USCB FINANCIAL HOLDINGS, INC. (USCB)

Item 2.

Management's Discussion and Analysis of Financial Condition

and Results of Operations

The

following

discussion

and

analysis

is

designed

to

provide

a

better

understanding

of

the

consolidated

financial

condition and results

of operations of

the Company and

the Bank, its

wholly owned subsidiary,

as of

and for the

three months

ended March 31,

2026. This

discussion and analysis

is best read

in conjunction

with the unaudited

consolidated financial

statements and related

notes included in

this Quarterly

Report on Form

10-Q (“Form 10-Q”)

and the audited

consolidated

financial

statements

and

related

notes

included

in

the

Annual

Report

on

Form

10-K

(“2025

Form

10-K”)

filed

with

the

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

actual results to differ materially

from management's expectations. Factors that could cause

such differences are discussed

in the sections

entitled "Forward-Looking

Statements" and Item

1A “Risk Factors"

below

in Part II

hereof and in

the 2025

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

SEC’s website www.sec.gov.

Throughout

this

document,

references

to

“we,”

“us,”

“our,”

and

“the

Company”

generally

refer

to

USCB

Financial

Holdings, Inc.

Forward-Looking Statements

This Form 10-Q

contains statements

that are not

historical in

nature are

intended to

be, and are

hereby identified

as,

forward-looking statements for purposes

of the safe

harbor provided by

Section 21E of

the Securities Exchange Act

of 1934,

as amended. The

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

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

“aim,” “plan,”

“estimate,” “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 potential future additional balance sheet restructuring.

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

materially from those anticipated in such statements.

Potential risks and uncertainties include, but are not

limited to:

•

the strength of the United States economy

in general and the strength of the local

economies in which we conduct

operations;

•

our ability to successfully manage interest rate risk, credit

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

•

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

for credit losses and deferred tax asset valuation allowance;

•

the efficiency and effectiveness of our

internal control procedures and processes;

•

our ability

to comply

with the

extensive laws

and regulations

to which

we are

subject, including

the laws

for each

jurisdiction where we operate;

•

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

the banking

industry;

•

deposit attrition and the level of our uninsured deposits;

•

legislative or regulatory changes, including the enactment

of the One Big Beautiful Bill, and changes in accounting

principles, policies,

practices or

guidelines, including

the on-going

effects of

the Current

Expected Credit

Losses

(“CECL”) standard;

•

the lack of a

significantly diversified loan

portfolio and our concentration

in the South Florida

market, including the

risks

of geographic,

depositor,

and

industry concentrations,

including our

concentration

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;

•

the effects of potential new or increased tariffs

,

retaliatory tariffs, and trade restrictions;

•

the impacts of international hostilities and geopolitical events;

•

increased competition and its

effect on the pricing

of our products and services

as well as our interest

rate spread

and net interest margin;

•

the loss of key employees;

•

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

Table of Contents

31

USCB Financial Holdings, Inc.

Q1 2026 Form 10-Q

•

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

10-Q are

made only

as of the

date

hereof, and we undertake

no obligation to update

or revise any forward-looking

statement to reflect events

or circumstances

after the date on which the statement is made or to reflect the occurrence of unanticipated events, unless required to do so

under the federal

securities laws. You should also review the

risk factors described in

the 2025 Form 10-K

and in the

reports

the Company has filed or will file with the SEC.

Overview

The Company

reported net

income of

$9.4 million

or $0.51

per diluted

share of

common stock

for the

three

months

ended March 31,

2026 compared

to $7.7

million or

$0.38 per

diluted share

of common

stock for

the three

months ended

March 31, 2025.

In evaluating our financial

performance, the Company

considers the level of

and trends in net

interest income, the

net

interest

margin,

the

cost

of

deposits

and

borrowings,

the

level and

composition

of non-interest

income

and

non-interest

expense, performance ratios,

asset quality ratios, regulatory capital ratios, and any

significant event or transaction.

Unless otherwise

stated, all

period comparisons

in the

bullet points

below are

calculated at

or for

the quarter

ended

March 31, 2026

compared

to at

or for

the

quarter ended

March 31,

2025 and

as of

December 31,

2025

and annualized

where appropriate:

•

Net interest

income before

provision for

credit losses

for the three

months ended

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.

•

Total assets

were $2.85

billion at

March 31, 2026,

representing an

increase of

$168.4 million

or 6.3%

from March 31,

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

December 31, 2025.

•

Total loans

held for

investment (net

of deferred

cost/fees)

were $2.24

billion at

March 31, 2026,

representing

an

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.

•

Total

deposits

were

$2.49

billion

at

March 31,

2026,

representing

an

increase

of

$184.0

million

or

8.0%

from

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 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 March 31,

2026,

the

total risk

-based capital

ratios

for the

Company

and

the

Bank were

14.09%

and 13.

96%,

respectively.

•

Tangible book

value per

common share

(a non-GAAP

measure) was

$12.23 at

March 31, 2026,

representing an

increase of $1.00 or

8.9% annualized from

$11.23 at March

31, 2025. At March 31, 2026,

tangible book value

per

common share was

negatively affected by

($1.72) due to

an accumulated comprehensive

loss of $31.4

million. At

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

comprehensive loss

of $41.1

million. See

“Reconciliation

and Management

Explanation for

Non-GAAP Financial

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

of this non-GAAP financial measure.

Table of Contents

32

USCB Financial Holdings, Inc.

Q1 2026 Form 10-Q

Critical Accounting Policies and Estimates

The consolidated

financial statements

are prepared

based on

the application

of U.S.

Generally Accepted

Accounting

Practices (“GAAP”),

the most significant

of which are

described in Note

1 “Summary

of Significant Accounting

Policies” in

the Company’s 2025

Form 10-K and

“Summary of Significant

Accounting Policies”

in Part I in

this Form 10-Q.

To

prepare

consolidated

financial

statements

in

conformity

with

US

GAAP,

management

makes

estimates,

assumptions,

and

judgments based

on available

information. These

estimates, assumptions,

and judgments

affect the

amounts reported

in

the consolidated financial

statements and accompanying

notes. These estimates,

assumptions, and judgments

are based

on information

available as

of the

date of

the financial

statements and,

as this

information changes,

actual results

could

differ

from

the

estimates,

assumptions

and

judgments

reflected

in

the

consolidated

financial

statements.

In

particular,

management has

identified accounting

policies that,

due to

the estimates,

assumptions and

judgments inherent

in those

policies,

are

critical

to

an

understanding

of

our

consolidated

financial

statements.

Management

has

presented

the

application of these policies to the Audit and Risk Committee of

our Board of Directors.

Non-GAAP Financial Measures

This

Form

10-Q

includes

financial

information

determined

by

methods

other

than

in

accordance

with

GAAP.

This

financial

information

includes

certain

operating

performance

measures.

Management

has

included

these

non-GAAP

measures because it believes these measures

may provide useful supplemental information

for evaluating the Company’s

underlying performance

trends. Further,

management

uses these

measures in

managing and

evaluating

the Company’s

business

and

intends

to

refer

to

them

in

discussions

about

our

operations

and

performance.

Operating

performance

measures should be

viewed in addition to,

and not as

an alternative to

or substitute for, measures determined in

accordance

with GAAP,

and are

not necessarily

comparable to

non-GAAP measures

that may

be presented

by other

companies. To

the extent applicable,

reconciliations of

these non-GAAP

measures to the

most directly comparable

GAAP measures

can

be found

in the

section “Reconciliation

[Excerpt truncated for page length; source filing is linked above.]

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,

2025

and

2024.

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.

Table of Contents

53

USCB Financial Holdings, Inc.

2025 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,”

the

negative

of

these

terms,

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

potential future additional 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 procedures and processes;

•

our ability

to comply

with the

extensive laws

and regulations

to which

we are

subject, including

the laws

for each

jurisdiction where we operate;

•

adverse

changes

or

conditions

in

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 including the

enactment of the

One Big Beautiful

Bill Act

and changes

in accounting principles, policies, practices or guidelines,

including the on-going effects of the CECL standard

;

•

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;

•

the effects of potential new or increased tariffs,

retaliatory tariffs and trade restrictions;

•

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 security 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.

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