USCB FINANCIAL HOLDINGS, INC. (USCB)

Item 7.

Management's Discussion and Analysis of Financial Condition

and Results of Operations

Management’s

discussion

and

analysis

of

financial

condition

and

results

of

operations

analyzes

the

consolidated

financial condition and results of operations of the Company and

the Bank, its wholly owned subsidiary, for the years ended

December

31, 2024

and

2023. This

discussion

and

analysis

is best

read

in

conjunction

with

the

Consolidated

Financial

Statements and related

footnotes of the Company

presented in Item

8 “Financial Statements

and Supplementary Data”

of

this Annual Report on Form

10-K. In addition to

historical information, 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" of this Annual Report.

In this Annual Report on Form 10-K, unless the context indicated otherwise, references to “we,” “us,”, and “our” refer to

the Company and the Bank, as

the contest dictates. However, if

the discussion relates to a period

before the Effective Date,

the terms refer only to the Bank.

Table of Contents

55

USCB Financial Holdings, Inc.

2024 10-K

CAUTIONARY NOTE REGARDING FORWARD

-LOOKING STATEMENTS

This

Annual

Report

on

Form

10-K

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,”

“seek,” “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 related to

our projected growth, anticipated future financial performance, and management’s long-term performance goals, as well as

statements relating to

the anticipated effects

on results of

operations and financial

condition from expected

developments

or events, or business and growth strategies, including

anticipated internal growth and balance sheet restructuring.

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

materially from those anticipated in such statements.

Potential risks and uncertainties include, but are not

limited to:

•

the strength of the United States economy

in general and the strength of the local

economies in which we conduct

operations;

•

our ability to successfully manage interest rate risk, credit

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

•

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

reserve and deferred tax asset valuation allowance;

•

the efficiency and effectiveness of our

internal control environment;

•

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

the

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 CECL;

•

the lack of a significantly diversified loan portfolio and concentration in the South Florida market, including the risks

of geographic, depositor,

and industry concentrations,

including our concentration

in loans secured by

real estate,

in particular, commercial real estate;

•

the effects of climate change;

•

the concentration of ownership of our common stock;

•

fluctuations in the price of our common stock;

•

our ability to fund or access the capital markets at attractive

rates and terms and manage our growth, both organic

growth 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

net

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 cybersecurity breaches;

and

•

other risks described in this Annual Report on Form 10-K

and other filings we make with the SEC.

All

forward-looking

statements

are

necessarily

only

estimates

of

future

results,

and

there

can

be

no

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

Annual Report

on Form

10-K 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 this Annual

Report on

Form 10-K

and in

the reports

the Company

filed or

will file

with the

SEC and,

for periods

prior to

the Effective

Date, the Bank filed with the FDIC.

Non-GAAP Financial Measures

This Annual Report on Form 10-K 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

Item 7.

Management's Discussion and Analysis of Financial Condition

and Results of Operations

Management’s

discussion

and

analysis

of

financial

condition

and

results

of

operations

analyzes

the

consolidated

financial condition and results of operations of the Company and

the Bank, its wholly owned subsidiary, for the years ended

December

31, 2023

and

2022. This

discussion

and

analysis

is best

read

in

conjunction

with

the

Consolidated

Financial

Statements and related

footnotes of the Company

presented in Item

8 “Financial Statements

and Supplementary Data”

of

this Annual Report on Form

10-K. In addition to

historical information, 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" of this Annual Report.

In this Annual Report on Form 10-K, unless the context indicated otherwise, references to “we,” “us,”, and “our” refer to

the Company and the Bank, as

the contest dictates. However, if

the discussion relates to a period

before the Effective Date,

the terms refer only to the Bank.

Table of Contents

51

USCB Financial Holdings, Inc.

2023 10-K

CAUTIONARY NOTE REGARDING FORWARD

-LOOKING STATEMENTS

This

Annual

Report

on

Form

10-K

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

related

to

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 environment;

•

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

the

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 CECL;

•

the lack of a significantly diversified loan portfolio and concentration in the South Florida market, including the risks

of geographic, depositor,

and industry concentrations,

including our concentration

in loans secured by

real estate,

in particular, commercial real estate;

•

the effects of climate change;

•

the concentration of ownership of our common stock;

•

fluctuations in the price of our common stock;

•

our ability to fund or access the capital markets at attractive

rates and terms and manage our growth, both organic

growth 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

net

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 cybersecurity breaches;

and

•

other risks described in this Annual Report on Form 10-K

and other filings we make with the SEC.

All

forward-looking

statements

are

necessarily

only

estimates

of

future

results,

and

there

can

be

no

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

Annual Report

on Form

10-K 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 this Annual

Report on Form 10-K

and in the reports the

Company filed or will file

with the SEC and, for

periods prior to the completion

of the bank holding company reorganization, the Bank

filed with the FDIC.

Non-GAAP Financial Measures

This Annual Report on Form 10-K 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

Item 7.

Management's Discussion and Analysis of Financial Condition

and Results of Operations

Management’s

discussion

and

analysis

of

financial

condition

and

results

of

operations

analyzes

the

consolidated

financial condition and results of operations of the Company and the

Bank, its wholly owned subsidiary, for the years ended

December 31, 2022

and 2021.

This discussion

and analysis

are best

read in

conjunction with

the Consolidated

Financial

Statements and related footnotes

of our Company presented

in Item 8 “Financial

Statements and Supplementary

Data” of

this Annual Report on Form

10-K. In addition to

historical information, 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" of this Annual Report.

In this Annual Report on Form 10-K, unless the context indicated otherwise, references to “we,”

“us,”, and “our” refer to

the Company and the Bank, as

the contest dictates. However, if

the discussion relates to a period

before the Effective Date,

the terms refer only to the Bank.

Forward-Looking Statements

This

Annual

Report

on

Form

10-K

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,”

“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

related

to

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;

•

the COVID-19

pandemic

and its

impact

on us,

our employees,

customers

and third-party

service

providers,

and the

ultimate extent of the impact of the pandemic and related

government stimulus programs;

•

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 environment;

•

our

ability

to

comply

with

the

extensive

laws

and

regulations

to

which

we

are

subject,

including

the

laws

for

each

jurisdiction where we operate;

•

legislative or

regulatory changes

and changes

in accounting

principles, policies,

practices or

guidelines, including

the

effects of the implementation of the Current Expected

Credit Losses (“CECL”) standard on January 1, 2023;

•

the effects of our lack of a diversified loan portfolio and concentration in the South Florida market, including the risks of

geographic, depositor, and

industry concentrations, including our concentration in loans

secured by real estate;

•

effects of climate change;

•

the concentration of ownership of our common stock;

•

fluctuations in the price of our Class A 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 potential 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 margin;

•

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 Annual Report and other

filings we make with the SEC.

All

forward-looking

statements

are

necessarily

only

estimates

of

future

results,

and

there

can

be

no

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

Annual Report

on Form

10-K 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 herein and in

Table of Contents

45

USCB Financial Holdings, Inc.

2022 10-K

the reports the Company filed or will file with the SEC and, for periods

prior to the completion of the bank holding company

reorganization in December 2021, the Bank filed with the FDIC

Non-GAAP Financial Measures

This Annual Report on Form 10-K 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

Item 7.

Management's Discussion and Analysis of Financial Condition

and Results of Operations

Management’s

discussion

and

analysis

of

financial

condition

and

results

of

operations

analyzes

the

consolidated

financial condition and results of operations of the Company and the

Bank, its wholly owned subsidiary, for the years ended

December 31, 2021

and

2020. This

discussion and

analysis are

best read

in conjunction

with the

Consolidated Financial

Statements and related footnotes

of our Company presented

in Item 8 “Financial

Statements and Supplementary

Data” of

this Annual

Report.

In

addition

to

historical

information,

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" of this Annual Report.

Throughout this document, references to “we,” “us,” “our,” and “the

Company” refer to USCB Financial Holdings, Inc.

Forward-Looking Statements

This

Annual

Report

on

Form

10-K

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,”

“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

related

to

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;

•

the COVID-19 pandemic and its impact on

us, our employees, customers and third-party service providers, and the

ultimate extent of the impacts of the pandemic and related government

stimulus programs;

•

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 environment;

•

our ability

to comply

with the

extensive laws

and regulations

to which

we are

subject, including

the laws

for each

jurisdiction where we operate;

•

legislative or regulatory

changes and changes

in accounting

principles, policies,

practices or guidelines,

including

the effects of the forthcoming implementation

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

•

the effects

of our

lack of

a diversified

loan portfolio

and concentration

in the

South Florida

market, including

the

risks

of geographic,

depositor,

and

industry concentrations,

including our

concentration

in

loans secured

by real

estate;

•

the concentration of ownership of our Class A common

stock;

•

fluctuations in the price of our Class A 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;

•

increased competition and its effect on pricing

of our products and services as well as our margins;

•

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

this

Form

10-K

and

other

filings

we

make

with

the

Securities

and

Exchange

Commission

(“SEC”).

All

forward-looking

statements

are

necessarily

only

estimates

of

future

results,

and

there

can

be

no

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 presentation

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 reports the Company

filed or will

file with the

SEC and,

for periods

prior to

the completion

of the bank

holding company

reorganization, the

Bank filed

with

the FDIC.

Table of Contents

44

USCB Financial Holdings, Inc.

2021 10-K

Non-GAAP Financial Measures

This Annual Report on Form 10-K 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