USCB FINANCIAL HOLDINGS, INC. 10-Q

Item 1. Financial Statements USCB FINANCIAL HOLDINGS, INC Consolidated Balance Sheets – Unaudited (Dollars in thousands, except share data) March 31, 2026 December 31, 2025 ASSETS: Cash and due from banks $ 6,598 $ 6,027 Interest-bearing deposits in banks 72,365 32,450 Total cash and cash equivalents 78,963 38,477 Investment securities held to maturity, net of allowance of $ 0 and $ 2 , respectively (fair value of $ 137,714 and $ 142,508 , respectively) 149,931 153,941 Investment securities available for sale, at fair value 277,160 307,490 Federal Home Loan Bank stock, at cost 4,470 9,323 Loans held for investment, net of allowance of $ 26,102 and $ 25,500 , respectively 2,214,949 2,163,757 Accrued interest receivable 11,773 11,661 Premises and equipment, net 4,401 4,247 Bank owned life insurance 59,920 59,424 Deferred tax assets, net 19,649 18,046 Lease right-of-use asset 4,756 5,519 Other assets 19,763 19,655 Total assets $ 2,845,735 $ 2,791,540 LIABILITIES: Deposits: Non-interest bearing demand deposits $ 620,714 $ 583,860 Savings and money market deposits 1,263,248 1,186,422 Interest-bearing demand deposits 57,444 46,989 Time deposits 552,174 527,809 Total deposits 2,493,580 2,345,080 Federal Home Loan Bank advances 53,000 158,250 Subordinated notes, net 39,338 39,300 Lease liability 4,756 5,519 Accrued interest and other liabilities 31,815 26,208 Total liabilities 2,622,489 2,574,357 Commitments and contingencies (See Notes 5 and 10) (nil) (nil) STOCKHOLDERS' EQUITY: Preferred stock - Class C; $ 1.00 par value; $ 1,000 per share liquidation preference; 52,748 shares authorized; 0 and 0 issued and outstanding as of March 31, 2026 and December 31, 2025 - - Preferred stock - Class D; $ 1.00 par value; $ 5.00 per share liquidation preference; 12,309,480 shares authorized; 0 and 0 issued and outstanding as of March 31, 2026 and December 31, 2025 - - Preferred stock - Class E; $ 1.00 par value; $ 1,000 per share liquidation preference; 3,185,024 shares authorized; 0 and 0 issued and outstanding as of March 31, 2026 and December 31, 2025 - - Common stock - Class A Voting; $ 1.00 par value; 45,000,000 shares authorized; 18,257,400 issued and outstanding as of March 31, 2026, 18,137,885 issued and outstanding as of December 31, 2025 18,257 18,138 Common stock - Class B Non-voting; $ 1.00 par value; 8,000,000 shares authorized; 0 and 0 issued and outstanding as of March 31, 2026 and December 31, 2025 - - Additional paid-in capital on common stock 278,812 278,852 Accumulated deficit ( 42,473 ) ( 49,542 ) Accumulated other comprehensive loss ( 31,350 ) ( 30,265 ) Total stockholders' equity 223,246 217,183 Total liabilities and stockholders' equity $ 2,845,735 $ 2,791,540 The accompanying notes are an integral part of these unaudited consolidated financial statements. Table of Contents 4 USCB Financial Holdings, Inc. Q1 2026 Form 10-Q USCB FINANCIAL HOLDINGS, INC. Consolidated Statements of Operations - Unaudited (Dollars in thousands, except per share data) Three Months Ended March 31, 2026 2025 Interest income: Loans, including fees $ 32,789 $ 30,245 Investment securities 3,411 3,024 Interest-bearing deposits in financial institutions 832 709 Total interest income 37,032 33,978 Interest expense: Interest-bearing demand deposits 310 338 Savings and money market deposits 8,133 9,335 Time deposits 4,700 3,918 Federal Home Loan Bank advances 1,040 1,272 Subordinated notes 801 - Total interest expense 14,984 14,863 Net interest income before provision for credit losses 22,048 19,115 Provision for credit losses 801 681 Net interest income after provision for credit losses 21,247 18,434 Non-interest income: Service fees 3,100 2,331 Gain on sale of securities available for sale, net 14 - Gain on sale of loans held for sale, net 106 525 Other non-interest income 930 860 Total non-interest income 4,150 3,716 Non-interest expense: Salaries and employee benefits 8,570 7,636 Occupancy 1,316 1,284 Regulatory assessments and fees 484 421 Consulting and legal fees 561 193 Network and information technology services 560 505 Other operating expense 2,220 2,013 Total non-interest expense 13,711 12,052 Income before income tax expense 11,686 10,098 Income tax expense 2,335 2,440 Net income $ 9,351 $ 7,658 Per share information: Earnings per share, basic $ 0.51 $ 0.38 Earnings per share, diluted $ 0.51 $ 0.38 Cash dividends declared $ 0.125 $ 0.10 The accompanying notes are an integral part of these unaudited consolidated financial statements. Table of Contents 5 USCB Financial Holdings, Inc. Q1 2026 Form 10-Q USCB FINANCIAL HOLDINGS, INC. Consolidated Statements of Comprehensive Income - Unaudited (Dollars in thousands) Three Months Ended March 31, 2026 2025 Net income $ 9,351 $ 7,658 Other comprehensive (loss) income: Unrealized (loss) gain on investment securities ( 2,207 ) 4,673 Reclassification adjustment for amortization of net unrealized losses on securities transferred from available- for-sale to held-to-maturity 68 67 Reclassification adjustment for realized gains included in net income ( 14 ) - Unrealized gain (loss) on cash flow hedge 97 ( 158 ) Tax effect 971 ( 1,161 ) Total other comprehensive (loss) income, net of tax ( 1,085 ) 3,421 Total comprehensive income $ 8,266 $ 11,079 The accompanying notes are an integral part of these unaudited consolidated financial statements. Table of Contents 6 USCB Financial Holdings, Inc. Q1 2026 Form 10-Q USCB FINANCIAL HOLDINGS, INC. Consolidated Statements of Changes in Stockholders’ Equity - Unaudited (Dollars in thousands, except per share data) Common Stock Additional Paid-in Capital on Common Stock Accumulated Deficit Accumulated Other Comprehensive Loss Shares Par Value Total Stockholders' Equity Balance at December 31, 2025 18,137,885 $ 18,138 $ 278,852 $ ( 49,542 ) $ ( 30,265 ) $ 217,183 Net income - - - 9,351 - 9,351 Other comprehensive loss - - - - ( 1,085 ) ( 1,085 ) Repurchase of Class A common stock ( 53,475 ) ( 53 ) ( 948 ) - - ( 1,001 ) Restricted stock issued 147,490 147 ( 147 ) - - - Exercise of stock options 25,500 25 166 - - 191 Dividend payment - - - ( 2,282 ) - ( 2,282 ) Stock-based compensation - - 889 - - 889 Balance at March 31, 2026 18,257,400 $ 18,257 $ 278,812 $ ( 42,473 ) $ ( 31,350 ) $ 223,246 Balance at December 31, 2024 19,924,632 $ 19,925 $ 307,810 $ ( 67,813 ) $ ( 44,534 ) $ 215,388 Net income - - - 7,658 - 7,658 Other comprehensive income - - - - 3,421 3,421 Repurchase of Class A common stock ( 9,671 ) ( 10 ) ( 164 ) - - ( 174 ) Restricted stock issued 124,424 124 ( 124 ) - - - Exercise of stock options 9,000 9 83 - - 92 Dividend payment - - - ( 2,005 ) - ( 2,005 ) Stock-based compensation - - 708 - - 708 Balance at March 31, 2025 20,048,385 $ 20,048 $ 308,313 $ ( 62,160 ) $ ( 41,113 ) $ 225,088 The accompanying notes are an integral part of these consolidated financial statements. Table of Contents 7 USCB Financial Holdings, Inc. Q1 2026 Form 10-Q USCB FINANCIAL HOLDINGS, INC. Consolidated Statements of Cash Flows - Unaudited (Dollars in thousands) Three Months Ended March 31, 2026 2025 Cash flows from operating activities: Net income $ 9,351 $ 7,658 Adjustments to reconcile net income to net cash provided by operating activities: Provision for credit losses 801 681 Depreciation and amortization 166 148 Accretion of premiums on securities, net ( 374 ) ( 212 ) Amortization of deferred loan fees, net 269 126 Stock-based compensation 889 708 Gain on sale of available for sale securities, net ( 14 ) - Gain on sale of loans held for sale, net ( 106 ) ( 525 ) Proceeds from the sale of loans held for sale 1,329 7,719 Origination of loans held for sale ( 1,223 ) ( 7,194 ) Increase in cash surrender value of bank owned life insurance ( 496 ) ( 471 ) Amortization of subordinated debt issuance costs 38 - Deferred income tax expense (benefit) ( 581 ) 2,440 Net change in operating assets and liabilities: Accrued interest receivable ( 112 ) ( 79 ) Other assets ( 62 ) ( 3,005 ) Accrued interest and other liabilities 5,401 6,634 Net cash provided by operating activities 15,276 14,628 Cash flows from investing activities: Proceeds from maturities and pay-downs of investment securities held to maturity 4,063 2,955 Purchase of investment securities available for sale ( 13,631 ) ( 14,123 ) Proceeds from maturities and pay-downs of investment securities available for sale 4,964 4,106 Proceeds from sales of investment securities available for sale 37,181 - Net increase in loans held for investment ( 7,968 ) ( 43,503 ) Purchase of loans held for investment ( 44,090 ) ( 19,989 ) Additions to premises and equipment ( 320 ) ( 46 ) Purchase of bank owned life insurance - ( 4,000 ) Proceeds from the redemption of Federal Home Loan Bank stock 6,994 2,612 Purchase of Federal Home Loan Bank stock ( 2,141 ) ( 169 ) Net cash used in investment activities ( 14,948 ) ( 72,157 ) Cash flows from financing activities: Proceeds from issuance of Class A common stock, net 191 92 Cash dividends paid ( 2,282 ) ( 2,005 ) Repurchase of Class A common stock ( 1,001 ) ( 174 ) Net increase in deposits 148,500 135,565 Proceeds from FHLB advances 42,000 - Repayments on Federal Home Loan Bank advances ( 147,250 ) ( 55,000 ) Net cash provided by financing activities 40,158 78,478 Net increase in cash and cash equivalents 40,486 20,949 Cash and cash equivalents at beginning of period 38,477 77,035 Cash and cash equivalents at end of period $ 78,963 $ 97,984 Supplemental disclosure of cash flow information: Interest paid $ 14,673 $ 14,454 The accompanying notes are an integral part of these unaudited consolidated financial statements. Table of Contents USCB FINANCIAL HOLDINGS, INC. Notes to the Consolidated Financial Statements - Unaudited 8 USCB Financial Holdings, Inc. Q1 2026 Form 10-Q 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Overview USCB Financial Holdings, Inc., a Florida corporation incorporated in 2021, is a bank holding company with one direct wholly owned subsidiary, U.S. Century Bank (the “Bank”), together referred to as “the Company”. The Bank, established in 2002, is a Florida state-chartered, non-member financial institution providing financial services through its banking centers located in South Florida. The Bank owns a subsidiary, Florida Peninsula Title LLC, that offers our clients title insurance policies for real estate transactions closed at the Bank. Licensed in the State of Florida and approved by the Department of Insurance Regulation, Florida Peninsula Title LLC began operations in 2021. Basis of Presentation The accompanying unaudited consolidated financial statements have been prepared in accordance with instructions to Form 10-Q and do not include all the information and footnotes required by U.S. generally accepted accounting principles (“U.S. GAAP”) for complete financial statements. All adjustments consisting of normally recurring accruals that, in the opinion of management, are necessary for a fair presentation of the financial position and results of operations for the periods presented have been included. These unaudited consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and related notes appearing in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025. Principles of Consolidation The Company consolidates entities in which it has a controlling financial interest. Intercompany transactions and balances are eliminated in consolidation. Use of Estimates To prepare consolidated financial statements in conformity with U.S. GAAP, management makes estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in the consolidated financial statements. The most significant estimate impacting the Company’s consolidated financial statements is the allowance for credit losses (“ACL”). Reclassifications Certain amounts in prior period consolidated financial statements have been reclassified to conform to the current presentation. Reclassifications had no impact on prior period net income or stockholders’ equity. Recently Issued Accounting Standards There were no recently issued accounting standards adopted or issued during the period that are expected to have a material impact on the Company’s consolidated financial statements. Table of Contents USCB FINANCIAL HOLDINGS, INC. Notes to the Consolidated Financial Statements - Unaudited 9 USCB Financial Holdings, Inc. Q1 2026 Form 10-Q 2. INVESTMENT SECURITIES The following tables present a summary of the amortized cost, unrealized or unrecognized gains and losses, and fair value of investment securities at the dates indicated (in thousands): March 31, 2026 Available-for-sale: Amortized Cost Unrealized Gains Unrealized Losses Fair Value U.S. Government Agency $ 12,568 $ - $ ( 970 ) $ 11,598 Collateralized mortgage obligations 86,307 - ( 17,727 ) 68,580 Mortgage-backed securities - residential 35,364 98 ( 6,190 ) 29,272 Mortgage-backed securities - commercial 156,895 145 ( 8,005 ) 149,035 Municipal securities 5,194 - ( 995 ) 4,199 Bank subordinated debt securities 14,570 163 ( 257 ) 14,476 $ 310,898 $ 406 $ ( 34,144 ) $ 277,160 March 31, 2026 Held-to-maturity: Amortized Cost Unrecognized Gains Unrecognized Losses Fair Value U.S. Government Agency $ 40,748 $ 78 $ ( 3,319 ) $ 37,507 Collateralized mortgage obligations 50,175 664 ( 5,768 ) 45,071 Mortgage-backed securities - residential 35,963 659 ( 3,359 ) 33,263 Mortgage-backed securities - commercial 15,041 - ( 1,163 ) 13,878 Corporate bonds 8,004 - ( 9 ) 7,995 $ 149,931 $ 1,401 $ ( 13,618 ) $ 137,714 Allowance for credit losses - securities held-to-maturity - Securities held-to maturity, net of allowance for credit losses $ 149,931 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 Transfers of debt securities into the held -to-maturity (“HTM”) category from the available for sale (“AFS”) category are made at fair value as of the date of transfer. The unrealized gain or loss at the date of transfer is retained in accumulated Table of Contents USCB FINANCIAL HOLDINGS, INC. Notes to the Consolidated Financial Statements - Unaudited 10 USCB Financial Holdings, Inc. Q1 2026 Form 10-Q other comprehensive loss (“AOCL”) and in the carrying value of the HTM securities and there is no impact to net income. Such amounts are amortized over the remaining life of the security. The Company made two transfers from AFS to HTM portfolios in 2022. During the quarter ended March 31, 2026, there were no investment securities that were transferred from AFS to HTM. For three months ended March 31, 2026, total amortization out of AOCL for net unrealized losses on securities transferred in 2022 from AFS to HTM was $ 68 thousand and $ 67 thousand for the three months ended March 31, 2025. At March 31, 2026, the fair value of the transferred securities was $ 96.1 million and the balance of the remaining unamortized loss was $ 8.9 million. The measurement of expected credit losses under the current expected credit loss (“CECL”) methodology is applicable to financial assets measured at amortized cost, including loan receivables and HTM debt securities. CECL requires a loss reserve for securities classified as HTM. The reserve should reflect historical credit performance as well as the impact of projected economic forecasts. For U.S. Government bonds and U.S. Agency issued bonds classified as HTM, the explicit guarantee of the U.S. Government is sufficient to conclude that an allowance for credit loss reserve is not required. The reserve requirement is for three primary assets groups: municipal bonds, corporate bonds, and non- agency securitizations. The Company calculates quarterly the loss reserve utilizing Moody’s ImpairmentStudio. The CECL measurement for investment securities incorporates historical data, containing defaults and recoveries information, and Moody’s baseline economic forecast. The solution uses the probability of default/loss given default (“PD/LGD”) approach. PD represents the likelihood a borrower will default. Within the Moody’s model, this is determined using historical default data, adjusted for the current economic environment. LGD projects the expected loss if a borrower were to default. The Company monitors the credit quality of HTM securities through the use of credit ratings. Credit ratings are monitored by the Company on at least a quarterly basis. As of March 31, 2026 and December 31, 2025, all HTM securities held by the Company were rated investment grade. At March 31, 2026, HTM securities included $ 141.9 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 $ 8.0 million in investment grade corporate bonds that mature in May of 2026. 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 $ 0 ACL as of March 31, 2026. The book value for debt securities classified as HTM represents amortized cost less the ACL related to these securities. The Company’s investment portfolio includes AFS debt securities, which are carried at fair value with unrealized gains and losses recognized in AOCL, net of applicable taxes. The Company evaluates whether the declines in fair value are attributable to credit losses or other factors like interest rate risk, using both quantitative and qualitative analyses, including company performance analysis, review of credit ratings, bond vintage, remaining payment terms, prepayment speeds and analysis of macro-economic conditions. When the fair value of an AFS security is less than its amortized cost and the decline is attributable to credit-related factors, an ACL is recorded. As a result of this evaluation, the Company concluded that no allowance was required on AFS securities as of March 31, 2026. Table of Contents USCB FINANCIAL HOLDINGS, INC. Notes to the Consolidated Financial Statements - Unaudited 11 USCB Financial Holdings, Inc. Q1 2026 Form 10-Q 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): March 31, 2026 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 $ 5,909 $ ( 88 ) $ 5,689 $ ( 882 ) $ 11,598 $ ( 970 ) Collateralized mortgage obligations 3,898 ( 116 ) 64,682 ( 17,611 ) 68,580 ( 17,727 ) Mortgage-backed securities - residential - - 22,164 ( 6,190 ) 22,164 ( 6,190 ) Mortgage-backed securities - commercial 73,867 ( 977 ) 55,483 ( 7,028 ) 129,350 ( 8,005 ) Municipal securities - - 4,199 ( 995 ) 4,199 ( 995 ) Bank subordinated debt securities 2,722 ( 12 ) 6,245 ( 246 ) 8,967 ( 257 ) $ 86,396 $ ( 1,193 ) $ 158,462 $ ( 32,952 ) $ 244,858 $ ( 34,144 ) 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 ) The contractual cash flows associated with U.S. Government Agency securities, collateralized mortgage obligations, and residential and commercial mortgage-backed securities are guaranteed by U.S. government-sponsored enterprises, thereby minimizing credit risk. Municipal bonds are of high credit quality, and the observed declines in fair value are not attributable to a deterioration in the creditworthiness. Similarly, the decrease in fair value of bank subordinated debt securities is primarily driven by changes in market interest rates rather than credit concerns. Based on management’s evaluation of these factors, management believes that the unrealized losses on these debt securities are attributable to fluctuations in market spreads and interest rate movements, rather than adverse changes in the underlying credit quality of the issuers. Table of Contents USCB FINANCIAL HOLDINGS, INC. Notes to the Consolidated Financial Statements - Unaudited 12 USCB Financial Holdings, Inc. Q1 2026 Form 10-Q Gains and losses on the sale of securities are recorded on the trade date and are determined on the specific identification basis. The following table presents the proceeds, realized gross gains and realized gross losses on sales and calls of AFS debt securities for the three months ended March 31, 2026 and 2025 (in thousands): Three Months Ended March 31, Available-for-sale: 2026 2025 Proceeds from sale and call of securities $ 38,181 $ - Gross gains $ 82 $ - Gross losses ( 68 ) - Net realized gain $ 14 $ - The amortized cost and fair value of investment securities, by contractual maturity, are shown below as of the date indicated (in thousands). Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Securities not due at a single maturity date are shown separately. Available-for-sale Held-to-maturity March 31, 2026: Amortized Cost Fair Value Amortized Cost Fair Value Due within one year $ - $ - $ 8,004 $ 7,995 Due after one year through five years 2,000 1,984 - - Due after five years through ten years 17,764 16,691 - - Due after ten years - - - - U.S. Government Agency 12,568 11,598 40,748 37,507 Collateralized mortgage obligations 86,307 68,580 50,175 45,071 Mortgage-backed securities - residential 35,364 29,272 35,963 33,263 Mortgage-backed securities - commercial 156,895 149,035 15,041 13,878 $ 310,898 $ 277,160 $ 149,931 $ 137,714 At March 31, 2026, there were no securities held in the portfolio from any one issuer in an amount greater than 10% of total stockholders’ equity other than the U.S. Government and U.S. Government Agency issued securities. All the collateralized mortgage obligations and mortgage-backed securities at March 31, 2026 and December 31, 2025 were issued by U.S. Government entities. The Bank is a Qualified Public Depository (“QPD”) with the State of Florida. As a QPD, the Bank has the legal authority to maintain public deposits from cities, municipalities, and the State of Florida. These public deposits are secured by securities pledged to the State of Florida at a ratio of 25 % of the quarter daily average balance for quarters ended March 31, 2026 and December 31, 2025. The Bank must also maintain a minimum amount of pledged securities to be in the public funds program. As of March 31, 2026, the Bank had a total of $ 220.8 million in deposits under the public funds program and pledged to the State of Florida for these public funds were twenty bonds with an aggregate fair value of $ 55.1 million. As of December 31, 2025, the Bank had a total of $ 167.7 million in deposits under the public funds program and pledged to the State of Florida for these public funds were fifteen bonds with an aggregate fair value of $ 43.5 million. Table of Contents USCB FINANCIAL HOLDINGS, INC. Notes to the Consolidated Financial Statements - Unaudited 13 USCB Financial Holdings, Inc. Q1 2026 Form 10-Q 3. LOANS The following table is a summary of the distribution of loans held for investment by type (dollars in thousands): March 31, 2026 December 31, 2025 Total Percent of Total Total Percent of Total Residential real estate $ 346,917 15.5 % $ 307,692 14.1 % Commercial real estate 1,259,642 56.4 % 1,244,835 57.0 % Commercial and industrial 291,333 13.0 % 295,548 13.5 % Correspondent banks 128,722 5.8 % 127,968 5.9 % Consumer and other 207,794 9.3 % 207,215 9.5 % Total gross loans 2,234,408 100.0 % 2,183,258 100.0 % Plus: Deferred fees/costs 6,643 5,999 Total loans net of deferred fees/costs 2,241,051 2,189,257 Less: Allowance for credit losses 26,102 25,500 Total net loans $ 2,214,949 $ 2,163,757 At March 31, 2026 and December 31, 2025, the Company had $ 599.7 million and $ 561.4 million, respectively, of commercial real estate and residential mortgage loans pledged as collateral for lines of credit with the Federal Home Loan Bank (“FHLB”) of Atlanta and the Federal Reserve Bank of Atlanta. Allowance for Credit Losses In general, the Company utilizes the Discounted Cash Flow (“DCF”) method or the Weighted-Average Remaining Maturity (“WARM”) methodology to estimate the quantitative portion of the ACL for loan pools. The DCF method uses a loss driver analysis (“LDA”) and DCF analysis. Management engaged advisors and consultants with expertise in CECL model development to assist in development of a LDA based on regression models and supportable forecast. Peer group data obtained from FFIEC Call Report filings is used to inform regression analyses to quantify the impact of reasonable and supportable forecasts in projective models. Economic forecasts applied to regression models to estimate probability of default for loan receivables use at least one of the following economic indicators: civilian unemployment rate (national), real gross domestic product growth (national GDP) or the House Price Index (“HPI”). For each of the segments in which the WARM methodology is used, the long-term average loss rate is calculated and applied on a quarterly basis for the remaining life of the pool. Adjustments for economic expectations are made through qualitative factors. Qualitative factors (“Q-Factors”) used in the ACL methodology include: • Changes in lending policies, procedures, and strategies • Changes in international, national, regional, and local economic conditions • Changes in nature and volume of the portfolio • Changes in the volume and severity of past due loans and other similar conditions • Concentration risk • Changes in the value of underlying collateral • The effect of other external factors: e.g., competition, legal, and regulatory requirements • Changes in lending management, among others • Changes in the loan review system Table of Contents USCB FINANCIAL HOLDINGS, INC. Notes to the Consolidated Financial Statements - Unaudited 14 USCB Financial Holdings, Inc. Q1 2026 Form 10-Q Changes in the ACL for the three months ended March 31, 2026 and 2025 were as follows (in thousands): Residential Real Estate Commercial Real Estate Commercial and Industrial Correspondent Banks Consumer and Other Total Three Months Ended March 31, 2026 Beginning balance $ 5,908 $ 9,476 $ 4,814 $ 1,015 $ 4,287 $ 25,500 Provision for credit losses (1) ( 644 ) 456 512 3 271 598 Recoveries 6 - 4 - - 10 Charge-offs - - - - ( 6 ) ( 6 ) Ending Balance $ 5,270 $ 9,932 $ 5,330 $ 1,018 $ 4,552 $ 26,102 (1) Provision for credit losses excludes a $ 205 thousand provision due to unfunded commitments included in accrued interest and other liabilities and a $ 2 thousand release related to investment securities held to maturity. Residential Real Estate Commercial Real Estate Commercial and Industrial Correspondent Banks Consumer and Other Total Three Months Ended March 31, 2025 Beginning balance $ 5,121 $ 8,788 $ 4,633 $ 654 $ 4,874 $ 24,070 Provision for credit losses (1) ( 12 ) 409 ( 204 ) 163 316 672 Recoveries 6 - 5 - - 11 Charge-offs - - - - ( 13 ) ( 13 ) Ending Balance $ 5,115 $ 9,197 $ 4,434 $ 817 $ 5,177 $ 24,740 (1) Provision for credit losses excludes a $ 10 thousand provision due to unfunded commitments included in accrued interest and other liabilities and a $ 1 thousand release related to investment securities held to maturity. At March 31, 2026, the ACL for loans was $ 26.1 million compared to $ 25.5 million at December 31, 2025. The $ 602 thousand increase in the ACL was primarily attributable to loan portfolio growth, partially offset by lower expected loss rates resulting from improvements in the economic forecast. Charge offs related to loans for the three months ended March 31, 2026 were $ 6 thousand and were all originated in 2026. Charge-offs for the three months ended March 31, 2025 totaled $ 13 thousand and were all originated in 2025. Table of Contents USCB FINANCIAL HOLDINGS, INC. Notes to the Consolidated Financial Statements - Unaudited 15 USCB Financial Holdings, Inc. Q1 2026 Form 10-Q The ACL and the outstanding balances in the specified loan categories as of March 31, 2026 and December 31, 2025 are as follows (in thousands): Residential Real Estate Commercial Real Estate Commercial and Industrial Correspondent Banks Consumer and Other Total March 31, 2026: Allowance for credit losses: Individually evaluated $ 24 $ - $ 16 $ - $ - $ 40 Collectively evaluated 5,246 9,932 5,314 1,018 4,552 26,062 Balances, end of period $ 5,270 $ 9,932 $ 5,330 $ 1,018 $ 4,552 $ 26,102 Loans: Individually evaluated $ 6,023 $ - $ 1,288 $ - $ - $ 7,311 Collectively evaluated 340,894 1,259,642 290,045 128,722 207,794 2,227,097 Balances, end of period $ 346,917 $ 1,259,642 $ 291,333 $ 128,722 $ 207,794 $ 2,234,408 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 Credit Quality Indicators The Company grades loans based on the estimated capability of the borrower to repay the contractual obligation of the loan agreement based on relevant information which may include: current financial information on the borrower, historical payment experience, credit documentation and other current economic trends. Internal credit risk grades are evaluated periodically. The Company's internally assigned credit risk grades are as follows: Pass – Loans indicate different levels of satisfactory financial condition and performance. Special Mention – Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date. Substandard – Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligator or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected. Doubtful – Loans classified as doubtful have all the weaknesses inherent in those classified at substandard, with the added characteristic that the weaknesses make collection or liquidation in full on the basis of currently existing facts, conditions, and values, highly questionable and improbable. Loss – Loans classified as loss are considered uncollectible. Table of Contents USCB FINANCIAL HOLDINGS, INC. Notes to the Consolidated Financial Statements - Unaudited 16 USCB Financial Holdings, Inc. Q1 2026 Form 10-Q Loan credit exposures by internally assigned grades are presented below for the periods indicated (in thousands): As of March 31, 2026 Term Loans by Origination Year Revolving Loans Total 2026 2025 2024 2023 2022 Prior Residential real estate Pass $ 52,271 $ 63,410 $ 81,292 $ 31,652 $ 23,244 $ 71,610 $ 19,989 $ 343,468 Special Mention - 488 - - - - - 488 Substandard - 370 1,015 1,468 - 108 - 2,961 Total 52,271 64,268 82,307 33,120 23,244 71,718 19,989 346,917 Commercial real estate Pass 74,914 243,124 175,333 99,617 269,282 372,973 5,861 1,241,104 Special Mention - - 2,933 10,083 - 3,137 - 16,153 Substandard - - - - - 2,385 - 2,385 Total 74,914 243,124 178,266 109,700 269,282 378,495 5,861 1,259,642 Commercial and industrial Pass 4,473 72,274 62,037 56,211 31,367 39,343 23,336 289,041 Special Mention - - - - - 805 - 805 Substandard - - 72 378 - 1,037 - 1,487 Total 4,473 72,274 62,109 56,589 31,367 41,185 23,336 291,333 Correspondent banks Pass 55,661 73,061 - - - - - 128,722 Total 55,661 73,061 - - - - - 128,722 Consumer and other Pass 2,623 58,516 34,010 36,516 50,584 21,819 3,726 207,794 Total 2,623 58,516 34,010 36,516 50,584 21,819 3,726 207,794 Total Loans Pass 189,942 510,385 352,672 223,996 374,477 505,745 52,912 2,210,129 Special Mention - 488 2,933 10,083 - 3,942 - 17,446 Substandard - 370 1,087 1,846 - 3,530 - 6,833 Total $ 189,942 $ 511,243 $ 356,692 $ 235,925 $ 374,477 $ 513,217 $ 52,912 $ 2,234,408 Table of Contents USCB FINANCIAL HOLDINGS, INC. Notes to the Consolidated Financial Statements - Unaudited 17 USCB Financial Holdings, Inc. Q1 2026 Form 10-Q 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 Pass 59,276 34,309 36,808 51,091 23,214 747 1,770 207,215 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 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 - Unaudited 18 USCB Financial Holdings, Inc. Q1 2026 Form 10-Q Loan Aging The Company also considers the performance of loans in grading and in evaluating the credit quality of the loan portfolio. The Company analyzes credit quality and loan grades based on payment performance and the aging status of the loans. The following tables include an aging analysis of accruing loans and total non-accruing loans as of March 31, 2026 and December 31, 2025 (in thousands): Accruing As of March 31, 2026 Current Past Due 30- 89 Days Past Due 90 Days or > and Still Accruing Total Accruing Non-Accrual Total Loans Residential real estate: Home equity lines of credit and other $ 1,848 $ - $ - $ 1,848 $ - $ 1,848 1-4 family residential 259,121 1,257 - 260,378 2,732 263,110 Condo residential 79,585 2,145 - 81,730 229 81,959 340,554 3,402 - 343,956 2,961 346,917 Commercial real estate: Land and construction 65,423 - - 65,423 - 65,423 Multi-family residential 265,267 4,583 - 269,850 - 269,850 Condo commercial 63,777 - - 63,777 - 63,777 Commercial property 858,500 2,092 - 860,592 - 860,592 1,252,967 6,675 - 1,259,642 - 1,259,642 Commercial and industrial: Secured 269,120 23 - 269,143 679 269,822 Unsecured 21,511 - - 21,511 - 21,511 290,631 23 - 290,654 679 291,333 Correspondent banks 128,722 - - 128,722 - 128,722 Consumer and other 207,794 - - 207,794 - 207,794 Total $ 2,220,668 $ 10,100 $ - $ 2,230,768 $ 3,640 $ 2,234,408 Table of Contents USCB FINANCIAL HOLDINGS, INC. Notes to the Consolidated Financial Statements - Unaudited 19 USCB Financial Holdings, Inc. Q1 2026 Form 10-Q Accruing As of December 31, 2025: Current Past Due 30-89 Days Past Due 90 Days or > and Still Accruing Total Accruing Non-Accrual Total Loans Residential real estate: Home equity lines of credit and other $ 1,538 $ - $ - $ 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 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 Non-accrual Status The following table includes the amortized cost basis of loans on non-accrual status as of March 31, 2026 and as of December 31, 2025 (in thousands): March 31, 2026 Non-accrual Loans With No Related Allowance Non-accrual Loans With Related Allowance Total Non- accruals Residential real estate $ 2,961 $ - $ 2,961 Commercial and industrial 679 - 679 Total $ 3,640 $ - $ 3,640 December 31, 2025 Non-accrual Loans With No Related Allowance Non-accrual Loans With Related Allowance Total Non- accruals Residential real estate $ 2,500 $ - $ 2,500 Commercial and industrial 563 75 638 Total $ 3,063 $ 75 $ 3,138 Accrued interest receivable is excluded from the estimate of credit losses. There was no interest income recognized attributable to non-accrual loans outstanding during the three months ended March 31, 2026 and 2025. Interest income on these loans for the three months ended March 31, 2026 and 2025, would have been approximately $ 60 thousand and $ 52 thousand, respectively, had these loans performed in accordance with their original terms. Table of Contents USCB FINANCIAL HOLDINGS, INC. Notes to the Consolidated Financial Statements - Unaudited 20 USCB Financial Holdings, Inc. Q1 2026 Form 10-Q Collateral-Dependent Loans A loan is collateral dependent when the borrower is experiencing financial difficulty and repayment of the loan is expected to be provided substantially through the sale or operation of the collateral. The following table includes the amortized cost basis of collateral dependent loans related to borrowers experiencing financial difficulty by type of collateral as of March 31, 2026 and December 31, 2025 (in thousands): March 31, 2026 Collateral Type Residential Real Estate Specific Reserve Residential real estate $ 3,063 $ - Commercial and industrial 72 - Total $ 3,135 $ - December 31, 2025 Collateral Type Residential Real Estate Specific Reserve Residential real estate $ 2,583 $ - Total $ 2,583 $ - Management evaluates on an individual basis collateral dependent loans using the fair value of the collateral method to determine if a allowance for credit loss reserve is necessary. The ACL is measured based on the difference of the fair value of the collateral and amortized cost basis of the loan. If the final collateral valuation is less than the amortized cost basis of the loan, a reserve amount is calculated. If the collateral valuation is equal to or greater than the amortized cost basis of the loan, no reserve is determined. Loan Modifications to Borrowers Experiencing Financial Difficulties The Company had one new modification to borrowers experiencing financial difficulties for the three months ended March 31, 2026. The Company had no new modifications to borrowers experiencing financial difficulties for the three months ended March 31, 2025. The following table presents newly restructured loans, by type of modification, which occurred during the three months ended March 31, 2026 (in thousands): Amortized Cost Basis Prior to Modification Amortized Cost Basis After Modification Number of Loans Combination Modifications Total Modifications Number of Loans Combination Modifications Total Modifications Commercial and industrial 1 $ 418 $ 418 1 $ 350 $ 350 Total 1 $ 418 $ 418 1 $ 350 $ 350 The loan modification for the borrower experiencing financial difficulty at March 31, 2026 included a combination of principal and maturity modifications. There was a principal reduction of $ 68 thousand and a two-year extension of the loan maturity. There were no existing loan modifications that subsequently defaulted during the three months ended March 31, 2026 and 2025. Table of Contents USCB FINANCIAL HOLDINGS, INC. Notes to the Consolidated Financial Statements - Unaudited 21 USCB Financial Holdings, Inc. Q1 2026 Form 10-Q 4. INCOME TAXES The Company’s income tax expense is presented in the following table for the periods indicated (in thousands): Three Months Ended March 31, 2026 2025 Pre-tax income: Domestic $ 11,686 $ 10,098 Total pre-tax income $ 11,686 $ 10,098 Current tax expense: Federal $ 2,833 $ - State 83 - Total current 2,916 - Deferred tax expense: Federal ( 799 ) 1,914 State 218 526 Deferred income tax expense (benefit) ( 581 ) 2,440 Total income tax expense $ 2,335 $ 2,440 The actual income tax expense for the three months ended March 31, 2026 and 2025 differs from the statutory tax expense for the periods (computed by applying the U.S. federal corporate tax rate of 21 % for both 2026 and 2025 periods to income before income tax expense) as follows (in thousands): Three Months Ended March 31, 2026 2025 Amount % Pre-tax Income Amount % Pre-tax Income Computed tax at the statutory federal income tax rate $ 2,454 21.00 % $ 2,120 21.00 % Increase (decrease) resulting from: State income taxes, net of federal tax benefit (1) 631 5.40 % 439 4.34 % Bank owned life insurance income ( 131 ) ( 1.12 %) ( 119 ) ( 1.18 %) Benefit from stock-based compensation ( 166 ) ( 1.42 %) - - Section 162(m) limitation 83 0.71 % - - Other adjustments, net ( 536 ) ( 4.59 %) - - Total tax expense $ 2,335 19.98 % $ 2,440 24.16 % (1) Taxes in Florida made up the majority (greater than 50%) of the tax effect in this category. Table of Contents USCB FINANCIAL HOLDINGS, INC. Notes to the Consolidated Financial Statements - Unaudited 22 USCB Financial Holdings, Inc. Q1 2026 Form 10-Q The Company’s deferred tax assets and deferred tax liabilities as of the dates indicated were (in thousands): March 31, 2026 December 31, 2025 Deferred tax assets: Net operating loss $ 618 $ 1,039 Allowance for credit losses 6,891 6,463 Lease liability 1,256 1,399 Unrealized losses on available for sale securities 11,266 10,270 Equity compensation 878 973 Accruals 174 721 Cash flow hedge 21 ( 5 ) Other, net 1,771 268 Deferred tax assets: 22,875 21,128 Deferred tax liabilities: Deferred loan cost ( 1,754 ) ( 1,520 ) Lease right of use asset ( 1,256 ) ( 1,399 ) Deferred expenses ( 194 ) ( 154 ) Depreciable property ( 22 ) ( 9 ) Other, net - - Deferred tax liabilities ( 3,226 ) ( 3,082 ) Net deferred tax assets $ 19,649 $ 18,046 The Company has approximately $ 17.4 million of state net operating loss carryforwards expiring in various amounts between 2032 and 2036 and which are limited to offset, to the extent permitted, future taxable earnings of the Company. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. The major tax jurisdictions where the Company files income tax returns are the U.S. federal jurisdiction and the State of Florida. With few exceptions, the Company is no longer subject to U.S. federal and state income tax return examinations by tax authorities for years before 2022. For the three months ended March 31, 2026 and 2025 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. 5. OFF-BALANCE SHEET ARRANGEMENTS The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business in order to meet the financial needs of its customers and to reduce its own exposure to fluctuations in interest rates. These financial instruments include unfunded commitments under lines of credit, commitments to extend credit, and standby and commercial letters of credit. Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the Company’s Consolidated Balance Sheets. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments. The Company's exposure to credit loss in the event of nonperformance by the other party to the financial instruments for unused lines of credit and standby letters of credit is represented by the contractual amount of these commitments. Table of Contents USCB FINANCIAL HOLDINGS, INC. Notes to the Consolidated Financial Statements - Unaudited 23 USCB Financial Holdings, Inc. Q1 2026 Form 10-Q A summary of the amounts of the Company's financial instruments with off-balance sheet risk are shown below at March 31, 2026 and December 31, 2025 (in thousands): March 31, 2026 December 31, 2025 Commitments to grant loans and unfunded lines of credit $ 179,642 $ 161,606 Standby and commercial letters of credit 3,073 2,700 Total $ 182,715 $ 164,306 Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses. Unfunded lines of credit and revolving credit lines are commitments for possible future extensions of credit to existing customers. These lines of credit are uncollateralized and usually do not contain a specified maturity date and ultimately may not be drawn upon to the total extent to which the Company committed. Standby and commercial letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. Those letters of credit are primarily issued to support public and private borrowing arrangements. Essentially all letters of credit have fixed maturity dates and since many of them expire without being drawn upon, they do not generally present a significant liquidity risk to the Company. 6. DERIVATIVES The Company utilizes interest rate swap agreements as part of its asset-liability management strategy to help manage its interest rate risk exposure. The notional amount of the interest rate swaps does not represent actual amounts exchanged by the parties. The amounts exchanged are determined by reference to the notional amount and the other terms of the individual interest rate swap agreements. Interest Rate Swaps Designated as a Cash Flow Hedge As of March 31, 2026, the Company had two costless collar hedges with a notional amount of $ 100 million that were designated as cash flow hedges of two three-month brokered CDs. The derivatives are based on the USD SOFR overnight index and have a weighted average cap rate of 4.50 % and weighted average floor rate of 1.763 %, effectively creating a defined range of interest rate outcomes without requiring an upfront premium. The costless collar hedges have an average maturity of 1.29 years. As of December 31, 2025, the Company had two costless collar hedges with a notional amount of $ 100 million that were designated as cash flow hedge of two three-month brokered CDs. The derivatives are based on the USD SOFR overnight index and have a weighted average cap rate of 4.50 % and weighted average floor rate of 1.763 %, effectively creating a defined range of interest rate outcomes without requiring an upfront premium. The costless collar hedges had an average maturity of 1.54 years. As of March 31, 2026, the Company had one interest rate swap agreement with a notional aggregate amount of $ 25 million that was designated as a cash flow hedge of a certificate of deposit. Under the agreement, the Company pays a fixed rate of 3.47 % and receives a variable rate based on the weighted ‑ average three ‑ months compounded USD SOFR. The swap has a remaining maturity of 0.12 years. As of December 31, 2025, the Company had one interest rate swap agreement with a notional aggregate amount of $ 25 million that was designated as cash flow hedge of a certificate of deposit. Under the agreement, the Company pays a fixed rate of 3.47 % and receives a variable rate based on the weighted ‑ average three ‑ months compounded USD SOFR. The swap had a maturity of 0.42 years. The Company unwound one interest rate swap designated as a cash flow hedge of certificate of deposit 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. The changes in fair value of these interest rate swaps are recorded in other assets or accrued interest and other liabilities with a corresponding recognition in other comprehensive income (loss) and subsequently reclassified to earnings when gains or losses are realized. Table of Contents USCB FINANCIAL HOLDINGS, INC. Notes to the Consolidated Financial Statements - Unaudited 24 USCB Financial Holdings, Inc. Q1 2026 Form 10-Q Interest Rate Swaps The Company enters into interest rate swaps with its loan customers. The Company had 113 and 94 interest rate swaps with loan customers with an aggregate notional amount of $ 370.1 million and $ 310.8 million at March 31, 2026 and December 31, 2025, respectively. At March 31, 2026, these interest rate swaps mature between 2026 and 2051. The Company entered into corresponding and offsetting derivatives with third parties. The fair value of the liability created by these derivatives requires the Company to provide the counterparty with funds to be held as collateral which the Company reports as other assets under the Consolidated Balance Sheets. While these derivatives represent economic hedges, they do not qualify as hedges for accounting purposes. The following table reflects the Company’s interest rate swaps at the dates indicated (in thousands): Fair Value Notional Amount Collateral Amount Balance Sheet Location Asset Liability March 31, 2026: Derivatives designated as cash flow hedges: Interest rate swaps $ 125,000 $ - Other assets/Accrued interest and other liabilities $ 78 $ - Derivatives not designated as hedging instruments: Interest rate swaps related to customer loans $ 370,106 $ 6,972 Other assets/Accrued interest and other liabilities $ 8,837 $ 8,837 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 7. FAIR VALUE MEASUREMENTS Determination of Fair Value The Company uses fair value measurements to record fair-value adjustments to certain assets and liabilities and to determine fair value disclosures. In accordance with the fair value measurements accounting guidance, the fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Company's various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument. The fair value guidance provides a consistent definition of fair value, which focuses on exit price in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under current market conditions. If there has been a significant decrease in the volume and level of activity for the asset or liability, a change in valuation technique or the use of multiple valuation techniques may be appropriate. In such instances, determining the price at which willing market participants would transact at the measurement date under current market conditions depends on the facts and circumstances and requires the use of significant judgment. The fair value is a reasonable point within the range that is most representative of fair value under current market conditions. Fair Value Hierarchy In accordance with this guidance, the Company groups its financial assets and financial liabilities generally measured at fair value in three levels, based on the markets in which the assets and liabilities are traded, and the reliability of the assumptions used to determine fair value. Level 1 - Valuation is based on quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 1 assets and liabilities generally include debt and Table of Contents USCB FINANCIAL HOLDINGS, INC. Notes to the Consolidated Financial Statements - Unaudited 25 USCB Financial Holdings, Inc. Q1 2026 Form 10-Q 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 AFS investment securities: When instruments are traded in secondary markets and quoted market prices do not exist for such securities, management generally relies on prices obtained from independent vendors or third-party broker-dealers. Management reviews pricing methodologies provided by the vendors and third-party broker-dealers in order to determine if observable market information is being utilized. Securities measured with pricing provided by independent vendors or third- party broker-dealers are classified within Level 2 of the hierarchy and often involve using quoted market prices for similar securities, pricing models or discounted cash flow analyses utilizing inputs observable in the market where available. Derivatives: The fair values 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 March 31, 2026 and December 31, 2025 for each of the fair value hierarchy levels (in thousands): March 31, 2026 December 31, 2025 Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total Investment securities available for sale: U.S. Government Agency $ - $ 11,598 $ - $ 11,598 $ - $ 14,144 $ - $ 14,144 Collateralized mortgage obligations - 68,580 - 68,580 - 75,828 - 75,828 Mortgage-backed securities - residential - 29,272 - 29,272 - 29,917 - 29,917 Mortgage-backed securities - commercial - 149,035 - 149,035 - 168,108 - 168,108 Municipal securities - 4,199 - 4,199 - 4,263 - 4,263 Bank subordinated debt securities - 14,476 - 14,476 - 15,230 - 15,230 Total - 277,160 - 277,160 - 307,490 - 307,490 Derivative assets - 8,915 - 8,915 - 9,767 - 9,767 Total assets at fair value $ - $ 286,075 $ - $ 286,075 $ - $ 317,257 $ - $ 317,257 Derivative liabilities $ - $ 8,837 $ - $ 8,837 $ - $ 9,786 $ - $ 9,786 Total liabilities at fair value $ - $ 8,837 $ - $ 8,837 $ - $ 9,786 $ - $ 9,786 Table of Contents USCB FINANCIAL HOLDINGS, INC. Notes to the Consolidated Financial Statements - Unaudited 26 USCB Financial Holdings, Inc. Q1 2026 Form 10-Q Fair Value Measurements on a Nonrecurring Basis At March 31, 2026 and December 31, 2025, the Company did no t have any assets or liabilities measured at fair value on a nonrecurring basis. Items Not Measured at Fair Value The following table presents the carrying amounts and estimated fair values of financial instruments not carried at fair value as of March 31, 2026 and December 31, 2025 (in thousands): Fair Value Hierarchy Carrying Amount Level 1 Level 2 Level 3 Fair Value Amount March 31, 2026: Financial Assets: Cash and due from banks $ 6,598 $ 6,598 $ - $ - $ 6,598 Interest-bearing deposits in banks $ 72,365 $ 72,365 $ - $ - $ 72,365 Investment securities held to maturity, net $ 149,931 $ - $ 137,714 $ - $ 137,714 Loans held for investment, net $ 2,214,949 $ - $ - $ 2,266,736 $ 2,266,736 Accrued interest receivable $ 11,773 $ - $ 1,331 $ 10,442 $ 11,773 Financial Liabilities: Non-interest bearing demand deposits $ 620,714 $ 620,714 $ - $ - $ 620,714 Savings and money market deposits $ 1,263,248 $ 1,263,248 $ - $ - $ 1,263,248 Interest-bearing demand deposits $ 57,444 $ 57,444 $ - $ - $ 57,444 Time deposits $ 552,174 $ - $ 551,253 $ - $ 551,253 FHLB advances $ 53,000 $ - $ 52,989 $ - $ 52,989 Subordinated notes, net $ 39,338 $ - $ 39,454 $ - $ 39,454 Accrued interest payable $ 2,436 $ - $ 2,436 $ - $ 2,436 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, net $ 39,300 $ - $ 40,131 $ - $ 40,131 Accrued interest payable $ 3,984 $ - $ 3,984 $ - $ 3,984 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 $ 0 with no reserve as of March 31, 2026 and $ 2.6 million with no specific reserve as of December 31, 2025. Table of Contents USCB FINANCIAL HOLDINGS, INC. Notes to the Consolidated Financial Statements - Unaudited 27 USCB Financial Holdings, Inc. Q1 2026 Form 10-Q 8. STOCKHOLDERS’ EQUITY Common Stock During the three months ended March 31, 2026, the Company repurchased 53,475 shares of Class A common stock at a weighted average cost per share of $ 18.74 . The aggregate purchase price for these transactions was approximately $ 1.0 million, including transaction costs. These repurchases were made pursuant to the Company’s publicly announced repurchase programs. As of March 31, 2026, 474,834 shares remained authorized for repurchase under the Company’s the 2024 share repurchase program. The Company’s 2022 share repurchase program has been fully utilized. During the three months ended March 31, 2025, the Company repurchased 9,671 shares of Class A common stock at a weighted average cost per share of $ 17.91 . The aggregate purchase price for these transactions was approximately $ 174 thousand, including transaction costs. These repurchases were made pursuant to the Company’s publicly announced repurchase programs. As of March 31, 2025, 528,309 shares remained authorized for repurchase under the Company’s two stock repurchase programs. During the three months ended March 31, 2026, the Company issued 147,490 shares of Class common stock to employees as restricted stock awards pursuant to the Company’s 2015 equity incentive plan. During the three months ended March 31, 2025, the Company issued 124,424 shares of Class A common stock to employees as restricted stock awards pursuant to the Company’s 2015 equity incentive plan. The number of shares of the Company’s Class A common stock issued and outstanding as of March 31, 2026 and December 31, 2025 were 18,257,400 and 18,137,885 , respectively. Dividends Declaration of dividends by the Board of Directors is required before dividend payments are made. The Company is limited in the amount of cash dividends that it may pay. Payment of dividends is generally limited to the Company’s net income 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 since the Bank is the primary source of funds to fund dividends paid by the Company. It is likely that these factors would further limit the amount of dividends which the Company could legally declare. In addition, bank regulators have the authority to prohibit banks and bank holding companies from paying dividends if they deem such payment to be an unsafe or unsound practice. As of March 31, 2026, the Company was not subject to any formal supervisory restrictions on its ability to pay dividends but will notify the Federal Reserve Bank of Atlanta in advance of any proposed dividend to the Company's stockholders in light of the Bank's negative retained earnings. In addition, under applicable FDIC regulations and policy, because the Bank has negative retained earnings, it must obtain the prior approval of the FDIC before effecting a cash dividend or other capital distribution from the Bank to the Company. The following table details the dividends declared and paid by the Company for the periods presented: Three Months Ended March 31, 2026 Declaration Date Record Date Payment Date Dividend Per Share Dividend Amount January 20, 2026 February 17, 2026 March 5, 2026 $ 0.125 $ 2.3 million Three Months Ended March 31, 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 The Company and the Bank exceeded all regulatory capital requirements and remained above “well-capitalized” guidelines as of March 31, 2026 and December 31, 2025. At March 31, 2026, the total risk-based capital ratio for the Bank was 13.96 %. The Company is not subject to regulatory capital ratios imposed by Basel III on bank holding companies because the Company is deemed to be a small bank holding company. Table of Contents USCB FINANCIAL HOLDINGS, INC. Notes to the Consolidated Financial Statements - Unaudited 28 USCB Financial Holdings, Inc. Q1 2026 Form 10-Q See Note 11, Subsequent Events, for information regarding dividends declared in April 2026. 9. EARNINGS PER SHARE Earnings per share (“EPS”) for common stock is calculated using the two-class method required for participating securities. Basic EPS is calculated by dividing net income available to common shareholders by the weighted-average number of common shares outstanding for the period, without consideration for common stock equivalents. Diluted EPS is computed by dividing net income available to common shareholders by the weighted-average number of common shares outstanding for the period and the weighted-average number of dilutive common stock equivalents outstanding for the period determined using the treasury-stock method. For purposes of this calculation, common stock equivalents include common stock options which are only included in the calculation of diluted EPS when their effect is dilutive. The following table reflects the calculation of net income available to common shareholders for the three months ended March 31, 2026 and 2025 (in thousands): Three Months Ended March 31, 2026 2025 Net Income $ 9,351 $ 7,658 Net income available to common shareholders $ 9,351 $ 7,658 The following table reflects the calculation of basic and diluted earnings per common share class for the three months ended March 31, 2026 and 2025 (in thousands, except share amounts): Three Months Ended March 31, 2026 2025 Class A Basic EPS Numerator: Net income available to common shares $ 9,351 $ 7,658 Denominator: Weighted average shares outstanding 18,214,041 20,020,933 Earnings per share, basic $ 0.51 $ 0.38 Diluted EPS Numerator: Net income available to common shares $ 9,351 $ 7,658 Denominator: Weighted average shares outstanding for basic EPS 18,214,041 20,020,933 Add: Dilutive effects of assumed exercises of stock options 239,965 298,602 Weighted avg. shares including dilutive potential common shares 18,454,006 20,319,535 Earnings per share, diluted $ 0.51 $ 0.38 Anti-dilutive stock options excluded from diluted EPS - - Net income has not been allocated to unvested restricted stock awards that are participating securities because the amounts that would be allocated are not material to 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. Table of Contents USCB FINANCIAL HOLDINGS, INC. Notes to the Consolidated Financial Statements - Unaudited 29 USCB Financial Holdings, Inc. Q1 2026 Form 10-Q 10. LOSS CONTINGENCIES Loss contingencies, including claims and legal actions may arise in the ordinary course of business. In the opinion of management, none of these actions, either individually or in the aggregate, is expected to have a material adverse effect on the Company’s Consolidated Financial Statements . 11. SUBSEQUENT EVENTS Dividends On April 20, 2026, the Company announced that its Board of Directors declared its quarterly cash dividend. The dividend is in the amount of $ 0.125 per share of Class A common stock and will be paid on June 5, 2026, to stockholders of record as of the close of business on May 15, 2026. Table of Contents 30 USCB Financial Holdings, Inc. Q1 2026 Form 10-Q