What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2025-05-09 compared with 2024-11-12 · 451 added, 543 removed, 1083 unchanged (48% of the section changed)

2 unchanged sentences

understanding

condition and results of

operations of the

Company and the Bank,

its wholly owned subsidiary,

as of and for

the three and

September 30,

consolidated financial statements and related

notes included in this Quarterly

Report on Form 10-Q (“Form

10-Q”) and the

audited consolidated financial

condition and results

of operations of

the Company and

the Bank, its

wholly owned subsidiary,

ended March 31,

discussion and analysis

in conjunction

with the unaudited

consolidated financial

statements and related

notes included in the

Annual Report on

Form 10-K (“2023

K”) filed with the Securities and Exchange Commission

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

notes included in

this Quarterly

Report on Form

10-Q (“Form 10-Q”)

and the audited

Securities and Exchange Commission (“SEC”) for the year ended

December 31, 2024.

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

63 unchanged sentences

practices or guidelines,

the on-going effects of the implementation of the

Current Expected Credit Losses (“CECL”) standard;

the on-going effects of the Current Expected Credit

Losses (“CECL”) standard;

the lack of a

18 unchanged sentences

fluctuations;

the effects of potential new or increased tariffs

and trade restrictions;

impacts of international hostilities and geopolitical events;

31 unchanged sentences

the Company filed or will file with the SEC.

ended September 30, 2023.

On October 28, 2024, the Company’s

Board of Directors declared its fourth

quarterly cash dividend of $0.05

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

the Company’s

publicly announced

repurchase programs.

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

authorized for repurchase under the Company’s program

March 31, 2024.

On January 21, 2025,

the Company’s Board of

Directors declared a quarterly

cash dividend of $0.10

per share on the

business on February 14, 2025.

The aggregate amount distributed in

connection with the quarterly cash dividend paid was

$2.0 million.

In evaluating our financial

10 unchanged sentences

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:

months ended September

increased $4.1 million

March 31, 2025

and annualized

where appropriate:

2025 increased

to $19.1 million

from $14.0 million for the quarter ended September

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.

September 30, 2023 and an increase of $164.9 million

or 9.4% annualized from December 31, 2023.

September 30, 2023 and an increase of $150.5 million

or 11.3% annualized from December 31, 2023.

Total deposits were

from $15.2 million for the quarter ended March 31,

Net interest margin (“NIM”)

was 3.10% for

the three months ended

2025 compared to 2.62%

for the three

months ended March 31,

Total assets were

$2.68 billion at

September 30,

2024, representing

March 31, 2025,

representing an increase

of $188.2 million

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

compared to 0.67% for

the quarter ended September 30, 2023.

stockholders’

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

31, 2024 and an increase of $96.2 million or 15.1% annualized

from December 31, 2024.

$2.04 billion

2025, representing

13.0% annualized

from December

Total deposits were $2.31 billion at March 31, 2025, representing an increase of $206.8 million or 9.8% from March

31, 2024 and an increase of $135.6 million or 25.3%

annualized from December 31, 2024.

Annualized return on average assets for the quarter

ended March 31, 2025 was 1.19% compared to 0.76%

quarter ended March 31, 2024.

Annualized return on average stockholders’ equity for the quarter ended March 31, 2025 was 14.15% compared to

9.61% for quarter ended March 31, 2024.

The ACL to total loans was 1.22% at both March 31, 2025 and December 31, 2024.

Non-performing loans to total loans was 0.20% at March

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

At September 30, 2024, the total

risk-based capital ratios

for the Company and

the Bank were 13.22% and

-based capital

respectively.

Tangible book value per

common share (a non-GAAP

measure) was $10.90 at

September 30, 2024, representing

annualized from

Tangible book

was negatively

accumulated comprehensive

USCB Financial Holdings, Inc.

Q3 2024 Form 10-Q

2025, representing

increase of $0.42 or 15.6% annualized from $10.81 at December 31, 2024.

At March 31, 2025, tangible book value

per common share

was negatively affected

to an accumulated

comprehensive loss

of $41.1 million.

accumulated comprehensive loss

1 unchanged sentence

Explanation for

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

of this non-GAAP financial measure.

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

on of this non-GAAP financial measure.

USCB Financial Holdings, Inc.

Q1 2025 Form 10-Q

Critical Accounting Policies and Estimates

62 unchanged sentences

(in thousands, except ratios):

September 30, 2024

March 31, 2025

December 31, 2024

4 unchanged sentences

Q1 2025 Form 10-Q

Three Months Ended

September 30,

Nine Months Ended

September 30,

Three Months Ended March 31,

Consolidated Statements of Operations:

13 unchanged sentences

expense, and the provision for income taxes.

Three months ended September 30, 2024 compared to the

three months ended September 30, 2023

ended September 30,

period in 2023.

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

margin expansion,

increased activity

loans, SWAP fees, and treasury management

fees) between periods.

Nine months ended September 30, 2024 compared to the

nine months ended September 30, 2023

Three months ended March 31, 2025 compared to the three

months ended March 31, 2024

Net income increased to $7.7

7.8 million for the nine

months ended September 30,

from $13.8 million for the

28.5% increase

attributable to

higher interest

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

SWAP fees, and treasury management

between periods.

million for the three months ended March

from $4.6 million for the same period

The $3.0 million

or 66% increase

in net income

was attributable to

higher interest income

from a larger

loan portfolio

and increased

activity in fee

generating transactions

(gain on sale

loans, prepayment

penalties, title

income) between periods.

Net Interest Income

61 unchanged sentences

costs of liabilities for the periods indicated (dollars in

Three Months Ended September 30,

Three Months Ended March 31,

Interest-earning assets:

21 unchanged sentences

to calculate yields/rates.

Average loan balances include non-accrual loans.

Interest income

on loans includes accretion of deferred loan

fees, net of deferred loan costs.

Average loan balances include

deferred fees/costs and non-accrual loans.

Interest income on loans includes accretion of

deferred loan fees, net of

deferred loan costs.

At fair value except for securities held to maturity.

5 unchanged sentences

income to average total interest-earning assets.

USCB Financial Holdings, Inc.

Q3 2024 Form 10-Q

Nine Months Ended September 30,

Interest-earning assets:

Investment securities

Other interest-earnings assets

Total interest-earning assets

Non-interest earning assets

Liabilities and stockholders' equity

Interest-bearing liabilities:

Interest-bearing checking

Money market and savings accounts

Time deposits

Total interest-bearing deposits

Borrowings and repurchase agreements

Total interest-bearing liabilities

Non-interest bearing demand deposits

Other non-interest-bearing liabilities

Total liabilities

Stockholders' equity

Total liabilities and stockholders' equity

Net interest income

Net interest spread

Net interest margin

Average balances - Daily average balances are used

to calculate yields/rates.

Average loan balances include non-accrual loans.

Interest income

on loans includes accretion of deferred loan fees,

net of deferred loan costs.

At fair value except for securities held to maturity.

This amount includes

Net interest spread is the weighted average

yield on total interest-earning assets minus the weighted

average rate on total interest-bearing

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,

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.

and interest-bearing

liabilities both

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

months ended September

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%

Three months ended March 31, 2025 compared to the three months ended

March 31, 2024

Net interest income before the provision for

credit losses was $19.1 million for the

three months ended March 31, 2025,

an increase of $4.0 million

or 26.1%, from $15.2 million

for the same period in

liabilities both

assets balance

was greater than that of interest-bearing liabilities.

the effect of the increase in yields

resulted in a NIM expansion

of 3 bps between periods.

USCB Financial Holdings, Inc.

Q3 2024 Form 10-Q

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

3.10% for the

three months ended

March 31, 2025

and 2.62% for

the same period

NIM expansion

points was due

yields and the

average balance of

interest-earning

assets, and also a decrease on rates paid on interest-bearing

liabilities between periods.

Provision for Credit Losses

15 unchanged sentences

and net charge-offs.

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

ended September 30, 2023

Three months ended March 31, 2025 compared to the three months ended

March 31, 2024

USCB Financial Holdings, Inc.

Q1 2025 Form 10-Q

The provision

$681 thousand

ended September 30,

2024 compared

loan portfolio

primary driver

of the increase

in the provision

expense during the three months ended September 30,

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

ended September 30, 2023

September 30,

loan portfolio

primary driver

of the increase

in the provision

expense during the nine months ended September 30, 2024.

ended March 31, 2025

$410 thousand

portfolio was

provision expense,

and to a lesser degree the

slight deterioration in the economic

forecast under the CECL methodology

to calculate the ACL

during the three months ended March 31, 2025.

Non-Interest Income

1 unchanged sentence

We also generate

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

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

income from gain

loans though our

SBA loan programs.

addition, we own

and are beneficiaries

surrender values.

The following table presents the components of non-interest

income for the dates indicated (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

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

Three Months Ended March 31,

Gain on sale of loans held for sale, net

1 unchanged sentence

non-interest income

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

ended September 30, 2023

Non-interest income

ended September 30,

2024 increased

$3.4 million,

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

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.

USCB Financial Holdings, Inc.

Q3 2024 Form 10-Q

Three months ended March 31, 2025 compared to the three months ended

March 31, 2024

reported under service

fees category combined with

an increase in the

gain on sale of

of loans during

the first quarter of 2025 was greater than the first quarter

of 2024 due to higher loan amounts in new SBA 7a loans.

Non-Interest Expense

1 unchanged sentence

expense for the dates indicated (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Salaries and employee benefits

4 unchanged sentences

non-interest expense

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

was primarily

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

Three months ended March 31, 2025 compared to the three months ended

March 31, 2024

Non-interest expense for the three

months ended March 31, 2025

increased $878 thousand or 7.9%,

compared to the

was primarily

employee benefits

sales incentives,

bonus accrual

the Company’s

Other operating expenses increased due to

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

due to merit increases, management

bonuses, stock-based compensation expense,

and an increase in payroll

taxes for the

first quarter 2025.

Provision for Income Tax

14 unchanged sentences

elements in determining our effective tax rate.

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

ended September 30, 2023

ended September

same period in 2023.

The effective tax rate

for the three months ended

September 30, 2024 was 24.2% compared to

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

ended September 30, 2023

Three months ended March 31, 2025 compared to the three months ended

March 31, 2024

Income tax expense

nine months ended

September 30, 2024

for the three

March 31, 2025

was $2.4 million

as compared to

effective tax

September 30,

24.0% compared

24.4% for the same period in 2023.

same period in 2024.

The effective tax rate for the three months ended

March 31, 2025 was 24.2% compared to 23.6% for

the same period in 2024.

USCB Financial Holdings, Inc.

Q1 2025 Form 10-Q

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

Analysis of Financial Condition

September 30, 2024

$164.9 million,

annualized, over

$2.34 billion

at December 31,

fees/costs, increased

$150.5 million,

September 30,

assets at March 31, 2025 were $2.68

billion, an increase of $96.2

million, or 15.1% annualized, over

of $2.58 billion at

December 31, 2024.

USCB Financial Holdings, Inc.

Q3 2024 Form 10-Q

Total loans, net of deferred fees/costs, increased

$63.4 million, or 13.0% annualized,

March 31, 2025

million, or 25.3% annualized, to $2.31 billion at March

31, 2025 compared to $2.17 billion December 31, 2024.

Investment Securities

9 unchanged sentences

profitability

consideration the Company’s

risk appetite and

consideration the

Company’s risk

tolerance, manage

the asset composition

and diversification,

composition and

diversification, and

adequate risk-based capital ratios.

13 unchanged sentences

sources) and all available sources of credit.

Our investment portfolio consists

primarily of securities issued

government-sponsored agencies,

mortgage-backed securities,

collateralized mortgage

obligation securities,

corporate securities,

securities, and

municipal securities all

with varying contractual

maturities and coupons.

the optionality embedded

in these securities,

the final maturities do not

necessarily represent the expected

life of the portfolio.

of these securities will

paid down prior

to maturity depending

on capital market

Our investment portfolio consists primarily of

securities issued by the U.S.

Government and U.S.

Government Agencies

mortgage-backed

collateralized

contractual maturities do not necessarily represent the

expected life of the portfolio.

Some of these securities

will be called

prior to maturity

depending on capital market

conditions and expectations.

The investment portfolio

investment portfolio is

reviewed by the Chief Financial Officer,

18 unchanged sentences

of this evaluation, the Company concluded that no allowance

was required on AFS securities as of September

was required on AFS securities as of March

mortgage-backed

The remaining

in investment

corporate bonds.

The required reserve for these holdings is

determined each quarter using the model described above.

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

as HTM represents amortized cost less ACL.

HTM investment

securities increased

$22.2 million, or

7.3% annualized,

to $426.5 million

at September 30,

explicit and/or

holds no reserves

on these holdings.

The remaining portion

portfolio is made

million in investment

For the portion of the HTM

exposed to non-government credit risk,

the Company utilized the PD/LGD

allowance for

classified as HTM represents amortized cost less ACL.

AFS and HTM investment securities increased $12.0 million,

annualized, to $436.9 million at March 31, 2025

from $424.9 million at December 31, 2024.

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

Company’s balance sheet

duration according to

the ALM policy.

of September 30, 2024,

investment securities

of $69.7 million

public deposits.

The investment

portfolio does

tax-exempt securities.

securities increased due to reinvestment of payments

investment of excess

balances into high

credit quality investments

to increase the

Company’s profitability and

March 31, 2025,

$51.1 million

exempt securities.

USCB Financial Holdings, Inc.

Q1 2025 Form 10-Q

September 30, 2024

The following table

presents the amortized

cost and fair

value of investment

securities for

the dates indicated

in thousands):

March 31, 2025

December 31, 2024

19 unchanged sentences

for investment

as of September 30, 2024 (in thousands,

except yields):

as of March 31, 2025 (in thousands, except yields):

Within 1 year

36 unchanged sentences

as of the dates indicated (in thousands):

September 30, 2024

March 31, 2025

December 31, 2024

7 unchanged sentences

Allowance for credit losses

$150.5 million,

September 30, 2024

December 31, 2023.

The residential

most significant

fees/costs, increased

by $63.4 million,

annualized to

$2.04 billion,

2025 compared to December 31, 2024.

The correspondent

banks loan segment had the most significant growth

approximately 56.7%

loan portfolio

September 30, 2024.

March 31, 2025.

growth strategy

since inception

has been reflective of the market in which we operate and

been reflective of the market in which we operate and

of our strategic plan as approved by the Board.

17 unchanged sentences

or unexpected

September 30, 2024 (in thousands):

The following table shows maturities and sensitivity to interest rate changes of the loan portfolio at March 31,

2025 (in thousands):

Due in 1 year or

25 unchanged sentences

/rate modifications are discussed as well.

As of September 30,

March 31, 2025,

approximately 57.6%

of the loans have

adjustable/variable rates and

adjustable/variable rates

The adjustable/variable

63 unchanged sentences

as follows for the dates indicated (in thousands):

September 30, 2024

March 31, 2025

Special Mention

17 unchanged sentences

except ratios):

September 30, 2024

March 31, 2025

December 31, 2024

52 unchanged sentences

Allowance for Credit Losses

expected future credit losses on outstanding loans.

Additionally,

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.

qualitative adjustments are made to the ACL when, based

calculations.

See Note 3 “Loans” in Item 1 of Part 1 of

this Form 10-Q for more information on the ACL.

USCB Financial Holdings, Inc.

Q1 2025 Form 10-Q

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

type for the periods indicated (in thousands):

Correspondent

Three Months Ended September 30,

Beginning balance

Provision for credit losses

Ending Balance

Average loans

Net charge-offs to average loans

Nine Months Ended September 30, 2024

Beginning balance

Provision for credit losses

Ending Balance

Average loans

Net charge-offs to average loans

(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.

The following

table presents

net charge-offs

indicated (in

Correspondent

Three Months Ended September 30,

Three Months Ended March 31, 2025

Beginning balance

2 unchanged sentences

Average loans

Net charge-offs to average loans

Nine Months Ended September 30, 2023

Net charge-offs (recoveries) to average

Three Months Ended March 31, 2024

Beginning balance

Cumulative effect of adoption of accounting

Provision for credit losses

1 unchanged sentence

Average loans

Net charge-offs to average loans

(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.

Net charge-offs (recoveries) to average

(1) Provision for credit losses excludes a $10 thousand expense due to unfunded commitments included in accrued interest and other

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

(2) Provision for credit losses excludes a $43 thousand expense due to unfunded commitments included in accrued interest and other

liabilities and a $4 thousand charge related to investment securities held to maturity.

(3) Annualized.

deterioration

deterioration in

national housing

Company continued

loan portfolio

housing prices

factor scorecard was updated based on the latest portfolio stress

test and the resulting maximum loss calculation.

included residential

potential impact

in qualitative

factors related

a sensitivity

in calculating

expected losses on the residential loan segment.

As of March 31,

2025, for every 100 basis points increase in the HPI, the

approximately

everything else being

This sensitivity

analysis provides a

hypothetical result to

assess the sensitivity

and does not represent a change in management’s

As of March 31,

2025, we stress tested two

qualitative factors in our commercial

real estate loan pool,

our portfolio.

the qualitative

measure the sensitivity

of the qualitative

resulted in a $10.2

million or 41.0%

This sensitivity

analysis provides

a hypothetical

sensitivity of

not represent a change in management’s judgement.

Bank-Owned Life Insurance

As of March 31, 2025, the combined cash surrender value of all bank-owned life insurance (“BOLI”) policies was

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

The Company has BOLI policies with five insurance carriers.

The Company is the beneficiary of these policies.

USCB Financial Holdings, Inc.

Q1 2025 Form 10-Q

Bank-Owned Life Insurance

As of September 30,

2024, the combined

cash surrender

bank-owned life

insurance (“BOLI”)

Statements of Operations.

The Company had BOLI policies with five insurance carriers.

The Company is the beneficiary of

these policies.

Customer deposits are the

15 unchanged sentences

presented (in thousands, except ratios):

Three Months Ended September 30,

Three Months Ended March 31,

Average Balance

8 unchanged sentences

collateralized)

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

estimated average

account size of

our deposit portfolio

was approximately

$104 thousand

of September 30, 2024.

accounts at the Company

deposits balance at March 31, 2025 was $178.0 million

and $133.0 million at December 31, 2024.

has approximately

deposit accounts

approximately

approximately $112

thousand as of March 31, 2025.

The uninsured deposits are estimated based on

the FDIC deposit insurance limit of $250 thousand

per account holder

The total estimated amount

of uninsured deposits was

56% at September 30,

at September 30, 2023.

The Company offers Insured

Cash Sweep (“ICS”)

and Certificate of

for all deposit accounts at the Company.

The total estimated percentage of uninsured deposits was 54% at March 31, 2025

Deposit Account

Registry Service (“CDARS”) deposit products

to fully insure our clients.

deposit balance in ICS/CDARS at

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

million at December 31, 2023.

Registry Service

deposit products

deposit balance

million at March 31, 2025 and $125.5 million at December

The following table shows scheduled maturities of uninsured

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

September 30, 2024

time deposits as of March 31, 2025 (in thousands):

March 31, 2025

Three months or less

9 unchanged sentences

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.

USCB Financial Holdings, Inc.

Q3 2024 Form 10-Q

accessibility of additional

As of March 31, 2025, escrow balances totaled $13.5

million compared to $6.1 million at December 31, 2024.

accessibility to additional

funding allows us

4 unchanged sentences

and collateral needs without adversely affecting

either daily operations or the financial condition

of the Company.

September 30, 2024,

fixed-rate advances

outstanding from

average rate of 3.47%.

Maturity dates for the advances

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

either daily operations or the financial condition of the

As of March 31,

$108.0 million of

fixed-rate advances outstanding

from the FHLB

with a weighted

rate of 3.60%.

Maturity dates for the advances range

between 2025 to 2028 as detailed in the table below.

USCB Financial Holdings, Inc.

Q1 2025 Form 10-Q

The following table presents the FHLB advances as of

September 30, 2024 (in thousands):

March 31, 2025 (in thousands):

Interest Rate

Maturity Date

March 27, 2025

July 18, 2025

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correspondent

September 30, 2024, there were no outstanding balances

with any of these liquidity sources.

March 31, 2025, there were no outstanding balances with

any of these liquidity sources.

Off-Balance Sheet Arrangements

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these commitments;

liabilities on the unaudited Consolidated Balance Sheets.

we maintain an allowance

for off-balance sheet

credit risk which is

recorded under accrued

interest and other liabilities

on the unaudited Consolidated

Balance Sheets.

ACL related to unfunded

commitments at

March 31, 2025 was $581 thousand and at March 31, 2024 was

$415 thousand.

Since commitments associated with letters of

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commitments outstanding as of the dates indicated (in thousands

September 30, 2024

March 31, 2025

December 31, 2024

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from the client

USCB Financial Holdings, Inc.

Q3 2024 Form 10-Q

the underlying collateral,

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authority and responsibility in a timely manner.

USCB Financial Holdings, Inc.

Q1 2025 Form 10-Q

establishment,

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Market and Interest Rate Risk Management

asset sensitive

balance sheet

two modeling,

static modeling.

According to our ALCO model, as of March

31, 2025, we had a neutral to slightly asset

sensitive balance sheet both for

asset sensitivity

balance sheet

sensitivity indicates

assets generally

Liability sensitivity indicates that our liabilities generally reprice faster

than our assets, which results in a

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.

reprice faster

liabilities, which

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

rate variations

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

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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

under interest

scenarios (an

impact of rates variations will be minimal

Additionally,

utilizing an EVE approach, we analyze

the risk to capital

According to our model, as of March 31, 2025, our balance sheet is neutral to slightly asset sensitive

for year one more

asset sensitivity and year two

under interest static rate scenarios (an

increase or decrease of 400 basis

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

various interest rate

scenarios through

a long-term discounted

cash flow model.

This measures

the difference between

the economic value of

our assets and the

economic value of

our liabilities, which is

a proxy for our

liquidation value.

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interest rates will have a

negative impact on the EVE and

lower rates, a positive impact.

negative impact on the EVE

and lower rates, a positive

Results and analysis are presented

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

USCB Financial Holdings, Inc.

Q3 2024 Form 10-Q

Liquidity is defined

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and off-balance sheet obligations.

USCB Financial Holdings, Inc.

Q1 2025 Form 10-Q

monitors situations

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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

cybersecurity risk,

an unexpected

the Company’s

liquidity risk

the assessment of liquidity and the ALM framework.

pledging assets and contingent liquidity events.

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

cybersecurity risk and

assessment of liquidity and the ALM framework.

Management has established

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oversight by the

Board and active

involvement of senior

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

activities of

active management

liquidity and

appropriately diverse

active involvement

strategies, policies,

comprehensive

funding plans

that sufficiently address

potential adverse liquidity

events and emergency

complexity and business activities of the Company;

active management of intraday liquidity and collateral;

an appropriately

and potential

future funding

highly liquid

marketable securities

legal, regulatory, or operational impediments,

liquidity needs in

stressful situations;

comprehensive

requirements;

institution’s

repayment and maturity of

loans and investment security cash

Other potential funding

sources include Federal Funds

adequate to fund loans and meet other cash needs as

USCB Financial Holdings, Inc.

Q3 2024 Form 10-Q

liquidity risk management process.

repayment and maturity

the investment

portfolio cash flows.

Other potential

funding sources

include Federal

Funds purchased,

deposit, unsecured

other banking institutions

and draws from the

Federal Reserve Bank

of Atlanta discount

borrowings from the

Accordingly, we believe our liquidity resources are adequate

to fund loans and meet

other cash needs as necessary.

Capital Adequacy

September 30,

well capitalized

March 31, 2025,

prompt corrective

action framework.

also follow the capital conservation buffer framework, and

as of September 30, 2024, we exceeded the

capital conversation

all capital ratios,

our actual ratios.

The following table

presents the capital

dates indicated (in thousands,

except ratios).

follow the capital conservation buffer framework, and as of March 31, 2025, we exceeded the capital conversation buffer

indicated (in thousands, except ratios).

Minimum Capital

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Action Provisions

September 30, 2024

March 31, 2025

risk-based capital

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of historical dollars, without considering

the changes in the

relative purchasing power

of money over time

USCB Financial Holdings, Inc.

Q1 2025 Form 10-Q

the changes in the relative purchasing power of money over time

due to inflation.

impact of inflation is

reflected in the

increased cost of operations.

Unlike most industrial companies,

nearly all our assets and

liabilities are monetary in

interest rates have a

greater impact on our

performance than do the

effects of general levels

of inflation.

of high inflation

are often accompanied

by relatively higher

interest rates, and

periods of low

inflation are accompanied

relatively lower interest rates.

The impact of inflation is mostly reflected

in the increased cost

of operations, inflation

can negatively impact

overhead expenses.

most industrial companies,

performance than the effects of inflation.

Periods of high inflation are often accompanied

by relatively higher interest rates,

and periods of low inflation are accompanied by relatively

lower interest rates.

Recently Issued Accounting Pronouncements

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis