KBRA Affirms Ratings for USCB Financial Holdings, Inc.

KBRA affirms the senior unsecured debt rating of BBB, the subordinated debt rating of BBB-, and the short-term debt rating of K3 for USCB Financial Holdings, Inc. (NASDAQ: USCB)(“the company”). Additionally, KBRA affirms the deposit and senior unsecured debt ratings of BBB+, the subordinated debt rating of BBB, and the short-term deposit and debt ratings of K2 for its subsidiary, U.S. Century Bank ("the bank"). The Outlook for all long-term ratings is Stable.

Key Credit Considerations

The ratings are supported by USCB’s solid earnings profile, evidenced by a core ROA that has consistently exceeded 1% in recent quarters, upheld by minimal credit costs over a multi-year period. Moreover, given the company’s branch-lite model, USCB maintains a meaningfully lower-cost expense structure, with noninterest expenses tracking between 1.7% - 1.8% of average assets in recent quarters. While the proportion of noninterest income to total revenue (historically 13%-17%) tracks slightly below peers, contribution to bottom line earnings has remained stable, derived from deposit fees, SBA loan sales, and other fee-based income. The ratings are further supported by a core deposit franchise that represented 81% of total funding at 1Q26, derived from respectable market share in the Miami-Dade MSA and a favorable mix of NIB accounts (25% at 1Q26). However, the bank's funding costs were slightly above average, with total deposit costs of 2.14% at 1Q26 (25 bps above peers), in part, due to its various specialty segments such as private banking, which are inherently higher cost. Conversely, these specialty deposits generate a greater amount of fee income, particularly its private banking and HOA deposits which totaled approximately $330 million and $160 million, respectively, at 1Q26. Profitability has improved as management enhanced the balance sheet mix through a combination of loan growth and strategic asset repositioning, selling lower-yielding AFS securities, and redeploying the proceeds of the investment portfolio into higher-yielding loans. This remixing of earning assets along with a more favorable interest rate environment has led to a meaningful expansion of NIM (33 bps since YE24), though remains comparatively lower than peers. The company has demonstrated favorable asset quality performance in recent years, including nominal credit losses attributable to disciplined underwriting, a selective borrower base, and a management team with extensive experience and market knowledge across its footprint. While we acknowledge its higher investor CRE mix (349% of risk-based capital), USCB has actively reduced its CRE concentration in recent years and continues to focus on diversifying the loan portfolio. USCB's capital metrics have moderated over the past year following strategic capital deployment initiatives coupled with solid loan growth; however, KBRA continues to view capital protection as sufficient for the company's risk profile, supported by an 11.1% CET1 ratio, strong bank-level regulatory capital ratios, and solid loss absorption capacity (LLR of 1.16%). While the company’s investment securities portfolio's negative AOCI balances represent ~12% of shareholder equity, somewhat pressuring the TCE ratio, this is, in our view, in line with similarly rated peers.

Rating Sensitivities

Further geographic diversification along with increased, stable noninterest revenue, as well as continued minimal loss content and maintenance of solid capital metrics, could lead to positive rating momentum over time. Conversely, a rating downgrade is unlikely in the medium term, though significant deterioration in asset quality performance impacting earnings over an extended period, deterioration in capital to levels inconsistent with the rating category, or significant runoff of core deposits could cause negative pressure.

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