10-Q - USCB - Equibles

uscb-20240930p1i0

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, 2024

☐

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

For the transition period from _____to_____

Commission File Number:

001-41196

USCB Financial Holdings, Inc.

(Exact name of registrant as specified in its charter)

Florida

87-4070846

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

2301 N.W. 87th Avenue

Doral

33172

(Address of principal executive offices) (zip code)

Registrant’s telephone number, including area code:

(

305

)

715-5200

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

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Class A common stock, $1.00 par value per share

USCB

The Nasdaq Stock Market LLC

Indicate by check

mark whether the

registrant (1) has

filed all reports

required to be

filed by Section

13 or 15(d)

of the Securities

Exchange

Act of 1934 during the preceding 12 months

(or for such shorter period that the registrant was

required to file such reports), and (2)

has

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

Yes

☒

☐

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

File required to be submitted pursuant

to Rule 405

of Regulation S-T

(§232.405 of this

chapter) during the

preceding 12 months

(or for such

shorter period that

the registrant

was required to submit such files).

Yes

☒

☐

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

company

emerging

growth

company.

See

the

definitions

“large

accelerated

filer,”

“accelerated

filer,”

“non-accelerated

filer,”

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

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

☒

Smaller reporting company

☒

Emerging growth company

☒

If an

emerging growth

company, indicate by

check mark

if the

registrant has elected

not to

use the

extended transition

period for

complying

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

☐

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

☐

☒

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

As of October 31, 2024 the registrant had

19,840,632

shares of Class

common stock outstanding.

uscb-20240930p1i0

FORM 10-Q

September 30, 2024

TABLE OF CONTENTS

PART I

Item 1.

Financial Statements

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

Consolidated Statements of Operations for the three and nine months ended September 30, 2024 and 2023

(Unaudited)

Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended

September 30, 2024 and 2023 (Unaudited)

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

September 30, 2024 and 2023 (Unaudited)

Consolidated Statements of Cash Flows for the nine months ended September 30, 2024 and 2023

(Unaudited)

Notes to the Consolidated Financial Statements (Unaudited)

Item 2.

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

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Item 4.

Controls and Procedures

PART II

Item 1.

Legal Proceedings

Item 1A.

Risk Factors

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

Item 3.

Defaults Upon Senior Securities

Item 4.

Mine Safety Disclosures

Item 5.

Other Information

Item 6.

Exhibit Index

Signatures

Table of Contents

USCB Financial Holdings, Inc.

Q3 2024 Form 10-Q

PART

Item 1.

Financial Statements

USCB FINANCIAL HOLDINGS, INC

Consolidated Balance Sheets – Unaudited

(Dollars in thousands, except share data)

September 30, 2024

December 31, 2023

ASSETS:

Cash and due from banks

7,084

8,019

Interest-bearing deposits in banks

31,402

33,043

Total cash and cash equivalents

38,486

41,062

Investment securities held to maturity, net of allowance of $

for both periods (fair value $

153,125

and

155,510

, respectively)

167,001

174,974

Investment securities available for sale, at fair value

259,527

229,329

Federal Home Loan Bank stock, at cost

7,242

10,153

Loans held for investment, net of allowance of $

23,067

and $

21,084

, respectively

1,908,295

1,759,743

Accrued interest receivable

10,765

10,688

Premises and equipment, net

4,656

4,836

Bank owned life insurance

53,038

51,781

Deferred tax assets, net

29,540

37,282

Lease right-of-use asset

9,194

11,423

Other assets

16,210

7,822

Total assets

2,503,954

2,339,093

LIABILITIES:

Deposits:

Demand deposits

637,313

552,762

Money market and savings accounts

1,091,029

1,048,272

Interest-bearing checking

64,333

47,702

Time deposits

333,942

288,403

Total deposits

2,126,617

1,937,139

Federal Home Loan Bank advances and other

borrowings

118,000

183,000

Lease liability

9,194

11,423

Accrued interest and other liabilities

36,227

15,563

Total liabilities

2,290,038

2,147,125

Commitments and contingencies (See Notes 5

and 10)

(nil)

STOCKHOLDERS' EQUITY:

Preferred stock - Class C; $1.00 par value; $1,000

per share liquidation preference; 52,748 shares

authorized; 0 and 0 issued and outstanding as

of September 30, 2024 and December 31, 2023

Preferred stock - Class D; $1.00 par value; $5.00

per share liquidation preference; 12,309,480

authorized; 0 and 0 issued and outstanding as

of September 30, 2024 and December 31,

2023

Preferred stock - Class E; $1.00 par value; $1,000 per

share liquidation preference; 3,185,024 shares

authorized; 0 and 0 issued and outstanding as

of of September 30, 2024 and December 31,

2023

Common stock - Class A Voting; $1.00 par value; 45,000,000 shares

authorized; 19,620,632 issued and

outstanding

as of September 30, 2024, 19,575,435 issued and

outstanding as of

December 31, 2023

19,621

19,575

Common stock - Class B Non-voting; $1.00 par

value; 8,000,000 shares authorized; 0 and 0

issued and

outstanding as of September 30, 2024 and

December 31, 2023

Additional paid-in capital on common stock

306,100

305,212

Accumulated deficit

(73,827)

(88,548)

Accumulated other comprehensive loss

(37,978)

(44,271)

Total stockholders' equity

213,916

191,968

Total liabilities and stockholders' equity

2,503,954

2,339,093

The accompanying notes are an integral part of

these unaudited consolidated financial statements.

Table of Contents

USCB Financial Holdings, Inc.

Q3 2024 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,

2024

2023

2024

2023

Interest income:

Loans, including fees

29,819

22,523

84,479

63,081

Investment securities

2,754

2,833

8,634

7,501

Interest-bearing deposits in financial institutions

989

1,026

3,953

2,459

Total interest income

33,562

26,382

97,066

73,041

Interest expense:

Interest-bearing checking

411

331

1,171

574

Money market and savings accounts

10,064

8,779

30,529

20,532

Time deposits

3,391

2,565

9,907

5,767

Federal Home Loan Bank advances and other borrowings

1,587

685

4,881

1,976

Total interest expense

15,453

12,360

46,488

28,849

Net interest income before provision for

credit losses

18,109

14,022

50,578

44,192

Provision for credit losses

931

653

2,127

892

Net interest income after provision for

credit losses

17,178

13,369

48,451

43,300

Non-interest income:

Service fees

2,544

1,329

6,172

3,707

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

net

(955)

(976)

Gain on sale of loans held for sale, net

109

255

593

696

Other non-interest income

785

1,532

2,334

2,650

Total non-interest income

3,438

2,161

9,113

6,077

Non-interest expense:

Salaries and employee benefits

7,200

6,066

20,863

18,325

Occupancy

1,341

1,350

3,921

3,968

Regulatory assessment and fees

452

365

1,361

1,041

Consulting and legal fees

161

513

1,016

1,257

Network and information technology services

513

481

1,499

1,464

Other operating expense

1,787

1,686

5,528

5,034

Total non-interest expense

11,454

10,461

34,188

31,089

Income before income tax expense

9,162

5,069

23,376

18,288

Income tax expense

2,213

1,250

5,606

4,464

Net income

6,949

3,819

17,770

13,824

Per share information:

Net income per share, basic

0.35

0.20

0.90

0.70

Net income per share, diluted

0.35

0.19

0.90

0.70

Cash dividend declared

0.05

0.15

The accompanying notes are an integral part of

these unaudited consolidated financial statements.

Table of Contents

USCB Financial Holdings, Inc.

Q3 2024 Form 10-Q

USCB FINANCIAL HOLDINGS, INC.

Consolidated Statements of Comprehensive Income

(Loss) - Unaudited

(Dollars in thousands)

Three Months Ended

September 30,

Nine Months Ended

September 30,

2024

2023

2024

2023

Net income

6,949

3,819

17,770

13,824

Other comprehensive income (loss):

Unrealized gain (loss) on investment securities

9,848

(7,858)

8,624

(11,145)

Amortization of net unrealized gain on securities

transferred from

available-for-sale to held-to-maturity

200

184

Reclassification adjustment for (gain) loss included

in net income

955

(14)

976

Unrealized gain (loss) on cash flow hedge

(930)

266

(381)

1,312

Tax effect

(2,277)

1,666

(2,136)

2,198

Total other comprehensive income (loss), net of tax

6,708

(4,907)

6,293

(6,475)

Total comprehensive income (loss)

13,657

(1,088)

24,063

7,349

The accompanying notes are an integral part of

these unaudited consolidated financial statements.

Table of Contents

USCB Financial Holdings, Inc.

Q3 2024 Form 10-Q

USCB FINANCIAL HOLDINGS, INC.

Consolidated Statements of Changes in Stockholders’

Equity - Unaudited

(Dollars in thousands,

except per share data)

Common Stock

Additional Paid-in

Capital on Common

Stock

Accumulated

Deficit

Accumulated Other

Comprehensive

Loss

Par Value

Total

Stockholders'

Equity

Balance at 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

Balance at June 30, 2023

19,544,777

19,545

305,547

(95,088)

(46,319)

183,685

Net income

3,819

Other comprehensive loss

(4,907)

Restricted stock forfeiture

(2,487)

(3)

Stock-based compensation

287

Balance at September 30, 2023

19,542,290

19,542

305,837

(91,269)

(51,226)

182,884

The accompanying notes are an integral

part of these consolidated financial statements.

Common Stock

Additional Paid-in

Capital on Common

Stock

Accumulated

Deficit

Accumulated Other

Comprehensive

Loss

Par Value

Total

Stockholders'

Equity

Balance at December 31, 2023

19,575,435

19,575

305,212

(88,548)

(44,271)

191,968

Net income

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

Balance at December 31, 2022

20,000,753

20,001

311,282

(104,104)

(44,751)

182,428

After tax cumulative effect of adoption of accounting

principle related to ASC

326

(989)

Adjusted beginning balance after cumulative

effect adjustment

20,000,753

20,001

311,282

(105,093)

(44,751)

181,439

Net income

13,824

Other comprehensive loss

(6,475)

Repurchase of Class A common stock

(577,603)

(577)

(6,036)

(6,613)

Restricted stock issued

121,627

121

(121)

Restricted stock forfeiture

(2,487)

(3)

Stock-based compensation

709

Balance at September 30, 2023

19,542,290

19,542

305,837

(91,269)

(51,226)

182,884

The accompanying notes are an integral

part of these unaudited consolidated financial

statements.

Table of Contents

USCB Financial Holdings, Inc.

Q3 2024 Form 10-Q

USCB FINANCIAL HOLDINGS, INC.

Consolidated Statements of Cash Flows - Unaudited

(Dollars in thousands)

Nine Months Ended September 30,

2024

2023

Cash flows from operating activities:

Net income

17,770

13,824

Adjustments to reconcile net income

to net cash provided by operating activities:

Provision for credit losses

2,127

892

Depreciation and amortization

436

443

(Accretion) amortization of premiums on securities,

net

(365)

(651)

Accretion of deferred loan fees, net

660

(236)

Stock-based compensation

1,112

709

(Gain) loss on sale of available for sale securities

(14)

976

Gain on sale of loans held for sale

(593)

(696)

Increase in cash surrender value of bank owned

life insurance

(1,257)

(1,756)

Decrease in deferred tax assets

5,129

4,465

Net change in operating assets and liabilities:

Accrued interest receivable

(77)

(1,374)

Other assets

(8,292)

(751)

Accrued interest and other liabilities

20,505

12,679

Net cash provided by operating activities

37,141

28,524

Cash flows from investing activities:

Purchase of investment securities held

to maturity

(86,788)

Proceeds from maturities and pay-downs of investment

securities held to maturity

8,110

79,085

Purchase of investment securities available

for sale

(70,996)

(26,792)

Proceeds from maturities and pay-downs of investment

securities available for sale

15,097

11,679

Proceeds from sales of investment securities

available for sale

34,753

15,409

Net increase in loans held for investment

(99,627)

(165,662)

Purchase of loans held for investment

(58,368)

(13,277)

Additions to premises and equipment

(256)

(131)

Proceeds from the sale of loans held for sale

7,408

10,715

Purchase of Bank owned life insurance

(11,100)

Proceeds from the redemption of Federal

Home Loan Bank stock

8,645

6,517

Purchase of Federal Home Loan Bank stock

(5,734)

(9,940)

Net cash used in investment activities

(160,968)

(190,285)

Cash flows from financing activities:

Proceeds from issuance of Class A common

stock, net

323

Cash dividends paid

(3,049)

Repurchase of Class A common stock

(501)

(6,613)

Net increase in deposits

189,478

91,641

Proceeds from Federal Home Loan Bank advances

and other borrowings

197,000

259,350

Repayments on Federal Home Loan Bank advances

and other borrowings

(262,000)

(203,350)

Net cash provided by financing activities

121,251

141,028

Net decrease in cash and cash equivalents

(2,576)

(20,733)

Cash and cash equivalents at beginning

of period

41,062

54,168

Cash and cash equivalents at end of period

38,486

33,435

Supplemental disclosure of cash flow

information:

Interest paid

46,058

27,872

Supplemental schedule of non-cash investing

and financing activities:

Transfer of loans held for investment to loans held

for sale

6,815

10,019

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 2024 Form 10-Q

SUMMARY OF SIGNIFICANT ACCOUNTING

POLICIES

Overview

USCB Financial Holdings,

Inc.,

a Florida corporation

incorporated in 2021,

is a bank

holding company with

one direct

wholly owned subsidiary,

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

The Bank, established in

2002, is a Florida state-chartered,

non-member financial institution providing

financial services through its

banking centers

located in South Florida.

The Bank

owns a

subsidiary,

Florida Peninsula

Title LLC,

that offers

our clients

title insurance

policies for

real estate

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

Florida Peninsula Title LLC began operations

in 2021.

Basis of Presentation

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

Form 10-Q and

do not include all

the information and

footnotes required by U.S.

generally accepted accounting

principles

(“U.S.

GAAP”)

for

complete

financial

statements.

All

adjustments

consisting

normally

recurring

accruals

that,

the

opinion

management,

are

necessary

for

fair

presentation

the

financial

position

and

results

operations

for

the

periods presented

have been

included. These

unaudited consolidated

financial statements

should be

read in

conjunction

with the Company’s audited

consolidated financial statements and

related notes appearing in

the Company’s Annual Report

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

Principles of Consolidation

The

Company

consolidates

entities

which

has

controlling

financial

interest.

Intercompany

transactions

and

balances are eliminated in consolidation.

Use of Estimates

To prepare

financial statements in conformity with U.S. GAAP,

management makes estimates and assumptions based

on available

information. These

estimates and

assumptions affect

the amounts

reported in

the financial

statements. The

most significant

estimates impacting

the Company’s

consolidated financial

statements are

the allowance

for credit

losses

(“ACL”) and income taxes.

Reclassifications

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

to the current presentation.

Reclassifications had no impact on the net income or stockholders’

equity of the Company.

Recently Issued Accounting Standards

Adoption of New Accounting Standards

Reference Rate Reform

In March 2020, the Financial Accounting Standards

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

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

initiative was

subsequently clarified

in January

2021 through

ASU 2021-01,

providing optional

directives for

a designated

timeframe to alleviate challenges associated

with accounting for,

or acknowledging the effects of, reference

rate reform on

financial reporting.

These amendments

offer

discretionary

guidance for

a defined

period to

alleviate potential

accounting

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

and exceptions provided by these

amendments

are

not

applicable

contract

modifications

executed

and

hedging

relationships

initiated

reviewed

after

December 31, 2022, except

for pre-existing hedging relationships

as of December 31, 2022,

for which an entity

has opted

for specific

optional expedients,

and which

are retained

until the

conclusion

of the

hedging relationship.

Additionally,

the

amendments

permit

entities

make

one-time

choice

divest,

transfer,

both

divest

and

transfer

debt

securities

categorized as held to

maturity, referencing a rate impacted by reference rate

reform, and classified as

held to maturity prior

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

December

31, 2022

December

31,

2024, after

which

entities will

no longer

authorized

apply

the relief

provided

Table of Contents

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q3 2024 Form 10-Q

under this guidance. Before this recent guidance, these amendments

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

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

Offered

Rate

(“LIBOR”)

and

the

adjustment

its

existing

financial

instruments

affected

LIBOR,

whether

directly

indirectly.

LIBOR-based

originations

were

ceased

June

30,

2023,

and

for

existing

LIBOR-based

transactions,

the

Company substituted

the Secured

Overnight Financing Rate

(“SOFR”) for

LIBOR. The

Company has

completed its

transition

away from LIBOR for its loan and other financial instruments

Issued and Not Yet Adopted

Improvements to Income Tax

Disclosures

December

2023,

the

FASB

issued

ASU

2023-09,

“Income

Taxes

”

(Topic

740):

Improvements

Income

Tax

Disclosures. This

ASU pertains

to disclosures

regarding effective

tax rates

and

cash income

taxes

paid with

the goal

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

annual periods beginning

after Dec. 15,

The Company

is currently assessing

the potential impact

of this ASU

on its

financial

reporting

and

has

not

yet

concluded

whether

the

changes

will

materially

affect

its

business

operations

consolidated financial statements.

Improvements to Reportable Segment Disclosures

In November

2023, the

FASB

issued ASU

2023-07, “Improvements

to Reportable

Segment Disclosures.”

ASU 2023-

requires

disclosure

significant

segment

expenses

and

other

segment

items

interim

and

annual

basis.

The

standard is effective

for fiscal years beginning

after December 15,

2023 and for

interim periods beginning

after December

15, 2024. The Company is evaluating the impact of the

changes to its existing disclosures.

INVESTMENT SECURITIES

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

financial

assets

measured

amortized

cost,

including

loan

receivables

and

held-to-maturity

debt

securities.

The

accounting

for available-for-sale

debt securities

credit

losses is

presented

as an

allowance rather

than

as a

write-down.

Management does not intend to sell or believes that

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

securities.

CECL requires a loss reserve for

securities classified as held-to-maturity

(“HTM”). The reserve should reflect

historical

credit performance

as well

as the

impact of

projected economic

forecasts.

For U.S.

Government bonds

and U.S.

Agency

issued bonds

classified as

HTM, the

explicit guarantee

of the U.S.

Government is

sufficient to

conclude that

a credit

loss

reserve is not required.

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

non-agency

securitizations.

The Company

calculates

quarterly

the loss

reserve

utilizing Moody’s

ImpairmentStudio.

The

CECL measurement for

investment securities

incorporates historical

data, containing

defaults and recoveries

information,

and Moody’s baseline

economic forecast. The solution

uses probability of default/loss

given default (“PD/LGD”)

approach.

PD represents

the likelihood

a borrower

will default.

Within the

Moody’s model

this is

determined using

historical default

data, adjusted for the current economic environment. LGD projects

the expected loss if a borrower were to default.

The Company

monitors the credit

quality of 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, 2024

and December 31, 2023,

all HTM securities held

by the Company were rated investment grade.

quarter

end,

HTM

securities

included

157.7

million

U.S.

Government

and

U.S.

Agency

issued

bonds

and

mortgage-backed

securities.

Because

the

explicit

and/or

implicit

guarantee

these

bonds,

the

Company

holds

reserves

on these

holdings.

The remaining

portion

the HTM

portfolio

is made

up of

9.3

million

investment

grade

corporate bonds. The required reserve for these holdings is

determined each quarter using the model described above.

For

the portion of the HTM exposed to non-government

credit risk, the Company utilized the PD/LGD

methodology to estimate

a $

thousand ACL as of September

30, 2024. The book value

for debt securities classified

as HTM represents amortized

cost less the ACL related to these securities.

The

Company

determined

that

ACL

its

debt

securities

available

for

sale

September 30,

2024

and

December 31, 2023 was not required.

Table of Contents

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q3 2024 Form 10-Q

The following

tables present

a summary

of the amortized

cost, unrealized

or unrecognized

gains and

losses,

and fair

value of investment securities at the dates indicated (in

thousands):

September 30, 2024

Available-for-sale:

Amortized

Cost

Unrealized

Gains

Unrealized

Losses

Fair Value

U.S. Government Agency

11,916

(1,204)

10,733

Collateralized mortgage obligations

104,228

(20,089)

84,194

Mortgage-backed securities - residential

60,390

(9,649)

50,762

Mortgage-backed securities - commercial

75,263

676

(5,606)

70,333

Municipal securities

24,945

(4,520)

20,425

Bank subordinated debt securities

24,272

193

(1,385)

23,080

301,014

966

(42,453)

259,527

Held-to-maturity:

U.S. Government Agency

42,909

(4,041)

38,965

Collateralized mortgage obligations

58,345

386

(6,328)

52,403

Mortgage-backed securities - residential

41,173

677

(3,537)

38,313

Mortgage-backed securities - commercial

15,316

(788)

14,563

Corporate bonds

9,266

(385)

8,881

167,009

1,195

(15,079)

153,125

Allowance for credit losses - securities held-to-maturity

(8)

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

167,001

December 31, 2023

Available-for-sale:

Amortized

Cost

Unrealized

Gains

Unrealized

Losses

Fair Value

U.S. Government Agency

9,664

(1,491)

8,173

Collateralized mortgage obligations

103,645

(23,039)

80,606

Mortgage-backed securities - residential

63,795

(11,608)

52,187

Mortgage-backed securities - commercial

49,212

(6,504)

42,764

Municipal securities

25,005

(5,667)

19,338

Bank subordinated debt securities

28,106

188

(2,033)

26,261

279,427

244

(50,342)

229,329

Held-to-maturity:

U.S. Government Agency

43,626

(5,322)

38,306

Collateralized mortgage obligations

62,735

(7,983)

54,752

Mortgage-backed securities - residential

43,784

348

(4,533)

39,599

Mortgage-backed securities - commercial

15,439

(1,257)

14,182

Corporate bonds

9,398

(727)

8,671

174,982

350

(19,822)

155,510

Allowance for credit losses - securities held-to-maturity

(8)

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

174,974

During the quarter ended

September 30, 2024 there were

investment securities that were

transferred from available-

for-sale

(“AFS”)

HTM.

For

the

three

months

ended

September 30,

2024,

total

amortization

out

Additional

Other

Comprehensive

Income

(“AOCI”)

for net

unrealized

losses

on securities

transferred

2022 from

AFS to

HTM was

thousand. The

unamortized net

unrealized loss

as of

September 30,

2024, was

9.3

million. For

the nine

months ended

September 30, 2024,

total amortization

out of Additional

Other Comprehensive

Income (“AOCI”) for

net unrealized

losses

on securities transferred in 2022 from AFS to HTM was

200

thousand.

For

the

years

ended

December

31,

2023

total

amortization

out

AOCI

for

the

net

unrealized

losses

securities

transferred from AFS to HTM was $

251

thousand. In addition for these securities,

the balance of the net unrealized

losses

retained in AOCI was $

9.5

million at December 31, 2023.

Table of Contents

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q3 2024 Form 10-Q

Gains

and

losses

the

sale

securities

are

recorded

the

trade

date

and

are

determined

the

specific

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

calls of AFS debt securities for the three and nine months

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

Three Months Ended September 30,

Nine Months Ended September 30,

Available-for-sale:

2024

2023

2024

2023

Proceeds from sale and call of securities

6,792

34,753

15,409

Gross gains

195

Gross losses

(955)

(181)

(979)

Net realized gain (loss)

(955)

(976)

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, 2024:

Amortized

Cost

Fair Value

Amortized

Cost

Fair Value

Due within one year

Due after one year through five years

1,000

1,006

9,266

8,881

Due after five years through ten years

42,975

38,294

Due after ten years

5,242

4,205

U.S. Government Agency

11,916

10,733

42,909

38,965

Collateralized mortgage obligations

104,228

84,194

58,345

52,403

Mortgage-backed securities - residential

60,390

50,762

41,173

38,313

Mortgage-backed securities - commercial

75,263

70,333

15,316

14,563

301,014

259,527

167,009

153,125

At September 30,

2024, there

were no

securities held

in the

portfolio from

any one

issuer in

an amount

greater than

10% of total stockholders’

equity other than the U.S. Government and Government Agency

securities. All the collateralized

mortgage obligations and mortgage-backed securities at September 30, 2024 and

December 31, 2023 were issued by U.S.

sponsored entities

having a

fair value

of $

284.1

million that

were

attributable to a combination of factors, including relative

changes in interest rates since the time of purchase.

The contractual

cash

flows

for these

securities

are

guaranteed

U.S.

government

agencies

and

U.S.

government

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

value are not due to credit quality.

Based

the

assessment

these

mitigating

factors,

management

believed

that

the

unrealized

losses

these

debt

security holdings are

a function of

changes in investment

spreads and interest

rate movements

and not changes

in credit

quality. Management

expects to recover the entire amortized cost basis of these

securities.

At September 30, 2024, the Company did not intend to

sell debt securities that are in an unrealized loss position

and it

is more than likely not required to sell these securities

before recovery of the amortized cost basis.

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

Bank has the legal authority

maintain

public

deposits

from

cities,

municipalities,

and

the

State

Florida.

These

public

deposits

are

secured

securities pledged

to the

State of

Florida at

a ratio

% of

the outstanding

uninsured deposits

at September 30,

2024

and

% at December 31, 2023. The Bank

must also maintain a minimum amount of pledged

securities to be in the public

funds program.

September 30,

2024,

the

Bank

had

total

114.4

million

deposits

under

the

public

funds

program

and

pledged to the State of Florida for these public funds were

fifty-one

bonds with an aggregate fair value of $

69.7

million.

As of

December 31, 2023, the

Bank had

a total

of $

268.4

million in

deposits under the

public funds program

and pledged

to the State of Florida for these public funds were

twenty-eight

bonds with an aggregate fair value of $

86.9

million.

The Board

of Governors

of the Federal

Reserve System,

on March

12, 2023,

announced the

creation of

a new

Bank

Term

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

unions,

and

other

eligible

depository

institutions

pledging

U.S.

Treasuries,

U.S.

agency

debt

and

mortgage-backed

securities, and other qualifying assets as collateral. The

BTFP program ceased making new loans as of March

2024.

Table of Contents

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q3 2024 Form 10-Q

The Company

paid off

million in

borrowings under

the BTFP

program during

the third

quarter 2024.

The original

maturity of this

borrowing under the

BTFP program

was January 2025,

and there

are no remaining

borrowings under

this

program.

LOANS

The following table is a summary of the distribution of

loans held for investment by type (in thousands):

September 30, 2024

December 31, 2023

Total

Percent of

Total

Percent of

Total

Residential Real Estate

283,477

14.7

204,419

11.5

Commercial Real Estate

1,095,112

56.8

1,047,593

58.8

Commercial and Industrial

246,539

12.8

219,757

12.4

Correspondent Banks

103,815

5.4

114,945

6.5

Consumer and Other

198,604

10.3

191,930

10.8

Total

gross loans

1,927,547

100.0

1,778,644

100.0

Plus: Deferred fees/costs

3,815

2,183

Total

loans net of deferred fees/costs

1,931,362

1,780,827

Less: Allowance for credit losses

23,067

21,084

Total

net loans

1,908,295

1,759,743

At September 30, 2024

and December 31, 2023,

the Company had

535.7

million and $

534.2

million, respectively,

commercial real estate

and residential mortgage loans

pledged as collateral

for lines of

credit with the

FHLB and the

Federal

Reserve Bank of Atlanta.

Allowance for Credit Losses

general,

the

Company

utilizes

the

Discounted

Cash

Flow

(“DCF”)

method

the

Remaining

Life

(“WARM”)

methodology to

estimate the

quantitative portion

of the

ACL for

loan pools.

The DCF

method uses

a loss

driver analysis

(“LDA”) and discounted cash flow analyses. Management engaged

advisors and consultants with expertise in CECL model

development to

assist in

development of

a LDA

based on

regression models

and supportable

forecast. Peer

group data

obtained

from

FFIEC

Call

Report

filings

used 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 conditions

•

Changes in nature and volume of portfolio

•

Changes in the volume and severity of past due loans

and other similar conditions

•

Concentration risk

•

Changes in the value of underlying collateral

•

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

legal, and regulatory requirements

•

Changes in lending management, among others

Table of Contents

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q3 2024 Form 10-Q

Changes in the

ACL for the

three and nine

months ended September 30,

2024 and 2023

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,

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

thousand release related to investment securities held to maturity.

(2) Provision for credit losses excludes a $

159

thousand charge due to unfunded commitments included in other liabilities.

Residential

Real Estate

Commercial

Real Estate

Commercial

and

Industrial

Correspondent

Banks

Consumer

and Other

Total

Three Months Ended September 30,

2023

Beginning balance

2,673

10,183

2,500

677

2,782

18,815

Provision for credit losses

(1)

(162)

(84)

738

108

673

Recoveries

Charge-offs

(3)

Ending Balance

2,511

10,099

3,246

750

2,887

19,493

Nine Months Ended September 30, 2023

Beginning balance

1,352

10,143

4,163

720

1,109

17,487

Cumulative effect of adoption of accounting

principle

(2)

1,238

1,105

(2,158)

858

1,066

Provision for credit losses

(3)

(89)

(1,149)

1,181

965

915

Recoveries

Charge-offs

(48)

Ending Balance

2,511

10,099

3,246

750

2,887

19,493

(1) Provision for credit losses excludes a $

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

thousand expense related to investment securities held to maturity.

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

(3) Provision for credit losses excludes a $

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

thousand expense related to investment securities held to maturity.

At September 30, 2024,

the ACL was

23.1

million compared to

21.1

million at December 31,

The increase

2.0

million in the ACL was due to loan growth.

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.

Table of Contents

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q3 2024 Form 10-Q

The

Company

had

charge

offs

totaling

thousand

for

the

quarter

ended

September

30,

2023

loans

originated in

Company had

charge offs

totaling $

thousand for

the nine

months ended

September 30,

2023

related to loans. $

thousand was related to loans originated

in 2023 and $

thousand of charge offs was related to

loans

originated in 2015.

The

Federal

Open

Market

Committee

(“FOMC”)

economic

forecasts

September 30,

2024,

showed

moderate

deterioration in unemployment

and a slight

improvement forecast for

real GDP. Fannie Mae HPI forecast

reflected moderate

improvement in national housing prices

over the next four quarters.

The Company continued to adjust the

HPI index effect

1-4

Family

loan

portfolio

with

qualitative

factor

because

Florida

housing

prices

are

performing

better

than

national

levels.

The

Q-factor

scorecard

was

updated

based

the

latest

portfolio

stress

test

and

the

resulting

maximum

loss

calculation.

Our ACL

included residential

loans. To

assess the

potential impact

of changes

in qualitative

factors related

to these

loans,

management

performed

a sensitivity

analysis.

The Company

evaluated

the

impact

of the

HPI

used

in calculating

expected losses on the residential loan segment. As of September 30, 2024, for every 100 basis points increase in the HPI

index, the forecast reduces

reserves by approximately $

244

thousand and about

basis point to

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, 2024,

we stress

tested two

qualitative factors

in our commercial

real estate

loan pool,

as its

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

6.4

million or

29.3

% increase in ACL. This sensitivity analysis provides a

hypothetical result to assess the sensitivity of

the ACL and does

not represent a change in management’s judgement.

The ACL and

the outstanding balances

in the specified

loan categories

as of September

30, 2024 and

December 31,

2023 are as follows (in thousands):

Residential

Real Estate

Commercial

Real Estate

Commercial

and Industrial

Correspondent

Banks

Consumer

and Other

Total

September 30, 2024:

Allowance for credit losses:

Individually evaluated

Collectively evaluated

3,912

10,186

4,623

823

3,425

22,969

Balances, end of period

3,955

10,186

4,661

823

3,442

23,067

Loans:

Individually evaluated

6,848

719

1,990

9,557

Collectively evaluated

276,629

1,095,112

245,820

103,815

196,614

1,917,990

Balances, end of period

283,477

1,095,112

246,539

103,815

198,604

1,927,547

December 31, 2023:

Allowance for credit losses:

Individually evaluated

145

128

273

Collectively evaluated

2,550

10,366

3,846

911

3,138

20,811

Balances, end of period

2,695

10,366

3,974

911

3,138

21,084

Loans:

Individually evaluated

6,994

1,668

8,662

Collectively evaluated

197,425

1,047,593

218,089

114,945

191,930

1,769,982

Balances, end of period

204,419

1,047,593

219,757

114,945

191,930

1,778,644

Credit Quality Indicators

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

loan agreement based

on relevant information

which may include:

current financial information

on the borrower,

historical

Table of Contents

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q3 2024 Form 10-Q

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 2024 Form 10-Q

Loan credit exposures by internally assigned grades are

presented below for the periods indicated (in thousands):

As of September 30, 2024

Term Loans by Origination Year

Revolving

Loans

Total

2024

2023

2022

2021

2020

Prior

Residential real estate

Pass

96,900

40,187

34,454

23,930

5,823

71,867

9,748

282,909

Substandard

568

Total

96,900

40,187

34,454

23,930

5,823

72,435

9,748

283,477

Commercial real estate

Pass

116,130

132,831

323,299

177,281

99,368

239,803

3,936

1,092,648

Substandard

1,776

688

2,464

Total

116,130

132,831

323,299

179,057

100,056

239,803

3,936

1,095,112

Commercial and

industrial

Pass

46,599

91,611

35,031

30,950

4,469

12,494

23,466

244,620

Substandard

536

1,146

237

1,919

Total

46,599

91,611

35,031

31,486

4,469

13,640

23,703

246,539

Correspondent banks

Pass

100,865

2,950

103,815

Total

100,865

2,950

103,815

Consumer and other

loans

Pass

34,623

53,815

66,254

37,800

495

1,636

1,990

196,613

Substandard

1,991

Total

34,623

53,815

68,245

37,800

495

1,636

1,990

198,604

Total

Loans

Pass

395,117

321,394

459,038

269,961

110,155

325,800

39,140

1,920,605

Special Mention

Substandard

1,991

2,312

688

1,714

237

6,942

Doubtful

Total

395,117

321,394

461,029

272,273

110,843

327,514

39,377

1,927,547

Table of Contents

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q3 2024 Form 10-Q

As of December 31, 2023

Term Loans by Origination Year

Revolving

Loans

Total

2023

2022

2021

2020

2019

Prior

Residential real estate

Pass

44,365

36,325

26,180

6,080

9,325

75,654

6,198

204,127

Substandard

292

Total

44,365

36,325

26,180

6,080

9,617

75,654

6,198

204,419

Commercial real estate

Pass

148,311

337,938

184,024

104,182

78,153

182,714

4,710

1,040,032

Substandard

6,867

694

7,561

Total

148,311

337,938

190,891

104,876

78,153

182,714

4,710

1,047,593

Commercial and

industrial

Pass

97,753

37,414

34,090

6,499

13,706

3,113

25,554

218,129

Substandard

330

1,298

1,628

Total

97,753

37,414

34,420

6,499

15,004

3,113

25,554

219,757

Correspondent banks

Pass

114,945

Total

114,945

Consumer and other

loans

Pass

71,593

74,387

41,966

615

560

1,337

1,472

191,930

Total

71,593

74,387

41,966

615

560

1,337

1,472

191,930

Total

Loans

Pass

476,967

486,064

286,260

117,376

101,744

262,818

37,934

1,769,163

Special Mention

Substandard

7,197

694

1,590

9,481

Doubtful

Total

476,967

486,064

293,457

118,070

103,334

262,818

37,934

1,778,644

Table of Contents

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q3 2024 Form 10-Q

Loan Aging

The Company

also considers the

performance of loans

in grading

and in

evaluating the

credit quality

of the

loan portfolio.

The Company

analyzes credit

quality and

loan grades

based on

payment performance

and the

aging status

of the

loan.

The following

tables include

an aging

analysis of

accruing loans

and total

non-accruing

loans as

of September 30,

2024

and December 31, 2023 (in thousands):

Accruing

As of September 30, 2024

Current

Past Due 30-

89 Days

Past Due 90

Days or >

and Still

Accruing

Total

Accruing

Non-Accrual

Total Loans

Residential real estate:

Home equity line of credit and other

843

1-4 family residential

229,797

4,017

233,814

Condo residential

48,506

314

48,820

279,146

4,017

283,163

314

283,477

Commercial real estate:

Land and construction

38,342

Multi-family residential

204,298

Condo commercial

56,921

Commercial property

795,551

Leasehold improvements

1,095,112

Commercial and industrial:

Secured

230,202

420

230,622

Unsecured

15,917

246,119

420

246,539

Correspondent banks

103,815

Consumer and other

196,613

1,991

198,604

Total

1,920,805

4,017

1,924,822

2,725

1,927,547

Table of Contents

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q3 2024 Form 10-Q

Accruing

As of December 31, 2023:

Current

Past Due

30-89 Days

Past Due 90

Days or >

and Still

Accruing

Total

Accruing

Non-Accrual

Total Loans

Residential real estate:

Home equity line of credit and other

559

1-4 family residential

155,842

711

156,553

Condo residential

43,572

3,735

47,307

199,973

4,446

204,419

Commercial real estate:

Land and construction

33,710

Multi-family residential

181,287

Condo commercial

58,106

Commercial property

772,569

1,890

774,459

Leasehold improvements

1,045,703

1,890

1,047,593

Commercial and industrial:

Secured

200,235

200,264

468

200,732

Unsecured

19,025

219,260

219,289

468

219,757

Correspondent banks

114,945

Consumer and other

191,930

Total

1,771,811

6,365

1,778,176

468

1,778,644

Non-accrual Status

The following table

includes the amortized

cost basis of

loans on non-accrual

status and loans

past due over

90 days

and still accruing as of September 30, 2024 and as of

December 31, 2023 (in thousands):

September 30, 2024

Nonaccrual

Loans With

No Related

Allowance

Nonaccrual

Loans With

Allowance

Total Non-

accruals

Loans Past

Due Over 90

Days and Still

Accruing

Residential real estate

314

Commercial and industrial

420

Consumer and other

1,991

Total

314

2,411

2,725

December 31, 2023

Nonaccrual

Loans With

No Related

Allowance

Nonaccrual

Loans With

Allowance

Total Non-

accruals

Loans Past

Due Over 90

Days and Still

Accruing

Commercial and industrial

468

Total

468

Accrued interest

receivable is

excluded from

the estimate

of credit

losses. There

was

interest income

recognized

attributable to non-accrual

loans outstanding during

the three months

ended September 30, 2024 and

Interest income

on these loans for

the three months

ended September 30,

2024 and 2023,

would have been

approximately $

thousand

and $

thousand, respectively, had these loans performed

in accordance with

their original terms.

Interest income on

these

Table of Contents

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q3 2024 Form 10-Q

loans for

the nine

months ended

September 30, 2024

and 2023,

would have

been approximately

thousand and

thousand, respectively,

had these loans performed in accordance with their

original terms.

Collateral-Dependent Loans

loan

collateral

dependent

when

the

borrower

experiencing

financial

difficulty

and

repayment

the

loan

expected to

be provided

substantially through

the sale

or operation

of the

collateral. There

were

collateral dependent

loans as of September 30, 2024, or as of December 31,

2023.

Loan Modifications to Borrowers Experiencing Financial

Difficulties

The following table

presents newly restructured

loans, by type of

modification, which occurred

during the 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

Company

had

new

modifications

borrowers

experiencing

financial

difficulties

for

the

three

months

ended

September 30,

2024 and

one

new modification

for the

nine months

ended

September 30,

2024.

There were

existing

loan modifications that subsequently

defaulted during the three

months and nine

months ended September 30,

Company

had

new

modification

borrowers

experiencing

financial

difficulties

for

the

three

and

nine

months

ended

September 30, 2023. There were

existing loan modifications that subsequently

defaulted for the three and nine

months

ended September 30, 2023.

INCOME TAXES

The Company’s provision for income taxes is presented

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

Nine Months Ended September 30,

2024

2023

Current:

Federal

State

Total

current

Deferred:

Federal

4,384

3,510

State

1,222

954

Total

deferred

5,606

4,464

Total

tax expense

5,606

4,464

The actual income tax expense for the nine months

ended September 30, 2024 and 2023 differs

from the statutory tax

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

federal corporate tax rate of

% for both 2024 and 2023

periods

to income before provision for income taxes) as follows

(in thousands):

Nine Months Ended September 30,

2024

2023

Federal taxes at statutory rate

4,909

3,840

State income taxes, net of federal tax benefit

1,016

795

Bank owned life insurance

(319)

(171)

Other, net

Total

tax expense

5,606

4,464

Table of Contents

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q3 2024 Form 10-Q

The Company’s deferred tax assets and deferred

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

September 30, 2024

December 31, 2023

Deferred tax assets:

Net operating loss

10,562

16,430

Allowance for credit losses

5,912

5,410

Lease liability

2,330

2,895

Unrealized losses on available for sale securities

12,881

15,114

Depreciable property

149

203

Equity compensation

906

630

Accruals

417

382

Other, net

Deferred tax assets:

33,218

41,074

Deferred tax liabilities:

Deferred loan cost

(967)

(553)

Lease right of use asset

(2,330)

(2,895)

Deferred expenses

(298)

(180)

Cash flow hedge

(5)

(85)

Other, net

(78)

(79)

Deferred tax liabilities

(3,678)

(3,792)

Net deferred tax assets

29,540

37,282

The Company

has approximately

37.8

million of

federal

and $

60.5

million of

state net

operating

loss carryforwards

expiring in various amounts between

2031 and 2036 and which

are limited to offset,

to the extent permitted, future

taxable

earnings of the Company.

In assessing the realizability of deferred tax assets, management considers

whether it is more likely than not that some

portion or

all of

the deferred

tax assets

will not

be realized.

The ultimate

realization

of deferred

tax assets

is dependent

upon the generation of

future taxable income

during the periods

in which those temporary

differences become deductible.

Management considers the scheduled reversal

of deferred tax liabilities, projected future taxable

income, and tax planning

strategies in making this assessment.

The major tax

jurisdictions where the

Company files income

tax returns are

the U.S. federal

jurisdiction and

the State

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

by tax authorities for years before 2020.

For

the

three

months

and

nine

months

ended

September 30,

2024

and

2023,

the

Company

did

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.

OFF-BALANCE SHEET ARRANGEMENTS

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

meet the financial

needs of

its customers

and to reduce

its own

exposure to

fluctuations in

interest rates.

These financial

instruments include

unfunded commitments

under lines

of credit,

commitments to

extend credit,

standby and

commercial

letters of

credit. Those

instruments involve,

to varying

degrees, elements

of credit

and interest

rate risk

in excess

of the

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

same credit policies in making

commitments and conditional obligations as it does for on-balance

sheet instruments.

The Company's

exposure to credit

loss in the

event of nonperformance

by the other

party to the

financial instruments

for unused lines of credit, and standby letters of credit

is represented by the contractual amount of these commitments.

Table of Contents

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q3 2024 Form 10-Q

summary

the

amounts

the

Company's

financial

instruments

with

off-balance

sheet

risk

are

shown

below

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

September 30, 2024

December 31, 2023

Commitments to grant loans and unfunded lines of credit

104,851

85,117

Standby and commercial letters of credit

4,507

3,987

Total

109,358

89,104

Commitments to

extend credit

are agreements

to lend

to a

customer as

long as

there is

no violation

of any

condition

established in the contract. Commitments generally have

fixed expiration dates or other termination clauses.

Unfunded lines of

credit and revolving

credit lines are

commitments for possible

future extensions

of credit to

existing

customers. These lines of

credit are uncollateralized and

usually do not contain

a specified maturity date

and ultimately may

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

committed.

Standby

and

commercial

letters

credit

are

conditional

commitments

issued

the

Company

guarantee

the

performance of a

customer to

a third

party. Those letters of

credit are

primarily issued to

support public and

private borrowing

arrangements. Essentially all letters of credit have fixed maturity dates and since

many of them expire without being drawn

upon, they do not generally present a significant liquidity

risk to the Company.

DERIVATIVES

The Company utilizes interest rate swap agreements

as part of its asset-liability management strategy to help

manage

its interest rate

risk exposure. The notional

amount of the interest

rate swaps does not

represent actual amounts exchanged

by the

parties.

The amounts

exchanged

are determined

by reference

to the

notional amount

and the

other

terms

of the

individual interest rate swap agreements.

Interest Rate Swaps Designated as a Cash Flow Hedge

As of September 30,

2024, 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

1.63

years,

weighted

average

fixed-rate

paid

3.59

and

with

weighted

average

3-month

compound SOFR being received.

As of December

31, 2023,

the Company had

two

interest rate swap

agreements with

a notional aggregate

amount of

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

average

maturity

2.38

years,

weighted

average

fixed-rate

paid

3.59

and

with

weighted

average

3-month

compound SOFR being received.

The

changes

fair

value

these

interest

rate

swaps

are

recorded

other

assets

other

liabilities

with

corresponding recognition

in other comprehensive

income (loss)

and subsequently reclassified

to earnings when

gains or

losses are realized.

Interest Rate Swaps Designated as Fair Value

Hedge

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 fees

allocated to

each loan

category will

be amortized

over the

remining life

of the

hedge loans

on a

monthly

straight-line basis with full recognition of the unamortized

cost upon the early payoff of the hedge

loan. The amortization of

the termination fee

is reflected in

the loan interest income

line in the

statement of operations.

The original maturities of

these

fair

value

interest

swaps

were

between

2025

and

2026.

The

fair

value

interest

rate

swap

agreements

had

average

maturity of

1.51

years at the date of 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

aggregate

notional

amount

143.8

million

and

46.5

million

September 30,

2024

and

December 31, 2023, respectively.

At September 30, 2024, these

interest rate swaps mature between

2025 and 2051. The

Table of Contents

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q3 2024 Form 10-Q

Company

entered

into

corresponding

and

offsetting

derivatives

with

third

parties.

The

fair

value

liability

these

derivatives requires the Company to

provide the counterparty with funds to

be held as collateral which

the Company reports

as other assets under

the Consolidated Balance

Sheets.

While these derivatives

represent economic hedges,

they do not

qualify as hedges for accounting purposes.

The following table reflects the Company’s

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

Fair Value

Notional

Amount

Collateral

Amount

Balance Sheet Location

Asset

Liability

September 30, 2024:

Derivatives designated as cash flow hedges:

Interest rate swaps

50,000

Other assets

Derivatives not designated as hedging instruments:

Interest rate swaps related to customer loans

143,801

4,886

Other assets/Other liabilities

7,695

December 31, 2023:

Derivatives designated as cash flow hedges:

Interest rate swaps

50,000

Other assets

334

Derivatives designated as fair value hedges:

Interest rate swaps

200,000

Other liabilities

3,430

Derivatives not designated as hedging instruments:

Interest rate swaps related to customer loans

46,463

1,326

Other assets/Other liabilities

4,558

FAIR VALUE

MEASUREMENTS

Determination of Fair Value

The Company

uses

fair value

measurements

to record

fair-value

adjustments

to certain

assets

and liabilities

and to

determine fair value

disclosures. In accordance

with the fair

value measurements

accounting guidance, the

fair value of

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

between market

participants

at the

measurement

date.

Fair value

is best

determined based

upon quoted

market prices.

However, in

many instances, there

are no quoted

market prices for the

Company's various financial

instruments. In cases

where quoted

market prices

are not

available, fair

values are

based on

estimates using

present value

or other

valuation

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

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

an immediate settlement of the instrument.

The fair

value guidance provides

a consistent definition

of fair

value, which focuses

on exit

price in

an orderly transaction

(that is,

not a

forced

liquidation

or distressed

sale) between

market participants

at the

measurement

date

under current

market conditions.

If there

has been

a significant

decrease

in the

volume

and level

of activity

for the

asset

or liability,

change in

valuation technique or

the use

of multiple

valuation techniques may

be appropriate.

In such

instances, determining

the

price

which

willing

market

participants

would

transact

the

measurement

date

under

current

market

conditions

depends on the facts

and circumstances and

requires the use of

significant judgment. The fair

value is a reasonable

point

within the range that is most representative of fair value under

current market conditions.

Fair Value Hierarchy

In accordance with

this guidance, the

Company groups its

financial assets

and financial liabilities

generally measured

at fair

value in

three

levels, based

on the

markets

in which

the assets

and liabilities

are traded,

and the

reliability

of the

assumptions used to determine fair value.

Level 1

Valuation

is based

on quoted

prices in

active markets

for identical

assets or

liabilities that

the reporting

entity has

the ability

to access

at the measurement

date. Level

1 assets

and liabilities

generally include

debt and

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

Table of Contents

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q3 2024 Form 10-Q

liabilities; quoted

prices in

markets that are

not active;

or other inputs

that are observable

or can be

corroborated

by observable market data for substantially the full term of the

asset or liability.

Level 3

Valuation

is based on

unobservable inputs that

are supported

by little or

no market activity

and that are

significant

the

fair

value

the

assets

liabilities.

Level

assets

and

liabilities

include

financial

instruments

whose value

is determined

using pricing

models, discounted

cash

flow

methodologies,

or similar

techniques,

well as instruments for which determination of fair value

requires significant management judgment or estimation.

financial

instrument's

categorization

within

the

valuation

hierarchy

based

upon

the

lowest

level

input

that

significant to the fair value measurement.

Items Measured at Fair Value

on a Recurring Basis

AFS investment securities:

When instruments are traded in

secondary markets and quoted market

prices do not exist

for such securities,

management generally relies

on prices obtained

from independent vendors

or third-party broker-dealers.

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

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

third-

party broker-dealers

are classified within

Level 2 of

the hierarchy and

often involve using

quoted market

prices for similar

securities, pricing models or discounted cash flow analyses

utilizing inputs observable in the market where available.

Derivatives:

The

fair

value

derivatives

are

measured

with

pricing

provided

third-party

participants

and

are

classified within Level 2 of the hierarchy.

The

following

table

represents

the

Company's

assets

and

liabilities

measured

fair

value

recurring

basis

September 30, 2024 and December 31, 2023 for each

of the fair value hierarchy levels (in thousands):

September 30, 2024

December 31, 2023

Level 1

Level 2

Level 3

Total

Level 1

Level 2

Level 3

Total

Investment securities available for sale:

U.S. Government Agency

10,733

8,173

Collateralized mortgage obligations

84,194

80,606

Mortgage-backed securities - residential

50,762

52,187

Mortgage-backed securities - commercial

70,333

42,764

Municipal securities

20,425

19,338

Bank subordinated debt securities

23,080

26,261

Total

259,527

229,329

Derivative assets

7,713

4,892

Total assets at fair value

267,240

234,221

Derivative liabilities

7,695

7,988

Total liabilities at fair value

7,695

7,988

Table of Contents

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q3 2024 Form 10-Q

Items Not Measured at Fair Value

The following table

presents the carrying

amounts and estimated

fair values of

financial instruments

not carried at fair

value as of September 30, 2024 and December 31, 2023

(in thousands):

Fair Value Hierarchy

Carrying

Amount

Level 1

Level 2

Level 3

Fair Value

Amount

September 30, 2024:

Financial Assets:

Cash and due from banks

7,084

Interest-bearing deposits in banks

31,402

Investment securities held to maturity, net

167,001

153,125

Loans held for investment, net

1,908,295

1,924,884

Accrued interest receivable

10,765

1,536

9,229

10,765

Financial Liabilities:

Demand deposits

637,313

Money market and savings accounts

1,091,029

Interest-bearing checking accounts

64,333

Time deposits

333,942

333,659

FHLB advances and other borrowings

118,000

118,193

Accrued interest payable

1,802

537

1,265

1,802

December 31, 2023:

Financial Assets:

Cash and due from banks

8,019

Interest-bearing deposits in banks

33,043

Investment securities held to maturity

174,974

155,510

Loans held for investment, net

1,759,743

1,723,210

Accrued interest receivable

10,688

1,448

9,240

10,688

Financial Liabilities:

Demand deposits

552,762

Money market and savings accounts

1,048,272

Interest-bearing checking accounts

47,702

Time deposits

288,403

287,104

FHLB advances

183,000

182,282

Accrued interest payable

1,372

551

821

1,372

STOCKHOLDERS’ EQUITY

Common Stock

In July

2021, the

Bank completed

the initial

public offering

of its

Class

A common

stock, in

which it

issued

and sold

4,600,000

shares of Class A

common stock at a

price of $

10.00

per share. The Bank

received total net proceeds

of $

40.0

million after deducting underwriting discounts and expenses.

In December 2021,

the Company acquired

all the issued

and outstanding shares

of the Class

A common stock

of the

Bank, which at the time were

the only issued and outstanding shares

of the Bank’s capital stock,

in a share exchange (the

“Reorganization”)

effected

under

the

Florida

Business

Corporation

Act.

Each

outstanding

the

Bank’s

Class

common stock,

par value

1.00

per share,

formerly held

by its

shareholders

was

converted into

and exchanged

for

one

newly

issued

the

Company’s

Class

common

stock,

par

value

1.00

per

share,

and

the

Bank

became

the

Company’s wholly owned subsidiary.

In the

Reorganization,

each

shareholder

of the

Bank

received securities

the same

class,

having

substantially

the

same designations,

rights,

powers, preferences,

qualifications,

limitations

and restrictions,

as those

that the

shareholder

held in the Bank,

and the Company’s

then current shareholders

owned the same

percentages of the

Company’s common

stock as they previously owned of the Bank’s common

stock.

Table of Contents

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q3 2024 Form 10-Q

During the first quarter 2024, the Company issued

52,753

shares of Class A common stock to employees as restricted

stock awards

pursuant to

the Company’s

2015 equity

incentive plan

During

the first

quarter 2023,

the Company

issued

121,627

shares of Class A

common stock to

employees and directors as

restricted stock awards pursuant

to the Company’s

2015 equity incentive plan.

As previously announced,

on April 22,

2024, the

Board of Directors

approved a

new share repurchase

program of up

500,000

shares of

Class A

common stock

or approximately

2.5

% of

the Company’s

issued and

outstanding shares

common

stock.

Under

the

repurchase

program,

the

Company

may

purchase

Class

common

stock

discretionary basis from time

to time through open

market repurchases, privately negotiated

transactions, or other means.

The

repurchase

program

has

expiration

date

and

may

modified,

suspended,

terminated

any

time.

The

new

repurchase program

will commence

upon completion

of the Company’s

current repurchase

program. Repurchases

under

this new program will be funded from the Company’s

existing cash and cash equivalents or future cash flow.

During the

three

months ended

September 30,

2024, the

Company

repurchased

10,000

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.

These

repurchases

were

made

pursuant

the

Company’s

publicly announced repurchase programs. As of September 30, 2024,

537,980

shares remained authorized for repurchase

under the Company’s

two stock repurchase

programs. During

the nine months

ended September 30,

2023, the Company

repurchased

577,603

Class A common

stock

weighted

average

price

per

9.77

. The

aggregate

purchase price for these transactions was approximately $

6.6

million, including transaction costs.

addition,

the

Company

will

provide

prior

notification

the

Federal

Reserve

prior

effecting

proposed

repurchases in new share repurchase programs.

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

of September 30, 2024 and December 31,

2023 were

19,620,632

and

19,575,435

, respectively.

See Note

11, Subsequent Events, for

information regarding issuance

of Class

A common

stock to

employees

in October

2024.

Dividends

Declaration of dividends

by the Board

is required before

dividend payments

are made. The

Company is

limited in the

amount of

cash dividends

that it

may pay.

Payment of

dividends is

generally limited

to the

Company’s

net income

of the

current

year

combined

with

the

Company’s

retained

income

for

the

preceding

two

years,

defined

state

banking

regulations. However,

for any

dividend declaration,

the Company

must consider

additional factors

such as

the amount

current period net income, liquidity,

asset quality,

capital adequacy and economic conditions

at the Bank since the Bank is

the primary source

of funds to fund

dividends by the Company.

It is likely that

these factors would

further limit the

amount

of dividends which

the Company could

declare. In addition,

bank regulators have

the authority to

prohibit banks and

bank

holding companies from paying dividends if they deem

such payment to be an unsafe or unsound practice.

As of

September

30,

2024,

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

shareholders 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.

On January 29, 2024, the

Company announced that its Board of

Directors approved a quarterly cash dividend program.

The quarterly dividend for

the first quarter of

2024 was $

0.05

per share of Class

A common stock, paid

on March 5, 2024,

to stockholders

of record as

of the close

of business

on February 15,

aggregate distribution

in connection

with

the first

quarter dividend

was $

1.0

million. The

quarterly dividend

for the

second quarter

was $

0.05

per share

of Class

common stock, paid on June

5, 2024, to stockholders of

record as of the

close of business on May 15,

The aggregate

distribution on connection with

the second quarter dividend

was $

1.0

million. The quarterly dividend

for the third quarter

was

0.05

per share of Class

A common stock, paid on

September 5, 2024, to

stockholders of record as of

the close of business

on August 15, 2024. The aggregate distribution on connection with

the second quarter dividend was $

1.0

million.

Table of Contents

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q3 2024 Form 10-Q

dividends

were

declared

the

Board

for

the

stockholders

for

the

three

months

and

nine

months

ended

September 30, 2023.

See Note 11, Subsequent

Events, for information regarding dividends declared in October

2024.

The following table details the dividends declared and paid by

the Company during the three months and 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, 2024 and December 31,

At September 30, 2024, the total

risk-based capital ratios for

the Bank was

13.14

EARNINGS PER SHARE

Earnings

per

(“EPS”)

for

common

stock

calculated

using

the

two-class

method

required

for

participating

securities. Basic EPS

is calculated by

dividing net income

(loss) available to

common shareholders by

the weighted-average

number of common shares outstanding for

the period, without consideration for common

stock equivalents. Diluted EPS is

computed by

dividing net

income (loss)

available to

common share

holders by

the weighted

-average

number of

common

shares outstanding for

the period and

the weighted-average number

of dilutive common

stock equivalents outstanding

for

the period determined using the treasury-stock method. For

purposes of this calculation, common stock equivalents

include

common stock options and are only included in the calculation

of diluted EPS when their effect is dilutive.

The

following

table

reflects

the

calculation

net

income

available

common

shareholders

for

the

three

and

nine

months ended September 30, 2024 and 2023 (in thousands):

Three Months Ended

September 30,

Nine Months Ended

September 30,

2024

2023

2024

2023

Net Income

6,949

3,819

17,770

13,824

Net income available to common shareholders

6,949

3,819

17,770

13,824

Table of Contents

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q3 2024 Form 10-Q

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

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

except per share amounts):

Three Months Ended September 30,

2024

2023

Class A

Basic EPS

Numerator:

Net income available to common shares

6,949

3,819

Denominator:

Weighted average shares outstanding

19,621,447

19,542,723

Earnings per share, basic

0.35

0.20

Diluted EPS

Numerator:

Net income available to common shares

6,949

3,819

Denominator:

Weighted average shares outstanding for basic EPS

19,621,447

19,542,723

Add: Dilutive effects of assumed exercises of stock options

203,764

69,174

Weighted avg. shares including dilutive potential common shares

19,825,211

19,611,897

Earnings per share, diluted

0.35

0.19

Anti-dilutive stock options excluded from diluted EPS

720,500

Net income has not been allocated to unvested restricted

stock awards that are participating securities

because the amounts that would be allocated are

not material to net income per share of common

stock. Unvested restricted stock awards that are participating

securities represent less than one percent

of all of the outstanding shares of common stock

for each of the periods presented.

Nine Months Ended September 30,

2024

2023

Class A

Basic EPS

Numerator:

Net income available to common shares

17,770

13,824

Denominator:

Weighted average shares outstanding

19,653,103

19,661,685

Earnings per share, basic

0.90

0.70

Diluted EPS

Numerator:

Net income available to common shares

17,770

13,824

Denominator:

Weighted average shares outstanding for basic EPS

19,653,103

19,661,685

Add: Dilutive effects of assumed exercises of stock options

108,139

67,496

Weighted avg. shares including dilutive potential common shares

19,761,242

19,729,181

Earnings per share, diluted

0.90

0.70

Anti-dilutive stock options excluded from diluted EPS

15,000

720,500

Net income has not been allocated to unvested

restricted stock awards that are participating securities

because the amounts that would be allocated are

not material to net income per share of common

stock. Unvested restricted stock awards that are participating

securities represent less than one percent

of all of the outstanding shares of common stock

for each of the periods presented.

Table of Contents

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q3 2024 Form 10-Q

10.

LOSS CONTINGENCIES

Loss contingencies,

including claims

and legal actions

may arise in

the ordinary

course of

business. In

the opinion

management, none

of these

actions, either

individually or

in the aggregate,

is expected to

have a

material adverse

effect

on the Company’s Consolidated Financial Statements.

11.

SUBSEQUENT EVENTS

Common Stock

During the

month of

October 2024,

the Company

issued

220,000

shares of

Class A

common stock

to employees

restricted stock awards pursuant to the Company’s

2015 equity incentive plan. Shares of the

Company’s Class A common

stock issued and outstanding as of October 31, 2024

was

19,840,632

Dividends

On October 28,

2024, the Company

announced that its

Board of Directors

declared its fourth

quarterly cash

dividend.

The quarterly

dividend for

the fourth

quarter of

2024 was

0.05

per share

of Class

A common

stock and

will be

paid on

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

of business on November 15, 2024.

Table of Contents

USCB Financial Holdings, Inc.

Q3 2024 Form 10-Q

Item 2.

Management's Discussion and Analysis of Financial Condition

and Results of Operations

The

following

discussion

and

analysis

designed

provide

better

understanding

the

consolidated

financial

condition and results of

operations of the

Company and the Bank,

its wholly owned subsidiary,

as of and for

the three and

nine

months

ended

September 30,

2024.

This

discussion

and

analysis

best

read

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 (“2023

Form 10-

K”) filed with the Securities and Exchange Commission

(“SEC”) for the year ended December 31, 2023.

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

actual results to differ materially

from management's expectations. Factors that could cause

such differences are discussed

in the sections

entitled "Forward-Looking

Statements" and Item

1A “Risk Factors"

below

in Part II

hereof and in

the 2023

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

SEC’s website www.sec.gov.

Throughout

this

document,

references

“we,”

“us,”

“our,”

and

“the

Company”

generally

refer

USCB

Financial

Holdings, Inc.

Forward-Looking Statements

This Form 10

-Q contains

statements that

are not

historical in

nature are

intended to

be, and are

hereby identified

as,

forward-looking statements for purposes

of the safe

harbor provided by

Section 21E of

the Securities Exchange Act

of 1934,

as amended. The

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

“should,” “would,” “believe,”

“contemplate,” “expect,” “aim,”

“plan,”

“estimate,” “continue,”

and “intend,”

as well

as other

similar words

and expressions

of the

future, are

intended to

identify

forward-looking

statements.

These

forward-looking

statements

include

statements

our

projected

growth,

anticipated future

financial performance,

and management’s

long-term performance

goals, as

well as

statements relating

to the anticipated

effects on results

of operations and

financial condition from

expected developments or

events, or business

and growth strategies, including anticipated internal growth.

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

materially from those anticipated in such statements.

Potential risks and uncertainties include, but are not

limited to:

•

the strength of the United States economy

in general and the strength of the local

economies in which we conduct

operations;

•

our ability to successfully manage interest rate risk, credit

risk, liquidity risk, and other risks inherent to our industry;

•

the accuracy of our financial statement estimates and assumptions, including the estimates used for our credit loss

reserve and deferred tax asset valuation allowance;

•

the efficiency and effectiveness of our

internal control procedures and processes;

•

our ability

to comply

with the

extensive laws

and regulations

to which

we are

subject, including

the laws

for each

jurisdiction where we operate;

•

adverse changes or conditions in capital and financial markets, including actual or potential stresses in

the banking

industry;

•

deposit attrition and the level of our uninsured deposits;

•

legislative or regulatory

changes and changes

in accounting

principles, policies,

practices or guidelines,

including

the on-going effects of the implementation of the

Current Expected Credit Losses (“CECL”) standard;

•

the lack of a

significantly diversified loan

portfolio and the 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;

•

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;

•

the effectiveness of our risk management strategies, including operational risks, including, but not limited to, client,

employee, or third-party fraud and security breaches; and

•

other risks described in this Form 10-Q, the 2023 Form

10-K and other filings we make with the SEC.

Table of Contents

USCB Financial Holdings, Inc.

Q3 2024 Form 10-Q

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 2023 Form 10-K

and in the

reports

the Company filed or will file with the SEC.

Overview

The Company

reported net

income of

$6.9 million

or $0.35

per diluted

share of

common stock

for the

three

months

ended

September

30,

2024

compared

$3.8

million

$0.19

per

diluted

common

stock

for

the

three

months

ended September 30, 2023.

On October 28, 2024, the Company’s

Board of Directors declared its fourth

quarterly cash dividend of $0.05

per share

of the Company’s Class A

common stock. The cash dividend will be paid on December 5, 2024 to

shareholders of record at

the close of business on November 15, 2024. The aggregate amount distributed in connection with the three prior quarterly

cash dividends paid in 2024 was $3.0 million.

10,000 shares of Class A common stock were repurchased at a weighted average price per share of $11.99 during the

third quarter

These repurchases

were made

pursuant to

the Company’s

publicly announced

repurchase programs.

As of September 30, 2024, 537,980 shares remained

authorized for repurchase under the Company’s program

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, 2024 compared to at

or for the quarter ended

September 30, 2023 and as of

September 30, 2024 compared

to December 31, 2023, and annualized where appropriate:

•

Net interest

income for

the three

months ended September

30, 2024

increased $4.1 million

or 29.1%

to $18.1 million

from $14.0 million for the quarter ended September

30, 2023.

•

Net interest margin (“NIM”) was 3.03% for the three months ended September 30, 2024

compared to 2.60% for the

three months ended September 30, 2023.

•

Total assets

were $2.5

billion

at September

30, 2024,

representing

increase

of $259.4

million

or 11.6%

from

September 30, 2023 and an increase of $164.9 million

or 9.4% annualized from December 31, 2023.

•

Total

loans

were

$1.9

billion

September

30,

2024,

representing

increase

$254.8

million

15.2%

from

September 30, 2023 and an increase of $150.5 million

or 11.3% annualized from December 31, 2023.

•

Total deposits were

$2.1 billion at

September 30,

2024, representing

an increase

of $205.7 million

or 10.7%

from

September 30, 2023 and an increase of $189.5 million

or 13.1% annualized from December 31, 2023.

•

Annualized return on average assets for the quarter ended September 30, 2024 was

1.11%

compared to 0.67% for

the quarter ended September 30, 2023.

•

Annualized

return

average

stockholders’

equity

for

the

quarter

ended

September

30,

2024

was

13.38%

compared to 8.19%

for quarter ended September 30, 2023.

•

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

•

Non-performing loans to total loans was 0.14% at September

30, 2024 and 0.03% at December 31, 2023.

•

At September 30, 2024, the total

risk-based capital ratios

for the Company and

the Bank were 13.22% and

13.14%,

respectively.

•

Tangible book value per

common share (a non-GAAP

measure) was $10.90 at

September 30, 2024, representing

an increase

of $0.66

or 25.6%

annualized from

$10.24 at

June 30,

At September

30, 2024,

tangible book

value per

common share

was negatively

affected by

$1.94 due

to an

accumulated comprehensive

loss of

$38.0

Table of Contents

USCB Financial Holdings, Inc.

Q3 2024 Form 10-Q

million. At

June

30,

2024,

tangible

book

value

per

common

was

negatively

affected

$2.28

due

accumulated comprehensive loss

of $44.7

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.

Critical Accounting Policies and Estimates

The

consolidated

financial

statements

are

prepared

based

the

application

U.S.

GAAP,

the

most

significant

which

are

described

Note

“Summary

Significant

Accounting

Policies”

the

Company’s

2023

Form

10-K

and

“Summary of Significant Accounting Policies” in Part I

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

US GAAP,

management makes estimates, assumptions,

and judgments based on available information.

These estimates,

assumptions,

and

judgments

affect

the

amounts

reported

the

financial

statements

and

accompanying

notes.

These

estimates, assumptions,

and judgments are

based on information

available as of the

date of the financial

statements and,

this

information

changes,

actual

results

could

differ

from

the

estimates,

assumptions

and

judgments

reflected

the

financial statements. In

particular,

management has identified

accounting policies that,

due to the

estimates, assumptions

and

judgments

inherent

those

policies,

are

critical

understanding

our

financial

statements.

Management

has

presented the application of these policies to the Audit

and Risk Committee of our Board of Directors.

Non-GAAP Financial Measures

This Form 10-Q

includes financial information determined by

methods other than in

accordance with generally accepted

accounting principles (“GAAP”). This financial information

includes certain operating performance measures.

Management

has included these non-GAAP measures because it believes these

measures may provide useful supplemental information

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

managing and

evaluating

the

Company’s

business

and

intends

refer

them

discussions

about

our

operations

and

performance.

Operating performance measures

should be viewed in

addition to, and not

as an alternative to

or substitute for,

measures

determined in accordance with GAAP,

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

be presented

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

non-GAAP measures to the most

directly comparable

GAAP

measures

can

found

the

section

“Reconciliation

and

Management

Explanation

Non-GAAP

Financial

Measures” included in this Form 10-Q.

Segment Reporting

Management monitors the revenue streams for all its various

products and services. The identifiable segments are not

material

and

operations

are

managed

and

financial

performance

evaluated

overall

Company-wide

basis.

Accordingly, all

the financial service

operations are

considered by management

to be

aggregated in one

reportable operating

segment.

Results of Operations

General

The following

tables present

selected balance

sheet, income

statement, and

profitability ratios

for the

dates indicated

(in thousands, except ratios):

September 30, 2024

December 31, 2023

Consolidated Balance Sheets:

Total

assets

2,503,954

2,339,093

Total

loans

(1)

1,931,362

1,780,827

Total

deposits

2,126,617

1,937,139

Total

stockholders' equity

213,916

191,968

(1)

Loan amounts include deferred fees/costs.

Table of Contents

USCB Financial Holdings, Inc.

Q3 2024 Form 10-Q

Three Months Ended

September 30,

Nine Months Ended

September 30,

2024

2023

2024

2023

Consolidated Statements of Operations:

Net interest income before provision for credit losses

18,109

14,022

50,578

44,192

Total

non-interest income

3,438

2,161

9,113

6,077

Total

non-interest expense

11,454

10,461

34,188

31,089

Net income

6,949

3,819

17,770

13,824

Profitability:

Efficiency ratio

53.16%

64.64%

57.27%

61.85%

Net interest margin

3.03%

2.60%

2.87%

2.84%

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, 2024 compared to the

three months ended September 30, 2023

Net income

increased to

$6.9 million

for the

three months

ended September 30,

2024

from $3.8

million for

the same

period in 2023. The $3.1 million or 82% increase in net income was attributable to higher interest income from a larger loan

portfolio,

net interest

margin expansion,

and

increased activity

in fee

generating

transactions

(wire fees,

gain on

sale

loans, SWAP fees, and treasury management

fees) between periods.

Nine months ended September 30, 2024 compared to the

nine months ended September 30, 2023

Net income increased to $1

7.8 million for the nine

months ended September 30,

2024

from $13.8 million for the

same

period in

The $3.9

million or

28.5% increase

in net

income was

attributable to

higher interest

income from

a larger

loan portfolio and increased activity in fee generating transactions (wire fees,

SWAP fees, and treasury management

fees)

between periods.

Net Interest Income

Net interest income

is the difference

between interest

earned on interest-earning

assets and interest

paid on interest-

bearing liabilities

and is

the primary

driver of

core earnings.

Interest income

is generated

from interest

and dividends

interest-earning

assets,

including

loans,

investment

securities

and

other

short-term

investments.

Interest

expense

incurred

from

interest

paid

interest-bearing

liabilities,

including

interest-bearing

deposits,

FHLB

advances

and

other

borrowings.

To evaluate net

interest income, we

measure and monitor

(i) yields on

loans and other

interest-earning assets, (ii)

the

costs of deposits

and other funding

sources, (iii) net

interest spread, and

(iv) net interest margin.

Net interest spread is

equal

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

margin is

equal to

the annualized

net interest

income

divided by

average interest

-earning assets.

Because

non-interest-

bearing sources

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

stockholders’ equity, also fund interest-earning assets,

net interest margin includes the indirect benefit of these

non-interest-bearing funding sources.

Changes

market

interest

rates

and

interest

rates

earn

interest-earning

assets

pay

interest-bearing

liabilities, as well

as the volume

and types of

interest-earning assets and interest-bearing

and non-interest-bearing liabilities,

are usually the

largest drivers

of periodic changes

in net interest

spread, net interest

margin and net

interest income.

Our

asset liability committee

(“ALCO”) has

in place asset-liability

management techniques

to manage major

factors that

affect

net interest income and net interest margin.

Table of Contents

USCB Financial Holdings, Inc.

Q3 2024 Form 10-Q

The following

table contains

information related

to average

balances, average

yields earned

on assets,

and average

costs of liabilities for the periods indicated (dollars in

thousands):

Three Months Ended September 30,

2024

2023

Average

(1)

Balance

Interest

Yield/Rate

(2)

Average

(1)

Balance

Interest

Yield/Rate

(2)

Assets

Interest-earning assets:

Loans

(3)

1,878,230

29,819

6.32%

1,610,864

22,523

5.55%

Investment securities

(4)

419,315

2,754

2.61%

445,828

2,833

2.52%

Other interest-earnings assets

80,378

989

4.89%

83,479

1,026

4.88%

Total interest-earning assets

2,377,923

33,562

5.61%

2,140,171

26,382

4.89%

Non-interest-earning assets

107,511

110,087

Total assets

2,485,434

2,250,258

Liabilities and stockholders' equity

Interest-bearing liabilities:

Interest-bearing checking

57,925

411

2.82%

52,080

331

2.52%

Saving and money market deposits

1,084,562

10,064

3.69%

1,011,164

8,779

3.44%

Time deposits

325,580

3,391

4.14%

290,272

2,565

3.51%

Total interest-bearing deposits

1,468,067

13,866

3.76%

1,353,516

11,675

3.42%

FHLB advances and other borrowings

156,043

1,587

4.05%

85,326

685

3.19%

Total interest-bearing liabilities

1,624,110

15,453

3.79%

1,438,842

12,360

3.41%

Non-interest-bearing demand deposits

609,456

587,917

Other non-interest-bearing liabilities

45,227

38,598

Total liabilities

2,278,793

2,065,357

Stockholders' equity

206,641

184,901

Total liabilities and stockholders' equity

2,485,434

2,250,258

Net interest income

18,109

14,022

Net interest spread

(5)

1.82%

1.48%

Net interest margin

(6)

3.03%

2.60%

(1)

Average balances - Daily average balances are used

to calculate yields/rates.

(2)

Annualized.

(3)

Average loan balances include non-accrual loans. Interest income

on loans includes accretion of deferred loan

fees, net of deferred loan costs.

(4)

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

FHLB stock.

(5)

Net interest spread is the weighted average

yield on total interest-earning assets minus the weighted

average rate on total interest-bearing liabilities.

(6)

Net interest margin is the ratio of net interest

income to average total interest-earning assets.

Table of Contents

USCB Financial Holdings, Inc.

Q3 2024 Form 10-Q

Nine Months Ended September 30,

2024

2023

Average

Balance

(1)

Interest

Yield/Rate

(2)

Average

Balance

(1)

Interest

Yield/Rate

(2)

Assets

Interest-earning assets:

Loans

(3)

1,829,593

84,479

6.17

1,576,074

63,081

5.35

Investment securities

(4)

426,594

8,634

2.70

430,118

7,501

2.33

Other interest-earnings assets

101,919

3,953

5.18

71,514

2,459

4.60

Total interest-earning assets

2,358,106

97,066

5.50

2,077,706

73,041

4.70

Non-interest earning assets

108,902

107,443

Total assets

2,467,008

2,185,149

Liabilities and stockholders' equity

Interest-bearing liabilities:

Interest-bearing checking

55,887

1,171

2.80

54,554

574

1.41

Money market and savings accounts

1,094,433

30,529

3.73

949,858

20,532

2.89

Time deposits

321,470

9,907

4.12

264,241

5,767

2.92

Total interest-bearing deposits

1,471,790

41,607

3.78

1,268,653

26,873

2.83

Borrowings and repurchase agreements

160,726

4,881

4.06

80,087

1,976

3.30

Total interest-bearing liabilities

1,632,516

46,488

3.80

1,348,740

28,849

2.87

Non-interest bearing demand deposits

598,294

617,741

Other non-interest-bearing liabilities

37,045

34,492

Total liabilities

2,267,855

2,000,973

Stockholders' equity

199,153

184,176

Total liabilities and stockholders' equity

2,467,008

2,185,149

Net interest income

50,578

44,192

Net interest spread

(5)

1.70

1.83

Net interest margin

(6)

2.87

2.84

(1)

Average balances - Daily average balances are used

to calculate yields/rates.

(2)

Annualized.

(3)

Average loan balances include non-accrual loans. Interest income

on loans includes accretion of deferred loan fees,

net of deferred loan costs.

(4)

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

FHLB stock.

(5)

Net interest spread is the weighted average

yield on total interest-earning assets minus the weighted

average rate on total interest-bearing

liabilities.

(6)

Net interest margin is the ratio of net interest

income to average total interest-earning assets.

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

ended September 30, 2023

Net interest income before the provision

for credit losses was $18.1

million for the three months

ended September 30,

2024, an

increase

of $4.1

million or

29.1%,

from

$14.0

million for

the same

period in

This

increase

was

primarily

attributable to higher income from a larger loan portfolio combined

with an increase in the weighted average loan yield

Net interest margin was 3.03%

for the quarter ended September 30, 2024 and 2.60%

for the same period in 2023. The

volume of

and rates

on loans

and interest-bearing

liabilities both

increased; however,

the volume

of and

yields on

loans

grew at a higher rate, offsetting the increase in deposits

and borrowing costs.

Nine months ended September 30, 2024 compared to the nine months

ended September 30, 2023

Net interest income

before the provision

for credit losses

was $50.6 million

for the nine

months ended September

30,

2024, an

increase

of $6.4

million or

14.5%,

from

$44.2

million for

the same

period in

This

increase

was

primarily

attributable to higher income from a larger loan portfolio combined

with an increase in the weighted average loan yield.

Net interest margin was 2.87% for the nine

months ended September 30, 2024 and 2.84%

for the same period in 2023.

Loan yields

and the

rate paid

on interest

-bearing

liabilities both

increased; however

the interest

-earning

assets balance

was greater than that of interest-bearing liabilities. Therefore

the effect of the increase in yields

resulted in a NIM expansion

of 3 bps between periods.

Table of Contents

USCB Financial Holdings, Inc.

Q3 2024 Form 10-Q

Provision for Credit Losses

The provision

for credit

losses represents

a charge

to earnings

necessary to

maintain an

allowance for

credit losses

that, in

management's evaluation,

is adequate

to provide

coverage for

all expected

credit losses.

The provision

for credit

losses is impacted

by variations in

the size and

composition of our

loan and debt

securities portfolio, recent

historical and

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

securities portfolios

and net charge-offs.

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

ended September 30, 2023

The provision

for credit

loss was

$931 thousand

for the

three months

ended September 30,

2024 compared

to $653

thousand for

the same

period in

Growth

in the

loan portfolio

was the

primary driver

of the increase

in the provision

expense during the three months ended September 30,

2024.

Nine months ended September 30, 2024 compared to the nine months

ended September 30, 2023

The

provision

for

credit

loss

was

$2.1

million

for

the

nine

months

ended

September 30,

2024

compared

$892

thousand for

the same

period in

Growth

in the

loan portfolio

was the

primary driver

of the increase

in the provision

expense during the nine months ended September 30, 2024.

Non-Interest Income

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

accounts. We also generate

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

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

insurance policies on some of our

employees and generate income from

the increase in the cash surrender

value of these

policies.

The following table presents the components of non-interest

income for the dates indicated (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

2024

2023

2024

2023

Service fees

2,544

1,329

6,172

3,707

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

(955)

(976)

Gain on sale of loans held for sale, net

109

255

593

696

Other non-interest income

785

1,532

2,334

2,650

Total

non-interest income

3,438

2,161

9,113

6,077

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

ended September 30, 2023

Non-interest income

for the

three months

ended September 30,

2024 increased

$1.3 million

or 59.1% to

$3.4 million,

compared

the

same

period in

This

increase

was

primarily

driven

growth

SWAP loan

fees

reported

under

service fees category,

partially offset by declines in gains on sale of loans and

other non-interest income.

Nine months ended September 30, 2024 compared to the nine months

ended September 30, 2023

Non-interest income for the nine months ended September

30, 2024 increased $3.0 million or 50.0%, compared

to the

same period in 2023. This increase was

primarily driven by growth in SWAP loan

fees reported under service fees category

and gain on sale of loans, , partially offset by declines in gains

on sale of loans and other non-interest income.

Table of Contents

USCB Financial Holdings, Inc.

Q3 2024 Form 10-Q

Non-Interest Expense

The following table presents the components of non-interest

expense for the dates indicated (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

2024

2023

2024

2023

Salaries and employee benefits

7,200

6,066

20,863

18,325

Occupancy

1,341

1,350

3,921

3,968

Regulatory assessment and fees

452

365

1,361

1,041

Consulting and legal fees

161

513

1,016

1,257

Network and information technology services

513

481

1,499

1,464

Other operating

1,787

1,686

5,528

5,034

Total

non-interest expense

11,454

10,461

34,188

31,089

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

ended September 30, 2023

Non-interest expense for the three months ended September 30, 2024

increased $1.0 million or 9.5%, compared to the

same period

in 2023.

The increase

was primarily

driven by

an increase

of $1.1

million in

salaries and

employee benefits

due to management bonus accrual based on the Company’s

performance, and stock-based compensation expense.

Nine months ended September 30, 2024 compared to the nine months

ended September 30, 2023

Non-interest expense for the nine

months ended September 30, 2024 increased $3.1

million or 10.0%, compared to

the

same period

in 2023.

The increase

was primarily

driven by

an increase

of $2.5

million in

salaries and

employee benefits

due to

sales incentives,

management

bonus accrual

based on

the Company’s

performance,

merit

increases,

and stock-

based

compensation

expense.

Regulatory

assessment

and

fees

increased

$306

thousand

due

FDIC

deposit

insurance. Other operating expenses increased due to

an increase of $153 thousand in audit and tax services.

Provision for Income Tax

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

and expenses for

income tax purposes.

Therefore, future

decisions on the

investments we choose

will affect our

effective

tax rate.

The cash

surrender value

of bank-owned

life insurance

policies covering

key employees,

purchasing municipal

bonds, and overall levels of taxable income will be important

elements in determining our effective tax rate.

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

ended September 30, 2023

Income tax

expense for

the quarter

ended September

30, 2024

was $2.2

million as

compared to

$1.3 million

for the

same period in 2023.

The effective tax rate

for the three months ended

September 30, 2024 was 24.2% compared to

24.7%

for 2023.

Nine months ended September 30, 2024 compared to the nine months

ended September 30, 2023

Income tax expense

for the

nine months ended

September 30, 2024

was $5.6 million

as compared to

$4.5 million

for

the same

period in

effective tax

rate for

the nine

months ended

September 30,

2024 was

24.0% compared

24.4% for the same period in 2023.

For

further

discussion

income

taxes,

see

Note

“Income

Taxes”

the

unaudited

Consolidated

Financial

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

Analysis of Financial Condition

Total

assets at

September 30, 2024

were $2.50

billion, an

increase of

$164.9 million,

or 9.4%

annualized, over

total

assets of

$2.34 billion

at December 31,

Total

loans, net

of deferred

fees/costs, increased

$150.5 million,

or 11.3%

annualized,

$1.93

billion

September 30,

2024

compared

$1.78

billion

December 31,

2023.

Total

deposits

increased

$189.5

million,

13.1%

annualized,

$2.13

billion

September 30,

2024

compared

$1.94

billion

December 31, 2023.

Table of Contents

USCB Financial Holdings, Inc.

Q3 2024 Form 10-Q

Investment Securities

The investment portfolio

is used and

managed to provide

liquidity through cash

flows, marketability

and, if necessary,

collateral for

borrowings. The

investment portfolio

is also

used as

a tool

to manage

interest rate

risk and

the Company’s

capital

market

risk

exposure.

The

philosophy

the

portfolio

maximize

the

Company’s

profitability

taking

into

consideration the Company’s

risk appetite and

tolerance, manage

the asset composition

and diversification,

and maintain

adequate risk-based capital ratios.

The investment portfolio

is managed in accordance

with the Board approved

Asset and Liability

Management (“ALM”)

policy,

which

includes

investment

guidelines.

Such

policy

reviewed

least

annually

frequently

deemed

necessary,

depending on

market conditions

and/or unexpected

events. The investment

portfolio composition

is subject to

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

the

Asset-Liability

Committee

(“ALCO”).

The

portfolio

investments

also

can

used

modify

the

duration

the

balance

sheet.

The

allocation

cash

into

securities

takes

into

consideration

anticipated

future

cash

flows

(uses

and

sources) and all available sources of credit.

Our investment portfolio consists

primarily of securities issued

by U.S. government-sponsored agencies,

U.S.

agency

mortgage-backed securities,

collateralized mortgage

obligation securities,

corporate securities,

other debt

securities, and

municipal securities all

with varying contractual

maturities and coupons.

Due to

the optionality embedded

in these securities,

the final maturities do not

necessarily represent the expected

life of the portfolio. Some

of these securities will

be called or

paid down prior

to maturity depending

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 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 of macro-economic conditions. Each investment is expected to recover its unrealized loss position over its holding

period as it approaches

to maturity and the Company has the intent and ability to hold these securities maturity.

As a result

of this evaluation, the Company concluded that no allowance

was required on AFS securities as of September

30, 2024.

quarter

end,

HTM

securities

included

$157.7

million

U.S.

Government

and

U.S.

Agency

issued

bonds

and

mortgage-backed

securities.

Because

the

explicit

and/or

implicit

guarantee

these

bonds,

the

Company

holds

reserves

on these

holdings.

The remaining

portion of

the HTM

portfolio

is made

up of

$9.3

million

in investment

grade

corporate bonds. The required reserve for these holdings is

determined each quarter using the model described above. For

the portion of the HTM exposed to non-government

credit risk, the Company utilized the PD/LGD

methodology to estimate

a $8 thousand allowance

for credit losses (“ACL”)

as of September 30,

The book value

for debt securities

classified

as HTM represents amortized cost less ACL.

AFS and

HTM investment

securities increased

$22.2 million, or

7.3% annualized,

to $426.5 million

at September 30,

2024 from $404.3 million at December 31,

Investment securities increased due

to reinvestment of payments received

and investment of excess

in cash balances into

high credit quality investments

to increase the Company’s

profitability and

modify the

Company’s balance sheet

duration according to

the ALM policy. As

of September 30, 2024,

investment securities

with a

market value

of $69.7 million

were pledged

to secure

public deposits.

The investment

portfolio does

not have

any

tax-exempt securities.

Table of Contents

USCB Financial Holdings, Inc.

Q3 2024 Form 10-Q

The

following

table

presents

the

amortized

cost

and

fair

value

investment

securities

for

the

dates

indicated

(in

thousands):

September 30, 2024

December 31, 2023

Available-for-sale:

Amortized

Cost

Fair Value

Amortized

Cost

Fair Value

U.S. Government Agency

11,916

10,733

9,664

8,173

Collateralized mortgage obligations

104,228

84,194

103,645

80,606

Mortgage-backed securities - residential

60,390

50,762

63,795

52,187

Mortgage-backed securities - commercial

75,263

70,333

49,212

42,764

Municipal securities

24,945

20,425

25,005

19,338

Bank subordinated debt securities

24,272

23,080

28,106

26,261

301,014

259,527

279,427

229,329

Held-to-maturity:

U.S. Government Agency

42,909

38,965

43,626

38,306

Collateralized mortgage obligations

58,345

52,403

62,735

54,752

Mortgage-backed securities - residential

41,173

38,313

43,784

39,599

Mortgage-backed securities - commercial

15,316

14,563

15,439

14,182

Corporate bonds

9,266

8,881

9,398

8,671

167,009

153,125

174,982

155,510

Allowance for credit losses - securities held-to-maturity

(8)

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

167,001

174,974

The following

table shows

the weighted

average yields,

categorized by

contractual maturity,

for investment

securities

as of September 30, 2024 (in thousands,

except yields):

Within 1 year

After 1 year

through 5 years

After 5 years

through 10 years

After 10 years

Total

Amortized

Cost

Yield

Amortized

Cost

Yield

Amortized

Cost

Yield

Amortized

Cost

Yield

Amortized

Cost

Yield

Available-for-sale:

U.S. Government Agency

0.00%

2,375

3.15%

9,541

1.96%

11,916

2.19%

Collateralized mortgage obligations

0.00%

104,228

1.64%

104,228

1.64%

MBS - residential

0.00%

60,390

1.84%

60,390

1.84%

MBS - commercial

0.00%

4,099

4.70%

71,164

3.40%

75,263

3.47%

Municipal securities

0.00%

19,704

1.72%

5,241

1.85%

24,945

1.75%

Bank subordinated debt securities

0.00%

1,000

7.99%

23,272

5.07%

0.00%

24,272

5.19%

1,000

49,450

250,564

301,014

2.45%

Held-to-maturity:

U.S. Government Agency

0.00%

7,945

1.02%

20,067

1.42%

14,897

2.06%

42,909

1.57%

Collateralized mortgage obligations

0.00%

58,345

1.66%

58,345

1.66%

MBS - residential

0.00%

4,352

1.86%

5,891

1.75%

30,930

2.22%

41,173

2.12%

MBS - commercial

0.00%

3,061

1.62%

0.00%

12,255

2.85%

15,316

2.60%

Corporate bonds

0.00%

9,266

2.81%

0.00%

9,266

2.81%

24,624

25,958

116,427

167,009

1.90%

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 2024 Form 10-Q

The following table shows the loan portfolio composition

as of the dates indicated (in thousands):

September 30, 2024

December 31, 2023

Total

Percent of

Total

Percent of

Total

Residential Real Estate

283,477

14.7

204,419

11.5

Commercial Real Estate

1,095,112

56.8

1,047,593

58.8

Commercial and Industrial

246,539

12.8

219,757

12.4

Correspondent Banks

103,815

5.4

114,945

6.5

Consumer and Other

198,604

10.3

191,930

10.8

Total

gross loans

1,927,547

100.0

1,778,644

100.0

Plus: Deferred fees/costs

3,815

2,183

Total

loans net of deferred fees/costs

1,931,362

1,780,827

Less: Allowance for credit losses

23,067

21,084

Total

net loans

1,908,295

1,759,743

Total

loans,

net

deferred

fees/costs,

increased

$150.5 million,

11.3%

annualized

$1.93

billion,

September 30, 2024

compared to

December 31, 2023.

The residential

real estate

loan segment

had the

most significant

growth.

Our

loan

portfolio

continues

grow,

with

commercial

real

estate

lending

the

primary

focus

which

represented

approximately 56.8%

of the

total gross

loan portfolio

as of

September 30, 2024.

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.

Most of the

commercial real estate

exposure represents

loans to commercial

businesses secured

by owner-occupied

real estate.

The growth

experienced in

recent years

is primarily

due to

implementation of

our relationship-based

banking

model and

the success

of our

relationship managers

in competing

for new

business

in a

highly competitive

metropolitan

area. Many

of our

larger loan

clients have

long-term relationships

with members

of our

senior management

team or

our

relationship managers that date back to former institutions.

From a

liquidity perspective,

our loan

portfolio provides

us with

additional

liquidity due

to repayments

or unexpected

prepayments.

The

following

table

shows

maturities

and

sensitivity

interest

rate

changes

the

loan

portfolio

September 30, 2024 (in thousands):

Due in 1 year or

less

Due in 1 to 5

years

Due after 5 to 15

years

Due after 15

years

Total

Residential Real Estate

6,136

69,921

67,027

140,393

283,477

Commercial Real Estate

88,789

304,663

696,167

5,493

1,095,112

Commercial and Industrial

10,396

64,579

125,719

45,845

246,539

Correspondent Banks

103,815

Consumer and Other

3,186

2,976

14,144

178,298

198,604

Total

gross loans

212,322

442,139

903,057

370,029

1,927,547

Interest rate sensitivity:

Fixed interest rates

177,851

208,887

184,199

279,696

850,633

Floating or adjustable rates

34,471

233,252

718,858

90,333

1,076,914

Total

gross loans

212,322

442,139

903,057

370,029

1,927,547

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,

2024, approximately 56%

of the loans have

adjustable/variable rates and

44% of the

loans have

fixed rates. The adjustable/variable

rate loans re-price

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 a decrease

in interest

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

of higher interest rates.

Table of Contents

USCB Financial Holdings, Inc.

Q3 2024 Form 10-Q

Asset Quality

Our asset quality grading

analysis estimates the capability of

the borrower to repay

the contractual obligation of

the loan

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

graded loans. Internal credit

risk grades are reviewed

at least once a

year, and

more frequently as

needed. Internal credit

risk ratings

may change

based on

management’s

assessment of

the results

from the

annual review,

portfolio monitoring,

and other developments observed with borrowers.

The internal credit risk grades used by the Company to

assess the credit worthiness of a loan are shown below:

Pass

– Loans indicate different levels of satisfactory

financial condition and performance.

Special Mention

– Loans classified as special mention have a potential weakness

that deserves management’s

close attention. If left uncorrected, these potential weaknesses

may result in deterioration of the repayment

prospects for the loan or of the institution’s

credit position at some future date.

Substandard

– Loans classified as substandard are inadequately protected

by the current net worth and paying

capacity of the obligator or of the collateral pledged, if

any. Loans so classified

have a well-defined weakness or

weaknesses that jeopardize the liquidation of the debt.

They are characterized by the distinct possibility that the

institution will sustain some loss if the deficiencies are

not corrected.

Doubtful

– Loans classified as doubtful have all the weaknesses inherent

in those classified at substandard, with

the added characteristic that the weaknesses make collection

or liquidation in full on the basis of currently existing

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

Loss

– Loans classified as loss are considered uncollectible.

Loan credit exposures by internally assigned grades are

as follows for the dates indicated (in thousands):

September 30, 2024

Pass

Special Mention

Substandard

Doubtful

Total

Residential Real Estate

282,909

568

283,477

Commercial Real Estate

1,092,648

2,464

1,095,112

Commercial and Industrial

244,620

1,919

246,539

Correspondent Banks

103,815

Consumer and Other

196,613

1,991

198,604

1,920,605

6,942

1,927,547

December 31, 2023

Pass

Special Mention

Substandard

Doubtful

Total

Residential Real Estate

204,127

292

204,419

Commercial Real Estate

1,040,032

7,561

1,047,593

Commercial and Industrial

218,129

1,628

219,757

Correspondent Banks

114,945

Consumer and Other

191,930

1,769,163

9,481

1,778,644

Table of Contents

USCB Financial Holdings, Inc.

Q3 2024 Form 10-Q

Non-Performing Assets

The following table presents non-performing assets as

of the dates shown (in thousands,

except ratios):

September 30, 2024

December 31, 2023

Non-accrual loans

2,725

468

Loans past due over 90 days and still accruing

Total

non-performing loans

2,725

468

Other real estate owned

Total

non-performing assets

2,725

468

Asset quality ratios:

Allowance for credit losses to total loans

1.19%

1.18%

Allowance for credit losses to non-performing loans

846%

4,505%

Non-performing loans to total loans

0.14%

0.03%

Non-performing

assets

include

all

loans

categorized

non-accrual,

other

real

estate

owned

(“OREO”)

and

other

repossessed assets. Problem loans for

which the collection or

liquidation in full is

reasonably uncertain are placed on

a non-

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

the

borrower.

When

the

collection

the

full

contractual

balance

unlikely,

the

loan

placed

non-accrual

avoid

overstating the Company’s income for a loan with

increased credit risk.

If the

principal or

interest on

a commercial

loan becomes

due and

unpaid for

90 days

or more,

the loan

is placed

non-accrual status as of

the date it becomes

90 days past due

and remains in non-accrual

status until it meets

the criteria

for restoration to accrual status.

Residential loans, on

the other hand, are placed

on non-accrual status when

the principal

or interest

becomes due

and unpaid

for 120

days or

more and remains

in non-accrual

status until

it meets

the criteria

for

restoration

accrual

status.

Restoring

loan

accrual

status

possible

when

the

borrower

resumes

payment

all

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

has a documented expectation of

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

The

Company

may

grant

loan

concession

borrower

experiencing

financial

difficulties.

This

determination

performed

during

the

annual

review

process

whenever

problems

surface

regarding

the

borrower’s

ability

repay

accordance with

the original

terms of

the loan

or line

of credit.

The concessions

are given

to the

debtor in

various forms,

including interest rate

reductions, principal forgiveness, extension

of maturity date,

waiver, or deferral of

payments and other

concessions intended to minimize potential losses.

For further discussion of

non-performing loans and

borrowers experiencing financial

difficulties, see

Note 3 “Loans” to

the unaudited Consolidated Financial Statements in Item

1 of Part 1 this Form 10-Q.

Allowance for Credit Losses

The ACL

represents

an amount

that,

management's

evaluation,

is adequate

to provide

coverage

for

all

expected

future

credit

losses

outstanding

loans.

Additionally,

qualitative

adjustments

are

made

the

ACL

when,

based

management’s judgment, there

are factors impacting

the allowance estimate

not considered by

the quantitative calculations.

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

for more information on the ACL.

Table of Contents

USCB Financial Holdings, Inc.

Q3 2024 Form 10-Q

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

type for the periods indicated (in thousands):

Residential

Real Estate

Commercial

Real Estate

Commercial

and

Industrial

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 to average loans

(3)

(0.00)%

(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

(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

Average loans

231,947

1,065,280

232,160

102,659

197,547

1,829,593

Net charge-offs to average loans

(3)

(0.01)%

(0.02)%

0.01%

0.00%

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

thousand release related to investment securities held to maturity.

(2) Provision for credit losses excludes $159 thousand expense due to unfunded commitments included in other liabilities.

(3) Annualized.

Residential

Real Estate

Commercial

Real Estate

Commercial

and

Industrial

Correspondent

Banks

Consumer

and Other

Total

Three Months Ended September 30,

2023

Beginning balance

2,673

10,183

2,500

677

2,782

18,815

Provision for credit losses

(1)

(162)

(84)

738

108

673

Recoveries

Charge-offs

(3)

Ending Balance

2,511

10,099

3,246

750

2,887

19,493

Average loans

183,643

992,171

179,127

87,847

168,076

1,610,864

Net charge-offs to average loans

(4)

(0.02)%

0.01%

0.00%

Nine Months Ended September 30, 2023

Beginning balance

1,352

10,143

4,163

720

1,109

17,487

Cumulative effect of adoption of accounting

principle

(2)

1,238

1,105

(2,158)

858

1,066

Provision for credit losses

(3)

(89)

(1,149)

1,181

965

915

Recoveries

Charge-offs

(48)

Ending Balance

2,511

10,099

3,246

750

2,887

19,493

Average loans

186,918

980,244

164,466

90,597

153,849

1,576,074

Net charge-offs to average loans

(4)

(0.01)%

(0.05)%

0.04%

0.00%

(1) Provision for credit losses excludes a $17 thousand expense due to unfunded commitments included in other liabilities and a $3

thousand release related to investment securities held to maturity.

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

(3) Provision for credit losses excludes $39 thousand release due to unfunded commitments included in other liabilities and $16

thousand expense due to investment securities held to maturity.

(4) Annualized.

Table of Contents

USCB Financial Holdings, Inc.

Q3 2024 Form 10-Q

Bank-Owned Life Insurance

As of September 30,

2024, the combined

cash surrender

value of all

bank-owned life

insurance (“BOLI”)

policies was

$53.0

million.

Changes

cash

surrender

value

are

recorded

non-interest

income

the

unaudited

Consolidated

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

these policies.

Deposits

Customer deposits are the

primary funding source for

the Bank’s growth.

Through our network of

banking centers, we

offer a competitive array of deposit

accounts and treasury management services designed

to meet our customers’ business

needs.

Our

primary

deposit

customers

are

small-to-medium

sized

businesses

(“SMBs”),

and

the

personal

business

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

relationships of the employees of these businesses.

The following table

presents the daily

average balance and

average rate paid

on deposits by

category for

the periods

presented (in thousands, except ratios):

Three Months Ended September 30,

2024

2023

Average Balance

Average Rate

Paid

Average Balance

Average Rate

Paid

Non-interest-bearing checking

609,456

0.00%

587,917

0.00%

Interest-bearing checking

57,925

2.82%

52,080

2.52%

Money market and savings deposits

1,084,562

3.69%

1,011,164

3.44%

Time deposits

325,580

4.14%

290,272

3.51%

Total

2,077,523

2.66%

1,941,433

2.39%

The Company

has a

granular deposit

portfolio with

outstanding balances

comprised of

59% in

commercial

deposits,

31%

personal

deposits,

public

funds

(which

are

partially

collateralized)

and

brokered

deposits.

The

brokered

deposits balance at September 30, 2024 was $100.0

million and $50.0 million at December 31, 2024.

The Company has approximately

20 thousand deposit accounts

with the majority in

personal accounts, approximately

13 thousand or

62.3%. The

estimated average

account size of

our deposit portfolio

was approximately

$104 thousand

of September 30, 2024.

The

uninsured

deposits

are

estimated

based

the

FDIC

deposit

insurance

limit

$250

thousand

for

all

deposit

accounts at the Company

per account holder. The total estimated amount

of uninsured deposits was

56% at September 30,

2024 and 53%

at September 30, 2023.

The Company offers Insured

Cash Sweep (“ICS”)

and Certificate of

Deposit Account

Registry Service (“CDARS”) deposit products

to fully insure our clients. The

deposit balance in ICS/CDARS at

quarter end

was $106.0 million at September 30, 2024 and $107.3

million at December 31, 2023.

The following table shows scheduled maturities of uninsured

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

September 30, 2024

Three months or less

33,952

Over three through six months

50,797

Over six though twelve months

10,780

Over twelve months

776

96,305

Other Liabilities

The Company collects from commercial and residential loan

customers funds which are held in escrow for future

payment of real estate taxes and insurance. These escrow

funds are disbursed by the Company directly to the

insurance

companies and taxing authority of the borrower.

Escrow funds are recorded as other liabilities.

As of September 30, 2024 escrow balances totaled $22.5 million

compared to $2.3 million at December 31, 2023.

Table of Contents

USCB Financial Holdings, Inc.

Q3 2024 Form 10-Q

Borrowings

member

the

FHLB

Atlanta,

are

eligible

obtain

advances

with

various

terms

and

conditions.

This

accessibility of additional

funding allows us

to efficiently and

timely meet both

expected and unexpected

outgoing cash flows

and collateral needs without adversely affecting

either daily operations or the financial condition

of the Company.

As of

September 30, 2024,

we had

$118.0

million of

fixed-rate advances

outstanding from

the FHLB

with a

weighted

average rate of 3.47%. Maturity dates for the advances

range between 2024 to 2028 as detailed in the table below.

The following table presents the FHLB advances as of

September 30, 2024 (in thousands):

Interest Rate

Type of Rate

Maturity Date

Amount

2.05%

Fixed

March 27, 2025

10,000

1.07%

Fixed

July 18, 2025

6,000

3.76%

Fixed

January 24, 2028

11,000

3.77%

Fixed

April 25, 2028

50,000

3.68%

Fixed

September 13, 2027

21,000

3.79%

Fixed

March 23, 2026

20,000

118,000

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, 2024, there were no outstanding balances

with any of these liquidity sources.

Off-Balance Sheet Arrangements

We engage

in various financial

transactions in

our operations

that, under GAAP,

may not be

included on

the balance

sheet. To

meet the financing needs of our customers,

we may include commitments to extend credit and standby

letters 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 use

more conservative

credit and

collateral policies

in making

these credit

commitments than

we do

for on-balance

sheet items.

We are

not aware

of any accounting

loss to

be incurred

by funding

these commitments;

however,

maintain

allowance

for

off-balance

sheet

credit

risk

which

is recorded

under

other

liabilities on the unaudited Consolidated Balance Sheets.

Since commitments associated with letters of

credit and commitments to extend

credit may expire unused, the

amounts

shown

not

necessarily

reflect

actual

future

cash

funding

requirements.

The

following

table

presents

lending

commitments outstanding as of the dates indicated (in thousands

September 30, 2024

December 31, 2023

Commitments to grant loans and unfunded lines of credit

104,851

85,117

Standby and commercial letters of credit

4,507

3,987

Total

109,358

89,104

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

established

the

contract,

for

specific

purpose.

Commitments

generally

have

variable

interest

rates,

fixed

expiration

dates or

other

termination

clauses

and

may require

payment

a fee.

Since many

of the

commitments

are

expected to

expire without being

fully drawn, the

total commitment

amounts disclosed

above do not

necessarily represent

future cash

requirements.

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

in credit risk in our portfolio. Lines

of credit generally have variable interest

rates. The maximum potential amount

of future

payments we could

be required to

make is represented

by the contractual

amount of the

commitment, less

the amount of

any advances made.

Letters of credit are

conditional commitments issued

by us to guarantee

the performance of a

client to a third

party.

the event of nonperformance by

the client in accordance with the

terms of the agreement with the

third party,

we would be

required to fund

the commitment.

If the commitment

is funded, we

would be entitled

to seek recovery

from the client

from

Table of Contents

USCB Financial Holdings, Inc.

Q3 2024 Form 10-Q

the underlying collateral,

which can include

commercial real estate,

physical plant and

property, inventory, receivables, cash

or marketable securities.

Asset and Liability Management Committee

Members

senior

management

and

our

Board

make

the

asset

and

liability

management

committee,

ALCO.

Senior management

is responsible

for ensuring

that Board

approved strategies

and policies

for managing

and mitigating

risks are appropriately executed within the designated lines of

authority and responsibility in a timely manner.

ALCO

oversees

the

establishment,

approval,

implementation,

and

review

interest

rate

risk,

management,

and

mitigation strategies, ALM related policies, ALCO procedures

and risk tolerances and appetite.

While some degree of Interest Rate Risk (“IRR”) is inherent to the banking business, we believe our ALCO 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 rates

scenarios and

time horizons.

These simulations

utilize both

instantaneous and

parallel changes

in the

level of

interest rates,

as well

non-parallel changes such as

changing slopes (flat and steepening)

and twists of the yield curve.

Static simulation models

are based

on current

exposures

and assume

a constant

balance sheet

with

new growth.

Dynamic

simulation

is also

utilized to have a

more comprehensive assessment

on IRR. This simulation

relies on detailed

assumptions outlined in

our

budget and strategic plan, and 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, 2024,

we had

a neutral

to slightly

asset sensitive

balance sheet

both for

year one

and year

two modeling,

using the

static modeling.

Asset sensitivity

indicates

that our

assets generally

reprice

faster

than

our

liabilities,

which

results

favorable

impact

net

interest

income

when

market

interest

rates

increase. Liability sensitivity indicates that our liabilities generally reprice faster

than our assets, which results in a

favorable

impact to net interest

income when market interest

rates decrease. Many assumptions

are used to calculate

the impact of

interest rate variations on our net interest income, such as asset prepayment speeds,

non-maturity deposit price sensitivity

(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.

According to our model, as of September 30, 2024, our balance sheet is neutral to slightly asset sensitive for both year

one and

year two

under interest

static rate

scenarios (an

increase or

decrease of

400 basis

points). This

means that

the

impact of rates variations will be minimal

to our NIM. Additionally,

utilizing an EVE approach, we analyze

the risk to capital

from

the

effects

various

interest

rate

scenarios

through

long-term

discounted

cash

flow

model.

This

measures

the

difference

between

the

economic

value

our

assets

and

the

economic

value

our

liabilities,

which

proxy

for

our

liquidation value.

According to

our balance

sheet composition,

and as

expected, our

model stipulates

that an

increase in

interest rates will have a

negative impact on the EVE and

lower rates, a positive impact.

Results and analysis are presented

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

Table of Contents

USCB Financial Holdings, Inc.

Q3 2024 Form 10-Q

Liquidity

Liquidity is defined

as a Company’s

capacity to meet

its cash and

collateral obligations at

a reasonable cost.

Maintaining

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

efficiently meet both expected and unexpected cash flow

and collateral needs without adversely affecting

either daily operations or the financial condition of the

Company.

Liquidity risk

is the

risk that

we will

be unable

to meet

our short-term

and long-term

obligations as

they become

due

because of an inability

to liquidate assets or

obtain relatively adequate funding. The

Company’s obligations, and the funding

sources

used

meet

them,

depend

significantly

our

business

mix,

balance

sheet

structure

and

composition,

credit

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

and off-balance sheet obligations.

In managing

inflows and

outflows,

management

regularly

monitors situations

that can

give rise

to increased

liquidity

risk. These

include funding

mismatches, market

constraints on

the ability

to convert

assets (particularly

investments) into

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

pledging of assets and contingent liquidity events.

Changes in macroeconomic conditions, as well as exposure

to credit, market, operational, legal and reputational

risks,

such as

cybersecurity risk,

could have

an unexpected

impact on

the Company’s

liquidity risk

profile and

are factored

into

the assessment of liquidity and the ALM framework.

Management has established

a comprehensive and

holistic management process for

identifying, measuring, monitoring

and

mitigating

liquidity

risk.

Due

its

critical

importance

the

viability

the

Company,

liquidity

risk

management

integrated into our risk management processes, Contingency

Funding Plan and ALM policy.

Critical elements of our liquidity

risk management include: effective corporate governance consisting of

oversight by the

Board and active

involvement of senior

management; appropriate strategies, policies,

procedures, and limits

used to identify

and mitigate liquidity risk; comprehensive liquidity risk measurement and

monitoring systems (including assessments of the

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

business

activities of

the Company;

active management

of intraday

liquidity and

collateral; an

appropriately diverse

mix of

existing

and

potential

future

funding

sources;

adequate

levels

highly

liquid

marketable

securities

free

legal,

regulatory,

operational

impediments,

that

can

used

meet

liquidity

needs

stressful

situations;

comprehensive

contingency

funding plans

that sufficiently address

potential adverse liquidity

events and emergency

cash flow

requirements; and internal

controls

and

internal

audit

processes

sufficient

determine

the

adequacy

the

institution’s

liquidity

risk

management

process.

expect

funds

available

from

several

basic

banking

activity

sources,

including

the

core

deposit

base,

the

repayment and maturity of

loans and investment security cash

flows. Other potential funding

sources include Federal Funds

purchased,

brokered

certificates

deposit,

listing

services

certificates

deposit,

and

draws

from

the

Federal

Reserve

Bank

Atlanta

discount

window,

and

borrowings

from

the

FHLB.

Accordingly,

believe

our

liquidity

resources

are

adequate to fund loans and meet other cash needs as

necessary.

Table of Contents

USCB Financial Holdings, Inc.

Q3 2024 Form 10-Q

Capital Adequacy

As of

September 30,

2024, the

Bank was

well capitalized

under the

FDIC’s

prompt corrective

action framework.

also follow the capital conservation buffer framework, and

as of September 30, 2024, 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, 2024

Total

risk-based capital

257,212

13.14

156,587

8.00

195,733

10.00

Tier 1 risk-based capital

233,606

11.93

117,440

6.00

156,587

8.00

Common equity tier 1 capital

233,606

11.93

88,080

4.50

127,227

6.50

Leverage ratio

233,606

9.28

100,700

4.00

125,874

5.00

December 31, 2023:

Total

risk-based capital

233,109

12.65

147,432

8.00

184,290

10.00

Tier 1 risk-based capital

211,645

11.48

110,574

6.00

147,432

8.00

Common equity tier 1 capital

211,645

11.48

82,931

4.50

119,789

6.50

Leverage ratio

211,645

9.17

92,328

4.00

115,410

5.00

The Company is

not subject to

regulatory capital ratios

imposed by Basel

III on bank

holding companies because

the

Company is deemed to be a small bank holding company.

Impact of Inflation

Our

Consolidated

Financial

Statements

and

notes

have

been

prepared

accordance

with

U.S.

GAAP,

which require the measurement of financial

position and operating results in terms

of historical dollars, without considering

the changes in the

relative purchasing power

of money over time

due to inflation. The

impact of inflation is

reflected in the

increased cost of operations.

Unlike most industrial companies,

nearly all our assets and

liabilities are monetary in

nature.

As a result,

interest rates have a

greater impact on our

performance than do the

effects of general levels

of inflation. Periods

of high inflation

are often accompanied

by relatively higher

interest rates, and

periods of low

inflation are accompanied

relatively lower interest rates.

Recently Issued Accounting Pronouncements

Recently issued accounting

pronouncements are discussed

in Note 1 “Summary

of Significant Accounting Policies”

the unaudited Consolidated Financial Statements in Part

1 of this Form 10-Q.

Table of Contents

USCB Financial Holdings, Inc.

Q3 2024 Form 10-Q

Reconciliation and Management Explanation of Non

-GAAP Financial Measures

Management

has

included

these

non-GAAP

measures

because

believes

these

measures

may

provide

useful

supplemental information

for evaluating

the Company’s

underlying performance

trends. Further,

management uses

these

measures

managing

and

evaluating

the

Company’s

business

and

intends

refer

them

discussions

about

our

operations and performance.

Operating performance

measures should be

viewed in addition

to, and not

as an alternative

to or

substitute

for,

measures

determined

accordance

with

GAAP,

and

are

not

necessarily

comparable

to non-GAAP

measures that may be presented by other

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

of operating net income available to

common 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

9/30/2024

6/30/2024

3/31/2024

12/31/2023

9/30/2023

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

(1)

Net income

6,949

6,209

4,612

2,721

3,819

Plus: Provision for income taxes

2,213

1,967

1,426

787

1,250

Plus: Provision for credit losses

931

786

410

1,475

653

PTPP income

10,093

8,962

6,448

4,983

5,722

PTPP return on average assets:

(1)

PTPP income

10,093

8,962

6,448

4,983

5,722

Average assets

2,485,434

2,479,222

2,436,103

2,268,811

2,250,258

PTPP return on average assets

(2)

1.62%

1.45%

1.06%

0.87%

1.01%

Operating net income:

(1)

Net income

6,949

6,209

4,612

2,721

3,819

Less: Net gains (losses) on sale of securities

(883)

(955)

Less: Tax effect on sale of securities

(4)

224

242

Operating net income

6,949

6,199

4,612

3,380

4,532

Operating PTPP income:

(1)

PTPP income

10,093

8,962

6,448

4,983

5,722

Less: Net gains (losses) on sale of securities

(883)

(955)

Operating PTPP income

10,093

8,948

6,448

5,866

6,677

Operating PTPP return on average assets:

(1)

Operating PTPP income

10,093

8,948

6,448

5,866

6,677

Average assets

2,485,434

2,479,222

2,436,103

2,268,811

2,250,258

Operating PTPP return on average assets

(2)

1.62%

1.45%

1.06%

1.03%

1.18%

Operating return on average assets:

(1)

Operating net income

6,949

6,199

4,612

3,380

4,532

Average assets

2,485,434

2,479,222

2,436,103

2,268,811

2,250,258

Operating return on average assets

(2)

1.11%

1.01%

0.76%

0.59%

0.80%

Operating return on average equity:

(1)

Operating net income

6,949

6,199

4,612

3,380

4,532

Average equity

206,641

197,755

193,092

183,629

184,901

Operating return on average equity

(2)

13.38%

12.61%

9.61%

7.30%

9.72%

Operating Revenue:

(1)

Net interest income

18,109

17,311

15,158

14,376

14,022

Plus: Non-interest income

3,438

3,211

2,464

1,326

2,161

Less: Net gains (losses) on sale of

securities

(883)

(955)

Operating revenue

21,547

20,508

17,622

16,585

17,138

Operating Efficiency Ratio:

(1)

Total non-interest expense

11,454

11,560

11,174

10,719

10,461

Operating revenue

21,547

20,508

17,622

16,585

17,138

Operating efficiency ratio

53.16%

56.37%

63.41%

64.63%

61.04%

(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 2024 Form 10-Q

USCB FINANCIAL HOLDINGS, INC.

NON-GAAP FINANCIAL MEASURES (UNAUDITED)

(Dollars in thousands, except per share data)

As of or For the Three Months Ended

9/30/2024

6/30/2024

3/31/2024

12/31/2023

9/30/2023

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

(1)

Total stockholders' equity

213,916

201,020

195,011

191,968

182,884

Less: Intangible assets

Tangible stockholders' equity

213,916

201,020

195,011

191,968

182,884

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

Total common shares issued and outstanding

19,620,632

19,630,632

19,650,463

19,575,435

19,542,290

Tangible book value per common share

(2)

10.90

10.24

9.92

9.81

9.36

Operating diluted net income per common share:

(1)

Operating net income

6,949

6,199

4,612

3,380

4,532

Total weighted average diluted shares of common stock

19,825,211

19,717,167

19,698,258

19,573,350

19,611,897

Operating diluted net income per common share:

0.35

0.31

0.23

0.17

0.23

Tangible Common Equity/Tangible Assets

(1)

Tangible stockholders' equity

213,916

201,020

195,011

191,968

182,884

Tangible total assets

(3)

2,503,954

2,458,270

2,489,142

2,339,093

2,244,602

Tangible Common Equity/Tangible

Assets

8.54%

8.18%

7.83%

8.21%

8.15%

(1)

The Company believes these non-GAAP measurements

are key indicators of the ongoing earnings

power of the Company.

(2)

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

of outstanding stock options.

(3) Since the Company has no intangible

assets, tangible total assets is the same amount

as total assets calculated under GAA

Table of Contents

USCB Financial Holdings, Inc.

Q3 2024 Form 10-Q

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

As a smaller reporting company,

we are not required to provide the information required

by this item.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Under the

supervision and with

the participation of

our management, including

our President and

Chief Executive Officer

and our

Chief Financial

Officer,

we evaluated

the effectiveness

of the

design and

operation of

the Company’s

disclosure

controls and

procedures (as

defined in

Rules 13a-15(e)

and 15d-15(e)

under the

Securities Exchange

Act of

1934) as

September 30, 2024. 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 2024 Form 10-Q

PART II

Item 1.

Legal Proceedings

The

Company

previously

disclosed

that

litigation

(the

“Litigation”)

had

been

commenced

July

13,

2023

three

individuals

who

were

shareholders

the

Bank

prior

the

Bank’s

reorganization

into

the

holding

company

form

organization in 2021

(the “Plaintiffs”)

against six

persons, all

of whom were

directors of

the Bank at

the relevant

time (the

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

Aguilera

al.)

alleging

the

Defendants

(i) caused

the

Bank,

directors

thereof,

engage

in ultra

vires

conduct by

devising

and

approving

the

exchange

transaction

effected

July

2021

pursuant

which

the

Bank’s

then

outstanding

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

Bank (the

“Exchange Transaction”),

which action

the Plaintiffs

allege was

not permitted

by the

Bank’s Articles

of Incorporation,

and

(ii) breached

their

fiduciary

duty as

directors

of the

Bank

approving

and

engaging

the

Exchange

Transaction.

The

Plaintiffs sought the

Court to certify the

action as a class

action and to award

damages in an

amount to be

proven at trial.

The Plaintiffs sought damages exceeding $750,000

plus attorney’s fees and costs

as well as such other relief as the Court

determined to award.

The Defendants filed a motion to dismiss the Litigation with

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

after reviewing

the Motion,

the Plaintiff’s response

thereto and

the Defendant’s reply

as well

as the

oral arguments presented

the

parties

December

14,

2023,

granted

the

Motion,

dismissing

the

Litigation

with

prejudice

and

rendering

final

judgment in favor

of the Defendants

(the “Order”). The Court

reserved jurisdiction to award

costs or grant

any post-judgment

relief.

On May 1,

2024, the

Plaintiffs filed

in the Third

District Court

of Appeal for

the State of

Florida (the “Appellate

Court”)

an appeal (the “Appeal”),

appealing the issuance

of the Order and

seeking a reversal

of the Order.

The Plaintiffs claimed

the Court erred by

concluding (i) the Exchange Transaction was not

ultra vires, and (ii)

that the Legacy Shareholders (which

includes the Plaintiffs)

lacked direct standing.

The Plaintiffs

filed their initial

brief and the

Defendants filed

on July 1,

2024

their answer brief

(“Answer Brief”) responding

to the allegations

contained in the

Appeal.

The Plaintiffs

have the ability

file a

Reply Brief

responding to

the Defendant’s

Answer Brief

but have

not done

so as

of the

date hereof.

The Plaintiff’s

have requested oral argument.

The Company believes

that the positions

in the Appeal

are legally

and factually without

merit, and it

intends to vigorously

defend

against

the

Appeal,

pursue

any

potential

counterclaims

against

the

Plaintiffs

deems

appropriate,

and

seek

coverage

from

its

insurance

carriers.

However,

there

can

assurance

that

the

Appeal

will

resolved

favorably.

Furthermore, there

is also

no assurance

that we

will be

able to

secure coverage

from our

insurance carriers

for any

expenses

incurred by

us in

connection with

defending against

the Appeal.

The Appellate

Court could

grant the

Plaintiff’s motion

reverse the Order and remand the case to the Court.

this

time,

the

opinion

management,

the

likelihood

remote

that

the

impact

such

proceedings,

either

individually or

in the

aggregate, would

have a

material adverse

effect

on our

consolidated results

of operations,

financial

condition

or cash

flows. However,

one

or more

unfavorable

outcomes

in any

claim or

litigation

against

us, including

the

aforementioned Appeal

regarding the

Exchange Transaction,

could have

a material

adverse effect

on the period

in which

such claims

or litigation

are resolved.

In addition,

regardless of

their merits

or their

ultimate outcomes,

such matters

are

costly, divert management’s

attention and may materially adversely affect our

reputation, even if resolved in our favor.

In addition

to the

foregoing, we

are from

time to

time subject

to claims

and litigation

arising in

the ordinary

course of

business.

These

claims

and

litigation

may

include,

among

other

things,

allegations

violation

banking

and

other

applicable regulations, competition

law, labor

laws and consumer

protection laws, as

well as claims or

litigation relating to

intellectual property,

securities, breach of contract

and tort. We intend

to defend ourselves vigorously

against any pending

or future claims and litigation.

There can be no

assurance that any

future legal proceedings

to which we are

a party will not

be decided adversely

our interests and have a material adverse effect

on our financial condition and operations.

Item 1A. Risk Factors

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

condition, or future

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

2023 Form 10-K.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

(a) None.

Table of Contents

USCB Financial Holdings, Inc.

Q3 2024 Form 10-Q

(b) Not applicable.

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

Total

Number of

Purchased

Average

Price Paid

Per Share

Total Number of Shares Purchased

as Part of Publicly Announced Plans

or Programs (1)

Maximum Number

of Shares that May

Yet Be Purchased

Under Plans or

Programs (1)

Period

July 1 - 31, 2024

10,000

11.99

10,000

537,980

August 1 -31, 2024

537,980

September 1 - 30, 2024

537,980

On April 22, 2024,

the Company announced the adoption

of a second repurchase program

to repurchase up to 500,000

Class

common

stock,

which

repurchase

program

will

commence

upon

completion

its

first

repurchase

program.

Item 3.

Defaults Upon Senior Securities

(a)

Not applicable

(b)

Not applicable

Item 4.

Mine Safety Disclosures

Not applicable.

Item 5. Other Information

(a)

Not applicable

(b)

Not applicable

(c)

During

the

three

months

ended

September

30,

2024,

none

the

Company’s

directors

Section

reporting

officers

adopted

terminated

any Rule 10b5-1

trading arrangement or

non-Rule

10b5-1

trading arrangement (as

such terms are defined in Item 408 of the SEC’s

Regulation S-K).

Table of Contents

USCB Financial Holdings, Inc.

Q3 2024 Form 10-Q

Item 6. Exhibits

Exhibit No.

Description of Exhibit

2.1

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

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

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

3.1

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

Registrant's Quarterly Report on Form 10-Q for the quarter ended 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).

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,

2024 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)

Filed herewith.

Furnished herby.

Table of Contents

USCB Financial Holdings, Inc.

Q3 2024 Form 10-Q

SIGNATURES

Pursuant to the

requirements of

the Securities Exchange

Act of 1934,

the registrant has

duly caused this

report to be

signed on its behalf by the undersigned thereunto duly authorized.

USCB FINANCIAL HOLDINGS, INC.

(Registrant)

Signature

Title

Date

/s/ Luis de la Aguilera

Chairman, President and Chief Executive

Officer

November 12, 2024

Luis de la Aguilera

(Principal Executive Officer)

/s/ Robert Anderson

Executive Vice President and Chief Financial

Officer

November 12, 2024

Robert Anderson

(Principal Financial Officer and Principal

Accounting Officer)

exhibit311

Exhibit 31.1

Certification of Chief Executive Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act

of 2002

I, Luis de la Aguilera, certify that:

I have reviewed this Quarterly Report on Form

10-Q of USCB Financial Holdings, Inc.;

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

necessary

make

the

statements

made,

light

the

circumstances

under

which

such

statements

were

made,

not

misleading with respect to the period covered by this report;

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

material respects

the financial

condition, results

of operations

and cash

flows of

the registrant

as of,

and for,

the periods

presented in this report;

The

registrant’s

other

certifying

officer

and

are

responsible

for

establishing

and

maintaining

disclosure

controls

and

procedures (as

defined in

Exchange Act

Rules 13a-15(e)

and 15d-15(e))

and internal

control over

financial reporting

(as

defined in Exchange

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

have:

designed

such

disclosure

controls

and

procedures,

caused

such

disclosure

controls

and

procedures

designed

under

our

supervision,

ensure

that

material

information

relating

the

registrant,

including

its

consolidated subsidiaries, is

made known

to us by

others within those

entities, particularly during

the period in

which

this report is being prepared;

designed such internal control over financial reporting, or caused such

internal control over financial reporting to be

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

the

preparation

financial

statements

for

external

purposes

accordance

with

generally

accepted

accounting

principles;

evaluated the effectiveness

of the registrant’s

disclosure controls and

procedures and presented

in this report our

conclusions about the effectiveness of the

disclosure controls and procedures, as of the

end of the period covered

by this report based on such evaluation; and

disclosed in this

report any

change in the

registrant’s internal

control over

financial reporting

that occurred

during

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

has

materially

affected,

reasonably

likely

materially

affect,

the

registrant’s

internal

control

over

financial

reporting; and

The registrant’s

other certifying

officer

and I

have disclosed,

based on

our most

recent evaluation

of internal

control over

financial

reporting,

the

registrant’s

auditors

and

the

audit

committee

the

registrant’s

board

directors

(or

persons

performing the equivalent functions):

All

significant

deficiencies

and

material

weaknesses

the

design

operation

internal

control

over

financial

reporting which are

reasonably likely

to adversely affect

the registrant’s ability

to record, process,

summarize and

report financial information; and

Any fraud, whether or not material,

that involves management or other employees who

have a significant role in

the

registrant’s internal control over financial reporting.

/s/ Luis de la Aguilera

Luis de la Aguilera

Chairman, President and Chief Executive Officer

Date: November 12, 2024

exhibit312

Exhibit 31.2

Certification of Chief Financial Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act

of 2002

I, Robert Anderson, certify that:

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

USCB Financial Holdings, Inc.;

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

necessary

make

the

statements

made,

light

the

circumstances

under

which

such

statements

were

made,

not

misleading with respect to the period covered by this report;

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

material respects

the financial

condition, results

of operations

and cash

flows of

the registrant

as of,

and for,

the periods

presented in this report;

The

registrant’s

other

certifying

officer

and

are

responsible

for

establishing

and

maintaining

disclosure

controls

and

procedures (as

defined in

Exchange Act

Rules 13a-15(e)

and 15d-15(e))

and internal

control over

financial reporting

(as

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

for the registrant and have:

designed

such

disclosure

controls

and

procedures,

caused

such

disclosure

controls

and

procedures

designed

under

our

supervision,

ensure

that

material

information

relating

the

registrant,

including

its

consolidated subsidiaries, is

made known

to us by

others within those

entities, particularly during

the period in

which

this report is being prepared;

designed such internal control over financial reporting, or caused such

internal control over financial reporting to be

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

the

preparation

financial

statements

for

external

purposes

accordance

with

generally

accepted

accounting

principles;

evaluated the effectiveness

of the registrant’s

disclosure controls and

procedures and presented

in this report our

conclusions about the effectiveness of the

disclosure controls and procedures, as of the

end of the period covered

by this report based on such evaluation; and

disclosed in this

report any

change in the

registrant’s internal

control over

financial reporting

that occurred

during

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

has

materially

affected,

reasonably

likely

materially

affect,

the

registrant’s

internal

control

over

financial

reporting; and

The registrant’s

other certifying

officer

and I

have disclosed,

based on

our most

recent evaluation

of internal

control over

financial

reporting,

the

registrant’s

auditors

and

the

audit

committee

the

registrant’s

board

directors

(or

persons

performing the equivalent functions):

All

significant

deficiencies

and

material

weaknesses

the

design

operation

internal

control

over

financial

reporting which are

reasonably likely

to adversely affect

the registrant’s ability

to record, process,

summarize and

report financial information; and

Any fraud, whether or not material, that involves

management or other employees who have a significant role

in the

registrant’s internal control over financial reporting.

/s/ Robert Anderson

Robert Anderson

Chief Financial Officer

Date: November 12, 2024

exhibit321

Exhibit 32.1

Certification of Chief Executive Officer Pursuant to

18 U.S.C. Section 1350

as Adopted Pursuant to Section 906 of the Sarbanes

-Oxley Act of 2002

In connection with the Quarterly

Report of USCB Financial Holdings, Inc. (the

“Company”) on Form 10-Q for the

quarter

ended September 30, 2024, as filed

with the Securities and Exchange

Commission on the date hereof

(the “Report”), I, Luis

de la Aguilera, as President

and Chief Executive Officer

of the Company,

certify, to

the best of my knowledge,

pursuant to

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 12, 2024

exhibit322

Exhibit 32.2

Certification of Chief Financial Officer Pursuant to

18 U.S.C. Section 1350

as Adopted Pursuant to Section 906 of the Sarbanes

-Oxley Act of 2002

In connection with the Quarterly

Report of USCB Financial Holdings, Inc. (the

“Company”) on Form 10-Q for the

quarter

ended September

30,

2024,

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 12, 2024