USCB FINANCIAL HOLDINGS, INC. 10-K

Item 8. Financial Statements and Supplementary Data INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Registered Public Accounting Firm ( Crowe LLP , PCAOB ID: 173 ) 77 Consolidated Balance Sheets 78 Consolidated Statements of Operations 79 Consolidated Statements of Comprehensive Income 80 Consolidated Statements of Changes in Stockholders’ Equity 81 Consolidated Statements of Cash Flows 82 Notes to the Consolidated Financial Statements 84 Crowe LLP Independent Member Crowe Global 77 USCB Financial Holdings, Inc. 2025 10-K REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Stockholders and the Board of Directors of USCB Financial Holdings, Inc. Doral, Florida Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of USCB Financial Holdings, Inc. (the “Company”) as of December 31, 2025 and 2024, the related consolidated statements of operations, comprehensive income, changes in stockholders’ equity, and cash flows for the years then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ Crowe LLP Crowe LLP We have served as the Company's auditor since 2017. Fort Lauderdale, Florida March 13, 2026 Table of Contents 78 USCB Financial Holdings, Inc. 2025 10-K USCB FINANCIAL HOLDINGS, INC. Consolidated Balance Sheets (Dollars in thousands, except share and per share data) December 31, 2025 2024 ASSETS: Cash and due from banks $ 6,027 $ 6,986 Interest-bearing deposits in banks 32,450 70,049 Total cash and cash equivalents 38,477 77,035 Investment securities held to maturity net of allowance of $ 2 and $ 6 , respectively (fair value $ 142,508 and $ 145,540 , respectively) 153,941 164,694 Investment securities available for sale, at fair value 307,490 260,221 Federal Home Loan Bank stock, at cost 9,323 9,379 Loans held for investment, net of allowance of $ 25,500 and $ 24,070 , respectively 2,163,757 1,948,778 Accrued interest receivable 11,661 10,945 Premises and equipment, net 4,247 4,563 Bank owned life insurance 59,424 53,472 Deferred tax asset, net 18,046 29,646 Lease right-of-use asset 5,519 8,451 Other assets 19,655 14,032 Total assets $ 2,791,540 $ 2,581,216 LIABILITIES: Deposits: Non-interest-bearing demand deposits $ 583,860 $ 575,159 Savings and money market deposits 1,186,422 1,180,809 Interest-bearing demand deposits 46,989 50,648 Time deposits 527,809 367,388 Total deposits 2,345,080 2,174,004 Federal Home Loan Bank advances 158,250 163,000 Subordinated notes 39,300 - Lease liability 5,519 8,451 Accrued interest and other liabilities 26,208 20,373 Total liabilities 2,574,357 2,365,828 Commitments and contingencies (See Notes 11 and 20) (nil) (nil) STOCKHOLDERS' EQUITY: Preferred stock - Class C; $ 1.00 par value; $ 1,000 per share liquidation preference; 52,748 shares authorized; 0 issued and 0 outstanding as of December 31, 2025 and 2024 - - Preferred stock - Class D; $ 1.00 par value; $ 5.00 per share liquidation preference; 12,309,480 shares authorized; 0 issued and 0 outstanding as of December 31, 2025 and 2024 - - Preferred stock - Class E; $ 1.00 par value; $ 1,000 per share liquidation preference; 3,185,024 shares authorized; 0 issued and 0 outstanding as of December 31, 2025 and 2024 - - Common stock - Class A Voting; $ 1.00 par value; 45,000,000 shares authorized; 18,137,885 and 19,924,632 issued and outstanding as of December 31, 2025 and 2024 18,138 19,925 Common stock - Class B Non-Voting; $ 1.00 par value; 8,000,000 shares authorized; 0 and 0 issued and outstanding as of December 31, 2025 and 2024 - - Additional paid-in capital on common stock 278,852 307,810 Accumulated deficit ( 49,542 ) ( 67,813 ) Accumulated other comprehensive loss ( 30,265 ) ( 44,534 ) Total stockholders' equity 217,183 215,388 Total liabilities and stockholders' equity $ 2,791,540 $ 2,581,216 The accompanying notes are an integral part of these consolidated financial statements. Table of Contents 79 USCB Financial Holdings, Inc. 2025 10-K USCB FINANCIAL HOLDINGS, INC. Consolidated Statements of Operations (Dollars in thousands, except per share data) Years Ended December 31, 2025 2024 Interest income: Loans, including fees $ 128,160 $ 115,236 Investment securities 13,715 11,480 Interest-bearing deposits in financial institutions 3,612 4,517 Total interest income 145,487 131,233 Interest expense: Interest-bearing checking deposits 1,283 1,509 Savings and money markets deposits 38,027 40,098 Time deposits 18,104 13,354 Federal Home Loan Bank advances 3,238 6,336 Subordinated notes 1,205 - Total interest expense 61,857 61,297 Net interest income before provision for credit losses 83,630 69,936 Provision for credit losses 2,297 3,157 Net interest income after provision for credit losses 81,333 66,779 Non-interest income: Service fees 9,603 8,839 (Loss) gain on sale of securities available for sale, net ( 7,526 ) 14 Gain on sale of loans held for sale, net 1,001 747 Other non-interest income 3,514 3,140 Total non-interest income 6,592 12,740 Non-interest expense: Salaries and employee benefits 32,167 28,793 Occupancy 5,330 5,258 Regulatory assessment and fees 1,637 1,766 Consulting and legal fees 1,941 1,568 Network and information technology services 2,324 1,993 Other operating expense 8,610 7,664 Total non-interest expense 52,009 47,042 Net income before income tax expense 35,916 32,477 Income tax expense 9,816 7,803 Net income 26,100 24,674 Net income available to common stockholders $ 26,100 $ 24,674 Per share information: Earnings per share, basic $ 1.34 $ 1.25 Earnings per share, diluted $ 1.33 $ 1.24 Weighted average shares outstanding: Common shares, basic 19,425,746 19,675,444 Common shares, diluted 19,650,814 19,831,421 The accompanying notes are an integral part of these consolidated financial statements. Table of Contents 80 USCB Financial Holdings, Inc. 2025 10-K USCB FINANCIAL HOLDINGS, INC. Consolidated Statements of Comprehensive Income (Dollars in thousands) Years Ended December 31, 2025 2024 Net income $ 26,100 $ 24,674 Other comprehensive income (loss): Unrealized gain (loss) on investment securities 11,661 ( 592 ) Amortization of net unrealized losses on securities transferred from available-for-sale to held-to-maturity 266 267 Reclassification adjustment on sale of available for sale securities for (income) loss included in net income 7,526 ( 14 ) Unrealized loss on cash flow hedge ( 340 ) ( 13 ) Tax (expense) benefit ( 4,844 ) 89 Total other comprehensive income (loss), net of tax 14,269 ( 263 ) Total comprehensive income $ 40,369 $ 24,411 The accompanying notes are an integral part of these consolidated financial statements. Table of Contents 81 USCB Financial Holdings, Inc. 2025 10-K USCB FINANCIAL HOLDINGS, INC. Consolidated Statements of Changes in Stockholders’ Equity (Dollars in thousands, except per share data) Common Stock Additional Paid-in Capital on Common Stock Accumulated Deficit Accumulated Other Comprehensive Loss Shares Par Value Total Stockholders' Equity Balance at January 1, 2025 19,924,632 $ 19,925 $ 307,810 $ ( 67,813 ) $ ( 44,534 ) $ 215,388 Net income - - - 26,100 - 26,100 Other comprehensive income - - - - 14,269 14,269 Repurchase of Class A common stock ( 2,009,671 ) ( 2,010 ) ( 32,544 ) - - ( 34,554 ) Restricted stock issued 124,424 124 ( 124 ) - - - Exercise of stock options 98,500 99 705 - - 804 Dividend payment - - - ( 7,829 ) - ( 7,829 ) Stock-based compensation - - 3,005 - - 3,005 Balance at December 31, 2025 18,137,885 $ 18,138 $ 278,852 $ ( 49,542 ) $ ( 30,265 ) $ 217,183 Balance at January 1, 2024 19,575,435 $ 19,575 $ 305,212 $ ( 88,548 ) $ ( 44,271 ) $ 191,968 Net income - - - 24,674 - 24,674 Other comprehensive loss - - - - ( 263 ) ( 263 ) Repurchase of Class A common stock ( 42,100 ) ( 42 ) ( 459 ) - - ( 501 ) Restricted stock issued 277,922 278 ( 278 ) - - - Restricted stock forfeiture ( 8,625 ) ( 8 ) 8 - - - Exercise of stock options 122,000 122 1,197 - - 1,319 Dividend payment - - - ( 3,939 ) - ( 3,939 ) Stock-based compensation - - 2,130 - - 2,130 Balance at December 31, 2024 19,924,632 $ 19,925 $ 307,810 $ ( 67,813 ) $ ( 44,534 ) $ 215,388 The accompanying notes are an integral part of these consolidated financial statements. Table of Contents 82 USCB Financial Holdings, Inc. 2025 10-K USCB FINANCIAL HOLDINGS, INC. Consolidated Statements of Cash Flows (Dollars in thousands) Years Ended December 31, 2025 2024 Cash flows from operating activities: Net income $ 26,100 $ 24,674 Adjustments to reconcile net income to net cash provided by operating activities: Provision for credit losses 2,297 3,157 Depreciation and amortization 619 587 Accretion of premiums on securities, net ( 1,540 ) ( 521 ) Amortization of deferred loan fees, net 1,020 660 Stock-based compensation 3,005 2,130 Loss (gain) on sale of available for sale securities 7,526 ( 14 ) Gain on sale of loans held for sale ( 1,001 ) ( 747 ) Proceeds from the sale of loans held for sale 13,810 9,137 Origination of loans held for sale ( 12,809 ) ( 8,390 ) Increase in cash surrender value of bank owned life insurance ( 1,952 ) ( 1,691 ) Decrease in deferred tax asset 6,756 7,725 Net change in operating assets and liabilities: Accrued interest receivable ( 716 ) ( 257 ) Other assets ( 5,930 ) ( 6,223 ) Accrued interest and other liabilities 5,620 4,610 Net cash provided by operating activities 42,805 34,837 Cash flows from investing activities: Proceeds from maturities and pay-downs of investment securities held to maturity 10,935 10,461 Purchase of investment securities available for sale ( 139,841 ) ( 85,673 ) Proceeds from maturities and pay-downs of investment securities available for sale 23,364 20,045 Proceeds from sales of investment securities available for sale 82,497 34,753 Net increase in loans held for investment ( 136,726 ) ( 126,049 ) Purchase of loans held for investment ( 81,392 ) ( 66,605 ) Additions to premises and equipment ( 303 ) ( 314 ) Proceeds from the redemption of Federal Home Loan Bank stock 16,221 11,733 Purchase of Federal Home Loan Bank stock ( 16,165 ) ( 10,959 ) Purchase of bank owned life insurance, net ( 4,000 ) - Net cash used in investment activities ( 245,410 ) ( 212,608 ) (Continued) The accompanying notes are an integral part of these consolidated financial statements. Table of Contents 83 USCB Financial Holdings, Inc. 2025 10-K USCB FINANCIAL HOLDINGS, INC. Consolidated Statements of Cash Flows (Continued) (Dollars in thousands) Years Ended December 31, 2025 2024 Cash flows from financing activities: Proceeds from exercise of Class A common stock options, net 804 1,319 Cash dividends paid ( 7,829 ) ( 3,939 ) Repurchase of Class A common stock ( 34,554 ) ( 501 ) Net increase in deposits 171,076 236,865 Proceeds from subordinated notes, net 39,300 - Proceeds from Federal Home Loan Bank advances and other borrowings 336,750 227,000 Repayments on Federal Home Loan Bank advances and other borrowings ( 341,500 ) ( 247,000 ) Net cash provided by financing activities 164,047 213,744 Net increase (decrease) in cash and cash equivalents ( 38,558 ) 35,973 Cash and cash equivalents at beginning of period 77,035 41,062 Cash and cash equivalents at end of period $ 38,477 $ 77,035 Supplemental disclosure of cash flow information: Interest paid $ 59,998 $ 60,544 The accompanying notes are an integral part of these consolidated financial statements. Table of Contents USCB FINANCIAL HOLDINGS, INC. Notes to the Consolidated Financial Statements 84 USCB Financial Holdings, Inc. 2025 10-K 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Overview USCB Financial Holdings, Inc., a Florida corporation incorporated in 2021, is a bank holding company with one direct wholly owned subsidiary, U.S. Century Bank (the “Bank”), together referred to as “the Company”. The Bank, established in 2002, is a Florida state-chartered, non-member financial institution providing financial services through its banking centers located in South Florida. In December 2021, USCB Financial Holdings, Inc. acquired all issued and outstanding shares of the Class A common stock of the Bank in connection with the reorganization of the Bank into a holding company structure. Each of the outstanding shares of the Bank’s class A common stock, par value $ 1.00 per share, formerly held by its stockholders were converted into and exchanged for one newly issued share of the Company’s Class A common stock, par value $ 1.00 per share. The Bank owns a subsidiary, Florida Peninsula Title LLC, that offers our clients title insurance policies for real estate transactions closed at the Bank. Licensed in the State of Florida and approved by the Department of Insurance Regulation, Florida Peninsula tittle LLC began operations in 2021. Principles of Consolidation Intercompany transactions and balances are eliminated in consolidation. The consolidated financial statements have been prepared in accordance with GAAP. Use of Estimates The Company has established policies and control procedures that are intended to ensure valuation methods are controlled and applied consistently from period to period. These estimates and assumptions, which may materially affect the reported amounts of certain assets, liabilities, revenues and expenses, are based on information available as of the date of the financial statements, and changes in this information over time and the use of revised estimates and assumptions could materially affect amounts reported in subsequent financial statements. Cash and Cash Equivalents The Company considers investments with a maturity of 90 days or less from its original purchase date to be cash equivalents. For the Consolidated Statements of Cash Flows, cash and cash equivalents include cash on hand, amounts due from banks, and interest-bearing deposits in banks. Restricted Cash The Company may be required to maintain funds at other banks to satisfy the terms of a loan participation agreement. The Company reports restricted cash within cash and cash equivalents. At both December 31, 2025 and 2024, the Company had $ 0 in restricted cash. Interest-Bearing Deposits in Banks Interest-bearing deposits in other financial institutions consist of accounts at the Federal Reserve Bank of Atlanta, Federal Home Loan Bank of Atlanta and other accounts. Investment Securities Debt securities are recorded at fair value except for those securities which the Company has the positive intent and ability to hold to maturity. Management generally determines the appropriate classification of its securities at the time of purchase and accounts for them on a trade date basis. Debt securities that management has the positive intent and ability to hold to maturity are classified as "held-to-maturity" and recorded at amortized cost. Trading securities are recorded at fair value with changes in fair value included in earnings. Securities not classified as held-to-maturity or trading are classified as "available-for-sale" and recorded at fair value, with unrealized gains and losses excluded from earnings and reported in other comprehensive income (loss). Table of Contents USCB FINANCIAL HOLDINGS, INC. Notes to the Consolidated Financial Statements 85 USCB Financial Holdings, Inc. 2025 10-K Purchase premiums and discounts are amortized or accreted over the estimated life of the related available-for-sale or held-to-maturity security as an adjustment to yield using the effective interest method. Prepayments of principal are considered in determining the estimated life of the security. Such amortization and accretion are included in interest income in the Consolidated Statements of Operations. Dividend and interest income are recognized when earned. Gains and losses on the sale of securities are recorded on trade date and are determined on a specific identification basis. For available-for-sale debt securities in an unrealized loss position, the Company first assesses whether it intends to sell, or it is more likely than not that it will be required to sell, the security before recovery of its amortized cost basis. If the Company has the intent to sell, or is required to sell, the difference between fair value and amortized cost is considered impaired and is recognized in the provision for credit losses. For available-for-sale debt securities that do not meet the aforementioned criteria, the Company evaluates whether the decline in fair value has resulted from credit factors or other market conditions. The Company monitors the credit quality of debt securities through the use of credit ratings. Credit ratings are monitored by the Company on at least a quarterly basis. CECL requires a loss reserve for securities classified as HTM. The reserve should reflect historical credit performance as well as the impact of projected economic forecast. For U.S. Government bonds and U.S. Agency issued bonds in HTM the explicit and/or implicit guarantee of the U.S. Government is sufficient to conclude that a credit loss reserve is not required. The reserve requirement is for three primary assets groups: municipal bonds, corporate bonds, and non-agency securitizations. The Company calculates quarterly the loss reserve utilizing Moody’s ImpairmentStudio. The CECL measurement for investment securities incorporates historical data, containing defaults and recoveries information, and Moody’s baseline economic forecast. The solution uses probability of default/loss given default (“PD/LGD”) approach. PD represents the likelihood a borrower will default. Within the Moody’s model, this is determined using historical default data, adjusted for the current economic environment. LGD projects the expected loss if a borrower were to default. Federal Home Loan Bank (FHLB) Stock The Bank is a member of the FHLB system. Members are required to own a certain amount of stock based on the level of borrowings and other factors and may invest in additional amounts. FHLB stock is carried at cost, classified as a restricted asset, and periodically evaluated for impairment based on ultimate recovery of par value. As of December 31, 2025 and 2024, FHLB stock amounted to $ 9.3 million and $ 9.4 million, respectively, with no impairment deemed necessary. Both cash and stock dividends are reported as interest income. Loans Held for Investment and Allowance for Credit Losses (“ACL”) Loans held for investment (“loans”) are reported at their outstanding principal balance net of charge-offs, deferred loan cost, unearned income, and the ACL. Interest income is generally recognized when income is earned using the interest method. Loan origination and commitment fees and the costs associated with the origination of loans are deferred and amortized, using the interest method or the straight-line method, over the life of the related loan. If the principal or interest on a commercial loan becomes due and unpaid for 90 days or more, the loan is placed on non-accrual status as of the date it becomes 90 days past due and remains in non-accrual status until it meets the criteria for restoration to accrual status. Residential loans, on the other hand, are placed on non-accrual status when the principal or interest becomes due and unpaid for 120 days or more and remains in non-accrual status until it meets the criteria for restoration to accrual status. Restoring a loan to accrual status is possible when the borrower resumes payment of all principal and interest payments for a period of six consecutive months and the Company has a documented expectation of repayment of the remaining contractual principal and interest or the loan becomes secured and in the process of collection. All interest accrued but not collected for loans that are placed on nonaccrual status is reversed against interest income. The interest on these loans is accounted for on the cash-basis or cost-recovery method, under which cash collections are applied to unpaid principal, which may change as conditions dictate. The Company has determined that the entire balance of a loan is contractually delinquent for all loan categories if the minimum payment is not received by the specified due date on the borrower's statement. Interest and fees continue to accrue on past due loans until the date the loan goes into nonaccrual status. The Company provides for loan losses through a provision for credit losses charged to earnings. When management believes that a loan or a portion of the loan balance is uncollectible, that amount is charged against the ACL. Subsequent recoveries, if any, are credited to the ACL. Table of Contents USCB FINANCIAL HOLDINGS, INC. Notes to the Consolidated Financial Statements 86 USCB Financial Holdings, Inc. 2025 10-K The ACL reflects management's judgment of expected loan losses in the portfolio at the balance sheet date. Management uses a disciplined process and methodology to establish the ACL each quarter. To determine the total ACL, the Company estimates the reserves needed for each segment of the portfolio, including loans analyzed individually and loans analyzed on a pooled basis. The ACL consists of the amount applicable to the following segments: • Residential real estate • Commercial real estate • Commercial and industrial • Correspondent banks • Other loans (secured and unsecured consumer loans) Residential real estate loans are underwritten following the policies of the Company which include a review of the borrower’s credit, capacity and the collateral securing the loan. The borrower’s ability to repay involves an analysis of factors including: current income, employment status, monthly payment of the loan, current debt obligations, monthly debt to income ratio and credit history. The Company relies on appraisals in determining the value of the property. Risk is mitigated by this analysis and the diversity of the residential portfolio. Commercial real estate loans are secured by liens on commercial properties, land, construction and multifamily housing. Underwriting of commercial real estate loans will analyze the key market and business factors to arrive at a decision on the credit worthiness of the borrower. The analysis may include the capacity of the borrower, income generated by property for debt service, other sources of repayment, sensitivity analysis to fluctuations in market conditions including vacancy and rental rates in geographic location and loan to value. Land and construction loan analysis will include the time to develop, sell or lease the property. Appraisals are used to determine the value of the underlying collateral. Risk is mitigated as the properties securing the commercial real estate loans are diverse in type, location, and loan structure. Commercial and industrial loans are secured by the business assets of the borrower and may include equipment, inventory, and receivables. The loans are underwritten based on the income capacity of the business, the ability to service the debt based on operating cash flows, the credit worthiness of the borrower, other sources of repayment and collateral. The Company mitigates the risk in the commercial portfolio through industry diversification. Correspondent bank loans are short-term loans with international correspondent banking institutions primarily domiciled in Latin America. Most of these loans are for trade capital and have a life of less than one year. The Company’s credit review includes a credit analysis, peer comparison and current country risk overview. Annual re-evaluation of the risk rating of the borrower and country where the borrower is located and a review by the authorized signer within the Company. The risk is mitigated as these loans are short term, have limited exposure, and are geographically dispersed. Other loans are secured and unsecured consumer loans including yacht loans, personal loans, home equity lines of credit, overdrafts, and deposit account collateralized loans. Repayment of these loans are primarily from the personal income of the borrowers. Loans are underwritten based on the credit worthiness of the borrower. The risk on these loans is mitigated by small loan balances. Under CECL, the Company estimates the ACL using relevant available information, from both internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. Historical credit losses provide the basis for estimation of expected credit losses. Qualitative adjustments are applied to the expected credit losses estimated for the loan portfolio in relation to potential limitations of the quantitative model. A scorecard is used to aid management in the assessment of qualitative factor adjustments applied to expected credit losses. The quantitative component of the estimate relies on the statistical relationship between the projected value of an economic indicator and the implied historical loss experience among a curated group of peers. The Company utilized regression analyses of peer data, in which the Company was included, and where observed credit losses and selected economic factors were used to determine suitable loss drivers for modeling the lifetime rates of probability of default (PD). A loss given default rate (LGD) is assigned to each pool for each period based on these PD outcomes. The model fundamentally utilizes an expected discounted cash flow (DCF) analysis for loan portfolio segments. The DCF analysis is run at the instrument-level and incorporates an array of loan-specific data points and segment-implied assumptions to determine the lifetime expected loss attributable to each instrument. An implicit "hypothetical loss" is derived for each period of the DCF and helps establish the present value of future cash flows for each period. The reserve applied to a specific instrument is the difference between the sum of the present value of future cash flows and the book balance of the loan at the measurement date. Table of Contents USCB FINANCIAL HOLDINGS, INC. Notes to the Consolidated Financial Statements 87 USCB Financial Holdings, Inc. 2025 10-K Management elected the Remaining Life (WARM) methodology for correspondent bank loans and secured and unsecured consumer loan portfolio segments. For each of these segments, a long-term average loss rate is calculated and applied on a quarterly basis for the remaining life of the pool. Adjustments for economic expectations are made through qualitative assessments. For the remaining life estimated, management implemented a software solution that uses an attrition-based calculation that performs quarterly, cohort-based attrition measurements based on the loan portfolio. Portfolio segments are the level at which loss assumptions are applied to a pool of loans based on the similarity of risk characteristics inherent in the included instruments, relying on collateral codes and FFIEC Call Report codes. The Company currently segments the portfolio based on collateral codes for the purpose of establishing reserves. Each of these segments is paired to regression models (Loss Driver Analyses) based on peer data for loans of similar risk characteristics. The Company has established relationships between internal segmentation and FFIEC Call Report codes for this purpose. The loss driver for each loan portfolio segment is derived from a readily available and reasonable economic forecast, including the Federal Reserve Bank projections of U.S. civilian unemployment rate and the year-over-year real GDP growth; for the residential loan segment, the HPI projections published by Fannie Mae’s Economic and Strategic Research Group are utilized for the forecast. Forecasts are applied to the first four quarters of the credit loss estimate and revert on a straight- line basis to the lookback period's historical mean for the economic indicator over the expected life of loans. The model incorporates qualitative factor adjustments in order to calibrate the model for risk in each portfolio segment that may not be captured through quantitative analysis. Determinations regarding qualitative adjustments are reflective of management's expectation of loss conditions differing from those already captured in the quantitative component of the model. Qualitative factors (“Q-Factors”) used in the ACL methodology include: • Changes in lending policies, procedures, and strategies • Changes in international, national, regional, and local conditions • Changes in nature and volume of portfolio • Changes in the volume and severity of past due loans and other similar conditions • Concentration risk • Changes in the value of underlying collateral • The effect of other external factors: e.g., competition, legal, and regulatory requirements • Changes in lending management, among others Management evaluates on an individual basis collateral dependent loans using the fair value of the collateral method to determine if a credit loss reserve is necessary. The ACL is measured based on the difference of the fair value of the collateral and the recorded investment (amortized cost basis of the loan). If the final collateral valuation is less than the recorded investment of the loan, a reserve amount is calculated. If the collateral valuation is equal to or greater than the recorded investment of the loan, no reserve is determined to be required. The Company estimates a reserve for unfunded commitments, which is reported separately from the ACL within accrued interest and other liabilities. The reserve is based upon the same quantitative and qualitative factors applied to the collectively evaluated loan portfolio. Concentration of Credit Risks Credit risk represents the accounting loss that would be recognized at the reporting date if counterparties failed to perform as contracted and any collateral or security proved to be insufficient to cover the loss. Concentrations of credit risk (whether on or off-balance sheet) arising from financial instruments exist in relation to certain groups of customers. A group concentration arises when a number of counterparties have similar economic characteristics that would cause their ability to meet contractual obligations to be similarly affected by changes in economic or other conditions. The Company does not have a significant exposure to any individual customer or counterparty. Most of the Company's business activity is with customers located within its primary market area, which is generally the State of Florida. The Company's loan portfolio is concentrated largely in real estate and commercial loans in South Florida. Many of the Company's loan customers are engaged in real estate development. Circumstances which negatively impact the South Florida real estate industry or the South Florida economy, in general, could adversely impact the Company's loan portfolio. Table of Contents USCB FINANCIAL HOLDINGS, INC. Notes to the Consolidated Financial Statements 88 USCB Financial Holdings, Inc. 2025 10-K At December 31, 2025 and 2024, the Company had a concentration of risk with loans outstanding to the Company’s top ten lending relationships totaling $ 224.9 million and $ 236.2 million, respectively. At December 31, 2025 and 2024, this concentration represented 10.3 % and 12.0 % of net loans outstanding, respectively. At December 31, 2025 and December 31, 2024, the largest loan relationship outside Florida was a commercial real estate loan with an outstanding balance of $ 19.0 million and $ 19.8 million, at such dates respectively, collateralized by a 1 st lien on a commercial property located in New York State. At December 31, 2025, the Company had a concentration of risk with loans outstanding totaling $ 128.0 million to correspondent banks located in Ecuador, Guatemala, Dominican Republic, Honduras, Panama, and El Salvador. At December 31, 2024, the Company also had a concentration of risk with loans outstanding totaling $ 82.4 million to correspondent banks located in Ecuador, Dominican Republic, Honduras, and El Salvador. These banks maintained deposits with right of offset totaling $ 57.1 million and $ 62.6 million at December 31, 2025 and 2024, respectively. At various times during the year, the Company has maintained deposits with other financial institutions. The exposure to the Company from these transactions is solely dependent upon daily balances and the financial strength of the respective institutions. Premises and Equipment, net Land is carried at cost. Premises and equipment are stated at cost less accumulated depreciation and amortization. Depreciation is computed on the straight-line method over the estimated useful life of the asset. Leasehold improvements are amortized over the remaining term of the applicable leases or their useful lives, whichever is shorter. Estimated useful lives of these assets were as follows: Building s 40 years Furniture, fixtures and equipment 3 to 25 years Computer hardware and software 3 to 5 years Leasehold improvements Shorter of life or term of lease Maintenance and repairs are charged to expense as incurred while improvements and betterments are capitalized. When items are retired or are otherwise disposed of, the related costs and accumulated depreciation and amortization are removed from the accounts and any resulting gains or losses are credited or charged to income. Other Real Estate Owned OREO consists of real estate properties acquired through, or in lieu of, foreclosure that are held for sale and are initially recorded at the fair value of the property less estimated selling costs as of the date of foreclosure, establishing a new cost basis. Subsequent to foreclosure, valuations are periodically performed by management and the assets are carried at the lower of carrying amount or fair value less cost to sell. Subsequent write-downs are recognized as a valuation allowance with the offset recorded in the Consolidated Statements of Operations. Carrying costs are charged to OREO expenses in the accompanying Consolidated Statements of Operation. Gains or losses on sale of OREO are recognized when consideration has been exchanged, all closing conditions have been met and permanent financing has been arranged. Bank Owned Life Insurance Bank Owned Life Insurance (“BOLI”) is carried at the amount that could be realized under the contract at the balance sheet date, which is typically the cash surrender value. Changes in cash surrender value are recorded in non-interest income. At December 31, 2025, the Company maintained BOLI policies with five insurance carriers with a combined cash surrender value of $ 59.4 million. At December 31, 2024, the Company maintained BOLI policies with five insurance carriers with a combined cash surrender value of $ 53.5 million. These policies cover certain present and former executives and officers; the Company is the beneficiary of these policies. Employee 401(k) Plan The Company has an 401(k) plan covering substantially all eligible employees. Employee 401(k) plan expense is the amount of matching contributions. Table of Contents USCB FINANCIAL HOLDINGS, INC. Notes to the Consolidated Financial Statements 89 USCB Financial Holdings, Inc. 2025 10-K Income Taxes Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Management is required to assess whether a valuation allowance should be established on the net deferred tax asset based on the consideration of all available evidence using a more likely than not standard. In its evaluation, Management considers taxable loss carry-back availability, expectation of sufficient taxable income, trends in earnings, the future reversal of temporary differences, and available tax planning strategies. The Company recognizes positions taken or expected to be taken in a tax return in accordance with existing accounting guidance on income taxes which prescribes a recognition threshold and measurement process. Interest and penalties on tax liabilities, if any, would be recorded in interest expense and other operating non-interest expense, respectively. Impairment of Long-Lived Assets The Company's long-lived assets, such as premises and equipment, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of would be separately presented in the Consolidated Balance Sheets and reported at the lower of the carrying amount or fair value less costs to sell and are no longer depreciated. The assets and liabilities of a disposal group classified as held for sale would be presented separately in the appropriate asset and liability sections of the Consolidated Balance Sheets. Transfer of Financial Assets Transfers of financial assets are accounted for as sales, when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when (i) the assets have been isolated from the Company - put presumptively beyond the reach of the transferor and its creditors, even in bankruptcy or other receivership, (ii) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and (iii) the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity or the ability to unilaterally cause the holder to return specific assets. Comprehensive Income Under GAAP, certain changes in assets and liabilities, such as unrealized holding gains and losses on securities available-for-sale, are excluded from current period earnings and reported as a separate component of the stockholders’ equity section of the Consolidated Balance Sheets. Such items, along with net income, are components of comprehensive loss. Additionally, any unrealized gains or losses on transfers of investment securities from available-for-sale to held-to- maturity are recorded to accumulated other comprehensive income (loss) on the date of transfer and amortized over the remaining life of each security. The amortization of the unrealized gain or loss on transferred securities is reported as a component of comprehensive income (loss). See Note 2 “Investment Securities” for further discussion. The change in fair value on the interest rate swaps is recorded in other assets or accrued interest and other liabilities with a corresponding recognition in other comprehensive income (loss) and subsequently reclassified to earnings when gains or losses are realized. See Note 12. “Derivatives” for further discussion. Advertising Costs Advertising costs are expensed as incurred. Table of Contents USCB FINANCIAL HOLDINGS, INC. Notes to the Consolidated Financial Statements 90 USCB Financial Holdings, Inc. 2025 10-K Earnings per Common Share Basic earnings per common share is net income available to common stockholders divided by the weighted average number of common shares outstanding during the period. Diluted earnings per common share include the effect of additional potential common shares issuable under vested stock options and unvested shares of restricted stock. Basic and diluted earnings per share are updated to reflect the effect of stock splits as occurred. See Note 15 “Earnings Per Share” for additional information on earnings per common share. Interest Income Interest income is recognized as earned, based upon the principal amount outstanding, on an accrual basis. Operating Segments While the Company monitors the revenue streams of the various products and services, operations are managed and financial performance is evaluated on a Company wide basis. Operating results of the individual products are not used to make resource allocations or performance decisions by Company management. Stock-Based Compensation Stock-based compensation accounting guidance requires that the compensation cost relating to share-based payment transactions be recognized in the accompanying Consolidated Financial Statements. That cost will be measured based on the grant date fair value of the equity or liability instruments issued. The stock-based compensation accounting guidance covers a wide range of share-based compensation arrangements including stock options, restricted share awards, performance-based awards, share appreciation rights, and employee share purchase plans. The stock-based compensation accounting guidance requires that compensation cost for all stock awards be calculated and recognized over the employees' service period, generally defined as the vesting period. For awards with graded vesting, compensation cost is recognized on a straight-line basis over the requisite service period for the entire award. A Black- Scholes model is used to estimate the fair value of stock options. Loss Contingencies Loss contingencies, including claims and legal actions arising in the normal course of business, are recorded as liabilities when the likelihood of loss is probable, and an amount or range of loss can be reasonably estimated. In the opinion of management, none of these actions, either individually or in the aggregate, is expected to have a material adverse effect on the Company’s Consolidated Financial Statements. See Note 20 “Loss Contingencies” for further details. Dividend Restrictions Banking regulations require maintaining certain capital levels and may limit the dividends paid by the Bank to the Company or by the Company to the stockholders. Fair Value Measurements Fair values of financial instruments are estimated using relevant market information and other assumptions, as more fully disclosed in Note 13 “Fair Value Measurements”. Fair value estimates involve uncertainties and matters of significant judgment. Changes in assumptions or in market conditions could significantly affect the estimates. Derivative Instruments Derivative financial instruments are carried at fair value and reflect the estimated amount that would have been received to terminate these contracts at the reporting date based upon pricing or valuation models applied to current market information. Rate Swaps Designated as Cash Flow Hedges Table of Contents USCB FINANCIAL HOLDINGS, INC. Notes to the Consolidated Financial Statements 91 USCB Financial Holdings, Inc. 2025 10-K The changes in fair value on the interest rate swap is recorded in other assets or accrued interest and other liabilities with a corresponding recognition in other comprehensive income (loss) and subsequently reclassified to earnings when gains or losses are realized. As of December 31, 2025, the cash flow hedge was effective. Interest Rate Swaps Designated as Fair Value Hedges The changes in fair value on these interest rate swaps are recorded in other assets or accrued interest and other liabilities with a corresponding recognition in the assets being hedged. Interest Rate Swaps The Company enters into interest rate swaps agreements to provide commercial loan clients the ability to swap from a variable interest rate to a fixed rate. The Company enters into a floating-rate loan with a customer with a separately issued swap agreement allowing the customer to convert floating payments on the loan into a fixed interest rate. To mitigate risk, the Company enters into a matching agreement with a third party to offset the exposure on the customer agreement. These swaps are not considered to be qualified hedging transactions and the unmatched unrealized gain or loss is recorded in other non-interest income. Interest rate swap agreements are used by the Company as part of its asset-liability management strategy to help manage its interest rate risk exposure. The notional amount of the interest rate swaps does not represent actual amounts exchanged by the parties. The amounts exchanged are determined by reference to the notional amount and the other terms of the individual interest rate swap agreements. Revenue from Contracts with Customers Revenue from contracts with customers is recognized in an amount that reflects the consideration the Company expects to receive for the services the Company provides to its customers. The main revenue earned by the Company from loans and investment securities are excluded from the accounting standard update “Revenue from Contracts with Customers”. Deposit and service charge fees, consisting of primarily monthly maintenance fees, wire fees, ATM interchange fees and other transaction-based fees, are the most significant types of revenue within the accounting standard update. Revenue is recognized when the service provided by the Company is complete. The aggregate amount of revenue within the scope of this standard that is received from sources other than deposit service charges and fees is not material. Cash Flow Statement The Company reports the net activity rather than gross activity in the Consolidated Statements of Cash Flows. The net cash flows are reported for loans held for investment, accrued interest receivable, deferred tax assets, other assets, customer deposits, accrued interest payable, accrued interest and other liabilities, exercise of options, and proceeds from the issuance of Class A common shares and subordinated debt. Reclassifications Certain amounts in the Consolidated Financial Statements have been reclassified to conform to the current presentation. Reclassifications had no impact on the net income or stockholders’ equity of the Company. Recently Issued Accounting Standards Issued and Adopted Improvements to Income Tax Disclosures In December 2023, the FASB issued Accounting Standards Update (ASU) 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This ASU pertains to disclosures regarding effective tax rates and cash income taxes paid with the goal of providing stakeholders with more transparent and relevant information. This ASU is effective for public business entities for annual periods beginning after December 15, 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 92 USCB Financial Holdings, Inc. 2025 10-K 2. INVESTMENT SECURITIES The following tables present a summary of the amortized cost, unrealized or unrecognized gains and losses, and fair value of investment securities at the dates indicated (in thousands): December 31, 2025 Available-for-sale: Amortized Cost Unrealized Gains Unrealized Losses Fair Value U.S. Government Agency $ 15,169 $ 18 $ ( 1,043 ) $ 14,144 Collateralized mortgage obligations 92,871 - ( 17,043 ) 75,828 Mortgage-backed securities - residential 35,865 135 ( 6,083 ) 29,917 Mortgage-backed securities - commercial 174,622 347 ( 6,861 ) 168,108 Municipal securities 5,196 - ( 933 ) 4,263 Bank subordinated debt securities 15,284 189 ( 243 ) 15,230 $ 339,007 $ 689 $ ( 32,206 ) $ 307,490 December 31, 2025 Held-to-maturity: Amortized Cost Unrecognized Gains Unrecognized Losses Fair Value U.S. Government Agency $ 41,158 $ 91 $ ( 3,279 ) $ 37,970 Collateralized mortgage obligations 51,431 854 ( 5,499 ) 46,786 Mortgage-backed securities - residential 37,221 760 ( 3,263 ) 34,718 Mortgage-backed securities - commercial 15,088 - ( 1,037 ) 14,051 Corporate bonds 9,045 - ( 62 ) 8,983 $ 153,943 $ 1,705 $ ( 13,140 ) $ 142,508 Allowance for credit losses - securities held-to-maturity ( 2 ) Securities held-to maturity, net of allowance for credit losses $ 153,941 December 31, 2024 Available-for-sale: Amortized Cost Unrealized Gains Unrealized Losses Fair Value U.S. Government Agency $ 14,279 $ 14 $ ( 1,668 ) $ 12,625 Collateralized mortgage obligations 101,808 15 ( 22,918 ) 78,905 Mortgage-backed securities - residential 58,995 1 ( 12,063 ) 46,933 Mortgage-backed securities - commercial 86,604 40 ( 7,905 ) 78,739 Municipal securities 24,925 - ( 5,614 ) 19,311 Bank subordinated debt securities 24,314 438 ( 1,044 ) 23,708 $ 310,925 $ 508 $ ( 51,212 ) $ 260,221 December 31, 2024 Held-to-maturity: Amortized Cost Unrecognized Gains Unrecognized Losses Fair Value U.S. Government Agency $ 42,538 $ - $ ( 5,094 ) $ 37,444 Collateralized mortgage obligations 56,987 57 ( 7,785 ) 49,259 Mortgage-backed securities - residential 40,681 53 ( 4,613 ) 36,121 Mortgage-backed securities - commercial 15,272 - ( 1,385 ) 13,887 Corporate bonds 9,222 - ( 393 ) 8,829 164,700 $ 110 $ ( 19,270 ) $ 145,540 Allowance for credit losses - securities held-to-maturity ( 6 ) Securities held-to maturity, net of allowance for credit losses $ 164,694 Table of Contents USCB FINANCIAL HOLDINGS, INC. Notes to the Consolidated Financial Statements 93 USCB Financial Holdings, Inc. 2025 10-K Transfers of debt securities into the HTM category from the available for sale (“AFS”) category are made at fair value as of the date of transfer. The unrealized gain or loss at the date of transfer is retained in accumulated other comprehensive loss (“AOCL”) and in the carrying value of the HTM securities and there is no impact to net income. Such amounts are amortized over the remaining life of the securities. The Company made two transfers from AFS to HTM portfolios in 2022. There were no investment securities that were transferred from AFS to HTM for the years ended December 31, 2025, and 2024. For the years ended December 31, 2025 and 2024, total amortization out of AOCL for the net unrealized losses on securities transferred from AFS to HTM in 2022 was $ 266 thousand and $ 267 thousand, respectively. The remaining balance of the net unrealized losses retained in AOCL was $ 9.0 million at December 31, 2025 and $ 9.3 million at December 31, 2024. The fair value of the transferred securities was $ 99.6 million at December 31, 2025 and $ 101.2 million at December 31, 2024. Gains and losses on the sale of securities are recorded on the trade date and are determined on the specific identification basis. The following table presents the proceeds, realized gross gains and realized gross losses on sales and calls of AFS debt securities for the years ended December 31, 2025 and 2024 (in thousands): Available-for-sale: 2025 2024 Proceeds from sales and call of securities $ 82,497 $ 34,753 Gross gains $ 400 $ 195 Gross losses ( 7,926 ) ( 181 ) Net realized (losses) gains $ ( 7,526 ) $ 14 The amortized cost and fair value of investment securities, by contractual maturity, are shown below for the date indicated (in thousands). Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Securities not due at a single maturity date are shown separately. Available-for-sale Held-to-maturity December 31, 2025: Amortized Cost Fair Value Amortized Cost Fair Value Due within one year $ - $ - $ 9,045 $ 8,983 Due after one year through five years 4,473 4,504 - - Due after five years through ten years 16,007 14,989 - - Due after ten years - - - - U.S. Government Agency 15,169 14,144 41,158 37,970 Collateralized mortgage obligations 92,871 75,828 51,431 46,786 Mortgage-backed securities - residential 35,865 29,917 37,221 34,718 Mortgage-backed securities - commercial 174,622 168,108 15,088 14,051 $ 339,007 $ 307,490 $ 153,943 $ 142,508 At December 31, 2025 and 2024, there were no securities to any one issuer in an amount greater than 10% of total stockholders’ equity other than the U.S. Government and U.S. Government Agencies. All the collateralized mortgage obligations and mortgage-backed securities are issued by U.S. government sponsored entities at December 31, 2025 and 2024. Table of Contents USCB FINANCIAL HOLDINGS, INC. Notes to the Consolidated Financial Statements 94 USCB Financial Holdings, Inc. 2025 10-K Information pertaining to investment securities with gross unrealized losses, aggregated by investment category and length of time that those individual securities have been in a continuous loss position, are presented as of the following dates (in thousands): December 31, 2025 Less than 12 months 12 months or more Total Available-for-sale: Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses U.S. Government Agency $ 5,937 $ ( 59 ) $ 5,649 $ ( 984 ) $ 11,586 $ ( 1,043 ) Collateralized mortgage obligations 8,929 ( 93 ) 66,899 ( 16,950 ) 75,828 ( 17,043 ) Mortgage-backed securities - residential - - 22,695 ( 6,083 ) 22,695 ( 6,083 ) Mortgage-backed securities - commercial 59,655 ( 477 ) 56,852 ( 6,384 ) 116,507 ( 6,861 ) Municipal securities - - 4,263 ( 933 ) 4,263 ( 933 ) Bank subordinated debt securities 2,020 ( 4 ) 7,234 ( 239 ) 9,254 ( 243 ) $ 76,541 $ ( 633 ) $ 163,592 $ ( 31,573 ) $ 240,133 $ ( 32,206 ) December 31, 2024 Less than 12 months 12 months or more Total Available-for-sale: Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses U.S. Government Agency $ 4,468 $ ( 76 ) $ 7,451 $ ( 1,592 ) $ 11,919 $ ( 1,668 ) Collateralized mortgage obligations 3,101 ( 23 ) 72,952 ( 22,895 ) 76,053 ( 22,918 ) Mortgage-backed securities - residential 972 ( 11 ) 44,600 ( 12,052 ) 45,572 ( 12,063 ) Mortgage-backed securities - commercial 44,410 ( 1,266 ) 27,875 ( 6,639 ) 72,285 ( 7,905 ) Municipal securities - - 19,311 ( 5,614 ) 19,311 ( 5,614 ) Bank subordinated debt securities - - 14,352 ( 1,044 ) 14,352 ( 1,044 ) $ 52,951 $ ( 1,376 ) $ 186,541 $ ( 49,836 ) $ 239,492 $ ( 51,212 ) At December 31, 2025, the Company had $ 32.2 million of unrealized losses in its AFS securities portfolio, which had a fair value of $ 240.1 million with respect to the securities with unrealized losses. Mortgage-backed securities and collateralized mortgage obligations issued by U.S. government-sponsored entities accounted for $ 31.0 million of the unrealized losses and had a fair value of $ 226.6 million. These unrealized losses were primarily attributable to changes in interest rates since the time of purchase. The contractual cash flows for these securities are guaranteed by U.S. Government Agencies and U.S. government-sponsored entities. Municipal bonds had unrealized losses of $ 933 thousand and a fair value of $ 4.3 million. These securities are of high credit quality, and the decline in fair value was not attributable to credit deterioration. Bank subordinated debt securities had unrealized losses of $ 243 thousand and a fair value of $ 9.3 million, primarily due to changes in interest rate market conditions since purchase. Based on the assessment of these mitigating factors, management believes that the unrealized losses on these debt security holdings are a function of changes in investment spreads and interest rate movements and not changes in credit quality. The measurement of expected credit losses under the CECL methodology is applicable to financial assets measured at amortized cost, including loan receivables and HTM debt securities. CECL requires a loss reserve for securities classified as HTM. The reserve should reflect historical credit performance as well as the impact of projected economic forecast. For U.S. Government bonds and U.S. Agency issued bonds in HTM, the explicit guarantee of the U.S. Government is sufficient to conclude that a credit loss reserve is not required. The reserve requirement is for three primary assets groups: municipal bonds, corporate bonds, and non-agency securitizations. The Company calculates quarterly the loss reserve utilizing Moody’s ImpairmentStudio. The CECL measurement for investment securities incorporates historical data, containing defaults and recoveries information, and Moody’s baseline economic forecast. The solution uses probability of default/loss given default (“PD/LGD”) approach. PD represents the likelihood a borrower will default. Within Moody’s model, this is determined using historical default data, adjusted for the current economic environment. LGD projects the expected loss if a borrower were to default. Table of Contents USCB FINANCIAL HOLDINGS, INC. Notes to the Consolidated Financial Statements 95 USCB Financial Holdings, Inc. 2025 10-K The Company monitors the credit quality of HTM securities through the use of credit ratings. Credit ratings are monitored by the Company on at least a quarterly basis. As of December 31, 2025 and December 31, 2024, all HTM securities held by the Company were rated investment grade. At December 31, 2025, HTM securities included $ 144.9 million of U.S. Government and U.S. Agency issued bonds and mortgage-backed securities. Because of the explicit and/or implicit guarantee on these bonds, the Company holds no reserves on these holdings. The remaining portion of the HTM portfolio is made up of $ 9.0 million in investment grade corporate bonds. The required reserve for these holdings is determined each quarter using the model described above. For the portion of the HTM exposed to non-government credit risk, the Company utilized the PD/LGD methodology to estimate a $ 2 thousand ACL as of December 31, 2025. The book value for debt securities classified as HTM represents amortized cost less ACL. The Company determined that an ACL on its debt securities available for sale as was not required as of December 31, 2025 and December 31, 2024. In 2018, the Company became a Qualified Public Depository (“QPD”) with the State of Florida. As a QPD, the Company has the authority to legally maintain public deposits from cities, municipalities, and the State of Florida. These public deposits are secured by securities pledged to the State of Florida at a ratio of 25 % and 50 % of the average outstanding amount of uninsured deposits at December 31, 2025 and December 31, 2024, respectively. The Company must also maintain a minimum amount of pledged securities to be in the program related to these deposits. At December 31, 2025, the Company had fifteen securities with an aggregate fair value of $ 43.5 million pledged to the State of Florida under the public funds program. The Company held a total of $ 167.7 million in public funds at December 31, 2025. At December 31, 2024, the Company had twenty-one securities with an aggregate fair value of $ 66.1 million pledged to the State of Florida under the public funds program. The Company held a total of $ 110.5 million in public funds at December 31, 2024. 3. LOANS The following table is a summary of the distribution of loans held for investment by type (in thousands): December 31, 2025 December 31, 2024 Total Percent of Total Total Percent of Total Residential Real Estate $ 307,692 14.1 % $ 289,961 14.8 % Commercial Real Estate 1,244,835 57.0 % 1,136,417 57.8 % Commercial and Industrial 295,548 13.5 % 258,311 13.1 % Correspondent Banks 127,968 5.9 % 82,438 4.2 % Consumer and Other 207,215 9.5 % 198,091 10.1 % Total gross loans 2,183,258 100.0 % 1,965,218 100.0 % Plus: Deferred costs/fees 5,999 7,630 Total loans held for investment, net of deferred costs/fees 2,189,257 1,972,848 Less: Allowance for credit losses 25,500 24,070 Total loans held for investment, net of allowance $ 2,163,757 $ 1,948,778 At December 31, 2025 and 2024, the Company had $ 561.4 million and $ 518.8 million, respectively, of commercial real estate and residential mortgage loans pledged as collateral on lines of credit with the FHLB and the Federal Reserve Bank of Atlanta. At December 31, 2025 and 2024, the Company had no real estate loans in the process of foreclosure. Table of Contents USCB FINANCIAL HOLDINGS, INC. Notes to the Consolidated Financial Statements 96 USCB Financial Holdings, Inc. 2025 10-K Allowance for Credit Losses Changes in the ACL for the years ended December 31, 2025 and 2024 are as follows (in thousands): Residential Real Estate Commercial Real Estate Commercial and Industrial Correspondent Banks Consumer and Other Total December 31, 2025: Beginning balance $ 5,121 $ 8,788 $ 4,633 $ 654 $ 4,874 $ 24,070 Provision for credit losses (1) 763 688 164 361 143 2,119 Recoveries 24 - 17 - 2 43 Charge-offs - - - - ( 732 ) ( 732 ) Ending Balance $ 5,908 $ 9,476 $ 4,814 $ 1,015 $ 4,287 $ 25,500 December 31, 2024: Beginning balance $ 2,695 $ 10,366 $ 3,974 $ 911 $ 3,138 $ 21,084 Provision for credit losses (2) 2,403 ( 1,578 ) 640 ( 257 ) 1,752 2,960 Recoveries 23 - 19 - 3 45 Charge-offs - - - - ( 19 ) ( 19 ) Ending Balance $ 5,121 $ 8,788 $ 4,633 $ 654 $ 4,874 $ 24,070 (1) Provision for credit losses excludes $ 182 thousand provision for unfunded commitments included in accrued interest and other liabilities and $ 4 thousand release for investment securities held to maturity. (2) Provision for credit losses excludes $ 199 thousand provision for unfunded commitments included in accrued interest and other liabilities and $ 2 thousand release for investment securities held to maturity. Table of Contents USCB FINANCIAL HOLDINGS, INC. Notes to the Consolidated Financial Statements 97 USCB Financial Holdings, Inc. 2025 10-K At December 31, 2025, the ACL for loans was $ 25.5 million compared to $ 24.1 million at December 31, 2024. The increase of $ 1.4 million or 5.9% in the ACL was primarily due to loan growth. Charge offs related to loans for the year ended December 31, 2025 were $ 23 thousand originated in 2025 and $ 709 thousand originated in 2022. Charge offs for the year ended December 31, 2024 were $ 19 thousand originated in 2024. Allowance for credit losses and the outstanding balances in loans as of December 31, 2025 and 2024 are as follows (in thousands): Residential Real Estate Commercial Real Estate Commercial and Industrial Correspondent Banks Consumer and Other Total December 31, 2025: Allowance for credit losses: Individually evaluated $ 27 $ - $ 84 $ - $ - $ 111 Collectively evaluated 5,881 9,476 4,730 1,015 4,287 25,389 Balances, end of period $ 5,908 $ 9,476 $ 4,814 $ 1,015 $ 4,287 $ 25,500 Loans: Individually evaluated $ 5,583 $ - $ 1,265 $ - $ - $ 6,848 Collectively evaluated 302,109 1,244,835 294,283 127,968 207,215 2,176,410 Balances, end of period $ 307,692 $ 1,244,835 $ 295,548 $ 127,968 $ 207,215 $ 2,183,258 December 31, 2024: Allowance for credit losses: Individually evaluated $ 40 $ - $ 27 $ - $ 651 $ 718 Collectively evaluated 5,081 8,788 4,606 654 4,223 23,352 Balances, end of period $ 5,121 $ 8,788 $ 4,633 $ 654 $ 4,874 $ 24,070 Loans: Individually evaluated $ 6,788 $ - $ 690 $ - $ 1,990 $ 9,468 Collectively evaluated 283,173 1,136,417 257,621 82,438 196,101 1,955,750 Balances, end of period $ 289,961 $ 1,136,417 $ 258,311 $ 82,438 $ 198,091 $ 1,965,218 Credit Quality Indicators The Company grades loans based on the estimated capability of the borrower to repay the contractual obligation of the loan agreement based on relevant information which may include: current financial information on the borrower, historical payment experience, credit documentation and other current economic trends. Internal credit risk grades are evaluated periodically. The Company's internally assigned credit risk grades are as follows: Pass – Loans indicate different levels of satisfactory financial condition and performance. Special Mention – Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date. Substandard – Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligator or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected. Doubtful – Loans classified as doubtful have all the weaknesses inherent in those classified at substandard, with the added characteristic that the weaknesses make collection or liquidation in full on the basis of currently existing facts, conditions, and values, highly questionable and improbable. Table of Contents USCB FINANCIAL HOLDINGS, INC. Notes to the Consolidated Financial Statements 98 USCB Financial Holdings, Inc. 2025 10-K Loss – Loans classified as loss are considered uncollectible. Loan credit exposures by internally assigned grades are presented below for the periods indicated (in thousands): As of December 31, 2025 Term Loans by Origination Year Revolving Loans Total 2025 2024 2023 2022 2021 Prior Residential real estate Pass $ 65,582 $ 83,426 $ 32,139 $ 23,685 $ 21,056 $ 58,220 $ 20,168 $ 304,276 Special Mention 128 - - 587 - 201 - 916 Substandard - 917 1,468 - - 115 - 2,500 Total 65,710 84,343 33,607 24,272 21,056 58,536 20,168 307,692 Commercial real estate Pass 241,028 184,323 109,465 281,985 134,663 273,483 5,876 1,230,823 Special Mention - - 8,451 - - 3,162 - 11,613 Substandard - - - - 1,724 675 - 2,399 Total 241,028 184,323 117,916 281,985 136,387 277,320 5,876 1,244,835 Commercial and industrial Pass 75,867 63,178 58,060 32,118 28,090 12,314 23,542 293,169 Special Mention - 72 - - 835 - - 907 Substandard - - 389 - 445 638 - 1,472 Total 75,867 63,250 58,449 32,118 29,370 12,952 23,542 295,548 Correspondent banks Pass 127,968 - - - - - - 127,968 Total 127,968 - - - - - - 127,968 Consumer and other loans Pass 59,276 34,309 36,808 51,091 23,214 747 1,770 207,215 Substandard - - - - - - - - Total 59,276 34,309 36,808 51,091 23,214 747 1,770 207,215 Total Loans Pass 569,721 365,236 236,472 388,879 207,023 344,764 51,356 2,163,451 Special Mention 128 72 8,451 587 835 3,363 - 13,436 Substandard - 917 1,857 - 2,169 1,428 - 6,371 Doubtful - - - - - - - - Total $ 569,849 $ 366,225 $ 246,780 $ 389,466 $ 210,027 $ 349,555 $ 51,356 $ 2,183,258 Table of Contents USCB FINANCIAL HOLDINGS, INC. Notes to the Consolidated Financial Statements 99 USCB Financial Holdings, Inc. 2025 10-K As of December 31, 2024 Term Loans by Origination Year Revolving Loans Total 2024 2023 2022 2021 2020 Prior Residential real estate Pass $ 109,590 $ 39,666 $ 34,315 $ 23,039 $ 5,791 $ 66,115 $ 10,885 $ 289,401 Substandard - - - - - 560 - 560 Total 109,590 39,666 34,315 23,039 5,791 66,675 10,885 289,961 Commercial real estate Pass 175,023 130,503 317,971 175,535 98,695 231,558 4,680 1,133,965 Substandard - - - 1,765 687 - - 2,452 Total 175,023 130,503 317,971 177,300 99,382 231,558 4,680 1,136,417 Commercial and industrial Pass 68,405 80,644 33,962 30,495 3,891 11,839 26,795 256,031 Substandard - - - 519 - 1,093 668 2,280 Total 68,405 80,644 33,962 31,014 3,891 12,932 27,463 258,311 Correspondent banks Pass 82,438 - - - - - - 82,438 Total 82,438 - - - - - - 82,438 Consumer and other loans Pass 40,921 51,392 65,603 35,181 491 815 1,698 196,101 Substandard - - 1,990 - - - - 1,990 Total 40,921 51,392 67,593 35,181 491 815 1,698 198,091 Total Loans Pass 476,377 302,205 451,851 264,250 108,868 310,327 44,058 1,957,936 Special Mention - - - - - - - - Substandard - - 1,990 2,284 687 1,653 668 7,282 Doubtful - - - - - - - - Total $ 476,377 $ 302,205 $ 453,841 $ 266,534 $ 109,555 $ 311,980 $ 44,726 $ 1,965,218 Table of Contents USCB FINANCIAL HOLDINGS, INC. Notes to the Consolidated Financial Statements 100 USCB Financial Holdings, Inc. 2025 10-K Loan Aging The Company also considers the performance of loans in grading and in evaluating the credit quality of the loan portfolio. The Company analyzes credit quality and loan grades based on payment performance and the aging status of loans. The following table include an aging analysis of accruing loans and total non-accruing loans as of December 31, 2025 and 2024 (in thousands): Accruing As of December 31, 2025: Current Past Due 30-89 Days Past Due 90 Days or more and Still Accruing Total Accruing Non-Accrual Total Loans Residential real estate: Home equity line of credit and other $ 1,538 $ - $ - $ 1,538 $ - $ 1,538 1-4 family residential 238,852 1,150 - 240,002 2,385 242,387 Condo residential 62,364 1,288 - 63,652 115 63,767 302,754 2,438 - 305,192 2,500 307,692 Commercial real estate: Land and construction 83,305 - - 83,305 - 83,305 Multi-family residential 254,562 - - 254,562 - 254,562 Condo commercial 61,525 - - 61,525 - 61,525 Commercial property 845,003 440 - 845,443 - 845,443 Leasehold improvements - - - - - - 1,244,395 440 - 1,244,835 - 1,244,835 Commercial and industrial: Secured 272,900 71 - 272,971 638 273,609 Unsecured 21,939 - - 21,939 - 21,939 294,839 71 - 294,910 638 295,548 Correspondent banks 127,968 - - 127,968 - 127,968 Consumer and other 207,215 - - 207,215 - 207,215 Total $ 2,177,171 $ 2,949 $ - $ 2,180,120 $ 3,138 $ 2,183,258 Table of Contents USCB FINANCIAL HOLDINGS, INC. Notes to the Consolidated Financial Statements 101 USCB Financial Holdings, Inc. 2025 10-K Accruing As of December 31, 2024: Current Past Due 30-89 Days Past Due 90 Days or more and Still Accruing Total Accruing Non- Accrual Total Loans Residential real estate: Home equity line of credit and other $ 1,120 $ - $ - $ 1,120 $ - $ 1,120 1-4 family residential 225,334 2,886 - 228,220 - 228,220 Condo residential 58,956 1,351 - 60,307 314 60,621 285,410 4,237 - 289,647 314 289,961 Commercial real estate: Land and construction 40,090 - - 40,090 - 40,090 Multi-family residential 214,912 - - 214,912 - 214,912 Condo commercial 57,402 - - 57,402 - 57,402 Commercial property 823,326 687 - 824,013 - 824,013 Leasehold improvements - - - - - - 1,135,730 687 - 1,136,417 - 1,136,417 Commercial and industrial: Secured 232,779 521 - 233,300 403 233,703 Unsecured 24,608 - - 24,608 - 24,608 257,387 521 - 257,908 403 258,311 Correspondent banks 82,438 - - 82,438 - 82,438 Consumer and other 196,101 - - 196,101 1,990 198,091 Total $ 1,957,066 $ 5,445 $ - $ 1,962,511 $ 2,707 $ 1,965,218 Non-accrual Status The following table includes the amortized cost basis of loans on non-accrual status and loans past due 90 days or more and still accruing as of December 31, 2025 and 2024 (in thousands): December 31, 2025 Nonaccrual Loans With No Related Allowance Nonaccrual Loans With Related Allowance Total Non-accruals Loans Past Due 90 Days or more and Still Accruing Residential real estate $ 2,500 $ - $ 2,500 $ - Commercial and industrial 563 75 638 - Total $ 3,063 $ 75 $ 3,138 $ - December 31, 2024 Nonaccrual Loans With No Related Allowance Nonaccrual Loans With Related Allowance Total Non-accruals Loans Past Due 90 Days or more and Still Accruing Residential real estate $ 314 $ - $ 314 $ - Commercial and industrial - 403 403 $ - Consumer and other - 1,990 1,990 - Total $ 314 $ 2,393 $ 2,707 $ - Accrued interest receivable is excluded from the estimate of credit losses. There was no interest income recognized attributable to non-accrual loans outstanding during the years ended December 31, 2025 and 2024. Interest income on Table of Contents USCB FINANCIAL HOLDINGS, INC. Notes to the Consolidated Financial Statements 102 USCB Financial Holdings, Inc. 2025 10-K these loans for the years ended December 31, 2025 and 2024, would have been approximately $ 114 thousand and $ 84 thousand, respectively, had these loans performed in accordance with their original terms. Collateral-Dependent Loans A loan is collateral dependent when the borrower is experiencing financial difficulty and repayment of the loan is expected to be provided substantially through the sale or operation of the collateral. There were four collateral dependent loans as of December 31, 2025 and two collateral dependent loans as of December 31, 2024. The following table includes the amortized cost basis of collateral dependent loans related to borrowers experiencing financial difficulty by type of collateral as of December 31, 2025 and 2024 (in thousands): December 31, 2025 Collateral Type Residential Real Estate Specific Reserves Residential real estate $ 2,583 $ - Total $ 2,583 $ - December 31, 2024 Collateral Type Boat Specific Reserves Consumer and other loans $ 1,990 $ 651 Total $ 1,990 $ 651 Management evaluates on an individual basis collateral dependent loans using the fair value of the collateral method to determine if a credit loss reserve is necessary. The ACL is measured based on the difference of the fair value of the collateral and the recorded investment (amortized cost basis of the loan), if the final collateral valuation is less than the recorded investment of the loan a reserve amount is calculated. If the collateral valuation is equal to or greater than the recorded investment of the loan, no reserve is determined. Loan Modifications to Borrowers Experiencing Financial Difficulties The following table present newly restructured loans, by type of modification, which occurred during the years ended December 31, 2025 and December 31, 2024 (dollars in thousands): December 31, 2025 Amortized Cost Prior to Modification Amortized Cost After Modification Number of Loans Combination Modifications Total Modifications Number of Loans Combination Modifications Total Modifications Commercial and industrial 2 $ 969 $ 969 2 $ 883 $ 883 2 $ 969 $ 969 2 $ 883 $ 883 December 31, 2024 Amortized Cost Prior to Modification Amortized Cost After Modification Number of Loans Combination Modifications Total Modifications Number of Loans Combination Modifications Total Modifications Commercial and industrial 1 $ 468 $ 468 1 $ 468 $ 468 1 $ 468 $ 468 1 $ 468 $ 468 The two loan modifications for the borrowers experiencing financial difficulty at December 31, 2025 included a combination of rate, term and principal modifications. On one loan, the rate was modified from a variable rate to a 7.75 % fixed rate and the term was modified from October 2025 to January 2028. On the second loan, the rate was modified from a variable rate to a 7.20 % fixed rate and there was a principal reduction of $ 86 thousand. Table of Contents USCB FINANCIAL HOLDINGS, INC. Notes to the Consolidated Financial Statements 103 USCB Financial Holdings, Inc. 2025 10-K The loan modification for the borrower experiencing financial difficulty at December 31, 2024, included a combination of rate and maturity modifications. The rate was modified from a variable rate to a fixed rate of 8.0 %. The original maturity of September 2029 was extended to January 2034. There were no existing loan modifications that subsequently defaulted during either year ended December 31, 2025 and 2024. 4. LEASES The Company enters into leases in the normal course of business primarily for banking centers and back-office operations. As of December 31, 2025, the Company leased nine of the ten banking centers and the headquarter building. The Company is obligated under non-cancelable operating leases for these premises with expiration dates ranging from 2026 to 2036. Many of these leases have extension clauses which the Company could exercise which would extend these expiration dates. The Company has classified all leases as operating leases. Lease expense for operating leases are recognized on a straight-line basis over the lease term. Right-of-use (“ROU”) assets represent the right to use the underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. The Company elected the short-term lease recognition exemption for all leases that qualify, meaning those with terms under 12 months. ROU assets or lease liabilities are not to be recognized for short-term leases. ROU assets and lease liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, the incremental borrowing rate based on the information available at commencement date is used. The Company’s incremental borrowing rate is based on the FHLB advances rate matching or nearing the lease term. The following table presents the ROU assets and lease liabilities as of December 31, 2025 and 2024 (in thousands): December 31, 2025 2024 ROU assets: Operating leases $ 5,519 $ 8,451 Lease liabilities: Operating leases $ 5,519 $ 8,451 The weighted average remaining lease term and weighted average discount rate as of December 31, 2025 and 2024: December 31, 2025 2024 Weighted average remaining lease term (in years): Operating leases 6.04 5.95 Weighted average discount rate: Operating leases 2.94 % 2.94 % Table of Contents USCB FINANCIAL HOLDINGS, INC. Notes to the Consolidated Financial Statements 104 USCB Financial Holdings, Inc. 2025 10-K Future lease payment obligations and a reconciliation to lease liability as of December 31, 2025 (in thousands): Total 2026 $ 2,383 2027 951 2028 492 2029 478 Thereafter 2,509 Total future minimum lease payments 6,813 Less: interest component ( 1,294 ) Total lease liability $ 5,519 The lease cost for the years ended December 31, 2025 and 2024 (in thousands): December 31, 2025 2024 Finance lease cost: ROU assets amortization $ 2,932 $ 2,972 Operating lease cost 823 742 Less: Sublease income ( 85 ) ( 82 ) Total lease cost, net $ 3,670 $ 3,632 5. PREMISES AND EQUIPMENT A summary of premises and equipment are presented below as of December 31, 2025 and 2024 (in thousands): December 31, 2025 2024 Land $ 972 $ 972 Building 1,952 1,952 Furniture, fixtures and equipment 9,313 9,137 Computer hardware and software 4,747 4,623 Leasehold improvements 10,587 10,584 Premises and equipment, gross 27,571 27,268 Accumulated depreciation and amortization ( 23,324 ) ( 22,705 ) Premises and equipment, net $ 4,247 $ 4,563 Depreciation and amortization expense was $ 619 thousand and $ 587 thousand for the years ended December 31, 2025 and 2024, respectively. Table of Contents USCB FINANCIAL HOLDINGS, INC. Notes to the Consolidated Financial Statements 105 USCB Financial Holdings, Inc. 2025 10-K 6. INCOME TAXES The Company’s pre-tax income and provision for income taxes is presented in the following table for the years ended December 31, 2025 and 2024 (in thousands): December 31, 2025 2024 Pre-tax income: Domestic $ 35,916 $ 32,477 Total pre-tax income $ 35,916 $ 32,477 Current tax expense: Federal $ 1,213 $ - State 1,857 - Total current 3,070 - Deferred tax expense: Federal 4,907 6,122 State 1,839 1,681 Total deferred 6,746 7,803 Total income tax expense $ 9,816 $ 7,803 The actual income tax expense for the years ended December 31, 2025 and 2024 differs from the statutory tax expense for the year (computed by applying the U.S. federal corporate tax rate of 21 % for 2025 and 21 % for 2024 to income before provision for income taxes) as follows (in thousands): 2025 2024 Amount % Pre-tax Income Amount % Pre-tax Income Computed tax at the statutory federal income tax rate $ 7,542 21.00 % $ 6,820 21.00 % State income taxes, net of federal tax benefit (1) 2,767 7.70 % 1,411 4.33 % Nontaxable or Nondeductible Items Bank owned life insurance income ( 495 ) ( 1.38 %) ( 428 ) ( 1.32 %) Other 2 0.01 % - - Other adjustments, net - - - - Total tax expense $ 9,816 27.33 % $ 7,803 24.01 % (1) Taxes in Florida made up the majority (greater than 50%) of the tax effect in this category. 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Notes to the Consolidated Financial Statements 106 USCB Financial Holdings, Inc. 2025 10-K The following table presents the deferred tax assets and deferred tax liabilities as of December 31, 2025 and 2024 (in thousands): 2025 2024 Deferred tax assets: Net operating loss $ 1,039 $ 9,276 Allowance for credit losses 6,463 6,100 Lease liability 1,399 2,142 Unrealized loss on available for sale securities 10,270 15,200 Depreciable property - 38 Equity compensation 973 686 Accruals 721 520 Other, net 268 65 Deferred tax asset $ 21,133 $ 34,027 Deferred tax liability: Deferred loan cost ( 1,520 ) ( 1,934 ) Lease right of use asset ( 1,399 ) ( 2,142 ) Deferred expenses ( 154 ) ( 224 ) Cash flow hedge ( 5 ) ( 81 ) Depreciable property ( 9 ) - Deferred tax liability $ ( 3,087 ) $ ( 4,381 ) Net deferred tax asset $ 18,046 $ 29,646 At December 31, 2025, the Company had approximately $ 23.9 million of State net operating loss carryforwards expiring in various amounts from 2032 to 2036. If unused after 2036, their utilization is limited to future taxable earnings of the Company. In assessing the realizability of deferred tax assets, management considered whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. The U.S. Federal jurisdiction and Florida are the major tax jurisdictions where the Company files income tax returns. The Company is generally no longer subject to U.S. Federal or State examinations by tax authorities for years before 2022. For the years ended December 31, 2025 and 2024, the Company did no t have any unrecognized tax benefits as a result of tax positions taken during a prior period or during the current period. Additionally, no interest or penalties were recorded as a result of tax uncertainties. Cash payments for federal taxes was $ 3.9 million in the year ended December 31, 2025 and $ 0 in the year ended December 31, 2024. Table of Contents USCB FINANCIAL HOLDINGS, INC. Notes to the Consolidated Financial Statements 107 USCB Financial Holdings, Inc. 2025 10-K 7. DEPOSITS The following table presents deposits by type at December 31, 2025 and 2024 (in thousands): December 31, 2025 2024 Non-interest bearing demand deposits $ 583,860 $ 575,159 Interest-bearing demand deposits 46,989 50,648 Savings and money market deposits 1,186,422 1,180,809 Time deposits 527,809 367,388 Total deposits $ 2,345,080 $ 2,174,004 Time deposits exceeding the FDIC deposit insurance limit of $250 thousand per account at December 31, 2025 and 2024 were $ 111.5 million and $ 94.0 million, respectively. As of December 31, 2025, the Company had $ 256.8 million in brokered CDs at a weighted average rate of 3.93 %. Brokered CDs were 11.0 % of total deposits at such date. As of December 31, 2024, the Company had $ 133.0 million in brokered CDs at a weighted average rate of 4.38 %. Brokered CDs were 6.1 % of total deposits at such date. At December 31, 2025, the scheduled maturities of time deposits were (in thousands): December 31, 2025 Total 2026 $ 472,111 2027 54,174 2028 613 2029 418 2030 493 $ 527,809 At December 31, 2025 and 2024, the aggregate amount of demand deposits reclassified to loans as overdrafts was $ 372 thousand and $ 403 thousand, respectively. 8. FHLB ADVANCES At December 31, 2025, FHLB advances were $ 158.3 million and at December 31, 2024 were $ 163.0 million. Table of Contents USCB FINANCIAL HOLDINGS, INC. Notes to the Consolidated Financial Statements 108 USCB Financial Holdings, Inc. 2025 10-K The following table presents outstanding FHLB advances at December 31, 2025 and 2024 (in thousands): December 31, 2025 Interest Rate Type of Rate Maturity Date Amount 3.77 % Fixed March 16, 2026 $ 104,750 3.88 % Variable May 22, 2026 42,500 3.76 % Fixed January 24, 2028 11,000 $ 158,250 December 31, 2024 Interest Rate Type of Rate Maturity Date Amount 2.05 % Fixed March 27, 2025 $ 10,000 1.07 % Fixed July 18, 2025 6,000 3.76 % Fixed January 24, 2028 11,000 3.77 % Fixed April 25, 2028 50,000 3.68 % Fixed September 13, 2027 21,000 3.79 % Fixed March 23, 2026 20,000 4.65 % Fixed February 13, 2025 45,000 $ 163,000 The FHLB holds a blanket lien on the Company's loan portfolio that may be pledged as collateral for outstanding advances, subject to eligibility under the borrowing agreement. The Company may also choose to assign cash balances held at the FHLB as additional collateral. See Note 3 “Loans” for further discussion on pledged loans. The Board of Governors of the Federal Reserve System, on March 12, 2023, announced the creation of a new Bank Term Funding Program (“BTFP”). The BTFP offered loans of up to one year in length to banks, savings associations, credit unions, and other eligible depository institutions pledging U.S. Treasuries, U.S. Agency debt and mortgage-backed securities, and other qualifying assets as collateral. The BTFP program ceased making new loans as of March 2024. On January 12, 2024, the Company borrowed $ 80.0 million at a rate of 4.81 % with a maturity date of January 10, 2025 , under the BTFP program. The Company paid off the $ 80.0 million under the BTFP program during the third quarter 2024. The original maturity of this borrowing under the BTFP program was January 2025, and there are no remaining borrowings by the Company under this program. 9. SUBORDINATED NOTES On August 14, 2025, the Company entered into a Subordinated Note Purchase Agreement (the “Purchase Agreement”) with certain qualified institutional buyers (the “Purchasers”) pursuant to which the Company sold and issued $ 40.0 million in aggregate principal amount of its 7.625 % Fixed-to-Floating Rate Subordinated Notes due 2035 (the “Notes”). The Notes were issued by the Company to the Purchasers at a price equal to 100 % of their face amount. Net proceeds were $ 39.2 million after an estimated direct issuance cost of approximately $ 760 thousand. Unamortized issuance costs are deferred and amortized over the 10 -year Subordinated note term. As of December 31, 2025, the outstanding balance of subordinated notes, net of costs, totaled $ 39.3 million and the average interest rate paid on the outstanding average balance net of costs was 7.32 %. The Notes have a stated maturity of August 15, 2035, and are redeemable, in whole or in part, on any interest payment date on or after August 15, 2030, and at any time upon the occurrences of certain events. The Notes bear interest at a fixed rate of 7.625 % per year, from and including August 14, 2025, to but excluding August 15, 2030 or earlier redemption date. From and including August 15, 2030, to but excluding the maturity date or early redemption date, the interest rate will reset quarterly at a variable rate equal to the then current three-month term secured overnight financing rate (“SOFR”), plus 422 basis points. If three-month SOFR cannot be determined on a given date, a different index shall be determined and used in accordance with the terms of the Notes. The Notes were offered and sold by the Company in a private placement transaction in reliance on exemptions from the registration requirements of the Securities Act, pursuant to Section 4(a)(2) of the Securities Act and Rule 506(b) of Regulation D thereunder. On August 14, 2025, in connection with the sale and issuance of the Notes, the Company entered into a Registration Rights Agreement (the “Registration Rights Agreement”) with the Purchasers. Under the terms of the Table of Contents USCB FINANCIAL HOLDINGS, INC. Notes to the Consolidated Financial Statements 109 USCB Financial Holdings, Inc. 2025 10-K Registration Rights Agreement, the Company agreed to take certain actions to provide for the exchange of the Notes for subordinated notes that are registered under the Securities Act and have substantially the same terms as the Notes (the “Exchange Offer”). Under certain circumstances, if the Company fails to meet its obligations under the Registration Rights Agreement, it would be required to pay additional interest to the holders of the Notes. 10. EQUITY BASED AND OTHER COMPENSATION PLANS Employee 401(k) Plan The Company has an 401(k) plan (the “Plan”) covering substantially all eligible employees. The Plan includes a provision that the employer may contribute to the accounts of eligible employees for whom a salary deferral is made. The Company contributed $ 423 thousand and $ 354 thousand to the Plan during the years ended December 31, 2025 and 2024, respectively; the contributions are included under salaries and employee benefits in the Consolidated Statements of Operations. Stock-Based Compensation In 2015, the Company's stockholders approved the 2015 Equity Incentive Plan (the “2015 Option Plan”), which authorized grants of options to purchase up to 2,000,000 shares of common stock. The 2015 Option Plan provided that vesting schedules will be determined upon issuance of options by the Board of Directors or compensation committee. Options granted under the 2015 Option Plan have a 10 -year life and, in no event shall an option be exercisable after the expiration of 10 years from the grant date. The 2015 Option Plan had a 10 -year life and initially would have terminated in 2025. In July 2020, the stockholders of the Company approved the amendment of the 2015 Option plan to authorize the issuance of an additional 3,000,000 shares of common stock and extending the life of the plan 5 additional years, terminating in 2030. The authorized shares, after being adjusted to reflect the 1 for 5 reverse stock split, totaled 1,000,000 shares. In December 2021, the shareholders of the Company approved the amendment of the 2015 Option Plan to authorize the issuance of an additional 1,400,000 shares of common stock as well as the ability to issue restricted stock grants (up to 600,000 shares) for a total of 2,400,000 shares as well as extending the term until December 2031. At December 31, 2025, there were 872,012 shares available for grant under the 2015 Option Plan. At December 31, 2024, there were 996,436 shares available for grant under the 2015 Option Plan. Stock Options The Company recognizes compensation expense based on the estimated grant date fair value method using the Black- Scholes option pricing model and accounts for this expense using a prorated straight-line amortization method over the vesting period of the option. Stock-based compensation expense is based on awards that the Company expects will ultimately vest, reduced by estimated forfeitures. Estimated forfeitures consider the voluntary termination trends as well as actual option forfeitures. The compensation expense is reported under salaries and employee benefits in the accompanying Consolidated Statements of Operations. Compensation expense totaling $ 10 thousand was recognized for the year ended December 31, 2025 and $ 278 thousand for the year ended December 31, 2024. There was no related tax benefit for the years ended December 31, 2025 and 2024. Unrecognized compensation cost remaining on stock-based compensation totaled $ 0 and $ 10 thousand for the years ended December 31, 2025 and 2024, respectively. Cash flows resulting from excess tax benefits are required to be classified as a part of cash flows from operating activities. Excess tax benefits are realized tax benefits from tax deductions for exercised options in excess of the deferred tax asset attributable to the compensation cost for such options. There were no options granted in 2025 and 2024. 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Notes to the Consolidated Financial Statements 110 USCB Financial Holdings, Inc. 2025 10-K The following table presents a summary of stock options for the years ended December 31, 2025 and 2024: Stock Options Weighted Average Exercise Price Weighted Average Remaining Contractual Years Aggregate Intrinsic Value (in thousands) Balance at January 1, 2025 725,167 $ 10.86 5.3 Granted — $ - Exercised ( 98,500 ) $ 8.15 Forfeitures — $ - Balance at December 31, 2025 626,667 $ 11.29 4.8 Exercisable at December 31, 2025 624,500 $ 11.28 4.8 $ 4,458 Balance at January 1, 2024 947,167 $ 10.97 6.5 Granted — $ - Exercised ( 122,000 ) $ 10.81 Forfeitures ( 100,000 ) $ 11.99 Balance at December 31, 2024 725,167 $ 10.86 5.3 Exercisable at December 31, 2024 720,499 $ 10.85 5.3 $ 4,972 The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value of exercisable options at the dates presented (the difference between the valuation of the Company’s stock and the exercise price, multiplied by the number of options considered in-the-money) that would have been received by the option holders had all option holders exercised their options. Restricted Stock In 2025 , the Company issued 124,424 shares of Class A common stock to employees and directors as restricted stock awards pursuant to the Company's 2015 Option Plan. Awards under the 2015 Option Plan may not be sold or otherwise transferred until certain restrictions have lapsed. The Company primarily issues restricted stock awards with a 3 -year vesting period. In 2024 , the Company issued 277,922 shares of Class A common stock to employees and directors as restricted stock awards pursuant to the Company's 2015 Option Plan. Awards under the 2015 Option Plan may not be sold or otherwise transferred until certain restrictions have lapsed. The Company primarily issues restricted stock awards with a 3 -year vesting period. However, out of the 277,922 shares of Class A common stock issued pursuant to restricted stock awards in 2024, 150,000 shares issued in October 2024 had a modified vesting period. The 150,000 shares vested 33 % of the award in a period of two months in 2024, and the 67 % remaining vests one-third in 2025 and in 2026. The total share-based compensation expense for these awards is determined based on the market price of the Company's common stock as of the date of grant applied to the total number of shares granted and is amortized straight line over the vesting period which is generally three years unless the Board of Directors approves a different vesting schedule for the grants. As of December 31, 2025, unearned share -based compensation expense associated with these awards totaled $ 3.6 million. As of December 31, 2024, unearned share-based compensation expense associated with these awards totaled $ 4.3 million. Compensation expense totaling $ 3.0 million was recognized for the year ended December 31, 2025 and reported under salaries and benefits in the accompanying Consolidated Statement of Operations. Compensation expense totaling $ 1.9 thousand was recognized for the year ended December 31, 2024. Table of Contents USCB FINANCIAL HOLDINGS, INC. Notes to the Consolidated Financial Statements 111 USCB Financial Holdings, Inc. 2025 10-K The following table presents a summary of restricted stock awards for the years ended December 31, 2025 and 2024: Restricted Stock Weighted Average Grant Date Fair Value Balance at January 1, 2025 402,076 $ 13.31 Granted 124,424 $ 18.78 Forfeited — $ - Vested ( 120,237 ) $ 13.98 Balance at December 31, 2025 406,263 $ 14.80 Restricted Stock Weighted Average Grant Date Fair Value Balance at January 1, 2024 218,422 $ 12.19 Granted 277,922 $ 14.33 Forfeited ( 8,625 ) $ 12.63 Vested ( 85,643 ) $ 13.84 Balance at December 31, 2024 402,076 $ 13.31 11. OFF-BALANCE SHEET ARRANGEMENTS The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business in order to meet the financial needs of its customers and to reduce its own exposure to fluctuations in interest rates. These financial instruments include unfunded commitments under lines of credit, commitments to extend credit, standby and commercial letters of credit. Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the Company’s Consolidated Balance Sheets. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments. The Company's exposure to credit loss in the event of nonperformance by the other party to the financial instruments for unused lines of credit, and standby letters of credit is represented by the contractual amount of these commitments. The Company records a liability for expected credit losses on off-balance-sheet credit exposure in accordance with ASC 326. The Company uses the loss rate and exposure of default framework to estimate a reserve for unfunded commitments. Loss rates for the expected funded balances are determined based on the associated pooled loan analysis loss rate and the exposure at default is based on an estimated utilization given default. The off-balance sheet commitment allowance as of December 31, 2025 was $ 752 thousand and as of December 31, 2024 was $ 571 thousand. A summary of the amounts of the Company's financial instruments with off-balance sheet risk are shown below at December 31, 2025 and December 31, 2024 (in thousands): December 31, 2025 2024 Commitments to grant loans and unfunded lines of credit $ 161,606 $ 122,578 Standby and commercial letters of credit 2,700 5,389 Total $ 164,306 $ 127,967 Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses. Unfunded lines of credit and revolving credit lines are commitments for possible future extensions of credit to existing customers. These lines of credit are uncollateralized and usually do not contain a specified maturity date and ultimately may not be drawn upon to the total extent to which the Company is committed. Table of Contents USCB FINANCIAL HOLDINGS, INC. Notes to the Consolidated Financial Statements 112 USCB Financial Holdings, Inc. 2025 10-K Standby and commercial letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. Those letters of credit are primarily issued to support public and private borrowing arrangements. Essentially all letters of credit have fixed maturity dates and many of them expire without being drawn upon; they do not generally present a significant liquidity risk to the Company. 12. DERIVATIVES The Company utilizes interest rate swap agreements as part of its asset-liability management strategy to help manage its interest rate risk position. The notional amount of the interest rate swaps do not represent amounts exchanged by the parties. The amounts exchanged are determined by reference to the notional amount and the other terms of the individual interest rate swap agreements. Rate Swaps Designated as Cash Flow Hedges In July 2025, the Company entered into a two-year costless collar hedge with a notional amount of $ 50 million to manage exposure to interest rate volatility on a three-month brokered CD. The derivative is based on the USD SOFR overnight index and establishes a cap rate of 4.50 % and a floor rate of 1.875 %, effectively creating a defined range of interest rate outcomes without requiring an upfront premium. The hedge was designated as a cash flow hedge under ASC 815, Derivatives and Hedging, and is being accounted for accordingly. Changes in the fair value of the derivative will be recorded in other comprehensive income (loss) to the extent the hedge remains effective. In August 2025, the Company entered into a two-year costless collar hedge with a notional amount of $ 50 million to manage exposure to interest rate volatility on a three-month brokered CD. The derivative is based on the USD SOFR overnight index and establishes a cap rate of 4.50 % and a floor rate of 1.965 %, effectively creating a defined range of interest rate outcomes without requiring an upfront premium. The hedge was designated as a cash flow hedge under ASC 815, Derivatives and Hedging, and is being accounted for accordingly. Changes in the fair value of the derivative will be recorded in other comprehensive income (loss) to the extent the hedge remains effective. As of December 31, 2025, the Company had one interest rate swap agreements with a notional aggregate amount of $ 25 million that were designated as cash flow hedges of certificates of deposit. The interest rate swap agreements have a maturity of 0.42 years, a weighted average fixed-rate paid of 3.47 %, and with a weighted average 3-month compound USD SOFR being received. The company unwound one interest rate swap designated as a cash flow hedge of certificates of deposits with notional amount of $ 25 million during the quarter ended December 31, 2025. The decision to unwind this swap was driven by changes in interest rate forecasts and asset-liability management strategies. The early termination income to unwind the fair value swaps totaled $ 5 thousand. The original maturity of the cash flow interest rate swap was April 2026. As of December 31, 2024, the Company had two interest rate swap agreements with a notional aggregate amount of $ 50 million that were designated as cash flow hedges of certificates of deposit. The interest rate swap agreements have an average maturity of 1.38 years, the weighted average fixed-rate paid is 3.59 %, with the weighted average 3-month compound USD SOFR being received. The changes in fair value on these interest rate swaps are recorded in other assets or accrued interest and other liabilities with a corresponding recognition in other comprehensive income (loss) and subsequently reclassified to earnings when gains or losses are realized. Interest Rate Swaps Designated as Fair Value Hedges During the third quarter in 2024, the Company unwound four fair value interest rate swaps with a notional aggregate amount of $ 200 million. The decision to unwind these swaps was driven by changes in interest rate forecasts and asset- liability management strategies. The early termination fee to unwind the fair value swaps totaled $ 3.7 million. The termination fees allocated to each loan category are amortized over the remining life of the hedge loans on a monthly straight-line basis with full recognition of the unamortized cost upon the early payoff of the hedge loan. The amortization of the termination fee is reflected in the loan interest income line in the Company’s Consolidated Statement of Operations. The original maturities of these fair value interest swaps were between 2025 and 2026. The fair value interest rate swap agreements had an average maturity of 1.51 years at the date of termination. Table of Contents USCB FINANCIAL HOLDINGS, INC. Notes to the Consolidated Financial Statements 113 USCB Financial Holdings, Inc. 2025 10-K Interest Rate Swaps The Company also enters into interest rate swaps with its loan customers. The Company had 94 and 60 interest rate swaps with loan customers with a notional aggregate amount of $ 310.8 million and $ 206.3 million at December 31, 2025 and 2024, respectively. These interest rate swaps have maturity dates of between 2026 and 2051. The Company entered into corresponding and offsetting derivatives with third parties. The fair value of liability on these derivatives requires the Company to provide the counterparty with funds to be held as collateral which the Company reports as other assets under the Consolidated Balance Sheets. While these derivatives represent economic hedges, they do not qualify as hedges for accounting purposes. The following table reflects the Company’s customer related interest rate swaps at the dates indicated (in thousands): Fair Value Notional Amount Collateral Amount Balance Sheet Location Asset Liability December 31, 2025: Derivatives Designated as Cash Flow Hedges: Interest rate swaps $ 125,000 $ - Other assets/Accrued interest and other liabilities $ 14 $ 33 Derivatives not designated as hedging instruments: Interest rate swaps related to customer loans $ 310,761 $ 5,769 Other assets/Accrued interest and other liabilities $ 9,753 $ 9,753 December 31, 2024: Derivatives Designated as Cash Flow Hedges Interest rate swaps $ 50,000 $ - Other assets $ 321 $ - Derivatives not designated as hedging instruments: Interest rate swaps related to customer loans $ 206,258 $ 4,943 Other assets/Accrued interest and other liabilities $ 6,869 $ 6,869 13. FAIR VALUE MEASUREMENTS Determination of Fair Value The Company uses fair value measurements to record fair-value adjustments to certain assets and liabilities and to determine fair value disclosures. In accordance with the fair value measurements accounting guidance, the fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Company's various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument. The fair value guidance provides a consistent definition of fair value, which focuses on exit price in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under current market conditions. If there has been a significant decrease in the volume and level of activity for the asset or liability, a change in valuation technique or the use of multiple valuation techniques may be appropriate. In such instances, determining the price at which willing market participants would transact at the measurement date under current market conditions depends on the facts and circumstances and requires the use of significant judgment. The fair value is a reasonable point within the range that is most representative of fair value under current market conditions. Table of Contents USCB FINANCIAL HOLDINGS, INC. Notes to the Consolidated Financial Statements 114 USCB Financial Holdings, Inc. 2025 10-K Fair Value Hierarchy In accordance with this guidance, the Company groups its financial assets and financial liabilities generally measured at fair value in three levels, based on the markets in which the assets and liabilities are traded, and the reliability of the assumptions used to determine fair value. Level 1 - Valuation is based on quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 1 assets and liabilities generally include debt and equity securities that are traded in an active exchange market. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities. Level 2 - Valuation is based on inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. The valuation may be based on quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset or liability. Level 3 - Valuation is based on unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which determination of fair value requires significant management judgment or estimation. A financial instrument's categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Items Measured at Fair Value on a Recurring Basis Investment securities: When instruments are traded in secondary markets and quoted market prices do not exist for such securities, management generally relies on prices obtained from independent vendors or third-party broker -dealers. Management reviews pricing methodologies provided by the vendors and third-party broker-dealers in order to determine if observable market information is being utilized. Securities measured with pricing provided by independent vendors or third- party broker-dealers are classified within Level 2 of the hierarchy and often involve using quoted market prices for similar securities, pricing models or discounted cash flow analyses utilizing inputs observable in the market where available. Derivatives: The fair value of derivatives are measured with pricing provided by third-party participants and are classified within Level 2 of the hierarchy. The following table represents the Company's assets and liabilities measured at fair value on a recurring basis at December 31, 2025 and 2024 for each of the fair value hierarchy levels (in thousands): 2025 2024 Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total Investment securities available for sale: U.S. Government Agency $ - $ 14,144 $ - $ 14,144 $ - $ 12,625 $ - $ 12,625 Collateralized mortgage obligations - 75,828 - 75,828 - 78,905 - 78,905 Mortgage-backed securities - residential - 29,917 - 29,917 - 46,933 - 46,933 Mortgage-backed securities - commercial - 168,108 - 168,108 - 78,739 - 78,739 Municipal securities - 4,263 - 4,263 - 19,311 - 19,311 Bank subordinated debt securities - 15,230 - 15,230 - 23,708 - 23,708 Total - 307,490 - 307,490 - 260,221 - 260,221 Derivative assets - 9,767 - 9,767 - 7,190 - 7,190 Total assets at fair value $ - $ 317,257 $ - $ 317,257 $ - $ 267,411 $ - $ 267,411 Derivative liabilities $ - $ 9,786 $ - $ 9,786 $ - $ 6,869 $ - $ 6,869 Total liabilities at fair value $ - $ 9,786 $ - $ 9,786 $ - $ 6,869 $ - $ 6,869 Table of Contents USCB FINANCIAL HOLDINGS, INC. Notes to the Consolidated Financial Statements 115 USCB Financial Holdings, Inc. 2025 10-K Items Not Measured at Fair Value The following table presents the carrying amounts and estimated fair values of financial instruments not carried at fair value, at December 31, 2025 and 2024 are as follows (in thousands): Fair Value Hierarchy Carrying Amount Level 1 Level 2 Level 3 Fair Value Amount December 31, 2025: Financial Assets: Cash and due from banks $ 6,027 $ 6,027 $ - $ - $ 6,027 Interest-bearing deposits in banks $ 32,450 $ 32,450 $ - $ - $ 32,450 Investment securities held to maturity, net $ 153,941 $ - $ 142,508 $ - $ 142,508 Loans held for investment, net $ 2,163,757 $ - $ - $ 2,210,781 $ 2,210,781 Accrued interest receivable $ 11,661 $ - $ 1,443 $ 10,218 $ 11,661 Financial Liabilities: Non-interest bearing demand deposits $ 583,860 $ 583,860 $ - $ - $ 583,860 Savings and money market deposits $ 1,186,422 $ 1,186,422 $ - $ - $ 1,186,422 Interest-bearing demand deposits $ 46,989 $ 46,989 $ - $ - $ 46,989 Time deposits $ 527,809 $ - $ 527,575 $ - $ 527,575 FHLB advances $ 158,250 $ - $ 158,342 $ - $ 158,342 Subordinated notes $ 39,300 $ - $ 40,131 $ - $ 40,131 Accrued interest payable $ 3,984 $ - $ 3,984 $ - $ 3,984 December 31, 2024: Financial Assets: Cash and due from banks $ 6,986 $ 6,986 $ - $ - $ 6,986 Interest-bearing deposits in banks $ 70,049 $ 70,049 $ - $ - $ 70,049 Investment securities held to maturity, net $ 164,694 $ - $ 145,540 $ - $ 145,540 Loans held for investment, net $ 1,948,778 $ - $ - $ 1,950,646 $ 1,950,646 Accrued interest receivable $ 10,945 $ - $ 1,372 $ 9,573 $ 10,945 Financial Liabilities: Demand Deposits $ 575,159 $ 575,159 $ - $ - $ 575,159 Money market and savings accounts $ 1,180,809 $ 1,180,809 $ - $ - $ 1,180,809 Interest-bearing checking accounts $ 50,648 $ 50,648 $ - $ - $ 50,648 Time deposits $ 367,388 $ - $ 366,479 $ - $ 366,479 FHLB advances $ 163,000 $ - $ 161,375 $ - $ 161,375 Accrued interest payable $ 2,125 $ - $ 2,125 $ - $ 2,125 Collateral Dependent Loans Measured for Expected Credit Losses: Fair values of collateral-dependent yacht loans and real estate loans are based on recent boat and real estate appraisals less estimated costs of sale, repossession, and/or holding costs. Appraisals are made by a third party, and its evaluation may use either a comparative sales, cost and/or income approach or a combination of methodologies. The fair value of collateral dependent loans considered Level 3 in the fair value hierarchy was $ 2.6 million with no specific reserved as of December 31, 2025 and $ 2.0 million with a specific reserve of $ 651 thousand at December 31, 2024. Table of Contents USCB FINANCIAL HOLDINGS, INC. Notes to the Consolidated Financial Statements 116 USCB Financial Holdings, Inc. 2025 10-K The following table presents quantitative information about level 3 fair value measurements for assets measured at fair value on a non-recurring basis at December 31, 2025 and 2024: December 31, 2025 Range Weighted Financial Instrument Fair Value Valuation Technique(s) Unobservable Input(s) Minimum Maximum average Collateral dependent loans - residential loans $ 2,583 Sales comparison approach Third party appraisals 0 % 0 % 0 % December 31, 2024 Range Weighted Financial Instrument Fair Value Valuation Technique(s) Unobservable Input(s) Minimum Maximum average Collateral dependent loans - consumer boat loans $ 1,650 Sales comparison approach Adjustment for differences between the comparable sales 11 % 31 % 28 % 14. STOCKHOLDERS’ EQUITY Common Stock During the year ended December 31, 2025, the Company repurchased 2.0 million shares of Class A common stock from certain institutional shareholders through privately negotiated transactions, at a weighted average price per share of $ 17.19 . The aggregate purchase price for these transactions was approximately $ 34.4 million. The repurchases were supplemental and not part of the Company’s two previously announced stock repurchase programs. During the year ended December 31, 2025 pursuant to the Company’s publicly announced repurchase programs the Company repurchased 9,671 shares of Class A common stock at a weighted average price per share of $ 17.91 . The aggregate purchase price for these transactions was approximately $ 174 thousand including transaction costs. As of December 31, 2025, 528,309 shares remained authorized for repurchase under the Company’s two stock repurchase programs. During the year ended December 31, 2024, the Company repurchased 42,100 shares of Class A common stock at a weighted average price per share of $ 11.85 . The aggregate purchase price for these transactions was approximately $ 501 thousand, including transaction costs. As of December 31, 2024, 537,980 shares remained authorized for repurchase under the Company’s two stock repurchase programs. In 2025, the Company issued 124,424 shares of Class A common stock to employees and directors as restricted stock awards pursuant to the Company's 2015 Option Plan. In 2024, the Company issued 277,922 shares of Class A common stock to employees and directors as restricted stock awards pursuant to the Company's 2015 Option Plan. Shares of the Company’s Class A common stock issued and outstanding as of December 31, 2025 and December 31, 2024 were 18,137,885 and 19,924,632 , respectively. Dividends Declaration of dividends by the Board is required before dividend payments are made. The Company is limited in the amount of cash dividends that it may pay. Payment of dividends is generally limited to the Company’s net income of the current year combined with the Company’s retained income for the preceding two years, as defined by state banking regulations. However, for any dividend declaration, the Company must consider additional factors such as the amount of current period net income, liquidity, asset quality, capital adequacy and economic conditions at the Bank since the Bank is the primary source of funds to fund dividends by the Company. It is likely that these factors would further limit the amount of dividends which the Company could declare. In addition, bank regulators have the authority to prohibit banks and bank holding companies from paying dividends if they deem such payment to be an unsafe or unsound practice. Table of Contents USCB FINANCIAL HOLDINGS, INC. Notes to the Consolidated Financial Statements 117 USCB Financial Holdings, Inc. 2025 10-K As of December 31, 2025, the Company was not subject to any formal supervisory restrictions on its ability to pay dividends but has agreed to notify the Federal Reserve Bank of Atlanta in advance of any proposed dividend to the Company's shareholders in light of the Bank's negative retained earnings. In addition, under applicable FDIC regulations and policy, because the Bank has negative retained earnings, it must obtain the prior approval of the FDIC before effecting a cash dividend or other capital distribution. The following table details the dividends declared and paid by the Company for the periods presented: 2025 Declaration Date Record Date Payment Date Dividend Per Share Dividend Amount January 21, 2025 February 14, 2025 March 5, 2025 $ 0.10 $ 2.0 million April 21, 2025 May 15, 2025 June 5, 2025 $ 0.10 $ 2.0 million July 21, 2025 August 15, 2025 September 5, 2025 $ 0.10 $ 2.0 million October 20, 2025 November 14, 2025 December 5, 2025 $ 0.10 $ 1.8 million 2024 Declaration Date Record Date Payment Date Dividend Per Share Dividend Amount January 22, 2024 February 15, 2024 March 5, 2024 $ 0.05 $ 1.0 million April 22, 2024 May 15, 2024 June 5, 2024 $ 0.05 $ 1.0 million July 22, 2024 August 15, 2024 September 5, 2024 $ 0.05 $ 1.0 million October 28, 2024 November 15, 2024 December 5, 2024 $ 0.05 $ 0.9 million The Company and the Bank exceeded all regulatory capital requirements and remained above “well-capitalized” guidelines as of December 31, 2025 and December 31, 2024. At December 31, 2025, the total risk-based capital ratios for the Company and the Bank were 13.91 % and 13.67 %, respectively. See Note 21, “Subsequent Events”, for information regarding dividends declared in January 2026. 15. EARNINGS PER SHARE Earnings per share (“EPS”) for common stock is calculated using the two-class method required for participating securities. Basic EPS is calculated by dividing net income (loss) available to common stockholders by the weighted-average number of common shares outstanding for the period, without consideration for common stock equivalents. Diluted EPS is computed by dividing net income (loss) available to common stockholders by the weighted-average number of common shares outstanding for the period and the weighted-average number of dilutive common stock equivalents outstanding for the period determined using the treasury-stock method. For purposes of this calculation, common stock equivalents include common stock options and are only included in the calculation of diluted EPS when their effect is diluti ve. The following table reflects the calculation of net income available to common stockholders for the years ended December 31, 2025 and 2024 (in thousands): For the years ended December 31, 2025 2024 Net Income $ 26,100 $ 24,674 Net income available to common stockholders $ 26,100 $ 24,674 Table of Contents USCB FINANCIAL HOLDINGS, INC. Notes to the Consolidated Financial Statements 118 USCB Financial Holdings, Inc. 2025 10-K The following table reflects the calculation of basic and diluted earnings per common share class for the years ended December 31, 2025 and 2024 (in thousands, except per share amounts): As of and for the years ended December 31, 2025 2024 Class A Class A Basic EPS Numerator: Net income available to common shares $ 26,100 $ 24,674 Denominator: Weighted average shares outstanding 19,425,746 19,675,444 Earnings per share, basic $ 1.34 $ 1.25 Diluted EPS Numerator: Net income available to common shares $ 26,100 $ 24,674 Denominator: Weighted average shares outstanding for basic EPS 19,425,746 19,675,444 Add: Dilutive effects of assumed exercises of stock options 225,068 155,977 Weighted avg. shares including dilutive potential common shares 19,650,814 19,831,421 Earnings per share, diluted $ 1.33 $ 1.24 Anti-dilutive stock options excluded from diluted EPS - 15,000 Net income has not been allocated to unvested restricted stock awards that are participating securities because the amounts that would be allocated are not material to earnings per share of common stock. Unvested restricted stock awards that are participating securities represent less than one percent of all of the outstanding shares of common stock for each of the periods presented. 16. REGULATORY MATTERS Banks and bank holding companies are subject to regulatory capital requirements administered by federal and state banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company's Consolidated Financial Statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Bank must meet specific capital guidelines that involve quantitative measures of their assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The Company’s and the Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. Based on changes to the Federal Reserve’s definition of a “Small Bank Holding Company” that increased the threshold to $3.0 billion in assets in August 2018, the Company is not currently subject to separate minimum capital measurements. At such time when the Company reaches the $3.0 billion asset level, it will be subject to regulatory capital measurements independent of the Bank. The Bank elected to permanently opt-out of the inclusion of accumulated other comprehensive income in the capital calculations, as permitted by the regulations. This opt-out reduces the impact of market volatility on the Bank’s regulatory capital levels. The Bank is subject to the rules of the Basel III regulatory capital framework and related Dodd-Frank Wall Street Reform and Consumer Protection Act. The rules include the implementation of a 2.5 % capital conservation buffer that is added to the minimum requirements for capital adequacy purposes. Failure to maintain the required capital conservation buffer will limit the ability of the Bank to pay dividends, repurchase shares or pay discretionary bonuses. At December 31, 2025 and 2024, the capital ratios for the Bank were sufficient to meet the conservation buffer. Prompt corrective action regulations provide five classifications: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms are not used to Table of Contents USCB FINANCIAL HOLDINGS, INC. Notes to the Consolidated Financial Statements 119 USCB Financial Holdings, Inc. 2025 10-K represent overall financial condition. If adequately capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required. At December 31, 2025 and 2024, the most recent notification from the regulatory authorities categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. Failure to meet statutorily mandated capital guidelines could subject the Bank to a variety of enforcement remedies, including issuance of a capital directive, the termination of deposit insurance by the FDIC, a prohibition on accepting or renewing brokered deposits, limitations on the rates of interest that the Bank may pay on its deposits and other restrictions on its business. To be categorized as well capitalized, an institution must maintain minimum total risk-based, Tier 1 risk-based and Tier 1 leverage ratios as set forth in the table below. There are no conditions or events since the notification that management believes have changed the Bank’s category. Actual and required capital amounts and ratios are presented below for the Bank at December 31, 2025 and 2024 (in thousands, except ratios). The required amounts for capital adequacy shown do not include the capital conservation buffer previously discussed. Actual Minimum Capital Requirements To be Well Capitalized Under Prompt Corrective Action Provisions Amount Ratio Amount Ratio Amount Ratio December 31, 2025 Total risk-based capital: $ 299,596 13.67 % $ 175,387 8.00 % $ 219,234 10.00 % Tier 1 risk-based capital: $ 273,342 12.47 % $ 131,541 6.00 % $ 175,387 8.00 % Common equity tier 1 capital: $ 273,342 12.47 % $ 98,655 4.50 % $ 142,502 6.50 % Leverage ratio: $ 273,342 9.65 % $ 113,296 4.00 % $ 141,620 5.00 % December 31, 2024 Total risk-based capital: $ 266,387 13.34 % $ 159,795 8.00 % $ 199,744 10.00 % Tier 1 risk-based capital: $ 241,740 12.10 % $ 119,846 6.00 % $ 159,795 8.00 % Common equity tier 1 capital: $ 241,740 12.10 % $ 89,885 4.50 % $ 129,834 6.50 % Leverage ratio: $ 241,740 9.38 % $ 103,074 4.00 % $ 128,843 5.00 % The Company is limited in the amount of cash dividends that it may pay. Payment of dividends is generally limited to the Company’s net income for the current year combined with the Company’s retained income for the preceding two years, as defined by state banking regulations. However, for any dividend declaration, the Company must consider additional factors such as the amount of current period net income, liquidity, asset quality, capital adequacy and economic conditions at the Bank. It is likely that these factors would further limit the amount of dividends which the Company could declare. In addition, bank regulators have the authority to prohibit banks from paying dividends including dividends to their parent holding company, if they deem such payment to be an unsafe or unsound practice. Table of Contents USCB FINANCIAL HOLDINGS, INC. Notes to the Consolidated Financial Statements 120 USCB Financial Holdings, Inc. 2025 10-K 17. RELATED PARTY TRANSACTIONS In the ordinary course of business, principal officers, directors, and affiliates may engage in transactions with the Company. The following table presents loans to and deposits from related parties included within the accompanying Consolidated Financial Statements at December 31, 2025 and 2024 (in thousands): Years Ended December 31, 2025 2024 Consolidated Balance Sheets: Loans held for investment, net $ 15,000 $ - Deposits $ 3,238 $ 4,551 Consolidated Statements of Operations: Interest income $ 815 $ - Interest expense $ 118 $ 119 Loan Purchases During 2025, the Bank purchased $ 79.6 million of loans from entities that are deemed to be related parties. The Bank paid those entities fees of $ 447 thousand. During 2024, the Bank purchased $ 90.8 million of loans from entities that are deemed to be related parties. The Bank paid those entities fees of $ 2.7 million. Loan Originations During the year ended December 31, 2025, the Bank acted as the lead arranger in a $ 40.0 million syndicated loan extended to an entity deemed to be a related party. As of December 31, 2025, the Bank held an outstanding balance of $ 15.0 million related to this transaction. In connection with the syndication, the Bank received a 50 -basis point commitment fee and will earn a 25 -basis point annual servicing fee. The other two financial institutions participating in the syndication were also deemed to be related parties. Although originating loans to related parties is not part of the Company’s standard policy, this transaction was reviewed by the appropriate departments in accordance with Company procedures. Detailed analyses were presented to the Board of Directors and the Audit and Risk Committee, and all necessary approvals were obtained. Additional analysis was conducted to determine that the transaction was executed in the ordinary course of business and on arm’s-length terms, consistent with the requirements of Regulation O. During the year ended December 31, 2025, the Bank participated in two loans totaling $ 21.3 million with an entity that is considered a related party, for which the Bank was not the lead arranger. The underlying borrowers were not related parties. Under the terms of the participation agreements, the Bank pays the related ‑ party entity a servicing fee equal to 8 basis points, calculated on the declining monthly outstanding balance of the loans. There were no loan originations or syndications extended to entities deemed to be related parties for the year ended December 31, 2024. Table of Contents USCB FINANCIAL HOLDINGS, INC. Notes to the Consolidated Financial Statements 121 USCB Financial Holdings, Inc. 2025 10-K 18. PARENT COMPANY CONDENSED FINANCIAL INFORMATION In December 2021, USCB Financial Holdings, Inc. was formed as the parent bank holding company of U.S. Century Bank. The condensed balance sheet is presented below for USCB Financial Holdings, Inc. at the dates indicated (in thousands): December 31, 2025 December 31, 2024 ASSETS: Cash and Cash Equivalents $ 6,773 $ 3,735 Investment in bank subsidiary 248,230 210,253 Other assets 2,624 1,400 Total assets $ 257,627 $ 215,388 LIABILITIES AND STOCKHOLDERS' EQUITY: Subordinated notes $ 39,300 $ - Accrued interest and other liabilities 1,144 - Stockholders' equity 217,183 215,388 Total liabilities and stockholders' equity $ 257,627 $ 215,388 The condensed income statement is presented below for USCB Financial Holdings, Inc. for the periods indicated (in thousands): Years Ended December 31, 2025 December 31, 2024 INCOME: Dividends from subsidiaries $ 6,000 $ 5,000 Total 6,000 5,000 EXPENSE: Interest expense 1,205 - Employee compensation and benefits 3,005 2,129 Other operating 622 570 Total 4,832 2,699 Income before income taxes and undistributed subsidiary income 1,168 2,301 Benefit from income taxes ( 1,225 ) ( 684 ) Equity in undisbursed subsidiary income 23,707 21,689 Net Income $ 26,100 $ 24,674 Table of Contents USCB FINANCIAL HOLDINGS, INC. Notes to the Consolidated Financial Statements 122 USCB Financial Holdings, Inc. 2025 10-K The condensed cash flow is presented below for USCB Financial Holdings, Inc. for the periods indicated (in thousands): Years Ended December 31, 2025 December 31, 2024 Cash flows from operating activities: Net income $ 26,100 $ 24,674 Adjustments to reconcile net income to net cash provided by operating activities: Equity in undistributed earnings of subsidiaries ( 23,707 ) ( 21,689 ) Stock-based compensation 3,005 2,129 Increase in deferred tax asset ( 1,225 ) ( 684 ) Increase in accrued interest and other liabilities 1,144 - Net cash provided by operating activities 5,317 4,430 Cash flows from investing activities: Capital contributions to subsidiary - - Other - - Net cash used in investing activities - - Cash flows from financing activities: Dividends paid ( 7,829 ) ( 3,939 ) Proceeds from exercise of stock options 804 1,319 Repurchase of common stock ( 34,554 ) ( 501 ) Proceeds from issuance of subordinated notes, net of issuance cost 39,300 - Net cash used in financing activities ( 2,279 ) ( 3,121 ) Net increase in cash and cash equivalents 3,038 1,309 Cash and cash equivalents, beginning of period 3,735 2,426 Cash and cash equivalents, end of period $ 6,773 $ 3,735 Table of Contents USCB FINANCIAL HOLDINGS, INC. Notes to the Consolidated Financial Statements 123 USCB Financial Holdings, Inc. 2025 10-K 19. SEGMENT REPORTING Operating segments are components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker (“CODM”) in assessing performance and in deciding how to allocate resources. The Company’s CODM is the President, Chief Executive Officer, and Chairman. The Company through the Bank, its sole direct subsidiary, operates 10 banking centers in South Florida providing a wide range of personal and business banking products and services, and through a subsidiary of the Bank, offers clients title insurance policies for real estate transactions closed at the Bank. The Company’s business activities are similar in their nature, operations and economic characteristics, largely serving commercial and specialty banking clients with products and services that are offered through similar processes and platforms. Accounting policies for the products and services referenced here are the same as those described in Note 1, “Summary of Significant Accounting Policies”. The Company’s segment revenue is driven primarily by interest income on loans as well as fee income from the origination of loans and from fees charged on loans and deposit accounts. Lending activities include loans to individuals, which primarily consist of home equity lines of credit, residential real estate loans, yacht loans, and consumer loans, and loans to commercial clients, which include commercial and industrial loans, commercial real estate loans, residential real estate loans, correspondent banking loans, and letters of credit. The CODM regularly reviews consolidated income and expenses, as presented on the Consolidated Statements of Operations, in addition to consolidated assets presented on the Consolidated Balance Sheets. The significant segment expenses that the CODM receives regularly are interest expense, provision for credit losses, salaries and wages, employee benefits, and occupancy. The CODM evaluates the performance of the segment and allocates resources based on net income that is also reported on the Consolidated Statements of Operations as consolidated net income to maximize shareholder value . Additionally, consolidated internal financial information is used by the CODM to monitor credit quality and credit loss expense. Furthermore, net income, as the measure of profit or loss, is used to monitor budget versus actual results and to perform competitive analyses that benchmark the Company to competitors. As a result, the Company has determined that it has only one reportable segment. 20. LOSS CONTINGENCIES Loss contingencies, including claims and legal actions may arise in the ordinary course of business. In the opinion of management, none of these actions, either individually or in the aggregate, is expected to have a material adverse effect on the Company’s Consolidated Financial Statements. 21. SUBSEQUENT EVENTS Dividends On January 20, 2026, the Company’s Board of Directors declared a quarterly cash dividend of $ 0.125 per share of Class A common stock, to be paid on March 5, 2026, to stockholders of record as of the close of business on February 17, 2026. Table of Contents 124 USCB Financial Holdings, Inc. 2025 10-K Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.