USCB FINANCIAL HOLDINGS, INC.

We are not currently subject to any material legal proceedings. We are from time to time subject to claims and litigation

arising

in

the

ordinary

course

of

These

claims

and

may

include,

among

other

things,

allegations

of

violation of banking and other applicable regulations, competition

law, labor laws and consumer

protection laws, as well as

claims or

to intellectual

property,

securities, breach

of contract

and tort.

We

intend to

defend ourselves

vigorously against any pending or future claims and litigation.

The

Company

previously

disclosed

that

(the

“Litigation”)

had

been

commenced

on

July

13,

by

three

individuals

who

were

of

the

Bank

prior

to

the

reorganization

into

the

holding

company

form

of

organization in 2021

(the “Plaintiffs”)

against six

persons, all

of whom were

directors of

the Bank at

the relevant

time (the

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

la

Aguilera

et

al.)

alleging

the

Defendants

(i) caused

the

Bank,

as

thereof,

to

engage

in ultra

vires

conduct by

devising

and

the

exchange

effected

in

July

pursuant

to

which

the

then

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

Bank (the

“Exchange Transaction”),

which action

the Plaintiffs

allege was

not permitted

by the

Bank’s Articles

of Incorporation,

and

(ii) breached

their

fiduciary

duty as

of the

Bank

by

and

engaging

in

the

Transaction.

The

Plaintiffs sought the

Court to certify the

action as a class

action and to award

damages in an

amount to be

proven at trial.

The Plaintiffs sought damages exceeding $750,000

plus attorney’s fees and costs

as well as such other relief as the Court

determined to award.

The Defendants filed a motion to dismiss the Litigation with

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

after reviewing

the Motion,

the Plaintiff’s response

thereto and

the Defendant’s reply

as well

as the

oral arguments presented

by

the

parties

on

14,

2023,

granted

the

Motion,

dismissing

the

Litigation

with

prejudice

and

rendering

final

judgment in favor

of the Defendants

(the “Order”). The Court

reserved jurisdiction to award

costs or grant

any post-judgment

relief.

On May 1,

Plaintiffs filed

in the Third

District Court

of Appeal for

the State of

Florida (the “Appellate

Court”)

an appeal (the

“Appeal”), appealing

the issuance

of the

Order and seeking

a reversal

of the Order.

The Plaintiffs

claimed

the Court erred by

concluding (i) the Exchange Transaction was not

ultra vires, and (ii)

that the Legacy Shareholders (which

includes the Plaintiffs)

lacked direct standing.

The Plaintiffs

filed their initial

brief and the

Defendants filed

on July 1,

their answer brief (“Answer Brief”) responding to the allegations

contained in the Appeal.

Oral argument was

heard before the

Court on January

14, 2025. On

February 18,

Appellate Court

affirmed

the lower court's ruling and dismissed

the lawsuit, in favor of the Defendants

(the “Dismissal”).

The Plaintiffs have the right

to appeal the

Dismissal,

but they have not done so as of the date of the

filing of this Annual Report on Form 10-K.

The Company believes

that the positions

in the Appeal

are legally

and factually without

merit, and it

intends to vigorously

defend against

any appeal

of the

Dismissal of

the Appeal

,

pursue any

potential counterclaims

against the

Plaintiffs

as it

deems appropriate, and seek coverage from its

insurance carriers. Furthermore, there is also no assurance

that we will be

able to secure coverage from

our insurance carriers for

any expenses incurred by us

in connection with defending

against

the Appeal.

At

this

time,

in

the

opinion

of

the

likelihood

is

remote

that

the

impact

of

such

proceedings,

either

individually or

in the

aggregate, would

have a

material adverse

effect

on our

consolidated results

of operations,

or cash

flows. However,

one

or more

unfavorable

outcomes

in any

claim or

against

us, including

the

aforementioned Appeal

regarding the

Exchange Transaction,

on the period

such claims

or litigation

are resolved.

regardless of

their merits

or their

ultimate outcomes,

such matters

are

costly, divert management’s

attention and may materially adversely affect our

reputation, even if resolved in our favor.

There can be no

assurance that any

future legal proceedings

to which we are

a party will not

be decided adversely

to

our interests and have a material adverse effect

on our financial condition and operations.