What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-05-12 compared with 2022-11-10 · 1100 added, 1332 removed, 436 unchanged (85% of the section changed)

Management's Discussion and Analysis of Financial Condition

and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations

understanding

owned subsidiary,

September 30, 2022.

discussion and analysis

condition and

operations of

subsidiary, for the

March 31, 2023.

This discussion

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

actual results to differ materially

from management's expectations.

Factors that could cause

such differences are discussed

sections entitled

"Forward-Looking Statements"

the unaudited

financial statements and

related footnotes included

in the Annual Report

on Form 10-K/A

(“2022 Form 10-K/A”)

the Securities and Exchange Commission (“SEC”) for the year ended December 31, 2022.

This discussion contains forward-looking

statements that involve risks, uncertainties

and assumptions that could cause

actual results to

differ materially from

management's expectations.

that could cause

such differences are

sections entitled "Forward-Looking

Statements" and Item

1A “Risk Factors"

the 2022 Form

with the SEC which is available at the SEC’s website www.sec.gov.

1 unchanged sentence

Forward-Looking Statements

This Quarterly Report

(“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

This Quarterly

(“Form 10-Q”)

contains statements

not historical

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 (Exchange Act”).

The words “may,”

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

The words “may,” “will,” “anticipate,” “should,” “would,”

“contemplate,”

1 unchanged sentence

forward-looking statements.

These forward-looking

statements include,

management’s long-term performance

statements relating

anticipated effects on

internal growth.

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

forward-looking statements include,

management’s long-term

performance goals,

as statements

the anticipated

financial condition

from expected

developments or

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

materially from those anticipated in such statements.

Potential risks and uncertainties include, but are not

the strength of the United States economy

in general and the strength of the local

economies in which we conduct

the continuation

our employees,

customers and

providers, and the ultimate extent of the impacts of the

pandemic and related government stimulus programs;

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

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

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

reserve and deferred tax asset valuation allowance;

the efficiency and effectiveness of our

internal control environment;

extensive laws

and regulations

subject, including

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

jurisdiction where we operate;

legislative or regulatory

changes and changes

in accounting

principles, policies,

practices or guidelines,

the effects of the forthcoming implementation

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

adverse changes or conditions in

capital and financial markets, including

actual or potential stresses

in the banking

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

a diversified

3 unchanged sentences

market, including

of geographic,

industry concentrations,

including our

concentration

loans secured

the concentration of ownership of our Class A common

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;

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 margin;

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

geographic, depositor,

concentrations, including

our concentration

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 margin;

the effectiveness of our risk management strategies, including

operational risks, including, but not limited to,

employee, or third-party fraud and security breaches;

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

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

forward-looking

actual results will

materially from expectations.

Therefore, you are

cautioned not to

place undue reliance

forward-looking statements.

forward-looking statements

other risks described

10-Q, the 2022

Form 10-K/A and

other filings we

make with the

Securities and

Exchange Commission (“SEC”).

USCB Financial Holdings, Inc.

Q1 2023 Form 10-Q

hereof, and we undertake

no obligation to update

or revise any forward-looking

statement to reflect events

or circumstances

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

All forward-looking

statements are

necessarily only

future results,

actual results will not

differ materially from

expectations.

Therefore, you are cautioned

not to place undue

reliance on any

forward-looking statements.

forward-looking statements included in

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

Measures” included in this Form 10-Q.

the holding company of

the Bank, reported

are made only

hereof, and we

undertake no obligation

revise any forward-looking

statement to reflect

events or circumstances

after the date on which the statements are made or to reflect

the occurrence of unanticipated events, unless required to do

so under the federal securities laws.

should also review the risk

factors described in the reports the

Company filed or

will file with

for periods prior

to the completion

holding company reorganization

in December 2021,

the Bank filed with the FDIC.

Class A common stock for

months ended March 31,

2023, compared with

net income of

1 unchanged sentence

$0.24 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

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

(the “Board”)

share repurchase

750,000 shares of Class A common stock.

Under the repurchase program,

the Company may

purchase shares of Class A

discretionary basis

of September 30,

not repurchased

margin, the cost of deposits,

levels and composition of

non-interest income and non-interest

expense, performance ratios,

asset quality ratios, regulatory capital ratios, and any significant

event or transaction.

September 30, 2022 compared to the quarter ended September

30, 2021 and annualized where appropriate:

share for Class A common

stock, respectively, for the same period in 2022.

weighted average price per share of $11.74.

The aggregate purchase

price for these transactions was approximately $5.9

repurchase under this program.

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, levels 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

period comparisons

bullet points

calculated for

ended March 31,

2023 compared to the quarter ended March 31, 2022 and annualized where appropriate:

$16.0 million

September 30, 2021.

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

for the third quarter of 2021.

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

.5 million or 9.9%, compared to December 31, 2021.

Total loans grew to $1.4 billion, an increase of $241.4 million

or 20.3%, compared to December 31, 2021.

Total deposits increased $206.3 million or 13.0% to $1.8

billion from $1.6 billion at December 31, 2021.

Annualized return on average assets was 1.09% compared

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.

March 31, 2022.

Net interest margin (“NIM”) was 3.22% for both quarters ended at March 31, 2023 and 2022.

Total assets were $2.2

billion at March 31, 2023,

representing an increase of $196.6

million or 10.0% from March

31, 2022 and an increase of $78.0 million or 15.2% annualized from December 31, 2022.

2023, representing

31, 2022 and an increase of $73.1 million or 19.7% annualized from December 2022.

Total deposits were $1.8 billion at March 31,

2023, representing an increase of $117.2 million or

6.8% from March

31, 2022 and $1.2 million from December 31, 2022.

Annualized return on average assets was 1.11% compared to 1.03% at March 31, 2022.

Annualized return

stockholders’

12.85% compared

ended March 31,

The allowance for credit losses to

total loans was 1.20% for

March 31, 2023 and

1.16% for December 31, 2022.

ACL was calculated under the CECL methodology for the first quarter 2023 and the incurred loss

methodology for

the first quarter 2022.

Non-performing loans to total loans was 0.03% at March 31, 2023 compared to 0.0% at December 31, 2022.

total risk-based

capital ratios

respectively.

Tangible book value

per common share

2023 was negatively

affected by $2.14

tax unrealized security losses of $42.1 million at March 31, 2023.

At March 31, 2022, tangible book value of $9.60

was negatively affected by $0.97 due to $19.5 million after tax unrealized

security losses.

See “Reconciliation and

USCB Financial Holdings, Inc.

Q1 2023 Form 10-Q

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

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” in the Company’s 2021 Form 10-K.

consolidated financial

prepared based

the application

Significant Accounting

the Company’s

available information.

These estimates,

assumptions, and judgments affect

the amounts reported in

the financial statements

and judgments

affect the amounts

the financial

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

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

1 unchanged sentence

In particular,

has identified

management has

identified accounting

policies that,

the estimates, assumptions and judgments inherent in those policies, are critical in understanding our financial statements.

Management has presented the application of these policies

to the Audit and Risk Committee of our Board.

the estimates, assumptions and judgments inherent

in those policies, are critical in understanding

our financial statements.

Management has presented the application of these policies to the Audit and Risk Committee of our Board.

Allowance for Credit Losses

The allowance for credit

losses (“ACL”) is

a valuation allowance that

is established through charges

to earnings in the

a provision for

credit losses.

amount of the

affected by the

(i) charge-offs

of loans that

the allowance;

(ii) subsequent

recoveries on

loans previously

that increase

Measurement of Credit Losses on Financial Instruments, as

amended, which replaces the incurred loss methodology with

Significant Accounting

Policies” for

more information

the allowance

for credit losses charged to

income that increase the allowance.

Management considers the policies

related to the ACL as

the most critical to

the financial statement

presentation.

ACL includes activity

related to allowances

calculated in

accordance with Accounting Standards Codification (“ASC”) 310,

Receivables, and ASC 450, Contingencies.

Throughout the year,

management estimates the probable

incurred losses in the loan portfolio

to determine if the ACL

is adequate to absorb such losses.

consists of specific and general components.

The specific component relates

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 required.

The general component covers non-impaired loans

and is based on our specific historical loan

loss experience,

volume, growth and

composition of the

loan portfolio,

the evaluation

loan portfolio

process, general

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

recognized for

tax consequences

attributable to

the financial statement carrying amounts of

existing assets and liabilities and their

respective tax bases and operating loss

31, 2023, our

a concentration of

commercial real

estate loans.

To assess the potential impact

evaluated the impact of two scenarios:

(1) an increase in qualitative factors to simulate a maximum loss scenario and (2) a

reduction to all qualitative

factors to zero.

the first scenario, the

ACL increased by $4.6

million or 24.2% and

the second scenario the

ACL was reduced by

$1.1 million or 6.3%.

This sensitivity analysis provides

a hypothetical result

to assess the sensitivity of the ACL and does not represent a change in management’s judgement.

Deferred tax assets

and liabilities are

recognized for the

future tax consequences

attributable to differences

the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss

and tax credit carryforwards.

assets and liabilities are measured

using enacted tax rates expected

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to

taxable income

temporary differences

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

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

consideration of

all available evidence

likely than not

deferred tax assets and liabilities of a

change in tax rates is recognized in income

in the period that includes the enactment

Management is required to assess whether

a valuation allowance should be

established on the net deferred tax

based on the consideration of

all available evidence using

a more likely than

not standard.

evaluation, management

considers taxable loss

carry-back availability, expectation of sufficient

taxable income, trends

in earnings, the

future reversal

of temporary differences, and available tax planning

The Company recognizes positions taken

or expected to be

taken in a tax

return in accordance with existing accounting

which prescribes

considers taxable

loss carry-back

availability, expectation of

sufficient taxable

income, trends

of temporary differences, and available tax planning strategies.

The Company recognizes

positions taken or

expected to be

tax return in

accordance with existing

guidance on income

taxes which prescribes

a recognition threshold

and measurement

and penalties

tax liabilities, if any, would

be recorded in interest expense and other operating non-interest

expense, respectively.

and measurement process.

Interest and penalties

tax liabilities, if any, would be recorded in interest expense and other operating non-interest expense, respectively.

Non-GAAP Financial Measures

This Form 10-Q

includes financial

information determined

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

Further, management uses these

measures in managing

the Company’s

discussions about

our operations

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

directly comparable

“Reconciliation

Measures” included in this Form 10-Q.

USCB Financial Holdings, Inc.

1 unchanged sentence

Segment Reporting

Management monitors the revenue streams for all its various

products and services.

Management monitors the revenue streams for all its various products and services.

The identifiable segments are not

Accordingly, all

the financial service

operations are

considered by management

aggregated in one

reportable operating

the financial

service operations

are considered

by management

aggregated in

one reportable

Results of Operations

The following

tables present

selected balance

sheet, income

statement, and

profitability ratios

dates indicated

The following tables

present selected balance

sheet, income statement,

and profitability ratios

for the dates

(in thousands, except ratios):

September 30, 2022

March 31, 2023

December 31, 2022

2 unchanged sentences

Loan amounts include deferred fees/costs.

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Consolidated Statements of Operations:

2 unchanged sentences

non-interest expense

Net income (loss) available to common stockholders

Profitability:

1 unchanged sentence

Net interest margin

The Company’s results

of operations

depend substantially on

net interest income

and non-interest income.

The Company’s

operations depend

substantially on

non-interest income.

Other factors

operations include

our provision

losses, non-interest

expenses, and

income taxes.

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

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 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.

Three months ended March 31, 2023 compared to the three months ended March 31, 2022

Net income increased to $5.8 million for the three months ended March 31, 2023 from $4.9 million for the same period

in 2022 due to higher interest income generated by a larger loan portfolio and higher yields.

Net Interest Income

interest-earning

interest-bearing liabilities and

primary driver of

interest-bearing liabilities

core earnings.

income is generated

from interest and

Interest income

from interest

and dividends

interest-earning

USCB Financial Holdings, Inc.

Q3 2022 Form 10-Q

interest-bearing

To evaluate net

interest income, we

measure and monitor

(i) yields on

loans and other

interest-earning assets, (ii)

costs of deposits

and other funding

sources, (iii) net

interest spread, and

(iv) net interest margin.

Net interest spread is

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

To evaluate net interest income,

we measure and monitor (i)

yields on loans and other

interest-earning assets, (ii) the

deposits and other

funding sources,

(iii) net interest

interest margin.

spread is equal

to the difference between yields earned

on interest-earning assets and rates paid

on interest-bearing liabilities.

the annualized

average interest

-earning assets.

non-interest-

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

and stockholders’ equity, also fund

interest-earning assets,

net interest margin includes the indirect benefit of these

non-interest-bearing sources.

interest rates

income divided

interest-earning assets.

interest-bearing

liabilities, as well

as the volume

interest-earning assets and interest-bearing

and non-interest-bearing liabilities,

are usually the

largest drivers

of periodic changes

in net interest

spread, net interest

margin and net

interest income.

asset liability committee

in place asset-liability

management techniques

to manage major

net interest income and net interest margin.

Because non-interest-

bearing sources of funds,

such as non-interest-bearing deposits

and stockholders’

equity, also fund interest-earning

net interest margin includes the indirect benefit of these non-interest-bearing sources.

USCB Financial Holdings, Inc.

Q1 2023 Form 10-Q

The following table contains information related

to average balance sheet, average yields

on assets, and average costs

of liabilities for the periods indicated (in thousands):

Three Months Ended September 30,

Interest-earning assets:

Investment securities

Other interest earnings assets

Changes in the

market interest rates

and interest rates

interest-earning assets or

pay on interest-bearing

liabilities, as

interest-earning assets

Non-interest earning assets

Liabilities and stockholders' equity

Interest-bearing liabilities:

Interest-bearing checking

Money market and savings accounts

Time deposits

interest-bearing deposits

Borrowings and repurchase agreements

interest-bearing liabilities

Non-interest bearing demand deposits

Other non-interest-bearing liabilities

Stockholders' equity

liabilities and stockholders' equity

and interest-bearing

and non-interest-bearing

are usually the largest

drivers of periodic changes

in net interest spread,

net interest margin and

net interest income.

Net interest spread

Net interest margin

Average balances - Daily average balances are used

to calculate yields/rates.

Average loan balances include non-accrual loans.

Interest income

on loans includes accretion of deferred

loan fees, net of deferred loan costs.

At fair value except for securities held to maturity.

Includes FHLB stock.

Net interest spread is the average yield on

total interest-earning assets minus the average

rate on total interest-bearing liabilities.

Net interest margin is the ratio of net interest

income to average total interest-earning assets.

USCB Financial Holdings, Inc.

Q3 2022 Form 10-Q

Nine Months Ended September 30,

asset liability committee (“ALCO”)

has in place asset-liability

management techniques to manage

major factors that affect

net interest income and net interest margin.

The following table

contains information related

to average balance

sheet, average yields

on assets, and

average costs

of liabilities for the periods indicated (dollars in thousands):

Three Months Ended March 31,

Interest-earning assets:

1 unchanged sentence

Other interest-earnings assets

interest-earning assets

Total interest-earning

Non-interest-earning assets

2 unchanged sentences

Interest-bearing checking

Money market and savings accounts

Saving and money market deposits

Time deposits

interest-bearing deposits

Borrowings and repurchase agreements

interest-bearing liabilities

Total interest-bearing

FHLB advances and other borrowings

Total interest-bearing

Non-interest-bearing demand deposits

Other non-interest-bearing liabilities

Total liabilities

Stockholders' equity

liabilities and stockholders' equity

Total liabilities

and stockholders' equity

Net interest income

1 unchanged sentence

Net interest margin

Average balances - Daily average balances are used

to calculate yields/rates.

Average loan balances include non-accrual loans.

Interest income

on loans includes accretion of deferred loan

fees, net of deferred loan costs.

Interest income on loans includes accretion of deferred

loan fees, net of deferred loan costs.

At fair value except for securities held to maturity.

Includes FHLB stock.

Net interest spread is the average yield on

total interest-earning assets minus the average

rate on total interest-bearing liabilities.

Net interest margin is the ratio of net interest

income to average total interest-earning assets.

Three months ended September 30, 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

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 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

increased to 3.47%

for the quarter

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

amount includes FHLB stock.

Net interest spread is the average yield on total interest-earning assets minus the average rate on total interest-bearing liabilities.

Net interest margin is the ratio of net interest income to total interest-earning assets.

Three months ended March 31, 2023 compared to the three months ended March 31, 2022

Net interest income before

the provision for

credit losses was

$16.0 million for the

three months ended

March 31, 2023,

an increase of

$1.6 million or 11.3%, from

$14.4 million for the

same period in 2022.

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.

to higher income from a larger loan portfolio combined with an increase in the weighted average loan yield.

Included with loan

interest income

are PPP interest

fees totaling $1

thousand and $1.0

months ended March 31, 2023 and 2022, respectively.

PPP loan fees are recognized upon loan forgiveness by the SBA.

quarters ended

March 31, 2023 and

was partially

higher interest-bearing

liabilities cost.

attributed to

current interest

market conditions.

USCB Financial Holdings, Inc.

Q1 2023 Form 10-Q

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.

We maintain an adequate ACL

that can mitigate probable

losses inherent

loan portfolio.

The ACL is increased

provision for

The provision for

credit losses

determination of

corresponding

provision for

represents a charge

necessary to establish

for credit losses

management's evaluation, is

provide coverage for

credit losses.

metrics evaluate

non-performing

considers statistical and historical trends and economic conditions

and other applicable factors.

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

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

on how the ACL is calculated.

provision for

losses is impacted

our loan portfolio,

recent historical and

projected future economic

conditions, our internal

assessment of the credit quality of the loan portfolio and net charge-offs.

Three months ended March 31, 2023 compared to the three months ended March 31, 2022

The provision for credit loss was $201 thousand for the three months ended March 31, 2023 compared to no provision

recorded for the same period in 2022.

The primary driver of the provision expense in 2023 was attributable to loan growth.

See “Allowance for Credit Losses” below for further discussion on how the ACL

is calculated.

Non-Interest Income

Our services and products generate service charges and fees, mainly from our depository

Our services and products generate service charges and fees,

mainly from our depository accounts.

We also generate

income from gain on sale of loans though our swap and SBA

In addition, we own and are beneficiaries of the life

insurance policies

employees and

generate income

surrender value

The following table presents the components of non-interest

income for the dates indicated (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

income from gain on sale of

loans though our swap and SBA

In addition, we own

and are beneficiaries of the life

insurance policies on

employees and generate

income on the

increase in the

cash surrender value

The following table presents the components of non-interest income for the dates indicated (in thousands):

Three Months Ended March 31,

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

3 unchanged sentences

non-interest income

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.

Q3 2022 Form 10-Q

Three months ended March 31, 2023 compared to the three months ended March 31, 2022

Non-interest income for

the three months

ended March 31, 2023

increased $125 thousand

or 6.4%, compared

same period in 2022.

increase was primarily driven

by a $305 thousand

increase in fees related

to SWAP loans.

the period ended March 31, 2022 the Company recognized $161 thousand interest recovery from a prior lending customer

This payment reflected the final payment and settlement of lien judgements against the customer.

Non-Interest Expense

The following table presents the components of non-interest

expense for the dates indicated (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

The following table presents the components of non-interest expense for the dates indicated (in thousands):

Three Months Ended March 31,

Salaries and employee benefits

4 unchanged sentences

non-interest expense

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 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

Three months ended March 31, 2023 compared to the three months ended March 31, 2022

Non-interest expense for the three months ended March 31, 2023 increased $564 thousand or 5.9%, compared to the

same period in

The increase was primarily driven by

higher salaries and employee benefits expense

due to new hires

was primarily driven

by higher salaries

and employee benefits

expense due to

and increased salary compensation.

USCB Financial Holdings, Inc.

Q1 2023 Form 10-Q

Provision for Income Tax

Fluctuations in the effective tax rate reflect the effect of the differences in the inclusion or deductibility of certain income

and expenses for

income tax purposes.

Therefore, future

decisions on the

investments we choose

will affect our

Fluctuations in the effective tax

rate reflect the effect of the

differences in the inclusion or deductibility

of certain income

and expenses for income

tax purposes.

Therefore, future decisions

on the investments we

choose 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 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

life insurance policies

employees, purchasing municipal

bonds, and overall levels of taxable income will be important elements in determining our effective tax rate.

Three months ended March 31, 2023 compared to the three months ended March 31, 2022

Income tax expense for both the quarters ended March 31, 2023 and 2022

was $1.9 million.

The effective tax rate for

effective tax

period compared

period in 2021.

primarily because

adjustment of $300 thousand to deferred tax assets which increased the income tax provision.

Statements in this Form 10-Q.

Analysis of Financial Condition

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.

assets at March 31, 2023 were $2.2 billion, an increase of $78.0 million, or 3.7%, over total assets of

loans increased

$73.1 million,

March 31, 2023

December 31, 2022.

Investment Securities

The investment portfolio

managed to provide

liquidity through cash

flows, marketability

and, if necessary,

The investment portfolio is

used and managed to

provide liquidity through cash

flows, marketability and, if

collateral for

2 unchanged sentences

the Company’s

USCB Financial Holdings, Inc.

Q3 2022 Form 10-Q

profitability

consideration the Company’s

risk appetite and

tolerance, manage

the asset composition

and diversification,

consideration the Company’s risk

appetite and tolerance, manage the

asset composition and diversification, and

adequate risk-based capital ratios.

deemed necessary,

The investment

subject to change

depending on the

funding and liquidity

the Company, and the interest

risk management objective

allocation of cash into securities takes into consideration anticipated

future cash flows (uses and sources) and all available

market conditions

and/or unexpected

investment portfolio

composition is

change depending

liquidity needs

Company, and the

interest risk

management objective

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

primarily of securities issued

government-sponsored agencies,

Our investment portfolio consists primarily of securities issued by U.S.

government-sponsored agencies, U.S.

mortgage-backed securities,

3 unchanged sentences

debt securities,

all with varying contractual maturities and coupons.

Due to the optionality embedded in these securities, the final maturities

necessarily represent the

expected life of

all with varying contractual maturities

Due to the optionality

embedded in these securities, the

final maturities

necessarily represent

the portfolio.

securities will be

called or paid

down depending

on capital market conditions and expectations.

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

of the Company

appropriate risk and

return profile as

adherence to the

these securities

on capital market conditions and

expectations.

The investment portfolio

is regularly reviewed by the

Chief Financial Officer,

and the ALCO of

the Company to ensure

an appropriate risk and

return profile as well

as for adherence to

investment policy.

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”).

other-than-temporary-impairment guidance

securities, requiring

losses to be recorded as an allowance rather than through a

permanent write-down.

When evaluating AFS debt securities

under ASC Topic

326, the Company

has evaluated whether

the decline in

fair value is

attributed to credit

losses or other

interest rate

both quantitative

qualitative analyses,

including company

performance analysis,

review of credit

ratings, remaining payment

terms, prepayment speeds

and analysis of

macro-economic conditions.

investment is expected to

recover its price depreciations

over its holding period

as it moves to

maturity and the Company

concluded that no allowance was appropriate.

$415.8 million

respectively,

comprehensive

No gains or losses were recognized to income at

transfer date.

The book value of the AFS securities is adjusted monthly

for unrealized gain or loss as a valuation allowance,

comprehensive

stockholders’

Periodically,

circumstances

indicate that

an unrealized

an other-than-temporary

basis (“OTTI”).

duration of the impairment, the severity

of the event, our intent and

ability to hold the security for a

period of time sufficient

value, recent

events specific

credit events,

debt securities,

deterioration

unrealized loss

write-down recorded

realized loss

under line item

“Gain (loss) on

sale of securities

available-for-sale,

net” of the Consolidated

Statements of Operations.

of September 30,

which management

has classified

Financial Statements in this Form 10-Q.

HTM investment

securities decreased

$96.8 million or

$418.8 million at

September 30, 2022

$524.2 million

payments received

higher unrealized

profitability

September 30,

$39.1 million

portfolio does not have any tax-exempt securities.

December 31, 2022.

Investment securities

decreased due

Company’s profitability

the Company’s

balance sheet

duration according

USCB Financial Holdings, Inc.

Q1 2023 Form 10-Q

September 30, 2022

2023, investment securities with a

market value of $83.5 million were

pledged to secure public deposits

and Fed Borrowing

The investment portfolio does not have any tax-exempt securities.

March 31, 2023

December 31, 2022

13 unchanged sentences

Corporate bonds

The following

average yields,

categorized by

contractual maturity,

for investment

as of September 30, 2022 (in thousands,

The following table

shows the weighted

average yields, categorized

by contractual maturity,

for investment securities

as of March 31, 2023 (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

Loans are the largest

category of interest-earning assets on

the unaudited Consolidated Balance Sheets,

higher yields

interest-earning

liquidity risks in comparison to lower

yield assets.

The Company manages

and mitigates such risks in accordance

typically carry

liquidity risks in 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.

1 unchanged sentence

Q1 2023 Form 10-Q

The following table shows the loan portfolio composition

as of the dates indicated (in thousands):

September 30, 2022

The following table shows the loan portfolio composition as of the dates indicated (in thousands):

March 31, 2023

December 31, 2022

7 unchanged sentences

Allowance for credit losses

$241.4 million

September 30,

commercial real estate

extent, foreign banks

and consumer and

segments had the

most significant

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

loans increased

by $73.1 million or

4.8% at March

compared to December 31,

significant growth partially offset by declines in the residential real estate loan segment.

approximately 62.5% of the total gross loan portfolio as of March 31, 2023.

We do not expect any significant changes over

the foreseeable

the composition

1 unchanged sentence

on commercial

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

in which we operate and of our strategic plan as

strategy since

inception has

been reflective

strategic plan

approved by the Board.

commercial real estate

exposure represents

loans to commercial

businesses secured

by owner-occupied

exposure represents loans to

commercial businesses secured by

owner-occupied

experienced in

2 unchanged sentences

relationship managers

highly competitive

competitive metropolitan

long-term relationships

3 unchanged sentences

portfolio provides

liquidity due

to repayments

or unexpected

September 30, 2022 (in thousands):

additional liquidity

repayments or

The following

table shows maturities

and sensitivity to

interest rate changes

portfolio at March 31,

2023 (in thousands):

Due in 1 year or

10 unchanged sentences

The information

the contractual

maturities of

4 unchanged sentences

balance sheet

composition at the

the analysis,

modification of terms

composition at

any modification

loan’s maturity.

2 unchanged sentences

reviewed, and analyzed by the ALCO.

Decisions on term

rate modifications are discussed as well.

September 30, 2022,

Decisions on term rate modifications are discussed as well.

As of March 31,

2023, approximately 60.5%

adjustable/variable

have fixed rates.

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

and tenors in different periods of time.

have adjustable/variable rates

The adjustable/variable rate

loans re-price to

different benchmarks

contractual characteristics,

material concentrations on

anniversary repricing.

Additionally, it

is important to

USCB Financial Holdings, Inc.

Q1 2023 Form 10-Q

By contractual characteristics,

there are no material concentrations

on anniversary repricing.

Additionally,

it is important to

our loans have

interest rate floors.

loans have interest

This embedded option

protects the Company

from a decrease

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

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

Asset Quality

Our asset quality grading

analysis estimates the capability of

the borrower to repay

the contractual obligation of

Our asset quality

grading analysis estimates

the capability of

the borrower to

repay the contractual

obligation of the

agreement as scheduled or at all.

The Company’s internal credit risk grading system is based on experiences with similarly

The Company’s internal credit risk grading system

is based on experiences with

graded loans.

Internal credit

risk grades are reviewed

at least once a

more frequently as

Internal credit risk grades are

reviewed at least once a year,

and more frequently as needed.

Internal credit

assessment of

may change based

on management’s

assessment of the

results from the

annual review,

1 unchanged sentence

and other developments observed with borrowers.

The internal credit risk grades used by the Company to

assess the credit worthiness of a loan are shown below:

– Loans indicate different levels of satisfactory

financial condition and performance.

The internal credit risk grades used by the Company to assess the credit worthiness of a loan are shown below:

– Loans indicate different levels of satisfactory financial condition and performance.

Special Mention

– Loans classified as special mention have a potential weakness

that deserves management’s

– Loans classified as special mention have a potential weakness that deserves management’s

close attention.

If left uncorrected, these potential weaknesses

may result in deterioration of the repayment

prospects for the loan or of the institution’s

credit position at some future date.

– Loans classified as substandard are inadequately protected

by the current net worth and paying

capacity of the obligator or of the collateral pledged, if

Loans so classified

have a well-defined weakness or

If left uncorrected, these potential weaknesses may result in deterioration of the repayment

prospects for the loan or of the institution’s credit position at some future date.

– Loans classified as substandard are inadequately protected by the current net worth and paying

capacity of the obligator or of the collateral pledged, if any.

Loans so classified have a well-defined weakness or

weaknesses that jeopardize the liquidation of the debt.

They are characterized by the distinct possibility that the

institution will sustain some loss if the deficiencies are

not corrected.

– Loans classified as doubtful have all the weaknesses inherent

in those classified at substandard, with

the added characteristic that the weaknesses make collection

or liquidation in full on the basis of currently existing

institution will sustain some loss if the deficiencies are not corrected.

– Loans classified as doubtful have all the weaknesses inherent in those classified at substandard, with

the added characteristic that the weaknesses make collection or liquidation in full on the basis of currently existing

facts, conditions, and values, highly questionable and improbable.

– Loans classified as loss are considered uncollectible.

Loan credit exposures by internally assigned grades are

as follows for the dates indicated (in thousands):

September 30, 2022

Loan credit exposures by internally assigned grades are as follows for the dates indicated (in thousands):

March 31, 2023

Special Mention

14 unchanged sentences

Non-Performing Assets

The following table presents non-performing assets as

of the dates shown (in thousands,

except ratios):

September 30, 2022

The following table presents non-performing assets as of the dates shown (in thousands, except ratios):

March 31, 2023

December 31, 2022

Non-accrual loans, less non-accrual TDR loans

Non-accrual TDRs

Loans past due over 90 days and still accruing

non-performing loans

5 unchanged sentences

Non-performing loans to total loans

ACL was calculated under CECL methodology for first quarter 2023, and incurred loss methodology for fourth quarter 2022

Non-performing

assets include

categorized as

non-accrual or

restructured,

impaired securities,

troubled debt restructuring

(“TDRs”), other real

estate owned (“OREO”)

and other repossessed

which the collection

or liquidation

is reasonably

uncertain are

a non-accrual

determination is

based on current existing facts concerning collateral values and the paying capacity of

the borrower.

When the collection of

the full contractual

balance is unlikely,

placed on non-accrual

to avoid overstating

the Company’s

loan with increased credit risk.

non-accrual status as of

the date it becomes

90 days past due

and remains in non-accrual

status until it meets

reasonably uncertain are placed on a non-accrual status.

determination is based on current existing facts concerning

collateral values and the paying capacity of the borrower.

When the collection of the full contractual

balance is unlikely, the

loan is placed on non-accrual to avoid overstating the Company’s income for a loan with increased credit risk.

non-accrual status as of the date it becomes

90 days past due and remains in non-accrual status

until it meets the criteria

for restoration to accrual status.

Residential loans, on

the other hand, are placed

on non-accrual status when

the principal

non-accrual status

principal and interest

payments for a period

of six months

and the Company

has a documented

expectation of repayment

of the remaining contractual principal and interest or the

loan becomes secured and in the process of collection.

that is experiencing

financial difficulties

the Company grants

a loan concession.

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

Residential loans, on the other

hand, are placed on non-accrual status when the principal

or interest becomes

due and unpaid

remains in non-accrual

status until it

meets the criteria

principal and interest payments for

a period of six months

and the Company has a

documented expectation of repayment

of the remaining contractual principal and interest or the loan becomes secured and in the process of collection.

difficulties.

determination

accordance with the

original terms of

line of credit.

The concessions are

debtor in various

including interest

rate reductions,

potential losses.

The following tables present performing and non-performing

TDRs at the dates indicated (in thousands):

September 30, 2022

December 31, 2021

Accrual Status

Residential real estate

Commercial real estate

Commercial and industrial

Consumer and other

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.

principal forgiveness,

maturity date,

waiver, or deferral

concessions intended to minimize potential losses.

For further discussion on non-performing loans and borrowers experiencing financial difficulties, see Note 3 “Loans” to

the unaudited Consolidated Financial Statements on this Form 10-Q.

Allowance for Credit Losses

On January 1, 2023,

the Company adopted FASB

ASU 2016-13, which introduced

the current expected credit

(CECL) methodology

expected credit

the remaining

expected future credit losses on outstanding loans.

Additionally, qualitative adjustments are made to the ACL when,

calculations.

See Note 3 “Loans” for more information on the allowance for credit losses on this Form 10-Q.

USCB Financial Holdings, Inc.

Q1 2023 Form 10-Q

Allowance for Credit Losses

characteristics and management

evaluates the ACL on

each segment and on

a regular basis to maintain

the allowance at

changes in the composition and size of the loan portfolio

and the overall credit worthiness of the borrowers.

Additionally,

qualitative adjustments

the ACL when,

based on management’s

judgment, there are

impacting the allowance estimate not considered by the

quantitative calculations.

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

type for the periods indicated (in thousands):

The following table presents

ACL and net charge-offs to

average loans by type

for the periods indicated

(in thousands):

and Industrial

Three Months Ended September 30, 2022

Three Months Ended March 31, 2023

Beginning balance

Cumulative effect of adoption of accounting

Provision for credit losses

2 unchanged sentences

Net charge-offs to average loans

Nine Months Ended September 30, 2022

Beginning balance

Provision for credit losses

Ending Balance

Average loans

Impact of CECL adoption as of January 1, 2023

Provision for credit losses excludes $84 thousand reduction due to unfunded commitments included in other liabilities.

and Industrial

Three Months Ended September 30, 2021

Beginning balance

Provision for credit losses

Ending Balance

Average loans

Net charge-offs to average loans

Nine Months Ended September 30, 2021

Three Months Ended March 31, 2022

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 September 30,

2022, the combined

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.

Customer deposits are the

primary funding source for

the Bank’s growth.

Through our network of

banking centers, we

offer a competitive array of deposit

accounts and treasury management services designed

to meet our customers’ business

As of March 31, 2023, the combined cash surrender value

of all bank-owned life insurance (“BOLI”) policies was $43.0

Changes in cash surrender value are

recorded to non-interest income in the unaudited

Consolidated Statements of

The Company had BOLI

policies with five insurance carriers.

The Company is the beneficiary

of these policies.

Customer deposits are the primary funding source for the Bank’s

Through our network of banking centers, we

offer a competitive

array of deposit

accounts and treasury

management services designed

customers’ business

small-to-medium

owners and operators of these SMBs, as well as the retail/consumer

relationships of the employees of these businesses.

The following table

presents the daily

average balance and

average rate paid

on deposits by

owners and operators of these SMBs, as well as the retail/consumer relationships of the employees of these businesses.

The following table presents the

daily average balance and

average rate paid on deposits

by category for the

presented (in thousands, except ratios):

Three Months Ended September 30,

Three Months Ended March 31,

Average Balance

4 unchanged sentences

Time deposits

$250 thousand

$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

USCB Financial Holdings, Inc.

Q1 2023 Form 10-Q

granular deposit

portfolio with

outstanding balances

commercial deposits,

collateralized.

approximately

thousand deposits accounts with the

majority in personal accounts, approximately

12 thousand or 64.4%.

deposits adjusted

collateralized portion

compared to December 31, 2022

and below the 2022 average.

The estimated average account

size of our deposit portfolio

Deposit Account Registry Service (“CDARS”) deposit products to fully insure our clients.

accounts at the

Company per account

Total estimated uninsured deposits adjusted for

collateralized public deposits

were $1.0 billion and $1.1 billion at March 31, 2023 and December 31, 2022, respectively.

The following table shows scheduled maturities of uninsured time deposits as of March 31, 2023 (in thousands):

March 31, 2023

Three months or less

3 unchanged sentences

Other Liabilities

The Company collects from commercial loan customers

funds which are held in escrow for future payment of

The Company collects from commercial loan customers funds which are held in escrow for future payment of real

estate taxes and insurance.

These escrow funds are disbursed

by the Company directly to the insurance companies

These escrow funds are disbursed by the Company directly to the insurance companies and

taxing authority of the borrower.

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.

As of March 31, 2023 escrow balances totaled $8.3 million compared to $3.5 million at December 31, 2022.

we are eligible

advances with

various terms

to obtain 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,

accessibility of

additional funding allows us

to efficiently and timely

meet both expected and unexpected

outgoing cash flows and

needs without adversely affecting either daily operations or the financial condition of the Company.

March 31, 2023,

$120.0 million

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 September 30, 2022 (in thousands):

advances outstanding

rate of 4.15%.

Maturity dates for

the advances are

between third quarter

2023 and third

quarter 2025 as

detailed in the

The following table presents the FHLB fixed rate advances as of March 31, 2023 (in thousands):

Interest Rate

4 unchanged sentences

August 17, 2023

December 22, 2023

January 24, 2028

correspondent

fluctuations in our daily cash balances.

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

lines of credit.

fluctuations in our daily

cash balances.

March 31, 2023, there were

no outstanding balances with

the Fed Funds lines

Off-Balance Sheet Arrangements

in various financial

transactions in

our operations

various financial transactions

in our operations

that, under GAAP,

meet the financing needs

of our customers we may

include commitments to extend

credit and standby

included on the

meet the financing needs of our customers we may

include commitments to extend credit and standby letters of

commitments involve

credit, market,

USCB Financial Holdings, Inc.

Q1 2023 Form 10-Q

amount recognized

2 unchanged sentences

collateral policies

commitments than

for on-balance

commitments than we

do for on-balance

are not aware

of any accounting

incurred by funding

these commitments;

-balance sheet

recorded under

liabilities on the unaudited Consolidated Balance Sheets.

Since commitments associated with letters of

credit and commitments to extend

credit may expire unused, the

Since commitments associated

with letters of

credit and commitments

to extend credit

may expire unused,

requirements.

commitments outstanding as of the dates indicated (in thousands):

September 30, 2022

March 31, 2023

December 31, 2022

1 unchanged sentence

Standby and commercial letters of credit

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

expire without being

fully drawn, the

total commitment

amounts disclosed

necessarily represent

Commitments to extend credit are agreements to

lend funds to a client, as long as

there is no violation of any condition

contract, for

Commitments generally

other termination

commitments are

expire without being fully

drawn, the total commitment

amounts disclosed above do

not necessarily represent future

requirements.

Unfunded lines of credit represent unused portions of credit facilities to our current borrowers that represent no change

Unfunded lines of credit represent unused

portions of credit facilities to our

current borrowers that represent no change

in credit risk in our portfolio.

of credit generally have variable interest

The maximum potential amount

payments we could

be required to

make is represented

by the contractual

amount of the

commitment, less

the amount of

Lines of credit generally have variable interest rates.

The maximum potential amount of future

payments we could be

required to make is

represented by the contractual

amount of the commitment,

less the amount of

any advances made.

Letters of credit are

conditional commitments issued

by us to guarantee

the performance of a

client to a third

the event of nonperformance by

the client in accordance with the

terms of the agreement with the

required to fund

the commitment.

Letters of credit are conditional commitments issued by

us to guarantee the performance of a

client to a third party.

the event of nonperformance by the client in accordance with the terms of the agreement with the third party,

required to fund the

If the commitment

is funded, we

would be entitled

to seek recovery

from the client

the underlying collateral,

which can include

commercial real estate,

physical plant and

is funded, we would

be entitled to seek

recovery from the client

the underlying

collateral, which

commercial real

estate, physical

property, inventory, receivables, cash

1 unchanged sentence

Asset and Liability Management Committee

Senior management is responsible for ensuring that Board

approved strategies, policies, and procedures for managing and

mitigating risks are appropriately executed within the designated

lines of authority and responsibility in a timely

management and

liability management

Senior management is responsible

for ensuring that Board

approved strategies, policies, and

procedures for managing and

mitigating risks are appropriately executed within the designated lines of authority and responsibility in a timely manner.

establishment,

implementation,

mitigation strategies, ALM related policies, ALCO procedures

and risk tolerances and appetite.

While some degree

of IRR (“Interest

Rate Risk”) is

inherent to the banking

believe our ALCO

place sound risk management practices to identify,

quantify, monitor,

and limit IRR exposures.

USCB Financial Holdings, Inc.

Q3 2022 Form 10-Q

mitigation strategies, ALM related policies, ALCO procedures and risk tolerances and appetite.

While some degree of

IRR (“Interest Rate Risk”)

is inherent to the

banking business, we believe

our ALCO has put

place sound risk management practices to identify, quantify,

monitor, and limit IRR exposures.

When assessing

the consolidated

reduced earnings or outright losses could adversely affect

the Company’s liquidity,

performance, and capital adequacy.

Income simulations

earnings under

balance sheet,

reduced earnings or outright losses could adversely affect the Company’s liquidity, performance, and capital adequacy.

Income simulations are

assess the impact

of changing rates

on earnings under

different rates

5 unchanged sentences

interest rates,

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

twists of the yield curve.

Static simulation models are

based on current exposures and

assume a constant balance sheet with

no new growth.

Dynamic simulation analysis

utilized to have a

more comprehensive assessment

This simulation

relies on detailed

assumptions outlined in

budget and strategic plan, and in assumptions regarding changes in

existing lines of business, new business, management

non-parallel changes such as

changing slopes (flat and

steeping) and twists of

the yield curve.

simulation models are

based on current

exposures and assume

a constant balance

sheet with no

simulation analysis is

utilized to have a more comprehensive assessment

This simulation relies on

detailed assumptions outlined in our

budget and strategic plan,

and in assumptions regarding

changes in existing lines

of business, new business,

strategies and client expected behavior.

scenarios (parallel and non-parallel).

The economic value approach focuses on a longer-term time horizon and captures all

future cash flows expected

from existing assets and

The economic value

model utilizes a static

approach in that

economic value approach focuses on

a longer-term time horizon and

future cash flows expected from existing assets and liabilities.

The economic value model utilizes a static approach in

incorporate new

balance sheet.

USCB Financial Holdings, Inc.

Q1 2023 Form 10-Q

Market and Interest Rate Risk Management

According to our last

ALCO model run as

of September 30, 2022,

we are net interest

income neutral for year

asset-sensitive

generally reprice

According to our

ALCO model, as

2023, we were

a liability sensitive

Bank for year

one modeling and

sensitive for year two modeling.

Asset sensitivity indicates that our assets generally reprice faster than our liabilities, which

a favorable impact

interest income when

market interest rates

Liability sensitivity

indicates that

our liabilities generally

reprice faster than

our assets, which

favorable impact to

net interest income

interest rates increase.

interest rates decrease.

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

assumptions in the model,

our actual results may,

used to calculate

the impact of

interest rate

variations on

income, such as asset

prepayment speeds, non-maturity deposit

price sensitivity,

pricing correlations, deposit truncations

and decay rates, and key interest rate drivers.

Because of the inherent use of these estimates and assumptions in the

model, our actual results may,

and most likely

will, differ from static measures results.

In addition, static measures like EVE

do not include actions that management

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

In addition, static measures like EVE do not include actions that management may

undertake to manage the risks in response

to anticipated changes in interest rates

or client deposit behavior.

As part of our

balance sheet

management has

either increase

decrease liability

duration to reduce

asset sensitivity,

or to decrease

asset duration and

increase liability duration

asset duration

decrease liability duration to

reduce asset sensitivity,

or to decrease asset

duration and increase liability

duration in order

to increase asset sensitivity.

September 30, 2022,

remain mostly

estimated NIM

case scenario

According to our model, as of March 31, 2023, NIM most likely will decrease for year one and should increase for year

two under static rate

scenarios (-400 basis points

or +400 basis points).

For the static forecast

in year one, the

NIM will decrease

from the base case

a +400 basis points

Additionally,

discounted cash

utilizing an EVE approach,

we analyze the

risk to capital

from the effects

of various interest

rate scenarios through

a long-term 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

as a Company’s

capacity to meet

collateral obligations at

a reasonable cost.

an adequate level of liquidity depends on the Company’s ability to

efficiently meet both expected and unexpected cash flow

and collateral needs without adversely affecting

either daily operations or the financial condition of the

between the economic

assets and the

economic value of

our liabilities,

liquidation value.

sheet composition,

expected, our

model stipulates

that an increase of rates will have a negative impact on the EVE and lower rates and positive impact.

Results and analysis

are presented quarterly to the ALCO, and strategies are defined.

collateral obligations

reasonable cost.

an adequate level of liquidity

depends on the Company’s ability

to efficiently meet both expected

and unexpected cash flow

and collateral needs without adversely affecting either daily operations or the financial condition of the Company.

Liquidity risk

2 unchanged sentences

obligations as

because of an inability

to liquidate assets or

obtain relatively adequate funding.

Company’s obligations, and the funding

because of an

inability to liquidate

assets or obtain

relatively adequate funding.

The Company’s obligations,

and the funding

significantly

quality of our assets and the cash flow profiles of our on-

and off-balance sheet obligations.

monitors situations

include funding

mismatches, market

constraints on

assets (particularly

investments) into

cash or in accessing sources of funds (i.e., market liquidity),

and contingent liquidity events.

USCB Financial Holdings, Inc.

Q3 2022 Form 10-Q

Changes in macroeconomic conditions, as well as exposure

to credit, market, operational, legal and reputational

cybersecurity risk,

an unexpected

the Company’s

liquidity risk

quality of our assets and the cash flow profiles of our on- and off-balance sheet obligations.

outflows, management

regularly monitors

situations that

increased liquidity

These include

funding mismatches, market

constraints on the

ability to convert

assets (particularly investments)

cash or in accessing sources of funds (i.e., market liquidity), and contingent liquidity events.

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

such as cybersecurity

risk, could have

an unexpected impact

on the Company’s

liquidity risk profile

and are factored

the assessment of liquidity and the ALM framework.

Management has established

a comprehensive and

holistic management process for

identifying, measuring, monitoring

integrated into our risk management processes,

Contingency Funding Plan and ALM policy.

Critical elements of our liquidity

risk management include:

effective corporate governance consisting of

oversight by the

Board and active

involvement of senior

appropriate strategies, policies,

procedures, and limits

used to identify

Management has

established a

comprehensive and

holistic management

identifying, measuring,

integrated into our risk management processes, Contingency Funding Plan and ALM policy.

Critical elements of

our liquidity risk

management include:

corporate governance consisting

of oversight by

active involvement

strategies, policies,

procedures, and

and mitigate liquidity risk;

comprehensive liquidity risk measurement and

monitoring systems (including assessments of the

current and prospective cash flows or sources and uses of funds) that are commensurate with the complexity and

comprehensive liquidity risk

measurement and monitoring systems

(including assessments of

current and prospective cash flows

or sources and uses of

funds) that are commensurate with

the complexity and business

activities of

active management

liquidity and

appropriately diverse

management of intraday

liquidity and collateral;

an appropriately

comprehensive

funding plans

that sufficiently address

potential adverse liquidity

events and emergency

requirements;

that sufficiently

address potential

adverse liquidity

emergency cash

flow requirements;

institution’s

repayment and maturity of loans and investment security

Other potential funding sources include

federal funds

USCB Financial Holdings, Inc.

Q1 2023 Form 10-Q

repayment and maturity of loans and investment security cash flows.

Other potential funding sources include federal funds

purchased, brokered certificates

1 unchanged sentence

certificates of deposit,

and borrowings

The Bank Term Funding Program, and

from the FHLB.

resources to be compromised at this time.

Accordingly, our liquidity resources were adequate

to fund loans and meet other

cash needs as necessary.

Capital Adequacy

September 30,

well capitalized

March 31, 2023,

capitalized under

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,

follow the capital conservation buffer framework, and as of March

31, 2023, we exceeded the capital conversation buffer

ratios, according

actual ratios.

The following

table presents

indicated (in thousands,

except ratios).

3 unchanged sentences

Action Provisions

September 30, 2022:

March 31, 2023

risk-based capital

USCB Financial Holdings, Inc.

Tier 1 risk-based capital

USCB Financial Holdings, Inc.

Common equity tier 1 capital

USCB Financial Holdings, Inc.

Leverage ratio

USCB Financial Holdings, Inc.

December 31, 2022:

3 unchanged sentences

Leverage ratio

As of December 31, 2021, the regulatory capital

ratios for both USCB Financial Holdings, Inc.

Century Bank were the same since there

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

The Company is not subject to capital

ratios imposed by Basel III on bank

holding companies because the Company is

deemed to be a small bank holding company.

Impact of Inflation

which require the measurement of financial

position and operating results in terms

of historical dollars, without considering

the changes in the

relative purchasing power

of money over time

due to inflation.

impact of inflation is

reflected in the

which require the measurement of financial position and operating results in terms of historical dollars, without considering

the changes in the relative purchasing power

of money over time due to inflation.

impact of inflation is reflected in the

increased cost of operations.

Unlike most industrial companies,

nearly all our assets and

liabilities are monetary in

interest rates have a

greater impact on our

performance than do the

effects of general levels

of inflation.

of high inflation

are often accompanied

by relatively higher

interest rates, and

periods of low

inflation are accompanied

Unlike most industrial companies, nearly all our assets and liabilities

are monetary in nature.

interest rates have

a greater impact

on our performance

effects of general

levels of inflation.

of high inflation are often

accompanied by relatively higher interest rates,

and periods of low inflation

are accompanied by

relatively lower interest rates.

As market interest rates

rise or fall in relation

to the rates earned

on loans and investments,

rise or fall in relation to the

rates earned on loans and investments,

respectively.

1 unchanged sentence

Recently Issued Accounting Pronouncements

Recently issued accounting

pronouncements are discussed

in Note 1 “Summary

of Significant Accounting Policies”

the unaudited Consolidated Financial Statements in this

Recently issued accounting pronouncements are discussed in Note 1

“Summary of Significant Accounting Policies” to

the unaudited Consolidated Financial Statements in this Form 10-Q.

USCB Financial Holdings, Inc.

Q1 2023 Form 10-Q

Reconciliation and Management Explanation of Non

-GAAP Financial Measures

supplemental information

for evaluating

the Company’s

underlying performance

management uses

Reconciliation and Management Explanation of Non-GAAP Financial Measures

supplemental information for evaluating

the Company’s underlying

performance trends.

management uses these

operations and performance.

Operating performance

measures should be

viewed in addition

as an alternative

measures that may be presented by other

The following table reconciles the non-GAAP financial measurement

measures should be viewed

in addition to, and

not as an alternative

substitute for,

measures determined

in accordance

necessarily comparable

measures that may be

presented by other companies.

The following table reconciles

the non-GAAP financial

of operating net income available

to common stockholders for the periods presented (in thousands,

except per share data):

to common stockholders for the

periods presented (in thousands, except

per share data):

USCB Financial Holdings, Inc.

Q1 2023 Form 10-Q

USCB FINANCIAL HOLDINGS, INC.

NON-GAAP FINANCIAL MEASURES (UNAUDITED)

(Dollars in thousands)

As of or For the Three Months Ended

6 unchanged sentences

Operating net income:

Net gains (losses) on sale of

Tax effect on sale of securities

Net gains (losses) on sale of securities

on sale of securities

Operating net income

Operating PTPP income:

Net gains (losses) on sale of

Net gains (losses) on sale of securities

Operating PTPP income

7 unchanged sentences

Operating return on average assets

Operating return on average equity:

Operating net income

Average equity

Operating return on average equity

Operating Revenue:

Net interest income

Non-interest income

Net gains (losses) on sale of securities

Operating revenue

Operating Efficiency Ratio:

Total non-interest

Operating revenue

Operating efficiency ratio

USCB Financial Holdings, Inc.

Q1 2023 Form 10-Q

USCB FINANCIAL HOLDINGS, INC.

NON-GAAP FINANCIAL MEASURES (UNAUDITED)

(Dollars in thousands, except per share data)

As of or For the Three Months Ended

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

Total stockholders' equity

Total stockholders'

Intangible assets

Preferred stock

Tangible stockholders' equity

Tangible stockholders'

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

Class A common shares

Class B common shares

Total common shares issued and outstanding

Tangible book value per common share

Operating net income available to common stockholders:

Preferred dividends

Exchange and redemption of preferred shares

Net income (loss) available to common stockholders

Exchange and redemption of preferred

Operating net income avail.

to common stock

Allocation of operating net income per common

Class A common stock

Class B common stock

Weighted average shares outstanding:

Class A common stock

Class B common stock

Class A common stock

Net income (loss) per diluted share

Exchange and redemption of preferred

Operating net income per diluted share

Class B common stock

Net loss per diluted share

Exchange and redemption of preferred

Operating net income per diluted share

The Company believes these non-GAAP measurements are

a key indicator of the ongoing earnings power

of the Company.

During the quarter ended September 30, 2021,

47,473 shares of Class C preferred stock and

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

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.

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,

basic net loss per share is the same as

diluted net loss per share as the inclusion of all

common shares outstanding would have been antidilutive.

During the quarter ended December 31, 2021,

the Company entered into agreements with

the Class B shareholders to exchange all

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.

Total common shares

issued and outstanding

Tangible book value

per common share

Operating diluted net income per common share:

Operating net income

Total weighted average

diluted shares of common stock

Operating diluted net income per common share:

Tangible Common Equity/Tangible

Tangible stockholders'

Tangible assets

Tangible Common

Equity/Tangible

The Company believes these non-GAAP measurements are key indicators of the ongoing earnings power of the Company.

Excludes the dilutive effect, if any, of

shares of common stock issuable upon exercise of outstanding stock options.

USCB Financial Holdings, Inc.

1 unchanged sentence

Quantitative and Qualitative Disclosures About Market Risk

As a smaller reporting company,

we are not required to provide the information required

by this item.

As a smaller reporting company, we are not required to provide the information required by this item.

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