USCB Financial Holdings, Inc. (USCB) Earnings

Management highlights

- **Milestone Achievements** - Surpassed $3 billion in total assets, up 11% year over year, marking a key strategic milestone after years of disciplined relationship-driven growth - Generated net income of $9.1 million ($0.49 per diluted share), a 22.5% year-over-year increase; ROAA reached 1.26%, ROAE reached 15.9%, and the efficiency ratio improved to 49.97% (first time falling below 50%, down from 52.34% in Q1) - Net interest margin expanded 22 basis points to 3.49%, driven by higher-yielding assets, improving loan yields, and disciplined funding cost management - **Strategic Operations & Portfolio Diversification** - Reduced branch count from 18 to 9 (with the upcoming closure of the Miami Lakes branch) to maintain an efficient, branch-light, relationship-intensive operating model - Steadily reduced CRE concentration in the loan portfolio from 63% in 2020 to 57% as of mid-2026 via broad-based growth across C&I, correspondent banking, and consumer lending - Launched a new localized lending team focused on Doral, Medley, and Hialeah (South Florida), with 2 additional lenders scheduled to be hired in Q3 - **Market Positioning** - South Florida, particularly Miami-Dade, has strong sustained growth drivers: 2.6% unemployment, robust population net migration, substantial residential development, and a high volume of corporate relocations from across the U.S. and internationally, creating sustained demand for banking services - Launched a new 1031 exchange deposit aggregation initiative in partnership with a Florida-based qualified intermediary, which has already generated $22 million in low-cost new deposits within a few months of launch - **Credit Quality** - Non-performing loans fell to 0.09% of total loans (from 0.16% in Q1), and net charge-offs were just 0.05% of average loans for the quarter - Classified loans declined to 20 basis points of total loans from 30 basis points in the prior quarter, with allowance for credit losses totaling $26.7 million (1.15% of total loans)

Guidance

- Net loan growth guidance for the back half of 2026 is maintained at high single-digit to low double-digit - Near-term net interest margin is expected to stay in the 3.40% to 3.50% range for the remainder of 2026 - The full-year 2026 effective tax rate is projected to be 25% - Non-interest expenses are expected to rise at a measured pace, with the efficiency ratio remaining in the low 50% range going forward - New loan production in Q3 2026 is expected to moderate to the $175 million to $190 million range, down from the Q2 record of $272 million, due to typical seasonal vacation-related slowing, though the current pipeline remains robust

Segment performance

USCB Financial Holdings is a diversified banking firm with four core lending segments and three core deposit business verticals. For Q2 2026: - **Lending Segments**: Total average loans reached $2.3 billion, up 9.8% year over year. Record new loan production totaled $272 million for the quarter. Commercial real estate (CRE) represented 42% of total new loan production, with non-CRE lending representing the remaining 58%. Correspondent banking loans represented $83 million, or 30.6% of total quarterly new loan closings. The overall loan portfolio yield increased to 6.20% from 6.11% in Q1 2026; correspondent banking loans carry a yield of 5.22%, while non-correspondent new production has a weighted average yield of 6.20%, matching the overall portfolio yield. - **Deposit Verticals**: Association banking, private client group, and correspondent banking combined represent approximately 30% of total deposits. Average total deposits for the quarter were ~$2.5 billion, up 8.7% year over year. Average non-interest bearing DDA increased 32.5% annualized quarter over quarter, pushing average DDA over $600 million. The new 1031 exchange real estate deposit initiative generated $22 million in new deposits since its Q2 2026 launch.

Risks & headwinds

- Ongoing interest rate volatility and a competitive deposit market create pressure on deposit costs that could push net interest margin toward the lower end of the guided 3.40% to 3.50% range - Increasing competition from new market entrants and existing market participants, though management notes recent industry consolidation and new bank formation have not negatively impacted performance and have actually created new opportunities via client and talent migration - Seasonal slowing of loan closing activity in the third quarter due to elevated vacation schedules

Analyst Q&A

• Q: Will correspondent banking loan growth stay at Q2 levels in Q3, and what will average new loan production yield be?

  A: Correspondent banking loans are short-term 180-day notes that revolve quickly and have lower yields than core lending. Q3 new loan production will moderate to $175-$190 million (down from Q2's $272 million record) due to seasonal vacation slowing, and the average new production yield will fall between 5.90% and 6%, between the lower correspondent yield and higher core loan yield.

• Q: What factors would push NIM to the lower vs. higher end of the guided 3.40-3.50% range?

  A: Higher-than-expected deposit cost increases from competitive market pressure would push NIM to the lower end of the range. On the upside, $100 million in Q3 loan maturities (yielding 5.84%) and $78 million in Q4 maturities (yielding 5.35%) can be repriced to ~6.25%, supporting NIM at the higher end. The 3.40-3.50% range remains sustainable for the full year.

• Q: What is the long-term opportunity for the new 1031 exchange deposit initiative?

  A: The initiative targets transactional law firms, title companies, and CPAs in South Florida, a large high-volume real estate market. Though 1031 exchange deposits stay for only ~180 days, the new service attracts new relationship flow, and early market response has been very positive, with $22 million in deposits generated in the first few months post-launch.

• Q: Is the recent shift to FHLB wholesale funding to replace high-cost non-relationship deposits a one-time event or ongoing strategy?

  A: This is an ongoing deliberate funding optimization practice. Management regularly reviews non-core deposits; when high-cost non-relationship deposits do not convert to full relationship banking business, they are replaced with attractively-priced wholesale funding. The pace of this shift will not be as steep as it was in Q2 going forward, and the core priority remains growing granular low-cost core deposits.

• Q: Has average loan size changed as the pipeline has grown, and how have new market entrants impacted the business?

  A: Average loan size remains ~$2 million, unchanged from prior periods; the firm has only increased total credit exposure limits per client to $40 million (split across multiple loans to avoid single large loan concentration). New de novo banks have not impacted operations, and M&A consolidation of existing banks has created opportunity, as associated disruption drives client and talent migration to USCB.