What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-05-08 compared with 2025-11-07 · 508 added, 727 removed, 1057 unchanged (54% 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, 2025.

This discussion

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

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 (“2024

K”) filed with the Securities and Exchange Commission

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

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, 2025.

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

20 unchanged sentences

the Securities Exchange Act

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

“should,” “would,” “believe,”

“contemplate,” “expect,” “aim,”

“estimate,” “continue,”

and “intend,”

similar words

and expressions

forward-looking

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

“would,” “believe,” “contemplate,” “expect,”

“aim,” “plan,”

“estimate,” “seek,”

“continue,” and

other similar

expressions of

identify forward-looking statements.

These forward-looking statements

include statements related to

our projected growth,

anticipated future

9 unchanged sentences

events, or business

and growth strategies, including anticipated internal

growth and potential balance sheet restructuring.

and growth strategies, including anticipated internal growth

and potential future additional balance sheet restructuring.

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

44 unchanged sentences

retaliatory tariffs, and trade restrictions;

the effects of

the current federal

government shutdown, including,

but not limited

to, the ability

to sell Small

Administration loans;

the impacts of international hostilities and geopolitical events;

5 unchanged sentences

the loss of key employees;

USCB Financial Holdings, Inc.

Q3 2025 Form 10-Q

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

employee, or third-party fraud and security breaches;

USCB Financial Holdings, Inc.

Q1 2026 Form 10-Q

other risks described in this Form 10-Q, the 2025 Form

20 unchanged sentences

the Company has filed or will file with the SEC.

ended September 30,

For nine months

ended September 30,

2025, the Company

reported net income

of $24.7 million

or $1.23 per diluted

share of common stock

compared to $17.8 million

or $0.90 per diluted

share of common stock

nine months ended September 30, 2024.

ended March 31,

2026 compared

diluted share

March 31, 2025.

In evaluating our financial

3 unchanged sentences

interest income, the

of non-interest

expense, performance ratios,

4 unchanged sentences

bullet points

calculated at

March 31, 2026

quarter ended

September 30,

annualized where appropriate:

months ended September

increased $3.2 million

to $21.3 million

from $18.1 million for the quarter ended September

margin (“NIM”) expanded

three months ended

September 30, 2025

compared to 3.03%

for the three months ended September 30, 2024.

September 30,

2025, representing

September 30,

2024 and an increase of $186.7 million or 9.7%

annualized from December 31, 2024.

Total loans held

for investment (net

of deferred cost/fees)

were $2.13 billion

at September 30,

2025, representing

annualized from December 31, 2024.

Total deposits were $2.46 billion at September

30, 2025, representing an increase of $329.0

million or 15.5% from

September 30,

2024 and an increase of $281.6 million or 17.3%

and annualized

where appropriate:

income before

provision for

credit losses

for the three

March 31, 2026

increased $2.9

million or 15.3% to $22.0 million from $19.1 million for the

quarter ended March 31, 2025.

Net interest margin (“NIM”) expanded to 3.27% for the three months ended March 31, 2026 compared to 3.10% for

the three months ended March 31, 2025.

March 31, 2026,

representing an

$168.4 million

from March 31,

2025 and an increase of $54.2 million or 7.9% annualized from

December 31, 2025.

investment (net

March 31, 2026,

increase of $204.8 million or 10.1% from March 31, 2025 and an increase of $51.8 million or 9.6% annualized from

December 31, 2025.

March 31, 2025 and an increase of $148.5 million or

25.7% annualized from December 31, 2025.

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

1.27% compared to 1.11% for

the quarter ended September 30, 2024.

stockholders’

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

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

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

Annualized return on average assets for the quarter

ended March 31, 2026 was 1.34% compared to

1.19% for the

quarter ended March 31, 2025.

Annualized return on average stockholders’ equity for the quarter ended March 31, 2026 was 17.07% compared to

14.15% for quarter ended March 31, 2025.

The ACL to total loans was 1.16% at March 31, 2026 and at December 31, 2025.

Non-performing loans to total loans was 0.16% at March

31, 2026 and 0.14% at December 31, 2025.

At September 30, 2025, the total

risk-based capital ratios

for the Company and

the Bank were 14.20% and

-based capital

respectively.

Tangible book value per

common share (a

non-GAAP measure) was $11.55

at September 30,

2025, representing

an increase of $0.74 or

9.1% annualized from $10.81 at December

At September 30, 2025, tangible

value per common

Tangible book

March 31, 2026,

representing an

increase of $1.00 or

8.9% annualized from

$11.23 at March

At March 31, 2026,

tangible book value

common share was

negatively affected by

($1.72) due to

an accumulated

an accumulated comprehensive

loss of $31.4

March 31, 2025, tangible book value per common share was negatively affected by ($2.05) due to an accumulated

comprehensive loss

31, 2024, tangible

negatively affected

“Reconciliation

and Management

Explanation for

Non-GAAP Financial

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

of this non-GAAP financial measure.

USCB Financial Holdings, Inc.

Q1 2026 Form 10-Q

an accumulated

comprehensive loss

“Reconciliation and

Management Explanation

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

of this non-GAAP financial measure.

On August 14,

Company entered

Subordinated Note

Purchase Agreement

institutional buyers pursuant to which the

Company sold and issued $40.0 million

in aggregate principal amount of

fixed-to-floating rate

subordinated notes

due August 15,

placement transaction.

transaction was

conducted under

the provisions

of Regulation

D promulgated

Securities Act 1933.

subordinated notes were issued by

the Company to the

purchasers at a price equal

to 100% of their face

The majority of

the net proceeds

repurchase 2.0 million

shares of Class

common stock in

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

The aggregate

these transactions

approximately

$34.4 million.

Critical Accounting Policies and Estimates

7 unchanged sentences

of Significant Accounting

the Company’s 2024 Form

10-K and “Summary of Significant

Accounting Policies” in Part I

in this Form 10-Q .

financial statements

in conformity

management makes

the Company’s 2025

Form 10-K and

“Summary of Significant

Accounting Policies”

this Form 10-Q.

judgments based

estimates, assumptions,

and judgments

available information.

amounts reported

the consolidated financial

statements and accompanying

These estimates,

assumptions, and judgments affect

the amounts reported in

the financial statements

and accompanying notes.

These estimates, assumptions,

and judgments are based on information available as of the date

of the financial statements and,

as this information changes, actual results

could differ from the estimates, assumptions and

judgments reflected

financial statements.

In particular,

has identified

assumptions, and judgments

on information

the financial

statements and,

information changes,

actual results

management has

identified accounting

policies that,

the estimates,

assumptions and

judgments inherent

understanding

Management has

presented the application

of these policies to

the Audit and

Risk Committee of

application of these policies to the Audit and Risk Committee of

our Board of Directors.

Non-GAAP Financial Measures

32 unchanged sentences

reportable operating

USCB Financial Holdings, Inc.

Q3 2025 Form 10-Q

Results of Operations

3 unchanged sentences

indicated (in thousands, except ratios):

September 30, 2025

March 31, 2026

December 31, 2025

2 unchanged sentences

Loan amounts include deferred fees/costs.

Three Months Ended

September 30,

Nine Months Ended

September 30,

USCB Financial Holdings, Inc.

Q1 2026 Form 10-Q

Three Months Ended March 31,

Consolidated Statements of Operations:

13 unchanged sentences

expense, and the provision for income taxes.

Three months ended September 30, 2025 compared to the

three months ended September 30, 2024.

Net income increased $2.0 million to $8.9

million for the three months ended September

30, 2025 from $6.9 million for

the same period in

The $2.0 million

or 28.6% increase

in net income was

primarily driven by

an improvement in

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

between periods and a decrease in provision for

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

Nine months ended September 30, 2025 compared to

the nine months ended September 30, 2024

increased $7.0

$24.7 million

ended September 30,

for the same period in 2024.

million or 39.2% increase in the net income

was primarily driven by an improvement

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

However, the increase in

in non-interest

Additionally,

contributed to the increase between periods.

Three months ended March 31, 2026 compared to the three

months ended March 31, 2025

Net income increased

$1.7 million to

$9.4 million for the

three months ended

March 31, 2026

from $7.7 million

primarily driven

larger loan portfolio combined with a reduction

on rates paid of interest-bearing liabilities

between periods.

The increase in

net interest income was partially offset by an increase in

non-interest expense between periods.

Net Interest Income

11 unchanged sentences

interest-earning

interest-bearing

incurred from interest paid on interest-bearing liabilities, including interest

-bearing deposits, FHLB advances,

debt, and other borrowings.

To evaluate net

15 unchanged sentences

non-interest-

USCB Financial Holdings, Inc.

Q3 2025 Form 10-Q

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

and stockholders’ equity, also fund

interest-earning assets,

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

26 unchanged sentences

costs of liabilities for the periods indicated (dollars in

Three 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 demand deposits

Saving and money market deposits

Time deposits

Total interest-bearing deposits

FHLB advances and other borrowings

Subordinated notes

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

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.

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 liabilities.

Net interest margin is the ratio of net interest

income to average total interest-earning assets.

USCB Financial Holdings, Inc.

Q3 2025 Form 10-Q

Nine Months Ended September 30,

Three Months Ended March 31,

Interest-earning assets:

31 unchanged sentences

yield on total interest-earning assets minus the weighted

average rate on total interest-bearing

average rate on total interest-bearing liabilities.

Net interest margin is the ratio of net interest

income to average total interest-earning assets.

Three months ended September 30, 2025 compared to the

three months ended September 30, 2024.

Net interest income before the provision

for credit losses was $21.3

million for the three months

ended September 30,

2025 as compared to $18.1 million for the same period 2024.

The increase of $3.2 million or 17.5% was primarily driven by

interest-bearing

Net interest margin (“NIM”) was 3.14%

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

for the same period

11-basis-point

increase primarily

interest-bearing

that outweighed

interest-bearing

Additionally,

interest-bearing

assets grew more rapidly than the balance of interest-bearing

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

ended September 30, 2024

Net interest income

before the provision

for credit losses

was $61.4 million

months ended September

2025, an increase

of $10.8 million

or 21.4%, from

$50.6 million for

the same period

growth was primarily

by higher income

from an expanded

loan portfolio

and a reduction

in the weighted

average rates

paid on interest

liabilities between periods.

The NIM was 3.17% for the nine months

ended September 30, 2025 and 2.87% for

the same period in 2024.

expansion of 30 basis points reflects both

higher loan yields and growth in the loan average

balance, along with a decrease

in interest rate paid on interest-bearing liabilities.

USCB Financial Holdings, Inc.

Q3 2025 Form 10-Q

Three months ended March 31, 2026 compared to the three months

ended March 31, 2025

Net interest income before the provision for

credit losses was $22.0 million for the

three months ended March 31, 2026,

$19.1 million

primarily driven

higher income from a

larger loan portfolio

and a reduction in

the weighted average

rates paid on interest-bearing

between periods.

expansion of 17 basis

points reflects primarily

the increase in the

loan portfolio average balance

along with a decrease

the weighted average interest rate paid on interest-bearing

liabilities, particularly in savings and money market deposits.

Provision for Credit Losses

10 unchanged sentences

portfolios and net charge-offs.

Three months ended September 30, 2025 compared to the

three months ended September 30, 2024.

The provision

$105 thousand

ended September

significant decrease

primarily attributable

loan portfolio growth during the third quarter of 2025.

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

ended September 30, 2024

The provision for credit loss was

$1.8 million for the nine months

ended September 30, 2025 compared

to $2.1 million

individually evaluated loans, following two charge-offs

recorded during the nine months ended September

USCB Financial Holdings, Inc.

Q1 2026 Form 10-Q

Three months ended March 31, 2026 compared to the three months

ended March 31, 2025

thousand for the same period in 2025.

The increase in the provision

for credit losses was due to loan portfolio growth.

Non-Interest Income

1 unchanged sentence

We also generate

the monetization

income from gain on

sale of loans though

the SBA 7a loan program

and the monetization

of fees earned through

swap program.

beneficiaries of

insurance policies

policies generate income from the increase in the cash

surrender values.

addition, we own

and are beneficiaries

life insurance policies

covering certain of

our key employees,

which policies generate income from the increase in the

cash surrender values.

The following table presents the components of non-interest

income for the dates indicated (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

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

income for the periods indicated (in thousands):

Three Months Ended March 31,

Gain on sale of securities available for sale, net

Gain on sale of loans held for sale, net

1 unchanged sentence

non-interest income

Three months ended September 30, 2025 compared to the

three months ended September 30, 2024.

Three months ended March 31, 2026 compared to the three months

ended March 31, 2025

Non-interest income for the

three months ended September

three months ended March

31, 2026 increased $434

thousand or 7.2%, compared

fees category

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

ended September 30, 2024

Non-interest income for the nine months ended September

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

reported under

fees category

combined with

bank owned life insurance reported under other non-interest

USCB Financial Holdings, Inc.

Q3 2025 Form 10-Q

thousand or 11.7%, compared to

same period in 2025.

This increase

was primarily driven by $1.5 million increase in income

generated by the Company loan

swap program reported under service fees in the Consolidated

Statements of Operations.

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, 2025 compared to the

three months ended September 30, 2024.

Non-interest expense for the three

months ended September 30, 2025,

increased $1.6 million, or 13.9%,

reflecting merit increases,

new hires and

higher stock-based compensation

and legal fees

$424 thousand due to

the administration expense

related to the interest

rate collars and the

third quarter of 2024

reimbursement,

and contributed

the year-over-year

Additionally,

other operating

expense increased

Three months ended March 31, 2026 compared to the three months ended

March 31, 2025

Non-interest expense

increased $1.7

13.8%, compared

same period in 2025.

The increase was primarily driven by

an increase of $934

thousand in salaries and employee

payroll taxes,

addition, consulting

increased $368

primarily due

a reimbursement

force-placed insurance that was

received in the third quarter

These prior-period reimbursements

had the effect of

lowering reported expenses, making the current period’s

expenses appear higher by comparison.

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

ended September 30, 2024

Non-interest expense for the nine

months ended September 30, 2025 increased $3.5 million

or 10.4%, compared to the

was primarily

employee benefits

increase of $1.0

million in merit

increases and new

full-time employee

salaries, and

$1.5 million in

compensation expenses.

Additionally, other operating

expenses increased $744

thousand due to

increase of $276

shareholders expense and $103 thousand in forced placed insurance.

validation-related consulting

human resources

insurance expense and $183 thousand increase in promotional

expenses between periods.

Provision for Income Tax

14 unchanged sentences

elements in determining our effective tax rate.

Three months ended September 30, 2025 compared to the

three months ended September 30, 2024.

Income tax expense for the

three months ended September

30, 2025 was $2.9

million as compared to

$2.2 million for

the same period

reflected the increased

level of pre-tax

net income experienced

during the 2025

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

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

ended September 30, 2024

USCB Financial Holdings, Inc.

Q1 2026 Form 10-Q

Three months ended March 31, 2026 compared to the three months ended

March 31, 2025

Income tax expense

nine months ended

September 30, 2025

for the three

March 31, 2026

was $2.3 million

1 unchanged sentence

$2.4 million for

the same period in 2024 and

reflected the substantially increased

level of pre-tax net income

experienced during the 2025

Company recognized

a non-recurring

$619 thousand

2026 due to an

adjustment to the deferred tax

asset calculation from December 31,

The effective

the nine months

ended September 30, 2025

was 24.22% compared to

23.98% for the

period in 2024.

tax rate for the

months ended March 31, 2026 was 19.98% compared to 24.16%

for the same period in 2025.

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

USCB Financial Holdings, Inc.

Q3 2025 Form 10-Q

Analysis of Financial Condition

September 30, 2025

$186.7 million,

annualized, over

$2.58 billion

at December 31,

fees/costs, increased

March 31, 2026

were $2.85 billion,

an increase of

$54.2 million,

September 30,

December 31, 2024.

or 7.9% annualized,

over total assets

of $2.79 billion at December 31, 2025.

loans, net of deferred fees/costs, increased $51.8 million, or 9.6% annualized,

March 31, 2026

million, or 25.7% annualized, to $2.49 billion at March

31, 2026 compared to $2.35 billion at December 31, 2025.

Investment Securities

46 unchanged sentences

profile as well as for adherence to the Company’s

investment policy.

investment policies.

When evaluating AFS

11 unchanged sentences

macro-economic

required on AFS securities as of September 30, 2025.

required on AFS securities as of March 31, 2026.

mortgage-backed

6 unchanged sentences

grade corporate

to non-government credit

Company utilized

methodology to

of September 30,

classified as

HTM represents amortized cost less ACL.

$55.6 million,

methodology and

considering the

short remaining

securities exposed to

government credit risk,

allowance for credit

securities classified

represents amortized

$34.3 million

September 30,

$427.1 million

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

investment securities to increase the

Company’s profitability and modify the Company

’s balance sheet duration according to the ALM

September 30,

investment securities

of $49.7 million

The investment portfolio does not contain any

tax-exempt securities.

$461.4 million at December 31, 2025.

The decrease was primarily attributable to $38.2 million

of AFS securities sold during

the quarter ended March 31, 2026.

USCB Financial Holdings, Inc.

Q1 2026 Form 10-Q

March 31, 2026, investment

securities with a

market value of

$55.1 million were pledged

to secure public

The investment portfolio does not contain any tax-exempt

The following table

5 unchanged sentences

in thousands):

September 30, 2025

March 31, 2026

December 31, 2025

19 unchanged sentences

for investment

as of September 30, 2025 (in thousands,

except yields):

as of March 31, 2026 (in thousands, except yields):

Within 1 year

36 unchanged sentences

as of the dates indicated (in thousands):

September 30, 2025

March 31, 2026

December 31, 2025

7 unchanged sentences

Allowance for credit losses

$158.1 million,

September 30, 2025 compared

to December 31, 2024.

The commercial real

estate loan segment

balance increase compared to December 31, 2024.

2026 compared to December 31, 2025.

The residential real estate loan segment had the most

significant balance increase

compared to December 31, 2025.

portfolio continues

with commercial

lending being

approximately 56.4%

loan portfolio

September 30, 2025.

March 31, 2026.

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.

10 unchanged sentences

or unexpected

September 30, 2025 (in thousands):

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

2026 (in thousands):

Due in 1 year or

25 unchanged sentences

/rate modifications are discussed as well.

September 30, 2025,

March 31, 2026,

approximately 63.1%

1 unchanged sentence

has adjustable/variable

loan portfolio has fixed rates.

The adjustable/variable rate loans re-price to different benchmarks and tenors and

adjustable/variable

periods of time.

By contractual characteristics,

material concentrations

on anniversary repricing.

Additionally,

it is important to

note that most

of our loans have

interest rate floors.

This embedded option

protects the Company from

decrease in interest rates below the floor and positions

us to gain in the scenario of higher interest rates.

By contractual characteristics, there are no

material concentrations on anniversary repricing.

USCB Financial Holdings, Inc.

46 unchanged sentences

as follows for the dates indicated (in thousands):

September 30, 2025

March 31, 2026

Special Mention

17 unchanged sentences

except ratios):

September 30, 2025

March 31, 2026

December 31, 2025

64 unchanged sentences

Correspondent

Three Months Ended September 30,

Beginning balance

Provision for credit losses

Ending Balance

Average loans

Net charge-offs (recoveries) to average

Nine Months Ended September 30,

Three Months Ended March 31, 2026

Beginning balance

3 unchanged sentences

Net charge-offs (recoveries) to average

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

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

(2) Annualized.

(1) Provision for credit losses excludes a $205 thousand provision due to unfunded commitments included in accrued interest and

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

USCB Financial Holdings, Inc.

Q3 2025 Form 10-Q

(2) Annualized.

Correspondent

Three Months Ended September 30,

Beginning balance

Provision for credit losses

Ending Balance

Average loans

Net charge-offs (recoveries) to average

Nine Months Ended September 30,

Three Months Ended March 31, 2025

Beginning balance

6 unchanged sentences

(2) Annualized.

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

in unemployment

(“HPI”) forecast reflected a

deterioration in national housing

The Company continued

to adjust the HPI index

on the 1-4 Family loan portfolio with a

qualitative factor because Florida housing

prices are performing better than national

USCB Financial Holdings, Inc.

Q1 2026 Form 10-Q

improvement in

the unemployment

Index (“HPI”) forecast reflected an improvement in national

housing prices.

The Company continued to adjust

the HPI index

portfolio with

a qualitative

factor because

Florida housing

performing better

national levels.

scorecard was

updated based

latest portfolio

resulting maximum

loss calculation.

included residential

5 unchanged sentences

expected losses on the residential loan segment.

of September 30, 2025, for every 100 basis

points increase in the HPI,

by approximately

As of March 31,

2026, for every 100 basis points increase in the HPI, the

approximately

everything else being

3 unchanged sentences

assess the sensitivity

and does not represent a change in management’s

As of September 30,

2025, we stress tested

two qualitative factors in

our commercial real estate

loan pool, as it

largest segment

evaluated the

qualitative factors

sensitivity of

the qualitative

risk resulted

35.5% increase in the ACL.

This sensitivity analysis provides

a hypothetical result to assess

the sensitivity of the ACL

does not represent a change in management’s judgement.

not represent

in management’s

comparative purposes,

stress tested

the commercial

loan subcategory

based on collateral

lien, commercial

property) rather

occupied subsegment.

As of March 31, 2026, the Company stress tested

two qualitative factors within the non

occupied subsegment of

loan portfolio,

allowance for credit losses (“ACL”).

stress resulted in a hypothetical increase

of $6.7 million, or 25.7%,

sensitivity analysis is intended solely to illustrate the responsiveness

of the ACL to changes in qualitative assumptions and

does not represent

management’s judgment.

For comparative purposes,

in prior periods

the Company stress

tested the commercial real estate loan subcategory based on collateral code (1st lien, commercial property) rather than the

occupied subsegment.

Bank-Owned Life Insurance

As of September 30,

2025, the combined

cash surrender

bank-owned life

insurance (“BOLI”)

$58.9 million.

cash surrender

other non-interest

the unaudited

As of March 31, 2026, the combined cash surrender value of all bank-owned life insurance (“BOLI”) policies was

Statements of Operations.

3 unchanged sentences

these policies.

USCB Financial Holdings, Inc.

Q3 2025 Form 10-Q

Customer deposits are the

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presented (in thousands, except ratios):

Three Months Ended September 30,

Three Months Ended March 31,

Average Balance

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Time deposits

granular deposit

portfolio with

outstanding balances

27% in personal

deposits, 6% in

public funds (which

are partially collateralized)

brokered deposits.

deposits balance at

September 30, 2025 was

$235.5 million and

$133.0 million at

December 31, 2024.

This increase was

primarily driven

aggregate notional

amount associated

costless collar

hedges executed

mitigating the impact of rate movements on future cash flows.

As of September 30,

2025, the Company

has approximately 21

thousand deposit accounts

with the majority

were personal accounts, approximately 13 thousand or 61.7%.

The estimated average account size in our deposit portfolio

was approximately $119

thousand as of September 30, 2025.

USCB Financial Holdings, Inc.

Q1 2026 Form 10-Q

The Company has a

granular deposit portfolio

with outstanding balances

comprised of 55.7% in

commercial deposits,

partially collateralized)

brokered deposits balance at March 31, 2026 was $215.0

million and $256.8 million at December 31, 2025.

As of March 31, 2026, the Company has approximately

21 thousand deposit accounts with the majority

personal accounts, approximately

12 thousand or 59.6%.

The estimated average account

size in our deposit

portfolio was

approximately $120 thousand as of March 31, 2026.

account holder for all deposit accounts at the Company.

The total estimated percentage of uninsured deposits

September 30,

Deposit Account

ICS/CDARS was $183.9 million at September 30, 2025 and

was $129.5 million at December 31, 2024.

ICS/CDARS was $186.5 million at March 31, 2026 and was

$183.2 million at December 31, 2025.

The following table shows scheduled maturities of uninsured

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

September 30, 2025

time deposits as of March 31, 2026 (in thousands):

March 31, 2026

Three months or less

Over three through six months

Over six though twelve months

Over six through twelve months

Over twelve months

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consolidated balance sheet.

As of September 30, 2025, escrow balances totaled

As of March 31, 2026, escrow balances totaled $15.4

million compared to $8.1 million at December 31, 2025.

The increase reflects the normal growth in escrow accounts

increase reflects the normal growth in escrow accounts

pending tax and insurance payments.

USCB Financial Holdings, Inc.

Q3 2025 Form 10-Q

FHLB Advances

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either daily operations or the financial condition of the

September 30,

of fixed-rate

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

As of March 31, 2026, we had

$11.0 million of fixed-rate advances and $42.0 million of daily-rate advances outstanding

respectively, as detailed

in the table below.

The following table presents the FHLB advances as of

September 30, 2025 (in thousands):

March 31, 2026 (in thousands):

March 31, 2026

Interest Rate

1 unchanged sentence

January 24, 2028

During the third

quarter 2024, the

Company paid off

the $80.0 million

fixed-rate loan outstanding

from the Bank

Funding Program with an original maturity date of January

correspondent

September 30, 2025, there were no outstanding balances

with any of these liquidity sources.

March 31, 2026, there were no outstanding balances with

any of these additional liquidity sources.

USCB Financial Holdings, Inc.

Q1 2026 Form 10-Q

Subordinated Notes

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the Company to the purchasers

at a price equal to

100% of their face amount.

subordinated debt was originally issued at a

cost of $760 thousand.

amortization,

recognition over the

The subordinated

notes are presented

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

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

at a price equal to 100% of their face amount.

The subordinated debt was originally issued at a cost of $760 thousand.

subordinated debt,

million, reflecting

scheduled expense

term of the instruments.

The subordinated notes

are presented net of

these costs on the

consolidated balance sheet.

registration requirements of the Securities Act of

1933, as amended (the “Securities Act”), pursuant

to Section 4(a)(2) of the

Securities Act and Rule 506(b) of Regulation D thereunder.

For additional information, see the Company Form

August 14, 2025.

Off-Balance Sheet Arrangements

7 unchanged sentences

credit, market,

amount recognized in

the balance sheet.

maintain an allowance

for off-balance sheet credit

risk which is

amount recognized in the consolidated balance sheets.

We maintain an allowance for off-balance

sheet credit risk which is

recorded under

commitments at

September 30,

$795 thousand

accrued interest

liabilities on

the unaudited

Balance Sheets.

unfunded commitments

at December 31,

$752 thousand.

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commitments outstanding as of the dates indicated (in thousands

September 30, 2025

March 31, 2026

December 31, 2025

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

USCB Financial Holdings, Inc.

Q3 2025 Form 10-Q

expire without being

51 unchanged sentences

monitor, and limit IRR exposures.

When assessing

the consolidated

balance sheet,

reduced earnings or outright losses could adversely affect

the Company’s liquidity,

performance, and capital adequacy.

USCB Financial Holdings, Inc.

Q1 2026 Form 10-Q

When assessing the

exposure and impact

consolidated balance sheet,

cash flows and

volatility and reduced

earnings or outright

losses could adversely

affect the Company’s

performance, and

Income simulations are

25 unchanged sentences

Market and Interest Rate Risk Management

liability sensitive

balance sheet

a neutral balance

year two, using

the static model.

Liability sensitivity indicates

that our liabilities

Asset sensitivity indicates that our assets

generally reprice faster than our liabilities,

which results in a favorable

result of changes in

interest rates.

assumptions are used to

calculate the impact

of interest rate

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

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

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

to increase asset sensitivity.

simulations indicate

Bank’s balance sheet remains liability

sensitive in Year 1, positioning the Bank to benefit in a declining rate environment as

liabilities reprice more

quickly than assets,

resulting in favorable

Net Interest Income

(NII) outcomes.

both models transition toward

sensitive posture, reflecting projected

sheet growth, continued variable

looking assumptions embedded in the dynamic model.

Bank’s relationship

driven deposit

variable rate

lending profile

Florida market.

Modeled NII and Economic Value of Equity (EVE) outcomes remain well within ALCO policy limits across all rate shock

incorporates a

of assumptions,

including asset

prepayment speeds,

correlations,

inherent estimation involved

in these assumptions,

actual results may

modeled outcomes, particularly

EVE sensitivity remains compliant with policy guidelines, with greater volatility observed in rising

rate scenarios, driven

environments,

particularly as loan prepayments slow, while certain funding sources reprice less immediately.

scenarios, faster prepayments and

quicker asset repricing

help mitigate downside EVE

Importantly, EVE volatility

declined quarter over quarter, reflecting balance

sheet actions taken during the period and an overall

reduction in structural

interest rate risk.

The improvement in the Bank’s

IRR profile was driven primarily by a

reduction in asset duration, while liability

repositioning contributed to a shorter effective

asset duration and reduced optionality risk.

rate scenarios

and favorable

positioning in

rate environment.

Management continues

sheet strategies as market conditions evolve.

and related strategies are reviewed quarterly

with ALCO and

adjusted as appropriate.

USCB Financial Holdings, Inc.

Q1 2026 Form 10-Q

According to our model, as of

September 30, 2025, our balance sheet is

liability sensitive for year one and

in year two under static interest rate scenarios

(an increase or decrease of 400 basis

Additionally,

utilizing an EVE

approach, we analyze

the risk to capital

from the effects

of various interest

rate scenarios through

a long-term discounted

cash flow model.

This measures

the difference

economic value

of our assets

and the economic

liabilities, which is

our liquidation value.

According to our

balance sheet composition, and

as expected, our

Results and analysis are presented quarterly to the ALCO,

and strategies are reviewed and defined.

Liquidity is defined

26 unchanged sentences

pledging assets and contingent liquidity events.

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

cybersecurity risk and

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

assessment of liquidity and the ALM framework.

3 unchanged sentences

identifying, measuring, monitoring

relationships,

integrated into our risk management processes, Contingency

21 unchanged sentences

liquidity risk management process.

repayment and maturity

the investment

portfolio cash

potential funding

sources include

Funds purchased, brokered certificates of deposit, listing services

certificates of deposit, unsecured Federal Funds lines of

credit with other

banking institutions and

draws from the

Federal Reserve Bank

of Atlanta Discount Window, and

our liquidity

needs as necessary.

repayment and maturity of loans and investment security

Other potential funding sources include

federal funds

purchased, brokered

certificates of

deposit, listing

certificates of

and borrowings

Accordingly, our liquidity resources were at sufficient levels to

fund loans and meet other

cash needs as necessary.

unpledged securities

HTM securities)

The Company had an

additional $457 million

in off-balance sheet liquidity, excluding access to brokered deposits and

other off-balance sheet sources of funding.

Management believes current liquidity levels remain appropriate relative

to the Bank’s risk appetite, balance sheet

and anticipated funding needs under both base case and stressed

USCB Financial Holdings, Inc.

1 unchanged sentence

Capital Adequacy

September 30,

well capitalized

March 31, 2026,

prompt corrective

action framework.

also follow the capital conservation buffer framework, and

as of September 30, 2025, we exceeded the

capital conversation

all capital ratios,

our actual ratios.

The following table

presents the capital

ratios for the

dates indicated (in thousands,

except ratios).

follow the capital conservation buffer framework, and as of March 31, 2026, we exceeded the capital conversation buffer

indicated (in thousands, except ratios).

Minimum Capital

2 unchanged sentences

Action Provisions

September 30, 2025

March 31, 2026

risk-based capital

17 unchanged sentences

of historical dollars, without considering

the changes in the relative purchasing power of money over time

due to inflation.

the changes in the relative purchasing power of money over

time due to inflation.

The impact of inflation is mostly reflected

in the increased cost of operations, inflation can negatively impact overhead expenses and other variable expenses.

in the increased cost of operations;

inflation can negatively impact overhead expenses and other variable

most industrial

2 unchanged sentences

Periods of high inflation are often accompanied by relatively

higher interest rates, and periods of low inflation are accompanied

by relatively lower interest rates.

Recently Issued Accounting Pronouncements

Recently issued accounting

pronouncements are discussed

in Note 1 “Summary

of Significant Accounting Policies”

the unaudited Consolidated Financial Statements in Part

1 of this Form 10-Q.

higher interest rates, and

periods of low inflation

are accompanied by relatively

lower interest rates.

may also influence customer

deposit behavior,

loan demand, and pricing

dynamics, which management

considers as part

of its ongoing balance

sheet and earnings planning processes.

USCB Financial Holdings, Inc.

28 unchanged sentences

Operating net income:

Net losses on sale of securities

Net gains (losses) on sale of securities

Tax effect on sale of securities

Tax (benefit) liability expense from prior periods

Operating net income

Operating PTPP income:

Net losses on sale of securities

Operating PTPP income

Operating PTPP return on average assets:

Operating PTPP income

Average assets

Operating PTPP return on average assets

Operating return on average assets:

9 unchanged sentences

Non-interest income

Net losses on sale of securities

Net gains (losses) on sale of

Operating revenue

6 unchanged sentences

of the Company.

(3) The Company recognized a $619 thousand

income tax benefit in first quarter of 2026 due

to an adjustment to the deferred tax asset calculation

(4) State tax liability expenses for 2024 and for

the first three quarters of 2025 were recognized

during the fourth quarter of 2025.

is related to taxes due on interest income on

loans whose collateral are located outside of

the State of Florida.

USCB Financial Holdings, Inc.

22 unchanged sentences

of the Company.

Since the Company has no intangible assets,

tangible stockholders’ equity and tangible total

assets are the same amounts as stockholders’ equity

and total assets, respectively, as calculated under GAAP.

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

of outstanding stock options.

(3) Since the Company has no intangible

assets, tangible stockholders’ equity and tangible

total assets are the same amounts as stockholders’

and total assets, respectively, as calculated under GAAP.

USCB Financial Holdings, Inc.

5 unchanged sentences

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