under a +400-basis

points scenario.

Additionally,

utilizing an EVE approach,

we analyze the risk

to capital from the

interest rate

long-term discounted

the difference

between the economic

assets and the

economic value of

our liabilities, which is

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

liabilities, which is

our liquidation value.

sheet composition,

expected, our

model stipulates

interest rates

have a negative impact on

Results and analysis are

presented quarterly to the ALCO, and

strategies are reviewed

According to our

sheet composition, and as

expected, our model stipulates

that an increase of

interest rates will have

a negative impact on

Results and analysis are presented quarterly

to the ALCO, and strategies are reviewed and refined.

Additionally, in the last year we have been reducing our asset sensitivity by extending asset duration.

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expectations.

USCB Financial Holdings, Inc.

a Company’s capacity

80 unchanged sentences

purchased, brokered

listing certificates

borrowings from

certificates of

deposit, listing

certificates of

and borrowings

Accordingly, our liquidity resources were at sufficient levels to

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million in off-balance sheet liquidity,

excluding access to brokered deposits and other off balance

sheet sources of funding.

excluding access to brokered deposits and other off-balance sheet sources of funding.

USCB Financial Holdings, Inc.

1 unchanged sentence

Additionally,

we follow the

capital conservation buffer

framework, and according

to our actual ratios

the Bank exceeds

we follow the capital conservation

buffer framework, and according to

our actual ratios, the Bank

capital conversation

1 unchanged sentence

as of December

is not subject

to regulatory

Company is not

subject to regulatory

requirements because it is deemed by the Federal Reserve

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Management has included

non-GAAP measures set

forth below because

it believes these

measures may provide

supplemental information

for evaluating

the Company’s

underlying performance

management uses

the non-GAAP measures

set forth below

because it believes

these measures may

useful supplemental information

for evaluating the Company’s

underlying performance trends.

Further, management

these measures in managing and evaluating the Company’s business and intends to refer to them in discussions about our

operations and performance.

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Provision for income taxes

Provision for (recovery of) credit losses

Provision for credit losses

Operating net income:

13 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis