What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-11-09 compared with 2023-08-11 · 689 added, 690 removed, 1025 unchanged (57% of the section changed)

2 unchanged sentences

understanding

condition and results

of operations of

the Company and

the Bank, its

wholly owned subsidiary,

for the quarter

and six months

This discussion

unaudited consolidated

Securities and Exchange Commission (“SEC”) for the year ended

December 31, 2022.

September 30, 2023.

discussion and analysis

conjunction with

the unaudited consolidated

financial statements

footnotes included

in this Quarterly

(“Form 10-Q”)

related footnotes

10-K/A (“2022

K/A”) filed with 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

5 unchanged sentences

and Item 1A “Risk Factors" below and in the 2022 Form 10-K/A filed

with the SEC which is available at the SEC’s website

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

Holdings, Inc.

Forward-Looking Statements

This Quarterly Report

(“Form 10-Q”) contains

This Form 10-Q contains

statements that are

1 unchanged sentence

nature and are

to be, and are hereby identified

intended to be, and

are hereby identified

as, forward-looking statements for

purposes of the safe harbor provided by

Section 21E of

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

The words “may,”

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

purposes of the safe

harbor provided by Section

21E of the Securities

Exchange Act of

“anticipate,”

“contemplate,”

expressions of

forward-looking statements.

These forward-looking

statements include,

management’s long-term performance

statements relating

anticipated effects on

internal growth and balance sheet restructuring.

“expect,” “aim,” “plan,” “estimate,” “continue,” and “intend,” as well as other similar words and expressions of the future, are

forward-looking

performance goals, as well as statements relating

to the anticipated effects on results

of operations and financial condition

from expected

developments or events,

strategies, including anticipated

internal growth and

sheet restructuring.

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

1 unchanged sentence

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

our ability to successfully manage interest rate risk, credit

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

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

reserve and deferred tax asset valuation allowance;

the efficiency and effectiveness of

our internal control procedures and processes;

the strength of the United States economy in general and the strength of the local economies in which we conduct operations;

our ability to successfully manage interest rate risk, credit risk, liquidity risk, and other risks inherent to our industry;

the accuracy of our financial statement estimates and assumptions, including the estimates

used for our credit loss reserve and

deferred tax asset valuation allowance;

the efficiency and effectiveness of our internal control procedures and processes;

extensive laws

and regulations

we are subject,

including the

jurisdiction where we operate;

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

subject, including

where we operate;

adverse changes or conditions in capital and financial markets, including actual or potential stresses in the banking industry;

deposit attrition and the level of our uninsured deposits;

legislative or regulatory

changes in accounting

principles, policies,

practices or guidelines,

the on-going effects of the implementation of the

Current Expected Credit Losses (“CECL”) standard;

a diversified

loan portfolio

and concentration

South Florida

including the

of geographic,

industry concentrations,

including our

legislative or regulatory changes and changes in

accounting principles, policies, practices or guidelines, including

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

significantly

concentration

loans secured

effects of climate change;

geographic, depositor,

concentrations, including

our concentration

in particular,

commercial real estate;

the effects of climate change;

the concentration of ownership of our common stock;

fluctuations in the price of our common stock;

our ability to fund or access the capital markets at attractive rates

and terms and manage our growth, both organic

growth as well as growth through other means, such as

future acquisitions;

inflation, interest rate, unemployment rate, market

and monetary fluctuations;

our ability to

fund or access

the capital markets

at attractive rates

and terms and

manage our growth,

both organic growth

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, client,

employee, or third-party fraud and security breaches;

described in this

the 2022 Form

10-K/A and other

make with the

interest margin;

the loss of key employees;

the effectiveness of

our risk management strategies,

including operational risks,

including, but not limited

to, client, employee,

or third-party fraud and security breaches;

other filings

Securities and

Exchange Commission (“SEC”).

USCB Financial Holdings, Inc.

Q2 2023 Form 10-Q

Commission (“SEC”).

forward-looking

actual results will

materially from

expectations.

you are cautioned

undue reliance on

materially from expectations.

Therefore, you are

cautioned not to

place undue reliance

USCB Financial Holdings, Inc.

Q3 2023 Form 10-Q

forward-looking statements.

forward-looking statements

included in this

are made only

hereof, and we undertake

no obligation to

update or revise any

forward-looking statement to reflect events

no obligation to update

or 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

will file with the SEC.

ended June 30, 2023 compared

to $5.3 million or

$0.26 per diluted share

of common stock for

the three months ended

for the six months

ended June 30, 2023

was $10.0 million or

$0.51 per diluted share

of common stock

compared to $10.1 million or $0.50 per diluted share of

common stock for the same period in 2022.

During the second quarter

of 2023, the Company

repurchased 77,603 shares

of Class A common stock at a

average price per share of $9.58.

The aggregate

purchase price for these transactions

was approximately $747 thousand,

including transaction costs.

Year-to-date, the Company

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.

You should also review the risk factors described in the reports the Company has filed

or will file with the SEC.

September 30,

ended September

diluted share of common stock

compared to $15.7 million

or $0.78 per diluted

share of common stock

for the same period

were repurchased

quarter 2023.

Year-to-date, the

has repurchased

577,603 shares

weighted average

announced repurchase

172,397 shares

remain authorized for

repurchase under

this program.

common stock shares at

a weighted average price

These repurchases were

made through open

market purchases pursuant to

the Company’s publicly announced repurchase

September 30, 2023, 172,397

shares remained authorized for repurchase under this

In evaluating our financial

5 unchanged sentences

and composition of non-interest income and non-interest expense, performance

ratios, asset quality ratios,

regulatory capital ratios, and any significant event or transaction

Unless otherwise stated, all period comparisons in the

bullet points below are calculated for the

quarter ended June 30,

2023 compared to the quarter ended June 30,

2022 and to December 31, 2022,

comparison annualized where appropriate:

Net interest income for the three months ended

June 30, 2023 decreased $1.5 million or 9.4% to

$14.2 million from

$15.6 million for

the quarter ended

June 30, 2022.

interest income for

the six months

ended in June 30,

increased $149 thousand or 0.5% compared to the same

period ended June 30, 2022.

Net interest margin (“NIM”) was 2.73% for the three months ended June 30, 2023 compared to 3.37% for the three

months ended June 30,

ratios, asset quality ratios, regulatory capital ratios, and any

significant event or transaction.

September 30, 2023 compared

to the quarter

ended September 30, 2022

December 31, 2022,

and annualized where

Net interest income

for the three

months ended September

30, 2023 decreased

$2.8 million or

16.4% to $14.0 million

September 30,

decreased $2.6 million or 5.6% to $44.2 million compared to the same period ended September 30, 2022.

Net interest margin

(“NIM”) was 2.60%

for the three

months ended September

30, 2023 compared

the three months

ended September 30, 2022.

NIM was 2.84% for

the six months ended

in June 30, 2023

the nine months ended

in September 30, 2023

compared to 3.36% for

the same period in 2022.

Total assets were $2.2 billion at June

30, 2023, representing an increase of $209.8

million or 10.4% from June 30,

2022 and an increase of $140.1 million or 13.5% annualized

from December 31, 2022.

period in 2022.

Total assets were $2.2 billion at September 30,

2023, representing an increase of $207.1 million or 10.2%

from September 30,

2022 and an increase of $158.8 million or 10.2% annualized from December 31, 2022.

Total loans were

$1.7 billion at

June 30, 2023,

September 30, 2023,

representing an increase

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or 17.1% from

2022 and an increase of $88.6 million or 11.9% annualized

from December 31, 2022.

Total deposits

2023, representing

30, 2022 and an increase of $92.0 million or 10.1% annualized

from December 31, 2022.

Annualized return on

average assets for

the quarter ended

June 30, 2023

was 0.77% compared

quarter ended June 30, 2022.

Annualized return

on average assets was

0.94% for the six months

ended June 30,

2023 compared to 1.05% for the same period in 2022.

Annualized return

stockholders’

quarter ended

June 30, 2022.

Annualized return on

average equity was

June 30, 2023 compared to 10.54% for the same period

September 30,

2022 and an increase of $169.2 million or 15.0% annualized from December 31, 2022.

Total deposits were $1.9 billion at September 30, 2023, representing an increase of $124.3 million or 6.9% from September 30,

2022 and an increase of $91.6 million or 6.7% annualized from December 31, 2022.

Annualized return on average assets for the quarter ended September 30, 2023 was 0.67% compared to 1.09% for the quarter

ended September 30, 2022.

Annualized return on average stockholders’ equity for the quarter

ended September 30, 2023 was 8.19% compared

for quarter ended September 30, 2022.

The ACL to total loans was

at June 30, 2023 and

1.16% at December

1.16% at both

September 30, 2023 and December

ACL was calculated under

the CECL methodology

loss methodology

periods in 2022.

Non-performing loans to total loans was 0.03% at June

30, 2023 compared to 0.0% at December 31, 2022.

USCB Financial Holdings, Inc.

Q2 2023 Form 10-Q

methodology for three and nine months ended September 30, 2023 and the incurred loss methodology for all periods in 2022.

Non-performing loans to total loans was 0.03% at September 30, 2023 compared to 0.00% at December 31, 2022.

At September 30, 2023,

the total risk-based

capital ratios for

the Company and

the Bank were

13.10% and 13.06%,

respectively.

negatively affected

unrealized security

securities of

$47.1 million

At June 30, 2022,

Tangible book value

common share was

negatively affected

$36.9 million after tax unrealized security losses.

See “Reconciliation and Management Explanation for Non-GAAP

Financial Measures”

for a reconciliation of this non-GAAP financial measure.

per common share

(a non-GAAP financial

measurement) of $9.36

as of September

to accumulated

comprehensive loss

September 30,

comprehensive loss.

See “Reconciliation and Management Explanation for Non-GAAP Financial Measures” for a reconciliation

of this non-GAAP financial measure.

USCB Financial Holdings, Inc.

Q3 2023 Form 10-Q

Critical Accounting Policies and Estimates

3 unchanged sentences

in conformity

with US GAAP,

management makes

3 unchanged sentences

These estimates,

and judgments affect the

amounts reported in

assumptions, and judgments affect

the amounts reported in

the financial statements

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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.

Management has presented the application of these policies

to the Audit and Risk Committee of our Board of

Allowance for Credit Losses

3 unchanged sentences

the incurred loss methodology

“Summary of Significant

Accounting Policies” Item

10-Q for more information

on the adoption

326 and the allowance of credit losses.

“Summary of Significant Accounting Policies” in Item 1

of Part I of this

Form 10-Q for more information on the

326 and the allowance for credit losses.

included residential

3 unchanged sentences

a sensitivity

Company evaluated

in calculating

expected losses on the residential loan segment.

As of June 30,

2023, for every 100 basis points increase in the

approximately

As of September 30, 2023, for every 100 basis points increase in the HPI

index, the forecast reduces

by approximately $217

thousand and about 1

basis point to

the reserve coverage ratio,

everything else being

12 unchanged sentences

and tax credit carryforwards.

tax assets and liabilities are measured

using enacted tax rates expected to

assets and liabilities are measured

using enacted tax rates expected

taxable income

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considers taxable loss

carry-back availability, expectation of sufficient taxable

income, trends in

earnings, the future

carry-back availability, expectation of sufficient

taxable income, trends

in earnings, the

future reversal

of temporary differences, and available tax planning

6 unchanged sentences

and measurement

and penalties on

tax liabilities, if any,

would be recorded in interest expense and other operating

non-interest expense, respectively.

and penalties

tax liabilities, if any, would

be recorded in interest expense and other operating non-interest

expense, respectively.

Non-GAAP Financial Measures

4 unchanged sentences

accounting principles (“GAAP”).

This financial

information includes certain operating performance

has included these non-GAAP measures because it believes

these measures may provide useful supplemental information

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

USCB Financial Holdings, Inc.

Q2 2023 Form 10-Q

Operating performance measures

4 unchanged sentences

determined in accordance with GAAP,

and are not necessarily comparable to non-GAAP measures

that may be presented

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

non-GAAP measures to the most

directly comparable

“Reconciliation

Measures” included in this Form 10-Q.

USCB Financial Holdings, Inc.

Q3 2023 Form 10-Q

Segment Reporting

Management monitors the revenue streams for

all its various products and services.

The identifiable segments

Management monitors the revenue streams for all its various

products and services.

The identifiable segments are not

Accordingly, all

1 unchanged sentence

operations are

considered by

management to be

considered by management

aggregated in one

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(in thousands, except ratios):

June 30, 2023

September 30, 2023

December 31, 2022

2 unchanged sentences

Loan amounts include deferred fees/costs.

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Consolidated Statements of Operations:

6 unchanged sentences

The Company’s results

of operations depend

substantially on net

interest income and

non-interest income.

contributing to the results of operations include our provision

for credit losses, non-interest expenses,

and the provision for

income taxes.

Three months ended June 30, 2023 compared to the three

months ended June 30, 2022

Net income decreased to

$4.2 million for the

three months ended June

30, 2023 from $5.3 million

for the same period

in 2022 mainly due to higher weighted average deposit

Six months ended June 30, 2023 compared to six months

ended June 30, 2022

Net income slightly decreased to $10.0 million for the six months

ended June 30, 2023 from $10.1 million for the same

generated from higher loan

yields and a bigger loan

portfolio, offset by a

$14.5 million increase in

interest expense mainly

due to increases in deposit cost, combined with a $1.5

million increase in non-interest expense.

USCB Financial Holdings, Inc.

Q2 2023 Form 10-Q

of operations

depend substantially on

net interest income

interest-earning

interest-bearing liabilities and

primary driver of

and non-interest income.

Other factors

contributing to

of operations

provision for

credit losses,

of non-interest

provision for income taxes.

Three months ended September 30, 2023 compared to the

three months ended September 30, 2022

Net income decreased

to $3.8 million

for the three

months ended September

30, 2023 from

$5.6 million for

period in 2022 mainly due to higher weighted average

deposit costs.

Nine months ended September 30, 2023 compared to nine

months ended September 30, 2022

Net income decreased to $13.8 million for the nine months ended September 30,

2023 from $15.7 million for the same

period in 2022.

The main drivers of the variance of net income was a $25.1 million increase in

interest expense mainly due

to increases in the cost of deposits partially offset by a $22.5 million increase in interest income generated from higher loan

yields and a larger loan portfolio.

Net Interest Income

Net interest income

is the difference

between interest

earned on interest-earning

assets and interest

paid on interest-

bearing liabilities

core earnings.

income is generated

from interest and

Interest income

from interest

and dividends

interest-earning

14 unchanged sentences

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

USCB Financial Holdings, Inc.

Q3 2023 Form 10-Q

the annualized

3 unchanged sentences

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

and stockholders’

equity, also fund interest-earning assets,

and stockholders’ equity, also fund

interest-earning assets,

net interest margin includes the indirect benefit of these

non-interest-bearing funding sources.

interest rates and

interest rates

interest-earning assets

interest-earning

interest-bearing

liabilities, as well

as the volume and

types of interest-earning

assets and interest-bearing and

non-interest-bearing liabilities,

as the volume

interest-earning assets and interest-bearing

and non-interest-bearing liabilities,

are usually the

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costs of liabilities for the periods indicated (dollars in

Three Months Ended June 30,

Three Months Ended September 30,

Interest-earning assets:

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Q3 2023 Form 10-Q

Six Months Ended June 30,

Nine Months Ended September 30,

Interest-earning assets:

32 unchanged sentences

income to average total interest-earning assets.

Three months ended June 30, 2023 compared to the three

months ended June 30, 2022

Three months ended September 30, 2023 compared to the

three months ended September 30, 2022

Net interest income before the provision

for credit losses was $14.2 million for

the three months ended June 30,

a decrease of

$1.5 million or

$15.6 million

period in 2022.

The decrease can

be attributed to

impact of higher deposit costs, which was a result to

the prevailing market interest rate conditions.

quarter ended

June 30, 2023

for credit losses was $14.0

million for the three months

ended September 30,

conditions which offset the increase in interest income.

Net interest margin was 2.60%

for the quarter ended September 30, 2023 and 3.47% for the same period in 2022.

increase in loan yields as well as yields on other interest

-earning assets was offset by higher deposit and borrowing

Six months ended June 30, 2023 compared to six months

ended June 30, 2022

Net interest income before the provision for credit losses was $30.2 million for the six months ended June 30, 2023, an

increase of $149 thousand or 0.5%, from $30.0 million for

the same period in 2022.

Overall interest-bearing asset yields grew but were outpaced

by the increase in cost of funds.

Nine months ended September 30, 2023 compared to nine

months ended September 30, 2022

Net interest income

before the provision

for credit losses

was $44.2 million

months ended September

conditions which partially offset by the increase in interest

Net interest margin

decreased to 2.84%

months ended September

30, 2023 from

3.36% for the

Overall interest-bearing asset yields grew but

were outpaced by the increase in the cost of funds.

Provision for Credit Losses

6 unchanged sentences

The provision

variations in

securities portfolio,

recent historical

and projected

future economic

USCB Financial Holdings, Inc.

Q3 2023 Form 10-Q

conditions, our internal assessment of the credit quality of

the loan and debt securities portfolios

losses is impacted

by variations in

composition of our

loan and debt

securities portfolio, recent

historical and

projected future economic conditions, our internal assessment of the credit quality of the loan and debt

securities portfolios

and net charge-offs.

Three months ended June 30, 2023 compared to the three

months ended June 30, 2022

The provision for credit loss was $38 thousand for the three months

ended June 30, 2023 compared to $705 thousand

for the same period

Growth in unfunded commitments

was the primary driver

of the provision expense

three months ended June

30, 2023 period.

decrease in provision for

credit losses in the

2023 period compared to

June 30, 2022 quarter was due to greater loan growth

in second quarter 2022.

Six months ended June 30, 2023 compared to six months

ended June 30, 2022

The provision for credit

loss was $239

thousand for the six

months ended June

Three months ended September 30, 2023 compared to the

three months ended September 30, 2022

The provision

$653 thousand

ended September 30,

2023 compared

to $705 thousand

for the same period in 2022.

Decrease of $466 thousand due to higher loan growth in the six months ended

June 30, 2022.

The ACL as a percentage of total loans increased to 1.18% at June 30, 2023 compared to 1.15% at June 30,

three and six months ended

June 30 2023, was estimated under

the CECL methodology, and for

in 2022, it was estimated under the incurred loss model

See “Allowance for Credit Losses”

below for further discussion on

how the ACL is calculated.

thousand for the

same period in

the loan portfolio

was the primary

driver of the

provision expense during

September 30, 2023

period compared

to the September 30, 2022 quarter was due to greater loan

growth in third quarter 2022.

Nine months ended September 30, 2023 compared to nine

months ended September 30, 2022

The provision

$892 thousand

2023 compared

September 30,

ACL for the three

and nine months

ended September 30,

2023, was estimated

under the CECL methodology,

estimated under

See “Allowance

discussion on how the ACL is calculated.

Non-Interest Income

3 unchanged sentences

In addition, we own and are beneficiaries of the life

insurance policies

employees and

generate income

surrender value

insurance policies on some of our

employees and generate income from

the increase in the cash surrender

value of these

The following table presents the components of non-interest

income for the dates indicated (in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

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

3 unchanged sentences

non-interest income

Three months ended June 30, 2023 compared to the three

months ended June 30, 2022

Non-interest income

ended June 30,

2023 increased

$229 thousand

same period in

Three months ended September 30, 2023 compared to the

three months ended September 30, 2022

Non-interest income for the three months ended September 30, 2023 increased $372 thousand or 20.8%, compared to

the same period in 2022.

This increase was primarily driven by growth in service fees from a larger deposit portfolio and an

restructuring

life insurance

Company sold $7.7 million in lower-yielding securities to reinvest

the funds in higher-return investments.

Nine months ended September 30, 2023 compared to the

nine months ended September 30, 2022

Non-interest income for the nine months

ended September 30, 2023 increased $726

thousand or 13.6%, compared to

This increase

was primarily driven

by an increase

in service fees

from a larger

deposit portfolio and

$72 increase in gain on sale of loans due to higher sales

Six months ended June 30, 2023 compared to the six

months ended June 30, 2022

Non-interest income for the six months ended June 30, 2023 increased $354 thousand or 9.9%,

compared to the same

larger deposit

recognized $161

thousand interest

recovery from

lending customer

This payment reflected the final payment and settlement

of lien judgements against the customer.

was primarily

deposit portfolio

treasury management

A strategic restructuring

insurance increased

other income by

$982 thousand

experienced during

$976 thousand securities

$16.4 million

in lower-yielding

in higher-return

ended September 30, 2022, the Company recognized $161 thousand interest

recovery from a prior lending customer of the

This payment reflected the final payment and settlement of

lien judgements against the customer.

USCB Financial Holdings, Inc.

3 unchanged sentences

expense for the dates indicated (in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Salaries and employee benefits

4 unchanged sentences

non-interest expense

Three months ended June 30, 2023 compared to the three

months ended June 30, 2022

Non-interest expense

ended June 30,

2023 increased

$901 thousand

Three months ended September 30, 2023 compared to the

three months ended September 30, 2022

Non-interest expense for the three months ended September 30, 2023 increased $329 thousand or 3.2%, compared to

was primarily

services, legal

FDIC deposit insurance assessment,

and was partially offset by a decrease in the professional

Nine months ended September 30, 2023 compared to

the nine months ended September 30, 2022

Non-interest expense for the nine months ended September 30,

2023 increased $1.8 million or 6.1%, compared to

same period in

The increase was primarily driven by an increase in the FDIC deposit insurance assessment rate and

included in salary and employee benefits expense.

Six months ended June 30, 2023 compared to the six

months ended June 30, 2022

Non-interest expense

months ended June

30, 2023 increased

$1.5 million or

7.6%, compared

increased salary compensation and seasonal payroll taxes as well as increases

in the FDIC deposit insurance assessment

was primarily driven

by higher salaries

and employee benefits

expense due to

increased salary compensation and seasonal payroll taxes as well as increases in the FDIC deposit insurance assessment

rate, and audit and tax services expense.

15 unchanged sentences

elements in determining our effective tax rate.

Three months ended June 30, 2023 compared to the three

months ended June 30, 2022

ended June 30,

effective tax

Three months ended September 30, 2023 compared to the

three months ended September 30, 2022

ended September

same period in 2022.

Six months ended June 30, 2023 compared to the six

months ended June 30, 2022

Income tax expense

months ended June

30, 2023 decreased

to $3.2 million

from $3.6 million

The effective tax rate

for the three months ended

September 30, 2023 was 24.7% compared to

for the same period in 2022.

Nine months ended September 30, 2023 compared to the

nine months ended September 30, 2022

Income tax expense for the nine months ended September 30, 2023 decreased to $4.5 million from $5.5 million for

The Company’s

effective tax

period compared

period in 2022.

The Company’s effective tax rate was 24.3% for the 2023 period compared to 26.0% for the same period in

higher primarily

recorded a one-time adjustment of $300 thousand to deferred

tax assets which increased the income tax provision.

Statements in Item 1 of Part I of this Form 10-Q.

Analysis of Financial Condition

assets at June 30, 2023 were $2.2 billion, an increase of $140.1 million, or 13.5%

annualized, over total assets of

$2.1 billion at December 31, 2022.

loans, net of unearned fees/cost, increased $88.6 million, or 11.9

annualized, to

$1.6 billion at June 30,

2023 compared to $1.5

billion at December

deposits increased by $92.0

10.1% annualized, to $1.9 billion at June 30, 2023 compared

to December 31, 2022.

USCB Financial Holdings, Inc.

Q2 2023 Form 10-Q

September 30, 2023

$158.8 million,

annualized, to $1.7 billion at September 30, 2023 compared to $1.5 billion at December 31, 2022.

deposits increased

by $91.6 million,

or 6.7% annualized, to $1.9 billion at September 30, 2023

compared to December 31, 2022.

Investment Securities

9 unchanged sentences

profitability

USCB Financial Holdings, Inc.

Q3 2023 Form 10-Q

consideration the Company’s

4 unchanged sentences

adequate risk-based capital ratios.

conditions and/or

subject to change

depending on the

funding and liquidity

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.

The investment portfolio

is managed in accordance

with the Board approved

Asset and Liability

Management (“ALM”)

market conditions

and/or unexpected

The investment

portfolio composition

is subject to

change depending on the funding and liquidity needs of the Company, and the interest risk management objective directed

by the Asset-Liability

Comittee (“ALCO”).

portfolio of investments

used to modify

the duration of

The allocation

securities takes into

consideration anticipated future

cash flows (uses

and sources) and

all available sources of credit.

Our investment portfolio consists

8 unchanged sentences

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

necessarily represent the

expected life of

do not necessarily represent

the expected life of

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

for adherence to

investment policy.

of these securities will

be called or paid

down prior to

capital market

expectations.

Chief Financial

an appropriate

return profile

as for adherence to the investment policy.

other-than-temporary-impairment

2 unchanged sentences

through a permanent write-down.

When evaluating AFS

debt securities

evaluated whether

attributed to

credit losses

When evaluating AFS debt

under ASC Topic

326, the Company has evaluated

whether the decline in fair value

is attributable to credit losses

review of credit

9 unchanged sentences

HTM investment

securities increased

$20.6 million, or

securities de

0.9% annualized,

1 unchanged sentence

2023 from $418.8 million at December 31,

securities increased due to reinvestment of payments

investment of excess

balances into high

credit quality investments

to increase the

Company’s profitability and

market value of

$223.2 million were

pledged to secure

public deposits and

The investment portfolio

does not have

any tax-exempt securities.

Investment securities increased due

to reinvestment of payments received

and investment of excess

in cash balances into

high credit quality investments

to increase the Company’s

profitability and

Company’s balance sheet

duration according to

the ALM policy.

of September 30, 2023,

investment securities

with a market value of $107.7 million

were pledged to secure public deposits

and the BTFP.

The investment portfolio does

not have any tax-exempt securities.

USCB Financial Holdings, Inc.

Q3 2023 Form 10-Q

June 30, 2023

September 30, 2023

December 31, 2022

20 unchanged sentences

for investment

as of June 30, 2023 (in thousands,

as of September 30, 2023 (in thousands,

except ratios):

28 unchanged sentences

and mitigates such risks in accordance

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

credit and ALM policies, risk tolerance and balance sheet

USCB Financial Holdings, Inc.

2 unchanged sentences

as of the dates indicated (in thousands):

June 30, 2023

September 30, 2023

December 31, 2022

7 unchanged sentences

Allowance for credit losses

loans, net of unearned fees/cost, increased by $88.6 million,

annualized, at June 30, 2023 compared to

December 31, 2022.

The commercial and industrial, and

to a lesser extent, consumer and

other and commercial real estate

segments had the

most significant growth partially

offset by modest declines

in the residential

real estate and

correspondent

bank loan segments.

$169.2 million,

September 30, 2023

and industrial,

extent, consumer

and other and commercial real estate loan segments had the

most significant growth.

approximately 60.0%

loan portfolio

June 30, 2023.

been reflective of the market in which we operate and

of our strategic plan as approved by the Board.

September 30, 2023.

growth strategy

since inception

has been reflective of the market in which we operate and of our

strategic plan as approved by the Board.

commercial real estate

8 unchanged sentences

highly competitive

relationships with

long-term relationships

senior management

5 unchanged sentences

or unexpected

The following table shows maturities and sensitivity to

interest rate changes for the loan portfolio at June 30,

2023 (in thousands):

September 30, 2023 (in thousands):

Due in 1 year or

10 unchanged sentences

The information

contractual maturities

maturities of

the individual

their contractual

Renewals will

department and

balance sheet

composition at the

any modification of

the loan’s maturity.

the analysis,

modification of terms

loan’s maturity.

Additionally,

3 unchanged sentences

/rate modifications are discussed as well.

As of September 30,

2023, approximately 59%

have adjustable/variable

of the loans have

adjustable/variable rates and

The adjustable/variable

4 unchanged sentences

important to note

USCB Financial Holdings, Inc.

Q2 2023 Form 10-Q

interest rate

2 unchanged sentences

of higher interest rates.

USCB Financial Holdings, Inc.

Q3 2023 Form 10-Q

Asset Quality

1 unchanged sentence

analysis estimates the capability of

the borrower to

repay the contractual obligation of

the borrower to repay

the contractual obligation of

agreement as scheduled or at all.

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assess the credit worthiness of a loan are shown below:

– Loans indicate different levels of satisfactory financial

condition and performance.

– Loans indicate different levels of satisfactory

financial condition and performance.

Special Mention

15 unchanged sentences

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

– 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.

2 unchanged sentences

as follows for the dates indicated (in thousands):

June 30, 2023

September 30, 2023

Special Mention

14 unchanged sentences

Non-Performing Assets

The following table presents non-performing assets

as of the dates shown (in thousands,

The following table presents non-performing assets as

of the dates shown (in thousands,

except ratios):

June 30, 2023

September 30, 2023

December 31, 2022

15 unchanged sentences

collateral values and the paying capacity of the borrower.

the collection of the full contractual balance is unlikely,

When the collection of the full contractual balance is unlikely,

loan is placed on non-accrual to avoid overstating the

2 unchanged sentences

the date it becomes

90 days past due and

remains in non-accrual

90 days past due

and remains in non-accrual

status until it meets

4 unchanged sentences

the principal

non-accrual status

until it meets

more and remains

in non-accrual

principal and interest

payments for a

period of six

months and the

Company has a

documented expectation

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

14 unchanged sentences

see Note 3 “Loans” to

the unaudited Consolidated Financial Statements of this

the unaudited Consolidated Financial Statements in Item

1 of Part 1 this Form 10-Q.

Allowance for Credit Losses

4 unchanged sentences

credit losses

(CECL) methodology

the remaining

8 unchanged sentences

and Industrial

Three Months Ended June 30, 2023

Three Months Ended September 30, 2023

Beginning balance

3 unchanged sentences

Net charge-offs to average loans

Six Months Ended June 30, 2023

Nine Months Ended September 30, 2023

Beginning balance

4 unchanged sentences

Net charge-offs to average loans

(1) Provision for credit losses excludes $62 thousand expense due to unfunded commitments included in other liabilities and $19

thousand expense due to investment securities held to maturity.

(1) Provision for credit losses excludes $17 thousand release due to unfunded commitments included in other liabilities and $3

thousand release due to investment securities held to maturity.

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

2 unchanged sentences

and Industrial

Three Months Ended June 30, 2022

Three Months Ended September 30, 2022

Beginning balance

3 unchanged sentences

Net charge-offs to average loans

Six Months Ended June 30, 2022

Nine Months Ended September 30, 2022

Beginning balance

3 unchanged sentences

Net charge-offs to average loans

USCB Financial Holdings, Inc.

Q2 2023 Form 10-Q

Bank-Owned Life Insurance

As of June 30,

As of September 30,

2023, the combined

cash surrender

value of all bank-owned

life insurance (“BOLI”)

policies was $43.3

Changes in cash surrender value are recorded to non-interest income in the unaudited Consolidated Statements of

bank-owned life

insurance (“BOLI”)

Statements of Operations.

The Company had BOLI policies with five insurance carriers.

The Company is the beneficiary of these policies.

The Company is the beneficiary of

these policies.

USCB Financial Holdings, Inc.

Q3 2023 Form 10-Q

third quarter

restructured its

BOLI, cancelling

million policy

by surrendering

$4.2 million of the value and transferring the remaining $2.9 million to a new BOLI

The new BOLI policy

with an additional

$14.1 million.

received a cash

surrender enhancement

from the new insurance carrier of $981 thousand.

Customer deposits are the

11 unchanged sentences

presents the daily

average balance

and average rate

paid on deposits

by category for

average balance and

average rate paid

on deposits by

presented (in thousands, except ratios):

Three Months Ended June 30,

Three Months Ended September 30,

Average Balance

5 unchanged sentences

granular deposit

with outstanding

balances comprised

in commercial

deposits, 11%

partially collateralized

brokered deposits.

quarter ended June 30, 2023, the Company acquired

$50 million in brokered deposits to boost liquidity.

The Company has

approximately 20 thousand deposits accounts with the majority in personal

approximately 13 thousand or 64.4%.

portfolio with

outstanding balances

collateralized

months ended September

30, 2023, the

Company acquired $50

million in brokered

deposits to boost

approximately

estimated average

deposit portfolio

is approximately

September 30,

Company also offers

Insured Cash Sweep (“ICS”) and Certificate

Deposit Account Registry Service (“CDARS”)

products to fully insure our clients.

accounts at the Company per

account holder.

total estimated amount of uninsured

deposits is 53.2% or $1.0 billion

June 30, 2023.

Sweep (“ICS”) and

Certificate of

Deposit Account Registry Service

deposit products to fully insure our clients.

accounts at the Company

per account holder.

The total estimated

amount of uninsured deposits

September 30,

The following table shows scheduled maturities of uninsured

time deposits as of June 30, 2023 (in thousands):

June 30, 2023

time deposits as of September 30, 2023 (in thousands):

September 30, 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

estate taxes and insurance.

These escrow funds are disbursed

by the Company directly to the insurance companies

taxing authority of the borrower.

The Company collects from commercial and residential loan

customers funds which are held in escrow for future

payment of real estate taxes and insurance.

funds are disbursed by the Company directly to the

companies and taxing authority of the borrower.

Escrow funds are recorded as other liabilities.

As of June 30, 2023 escrow balances totaled $12.1 million

As of September 30, 2023 escrow balances totaled $16.7 million

compared to $3.5 million at December 31, 2022.

8 unchanged sentences

and unexpected outgoing cash flows and collateral

needs without adversely affecting either daily operation

needs without adversely affecting either daily operations

or the financial condition of the Company.

As of June 30, 2023, we

had $87.0 million of fixed-rate

As of September 30, 2023,

we had $102.0 million

of fixed and variable rate

advances outstanding from

the FHLB with a weighted average

rate of 3.06%.

Maturity dates for the advances range between

2023 to 2028 detailed in the table below.

The following table presents the FHLB fixed rate advances

as of June 30, 2023 (in thousands):

the FHLB with

a weighted average rate of 3.66%.

Maturity dates for the advances range

between 2023 to 2028 detailed

in the table below.

The following table presents the FHLB advances as of

September 30, 2023 (in thousands):

Interest Rate

Maturity Date

August 17, 2023

December 22, 2023

July 30, 2024

3 unchanged sentences

April 25, 2028

also established

Federal Funds

correspondent banks,

correspondent

Discount Window

fluctuations in

June 30, 2023,

were no outstanding balances with any of these sources.

temporary fluctuations

there were no outstanding balances with any of these

liquidity sources.

Off-Balance Sheet Arrangements

7 unchanged sentences

credit and standby letters

involve elements

commitments involve

credit, market,

amount recognized

balance sheet.

conservative credit

and collateral

more conservative

collateral policies

commitments than

on-balance sheet

are not aware

for on-balance

of any accounting

6 unchanged sentences

commitments outstanding as of the dates indicated (in thousands

June 30, 2023

September 30, 2023

December 31, 2022

2 unchanged sentences

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

the commitments

expire without being

12 unchanged sentences

by the contractual

the commitment,

less the amount

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 third party,

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

3 unchanged sentences

would be entitled

recovery from

the client from

to seek recovery

from the client

the underlying collateral,

7 unchanged sentences

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 manner.

Senior management

is responsible

approved strategies

and mitigating

risks are appropriately executed within the designated lines of

authority and responsibility in a timely manner.

establishment,

2 unchanged sentences

and risk tolerances and appetite.

degree of IRR

(“Interest Rate Risk”)

is inherent to the

banking business,

we believe our

place sound risk management practices to identify,

quantify, monitor,

and limit IRR exposures.

While some degree of

IRR (“Interest Rate

Risk”) is inherent to

the banking business, we

believe our ALCO implemented

sound risk management practices to identify,

monitor, and limit IRR exposures.

When assessing

13 unchanged sentences

interest rates,

non-parallel changes such as changing

slopes (flat and steepening)

non-parallel changes such as

changing slopes (flat and steepening)

and twists of the yield curve.

9 unchanged sentences

from existing assets and

value model utilizes a

static approach in that

The economic value

model utilizes a static

approach in that

incorporate new

1 unchanged sentence

Market and Interest Rate Risk Management

According to our ALCO

model, as of June

30, 2023, we had

a neutral balance sheet

for year one modeling

sensitive balance

sheet for year

two modeling.

Asset sensitivity indicates

assets generally reprice

faster than our

liabilities, which results in a favorable impact to net interest income when market

interest rates increase.

According to our

ALCO model, as of

September 30, 2023,

we had an asset

sensitive balance sheet

both for year one

static modeling.

Asset sensitivity

generally reprice

liabilities, which results in a favorable impact to net interest income when market interest rates

Liability sensitivity

indicates that our

liabilities generally reprice

faster than our

assets, which results

in a favorable

impact to net

interest income

liabilities generally reprice faster

than our assets,

which results in

a favorable impact

to net interest

when market interest rates decrease.

Many assumptions are used

to calculate the impact of

interest rate variations on our

to calculate the impact of interest

rate variations on our

net interest income,

24 unchanged sentences

According to our

June 30, 2023,

NIM most likely

will remain neutral

and should increase

year two under static

rate scenarios (an

increase or decrease

static forecast in

year one, the

estimated NIM

will decrease

base case scenario

points scenario.

Additionally,

approach, we analyze

the risk to capital

from the effects

of various interest

rate scenarios through

cash flow model.

This measures

the difference

economic value

of our assets

and the economic

liabilities, which is

our liquidation value.

According to our

balance sheet composition, and

as expected, our

stipulates that an increase

in rates will have a

negative impact on the EVE

and lower rates, a

positive impact.

analysis are presented quarterly to the ALCO, and strategies

model, as of September

30, 2023, our balance

sheet is asset

sensitive for both year

interest static rate

scenarios (an increase

or decrease of

400 basis points).

This means than

if rates increase the

increase and if rates decrease the NIM will decrease.

Additionally, utilizing an EVE approach, we analyze the risk to capital

liquidation value.

sheet composition,

expected, our

model stipulates

interest rates will have a

negative impact on the EVE and

lower rates, a positive impact.

Results and analysis are presented

quarterly to the ALCO, and strategies are reviewed and refined.

USCB Financial Holdings, Inc.

8 unchanged sentences

and collateral needs without adversely affecting

either daily operations or the financial condition of

either daily operations or the financial condition of the

Liquidity risk

9 unchanged sentences

and off-balance sheet obligations.

regularly monitors

situations that

monitors situations

include funding

16 unchanged sentences

identifying, measuring, monitoring

integrated into our risk management processes,

Contingency Funding Plan and ALM policy.

integrated into our risk management processes, Contingency

Funding Plan and ALM policy.

Critical elements of our liquidity

26 unchanged sentences

purchased, brokered

listing services

certificates of

deposit, listing

services certificates

Funding Program,

7 unchanged sentences

Capital Adequacy

September 30,

well capitalized

follow the capital conservation

buffer framework,

and as of June

exceeded the capital

conversation buffer

indicated (in thousands, except ratios).

prompt corrective

action framework.

also follow the capital conservation buffer framework, and

as of September 30, 2023, we exceeded the

capital conversation

all capital ratios,

our actual ratios.

The following table

presents the capital

dates indicated (in thousands,

except ratios).

Minimum Capital

2 unchanged sentences

Action Provisions

June 30, 2023

September 30, 2023

risk-based capital

7 unchanged sentences

Leverage ratio

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.

The Company is

not subject to

regulatory capital ratios

imposed by Basel

holding companies because

Company is deemed to be a small bank holding company.

Impact of Inflation

6 unchanged sentences

due to inflation.

impact of inflation is reflected

impact of inflation is

reflected in the

increased cost of operations.

19 unchanged sentences

respectively.

associated with delivering the Company’s services.

associated with delivering the Company’s servi

Recently Issued Accounting Pronouncements

2 unchanged sentences

in Note 1 “Summary

of Significant Accounting

of Significant Accounting Policies”

the unaudited Consolidated Financial Statements in this

57 unchanged sentences

Operating efficiency ratio

The Company believes these non-GAAP measurements are

key indicators of the ongoing earnings power

of the Company.

The Company believes these non-GAAP measurements

are key indicators of the ongoing earnings

power of the Company.

USCB Financial Holdings, Inc.

19 unchanged sentences

Tangible Common Equity/Tangible

The Company believes these non-GAAP measurements are

key indicators of the ongoing earnings power

of the Company.

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

4 unchanged sentences

As a smaller reporting company,

we are not required to provide the information required by

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