What changed in this filing

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Item 1. Financial Statements

2023-08-11 compared with 2023-05-12 · 1176 added, 940 removed, 677 unchanged (76% of the section changed)

2 unchanged sentences

Consolidated Balance Sheets – Unaudited

(Dollars in thousands,

except share data)

March 31, 2023

(Dollars in thousands, except share data)

June 30, 2023

December 31, 2022

1 unchanged sentence

Interest-bearing deposits in banks

Total cash and cash

Investment securities held to maturity, net of allowance

for credit losses of $

(fair value $

Total cash and cash equivalents

Investment securities held to maturity, net of allowance for credit losses of $

, respectively (fair

, respectively)

1 unchanged sentence

Federal Home Loan Bank stock, at cost

Loans held for investment, net of allowance of $

Loans held for investment, net of allowance

, respectively

13 unchanged sentences

Total liabilities

Commitments and contingencies (See Notes 5 and 10)

Commitments and contingencies (See Notes 5

STOCKHOLDERS' EQUITY:

1 unchanged sentence

per share liquidation preference;

issued and outstanding as of March 31, 2023 and December 31, 2022

issued and outstanding as of June 30, 2023

and December 31, 2022

Preferred stock - Class D;

per share liquidation preference;

issued and outstanding as of March 31, 2023 and December 31, 2022

issued and outstanding as of June 30, 2023

and December 31, 2022

Preferred stock - Class E;

per share liquidation preference;

issued and outstanding as of March 31, 2023 and December 31, 2022

issued and outstanding as of June 30, 2023

and December 31, 2022

Common stock - Class A Voting;

shares authorized;

as of March 31, 2023,

as of June 30, 2023,

issued and outstanding as of December 31,

1 unchanged sentence

shares authorized;

outstanding as of March 31, 2023 and December 31, 2022

outstanding as of June 30, 2023 and December

Additional paid-in capital on common stock

1 unchanged sentence

Accumulated other comprehensive loss

Total stockholders'

Total liabilities

and stockholders' equity

The accompanying notes are an integral part of these unaudited consolidated financial statements.

Total stockholders' equity

Total liabilities and stockholders' equity

The accompanying notes are an integral part of

these unaudited consolidated financial statements.

USCB Financial Holdings, Inc.

4 unchanged sentences

except per share data)

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Interest income:

2 unchanged sentences

Interest-bearing deposits in financial institutions

Total interest

Total interest income

Interest expense:

3 unchanged sentences

Federal Home Loan Bank advances and other borrowings

Total interest

Net interest income before provision for credit losses

Total interest expense

Net interest income before provision for

credit losses

Provision for credit losses

Net interest income after provision for credit losses

Net interest income after provision for

credit losses

Non-interest income:

(Loss) gain on sale of securities available for sale, net

(Loss) gain on sale of securities available

for sale, net

Gain on sale of loans held for sale, net

1 unchanged sentence

Other non-interest income

Total non-interest

Total non-interest income

Non-interest expense:

4 unchanged sentences

Other operating expense

Total non-interest

Total non-interest expense

Income before income tax expense

3 unchanged sentences

Net income per share, diluted

The accompanying notes are an integral part of these unaudited consolidated financial statements.

The accompanying notes are an integral part of

these unaudited consolidated financial statements.

USCB Financial Holdings, Inc.

1 unchanged sentence

USCB FINANCIAL HOLDINGS, INC.

Consolidated Statements of Comprehensive Income (Loss) - Unaudited

Consolidated Statements of Comprehensive Income

(Loss) - Unaudited

(Dollars in thousands)

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Other comprehensive income (loss):

Unrealized gain (loss) on investment securities

Amortization of net unrealized (loss) gain on securities transferred from available-for-sale to held-to-maturity

Reclassification adjustment for loss (gain) included in net income

Total other comprehensive

income (loss), net of tax

Total comprehensive

income (loss)

The accompanying notes are an integral part of these unaudited consolidated financial statements.

Unrealized loss on investment securities

Amortization of net unrealized (loss) gain on

securities transferred from

available-for-sale to held-to-maturity

Reclassification adjustment for loss (gain) included

in net income

Unrealized gain on cash flow hedge

Total other comprehensive income (loss), net of tax

Total comprehensive income (loss)

The accompanying notes are an integral part of

these unaudited consolidated financial statements.

USCB Financial Holdings, Inc.

1 unchanged sentence

USCB FINANCIAL HOLDINGS, INC.

Consolidated Statements of Changes in Stockholders’ Equity - Unaudited

Consolidated Statements of Changes in Stockholders’

Equity - Unaudited

(Dollars in thousands,

5 unchanged sentences

Comprehensive

Total Stockholders'

Balance at December 31, 2022

Cumulative effect of adoption of accounting principle related to ASC 326

Adjusted beginning balance after cumulative effect adjustment

Other comprehensive income

Stockholders'

Balance at April 1, 2023

Cumulative tax effect of adoption of accounting

principle related to ASC 326

Adjusted beginning balance after cumulative

effect adjustment

Other comprehensive loss

Repurchase of Class A common stock

1 unchanged sentence

Stock based compensation

Balance at March 31, 2023

Balance at June 30, 2023

Balance at April 1, 2022

Other comprehensive loss

Stock-based compensation

Balance at June 30, 2022

Additional Paid-in

Capital on Common

Accumulated Deficit

Accumulated Other

Comprehensive

Stockholders'

Balance at January 1, 2023

After tax cumulative effect of adoption of accounting

principle related to ASC

Adjusted beginning balance after cumulative

effect adjustment

Other comprehensive loss

Repurchase of Class A common stock

Restricted stock issued

Stock-based compensation

Balance at June 30, 2023

Balance at January 1, 2022

Other comprehensive loss

Exercise of stock options

Stock-based compensation

Balance at March 31, 2022

Balance at June 30, 2022

The accompanying notes are an integral

part of these unaudited consolidated financial

USCB Financial Holdings, Inc.

3 unchanged sentences

(Dollars in thousands)

Three Months Ended March 31,

Six Months Ended June 30,

Cash flows from operating activities:

Adjustments to reconcile net income to net cash provided by operating activities:

Adjustments to reconcile net income

to net cash provided by operating activities:

Provision for credit losses

Depreciation and amortization

(Accretion) Amortization of premiums on securities, net

(Accretion) amortization of premiums on

securities, net

Accretion of deferred loan fees, net

2 unchanged sentences

Gain on sale of loans held for sale

Increase in cash surrender value of bank owned life insurance

Increase in cash surrender value of bank owned

life insurance

Decrease in deferred tax assets

4 unchanged sentences

Cash flows from investing activities:

Purchase of investment securities held to maturity

Proceeds from maturities and pay-downs of investment securities held to maturity

Purchase of investment securities available for sale

Proceeds from maturities and pay-downs of investment securities available for sale

Proceeds from sales of investment securities available for sale

Purchase of investment securities held

Proceeds from maturities and pay-downs of investment

securities held to maturity

Purchase of investment securities available

Proceeds from maturities and pay-downs of investment

securities available for sale

Proceeds from sales of investment securities

available for sale

Net increase in loans held for investment

2 unchanged sentences

Proceeds from the sale of loans held for sale

Proceeds from the redemption of Federal Home Loan Bank stock

Proceeds from the redemption of Federal Home

Loan Bank stock

Purchase of Federal Home Loan Bank stock

1 unchanged sentence

Cash flows from financing activities:

Proceeds from issuance of Class A common stock, net

Proceeds from issuance of Class A common

Repurchase of Class A common stock

4 unchanged sentences

Net increase in cash and cash equivalents

Cash and cash equivalents at beginning of period

Cash and cash equivalents at beginning

Cash and cash equivalents at end of period

Supplemental disclosure of cash flow information:

Supplemental disclosure of cash flow

Interest paid

Supplemental schedule of non-cash investing and financing activities:

Transfer of loans held for investment to loans held for sale

The accompanying notes are an integral part of these unaudited consolidated financial statements.

Supplemental schedule of non-cash investing

and financing activities:

Transfer of loans held for investment to loans held

Lease liability arising from obtaining right-of-use

The accompanying notes are an integral

part of these unaudited consolidated financial

USCB FINANCIAL HOLDINGS, INC.

2 unchanged sentences

Q2 2023 Form 10-Q

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

USCB Financial Holdings, Inc., a Florida corporation incorporated in 2021, is a bank

SUMMARY OF SIGNIFICANT

ACCOUNTING POLICIES

USCB Financial Holdings, Inc., a

Florida corporation incorporated

in 2021, is a bank

holding company with one wholly

owned subsidiary, U.S.

Bank (the “Bank”), together referred to as “the Company”.

owned subsidiary,

Century Bank (the

“Bank”), together referred to

as “the Company”.

established in 2002,

state-chartered, non-member

financial institution

providing financial services

through its banking

state-chartered, non-member financial institution providing financial

services through its banking

centers located

in South Florida.

The Bank owns

a subsidiary,

Florida Peninsula Title

LLC, that offers

owns a subsidiary,

Florida Peninsula

our clients title

insurance policies for

insurance policies

transactions closed at the Bank.

in the State of Florida and

approved by the Department of

Insurance Regulation,

Florida Peninsula Title LLC began operations in 2021.

Licensed in the State of Florida and approved by the Department of Insurance Regulation,

Florida Peninsula Title LLC began operations

Basis of Presentation

The accompanying unaudited consolidated financial

statements have been prepared in accordance

with instructions to

Form 10-Q and do not

include all the information and footnotes

required by U.S.

The accompanying unaudited consolidated financial statements have been prepared in accordance with instructions to

Form 10-Q and

do not include all

the information and

footnotes required by U.S.

generally accepted accounting

periods presented have

been included.

unaudited consolidated financial

statements should be

read in conjunction

consolidated financial

statements and

related notes

the Company’s

Annual Report

periods presented

unaudited consolidated

financial statements

Form 10-K/A for the year ended December 31, 2022.

4 unchanged sentences

management makes estimates and assumptions based

estimates and

assumptions affect

and assumptions

the financial

most significant estimates

impacting the Company’s

consolidated financial statements

are the allowance

for credit losses

and income taxes.

most significant

estimates impacting

the Company’s

consolidated financial

statements are

the allowance

(ACL) and income taxes.

Reclassifications

Certain amounts in the

consolidated financial statements have

been reclassified to conform

to the current presentation.

Reclassifications had no impact on the net income or stockholders’ equity of the Company.

Recently Issued Accounting Standards

Certain amounts in the consolidated financial statements have been reclassified to conform to

the current presentation.

Reclassifications had no impact on the net income or stockholders’

equity of the Company.

Adoption of New Accounting Standards

Measurement of Credit Losses on Financial Instruments

Measurement of Credit Losses on Financial Instruments, as

amended, which replaces the incurred loss methodology with

Measurement of Credit Losses

on Financial Instruments,

as amended, which replaces

the incurred loss methodology

loss methodology

current expected

(CECL) methodology.

receivables and

held-to-maturity debt

credit exposures

instruments) and

net investments

recognized by

in accordance

ASC 326 amended the accounting

for available-for-sale debt securities.

change is to require credit

current expected credit

The measurement

held-to-maturity

ASC 326 amended

the accounting for

available-for-sale debt securities.

One such change

is to require credit

write-down on

available-for-sale debt

securities, that

management does

intend to sell or believes that it is more likely than not they will be required to sell.

available-for-sale

debt securities,

that management

intend to sell or believes that it is more likely than not they

will be required to sell.

estimates the

3 unchanged sentences

available information,

Historical credit losses provide the basis for estimation of expected credit losses.

Qualitative adjustments are applied to the

USCB FINANCIAL HOLDINGS, INC.

2 unchanged sentences

Q2 2023 Form 10-Q

Historical credit losses provide

the basis for estimation of

expected credit losses.

Qualitative adjustments

are applied to the

expected credit

losses estimated

loan portfolio

limitations of

losses estimated for

potential limitations of

the quantitative

is used to aid management in the assessment of qualitative factor adjustments applied to expected credit losses.

regression analyses

included, and

is used to aid management in the assessment of

qualitative factor adjustments applied to expected credit

where observed

credit losses

economic factors were used to determine suitable loss drivers

for modeling the lifetime rates of probability of default (PD).

fundamentally utilizes an expected discounted cash

flow (DCF) analysis for

economic factors were used

to determine suitable

loss drivers for modeling

the lifetime rates of

probability of default (PD).

fundamentally utilizes an

expected discounted cash

flow (DCF) analysis

loan portfolio segments.

The DCF analysis

instrument-level and

incorporates an

instrument-level

loan-specific

determine the lifetime

expected loss attributable

to each instrument.

segment-implied

determine the lifetime expected

loss attributable to each

An implicit "hypothetical

2 unchanged sentences

helps establish

instrument is the difference between the sum of the present value of future cash

flows and the book balance of the loan at

instrument is the difference

between the sum of the present

value of future cash flows and

the book balance of

the measurement date.

Management elected

the Remaining

Life (WARM) methodology

Management elected the

Remaining Life (WARM)

methodology for five

portfolio segments.

a long-term average loss rate is calculated

and applied on a quarterly basis

for the remaining life of the pool.

each of these

a long-term average

loss rate is calculated

and applied on a

quarterly basis for

the remaining life of

attrition-based

measurements based on the loan portfolio.

For loans collectively

At adoption of

billion of loan

receivables or

% were evaluated

under Discounted Cash

receivables were collectively

evaluated under DCF

loan receivables

evaluated under

the Remaining

The remaining

million loan receivable of the total loan portfolio were individually evaluated.

Portfolio segments are the level at which loss assumptions are applied to a pool of loans based on the similarity of risk

characteristics inherent

included instruments,

collateral codes

were collectively

million loan receivables of the total loan portfolio

were individually evaluated.

Portfolio segments are the level at which loss assumptions

are applied to a pool of loans based on the similarity

characteristics inherent in

the included instruments,

collateral codes and

Report codes.

currently segments the portfolio based on collateral codes for purpose of establishing reserves.

Each of these segments is

currently segments

the portfolio based on collateral codes for purpose

of establishing reserves.

Each of these segments

characteristics.

Company has established relationships between internal segmentation and

FFIEC Call Report codes for this purpose.

loss driver for each loan portfolio segment is derived from a

readily available and reasonable economic forecast, including

the Federal Reserve Bank projections of U.S.

civilian unemployment rate and the year-over-year real

Company has established relationships between internal segmentation and FFIEC

Call Report codes for this purpose.

loss driver for each loan

portfolio segment is derived

from a readily available

and reasonable economic

forecast, including

the Federal Reserve Bank

projections of U.S.

unemployment rate and

the year-over-year real

Research Group

four quarters

straight-line basis to

the lookback period's

historical mean for

the economic indicator over

the expected life

The model incorporates qualitative factor adjustments in order to calibrate the model for risk

straight-line basis

to the lookback

period's historical mean

economic indicator

over the expected

The model incorporates qualitative

factor adjustments in order to

calibrate the model for risk

in each portfolio segment

be captured through

quantitative analysis.

not be captured

through quantitative

Determinations

regarding qualitative adjustments

are reflective of

management's expectation

conditions differing

already captured

quantitative component

commitments, which

reported separately

credit losses within other liabilities.

The reserve is based

upon the same quantitative and

qualitative factors applied to the

regarding qualitative

adjustments are

reflective of

those already

credit losses within

other liabilities.

reserve is based

upon the same

quantitative and qualitative

factors applied to

collectively evaluated loan portfolio.

The impact of adoption of the ASU 2016-13 was an increase to the allowance for credit losses on loans receivables of

adjustment resulted in a decrease of $

3 million in retained earnings.

See “Allowance for Credit Losses” section in Note 3

for more information on the allowance of credit losses (”ACL”).

receivables of $

million and an increase

to the reserve for unfunded

commitments of $

This one-time net

of tax cumulative adjustment resulted in a

increase of $

million in accumulated deficit.

See “Allowance for Credit Losses”

section in Note 3 for more

information on ACL.

Trouble Debt Restructuring

Financial Accounting

Standards Board

(“FASB”) issued Accounting

Standards Update

(“ASU”) 2022-

02, Financial Instruments-Credit Losses (Topic

Troubled Debt

Restructurings (“TDR”) and Vintage

modifications, and

require disclosure

receivables within

Financial Accounting Standards

Board (“FASB”) issued Accounting

Standards Update (“ASU”)

02, Financial Instruments

-Credit Losses (Topic

Debt Restructurings

(“TDR”) and Vintage

standard addresses the following:

1) eliminates the accounting guidance for TDRs, requires an entity to determine whether

a modification

a continuation

existing loan,

disclosures related

to modifications,

vintage disclosures

USCB FINANCIAL HOLDINGS, INC.

2 unchanged sentences

Q2 2023 Form 10-Q

disclosures table (see

footnote 3 “Loans”).

Company adopted ASU

2022-02 effective January 1,

2023 on a prospective

The adoption of ASU 2022-02 did not have a material impact on the Company’s consolidated financial statements.

Issued and Not Yet Adopted

(see note 3).

The Company adopted

ASU 2022-02 effective January

1, 2023 on a prospective basis.

The adoption of ASU

2022-02 did not have a material impact on the Company’s

consolidated financial statements.

Issued and Not Yet

Reference Rate Reform

Reference Rate Reform on

Financial Reporting.

Reference Rate Reform

on Financial Reporting.

In January 2021,

clarified the scope of

this guidance with ASU

2021-01 which provides optional guidance for a

limited period of time to ease

the burden in accounting for (or

the effects of)

reference rate

clarified the scope

of this guidance

2021-01 which provides

optional guidance for

a limited period of

time to ease the

burden in accounting for

(or recognizing

the effects of) reference

rate reform on

financial reporting.

is effective from

March 12, 2020

is effective from March 12,

2020 through December 31,

evaluating the

determined whether

LIBOR transition

ASU will have a material effect on our business operations and consolidated financial statements.

whether LIBOR

transition and

ASU will have a material effect on our business operations

and consolidated financial statements.

USCB FINANCIAL HOLDINGS, INC.

3 unchanged sentences

INVESTMENT SECURITIES

Measurement of Credit Losses on Financial Instruments, as

amended, which replaces the incurred loss methodology with

Measurement of Credit Losses

on Financial Instruments,

as amended, which replaces

the incurred loss methodology

loss methodology

current expected

(CECL) methodology.

including loan receivables and

held-to-maturity debt securities.

addition, ASC 326 amended

the accounting for available-

current expected credit

The measurement

including loan receivables and held-to-maturity debt securities.

In addition, ASC 326 amended the accounting for available-

for-sale debt securities.

such change is to

require credit losses to

be presented as an

allowance rather than as

down on available-for-sale debt

securities management does not

intend to sell or

believes that it is

more likely than not

One such change is to

require credit losses to be presented as an allowance rather

than as a write-

down on available-for-sale debt securities management does not intend to

sell or believes that it is more likely

than not they

will be required to sell.

CECL requires loss

reserve for securities

CECL requires

a loss reserve

for securities

classified as

Held-to-Maturity (HTM).

reserve should

The reserve should

reflect historical

credit performance

projected economic

issued bonds in HTM the explicit guarantee of the US Government is sufficient to conclude that a credit loss reserve is not

issued bonds in HTM the explicit guarantee

of the US Government is sufficient

to conclude that a credit loss reserve is

reserve requirement

6 unchanged sentences

ImpairmentStudio.

incorporates historical

Moody’s baseline economic

Moody’s baseline

economic forecast.

The solution uses

probability of default/loss given

default (“PD/LGD”) approach.

represents the likelihood a borrower will default.

Within the Moody’s model, this is determined using historical default data,

probability of

default/loss given

default (“PD/LGD”)

represents the likelihood a borrower will

Within the Moody’s model

this is determined using historical

default data,

adjusted for the current economic environment.

LGD projects the expected loss if a borrower were to default.

the expected loss if a borrower were to default.

The Company monitors

quality of held

securities through

credit ratings.

Credit ratings

maturity securities held by the Company were rated investment

mortgage-backed

3 unchanged sentences

corporate bonds.

reserve for these

holdings is determined

each quarter using

the model described

resulting amount of allowance was immaterial at March 31, 2023.

allowance for Available for Sale (“AFS”) securities that needed to be recorded as of March 31, 2023.

The following tables

present a summary of

the amortized cost,

unrealized or unrecognized gains

value of investment securities at the dates indicated (in thousands):

March 31, 2023

The required reserve for these holdings is

determined each quarter using the model described above.

the portion of the HTM

exposed to non-government

credit risk the Company

utilized the PD/LGD methodology

thousand ACL as of

June 30, 2023.

value for debt securities

classified as HTM represents

amortized cost

The Company determined that

an ACL on its debt

securities available for sale

as of June 30, 2023

and December 31,

2022 was not required.

The following

tables present

amortized cost,

unrealized or

unrecognized gains

value of investment securities at the dates indicated (in

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q2 2023 Form 10-Q

June 30, 2023

Available-for-sale:

12 unchanged sentences

Corporate bonds

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q1 2023 Form 10-Q

Allowance for credit losses - securities held-to-maturity

Securities held-to maturity, net of allowance for credit losses

December 31, 2022

13 unchanged sentences

Corporate bonds

investment securities

amortized cost

respectively,

unrealized loss

net unrealized

in accumulated

comprehensive income (“AOCI”)

amortized over

the remaining

comprehensive income

(“AOCI”) is being

amortized over the

remaining life of

the securities.

the three months

amortization out

unrealized losses

on securities

the three and

ended June 30,

2023, total amortization

for net unrealized

losses on securities

transferred from

The unamortized net unrealized loss at March 31, 2023 was $

thousand and $

thousand, respectively.

The unamortized net unrealized

identification basis.

The following table presents

the proceeds, realized gross gains and

realized gross losses on sales and

calls of AFS debt securities for the three months ended March 31, 2023 and 2022 (in thousands):

Three Months Ended Mach 31,

Available-for-sale:

Proceeds from sale and call of securities

Net realized (loss) gain

The following table presents the proceeds, realized gross gains and realized gross losses on sales and

calls of AFS debt securities for the three and six months

ended June 30, 2023 and 2022 (in thousands):

USCB FINANCIAL HOLDINGS, INC.

2 unchanged sentences

Q2 2023 Form 10-Q

The amortized

of investment

securities, by

contractual maturity,

Three Months Ended June 30,

Six Months Ended June 30,

Available-for-sale:

Proceeds from sale and call of securities

Net realized (loss) gain

amortized cost

by contractual

indicated (in thousands).

Actual maturities may differ

from contractual maturities because borrowers may have the

from contractual maturities

because borrowers may have

call or prepay

obligations with

or without call

or prepayment

a single maturity

date are shown

obligations with or without

call or prepayment penalties.

Securities not due

maturity date are shown

Available-for-sale

Held-to-maturity

March 31, 2023:

June 30, 2023:

Due within one year

6 unchanged sentences

Mortgage-backed securities - commercial

At March 31, 2023, there were no securities held in the portfolio from any one issuer in an amount greater than 10%

stockholders’

At June 30, 2023,

there were no

securities held in

the portfolio from

any one issuer in

an amount greater

total stockholders’

equity other than

the United States

Government and Government

Agency securities.

collateralized

mortgage obligations

and mortgage-backed

securities are

United States

sponsored entities.

The municipal

bonds are of high credit

quality and the declines in

fair value are not due

to credit quality.

security holdings are a

function of changes in

investment spreads and interest

rate movements and not

changes in credit

Management expects to recover the entire amortized cost basis of these securities.

At December 31, 2022, the Company does not intend to sell debt securities that are in

an unrealized loss position and

it is not more than likely

than not that the Company will

be required to sell these securities

before recovery of the amortized

Therefore, management does

not consider any investment to

be other than temporarily

impaired at December

The municipal bonds are of high credit quality and the declines in fair value

are not due to credit quality.

security holdings are

a function of

changes in investment

spreads and interest

rate movements

and not changes

expects to recover the entire amortized cost basis of these securities.

securities that

unrealized loss position

not more than likely than

not that the Company will

be required to sell these

securities before recovery of the amortized

Therefore, management does not consider any investment

to be other than temporarily impaired at June 30,

Pledged Securities

The Company maintains

repurchase agreement with

banking institution for

master repurchase

agreement with

banking institution

million fully

guaranteed with investment securities upon withdrawal.

amounts borrowed would be at a

variable interest rate based

on prevailing

is requested.

As of March 31,

2023, the Company

any securities pledged

guaranteed with investment

securities upon withdrawal.

Any amounts borrowed

would be at a

variable interest rate

on prevailing rates at the time funding is requested.

As of June 30, 2023, the Company did

t have any securities pledged

under this agreement.

The Company is a Qualified Public Depositor (“QPD”) with the State

As a QPD, the Company has the legal

authority to maintain public deposits from cities, municipalities, and the State of Florida.

The Company is a Qualified

Public Depositor (“QPD”) with

the State of Florida.

a QPD, the Company has

authority to maintain public deposits from cities, municipalities, and

the State of Florida.

These public deposits are secured

by securities pledged

of Florida at

outstanding uninsured deposits.

The Company must

also maintain a minimum amount of pledged securities to be in the public funds program.

March 31, 2023,

deposits under

funds program

to the State of Florida for these

public funds were

corporate bonds with an aggregate fair

As of December 31,

2022, the Company had

million in deposits

under the public

funds program and

Reserve Board,

announced the

Bank Term Funding Program

offers loans of

banks, savings

associations, credit

other eligible depository

institutions pledging

and mortgage-backed

securities, and

other qualifying

These assets will be valued at par.

The Company had

borrowing under the BTFP program and had pledged

million in securities measured at par

to the Federal Reserve Bank of Atlanta for the BTFP program.

by securities

the outstanding

uninsured deposits.

also maintain a minimum amount of pledged securities to be

in the public funds program.

USCB FINANCIAL HOLDINGS, INC.

2 unchanged sentences

Q2 2023 Form 10-Q

Company adopted

retrospective methodology

allowance for credit losses (“ACL”) methodology that replaces its

previous allowance for loan losses methodology.

ACL section in this note for further information

regarding the Company’s ACL.

Prior periods balance for ACL

are presented

under legacy GAAP and may not be comparable to current period presentation.

The following table is a summary of the distribution of loans held for investment by type (in thousands):

As of June 30, 2023,

the Company had a

million in deposits under the

public funds program and pledged

to the State of Florida for these public funds were

bonds with an aggregate fair value of $

As of December

the Company had

million in deposits

under the public

funds program

Reserve Board, on

March 12, 2023,

announced the creation

new Bank Term Funding Program

The BTFP offers loans

length to banks,

savings associations, credit

unions, and other

eligible depository

mortgage-backed

These assets will be valued at par.

securities measured at par to the Federal Reserve Bank

of Atlanta for the BTFP program.

retrospective

allowance for credit losses (“ACL”) methodology that replaces its previous allowance

for loan losses methodology.

ACL section in this note for further information regarding the Company’s ACL.

Prior periods balance for ACL are presented

under legacy GAAP and may not be comparable to current

period presentation.

The following table is a summary of the distribution of

loans held for investment by type (in thousands):

June 30, 2023

December 31, 2022

8 unchanged sentences

respectively,

commercial real

residential mortgage

loans pledged

as collateral

commercial real estate

and residential mortgage loans

pledged as collateral

credit with the

Reserve Bank of Atlanta.

The Company was a participant in the Small Business

Administration’s (“SBA”) Paycheck Protection Program (“PPP”)

were designed to

provide a direct

incentive for small

businesses to keep

their workers on

the funds had to be used towards payroll cost,

mortgage interest, rent, utilities and other costs related to

loans are forgivable under

specific criteria as determined

Company had PPP

loans totaling $

at March 31, 2023 and $

million at December 31, 2022, which are categorized as commercial and industrial loans.

The Company recognized $

thousand and $

million in PPP loan fees and interest income during the three months

The Company was a participant

in the Small Business

Administration’s (“SBA”) Paycheck

Protection Program (“PPP”)

direct incentive

businesses to

the funds had to be used towards payroll cost, mortgage

interest, rent, utilities and other costs related to COVID-19.

loans are forgivable under specific criteria as

determined by the SBA.

The Company had

PPP loans totaling $

at June 30, 2023 and $

million at December 31, 2022, which are categorized as

commercial and industrial loans.

interest income

respectively,

Statements of Operations.

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q2 2023 Form 10-Q

Allowance for Credit Losses

In general, the

Company utilizes the

Discounted Cash Flow

(DCF) method or

the Remaining Life

In general, the Company utilizes

the Discounted Cash Flow (DCF)

method or the Remaining Life

(WARM) methodology

to estimate the

quantitative portion of

loss driver analysis

(LDA) and discounted

the quantitative

analysis (LDA)

and discounted

cash flow analyses.

Management engaged

advisors and consultants with expertise

in CECL model development to

in development of a

loss driver analysis based

on regression models and

supportable forecast.

advisors and consultants

with expertise in

CECL model development

in development of

a loss driver

analysis based on

regression models

and supportable

data obtained

from FFIEC Call Report filings is used

to inform regression analyses to quantify the impact

from FFIEC Call Report

filings is used to

inform regression analyses

to quantify the impact

of reasonable and supportable

forecasts in projective models.

forecasts applied to regression models

to estimate probability of default

receivables use at

the following economic

civilian unemployment

rate (national), real

gross domestic

forecasts in projective

applied to regression

models to estimate

probability of default

receivables use at least one

of the following economic indicators:

unemployment rate (national), real gross domestic

product growth

(national GDP)

methodology is

long-term average loss rate is calculated and

applied on a quarterly basis for the remaining

life of the pool.

long-term average loss rate is calculated and applied on a quarterly basis for the remaining life of the pool.

Adjustments for

4 unchanged sentences

Changes in nature and volume of portfolio

Changes in the volume and severity of past due loans and other similar conditions

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q1 2023 Form 10-Q

Changes in the volume and severity of past due loans

and other similar conditions

Concentration risk

1 unchanged sentence

The effect of other external factors:

e.g., competition, legal, and regulatory requirements

e.g., competition,

legal, and regulatory requirements

Changes in lending management, among others

estimated under

methodology, and for

ended December 31, 2022, and prior periods, it was estimated under the incurred loss model.

Changes in the allowance

for credit losses for

the three months ended

March 31, 2023 and

were as follows (in

Three Months Ended March 31, 2023

ACL for the three

and six months ended

June 30 2023, was

estimated under the CECL

methodology, and for all periods

in 2022, it was estimated under the incurred loss model.

Changes in the allowance for credit losses for the three

and six months ended June 30 2023 and 2022

were as follows

(in thousands):

Three Months Ended June 30, 2023

Beginning balance

Cumulative effect of adoption of accounting

Provision for credit losses

Ending Balance

Three Months Ended March 31, 2022

Six Months Ended June 30, 2023

Beginning balance

Cumulative effect of adoption of accounting

Provision for credit losses

Ending Balance

(1) Provision for credit losses excludes $

thousand expense due to unfunded commitments included in other liabilities and $

thousand expense due to investment securities held to maturity.

(2) Impact of CECL adoption on January 1, 2023

(3) Provision for credit losses excludes $

thousand reduction due to unfunded commitments included in other liabilities.

thousand release due to unfunded commitments included in other liabilities and $

thousand expense due to investment securities held to maturity.

USCB FINANCIAL HOLDINGS, INC.

2 unchanged sentences

Q2 2023 Form 10-Q

The ACL and the outstanding balances in the specified loan categories as of March 31,

2023 and December 31, 2022

and Industrial

Three Months Ended June 30, 2022

Beginning balance

Provision for credit losses

Ending Balance

Six Months Ended June 30, 2022

Beginning balance

Provision for credit losses

Ending Balance

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q2 2023 Form 10-Q

CECL methodology,

million compared

incurred loss

The increase of

composed of $

million impact of

of the ASU 2016-13 on loan receivables, $

thousand increase on ACL for loan receivables due to loan growth, and $

thousand decrease due to net charge offs

offs totaling

charge offs related to loans were originated in 2015

thousand related to loans were originated in 2023.

The Company had

the six months

ended June 30

2023 on loans.

of charge offs related to loans were originated

in 2015 and $

thousand related to loans were originated in 2023.

unemployment and

forecast reflected

deterioration in

national housing

lesser extent than

forecasts published

in first quarter

to adjust the

HPI index effect

Family loan portfolio with a qualitative factor because Florida

housing prices are performing better than national levels.

outstanding balances

specified loan

categories as

December 31, 2022

are as follows (in thousands):

and Industrial

March 31, 2023:

June 30, 2023:

Allowance for credit losses:

14 unchanged sentences

Credit Quality Indicators

The Company grades loans based

on the estimated capability of

the borrower to repay the contractual

obligation of the

loan agreement based on

relevant information which may

The Company grades loans based on the estimated capability of the borrower to repay the contractual obligation of the

loan agreement based

on relevant information

which may include:

current financial information

on the borrower,

experience, credit

documentation

other current

periodically.

The Company's internally assigned credit risk grades are as follows:

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

The Company's internally assigned credit risk

grades are as follows:

– 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 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

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

– Loans classified as loss are considered uncollectible.

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.

USCB FINANCIAL HOLDINGS, INC.

2 unchanged sentences

Q2 2023 Form 10-Q

Loan credit exposures by internally assigned grades are presented below for the periods indicated (in thousands):

As of March 31, 2023

– 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

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

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

– Loans classified as loss are considered uncollectible.

Loan credit exposures by internally assigned grades are

presented below for the periods indicated (in thousands):

As of June 30, 2023

Term Loans by Origination Year

22 unchanged sentences

Consumer and other loans

The Company had charge offs totaling

thousand for the quarter ended as of

March 31, 2023 on loans that

originated within 2023.

USCB FINANCIAL HOLDINGS, INC.

2 unchanged sentences

Q2 2023 Form 10-Q

also considers

the performance

also considers the

performance of loans

evaluating the

3 unchanged sentences

payment performance

The following

tables include

accruing loans

non-accruing loans

March 31, 2023

December 31, 2022 (in thousands):

As of March 31, 2023

As of June 30, 2023

Residential real estate:

30 unchanged sentences

Nonaccrual Status

The following table

includes the amortized

cost basis of

The following

table includes

the amortized cost

loans on nonaccrual

status and loans

past due over

and still accruing as of March 31, 2023:

March 31, 2023

and still accruing as of June 30 2023:

June 30, 2023

Loans With No

10 unchanged sentences

interest income

attributable to nonaccrual loans outstanding during the three months

ended March 31, 2023 and 2022.

Interest income on

these loans for

the three months

ended March 31, 2023

and 2022, would

have been approximately

respectively, had these loans performed in accordance with their original terms.

attributable to

nonaccrual loans

outstanding during

June 30, 2023

Interest income

been approximately

thousand, respectively,

had these loans performed in accordance with their

original terms.

Collateral-Dependent Loans

1 unchanged sentence

collateral dependent

loans as of March 31, 2023 and as of December 31, 2022.

loans as of June 30 2023 and as of December 31, 2022.

USCB FINANCIAL HOLDINGS, INC.

3 unchanged sentences

Impaired Loans

The following table includes the unpaid principal balances for

impaired loans with the associated allowance amount, if

applicable, on the basis of impairment methodology as of December 31, 2022 (in thousands):

The following table includes

the unpaid principal balances

for impaired loans with

the associated allowance amount,

applicable, on the basis of impairment methodology as of

December 31, 2022 (in thousands):

December 31, 2022

6 unchanged sentences

Consumer and other

Net investment balance is the unpaid principal balance of the loan adjusted for the remaining net deferred loan fees.

Three Months Ended March 31, 2022

Net investment balance is the unpaid principal balance

of the loan adjusted for the remaining net deferred loan

The following table

presents the average

recorded investment

balance on impaired

loans for the

periods indicated (in

Three Months Ended June 30, 2022

Six Months Ended June 30, 2022

Residential real estate

2 unchanged sentences

Consumer and other

Interest income recognized on impaired loans for the three months ended March 31, 2022 was $

Loan Modifications to Borrowers Experiencing Financial Difficulties

The Company did

t have new modifications to borrowers experiencing financial difficulties and

loan modifications

that subsequently defaulted during for the three months ended March 31, 2023.

The Company’s provision for income taxes is presented in the following table for the dates indicated (in thousands):

Three Months Ended March 31,

Interest income recognized on impaired loans for the three months ended June 30,

thousand and for the

six months ended June 30, 2022 was $

Loan Modifications to Borrowers Experiencing Financial

The following table present newly restructured

loans, by type of modification,

which occurred during the quarter ended

June 30, 2023:

Recorded Investment Prior to Modification

Recorded Investment After Modification

Modifications

Residential real estate

Commercial real estate

Commercial and industrial

Consumer and other

new modifications

experiencing financial

difficulties for

the three and

ended June 30, 2023.

loan modifications that subsequently defaulted for

the three and six

months ended June 30, 2023.

USCB FINANCIAL HOLDINGS, INC.

2 unchanged sentences

Q2 2023 Form 10-Q

March 31, 2023

statutory tax

corporate tax

before provision for income taxes) as follows (in thousands):

Three Months Ended March 31,

The Company’s provision for income taxes is

presented in the following table for the dates indicated

(in thousands):

Six Months Ended June 30,

The actual income tax

expense for the six

months ended June 30, 2023 and

2022 differs from the statutory

period (computed

federal corporate

income before provision

for income taxes) as follows (in thousands):

Six Months Ended June 30,

Federal taxes at statutory rate

1 unchanged sentence

Bank owned life insurance

The Company’s deferred tax assets and deferred tax liabilities as of the dates indicated were (in thousands):

March 31, 2023

The Company’s deferred tax assets and deferred

tax liabilities as of the dates indicated were (in thousands):

June 30, 2023

December 31, 2022

4 unchanged sentences

Unrealized losses on available for sale securities

Deferred loan fees

Depreciable property

Stock option compensation

Equity compensation

Deferred tax assets:

3 unchanged sentences

Deferred expenses

Cash flow hedge

Deferred tax liability

Net deferred tax assets

has approximately

operating loss

approximately

carryforwards

expiring in various amounts between 2031 and 2036 and which are limited to offset, to the extent permitted, future

expiring in various amounts between

2031 and 2036 and which are

limited to offset, to the

extent permitted, future taxable

earnings of the Company.

In assessing the realizability of

deferred tax assets, management considers

whether it is more likely

than not that some

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q2 2023 Form 10-Q

In assessing the realizability of deferred tax assets, management considers

whether it is more likely than not that some

realization of

upon the generation of future taxable

income during the periods in which

those temporary differences become deductible.

Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning

upon the generation of

future taxable income

during the periods in

which those temporary differences

become deductible.

Management considers the scheduled reversal

of deferred tax liabilities, projected future taxable

income, and tax planning

strategies in making this assessment.

The major tax jurisdictions

where the Company files

income tax returns are

federal jurisdiction

and the State

With few exceptions,

the Company is no longer subject

federal and state income

tax examinations by tax

The major tax

jurisdictions where the

Company files income

tax returns are

jurisdiction and

With few exceptions, the Company is no longer subject to U.S.

federal and state income tax examinations by tax

authorities for years before 2019.

For the three months ended March 31, 2023 and 2022, the Company did

t have any unrecognized tax benefits as a

tax positions

current period.

For the three and six months ended June

30, 2023 and 2022, the Company did

t have any unrecognized tax benefits

as a result of

tax positions taken during a prior

period or during the current period.

Additionally,

penalties were

interest or penalties were

recorded as a result of tax uncertainties.

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q1 2023 Form 10-Q

OFF-BALANCE SHEET ARRANGEMENTS

The Company is a party to

financial instruments with off-balance-sheet risk in

the normal course of business

meet the financial

customers and to

reduce its own

exposure to fluctuations

in interest rates.

These financial

instruments include unfunded

commitments under lines

of credit, commitments

to extend credit,

standby and commercial

instruments involve,

degrees, elements

amount recognized in the

Company’s Consolidated Balance Sheets.

The Company uses the

same credit policies in

commitments and conditional obligations as it does for on-balance sheet instruments.

The Company's exposure to

credit loss in the

event of nonperformance by

the other party to

the financial instruments

for unused lines of credit, and standby letters of credit is represented by the contractual amount of these commitments.

March 31, 2023 and December 31, 2022 (in thousands):

March 31, 2023

The Company is a party to financial

instruments with off-balance-sheet risk in the normal course of business in order to

financial needs

customers and

to reduce its

to fluctuations

instruments include

unfunded commitments

commitments to

extend credit,

varying degrees,

interest rate

amount recognized in the Company’s Consolidated Balance Sheets.

The Company uses

the same credit policies in making

commitments and conditional obligations as it does for

on-balance sheet instruments.

The Company's

exposure to credit

event of nonperformance

financial instruments

for unused lines of credit, and standby letters of credit

is represented by the contractual amount of these commitments.

June 30, 2023 and December 31, 2022 (in thousands):

June 30, 2023

December 31, 2022

1 unchanged sentence

Standby and commercial letters of credit

Commitments to extend

credit are agreements

a customer as

long as there

is no violation

of any condition

Commitments to

extend credit

are agreements

established in the contract.

Commitments generally have fixed expiration dates or other termination clauses.

Unfunded lines of credit

and revolving credit lines

are commitments for possible

future extensions of credit

of credit are

uncollateralized and usually

do not contain

a specified maturity

date and ultimately

not be drawn upon to the total extent to which the Company committed.

performance of

primarily issued

Commitments generally have fixed

expiration dates or other termination clauses.

Unfunded lines of

credit and revolving

credit lines are

commitments for

possible future extensions

These lines of

credit are uncollateralized and

usually do not contain

a specified maturity date

and ultimately may

not be drawn upon to the total extent to which the Company

performance of a

Those letters of

primarily issued to

support public and

private borrowing

arrangements.

Essentially all letters of credit have fixed maturity

dates and since many of them expire without being drawn

upon, they do not generally present a significant liquidity risk to the Company.

The Company utilizes interest rate swap agreements as part of its asset liability management strategy to help manage

its interest rate risk exposure.

Essentially all letters of credit have fixed maturity dates and since

many of them expire without being drawn

upon, they do not generally present a significant liquidity risk

to the Company.

The Company utilizes interest rate swap agreements

as part of its asset liability management

strategy to help manage

its interest rate risk

The notional amount of

the interest rate swaps do not represent actual

amounts exchanged

the interest rate swaps

do not represent actual

amounts exchanged

2 unchanged sentences

individual interest rate swap agreements.

The Company enters into interest rate

swaps with its loan customers.

The Company had

interest rate swaps

December 31, 2022, respectively.

These interest rate

swaps mature between 2025

corresponding

Company to provide the counterparty with funds to be held as collateral which the Company reports as other assets under

the Consolidated Balance

derivatives represent economic

hedges, they do

not qualify as

accounting purposes.

Interest Rate Swaps Designated as a Cash Flow Hedge

30, 2023, the

interest rate swap

agreements with a notional

aggregate amount of $

designated as

agreements have

USCB FINANCIAL HOLDINGS, INC.

2 unchanged sentences

Q2 2023 Form 10-Q

The following table reflects the Company’s customer-related interest rate swaps at the dates indicated (in thousands):

years, the weighted average fixed

%, with the weighted average 3-month compound SOFR

being received.

The Company had

cash flow hedges at December 31, 2022.

corresponding recognition in other comprehensive

income and subsequently reclassified to

earnings when gains or losses

are realized.

Interest Rate Swaps

The Company enters into interest rate swaps with its loan customers.

The Company had

interest rate swaps

December 31, 2022,

respectively.

These interest

mature between

Company entered

corresponding

Company to provide the counterparty

with funds to be held as collateral

which the Company reports as other

the Consolidated

Balance Sheets.

derivatives represent

economic hedges,

accounting purposes.

The following table reflects the Company’s

interest rate swaps at the dates indicated (in thousands):

Balance Sheet Location

March 31, 2023:

June 30, 2023:

Derivatives designated as hedging instruments:

Interest rate swaps

Derivatives not designated as hedging instruments:

6 unchanged sentences

Determination of Fair Value

value measurements

fair-value adjustments

liabilities and

determine fair value disclosures.

accordance with the fair value

measurements accounting guidance, the fair value

financial instrument is the price that would be received to

sell an asset or paid to transfer a liability

in an orderly transaction

and liabilities

determine fair value

In accordance

with the fair

value measurements accounting

guidance, the fair

financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction

between market

participants at

the measurement

best determined

quoted market

However, in many

instances, there are no quoted market

prices for the Company's various financial

many instances, there

are no quoted market

prices for the Company's

various financial instruments.

market prices

2 unchanged sentences

present value

Those techniques are

significantly affected by the assumptions

used, including the discount

rate and estimates

Those techniques are significantly affected by the assumptions used, including the discount rate and estimates

of future cash flows.

Accordingly, the fair value estimates may not

be realized in an

immediate settlement of the

value guidance

consistent definition

orderly transaction

forced liquidation

Accordingly, the fair value estimates may not be realized in

an immediate settlement of the instrument.

value guidance provides

a consistent definition

of fair value,

which focuses on

exit price in

an orderly transaction

or distressed

sale) between

market participants

measurement date

under current

market conditions.

a significant

valuation technique

multiple valuation

techniques may

be appropriate.

instances, determining

depends on the facts and circumstances and requires

or liability,

valuation technique or

valuation techniques

such instances, determining

depends on the facts

and circumstances and requires

the use of significant judgment.

The fair value

is a reasonable point

within the range that is most representative of fair value under current market conditions.

The fair value is

a reasonable point

within the range that is most representative of fair value under

current market conditions.

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q2 2023 Form 10-Q

Fair Value Hierarchy

In accordance with this

guidance, the Company groups its

financial assets and financial liabilities

In accordance with

this guidance, the

Company groups its

financial assets

and financial liabilities

generally measured

three levels,

levels, based

and liabilities

reliability of

assumptions used to determine fair value.

quoted prices in

active markets for

identical assets or

liabilities that the

entity has the

ability to access

at the measurement

assets and liabilities

generally include debt

equity securities

exchange market.

Valuations are obtained

available pricing

sources for market transactions involving identical assets or liabilities.

- Valuation is

based on inputs other than quoted prices included within Level 1 that are

active markets

for identical

liabilities that

the reporting

the ability to

the measurement

and liabilities

generally include

equity securities that

are traded in

an active exchange

Valuations are obtained from

readily available pricing

sources for market transactions involving identical assets

or liabilities.

is based on inputs other

than quoted prices included

within Level 1 that are

observable for the

quoted prices

in markets that

are not active;

1 unchanged sentence

that are observable

by observable market data for substantially the full term of the asset or liability.

is based on unobservable

inputs that are supported

by little or no

market activity and that

liabilities include

by observable market data for substantially the full term

of the asset or liability.

unobservable inputs that

are supported

no market activity

is determined

1 unchanged sentence

models, discounted

methodologies, or

similar techniques,

well as instruments for which determination of fair value requires significant management judgment or estimation.

flow methodologies,

well as instruments for which determination of fair value

requires significant management judgment or estimation.

categorization

significant to the fair value measurement.

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q1 2023 Form 10-Q

Items Measured at Fair Value on a Recurring Basis

Items Measured at Fair Value

on a Recurring Basis

AFS investment securities:

When instruments are

traded in secondary

markets and quoted

market prices do

securities, management

generally relies

obtained from

independent vendors

or third-party

broker-dealers.

Management reviews pricing methodologies provided

by the vendors and third-party broker-dealers

in order to determine if

observable market information is

being utilized.

Securities measured

with pricing provided by independent

vendors or third-

party broker-dealers are classified

within Level 2 of

the hierarchy and

often involve using quoted

market prices for

securities, pricing models or discounted cash flow analyses utilizing inputs observable in the market where available.

When instruments are traded in secondary

markets and quoted market prices

for such securities,

management generally relies

on prices obtained

from independent vendors or

third-party broker-dealers.

Management reviews pricing methodologies provided by the vendors and third-party broker-dealers in order to determine if

observable market information is being utilized.

Securities measured with pricing provided by independent vendors or

party broker-dealers

are classified

within Level 2

of the hierarchy

involve using quoted

market prices

securities, pricing models or discounted cash flow analyses

utilizing inputs observable in the market where available.

classified within Level 2 of the hierarchy.

March 31, 2023 and December 31, 2022 for each of the fair value hierarchy levels (in thousands):

March 31, 2023

June 30, 2023 and December 31, 2022 for each of

the fair value hierarchy levels (in thousands):

June 30, 2023

December 31, 2022

11 unchanged sentences

Total liabilities at fair value

Items Measured at Fair Value on a Non-recurring Basis

Individually Evaluated Loans

and Impaired Loans:

ASC 326 eliminates

the current accounting

model for impaired

guidance, individual

carrying amount

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q2 2023 Form 10-Q

Items Measured at Fair Value

on a Non-recurring Basis

Individually Evaluated

Impaired Loans:

eliminates the

current accounting

approximately

2 unchanged sentences

impairment charge

thousand, which

allowance for

credit losses at

December 31, 2022.

subject to write-downs,

or impaired loans,

are estimated using

the present value

of expected cash flows

or the appraised value

of the underlying collateral

discounted as necessary due

the allowance

credit losses at December 31,

Loans subject to write-downs,

or impaired loans, are

estimated using the present value

of expected cash

appraised value

of the underlying

collateral discounted

as necessary due

to management's

estimates of changes in economic conditions are considered a Level 3 valuation.

estimates of changes in economic conditions are considered

a Level 3 valuation.

the third-party

appraisals less

carrying cost

estate owned.

estimate of the

carrying cost of

Appraisals generally

market approach

valuation technique and

use market observable

data to formulate

valuation technique

market observable

the properties.

the appraiser uses

professional judgment in

the appraiser

uses professional

determining the

the value for changes in market conditions subsequent to the

valuation date when current appraisals are not available.

a consequence of the

carrying cost or the third-party

appraisal and adjustments therein,

the fair values of

the properties are

the value for changes in

market conditions subsequent to

the valuation date when

current appraisals are not

a consequence of the carrying cost or the

third-party appraisal and adjustments therein, the fair values of the properties are

considered a Level 3 valuation.

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q1 2023 Form 10-Q

The following

table represents

the Company’s assets

fair value on

a non-recurring

basis at March

and December 31, 2022 for each of the fair value hierarchy levels (in thousands):

March 31, 2023:

The following table represents the Company’s assets measured at fair value on a non-recurring basis at June 30, 2023

and December 31, 2022 for each of the fair value hierarchy

levels (in thousands):

June 30, 2023:

Individually evaluated loans

1 unchanged sentence

Impaired loans

The following table presents quantified information about Level 3

fair value measurements for assets measured at fair

value on a non-recurring basis at December 31, 2022 (in thousands):

The following table presents

quantified information about

Level 3 fair value

measurements for assets measured

value on a non-recurring basis at December 31, 2022 (in

Valuation Technique(s)

11 unchanged sentences

impaired loans

financial liabilities measured at

fair value on a non-recurring

basis at March 31, 2023 and

financial liabilities measured

at fair value on a

non-recurring basis at June

30, 2023 and December

USCB FINANCIAL HOLDINGS, INC.

3 unchanged sentences

Items Not Measured at Fair Value

The following table presents the

carrying amounts and estimated fair

values of financial instruments not

The following table

presents the carrying

amounts and estimated

fair values of

financial instruments not

carried at fair

value as of December 31, 2022 (in thousands):

value as of June 30, 2023 and December 31, 2022 (in

Fair Value Hierarchy

March 31, 2023:

June 30, 2023:

Financial Assets:

26 unchanged sentences

STOCKHOLDERS’ EQUITY

Bank completed

public offering

completed the

initial public

common stock,

shares of Class A common stock at a

The Bank received total net proceeds of

shares of Class A

common stock at a

received total net proceeds

million after deducting underwriting discounts and expenses.

In December 2021, the Company acquired all

the issued and outstanding shares of the

Class A voting common stock

of the Bank, which

at the time were

the only issued and

outstanding shares of

the Bank’s capital stock,

in a share exchange

(the “Reorganization”) effected under the Florida Business Corporation Act.

Each outstanding share of the

Bank’s Class A

common stock,

formerly held

shareholders was

In December 2021, the

Company acquired all

the issued and outstanding

shares of the Class

A voting common

of the Bank, which at

the time were the only issued

and outstanding shares of the Bank’s capital stock, in

a share exchange

(the “Reorganization”) effected under

the Florida Business Corporation

Each outstanding share

of the Bank’s Class

its shareholders

converted into

1 unchanged sentence

Company’s wholly owned subsidiary.

Reorganization, each

shareholder of

Reorganization,

received securities

1 unchanged sentence

same designations,

rights, powers,

preferences, qualifications,

limitations and

restrictions, as

the shareholder

held in the Bank, and

the Company’s then current shareholders

owned the same percentages of the

Company’s common

stock as they previously owned of the Bank’s common stock.

powers, preferences,

qualifications,

and restrictions,

USCB FINANCIAL HOLDINGS, INC.

2 unchanged sentences

Q2 2023 Form 10-Q

The Company issued

shares of Class A common stock to employees and

directors as restricted stock awards

pursuant to the Company’s 2015 equity incentive plan in March 2023.

weighted average price per share of $

The aggregate purchase price for these transactions was approximately

repurchase under this program.

Shares of the

Company’s Class A

common stock issued

and outstanding as

2023 and December

held in the Bank,

and the Company’s

then current shareholders

owned the same

percentages of the

Company’s common

stock as they previously owned of the Bank’s common

In March 2023, the

Company issued

shares of Class A

common stock to employees and

directors as restricted

stock awards pursuant to the Company’s 2015 equity incentive plan.

stock awards issued during the quarter

ended June 30, 2023 nor during the three and six months

ended June 30, 2022.

During the second quarter

of 2023, the Company

shares of Class A common stock

at a weighted

average price per share of $

The aggregate purchase price for these

transactions was approximately $

including transaction

publicly announced repurchase

As of June 30, 2023,

shares remained authorized

for repurchase under

this program.

Shares of the Company’s Class A common stock issued and outstanding as

of June 30, 2023 and December 31, 2022

, respectively.

Declaration of dividends by the Board is

required before dividend payments are made.

Declaration of dividends by the Board is required before dividend payments are made.

dividends were approved by

the Board for the common stock classes for the three months ended

March 31, 2023 and 2022.

Additionally, there were

dividends declared and unpaid as of March 31, 2023 and 2022.

significantly

capitalized” guidelines as of December 31, 2022 and

March 31, 2023.

At March 31, 2023, the total

risk-based capital ratios

for the Company and the Bank were

the Board for the

classes for the three

months ended June 30,

2023 and 2022.

Additionally,

dividends declared and unpaid as of June 30, 2023 and 2022.

“well-capitalized”

guidelines as

and December 31,

June 30, 2023, the

total risk-based

capital ratios

and the Bank were

%, respectively.

1 unchanged sentence

participating

calculated by

income (loss)

common stockholders

weighted-average

number of common shares outstanding for the period, without consideration for common stock equivalents.

is calculated by

dividing net income (loss)

available to common

stockholders by the weighted-average

number of common shares outstanding for

the period, without consideration for common

stock equivalents.

Diluted EPS is

income (loss)

common stockholders

stockholders by

weighted-average number

shares outstanding for the period

and the weighted-average number of

dilutive common stock equivalents outstanding for

the period determined

using the treasury-stock

of this calculation,

common stock equivalents

common stock options and are only included in the calculation of diluted EPS when their effect is dilutive.

The following table reflects the calculation

of net income available to common stockholders

for the three months ended

March 31, 2023 and 2022 (in thousands):

Three Months Ended March 31,

Preferred stock dividends

shares outstanding for

the period and

the weighted-average number

of dilutive common

stock equivalents outstanding

the period determined using the treasury-stock method.

of this calculation, common stock equivalents include

common stock options and are only included in the calculation

of diluted EPS when their effect is dilutive.

The following table reflects the

calculation of net income available to

common stockholders for the three

and six months

ended June 30, 2023 and 2022 (in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

Net income available to common stockholders

3 unchanged sentences

Q2 2023 Form 10-Q

The following table reflects the calculation of basic and diluted

earnings per common share class for the three months

ended March 31, 2023 and 2022 (in thousands, except per share amounts):

Three Months Ended March 31,

The following table reflects

the calculation of basic

and diluted earnings per

common share class

for the three

months ended June 30, 2023 and 2022 (in thousands,

except per share amounts):

Three Months Ended June 30,

Net income available to common shares

8 unchanged sentences

Anti-dilutive stock options excluded from diluted EPS

Net income has not been allocated to unvested restricted

stock awards that are participating securities

because the amounts that would be allocated

are not material to net income per share of

common stock.

Unvested restricted stock awards

that are participating securities represent less than one

percent of all of the outstanding shares of

common stock for each of the periods presented.

Six Months Ended June 30,

Net income (loss) available to common shares

Weighted average shares outstanding

Earnings per share, basic

Net income available to common shares

Weighted average shares outstanding for basic EPS

Dilutive effects of assumed exercises of stock options

Weighted avg.

shares including dilutive potential common shares

Earnings per share, diluted

Anti-dilutive stock options excluded from diluted EPS

Net income has not been allocated to unvested

restricted stock awards that are participating securities

because the amounts that would be allocated

not material to net income per share of common

Unvested restricted stock awards that are participating

securities represent less than one percent

of all of the outstanding shares of common stock

for each of the periods presented.

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q2 2023 Form 10-Q

LOSS CONTINGENCIES

Loss contingencies, including

claims and legal

actions may arise

Loss contingencies,

including claims

and legal actions

in the ordinary

course of business.

In the opinion

management, none of

these actions, either

individually or in

the aggregate, is

expected to have

a material adverse

management, none

actions, either

individually or

in the aggregate,

is expected to

have a material

adverse effect

on the Company’s Consolidated Financial Statements.

SUBSEQUENT EVENTS

Management has evaluated subsequent events from July 1, 2023

through August 11, 2023, which is the date this Form

10-Q was available to be issued.

individual shareholders

complaint against

board members

naming the Bank

alleging the named

directors did not

have the authority

to approve the exchange

Bank’s initial

public offering

breached their

fiduciary duties.

The Plaintiffs claim this exchange was not

permitted by the Bank’s Articles of Incorporation.

The Company believes

allegations in the lawsuit are legally

and factually without merit, and the

Company intends to vigorously defend

allegations in

Despite the Company’s

lawsuit lacks

the plaintiffs

were successful,

could award substantial compensatory damages.

USCB Financial Holdings, Inc.

1 unchanged sentence

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 1. Financial Statements