10-Q - USCB - Equibles

uscb-20240630p1i0

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM

10-Q

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended

June 30, 2024

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____to_____

Commission File Number:

001-41196

USCB Financial Holdings, Inc.

(Exact name of registrant as specified in its charter)

Florida

87-4070846

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

2301 N.W. 87th Avenue

Doral

33172

(Address of principal executive offices) (zip code)

Registrant’s telephone number, including area code:

(

305

)

715-5200

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Class A common stock, $1.00 par value per share

USCB

The Nasdaq Stock Market LLC

Indicate by check

mark whether the

registrant (1) has

filed all reports

required to be

filed by Section

13 or 15(d)

of the Securities

Exchange

Act of 1934 during the preceding 12 months

(or for such shorter period that the registrant was

required to file such reports), and (2)

has

been subject to such filing requirements for the past 90 days.

Yes

☒

☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data

File required to be submitted pursuant

to Rule 405

of Regulation S-T

(§232.405 of this

chapter) during the

preceding 12 months

(or for such

shorter period that

the registrant

was required to submit such files).

Yes

☒

☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting

company

emerging

growth

company.

See

the

definitions

“large

accelerated

filer,”

“accelerated

filer,”

“non-accelerated

filer,”

“smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

☒

Smaller reporting company

☒

Emerging growth company

☒

If an

emerging growth

company, indicate by

check mark

if the

registrant has elected

not to

use the

extended transition

period for

complying

with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes

☐

☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

As of July 31, 2024 the registrant had

19,620,632

shares of Class

common stock outstanding.

uscb-20240630p1i0

FORM 10-Q

June 30, 2024

TABLE OF CONTENTS

PART I

Item 1.

Financial Statements

Consolidated Balance Sheets as of June 30, 2024 (Unaudited) and December 31, 2023

Consolidated Statements of Operations for the three and six months ended June 30, 2024 and 2023

(Unaudited)

Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended June 30, 2024

and 2023 (Unaudited)

Consolidated Statements of Changes in Stockholders’ Equity for the three and six months ended June 30,

2024 and 2023 (Unaudited)

Consolidated Statements of Cash Flows for the six months ended June 30, 2024 and 2023 (Unaudited)

Notes to the Consolidated Financial Statements (Unaudited)

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Item 4.

Controls and Procedures

PART II

Item 1.

Legal Proceedings

Item 1A.

Risk Factors

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

Item 3.

Defaults Upon Senior Securities

Item 4.

Mine Safety Disclosures

Item 5.

Other Information

Item 6.

Exhibit Index

Signatures

Table of Contents

USCB Financial Holdings, Inc.

Q2 2024 Form 10-Q

PART

Item 1.

Financial Statements

USCB FINANCIAL HOLDINGS, INC

Consolidated Balance Sheets – Unaudited

(Dollars in thousands, except share data)

June 30, 2024

December 31, 2023

ASSETS:

Cash and due from banks

5,179

8,019

Interest-bearing deposits in banks

72,082

33,043

Total cash and cash equivalents

77,261

41,062

Investment securities held to maturity, net of allowance of $

and $

, respectively (fair value $

149,573

and $

155,510

, respectively)

169,606

174,974

Investment securities available for sale, at fair value

236,444

229,329

Federal Home Loan Bank stock, at cost

5,532

10,153

Loans held for investment, net of allowance of $

22,230

and $

21,084

, respectively

1,847,019

1,759,743

Accrued interest receivable

11,538

10,688

Premises and equipment, net

4,728

4,836

Bank owned life insurance

52,607

51,781

Deferred tax assets, net

34,030

37,282

Lease right-of-use asset

9,937

11,423

Other assets

9,568

7,822

Total assets

2,458,270

2,339,093

LIABILITIES:

Deposits:

Demand deposits

579,243

552,762

Money market and savings accounts

1,097,468

1,048,272

Interest-bearing checking

65,844

47,702

Time deposits

314,147

288,403

Total deposits

2,056,702

1,937,139

Federal Home Loan Bank advances and other

borrowings

162,000

183,000

Lease liability

9,937

11,423

Accrued interest and other liabilities

28,611

15,563

Total liabilities

2,257,250

2,147,125

Commitments and contingencies (See Notes 5

and 10)

(nil)

STOCKHOLDERS' EQUITY:

Preferred stock - Class C; $

1.00

par value; $

1,000

per share liquidation preference;

52,748

authorized;

and

issued and outstanding as of June 30, 2024

and December 31, 2023

Preferred stock - Class D; $

1.00

par value; $

5.00

per share liquidation preference;

12,309,480

authorized;

and

issued and outstanding as of June 30, 2024

and December 31, 2023

Preferred stock - Class E; $

1.00

par value; $

1,000

per share liquidation preference;

3,185,024

authorized;

and

issued and outstanding as of June 30, 2024

and December 31, 2023

Common stock - Class A Voting; $

1.00

par value;

45,000,000

shares authorized;

19,630,632

issued and

outstanding

as of June 30, 2024,

19,575,435

issued and outstanding as of December 31,

2023

19,631

19,575

Common stock - Class B Non-voting; $

1.00

par value;

8,000,000

shares authorized;

and

issued and

outstanding as of June 30, 2024 and December

31, 2023

Additional paid-in capital on common stock

305,835

305,212

Accumulated deficit

(79,760)

(88,548)

Accumulated other comprehensive loss

(44,686)

(44,271)

Total stockholders' equity

201,020

191,968

Total liabilities and stockholders' equity

2,458,270

2,339,093

The accompanying notes are an integral part of

these unaudited consolidated financial statements.

Table of Contents

USCB Financial Holdings, Inc.

Q2 2024 Form 10-Q

USCB FINANCIAL HOLDINGS, INC.

Consolidated Statements of Operations - Unaudited

(Dollars in thousands,

except per share data)

Three Months Ended June 30,

Six Months Ended June 30,

2024

2023

2024

2023

Interest income:

Loans, including fees

28,017

20,847

54,660

40,558

Investment securities

3,069

2,382

5,880

4,668

Interest-bearing deposits in financial institutions

1,531

1,051

2,964

1,433

Total interest income

32,617

24,280

63,504

46,659

Interest expense:

Interest-bearing checking

391

200

760

243

Money market and savings accounts

10,071

6,968

20,465

11,753

Time deposits

3,222

2,145

6,516

3,202

Federal Home Loan Bank advances and other borrowings

1,622

794

3,294

1,291

Total interest expense

15,306

10,107

31,035

16,489

Net interest income before provision for

credit losses

17,311

14,173

32,469

30,170

Provision for credit losses

786

1,196

239

Net interest income after provision for

credit losses

16,525

14,135

31,273

29,931

Non-interest income:

Service fees

1,977

1,173

3,628

2,378

Gain (loss) on sale of securities available for sale,

net

(21)

Gain on sale of loans held for sale, net

417

484

441

Other non-interest income

803

579

1,549

1,118

Total non-interest income

3,211

1,846

5,675

3,916

Non-interest expense:

Salaries and employee benefits

7,353

5,882

13,663

12,259

Occupancy

1,266

1,319

2,580

2,618

Regulatory assessment and fees

476

452

909

676

Consulting and legal fees

263

386

855

744

Network and information technology services

479

505

986

983

Other operating expense

1,723

1,908

3,741

3,348

Total non-interest expense

11,560

10,452

22,734

20,628

Income before income tax expense

8,176

5,529

14,214

13,219

Income tax expense

1,967

1,333

3,393

3,214

Net income

6,209

4,196

10,821

10,005

Per share information:

Net income per share, basic

0.32

0.21

0.55

0.51

Net income per share, diluted

0.31

0.21

0.55

0.51

Cash dividend declared

0.05

0.10

The accompanying notes are an integral part of

these unaudited consolidated financial statements.

Table of Contents

USCB Financial Holdings, Inc.

Q2 2024 Form 10-Q

USCB FINANCIAL HOLDINGS, INC.

Consolidated Statements of Comprehensive Income

(Loss) - Unaudited

(Dollars in thousands)

Three Months Ended June 30,

Six Months Ended

June 30,

2024

2023

2024

2023

Net income

6,209

4,196

10,821

10,005

Other comprehensive income (loss):

Unrealized gain (loss) on investment securities

910

(6,804)

(1,224)

(3,287)

Amortization of net unrealized gain (loss) on securities

transferred from

available-for-sale to held-to-maturity

133

120

Reclassification adjustment for (gain) loss included

in net income

(14)

Unrealized gain on cash flow hedge

1,046

549

1,046

Tax effect

(251)

1,444

141

532

Total other comprehensive income (loss), net of tax

741

(4,254)

(415)

(1,568)

Total comprehensive income (loss)

6,950

(58)

10,406

8,437

The accompanying notes are an integral part of

these unaudited consolidated financial statements.

Table of Contents

USCB Financial Holdings, Inc.

Q2 2024 Form 10-Q

USCB FINANCIAL HOLDINGS, INC.

Consolidated Statements of Changes in Stockholders’

Equity - Unaudited

(Dollars in thousands,

except per share data)

Common Stock

Additional Paid-in

Capital on Common

Stock

Accumulated

Deficit

Accumulated Other

Comprehensive

Loss

Par Value

Total

Stockholders'

Equity

Balance at March 31, 2024

19,650,463

19,650

305,740

(84,952)

(45,427)

195,011

Net income

6,209

Other comprehensive income

741

Repurchase of Class A common stock

(25,000)

(25)

(275)

(300)

Restricted stock issued

5,169

(6)

Dividend payment

(1,017)

Stock-based compensation

376

Balance at June 30, 2024

19,630,632

19,631

305,835

(79,760)

(44,686)

201,020

Balance at March 31, 2023

19,622,380

19,622

305,921

(99,620)

(42,065)

183,858

Cumulative effect of adoption of accounting principle

related to ASC 326

336

Adjusted beginning balance after cumulative

effect adjustment

19,622,380

19,622

305,921

(99,284)

(42,065)

184,194

Net income

4,196

Other comprehensive loss

(4,254)

Repurchase of Class A common stock

(77,603)

(77)

(670)

(747)

Restricted stock issued

Stock-based compensation

296

Balance at June 30, 2023

19,544,777

19,545

305,547

(95,088)

(46,319)

183,685

The accompanying notes are an integral

part of these consolidated financial statements.

Table of Contents

USCB Financial Holdings, Inc.

Q2 2024 Form 10-Q

Common Stock

Additional Paid-in

Capital on Common

Stock

Accumulated

Deficit

Accumulated Other

Comprehensive

Loss

Par Value

Total

Stockholders'

Equity

Balance at December 31, 2023

19,575,435

19,575

305,212

(88,548)

(44,271)

191,968

Net income

10,821

Other comprehensive loss

(415)

Repurchase of Class A common stock

(32,100)

(32)

(348)

(380)

Restricted stock issued

57,922

(58)

Restricted stock forfeiture

(8,625)

(8)

Exercise of stock options

38,000

285

323

Dividend payment

(2,033)

Stock-based compensation

736

Balance at June 30, 2024

19,630,632

19,631

305,835

(79,760)

(44,686)

201,020

Balance at December 31, 2022

20,000,753

20,001

311,282

(104,104)

(44,751)

182,428

After tax cumulative effect of adoption of accounting

principle related to ASC

326

(989)

Adjusted beginning balance after cumulative

effect adjustment

20,000,753

20,001

311,282

(105,093)

(44,751)

181,439

Net income

10,005

Other comprehensive loss

(1,568)

Repurchase of Class A common stock

(577,603)

(577)

(6,036)

(6,613)

Restricted stock issued

121,627

121

(121)

Stock-based compensation

422

Balance at June 30, 2023

19,544,777

19,545

305,547

(95,088)

(46,319)

183,685

The accompanying notes are an integral

part of these unaudited consolidated financial

statements.

Table of Contents

USCB Financial Holdings, Inc.

Q2 2024 Form 10-Q

USCB FINANCIAL HOLDINGS, INC.

Consolidated Statements of Cash Flows - Unaudited

(Dollars in thousands)

Six Months Ended June 30,

2024

2023

Cash flows from operating activities:

Net income

10,821

10,005

Adjustments to reconcile net income

to net cash provided by operating activities:

Provision for credit losses

1,196

239

Depreciation and amortization

286

298

(Accretion) amortization of premiums on securities,

net

(228)

(178)

Accretion of deferred loan fees, net

100

(163)

Stock-based compensation

736

422

Loss (gain) on sale of available for sale securities

(14)

Gain on sale of loans held for sale

(484)

(441)

Increase in cash surrender value of bank owned

life insurance

(826)

(538)

Decrease in deferred tax assets

3,393

3,214

Net change in operating assets and liabilities:

Accrued interest receivable

(850)

(483)

Other assets

(1,198)

739

Accrued interest and other liabilities

12,991

7,051

Net cash provided by operating activities

25,923

20,186

Cash flows from investing activities:

Purchase of investment securities held

to maturity

(86,788)

Proceeds from maturities and pay-downs of investment

securities held to maturity

5,455

54,873

Purchase of investment securities available

for sale

(52,449)

(7,667)

Proceeds from maturities and pay-downs of investment

securities available for sale

9,630

7,399

Proceeds from sales of investment securities

available for sale

34,753

8,617

Net increase in loans held for investment

(49,386)

(93,737)

Purchase of loans held for investment

(44,691)

(700)

Additions to premises and equipment

(178)

(60)

Proceeds from the sale of loans held for sale

6,049

6,441

Proceeds from the redemption of Federal

Home Loan Bank stock

4,798

6,305

Purchase of Federal Home Loan Bank stock

(177)

(8,164)

Net cash used in investment activities

(86,196)

(113,481)

Cash flows from financing activities:

Proceeds from issuance of Class A common

stock, net

323

Cash dividends paid

(2,033)

Repurchase of Class A common stock

(380)

(6,613)

Net increase in deposits

119,562

92,020

Proceeds from Federal Home Loan Bank advances

and other borrowings

80,000

239,350

Repayments on Federal Home Loan Bank advances

(101,000)

(198,350)

Net cash provided by financing activities

96,472

126,407

Net increase in cash and cash equivalents

36,199

33,112

Cash and cash equivalents at beginning

of period

41,062

54,168

Cash and cash equivalents at end of period

77,261

87,280

Supplemental disclosure of cash flow

information:

Interest paid

28,538

15,535

Supplemental schedule of non-cash investing

and financing activities:

Transfer of loans held for investment to loans held

for sale

5,565

6,000

The accompanying notes are an integral

part of these unaudited consolidated financial

statements.

Table of Contents

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q2 2024 Form 10-Q

SUMMARY OF SIGNIFICANT ACCOUNTING

POLICIES

Overview

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.

The Bank

owns a

subsidiary,

Florida Peninsula

Title LLC,

that offers

our clients

title insurance

policies for

real estate

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

Florida Peninsula Title LLC began operations

in 2021.

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with instructions to

Form 10-Q and

do not include all

the information and

footnotes required by U.S.

generally accepted accounting

principles

(“U.S.

GAAP”)

for

complete

financial

statements.

All

adjustments

consisting

normally

recurring

accruals

that,

the

opinion

management,

are

necessary

for

fair

presentation

the

financial

position

and

results

operations

for

the

periods presented

have been

included. These

unaudited consolidated

financial statements

should be

read in

conjunction

with the Company’s consolidated

audited financial statements and

related notes appearing in

the Company’s Annual Report

on Form 10-K for the year ended December 31, 2023.

Principles of Consolidation

The

Company

consolidates

entities

which

has

controlling

financial

interest.

Intercompany

transactions

and

balances are eliminated in consolidation.

Use of Estimates

To prepare

financial statements in conformity with U.S. GAAP,

management makes estimates and assumptions based

on available

information. These

estimates and

assumptions affect

the amounts

reported in

the financial

statements. The

most significant

estimates impacting

the Company’s

consolidated financial

statements are

the allowance

for credit

losses

(“ACL”) and income taxes.

Reclassifications

Certain amounts in the consolidated financial statements have been reclassified to conform

to the current presentation.

Reclassifications had no impact on the net income or stockholders’

equity of the Company.

Recently Issued Accounting Standards

Adoption of New Accounting Standards

Reference Rate Reform

In March 2020, the Financial Accounting Standards

Board (“FASB”) issued Accounting Standard Update (“ASU”) 2020-

04, Reference Rate Reform (Topic 848), aiming to facilitate the impacts of reference rate reform on financial reporting. This

initiative was

subsequently clarified

in January

2021 through

ASU 2021-01,

providing optional

directives for

a designated

timeframe to alleviate challenges associated

with accounting for,

or acknowledging the effects of, reference

rate reform on

financial reporting.

These amendments

offer

discretionary

guidance for

a defined

period to

alleviate potential

accounting

complexities associated with reference rate reform in financial reporting. The expedients

and exceptions provided by these

amendments

are

not

applicable

contract

modifications

executed

and

hedging

relationships

initiated

reviewed

after

December 31, 2022, except

for pre-existing hedging relationships

as of December 31, 2022,

for which an entity

has opted

for specific

optional expedients,

and which

are retained

until the

conclusion

of the

hedging relationship.

Additionally,

the

amendments

permit

entities

make

one-time

choice

divest,

transfer,

both

divest

and

transfer

debt

securities

categorized as held to

maturity, referencing a rate impacted by reference rate

reform, and classified as

held to maturity prior

to January 1, 2020. In December 2022, the FASB issued new guidance extending the expiration date of this guidance from

December

31, 2022

December

31,

2024, after

which

entities will

no longer

authorized

apply

the relief

provided

Table of Contents

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q2 2024 Form 10-Q

under this guidance. Before this recent guidance, these amendments

were effective for all entities from March 12, 2020, to

December 31, 2022. The Company executed its transition strategy in preparation for the cessation of the London Intrabank

Offered

Rate

(“LIBOR”)

and

the

adjustment

its

existing

financial

instruments

affected

LIBOR,

whether

directly

indirectly.

LIBOR-based

originations

were

ceased

June

30,

2023,

and

for

existing

LIBOR-based

transactions,

the

Company substituted

the Secured

Overnight Financing Rate

(“SOFR”) for

LIBOR. The

Company has

completed its

transition

away from LIBOR for its loan and other financial instruments

Issued and Not Yet Adopted

Improvements to Income Tax

Disclosures

December

2023,

the

FASB

issued

ASU

2023-09,

Income

Taxes

(Topic

740):

Improvements

Income

Tax

Disclosures. This

ASU pertains

to disclosures

regarding effective

tax rates

and

cash income

taxes

paid with

the goal

providing stakeholders with more transparent and relevant information. This ASU is effective for public business entities for

annual periods beginning

after Dec. 15,

The Company

is currently assessing

the potential impact

of this ASU

on its

financial

reporting

and

has

not

yet

concluded

whether

the

changes

will

materially

affect

its

business

operations

consolidated financial statements.

INVESTMENT SECURITIES

The measurement of expected credit losses under the current expected credit loss (“CECL”) methodology is applicable

financial

assets

measured

amortized

cost,

including

loan

receivables

and

held-to-maturity

debt

securities.

The

accounting

for available-for-sale

debt securities

credit

losses is

presented

as an

allowance rather

than

as a

write-down.

Management does not intend to sell or believes that

it is more likely they will not be required to sell AFS

securities.

CECL requires a loss reserve for

securities classified as held-to-maturity

(“HTM”). The reserve should reflect

historical

credit performance

as well

as the

impact of

projected economic

forecasts.

For U.S.

Government bonds

and U.S.

Agency

issued bonds

classified as

HTM, the

explicit guarantee

of the U.S.

Government is

sufficient to

conclude that

a credit

loss

reserve is not required.

The reserve requirement is for three primary assets groups: municipal bonds, corporate bonds, and

non-agency

securitizations.

The Company

calculates

quarterly

the loss

reserve

utilizing Moody’s

ImpairmentStudio.

The

CECL measurement for

investment securities

incorporates historical

data, containing

defaults and recoveries

information,

and Moody’s baseline

economic forecast. The solution

uses probability of default/loss

given default (“PD/LGD”)

approach.

PD 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.

The Company monitors

the credit

quality of held

to maturity

securities through

the use of

credit ratings.

Credit ratings

are monitored by

the Company on

at least

a quarterly basis.

As of

June 30, 2024

and December 31,

2023, all HTM

securities

held by the Company were rated investment grade.

quarter

end,

HTM

securities

included

160.3

million

U.S.

Government

and

U.S.

Agency

issued

bonds

and

mortgage-backed

securities.

Because

the

explicit

and/or

implicit

guarantee

these

bonds,

the

Company

holds

reserves

on these

holdings.

The remaining

portion

the HTM

portfolio

is made

up of

9.3

million

investment

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 June

30, 2024.

The book

value for debt

securities classified

as HTM

represents amortized

cost

less the ACL related to these securities.

The Company determined that

an ACL on its debt

securities available for sale

as of June 30,

2024 and December 31,

2023 was not required.

Table of Contents

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q2 2024 Form 10-Q

The following

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

thousands):

June 30, 2024

Available-for-sale:

Amortized

Cost

Unrealized

Gains

Unrealized

Losses

Fair Value

U.S. Government Agency

12,420

(1,585)

10,856

Collateralized mortgage obligations

106,663

(23,671)

82,992

Mortgage-backed securities - residential

61,566

(11,788)

49,778

Mortgage-backed securities - commercial

57,936

(7,051)

50,926

Municipal securities

24,965

(5,555)

19,410

Bank subordinated debt securities

24,230

(1,770)

22,482

287,780

(51,420)

236,444

Held-to-maturity:

U.S. Government Agency

43,106

(5,520)

37,586

Collateralized mortgage obligations

59,933

(8,148)

51,789

Mortgage-backed securities - residential

41,896

285

(4,658)

37,523

Mortgage-backed securities - commercial

15,370

(1,381)

13,989

Corporate bonds

9,310

(624)

8,686

169,615

289

(20,331)

149,573

Allowance for credit losses - securities held-to-maturity

(9)

Securities held-to maturity, net of allowance for credit losses

169,606

December 31, 2023

Available-for-sale:

Amortized

Cost

Unrealized

Gains

Unrealized

Losses

Fair Value

U.S. Government Agency

9,664

(1,491)

8,173

Collateralized mortgage obligations

103,645

(23,039)

80,606

Mortgage-backed securities - residential

63,795

(11,608)

52,187

Mortgage-backed securities - commercial

49,212

(6,504)

42,764

Municipal securities

25,005

(5,667)

19,338

Bank subordinated debt securities

28,106

188

(2,033)

26,261

279,427

244

(50,342)

229,329

Held-to-maturity:

U.S. Government Agency

43,626

(5,322)

38,306

Collateralized mortgage obligations

62,735

(7,983)

54,752

Mortgage-backed securities - residential

43,784

348

(4,533)

39,599

Mortgage-backed securities - commercial

15,439

(1,257)

14,182

Corporate bonds

9,398

(727)

8,671

174,982

350

(19,822)

155,510

Allowance for credit losses - securities held-to-maturity

(8)

Securities held-to maturity, net of allowance for credit losses

174,974

During the quarter

ended June

30, 2024 there

were

investment securities

that were transferred

from available-for-

sale (“AFS”) to HTM.

For the three months ended June 30, 2024, total amortization out of Additional Other Comprehensive

Income

(“AOCI”)

for

net

unrealized

losses

securities

transferred

2022

from

AFS

HTM

was

thousand.

The

unamortized

net

unrealized

loss

June

30,

2024,

was

9.4

million.

For

the

six

months

ended

June

30,

2024,

total

amortization out of Additional

Other Comprehensive Income

(“AOCI”) for net unrealized

losses on securities transferred

2022 from AFS to HTM was $

133

thousand.

Table of Contents

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q2 2024 Form 10-Q

Gains

and

losses

the

sale

securities

are

recorded

the

trade

date

and

are

determined

the

specific

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 three and six months

ended June 30, 2024 and 2023 (in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

Available-for-sale:

2024

2023

2024

2023

Proceeds from sale and call of securities

34,753

8,617

Gross gains

195

Gross losses

(181)

(24)

Net realized gain (loss)

(21)

The amortized

cost

and

fair

value of

investment

securities,

by contractual

maturity,

are shown

below

as of

the date

indicated (in thousands).

Actual maturities may

differ from contractual

maturities because borrowers

may have the right

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

June 30, 2024:

Amortized

Cost

Fair Value

Amortized

Cost

Fair Value

Due within one year

Due after one year through five years

1,000

996

9,310

8,686

Due after five years through ten years

35,364

31,065

Due after ten years

12,831

9,831

U.S. Government Agency

12,420

10,856

43,106

37,586

Collateralized mortgage obligations

106,663

82,992

59,933

51,789

Mortgage-backed securities - residential

61,566

49,778

41,896

37,523

Mortgage-backed securities - commercial

57,936

50,926

15,370

13,989

287,780

236,444

169,615

149,573

At June 30, 2024,

there were no

securities held in

the portfolio from

any one issuer

in an amount greater

than 10% of

total

stockholders’

equity

other

than

the

U.S.

Government

and

Government

Agency

securities.

All

the

collateralized

mortgage

obligations

and

mortgage-backed

securities

June 30,

2024

and

December 31,

2023

were

issued

U.S.

sponsored entities

having a

fair value

of $

284.1

million that

were

attributable to a combination of factors, including relative

changes in interest rates since the time of purchase.

The contractual

cash

flows

for these

securities

are

guaranteed

U.S.

government

agencies

and

U.S.

government

sponsored entities. The municipal bonds are of high credit quality and the declines in fair

value are not due to credit quality.

Based

the

assessment

these

mitigating

factors,

management

believed

that

the

unrealized

losses

these

debt

security holdings are

a function of

changes in investment

spreads and interest

rate movements

and not changes

in credit

quality. Management

expects to recover the entire amortized cost basis of these

securities.

At June 30, 2024,

the Company did not

intend to sell debt

securities that are in

an unrealized loss position and

it is more

than likely not required to sell these securities before recovery

of the amortized cost basis.

The Bank is a Qualified Public Depository (“QPD”) with the State of Florida. As a QPD, the

Bank has the legal authority

maintain

public

deposits

from

cities,

municipalities,

and

the

State

Florida.

These

public

deposits

are

secured

securities pledged to the State of

Florida at a ratio of

% of the outstanding uninsured deposits

for June 30, 2024 and

for December

31, 2023.

The Bank

must also

maintain a

minimum amount

of pledged

securities to

be in

the public

funds

program.

As of June 30, 2024, the

Bank had a total of $

145.4

million in deposits under the

public funds program and pledged

the State of Florida for these public funds were

fifty-one

bonds with an aggregate fair value of $

135.2

million.

As of

December 31, 2023, the

Bank had

a total

of $

268.4

million in

deposits under the

public funds program

and pledged

to the State of Florida for these public funds were

twenty-eight

bonds with an aggregate fair value of $

86.9

million.

The Board

of Governors

of the

Federal 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

eligible

depository

institutions

pledging

U.S.

Treasuries,

U.S.

agency

debt

and

mortgage-backed

securities, and other qualifying

assets as collateral. These

pledged assets were valued

at par. The

BTFP program ceased

making new loans as of March 2024.

Table of Contents

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q2 2024 Form 10-Q

The Company

had $

million in

borrowings under

the BTFP

program as

of June

30, 2024,

and had

pledged $

127.4

million in

securities

measured

at par

to the

Federal

Reserve

Bank of

Atlanta for

the BTFP

program

maturing

in January

2025.

LOANS

The following table is a summary of the distribution of

loans held for investment by type (in thousands):

June 30, 2024

December 31, 2023

Total

Percent of

Total

Percent of

Total

Residential Real Estate

256,807

13.8

204,419

11.5

Commercial Real Estate

1,053,030

56.4

1,047,593

58.8

Commercial and Industrial

248,525

13.3

219,757

12.4

Foreign Banks

112,510

6.0

114,945

6.5

Consumer and Other

194,644

10.5

191,930

10.8

Total

gross loans

1,865,516

100.0

1,778,644

100.0

Plus: Deferred fees/costs

3,733

2,183

Total

loans net of deferred fees/costs

1,869,249

1,780,827

Less: Allowance for credit losses

22,230

21,084

Total

net loans

1,847,019

1,759,743

June 30,

2024

and

December 31,

2023,

the

Company

had

547.9

million

and

534.2

million,

respectively,

commercial real estate

and residential mortgage loans

pledged as collateral

for lines of

credit with the

FHLB and the

Federal

Reserve Bank of Atlanta.

Allowance for Credit Losses

general,

the

Company

utilizes

the

Discounted

Cash

Flow

(“DCF”)

method

the

Remaining

Life

(“WARM”)

methodology to estimate the quantitative portion

of the ACL for loan

pools. The DCF uses a

loss driver analysis (“LDA”) and

discounted cash flow

analyses. Management engaged

advisors and consultants

with expertise in

CECL model development

to assist

in development

of a

LDA based

on regression

models and

supportable forecast.

Peer group

data obtained

from

FFIEC

Call

Report

filings

used

inform

regression

analyses

quantify

the

impact

reasonable

and

supportable

forecasts in projective

models. Economic forecasts

applied to regression

models to estimate

probability of default

for loan

receivables use at least one

of the following economic indicators: civilian

unemployment rate (national), real gross domestic

product growth (national

GDP) or the

House Price Index (“HPI”).

For each of

the segments in

which the WARM methodology

is used,

the 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

qualitative factors.

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

Table of Contents

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q2 2024 Form 10-Q

Changes in the ACL for the three and six months ended June

30, 2024 and 2023 were as follows (in thousands):

Residential

Real Estate

Commercial

Real Estate

Commercial

and

Industrial

Foreign

Banks

Consumer

and Other

Total

Three Months Ended June 30, 2024

Beginning balance

2,930

10,302

4,272

794

3,156

21,454

Provision for credit losses

(1)

257

(30)

474

(25)

774

Recoveries

Charge-offs

(5)

Ending Balance

3,193

10,272

4,747

892

3,126

22,230

Six Months Ended June 30, 2024

Beginning balance

2,695

10,366

3,974

911

3,138

21,084

Provision for credit losses

(2)

492

(94)

762

(19)

(4)

1,137

Recoveries

Charge-offs

(10)

Ending Balance

3,193

10,272

4,747

892

3,126

22,230

(1) Provision for credit losses excludes a $

thousand charge due to unfunded commitments included in other liabilities and a $

thousand charge related to investment securities held to maturity.

(2) Provision for credit losses excludes a $

thousand charge due to unfunded commitments included in other liabilities and a $

thousand charge related to investment securities held to maturity.

Residential

Real Estate

Commercial

Real Estate

Commercial

and

Industrial

Foreign

Banks

Consumer

and Other

Total

Three Months Ended June 30, 2023

Beginning balance

2,819

10,453

2,367

772

2,476

18,887

Provision for credit losses

(1)

(148)

(270)

125

(95)

345

(43)

Recoveries

Charge-offs

(40)

Ending Balance

2,673

10,183

2,500

677

2,782

18,815

Six Months Ended June 30, 2023

Beginning balance

1,352

10,143

4,163

720

1,109

17,487

Cumulative effect of adoption of accounting

principle

(2)

1,238

1,105

(2,158)

858

1,066

Provision for credit losses

(3)

(1,065)

443

(66)

857

242

Recoveries

Charge-offs

(45)

Ending Balance

2,673

10,183

2,500

677

2,782

18,815

(1) Provision for credit losses excludes a $

thousand release due to unfunded commitments included in other liabilities and $

thousand expense related to investment securities held to maturity.

(2) Impact of CECL adoption on January 1, 2023.

(3) Provision for credit losses excludes a $

thousand release due to unfunded commitments included in other liabilities and $

thousand expense related to investment securities held to maturity.

At June

30, 2024,

the ACL

was $

22.2

million compared

to $

21.1

million at

December 31,

increase of

1.1

million in the ACL was due to loan growth.

Charge offs for the three months ended

June 30, 2024 totaled $

thousand and were all originated in

Charge offs

for the six months ended June 30, 2024 totaled $

thousand and were all originated in 2024.

Table of Contents

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q2 2024 Form 10-Q

The Company

had charge

offs totaling

thousand for

the quarter

ended June

30 2023

on loans.

thousand of

charge offs related to loans were originated in 2015 and

thousand related to loans were originated in 2023. For the six

months ended

June 30,

2023, the

Company had

a total

of $

thousand in

charge offs,

thousand originated

in 2023

and $

originated in 2015.

The

Federal

Open

Market

Committee

(“FOMC”)

economic

forecasts

June

30,

2024,

showed

minimal

improvements in

unemployment and a

slight slower

growth forecast

for real

GDP. Fannie Mae HPI forecast

reflected minimal

improvement in national housing prices

over the next four quarters.

The Company continued to adjust the

HPI index effect

1-4

Family

loan

portfolio

with

qualitative

factor

because

Florida

housing

prices

are

performing

better

than

national

levels.

The

Q-factor

scorecard

was

updated

based

the

latest

portfolio

stress

test

and

the

resulting

maximum

loss

calculation.

Our ACL

included residential

loans. To

assess the

potential impact

of changes

in qualitative

factors related

to these

loans,

management

performed

a sensitivity

analysis.

The Company

evaluated

the

impact

of the

HPI

used

in calculating

expected losses on the residential loan segment. As of June 30,

2024, for every 100 basis points increase in the HPI

index,

the

forecast

reduces

reserves

approximately

218

thousand

and

about

basis

point

the

reserve

coverage

ratio,

everything else being

constant. This sensitivity

analysis provides a

hypothetical result to

assess the sensitivity

of the ACL

and does not represent a change in management’s

judgement.

As of June 30, 2024, we stress

tested two qualitative factors in our commercial

real estate loan pool, as it’s

the largest

segment in

our portfolio.

We evaluated

the impact

of a

change in

the qualitative

factors from

no risk

to maximum

loss to

measure the

sensitivity of

the qualitative

factors. The

change from

no risk

to high

risk resulted

in a

5.9

million or

29.5

increase in

ACL. This

sensitivity analysis

provides a

hypothetical result

to assess

the sensitivity

of the

ACL and

does not

represent a change in management’s judgement.

The ACL

and the

outstanding balances

in the

specified loan

categories as

of June 30,

2024 and

December 31, 2023

are as follows (in thousands):

Residential

Real Estate

Commercial

Real Estate

Commercial

and Industrial

Foreign

Banks

Consumer

and Other

Total

June 30, 2024:

Allowance for credit losses:

Individually evaluated

Collectively evaluated

3,148

10,272

4,697

892

3,126

22,135

Balances, end of period

3,193

10,272

4,747

892

3,126

22,230

Loans:

Individually evaluated

7,209

747

7,956

Collectively evaluated

249,598

1,053,030

247,778

112,510

194,644

1,857,560

Balances, end of period

256,807

1,053,030

248,525

112,510

194,644

1,865,516

December 31, 2023:

Allowance for credit losses:

Individually evaluated

145

128

273

Collectively evaluated

2,550

10,366

3,846

911

3,138

20,811

Balances, end of period

2,695

10,366

3,974

911

3,138

21,084

Loans:

Individually evaluated

6,994

1,668

8,662

Collectively evaluated

197,425

1,047,593

218,089

114,945

191,930

1,769,982

Balances, end of period

204,419

1,047,593

219,757

114,945

191,930

1,778,644

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

which may include:

current financial information

on the borrower,

historical

payment

experience,

credit

documentation

and

other

current

economic

trends.

Internal

credit

risk

grades

are

evaluated

periodically.

Table of Contents

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q2 2024 Form 10-Q

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

Pass

– Loans indicate different levels of satisfactory

financial condition and performance.

Special Mention

– Loans classified as special mention have a potential weakness

that deserves management’s

close attention. If left uncorrected, these potential weaknesses

may result in deterioration of the repayment

prospects for the loan or of the institution’s

credit position at some future date.

Substandard

– Loans classified as substandard are inadequately protected

by the current net worth and paying

capacity of the obligator or of the collateral pledged, if

any. Loans so classified

have a well-defined weakness or

weaknesses that jeopardize the liquidation of the debt.

They are characterized by the distinct possibility that the

institution will sustain some loss if the deficiencies are

not corrected.

Doubtful

– Loans classified as doubtful have all the weaknesses inherent

in those classified at substandard, with

the added characteristic that the weaknesses make collection

or liquidation in full on the basis of currently existing

facts, conditions, and values, highly questionable and improbable.

Loss

– Loans classified as loss are considered uncollectible.

Table of Contents

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q2 2024 Form 10-Q

Loan credit exposures by internally assigned grades are

presented below for the periods indicated (in thousands):

As of June 30, 2024

Term Loans by Origination Year

Revolving

Loans

Total

2024

2023

2022

2021

2020

Prior

Residential real estate

Pass

63,233

40,811

36,206

24,077

5,855

77,144

8,894

256,220

Substandard

587

Total

63,233

40,811

36,206

24,077

5,855

77,731

8,894

256,807

Commercial real estate

Pass

47,957

141,375

326,081

178,623

100,704

247,850

4,287

1,046,877

Substandard

5,463

690

6,153

Total

47,957

141,375

326,081

184,086

101,394

247,850

4,287

1,053,030

Commercial and

industrial

Pass

42,342

93,995

36,074

31,401

5,038

15,055

22,869

246,774

Substandard

552

1,199

1,751

Total

42,342

93,995

36,074

31,953

5,038

16,254

22,869

248,525

Foreign banks

Pass

85,759

26,751

112,510

Total

85,759

26,751

112,510

Consumer and other

loans

Pass

25,731

57,722

68,818

38,250

498

1,708

1,917

194,644

Substandard

Total

25,731

57,722

68,818

38,250

498

1,708

1,917

194,644

Total

Loans

Pass

265,022

360,654

467,179

272,351

112,095

341,757

37,967

1,857,025

Special Mention

Substandard

6,015

690

1,786

8,491

Doubtful

Total

265,022

360,654

467,179

278,366

112,785

343,543

37,967

1,865,516

Table of Contents

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q2 2024 Form 10-Q

As of December 31, 2023

Term Loans by Origination Year

Revolving

Loans

Total

2023

2022

2021

2020

2019

Prior

Residential real estate

Pass

44,365

36,325

26,180

6,080

9,325

75,654

6,198

204,127

Substandard

292

Total

44,365

36,325

26,180

6,080

9,617

75,654

6,198

204,419

Commercial real estate

Pass

148,311

337,938

184,024

104,182

78,153

182,714

4,710

1,040,032

Substandard

6,867

694

7,561

Total

148,311

337,938

190,891

104,876

78,153

182,714

4,710

1,047,593

Commercial and

industrial

Pass

97,753

37,414

34,090

6,499

13,706

3,113

25,554

218,129

Substandard

330

1,298

1,628

Total

97,753

37,414

34,420

6,499

15,004

3,113

25,554

219,757

Foreign banks

Pass

114,945

Total

114,945

Consumer and other

loans

Pass

71,593

74,387

41,966

615

560

1,337

1,472

191,930

Total

71,593

74,387

41,966

615

560

1,337

1,472

191,930

Total

Loans

Pass

476,967

486,064

286,260

117,376

101,744

262,818

37,934

1,769,163

Special Mention

Substandard

7,197

694

1,590

9,481

Doubtful

Total

476,967

486,064

293,457

118,070

103,334

262,818

37,934

1,778,644

Table of Contents

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q2 2024 Form 10-Q

Loan Aging

The Company

also considers the

performance of loans

in grading

and in

evaluating the

credit quality

of the

loan portfolio.

The Company

analyzes credit

quality and

loan grades

based on

payment performance

and the

aging status

of the

loan.

The

following

tables

include

aging

analysis

accruing

loans

and

total

non-accruing

loans

June 30,

2024

and

December 31, 2023 (in thousands):

Accruing

As of June 30, 2024

Current

Past Due 30-

89 Days

Past Due 90

Days or >

and Still

Accruing

Total

Accruing

Non-Accrual

Total Loans

Residential real estate:

Home equity line of credit and other

547

1-4 family residential

197,537

5,757

203,294

Condo residential

52,646

320

52,966

250,730

5,757

256,487

320

256,807

Commercial real estate:

Land and construction

40,049

Multi-family residential

204,811

Condo commercial

58,292

Commercial property

749,868

Leasehold improvements

1,053,030

Commercial and industrial:

Secured

229,428

438

229,866

Unsecured

18,659

248,087

438

248,525

Foreign banks

112,510

Consumer and other

194,644

Total

1,859,001

5,757

1,864,758

758

1,865,516

Table of Contents

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q2 2024 Form 10-Q

Accruing

As of December 31, 2023:

Current

Past Due

30-89 Days

Past Due 90

Days or >

and Still

Accruing

Total

Accruing

Non-Accrual

Total Loans

Residential real estate:

Home equity line of credit and other

559

1-4 family residential

155,842

711

156,553

Condo residential

43,572

3,735

47,307

199,973

4,446

204,419

Commercial real estate:

Land and construction

33,710

Multi-family residential

181,287

Condo commercial

58,106

Commercial property

772,569

1,890

774,459

Leasehold improvements

1,045,703

1,890

1,047,593

Commercial and industrial:

Secured

200,235

200,264

468

200,732

Unsecured

19,025

219,260

219,289

468

219,757

Foreign banks

114,945

Consumer and other

191,930

Total

1,771,811

6,365

1,778,176

468

1,778,644

Non-accrual Status

The following table

includes the amortized

cost basis of

loans on non-accrual

status and loans

past due over

90 days

and still accruing as of June 30, 2024 and as of December

31, 2023 (in thousands):

June 30, 2024

Nonaccrual

Loans With

No Related

Allowance

Nonaccrual

Loans With

Allowance

Total Non-

accruals

Loans Past

Due Over 90

Days and Still

Accruing

Residential real estate

320

Commercial and industrial

438

Total

320

438

758

December 31, 2023

Nonaccrual

Loans With

No Related

Allowance

Nonaccrual

Loans With

Allowance

Total Non-

accruals

Loans Past

Due Over 90

Days and Still

Accruing

Commercial and industrial

468

Total

468

Accrued interest

receivable is

excluded from

the estimate

of credit

losses. There

was

interest income

recognized

attributable to non-accrual

loans outstanding during

the three months

ended June 30,

2024 and 2023.

Interest income

these loans for

the three months

ended June 30,

2024 and 2023,

would have been

approximately $

thousand and

thousand, respectively,

had these loans performed in accordance with their

original terms.

Table of Contents

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q2 2024 Form 10-Q

Collateral-Dependent Loans

loan

collateral

dependent

when

the

borrower

experiencing

financial

difficulty

and

repayment

the

loan

expected to

be provided

substantially through

the sale

or operation

of the

collateral. There

were

collateral dependent

loans as of June 30,

2024, or as of December 31, 2023.

Loan Modifications to Borrowers Experiencing Financial

Difficulties

The following

table presents

newly restructured

loans, by

type of

modification, which

occurred during

the six

months

ended June 30, 2024 (in thousands):

Recorded Investment Prior to Modification

Recorded Investment After Modification

Number of

Loans

Combination

Modifications

Total

Modifications

Number of

Loans

Combination

Modifications

Total

Modifications

Commercial and industrial

468

Total

468

The Company had

no new modifications to

borrowers experiencing financial difficulties for

the three months

ended June

30, 2024 and one new modification for the six months ended June 30, 2024. There were

existing loan modifications that

subsequently

defaulted

during

the

three

months

and

six

months

ended

June

30,

2024.

The

Company

had

one

new

modification to borrowers experiencing

financial difficulties for

the three and six

months ended June 30,

There were

existing loan modifications that subsequently defaulted

for the three and six months ended June 30, 2023.

INCOME TAXES

The Company’s provision for income taxes is presented

in the following table for the periods indicated (in thousands):

Six Months Ended June 30,

2024

2023

Current:

Federal

State

Total

current

Deferred:

Federal

2,653

2,513

State

740

701

Total

deferred

3,393

3,214

Total

tax expense

3,393

3,214

The actual income tax

expense for the six

months ended June 30, 2024 and

2023 differs from the statutory

tax expense

for the periods (computed by

applying the U.S. federal corporate tax

rate of

% for both 2024 and 2023

to income before

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

Six Months Ended June 30,

2024

2023

Federal taxes at statutory rate

2,985

2,776

State income taxes, net of federal tax benefit

618

574

Bank owned life insurance

(210)

(136)

Other, net

Total

tax expense

3,393

3,214

Table of Contents

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q2 2024 Form 10-Q

The Company’s deferred tax assets and deferred

tax liabilities as of the dates indicated were (in thousands):

June 30, 2024

December 31, 2023

Deferred tax assets:

Net operating loss

13,098

16,430

Allowance for credit losses

5,700

5,410

Lease liability

2,519

2,895

Unrealized losses on available for sale securities

15,394

15,114

Depreciable property

141

203

Equity compensation

811

630

Accruals

331

382

Other, net

Deferred tax assets:

38,009

41,074

Deferred tax liabilities:

Deferred loan cost

(946)

(553)

Lease right of use asset

(2,519)

(2,895)

Deferred expenses

(213)

(180)

Cash flow hedge

(224)

(85)

Other, net

(77)

(79)

Deferred tax liabilities

(3,979)

(3,792)

Net deferred tax assets

34,030

37,282

The Company

has approximately

47.8

million of

federal

and $

70.5

million of

state net

operating

loss carryforwards

expiring in various amounts between

2031 and 2036 and which

are limited to offset,

to the extent permitted, future

taxable

earnings of the Company.

In assessing the realizability of deferred tax assets, management considers

whether it is more likely than not that some

portion or

all of

the deferred

tax assets

will not

be realized.

The ultimate

realization

of deferred

tax assets

is dependent

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 major tax

jurisdictions where the

Company files income

tax returns are

the U.S. federal

jurisdiction and

the State

of Florida. With few exceptions, the Company is no longer subject to U.S. federal and state income tax examinations by tax

authorities for years before 2020.

For the three months and six months ended June 30, 2024 and 2023, the Company did

t have any unrecognized tax

benefits

result

tax

positions

taken

during

prior

period

during

the

current

period.

Additionally,

interest

penalties were recorded as a result of tax uncertainties.

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

commercial

letters of

credit. Those

instruments involve,

to varying

degrees, elements

of credit

and interest

rate risk

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 instruments

for unused lines of credit, and standby letters of credit

is represented by the contractual amount of these commitments.

Table of Contents

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q2 2024 Form 10-Q

summary

the

amounts

the

Company's

financial

instruments

with

off-balance

sheet

risk

are

shown

below

June 30, 2024 and December 31, 2023 (in thousands):

June 30, 2024

December 31, 2023

Commitments to grant loans and unfunded lines of credit

90,426

85,117

Standby and commercial letters of credit

3,566

3,987

Total

93,992

89,104

Commitments to

extend credit

are agreements

to lend

to a

customer as

long as

there is

no violation

of any

condition

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

existing

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

committed.

Standby

and

commercial

letters

credit

are

conditional

commitments

issued

the

Company

guarantee

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 since

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 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.

Interest Rate Swaps Designated as a Cash Flow Hedge

As of

June 30,

2024, the

Company had

two

interest rate

swap agreements

with a

notional aggregate

amount of

million that

were designated

as cash

flow hedges

certificates

of deposit.

The

interest rate

swap

agreements

have an

average maturity

1.88

years, the

weighted

average

fixed-rate

paid of

3.59

%, and

with the

weighted

average

3-month

compound SOFR being received.

As of December

31, 2023,

the Company had

two

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 an

average

maturity

2.38

years,

the

weighted

average

fixed-rate

paid

3.59

with

the

weighted

average

3-month

compound SOFR being received.

The

changes

fair

value

these

interest

rate

swaps

are

recorded

other

assets

other

liabilities

with

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

Hedge

As of June 30,

2024, the Company

had

four

interest rate swap

agreements with a

notional aggregate amount

of $

200

million that were designated as fair value hedges on loans. The interest

rate swap agreements have an average maturity of

1.73

years,

the

weighted

average

fixed-rate

paid

4.74

with

the

weighted

average

3-month

compound

SOFR

being

received.

As of December

31, 2023, the

Company had

four

interest rate swap

agreements with a

notional aggregate amount

200

million

that

were

designated

fair

value

hedges

loans.

The

interest

rate

swap

agreements

have

average

maturity of

2.23

years, the weighted average fixed-rate paid

4.74

%, with the weighted average

3-month compound SOFR

being received.

The

changes

fair

value

these

interest

rate

swaps

are

recorded

other

assets

other

liabilities

with

corresponding recognition in the assets being hedged.

Table of Contents

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q2 2024 Form 10-Q

Interest Rate Swaps

The Company enters into interest rate swaps with its loan customers. The Company had

and

interest rate swaps

with

loan

customers

with

aggregate

notional

amount

82.8

million

and

46.5

million

June 30,

2024

and

December 31, 2023,

respectively.

These interest

rate swaps

mature between

2025 and

Company entered

into

corresponding

and

offsetting

derivatives

with

third

parties.

The

fair

value

liability

these

derivatives

requires

the

Company to provide the counterparty

with funds to be held as collateral

which the Company reports as other

assets under

the Consolidated

Balance Sheets.

While these

derivatives represent

economic hedges,

they do

not qualify

as hedges

for

accounting purposes.

The following table reflects the Company’s

interest rate swaps at the dates indicated (in thousands):

Fair Value

Notional

Amount

Collateral

Amount

Balance Sheet Location

Asset

Liability

June 30, 2024:

Derivatives designated as cash flow hedges:

Interest rate swaps

50,000

Other assets

882

Derivatives designated as hedging instruments:

Interest rate swaps

200,000

Other liabilities

408

Derivatives not designated as hedging instruments:

Interest rate swaps related to customer loans

82,849

1,363

Other assets/Other liabilities

5,568

December 31, 2023:

Derivatives designated as cash flow hedges:

Interest rate swaps

50,000

Other assets

334

Derivatives designated as fair value hedges:

Interest rate swaps

200,000

Other liabilities

3,430

Derivatives not designated as hedging instruments:

Interest rate swaps related to customer loans

46,463

1,326

Other assets/Other liabilities

4,558

FAIR VALUE

MEASUREMENTS

Determination of Fair Value

The Company

uses

fair value

measurements

to record

fair-value

adjustments

to certain

assets

and liabilities

and to

determine fair value

disclosures. In accordance

with the fair

value measurements

accounting guidance, the

fair value of

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

participants

at the

measurement

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

based on

estimates using

present value

or other

valuation

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

measurement

date

under current

market conditions.

If there

has been

a significant

decrease

in the

volume

and level

of activity

for the

asset

or liability,

change in

valuation technique or

the use

of multiple

valuation techniques may

be appropriate.

In such

instances, determining

the

price

which

willing

market

participants

would

transact

the

measurement

date

under

current

market

conditions

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

the assets

and liabilities

are traded,

and the

reliability

of the

assumptions used to determine fair value.

Level 1

Valuation

is based

on quoted

prices in

active markets

for identical

assets or

liabilities that

the reporting

entity has

the ability

to access

at the measurement

date. Level

1 assets

and liabilities

generally include

debt and

Table of Contents

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q2 2024 Form 10-Q

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

Valuation

is based on inputs other

than quoted prices included

within Level 1 that are

observable for the

asset

liability,

either

directly

indirectly.

The

valuation

may

based

quoted

prices

for

similar

assets

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

Valuation

is based on

unobservable inputs that

are supported

by little or

no market activity

and that are

significant

the

fair

value

the

assets

liabilities.

Level

assets

and

liabilities

include

financial

instruments

whose value

is determined

using pricing

models, discounted

cash

flow

methodologies,

or similar

techniques,

well as instruments for which determination of fair value

requires significant management judgment or estimation.

financial

instrument's

categorization

within

the

valuation

hierarchy

based

upon

the

lowest

level

input

that

significant to the fair value measurement.

Items Measured at Fair Value

on a Recurring Basis

AFS 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

derivatives

are

measured

with

pricing

provided

third-party

participants

and

are

classified within Level 2 of the hierarchy.

The

following

table

represents

the

Company's

assets

and

liabilities

measured

fair

value

recurring

basis

June 30, 2024 and December 31, 2023 for each of the

fair value hierarchy levels (in thousands):

June 30, 2024

December 31, 2023

Level 1

Level 2

Level 3

Total

Level 1

Level 2

Level 3

Total

Investment securities available for sale:

U.S. Government Agency

10,856

8,173

Collateralized mortgage obligations

82,992

80,606

Mortgage-backed securities - residential

49,778

52,187

Mortgage-backed securities - commercial

50,926

42,764

Municipal securities

19,410

19,338

Bank subordinated debt securities

22,482

26,261

Total

236,444

229,329

Derivative assets

6,465

4,892

Total assets at fair value

242,909

234,221

Derivative liabilities

5,976

7,988

Total liabilities at fair value

5,976

7,988

Table of Contents

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q2 2024 Form 10-Q

Items Not Measured at Fair Value

The following table

presents the carrying

amounts and estimated

fair values of

financial instruments

not carried at fair

value as of June 30, 2024 and December 31, 2023 (in

thousands):

Fair Value Hierarchy

Carrying

Amount

Level 1

Level 2

Level 3

Fair Value

Amount

June 30, 2024:

Financial Assets:

Cash and due from banks

5,179

Interest-bearing deposits in banks

72,082

Investment securities held to maturity, net

169,606

149,573

Loans held for investment, net

1,847,019

1,821,431

Accrued interest receivable

11,538

1,454

10,084

11,538

Financial Liabilities:

Demand deposits

579,243

Money market and savings accounts

1,097,468

Interest-bearing checking accounts

65,844

Time deposits

314,147

312,428

FHLB advances and other borrowings

162,000

160,087

Accrued interest payable

3,869

2,256

1,613

3,869

December 31, 2023:

Financial Assets:

Cash and due from banks

8,019

Interest-bearing deposits in banks

33,043

Investment securities held to maturity

174,974

155,510

Loans held for investment, net

1,759,743

1,723,210

Accrued interest receivable

10,688

1,448

9,240

10,688

Financial Liabilities:

Demand deposits

552,762

Money market and savings accounts

1,048,272

Interest-bearing checking accounts

47,702

Time deposits

288,403

287,104

FHLB advances

183,000

182,282

Accrued interest payable

1,372

551

821

1,372

STOCKHOLDERS’ EQUITY

Common Stock

In July

2021, the

Bank completed

the initial

public offering

of its

Class

A common

stock, in

which it

issued

and sold

4,600,000

shares of Class A

common stock at a

price of $

10.00

per share. The Bank

received total net proceeds

of $

40.0

million after deducting underwriting discounts and expenses.

In December 2021,

the Company acquired

all the issued

and outstanding shares

of the Class

A common stock

of the

Bank, which at the time were

the only issued and outstanding shares

of the Bank’s capital stock,

in a share exchange (the

“Reorganization”)

effected

under

the

Florida

Business

Corporation

Act.

Each

outstanding

the

Bank’s

Class

common stock,

par value

1.00

per share,

formerly held

by its

Shareholders was

converted into

and exchanged

for

one

newly

issued

the

Company’s

Class

common

stock,

par

value

1.00

per

share,

and

the

Bank

became

the

Company’s wholly owned subsidiary.

In the

Reorganization,

each

shareholder

of the

Bank

received securities

the same

class,

having

substantially

the

same designations,

rights,

powers, preferences,

qualifications,

limitations

and restrictions,

as those

that the

shareholder

Table of Contents

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q2 2024 Form 10-Q

held in the Bank,

and the Company’s

then current shareholders

owned the same

percentages of the

Company’s common

stock as they previously owned of the Bank’s common

stock.

During the first quarter 2024, the Company issued

52,753

shares of Class A common stock to employees as restricted

stock awards

pursuant to

the Company’s

2015 equity

incentive plan

During

the first

quarter 2023,

the Company

issued

121,627

shares of Class A

common stock to

employees and directors as

restricted stock awards pursuant

to the Company’s

2015 equity incentive plan.

As previously announced,

on April 22,

2024, the

Board of Directors

approved a

new share repurchase

program of up

500,000

shares of

Class A

common stock

or approximately

2.5

% of

the Company’s

issued and

outstanding shares

common

stock.

Under

the

repurchase

program,

the

Company

may

purchase

Class

common

stock

discretionary basis from time

to time through open

market repurchases, privately negotiated

transactions, or other means.

The

repurchase

program

has

expiration

date

and

may

modified,

suspended,

terminated

any

time.

The

new

repurchase program

will commence

upon completion

of the Company’s

current repurchase

program. Repurchases

under

this new program will be funded from the Company’s

existing cash and cash equivalents or future cash flow.

During the three months

ended June 30, 2024, the

Company repurchased

25,000

shares of Class A common stock at

a weighted

average

price

per share

12.00

. The

aggregate

purchase

price

for

these

transactions

was

approximately

301

thousand, including transaction costs. These repurchases were made pursuant to the Company’s publicly announced

repurchase programs. As of June 30, 2024,

547,980

shares remained authorized for repurchase under the Company’s two

stock repurchase

programs. During

the three

months ended

June 30,

2023, the

Company repurchased

77,603

shares of

Class A

common stock at a

weighted average price per

share of $

9.58

. The aggregate purchase

price for these transactions

was approximately $

747

thousand, including transaction costs.

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

30, 2024 and December 31, 2023

were

19,630,632

and

19,575,435

, respectively.

Dividends

Declaration of dividends

by the Board

is required before

dividend payments

are made. The

Company is

limited in the

amount of

cash dividends

that it

may pay.

Payment of

dividends is

generally limited

to the

Company’s

net income

of the

current

year

combined

with

the

Company’s

retained

income

for

the

preceding

two

years,

defined

state

banking

regulations. However,

for any

dividend declaration,

the Company

must consider

additional factors

such as

the amount

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.

On January 29, 2024, the

Company announced that its Board of

Directors approved a quarterly cash dividend program.

The quarterly dividend for

the first quarter of

2024 was $

0.05

per share of Class

A common stock, paid

on March 5, 2024,

to stockholders

of record as

of the close

of business

on February 15,

aggregate distribution

in connection

with

the first

quarter dividend

was $

1.0

million. The

quarterly dividend

for the

second quarter

was $

0.05

per share

of Class

common stock, paid on June

5, 2024, to stockholders of

record as of the

close of business on May 15,

The aggregate

distribution on connection with the second quarter dividend

was $

1.0

million.

dividends were

declared

by the

Board for

the stockholders

for the

three months

and six

months ended

June 30,

2023.

See Note 11, Subsequent

Events, for information regarding dividends declared in July 2024.

The following table details the dividends declared and paid by

the Company during the three months and six months

ended June 30, 2024:

Table of Contents

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q2 2024 Form 10-Q

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

The

Company

and

the

Bank

exceeded

all

regulatory

capital

requirements

and

remained

above

“well-capitalized”

guidelines as

of June

30, 2024

and December

31, 2023. At

June 30, 2024, the

total risk-based

capital ratios for

the Company

and the Bank were

13.12

% and

13.01

%, respectively.

EARNINGS PER SHARE

Earnings

per

(“EPS”)

for

common

stock

calculated

using

the

two-class

method

required

for

participating

securities. Basic EPS

is calculated by

dividing net income

(loss) available to

common shareholders 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)

available to

common share

holders 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 dilutive.

The following table

reflects the calculation of

net income available to

common shareholders for the

three and six months

ended June 30, 2024 and 2023 (in thousands):

Three Months Ended June 30,

Six Months Ended

June 30,

2024

2023

2024

2023

Net Income

6,209

4,196

10,821

10,005

Net income available to common shareholders

6,209

4,196

10,821

10,005

The following table reflects

the calculation of basic

and diluted earnings per

common share class

for the three

and six

months ended June 30, 2024 and 2023 (in thousands,

except per share amounts):

Three Months Ended June 30,

2024

2023

Class A

Basic EPS

Numerator:

Net income available to common shares

6,209

4,196

Denominator:

Weighted average shares outstanding

19,650,681

19,590,359

Earnings per share, basic

0.32

0.21

Diluted EPS

Numerator:

Net income available to common shares

6,209

4,196

Denominator:

Weighted average shares outstanding for basic EPS

19,650,681

19,590,359

Add: Dilutive effects of assumed exercises of stock options

66,486

49,323

Weighted avg. shares including dilutive potential common shares

19,717,167

19,639,682

Earnings per share, diluted

0.31

0.21

Anti-dilutive stock options excluded from diluted EPS

502,500

730,500

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 net income 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.

Table of Contents

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q2 2024 Form 10-Q

Six Months Ended June 30,

2024

2023

Class A

Basic EPS

Numerator:

Net income available to common shares

10,821

10,005

Denominator:

Weighted average shares outstanding

19,642,006

19,722,152

Earnings per share, basic

0.55

0.51

Diluted EPS

Numerator:

Net income available to common shares

10,821

10,005

Denominator:

Weighted average shares outstanding for basic EPS

19,642,006

19,722,152

Add: Dilutive effects of assumed exercises of stock options

65,555

68,604

Weighted avg. shares including dilutive potential common shares

19,707,561

19,790,756

Earnings per share, diluted

0.55

0.51

Anti-dilutive stock options excluded from diluted EPS

502,500

730,500

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 net income 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.

10.

LOSS CONTINGENCIES

Loss contingencies,

including claims

and legal actions

may arise in

the ordinary

course of

business. In

the opinion

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.

11.

SUBSEQUENT EVENTS

Dividends

On July

22, 2024,

the Company

announced that

its Board

of Directors

declared its

third quarterly

cash dividend.

The

quarterly dividend for the

third quarter of 2024

was $

0.05

per share of

Class A common

stock and will

be paid on September

5, 2024, to stockholders of record as of the close of business

on August 15, 2024.

Table of Contents

USCB Financial Holdings, Inc.

Q2 2024 Form 10-Q

Item 2.

Management's Discussion and Analysis of Financial Condition

and Results of Operations

The

following

discussion

and

analysis

designed

provide

better

understanding

the

consolidated

financial

condition and results of

operations of the

Company and the Bank,

its wholly owned subsidiary,

as of and for

the three and

six months ended June 30, 2024.

This discussion and analysis

is best read in conjunction

with the unaudited consolidated

financial

statements

and

notes

included

this

Quarterly

Report

Form

10-Q

(“Form

10-Q”)

and

the

audited

consolidated financial statements

and related notes

included in the Annual

Report on Form

10-K (“2023 Form

10-K”) filed

with the Securities and Exchange Commission (“SEC”)

for the year ended December 31, 2023.

This discussion contains forward-looking statements that involve risks, uncertainties and assumptions that could cause

actual results to differ materially

from management's expectations. Factors that could cause

such differences are discussed

in the sections

entitled "Forward-Looking

Statements" and Item

1A “Risk Factors"

below

in Part II

hereof and in

the 2023

Form 10-K filed with the SEC which is available at the

SEC’s website www.sec.gov.

Throughout

this

document,

references

“we,”

“us,”

“our,”

and

“the

Company”

generally

refer

USCB

Financial

Holdings, Inc.

Forward-Looking Statements

This Form 10

-Q contains

statements that

are not

historical in

nature are

intended to

be, and are

hereby identified

as,

forward-looking statements for purposes

of the safe

harbor provided by

Section 21E of

the Securities Exchange Act

of 1934,

as amended. The

words “may,” “will,” “anticipate,” “could,”

“should,” “would,” “believe,”

“contemplate,” “expect,” “aim,”

“plan,”

“estimate,” “continue,”

and “intend,”

as well

as other

similar words

and expressions

of the

future, are

intended to

identify

forward-looking

statements.

These

forward-looking

statements

include

statements

our

projected

growth,

anticipated future

financial performance,

and management’s

long-term performance

goals, as

well as

statements relating

to the anticipated

effects on results

of operations and

financial condition from

expected developments or

events, or business

and growth strategies, including anticipated internal growth.

These forward-looking statements involve significant risks and uncertainties that could cause our actual results to differ

materially from those anticipated in such statements.

Potential risks and uncertainties include, but are not

limited to:

•

the strength of the United States economy in general and the strength of the local economies in which we conduct operations;

•

our ability to successfully manage interest rate risk, credit risk, liquidity risk, and other risks inherent to our industry;

•

the accuracy of our financial statement estimates and assumptions, including the estimates

used for our credit loss reserve and

deferred tax asset valuation allowance;

•

the efficiency and effectiveness of our internal control procedures and processes;

•

our ability

to comply

with the

extensive laws

and regulations

to which

we are

subject, including

the laws

for each

jurisdiction

where we operate;

•

adverse changes or conditions in capital and financial markets, including actual or potential stresses in the banking industry;

•

deposit attrition and the level of our uninsured deposits;

•

legislative or regulatory changes and changes in

accounting principles, policies, practices or guidelines, including

the on-going

effects of the implementation of the Current Expected Credit Losses (“CECL”) standard;

•

the

lack

significantly

diversified

loan

portfolio

and

the

concentration

the

South

Florida

market,

including

the

risks

geographic, depositor,

and industry

concentrations, including

our concentration

in loans

secured by

real estate,

in particular,

commercial real estate;

•

the effects of climate change;

•

the concentration of ownership of our common stock;

•

fluctuations in the price of our common stock;

•

our ability to

fund or access

the capital markets

at attractive rates

and terms and

manage our growth,

both organic growth

well as growth through other means, such as future acquisitions;

•

inflation, interest rate, unemployment rate, market and monetary fluctuations;

•

impacts of international hostilities and geopolitical events;

•

increased

competition

and its

effect

the pricing

our products

and services

well as

our interest

rate spread

and net

interest margin;

•

the loss of key employees;

•

the effectiveness of

our risk management strategies,

including operational risks,

including, but not limited

to, client, employee,

or third-party fraud and security breaches; and

•

other risks described in this Form 10-Q, the 2023 Form 10-K and other filings we make with the SEC.

All

forward-looking

statements

are

necessarily

only

estimates

future

results,

and

there

can

assurance

that

actual results will

not differ

materially from expectations.

Therefore, you are

cautioned not to

place undue reliance

on any

forward-looking statements.

Further,

forward-looking statements

included in

this quarterly

report on

Form 10-Q

are made

only

as of

the

date

hereof,

and

undertake

obligation

update

revise

any forward

-looking

statement

to reflect

events or circumstances after the date on which the statement is made or to

reflect the occurrence of unanticipated events,

Table of Contents

USCB Financial Holdings, Inc.

Q2 2024 Form 10-Q

unless required

to do

so under

the federal

securities laws.

You

should also

review the

risk factors

described in

the 2023

Form 10-K and in the reports the Company filed or will

file with the SEC.

Overview

The Company

reported net

income of

$6.2 million

or $0.31

per diluted

share of

common stock

for the

three

months

ended June

30, 2024

compared

to $4.2

million

or $0.21

per diluted

share of

common

stock for

the

three

months ended

June 30,

2023.

On January 29, 2024, the Company’s Board of Directors announced the adoption

of a quarterly dividend program. The

first quarter

a cash

dividend of

$0.05 per

share of

the Company’s

Class A common

stock was

paid on

March 5,

2024 to

shareholders of record at the close of business on February 15,

The aggregate amount distributed in connection with

this dividend

was $1.0

million. The

second quarter

cash dividend

of $0.05

per share

of the

Company’s Class

A common

stock was paid on June 5, 2024

to shareholders of record at the close of

business on May 15, 2024. The aggregate amount

distributed in connection with this dividend

was $1.0 million. Additionally,

the Company’s Board of Directors declared

a cash

dividend

$0.05

per

the

Company’s

Class A

common

stock

July

22,

2024.

The

dividend

will

paid

September 5, 2024 to shareholders of record at the close

of business on August 15, 2024.

25,000 shares of Class A common stock were repurchased at a weighted average price per share of $12.00 during the

second quarter 2024.

These repurchases were made

pursuant to the

Company’s publicly announced repurchase programs.

As of June 30, 2024, 547,980 shares remained authorized

for repurchase under the

Company’s programs.

In evaluating our financial

performance, the Company

considers the level of

and trends in net

interest income, the

net

interest

margin,

the

cost

deposits

and

borrowings,

levels

and

composition

non-interest

income

and

non-interest

expense, performance ratios,

asset quality ratios, regulatory capital ratios, and any

significant event or transaction.

Unless otherwise

stated, all

period comparisons

in the

bullet points

below are

calculated

at or

for the

quarter ended

June 30, 2024 compared to at or for the quarter ended June 30, 2023 and as of June 30, 2024

compared to December 31,

2023, and annualized where appropriate:

•

Net interest income

for the three

months ended June

30, 2024 increased

$3.1 million or

22.1% to $17.3 million

from $14.2 million

for the quarter ended June 30, 2023.

•

Net interest

margin (“NIM”)

was 2.94%

for the

three months

ended June

30, 2024

compared to

2.73% for

the three

months

ended June 30, 2023.

•

Total assets were $2.5 billion at June 30, 2024, representing an increase of $232.4 million or 10.4% from June 30, 2023

and an

increase of $119.2 million or 10.2% annualized from December 31, 2023.

•

Total loans were $1.9 billion at June

30, 2024, representing an increase of $273.3

million or 17.1% from June 30,

2023 and an

increase of $88.4 million or 10.0% annualized from December 31, 2023.

•

Total deposits were $2.1 billion at June

30, 2024, representing an increase of

$135.4 million or 7.0% from June 30,

2023 and an

increase of $119.6 million or 12.4% annualized from December 31, 2023.

•

Annualized return on average assets for the quarter ended June 30,

2024 was 1.01% compared to 0.77% for the quarter

ended

June 30, 2023.

•

Annualized return

on average

stockholders’ equity

for the

quarter ended

June 30,

2024 was

12.63% compared

to 9.13%

for

quarter ended June 30, 2023.

•

The ACL to total loans was 1.19% at June 30, 2024 and 1.18% at December 31, 2023.

•

Non-performing loans to total loans was 0.04% at June 30, 2024 and 0.03% at December 31, 2023.

•

At June 30, 2024, the total risk-based capital ratios for the Company and the Bank were 13.12% and 13.01%, respectively.

•

Tangible book

value per

common share

(a non-GAAP

financial measurement)

of $10.24

as of

June 30,

2024 was

negatively

affected by $2.28

due to accumulated

comprehensive loss of

$44.7 million at

June 30, 2024. At

June 30, 2023,

tangible book

value of $9.40 per common

share was negatively affected

by $2.37 due to

$46.3 million accumulated other

comprehensive loss.

See

“Reconciliation

and

Management

Explanation

for

Non-GAAP

Financial

Measures”

included

this

Form

10-Q

for

reconciliation of this non-GAAP financial measure.

Table of Contents

USCB Financial Holdings, Inc.

Q2 2024 Form 10-Q

Critical Accounting Policies and Estimates

The

consolidated

financial

statements

are

prepared

based

the

application

U.S.

GAAP,

the

most

significant

which

are

described

Note

“Summary

Significant

Accounting

Policies”

the

Company’s

2023

Form

10-K

and

“Summary of Significant Accounting Policies” in Part I

in this Form 10-Q . To prepare financial statements in conformity with

US GAAP,

management makes estimates, assumptions,

and judgments based on available information.

These estimates,

assumptions,

and

judgments

affect

the

amounts

reported

the

financial

statements

and

accompanying

notes.

These

estimates, assumptions,

and judgments are

based on information

available as of the

date of the financial

statements and,

this

information

changes,

actual

results

could

differ

from

the

estimates,

assumptions

and

judgments

reflected

the

financial statements. In

particular,

management has identified

accounting policies that,

due to the

estimates, assumptions

and

judgments

inherent

those

policies,

are

critical

understanding

our

financial

statements.

Management

has

presented the application of these policies to the Audit

and Risk Committee of our Board of Directors.

Non-GAAP Financial Measures

This Form 10-Q

includes financial information determined by

methods other than in

accordance with generally accepted

accounting principles (“GAAP”). This financial information

includes certain operating performance measures.

Management

has included these non-GAAP measures because it believes these

measures may provide useful supplemental information

for evaluating the Company’s underlying performance trends. Further, management uses these measures in

managing and

evaluating

the

Company’s

business

and

intends

refer

them

discussions

about

our

operations

and

performance.

Operating performance measures

should be viewed in

addition to, and not

as an alternative to

or substitute for,

measures

determined in accordance with GAAP,

and are not necessarily comparable to non-GAAP measures that may

be presented

by other companies. To the extent applicable, reconciliations of these

non-GAAP measures to the most

directly comparable

GAAP

measures

can

found

the

section

“Reconciliation

and

Management

Explanation

Non-GAAP

Financial

Measures” included in this Form 10-Q.

Segment Reporting

Management monitors the revenue streams for all its various

products and services. The identifiable segments are not

material

and

operations

are

managed

and

financial

performance

evaluated

overall

Company-wide

basis.

Accordingly, all

the financial service

operations are

considered by management

to be

aggregated in one

reportable operating

segment.

Results of Operations

General

The following

tables present

selected balance

sheet, income

statement, and

profitability ratios

for the

dates indicated

(in thousands, except ratios):

June 30, 2024

December 31, 2023

Consolidated Balance Sheets:

Total

assets

2,458,270

2,339,093

Total

loans

(1)

1,869,249

1,780,827

Total

deposits

2,056,702

1,937,139

Total

stockholders' equity

201,020

191,968

(1)

Loan amounts include deferred fees/costs.

Three Months Ended June 30,

Six Months Ended June 30,

2024

2023

2024

2023

Consolidated Statements of Operations:

Net interest income before provision for credit losses

17,311

14,173

32,469

30,170

Total

non-interest income

3,211

1,846

5,675

3,916

Total

non-interest expense

11,560

10,452

22,734

20,628

Net income

6,209

4,196

10,821

10,005

Profitability:

Efficiency ratio

56.33%

65.25%

59.60%

60.52%

Net interest margin

2.94%

2.73%

2.78%

2.97%

Table of Contents

USCB Financial Holdings, Inc.

Q2 2024 Form 10-Q

The Company’s

results

operations

depend

substantially

the

levels

our

net

interest

income

and

non-interest

income. Other factors contributing

to the results of

operations include our provision for

credit losses, the level

of non-interest

expense, and the provision for income taxes.

Three months ended June 30, 2024 compared to the three

months ended June 30, 2023

Net income increased

to $6.2 million

for the three

months ended June

30, 2024

from $4.2 million

for the same

period

in 2023.

The $2.0

million or

48% increase

in net

income was attributable

to higher

interest income from

a larger

loan portfolio,

net interest margin expansion, and increased

activity in fee generating transactions (wire fees,

gain on sale of loans,

SWAP

fees, and treasury management fees) between periods.

Six months ended June 30, 2024 compared to the six

months ended June 30, 2023

Net income increased

to $10.8 million

for the six

months ended June

30, 2024

from $10.0 million

for the same

period

in 2023. The

$816 thousand

or 8.2%

increase in

net income

was attributable

to higher

interest income

from a

larger loan

portfolio and

increased activity

in fee

generating transactions

(wire fees,

gain on

sale of

loans, SWAP

fees, and

treasury

management fees) between periods.

Net Interest Income

Net interest income

is the difference

between interest

earned on interest-earning

assets and interest

paid on interest-

bearing liabilities

and is

the primary

driver of

core earnings.

Interest income

is generated

from interest

and dividends

interest-earning

assets,

including

loans,

investment

securities

and

other

short-term

investments.

Interest

expense

incurred

from

interest

paid

interest-bearing

liabilities,

including

interest-bearing

deposits,

FHLB

advances

and

other

borrowings.

To evaluate net

interest income, we

measure and monitor

(i) yields on

loans and other

interest-earning assets, (ii)

the

costs of deposits

and other funding

sources, (iii) net

interest spread, and

(iv) net interest margin.

Net interest spread is

equal

to the difference between yields earned on interest-earning assets and rates paid on interest-bearing liabilities. Net interest

margin is

equal to

the annualized

net interest

income

divided by

average interest

-earning assets.

Because

non-interest-

bearing sources

of funds, such as non-interest-bearing deposits and

stockholders’ equity, also fund interest-earning assets,

net interest margin includes the indirect benefit of these

non-interest-bearing funding sources.

Changes

market

interest

rates

and

interest

rates

earn

interest-earning

assets

pay

interest-bearing

liabilities, as well

as the volume

and types of

interest-earning assets and interest-bearing

and non-interest-bearing liabilities,

are usually the

largest drivers

of periodic changes

in net interest

spread, net interest

margin and net

interest income.

Our

asset liability committee

(“ALCO”) has

in place asset-liability

management techniques

to manage major

factors that

affect

net interest income and net interest margin.

Table of Contents

USCB Financial Holdings, Inc.

Q2 2024 Form 10-Q

The following

table contains

information related

to average

balances, average

yields earned

on assets,

and average

costs of liabilities for the periods indicated (dollars in

thousands):

Three Months Ended June 30,

2024

2023

Average

(1)

Balance

Interest

Yield/Rate

(2)

Average

(1)

Balance

Interest

Yield/Rate

(2)

Assets

Interest-earning assets:

Loans

(3)

1,828,487

28,017

6.16%

1,569,266

20,847

5.33%

Investment securities

(4)

440,559

3,069

2.80%

422,544

2,382

2.26%

Other interest-earnings assets

100,371

1,531

6.13%

87,536

1,051

4.82%

Total interest-earning assets

2,369,417

32,617

5.54%

2,079,346

24,280

4.68%

Non-interest-earning assets

109,805

104,196

Total assets

2,479,222

2,183,542

Liabilities and stockholders' equity

Interest-bearing liabilities:

Interest-bearing checking

56,369

391

2.79%

53,561

200

1.50%

Saving and money market deposits

1,101,272

10,071

3.68%

940,095

6,968

2.97%

Time deposits

315,872

3,222

4.10%

277,001

2,145

3.11%

Total interest-bearing deposits

1,473,513

13,684

3.74%

1,270,657

9,313

2.94%

FHLB advances and other borrowings

162,000

1,622

4.03%

93,075

794

3.42%

Total interest-bearing liabilities

1,635,513

15,306

3.76%

1,363,732

10,107

2.97%

Non-interest-bearing demand deposits

610,370

601,778

Other non-interest-bearing liabilities

35,584

33,794

Total liabilities

2,281,467

1,999,304

Stockholders' equity

197,755

184,238

Total liabilities and stockholders' equity

2,479,222

2,183,542

Net interest income

17,311

14,173

Net interest spread

(5)

1.78%

1.71%

Net interest margin

(6)

2.94%

2.73%

(1)

Average balances - Daily average balances are used

to calculate yields/rates.

(2)

Annualized.

(3)

Average loan balances include non-accrual loans. Interest income

on loans includes accretion of deferred loan

fees, net of deferred loan costs.

(4)

At fair value except for securities held to maturity. This amount includes

FHLB stock.

(5)

Net interest spread is the weighted average

yield on total interest-earning assets minus the weighted

average rate on total interest-bearing liabilities.

(6)

Net interest margin is the ratio of net interest

income to average total interest-earning assets.

Table of Contents

USCB Financial Holdings, Inc.

Q2 2024 Form 10-Q

Six Months Ended June 30,

2024

2023

Average

Balance

(1)

Interest

Yield/Rate

(2)

Average

Balance

(1)

Interest

Yield/Rate

(2)

Assets

Interest-earning assets:

Loans

(3)

1,805,008

54,660

6.09

1,558,390

40,558

5.25

Investment securities

(4)

430,274

5,880

2.75

422,132

4,668

2.23

Other interest-earnings assets

112,808

2,964

5.28

65,433

1,433

4.42

Total interest-earning assets

2,348,090

63,504

5.44

2,045,955

46,659

4.60

Non-interest earning assets

109,572

106,100

Total assets

2,457,662

2,152,055

Liabilities and stockholders' equity

Interest-bearing liabilities:

Interest-bearing checking

54,857

760

2.79

55,812

243

0.88

Money market and savings accounts

1,099,423

20,465

3.74

918,697

11,753

2.58

Time deposits

319,392

6,516

4.10

251,009

3,202

2.57

Total interest-bearing deposits

1,473,672

27,741

3.79

1,225,518

15,198

2.50

Borrowings and repurchase agreements

163,093

3,294

4.06

77,425

1,291

3.36

Total interest-bearing liabilities

1,636,765

31,035

3.81

1,302,943

16,489

2.55

Non-interest bearing demand deposits

592,565

632,901

Other non-interest-bearing liabilities

32,908

32,404

Total liabilities

2,262,238

1,968,248

Stockholders' equity

195,424

183,807

Total liabilities and stockholders' equity

2,457,662

2,152,055

Net interest income

32,469

30,170

Net interest spread

(5)

1.63

2.05

Net interest margin

(6)

2.78

2.97

(1)

Average balances - Daily average balances are used

to calculate yields/rates.

(2)

Annualized.

(3)

Average loan balances include non-accrual loans. Interest income

on loans includes accretion of deferred loan fees,

net of deferred loan costs.

(4)

At fair value except for securities held to maturity. Includes FHLB stock.

(5)

Net interest spread is the weighted average

yield on total interest-earning assets minus the weighted

average rate on total interest-bearing

liabilities.

(6)

Net interest margin is the ratio of net interest

income to average total interest-earning assets.

Three months ended June 30, 2024 compared to the three months

ended June 30, 2023

Net interest income before the provision

for credit losses was $17.3 million

for the three months ended June

30, 2024,

an increase of $3.1 million

or 22.1%, from $14.2 million

for the same period in

This increase was

primarily attributable

to higher income from a larger loan portfolio combined with

an increase in the weighted average loan yield.

Net interest margin was

2.94%

for the quarter ended

June 30, 2024 and 2.73%

for the same period

in 2023. Loan yields

and rate paid on cost of funds both increased,

however loan yields grew at a higher rate

offsetting the increase in deposits

and borrowing costs.

Six months ended June 30, 2024 compared to the six months ended

June 30, 2023

Net interest income before the provision for credit losses was $32.5 million for the six months ended June 30, 2024, an

increase of $2.3 million or

7.6%, from $30.2 million for

the same period in 2023. This increase

was primarily attributable to

higher income from a larger loan portfolio combined with

an increase in the weighted average loan yield.

Net interest margin was

2.78% for the

six months ended

June 30, 2024 and

2.97%

for the same period

in 2023. Loan

yields and

rate paid

on cost

of funds

both increased,

however the

increase in

volume and

rate paid

on cost

of funds

was

higher than the increase in total interest-bearing assets.

Table of Contents

USCB Financial Holdings, Inc.

Q2 2024 Form 10-Q

Provision for Credit Losses

The provision

for credit

losses represents

a charge

to earnings

necessary to

maintain an

allowance for

credit losses

that, in

management's evaluation,

is adequate

to provide

coverage for

all expected

credit losses.

The provision

for credit

losses is impacted

by variations in

the size and

composition of our

loan and debt

securities portfolio, recent

historical and

projected future economic conditions, our internal assessment of the credit quality of the loan and debt

securities portfolios

and net charge-offs.

Three months ended June 30, 2024 compared to the three months

ended June 30, 2023

The provision for credit loss was $786 thousand for the three months ended

June 30, 2024 compared to $38 thousand

for the

same period

in 2023.

Growth in

the loan

portfolio was

the primary

driver of

the increase

in the

provision expense

during the three months ended June 30, 2024.

Six months ended June 30, 2024 compared to the six months ended

June 30, 2023

The provision for

credit loss was

$1.2 million for

the six months

ended June 30,

2024 compared to

$239 thousand for

the same period in 2023. Growth in the loan portfolio was the primary driver of the increase

in the provision expense during

the six months ended June 30, 2024.

Non-Interest Income

Our services and products generate service charges and fees, mainly from our depository

accounts. We also generate

income from gain on sale of loans though our swap and SBA

programs. In addition, we own and are beneficiaries of the life

insurance policies on some of our

employees and generate income from

the increase in the cash surrender

value of these

policies.

The following table presents the components of non-interest

income for the dates indicated (in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

2024

2023

2024

2023

Service fees

1,977

1,173

3,628

2,378

Gain (loss) on sale of securities available for sale, net

(21)

Gain on sale of loans held for sale, net

417

484

441

Other non-interest income

803

579

1,549

1,118

Total

non-interest income

3,211

1,846

5,675

3,916

Three months ended June 30, 2024 compared to the three months

ended June 30, 2023

Non-interest

income

for

the

three

months

ended

June 30,

2024

increased

$1.4

million

73.9%

$3.2

million,

compared to

the same

period in

This

increase was

primarily driven

by growth

in wire

fees, gain

on sale

of a

loans,

SWAP loan fees, and treasury management fees.

Six months ended June 30, 2024 compared to the six months ended

June 30, 2023

Non-interest income

for the six

months ended June

30, 2024

increased $1.8

million or 44.9%,

compared to

the same

period

This

increase

was

primarily

driven

growth

wire

fees,

gain

sale

loans,

SWAP

loan

fees,

and

treasury management fees.

Table of Contents

USCB Financial Holdings, Inc.

Q2 2024 Form 10-Q

Non-Interest Expense

The following table presents the components of non-interest

expense for the dates indicated (in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

2024

2023

2024

2023

Salaries and employee benefits

7,353

5,882

13,663

12,259

Occupancy

1,266

1,319

2,580

2,618

Regulatory assessment and fees

476

452

909

676

Consulting and legal fees

263

386

855

744

Network and information technology services

479

505

986

983

Other operating

1,723

1,908

3,741

3,348

Total

non-interest expense

11,560

10,452

22,734

20,628

Three months ended June 30, 2024 compared to the three months

ended June 30, 2023

Non-interest expense for

the three months

ended June 30, 2024

increased $1.1 million

or 10.6%, compared

to the

same

period in 2023.

The increase

was primarily

driven by an

increase of

$1.5 million

in salaries

and employee

benefits due

sales

incentives,

management

bonus

accrual

based

the

Company’s

performance,

merit

increases,

and

stock-based

compensation expense.

Six months ended June 30, 2024 compared to the six months ended

June 30, 2023

Non-interest expense for the six

months ended June 30, 2024 increased $2.1

million or 10.2%, compared to the

same

period in 2023.

The increase

was primarily

driven by an

increase of

$1.4 million

in salaries and

employee benefits

due to

sales

incentives,

management

bonus

accrual

based

the

Company’s

performance,

merit

increases,

and

stock-based

compensation

expense.

Regulatory

assessment

and

fees

increased

$233

thousand

due

FDIC

deposit

insurance.

Other operating expenses increased due to increase of

$153 thousand in audit and tax services.

Provision for Income Tax

Fluctuations in the effective tax rate reflect the effect of the differences in the inclusion or deductibility of certain income

and expenses for

income tax purposes.

Therefore, future

decisions on the

investments we choose

will affect our

effective

tax rate.

The cash

surrender value

of bank-owned

life insurance

policies covering

key employees,

purchasing municipal

bonds, and overall levels of taxable income will be important

elements in determining our effective tax rate.

Three months ended June 30, 2024 compared to the three months

ended June 30, 2023

Income tax

expense for

the quarter

ended June 30,

2024 was

$2.0 million

as compared

to $1.3

million for

the same

period in 2023. The effective tax rate for the three months ended June

30, 2024 and 2023 was 24.1%.

Six months ended June 30, 2024 compared to the six months ended

June 30, 2023

Income tax expense for the six months ended June 30, 2024 was $3.4 million as compared to $3.2 million for

the same

period in 2023. The effective tax rate for the six months ended June

30, 2024 was 23.9% compared to 24.3% for the same

period in 2023.

For

further

discussion

income

taxes,

see

Note

“Income

Taxes”

the

unaudited

Consolidated

Financial

Statements in Item 1 of Part I of this Form 10-Q.

Analysis of Financial Condition

Total

assets at June 30, 2024 were

$2.46 billion, an increase

of $119.2

million, or 10.2% annualized,

over total assets

of $2.34 billion at December 31, 2023. Total

loans, net of deferred fees/cost, increased $88.4 million, or 10.0% annualized,

$1.87

billion

June 30,

2024

compared

$1.78

billion

December

31,

2023.

Total

deposits

increased

$119.6

million, or 12.4% annualized, to $2.06 billion at June 30,

2024 compared to $1.94 billion December 31, 2023.

Table of Contents

USCB Financial Holdings, Inc.

Q2 2024 Form 10-Q

Investment Securities

The investment portfolio

is used and

managed to provide

liquidity through cash

flows, marketability

and, if necessary,

collateral for

borrowings. The

investment portfolio

is also

used as

a tool

to manage

interest rate

risk and

the Company’s

capital

market

risk

exposure.

The

philosophy

the

portfolio

maximize

the

Company’s

profitability

taking

into

consideration the Company’s

risk appetite and

tolerance, manage

the asset composition

and diversification,

and maintain

adequate risk-based capital ratios.

The investment portfolio

is managed in accordance

with the Board approved

Asset and Liability

Management (“ALM”)

policy,

which

includes

investment

guidelines.

Such

policy

reviewed

least

annually

frequently

deemed

necessary,

depending on

market conditions

and/or unexpected

events. The investment

portfolio composition

is subject to

change depending on the funding and liquidity needs of the Company, and the interest risk management objective directed

the

Asset-Liability

Committee

(“ALCO”).

The

portfolio

investments

also

can

used

modify

the

duration

the

balance

sheet.

The

allocation

cash

into

securities

takes

into

consideration

anticipated

future

cash

flows

(uses

and

sources) and all available sources of credit.

Our investment portfolio consists

primarily of securities issued

by U.S. government-sponsored agencies,

U.S.

agency

mortgage-backed securities,

collateralized mortgage

obligation securities,

municipal securities,

and other

debt securities,

all with varying contractual maturities and coupons. Due to the optionality embedded in these securities, the final maturities

do not necessarily represent

the expected life of

the portfolio. Some

of these securities will

be called or paid

down prior to

maturity

depending

capital market

conditions

and

expectations.

The

investment

portfolio

is regularly

reviewed by

the

Chief Financial

Officer,

Treasurer,

and the

ALCO of

the Company

to ensure

an appropriate

risk and

return profile

as well

as for adherence to the investment policy.

When evaluating AFS

debt securities under

ASC Topic

326, the Company

evaluates

whether the decline

in fair value

is attributable

to credit losses

or other

factors like interest

rate risk,

using both quantitative

and qualitative

analyses, including

company

performance

analysis,

review

credit

ratings,

remaining

payment

terms,

prepayment

speeds

and

analysis

macro-economic conditions.

Each investment is

expected to recover

its unrealized loss

position over its

holding period as

it approaches to maturity and the Company

has the intent and ability to hold

these securities to maturity.

As a result of this

evaluation, the Company concluded that no allowance

was required on AFS securities as of June 30, 2024.

quarter

end,

HTM

securities

included

$160.3

million

U.S.

Government

and

U.S.

Agency

issued

bonds

and

mortgage-backed

securities.

Because

the

explicit

and/or

implicit

guarantee

these

bonds,

the

Company

holds

reserves

on these

holdings.

The remaining

portion of

the HTM

portfolio

is made

up of

$9.3

million

in investment

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 $9 thousand Allowance

for credit losses (“ACL”)

as of June 30,

The book value

for debt securities classified as

HTM

represents amortized cost less ACL.

AFS and HTM

investment securities increased $1.7 million,

or 0.9% annualized, to

$406.1 million at June 30, 2024

from

$404.3 million

December 31,

2023.

Investment

securities

increased

due

reinvestment

payments

received

and

investment of excess

in cash

balances into high

credit quality investments

to increase the

Company’s profitability and

modify

the

Company’s

balance

sheet

duration

according

the

ALM

policy.

June 30,

2024,

investment

securities

with

market value

of $262.6 million

were pledged

to secure

public deposits

and the

BTFP.

The investment

portfolio does

not

have any tax-exempt securities.

Table of Contents

USCB Financial Holdings, Inc.

Q2 2024 Form 10-Q

The

following

table

presents

the

amortized

cost

and

fair

value

investment

securities

for

the

dates

indicated

(in

thousands):

June 30, 2024

December 31, 2023

Available-for-sale:

Amortized

Cost

Fair Value

Amortized

Cost

Fair Value

U.S. Government Agency

12,420

10,856

9,664

8,173

Collateralized mortgage obligations

106,663

82,992

103,645

80,606

Mortgage-backed securities - residential

61,566

49,778

63,795

52,187

Mortgage-backed securities - commercial

57,936

50,926

49,212

42,764

Municipal securities

24,965

19,410

25,005

19,338

Bank subordinated debt securities

24,230

22,482

28,106

26,261

287,780

236,444

279,427

229,329

Held-to-maturity:

U.S. Government Agency

43,106

37,586

43,626

38,306

Collateralized mortgage obligations

59,933

51,789

62,735

54,752

Mortgage-backed securities - residential

41,896

37,523

43,784

39,599

Mortgage-backed securities - commercial

15,370

13,989

15,439

14,182

Corporate bonds

9,310

8,686

9,398

8,671

169,615

149,573

174,982

155,510

Allowance for credit losses - securities held-to-maturity

(9)

(8)

Securities held-to maturity, net of allowance for credit losses

169,606

174,974

The following

table shows

the weighted

average yields,

categorized by

contractual maturity,

for investment

securities

as of June 30, 2024 (in thousands,

except yields):

Within 1 year

After 1 year through

5 years

After 5 years through

10 years

After 10 years

Total

Amortized

Cost

Yield

Amortized

Cost

Yield

Amortized

Cost

Yield

Amortized

Cost

Yield

Amortized

Cost

Yield

Available-for-sale:

U.S. Government Agency

0.00%

2,371

3.15%

10,049

6.82%

12,420

6.12%

Collateralized mortgage obligations

0.00%

106,663

1.64%

106,663

1.64%

MBS - residential

0.00%

61,566

1.82%

61,566

1.82%

MBS - commercial

0.00%

4,102

4.70%

53,834

3.03%

57,936

3.15%

Municipal securities

0.00%

12,134

1.71%

12,831

1.78%

24,965

1.74%

Bank subordinated debt securities

0.00%

1,000

8.00%

23,230

5.25%

0.00%

24,230

5.36%

Corporate bonds

0.00%

1,000

41,837

244,943

287,780

2.50%

Held-to-maturity:

U.S. Government Agency

0.00%

7,939

1.02%

20,154

1.46%

15,013

1.85%

43,106

1.51%

Collateralized mortgage obligations

0.00%

59,933

1.66%

59,933

1.66%

MBS - residential

0.00%

4,381

1.86%

5,899

1.75%

31,616

2.20%

41,896

2.10%

MBS - commercial

0.00%

3,065

1.62%

0.00%

12,305

2.60%

15,370

2.40%

Corporate bonds

0.00%

9,310

2.80%

0.00%

9,310

2.80%

24,695

26,053

118,867

169,615

1.86%

Loans

Loans are the

largest category of

interest-earning assets

on the unaudited

Consolidated Balance

Sheets, and usually

provide higher yields than the

remainder of the interest

-earning assets. Higher yields

typically carry greater

inherent credit

and liquidity risks in comparison to lower yield assets. The Company manages and mitigates such risks in accordance with

the credit and ALM policies, risk tolerance and balance

sheet composition.

Table of Contents

USCB Financial Holdings, Inc.

Q2 2024 Form 10-Q

The following table shows the loan portfolio composition

as of the dates indicated (in thousands):

June 30, 2024

December 31, 2023

Total

Percent of

Total

Percent of

Total

Residential Real Estate

256,807

13.8

204,419

11.5

Commercial Real Estate

1,053,030

56.4

1,047,593

58.8

Commercial and Industrial

248,525

13.3

219,757

12.4

Foreign Banks

112,510

6.0

114,945

6.5

Consumer and Other

194,644

10.5

191,930

10.8

Total

gross loans

1,865,516

100.0

1,778,644

100.0

Plus: Deferred fees/costs

3,733

2,183

Total

loans net of deferred fees/costs

1,869,249

1,780,827

Less: Allowance for credit losses

22,230

21,084

Total

net loans

1,847,019

1,759,743

Total

loans,

net of

deferred

fees/costs,

increased by

$88.4 million,

or 10.0%

annualized

$1.87

billion,

June 30,

2024 compared to December 31, 2023. The residential

real estate loan segment had the most significant growth.

Our

loan

portfolio

continues

grow,

with

commercial

real

estate

lending

the

primary

focus

which

represented

approximately

56.4%

of the

total gross

loan portfolio

as of

June 30,

loan growth

strategy

since

inception

has

been reflective of the market in which we operate and

of our strategic plan as approved by the Board.

Most of the

commercial real estate

exposure represents

loans to commercial

businesses secured

by owner-occupied

real estate.

The growth

experienced in

recent years

is primarily

due to

implementation of

our relationship-based

banking

model and

the success

of our

relationship managers

in competing

for new

business

in a

highly competitive

metropolitan

area. Many

of our

larger loan

clients have

long-term relationships

with members

of our

senior management

team or

our

relationship managers that date back to former institutions.

From a

liquidity perspective,

our loan

portfolio provides

us with

additional

liquidity due

to repayments

or unexpected

prepayments. The following table shows maturities and sensitivity

to interest rate changes for the loan portfolio at June 30,

2024 (in thousands):

Due in 1 year or

less

Due in 1 to 5

years

Due after 5 to 15

years

Due after 15

years

Total

Residential Real Estate

5,882

47,825

69,779

133,321

256,807

Commercial Real Estate

106,558

215,026

725,714

5,732

1,053,030

Commercial and Industrial

10,690

67,196

125,700

44,939

248,525

Foreign Banks

112,510

Consumer and Other

1,809

3,273

11,398

178,164

194,644

Total

gross loans

237,449

333,320

932,591

362,156

1,865,516

Interest rate sensitivity:

Fixed interest rates

198,101

179,866

185,436

265,058

828,461

Floating or adjustable rates

39,348

153,454

747,155

97,098

1,037,055

Total

gross loans

237,449

333,320

932,591

362,156

1,865,516

The information

presented

in the

table above

is based

upon the

contractual

maturities of

the individual

loans, which

may be

subject to

renewal at

their contractual

maturity.

Renewals will

depend on

approval by

our credit

department and

balance sheet

composition at the

time of

the analysis,

as well

as any

modification of terms

at the

loan’s maturity. Additionally,

maturity

concentrations,

loan

duration,

prepayment

speeds

and

other

interest

rate

sensitivity

measures

are

discussed,

reviewed, and analyzed by the ALCO. Decisions on term

/rate modifications are discussed as well.

As of June 30,

2024, approximately

56% of

the loans

have adjustable/variable

rates and

44% of the

loans have

fixed

rates.

The

adjustable/variable

rate

loans

re-price

different

benchmarks

and

tenors

different

periods

time.

contractual characteristics, there are no

material concentrations on anniversary repricing. Additionally, it is

important to note

that most

of our

loans have

interest rate

floors. This

embedded option

protects the

Company from

a decrease

in interest

rates below the floor and positions us to gain in the scenario

of higher interest rates.

Table of Contents

USCB Financial Holdings, Inc.

Q2 2024 Form 10-Q

Asset Quality

Our asset quality grading

analysis estimates the capability of

the borrower to repay

the contractual obligation of

the loan

agreement as scheduled or at all. The Company’s internal credit risk grading system is based on experiences with similarly

graded loans. Internal credit

risk grades are reviewed

at least once a

year, and

more frequently as

needed. Internal credit

risk ratings

may change

based on

management’s

assessment of

the results

from the

annual review,

portfolio monitoring,

and other developments observed with borrowers.

The internal credit risk grades used by the Company to

assess the credit worthiness of a loan are shown below:

Pass

– Loans indicate different levels of satisfactory

financial condition and performance.

Special Mention

– Loans classified as special mention have a potential weakness

that deserves management’s

close attention. If left uncorrected, these potential weaknesses

may result in deterioration of the repayment

prospects for the loan or of the institution’s

credit position at some future date.

Substandard

– Loans classified as substandard are inadequately protected

by the current net worth and paying

capacity of the obligator or of the collateral pledged, if

any. Loans so classified

have a well-defined weakness or

weaknesses that jeopardize the liquidation of the debt.

They are characterized by the distinct possibility that the

institution will sustain some loss if the deficiencies are

not corrected.

Doubtful

– Loans classified as doubtful have all the weaknesses inherent

in those classified at substandard, with

the added characteristic that the weaknesses make collection

or liquidation in full on the basis of currently existing

facts, conditions, and values, highly questionable and improbable.

Loss

– Loans classified as loss are considered uncollectible.

Loan credit exposures by internally assigned grades are

as follows for the dates indicated (in thousands):

June 30, 2024

Pass

Special Mention

Substandard

Doubtful

Total

Residential Real Estate

256,220

587

256,807

Commercial Real Estate

1,046,877

6,153

1,053,030

Commercial and Industrial

246,774

1,751

248,525

Foreign Banks

112,510

Consumer and Other

194,644

1,857,025

8,491

1,865,516

December 31, 2023

Pass

Special Mention

Substandard

Doubtful

Total

Residential Real Estate

204,127

292

204,419

Commercial Real Estate

1,040,032

7,561

1,047,593

Commercial and Industrial

218,129

1,628

219,757

Foreign Banks

114,945

Consumer and Other

191,930

1,769,163

9,481

1,778,644

Table of Contents

USCB Financial Holdings, Inc.

Q2 2024 Form 10-Q

Non-Performing Assets

The following table presents non-performing assets as

of the dates shown (in thousands,

except ratios):

June 30, 2024

December 31, 2023

Non-accrual loans

758

468

Loans past due over 90 days and still accruing

Total

non-performing loans

758

468

Other real estate owned

Total

non-performing assets

758

468

Asset quality ratios:

Allowance for credit losses to total loans

1.19%

1.18%

Allowance for credit losses to non-performing loans

2,933%

4,505%

Non-performing loans to total loans

0.04%

0.03%

Non-performing

assets

include

all

loans

categorized

non-accrual,

other

real

estate

owned

(“OREO”)

and

other

repossessed assets. Problem loans for

which the collection or

liquidation in full is

reasonably uncertain are placed on

a non-

accrual status. This determination is based on current existing facts concerning collateral values and the paying capacity of

the

borrower.

When

the

collection

the

full

contractual

balance

unlikely,

the

loan

placed

non-accrual

avoid

overstating the Company’s income for a loan with

increased credit risk.

If the

principal or

interest on

a commercial

loan becomes

due and

unpaid for

90 days

or more,

the loan

is placed

non-accrual status as of

the date it becomes

90 days past due

and remains in non-accrual

status until it meets

the criteria

for restoration to accrual status.

Residential loans, on

the other hand, are placed

on non-accrual status when

the principal

or interest

becomes due

and unpaid

for 120

days or

more and remains

in non-accrual

status until

it meets

the criteria

for

restoration

accrual

status.

Restoring

loan

accrual

status

possible

when

the

borrower

resumes

payment

all

principal and interest payments for a period of six consecutive months and the Company

has a documented expectation of

repayment of the remaining contractual principal and interest or the loan becomes secured and in the process of collection.

The

Company

may

grant

loan

concession

borrower

experiencing

financial

difficulties.

This

determination

performed

during

the

annual

review

process

whenever

problems

surface

regarding

the

borrower’s

ability

repay

accordance with

the original

terms of

the loan

or line

of credit.

The concessions

are given

to the

debtor in

various forms,

including interest rate

reductions, principal forgiveness, extension

of maturity date,

waiver, or deferral of

payments and other

concessions intended to minimize potential losses.

For further discussion of

non-performing loans and

borrowers experiencing financial

difficulties, see

Note 3 “Loans” to

the unaudited Consolidated Financial Statements in Item

1 of Part 1 this Form 10-Q.

Allowance for Credit Losses

The ACL

represents

an amount

that,

management's

evaluation,

is adequate

to provide

coverage

for

all

expected

future

credit

losses

outstanding

loans.

Additionally,

qualitative

adjustments

are

made

the

ACL

when,

based

management’s judgment, there

are factors impacting

the allowance estimate

not considered by

the quantitative calculations.

See Note 3 “Loans” in Item 1 of Part 1 of this Form 10-Q

for more information on the ACL.

Table of Contents

USCB Financial Holdings, Inc.

Q2 2024 Form 10-Q

The following table presents ACL and net charge-offs to average loans by

type for the periods indicated (in thousands):

Residential

Real Estate

Commercial

Real Estate

Commercial

and Industrial

Foreign

Banks

Consumer

and Other

Total

Three Months Ended June 30, 2024

Beginning balance

2,930

10,302

4,272

794

3,156

21,454

Provision for credit losses

(1)

257

(30)

474

(25)

774

Recoveries

Charge-offs

(5)

Ending Balance

3,193

10,272

4,747

892

3,126

22,230

Average loans

231,807

1,064,636

232,019

102,597

197,428

1,828,487

Net charge-offs to average loans

(0.01)%

(0.00)%

0.01%

0.00%

Six Months Ended June 30, 2024

Beginning balance

2,695

10,366

3,974

911

3,138

21,084

Provision for credit losses

(2)

492

(94)

762

(19)

(4)

1,137

Recoveries

Charge-offs

(10)

Ending Balance

3,193

10,272

4,747

892

3,126

22,230

Average loans

228,830

1,050,965

229,040

101,280

194,893

1,805,008

Net charge-offs to average loans

(0.01)%

0.01%

0.00%

(1) Provision for credit losses excludes a $15 thousand expense due to unfunded commitments included in other liabilities and a $3

thousand release related to investment securities held to maturity.

(2) Provision for credit losses excludes $58 thousand expense due to unfunded commitments included in other liabilities and $1

thousand expense due to investment securities held to maturity.

Residential

Real Estate

Commercial

Real Estate

Commercial

and Industrial

Foreign

Banks

Consumer

and Other

Total

Three Months Ended June 30, 2023

Beginning balance

2,819

10,453

2,367

772

2,476

18,887

Provision for credit losses

(1)

(148)

(270)

125

(95)

345

(43)

Recoveries

Charge-offs

(40)

Ending Balance

2,673

10,183

2,500

677

2,782

18,815

Average loans

180,945

983,926

155,241

96,399

152,755

1,569,266

Net charge-offs to average loans

0.00%

(0.02)%

0.10%

0.01%

Six Months Ended June 30, 2023

Beginning balance

1,352

10,143

4,163

720

1,109

17,487

Cumulative effect of adoption of accounting

principle

(2)

1,238

1,105

(2,158)

858

1,066

Provision for credit losses

(3)

(1,065)

443

(66)

857

242

Recoveries

Charge-offs

(45)

Ending Balance

2,673

10,183

2,500

677

2,782

18,815

Average loans

188,630

974,149

153,883

92,238

146,490

1,555,390

Net charge-offs to average loans

(0.01)%

(0.07)%

0.06%

0.00%

(1) Provision for credit losses excludes a $62 thousand expense due to unfunded commitments included in other liabilities and a $19

thousand expense related to investment securities held to maturity.

(2) Impact of CECL adoption on January 1, 2023.

(3) Provision for credit losses excludes $22 thousand release due to unfunded commitments included in other liabilities and $19

thousand expense due to investment securities held to maturity.

Table of Contents

USCB Financial Holdings, Inc.

Q2 2024 Form 10-Q

Bank-Owned Life Insurance

As of June 30,

2024, the combined

cash surrender value

of all bank-owned

life insurance (“BOLI”)

policies was $52.6

million. Changes in cash surrender value are recorded to non-interest income in the unaudited Consolidated Statements of

Operations. The Company had BOLI policies with five insurance carriers. The Company is the beneficiary of these policies.

Deposits

Customer deposits are the

primary funding source for

the Bank’s growth.

Through our network of

banking centers, we

offer a competitive array of deposit

accounts and treasury management services designed

to meet our customers’ business

needs.

Our

primary

deposit

customers

are

small-to-medium

sized

businesses

(“SMBs”),

and

the

personal

business

owners and operators of these SMBs, as well as the retail/consumer

relationships of the employees of these businesses.

The following table

presents the daily

average balance and

average rate paid

on deposits by

category for

the periods

presented (in thousands, except ratios):

Three Months Ended June 30,

2024

2023

Average Balance

Average Rate

Paid

Average Balance

Average Rate

Paid

Non-interest-bearing checking

610,370

0.00%

601,778

0.00%

Interest-bearing checking

56,369

2.79%

53,561

1.50%

Money market and savings deposits

1,101,272

3.68%

940,095

2.97%

Time deposits

315,872

4.10%

277,001

3.11%

Total

2,083,883

2.64%

1,872,435

1.99%

The Company

has a

granular deposit

portfolio with

outstanding balances

comprised of

57% in

commercial

deposits,

32%

personal

deposits,

public

funds

(which

are

partially

collateralized)

and

brokered

deposits.

The

brokered

deposits balance at June 30, 2024 was $90.0 million

and $50.0 million at June 30, 2023.

The Company has approximately

20 thousand deposit accounts

with the majority in

personal accounts, approximately

13 thousand or

62.4%. The

estimated average

account size of

our deposit portfolio

was approximately

$101 thousand

of June 30, 2024.

The

uninsured

deposits

are

estimated

based

the

FDIC

deposit

insurance

limit

$250

thousand

for

all

deposit

accounts at the Company per account holder. The total estimated amount of uninsured deposits was

54% at June 30, 2024

and 53% at

June 30, 2023.

The Company offers

Insured Cash Sweep

(“ICS”) and Certificate

Deposit Account Registry

Service

(“CDARS”)

deposit

products

fully

insure

our

clients.

The

deposit

balance

ICS/CDARS

quarter

end

was

$121.8 million at June 30, 2024 and $107.3 million at December

31, 2023.

The following table shows scheduled maturities of uninsured

time deposits as of June 30, 2024 (in thousands):

June 30, 2024

Three months or less

19,097

Over three through six months

27,505

Over six though twelve months

41,110

Over twelve months

890

88,602

Other Liabilities

The Company collects from commercial and residential loan

customers funds which are held in escrow for future

payment of real estate taxes and insurance. These escrow

funds are disbursed by the Company directly to the

insurance

companies and taxing authority of the borrower.

Escrow funds are recorded as other liabilities.

As of June 30, 2024 escrow balances totaled $14.8 million

compared to $2.3 million at December 31, 2023

Table of Contents

USCB Financial Holdings, Inc.

Q2 2024 Form 10-Q

Borrowings

member

the

FHLB

Atlanta,

are

eligible

obtain

advances

with

various

terms

and

conditions.

This

accessibility of additional

funding allows us

to efficiently and

timely meet both

expected and unexpected

outgoing cash flows

and collateral needs without adversely affecting

either daily operations or the financial condition

of the Company.

As of June 30, 2024, we

had $82.0 million of fixed-rate

advances outstanding from the

FHLB with a weighted average

rate of 3.19%. Maturity dates for the advances range between

2024 to 2028 as detailed in the table below.

The following table presents the FHLB advances as of

June 30, 2024 (in thousands):

Interest Rate

Type of Rate

Maturity Date

Amount

1.04%

Fixed

July 30, 2024

5,000

2.05%

Fixed

March 27, 2025

10,000

1.07%

Fixed

July 18, 2025

6,000

3.76%

Fixed

January 24, 2028

11,000

3.77%

Fixed

April 25, 2028

50,000

82,000

As of June 30, 2024,

we had a $80.0

million fixed-rate loan outstanding from

the FRB issued pursuant

to the Bank Term

Funding Program with an interest rate of 4.81% and a maturity

date of January 10, 2025.

have

also

established

Federal

Funds

lines

credit

with

our

upstream

correspondent

banks

and

the

Federal

Reserve Bank

of Atlanta

Discount

Window to

manage

temporary fluctuations

in our

daily cash

balances.

As of

June 30,

2024, there were no outstanding balances with any of these

liquidity sources.

Off-Balance Sheet Arrangements

We engage

in various financial

transactions in

our operations

that, under GAAP,

may not be

included on

the balance

sheet. To

meet the financing needs

of our customers we may

include commitments to extend

credit and standby letters

credit. To

a varying

degree, such

commitments involve

elements of

credit, market,

and interest

rate risk

in excess

of the

amount recognized

in the

balance sheet.

We use

more conservative

credit and

collateral policies

in making

these credit

commitments than

we do

for on-balance

sheet items.

We are

not aware

of any accounting

loss to

be incurred

by funding

these commitments;

however,

maintain

allowance

for

off-balance

sheet

credit

risk

which

is recorded

under

other

liabilities on the unaudited Consolidated Balance Sheets.

Since commitments associated with letters of

credit and commitments to extend

credit may expire unused, the

amounts

shown

not

necessarily

reflect

actual

future

cash

funding

requirements.

The

following

table

presents

lending

commitments outstanding as of the dates indicated (in thousands

June 30, 2024

December 31, 2023

Commitments to grant loans and unfunded lines of credit

90,426

85,117

Standby and commercial letters of credit

3,566

3,987

Total

93,992

89,104

Commitments to extend credit are agreements to lend funds to a client, as long as there is no violation of any condition

established

the

contract,

for

specific

purpose.

Commitments

generally

have

variable

interest

rates,

fixed

expiration

dates or

other

termination

clauses

and

may require

payment

a fee.

Since many

of the

commitments

are

expected to

expire without being

fully drawn, the

total commitment

amounts disclosed

above do not

necessarily represent

future cash

requirements.

Unfunded lines of credit represent unused portions of credit facilities to our current borrowers that represent no change

in credit risk in our portfolio. Lines

of credit generally have variable interest

rates. The maximum potential amount

of future

payments we could

be required to

make is represented

by the contractual

amount of the

commitment, less

the amount of

any advances made.

Letters of credit are

conditional commitments issued

by us to guarantee

the performance of a

client to a third

party.

the event of nonperformance by

the client in accordance with the

terms of the agreement with the

third party,

we would be

required to fund

the commitment.

If the commitment

is funded, we

would be entitled

to seek recovery

from the client

from

Table of Contents

USCB Financial Holdings, Inc.

Q2 2024 Form 10-Q

the underlying collateral,

which can include

commercial real estate,

physical plant and

property, inventory, receivables, cash

or marketable securities.

Asset and Liability Management Committee

Members

senior

management

and

our

Board

make

the

asset

and

liability

management

committee,

ALCO.

Senior management

is responsible

for ensuring

that Board

approved strategies

and policies

for managing

and mitigating

risks are appropriately executed within the designated lines

of authority and responsibility in a timely manner.

ALCO

oversees

the

establishment,

approval,

implementation,

and

review

interest

rate

risk,

management,

and

mitigation strategies, ALM related policies, ALCO procedures

and risk tolerances and appetite.

While some degree of

Interest Rate Risk

(“IRR”) is inherent to

the banking business, we

believe our ALCO implemented

sound risk management practices to identify,

quantify,

monitor, and limit IRR exposures.

When assessing

the scope

of IRR

exposure

and

impact on

the consolidated

balance sheet,

cash

flows and

income

statement,

management

considers

both

earnings

and

economic

impacts.

Asset

price

variations,

deposit

volatility

and

reduced earnings or outright losses could adversely affect

the Company’s liquidity,

performance, and capital adequacy.

Income simulations

are used

to assess

the impact

of changing

rates on

earnings under

different rates

scenarios and

time horizons.

These simulations

utilize both

instantaneous and

parallel changes

in the

level of

interest rates,

as well

non-parallel changes such as

changing slopes (flat and steepening)

and twists of the yield curve.

Static simulation models

are based on current exposures and assume a constant balance sheet with no new growth. Dynamic simulation analysis is

also utilized to have a more comprehensive assessment on IRR. This

simulation relies on detailed assumptions outlined in

our

budget

and

strategic

plan,

and

assumptions

regarding

changes

existing

lines

business,

new

business,

management strategies and client expected behavior.

have

complete

picture

IRR,

the

Company

also

evaluates

the

economic

value

equity

(“EVE”).

This

assessment

allows

measure

the

degree

which

the

economic

values

will

change

under

different

interest

rate

scenarios (parallel and non-parallel). The economic value approach focuses on a longer-term time horizon and captures all

future cash flows expected

from existing assets and

liabilities. The economic value

model utilizes a static

approach in that

the analysis

does not

incorporate new

business; rather,

the analysis

shows a

snapshot in

time of

the risk

inherent in

the

balance sheet.

Market and Interest Rate Risk Management

According to

our ALCO

model, as

of June

30, 2024,

we had

an asset

sensitive balance

sheet both

for year

one and

year two

modeling, using

the static

modeling. Asset

sensitivity indicates

that our

assets generally

reprice faster

than our

liabilities, which results in a favorable impact to net interest income when market interest rates

increase. Liability sensitivity

indicates that our

liabilities generally reprice

faster than our

assets, which results

in a favorable

impact to net

interest income

when market interest rates decrease.

Many assumptions are used

to calculate the impact of interest

rate variations on our

net interest income,

such as asset

prepayment speeds, non-maturity

deposit price sensitivity,

pricing correlations, deposit

truncations and decay rates, and key interest rate drivers.

Because of the inherent use

of these estimates and

assumptions in the model,

our actual results may,

and most likely

will, differ from static measures results.

In addition, static measures like EVE

do not include actions that management

may

undertake to manage the risks in response to anticipated changes in interest rates or customer deposit behavior. As part of

our ALM strategy and policy, management

has the ability to modify the balance sheet to either increase asset duration and

decrease liability

duration to reduce

asset sensitivity,

or to decrease

asset duration and

increase liability duration

in order

to increase asset sensitivity.

According to our model, as of June 30, 2024,

our balance sheet is asset sensitive for both year

one and year two under

interest static rate scenarios

(an increase or decrease of

400 basis points). This

means than if rates increase

the NIM will

increase and if rates decrease,

the NIM will decrease. Additionally, utilizing an EVE approach, we analyze

the risk to capital

from

the

effects

various

interest

rate

scenarios

through

long-term

discounted

cash

flow

model.

This

measures

the

difference

between

the

economic

value

our

assets

and

the

economic

value

our

liabilities,

which

proxy

for

our

liquidation value.

According to

our balance

sheet composition,

and as

expected, our

model stipulates

that an

increase in

interest rates will have a

negative impact on the EVE and

lower rates, a positive impact.

Results and analysis are presented

quarterly to the ALCO, and strategies are reviewed and refined.

Table of Contents

USCB Financial Holdings, Inc.

Q2 2024 Form 10-Q

Liquidity

Liquidity is defined

as a Company’s

capacity to meet

its cash and

collateral obligations at

a reasonable cost.

Maintaining

an adequate level of liquidity depends on the Company’s ability to

efficiently meet both expected and unexpected cash flow

and collateral needs without adversely affecting

either daily operations or the financial condition of the

Company.

Liquidity risk

is the

risk that

we will

be unable

to meet

our short-term

and long-term

obligations as

they become

due

because of an inability

to liquidate assets or

obtain relatively adequate funding. The

Company’s obligations, and the funding

sources

used

meet

them,

depend

significantly

our

business

mix,

balance

sheet

structure

and

composition,

credit

quality of our assets and the cash flow profiles of our on-

and off-balance sheet obligations.

In managing

inflows and

outflows,

management

regularly

monitors situations

that can

give rise

to increased

liquidity

risk. These

include funding

mismatches, market

constraints on

the ability

to convert

assets (particularly

investments) into

cash or in accessing sources of funds (i.e., market liquidity),

and contingent liquidity events.

Changes in macroeconomic conditions, as well as exposure

to credit, market, operational, legal and reputational

risks,

such as

cybersecurity risk,

could have

an unexpected

impact on

the Company’s

liquidity risk

profile and

are factored

into

the assessment of liquidity and the ALM framework.

Management has established

a comprehensive and

holistic management process for

identifying, measuring, monitoring

and

mitigating

liquidity

risk.

Due

its

critical

importance

the

viability

the

Company,

liquidity

risk

management

integrated into our risk management processes, Contingency

Funding Plan and ALM policy.

Critical elements of our liquidity

risk management include: effective corporate governance consisting of

oversight by the

Board and active

involvement of senior

management; appropriate strategies, policies,

procedures, and limits

used to identify

and mitigate liquidity risk; comprehensive liquidity risk measurement and

monitoring systems (including assessments of the

current and prospective cash flows or sources and uses of funds) that are commensurate with the complexity and

business

activities of

the Company;

active management

of intraday

liquidity and

collateral; an

appropriately diverse

mix of

existing

and

potential

future

funding

sources;

adequate

levels

highly

liquid

marketable

securities

free

legal,

regulatory,

operational

impediments,

that

can

used

meet

liquidity

needs

stressful

situations;

comprehensive

contingency

funding plans

that sufficiently address

potential adverse liquidity

events and emergency

cash flow

requirements; and internal

controls

and

internal

audit

processes

sufficient

determine

the

adequacy

the

institution’s

liquidity

risk

management

process.

expect

funds

available

from

several

basic

banking

activity

sources,

including

the

core

deposit

base,

the

repayment and maturity of loans and investment security

cash flows. Other potential funding sources include

federal funds

purchased,

brokered

certificates

deposit,

listing

services

certificates

deposit,

and

draws

from

the

Federal

Reserve

Bank

Atlanta

discount

window,

and

borrowings

from

the

FHLB.

Accordingly,

believe

our

liquidity

resources

are

adequate to fund loans and meet other cash needs as

necessary.

Table of Contents

USCB Financial Holdings, Inc.

Q2 2024 Form 10-Q

Capital Adequacy

June 30,

2024,

the

Bank

was

well

capitalized

under

the

FDIC’s

prompt

corrective

action

framework.

also

follow the capital conservation

buffer framework,

and as of June

30, 2024, we

exceeded the capital

conversation buffer

all capital

ratios,

according

our actual

ratios.

The

following

table

presents

the

capital

ratios

for

the

Bank

at the

dates

indicated (in thousands, except ratios).

Actual

Minimum Capital

Requirements

To be Well Capitalized

Under Prompt Corrective

Action Provisions

Amount

Ratio

Amount

Ratio

Amount

Ratio

June 30, 2024

Total

risk-based capital

247,580

13.01

152,201

8.00

190,251

10.00

Tier 1 risk-based capital

224,911

11.82

114,151

6.00

152,201

8.00

Common equity tier 1 capital

224,911

11.82

85,613

4.50

123,663

6.50

Leverage ratio

224,911

8.94

100,597

4.00

125,746

5.00

December 31, 2023:

Total

risk-based capital

233,109

12.65

147,432

8.00

184,290

10.00

Tier 1 risk-based capital

211,645

11.48

110,574

6.00

147,432

8.00

Common equity tier 1 capital

211,645

11.48

82,931

4.50

119,789

6.50

Leverage ratio

211,645

9.17

92,328

4.00

115,410

5.00

The Company is

not subject to

regulatory capital ratios

imposed by Basel

III on bank

holding companies because

the

Company is deemed to be a small bank holding company.

Impact of Inflation

Our

Consolidated

Financial

Statements

and

notes

have

been

prepared

accordance

with

U.S.

GAAP,

which require the measurement of financial

position and operating results in terms

of historical dollars, without considering

the changes in the

relative purchasing power

of money over time

due to inflation. The

impact of inflation is

reflected in the

increased cost of operations.

Unlike most industrial companies,

nearly all our assets and

liabilities are monetary in

nature.

As a result,

interest rates have a

greater impact on our

performance than do the

effects of general levels

of inflation. Periods

of high inflation

are often accompanied

by relatively higher

interest rates, and

periods of low

inflation are accompanied

relatively lower interest rates.

Recently Issued Accounting Pronouncements

Recently issued accounting

pronouncements are discussed

in Note 1 “Summary

of Significant Accounting Policies”

the unaudited Consolidated Financial Statements in Part

1 of this Form 10-Q.

Table of Contents

USCB Financial Holdings, Inc.

Q2 2024 Form 10-Q

Reconciliation and Management Explanation of Non

-GAAP Financial Measures

Management

has

included

these

non-GAAP

measures

because

believes

these

measures

may

provide

useful

supplemental information

for evaluating

the Company’s

underlying performance

trends. Further,

management uses

these

measures

managing

and

evaluating

the

Company’s

business

and

intends

refer

them

discussions

about

our

operations and performance.

Operating performance

measures should be

viewed in addition

to, and not

as an alternative

to or

substitute

for,

measures

determined

accordance

with

GAAP,

and

are

not

necessarily

comparable

to non-GAAP

measures that may be presented by other

companies. The following table reconciles the non-GAAP financial measurement

of operating net income available to common stockholders for the periods presented (in thousands,

except per share data):

Table of Contents

USCB Financial Holdings, Inc.

Q2 2024 Form 10-Q

USCB FINANCIAL HOLDINGS, INC.

NON-GAAP FINANCIAL MEASURES (UNAUDITED)

(Dollars in thousands)

As of or For the Three Months Ended

6/30/2024

3/31/2024

12/31/2023

9/30/2023

6/30/2023

Pre-tax pre-provision ("PTPP") income:

(1)

Net income

6,209

4,612

2,721

3,819

4,196

Plus: Provision for income taxes

1,967

1,426

787

1,250

1,333

Plus: Provision for credit losses

786

410

1,475

653

PTPP income

8,962

6,448

4,983

5,722

5,567

PTPP return on average assets:

(1)

PTPP income

8,962

6,448

4,983

5,722

5,567

Average assets

2,479,222

2,436,103

2,268,811

2,250,258

2,183,542

PTPP return on average assets

(2)

1.45%

1.06%

0.87%

1.01%

1.02%

Operating net income:

(1)

Net income

6,209

4,612

2,721

3,819

4,196

Less: Net gains (losses) on sale of securities

(883)

(955)

Less: Tax effect on sale of securities

(4)

224

242

Operating net income

6,199

4,612

3,380

4,532

4,196

Operating PTPP income:

(1)

PTPP income

8,962

6,448

4,983

5,722

5,567

Less: Net gains (losses) on sale of securities

(883)

(955)

Operating PTPP income

8,948

6,448

5,866

6,677

5,567

Operating PTPP return on average assets:

(1)

Operating PTPP income

8,948

6,448

5,866

6,677

5,567

Average assets

2,479,222

2,436,103

2,268,811

2,250,258

2,183,542

Operating PTPP return on average assets

(2)

1.45%

1.06%

1.03%

1.18%

1.02%

Operating return on average assets:

(1)

Operating net income

6,199

4,612

3,380

4,532

4,196

Average assets

2,479,222

2,436,103

2,268,811

2,250,258

2,183,542

Operating return on average assets

(2)

1.01%

0.76%

0.59%

0.80%

0.77%

Operating return on average equity:

(1)

Operating net income

6,199

4,612

3,380

4,532

4,196

Average equity

197,755

193,092

183,629

184,901

184,238

Operating return on average equity

(2)

12.63%

9.61%

7.30%

9.72%

9.13%

Operating Revenue:

(1)

Net interest income

17,311

15,158

14,376

14,022

14,173

Plus: Non-interest income

3,211

2,464

1,326

2,161

1,846

Less: Net gains (losses) on sale of

securities

(883)

(955)

Operating revenue

20,508

17,622

16,585

17,138

16,019

Operating Efficiency Ratio:

(1)

Total non-interest expense

11,560

11,174

10,719

10,461

10,452

Operating revenue

20,508

17,622

16,585

17,138

16,019

Operating efficiency ratio

56.37%

63.41%

64.63%

61.04%

65.25%

(1)

The Company believes these non-GAAP measurements

are key indicators of the ongoing earnings

power of the Company.

(2)

Annualized.

Table of Contents

USCB Financial Holdings, Inc.

Q2 2024 Form 10-Q

USCB FINANCIAL HOLDINGS, INC.

NON-GAAP FINANCIAL MEASURES (UNAUDITED)

(Dollars in thousands, except per share data)

As of or For the Three Months Ended

6/30/2024

3/31/2024

12/31/2023

9/30/2023

6/30/2023

Tangible book value per common share (at period-end):

(1)

Total stockholders' equity

201,020

195,011

191,968

182,884

183,685

Less: Intangible assets

Tangible stockholders' equity

201,020

195,011

191,968

182,884

183,685

Total shares issued and outstanding (at period-end):

Total common shares issued and outstanding

19,630,632

19,650,463

19,575,435

19,542,290

19,544,777

Tangible book value per common share

(2)

10.24

9.92

9.81

9.36

9.40

Operating diluted net income per common share:

(1)

Operating net income

6,199

4,612

3,380

4,532

4,196

Total weighted average diluted shares of common stock

19,717,167

19,698,258

19,573,350

19,611,897

19,639,682

Operating diluted net income per common share:

0.31

0.23

0.17

0.23

0.21

Tangible Common Equity/Tangible Assets

(1)

Tangible stockholders' equity

201,020

195,011

191,968

182,884

183,685

Tangible total assets

(3)

2,458,270

2,489,142

2,339,093

2,244,602

2,225,914

Tangible Common Equity/Tangible

Assets

8.18%

7.83%

8.21%

8.15%

8.25%

(1)

The Company believes these non-GAAP measurements

are key indicators of the ongoing earnings

power of the Company.

(2)

Excludes the dilutive effect, if any, of shares of common stock issuable upon exercise

of outstanding stock options.

(3) Since the Company has no intangible

assets, tangible total assets is the same amount

as total assets calculated under GAA

Table of Contents

USCB Financial Holdings, Inc.

Q2 2024 Form 10-Q

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

As a smaller reporting company,

we are not required to provide the information required

by this item.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Under the

supervision and with

the participation of

our management, including

our President and

Chief Executive Officer

and our

Chief Financial

Officer,

we evaluated

the effectiveness

of the

design and

operation of

the Company’s

disclosure

controls and procedures (as

defined in Rules 13a-15(e)

and 15d-15(e) under the

Exchange Act) as of

June 30, 2024. Based

that

evaluation,

management

believes

that,

the

end

the

period

covered

this

Form

10-Q,

the

Company's

disclosure controls and procedures were effective to collect, process, and disclose the information required to be disclosed

in the reports filed or submitted under the Exchange Act

within the required time periods.

Changes in Internal Control Over Financial Reporting

There has been

no change in

our internal control

over financial reporting

(as defined in

Rules 13a-15(f) and

15d-15(f)

under the Exchange Act) during the period covered by this Form 10-Q that has

materially affected, or is reasonably likely to

materially affect, our internal control over financial

reporting.

Limitations on Effectiveness of Controls and Procedures

designing

and

evaluating

the

disclosure

controls

and

procedures,

management

recognizes

that

any

controls

and

procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving

the desired control objectives.

In addition, the design

of disclosure controls and

procedures must reflect the

fact that there

are resource constraints and that management is required to apply

judgment in evaluating the benefits of possible controls

and procedures relative to their costs.

Table of Contents

USCB Financial Holdings, Inc.

Q2 2024 Form 10-Q

PART II

Item 1.

Legal Proceedings

We are not currently subject to any material legal proceedings. We are from time to time subject to claims and litigation

arising

the

ordinary

course

business.

These

claims

and

litigation

may

include,

among

other

things,

allegations

violation of banking and other applicable regulations, competition

law, labor laws and consumer

protection laws, as well as

claims or

litigation

relating

to intellectual

property,

securities, breach

of contract

and tort.

intend to

defend ourselves

vigorously against any pending or future claims and litigation.

The

Company

previously

disclosed

that

litigation

(the

“Litigation”)

had

been

commenced

July

13,

2023

three

individuals

who

were

shareholders

the

Bank

prior

the

Bank’s

reorganization

into

the

holding

company

form

organization in 2021

(the “Plaintiffs”)

against six

persons, all

of whom were

directors of

the Bank at

the relevant

time (the

“Defendants”), in the Circuit Court, Eleventh Judicial Circuit for Miami-Dade County, Florida (the “Court”) (Benes et al. v. de

Aguilera

al.)

alleging

the

Defendants

(i) caused

the

Bank,

directors

thereof,

engage

in ultra

vires

conduct by

devising

and

approving

the

exchange

transaction

effected

July

2021

pursuant

which

the

Bank’s

then

outstanding

shares of Class C and Class D preferred stock was exchanged for shares of Class A voting common stock in the

Bank (the

“Exchange Transaction”),

which action

the Plaintiffs

allege was

not permitted

by the

Bank’s Articles

of Incorporation,

and

(ii) breached

their

fiduciary

duty as

directors

of the

Bank

approving

and

engaging

the

Exchange

Transaction.

The

Plaintiffs sought the

Court to certify the

action as a class

action and to award

damages in an

amount to be

proven at trial.

The Plaintiffs sought damages exceeding $750,000

plus attorney’s fees and costs

as well as such other relief as the Court

determined to award.

The Defendants filed a motion to dismiss the Litigation with

prejudice (the “Motion”). On December 27, 2023, the Court,

after reviewing

the Motion,

the Plaintiff’s response

thereto and

the Defendant’s reply

as well

as the

oral arguments presented

the

parties

December

14,

2023,

granted

the

Motion,

dismissing

the

Litigation

with

prejudice

and

rendering

final

judgment in favor

of the Defendants

(the “Order”). The Court

reserved jurisdiction to award

costs or grant

any post-judgment

relief.

On May 1, 2024, the

Plaintiffs filed in the

Thirds District Court of

Appeal for the State of

Florida (the “Appellate Court”)

an appeal (the “Appeal”), appealing the issuance of the Order and

seeking a reversal of the Order.

The Plaintiffs claim the

Court erred

by concluding

(i) the

Exchange Transaction

was not

ultra vires,

and (ii)

that the

Legacy Shareholders

(which

includes the Plaintiffs)

lacked direct standing.

The Plaintiffs

filed their initial

brief and the

Defendants filed

on July 1,

2024

their answer brief

(“Answer Brief”) responding

to the allegations

contained in the

Appeal.

The Plaintiffs

have the ability

file a Reply Brief responding to the Defendant’s

Answer Brief but have not done so as of the date hereof.

The Company believes

that the positions

in the Appeal

are legally

and factually without

merit, and it

intends to vigorously

defend

against

the

Appeal,

pursue

any

potential

counterclaims

against

the

Plaintiffs

deems

appropriate,

and

seek

coverage

from

its

insurance

carriers.

However,

there

can

assurance

that

the

Appeal

will

resolved

favorably.

Furthermore, there

is also

no assurance

that we

will be

able to

secure coverage from

our insurance

carriers for

any expenses

incurred by

us in

connection with

defending against

the Appeal.

The Appellate

Court could

grant the

Plaintiff’s motion

reverse the Order and remand the case to the Court.

this

time,

the

opinion

management,

the

likelihood

remote

that

the

impact

such

proceedings,

either

individually or

in the

aggregate, would

have a

material adverse

effect

on our

consolidated results

of operations,

financial

condition

or cash

flows. However,

one

or more

unfavorable

outcomes

in any

claim or

litigation

against

us, including

the

aforementioned Appeal

regarding the

Exchange Transaction,

could have

a material

adverse effect

on the period

in which

such claims

or litigation

are resolved.

In addition,

regardless of

their merits

or their

ultimate outcomes,

such matters

are

costly, divert management’s

attention and may materially adversely affect our

reputation, even if resolved in our favor.

In addition

to the

foregoing, we

are from

time to

time subject

to claims

and litigation

arising in

the ordinary

course of

business.

These

claims

and

litigation

may

include,

among

other

things,

allegations

violation

banking

and

other

applicable regulations, competition

law, labor

laws and consumer

protection laws, as

well as claims or

litigation relating to

intellectual property,

securities, breach of contract

and tort. We intend

to defend ourselves vigorously

against any pending

or future claims and litigation.

There can be no

assurance that any

future legal proceedings

to which we are

a party will not

be decided adversely

our interests and have a material adverse effect

on our financial condition and operations.

Table of Contents

USCB Financial Holdings, Inc.

Q2 2024 Form 10-Q

Item 1A. Risk Factors

For detailed information about certain risk factors that could materially affect our business, financial

condition, or future

results, see “Part I, Item 1A – Risk Factors” of the

2023 Form 10-K.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

(a) None.

(b) Not applicable.

for the quarter ended June 30, 2024 were as follows:

Total

Number of

Purchased

Average

Price Paid

Per Share

Total Number of Shares Purchased

as Part of Publicly Announced Plans

or Programs (1)

Maximum Number

of Shares that May

Yet Be Purchased

Under Plans or

Programs (1)

Period

April 1 - 30, 2024

572,980

May 1 -31, 2024

572,980

June 1 - 30, 2024

25,000

12.00

25,000

547,980

(1) As of March 31, 2024 there were 72,980

number of shares available for repurchase. As

of June 30, 2024 there are two outstanding

share repurchase

programs:

On January 24, 2022, the Company announced

its initial stock repurchase program to repurchase

up to 750,000 shares of Class A common

stock.

On April 22, 2024, the Company announced the

adoption of a second repurchase program to repurchase

up to 500,000 share of Class A common

stock. To commence upon completion of its first repurchase program.

Item 3.

Defaults Upon Senior Securities

(a)

Not applicable

(b)

Not applicable

Item 4.

Mine Safety Disclosures

Not applicable.

Item 5. Other Information

(a)

Not applicable

(b)

Not applicable

(c)

During the

three months

ended June

30, 2024,

none of

the Company’s

directors or

Section 16

reporting officers

adopted

terminated

any Rule 10b5-1

trading arrangement or

non-Rule

10b5-1

trading arrangement (as

such terms are

defined in Item

408 of the SEC’s Regulation S-K).

Table of Contents

USCB Financial Holdings, Inc.

Q2 2024 Form 10-Q

Item 6. Exhibits

Exhibit No.

Description of Exhibit

2.1

Agreement and Plan of Share Exchange, dated December 27, 2021, by and between U.S. Century Bank and USCB

Financial Holdings, Inc. (incorporated by reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K (File No.

001-41196) filed with the Securities and Exchange Commission on December 30, 2021).

3.1

Articles of Incorporation, as amended, of USCB Financial Holdings, Inc. (incorporated by reference to Exhibit 3.1 to the

Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2023 (File No. 001-41196) filed with the

Securities and Exchange Commission on August 11, 2023).

3.2

Amended and Restated Bylaws of USCB Financial Holdings, Inc. (incorporated by reference to Exhibit 3.1 to the Registrant’s

Current Report on Form 8-K (File No. 001-41196) filed with the Securities and Exchange Commission on July 26, 2023).

4.1

Side Letter Agreement, dated December 30, 2021, between USCB Financial Holdings, Inc., U.S. Century Bank, Priam

Capital Fund II, LP, Patriot Financial Partners II, L.P. and Patriot Financial Partners Parallel II, L.P. (incorporated by

reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K (File No. 001-41196) filed with the Securities and

Exchange Commission on December 30, 2021).

4.2

Registration Rights Agreement, dated March 17, 2015, between U.S. Century Bank, Priam Capital Fund II, LP, Patriot

Financial Partners II, L.P., Patriot Financial Partners Parallel II, L.P., and certain other shareholders of U.S. Century Bank

(incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K (File No. 001-41196) filed with the

Securities and Exchange Commission on December 30, 2021).

4.3

Assignment and Assumption of Agreement, dated December 30, 2021, between U.S. Century Bank and USCB Financial

Holdings, Inc. (incorporated by reference to Exhibit 4.3 to the Registrant’s Current Report on Form 8-K (File No. 001-41196)

filed with the Securities and Exchange Commission on December 30, 2021).

4.4

Description of USCB Financial Holdings, Inc.’s securities (incorporated by reference to Exhibit 4.4 to the Registrant's Annual

Report on Form 10-K (File No. 001-41196) filed with the Securities and Exchange Commission on March 22, 2024).

31.1

Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.

31.2

Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.

32.1

Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350.

32.2

Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350.

101

The following financial statements

from the Company’s Quarterly

Report on Form

10-Q for the

quarter ended June 30,

2024

formatted

Inline

XBRL:

(i)

Consolidated

Balance

Sheets

(unaudited),

(ii)

Consolidated

Statements

Operations

(unaudited), (iii) Consolidated

Statements

of Comprehensive

Income (unaudited), (iv)

Consolidated Statements

of Changes

in Stockholders’

Equity (unaudited),

(v) Consolidated

Statements of

Cash Flows

(unaudited), (vi)

Notes to

Consolidated

Financial Statements (unaudited).

104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

Filed herewith.

Furnished herby.

Table of Contents

USCB Financial Holdings, Inc.

Q2 2024 Form 10-Q

SIGNATURES

Pursuant to the

requirements of

the Securities Exchange

Act of 1934,

the registrant has

duly caused this

report to be

signed on its behalf by the undersigned thereunto duly authorized.

USCB FINANCIAL HOLDINGS, INC.

(Registrant)

Signature

Title

Date

/s/ Luis de la Aguilera

Chairman, President and Chief Executive

Officer

August 12, 2024

Luis de la Aguilera

(Principal Executive Officer)

/s/ Robert Anderson

Executive Vice President and Chief Financial

Officer

August 12, 2024

Robert Anderson

(Principal Financial Officer and Principal

Accounting Officer)

exhibit311

Exhibit 31.1

Certification of Chief Executive Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act

of 2002

I, Luis de la Aguilera, certify that:

I have reviewed this Quarterly Report on Form

10-Q of USCB Financial Holdings, Inc.;

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact

necessary

make

the

statements

made,

light

the

circumstances

under

which

such

statements

were

made,

not

misleading with respect to the period covered by this report;

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all

material respects

the financial

condition, results

of operations

and cash

flows of

the registrant

as of,

and for,

the periods

presented in this report;

The

registrant’s

other

certifying

officer

and

are

responsible

for

establishing

and

maintaining

disclosure

controls

and

procedures (as

defined in

Exchange Act

Rules 13a-15(e)

and 15d-15(e))

and internal

control over

financial reporting

(as

defined in Exchange

Act Rules 13a-15(f) and 15d-15(f)) for the registrant and

have:

designed

such

disclosure

controls

and

procedures,

caused

such

disclosure

controls

and

procedures

designed

under

our

supervision,

ensure

that

material

information

relating

the

registrant,

including

its

consolidated subsidiaries, is

made known

to us by

others within those

entities, particularly during

the period in

which

this report is being prepared;

designed such internal control over financial reporting, or caused such

internal control over financial reporting to be

designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and

the

preparation

financial

statements

for

external

purposes

accordance

with

generally

accepted

accounting

principles;

evaluated the effectiveness

of the registrant’s

disclosure controls and

procedures and presented

in this report our

conclusions about the effectiveness of the

disclosure controls and procedures, as of the

end of the period covered

by this report based on such evaluation; and

disclosed in this

report any

change in the

registrant’s internal

control over

financial reporting

that occurred

during

the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an Annual Report) that

has

materially

affected,

reasonably

likely

materially

affect,

the

registrant’s

internal

control

over

financial

reporting; and

The registrant’s

other certifying

officer

and I

have disclosed,

based on

our most

recent evaluation

of internal

control over

financial

reporting,

the

registrant’s

auditors

and

the

audit

committee

the

registrant’s

board

directors

(or

persons

performing the equivalent functions):

All

significant

deficiencies

and

material

weaknesses

the

design

operation

internal

control

over

financial

reporting which are

reasonably likely

to adversely affect

the registrant’s ability

to record, process,

summarize and

report financial information; and

Any fraud, whether or not material,

that involves management or other employees who

have a significant role in

the

registrant’s internal control over financial reporting.

/s/ Luis de la Aguilera

Luis de la Aguilera

Chairman, President and Chief Executive Officer

Date: August 12, 2024

exhibit312

Exhibit 31.2

Certification of Chief Financial Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act

of 2002

I, Robert Anderson, certify that:

I have reviewed this Quarterly Report on Form 10-Q of

USCB Financial Holdings, Inc.;

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact

necessary

make

the

statements

made,

light

the

circumstances

under

which

such

statements

were

made,

not

misleading with respect to the period covered by this report;

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all

material respects

the financial

condition, results

of operations

and cash

flows of

the registrant

as of,

and for,

the periods

presented in this report;

The

registrant’s

other

certifying

officer

and

are

responsible

for

establishing

and

maintaining

disclosure

controls

and

procedures (as

defined in

Exchange Act

Rules 13a-15(e)

and 15d-15(e))

and internal

control over

financial reporting

(as

defined in Exchange Act Rules 13a-15(f) and 15d-15(f))

for the registrant and have:

designed

such

disclosure

controls

and

procedures,

caused

such

disclosure

controls

and

procedures

designed

under

our

supervision,

ensure

that

material

information

relating

the

registrant,

including

its

consolidated subsidiaries, is

made known

to us by

others within those

entities, particularly during

the period in

which

this report is being prepared;

designed such internal control over financial reporting, or caused such

internal control over financial reporting to be

designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and

the

preparation

financial

statements

for

external

purposes

accordance

with

generally

accepted

accounting

principles;

evaluated the effectiveness

of the registrant’s

disclosure controls and

procedures and presented

in this report our

conclusions about the effectiveness of the

disclosure controls and procedures, as of the

end of the period covered

by this report based on such evaluation; and

disclosed in this

report any

change in the

registrant’s internal

control over

financial reporting

that occurred

during

the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an Annual Report) that

has

materially

affected,

reasonably

likely

materially

affect,

the

registrant’s

internal

control

over

financial

reporting; and

The registrant’s

other certifying

officer

and I

have disclosed,

based on

our most

recent evaluation

of internal

control over

financial

reporting,

the

registrant’s

auditors

and

the

audit

committee

the

registrant’s

board

directors

(or

persons

performing the equivalent functions):

All

significant

deficiencies

and

material

weaknesses

the

design

operation

internal

control

over

financial

reporting which are

reasonably likely

to adversely affect

the registrant’s ability

to record, process,

summarize and

report financial information; and

Any fraud, whether or not material, that involves

management or other employees who have a significant role

in the

registrant’s internal control over financial reporting.

/s/ Robert Anderson

Robert Anderson

Chief Financial Officer

Date: August 12, 2024

exhibit321

Exhibit 32.1

Certification of Chief Executive Officer Pursuant to

18 U.S.C. Section 1350

as Adopted Pursuant to Section 906 of the Sarbanes

-Oxley Act of 2002

In connection with the Quarterly

Report of USCB Financial Holdings, Inc. (the

“Company”) on Form 10-Q for the

quarter

ended June 30, 2024, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Luis de la

Aguilera, as

President and

Chief Executive

Officer of

the Company,

certify,

to the

best of

my knowledge,

pursuant to

U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes

-Oxley Act of 2002, that:

The

Report

fully

complies

with

the

requirements

Section 13(a) or

15(d),

applicable,

the

Securities

Exchange Act of 1934; and

The

information

contained

the

Report

fairly

presents,

all

material

respects,

the

financial

condition

and

results of operations of the Company.

/s/ Luis de la Aguilera

Luis de la Aguilera

Chairman, President and Chief Executive Officer

Date: August 12, 2024

exhibit322

Exhibit 32.2

Certification of Chief Financial Officer Pursuant to

18 U.S.C. Section 1350

as Adopted Pursuant to Section 906 of the Sarbanes

-Oxley Act of 2002

In connection with the Quarterly

Report of USCB Financial Holdings, Inc. (the

“Company”) on Form 10-Q for the

quarter

ended June 30,

2024, as

filed with

the Securities

and Exchange

Commission on

the date

hereof (the

“Report”), I, Robert

Anderson,

as Chief Financial Officer of the Company, certify, to the best of my knowledge, pursuant to 18 U.S.C. §1350, as

adopted pursuant to Section 906 of the Sarbanes-Oxley

Act of 2002, that:

The

Report

fully

complies

with

the

requirements

Section 13(a) or

15(d),

applicable,

the

Securities

Exchange Act of 1934; and

The

information

contained

the

Report

fairly

presents,

all

material

respects,

the

financial

condition

and

results of operations of the Company.

/s/ Robert Anderson

Robert Anderson

Chief Financial Officer

Date: August 12, 2024