What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-11-10 compared with 2022-08-11 · 575 added, 609 removed, 1193 unchanged (50% of the section changed)

2 unchanged sentences

understanding

condition and results

of operations of

the Company and

owned subsidiary, for

the quarter and

ended June 30, 2022.

This discussion and

analysis are best read in conjunction with the

consolidated financial statements

and related footnotes

included in this Form

10-Q and in the Annual

Report filed on

the Form 10-K (“2021

form 10-K”) filed

with the Security and Exchange Commission (“SEC”) for the year

ended December 31, 2021.

owned subsidiary,

September 30, 2022.

discussion and analysis

conjunction with

the unaudited consolidated

financial statements

with the Securities and Exchange Commission (“SEC”) for

the year ended December 31, 2021.

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

10 unchanged sentences

This Quarterly Report

contains statements

historical in

are intended to

forward-looking

“anticipate,”

(“Form 10-Q”) contains

statements that are

not historical in

nature and are

to be, and are hereby identified as,

forward-looking statements for purposes

of the safe harbor provided by Section

the Securities Exchange Act of 1934, as amended (Exchange Act”).

The words “may,”

“will,” “anticipate,” “should,” “would,”

“contemplate,”

18 unchanged sentences

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;

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

29 unchanged sentences

future acquisitions;

inflation, interest rate, unemployment rate, market, and monetary

fluctuations;

continuing high

inflation, changes

interest rates,

the unemployment

fluctuations, in particular in reaction to inflation and changes

in interest rates

increased competition and its effect on the pricing

of our products and services as well as our interest rate margin;

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;

other risks described in this Form 10-Q and other filings

we make with the SEC.

other risks described in this Form 10-Q, the 2021 Form

10-K and other filings we make with the SEC.

forward-looking

6 unchanged sentences

forward-looking statements

USCB Financial Holdings, Inc.

Q3 2022 Form 10-Q

hereof, and we undertake

3 unchanged sentences

or circumstances

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

USCB Financial Holdings, Inc.

Q2 2022 Form 10-Q

under the federal securities laws.

should also review the risk factors

described in the reports the Company

filed or will

file with the

the completion

holding company

reorganization in

December 2021,

Century Bank (“Bank”) filed with the Federal Depository

Institution Corporation (“FDIC”).

occurring after the date

on which the statement

is made or to

reflect the occurrence of

unanticipated events, unless required

securities laws.

periods prior

completion of

holding company reorganization

Century Bank (“Bank”) filed with the Federal

Deposit Insurance Corporation (“FDIC”).

Non-GAAP Financial Measures

This Quarterly

includes financial

information determined

in accordance

with generally accepted

accounting principles

financial information includes

certain operating performance

Management has included these non-GAAP

measures because it believes these measures may

provide useful

supplemental information

for evaluating

the Company’s

underlying performance

management uses

operations and performance.

Operating performance

measures should be

viewed in addition

as an alternative

reconciliations

This Form 10-Q

includes financial information determined by

methods other than in

accordance with generally accepted

accounting principles (“GAAP”).

This financial information

includes certain operating performance measures.

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

Operating performance measures

should be viewed in

addition to, and not

as an alternative to

or substitute for,

determined in accordance with GAAP,

and are not necessarily comparable to non-GAAP measures that may

by other companies.

To the extent applicable, reconciliations of these

non-GAAP measures to the most

directly comparable

“Reconciliation

Explanation of Non-GAAP Financial Measures’

included in this Form 10-Q.

class A common stock for the three months

ended June 30, 2022, compared

with net income of

Measures” included in this Form 10-Q.

the holding company of

the Bank, reported

net income of

$5.6 million or

diluted share

$0.28 per diluted

share for Class

A common stock for the three

months ended September 30,

2022, compared with

net income of $6.6

million or $5.11 loss

common stock,

respectively, for

2021, the Company agreed to exchange all the outstanding

shares of Class B common stock for Class A common stock at

As of June 30,

2022 and December 31,

2021, the Company’s

only class of

securities issued and

losses per share for the Class

B common stock for the quarter ended September 30, 2021 reflected the effects

of the exchange and redemption

of the Bank’s preferred

In December 2021,

the Company agreed to

the outstanding

Class A common

each five shares

common stock.

of September 30,

December 31, 2021,

the Company’s

only class of securities issued and outstanding was Class A common stock.

first quarter

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purchase shares of Class A

a discretionary

discretionary basis

of September 30,

not repurchased

margin, the cost of deposits,

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event or transaction.

Unless otherwise stated, all comparisons in

the bullet points below are calculated

for the quarter ended June 30, 2022

compared to the quarter ended June 30, 2021 and annualized

where appropriate:

September 30, 2022 compared to the quarter ended September

30, 2021 and annualized where appropriate:

$16.8 million

June 30, 2021.

September 30, 2021.

Net interest margin (“NIM”) increased to 3.47% from 3.19%

for the second quarter of 2021.

for the third quarter of 2021.

Total assets exceeded $2.0 billion, an increase of $183

5 unchanged sentences

Annualized return on average assets was 1.09% compared

to 0.98% at June 30, 2021.

Annualized return on average stockholders’ equity was 11.38% compared

to 9.74% at June 30, 2021.

The allowance

ratio decreased

Non-performing loans to total loans was 0.00% at June

30, 2022 and 2021.

The Company and

the Bank exceeded

all regulatory

capital requirements

significantly above

capitalized” guidelines.

At June 30, 2022, total risk-based capital ratio for the Company and the Bank were 13.74%

and 13.67%, respectively.

to 1.50% at September 30, 2021.

Annualized return on average stockholders’ equity was 11.90% compared to

13.41% at September 30, 2021.

September 30,

September 30, 2021.

Non-performing loans to total loans was 0.00% at September

30, 2022 and September 30, 2021.

USCB Financial Holdings, Inc.

Q3 2022 Form 10-Q

Tangible book value

per common share

(a Non-GAAP financial

measure) was $9.00

as of June 30,

2022, compared

common shares as result of the exchange and redemption of preferred

shares combined with the completion of the

At September 30, 2022, the

total risk-based capital ratio for

the Company and the

Bank was 13.65%

respectively.

Tangible book

financial measure)

September 30,

comprehensive

September 30,

“Reconciliation

reconciliation of this non-GAAP financial measure.

Explanation for Non-GAAP Financial Measures” for a reconciliation of

this non-GAAP financial measure.

Critical Accounting Policies and Estimates

which are described in Note 1 “Summary of Significant Accounting Policies” of

the Company’s 2021 Form 10-K.

which are described in Note 1 “Summary of Significant Accounting Policies” in the Company’s 2021 Form 10-K.

available information.

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The specific component relates

to loans that are

individually classified as

a loan review program

to evaluate the credit

risk in the loan

to loans that

are individually classified

follow a loan

review program to

evaluate the credit

risk existing in

been identified

quarterly basis

specific reserve is

component covers

non-impaired loans

on industry and

historical loan

specific reserve is required.

The general component covers non-impaired loans

and is based on our specific historical loan

loss experience,

volume, growth

and composition

volume, growth and

composition of the

loan portfolio,

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process, general

affect the borrower’s ability to pay,

value of collateral and other qualitative relevant risk factors.

a review of these

estimates, we

adjust the ACL

level determined by

management to be

credit losses are

subjective as they involve an exercise of judgment.

Appropriations

modifications executed

between March 1,

emergency declared by President Trump and (ii) January 1, 2022, on loans

that were current as of December 31, 2019,

Additionally,

under guidance from the federal banking agencies,

other short-term modifications made on a good

current prior

Restructurings

modifications

insignificant.

The Company’s charge-off policy is to continuously

review all impaired loans to monitor the Company’s ability

to collect them in full at the applicable maturity date and/or in accordance

with terms of any restructurings.

For loans which

are collateral dependent,

be uncollectible, any

shortfall in the

fair value of

the collateral relative to

investment in the loan is charged off.

The amount charged

-off conforms to the amount necessary

to comply with GAAP.

current economic

conditions both

the borrower’s

ability to pay, value of collateral and

other qualitative relevant risk factors.

Based on a review of these estimates,

the ACL to a level determined by management to be adequate.

Estimates of credit losses are inherently subjective as they

involve an exercise of judgment.

liabilities are

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deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment

USCB Financial Holdings, Inc.

Q2 2022 Form 10-Q

Management is required to assess whether a valuation allowance should be established on the net deferred tax assets

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expense, respectively.

USCB Financial Holdings, Inc.

Q3 2022 Form 10-Q

Segment Reporting

17 unchanged sentences

(in thousands, except ratios):

June 30, 2022

September 30, 2022

December 31, 2021

2 unchanged sentences

Loan amounts include deferred fees/costs.

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Consolidated Statements of Operations:

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non-interest expense

Net income available to common stockholders

Net income (loss) available to common stockholders

Profitability:

8 unchanged sentences

income taxes.

Three months ended June 30, 2022 compared to the three months

ended June 30, 2021

Net income increased

Three months ended September 30, 2022 compared to the three months

ended September 30, 2021

Net income decreased

to $5.6 million

for the three

months ended June

30, 2022 from

September 30, 2022

million for the

September 30, 2022 compared

primarily because the

reflected the

dividends paid and the $89.6 million exchange and redemption

of the Bank’s preferred shares.

Nine months ended September 30, 2022 compared to nine months ended

September 30, 2021

Net income increased to $15.7

million for the nine months

ended September 30, 2022

from $15.4 million for the

common stockholders increased

$91.9 million for

the same period

common stockholders

increased $2.0

June 30, 2022

2021 primarily

Six months ended June 30, 2022 compared to six months

ended June 30, 2021

Net income increased to $10.1 million for

the six months ended June 30, 2022

from $8.8 million for the same period

USCB Financial Holdings, Inc.

Q2 2022 Form 10-Q

the September 30, 2022

2021 primarily

in net interest

income in 2022

period reflected

the effect of preferred dividends paid and the $89.6 million

exchange and redemption of the Bank’s preferred shares.

Net Interest Income

6 unchanged sentences

interest-earning

USCB Financial Holdings, Inc.

Q3 2022 Form 10-Q

interest-bearing

12 unchanged sentences

Net interest spread is

to the difference between rates

earned on interest-earning assets

and rates paid on interest-bearing

to the difference between yields earned on interest-earning assets and rates paid on interest-bearing liabilities.

the annualized

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of liabilities for the periods indicated (in thousands):

Three Months Ended June 30,

Three Months Ended September 30,

Interest-earning assets:

5 unchanged sentences

Interest-bearing liabilities:

Interest-bearing demand deposits

Saving and money market deposits

Interest-bearing checking

Money market and savings accounts

Time deposits

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Q3 2022 Form 10-Q

Six Months Ended June 30,

Nine Months Ended September 30,

Interest-earning assets:

5 unchanged sentences

Interest-bearing liabilities:

Interest-bearing demand deposits

Saving and money market deposits

Interest-bearing checking

Money market and savings accounts

Time deposits

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income to average total interest-earning assets.

Three months ended June 30, 2022 compared to the three months

ended June 30, 2021

Three months ended September 30, 2022 compared to the three months

ended September 30, 2021

Net interest income before the provision

for credit losses was $16.8 million

for the three months ended June

an increase of $3.2 million or

25.4%, from $12.5 million for

the same period in 2021.

This increase was primarily attributable

to higher income from larger loan and investment portfolio

for the three months ended

September 30,

$13.5 million

attributable to higher income from larger loan and investment portfolios

combined with an increase in the weighted average

Included with loan interest

income are PPP loan

fees totaling $484 thousand

and $925 thousand for

the three months

ended June 30, 2022 and 2021, respectively.

PPP loan fees are recognized upon loan forgiveness by the SBA

Included with loan interest income are PPP interest and loan fees totaling $145

thousand and $1.1 million for the three

September 30,

2021, respectively

recognized upon

loan forgiveness

Net interest margin

1 unchanged sentence

for the quarter

ended June 30, 2022

period in 2021.

The yield for loans and other interest-earning assets increased

while the overall interest-bearing deposits cost decreased

Six months ended June 30, 2022 compared to six months

ended June 30, 2021

income before

the provision

increase of $5.1 million or 20.3%, from $24.9 million for the same period in

This increase was primarily attributable to

higher income from larger loan and investment portfolios combined

with a decrease in the average deposit cost.

Included with loan

interest income are PPP

loan fees totaling $1.5

million and $2.4 million

months ended June 30,

2022 and 2021, respectively.

PPP loan fees are recognized upon

loan forgiveness by the SBA.

bearing liabilities yields decreased.

ended September 30,

2022 from 3.19%

This increase was primarily due to the yields

for loans and other interest-earning assets increasing.

Nine Months Ended September 30, 2022 compared to nine months ended

September 30, 2021

Net interest income before the provision for credit losses

was $46.8 million for the nine months

ended September 30, 2022,

an increase of $8.4 million

or 21.8%, from $38.4 million

for the same period in

This increase was

primarily attributable

to higher income from larger loan and investment portfolio

Included with loan interest income are

PPP interest and loan fees totaling $1.6

million and $3.5 million for the

ended September 30, 2022 and 2021, respectively.

PPP loan fees are recognized

upon loan forgiveness by the SBA.

USCB Financial Holdings, Inc.

Q3 2022 Form 10-Q

Provision for Credit

margin increased to

3.36% at September 30,

2022 from 3.22%

same period in

yield on interest

earnings assets increased 12 bps, with a decrease of

2 bps in interest-bearing liability rates.

Provision for Credit Losses

represents probable incurred losses in our portfolio.

7 unchanged sentences

determination of

and corresponding

corresponding

provision for

4 unchanged sentences

and other applicable factors.

Three months ended June 30, 2022 compared to the three months

ended June 30, 2021

2022 compared

recorded for the same period in 2021.

The primary driver of the provision

expense was attributed to loan growth.

Six months ended June 30, 2022 compared to six months

ended June 30, 2021

Three months ended September 30, 2022 compared to the three months

ended September 30, 2021

September 30,

attributable to loan growth.

Nine Months Ended September 30, 2022 compared to nine months ended

September 30, 2021

The provision for

was $705 thousand

June 30, 2022

net recovery of

$160 thousand for the same period in 2021.

The primary driver of the provision expense was attributed to loan growth.

ACL as a percentage of total

loans decreased to 1.15%

at June 30, 2022 compared

to 1.30% at June 30,

2021 due to the

growth of the loan portfolio.

credit loss was

$1.6 million for

the nine months

ended September 30, 2022

compared to a

of $160 thousand for the same period in 2021.

The primary driver of the provision expense was attribut

able to loan growth.

The ACL as a percentage of total loans decreased

to 1.16% at September 30,

2022 compared to 1.27%

at September 30,

2021 due to the growth of the loan portfolio.

See “Allowance for Credit Losses” below for further discussion

11 unchanged sentences

income for the dates indicated (in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

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

3 unchanged sentences

non-interest income

Three months ended June 30, 2022 compared to the three months

ended June 30, 2021

$101 thousand

same period in 2021.

This increase was primarily driven by higher

services fees.

Six months ended June 30, 2022 compared to the six

months ended June 30, 2021

Non-interest income for the

six months ended June 30,

2022 decreased $275 thousand

or 7.2%, compared to

period in 2021.

This decrease was primarily driven by fewer loan sales

resulting in reduced gains.

Three months ended September 30, 2022 compared to the three months

ended September 30, 2021

Non-interest income

ended September 30,

2022 decreased

the same period in

This decrease was

primarily driven by a

non-recurring $2.5 million

default interest recovery

lending customer

was originated

and subsequently

many iterations

credit collection.

This payment reflects the final payment and settlement

of lien judgements against the customer.

Nine Months Ended September 30, 2022 compared to nine months ended

September 30, 2021

Non-interest income for the nine months ended September 30, 2022 decreased $2.7 million or

33.6%, compared to the

This decrease

was primarily

a non-recurring

default interest

recovery from

prior lending customer of the Bank, as discussed above.

USCB Financial Holdings, Inc.

3 unchanged sentences

expense for the dates indicated (in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Salaries and employee benefits

4 unchanged sentences

non-interest expense

Three months ended June 30, 2022 compared to the three months

ended June 30, 2021

Non-interest expense for the

three months ended June 30,

2022 increased $877 thousand

or 10.1%, compared to

same period in 2021.

Three months ended September 30, 2022 compared to the three months

ended September 30, 2021

Non-interest expense

ended September 30,

2022 increased

the same period in 2021.

was primarily driven by higher salaries

and employee benefits due to

new hires, salary

compensation, and seasonal payroll taxes.

Six months ended June 30, 2022 compared to the six

months ended June 30, 2021

Non-interest expense for the six months

ended June 30, 2022 increased $1.8

million or 10.4%, compared to the

compensation, and seasonal payroll taxes.

and employee benefits expense

hires and increased salary compensation.

Nine Months Ended September 30, 2022 compared to nine months ended

September 30, 2021

Non-interest expense for the nine months

ended September 30, 2022 increased $2.9 million or

11.1%, compared to the

same period in 2021.

The increase was primarily driven by

higher salaries and employee benefits expense

due to new hires

and increased salary compensation.

Provision for Income Tax

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will affect our

Surrender value of

bank-owned life insurance policies

covering key employees, purchasing

municipal bonds, and

overall levels of taxable income will be important elements in

determining our effective tax rate.

Three months ended June 30, 2022 compared to the three months

ended June 30, 2021

Income tax expense for the three months

ended June 30, 2022 increased to $1.7 million from

$1.3 million for the same

period in 2021.

The effective tax

rate for the three months ended June 30, 2022

was 24.4% and for the three months

2021 was 23.8%.

Six months ended June 30, 2022 compared to the six

months ended June 30, 2021

June 30, 2022

surrender value

of bank-owned

life insurance

policies covering

key employees,

purchasing municipal

bonds, and overall levels of taxable income will be important

elements in determining our effective tax rate.

Three months ended September 30, 2022 compared to the three months

ended September 30, 2021

September 30, 2022

from $2.1 million

the same period

effective tax

ended September 30,

26.1% compared

24.1% for the same period in 2021.

Nine Months Ended September 30, 2022 compared to nine months ended

September 30, 2021

Income tax expense for the

nine months ended September 30,

2022 increased to $5.5

million from $4.8 million for

The Company’s

effective tax

period compared

period in 2021.

The Company’s effective tax rate was 26.0% compared

to 23.8% for the same period in 2021.

For a further discussion

on income taxes, see

Note 4 “Income Taxes” to

the Consolidated Financial

Statements in this

Statements in this Form 10-Q.

Analysis of Financial Condition

assets at June 30, 2022 were

$2.0 billion, an increase of

$162.1 million, or 8.7%,

over total assets of $1.9

loans increased

$182.7 million,

to $1.4 billion

2022 compared

billion at December 31,

Total deposits increased by $148.3 million,

or 9.3%, to $1.7

billion at June 30, 2022

to December 31, 2021.

assets at September 30,

2022 were $2.0 billion,

an increase of $183.5

million, or 9.9%, over

total assets of $1.9

September 30,

September 30, 2022 compared to December 31, 2021.

Investment Securities

8 unchanged sentences

the Company’s

profitability

USCB Financial Holdings, Inc.

Q3 2022 Form 10-Q

profitability

consideration the Company’s

4 unchanged sentences

adequate risk-based capital ratios.

investment guideline,

more frequently

deemed necessary,

5 unchanged sentences

risk management objective

directed by the ALCO.

The portfolio of investments can be used to modify the duration of the balance

The allocation

securities takes

into consideration

anticipated future cash

and sources) and

all available sources

allocation of cash into securities takes into consideration anticipated

future cash flows (uses and sources) and all available

sources of credit.

Our investment portfolio consists

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The investment portfolio is regularly reviewed by the Chief Financial Officer,

an appropriate

return profile

of the Company

appropriate risk and

return profile as

adherence to the

investment policy.

As of June 30, 2022, the

investment portfolio consisted

of available-for-sale (“AFS”) and

held-to-maturity (“HTM”) debt

During the year ended December 31, 2021,

there were 28 investment securities that were transferred from AFS

to HTM with an

amortized cost basis

and fair value amount

of $67.6 million and

$68.7 million, respectively.

On the date of

transfer, these securities had a total net unrealized gain of $1.1

The transfer of debt securities from the AFS

The unrealized

accumulated other

comprehensive income

over the remaining life of

the security.

There was no immediate

impact to net income on

the date of transfer.

transferred securities totaling $2.0 million matured during

the second quarter of 2022.

quarter ended

September 30, 2022

ended December 31,

Company transferred,

value, $63.8 million and $68.7 million, respectively, of securities from available-for-sale (“AFS”) to held-to-maturity (“HTM”).

$1.1 million,

respectively,

comprehensive

No gains or losses were recognized to income at

transfer date.

The book value of the AFS securities is adjusted monthly

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Statements of Operations.

of June 30, 2022, there are no securities

which management has classified as OTTI

For further discussion of our analysis

on impaired investment securities for OTTI, see Note 2 “Investment Securities” to the Consolidated Financial Statements in

this Form 10-Q.

$68.1 million

$456.1 million

of September 30,

which management

has classified

Financial Statements in this Form 10-Q.

HTM investment

securities decreased

$96.8 million or

$427.4 million at

September 30, 2022

$524.2 million

payments received

profitability and modify the Company’s balance sheet duration according

to the ALM policy.

30, 2022, corporate

bond securities with a market value

of $23.6 million were pledged to secure

public deposits.

The investment portfolio

not have any tax-exempt securities.

higher unrealized

profitability

September 30,

$39.1 million

portfolio does not have any tax-exempt securities.

USCB Financial Holdings, Inc.

Q3 2022 Form 10-Q

June 30, 2022

September 30, 2022

December 31, 2021

18 unchanged sentences

for investment

as of June 30, 2022 (in thousands,

as of September 30, 2022 (in thousands,

except ratios):

17 unchanged sentences

Corporate bonds

Loans are the

largest category of

interest-earning assets

on the unaudited

Consolidated Balance

Sheets, and usually

interest-earning

higher yields

the interest-earning

yields typically

carry inherent

liquidity risks

comparison to lower yield assets.

The Company manages and mitigates

such risks in accordance with the

credit and ALM

policies, risk tolerance and balance sheet composition.

liquidity risks in comparison to lower

yield assets.

The Company manages

and mitigates such risks in accordance

credit and ALM policies, risk tolerance and balance sheet composition.

USCB Financial Holdings, Inc.

2 unchanged sentences

as of the dates indicated (in thousands):

June 30, 2022

September 30, 2022

December 31, 2021

8 unchanged sentences

$241.4 million

September 30,

commercial real estate

3 unchanged sentences

most significant

growth partially offset by declines in the commercial and industrial loan segment.

Commercial and industrial loans declined

primarily because of continuing PPP loan forgiveness.

approximately 61.5%

gross loan portfolio

as of June 30,

do not expect

any significant changes

the foreseeable

growth partially offset

by declines in

the commercial and

industrial and residential

real estate loan

and industrial loans declined primarily because of continuing

PPP loan forgiveness.

approximately 64.9% of the total

gross loan portfolio as of

September 30, 2022.

not expect any significant changes

over the foreseeable

the composition

1 unchanged sentence

on commercial

our strategic

Our loan growth strategy since inception has been reflective of the market

in which we operate and of our strategic plan as

approved by the Board.

9 unchanged sentences

highly competitive

leng-term relationships

long-term relationships

senior management

5 unchanged sentences

or unexpected

The following table shows maturities and sensitivity

to interest rate changes for the loan portfolio at June 30,

2022 (in thousands):

September 30, 2022 (in thousands):

Due in 1 year or

25 unchanged sentences

rate modifications are discussed as well.

September 30, 2022,

approximately 60.8%

have adjustable/variable

adjustable/variable

have fixed rates.

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

and tenors in different periods of time.

USCB Financial Holdings, Inc.

Q3 2022 Form 10-Q

contractual characteristics, there are no

material concentrations on anniversary repricing.

Additionally, it is

important to note

interest rate

embedded option

By contractual characteristics,

there are no material concentrations

on anniversary repricing.

Additionally,

it is important to

our loans have

interest rate floors.

This embedded option

protects the Company

from a decrease

rates and positions us to gain in the scenario of higher interest

45 unchanged sentences

as follows for the dates indicated (in thousands):

June 30, 2022

September 30, 2022

Special Mention

17 unchanged sentences

except ratios):

June 30, 2022

September 30, 2022

December 31, 2021

57 unchanged sentences

a loan concession.

determination

are surfacing

ability to repay in accordance with

the original terms of the loan

or line of credit.

a borrower that can obtain funds

interest rates

for non-troubled

troubled debt

restructuring.

determination is performed during the annual review process

or whenever problems surface regarding the client’s ability

accordance with

sources other than the Company at market interest rates at or near those for non-troubled debt is not involved in a troubled

debt restructuring.

The concessions

interest rate

minimize potential losses.

including interest

rate reductions,

potential losses.

The following tables present performing and non-performing

TDRs at the dates indicated (in thousands):

June 30, 2022

September 30, 2022

December 31, 2021

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Consumer and other

The Company allocated

$319 thousand and $360

thousand of specific

allowance for TDR loans

at June 30, 2022 and

2021, respectively.

lend additional

quarter ended

June 30, 2022

Additionally, the Company

did not have any new TDR loans during the three months

ended June 30, 2022 and 2021.

modifications

classification

Section 4013 of the CARES Act or under applicable interagency

guidance of the federal banking regulators.

The Company allocated $309 thousand and $360

thousand of specific allowance for TDR loans

at September 30, 2022

and December 31, 2021, respectively.

There was no commitment to lend additional funds to these TDR

customers at either

September 30,

Additionally,

the Company did

new TDR loans

during the three

months ended September

For further discussion

on non-performing loans,

“Loans” to the

unaudited Consolidated Financial Statements

on this Form 10-Q.

USCB Financial Holdings, Inc.

Q3 2022 Form 10-Q

discussion on

non-performing loans,

to the Consolidated

Financial Statements

Allowance for Credit Losses

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quantitative calculations.

USCB Financial Holdings, Inc.

Q2 2022 Form 10-Q

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

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and Industrial

Three Months Ended June 30, 2022

Three Months Ended September 30, 2022

Beginning balance

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Net charge-offs to average loans

Six Months Ended June 30, 2022

Nine Months Ended September 30, 2022

Beginning balance

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and Industrial

Three Months Ended June 30, 2021

Three Months Ended September 30, 2021

Beginning balance

3 unchanged sentences

Net charge-offs to average loans

Six Months Ended June 30, 2021

Nine Months Ended September 30, 2021

Beginning balance

3 unchanged sentences

Net charge-offs to average loans

USCB Financial Holdings, Inc.

Q3 2022 Form 10-Q

Bank-Owned Life Insurance

As of June 30,

As of September 30,

2022, the combined

cash surrender value

of all bank-owned

life insurance (“BOLI”)

policies was $42.2

cash surrender value

are recorded to

non-interest income in

the Consolidated Statements

of Operations.

cash surrender

bank-owned life

insurance (“BOLI”)

Statements of Operations.

The Company had BOLI policies with five insurance carriers.

The Company is the beneficiary of these policies.

The Company is the beneficiary of

these policies.

Customer deposits are the

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relationships of the employees of these businesses.

USCB Financial Holdings, Inc.

Q2 2022 Form 10-Q

The following table

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presented (in thousands, except ratios):

Three Months Ended June 30,

Three Months Ended September 30,

Average Balance

Non-interest-bearing demand deposits

Interest-bearing demand deposits

Saving and money market deposits

Non-interest-bearing checking

Interest-bearing checking

Money market and savings deposits

Time deposits

$250 thousand

Total estimated uninsured deposits

were $1.0 billion and

$897.8 million at June 30,

2022 and December 31, 2021, respectively.

The following table shows scheduled maturities of uninsured

time deposits as of June 30, 2022 (in thousands):

June 30, 2022

$897.8 million

September 30, 2022 and December 31, 2021, respectively.

The following table shows

scheduled maturities of uninsured time deposits as of September

30, 2022 (in thousands):

September 30, 2022

Three months or less

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taxing authority of the borrower.

Escrow funds are recognized as other liabilities.

As of June 30, 2022 escrow balances totaled $10.2 million

Escrow funds are recorded as other liabilities.

As of September 30, 2022 escrow balances totaled $15.3 million

compared to $4.0 million at December 31, 2021.

are eligible for

advances with various

terms and conditions.

This accessibility of

funding allows

unexpected outgoing

and collateral

without adversely affecting either daily operations or the financial condition

of the Company.

As of June 30,

$66.0 million of

fixed-rate advances outstanding

from the FHLB

with a weighted

rate of 1.55%.

Most of the advances are due in the first

two calendar quarters of 2025.

we are eligible

advances with

various terms

and conditions.

This accessibility

additional funding allows us to efficiently and timely meet both expected

and unexpected outgoing cash flows and collateral

needs without adversely affecting either daily operations

or the financial condition of the Company.

September 30,

of fixed-rate

average rate of 1.39%.

Maturity dates for the

advances are between

third quarter 2023

and third quarter

2025 as detailed

in the table below.

USCB Financial Holdings, Inc.

Q3 2022 Form 10-Q

The following table presents the FHLB fixed rate advances

as of June 30, 2022 (in thousands):

as of September 30, 2022 (in thousands):

Interest Rate

Maturity Date

August 17, 2023

July 30, 2024

March 27, 2025

March 28, 2025

April 17, 2025

July 18, 2025

July 30, 2024

August 17, 2023

correspondent

fluctuations in our daily cash balances.

As of June 30, 2022, there

were no outstanding balances with

the Fed Funds lines

USCB Financial Holdings, Inc.

Q2 2022 Form 10-Q

As of September 30, 2022, there were no outstanding balances with the Fed Funds

lines of credit.

Off-Balance Sheet Arrangements

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include commitments to extend

credit and standby letters

credit and standby

commitments involve

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these commitments;

liabilities on the Consolidated Balance Sheets.

liabilities on the unaudited Consolidated Balance Sheets.

Since commitments associated with letters of

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commitments outstanding as of the dates indicated (in thousands

June 30, 2022

September 30, 2022

December 31, 2021

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and limit IRR exposures.

USCB Financial Holdings, Inc.

Q3 2022 Form 10-Q

When assessing

the consolidated

balance sheet,

reduced earnings or outright losses could adversely affect

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non-parallel changes such as changing slopes (flat and steeping) and

twists of the yield curve, Static simulation models are

twists of the yield curve.

Static simulation models are

based on current exposures and

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strategies and client expected behavior.

USCB Financial Holdings, Inc.

Q2 2022 Form 10-Q

scenarios (parallel and non-parallel).

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Market and Interest Rate Risk Management

According to our last ALCO model run as of June 30, 2022, we are an

asset-sensitive company for years one and two.

This indicates that our

assets generally reprice

faster than our liabilities,

which results in

a favorable impact to

income when market interest rates

Many assumptions are used

to calculate the impact of interest

rate variations

prepayment speeds,

non-maturity deposit

price sensitivity,

pricing correlations,

According to our last

ALCO model run as

of September 30, 2022,

we are net interest

income neutral for year

asset-sensitive

generally reprice

favorable impact to

net interest income

interest rates increase.

Many assumptions are

calculate the

impact of interest rate variations

on our net interest income, such

as asset prepayment speeds,

non-maturity deposit price

sensitivity, pricing correlations,

deposit truncations and decay rates, and key rate drivers.

Because of the inherent

use of these estimates and

Because of the inherent use

of these estimates and

assumptions in the model,

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will, differ from static measures results.

In addition, static measures like

EVEs do not include actions that management may

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 client deposit behavior.

9 unchanged sentences

to increase asset sensitivity.

According to our model,

as of June 30,

2022, NIM should

increase for static rate

scenarios (-400 basis

points or +400

basis points).

For the static

forecast in year

September 30, 2022,

remain mostly

estimated NIM

+400 basis points scenario.

Additionally, utilizing an EVE

approach, we analyze the risk

to capital from the

effects of various

economic value of our assets and the economic value

of our liabilities, which is a proxy for our liquidation value.

impact on the EVE.

Results and analysis are presented quarterly

to the Board, and strategies are defined.

been reducing asset

sensitivity by extending

asset duration, which

has lowered our

net interest income

volatility and allowed us to keep the net interest income

consistent with ALCO objectives.

case scenario

Additionally,

discounted cash

This measures

the difference

expected, our model stipulates

that an increase of

rates will have a

negative impact on

presented quarterly to the Board, and strategies are defined.

Liquidity is defined

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and contingent liquidity events.

USCB Financial Holdings, Inc.

Q3 2022 Form 10-Q

Changes in macroeconomic conditions, as well as exposure

9 unchanged sentences

identifying, measuring, monitoring

integrated into our risk management processes and ALM

integrated into our risk management processes,

Contingency Funding Plan and ALM policy.

Critical elements of our liquidity

15 unchanged sentences

appropriately diverse

USCB Financial Holdings, Inc.

Q2 2022 Form 10-Q

comprehensive

15 unchanged sentences

Capital Adequacy

follow the capital conservation

buffer framework,

and as of June

exceeded the capital

conversation buffer

all capital ratios, according to our actual ratios.

The following table presents the

capital ratios for both the Company and the

Bank at the dates indicated (in thousands,

September 30,

well capitalized

prompt corrective

action framework.

also follow the capital conservation buffer framework, and

as of September 30, 2022, we exceeded the

capital conversation

buffer in all capital ratios,

according to our actual ratios.

following table presents the capital ratios

for both the Company

and the Bank at the dates indicated (in thousands,

except ratios):

3 unchanged sentences

Action Provisions

June 30, 2022:

September 30, 2022:

risk-based capital:

15 unchanged sentences

was no activity between both of these entities.

The Company is not subject to regulatory capital

requirements as a small bank holding

Accordingly, the Company's capital ratios are provided for informational purposes

USCB Financial Holdings, Inc.

Q3 2022 Form 10-Q

Impact of Inflation

31 unchanged sentences

Recently Issued Accounting Pronouncements

USCB Financial Holdings, Inc.

Q2 2022 Form 10-Q

Recently issued accounting

2 unchanged sentences

of Significant Accounting Policies”

the Consolidated Financial Statements on this Form 10-Q.

the unaudited Consolidated Financial Statements in this

USCB Financial Holdings, Inc.

Q3 2022 Form 10-Q

Reconciliation and Management Explanation of Non

10 unchanged sentences

as an alternative

measures that may be presented by other companies.

following table reconciles the non-GAAP financial measurement

of operating net income available to common stockholders for the periods presented (in thousands,

measures that may be presented by other

The following table reconciles the non-GAAP financial measurement

of operating net income available

to common stockholders for the periods presented (in thousands,

except per share data):

2 unchanged sentences

Provision for income taxes

Provision for (recovery of) credit losses

Provision for credit losses

PTPP Return on Average Assets:

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Operating return on average assets

The Company believes these non-GAAP measurements

are a key indicator of the ongoing earnings

power of the Company.

(2) Annualized.

USCB Financial Holdings, Inc.

2 unchanged sentences

Tangible book value per common share (at period-end):

Total stockholders' equity (GAAP)

Total stockholders' equity

Intangible assets

Preferred stock

Tangible stockholders' equity (non-GAAP)

Tangible stockholders' equity

Total shares issued and outstanding (at period-end):

2 unchanged sentences

Total common shares issued and outstanding

Tangible book value per common share (non-GAAP)

Tangible book value per common share

Operating net income available to common stockholders:

Net income (GAAP)

Preferred dividends

3 unchanged sentences

Operating net income avail.

to common stock (non-GAAP)

to common stock

Allocation of operating net income per common

5 unchanged sentences

Class A common stock

Net income (loss) per diluted share (GAAP)

Net income (loss) per diluted share

Exchange and redemption of preferred

Operating net income per diluted share (non-GAAP)

Operating net income per diluted share

Class B common stock

Net income (loss) per diluted share (GAAP)

Net loss per diluted share

Exchange and redemption of preferred

Operating net income per diluted share (non-GAAP)

Operating net income per diluted share

The Company believes these non-GAAP measurements are

4 unchanged sentences

11,061,552 shares of Class D preferred stock were

exchanged for an aggregate of 10,278,072 shares

converted into 10,278,072 shares of Class A common

Additionally, the Bank completed its initial public offering of its Class

A common stock on

July 27, 2021, in which it issued 4,600,000 shares

of Class A common stock.

Additionally, the Bank completed the initial

public offering of its Class A

common stock on July 27, 2021, in which it

issued 4,600,000 shares of Class A common stock.

As such, the total shares issued and outstanding of

Class A common stock was 18,767,541 shares

at September 30, 2021.

As such, the total

shares issued and outstanding of Class A common stock

was 18,767,541 shares at September 30, 2021.

(3) Excludes the dilutive effect, if any, of shares of common stock issuable

upon exercise of outstanding stock options.

During the quarter ended September 30, 2021,

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the Class B shareholders to exchange all

shares of Class B non-voting stock for Class A

voting common stock at a ratio of 5 to 1.

In calculating net income (loss) per diluted

share for the prior

quarters presented, the allocation of operating net income

available to common stockholders was based

on the weighted average shares outstanding

per common share class to the total weighted average

shares outstanding during each period.

operating net income allocation was calculated using

the weighted average shares outstanding of Class

B common stock on a as-converted basis.

Class B non-voting common stock for Class A

voting common stock at a ratio of 1 share of Class

A common stock for each 5 shares of Class B non-

voting common stock.

In calculating net income

(loss) per diluted share for the prior quarters

presented, the allocation of operating net income

to common stockholders was based on the weighted

average shares outstanding per common share

class to the total weighted average shares

outstanding during each period.

The operating net

income allocation was calculated using the weighted

average shares outstanding of Class B common

stock on an as-converted basis.

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