USCB Uscb Financial Holdings, Inc. - 10-K
0001562762-26-000027Year-over-year tone shift - average net-tone change across Risk Factors and MD&A vs the prior 10-K. This filing is 0.13pp more bullish than last year's.
Why YoY instead of absolute: the LM lexicon has ~6.6× more negative words than positive (legal/risk-disclosure language is heavy on hedging), so every 10-K reads bearish on raw tone. Year-over-year change strips that bias and surfaces the actual shift in management's framing.
Tone shift by section
The two components the gauge averages: how Risk Factors and MD&A each shifted in net tone versus last year's 10-K. The headline above is their average, so a green needle over a soft section just means the other section carried it.
Sentence-level sentiment highlighting with category and subcategory filters is coming once the snippet-scoring pipeline lands. For now, dig into the actual section text on the Sections tab.
Language change vs prior 10-K
Risk Factors (Item 1A) - words with the biggest YoY frequency increase- difficult+4
- decline+4
- fail+4
- default+4
- disruptions+3
- stability+2
- achieve+1
- leadership+1
Risk Factors (Item 1A)
21,905 words
Item 1A. Risk Factors
This
section
contains
description
the
material
risk
and
uncertainties
identified
management
that
could,
individually or in combination, harm our business, results of
operations, liquidity and financial condition. The risks described
below are
not all
inclusive. We
may face
other risks
that are
not presently
known, or
that we
presently deem
immaterial,
which may also adversely
affect our business, results
of operations, liquidity and
financial condition. If any
of these known
or unknown risks
or uncertainties actually
occur,
our business, results
of operations, liquidity
and financial condition
could
be materially and adversely affected.
Summary of Risk Factors
Our business is subject to
a number of risks that could
cause actual results to differ
materially from those indicated
forward-looking statements
made in this
Form 10-K
or presented
elsewhere from
time to time.
These risks
are discussed
more fully in this Item 1A and include, without limitation,
the following:
Risks Related to our Business and Operations
Our
business
operations
and
lending
activities
are concentrated
South
Florida,
and
are
more
sensitive
adverse changes in the local economy than our more geographically
diversified competitors.
Our concentration of real estate loans in a limited market
area exposes us to lending risks.
The small- to medium-sized businesses
to which we lend may have
fewer resources to weather adverse
business
developments, which may impair a borrower's ability to
repay a loan.
Inflationary pressures and rising prices may affect
our results of operations and financial condition.
The soundness of other financial institutions could adversely
affect us.
Insufficient
liquidity
could
impair
our
ability
fund
operations
and
jeopardize
our
financial
condition,
results
operations, growth and prospects.
Significant
changes
the
size,
structure,
powers
and
operations
the
federal
government,
changes
economic policies,
and
uncertainties
regarding
the potential
for these
changes
may cause
economic
disruptions
that could, in turn, adversely impact our business, results
of operations and financial condition.
Our lending business is subject to credit risk, which could
lead to unexpected losses.
Natural
disasters
and
severe
weather
events
Florida
could
have
material
adverse
impact
our
business,
financial condition and operations.
Our business is subject to
interest rate risk and variations
in interest rates may
materially and adversely affect
our
financial performance.
Our allowance for credit losses may not be sufficient
to absorb potential losses in our loan portfolio.
Our commercial loan portfolio may expose us to increased
credit risk.
The imposition of further limits
by the bank regulators
on commercial real estate
lending activities could curtail our
growth and adversely affect our earnings.
Our SBA lending program depends on our status as a participant in the SBA's Preferred Lenders Program, and we
face specific risks associated with originating SBA loans
and selling the guaranteed portion thereof.
The SBA may not honor its guarantees if we do not originate
loans in compliance with SBA guidelines.
Correspondent banking is an important part of our business,
which creates increased BSA/AML risk.
We may not recover all amounts that are contractually
owed to us by our borrowers.
Table of Contents
USCB Financial Holdings, Inc.
Non-performing assets
take significant time
to resolve and
adversely affect
our results of
operations and financial
condition, and could result in further losses in the future.
We engage in
lending secured by
real estate and
may foreclose on
the collateral and
own the underlying
real estate,
subjecting us
to the
costs and potential
risks associated with
the ownership
of real
property and
other risks, including
exposure
environmental
liability,
consumer
protection
initiatives
changes
state
federal
law
may
substantially raise the cost of foreclosure or prevent us
from foreclosing at all.
We are exposed to risk of environmental liability when
we take title to property.
We are subject to
certain operational risks, including, but
not limited to, customer, employee or
third-party fraud and
data processing system failures and errors.
We face significant
operational risks because
the nature of the
financial services business
involves a high volume
of transactions.
We have several large depositor
relationships, the loss of
which could force us to
fund our business through more
expensive and less stable sources.
Any change in the Bank's ability to gather brokered deposits
may adversely impact the Bank.
Our
securities
portfolio
performance
difficult
market
conditions
could
have
adverse
effects
our
results
operations.
We may
not effectively
execute on
our expansion
strategy,
which may
adversely affect
our ability
to maintain
our
historical growth and earnings trends.
New lines of business, products, product enhancements
or services may subject us to additional risk.
Our business
needs and
future growth
may require us
to raise
additional capital
and that
capital may
not be
available
on terms acceptable to us or may be dilutive to existing shareholders.
We may grow through mergers or
acquisitions, a strategy that may
not be successful or, if successful, may produce
risks
successfully
integrating
and
managing
the
merged
companies
acquisitions
and
may
dilute
our
shareholders.
The loss of one or more
of our key personnel, or
our failure to attract and
retain other highly qualified
personnel in
the future, could harm our business.
Damage to our reputation could significantly harm our
businesses.
We face
strong competition
from financial
services
companies
and other
companies
that offer
banking services,
which could materially and adversely affect our
business.
We must respond to rapid technological changes
to remain competitive.
We continually
encounter technological change,
and we may
have fewer resources
than many of
our competitors
to invest in technological improvements.
Our current and future uses of artificial intelligence and
other emerging technologies may create additional risks.
failure, interruption, or breach in the
security of our systems, or those
of our contracted vendors, could disrupt
our
business, result in the disclosure of confidential information, damage our reputation, and
create significant financial
and legal exposure.
We rely on other companies to provide key components of our business infrastructure and our operations could be
interrupted if
our third-party
service providers
experience difficulty,
terminate their
services
or fail
to comply
with
banking regulations.
Litigation
and
regulatory
actions,
including
possible
enforcement
actions,
could
subject
significant
fines,
penalties, judgments
or other requirements
resulting in
increased expenses or
restrictions on
our business
activities.
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USCB Financial Holdings, Inc.
Certain of our
directors may
have conflicts of
interest in determining
whether to present
business opportunities
us or another entity with which they are, or may become, affiliated.
Risks Related to Our Tax, Accounting
and Regulatory Compliance
Our ability to
recognize the benefits
of our deferred
tax assets is
dependent on future
cash flows and
taxable income
and may be materially impaired upon significant changes
in ownership of our common stock.
The accuracy of
our financial statements
and related disclosures
could be affected
if the judgments,
assumptions
or estimates used in our critical accounting policies are inaccurate.
As a public company,
we may not efficiently or effectively
create an effective internal control environment,
and any
future failure to maintain effective
internal control over financial reporting
could impair the reliability of
our financial
statements, which
in turn could
harm our
business, impair
investor confidence
in the accuracy
and completeness
of our
financial
reports
and
our access
to the
capital
markets,
cause
the
price
our Class
A common
stock
decline and subject us to regulatory penalties.
We operate in a highly
regulated environment, and the
laws and regulations that
govern our operations, corporate
governance, executive
compensation and
accounting principles, or
changes in them,
or our failure
to comply with
them, could adversely affect us.
face
risk
noncompliance
with
the
Bank
Secrecy
Act
and
other
anti-money
laundering
statutes
and
regulations and corresponding enforcement proceedings.
Significantly heightened regulatory and
supervisory expectations and scrutiny
in the United States have
increased
our
compliance,
regulatory,
and
other
risks
and
costs
and
subject
legal
and
regulatory
examinations,
investigations, and enforcement actions.
We are subject to capital adequacy requirements
and may become subject to more stringent capital requirements,
which could adversely affect our financial condition
and operations.
We are periodically subject to examination and scrutiny by a number of
banking agencies and, depending upon the
findings and determinations of these agencies, we may
be required to make adjustments to our
business that could
adversely affect us.
We are
subject to
numerous laws
and regulations
of certain
regulatory agencies
designed to
protect consumers,
including the
Community Reinvestment
Act, or
CRA, and
fair lending
laws, and
failure to
comply with
these laws
could lead to a wide variety of sanctions.
Climate change
and related
legislative and
regulatory initiatives
may materially
affect our
business and
results of
operations.
Risks Related to Our Class A Common Stock
Our ability to pay dividends is subject to restrictions.
fail
pay
interest
otherwise
default
our
subordinated
notes,
will
prohibited
from
paying
dividends or distributions on our Class A common stock.
We may
issue additional
debt securities,
which would
be senior
to our
common stock
and may cause
the market
price of our Class A common stock to decline.
The market price and trading volume of our Class A common stock may be volatile, which could result in rapid and
substantial losses for our shareholders.
There are
significant restrictions
in our
Articles of
Incorporation
that restrict
the ability
to sell
our capital
stock
shareholders that would own 4.95% or more of our stock,
excluding our Significant Investors.
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USCB Financial Holdings, Inc.
Because
are
emerging
growth
company
and
because
have
decided
take
advantage
certain
exemptions from various reporting
and other requirements applicable
to emerging growth companies,
our Class A
common stock could be less attractive to investors.
Because
have
elected
use
the
extended
transition
period
for
complying
with
new
revised
accounting
standards for an
“emerging growth company,”
our financial statements
may not be comparable
to companies that
comply with these accounting standards as of the public
company effective dates.
We have existing investors that
own a significant amount of
our common stock whose individual
interests may differ
from yours.
Provisions in our governing documents and Florida
law may have an anti-takeover effect
and there are substantial
regulatory limitations on changes of control of the Company.
Risks Related to our Business and Operations
Our business
operations and
lending activities
are concentrated
in South
Florida, and
we are
more sensitive
to adverse changes in the local economy than our
more geographically diversified competitors.
Unlike many of
our larger competitors
that maintain significant
operations located
outside of our
market area, most
our customers are concentrated in South Florida. In addition, we have
a high concentration of loans secured by real estate
located in
South Florida.
Therefore, our
success depends
upon the
general economic
conditions in
South Florida,
which
may differ from the economic conditions in other areas
of the U.S. or the U.S. generally.
Our real estate
collateral provides
an alternate source
of repayment in
the event
of default by
the borrower;
however,
the value of the collateral may decline during the time the credit is outstanding. The concentration of our loans in the South
Florida area subjects us to
risk that a downturn in the
local economy or recession in
this area could result in
a decrease in
loan originations and increases in delinquencies and foreclosures, which would have a greater negative effect on us than if
our lending were more geographically diversified. Additionally, the COVID-19 pandemic accelerated the adoption of remote
work
options,
potentially
influencing
the
long-term
performance
office
properties
within
our
commercial
real
estate
portfolio. If we
are required to
liquidate our real
estate collateral securing
a loan during
a period of
reduced real estate
values
to satisfy the debt,
our earnings and capital could
be adversely affected. Moreover, since a large portion
of our loan portfolio
is secured by properties located in South Florida, the occurrence of a natural disaster, such as a hurricane, or a man-made
disaster could result in
a decline in loan originations,
a decline in the
value or the destruction
of mortgaged properties and
an increase in the risk of delinquencies, foreclosures or loss on loans originated by us. We may suffer further losses due to
the decline in the
value of the properties
underlying our mortgage loans, which
would have an adverse
impact on our results
of operations and financial condition.
A downturn in the local economy generally may lead to loan losses that are not offset by operations in other markets; it
may also reduce the ability
of our customers to grow
or maintain their deposits with
us. For these reasons, any
regional or
local economic
downturn
that
affects
South Florida,
or existing
or prospective
borrowers
depositors
South Florida,
could have a material adverse effect on our business,
financial condition and results of operations.
In addition, there are continuing concerns related
to, among other things, the increasing
level of U.S. government debt
and fiscal actions that may be taken to address that debt, price fluctuations
of key natural resources, inflation, the potential
resurgence of economic and political tensions with China, the continuing war in Ukraine and the level of oil and natural gas
prices due to, among
other things, Russian supply
disruptions resulting from
the ongoing Ukrainian conflict,
each of which
may have a
destabilizing effect
on financial markets
and economic activity.
Economic pressure on
consumers and overall
economic
uncertainty
may
result
changes
consumer
and
business
spending,
borrowing
and
saving
habits.
These
economic conditions and/or other negative developments in the domestic or international credit markets or economies may
significantly affect the
markets in which
business, the value
of our
loans and investments,
and our
ongoing operations,
costs and profitability.
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USCB Financial Holdings, Inc.
Our concentration of real estate loans in a limited
market area exposes us to lending risks.
At December 31, 2025, approximately
$1.55 billion, or 71.1%, of our
total loan portfolio, was secured
by real estate, in
particular commercial
real estate,
most of
which is
located in
our primary
lending market
area of
the Miami
metropolitan
statistical
area.
Future
declines
the
real
estate
values
our
primary
lending
market
and
surrounding
markets
could
significantly impair
the value
of the
particular real
estate collateral
securing our
loans and
our ability
to sell
the collateral
upon
foreclosure
for
amount
necessary
satisfy
the
borrower’s
obligations
This
could
require
increasing
our
allowance for credit
losses to address
the decrease in
the value of
the real estate
securing our loans,
which could have
material adverse effect on our business, financial
condition, results of operations, and growth prospects.
The
small-
medium-sized
businesses
which
lend
may
have
fewer
resources
weather
adverse
business developments, which may impair a borrower's
ability to repay a loan.
target
our
business
development
and
marketing
strategies
primarily
serve
the
banking
and
financial
services
needs of SMBs and
the owners and operators of
those businesses. SMBs generally have
fewer financial resources in terms
of capital or
borrowing capacity
than larger entities,
frequently have
smaller market shares
than their competition,
may be
more
vulnerable
economic
downturns,
often
need
substantial
additional
capital
expand
compete,
and
may
experience substantial
volatility in
operating results,
any of
which, individually
the aggregate,
may impair
their ability
as a borrower
to repay a loan.
In addition, the success
of SMBs often
depends on the management
skills, talents and efforts
small group
of key
people, and
the death,
disability or
resignation of
one or
more of
these individuals
could have
adverse impact on
the business and
its ability to
repay its loan.
If general economic
conditions negatively impact
the markets
in which we operate
or any of our
borrowers otherwise are affected by adverse
business developments, our SMB borrowers
may be disproportionately affected and their ability to
repay outstanding loans may be adversely affected, which could
have
a material adverse effect on our business, financial
condition and results of operations.
Inflationary pressures and rising prices may affect
our results of operations and financial condition.
The inflationary
outlook in
the United
States remains
uncertain. As
of December
the consumer
price index
was 2.7% year-over-year. While this is
a significant reduction to the rate of inflation experienced in 2023 and 2024,
it is still
above the FRB’s targeted rate. The risks to
our business from inflation depend on the
durability of the inflationary pressures
in our markets. Although
the FRB has reduced
the federal funds rate
three times in 2024,
and further three times
no assurance can be given that it will continue to do so. At the end of January 2026,
the FRB determined not to reduce the
federal funds rate. The
resurgence of elevated
levels of inflation could
lead the FRB to cease
reducing its benchmark
rate
or potentially
starting to
increase it
again which
could, in
turn, increase
the borrowings
costs of
our customers,
making it
more difficult for
them to repay their
loans or other obligations.
Elevated interest rates
may be needed to
tame inflationary
price pressures, which could also push down asset prices,
including collateral values, and weaken economic activity.
As inflation increases and market interest
rates rise the value of
our investment securities, particularly those with longer
maturities,
decreases,
although
this
effect
can
less
pronounced
for
floating-rate
instruments.
addition,
inflation
generally increases the cost of goods and services we use in
our business operations, such as electricity and other utilities,
which increases our
noninterest expenses. Also,
a prolonged period
of inflation could
cause wages and
other of our costs
to increase, which could adversely
affect our results of
operations and financial condition.
Furthermore, our customers are
also affected by inflation
and the rising costs of
goods and services used
in their households and businesses,
which could
have a negative impact on their ability to repay their loans with us.
In addition, SMBs may be impacted more during periods
high
inflation,
they
are
not
able
leverage
economics
scale
mitigate
cost
pressures
compared
larger
businesses. Consequently,
the ability of
our business
customers to repay
their loans
may deteriorate,
and in some
cases
this deterioration may occur quickly,
which would adversely impact our results of operations
and financial condition.
The soundness of other financial institutions could
adversely affect us.
Our
ability
engage
routine
funding
and
other
transactions
could
adversely
affected
the
actions
and
commercial soundness
of other
financial institutions.
Financial services
companies are
interrelated as
a result
of trading,
clearing,
counterparty
other
relationships.
have
exposure
different
industries
and
counterparties,
and
through
transactions
with
counterparties
the
financial
services
industry,
including
brokers
and
dealers,
commercial
banks,
investment
banks,
and
other
institutional
clients.
Defaults
even
rumors
questions
about,
one
more
financial
institutions or market utilities, or
the financial services industry generally, may lead to market-wide liquidity
problems, losses
of depositor,
creditor
and
counterparty
confidence
and
losses
or defaults
other institutions.
These
losses
defaults
could
have
material
adverse
effect
our
business,
financial
condition,
results
operations
and
growth
prospects. Additionally,
if our
competitors were
extending credit
on terms
we found
to pose
excessive risks,
or at interest
rates which we believed
did not warrant the
credit exposure, we may not
be able to maintain
our business volume and
could
experience deteriorating financial performance.
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USCB Financial Holdings, Inc.
Insufficient liquidity could
impair our ability to
fund operations and jeopardize
our financial condition,
results
of operations, growth and prospects.
Effective liquidity management is essential for the operation of our business. Although we
have implemented strategies
to maintain
sufficient
and
diverse
sources of
funding
to accommodate
planned,
as well
as unanticipated,
liquidity
needs
(including changes
in assets, liabilities, and
off-balance sheet commitments under various
economic conditions), an inability
raise
funds
through
deposits,
borrowings,
the
sale
investment
securities
and
other
sources
could
have
material
adverse effect
on our
liquidity. Our access
to funding
sources in
amounts adequate to
finance our
activities could
be impaired
by factors that affect us specifically or the financial services
industry in general. Factors that could detrimentally impact
our
access to liquidity sources include a decrease in the level of our business activity due to a market disruption, a decrease in
the borrowing capacity assigned to
our pledged assets by our
secured creditors, competition from other
financial institutions
which could drive up the
costs of deposits or adverse
regulatory action against us. Deterioration in
economic conditions and
the loss of
confidence in financial
institutions may increase
our cost of
funding and limit
our access to
some of our
customary
sources of liquidity,
including, but not
limited to, inter-bank
borrowings and borrowings
from the Federal
Home Loan Bank
of Atlanta, or
the FHLB, and
the Federal Reserve
Bank of Atlanta.
Our ability to
acquire deposits
or borrow
could also be
impaired by
factors that
are not
specific to
us, such
severe disruption
of the
financial markets
or negative
views and
expectations
about the
prospects
for the
financial
services
industry generally
a result
of conditions
faced
by banking
organizations
the
domestic
and
international
credit
markets.
Any decline
available
funding
or cost
of liquidity
could
adversely impact our ability to originate loans, invest in securities, meet our expenses
or fulfill obligations such as repaying
our borrowings or
meeting deposit withdrawal demands,
any of which
could, in turn,
have an adverse
effect on our
business,
financial condition, and results of operations.
Significant changes
to the size,
structure, powers
and operations of
the federal government,
changes to U.S.
economic policies, and
uncertainties regarding
the potential for
these changes may
cause economic
disruptions
that could, in turn, adversely impact our business,
results of operations and financial condition.
The current U.S. administration
has implemented significant changes in
federal priorities and has
taken steps to change
the operations,
structure, and
policy focus
of various
federal agencies,
as well
as regulatory
priorities, policy
approaches
and
interpretations
existing
laws
those
federal
agencies.
For
example,
recent
executive
actions
and
proposed
legislation has changed agency mandates, modified or reduced federal program funding, altered regulatory frameworks, or
adjusted the size and
composition of the
federal workforce. Moreover,
leadership transitions at
key federal agencies
have
impacted or
may impact
rulemaking, supervision,
enforcement, and
examination
priorities across
the financial
regulatory
landscape. These developments in the federal government may
have varying effects on the banking and financial services
industry that are difficult to predict, which makes it difficult for us to anticipate and mitigate attendant risks. Compliance with
changing federal and regulatory
priorities could, among
other things, increase
the costs of
operating our business,
reduce
the
demand
for
our
products
and
services,
impact
our
ability
achieve
our
business
goals,
and
increase
our
legal,
operational and reputational risks, any or all of which could
materially adversely affect our results of operations.
The current U.S. administration also has implemented rapid shifts in macroeconomic policies, such as those relating to
trade restrictions and tariffs, which
have created significant uncertainties regarding
U.S. economic growth, the potential for
recession, and concerns
over an increase in
inflation. Slow economic
growth, economic contraction
or recession, or shifts
in broader consumer and business trends would significantly impact our ability to originate loans, the ability of borrowers to
repay loans, and the value of the collateral securing loans.
Changes in U.S.
immigration policies, particularly those
that could lead
to mass deportations, may
disrupt key industries
in our region such as construction and
hospitality. These disruptions could exacerbate labor shortages, reduce productivity,
and cause financial instability among affected
businesses, impairing the repayment abilities of borrowers
in these sectors.
Other political and economic events within the U.S., including a contentious domestic political environment, changes in
disagreements
over
monetary
policy
and
actions
the
FRB,
disagreements
over
long-term
federal
budget
and
deficit
reduction
plans,
disagreements
over
threats
not
increase
the
government's
borrowing
limit
"debt
ceiling"),
and
risk
further
downgrade
the
ratings
government
debt
obligations,
also
may
negatively
impact
financial markets and the U.S. economy.
Further,
the perception
of the
potential for
additional significant
changes in
federal regulatory
or economic
policy has
also increased uncertainty and may exacerbate declines in investor and
consumer confidence, which in turn may adversely
impact financial
markets and the broader economy of the United States.
Regional business
and economic
conditions are
a major
driver of
our results
of operations.
Difficult
conditions in
the
regional’s
business
and
economic
environment,
including
those
caused
by the
lack
of stability
and
predictability
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USCB Financial Holdings, Inc.
policymaking,
may
materially
adversely
affect
our
operating
expenses,
the
quality
our
assets,
credit
losses,
and
the
demand for our products and services.
Regional business
and economic
conditions are
a major
driver of
our results
of operations.
Difficult
conditions in
the
regional
business
and
economic
environment,
including
those
caused
the
lack
stability
and
predictability
policymaking,
may
materially
adversely
affect
our
operating
expenses,
the
quality
our
assets,
credit
losses,
and
the
demand for our products and services.
Our lending business is subject to credit risk, which
could lead to unexpected losses.
Our
primary
business
involves
making
loans
customers.
The
business
lending
inherently
risky
because
the
principal or
interest on
the loan
may not
be repaid
timely or
at all
or the
value of
any collateral
securing the
loan may
insufficient to
cover our
outstanding exposure.
These risks
may be affected
by the
strength or
weakness of
the particular
borrower's business sector
and local, regional and
national market and
economic conditions. Many
of our loans are
made
to SMBs that may be
less able to withstand
competitive, economic and financial
pressures than larger borrowers.
Our risk
management practices,
such as
monitoring the
concentration of
our loans
within specific
industries in
which we
lend and
concentrations with individual borrowers
or related borrowers, and
our credit approval
practices, may not adequately
reduce
credit risk. In addition, there are risks inherent in making any loan, including
risks relating to proper loan underwriting, risks
resulting from
changes in
economic and
industry conditions,
risks inherent
in dealing
with individual
borrowers, including
the risk that a borrower may not provide
information to us about their business
in a timely manner,
may present inaccurate
or incomplete information to us, may lack a U.S. credit history,
or may leave the U.S. without fulfilling their loan obligations,
leaving us with
little recourse
to them personally,
and/or risks
relating to the
value of
collateral. In
order to
manage credit
risk successfully,
we must,
among other
things, maintain
disciplined and
prudent underwriting
standards and
ensure that
our lenders follow those standards. The weakening of
these standards for any reason, such as an
attempt to attract higher
yielding loans,
a lack
of discipline
or diligence
by our
employees in
underwriting and
monitoring loans,
the inability
of our
employees to adequately adapt
policies and procedures to
changes in economic or
any other conditions affecting borrowers
and the quality
of our loan portfolio,
may result in loan
defaults, foreclosures and additional charge-offs and
may necessitate
that we significantly increase our allowance for credit losses, each of which could adversely affect our net income. A failure
to effectively
manage
credit risk
associated
with
our loan
portfolio could
lead to
unexpected
losses and
have a
material
adverse effect on our business, financial condition
and results of operations.
Natural disasters and severe weather events in Florida
could have a material adverse impact on our
business,
financial condition and operations.
Our
operations
and
our
customer
base
are
primarily
located
South
Florida.
This
region
vulnerable
natural
disasters
and
severe
weather
events
acts
God,
such
hurricanes
tropical
storms,
which
can
have
material
adverse impact
on our
loan portfolio,
our overall
business, financial
condition and
operations, cause
widespread property
damage and have
the potential to
significantly depress
the local economies
in which we
operate. Future adverse
weather
events in
Florida could
potentially result
in extensive
and costly
property damage
to businesses
and residences,
depress
the value of property serving as collateral for our loans, force the relocation of residents, and
significantly disrupt economic
activity in the region.
We cannot
predict the
extent of
damage that
may result
from such
adverse weather
events, which
will depend
variety of factors that are beyond our control,
including, but not limited to, the
severity and duration of the event,
the timing
and level
of government
responsiveness, the
pace of
economic recovery
and availability
of insurance
to cover
losses. In
addition,
the
nature,
frequency
and
severity
these
adverse
weather
events
and
other
natural
disasters
may
exacerbated by climate change. If a significant adverse weather event or other natural disaster were to occur, it could have
a materially adverse impact
on our financial
condition, results of operations
and our business, as
well as potentially
increase
our exposure to credit and liquidity risks.
Our business is subject to
interest rate risk, and variations in
interest rates may materially and adversely
affect
our financial performance.
Changes in the
interest rate environment
may reduce our
profits. It is
expected that our
primary source of
income will
continue to be from
the differential or
"spread" between the
interest earned on
loans, securities and
other interest-earning
assets, and the interest paid on
deposits, borrowings and other interest-bearing liabilities. Net
interest spreads are affected,
in part, by the
difference between the maturities and repricing characteristics of
interest-earning assets and interest-bearing
liabilities. Changes
in market
interest rates
generally affect
loan volume,
loan yields,
funding sources
and funding
costs.
Our
net interest
spread
depends
many
factors
that
are partly
or completely
out
of our
control,
including
competition,
general economic
conditions, and
federal economic
monetary and
fiscal policies,
and in particular,
the Federal
Reserve's
policy determinations with respect to interest rates.
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USCB Financial Holdings, Inc.
During 2022 and 2023, the Federal
Open Market Committee (the “FOMC”)
increased certain benchmark interest
rates
reduce
the
rate
inflation
the
extent
necessary
reduce
inflation
the
target
rate
that
the
FOMC
believes
appropriate.
All of these
increases were expressly made
in response to
inflationary pressures. However, In 2024, the
FOMC
decreased such benchmark
rates three times
followed in 2025
by three additional
decreases
totaling 0.75%. However, there
can be no
assurances as
to any future
FOMC action,
including whether
it continues to
decrease the federal
funds rate or
implements increases. In late January 2026, the
FOMC determined to not change the federal
funds rate at 3.50% to 3.75%.
While an increase in
interest rates may increase
our weighted average
loan yield, it may
adversely affect the
ability of
certain borrowers
with variable rate
loans to pay
the contractual
interest and principal
due to us.
Following an
increase in
interest rates, our
ability to maintain
a positive net
interest spread is
dependent on our ability
to increase our
loan offering
rates, replace
loans that
mature and
repay or
that prepay
before maturity
with new
originations at
higher rates,
minimize
increases on
our deposit
rates, and maintain
an acceptable level
and composition of
funding. We cannot
provide assurances
that we will be
able to increase
our loan offering
rates and continue
to originate loans
due to the competitive
landscape in
which we operate. Additionally, we cannot provide
assurances that we can minimize
the increases in our
deposit rates while
maintaining
acceptable
level
deposits.
Due
competitive
pressures
increased
the
rates
paid
our
interest-bearing deposits such that
our weighted average cost
of deposits increased from
0.62% for 2022
to 3.04% for
However,
and
light
the
FOMC’s
actions
decrease
the
federal
funds
rate
total
six
times,
decreased the
rates paid
on our
interest-bearing deposits. As
a result,
while the
overall cost
of funds
increased, as
compared
to 2022 and 2023, it increased at a slower
pace when compared to the increase
in the cost of deposits from 2022 to
Finally,
cannot
provide
any
assurances
that
can
maintain
our
current
levels
noninterest-bearing
deposits
customers continue
seeking higher-yielding
products due
to the increased
interest rates
being paid on
deposits currently,
as compared to rates in early 2024 and 2023 and 2022.
Accordingly,
changes
levels
interest
rates
could
materially
and
adversely
affect
our
net
interest
margin,
asset
quality, loan origination
volume, average loan portfolio balance, liquidity,
and overall profitability.
Our allowance for credit losses may not be sufficient
to absorb potential losses in our loan portfolio.
maintain
allowance
for
credit
losses
that
represents
management's
judgment
probable
losses
and
risks
inherent in our loan portfolio.
The level of the allowance
reflects management's continuing
evaluation of general economic
conditions,
present
political
and
regulatory
conditions,
diversification
and
seasoning
the
loan
portfolio,
historic
loss
experience, identified credit
problems, delinquency levels
and adequacy of
collateral. Determining the
appropriate level of
our
allowance
for
credit
losses
involves
degree
subjective
judgment
and
requires
management
make
significant
estimates of and assumptions regarding current credit risks
and future trends, all of which may undergo material changes.
Inaccurate
management
assumptions,
deterioration
economic
conditions
affecting
borrowers,
new
negative
information
regarding
existing
loans,
identification
additional
problem
loans
or deterioration
of existing
problem
loans,
and
other
factors
(including
third-party
review
and
analysis),
both
within
and
outside
our
control,
may
require
increase our allowance for
credit losses. In addition,
our regulators, as an
integral part of their
periodic examinations, review
our methodology for calculating, and
the adequacy of, our allowance
for credit losses and may
direct us to make additions
to the allowance
based on their
judgments about
information available to
them at the
time of their
examination. Further,
actual charge-offs in future
periods exceed the
amounts allocated to
our allowance for
credit losses, we
may need additional
provisions for credit losses to restore
the adequacy of our allowance for
credit losses. Finally, the measure of our allowance
for credit losses depends on the
adoption and interpretation of accounting
standards. The Financial Accounting
Standards
Board, or FASB, issued a new credit
impairment model, the Current Expected Credit Loss,
or CECL model, which became
applicable
January
CECL
requires
financial
institutions
estimate
and
develop
provision
for
credit
losses over the lifetime of the loan at origination, as opposed to reserving for incurred or probable
losses up to the balance
sheet date. Under the CECL
model, expected credit deterioration
will be reflected in the
income statement in the
period of
origination or acquisition of a loan,
with changes in expected credit losses
due to further credit deterioration or
improvement
reflected in the periods in which the expectation
changes. As a result of the initial
implementation of CECL, we incurred as
of January 1, 2023
a $1.1 million cumulative
effect of the
adoption of CECL. Moreover,
the CECL model may
create more
volatility in our level of allowance for credit
losses. If we are required to materially
increase our level of allowance for credit
losses for any reason, such increase could adversely affect our business, prospects, cash flow,
liquidity, financial condition
and results of operations.
Our commercial loan portfolio may expose us to increased
credit risk.
Commercial business
and real
estate loans
generally have
a higher
risk of
loss because
loan balances
are typically
larger
than
residential
real
estate
and
consumer
loans
and
repayment
usually
dependent
cash
flows
from
the
borrower’s business or the
property securing the loan. Our
commercial business loans are primarily made
to small business
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USCB Financial Holdings, Inc.
and middle market customers. These loans typically
involve repayment that depends upon income
generated, or expected
to be generated, by the property securing the loan
and/or by the cash flow generated by the business borrower and
may be
adversely affected by changes in the economy or
local market conditions. These loans expose a
lender to the risk of having
to liquidate the collateral securing
these loans at times when there
may be significant fluctuation of commercial
real estate
values or to the
risk of inadequate cash flows to
service the commercial loans. Unexpected deterioration in
the credit quality
of our
commercial business
and/or real
estate loan
portfolio could
require us
to increase
our allowance
for credit
losses,
which would
reduce our
profitability and
could have
an adverse
effect on
our business,
financial condition,
and results
operations.
Commercial construction loans generally
have a higher risk of
loss due to the assumptions
used to estimate the value
of property
at completion
and the
cost of
the project,
including interest.
It can
be difficult
to accurately
evaluate the
total
funds required
to complete
a project,
and construction
lending often
involves the
disbursement
of substantial
funds with
repayment dependent, in large part, on the success of the ultimate project rather than the ability of a borrower or guarantor
to repay the loan from sources other than the subject project. If the assumptions and estimates are inaccurate, the value of
completed property
may fall
below the
related loan
amount. If we
are forced to
foreclose on
a project
prior to
completion,
we may
unable
recover
the
entire
unpaid
portion
of the
loan,
which
would
lead
losses.
addition,
may
required to fund additional amounts to complete a project,
incur taxes, maintenance and compliance costs for
a foreclosed
property and
may have
to hold
the property
for an
indeterminate
period of
time, any
of which
could adversely
affect
our
business, prospects, cash flow,
liquidity, financial
condition and results of operations.
The imposition of
further limits by the
bank regulators on commercial
real estate lending activities
could curtail
our growth and adversely affect our earnings.
The FDIC, the Federal Reserve
and the Office of
the Comptroller of the
Currency have promulgated joint
guidance on
sound risk management practices for financial institutions with concentrations in commercial real estate lending. Under this
guidance,
a financial
institution
that,
like
is actively
involved
commercial
real
estate
lending should
perform
a risk
assessment to identify
concentrations. Regulatory
guidance on concentrations
in commercial real
estate lending provides
that a bank’s commercial real estate lending exposure could
receive increased supervisory scrutiny where total commercial
real estate
loans, including
loans secured
by multi-family
residential
properties, owner-occupied
and nonowner-occupied
investor real estate, and
construction and land loans, represent 300%
or more of an
institution’s total risk-based capital, and
the outstanding balance of the commercial real estate loan portfolio has increased by
50% or more during the preceding 36
months.
December
our
total
commercial
investor
real
estate
loans,
including
loans
secured
apartment
buildings, commercial real estate, and construction and land loans represented 370% of the Bank’s total risk-based capital.
However,
the growth
in the
commercial real
estate portfolio
did not
exceed 50%
over the
preceding 36
months but
it has
exceeded the threshold in prior
periods. The particular focus of
the guidance is on exposure
to commercial real estate loans
that are
dependent on
the cash flow
from the
real estate held
as collateral and
that are likely
at greater
risk to
conditions
in the commercial
real estate
market (as opposed
to real estate
collateral held as
a secondary source
of repayment or
an abundance
of caution).
The purpose
of the
guidance is
to guide
institutions in
developing risk
management practices
and capital
levels commensurate
with the
level and
nature of
real estate
concentrations. Management
has established
commercial
real
estate
lending
framework
monitor
specific
exposures
and
limits
types
within
the
commercial
real
estate
portfolio
and
takes
appropriate
actions,
necessary.
While
believe
have
implemented
policies
and
procedures with
respect
to our
commercial
real estate
loan portfolio
consistent
with this
guidance,
the FDIC,
the Bank’s
primary federal regulator,
could require us
to implement additional
policies and procedures
pursuant to their
interpretation
of the guidance that may result
in additional costs to us.
In addition, If the FDIC were
to impose restrictions on the
amount
of commercial real estate loans we can hold in our portfolio,
our earnings would be adversely affected.
Our
SBA
lending
program
is dependent
upon
the
federal
government
and
our status
a participant
in the
SBA's Preferred
Lenders Program,
and we
face specific
risks associated
with originating
SBA loans
and selling
the guaranteed portion thereof.
have
been
approved
the
SBA
participate
the
SBA's
Preferred
Lenders
Program.
SBA
Preferred
Lender,
we enable
our clients
to obtain
SBA loans
without being
subject to
the potentially
lengthy SBA
approval process
necessary
for
lenders
that
are
not
SBA
Preferred
Lenders.
The
SBA
periodically
reviews
the
lending
operations
participating
lenders
assess,
among
other
things,
whether
the
lender
exhibits
prudent
risk
management.
When
weaknesses are identified, the SBA may request corrective actions
or impose enforcement actions, including revocation of
the lender's
Preferred Lender
status. If
we lose
our status
SBA Preferred
Lender,
we may
lose some
or all
of our
customers to
lenders who
are SBA
Preferred Lenders,
which could
adversely affect
our business,
financial condition
and
results of operations.
We generally sell the guaranteed
portion of our SBA 7(a) loans
in the secondary market. These sales
have resulted in
both premium income for us
at the time of
sale and created a stream
of future servicing income. There
can be no assurance
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USCB Financial Holdings, Inc.
that we will be able to continue originating these loans, that a secondary market for these loans will continue to exist or that
we will continue to realize
premiums upon the sale of
the guaranteed portion of
these loans. When we sell
the guaranteed
portion of our SBA 7(a) loans, we incur credit risk on the non-guaranteed portion of the loans, and if a customer defaults on
the non-guaranteed portion of a loan, we share any loss
and recovery related to the loan pro-rata with the SBA.
The laws, regulations and
standard operating procedures
that are applicable to
SBA loan products may
change in the
future. We
cannot predict
the effects
of these
changes on
our business
and profitability.
Because government
regulation
greatly
affects
the
business
and
financial
results
all
commercial
banks
and
bank
holding
companies,
especially
our
organization, changes in the laws, regulations
and procedures applicable to SBA loans
could adversely affect our ability
operate profitably.
In addition, the
aggregate amount of
SBA 7(a) and 504
loan guarantees by the
SBA must be approved
each fiscal year by the federal
government. We cannot predict
the amount of SBA 7(a)
loan guarantees in any given fiscal
year. If the federal government were to reduce the amount of SBA loan guarantees, such reduction
could adversely impact
our SBA lending
program, including making and
selling the guaranteed portion
of fewer SBA
7(a) and 504
loans. In addition,
any default by
the U.S. government
on its obligations
or any prolonged
government shutdown
could, among
other things,
impede our ability to originate
SBA loans or sell such loans
in the secondary market, which
could materially and adversely
affect our business, financial condition and results
of operations.
The SBA may not honor its guarantees if we do not originate
loans in compliance with SBA guidelines
SBA lending programs typically guarantee 75% of the
principal on an underlying loan. If the
SBA establishes that a loss
SBA guaranteed loan
is attributable
to significant
technical deficiencies in
the manner
in which
the loan
was originated,
funded or serviced by us, the SBA may seek recovery of the principal loss related to the
deficiency from us notwithstanding
that a
portion of
the loan
was guaranteed
by the
SBA, which
could adversely
affect
our business,
financial condition
and
results of operations. While we follow the SBA's underwriting
guidelines, our ability to do so depends on
the knowledge and
diligence of our employees
and the effectiveness
of controls we have
established. If our employees
do not follow the
SBA
guidelines in
originating loans
and if
our loan
review and
audit programs
fail to
identify and
rectify such
failures, the
SBA
may reduce or, in some cases,
refuse to honor its guarantee obligations and we may incur
losses as a result.
Correspondent banking is an important part of our business,
which creates increased BSA/AML risk.
As our
business
model
includes
correspondent
services
to banks
in Latin
America
and the
Caribbean,
these
cross-
border
correspondent
banking
relationships
pose
unique
risks
because
they
create
situations
which
financial
institution will be
handling funds from
a financial institution
in Latin America
and the Caribbean
whose customers may
not
be transparent to us. Moreover, many foreign financial institutions, including
in Latin America and the Caribbean where our
correspondent banking
services
are located,
are not
subject to
the same
or similar
regulatory
guidelines
banks.
Accordingly,
these
foreign
institutions
may
pose
greater
money
laundering
risk
their
respective
bank
correspondent(s). Because
of the
large amount
of funds,
multiple transactions,
and our
potential lack
of familiarity
with a
foreign correspondent financial institution's customers, these customers may
be able to more easily
conceal the source and
use
illicit
funds.
Consequently,
may
have
higher
risk
non-compliance
with
the
BSA
and
other
anti-money
laundering (“AML”) rules and regulations including the AML Act due
to our correspondent banking relationships with foreign
financial institutions.
Additionally,
international private
banking places additional
pressure on our
policies, procedures
and
systems for complying with the BSA, and
AML statutes and regulations as well as
the recently enacted CTA.
Our failure to
strictly
adhere
the
terms
and
requirements
our
OFAC
license
our
failure
adequately
manage
our
BSA/AML
compliance risk in light of our correspondent banking relationship
with foreign financial institutions and international private
banking could result in regulatory or other actions being
taken against us, including the imposition
of civil money penalties,
formal agreements and
cease and desist
orders. Furthermore, failure
to meet regulatory
requirements could require
incur
additional
significant
costs
order
bring
our
BSA/AML
processes
and
procedures
into
compliance,
negatively
impact our reputation, and have a material adverse effect
on our business, financial condition and results of operations
In recent
years, sanctions
that the
regulators have
imposed on
banks that
have not
complied with
all BSA
and AML
requirements have been
especially severe. In
order to comply
with regulations, guidelines
and examination procedures
this area, we have
dedicated significant resources to our BSA/AML process
and procedures. If our policies, procedures and
systems
are deemed
deficient,
we could
subject
liability,
including
fines
and
regulatory
actions
such
as additional
restrictions on our ability to pay
dividends and the necessity to obtain
regulatory approvals to proceed with
certain aspects
of our business plan, such as acquisitions.
We may not recover all amounts that are contractually
owed to us by our borrowers.
We are
dependent on
the collection
of loan
principal, interest,
and fees
to partially
fund our
operations. A
shortfall in
collections and proceeds may impair our ability to fund
our operations or to repay our existing debt.
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USCB Financial Holdings, Inc.
When
lend
funds,
commit
fund
loan
enter
into
letter
credit
other
credit-related
contract
with
counterparty, we incur credit risk. The
credit quality of our
portfolio can have a
significant impact on our
earnings. We expect
to experience
charge-offs
and delinquencies
on our
loans
in the
future.
Our
customers'
actual
operating
results
may be
worse
than
our
underwriting
contemplated
when
originated
the
loans,
and
these
circumstances,
could
incur
substantial impairment or loss
of the value on these
loans. We may
fail to identify problems
because our customer
did not
report them in a timely manner
or, even if
the customer did report the problem,
we may fail to address it
quickly enough or
at all, or some loans,
due to market circumstances,
may not be able
to be fully rehabilitated.
Even if customers provide
with full and accurate disclosure
of all material information concerning
their businesses, we may misinterpret
or incorrectly
analyze this information. Mistakes
may cause us
to make loans that
we otherwise would not
have made or
to fund advances
that we otherwise would not have funded, either
of which could result in losses on
loans, or necessitate that we significantly
increase our allowance for loan and
lease losses. As a result, we could
suffer loan losses and
have non-performing loans,
which could
have
a material
adverse
effect
on our
net
earnings
and
results
operations
and financial
condition,
to the
extent the losses exceed our allowance for loan and lease
losses.
Some
our
loans
are
secured
liens
specified
collateral
the
borrowers
and
may
not
obtain
properly
perfect our liens or the value
of the collateral securing any
particular loan may not be sufficient
to protect us from suffering
a partial or complete
loss if the loan
becomes non-performing and
we proceed to foreclose
on or repossess
the collateral.
With
respect
loans
that
originate
for
condominium
homeowners'
associations
(“Associations”),
these
loans
are
primarily secured by and rely
upon the cash flow received
by the Associations from
payments received from their
property
owners, as well
as cash on
hand. These Associations
rely upon payments
received from their
property owners in
order to
perform
these
loans
and
for
the
loan
collateral.
Accordingly,
our
ability
recover
amounts
non-performing
loans
made to Associations
is dependent
upon the Association
having sufficient
cash on hand
for repayment of
the loan and/or
having
the
ability
impose
assessments
its
property
owners,
some
whom
may
not
have
the
ability
pay
such
assessments. In such events, we could suffer loan losses,
which could have a material adverse effect on our
net earnings,
allowance for loan and lease losses, financial condition,
and results of operations.
Non-performing
assets
take
significant
time
resolve
and
adversely
affect
our
results
operations
and
financial condition, and could result in further losses in
the future.
Non-performing assets adversely
affect our net
income in
various ways. We
do not
record interest income
on nonaccrual
loans or other
real estate
owned (“OREO”),
thereby adversely
affecting our
net income
and returns on
assets and
equity,
increasing our loan administration costs and adversely
affecting our efficiency ratio. When
we take collateral in foreclosure
and similar proceedings, we are
required to mark the collateral to
its then-fair market value, which may
result in a loss. Non-
performing loans
and OREO
also increase our
risk profile
and the level
of capital
our regulators
believe is appropriate
for
maintain in
light of
such risks.
The resolution
of non-performing
assets requires
significant time
commitments from
management
and
can
detrimental
the
performance
their
other
responsibilities.
addition,
there
are
legal
fees
associated
with
the
resolution
problem
assets
well
carrying
costs
such
taxes,
insurance,
and
maintenance
related to OREO.
If we experience
increases in non-performing
loans and non-performing
assets, our net
interest income
may be negatively impacted and
our loan administration costs
could increase, each of which could
have an adverse effect
on our net income and related ratios, such as return
on assets and equity.
We engage in
lending secured by
real estate and
may foreclose on
the collateral and
own the underlying
real
estate,
subjecting
the
costs
and
potential
risks
associated
with
the
ownership
real
property,
including
exposure
environmental
liability,
consumer
protection
initiatives
changes
state
federal
law
may
substantially raise the cost of foreclosure or prevent
us from foreclosing at all.
Since we
originate
loans secured
by real
estate, we
may have
to foreclose
on the
collateral
property
to recover
our
investment and may thereafter own and operate such property,
in which case we would be exposed to the risks inherent in
the
ownership
real
estate.
The
amount
that
mortgagee,
may
realize
after
foreclosure
depends
factors
outside of our
control, including,
but not limited
to, general or
local economic conditions,
environmental cleanup
liabilities,
various assessments
relating to
the ownership
of the property,
interest rates, real
estate tax rates,
operating expenses
the
mortgaged
properties,
our
ability
obtain
and
maintain
adequate
occupancy
the
properties,
zoning
laws,
governmental and
regulatory rules,
and natural disasters.
Our inability
to manage
the amount
of costs
or size
of the risks
associated with
the ownership
of real
estate, or
write-downs in
the value
of OREO,
could have
an adverse
effect on
our
business, financial condition, and results of operations.
Additionally,
consumer protection initiatives
or changes in state
or federal law may
substantially increase the time
and
expenses associated
with the
residential foreclosure
process or
prevent us
from foreclosing
at all.
A number
of states
recent
years
have
either
considered
adopted
foreclosure
reform
laws
that
make
substantially
more
difficult
and
expensive for
lenders to
foreclose on
residential properties
in default.
Furthermore, federal
regulators have
prosecuted a
number of
mortgage servicing
companies for
alleged consumer
law violations.
If new
state or
federal laws
or regulations
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USCB Financial Holdings, Inc.
are ultimately enacted
that significantly raise
the cost of residential
foreclosures or raise
outright barriers, they
could have
an adverse effect on our business, financial condition,
and results of operations.
We are exposed to risk of environmental liability
when we take title to property.
significant
portion
our
loan
portfolio
secured
real
estate,
and
could
become
subject
environmental
liabilities with respect
to one or
more of these
properties, or with
respect to properties that
we own in
operating our business.
During the ordinary course of business,
we may foreclose on and take title to
properties securing defaulted loans. In
doing
so, there is
a risk that
hazardous or toxic
substances could
be found on
these properties. If
hazardous conditions
or toxic
substances are found
on these properties,
we may be
liable for remediation
costs, as well
as for personal
injury and property
damage, civil
fines and
criminal penalties
regardless
of when
the hazardous
conditions or
toxic substances
first affected
any particular property.
The costs associated with investigation or
remediation activities could be substantial.
In addition, if
we are the owner or former owner
of a contaminated site, we may be
subject to common law claims by
third parties based
on damages and
costs resulting
from environmental
contamination emanating
from the
property.
If we become
subject to
significant environmental liabilities, our business, financial condition
and results of operations could be adversely affecte
are
subject
certain
operational
risks,
including,
but
not
limited
customer,
employee
third-party
fraud and data processing system failures and errors.
Employee errors and employee or
customer misconduct could subject us
to financial losses or
regulatory sanctions and
seriously harm our reputation. Misconduct by our employees could include hiding unauthorized
activities from us, improper
or unauthorized activities on behalf of our customers or improper use of confidential information. It is not
always possible to
prevent employee
errors and
misconduct, and
the precautions we
take to
prevent and
detect this
activity may
not be
effective
in all cases. Employee errors could also subject us
to financial claims for negligence.
We have
implemented a
system of
internal controls
designed to
mitigate operational
risks, including
data processing
system failures
and errors
and customer
or employee
fraud, as
well as
insurance
coverage
designed to
protect us
from
material
losses
associated
with
these
risks,
including
losses
resulting
from
any
associated
business
interruption.
our
internal controls fail
to prevent or
detect an
occurrence, or if
any resulting loss
is not
insured or exceeds
applicable insurance
limits, it could adversely affect our business,
prospects, cash flow, liquidity,
financial condition and results of operations.
also
rely
the
integrity
and
security
variety
third
party
processors,
payment,
clearing
and
settlement
systems, as well
as the various
participants involved
in these systems,
many of which
have no direct
relationship with us.
Failure
these
participants
their
systems
protect
our
customers'
transaction
data
may
put
risk
for
possible
losses due
to fraud
or operational
disruption. At
the date
of this
Annual Report
Form 10-K,
there is
no knowledge or
indication
that customer
sensitive information
was compromised
result of
third parties
system vulnerabilities,
but management
continues to monitor developments and vendor communications.
When we originate loans, we rely
heavily upon information supplied by third parties,
including the information contained
in credit
applications, property
appraisals, title
information, equipment
pricing and
valuation and
employment and
income
documentation, in deciding which loans we will originate, as well as the terms of those loans. If any of the information upon
which
rely
misrepresented,
either
fraudulently
inadvertently,
and
the
misrepresentation
not
detected
prior
funding,
the value
the
loan may
be significantly
lower
than expected,
may
fund a
loan that
would not
have
funded or
on terms
that do
not comply
with our
general underwriting
standards. Whether
a misrepresentation
is made
the applicant, the borrower,
one of our employees or another
third party,
we generally bear the risk of
loss associated with
the misrepresentation. A loan
subject to a material
misrepresentation is typically
unsellable or subject to
repurchase if it
sold prior to detection of the
misrepresentation. The sources of
the misrepresentations are often
difficult to locate, and
often difficult
to recover
any
of the
resulting monetary
losses we
may suffer,
which
could
adversely
affect
our business,
financial condition and results of operations.
face
significant
operational
risks
because
the
nature
the
financial
services
business
involves
high
volume of transactions
operate
diverse
markets
and
rely
the
ability
our
employees
and
systems
process
high
number
transactions. Operational
risk is
the risk of
loss resulting from
our operations,
including but not
limited to, the
risk of fraud
by employees or
persons outside
the Company,
the execution
of unauthorized
transactions by
employees, errors
relating
to transaction
processing and technology, breaches of
our internal
control systems and
compliance requirements. Insurance
coverage may
not be available
for such
losses, or
where available, such
losses may
exceed insurance
limits. This
risk of
loss
also
includes
potential
legal
actions
that
could
arise
result
operational
deficiencies
result
non-
compliance with applicable regulatory standards,
adverse business decisions or their
implementation, or customer attrition
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USCB Financial Holdings, Inc.
due to
potential adverse publicity. In the
event of a
breakdown in our
internal control systems,
improper operation of
systems
or improper employee actions, we could suffer financial
loss, face regulatory action, and/or suffer damage to
our reputation.
We have several
large depositor relationships,
the loss of which
could force us to
fund our business
through
more expensive and less stable sources.
Withdrawals of deposits by any
one of our largest depositors
could force us to
rely more heavily on more expensive
and
less
stable
funding
sources.
Consequently,
the
occurrence
such
event
could
have
material
adverse
effect
our
business, financial condition and results of operations. At
December 31, 2025, our top 10 depositors held 15.5% of
our total
deposit portfolio. As of December 31, 2025, 49% of our deposits
are estimated to be FDIC-insured. At such date, our
public
funds are 7%
of total deposits
and are partially
collateralized. The
estimated average account
size of our
deposit portfolio
thousand
December 31,
addition,
the
Bank
was
considered
“well
capitalized”
institution
December 31, 2025 and 2024.
Any change in the Bank's ability to gather brokered
deposits may adversely impact the Bank.
Failure to maintain
the Bank's status as
a "well capitalized" institution
could have an adverse
effect on us, and
our ability
to fund
our operations.
The Bank
uses brokered
deposits to
assist in
funding its
loan and
other financing
products. As
December
our
total
deposits
consisted
brokered
deposits.
Should
the
Bank
ever
fail
well
capitalized
the
future
result
not
meeting
the
well
capitalized
requirements
the
imposition
individual
minimum capital
requirement
or similar
formal
requirement,
then,
the
Bank would
prohibited,
absent
waiver
from the
FDIC, from utilizing brokered deposits
(i.e., no insured depository institution
that is deemed to be
less than "well capitalized"
may accept, renew or
rollover brokered deposits absent a
waiver from the
FDIC). In such event,
such a result
could produce
material adverse
consequences for
the Bank with
respect to
liquidity and could
also have
material adverse
effects on
our
financial condition
and results
of operations.
Further,
depending on
the Bank's
condition in
the future
and its
reliance on
these deposits
source
of funding,
the
FDIC could
increase the
surcharge
our brokered
deposits.
we are
ever
required
pay
higher
surcharge
assessments
with
respect
these
deposits,
such
payments
could
material
and
therefore could have
a material adverse
effect on our
financial condition and
results of operations.
In addition, changes
FDIC regulations regarding brokered deposits
or interpretations of such
regulations by federal banking agencies could
have
an adverse impact on the Bank’s ability to accept
brokered deposits. Additionally,
brokered deposits are highly sensitive to
changes in interest rates and, accordingly,
can be a more volatile source of funding.
Use of brokered deposits involves the
risk that growth supported by such deposits would be halted,
or the Bank’s liquidity adversely impacted, if the
rates offered
by the
Bank were
less than
those offered
by other
institutions seeking
such deposits,
depositors were
to perceive
decline in the Bank’s safety and soundness, or both.
Our securities portfolio performance in difficult market conditions could have adverse effects on
our results of
operations
Unrealized losses on
investment securities result from
changes in credit
spreads and liquidity
issues in the
marketplace,
along
with
changes
the
credit
profile
individual
securities
issuers.
Under
GAAP,
are
required
review
our
investment
portfolio
periodically
for
the
presence
of credit
losses
our securities,
taking
into consideration
current
and
future
market
conditions,
the
extent
and
nature
changes
fair
value,
issuer
rating
changes
and
trends,
volatility
earnings, current
analysts’ evaluations,
our ability
and intent
to hold
investments until
a recovery
of fair
value, as
well as
other factors. Adverse developments with respect to one or more of
the foregoing factors may require us to deem particular
securities to be impaired, with the credit-related portion of
the reduction in the value recognized as a
charge to our earnings
through an allowance. Subsequent valuations,
in light of factors prevailing at that
time, may result in significant changes
the values of these securities in future periods. Any
of these factors could require us to
recognize further impairments in the
value of our securities portfolio, which may have an adverse
effect on our results of operations in future periods.
We may not
effectively execute
on our expansion
strategy, which
may adversely affect
our ability to
maintain
our historical growth and earnings trends.
Our
primary
expansion
strategy
focuses
organic
growth,
supplemented
potential
acquisitions
financial
institutions and
banking teams;
however,
we may
not be
able to
successfully execute
on these
aspects of
our expansion
strategy,
which
may
cause
our
future
growth
rate
decline
below
our
recent
historical
levels,
may
prevent
from
growing at
all. More
specifically,
we may
not be able
to generate
sufficient new
loans and
deposits within
acceptable risk
and
expense
tolerances
obtain
the
personnel
funding
necessary
for
additional
growth.
Various
factors,
such
economic conditions
and competition with
other financial
institutions, may impede
or restrict the
growth of our
operations.
Further, we may be unable to attract
and retain experienced bankers, which could adversely
affect our growth. The success
of our strategy also depends on our ability to manage our growth effectively,
which in turn depends on a number of factors,
including
our
ability
adapt
our
credit,
operational,
technology,
risk
management,
internal
controls
and
governance
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USCB Financial Holdings, Inc.
infrastructure to accommodate expanded operations.
Even if we are successful in continuing our growth,
such growth may
not offer the same
levels of potential profitability,
and we may not
be successful in
controlling costs and maintaining
asset
quality in the
face of that
growth. Accordingly,
our inability
to maintain growth
effectively manage
growth could
have
an adverse effect on our business, financial condition
and results of operations.
New lines of business, products, product enhancements
or services may subject us to additional risk.
From time to time, we
may implement new lines
of business or offer
new products and product
enhancements as well
as new
services within
our existing
lines of
business. There
are substantial
risks and
uncertainties associated
with these
efforts. In
developing, implementing
or marketing new
lines of business,
products, product
enhancements or
services, we
may invest significant time and
resources. We may underestimate the appropriate level
of resources or expertise
necessary
make
new
lines
business
products
successful
realize
their
expected
benefits.
may
not
achieve
the
milestones
set
initial
timetables
for
the
development
and
introduction
new
lines
business,
products,
product
enhancements or services, and price
and profitability targets may not
prove feasible. External factors, such
as compliance
with regulations, competitive
alternatives and shifting
market preferences, may
also impact the
ultimate implementation of
a new line of business or offerings of new products, product
enhancements or services. Any new line of business,
product,
product enhancement or service could have a significant impact on the effectiveness of our system of internal controls. We
may also
decide to
discontinue
businesses
or products,
due to
lack
of customer
acceptance
or unprofitability.
Failure to
successfully develop and implement new lines of business or offerings of new products, product enhancements or services
could have an adverse effect on our business, financial condition and results
of operations and could subject us to new and
unanticipated operational, credit, regulatory and reputational risks,
among other risks.
Our business
needs and
future growth
may require
raise additional
capital and
that capital
may not
available on terms acceptable to us or may be dilutive to
existing shareholders.
We believe that we
have sufficient capital
to meet our capital
needs for our current
growth plans. However,
we expect
that we would need to raise additional capital,
in the form of debt or equity securities,
in the future to have sufficient capital
resources
meet
our
longer-term
growth
plans,
and/or
the
quality
our
assets
earnings
were
deteriorate
significantly.
In addition, we
are required by federal
regulatory authorities to
maintain adequate levels
of capital to support
our operations.
Our ability
to raise
capital will
depend on,
among other
things, conditions
in the
capital markets,
which are
outside of
our control, and our financial performance. Accordingly,
we cannot provide assurance that such capital will
be available on
terms acceptable to us or at all. Any occurrence
that limits our access to capital may adversely
affect our capital costs and
our ability to raise capital. Further, if we need to raise capital in the future, we may have to do so when many other financial
institutions are also
seeking to
raise capital and
would then have
to compete with
those institutions for
investors. Any inability
to raise capital on acceptable terms when needed may cause us to
either issue additional shares of common stock or other
securities on less than
desirable terms or
reduce our rate of
growth until market conditions
become more favorable. If
any
of such
events occur, they could
have a material
adverse effect on
our business, financial
condition and results
of operations
and could be dilutive to both tangible book value and our
share price.
Federal law requires that a holding company act as a source of financial and managerial strength to its subsidiary bank
and to
commit
resources
to support
such subsidiary
bank. Under
the “source
of strength”
doctrine, the
Federal Reserve
may
require
holding
company
make
capital
injections
into
troubled
subsidiary
bank
and
may
charge
the
holding
company with
engaging
in unsafe
and unsound
practices
for failure
to commit
resources
subsidiary
bank. A
capital
injection may be required
at times when the
holding company may
not have the resources
to provide it and
therefore may
be required to attempt to
borrow the funds or raise
capital. Thus, any borrowing that must
be done by the Company
to make
a required
capital injection becomes
more difficult and
expensive and
could have
an adverse
effect on our
business, financial
condition and results of operations.
Moreover, it is possible that we will be
unable to borrow funds or
otherwise raise capital
time when
needed. In
addition, an
inability to
raise capital
when needed
may subject
increased regulatory
supervision and
the
imposition of
restrictions
on our
growth
and business.
These restrictions
could
negatively
affect
our
ability
operate
further
expand
our
operations
through
loan
growth,
acquisitions
the
establishment
additional
branches. These restrictions may also
result in increases in operating
expenses and reductions in revenues
that could have
a material adverse effect on our financial condition,
results of operations and our share price.
We may
grow through
mergers or
acquisitions,
a strategy
that may
not be
successful or,
if successful,
may
produce risks in successfully integrating and managing the merged companies or acquisitions and may dilute our
shareholders.
part
our
growth
strategy,
may
pursue
mergers
and
acquisitions
banks
and
non-bank
financial
services
companies within or outside our principal market areas that fit within the mission-driven values of our franchise and that we
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USCB Financial Holdings, Inc.
believe support our business and make financial and strategic
sense. We may have difficulty identifying suitable acquisition
candidates or executing on acquisitions that we pursue, and we may
not realize the anticipated benefits of any transactions
we complete. Additionally,
for any opportunistic
acquisition we were
to consider,
we expect to
face significant
competition
from
numerous
other
financial
services
institutions,
many
which
will
have
greater
financial
resources
than
Accordingly,
attractive
opportunistic
acquisitions
may
not be
available to
us. There
can be
no assurance
that we
will
successful in identifying or completing any future acquisitions.
Mergers and acquisitions involve numerous risks, any
of which could harm our business, including:
the possibility that expected benefits
may not materialize in the
time frame expected or at
all, or may be more
costly
to achieve, or that the acquired business will not perform
to our expectations;
time,
expense
and
difficulties
integrating
the
operations,
management,
products
and
services,
technologies,
existing contracts, accounting processes
and personnel of the target
and realizing the anticipated synergies
of the
combined businesses;
incurring the
time and
expense associated with
identifying and
evaluating potential acquisitions
and merger
partners
and negotiating potential transactions, resulting in management’s attention being diverted from the operation of our
existing business;
difficulties in supporting and transitioning customers
of the target and disruption of our ongoing banking
business;
the price we
pay or other
resources that we
devote may exceed
the value we
realize, or the
value we could
have
realized if we had allocated the purchase consideration
or other resources to another opportunity;
entering new markets or areas in which we have limited or
no experience;
the possibility that our culture is disrupted as a result of
an acquisition;
potential loss of key personnel and customers from either
our business or the target’s business;
assumption of unanticipated problems, claims or other liabilities
of the acquired business;
an inability to realize expected synergies or returns on
investment;
the possibility of regulatory approval for the acquisition being delayed,
impeded, restrictively conditioned, including
the requirement to divest
various activities, or denied
due to existing or
new regulatory issues surrounding
us, the
target institution or the proposed combined entity and
the possibility that any such issues associated with
the target
institution, of which
we may or
may not be
aware at the
time of the
acquisition, could adversely impact
the combined
entity after completion of the acquisition;
the possibility that the acquisition may not be timely completed,
if at all;
the need to raise capital; and
inability to generate sufficient revenue to offset
acquisition costs.
Any acquisition activities we engage in could require us to use a substantial amount of cash, other liquid assets, and/or
incur debt. Also, if
we finance acquisitions by issuing equity securities,
our existing shareholders’ ownership may be
diluted,
which
could
negatively
affect
the
market
price
our
Class
common
stock.
Additionally,
the
goodwill
recorded
connection with our potential future acquisitions were determined to be impaired, then we would be required to recognize a
charge against our earnings, which
could materially and adversely affect our
results of operations during the
period in which
the impairment was recognized. Acquisitions
may also involve the payment
of a premium over book
and market values and,
therefore, some
dilution of
our tangible
book value
and net
income per
common share
may occur
in connection
with any
future transaction.
As a result, we
may not achieve the
anticipated benefits of
any such merger or
acquisition, and we
may incur costs
excess
what
anticipate.
Our
failure
successfully
evaluate
and
execute
mergers,
acquisitions
investments
otherwise adequately address and manage
the risks associated with
such transactions could have
a material adverse effect
on our business, results of operations and financial condition,
including short-term and long-term liquidity.
The loss of
one or more
of our key
personnel, or our
failure to attract
and retain other
highly qualified personnel
in the future, could harm our business.
Our future success will, to some extent, depend on the continued service of our directors, executive officers and senior
management
team.
The
loss
the
services
any
these
individuals
could
have
significant
adverse
effect
our
business. In particular,
we believe that retaining
Luis de la Aguilera,
our Chairman, President
and Chief Executive
Officer,
Robert
Anderson,
our
Chief
Financial
Officer,
Nicholas
Bustle,
our
Chief
Lending
Officer,
and
William
Turner,
our
Chief
Credit
Officer,
important
our
continuing
success.
Although
have
entered
into
employment
change-in-control
agreements
with
certain
members
our
executive
and
senior
management
team,
including
Messrs.
Aguilera,
Anderson, Bustle
and Turner,
no assurance
can be
given that
these individuals
will continue
employed by
us. The
loss of any of these
individuals could negatively affect
our ability to achieve our
growth strategy and could
have a material
adverse effect on our business and results of operations.
Table of Contents
USCB Financial Holdings, Inc.
We also need to continue
to attract and retain other senior
management and to recruit qualified
individuals to succeed
existing
key
personnel
ensure
the continued
growth
and successful
operation
of our
business.
may
be unable
attract or
retain qualified
management
and other
key
personnel
in the
future due
to the
intense competition
for qualified
personnel
among
companies
the
financial
services
business
and
related
businesses.
The
loss
the
services
of any
senior management personnel, or the inability to recruit
and retain qualified personnel in the future, could
have an adverse
effect on our business, results of
operations, financial condition and prospects.
Additionally,
to attract and retain personnel
with appropriate skills and
knowledge to support our
business, we may offer
a variety of benefits, including
equity awards,
which may reduce our earnings or adversely affect our
business, results of operations, financial condition or prospects.
Damage to our reputation could significantly harm
our businesses.
Our ability to attract
and retain customers and
highly-skilled management and employees is impacted
by our reputation.
A negative public
opinion of us
and our business
can result from
any number of
activities, including our
lending practices,
corporate
governance
and
regulatory
compliance,
acquisitions,
customer
complaints
and
actions
taken
community
organizations in
response to
these activities.
Furthermore, negative
publicity regarding
an employer
could have
adverse
impact on
our reputation,
especially
with respect
matters of
diversity,
pay equity
and workplace
harassment.
Significant
harm
our
reputation
could
also
arise
result
regulatory
governmental
actions,
litigation
and
the
activities of our customers, other
participants in the financial services
industry or our contractual counterparties, such
as our
service providers
and vendors.
The potential
harm
is heightened
given
increased attention
to how
corporations
address
environmental, social
and governance
issues. In
addition, a
cybersecurity event
affecting us
or our customers'
data could
have a negative
impact on our
reputation and
customer confidence
in us and
our cybersecurity
practices. Damage
to our
reputation could also
adversely affect
our credit ratings
and access to
the capital markets.
Additionally,
whereas negative
public opinion once was
primarily driven by adverse
news coverage in traditional
media, the widespread use
of social media
platforms by
virtually every
segment of
society facilitates
the rapid
dissemination
of information
or misinformation,
which
magnifies the potential harm to our reputation.
face
strong
competition
from
financial
services
companies
and
other
companies
that
offer
banking
services, which could materially and adversely affect
our business.
The financial
services industry has
become even
more competitive as
a result
of legislative,
regulatory and technological
changes and
continued
banking consolidation,
which
may increase
result of
current economic,
market and
political
conditions. We
face substantial
competition
in all
phases
of our
operations
from
a variety
of competitors,
including local
banks,
regional
banks,
community
banks
and,
more
recently,
financial
technology,
"fintech"
companies.
Many
our
competitors offer the same banking services that
we offer and our success depends on
our ability to adapt our
products and
services
evolving
industry
standards
and
customer
requirements.
Increased
competition
our
market
may
result
reduced new
loan and
lease production
and/or decreased
deposit balances
or less
favorable terms
on loans
and leases
and/or deposit
accounts. We also
face competition
from many
other types
of financial
institutions, including
without limitation,
non-bank
specialty
lenders,
insurance
companies,
private
investment
funds,
investment
banks,
and
other
financial
intermediaries. Should competition in
the financial services industry
intensify, our ability to market our
products and services
may be adversely affected. If we are unable to attract and retain banking customers, we may be
unable to grow or maintain
the levels
of our
loans and
deposits and
our results
of operations
and financial
condition may
be adversely
affected as
result. Ultimately, we
may not be able to compete successfully against current
and future competitors.
We must respond to rapid technological changes
to remain competitive.
We will have to continue to respond
to future technological changes, which are occurring at a
rapid pace in the financial
services industry
in order
to remain
competitive. We
expect that
new technologies
and business
processes applicable
the banking industry will
continue to emerge, and
these new technologies and
business processes may be
better than those
we currently
use. Because
the pace
of technological
change is
high and
our industry
is intensely
competitive,
our future
success will depend, in
part, upon our ability
to address the needs
of our customers by
using technology to provide
products
and
services
that
will
satisfy
customer
demands
for
convenience,
well
create
additional
efficiencies
our
operations. We may
not be able to
implement new technology-driven
products and services effectively
or be successful in
marketing
these
products
and
services
our
customers.
Failure
keep
pace
successfully
with
technological
change
affecting the
financial services
industry could
harm our
ability to compete
effectively and
could have
an adverse
effect on
our business, financial condition and results of
operations. As these technologies improve in the future,
we may be required
to make significant capital expenditures in order to remain competitive, which may increase our overall expenses and have
an adverse effect on our business, financial condition
and results of operations.
Table of Contents
USCB Financial Holdings, Inc.
continually
encounter
technological
change,
and
may
have
fewer
resources
than
many
our
competitors to invest in technological improvements.
The financial
services
industry
continues to
undergo
rapid
technological
changes
with
frequent
introductions
of new
technology-driven products
and services,
including recent
and rapid
developments in
artificial intelligence
(“AI”) including
agentic AI. The effective use of technology increases efficiency
and enables financial institutions to better serve customers
and to reduce
costs. Our future
success will depend,
in part, upon
our ability to
address the needs
of our clients
by using
technology to provide products and services that will satisfy client demands for convenience, as well as to create additional
efficiencies
our
operations,
including
through
capabilities.
Many
national
vendors
provide
turn-key
services
community banks, such
as internet banking
and remote deposit
capture that allow
smaller banks to
compete with institutions
that
have
substantially
greater
resources
invest
technological
improvements.
may
not
able,
however,
effectively
implement
new
technology-driven
products
and
services
successful
marketing
these
products
and
services to our customers.
Our
current
and
future
uses of
artificial
intelligence
and
other
emerging
technologies
may
create
additional
risks.
The increasing adoption of AI in financial services
presents significant opportunities but also introduces a range of
risks
that
could
impact
our
operations,
regulatory
compliance,
and
customer
trust.
introduces
model
risk,
where
flawed
algorithms or
biased data could
result in inaccurate
credit decisions,
compliance violations,
or discriminatory
outcomes in
lending or customer
service. Cybersecurity
threats, such
as data breaches,
adversarial attacks,
and data poisoning,
pose
significant challenges,
particularly as these
systems handle
large volumes of
sensitive customer
information. Additionally,
the opaque nature of some AI models, often referred to as "black-box" systems, raises regulatory compliance concerns, as
regulators
increasingly
require
transparency
and
explainability
AI-driven
decision-making.
The
legal
and
regulatory
environment for AI is uncertain and rapidly evolving, potentially
increasing compliance cost and risk of non-compliance.
Operational risks also arise from potential system failures, over-reliance
on AI, and integration challenges with existing
infrastructure. Disruptions in AI systems could impact critical functions such as fraud detection, transaction monitoring, and
customer support.
Ethical and reputational
risks, including
unintended consequences
or perceived unfairness
in AI-driven
decisions,
may
erode
customer
trust
and
expose
regulatory
scrutiny.
Mitigating
these
risks
requires
robust
governance
framework,
regularly
testing
and
auditing
models,
and
strong
human
oversight.
Investments
cybersecurity, data
privacy protections, and employee training are critical
to managing these risks.
failure,
interruption,
breach
the
security
our
systems,
those
our
contracted
vendors,
could
disrupt
our
business,
result
the
disclosure
confidential
information,
damage
our
reputation,
and
create
significant financial and legal exposure.
Although we
devote significant
resources to maintain
and regularly update
our systems and
processes that are
designed
protect
the
security
our
computer
systems,
software,
networks
and
other
technology
assets,
well
the
confidentiality,
integrity and availability
of information belonging
to us and
our customers,
there is no
assurance that
all of
our
security
measures
will
provide
absolute
security.
Many
financial
institutions,
including
have
been
subjected
attempts to infiltrate the security of their websites or other systems, some involving sophisticated
targeted attacks intended
to obtain
unauthorized access
to confidential
information, destroy
data, disrupt
or degrade
service, sabotage
systems or
cause other damage, including through the introduction of
computer viruses or malware, cyber-attacks and other means. At
this point,
although there
knowledge or
indication that we
have experienced a
material cyber-incident or
security breach
that has been successful in compromising our
data or systems to date, we can
never be certain that all of our
systems are
entirely free from vulnerability to breaches of security or
other technological difficulties or failures.
Despite efforts to
ensure the integrity
and security of
our systems, it
is possible that
we may not
be able to
anticipate,
detect or recognize
threats to our
systems or to
implement effective
preventive measures
against all efforts
to breach our
security inside or outside our business, especially because the techniques used to attack our systems
change frequently or
are
not
recognized
until
launched,
and
because
cyber-attacks
can
originate
from
wide
variety
sources,
including
individuals or groups who are associated with
external service providers or who are or
may be involved in organized crime
or linked
to terrorist
organizations or
hostile foreign
governments. Those
parties may
also attempt
to fraudulently
induce
employees, customers, third-party service providers or other users of our systems to disclose sensitive information in order
to gain access
to our data or
that of our customers
or clients. Similar
to other companies,
our risks and exposures
related
to cybersecurity attacks have increased as a result of the related increased reliance on remote working and the increase in
digital
operations.
Such
risks
and
exposures
are
expected
remain
high
for
the
foreseeable
future
due
the
rapidly
evolving nature
and sophistication of
these threats
and the
expanding use
of technology, as our
web-based product offerings
grow and
we expand
internal usage
of web-based
applications.
Cybersecurity
risk and
other security
matters are
also a
major focus of regulatory authorities.
Table of Contents
USCB Financial Holdings, Inc.
A successful
penetration
circumvention
of the
security
of our
systems,
including those
of our
third-party
vendors,
could
cause
serious
negative
consequences,
including
significant
disruption
our
operations,
misappropriation
confidential information,
or damage
to computers
or systems,
and may
result in violations
of applicable
privacy and
other
laws, financial loss,
loss of confidence
in our security measures,
customer dissatisfaction, increased
insurance premiums,
significant litigation exposure and harm to our reputation, all of which could have a material adverse effect on our business,
financial condition, results of operations, and future prospects.
rely
other
companies
provide
key
components
our
business
infrastructure
and
our
operations
could
interrupted
our
third-party
service
providers
experience
difficulty,
terminate
their
services
fail
comply with banking regulations.
Third parties
provide key
components of
our business
operations such
as data
processing, recording
and monitoring
transactions,
online
banking
interfaces
and services,
Internet
connections
and
network
access.
While
have
selected
these third-party
vendors carefully,
performing upfront
due diligence
and ongoing
monitoring activities,
not control
their actions. Any problems caused by these third parties, including those resulting from disruptions in services provided by
vendor
(including
result
cyber-attack,
other
information
security
event
natural
disaster),
financial
operational difficulties
for the vendor,
issues at third-party
vendors to our
vendors, failure of
a vendor to
handle current or
higher volumes, failure of a vendor to provide services for
any reason, poor performance of services, failure to comply
with
applicable laws
and regulations,
or fraud
or misconduct
on the
part of
employees of
any of
our vendors,
could adversely
affect our ability
to deliver products
and services to
our customers, our
reputation and our
ability to conduct
our business,
which could
adversely affect
our business,
prospects, cash
flow,
liquidity,
financial condition
and results
of operations.
certain
situations,
replacing
these
third-party
vendors
could
also
create
significant
delay,
expense,
and
operational
difficulties, which
could also
adversely affect
our business.
Accordingly,
use of
such third
parties creates
an unavoidable
and inherent
risk to
our business
operations. Such
risk is
generally expected
to remain
elevated as
many of
our vendors
have also
been, and
may
further be,
affected
by increased
reliance
on remote
work
environments,
market
volatility
and
other factors
that increase
their risks
of business
disruption or
that may
otherwise affect
their ability
to perform
under the
terms of any agreements with us or provide essential services.
Our operations could be interrupted or
materially impacted if any of our
third-party service providers fail to comply
with
banking regulations
and other
applicable laws.
The Federal
Reserve, FDIC,
FOFR, and
other regulators
expect financial
institutions
responsible
for
all
aspects
their
performance,
including
aspects
that
they
delegate
third
parties.
Accordingly,
we will
be responsible
for deficiencies
in our
oversight and
control of
our third
party relationships
and in
the
performance of the parties with which
we have these relationships. As
a result, if our regulators conclude that
we have not
exercised adequate oversight and control over our third party vendors or
other ongoing third party business relationships or
that
such
third
parties
have
not
performed
appropriately,
could
subject
remedial
and/or
enforcement
actions,
including civil
money penalties
or other
administrative
or judicial
penalties or
fines
as well
as requirements
for customer
remediation, any of which could have a material adverse
effect our business, financial condition or results
of operations.
Litigation and regulatory actions,
including possible enforcement actions, could subject
us to significant fines,
penalties,
judgments
other
requirements
resulting
increased
expenses
restrictions
our
business
activities.
In the normal course of
business, from time to time, we
have in the past and
may in the future be
named as a defendant
in various
legal actions
arising in
connection with
our current
and/or prior
business
activities. Legal
actions could
include
claims for substantial compensatory and/or
punitive damages or claims for indeterminate
amounts of damages. Further,
the future
our
federal
and/or
state
bank
regulators
may
impose
consent
orders,
civil
money
penalties,
matters
requiring
attention, or similar types of
supervisory penalties or criticism. We may also,
from time to time, be
the subject of subpoenas,
requests
for
information,
reviews,
investigations
and
proceedings
(both
formal
and
informal)
governmental
agencies
regarding our
current
and/or prior
business
activities.
Any such
legal or
regulatory
actions may
subject
substantial
compensatory
punitive
damages,
significant
fines,
penalties,
obligations
change
our
business
practices
other
requirements resulting
in increased
expenses, diminished
income and
damage to
our reputation.
Our involvement
in any
such matters,
whether tangential
or otherwise
and
even if
the matters
are ultimately
determined
in our
favor,
could also
cause significant harm to our
reputation and divert management attention away from
the operation of our business.
Further,
any settlement, consent order or adverse judgment in connection with any formal or informal proceeding or investigation by
government
agencies
may
result
litigation,
investigations
proceedings
other
litigants
and
government
agencies
begin independent
reviews of
the same
activities. As
a result,
the outcome
of legal
and regulatory
actions could
have an
adverse effect on our business, results of operations
and results of operations.
Table of Contents
USCB Financial Holdings, Inc.
Certain of
our directors may
have conflicts
of interest in
determining whether to
present business
opportunities
to us or another entity with which they are, or may
become, affiliated.
Certain of our
directors are or may
become subject to fiduciary
obligations in connection with
their service on the
boards
directors
other
corporations,
including
financial
institutions.
director's
association
with
other
financial
institutions,
which give rise to
fiduciary or contractual obligations to such other
institutions, may create conflicts of interest. To the extent
that any of our directors
become aware of acquisition
opportunities that may be
suitable for entities other
than us to which
they have fiduciary or contractual obligations, or they are
presented with such opportunities in their capacities as fiduciaries
to such
entities, they
may honor
such obligations
to such
other entities.
You
should assume
that to
the extent
any of
our
directors become aware
of an opportunity
that may be
suitable both for
us and another
entity to which
such person has
fiduciary obligation
or contractual
obligation
to present
such
opportunity as
set forth
above,
she may
first give
the
opportunity to such other entity
or entities and may give
such opportunity to us only
to the extent such other
entity or entities
reject
are
unable
pursue
such
opportunity.
addition,
you
should
assume
that
the
extent
any
our
directors
become
aware
acquisition
opportunity
that
does
not
fall
within
the
above
parameters,
but
that
may
otherwise
suitable for us, he or she may not present such opportunity to
Pursuant to an agreement between us and each of our Significant Investors
(as defined below), each of the Significant
Investors has the right
to nominate one
director to serve
on our Board, including
Board committees, and
to designate one
non-voting Board
observer.
The directors
and Board
observers
designated by
the Significant
Investors have
the right
and have
no duty
not to,
engage in
the same
or similar
business activities
or lines
of business
In the
event that
director or Board observer designated by a Significant Investor acquires knowledge of a potential transaction or matter that
may be
a corporate opportunity
for us,
such person shall
have no
duty to
communicate or
present such corporate
opportunity
and shall
not be
liable to
our shareholders
for breach
of any
duty by
reason of
the fact
that such
person or
related investment fund
thereof, directly or
indirectly, pursues or acquires such opportunity
for itself, directs
such opportunity
to another person, or does not present such opportunity
Risks Related to Our Tax,
Accounting and Regulatory Compliance
Our ability to recognize
the benefits of
our deferred tax
assets is dependent
on future cash flows
and taxable
income and may be materially impaired upon significant
changes in ownership of our common stock.
We recognize the expected future tax
benefit from deferred tax assets when
it is more likely than
not that the tax benefit
will be
realized. Otherwise,
a valuation
allowance
is applied
against our
deferred
tax assets,
reducing
the value
of such
assets. Assessing
the recoverability
of deferred
tax assets
requires management
to make significant
estimates related
expectations
future
taxable
income
from
all
sources,
including
reversal
taxable
temporary
differences,
forecasted
operating
earnings
and
available
tax
planning
strategies.
Estimates
future
taxable
income
are
based
forecasted
income from operations and the application of existing tax laws in each jurisdiction. The improved risk profile of the Bank is
a key
component used
in the determination
of our
ability to
realize the
expected future
benefit of
our deferred
tax assets.
the extent that future taxable income differs
significantly from estimates as a result
of the interest rate environment and
loan growth capabilities or other factors, our ability to realize
the net deferred tax assets could be negatively
affected.
Subject to certain exceptions, our Class A common stock is subject
to transfer restrictions as set forth in our Articles of
Incorporation that are
designed to preserve
our deferred tax
assets. Notwithstanding these
protective provisions, the
Articles
of Incorporation include
an exception that
allows our Significant
Investors the right
to effect any
transfer that would
otherwise
be prohibited, which transfer could result in the loss of the deferred
tax assets.
Additionally,
significant future
issuances of
common stock
or common
stock equivalents,
or changes
in the
direct or
indirect ownership
of our
common stock
or common
stock equivalents,
could cause
an ownership
change and
could limit
our ability to
utilize our net
operating loss carryforwards
and other tax
attributes pursuant
to Section 382
and Section 383
of the
Internal Revenue
Code of
amended.
Future changes
in tax
law or
changes in
ownership structure
could
limit our ability to utilize our recorded net deferred tax assets.
The
accuracy
our
financial
statements
and
related
disclosures
could
affected
the
judgments,
assumptions or estimates used in our critical accounting
policies are inaccurate.
The
preparation
our
financial
statements
and
related
disclosures
conformity
with
GAAP
requires
make
judgments,
assumptions
and
estimates
that
affect
the
amounts
reported
our
consolidated
financial
statements
and
accompanying notes. In some cases, management
must select the accounting policy or method
to apply from two or more
alternatives,
any of
which
may be
reasonable
under
the circumstances,
yet
which
may result
our
reporting
materially
different
results
than
would
have
been
reported
under
different
alternative.
Certain
accounting
policies
are
critical
significant to presenting our financial
condition and results of
operations. Our critical accounting policies, which
are included
Table of Contents
USCB Financial Holdings, Inc.
in the section captioned "Management's Discussion and Analysis of Financial Condition and Results of Operations"
in Item
7 of this Annual Report
on Form 10-K, describe
those significant accounting
policies and methods used
in the preparation
our
consolidated
financial
statements
that
consider
critical
because
they
require
judgments,
assumptions
and
estimates that materially affect our consolidated financial statements and related disclosures. As a result, if
future events or
regulatory views concerning such analyses differ significantly from the judgments, assumptions and estimates in
our critical
accounting policies,
those events
or assumptions
could have
a material
impact on
our consolidated
financial statements
and
related
disclosures,
each
case
resulting
our
need
revise
restate
prior
period
financial
statements,
cause
damage to our
reputation and
the price
of our Class
A common stock
and adversely affect
our business, prospects,
cash
flow, liquidity,
financial condition and results of operations.
As a public company, we may not efficiently or effectively create an effective internal control environment, and
any future
failure to
maintain
effective
internal control
over financial
reporting
could impair
the reliability
of our
financial
statements,
which
turn
could
harm
our
business,
impair
investor
confidence
the
accuracy
and
completeness of
our financial
reports and
our access
to the
capital markets,
cause the
price of
our Class
A common
stock to decline and subject us to regulatory penalties.
Our management is responsible for establishing
and maintaining adequate internal control over financial
reporting and
for evaluating
and
reporting
that
system
internal
control.
Our
internal
control
over
financial
reporting
consists
process
designed
provide
reasonable
assurance
regarding
the
reliability
financial
reporting
and
the
preparation
financial statements for external purposes in accordance with GAAP.
As a public company,
we are required to comply with
SEC regulations, including
the SOA and
other rules that
govern public companies
that we previously
were not required
comply with
private company.
In particular,
we are
required to
certify our
compliance with
Section 404
of the
SOA,
which requires
annually
furnish
a report
by management
on the
effectiveness
of our
internal
control
over
financial
reporting. When evaluating our internal controls over financial reporting, we may identify material weaknesses that we may
not be able to remediate
in time to meet the applicable
deadline imposed upon us for
compliance with the requirements
Section 404
of the SOA.
We periodically
review our
formal policies,
processes and practices
related to
financial reporting
and to the
identification of key financial
reporting risks, assess their
potential impact and the
linkage of those
risks to specific
areas and controls within our organization.
If we fail to achieve and maintain the adequacy of
our internal controls, as such standards are modified, supplemented,
or amended from time to
time, we may not
be able to ensure
that we will be able
to conclude on an ongoing
basis that we
have effective
internal controls
over financial
reporting in
accordance with
Section 404
of the
SOA. We
cannot be
certain
the
timing
of completion
our
evaluation,
testing,
and
any
remediation
actions
the
impact
the
same
our
operations. If we fail to adequately comply with the requirements of Section 404 of the SOA,
we may be subject to adverse
regulatory consequences and there
could be a
negative reaction in
the financial markets due
to a loss
of investor confidence
in us and the
reliability of our
financial statements. In
addition, we may be
required to incur
costs in improving
our internal
control system
and hiring
additional personnel.
Any such
action could
negatively
affect
our business,
financial condition,
results of operations, and the price of our Class A common
stock may decline.
While we
remain an emerging
growth company, we will
not be
required to include
an attestation report
on internal
control
over financial
reporting issued by
our independent registered
public accounting firm.
We will
cease to be
an emerging
growth
company no later
than December 31,
prepare for compliance
with the auditor
attestation requirement
of Section
the
SOA
once
longer
qualify
emerging
growth
company
non-accelerated
smaller
reporting
company, we are engaged in a process to document and evaluate
our internal control over financial reporting, which
is both
costly and
challenging. In
this regard,
we will
need to
dedicate internal
resources, potentially
engage outside
consultants
and adopt a detailed work
plan to assess and document
the adequacy of internal
control over financial reporting,
continue
steps to improve control
processes as appropriate, validate through
testing that controls are
functioning as documented and
continue to
refine our
reporting and
improvement process
for internal
control over
financial reporting.
Despite our
efforts,
there is a
risk that
we will not
be able
to conclude,
within the prescribed
time frame
or at all,
that our
internal control
over
financial
reporting
effective
required
Section
Sarbanes-Oxley.
identify
one
more
material
weaknesses, it could result in an adverse reaction in
the financial markets due to a loss of confidence in
the reliability of our
financial statements.
operate
highly
regulated
environment,
and
the
laws
and
regulations
that
govern
our
operations,
corporate governance,
executive compensation
and accounting
principles, or
changes in
them, or
our failure
comply with them, could adversely affect us.
We operate in a
highly regulated industry and
we are subject to
examination, supervision and comprehensive
regulation
by various federal and state agencies,
including the Federal Reserve, the
FDIC and the FOFR. As
such, we are subject to
extensive regulation, supervision and
legal requirements that govern almost
all aspects of our operations.
These laws and
regulations
are
not
intended
protect
our
shareholders.
Rather,
these
laws
and
regulations
are
intended
protect
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USCB Financial Holdings, Inc.
customers, depositors, the Deposit Insurance
Fund, or DIF, and the overall financial health and
stability of the United
States
banking
system.
These
laws
and
regulations,
among
other
matters,
prescribe
minimum
capital
requirements,
impose
limitations on the
business activities
and investments
in which we
can engage, regulate
and restrict our
lending activities,
require us to provide certain banking services broadly within the communities in which we operate,
determine the locations
of our branch
offices and impose certain
specific accounting requirements on us
that may be more
restrictive and may result
greater
earlier
charges
earnings
reductions
our
capital
than
GAAP
would
require.
are
also
subject
capitalization
guidelines
established
our
regulators,
which
require
maintain
adequate
capital
support
our
business.
Compliance
with
laws
and
regulations
can
difficult
and
costly,
and
changes
laws
and
regulations
often
impose additional operating costs. Further, we must obtain approval from our regulators
before engaging in many activities,
and
our
regulators
have
the
ability
compel
restrict
from,
taking
certain
actions
entirely.
There
can
assurance that any regulatory approvals we may require
or otherwise seek will be obtained.
Regulations affecting
banks and
other financial
institutions are
undergoing continuous
review and
frequently change,
and the ultimate effect of such changes cannot be predicted. Changes to the legal and regulatory framework governing our
operations, including the Dodd-Frank Act and the 2018 Act, have significantly
revised the laws and regulations under which
we operate. Such regulations
and laws may be modified
or repealed at any time,
and new legislation may be
enacted that
will affect us and our subsidiaries.
Our failure to comply with these laws and regulations, even if the failure follows good faith effort
or reflects a difference
interpretation,
could
subject
restrictions
our
business
activities,
enforcement
actions
and
fines
and
other
penalties,
any
which
could
adversely
affect
our
results
operations,
regulatory
capital
levels
and
the
price
our
securities. Further, any new laws, rules
and regulations, such as were imposed under the Dodd-Frank
Act or the 2018 Act,
could make
compliance more difficult
or expensive
or otherwise
adversely affect our
business, prospects,
cash flow, liquidity,
financial condition and results of operations.
face
risk
noncompliance
with
the
Bank
Secrecy
Act
and
other
anti-money
laundering
statutes
and
regulations and corresponding enforcement proceedings.
The BSA, the
USA PATRIOT
Act, and other
laws and regulations
require financial
institutions, among other
duties, to
institute
and
maintain
effective
anti-money
laundering
programs
and
file
suspicious
activity
and
currency
transaction
reports,
appropriate.
FinCEN,
established
the
Treasury
Department
administer
the
Bank
Secrecy
Act,
authorized to impose significant civil money
penalties for violations of those requirements
and has engaged in coordinated
enforcement
efforts
with
the
individual
federal
banking
regulators,
well
the
Department
Justice,
Drug
Enforcement
Administration
and
Internal
Revenue
Service.
Additionally,
South
Florida
has
been
designated
“High
Intensity Financial Crime
Area” (“HIFCA”)
by FinCEN and
a “High Intensity
Drug Trafficking
Area” (“HIDTA”)
by the Office
of National Drug Control
Policy.
The HIFCA program
is intended to concentrate
law enforcement efforts
to combat money
laundering efforts
in higher-risk
areas. There
is also
increased scrutiny
of compliance
with the
rules enforced
by OFAC.
Federal and
state bank
regulators have
for many
years focused
on compliance
with the
BSA and
anti-money laundering
regulations. In
order to
comply with
regulations,
guidelines and
examination
procedures
in this
area, we
have dedicated
significant resources
to our
anti-money laundering
program, especially
due to
the regulatory
focus on
financial and
other
institutions located in South
Florida. Our business includes
supporting our customers, including foreign
financial institutions,
with respect to their international banking needs and our policies, procedures and systems have been designed to address
federal and
state anti-money
laundering compliance.
If our policies,
procedures and
systems are
deemed deficient
or the
policies,
procedures
and
systems
the
financial
institutions
that
may
acquire
are
deficient,
would
subject
liability,
including
fines,
and
regulatory
actions
that
are
deemed
necessary
order
remediate
such
deficiencies
and
prevent the recurrence
thereof. In recent
years, sanctions that
the regulators have
imposed on banks
that have not
complied
with
all
anti-money
laundering
requirements
have
been
especially
severe.
Failure
maintain
and
implement
adequate
programs to
combat money
laundering and
terrorist financing
could also
have serious
reputational consequences
for us,
which could have a material adverse effect on
our business, financial condition and results of operations.
Significantly
heightened
regulatory
and
supervisory
expectations
and
scrutiny
the
United
States
have
increased
our
compliance,
regulatory,
and
other
risks
and
costs
and
subject
legal
and
regulatory
examinations, investigations, and enforcement actions.
The regulatory and political environment has generally been challenging for
U.S. financial institutions, which have been
subject to
increased regulatory
scrutiny,
including in
the wake
of the failures
of several
regional banks
and other
banking
stresses in recent periods. The
general heightened scrutiny and expectations from
regulators could lead to a more
stringent
regulatory posture by the regulators, investigations and other
inquiries, as well as remediation requirements, regulatory and
operational
restrictions,
more
regulatory
other
enforcement
proceedings,
civil
litigation
and
substantial
compliance,
regulatory and other risks and costs.
Our regulators have broad powers
and discretion under their supervisory
authority. A
failure to comply
with regulators’ expectations and
requirements, even if inadvertent,
or to resolve
any identified deficiencies
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USCB Financial Holdings, Inc.
timely
and
sufficiently
satisfactory
manner
regulators,
could
result
increased
regulatory
oversight;
material
restrictions,
including,
among
others,
imposition
limitations
capital
distributions
other
business
activities
operations; enforcement proceedings; penalties; and fines.
Responding to regulatory inquiries and
proceedings can be time
consuming and
costly and
divert management
attention from
our other
business activities.
As a result
of these
regulatory
efforts and pressures,
like many other
financial institutions, from
time to time,
we may be
subject to public
and non-public
written
agreements,
cease
and
desist
orders,
consent
orders,
memoranda
understanding
other
enforcement
supervisory actions by our regulators.
are
subject
capital
adequacy
requirements
and
may
become
subject
more
stringent
capital
requirements, which could adversely affect our
financial condition and operations.
the
federal
banking
agencies
published
new
regulatory
capital
rules
based
the
international
standards,
known as
Basel III,
that were
developed by
the Basel
Committee on
Banking Supervision.
The new
rules raised
the risk-
based capital
requirements
and revised
the
methods for
calculating
risk-weighted
assets, usually
resulting
in higher
risk
weights. The rules apply to us.
The Basel III rules increased
capital requirements and included
two new capital measurements,
a risk-based common
equity Tier 1 ratio
and a capital conservation buffer.
Common Equity Tier
1 (CET1) capital is a subset
of Tier 1 capital
and
is limited to common
equity (plus related surplus), retained earnings,
accumulated other comprehensive income and certain
other
items.
Other
instruments
that
have
historically
qualified
for
Tier
treatment,
including
noncumulative
perpetual
preferred stock,
are consigned
category known
as Additional
Tier
1 capital
and must
be phased
out of
CETI over
period of
nine years
beginning in
order to
“well-capitalized” depository
institution under
the new
regime, an
institution must maintain a
CET1 capital ratio of 7.0%
or more; a Tier
1 capital ratio of 8.5%
or more; a total capital
ratio of
or more;
and
Tier
1 leverage
ratio
more. Institutions
must
also
maintain
a capital
conservation
buffer
consisting of
common equity
Tier
1 capital
(which amount
reflected above
in the
CET1, Tier
1 and
total capital
ratios). In addition
to the higher
required capital
ratios and
the new
deductions and
adjustments, the
final rules
increased
the risk weights
for certain assets,
meaning that we
will have to
hold more capital
against these assets. We
are also required
to hold capital against short-term commitments that are not
unconditionally cancellable.
While we currently meet the requirements of
the Basel III-based capital requirements, we may fail to
do so in the future.
The failure to
meet applicable regulatory
capital requirements could
result in one
or more of
our regulators placing
limitations
or conditions on our activities, including our growth initiatives, or restricting the commencement of new activities, and could
affect
customer
and
investor confidence,
our costs
of funds
and
level of
required
deposit
insurance
assessments
the
FDIC,
our
ability
pay
dividends
our
capital
stock,
our
ability
make
acquisitions,
and
our
business,
results
operations and financial condition, generally.
In addition, in the current economic
and regulatory environment bank regulators
may impose capital requirements that
are
more
stringent
than
those
required
applicable
existing
regulations.
The
application
more
stringent
capital
requirements for us could, among other things, result
in lower returns on equity, require the raising of additional capital, and
result in regulatory actions
if we were to be
unable to comply with
such requirements. Implementation
of changes to asset
risk weightings for risk-based capital
calculations, items included
or deducted in calculating
regulatory capital or additional
capital conservation buffers, could result in management modifying our business strategy
and could limit our ability to make
distributions, including paying
dividends.
We are periodically subject
to examination and
scrutiny by a
number of banking agencies
and, depending upon
the findings and determinations
of these agencies, we may
be required to make adjustments
to our business that
could adversely affect us.
As part of
the bank regulatory process,
the Federal Reserve, the
FDIC and the FOFR
periodically conduct examinations
of our business,
including compliance
with applicable
laws and regulations.
result of an
examination, one
of these
banking
agencies
were
determine
that
the
financial
condition,
capital
resources,
asset
quality,
asset
concentration,
earnings prospects, management, liquidity sensitivity
to market risk, risk
management and internal controls
or other aspects
of any of our operations has become unsatisfactory, or that we or our management are in violation of any law or regulation,
the banking
agency could
take a
number of
different remedial
or punitive
actions as
it deems
appropriate. These
actions
include the power to prohibit the continuation
of "unsafe or unsound" practices, to require
affirmative actions to correct any
conditions
resulting
from
any
violation
or practice,
issue an
administrative
order
or enforcement
that
can
be judicially
enforced, to direct an increase
in our capital, to restrict our
growth, to change the asset composition
of our loan or securities
portfolios
balance
sheet,
assess
civil
monetary
penalties
against
our
officers
directors,
remove
officers
and
directors and, if
it is concluded
that such conditions
cannot be corrected
or there is
an imminent risk
of loss to
depositors,
terminate
our
deposit
insurance
and
force
terminate
our
business
operations.
become
subject
such
regulatory actions, our business, financial condition, result
of operations and reputation may be negatively impacted.
Table of Contents
USCB Financial Holdings, Inc.
are
subject
numerous
laws
and
regulations
certain
regulatory
agencies
designed
protect
consumers, including the Community Reinvestment
Act, or CRA, and fair lending laws, and failure
to comply with
these laws could lead to a wide variety of sanctions.
The CRA directs all insured depository institutions to help meet the credit needs of the local communities
in which they
operate
branches,
including
low-
and
moderate-income
neighborhoods.
Each
institution
examined
periodically
its
primary federal
regulator,
which assesses
the institution’s
CRA performance.
The Equal
Credit Opportunity
Act, the
Fair
Housing
Act
and
other
fair
lending
laws
and
regulations
impose
nondiscriminatory
lending
requirements
financial
institutions. The U.S. Department of Justice, the Federal Reserve, and other federal agencies are responsible for enforcing
these laws and regulations. A successful regulatory challenge to our performance under the CRA, fair lending or consumer
lending
laws
and
regulations
could
result
wide
variety
sanctions,
including
damages
and
civil
money
penalties,
injunctive
relief,
customer
restitution,
restrictions
mergers
and
acquisitions
activity,
restrictions
expansion,
and
restrictions
entering
new
business
lines.
Private
parties
may
also
have
the
ability
challenge
institution’s
performance
under
fair
lending
laws
private
class
action
litigation.
Such
actions
could
have
adverse
effect
our
business, financial condition and results of operations.
Climate change and related legislative and regulatory initiatives may materially affect our business and results
of operations.
The effects
of climate change
continue to create
a significant level
of concern
for the state
of the global
environment.
The lack of empirical
data surrounding the credit and
other financial risks posed by
climate change render it
difficult, or even
impossible,
predict
how
climate
change
may
impact
our
financial
condition
and
results
operations;
however,
the
physical
effects
climate
change
may
also
directly
impact
Specifically,
unpredictable
and
more
frequent
weather
disasters may adversely impact the real property,
and/or the value of the real property,
securing the loans in our portfolios.
Additionally,
insurance
obtained
our
borrowers
insufficient
cover
any
losses
sustained
the
collateral,
insurance coverage is otherwise unavailable to
our borrowers, the collateral securing
our loans may be negatively
impacted
by climate
change, natural disasters
and related events,
which could impact
our financial condition
and results of
operations.
Further,
the effects
of climate
change may
negatively impact
regional and
local economic
activity,
which could
adversely
affect
our
customers
and
the
communities
which
operate.
Overall,
climate
change,
its
effects
and
the
resulting
unknown impact could have a material adverse effect
on our financial condition and results of operations.
Risks Related to Our Class A Common Stock
Our ability to pay dividends is subject to restrictions.
Holders of our Class A common stock
are only entitled to receive cash dividends when, as
and if declared by our Board
out of funds
legally available
for dividends.
The Company
is a bank
holding company
that conducts
substantially all
of its
operations through the Bank,
which is a legal entity
separate and distinct from
the Company.
As a result, our ability
to pay
dividends
our
common
stock
will substantially
depend
upon
the
receipt
dividends
and
other
distributions
from
the
Bank,
the
profitability
which
subject
the
fluctuating
cost
and
availability
money,
changes
interest
rates
and
economic conditions in general. There are
numerous laws and banking regulations and
guidance that limit the Bank's
ability
to pay
dividends to
us and
our ability
to pay
dividends on
our common
stock. Due
to the
fact that
the Bank
has negative
retained earnings,
the Bank
may not
pay dividends
to the
Company without
the prior
approval of
the FDIC.
Similarly,
have agreed to notify the Federal Reserve before declaring
and paying any dividends on our Class A common stock.
If we fail to
pay interest on
or otherwise default
on our subordinated
notes, we will
be prohibited from
paying
dividends or distributions on our Class A common
stock.
December
had
million
subordinated
notes
outstanding.
The
indenture
under
which
the
subordinated
notes
were
issued
prohibits
from
paying
any
dividends
our
common
stock
making
any
other
distributions
our
shareholders
upon
our
failure
make
any
required
payment
principal
interest
during
the
continuance
an event
default
under
the
applicable
agreement.
Events
default
generally
consist
among other
things, certain events
of bankruptcy,
insolvency or liquidation
relating to us.
If we were
to fail to
make a required
payment
of principal or interest
on our subordinated
notes, it could have
a material adverse effect on
the market value of
our common
stock.
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USCB Financial Holdings, Inc.
may
issue
additional
debt
securities,
which
would
senior
our
common
stock
and
may
cause
the
market price of our Class A common stock to decline.
We have issued $40.0 million in aggregate principal amount of 7.625% Fixed-to-Floating Rate Subordinated Notes due
2035. In the future, we may increase our capital resources by making additional offerings of debt or equity securities, which
may include
senior or
additional subordinated
notes, classes
of preferred
shares
and/or common
shares. Holders
of our
common stock are
not entitled to
preemptive rights or
other protections against
dilution. Preferred shares
and debt, if
issued,
have a preference on liquidating distributions or a preference
on dividend or interest payments that could limit our
ability to
make
distribution
the
holders
our
common
stock.
Future
issuances
and
sales
parity
preferred
stock,
the
perception that
such
issuances
and sales
could occur,
may also
cause
prevailing
market price
for our
Class
A common
stock to decline
and may adversely
affect our
ability to raise
additional capital
in the financial
markets at times
and prices
favorable to us. Further issuances of our Class A common stock could
be dilutive to holders of our Class A common stock.
The market price and trading volume of our Class A
common stock may be volatile, which could result in rapid
and substantial losses for our shareholders.
The market
price
our
Class
A common
stock
may
be highly
volatile
and
could
subject
wide
fluctuations.
addition, the trading volume on
our Class A common stock may
fluctuate and cause significant price variations to
occur. We
cannot assure you that the market price of our Class A common stock will not fluctuate or decline significantly in the future.
Some, but
certainly not
all, of
the factors
that could
negatively affect
the price
of our
Class A
common stock,
or result
fluctuations in the price or trading volume of our Class
A common stock, include but not limited to:
general market conditions;
domestic and international economic factors unrelated
to our performance;
variations in our quarterly operating results or failure to
meet the market’s earnings expectations;
publication of research reports about us or the financial services
industry in general;
the determination of securities analysts to not cover our
Class A common stock;
the opinion of securities analysts about our stock as an investment;
additions to or departures of our key personnel;
future sales of our Class A common stock;
adverse market reactions to any indebtedness we may
incur or securities we may issue in the future;
actions by our shareholders;
the operating and securities price performance of companies
that investors consider to be comparable to us;
changes or proposed changes in laws or regulations affecting
our business; and
actual or potential litigation and governmental investigations.
addition,
the
market
for
stocks
our
industry,
the
stock
market
general,
experiences
loss
investor
confidence, the
trading price
of the
Class A
common stock
could decline
for reasons
unrelated to
our business,
financial
condition or results of operations.
If any of the foregoing occurs,
it could cause our Class A common
stock price to fall and
may expose us to lawsuits that, even if unsuccessful, could
be costly to defend and a distraction to management.
There are significant restrictions in our Articles of Incorporation that restrict the
ability to sell our capital stock
to shareholders that would own 4.95% or more of our stock,
excluding our Significant Investors.
Because the
continued availability
of our
"deferred tax
assets" depends,
in part,
on the
value of
our stock
owned by
shareholders owning 5% or
more of our
stock, our amended Articles
of Incorporation, except as
otherwise may be approved
by the Board or
except for transfers by
our Significant Investors, prohibits
any direct or indirect
transfer of stock
or options
acquire
stock
any
person
who,
result
the
transfer,
would
own
more
our
stock,
long
the
Company continues to have "deferred tax assets." Such
restrictions may limit the ability to transfer our stock.
Because
are
emerging
growth
company
and
because
have
decided
take
advantage
certain
exemptions from
various reporting
and other
requirements applicable
to emerging
growth companies,
our Class
A common stock could be less attractive to investors.
We are
an “emerging
growth company,”
as defined
in the
JOBS Act.
For as
long as
we remain
an emerging
growth
company,
we will
have the
option to take
advantage of
certain exemptions
from various
reporting and
other requirements
that are applicable to other public companies that are not
emerging growth companies, including:
may
present
only
two
years
audited
financial
statements
and
only
two
years
related
management’s
discussion and analysis of financial condition and results
of operations
Table of Contents
USCB Financial Holdings, Inc.
are
exempt
from
the
requirements
obtain
attestation
and
report
from
our
auditors
management’s
assessment of our internal control over financial reporting
under the SOA;
we are permitted to have less extensive disclosure about our
executive compensation arrangements; and
are
not
required
give
our
shareholders
non-binding
advisory
votes
executive
compensation
golden
parachute arrangements.
We may
continue to
take advantage
of some
or all
of the
reduced regulatory
and reporting
requirements that
will be
available to
long as
we continue
qualify
emerging
growth
company.
will remain
an emerging
growth
company until the
earliest to occur
of (i) the
last day of
the first fiscal
year in which
our annual gross
revenues exceed $1.235
billion, (ii) the date that the market
value of our Class A common stock
that is held by non-affiliates
exceeds $700.0 million
as of the
last business day in
June of that
year, (iii) the date on
which we have, during
the previous three-year period, issued
more than $1.0 billion
in non-convertible debt, or
(iv) the end of fiscal
year following the fifth
anniversary of the completion
of our initial public offering (which will be December
It is possible
that some
investors may
find our Class
A common stock
less attractive
since we chose
to rely
on these
exemptions. If some investors find our Class A common
stock less attractive, there may be a less
active trading market for
our Class A common stock and our stock price may be
more volatile.
Because we have elected
to use the extended
transition period for complying
with new or revised
accounting
standards for an “emerging growth company,” our financial statements may not be comparable to companies that
comply with these accounting standards as of the
public company effective dates.
As an emerging
growth company,
we elected to
use the extended
transition period
for complying
with new
or revised
accounting standards under Section 7(a)(2)(B) of the Securities Act. This election allows us to delay the adoption of new or
revised accounting standards
that have different
effective dates for
public and private
companies until those
standards apply
to private companies. As a
result of this election, our
financial statements may not be
comparable to companies that comply
with these
accounting standards
the public
company effective
dates. Because
our financial
statements
may not
comparable
companies
that
comply
with
public
company
effective
dates,
investors
may
have
difficulty
evaluating
comparing our
business, performance
or prospects
in comparison to
other public
companies, which
may have a
negative
impact on the value and liquidity of our Class A common stock. We cannot predict if investors will find our Class A common
stock
less
attractive
because
have
relied
this
exemption.
some
investors
find
our
Class
common
stock
less
attractive as a result, there
may be a less active trading
market for our Class A common
stock and our stock price
may be
more volatile.
We have existing investors that own
a significant amount of our
common stock whose individual interests may
differ from yours.
A significant percentage of our Class A common stock is currently held by a few institutional investors, including Patriot
Financial Partners II,
and Patriot Financial
Partners Parallel II, L.P.
(collectively,
"Patriot"), and Priam
Capital Fund II,
("Priam,"
and
together
with
Patriot,
the
"Significant
Investors").
February
Patriot
and
Priam
own
approximately 10.4% and 21.8%, respectively, of our outstanding shares of Class A common stock. In addition, Patriot and
Priam are
each entitled
to nominate
a director
to our
Board and
have certain
subscription rights
to purchase
new equity
securities that we
issue in the
future, in each
case as long
as certain equity
ownership criteria
are met. Patriot
and Priam
also have
certain registration rights
(which they
have exercised), including
demand registration rights,
and information rights.
Although Patriot
and Priam
are independent
of each
other,
these institutional
investors will
continue to
have a
significant
level of influence over us because of their level
of Class A common stock ownership and their right
to representation on our
Board. For
example, Patriot
and Priam
will have
a greater
ability than
our other
shareholders to
influence the
election of
directors and the
potential outcome of
other matters submitted
to a vote
of our shareholders,
including mergers and
other
acquisition transactions,
amendments to
our amended
Articles of
Incorporation and
Amended and
Restated Bylaws,
and
other
extraordinary
corporate
matters.
The
interests
these
investors
could
conflict
with
the
interests
our
other
shareholders, and
any future
transfer by
these investors
of their
shares of
Class A
common stock
to other
investors who
have different business objectives
could adversely affect our
business, results of operations,
financial condition, prospects
or the market value of our Class A common stock.
Provisions
our
governing
documents
and
Florida
law
may
have
anti-takeover
effect
and
there
are
substantial regulatory limitations on changes of control
of the Company.
Our corporate organizational documents and provisions of federal
and state law to which we
are subject contain certain
provisions that could
have an anti-takeover
effect and
may delay,
make more difficult
or prevent an
attempted acquisition
that you may favor or an attempted replacement of our
Board or management.
Table of Contents
USCB Financial Holdings, Inc.
Our governing documents include provisions that:
empower our Board, without shareholder approval, to issue shares of preferred stock, the terms of
which, including
voting power, are set by our
Board;
provide that directors may be removed from office only for cause and only upon a majority vote
of the shares of our
Company with voting power;
prohibit holders of our Class A common stock to take action
by written consent in lieu of a shareholder meeting;
require holders of at least 10% of our Class A common
stock to call a special meeting;
do not provide for cumulative voting in elections of our
directors;
provide that
our Board
has the
authority to amend
our Amended
and Restated Bylaws
without shareholder approval;
require shareholders that wish to bring business before annual or special meetings of shareholders, or to nominate
candidates for election as directors at our annual meeting of shareholders, to provide
timely notice of their intent in
writing and satisfy disclosure requirements; and
enable our Board to increase, between
annual meetings, the number of
persons serving as directors and
to fill the
vacancies created
result of
the increase until
the next
meeting of
shareholders by a
majority vote
of the
directors
present at a meeting of directors.
In addition,
certain provisions
of Florida
law may
delay,
discourage, or
prevent an
attempted acquisition
or change
control. Furthermore,
banking laws
impose notice,
approval, and
ongoing regulatory
requirements on
any shareholder
other party that seeks to acquire direct or indirect "control" of a
bank holding company,
which includes the Change in Bank
Control Act
and the
Bank Holding
Company Act.
These laws
could delay
or prevent
an acquisition.
Also, for
preservation
and continued availability
of our "deferred
tax assets," our
amended Articles of
Incorporation prohibit any
direct or indirect
transfer of stock or options to acquire stock to any person who, as a result of the transfer,
would own 4.95% or more of our
stock,
long
continue
have
"deferred
tax
assets,"
subject
limited
exceptions
provided
our
amended
Articles of Incorporation. Because of the requirements to overcome this restriction, this
provision of the amended Articles of
Incorporation could
have an
anti-takeover
effect
and
may delay,
make more
difficult
or prevent
an attempted
acquisition
that you may favor.
Table of Contents
USCB Financial Holdings, Inc.
Language change vs prior 10-K
MD&A (Item 7) - words with the biggest YoY frequency increase- critical+2
- restructuring+2
- decline+2
- threats+1
- negative+1
- advances+3
- gains+2
- integrity+2
- gain+1
- improvement+1
MD&A (Item 7)
16,505 words
management’s
discussion and analysis of financial condition and results
of operations
Table of Contents
USCB Financial Holdings, Inc.
are
exempt
from
the
requirements
obtain
attestation
and
report
from
our
auditors
management’s
assessment of our internal control over financial reporting
under the SOA;
we are permitted to have less extensive disclosure about our
executive compensation arrangements; and
are
not
required
give
our
shareholders
non-binding
advisory
votes
executive
compensation
golden
parachute arrangements.
We may
continue to
take advantage
of some
or all
of the
reduced regulatory
and reporting
requirements that
will be
available to
long as
we continue
qualify
emerging
growth
company.
will remain
an emerging
growth
company until the
earliest to occur
of (i) the
last day of
the first fiscal
year in which
our annual gross
revenues exceed $1.235
billion, (ii) the date that the market
value of our Class A common stock
that is held by non-affiliates
exceeds $700.0 million
as of the
last business day in
June of that
year, (iii) the date on
which we have, during
the previous three-year period, issued
more than $1.0 billion
in non-convertible debt, or
(iv) the end of fiscal
year following the fifth
anniversary of the completion
of our initial public offering (which will be December
It is possible
that some
investors may
find our Class
A common stock
less attractive
since we chose
to rely
on these
exemptions. If some investors find our Class A common
stock less attractive, there may be a less
active trading market for
our Class A common stock and our stock price may be
more volatile.
Because we have elected
to use the extended
transition period for complying
with new or revised
accounting
standards for an “emerging growth company,” our financial statements may not be comparable to companies that
comply with these accounting standards as of the
public company effective dates.
As an emerging
growth company,
we elected to
use the extended
transition period
for complying
with new
or revised
accounting standards under Section 7(a)(2)(B) of the Securities Act. This election allows us to delay the adoption of new or
revised accounting standards
that have different
effective dates for
public and private
companies until those
standards apply
to private companies. As a
result of this election, our
financial statements may not be
comparable to companies that comply
with these
accounting standards
the public
company effective
dates. Because
our financial
statements
may not
comparable
companies
that
comply
with
public
company
effective
dates,
investors
may
have
difficulty
evaluating
comparing our
business, performance
or prospects
in comparison to
other public
companies, which
may have a
negative
impact on the value and liquidity of our Class A common stock. We cannot predict if investors will find our Class A common
stock
less
attractive
because
have
relied
this
exemption.
some
investors
find
our
Class
common
stock
less
attractive as a result, there
may be a less active trading
market for our Class A common
stock and our stock price
may be
more volatile.
We have existing investors that own
a significant amount of our
common stock whose individual interests may
differ from yours.
A significant percentage of our Class A common stock is currently held by a few institutional investors, including Patriot
Financial Partners II,
and Patriot Financial
Partners Parallel II, L.P.
(collectively,
"Patriot"), and Priam
Capital Fund II,
("Priam,"
and
together
with
Patriot,
the
"Significant
Investors").
February
Patriot
and
Priam
own
approximately 10.4% and 21.8%, respectively, of our outstanding shares of Class A common stock. In addition, Patriot and
Priam are
each entitled
to nominate
a director
to our
Board and
have certain
subscription rights
to purchase
new equity
securities that we
issue in the
future, in each
case as long
as certain equity
ownership criteria
are met. Patriot
and Priam
also have
certain registration rights
(which they
have exercised), including
demand registration rights,
and information rights.
Although Patriot
and Priam
are independent
of each
other,
these institutional
investors will
continue to
have a
significant
level of influence over us because of their level
of Class A common stock ownership and their right
to representation on our
Board. For
example, Patriot
and Priam
will have
a greater
ability than
our other
shareholders to
influence the
election of
directors and the
potential outcome of
other matters submitted
to a vote
of our shareholders,
including mergers and
other
acquisition transactions,
amendments to
our amended
Articles of
Incorporation and
Amended and
Restated Bylaws,
and
other
extraordinary
corporate
matters.
The
interests
these
investors
could
conflict
with
the
interests
our
other
shareholders, and
any future
transfer by
these investors
of their
shares of
Class A
common stock
to other
investors who
have different business objectives
could adversely affect our
business, results of operations,
financial condition, prospects
or the market value of our Class A common stock.
Provisions
our
governing
documents
and
Florida
law
may
have
anti-takeover
effect
and
there
are
substantial regulatory limitations on changes of control
of the Company.
Our corporate organizational documents and provisions of federal
and state law to which we
are subject contain certain
provisions that could
have an anti-takeover
effect and
may delay,
make more difficult
or prevent an
attempted acquisition
that you may favor or an attempted replacement of our
Board or management.
Table of Contents
USCB Financial Holdings, Inc.
Our governing documents include provisions that:
empower our Board, without shareholder approval, to issue shares of preferred stock, the terms of
which, including
voting power, are set by our
Board;
provide that directors may be removed from office only for cause and only upon a majority vote
of the shares of our
Company with voting power;
prohibit holders of our Class A common stock to take action
by written consent in lieu of a shareholder meeting;
require holders of at least 10% of our Class A common
stock to call a special meeting;
do not provide for cumulative voting in elections of our
directors;
provide that
our Board
has the
authority to amend
our Amended
and Restated Bylaws
without shareholder approval;
require shareholders that wish to bring business before annual or special meetings of shareholders, or to nominate
candidates for election as directors at our annual meeting of shareholders, to provide
timely notice of their intent in
writing and satisfy disclosure requirements; and
enable our Board to increase, between
annual meetings, the number of
persons serving as directors and
to fill the
vacancies created
result of
the increase until
the next
meeting of
shareholders by a
majority vote
of the
directors
present at a meeting of directors.
In addition,
certain provisions
of Florida
law may
delay,
discourage, or
prevent an
attempted acquisition
or change
control. Furthermore,
banking laws
impose notice,
approval, and
ongoing regulatory
requirements on
any shareholder
other party that seeks to acquire direct or indirect "control" of a
bank holding company,
which includes the Change in Bank
Control Act
and the
Bank Holding
Company Act.
These laws
could delay
or prevent
an acquisition.
Also, for
preservation
and continued availability
of our "deferred
tax assets," our
amended Articles of
Incorporation prohibit any
direct or indirect
transfer of stock or options to acquire stock to any person who, as a result of the transfer,
would own 4.95% or more of our
stock,
long
continue
have
"deferred
tax
assets,"
subject
limited
exceptions
provided
our
amended
Articles of Incorporation. Because of the requirements to overcome this restriction, this
provision of the amended Articles of
Incorporation could
have an
anti-takeover
effect
and
may delay,
make more
difficult
or prevent
an attempted
acquisition
that you may favor.
Table of Contents
USCB Financial Holdings, Inc.
Item 1B. Unresolved Staff Comments
None.
Item 1C. Cybersecurity
Risk Management and Strategy Overview
Customers depend
on the
Company to
safeguard
nonpublic personal
information
gathered and
stored in
connection
with the
services we
provide. The
Company understands
that cyber
incidents can
have financial,
reputational, legal,
and
operational impacts
that can
adversely affect
our customers,
capital, and
earnings. Therefore,
we integrate
cybersecurity
processes throughout the
Company as part of
our enterprise-wide governance
process. Regulatory agencies
are charged
with
ensuring
the
Company’s
cybersecurity
controls
and
procedures
are
compliant
with
the
intent
the
cybersecurity
expectations set forth
by the Federal
Financial Institutions
Examination Council
(“FFIEC”). The
FFIEC framework
offers a
set
guidelines
and
best
practices
help
financial
institutions
manage
and
mitigate
cybersecurity
risks
effectively.
focuses on ensuring the confidentiality,
integrity, and availability
of sensitive information and systems.
The Information
Security Officer
(“ISO”) is
an integral
member of
the Risk
Management and
Compliance Department
(“RMCD”) of
the Bank
and provides
expert counsel
on matters
of cybersecurity
and presents
periodic reports
to the
Risk
Committee of our Board of Directors.
As part
of the
program, periodic
risk assessments
are performed
to determine
the Company’s
inherent and
residual
cybersecurity risk, the
maturity level of the program,
the risk of cyber
threats, and the effectiveness
of controls currently
practice. The Company utilizes the National Institute of Standards and
Technology
(“NIST”) Framework and the Cyber Risk
Institute Framework (“CRI
Framework”) to help
management identify its
risks and determine
the Company’s
cybersecurity
posture.
Through
the
implementation
of rigorous
procedures
and controls,
augmented
by ongoing
training
initiatives
for
both management and
staff, the institution
cultivates a safe
cybersecurity environment. This
approach encompasses diverse
methodologies
including
defense-in-depth
and
proactive
security
awareness
training
aimed
fortifying
the
institutions’
cybersecurity controls and fostering a resilient operational
framework.
Assessment and Response to Cybersecurity Threats
It is the policy of
the Company and its
technology service providers
(“TSPs”) to ensure that
they can identify,
mitigate,
and respond to cyber-attacks involving destructive
malware and invasive attacks such
as phishing, ransomware, malware,
DDoS
attacks,
etc.
This
commitment
aligns
with
the
Company’s
risk
appetite,
Incident
Response
Policy,
and
Business
Continuity Plan,
which incorporates
business continuity
planning and
testing activities
to enhance response
and recovery
capabilities.
The Company recognizes that it faces a variety of risks from cyber-attacks involving destructive malware, including
liquidity, capital, operational, and
reputation risks, due
to events such
as fraud, data
loss, and disruption
of customer
service.
As such,
the policy
of the
Company to
ensure that
its risk
management processes,
and business
continuity planning
address these risks by:
Establishing
comprehensive
governance
program
encompassing
policies
and
procedures
administer
and
oversee
the
information/cybersecurity
programs
ensure
adherence
regulatory
guidance
and
industry
best
practices.
Securely configuring systems and services to mitigate the impact of cyber-threats. This includes measures such as
logical network segmentation, backups, maintaining an inventory
of authorized devices and software, and physical
segmentation
critical
systems.
Consistency
system
configuration
fosters
secure
network
environment
removing or disabling unused applications, functions, or components.
Implementing and testing
controls around critical
systems on a regular
basis to ensure appropriate
access control
and segregation of duties. Limits on sign-on attempts
for critical systems are enforced, with accounts
being locked
when
the
threshold
are
met.
Alert
systems
notify
baseline
control
changes
critical
systems,
with
the
effectiveness and
adequacy of
controls periodically
tested and
the results
reported to
senior management
and, if
applicable,
the
Risk
Committee,
along
with
recommended
risk
mitigation
strategies
and
the
progress
actions
taken to remediate findings.
Performing security
monitoring, prevention,
and risk
mitigation activities
to ensure
the effectiveness
of protection
and detection systems.
This includes maintaining
up-to-date intrusion detection
systems, antivirus protection,
and
properly configured
firewall
rules. Systems
are monitored
identify,
prevent,
and contain
cyber-attack
attempts
from all sources.
Table of Contents
USCB Financial Holdings, Inc.
Maintaining robust business
continuity planning processes
to swiftly
recover, resume, and maintain
operations post-
cyber-attack incidents
involving destructive
malware. These
processes encompass
data and business
operations
recovery,
network
capability
rebuilding,
and
data
protection
for
offline
backups
the
event
cyber-attacks
impacting the Company and/or its critical service providers.
Conducting ongoing
information security
risk assessments
to address
new and
evolving threats
to online
deposit
and loan accounts. This involves identifying, prioritizing, and assessing risks to
critical systems, including threats to
applications controlling
various system parameters and implementing
necessary security prevention measures.
Reviewing, updating, and testing incident response and business
continuity plans annually to ensure effectiveness.
Testing
encompasses
both
in-house
and
third-party
processor
scenarios
validate
employee
understanding
responsibilities and adherence to Company protocols.
Executive Oversight and Roles
The
responsibility
for
adopting
and
maintaining
effective
cybersecurity
program
assigned
the
RMCD,
who
collaborates
with
functional
area
management,
departmental
level
managers,
and
other
relevant
staff.
Management
committees and
the Audit
and Risk
Committee of
the Board
(“ARC”) review
reports submitted
by the
RMCD detailing
the
Company’s
inherent
and
residual
cybersecurity
risk,
program
sophistication
level,
and
high-risk
threats
identified
the
cybersecurity risk assessment.
The
ARC
oversees
the
development
and
maintenance
the
information
security
program,
holding
management
accountable.
Management
committees
ensure
program
integration
and
effectiveness,
with
the
RMCD
responsible
for
cybersecurity controls
and procedures.
The ARC
receives regular
reports
on cybersecurity
risk assessment
and program
updates,
providing
expectations
and
requirements
management
and
holding
them
accountable
for
oversight
and
coordination, assignment of responsibility,
and the effectiveness of the information and cybersecurity
security program.
Annually,
required,
the
RMCD
provides
comprehensive
report
the
Board
regarding
the
status
the
cybersecurity
program
This
report
encompasses
internal
assessments,
utilization
the
Cybersecurity
Assessment,
discussion of
significant program
matters such
as the
annual risk
assessment, risk
management decisions,
monitoring of
service provider compliance, results of key controls testing, security breaches
or violations, management's responses, and
recommendations for program enhancements.
Engagement with Third Party Vendors
The engagement of critical third-party providers introduces a range of
potential risks that can affect the Bank’s strategic
direction, reputation, daily
operations, transaction integrity,
credit exposures, financial
stability,
technological environment,
and compliance posture. Providers whose services include the transmission, storage, or processing
of non-public personal
information
present heightened
compliance risks,
particularly
with respect
to the
requirements
of the
GLB
Act and
other
applicable Privacy Laws and Regulations.
The
Bank
has
established
general
guidelines
support
the
identification,
risk
assessment,
monitoring,
and
management of risks related
to the engagement of
third-party providers or vendors.
This framework ensures that risks
are
addressed proactively and in accordance with regulatory
expectations.
Risk assessment for
critical providers may
require the involvement
of specialized personnel,
including the compliance
officer, technology officers, finance officers,
internal auditors, and
legal counsel. Their
participation is essential
for identifying
potential risks arising
from third-party relationships,
defining performance criteria,
establishing internal controls,
specifying
reporting requirements, and ensuring
contractual obligations are in
place for ongoing risk assessment
and mitigation. This
collaborative approach helps maintain the integrity and security of the
Bank’s operations while meeting regulatory and legal
standards.
Compliance with Regulatory Standards
As noted above, annual testing, or more frequently
if deemed necessary,
of cybersecurity controls and procedures
will
be conducted
to ensure
compliance. In
instances of
identified deficiencies
or vulnerabilities,
remedial action
plans will
implemented to rectify issues or establish mitigating controls. Any exceptions
deemed significant will be promptly reported,
with remediation efforts prioritized.
Annually,
required,
the
RMCD
will
provide
comprehensive
report
the
ARC
designated
committee
regarding
the
status
the
cybersecurity
program.
This
report
will
encompass
internal
assessments,
utilization
the
Cybersecurity Assessment, and discussion of other significant
program matters.
Table of Contents
USCB Financial Holdings, Inc.
As of the end of
the reporting period set
forth in this Annual
Report on Form 10-K,
there is no knowledge
or indication
that
customer
sensitive
information
was
compromised
result
third-parties’
system
vulnerabilities.
Management
continues to monitor developments and vendor communications.
Item 2.
Properties
The Company’s corporate
offices
are headquartered at
87th Avenue, Doral,
Florida 33172. The
Company,
through the Bank,
operates 10 banking
centers in South
Florida within Miami-Dade and
Broward counties. Of
the 10 banking
centers, nine of these locations are leased
and one is owned. The banking
center that is owned is located at
3999 Sheridan
St, Hollywood,
Management believes
that each
of these locations
are in good
condition and
adequate to
meet
our present and foreseeable needs, subject to possible future
expansion.
See Note 4 “Leases” and Note 5 “Premises and Equipment” to the Consolidated
Financial Statements included in Item
8 in this Annual Report on Form 10-K for additional information.
Item 3.
Legal Proceedings
We are not currently subject to any material legal proceedings. We are from time to time subject to claims and litigation
arising
the
ordinary
course
business.
These
claims
and
litigation
may
include,
among
other
things,
allegations
violation of banking and other applicable regulations, competition
law, labor laws and consumer
protection laws, as well as
claims or
litigation
relating
to intellectual
property,
securities, breach
of contract
and tort.
intend to
defend ourselves
vigorously against any pending or future claims and litigation.
There can be no
assurance that any
future legal proceedings
to which we are
a party will not
be decided adversely
our interests and have a material adverse effect
on our financial condition and operations.
Item 4.
Mine Safety Disclosures
Not applicable.
Table of Contents
USCB Financial Holdings, Inc.
PART II
Item 5.
Market
for
Registrant’s
Common
Equity,
Related
Stockholder
Matters
and
Issuer
Purchases
Equity
Securities
Market Information
In July
2021, the Bank’s
Class A common
stock began trading
on the
Nasdaq Stock Market
under ticker
symbol “USCB”.
Effective December
the Company
acquired all
issued and
outstanding shares
of Class
A common
stock of
the
Bank
connection
with
the
bank
holding
company
reorganization.
Each
the
outstanding
shares
the
Bank’s
common
stock
formerly
held
its
shareholders
was
converted
into
and
exchanged
for
one
newly
issued
share
the
Company’s Class A common stock. The Company’s
Class A common stock is also listed on the Nasdaq Stock
Market and
uses the same ticker symbol.
The listing of our Class
A common stock on the
Nasdaq Stock Market has
resulted in a more active
trading market for
our Class A common
stock. However, we cannot assure investors that
a liquid trading market
for our Class A
common stock
will be sustained.
Prior
our
listing
the
Nasdaq
Stock
Market
there
was
not
established
public
trading
market
for
the
Class
common shares.
As of December 31, 2025, our
Class B common stock is
not listed or traded
on any stock exchange and
no shares were
issued and outstanding at such date.
Holders
February
the
Company’s
Class
A common
shares
were held
approximately
550 shareholders
record,
not including
the number
of persons
or entities
whose stock
is held
in nominee
or “street”
name through
various
brokerage firms and banks.
Dividends
As a bank holding company, the Company’s ability to declare and pay dividends depends on various federal regulatory
considerations, including
the guidelines
of the Federal
Reserve regarding
capital adequacy
and dividends.
The Company
has agreed to provide notice to the Federal Reserve prior to paying
any cash dividends on its Class A common stock.
Because we are
a bank holding
company and currently do
not engage directly in
business activities of a
material nature,
our ability to pay dividends
to our shareholders depends,
in large part, upon
our receipt of dividends
from the Bank, which
is also subject to
numerous limitations on
the payment of dividends
under federal and state
banking laws, regulations
and
policies. The Bank cannot
declare and pay and
cash dividends to
the Company without receiving
the prior approval of
the
FDIC.
The principal
source of
revenue with
which to
pay dividends
on common
shares are
dividends the
Bank may
declare
and
pay
out
funds
legally
available
for
payment
dividends.
Florida
corporation,
are
only
permitted
pay
dividends to shareholders if, after giving effect to the dividend, (i) the Company is able to pay its debts as they become due
in the ordinary course
of business and
(ii) the Company’s
assets exceeds the
sum of Company’s
(a) liabilities plus
(b) the
amount that
would be
needed for
the Company
to satisfy
the preferential
rights
upon dissolution
of shareholders
whose
preferential rights are superior to those receiving the dividend,
if any.
Securities Authorized for Issuance Under Equity Compensation
Plans
See Note 10 ”Equity Based
and Other Compensation Plans” to
the Consolidated Financial Statements
included in this
Annual Report Form on 10-K for additional information
required.
Table of Contents
USCB Financial Holdings, Inc.
Recent Sales of Unregistered Securities
The Company did not sell any of its equity securities during
2025 that were not registered under the Securities
Act.
Purchases of Equity Securities by Issuer and Other Affiliates
On January 24,
2022, the Board
of Directors approved
the first share
repurchase program
750,000 shares
Class A common stock. On April
22, 2024 the Board of
Directors approved the second share repurchase
program of up to
500,000 shares of
Class A common
stock. Under the
repurchase programs,
the Company may
purchase shares
of Class
common
stock
discretionary
basis
from
time
time
through
open
market
repurchases,
privately
negotiated
transactions, or otherwise
in compliance with
Rule 10b-18 under
the Exchange Act.
As of December 31,
2025, the Company
had
repurchased
shares
Class
common
stock
under
the
first
program
and
shares
under
the
second
repurchase
program.
The
Company
did
not
repurchase
any
its
equity
securities
for
the
quarter
ended
December 31,
December 31,
shares
remained
authorized
for
repurchase
under
the
Company’s
two
stock
repurchase programs.
During the
year ended
December 31,
2025, the
Company
repurchased
2.0 million
shares of
Class
A common
stock
from certain
institutional shareholders
through privately
negotiated transactions,
at a weighted
average price
per share of
The
aggregate
purchase
price
for
these
transactions
was
approximately
million.
The
repurchases
were
supplemental and not part of the Company’s two
previously announced stock repurchase programs described
above.
Item 6.
Reserved
Table of Contents
USCB Financial Holdings, Inc.
Item 7.
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Management’s
discussion
and
analysis
financial
condition
and
results
operations
analyzes
the
consolidated
financial condition and results of operations of the Company and
the Bank, its wholly owned subsidiary, for the years ended
December 31,
and
This
discussion
and
analysis
is best
read
conjunction
with
the
Consolidated
Financial
Statements and related
footnotes of the Company
presented in Item
8 “Financial Statements
and Supplementary Data”
this Annual Report on Form
10-K. In addition to
historical information, this
discussion contains forward-looking
statements
that
involve
risks,
uncertainties
and
assumptions
that
could
cause
actual
results
differ
materially
from
management's
expectations.
Factors
that
could
cause
such
differences
are
discussed
the
sections
entitled
"Forward-Looking
Statements" and Item 1A “Risk Factors" of this Annual Report.
In this Annual Report on Form 10-K, unless the context indicated otherwise, references to “we,” “us,”, and “our” refer to
the Company and the Bank, as the contest dictates.
Table of Contents
USCB Financial Holdings, Inc.
CAUTIONARY NOTE REGARDING FORWARD
-LOOKING STATEMENTS
This
Annual
Report
Form
contains
statements
that
are
not
historical
nature
are
intended
and
are
hereby identified as, forward-looking
statements for purposes of
the safe harbor provided by
Section 21E of the Securities
Exchange Act
as amended.
The words
“may,” “will,” “anticipate,” “could,”
“should,” “would,” “believe,”
“contemplate,”
“expect,”
“aim,”
“plan,”
“estimate,”
“seek,”
“continue,”
and
“intend,”
the
negative
these
terms,
well
other
similar
words and expressions of the
future, are intended to identify forward-looking statements.
These forward-looking statements
include statements related to
our projected growth, anticipated
future financial performance, and
management’s long-term
performance goals, as well as statements
relating to the anticipated effects
on results of operations and financial condition
from
expected
developments
events,
business
and
growth
strategies,
including
anticipated
internal
growth
and
potential future additional balance sheet restructuring.
These forward-looking statements involve significant risks and uncertainties that could cause our actual results to differ
materially from those anticipated in such statements.
Potential risks and uncertainties include, but are not
limited to:
the strength of the United States economy
in general and the strength of the local
economies in which we conduct
operations;
our ability to successfully manage interest rate risk, credit
risk, liquidity risk, and other risks inherent to our industry;
the accuracy of our financial statement estimates and assumptions, including the estimates used for our credit loss
reserve and deferred tax asset valuation allowance;
the efficiency and effectiveness of our
internal control procedures and processes;
our ability
to comply
with the
extensive laws
and regulations
to which
we are
subject, including
the laws
for each
jurisdiction where we operate;
adverse
changes
conditions
the
capital
and
financial
markets,
including
actual
potential
stresses
the
banking industry;
deposit attrition and the level of our uninsured deposits;
legislative or
regulatory changes and
changes including the
enactment of the
One Big Beautiful
Bill Act
and changes
in accounting principles, policies, practices or guidelines,
including the on-going effects of the CECL standard
the lack of a significantly diversified loan portfolio and concentration in the South Florida market, including the risks
of geographic, depositor,
and industry concentrations,
including our concentration
in loans secured by
real estate,
in particular, commercial real estate;
the effects of climate change;
the concentration of ownership of our common stock;
fluctuations in the price of our common stock;
our ability to fund or access the capital markets at attractive
rates and terms and manage our growth, both organic
growth as well as growth through other means, such as
future acquisitions;
inflation, interest rate, unemployment rate, market, and monetary
fluctuations;
the effects of potential new or increased tariffs,
retaliatory tariffs and trade restrictions;
impacts of international hostilities and geopolitical events;
increased
competition
and
its
effect
the
pricing
our
products
and
services
well
our
net
interest
rate
spread and net interest margin;
the loss of key employees;
the effectiveness of our risk management strategies, including operational risks, including, but not limited to, client,
employee, or third-party fraud and security breaches; and
other risks described in this Annual Report on Form 10-K
and other filings we make with the SEC.
All
forward-looking
statements
are
necessarily
only
estimates
future
results,
and
there
can
assurance
that
actual results will
not differ
materially from expectations.
Therefore, you are
cautioned not to
place undue reliance
on any
forward-looking
statements.
Further,
forward-looking
statements
included in
this
Annual Report
on Form
10-K are
made
only
the
date
hereof,
and
undertake
obligation
update
revise
any forward
-looking
statement
to reflect
events or circumstances after the date on which the statement is made or to reflect the
occurrence of unanticipated events,
unless required to do so under
the federal securities laws. You
should also review the risk
factors described in this Annual
Report on Form 10-K and in the reports the
Company filed or will file with the SEC.
Non-GAAP Financial Measures
This Annual Report on Form 10-K includes
financial information determined by methods
other than in accordance with
generally
accepted
accounting
principles
(“GAAP”).
This
financial
information
includes
certain
operating
performance
measures. Management has included these non-GAAP
measures because it believes these measures may
provide useful
supplemental information
for evaluating
the Company’s
underlying performance
trends. Further,
management uses
these
measures
managing
and
evaluating
the
Company’s
business
and
intends
refer
them
discussions
about
our
Table of Contents
USCB Financial Holdings, Inc.
operations and performance.
Operating performance
measures should be
viewed in addition
to, and not
as an alternative
substitute
for,
measures
determined
accordance
with
GAAP,
and
are
not
necessarily
comparable
to non-GAAP
measures
that
may
presented
other
companies.
the
extent
applicable,
reconciliations
these
non-GAAP
measures to the most directly
comparable GAAP measures can be found
in the ‘Non-GAAP Reconciliation Tables’ included
in this Annual Report on form 10-K.
Overview
For the year ended December 31, 2025, the Company reported net income of
$26.1 million compared with net income
of $24.7 million for the year ended December 31, 2024.
evaluating
our
financial
performance,
consider
the
level
and
trends
net
interest
income,
the
net
interest
margin, the
cost of
deposits, growth
and composition
of our
loan portfolio,
levels and
composition of
non-interest income
and non-interest
expense,
performance
ratios,
asset
quality ratios,
regulatory
capital
ratios,
and any
significant
event or
transaction.
The following significant highlights are of note for the year
ended December 31, 2025:
Net interest income
before provision
for credit losses
totaled $83.6
million, an
increase of $13.7
million or 19.6%,
compared to $69.9 million for the year ended December
Net interest margin (“NIM”) was 3.20% for the year
ended December 31, 2025, an improvement from 2.94% for the
year ended December 31, 2024.
Total assets
grew to
$2.8 billion
at December 31,
an increase
million or
8.1%, compared
billion at December 31, 2024.
Total loans held for investment
grew to $2.2 billion
at December 31, 2025,
an increase of $216.4
million or 11.0%,
compared to $2.0 billion at December 31, 2024.
Return on average assets for the year ended December
31, 2025 was 0.96% compared to 0.99%
for 2024.
Return on average
stockholders’ equity for
the year ended
December 31, 2025
was 11.79% compared
for 2024.
Nonperforming assets totaled $3.1 million at December
31, 2025 compared to $2.7 million at December 31, 2024.
The
Bank
maintained
its
strong
capital
position.
December 31,
the
Bank
was
well-capitalized
for
regulatory capital purposes,
with a
total risk-based capital
ratio of 13.67%,
a tier 1
risk-based capital ratio
common
equity
tier
capital
ratio
and
leverage
ratio
December 31,
and
December 31, 2024, all of the Bank’s regulatory capital ratios exceeded the thresholds to be well-capitalized under
the applicable
bank regulatory
requirements. The
Company,
small
bank holding
company,
is not
subject
regulatory capital requirements.
On August 14,
2025, the
Company entered
into a
Subordinated Note
Purchase Agreement
with certain
qualified
institutional buyers pursuant to which the
Company sold and issued $40.0 million
in aggregate principal amount of
its 7.625%
fixed-to-floating rate
subordinated notes
due August 15,
a private
placement transaction.
This
transaction was
conducted under
the provisions
of Regulation
D promulgated
under the
Securities Act 1933. The
subordinated notes were issued by
the Company to the
purchasers at a price equal
to 100% of their face
amount.
The majority of
the net proceeds
were used to
repurchase 2.0 million
shares of Class
common stock in
September
2025, from certain institutional shareholders through privately negotiated transactions, at a weighted average price
per share
The aggregate
purchase
price for
these transactions
was
approximately
$34.4 million.
The
repurchases
were
supplemental
and
not
part
the
Company’s
two
previously
announced
stock
repurchase
programs.
During the fourth quarter
of 2025 the Company
executed a portfolio restructuring
strategy which resulted in
a sale
million of
its lower-yielding
available-for sale
securities for
a pre-tax
loss of
$7.5 million.
The majority
proceeds from the sale were reinvested into loans at quarter-end.
Table of Contents
USCB Financial Holdings, Inc.
Critical Accounting Policies and Estimates
The
consolidated
financial
statements
are
prepared
based
the
application
GAAP,
the
most
significant
which are described
in Note 1 “Summary
of Significant Accounting
Policies” to our
Consolidated Financial Statements.
prepare financial statements in conformity with GAAP,
management makes estimates, assumptions,
and judgments based
available
information.
These
estimates,
assumptions,
and
judgments
affect
the
amounts
reported
the
financial
statements and accompanying notes. These estimates, assumptions, and judgments are based on
information available as
the
date
the
financial
statements
and,
this
information
changes,
actual
results
could
differ
from
the
estimates,
assumptions
and
judgments
reflected
the
financial
statements.
particular,
management
has
identified
accounting
policies that, due to
the estimates, assumptions
and judgments inherent
in those policies, are
critical in understanding
our
financial statements.
Management
has presented
the application
of these
policies
to the
audit and
risk committee
of our
Board.
Allowance for Credit Losses - Loans
The allowance for credit
losses (“ACL”) is
a valuation allowance that
is established through charges
to earnings in the
form of
a provision for
credit losses. The
amount of the
ACL is
affected by the
following: (i) charge-offs
of loans that
decrease
the allowance;
(ii) subsequent
recoveries on
loans previously
charged off
that increase
the allowance;
and (iii)
provisions
for credit losses charged to income that increase or decrease the allowance. Management considers the policies related to
the ACL as the most critical to the Company’s financ
ial statement presentation.
ACL is calculated using
CECL methodology.
The CECL methodology
measures expected credit
losses and applies to
financial assets measured at amortized cost, including loan receivables and
held-to-maturity debt securities. It also applies
to off
-balance
sheet
credit
exposures
not
accounted
for
as insurance
loan
commitments,
standby
letters
of credit,
financial guarantees,
and similar
instruments), as
well as
net investments
in leases
recognized by
lessors in
accordance
with
Topic
leases.The
Company
estimates
the
allowance
for
credit
losses
utilizing
pertinent
available
data,
sourced both internally
and externally, relating to
past events, current
conditions, and reasonable
and supportable forecasts.
Historical
credit
losses
provide
the
foundation
for
the
estimation
expected
credit
losses.
Qualitative
adjustments
are
applied to the estimated
expected credit losses
for the loan portfolio
to account for
potential constraints of
the quantitative
model. Management
employs
a scorecard
to facilitate
the evaluation
of qualitative
factor adjustments
made to
expected
credit losses.
The estimation's
quantitative aspect
relies on
the statistical
correlation between
the anticipated
value of
an economic
indicator and the
historical loss
experience implied
within a
selected group
of peers.
The Company conducted
regression
analyses using
peer data,
inclusive of
the Company
itself, where
observed credit
losses and chosen
economic indicators
were utilized to identify
appropriate drivers for
modeling the lifetime
probability of default (“PD”)
rates. A loss given
default
rate (“LGD”) is assigned to each pool
of loans for each period based on
these PD outcomes. The model
primarily employs
an expected
discounted cash
flow (“DCF”)
analysis for
segments within
the loan
portfolio. This
DCF analysis
operates at
the
individual
instrument
level
and
incorporates
various
loan-specific
data
points
and
segment-specific
assumptions
ascertain the lifetime expected
loss associated with each
instrument. An implicit "hypothetical
loss" is determined for
each
period of the DCF,
aiding in establishing the
present value of future
cash flows for each
period. The reserve allocated
particular loan represents the disparity
between the sum of the
present value of future cash
flows and the book balance
the loan at the measurement date.
Management
uses
the
Remaining
Life
(“WARM”)
methodology
for
five
segments
within
the
loan
portfolio.
For
each
segment,
long-term
average
loss
rate
computed
and
applied
quarterly
throughout
the
remaining
life
the
pool.
Qualitative assessments
are conducted
to adjust for
economic expectations.
estimate the remaining
life, management
employed a software solution utilizing an attrition-based calculation. This software conducts quarterly cohort-based attrition
measurements based on the loan portfolio.
Portfolio
segments
represent
the
level
which
loss
assumptions
are
applied
pool of
loans,
determined
the
similarity of
risk characteristics inherent
in the
included instruments, based
on collateral
codes and
FFIEC Call Report
codes.
Currently,
the Company segments
the portfolio based on
collateral codes to establish
reserves. Each segment
is linked to
regression
models
(Loss
Driver
Analyses)
using
peer
data
for
loans
with
similar
risk
characteristics.
The
Company
has
established connections
between
internal portfolio
segmentation and
FFIEC Call
Report codes
for this
purpose. The
loss
driver
for
each
loan
portfolio
segment
derived
from
readily
available
and
reasonable
economic
forecast,
including
Federal
Reserve
Bank
projections
the
civilian
unemployment
rate
and
year-over-year
real
GDP
growth.
For
the
residential
loan
segment,
House
Price
Index
(“HPI”)
projections
published
Fannie
Mae’s
Economic
and
Strategic
Research Group are utilized for the forecast. Forecasts are applied for the first
four quarters of the credit loss estimate and
then linearly revert to the historical mean of the economic indicator
over the expected life of the loans.
Table of Contents
USCB Financial Holdings, Inc.
The model integrates qualitative
factor adjustments to
fine-tune risk calibration
for each portfolio
segment, addressing
aspects that quantitative analysis may
not fully capture. Decisions concerning
qualitative adjustments reflect management's
anticipation of loss conditions deviating from those already accounted
for in the quantitative aspect of the model.
Our ACL
included residential
loans. To
assess the
potential impact
of changes
in qualitative
factors related
to these
loans,
management
performed
a sensitivity
analysis.
The Company
evaluated
the
impact
of the
HPI
used
in calculating
expected losses on the residential loan segment.
As of December 31, 2025, for every
100 basis points increase in the HPI
index, the
forecast reduces
reserves by
approximately $398
thousand and
about 2
basis points
to the
reserve coverage
ratio, everything else being
constant. This sensitivity analysis
provides a hypothetical result
to assess the sensitivity
of the
ACL and does not represent a change in management’s
judgement.
December 31, 2025,
we stress
tested two
qualitative factors
in our
commercial real
estate loan
pool, as
it’s the
largest segment
in our
portfolio. We
evaluated the
impact of
a change
in the
qualitative factors
from no
risk to
maximum
loss to
measure the
sensitivity of
the qualitative
factors. The
change resulted
$10.3 million
increase in
the
ACL. This sensitivity
analysis provides a
hypothetical result to
assess the sensitivity
of the ACL
and does
not represent a
change in management’s judgement.
The Company calculates a reserve for unfunded commitments, distinct from
the allowance for credit losses reported in
accrued interest
and other liabilities.
This reserve
is determined
using both quantitative
and qualitative
factors identical
those applied to the collectively evaluated loan portfolio.
Results of Operations
General
The following tables
present selected balance sheet, income statement, and profitability ratios for the dates and for the
periods indicated (in thousands, except ratios):
As of December 31,
Consolidated Balance Sheets:
Total
assets
Total
loans held for investment
Total
deposits
Total
stockholders' equity
Loan amounts include deferred fees/costs.
Years Ended December 31,
Consolidated Statements of Operations:
Net interest income before provision for credit losses
Provision for credit losses
Total
non-interest income
Total
non-interest expense
Net income
Net income available to common stockholders
Profitability:
Efficiency ratio
Net interest margin
The Company’s results
of operations
depend substantially on
net interest income
and non-interest income.
Other factors
contributing to the
results of operations
include our provision
for credit losses,
non-interest expense, and
the provision for
income taxes.
Net income
for the
year ended
December 31, 2025
was $26.1 million
compared with
net income
of $24.7 million
for
the same
period in
2024. The Company
reported
net income
per diluted
share for
the year
ended December 31,
$1.33 compared to net income per diluted share for the
same period in 2024 of $1.24.
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USCB Financial Holdings, Inc.
Net Interest Income
Net
interest
income
the
difference
between
interest
earned
interest-earning
assets
and
interest
incurred
interest-bearing liabilities and
is the
primary driver of
core earnings. Interest
income is generated
from interest and
dividends
interest-earning
assets,
including
loans,
investment
securities
and
other
short-term
investments.
Interest
expense
incurred
from
interest
paid
interest-bearing
liabilities,
including
interest-bearing
deposits,
FHLB
advances
and
other
borrowings.
To evaluate net
interest income, we
measure and monitor
(i) yields on
loans and other
interest-earning assets, (ii)
the
costs of deposits
and other funding
sources, (iii) net
interest spread, and
(iv) net interest margin.
Net interest spread is
equal
to the
difference between
the weighted
average yields
earned on interest
-earning assets
and the weighted
average rates
paid on
interest-bearing liabilities.
Net interest
margin is
equal to
net interest
income divided
by average
interest-earning
assets. Because non-interest-bearing
sources of funds,
such as non-interest-bearing
deposits and stockholders’
equity, also
fund interest-earning assets, net interest margin includes
the benefit of these non-interest-bearing sources.
Changes in
the market
interest rates
and interest
rates we
earn on
interest-earning assets
or pay on
interest-bearing
liabilities, as well
as the volume
and types of
interest-earning assets and interest-bearing
and non-interest-bearing liabilities,
are usually the
largest drivers of
periodic changes in
net interest spread,
net interest margin
and net interest
income. The
Asset-Liability Committee (“ALCO”) has in place asset-liability management techniques to manage major factors that affect
net interest income and net interest margin.
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USCB Financial Holdings, Inc.
The following table
contains information
related to average
balances, average
yields on assets,
and average
costs of
liabilities for the periods indicated (in thousands).
Years Ended December 31,
Average
Balance
Interest
Yield/Rate
Average
Balance
Interest
Yield/Rate
Assets
Interest-earning assets:
Loans
Investment securities
Other interest-earning assets
Total
interest-earning assets
Non-interest earning assets
Total
assets
Liabilities and stockholders' equity
Interest-bearing liabilities:
Interest-bearing demand deposits
Savings and money market deposits
Time deposits
Total
interest-bearing deposits
FHLB advances
Subordinated notes
Total
interest-bearing liabilities
Non-interest-bearing demand deposits
Other non-interest-bearing liabilities
Total
liabilities
Stockholders' equity
Total
liabilities and stockholders' equity
Net interest income
Net interest spread
Net interest margin
Average balances - Daily average balances are used
to calculate yields/rates.
Average loan balances include non-accrual loans. Interest income
on loans includes accretion of deferred
loan fees, net of deferred loan costs.
At fair value except for securities held to maturity. This amount includes
FHLB stock.
Net interest spread is the weighted average
yield earned on total interest-earning assets
minus the weighted average rate paid on total interest-
bearing liabilities.
Net interest margin is the ratio of net interest
income to average total interest-earning assets.
Net interest
income before
the provision
for credit
losses was
$83.6 million for
the year
ended December 31,
increase of $13.7
million or 19.6%,
from $69.9 million
for the year
ended December 31,
2024. The increase
was primarily
driven by a decrease in the weighted
average rates paid on interest
bearing liabilities, which lowered overall funding costs,
combined with higher weighted
average yields on interest
earning assets. In addition, growth in the
loan portfolio increased
the volume of interest
earning assets, further contributing to the increase in net
interest income.
The
net
interest
margin
(“NIM”)
was
for
the
year
ended
December 31,
and
for
the
year
ended
December 31, 2024. The NIM increased
primarily due to a decrease
in the weighted average rate
paid on interest-bearing
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USCB Financial Holdings, Inc.
liabilities, in
particular a
decrease in
weighted average
rate paid
on saving
and money
market deposits.
The decrease
our cost of funds was primarily due to the interest rate
market.
Provision for Credit Losses
ACL represents expected
credit losses
in our
portfolio as
the measurement
date. We
maintain an
adequate ACL that
can
mitigate
expected
credit
losses
the
loan
portfolio.
The ACL
increased
the
provision
for
credit
losses
and
decreased by charge-offs, net
of recoveries on prior
loan charge-offs. There are
multiple credit quality metrics
that we use
to base
our determination
of the
amount
of the
ACL and
corresponding
provision
for
credit
losses. These
credit metrics
evaluate the
credit quality
and level
of credit
risk inherent
in our
loan portfolio,
assess non-performing
loans and
charge-
offs levels, consider statistical trends and economic conditions
and other applicable factors.
The
provision
for
credit
loss
for
the
year
ended
December 31,
was
million
compared
million
provision expense for the
same period in 2024. The ACL as a
percentage of total
loans was 1.16%
at December 31, 2025
compared to 1.22% at December
31, 2024. The ratio of ACL to total loans decreased due
to several payoffs of individually
reserved
loans during 2025 and the improvement of the expected loss
rate for various categories of pooled loans.
See “Allowance
for Credit
Losses” below
for further
discussion on
how the
ACL was
calculated for
the periods
presented.
Non-Interest Income
Net interest income
and other types of
recurring non-interest
income are generated
from our operations.
Our services
and products generate service charges and
fees, mainly from our depository accounts.
We also generate income from
our
interest
swap
program
and
from
the
gain
sale
loans
though
our
SBA program.
addition,
own
life
insurance
policies on several
key employees and
generate income reflecting
the increase in
the cash surrender
value of these
policies.
The following table presents the components of non-interest
income for the periods indicated (in thousands):
Years Ended December 31,
Service fees
(Loss) gain on sale of securities available for sale, net
Gain on sale of loans held for sale, net
Other non-interest income
Total
non-interest income
Non-interest income
for the
year ended
December 31, 2025
was $6.6
million compared
million for
the same
period in
2024. This
decrease was
primarily driven
$7.5 million
loss on
sale of
securities available
for sale
resulting
from a portfolio restructuring strategy
approved by the Board of
Directors and implemented in December 2025.
The portfolio
restructuring strategy
resulted in
the sale of
lower-yielding available-for-sale
securities at
a loss in
order to better
position
our securities portfolio.
Proceeds from the sale
transactions were primarily
reinvested in assets
bearing higher yields
than
those on the securities that were
sold. Service fees increased $764
thousand or 8.6%, primarily due
to title insurance fees
and prepayment
penalties.
The gain
on sale
of SBA 7a
loans increased
$254 thousand
and other
non-interest
income
increased
thousand
primarily
due
increases
the
cash
surrender
values
bank-owned
life
insurance policies.
Non-Interest Expense
The following table presents the components of non-interest
expense for the periods indicated (in thousands):
Years Ended December 31,
Salaries and employee benefits
Occupancy
Regulatory assessment and fees
Consulting and legal fees
Network and information technology services
Other operating
Total
non-interest expense
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USCB Financial Holdings, Inc.
Non-interest expense
for the
year ended
December 31, 2025
increased $5.0 million
compared to
the year
ended December 31, 2024.
The increase is
primarily due to
$3.4 million or
11.7% increase in
salaries and employee
benefits
consisting of a $2.2
million or 11.0% increase
due to merit
promotions and new hires,
a $455 thousand or
13.6% increase
in benefits
(health insurance)
and payroll
taxes,
and a
$876 thousand
increase in
stock-based
compensation due
to the
Company’s favorable financial performance in 2025. Other operating
expense had an increase of $946 thousand or 12.3%
consisting of
an increase
thousand in
item processing,
$146 thousand
in internet
banking fees,
thousand
increase
promotional
expense,
thousand
increase
director
fees,
and
thousand
other
operating
expenses.
Provision for Income Tax
Fluctuations in the effective tax rate reflect the effect of the differences in the inclusion or deductibility of certain income
and expense for income tax purposes.
Therefore, future decisions on the investments we
choose will affect our effective tax
rate. Changes in the
cash surrender value
of bank-owned life
insurance policies for
key employees, purchasing
municipal
bonds, and overall taxable income will be important elements
in determining our effective tax rate.
Income tax
expense for
the year
ended December
was
$9.8 million,
compared
to $7.8 million
for the
year
ended December 31,
2024. The effective
tax rate
increased to 27.3%
for the year
ended December 31,
2025 from 24.0%
for the
year ended
December 31, 2024.
The increase
in effective
tax rate
was due
primarily to
the recognition
$1.1 million of state tax liability expense for the year ended December 31, 2024. The state tax liability
expense was related
to taxes due on interest income on loans whose collateral
is located outside the State of Florida.
The Company did not have any tax-exempt securities
at both December 31, 2025 and December 31, 2024.
For a further
discussion on income taxes, see
Note 6 “Income Taxes”
to the Consolidated Financial Statements
set forth
in Item 8 of this Annual Report on Form 10-K.
Rate/Volume Analysis
The
table
below
sets
forth
information
regarding
changes
interest
income
and
interest
expense
for
the
periods
indicated (in thousands).
For each category of
interest-earning assets and interest-bearing liabilities,
information is provided
on changes attributable to (i) changes in rate (changes in rate multiplied by old volume); (ii) changes in volume (changes in
volume multiplied by old rate); and (iii) changes in rate-volume (change in
rate multiplied by change in volume). Changes in
rate-volume are proportionately allocated between rate and volume
variance (in thousands).
Years Ended 2025 vs. 2024
Years Ended 2024 vs. 2023
Increase (decrease) due to change in
Increase (decrease) due to change in
Volume
Rate
Net
Change
Volume
Rate
Net
Change
Interest-earning assets:
Loans
Investment securities
Other interest-earning assets
Total increase in interest income
Interest-bearing liabilities:
Interest-bearing demand deposits
Savings and money market deposits
Time deposits
FHLB advances
Subordinated notes
Total increase (decrease) in interest expense
Increase in net interest income
Average loan balances include non-accrual loans. Interest income
on loans includes accretion of deferred
loan fees, net of deferred loan costs.
At fair value except for securities held to maturity. This amount includes
FHLB stock.
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USCB Financial Holdings, Inc.
During
the
year
ended
December 31,
average
rates
paid
interest-bearing
liabilities
decreased,
while
yields
earned
interest-earning
assets
increased
slightly.
The
Company
was
able
reprice
its
interest-bearing
liabilities
downward more rapidly than its interest-earning assets.
Analysis of Financial Condition
Total
assets at December 31,
2025, were $2.8 billion,
an increase of $210.3
million, or 8.1%, over
total assets of $2.6
billion
December 31,
Total
loans
held
for
investment
increased
million,
billion
December 31, 2025
compared to
$2.0 billion
at December 31,
2024. Total
deposits increased
million, or
billion at December 31, 2025 compared to $2.2
billion at December 31, 2024.
Investment Securities
The investment portfolio
is used and
managed to provide
liquidity through cash
flows, marketability
and, if necessary,
collateral for
borrowings. The
investment portfolio
is also
used as
a tool
to manage
interest rate
risk and
the Company’s
capital market risk exposure. The
operating philosophy of the portfolio is
to maximize the Company’s profitability,
taking into
consideration the
Company’s risk
appetite and
tolerance, manage
it’s asset
composition and
diversification, and
maintain
adequate risk-based capital ratios.
The
investment
portfolio
managed
accordance
with
the
Asset
and
Liability
Management
(“ALM”)
policy,
which
includes
investment
guidelines,
approved
the
Board.
Such
policy
reviewed
least
annually
more
frequently
deemed necessary,
depending on
market
conditions
and/or
unexpected
events.
The investment
portfolio
composition
subject
change
depending
the
funding
and
liquidity
needs
the
Company,
and
the
interest
risk
management
objectives directed by the ALCO. The portfolio of investments can be used to modify the duration of the balance sheet.
The
allocation of cash into securities takes into consideration anticipated
future cash flows (uses and sources) and all available
sources of credit.
Our
investment
portfolio
consists
primarily
securities
issued
government-sponsored
agencies,
agency
mortgage-backed securities,
collateralized mortgage
obligation securities,
municipal securities,
and other
debt securities,
all with varying contractual maturities and coupons. Due to the optionality embedded in these securities, the final maturities
do not
necessarily represent the
expected life of
the portfolio. Some
of these
securities will be
called or paid
down depending
on capital market conditions and expectations. The investment portfolio is regularly reviewed by the Chief Financial Officer,
Treasurer, and/or the ALCO of the Company to ensure an appropriate risk and return profile as
well as for adherence to the
Company’s investment policy.
As of December 31, 2025, the investment portfolio consisted of available-for-sale
(“AFS”) and held-to-maturity (“HTM”)
debt securities. In 2022, the Company transferred investment securities from
AFS to HTM with an amortized cost basis and
fair value
amount of
$74.4 million
and $63.8
million, respectively.
On the
date of
transfer,
these securities
had a
total net
unrealized loss of $10.6 million. The transfer of the debt securities from the AFS to HTM
category was made at fair value at
the date of transfer. The unrealized gain or loss at the date of transfer is retained in accumulated other comprehensive loss
and in the carrying value
of the HTM securities. Such
amounts are amortized over
the remaining life of the security.
There
was no impact
to net income on
the date of transfer. There were
no securities transferred from
AFS to HTM
The book value of the AFS securities is adjusted quarterly for
unrealized gain or loss as a valuation allowance, and any
gain or loss is reported on an after-tax basis as a component
of other comprehensive loss in stockholders’ equity.
CECL requires a loss reserve for securities
classified as HTM. The reserve should reflect
historical credit performance
as well as the impact of projected economic forecast.
For U.S. Government bonds and U.S. Agency issued
bonds in HTM,
the explicit guarantee of the U.S.
Government is sufficient to conclude that a
credit loss reserve is not required.
The reserve
requirement
for three
primary
assets
groups:
municipal
bonds,
corporate
bonds,
and
non-agency
securitizations.
The
Company calculates quarterly the loss reserve
utilizing Moody’s ImpairmentStudio. The CECL measurement for investment
securities
incorporates
historical
data,
containing
defaults
and
recoveries
information,
and
Moody’s
baseline
economic
forecast. The
solution uses
probability of
default/loss
given default
(“PD/LGD”)
approach. PD
represents the
likelihood a
borrower will
default.
Within the
Moody’s
model, this
is determined
using historical
default data,
adjusted for
the current
economic environment. LGD projects the expected loss
if a borrower were to default.
The Company
monitors the credit
quality of HTM
securities through the
use of
credit ratings. Credit
ratings are monitored
by the Company
on at least
a quarterly basis.
As of December
31, 2025 and
December 31, 2024,
all HTM securities
held
by the Company were rated investment grade.
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USCB Financial Holdings, Inc.
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
the
explicit
and/or
implicit
guarantee
these
bonds,
the
Company
holds
reserves
these
holdings.
The
remaining
portion
the
HTM
portfolio
made
million
investment
grade
corporate bonds. The required reserve for these
holdings is determined each quarter using the model described above.
For
the portion of the HTM exposed to non-government credit risk,
the Company utilized the PD/LGD methodology
to estimate
a $2 thousand
ACL as of
December 31, 2025. The
book value for
debt securities classified
as HTM represents
amortized
cost less ACL.
As of December 31, 2025, securities with a fair value of $43.5
million were pledged to secure public deposits.
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USCB Financial Holdings, Inc.
The
following
table
presents
the
amortized
cost
and
fair
value
investment
securities
for
the
dates
indicated
thousands):
December 31, 2025
Available-for-sale:
Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Fair Value
U.S. Government Agency
Collateralized mortgage obligations
Mortgage-backed securities - residential
Mortgage-backed securities - commercial
Municipal securities
Bank subordinated debt securities
December 31, 2025
Held-to-maturity:
Amortized
Cost
Unrecognized
Gains
Unrecognized
Losses
Fair Value
U.S. Government Agency
Collateralized mortgage obligations
Mortgage-backed securities - residential
Mortgage-backed securities - commercial
Corporate bonds
Allowance for credit losses - securities held-to-maturity
Securities held-to maturity, net of allowance for credit losses
December 31, 2024
Available-for-sale:
Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Fair Value
U.S. Government Agency
Collateralized mortgage obligations
Mortgage-backed securities - residential
Mortgage-backed securities - commercial
Municipal securities
Bank subordinated debt securities
December 31, 2024
Held-to-maturity:
Amortized
Cost
Unrecognized
Gains
Unrecognized
Losses
Fair Value
U.S. Government Agency
Collateralized mortgage obligations
Mortgage-backed securities - residential
Mortgage-backed securities - commercial
Corporate bonds
Allowance for credit losses - securities held-to-maturity
Securities held-to maturity, net of allowance for credit losses
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USCB Financial Holdings, Inc.
AFS and
HTM investment
securities in
aggregate increased
$36.5 million
million at
December 31,
2025 from $424.9 million at December 31, 2024.
The following
table shows
the weighted
average yields,
categorized by
contractual maturity,
for investment
securities
as of December 31, 2025 (in thousands, except ratios):
Within 1 year
After 1 year
through 5 years
After 5 years
through 10 years
After 10 years
Total
Amortized
Cost
Yield
Amortized
Cost
Yield
Amortized
Cost
Yield
Amortized
Cost
Yield
Amortized
Cost
Yield
Available-for-sale:
U.S. Government Agency
Collateralized mortgage obligations
Mortgage-backed securities - residential
Mortgage-backed securities - commercial
Municipal securities
Bank subordinated debt securities
Held-to-maturity:
U.S. Government Agency
Collateralized mortgage obligations
Mortgage-backed securities - residential
Mortgage-backed securities - commercial
Corporate bonds
The Company did not have any tax-exempt securities
at both December 31, 2025 and 2024.
Loans
Loans are
the largest
category of
interest-earning assets
on the
Consolidated
Balance Sheets,
and usually
provides
higher yields than the remainder of the Company’s
interest-earning assets. Higher yields typically carry
inherent credit and
liquidity risks in
comparison to lower
yielding assets. The
Company manages and
mitigates such risks
in accordance with
the credit and ALM policies, risk tolerance and balance
sheet composition.
The following table shows the loan portfolio composition
as of the dates indicated (in thousands):
December 31, 2025
December 31, 2024
Total
Percent of
Total
Total
Percent of
Total
Residential Real Estate
Commercial Real Estate
Commercial and Industrial
Correspondent Banks
Consumer and Other
Total
gross loans
Plus: Deferred costs/fees
Total
loans held for investment, net of deferred costs/fees
Less: Allowance for credit losses
Total
loans held for investment, net of allowance
Total
loans held for investment net
of deferred costs/fees increased
by $216.4 million or 11.0%
at December 31, 2025
compared to December 31,
2024. The most
significant growth was
in the commercial
real estate and
correspondent bank
loan pools.
Commercial real estate continues to
be the main category of
our portfolio, reflective of the
market in which we
operate. We continue
to grow our non-CRE
loan pools to further
diversify the loan portfolio
overall composition, but we
not expect any significant changes over the foreseeable
future in the composition of our loan portfolio.
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USCB Financial Holdings, Inc.
The
growth
experienced
over
the
last
couple
years
primarily
due
implementation
our
relationship-based
banking
model,
our
diversified
business
verticals,
and
the
success
our
relationship
managers
competing
for
new
business in a highly competitive metropolitan area.
From a
liquidity perspective,
our loan
portfolio provides
us with
additional
liquidity due
to repayments
or unexpected
prepayments.
The
following
table
shows
maturities
and
sensitivity
interest
rate
changes
for
the
loan
portfolio
December 31, 2025 (in thousands):
Due in 1 year or
less
Due in 1 to 5
years
Due after 5 to 15
years
Due after 15
years
Total
Residential Real Estate
Commercial Real Estate
Commercial and Industrial
Correspondent Banks
Consumer and Other
Total
gross loans
Interest rate sensitivity:
Fixed interest rates
Floating or adjustable rates
Total
gross loans
The information
presented in
the table
above is
based upon
contractual maturities
of the
individual loans,
which may
be subject to renewal at their contractual maturity. Renewals will depend on approval by our credit department and balance
sheet composition
at the
time of
the analysis,
as well
as any
modification of
terms at
the loan’s maturity. Additionally, maturity
concentrations,
loan duration,
prepayment
speeds
and
other interest
rate
sensitivity
measures
are discussed,
reviewed,
and analyzed by the ALCO. Decisions on term and rate
modifications are discussed as well.
December 31,
approximately
of the
loans
have adjustable/variable
rates
and
of the
loans
have fixed rates.
The adjustable/variable
loans re-price to
different benchmarks
and tenors in
different periods
of time. By
contractual characteristics, there are no
material concentrations on anniversary repricing. Additionally, it is
important to note
that most
of our
loans have
interest rate
floors. This
embedded option
protects the
Company from
a decrease
in interest
rates and positions us to gain in the scenario of higher interest
rates.
December 31, 2025, the
commercial real estate
portfolio was $1.2
billion or 57.0%
of the
total gross loans
portfolio.
such
date,
million
outstanding
balances
are
characterized
owner
occupied
and
billion
are
characterized as non-owner occupied.
The retail sector
was the largest
segment comprising $320.1 million
of the non-owner
occupied commercial real estate portfolio.
The
following
table
summary
the
distribution
non-owner
occupied
commercial
real
estate
loans
held
for
investment by loan type (dollars in thousands):
December 31, 2025
Balance
# of Notes
% of Total
Gross Loans
Average Loan Size
Non-Accruals
Weighted Avg
LTV
Retail
Multifamily
Warehouse
Office
Hotels/Motels
Construction/Land
Other
(1) Loan-to-value is calculated based on the real estate value at the time of origination, renewal, or update, whichever is more recent.
Table of Contents
USCB Financial Holdings, Inc.
The following table is a summary of non-owner occupied commercial real estate loans held for investment by collateral
geographical location (dollars in thousands):
December 31, 2025
South Florida
Rest of Florida
Outside Florida
Balance
% of Non-
Owner
Occupied
CRE Loans
Balance
% of Non-
Owner
Occupied
CRE Loans
Balance
% of Non-
Owner
Occupied
CRE Loans
Retail
Multifamily
Warehouse
Office
Hotels/Motels
Construction/Land
Other
(1) Miami-Dade, Broward, and West Palm Beach counties
(2) All other Florida counties
(3) Within the U.S.
December 31, 2025,
the non-owner
occupied CRE
portfolio were
located within
South Florida.
26 loan
notes with an
outstanding principal
balance of
$66.9 million
are located
outside Florida.
Balances of
non-owner occupied
CRE loans outside
Florida were: $44.2
million in New
York,
$7.3 million in
Georgia,
$7.1 million in
Indiana, $4.3 million
Arkansas, and $4.1 million in North Carolina.
Asset Quality
Our asset quality grading
analysis estimates the capability of
the borrower to repay
the contractual obligation of
the loan
agreement as scheduled or at all. The Company’s internal credit risk grading system is based on experiences with similarly
graded loans. Internal
credit risk
grades are evaluated
at least annually,
or more frequently
if deemed necessary.
Internal
credit
risk
ratings
may
change
based
management’s
assessment
the
results
from
the
annual
review,
portfolio
monitoring and other developments observed with borrowers.
The internal credit risk grades used by the Company to
assess the credit worthiness of a loan are shown below:
Pass
– Loans indicate different levels of satisfactory
financial condition and performance.
Special Mention
– Loans classified as special mention have a potential weakness
that deserves management’s
close attention. If left uncorrected, these potential weaknesses
may result in deterioration of the repayment
prospects for the loan or of the institution’s
credit position at some future date.
Substandard
– Loans classified as substandard are inadequately protected
by the current net worth and paying
capacity of the obligator or of the collateral pledged, if
any. Loans so classified
have a well-defined weakness or
weaknesses that jeopardize the liquidation of the debt.
They are characterized by the distinct possibility that the
institution will sustain some loss if the deficiencies are
not corrected.
Doubtful
– Loans classified as doubtful have all the weaknesses inherent
in those classified at substandard, with
the added characteristic that the weaknesses make collection
or liquidation in full on the basis of currently existing
facts, conditions, and values, highly questionable and improbable.
Loss
– Loans classified as loss are considered uncollectible.
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USCB Financial Holdings, Inc.
Loan credit exposures by internally assigned grades are
as follows for the dates indicated (in thousands):
December 31, 2025
Pass
Special Mention
Substandard
Doubtful
Total
Residential Real Estate
Commercial Real Estate
Commercial and Industrial
Correspondent Banks
Consumer and Other
December 31, 2024
Pass
Special Mention
Substandard
Doubtful
Total
Residential Real Estate
Commercial Real Estate
Commercial and Industrial
Correspondent Banks
Consumer and Other
Non-Performing Assets
The following table presents non-performing assets as
of December 31, 2025 and 2024 (in thousands, except
ratios):
Total
non-performing loans
Other real estate owned
Total
non-performing assets
Asset quality ratios:
Allowance for credit losses to total loans
Allowance for credit losses to non-performing loans
Non-performing loans to total loans
Non-performing
assets
include
all
loans
categorized
as non-accrual
or restructured,
impaired
securities,
OREO
and
other repossessed assets. Problem loans for which the collection or liquidation in full is reasonably uncertain are placed on
non-accrual
status.
This
determination
based
current
existing
facts
concerning
collateral
values
and
the
paying
capacity of the borrower. When the collection of the full contractual balance is unlikely,
the loan is placed on non-accrual to
avoid overstating the Company’s income for a loan with
increased credit risk.
If the
principal or
interest on
a commercial
loan becomes
due and
unpaid for
90 days
or more,
the loan
is placed
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
accrual
status.
Restoring
loan
accrual
status
possible
when
the
borrower
resumes
payment
all
principal and interest payments for a period of six consecutive months and the Company
has a documented expectation of
repayment of the remaining contractual principal and interest or the loan becomes secured and in the process of collection.
The
Company
may
grant
loan
concession
borrower
experiencing
financial
difficulties.
This
determination
performed during
the annual
review process
or whenever
problems are
surfacing regarding
the client’s
ability to
repay in
accordance with
the original
terms of
the loan
or line
of credit.
The concessions
are given
to the
debtor in
various forms,
including interest rate
reductions, principal forgiveness, extension
of maturity date,
waiver, or deferral of
payments and other
concessions intended to minimize potential losses.
For further discussion on non-performing loans, see Note
3 “Loans” to the Consolidated Financial Statements
set forth
in Item 8 of this Annual Report on Form 10-K.
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USCB Financial Holdings, Inc.
Allowance for Credit Losses
The ACL
represents
an amount
that,
management's
evaluation,
is adequate
to provide
coverage
for
all
expected
future credit losses on outstanding loans as of the measurement date. Additionally, qualitative adjustments are made to the
ACL when,
based on
management’s judgment,
there are
factors impacting
the allowance
estimate not
considered by
the
quantitative calculations.
See Note 3
“Loans” to the
Consolidated Financial
Statements set forth
in Item 8
of Part 1
of this
Annual Report as Form 10-K for more information on the
allowance for credit losses.
The following table presents ACL and net charge-offs to average loans by
type for the periods indicated (in thousands):
Residential
Real Estate
Commercial
Real Estate
Commercial
and Industrial
Correspondent
Banks
Consumer
and Other
Total
December, 31, 2025
Beginning balance
Provision for credit losses
Recoveries
Charge-offs
Ending Balance
Average loans
Net charge-offs (recoveries) to
average loans
December, 31, 2024
Beginning balance
Provision for credit losses
Recoveries
Charge-offs
Ending Balance
Average loans
Net charge-offs (recoveries) to
average loans
(1) Provision for credit losses excludes $182 thousand provision for unfunded commitments included in accrued interest and other
liabilities and $4 thousand release for investment securities held to maturity.
(2) Provision for credit losses excludes $199 thousand provision for unfunded commitments included in accrued interest and other
liabilities and $2 thousand release for investment securities held to maturity.
The
following
table
presents
ACL
type
and
its
individual
percentage
total
loans
for
the
periods
indicated
thousands):
December 31,
Loan Category
Allowance
% of Loans in
Each Category to
Total Loans
Allowance
% of Loans in
Each Category to
Total Loans
Residential Real Estate
Commercial Real Estate
Commercial and Industrial
Correspondent Banks
Consumer and Other
Total
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USCB Financial Holdings, Inc.
Bank-Owned Life Insurance
December 31,
the
combined
cash
surrender
value
all
bank-owned
life
insurance
(“BOLI”)
policies
was
$59.4 million.
Changes
cash
surrender
value
are
recorded
non-interest
income
the
Consolidated
Statements
Operations. In
2025, the Company
maintained BOLI
policies with
five insurance
carriers. The
Company is
the beneficiary
of these policies.
Deposits
Customer deposits are the
primary funding source for
the Bank’s growth.
Through our network of
banking centers, we
offer a competitive array of deposit
accounts and treasury management services designed
to meet our customers’ business
needs. Our primary
deposit customers
are SMBs,
and the personal
business of owners
and operators
of these SMBs,
well as the retail/consumer relationships of the employees
of these businesses. Our focus on quality and customer
service
has created a strong brand recognition within
our depositors, which reflects in the composition
of our deposits; most of our
funding sources are customer
deposits. In addition
to our banking centers
network, we have developed
business verticals
to diversify our
portfolio in different specialty industries
and we offer public
fund deposit products to
municipalities and public
agencies in our geographical footprint.
Furthermore, our
personal and
private banking
management
line of
business is
focused on
the needs
of the
owners
and operators of
our business customers,
offering a suite
of checking, savings,
money market and
time deposit accounts,
and utilizing superior
client service
to build and
expand client relationships.
A unique aspect
of our business
model is our
ability to offer correspondent services to banks in
Central America and the Caribbean.
The following
table presents
the daily
average balance
and average
rate paid
on deposits
by category
for the
years
ended December 31, 2025 and 2024 (in thousands, except
ratios):
Years Ended December 31,
Average Balance
Average Rate
Paid
Average Balance
Average Rate
Paid
Non-interest bearing demand deposits
Interest-bearing demand deposits
Savings and money market deposits
Time deposits
Total average deposits for the year ended December 31, 2025 was $2.4 billion,
an increase of $268.0 million,
over total
average deposits
of $2.1 billion
for the
same period
The greatest
increase was
in savings
and money
market deposits which
increased by
$145.9 million, or
13.1%. Non-interest-bearing
demand deposits
decreased by
million or 3.2%.
The
uninsured
deposits
are
estimated
based
the
FDIC
deposit
insurance
limit
$250 thousand
for
all
deposit
accounts at the Bank per account holder. Total
estimated uninsured deposits was $1.2 billion at December 31, 2025 and at
December 31, 2024. As of December 31, 2025,
49% of our deposits were estimated to
be FDIC-insured.
At December 31,
2025, our
deposit portfolio
included 7%
of total
deposits were
public funds
(partially collateralized),
of total
deposits
were
brokered
deposits
(FDIC-insured),
and
were
deposits
ICS/CDARs
deposit
programs
(FDIC-insured).
The
estimated average
account size
of our deposit
portfolio is
thousand. Time
deposits with
balances of
$250 thousand
or more totaled $111.5
million and $94.0 million at December 31, 2025 and 2024,
respectively. At December
31, 2025, our
top 10 depositors held 15.59% of our
total deposit portfolio. At December 31, 2024, our top 10
depositors held 16.7% of our
total deposit portfolio.
Critical elements of our liquidity
risk management include: effective corporate governance consisting of
oversight by the
Board and ALCO and
involvement by senior management;
appropriate strategies, policies,
procedures, and limits
used to
identify
and
mitigate
liquidity
risk;
comprehensive
liquidity
risk
measurement
and
monitoring
systems
(including
assessments
the
current
and
prospective
cash
flows
sources
and
uses
funds)
that
are
commensurate
with
the
complexity and business
activities of the
Company; management of intraday
liquidity and collateral;
an appropriately diverse
mix
existing
and
potential
future
funding
sources;
adequate
levels
highly
liquid
marketable
securities
free
legal,
regulatory,
operational
impediments,
that
can
used
meet
liquidity
needs
stressful
situations;
comprehensive
contingency
funding
plans
that
sufficiently
address
potential
adverse
liquidity
events
and
emergency
cash
flow
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USCB Financial Holdings, Inc.
requirements;
and
internal
controls and
internal
audit
processes
sufficient
determine
the
adequacy
the
institution’s
liquidity risk management process.
expect
funds
available
from
several
basic
banking
activity
sources,
including
the
core
deposit
base,
the
repayment and maturity of loans and investment security
cash flows. Other potential funding sources include
federal funds
purchased, brokered certificates of deposit, listing services certificates of deposit, Fed Funds lines and borrowings from the
FHLB
Atlanta.
Accordingly,
our liquidity
resources
were
at sufficient
levels
to fund
loans
and
meet
other
cash
needs as
necessary.
The following table shows scheduled maturities of uninsured
time deposits as of December 31, 2025 (in thousands):
Total
Three months or less
Over three through six months
Over six through twelve months
Over twelve months
Borrowings
FHLB Advances
member
the
FHLB
Atlanta,
are
eligible
obtain
advances
with
various
terms
and
conditions.
This
accessibility of additional
funding allows us
to efficiently and
timely meet both
expected and unexpected
outgoing cash flows
and collateral needs without adversely affecting
either daily operations or the financial condition
of the Company.
Outstanding fixed-rate
advances from the
FHLB were
at $158.3 million
and $163.0 million,
as of December
and
December 31,
respectively.
The
weighted
average
rate
for
outstanding
FHLB
advances
was
December 31, 2025 and 2024.
The following table presents the FHLB fixed-rate advances
as of December 31, 2025 (in thousands):
December, 31, 2025
Interest Rate
Type of Rate
Maturity Date
Amount
Fixed
March 16, 2026
Variable
May 22, 2026
Fixed
January 24, 2028
December, 31, 2024
Interest Rate
Type of Rate
Maturity Date
Amount
Fixed
March 27, 2025
Fixed
July 18, 2025
Fixed
January 24, 2028
Fixed
April 25, 2028
Fixed
September 13, 2027
Fixed
March 23, 2026
Fixed
February 13, 2025
have
also
established
Fed
Funds
lines
credit
with
our
upstream
correspondent
banks
manage
temporary
fluctuations in our daily
cash balances. As of
December 31, 2025, there were no
outstanding balances under the Fed
Funds
lines of credit.
The Board
of Governors
of the Federal
Reserve System,
on March
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
Treasuries,
agency
debt
and
mortgage-backed
securities, and other qualifying assets as collateral. The
BTFP program ceased making new loans as of March
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USCB Financial Holdings, Inc.
The Company paid off $80 million in borrowings under the BTFP
program during the third quarter of 2024. The original
maturity of this borrowing by the Bank under the BTFP program was January 2025, and there are no remaining borrowings
under this program.
Subordinated Notes
August
the
Company
entered
into
Subordinated
Note
Purchase
Agreement
with
certain
qualified
institutional
buyers
pursuant
which
the
Company
sold
and
issued
million
aggregate
principal
amount
its
7.625% Fixed-to-Floating
Rate Subordinated
Notes due 2035.
The Notes were
issued by the
Company to the
purchasers
price equal
of their
face amount.
The Notes
were offered
and sold
by the
Company in
a private
placement
transaction in reliance
on exemptions from
the registration
requirements of the
Securities Act,
pursuant to
Section 4(a)(2)
of the Securities
Act and
Rule 506(b) of
Regulation D thereunder. For additional
information, see the
Form 8-K the
Company
filed on August 14, 2025.The subordinated debt was originally issued at a cost of $760 thousand. The carrying value of the
issuance
cost
has
been
reduced
thousand,
reflecting
the
scheduled
expense
recognition
over
the
term
the
subordinated
debt.
The
subordinated
notes
are
presented
net
these
costs
the
consolidated
balance
sheet.
December 31, 2025, the outstanding balance of subordinated
notes, net of costs, totaled $39.3 million.
Off-Balance Sheet Arrangements
We engage
in various financial
transactions in
our operations
that, under GAAP,
may not be
included on
the balance
sheet. To
meet the financing needs
of our customers we may
include commitments to extend
credit and standby letters
credit. To
a varying
degree, such
commitments involve
elements of
credit, market,
and interest
rate risk
in excess
of the
amount recognized
in the
balance sheet.
We use
more conservative
credit and
collateral policies
in making
these credit
commitments as we
do for on-balance sheet
items. We are not
aware of any accounting
loss to be
incurred by funding
these
commitments; however, we maintain an allowance for off-balance sheet
credit risk which is recorded
under accrued interest
and other liabilities on the Consolidated Balance Sheets.
Since commitments associated with letters of
credit and commitments to extend
credit may expire unused, the
amounts
shown do not necessarily
reflect the actual
future cash funding requirements
The following table
presents lending related
commitments outstanding as of December 31, 2025 and
2024 (in thousands):
December 31, 2025
December 31, 2024
Commitments to grant loans and unfunded lines of credit
Standby and commercial letters of credit
Total
Commitments to extend credit are agreements to lend funds to a client, as long as there is no violation of any condition
established
the
contract,
for
specific
purpose.
Commitments
generally
have
variable
interest
rates,
fixed
expiration
dates or
other
termination
clauses
and
may require
payment
a fee.
Since many
of the
commitments
are
expected to
expire without being
fully drawn, the
total commitment
amounts disclosed
above do not
necessarily represent
future cash
requirements.
Unfunded lines of credit represent unused portions of credit facilities to our current borrowers that represent no change
in credit risk in our portfolio. Lines of credit
generally have variable interest rates. The
maximum potential number of future
payments we could
be required to
make is represented
by the contractual
amount of the
commitment, less
the amount of
any advances made.
Letters of credit are
conditional commitments issued
by us to guarantee
the performance of a
client to a third
party.
the event of nonperformance by
the client in accordance with the
terms of the agreement with the
third party,
we would be
required to fund
the commitment.
If the commitment
is funded, we
would be entitled
to seek recovery
from the client
from
the underlying collateral,
which can include
commercial real estate,
physical plant and
property, inventory, receivables, cash
or marketable securities.
Asset and Liability Management Committee
The asset and liability management committee of our Company, or ALCO, consists of members of senior management
and our Board. Senior management is responsible for
ensuring in a timely manner that Board
approved strategies, policies,
and procedures
for managing
and mitigating
risks are
appropriately executed
within the
designated lines
of authority
and
responsibility.
Table of Contents
USCB Financial Holdings, Inc.
ALCO
oversees
the
establishment,
approval,
implementation,
and
review
interest
rate
risk,
management,
and
mitigation strategies, ALM related policies, ALCO procedures
and risk tolerances and appetite.
While some degree of interest
rate risk (“IRR”) exposure is inherent
to the banking business, our ALCO
has established
what it believes are sound risk management practices
in place to identify,
measure, monitor and mitigate IRR exposures.
When assessing the scope
of IRR exposure and
impact on the consolidated
balance sheet, cash flows
and statement
of operations,
management considers
both earnings
and economic
impacts. Asset price
variations, deposits
volatility and
reduced earnings or outright losses could adversely affect
the Company’s liquidity,
performance, and capital adequacy.
Income simulations
are used
to assess
the impact
of changing
rates on
earnings under
different rates
scenarios and
time horizons.
These simulations
utilize both
instantaneous and
parallel changes
in the
level of
interest rates,
as well
non-parallel changes such as changing slopes (flat and steeping) and
twists of the yield curve, Static simulation models are
based on current exposures and
assume a constant balance sheet with
no new growth. Dynamic simulation analysis
is also
utilized to have a
more comprehensive assessment
on IRR. This simulation
relies on detailed
assumptions outlined in
our
budget and strategic plan, and in assumptions regarding changes in
existing lines of business, new business, management
strategies and client expected behavior.
have a more complete
picture of IRR, the Company
also evaluates the economic
value of equity.
This assessment
allows
measure
the
degree
which
the
economic
values
will
change
under
different
interest
rate
scenarios.
The
economic value of equity approach focuses on a longer-term time horizon and captures all future cash flows expected from
existing assets and liabilities. The economic value model utilizes a static approach in that the analysis does not incorporate
new business; rather, the
analysis shows a snapshot in time of the risk inherent
in the balance sheet.
Market and Interest Rate Risk Management
As of December 31, 2025, both the
static and dynamic scenarios of the
ALCO model indicate that the Bank’s
balance
sheet is
liability
sensitive
year
one.
This means
that
our liabilities
reprice
more
quickly than
our
assets,
resulting in
favorable expansion in net interest income
(NII) when market interest rates
decline. For year two, the static
model shifts to
a neutral position, while the dynamic model reflects an asset sensitive
posture, driven primarily by projected balance sheet
growth.
This
divergence
expected,
the
dynamic
model
incorporates
forward
looking
assumptions
that
include
loan
growth and
mix shifts
over time.
Many assumptions
are used to
calculate the
impact of
interest rate
variations on
our net
interest
income,
such
asset
prepayment
speeds,
non-maturity
deposit
price
sensitivity,
pricing
correlations,
deposit
truncations and decay rates, and key interest rate drivers
Because of the inherent use
of these estimates and
assumptions in the model,
our actual results may,
and most likely
will, differ from static measures results. In addition, static measures like the economic value of equity
do not include actions
that management may undertake to
manage the risks in response
to anticipated changes in interest
rates or client deposit
behavior. As part of our ALM strategy and
policy, management has the ability to modify the balance sheet
to either increase
or decrease
asset
duration
and
increase
or decrease
liability
duration
modify
the balance
sheet
sensitivity
to interest
rates.
Additionally, utilizing an EVE approach, we analyze the risk to capital from the effects
of various interest rate scenarios
through a long-term discounted
cash flow model. This
measures the difference
between the economic value
of our assets
and
the
economic
value
our
liabilities,
which
proxy
for
our
liquidation
value.
According
our
balance
sheet
composition, and
as expected,
our model
stipulates that
an increase
of interest
rates will
have a
negative impact
on the
EVE. Results and
analysis are presented
quarterly to the
ALCO, and strategies
are reviewed and
refined. The Bank
remains
within policy limits for long-term interest
rate risk based on EVE
results as of December 31, 2025. The
balance sheet shows
larger EVE swings
when rates go
up than when
rates go down.
This happens because,
in rising rate
scenarios, the value
of our longer
term assets
falls more
quickly,
especially when
loan prepayments
slow while our
liabilities do
not reprice as
fast. In contrast,
when rates
decline, faster
loan prepayments
and quicker
asset repricing
help soften the
impact on
EVE.
Additionally, during 2025, we have been taking actions to reduce
our asset sensitivity by extending asset duration. This has
reduced our NII
volatility for the
first and second
year in the
analysis and has
helped us to
maintain the NII
in accordance
with ALCO expectations.
Liquidity
Liquidity is
defined as
a Company’s capacity
to meet
its cash
and collateral
obligations at
a reasonable
cost. Maintaining
an adequate level of liquidity depends on the Company’s ability to
efficiently meet both expected and unexpected cash flow
and collateral needs without adversely affecting
either daily operations or the financial condition of the
Company.
Table of Contents
USCB Financial Holdings, Inc.
Liquidity risk
is the
risk that
we will
be unable
to meet
our short-term
and long-term
obligations as
they become
due
because of an
inability to liquidate
assets or obtain
adequate funding on
acceptable terms in
a timely matter. The
Company’s
obligations, and the funding sources used to meet them, depend significantly
on our business mix, balance sheet structure
and composition, credit quality of
our assets, interest rate
environment and the cash flow
profiles of our on- and
off-balance
sheet obligations.
managing
cash
inflows
and
outflows,
management
regularly
monitors
situations
that
can
give
rise
increased
liquidity risk.
These include
funding mismatches, market
constraints on
the ability
to convert
assets (particularly investments)
into cash or in
accessing sources of
funds (i.e., market
liquidity), and contingent
liquidity events. Management
presents to
the ALCO,
quarterly basis, liquidity
stress tests following
the scenarios
described in
the Company’s contingency
funding
plan.
Changes
macroeconomic
conditions,
exposure
credit
deterioration,
market,
operational,
legal
and
reputational
risks, including cybersecurity risk and
social media events could
also affect the Company’s liquidity risk
profile unexpectedly
and are considered in the assessment of liquidity and ALM
framework.
Management has established
a comprehensive and
holistic management process for
identifying, measuring, monitoring
and
mitigating
liquidity
risk.
Due
its
critical
importance
the
viability
the
Company,
liquidity
risk
management
integrated into our risk management processes, Contingency
Funding Plan and ALM policy.
Critical elements of our liquidity
risk management include: effective corporate governance consisting of
oversight by the
Board and ALCO and
involvement by senior management;
strategies, policies, procedures,
and limits used to
identify and
mitigate
liquidity
risk;
comprehensive
liquidity
risk
measurement
and
monitoring
systems
(including
assessments
the
current and prospective cash flows or sources and uses of funds) that are commensurate with the complexity and
business
activities
of the
Company;
management
of intraday
liquidity and
collateral;
a diverse
mix of
existing
and
potential
future
funding sources; adequate levels of highly liquid marketable securities free
of legal, regulatory, or operational impediments,
that can
be used
to meet
liquidity needs
in stressful situations;
comprehensive contingency
funding plans
that sufficiently
address potential adverse
liquidity events and
emergency cash
flow requirements; and
internal controls and
internal audit
processes sufficient to determine the adequacy
of the institution’s liquidity risk management
process.
expect
funds
available
from
several
basic
banking
activity
sources,
including
the
core
deposit
base,
the
repayment and maturity of loans and investment security
cash flows. Other potential funding sources include
federal funds
purchased, brokered
certificates of
deposit, listing
certificates of
deposit, Fed
Funds lines
and borrowings
from the
FHLB
Atlanta. Accordingly, our liquidity resources were at sufficient levels to
fund loans and meet other
cash needs as necessary.
At December 31, 2025, the
Company had $321.4
million in available liquidity
on balance sheet, including
$286.9 million in
unpledged securities available to
use as collateral and
$34.5 million in
excess cash. The Company
had an additional $349.0
million in off-balance sheet liquidity including excess FHLB Atlanta borrowing
capacity, the Federal Reserve
Bank discount
window and Fed
Fund lines of credit, excluding
access to brokered deposits
and other off-balance sheet sources
of funding.
Table of Contents
USCB Financial Holdings, Inc.
Capital Adequacy
December 31,
the
Bank
was
well
capitalized
under
the
FDIC’s
prompt
corrective
action
framework.
Additionally,
we follow the capital conservation
buffer framework, and according to
our actual ratios, the Bank
exceeds the
capital conversation
buffer in
all capital ratios
as of December
31, 2025. The
Company is not
subject to regulatory
capital
requirements because it is deemed by the Federal Reserve
to be a small bank holding company.
The
following
table
presents
the
capital
ratios
for
the
Bank
December 31,
and
thousands,
except
ratios):
Actual
Minimum Capital
Requirements
To be Well Capitalized Under
Prompt Corrective Action
Provisions
Amount
Ratio
Amount
Ratio
Amount
Ratio
December 31, 2025
Total
risk-based capital:
Tier 1 risk-based capital:
Common equity tier 1 capital:
Leverage ratio:
December 31, 2024
Total
risk-based capital:
Tier 1 risk-based capital:
Common equity tier 1 capital:
Leverage ratio:
Impact of Inflation
Our Consolidated
Financial Statements
and related
notes have been
prepared in
accordance with U.S.
GAAP,
which
requires the
measurement of
financial position
and operating
results in
terms of
historical dollars,
without considering
the
changes
the
relative
purchasing
power
money
over
time due
inflation.
The
impact
inflation
reflected
the
increased cost of operations.
Unlike most industrial companies,
nearly all our assets and
liabilities are monetary in
nature.
As a result,
interest rates have a
greater impact on our
performance than do the
effects of general levels
of inflation. Periods
of high inflation
are often accompanied
by relatively higher
interest rates, and
periods of low
inflation are accompanied
relatively lower interest rates.
As market interest rates
rise or fall in relation
to the rates earned
on loans and investments,
the value of these assets decreases or increases respectively.
Recently Issued Accounting Pronouncements
Recently issued accounting
pronouncements are discussed
in Note 1 “Summary
of Significant Accounting
Policies” in
the Consolidated Financial Statements of this Annual Report
on Form 10-K.
Table of Contents
USCB Financial Holdings, Inc.
Reconciliation and Management Explanation of Non
-GAAP Financial Measures
Management has included
the non-GAAP measures
set forth below
because it believes
these measures may
provide
useful supplemental information
for evaluating the Company’s
underlying performance trends.
Further, management
uses
these measures in managing and evaluating the Company’s business and intends to refer to them in discussions about our
operations and performance.
Operating performance
measures should be
viewed in addition
to, and not
as an alternative
substitute
for,
measures
determined
accordance
with
GAAP,
and
are
not
necessarily
comparable
to non-GAAP
measures
that
may be
presented
by other
companies.
The Company
believes
these
non-GAAP
measurements
are key
indicators of the
earnings power
of the Company.
The following
table reconciles
the non-GAAP
financial measurement
operating net income available to common stockholders
for the periods presented (in thousands,
except per share data):
As of and for the years ended December 31,
Pre-Tax Pre-Provision ("PTPP") income: (1)
Net income (GAAP)
Plus: Provision for income taxes
Plus: Provision for credit losses
PTPP income
Operating net income: (1)
Net income (GAAP)
Less: Net gain (loss) on sale of securities
Less: Tax
effect on sale of securities
Plus: Tax
liability expenses from prior periods
Operating net income
Operating revenue: (1)
Net interest income
Non-interest income
Less: Net gain (losses) on sale of securities
Operating revenue
Operating efficency ratio: (1)
Total
non-interest expense
Operating revenue
Operating efficency ratio
(1) The Company believes these non-GAAP measurements are key indicators of the ongoing earnings power of the Company.
- Exhibit 106exhibit106.htm · 92.0 KB
- Exhibit 211exhibit211.htm · 1.9 KB
- Exhibit 231exhibit231.htm · 3.1 KB
- Exhibit 311exhibit311.htm · 21.8 KB
- Exhibit 312exhibit312.htm · 21.6 KB
- Exhibit 321exhibit321.htm · 9.2 KB
- Exhibit 322exhibit322.htm · 8.0 KB
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- Exhibit 1010exhibit1010.htm · 89.7 KB
- Exhibit 1011exhibit1011.htm · 89.4 KB
- Exhibit 1012exhibit1012.htm · 89.2 KB
- Ticker
- USCB
- CIK
0001901637- Form Type
- 10-K
- Accession Number
0001562762-26-000027- Filed
- Mar 13, 2026
- Period
- Dec 31, 2025 (Q4 25)
- Industry
- State Commercial Banks
External resources
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