USCB’s Earnings Hide Surging Loan Growth and Deposit Gains

Date of Call: Jan 23, 2026

Financials Results

• EPS: GAAP diluted EPS of $0.07, including $0.31 per share nonoperating loss from securities sale and $0.06 per share income tax liability. Excluding items, operational diluted EPS was $0.44, consistent with last quarter.
• Operating Margin: Operating efficiency ratio was 55.92%, demonstrating stable operating leverage.

Guidance:

• NIM expected to improve in 2026, supported by rate cuts, deposit repricing strategy, and securities restructuring.
• Loan yields expected to remain above 6% in 2026.
• Deposit growth is a top priority, with specific targets for business banking, private client, association banking, and correspondent banking verticals.
• Noninterest income (excluding securities loss) expected to build to a range of $3.5 million to $3.8 million in 2026.
• Tax expense should be modeled at 26.4% for 2026.
• Loan growth anticipated to be high single digits to low double digits.
• Expense base (adjusted baseline) estimated at around $13.2 million for Q4 2025, with efficiency ratio targeted in the low 50%s.

Business Commentary:

Asset and Loan Growth:

• USCB Financial Holdings reported total assets of $2.8 billion, up 8.1% year-over-year, with loans growing by $216 million or 11%.
• This growth was driven by strong commercial activity and disciplined underwriting practices.

Deposit and Funding Strategy:

• The company's deposits increased by $171 million or 7.9%, showing continued franchise growth.
• The increase in deposits was supported by deep client relationships and a shift towards lower cost funding, which includes a 26.4% increase in DDA balances.

Net Interest Income and Margin:

• USCB's net interest income improved to 3.27%, expanding by 13 basis points quarter-over-quarter and 11 basis points year-over-year.
• This improvement was due to disciplined deposit pricing strategies and the ability to reprice deposits more quickly than the loan portfolio.

Capital Management and Shareholder Returns:

• The company completed a $40 million subordinated debt issuance and repurchased 2 million shares, indicating confidence in the stock's intrinsic value.
• The strategic actions included a 25% increase in quarterly cash dividends, reflecting strong operating earnings and a focus on returning capital to shareholders.

Credit Quality and Risk Management:

• Credit quality was highlighted by nonperforming loans at 0.14% of total loans, with an allowance for credit losses at 1.16%.
• This reflects the bank's disciplined risk management and conservative underwriting standards, ensuring portfolio quality and payment performance remain strong.

Sentiment Analysis:

Overall Tone: Positive

• Management described '2025 was another successful year' and 'strong execution.' They noted 'strong commercial activity,' 'continued franchise growth,' 'excellent credit quality,' and 'nonperforming loans at 0.14% of total loans.' The Board approved a 25% dividend increase. They expressed confidence in strategic actions to 'enhance our earnings power in 2026 and beyond' and stated the bank is 'well positioned to benefit from an easing cycle.'

Q&A:

• Question from William Jones (KBW): Concerns about deposit shrinkage at year-end and any notable trends or seasonality.
  Response: Attributed shrinkage to two identified, temporary events: a $100+ million client deposit move and a $50 million correspondent banking swing; not concerned, as deposits are expected to rebuild.

• Question from William Jones (KBW): Thoughts on optimal loan-to-deposit ratio and current levels.
  Response: Optimally between 90% and 95%; current level is within that range, with a focus on deposit building as the #1 priority for 2026.

• Question from William Jones (KBW): Unpack the new SBA vertical initiative in Florida markets.
  Response: It is an extension and ramp-up of an existing SBA business launched four years ago, targeting established small businesses with revenues of $3-5 million in specific markets, aiming for $40-50 million in annual volume over three years.

• Question from William Jones (KBW): Strategic priorities on the capital front for 2026.
  Response: Priority is earning and returning capital to shareholders, as demonstrated by the 25% dividend increase; no significant additional capital plans beyond producing good earnings.

• Question from Feddie Strickland (Hovde Group): Expectation for NIM spike in Q1 2026 from balance sheet restructure and growth thereafter.
  Response: Conservative outlook is for NIM to be flat to slightly up in Q1 2026, with potential for expansion from rate cuts and repricing of money market and CDs.

• Question from Feddie Strickland (Hovde Group): Loan growth expectations for 2026.
  Response: Conservative guide is high single digits to low double digits, with Q4 2025 seeing the largest quarterly new loan production of $196 million.

• Question from Feddie Strickland (Hovde Group): Driver for increased tax rate guidance to 26.4%.
  Response: Increase is due to prior period state tax liabilities for income generated outside Florida; it is the correct modeling number for 2026.

• Question from Unknown Analyst (Raymond James): Expense outlook and impact of new bonus/retention plans and anticipated hires.
  Response: Adjusted expense base was around $13.2 million in Q4 2025; expects gradual increase in 2026 with new hires, targeting low 50% efficiency ratio.

• Question from Unknown Analyst (Raymond James): Fee income outlook for 2026.
  Response: Expects noninterest income (excluding securities loss) to build to a range of $3.5 million to $3.8 million, supported by wire fees, swap fees, and treasury management.

Contradiction Point 1

Net Interest Margin (NIM) Outlook for Q1 2026

Contradiction on the direction and drivers of NIM change in the near term.

Will the balance sheet restructure drive a Q1 2026 NIM spike and subsequent steady growth with further rate cuts? - Feddie Strickland (Hovde Group)

20260123-2025 Q4: For Q1 2026, the NIM is expected to be conservatively flat to slightly up. The challenge is replacing the deposits that were lost with either DDA or moderately priced money market funds. If rate cuts occur, they would provide a tailwind, but the primary driver for expansion will be the ability to redeploy into higher-yielding loans. - [Robert Anderson](CFO)

Is the 3.27% September margin a good Q4 starting point, and will further expansion follow from additional rate cuts? - Michael Rose (Raymond James & Associates, Inc.)

2025Q3: Yes, 3.27% is a solid starting point for Q4. The company is liability sensitive and has been proactive in cutting rates on its money market book. The securities portfolio, still yielding a COVID-era 3.03%, presents a significant opportunity for margin expansion if rates rise. The company expects to benefit from the rate environment and could see margin expansion as rates continue to fall and the portfolio is rebalanced. - [Robert Anderson](CFO)

Contradiction Point 2

Deposit Growth Strategy and Priorities

Shift from stable international deposits to concern over domestic deposit volatility.

What caused the year-end deposit shrinkage, and were there notable trends, seasonal effects, or strategic factors? - William Jones (KBW)

20260123-2025 Q4: The decline was due to two isolated events... The bank is not concerned and expects to rebuild those deposits. - [Luis de la Aguilera](CEO)

What factors caused the DDA increase this quarter, and are they sustainable? - Feddie Justin Strickland (Hovde Group, LLC)

2025Q2: The growth is driven by a team-focused strategy to make the bank the primary financial institution for clients... The bank actively competes for low-cost core deposits, which are crucial for sustaining growth. - [Robert Anderson](CFO)

Contradiction Point 3

Loan Growth Outlook

Contradiction between projected high single-digit growth and previous expectation of ~$150M quarterly originations.

What is the 2026 loan growth forecast? - Feddie Strickland (Hovde Group)

20260125-2025 Q4: High single digits to low double digits is a reasonable guide. - [Robert Anderson](CFO)

Will mid-teens loan growth continue for the next few quarters? - Michael Edward Rose (Raymond James & Associates, Inc.)

2025Q2: The bank expects solid loan growth, projecting between $150 million to $180 million in new originations per quarter, which would support low double-digit annual growth. - [Robert Anderson](CFO)

Contradiction Point 4

Net Interest Margin (NIM) Trajectory

Different outlooks for NIM movement in the near term.

Will the balance sheet restructure cause a NIM spike in Q1 2026, followed by steady growth if more rate cuts occur? - Feddie Strickland (Hovde Group)

20260123-2025 Q4: For Q1 2026, the NIM is expected to be conservatively flat to slightly up. - [Robert Anderson](CFO)

What factors contributed to the quarter's deposit growth and any seasonal effects? How should we assess the NIM trajectory given excess liquidity and late-quarter loan production? How do ALCO models support potential NIM increases in a down rate environment? - Woody Lay (KBW)

2025Q1: The internal bias is for the NIM to be flat to slightly up in the coming quarters. - [Robert Anderson](CFO)

Contradiction Point 5

Deposit Growth Strategy and Priority

Shift in stated priority for deposit growth versus broader organic growth.

What is your target range for the loan-to-deposit ratio, and how do you assess its current level? - William Jones (KBW)

20260123-2025 Q4: Expanding deposits is the #1 priority for the coming year. - [Robert Anderson](CFO)

What is the outlook for deposit growth considering the strong start and impacts from specialty verticals and new hires, how should we view the expense base and hiring plans, and is organic growth still the capital focus? - Michael Rose (Raymond James)

2025Q1: Organic growth continues to be the primary focus. - [Luis de la Aguilera](CEO)