10-Q - USCB - Equibles

uscb-20250930p1i0

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

September 30, 2025

☐

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 October 31, 2025, the registrant had

18,110,385

shares of Class

common stock outstanding.

uscb-20250930p1i0

FORM 10-Q

September 30, 2025

TABLE OF CONTENTS

PART I

Item 1.

Financial Statements

Consolidated Balance Sheets as of September 30, 2025 (Unaudited) and December 31, 2024

Consolidated Statements of Operations for the three and nine months ended September 30, 2025 and 2024

(Unaudited)

Consolidated Statements of Comprehensive Income for the three and nine months ended September 30,

2025 and 2024 (Unaudited)

Consolidated Statements of Changes in Stockholders’ Equity for the three and nine months ended

September 30, 2025 and 2024 (Unaudited)

Consolidated Statements of Cash Flows for the nine months ended September 30, 2025 and 2024

(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.

Q3 2025 Form 10-Q

PART

Item 1.

Financial Statements

USCB FINANCIAL HOLDINGS, INC

Consolidated Balance Sheets – Unaudited

(Dollars in thousands, except share data)

September 30, 2025

December 31, 2024

ASSETS:

Cash and due from banks

9,988

6,986

Interest-bearing deposits in banks

46,823

70,049

Total cash and cash equivalents

56,811

77,035

Investment securities held to maturity, net of allowance of $

and $

, respectively (fair value of

143,299

and $

145,540

, respectively)

156,365

164,694

Investment securities available for sale, at fair value

324,179

260,221

Federal Home Loan Bank stock, at cost

2,328

9,379

Loans held for investment, net of allowance of

24,964

and $

24,070

, respectively

2,106,002

1,948,778

Accrued interest receivable

12,126

10,945

Premises and equipment, net

4,315

4,563

Bank owned life insurance

58,923

53,472

Deferred tax assets, net

19,457

29,646

Lease right-of-use asset

6,282

8,451

Other assets

21,157

14,032

Total assets

2,767,945

2,581,216

LIABILITIES:

Deposits:

Non-interest bearing demand deposits

584,240

575,159

Savings and money market deposits

1,291,283

1,180,809

Interest-bearing demand deposits

60,016

50,648

Time deposits

520,075

367,388

Total deposits

2,455,614

2,174,004

Federal Home Loan Bank advances

11,000

163,000

Subordinated notes

39,262

Lease liability

6,282

8,451

Accrued interest and other liabilities

46,692

20,373

Total liabilities

2,558,850

2,365,828

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 September 30, 2025

and December 31, 2024

Preferred stock - Class D; $

1.00

par value; $

5.00

per share liquidation preference;

12,309,480

authorized;

and

issued and outstanding as of September 30, 2025

and December 31, 2024

Preferred stock - Class E; $

1.00

par value; $

1,000

per share liquidation preference;

3,185,024

authorized;

and

issued and outstanding as of September 30, 2025

and December 31, 2024

Common stock - Class A Voting; $

1.00

par value;

45,000,000

shares authorized;

18,107,385

issued and

outstanding as of September 30, 2025,

19,924,632

issued and outstanding as of December 31,

2024

18,107

19,925

Common stock - Class B Non-voting; $

1.00

par value;

8,000,000

shares authorized;

and

issued and

outstanding as of September 30, 2025 and

December 31, 2024

Additional paid-in capital on common stock

277,888

307,810

Accumulated deficit

(49,094)

(67,813)

Accumulated other comprehensive loss

(37,806)

(44,534)

Total stockholders' equity

209,095

215,388

Total liabilities and stockholders' equity

2,767,945

2,581,216

The accompanying notes are an integral part of

these unaudited consolidated financial statements.

Table of Contents

USCB Financial Holdings, Inc.

Q3 2025 Form 10-Q

USCB FINANCIAL HOLDINGS, INC.

Consolidated Statements of Operations - Unaudited

(Dollars in thousands,

except per share data)

Three Months Ended September 30,

Nine Months Ended September 30,

2025

2024

2025

2024

Interest income:

Loans, including fees

32,866

29,819

95,057

84,479

Investment securities

3,522

2,754

9,978

8,634

Interest-bearing deposits in financial institutions

1,332

989

2,817

3,953

Total interest income

37,720

33,562

107,852

97,066

Interest expense:

Interest-bearing demand deposits

286

411

909

1,171

Savings and money market deposits

10,343

10,064

29,088

30,529

Time deposits

5,036

3,391

13,297

9,907

Federal Home Loan Bank advances

377

1,587

2,731

4,881

Subordinated notes

404

Total interest expense

16,446

15,453

46,429

46,488

Net interest income before provision for

credit losses

21,274

18,109

61,423

50,578

Provision for credit losses

105

931

1,817

2,127

Net interest income after provision for

credit losses

21,169

17,178

59,606

48,451

Non-interest income:

Service fees

2,661

2,544

7,394

6,172

(Loss) gain on sale of securities available for

sale, net

(28)

Gain on sale of loans held for sale, net

128

109

804

593

Other non-interest income

923

785

2,600

2,334

Total non-interest income

3,684

3,438

10,770

9,113

Non-interest expense:

Salaries and employee benefits

7,909

7,200

23,499

20,863

Occupancy

1,382

1,341

4,003

3,921

Regulatory assessments and fees

377

452

1,194

1,361

Consulting and legal fees

585

161

1,041

1,016

Network and information technology services

656

513

1,725

1,499

Other operating expense

2,139

1,787

6,272

5,528

Total non-interest expense

13,048

11,454

37,734

34,188

Income before income tax expense

11,805

9,162

32,642

23,376

Income tax expense

2,866

2,213

7,905

5,606

Net income

8,939

6,949

24,737

17,770

Per share information:

Net income per share, basic

0.46

0.35

1.25

0.90

Net income per share, diluted

0.45

0.35

1.23

0.90

Cash dividends declared

0.10

0.05

0.30

0.15

The accompanying notes are an integral part of

these unaudited consolidated financial statements.

Table of Contents

USCB Financial Holdings, Inc.

Q3 2025 Form 10-Q

USCB FINANCIAL HOLDINGS, INC.

Consolidated Statements of Comprehensive Income

Unaudited

(Dollars in thousands)

Three Months Ended

September 30,

Nine Months Ended

September 30,

2025

2024

2025

2024

Net income

8,939

6,949

24,737

17,770

Other comprehensive income:

Unrealized gain on investment securities

5,315

9,848

9,093

8,624

Reclassification adjustment for amortization of net

unrealized losses on

securities transferred from available-for-sale to held-to-maturity

200

Reclassification adjustment for realized losses (gains)

included in net

income

(14)

Unrealized loss on cash flow hedge

(123)

(930)

(309)

(381)

Tax expense

(1,340)

(2,277)

(2,284)

(2,136)

Total other comprehensive income, net of tax

3,946

6,708

6,728

6,293

Total comprehensive income

12,885

13,657

31,465

24,063

The accompanying notes are an integral part of

these unaudited consolidated financial statements.

Table of Contents

USCB Financial Holdings, Inc.

Q3 2025 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 June 30, 2025

20,078,385

20,078

309,282

(56,025)

(41,752)

231,583

Net income

8,939

Other comprehensive income

3,946

Repurchase of Class A common stock

(2,000,000)

(2,000)

(32,380)

(34,380)

Exercise of stock options

29,000

212

241

Dividend payment

(2,008)

Stock-based compensation

774

Balance at September 30, 2025

18,107,385

18,107

277,888

(49,094)

(37,806)

209,095

Balance at June 30, 2024

19,630,632

19,631

305,835

(79,760)

(44,686)

201,020

Net income

6,949

Other comprehensive income

6,708

Repurchase of Class A common stock

(10,000)

(10)

(111)

(121)

Dividend payment

(1,016)

Stock-based compensation

376

Balance at September 30, 2024

19,620,632

19,621

306,100

(73,827)

(37,978)

213,916

Common Stock

Additional Paid-in

Capital on Common

Stock

Accumulated

Deficit

Accumulated Other

Comprehensive

Loss

Par Value

Total

Stockholders'

Equity

Balance at December 31, 2024

19,924,632

19,925

307,810

(67,813)

(44,534)

215,388

Net income

24,737

Other comprehensive income

6,728

Repurchase of Class A common stock

(2,009,671)

(2,010)

(32,544)

(34,554)

Restricted stock issued

124,424

124

(124)

Exercise of stock options

68,000

490

558

Dividend payment

(6,018)

Stock-based compensation

2,256

Balance at September 30, 2025

18,107,385

18,107

277,888

(49,094)

(37,806)

209,095

Balance at December 31, 2023

19,575,435

19,575

305,212

(88,548)

(44,271)

191,968

Net income

17,770

Other comprehensive income

6,293

Repurchase of Class A common stock

(42,100)

(42)

(459)

(501)

Restricted stock issued

57,922

(58)

Restricted stock forfeiture

(8,625)

(8)

Exercise of stock options

38,000

285

323

Dividend payment

(3,049)

Stock-based compensation

1,112

Balance at September 30, 2024

19,620,632

19,621

306,100

(73,827)

(37,978)

213,916

The accompanying notes are an integral

part of these consolidated financial statements.

Table of Contents

USCB Financial Holdings, Inc.

Q3 2025 Form 10-Q

USCB FINANCIAL HOLDINGS, INC.

Consolidated Statements of Cash Flows - Unaudited

(Dollars in thousands)

Nine Months Ended September 30,

2025

2024

Cash flows from operating activities:

Net income

24,737

17,770

Adjustments to reconcile net income

to net cash provided by operating activities:

Provision for credit losses

1,817

2,127

Depreciation and amortization

456

436

Accretion of premiums on securities, net

(1,136)

(365)

Amortization of deferred loan fees, net

723

660

Stock-based compensation

2,256

1,112

(Loss) gain on sale of available for sale securities,

net

(14)

Gain on sale of loans held for sale, net

(804)

(593)

Proceeds from the sale of loans held for sale

11,373

7,408

Origination of loans held for sale

(10,569)

(6,815)

Increase in cash surrender value of bank owned

life insurance

(1,451)

(1,257)

Decrease in deferred tax assets

7,905

5,129

Net change in operating assets and liabilities:

Accrued interest receivable

(1,181)

(77)

Other assets

(7,389)

(8,292)

Accrued interest and other liabilities

26,051

20,505

Net cash provided by operating activities

52,816

37,734

Cash flows from investing activities:

Proceeds from maturities and pay-downs of investment

securities held to maturity

8,469

8,110

Purchase of investment securities available

for sale

(101,486)

(70,996)

Proceeds from maturities and pay-downs of investment

securities available for sale

16,433

15,097

Proceeds from sales of investment securities

available for sale

31,384

34,753

Net increase in loans held for investment

(78,149)

(92,812)

Purchase of loans held for investment

(81,392)

(58,368)

Additions to premises and equipment

(208)

(256)

Purchase of bank owned life insurance

(4,000)

Proceeds from the redemption of Federal

Home Loan Bank stock

12,778

8,645

Purchase of Federal Home Loan Bank stock

(5,727)

(5,734)

Net cash used in investment activities

(201,898)

(161,561)

Cash flows from financing activities:

Proceeds from issuance of Class A common

stock, net

558

323

Cash dividends paid

(6,018)

(3,049)

Repurchase of Class A common stock

(34,554)

(501)

Net increase in deposits

281,610

189,478

Proceeds from subordinated notes

39,262

Proceeds from FHLB advances

117,000

197,000

Repayments on Federal Home Loan Bank advances

(269,000)

(262,000)

Net cash provided by financing activities

128,858

121,251

Net decrease in cash and cash equivalents

(20,224)

(2,576)

Cash and cash equivalents at beginning

of period

77,035

41,062

Cash and cash equivalents at end of period

56,811

38,486

Supplemental disclosure of cash flow

information:

Interest paid

45,751

46,058

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.

Q3 2025 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 audited

consolidated financial statements and

related notes appearing in

the Company’s Annual Report

on Form 10-K for the year ended December 31, 2024.

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

estimate

impacting

the

Company’s

consolidated

financial

statements

the

allowance

for

credit

losses

(“ACL”).

Reclassifications

Certain

amounts

prior

period

consolidated

financial

statements

have

been

reclassified

conform

the

current

presentation. Reclassifications had no impact on prior period

net income or stockholders’ equity.

Recently Issued Accounting Standards

Adoption of New Accounting Standards

Improvements to Income Tax

Disclosures

In December

2023,

the

Financial

Accounting

Standard

Board

(“FASB”)

issued

Accounting

Standards

Update

(ASU)

2023-09, Income Taxes (Topic

740): Improvements to Income Tax Disclosures. This ASU pertains to disclosures regarding

effective tax rates

and cash income

taxes paid with

the goal of providing

stakeholders with more

transparent and relevant

information. This

ASU is effective

for public

business entities

for annual

periods beginning

after December

15, 2024. The

Company adopted this ASU 2023-09 effective January 1, 2025. The adoption of

this ASU did not have a material impact on

the Company’s consolidated financial statements.

Table of Contents

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q3 2025 Form 10-Q

INVESTMENT SECURITIES

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):

September 30, 2025

Available-for-sale:

Amortized

Cost

Unrealized

Gains

Unrealized

Losses

Fair Value

U.S. Government Agency

13,143

(1,214)

11,965

Collateralized mortgage obligations

100,830

(19,135)

81,695

Mortgage-backed securities - residential

60,915

118

(9,715)

51,318

Mortgage-backed securities - commercial

145,991

(7,491)

138,517

Municipal securities

22,838

(3,923)

18,915

Bank subordinated debt securities

22,046

162

(439)

21,769

365,763

333

(41,917)

324,179

Held-to-maturity:

Amortized

Cost

Unrecognized

Gains

Unrecognized

Losses

Fair Value

U.S. Government Agency

41,500

(3,529)

38,046

Collateralized mortgage obligations

52,766

566

(5,956)

47,376

Mortgage-backed securities - residential

37,880

558

(3,523)

34,915

Mortgage-backed securities - commercial

15,135

(1,133)

14,002

Corporate bonds

9,089

(129)

8,960

156,370

1,199

(14,270)

143,299

Allowance for credit losses - securities held-to-maturity

(5)

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

156,365

December 31, 2024

Available-for-sale:

Amortized

Cost

Unrealized

Gains

Unrealized

Losses

Fair Value

U.S. Government Agency

14,279

(1,668)

12,625

Collateralized mortgage obligations

101,808

(22,918)

78,905

Mortgage-backed securities - residential

58,995

(12,063)

46,933

Mortgage-backed securities - commercial

86,604

(7,905)

78,739

Municipal securities

24,925

(5,614)

19,311

Bank subordinated debt securities

24,314

438

(1,044)

23,708

310,925

508

(51,212)

260,221

Held-to-maturity:

Amortized

Cost

Unrecognized

Gains

Unrecognized

Losses

Fair Value

U.S. Government Agency

42,538

(5,094)

37,444

Collateralized mortgage obligations

56,987

(7,785)

49,259

Mortgage-backed securities - residential

40,681

(4,613)

36,121

Mortgage-backed securities - commercial

15,272

(1,385)

13,887

Corporate bonds

9,222

(393)

8,829

164,700

110

(19,270)

145,540

Allowance for credit losses - securities held-to-maturity

(6)

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

164,694

Transfers of debt

securities into the held

-to-maturity (“HTM”) category

from the available for

sale (“AFS”) category

are

made at fair

value as of

the date of

transfer. The

unrealized gain or

loss at the

date of transfer

is retained in

accumulated

other comprehensive

loss (“AOCL”) and

in the carrying

value of the

HTM securities

and there is

no impact to

net income.

Such amounts

are amortized

over the

remaining life

of the security.

The Company

made

two

transfers from

AFS to

HTM

portfolios in 2022.

During the quarter ended

September 30, 2025, there

were

investment securities that

were transferred from

AFS to

HTM.

For

the

three

months

ended

September 30,

2025,

total

amortization

out

AOCL

for

net

unrealized

losses

Table of Contents

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q3 2025 Form 10-Q

securities transferred in

2022 from

AFS to

HTM was

thousand and

200

thousand for

the nine

months ended September

30, 2025. At September 30,

2025, the fair value of the

transferred securities was $

100.2

million and the balance of

the net

unrealized loss was $

9.1

million.

For the quarter

ended September 30,

2024, total amortization

out of AOCL

for the net

unrealized losses

on securities

transferred from

AFS to

HTM was

thousand

and

200

thousand

for the

nine month

ended September

30, 2024.

September 30,

2024, the

fair value

of the

transferred securities

was $

106.3

million and

the balance

of the

net unrealized

losses was $

9.3

million.

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

to financial assets measured at amortized cost, including

loan receivables and HTM debt securities.

CECL requires a loss reserve for securities

classified as 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

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 the 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 HTM

securities through the

use of

credit ratings. Credit

ratings are monitored

by the Company on

at least a quarterly basis.

As of September 30, 2025

and December 31, 2024,

all HTM securities held

by the Company were rated investment grade.

At September

30, 2025,

HTM securities

included $

147.3

million of

U.S. Government

and U.S.

Agency issued

bonds

and mortgage-backed securities.

Because of the explicit

and/or implicit guarantee

on these bonds, the

Company holds

reserves

on these

holdings.

The remaining

portion of

the HTM

portfolio

is made

up of

9.1

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 $

thousand ACL as of September

30, 2025. The book value

for debt securities classified

as HTM represents amortized

cost less the ACL related to these securities.

The Company’s investment portfolio

includes AFS debt securities, which

are carried at fair value with unrealized

gains

and losses

recognized

AOCL, net

of applicable

taxes.

The Company

evaluates

whether the

declines

in fair

value

are

attributable to credit losses or other factors like interest rate risk, using both quantitative and qualitative

analyses, including

company performance analysis, review

of credit ratings, bond

vintage, remaining payment terms,

prepayment speeds and

analysis

macro-economic

conditions.

When

the

fair

value

AFS

security

less

than

its

amortized

cost

and

the

decline is attributable

to credit-related

factors, an ACL

is recorded. As

a result of

this evaluation, the

Company concluded

that no allowance was required on AFS securities as of

September 30, 2025.

Information pertaining

to investment

securities with

gross unrealized

losses, aggregated

by investment

category

and

length of

time that

those

individual securities

have been

in a

continuous

loss position,

are presented

as of

the following

dates (in thousands):

September 30, 2025

Less than 12 months

12 months or more

Total

Available-for-Sale:

Fair Value

Unrealized

Losses

Fair Value

Unrealized

Losses

Fair Value

Unrealized

Losses

U.S. Government Agency

511

(11)

8,237

(1,203)

8,748

(1,214)

Collateralized mortgage obligations

9,257

(34)

72,438

(19,101)

81,695

(19,135)

Mortgage-backed securities - residential

43,856

(9,715)

43,856

(9,715)

Mortgage-backed securities - commercial

81,800

(412)

51,918

(7,079)

133,718

(7,491)

Municipal securities

18,915

(3,923)

18,915

(3,923)

Bank subordinated debt securities

1,999

(1)

10,535

(438)

12,534

(439)

93,567

(458)

205,899

(41,459)

299,466

(41,917)

Table of Contents

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q3 2025 Form 10-Q

December 31, 2024

Less than 12 months

12 months or more

Total

Available-for-sale:

Fair Value

Unrealized

Losses

Fair Value

Unrealized

Losses

Fair Value

Unrealized

Losses

U.S. Government Agency

4,468

(76)

7,451

(1,592)

11,919

(1,668)

Collateralized mortgage obligations

3,101

(23)

72,952

(22,895)

76,053

(22,918)

Mortgage-backed securities - residential

972

(11)

44,600

(12,052)

45,572

(12,063)

Mortgage-backed securities - commercial

44,411

(1,265)

27,874

(6,640)

72,285

(7,905)

Municipal securities

19,311

(5,614)

19,311

(5,614)

Bank subordinated debt securities

14,352

(1,044)

14,352

(1,044)

52,952

(1,375)

186,540

(49,837)

239,492

(51,212)

The contractual

cash flows

associated with

U.S. Government

Agency securities,

collateralized

mortgage obligations,

and residential

and commercial

mortgage-backed

securities

are guaranteed

by U.S.

government-sponsored

enterprises,

thereby minimizing

credit risk.

Municipal bonds

are of

high credit

quality,

and the

observed declines

in fair

value are

not

attributable to deterioration in the

creditworthiness. Similarly, the decrease in fair value of bank

subordinated debt securities

is primarily driven

by changes

in market interest

rates rather

than credit

concerns. Based

on management’s

evaluation of

these factors,

management believes

that the

unrealized losses

on these

debt securities

are attributable

to fluctuations

market spreads and interest rate movements, rather than adverse

changes in the underlying credit quality of the issuers.

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 nine months

ended September 30, 2025 and 2024 (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

Available-for-sale:

2025

2024

2025

2024

Proceeds from sale and call of securities

31,384

34,753

Gross gains

335

195

Gross losses

(363)

(181)

Net realized gain (loss)

(28)

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

September 30, 2025:

Amortized

Cost

Fair Value

Amortized

Cost

Fair Value

Due within one year

9,089

8,960

Due after one year through five years

1,983

1,999

Due after five years through ten years

42,901

38,685

Due after ten years

U.S. Government Agency

13,143

11,965

41,500

38,046

Collateralized mortgage obligations

100,830

81,695

52,766

47,376

Mortgage-backed securities - residential

60,915

51,318

37,880

34,915

Mortgage-backed securities - commercial

145,991

138,517

15,135

14,002

365,763

324,179

156,370

143,299

At September 30,

2025, 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 U.S. Government

Agency issued securities.

All the

collateralized mortgage obligations

and mortgage-backed securities

at September 30, 2025 and

December 31, 2024 were

issued by U.S. Government entities.

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

Table of Contents

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q3 2025 Form 10-Q

securities

pledged

the

State

Florida

ratio

the

quarter

daily

average

balance

for

quarter

ended

September 30, 2025, and

% for the quarter daily average balance

for quarter ended December 31, 2024. The Bank must

also maintain a minimum amount of pledged securities

to be in the public funds program.

September 30,

2025,

the

Bank

had

total

151.4

million

deposits

under

the

public

funds

program

and

pledged to the State of Florida for these public funds were

sixteen

bonds with an aggregate fair value of $

49.7

million.

As of

December 31, 2024, the

Bank had

a total

of $

110.5

million in

deposits under the

public funds program

and pledged

to the State of Florida for these public funds were

twenty-one

bonds with an aggregate fair value of $

66.1

million.

LOANS

The following table is a summary of the distribution of loans

held for investment by type (dollars in thousands):

September 30, 2025

December 31, 2024

Total

Percent of

Total

Percent of

Total

Residential real estate

316,557

14.9

289,961

14.8

Commercial real estate

1,226,121

57.7

1,136,417

57.8

Commercial and industrial

269,430

12.7

258,311

13.1

Correspondent banks

104,598

4.9

82,438

4.2

Consumer and other

207,939

9.8

198,091

10.1

Total

gross loans

2,124,645

100.0

1,965,218

100.0

Plus: Deferred fees/costs

6,321

7,630

Total

loans net of deferred fees/costs

2,130,966

1,972,848

Less: Allowance for credit losses

24,964

24,070

Total

net loans

2,106,002

1,948,778

At September 30, 2025

and December 31, 2024,

the Company had

592.0

million and $

518.8

million, respectively,

commercial real estate and residential mortgage

loans pledged as collateral for lines of

credit with the Federal Home Loan

Bank (“FHLB”) of Atlanta and the Federal Reserve Bank

of Atlanta.

Allowance for Credit Losses

general,

the

Company

utilizes

the

Discounted

Cash

Flow

(“DCF”)

method

the

Weighted-Average

Remaining

Maturity (“WARM”) methodology to estimate the

quantitative portion of the ACL

for loan pools. The

DCF method uses a loss

driver analysis (“LDA”)

and DCF 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 to

inform

regression

analyses

quantify

the

impact

of reasonable

and

supportable

forecasts

projective

models.

Economic

forecasts

applied

regression

models

estimate

probability

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 economic

conditions

•

Changes in nature and volume of the 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.

Q3 2025 Form 10-Q

Changes in the

ACL for the

three and nine

months ended September 30,

2025 and 2024

were as follows

(in thousands):

Residential

Real Estate

Commercial

Real Estate

Commercial

and

Industrial

Correspondent

Banks

Consumer

and Other

Total

Three Months Ended September 30,

2025

Beginning balance

5,477

9,491

4,508

874

4,583

24,933

Provision for credit losses

(1)

544

(102)

(118)

(45)

(252)

Recoveries

Charge-offs

(7)

Ending Balance

6,026

9,389

4,396

829

4,324

24,964

Nine Months Ended September 30, 2025

Beginning balance

5,121

8,788

4,633

654

4,874

24,070

Provision for credit losses

(2)

888

601

(249)

175

179

1,594

Recoveries

Charge-offs

(730)

Ending Balance

6,026

9,389

4,396

829

4,324

24,964

(1) Provision for credit losses excludes a $

thousand provision due to unfunded commitments included in accrued interest and other

liabilities and a $

thousand release related to investment securities held to maturity.

(2) Provision for credit losses excludes a $

224

thousand provision due to unfunded commitments included in accrued interest and

other liabilities and a $

thousand release related to investment securities held to maturity.

Residential

Real Estate

Commercial

Real Estate

Commercial

and

Industrial

Correspondent

Banks

Consumer

and Other

Total

Three Months Ended September 30,

2024

Beginning balance

3,193

10,272

4,747

892

3,126

22,230

Provision for credit losses

(1)

760

(86)

(96)

(69)

322

831

Recoveries

Charge-offs

(7)

Ending Balance

3,955

10,186

4,661

823

3,442

23,067

Nine Months Ended September 30, 2024

Beginning balance

2,695

10,366

3,974

911

3,138

21,084

Provision for credit losses

(2)

1,252

(180)

666

(88)

318

1,968

Recoveries

Charge-offs

(17)

Ending Balance

3,955

10,186

4,661

823

3,442

23,067

(1) Provision for credit losses excludes a $

101

thousand provision due to unfunded commitments included in accrued interest and

other liabilities and a $

thousand release related to investment securities held to maturity.

(2) Provision for credit losses excludes a $

159

thousand provision due to unfunded commitments included in accrued interest and

other liabilities.

At September

30,

2025, the

ACL

for loans

was

25.0

million compared

to $

24.1

million

at December

31,

increase of $

894

thousand in the ACL was due to loan growth.

Charge offs

to loans

for the

three

months ended

September 30,

2025 were

thousand

originated

in 2025.

Charge

offs

for

the

nine

months

ended

September

30,

2025

were

709

thousand

originated

2022 and

thousand

originated in 2025.

Table of Contents

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q3 2025 Form 10-Q

Charge-offs

for

the

three

months

ended

September

30,

2024

totaled

thousand

and

were

all

originated

2024.

Charge-offs for the nine months ended September

30, 2024 totaled $

thousand and were all originated in 2024.

The ACL and

the outstanding balances

in the specified

loan categories

as of September

30, 2025 and

December 31,

2024 are as follows (in thousands):

Residential

Real Estate

Commercial

Real Estate

Commercial

and Industrial

Correspondent

Banks

Consumer

and Other

Total

September 30, 2025:

Allowance for credit losses:

Individually evaluated

Collectively evaluated

5,994

9,389

4,343

829

4,324

24,879

Balances, end of period

6,026

9,389

4,396

829

4,324

24,964

Loans:

Individually evaluated

3,761

1,005

4,766

Collectively evaluated

312,796

1,226,121

268,425

104,598

207,939

2,119,879

Balances, end of period

316,557

1,226,121

269,430

104,598

207,939

2,124,645

December 31, 2024:

Allowance for credit losses:

Individually evaluated

651

718

Collectively evaluated

5,081

8,788

4,606

654

4,223

23,352

Balances, end of period

5,121

8,788

4,633

654

4,874

24,070

Loans:

Individually evaluated

6,788

690

1,990

9,468

Collectively evaluated

283,173

1,136,417

257,621

82,438

196,101

1,955,750

Balances, end of period

289,961

1,136,417

258,311

82,438

198,091

1,965,218

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.

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.

Q3 2025 Form 10-Q

Loan credit exposures by internally assigned grades are

presented below for the periods indicated (in thousands):

As of September 30, 2025

Term Loans by Origination Year

Revolving

Loans

Total

2025

2024

2023

2022

2021

Prior

Residential real estate

Pass

61,481

95,490

33,220

25,812

21,418

60,492

16,032

313,945

Special Mention

592

1,468

2,060

Substandard

434

118

552

Total

61,481

96,516

34,688

25,812

21,418

60,610

16,032

316,557

Commercial real estate

Pass

196,195

182,297

113,450

284,214

135,835

293,746

6,315

1,212,052

Special Mention

8,474

3,182

11,656

Substandard

1,735

678

2,413

Total

196,195

182,297

121,924

284,214

137,570

297,606

6,315

1,226,121

Commercial and

industrial

Pass

34,112

64,047

72,949

32,776

28,646

13,020

21,251

266,801

Special Mention

864

936

Substandard

460

758

475

1,693

Total

34,112

64,119

72,949

32,776

29,970

13,778

21,726

269,430

Correspondent banks

Pass

98,192

6,406

104,598

Total

98,192

6,406

104,598

Consumer and other

loans

Pass

49,530

37,792

37,068

54,155

26,435

1,133

1,826

207,939

Total

49,530

37,792

37,068

54,155

26,435

1,133

1,826

207,939

Total

Loans

Pass

439,510

386,032

256,687

396,957

212,334

368,391

45,424

2,105,335

Special Mention

664

9,942

864

3,182

14,652

Substandard

434

2,195

1,554

475

4,658

Doubtful

Total

439,510

387,130

266,629

396,957

215,393

373,127

45,899

2,124,645

Table of Contents

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q3 2025 Form 10-Q

As of December 31, 2024

Term Loans by Origination Year

Revolving

Loans

Total

2024

2023

2022

2021

2020

Prior

Residential real estate

Pass

109,590

39,666

34,315

23,039

5,791

66,115

10,885

289,401

Substandard

560

Total

109,590

39,666

34,315

23,039

5,791

66,675

10,885

289,961

Commercial real estate

Pass

175,023

130,503

317,971

175,535

98,695

231,558

4,680

1,133,965

Substandard

1,765

687

2,452

Total

175,023

130,503

317,971

177,300

99,382

231,558

4,680

1,136,417

Commercial and

industrial

Pass

68,405

80,644

33,962

30,495

3,891

11,839

26,795

256,031

Substandard

519

1,093

668

2,280

Total

68,405

80,644

33,962

31,014

3,891

12,932

27,463

258,311

Correspondent banks

Pass

82,438

Total

82,438

Consumer and other

loans

Pass

40,921

51,392

65,603

35,181

491

815

1,698

196,101

Substandard

1,990

Total

40,921

51,392

67,593

35,181

491

815

1,698

198,091

Total

Loans

Pass

476,377

302,205

451,851

264,250

108,868

310,327

44,058

1,957,936

Special Mention

Substandard

1,990

2,284

687

1,653

668

7,282

Doubtful

Total

476,377

302,205

453,841

266,534

109,555

311,980

44,726

1,965,218

Table of Contents

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q3 2025 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 loans.

The following

tables include

an aging

analysis of

accruing loans

and total

non-accruing

loans as

of September 30,

2025

and December 31, 2024 (in thousands):

Accruing

As of September 30, 2025

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 lines of credit and other

1,268

1-4 family residential

251,453

3,548

255,001

434

255,435

Condo residential

59,615

121

59,736

118

59,854

312,336

3,669

316,005

552

316,557

Commercial real estate:

Land and construction

87,417

1,587

89,004

Multi-family residential

237,215

1,969

239,184

Condo commercial

57,108

Commercial property

839,925

900

840,825

1,221,665

4,456

1,226,121

Commercial and industrial:

Secured

245,445

758

246,203

Unsecured

23,227

268,672

758

269,430

Correspondent banks

104,598

Consumer and other

207,939

Total

2,115,210

8,125

2,123,335

1,310

2,124,645

Table of Contents

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q3 2025 Form 10-Q

Accruing

As of December 31, 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 lines of credit and other

1,120

1-4 family residential

225,334

2,886

228,220

Condo residential

58,956

1,351

60,307

314

60,621

285,410

4,237

289,647

314

289,961

Commercial real estate:

Land and construction

40,090

Multi-family residential

214,912

Condo commercial

57,402

Commercial property

823,326

687

824,013

1,135,730

687

1,136,417

Commercial and industrial:

Secured

232,779

521

233,300

403

233,703

Unsecured

24,608

257,387

521

257,908

403

258,311

Correspondent banks

82,438

Consumer and other

196,101

1,990

198,091

Total

1,957,066

5,445

1,962,511

2,707

1,965,218

Non-accrual Status

The following table includes

the amortized cost basis of loans

on non-accrual status as of

September 30, 2025 and as

of December 31, 2024 (in thousands):

September 30, 2025

Non-accrual

Loans With No

Related Allowance

Non-accrual

Loans With

Related Allowance

Total Non-

accruals

Residential real estate

552

Commercial and industrial

712

758

Total

1,264

1,310

December 31, 2024

Non-accrual

Loans With No

Related Allowance

Non-accrual

Loans With

Related Allowance

Total Non-

accruals

Residential real estate

314

Commercial and industrial

403

Consumer and other

1,990

Total

314

2,393

2,707

Accrued interest

receivable is

excluded from

the estimate

of credit

losses. There

was

interest income

recognized

attributable

non-accrual

loans

outstanding

during

the

three

and

nine

months

ended

September 30,

2025

and

2024.

Interest income on these loans for the three months ended September 30, 2025 and 2024, would have been

approximately

thousand and $

thousand, respectively,

had these loans

performed in accordance

with their original

terms. Interest

income on

these loans

for the

nine months

ended September

30, 2025

and 2024,

would have

been approximately

108

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.

Q3 2025 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.

The following

table includes

the amortized cost

basis of

collateral dependent

loans related

to borrowers

experiencing

financial difficulty by type of collateral as of September

30, 2025 and December 31, 2024 (in thousands):

September 30, 2025

Collateral Type

Residential Real Estate

Specific Reserve

Residential real estate

575

Total

575

December 31, 2024

Collateral Type

Boat

Specific Reserve

Consumer and other

1,990

651

Total

1,990

651

Management evaluates

on an individual

basis collateral

dependent loans

using the fair

value of the

collateral method

to determine

if a

credit loss

reserve is

necessary.

The ACL

is measured

based on

the difference

of the

fair

value of

the

collateral and

amortized cost

basis of

the loan.

If the

final collateral

valuation is

less than

the recorded

investment of

the

loan, a

reserve amount

is calculated.

If the

collateral valuation

is equal

to or

greater than

the recorded

investment of

the

loan, no reserve is determined.

Loan Modifications to Borrowers Experiencing Financial

Difficulties

The Company had

no new modifications

to borrowers

experiencing financial

difficulties for

the three and

nine months

ended

September 30,

2025

and

three

months

ended

September

30,

2024.

The

Company

had

one

new

modification

borrowers experiencing

financial difficulties

for the

nine months

ended September

30, 2024.

The following

table presents

newly restructured

loans, by

type of

modification, which

occurred during

the nine

months ended

September 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 loan modification

for the borrower

experiencing financial

difficulty at

September 30,

2024 included

a combination

of rate and maturity modifications.

The rate was modified

from a variable rate

to a fixed rate

8.0

%. The original maturity

of September 2029 was extended to January

2034.

There were

existing loan modifications that subsequently defaulted during either the three or the

nine months ended

September 30, 2025 and 2024.

Table of Contents

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q3 2025 Form 10-Q

INCOME TAXES

The Company’s income tax expense is presented

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

Nine Months Ended September 30,

2025

2024

Current:

Federal

401

State

Total

current

401

Deferred:

Federal

5,782

4,384

State

1,722

1,222

Total

deferred

7,504

5,606

Total

tax expense

7,905

5,606

The actual income tax expense for the nine months ended

September 30, 2025 and 2024 differs from

the statutory tax

expense for the periods (computed by applying the U.S.

federal corporate tax rate of

% for both 2025 and 2024

periods

to income before income tax expense) as follows (in thousands):

Nine Months Ended September 30,

2025

2024

Federal taxes at statutory rate

6,855

4,909

State income taxes, net of federal tax benefit

1,418

1,016

Bank owned life insurance

(368)

(319)

Total

tax expense

7,905

5,606

The Company’s deferred tax assets and deferred

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

September 30, 2025

December 31, 2024

Deferred tax assets:

Net operating loss

906

9,276

Allowance for credit losses

6,327

6,100

Lease liability

1,592

2,142

Unrealized losses on available for sale securities

12,838

15,200

Depreciable property

Equity compensation

1,072

686

Accruals

446

520

Other, net

Deferred tax assets:

23,185

34,027

Deferred tax liabilities:

Deferred loan cost

(1,602)

(1,934)

Lease right of use asset

(1,592)

(2,142)

Deferred expenses

(245)

(224)

Cash flow hedge

(3)

(81)

Other, net

(286)

Deferred tax liabilities

(3,728)

(4,381)

Net deferred tax assets

19,457

29,646

The Company

has approximately

20.8

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.

Table of Contents

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q3 2025 Form 10-Q

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 return examinations

by tax authorities for years before 2022.

For the nine

months ended

September 30, 2025

and 2024, the

Company did

t have any

unrecognized tax

benefits

as a result of

tax positions taken during a prior

period or during the current period. Additionally,

interest or penalties were

recorded as a result of tax uncertainties.

July

2025,

the

One

Big

Beautiful

Bill

Act

(“OBBBA”)

was

enacted

the

United

States.

The

OBBBA

includes

significant provisions, such as the permanent extension of certain expiring provisions of

the Tax Cuts and Jobs Act enacted

in 2017, modifications to the international

tax framework and the restoration of

favorable tax treatment for certain business

provisions, in particular the depreciation

of capital asset additions. The

legislation has multiple effective

dates, with certain

provisions effective

in 2025

and others

implemented through

Company is

currently assessing

its impact

on its

consolidated

financial

statements

but

preliminarily

does

not

believe

the

OBBBA

provisions

will

significantly

modify

its

effective income tax rate.

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

credit,

commitments

extend

credit,

and

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.

summary

the

amounts

the

Company's

financial

instruments

with

off-balance

sheet

risk

are

shown

below

September 30, 2025 and December 31, 2024 (in thousands):

September 30, 2025

December 31, 2024

Commitments to grant loans and unfunded lines of credit

140,146

122,578

Standby and commercial letters of credit

3,855

5,389

Total

144,001

127,967

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.

Table of Contents

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q3 2025 Form 10-Q

Interest Rate Swaps Designated as a Cash Flow Hedge

In July

2025, the

Company entered into

a two-year costless

collar hedge

with a

notional amount of

million to

manage

exposure to interest

rate volatility on

a three-month brokered CD.

The derivative is

based on the

USD SOFR overnight index

and establishes a

cap rate of

4.50

% and a

floor rate of

1.875

%, effectively creating a

defined range of

interest rate outcomes

without requiring

an upfront

premium. The

hedge was

designated as

a cash

flow hedge

under ASC

815, Derivatives

and

Hedging,

and

will

accounted

for

accordingly.

Changes

the

fair

value

the

derivative

will

recorded

other

comprehensive income (loss) to the extent the hedge remains

effective.

In August

2025, the

Company entered

into a

two-year

costless collar

hedge with

a notional

amount of

million to

manage

exposure

interest

rate

volatility

three-month

brokered

CD.

The

derivative

based

the

USD

SOFR

overnight

index

and

establishes

cap

rate

4.50

and

floor

rate

1.965

effectively

creating

defined

range

interest rate outcomes without requiring

an upfront premium. The hedge was

designated as a cash flow hedge

under ASC

815,

Derivatives

and

Hedging,

and

will

accounted

for

accordingly.

Changes

the

fair

value

the

derivative

will

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

hedge remains effective.

As of September 30, 2025,

the Company had

two

interest rate swap

agreements with a

notional aggregate amount

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

average

maturity

0.63

years,

weighted

average

fixed-rate

paid

3.59

and

with

weighted

average

3-month

compound USD SOFR being received.

As of December

31, 2024,

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

1.38

years,

weighted

average

fixed-rate

paid

3.59

and

with

weighted

average

3-month

compound USD SOFR being received.

The changes

in fair

value of

these interest

rate swaps

are recorded

in other

assets or

accrued interest

and other

liabilities

with

corresponding

recognition

other

comprehensive

income

(loss)

and

subsequently

reclassified

earnings

when

gains or losses are realized.

Interest Rate Swaps Designated as Fair Value

Hedge

The Company had

interest rate swap

agreements designated

as fair value

hedges at September

30, 2025. During

the quarter ended September 30, 2024,

the Company unwound

four

fair value interest rate swaps with

a notional aggregate

amount of

200

million. The

decision to

unwind these

swaps was

driven by

changes in

interest rate

forecasts and

asset-

liability management

strategies. The

early termination

fee to

unwind the

fair value

swaps totaled

3.7

million. The

termination

fee allocated to

each loan category

is being amortized

over the remining

life of the

hedge loans on

a monthly straight-line

basis

with

full

recognition

the

unamortized

cost

upon

the

early

payoff

the

hedge

loans.

The

amortization

the

termination

fee

is reflected

in the

loan interest

income

line in

the

Consolidated

Statement

of Operations

The remaining

unamortized termination fee as

of September 30, 2025

was $

3.0

million. The original maturities

of these fair value

interest

swaps were between 2025 and

The fair value interest

rate swap agreements had

an average maturity of

1.51

years

at the date of their termination.

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

an aggregate

notional amount

of $

277.9

million and

206.3

million at

September 30,

2025 and

December 31, 2024, respectively.

At September 30, 2025,

these interest rate swaps mature

between 2025 and 2051. The

Company entered

into corresponding

and offsetting

derivatives with

third parties.

The fair

value of

the liability

created by

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.

Table of Contents

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q3 2025 Form 10-Q

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

September 30, 2025:

Derivatives designated as cash flow hedges:

Interest rate swaps

150,000

Other assets/Accrued interest and

other liabilities

Derivatives not designated as hedging instruments:

Interest rate swaps related to customer loans

277,924

5,074

Other assets/Accrued interest and

other liabilities

10,033

December 31, 2024:

Derivatives designated as cash flow hedges:

Interest rate swaps

50,000

Other assets

321

Derivatives not designated as hedging instruments:

Interest rate swaps related to customer loans

206,258

4,943

Other assets/Accrued interest and

other liabilities

6,869

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

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

Table of Contents

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q3 2025 Form 10-Q

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

September 30, 2025 and December 31, 2024 for each

of the fair value hierarchy levels (in thousands):

September 30, 2025

December 31, 2024

Level 1

Level 2

Level 3

Total

Level 1

Level 2

Level 3

Total

Investment securities available for sale:

U.S. Government Agency

11,965

12,625

Collateralized mortgage obligations

81,695

78,905

Mortgage-backed securities - residential

51,318

46,933

Mortgage-backed securities - commercial

138,517

78,739

Municipal securities

18,915

19,311

Bank subordinated debt securities

21,769

23,708

Total

324,179

260,221

Derivative assets

10,089

7,190

Total assets at fair value

334,268

267,411

Derivative liabilities

10,077

6,869

Total liabilities at fair value

10,077

6,869

Table of Contents

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q3 2025 Form 10-Q

Fair Value Measurements

on a Nonrecurring Basis

During

the

three

and

nine

months

ended

September

30,

2025

and

2024,

the

Company

did

not

have

any

assets

liabilities measured at fair value on a nonrecurring basis.

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 September 30, 2025 and December 31, 2024

(in thousands):

Fair Value Hierarchy

Carrying

Amount

Level 1

Level 2

Level 3

Fair Value

Amount

September 30, 2025:

Financial Assets:

Cash and due from banks

9,988

Interest-bearing deposits in banks

46,823

Investment securities held to maturity, net

156,365

143,299

Loans held for investment, net

2,106,002

2,143,816

Accrued interest receivable

12,126

1,634

10,492

12,126

Financial Liabilities:

Non-interest bearing demand deposits

584,240

Savings and money market deposits

1,291,283

Interest-bearing demand deposits

60,016

Time deposits

520,075

519,740

FHLB advances

11,000

11,045

Subordinated notes

39,262

Accrued interest payable

3,184

December 31, 2024:

Financial Assets:

Cash and due from banks

6,986

Interest-bearing deposits in banks

70,049

Investment securities held to maturity

164,694

145,540

Loans held for investment, net

1,948,778

1,950,646

Accrued interest receivable

10,945

1,372

9,573

10,945

Financial Liabilities:

Non-interest bearing demand deposits

575,159

Savings and money market deposits

1,180,809

Interest-bearing demand deposits

50,648

Time deposits

367,388

366,479

FHLB advances

163,000

161,375

Accrued interest payable

2,125

STOCKHOLDERS’ EQUITY

Common Stock

During the three months ended September 30 2025, the

Company repurchased

2.0

million shares of Class A common

stock from

certain institutional shareholders

through privately negotiated

transactions, at a

weighted average price

per share

of $

17.19

. The

aggregate purchase

price for

these transactions

was approximately

34.4

million. The

repurchases

were

supplemental and not

part of the

Company’s two previously announced

stock repurchase programs. During

the nine months

ended

September

30,

2025

pursuant

the

Company’s

publicly

announced

repurchase

programs

the

Company

repurchased

9,671

Class

common

stock

weighted

average

price

per

17.91

The

aggregate

purchase price for

these transactions

was approximately $

174

thousand including

transaction costs.

As of September

30,

2025,

528,309

shares remained authorized for repurchase under the

Company’s two stock repurchase programs.

Table of Contents

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q3 2025 Form 10-Q

During the

three months

ended September

30, 2024,

the Company

repurchased

10,000

shares of

Class

A common

stock

weighted

average

price

per

11.99

The

aggregate

purchase

price

for

these

transactions

was

approximately $

120

thousand, including

transaction costs.

During the nine

months ended September

30, 2024, Company

repurchased

42,100

of Class

A common

stock

at a

weighted

average

price per

of $

11.90

. The

aggregate

purchase price for these transactions was approximately $

501

thousand, including transaction costs

There were

restricted stock awards issued in the three months ended September

30, 2025. During the nine months

ended September

30,

2025, the

Company

issued

124,424

of Class

A common

stock to

employees

as restricted

stock awards pursuant to the Company’s 2015 equity

incentive plan.

There

were

restricted

stock

awards

issued

the

three

months

ended

September

30,

2024.

For

the

nine

month

ended September 30, 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.

The number of shares of the Company’s Class A common

stock issued and outstanding as of September 30, 2025 and

December 31, 2024 were

18,107,385

and

19,924,632

, respectively.

Dividends

Declaration of

dividends by

the Board

of Directors

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,

as defined by state

banking

regulations.

However,

for

any

dividend

declaration,

the

Company

must

consider

additional

factors

such

the

amount of current

period net income,

liquidity,

asset quality,

capital adequacy

and economic

conditions at the

Bank since

the Bank is the

primary source of

funds to fund

dividends by the

Company.

It is likely that

these factors would

further limit

the amount of dividends which the

Company could legally declare. In addition, bank regulators

have the authority to prohibit

banks and bank holding companies from paying dividends if they

deem such payment to be an unsafe or

unsound practice.

As of

September

30,

2025,

the

Company

was

not

subject

to any

formal

supervisory

restrictions

its

ability

to pay

dividends

but

will

notify

the

Federal

Reserve

Bank

Atlanta

advance

any

proposed

dividend

the

Company's

stockholders in

light of

the

Bank's negative

retained earnings.

In addition,

under applicable

FDIC regulations

and policy,

because the

Bank has

negative

retained

earnings,

must obtain

the

prior approval

of the

FDIC before

effecting

a cash

dividend or other capital distribution from the Bank to the

Company.

The following table details the dividends declared and paid by

the Company for the periods presented:

Nine Months Ended September 30, 2025

Declaration Date

Record Date

Payment Date

Dividend Per Share

Dividend Amount

January 21, 2025

February 14, 2025

March 5, 2025

0.10

2.0

million

April 21, 2025

May 15, 2025

June 5, 2025

0.10

2.0

million

July 21, 2025

August 15, 2025

September 5, 2025

0.10

2.0

million

Nine Months Ended September 30, 2024

Declaration Date

Record Date

Payment Date

Dividend Per Share

Dividend Amount

January 22, 2024

February 15, 2024

March 5, 2024

0.05

1.0

million

April 22, 2024

May 15, 2024

June 5, 2024

0.05

1.0

million

July 22, 2024

August 15, 2024

September 5, 2024

0.05

1.0

million

The

Company

and

the

Bank

exceeded

all

regulatory

capital

requirements

and

remained

above

“well-capitalized”

guidelines as of September 30, 2025 and December 31,

At September 30, 2025, the total risk-based

capital ratio for

the

Bank

was

13.93

The

Company

not

subject

regulatory

capital

ratios

imposed

Basel

III

bank

holding

companies because the Company is deemed to be a small

bank holding company.

See Note 12, Subsequent Events, for information regarding

dividends declared in October 2025.

Table of Contents

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q3 2025 Form 10-Q

EARNINGS PER SHARE

Earnings

per

(“EPS”)

for

common

stock

calculated

using

the

two-class

method

required

for

participating

securities.

Basic

EPS

calculated

dividing

net

income

available

common

shareholders

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

available to common

shareholders 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

net

income

available

common

shareholders

for

the

three

and

nine

months ended September 30, 2025 and 2024 (in thousands):

Three Months Ended

September 30,

Nine Months Ended

September 30,

2025

2024

2025

2024

Net Income

8,939

6,949

24,737

17,770

Net income available to common shareholders

8,939

6,949

24,737

17,770

The following table reflects the calculation of basic and diluted earnings per common share class for the three and nine

months ended September 30, 2025 and 2024 (in thousands,

except share amounts):

Three Months Ended September 30,

Nine Months Ended September 30,

2025

2024

2025

2024

Class A

Basic EPS

Numerator:

Net income available to common shares

8,939

6,949

24,737

17,770

Denominator:

Weighted average shares outstanding

19,524,798

19,621,447

19,866,514

19,653,103

Earnings per share, basic

0.46

0.35

1.25

0.90

Diluted EPS

Numerator:

Net income available to common shares

8,939

6,949

24,737

17,770

Denominator:

Weighted average shares outstanding for basic EPS

19,524,798

19,621,447

19,866,514

19,653,103

Add: Dilutive effects of assumed exercises of stock

options

231,022

203,764

239,536

108,139

Weighted avg. shares including dilutive potential common

19,755,820

19,825,211

20,106,050

19,761,242

Earnings per share, diluted

0.45

0.35

1.23

0.90

Anti-dilutive stock options excluded from diluted

EPS

15,000

Net income has not been allocated to unvested

restricted stock awards that are participating

securities because the amounts that

would be allocated are not material to 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.

Table of Contents

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q3 2025 Form 10-Q

11.

RELATED PARTY

TRANSACTIONS

In the ordinary course of business, principal officers,

directors, and affiliates may engage in transactions

with the

Company.

Loan Purchases

During the nine months ended September 30, 2025,

the Bank purchased $

79.6

million from entities that deemed to be

related parties. The Bank paid those entities net fees of

447

thousand.

During the nine months ended September 30, 2024,

the Bank purchased $

73.8

million of loans from entities that are

deemed to be related parties. The Bank paid those entities

fees of $

2.5

million.

Loan Originations

During the nine months ended September 30, 2025, the

Bank acted as the lead arranger in a $

40.0

million syndicated

loan extended to an entity deemed to be a related party.

As of September 30, 2025, the Bank held an outstanding

balance

of $

15.0

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

the Bank received a

-basis point

commitment fee and will earn a

-basis point annual servicing fee. The other two financial

institutions participating in the

syndication were also deemed to be related parties. Although

originating loans to related parties is not part of the

Company’s standard policy,

this transaction was reviewed by the appropriate departments

in accordance with Company

procedures. Detailed analyses were presented to the Board of Directors

and the Audit and Risk Committee, and all

necessary approvals were obtained. Additional analysis

was conducted to determine that the transaction was executed

the ordinary course of business and on arm’s-length terms,

consistent with the requirements of Regulation O.

There were

loan originations or syndications extended to entities deemed

to be related parties for the year ended

December 31, 2024.

12.

SUBSEQUENT EVENTS

Dividends

On October

21, 2025,

the Company

announced that

its Board

of Directors

declared its

quarterly cash

dividend. The

quarterly dividend for

the fourth quarter

of 2025

was $

0.10

per share of

Class A common

stock and will

be paid

on December

5, 2025, to stockholders of record as of the close of business

on November 14, 2025.

Table of Contents

USCB Financial Holdings, Inc.

Q3 2025 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

the nine

months ended

September 30, 2025.

This discussion

and analysis

is best

read in

conjunction with

the unaudited

consolidated financial statements and related

notes included in this Quarterly

Report on Form 10-Q (“Form

10-Q”) and the

audited consolidated financial

statements and related

notes included in the

Annual Report on

Form 10-K (“2024

Form 10-

K”) filed with the Securities and Exchange Commission

(“SEC”) for the year ended December 31, 2024.

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 2024

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 and potential balance sheet restructuring.

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 allowance

for credit losses 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, including the enactment

of the One Big Beautiful Bill, and changes in accounting

principles, policies,

practices or

guidelines, including

the on-going

effects of

the Current

Expected Credit

Losses

(“CECL”) standard;

•

the lack of a

significantly diversified loan

portfolio and our concentration

in the South Florida

market, including the

risks

of geographic,

depositor,

and

industry concentrations,

including our

concentration

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 as well as growth through other means, such as

future acquisitions;

•

inflation, interest rate, unemployment rate, market and monetary

fluctuations;

•

the effects of potential new or increased tariffs

retaliatory tariffs, and trade restrictions;

•

the effects of

the current federal

government shutdown, including,

but not limited

to, the ability

to sell Small

Business

Administration loans;

•

the impacts of international hostilities and geopolitical events;

•

increased competition and its

effect on the pricing

of our products and services

as well as our interest

rate spread

and net interest margin;

•

the loss of key employees;

Table of Contents

USCB Financial Holdings, Inc.

Q3 2025 Form 10-Q

•

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 2024 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 Form

10-Q are

made only

as of the

date

hereof, and we undertake

no obligation to update

or 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, unless required to do so

under the federal

securities laws. You should also review the

risk factors described in

the 2024 Form 10-K

and in the

reports

the Company has filed or will file with the SEC.

Overview

The Company

reported net

income of

$8.9 million

or $0.45

per diluted

share of

common stock

for the

three

months

ended

September

30,

2025

compared

$6.9

million

$0.35 per

diluted

common

stock

for

the

three

months

ended September 30,

2024.

For nine months

ended September 30,

2025, the Company

reported net income

of $24.7 million

or $1.23 per diluted

share of common stock

compared to $17.8 million

or $0.90 per diluted

share of common stock

for the

nine months ended September 30, 2024.

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

September 30,

2025

compared

for

the

quarter

ended

September 30,

2024

and

December

31,

2024

and

annualized where appropriate:

•

Net interest

income for

the three

months ended September

30, 2025

increased $3.2 million

or 17.5%

to $21.3 million

from $18.1 million for the quarter ended September

30, 2024.

•

Net interest

margin (“NIM”) expanded

to 3.14%

for the

three months ended

September 30, 2025

compared to 3.03%

for the three months ended September 30, 2024.

•

Total assets

were $2.77

billion at

September 30,

2025, representing

an increase

of $264.0

million or

10.5% from

September 30,

2024 and an increase of $186.7 million or 9.7%

annualized from December 31, 2024.

•

Total loans held

for investment (net

of deferred cost/fees)

were $2.13 billion

at September 30,

2025, representing

increase

$199.6

million

10.3%

from

September

30,

2024

and

increase

$158.1

million

10.7%

annualized from December 31, 2024.

•

Total deposits were $2.46 billion at September

30, 2025, representing an increase of $329.0

million or 15.5% from

September 30,

2024 and an increase of $281.6 million or 17.3%

annualized from December 31, 2024.

•

Annualized return on average assets for the quarter ended September 30, 2025 was

1.27% compared to 1.11% for

the quarter ended September 30, 2024.

•

Annualized

return

average

stockholders’

equity

for

the

quarter

ended

September

30,

2025

was

15.74%

compared to 13.38% for quarter ended September 30, 2024.

•

The ACL to total loans was 1.17% at September 30, 2025 compared to 1.22% at December 31, 2024.

•

Non-performing loans to total loans was 0.06% at September

30, 2025 and 0.14% at December 31, 2024.

•

At September 30, 2025, the total

risk-based capital ratios

for the Company and

the Bank were 14.20% and

13.93%,

respectively.

•

Tangible book value per

common share (a

non-GAAP measure) was $11.55

at September 30,

2025, representing

an increase of $0.74 or

9.1% annualized from $10.81 at December

31, 2024.

At September 30, 2025, tangible

book

value per common

share was

negatively affected by

($2.09) due to

an accumulated

comprehensive loss

of $37.8

million. At December

31, 2024, tangible

book value

per common

share was

negatively affected

by ($2.24)

due to

Table of Contents

USCB Financial Holdings, Inc.

Q3 2025 Form 10-Q

an accumulated

comprehensive loss

of $44.5

million. See

“Reconciliation and

Management Explanation

for Non-

GAAP Financial Measures” included in this Form 10-Q for a reconciliation

of this non-GAAP financial measure.

•

On August 14,

2025, the

Company entered

into a

Subordinated Note

Purchase Agreement

with certain

qualified

institutional buyers pursuant to which the

Company sold and issued $40.0 million

in aggregate principal amount of

its 7.625%

fixed-to-floating rate

subordinated notes

due August 15,

2035 in

a private

placement transaction.

This

transaction was

conducted under

the provisions

of Regulation

D promulgated

under the

Securities Act 1933. The

subordinated notes were issued by

the Company to the

purchasers at a price equal

to 100% of their face

amount.

The majority of

the net proceeds

were used to

repurchase 2.0 million

shares of Class

common stock in

September

2025, from certain institutional shareholders through privately negotiated transactions, at a weighted average price

per share

of $17.19.

The aggregate

purchase

price for

these transactions

was

approximately

$34.4 million.

The

repurchases

were

supplemental

and

not

part

the

Company’s

two

previously

announced

stock

repurchase

programs.

Critical Accounting Policies and Estimates

The consolidated

financial statements

are prepared

based on

the application

of U.S.

Generally Accepted

Accounting

Practices (“GAAP”),

the most significant

of which are

described in Note

1 “Summary

of Significant Accounting

Policies” in

the Company’s 2024 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 in

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,

as this information changes, actual results

could differ from the estimates, assumptions and

judgments reflected

in 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

methods

other

than

accordance

with

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

be found

in the

section “Reconciliation

and Management

Explanation of

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.

Table of Contents

USCB Financial Holdings, Inc.

Q3 2025 Form 10-Q

Results of Operations

General

The following tables present selected

balance sheet, income statement, and

profitability ratios for the dates

and periods

indicated (in thousands, except ratios):

September 30, 2025

December 31, 2024

Consolidated Balance Sheets:

Total

assets

2,767,945

2,581,216

Total

loans

(1)

2,130,966

1,972,848

Total

deposits

2,455,614

2,174,004

Total

stockholders' equity

209,095

215,388

(1)

Loan amounts include deferred fees/costs.

Three Months Ended

September 30,

Nine Months Ended

September 30,

2025

2024

2025

2024

Consolidated Statements of Operations:

Net interest income before provision for credit losses

21,274

18,109

61,423

50,578

Total

non-interest income

3,684

3,438

10,770

9,113

Total

non-interest expense

13,048

11,454

37,734

34,188

Net income

8,939

6,949

24,737

17,770

Profitability:

Efficiency ratio

52.28%

53.16%

52.27%

57.27%

Net interest margin

3.14%

3.03%

3.17%

2.87%

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 September 30, 2025 compared to the

three months ended September 30, 2024.

Net income increased $2.0 million to $8.9

million for the three months ended September

30, 2025 from $6.9 million for

the same period in

The $2.0 million

or 28.6% increase

in net income was

primarily driven by

an improvement in

net

interest margin due to reduction in rates paid on interest-bearing liabilitie

between periods and a decrease in provision for

credit losses for the third quarter ended September 30, 2025.

Nine months ended September 30, 2025 compared to

the nine months ended September 30, 2024

Net income

increased $7.0

million to

$24.7 million

for the

nine months

ended September 30,

2025

from $17.8

million

for the same period in 2024. The $7.0

million or 39.2% increase in the net income

was primarily driven by an improvement

in net interest margin due to reduction in rates paid on interest-bearing liabilities between periods. However, the increase in

net interest

income

was

partially

offset

increase

in non-interest

expense

between

periods.

Additionally,

increased

activity

fee

generating

transactions

(gain

sale

SBA

loans,

prepayment

penalties,

title

insurance

income)

contributed to the increase 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-

Table of Contents

USCB Financial Holdings, Inc.

Q3 2025 Form 10-Q

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.

Q3 2025 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 September 30,

2025

2024

Average

(1)

Balance

Interest

Yield/Rate

(2)

Average

(1)

Balance

Interest

Yield/Rate

(2)

Assets

Interest-earning assets:

Loans

(3)

2,099,043

32,866

6.21%

1,878,230

29,819

6.32%

Investment securities

(4)

461,303

3,522

3.03%

419,315

2,754

2.61%

Other interest-earnings assets

130,740

1,332

4.04%

80,378

989

4.89%

Total interest-earning assets

2,691,086

37,720

5.56%

2,377,923

33,562

5.61%

Non-interest-earning assets

107,029

107,511

Total assets

2,798,115

2,485,434

Liabilities and stockholders' equity

Interest-bearing liabilities:

Interest-bearing demand deposits

47,338

286

2.40%

57,925

411

2.82%

Saving and money market deposits

1,319,862

10,343

3.11%

1,084,562

10,064

3.69%

Time deposits

520,345

5,036

3.84%

325,580

3,391

4.14%

Total interest-bearing deposits

1,887,545

15,665

3.29%

1,468,067

13,866

3.76%

FHLB advances and other borrowings

40,065

377

3.73%

156,043

1,587

4.05%

Subordinated notes

26,029

404

6.16%

Total interest-bearing liabilities

1,953,639

16,446

3.34%

1,624,110

15,453

3.79%

Non-interest-bearing demand deposits

569,522

609,456

Other non-interest-bearing liabilities

49,638

45,227

Total liabilities

2,572,799

2,278,793

Stockholders' equity

225,316

206,641

Total liabilities and stockholders' equity

2,798,115

2,485,434

Net interest income

21,274

18,109

Net interest spread

(5)

2.22%

1.82%

Net interest margin

(6)

3.14%

3.03%

(1)

Average balances - Daily average balances are used

to calculate yields/rates.

(2)

Annualized.

(3)

Average loan balances include

deferred fees/costs and 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.

Q3 2025 Form 10-Q

Nine Months Ended September 30,

2025

2024

Average

Balance

(1)

Interest

Yield/Rate

(2)

Average

Balance

(1)

Interest

Yield/Rate

(2)

Assets

Interest-earning assets:

Loans

(3)

2,048,192

95,057

6.21

1,829,593

84,479

6.17

Investment securities

(4)

449,376

9,978

2.97

426,594

8,634

2.70

Other interest-earnings assets

90,169

2,817

4.18

101,919

3,953

5.18

Total interest-earning assets

2,587,737

107,852

5.57

2,358,106

97,066

5.50

Non-interest earning assets

106,933

108,902

Total assets

2,694,670

2,467,008

Liabilities and stockholders' equity

Interest-bearing liabilities:

Interest-bearing demand deposits

49,191

909

2.47

55,887

1,171

2.80

Saving and money market deposits

1,243,911

29,088

3.13

1,094,433

30,529

3.73

Time deposits

457,847

13,297

3.88

321,470

9,907

4.12

Total interest-bearing deposits

1,750,949

43,294

3.31

1,471,790

41,607

3.78

FHLB advances

98,151

2,731

3.72

160,726

4,881

4.06

Subordinated notes

8,771

404

6.16

Total interest-bearing liabilities

1,857,871

46,429

3.34

1,632,516

46,488

3.80

Non-interest bearing demand deposits

570,918

598,294

Other non-interest-bearing liabilities

41,422

37,045

Total liabilities

2,470,211

2,267,855

Stockholders' equity

224,459

199,153

Total liabilities and stockholders' equity

2,694,670

2,467,008

Net interest income

61,423

50,578

Net interest spread

(5)

2.23

1.70

Net interest margin

(6)

3.17

2.87

(1)

Average balances - Daily average balances are used

to calculate yields/rates.

(2)

Annualized.

(3)

Average loan balances include

deferred fees/costs and 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.

Three months ended September 30, 2025 compared to the

three months ended September 30, 2024.

Net interest income before the provision

for credit losses was $21.3

million for the three months

ended September 30,

2025 as compared to $18.1 million for the same period 2024. The increase of $3.2 million or 17.5% was primarily driven by

higher

income

from

expanded

loan

portfolio,

and

reduction

rates

paid

interest-bearing

liabilities

between

the

periods.

Net interest margin (“NIM”) was 3.14%

for the three months ended September 30, 2025 and 3.03%

for the same period

in 2024.

The

11-basis-point

increase primarily

reflects

a reduction

in the

weighted

average rate

paid on

interest-bearing

liabilities

that outweighed

the

decline in

the yield

interest-bearing

assets. Additionally,

the

balance of

interest-bearing

assets grew more rapidly than the balance of interest-bearing

liabilities.

Nine months ended September 30, 2025 compared to the nine months

ended September 30, 2024

Net interest income

before the provision

for credit losses

was $61.4 million

for the nine

months ended September

30,

2025, an increase

of $10.8 million

or 21.4%, from

$50.6 million for

the same period

in 2024. This

growth was primarily

driven

by higher income

from an expanded

loan portfolio

and a reduction

in the weighted

average rates

paid on interest

-bearing

liabilities between periods.

The NIM was 3.17% for the nine months

ended September 30, 2025 and 2.87% for

the same period in 2024. The NIM

expansion of 30 basis points reflects both

higher loan yields and growth in the loan average

balance, along with a decrease

in interest rate paid on interest-bearing liabilities.

Table of Contents

USCB Financial Holdings, Inc.

Q3 2025 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 at

a level 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

the

credit

quality

the

loan

and

debt

securities

portfolios and net charge-offs.

Three months ended September 30, 2025 compared to the

three months ended September 30, 2024.

The provision

for credit

loss was

$105 thousand

for the

three months

ended September

30, 2025

compared to

$931

thousand for

the same

period in

significant decrease

in provision

expense was

primarily attributable

to slower

loan portfolio growth during the third quarter of 2025.

Nine months ended September 30, 2025 compared to the nine months

ended September 30, 2024

The provision for credit loss was

$1.8 million for the nine months

ended September 30, 2025 compared

to $2.1 million

for

the

same

period

2024.

The

decrease

the

provision

for

credit

losses

was

due

release

reserves

individually evaluated loans, following two charge-offs

recorded during the nine months ended September

30, 2025.

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

the SBA

7a loan

program and

the monetization

fees earned

through our

loan

swap program.

In addition,

we own

and are

beneficiaries of

the life

insurance policies

on some

of our

employees,

which

policies generate income from the increase in the cash

surrender values.

The following table presents the components of non-interest

income for the dates indicated (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

2025

2024

2025

2024

Service fees

2,661

2,544

7,394

6,172

(Loss) gain on sale of securities available for sale, net

(28)

Gain on sale of loans held for sale, net

128

109

804

593

Other non-interest income

923

785

2,600

2,334

Total

non-interest income

3,684

3,438

10,770

9,113

Three months ended September 30, 2025 compared to the

three months ended September 30, 2024.

Non-interest income for the

three months ended September

30, 2025 increased $246

thousand or 7.2%, compared

the

same

period

2024.

This

increase

was

primarily

driven

growth

prepayment

penalties

and

wire

transfer

fees

reported

under

the

service

fees category

and

income

from bank

owned

life

insurance

reported

under

other

non-interest

income.

Nine months ended September 30, 2025 compared to the nine months

ended September 30, 2024

Non-interest income for the nine months ended September

30, 2025 increased $1.7 million or 18.2%, compared to

the

same

period

This

increase

was

primarily

driven

growth

prepayment

penalties

and

title

insurance

income

reported under

the service

fees category

combined with

an increase

in the

gain on

sale of

loans as

well as

income from

bank owned life insurance reported under other non-interest

income.

Table of Contents

USCB Financial Holdings, Inc.

Q3 2025 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 September 30,

Nine Months Ended September 30,

2025

2024

2025

2024

Salaries and employee benefits

7,909

7,200

23,499

20,863

Occupancy

1,382

1,341

4,003

3,921

Regulatory assessment and fees

377

452

1,194

1,361

Consulting and legal fees

585

161

1,041

1,016

Network and information technology services

656

513

1,725

1,499

Other operating

2,139

1,787

6,272

5,528

Total

non-interest expense

13,048

11,454

37,734

34,188

Three months ended September 30, 2025 compared to the

three months ended September 30, 2024.

Non-interest expense for the three

months ended September 30, 2025,

increased $1.6 million, or 13.9%,

compared to

the same

period in

increase was

primarily

driven by

a $709

thousand

rise in

salaries and

employee

benefits,

reflecting merit increases,

new hires and

higher stock-based compensation

expense. Consulting

and legal fees

increased

$424 thousand due to

the administration expense

related to the interest

rate collars and the

third quarter of 2024

included

a legal

expense

reimbursement,

which

reduced

expenses

in that

period

and contributed

the year-over-year

increase.

Additionally,

other operating

expense increased

by $352

thousand,

primarily due

to the

absence of

a reimbursement

for

force-placed insurance that was

received in the third quarter

of 2024. These prior-period reimbursements

had the effect of

lowering reported expenses, making the current period’s

expenses appear higher by comparison.

Nine months ended September 30, 2025 compared to the nine months

ended September 30, 2024

Non-interest expense for the nine

months ended September 30, 2025 increased $3.5 million

or 10.4%, compared to the

same period

in 2024.

The increase

was primarily

driven by

an increase

of $2.6

million in

salaries and

employee benefits

due to an

increase of $1.0

million in merit

increases and new

full-time employee

salaries, and

$1.5 million in

stock-based

compensation expenses.

Additionally, other operating

expenses increased $744

thousand due to

increase of $276

thousand

due

item

processing

and

internet

banking

fees,

$160

thousand

board

directors’

expenses,

$147

thousand

shareholders expense and $103 thousand in forced placed insurance.

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 September 30, 2025 compared to the

three months ended September 30, 2024.

Income tax expense for the

three months ended September

30, 2025 was $2.9

million as compared to

$2.2 million for

the same period

in 2024 and

reflected the increased

level of pre-tax

net income experienced

during the 2025

period. The

effective tax rate for the three months ended September 30, 2025 was 24.28% compared to 24.15% for the same period

2024.

Nine months ended September 30, 2025 compared to the nine months

ended September 30, 2024

Income tax expense

for the

nine months ended

September 30, 2025

was $7.9 million

as compared to

$5.6 million for

the same period in 2024 and

reflected the substantially increased

level of pre-tax net income

experienced during the 2025

period. The effective

tax rate for

the nine months

ended September 30, 2025

was 24.22% compared to

23.98% for the

same

period in 2024.

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.

Table of Contents

USCB Financial Holdings, Inc.

Q3 2025 Form 10-Q

Analysis of Financial Condition

Total

assets at

September 30, 2025

were $2.77

billion, an

increase of

$186.7 million,

or 9.7%

annualized, over

total

assets of

$2.58 billion

at December 31,

Total

loans, net

of deferred

fees/costs, increased

$158.1 million,

or 10.7%

annualized,

$2.13

billion

September 30,

2025

compared

$1.97

billion

December 31,

2024.

Total

deposits

increased

$281.6

million,

17.3%

annualized,

$2.46

billion

September 30,

2025

compared

$2.17

billion

December 31, 2024.

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

it’s 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 the U.S.

Government and U.S. Government Agencies

and

mortgage-backed

securities,

collateralized

mortgage

obligations,

corporate

bonds,

municipal

securities,

other

debt

securities

all

with

varying

contractual

maturities

and

coupons.

Due

the

optionality

embedded

these

securities,

the

contractual 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 on 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 Company’s

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 of credit ratings, vintage bonds, remaining payment terms, prepayment speeds and

analysis

macro-economic

conditions.

result

this

evaluation,

the

Company

concluded

that

allowance

was

required on AFS securities as of September 30, 2025.

quarter

end,

HTM

securities

included

$147.3

million

U.S.

Government

and

U.S.

Government

Agencies

issued

bonds and

mortgage-backed

securities.

Because

of the

explicit and/or

implicit

guarantee

on these

bonds,

the

Company

holds no reserves

on these holdings.

The remaining portion

of the HTM

portfolio is made

up of $9.1

million in investment

grade corporate

bonds. For

the portion

of the

HTM exposed

to non-government credit

risk, the

Company utilized

the PD/LGD

methodology to

estimate a

$5 thousand

ACL as

of September 30,

book value

for debt

securities

classified as

HTM represents amortized cost less ACL.

Aggregate

AFS

and

HTM

investment

securities

increased

$55.6 million,

17.5%

annualized,

$480.5 million

September 30,

2025 from

$424.9 million

December 31,

2024.

Investment

securities

increased

due

reinvestment

payments received and investment of excess in cash balances into high credit quality

investment securities to increase the

Company’s profitability and modify the Company

’s balance sheet duration according to the ALM

policy.

As of

September 30,

2025,

investment securities

with a

market value

of $49.7 million

were pledged

to secure

public

deposits. The investment portfolio does not contain any

tax-exempt securities.

Table of Contents

USCB Financial Holdings, Inc.

Q3 2025 Form 10-Q

The following table

presents the amortized

cost and fair

value of investment

securities for

the dates indicated

(dollars

in thousands):

September 30, 2025

December 31, 2024

Available-for-sale:

Amortized

Cost

Fair Value

Amortized

Cost

Fair Value

U.S. Government Agency

13,143

11,965

14,279

12,625

Collateralized mortgage obligations

100,830

81,695

101,808

78,905

Mortgage-backed securities - residential

60,915

51,318

58,995

46,933

Mortgage-backed securities - commercial

145,991

138,517

86,604

78,739

Municipal securities

22,838

18,915

24,925

19,311

Bank subordinated debt securities

22,046

21,769

24,314

23,708

365,763

324,179

310,925

260,221

Held-to-maturity:

U.S. Government Agency

41,500

38,046

42,538

37,444

Collateralized mortgage obligations

52,766

47,376

56,987

49,259

Mortgage-backed securities - residential

37,880

34,915

40,681

36,121

Mortgage-backed securities - commercial

15,135

14,002

15,272

13,887

Corporate bonds

9,089

8,960

9,222

8,829

156,370

143,299

164,700

145,540

Allowance for credit losses - securities held-to-maturity

(5)

(6)

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

156,365

164,694

The following

table shows

the weighted

average yields,

categorized by

contractual maturity,

for investment

securities

as of September 30, 2025 (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

2,390

2.90%

10,753

2.62%

13,143

2.68%

Collateralized mortgage obligations

100,830

1.46%

100,830

1.46%

MBS - residential

60,915

1.86%

60,915

1.86%

MBS - commercial

145,991

3.67%

145,991

3.67%

Municipal securities

22,838

1.45%

22,838

1.45%

Bank subordinated debt securities

1,983

7.97%

20,063

5.26%

22,046

5.52%

1,983

7.97%

45,291

3.21%

318,489

2.59%

365,763

2.70%

Held-to-maturity:

U.S. Government Agency

2,998

0.64%

13,873

1.22%

10,885

1.59%

13,744

2.07%

41,500

1.56%

Collateralized mortgage obligations

52,766

1.64%

52,766

1.64%

MBS - residential

4,597

1.85%

5,052

1.62%

28,231

2.33%

37,880

2.18%

MBS - commercial

3,046

1.63%

12,089

2.57%

15,135

2.38%

Corporate bonds

9,089

2.82%

9,089

2.82%

12,087

2.28%

21,516

1.42%

15,937

1.60%

106,830

1.98%

156,370

1.89%

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.

Q3 2025 Form 10-Q

The following table shows the loan portfolio composition

as of the dates indicated (in thousands):

September 30, 2025

December 31, 2024

Total

Percent of

Total

Percent of

Total

Residential real estate

316,557

14.9

289,961

14.8

Commercial real estate

1,226,121

57.7

1,136,417

57.8

Commercial and industrial

269,430

12.7

258,311

13.1

Correspondent banks

104,598

4.9

82,438

4.2

Consumer and other

207,939

9.8

198,091

10.1

Total

gross loans

2,124,645

100.0

1,965,218

100.0

Plus: Deferred fees/costs

6,321

7,630

Total

loans net of deferred fees/costs

2,130,966

1,972,848

Less: Allowance for credit losses

24,964

24,070

Total

net loans

2,106,002

1,948,778

Total

loans,

net

deferred

fees/costs,

increased

$158.1 million,

10.7%

annualized

$2.13

billion,

September 30, 2025 compared

to December 31, 2024.

The commercial real

estate loan segment

had the most

significant

balance increase compared to December 31, 2024.

Our

loan

portfolio

continues

grow,

with

commercial

real

estate

lending

the

primary

focus

which

represented

approximately 57.7%

of the

total gross

loan portfolio

as of

September 30, 2025.

Our 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.

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

our

senior

management

team

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

interest

rate

changes

the

loan

portfolio

September 30, 2025 (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

15,515

51,018

68,095

181,929

316,557

Commercial real estate

83,082

463,653

673,810

5,576

1,226,121

Commercial and industrial

10,968

109,875

104,382

44,205

269,430

Correspondent banks

104,598

Consumer and other

2,519

1,307

22,547

181,566

207,939

Total

gross loans

216,682

625,853

868,834

413,276

2,124,645

Interest rate sensitivity:

Fixed interest rates

170,510

180,720

146,407

315,912

813,549

Floating or adjustable rates

46,172

445,133

722,427

97,364

1,311,096

Total

gross loans

216,682

625,853

868,834

413,276

2,124,645

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

September 30, 2025,

approximately 61.7%

of the

loan portfolio

has adjustable/variable

rates and

38.3% of

the

loan portfolio has fixed rates. The adjustable/variable rate loans re-price to different benchmarks and tenors and

in different

periods of time.

By 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

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.

Q3 2025 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):

September 30, 2025

Pass

Special Mention

Substandard

Doubtful

Total

Residential real estate

313,945

2,060

552

316,557

Commercial real estate

1,212,052

11,656

2,413

1,226,121

Commercial and industrial

266,801

936

1,693

269,430

Correspondent banks

104,598

Consumer and other

207,939

2,105,335

14,652

4,658

2,124,645

December 31, 2024

Pass

Special Mention

Substandard

Doubtful

Total

Residential real estate

289,401

560

289,961

Commercial real estate

1,133,965

2,452

1,136,417

Commercial and industrial

256,031

2,280

258,311

Correspondent banks

82,438

Consumer and other

196,101

1,990

198,091

1,957,936

7,282

1,965,218

Table of Contents

USCB Financial Holdings, Inc.

Q3 2025 Form 10-Q

Non-Performing Assets

The following table presents non-performing assets as

of the dates shown (in thousands,

except ratios):

September 30, 2025

December 31, 2024

Non-accrual loans

1,310

2,707

Loans past due over 90 days and still accruing

Total

non-performing loans

1,310

2,707

Other real estate owned

Total

non-performing assets

1,310

2,707

Asset quality ratios:

Allowance for credit losses to total loans

1.17%

1.22%

Allowance for credit losses to non-performing loans

1,906%

889%

Non-performing loans to total loans

0.06%

0.14%

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 of this Form 10-Q.

Allowance for Credit Losses

The

ACL

loans

represents

amount

that,

management's

evaluation,

adequate

provide

coverage

for

all

expected future credit losses on outstanding loans. Additionally,

qualitative adjustments are made to the ACL when, based

management’s

judgment,

there

are

factors

impacting

the

allowance

estimate

not

considered

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.

Q3 2025 Form 10-Q

The following

table presents

ACL on

loans and

net charge-offs

to average

loans by

type for

the periods

indicated (in

thousands):

Residential

Real

Estate

Commercial

Real Estate

Commercial

and

Industrial

Correspondent

Banks

Consumer

and Other

Total

Three Months Ended September 30,

2025

Beginning balance

5,477

9,491

4,508

874

4,583

24,933

Provision for credit losses

(1)

544

(102)

(118)

(45)

(252)

Recoveries

Charge-offs

(7)

Ending Balance

6,026

9,389

4,396

829

4,324

24,964

Average loans

316,701

1,184,145

269,204

103,210

225,783

2,099,043

Net charge-offs (recoveries) to average

loans

(2)

(0.01)%

0.01%

(0.00)%

Nine Months Ended September 30,

2025

Beginning balance

5,121

8,788

4,633

654

4,874

24,070

Provision for credit losses

(3)

888

601

(249)

175

179

1,594

Recoveries

Charge-offs

(730)

Ending Balance

6,026

9,389

4,396

829

4,324

24,964

Average loans

304,401

1,170,204

264,718

95,724

213,145

2,048,192

Net charge-offs (recoveries) to average

loans

(2)

(0.01)%

(0.00)%

0.69%

0.07%

(1) Provision for credit losses excludes a $80 thousand provision due to unfunded commitments included in accrued interest and other

liabilities and a $2 thousand release related to investment securities held to maturity.

(2) Annualized.

(3) Provision for credit losses excludes a $224 thousand provision due to unfunded commitments included in accrued interest and

other liabilities and a $1 thousand release related to investment securities held to maturity.

Table of Contents

USCB Financial Holdings, Inc.

Q3 2025 Form 10-Q

Residential

Real Estate

Commercial

Real Estate

Commercial

and

Industrial

Correspondent

Banks

Consumer

and Other

Total

Three Months Ended September 30,

2024

Beginning balance

3,193

10,272

4,747

892

3,126

22,230

Provision for credit losses

(1)

760

(86)

(96)

(69)

322

831

Recoveries

Charge-offs

(7)

Ending Balance

3,955

10,186

4,661

823

3,442

23,067

Average loans

238,113

1,093,599

238,331

105,388

202,799

1,878,230

Net charge-offs (recoveries) to average

loans

(2)

(0.01)%

(0.02)%

0.01%

0.00%

Nine Months Ended September 30,

2024

Beginning balance

2,695

10,366

3,974

911

3,138

21,084

Provision for credit losses

(3)

1,252

(180)

666

(88)

318

1,968

Recoveries

Charge-offs

(17)

Ending Balance

3,955

10,186

4,661

823

3,442

23,067

Average loans

231,947

1,065,280

232,160

102,659

197,547

1,829,593

Net charge-offs (recoveries) to average

loans

(2)

(0.01)%

(0.02)%

0.01%

0.00%

(1) Provision for credit losses excludes a $101 thousand provision due to unfunded commitments included in accrued interest and other

liabilities and a $1 thousand release related to investment securities held to maturity.

(2) Annualized.

(3) Provision for credit losses excludes $159 thousand provision due to unfunded commitments included in accrued interest.

The

Federal

Open

Market

Committee

(“FOMC”)

economic

forecasts

September

30,

2025,

showed

moderate

improvement

the forecast

for real

GDP

an slight

improvement

in unemployment

rate.

Fannie

Mae House

Price Index

(“HPI”) forecast reflected a

deterioration in national housing

prices. The Company continued

to adjust the HPI index

effect

on the 1-4 Family loan portfolio with a

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 September 30, 2025, for every 100 basis

points increase in the HPI,

the forecast

reduces

reserves

by approximately

$380

thousand

and

about

2 basis

points

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 September 30,

2025, we stress tested

two qualitative factors in

our commercial real estate

loan pool, as it

is 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

$9.1 million

35.5% increase in the 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.

Bank-Owned Life Insurance

As of September 30,

2025, the combined

cash surrender

value of all

bank-owned life

insurance (“BOLI”)

policies was

$58.9 million.

Changes in

cash surrender

value are

recorded to

other non-interest

income in

the unaudited

Consolidated

Statements of Operations. The Company has

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

these policies.

Table of Contents

USCB Financial Holdings, Inc.

Q3 2025 Form 10-Q

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 of the

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 September 30,

2025

2024

Average Balance

Average Rate

Paid

Average Balance

Average Rate

Paid

Non-interest bearing demand deposits

569,522

0.00%

609,456

0.00%

Interest-bearing demand deposits

47,338

2.40%

57,925

2.82%

Saving and money market deposits

1,319,862

3.11%

1,084,562

3.69%

Time deposits

520,345

3.84%

325,580

4.14%

Total

2,457,067

2.53%

2,077,523

2.66%

The Company

has a

granular deposit

portfolio with

outstanding balances

comprised of

57% in

commercial

deposits,

27% in personal

deposits, 6% in

public funds (which

are partially collateralized)

and 10% in

brokered deposits. The

brokered

deposits balance at

September 30, 2025 was

$235.5 million and

$133.0 million at

December 31, 2024.

This increase was

primarily driven

by a

$100 million

aggregate notional

amount associated

with two

costless collar

hedges executed

during

the

third

quarter

2025.These

costless

hedges

enhance

the

Company’s

interest

rate

risk

management

strategy

mitigating the impact of rate movements on future cash flows.

As of September 30,

2025, the Company

has approximately 21

thousand deposit accounts

with the majority

which

were personal accounts, approximately 13 thousand or 61.7%. The estimated average account size in our deposit portfolio

was approximately $119

thousand as of September 30, 2025.

The

amount

uninsured

deposits

are

estimated

based

the

FDIC

deposit

insurance

limit

$250

thousand

per

account holder for all deposit accounts at the Company.

The total estimated percentage of uninsured deposits

was 53% at

September 30,

2025 and

55%

at December

31,

2024.

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 was $183.9 million at September 30, 2025 and

was $129.5 million at December 31, 2024.

The following table shows scheduled maturities of uninsured

time deposits as of September 30, 2025 (in thousands):

September 30, 2025

Three months or less

68,923

Over three through six months

24,033

Over six though twelve months

9,923

Over twelve months

38,097

140,976

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 accrued interest and other

liabilities in the

consolidated balance sheet.

As of September 30, 2025, escrow balances totaled

$29.2 million compared to $6.1 million at December

31, 2024.

The increase reflects the normal growth in escrow accounts

pending tax and insurance payments.

Table of Contents

USCB Financial Holdings, Inc.

Q3 2025 Form 10-Q

Borrowings

FHLB Advances

member

the

FHLB

Atlanta,

are

eligible

obtain

advances

with

various

terms

and

conditions.

This

accessibility to 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

September 30,

2025, we

had $11.0

million

of fixed-rate

advances

outstanding

from the

FHLB with

a weighted

average rate of 3.76% maturing in 2028 as detailed in the table

below.

The following table presents the FHLB advances as of

September 30, 2025 (in thousands):

Interest Rate

Type of Rate

Maturity Date

Amount

3.76%

Fixed

January 24, 2028

11,000

During the third

quarter 2024, the

Company paid off

the $80.0 million

fixed-rate loan outstanding

from the Bank

Term

Funding Program with an original maturity date of January

10, 2025.

The

Company

has

also

established

Federal

Funds

lines

credit

with

our

upstream

correspondent

banks

and

the

Federal

Reserve

Bank

Atlanta

Discount

Window

manage

temporary

fluctuations

our

daily

cash

balances.

September 30, 2025, there were no outstanding balances

with any of these liquidity sources.

Subordinated Notes

August

14,

2025,

the

Company

entered

into

Subordinated

Note

Purchase

Agreement

with

certain

qualified

institutional

buyers

pursuant

which

the

Company

sold

and

issued

$40.0

million

aggregate

principal

amount

its

7.625% Fixed-to-Floating Rate

Subordinated Notes due 2035.

The Notes were issued by

the Company to the purchasers

at a price equal to

100% of their face amount. The

subordinated debt was originally issued at a

cost of $760 thousand. After

two

months

amortization,

the

carrying

value

has

been

reduced

$738

thousand,

reflecting

the

scheduled

expense

recognition over the

term of the

instrument. The subordinated

notes are presented

net of these

costs on the

consolidated

balance

sheet.

The

Notes

were

offered

and

sold

the

Company

private

placement

transaction

reliance

exemptions from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), pursuant to

Section

4(a)(2)

the

Securities

Act

and

Rule

506(b)

Regulation

thereunder.

For

additional

information,

see

the

Company Form 8-K filed on August 14, 2025.

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 of

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

maintain an allowance

for off-balance sheet credit

risk which is

recorded under

accrued

interest

and

other

liabilities

the

unaudited

Consolidated

Balance

Sheets.

The

ACL

unfunded

commitments at

September 30,

2025 was

$795 thousand

and at

December 31,

2024 was

$571 thousand.

The increase

was primarily driven by an increase in unfunded commitments.

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

September 30, 2025

December 31, 2024

Commitments to grant loans and unfunded lines of credit

140,146

122,578

Standby and commercial letters of credit

3,855

5,389

Total

144,001

127,967

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

Table of Contents

USCB Financial Holdings, Inc.

Q3 2025 Form 10-Q

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

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 implements

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 interest rates

scenarios,

yield curve

shapes

and

time

horizons.

These

simulations

utilize

both

instantaneous

and

parallel

changes

the

level of

interest rates, as well as

non-parallel changes such as

changing slopes (flat and steepening)

and twists of the yield

curve.

Static

simulation

models

are

based

current

exposures

and

assume

constant

balance

sheet

with

new

growth.

Dynamic simulation

is also

utilized to

have a

more comprehensive

assessment

on IRR.

This simulation

relies on,

and in

assumptions regarding

changes in

existing lines

of 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 September

30, 2025,

we had

a slightly

liability sensitive

balance sheet

for year

one, and

a neutral balance

sheet for

year two, using

the static model.

Liability sensitivity indicates

that our liabilities

generally

reprice

faster

than

our

assets,

which

results

favorable

impact

net

interest

income

when

market

interest

rates

decrease. Asset sensitivity indicates that our assets

generally reprice faster than our liabilities,

which results in a favorable

impact

net

interest

income

when

market

interest

rates

increase.

Neutral

denotes

minimal

effect

net

interest

income as a

result of changes in

interest rates. Many

assumptions are used to

calculate the impact

of interest rate

variations

our

net

interest

income,

such

asset

prepayment

speeds,

non-maturity

deposit

price

sensitivity

(betas),

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.

Table of Contents

USCB Financial Holdings, Inc.

Q3 2025 Form 10-Q

According to our model, as of

September 30, 2025, our balance sheet is

liability sensitive for year one and

more neutral

in year two under static interest rate scenarios

(an increase or decrease of 400 basis

points). Additionally,

utilizing an EVE

approach, we analyze

the risk to capital

from the effects

of various interest

rate scenarios through

a long-term discounted

cash flow model.

This measures

the difference

between the

economic value

of our assets

and the economic

value of our

liabilities, which is

a proxy for

our liquidation value.

According to our

balance sheet composition, and

as expected, our

model

stipulates

that

increase

interest

rates

will

have

negative

impact

the

EVE

and

lower

rates,

positive

impact.

Results and analysis are presented quarterly to the ALCO,

and strategies are reviewed and defined.

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),

pledging assets and contingent liquidity events.

Changes in macroeconomic conditions, as well as exposure to credit, market, operational, legal,

cybersecurity risk and

reputational

risks,

could

have

unexpected

impact

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

ALCO, and

active involvement

of senior

management; appropriate

strategies, policies,

procedures,

and limits

used

identify

and

mitigate

liquidity

risk;

comprehensive

liquidity

risk

measurement

and

monitoring

systems

(including

assessments

the

current

and

prospective

cash

flows

sources

and

uses

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 of

highly liquid

marketable securities

free of

legal, regulatory, or operational impediments,

that can be

used to meet

liquidity needs in

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

the investment

portfolio cash

flows. Other

potential funding

sources include

Federal

Funds purchased, brokered certificates of deposit, listing services

certificates of deposit, unsecured Federal Funds lines of

credit with other

banking institutions and

draws from the

Federal Reserve Bank

of Atlanta Discount Window, and

borrowings

from the

FHLB

Atlanta.

Accordingly,

we believe

our liquidity

resources

are adequate

to fund

loans and

meet other

cash

needs as necessary.

Table of Contents

USCB Financial Holdings, Inc.

Q3 2025 Form 10-Q

Capital Adequacy

As of

September 30,

2025, the

Bank was

well capitalized

under the

FDIC’s

prompt corrective

action framework.

also follow the capital conservation buffer framework, and

as of September 30, 2025, we exceeded the

capital conversation

buffer in

all capital ratios,

according to

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

September 30, 2025

Total

risk-based capital

299,147

13.93

171,861

8.00

214,826

10.00

Tier 1 risk-based capital

273,382

12.73

128,896

6.00

171,861

8.00

Common equity tier 1 capital

273,382

12.73

96,672

4.50

139,637

6.50

Leverage ratio

273,382

9.63

113,507

4.00

141,883

5.00

December 31, 2024

Total

risk-based capital

266,387

13.34

159,795

8.00

199,744

10.00

Tier 1 risk-based capital

241,740

12.10

119,846

6.00

159,795

8.00

Common equity tier 1 capital

241,740

12.10

89,885

4.50

129,834

6.50

Leverage ratio

241,740

9.38

103,074

4.00

128,843

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 mostly reflected

in the increased cost of operations, inflation can negatively impact overhead expenses and other variable expenses. 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 the effects of inflation. Periods of high inflation are often accompanied by relatively

higher interest rates, and periods of low inflation are accompanied

by 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.

Q3 2025 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 shareholders for the periods presented (in thousands,

except per share data):

USCB FINANCIAL HOLDINGS, INC.

NON-GAAP FINANCIAL MEASURES (UNAUDITED)

(Dollars in thousands)

As of or For the Three Months Ended

9/30/2025

6/30/2025

3/31/2025

12/31/2024

9/30/2024

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

(1)

Net income

8,939

8,140

7,658

6,904

6,949

Plus: Income tax expense

2,866

2,599

2,440

2,197

2,213

Plus: Provision for credit losses

105

1,031

681

1,030

931

PTPP income

11,910

11,770

10,779

10,131

10,093

PTPP return on average assets:

(1)

PTPP income

11,910

11,770

10,779

10,131

10,093

Average assets

2,798,115

2,677,198

2,606,593

2,544,592

2,485,434

PTPP return on average assets

(2)

1.69%

1.76%

1.68%

1.58%

1.62%

Operating net income:

(1)

Net income

8,939

8,140

7,658

6,904

6,949

Less: Net losses on sale of securities

(28)

Less: Tax effect on sale of securities

Operating net income

8,960

8,140

7,658

6,904

6,949

Operating PTPP income:

(1)

PTPP income

11,910

11,770

10,779

10,131

10,093

Less: Net losses on sale of securities

(28)

Operating PTPP income

11,938

11,770

10,779

10,131

10,093

Operating PTPP return on average assets:

(1)

Operating PTPP income

11,938

11,770

10,779

10,131

10,093

Average assets

2,798,115

2,677,198

2,606,593

2,544,592

2,485,434

Operating PTPP return on average assets

(2)

1.69%

1.76%

1.68%

1.58%

1.62%

Operating return on average assets:

(1)

Operating net income

8,960

8,140

7,658

6,904

6,949

Average assets

2,798,115

2,677,198

2,606,593

2,544,592

2,485,434

Operating return on average assets

(2)

1.27%

1.22%

1.19%

1.08%

1.11%

Operating return on average equity:

(1)

Operating net income

8,960

8,140

7,658

6,904

6,949

Average equity

225,316

228,492

219,505

215,715

206,641

Operating return on average equity

(2)

15.78%

14.29%

14.15%

12.73%

13.38%

Operating Revenue:

(1)

Net interest income

21,274

21,034

19,115

19,358

18,109

Plus: Non-interest income

3,684

3,370

3,716

3,627

3,438

Less: Net losses on sale of securities

(28)

Operating revenue

24,986

24,404

22,831

22,985

21,547

Operating Efficiency Ratio:

(1)

Total non-interest expense

13,048

12,634

12,052

12,854

11,454

Operating revenue

24,986

24,404

22,831

22,985

21,547

Operating efficiency ratio

52.22%

51.77%

52.79%

55.92%

53.16%

(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.

Q3 2025 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

9/30/2025

6/30/2025

3/31/2025

12/31/2024

9/30/2024

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

(1)

Total stockholders' equity

209,095

231,583

225,088

215,388

213,916

Less: Intangible assets

Tangible stockholders' equity

(3)

209,095

231,583

225,088

215,388

213,916

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

Total common shares issued and outstanding

18,107,385

20,078,385

20,048,385

19,924,632

19,620,632

Tangible book value per common share

(2)

11.55

11.53

11.23

10.81

10.90

Operating diluted net income per common share:

(1)

Operating net income

8,960

8,140

7,658

6,904

6,949

Total weighted average diluted shares of common stock

19,755,820

20,295,794

20,319,535

20,183,731

19,825,211

Operating diluted net income per common share:

0.45

0.40

0.38

0.34

0.35

Tangible Common Equity/Tangible Assets

(1)

Tangible stockholders' equity

209,095

231,583

225,088

215,388

213,916

Tangible total assets

(3)

2,767,945

2,719,474

2,677,382

2,581,216

2,503,954

Tangible Common Equity/Tangible

Assets

7.55%

8.52%

8.41%

8.34%

8.54%

(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 stockholders’ equity and tangible

total assets are the same amounts as stockholders’

equity

and total assets, respectively, as calculated under GAAP.

Table of Contents

USCB Financial Holdings, Inc.

Q3 2025 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

Rules

13a-15(e)

and

15d-15(e)

under

the

Securities

Exchange

Act

1934

(“Exchange Act”))

as of

September 30,

Based

on that

evaluation,

management

believes that,

as of

the end

of the

period covered

by 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.

Q3 2025 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.

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.

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

2024 Form 10-K.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

(a) None.

(b) Not applicable.

for the three months ended September 30, 2025 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

July 1 - 31, 2025

528,309

August 1 - 31, 2025

528,309

September 1 - 30, 2025

2,000,000

17.19

528,309

Total

2,000,000

(2)

17.19

(1) As of September 30, 2025 there were

528,309 number of shares available for repurchase under

the 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.

(2) Reflects the repurchase of shares pursuant

to stock repurchase agreements entered into

with certain institutional investors on September 2, 2025.

For additional information regarding such repurchases,

please see the Current Report on Form 8-K filed

with the SEC on September 5, 2025.

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

Table of Contents

USCB Financial Holdings, Inc.

Q3 2025 Form 10-Q

(c)

During

the

three

months

ended

September

30,

2025,

none

the

Company’s

directors

Section

reporting

persons

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.

Q3 2025 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 September 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).

4.5

Indenture, dated August 14, by and between USCB Financial Holdings, Inc. and Wilmington Trust, National Association, as

trustee (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 August 14, 2025).

4.6

Form of 7.625% Fixed-to-Floating Rate Subordinated Note due 2035 (included as Exhibit A-1 and Exhibit A-2 to the

Indenture referenced in Exhibit 4.5 hereto (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 August 14, 2025).

10.1

Form of Subordinated Note Purchase Agreement, dated August 14, 2024, by and among USCB Financial Holdings, Inc.

and certain qualified institutional buyers (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on

Form 8-K (File No. 001-41196) filed with the Securities and Exchange Commission on August 14, 2025).

10.2

Form of Registration Rights Agreement, dated August 14, 2025, by and among USCB Financial Holdings, Inc. and certain

institutional buyers (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K (File No. 001-

41196) filed with the Securities and Exchange Commission on August 14, 2025).

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

September 30,

2025 formatted

in Inline

XBRL: (i)

Consolidated Balance

Sheets (unaudited),

(ii) Consolidated

Statements of

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)

Management Contract or Compensatory plan or arrangement.

Filed herewith.

***

Furnished hereby.

Table of Contents

USCB Financial Holdings, Inc.

Q3 2025 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

November 7, 2025

Luis de la Aguilera

(Principal Executive Officer)

/s/ Robert Anderson

Executive Vice President and Chief Financial

Officer

November 7, 2025

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: November 7, 2025

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: November 7, 2025

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 September 30, 2025, 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

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/ Luis de la Aguilera

Luis de la Aguilera

Chairman, President and Chief Executive Officer

Date: November 7, 2025

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 September

30,

2025,

as filed

with

the

Securities

and

Exchange

Commission

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: November 7, 2025