USCB FINANCIAL HOLDINGS, INC. 10-Q

Item 1. Financial Statements USCB FINANCIAL HOLDINGS, INC Consolidated Balance Sheets – Unaudited (Dollars in thousands, except share data) September 30, 2025 December 31, 2024 ASSETS: Cash and due from banks $ 9,988 $ 6,986 Interest-bearing deposits in banks 46,823 70,049 Total cash and cash equivalents 56,811 77,035 Investment securities held to maturity, net of allowance of $ 5 and $ 6 , respectively (fair value of $ 143,299 and $ 145,540 , respectively) 156,365 164,694 Investment securities available for sale, at fair value 324,179 260,221 Federal Home Loan Bank stock, at cost 2,328 9,379 Loans held for investment, net of allowance of $ 24,964 and $ 24,070 , respectively 2,106,002 1,948,778 Accrued interest receivable 12,126 10,945 Premises and equipment, net 4,315 4,563 Bank owned life insurance 58,923 53,472 Deferred tax assets, net 19,457 29,646 Lease right-of-use asset 6,282 8,451 Other assets 21,157 14,032 Total assets $ 2,767,945 $ 2,581,216 LIABILITIES: Deposits: Non-interest bearing demand deposits $ 584,240 $ 575,159 Savings and money market deposits 1,291,283 1,180,809 Interest-bearing demand deposits 60,016 50,648 Time deposits 520,075 367,388 Total deposits 2,455,614 2,174,004 Federal Home Loan Bank advances 11,000 163,000 Subordinated notes 39,262 - Lease liability 6,282 8,451 Accrued interest and other liabilities 46,692 20,373 Total liabilities 2,558,850 2,365,828 Commitments and contingencies (See Notes 5 and 10) (nil) (nil) STOCKHOLDERS' EQUITY: Preferred stock - Class C; $ 1.00 par value; $ 1,000 per share liquidation preference; 52,748 shares authorized; 0 and 0 issued and outstanding as of September 30, 2025 and December 31, 2024 - - Preferred stock - Class D; $ 1.00 par value; $ 5.00 per share liquidation preference; 12,309,480 shares authorized; 0 and 0 issued and outstanding as of September 30, 2025 and December 31, 2024 - - Preferred stock - Class E; $ 1.00 par value; $ 1,000 per share liquidation preference; 3,185,024 shares authorized; 0 and 0 issued and outstanding as of September 30, 2025 and December 31, 2024 - - Common stock - Class A Voting; $ 1.00 par value; 45,000,000 shares authorized; 18,107,385 issued and outstanding as of September 30, 2025, 19,924,632 issued and outstanding as of December 31, 2024 18,107 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 September 30, 2025 and December 31, 2024 - - Additional paid-in capital on common stock 277,888 307,810 Accumulated deficit ( 49,094 ) ( 67,813 ) Accumulated other comprehensive loss ( 37,806 ) ( 44,534 ) Total stockholders' equity 209,095 215,388 Total liabilities and stockholders' equity $ 2,767,945 $ 2,581,216 The accompanying notes are an integral part of these unaudited consolidated financial statements. Table of Contents 4 USCB Financial Holdings, Inc. Q3 2025 Form 10-Q USCB FINANCIAL HOLDINGS, INC. Consolidated Statements of Operations - Unaudited (Dollars in thousands, except per share data) Three Months Ended September 30, Nine Months Ended September 30, 2025 2024 2025 2024 Interest income: Loans, including fees $ 32,866 $ 29,819 $ 95,057 $ 84,479 Investment securities 3,522 2,754 9,978 8,634 Interest-bearing deposits in financial institutions 1,332 989 2,817 3,953 Total interest income 37,720 33,562 107,852 97,066 Interest expense: Interest-bearing demand deposits 286 411 909 1,171 Savings and money market deposits 10,343 10,064 29,088 30,529 Time deposits 5,036 3,391 13,297 9,907 Federal Home Loan Bank advances 377 1,587 2,731 4,881 Subordinated notes 404 - 404 - Total interest expense 16,446 15,453 46,429 46,488 Net interest income before provision for credit losses 21,274 18,109 61,423 50,578 Provision for credit losses 105 931 1,817 2,127 Net interest income after provision for credit losses 21,169 17,178 59,606 48,451 Non-interest income: Service fees 2,661 2,544 7,394 6,172 (Loss) gain on sale of securities available for sale, net ( 28 ) - ( 28 ) 14 Gain on sale of loans held for sale, net 128 109 804 593 Other non-interest income 923 785 2,600 2,334 Total non-interest income 3,684 3,438 10,770 9,113 Non-interest expense: Salaries and employee benefits 7,909 7,200 23,499 20,863 Occupancy 1,382 1,341 4,003 3,921 Regulatory assessments and fees 377 452 1,194 1,361 Consulting and legal fees 585 161 1,041 1,016 Network and information technology services 656 513 1,725 1,499 Other operating expense 2,139 1,787 6,272 5,528 Total non-interest expense 13,048 11,454 37,734 34,188 Income before income tax expense 11,805 9,162 32,642 23,376 Income tax expense 2,866 2,213 7,905 5,606 Net income $ 8,939 $ 6,949 $ 24,737 $ 17,770 Per share information: Net income per share, basic $ 0.46 $ 0.35 $ 1.25 $ 0.90 Net income per share, diluted $ 0.45 $ 0.35 $ 1.23 $ 0.90 Cash dividends declared $ 0.10 $ 0.05 $ 0.30 $ 0.15 The accompanying notes are an integral part of these unaudited consolidated financial statements. Table of Contents 5 USCB Financial Holdings, Inc. Q3 2025 Form 10-Q USCB FINANCIAL HOLDINGS, INC. Consolidated Statements of Comprehensive Income - Unaudited (Dollars in thousands) Three Months Ended September 30, Nine Months Ended September 30, 2025 2024 2025 2024 Net income $ 8,939 $ 6,949 $ 24,737 $ 17,770 Other comprehensive income: Unrealized gain on investment securities 5,315 9,848 9,093 8,624 Reclassification adjustment for amortization of net unrealized losses on securities transferred from available-for-sale to held-to-maturity 66 67 200 200 Reclassification adjustment for realized losses (gains) included in net income 28 - 28 ( 14 ) Unrealized loss on cash flow hedge ( 123 ) ( 930 ) ( 309 ) ( 381 ) Tax expense ( 1,340 ) ( 2,277 ) ( 2,284 ) ( 2,136 ) Total other comprehensive income, net of tax 3,946 6,708 6,728 6,293 Total comprehensive income $ 12,885 $ 13,657 $ 31,465 $ 24,063 The accompanying notes are an integral part of these unaudited consolidated financial statements. Table of Contents 6 USCB Financial Holdings, Inc. Q3 2025 Form 10-Q USCB FINANCIAL HOLDINGS, INC. Consolidated Statements of Changes in Stockholders’ Equity - Unaudited (Dollars in thousands, except per share data) Common Stock Additional Paid-in Capital on Common Stock Accumulated Deficit Accumulated Other Comprehensive Loss Shares Par Value Total Stockholders' Equity Balance at June 30, 2025 20,078,385 $ 20,078 $ 309,282 $ ( 56,025 ) $ ( 41,752 ) $ 231,583 Net income - - - 8,939 - 8,939 Other comprehensive income - - - - 3,946 3,946 Repurchase of Class A common stock ( 2,000,000 ) ( 2,000 ) ( 32,380 ) - - ( 34,380 ) Exercise of stock options 29,000 29 212 - - 241 Dividend payment - - - ( 2,008 ) - ( 2,008 ) Stock-based compensation - - 774 - - 774 Balance at September 30, 2025 18,107,385 $ 18,107 $ 277,888 $ ( 49,094 ) $ ( 37,806 ) $ 209,095 Balance at June 30, 2024 19,630,632 $ 19,631 $ 305,835 $ ( 79,760 ) $ ( 44,686 ) $ 201,020 Net income - - - 6,949 - 6,949 Other comprehensive income - - - - 6,708 6,708 Repurchase of Class A common stock ( 10,000 ) ( 10 ) ( 111 ) - - ( 121 ) Dividend payment - - - ( 1,016 ) - ( 1,016 ) Stock-based compensation - - 376 - - 376 Balance at September 30, 2024 19,620,632 $ 19,621 $ 306,100 $ ( 73,827 ) $ ( 37,978 ) $ 213,916 Common Stock Additional Paid-in Capital on Common Stock Accumulated Deficit Accumulated Other Comprehensive Loss Shares Par Value Total Stockholders' Equity Balance at December 31, 2024 19,924,632 $ 19,925 $ 307,810 $ ( 67,813 ) $ ( 44,534 ) $ 215,388 Net income - - - 24,737 - 24,737 Other comprehensive income - - - - 6,728 6,728 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 68,000 68 490 - - 558 Dividend payment - - - ( 6,018 ) - ( 6,018 ) Stock-based compensation - - 2,256 - - 2,256 Balance at September 30, 2025 18,107,385 $ 18,107 $ 277,888 $ ( 49,094 ) $ ( 37,806 ) $ 209,095 Balance at December 31, 2023 19,575,435 19,575 305,212 ( 88,548 ) ( 44,271 ) 191,968 Net income - - - 17,770 - 17,770 Other comprehensive income - - - - 6,293 6,293 Repurchase of Class A common stock ( 42,100 ) ( 42 ) ( 459 ) - - ( 501 ) Restricted stock issued 57,922 58 ( 58 ) - - - Restricted stock forfeiture ( 8,625 ) ( 8 ) 8 - - - Exercise of stock options 38,000 38 285 - - 323 Dividend payment - - - ( 3,049 ) - ( 3,049 ) Stock-based compensation - - 1,112 - - 1,112 Balance at September 30, 2024 19,620,632 $ 19,621 $ 306,100 $ ( 73,827 ) $ ( 37,978 ) $ 213,916 The accompanying notes are an integral part of these consolidated financial statements. Table of Contents 7 USCB Financial Holdings, Inc. Q3 2025 Form 10-Q USCB FINANCIAL HOLDINGS, INC. Consolidated Statements of Cash Flows - Unaudited (Dollars in thousands) Nine Months Ended September 30, 2025 2024 Cash flows from operating activities: Net income $ 24,737 $ 17,770 Adjustments to reconcile net income to net cash provided by operating activities: Provision for credit losses 1,817 2,127 Depreciation and amortization 456 436 Accretion of premiums on securities, net ( 1,136 ) ( 365 ) Amortization of deferred loan fees, net 723 660 Stock-based compensation 2,256 1,112 (Loss) gain on sale of available for sale securities, net 28 ( 14 ) Gain on sale of loans held for sale, net ( 804 ) ( 593 ) Proceeds from the sale of loans held for sale 11,373 7,408 Origination of loans held for sale ( 10,569 ) ( 6,815 ) Increase in cash surrender value of bank owned life insurance ( 1,451 ) ( 1,257 ) Decrease in deferred tax assets 7,905 5,129 Net change in operating assets and liabilities: Accrued interest receivable ( 1,181 ) ( 77 ) Other assets ( 7,389 ) ( 8,292 ) Accrued interest and other liabilities 26,051 20,505 Net cash provided by operating activities 52,816 37,734 Cash flows from investing activities: Proceeds from maturities and pay-downs of investment securities held to maturity 8,469 8,110 Purchase of investment securities available for sale ( 101,486 ) ( 70,996 ) Proceeds from maturities and pay-downs of investment securities available for sale 16,433 15,097 Proceeds from sales of investment securities available for sale 31,384 34,753 Net increase in loans held for investment ( 78,149 ) ( 92,812 ) Purchase of loans held for investment ( 81,392 ) ( 58,368 ) Additions to premises and equipment ( 208 ) ( 256 ) Purchase of bank owned life insurance ( 4,000 ) - Proceeds from the redemption of Federal Home Loan Bank stock 12,778 8,645 Purchase of Federal Home Loan Bank stock ( 5,727 ) ( 5,734 ) Net cash used in investment activities ( 201,898 ) ( 161,561 ) Cash flows from financing activities: Proceeds from issuance of Class A common stock, net 558 323 Cash dividends paid ( 6,018 ) ( 3,049 ) Repurchase of Class A common stock ( 34,554 ) ( 501 ) Net increase in deposits 281,610 189,478 Proceeds from subordinated notes 39,262 - Proceeds from FHLB advances 117,000 197,000 Repayments on Federal Home Loan Bank advances ( 269,000 ) ( 262,000 ) Net cash provided by financing activities 128,858 121,251 Net decrease in cash and cash equivalents ( 20,224 ) ( 2,576 ) Cash and cash equivalents at beginning of period 77,035 41,062 Cash and cash equivalents at end of period $ 56,811 $ 38,486 Supplemental disclosure of cash flow information: Interest paid $ 45,751 $ 46,058 The accompanying notes are an integral part of these unaudited consolidated financial statements. Table of Contents USCB FINANCIAL HOLDINGS, INC. Notes to the Consolidated Financial Statements - Unaudited 8 USCB Financial Holdings, Inc. Q3 2025 Form 10-Q 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Overview USCB Financial Holdings, Inc., a Florida corporation incorporated in 2021, is a bank holding company with one direct wholly owned subsidiary, U.S. Century Bank (the “Bank”), together referred to as “the Company”. The Bank, established in 2002, is a Florida state-chartered, non-member financial institution providing financial services through its banking centers located in South Florida. The Bank owns a subsidiary, Florida Peninsula Title LLC, that offers our clients title insurance policies for real estate transactions closed at the Bank. Licensed in the State of Florida and approved by the Department of Insurance Regulation, Florida Peninsula Title LLC began operations in 2021. Basis of Presentation The accompanying unaudited consolidated financial statements have been prepared in accordance with instructions to Form 10-Q and do not include all the information and footnotes required by U.S. generally accepted accounting principles (“U.S. GAAP”) for complete financial statements. All adjustments consisting of normally recurring accruals that, in the opinion of management, are necessary for a fair presentation of the financial position and results of operations for the periods presented have been included. These unaudited consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and related notes appearing in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024. Principles of Consolidation The Company consolidates entities in which it has a controlling financial interest. Intercompany transactions and balances are eliminated in consolidation. Use of Estimates To prepare financial statements in conformity with U.S. GAAP, management makes estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in the financial statements. The most significant estimate impacting the Company’s consolidated financial statements is the allowance for credit losses (“ACL”). Reclassifications Certain amounts in prior period consolidated financial statements have been reclassified to conform to the current presentation. Reclassifications had no impact on prior period net income or stockholders’ equity. Recently Issued Accounting Standards Adoption of New Accounting Standards Improvements to Income Tax Disclosures In December 2023, the Financial Accounting Standard Board (“FASB”) issued Accounting Standards Update (ASU) 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This ASU pertains to disclosures regarding effective tax rates and cash income taxes paid with the goal of providing stakeholders with more transparent and relevant information. This ASU is effective for public business entities for annual periods beginning after December 15, 2024. The Company adopted this ASU 2023-09 effective January 1, 2025. The adoption of this ASU did not have a material impact on the Company’s consolidated financial statements. Table of Contents USCB FINANCIAL HOLDINGS, INC. Notes to the Consolidated Financial Statements - Unaudited 9 USCB Financial Holdings, Inc. Q3 2025 Form 10-Q 2. INVESTMENT SECURITIES The following tables present a summary of the amortized cost, unrealized or unrecognized gains and losses, and fair value of investment securities at the dates indicated (in thousands): September 30, 2025 Available-for-sale: Amortized Cost Unrealized Gains Unrealized Losses Fair Value U.S. Government Agency $ 13,143 $ 36 $ ( 1,214 ) $ 11,965 Collateralized mortgage obligations 100,830 - ( 19,135 ) 81,695 Mortgage-backed securities - residential 60,915 118 ( 9,715 ) 51,318 Mortgage-backed securities - commercial 145,991 17 ( 7,491 ) 138,517 Municipal securities 22,838 - ( 3,923 ) 18,915 Bank subordinated debt securities 22,046 162 ( 439 ) 21,769 $ 365,763 $ 333 $ ( 41,917 ) $ 324,179 Held-to-maturity: Amortized Cost Unrecognized Gains Unrecognized Losses Fair Value U.S. Government Agency $ 41,500 $ 75 $ ( 3,529 ) $ 38,046 Collateralized mortgage obligations 52,766 566 ( 5,956 ) 47,376 Mortgage-backed securities - residential 37,880 558 ( 3,523 ) 34,915 Mortgage-backed securities - commercial 15,135 - ( 1,133 ) 14,002 Corporate bonds 9,089 - ( 129 ) 8,960 $ 156,370 $ 1,199 $ ( 14,270 ) $ 143,299 Allowance for credit losses - securities held-to-maturity ( 5 ) Securities held-to maturity, net of allowance for credit losses $ 156,365 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 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 Transfers of debt securities into the held -to-maturity (“HTM”) category from the available for sale (“AFS”) category are made at fair value as of the date of transfer. The unrealized gain or loss at the date of transfer is retained in accumulated other comprehensive loss (“AOCL”) and in the carrying value of the HTM securities and there is no impact to net income. Such amounts are amortized over the remaining life of the security. The Company made two transfers from AFS to HTM portfolios in 2022. During the quarter ended September 30, 2025, there were no investment securities that were transferred from AFS to HTM. For the three months ended September 30, 2025, total amortization out of AOCL for net unrealized losses on Table of Contents USCB FINANCIAL HOLDINGS, INC. Notes to the Consolidated Financial Statements - Unaudited 10 USCB Financial Holdings, Inc. Q3 2025 Form 10-Q securities transferred in 2022 from AFS to HTM was $ 66 thousand and $ 200 thousand for the nine months ended September 30, 2025. At September 30, 2025, the fair value of the transferred securities was $ 100.2 million and the balance of the net unrealized loss was $ 9.1 million. For the quarter ended September 30, 2024, total amortization out of AOCL for the net unrealized losses on securities transferred from AFS to HTM was $ 67 thousand and $ 200 thousand for the nine month ended September 30, 2024. At September 30, 2024, the fair value of the transferred securities was $ 106.3 million and the balance of the net unrealized losses was $ 9.3 million. The measurement of expected credit losses under the current expected credit loss (“CECL”) methodology is applicable to financial assets measured at amortized cost, including loan receivables and HTM debt securities. CECL requires a loss reserve for securities classified as HTM. The reserve should reflect historical credit performance as well as the impact of projected economic forecasts. For U.S. Government bonds and U.S. Agency issued bonds classified as HTM, the explicit guarantee of the U.S. Government is sufficient to conclude that a credit loss reserve is not required. The reserve requirement is for three primary assets groups: municipal bonds, corporate bonds, and non-agency securitizations. The Company calculates quarterly the loss reserve utilizing Moody’s ImpairmentStudio. The CECL measurement for investment securities incorporates historical data, containing defaults and recoveries information, and Moody’s baseline economic forecast. The solution uses the probability of default/loss given default (“PD/LGD”) approach. PD represents the likelihood a borrower will default. Within the Moody’s model, this is determined using historical default data, adjusted for the current economic environment. LGD projects the expected loss if a borrower were to default. The Company monitors the credit quality of HTM securities through the use of credit ratings. Credit ratings are monitored by the Company on at least a quarterly basis. As of September 30, 2025 and December 31, 2024, all HTM securities held by the Company were rated investment grade. At September 30, 2025, HTM securities included $ 147.3 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 $ 9.1 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 $ 5 thousand ACL as of September 30, 2025. The book value for debt securities classified as HTM represents amortized cost less the ACL related to these securities. The Company’s investment portfolio includes AFS debt securities, which are carried at fair value with unrealized gains and losses recognized in AOCL, net of applicable taxes. The Company evaluates whether the declines in fair value are attributable to credit losses or other factors like interest rate risk, using both quantitative and qualitative analyses, including company performance analysis, review of credit ratings, bond vintage, remaining payment terms, prepayment speeds and analysis of macro-economic conditions. When the fair value of an AFS security is less than its amortized cost and the decline is attributable to credit-related factors, an ACL is recorded. As a result of this evaluation, the Company concluded that no allowance was required on AFS securities as of September 30, 2025. Information pertaining to investment securities with gross unrealized losses, aggregated by investment category and length of time that those individual securities have been in a continuous loss position, are presented as of the following dates (in thousands): September 30, 2025 Less than 12 months 12 months or more Total Available-for-Sale: Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses U.S. Government Agency $ 511 $ ( 11 ) $ 8,237 $ ( 1,203 ) $ 8,748 $ ( 1,214 ) Collateralized mortgage obligations 9,257 ( 34 ) 72,438 ( 19,101 ) 81,695 ( 19,135 ) Mortgage-backed securities - residential - - 43,856 ( 9,715 ) 43,856 ( 9,715 ) Mortgage-backed securities - commercial 81,800 ( 412 ) 51,918 ( 7,079 ) 133,718 ( 7,491 ) Municipal securities - - 18,915 ( 3,923 ) 18,915 ( 3,923 ) Bank subordinated debt securities 1,999 ( 1 ) 10,535 ( 438 ) 12,534 ( 439 ) $ 93,567 $ ( 458 ) $ 205,899 $ ( 41,459 ) $ 299,466 $ ( 41,917 ) Table of Contents USCB FINANCIAL HOLDINGS, INC. Notes to the Consolidated Financial Statements - Unaudited 11 USCB Financial Holdings, Inc. Q3 2025 Form 10-Q December 31, 2024 Less than 12 months 12 months or more Total Available-for-sale: Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses U.S. Government Agency $ 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 44,411 ( 1,265 ) 27,874 ( 6,640 ) 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 ) $ 52,952 $ ( 1,375 ) $ 186,540 $ ( 49,837 ) $ 239,492 $ ( 51,212 ) The contractual cash flows associated with U.S. Government Agency securities, collateralized mortgage obligations, and residential and commercial mortgage-backed securities are guaranteed by U.S. government-sponsored enterprises, thereby minimizing credit risk. Municipal bonds are of high credit quality, and the observed declines in fair value are not attributable to deterioration in the creditworthiness. Similarly, the decrease in fair value of bank subordinated debt securities is primarily driven by changes in market interest rates rather than credit concerns. Based on management’s evaluation of these factors, management believes that the unrealized losses on these debt securities are attributable to fluctuations in market spreads and interest rate movements, rather than adverse changes in the underlying credit quality of the issuers. Gains and losses on the sale of securities are recorded on the trade date and are determined on the specific identification basis. The following table presents the proceeds, realized gross gains and realized gross losses on sales and calls of AFS debt securities for the three and nine months ended September 30, 2025 and 2024 (in thousands): Three Months Ended September 30, Nine Months Ended September 30, Available-for-sale: 2025 2024 2025 2024 Proceeds from sale and call of securities $ 31,384 $ - $ 31,384 $ 34,753 Gross gains $ 335 $ - $ 335 $ 195 Gross losses ( 363 ) - ( 363 ) ( 181 ) Net realized gain (loss) $ ( 28 ) $ - $ ( 28 ) $ 14 The amortized cost and fair value of investment securities, by contractual maturity, are shown below as of the date indicated (in thousands). Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Securities not due at a single maturity date are shown separately. Available-for-sale Held-to-maturity September 30, 2025: Amortized Cost Fair Value Amortized Cost Fair Value Due within one year $ - $ - $ 9,089 $ 8,960 Due after one year through five years 1,983 1,999 - - Due after five years through ten years 42,901 38,685 - - Due after ten years - - - - U.S. Government Agency 13,143 11,965 41,500 38,046 Collateralized mortgage obligations 100,830 81,695 52,766 47,376 Mortgage-backed securities - residential 60,915 51,318 37,880 34,915 Mortgage-backed securities - commercial 145,991 138,517 15,135 14,002 $ 365,763 $ 324,179 $ 156,370 $ 143,299 At September 30, 2025, there were no securities held in the portfolio from any one issuer in an amount greater than 10% of total stockholders’ equity other than the U.S. Government and U.S. Government Agency issued securities. All the collateralized mortgage obligations and mortgage-backed securities at September 30, 2025 and December 31, 2024 were issued by U.S. Government entities. The Bank is a Qualified Public Depository (“QPD”) with the State of Florida. As a QPD, the Bank has the legal authority to maintain public deposits from cities, municipalities, and the State of Florida. These public deposits are secured by Table of Contents USCB FINANCIAL HOLDINGS, INC. Notes to the Consolidated Financial Statements - Unaudited 12 USCB Financial Holdings, Inc. Q3 2025 Form 10-Q securities pledged to the State of Florida at a ratio of 25 % of the quarter daily average balance for quarter ended September 30, 2025, and 50 % for the quarter daily average balance for quarter ended December 31, 2024. The Bank must also maintain a minimum amount of pledged securities to be in the public funds program. As of September 30, 2025, the Bank had a total of $ 151.4 million in deposits under the public funds program and pledged to the State of Florida for these public funds were sixteen bonds with an aggregate fair value of $ 49.7 million. As of December 31, 2024, the Bank had a total of $ 110.5 million in deposits under the public funds program and pledged to the State of Florida for these public funds were twenty-one bonds with an aggregate fair value of $ 66.1 million. 3. LOANS The following table is a summary of the distribution of loans held for investment by type (dollars in thousands): September 30, 2025 December 31, 2024 Total Percent of Total Total Percent of Total Residential real estate $ 316,557 14.9 % $ 289,961 14.8 % Commercial real estate 1,226,121 57.7 % 1,136,417 57.8 % Commercial and industrial 269,430 12.7 % 258,311 13.1 % Correspondent banks 104,598 4.9 % 82,438 4.2 % Consumer and other 207,939 9.8 % 198,091 10.1 % Total gross loans 2,124,645 100.0 % 1,965,218 100.0 % Plus: Deferred fees/costs 6,321 7,630 Total loans net of deferred fees/costs 2,130,966 1,972,848 Less: Allowance for credit losses 24,964 24,070 Total net loans $ 2,106,002 $ 1,948,778 At September 30, 2025 and December 31, 2024, the Company had $ 592.0 million and $ 518.8 million, respectively, of commercial real estate and residential mortgage loans pledged as collateral for lines of credit with the Federal Home Loan Bank (“FHLB”) of Atlanta and the Federal Reserve Bank of Atlanta. Allowance for Credit Losses In general, the Company utilizes the Discounted Cash Flow (“DCF”) method or the Weighted-Average Remaining Maturity (“WARM”) methodology to estimate the quantitative portion of the ACL for loan pools. The DCF method uses a loss driver analysis (“LDA”) and DCF analyses. Management engaged advisors and consultants with expertise in CECL model development to assist in development of a LDA based on regression models and supportable forecast. Peer group data obtained from FFIEC Call Report filings is used to inform regression analyses to quantify the impact of reasonable and supportable forecasts in projective models. Economic forecasts applied to regression models to estimate probability of default for loan receivables use at least one of the following economic indicators: civilian unemployment rate (national), real gross domestic product growth (national GDP) or the House Price Index (“HPI”). For each of the segments in which the WARM methodology is used, the long-term average loss rate is calculated and applied on a quarterly basis for the remaining life of the pool. Adjustments for economic expectations are made through qualitative factors. Qualitative factors (“Q-Factors”) used in the ACL methodology include: • Changes in lending policies, procedures, and strategies • Changes in international, national, regional, and local economic conditions • Changes in nature and volume of the 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 Table of Contents USCB FINANCIAL HOLDINGS, INC. Notes to the Consolidated Financial Statements - Unaudited 13 USCB Financial Holdings, Inc. Q3 2025 Form 10-Q Changes in the ACL for the three and nine months ended September 30, 2025 and 2024 were as follows (in thousands): Residential Real Estate Commercial Real Estate Commercial and Industrial Correspondent Banks Consumer and Other Total Three Months Ended September 30, 2025 Beginning balance $ 5,477 $ 9,491 $ 4,508 $ 874 $ 4,583 $ 24,933 Provision for credit losses (1) 544 ( 102 ) ( 118 ) ( 45 ) ( 252 ) 27 Recoveries 5 - 6 - - 11 Charge-offs - - - - ( 7 ) ( 7 ) Ending Balance $ 6,026 $ 9,389 $ 4,396 $ 829 $ 4,324 $ 24,964 Nine Months Ended September 30, 2025 Beginning balance $ 5,121 $ 8,788 $ 4,633 $ 654 $ 4,874 $ 24,070 Provision for credit losses (2) 888 601 ( 249 ) 175 179 1,594 Recoveries 17 - 12 - 1 30 Charge-offs - - - - ( 730 ) ( 730 ) Ending Balance $ 6,026 $ 9,389 $ 4,396 $ 829 $ 4,324 $ 24,964 (1) Provision for credit losses excludes a $ 80 thousand provision due to unfunded commitments included in accrued interest and other liabilities and a $ 2 thousand release related to investment securities held to maturity. (2) Provision for credit losses excludes a $ 224 thousand provision due to unfunded commitments included in accrued interest and other liabilities and a $ 1 thousand release related to investment securities held to maturity. Residential Real Estate Commercial Real Estate Commercial and Industrial Correspondent Banks Consumer and Other Total Three Months Ended September 30, 2024 Beginning balance $ 3,193 $ 10,272 $ 4,747 $ 892 $ 3,126 $ 22,230 Provision for credit losses (1) 760 ( 86 ) ( 96 ) ( 69 ) 322 831 Recoveries 2 - 10 - 1 13 Charge-offs - - - - ( 7 ) ( 7 ) Ending Balance $ 3,955 $ 10,186 $ 4,661 $ 823 $ 3,442 $ 23,067 Nine Months Ended September 30, 2024 Beginning balance $ 2,695 $ 10,366 $ 3,974 $ 911 $ 3,138 $ 21,084 Provision for credit losses (2) 1,252 ( 180 ) 666 ( 88 ) 318 1,968 Recoveries 8 - 21 - 3 32 Charge-offs - - - - ( 17 ) ( 17 ) Ending Balance $ 3,955 $ 10,186 $ 4,661 $ 823 $ 3,442 $ 23,067 (1) Provision for credit losses excludes a $ 101 thousand provision due to unfunded commitments included in accrued interest and other liabilities and a $ 1 thousand release related to investment securities held to maturity. (2) Provision for credit losses excludes a $ 159 thousand provision due to unfunded commitments included in accrued interest and other liabilities. At September 30, 2025, the ACL for loans was $ 25.0 million compared to $ 24.1 million at December 31, 2024. The increase of $ 894 thousand in the ACL was due to loan growth. Charge offs related to loans for the three months ended September 30, 2025 were $ 7 thousand originated in 2025. Charge offs for the nine months ended September 30, 2025 were $ 709 thousand originated in 2022 and $ 21 thousand originated in 2025. Table of Contents USCB FINANCIAL HOLDINGS, INC. Notes to the Consolidated Financial Statements - Unaudited 14 USCB Financial Holdings, Inc. Q3 2025 Form 10-Q Charge-offs for the three months ended September 30, 2024 totaled $ 7 thousand and were all originated in 2024. Charge-offs for the nine months ended September 30, 2024 totaled $ 17 thousand and were all originated in 2024. The ACL and the outstanding balances in the specified loan categories as of September 30, 2025 and December 31, 2024 are as follows (in thousands): Residential Real Estate Commercial Real Estate Commercial and Industrial Correspondent Banks Consumer and Other Total September 30, 2025: Allowance for credit losses: Individually evaluated $ 32 $ - $ 53 $ - $ - $ 85 Collectively evaluated 5,994 9,389 4,343 829 4,324 24,879 Balances, end of period $ 6,026 $ 9,389 $ 4,396 $ 829 $ 4,324 $ 24,964 Loans: Individually evaluated $ 3,761 $ - $ 1,005 $ - $ - $ 4,766 Collectively evaluated 312,796 1,226,121 268,425 104,598 207,939 2,119,879 Balances, end of period $ 316,557 $ 1,226,121 $ 269,430 $ 104,598 $ 207,939 $ 2,124,645 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. Loss – Loans classified as loss are considered uncollectible. Table of Contents USCB FINANCIAL HOLDINGS, INC. Notes to the Consolidated Financial Statements - Unaudited 15 USCB Financial Holdings, Inc. Q3 2025 Form 10-Q Loan credit exposures by internally assigned grades are presented below for the periods indicated (in thousands): As of September 30, 2025 Term Loans by Origination Year Revolving Loans Total 2025 2024 2023 2022 2021 Prior Residential real estate Pass $ 61,481 $ 95,490 $ 33,220 $ 25,812 $ 21,418 $ 60,492 $ 16,032 $ 313,945 Special Mention - 592 1,468 - - - - 2,060 Substandard - 434 - - - 118 - 552 Total 61,481 96,516 34,688 25,812 21,418 60,610 16,032 316,557 Commercial real estate Pass 196,195 182,297 113,450 284,214 135,835 293,746 6,315 1,212,052 Special Mention - - 8,474 - - 3,182 - 11,656 Substandard - - - - 1,735 678 - 2,413 Total 196,195 182,297 121,924 284,214 137,570 297,606 6,315 1,226,121 Commercial and industrial Pass 34,112 64,047 72,949 32,776 28,646 13,020 21,251 266,801 Special Mention - 72 - - 864 - - 936 Substandard - - - - 460 758 475 1,693 Total 34,112 64,119 72,949 32,776 29,970 13,778 21,726 269,430 Correspondent banks Pass 98,192 6,406 - - - - - 104,598 Total 98,192 6,406 - - - - - 104,598 Consumer and other loans Pass 49,530 37,792 37,068 54,155 26,435 1,133 1,826 207,939 Total 49,530 37,792 37,068 54,155 26,435 1,133 1,826 207,939 Total Loans Pass 439,510 386,032 256,687 396,957 212,334 368,391 45,424 2,105,335 Special Mention - 664 9,942 - 864 3,182 - 14,652 Substandard - 434 - - 2,195 1,554 475 4,658 Doubtful - - - - - - - - Total $ 439,510 $ 387,130 $ 266,629 $ 396,957 $ 215,393 $ 373,127 $ 45,899 $ 2,124,645 Table of Contents USCB FINANCIAL HOLDINGS, INC. Notes to the Consolidated Financial Statements - Unaudited 16 USCB Financial Holdings, Inc. Q3 2025 Form 10-Q As of December 31, 2024 Term Loans by Origination Year Revolving Loans Total 2024 2023 2022 2021 2020 Prior Residential real estate Pass $ 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 - Unaudited 17 USCB Financial Holdings, Inc. Q3 2025 Form 10-Q Loan Aging The Company also considers the performance of loans in grading and in evaluating the credit quality of the loan portfolio. The Company analyzes credit quality and loan grades based on payment performance and the aging status of the loans. The following tables include an aging analysis of accruing loans and total non-accruing loans as of September 30, 2025 and December 31, 2024 (in thousands): Accruing As of September 30, 2025 Current Past Due 30- 89 Days Past Due 90 Days or > and Still Accruing Total Accruing Non-Accrual Total Loans Residential real estate: Home equity lines of credit and other $ 1,268 $ - $ - $ 1,268 $ - $ 1,268 1-4 family residential 251,453 3,548 - 255,001 434 255,435 Condo residential 59,615 121 - 59,736 118 59,854 312,336 3,669 - 316,005 552 316,557 Commercial real estate: Land and construction 87,417 1,587 - 89,004 - 89,004 Multi-family residential 237,215 1,969 - 239,184 - 239,184 Condo commercial 57,108 - - 57,108 - 57,108 Commercial property 839,925 900 - 840,825 - 840,825 1,221,665 4,456 - 1,226,121 - 1,226,121 Commercial and industrial: Secured 245,445 - - 245,445 758 246,203 Unsecured 23,227 - - 23,227 - 23,227 268,672 - - 268,672 758 269,430 Correspondent banks 104,598 - - 104,598 - 104,598 Consumer and other 207,939 - - 207,939 - 207,939 Total $ 2,115,210 $ 8,125 $ - $ 2,123,335 $ 1,310 $ 2,124,645 Table of Contents USCB FINANCIAL HOLDINGS, INC. Notes to the Consolidated Financial Statements - Unaudited 18 USCB Financial Holdings, Inc. Q3 2025 Form 10-Q Accruing As of December 31, 2024: Current Past Due 30-89 Days Past Due 90 Days or > and Still Accruing Total Accruing Non-Accrual Total Loans Residential real estate: Home equity lines of credit and other $ 1,120 $ - $ - $ 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 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 as of September 30, 2025 and as of December 31, 2024 (in thousands): September 30, 2025 Non-accrual Loans With No Related Allowance Non-accrual Loans With Related Allowance Total Non- accruals Residential real estate $ 552 $ - $ 552 Commercial and industrial 712 46 758 Total $ 1,264 $ 46 $ 1,310 December 31, 2024 Non-accrual Loans With No Related Allowance Non-accrual Loans With Related Allowance Total Non- accruals 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 three and nine months ended September 30, 2025 and 2024. Interest income on these loans for the three months ended September 30, 2025 and 2024, would have been approximately $ 28 thousand and $ 24 thousand, respectively, had these loans performed in accordance with their original terms. Interest income on these loans for the nine months ended September 30, 2025 and 2024, would have been approximately $ 108 thousand and $ 44 thousand, respectively, had these loans performed in accordance with their original terms. Table of Contents USCB FINANCIAL HOLDINGS, INC. Notes to the Consolidated Financial Statements - Unaudited 19 USCB Financial Holdings, Inc. Q3 2025 Form 10-Q Collateral-Dependent Loans A loan is collateral dependent when the borrower is experiencing financial difficulty and repayment of the loan is expected to be provided substantially through the sale or operation of the collateral. The following table includes the amortized cost basis of collateral dependent loans related to borrowers experiencing financial difficulty by type of collateral as of September 30, 2025 and December 31, 2024 (in thousands): September 30, 2025 Collateral Type Residential Real Estate Specific Reserve Residential real estate $ 575 $ - Total $ 575 $ - December 31, 2024 Collateral Type Boat Specific Reserve Consumer and other $ 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 amortized cost basis of the loan. If the final collateral valuation is less than the recorded investment of the loan, a reserve amount is calculated. If the collateral valuation is equal to or greater than the recorded investment of the loan, no reserve is determined. Loan Modifications to Borrowers Experiencing Financial Difficulties The Company had no new modifications to borrowers experiencing financial difficulties for the three and nine months ended September 30, 2025 and three months ended September 30, 2024. The Company had one new modification to borrowers experiencing financial difficulties for the nine months ended September 30, 2024. The following table presents newly restructured loans, by type of modification, which occurred during the nine months ended September 30, 2024 (in thousands): Recorded Investment Prior to Modification Recorded Investment After Modification Number of Loans Combination Modifications Total Modifications Number of Loans Combination Modifications Total Modifications Commercial and industrial 1 $ 468 $ 468 1 $ 468 $ 468 Total 1 $ 468 $ 468 1 $ 468 $ 468 The loan modification for the borrower experiencing financial difficulty at September 30, 2024 included a combination of rate and maturity modifications. The rate was modified from a variable rate to a fixed rate of 8.0 %. The original maturity of September 2029 was extended to January 2034. There were no existing loan modifications that subsequently defaulted during either the three or the nine months ended September 30, 2025 and 2024. Table of Contents USCB FINANCIAL HOLDINGS, INC. Notes to the Consolidated Financial Statements - Unaudited 20 USCB Financial Holdings, Inc. Q3 2025 Form 10-Q 4. INCOME TAXES The Company’s income tax expense is presented in the following table for the periods indicated (in thousands): Nine Months Ended September 30, 2025 2024 Current: Federal $ 401 $ - State - - Total current 401 - Deferred: Federal 5,782 4,384 State 1,722 1,222 Total deferred 7,504 5,606 Total tax expense $ 7,905 $ 5,606 The actual income tax expense for the nine months ended September 30, 2025 and 2024 differs from the statutory tax expense for the periods (computed by applying the U.S. federal corporate tax rate of 21 % for both 2025 and 2024 periods to income before income tax expense) as follows (in thousands): Nine Months Ended September 30, 2025 2024 Federal taxes at statutory rate $ 6,855 $ 4,909 State income taxes, net of federal tax benefit 1,418 1,016 Bank owned life insurance ( 368 ) ( 319 ) Total tax expense $ 7,905 $ 5,606 The Company’s deferred tax assets and deferred tax liabilities as of the dates indicated were (in thousands): September 30, 2025 December 31, 2024 Deferred tax assets: Net operating loss $ 906 $ 9,276 Allowance for credit losses 6,327 6,100 Lease liability 1,592 2,142 Unrealized losses on available for sale securities 12,838 15,200 Depreciable property 4 38 Equity compensation 1,072 686 Accruals 446 520 Other, net - 65 Deferred tax assets: 23,185 34,027 Deferred tax liabilities: Deferred loan cost ( 1,602 ) ( 1,934 ) Lease right of use asset ( 1,592 ) ( 2,142 ) Deferred expenses ( 245 ) ( 224 ) Cash flow hedge ( 3 ) ( 81 ) Other, net ( 286 ) - Deferred tax liabilities ( 3,728 ) ( 4,381 ) Net deferred tax assets $ 19,457 $ 29,646 The Company has approximately $ 20.8 million of state net operating loss carryforwards expiring in various amounts between 2031 and 2036 and which are limited to offset, to the extent permitted, future taxable earnings of the Company. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Table of Contents USCB FINANCIAL HOLDINGS, INC. Notes to the Consolidated Financial Statements - Unaudited 21 USCB Financial Holdings, Inc. Q3 2025 Form 10-Q Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. The major tax jurisdictions where the Company files income tax returns are the U.S. federal jurisdiction and the State of Florida. With few exceptions, the Company is no longer subject to U.S. federal and state income tax return examinations by tax authorities for years before 2022. For the nine months ended September 30, 2025 and 2024, the Company did 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. On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted in the United States. The OBBBA includes significant provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act enacted in 2017, modifications to the international tax framework and the restoration of favorable tax treatment for certain business provisions, in particular the depreciation of capital asset additions. The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. The Company is currently assessing its impact on its consolidated financial statements but preliminarily does not believe the OBBBA provisions will significantly modify its effective income tax rate. 5. OFF-BALANCE SHEET ARRANGEMENTS The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business in order to meet the financial needs of its customers and to reduce its own exposure to fluctuations in interest rates. These financial instruments include unfunded commitments under lines of credit, commitments to extend credit, and standby and commercial letters of credit. Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the Company’s Consolidated Balance Sheets. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments. The Company's exposure to credit loss in the event of nonperformance by the other party to the financial instruments for unused lines of credit and standby letters of credit is represented by the contractual amount of these commitments. A summary of the amounts of the Company's financial instruments with off-balance sheet risk are shown below at September 30, 2025 and December 31, 2024 (in thousands): September 30, 2025 December 31, 2024 Commitments to grant loans and unfunded lines of credit $ 140,146 $ 122,578 Standby and commercial letters of credit 3,855 5,389 Total $ 144,001 $ 127,967 Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses. Unfunded lines of credit and revolving credit lines are commitments for possible future extensions of credit to existing customers. These lines of credit are uncollateralized and usually do not contain a specified maturity date and ultimately may not be drawn upon to the total extent to which the Company committed. Standby and commercial letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. Those letters of credit are primarily issued to support public and private borrowing arrangements. Essentially all letters of credit have fixed maturity dates and since many of them expire without being drawn upon, they do not generally present a significant liquidity risk to the Company. 6. DERIVATIVES The Company utilizes interest rate swap agreements as part of its asset-liability management strategy to help manage its interest rate risk exposure. The notional amount of the interest rate swaps does not represent actual amounts exchanged by the parties. The amounts exchanged are determined by reference to the notional amount and the other terms of the individual interest rate swap agreements. Table of Contents USCB FINANCIAL HOLDINGS, INC. Notes to the Consolidated Financial Statements - Unaudited 22 USCB Financial Holdings, Inc. Q3 2025 Form 10-Q Interest Rate Swaps Designated as a Cash Flow Hedge In July 2025, the Company entered into a two-year costless collar hedge with a notional amount of $ 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 will be accounted for accordingly. Changes in the fair value of the derivative will be recorded in other comprehensive income (loss) to the extent the hedge remains effective. In August 2025, the Company entered into a two-year costless collar hedge with a notional amount of $ 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 will be accounted for accordingly. Changes in the fair value of the derivative will be recorded in other comprehensive income (loss) to the extent the hedge remains effective. As of September 30, 2025, the Company had 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 0.63 years, a weighted average fixed-rate paid of 3.59 %, and with a weighted average 3-month compound USD SOFR being received. 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, a weighted average fixed-rate paid of 3.59 %, and with a weighted average 3-month compound USD SOFR being received. The changes in fair value of these interest rate swaps are recorded in other assets or accrued interest and other liabilities with a corresponding recognition in other comprehensive income (loss) and subsequently reclassified to earnings when gains or losses are realized. Interest Rate Swaps Designated as Fair Value Hedge The Company had no interest rate swap agreements designated as fair value hedges at September 30, 2025. During the quarter ended September 30, 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 fee allocated to each loan category is being amortized over the remining life of the hedge loans on a monthly straight-line basis with full recognition of the unamortized cost upon the early payoff of the hedge loans. The amortization of the termination fee is reflected in the loan interest income line in the Consolidated Statement of Operations . The remaining unamortized termination fee as of September 30, 2025 was $ 3.0 million. 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 their termination. Interest Rate Swaps The Company enters into interest rate swaps with its loan customers. The Company had 82 and 60 interest rate swaps with loan customers with an aggregate notional amount of $ 277.9 million and $ 206.3 million at September 30, 2025 and December 31, 2024, respectively. At September 30, 2025, these interest rate swaps mature between 2025 and 2051. The Company entered into corresponding and offsetting derivatives with third parties. The fair value of the liability created by these derivatives requires the Company to provide the counterparty with funds to be held as collateral which the Company reports as other assets under the Consolidated Balance Sheets. While these derivatives represent economic hedges, they do not qualify as hedges for accounting purposes. Table of Contents USCB FINANCIAL HOLDINGS, INC. Notes to the Consolidated Financial Statements - Unaudited 23 USCB Financial Holdings, Inc. Q3 2025 Form 10-Q The following table reflects the Company’s interest rate swaps at the dates indicated (in thousands): Fair Value Notional Amount Collateral Amount Balance Sheet Location Asset Liability September 30, 2025: Derivatives designated as cash flow hedges: Interest rate swaps $ 150,000 $ - Other assets/Accrued interest and other liabilities $ 56 $ 44 Derivatives not designated as hedging instruments: Interest rate swaps related to customer loans $ 277,924 $ 5,074 Other assets/Accrued interest and other liabilities $ 10,033 $ 10,033 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 7. FAIR VALUE MEASUREMENTS Determination of Fair Value The Company uses fair value measurements to record fair-value adjustments to certain assets and liabilities and to determine fair value disclosures. In accordance with the fair value measurements accounting guidance, the fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Company's various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument. The fair value guidance provides a consistent definition of fair value, which focuses on exit price in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under current market conditions. If there has been a significant decrease in the volume and level of activity for the asset or liability, a change in valuation technique or the use of multiple valuation techniques may be appropriate. In such instances, determining the price at which willing market participants would transact at the measurement date under current market conditions depends on the facts and circumstances and requires the use of significant judgment. The fair value is a reasonable point within the range that is most representative of fair value under current market conditions. Fair Value Hierarchy In accordance with this guidance, the Company groups its financial assets and financial liabilities generally measured at fair value in three levels, based on the markets in which the assets and liabilities are traded, and the reliability of the assumptions used to determine fair value. Level 1 - 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 Table of Contents USCB FINANCIAL HOLDINGS, INC. Notes to the Consolidated Financial Statements - Unaudited 24 USCB Financial Holdings, Inc. Q3 2025 Form 10-Q whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which determination of fair value requires significant management judgment or estimation. A financial instrument's categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Items Measured at Fair Value on a Recurring Basis AFS investment securities: 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 September 30, 2025 and December 31, 2024 for each of the fair value hierarchy levels (in thousands): September 30, 2025 December 31, 2024 Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total Investment securities available for sale: U.S. Government Agency $ - $ 11,965 $ - $ 11,965 $ - $ 12,625 $ - $ 12,625 Collateralized mortgage obligations - 81,695 - 81,695 - 78,905 - 78,905 Mortgage-backed securities - residential - 51,318 - 51,318 - 46,933 - 46,933 Mortgage-backed securities - commercial - 138,517 - 138,517 - 78,739 - 78,739 Municipal securities - 18,915 - 18,915 - 19,311 - 19,311 Bank subordinated debt securities - 21,769 - 21,769 - 23,708 - 23,708 Total - 324,179 - 324,179 - 260,221 - 260,221 Derivative assets - 10,089 - 10,089 - 7,190 - 7,190 Total assets at fair value $ - $ 334,268 $ - $ 334,268 $ - $ 267,411 $ - $ 267,411 Derivative liabilities $ - $ 10,077 $ - $ 10,077 $ - $ 6,869 $ - $ 6,869 Total liabilities at fair value $ - $ 10,077 $ - $ 10,077 $ - $ 6,869 $ - $ 6,869 Table of Contents USCB FINANCIAL HOLDINGS, INC. Notes to the Consolidated Financial Statements - Unaudited 25 USCB Financial Holdings, Inc. Q3 2025 Form 10-Q Fair Value Measurements on a Nonrecurring Basis During the three and nine months ended September 30, 2025 and 2024, the Company did not have any assets or liabilities measured at fair value on a nonrecurring basis. Items Not Measured at Fair Value The following table presents the carrying amounts and estimated fair values of financial instruments not carried at fair value as of September 30, 2025 and December 31, 2024 (in thousands): Fair Value Hierarchy Carrying Amount Level 1 Level 2 Level 3 Fair Value Amount September 30, 2025: Financial Assets: Cash and due from banks $ 9,988 $ 9,988 $ - $ - $ 9,988 Interest-bearing deposits in banks $ 46,823 $ 46,823 $ - $ - $ 46,823 Investment securities held to maturity, net $ 156,365 $ - $ 143,299 $ - $ 143,299 Loans held for investment, net $ 2,106,002 $ - $ - $ 2,143,816 $ 2,143,816 Accrued interest receivable $ 12,126 $ - $ 1,634 $ 10,492 $ 12,126 Financial Liabilities: Non-interest bearing demand deposits $ 584,240 $ 584,240 $ - $ - $ 584,240 Savings and money market deposits $ 1,291,283 $ 1,291,283 $ - $ - $ 1,291,283 Interest-bearing demand deposits $ 60,016 $ 60,016 $ - $ - $ 60,016 Time deposits $ 520,075 $ - $ 519,740 $ - $ 519,740 FHLB advances $ 11,000 $ - $ 11,045 $ - $ 11,045 Subordinated notes $ 39,262 $ 39,262 $ - $ $ 39,262 Accrued interest payable $ 3,184 $ - $ 3,184 $ - $ 3,184 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 $ 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: Non-interest bearing demand deposits $ 575,159 $ 575,159 $ - $ - $ 575,159 Savings and money market deposits $ 1,180,809 $ 1,180,809 $ - $ - $ 1,180,809 Interest-bearing demand deposits $ 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 8. STOCKHOLDERS’ EQUITY Common Stock During the three months ended September 30 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 nine months ended September 30, 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 September 30, 2025, 528,309 shares remained authorized for repurchase under the Company’s two stock repurchase programs. Table of Contents USCB FINANCIAL HOLDINGS, INC. Notes to the Consolidated Financial Statements - Unaudited 26 USCB Financial Holdings, Inc. Q3 2025 Form 10-Q During the three months ended September 30, 2024, the Company repurchased 10,000 shares of Class A common stock at a weighted average price per share of $ 11.99 . The aggregate purchase price for these transactions was approximately $ 120 thousand, including transaction costs. During the nine months ended September 30, 2024, Company repurchased 42,100 shares of Class A common stock at a weighted average price per share of $ 11.90 . The aggregate purchase price for these transactions was approximately $ 501 thousand, including transaction costs There were no restricted stock awards issued in the three months ended September 30, 2025. During the nine months ended September 30, 2025, the Company issued 124,424 shares of Class A common stock to employees as restricted stock awards pursuant to the Company’s 2015 equity incentive plan. There were no restricted stock awards issued in the three months ended September 30, 2024. For the nine month ended September 30, 2024 the Company issued 52,753 shares of Class A common stock to employees as restricted stock awards pursuant to the Company’s 2015 equity incentive plan. The number of shares of the Company’s Class A common stock issued and outstanding as of September 30, 2025 and December 31, 2024 were 18,107,385 and 19,924,632 , respectively. Dividends Declaration of dividends by the Board of Directors is required before dividend payments are made. The Company is limited in the amount of cash dividends that it may pay. Payment of dividends is generally limited to the Company’s net income of the current year combined with the Company’s retained income for the preceding two years, as defined by state banking regulations. However, for any dividend declaration, the Company must consider additional factors such as the amount of current period net income, liquidity, asset quality, capital adequacy and economic conditions at the Bank since the Bank is the primary source of funds to fund dividends by the Company. It is likely that these factors would further limit the amount of dividends which the Company could legally declare. In addition, bank regulators have the authority to prohibit banks and bank holding companies from paying dividends if they deem such payment to be an unsafe or unsound practice. As of September 30, 2025, the Company was not subject to any formal supervisory restrictions on its ability to pay dividends but will notify the Federal Reserve Bank of Atlanta in advance of any proposed dividend to the Company's stockholders in light of the Bank's negative retained earnings. In addition, under applicable FDIC regulations and policy, because the Bank has negative retained earnings, it must obtain the prior approval of the FDIC before effecting a cash dividend or other capital distribution from the Bank to the Company. The following table details the dividends declared and paid by the Company for the periods presented: Nine Months Ended September 30, 2025 Declaration Date Record Date Payment Date Dividend Per Share Dividend Amount 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 Nine Months Ended September 30, 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 The Company and the Bank exceeded all regulatory capital requirements and remained above “well-capitalized” guidelines as of September 30, 2025 and December 31, 2024. At September 30, 2025, the total risk-based capital ratio for the Bank was 13.93 %. The Company is not subject to regulatory capital ratios imposed by Basel III on bank holding companies because the Company is deemed to be a small bank holding company. See Note 12, Subsequent Events, for information regarding dividends declared in October 2025. Table of Contents USCB FINANCIAL HOLDINGS, INC. Notes to the Consolidated Financial Statements - Unaudited 27 USCB Financial Holdings, Inc. Q3 2025 Form 10-Q 9. EARNINGS PER SHARE Earnings per share (“EPS”) for common stock is calculated using the two-class method required for participating securities. Basic EPS is calculated by dividing net income available to common shareholders by the weighted-average number of common shares outstanding for the period, without consideration for common stock equivalents. Diluted EPS is computed by dividing net income available to common shareholders by the weighted-average number of common shares outstanding for the period and the weighted-average number of dilutive common stock equivalents outstanding for the period determined using the treasury-stock method. For purposes of this calculation, common stock equivalents include common stock options and are only included in the calculation of diluted EPS when their effect is dilutive. The following table reflects the calculation of net income available to common shareholders for the three and nine months ended September 30, 2025 and 2024 (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2025 2024 2025 2024 Net Income $ 8,939 $ 6,949 $ 24,737 $ 17,770 Net income available to common shareholders $ 8,939 $ 6,949 $ 24,737 $ 17,770 The following table reflects the calculation of basic and diluted earnings per common share class for the three and nine months ended September 30, 2025 and 2024 (in thousands, except share amounts): Three Months Ended September 30, Nine Months Ended September 30, 2025 2024 2025 2024 Class A Class A Basic EPS Numerator: Net income available to common shares $ 8,939 $ 6,949 $ 24,737 $ 17,770 Denominator: Weighted average shares outstanding 19,524,798 19,621,447 19,866,514 19,653,103 Earnings per share, basic $ 0.46 $ 0.35 $ 1.25 $ 0.90 Diluted EPS Numerator: Net income available to common shares $ 8,939 $ 6,949 $ 24,737 $ 17,770 Denominator: Weighted average shares outstanding for basic EPS 19,524,798 19,621,447 19,866,514 19,653,103 Add: Dilutive effects of assumed exercises of stock options 231,022 203,764 239,536 108,139 Weighted avg. shares including dilutive potential common shares 19,755,820 19,825,211 20,106,050 19,761,242 Earnings per share, diluted $ 0.45 $ 0.35 $ 1.23 $ 0.90 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 net income per share of common stock. Unvested restricted stock awards that are participating securities represent less than one percent of all of the outstanding shares of common stock for each of the periods presented. 10. LOSS CONTINGENCIES Loss contingencies, including claims and legal actions may arise in the ordinary course of business. In the opinion of management, none of these actions, either individually or in the aggregate, is expected to have a material adverse effect on the Company’s Consolidated Financial Statements. Table of Contents USCB FINANCIAL HOLDINGS, INC. Notes to the Consolidated Financial Statements - Unaudited 28 USCB Financial Holdings, Inc. Q3 2025 Form 10-Q 11. RELATED PARTY TRANSACTIONS In the ordinary course of business, principal officers, directors, and affiliates may engage in transactions with the Company. Loan Purchases During the nine months ended September 30, 2025, the Bank purchased $ 79.6 million from entities that deemed to be related parties. The Bank paid those entities net fees of $ 447 thousand. During the nine months ended September 30, 2024, the Bank purchased $ 73.8 million of loans from entities that are deemed to be related parties. The Bank paid those entities fees of $ 2.5 million. Loan Originations During the nine months ended September 30, 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 September 30, 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. There were no loan originations or syndications extended to entities deemed to be related parties for the year ended December 31, 2024. 12. SUBSEQUENT EVENTS Dividends On October 21, 2025, the Company announced that its Board of Directors declared its quarterly cash dividend. The quarterly dividend for the fourth quarter of 2025 was $ 0.10 per share of Class A common stock and will be paid on December 5, 2025, to stockholders of record as of the close of business on November 14, 2025. Table of Contents 29 USCB Financial Holdings, Inc. Q3 2025 Form 10-Q