USCB FINANCIAL HOLDINGS, INC.

USCB Financial Holdings,

Inc., a Florida

corporation incorporated

in 2021, is

a bank holding

company with

one

direct

wholly owned subsidiary,

U.S. Century Bank (the “Bank”), together referred to as “the Company”.

The Bank, established in

2002, is a Florida state-chartered,

non-member financial institution providing

financial services through its

banking centers

located in South Florida.

In December 2021, USCB Financial

Holdings, Inc. acquired all issued

and outstanding shares of the Class

stock of

in connection

reorganization of the

Bank into

a holding

company structure. Each

of the

class A

common stock,

par value

$

1.00

per share,

formerly held

by its

stockholders were

into and exchanged for

one

newly issued share of the Company’s Class

A common stock, par value $

1.00

per share.

owns a

Florida Peninsula

Title LLC,

that offers

our clients

title insurance

policies for

transactions closed at the Bank. Licensed in the State of Florida and approved by the Department of Insurance Regulation,

Florida Peninsula tittle LLC began operations in 2021.

Principles of Consolidation

Intercompany transactions

and balances

are eliminated

in consolidation.

The consolidated

financial statements

have

been prepared in accordance with GAAP.

Use of Estimates

The

Company

has

and

control

that

are

to

ensure

methods

are

controlled and

applied consistently

from period

to period.

These estimates

and assumptions,

materially affect

the reported amounts of

certain assets, liabilities, revenues and

expenses, are based on

information available as of

of the

financial statements,

and changes

in this

information over

time and

the use

of revised

estimates and

could materially affect amounts reported in subsequent

Cash and Cash Equivalents

The

Company

considers

investments

with

a

maturity

of

days

or

less

from

its

original

date

to

be

cash

equivalents. For

Statements of

Cash Flows,

cash and cash

equivalents include

cash on hand,

amounts

due from banks, and interest-bearing deposits in banks.

Restricted Cash

The Company may be required to maintain

funds at other banks to satisfy

the terms of a loan participation agreement.

reports restricted cash

within cash

and cash equivalents.

At both

December 31, 2025 and

Company

had $

in restricted cash.

Interest-Bearing Deposits in Banks

Interest-bearing

in

other

consist

of

at

the

Federal

Reserve

Bank

of

Atlanta,

Federal Home Loan Bank of Atlanta and other accounts.

Investment Securities

Debt securities

are recorded

at fair

value except

for those

securities which

has the

positive intent

and

hold to

generally determines

the appropriate

classification

of its

at the

time of

purchase and accounts for them on a trade date basis.

Debt securities that

management has the

positive intent and

ability to hold

to maturity are

classified as "held-to-maturity"

and recorded at amortized cost. Trading securities are

recorded at fair value with

changes in fair value included

in earnings.

Securities not classified

as held-to-maturity or

trading are classified

as "available-for-sale"

and recorded at

fair value, with

unrealized gains and losses excluded from earnings and

reported in other comprehensive income (loss).

Purchase premiums and discounts are amortized or accreted over

the estimated life of the related available-for-sale or

held-to-maturity

as

an

adjustment

to

yield

using

the

method.

Prepayments

of

are

considered in determining the estimated life of

the security. Such amortization and accretion are included in interest income

in the Consolidated

Statements of Operations.

Dividend and interest

income are recognized

when earned. Gains

and losses

on the sale of securities are recorded on trade date and are determined

on a specific identification basis.

For available-for-sale

debt securities

in an

unrealized loss

position, the

Company first

assesses whether

it intends

to

sell, or it is more likely than

not that it will be required to

sell, the security before recovery

of its amortized cost basis.

If the

Company has

the intent

to sell,

or is

sell, the

between fair

value and

amortized cost

is considered

impaired

and

is

in

the

for

credit

losses.

For

available-for-sale

debt

that

do

not

meet

the

aforementioned criteria,

evaluates whether

the decline in

has resulted from

credit factors

market conditions. The

Company monitors the

credit quality of

debt securities through

the use of

credit ratings. Credit

ratings

are monitored by the Company on at least a quarterly

basis.

as well as the impact

of projected economic forecast.

For U.S. Government bonds

and U.S. Agency issued bonds

in HTM

the

and/or

of

the

U.S.

is

to

conclude

that

a

credit

loss

reserve

is

not

required. The reserve

requirement is for

three primary assets

groups: municipal bonds,

corporate bonds, and

The

Company

calculates

the

loss

reserve

utilizing

ImpairmentStudio.

The

CECL

for

data,

and

and

Moody’s baseline

economic forecast.

The solution

uses probability

of default/loss

given default (“PD/LGD”)

represents the likelihood a borrower will

default. Within the Moody’s model,

this is determined using historical

default data,

adjusted for the current economic environment. LGD projects

the expected loss if a borrower were to default.

Federal Home Loan Bank (FHLB) Stock

The Bank is a member of the FHLB system. Members are required to

own a certain amount of stock based on the level

of borrowings and

other factors and

may invest in

additional amounts. FHLB

stock is carried

at cost, classified

as a restricted

asset, and

periodically evaluated

for impairment

ultimate recovery

of par

value. As

31, 2025

and

2024,

FHLB

stock

amounted

to

$

9.3

million

and

$

9.4

respectively,

with

no

impairment

deemed

Both

cash and stock dividends are reported as interest income.

Loans Held for Investment and Allowance for Credit

Losses (“ACL”)

Loans held for investment (“loans”) are reported at their outstanding principal

balance net of charge-offs, deferred loan

cost,

unearned income,

and the

ACL. Interest

income

when

income is

earned using

the interest

method.

Loan

origination

and

commitment

fees

and

the

costs

with

the

origination

of

loans

are

and

amortized, using the interest method or the straight-line

method, over the life of the related loan.

If the

loan becomes

due and

unpaid for

90 days

or more,

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

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

for

to

accrual

status.

Restoring

a

loan

to

accrual

status

is

when

the

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.

All interest accrued but not

collected for loans that are

placed on nonaccrual status is

reversed against interest income. The

these loans is

accounted for on

the cash-basis or

cost-recovery method, under

which cash collections

are applied

to unpaid principal, which may change as conditions

dictate.

The Company has determined

that the entire

balance of a

loan is contractually delinquent

for all loan

categories if the

minimum

payment

is

not

received

by

the

due

date

on

the

borrower's

statement.

and

fees

to

accrue on past due loans until the date the loan goes into

nonaccrual status.

provides for

loan losses

through a provision

for credit losses

charged to

earnings. When

believes that a

loan or a portion

of the loan balance

is uncollectible, that

amount is charged

against the ACL.

Subsequent

recoveries, if any,

are credited to the ACL.

The

ACL

reflects

of

loan

losses

in

the

at

the

balance

sheet

date.

Management uses a disciplined

process and methodology

to establish the ACL

each quarter.

To

determine the total

ACL,

estimates the

reserves needed

segment of

the portfolio,

including loans

analyzed individually

and

loans analyzed on a pooled basis. The ACL consists

of the amount applicable to the following segments:

•

•

•

•

•

Other loans (secured and unsecured consumer loans)

real

estate

loans

are

underwritten

the

of

the

Company

which

include

a

review

of

the

borrower’s credit, capacity

and the collateral

securing the loan.

The borrower’s ability

to repay involves

an analysis of

factors

including: current income,

employment status, monthly

payment of

the loan,

current debt

obligations, monthly debt

to income

ratio and credit history. The Company relies on appraisals in determining the value of the property.

Risk is mitigated by this

analysis and the diversity of the residential portfolio.

loans are

secured by liens

on commercial properties,

land, construction and

multifamily housing.

Underwriting of commercial real estate loans will analyze the key market and business factors to arrive at a decision on the

credit worthiness of the borrower. The analysis may include the capacity of the borrower,

income generated by property for

debt service,

other

sources

of repayment,

to fluctuations

in market

including vacancy

and

rental rates in geographic

location and loan

to value. Land

and construction loan

analysis will include

the time to

develop,

sell or lease

the property.

Appraisals are used

to determine the

underlying collateral.

Risk is mitigated

as the

properties securing the commercial real estate loans

are diverse in type, location, and loan structure.

and

loans

are

secured

by

the

assets

of

the

and

may

include

equipment,

inventory, and receivables.

The loans are underwritten based on the

income capacity of the business, the ability

to service

the debt based

on operating cash

flows, the credit

worthiness of the

borrower,

other sources

of repayment

and collateral.

The Company mitigates the risk in the commercial portfolio

through industry diversification.

Correspondent bank loans are

short-term loans with international

correspondent banking institutions primarily domiciled

in Latin America.

Most of these

loans are for

trade capital and

have a life

of less than

one year. The Company’s credit

review

includes a credit analysis, peer comparison and current

country risk overview.

Annual re-evaluation of the risk rating of the

borrower and country where the borrower is

located and a review by the authorized signer

within the Company.

The risk is

mitigated as these loans are short term, have limited exposure,

and are geographically dispersed.

Other loans

are secured

and unsecured

loans including

yacht loans,

personal loans,

home equity

lines of

credit,

overdrafts,

and

deposit

account

loans.

Repayment

of

these

loans

are

from

the

income of the borrowers. Loans are underwritten based on the credit worthiness of the borrower. The risk on these loans is

mitigated by small loan balances.

Under

CECL,

the

Company

the

ACL

using

relevant

from

both

and

external

to

past

events,

current

and

and

supportable

forecasts.

Historical

credit

losses

provide the basis for estimation of expected credit losses. Qualitative adjustments are applied to the expected credit losses

estimated

for

the

loan

in

relation

to

of

the

model.

A

scorecard

is

used

to

aid

management in the assessment of qualitative factor adjustments

applied to expected credit losses.

The

component

of

the

relies

on

the

relationship

between

the

projected

value

of

an

indicator

and

the

implied

loss

among

a

curated

group

of

peers.

The

Company

utilized

analyses

of peer

data,

in

which

the

Company

was

included,

and

where

observed

credit

losses

and selected

economic factors were used

to determine suitable

loss drivers for modeling

the lifetime rates of

probability of default (PD).

A

loss

given

default

rate

(LGD)

is

assigned

to

each

pool

for

each

period

based

on

these

PD

outcomes.

The

model

fundamentally utilizes

an expected

discounted cash

flow (DCF)

analysis for loan

portfolio segments.

The DCF

analysis is

run

at

the

instrument-level

and

an

array

of

loan-specific

data

points

and

segment-implied

to

determine the lifetime expected

loss attributable to each

instrument. An implicit "hypothetical

loss" is derived

for each period

of the

DCF and

helps establish

the present

future cash

flows for

each period.

applied to

a specific

instrument is the difference

between the sum of the present

value of future cash flows

and the book balance of

the loan at

the measurement date.

elected

the

Life

(WARM)

methodology

for

bank

loans

and

secured

and

unsecured consumer loan portfolio segments. For each of these segments, a long-term average loss rate is calculated and

applied on

a quarterly

basis for

the remaining

life of

the pool.

Adjustments for

economic expectations

are made

through

assessments.

For

the

life

estimated,

implemented

a

software

solution

that

uses

an

attrition-based calculation that performs quarterly,

cohort-based attrition measurements based on the loan portfolio.

Portfolio segments are the level at which loss assumptions

are applied to a pool of loans based on the similarity

of risk

characteristics inherent in the

included instruments, relying on

collateral codes and FFIEC

Call Report codes. The

Company

currently segments the

portfolio based on

collateral codes for the

purpose of establishing

reserves. Each of

these segments

is

paired

to

models

(Loss

Driver

Analyses)

based

on

peer

data

for

loans

of

similar

risk

characteristics.

The

Company has established relationships between internal segmentation and FFIEC

Call Report codes for this purpose. The

loss driver for each loan

portfolio segment is derived

from a readily available and

reasonable economic forecast, including

the Federal Reserve Bank

projections of U.S. civilian

unemployment rate and the

year-over-year real GDP

growth; for the

loan

the

HPI

by

Fannie

Mae’s

Economic

and

Strategic

Research

Group

are

utilized for the

forecast. Forecasts

are applied to

the first four

quarters of the

credit loss estimate

and revert on

a straight-

line basis to the lookback period's historical mean for the

economic indicator over the expected life of loans.

The model incorporates qualitative

factor adjustments in order to

calibrate the model for risk

in each portfolio segment

not be captured

through quantitative

analysis. Determinations

regarding qualitative

adjustments are

reflective of

expectation

of loss

differing

from those

already

captured

in

the

component

of

the

model.

Qualitative factors (“Q-Factors”) used in the ACL methodology

include:

• Changes in lending policies, procedures, and strategies

• Changes in international, national, regional, and local conditions

• Changes in nature and volume of portfolio

• Changes in the volume and severity of past due loans

and other similar conditions

• Concentration risk

• Changes in the value of underlying collateral

• The effect of other external factors: e.g., competition,

legal, and regulatory requirements

• Changes in lending management, among others

Management evaluates

on an individual

basis collateral

dependent loans

using the fair

collateral method

if a

credit loss

reserve is

The ACL

is measured

the difference

of the

fair

the

collateral and

the recorded

(amortized

cost basis

of the

loan). If

is less

recorded investment

of the

loan, a

reserve amount

is calculated.

If the

collateral valuation

is equal

to or

the

recorded investment of the loan, no reserve is determined

to be required.

estimates a

reserve for

unfunded commitments, which

is reported

separately from the

ACL within

accrued

and

other

liabilities.

The

reserve

is

based

upon

the

same

and

factors

applied

to

the

collectively evaluated loan portfolio.

Concentration of Credit Risks

Credit

risk

the

loss

that

would

be

at

the

date

if

counterparties

failed

to

perform as contracted and any collateral or security proved to be insufficient

to cover the loss. Concentrations of credit risk

(whether on or off-balance sheet) arising from financial instruments exist in relation to certain

groups of customers. A group

concentration arises

when a number

of counterparties

have similar economic

characteristics that would

cause their ability

to meet contractual obligations to be similarly affected by changes in economic or other conditions. The Company does not

have a significant exposure to any individual customer

or counterparty.

Most of the Company's business activity is

with customers located within its primary market area, which

is generally the

State of Florida. The Company's loan portfolio is concentrated largely in real estate and commercial loans in South Florida.

Many of the

Company's loan

customers are engaged

in real estate

development. Circumstances

which negatively

impact

the South Florida real estate industry

or the South Florida economy, in general, could adversely impact

the Company's loan

a concentration

of risk

with loans

outstanding to

top ten lending relationships

totaling $

224.9

236.2

At December 31, 2025 and

2024, this

represented

10.3

%

and

12.0

%

of

net

loans

outstanding,

At

and

largest

loan relationship

outside Florida

was a

real

with an

balance of $

19.0

19.8

million, at such dates

respectively,

collateralized by a 1

st

lien on a commercial property

located in New York

State.

At

2025,

the

Company

had

a

of

risk

with

loans

$

128.0

million

to

banks

located

in

Ecuador,

Guatemala,

Dominican

Republic,

Honduras,

Panama,

and

El

Salvador.

At

2024,

the

Company

also

had

a

of

risk

with

loans

$

82.4

million

to

banks

located

in

Ecuador,

Dominican

Republic,

Honduras,

and

El

Salvador.

These

banks

maintained

deposits with right of offset totaling $

57.1

62.6

million at December 31, 2025 and 2024, respectively.

At various times during

the year,

the Company has maintained

deposits with other

financial institutions. The exposure

to the Company from

these transactions is solely

dependent upon daily balances

and the financial strength

of the respective

Premises and Equipment, net

Land is

carried at

cost. Premises

and equipment

are stated

at cost

less accumulated

depreciation

and amortization.

Depreciation is computed

on the straight-line

method over the

estimated useful life

of the asset. Leasehold

improvements

are amortized over the

remaining term of the

applicable leases or their

useful lives, whichever

is shorter.

Estimated useful

lives of these assets were as follows:

Building

s

years

Furniture, fixtures and equipment

to

years

Computer hardware and software

to

years

Shorter of life or term of lease

Maintenance

and

repairs

are

charged

to

expense

as

while

improvements

and

betterments

are

capitalized.

When items are retired or are

otherwise disposed of, the related costs

and accumulated depreciation and amortization

are

removed from the accounts and any resulting gains or losses

are credited or charged to income.

Other Real Estate Owned

OREO consists of real estate properties acquired through,

or in lieu of, foreclosure that are

held for sale and are initially

recorded at the fair value of

the property less estimated selling

costs as of the date of

foreclosure, establishing a new

cost

basis. Subsequent to

foreclosure, valuations

are periodically performed

by management and

the assets are

carried at the

lower of carrying

amount or

less cost

to sell.

Subsequent write-downs

are recognized

as a

valuation allowance

with the offset

recorded in the

Consolidated Statements

of Operations. Carrying

costs are charged

to OREO

expenses in

the

of

Operation.

Gains

or

losses

on

sale

of

OREO

are

when

consideration has been exchanged, all closing conditions

have been met and permanent financing has been arranged.

Bank Owned Life Insurance

Bank Owned Life

Insurance (“BOLI”)

is carried at

the amount that

could be realized

under the contract

at the balance

sheet

date,

which

is

typically

the

cash

value.

Changes

in

cash

value

are

in

income. At December 31,

maintained BOLI policies

with five insurance

carriers with a

combined cash

surrender value of $

59.4

million. At December 31, 2024, the Company maintained BOLI

policies with five insurance carriers

with a

combined cash

surrender value

of $

53.5

These policies

cover certain

present and

former executives

and

officers; the Company is the beneficiary of these

policies.

Employee 401(k) Plan

has an 401(k)

plan covering substantially

all eligible

employees. Employee

401(k) plan

expense is

the

amount of matching contributions.

Income Taxes

Income taxes are accounted for under the

asset and liability method. Deferred tax

assets and liabilities are recognized

for the

future

tax

consequences

attributable

to differences

between the

amounts

of existing

liabilities and

their respective

tax bases

and operating

loss and

tax credit

carryforwards. Deferred

and

are

using

enacted

tax

rates

to

apply

to

taxable

income

in

the

years

in

which

those

temporary differences are expected to be recovered

or settled. The effect on deferred tax assets and

liabilities of a change

in tax rates is recognized in income in the period that includes

the enactment date.

Management is required to

assess whether a valuation

allowance should be established

on the net deferred tax

asset

consideration of

all available evidence

using a more

likely than not

standard. In its

evaluation, Management

considers taxable loss

carry-back availability, expectation of sufficient

taxable income, trends

in earnings, the

future reversal

of temporary differences, and available tax planning

strategies.

The Company recognizes positions taken

or expected to be

taken in a tax

return in accordance with existing accounting

guidance on

income taxes

which prescribes

a recognition threshold

and measurement

process. Interest

and penalties

on

tax liabilities, if any, would

be recorded in interest expense and other operating non-interest

expense, respectively.

Impairment of Long-Lived Assets

The Company's long-lived

assets, such as premises

and equipment, are reviewed

for impairment whenever

events or

changes in circumstances

indicate that

the carrying

an asset may

not be recoverable.

Recoverability of

assets

to be held and

used is measured by a

comparison of the carrying amount of

an asset to estimated undiscounted future

cash

flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an

impairment charge

is recognized

by the

amount by

which the

carrying amount

of the

asset exceeds

the fair

the

asset. Assets

to be

disposed of

would be

separately

presented in

Balance Sheets

and reported

at the

lower of

the carrying

amount or

less costs

to sell

and are

no longer

depreciated. The

liabilities of

a

disposal group classified as held for

sale would be presented separately in

the appropriate asset and liability sections of

the

Transfer of Financial Assets

Transfers of

financial assets

are accounted for

as sales,

when control over

has been surrendered.

Control

over

transferred

assets

is

deemed

to

be

surrendered

when

(i)

the

assets

have

been

isolated

from

the

Company

put

presumptively

beyond

the

reach

of

the

transferor

and

its

creditors,

even

in

bankruptcy

or

other

receivership,

(ii)

the

transferee obtains

the right

(free of conditions

that constrain

it from taking

advantage of

that right)

to pledge

or exchange

the transferred

assets,

and

(iii) the

Company

does not

maintain effective

control

over

the transferred

assets

through

an

agreement to repurchase them before their maturity or

the ability to unilaterally cause the holder to return specific assets.

Comprehensive Income

Under

GAAP,

certain

changes

in

assets

and

such

as

holding

gains

and

losses

on

available-for-sale, are

excluded from

current period

earnings and

reported as

a separate

component of

the stockholders’

equity section of the Consolidated Balance

Sheets. Such items, along with net

income, are components of comprehensive

loss. Additionally,

any unrealized

gains or

losses on

transfers

of investment

from available-for-sale

to held-to-

maturity are

recorded to

accumulated other

comprehensive income

(loss) on

of transfer

and amortized

over the

remaining life

of each

security.

The amortization

of the

unrealized gain

or loss

on transferred

is reported

as a

component of comprehensive income (loss). See Note 2 “Investment

Securities” for further discussion.

The change in

fair value on

the interest rate

swaps is recorded

in other assets

or accrued interest

with

a

in

other

income

(loss)

and

subsequently

to

when

gains or losses are realized. See Note 12.

“Derivatives” for further discussion.

Advertising Costs

Advertising costs are expensed as incurred.

Earnings per Common Share

Basic earnings

per common

share is

common stockholders

divided by

average

common shares outstanding

during the period.

Diluted earnings per

common share include

the effect of

potential common

shares issuable

under vested

stock options

and unvested

restricted stock.

Basic and

diluted

per

share

are

updated

to

reflect

the

effect

of

stock

splits

as

occurred.

See

Note

“Earnings

Per

Share”

for

additional information on earnings per common share.

Interest Income

Interest income is recognized as earned, based upon the principal

amount outstanding, on an accrual basis.

Operating Segments

While the Company monitors

the revenue streams of

the various products

and services, operations

are managed and

financial performance

is evaluated on

a Company wide

basis. Operating results

of the individual

products are

not used to

make resource allocations or performance decisions by

Company management.

Stock-Based Compensation

Stock-based compensation accounting guidance requires that the compensation

cost relating to share-based payment

transactions be recognized in the accompanying Consolidated

Financial Statements. That cost will be measured

the grant

date fair

the equity

or liability

instruments issued.

The stock-based

compensation accounting

guidance

covers

a

wide

range

of

share-based

arrangements

stock

options,

restricted

share

awards,

performance-based awards, share appreciation rights, and

employee share purchase plans.

The stock-based compensation accounting guidance

requires that compensation cost

for all stock

awards be calculated

and recognized over

the employees' service

period, generally defined

as the vesting

period. For awards

with graded vesting,

compensation cost

is recognized

on

a straight-line

basis over

the

requisite service

period for

the

entire award.

A Black-

Scholes model is used to estimate the fair value of stock

options.

Loss Contingencies

Loss

contingencies,

claims

and

legal

actions

arising

in

the

normal

course

of

are

as

liabilities when the

likelihood of loss is

probable, and an

amount or range of

loss can be

reasonably estimated. In the

opinion

of management, none of these actions, either individually or in the aggregate, is expected to have a material adverse effect

on the Company’s Consolidated Financial Statements.

See Note 20 “Loss Contingencies” for further details.

Dividend Restrictions

Banking

require

certain

capital

levels

and

may

limit

the

paid

by

the

Bank

to

the

Company or by the Company to the stockholders.

Fair Value Measurements

Fair values

instruments are

estimated using

relevant market

information and

other assumptions,

as more

fully disclosed in Note

13 “Fair Value

Measurements”. Fair value estimates

involve uncertainties and

matters of significant

judgment. Changes in assumptions or in market conditions

could significantly affect the estimates.

Derivative Instruments

Derivative financial instruments are

carried at fair

value and reflect

the estimated amount that

would have been

received

to

these

contracts

at

the

date

based

upon

pricing

or

models

applied

to

current

market

information.

Rate Swaps Designated as Cash Flow Hedges

The changes in

fair value on

the interest rate

swap is recorded

in other assets

or accrued interest

with

a

in

other

income

(loss)

and

subsequently

to

when

gains or losses are realized. As of December 31, 2025,

the cash flow hedge was effective.

Interest Rate Swaps Designated as Fair Value

Hedges

The

changes

in

fair

value

on

these

rate

swaps

are

in

other

assets

or

accrued

and

other

liabilities with a corresponding recognition in the assets

being hedged.

Interest Rate Swaps

The Company enters into interest rate swaps

agreements to provide commercial loan clients

the ability to swap from a

variable interest rate to a fixed rate. The Company

enters into a floating-rate loan with a customer with

a separately issued

swap agreement allowing

the customer to convert

floating payments on

the loan into a

fixed interest rate. To

mitigate risk,

the Company enters into a matching agreement with

a third party to offset the exposure on

the customer agreement. These

swaps are

not considered

to be

qualified hedging

transactions and

the unmatched

unrealized gain

or loss

is recorded

in

other non-interest income.

rate

swap

are

used

by

the

Company

as

part

of

its

asset-liability

strategy

to

help

manage its interest

rate risk exposure.

The notional amount

of the interest

rate swaps does

not represent actual

amounts

exchanged by the parties.

The amounts exchanged are determined

by reference to the

notional amount and the

other terms

of the individual interest rate swap agreements.

Revenue from Contracts with Customers

Revenue from

contracts with customers

is recognized in

an amount that

reflects the consideration

the Company expects

to receive for the

services the Company

provides to its

customers. The main

revenue earned by

the Company from

loans

and investment

are excluded

accounting standard

update “Revenue

from Contracts

with Customers”.

Deposit and

service charge

fees, consisting

of primarily

monthly maintenance

fees, wire

fees, ATM

interchange fees

and

other transaction-based fees, are the most

significant types of revenue within

the accounting standard update.

Revenue is

recognized when the service provided by the

Company is complete. The aggregate amount

of revenue within the scope of

this standard that is received from sources other than deposit

service charges and fees is not material.

Cash Flow Statement

The Company reports the net activity rather than gross activity in the Consolidated

Statements of Cash Flows. The net

cash

flows

are

for

loans

held

for

investment,

accrued

receivable,

tax

assets,

other

assets,

customer deposits, accrued

interest payable, accrued

interest and other

liabilities, exercise of

options, and proceeds

from

the issuance of Class A common shares and subordinated

debt.

Reclassifications

Certain

amounts

in

the

have

been

to

conform

to

the

current

presentation. Reclassifications had no impact on the net income

or stockholders’ equity of the Company.

Recently Issued Accounting Standards

Issued and Adopted

Improvements to Income Tax

Disclosures

In

2023,

the

FASB

issued

Accounting

Standards

Update

(ASU)

2023-09,

Income

Taxes

(Topic

740):

Improvements to Income Tax

Disclosures. This ASU pertains to

disclosures regarding effective

tax rates and cash income

taxes paid with the goal of providing stakeholders with more transparent

and relevant information. This ASU is effective for

public business

entities for

annual periods

beginning after

December 15,

2024. The Company

adopted this

ASU 2023-09

effective January 1, 2025; the adoption of this ASU did not have a material impact on the

Company’s consolidated financial

INVESTMENT SECURITIES

tables present

a summary

of the amortized

cost, unrealized

or unrecognized

gains and

losses,

and fair

value of investment securities at the dates indicated (in

Cost

Gains

Losses

$

15,169

$

$

(1,043)

$

14,144

92,871

75,828

35,865

(6,083)

29,917

174,622

(6,861)

168,108

5,196

(933)

4,263

15,284

(243)

15,230

$

339,007

$

$

$

307,490

Cost

Gains

Losses

$

41,158

$

$

(3,279)

$

37,970

51,431

(5,499)

46,786

37,221

(3,263)

34,718

15,088

(1,037)

14,051

9,045

(62)

8,983

$

153,943

$

1,705

$

(13,140)

$

142,508

(2)

$

153,941

Cost

Gains

Losses

$

14,279

$

$

(1,668)

$

12,625

101,808

78,905

58,995

46,933

86,604

(7,905)

78,739

24,925

(5,614)

19,311

24,314

(1,044)

23,708

$

310,925

$

$

$

260,221

Cost

Gains

Losses

$

42,538

$

$

(5,094)

$

37,444

56,987

(7,785)

49,259

40,681

(4,613)

36,121

15,272

(1,385)

13,887

9,222

(393)

8,829

164,700

$

$

(19,270)

$

145,540

(6)

$

164,694

Transfers of

debt securities

into the HTM

category from

the available for

sale (“AFS”)

category are made

at fair value

as of the date

of transfer. The unrealized gain or loss

at the date of

transfer is retained in accumulated other

loss

(“AOCL”)

and in

the

value

of the

HTM securities

and there

is no

impact

to net

income.

Such

amounts

are

amortized over the remaining life of the securities. The

Company made two transfers from AFS to HTM portfolios

in 2022.

no

investment securities that

were transferred from

AFS to HTM for

the years ended December

and 2024.

For the

years

31,

2024,

total amortization

out of

AOCL

for the

net unrealized

losses

on

transferred

from

AFS

to

HTM

in

was

$

and

$

thousand,

The

balance

of

the

net

losses

in

AOCL

was

$

9.0

million

at

and

$

9.3

million

at

December 31, 2024. The fair value of the transferred securities was $

99.6

million at December 31, 2025 and $

101.2

million

at December 31, 2024.

Gains

and

losses

on

the

sale

of

are

on

the

trade

date

and

are

on

the

identification basis. The following table presents the proceeds, realized gross gains and realized gross losses on sales and

calls of AFS debt securities for the years ended December

31, 2025 and 2024 (in thousands):

Proceeds from sales and call of securities

$

82,497

$

34,753

Gross gains

$

$

Gross losses

(7,926)

(181)

Net realized (losses) gains

$

(7,526)

$

The

cost

and

fair

value

of

by

contractual

maturity,

are

shown

below

for

the

date

indicated (in thousands).

Actual maturities may

differ from contractual

maturities because borrowers

may have the right

to

call or prepay

obligations with or

without call or

prepayment penalties. Securities not

due at a

single maturity date are

shown

separately.

Available-for-sale

Held-to-maturity

Cost

Cost

Due within one year

$

$

$

9,045

$

8,983

Due after one year through five years

4,473

4,504

Due after five years through ten years

16,007

14,989

Due after ten years

15,169

14,144

41,158

37,970

92,871

75,828

51,431

46,786

35,865

29,917

37,221

34,718

174,622

168,108

15,088

14,051

$

339,007

$

307,490

$

153,943

$

142,508

2024, there

were no

securities to

any one

issuer in

an amount

10% of

total

stockholders’

equity

other

than

the

U.S.

and

U.S.

Agencies.

All

the

obligations and mortgage-backed securities

are issued by U.S. government

sponsored entities at December

Information pertaining

to investment

securities with

gross unrealized

losses, aggregated

by investment

and

length of

time that

those

individual securities

have been

in a

continuous

loss position,

are presented

as of

the following

dates (in thousands):

Less than 12 months

12 months or more

Total

Losses

Losses

Losses

$

5,937

$

(59)

$

5,649

$

(984)

$

11,586

$

(1,043)

8,929

(93)

66,899

(16,950)

75,828

22,695

(6,083)

22,695

(6,083)

Mortgage-backed securities -

59,655

(477)

56,852

(6,384)

116,507

(6,861)

4,263

(933)

4,263

(933)

2,020

(4)

7,234

(239)

9,254

(243)

$

76,541

$

(633)

$

163,592

$

(31,573)

$

240,133

$

Less than 12 months

12 months or more

Total

Losses

Losses

Losses

$

4,468

$

(76)

$

7,451

$

(1,592)

$

11,919

$

(1,668)

3,101

(23)

72,952

(22,895)

76,053

(11)

44,600

(12,052)

45,572

44,410

(1,266)

27,875

(6,639)

72,285

(7,905)

19,311

(5,614)

19,311

(5,614)

14,352

(1,044)

14,352

(1,044)

$

52,951

$

(1,376)

$

186,541

$

(49,836)

$

239,492

$

At December 31, 2025, the Company had $

32.2

million of unrealized losses in its AFS securities portfolio, which

had a

fair

value

of

$

240.1

million

with

respect

to

the

with

losses.

Mortgage-backed

and

issued

by

U.S.

for

$

31.0

million

of

the

unrealized losses and had

a fair value of $

226.6

million. These unrealized

losses were primarily attributable

to changes in

since the

time of

purchase. The

contractual cash

flows for

these securities are

guaranteed by

U.S. Government

Agencies

and

U.S.

entities.

Municipal

bonds

had

losses

of

$

and

a

fair

value of $

4.3

million. These

securities are

of high credit

quality,

and the decline

in fair value

was not

attributable to

credit

deterioration. Bank

subordinated debt

securities had

unrealized losses

of $

a fair

$

9.3

primarily due

to changes

in interest

rate market

conditions since

purchase. Based

on the

assessment of

these mitigating

factors,

that

the

losses

on

these

debt

holdings

are

a

function

of

changes

in

investment spreads and interest rate movements and not changes

in credit quality.

The measurement

of expected credit

losses under

the CECL

methodology is

applicable to financial

assets measured

at amortized cost, including loan receivables and HTM

debt securities.

as well as the impact of projected economic forecast.

For U.S. Government bonds and U.S. Agency issued

bonds in HTM,

the explicit guarantee of the U.S.

Government is sufficient to conclude that a

credit loss reserve is not required.

is

for three

primary

assets

groups:

bonds,

bonds,

and

The

Company calculates quarterly the loss reserve

utilizing Moody’s ImpairmentStudio. The CECL measurement for investment

data,

and

and

forecast. The

solution uses

probability of

default/loss

given default

(“PD/LGD”)

represents the

likelihood a

will

default.

Within

model,

this

is

using

default

data,

adjusted

for

the

current

economic environment. LGD projects the expected loss

if a borrower were to default.

The Company monitors

the credit

quality of HTM

securities through

the use of

credit ratings.

Credit ratings

are monitored

by the Company

on at least

a quarterly basis.

December 31, 2024,

all HTM securities

held

by the Company were rated investment grade.

At December 31, 2025, HTM securities included $

144.9

million of U.S. Government and U.S.

Agency issued bonds and

securities.

Because

of

the

and/or

on

these

bonds,

the

Company

holds

no

reserves

on

these

holdings.

The

portion

of

the

HTM

is

made

up

of

$

9.0

million

in

grade

corporate bonds. The required reserve for these

holdings is determined each quarter using the model described above.

For

the portion of the HTM exposed to non-government

credit risk, the Company utilized the PD/LGD

methodology to estimate

a $

thousand ACL as

of December 31, 2025.

The book value

for debt securities

classified as HTM

represents amortized

cost less ACL.

The Company determined that an ACL on its debt securities available for sale as was not required as of December

31,

2025 and December 31, 2024.

In 2018, the Company

became a Qualified Public Depository

(“QPD”) with the State

of Florida. As a

QPD, the Company

has the

authority to

legally maintain public

deposits from cities,

municipalities, and the

State of

Florida. These public

are secured by securities

pledged to the

State of Florida at

a ratio of

% and

% of the average

outstanding amount of

uninsured

at

and

2024,

The

Company

must

also

a

minimum amount of pledged securities to be in the program

related to these deposits.

At December 31, 2025, the Company had

fifteen

securities with an aggregate fair value of

$

43.5

million pledged to the

State of Florida

under the public

funds program. The Company

held a total of

$

167.7

million in public

funds at December 31,

twenty-one

securities with

an aggregate

of $

66.1

million pledged

to

the

State

of

Florida

under

the

public

funds

The

Company

held

a

total

of

$

110.5

million

in

public

funds

at

LOANS

The following table is a summary of the distribution of loans

held for investment by type (in thousands):

Total

Total

Total

Total

$

307,692

14.1

%

$

289,961

14.8

%

57.0

%

57.8

%

295,548

13.5

%

258,311

13.1

%

127,968

5.9

%

82,438

4.2

%

207,215

9.5

%

198,091

10.1

%

Total

100.0

%

100.0

%

Plus: Deferred costs/fees

5,999

7,630

Total

loans held for investment, net of deferred costs/fees

Less: Allowance for credit losses

25,500

24,070

Total

loans held for investment, net of allowance

$

$

At December 31, 2025 and 2024, the Company had $

561.4

518.8

million, respectively, of commercial real

estate and residential mortgage loans pledged as collateral on lines of credit with the FHLB and the

Federal Reserve Bank

of Atlanta. At December 31, 2025 and 2024, the Company

had

no

real estate loans in the process of foreclosure.

Allowance for Credit Losses

Changes in the ACL for the years ended December 31, 2025

and 2024 are as follows (in thousands):

Banks

Total

$

5,121

$

8,788

$

4,633

$

$

4,874

$

24,070

(1)

2,119

(732)

(732)

$

5,908

$

9,476

$

4,814

$

1,015

$

4,287

$

25,500

$

2,695

$

10,366

$

3,974

$

$

3,138

$

21,084

(2)

2,403

(1,578)

(257)

1,752

2,960

(19)

(19)

$

5,121

$

8,788

$

4,633

$

$

4,874

$

24,070

(1) Provision for credit losses excludes $

thousand provision for unfunded commitments included

in accrued interest and other liabilities and $

thousand release for investment securities held to

(2) Provision for credit losses excludes $

thousand provision for unfunded commitments included

in accrued interest and other liabilities and $

thousand release for investment securities held to

At December

31,

2025,

the

ACL

for

loans

was

$

25.5

million

to

$

24.1

million

at

31,

The

increase of $

1.4

million or 5.9% in the ACL was primarily due to loan growth.

Charge offs

related to

loans for

2025 were

$

thousand originated

in 2025

and $

thousand originated in 2022. Charge offs for the year

ended December 31, 2024 were $

thousand originated in 2024.

Allowance for credit losses and the outstanding balances in

loans as of December 31, 2025 and 2024 are as

follows (in

Banks

Total

Allowance for credit losses:

$

$

$

$

$

$

5,881

9,476

4,730

1,015

4,287

25,389

$

5,908

$

9,476

$

4,814

$

1,015

$

4,287

$

25,500

Loans:

$

5,583

$

$

1,265

$

$

$

6,848

302,109

294,283

127,968

207,215

2,176,410

$

307,692

$

$

295,548

$

127,968

$

207,215

$

Allowance for credit losses:

$

$

$

$

$

$

5,081

8,788

4,606

4,223

23,352

$

5,121

$

8,788

$

4,633

$

$

4,874

$

24,070

Loans:

$

6,788

$

$

$

$

1,990

$

9,468

283,173

257,621

82,438

196,101

1,955,750

$

289,961

$

$

258,311

$

82,438

$

198,091

$

Credit Quality Indicators

The Company grades loans based on the estimated capability of the borrower to repay the contractual obligation of the

loan agreement based

on relevant information

include: current financial

information on the

borrower,

payment

experience,

credit

documentation

and

other

current

trends.

credit

risk

grades

are

periodically.

The Company's internally assigned credit risk grades are as follows:

Pass

– Loans indicate different levels of satisfactory

financial condition and performance.

– 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.

– 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.

– 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

presented below for the periods indicated (in thousands):

As of December 31, 2025

Term Loans by Origination Year

Revolving

Loans

Total

Prior

Pass

$

65,582

$

83,426

$

32,139

$

23,685

$

21,056

$

58,220

$

20,168

$

304,276

1,468

2,500

Total

65,710

84,343

33,607

24,272

21,056

58,536

20,168

307,692

Pass

241,028

184,323

109,465

281,985

134,663

273,483

5,876

1,230,823

8,451

3,162

11,613

1,724

2,399

Total

241,028

184,323

117,916

281,985

136,387

277,320

5,876

Commercial and

Pass

75,867

63,178

58,060

32,118

28,090

12,314

23,542

293,169

1,472

Total

75,867

63,250

58,449

32,118

29,370

12,952

23,542

295,548

Pass

127,968

127,968

Total

127,968

127,968

loans

Pass

59,276

34,309

36,808

51,091

23,214

1,770

207,215

Total

59,276

34,309

36,808

51,091

23,214

1,770

207,215

Total

Loans

Pass

569,721

365,236

236,472

388,879

207,023

344,764

51,356

2,163,451

8,451

3,363

13,436

1,857

2,169

1,428

6,371

Total

$

569,849

$

366,225

$

246,780

$

389,466

$

210,027

$

349,555

$

51,356

$

As of December 31, 2024

Term Loans by Origination Year

Revolving

Loans

Total

Prior

Pass

$

109,590

$

39,666

$

34,315

$

23,039

$

5,791

$

66,115

$

10,885

$

289,401

Total

109,590

39,666

34,315

23,039

5,791

66,675

10,885

289,961

Pass

175,023

130,503

317,971

175,535

98,695

231,558

4,680

1,133,965

1,765

2,452

Total

175,023

130,503

317,971

177,300

99,382

231,558

4,680

Commercial and

Pass

68,405

80,644

33,962

30,495

3,891

11,839

26,795

256,031

1,093

2,280

Total

68,405

80,644

33,962

31,014

3,891

12,932

27,463

258,311

Pass

82,438

82,438

Total

82,438

82,438

loans

Pass

40,921

51,392

65,603

35,181

1,698

196,101

1,990

1,990

Total

40,921

51,392

67,593

35,181

1,698

198,091

Total

Loans

Pass

476,377

302,205

451,851

264,250

108,868

310,327

44,058

1,957,936

1,990

2,284

1,653

7,282

Total

$

476,377

$

302,205

$

453,841

$

266,534

$

109,555

$

311,980

$

44,726

$

Loan Aging

also considers the

performance of loans

in grading

and in

evaluating the

of the

loan portfolio.

The Company analyzes credit quality and

loan grades based on payment performance

and the aging status of loans.

The

following table include an aging analysis of accruing

loans and total non-accruing loans as of December 31, 2025 and 2024

(in thousands):

As of December 31, 2025:

Current

30-89 Days

90 Days or

more and

Still

Total

Non-Accrual

Residential real estate:

Home equity line of credit and other

$

1,538

$

$

$

1,538

$

$

1,538

1-4 family residential

238,852

1,150

240,002

2,385

242,387

Condo residential

62,364

1,288

63,652

63,767

302,754

2,438

305,192

2,500

307,692

Commercial real estate:

Land and construction

83,305

83,305

83,305

Multi-family residential

254,562

254,562

254,562

Condo commercial

61,525

61,525

61,525

Commercial property

845,003

845,443

845,443

1,244,395

Commercial and industrial:

Secured

272,900

272,971

273,609

Unsecured

21,939

21,939

21,939

294,839

294,910

295,548

127,968

127,968

127,968

207,215

207,215

207,215

Total

$

2,177,171

$

2,949

$

$

2,180,120

$

3,138

$

As of December 31, 2024:

Current

30-89 Days

90 Days

or more

and Still

Total

Non-

Accrual

Residential real estate:

Home equity line of credit and other

$

1,120

$

$

$

1,120

$

$

1,120

1-4 family residential

225,334

2,886

228,220

228,220

Condo residential

58,956

1,351

60,307

60,621

285,410

4,237

289,647

289,961

Commercial real estate:

Land and construction

40,090

40,090

40,090

Multi-family residential

214,912

214,912

214,912

Condo commercial

57,402

57,402

57,402

Commercial property

823,326

824,013

824,013

1,135,730

Commercial and industrial:

Secured

232,779

233,300

233,703

Unsecured

24,608

24,608

24,608

257,387

257,908

258,311

82,438

82,438

82,438

196,101

196,101

1,990

198,091

Total

$

1,957,066

$

5,445

$

$

1,962,511

$

2,707

$

Non-accrual Status

table includes

the amortized

cost

loans on

status

and loans

past due

90 days

or

more and still accruing as of December 31, 2025 and 2024 (in

With No Related

With Related

Total

Non-accruals

Loans Past Due

Days or more and

Still Accruing

$

2,500

$

$

2,500

$

Total

$

3,063

$

$

3,138

$

With No Related

With Related

Total

Non-accruals

Loans Past Due

Days or more and

Still Accruing

$

$

$

$

$

1,990

1,990

Total

$

$

2,393

$

2,707

$

Accrued interest

receivable is

excluded from

the estimate

losses. There

was

no

attributable

to

loans

during

the

years

ended

and

income

on

these loans

for the

years ended

and 2024,

would have

been approximately

$

$

thousand, respectively,

had these loans performed in accordance with their

original terms.

Collateral-Dependent Loans

A

loan

is

when

the

is

and

repayment

of

the

loan

is

expected to be

provided substantially

through the sale

or operation of

the collateral. There

were

four

collateral dependent

loans as of December 31, 2025 and

two

collateral dependent loans as of December

table includes

the amortized cost

collateral dependent

loans related

to borrowers

financial difficulty by type of collateral as of December

31, 2025 and 2024 (in thousands):

Collateral Type

Specific Reserves

$

2,583

$

Total

$

2,583

$

Collateral Type

Boat

Specific Reserves

Consumer and other loans

$

1,990

$

Total

$

1,990

$

Management evaluates

on an individual

basis collateral

dependent loans

using the fair

collateral method

if a

credit loss

reserve is

The ACL

is measured

the difference

of the

fair

the

collateral and

the recorded

(amortized

cost

the

loan), if

is less

recorded investment

of the

loan a

reserve amount

is calculated.

If the

valuation is

equal to

or greater

recorded investment of the loan, no reserve is determined.

Loan Modifications to Borrowers Experiencing Financial

Difficulties

table present

newly restructured

loans, by

type of

modification, which

occurred during

the years

ended

December 31, 2025 and December 31, 2024 (dollars

in thousands):

Amortized Cost Prior to Modification

Amortized Cost After Modification

Loans

Total

Loans

Total

$

$

$

$

$

$

$

$

Amortized Cost Prior to Modification

Amortized Cost After Modification

Loans

Total

Loans

Total

$

$

$

$

$

$

$

$

The

two

loan

modifications

for

the

at

a

combination of

rate, term

and principal

modifications. On

one loan, the

rate was

modified from

a variable rate

to a

7.75

%

fixed rate and the term was

modified from October 2025

to January 2028. On the

second loan, the rate was

modified from

a variable rate to a

7.20

% fixed rate and there was a principal reduction

of $

The loan modification

for the

borrower experiencing

financial difficulty

2024, included

a combination

of rate and maturity modifications.

The rate was modified

from a variable rate

to a fixed rate

of

8.0

%. The original maturity

of September 2029 was extended to January 2034.

no

existing loan

modifications

that subsequently

defaulted

during either

and 2024.

LEASES

The

Company

enters

into

leases

in

the

normal

course

of

for

banking

centers

and

back-office

operations. As of

December 31, 2025, the

Company leased nine

of the ten

banking centers and

the headquarter building.

is obligated

under non-cancelable

operating leases

for these

premises with

expiration dates

ranging from

2026 to 2036. Many of these leases have extension

clauses which the Company could exercise which

would extend these

expiration dates.

has classified

all leases as

operating leases.

Lease expense

for operating

leases are

recognized on

a

straight-line basis over

the lease term.

Right-of-use (“ROU”)

assets represent the

right to use

the underlying

asset for the

lease

term

and

lease

represent

the

to

make

lease

arising

from

the

lease.

The

Company

elected the short-term

lease recognition exemption

for all leases

that qualify,

meaning those with

terms under 12

months.

ROU assets or lease liabilities are not to be recognized

for short-term leases.

ROU assets and

lease liabilities are

recognized at the lease

commencement date based on

the estimated present value

of lease payments over the lease term.

As

most

of

the

leases

do

not

provide

an

rate,

the

incremental

rate

based

on

the

information available

at commencement

date is

used.

The Company’s

incremental borrowing

rate is

advances rate matching or nearing the lease term.

The following table presents the ROU assets and lease liabilities

as of December 31, 2025 and 2024 (in thousands):

ROU assets:

$

5,519

$

8,451

Lease liabilities:

$

5,519

$

8,451

The weighted average remaining lease term and weighted average

discount rate as of December 31, 2025 and 2024:

Weighted average remaining lease term (in years):

6.04

5.95

Weighted average discount rate:

2.94

%

2.94

%

Future lease payment obligations and a reconciliation to lease

liability as of December 31, 2025 (in thousands):

Total

$

2,383

Thereafter

2,509

Total

future minimum lease payments

6,813

Less: interest component

(1,294)

Total

lease liability

$

5,519

The lease cost for the years ended December 31, 2025

and 2024 (in thousands):

Finance lease cost:

ROU assets amortization

$

2,932

$

2,972

Operating lease cost

Less: Sublease income

(85)

(82)

Total

lease cost, net

$

3,670

$

3,632

PREMISES AND EQUIPMENT

A summary of premises and equipment are presented below

as of December 31, 2025 and 2024 (in thousands):

Land

$

$

Building

1,952

1,952

Furniture, fixtures and equipment

9,313

9,137

Computer hardware and software

4,747

4,623

10,587

10,584

Premises and equipment, gross

27,571

27,268

Accumulated depreciation and amortization

(23,324)

(22,705)

Premises and equipment, net

$

4,247

$

4,563

Depreciation

and

amortization

expense

was

$

and

$

for

the

years

ended

2025 and 2024, respectively.

INCOME TAXES

The Company’s pre-tax

income and provision

for income taxes

is presented in

the following table

for the years

ended

December 31, 2025 and 2024 (in thousands):

Pre-tax income:

Domestic

$

35,916

$

32,477

Total pre-tax income

$

35,916

$

32,477

Current tax expense:

Federal

$

1,213

$

State

1,857

Total

current

3,070

Deferred tax expense:

Federal

4,907

6,122

State

1,839

1,681

Total

6,746

7,803

Total

income tax expense

$

9,816

$

7,803

The actual income

tax expense for the

years ended December 31, 2025

and 2024 differs from

the statutory tax expense

for the year (computed by applying the U.S. federal

corporate tax rate of

% for 2025 and

% for 2024 to income before

provision for income taxes) as follows (in thousands):

Amount

% Pre-tax

Income

Amount

% Pre-tax

Income

Computed tax at the statutory federal income tax rate

$

7,542

21.00%

$

6,820

21.00%

State income taxes, net of federal tax benefit

(1)

2,767

7.70%

1,411

4.33%

Nontaxable or Nondeductible Items

Bank owned life insurance income

(495)

(1.38%)

(428)

(1.32%)

Other

0.01%

Other adjustments, net

Total

tax expense

$

9,816

27.33%

$

7,803

24.01%

(1) Taxes

in Florida made up the majority (greater than 50%) of the tax effect in this category.

The following table presents

the deferred tax assets

and deferred tax liabilities

as of December 31, 2025

and 2024 (in

Deferred tax assets:

Net operating loss

$

1,039

$

9,276

Allowance for credit losses

6,463

6,100

Lease liability

1,399

2,142

Unrealized loss on available for sale securities

10,270

15,200

Depreciable property

Equity compensation

Accruals

Other, net

Deferred tax asset

$

21,133

$

34,027

Deferred tax liability:

Deferred loan cost

(1,520)

(1,934)

Lease right of use asset

(1,399)

(2,142)

Deferred expenses

(154)

(224)

Cash flow hedge

(5)

(81)

Depreciable property

(9)

Deferred tax liability

$

(3,087)

$

(4,381)

Net deferred tax asset

$

18,046

$

29,646

At December 31, 2025,

the Company had

approximately $

23.9

million of State

net operating loss carryforwards

expiring

in

various

amounts

from

to

If

unused

after

2036,

their

is

limited

to

future

taxable

of

the

In assessing the

realizability of deferred

tax assets, management considered

whether it is

more likely than

not that some

portion or

all of

the deferred

will not

be realized.

The ultimate

realization

of deferred

upon the generation of

future taxable income

during the periods

in which those temporary

differences become deductible.

Management considers the scheduled reversal

of deferred tax liabilities, projected future taxable

income, and tax planning

strategies in making this assessment.

The U.S.

Federal jurisdiction

and Florida

are the

major tax

jurisdictions where

files income

tax returns.

The Company is generally no longer subject to U.S. Federal or

State examinations by tax authorities for years before 2022.

For

the

years

ended

2024,

the

Company

did

no

t have

any unrecognized

tax benefits

as a

tax positions

taken during

a prior

period or

during the

current period.

no

interest or

were

recorded as a result of tax uncertainties.

Cash payments

for

federal

taxes

was

$

3.9

million

in

the

year

ended

31,

and

$

in

the

year

ended

DEPOSITS

The following table presents deposits by type at December 31,

2025 and 2024 (in thousands):

$

583,860

$

575,159

46,989

50,648

527,809

367,388

Total

$

$

Time

deposits exceeding

limit of

per account

2024 were $

111.5

94.0

As

of

2025,

the

Company

had

$

256.8

million

in

CDs

at

a

average

rate

of

3.93

%.

Brokered CDs were

11.0

% of total deposits at such date.

As

of

2024,

the

Company

had

$

133.0

million

in

CDs

at

a

average

rate

of

4.38

%.

Brokered CDs were

6.1

% of total deposits at such date.

At December 31, 2025, the scheduled maturities of time deposits

were (in thousands):

Total

$

472,111

54,174

$

527,809

aggregate amount

of demand

deposits reclassified

to loans

as overdrafts

was

$

thousand and $

thousand, respectively.

FHLB ADVANCES

At December 31, 2025, FHLB advances were $

158.3

million and at December 31, 2024 were $

163.0

The following table presents outstanding FHLB advances

at December 31, 2025 and 2024 (in thousands):

Amount

3.77

%

Fixed

March 16, 2026

$

104,750

3.88

%

Variable

May 22, 2026

42,500

3.76

%

Fixed

11,000

$

158,250

Amount

2.05

%

Fixed

March 27, 2025

$

10,000

1.07

%

Fixed

July 18, 2025

6,000

3.76

%

Fixed

11,000

3.77

%

Fixed

April 25, 2028

50,000

3.68

%

Fixed

September 13, 2027

21,000

3.79

%

Fixed

March 23, 2026

20,000

4.65

%

Fixed

February 13, 2025

45,000

$

163,000

The

FHLB

holds

a

blanket

lien

on

the

loan

that

may

be

pledged

as

for

advances, subject

to eligibility

borrowing agreement.

choose to

assign cash

balances

held at the FHLB as additional collateral. See Note 3 “Loans”

for further discussion on pledged loans.

The Board

Reserve System,

on March

12, 2023,

announced the

creation of

a new

Bank

Term

Funding Program (“BTFP”). The BTFP offered loans of up to one year in length to banks, savings associations, credit

unions,

and

other

pledging

U.S.

Treasuries,

U.S.

Agency

debt

and

securities, and other qualifying assets as collateral. The

BTFP program ceased making new loans as of March

On January 12, 2024, the Company borrowed $

80.0

million at a rate of

4.81

% with a maturity date of

January 10, 2025

,

under the BTFP program.

The Company paid

off the $

80.0

million under the

BTFP program during

the third quarter

The original maturity of this borrowing under the BTFP program was January 2025, and there are no remaining borrowings

by the Company under this program.

SUBORDINATED

NOTES

On August 14, 2025,

the Company entered into a

Subordinated Note Purchase Agreement (the

“Purchase Agreement”)

with certain qualified

institutional buyers

(the “Purchasers”)

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”). The Notes

were issued

by the

the Purchasers

at a

price equal

to

% of

their face

amount. Net

proceeds were

$

39.2

million after an

estimated direct

issuance cost

of approximately $

thousand. Unamortized

issuance costs

are deferred

and amortized over

the

-year Subordinated note

term. As of

the outstanding balance

of subordinated

notes, net of costs, totaled $

39.3

million and the average interest rate paid on the outstanding average balance net of

costs

was

7.32

%.

The Notes have a stated maturity of August 15, 2035, and

are redeemable, in whole or in part, on any interest payment

date on or after August 15,

2030, and at any time upon

the occurrences of certain events. The Notes

bear interest at a fixed

rate of

7.625

% per year,

from and including August 14, 2025,

to but excluding August 15, 2030

or earlier redemption date.

From and including August 15, 2030, to but excluding the maturity date or early redemption date, the interest rate will reset

quarterly at a variable rate equal to the

then current three-month term secured

overnight financing rate (“SOFR”), plus

basis points. If three-month SOFR cannot be determined on a given date, a different index shall be determined and used in

accordance with the terms of the Notes.

The Notes

were offered

and sold

by the

Company in

placement transaction

in reliance

on exemptions

from

the

registration

of

the

Act,

pursuant

to

Section

4(a)(2)

of

the

Act

and

Rule

506(b)

of

Regulation D thereunder. On August 14, 2025, in

connection with the sale and

issuance of the Notes, the

into a

Agreement (the

“Registration

Rights Agreement”)

Purchasers. Under

the terms

of the

Agreement, the

Company agreed

to take

certain actions

for the

exchange of

the Notes

for

subordinated notes

registered under

the Securities

Act and

have substantially

terms as

the Notes

(the

“Exchange Offer”). Under

certain circumstances, if the

Company fails to meet

its obligations under the

Agreement, it would be required to pay additional interest

to the holders of the Notes.

EQUITY BASED AND OTHER COMPENSATION

PLANS

Employee 401(k) Plan

has an

401(k) plan

(the “Plan”)

covering substantially all

eligible employees.

The Plan

includes a

that the employer may contribute

to the accounts of

eligible employees for whom

a salary deferral is made.

contributed

$

and

$

to

the

Plan

during

the

years

ended

and

2024,

respectively;

the

contributions

are

under

and

in

the

of

Operations.

Stock-Based Compensation

In

2015,

the

the

Equity

Incentive

Plan

(the

“2015

Option

Plan”),

which

authorized grants

of options

to purchase

up to

2,000,000

common stock.

The

Option

Plan

provided that

vesting

schedules

will

be

upon

of

options

by

the

Board

of

Directors

or

committee.

Options granted

Plan have

a

-year life

and, in

no event

shall an

option be

exercisable after

the

expiration of

years from the

grant date. The

2015 Option Plan

had a

-year life and

initially would have

terminated in

2025. In

July 2020,

the stockholders

of the

Company approved

the amendment

of the

plan to

authorize the

issuance of

an additional

3,000,000

common stock and

extending the

life of

the plan

additional years, terminating

in 2030. The

authorized shares,

after being adjusted

to reflect the

1 for 5

reverse stock

split, totaled

1,000,000

shares. In

2021,

the

of

the

Company

the

amendment

of

the

Option

Plan

to

authorize

the

issuance of

an additional

1,400,000

as well

as the

issue restricted

stock grants

(up to

600,000

shares) for a total of

2,400,000

shares as well as extending the term until December

2025, there

were

872,012

shares available

for grant

Plan. At

2024, there were

996,436

shares available for grant under the 2015 Option

Plan.

Stock Options

The Company recognizes compensation expense based

on the estimated grant date

fair value method using the

Black-

Scholes

option

pricing

model and

for this

expense

using

a prorated

straight-line

amortization

method over

the

vesting

period

of

the

option.

Stock-based

expense

is

based

on

awards

that

the

Company

expects

will

ultimately vest,

reduced by estimated forfeitures.

Estimated forfeitures consider the voluntary

termination trends as well as

actual option forfeitures.

The

expense

is

under

and

in

the

Statements of Operations. Compensation expense totaling $

thousand was recognized for the year

$

for

ended

2024. There

was

no

related tax

benefit

for

the

years

ended

Unrecognized compensation cost

remaining on stock-based

compensation totaled $

and $

thousand for the

years

ended December 31, 2025 and 2024, respectively.

Cash

flows

from

excess

tax

are

to

be

classified

as

a

part

of

cash

flows

from

activities. Excess tax benefits

are realized tax benefits

from tax deductions for

exercised options in

excess of the deferred

tax asset attributable to the compensation cost for such

options.

no

options granted in 2025 and 2024.

The following table presents a summary of stock options

for the years ended December 31, 2025 and 2024:

Stock Options

Weighted Average

Exercise Price

Weighted Average

Contractual Years

Aggregate Intrinsic

Value (in

thousands)

725,167

$

10.86

5.3

Granted

—

$

Exercised

(98,500)

$

8.15

Forfeitures

—

$

626,667

$

11.29

4.8

Exercisable at December 31, 2025

624,500

$

11.28

4.8

$

4,458

947,167

$

10.97

6.5

Granted

—

$

Exercised

(122,000)

$

10.81

Forfeitures

(100,000)

$

11.99

725,167

$

10.86

5.3

Exercisable at December 31, 2024

720,499

$

10.85

5.3

$

4,972

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value of exercisable options at the

dates presented

(the

between

the

of the

stock

and the

exercise

price,

multiplied

by the

options considered

in-the-money) that

would have

been received

by the

option holders

had all

option holders

exercised their options.

In 2025 , the Company issued

124,424

shares of Class A common stock to employees and

directors as restricted stock

awards pursuant

to the

Company's 2015

Option Plan.

Awards under

the 2015

Option Plan

may not

be sold

transferred until

certain restrictions have

lapsed. The Company

primarily issues restricted

stock awards with

a

-year vesting

period.

In 2024 , the Company issued

277,922

shares of Class A common stock to employees and

directors as restricted stock

awards pursuant

to the

Company's 2015

Option Plan.

Awards under

the 2015

Option Plan

may not

be sold

transferred until

certain restrictions have

lapsed. The Company

primarily issues restricted

stock awards with

a

-year vesting

period. However,

out of the

277,922

shares of Class

issued pursuant to

restricted stock awards

in 2024,

150,000

shares issued in

October 2024 had

a modified vesting

period. The

150,000

shares vested

% of the

award in a

period of two months in 2024, and the

% remaining vests one-third in 2025 and in 2026.

The

total

share-based

expense

for

these

awards

is

based

on

the

market

price

of

the

Company's common

stock as

of the date

of grant

applied to

the total

shares granted

and is

amortized straight

line

over

the

vesting

period

which

is

three

years

unless

the

Board

of

Directors

approves

a

vesting

schedule for

the grants.

As of

unearned share

-based compensation

expense associated

awards totaled $

3.6

million. As of

December 31, 2024, unearned

share-based compensation expense associated

awards totaled $

4.3

Compensation expense totaling $

3.0

million was recognized for

the year ended December 31, 2025

and reported under

and

in

the

Statement

of

Operations.

Compensation

expense

$

1.9

thousand was recognized for the year ended December

The following table presents a summary of restricted stock

awards for the years ended December 31, 2025 and 2024:

Weighted Average Grant Date

402,076

$

13.31

Granted

124,424

$

18.78

Forfeited

—

$

Vested

(120,237)

$

13.98

406,263

$

14.80

Weighted Average Grant Date

218,422

$

12.19

Granted

277,922

$

14.33

Forfeited

(8,625)

$

12.63

Vested

(85,643)

$

13.84

402,076

$

13.31

OFF-BALANCE SHEET ARRANGEMENTS

The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business in order to

meet the financial

needs of

its customers

and to reduce

its own

exposure to

fluctuations in

interest rates.

These financial

instruments include

unfunded commitments

under lines

of credit,

commitments to

extend credit,

standby and

letters of

credit. Those

instruments involve,

to varying

degrees, elements

in excess

of the

amount recognized in the Company’s Consolidated Balance Sheets. The Company uses the

same credit policies in making

commitments and conditional obligations as it does for on-balance-sheet

instruments.

The Company's exposure

to credit loss

in the event

of nonperformance by

the other party

to the financial

for unused lines of credit, and standby letters of credit

is represented by the contractual amount of these commitments.

records

a

for

credit

losses

on

off-balance-sheet

credit

in

with

ASC

The

Company

uses

the

loss

rate

and

of

default

to

a

reserve

for

unfunded

commitments. Loss rates

for the expected funded

balances are determined

associated pooled loan

loss rate and the exposure at default is

based on an estimated utilization given

default. The off-balance sheet commitment

allowance as of December 31, 2025 was $

thousand and as of December 31, 2024 was $

A

summary

of

the

amounts

of

the

with

sheet

risk

are

shown

below

at

December 31, 2025 and December 31, 2024 (in thousands):

Commitments to grant loans and unfunded lines of credit

$

161,606

$

122,578

Standby and commercial letters of credit

2,700

5,389

Total

$

164,306

$

127,967

Commitments to

extend credit

are agreements

to lend

to a

customer as

long as

there is

no violation

of any

established in the contract. Commitments generally have

fixed expiration dates or other termination clauses.

Unfunded lines of

credit and revolving

credit lines are

commitments for possible

future extensions

of credit to

customers. These lines of

credit are uncollateralized and

usually do not contain

a specified maturity date

and ultimately may

not be drawn upon to the total extent to which the Company

is committed.

Standby

and

letters

of

credit

are

conditional

commitments

issued

by

the

Company

to

the

performance of a

customer to

a third

party. Those letters of

credit are

primarily issued to

support public and

private borrowing

arrangements. Essentially all letters of credit have fixed maturity dates and many of them expire without being drawn upon;

they do not generally present a significant liquidity risk

to the Company.

DERIVATIVES

The Company utilizes interest rate swap agreements

as part of its asset-liability management strategy to help

manage

its interest

position. The

notional amount

of the

swaps do

not represent

amounts exchanged

by the

parties. The amounts exchanged

are determined by reference

to the notional amount

and the other terms of

the individual

interest rate swap agreements.

Rate Swaps Designated as Cash Flow Hedges

In July

Company entered into

a two-year costless

collar hedge

with a

notional amount of

$

million to

manage

exposure to interest

rate volatility on

a three-month brokered CD.

The derivative is

USD SOFR overnight index

and establishes a

cap rate of

4.50

% and a

floor rate of

1.875

%, effectively creating a

defined range of

interest rate outcomes

without requiring

an upfront

premium. The

hedge was

designated as

a cash

flow hedge

under ASC

815, Derivatives

and

Hedging,

and

is

being

for

accordingly.

Changes

in

the

fair

value

of

the

derivative

will

be

in

other

comprehensive income (loss) to the extent the hedge remains

effective.

In August

into a

two-year

costless collar

hedge with

a notional

$

million to

manage

to

rate

on

a

three-month

CD.

The

derivative

is

based

on

the

USD

SOFR

overnight

index

and

establishes

a

cap

rate

of

4.50

%

and

a

floor

rate

of

1.965

%,

effectively

creating

a

defined

range

of

interest rate outcomes without requiring

an upfront premium. The hedge was

designated as a cash flow hedge

under ASC

815, Derivatives

and Hedging,

and is

being accounted

for accordingly.

the fair

the derivative

will be

recorded in other comprehensive income (loss) to the extent the

hedge remains effective.

had

one

interest rate swap

agreements with a

notional aggregate amount

of

$

million that were designated as

cash flow hedges of certificates

of deposit. The interest rate

swap agreements have a

maturity of

0.42

years, a weighted average fixed-rate paid of

3.47

%, and with a weighted average 3-month compound USD

SOFR being

received. The

company unwound

one

swap designated

as a

cash flow

hedge of

deposits with notional

amount of $

million during the

quarter ended December 31,

2025. The decision to

unwind this swap

was driven by changes in interest rate

forecasts and asset-liability management strategies. The early termination income to

unwind the fair value swaps totaled $

thousand. The original maturity of the cash flow interest

rate swap was April 2026.

31, 2024,

the Company had

two

interest rate swap

agreements with

a notional aggregate

$

million that were designated as cash flow hedges of certificates of deposit. The interest rate swap agreements have an

average

maturity

of

1.38

years,

the

average

fixed-rate

paid

is

3.59

%,

with

the

average

3-month

compound USD SOFR being received.

The

changes

in

fair

value

on

these

rate

swaps

are

in

other

assets

or

accrued

and

other

liabilities with a corresponding recognition in other comprehensive

income (loss) and subsequently reclassified to earnings

when gains or losses are realized.

Interest Rate Swaps Designated as Fair Value

Hedges

third quarter

in 2024,

unwound

four

swaps with

a notional

$

million. The

decision to

unwind these

swaps was

driven by

forecasts and

asset-

liability management

strategies. The

early termination

fee to

unwind the

swaps totaled

$

3.7

million. The

fees allocated to each loan category are

amortized over the remining life of the

hedge loans on a monthly straight-line basis

with full recognition of the unamortized cost upon

the early payoff of the hedge loan. The amortization

of the termination fee

is reflected in the loan interest income line in the Company’s Consolidated Statement of Operations. The original maturities

of

these

fair

value

swaps

were

between

and

The

fair

value

rate

swap

had

an

average maturity of

1.51

years at the date of termination.

Interest Rate Swaps

The Company also

enters into

interest rate swaps

with its

loan customers. The

and

swaps with

loan customers

with a

notional aggregate

$

310.8

million and

$

206.3

million at

and 2024, respectively.

These interest rate swaps

have maturity dates of

between 2026 and 2051.

The Company entered

into corresponding

and offsetting

derivatives with

third parties.

The fair

liability on

these derivatives

requires the

Company to provide the counterparty

with funds to be held as collateral

which the Company reports as other

assets under

Balance Sheets.

While these

derivatives represent

economic hedges,

they do

not qualify

as hedges

for

accounting purposes.

The following table reflects the Company’s customer

related interest rate swaps at the dates indicated (in

Notional

Amount

Collateral

Amount

Balance Sheet Location

Asset

Liability

Derivatives Designated as Cash Flow Hedges:

Interest rate swaps

$

125,000

$

$

$

Derivatives not designated as hedging instruments:

Interest rate swaps related to customer loans

$

310,761

$

5,769

$

9,753

$

9,753

Derivatives Designated as Cash Flow Hedges

Interest rate swaps

$

50,000

$

$

$

Derivatives not designated as hedging instruments:

Interest rate swaps related to customer loans

$

206,258

$

4,943

$

6,869

$

6,869

FAIR VALUE

MEASUREMENTS

Determination of Fair Value

uses

measurements

to record

fair-value

adjustments

to certain

assets

and to

determine fair value

disclosures. In accordance

with the fair

value measurements

accounting guidance, the

fair value of

a

financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction

between market

at the

date.

Fair value

is best

determined based

upon quoted

market prices.

However, in

many instances, there

are no quoted

market prices for the

Company's various financial

instruments. In cases

where quoted

market prices

are not

available, fair

values are

estimates using

present value

techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates

of future cash flows. Accordingly, the fair value estimates may not be realized in

an immediate settlement of the instrument.

The fair

value guidance provides

a consistent definition

of fair

value, which focuses

on exit

price in

an orderly transaction

(that is,

not a

forced

liquidation

or distressed

sale) between

market participants

at the

date

under current

market conditions.

If there

has been

a significant

in the

volume

of activity

for the

asset

or liability,

a

change in

valuation technique or

the use

of multiple

valuation techniques may

be appropriate.

In such

instances, determining

the

price

at

which

willing

market

would

transact

at

the

date

under

current

market

depends on the facts

and circumstances and

requires the use of

significant judgment. The fair

value is a reasonable

point

within the range that is most representative of fair value under

current market conditions.

Fair Value Hierarchy

In accordance with

this guidance, the

Company groups its

financial assets

and financial liabilities

generally measured

at fair

value in

three

levels, based

on the

markets

in which

are traded,

and the

reliability

of the

assumptions used to determine fair value.

Level 1

is based

on quoted

prices in

active markets

for identical

assets or

liabilities that

the reporting

entity has

to access

at the measurement

date. Level

1 assets

generally include

debt and

equity securities that

are traded in

an active exchange

market. Valuations are obtained from

readily available pricing

sources for market transactions involving identical assets

or liabilities.

Level 2

is based on inputs other

than quoted prices included

within Level 1 that are

observable for the

asset

or

either

directly

or

indirectly.

The

may

be

based

on

quoted

prices

for

similar

assets

or

liabilities; quoted

prices in

markets that are

not active;

or other inputs

that are observable

or can be

corroborated

by observable market data for substantially the full term of the

asset or liability.

Level 3

is based on

unobservable inputs that

are supported

by little or

no market activity

and that are

to

the

fair

value

of

the

assets

or

liabilities.

Level

assets

and

include

whose value

using pricing

models, discounted

cash

flow

methodologies,

techniques,

as

well as instruments for which determination of fair value

requires significant management judgment or estimation.

A

instrument's

categorization

within

the

hierarchy

is

based

upon

the

lowest

level

of

input

that

is

significant to the fair value measurement.

Items Measured at Fair Value

on a Recurring Basis

Investment securities:

When instruments are traded

in secondary markets and

quoted market prices do

not exist for

such securities,

management generally

relies on

prices obtained

from independent

vendors or

third-party broker

-dealers.

Management reviews pricing methodologies provided by the vendors and third-party broker-dealers in order to determine if

observable market information is being utilized. Securities measured with pricing provided by independent vendors or

third-

party broker-dealers

are classified within

Level 2 of

the hierarchy

and often

involve using quoted

market prices

for similar

securities, pricing models or discounted cash flow analyses

utilizing inputs observable in the market where available.

Derivatives:

The

fair

value

of

derivatives

are

with

pricing

by

and

are

classified within Level 2 of the hierarchy.

The

table

the

assets

and

at

fair

value

on

a

recurring

basis

at

December 31, 2025 and 2024 for each of the fair value

hierarchy levels (in thousands):

Level 1

Level 2

Level 3

Total

Level 1

Level 2

Level 3

Total

Investment securities available for sale:

$

$

14,144

$

$

14,144

$

$

12,625

$

$

12,625

75,828

75,828

78,905

78,905

29,917

29,917

46,933

46,933

168,108

168,108

78,739

78,739

4,263

4,263

19,311

19,311

15,230

15,230

23,708

23,708

Total

307,490

307,490

260,221

260,221

Derivative assets

9,767

9,767

7,190

7,190

Total assets at fair value

$

$

317,257

$

$

317,257

$

$

267,411

$

$

267,411

Derivative liabilities

$

$

9,786

$

$

9,786

$

$

6,869

$

$

6,869

Total liabilities at fair value

$

$

9,786

$

$

9,786

$

$

6,869

$

$

6,869

Items Not Measured at Fair Value

presents the carrying

amounts and estimated

fair values of

financial instruments

not carried at fair

value, at December 31, 2025 and 2024 are as follows (in thousands):

Fair Value Hierarchy

Carrying

Amount

Level 1

Level 2

Level 3

Amount

Financial Assets:

$

6,027

$

6,027

$

$

$

6,027

$

32,450

$

32,450

$

$

$

32,450

Investment securities held to maturity, net

$

153,941

$

$

142,508

$

$

142,508

$

$

$

$

2,210,781

$

2,210,781

$

11,661

$

$

1,443

$

10,218

$

11,661

Financial Liabilities:

$

583,860

$

583,860

$

$

$

583,860

$

$

$

$

$

$

46,989

$

46,989

$

$

$

46,989

$

527,809

$

$

527,575

$

$

527,575

$

158,250

$

$

158,342

$

$

158,342

$

39,300

$

$

40,131

$

$

40,131

Accrued interest payable

$

3,984

$

$

3,984

$

$

3,984

Financial Assets:

$

6,986

$

6,986

$

$

$

6,986

$

70,049

$

70,049

$

$

$

70,049

Investment securities held to maturity, net

$

164,694

$

$

145,540

$

$

145,540

$

$

$

$

1,950,646

$

1,950,646

$

10,945

$

$

1,372

$

9,573

$

10,945

Financial Liabilities:

Demand Deposits

$

575,159

$

575,159

$

$

$

575,159

Money market and savings accounts

$

$

$

$

$

Interest-bearing checking accounts

$

50,648

$

50,648

$

$

$

50,648

$

367,388

$

$

366,479

$

$

366,479

$

163,000

$

$

161,375

$

$

161,375

Accrued interest payable

$

2,125

$

$

2,125

$

$

2,125

Collateral Dependent Loans Measured for

Expected Credit Losses:

Fair values of collateral-dependent yacht loans

and real estate loans

are based on recent

boat and real estate

appraisals less estimated costs of

sale, repossession, and/or

holding costs.

Appraisals

are made

by a

third

party,

and

its evaluation

may use

either a

comparative

sales, cost

and/or

income approach or a combination of methodologies.

The

fair

value

of

loans

Level

in

the

fair

value

hierarchy

was

$

2.6

million

with

no

specific reserved as

of December 31, 2025

and $

2.0

million with a

specific reserve of

$

thousand at December 31, 2024.

The following table presents quantitative information about level 3 fair value measurements for assets measured at fair

value on a non-recurring basis at

December 31, 2025 and 2024:

Range

Weighted

Financial Instrument

Valuation Technique(s)

Unobservable Input(s)

Minimum

Maximum

average

Collateral dependent loans -

residential loans

$2,583

Sales comparison approach

Third party appraisals

0%

0%

0%

Range

Weighted

Financial Instrument

Valuation Technique(s)

Unobservable Input(s)

Minimum

Maximum

average

Collateral dependent loans -

consumer boat loans

$1,650

Sales comparison approach

Adjustment for differences

between the comparable sales

11%

31%

28%

STOCKHOLDERS’ EQUITY

Company

2.0

million

Class

stock

from certain

institutional shareholders

through privately

negotiated transactions,

at a weighted

average price

per share of

$

17.19

.

The

price

for

these

was

$

34.4

The

were

supplemental and not part of the Company’s two previously announced stock repurchase programs. During the year ended

December 31, 2025 pursuant to the

Company’s publicly announced repurchase programs the

Company repurchased

9,671

shares of Class A common stock at a weighted average price per share of $

17.91

. The aggregate purchase price for these

was

$

costs.

As

of

2025,

528,309

shares

remained authorized for repurchase under the Company’s

two stock repurchase programs.

During the year

31, 2024,

42,100

stock at

a

weighted average price per share of $

11.85

. The aggregate purchase price for these transactions was approximately $

thousand, including transaction costs.

2024,

537,980

shares remained authorized for

repurchase under

the Company’s two stock repurchase programs.

In 2025, the Company issued

124,424

shares of Class A common stock to employees and directors as restricted stock

awards pursuant to the Company's 2015 Option Plan.

In 2024, the Company issued

277,922

shares of Class A common stock to employees and directors as restricted stock

awards pursuant to the Company's 2015 Option Plan.

Shares of the Company’s Class A common stock issued and

outstanding as of December 31, 2025 and December 31,

2024 were

and

, respectively.

Declaration of dividends

by the Board

is required before

dividend payments

are made. The

limited in the

cash dividends

that it

may pay.

Payment of

dividends is

generally limited

to the

of the

current

year

with

the

income

for

the

preceding

two

years,

as

defined

by

state

banking

regulations. However,

for any

dividend declaration,

must consider

additional factors

such as

of

current period net income, liquidity,

asset quality,

capital adequacy and economic conditions

at the Bank since the Bank is

the primary source

of funds to fund

dividends by the Company.

It is likely that

these factors would

further limit the

amount

of dividends which

the Company could

declare. In addition,

bank regulators have

the authority to

prohibit banks and

bank

holding companies from paying dividends if they deem

such payment to be an unsafe or unsound practice.

As

of

2025,

the

Company

was

not

subject

to

any

formal

on

its

ability

to

pay

but

has

agreed

to

notify

the

Federal

Reserve

Bank

of

Atlanta

in

advance

of

any

proposed

to

the

Company's shareholders

in light

of the

Bank's negative

retained earnings.

under applicable

FDIC regulations

and policy, because the Bank has negative retained

earnings, it must obtain the prior approval of the FDIC before effecting

a cash dividend or other capital distribution.

The following table details the dividends declared and paid by

the Company for the periods presented:

Declaration Date

Record Date

Payment Date

Dividend Per Share

Dividend Amount

January 21, 2025

February 14, 2025

March 5, 2025

$

0.10

$

2.0

million

April 21, 2025

May 15, 2025

June 5, 2025

$

0.10

$

2.0

million

July 21, 2025

August 15, 2025

September 5, 2025

$

0.10

$

2.0

million

October 20, 2025

November 14, 2025

December 5, 2025

$

0.10

$

1.8

million

Declaration Date

Record Date

Payment Date

Dividend Per Share

Dividend Amount

January 22, 2024

February 15, 2024

March 5, 2024

$

0.05

$

1.0

million

April 22, 2024

May 15, 2024

June 5, 2024

$

0.05

$

1.0

million

July 22, 2024

August 15, 2024

September 5, 2024

$

0.05

$

1.0

million

October 28, 2024

November 15, 2024

December 5, 2024

$

0.05

$

0.9

million

The

Company

and

the

Bank

exceeded

all

capital

and

remained

above

guidelines as of December 31, 2025 and December

31, 2024. At December 31, 2025, the

total risk-based capital ratios for

the Company and the Bank were

13.91

% and

13.67

%, respectively.

See Note 21, “Subsequent Events”, for information regarding dividends

declared in January 2026.

EARNINGS PER SHARE

Earnings

per

share

(“EPS”)

for

common

stock

is

calculated

using

the

two-class

method

for

participating

securities. Basic EPS

is calculated by

dividing net income

(loss) available to common

stockholders by the weighted-average

number of common shares outstanding for

the period, without consideration for common

stock equivalents. Diluted EPS is

computed by

dividing net

income (loss)

common stockholders

by the

weighted-average

number

of common

shares outstanding for

the period and

the weighted-average number

of dilutive common

stock equivalents outstanding

for

the period determined using the treasury-stock method. For

purposes of this calculation, common stock equivalents

include

common stock options and are only included in the calculation

of diluted EPS when their effect is diluti

ve.

The

table

reflects

the

calculation

of

net

income

to

common

for

the

years

ended

December 31, 2025 and 2024 (in thousands):

For the years ended December 31,

Net Income

$

26,100

$

24,674

$

26,100

$

24,674

reflects the calculation

of basic and

diluted earnings per

common share

class for the

years ended

December 31, 2025 and 2024 (in thousands, except

per share amounts):

As of and for the years ended December 31,

Class A

Class A

Basic EPS

Numerator:

Net income available to common shares

$

26,100

$

24,674

Denominator:

Weighted average shares outstanding

Earnings per share, basic

$

1.34

$

1.25

Diluted EPS

Numerator:

Net income available to common shares

$

26,100

$

24,674

Denominator:

Weighted average shares outstanding for basic EPS

Add: Dilutive effects of assumed exercises of stock options

225,068

155,977

Weighted avg. shares including dilutive potential common shares

19,650,814

19,831,421

Earnings per share, diluted

$

1.33

$

1.24

Anti-dilutive stock options excluded from diluted EPS

15,000

Net income has not been allocated to unvested

restricted stock awards that are participating

securities because the amounts that would be allocated

are

not material to earnings per share of common stock.

Unvested restricted stock awards that are participating

securities represent less than one percent of

all of the outstanding shares of common stock for

each of the periods presented.

REGULATORY

MATTERS

Banks and

to regulatory

capital requirements

administered by

state

banking

agencies.

Failure

to

meet

minimum

capital

can

initiate

certain

mandatory

and

possibly

discretionary actions

by regulators that,

if undertaken,

could have a

direct material

the Company's

Financial Statements.

Under

capital adequacy

guidelines and

for prompt

action, the

Company and the

Bank must meet

capital guidelines that

involve quantitative measures

of their assets,

and certain

off-balance-sheet

items as

calculated under

regulatory accounting

practices. The

Company’s and

capital

amounts

and

classification

are

also

subject

to

by

the

about

components,

risk

weightings, and other factors.

Based on changes to the Federal Reserve’s definition of a “Small Bank

Holding Company” that increased the threshold

to $3.0 billion in assets

in August 2018, the Company

is not currently subject to

separate minimum capital measurements.

At such time

when the Company

reaches the $3.0

billion asset level,

it will be

regulatory capital measurements

independent of the Bank.

elected to

permanently opt-out

of the

inclusion of

accumulated other

comprehensive income

in the

capital

calculations, as

permitted by the

regulations. This

opt-out reduces

the impact of

market volatility on

capital levels.

The Bank is

subject to the

rules of the

Basel III regulatory capital

framework and related Dodd-Frank

Wall Street Reform

and Consumer Protection

Act. The rules include

the implementation of

a

2.5

% capital conservation

buffer that is

added to

the minimum requirements

for capital adequacy

purposes. Failure

to maintain the

required capital conservation

buffer will

limit the ability of

the Bank to pay

dividends, repurchase shares

or pay discretionary

bonuses. At December

2024, the capital ratios for the Bank were sufficient

to meet the conservation buffer.

Prompt

action

provide

five

classifications:

well

capitalized,

capitalized,

significantly

and

critically

although

these

terms

are

not

used

to

represent overall financial condition. If

adequately capitalized, regulatory approval

is required to accept brokered

If

capital

are

limited,

as

is

asset

growth

and

expansion,

and

capital

plans

are

required.

most recent

notification from

authorities categorized

as

well capitalized

regulatory framework

for prompt

corrective action.

Failure to

meet statutorily

mandated capital

could

subject

the

Bank

to

a

variety

of

remedies,

of

a

capital

directive,

the

termination of deposit

insurance by the

FDIC, a prohibition

on accepting or

renewing brokered deposits,

rates of

interest that

may pay

on

its deposits

on

its business.

To

be categorized

as well

capitalized, an institution

must maintain minimum

total risk-based, Tier

1 risk-based and Tier

1 leverage ratios as

in the

table below.

There are

no conditions

or events

since the

notification that

management believes

have changed

the

Bank’s category.

Actual and required

capital amounts and

ratios are presented

below for the

Bank at December 31,

2025 and 2024

(in

thousands, except ratios). The required amounts for capital adequacy

shown do not include the capital conservation buffer

previously discussed.

Actual

Minimum Capital

Requirements

To be Well Capitalized

Under Prompt Corrective

Action Provisions

Amount

Ratio

Amount

Ratio

Amount

Ratio

Total

$

299,596

13.67

%

$

175,387

8.00

%

$

219,234

10.00

%

$

273,342

12.47

%

$

131,541

6.00

%

$

175,387

8.00

%

$

273,342

12.47

%

$

98,655

4.50

%

$

142,502

6.50

%

$

273,342

9.65

%

$

113,296

4.00

%

$

141,620

5.00

%

Total

$

266,387

13.34

%

$

159,795

8.00

%

$

199,744

10.00

%

$

241,740

12.10

%

$

119,846

6.00

%

$

159,795

8.00

%

$

241,740

12.10

%

$

89,885

4.50

%

$

129,834

6.50

%

$

241,740

9.38

%

$

103,074

4.00

%

$

128,843

5.00

%

is limited in

of cash

dividends that

it may

pay.

Payment of dividends

limited to

the Company’s net income for the current year combined with the Company’s

retained income for the preceding two years,

as

defined

by

state

banking

regulations.

for

any

declaration,

the

Company

must

factors such as the amount of current period net income, liquidity,

asset quality, capital adequacy

and economic conditions

at the Bank.

It is likely

that these factors

would further limit

the amount of

dividends which the

Company could declare.

In

bank

have

the

authority

to

prohibit

banks

from

paying

to

their

parent

holding company,

if they deem such payment to be an unsafe or unsound

practice.

RELATED PARTY

TRANSACTIONS

In

the

course

of

officers,

directors,

and

affiliates

may

engage

in

with

the

The

table

loans

to

and

from

related

parties

within

the

Consolidated Financial Statements at December 31, 2025

and 2024 (in thousands):

$

15,000

$

Deposits

$

3,238

$

4,551

Interest income

$

$

Interest expense

$

$

Loan Purchases

During 2025, the Bank purchased $

79.6

million of loans from entities that are

deemed to be related parties.

paid those entities fees of $

During 2024, the Bank purchased $

90.8

million of loans from entities that are

deemed to be related parties.

paid those entities fees of $

2.7

Loan Originations

During

the

year

ended

Bank

acted

as the

lead

arranger

in

a

$

40.0

million

syndicated

loan

extended to

an entity

deemed to

be a

related party.

As of

Bank held

an outstanding

balance of

$

15.0

million related to this transaction. In connection with the syndication, the Bank received a

-basis point commitment

fee and

will earn

a

-basis point

annual servicing

fee. The

other two

participating in

the syndication

were also deemed to be related parties. Although

originating loans to related parties is not part of

the Company’s standard

policy,

this transaction

was reviewed

by the

appropriate departments

with Company

procedures.

Detailed

analyses were

presented to

of Directors

and the

Audit and

Risk Committee,

and all

necessary approvals

were

obtained.

Additional

was

conducted

to

that

the

was

executed

in

the

course

of

business and on arm’s-length terms, consistent with the

requirements of Regulation O.

During the year ended December

31, 2025, the Bank participated

in two loans totaling $

21.3

million with an entity that

is considered

a related

party,

for which

the

Bank was

not the

lead arranger.

The

underlying

were

not related

parties. Under the

terms of the

participation agreements,

the Bank pays

the related

‑

party entity a

servicing fee equal

to 8

basis points, calculated on the declining monthly outstanding

balance of the loans.

no

loan originations

or syndications

extended to

entities deemed

to be

related parties

for the

PARENT COMPANY

CONDENSED FINANCIAL INFORMATION

In December

2021, USCB

Financial Holdings,

Inc. was

formed as

the parent

company of

U.S. Century

Bank.

The

condensed

balance

sheet

is

below

for

USCB

Holdings,

Inc.

at

the

dates

(in

ASSETS:

Cash and Cash Equivalents

$

6,773

$

3,735

Investment in bank subsidiary

248,230

210,253

2,624

1,400

Total

assets

$

257,627

$

215,388

LIABILITIES AND STOCKHOLDERS' EQUITY:

$

39,300

$

1,144

Stockholders' equity

217,183

215,388

Total

liabilities and stockholders' equity

$

257,627

$

215,388

The condensed

income statement

is presented

below for

USCB Financial

Holdings, Inc.

for the

periods indicated

(in

Years Ended

INCOME:

Dividends from subsidiaries

$

6,000

$

5,000

Total

6,000

5,000

EXPENSE:

Interest expense

1,205

Employee compensation and benefits

3,005

2,129

Other operating

Total

4,832

2,699

Income before income taxes and undistributed subsidiary income

1,168

2,301

Benefit from income taxes

(1,225)

(684)

Equity in undisbursed subsidiary income

23,707

21,689

Net Income

$

26,100

$

24,674

The condensed cash

flow is presented below

for USCB Financial Holdings,

Inc. for the periods

indicated (in thousands):

Years Ended

Cash flows from operating activities:

$

26,100

$

24,674

Adjustments to reconcile net income to net cash provided by operating

activities:

Equity in undistributed earnings of subsidiaries

(23,707)

(21,689)

3,005

2,129

Increase in deferred tax asset

(1,225)

(684)

Increase in accrued interest and other liabilities

1,144

Net cash provided by operating activities

5,317

4,430

Cash flows from investing activities:

Capital contributions to subsidiary

Other

Net cash used in investing activities

Cash flows from financing activities:

Dividends paid

(7,829)

(3,939)

Proceeds from exercise of stock options

1,319

Repurchase of common stock

(501)

Proceeds from issuance of subordinated notes, net of issuance cost

39,300

Net cash used in financing activities

(2,279)

(3,121)

Net increase in cash and cash equivalents

3,038

1,309

Cash and cash equivalents, beginning of period

3,735

2,426

Cash and cash equivalents, end of period

$

6,773

$

3,735

SEGMENT REPORTING

Operating

are components

of an

enterprise

about which

separate

is available

that

is

by

the

chief

decision

maker

(“CODM”)

in

assessing

and

in

deciding

how

to

allocate resources. The Company’s CODM is the

President, Chief Executive Officer,

and Chairman.

through the

Bank, its

sole direct

operates

banking centers

in South

Florida providing

a

wide range

of personal

banking products

and through

a subsidiary

of the

Bank, offers

clients

title insurance policies for real estate transactions closed at

the Bank. The Company’s business activities are similar in their

nature,

and

characteristics,

largely

serving

and

specialty

banking clients

with products

and services

offered through

similar processes

and platforms.

Accounting policies

for the

and services

referenced here are the same as those described in Note 1, “Summary of Significant Accounting Policies”. The Company’s

segment revenue

is driven

primarily by

on loans

as well

as fee

income from

the origination

of loans

and

from fees charged on loans and deposit