What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-11-12 compared with 2024-08-12 · 484 added, 454 removed, 1142 unchanged (45% of the section changed)

8 unchanged sentences

the three and

six months ended June 30, 2024.

This discussion and analysis

is best read in conjunction

with the unaudited consolidated

consolidated financial statements

and related notes

included in the Annual

Report on Form

10-K (“2023 Form

with the Securities and Exchange Commission (“SEC”)

for the year ended December 31, 2023.

September 30,

consolidated financial statements and related

notes included in this Quarterly

Report on Form 10-Q (“Form

10-Q”) and the

audited consolidated financial

statements and related

notes included in the

Annual Report on

Form 10-K (“2023

K”) filed with the 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

43 unchanged sentences

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 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;

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;

extensive laws

1 unchanged sentence

subject, including

where we operate;

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

jurisdiction where we operate;

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

deposit attrition and the level of our uninsured deposits;

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

legislative or regulatory

changes and changes

in accounting

principles, policies,

practices or guidelines,

the on-going effects of the implementation of the

Current Expected Credit Losses (“CECL”) standard;

the lack of a

significantly diversified loan

portfolio and the concentration

in the South Florida

market, including the

of geographic,

industry concentrations,

including our

concentration

geographic, depositor,

concentrations, including

our concentration

in particular,

commercial real estate;

loans secured

estate, in particular, commercial real

the effects of climate change;

1 unchanged sentence

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

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 as well as growth through other means, such as

future acquisitions;

inflation, interest rate, unemployment rate, market and monetary

fluctuations;

impacts of international hostilities and geopolitical events;

interest margin;

increased competition and its

effect on the pricing

of our products and services

as well as our interest

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

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

employee, or third-party fraud and security breaches;

other risks described in this Form 10-Q, the 2023 Form

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

USCB Financial Holdings, Inc.

Q3 2024 Form 10-Q

forward-looking

6 unchanged sentences

forward-looking statements

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.

Q2 2024 Form 10-Q

unless required

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

under the federal

securities laws.

Form 10-K and in the reports the Company filed or will

file with the SEC.

On January 29, 2024, the Company’s Board of Directors announced the adoption

of a quarterly dividend program.

first quarter

the Company’s

Class A common

shareholders of record at the close of business on February 15,

The aggregate amount distributed in connection with

this dividend

second quarter

cash dividend

Company’s Class

stock was paid on June 5, 2024

to shareholders of record at the close of

business on May 15, 2024.

The aggregate amount

distributed in connection with this dividend

was $1.0 million.

Additionally,

the Company’s Board of Directors declared

September 5, 2024 to shareholders of record at the close

of business on August 15, 2024.

You should also review the

risk factors described in

the 2023 Form 10-K

the Company filed or will file with the SEC.

ended September 30, 2023.

On October 28, 2024, the Company’s

Board of Directors declared its fourth

quarterly cash dividend of $0.05

of the Company’s Class A

common stock.

The cash dividend will be paid on December 5, 2024 to

shareholders of record at

the close of business on November 15, 2024.

The aggregate amount distributed in connection with the three prior quarterly

cash dividends paid in 2024 was $3.0 million.

10,000 shares of Class A common stock were repurchased at a weighted average price per share of $11.99 during the

second quarter 2024.

These repurchases were made

pursuant to the

Company’s publicly announced repurchase programs.

As of June 30, 2024, 547,980 shares remained authorized

for repurchase under the

Company’s programs.

third quarter

These repurchases

the Company’s

publicly announced

repurchase programs.

As of September 30, 2024, 537,980 shares remained

authorized for repurchase under the Company’s program

In evaluating our financial

10 unchanged sentences

quarter ended

June 30, 2024 compared to at or for the quarter ended June 30, 2023 and as of June 30, 2024

compared to December 31,

2023, and annualized where appropriate:

Net interest income

for the three

months ended June

30, 2024 increased

$3.1 million or

September 30, 2024 compared to at

or for the quarter ended

September 30, 2023 and as of

September 30, 2024 compared

to December 31, 2023, and annualized where appropriate:

months ended September

increased $4.1 million

to $18.1 million

from $14.2 million

for the quarter ended June 30, 2023.

margin (“NIM”)

ended June 30, 2023.

Total assets were $2.5 billion at June 30, 2024, representing an increase of $232.4 million or 10.4% from June 30, 2023

increase of $119.2 million or 10.2% annualized from December 31, 2023.

Total loans were $1.9 billion at June

30, 2024, representing an increase of $273.3

million or 17.1% from June 30,

increase of $88.4 million or 10.0% annualized from December 31, 2023.

Total deposits were $2.1 billion at June

30, 2024, representing an increase of

$135.4 million or 7.0% from June 30,

increase of $119.6 million or 12.4% annualized from December 31, 2023.

Annualized return on average assets for the quarter ended June 30,

2024 was 1.01% compared to 0.77% for the quarter

June 30, 2023.

Annualized return

stockholders’ equity

quarter ended

12.63% compared

quarter ended June 30, 2023.

The ACL to total loans was 1.19% at June 30, 2024 and 1.18% at December 31, 2023.

Non-performing loans to total loans was 0.04% at June 30, 2024 and 0.03% at December 31, 2023.

At June 30, 2024, the total risk-based capital ratios for the Company and the Bank were 13.12% and 13.01%, respectively.

Tangible book

financial measurement)

affected by $2.28

due to accumulated

comprehensive loss of

$44.7 million at

June 30, 2024.

June 30, 2023,

from $14.0 million for the quarter ended September

Net interest margin (“NIM”) was 3.03% for the three months ended September 30, 2024

compared to 2.60% for the

three months ended September 30, 2023.

September 30, 2023 and an increase of $164.9 million

or 9.4% annualized from December 31, 2023.

September 30, 2023 and an increase of $150.5 million

or 11.3% annualized from December 31, 2023.

Total deposits were

$2.1 billion at

September 30,

2024, representing

of $205.7 million

September 30, 2023 and an increase of $189.5 million

or 13.1% annualized from December 31, 2023.

Annualized return on average assets for the quarter ended September 30, 2024 was

compared to 0.67% for

the quarter ended September 30, 2023.

stockholders’

compared to 8.19%

for quarter ended September 30, 2023.

The ACL to total loans was 1.19% at September 30, 2024 and 1.18% at December 31, 2023.

Non-performing loans to total loans was 0.14% at September

30, 2024 and 0.03% at December 31, 2023.

At September 30, 2024, the total

risk-based capital ratios

for the Company and

the Bank were 13.22% and

respectively.

Tangible book value per

common share (a non-GAAP

measure) was $10.90 at

September 30, 2024, representing

annualized from

tangible book

value of $9.40 per common

share was negatively affected

by $2.37 due to

$46.3 million accumulated other

comprehensive loss.

“Reconciliation

reconciliation of this non-GAAP financial measure.

was negatively

accumulated comprehensive

USCB Financial Holdings, Inc.

Q3 2024 Form 10-Q

accumulated comprehensive loss

“Reconciliation and Management

Explanation for

Financial Measures” included in this Form 10-Q for a reconciliation

of this non-GAAP financial measure.

Critical Accounting Policies and Estimates

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(in thousands, except ratios):

June 30, 2024

September 30, 2024

December 31, 2023

2 unchanged sentences

Loan amounts include deferred fees/costs.

Three Months Ended June 30,

Six Months Ended June 30,

USCB Financial Holdings, Inc.

Q3 2024 Form 10-Q

Three Months Ended

September 30,

Nine Months Ended

September 30,

Consolidated Statements of Operations:

5 unchanged sentences

Net interest margin

USCB Financial Holdings, Inc.

Q2 2024 Form 10-Q

The Company’s

6 unchanged sentences

expense, and the provision for income taxes.

Three months ended June 30, 2024 compared to the three

months ended June 30, 2023

Net income increased

to $6.2 million

for the three

months ended June

from $4.2 million

income was attributable

interest income from

loan portfolio,

net interest margin expansion, and increased

activity in fee generating transactions (wire fees,

gain on sale of loans,

fees, and treasury management fees) between periods.

Six months ended June 30, 2024 compared to the six

months ended June 30, 2023

Net income increased

to $10.8 million

months ended June

from $10.0 million

$816 thousand

was attributable

interest income

portfolio and

Three months ended September 30, 2024 compared to the

three months ended September 30, 2023

ended September 30,

period in 2023.

The $3.1 million or 82% increase in net income was attributable to higher interest income from a larger loan

margin expansion,

increased activity

generating transactions

management fees) between periods.

loans, SWAP fees, and treasury management

fees) between periods.

Nine months ended September 30, 2024 compared to the

nine months ended September 30, 2023

Net income increased to $1

7.8 million for the nine

months ended September 30,

from $13.8 million for the

28.5% increase

attributable to

higher interest

loan portfolio and increased activity in fee generating transactions (wire fees,

SWAP fees, and treasury management

between periods.

Net Interest Income

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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:

34 unchanged sentences

Q3 2024 Form 10-Q

Six Months Ended June 30,

Nine Months Ended September 30,

Interest-earning assets:

26 unchanged sentences

At fair value except for securities held to maturity.

Includes FHLB stock.

This amount includes

Net interest spread is the weighted average

3 unchanged sentences

income to average total interest-earning assets.

Three months ended June 30, 2024 compared to the three months

ended June 30, 2023

Three months ended September 30, 2024 compared to the three months

ended September 30, 2023

Net interest income before the provision

for credit losses was $17.3 million

for the three months ended June

an increase of $3.1 million

or 22.1%, from $14.2 million

for the same period in

This increase was

primarily attributable

to higher income from a larger loan portfolio combined with

an increase in the weighted average loan yield.

for credit losses was $18.1

million for the three months

ended September 30,

attributable to higher income from a larger loan portfolio combined

with an increase in the weighted average loan yield

Net interest margin was 3.03%

for the quarter ended

June 30, 2024 and 2.73%

for the same period

and rate paid on cost of funds both increased,

however loan yields grew at a higher rate

offsetting the increase in deposits

for the quarter ended September 30, 2024 and 2.60%

for the same period in 2023.

and interest-bearing

liabilities both

grew at a higher rate, offsetting the increase in deposits

and borrowing costs.

Six months ended June 30, 2024 compared to the six months ended

June 30, 2023

Net interest income before the provision for credit losses was $32.5 million for the six months ended June 30, 2024, an

increase of $2.3 million or

7.6%, from $30.2 million for

the same period in 2023.

This increase

was primarily attributable to

higher income from a larger loan portfolio combined with

an increase in the weighted average loan yield.

Net interest margin was

2.78% for the

six months ended

June 30, 2024 and

for the same period

both increased,

higher than the increase in total interest-bearing assets.

Nine months ended September 30, 2024 compared to the nine months

ended September 30, 2023

Net interest income

before the provision

for credit losses

was $50.6 million

months ended September

attributable to higher income from a larger loan portfolio combined

with an increase in the weighted average loan yield.

Net interest margin was 2.87% for the nine

months ended September 30, 2024 and 2.84%

for the same period in 2023.

liabilities both

assets balance

was greater than that of interest-bearing liabilities.

the effect of the increase in yields

resulted in a NIM expansion

of 3 bps between periods.

USCB Financial Holdings, Inc.

17 unchanged sentences

and net charge-offs.

Three months ended June 30, 2024 compared to the three months

ended June 30, 2023

The provision for credit loss was $786 thousand for the three months ended

June 30, 2024 compared to $38 thousand

portfolio was

provision expense

during the three months ended June 30, 2024.

Six months ended June 30, 2024 compared to the six months ended

June 30, 2023

The provision for

credit loss was

$1.2 million for

the six months

ended June 30,

2024 compared to

$239 thousand for

the same period in 2023.

Growth in the loan portfolio was the primary driver of the increase

in the provision expense during

the six months ended June 30, 2024.

Three months ended September 30, 2024 compared to the three months

ended September 30, 2023

The provision

$931 thousand

ended September 30,

2024 compared

loan portfolio

primary driver

of the increase

in the provision

expense during the three months ended September 30,

Nine months ended September 30, 2024 compared to the nine months

ended September 30, 2023

September 30,

loan portfolio

primary driver

of the increase

in the provision

expense during the nine months ended September 30, 2024.

Non-Interest Income

9 unchanged sentences

income for the dates indicated (in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

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

2 unchanged sentences

non-interest income

Three months ended June 30, 2024 compared to the three months

ended June 30, 2023

primarily driven

SWAP loan fees, and treasury management fees.

Six months ended June 30, 2024 compared to the six months ended

June 30, 2023

Three months ended September 30, 2024 compared to the three months

ended September 30, 2023

Non-interest income

months ended June

ended September 30,

2024 increased

million or 44.9%,

treasury management fees.

$3.4 million,

service fees category,

partially offset by declines in gains on sale of loans and

other non-interest income.

Nine months ended September 30, 2024 compared to the nine months

ended September 30, 2023

Non-interest income for the nine months ended September

30, 2024 increased $3.0 million or 50.0%, compared

same period in 2023.

This increase was

primarily driven by growth in SWAP loan

fees reported under service fees category

and gain on sale of loans, , partially offset by declines in gains

on sale of loans and other non-interest income.

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, 2024 compared to the three months

ended June 30, 2023

Non-interest expense for

the three months

ended June 30, 2024

increased $1.1 million

or 10.6%, compared

period in 2023.

Three months ended September 30, 2024 compared to the three months

ended September 30, 2023

Non-interest expense for the three months ended September 30, 2024

increased $1.0 million or 9.5%, compared to the

was primarily

compensation expense.

Six months ended June 30, 2024 compared to the six months ended

June 30, 2023

Non-interest expense for the six

months ended June 30, 2024 increased $2.1

million or 10.2%, compared to the

period in 2023.

employee benefits

due to management bonus accrual based on the Company’s

performance, and stock-based compensation expense.

Nine months ended September 30, 2024 compared to the nine months

ended September 30, 2023

Non-interest expense for the nine

months ended September 30, 2024 increased $3.1

million or 10.0%, compared to

was primarily

in salaries and

employee benefits

Other operating expenses increased due to increase of

$153 thousand in audit and tax services.

sales incentives,

bonus accrual

the Company’s

Other operating expenses increased due to

an increase of $153 thousand in audit and tax services.

Provision for Income Tax

14 unchanged sentences

elements in determining our effective tax rate.

Three months ended June 30, 2024 compared to the three months

ended June 30, 2023

ended June 30,

period in 2023.

The effective tax rate for the three months ended June

30, 2024 and 2023 was 24.1%.

Six months ended June 30, 2024 compared to the six months ended

June 30, 2023

Income tax expense for the six months ended June 30, 2024 was $3.4 million as compared to $3.2 million for

period in 2023.

The effective tax rate for the six months ended June

30, 2024 was 23.9% compared to 24.3% for the same

period in 2023.

Three months ended September 30, 2024 compared to the three months

ended September 30, 2023

ended September

same period in 2023.

The effective tax rate

for the three months ended

September 30, 2024 was 24.2% compared to

Nine months ended September 30, 2024 compared to the nine months

ended September 30, 2023

Income tax expense

nine months ended

September 30, 2024

was $5.6 million

as compared to

effective tax

September 30,

24.0% compared

24.4% for the same period in 2023.

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

Analysis of Financial Condition

assets at June 30, 2024 were

$2.46 billion, an increase

million, or 10.2% annualized,

over total assets

of $2.34 billion at December 31, 2023.

loans, net of deferred fees/cost, increased $88.4 million, or 10.0% annualized,

million, or 12.4% annualized, to $2.06 billion at June 30,

2024 compared to $1.94 billion December 31, 2023.

September 30, 2024

$164.9 million,

annualized, over

$2.34 billion

at December 31,

fees/costs, increased

$150.5 million,

September 30,

December 31, 2023.

USCB Financial Holdings, Inc.

37 unchanged sentences

obligation securities,

municipal securities,

debt securities,

all with varying contractual maturities and coupons.

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

do not necessarily represent

the expected life of

the portfolio.

corporate securities,

securities, and

municipal securities all

with varying contractual

maturities and coupons.

the optionality embedded

in these securities,

the final maturities do not

necessarily represent the expected

life of the portfolio.

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.

paid down prior

to maturity depending

on capital market

conditions and expectations.

The investment portfolio

reviewed by the Chief Financial Officer,

and the ALCO of the Company to ensure an appropriate risk and return

profile as well as for adherence to the investment policy.

When evaluating AFS

9 unchanged sentences

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.

As a result of this

evaluation, the Company concluded that no allowance

was required on AFS securities as of June 30, 2024.

company performance analysis, review of credit ratings, vintage bonds, remaining payment terms, prepayment speeds and

analysis of 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 maturity.

of this evaluation, the Company concluded that no allowance

was required on AFS securities as of September

mortgage-backed

2 unchanged sentences

corporate bonds.

The required reserve for these

holdings is determined each quarter using the model described above.

The required reserve for these holdings is

determined each quarter using the model described above.

the portion of the HTM exposed to non-government

3 unchanged sentences

for credit losses (“ACL”)

as of June 30,

as of September 30,

The book value

for debt securities classified as

represents amortized cost less ACL.

investment securities increased $1.7 million,

or 0.9% annualized, to

$406.1 million at June 30, 2024

$404.3 million

investment of excess

balances into high

credit quality investments

to increase the

Company’s profitability and

for debt securities

as HTM represents amortized cost less ACL.

HTM investment

securities increased

$22.2 million, or

7.3% annualized,

to $426.5 million

at September 30,

2024 from $404.3 million at December 31,

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, 2024,

investment securities

of $69.7 million

2 unchanged sentences

portfolio does

have any tax-exempt securities.

tax-exempt securities.

USCB Financial Holdings, Inc.

Q3 2024 Form 10-Q

June 30, 2024

September 30, 2024

December 31, 2023

19 unchanged sentences

for investment

as of June 30, 2024 (in thousands,

as of September 30, 2024 (in thousands,

except yields):

Within 1 year

After 1 year through

After 5 years through

through 5 years

After 5 years

through 10 years

After 10 years

Available-for-sale:

5 unchanged sentences

Bank subordinated debt securities

Corporate bonds

Held-to-maturity:

24 unchanged sentences

as of the dates indicated (in thousands):

June 30, 2024

September 30, 2024

December 31, 2023

2 unchanged sentences

Commercial and Industrial

Foreign Banks

Correspondent Banks

Consumer and Other

3 unchanged sentences

$150.5 million,

2024 compared to December 31, 2023.

September 30, 2024

December 31, 2023.

The residential

real estate loan segment had the most significant growth.

most significant

approximately 56.8%

loan portfolio

been reflective of the market in which we operate and

September 30, 2024.

growth strategy

since inception

has been reflective of the market in which we operate and

of our strategic plan as approved by the Board.

17 unchanged sentences

or unexpected

The following table shows maturities and sensitivity

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

2024 (in thousands):

September 30, 2024 (in thousands):

Due in 1 year or

4 unchanged sentences

Commercial and Industrial

Foreign Banks

Correspondent Banks

Consumer and Other

18 unchanged sentences

/rate modifications are discussed as well.

As of June 30,

As of September 30,

2024, approximately 56%

have adjustable/variable

adjustable/variable

contractual characteristics, there are no

material concentrations on anniversary repricing.

Additionally, it is

important to note

interest rate

embedded option

of the loans have

adjustable/variable rates and

The adjustable/variable

rate loans re-price

to different benchmarks

and tenors and

in different periods

By contractual characteristics,

there are no material concentrations

on anniversary repricing.

Additionally,

it is important to

our loans have

interest rate floors.

This embedded option

protects the Company

from a decrease

rates below the floor and positions us to gain in the scenario

48 unchanged sentences

as follows for the dates indicated (in thousands):

June 30, 2024

September 30, 2024

Special Mention

2 unchanged sentences

Commercial and Industrial

Foreign Banks

Correspondent Banks

Consumer and Other

4 unchanged sentences

Commercial and Industrial

Foreign Banks

Correspondent Banks

Consumer and Other

5 unchanged sentences

except ratios):

June 30, 2024

September 30, 2024

December 31, 2023

64 unchanged sentences

type for the periods indicated (in thousands):

and Industrial

Three Months Ended June 30, 2024

Correspondent

Three Months Ended September 30,

Beginning balance

3 unchanged sentences

Net charge-offs to average loans

Six Months Ended June 30, 2024

Nine Months Ended September 30, 2024

Beginning balance

5 unchanged sentences

thousand release related to investment securities held to maturity.

(2) Provision for credit losses excludes $58 thousand expense due to unfunded commitments included in other liabilities and $1

thousand expense due to investment securities held to maturity.

and Industrial

Three Months Ended June 30, 2023

(2) Provision for credit losses excludes $159 thousand expense due to unfunded commitments included in other liabilities.

(3) Annualized.

Correspondent

Three Months Ended September 30,

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

5 unchanged sentences

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

thousand expense related to investment securities held to maturity.

thousand release related to investment securities held to maturity.

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

1 unchanged sentence

thousand expense due to investment securities held to maturity.

(4) Annualized.

USCB Financial Holdings, Inc.

1 unchanged sentence

Bank-Owned Life Insurance

As of June 30,

As of September 30,

2024, the combined

cash surrender value

of all bank-owned

life insurance (“BOLI”)

policies was $52.6

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

cash surrender

bank-owned life

insurance (“BOLI”)

Statements of Operations.

The Company had BOLI policies with five insurance carriers.

The Company is the beneficiary of these policies.

The Company is the beneficiary of

these policies.

Customer deposits are the

15 unchanged sentences

presented (in thousands, except ratios):

Three Months Ended June 30,

Three Months Ended September 30,

Average Balance

8 unchanged sentences

collateralized)

deposits balance at June 30, 2024 was $90.0 million

and $50.0 million at June 30, 2023.

deposits balance at September 30, 2024 was $100.0

million and $50.0 million at December 31, 2024.

The Company has approximately

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$104 thousand

of June 30, 2024.

accounts at the Company per account holder.

The total estimated amount of uninsured deposits was

54% at June 30, 2024

June 30, 2023.

The Company offers

Insured Cash Sweep

(“ICS”) and Certificate

Deposit Account Registry

$121.8 million at June 30, 2024 and $107.3 million at December

of September 30, 2024.

accounts at the Company

per account holder.

The total estimated amount

of uninsured deposits was

56% at September 30,

at September 30, 2023.

The Company offers Insured

Cash Sweep (“ICS”)

and Certificate of

Deposit Account

Registry Service (“CDARS”) deposit products

to fully insure our clients.

deposit balance in ICS/CDARS at

was $106.0 million at September 30, 2024 and $107.3

million at December 31, 2023.

The following table shows scheduled maturities of uninsured

time deposits as of June 30, 2024 (in thousands):

June 30, 2024

time deposits as of September 30, 2024 (in thousands):

September 30, 2024

Three months or less

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Escrow funds are recorded as other liabilities.

As of June 30, 2024 escrow balances totaled $14.8 million

As of September 30, 2024 escrow balances totaled $22.5 million

compared to $2.3 million at December 31, 2023.

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of the Company.

As of June 30, 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.

September 30, 2024,

fixed-rate advances

outstanding from

average rate of 3.47%.

Maturity dates for the advances

range between 2024 to 2028 as detailed in the table below.

The following table presents the FHLB advances as of

June 30, 2024 (in thousands):

September 30, 2024 (in thousands):

Interest Rate

Maturity Date

July 30, 2024

March 27, 2025

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April 25, 2028

As of June 30, 2024,

we had a $80.0

million fixed-rate loan outstanding from

the FRB issued pursuant

to the Bank Term

Funding Program with an interest rate of 4.81% and a maturity

date of January 10, 2025.

September 13, 2027

March 23, 2026

During the third

quarter 2024, the

Company paid off

the $80.0 million

fixed-rate loan outstanding

from the Bank

Funding Program with an original maturity date of January

correspondent

temporary fluctuations

2024, there were no outstanding balances with any of these

liquidity sources.

September 30, 2024, there were no outstanding balances

with any of these liquidity sources.

Off-Balance Sheet Arrangements

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that, under GAAP,

meet the financing needs

of our customers we may

include commitments to extend

credit and standby letters

meet the financing needs of our customers,

we may include commitments to extend credit and standby

commitments involve

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commitments outstanding as of the dates indicated (in thousands

June 30, 2024

September 30, 2024

December 31, 2023

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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.

establishment,

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and risk tolerances and appetite.

While some degree of

Interest Rate Risk

(“IRR”) is inherent to

the banking business, we

believe our ALCO implemented

While some degree of Interest Rate Risk (“IRR”) is inherent to the banking business, we believe our ALCO implements

sound risk management practices to identify,

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Static simulation models

are based on current exposures and assume a constant balance sheet with no new growth.

Dynamic simulation analysis is

also utilized to have a more comprehensive assessment on IRR.

simulation relies on detailed assumptions outlined in

management strategies and client expected behavior.

balance sheet

utilized to have a

more comprehensive assessment

This simulation

relies on detailed

assumptions outlined in

budget and strategic plan, and in assumptions regarding changes in

existing lines of business, new business, management

strategies and client expected behavior.

scenarios (parallel and non-parallel).

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Market and Interest Rate Risk Management

sensitive balance

modeling, using

sensitivity indicates

asset sensitive

balance sheet

two modeling,

static modeling.

Asset sensitivity

assets generally

reprice faster

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

when market interest rates decrease.

Many assumptions are used

to calculate the impact of interest

rate variations on our

net interest income,

such as asset

prepayment speeds, non-maturity

deposit price sensitivity,

pricing correlations, deposit

truncations and decay rates, and key interest rate drivers.

Liability sensitivity indicates that our liabilities generally reprice faster

than our assets, which results in a

impact to net interest

income when market interest

rates decrease.

Many assumptions

are used to calculate

the impact of

interest rate variations on our net interest income, such as asset prepayment speeds,

non-maturity deposit price sensitivity

(betas), pricing correlations, deposit truncations and decay

rates, and key interest rate drivers.

Because of the inherent use

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to increase asset sensitivity.

According to our model, as of June 30, 2024,

our balance sheet is asset sensitive for both year

one and year two under

interest static rate scenarios

(an increase or decrease of

400 basis points).

means than if rates increase

increase and if rates decrease,

the NIM will decrease.

Additionally, utilizing an EVE approach, we analyze

According to our model, as of September 30, 2024, our balance sheet is neutral to slightly asset sensitive for both year

under interest

scenarios (an

impact of rates variations will be minimal

Additionally,

utilizing an EVE approach, we analyze

the risk to capital

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Results and analysis are presented

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

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

USCB Financial Holdings, Inc.

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

and contingent liquidity events.

pledging of assets and contingent liquidity events.

Changes in macroeconomic conditions, as well as exposure

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institution’s

repayment and maturity of loans and investment security

Other potential funding sources include

federal funds

repayment and maturity of

loans and investment security cash

Other potential funding

sources include Federal Funds

adequate to fund loans and meet other cash needs as

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Capital Adequacy

follow the capital conservation

buffer framework,

and as of June

exceeded the capital

conversation buffer

indicated (in thousands, except ratios).

September 30,

well capitalized

prompt corrective

action framework.

also follow the capital conservation buffer framework, and

as of September 30, 2024, 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

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Action Provisions

June 30, 2024

September 30, 2024

risk-based capital

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The following table reconciles the non-GAAP financial measurement

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

of operating net income available to

common shareholders for the periods presented (in

except per share data):

USCB FINANCIAL HOLDINGS, INC.

Q2 2024 Form 10-Q

USCB FINANCIAL HOLDINGS, INC.

NON-GAAP FINANCIAL MEASURES (UNAUDITED)

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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