What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-05-10 compared with 2023-11-09 · 494 added, 701 removed, 1013 unchanged (54% of the section changed)

2 unchanged sentences

understanding

September 30, 2023.

condition and results

of operations of

the Company and

the Bank, its

wholly owned subsidiary,

ended March 31,

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.

in conjunction

with the unaudited

consolidated financial

statements and related

notes included in

this Quarterly

Report on Form

10-Q (“Form 10-Q”)

and the audited

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

ended December 31, 2023.

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

3 unchanged sentences

such differences are discussed

in the sections entitled "Forward-Looking Statements"

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 www.sec.gov.

in the sections

entitled "Forward-Looking

Statements" and Item

1A “Risk Factors"

hereof and in

Form 10-K filed with the SEC which is available at the

SEC’s website www.sec.gov.

Holdings, Inc.

Forward-Looking Statements

This Form 10-Q contains

statements that are

not historical in

nature and are

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

“anticipate,”

“contemplate,”

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

statements that

historical in

hereby identified

forward-looking statements for purposes

harbor provided by

Section 21E of

the Securities Exchange Act

words “may,” “will,” “anticipate,” “could,”

“should,” “would,” “believe,”

“contemplate,” “expect,” “aim,”

“estimate,” “continue,”

and “intend,”

similar words

and expressions

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.

anticipated future

financial performance,

and management’s

long-term performance

statements relating

to the anticipated

effects on results

of operations and

financial condition from

expected developments or

events, or business

and growth strategies, including anticipated internal growth.

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

44 unchanged sentences

or third-party fraud and security breaches;

other filings

Securities and

Commission (“SEC”).

other risks described in this Form 10-Q, the 2023 Form 10-K and other filings we make with the SEC.

forward-looking

4 unchanged sentences

place undue reliance

USCB Financial Holdings, Inc.

Q3 2023 Form 10-Q

forward-looking statements.

forward-looking statements

hereof, and we undertake

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.

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

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

this quarterly

events or circumstances after the date on which the statement is made or to

reflect the occurrence of unanticipated events,

USCB Financial Holdings, Inc.

Q1 2024 Form 10-Q

unless required to do so

under the federal securities

should also review the

risk factors described

in the Annual

Report on Form 10-K and in the reports the Company

filed or will file with the SEC.

ended March 31,

2024 compared

diluted share

March 31, 2023.

On January 29, 2024, the Company’s Board of

Directors declared a cash dividend of $0.05 per

share of the Company’s

dividend was paid

2024 to shareholders

business on February

amount distributed in

connection with this

dividend was $1.0

Additionally,

the Company’s Board

of Directors declared

a cash dividend of $0.05 per share of the Company’s Class

A common stock on

April 22, 2024.

The dividend will be paid on

June 5, 2024 to shareholders of record at the close of

business on May 15, 2024.

7,100 shares of

Class A common stock were repurchased

at a weighted

average price per

share of $11.15

first quarter 2024.

These repurchases were made

pursuant to the Company’s publicly

announced repurchase program.

of March 31, 2024, 72,980 shares remained authorized

for repurchase under this program.

On April 22, 2024, the Board of Directors approved a new share repurchase

program of up to 500,000 shares of Class

approximately

repurchase program,

Class A common stock

on a discretionary

time through open market repurchases, privately negotiated transactions, or other means.

The repurchase program has no

expiration date and may

be modified, suspended,

or terminated at any

The new repurchase

program will commence

Company’s existing cash and cash equivalents or future

As of April 22, 2024, 572,980 shares remain authorized

for repurchase under the Company’s share repurchase

In evaluating our financial

7 unchanged sentences

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

Unless otherwise

stated, all period

comparisons in the

bullet points below

are calculated for

ended March 31,

2024 compared

annualized where appropriate:

Net interest income for the three months ended

March 31, 2024 decreased $839 thousand or 5.2% to $15.2 million

million for the quarter ended March 31, 2023.

margin (“NIM”)

the three months

ended September 30, 2022.

NIM was 2.84% for

the nine months ended

in September 30, 2023

compared to 3.36% for

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.

ended March 31, 2023.

Total assets were $2.5 billion at March 31, 2024, representing an increase of $325.3 million or 15.0% from March 31, 2023 and

an increase of $150.0 million or 25.7% annualized from December 31, 2023.

Total loans were $1.8

$1.7 billion at

September 30, 2023,

billion at March 31, 2024,

representing an increase of $240.8

million or 15.2% from March

an increase of $40.4 million or 9.1% annualized from December 31, 2023.

Total deposits

were $2.1 billion

representing an increase

of $245.0 million

or 17.1% from

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,

14.9% from March

and an increase of $165.7 million or 34.4% annualized from December 31, 2023.

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

1.16% at both

September 30, 2023 and December

ACL was calculated under

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.

Tangible book value

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.

Annualized return on average

assets for the quarter

ended March 31, 2024

was 0.76% compared

the quarter ended

March 31, 2023.

Annualized return on

average stockholders’ equity

for the quarter

9.61% compared to

quarter ended March 31, 2023.

The ACL to total loans was 1.18% at both March 31, 2024 and December 31, 2023.

Non-performing loans to total loans was 0.03% at both March 31, 2024 and December 31, 2023.

At March 31, 2024, the total risk-based capital ratios for the Company and the Bank were 12.98% and 12.89%, respectively.

USCB Financial Holdings, Inc.

Q1 2024 Form 10-Q

Tangible book

financial measurement)

affected by $2.31 due to accumulated comprehensive loss of

$45.4 million at March 31, 2024.

At March 31, 2023, tangible book

value of $9.37 per common

share was negatively affected

by $2.14 due to

$42.1 million accumulated other

comprehensive loss.

“Reconciliation and

Explanation for

Non-GAAP Financial

Measures” for

reconciliation

this non-GAAP

financial measure.

Critical Accounting Policies and Estimates

Significant Accounting Policies”

Company’s 2022 Form

financial statements

in conformity

management makes

estimates, assumptions,

and judgments

available information.

“Summary of Significant Accounting Policies” in Part I

in this Form 10-Q .

To prepare financial statements in conformity with

management makes estimates, assumptions,

and judgments based on available information.

These estimates,

assumptions, and judgments affect

the amounts reported in

the financial statements

and accompanying notes.

These estimates, assumptions,

and judgments are based on information available as of the date

of the financial statements and,

as this information changes, actual results

could differ from the estimates, assumptions and

judgments reflected

estimates, assumptions,

and judgments are

based on information

available as of the

date of the financial

statements and,

financial statements.

In particular,

has identified

policies that,

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

Management has presented the application of these policies

to the Audit and Risk Committee of our Board of

Allowance for Credit Losses

Measurement of Credit Losses

on Financial Instruments,

as amended, which replaces

the incurred loss methodology

“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

potential impact

in qualitative

factors related

a sensitivity

in calculating

expected losses on the residential loan segment.

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

sensitivity analysis provides

a hypothetical result

to assess the

sensitivity of the

and does not represent a change in management’s

liabilities are

recognized for

tax consequences

attributable to

the financial statement carrying amounts of

existing assets and liabilities and their

respective tax bases and operating loss

and tax credit carryforwards.

assets and liabilities are measured

using enacted tax rates expected

taxable income

temporary differences

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

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

consideration of

all available evidence

likely than not

evaluation, management

considers taxable loss

carry-back availability, expectation of sufficient

taxable income, trends

in earnings, the

future reversal

of temporary differences, and available tax planning

The Company recognizes positions taken

or expected to be

taken in a tax

return in accordance with existing accounting

which prescribes

a recognition threshold

and measurement

and penalties

tax liabilities, if any, would

be recorded in interest expense and other operating non-interest

expense, respectively.

management has identified

accounting policies that,

estimates, assumptions

understanding

presented the application of these policies to the Audit

and Risk Committee of our Board of Directors.

Non-GAAP Financial Measures

23 unchanged sentences

Measures” included in this Form 10-Q.

USCB Financial Holdings, Inc.

Q3 2023 Form 10-Q

Segment Reporting

17 unchanged sentences

(in thousands, except ratios):

September 30, 2023

March 31, 2024

December 31, 2023

1 unchanged sentence

stockholders' equity

Loan amounts include deferred fees/costs.

Three Months Ended September 30,

Nine Months Ended September 30,

Loan amounts include deferred costs.

USCB Financial Holdings, Inc.

Q1 2024 Form 10-Q

Three Months Ended March 31,

Consolidated Statements of Operations:

5 unchanged sentences

Net interest margin

The Company’s results

of operations

depend substantially on

net interest income

and non-interest income.

Other factors

contributing to

of operations

provision for

credit losses,

The Company’s

substantially

Other factors contributing

to the results of

operations include our provision for

credit losses, the level

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

expense, and the provision for income taxes.

Three months ended March 31, 2024 compared to the three

months ended March 31, 2023

million compared

this positive

million increase

interest expense

weighted average deposit

and borrowing costs.

Consequently, net income

decreased $1.2 million

to $4.6 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.

the three months ended March 31, 2024 compared to the three

months ended March 31, 2023.

Net Interest Income

26 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

2 unchanged sentences

non-interest-

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

and stockholders’ equity, also fund

interest-earning assets,

bearing sources

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

stockholders’ equity, also fund interest-earning assets,

net interest margin includes the indirect benefit of these

13 unchanged sentences

interest income.

asset liability committee (ALCO) has in

place asset-liability management techniques to manage major factors that

interest income and net interest margin.

asset liability committee

in place asset-liability

management techniques

to manage major

net interest income and net interest margin.

USCB Financial Holdings, Inc.

6 unchanged sentences

costs of liabilities for the periods indicated (dollars in

Three Months Ended September 30,

Three Months Ended March 31,

Interest-earning assets:

32 unchanged sentences

income to average total interest-earning assets.

USCB Financial Holdings, Inc.

Q3 2023 Form 10-Q

Nine Months Ended September 30,

Interest-earning assets:

Investment securities

Other interest-earnings assets

Total interest-earning assets

Non-interest earning assets

Liabilities and stockholders' equity

Interest-bearing liabilities:

Interest-bearing checking

Money market and savings accounts

Time deposits

Total interest-bearing deposits

Borrowings and repurchase agreements

Total interest-bearing liabilities

Non-interest bearing demand deposits

Other non-interest-bearing liabilities

Total liabilities

Stockholders' equity

Total liabilities and stockholders' equity

Net interest income

Net interest spread

Net interest margin

Average balances - Daily average balances are used

to calculate yields/rates.

Average loan balances include non-accrual loans.

Interest income

on loans includes accretion of deferred loan fees,

net of deferred loan costs.

At fair value except for securities held to maturity.

Includes FHLB stock.

Net interest spread is the weighted average

yield on total interest-earning assets minus the weighted

average rate on total interest-bearing

Net interest margin is the ratio of net interest

income to average total interest-earning assets.

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 $14.0

million for the three months

ended September 30,

Three months ended March 31, 2024 compared to the three months

ended March 31, 2023

Net interest income before the provision for

credit losses was $15.2 million for the

three months ended March 31, 2024,

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

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.

in loan yields as well as yields on other interest-earning assets was offset by

higher deposit and borrowing costs.

Provision for Credit Losses

6 unchanged sentences

The provision

USCB Financial Holdings, Inc.

Q3 2023 Form 10-Q

losses is impacted

7 unchanged sentences

and net charge-offs.

Three months ended September 30, 2023 compared to the

three months ended September 30, 2022

USCB Financial Holdings, Inc.

Q1 2024 Form 10-Q

Three months ended March 31, 2024 compared to the three months

ended March 31, 2023

The provision

$410 thousand

ended September 30,

2023 compared

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

ended March 31, 2024

$201 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.

portfolio was

provision expense

during the three months ended March 31, 2024.

Non-Interest Income

9 unchanged sentences

income for the dates indicated (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

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

Gain on sale of loans held for sale, net

Loan settlement

Other non-interest income

non-interest income

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

Three months ended March 31, 2024 compared to the three months

ended March 31, 2023

Non-interest income for the three

months ended March 31, 2024

increased $394 thousand or 19.0%,

compared to the

This increase

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.

Q3 2023 Form 10-Q

larger deposit

portfolio and

increase in wire and treasury management fees.

Non-Interest Expense

1 unchanged sentence

expense for the dates indicated (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Salaries and employee benefits

4 unchanged sentences

non-interest expense

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

Three months ended March 31, 2024 compared to the three months

ended March 31, 2023

Non-interest expense for the three

months ended March 31, 2024

increased $998 thousand or 9.8%,

compared to the

same period in 2023.

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.

The increase was

primarily driven by an increase

in other operating expenses of $578

to $199 thousand

external audit

thousand increase

in miscellaneous

Additionally, consulting and legal fees increased

$234 thousand due to legal

and regulatory assessment and fees

increased $209 thousand mostly due to FDIC deposit insurance

as our deposit portfolio grew.

Provision for Income Tax

14 unchanged sentences

elements in determining our effective tax rate.

Three months ended September 30, 2023 compared to the

three months ended September 30, 2022

ended September

same period in 2022.

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

USCB Financial Holdings, Inc.

Q1 2024 Form 10-Q

Three months ended March 31, 2024 compared to the three months

ended March 31, 2023

Income tax expense for

the quarter ended March

31, 2024 was $1.4

million as compared to

$1.9 million for the

effective tax

period compared

period in 2022.

March 31, 2024

same period in 2023.

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

Analysis of Financial Condition

September 30, 2023

$158.8 million,

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

Total assets at March 31, 2024 were $2.49 billion, an increase of $150.0 million, or 25.8% annualized,

over total assets

of $2.34 billion at December 31, 2023.

loans, net of unearned fees/cost, increased $40.4 million, or 9.1% annualized,

2024 compared

deposits increased

by $91.6 million,

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

compared to December 31, 2022.

million, or 34.4% annualized, to $2.10 billion at March

31, 2024 compared to $1.94 billion December 31, 2023.

Investment Securities

9 unchanged sentences

profitability

USCB Financial Holdings, Inc.

Q3 2023 Form 10-Q

consideration the Company’s

15 unchanged sentences

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.

Asset-Liability

consideration

sources) and all available sources of credit.

Our investment portfolio consists

20 unchanged sentences

as for adherence to the investment policy.

other-than-temporary-impairment

losses to be recorded as

an allowance rather than

through a permanent write-down.

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

ratings, remaining

payment terms,

prepayment speeds

of macro-economic

investment is expected

its price depreciations

over its holding

maturity and the

concluded that no allowance was required on AFS securities.

HTM investment

securities de

0.9% annualized,

to $415.9 million

When evaluating AFS

debt securities under

326, the Company

whether the decline

in fair value

is attributable

to credit losses

factors like interest

using both quantitative

and qualitative

analyses, including

macro-economic conditions.

Each investment is

expected to recover

its unrealized loss

position over its

holding period as

it approaches to maturity

and the Company has

the intent and ability

to hold these securities

to maturity until

a result of this evaluation, the

Company concluded that no allowance was required on AFS

securities as of March 31, 2024.

AFS and HTM investment securities increased $28.7 million,

or 28.6% annualized, to $433.0 million at March 31, 2024

from $404.3 million at December 31, 2023.

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.

securities increased due to reinvestment of payments

investment of excess

balances into high

credit quality investments

to increase the

Company’s profitability and

March 31, 2024,

of $244.4 million

public deposits

The investment

portfolio does

have any tax-exempt securities.

USCB Financial Holdings, Inc.

Q1 2024 Form 10-Q

September 30, 2023

March 31, 2024

December 31, 2023

6 unchanged sentences

Bank subordinated debt securities

Corporate bonds

Held-to-maturity:

11 unchanged sentences

for investment

as of September 30, 2023 (in thousands,

except ratios):

as of March 31, 2024 (in thousands, except ratios):

Within 1 year

22 unchanged sentences

Sheets, and usually

interest-earning

liquidity risks in comparison to lower

yield assets.

The Company manages

and mitigates such risks in accordance

credit and ALM policies, risk tolerance and balance sheet

provide higher yields than the

remainder of the interest

-earning assets.

Higher yields

typically carry greater

inherent credit

and liquidity risks in comparison to lower yield assets.

The Company manages and mitigates such risks in accordance with

the credit and ALM policies, risk tolerance and balance

sheet composition.

USCB Financial Holdings, Inc.

2 unchanged sentences

as of the dates indicated (in thousands):

September 30, 2023

March 31, 2024

December 31, 2023

4 unchanged sentences

Consumer and Other

Deferred fees (cost)

loans net of deferred fees (cost)

Deferred costs

loans net of deferred fees (costs)

Allowance for credit losses

$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

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.

cost, increased

by $40.4 million,

annualized to

$1.82 billion,

compared to December 31, 2023.

The residential real

estate loan segment had the most significant growth.

approximately 58% of the

total gross loan portfolio as

of March 31, 2024.

growth strategy since inception has

reflective of the market in which we operate and of our strategic

plan as approved by the Board.

commercial real estate

16 unchanged sentences

or unexpected

September 30, 2023 (in thousands):

The following table shows

maturities and sensitivity to

interest rate changes for the

loan portfolio at March 31,

2024 (in thousands):

Due in 1 year or

25 unchanged sentences

/rate modifications are discussed as well.

As of September 30,

2023, approximately 59%

of the loans have

adjustable/variable rates and

The adjustable/variable

different benchmarks

As of March 31, 2024, approximately 58% of

the loans have adjustable/variable rates

and 42% of the loans have fixed

adjustable/variable

contractual characteristics, there are no

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as follows for the dates indicated (in thousands):

September 30, 2023

March 31, 2024

Special Mention

17 unchanged sentences

except ratios):

September 30, 2023

March 31, 2024

December 31, 2023

6 unchanged sentences

Non-performing loans to total loans

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

Non-performing

restructured,

reasonably uncertain are

placed on a non-accrual

Non-performing assets include all loans categorized

as non-accrual or restructured, other real

estate owned (“OREO”)

and other repossessed assets.

Problem loans for which

the collection or

liquidation in full

is reasonably uncertain are

on a non-accrual

This determination

is based on current

existing facts concerning

collateral values and the paying capacity of the borrower.

current existing facts

concerning collateral

values and the

capacity of the borrower.

When the collection of the full contractual balance is unlikely,

loan is placed on non-accrual to avoid overstating the

Company’s income for a loan with increased credit

the loan is placed on non-accrual to

avoid overstating the Company’s income for a

loan with increased credit risk.

non-accrual status as of

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in non-accrual

principal and interest

payments for a period

of six months

and the Company

has a documented

expectation of repayment

of the remaining contractual principal and interest or the

loan becomes secured and in the process of collection.

principal and interest payments for a period of six consecutive months and the Company

has a documented expectation of

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

difficulties.

15 unchanged sentences

Allowance for Credit Losses

On January 1,

2023, the Company

which introduced the

current expected

credit losses

the remaining

expected future credit losses on outstanding loans.

Additionally,

qualitative adjustments are made to the ACL when, based

calculations.

management’s judgment, there

are factors impacting

the allowance estimate

not considered by

the quantitative calculations.

See Note 3 “Loans” in Item 1 of Part 1 of this Form 10-Q

for more information on the ACL.

USCB Financial Holdings, Inc.

2 unchanged sentences

type for the periods indicated (in thousands):

and Industrial

Three Months Ended September 30, 2023

Three Months Ended March 31, 2024

Beginning balance

3 unchanged sentences

Net charge-offs to average loans

Nine Months Ended September 30, 2023

(1) Provision for credit losses excludes a $43 thousand charge due to unfunded commitments included in other liabilities and a $4

thousand charge related to investment securities held to maturity.

Three Months Ended March 31, 2023

Beginning balance

Cumulative effect of adoption of accounting

Cumulative effect of adoption of

accounting principle

Provision for credit losses

2 unchanged sentences

Net charge-offs to average loans

(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.

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

(3) Provision for credit losses excludes $39 thousand release due to unfunded commitments included in other liabilities and $16

thousand expense due to investment securities held to maturity.

and Industrial

Three Months Ended September 30, 2022

Beginning balance

Provision for credit losses

Ending Balance

Average loans

Net charge-offs to average loans

Nine Months Ended September 30, 2022

Beginning balance

Provision for credit losses

Ending Balance

Average loans

Net charge-offs to average loans

(2) Provision for credit losses excludes a $84 thousand release due to unfunded commitments included in other liabilities

Bank-Owned Life Insurance

As of September 30,

2023, the combined

cash surrender

bank-owned life

insurance (“BOLI”)

Statements of Operations.

As of March 31, 2024, the combined cash surrender value of all bank-owned life insurance (“BOLI”) policies was

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

The Company had BOLI policies with five insurance carriers.

The Company is the beneficiary of

these policies.

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.

The Company is the beneficiary of these policies.

Customer deposits are the

9 unchanged sentences

relationships of the employees of these businesses.

USCB Financial Holdings, Inc.

Q1 2024 Form 10-Q

The following table

4 unchanged sentences

presented (in thousands, except ratios):

Three Months Ended September 30,

Three Months Ended March 31,

Average Balance

7 unchanged sentences

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

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,

32% personal deposits, 12% public funds

(which are partially collateralized)

and 4% brokered deposits.

balance at March 31, 2024 was $90.1 million and there

were no brokered deposits at March 31, 2023.

The Company has approximately

21 thousand deposit accounts

with the majority in

personal accounts, approximately

13 thousand or

The estimated

average account

deposit portfolio is

approximately $103 thousand

March 31, 2024.

Sweep (“ICS”)

and Certificate

Deposit Account

Registry Service (“CDARS”) deposit products

to fully insure our clients.

deposit balance in ICS/CDARS at

was $144.1 million and $35.7 million at March 31, 2023.

The following table shows scheduled maturities of uninsured

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

September 30, 2023

time deposits as of March 31, 2024 (in thousands):

March 31, 2024

Three months or less

9 unchanged sentences

Escrow funds are recorded as other liabilities.

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

compared to $3.5 million at December 31, 2022.

As of March 31, 2024 escrow balances totaled $7.8 million compared

to $2.3 million at December 31, 2023.

accessibility of additional

funding allows us

to efficiently and

timely meet both

expected and unexpected

outgoing cash flows

and collateral needs without adversely affecting

either daily operations or the financial condition

of the Company.

As of March 31, 2024, we had $82.0 million of

fixed-rate advances outstanding from the FHLB with a weighted average

rate of 3.19%.

Maturity dates for the advances range between

2024 to 2028 as detailed in the table below.

USCB Financial Holdings, Inc.

Q1 2024 Form 10-Q

we are eligible

advances with

various terms

and conditions.

This accessibility

additional funding allows us to efficiently and timely meet both expected

and unexpected outgoing cash flows and collateral

needs without adversely affecting either daily operations

or the financial condition of the Company.

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 3.66%.

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):

March 31, 2024 (in thousands):

Interest Rate

Maturity Date

December 22, 2023

July 30, 2024

3 unchanged sentences

April 25, 2028

March 31, 2024,

million fixed-rate

loan outstanding

Funding Program with an interest rate of 4.81% and

a maturity date of January 10, 2025.

also established

Federal Funds

correspondent

Discount Window

temporary fluctuations

there were no outstanding balances with any of these

liquidity sources.

lines of credit

upstream correspondent

outstanding balances with any of these liquidity sources.

Off-Balance Sheet Arrangements

23 unchanged sentences

commitments outstanding as of the dates indicated (in thousands

September 30, 2023

March 31, 2024

December 31, 2023

41 unchanged sentences

or marketable securities.

USCB Financial Holdings, Inc.

Q3 2023 Form 10-Q

Asset and Liability Management Committee

3 unchanged sentences

and mitigating

risks are appropriately executed within the designated lines of

authority and responsibility in a timely manner.

risks are appropriately executed within the designated lines

of authority and responsibility in a timely manner.

USCB Financial Holdings, Inc.

Q1 2024 Form 10-Q

establishment,

3 unchanged sentences

While some degree of

IRR (“Interest Rate

Risk”) is inherent to

Interest Rate Risk

(“IRR”) is inherent to

the banking business, we

37 unchanged sentences

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

ALCO model, as

an asset sensitive

balance sheet both

modeling, using

sensitivity indicates

assets generally

reprice faster

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

24 unchanged sentences

do not include actions that management

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

As part of our

balance sheet

either increase

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

our ALM strategy and policy, management

has the ability to modify the balance sheet to either increase asset duration and

decrease liability

5 unchanged sentences

to increase asset sensitivity.

According to our

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

under interest

scenarios (an

rates increase,

NIM will increase and if rates decrease, the NIM will decrease.

Additionally, utilizing

an EVE approach, we analyze the risk

to capital from the

effects of various interest rate scenarios

through a long-term discounted cash flow

This measures

the difference between

the economic value of

our assets and the

economic value of

our liabilities, which is

a proxy for our

liquidation value.

3 unchanged sentences

interest rates will have a

negative impact on the EVE and

lower rates, a positive impact.

negative impact on the EVE

and lower rates, a positive

Results and analysis are presented

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

USCB Financial Holdings, Inc.

Q3 2023 Form 10-Q

Liquidity is defined

15 unchanged sentences

Company’s obligations, and the funding

USCB Financial Holdings, Inc.

Q1 2024 Form 10-Q

significantly

49 unchanged sentences

federal funds

purchased, brokered

certificates of

deposit, listing

services certificates

Funding Program,

Atlanta discount

purchased, brokered certificates of deposit, listing services certificates of deposit, and draws

from the FRB Atlanta discount

and borrowings

our liquidity

resources are

fund loans and meet other cash needs as necessary.

USCB Financial Holdings, Inc.

Q3 2023 Form 10-Q

meet other cash needs as necessary.

Capital Adequacy

September 30,

well capitalized

March 31, 2024,

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).

follow the capital conservation buffer framework, and as of March 31, 2024, we exceeded the capital conversation buffer

indicated (in thousands, except ratios).

Minimum Capital

2 unchanged sentences

Action Provisions

September 30, 2023

March 31, 2024

risk-based capital

13 unchanged sentences

Company is deemed to be a small bank holding company.

USCB Financial Holdings, Inc.

Q1 2024 Form 10-Q

Impact of Inflation

29 unchanged sentences

respectively.

associated with delivering the Company’s servi

associated with delivering the Company’s services.

Recently Issued Accounting Pronouncements

3 unchanged sentences

of Significant Accounting Policies”

the unaudited Consolidated Financial Statements in this

the unaudited Consolidated Financial Statements in Part

1 of this Form 10-Q.

USCB Financial Holdings, Inc.

92 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis