Uscb Financial Holdings, Inc.: Form 10-Q for the period ended Jun 30, 2026
Filed with the SEC on Aug 7, 2026 and accepted by EDGAR at Aug 7, 2026, 11:10 ET.
Management's discussion and analysis
As filed, 78,286 characters, with its headings, lists and tables. Extracted from the main document; charts and exhibits are in the original on sec.gov.
The following discussion and analysis is designed to provide a better understanding of the consolidated financial
condition and results of operations of the Company and the Bank, its wholly owned subsidiary, as of and for the three and
six months ended June 30, 2026. This discussion and analysis is best read in conjunction with the unaudited consolidated
financial statements and related notes included in this Quarterly Report on Form 10-Q (“Form 10-Q”) and the audited
consolidated financial statements and related notes included in the Annual Report on Form 10-K (“2025 Form 10-K”) filed
with the Securities and Exchange Commission (“SEC”) for the year ended December 31, 2025.
This discussion contains forward-looking statements that involve risks, uncertainties and assumptions that could cause
actual results to differ materially from management's expectations. Factors that could cause such differences are discussed
in the sections entitled "Forward-Looking Statements" and Item 1A “Risk Factors" below in Part II hereof and in the 2025
Form 10-K filed with the SEC which is available at the SEC’s website www.sec.gov (http://www.sec.gov).
Throughout this document, references to “we,” “us,” “our,” and “the Company” generally refer to USCB Financial
Holdings, Inc.
Forward-Looking Statements
This Form 10-Q contains statements that are not historical in nature are intended to be, and are hereby identified as,
forward-looking statements for purposes of the safe harbor provided by Section 21E of the Securities Exchange Act of 1934,
as amended. The words “may,” “will,” “anticipate,” “could,” “should,” “would,” “believe,” “contemplate,” “expect,” “aim,” “plan,”
“estimate,” “seek,” “continue,” and “intend,” as well as 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 or events, or 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 allowance
for credit losses;
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 or conditions in capital and financial markets, including actual or potential stresses in the banking
industry;
deposit attrition and the level of our uninsured deposits;
legislative or regulatory changes, including the enactment of the One Big Beautiful Bill, and changes in accounting
principles, policies, practices or guidelines;
the lack of a significantly diversified loan portfolio and our 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;
the impacts of international hostilities and geopolitical events;
increased competition and its effect on the pricing of our products and services as well as our 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 Form 10-Q, the 2025 Form 10-K and other filings we make with the SEC.
All forward-looking statements are necessarily only estimates of future results, and there can be no 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, any forward-looking statements included in this Form 10-Q are made only as of the
date hereof, and we undertake no obligation to update or revise any forward-looking statement to reflect events or
circumstances ocurring 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 the 2025
Form 10-K and in the reports the Company has filed or will file with the SEC.
Overview
The Company reported net income of $9.1 million or $0.49 per diluted share of common stock for the three months
ended June 30, 2026 compared to $8.1 million or $0.40 per diluted share of common stock for the three months ended
June 30, 2025.
In evaluating our financial performance, the Company considers the level of and trends in net interest income, the net
interest margin, the cost of deposits and borrowings, the level and composition of non-interest income and non-interest
expense, performance ratios, asset quality ratios, regulatory capital ratios, and any significant event or transaction.
Unless otherwise stated, all period comparisons in the bullet points below are calculated at or for the quarter ended
June 30, 2026 compared to at or for the quarter ended June 30, 2025 and as of December 31, 2025 and annualized where
appropriate:
Net interest income before provision for credit losses for the three months ended June 30, 2026 increased $3.4
million or 15.9% to $24.4 million from $21.0 million for the quarter ended June 30, 2025.
Net interest margin (“NIM”) expanded to 3.49% for the three months ended June 30, 2026 compared to 3.28% for
the three months ended June 30, 2025.
Total assets surpassed $3.0 billion at June 30, 2026, representing an increase of $300.2 million or 11.0% from
June 30, 2025 and an increase of $228.2 million or 16.5% annualized from December 31, 2025.
Total loans held for investment (net of deferred cost/fees) were $2.3 billion at June 30, 2026, representing an
increase of $209.0 million or 9.9% from June 30, 2025 and an increase of $133.1 million or 12.3% annualized from
December 31, 2025.
Total deposits were $2.5 billion at June 30, 2026, representing an increase of $116.6 million or 5.0% from June 30,
2025 and an increase of $107.2 million or 9.2% annualized from December 31, 2025.
Annualized return on average assets for the quarter ended June 30, 2026 was 1. 26% compared to 1.22% for the
quarter ended June 30, 2025.
Annualized return on average stockholders’ equity for the quarter ended June 30, 2026 was 15.90% compared to
14.29% for quarter ended June 30, 2025.
The ACL to total loans was 1.15% at June 30, 2026 compared to 1.16% at December 31, 2025.
Non-performing loans to total loans was 0.09% at June 30, 2026 and 0.14% at December 31, 2025.
At June 30, 2026, the total risk-based capital ratios for the Company and the Bank were 13.88% and 13.68%,
respectively.
Tangible book value per common share (a non-GAAP measure) was $12.64 at June 30, 2026, representing an
increase of $1.11 or 9.6% annualized from $11.53 at June 30, 2025. At June 30, 2026, tangible book value per
common share was negatively affected by ($1.70) due to an accumulated comprehensive loss of $31.4 million. At
June 30, 2025, tangible book value per common share was negatively affected by ($2.08) due to an accumulated
comprehensive loss of $41.8 million. See “Reconciliation and Management Explanation for Non-GAAP Financial
Measures” included in this Form 10-Q for a reconciliation of this non-GAAP financial measure.
Critical Accounting Policies and Estimates
The consolidated financial statements are prepared based on the application of U.S. Generally Accepted Accounting
Principles (“GAAP”), the most significant of which are described in Note 1 “Summary of Significant Accounting Policies” in
the Company’s 2025 Form 10-K and “Summary of Significant Accounting Policies” in Part I in this Form 10-Q. To prepare
consolidated financial statements in conformity with US GAAP, management makes estimates, assumptions, and
judgments based on available information. These estimates, assumptions, and judgments affect the amounts reported in
the consolidated financial statements and accompanying notes. These estimates, assumptions, and judgments are based
on information available as of the date of the financial statements and, as this information changes, actual results could
differ from the estimates, assumptions and judgments reflected in the consolidated financial statements. In particular,
management has identified accounting policies that, due to the estimates, assumptions and judgments inherent in those
policies, are critical to an understanding of our consolidated financial statements. Management has presented the
application of these policies to the Audit and Risk Committee of our Board of Directors.
Non-GAAP Financial Measures
This Form 10-Q includes financial information determined by methods other than in accordance with 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 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 to or substitute for, measures determined in accordance
with GAAP, and are not necessarily comparable to non-GAAP measures that may be presented by other companies. To
the extent applicable, reconciliations of these non-GAAP measures to the most directly comparable GAAP measures can
be found in the section “Reconciliation and Management Explanation of Non-GAAP Financial Measures” included in this
Form 10-Q.
Segment Reporting
Management monitors the revenue streams for all its various products and services. The identifiable segments are not
material and operations are managed and financial performance is evaluated on an overall Company-wide basis.
Accordingly, all the financial service operations are considered by management to be aggregated in one reportable operating
segment.
Results of Operations
General
The following tables present selected balance sheet, income statement, and profitability ratios for the dates and periods
indicated (in thousands, except ratios):
June 30, 2026
December 31, 2025
Consolidated Balance Sheets:
Total assets
3,019,701
2,791,540
Total loans
(1)
2,322,385
2,189,257
Total deposits
2,452,271
2,345,080
Total stockholders' equity
233,238
217,183
(1) Loan amounts include deferred fees/costs.
Three Months Ended
June 30,
Six Months Ended
June 30,
2026
2025
2026
2025
Consolidated Statements of Operations:
Net interest income before provision for credit losses
24,387
21,034
46,435
40,149
Total non-interest income
3,560
3,370
7,710
7,086
Total non-interest expense
13,966
12,634
27,677
24,686
Net income
9,078
8,140
18,429
15,798
Profitability:
Efficiency ratio
49.97%
51.77%
51.12%
52.26%
Net interest margin
3.49%
3.28%
3.38%
3.18%
The Company’s results of operations depend substantially on the levels of our net interest income and non-interest
income. Other factors contributing to the results of operations include our provision for credit losses, the level of non-interest
expense, and the provision for income taxes.
Three months ended June 30, 2026 compared to the three months ended June 30, 2025
Net income increased $938 thousand to $9.1 million for the three months ended June 30, 2026 from $8.1 million for the
same period in 2025. The $938 thousand or 11.5% increase in net income was primarily driven by growth in the average
loan portfolio and expansion of net interest margin resulting from lower funding costs. These benefits were partially offset
by higher non-interest expense, income tax expense, and provision for credit losses.
Six months ended June 30, 2026 compared to the six months ended June 30, 2025
Net income increased $2.6 million to $18.4 million for the six months ended June 30, 2026
from $15.8 million for the
same period in 2025. The $2.6 million or 16.7% increase in the net income was primarily driven by higher income from a
larger loan portfolio and, to a lesser extent, an increase in service fees. The increase in income was partially offset by an
increase in non-interest expense, income tax expense, and provision for credit losses expense between periods.
Net Interest Income
Net interest income is the difference between interest earned on interest-earning assets and interest paid on interest-
bearing liabilities and is the primary driver of core earnings. Interest income is generated from interest and dividends on
interest-earning assets, including loans, investment securities and other short-term investments. Interest expense is
incurred from interest paid on interest-bearing liabilities, including interest -bearing deposits, FHLB advances, subordinated
debt, 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 yields earned on interest-earning assets and rates paid on interest-bearing liabilities. Net interest
margin is equal to the annualized 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 indirect benefit of these non-interest-bearing funding sources.
Changes in 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. Our
asset liability committee (“ALCO”) has in place asset-liability management techniques to manage major factors that affect
net interest income and net interest margin.
The following table contains information related to average balances, average yields earned on assets, and average
costs of liabilities for the periods indicated (dollars in thousands):
Three Months Ended June 30,
2026
2025
Average
(1)
Balance
Interest
Yield/Rate
(2)
Average
(1)
Balance
Interest
Yield/Rate
(2)
Assets
Interest-earning assets:
Loans held for investment
(3)
2,258,965
34,899
6.20%
2,057,445
31,946
6.23%
Investment securities
(4)
461,849
3,858
3.35%
449,624
3,432
3.06%
Other interest-earnings assets
80,640
823
4.09%
63,974
776
4.87%
Total interest-earning assets
2,801,454
39,580
5.67%
2,571,043
36,154
5.64%
Non-interest-earning assets
99,271
106,155
Total assets
2,900,725
2,677,198
Liabilities and stockholders' equity
Interest-bearing liabilities:
Interest-bearing demand deposits
51,711
311
2.41%
46,694
285
2.45%
Savings and money market deposits
1,280,578
8,478
2.66%
1,211,513
9,410
3.12%
Time deposits
524,474
4,628
3.54%
452,361
4,343
3.85%
Total interest-bearing deposits
1,856,763
13,417
2.90%
1,710,568
14,038
3.29%
FHLB advances
100,685
976
3.89%
116,527
1,082
3.72%
Subordinated notes, net
39,351
800
8.15%
Total interest-bearing liabilities
1,996,799
15,193
3.05%
1,827,095
15,120
3.32%
Non-interest-bearing demand deposits
632,198
580,121
Other non-interest-bearing liabilities
42,795
41,490
Total liabilities
2,671,792
2,448,706
Stockholders' equity
228,933
228,492
Total liabilities and stockholders' equity
2,900,725
2,677,198
Net interest income
24,387
21,034
Net interest spread
(5)
2.62%
2.32%
Net interest margin
(6)
3.49%
3.28%
(1) Average balances - Daily average balances are used to calculate yields/rates.
(2) Annualized.
(3) Average loan balances include deferred fees/costs and non-accrual loans. Interest income on loans includes accretion of deferred loan fees, net of
deferred loan costs.
(4) At fair value except for securities held to maturity. This amount includes FHLB stock.
(5) Net interest spread is the weighted average yield on total interest-earning assets minus the weighted average rate on total interest-bearing liabilities.
(6) Net interest margin is the ratio of net interest income to average total interest-earning assets.
Six Months Ended June 30,
2026
2025
Average
Balance
(1)
Interest
Yield/Rate
(2)
Average
Balance
(1)
Interest
Yield/Rate
(2)
Assets
Interest-earning assets:
Loans held for investment
(3)
2,218,574
67,688
6.15
2,022,345
62,191
6.18
Investment securities
(4)
458,076
7,269
3.20
443,314
6,456
2.93
Other interest-earnings assets
92,980
1,655
3.59
69,547
1,485
4.29
Total interest-earning assets
2,769,630
76,612
5.58
2,535,206
70,132
5.56
Non-interest earning assets
98,273
106,885
Total assets
$2,867,903
2,642,091
Liabilities and stockholders' equity
Interest-bearing liabilities:
Interest-bearing demand deposits
51,904
621
2.41
50,133
623
2.50
Savings and money market deposits
1,268,565
16,611
2.64
1,205,305
18,745
3.13
Time deposits
529,094
9,328
3.56
426,081
8,261
3.90
Total interest-bearing deposits
1,849,563
26,560
2.90
1,681,519
27,629
3.30
FHLB advances
105,339
2,016
3.86
127,674
2,354
3.71
Subordinated notes, net
39,332
1,601
8.21
Total interest-bearing liabilities
1,994,234
30,177
3.05
1,809,193
29,983
3.33
Non-interest bearing demand deposits
608,622
571,627
Other non-interest-bearing liabilities
39,449
37,247
Total liabilities
2,642,305
2,418,067
Stockholders' equity
225,598
224,024
Total liabilities and stockholders' equity
$2,867,903
2,642,091
Net interest income
46,435
40,149
Net interest spread
(5)
2.53
2.23
Net interest margin
(6)
3.38
3.18
(1) Average balances - Daily average balances are used to calculate yields/rates.
(2) Annualized.
(3) Average loan balances include deferred fees/costs and non-accrual loans. Interest income on loans includes accretion of deferred loan fees, net of
deferred loan costs.
(4) At fair value except for securities held to maturity. This amount includes FHLB stock.
(5) Net interest spread is the weighted average yield on total interest-earning assets minus the weighted average rate on total interest-bearing
liabilities.
(6) Net interest margin is the ratio of net interest income to average total interest-earning assets.
Three months ended June 30, 2026 compared to the three months ended June 30, 2025
Net interest income before the provision for credit losses was $24.4 million for the three months ended June 30, 2026,
an increase of $3.4 million or 15.9%, from $21.0 million for the same period in 2025. This growth was primarily driven by
higher income from a larger loan portfolio and lower rate s paid on interest -bearing deposits. This increase was partially
offset by interest expense associated with the subordinated notes issued during 2025.
The NIM was 3.49% for the three months ended June 30, 2026 and 3.28% for the same period in 2025. The 21-basis
point increase in net interest margin was primarily attributable to a reduction in the weighted average rates paid on interest-
bearing deposits, particularly savings and money market accounts, together with a favorable earning asset mix.
Six months ended June 30, 2026 compared to the six months ended June 30, 2025
Net interest income before the provision for credit losses was $46.4 million for the six months ended June 30, 2026, an
increase of $6.3 million or 15.7%, from $40.1 million for the same period in 2025. This growth was primarily driven by higher
income from a larger loan portfolio and a reduction in the weighted average rates paid on interest-bearing deposit between
periods.
The NIM was 3.38% for the six months ended June 30, 2026 and 3.18% for the same period in 2025. The NIM expansion
of 20 basis points reflects primarily the decrease in the weighted average interest rate paid on interest-bearing deposits,
particularly in savings and money market deposits.
Provision for Credit Losses
The provision for credit losses represents a charge to earnings necessary to maintain an allowance for credit losses at
a level that, in management's evaluation, is adequate to provide coverage for all expected credit losses. The provision for
credit losses is impacted by variations in the size and composition of our loan and investment securities portfolio, recent
historical and projected future economic conditions, our internal assessment of the credit quality of the loan and investment
securities portfolios and net charge-offs.
Three months ended June 30, 2026 compared to the three months ended June 30, 2025
The provision for credit losses was $1.3 million for the three months ended June 30, 2026 compared to $1.0 million for
the same period in 2025. The increase in the provision for credit losses primarily reflects growth in the loan portfolio and off-
balance sheet arrangements, which increased the level of estimated expected credit losses under CECL.
Six months ended June 30, 2026 compared to the six months ended June 30, 2025
The provision for credit losses was $2.1 million for the six months ended June 30, 2026 compared to $1.7 million for
the same period in 2025. The increase in the provision for credit losses primarily reflects growth in the loan portfolio, which
increased the level of estimated expected credit losses under CECL.
Non-Interest Income
Our services and products generate service charges and fees, mainly from our depository accounts. We also generate
income from gain on sale of loans though the SBA 7a loan program and the monetization of fees earned through our loan
swap program. In addition, we own and are beneficiaries of the life insurance policies covering certain of our key employees,
which policies generate income from the increase in the cash surrender values.
The following table presents the components of non-interest income for the periods indicated (in thousands):
Three Months Ended June 30,
Six Months Ended June 30,
2026
2025
2026
2025
Service fees
2,601
2,402
5,701
4,733
Gain on sale of securities available for sale, net
14
Gain on sale of loans held for sale, net
151
106
676
Other non-interest income
959
817
1,889
1,677
Total non-interest income
3,560
3,370
7,710
7,086
Three months ended June 30, 2026 compared to the three months ended June 30, 2025
Non-interest income for the three months ended June 30, 2026 increased $190 thousand or 5.6%, compared to the
same period in 2025. This increase was primarily driven by a $322 thousand increase in loan prepayment penalty income
reported under service fees compared to the same period last year.
Six months ended June 30, 2026 compared to the six months ended June 30, 2025
Non-interest income for the six months ended June 30, 2026 increased $624 thousand or 8.8%, compared to the same
period in 2025. This increase was primarily driven by $1.6 million increase in income generated by the Company’s loan
swap program reported under service fees in the Consolidated Statements of Operations. This increase was partially offset
by a decrease in gain on sale of loans during the quarter ended June 30, 2026.
Non-Interest Expense
The following table presents the components of non-interest expense for the dates indicated (in thousands):
Three Months Ended June 30,
Six Months Ended June 30,
2026
2025
2026
2025
Salaries and employee benefits
8,537
7,954
17,107
15,590
Occupancy
1,369
1,337
2,685
2,621
Regulatory assessment and fees
397
396
881
817
Consulting and legal fees
583
263
1,144
456
Network and information technology services
524
564
1,084
1,069
Other operating
2,556
2,120
4,776
4,133
Total non-interest expense
13,966
12,634
27,677
24,686
Three months ended June 30, 2026 compared to the three months ended June 30, 2025
Non-interest expense for the three months ended June 30, 2026 increased $1.3 million or 10.5%, compared to the same
period in 2025. This increase was primarily driven by an increase of $583 thousand in salaries and employee benefits due
to an increase of $236 thousand in salaries associated with additional full-time employees and an increase of $228 thousand
in health insurance and 401(k) expense. Additionally , consulting and legal fees increase by $320 mainly due to $290
thousand reimbursement of legal expenses recognized during the second quarter of 2025, which reduced legal expense in
the prior-year period. Other operating expenses increased by $436 thousand due mainly to $312 thousand excise tax
expense paid in the quarter ended June 30, 2026.
Six months ended June 30, 2026 compared to the six months ended June 30, 2025
Non-interest expense for the six months ended June 30, 2026 increased $3.0 million or 12.1%, compared to the same
period in 2025. The increase was primarily driven by an increase of $1.5 million in salaries and employee benefits, consisting
of $666 thousand related to merit increases and new full-time employee salaries, $580 thousand increase in health
insurance and 401(k) expense, and a $349 thousand increase in additional stock-based compensation expense. In addition,
consulting and legal fees increased $688 thousand, primarily due to an increase of $405 thousand in legal fees due to the
reimbursement of legal expenses recognized during the second quarter of 2025, which reduced legal expense in the prior-
year period. Other non-interest expenses increased by $643 thousand, mainly due to increase of $285 thousand in excise
tax expense and increase of $83 thousand in ATM expense for the six months ended June 30, 2026.
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 expenses for income tax purposes. Therefore, future decisions on the investments we choose will affect our effective
tax rate. The cash surrender value of bank-owned life insurance policies covering key employees, purchasing municipal
bonds, and overall levels of taxable income will be important elements in determining our effective tax rate.
Three months ended June 30, 2026 compared to the three months ended June 30, 2025
Income tax expense for the three months ended June 30, 2026 was $3.6 million as compared to $2.6 million for the
same period in 2025. The effective tax rate for the three months ended June 30, 2026 was 28.60% compared to 24.20% for
the same period in 2025.
Six months ended June 30, 2026 compared to the six months ended June 30, 2025
Income tax expense for the six months ended June 30, 2026 was $6.0 million as compared to $5.0 million for the same
period in 2025. The Company recognized a non-recurring $619 thousand income tax benefit in the first quarter of 2026 due
to an adjustment to the deferred tax asset calculation from December 31, 2025. The effective tax rate for the six months
ended June 30, 2026 was 24.47% compared to 24.18% for the same period in 2025.
For a further discussion of income taxes, see Note 5 “Income Taxes” to the unaudited Consolidated Financial
Statements in Item 1 of Part I of this Form 10-Q.
Analysis of Financial Condition
Total assets at June 30, 2026 were $3.02 billion, an increase of $228.2 million, or 16.5% annualized, over total assets
of $2.79 billion at December 31, 2025. Total loans, net of deferred fees/costs, increased $133.1 million, or 12.3%
annualized, to $2.32 billion at June 30, 2026 compared to $2.19 billion at December 31, 2025. Total deposits increased by
$107.2 million, or 9.2% annualized, to $2.45 billion at June 30, 2026 compared to $2.35 billion at December 31, 2025.
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 philosophy of the portfolio is to maximize the Company’s profitability taking into
consideration the Company’s risk appetite and tolerance, manage its asset composition and diversification, and maintain
adequate risk-based capital ratios.
The investment portfolio is managed in accordance with the Board approved Asset and Liability Management (“ALM”)
policy, which includes investment guidelines. Such policy is reviewed at least annually or more frequently if deemed
necessary, depending on market conditions and/or unexpected events. The investment portfolio composition is subject to
change depending on the funding and liquidity needs of the Company, and the interest risk management objective directed
by the Asset-Liability Committee (“ALCO”). The portfolio of investments also 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 of securities issued by the U.S. Government and U.S. Government Agencies
and mortgage-backed securities, collateralized mortgage obligations, corporate bonds, municipal securities, other debt
securities all with varying contractual maturities and coupons. Due to the optionality embedded in these securities, the
contractual maturities do not necessarily represent the expected life of the portfolio. Some of these securities will be called
or paid down prior to maturity depending on capital market conditions and expectations. The investment portfolio is regularly
reviewed by the Chief Financial Officer, Treasurer, and the ALCO of the Company to ensure an appropriate risk and return
profile as well as for adherence to the Company’s investment policies.
When evaluating AFS debt securities under ASC Topic 326, the Company evaluates whether the decline in fair value
is attributable to credit losses or other factors like interest rate risk, using both quantitative and qualitative analyses, including
company performance analysis, review of credit ratings, vintage bonds, remaining payment terms, prepayment speeds and
analysis of macro-economic conditions. As a result of this evaluation, the Company concluded that no allowance was
required on AFS securities as of June 30, 2026.
At quarter end, HTM securities included $136.1 million of U.S. Government and U.S. Government Agencies issued
bonds and mortgage-backed securities. Because of the explicit and/or implicit guarantee on these bonds, the Company
holds no reserves on these holdings. Using the PD/LGD methodology and considering that there are no HTM securities
exposed to non
government credit risk, the Company estimated an allowance for credit losses (“ACL”) of $0 as of June 30,
2026. For periods where there was an ACL for HTM securities recorded the book value for debt securities classified as HTM
represents amortized cost less ACL.
Aggregate AFS and HTM investment securities increased $7.6 million to $469.0 million at June 30, 2026 from
$461.4 million at December 31, 2025.
As of June 30, 2026, investment securities with a market value of $56.3 million were pledged to secure public deposits.
The investment portfolio does not contain any tax-exempt securities.
The following table presents the amortized cost and fair value of investment securities for the dates indicated (dollars
in thousands):
June 30, 2026
December 31, 2025
Available-for-sale:
Amortized
Cost
Fair Value
Amortized
Cost
Fair Value
U.S. Government Agency
11,883
10,855
15,169
14,144
Collateralized mortgage obligations
84,406
67,099
92,871
75,828
Mortgage-backed securities - residential
34,909
28,991
35,865
29,917
Mortgage-backed securities - commercial
215,345
206,999
174,622
168,108
Municipal securities
5,191
4,225
5,196
4,263
Bank subordinated debt securities
14,578
14,690
15,284
15,230
366,312
332,859
339,007
307,490
Held-to-maturity:
U.S. Government Agency
37,328
34,129
41,158
37,970
Collateralized mortgage obligations
48,762
43,821
51,431
46,786
Mortgage-backed securities - residential
35,188
32,522
37,221
34,718
Mortgage-backed securities - commercial
14,849
13,705
15,088
14,051
Corporate bonds
9,045
8,983
136,127
124,177
153,943
142,508
Allowance for credit losses - securities held-to-maturity
(2)
Securities held-to maturity, net of allowance for credit losses
136,127
153,941
The following table shows the weighted average yields, categorized by contractual maturity, for investment securities
as of June 30, 2026 (in thousands, except yields):
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
11,883
3.43%
11,883
3.43%
Collateralized mortgage obligations
84,406
1.56%
84,406
1.56%
MBS - residential
34,909
2.43%
34,909
2.43%
MBS - commercial
4,996
4.55%
4,906
4.81%
205,443
4.38%
215,345
4.40%
Municipal securities
5,191
1.87%
5,191
1.87%
Bank subordinated debt securities
2,000
7.86%
12,578
5.81%
14,578
6.09%
6,996
5.50%
22,675
4.69%
336,641
3.44%
366,312
3.56%
Held-to-maturity:
U.S. Government Agency
4,988
1.24%
18,041
1.31%
1,483
2.85%
12,816
1.85%
37,328
1.55%
Collateralized mortgage obligations
48,762
1.65%
48,762
1.65%
MBS - residential
21
2.98%
8,874
1.65%
26,293
2.29%
35,188
2.13%
MBS - commercial
3,034
1.63%
11,815
2.57%
14,849
2.37%
5,009
1.25%
29,949
1.44%
1,483
2.85%
99,686
1.95%
136,127
1.83%
Loans
Loans are the largest category of interest-earning assets on the unaudited Consolidated Balance Sheets, and usually
provide higher yields than the remainder of the interest -earning assets. Higher yields typically carry greater inherent credit
and liquidity risks in comparison to lower yield 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):
June 30, 2026
December 31, 2025
Total
Percent of
Total
Total
Percent of
Total
Residential real estate
356,747
15.4
307,692
14.1
Commercial real estate
1,314,367
56.6
1,244,835
57.0
Commercial and industrial
300,265
13.0
295,548
13.5
Correspondent banks
137,912
6.0
127,968
5.9
Consumer and other
207,404
9.0
207,215
9.5
Total gross loans
2,316,695
100.0
2,183,258
100.0
Plus: Deferred fees/costs
5,690
5,999
Total loans net of deferred fees/costs
2,322,385
2,189,257
Less: Allowance for credit losses
26,701
25,500
Total net loans
2,295,684
2,163,757
Total loans, net of deferred fees/costs, increased by $133.1 million, or 12.3% annualized to $2.32 billion, at June 30,
2026 compared to December 31, 2025. The commercial real estate loan segment had the most significant balance increase
compared to December 31, 2025.
Our loan portfolio continues to grow, with commercial real estate lending being the primary focus which represented
approximately 56.6% of the total gross loan portfolio as of June 30, 2026. Our loan growth strategy since inception has
been reflective of the market in which we operate and of our strategic plan as approved by the Board.
The growth experienced in recent years is primarily due to implementation of our relationship-based banking model and
the success of our relationship managers in competing for new business in a highly competitive metropolitan area. Many of
our larger loan clients have long-term relationships with members of our senior management team or our relationship
managers that date back to former institutions.
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 to interest rate changes of the loan portfolio at June 30,
2026 (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
7,064
83,310
65,616
200,757
356,747
Commercial real estate
71,847
590,427
647,640
4,453
1,314,367
Commercial and industrial
12,401
111,248
133,331
43,285
300,265
Correspondent banks
137,912
137,912
Consumer and other
3,579
1,238
21,910
180,677
207,404
Total gross loans
232,803
786,223
868,497
429,172
2,316,695
Interest rate sensitivity:
Fixed interest rates
187,594
201,973
159,167
302,650
851,384
Floating or adjustable rates
45,209
584,250
709,330
126,522
1,465,311
Total gross loans
232,803
786,223
868,497
429,172
2,316,695
The information presented in the table above is based upon the 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 /rate modifications are discussed as well.
As of June 30, 2026, approximately 63% of the loan portfolio has adjustable/variable rates and 37% of the loan portfolio
has fixed rates. The adjustable/variable rate loans re-price to different benchmarks and tenors and in different periods of
time. By contractual characteristics, there are no material concentrations on anniversary repricing.
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 reviewed at least once a year, and more frequently as needed. Internal credit
risk ratings may change based on management’s assessment of 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.
Loan credit exposures by internally assigned grades are as follows for the dates indicated (in thousands):
June 30, 2026
Pass
Special Mention
Substandard
Doubtful
Total
Residential real estate
353,869
1,370
1,508
356,747
Commercial real estate
1,301,144
11,520
1,703
1,314,367
Commercial and industrial
298,081
773
1,411
300,265
Correspondent banks
137,912
137,912
Consumer and other
207,404
207,404
2,298,410
13,663
4,622
2,316,695
December 31, 2025
Pass
Special Mention
Substandard
Doubtful
Total
Residential real estate
304,276
916
2,500
307,692
Commercial real estate
1,230,823
11,613
2,399
1,244,835
Commercial and industrial
293,169
907
1,472
295,548
Correspondent banks
127,968
127,968
Consumer and other
207,215
207,215
2,163,451
13,436
6,371
2,183,258
Non-Performing Assets
The following table presents non-performing assets as of the dates shown (in thousands, except ratios):
June 30, 2026
December 31, 2025
Non-accrual loans
2,148
3,138
Loans past due over 90 days and still accruing
Total non-performing loans
2,148
3,138
Other real estate owned
Total non-performing assets
2,148
3,138
Asset quality ratios:
Allowance for credit losses to total loans
1.15%
1.16%
Allowance for credit losses to non-performing loans
1,243%
813%
Non-performing loans to total loans
0.09%
0.14%
Non-performing assets include all loans categorized as non-accrual, other real estate owned (“OREO”) and other
repossessed assets. Problem loans for which the collection or liquidation in full is reasonably uncertain are placed on a non-
accrual status. This determination is based on 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 on
non-accrual status as of the date it becomes 90 days past due and remains in non-accrual status until it meets the criteria
for restoration to accrual status. Residential loans, on the other hand, are placed on non-accrual status when the principal
or interest becomes due and unpaid for 120 days or more and remains in non-accrual status until it meets the criteria for
restoration to accrual status. Restoring a loan to accrual status is possible when the borrower resumes payment of all
principal and interest payments for a period of six consecutive months and the Company has a documented expectation of
repayment of the remaining contractual principal and interest or the loan becomes secured and in the process of collection.
The Company may grant a loan concession to a borrower experiencing financial difficulties. This determination is
performed during the annual review process or whenever problems surface regarding the borrower’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 of non-performing loans and borrowers experiencing financial difficulties, see Note 3 “Loans” to
the unaudited Consolidated Financial Statements in Item 1 of Part 1 of this Form 10-Q.
Allowance for Credit Losses
The ACL on loans represents an amount that, in management's evaluation, is adequate to provide coverage for all
expected future credit losses on outstanding loans. 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” in Item 1 of Part 1 of this Form 10-Q for more information on the ACL.
The following table presents ACL on loans 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
Three Months Ended June 30, 2026
Beginning balance
5,270
9,932
5,330
1,018
4,552
26,102
Provision for credit losses
(1)
222
184
407
76
(2)
887
Recoveries
8
1
9
Charge-offs
(296)
(1)
(297)
Ending Balance
5,204
10,116
5,738
1,094
4,549
26,701
Average loans
354,678
1,275,161
292,088
128,762
208,276
2,258,965
Net charge-offs (recoveries) to average
loans
(2)
0.33%
(0.00)%
0.00%
0.05%
Six Months Ended June 30, 2026
Beginning balance
5,908
9,476
4,814
1,015
4,287
25,500
Provision for credit losses
(3)
(422)
640
919
79
269
1,485
Recoveries
14
5
19
Charge-offs
(296)
(7)
(303)
Ending Balance
5,204
10,116
5,738
1,094
4,549
26,701
Average loans
329,736
1,271,120
264,440
128,783
224,495
2,218,574
Net charge-offs (recoveries) to average
loans
(2)
0.17%
(0.00)%
0.01%
0.03%
(1) Provision for credit losses excludes a $380 thousand provision due to unfunded commitments included in accrued interest and
other liabilities.
(2) Annualized.
(3) Provision for credit losses excludes a $585 thousand provision due to unfunded commitments included in accrued interest and
other liabilities and a $2 thousand release related to investment securities held to maturity.
Residential
Real Estate
Commercial
Real Estate
Commercial
and
Industrial
Correspondent
Banks
Consumer
and Other
Total
Three Months Ended June 30, 2025
Beginning balance
5,115
9,197
4,434
817
5,177
24,740
Provision for credit losses
(1)
356
294
73
57
115
895
Recoveries
6
1
1
8
Charge-offs
(710)
(710)
Ending Balance
5,477
9,491
4,508
874
4,583
24,933
Average loans
299,857
1,167,698
265,465
101,776
222,649
2,057,445
Net charge-offs (recoveries) to average
loans
(2)
(0.01)%
(0.00)%
1.28%
0.14%
Six Months Ended June 30, 2025
Beginning balance
5,121
8,788
4,633
654
4,874
24,070
Provision for credit losses
(3)
344
703
(131)
220
431
1,567
Recoveries
12
6
1
19
Charge-offs
(723)
(723)
Ending Balance
5,477
9,491
4,508
874
4,583
24,933
Average loans
300,560
1,155,436
261,377
94,516
210,456
2,022,345
Net charge-offs (recoveries) to average
loans
(2)
(0.01)%
(0.00)%
0.69%
0.07%
(1) Provision for credit losses excludes a $134 thousand provision due to unfunded commitments included in accrued interest and other
liabilities and a $2 thousand provision related to investment securities held to maturity.
(2) Annualized.
(3) Provision for credit losses excludes $144 thousand provision due to unfunded commitments included in accrued interest and a $1
thousand provision related to investment securities held to maturity.
The Federal Open Market Committee (“FOMC”) economic forecasts as of June 30, 2026, showed moderate
improvement in the forecast for real GDP and a slight improvement in the unemployment rate. Fannie Mae House Price
Index (“HPI”) forecast reflected an improvement in national housing prices. The Company continued to adjust the HPI index
effect on the 1-4 Family loan portfolio with a qualitative factor because Florida housing prices are performing better than
national levels. The Q-factor scorecard was updated based on the latest portfolio stress test and the resulting maximum
loss calculation.
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 June 30, 2026, for every 100 basis point increase in the HPI, the
forecast reduces reserves by approximately $241 thousand and about 1 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. For comparative purposes, in prior periods the Company
stress tested the commercial real estate loan subcategory based on collateral code (1st lien, commercial property) rather
than the non
owner
occupied subsegment.
As of June 30, 2026, the Company stress tested two qualitative factors within the non
owner
occupied subsegment of
the commercial real estate loan portfolio, as it represents the largest segment of the Company’s portfolio. The analysis
evaluated the impact of changing the qualitative factors from no risk to maximum loss to assess the sensitivity of the
allowance for credit losses (“ACL”). This stress resulted in a hypothetical increase of $6.0 million, or 22.3%, in the ACL. The
sensitivity analysis is intended solely to illustrate the responsiveness of the ACL to changes in qualitative assumptions and
does not represent a change in management’s judgment. For comparative purposes, in prior periods the Company stress
tested the commercial real estate loan subcategory based on collateral code (1st lien, commercial property) rather than the
non
owner
occupied subsegment.
Bank-Owned Life Insurance
As of June 30, 2026, the combined cash surrender value of all bank-owned life insurance (“BOLI”) policies was $60.4
million. Changes in cash surrender value are recorded to other non-interest income in the unaudited Consolidated
Statements of Operations. The Company has 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 small-to-medium sized businesses (“SMBs”), and the personal business of the
owners and operators of these SMBs, as well as the retail/consumer relationships of the employees of these businesses.
The following table presents the daily average balance and average rate paid on deposits by category for the periods
presented (in thousands, except ratios):
Three Months Ended June 30,
2026
2025
Average Balance
Average Rate
Paid
Average Balance
Average Rate
Paid
Non-interest bearing demand deposits
632,198
0.00%
580,121
0.00%
Interest-bearing demand deposits
51,711
2.41%
46,694
2.45%
Saving and money market deposits
1,280,578
2.66%
1,211,513
3.12%
Time deposits
524,474
3.54%
452,361
3.85%
Total
2,488,961
2.16%
2,290,689
2.46%
The Company has a granular deposit portfolio with outstanding balances comprised of 57.1% in commercial deposits,
26.0% in personal deposits, 9.1% in public funds (which are partially collateralized) and 7.8% in brokered deposits. The
brokered deposits balance at June 30, 2026 was $190.9 million and $256.8 million at December 31, 2025.
As of June 30, 2026, the Company has approximately 21 thousand deposit accounts with the majority of which were
personal accounts, approximately 12 thousand or 58.6%. The estimated average account size in our deposit portfolio was
approximately $118 thousand as of June 30, 2026.
The amount of uninsured deposits are estimated based on the FDIC deposit insurance limit of $250 thousand per
account holder for all deposit accounts at the Company. The total estimated percentage of uninsured deposits was 55% at
June 30, 2026 and 51% at December 31, 2025. The Company offers Insured Cash Sweep (“ICS”) and Certificate
of
Deposit Account Registry Service (“CDARS”) deposit products to fully insure our clients. The deposit balance in
ICS/CDARS was $176.1 million at June 30, 2026 and was $183.2 million at December 31, 2025.
The following table shows scheduled maturities of uninsured time deposits as of June 30, 2026 (in thousands):
June 30, 2026
Three months or less
68,697
Over three through six months
17,702
Over six through twelve months
57,687
Over twelve months
51,597
195,683
Other Liabilities
The Company collects from commercial and residential loan customers funds which are held in escrow for future
payment of real estate taxes and insurance. These escrow funds are disbursed by the Company directly to the insurance
companies and taxing authority of the borrower. Escrow funds are recorded as accrued interest and other liabilities in the
consolidated balance sheet.
As of June 30, 2026, escrow balances totaled $23.5 million compared to $8.1 million at December 31, 2025. The
increase reflects the normal growth in escrow accounts pending tax and insurance payments.
Borrowings
FHLB Advances
As a member of the FHLB of Atlanta, we are eligible to obtain advances with various terms and conditions. This
accessibility to 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.
As of June 30, 2026, we had $112.0 million of fixed-rate advances and $128.9 million of daily-rate advances outstanding
with the FHLB, with weighted average interest rates of 3.82% and 3.88%, maturing in July 2026 and September 2026 for
the fixed-rate advances and May 2027 for the daily-rate advance , as detailed in the table below.
The following table presents the FHLB advances as of June 30, 2026 (in thousands):
June 30, 2026
Interest Rate
Type of Rate
Maturity Date
Amount
3.82%
Fixed
July 13, 2026
37,000
3.82%
Fixed
July 23, 2026
5,000
3.81%
Fixed
July 29, 2026
30,000
3.84%
Fixed
September 09, 2026
40,000
3.88%
Daily
May 24, 2027
128,900
240,900
The Company has also established Federal Funds lines of credit with our upstream correspondent banks and the
Federal Reserve Bank of Atlanta Discount Window to manage temporary fluctuations in our daily cash balances. As of
June 30, 2026, there were no outstanding balances with any of these additional liquidity sources.
Subordinated Notes
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 2035. The Notes were issued by the Company to the purchasers
at a price equal to 100% of their face amount. The subordinated debt was originally issued at a cost of $760 thousand. The
subordinated debt, net of amortized expenses, was $39.4 million, reflecting the scheduled expense recognition over the
term of the instruments. The subordinated notes are presented net of these costs on the consolidated balance sheet. 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 of 1933, as amended (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 Company Form 8-K filed on
August 14, 2025.
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 of
credit. To a varying degree, such commitments involve elements of credit, market, and interest rate risk in excess of the
amount recognized in the consolidated balance sheets. We maintain an allowance for off-balance sheet credit risk which is
recorded under accrued interest and other liabilities on the unaudited Consolidated Balance Sheets. The ACL related to
unfunded commitments at June 30, 2026 was $1.3 million and at December 31, 2025 was $752 thousand. The increase
was primarily driven by an increase in unfunded commitments.
Since commitments associated with letters of credit and commitments to extend credit may expire unused, the amounts
shown do not necessarily reflect actual future cash funding requirements. The following table presents lending related
commitments outstanding as of the dates indicated (in thousands ):
June 30, 2026
December 31, 2025
Commitments to grant loans and unfunded lines of credit
205,573
161,606
Standby and commercial letters of credit
3,646
2,700
Total
209,219
164,306
Commitments to extend credit are agreements to lend funds to a client, as long as there is no violation of any condition
established in the contract, for a specific purpose. Commitments generally have variable interest rates, fixed expiration
dates or other termination clauses and may require payment of 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 amount 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. In
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
Members of senior management and our Board make up the asset and liability management committee, or ALCO.
Senior management is responsible for ensuring that Board approved strategies and policies for managing and mitigating
risks are appropriately executed within the designated lines of authority and responsibility in a timely manner.
ALCO oversees the establishment, approval, implementation, and review of 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”) is inherent to the banking business, we believe our ALCO implements
sound risk management practices to identify, quantify, monitor, and limit IRR exposures.
When assessing the scope of IRR exposure and impact on the consolidated balance sheet, cash flows and consolidated
statement of operations, management considers both earnings and economic impacts. Asset price variations, deposit
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 interest rates scenarios,
yield curve shapes and time horizons. These simulations utilize both instantaneous and parallel changes in the level of
interest rates, as well as non-parallel changes such as changing slopes (flat and steepening) 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 is also utilized to have a more comprehensive assessment on IRR. This simulation relies on
assumptions regarding changes in existing lines of business, new business, management strategies and client expected
behavior.
To have a more complete picture of IRR, the Company also evaluates the economic value of equity (“EVE”). This
assessment allows us to measure the degree to which the economic values will change under different interest rate
scenarios (parallel and non-parallel). The economic value 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
According to our ALCO model, as of June 30, 2026, both the static and dynamic ALM simulations indicate that the
Bank’s balance sheet remains liability sensitive in Year 1, positioning the Bank to benefit in a declining rate environment as
liabilities reprice more quickly than assets, resulting in favorable Net Interest Income (NII) outcomes. Beginning in Year 2,
both models transition toward an asset sensitive posture, reflecting projected balance sheet growth, continued variable rate
loan production, and changes in balance sheet mix over time. This progression is consistent with management’s forward
looking assumptions embedded in the dynamic model.
The Bank’s interest rate risk profile is fairly neutral, with no significant change in overall sensitivity. While the funding
mix shifted modestly, core deposits remained essentially flat, and the Bank’s Year 1 liability-sensitive positioning was
unchanged. All modeled NII and EVE results continued to remain within ALCO policy limits across all rate shock scenarios.
Management’s interest rate positioning reflects a deliberate balance between earnings stability and balance sheet
flexibility, particularly given the Bank’s relationship driven deposit base and variable rate lending profile within the South
Florida market.
The ALM model incorporates a wide range of assumptions, including asset prepayment speeds, non maturity deposit
beta and decay assumptions, pricing correlations, deposit truncations, and key interest rate drivers. Given the inherent
estimation involved in these assumptions, actual results may differ from modeled outcomes, particularly as static measures
do not incorporate potential management actions in response to changes in market conditions or customer behavior.
EVE sensitivity remains compliant with policy guidelines, with greater volatility observed in rising rate scenarios, driven
by asset and liability convexity. In higher rate environments, the value of longer term assets declines more rapidly,
particularly as loan prepayments slow, while certain funding sources reprice less immediately. Conversely, in declining rate
scenarios, faster prepayments and quicker asset repricing help mitigate downside EVE exposure. Importantly, EVE volatility
declined quarter over quarter, reflecting balance sheet actions taken during the period and an overall reduction in structural
interest rate risk.
Overall, the Bank remains well positioned to manage current interest rate volatility, with limited exposure under rising
rate scenarios and favorable positioning in a declining rate environment. Management continues to actively review ALM
results and retains the flexibility, consistent with ALCO policy, to adjust asset and liability duration through balance sheet
strategies as market conditions evolve. Results and related strategies are reviewed quarterly with ALCO and adjusted as
appropriate.
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.
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 relatively adequate funding. 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 and the cash flow profiles of our on- and off-balance sheet obligations.
In managing inflows and outflows, management regularly monitors situations that can give rise to 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), pledging assets and contingent liquidity events.
Changes in macroeconomic conditions, as well as exposure to credit, market, operational, legal, cybersecurity risk and
reputational risks, could have an unexpected impact on the Company’s liquidity risk profile and are factored into the
assessment of liquidity and the ALM framework.
Management has established a comprehensive and holistic management process for identifying, measuring, monitoring
and mitigating liquidity risk. Liquidity management also reflects the Bank’s granular mix of consumer and commercial
relationships, which management believes enhances funding stability and mitigates reliance on more rate sensitive
wholesale funding sources. Due to its critical importance to the viability of the Company, liquidity risk management is
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 active involvement of senior management; appropriate strategies, policies, procedures, and limits
used to identify and mitigate liquidity risk; comprehensive liquidity risk measurement and monitoring systems (including
assessments of the current and prospective cash flows or sources and uses of funds) that are commensurate with the
complexity and business activities of the Company; active management of intraday liquidity and collateral; an appropriately
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.
We expect funds to be 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.
As of June 30, 2026, the Company had $428 million in available liquidity on balance sheet, including $314 million in
unpledged securities (excluding Unencumbered HTM securities) available to use as collateral and $114 million in excess
cash. The Company had an additional $309 million in off-balance sheet liquidity, excluding access to brokered deposits and
other off-balance sheet sources of funding.
Management believes current liquidity levels remain appropriate relative to the Bank’s risk appetite, balance sheet size,
and anticipated funding needs under both base case and stressed scenarios.
Capital Adequacy
As of June 30, 2026, the Company and the Bank were well capitalized under the FRB’s and FDIC’s prompt corrective
action framework. We also follow the capital conservation buffer framework, and as of June 30, 2026, we exceeded the
capital conversation buffer in all capital ratios, according to our actual ratios. The following table presents the capital ratios
for the Company and the Bank at the dates indicated (in thousands, except ratios).
The Company's consolidated regulatory capital amounts and ratios:
Actual
Minimum Capital
Requirements
To be Well Capitalized
Under Prompt Corrective
Action Provisions
Amount
Ratio
Amount
Ratio
Amount
Ratio
June 30, 2026
Total risk-based capital
325,362
13.88
187,482
8.00
234,352
10.00
Tier 1 risk-based capital
257,948
11.01
140,611
6.00
187,482
8.00
Common equity tier 1 capital
257,948
11.01
105,458
4.50
152,329
6.50
Leverage ratio
257,948
8.81
117,132
4.00
146,415
5.00
December 31, 2025
Total risk-based capital
305,225
13.91
175,565
8.00
219,457
10.00
Tier 1 risk-based capital
239,671
10.92
131,674
6.00
175,565
8.00
Common equity tier 1 capital
239,671
10.92
98,756
4.50
142,647
6.50
Leverage ratio
239,671
8.46
113,285
4.00
141,606
5.00
The Bank's regulatory capital amounts and ratios:
Actual
Minimum Capital
Requirements
To be Well Capitalized
Under Prompt Corrective
Action Provisions
Amount
Ratio
Amount
Ratio
Amount
Ratio
June 30, 2026
Total risk-based capital
320,052
13.68
187,185
8.00
233,981
10.00
Tier 1 risk-based capital
292,014
12.48
140,389
6.00
187,185
8.00
Common equity tier 1 capital
292,014
12.48
105,291
4.50
152,088
6.50
Leverage ratio
292,014
9.97
117,144
4.00
146,430
5.00
December 31, 2025
Total risk-based capital
299,596
13.67
175,387
8.00
219,234
10.00
Tier 1 risk-based capital
273,342
12.47
131,541
6.00
175,387
8.00
Common equity tier 1 capital
273,342
12.47
98,655
4.50
142,502
6.50
Leverage ratio
273,342
9.65
113,296
4.00
141,620
5.00
Impact of Inflation
Our Consolidated Financial Statements and related notes have been prepared in accordance with U.S. GAAP,
which require the measurement of financial position and operating results in terms of historical dollars, without considering
the changes in the relative purchasing power of money over time due to inflation. The impact of inflation is mostly reflected
in the increased cost of operations; inflation can negatively impact overhead expenses and other variable expenses. 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 the effects of inflation. Periods of high inflation are often accompanied by relatively
higher interest rates, and periods of low inflation are accompanied by relatively lower interest rates. Inflationary conditions
may also influence customer deposit behavior, loan demand, and pricing dynamics, which management considers as part
of its ongoing balance sheet and earnings planning processes.
Reconciliation and Management Explanation of Non -GAAP Financial 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 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
to or substitute for, measures determined in accordance with GAAP, and are not necessarily comparable to non-GAAP
measures that may be presented by other companies. The following table reconciles the non-GAAP financial measurement
of operating net income available to common shareholders for the periods presented (in thousands, except per share data):
USCB FINANCIAL HOLDINGS, INC.
NON-GAAP FINANCIAL MEASURES (UNAUDITED)
(Dollars in thousands)
As of or For the Three Months Ended
6/30/2026
3/31/2026
12/31/2025
9/30/2025
6/30/2025
Pre-tax pre-provision ("PTPP") income:
(1)
Net income
9,078
9,351
1,363
8,939
8,140
Plus: Income tax expense
3,636
2,335
1,911
2,866
2,599
Plus: Provision for credit losses
1,267
801
480
105
1,031
PTPP income
13,981
12,487
3,754
11,910
11,770
PTPP return on average assets:
(1)
PTPP income
13,981
12,487
3,754
11,910
11,770
Average assets
2,900,725
2,834,717
2,799,863
2,798,115
2,677,198
PTPP return on average assets
(2)
1.93%
1.79%
0.53%
1.69%
1.76%
Operating net income:
(1)
Net income
9,078
9,351
1,363
8,939
8,140
Less: Net gains (losses) on sale of securities
14
(7,498)
(28)
Less: Tax effect on sale of securities
(4)
1,900
7
Plus: Tax (benefit) liability expense from prior periods
(619)
(3)
1,096
(4)
Operating net income
9,078
8,722
8,057
8,960
8,140
Operating return on average assets:
(1)
Operating net income
9,078
8,722
8,057
8,960
8,140
Average assets
2,900,725
2,834,717
2,799,863
2,798,115
2,677,198
Operating return on average assets
(2)
1.26%
1.25%
1.14%
1.27%
1.22%
Operating return on average equity:
(1)
Operating net income
9,078
8,722
8,057
8,960
8,140
Average equity
228,933
222,226
212,393
225,316
228,492
Operating return on average equity
(2)
15.90%
15.92%
15.05%
15.78%
14.29%
Operating Revenue:
(1)
Net interest income
24,387
22,048
22,207
21,274
21,034
Plus: Non-interest income
3,560
4,150
(4,178)
3,684
3,370
Less: Net gains (losses) on sale of securities
14
(7,498)
(28)
Operating revenue
27,947
26,184
25,527
24,986
24,404
Operating Efficiency Ratio:
(1)
Total non-interest expense
13,966
13,711
14,275
13,048
12,634
Operating revenue
27,947
26,184
25,527
24,986
24,404
Operating efficiency ratio
49.97%
52.36%
55.92%
52.22%
51.77%
(1) The Company believes these non-GAAP measurements are key indicators of the ongoing earnings power of the Company.
(2) Annualized.
(3) The Company recognized a $619 thousand income tax benefit in first quarter of 2026 due to an adjustment to the deferred tax asset calculation from
(4) State tax liability expenses for 2024 and for the first three quarters of 2025 were recognized during the fourth quarter of 2025. The state tax expense
is related to taxes due on interest income on loans whose collateral are located outside of the State of Florida.
NON-GAAP FINANCIAL MEASURES (UNAUDITED)
(Dollars in thousands, except per share data)
As of or For the Three Months Ended
6/30/2026
3/31/2026
12/31/2025
9/30/2025
6/30/2025
Tangible book value per common share (at period-end):
(1)(4)
Total stockholders' equity
233,238
223,246
217,183
209,095
231,583
Less: Intangible assets
Tangible stockholders' equity
(3)
233,238
223,246
217,183
209,095
231,583
Total shares issued and outstanding (at period-end):
Total common shares issued and outstanding
18,459,470
18,257,400
18,137,885
18,107,385
20,078,385
Tangible book value per common share
(2)
12.64
12.23
11.97
11.55
11.53
Operating diluted net income per common share:
(1)
Operating net income
9,078
8,722
8,057
8,960
8,140
Total weighted average diluted shares of common stock
18,509,572
18,454,006
18,348,725
19,755,820
20,295,794
Operating diluted net income per common share:
0.49
0.47
0.44
0.45
0.40
Tangible Common Equity/Tangible Assets
(1)(4)
Tangible stockholders' equity
(3)
233,238
223,246
217,183
209,095
231,583
Tangible total assets
(3)
3,019,701
2,845,735
2,791,540
2,767,945
2,719,474
Tangible Common Equity/Tangible Assets
7.72%
7.84%
7.78%
7.55%
8.52%
(1) The Company believes these non-GAAP measurements are key indicators of the ongoing earnings power of the Company.
(2) Excludes the dilutive effect, if any, of shares of common stock issuable upon exercise of outstanding stock options.
(3) Since the Company has no intangible assets, tangible stockholders’ equity and tangible total assets are the same amounts as stockholders’ equity
and total assets,
(4) The decrease in total stockholders’ equity in September 2025 was primarily driven by the repurchase of 2.0 million shares of Class A common
stock, as previously
disclosed.
Controls and procedures
As filed, 1,739 characters, with its headings, lists and tables. Extracted from the main document; charts and exhibits are in the original on sec.gov.
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our President and Chief Executive Officer
and our Chief Financial Officer, we evaluated the effectiveness of the design and operation of the Company’s disclosure
controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934
(“Exchange Act”)) as of June 30, 2026. Based on that evaluation, management believes that, as of the end of the period
covered by this Form 10-Q, the Company's disclosure controls and procedures were effective to collect, process, and
disclose the information required to be disclosed in the reports filed or submitted under the Exchange Act within the required
time periods.
Changes in Internal Control Over Financial Reporting
There has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f)
under the Exchange Act) during the period covered by this Form 10-Q that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.
Limitations on Effectiveness of Controls and Procedures
In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and
procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving
the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there
are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls
and procedures relative to their costs.
Risk factors
As filed, 284 characters, with its headings, lists and tables. Extracted from the main document; charts and exhibits are in the original on sec.gov.
For detailed information about certain risk factors that could materially affect our business, financial condition, or future
results, see “Part I, Item 1A – Risk Factors” of the 2025 Form 10-K.There have been no material changes to the risk factors
disclosed in the 2025 Form 10-K.
Figures reported in this filing
Standardized line items from the XBRL in this filing, for the period ended 2026-06-30. Comparative periods it repeats are left out.
| Line item | Period | Value | XBRL concept |
|---|---|---|---|
| Income tax | 3 months2026-04-01 to 2026-06-30 | $3.6m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 6 months2026-01-01 to 2026-06-30 | $6.0m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months2026-04-01 to 2026-06-30 | $9.1m | us-gaap:NetIncomeLoss |
| Net income | 6 months2026-01-01 to 2026-06-30 | $18.4m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months2026-04-01 to 2026-06-30 | $0.49 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 6 months2026-01-01 to 2026-06-30 | $1.00 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months2026-04-01 to 2026-06-30 | $0.49 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 6 months2026-01-01 to 2026-06-30 | $1.01 | us-gaap:EarningsPerShareBasic |
| Operating cash flow | 6 months2026-01-01 to 2026-06-30 | $39.9m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 6 months2026-01-01 to 2026-06-30 | $762.0k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 6 months2026-01-01 to 2026-06-30 | $4.6m | us-gaap:PaymentsOfDividends |
| Share repurchases | 6 months2026-01-01 to 2026-06-30 | $1.0m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | At period end2026-06-30 | $118.2m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Total assets | At period end2026-06-30 | $3.02bn | us-gaap:Assets |
| Total liabilities | At period end2026-06-30 | $2.79bn | us-gaap:Liabilities |
| Shareholders' equity | At period end2026-06-30 | $233.2m | us-gaap:StockholdersEquity |
Source: SEC EDGAR, the filing index for accession 0001562762-26-000090. Last ingested by Listed: Nov 6, 2026, 12:51 ET. Listed shows no prices and gives no investment advice.